The accompanying notes are an integral part of these financial statements.
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE
1 NATURE OF OPERATIONS
Nature
of Operations – New Peoples Bankshares, Inc. (New Peoples) is a financial holding company whose principal activity is the ownership
and management of a community bank, New Peoples Bank, Inc. (the Bank). New Peoples and the Bank are each organized and incorporated under
the laws of the Commonwealth of Virginia. As a state-chartered member bank, the Bank is subject to regulation by the Virginia Bureau
of Financial Institutions, the Federal Deposit Insurance Corporation and the Board of Governors of the Federal Reserve System. The Bank
provides general banking services to individuals, small and medium size businesses and the professional community of southwest Virginia,
southern West Virginia, northeastern Tennessee and western North Carolina. These services include commercial and consumer loans along
with traditional deposit products such as checking and savings accounts.
NOTE
2 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis
of Presentation and Consolidation - The consolidated financial statements include New Peoples, the Bank, NPB Insurance Services,
Inc., and NPB Web Services, Inc. (Hereinafter, collectively referred to as the Company, we, us, or our). All significant intercompany
balances and transactions have been eliminated. In accordance with Accounting Standards Codification (ASC) 942, Financial Services –
Depository and Lending, NPB Capital Trust I and 2 are not included in the consolidated financial statements.
Use
of Estimates - The preparation of financial statements in conformity with generally accepted accounting principles of the United
States (GAAP) requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, disclosure
of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during
the reporting period. Actual results could differ from those estimates. The determination of the adequacy of the allowance for loan losses
and the determination of the deferred tax asset and related valuation allowance are based on estimates that are particularly susceptible
to significant changes in the economic environment and market conditions.
Cash
and Cash Equivalents – Cash and cash equivalents as used in the cash flow statements include cash and due from banks, interest-bearing
deposits with banks, federal funds sold and investment securities maturing within three months.
Investment
Securities – Management determines the appropriate classification of securities at the time of purchase. If management has
the intent and the Company has the ability at the time of purchase to hold securities until maturity, they are classified as held to
maturity and carried at amortized historical cost. Securities not intended to be held to maturity are classified as available-for-sale
and carried at fair value. Securities available-for-sale are intended to be used as part of the Company’s asset and liability management
strategy and may be sold in response to changes in interest rates, prepayment risk or other similar factors.
The
amortization of premiums and accretion of discounts are recognized in interest income using the effective interest method over the period
to maturity for discounts and the earlier of call date or maturity for premiums. Realized gains and losses on dispositions are based
on the net proceeds and the adjusted book value of the securities sold, using the specific identification method. Realized gains (losses)
on securities available-for-sale are included in noninterest income and, when applicable, are reported as a reclassification adjustment,
net of tax, in other comprehensive income. Unrealized gains and losses on investment securities available for sale are based on the difference
between book value and fair value of each security. These gains and losses are credited or charged to other comprehensive income, net
of tax, whereas realized gains and losses flow through the statements of income.
Loans
held for sale – Mortgage loans originated and intended for sale in the secondary market are carried at the lower of aggregate
cost or fair value, as determined by outstanding commitments from investors. Net unrealized losses, if any, are recorded as a valuation
allowance through earnings. Mortgage loans held for sale are generally sold with servicing released. Gains and losses on sales of mortgages
are based on the difference between the selling price and the carrying value of the related loan sold.
Loans
– Loans are carried on the balance sheet at unpaid principal balance, net of any unearned interest and the allowance for loan
losses. Interest income on loans is computed using the effective interest method, except where serious doubt exists as to the collectability
of the loan, in which case accrual of the income is discontinued.
It
is the Company’s policy to stop accruing interest on a loan, and classify that loan as non-accrual under the following circumstances:
(a) whenever we are advised by the borrower that scheduled payment or interest payments cannot be met, (b) when our best judgment indicates
that payment in full of principal and interest can no longer be expected, or (c) when any such loan or obligation becomes delinquent
for 90 days unless it is both well secured and in the process of collection. All interest accrued but not collected for loans that are
placed on nonaccrual or charged off is reversed against interest income, except in the case of a nonaccrual loan that is well secured
and in the process of collection, in which case, the interest accrued but not collected is not reversed. The interest on these loans
is accounted for on the cash basis or cost-recovery method, until qualifying for return to accrual status. Generally, loans are returned
to accrual status when all the principal and interest amounts contractually due are brought current, six consecutive timely payments
are made, and prospects for future contractual payments are reasonably assured.
A
loan is considered impaired when, based on current information and events, it is probable that the Company will be unable to collect
the scheduled payments of principal or interest when due according to the contractual terms of the loan agreement. Factors considered
by management in determining impairment include payment status, collateral value, and the probability of collecting scheduled principal
and interest payments when due. Loans that experience insignificant payment delays and payment shortfalls generally are not classified
as impaired. Management determines the significance of payment delays and payment shortfalls on a case-by-case basis, taking into consideration
all of the circumstances surrounding the loan and the borrower, including the length of the delay, the reasons for the delay, the borrower’s
prior payment record, and the amount of the shortfall in relation to the principal and interest owed. Impairment is measured on a loan
by loan basis for commercial and construction loans by either the present value of expected future cash flows discounted at the loan’s
effective interest rate, the loan’s obtainable market price, or the fair value of the collateral if the loan is collateral dependent.
Significant
Group Concentrations of Credit Risk – The Company identifies a concentration as any obligation, direct or indirect, of the
same or affiliated interests which represent 25% or more of the Company’s capital structure, or $15.9 million as of December 31,
2021. Most of the Company’s activities are with customers located within southwest Virginia, southern West Virginia, northeastern
Tennessee region and western North Carolina. Certain concentrations may pose credit risk. The Company does not have any significant concentrations
to any one industry or customer.
Allowance
for Loan Losses – The allowance for loan losses is maintained at a level that, in management’s judgment, is adequate
to absorb credit losses inherent in the loan portfolio. The loan portfolio is analyzed periodically and loans are assigned a risk rating.
Allowances for impaired loans are generally determined based on collateral values or the present value of expected cash flows. A general
allowance is made for all other loans not considered impaired as deemed appropriate by management. In determining the adequacy of the
allowance, management considers the following factors: the nature of the portfolio, credit concentrations, trends in historical loss
experience, specific impaired loans, the estimated value of any underlying collateral, prevailing environmental factors and economic
conditions, and other inherent risks. While management uses available information to recognize losses on loans, further reductions in
the carrying amounts of loans may be necessary based on changes in collateral values and changes in estimates of cash flows on impaired
loans. This evaluation is inherently subjective as it requires estimates that are susceptible to significant revision as more information
becomes available.
The
allowance is increased by a provision for loan losses, which is charged to expense and reduced by charge-offs, net of recoveries. Loans
are charged against the allowance for loan losses when management believes that collectability of all or part of the principal is unlikely.
Past due status is determined based on contractual terms.
In
regard to our consumer and consumer real estate loan portfolio, the Company uses the guidance found in the Uniform Retail Credit
Classification and Account Management Policy which affects our estimate of the allowance for loan losses. Under this approach, a
consumer or consumer real estate loan must initially have a credit risk grade of Pass or better. Subsequently, if the loan becomes
contractually 90 days past due or the borrower files for bankruptcy protection, the loan is downgraded to Substandard and placed in
nonaccrual status. If the loan is unsecured, upon being deemed Substandard, the entire loan amount is charged off. For non-1-4
family residential loans that are 90 days past due or greater, or in bankruptcy, the collateral value less estimated liquidation
costs is compared to the loan balance to calculate any potential deficiency. If the collateral is sufficient then no charge-off is
necessary. If a deficiency exists, then upon the loan becoming contractually 120 days past due, the deficiency is charged-off
against the allowance for loan loss. In the case of 1-4 family residential or home equity loans, upon the loan becoming 120 days
past due, a current value is obtained and after application of an estimated liquidation discount, a comparison is made to the loan
balance to calculate any deficiency. Subsequently, any noted deficiency is then charged-off against the allowance for loan loss when
the loan becomes contractually 180 days past due. If the customer has filed bankruptcy, then within 60 days of the bankruptcy
notice, any calculated deficiency is charged-off against the allowance for
loan loss. Collection efforts continue by means of repossessions or foreclosures, and upon bank ownership, liquidation ensues.
Bank
Premises and Equipment – Land, buildings and equipment are recorded at cost less accumulated depreciation. Depreciation is
computed using the straight-line method over the following estimated useful lives:
Schedule of estimated useful lives |
|
|
Type |
|
Estimated
useful life |
Buildings |
|
39
years |
Paving
and landscaping |
|
15
years |
Computer
equipment and software |
|
3
to 5 years |
Vehicles |
|
5
years |
Furniture
and other equipment |
|
5
to 10 years |
Leasehold
improvements are amortized over the terms of the respective leases or the estimated useful lives of the improvements, whichever is shorter.
Repairs and maintenance costs are recorded as a component of noninterest expense as incurred.
Other
Real Estate Owned – Other real estate owned represents properties acquired through foreclosure or deeds taken in lieu of foreclosure
and former branch sites that have been closed and for which there are no intentions to re-open or otherwise use the location. At the
time of acquisition, these properties are recorded at fair value less estimated costs to sell. Expenses incurred in connection with operating
these properties and subsequent write-downs, if any, are charged to operations. Subsequent to foreclosure, management periodically considers
the adequacy of the reserve for losses on the property. Gains and losses on the sales of these properties are credited or charged to
income in the year of the sale.
Bank
Owned Life Insurance (BOLI) – The Bank purchased life insurance policies on certain, now-former, key officers and employees.
BOLI is recorded at the cash surrender value. Tax-exempt income from changes in the net cash surrender value are recorded in noninterest
income.
Leases
– A right-of-use asset and related lease liability is recognized for operating leases the Bank has entered into for certain
office facilities. Most leases include one or more options to renew. The exercise of lease renewal options is typically at the sole discretion
of management. If it is determined that it is reasonably certain that the Bank will exercise renewal options, the additional term is
included in the calculation of the lease liability. As most of our leases do not provide an implicit rate, we use the fully collateralized
Federal Home Loan Bank borrowing rate, commensurate with the lease terms at the lease commencement date in determining the present value
of the lease payments.
Income
Taxes – Deferred tax assets or liabilities are computed based upon the difference between financial statement and income tax
bases of assets and liabilities using the enacted marginal tax rate. The Company provides a valuation allowance on its net deferred tax
assets where it is more likely than not such assets will not be realized. At December 31, 2021 and 2020, the Company had no valuation
allowance on its net deferred tax assets.
The
Company recognizes the tax benefit from an uncertain tax position only if it is more likely than not the tax position will be sustained
on examination by the taxing authorities, based on the technical merits of the position. The tax benefits recognized in the financial
statements from such positions are then measured based on the largest benefit that has a greater than 50% likelihood of being realized
upon settlement. See Note 10, Income Taxes, for additional information. The Company records any penalties and interest attributed to
uncertain tax positions as a component of income tax expenses.
Income
Per Share – Basic income per share computations are based on the weighted average number of shares outstanding during each
period. Dilutive earnings per share reflect the additional common shares that would have been outstanding if dilutive potential common
shares had been issued.
Financial
Instruments – Off-balance-sheet instruments - In the ordinary course of business, the Company has entered into commitments
to extend credit. Such financial instruments are recorded in the financial statements when they are funded.
Financial
Instruments – Fair Value – Fair values of financial instruments are estimated using relevant market information and other
assumptions, as more fully discussed in Note 22. Fair value estimates involve uncertainties and matters of significant judgment regarding
interest rates, credit risks, prepayments and other factors, especially in the absence of broad markets for particular items. Changes
in assumptions or market conditions could significantly affect these estimates.
Comprehensive
Income – GAAP require that recognized revenue, expenses, gains and losses be included in net income. Although certain changes
in assets and liabilities, such as unrealized gains and losses on available-for-sale securities, are reported as a separate component
of the equity section of the balance sheet, such items, along with net income, are components of comprehensive income. The change in
unrealized gains and losses on available-for-sale securities is the Company’s only component of other comprehensive income.
Revenue
from Contracts with Customers - The Company generally satisfies its performance obligations fully on its contracts with customers
as services are rendered; and the transaction prices are typically fixed, charged either on a periodic basis or based on activity.
Advertising
Cost – Advertising costs are expensed in the period incurred. Those costs, which are included in Advertising, sponsorships
and donations in Note 24 totaled $252 thousand and $216 thousand, for the years ended December 31, 2021 and 2020, respectively.
Reclassification
– Certain reclassifications have been made to the prior years’ financial statements to place them on a comparable basis
with the current year. Net income and stockholders’ equity previously reported were not affected by these reclassifications.
Subsequent
Events – The Company has evaluated subsequent events for potential recognition and/or disclosure through the date these consolidated
financial statements were issued. See Note 25 Subsequent Events for additional information.
NOTE
3 INCOME PER SHARE
Basic
income per share computations are based on the weighted average number of shares outstanding during each year. Dilutive earnings per
share reflect the additional common shares that would have been outstanding if dilutive potential common shares had been issued. For
the years ended December 31, 2021 and 2020, there were no dilutive potential common shares. Basic and diluted net income per common share
calculations follows:
Schedule of basic and diluted net loss per common share calculations | |
| | | |
| | |
(Amounts in thousands, except | |
For the year ended |
share and per share data) | |
December 31, |
| |
2021 | |
2020 |
Net income | |
$ | 7,010 | | |
$ | 2,890 | |
Weighted average shares outstanding | |
| 23,922,086 | | |
| 23,922,086 | |
Weighted average dilutive shares outstanding | |
| 23,992,086 | | |
| 23,992,086 | |
Basic and diluted income per share | |
$ | 0.29 | | |
$ | 0.12 | |
NOTE
4 DEPOSITS IN AND FEDERAL FUNDS SOLD TO BANKS
The
Bank had federal funds sold and interest-bearing cash on deposit with other commercial banks amounting to $46.0 million and $76.3 million
at December 31, 2021 and 2020, respectively. Deposit amounts at other commercial banks may, at times, exceed federally insured limits.
Effective
March 26, 2020, the Board of Governors of the Federal Reserve System set reserve requirements to zero. Therefore, the Bank is no longer
required to maintain minimum reserve balances with the Federal Reserve Bank of Richmond (the Federal Reserve Bank). Prior to March 26,
2020, the minimum required reserve balance was computed by applying prescribed percentages to various types of deposits, either at the
Bank or on deposit with the Federal Reserve Bank.
The
Bank has a total of $30.0 million and $20 million in unsecured fed funds lines of credit facilities from three correspondent banks
that were available at December 31, 2021 and 2020. Of these total commitments, all were available at December 31, 2021 and
2020, respectively. As a condition for $5.0 million of one of the unsecured fed funds line of credit, the Bank maintains a minimum deposit
balance of $250 thousand with this correspondent bank. At December 31, 2021 and 2020, the Bank was in compliance with this
requirement.
NOTE
5 INVESTMENT SECURITIES
The
amortized cost and estimated fair value of securities (all available-for-sale) as of December 31, 2021 and December 31, 2020 are as follows:
Schedule of securities amortized cost and estimated fair value | |
| | | |
| | | |
| | | |
| | |
| |
| |
Gross | |
Gross | |
Approximate |
| |
Amortized | |
Unrealized | |
Unrealized | |
Fair |
(Dollars are in thousands) | |
Cost | |
Gains | |
Losses | |
Value |
December 31, 2021 | |
| | | |
| | | |
| | | |
| | |
U.S. Treasuries | |
| 7,791 | | |
$ | 2 | | |
$ | 122 | | |
$ | 7,671 | |
U.S. Government Agencies | |
| 9,098 | | |
| 77 | | |
| 86 | | |
| 9,089 | |
Taxable municipals | |
| 23,075 | | |
| 159 | | |
| 254 | | |
| 22,980 | |
Corporate bonds | |
| 2,014 | | |
| 23 | | |
| 18 | | |
| 2,019 | |
Mortgage backed securities | |
| 66,410 | | |
| 143 | | |
| 954 | | |
| 65,599 | |
Total Securities available for sale | |
| 108,388 | | |
$ | 404 | | |
$ | 1,434 | | |
$ | 107,358 | |
December 31, 2020 | |
| | | |
| | | |
| | | |
| | |
U.S. Government Agencies | |
| 13,852 | | |
$ | 322 | | |
$ | 67 | | |
$ | 14,107 | |
Taxable municipals | |
| 5,157 | | |
| 188 | | |
| — | | |
| 5,345 | |
Corporate bonds | |
| 5,893 | | |
| 186 | | |
| 31 | | |
| 6,048 | |
Mortgage backed securities | |
| 22,565 | | |
| 388 | | |
| 47 | | |
| 22,906 | |
Total Securities available for sale | |
| 47,467 | | |
$ | 1,084 | | |
$ | 145 | | |
$ | 48,406 | |
The
following table details unrealized losses and related fair values in the available-for-sale portfolio. This information is aggregated
by the length of time that individual securities have been in a continuous unrealized loss position as of December 31, 2021 and December
31, 2020.
Schedule of fair value and gross unrealized losses on investment securities | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
| |
Less than 12 Months | |
12 Months or More | |
Total |
(Dollars are in thousands) | |
Fair Value | |
Unrealized Losses | |
Fair Value | |
Unrealized Losses | |
Fair Value | |
Unrealized Losses |
December 31, 2021 | |
| |
| |
| |
| |
| |
|
U.S. Treasuries | |
$ | 6,200 | | |
$ | 122 | | |
$ | — | | |
$ | — | | |
$ | 6,200 | | |
$ | 122 | |
U.S. Government Agencies | |
| 977 | | |
| 10 | | |
| 3,434 | | |
| 76 | | |
| 4,411 | | |
| 86 | |
Taxable municipals | |
| 13,040 | | |
| 237 | | |
| 387 | | |
| 17 | | |
| 13,427 | | |
| 254 | |
Corporate bonds | |
| 1,482 | | |
| 18 | | |
| — | | |
| — | | |
| 1,482 | | |
| 18 | |
Mtg. backed securities | |
| 52,180 | | |
| 758 | | |
| 6,282 | | |
| 196 | | |
| 58,462 | | |
| 954 | |
Total Securities AFS | |
$ | 73,879 | | |
$ | 1,145 | | |
$ | 10,103 | | |
$ | 289 | | |
$ | 83,982 | | |
$ | 1,434 | |
| |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
December 31, 2020 | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
U.S. Government Agencies | |
$ | 1,479 | | |
$ | 12 | | |
$ | 3,829 | | |
$ | 55 | | |
$ | 5,308 | | |
$ | 67 | |
Taxable municipals | |
| — | | |
| — | | |
| — | | |
| — | | |
| — | | |
| — | |
Corporate bonds | |
| 1,219 | | |
| 31 | | |
| — | | |
| — | | |
| 1,219 | | |
| 31 | |
Mtg. backed securities | |
| 7,517 | | |
| 44 | | |
| 218 | | |
| 3 | | |
| 7,735 | | |
| 47 | |
Total Securities AFS | |
$ | 10,215 | | |
$ | 87 | | |
$ | 4,047 | | |
$ | 58 | | |
$ | 14,262 | | |
$ | 145 | |
| |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
At
December 31, 2021, the available-for-sale portfolio included 113 investments for which the fair market value was less than amortized
cost. At December 31, 2020, the available-for-sale portfolio included 42 investments for which the fair market value was less than amortized
cost. Management evaluates securities for other-than-temporary impairment at least on a quarterly basis, and more frequently when economic
or market concerns warrant such evaluation. Consideration is given to (1) the length of time and the extent to which the fair value has
been less than cost, (2) the financial conditions and near-term prospects of the issuer, and (3) the intent and ability of the Company
to retain its investment in the issuer for a period of time sufficient to allow for any anticipated recovery in fair value. Based on
the Company’s analysis, the Company concluded that no securities had other-than-temporary impairment at December 31, 2021 or December
31, 2020.
Investment
securities with a carrying value of $12.1 million and $6.8 million at December 31, 2021 and 2020, respectively, were pledged to secure
public deposits and for other purposes required by law.
During
the year ended December 31, 2021, $7.7 million of securities were sold, realizing $322 thousand in gains. During the year ended December
31, 2020, $1.0 million of securities were sold, realizing $4 thousand in gains.
The
amortized cost and fair value of investment securities at December 31, 2021, by contractual maturity, are shown in the following schedule.
Expected maturities will differ from contractual maturities because borrowers may have the right to call or prepay obligations with or
without call or prepayment penalties. Also, actual maturities may differ from scheduled maturities on amortizing securities, such as
mortgage-backed securities and collateralized mortgage obligations, because the underlying collateral on these types of securities may
be repaid prior to the scheduled maturity date.
Schedule of amortized cost and fair value of investment securities contractual maturity |
|
|
|
|
Weighted |
(Dollars
are in thousands) |
Amortized
|
|
Fair
|
|
Average |
Securities
Available for Sale |
Cost |
|
Value |
|
Yield |
Due
in one year or less |
$ |
1,051 |
$ |
1,060 |
|
2.56% |
Due
after one year through five years |
7,858 |
7,804 |
1.41% |
Due
after five years through ten years |
|
12,819 |
|
12,747 |
|
1.54% |
Due
after ten years |
|
86,660 |
|
85,747 |
|
1.61% |
Total |
$ |
108,388 |
$ |
107,358 |
|
1.59% |
The
Bank, as a member of the Federal Reserve Bank and the Federal Home Loan Bank of Atlanta (FHLB), is required to hold stock in each. The
Bank also owns stock in CBB Financial Corp., which is a correspondent of the Bank. These equity securities, which are included in Other
Assets on the consolidated balance sheet, are restricted from trading and are recorded at a cost of $2.0 million and $2.6 million at
December 31, 2021 and 2020, respectively. The stock has no quoted market value and no ready market exists.
NOTE
6 LOANS
Loans
receivable outstanding at December 31, 2021 and 2020, are summarized as follows:
Summary of loans receivable outstanding | |
| | | |
| | |
| |
December 31, |
(Dollars are in thousands) | |
2021 | |
2020 |
Real estate secured: | |
| | | |
| | |
Commercial | |
$ | 206,162 | | |
$ | 179,381 | |
Construction and land development | |
| 32,325 | | |
| 25,031 | |
Residential 1-4 family | |
| 224,530 | | |
| 222,980 | |
Multifamily | |
| 33,048 | | |
| 16,569 | |
Farmland | |
| 18,735 | | |
| 18,368 | |
Total real estate loans | |
| 514,800 | | |
| 462,329 | |
Commercial | |
| 54,325 | | |
| 86,010 | |
Agriculture | |
| 4,021 | | |
| 4,450 | |
Consumer installment loans | |
| 18,756 | | |
| 20,632 | |
All other loans | |
| 1,842 | | |
| 2,145 | |
Total loans | |
$ | 593,744 | | |
$ | 575,566 | |
Included
in commercial loans at December 31, 2021 and 2020, were $6.4 million and $34.8 million of PPP loans that are guaranteed by the SBA.
Also
included in total loans above are deferred loan fees of $1.8 million and $2.3 million, at December 31, 2021 and 2020, respectively, which
include deferred PPP loan fees. Deferred loan costs were $2.0 million and $1.8 million, at December 31, 2021 and 2020, respectively.
Income from net deferred fees and costs is recognized as income over the lives of the respective loans as a yield adjustment. If loans
repay prior to scheduled maturities any unamortized fee or cost is recognized at that time.
As
a result of PPP originations during 2021 and 2020, net deferred fees totaling $1.6 million and $1.6 million were received, respectively,
and $2.0 million and $994 thousand was recognized through earnings, respectively.
Loans
receivable on nonaccrual status at December 31, 2021 and 2020 are summarized as follows:
Summary of loans receivable on nonaccrual status | |
| | | |
| | |
(Dollars are in thousands) | |
2021 | |
2020 |
Real estate secured: | |
| | | |
| | |
Commercial | |
$ | 415 | | |
$ | 2,225 | |
Construction and land development | |
| 37 | | |
| 57 | |
Residential 1-4 family | |
| 2,314 | | |
| 2,700 | |
Multi-family | |
| 111 | | |
| — | |
Farmland | |
| 48 | | |
| 101 | |
Total real estate loans | |
| 2,925 | | |
| 5,083 | |
Commercial | |
| 9 | | |
| 453 | |
Consumer installment and other loans | |
| 7 | | |
| 12 | |
Total loans receivable on nonaccrual status | |
$ | 2,941 | | |
$ | 5,548 | |
Total
interest income not recognized on nonaccrual loans for 2021 and 2020 was $223 thousand and $494 thousand, respectively.
No
accounts received pandemic related forbearance in 2021. During the year ended December 31, 2020, under the provisions of the CARES Act
or related guidance issued by banking regulators, modifications, mainly in the form of short-term payment deferrals, were granted on
786 loans totaling $119.6 million. At December 31, 2021, 543 accounts totaling $82.4 million remain, of which 538 accounts totaling $82.3
million are current or less than 90 days past due. All of these accounts are subject to a normal repayment schedule. No accounts at December
31, 2021 were subject to pandemic related forbearance. At December 31, 2020, 673 loans totaling $110.7 million had completed their forbearance
period and resumed a normal payment schedule, and 15 loans totaling $836 thousand remained in forbearance. At December 31, 2020, the
remaining 98 accounts had been repaid in full or refinanced at market terms and conditions.
Of
the accounts that received some form of forbearance during 2020, at December 31, 2021, $15.2 million were to lessors of residential properties,
$12.8 to lessors of nonresidential properties and $6.7 million to hotels and restaurants; while at December 31, 2020, $21.4 million were
to lessors of residential properties, $16.0 million to lessors of non-residential properties, $12.4 million to hotels and restaurants,
and $6.0 million to coal and gas mining operations.
The
following table presents information concerning the Company’s investment in loans considered impaired as of December 31, 2021 and
December 31, 2020:
Summary of impaired loans | |
| | | |
| | | |
| | | |
| | | |
| | |
As of December 31, 2021 (Dollars are in thousands) | |
Average Recorded Investment | |
Interest Income Recognized | |
Recorded Investment | |
Unpaid Principal Balance | |
Related Allowance |
With no related allowance recorded: | |
| | | |
| | | |
| | | |
| | | |
| | |
Real estate secured: | |
| | | |
| | | |
| | | |
| | | |
| | |
Commercial | |
$ | 245 | | |
$ | — | | |
$ | 99 | | |
$ | 140 | | |
$ | — | |
Construction and land development | |
| 64 | | |
| 18 | | |
| 24 | | |
| 298 | | |
| — | |
Residential 1-4 family | |
| 1,720 | | |
| 24 | | |
| 1,508 | | |
| 1,791 | | |
| — | |
Multifamily | |
| — | | |
| — | | |
| — | | |
| — | | |
| — | |
Farmland | |
| 438 | | |
| 14 | | |
| 320 | | |
| 490 | | |
| — | |
Commercial | |
| — | | |
| — | | |
| — | | |
| — | | |
| — | |
Agriculture | |
| — | | |
| — | | |
| — | | |
| — | | |
| — | |
Consumer installment loans | |
| 3 | | |
| — | | |
| 2 | | |
| 2 | | |
| — | |
All other loans | |
| — | | |
| — | | |
| — | | |
| — | | |
| — | |
With an allowance recorded: | |
| | | |
| | | |
| | | |
| | | |
| | |
Real estate secured: | |
| | | |
| | | |
| | | |
| | | |
| | |
Commercial | |
| 871 | | |
| 3 | | |
| 315 | | |
| 372 | | |
| 94 | |
Construction and land development | |
| — | | |
| — | | |
| — | | |
| — | | |
| — | |
Residential 1-4 family | |
| 338 | | |
| 6 | | |
| 340 | | |
| 372 | | |
| 53 | |
Multifamily | |
| — | | |
| — | | |
| — | | |
| — | | |
| — | |
Farmland | |
| 121 | | |
| 4 | | |
| 197 | | |
| 209 | | |
| 17 | |
Commercial | |
| 109 | | |
| 1 | | |
| 28 | | |
| 35 | | |
| 2 | |
Agriculture | |
| — | | |
| — | | |
| — | | |
| — | | |
| — | |
Consumer installment loans | |
| — | | |
| — | | |
| — | | |
| — | | |
| — | |
All other loans | |
| — | | |
| — | | |
| — | | |
| — | | |
| — | |
Total | |
$ | 3,909 | | |
$ | 70 | | |
$ | 2,833 | | |
$ | 3,709 | | |
$ | 166 | |
As of December 31, 2020 (Dollars are in thousands) | |
Average Recorded Investment | |
Interest Income Recognized | |
Recorded Investment | |
Unpaid Principal Balance | |
Related Allowance |
With no related allowance recorded: | |
| | | |
| | | |
| | | |
| | | |
| | |
Real estate secured: | |
| | | |
| | | |
| | | |
| | | |
| | |
Commercial | |
$ | 1,680 | | |
$ | 16 | | |
$ | 385 | | |
$ | 386 | | |
$ | — | |
Construction and land development | |
| 89 | | |
| 18 | | |
| 99 | | |
| 376 | | |
| — | |
Residential 1-4 family | |
| 1,788 | | |
| 53 | | |
| 1,662 | | |
| 1,898 | | |
| — | |
Multifamily | |
| — | | |
| — | | |
| — | | |
| — | | |
| — | |
Farmland | |
| 550 | | |
| 59 | | |
| 391 | | |
| 560 | | |
| — | |
Commercial | |
| 59 | | |
| — | | |
| — | | |
| — | | |
| — | |
Agriculture | |
| — | | |
| — | | |
| — | | |
| — | | |
| — | |
Consumer installment loans | |
| 4 | | |
| — | | |
| 5 | | |
| 6 | | |
| — | |
All other loans | |
| — | | |
| — | | |
| — | | |
| — | | |
| — | |
With an allowance recorded: | |
| | | |
| | | |
| | | |
| | | |
| | |
Real estate secured: | |
| | | |
| | | |
| | | |
| | | |
| | |
Commercial | |
| 707 | | |
| — | | |
| 1,566 | | |
| 1,678 | | |
| 574 | |
Construction and land development | |
| — | | |
| — | | |
| — | | |
| — | | |
| — | |
Residential 1-4 family | |
| 150 | | |
| 3 | | |
| 337 | | |
| 365 | | |
| 72 | |
Multifamily | |
| — | | |
| — | | |
| — | | |
| — | | |
| — | |
Farmland | |
| 212 | | |
| 9 | | |
| 208 | | |
| 220 | | |
| 2 | |
Commercial | |
| 214 | | |
| 12 | | |
| 429 | | |
| 437 | | |
| 404 | |
Agriculture | |
| — | | |
| — | | |
| — | | |
| — | | |
| — | |
Consumer installment loans | |
| — | | |
| — | | |
| — | | |
| — | | |
| — | |
All other loans | |
| — | | |
| — | | |
| — | | |
| — | | |
| — | |
Total | |
$ | 5,453 | | |
$ | 170 | | |
$ | 5,082 | | |
$ | 5,926 | | |
$ | 1,052 | |
An
age analysis of past due loans receivable is below. At December 31, 2021 and 2020, there were no loans over 90 days past due that were
accruing.
Summary of age analysis of past due loans receivable | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
As of December 31, 2021 (Dollars are in thousands) | |
Loans 30-59 Days Past Due | |
Loans 60-89 Days Past Due | |
Loans 90 or More Days Past Due | |
Total Past Due Loans | |
Current Loans | |
Total Loans |
Real estate secured: | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
Commercial | |
$ | — | | |
$ | — | | |
$ | — | | |
$ | — | | |
$ | 206,162 | | |
$ | 206,162 | |
Construction and land development | |
| 7 | | |
| — | | |
| 7 | | |
| 14 | | |
| 32,311 | | |
| 32,325 | |
Residential 1-4 family | |
| 2,473 | | |
| 240 | | |
| 486 | | |
| 3,199 | | |
| 221,331 | | |
| 224,530 | |
Multifamily | |
| — | | |
| — | | |
| 111 | | |
| 111 | | |
| 32,937 | | |
| 33,048 | |
Farmland | |
| — | | |
| — | | |
| — | | |
| — | | |
| 18,735 | | |
| 18,735 | |
Total real estate loans | |
| 2,480 | | |
| 240 | | |
| 604 | | |
| 3,324 | | |
| 511,476 | | |
| 514,800 | |
Commercial | |
| 5 | | |
| — | | |
| — | | |
| 5 | | |
| 54,320 | | |
| 54,325 | |
Agriculture | |
| — | | |
| — | | |
| — | | |
| — | | |
| 4,021 | | |
| 4,021 | |
Consumer installment Loans | |
| 56 | | |
| 5 | | |
| — | | |
| 61 | | |
| 18,695 | | |
| 18,756 | |
All other loans | |
| — | | |
| — | | |
| — | | |
| — | | |
| 1,842 | | |
| 1,842 | |
Total loans | |
$ | 2,541 | | |
$ | 245 | | |
$ | 604 | | |
$ | 3,390 | | |
$ | 590,354 | | |
$ | 593,744 | |
As of December 31, 2020 (Dollars are in thousands) | |
Loans 30-59 Days Past Due | |
Loans 60-89 Days Past Due | |
Loans 90 or More Days Past Due | |
Total Past Due Loans | |
Current Loans | |
Total Loans |
Real estate secured: | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
Commercial | |
$ | 969 | | |
$ | — | | |
$ | — | | |
$ | 969 | | |
$ | 178,412 | | |
$ | 179,381 | |
Construction and land development | |
| 64 | | |
| — | | |
| — | | |
| 64 | | |
| 24,967 | | |
| 25,031 | |
Residential 1-4 family | |
| 5,717 | | |
| 615 | | |
| 690 | | |
| 7,022 | | |
| 215,958 | | |
| 222,980 | |
Multifamily | |
| — | | |
| — | | |
| — | | |
| — | | |
| 16,569 | | |
| 16,569 | |
Farmland | |
| 57 | | |
| — | | |
| — | | |
| 57 | | |
| 18,311 | | |
| 18,368 | |
Total real estate loans | |
| 6,807 | | |
| 615 | | |
| 690 | | |
| 8,112 | | |
| 454,217 | | |
| 462,329 | |
Commercial | |
| 214 | | |
| — | | |
| — | | |
| 214 | | |
| 85,796 | | |
| 86,010 | |
Agriculture | |
| 7 | | |
| 1 | | |
| — | | |
| 8 | | |
| 4,442 | | |
| 4,450 | |
Consumer installment Loans | |
| 214 | | |
| 22 | | |
| — | | |
| 236 | | |
| 20,396 | | |
| 20,632 | |
All other loans | |
| — | | |
| — | | |
| — | | |
| — | | |
| 2,145 | | |
| 2,145 | |
Total loans | |
$ | 7,242 | | |
$ | 638 | | |
$ | 690 | | |
$ | 8,570 | | |
$ | 566,996 | | |
$ | 575,566 | |
The
Company categorizes loans receivable into risk categories based on relevant information about the ability of borrowers to service their
debt such as: current financial information, historical payment experience, credit documentation, public information, and current economic
trends, among other factors. The Company analyzes loans and leases individually by classifying the loans receivable as to credit risk.
The Company uses the following definitions for risk ratings:
Pass
- Loans in this category are considered to have a low likelihood of loss based on analysis of relevant information about the ability
of the borrowers to service their debt and other factors.
Special
Mention - Loans in this category are currently protected but are potentially weak, including adverse trends in borrower’s operations,
credit quality or financial strength. Those loans constitute an undue and unwarranted credit risk but not to the point of justifying
a substandard classification. The credit risk may be relatively minor yet constitute an unwarranted risk in light of the circumstances.
Special mention loans have potential weaknesses which may, if not checked or corrected, weaken the loan or inadequately protect
the Company’s credit position at some future date.
Substandard
- A substandard loan is inadequately protected by the current sound net worth and paying capacity of
the obligor or of the collateral pledged, if any. Loans classified as substandard must have a well-defined weakness or weaknesses that
jeopardize the liquidation of the debt; they are characterized by the distinct possibility that the institution will sustain some loss
if the deficiencies are not corrected.
Doubtful
- Loans classified Doubtful have all the weaknesses
inherent in loans classified Substandard, plus the added characteristic that the weaknesses make collection or liquidation in full on
the basis of currently existing facts, conditions, and values highly questionable and improbable. There were no loans classified as doubtful
at either December 31, 2021 or 2020.
Based
on the most recent analysis performed, the risk category of loans receivable was as follows:
Summary of risk category of loans receivable | |
| | | |
| | | |
| | | |
| | | |
| | |
As of December 31, 2021 (Dollars are in thousands) | |
Pass | |
Special Mention | |
Substandard | |
Doubtful | |
Total |
Real estate secured: | |
| | | |
| | | |
| | | |
| | | |
| | |
Commercial | |
$ | 198,022 | | |
$ | 7,725 | | |
$ | 415 | | |
$ | — | | |
$ | 206,162 | |
Construction and land development | |
| 31,366 | | |
| 922 | | |
| 37 | | |
| — | | |
| 32,325 | |
Residential 1-4 family | |
| 221,342 | | |
| 915 | | |
| 2,273 | | |
| — | | |
| 224,530 | |
Multifamily | |
| 32,499 | | |
| 438 | | |
| 111 | | |
| — | | |
| 33,048 | |
Farmland | |
| 18,137 | | |
| 550 | | |
| 48 | | |
| — | | |
| 18,735 | |
Total real estate loans | |
| 501,366 | | |
| 10,550 | | |
| 2,884 | | |
| — | | |
| 514,800 | |
Commercial | |
| 53,162 | | |
| 1,154 | | |
| 9 | | |
| — | | |
| 54,325 | |
Agriculture | |
| 4,021 | | |
| — | | |
| — | | |
| — | | |
| 4,021 | |
Consumer installment loans | |
| 18,746 | | |
| 2 | | |
| 8 | | |
| — | | |
| 18,756 | |
All other loans | |
| 1,842 | | |
| — | | |
| — | | |
| — | | |
| 1,842 | |
Total | |
$ | 579,137 | | |
$ | 11,706 | | |
$ | 2,901 | | |
$ | — | | |
$ | 593,744 | |
As of December 31, 2020 (Dollars are in thousands) | |
Pass | |
Special Mention | |
Substandard | |
Doubtful | |
Total |
Real estate secured: | |
| | | |
| | | |
| | | |
| | | |
| | |
Commercial | |
$ | 171,212 | | |
$ | 6,112 | | |
$ | 2,057 | | |
$ | — | | |
$ | 179,381 | |
Construction and land development | |
| 23,168 | | |
| 1,806 | | |
| 57 | | |
| — | | |
| 25,031 | |
Residential 1-4 family | |
| 218,947 | | |
| 1,304 | | |
| 2,729 | | |
| — | | |
| 222,980 | |
Multifamily | |
| 16,337 | | |
| 232 | | |
| — | | |
| — | | |
| 16,569 | |
Farmland | |
| 17,019 | | |
| 1,249 | | |
| 100 | | |
| — | | |
| 18,368 | |
Total real estate loans | |
| 446,683 | | |
| 10,703 | | |
| 4,943 | | |
| — | | |
| 462,329 | |
Commercial | |
| 81,846 | | |
| 3,711 | | |
| 453 | | |
| — | | |
| 86,010 | |
Agriculture | |
| 4,255 | | |
| 195 | | |
| — | | |
| — | | |
| 4,450 | |
Consumer installment loans | |
| 20,615 | | |
| 5 | | |
| 12 | | |
| — | | |
| 20,632 | |
All other loans | |
| 2,145 | | |
| — | | |
| — | | |
| — | | |
| 2,145 | |
Total | |
$ | 555,544 | | |
$ | 14,614 | | |
$ | 5,408 | | |
$ | — | | |
$ | 575,566 | |
| |
| | | |
| | | |
| | | |
| | | |
| | |
NOTE
7 ALLOWANCE FOR LOAN LOSSES
The
following tables present activity in the allowance for loan losses for the years ended December 30, 2021 and 2020. Allocation of a portion
of the allowance to one category of loans does not preclude its availability to absorb losses in other categories. Additionally, the
allocation of the allowance by recorded portfolio segment and impairment method is presented as of December 30, 2021 and 2020.
Schedule of allocation of portion of allowance |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Real
estate secured |
|
|
|
|
|
|
|
|
|
|
(Dollars are in thousands) |
|
Commercial |
|
Construction
and Land Development |
|
Residential
1-4 family |
|
Multifamily |
|
Farmland |
|
Commercial |
|
Agriculture |
|
Consumer
and All Other |
|
Unallocated |
|
Total |
Year ended
December 31, 2021 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Beginning balance |
$ |
2,281 |
$ |
233 |
$ |
1,951 |
$ |
151 |
$ |
97 |
$ |
2,275 |
$ |
40 |
$ |
163 |
$ |
- |
$ |
7,191 |
Charge-offs |
|
(915) |
|
- |
|
(48) |
|
- |
|
- |
|
(92) |
|
- |
|
(78) |
|
- |
|
(1,133) |
Recoveries |
|
2 |
|
6 |
|
85 |
|
- |
|
29 |
|
137 |
|
1 |
|
45 |
|
- |
|
305 |
Provision |
|
766 |
|
(50) |
|
249 |
|
103 |
|
23 |
|
(1,221) |
|
(13) |
|
(22) |
|
537 |
|
372 |
Ending balance |
$ |
2,134 |
$ |
189 |
$ |
2,237 |
$ |
254 |
$ |
149 |
$ |
1,099 |
$ |
28 |
$ |
108 |
$ |
537 |
$ |
6,735 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Allowance
for loan losses at December 31, 2021 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Individually evluated for impairment |
$ |
94 |
$ |
- |
$ |
53 |
$ |
- |
$ |
17 |
$ |
2 |
$ |
- |
$ |
- |
$ |
- |
$ |
166 |
Collectively evaluated for impairment |
|
2,040 |
|
189 |
|
2,184 |
|
254 |
|
132 |
|
1,097 |
|
28 |
|
108 |
|
537 |
|
6,569 |
Total |
$ |
2,134 |
$ |
189 |
$ |
2,237 |
$ |
254 |
$ |
149 |
$ |
1,099 |
$ |
28 |
$ |
108 |
$ |
537 |
$ |
6,735 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loans at December 31,
2021 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Individually evluated for impairment |
$ |
414 |
$ |
24 |
$ |
1,848 |
$ |
- |
$ |
517 |
$ |
28 |
$ |
- |
$ |
2 |
$ |
- |
$ |
2,833 |
Collectively evaluated for impairment |
|
205,748 |
|
32,301 |
|
222,682 |
|
33,048 |
|
18,218 |
|
54,297 |
|
4,021 |
|
20,596 |
|
- |
|
590,911 |
Total |
$ |
206,162 |
$ |
32,325 |
$ |
224,530 |
$ |
33,048 |
$ |
18,735 |
$ |
54,325 |
$ |
4,021 |
$ |
20,598 |
$ |
- |
$ |
593,744 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Real
estate secured |
|
|
|
|
|
|
|
|
|
|
(Dollars are in thousands) |
|
Commercial |
|
Construction
and Land Development |
|
Residential
1-4 family |
|
Multifamily |
|
Farmland |
|
Commercial |
|
Agriculture |
|
Consumer
and All Other |
|
Unallocated |
|
Total |
Year ended
December 31, 2020 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Beginning balance |
$ |
1,248 |
$ |
158 |
$ |
1,736 |
$ |
104 |
$ |
109 |
$ |
1,789 |
$ |
27 |
$ |
195 |
$ |
2 |
$ |
5,368 |
Charge-offs |
|
(65) |
|
- |
|
(165) |
|
- |
|
(42) |
|
(329) |
|
(15) |
|
(85) |
|
- |
|
(701) |
Recoveries |
|
57 |
|
- |
|
38 |
|
- |
|
33 |
|
40 |
|
1 |
|
55 |
|
- |
|
224 |
Provision |
|
1,041 |
|
75 |
|
342 |
|
47 |
|
(3) |
|
775 |
|
27 |
|
(2) |
|
(2) |
|
2,300 |
Ending balance |
$ |
2,281 |
$ |
233 |
$ |
1,951 |
$ |
151 |
$ |
97 |
$ |
2,275 |
$ |
40 |
$ |
163 |
$ |
- |
$ |
7,191 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Allowance
for loan losses at December 31, 2020 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Individually evluated for impairment |
$ |
574 |
$ |
- |
$ |
72 |
$ |
- |
$ |
2 |
$ |
404 |
$ |
- |
$ |
- |
$ |
- |
$ |
1,052 |
Collectively evaluated for impairment |
|
1,707 |
|
233 |
|
1,879 |
|
151 |
|
95 |
|
1,871 |
|
40 |
|
163 |
|
- |
|
6,139 |
Total |
$ |
2,281 |
$ |
233 |
$ |
1,951 |
$ |
151 |
$ |
97 |
$ |
2,275 |
$ |
40 |
$ |
163 |
$ |
- |
$ |
7,191 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loans at December 31,
2020 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Individually evluated for impairment |
$ |
1,951 |
$ |
99 |
$ |
1,999 |
$ |
- |
$ |
599 |
$ |
429 |
$ |
- |
$ |
5 |
$ |
- |
$ |
5,082 |
Collectively evaluated for impairment |
|
177,430 |
|
24,932 |
|
220,981 |
|
16,569 |
|
17,769 |
|
85,581 |
|
4,450 |
|
22,772 |
|
- |
|
570,484 |
Total |
$ |
179,381 |
$ |
25,031 |
$ |
222,980 |
$ |
16,569 |
$ |
18,368 |
$ |
86,010 |
$ |
4,450 |
$ |
22,777 |
$ |
- |
$ |
575,566 |
In
determining the amount of our allowance, we rely on an analysis of our loan portfolio, our experience and our evaluation of general economic
conditions. If our assumptions prove to be incorrect, our current allowance may not be sufficient to cover future loan losses and we
may experience significant increases to our provision. Due to the underlying SBA guarantee provided for PPP loans, these accounts were
not included in either the portfolio segment or impairment calculations at December 31, 2021 and 2020. Additionally, due to uncertainties
presented by the ongoing pandemic and the resulting economic uncertainty, internal and external qualitative factors were revised accordingly.
For 2021, external qualitative factors were adjusted to consider the impact of inflation.
NOTE
8 TROUBLED DEBT RESTRUCTURINGS
At
December 31, 2021, loans classified as troubled debt restructurings totaled $2.5 million compared to $4.0 million at December 31, 2020.
The following table presents information related to loans modified as troubled debt restructurings during the years ended December 31,
2021 and 2020.
Schedule of loans modified as troubled debt restructurings | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
| |
December 31, 2021 | |
December 31, 2020 |
(Dollars are in thousands) | |
# of Loans | |
Pre-Mod. Recorded Investment | |
Post-Mod. Recorded Investment | |
# of Loans | |
Pre-Mod. Recorded Investment | |
Post-Mod. Recorded Investment |
Real estate secured: | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
Commercial | |
| — | | |
$ | — | | |
$ | — | | |
| 3 | | |
$ | 190 | | |
$ | 190 | |
Construction and land Development | |
| — | | |
| — | | |
| — | | |
| — | | |
| — | | |
| — | |
Residential 1-4 family | |
| 1 | | |
| 35 | | |
| 35 | | |
| 27 | | |
| 1,236 | | |
| 1,236 | |
Multifamily | |
| — | | |
| — | | |
| — | | |
| — | | |
| — | | |
| — | |
Farmland | |
| — | | |
| — | | |
| — | | |
| — | | |
| — | | |
| — | |
Total real estate loans | |
| — | | |
| — | | |
| — | | |
| 30 | | |
| 1,426 | | |
| 1,426 | |
Commercial | |
| — | | |
| — | | |
| — | | |
| — | | |
| — | | |
| — | |
Agriculture | |
| — | | |
| — | | |
| — | | |
| — | | |
| — | | |
| — | |
Consumer installment loans | |
| — | | |
| — | | |
| — | | |
| 2 | | |
| 7 | | |
| 7 | |
All other loans | |
| — | | |
| — | | |
| — | | |
| — | | |
| — | | |
| — | |
Total | |
| 1 | | |
$ | 35 | | |
$ | 35 | | |
| 32 | | |
$ | 1,433 | | |
$ | 1,433 | |
During
the year ended December 31, 2021, one loan was modified for which the modification was considered to be a troubled dept restructuring.
At
December 31, 2021, two loans totaling $56.0 thousand are considered to be in default. Generally, a TDR is considered to be in default
once it becomes 90 days or more past due following a modification.
As
discussed in Note 6, during the year ended December 31, 2020 modifications were granted on 786 loans with a gross aggregate balance of
$119.6 million, under the provisions of the CARES Act. The characteristics of these modifications are considered short-term and did not
result in a reclassification of the loans as troubled debt restructurings, as the accounts met the requirements stated in the CARES Act
and had not been subject to prior modification.
During
the year ended December 31, 2020, the Company modified the terms of 32 loans for which the modification was considered to be a troubled
debt restructuring. The interest rate was not modified on these loans; however, the payment terms or maturity date were changed.
When
determining the level of the allowance for loan losses, management considers troubled debt restructurings and subsequent defaults in
these restructurings in its estimate. The Company evaluates all troubled debt restructurings for possible further impairment. As a result,
the allowance may be increased, adjustments may be made in the allocation of the allowance, or charge-offs may be taken to further write
down the carrying value of these loans.
NOTE
9 BANK PREMISES AND EQUIPMENT
Depreciation
expense for 2021 and 2020 was $2.1 million and $2.2 million, respectively. Bank premises and equipment at December 31, 2021 and 2020
are summarized as follows:
Schedule of bank premises and equipment | |
| | | |
| | |
(Dollars are in thousands) | |
2021 | |
2020 |
Land | |
$ | 7,424 | | |
$ | 7,796 | |
Buildings and improvements | |
| 16,252 | | |
| 16,227 | |
Furniture and equipment | |
| 14,139 | | |
| 16,253 | |
Construction in progress | |
| — | | |
| 1,025 | |
| |
| 37,815 | | |
| 43,008 | |
Less accumulated depreciation | |
| (17,080 | ) | |
| (18,726 | ) |
Bank Premises and Equipment | |
$ | 20,735 | | |
$ | 22,174 | |
During
the year ended December 31, 2021, the Bank sold four former branch locations, with net book values of approximately $1.1 million, resulting
in approximately $173 thousand of net gains on sales.
Also,
during 2021, the Bank transferred three other former branch locations, with net book values totaling approximately $2.0 million, to other
real estate owned, resulting in an increase to OREO of $950 thousand, and disposal and valuation costs of approximately $1.1 million.
Subsequently, in December 2021, these OREO properties were written down to $912 thousand. Equipment with a combined net book value of
$188 thousand were written off in 2021.
One
new branch office, in Bristol, Virginia, was opened in 2021, resulting in an increase of $2.7 million in premises and equipment. During
2020, the Bank opened a new branch office in Kingsport, Tennessee, and a loan production office in Boone, North Carolina.
As
presented in Note 17 Leasing Activities, during 2021, the Bank repurchased the branch office located in Lebanon, Virginia, which had
previously been sold and leased back.
NOTE
10 INCOME TAXES
The
Company files a consolidated federal income tax return. The following summarizes the provision for income taxes and the related deferred
tax components for the years ended December 31, 2021 and 2020.
The
source of pre-tax book income is summarized as follows for the years ended December 31, 2021 and 2020:
Schedule of pre-tax book income | |
| | | |
| | |
(Dollars are in thousands) | |
2021 | |
2020 |
Pre-tax book income | |
| | | |
| | |
Domestic | |
$ | 8,952 | | |
$ | 3,993 | |
Total pre-tax book income | |
$ | 8,952 | | |
$ | 3,993 | |
Income
tax expense is summarized as follows for the years ended December 31, 2021 and 2020:
Schedule of components of income tax expense | |
| | | |
| | |
(Dollars are in thousands) | |
2021 | |
2020 |
Current income tax expense (benefit) | |
| | | |
| | |
Federal | |
$ | (172 | ) | |
$ | (200 | ) |
State | |
| — | | |
| — | |
Total current income tax expense (benefit) | |
| (172 | ) | |
| (200 | ) |
Deferred income tax expense | |
| |
|
Federal | |
| 2,067 | | |
| 1,304 | |
State | |
| 47 | | |
| (1 | ) |
Total deferred income tax expense | |
| 2,114 | | |
| 1,303 | |
Income tax expense | |
$ | 1,942 | | |
$ | 1,103 | |
The
following table summarizes the differences between the actual income tax expense and the amounts computed using the federal statutory
tax rate of 21% for years ended December 31, 2021 and 2020, respectively:
Schedule of reconciliation of income tax expense | |
| | | |
| | |
(Dollars are in thousands) | |
2021 | |
2020 |
Income tax expense (benefit) at the applicable federal rate | |
$ | 1,879 | | |
$ | 839 | |
Permanent differences resulting from: | |
| | | |
| | |
Nondeductible expenses | |
| 7 | | |
| 8 | |
Tax exempt interest income | |
| (4 | ) | |
| (7 | ) |
Bank owned life insurance | |
| (7 | ) | |
| (16 | ) |
Other adjustments | |
| 67 | | |
| 279 | |
Income tax expense | |
$ | 1,942 | | |
$ | 1,103 | |
The
net deferred tax assets and liabilities resulting from temporary differences as of December 31, 2021 and 2020, are summarized as follows:
Schedule of net deferred tax assets and liabilities | |
| | | |
| | |
(Dollars are in thousands) | |
2021 | |
2020 |
Deferred Tax Assets | |
| | | |
| | |
Allowance for loan losses | |
$ | 1,500 | | |
$ | 1,568 | |
Deferred compensation | |
| 85 | | |
| 92 | |
Nonaccrual loan interest | |
| 532 | | |
| 490 | |
Unrealized loss on securities available for sale | |
| 216 | | |
| — | |
Other real estate owned | |
| 305 | | |
| 83 | |
Amortization of core deposits | |
| 6 | | |
| 18 | |
Amortization of goodwill | |
| 31 | | |
| 90 | |
Capitalized interest and repair expense | |
| 23 | | |
| 23 | |
Net operating loss carryforward | |
| 460 | | |
| 2,172 | |
Other | |
| 98 | | |
| 33 | |
Total Assets, gross | |
| 3,256 | | |
| 4,569 | |
Valuation allowance | |
| — | | |
| — | |
Total Assets, net | |
| 3,256 | | |
| 4,569 | |
Deferred Tax Liabilities | |
| | | |
| | |
Accelerated depreciation | |
| 1,105 | | |
| 869 | |
Unrealized gain on securities available for sale | |
| — | | |
| 197 | |
Prepaid expenses | |
| 27 | | |
| 22 | |
Deferred loan costs | |
| 451 | | |
| 355 | |
Total Liabilities, gross | |
| 1,583 | | |
| 1,443 | |
Net Deferred Tax Asset | |
$ | 1,673 | | |
$ | 3,126 | |
In
accordance with applicable accounting guidance, the Company determined that it was not required to establish a valuation allowance for
deferred tax assets as it is more likely than not that the deferred tax asset will be realized through future taxable income, future
reversals of existing taxable temporary differences and tax strategies. The Company’s net deferred tax asset is recorded in the
consolidated financial statements separately.
At
December 31, 2021 and 2020, the Company had no unrecognized tax benefits. The Company does not expect the total amount of unrecognized
tax benefits to increase significantly over the next twelve months. The company recognizes interest and penalties as a component of income
tax expense.
The
Company and Bank are subject to U. S. federal income tax, a capital-based franchise tax in the Commonwealth of Virginia; and income and
excise taxes in West Virginia, Tennessee and North Carolina, respectively, based on earnings realized from business activities within
each state. Years prior to 2018 are no longer subject to examination by taxing authorities.
NOTE
11 TIME DEPOSITS
The
aggregate amount of time deposits that meet or exceed the Federal Deposit Insurance Corporation (FDIC) Insurance limit of $250,000 was
$28.6 million and $34.8 million at December 31, 2021 and 2020, respectively. We had no brokered time deposits at either December 31,
2021 or 2020. At December 31, 2021, the scheduled maturities of time deposits are as follows (dollars
are in thousands):
Schedule of maturities |
|
|
2022 |
$ |
116,638 |
2023 |
|
39,197 |
2024 |
|
11,925 |
2025 |
|
18,095 |
2026 |
|
10,417 |
After
five years |
|
- |
Total |
$ |
196,272 |
NOTE
12 RELATED PARTY TRANSACTIONS
Officers,
directors (and companies controlled by them), principal shareholders, and associates were customers of and had loan transactions with
the Bank in the normal course of business. The following table summarizes these transactions, which were made on substantially the same
terms as those prevailing for other customers and did not involve any abnormal risk.
Schedule of related party | |
| | | |
| | |
| |
For the year ended December 31, |
(Dollars in thousands) | |
2021 | |
2020 |
Beginning balance | |
$ | 4,187 | | |
$ | 2,457 | |
New loans and advances on lines | |
| 2,620 | | |
| 4,567 | |
Payments and other reductions | |
| (3,388 | ) | |
| (2,837 | ) |
Ending balance | |
$ | 3,419 | | |
$ | 4,187 | |
Total
related party deposits held at the Bank were $24.8 million and $21.5 million as of December 31, 2021 and 2020, respectively.
NPB
Insurance Services, Inc. holds a 39% membership interest in Lonesome Pine Title Agency, LLC, which provides title insurance. Another
member of the agency is a related party to the Company.
In
August, 2021, the Bank sold a parcel of land, adjacent to the Grundy, Virginia office to a director for $150 thousand, which approximated
the fair value of the property. A gain of $17 thousand was recorded from this transaction.
NOTE
13 RETIREMENT PLANS
The
Company has established a qualified defined contribution plan that covers all full-time employees. The Company matches employee contributions
up to a maximum of 3% of their salary. The Company contributed $246 thousand and $258 thousand to the defined contribution plan for 2021
and 2020, respectively.
The
Bank maintains a salary continuation plan for key executives which was established in 2002 and is funded by single premium life insurance
policies. Expenses related to the plan were $29 thousand and $17 thousand for the years ended December 31, 2021 and 2020, respectively.
NOTE
14 OTHER REAL ESTATE OWNED
The
following table summarizes the activity in other real estate owned for the years ended December 31, 2021 and 2020:
Schedule of other real estate owned | |
| | | |
| | |
| |
2021 | |
2020 |
(Dollars are in thousands) | |
| | | |
| | |
Balance, beginning of year | |
$ | 3,334 | | |
$ | 3,393 | |
Additions | |
| 566 | | |
| 1,128 | |
Transfers from premises and equipment | |
| 950 | | |
| — | |
Proceeds from sales | |
| (2,645 | ) | |
| (687 | ) |
Proceeds from insurance claims | |
| (54 | ) | |
| — | |
Loans made to finance sales | |
| (400 | ) | |
| (428 | ) |
Adjustment of carrying value | |
| (466 | ) | |
| (132 | ) |
Gains (losses) from sales | |
| 76 | | |
| 60 | |
Balance, end of year | |
$ | 1,361 | | |
$ | 3,334 | |
NOTE
15 BANK OWNED LIFE INSURANCE
At
December 31, 2021 and 2020, the Bank had an aggregate total cash surrender value of $4.7 million and $4.7 million, respectively, on life
insurance policies covering former key officers.
Total
income for the policies during 2021 and 2020 was $32 thousand and $77 thousand, respectively.
NOTE
16 DIVIDEND LIMITATIONS ON SUBSIDIARY BANK
A
principal source of funds for the Company is dividends paid by the Bank. The Federal Reserve Act restricts the amount of dividends the
Bank may pay. Approval by the Board of Governors of the Federal Reserve System is required if the dividends declared by a state member
bank, in any year, exceed the sum of (1) net income of the current year and (2) income net of dividends for the preceding two years.
Virginia
law restricts the amount of dividends a Virginia corporation may pay. Generally, a Virginia corporation may not authorize and make distributions
if, after giving effect to the distribution, it would be unable to meet its debts as they become due in the usual course of business
or if the corporation’s total assets would be less than the sum of its total liabilities plus the amount that would be needed,
if it were dissolved at that time, to satisfy the preferential rights of shareholders whose rights are superior to the rights of those
receiving the distribution. In addition, the payment of distributions to shareholders is subject to any prior rights of outstanding preferred
stock.
NOTE
17 LEASING ACTIVITIES
During
2021, the Bank repurchased its branch office located in Lebanon, Virginia, for $1.3 million. This branch had previously been sold and
leased back in September 2019. As a result of the repurchase, the lease with a remaining term of 12.9 years was cancelled.
At
December 31, 2021, the Bank leases four branch offices and sublets a lot adjacent to another branch office. The lease agreements have
maturity dates ranging from May 2032 to December 2041. It is assumed that there are currently no circumstances in which the leases would
be terminated prior to expiration. The weighted average remaining life of the lease terms at December 31, 2021, was 10.61 years.
The
discount rate used in determining the lease liability for each individual lease was the FHLB fixed advance rate which corresponded to
the lease term for each transaction. This methodology is expected to be used for any other subsequent lease agreements. The weighted
average discount rate for the leases at December 31, 2021 was 3.24%.
The
Company’s operating lease costs for the years ended December 31, 2021 and 2020, as a result of the transactions discussed above,
was $528 thousand and $552 thousand, respectively.
The
Company’s other operating leases were evaluated and determined to be immaterial to the financial statements. At
December 31, 2021, future minimum rental commitments under the non-cancellable operating leases discussed above are as follows (dollars
are in thousands):
Schedule of future minimum rental commitments under the non-cancellable operating leases |
|
|
2022 |
$ |
441 |
2023 |
|
455 |
2024 |
|
455 |
2025 |
|
455 |
2026 |
|
455 |
Thereafter |
|
2,698 |
Total
lease payments |
|
4,959 |
Less
imputed interest |
|
897 |
|
|
|
Total |
$ |
4,062 |
NOTE
18 BORROWED FUNDS
The
following table presents the breakdown of borrowed funds as of December 31, 2021 and 2020 (dollars in thousands):
Schedule of breakdown of borrowed funds |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
FHLB
Revolving Advances
(a) |
|
Federal
Funds Lines
(b) |
|
FHLB
Term Loans Short-Term
(c) |
|
FHLB
Term Loans Long-Term
(d) |
|
NPB
Capital Trust I
(e) |
|
NPB
Capital Trust 2
(e) |
|
Total
|
Balance
December 31, 2021 |
$ |
- |
$ |
-
|
$ |
-
|
$ |
-
|
$ |
11,341
|
$ |
5,155
|
$ |
16,496
|
Highest
balance at any month-end |
|
-
|
|
1,020
|
|
5,000
|
|
- |
|
11,341
|
|
5,155
|
|
|
Average
weighted balance |
|
-
|
|
8 |
|
2,466
|
|
- |
|
11,341
|
|
5,155
|
|
18,970
|
Average
interest rate: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Paid
during the year |
|
-
% |
|
2.51% |
|
1.36% |
|
-
% |
|
2.81% |
|
1.97% |
|
2.39% |
|
At
year-end |
|
-% |
|
-% |
|
-% |
|
-
% |
|
2.72% |
|
1.89% |
|
2.46% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance
December 31, 2020 |
$ |
- |
$ |
-
|
$ |
5,000
|
$ |
-
|
$ |
11,341
|
$ |
5,155
|
$ |
21,496
|
Highest
balance at any month-end |
|
-
|
|
-
|
|
5,000
|
|
5,000 |
|
11,341
|
|
5,155
|
|
|
Average
weighted balance |
|
-
|
|
-
|
|
2,555
|
|
2,445 |
|
11,341
|
|
5,155
|
|
21,496
|
Average
interest rate: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Paid
during the year |
|
-
% |
|
-% |
|
1.36% |
|
1.36% |
|
3.55% |
|
2.70% |
|
2.84% |
|
At
year-end |
|
-% |
|
-% |
|
1.34% |
|
-
% |
|
2.84% |
|
2.01% |
|
2.29% |
(a)
- The Bank has the ability to borrow up to an additional $111.6 million from the FHLB under a line of credit which is secured by a blanket
lien on residential real estate loans. With additional collateral, the Bank’s total credit availability would be $187.9 million.
The Bank had no overnight borrowings subject to daily rate changes from the FHLB at December 31, 2021 or 2020.
We
have used our line of credit with FHLB to issue letters of credit totaling $12.0 million to the Treasury Board of Virginia for collateral
on public funds deposited in the Bank. No draws on the letters of credit have been issued. The letters of credit are considered draws
on our FHLB line of credit.
(b)
- Federal funds lines consist of $30.0 million and $20.0 million in unsecured federal funds line of credit facilities with correspondent
banks as of December 31, 2021 and 2020, respectively exclusive of any outstanding balance.
(c)
- At December 31, 2020, short term FHLB advances consisted of one $5.0 million advance with a fixed rate of 1.34% which matured and was
paid off on June 30, 2021.
(d)
- At December 31, 2021 and 2020, there were no long term FHLB advances.
(e) -
TPS I - On July 7, 2004, the Company completed the issuance of $11.3 million in floating rate trust preferred securities offered by its
wholly owned subsidiary, NPB Capital Trust I (TPS I). The rate is determined quarterly and floats based on the 3-month LIBOR plus 260
basis points.
TPS
2 - On September 27, 2006, the Company completed the issuance of $5.2 million in floating rate trust preferred securities offered by
its wholly owned subsidiary, NPB Capital Trust 2 (TPS 2). The rate is determined quarterly and floats based on the 3-month LIBOR plus
177 basis points.
Under
the terms of the subordinated debt transactions, the securities have 30-year maturities and are redeemable, in whole or in part, without
penalty, at the option of the Company after five years from the issuance date, and on a quarterly basis thereafter.
Following
are maturities of borrowed funds at December 31, 2021 (dollars in thousands):
Schedule of maturities of borrowed funds | |
|
2022 | $ |
|
- |
2023 | |
- |
2024 | |
- |
2025 | |
- |
2026 | |
- |
| 2027 and thereafter | | |
| 16,496 |
| | | |
$ | 16,496 |
NOTE
19 FINANCIAL INSTRUMENTS WITH OFF-BALANCE SHEET RISK
In
the normal course of business, the Bank has outstanding commitments and contingent liabilities, such as commitments to extend credit
and standby letters of credit, which are not included in the accompanying consolidated financial statements. The Bank’s exposure
to credit loss in the event of nonperformance by the other party to the financial instruments for commitments to extend credit and standby
letters of credit is represented by the contractual or notional amount of those instruments. The Bank uses the same credit policies in
making such commitments as it does for instruments that are included in the balance sheet.
Financial
instruments whose contract amount represents credit risk at December 31, 2021 and 2020 were as follows:
Schedule of financial instruments with credit risk | |
| | | |
| | |
| |
2021 | |
2020 |
(Dollars in thousands) | |
| | | |
| | |
Commitments to extend credit | |
$ | 69,015 | | |
$ | 57,334 | |
Standby letters of credit | |
| 3,684 | | |
| 2,031 | |
Commitments
to extend credit are agreements to lend to a customer at either a fixed or variable interest rate as long as there is no violation of
any condition established in the contract. Commitments generally have fixed expiration dates or other termination clauses and may require
payment of a fee. Since many of the commitments are expected to expire without being drawn upon, the total commitment amounts do not
necessarily represent future cash requirements. The Bank evaluates each customer’s creditworthiness on a case-by-case basis. The
amount of collateral obtained, if deemed necessary by the Bank upon extension of credit, is based on management’s credit evaluation.
Collateral held varies but may include accounts receivable, inventory, property and equipment, and income-producing commercial properties.
Standby
letters of credit are conditional commitments issued by the Bank to guarantee the performance of a customer to a third party. Standby
letters of credit generally have fixed expiration dates or other termination clauses and may require payment of a fee. The credit risk
involved in issuing letters of credit is essentially the same as that involved in extending loan facilities to customers. The Bank’s
policy for obtaining collateral, and the nature of such collateral, is essentially the same as that involved in making commitments to
extend credit.
NOTE
20 LEGAL CONTINGENCIES
In
the course of operations, we may become a party to legal proceedings in the normal course of business. At December 31, 2021, we do not
anticipate that the aggregate ultimate liability arising out of litigation pending or threatened against the Company or any of its subsidiaries
to which the property of the Company or any of its subsidiaries is subject, in the opinion of management, may materially impact the financial
condition or liquidity of the Company.
The
Bank is a defendant in a complaint filed by a former employee in the United States District Court for the Western District of Virginia
on January 1, 2021. The complaint alleges wrongful termination based on gender, religion and age. The Bank denies the allegations and
intends to vigorously defend against these claims. The complaint does not specify the dollar amount of damage sought. The Bank has responded
with a vigorous defense as to all claims and assertions. The amount of any possible loss cannot be estimated at this time.
NOTE
21 CAPITAL
Capital
Requirements and Ratios
The
Company meets eligibility criteria of a small bank holding company in accordance with the Board of Governors of the Federal Reserve System’s
Small Bank Holding Company Policy Statement issued in February 2015, and is no longer obligated to report consolidated regulatory capital.
The
Bank is subject to various capital requirements administered by federal banking agencies. Failure to meet minimum capital requirements
can initiate certain mandatory and, possibly, additional discretionary actions by regulators that, if undertaken, could have a direct
material effect on the Bank’s financial statements. Under capital adequacy guidelines and the regulatory framework for prompt corrective
action, the Bank must meet specific capital guidelines that involve quantitative measures of assets, liabilities, and certain off-balance
sheet items as calculated under regulatory accounting practices. The capital amounts and classification are also subject to qualitative
judgments by the regulators about components, risk weightings, and other factors.
Quantitative
measures established by regulation to ensure capital adequacy require the Bank to maintain minimum amounts and ratios (set forth in the
following table) of total and Tier 1 capital to risk-weighted assets, Tier 1 capital to average assets, and Common Equity Tier 1 capital
to risk-weighted assets. As of December 31, 2021, the Bank meets all capital adequacy requirements to which it is subject.
The
Bank’s actual capital amounts and ratios are presented in the following table as of December 31, 2021 and 2020, respectively.
Schedule of capital requirements |
|
|
|
|
|
|
|
|
|
|
Actual |
Minimum
Capital Requirement |
Minimum
to Be Well Capitalized Under Prompt Corrective Action Provisions |
(Dollars
are in thousands) |
Amount |
Ratio |
Amount |
Ratio |
|
Amount |
Ratio |
December
31, 2021: |
Total
Capital to Risk Weighted Assets |
$ |
85,890 |
16.23% |
$
42,332 |
8.0% |
$ |
52,915 |
10.0% |
Tier
1 Capital to Risk Weighted Assets |
|
79,274 |
14.98% |
31,749 |
6.0% |
|
42,332 |
8.0% |
Tier
1 Capital to Average Assets |
|
79,274 |
9.86% |
32,145 |
4.0% |
|
40,181 |
5.0% |
Common
Equity Tier 1 Capital |
to
Risk Weighted Assets |
|
79,274 |
14.98% |
23,812 |
4.5% |
|
34,395 |
6.5% |
December
31, 2020: |
Total
Capital to Risk Weighted Assets |
$ |
77,133 |
16.41% |
$
37,603 |
8.0% |
$ |
47,028 |
10.0% |
Tier
1 Capital to Risk Weighted Assets |
|
71,241 |
15.16% |
28,202 |
6.0% |
|
37,603 |
8.0% |
Tier
1 Capital to Average Assets |
|
71,241 |
9.49% |
29,989 |
4.0% |
|
37,545 |
5.0% |
Common
Equity Tier 1 Capital |
to
Risk Weighted Assets |
|
71,241 |
15.16% |
30,036 |
4.5% |
|
30,552 |
6.5% |
Accordingly,
as of December 31, 2021 and 2020, the Bank was well capitalized under the regulatory framework for prompt corrective action. There are
no conditions or events since such dates that management believes have changed the Bank’s category.
The
Bank is also subject to the rules implementing the Basel III capital framework and certain related provisions of the Dodd-Frank
Wall Street Reform and Consumer Protection Act of 2010. The final rules require the Bank to comply with the following minimum capital
ratios: (i) a Common Equity Tier 1 capital to risk-weighted assets ratio of at least 4.5%, plus a 2.5% “capital conservation
buffer” (effectively resulting in a minimum Common Equity Tier 1 capital to risk-weighted assets ratio of 7%), (ii) a ratio of
Tier 1 capital to risk-weighted assets of at least 6.0%, plus the 2.5% capital conservation buffer (effectively resulting in a minimum
Tier 1 capital ratio of 8.5%), (iii) a ratio of total capital to risk-weighted assets of at least, 8.0%, plus the 2.5% capital conservation
buffer (effectively resulting in a minimum total capital ratio of 10.5%), and (iv) a leverage ratio of 4%, calculated as the ratio
of Tier 1 capital to average assets. The Bank’s capital conservation buffer was 8.23% at December 31, 2021. The capital conservation
buffer is designed to absorb losses during periods of economic stress. Banking institutions with a Common Equity Tier 1 capital to risk-weighted
assets ratio above the minimum but below the conservation buffer face constraints on dividends, equity repurchases, and compensation
based on the amount of the shortfall. As of both December 31, 2021 and 2020, the Common Equity Tier 1 Capital to Risk-weighted Assets
ratio, the Tier 1 Capital to Risk-weighted Assets ratio, the Total Capital to Risk-weighted Assets ratio, and the Tier 1 Capital to Average
Assets ratio of the Bank, all exceeded the minimum requirements.
NOTE
22 FAIR VALUES
The
Company established a hierarchal disclosure framework associated with the level of pricing observability utilized in measuring assets
and liabilities at fair value. The three broad levels defined by this hierarchy are:
Level
1: Quoted prices are available in active markets for identical assets or liabilities as of the reported date.
Level
2: Pricing inputs are other than quoted prices in active markets, which are either directly or indirectly observable as of the reported
date. The nature of these assets and liabilities include items for which quoted prices are available but traded less frequently, and
items that are valued using other financial instruments, the parameters of which can be directly observed.
Level
3: Assets and liabilities that have little to no pricing observability as of the reported date. These items do not have two-way markets
and are measured using management’s best estimate of fair value, where the inputs into the determination of fair value require
significant management judgment or estimation.
A
description of the valuation methodologies used for instruments measured at fair value, as well as the general classification of such
instruments pursuant to the valuation hierarchy are as follows:
Investment
Securities Available for Sale - Investment securities available for sale are recorded at fair value on a recurring basis. Fair value
measurement is based upon quoted prices. The Company’s available for sale securities, totaling $107.4 million and $48.4 million
at December 31, 2021 and 2020, respectively, are the only assets whose fair values are measured on a recurring basis using Level 2 inputs
from an independent pricing service.
Loans
- The Company does not record loans at fair value on a recurring basis. Real estate serves as collateral on a substantial majority
of the Company’s loans. When a loan is considered impaired, a specific reserve may be established. Loans, which are deemed to be
impaired and require a reserve, are primarily valued on a non-recurring basis at the fair value of the underlying real estate collateral.
Where there is no observable market price, such fair values are obtained using independent appraisals, which management evaluates to
determine whether or not the fair value of the collateral is further impaired below the appraised value and adjusts for estimated costs
of disposition. The Company records impaired loans as nonrecurring Level 3 assets. The aggregate amount of impaired loans carried at
fair value was $2.8 million and $4.0 million at December 31, 2021 and 2020, respectively.
Other
Real Estate Owned –Other real estate owned is adjusted to fair value upon transfer of the loans, or former bank premises,
to other real estate owned. These assets are carried at the lower of their carrying value or fair value. Fair value is based
upon observable market prices, when available, reduced by estimated disposition costs, which the Company considers to be nonrecurring
Level 2 inputs. When observable market prices are not available, management determines the fair value of the foreclosed asset using independent
third-party appraisals, evaluated to determine whether or not the property is further impaired below the appraised value, and adjusts
for estimated costs of disposition. The Company records foreclosed assets as nonrecurring Level 3. The aggregate carrying amounts of
foreclosed assets were $1.4 million and $3.3 million at December 31, 2021 and 2020, respectively.
Assets
and liabilities measured at fair value are as follows as of December 31, 2021 (for purpose of this table the impaired loans are shown
net of the related allowance):
Schedule of summary of assets and liabilities measured at fair value |
|
|
|
|
|
|
(Dollars
are in thousands) |
|
Quoted
market price in active markets
(Level
1) |
|
Significant
other observable inputs
(Level
2) |
|
Significant
unobservable inputs
(Level
3) |
(On
a recurring basis)
Available
for sale investments |
|
|
|
|
|
|
U.S.
Treasuries |
$ |
- |
$ |
7,671 |
$ |
|
U.S.
Government Agencies |
|
- |
|
9,089 |
|
- |
Taxable
municipals |
|
- |
|
22,980 |
|
- |
Corporate
bonds |
|
- |
|
2,019 |
|
- |
Mortgage
backed securities |
|
- |
|
65,599 |
|
- |
|
|
|
|
|
|
|
(On
a non-recurring basis)
Other
real estate owned |
|
- |
|
- |
|
1,361 |
Impaired
loans: |
|
|
|
|
|
|
Real
estate secured: |
|
|
|
|
|
|
Commercial |
|
- |
|
- |
|
414 |
Construction
and land development |
|
- |
|
- |
|
24 |
Residential
1-4 family |
|
- |
|
- |
|
1,848 |
Multifamily |
|
- |
|
- |
|
- |
Farmland |
|
- |
|
- |
|
517 |
Commercial |
|
- |
|
- |
|
28 |
Agriculture |
|
- |
|
- |
|
- |
Consumer
installment loans |
|
- |
|
- |
|
2 |
All
other loans |
|
- |
|
- |
|
- |
Total |
$ |
- |
$ |
107,358 |
$ |
4,194 |
Assets
and liabilities measured at fair value are as follows as of December 31, 2020 (for purpose of this table the impaired loans are shown
net of the related allowance):
|
|
|
|
|
|
|
(Dollars
are in thousands) |
|
Quoted
market price in active markets
(Level
1) |
|
Significant
other observable inputs
(Level
2) |
|
Significant
unobservable inputs
(Level
3) |
(On
a recurring basis)
Available
for sale investments |
|
|
|
|
|
|
U.S.
Government Agencies |
$ |
- |
$ |
14,107 |
$ |
- |
Taxable
municipals |
|
- |
|
5,345 |
|
- |
Corporate
bonds |
|
- |
|
6,048 |
|
- |
Mortgage
backed securities |
|
- |
|
22,906 |
|
- |
|
|
|
|
|
|
|
(On
a non-recurring basis)
Other
real estate owned |
|
- |
|
- |
|
3,334 |
Impaired
loans: |
|
|
|
|
|
|
Real
estate secured: |
|
|
|
|
|
|
Commercial |
|
- |
|
- |
|
1,377 |
Construction
and land development |
|
- |
|
- |
|
99 |
Residential
1-4 family |
|
- |
|
- |
|
1,927 |
Multifamily |
|
- |
|
- |
|
- |
Farmland |
|
- |
|
- |
|
597 |
Commercial |
|
- |
|
- |
|
25 |
Agriculture |
|
- |
|
- |
|
- |
Consumer
installment loans |
|
- |
|
- |
|
5 |
All
other loans |
|
- |
|
- |
|
- |
Total |
$ |
- |
$ |
48,406 |
$ |
7,364 |
For
Level 3 assets measured at fair value on a recurring or non-recurring basis as of December 31, 2021 and 2020, the significant unobservable
inputs used in the fair value measurements were as follows:
Schedule of significant unobservable inputs In level 3 assets |
|
|
|
|
|
|
|
|
|
|
(Dollars
in thousands) |
|
Fair
Value at December 31,
2021 |
|
Fair
Value at
December
31,
2020 |
|
Valuation
Technique |
|
Significant
Unobservable Inputs |
|
General
Range of Significant Unobservable Input Values |
|
|
|
|
|
|
|
|
|
|
|
Impaired
Loans |
$ |
2,667 |
$ |
4,030 |
|
Appraised
Value/Discounted Cash Flows/Market Value of Note |
|
Discounts
to reflect current market conditions, ultimate collectability, and estimated costs to sell |
|
0
– 18% |
|
|
|
|
|
|
|
|
|
|
|
Other
Real Estate Owned |
$ |
1,361 |
$ |
3,334 |
|
Appraised
Value/Comparable Sales/Other Estimates from Independent Sources |
|
Discounts
to reflect current market conditions and estimated costs to sell |
|
0
– 18% |
Fair
Value of Financial Instruments
The
carrying amount and fair value of the Company’s financial instruments that are not required to be measured or reported at fair
value on a recurring basis are as follows:
Schedule of estimated fair value of financial instruments |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fair
Value Measurements |
(Dollars
are in thousands) |
|
Carrying
Amount |
|
Fair
Value |
|
Quoted
market price in active markets
(Level
1) |
|
Significant
other observable inputs
(Level
2) |
|
Significant
unobservable inputs
(Level
3) |
|
|
|
|
|
|
|
|
|
|
|
December
31, 2021 |
|
|
|
|
|
|
|
|
|
|
Financial
Instruments – Assets |
|
|
|
|
|
|
|
|
|
|
Net
Loans |
$ |
587,009 |
$ |
580,024 |
$ |
- |
$ |
577,357 |
$ |
2,667 |
|
|
|
|
|
|
|
|
|
|
|
Financial
Instruments – Liabilities |
|
|
|
|
|
|
|
|
|
|
Time
Deposits |
|
196,285 |
|
198,353 |
|
- |
|
198,353 |
|
- |
Borrowed
Funds |
|
16,496 |
|
15,649 |
|
- |
|
15,649 |
|
- |
|
|
|
|
|
|
|
|
|
|
|
December
31, 2020 |
|
|
|
|
|
|
|
|
|
|
Financial
Instruments – Assets |
|
|
|
|
|
|
|
|
|
|
Net
Loans |
$ |
568,375 |
$ |
564,664 |
$ |
- |
$ |
560,634 |
$ |
4,030 |
|
|
|
|
|
|
|
|
|
|
|
Financial
Instruments – Liabilities |
|
|
|
|
|
|
|
|
|
|
Time
Deposits |
|
234,449 |
|
237,768 |
|
- |
|
237,768 |
|
- |
Borrowed
Funds |
|
21,496 |
|
16,788 |
|
- |
|
16,788 |
|
- |
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 judgments regarding future expected loss experience, current economic conditions, risk
characteristics of various financial instruments and other factors. These estimates are subjective in nature and involve uncertainties
and matters of significant judgment and therefore cannot be determined with precision. Changes in assumptions can significantly affect
the estimates.
Estimated
fair values have been determined by the Company using historical data, as generally provided in the Company’s regulatory reports,
and an estimation methodology suitable for each category of financial instruments. The Company’s fair value estimates, methods
and assumptions are set forth below for the Company’s other financial instruments.
The
carrying value of cash and due from banks, federal funds sold, interest-bearing deposits, deposits with no stated maturities and accrued
interest approximates fair value and is excluded from the table above.
The
methods utilized to measure the fair value of financial instruments represent an approximation of exit price; however, an actual exit
price may differ.
NOTE
23 REVENUE FROM CONTRACTS WITH CUSTOMERS
All
of our revenue from contracts with customers as defined in ASC 606 is recognized within Noninterest Income. The following table presents
Noninterest Income by revenue stream for the years ended December 31, 2021 and 2020.
Schedule of revenue from contracts with customers | |
| | | |
| | |
(Dollars are in thousands) | |
2021 | |
2020 |
Service charges and fees | |
$ | 3,724 | | |
$ | 3,217 | |
Card processing and interchange income | |
| 3,871 | | |
| 3,314 | |
Insurance and investment fees | |
| 1,029 | | |
| 716 | |
Gains on sales of available-for-sale securities (1) | |
| 322 | | |
| 4 | |
Other noninterest income | |
| 1,034 | | |
| 896 | |
Total Noninterest Income | |
$ | 9,980 | | |
$ | 8,147 | |
(1) |
– Not within the scope of ASU
2014-9 |
Certain
revenues are earned from contracts with customers. These revenues are recognized when the promised services are rendered to the customer
and reflects the entitled consideration received in exchange for those services.
Service
charges and fees – revenue is recognized on deposit services based on published fees for the services provided. These fees
may be collected on a transaction basis, at the time the service is rendered or periodically based on the period over which the service
is provided. Transaction based fees include services such as stop payment requests, paper statement rendering and ITM usage fees. Periodic
fees include such charges as monthly account maintenance fees. Overdraft fees are realized at the time the overdraft occurs.
Card
processing and interchange fees – Card related interchange revenue is primarily comprised of debit and credit card income.
Debit and credit card income is earned when customers’ debit or credit cards are processed through a card payment network. Card
related interchange income is recognized at the time the customer transactions settle.
Insurance
and investment fees - Insurance and investment fee income consists of commissions received on annuity and investment product sales
through a third-party service provider. Performance is generally satisfied at the time an annuity policy is issued, or at the execution
of an investment transaction.
NOTE
24 NONINTEREST EXPENSES
Other
operating expenses, included as part of noninterest expenses, consisted of the following for the years ended December 31, 2021 and 2020:
Schedule of noninterest expenses | |
| | | |
| | |
(Dollars are in thousands) | |
2021 | |
2020 |
Advertising, sponsorships and donations | |
$ | 252 | | |
$ | 216 | |
ATM network expense | |
| 1,473 | | |
| 1,476 | |
Legal and professional fees | |
| 922 | | |
| 839 | |
Consulting fees | |
| 269 | | |
| 504 | |
Loan related expenses | |
| 599 | | |
| 353 | |
Printing and supplies | |
| 133 | | |
| 141 | |
FDIC insurance premiums | |
| 266 | | |
| 393 | |
Other real estate owned expenses, net | |
| 506 | | |
| 307 | |
Other operating expenses | |
| 2,556 | | |
| 2,507 | |
Total | |
$ | 6,976 | | |
$ | 6,736 | |
NOTE
25 SUBSEQUENT EVENTS
Subsequent
events are events or transactions that occur after the balance sheet date but before financial statements are issued. Recognized subsequent
events are events or transactions that provide additional evidence about conditions that existed at the date of the balance sheet, including
the estimates inherent in the process of preparing financial statements. Non-recognized subsequent events are events that provide evidence
about conditions that did not exist at the date of the balance sheet but arose after that date. Management has reviewed events occurring
through the date the financial statements were available to be issued and has identified the following as a non-recognized subsequent
event.
On
February 28, 2022, the board of directors declared a dividend of $0.05 per share payable on March 31, 2022 to shareholders of record
as of March 15, 2022.
At
this time, we cannot state how the continuing economic uncertainty related to the pandemic and current geopolitical conditions will affect
the financial position, operations or liquidity of the Company.
NOTE
26 RECENT ACCOUNTING DEVELOPMENTS
The
following is a summary of recent authoritative announcements:
In
June 2016, per ASU No. 2016-13, ‘Financial Instruments – Credit Losses (Topic 326): Measurement of Credit Losses on Financial
Instruments,’ the Financial Accounting Standards Board (the FASB) issued guidance to change the accounting for credit losses and
modify the impairment model for certain debt securities. Subsequently, per ASU No. 2019-10, implementation for the Company is delayed
until reporting periods beginning after December 15, 2022. Early adoption is permitted for all organizations for periods beginning after
December 15, 2018. The Company is currently evaluating the effect that implementation of the new standard will have on its financial
position, results of operations, and cash flows.
In
May 2019, the FASB issued targeted transition relief for entities which irrevocably elect the fair value option for certain financial
assets previously measured at amortized cost basis. For those entities, the amendments to the transition guidance for ASU 2016-13 will
increase comparability of financial statement information by providing an option to align measurement methodologies for similar financial
assets. Subsequently, per ASU No. 2019-10, implementation for the Company is delayed until reporting periods beginning after December
15, 2021. The Company is currently in the process of evaluating the impact of adoption of this guidance on its financial statements.
In
November 2019, the FASB released ASU 2019-10, ‘Financial Instruments – Credit Losses (Topic 326), Derivatives and Hedging
(Topic 815), and Leases (Topic 842),’ in which the FASB shared a new philosophy to extend and simplify how effective dates for
certain major Updates would be staggered between larger public companies (bucket one) and all other entities (bucket two). A major Update
would first be effective for bucket-one entities. For bucket-two entities, including the Company, it is anticipated that the FASB will
consider requiring an effective date staggered at least two years after bucket one for major Updates. Generally, it is expected that
early application would continue to be allowed for all entities. The Company is considered a bucket-two entity due to its eligibility
to be a smaller reporting company, per the Securities and Exchange Commission (the SEC). This Update applies to ASU 2016-13, as discussed
above, ASU 2017-12, which does not apply to the Company, and ASU 2016-02, which the Company has already early-adopted.
In
December 2019, the FASB released ASU 2019-12, ‘Income Taxes (Topic 740),’ which simplify the accounting for income taxes
by removing certain exceptions to the general principles in Topic 740, improve consistent application, and simplify GAAP for other areas
of Topic 740. The amendments in this Update are effective for the Company for fiscal years beginning after December 15, 2021, and interim
periods within fiscal years beginning after December 15, 2022. The Company does not expect these amendments to have a material effect
on its financial statements.
In
January 2020, the FASB released ASU 2020-01, ‘Investments – Equity Securities (Topic 321), Investments – Equity Method
and Joint Ventures (Topic 323), and Derivatives and Hedging (Topic 815),’ which clarify certain interactions between the guidance
to account for certain equity securities under Topic 321, 323 and 815, and improve current GAAP by reducing diversity in practice and
increasing comparability of accounting. The amendments in this Update are effective for the Company for fiscal years beginning after
December 31, 2021, and interim periods within those fiscal years. Early adoption is permitted. The Company does not expect these amendments
to have a material effect on its financial statements.
In
March 2020, the FASB released ASU 2020-03, ‘Codification Improvements to Financial Instruments,’ as part of its ongoing project
for improving the Codification or correcting its unintended application. This Update is being issued to increase stakeholder awareness
of these amendments. These amendments affect Fair Value Option Disclosures, Applicability of Portfolio Exception in Topic 820 to Nonfinancial
Items, Disclosures for Depository and Lending Institutions, Cross-Reference to Line-of-Credit or Revolving-Debt Arrangements Guidance
in Subtopic 470-50, Cross-Reference to Net Asset Value Practical Expedient in Subtopic 820-10, Interaction of Topic 842 and Topic 326,
and Interaction of Topic 326 and Subtopic 860-20. The amendments in this update are effective immediately. The implementation of these
amendments did not have a material effect on its financial statements.
In
March 2020, the FASB released ASU 2020-04, ‘Reference Rate Reform (Topic 848), Facilitation of the Effects of Reference Rate Reform
on Financial Reporting,’ which provides optional guidance for a limited period of time to ease the potential burden in accounting
for (or recognizing the effects of) reference rate reform. The amendments in this Update are elective and apply to all entities, subject
to meeting certain criteria, that have contracts, hedging relationships, and other transactions that reference the London Interbank Offering
Rate (LIBOR) or another reference rate expected to be discontinued because of reference rate reform. The amendments in the Update are
effective for the Company as of March 12, 2020 through December 31, 2022. The Company is working through implementation of this guidance,
but does not expect this amendment to have a material impact on its financial statements.
In
August 2020, the FASB released ASU 2020-06, ‘Accounting for Convertible Instruments and Contracts in an Entity’s Own Equity,’
which reduces the number of accounting models for convertible debt instruments and convertible preferred stock. The Board concluded that
eliminating certain accounting models simplifies the accounting for convertible instruments, reduces complexity for preparers and practitioners,
and improves the decision usefulness and relevance of the information provided to financial statement users. The amendments in this Update
are effective for the Company for fiscal years beginning after December 15, 2021, including interim periods within those fiscal years.
The implementation of these amendments did not have a material effect on its financial statements.
In
January 2021, the FASB released ASU 2021-01, ‘Reference Rate Reform (Topic 848),’ which clarifies that certain optional expedients
and exceptions in topic 848 for contract modifications and hedge accounting apply to derivatives that are affected by the discounting
transition related to reference rate reform. The amendments in this Update are effective immediately for all entities. An entity may
elect to apply the amendments in the Update on a full retrospective basis as of any date from the beginning of an interim period that
includes or is subsequent to March 12, 2020, or on a prospective basis to new modifications from any date within an interim period that
includes or is subsequent to the date of the issuance of a final Update, up to the date that financial statements are available to be
issued. The Company does not expect this amendment to have a material effect on its financial statements.
In
July 2021, the FASB released ASU 2021-05, ‘Lessors – Certain Leases with Variable Lease Payments (Topic 842),’ which
amends the lease classification requirements for lessors to align them with practice under Topic 840. The amendments in this Update amend
Topic 842 and are effective for the Company for fiscal years beginning after December 15, 2021, and for interim periods within fiscal
years beginning after December 13, 2022. The Company may elect either (1) to retrospectively apply the amendments to leases that commenced
or were modified on or after the adoption of Update 2016-02 or (2) prospectively to leases that commence or are modified on or after
the date that the Company first applies the amendments. The Company does not expect this amendment to have a material effect on its financial
statements.
In
August 2021, the FASB released ASU 2021-06, ‘Presentation of Financial Statements (Topic 205), Financial Services – Depository
and Lending (Topic 942), and Financial Services – Investment Companies (Topic 946),’ which amends certain SEC paragraphs
pursuant to SEC final rule releases No. 33-10786, Amendments to Financial Disclosures about Acquired and Disposed Businesses,
and No. 33-10835, Update of Statistical Disclosures for Bank and Savings and Loan Registrants. These amendments become effective
for fiscal years ending on or after December 15, 2021. 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.
NOTE
27 PARENT CORPORATION
ONLY FINANCIAL STATEMENTS
CONDENSED
BALANCE SHEETS
AS
OF DECEMBER 31, 2021 AND 2020
(Dollars
in Thousands)
Schedule of parent corporation only condensed balance sheets | |
| | | |
| | |
| |
2021 | |
2020 |
ASSETS | |
| | | |
| | |
Due from banks | |
$ | 187 | | |
$ | 215 | |
Investment in subsidiaries | |
| 78,460 | | |
| 72,990 | |
Other assets | |
| 1,645 | | |
| 1,669 | |
Total Assets | |
$ | 80,292 | | |
$ | 74,874 | |
| |
| | | |
| | |
LIABILITIES | |
| | | |
| | |
Accrued interest payable | |
$ | 104 | | |
$ | 109 | |
Accrued expenses and other liabilities | |
| 61 | | |
| 92 | |
Trust preferred securities | |
| 16,496 | | |
| 16,496 | |
Total Liabilities | |
| 16,661 | | |
| 16,697 | |
| |
| | | |
| | |
STOCKHOLDERS’ EQUITY | |
| | | |
| | |
Common stock - $2.00 par value, 50,000,000 shares authorized; 23,922,086 shares issued and outstanding at both December 31, 2021 and 2020 | |
| 47,844 | | |
| 47,844 | |
Additional paid capital | |
| 14,570 | | |
| 14,570 | |
Retained earnings (deficit) | |
| 2,031 | | |
| (4,979 | ) |
Accumulated other comprehensive (loss) income | |
| (814 | ) | |
| 742 | |
Total Stockholders’ Equity | |
| 63,631 | | |
| 58,177 | |
Total Liabilities and Stockholders’ Equity | |
$ | 80,292 | | |
$ | 74,874 | |
CONDENSED
STATEMENTS OF INCOME
FOR
THE YEARS ENDED DECEMBER 31, 2021 AND 2020
(Dollars
in thousands)
Schedule of parent corporation only condensed statements of income | |
| | | |
| | |
| |
2021 | |
2020 |
| |
| |
|
Income | |
| | | |
| | |
Miscellaneous income | |
$ | 13 | | |
$ | 16 | |
Dividends from subsidiaries | |
| 430 | | |
| 610 | |
Undistributed income of subsidiaries | |
| 7,026 | | |
| 2,842 | |
Total income | |
| 7,469 | | |
| 3,468 | |
| |
| | | |
| | |
Expenses | |
| | | |
| | |
Trust preferred securities interest expense | |
| 420 | | |
| 541 | |
Professional fees | |
| 99 | | |
| 114 | |
Other operating expenses | |
| 58 | | |
| 19 | |
Total Expenses | |
| 577 | | |
| 674 | |
| |
| | | |
| | |
Income before Income Taxes | |
| 6,892 | | |
| 2,794 | |
Income Tax Benefit | |
| (118 | ) | |
| (96 | ) |
Net Income | |
$ | 7,010 | | |
$ | 2,890 | |
CONDENSED
STATEMENTS OF CASH FLOWS
FOR
THE YEARS ENDED DECEMBER 31, 2021 AND 2020
(Dollars
in thousands)
Schedule of parent corporation only condensed statements of cash flows | |
| | | |
| | |
| |
2021 | |
2020 |
| |
| |
|
Cash Flows From Operating Activities | |
| | | |
| | |
Net income | |
$ | 7,010 | | |
$ | 2,890 | |
Adjustments to reconcile net income to net cash used in operating activities: | |
| | | |
| | |
Equity in undistributed earnings of subsidiaries | |
| (6,580 | ) | |
| (2,842 | ) |
Net (increase) decrease in other assets | |
| (422 | ) | |
| 67 | |
Net decrease in other liabilities | |
| (36 | ) | |
| (109 | ) |
Net cash (used in) provided by operating activities | |
| (28 | ) | |
| 6 | |
| |
| | | |
| | |
Net (decrease) increase in Cash and Cash Equivalents | |
| (28 | ) | |
| 6 | |
Cash and Cash Equivalents, Beginning of year | |
| 215 | | |
| 209 | |
Cash and Cash Equivalents, End of Year | |
$ | 187 | | |
$ | 215 | |
| |
| | | |
| | |
Supplemental Disclosure of Cash Paid During the Year for: | |
| | | |
| | |
Interest | |
$ | 425 | | |
$ | 614 | |
Taxes | |
$ | — | | |
$ | (166 | ) |
NOTE
28 SELECTED QUARTERLY INFORMATION (UNAUDITED)
Schedule of selected quarterly information | |
| | | |
| | | |
| | | |
| | |
| |
2021 QUARTERS |
(Dollars in thousands except per share data) | |
Fourth | |
Third | |
Second | |
First |
Income statement | |
| | | |
| | | |
| | | |
| | |
Net interest income | |
$ | 6,729 | | |
| 7,418 | | |
| 6,651 | | |
$ | 6,413 | |
Provision for loan losses | |
| — | | |
| — | | |
| 186 | | |
| 186 | |
Noninterest income | |
| 2,503 | | |
| 2,970 | | |
| 2,378 | | |
| 2,129 | |
Noninterest expense | |
| 6,727 | | |
| 8,067 | | |
| 6,724 | | |
| 6,349 | |
Net income | |
| 1,917 | | |
| 1,845 | | |
| 1,663 | | |
| 1,585 | |
Earnings per share, basic and diluted * | |
| 0.08 | | |
| 0.08 | | |
| 0.07 | | |
| 0.07 | |
Period end balance sheet | |
| | | |
| | | |
| | | |
| | |
Total loans receivable | |
$ | 593,744 | | |
| 574,053 | | |
| 591,914 | | |
$ | 594,454 | |
Total assets | |
| 794,647 | | |
| 800,849 | | |
| 797,588 | | |
| 810,266 | |
Total deposits | |
| 707,513 | | |
| 713,489 | | |
| 711,367 | | |
| 720,954 | |
Total stockholders’ equity | |
| 63,631 | | |
| 62,518 | | |
| 60,964 | | |
| 59,347 | |
| |
| | | |
| | | |
| | | |
| | |
| |
| 2020 QUARTERS |
| |
| | | |
| | | |
| | | |
| | |
(Dollars in thousands except per share data) | |
| Fourth | | |
| Third | | |
| Second | | |
| First | |
Income statement | |
| | | |
| | | |
| | | |
| | |
Net interest income | |
$ | 6,447 | | |
| 6,414 | | |
$ | 6,140 | | |
$ | 6,142 | |
Noninterest income | |
| 300 | | |
| 450 | | |
| 550 | | |
| 1,000 | |
Provision for loan losses | |
| 2,234 | | |
| 2,116 | | |
| 1,628 | | |
| 2,165 | |
Noninterest expense | |
| 6,272 | | |
| 6,282 | | |
| 7,192 | | |
| 7,251 | |
Net income (loss) | |
| 1,391 | | |
| 1,424 | | |
| 29 | | |
| 46 | |
Earnings (loss) per share, basic and diluted | |
| 0.06 | | |
| 0.06 | | |
| 0.00 | | |
| 0.00 | |
Period end balance sheet | |
| | | |
| | | |
| | | |
| | |
Total loans receivable | |
$ | 575,566 | | |
| 585,122 | | |
$ | 587,566 | | |
$ | 560,468 | |
Total assets | |
| 756,302 | | |
| 749,125 | | |
| 754,651 | | |
| 715,144 | |
Total deposits | |
| 668,012 | | |
| 661,672 | | |
| 668,404 | | |
| 629,525 | |
Total stockholders’ equity | |
| 58,177 | | |
| 56,919 | | |
| 55,473 | | |
| 55,251 | |
* |
- For 2021, quarterly income per share does not total year-to-date
income per share due to rounding. |