UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
☒QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period SeptemberJune 30, 20172018
or
☐TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
Commission File Number: 000-52598
KENTUCKY BANCSHARES, INC.
(Exact name of registrant as specified in its charter)
Kentucky |
| 61-0993464 |
(State or other jurisdiction of |
| (I.R.S. Employer Identification No.) |
incorporation or organization) |
|
|
P.O. Box 157, Paris, Kentucky |
| 40362-0157 |
(Address of principal executive offices) |
| (Zip Code) |
Registrant’s telephone number, including area code: (859) 987-1795
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (Section 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes ☒ No ☐
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
Large accelerated filer ☐ | Accelerated filer |
|
|
Non-accelerated filer | Smaller reporting company ☐ |
(Do not check if a smaller reporting company) |
|
| Emerging growth company ☐ |
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒
Number of shares of Common Stock outstanding as of OctoberJuly 31, 2017: 2,971,611.2018: 2,978,344.
KENTUCKY BANCSHARES, INC.
2
KENTUCKY BANCSHARES, INC.
CONSOLIDATED BALANCE SHEETS (unaudited)
(Dollar amounts in thousands except per share amounts)data)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| 9/30/2017 |
| 12/31/2016 |
|
| 6/30/2018 |
| 12/31/2017 |
| ||||
ASSETS |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and due from banks |
| $ | 18,426 |
| $ | 42,052 |
|
| $ | 28,765 |
| $ | 38,851 |
|
Federal funds sold |
|
| 186 |
|
| 1,198 |
|
|
| 5 |
|
| 321 |
|
Cash and cash equivalents |
|
| 18,612 |
|
| 43,250 |
|
|
| 28,770 |
|
| 39,172 |
|
Interest bearing time deposits |
|
| 1,830 |
|
| 5,029 |
|
|
| 1,785 |
|
| 1,830 |
|
Securities available for sale |
|
| 289,956 |
|
| 273,770 |
|
|
| 290,504 |
|
| 318,177 |
|
Trading Assets |
|
| 5,714 |
|
| 5,592 |
| |||||||
Loans held for sale |
|
| 1,316 |
|
| 724 |
|
|
| 2,005 |
|
| 1,231 |
|
Loans |
|
| 648,965 |
|
| 656,007 |
|
|
| 668,778 |
|
| 648,535 |
|
Allowance for loan losses |
|
| (7,755) |
|
| (7,541) |
|
|
| (8,184) |
|
| (7,720) |
|
Net loans |
|
| 641,210 |
|
| 648,466 |
|
|
| 660,594 |
|
| 640,815 |
|
Federal Home Loan Bank stock |
|
| 7,034 |
|
| 7,034 |
|
|
| 7,034 |
|
| 7,034 |
|
Real estate owned, net |
|
| 2,669 |
|
| 1,824 |
|
|
| 1,404 |
|
| 2,404 |
|
Assets held for sale |
|
| — |
|
| 969 |
| |||||||
Bank premises and equipment, net |
|
| 16,265 |
|
| 14,781 |
|
|
| 17,728 |
|
| 16,539 |
|
Interest receivable |
|
| 3,785 |
|
| 3,715 |
|
|
| 3,733 |
|
| 3,951 |
|
Mortgage servicing rights |
|
| 1,485 |
|
| 1,321 |
|
|
| 1,606 |
|
| 1,511 |
|
Goodwill |
|
| 14,001 |
|
| 14,001 |
|
|
| 14,001 |
|
| 14,001 |
|
Other intangible assets |
|
| 405 |
|
| 529 |
|
|
| 298 |
|
| 369 |
|
Bank owned life insurance |
|
| 10,075 |
|
| — |
| |||||||
Other assets |
|
| 6,476 |
|
| 7,442 |
|
|
| 7,570 |
|
| 6,159 |
|
Total assets |
| $ | 1,010,758 |
| $ | 1,028,447 |
|
| $ | 1,047,107 |
| $ | 1,053,193 |
|
|
|
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|
|
|
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|
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|
|
LIABILITIES AND STOCKHOLDERS’ EQUITY |
|
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|
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|
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Deposits |
|
|
|
|
|
|
|
|
|
|
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|
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Non-interest bearing |
| $ | 220,518 |
| $ | 219,556 |
|
| $ | 238,033 |
| $ | 230,241 |
|
Time deposits, $250,000 and over |
|
| 68,528 |
|
| 74,302 |
|
|
| 49,198 |
|
| 79,578 |
|
Other interest bearing |
|
| 459,333 |
|
| 509,123 |
|
|
| 515,251 |
|
| 505,454 |
|
Total deposits |
|
| 748,379 |
|
| 802,981 |
|
|
| 802,482 |
|
| 815,273 |
|
Repurchase agreements |
|
| 24,070 |
|
| 20,873 |
|
|
| 9,120 |
|
| 19,900 |
|
Federal funds purchased |
|
| 17,302 |
|
| — |
|
|
| 15,717 |
|
| — |
|
Short-term Federal Home Loan Bank advances |
|
| 8,530 |
|
| — |
|
|
| 16,000 |
|
| 8,400 |
|
Long-term Federal Home Loan Bank advances |
|
| 93,665 |
|
| 92,500 |
|
|
| 86,683 |
|
| 90,332 |
|
Note payable |
|
| 3,762 |
|
| 4,090 |
|
|
| 2,963 |
|
| 3,321 |
|
Subordinated debentures |
|
| 7,217 |
|
| 7,217 |
|
|
| 7,217 |
|
| 7,217 |
|
Interest payable |
|
| 796 |
|
| 692 |
|
|
| 645 |
|
| 838 |
|
Other liabilities |
|
| 6,768 |
|
| 7,122 |
|
|
| 5,791 |
|
| 7,583 |
|
Total liabilities |
|
| 910,489 |
|
| 935,475 |
|
|
| 946,618 |
|
| 952,864 |
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Stockholders’ equity |
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|
|
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Preferred stock, 300,000 shares authorized and unissued |
|
| — |
|
| — |
|
|
| — |
|
| — |
|
Common stock, no par value; 10,000,000 shares authorized; 2,971,611 and 2,973,232 shares issued and outstanding at September 30, 2017 and December 31, 2016 |
|
| 20,889 |
|
| 20,767 |
| |||||||
Common stock, no par value; 10,000,000 shares authorized; 2,978,386 and 2,971,522 shares issued and outstanding at June 30, 2018 and December 31, 2017 |
|
| 21,085 |
|
| 20,931 |
| |||||||
Retained earnings |
|
| 78,515 |
|
| 73,161 |
|
|
| 84,764 |
|
| 80,395 |
|
Accumulated other comprehensive income (loss) |
|
| 865 |
|
| (956) |
| |||||||
Accumulated other comprehensive loss |
|
| (5,360) |
|
| (997) |
| |||||||
Total stockholders’ equity |
|
| 100,269 |
|
| 92,972 |
|
|
| 100,489 |
|
| 100,329 |
|
Total liabilities and stockholders’ equity |
| $ | 1,010,758 |
| $ | 1,028,447 |
|
| $ | 1,047,107 |
| $ | 1,053,193 |
|
See Accompanying Notes
3
KENTUCKY BANCSHARES, INC.
CONSOLIDATED STATEMENTS OF INCOME (unaudited)
(Dollar amounts in thousands except per share data)
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|
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|
| Three Months Ended |
| Six Months Ended |
| ||||||||
|
| 6/30/2018 |
| 6/30/2017 |
| 6/30/2018 |
| 6/30/2017 |
| ||||
INTEREST INCOME: |
|
|
|
|
|
|
|
|
|
|
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Loans, including fees |
| $ | 8,421 |
| $ | 7,712 |
| $ | 16,433 |
| $ | 15,206 |
|
Securities |
|
|
|
|
|
|
|
|
|
|
|
|
|
Taxable |
|
| 1,549 |
|
| 1,135 |
|
| 3,051 |
|
| 2,197 |
|
Tax exempt |
|
| 436 |
|
| 568 |
|
| 949 |
|
| 1,176 |
|
Trading assets |
|
| — |
|
| 25 |
|
| — |
|
| 59 |
|
Other |
|
| 144 |
|
| 144 |
|
| 337 |
|
| 322 |
|
Total interest income |
|
| 10,550 |
|
| 9,584 |
|
| 20,770 |
|
| 18,960 |
|
INTEREST EXPENSE: |
|
|
|
|
|
|
|
|
|
|
|
|
|
Deposits |
|
| 904 |
|
| 684 |
|
| 1,751 |
|
| 1,329 |
|
Repurchase agreements and federal funds purchased |
|
| 41 |
|
| 25 |
|
| 64 |
|
| 51 |
|
Federal Home Loan Bank advances |
|
| 441 |
|
| 388 |
|
| 876 |
|
| 785 |
|
Note payable |
|
| 26 |
|
| 49 |
|
| 62 |
|
| 99 |
|
Subordinated debentures |
|
| 105 |
|
| 77 |
|
| 190 |
|
| 157 |
|
Total interest expense |
|
| 1,517 |
|
| 1,223 |
|
| 2,943 |
|
| 2,421 |
|
Net interest income |
|
| 9,033 |
|
| 8,361 |
|
| 17,827 |
|
| 16,539 |
|
Provision for loan losses |
|
| 250 |
|
| 200 |
|
| 250 |
|
| 550 |
|
Net interest income after provision |
|
| 8,783 |
|
| 8,161 |
|
| 17,577 |
|
| 15,989 |
|
NON-INTEREST INCOME: |
|
|
|
|
|
|
|
|
|
|
|
|
|
Service charges |
|
| 1,326 |
|
| 1,302 |
|
| 2,614 |
|
| 2,525 |
|
Loan service fee income, net |
|
| 96 |
|
| 60 |
|
| 148 |
|
| 174 |
|
Trust department income |
|
| 320 |
|
| 287 |
|
| 635 |
|
| 575 |
|
Gain (loss) on sale of available for sale securities, net |
|
| (30) |
|
| 43 |
|
| (74) |
|
| 43 |
|
Gain (loss) on trading assets |
|
| — |
|
| 34 |
|
| — |
|
| 51 |
|
Gain on sale of loans |
|
| 445 |
|
| 491 |
|
| 819 |
|
| 1,041 |
|
Brokerage income |
|
| 141 |
|
| 181 |
|
| 350 |
|
| 374 |
|
Debit card interchange income |
|
| 837 |
|
| 780 |
|
| 1,600 |
|
| 1,511 |
|
Gain on bank premises |
|
| — |
|
| 6 |
|
| — |
|
| 1,200 |
|
Other |
|
| 173 |
|
| 111 |
|
| 267 |
|
| 151 |
|
Total other income |
|
| 3,308 |
|
| 3,295 |
|
| 6,359 |
|
| 7,645 |
|
NON-INTEREST EXPENSE: |
|
|
|
|
|
|
|
|
|
|
|
|
|
Salaries and employee benefits |
|
| 4,717 |
|
| 4,508 |
|
| 9,210 |
|
| 8,953 |
|
Occupancy expenses |
|
| 1,084 |
|
| 984 |
|
| 2,064 |
|
| 1,949 |
|
Repossession expenses, net |
|
| 42 |
|
| 106 |
|
| 57 |
|
| 185 |
|
FDIC Insurance |
|
| 77 |
|
| 94 |
|
| 156 |
|
| 188 |
|
Legal and professional fees |
|
| 196 |
|
| 194 |
|
| 425 |
|
| 477 |
|
Data processing |
|
| 463 |
|
| 494 |
|
| 932 |
|
| 900 |
|
Debit card expenses |
|
| 432 |
|
| 443 |
|
| 866 |
|
| 818 |
|
Amortization expense of intangible assets, excluding mortgage servicing right |
|
| 35 |
|
| 43 |
|
| 71 |
|
| 86 |
|
Advertising and marketing |
|
| 221 |
|
| 212 |
|
| 440 |
|
| 424 |
|
Taxes other than payroll, property and income |
|
| 313 |
|
| 300 |
|
| 625 |
|
| 600 |
|
Telephone |
|
| 119 |
|
| 137 |
|
| 198 |
|
| 259 |
|
Postage |
|
| 87 |
|
| 85 |
|
| 172 |
|
| 178 |
|
Loan fees |
|
| 17 |
|
| 48 |
|
| 57 |
|
| 111 |
|
Other |
|
| 781 |
|
| 901 |
|
| 1,601 |
|
| 1,607 |
|
Total other expenses |
|
| 8,584 |
|
| 8,549 |
|
| 16,874 |
|
| 16,735 |
|
Income before income taxes |
|
| 3,507 |
|
| 2,907 |
|
| 7,062 |
|
| 6,899 |
|
Provision for income taxes |
|
| 439 |
|
| 497 |
|
| 846 |
|
| 1,352 |
|
Net income |
| $ | 3,068 |
| $ | 2,410 |
| $ | 6,216 |
| $ | 5,547 |
|
Earnings per share |
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic |
| $ | 1.03 |
| $ | 0.81 |
| $ | 2.09 |
| $ | 1.87 |
|
Diluted |
|
| 1.03 |
|
| 0.81 |
|
| 2.09 |
|
| 1.87 |
|
Dividends per share |
|
| 0.31 |
|
| 0.29 |
|
| 0.62 |
|
| 0.58 |
|
See Accompanying Notes
34
KENTUCKY BANCSHARES, INC.
CONSOLIDATED STATEMENTS OF INCOME AND COMPREHENSIVE INCOME (unaudited)
(Dollar amounts in thousands, except per share amounts)thousands)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Three Months Ended |
| Nine Months Ended |
| ||||||||
|
| 9/30/2017 |
| 9/30/2016 |
| 9/30/2017 |
| 9/30/2016 |
| ||||
INTEREST INCOME: |
|
|
|
|
|
|
|
|
|
|
|
|
|
Loans, including fees |
| $ | 7,779 |
| $ | 7,630 |
| $ | 22,985 |
| $ | 22,432 |
|
Securities |
|
|
|
|
|
|
|
|
|
|
|
|
|
Taxable |
|
| 1,156 |
|
| 782 |
|
| 3,353 |
|
| 2,555 |
|
Tax exempt |
|
| 625 |
|
| 649 |
|
| 1,801 |
|
| 1,967 |
|
Trading assets |
|
| 27 |
|
| 44 |
|
| 86 |
|
| 117 |
|
Other |
|
| 132 |
|
| 101 |
|
| 454 |
|
| 319 |
|
Total interest income |
|
| 9,719 |
|
| 9,206 |
|
| 28,679 |
|
| 27,390 |
|
INTEREST EXPENSE: |
|
|
|
|
|
|
|
|
|
|
|
|
|
Deposits |
|
| 668 |
|
| 555 |
|
| 1,997 |
|
| 1,667 |
|
Repurchase agreements and federal funds purchased |
|
| 38 |
|
| 30 |
|
| 89 |
|
| 83 |
|
Federal Home Loan Bank advances |
|
| 466 |
|
| 428 |
|
| 1,251 |
|
| 1,205 |
|
Note payable |
|
| 48 |
|
| 57 |
|
| 147 |
|
| 177 |
|
Subordinated debentures |
|
| 75 |
|
| 70 |
|
| 232 |
|
| 198 |
|
Total interest expense |
|
| 1,295 |
|
| 1,140 |
|
| 3,716 |
|
| 3,330 |
|
Net interest income |
|
| 8,424 |
|
| 8,066 |
|
| 24,963 |
|
| 24,060 |
|
Provision for loan losses |
|
| 100 |
|
| 175 |
|
| 650 |
|
| 775 |
|
Net interest income after provision |
|
| 8,324 |
|
| 7,891 |
|
| 24,313 |
|
| 23,285 |
|
NON-INTEREST INCOME: |
|
|
|
|
|
|
|
|
|
|
|
|
|
Service charges |
|
| 1,281 |
|
| 1,401 |
|
| 3,806 |
|
| 3,782 |
|
Loan service fee income, net |
|
| 60 |
|
| (26) |
|
| 234 |
|
| 23 |
|
Trust department income |
|
| 304 |
|
| 272 |
|
| 879 |
|
| 796 |
|
Gain on sale of available for sale securities, net |
|
| 60 |
|
| 40 |
|
| 103 |
|
| 317 |
|
Gain (loss) on trading assets |
|
| (15) |
|
| (52) |
|
| 36 |
|
| 48 |
|
Gain on sale of loans |
|
| 415 |
|
| 533 |
|
| 1,456 |
|
| 1,289 |
|
Brokerage income |
|
| 215 |
|
| 168 |
|
| 589 |
|
| 602 |
|
Debit card interchange income |
|
| 763 |
|
| 699 |
|
| 2,274 |
|
| 2,053 |
|
Gain on bank premises |
|
| — |
|
| — |
|
| 1,200 |
|
| 4 |
|
Other |
|
| 88 |
|
| 201 |
|
| 239 |
|
| 218 |
|
Total other income |
|
| 3,171 |
|
| 3,236 |
|
| 10,816 |
|
| 9,132 |
|
NON-INTEREST EXPENSE: |
|
|
|
|
|
|
|
|
|
|
|
|
|
Salaries and employee benefits |
|
| 4,592 |
|
| 4,540 |
|
| 13,545 |
|
| 13,472 |
|
Occupancy expenses |
|
| 935 |
|
| 974 |
|
| 2,884 |
|
| 2,831 |
|
Repossession expenses, net |
|
| 104 |
|
| 79 |
|
| 289 |
|
| 222 |
|
FDIC Insurance |
|
| 86 |
|
| 106 |
|
| 274 |
|
| 444 |
|
Legal and professional fees |
|
| 285 |
|
| 423 |
|
| 762 |
|
| 1,314 |
|
Data processing |
|
| 409 |
|
| 396 |
|
| 1,309 |
|
| 1,249 |
|
Debit card expenses |
|
| 486 |
|
| 391 |
|
| 1,304 |
|
| 1,078 |
|
Amortization expense of intangible assets, excluding mortgage servicing right |
|
| 38 |
|
| 45 |
|
| 124 |
|
| 201 |
|
Advertising and marketing |
|
| 212 |
|
| 225 |
|
| 636 |
|
| 675 |
|
Taxes other than payroll, property and income |
|
| 304 |
|
| 282 |
|
| 904 |
|
| 836 |
|
Telephone |
|
| 83 |
|
| 77 |
|
| 342 |
|
| 262 |
|
Postage |
|
| 92 |
|
| 88 |
|
| 270 |
|
| 278 |
|
Loan fees |
|
| 40 |
|
| 64 |
|
| 151 |
|
| 155 |
|
Other |
|
| 669 |
|
| 1,064 |
|
| 2,276 |
|
| 2,536 |
|
Total other expenses |
|
| 8,335 |
|
| 8,754 |
|
| 25,070 |
|
| 25,553 |
|
Income before taxes |
|
| 3,160 |
|
| 2,373 |
|
| 10,059 |
|
| 6,864 |
|
Income taxes |
|
| 568 |
|
| 8 |
|
| 1,920 |
|
| 580 |
|
Net income |
| $ | 2,592 |
| $ | 2,365 |
| $ | 8,139 |
| $ | 6,284 |
|
Other comprehensive income, net of tax: |
|
|
|
|
|
|
|
|
|
|
|
|
|
Change in unrealized gains on securities, net of tax |
|
| (348) |
|
| (800) |
|
| 1,821 |
|
| 3,243 |
|
Comprehensive Income |
| $ | 2,244 |
| $ | 1,565 |
| $ | 9,960 |
| $ | 9,527 |
|
Earnings per share |
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic |
| $ | 0.87 |
| $ | 0.79 |
| $ | 2.74 |
| $ | 2.10 |
|
Diluted |
|
| 0.87 |
|
| 0.79 |
|
| 2.74 |
|
| 2.10 |
|
Dividends per share |
|
| 0.29 |
|
| 0.27 |
|
| 0.87 |
|
| 0.81 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Three Months Ended |
|
| Six Months Ended | ||||||
|
| 6/30/2018 |
| 6/30/2017 |
| 6/30/2018 |
| 6/30/2017 | ||||
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income |
| $ | 3,068 |
| $ | 2,410 |
| $ | 6,216 |
| $ | 5,547 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Other comprehensive income (loss) |
|
|
|
|
|
|
|
|
|
|
|
|
Unrealized gains (losses) on securities arising during the period |
|
| (1,253) |
|
| 2,214 |
|
| (5,596) |
|
| 3,330 |
Reclassification of realized amount |
|
| 30 |
|
| (43) |
|
| 74 |
|
| (43) |
Net change in unrealized gain (loss) on securities |
|
| (1,223) |
|
| 2,171 |
|
| (5,522) |
|
| 3,287 |
Less: Tax impact |
|
| 257 |
|
| (738) |
|
| 1,159 |
|
| (1,118) |
Other comprehensive income (loss) |
|
| (966) |
|
| 1,433 |
|
| (4,363) |
|
| 2,169 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Comprehensive income |
| $ | 2,102 |
| $ | 3,843 |
| $ | 1,853 |
| $ | 7,716 |
See Accompanying Notes
45
KENTUCKY BANCSHARES, INC.
CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY (unaudited)
(Dollar amounts in thousands except per share information)data)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Accumulated |
|
|
| ||||
|
|
|
|
|
|
|
|
|
| Other |
| Total |
| ||
|
| Common Stock |
| Retained |
| Comprehensive |
| Stockholders’ |
| ||||||
(Dollars in thousands) |
| Shares |
| Amount |
| Earnings |
| Income |
| Equity |
| ||||
Balances, January 1, 2017 |
| 2,973,232 |
| $ | 20,767 |
| $ | 73,161 |
| $ | (956) |
| $ | 92,972 |
|
Common stock issued (employee stock grants of 5,423 shares, net of 1,152 shares forfeited, director stock awards of 1,386 shares and director stock options exercised of 600 shares) |
| 7,409 |
|
| 64 |
|
| — |
|
| — |
|
| 64 |
|
Stock compensation expense |
| — |
|
| 121 |
|
| — |
|
| — |
|
| 121 |
|
Common stock purchased and retired |
| (9,030) |
|
| (63) |
|
| (200) |
|
| — |
|
| (263) |
|
Other comprehensive income |
| — |
|
| — |
|
| — |
|
| 1,821 |
|
| 1,821 |
|
Net income |
| — |
|
| — |
|
| 8,139 |
|
| — |
|
| 8,139 |
|
Dividends declared - $0.87 per share |
| — |
|
| — |
|
| (2,585) |
|
| — |
|
| (2,585) |
|
Balances, September 30, 2017 |
| 2,971,611 |
| $ | 20,889 |
| $ | 78,515 |
| $ | 865 |
| $ | 100,269 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Accumulated |
|
|
| ||||
|
|
|
|
|
|
|
|
|
| Other |
| Total |
| ||
|
| Common Stock |
| Retained |
| Comprehensive |
| Stockholders’ |
| ||||||
|
| Shares |
| Amount |
| Earnings |
| Loss |
| Equity |
| ||||
Balances, December 31, 2017 |
| 2,971,522 |
| $ | 20,931 |
| $ | 80,395 |
| $ | (997) |
| $ | 100,329 |
|
Common stock issued (employee stock grants of 5,283 shares, net of 437 shares forfeited, director stock grants of 981 shares and director stock options exercised of 600 shares) |
| 6,864 |
|
| 64 |
|
| — |
|
| — |
|
| 64 |
|
Stock compensation expense |
| — | �� |
| 90 |
|
| — |
|
| — |
|
| 90 |
|
Other comprehensive loss |
| — |
|
| — |
|
| — |
|
| (4,363) |
|
| (4,363) |
|
Net income |
| — |
|
| — |
|
| 6,216 |
|
| — |
|
| 6,216 |
|
Dividends declared - $0.62 per share |
| — |
|
| — |
|
| (1,847) |
|
| — |
|
| (1,847) |
|
Balances, June 30, 2018 |
| 2,978,386 |
| $ | 21,085 |
| $ | 84,764 |
| $ | (5,360) |
| $ | 100,489 |
|
(1) | Common Stock has no par value; amount includes Additional Paid-in Capital |
See Accompanying Notes
56
KENTUCKY BANCSHARES, INC.
CONSOLIDATED STATEMENT OF CASH FLOWS (unaudited)
(Dollar amounts in thousands, except share information)thousands)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Nine Months Ended |
|
| Six Months Ended | ||||||||
|
| 9/30/2017 |
| 9/30/2016 |
|
| 6/30/2018 |
| 6/30/2017 | ||||
Cash Flows From Operating Activities |
|
|
|
|
|
|
|
|
|
|
|
|
|
Net Income |
| $ | 8,139 |
| $ | 6,284 |
|
| $ | 6,216 |
| $ | 5,547 |
Adjustments to reconcile net income to net cash provided by operating activities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
Depreciation and amortization |
|
| 514 |
|
| 985 |
| ||||||
Depreciation |
|
| 630 |
|
| 586 | |||||||
Amortization (accretion), net |
|
| (249) |
|
| (263) | |||||||
Securities amortization (accretion), net |
|
| 794 |
|
| 854 |
|
|
| 461 |
|
| 500 |
Stock based compensation expense |
|
| 121 |
|
| 117 |
|
|
| 90 |
|
| 80 |
Provision for loan losses |
|
| 650 |
|
| 775 |
|
|
| 250 |
|
| 550 |
Securities available for sale gains, net |
|
| (103) |
|
| (317) |
| ||||||
Securities losses (gains) available for sale gains, net |
|
| 74 |
|
| (43) | |||||||
Net change in trading assets |
|
| (122) |
|
| (165) |
|
|
| — |
|
| (110) |
Net increase in cash surrender value of bank-owned life insurance |
|
| (75) |
|
| — | |||||||
Originations of loans held for sale |
|
| (46,559) |
|
| (43,331) |
|
|
| (29,092) |
|
| (32,957) |
Proceeds from sale of loans |
|
| 47,423 |
|
| 42,345 |
|
|
| 29,137 |
|
| 32,805 |
Losses (gains) on sale of bank premises and equipment |
|
| (1,200) |
|
| (4) |
|
|
| — |
|
| (1,200) |
Losses (gains) on other real estate |
|
| (11) |
|
| (163) |
|
|
| (115) |
|
| (17) |
Gain on sale of loans |
|
| (1,456) |
|
| (1,289) |
|
|
| (819) |
|
| (1,041) |
Write-downs of other real estate, net |
|
| 141 |
|
| 131 |
|
|
| — |
|
| 38 |
Changes in: |
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest receivable |
|
| (70) |
|
| (6) |
|
|
| 218 |
|
| 101 |
Other assets |
|
| 4 |
|
| 461 |
|
|
| (248) |
|
| (181) |
Interest payable |
|
| 104 |
|
| 81 |
|
|
| (193) |
|
| (30) |
Deferred taxes |
|
| 12 |
|
| 1,663 |
|
|
| (25) |
|
| 260 |
Other liabilities |
|
| (354) |
|
| (2,425) |
|
|
| (1,792) |
|
| (1,374) |
Net cash from operating activities |
|
| 8,027 |
|
| 5,996 |
|
|
| 4,468 |
|
| 3,251 |
Cash Flows From Investing Activities |
|
|
|
|
|
|
|
|
|
|
|
|
|
Net change in interest bearing time deposits |
|
| 3,199 |
|
| (155) |
|
|
| 45 |
|
| 20 |
Purchases of securities available for sale |
|
| (59,235) |
|
| (61,876) |
|
|
| (18,631) |
|
| (37,702) |
Purchase of bank owned life insurance |
|
| (10,000) |
|
| — | |||||||
Proceeds from sales of securities available for sale |
|
| 14,559 |
|
| 23,888 |
|
|
| 14,715 |
|
| 4,017 |
Proceeds from principal payments, maturities and calls securities available for sale |
|
| 30,570 |
|
| 50,987 |
|
|
| 25,553 |
|
| 20,131 |
Net change in loans |
|
| 5,048 |
|
| (35,688) |
|
|
| (19,925) |
|
| 3,533 |
Purchases of bank premises and equipment |
|
| (2,270) |
|
| (667) |
|
|
| (1,819) |
|
| (1,692) |
Proceeds from the sale of bank premises and equipment |
|
| 2,062 |
|
| 4 |
|
|
| — |
|
| 2,174 |
Capitalized expenditures for other real estate |
|
| (74) |
|
| — | |||||||
Proceeds from the sale of other real estate |
|
| 922 |
|
| 734 |
|
|
| 1,310 |
|
| 918 |
Net cash used in investing activities |
|
| (5,145) |
|
| (22,773) |
|
|
| (8,826) |
|
| (8,601) |
Cash Flows From Financing Activities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
Net change in deposits |
|
| (54,602) |
|
| (24,783) |
|
|
| (12,791) |
|
| (19,009) |
Net change in federal funds purchased |
|
| 15,717 |
|
| — | |||||||
Net change in repurchase agreements |
|
| 3,197 |
|
| 5,037 |
|
|
| (10,780) |
|
| 3,077 |
Net change in federal funds purchased |
|
| 17,302 |
|
| 10,517 |
| ||||||
Net change in short-term Federal Home Loan Bank advances |
|
| 8,530 |
|
| 10,000 |
|
|
| 7,600 |
|
| 5,000 |
Proceeds from long-term Federal Home Loan Bank advances |
|
| 13,000 |
|
| 15,000 |
| ||||||
Repayment of long-term Federal Home Loan Bank advances |
|
| (11,835) |
|
| (6,660) |
|
|
| (3,649) |
|
| (8,691) |
Repayment of note payable |
|
| (328) |
|
| (600) |
|
|
| (358) |
|
| (217) |
Proceeds from issuance of common stock |
|
| 64 |
|
| 49 |
|
|
| 64 |
|
| 64 |
Purchase of common stock |
|
| (263) |
|
| (296) |
|
|
| — |
|
| (263) |
Dividends paid |
|
| (2,585) |
|
| (2,426) |
|
|
| (1,847) |
|
| (1,724) |
Net cash (used in) from financing activities |
|
| (27,520) |
|
| 5,838 |
|
|
| (6,044) |
|
| (21,763) |
Net change in cash and cash equivalents |
|
| (24,638) |
|
| (10,939) |
|
|
| (10,402) |
|
| (27,113) |
Cash and cash equivalents at beginning of period |
|
| 43,250 |
|
| 28,048 |
|
|
| 39,172 |
|
| 43,250 |
Cash and cash equivalents at end of period |
| $ | 18,612 |
| $ | 17,109 |
|
| $ | 28,770 |
| $ | 16,137 |
Supplemental disclosures of cash flow information Cash paid during the year for: |
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest expense |
| $ | 3,612 |
| $ | 3,249 |
|
| $ | 3,136 |
| $ | 2,451 |
Income taxes |
|
| 1,600 |
|
| 800 |
| ||||||
Supplemental disclosures of non-cash investing activities |
|
|
|
|
|
|
|
|
|
|
|
|
|
Securities transactions in process, payable |
|
| — |
|
| 7,642 | |||||||
Real estate acquired through foreclosure |
| $ | 1,897 |
| $ | 235 |
|
|
| 121 |
|
| 1,897 |
See Accompanying Notes
67
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The financial information presented as of any date other than December 31 has been prepared from the Company’s books and records without audit. The accompanying consolidated financial statements have been prepared in accordance with the instructions to Form 10-Q and Rule 10-01 of Regulation S-X. Certain financial information that is normally included in annual financial statements prepared in accordance with accounting principles generally accepted in the United States of America, but is not required for interim reporting purposes, has been condensed or omitted. There have been no significant changes to the Company’s accounting and reporting policies as disclosed in the Company’s Annual Report on Form 10-K for the year ended December 31, 2016.2017. In the opinion of management, all adjustments, consisting of normal recurring adjustments, necessary for a fair presentation of such financial statements, have been included. The results of operations for the interim periods are not necessarily indicative of the results to be expected for the full year. For further information, refer to the consolidated financial statements and footnotes thereto included in the Company's Annual Report on Form 10-K for the year ended December 31, 2016.2017.
Basis of Presentation: The consolidated financial statements include the accounts of Kentucky Bancshares, Inc. (“Kentucky Bancshares”, the “Company”, “we”, “our” or “us”), its wholly-owned subsidiaries, Kentucky Bank (the “Bank”) and KBI Insurance Company, Inc., and the Bank’s wholly-owned subsidiary, KB Special Assets Unit, LLC. Intercompany transactions and balances have been eliminated in consolidation.
Nature of Operations: As a state bank, the Bank is subject to regulation by the Kentucky Department of Financial Institutions and the Federal Deposit Insurance Corporation (“FDIC”). The Company, a bank holding company, is regulated by the Federal Reserve.
KBI Insurance Company, Inc. is a subsidiary of Kentucky Bancshares, Inc. and is located in Las Vegas, Nevada. It is a captive insurance subsidiary which provides various liability and property damage insurance policies for Kentucky Bancshares, Inc. and its related subsidiaries. KBI Insurance Company, Inc. is regulated by the State of Nevada Division of Insurance.
Estimates in the Financial Statements: The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and 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 and such differences could be material to the financial statements.
Trading AssetsBank Owned Life Insurance: The Company engages in trading activitieshas purchased life insurance policies on certain key executives. Bank owned life insurance is recorded at the amount that can be realized under the insurance contract at the balance sheet date, which is the cash surrender value adjusted for its own account. Securitiesother charges or other amounts due that are held principally for resale in the near term are recordedprobable at fair value with changes in fair value included in earnings. Interest and dividends are included in net interest income.settlement.
Loss Contingencies: Loss contingencies, including claims and legal actions arising in the ordinary course of business, are recorded as liabilities when the likelihood of loss is probable and an amount or range of loss can be reasonably estimated.
Reclassifications: Some items in the prior year financial statements were reclassified to conform to the current presentation. Reclassifications had no effect on prior period net income or stockholders’ equity.
Adoption of New Accounting Standards
ASU 2016-15, “Statement of Cash Flows (Topic 230): Classification of Certain Cash Receipts and Cash Payments.” Issued in August 2016, ASU 2016-15 provides guidance to reduce the diversity in practice of how certain cash receipts and cash payments are presented and classified in the statement of cash flows. The amendments of ASU 2016-15 provide guidance on eight specific cash flow: (i) debt prepayment or debt extinguishment costs; (ii) settlement of zero-coupon bonds; (iii) contingent consideration payments made after a business combination; (iv) proceeds from the settlement of insurance claims; (v) proceeds from the settlement of corporate-owned life insurance policies, including bank-owned life insurance policies; (vi) distributions received from equity method investees; (vii) beneficial interests in securitization
7
transactions and (viii) separately identifiable cash flows and application of the predominance principle. The amendments of ASU 2016-15 are effective for interim and annual periods beginning after December 15, 2017. Management has evaluated the amendments of ASU 2016-15 and does not believe that adoption of this ASU will impact Kentucky Bancshares existing presentation of the applicable cash receipts and cash payments on its consolidated statement of cash flows.
ASU 2016-13, “Financial Instruments-Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments.” Issued in June 2016, ASU 2016-13 will add Financial Accounting Standards Board “FASB” ASC Topic 326, “Financial Instruments-Credit Losses” and finalizes amendments to FASB ASC Subtopic 825-15, “Financial Instruments-Credit Losses.” The amendments of ASU 2016-13 are intended to provide financial statement users with more decision-useful information related to expected credit losses on financial instruments and other commitments to extend credit by replacing the current incurred loss impairment methodology with a methodology that reflects expected credit losses and requires consideration of a broader range of reasonable and supportable information to determine credit loss estimates.
8
The amendments of ASU 2016-13 eliminate the probable initial recognition threshold and, in turn, reflect an entity’s current estimate of all expected credit losses. ASU 2016-13 does not specify the method for measuring expected credit losses, and an entity is allowed to apply methods that reasonably reflect its expectations of the credit loss estimate. Additionally, the amendments of ASU 2016-13 require that credit losses on available for sale debt securities be presented as an allowance rather than as a writedown.
The amendments of ASU 2016-13 are effective for interim and annual periods beginning after December 15, 2019. Earlier application is permitted for interim and annual periods beginning after December 15, 2018. Kentucky Bancshares plans to adopt the amendments of ASU 2016-13 during the first quarter of 2020. Kentucky Bancshares has established a steering committee which includes the appropriate members of management to evaluate the impact this ASU will have on the Company’s financial position, results of operations and financial statement disclosures and determine the most appropriate method of implementing the amendments in this ASU as well as any resources needed to implement the amendments.
ASU 2016-09, “Compensation-Stock Compensation (Topic 718): Improvements to Employee Share-Based Payment Accounting.” Issued in March 2016, ASU 2016-09 seeks to reduce complexity in accounting standards by simplifying several aspects of the accounting for share-based payment transactions. The amendments of ASU 2016-09 include: (i) requiring all excess tax benefits and tax deficiencies to be recognized as income tax expense or benefit in the income statement; (ii) requiring excess tax benefits to be classified along with other income tax cash flows as an operating activity on the statement of cash flow; (iii) allowing an entity to make an entity-wide accounting policy election to either estimate the number of awards that expect to vest or account for forfeitures when they occur; (iv) change the threshold to qualify for equity classification to permit withholding up to the maximum statutory tax rates in the applicable jurisdictions; and (v) requiring that cash paid by an employer when directly withholding shares for tax-withholding purposes to be classified as a financing activity on the statement of cash flows. The amendments of ASU 2016-09 became effective for Kentucky Bancshares on January 1, 2017 and did not have a material impact on Kentucky Bancshares consolidated financial statements. The Company has made an entity-wide accounting policy election to account for forfeitures of stock awards as they occur. Changes to Kentucky Bancshares consolidated statement of cash flows required by the amendments of ASU 2016-09 are incorporated into the presentation in the Quarterly Report on Form 10-Q for the three month and nine month periods ending September 30, 2017.
ASU 2016-02, “Leases (Topic 842).” Issued in February 2016, ASU 2016-02 was issued by the FASB to increase transparency and comparability among organizations by recognizing lease assets and lease liabilities on the balance sheet and by disclosing key information about leasing arrangements. ASU 2016-02 will, among other things, require lessees to recognize a lease liability, which is a lessee’s obligation to make lease payments arising from a lease, measured on a discounted basis; and a right-of-use asset, which is an asset that represents the lessee’s right to use, or control the use of, a specified asset for the lease term. ASU 2016-02 does not significantly change lease accounting requirements applicable to lessors; however, the ASU contains some targeted improvements that are intended to align, where necessary, lessor accounting with the lessee accounting model and with the updated revenue recognition guidance issued in 2014. The amendments of ASU 2016-02 are effective for interim and annual periods beginning after December 15, 2018. Kentucky Bancshares plans to adopt the amendments of ASU 2016-02 beginning in the first quarter of 2019. At adoption, Kentucky Bancshares will recognize a lease asset and a corresponding lease liability on its consolidated balance sheet for its total lease obligation measured on a discounted basis. As of SeptemberJune 30, 2017,2018, all leases in which Kentucky Bancshares was the lessee were classified as operating leases.
8
Kentucky Bancshares doesthis standard will not anticipate anyhave a material impact to itson the Company’s consolidated statements of income, balance sheet or regulatory capital as a result of the adoption of this ASU as the Company has an immaterial amount of leases in which it is the lessee.
ASU 2016-01, “Financial Instruments-Overall (Subtopic 825-10): Recognition and Measurement of Financial Assets and Financial Liabilities (An Amendment of the FASB Accounting Standards Codification).” Issued in January 2016, ASU 2016-01 is intended to enhance the reporting model for financial instruments to provide users of financial statements with improved decision-making information. The amendments of ASU 2016-01 include: (i) requiring equity investments, except those accounted for under the equity method of accounting or those that result in the consolidation of an investee, to be measured at fair value with changes in fair value recognized in net income; (ii) requiring a qualitative assessment to identify impairment of equity investments without readily determinable fair values; (iii) eliminating the requirement to disclose the method and significant assumptions used to estimate the fair value for financial instruments measured at amortized cost on the balance sheet; (iv) requiring the use of the exit price notion when measuring the fair value of financial instruments for disclosure purposes; (v) requiring an entity that has elected the fair value option to measure the fair value of a liability to present separately in other comprehensive income the portion of the change in the fair value resulting from a change in the instrument-specific credit risk; (vi) requiring separate presentation of financial assets and financial liabilities by measurement category and form of financial asset on the balance sheet or the accompanying notes to the financial statements and (vii) clarifying that an entity should evaluate the need for a valuation allowance on a deferred tax asset related to available for sale securities in combination with the entity’s other deferred tax assets. The amendments of ASU 2016-01 are effective for interim and annual periods beginning after December 15, 2017. Kentucky Bancshares plans to adoptadopted the amendments of ASU 2016-01 during the first quarter of 2018. Management has evaluated the impact this ASU will have on the Company’s consolidated financial statements and does not expect theThe adoption of this ASU toamendment did not have a material impact on the Company’s consolidated financialsfinancial statements.
ASU 2018-02, “Income Statement-Reporting Comprehensive Income (Topic 220) – Reclassification of Certain Tax Effects from Accumulated Other Comprehenisve Income.” On December 22, 2017, the U.S. federal government enacted a tax bill, H.R.1, An Act to Provide for Reconciliation Pursuant to Titles II and V of the Concurrent Resolution on the Budget for Fiscal Year 2018 (“Tax Cuts and Jobs Act”). Stakeholders in the banking and insurance industries submitted unsolicited comment letters to the FASB about a narrow-scope financial reporting issue that arose as a consequence of the Tax Cuts and Jobs Act.
9
Specifically, stakeholders expressed concern about the guidance in current generally accepted accounting principles (GAAP) that requires deferred tax liabilities and assets to be adjusted for the effect of a change in tax laws or rates with the effect included in income from continuing operations in the reporting period that includes the enactment date. That guidance is applicable even in situations in which the related income tax effects of items in accumulated other comprehensive income were originally recognized in other comprehensive income (rather than in income from continuing operations).
Those stakeholders asserted that because the adjustment of deferred taxes due to the reduction of the historical corporate income tax rate to the newly enacted corporate income tax rate is required to be included in income from continuing operations, the tax effects of items within accumulated other comprehensive income (referred to as stranded tax effects for purposes of ASU 2018-02) do not reflect the appropriate tax rate.
The amendments in ASU 2018-02 allowed a reclassification from accumulated other comprehensive income to retained earnings for stranded tax effects resulting from the Tax Cuts and Jobs Act. Consequently, the amendments eliminate the stranded tax effects resulting from the Tax Cuts and Jobs Act and will improve the usefulness of information reported to financial statement users. However, because the amendments only relate to the reclassification of the income tax effects of the Tax Cuts and Jobs Act, the underlying guidance that requires that the effect of a change in tax laws or rates be included in income from continuing operations is not affected. The amendments in ASU 2018-02 also require certain disclosures about stranded tax effects.
The amendments in ASU 2018-02 are effective for all entities for fiscal years beginning after December 15, 2018, and interim periods within those fiscal years. Early adoption of the amendments in ASU 2018-02 is permitted, including adoption in any interim period, (1) for public business entities for reporting periods for which financial statements have not yet been issued and (2) for all other entities for reporting periods for which financial statements have not yet been made available for issuance. The Company chose to early adopt the amendments in ASU 2018-02 as of December 31, 2017.
ASU 2014-09, “Revenue from Contracts with Customers (Topic 606).” Issued in May 2014, ASU 2014-09 will add FASB ASC Topic 606, “Revenue from Contracts with Customers,” and will supersede revenue recognition requirements in FASB ASC Topic 605, “Revenue Recognition,” as well as certain cost guidance in FASB ASC Topic 605-35, “Revenue Recognition – Construction-Type and Production-Type Contracts.” ASU 2014-09 provides a framework for revenue recognition that replaces the existing industry and transaction specific requirements under the existing standards. ASU 2014-09 requires an entity to apply a five-step model to determine when to recognize revenue and at what amount. The model specifies that revenue should be recognized when (or as) an entity transfers control of goods or services to a customer at the amount in which the entity expects to be entitled. Depending on whether certain criteria are met, revenue should be recognized either over time, in a manner that depicts the entity’s performance, or at a point in time, when control of the goods or services are transferred to the customer. ASU 2014-09 provides that an entity should apply the following steps: (1) identify the contract(s) with a customer; (2) identify the performance obligations in the contract; (3) determine the transaction price; (4) allocate the transaction price to the performance obligations in the contract; and (5) recognize revenue when (or as) the entity satisfies a performance obligation. In addition, the existing requirements for the recognition of a gain or loss on the transfer of non-financial assets that are not in a contract with a customer are amended to be consistent with the guidance on recognition and measurement in ASU 2014-09.
The amendments of ASU 2014-09 may be applied either retrospectively to each prior reporting period presented or retrospectively with the cumulative effect of initially applying ASU 2014-09 recognized at the date of initial application. If the transition method of application is elected, the entity should also provide the additional disclosures in reporting periods that include the date of initial application of (1) the amount by which each financial statement line item is affected in the current reporting period, as compared to the guidance that was in effect before the change, and (2) an explanation of the reasons for significant changes. ASU 2015-14, “Revenue from Contracts with Customers (Topic 606)-Deferral of the Effective Date,” issued in August 2015, defers the effective date of ASU 2014-09 by one year. ASU 2015-14 provides that the amendments of ASU 2014-09 become effective for interim and annual periods beginning after December 15, 2017. All subsequently issued ASUs which provide additional guidance and clarifications to various aspects of FASB ASC Topic 606 will become effective when the amendments of ASU 2014-09 become effective. Kentucky Bancshares plans to adoptadopted these amendments during the first quarter of 2018. Management is continuing to evaluate the impact ASU 2014-09 will have on Kentucky Bancshares consolidated financial statements as well as the most appropriate transition method of application. Based on this evaluation to date, Management has determined that the majority of the revenues earned by Kentucky Bancshares are not within the scope of ASU 2014-09. Management also believes that for most revenue streams within the scope of ASU 2014-09, the amendments will not change the timing of when the revenue is recognized.
9
Management will continue to evaluate the impact the adoption of ASU 2014-09 will have on Kentucky Bancshares consolidated financial statements, focusing on noninterest income sources within the scope of ASU 2014-09 as well as new disclosures required by these amendments; however, the adoption of ASU 2014‑09 is not expected to have a2018 and there was no material impact on Kentucky Bancshares consolidatedto the Company’s financial statements.
ASU 2017-04 - Intangibles - Goodwill and Other (Topic 350): Simplifying the Test for Goodwill Impairment: In January 2017, the FASB issued ASU 2017-04, Intangibles - Goodwill and Other (Topic 350): Simplifying the Test for Goodwill Impairment. This ASU eliminates Step 2 from the goodwill impairment test. Instead, under the new guidance, an entity is to perform its annual goodwill impairment test by comparing the fair value of a reporting unit with its carrying amount. An impairment charge would be recognized for the amount by which the carrying amount exceeds the reporting unit's fair value. The new guidance is effective for annual reporting periods, and interim reporting periods within those annual periods, beginning after December 15, 2019, which for Kentucky Bancshares will be effective for the fiscal year beginning January 1, 2020. Early adoption is permitted for interim or annual goodwill impairment tests performed on testing dates after January 1, 2017. The adoption of this guidance is not expected to have an impact on the Company’s consolidated financial statements.
ASU 2017-08 - Receivables - Nonrefundable Fees and Other Costs (Subtopic 310-20): Premium Amortization on Purchased Callable Debt Securities: In March 2017, the FASB issued ASU 2017-08 - Receivables - Nonrefundable Fees and Other Costs (Subtopic 310-20): Premium Amortization on Purchased Callable Debt Securities. This ASU amends the amortization period for certain purchased callable debt securities held at a premium. It shortens the amortization period for the premium to the earliest call date. Under current U.S. GAAP, premiums on callable debt securities generally are amortized to the maturity date. The new guidance is effective for annual reporting periods, and interim reporting periods within those annual periods, beginning after December 15, 2018, which for Kentucky Bancshares will be the fiscal year beginning January 1, 2019. Early adoption is permitted for interim or annual periods. The adoption of this guidance is not expected to have a material impact on the Company’s consolidated financial statements.
ASU 2016-18 - Statement of Cash Flows (Topic 230): Restricted Cash (a consensus of the FASB Emerging Issues Task Force): Effective for public business entities for fiscal years beginning after December 15, 2017, and interim periods within those fiscal years. For all other entities, the amendments are effective for fiscal years beginning after December 15, 2018, and interim periods within fiscal years beginning after December 15, 2019. Early adoption is permitted, including adoption in an interim period. If an entity early adopts the amendments in an interim period, any adjustments should be reflected as of the beginning of the fiscal year that includes that interim period. The adoption of this guidance is not expected to have a material impact on the Company’s consolidated financial statements.
Update 2017-01 - Business Combinations (Topic 805): Clarifying the Definition of a Business: The amendments in this ASU are intended to help companies and other organizations evaluate whether transactions should be accounted for as acquisitions (or disposals) of assets or businesses.Public business entities should apply the amendments in this Update to annual periods beginning after December 15, 2017, which for Kentucky Bancshares will be the fiscal year beginning January 1, 2018, including interim periods within those periods. All other entities should apply the amendments to annual periods beginning after December 15, 2018, and interim periods within annual periods beginning after December 15, 2019.
ASU 2017-09 - Compensation - Stock Compensation (Topic 718): Scope of Modification Accounting: In May 2017, the FASB issued ASU 2017-09 - Compensation - Stock Compensation (Topic 718): Scope of Modification Accounting. This ASU amends the guidance about which changes to the terms or conditions of a share-based payment award require an entity to apply modification accounting in Topic 718. The new guidance is effective for annual reporting periods, and interim reporting periods within those annual periods, beginning after December 15, 2017. Early adoption is permitted for interim or annual periods. The adoption of this guidance is not expected to have a material impact on Kentucky Bancshares consolidated financial statements.
ASU 2017-12, "Derivatives and Hedging (Topic 815): Targeted Improvements to Accounting for Hedging Activities." Issued in August 2017, ASU 2017-12 aims to improve the financial reporting of hedging relationships to better portray the economic results of an entity's risk management activities in its financial statements. The amendments in ASU 2017-12 aim to better align an entity's risk management activities and financial reporting for hedging relationships by expanding and refining hedge accounting for both non-financial and financial risk components and aligning the recognition and presentation of the effects of the hedging instrument and the hedged item in the financial statements.
10
In March 2016, the FASB issued ASU No. 2016-08, Revenue from Contracts with Customers (Topic 606): Principal versus Agent Considerations (Reporting Revenue Gross versus Net). The amendments relate to when another party, along with the entity, is involved in providing a good or service to a customer. Topic 606 requires an entity to determine whether the nature of its promise is to provide that good or service to the customer (that is, the entity is a principal) or to arrange for the good or service to be provided to the customer by the other party (that is, the entity is an agent). This determination is based upon whether the entity controls the good or the service before it is transferred to the customer. Topic 606 includes indicators to assist in this evaluation. The amendments in this update affect the guidance in ASU 2017-12 (i) permit hedge accountingNo. 2014-09 above. The effective date is the same as the effective date of ASU No. 2014-09.
In April 2016, the FASB issued ASU No. 2016-10, Revenue from Contracts with Customers (Topic 606): Identifying Performance Obligations and Licensing. The amendments clarify the following two aspects of Topic 606: identifying performance obligations, and the licensing implementation guidance. Before an entity can identify its performance obligations in a contract with a customer, the entity first identifies the promised goods or services in the contract. The amendments in this update are expected to reduce the cost and complexity of applying the guidance on identifying promised goods or services. To identify performance obligations in a contract, an entity evaluates whether promised goods and services are distinct. Topic 606 includes two criteria for risk componentsassessing whether promises to transfer goods or services are distinct. One of those criteria is that the promises are separately identifiable. This update will improve the guidance on assessing that criterion. Topic 606 also includes implementation guidance on determining whether as entity’s promise to grant a license provides a customer with either a right to use the entity’s intellectual property, which is satisfied at a point in hedging relationships involving nonfinancial risktime, or a right to access the entity’s intellectual property, which is satisfied over time. The amendments in this update are intended to improve the operability and interest rate risk; (ii)understandability of the licensing implementation guidance. The amendments in this update affect the guidance in ASU No. 2014-09 above. The effective date is the same as the effective date of ASU No. 2014-09.
In May 2016, the FASB issued ASU No. 2016-12, Revenue from Contracts with Customers (Topic 606): Narrow-Scope Improvements and Practical Expedients. The amendments do not change the core revenue recognition principle in Topic 606. The amendments provide clarifying guidance in certain narrow areas and add some practical expedients.
In December 2016, the FASB issued ASU No. 2016-20, Revenue from Contracts with Customers (Topic 606): Technical Corrections and Improvements. The FASB board decided to issue a separate update for designating fair value hedges of interest rate risktechnical corrections and for measuring the change in fair valueimprovements to Topic 606 and other Topics amended by ASU No. 2014-09 to increase awareness of the hedged item in fair value hedges of interest rate risk; (iii) continueproposals and to allow an entityexpedite improvements to exclude option premiums and forward points from the assessment of hedge effectiveness; and (iv) permit an entity to exclude the portionASU No. 2014-09. The amendment affects narrow aspects of the changeguidance issued in fair value of a currency swap that is attributable to a cross-country basis spread from the assessment of hedge effectiveness. The amendments of ASU 2017-12 also include targeted improvements intended to simplify the application of hedge accounting. The amendments of ASU 2017-12 are effective for fiscal years, and interim periods within those years, beginning after December 15, 2018, which for Kentucky Bancshares isNo. 2014-09.
On January 1, 2019. All transition requirements2018, we adopted ASU 2014-09, Revenue from Contracts with Customers and elections must be appliedall subsequent amendments to all hedging relationships existing at the date of adoption. Kentucky Bancshares plansASU (collectively, “Topic 606”). We elected to adopt ASU 2017-12 during the first quarter of 2019implement using the required modified retrospective transition method. Kentucky Bancshares is currently not impacted by ASU 2017-12. However, if the Company does become involvedapplication, with derivatives or hedge accounting, the Company will recognize the cumulative effect of the change, if any, in the beginning balance of each affected component of equityrecorded as ofan adjustment to opening retained earnings at January 1, 2019. The adoption2018. Due to immateriality, we had no cumulative effect to record. Since interest income on loans and securities are both excluded from this topic, a significant majority of ASU 2017-12 isour revenues are not expectedsubject to have a material impact on the Company’s consolidated financial statements.new guidance. Our services that fall within the scope of Topic 606 are presented within noninterest income and are recognized as revenue as we satisfy our obligation to the customer. Services within the scope of Topic 606 include trust department income, service charges, debit card interchange income, and brokerage income.
Trust department income: We earn wealth management fees based upon asset custody, investment management, trust, and estate services provided to customers. Most of these customers receive monthly billings for services rendered based upon the market value of assets and/or income generated. Fees that are transaction based are recognized at the point in time that the transaction is executed.
Service charges: We earn fees from our deposit customers for transaction-based, account maintenance, and overdraft services. Transaction-based fees and overdraft fees are recognized at a point in time, since the customer generally has a right to cancel the depository arrangement at any time. The arrangement is considered a day-to-day contract with ongoing renewals and optional purchases, so the duration of the contract does not extend beyond the services already performed. Account maintenance fees, which relate primarily to monthly maintenance, are earned over the course of a month, representing the period over which we satisfy our performance obligation.
11
Debit card interchange income: As with the transaction-based fees on deposit accounts, debit card interchange income is recognized at the point in time that we fulfill the customer’s request. We earn interchange fees from cardholder transactions processed through card association networks. Interchange rates are generally set by the card associations based upon purchase volumes and other factors. Interchange fees represent a percentage of the underlying transaction value and are recognized daily, concurrently with the transaction processing services provided to the cardholder.
Brokerage income: Brokerage income fees are the commissions and fees received from a registered broker/dealer and investment adviser that provide those services to our customers. We act as an agent in arranging the relationship between the customer and the third-party service provider. These fees are recognized monthly from the third-party broker based upon services already performed.
ASU 2018-07, Compensation – Stock Compensation (Topic 718): Improvements to Nonemployee Share-Based Payment Accounting. Issued in June 2018, the amendments in ASU 2018-07 to Topic 718, Compensation-Stock Compensation, are intended to align the accounting for share-based payment awards issued to employees and nonemployees. Changes to the accounting for nonemployee awards include: 1) equity classified share-based payment awards issued to nonemployees will now be measured on the grant date, instead of the previous requirement to remeasure the awards through the performance completion date; 2) for performance conditions, compensation cost associated with the award will be recognized when achievement of the performance condition is probable, rather than upon achievement of the performance condition; and 3) the current requirement to reassess the classification (equity or liability) for nonemployee awards upon vesting will be eliminated, except for awards in the form of convertible instruments. The new guidance also clarifies that any share-based payment awards issued to customers should be evaluated under ASC 606, Revenue from Contracts with Customers. The amendments in this ASU are effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2018.
The Company's share-based payment awards to nonemployees consist only of grants made to the Company's Board of Directors as compensation solely related to the individual's role as a Director. As such, in accordance with ASC 718, the Company accounts for these share-based payment awards to its Directors in the same manner as share-based payment awards for its employees. Accordingly, the amendments in this guidance will not have an effect on the accounting for the Company's share-based payment awards to its Directors.
ASU 2018-09, Codification Improvements. Issued in July 2018, the amendments in ASU 2018-09 are intended to clarify or correct unintended guidance in the FASB Codification and affect a wide variety of Topics in the Codification. The topics that are applicable to the Company include: 1) debt modifications and extinguishments and 2) stock compensation. For debt modifications and extinguishments, the amendment clarifies that, in an early extinguishment of debt for which the fair value option has been elected, the net carrying amount of the extinguished debt is equal to its fair value at the reacquisition date, and upon extinguishment, the cumulative amount of the gain or loss on the extinguished debt that resulted from changes in instrument-specific credit risk should be presented in net income. The Company has subordinated debentures. Accordingly, if in the future, the Company chooses to repay this debt prior to its contractual maturity, this amendment would be applicable. For stock compensation, the amendment clarifies that excess tax benefits or tax deficiencies should be recognized in the period in which the amount of the tax deduction is determined, which is typically when an award is exercised (in the case of stock options) or vests (in the case of non-vested stock grants or awards). The Company already records excess tax benefits or tax deficiencies in the periods in which the tax deduction is determined. Therefore, this amendment will not have an effect on the Company's accounting for excess tax benefits or tax deficiencies.
12
2.SECURITIES
SECURITIES AVAILABLE FOR SALE
Period-end securities are as follows:
(in thousands)
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| Gross |
| Gross |
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| Gross |
| Gross |
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| Amortized |
| Unrealized |
| Unrealized |
| Fair |
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| Amortized |
| Unrealized |
| Unrealized |
| Fair |
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| Cost |
| Gains |
| Losses |
| Value |
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| Cost |
| Gains |
| Losses |
| Value |
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Available for Sale |
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September 30, 2017 |
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June 30, 2018 |
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U.S. treasury notes |
| $ | 4,039 |
| $ | — |
| $ | (77) |
| $ | 3,962 |
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U. S. government agencies |
| $ | 30,391 |
| $ | 448 |
| $ | (179) |
| $ | 30,660 |
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| 33,948 |
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| 368 |
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| (786) |
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| 33,530 |
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States and political subdivisions |
|
| 100,195 |
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| 2,254 |
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| (158) |
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| 102,291 |
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| 74,323 |
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| 641 |
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| (883) |
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| 74,081 |
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Mortgage-backed - residential |
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| 157,739 |
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| 330 |
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| (1,406) |
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| 156,663 |
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| 135,510 |
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| 20 |
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| (4,559) |
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| 130,971 |
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Mortgage-backed - commercial |
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| 49,199 |
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| — |
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| (1,522) |
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| 47,677 |
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Equity securities |
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| 320 |
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| 22 |
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| — |
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| 342 |
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| 270 |
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| 13 |
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| — |
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| 283 |
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Total |
| $ | 288,645 |
| $ | 3,054 |
| $ | (1,743) |
| $ | 289,956 |
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| $ | 297,289 |
| $ | 1,042 |
| $ | (7,827) |
| $ | 290,504 |
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December 31, 2016 |
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December 31, 2017 |
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U.S. treasury notes |
| $ | 4,046 |
| $ | — |
| $ | (22) |
| $ | 4,024 |
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U. S. government agencies |
| $ | 36,454 |
| $ | 373 |
| $ | (299) |
| $ | 36,528 |
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| 41,658 |
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| 405 |
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| (358) |
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| 41,705 |
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States and political subdivisions |
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| 90,117 |
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| 1,731 |
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| (716) |
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| 91,132 |
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| 88,485 |
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| 1,783 |
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| (133) |
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| 90,135 |
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Mortgage-backed - residential |
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| 148,327 |
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| 120 |
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| (2,677) |
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| 145,770 |
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| 132,664 |
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| 43 |
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| (2,330) |
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| 130,377 |
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Mortgage-backed - commercial |
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| 52,267 |
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| 18 |
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| (689) |
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| 51,596 |
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Equity securities |
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| 320 |
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| 20 |
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| — |
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| 340 |
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| 320 |
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| 20 |
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| — |
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| 340 |
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Total |
| $ | 275,218 |
| $ | 2,244 |
| $ | (3,692) |
| $ | 273,770 |
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| $ | 319,440 |
| $ | 2,269 |
| $ | (3,532) |
| $ | 318,177 |
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The amortized cost and fair value of securities Septemberas of June 30, 20172018 by contractual maturity are shown below. 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. Securities not due at a single maturity are shown separately. Further discussion concerning Fair Value Measurements can be found in Note 9.
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| Amortized |
| Fair |
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| Amortized |
| Fair |
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| Cost |
| Value |
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| Cost |
| Value |
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Due in one year or less |
| $ | 384 |
| $ | 384 |
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| $ | 84 |
| $ | 84 |
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Due after one year through five years |
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| 25,963 |
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| 26,669 |
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| 32,424 |
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| 32,322 |
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Due after five years through ten years |
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| 40,893 |
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| 41,554 |
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| 25,508 |
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| 25,211 |
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Due after ten years |
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| 63,346 |
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| 64,344 |
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| 54,294 |
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| 53,956 |
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| 130,586 |
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| 132,951 |
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| 112,310 |
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| 111,573 |
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Mortgage-backed - residential |
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| 157,739 |
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| 156,663 |
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| 135,510 |
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| 130,971 |
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Mortgage-backed - commercial |
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| 49,199 |
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| 47,677 |
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Equity |
|
| 320 |
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| 342 |
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| 270 |
|
| 283 |
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Total |
| $ | 288,645 |
| $ | 289,956 |
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| $ | 297,289 |
| $ | 290,504 |
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Proceeds from sales of securities during the first ninesix months of 2018 and 2017 were $14.7 million and 2016 were $14.6 and $23.9$4.0 million. Gross gains of $105$66 thousand and $317$43 thousand and gross losses of $2$114 thousand and $0 were realized on those sales, respectively. The tax provision related to these realized net gains or losses was $35$(10) thousand and $108$15 thousand, respectively.
Proceeds from sales of securities during the three months ended SeptemberJune 30, 2018 and June 30, 2017 and September 30, 2016 were $10.5$10.8 million and $2.5$4.0 million. Gross gains of $60$32 thousand and $40$43 thousand and gross losses of $2$36 thousand and $0 were realized on those sales, respectively. The tax provision related to these realized net gains or losses was $20$(1) thousand and $14$15 thousand, respectively.
1213
Securities with unrealized losses at SeptemberJune 30, 20172018 and at December 31, 20162017 not recognized in income are as follows:
SeptemberJune 30, 20172018
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| Less than 12 Months |
| 12 Months or More |
| Total |
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| Less than 12 Months |
| 12 Months or More |
| Total |
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| Fair |
| Unrealized |
| Fair |
| Unrealized |
| Fair |
| Unrealized |
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| Fair |
| Unrealized |
| Fair |
| Unrealized |
| Fair |
| Unrealized |
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Description of Securities |
| Value |
| Loss |
| Value |
| Loss |
| Value |
| Loss |
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| Value |
| Loss |
| Value |
| Loss |
| Value |
| Loss |
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U.S. Government agencies |
| $ | 15,617 |
| $ | (79) |
| $ | 6,056 |
| $ | (100) |
| $ | 21,673 |
| $ | (179) |
| |||||||||||||||||||||||||||
U.S. treasury notes |
| $ | 3,962 |
| $ | (77) |
| $ | — |
| $ | — |
| $ | 3,962 |
| $ | (77) |
| |||||||||||||||||||||||||||
U.S. government agencies |
|
| 23,798 |
|
| (464) |
|
| 7,925 |
|
| (322) |
|
| 31,723 |
|
| (786) |
| |||||||||||||||||||||||||||
States and municipals |
|
| 16,449 |
|
| (110) |
|
| 2,271 |
|
| (48) |
|
| 18,720 |
|
| (158) |
|
|
| 38,547 |
|
| (774) |
|
| 2,688 |
|
| (109) |
|
| 41,235 |
|
| (883) |
| ||||||||
Mortgage-backed - residential |
|
| 54,303 |
|
| (385) |
|
| 44,469 |
|
| (1,021) |
|
| 98,772 |
|
| (1,406) |
|
|
| 70,430 |
|
| (2,075) |
|
| 53,567 |
|
| (2,484) |
|
| 123,997 |
|
| (4,559) |
| ||||||||
Mortgage-backed - commercial |
|
| 38,069 |
|
| (1,135) |
|
| 6,768 |
|
| (387) |
|
| 44,837 |
|
| (1,522) |
| |||||||||||||||||||||||||||
Total temporarily impaired |
| $ | 86,369 |
| $ | (574) |
| $ | 52,796 |
| $ | (1,169) |
| $ | 139,165 |
| $ | (1,743) |
|
| $ | 174,807 |
| $ | (4,525) |
| $ | 70,948 |
| $ | (3,302) |
| $ | 245,755 |
| $ | (7,827) |
|
December 31, 2016
2017
|
|
|
|
| �� |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Less than 12 Months |
| 12 Months or More |
| Total |
|
| Less than 12 Months |
| 12 Months or More |
| Total |
| ||||||||||||||||||||||||
|
| Fair |
| Unrealized |
| Fair |
| Unrealized |
| Fair |
| Unrealized |
|
| Fair |
| Unrealized |
| Fair |
| Unrealized |
| Fair |
| Unrealized |
| ||||||||||||
Description of Securities |
| Value |
| Loss |
| Value |
| Loss |
| Value |
| Loss |
|
| Value |
| Loss |
| Value |
| Loss |
| Value |
| Loss |
| ||||||||||||
U.S. Government agencies |
| $ | 28,202 |
| $ | (299) |
| $ | — |
| $ | — |
| $ | 28,202 |
| $ | (299) |
| |||||||||||||||||||
U.S. treasury notes |
| $ | 4,024 |
| $ | (22) |
| $ | — |
| $ | — |
| $ | 4,024 |
| $ | (22) |
| |||||||||||||||||||
U.S. government agencies |
|
| 18,405 |
|
| (130) |
|
| 12,692 |
|
| (228) |
|
| 31,097 |
|
| (358) |
| |||||||||||||||||||
States and municipals |
|
| 27,834 |
|
| (716) |
|
| — |
|
| — |
|
| 27,834 |
|
| (716) |
|
|
| 15,442 |
|
| (97) |
|
| 2,769 |
|
| (36) |
|
| 18,211 |
|
| (133) |
|
Mortgage-backed - residential |
|
| 119,802 |
|
| (1,938) |
|
| 13,652 |
|
| (739) |
|
| 133,454 |
|
| (2,677) |
|
|
| 70,646 |
|
| (817) |
|
| 54,760 |
|
| (1,513) |
|
| 125,406 |
|
| (2,330) |
|
Mortgage-backed - commercial |
|
| 39,394 |
|
| (409) |
|
| 7,371 |
|
| (280) |
|
| 46,765 |
|
| (689) |
| |||||||||||||||||||
Total temporarily impaired |
| $ | 175,838 |
| $ | (2,953) |
| $ | 13,652 |
| $ | (739) |
| $ | 189,490 |
| $ | (3,692) |
|
| $ | 147,911 |
| $ | (1,475) |
| $ | 77,592 |
| $ | (2,057) |
| $ | 225,503 |
| $ | (3,532) |
|
The Company evaluates securities for other-than-temporary impairment at least on a quarterly basis, and more frequently when economic or market concerns warrant such evaluation. In analyzing an issuer’s financial condition, we may consider many factors including, (1) whether the securities are issued by the federal government or its agencies, (2) whether downgrades by bond rating agencies have occurred, (3) the results of reviews of the issuer’s financial condition and near-term prospects, (4) the length of time and the extent to which the fair value has been less than cost, and (5) whether we intend to sell the investment security or more likely than not will be required to sell the investment security before its anticipated recovery.
Unrealized losses on securities included in the tables above have not been recognized into income because (1) all rated securities are investment grade and are of high credit quality, (2) management does not intend to sell and it is more likely than not that management would not be required to sell the securities prior to their anticipated recovery, (3) management believes the decline in fair value is largely due to changes in interest rates and (4) management believes the declines in fair value are temporary. The Company believes the fair value will recover as the securities approach maturity.
TRADING ASSETS
The trading assets, which totaled $5.7 million at September 30, 2017 and $5.6 million at December 31, 2016, are primarily comprised of cash and cash equivalents and municipal securities which are generally held for 60 days or less.
1314
3.LOANS
Loans at period-end are as follows:
(in thousands)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| 9/30/2017 |
| 12/31/2016 |
|
| 6/30/2018 |
| 12/31/2017 |
| ||||
Commercial |
| $ | 75,061 |
| $ | 77,436 |
|
| $ | 80,677 |
| $ | 80,070 |
|
Real estate construction |
|
| 34,289 |
|
| 29,169 |
|
|
| 22,729 |
|
| 20,816 |
|
Real estate mortgage: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1-4 family residential |
|
| 242,152 |
|
| 244,638 |
|
|
| 245,724 |
|
| 238,121 |
|
Multi-family residential |
|
| 41,498 |
|
| 47,199 |
|
|
| 46,015 |
|
| 39,926 |
|
Non-farm & non-residential |
|
| 179,399 |
|
| 176,024 |
|
|
| 190,543 |
|
| 192,074 |
|
Agricultural |
|
| 58,930 |
|
| 62,491 |
|
|
| 63,711 |
|
| 59,176 |
|
Consumer |
|
| 17,520 |
|
| 18,867 |
|
|
| 19,241 |
|
| 18,182 |
|
Other |
|
| 116 |
|
| 183 |
|
|
| 138 |
|
| 170 |
|
Total |
| $ | 648,965 |
| $ | 656,007 |
|
| $ | 668,778 |
| $ | 648,535 |
|
Activity in the allowance for loan losses for the ninesix month and three month periods indicated was as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Nine Months Ended September 30, 2017 |
|
| Six Months Ended June 30, 2018 |
| ||||||||||||||||||||||||||
|
| (in thousands) |
|
| (in thousands) |
| ||||||||||||||||||||||||||
|
| Beginning |
|
|
|
|
|
|
|
|
|
| Ending |
|
| Beginning |
|
|
|
|
|
|
|
|
|
| Ending |
| ||||
|
| Balance |
| Charge-offs |
| Recoveries |
| Provision |
| Balance |
|
| Balance |
| Charge-offs |
| Recoveries |
| Provision |
| Balance |
| ||||||||||
|
|
|
|
|
|
|
| �� |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commercial |
| $ | 789 |
| $ | (35) |
| $ | 17 |
| $ | 161 |
| $ | 932 |
|
| $ | 975 |
| $ | — |
| $ | 6 |
| $ | 202 |
| $ | 1,183 |
|
Real estate Construction |
|
| 564 |
|
| — |
|
| 1 |
|
| 120 |
|
| 685 |
|
|
| 462 |
|
| — |
|
| — |
|
| (64) |
|
| 398 |
|
Real estate mortgage: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1-4 family residential |
|
| 2,301 |
|
| (203) |
|
| 8 |
|
| 248 |
|
| 2,354 |
|
|
| 2,316 |
|
| (63) |
|
| 262 |
|
| (62) |
|
| 2,453 |
|
Multi-family residential |
|
| 581 |
|
| — |
|
| 10 |
|
| 39 |
|
| 630 |
|
|
| 640 |
|
| — |
|
| 6 |
|
| 91 |
|
| 737 |
|
Non-farm & non-residential |
|
| 1,203 |
|
| (78) |
|
| — |
|
| 304 |
|
| 1,429 |
|
|
| 1,554 |
|
| — |
|
| — |
|
| 50 |
|
| 1,604 |
|
Agricultural |
|
| 856 |
|
| — |
|
| 47 |
|
| (420) |
|
| 483 |
|
|
| 494 |
|
| — |
|
| 146 |
|
| (165) |
|
| 475 |
|
Consumer |
|
| 547 |
|
| (128) |
|
| 34 |
|
| 80 |
|
| 533 |
|
|
| 582 |
|
| (93) |
|
| 22 |
|
| 71 |
|
| 582 |
|
Other |
|
| 60 |
|
| (682) |
|
| 573 |
|
| 91 |
|
| 42 |
|
|
| 18 |
|
| (413) |
|
| 341 |
|
| 103 |
|
| 49 |
|
Unallocated |
|
| 640 |
|
| — |
|
| — |
|
| 27 |
|
| 667 |
|
|
| 679 |
|
| — |
|
| — |
|
| 24 |
|
| 703 |
|
|
| $ | 7,541 |
| $ | (1,126) |
| $ | 690 |
| $ | 650 |
| $ | 7,755 |
|
| $ | 7,720 |
| $ | (569) |
| $ | 783 |
| $ | 250 |
| $ | 8,184 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Three Months Ended September 30, 2017 |
|
| Three Months Ended June 30, 2018 |
| ||||||||||||||||||||||||||
|
| (in thousands) |
|
| (in thousands) |
| ||||||||||||||||||||||||||
|
| Beginning |
|
|
|
|
|
|
|
|
|
| Ending |
|
| Beginning |
|
|
|
|
|
|
|
|
|
| Ending |
| ||||
|
| Balance |
| Charge-offs |
| Recoveries |
| Provision |
| Balance |
|
| Balance |
| Charge-offs |
| Recoveries |
| Provision |
| Balance |
| ||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commercial |
| $ | 1,006 |
| $ | (20) |
| $ | 2 |
| $ | (56) |
| $ | 932 |
|
| $ | 959 |
| $ | — |
| $ | 6 |
| $ | 218 |
| $ | 1,183 |
|
Real estate construction |
|
| 584 |
|
| — |
|
| — |
|
| 101 |
|
| 685 |
|
|
| 392 |
|
| — |
|
| — |
|
| 6 |
|
| 398 |
|
Real estate mortgage: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| — |
|
| — |
|
| — |
|
|
|
|
1-4 family residential |
|
| 2,575 |
|
| (170) |
|
| 3 |
|
| (54) |
|
| 2,354 |
|
|
| 2,499 |
|
| (1) |
|
| 5 |
|
| (50) |
|
| 2,453 |
|
Multi-family residential |
|
| 645 |
|
| — |
|
| 3 |
|
| (18) |
|
| 630 |
|
|
| 776 |
|
| — |
|
| 3 |
|
| (42) |
|
| 737 |
|
Non-farm & non-residential |
|
| 1,322 |
|
| (78) |
|
| — |
|
| 185 |
|
| 1,429 |
|
|
| 1,554 |
|
| — |
|
| — |
|
| 50 |
|
| 1,604 |
|
Agricultural |
|
| 504 |
|
| — |
|
| 19 |
|
| (40) |
|
| 483 |
|
|
| 484 |
|
| — |
|
| 123 |
|
| (132) |
|
| 475 |
|
Consumer |
|
| 561 |
|
| (26) |
|
| 6 |
|
| (8) |
|
| 533 |
|
|
| 561 |
|
| (65) |
|
| 6 |
|
| 80 |
|
| 582 |
|
Other |
|
| 76 |
|
| (214) |
|
| 172 |
|
| 8 |
|
| 42 |
|
|
| 24 |
|
| (199) |
|
| 151 |
|
| 73 |
|
| 49 |
|
Unallocated |
|
| 685 |
|
| — |
|
| — |
|
| (18) |
|
| 667 |
|
|
| 656 |
|
| — |
|
| — |
|
| 47 |
|
| 703 |
|
|
| $ | 7,958 |
| $ | (508) |
| $ | 205 |
| $ | 100 |
| $ | 7,755 |
|
| $ | 7,905 |
| $ | (265) |
| $ | 294 |
| $ | 250 |
| $ | 8,184 |
|
1415
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Nine Months Ended September 30, 2016 |
|
| Six Months Ended June 30, 2017 |
| ||||||||||||||||||||||||||
|
| (in thousands) |
|
| (in thousands) |
| ||||||||||||||||||||||||||
|
| Beginning |
|
|
|
|
|
|
|
|
|
| Ending |
|
| Beginning |
|
|
|
|
|
|
|
|
|
| Ending |
| ||||
|
| Balance |
| Charge-offs |
| Recoveries |
| Provision |
| Balance |
|
| Balance |
| Charge-offs |
| Recoveries |
| Provision |
| Balance |
| ||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commercial |
| $ | 486 |
| $ | — |
| $ | 37 |
| $ | 164 |
| $ | 687 |
|
| $ | 789 |
| $ | (15) |
| $ | 15 |
| $ | 217 |
| $ | 1,006 |
|
Real estate Construction |
|
| 411 |
|
| — |
|
| 15 |
|
| 153 |
|
| 579 |
|
|
| 564 |
|
| — |
|
| 1 |
|
| 19 |
|
| 584 |
|
Real estate mortgage: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1-4 family residential |
|
| 2,081 |
|
| (90) |
|
| 8 |
|
| 252 |
|
| 2,251 |
|
|
| 2,301 |
|
| (33) |
|
| 5 |
|
| 302 |
|
| 2,575 |
|
Multi-family residential |
|
| 458 |
|
| — |
|
| 7 |
|
| 111 |
|
| 576 |
|
|
| 581 |
|
| — |
|
| 7 |
|
| 57 |
|
| 645 |
|
Non-farm & non-residential |
|
| 1,213 |
|
| — |
|
| 355 |
|
| (355) |
|
| 1,213 |
|
|
| 1,203 |
|
| — |
|
| — |
|
| 119 |
|
| 1,322 |
|
Agricultural |
|
| 678 |
|
| (3) |
|
| 35 |
|
| 118 |
|
| 828 |
|
|
| 856 |
|
| — |
|
| 28 |
|
| (380) |
|
| 504 |
|
Consumer |
|
| 525 |
|
| (210) |
|
| 77 |
|
| 163 |
|
| 555 |
|
|
| 547 |
|
| (102) |
|
| 28 |
|
| 88 |
|
| 561 |
|
Other |
|
| 60 |
|
| (705) |
|
| 583 |
|
| 124 |
|
| 62 |
|
|
| 60 |
|
| (468) |
|
| 401 |
|
| 83 |
|
| 76 |
|
Unallocated |
|
| 609 |
|
| — |
|
| — |
|
| 45 |
|
| 654 |
|
|
| 640 |
|
| — |
|
| — |
|
| 45 |
|
| 685 |
|
|
| $ | 6,521 |
| $ | (1,008) |
| $ | 1,117 |
| $ | 775 |
| $ | 7,405 |
|
| $ | 7,541 |
| $ | (618) |
| $ | 485 |
| $ | 550 |
| $ | 7,958 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Three Months Ended September 30, 2016 |
|
| Three Months Ended June 30, 2017 |
| ||||||||||||||||||||||||||
|
| (in thousands) |
|
| (in thousands) |
| ||||||||||||||||||||||||||
|
| Beginning |
|
|
|
|
|
|
|
|
|
| Ending |
|
| Beginning |
|
|
|
|
|
|
|
|
|
| Ending |
| ||||
|
| Balance |
| Charge-offs |
| Recoveries |
| Provision |
| Balance |
|
| Balance |
| Charge-offs |
| Recoveries |
| Provision |
| Balance |
| ||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commercial |
| $ | 666 |
| $ | — |
| $ | 3 |
| $ | 18 |
| $ | 687 |
|
| $ | 871 |
| $ | (13) |
| $ | 7 |
| $ | 141 |
| $ | 1,006 |
|
Real estate Construction |
|
| 552 |
|
| — |
|
| 2 |
|
| 25 |
|
| 579 |
|
|
| 545 |
|
| — |
|
| 1 |
|
| 38 |
|
| 584 |
|
Real estate mortgage: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1-4 family residential |
|
| 2,304 |
|
| (26) |
|
| 1 |
|
| (28) |
|
| 2,251 |
|
|
| 2,375 |
|
| (22) |
|
| 4 |
|
| 218 |
|
| 2,575 |
|
Multi-family residential |
|
| 507 |
|
| — |
|
| 3 |
|
| 66 |
|
| 576 |
|
|
| 666 |
|
| — |
|
| 4 |
|
| (25) |
|
| 645 |
|
Non-farm & non-residential |
|
| 1,158 |
|
| — |
|
| 82 |
|
| (27) |
|
| 1,213 |
|
|
| 1,311 |
|
| — |
|
| — |
|
| 11 |
|
| 1,322 |
|
Agricultural |
|
| 801 |
|
| (3) |
|
| 12 |
|
| 18 |
|
| 828 |
|
|
| 862 |
|
| — |
|
| 18 |
|
| (376) |
|
| 504 |
|
Consumer |
|
| 550 |
|
| (47) |
|
| 7 |
|
| 45 |
|
| 555 |
|
|
| 534 |
|
| (65) |
|
| 24 |
|
| 68 |
|
| 561 |
|
Other |
|
| 50 |
|
| (206) |
|
| 143 |
|
| 75 |
|
| 62 |
|
|
| 60 |
|
| (243) |
|
| 167 |
|
| 92 |
|
| 76 |
|
Unallocated |
|
| 671 |
|
| — |
|
| — |
|
| (17) |
|
| 654 |
|
|
| 652 |
|
| — |
|
| — |
|
| 33 |
|
| 685 |
|
|
| $ | 7,259 |
| $ | (282) |
| $ | 253 |
| $ | 175 |
| $ | 7,405 |
|
| $ | 7,876 |
| $ | (343) |
| $ | 225 |
| $ | 200 |
| $ | 7,958 |
|
1516
The following tables present the balance in the allowance for loan losses and the recorded investment (excluding accrued interest receivable amounting to $2.4$2.5 million as of SeptemberJune 30, 20172018 and $2.4$2.6 million at December 31, 2016)2017) in loans by portfolio segment and based on impairment method as of SeptemberJune 30, 20172018 and December 31, 2016:2017:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Individually |
| Collectively |
| Purchased |
|
|
|
| Individually |
| Collectively |
|
|
| |||||||
As of September 30, 2017 |
| Evaluated for |
| Evaluated for |
| Credit |
|
|
|
| |||||||||||||
As of June 30, 2018 |
| Evaluated for |
| Evaluated for |
|
|
|
| |||||||||||||||
(in thousands) |
| Impairment |
| Impairment |
| Impaired |
| Total |
|
| Impairment |
| Impairment |
| Total |
| |||||||
Allowance for Loan Losses: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commercial |
| $ | — |
| $ | 932 |
| $ | — |
| $ | 932 |
|
| $ | 200 |
| $ | 983 |
| $ | 1,183 |
|
Real estate construction |
|
| — |
|
| 685 |
|
| — |
|
| 685 |
|
|
| — |
|
| 398 |
|
| 398 |
|
Real estate mortgage: |
|
|
|
|
| — |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1-4 family residential |
|
| 68 |
|
| 2,286 |
|
| — |
|
| 2,354 |
|
|
| 32 |
|
| 2,421 |
|
| 2,453 |
|
Multi-family residential |
|
| — |
|
| 630 |
|
| — |
|
| 630 |
|
|
| — |
|
| 737 |
|
| 737 |
|
Non-farm & non-residential |
|
| — |
|
| 1,429 |
|
| — |
|
| 1,429 |
|
|
| — |
|
| 1,604 |
|
| 1,604 |
|
Agricultural |
|
| — |
|
| 483 |
|
| — |
|
| 483 |
|
|
| — |
|
| 475 |
|
| 475 |
|
Consumer |
|
| — |
|
| 533 |
|
| — |
|
| 533 |
|
|
| — |
|
| 582 |
|
| 582 |
|
Other |
|
| — |
|
| 42 |
|
| — |
|
| 42 |
|
|
| — |
|
| 49 |
|
| 49 |
|
Unallocated |
|
| — |
|
| 667 |
|
| — |
|
| 667 |
|
|
| — |
|
| 703 |
|
| 703 |
|
|
| $ | 68 |
| $ | 7,687 |
| $ | — |
| $ | 7,755 |
|
| $ | 232 |
| $ | 7,952 |
| $ | 8,184 |
|
Loans: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commercial |
| $ | — |
| $ | 75,061 |
| $ | — |
| $ | 75,061 |
|
| $ | 323 |
| $ | 80,354 |
| $ | 80,677 |
|
Real estate construction |
|
| — |
|
| 34,289 |
|
| — |
|
| 34,289 |
|
|
| — |
|
| 22,729 |
|
| 22,729 |
|
Real estate mortgage: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1-4 family residential |
|
| 420 |
|
| 240,836 |
|
| 896 |
|
| 242,152 |
|
|
| 420 |
|
| 245,304 |
|
| 245,724 |
|
Multi-family residential |
|
| — |
|
| 40,924 |
|
| 574 |
|
| 41,498 |
|
|
| 697 |
|
| 45,318 |
|
| 46,015 |
|
Non-farm & non-residential |
|
| 1,133 |
|
| 178,263 |
|
| 3 |
|
| 179,399 |
|
|
| 1,380 |
|
| 189,163 |
|
| 190,543 |
|
Agricultural |
|
| 286 |
|
| 58,460 |
|
| 184 |
|
| 58,930 |
|
|
| 279 |
|
| 63,432 |
|
| 63,711 |
|
Consumer |
|
| — |
|
| 17,520 |
|
| — |
|
| 17,520 |
|
|
| — |
|
| 19,241 |
|
| 19,241 |
|
Other |
|
| — |
|
| 116 |
|
| — |
|
| 116 |
|
|
| — |
|
| 138 |
|
| 138 |
|
|
| $ | 1,839 |
| $ | 645,469 |
| $ | 1,657 |
| $ | 648,965 |
|
| $ | 3,099 |
| $ | 665,679 |
| $ | 668,778 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Individually |
| Collectively |
| Purchased |
|
|
| ||||
As of December 31, 2016 |
| Evaluated for |
| Evaluated for |
| Credit |
|
|
| ||||
(in thousands) |
| Impairment |
| Impairment |
| Impaired |
| Total |
| ||||
Allowance for Loan Losses: |
|
|
|
|
|
|
|
|
|
|
|
|
|
Commercial |
| $ | — |
| $ | 789 |
| $ | — |
| $ | 789 |
|
Real estate construction |
|
| — |
|
| 564 |
|
| — |
|
| 564 |
|
Real estate mortgage: |
|
|
|
|
|
|
|
|
|
|
|
|
|
1-4 family residential |
|
| 99 |
|
| 2,202 |
|
| — |
|
| 2,301 |
|
Multi-family residential |
|
| — |
|
| 581 |
|
| — |
|
| 581 |
|
Non-farm & non-residential |
|
| 15 |
|
| 1,188 |
|
| — |
|
| 1,203 |
|
Agricultural |
|
| 427 |
|
| 429 |
|
| — |
|
| 856 |
|
Consumer |
|
| — |
|
| 547 |
|
| — |
|
| 547 |
|
Other |
|
| — |
|
| 60 |
|
| — |
|
| 60 |
|
Unallocated |
|
| — |
|
| 640 |
|
| — |
|
| 640 |
|
|
| $ | 541 |
| $ | 7,000 |
| $ | — |
| $ | 7,541 |
|
Loans: |
|
|
|
|
|
|
|
|
|
|
|
|
|
Commercial |
| $ | 97 |
| $ | 77,339 |
| $ | — |
|
| 77,436 |
|
Real estate construction |
|
| 153 |
|
| 29,016 |
|
| — |
|
| 29,169 |
|
Real estate mortgage: |
|
|
|
|
|
|
|
|
|
|
|
|
|
1-4 family residential |
|
| 2,704 |
|
| 240,906 |
|
| 1,028 |
|
| 244,638 |
|
Multi-family residential |
|
| — |
|
| 46,637 |
|
| 562 |
|
| 47,199 |
|
Non-farm & non-residential |
|
| 1,725 |
|
| 174,154 |
|
| 145 |
|
| 176,024 |
|
Agricultural |
|
| 3,315 |
|
| 58,998 |
|
| 178 |
|
| 62,491 |
|
Consumer |
|
| — |
|
| 18,867 |
|
| — |
|
| 18,867 |
|
Other |
|
| — |
|
| 183 |
|
| — |
|
| 183 |
|
Total |
| $ | 7,994 |
| $ | 646,100 |
| $ | 1,913 |
| $ | 656,007 |
|
17
|
|
|
|
|
|
|
|
|
|
|
|
| Individually |
| Collectively |
|
|
| |||
As of December 31, 2017 |
| Evaluated for |
| Evaluated for |
|
|
| |||
(in thousands) |
| Impairment |
| Impairment |
| Total |
| |||
Allowance for Loan Losses: |
|
|
|
|
|
|
|
|
|
|
Commercial |
| $ | — |
| $ | 975 |
| $ | 975 |
|
Real estate construction |
|
| — |
|
| 462 |
|
| 462 |
|
Real estate mortgage: |
|
|
|
|
|
|
|
|
|
|
1-4 family residential |
|
| 23 |
|
| 2,293 |
|
| 2,316 |
|
Multi-family residential |
|
| — |
|
| 640 |
|
| 640 |
|
Non-farm & non-residential |
|
| — |
|
| 1,554 |
|
| 1,554 |
|
Agricultural |
|
| — |
|
| 494 |
|
| 494 |
|
Consumer |
|
| — |
|
| 582 |
|
| 582 |
|
Other |
|
| — |
|
| 18 |
|
| 18 |
|
Unallocated |
|
| — |
|
| 679 |
|
| 679 |
|
|
| $ | 23 |
| $ | 7,697 |
| $ | 7,720 |
|
Loans: |
|
|
|
|
|
| �� |
|
|
|
Commercial |
| $ | — |
| $ | 80,070 |
| $ | 80,070 |
|
Real estate construction |
|
| — |
|
| 20,816 |
|
| 20,816 |
|
Real estate mortgage: |
|
|
|
|
|
|
|
|
|
|
1-4 family residential |
|
| 206 |
|
| 237,915 |
|
| 238,121 |
|
Multi-family residential |
|
| — |
|
| 39,926 |
|
| 39,926 |
|
Non-farm & non-residential |
|
| 1,130 |
|
| 190,944 |
|
| 192,074 |
|
Agricultural |
|
| 284 |
|
| 58,892 |
|
| 59,176 |
|
Consumer |
|
| — |
|
| 18,182 |
|
| 18,182 |
|
Other |
|
| — |
|
| 170 |
|
| 170 |
|
Total |
| $ | 1,620 |
| $ | 646,915 |
| $ | 648,535 |
|
The following table presents loans individually evaluated for impairment by class of loans as of and for the six months ended June 30, 2018 (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Unpaid |
|
|
|
| Allowance for |
| Average |
| Interest |
| Cash Basis |
| |||||
|
| Principal |
| Recorded |
| Loan Losses |
| Recorded |
| Income |
| Interest |
| ||||||
|
| Balance |
| Investment |
| Allocated |
| Investment |
| Recognized |
| Recognized |
| ||||||
With no related allowance recorded: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Real estate mortgage: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Multi-family residential |
| $ | 697 |
| $ | 697 |
| $ | - |
| $ | 709 |
| $ | 24 |
| $ | 24 |
|
Non-farm & non-residential |
|
| 1,380 |
|
| 1,380 |
|
| - |
|
| 1,397 |
|
| 35 |
|
| 35 |
|
Agricultural |
|
| 279 |
|
| 279 |
|
| - |
|
| 282 |
|
| 8 |
|
| 8 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
With an allowance recorded: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commercial |
|
| 323 |
|
| 323 |
|
| 200 |
|
| 350 |
|
| 18 |
|
| 18 |
|
Real estate mortgage: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1-4 family residential |
|
| 420 |
|
| 420 |
|
| 32 |
|
| 420 |
|
| 10 |
|
| 10 |
|
Total |
| $ | 3,099 |
| $ | 3,099 |
| $ | 232 |
| $ | 3,158 |
| $ | 95 |
| $ | 95 |
|
The recorded investment in loans excludes accrued interest receivable and loan origination fees, net due to immateriality.
1618
The following table presents loans individually evaluated for impairment by class of loans as of and for the ninesix months ended SeptemberJune 30, 2017 (in thousands):2017:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
| Unpaid |
|
|
|
| Allowance for |
| Average |
| Interest |
| Cash Basis |
|
|
|
| Year to Date |
| Year to Date |
| ||||||||
|
| Principal |
| Recorded |
| Loan Losses |
| Recorded |
| Income |
| Interest |
|
| Average |
| Interest |
| Cash Basis |
| |||||||||
|
| Balance |
| Investment |
| Allocated |
| Investment |
| Recognized |
| Recognized |
|
| Recorded |
| Income |
| Interest |
| |||||||||
(in thousands): |
| Investment |
| Recognized |
| Recognized |
| ||||||||||||||||||||||
With no related allowance recorded: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Real estate mortgage: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-farm & non-residential |
| $ | 1,133 |
| $ | 1,133 |
| $ | — |
| $ | 1,243 |
| $ | 42 |
| $ | 42 |
| ||||||||||
1-4 family residential |
| $ | 311 |
| $ | — |
| $ | — |
| |||||||||||||||||||
Non-farm and non-residential |
|
| 2,595 |
|
| 53 |
|
| 53 |
| |||||||||||||||||||
Agricultural |
|
| 286 |
|
| 286 |
|
| — |
|
| 410 |
| 9 |
|
| 9 |
|
|
| 472 |
|
| 7 |
|
| 7 |
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
With an allowance recorded: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
Real estate mortgage: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
1-4 family residential |
|
| 420 |
|
| 420 |
|
| 68 |
|
| 1,045 |
|
| 8 |
|
| 8 |
|
|
| 1,358 |
|
| — |
|
| — |
|
Total |
| $ | 1,839 |
| $ | 1,839 |
| $ | 68 |
| $ | 2,699 |
| $ | 59 |
| $ | 59 |
|
| $ | 4,736 |
| $ | 60 |
| $ | 60 |
|
The recorded investment in loans excludes accrued interest receivable and loan origination fees, net due to immateriality.
The following table presents loans individually evaluated for impairment by class of loans for the nine months ended September 30, 2016:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Year to Date |
| Year to Date |
| |||
|
| Average |
| Interest |
| Cash Basis |
| |||
|
| Recorded |
| Income |
| Interest |
| |||
(in thousands): |
| Investment |
| Recognized |
| Recognized |
| |||
With no related allowance recorded: |
|
|
|
|
|
|
|
|
|
|
Real estate mortgage: |
|
|
|
|
|
|
|
|
|
|
Construction |
| $ | 171 |
| $ | 37 |
| $ | 37 |
|
Agricultural |
|
| 436 |
|
| 21 |
|
| 21 |
|
|
|
|
|
|
|
|
|
|
|
|
With an allowance recorded: |
|
|
|
|
|
|
|
|
|
|
Real estate mortgage: |
|
|
|
|
|
|
|
|
|
|
1-4 family residential |
|
| 989 |
|
| 47 |
|
| 47 |
|
Non-farm & non-residential |
|
| 1,983 |
|
| 70 |
|
| 70 |
|
Agricultural |
|
| 3,868 |
|
| — |
|
| — |
|
Total |
| $ | 7,447 |
| $ | 175 |
| $ | 175 |
|
The recorded investment in loans excludes accrued interest receivable and loan origination fees, net due to immateriality.
17
The following table presents loans individually evaluated for impairment by class of loans as of and for the year ended December 31, 20162017 (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||
|
| Unpaid |
|
|
|
| Allowance for |
| Average |
| Interest |
| Cash Basis |
|
| Unpaid |
|
|
|
| Allowance for |
| Average |
| Interest |
| Cash Basis |
| ||||||||||
|
| Principal |
| Recorded |
| Loan Losses |
| Recorded |
| Income |
| Interest |
|
| Principal |
| Recorded |
| Loan Losses |
| Recorded |
| Income |
| Interest |
| ||||||||||||
|
| Balance |
| Investment |
| Allocated |
| Investment |
| Recognized |
| Recognized |
|
| Balance |
| Investment |
| Allocated |
| Investment |
| Recognized |
| Recognized |
| ||||||||||||
With no related allowance recorded: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commercial |
| $ | 97 |
| $ | 97 |
| $ | — |
| $ | 48 |
| $ | 30 |
| $ | 30 |
| |||||||||||||||||||
Real-estate construction |
|
| 153 |
|
| 153 |
|
|
|
|
| 494 |
|
| 9 |
|
| 9 |
| |||||||||||||||||||
Real-estate mortgage: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1-4 family residential |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||||
Non-farm & non-residential |
| 606 |
|
| 606 |
|
| — |
|
| 488 |
|
| — |
|
| — |
|
| $ | 1,130 |
| $ | 1,130 |
| $ | — |
| $ | 1,140 |
| $ | 68 |
| $ | 68 |
| |
Agricultural |
|
| 654 |
|
| 654 |
|
| — |
|
| 561 |
|
| — |
|
| — |
|
|
| 284 |
|
| 284 |
|
| — |
|
| 289 |
|
| 11 |
|
| 11 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
With an allowance recorded: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Real estate mortgage |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1-4 family residential |
|
| 2,098 |
|
| 2,098 |
|
| 99 |
|
| 1,590 |
|
| 56 |
|
| 56 |
|
|
| 206 |
|
| 206 |
|
| 23 |
|
| 208 |
|
| 8 |
|
| 8 |
|
Non-farm & non-residential |
|
| 1,725 |
|
| 1,725 |
|
| 15 |
|
| 2,303 |
|
| 71 |
|
| 71 |
| |||||||||||||||||||
Agricultural |
|
| 2,661 |
|
| 2,661 |
|
| 427 |
|
| 3,309 |
|
| 25 |
|
| 25 |
| |||||||||||||||||||
Total |
| $ | 7,994 |
| $ | 7,994 |
| $ | 541 |
| $ | 8,793 |
| $ | 191 |
| $ | 191 |
|
| $ | 1,620 |
| $ | 1,620 |
| $ | 23 |
| $ | 1,637 |
| $ | 87 |
| $ | 87 |
|
The recorded investment in loans excludes accrued interest receivable and loan origination fees, net due to immateriality. The following tables present loans individually evaluated for impairment by class of loans for the three months ended SeptemberJune 30, 20172018 and SeptemberJune 30, 2016:2017:
|
|
|
|
|
|
|
|
|
|
|
|
| Three Months Ending September 30, 2017 |
| |||||||
|
| Average |
| Interest |
| Cash Basis |
| |||
|
| Recorded |
| Income |
| Interest |
| |||
(in thousands): |
| Investment |
| Recognized |
| Recognized |
| |||
With no related allowance recorded: |
|
|
|
|
|
|
|
|
|
|
Real estate mortgage: |
|
|
|
|
|
|
|
|
|
|
Non-farm & non-residential |
| $ | 2,431 |
| $ | 17 |
| $ | 17 |
|
Agricultural |
|
| 491 |
|
| 2 |
|
| 2 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
With an allowance recorded: |
|
|
|
|
|
|
|
|
|
|
Real estate mortgage: |
|
|
|
|
|
|
|
|
|
|
1-4 family residential |
|
| 455 |
|
| 1 |
|
| 1 |
|
|
| $ | 3,377 |
| $ | 20 |
| $ | 20 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Three Months Ending September 30, 2016 |
|
| Three Months Ending June 30, 2018 |
| ||||||||||||||
|
| Average |
| Interest |
| Cash Basis |
|
| Average |
| Interest |
| Cash Basis |
| ||||||
|
| Recorded |
| Income |
| Interest |
|
| Recorded |
| Income |
| Interest |
| ||||||
|
| Investment |
| Recognized |
| Recognized |
| |||||||||||||
(in thousands): |
| Investment |
| Recognized |
| Recognized |
| |||||||||||||
With no related allowance recorded: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Real estate mortgage: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Construction |
| $ | 167 |
| $ | 10 |
| $ | 10 |
| ||||||||||
Multi-family residential |
| $ | 703 |
| $ | 12 |
| $ | 12 |
| ||||||||||
Non-farm & non-residential |
|
| 1,385 |
|
| 16 |
|
| 16 |
| ||||||||||
Agricultural |
|
| 654 |
|
| — |
|
| — |
|
|
| 280 |
|
| 2 |
|
| 2 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||
With an allowance recorded: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commercial |
|
| 342 |
|
| — |
|
| — |
| ||||||||||
Real estate mortgage: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1-4 family residential |
|
| 949 |
|
| 17 |
|
| 17 |
|
|
| 422 |
|
| 5 |
|
| 5 |
|
Non-farm & non-residential |
|
| 2,094 |
|
| 21 |
|
| 21 |
| ||||||||||
Agricultural |
|
| 3,824 |
|
| — |
|
| — |
| ||||||||||
Total |
| $ | 7,688 |
| $ | 48 |
| $ | 48 |
| ||||||||||
|
| $ | 3,132 |
| $ | 35 |
| $ | 35 |
|
1819
|
|
|
|
|
|
|
|
|
|
|
|
| Three Months Ending June 30, 2017 |
| |||||||
|
| Average |
| Interest |
| Cash Basis |
| |||
|
| Recorded |
| Income |
| Interest |
| |||
|
| Investment |
| Recognized |
| Recognized |
| |||
With no related allowance recorded: |
|
|
|
|
|
|
|
|
|
|
Real estate mortgage: |
|
|
|
|
|
|
|
|
|
|
1-4 family residential |
| $ | 947 |
| $ | 40 |
| $ | 40 |
|
Non-farm and non-residential |
|
| 292 |
|
| 47 |
|
| 47 |
|
Agricultural |
|
|
|
|
|
|
|
|
|
|
With an allowance recorded: |
|
|
|
|
|
|
|
|
|
|
Real estate mortgage: |
|
|
|
|
|
|
|
|
|
|
Construction |
|
| 2,394 |
|
| — |
|
| — |
|
1-4 family residential |
|
| 720 |
|
| 1 |
|
| 1 |
|
Non-farm and non-resdiential |
|
| 2,070 |
|
| 23 |
|
| 23 |
|
Agricultural |
|
| 3,957 |
|
| — |
|
| — |
|
Total |
| $ | 10,380 |
| $ | 111 |
| $ | 111 |
|
The following tables present the recorded investment in nonaccrual, loans past due over 90 days still on accrual and accruing troubled debt restructurings by class of loans as of SeptemberJune 30, 20172018 and December 31, 2016:2017:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Loans Past Due |
|
|
|
|
|
| Loans Past Due |
|
|
| ||||||
|
|
|
|
| Over 90 Days |
|
|
|
|
|
|
|
| Over 90 Days |
|
|
|
| ||
As of September 30, 2017 |
|
|
|
| Still |
| Troubled Debt |
| ||||||||||||
As of June 30, 2018 |
|
|
|
| Still |
| Troubled Debt |
| ||||||||||||
(in thousands) |
| Nonaccrual |
| Accruing |
| Restructurings |
|
| Nonaccrual |
| Accruing |
| Restructurings |
| ||||||
Commercial |
| $ | — |
| $ | 32 |
| $ | — |
|
| $ | 322 |
| $ | 324 |
| $ | — |
|
Real estate construction |
|
| — |
|
| 67 |
|
| — |
|
|
| — |
|
| 374 |
|
|
|
|
Real estate mortgage: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1-4 family residential |
|
| 1,213 |
|
| 47 |
|
| — |
|
|
| 568 |
|
| 8 |
|
| — |
|
Non-farm & non-residential |
|
| — |
|
| — |
|
| — |
|
|
| 226 |
|
| — |
|
| — |
|
Agricultural |
|
| 150 |
|
| — |
|
| — |
|
|
| 92 |
|
| — |
|
| — |
|
Consumer |
|
| 30 |
|
| 5 |
|
| — |
|
|
| 42 |
|
| 11 |
|
| — |
|
Total |
| $ | 1,393 |
| $ | 151 |
| $ | — |
|
| $ | 1,250 |
| $ | 717 |
| $ | — |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Loans Past Due |
|
|
|
|
|
| Loans Past Due |
|
|
| ||||||
|
|
|
|
| Over 90 Days |
|
|
|
|
|
|
|
| Over 90 Days |
|
|
|
| ||
As of December 31, 2016 |
|
|
|
| Still |
| Troubled Debt |
| ||||||||||||
As of December 31, 2017 |
|
|
|
| Still |
| Troubled Debt | �� | ||||||||||||
(in thousands) |
| Nonaccrual |
| Accruing |
| Restructurings |
|
| Nonaccrual |
| Accruing |
| Restructurings |
| ||||||
Commercial |
| $ | 3 |
| $ | 11 |
| $ | — |
|
| $ | — |
| $ | 32 |
| $ | — |
|
Real estate construction |
|
| — |
|
| 153 |
|
| — |
| ||||||||||
Real estate mortgage: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1-4 family residential |
|
| 2,725 |
|
| 31 |
|
| 338 |
|
|
| 1,086 |
|
| 184 |
|
| — |
|
Multi-family residential |
|
| 25 |
|
| — |
|
| — |
| ||||||||||
Non-farm & non-residential |
|
| 272 |
|
| — |
|
| 1,725 |
| ||||||||||
Agricultural |
|
| 1,541 |
|
| 724 |
|
| — |
|
|
| 96 |
|
| — |
|
| — |
|
Consumer |
|
| — |
|
| 8 |
|
| — |
|
|
| 11 |
|
| 15 |
|
| — |
|
Total |
| $ | 4,566 |
| $ | 927 |
| $ | 2,063 |
|
| $ | 1,193 |
| $ | 231 |
| $ | — |
|
Nonaccrual loans secured by real estate make up 97.0%70.8% of the total nonaccrual loan balances at SeptemberJune 30, 2017.2018.
Nonaccrual loans and loans past due 90 days still on accrual include both smaller balance homogeneous loans that are collectively evaluated for impairment and individually classified impaired loans.
A loan is considered impaired when, based on current information and events, it is probable that a creditor will be unable to collect all amounts due according to the contractual terms of the loan agreement. All amounts due according to the contractual terms means that both the contractual interest payments and the contractual principal payments of a loan will be collected as scheduled in the loan agreement.
20
Nonaccrual loans are loans for which payments in full of principal or interest is not expected or which principal or interest has been in default for a period of 90 days or more unless the asset is both well secured and in the process of collection. Other impaired loans may be loans showing signs of weakness or interruptions in cash flow, but ultimately are current or less than 90 days past due with respect to principal and interest and for which we anticipate full payment of principal and interest but not in accordance with contractual terms.
Additional factors considered by management in determining impairment and non-accrual status include payment status, collateral value, availability of current financial information, and the probability of collecting all contractual principal and interest payments.
19
The following tables present the aging of the recorded investment in past due and non-accrual loans as of SeptemberJune 30, 20172018 and December 31, 20162017 by class of loans:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| 30–59 |
| 60–89 |
| Greater than |
|
|
| Total |
|
|
|
| 30–59 |
| 60–89 |
| Greater than |
|
|
| Total |
|
|
| ||||||||||||
As of September 30, 2017 |
| Days |
| Days |
| 90 Days |
|
|
| Past Due & |
| Loans Not |
| |||||||||||||||||||||||||
As of June 30, 2018 |
| Days |
| Days |
| 90 Days |
|
|
| Past Due & |
| Loans Not |
| |||||||||||||||||||||||||
(in thousands) |
| Past Due |
| Past Due |
| Past Due |
| Non-accrual |
| Non-accrual |
| Past Due |
|
| Past Due |
| Past Due |
| Past Due |
| Non-accrual |
| Non-accrual |
| Past Due |
| ||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commercial |
| $ | 95 |
| $ | — |
| $ | 32 |
| $ | — |
| $ | 127 |
| $ | 74,934 |
|
| $ | 21 |
| $ | 55 |
| $ | 324 |
| $ | 322 |
| $ | 722 |
| $ | 79,955 |
|
Real estate construction |
|
| — |
|
| — |
|
| 67 |
|
| — |
|
| 67 |
|
| 34,222 |
|
|
| — |
|
| — |
|
| 374 |
|
| — |
|
| 374 |
|
| 22,355 |
|
Real estate mortgage: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1-4 family residential |
|
| 1,512 |
|
| 706 |
|
| 47 |
|
| 1,213 |
|
| 3,478 |
|
| 238,674 |
|
|
| 1,154 |
|
| 347 |
|
| 8 |
|
| 568 |
|
| 2,077 |
|
| 243,647 |
|
Multi-family residential |
|
| — |
|
| — |
|
| — |
|
| — |
|
| — |
|
| 41,498 |
|
|
| — |
|
| — |
|
| — |
|
| — |
|
| — |
|
| 46,015 |
|
Non-farm & non-residential |
|
| 192 |
|
| — |
|
| — |
|
| — |
|
| 192 |
|
| 179,207 |
|
|
| 325 |
|
| 184 |
|
| — |
|
| 226 |
|
| 735 |
|
| 189,808 |
|
Agricultural |
|
| 151 |
|
| — |
|
| — |
|
| 150 |
|
| 301 |
|
| 58,629 |
|
|
| 96 |
|
| — |
|
| — |
|
| 92 |
|
| 188 |
|
| 63,523 |
|
Consumer |
|
| 95 |
|
| 10 |
|
| 5 |
|
| 30 |
|
| 140 |
|
| 17,380 |
|
|
| 147 |
|
| 16 |
|
| 11 |
|
| 42 |
|
| 216 |
|
| 19,025 |
|
Other |
|
| — |
|
| — |
|
| — |
|
| — |
|
| — |
|
| 116 |
|
|
| — |
|
| — |
|
| — |
|
| — |
|
| — |
|
| 138 |
|
Total |
| $ | 2,045 |
| $ | 716 |
| $ | 151 |
| $ | 1,393 |
| $ | 4,305 |
| $ | 644,660 |
|
| $ | 1,743 |
| $ | 602 |
| $ | 717 |
| $ | 1,250 |
| $ | 4,312 |
| $ | 664,466 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||
|
| 30–59 |
| 60–89 |
| Greater than |
|
|
| Total |
|
|
|
|
| 30–59 |
| 60–89 |
| Greater than |
|
|
| Total |
|
|
|
| ||||||||||
As of December 31, 2016 |
| Days |
| Days |
| 90 Days |
|
|
| Past Due & |
| Loans Not |
| |||||||||||||||||||||||||
As of December 31, 2017 |
| Days |
| Days |
| 90 Days |
|
|
| Past Due & |
| Loans Not |
| |||||||||||||||||||||||||
(in thousands) |
| Past Due |
| Past Due |
| Past Due |
| Non-accrual |
| Non-accrual |
| Past Due |
|
| Past Due |
| Past Due |
| Past Due |
| Non-accrual |
| Non-accrual |
| Past Due |
| ||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commercial |
| $ | 54 |
| $ | 45 |
| $ | 11 |
| $ | 3 |
| $ | 113 |
| $ | 77,323 |
|
| $ | 678 |
| $ | 44 |
| $ | 32 |
| $ | — |
| $ | 754 |
| $ | 79,316 |
|
Real estate construction |
|
| — |
|
| — |
|
| 153 |
|
| — |
|
| 153 |
| 29,016 |
|
|
| — |
|
| — |
|
| — |
|
| — |
|
| — |
| 20,816 |
| ||
Real estate mortgage: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||
1-4 family residential |
|
| 2,310 |
|
| 228 |
|
| 31 |
|
| 2,725 |
|
| 5,294 |
| 239,344 |
|
|
| 2,222 |
|
| 321 |
|
| 184 |
|
| 1,086 |
|
| 3,813 |
| 234,308 |
| ||
Multi-family residential |
|
| 391 |
|
| 3 |
|
| — |
|
| 25 |
|
| 419 |
| 46,780 |
|
|
| — |
|
| — |
|
| — |
|
| — |
|
| — |
| 39,926 |
| ||
Non-farm & non-residential |
|
| 159 |
|
| 61 |
|
| — |
|
| 272 |
|
| 492 |
| 175,532 |
|
|
| 162 |
|
| — |
|
| — |
|
| — |
|
| 162 |
| 191,912 |
| ||
Agricultural |
|
| 647 |
|
| 61 |
|
| 724 |
|
| 1,541 |
|
| 2,973 |
| 59,518 |
|
|
| 249 |
|
| — |
|
| — |
|
| 96 |
|
| 345 |
| 58,831 |
| ||
Consumer |
|
| 97 |
|
| 37 |
|
| 8 |
|
| — |
|
| 142 |
| 18,725 |
|
|
| 132 |
|
| 14 |
|
| 15 |
|
| 11 |
|
| 172 |
| 18,010 |
| ||
Other |
|
| — |
|
| — |
|
| — |
|
| — |
|
| — |
|
| 183 |
|
|
| — |
|
| — |
|
| — |
|
| — |
|
| — |
|
| 170 |
|
Total |
| $ | 3,658 |
| $ | 435 |
| $ | 927 |
| $ | 4,566 |
| $ | 9,586 |
| $ | 646,421 |
|
| $ | 3,443 |
| $ | 379 |
| $ | 231 |
| $ | 1,193 |
| $ | 5,246 |
| $ | 643,289 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Troubled Debt Restructurings:
Management periodically reviews renewals and modifications of previously identified TDRs,troubled debt restructurings (TDR), for which there was no principal forgiveness, to consider if it is appropriate to remove the TDR classification. If the borrower is no longer experiencing financial difficulty and the renewal/modification did not contain a concessionary interest rate or other concessionary terms, management considers the potential removal of the TDR classification. If deemed appropriate based upon current underwriting, the TDR classification is removed as the borrower has complied with the terms of the loan at the date of renewal/modification and there was a reasonable expectation that the borrower will continue to comply with the terms of the loan after the date of the renewal/modification. Additionally, TDR classification can be removed in circumstances in which the Company performs a non-concessionary re-modification of the loan at terms considered to be at market for loans with comparable risk and management expects the borrower will continue to perform under the re-modified terms based on the borrower's past history of performance. In July 2017, the TDR classification was removed from one loan that met the requirements as discussed above. This loans totaled $1.7 million at December 31, 2016. This loan is no longer evaluated individually for impairment.
21
The Company had no loans classified as troubled debt restructurings as of SeptemberJune 30, 2017. The Company allocated $40 thousand for specific reserves to customers whose loan terms had been modified in troubled debt restructuring as of2018 or December 31, 2016.
The Company has not committed to lend additional amounts as of September 30, 2017 and December 31, 2016 to customers with outstanding loans that are classified as troubled debt restructurings.
20
No loans were modified as troubled debt restructurings during the first nine months ended of 2017 or 2016.2017.
Credit Quality Indicators:
The Company categorizes loans into risk categories based on relevant information about the ability of borrowers to service their debt such as: current financial information, historical payment experience, credit documentation, public information, and current economic trends, among other factors. The Company analyzes loans individually by classifying the loans as to credit risk. This analysis is performed on a quarterly basis. The Company uses the following definitions for risk ratings:
Special Mention. Loans classified as special mention have one or more potential weaknesses that deserve management's close attention. If left uncorrected, these potential weaknesses may result in deterioration of the repayment prospects for the loan or of the institution's credit position at some future date.
Substandard. Loans classified as substandard are inadequately protected by the current net worth and paying capacity of the obligor or of the collateral pledged, if any. Loans so classified have a well-defined and documented weakness or weaknesses that jeopardize the liquidation of the debt. They are characterized by the distinct possibility that the institution will sustain some loss if the deficiencies are not corrected.
Doubtful. Loans classified as doubtful have all the weaknesses inherent in those classified as substandard, with the added characteristic that the weaknesses make collection or liquidation in full, on the basis of currently existing facts, conditions, and values, highly questionable and improbable.
Loans not meeting the criteria above that are analyzed individually as part of the above described process are considered to be pass rated loans.
As of SeptemberJune 30, 20172018 and December 31, 2016,2017, and based on the most recent analysis performed, the risk category of loans by class of loans is as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As of September 30, 2017 |
|
|
| Special |
|
|
|
|
| |||||||||||||||||
As of June 30, 2018 |
|
|
| Special |
|
|
|
|
| |||||||||||||||||
(in thousands) |
| Pass |
| Mention |
| Substandard |
| Doubtful |
|
| Pass |
| Mention |
| Substandard |
| Doubtful |
| ||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commercial |
| $ | 73,482 |
| $ | 1,537 |
| $ | 42 |
| $ | — |
|
| $ | 79,433 |
| $ | 887 |
| $ | 357 |
| $ | — |
|
Real estate construction |
|
| 34,289 |
|
| — |
|
| — |
|
| — |
|
|
| 22,729 |
|
| — |
|
| — |
|
| — |
|
Real estate mortgage: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1-4 family residential |
|
| 233,723 |
|
| 3,806 |
|
| 4,577 |
|
| 46 |
|
|
| 238,377 |
|
| 2,877 |
|
| 4,470 |
|
| — |
|
Multi-family residential |
|
| 38,195 |
|
| 3,303 |
|
| — |
|
| — |
|
|
| 42,801 |
|
| 2,517 |
|
| 697 |
|
| — |
|
Non-farm & non-residential |
|
| 171,052 |
|
| 7,275 |
|
| 1,072 |
|
| — |
|
|
| 180,534 |
|
| 8,233 |
|
| 1,776 |
|
| — |
|
Agricultural |
|
| 55,865 |
|
| 2,258 |
|
| 807 |
|
| — |
|
|
| 56,612 |
|
| 6,385 |
|
| 714 |
|
| — |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||
Total |
| $ | 606,606 |
| $ | 18,179 |
| $ | 6,498 |
| $ | 46 |
|
| $ | 620,486 |
| $ | 20,899 |
| $ | 8,014 |
| $ | — |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As of December 31, 2016 |
|
|
| Special |
|
|
|
|
| |||||||||||||||||
As of December 31, 2017 |
|
|
| Special |
|
|
|
|
| |||||||||||||||||
(in thousands) |
| Pass |
| Mention |
| Substandard |
| Doubtful |
|
| Pass |
| Mention |
| Substandard |
| Doubtful |
| ||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commercial |
| $ | 76,346 |
| $ | 1,078 |
| $ | 12 |
| $ | — |
|
| $ | 78,326 |
| $ | 1,703 |
| $ | 41 |
| $ | — |
|
Real estate construction |
|
| 28,577 |
|
| — |
|
| 592 |
|
| — |
|
|
| 20,816 |
|
| — |
|
| — |
|
| — |
|
Real estate mortgage: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1-4 family residential |
|
| 232,969 |
|
| 4,031 |
|
| 7,627 |
|
| 11 |
|
|
| 230,103 |
|
| 3,522 |
|
| 4,496 |
|
| — |
|
Multi-family residential |
|
| 43,681 |
|
| 2,617 |
|
| 901 |
|
| — |
|
|
| 36,654 |
|
| 2,551 |
|
| 721 |
|
| — |
|
Non-farm & non-residential |
|
| 167,451 |
|
| 8,185 |
|
| 388 |
|
| — |
|
|
| 183,230 |
|
| 7,240 |
|
| 1,604 |
|
| — |
|
Agricultural |
|
| 58,155 |
|
| 1,367 |
|
| 2,969 |
|
| — |
|
|
| 54,765 |
|
| 3,682 |
|
| 729 |
|
| — |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||
Total |
| $ | 607,179 |
| $ | 17,278 |
| $ | 12,489 |
| $ | 11 |
|
| $ | 603,894 |
| $ | 18,698 |
| $ | 7,591 |
| $ | — |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2122
For consumer loans, the Company evaluates the credit quality based on the aging of the recorded investment in loans, which was previously presented. Non-performing consumer loans are loans which are greater than 90 days past due or on non-accrual status, and total $35$53 thousand at SeptemberJune 30, 20172018 and $8$26 thousand at December 31, 2016.2017.
4.REAL ESTATE OWNED
Activity in real estate owned, net was as follows:follows (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Nine Months Ended |
|
| Six Months Ended |
| ||||||||
|
| September 30, |
|
| June 30, |
| ||||||||
|
| 2017 |
| 2016 |
|
| 2018 |
| 2017 |
| ||||
Beginning of year |
| $ | 1,824 |
| $ | 2,347 |
|
| $ | 2,404 |
| $ | 1,824 |
|
Additions |
|
| 1,897 |
|
| 193 |
|
|
| 121 |
|
| 1,897 |
|
Capitalized Expenditures |
|
| 74 |
|
| — |
| |||||||
Sales |
|
| (911) |
|
| (571) |
|
|
| (1,195) |
|
| (901) |
|
Fair value adjustments |
|
| (141) |
|
| (131) |
|
|
| — |
|
| (38) |
|
End of period |
| $ | 2,669 |
| $ | 1,838 |
|
| $ | 1,404 |
| $ | 2,782 |
|
Activity in the valuation allowance was as follows:follows (in thousands):
|
|
|
|
|
|
| ||||||
|
| Six Months Ended | ||||||||||
|
|
|
|
|
|
|
| June 30, | ||||
|
| 2017 |
| 2016 |
| 2018 |
| 2017 | ||||
Beginning of year |
| $ | 803 |
| $ | 616 |
| $ | 777 |
| $ | 803 |
Fair value adjustments |
|
| 141 |
|
| 131 |
|
| — |
|
| 38 |
Reductions from sale |
|
| (46) |
|
| — |
|
| (364) |
|
| (46) |
|
|
|
|
|
|
| ||||||
End of Period |
| $ | 898 |
| $ | 747 |
| $ | 413 |
| $ | 795 |
Expenses related to foreclosed assets include:include (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
| Nine Months Ended |
|
| Six Months Ended | ||||||||
|
| September 30, |
|
| June 30, | ||||||||
|
| 2017 |
| 2016 |
|
|
| 2018 |
|
| 2017 | ||
|
|
| (in thousands) |
| |||||||||
Net (gain) loss on sales, included in other income on income statement |
| $ | (11) |
| $ | (163) |
| ||||||
Net gains on sales, included in other income on income statement |
| $ | (115) |
| $ | (17) | |||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fair value adjustments |
|
| 141 |
|
| 131 |
|
|
| — |
|
| 38 |
Operating expenses, net of rental income |
|
| 148 |
|
| 91 |
|
|
| 57 |
|
| 147 |
Repossession expense, net |
|
| 289 |
|
| 222 |
|
|
| 57 |
|
| 185 |
|
|
|
|
|
|
| |||||||
Net expense, net of gain or loss on sales, for the period |
| $ | 278 |
| $ | 59 |
|
| $ | (58) |
| $ | 168 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Three Months Ended |
|
| Three Months Ended |
| ||||||||
|
| September 30, |
|
| June 30, |
| ||||||||
|
| 2017 |
| 2016 |
|
|
| 2018 |
|
| 2017 |
| ||
|
|
| (in thousands) |
| ||||||||||
Net (gain) loss on sales, included in other income on income statement |
| $ | 6 |
| $ | (163) |
| |||||||
Net gains on sales, included in other income on income statement |
| $ | (117) |
| $ | 28 |
| |||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fair value adjustments |
|
| 103 |
|
| 46 |
|
|
| — |
|
| 38 |
|
Operating expenses, net of rental income |
|
| 1 |
|
| 33 |
|
|
| 42 |
|
| 68 |
|
Repossession expense, net |
|
| 104 |
|
| 79 |
|
|
| 42 |
|
| 106 |
|
|
|
|
|
|
|
|
| |||||||
Net expense, net of gain or loss on sales, for the period |
| $ | 110 |
| $ | (84) |
|
| $ | (75) |
| $ | 134 |
|
|
|
|
|
|
|
|
|
2223
5.EARNINGS PER SHARE
Basic earnings per common share is net income divided by the weighted average number of common shares outstanding during the period. Diluted earnings per common share includes the dilutive effect of additional potential common shares issuable under stock based compensation agreements.
The factors used in the earnings per share computation follow:
|
|
|
|
|
|
|
|
| Nine Months Ended | ||||
|
| September 30, | ||||
|
| 2017 |
| 2016 | ||
|
| (in thousands) | ||||
Basic Earnings Per Share |
|
|
|
|
|
|
Net Income |
| $ | 8,139 |
| $ | 6,284 |
Weighted average common shares outstanding |
|
| 2,955 |
|
| 2,975 |
Basic earnings per share |
| $ | 2.74 |
| $ | 2.10 |
|
|
|
|
|
|
|
Diluted Earnings Per Share |
|
|
|
|
|
|
Net Income |
| $ | 8,139 |
| $ | 6,284 |
Weighted average common shares outstanding |
|
| 2,955 |
|
| 2,975 |
Weighted average common and dilutive potential common shares outstanding |
|
| 2,956 |
|
| 2,975 |
Diluted earnings per share |
| $ | 2.74 |
| $ | 2.10 |
|
|
|
|
|
|
|
|
| Six Months Ended | ||||
|
| June 30, | ||||
|
| 2018 |
| 2017 | ||
|
| (in thousands) | ||||
Basic and Diluted Earnings Per Share |
|
|
|
|
|
|
Net Income |
| $ | 6,216 |
| $ | 5,547 |
Weighted average common shares outstanding |
|
| 2,962 |
|
| 2,954 |
Basic and diluted earnings per share |
| $ | 2.09 |
| $ | 1.87 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Three Months Ended | ||||
|
| September 30, | ||||
|
| 2017 |
| 2016 | ||
|
| (in thousands) | ||||
Basic Earnings Per Share |
|
|
|
|
|
|
Net Income |
| $ | 2,592 |
| $ | 2,365 |
Weighted average common shares outstanding |
|
| 2,955 |
|
| 2,976 |
Basic earnings per share |
| $ | 0.87 |
| $ | 0.79 |
|
|
|
|
|
|
|
Diluted Earnings Per Share |
|
|
|
|
|
|
Net Income |
| $ | 2,592 |
| $ | 2,365 |
Weighted average common shares outstanding |
|
| 2,955 |
|
| 2,976 |
Weighted average common and dilutive potential common shares outstanding |
|
| 2,956 |
|
| 2,976 |
Diluted earnings per share |
| $ | 0.87 |
| $ | 0.79 |
|
|
|
|
|
|
|
|
| Three Months Ended | ||||
|
| June 30, | ||||
|
| 2018 |
| 2017 | ||
|
| (in thousands) | ||||
Basic and Diluted Earnings Per Share |
|
|
|
|
|
|
Net Income |
| $ | 3,068 |
| $ | 2,410 |
Weighted average common shares outstanding |
|
| 2,962 |
|
| 2,954 |
Basic and diluted earnings per share |
| $ | 1.03 |
| $ | 0.81 |
|
|
|
|
|
|
|
Stock options for 0 shares of common stock for the ninesix months and three months ended SeptemberJune 30, 20172018 and 1,2000 shares of common stock for the ninesix months and three months ended SeptemberJune 30, 20162017 were excluded from diluted earnings per share because their impact was antidilutive.
6.STOCK COMPENSATION
We have fourthree stock based compensation plans as described below.
Two Stock Option PlansPlan
Under its expired 1999 Employee Stock Option Plan, the Company has granted certain officers and key employees stock option awards which vest and become fully exercisable at the end of five years and provided for issuance of up to 100,000 options. Under the expired 1993 Non-Employee Directors Stock Ownership Incentive Plan, the Company also granted certain directors stock option awards which vestvested and becomebecame fully exercisable immediately and provided for issuance of up to 20,000 options. For each Stock Option Plan, theThe exercise price of each option which has a ten year life, was equal to the market price of the Company’s stock on the date of grant.
2324
Summary of activity in the stock option plan for the first ninesix months of 20172018 follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Weighted |
|
| ||
|
|
|
| Weighted |
| Average |
| Aggregate | ||
|
|
|
| Average |
| Remaining |
| Intrinsic | ||
|
|
|
| Exercise |
| Contractual |
| Value | ||
|
| Shares |
| Price |
| Term |
| (in thousands) | ||
Outstanding, beginning of year |
| 1,200 |
| $ | 31.00 |
|
|
|
|
|
Granted |
| — |
|
| — |
|
|
|
| — |
Forfeited or expired |
| — |
|
| — |
|
|
|
| — |
Exercised |
| (600) |
|
| 31.00 |
|
|
|
|
|
Outstanding, end of period |
| 600 |
| $ | 31.00 |
| 5 months |
| $ | 6 |
Vested and expected to vest |
| 600 |
| $ | 31.00 |
| 5 months |
| $ | 6 |
Exercisable, end of period |
| 600 |
| $ | 31.00 |
| 5 months |
| $ | 6 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Weighted |
|
| ||
|
|
|
| Weighted |
| Average |
| Aggregate | ||
|
|
|
| Average |
| Remaining |
| Intrinsic | ||
|
|
|
| Exercise |
| Contractual |
| Value | ||
|
| Shares |
| Price |
| Term |
| (in thousands) | ||
Outstanding, beginning of year |
| 600 |
| $ | 31.00 |
|
|
|
|
|
Granted |
| — |
|
| — |
|
|
|
| — |
Forfeited or expired |
| — |
|
| — |
|
|
|
| — |
Exercised |
| (600) |
|
| 31.00 |
|
|
|
|
|
Outstanding, end of period |
| — |
| $ | — |
| 0 months |
| $ | — |
Vested and expected to vest |
| — |
| $ | — |
| 0 months |
| $ | — |
Exercisable, end of period |
| — |
| $ | — |
| 0 months |
| $ | — |
As of SeptemberJune 30, 2017,2018, there was $0 of total unrecognized compensation cost related to nonvested stock options granted under the Plan. Since boththe stock option plans haveplan has expired, neither plan allows forno additional options towill be issued.
2005 Restricted Stock Grant Plan
On May 10, 2005, the Company’s stockholders approved a restricted stock grant plan. Total shares issuable under the plan were 50,000. There were no shares issued during the first ninesix months of 20172018 or 2016.2017. The plan is now expired and no additional shares will be issued from the 2005 plan. There were 11771 shares forfeited during the first ninesix months of 2017 and 639three months ending June 30, 2018 and no shares were forfeited during the first ninesix months 2016.and three months ending June 30, 2017.
A summary of changes in the Company’s nonvested shares for the year follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Weighted-Average |
| Fair |
|
|
|
| Weighted-Average |
| Fair |
| ||||
|
|
|
| Grant-Date |
| Value |
|
|
|
| Grant-Date |
| Value |
| ||||
Nonvested Shares |
| Shares |
| Fair Value |
| Per Share |
|
| Shares |
| Fair Value |
| Per Share |
| ||||
Nonvested at January 1, 2017 |
| 10,636 |
| $ | 253,518 |
| $ | 23.84 |
| |||||||||
Granted |
| — |
|
| — |
|
| — |
| |||||||||
Nonvested at January 1, 2018 |
| 6,141 |
| $ | 151,984 |
| $ | 24.75 |
| |||||||||
Vested |
| (4,348) |
|
| (97,747) |
|
| 22.48 |
|
| (3,090) |
|
| (72,224) |
|
| 23.37 |
|
Forfeited |
| (117) |
|
| (3,004) |
|
| — |
|
| (71) |
|
| (1,883) |
|
| 26.52 |
|
Nonvested at September 30, 2017 |
| 6,171 |
| $ | 152,767 |
| $ | 24.76 |
| |||||||||
Nonvested at June 30, 2018 |
| 2,980 |
| $ | 77,877 |
| $ | 26.13 |
|
(1) Grant date fair value in thousands
As of SeptemberJune 30, 2017,2018, there was $99$51 thousand of total unrecognized compensation cost related to nonvested shares granted under the 2005 restricted stock grant plan. The cost is expected to be recognized over a weighted-average period of 1.81.2 years. As of SeptemberJune 30, 2017,2018, no additional shares are available for issuance under the restricted stock grant plan.
2009 Stock Award Plan
On May 13, 2009, the Company’s stockholders approved a stock award plan that provides for the granting of both incentive and nonqualified stock options and other share based awards. Total shares issuable under the plan are 150,000. There were 6,5755,720 shares issued during the first ninesix months of 2017ended June 30, 2018 and 6,1706,575 shares were issued during the first ninesix months of 2016.2017. There were 951366 shares forfeited during the first ninesix months of 2017ended June 30, 2018 and 360600 shares were forfeited during the first ninesix months of 2016.ended June 30, 2017.
2425
A summary of changes in the Company’s nonvested shares for the year follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Weighted-Average |
| Fair |
|
|
|
| Weighted-Average |
| Fair |
| ||||
|
|
|
| Grant-Date |
| Value |
|
|
|
| Grant-Date |
| Value |
| ||||
Nonvested Shares |
| Shares |
| Fair Value |
| Per Share |
|
| Shares |
| Fair Value |
| Per Share |
| ||||
Nonvested at January 1, 2017 |
| 7,297 |
| $ | 213,853 |
| $ | 29.31 |
| |||||||||
Nonvested at January 1, 2018 |
| 10,930 |
| $ | 338,545 |
| $ | 30.97 |
| |||||||||
Granted |
| 6,575 |
|
| 213,688 |
|
| 32.50 |
|
| 5,720 |
|
| 263,406 |
|
| 46.05 |
|
Vested |
| (1,648) |
|
| (47,988) |
|
| 29.12 |
|
| (2,448) |
|
| (74,504) |
|
| 30.43 |
|
Forfeited |
| (951) |
|
| (30,463) |
|
| 32.03 |
|
| (366) |
|
| (13,841) |
|
| 37.82 |
|
Nonvested at September 30, 2017 |
| 11,273 |
| $ | 349,090 |
| $ | 30.97 |
| |||||||||
Nonvested at June 30, 2018 |
| 13,836 |
| $ | 513,606 |
| $ | 37.12 |
|
(1) | Grant date fair value in thousands |
As of SeptemberJune 30, 2017,2018, there was $292$449 thousand of total unrecognized compensation cost related to nonvested shares granted under the restricted stock grant plan. The cost is expected to be recognized over a weighted-average period of 3.73.8 years. As of SeptemberJune 30, 2017, 133,368,2018, 127,166, shares are still available for issuance.
7.REPURCHASE AGREEMENTS
Repurchase agreements totaled $24.1$9.1 million at SeptemberJune 30, 2017.2018. Of this, $18.1$6.1 million were overnight obligations and $6.0$3.0 million had terms extending through May 2021 and a weighted remaining average life of 1.61.9 years. The Company pledged agenciesagency and mortgage-backed securities with a carrying amount of $30.5$15.2 million to secure repurchase agreements as of SeptemberJune 30, 2017.2018.
8.OTHER BORROWINGS
On July 20, 2015, the Company borrowed $5$5.0 million which had an outstanding balance of $3.8$3.0 million at SeptemberJune 30, 2017.2018. The term loan has a fixed interest rate of 5.02%, requires quarterly principal and interest payments, matures July 20, 2025 and is collateralized by Kentucky Bank stock. The maturity schedule for the term loan as of SeptemberJune 30, 20172018 is as follows (in thousands):
|
|
|
|
|
|
|
|
|
2017 |
| $ | 81 |
| ||||
2018 |
|
| 399 |
|
| $ | 246 |
|
2019 |
|
| 419 |
|
|
| 511 |
|
2020 |
|
| 441 |
|
|
| 537 |
|
2021 |
|
| 463 |
|
|
| 564 |
|
2022 |
|
| 593 |
| ||||
Thereafter |
|
| 1,959 |
|
|
| 512 |
|
|
| $ | 3,762 |
|
| $ | 2,963 |
|
In addition, the Company also had $17.3 million in federal funds purchased at September 30, 2017.
9.FAIR VALUE MEASUREMENTS
ASC Topic 820, “Fair Value Measurements and Disclosures”, defines fair value, establishes a framework for measuring fair value, and sets forth disclosures about fair value measurements. ASC Topic 825, “Financial Instruments”, allows entities to choose to measure certain financial assets and liabilities at fair value. The Company has not elected the fair value option for any financial assets or liabilities.
26
ASC Topic 820 defines fair value as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. It also establishes a fair value hierarchy which requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. This Topic describes three levels of inputs that may be used to measure fair value:
Level 1 – Quoted prices (unadjusted) for identical assets or liabilities in active markets that the entity has the ability to access as of the measurement date.
25
Level 2 – Significant other observable inputs other than Level 1 prices such as quoted prices for similar assets or liabilities; quoted prices in markets that are not active; or other inputs that are observable or can be corroborated by observable market data.
Level 3 – Significant unobservable inputs that reflect a company’s own assumptions about the assumptions that market participants would use in pricing an asset or liability.
The Company used the following methods and significant assumptions to estimate the fair value:
Investment Securities and Trading Assets: The fair values for available for sale investment securities and trading assets are determined by quoted market prices, if available (Level 1). For securities where quoted prices are not available, fair values are calculated based on market prices of similar securities (Level 2). For securities where quoted prices or market prices of similar securities are not available, fair values are calculated using discounted cash flows or other market indicators (Level 3).
Impaired Loans: The fair value of impaired loans with specific allocations of the allowance for loan losses is generally based on recent third party real estate appraisals. These appraisals may utilize a single valuation approach or a combination of approaches including comparable sales and the income approach. Adjustments are routinely made in the appraisal process by the appraisers to adjust for differences between the comparable sales and income data available for similar loans and collateral underlying such loans.
AdjustmentsNet adjustments totaled $68$209 thousand the first ninesix months of 20172018 and $0 for the first ninesix months of 20162017 and resulted in a Level 3 classification of the inputs for determining fair value. Net adjustments totaled $167 thousand the three months June 30, 2018 and $0 for the three months ending June 30, 2017 and resulted in a Level 3 classification of the inputs for determining fair value
Non-real estate collateral may be valued using an appraisal, net book value per the borrower’s financial statements, or aging reports, adjusted or discounted based on management’s historical knowledge, changes in market conditions from the time of the valuation, and management’s expertise and knowledge of the client and client’s business, resulting in a Level 3 fair value classification. Impaired loans are evaluated on a quarterly basis for additional impairment and adjusted in accordance with the allowance policy.
Other Real Estate Owned: Assets acquired through or instead of loan foreclosure and classified as other real estate owned (OREO)“OREO” are initially recorded at fair value less costs to sell when acquired, establishing a new cost basis. These assets are subsequently accounted for at lower of cost or fair value less estimated costs to sell. Fair value is commonly based on recent real estate appraisals which are updated no less frequently than annually. These appraisals may utilize a single valuation approach or a combination of approaches including comparable sales and the income approach with data from comparable properties. Adjustments are routinely made in the appraisal process by the independent appraisers to adjust for differences between the comparable sales and income data available. Such adjustments were $141$0 for both the six months and three months ended June 30, 2018 and $38 thousand for the ninesix months ended September 30, 2017 and $131 thousand for the nine months ended September 30, 2016, and $103 thousand for the three months ended SeptemberJune 30, 2017, and $46 thousand for the three months ended September 30, 2016, and resulted in a Level 3 classification of the inputs for determining fair value. Real estate owned properties are evaluated on a quarterly basis for additional impairment and adjusted accordingly.
Mortgage Servicing Rights: Fair value is based on market prices for comparable mortgage servicing contracts, when available, or alternatively based on a valuation model that calculates the present value of estimated future net servicing income, resulting in a Level 3 classification.
2627
Assets and Liabilities Measured on a Recurring Basis:
Available for sale investment securities and trading assets are the Company’s only balance sheet items that meet the disclosure requirements for instruments measured at fair value on a recurring basis. Disclosures are as follows in the tables below.
Fair Value Measurements at SeptemberJune 30, 20172018 (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
|
|
| Quoted Prices |
|
|
|
|
|
|
|
| Quoted Prices |
|
|
|
|
| ||||||||
|
|
|
|
| In Active |
|
|
|
|
|
|
|
|
|
|
| In Active |
|
|
|
|
|
|
| ||
|
|
|
|
| Markets for |
| Significant Other |
| Significant |
|
|
|
|
| Markets for |
| Significant Other |
| Significant |
| ||||||
|
|
|
|
| Identical |
| Observable |
| Unobservable |
|
|
|
|
| Identical |
| Observable |
| Unobservable |
| ||||||
|
| Carrying |
| Assets |
| Inputs |
| Inputs |
|
| Carrying |
| Assets |
| Inputs |
| Inputs |
| ||||||||
Description |
| Value |
| (Level 1) |
| (Level 2) |
| (Level 3) |
|
| Value |
| (Level 1) |
| (Level 2) |
| (Level 3) |
| ||||||||
U.S. treasury notes |
| $ | 3,962 |
| $ | — |
| $ | 3,962 |
| $ | — |
| |||||||||||||
U. S. government agencies |
| $ | 30,660 |
| $ | — |
| $ | 30,660 |
| $ | — |
|
|
| 33,530 |
|
| — |
|
| 33,530 |
|
| — |
|
States and municipals |
|
| 102,291 |
|
| — |
|
| 102,291 |
|
| — |
|
|
| 74,081 |
|
| — |
|
| 74,081 |
|
| — |
|
Mortgage-backed - residential |
|
| 156,663 |
|
| — |
|
| 156,663 |
|
| — |
|
|
| 130,971 |
|
| — |
|
| 130,971 |
|
| — |
|
Mortgage-backed-commercial |
|
| 47,677 |
|
| — |
|
| 47,677 |
|
| — |
| |||||||||||||
Equity securities |
|
| 342 |
|
| 342 |
|
| — |
|
| — |
|
|
| 283 |
|
| 283 |
|
| — |
|
| — |
|
Trading Assets |
|
| 5,714 |
|
| 1,959 |
|
| 3,755 |
|
| — |
| |||||||||||||
Total |
| $ | 295,670 |
| $ | 2,301 |
| $ | 293,369 |
| $ | — |
|
| $ | 290,504 |
| $ | 283 |
| $ | 290,221 |
| $ | — |
|
Fair Value Measurements at December 31, 20162017 (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
|
|
| Quoted Prices |
|
|
|
|
|
|
|
| Quoted Prices |
|
|
|
|
| ||||||||
|
|
|
|
| In Active |
|
|
|
|
|
|
|
|
|
|
| In Active |
|
|
|
|
|
|
| ||
|
|
|
|
| Markets for |
| Significant Other |
| Significant |
|
|
|
|
| Markets for |
| Significant Other |
| Significant |
| ||||||
|
|
|
|
| Identical |
| Observable |
| Unobservable |
|
|
|
|
| Identical |
| Observable |
| Unobservable |
| ||||||
|
| Carrying |
| Assets |
| Inputs |
| Inputs |
|
| Carrying |
| Assets |
| Inputs |
| Inputs |
| ||||||||
Description |
| Value |
| (Level 1) |
| (Level 2) |
| (Level 3) |
|
| Value |
| (Level 1) |
| (Level 2) |
| (Level 3) |
| ||||||||
U.S. treasury notes |
| $ | 4,024 |
| $ | — |
| $ | 4,024 |
| $ | — |
| |||||||||||||
U. S. government agencies |
| $ | 36,528 |
| $ | — |
| $ | 36,528 |
| $ | — |
|
|
| 41,705 |
|
| — |
|
| 41,705 |
|
| — |
|
States and municipals |
|
| 91,132 |
|
| — |
|
| 91,132 |
|
| — |
|
|
| 90,135 |
|
| — |
|
| 90,135 |
|
| — |
|
Mortgage-backed - residential |
|
| 145,770 |
|
| — |
|
| 145,770 |
|
| — |
|
|
| 130,377 |
|
| — |
|
| 130,377 |
|
| — |
|
Mortgage-backed - commercial |
|
| 51,596 |
|
| — |
|
| 51,596 |
|
| — |
| |||||||||||||
Equity securities |
|
| 340 |
|
| 340 |
|
| — |
|
| — |
|
|
| 340 |
|
| 340 |
|
| — |
|
| — |
|
Trading Assets |
|
| 5,592 |
|
| 1,608 |
|
| 3,984 |
|
| — |
| |||||||||||||
Total |
| $ | 279,362 |
| $ | 1,948 |
| $ | 277,414 |
| $ | — |
|
| $ | 318,177 |
| $ | 340 |
| $ | 317,837 |
| $ | — |
|
There were no transfers between level 1 and level 2 during 20172018 or 2016.2017.
28
Assets measured at fair value on a non-recurring basis are summarized below (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
| Fair Value Measurements at September 30, 2017 Using : |
|
| Fair Value Measurements at June 30, 2018 Using : |
| ||||||||||||||||
|
|
|
|
| Quoted Prices |
|
|
|
|
|
|
|
|
| Quoted Prices |
|
|
|
|
| ||
|
|
|
|
| In Active |
|
|
|
|
|
|
|
|
|
| In Active |
|
|
|
|
|
|
|
|
|
|
| Markets for |
| Significant Other |
| Significant |
|
|
|
|
| Markets for |
| Significant Other |
| Significant |
| ||
|
|
|
|
| Identical |
| Observable |
| Unobservable |
|
|
|
|
| Identical |
| Observable |
| Unobservable |
| ||
|
| Carrying |
| Assets |
| Inputs |
| Inputs |
|
| Carrying |
| Assets |
| Inputs |
| Inputs |
| ||||
(In thousands) |
| Value |
| (Level 1) |
| (Level 2) |
| (Level 3) |
|
| Value |
| (Level 1) |
| (Level 2) |
| (Level 3) |
| ||||
Description |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
Impaired loans: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
Commercial |
| $ | 123 | $ | — | $ | 123 |
| $ | — |
| |||||||||||
Real Estate Mortgage: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
1-4 family Residential |
| $ | 353 | $ | — | $ | — |
| $ | 353 |
|
|
| 310 |
| — |
| — |
|
| 310 |
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||
Other real estate owned, net: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
Residential |
| 611 |
| — |
| — |
|
| 611 |
|
|
| 93 |
| — |
| — |
|
| 93 |
| |
Commercial |
| 57 |
| — |
| — |
|
| 57 |
|
|
| 246 |
| — |
| — |
|
| 246 |
| |
Mortgage servicing rights |
| 1,310 |
| — |
| — |
|
| 1,310 |
|
27
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||
|
| Fair Value Measurements at December 31, 2016 Using : |
|
| Fair Value Measurements at December 31, 2017 Using : |
| ||||||||||||||||
|
|
|
| Quoted Prices |
|
|
|
|
|
|
|
| Quoted Prices |
|
|
|
|
| ||||
|
|
|
|
| In Active |
|
|
|
|
|
|
|
|
|
| In Active |
|
|
|
|
|
|
|
|
|
|
| Markets for |
| Significant Other |
| Significant |
|
|
|
|
| Markets for |
| Significant Other |
| Significant |
| ||
|
|
|
|
| Identical |
| Observable |
| Unobservable |
|
|
|
|
| Identical |
| Observable |
| Unobservable |
| ||
|
| Carrying |
| Assets |
| Inputs |
| Inputs |
|
| Carrying |
| Assets |
| Inputs |
| Inputs |
| ||||
(In thousands) |
| Value |
| (Level 1) |
| (Level 2) |
| (Level 3) |
|
| Value |
| (Level 1) |
| (Level 2) |
| (Level 3) |
| ||||
Description |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||
Impaired loans: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||
Real Estate Mortgage: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||
1-4 family residential |
| $ | 1,685 | $ | — | $ | — |
| $ | 1,685 |
|
| $ | 183 | $ | — | $ | — |
| $ | 183 |
|
Agricultural |
| 2,234 |
| — |
| — |
|
| 2,234 |
| ||||||||||||
Other real estate owned, net: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||
Residential |
| 956 |
| — |
| — |
|
| 956 |
|
| 910 |
| — |
| — |
|
| 910 |
| ||
Commercial |
| 272 |
| — |
|
|
|
| 272 |
|
| 200 |
| — |
|
|
|
| 200 |
| ||
Mortgage servicing rights |
| 1,083 |
| — |
| — |
|
| 1,083 |
|
| 1,323 |
| — |
| — |
|
| 1,323 |
|
Impaired loans measured for impairment using the fair value of the collateral for collateral dependent loans had a carrying amount of $353 thousand, which includes a valuation allowance of $68 thousand at September 30, 2017. Impaired loans measured for impairment using the fair value of the collateral for collateral dependent loans had a net carrying amount of $3.9 million,$433 thousand, which includes a valuation allowance of $232 thousand at June 30, 2018. Impaired loans measured for impairment using the fair value of the collateral for collateral dependent loans had a net carrying amount of $183 thousand, with a valuation allowance of $502$23 thousand at December 31, 2016. One new loan became2017. Four additional loans were impaired during the nine monthat June 30, 2018 when compared to December 31, 2017 and three month period ended September 30, 2017 which resulted in $68 thousand in additional provision for loan lossesloss expense of $211 thousand for impaired loans.the six months ended June 30, 2018 and $167 thousand for the three months ended June 30, 2018. For the ninesix months and three months ended SeptemberJune 30, 2016,2017, no loans which became impaired during 2016, resulted in additional loan loss provision expense. impaired.
Other real estate owned measured at fair value less costs to sell had a net carrying amount of $668$339 thousand, which is made up of the outstanding balance of $1.6 million,$752 thousand, net of a valuation allowance of $898$413 thousand at SeptemberJune 30, 2017.2018. Other real estate owned which was measured at fair value less costs to sell, had a net carrying amount of $1.6$1.1 million, which was made up of the outstanding balance of $2.4$1.9 million, net of a valuation allowance of $803$777 thousand at December 31, 2016.2017. The Company recorded $141 thousand$0 in write-downs of other real estate owned properties for the ninesix months and three months ended SeptemberJune 30, 20172018 and $103$38 thousand for the six months and three months ended SeptemberJune 30, 2017. The Company recorded $131 thousand and $46 thousand in net write-downs of other real estate owned properties during the nine months and the three months ended September 30, 2016.
ImpairedAt December 31 , 2017, impaired mortgage servicing rights, which are carried at the lower of cost or fair value, were carried at their fair value of $1.3 million, which iswas made up of the outstanding balance of $1.4 million, net of a valuation allowance of $86 thousand at September 30, 2017. At December 31, 2016,$56 thousand. There were no impaired loanmortgage servicing rights were carried at their fair valueas of $1.1 million, which is made up of the outstanding balance of $1.2 million, net of a valuation allowance of $125 thousand.June 30, 2018. For the first ninesix months of 2017,2018, the Company recorded a net recovery of prior write-downs of $40$56 thousand and net write-downs of $106 thousand$0 for the nine months ended September 30, 2016. For the three months ended SeptemberJune 30, 2018. For the six months ended June 30, 2017, the Company recorded a net recovery of prior write-downs of $6$34 thousand compared toand net write-downs of $64$5 thousand for the three months ended SeptemberJune 30, 2016. 2017.
2829
The following table presents quantitative information about level 3 fair value measurements for financial instruments measured at fair value on a non-recurring basis at SeptemberJune 30, 20172018 and December 31, 2016:2017:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Range |
|
|
|
|
|
|
|
| Range |
| ||
September 30, 2017 |
| Fair |
| Valuation |
| Unobservable |
| (Weighted |
| |||||||||||
June 30, 2018 |
| Fair |
| Valuation |
| Unobservable |
| (Weighted |
| |||||||||||
(In thousands) |
| Value |
| Technique(s) |
| Input(s) |
| Average) |
|
| Value |
| Technique(s) |
| Input(s) |
| Average) |
| ||
Impaired loans |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Real estate mortgage: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1-4 family residential |
| 353 |
| sales comparison |
| adjustment for differences between the comparable sales |
| 0%-12% | (6)% |
| $ | 310 |
| sales comparison |
| adjustment for differences between the comparable sales |
| 0%-27% | (2)% |
|
Other real estate owned: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Residential |
| 611 |
| sales comparison |
| adjustment for differences between the comparable sales |
| 1%-16% | (9)% |
|
| 93 |
| sales comparison |
| adjustment for differences between the comparable sales |
| 0%-16% | (6)% |
|
Commercial |
| 57 |
| income approach |
| capitalization rate |
| 10%-10% | (10)% |
|
| 246 |
| income approach |
| capitalization rate |
| 10%-10% | (10)% |
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||
Mortgage Servicing Rights |
| 1,310 |
| discounted cash flow |
| constant prepayment rates |
| 8%-50% | (11)% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Range |
|
|
|
| Range | ||
December 31, 2016 |
| Fair |
| Valuation |
| Unobservable |
| (Weighted |
| ||||||
December 31, 2017 | Fair | Valuation | Unobservable | (Weighted | |||||||||||
(In thousands) |
| Value |
| Technique(s) |
| Input(s) |
| Average) |
| Value | Technique(s) | Input(s) | Average) | ||
Impaired loans |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Real estate mortgage: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1-4 family residential |
| 1,685 |
| sales comparison |
| adjustment for differences between the comparable sales |
| 0%-21% | (10)% |
| 183 | sales comparison | adjustment for differences between the comparable sales | 3%-27% | (15)% |
Agricultural |
| 2,234 |
| sales comparison |
| adjustment for differences between the comparable sales |
| 2%-75% | (9)% |
| |||||
Other real estate owned: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Residential |
| 956 |
| sales comparison |
| adjustment for differences between the comparable sales |
| 1%-16% | (9)% |
| 910 | sales comparison | adjustment for differences between the comparable sales | 0%-16% | (6)% |
Commercial |
| 272 |
| income approach |
| capitalization rate |
| 10%-10% | (10)% |
| 200 | income approach | capitalization rate | 10%-10% | (10)% |
Mortgage Servicing Rights |
| 1,083 |
| discounted cash flow |
| constant prepayment rates |
| 8%-45% | (13)% |
| 1,323 | discounted cash flow | constant prepayment rates | 7%-25% | (10)% |
29
Fair Value of Financial Instruments
The carrying amounts and estimated fair values of financial instruments, at SeptemberJune 30, 20172018 and December 31, 20162017 are as follows:
SeptemberJune 30, 2017:2018:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Carrying |
|
|
|
|
|
|
|
|
|
|
|
|
| |
(in thousands) |
| Value |
| Level 1 |
| Level 2 |
| Level 3 |
| Total |
| |||||
Financial assets |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents |
| $ | 18,612 |
| $ | 18,612 |
| $ | — |
| $ | — |
| $ | 18,612 |
|
Interest bearing time deposits |
|
| 1,830 |
|
| 1,830 |
|
| — |
|
| — |
|
| 1,830 |
|
Securities available for sale |
|
| 289,956 |
|
| 342 |
|
| 289,614 |
|
| — |
|
| 289,956 |
|
Trading assets |
|
| 5,714 |
|
| 1,959 |
|
| 3,755 |
|
| — |
|
| 5,714 |
|
Loans held for sale |
|
| 1,316 |
|
| — |
|
| 1,350 |
|
| — |
|
| 1,350 |
|
Net Loans |
|
| 641,210 |
|
| — |
|
| — |
|
| 640,915 |
|
| 640,915 |
|
Federal Home Loan Bank stock |
|
| 7,034 |
|
| — |
|
| — |
|
| — |
|
| N/A |
|
Interest receivable |
|
| 3,785 |
|
| — |
|
| 1,338 |
|
| 2,447 |
|
| 3,785 |
|
Financial liabilities |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total deposits |
| $ | 748,379 |
| $ | 559,820 |
| $ | 189,475 |
| $ | — |
| $ | 749,295 |
|
Federal funds purchased |
|
| 17,302 |
|
| 17,302 |
|
| — |
|
| — |
|
| 17,302 |
|
Repurchase agreements |
|
| 24,070 |
|
| — |
|
| 24,125 |
|
| — |
|
| 24,125 |
|
Short-term Federal Home Loan Bank advances |
|
| 8,530 |
|
| — |
|
| 8,532 |
|
| — |
|
| 8,532 |
|
Long-term Federal Home Loan Bank advances |
|
| 93,665 |
|
| — |
|
| 88,557 |
|
| — |
|
| 88,557 |
|
Note payable |
|
| 3,762 |
|
|
|
|
| 4,208 |
|
|
|
|
| 4,208 |
|
Subordinated debentures |
|
| 7,217 |
|
| — |
|
| — |
|
| 7,213 |
|
| 7,213 |
|
Interest payable |
|
| 796 |
|
| — |
|
| 736 |
|
| 60 |
|
| 796 |
|
December 31, 2016:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Carrying |
|
|
|
|
|
|
|
|
|
|
|
|
|
| Carrying |
|
|
|
|
|
|
|
|
|
|
|
|
| ||
(in thousands) |
| Value |
| Level 1 |
| Level 2 |
| Level 3 |
| Total |
|
| Value |
| Level 1 |
| Level 2 |
| Level 3 |
| Total |
| ||||||||||
Financial assets |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents |
| $ | 43,250 |
| $ | 43,250 |
| $ | — |
| $ | — |
| $ | 43,250 |
|
| $ | 28,770 |
| $ | 28,770 |
| $ | — |
| $ | — |
| $ | 28,770 |
|
Interest bearing time deposits |
|
| 5,029 |
|
| 5,029 |
|
| — |
|
| — |
|
| 5,029 |
|
|
| 1,785 |
|
| 1,785 |
|
| — |
|
| — |
|
| 1,785 |
|
Securities available for sale |
|
| 273,770 |
|
| 340 |
|
| 273,430 |
|
| — |
|
| 273,770 |
|
|
| 290,504 |
|
| 283 |
|
| 290,221 |
|
| — |
|
| 290,504 |
|
Trading assets |
|
| 5,592 |
|
| 1,608 |
|
| 3,984 |
|
| — |
|
| 5,592 |
| ||||||||||||||||
Loans held for sale |
|
| 724 |
|
| — |
|
| 750 |
|
| — |
|
| 750 |
|
|
| 2,005 |
|
| — |
|
| 2,037 |
|
| — |
|
| 2,037 |
|
Net Loans |
|
| 648,466 |
|
| — |
|
| — |
|
| 648,234 |
|
| 648,234 |
|
|
| 660,594 |
|
| — |
|
| 123 |
|
| 656,405 |
|
| 656,528 |
|
Federal Home Loan Bank stock |
|
| 7,034 |
|
| — |
|
| — |
|
| — |
|
| N/A |
|
|
| 7,034 |
|
| — |
|
| — |
|
| — |
|
| N/A |
|
Interest receivable |
|
| 3,715 |
|
| — |
|
| 1,334 |
|
| 2,381 |
|
| 3,715 |
|
|
| 3,733 |
|
| — |
|
| 1,244 |
|
| 2,489 |
|
| 3,733 |
|
Financial liabilities |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total deposits |
| $ | 802,981 |
| $ | 607,617 |
| $ | 195,528 |
| $ | — |
| $ | 803,145 |
|
| $ | 802,482 |
| $ | 643,404 |
| $ | 159,975 |
| $ | — |
| $ | 803,379 |
|
Federal Funds Purchased |
|
| 15,717 |
|
| 15,717 |
|
| — |
|
|
|
|
| 15,717 |
| ||||||||||||||||
Repurchase agreements |
|
| 20,873 |
|
| — |
|
| 21,006 |
|
| — |
|
| 21,006 |
|
|
| 9,120 |
|
| — |
|
| 9,152 |
|
| — |
|
| 9,152 |
|
Short-term Federal Home Loan Bank advances |
|
| 16,000 |
|
| — |
|
| 16,002 |
|
| — |
|
| 16,002 |
| ||||||||||||||||
Long-term Federal Home Loan Bank advances |
|
| 92,500 |
|
| — |
|
| 91,015 |
|
| — |
|
| 91,015 |
|
|
| 86,683 |
|
| — |
|
| 82,158 |
|
| — |
|
| 82,158 |
|
Note payable |
|
| 4,090 |
|
| — |
|
| 4,564 |
|
| — |
|
| 4,564 |
|
|
| 2,963 |
|
|
|
|
| 3,180 |
|
|
|
|
| 3,180 |
|
Subordinated debentures |
|
| 7,217 |
|
| — |
|
| — |
|
| 7,210 |
|
| 7,210 |
|
|
| 7,217 |
|
| — |
|
| — |
|
| 7,210 |
|
| 7,210 |
|
Interest payable |
|
| 692 |
|
| — |
|
| 639 |
|
| 53 |
|
| 692 |
|
|
| 645 |
|
| — |
|
| 632 |
|
| 13 |
|
| 645 |
|
30
December 31, 2017:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Carrying |
|
|
|
|
|
|
|
|
|
|
|
|
| |
(in thousands) |
| Value |
| Level 1 |
| Level 2 |
| Level 3 |
| Total |
| |||||
Financial assets |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents |
| $ | 39,172 |
| $ | 39,172 |
| $ | — |
| $ | — |
| $ | 39,172 |
|
Interest bearing time deposits |
|
| 1,830 |
|
| 1,830 |
|
| — |
|
| — |
|
| 1,830 |
|
Securities available for sale |
|
| 318,177 |
|
| 340 |
|
| 317,837 |
|
| — |
|
| 318,177 |
|
Loans held for sale |
|
| 1,231 |
|
| — |
|
| 1,269 |
|
| — |
|
| 1,269 |
|
Net Loans |
|
| 640,815 |
|
| — |
|
| — |
|
| 639,421 |
|
| 639,421 |
|
Federal Home Loan Bank stock |
|
| 7,034 |
|
| — |
|
| — |
|
| — |
|
| — |
|
Interest receivable |
|
| 3,951 |
|
| — |
|
| 1,378 |
|
| 2,573 |
|
| 3,951 |
|
Financial liabilities |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total deposits |
| $ | 815,273 |
| $ | 621,139 |
| $ | 195,143 |
| $ | — |
| $ | 816,282 |
|
Repurchase agreements |
|
| 19,900 |
|
| — |
|
| 19,968 |
|
| — |
|
| 19,968 |
|
Short-term Federal Home Loan Bank advances |
|
| 8,400 |
|
| — |
|
| 8,393 |
|
| — |
|
| 8,393 |
|
Long-term Federal Home Loan Bank advances |
|
| 90,332 |
|
| — |
|
| 86,899 |
|
| — |
|
| 86,899 |
|
Note payable |
|
| 3,321 |
|
| — |
|
| 3,560 |
|
| — |
|
| 3,560 |
|
Subordinated debentures |
|
| 7,217 |
|
| — |
|
| — |
|
| 7,212 |
|
| 7,212 |
|
Interest payable |
|
| 838 |
|
| — |
|
| 825 |
|
| 13 |
|
| 838 |
|
The methods and assumptions, not previously presented, used to estimate fair values are described as follows:
Cash and Cash Equivalents - The carrying amounts of cash and cash equivalents approximate fair values and are classified as Level 1.
Interest Bearing Deposits - The carrying amounts of interest bearing deposits approximate fair values and are classified as Level 1.
FHLB Stock - It is not practical to determine the fair value of FHLB stock due to restrictions placed on its transferability.
Loans - Fair values of loans excluding loans held for sale, are estimated based on discounted cash flows of portfolios of loans with similar credit quality and financial characteristics including the type of loan, interest terms and repayment history. The Company calculates a fair value by using a net present value of scheduled cash flows methodology incorporating estimated maturities using estimated market discount rates. Estimated market discount rates are reflective of market rates for similarly offered products, market interest rate projections, credit spreads and prepayment assumptions. In accordance with ASU 2016-01, the fair value of loans as follows: For variable rate loans that reprice frequently and with no significant change in credit risk, fair valuesof June 30, 2018 are based on carrying values resulting in a Level 3 classification. Fair values for other loans are estimated using discounted cash flow analyses, using interest rates currently being offered for loans with similar terms to borrowersthe notion of similar credit quality resulting in a Level 3 classification. Impaired loans are valued at the lower of cost or fair value as described previously. exit price.
The methods usedutilized to estimate the fair value of loans do not necessarily representas of December 31, 2017 was measured using an exit price.entry price notion.
The fair value of mortgage loans held for sale is estimated based upon binding contracts and quotes from third party investors resulting in a Level 2 classification.
Deposits - The fair values disclosed for demand deposits (e.g., interest and non-interest checking, passbook savings, and certain types of money market accounts) are, by definition, equal to the amount payable on demand at the reporting date (i.e., their carrying amount) resulting in a Level 1 classification. The carrying amounts of variable rate, fixed-term money market accounts and certificates of deposit approximate their fair values at the reporting date resulting in a Level 1 classification. Fair values for fixed rate certificates of deposit are estimated using a discounted cash flows calculation that applies interest rates currently being offered on certificates to a schedule of aggregated expected monthly maturities on time deposits resulting in a Level 2 classification.
31
Securities Sold Under Agreements to Repurchase and Other Borrowings - The carrying amounts of borrowings under repurchase agreements approximate their fair values resulting in a Level 2 classification.
The carrying amount of the Company’s variable rate borrowings approximate their fair values resulting in a Level 2 classification.
Federal Funds Purchased - The carrying amounts of federal funds purchased approximate fair values and are classified as Level 1.
FHLB Advances, Borrowings and Subordinated Debentures - The fair values of the Company’s FHLB advances and other borrowings are estimated using discounted cash flow analyses based on the current borrowing rates for similar types of borrowing arrangements resulting in a Level 2 classification.
The fair values of the Company’s Subordinated Debentures are estimated using discounted cash flow analyses based on the current borrowing rates for similar types of borrowing arrangements resulting in a Level 3 classification.
Accrued Interest Receivable/Payable - The carrying amounts of accrued interest approximate fair value resulting in a Level 2 or Level 3 classification based on the level of the related asset/liability.
Off-balance Sheet Instruments - Fair values for off-balance sheet, credit-related financial instruments are based on fees currently charged to enter into similar agreements, taking into account the remaining terms of the agreements and the counterparties’ credit standing. The fair value of off-balance sheet instruments is not material.
31
10.CHANGES IN ACCUMULATED OTHER COMPREHENSIVE INCOME BY COMPONENT
Changes in Accumulated Other Comprehensive Income by Component (unaudited)
(in thousands)
|
|
|
|
|
|
|
|
|
| Unrealized |
| ||||
|
| Gains and Losses on |
| ||||
|
| Available for Sale |
| ||||
|
| Securities |
| ||||
|
| For the Nine Months Ended September 30, |
| ||||
|
| 2017 |
| 2016 |
| ||
Beginning Balance |
| $ | (956) |
| $ | 359 |
|
|
|
|
|
|
|
|
|
Unrealized holding gains (losses) for the period, net of tax |
|
| 1,889 |
|
| 3,452 |
|
|
|
|
|
|
|
|
|
Reclassification adjustment for: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Securities gains realized in income |
|
| 103 |
|
| 317 |
|
Income taxes |
|
| (35) |
|
| (108) |
|
|
|
| 68 |
|
| 209 |
|
|
|
|
|
|
|
|
|
Net current period other comprehensive income |
|
| 1,821 |
|
| 3,243 |
|
|
|
|
|
|
|
|
|
Ending balance |
| $ | 865 |
| $ | 3,602 |
|
|
|
|
|
|
|
|
|
|
| Unrealized |
| ||||
|
| Gains and Losses on |
| ||||
|
| Available for Sale |
| ||||
|
| Securities |
| ||||
|
| For the Three Months Ended September 30, |
| ||||
|
| 2017 |
| 2016 |
| ||
Beginning Balance |
| $ | 1,213 |
| $ | 4,402 |
|
|
|
|
|
|
|
|
|
Unrealized holding gains (losses) for the period, net of tax |
|
| (308) |
|
| (774) |
|
|
|
|
|
|
|
|
|
Reclassification adjustment for: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Securities gains realized in income, net |
|
| 60 |
|
| 40 |
|
Income taxes |
|
| (20) |
|
| (14) |
|
|
|
| 40 |
|
| 26 |
|
|
|
|
|
|
|
|
|
Net current period other comprehensive income (loss) |
|
| (348) |
|
| (800) |
|
|
|
|
|
|
|
|
|
Ending balance |
| $ | 865 |
| $ | 3,602 |
|
32
The following is significant amounts reclassified out of each component of accumulated other comprehensive income (loss) for the nine months ended September 30, 2017 and September 30, 2016:
September 30, 2017
|
|
|
|
|
|
|
Details about |
| Amount |
| Affected Line Item |
| |
Accumulated Other |
| Reclassified From |
| in the Statement |
| |
Comprehensive |
| Accumulated Other |
| Where Net |
| |
Income Components |
| Comprehensive Income |
| Income is Presented |
| |
|
|
|
|
|
|
|
Unrealized gains and losses on available-for-sale securities |
| $ | 103 |
| Gain on sale of available for sale securities, net |
|
|
|
| 35 |
| Income taxes |
|
|
|
| 68 |
| Net income |
|
September 30, 2016
|
|
|
|
|
|
|
Details about |
| Amount |
| Affected Line Item |
| |
Accumulated Other |
| Reclassified From |
| in the Statement |
| |
Comprehensive |
| Accumulated Other |
| Where Net |
| |
Income Components |
| Comprehensive Income |
| Income is Presented |
| |
|
|
|
|
|
|
|
Unrealized gains and losses on available-for-sale securities |
| $ | 317 |
| Gain on sale of available for sale securities, net |
|
|
|
| 108 |
| Income taxes |
|
|
|
| 209 |
| Net income |
|
|
|
|
|
|
|
|
Item 2 - MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Forward-Looking Statements
The following discussion provides information about the financial condition and results of operations of the Company and its subsidiaries as of the dates and periods indicated. This discussion and analysis should be read in conjunction with the unaudited consolidated financial statements and Notes thereto appearing elsewhere in this report and the Management’s Discussion and Analysis in the Company’s Annual Report on Form 10-K for the year ended December 31, 2016.2017.
This discussion contains forward-looking statements under the Private Securities Litigation Reform Act of 1995 that involve risks and uncertainties. We intend such forward-looking statements to be covered by the safe harbor provisions for forward-looking statements contained in the federal securities laws. These statements are not historical facts, but rather statements based on our current expectations regarding our business strategies and their intended results and our future performance. Forward-looking statements are preceded by terms such as “expects,” “believes,” “anticipates,” “intends,” “estimates,” “potential,” “may,” and similar expressions.
Although we believe that the assumptions underlying the forward-looking statements contained herein are reasonable, any of the assumptions could be inaccurate, and therefore, there can be no assurance that the forward-looking statements included herein will prove to be accurate. Factors that could cause actual results to differ from the results discussed in the forward-looking statements include, but are not limited to: economic conditions (both generally and more specifically in the markets, including the tobacco market and the thoroughbred horse industry, in which we and our Bank operate); competition for our subsidiary’s customers from other providers of financial and mortgage services; government legislation, regulation and monetary policy (which changes from time to time and over which we have no control); changes in interest rates (both generally and more specifically mortgage interest rates); ability to successfully gain regulatory approval when required; material unforeseen changes in the liquidity, results of operations, or financial condition of our subsidiary’s customers; adequacy of the allowance for losses on loans and the level of future provisions
33
for losses on loans; future acquisitions, changes in technology, information security breaches or cyber security attacks involving the Company, it subsidiaries, or third-party service providers; and other risks detailed in our filings with the Securities and Exchange Commission, all of which are difficult to predict and many of which are beyond our control.
32
As a result of the uncertainties and the assumptions on which this discussion and the forward-looking statements are based, actual future operations and results in the future may differ materially from those indicated herein.
You should not place undue reliance on any forward-looking statements made by us or on our behalf. Our forward-looking statements are made as of the date of the report, and we undertake no obligation to republish revised forward-looking statements to reflect events or circumstances after the date hereof or to reflect the occurrence of unanticipated events.
Summary
The Company recorded net income of $8.1$6.2 million, or $2.74$2.09 basic earnings and diluted earnings per share for the first ninesix months ended SeptemberJune 30, 20172018 compared to $6.3$5.5 million or $2.10$1.87 basic earnings and diluted earnings per share for the ninesix month period ended SeptemberJune 30, 2016.2017. The first ninesix months net earnings reflect an increase of $1.9 million,$669 thousand, or 29.5%12.1%, compared to the same time period in 2016.2017. The increase in net earnings is mostly attributed to an increase of $903 thousand,$1.3 million, or 3.8%7.8%, in net interest income, an increasea decrease of $1.7$1.3 million, or 18.4%16.8%, in non-interest income, a decreasean increase of $483$139 thousand, or 1.9%0.8%, in non-interest expense, and a decrease of $125$300 thousand, or 16.1%54.6%, for the provision for loan losses. The increasedecrease in non-interest income is mostly attributed to the sale of a branch building located in Winchester, Kentucky, to a non-banking real estate investor.investor that was recorded in 2017. The sale was solely for the building and not for the loans or deposits associated with the branch. The sale of the building resulted in a pre-tax gain of approximately $1.2 million. Absent the sale of the building, netnon-interest income would have been up approximately $1.1 million or 16.9%, net of tax, compared todecreased $86 thousand from the same period last year. one year ago.
The earnings for the three months ended SeptemberJune 30, 20172018 were $2.6$3.1 million or $0.87$1.03 basic and diluted earnings per share compared to $2.4 million or $0.79$0.81 basic and diluted earnings per share for the three month period ended SeptemberJune 30, 2016.2017. The earnings for the three month period in 20172018 reflect an increase of 9.6%27.3% compared to the same time period in 2016.2017.
For the ninesix months ended SeptemberJune 30, 20172018 and compared to the ninesix months ended SeptemberJune 30, 2016,2017, service charges increased $24$89 thousand, gain on the sale of loans increased $167decreased $222 thousand, and debit card interchange income increased $221$89 thousand. Salaries and benefits expense increased $73$257 thousand, legal and professional fees decreased $552$52 thousand, and debit card expenses increased $226$48 thousand and repossession expenses decreased $128 thousand. For the three months ended SeptemberJune 30, 20172018 and compared to the three months ended SeptemberJune 30, 2016,2017, service charges decreased $120increased $24 thousand, debit card interchange income increased $64$57 thousand, and gains on the sale of loans decreased $118$46 thousand.
For the three months ended SeptemberJune 30, 20172018 and compared to the the three months ended SeptemberJune 30, 2016,2017, salaries and benefits expense increased $52 thousand, legal and professional fees decreased $138$209 thousand, data processing expense increased $13decreased $31 thousand, debit card expense increased $95decreased $11 thousand and other expenses decreased $298$120 thousand. For the same three month comparision,comparison, repossession expense decreased $64 thousand and occupancy expense increased $25$100 thousand.
Return on average assets was 1.05%1.19% for the ninesix months ended SeptemberJune 30, 20172018 and 0.84%1.06% for the ninesix months ended September
June 30, 2016.2017. Return on average assets was 1.01%1.17% for the three months ended SeptemberJune 30, 20172018 and 0.94%0.93% for the three months ended SeptemberJune 30, 2016.2017. Return on average equity was 11.16%12.53% for the ninesix month period ended SeptemberJune 30, 20172018 and 8.94%11.57% for the ninesix month period ended SeptemberJune 30, 2016.2017. Return on average equity was 10.33%12.34% for the three month period ended SeptemberJune 30, 20172018 and 9.83%9.81% for the three month period ended SeptemberJune 30, 2016. 2017.
Securities available for sale increased $16.2decreased $27.7 million from $273.8$318.2 million at December 31, 20162017 to $290.0$290.5 million at
June 30, 2018.
Gross Loans increased $20.3 million from $648.5 million on December 31, 2017 to $668.8 million at SeptemberJune 30, 2017. Trading assets increased by $122 thousand, or 2.20%, and totaled $5.7 million at September 30, 2017 compared to $5.6 million at2018.
The overall increase in loan balances from December 31, 2016,2017 to June 30, 2018 is comprised of the following: an increase of $7.6 million in 1-4 family residential loans, an increase of $607 thousand in commercial loans, an increase of $6.1 million in multi-family residential loans, an increase of $4.5 million in agricultural loans, a decrease of $1.5 million in non-farm and includes income on the investment totaling $86non-residential loans, an increase of $1.1 million in consumer loans and an increase of $1.9 million in real-estate construction loans. Other loan balances decreased $32 thousand during the first nine months offrom December 31, 2017 compared to $117 thousand for the nine months ended SeptemberJune 30, 2016. Income (loss) on the trading account totaled $27 thousand for the three months ended September 30, 2017 compared to $44 thousand for the three months ended September 30, 2016.2018.
3433
Gross LoansTotal deposits decreased $7.0 million from $656.0$815.3 million on December 31, 20162017 to $649.0$802.5 million at Septemberon June 30, 2017. The overall decrease in loan balances from December 31, 2016 to September 30, 2017 is comprised of the following:2018, a decrease of $2.5 million in 1-4 family residential loans, a decrease of $2.4 million in commercial loans, a decrease of $5.7 million in multi-family residential loans, a decrease of $3.6 million in agricultural loans, an increase of $3.4 million in non-farm and non-residential loans, a decrease of $1.3 million in consumer loans, and an increase of $5.1 million in real-estate construction loans. Other loan balances decreased $67 thousand from December 31, 2016 to September 30, 2017.
Total deposits decreased from $803.0 million on December 31, 2016 to $748.0 million on September 30, 2017, a decrease of $55.0$12.8 million. Non-interest bearing demand deposit accounts increased $962 thousand$7.8 million from December 31, 20162017 to SeptemberJune 30, 20172018 while time deposits $250 thousand and over decreased $5.8$30.3 million and other interest bearing deposit accounts decreased $49.8increased $9.8 million from December 31, 20162017 to SeptemberJune 30, 2017.2018.
Public fund account balances decreased $41.2$12.1 million from December 31, 20162017 to SeptemberJune 30, 2017.2018. Public fund accounts typically decrease during the first three quarters of the year and increase during the last quarter of the year due to tax payments collected during the fourth quarter and then withdrawn from the Bank during the following months.
Borrowings from the Federal Home Loan Bank increased $9.7$4.0 million from December 31, 20162017 to SeptemberJune 30, 2017, repurchase2018. Long-term borrowings decreased $3.6 million while short-term borrowings increased $7.6 million during the six month period. Repurchase agreements increased $3.2decreased $10.8 million and the note payable decreased $328$358 thousand.
Net Interest Income
Net interest income is the difference between interest income earned on interest-earning assets and the interest expense paid on interest-bearing liabilities.
Net interest income was $25.0$17.8 million for the ninesix months ended SeptemberJune 30, 20172018 compared to $24.1$16.5 million for the nine six
months ended SeptemberJune 30, 2016,2017, an increase of 3.8%7.8%. Net interest income was $9.0 million for the three months ended
June 30, 2018 compared to $8.4 million for the three months ended SeptemberJune 30, 2017, compared to $8.1 million for the three months ended September 30, 2016, an increase of 4.4%8.0%.
The interest spread, excluding tax equivalent adjustments, was 3.33%3.59% for the first ninesix months of 2017 compared to 3.37%
3.30% for the first ninesix months of 2016.2017. For the first ninesix months in 2017,2018, the yield on assets increased from 3.86%3.82% in 20162017 to 3.87%4.18% in 2017,2018, excluding tax equivalent adjustments. The yield on loans decreased threeincreased 35 basis points compared to the ninesix months ended SeptemberJune 30, 20162017 from 4.74%4.67% to 4.71%5.02% for the ninesix months ended SeptemberJune 30, 2017.2018. The yield on securities, excluding tax equivalent adjustments, increased from 2.30% during the first nine months of 20162.33% at June 30, 2017 to 2.35% during the first nine months of 2017.2.55% at June 30, 2018. The cost of liabilities was 0.53%0.83% for the first ninesix months in 20172018 compared to 0.49%0.52% in 2016. 2017.
Year to date average loans, excluding overdrafts, increased $8.9$3.1 million, or 1.4%0.47% for the ninesix months ended SeptemberJune 30, 2017
2018 compared to the ninesix months ended SeptemberJune 30, 2016.2017. Loan interest income increased $553 thousand$1.2 million during the first ninesix months of 20172018 compared to the first ninesix months of 2016.2017. Year to date total average total deposits increasedinterest bearing liabilities decreased from September 30, 2016 to SeptemberJune 30, 2017 to June 30, 2018 by $36.3$21.7 million or 4.7%3.0%. Year to date average interest bearing deposits increased $38.7decreased $20.0 million, or 7.0%3.3%, from SeptemberJune 30, 20162017 to SeptemberJune 30, 2017.2018. Deposit interest expense increased $330$422 thousand for the first ninesix months of 20172018 compared to the same period in 2016.2017. Year to date average borrowings, including repurchase agreements, increased $1.4decreased $1.7 million, or 1.1%1.4%, from SeptemberJune 30, 20162017 to SeptemberJune 30, 2017.2018. Interest expense on borrowed funds, including repurchase agreements, increased $57$99 thousand for the first ninesix months of 20172018 compared to the same period in 2016. Year to date average federal funds purchased increased $864 thousand. 2017.
The volume rate analysis for the ninesix months ended SeptemberJune 30, 20172018 indicates that $313$72 thousand of the increase in loan interest income is attributable to an increase in loan volume and $611$198 thousand of the increase in securities interest income is attributable to an increase in the volume of our security portfolio. Further, an increase in loan rates caused an increase of $240 thousand$1.2 million in interest income and a decreasean increase in rates in our security portfolio contributed to a decreasean increase of $10$370 thousand in securities interest income. The net effect to interest income was an increase of $1.3$1.8 million for the first ninesix months of 20172018 compared to the same time period in 2016.2017.
Also based on the following volume rate analysis for the six months ended June 30, 2018, an increase in demand deposit interest rates resulted in $388 thousand additional interest expense, an increase in interest rates paid for savings deposits resulted in an additional $6 thousand in interest expense, and increases in interest rates paid for time deposits resulted in an addition of $252 thousand in interest expense.
The change in volume in deposits and borrowings was responsible for a $356 thousand decrease in interest expense, of which a decrease in demand deposits resulted in a decrease of $24 thousand in interest expense, a decrease in time deposits resulted in a decrease of $200 thousand in interest expense, a decrease in repurchase agreements resulted in a decrease of $195 thousand in interest expense, and an increase in other borrowings resulted in an increase of $63 thousand in interest expense. The net effect to interest expense was an increase of $522 thousand.
34
As a result, the increase in net interest income for the first six months in 2018 is mostly attributed to increasing rates in the loan portfolio.
The volume rate analysis for the three months ended June 30, 2018 indicates that the $672 thousand increase in net interest income is attributable to an increase of $268 thousand due to change in growth in the Company’s balance sheet and an increase of $404 thousand is a result of changes in rates.
Changes in Interest Income and Expense
|
|
|
|
|
|
|
|
|
|
|
|
| Six Months Ended |
| |||||||
|
| 2018 vs. 2017 |
| |||||||
|
| Increase (Decrease) Due to Change in |
| |||||||
(in thousands) |
| Volume |
| Rate |
| Net Change |
| |||
INTEREST INCOME |
|
|
|
|
|
|
|
|
|
|
Loans |
| $ | 72 |
| $ | 1,155 |
| $ | 1,227 |
|
Investment Securities |
|
| 198 |
|
| 370 |
|
| 568 |
|
Other |
|
| (157) |
|
| 172 |
|
| 15 |
|
Total Interest Income |
|
| 113 |
|
| 1,697 |
|
| 1,810 |
|
INTEREST EXPENSE |
|
|
|
|
|
|
|
|
|
|
Deposits |
|
|
|
|
|
|
|
|
|
|
Demand |
|
| (24) |
|
| 388 |
|
| 364 |
|
Savings |
|
| — |
|
| 6 |
|
| 6 |
|
Negotiable Certificates of Deposit and Other Time Deposits |
|
| (200) |
|
| 252 |
|
| 52 |
|
Securities sold under agreements to repurchase and other borrowings |
|
| (195) |
|
| 204 |
|
| 9 |
|
Federal Home Loan |
|
|
|
|
|
|
|
|
|
|
Bank advances |
|
| 63 |
|
| 28 |
|
| 91 |
|
Total Interest Expense |
|
| (356) |
|
| 878 |
|
| 522 |
|
Net Interest Income |
| $ | 469 |
| $ | 819 |
| $ | 1,288 |
|
|
|
|
|
|
|
|
|
|
|
|
|
| Three Months Ended |
| |||||||
|
| 2018 vs. 2017 |
| |||||||
|
| Increase (Decrease) Due to Change in |
| |||||||
|
| Volume |
| Rate |
| Net Change |
| |||
INTEREST INCOME |
|
|
|
|
|
|
|
|
|
|
Loans |
| $ | 191 |
| $ | 518 |
| $ | 709 |
|
Investment Securities |
|
| 63 |
|
| 193 |
|
| 256 |
|
Other |
|
| 23 |
|
| (22) |
|
| 1 |
|
Total Interest Income |
|
| 277 |
|
| 689 |
|
| 966 |
|
INTEREST EXPENSE |
|
|
|
|
|
|
|
|
|
|
Deposits |
|
|
|
|
|
|
|
|
|
|
Demand |
|
| 36 |
|
| 160 |
|
| 196 |
|
Savings |
|
| — |
|
| 3 |
|
| 3 |
|
Negotiable Certificates of Deposit and Other Time Deposits |
|
| (65) |
|
| 86 |
|
| 21 |
|
Securities sold under agreements to repurchase and other borrowings |
|
| (23) |
|
| 44 |
|
| 21 |
|
Federal Home Loan |
|
|
|
|
|
|
|
|
|
|
Bank advances |
|
| 61 |
|
| (8) |
|
| 53 |
|
Total Interest Expense |
|
| 9 |
|
| 285 |
|
| 294 |
|
Net Interest Income |
| $ | 268 |
| $ | 404 |
| $ | 672 |
|
Non-Interest Income
Non-interest income decreased $1.3 million for the six months ended June 30, 2018, compared to the same period in
2017, to $6.4 million. Non-interest income increased $13 thousand for the three months ended June 30, 2018, compared to the three months ended June 30 2017, to remain at $3.3 million.
35
Also based on the following volume rate analysis for the nine months ended September 30, 2017, an increase in demand deposit interest rates resulted in $196 thousand additional interest expense, a decrease in interest rates paid for savings deposits resulted in a reduction of $4 thousand in interest expense, and increases in interest rates for time deposits resulted in an increase of $94 thousand in interest expense. Further, an increase in rates for repurchase agreements and other borrowings resulted in $47 thousand additional expense.
The change in volume in deposits and borrowings was responsible for a $52 thousand increase in interest expense, of which an increase in demand deposits resulted in an increase of $69 thousand in interest expense, a decrease in time deposits resulted in a decrease of $25 thousand in interest expense, a decrease in repurchase agreements and other borrwings resulted in a decrease of $37 thousand in interest expense, and a decrease in other borrowings resulted in a decrease of $45 thousand in interest expense. The net effect to interest expense was an increase of $386 thousand. As a result, the increase in net interest income for the first nine months in 2017 is mostly attributed to growth in the Company’s loan and security portfolios.
The volume rate analysis for the three months ended September 30, 2017 indicates that $166 thousand of the increase in net interest income is attributable to growth in the Company’s balance sheet and an increase of $192 thousand is a result of changes in rates.
Changes in Interest Income and Expense
|
|
|
|
|
|
|
|
|
|
|
|
| Nine Months Ended September 30 |
| |||||||
|
| 2017 vs. 2016 |
| |||||||
|
| Increase (Decrease) Due to Change in |
| |||||||
(in thousands) |
| Volume |
| Rate |
| Net Change |
| |||
INTEREST INCOME |
|
|
|
|
|
|
|
|
|
|
Loans |
| $ | 313 |
| $ | 240 |
| $ | 553 |
|
Investment Securities |
|
| 611 |
|
| (10) |
|
| 601 |
|
Other |
|
| 14 |
|
| 121 |
|
| 135 |
|
Total Interest Income |
|
| 938 |
|
| 351 |
|
| 1,289 |
|
INTEREST EXPENSE |
|
|
|
|
|
|
|
|
|
|
Deposits |
|
|
|
|
|
|
|
|
|
|
Demand |
|
| 69 |
|
| 196 |
|
| 265 |
|
Savings |
|
| — |
|
| (4) |
|
| (4) |
|
Negotiable Certificates of Deposit and Other Time Deposits |
|
| (25) |
|
| 94 |
|
| 69 |
|
Securities sold under agreements to repurchase and other borrowings |
|
| (37) |
|
| 47 |
|
| 10 |
|
Federal Home Loan |
|
|
|
|
|
|
|
|
|
|
Bank advances |
|
| 45 |
|
| 1 |
|
| 46 |
|
Total Interest Expense |
|
| 52 |
|
| 334 |
|
| 386 |
|
Net Interest Income |
| $ | 886 |
| $ | 17 |
| $ | 903 |
|
36
|
|
|
|
|
|
|
|
|
|
|
|
| Three Months Ended September 30 |
| |||||||
|
| 2017 vs. 2016 |
| |||||||
|
| Increase (Decrease) Due to Change in |
| |||||||
|
| Volume |
| Rate |
| Net Change |
| |||
INTEREST INCOME |
|
|
|
|
|
|
|
|
|
|
Loans |
| $ | (50) |
| $ | 199 |
| $ | 149 |
|
Investment Securities |
|
| 290 |
|
| 43 |
|
| 333 |
|
Other |
|
| (19) |
|
| 50 |
|
| 31 |
|
Total Interest Income |
|
| 221 |
|
| 292 |
|
| 513 |
|
INTEREST EXPENSE |
|
|
|
|
|
|
|
|
|
|
Deposits |
|
|
|
|
|
|
|
|
|
|
Demand |
|
| 12 |
|
| 80 |
|
| 92 |
|
Savings |
|
| — |
|
| (1) |
|
| (1) |
|
Negotiable Certificates of Deposit and Other Time Deposits |
|
| (11) |
|
| 33 |
|
| 22 |
|
Securities sold under agreements to repurchase and other borrowings |
|
| 26 |
|
| (22) |
|
| 4 |
|
Federal Home Loan |
|
|
|
|
|
|
|
|
|
|
Bank advances |
|
| 28 |
|
| 10 |
|
| 38 |
|
Total Interest Expense |
|
| 55 |
|
| 100 |
|
| 155 |
|
Net Interest Income |
| $ | 166 |
| $ | 192 |
| $ | 358 |
|
Non-Interest Income
Non-interest income increased $1.7 million for the nine months ended September 30, 2017, compared to the same period in 2016, to $10.8 million. Non-interest income increased $79 thousand for the three months ended September 30, 2017, compared to the thee months ended September 30 2016, to $3.2 million.
As previously noted, non-interest income increased $1.7 million for the nine months ended September 30, 2017 in comparison to the nine months ended September 30, 2016. Favorable variances to non-interest income for the first nine months of 2017 include an increase of $24 thousand in service charges, an increase of $211 thousand in loan net service fee income, an increase of $83 thousand in trust department income, an increase of $221 thousand in debit card interchange income, and an increase of $167 thousand in gains on the sale of loans.
The largest favorable variance to non-interest income for the first nine months of 2017 is an increase of $1.2 million in gains on bank premises due to the sale of a bank building located in Winchester, Kentucky. The sale was solely for the building and not for the loans or deposits associated with the branch.
Decreases to non-interest income for the ninesix months ended SeptemberJune 30, 20172018 compared to the ninesix months ended SeptemberJune 30, 2016
2017 include a decrease of $214$117 thousand in gains on the sale of securities, a decrease of $13$26 thousand in loan servicing fees, a decrease of $51 thousand in trading securities, a decrease of $24 thousand in brokerage income, and a decrease of $12 thousand$1.2 million in gainsgain on trading assets.bank premises which relates to the 2017 sale of a branch building.
The gain on the sale of loans increaseddecreased from $1.3$1.0 million during the first ninesix months of 20162017 to $1.5 million$819 thousand during the first ninesix months of 2017, an increase2018, a decrease of $167$222 thousand. For the three months ended SeptemberJune 30, the gain on the sale of loans decreased from $533$491 thousand in 20162017 to $415$445 thousand in 2017.2018.
The volume of loans originated to sell during the first ninesix months of 2017 increased $3.22018 decreased $3.9 million compared to the same time period in 2016. The volume of loans originated to sell the during the three months ended September 30, 2017 compared to the nine months ended September 30, 2016 decreased $5.8 million.2017. The volume of mortgage loan originations and sales is generally inverse to rate changes. A change in the mortgage loan rate environment can have a significant impact on the related gain on sale of mortgage loans. Loan service fee income, net of amortization and impairment expense, was $234$148 thousand for the ninesix months ended SeptemberJune 30, 20172018 compared to $23$174 thousand for the ninesix months ended SeptemberJune 30, 2016, an increase2017, a decrease of $211$26 thousand. During the first ninesix months of 2017,2018, the market value adjustment to the carrying value of the mortgage servicing right was a net recovery of prior-writedowns of $40$56 thousand for the six months ended June 30, 2018, as the fair value of this asset increased.increased, and no adjustments were made during the three months ended June 30, 2018. During the first ninesix months of 2016,ended June 30 2017, the market value adjustment to the carrying value of the mortgage servicing right asset was a net write-downrecovery of $106$34 thousand as the fair value of the mortgage servicing asset decreased.
37
For$5 thousand for the three months ended SeptemberJune 30, 2017, the market value adjustment to the carrying value of the mortgage serving right asset was a net recovery of prior write-downs of $6 thousand compared to a net write-down of $64 thousand during the third quarter of 2016.2017.
Non-Interest Expense
Total non-interest expense decreased $476increased $139 thousand for the ninesix month period ended SeptemberJune 30, 20172018 compared to the same period in 2016.2017. Total non-interest expense decreased $275increased $35 thousand for the three month period ended SeptemberJune 30, 20172018 compared to the three months ended SeptemberJune 30, 2016.2017. Management continues to consider opportunities for branch expansion, and will also consider acquisition opportunities that help advance its strategic objectives, which would result in additional future non-interest expense.
For the comparable ninesix month periods, salaries and employees benefits expense increased $73$257 thousand, an increase of 0.5%2.9%. The number of full-time employee equivalent employees decreased from 247243 at SeptemberJune 30, 20162017 to 236234 at SeptemberJune 30, 2017,2018, a decrease of 11nine full-time employee equivalent employees. For the three months ended SeptemberJune 30, 20172018 compared to the three months ended SeptemberJune 30, 2016,2017, salaries and employee benefits expense decreased $52increased $209 thousand, or 1.1%4.6%.
Occupancy expense increased $53$115 thousand to $2.9$2.1 million for the first ninesix months of 20172018 compared to the same time period in 2016. Building rent expense increased $76 thousand mostly due to rent expense being lower in 2016 due to the Company recovering $20 thousand in accrued expense for a former branch leased in Richmond, KY. In addition, the Company incurred an additional $42 thousand in building rents during the first nine months of 2017, compared to the same time period in 2016, due to rent expense associated with leasing back the branch building that was sold in Winchester, KY during the first quarter of 2017. The Company is leasing back the formerly owned building until a new building is contructed which is expected to be completed in 2018.
Depreciation expense decreased $107 thousand for the nine months ended September 30, 2017 compared to September 30, 2016. Expenses incurred for assets not depreciated increased $121 thousand during the first nine months of 2017 compared to the first nine months of 2016. This increase is attributed to purchasing additional equipment during the first quarter of 2017 and increasing the threshold for which we depreciate assets. The capitalization policy, during the first nine months of 2016, stated assets purchased with a cost of $1,000 or greater would be capitalized and depreciated. This policy was changed during the last half of 2016 and now states the minimum threshold for an asset to be capitalized is $2,500.
Occupancy expense was $935$1.1 million for the three months ended June 30, 2018 compared to $984 thousand for the three months ended SeptemberJune 30, 2017, compared to $974 thousand for the three months ended September 30, 2016, a decreasean increase of $39 thousand.10.2%.
Legal and professional fees decreased $505$52 thousand for the ninesix months ended SeptemberJune 30, 20172018 compared to the first ninesix months in 2016 and decreased $91 thousand for the three months ended September 30, 2017 compared to the three months ended September 30, 2016.2017. The reduction in legal and professional fees is mostly attributed to expenses being higher for the ninesix months ended SeptemberJune 30, 20162017 due to the Company incurring $625 thousand for expensesadditional expense related to acquiring the services of an outside firm to help the Company identify ways to become more efficient and profitable. Similar expenses totaled $198 thousand for the nine months ended September 30, 2017, a decrease of $427 thousand.
Debit card expenses increased $226$48 thousand for the ninesix months ended SeptemberJune 30, 20172018 compared to the first ninesix months of 20162017 and increased $95decreased $11 thousand for the three months ended SeptemberJune 30, 20172018 compared to the three months ended SeptemberJune 30, 2016.2017. The year to date increase in debit card expense is attributed to an increase in debit card interchange activity which also resulted in increases in debit card interchange income as shown on the income statement. Debit card expenses have also increased during 2017 due to issuing new debit cards.
Repossession expense increased $67decreased $128 thousand for the first ninesix months ended SeptemberJune 30, 20172018 compared to the same time period in 20162017 and increased $25decreased $64 thousand for the three month period ended SeptemberJune 30, 20172018 compared to the three months ended SeptemberJune 30, 2016.2017. Repossession expenses are reported net of rental income earned on repossessed properties. Net repossession expenses were higher during the first nine months of 2017 when compared to 2016 due to net write-downs totaling $141 in 2017 compared to net write-downs of $131 thousand in 2016.
3836
Income Taxes
The effective tax rate for the ninesix months ended SeptemberJune 30, 20172018 was 19.1%12.0% compared to 8.5%19.6% in 2016.2017. The effective tax rate for the three months ended SeptemberJune 30, 20172018 was 18.0%12.5% compared to 0.3%17.1% in 2016.2017. The effective tax rate iswas higher in 2017 due to an increaselower tax rates in taxable income, largely due2018. On December 22, 2017, the “Tax Cuts and Jobs Act” was enacted into legislation. As a result, the 2018 statutory tax rate for the Company is 21% compared to the $1.2 million gain on the sale of the branch building. 34% in recent prior years.
These effective tax rates are less than the statutory rate as a result of the Company investing in tax-free securities, loans and other investments which generate tax credits for the Company.
The Company also has a captive insurance subsidiary which contributes to reducing taxable income. Income tax expense increased $1.3 milliondecreased $506 thousand for the ninesix months ended SeptemberJune 30, 20172018 compared to the first ninesix months in 2016.2017. Tax-exempt interest income decreased $166$241 thousand for the first ninesix months of 20172018 compared to the first ninesix months of 2016.2017. Further, for the first ninesix months of 2017,2018, the Company had tax credits totaling $416$277 thousand for investments made in low income housing projects compared to similar tax credits of $836 thousand$277 for the first ninesix months of 2016.2017.
As part of normal business, the Bank typically makes tax free loans to select municipalities in our market and invests in selected tax free securities, primarily in the Commonwealth of Kentucky. In making these investments, the Company considers the overall impact to managing our net interest margin, credit worthiness of the underlying issuer and the favorable impact on our tax position.
For the ninesix months ended SeptemberJune 30, 2017,2018, the Company averaged $92$64.2 million in tax free securities and $40$38.5 million in tax free loans. As of SeptemberJune 30, 2017,2018, the weighted average remaining maturity for the tax free securities is 11282 months, while the weighted average remaining maturity for the tax free loans is 138136 months.
Liquidity and Funding
Liquidity is the ability to meet current and future financial obligations. The Company’s primary sources of funds consist of deposit inflows, loan repayments, maturities and sales of investment securities and Federal Home Loan Bank borrowings.
Liquidity risk is the possibility that we may not be able to meet our cash requirements in an orderly manner.
Management of liquidity risk includes maintenance of adequate cash and sources of cash to fund operations and to meet the needs of borrowers, depositors and creditors. Excess liquidity has a negative impact on earnings as a result of the lower yields on short-term assets.
Cash and cash equivalents were $18.6$28.8 million as of SeptemberJune 30, 20172018 compared to $43.2$39.2 million at December 31, 2016. 2017.
The decrease in cash and cash equivalents is attributed to a decrease of $23.6$10.1 million in cash and due from banks and a decrease of $1.0 million$316 thousand in federal funds sold. The decrease in cash and cash equivalents is mostly attributed to depositdeposits balances being greater at December 31 for our public entity depositors due to the recent collection of tax revenues. As the tax dollars are dispurseddispersed throughout the year, the balances for these depositors will decrease resulting in a decrease in the Company’s cash and cash equivalents.
In addition to cash and cash equivalents, the securities portfolio provides an important source of liquidity. Securities available for sale totaled $290.0$290.5 million at SeptemberJune 30, 20172018 compared to $273.8$318.2 million at December 31, 2016. Securities classified as trading assets totaled $5.7 million at September 30, 2017 compared to $5.6 million at December 31, 2016.2017. The securities available for sale and trading assets are available to meet liquidity needs on a continuing basis. However, we expect our customers’ deposits to be adequate to meet our funding demands.
Generally, we rely upon net cash inflows from financing activities, supplemented by net cash inflows from operating activities, to provide cash used in our investing activities. As is typical of many financial institutions, significant financing activities include deposit gathering and the use of short-term borrowings, such as federal funds purchased and securities sold under repurchase agreements along with long-term debt. Our primary investing activities include purchasing investment securities and loan originations.
3937
For the first ninesix months of 2017,2018, deposits decreased $54.6$12.8 million compared to December 31, 2016.2017. The Company’s borrowed funds from the Federal Home Loan Bank increased $9.7$4.0 million from December 31, 20162017 to SeptemberJune 30, 2017,2018, federal funds purchased increased $17.3$15.7 million, and total repurchase agreements increased $3.2decreased $10.8 million from December 31, 20162017 to SeptemberJune 30, 2017.2018.
Management is aware of the challenge of funding sustained loan growth. Therefore, in addition to deposits, other sources of funds, such as Federal Home Loan Bank advances, may be used. We rely on Federal Home Loan Bank advances for both liquidity and asset/liability management purposes. These advances are used primarily to fund long-term fixed rate residential mortgage loans. As of SeptemberJune 30, 2017,2018, we have sufficient collateral to borrow an additional $69$67 million from the Federal Home Loan Bank.
In addition, as of SeptemberJune 30, 2017, $302018, $38 million is available in overnight borrowing through various correspondent banks and the Company has access to an additional $289$202 million in brokered deposits. In light of this, management believes there is sufficient liquidity to meet all reasonable borrower, depositor and creditor needs in the present economic environment.
Capital Requirements
The Company and the Bank are subject to various regulatory capital requirements administered by the federal banking agencies. Failure to meet minimum capital requirements can initiate certain mandatory and possible additional discretionary actions by regulators that, if undertaken, could have a direct material effect on the Company’s financial statements.
Under capital adequacy guidelines and the regulatory framework for prompt corrective action, the Company and the Bank must meet specific capital guidelines that involve quantitative measures of the Company’s and the Bank’s assets, liabilities, and certain off-balance sheet items as calculated under regulatory accounting practices. The Company and Bank capital amounts and classifications are also subject to qualitative judgments by regulators about components, risk weightings, and other factors.
Quantitative measures established by regulation to ensure capital adequacy require the Company and the Bank to maintain minimum amounts and ratios (set forth in the following table) of Total and Tier I capital, including Common Equity Tier 1 Capital, (as defined in the applicable banking regulations) to risk-weighted assets (as defined), and of Tier I1 capital to average assets (as defined). Management believes, as of SeptemberJune 30, 20172018 and December 31, 2016,2017, that the Company and the Bank meet all capital adequacy requirements to which they are subject.
The most recent notification from the FDIC categorized the Bank as well capitalized under the regulatory framework for prompt corrective action. To be categorized as well capitalized, the Bank must maintain minimum Total risk-based, Tier I risk-based, Common Equity Tier 1 risk basedrisk-based and Tier I leverage ratios as set forth in the following table. There are no conditions or events since that notification that management believes have changed the institution’s category.
In July 2013, the FDIC and the other federal bank regulatory agencies issued a final rule that revised their leverage and risk-based capital requirements and the method of calculating risk-weighted assets to make them consistent with agreements that were reached by the Basel Committee on Banking Supervision and certain provisions of the Dodd-Frank Act.
Among other things, the rule establishes a new common equity Tier 1 minimum capital requirement (4.5% of risk-weighted assets), increases the minimum Tier 1 capital to risk-based assets requirement (from 4% to 6% of risk-weighted assets) and assigns a higher risk weight (150%) to exposures that are more than 90 days past due or are on nonaccrual status and to certain commercial real estate facilities that finance the acquisition, development or construction of real property. The final rule also requires unrealized gains and losses on certain “available-for-sale” securities holdings to be included for purposes of calculating regulatory capital requirement unless a one-time opt-in or opt-out is exercised, which the Company did opt-out of.
38
The rule limits a banking organization’s capital distributions and certain discretionary bonus payments if the banking organization does not hold a “capital conservation buffer” consisting of 2.5% of common equity Tier 1 capital to risk-weighted assets in addition to the amount necessary to meet its minimum risk-based capital requirements.
40
The capital conservation buffer was 1.25%1.875% at SeptemberJune 30, 20172018 and the Company is in compliance with the capital conservation buffer. The final rule became effective for the Bank on January 1, 2016. In accordance with the final rule, the capital conservation buffer requirement began being phased in beginning January 1, 2016 and will continue through January 1, 2019, when the full capital conservation buffer requirement will be effective. The Company’s and the Bank’s actual amounts and ratios, exclusive of the capital conservation buffer, are presented in the table below:
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| Corrective |
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September 30, 2017 |
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June 30, 2018 |
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Consolidated |
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Total Capital (to Risk-Weighted Assets) |
| $ | 100,029 |
| 14.2 | % | $ | 56,479 |
| 8.0 | % |
| N/A |
| N/A |
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| $ | 106,877 |
| 15.4 | % | $ | 55,355 |
| 8.0 | % |
| N/A |
| N/A |
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Tier I Capital (to Risk-Weighted Assets) |
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| 92,189 |
| 13.1 |
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| 42,359 |
| 6.0 |
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| N/A |
| N/A |
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| 98,613 |
| 14.3 |
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| 41,516 |
| 6.0 |
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| N/A |
| N/A |
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Common Equity Tier 1 Capital (to Risk-Weighted Assets) |
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| 85,189 |
| 12.1 |
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| 31,770 |
| 4.5 |
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| N/A |
| N/A |
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| 91,613 |
| 13.2 |
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| 31,137 |
| 4.5 |
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| N/A |
| N/A |
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Tier I Capital (to Average Assets) |
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| 92,189 |
| 9.1 |
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| 40,607 |
| 4.0 |
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| N/A |
| N/A |
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| 98,613 |
| 9.5 |
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| 41,543 |
| 4.0 |
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| N/A |
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Bank Only |
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Total Capital (to Risk-Weighted Assets) |
| $ | 98,654 |
| 14.7 | % | $ | 53,759 |
| 8.0 | % | $ | 67,198 |
| 10.0 | % |
| $ | 102,923 |
| 14.8 | % | $ | 55,794 |
| 8.0 | % | $ | 69,742 |
| 10.0 | % | ||||
Tier I Capital (to Risk-Weighted Assets) |
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| 90,814 |
| 13.5 |
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| 40,319 |
| 6.0 |
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| 53,759 |
| 8.0 |
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| 94,658 |
| 13.6 |
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| 41,845 |
| 6.0 |
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| 55,794 |
| 8.0 |
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Common Equity Tier 1 Capital (to Risk-Weighted Assets) |
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| 90,814 |
| 13.5 |
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| 30,239 |
| 4.5 |
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| 43,679 |
| 6.5 |
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| 94,658 |
| 13.6 |
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| 31,384 |
| 4.5 |
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| 45,332 |
| 6.5 |
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Tier I Capital (to Average Assets) |
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| 90,814 |
| 9.0 |
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| 40,469 |
| 4.0 |
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| 50,587 |
| 5.0 |
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| 94,658 |
| 9.1 |
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| 41,453 |
| 4.0 |
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| 51,817 |
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December 31, 2016 |
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December 31, 2017 |
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Consolidated |
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Total Capital (to Risk-Weighted Assets) |
| $ | 94,343 |
| 13.9 | % | $ | 54,280 |
| 8.0 | % |
| N/A |
| N/A |
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| $ | 101,896 |
| 14.9 | % | $ | 54,599 |
| 8.0 | % |
| N/A |
| N/A |
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Tier I Capital (to Risk-Weighted Assets) |
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| 86,718 |
| 12.8 |
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| 40,710 |
| 6.0 |
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| N/A |
| N/A |
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| 94,092 |
| 13.8 |
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| 40,949 |
| 6.0 |
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| N/A |
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Common Equity Tier 1 Capital (to Risk-Weighted Assets) |
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| 79,718 |
| 11.8 |
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| 30,533 |
| 4.5 |
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| N/A |
| N/A |
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| 87,092 |
| 12.8 |
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| 30,712 |
| 4.5 |
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| N/A |
| N/A |
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Tier I Capital (to Average Assets) |
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| 86,718 |
| 8.7 |
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| 39,795 |
| 4.0 |
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| N/A |
| N/A |
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| 94,092 |
| 9.2 |
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| 40,754 |
| 4.0 |
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Bank Only |
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Total Capital (to Risk-Weighted Assets) |
| $ | 95,118 |
| 14.0 | % | $ | 54,246 |
| 8.0 | % | $ | 67,808 |
| 10.0 | % |
| $ | 99,688 |
| 14.6 | % | $ | 54,581 |
| 8.0 | % | $ | 68,226 |
| 10.0 | % | ||||
Tier I Capital (to Risk-Weighted Assets) |
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| 87,493 |
| 12.9 |
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| 40,685 |
| 6.0 |
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| 54,246 |
| 8.0 |
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| 91,884 |
| 13.5 |
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| 40,936 |
| 6.0 |
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| 54,581 |
| 8.0 |
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Common Equity Tier 1 Capital (to Risk-Weighted Assets) |
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| 87,493 |
| 12.9 |
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| 30,513 |
| 4.5 |
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| 44,075 |
| 6.5 |
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| 91,884 |
| 13.5 |
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| 30,702 |
| 4.5 |
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| 44,347 |
| 6.5 |
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Tier I Capital (to Average Assets) |
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| 87,493 |
| 8.8 |
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| 39,671 |
| 4.0 |
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| 49,588 |
| 5.0 |
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| 91,884 |
| 9.0 |
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| 40,669 |
| 4.0 |
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| 50,836 |
| 5.0 |
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Non-Performing Assets
As of SeptemberJune 30, 2017,2018, our non-performing assets totaled $4.2$3.4 million or 0.42%0.32% of assets compared to $9.4$3.8 million or 0.91%
0.36% of assets at December 31, 20162017 (See table below.) The Company experienced a decreasean increase of $3.2 million$57 thousand in non-accrualnonaccrual loans from December 31, 20162017 to SeptemberJune 30, 2017.2018. As of SeptemberJune 30, 2017,2018, non-accrual loans include $150$322 thousand in loans secured by commercial properties, $92 thousand in loans secured by farmland, $1.2 million$568 thousand in loans secured by 1-4 family properties, $226 thousand in loans secured by non-farm and $30non-residential properties and $42 thousand in consumer loans.
Loans secured by real estate composed 97.8% of the non-performing loans as of September 30, 2017 and 96.9% as of December 31, 2016. Forgone interest income on non-accrual loans totaled $63 thousand for the first nine months of 2017 compared to forgone interest of $65 thousand for the same time period in 2016.
4139
Loans secured by real estate composed 70.9% of the non-performing, nonaccrual loans as of June 30, 2018 and 99.1% as of December 31, 2017. Forgone interest income on non-accrual loans totaled $55 thousand for the first six months of 2018 compared to forgone interest of $102 thousand for the same time period in 2017. Accruing loans that are contractually 90 days or more past due as of SeptemberJune 30, 20172018 totaled $151$717 thousand compared to $757$231 thousand at December 31, 2016, a decrease2017, an increase of $606$486 thousand.
Total nonperforming and restructured loans decreased $6.0 millionincreased $543 thousand from December 31, 20162017 to SeptemberJune 30, 2017.2018. The decreaseincrease in non-performing loan balances contributed to the decreaseincrease in the ratio of nonperforming and restructured loans to loans which decreased 91of seven basis points to 0.24%0.29% from December 31, 20162017 to SeptemberJune 30, 2017.2018.
In addition, the amount the Company has recorded as other real estate owned increased $845 thousanddecreased $1.0 million from December 31, 20162017 to SeptemberJune 30, 2017.2018. As of SeptemberJune 30, 2017,2018, the amount recorded as other real estate owned totaled $2.7$1.4 million compared to $1.8$2.4 million at December 31, 2016.2017. During the first ninesix months of 2017, $1.9 million2018, $121 thousand in loan balances were foreclosed upon and added to other real estate properties while $911 thousand$1.2 million in other real estate properties were sold. The allowance as a percentage of non-performing and restructured loans and other real estate owned increased from 80%202% at December 31, 20162017 to 184%329% at SeptemberJune 30, 2017.2018.
Nonperforming and Restructured Assets
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| 9/30/2017 |
| 12/31/2016 |
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| 6/30/2018 |
| 12/31/2017 |
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| (in thousands) |
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Non-accrual Loans |
| $ | 1,393 |
| $ | 4,566 |
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| $ | 1,250 |
| $ | 1,193 |
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Accruing Loans which are Contractually past due 90 days or more |
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| 151 |
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| 927 |
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| 717 |
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| 231 |
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Accruing Troubled Debt Restructurings |
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| — |
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| 2,063 |
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| — |
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| — |
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Total Nonperforming and Restructured Loans |
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| 1,544 |
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| 7,556 |
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| 1,967 |
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| 1,424 |
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Other Real Estate |
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| 2,669 |
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| 1,824 |
|
|
| 1,404 |
|
| 2,404 |
|
Total Nonperforming and Restructured Loans and Other Real Estate |
| $ | 4,213 |
| $ | 9,380 |
|
| $ | 3,371 |
| $ | 3,828 |
|
Nonperforming and Restructured Loans as a Percentage of Loans |
|
| 0.24 | % |
| 1.15 | % |
|
| 0.29 | % |
| 0.22 | % |
Nonperforming and Restructured Loans and Other Real Estate as a Percentage of Total Assets |
|
| 0.42 | % |
| 0.91 | % |
|
| 0.32 | % |
| 0.36 | % |
Allowance as a Percentage of Period-end Loans |
|
| 1.19 | % |
| 1.15 | % |
|
| 1.22 | % |
| 1.19 | % |
Allowance as a Percentage of Non-performing and Restructured Loans and Other Real Estate |
|
| 184 | % |
| 80 | % |
|
| 243 | % |
| 202 | % |
We maintain a “watch list” of agricultural, commercial, real estate mortgage, and real estate construction loans and review those loans at least quarterly but more often if needed. Generally, assets are designated as “watch list” loans to ensure more frequent monitoring. If we determine that there is serious doubt as to performance in accordance with original terms of the contract, then the loan is generally downgraded and often placed on non-accrual status.
We review and evaluate nonaccrual loans, past due loans, and loans graded substandard or worse on a regular basis to determine if the loan should be evaluated for impairment and whether specific allocations are needed.
Provision for Loan Losses
The loan loss provision for the first ninesix months of 20172018 was $650$250 thousand compared to $775$550 thousand for the first ninesix months of 2016.2017. The loan loss provision for the three months ended SeptemberJune 30, 20172018 was $100$250 thousand compared to $175$200 thousand for the three months ended SeptemberJune 30, 2016.2017. The decrease in the total loan loss provision during the first ninesix months of 20172018 compared to the same time period in 20162017 is mostlylargely attributed to improved loan credit quality.recording net recoveries of prior charge-offs of $214 thousand during the six months ended June 30, 2018. The allowaceallowance for loan losses as a percentage of loans was 1.19%1.22% at SeptemberJune 30, 20172018 compared to 1.15%1.22% at SeptemberJune 30, 2016. 2017.
Management evaluates the loan portfolio by reviewing the historical loss rate for each respective loan type and assigns risk multiples to certain categories to account for qualitative factors including current economic conditions. The average loss rates are reviewed for trends in the analysis, as well as comparisons to peer group loss rates.
40
Management makes allocations within the allowance for loan losses for specifically classified loans regardless of loan amount, collateral or loan type. Loan categories are evaluated utilizing subjective factors in addition to the historical loss calculations to determine a loss allocation for each of those types.
42
As this analysis, or any similar analysis, is an imprecise measure of loss, the allowance is subject to ongoing adjustments. Therefore, management will often take into account other significant factors that may be necessary or prudent in order to reflect probable incurred losses in the total loan portfolio.
Nonperforming loans and restructured loans decreased $337 thousand from December 31, 2017 to $1.1 million at June 30, 2018. The Company recorded net charge-offsrecoveries of $436$214 thousand for the ninesix months ended SeptemberJune 30, 20172018 compared to net recoveriescharge-offs of $109$133 thousand for the ninesix months ended SeptemberJune 30, 2016.2017. During the first quartersix months of 2016,2018, the Company recorded a recoveryrecoveries of $259 thousand$368 for one loantwo loans which waswere charged-off in a prior year. Future levels of charge-offs will be determined by the particular facts and circumstances surrounding individual loans.
Based on the above information, management believes the current loan loss allowance is sufficient to meet probable incurred loan losses.
Loan Losses
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Nine Months Ended September 30, |
|
| Six Months Ended June 30, |
| ||||||||
|
| (in thousands) |
|
| (in thousands) |
| ||||||||
|
|
| 2017 |
|
| 2016 |
|
|
| 2018 |
|
| 2017 |
|
Balance at Beginning of Period |
| $ | 7,541 |
| $ | 6,521 |
|
| $ | 7,720 |
| $ | 7,541 |
|
Amounts Charged-Off: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commercial |
|
| 35 |
|
| — |
|
|
| — |
|
| 15 |
|
1-4 family residential |
|
| 203 |
|
| 90 |
|
|
| 63 |
|
| 33 |
|
Multi-family residential |
|
| — |
|
| — |
| |||||||
Non-farm & non-residential |
|
| 78 |
|
| — |
| |||||||
Agricultural |
|
| — |
|
| 3 |
| |||||||
Consumer and other |
|
| 810 |
|
| 915 |
|
|
| 506 |
|
| 570 |
|
Total Charged-off Loans |
|
| 1,126 |
|
| 1,008 |
|
|
| 569 |
|
| 618 |
|
Recoveries on Amounts Previously Charged-off: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commercial |
|
| 17 |
|
| 37 |
|
|
| 6 |
|
| 15 |
|
Real Estate Construction |
|
| 1 |
|
| 15 |
|
|
| — |
|
| 1 |
|
1-4 family residential |
|
| 8 |
|
| 8 |
|
|
| 262 |
|
| 5 |
|
Multi-family residential |
|
| 10 |
|
| 7 |
|
|
| 6 |
|
| 7 |
|
Non-farm & non-residential |
|
| — |
|
| 355 |
| |||||||
Agricultural |
|
| 47 |
|
| 35 |
|
|
| 146 |
|
| 28 |
|
Consumer and other |
|
| 607 |
|
| 660 |
|
|
| 363 |
|
| 429 |
|
Total Recoveries |
|
| 690 |
|
| 1,117 |
|
|
| 783 |
|
| 485 |
|
Net Charge-offs (Recoveries) |
|
| 436 |
|
| (109) |
|
|
| (214) |
|
| 133 |
|
Provision for Loan Losses |
|
| 650 |
|
| 775 |
|
|
| 250 |
|
| 550 |
|
Balance at End of Period |
|
| 7,755 |
|
| 7,405 |
|
|
| 8,184 |
|
| 7,958 |
|
Loans |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Average |
|
| 652,387 |
|
| 642,998 |
|
|
| 656,515 |
|
| 655,491 |
|
At September 30, |
|
| 648,965 |
|
| 659,970 |
| |||||||
At June 30, |
|
| 668,778 |
|
| 650,657 |
| |||||||
As a Percentage of Average Loans: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net Charge-offs for the period |
|
| 0.07 | % |
| (0.02) | % |
|
| (0.03) | % |
| 0.02 | % |
Provision for Loan Losses for the period |
|
| 0.10 | % |
| 0.12 | % |
|
| 0.04 | % |
| 0.08 | % |
Allowance as a Multiple of Net Charge-offs annualized |
|
| 13.3 |
|
| (51.0) |
|
|
| (19.1) |
|
| 29.9 |
|
4341
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Three Months Ended September 30, |
|
| Three Months Ended June 30, |
| ||||||||
|
| (in thousands) |
|
| (in thousands) |
| ||||||||
|
| 2017 |
| 2016 |
|
| 2018 |
| 2017 |
| ||||
Balance at Beginning of Period: |
| $ | 7,958 |
| $ | 7,259 |
|
| $ | 7,905 |
| $ | 7,876 |
|
Amounts Charged-Off: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commercial |
|
| 20 |
|
| — |
|
|
| — |
|
| 13 |
|
1-4 family residential |
|
| 170 |
|
| 26 |
|
|
| 1 |
|
| 22 |
|
Non-farm & non-residential |
|
| 78 |
|
| — |
| |||||||
Agricultural |
|
| — |
|
| 3 |
| |||||||
Consumer and other |
|
| 240 |
|
| 253 |
|
|
| 264 |
|
| 308 |
|
Total Charged-off Loans |
|
| 508 |
|
| 282 |
|
|
| 265 |
|
| 343 |
|
Recoveries on Amounts Previously Charged-off: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commercial |
|
| 2 |
|
| 3 |
|
|
| 6 |
|
| 7 |
|
Real Estate Construction |
|
| 0 |
|
| 2 |
|
|
| — |
|
| 1 |
|
1-4 family residential |
|
| 3 |
|
| 1 |
|
|
| 5 |
|
| 4 |
|
Multi-family residential |
|
| 3 |
|
| 3 |
|
|
| 3 |
|
| 4 |
|
Non-farm & non-residential |
|
| 0 |
|
| 82 |
| |||||||
Agricultural |
|
| 19 |
|
| 12 |
|
|
| 123 |
|
| 18 |
|
Consumer and other |
|
| 178 |
|
| 150 |
|
|
| 157 |
|
| 191 |
|
Total Recoveries |
|
| 205 |
|
| 253 |
|
|
| 294 |
|
| 225 |
|
Net Charge-offs |
|
| 303 |
|
| 29 |
|
|
| (29) |
|
| 118 |
|
Provision for Loan Losses |
|
| 100 |
|
| 175 |
|
|
| 250 |
|
| 200 |
|
Balance at End of Period |
|
| 7,755 |
|
| 7,405 |
|
|
| 8,184 |
|
| 7,958 |
|
Loans |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Average |
|
| 647,103 |
|
| 657,336 |
|
|
| 661,220 |
|
| 655,665 |
|
At September 30, |
|
| 648,965 |
|
| 659,970 |
| |||||||
At June 30, |
|
| 668,778 |
|
| 650,657 |
| |||||||
As a Percentage of Average Loans: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net Charge-offs (Recoveries) for the period |
|
| 0.05 | % |
| 0.00 | % |
|
| (0.00) | % |
| 0.02 | % |
Provision for Loan Losses for the period |
|
| 0.02 | % |
| 0.03 | % |
|
| 0.04 | % |
| 0.03 | % |
Allowance as a Multiple of Net Charge-offs annualized |
|
| 6.4 |
|
| 63.8 |
|
|
| (70.6) |
|
| 16.9 |
|
44
Item 3 - QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Asset/Liability management control is designed to ensure safety and soundness, maintain liquidity and regulatory capital standards, and achieve acceptable net interest income. Management considers interest rate risk to be the most significant market risk since a bank’s net income is largely dependent on net interest income. Our exposure to market risk is reviewed on a regular basis by the Asset/Liability Committee. Interest rate risk is the potential of economic losses due to future interest rate changes.
These economic losses can be reflected as a loss of future net interest income and/or a loss of current fair market values. The objective is to measure the effect on net interest income and to adjust the balance sheet to minimize the inherent risk, while at the same time, maximize income.
Management realizes certain risks are inherent and that the goal is to identify and minimize the risks. The primary tools used by management are interest rate shock and economic value of equity (EVE) simulations. The Company has $5.7 million in market risk sensitive instruments which are held for trading purposes. These assets are held for a minimal period of time and are used to generate profits on short-term differences in price while earning interest for the time they are held.
Using interest rate shock simulations, the following table depicts the change in net interest income resulting from 100 and 300 basis point changes in rates on the Company’s interest earning assets and interest bearing liabilities.
The projections are based on balance sheet growth assumptions and repricing opportunities for new, maturing and adjustable rate amounts. As of SeptemberJune 30, 2017,2018, the projected percentage changes are within limits approved by our Board of Directors (“Board”).
Although management does analyze and monitor the projected percentage change in a declining interest rate environment, due to the current rate environment many of the current deposit rates cannot decline an additional 100 basis points. Therefore, management places more emphasis in the rising rate environment scenarios. Similar to prior periods, this period’s volatility is comparable in each rate shock simulation when compared to the same period a year ago.
42
The projected net interest income report summarizing our interest rate sensitivity as of SeptemberJune 30, 2018 is as follows:
PROJECTED NET INTEREST INCOME
(dollars in thousands)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||
Change in basis points: |
| - 100 |
| Level Rates |
| + 100 |
| + 300 |
| |||
Year One (7/18-6/19) |
|
|
|
|
|
|
|
|
|
|
|
|
Net interest income percentage change |
|
| (2.1) | % |
| N/A |
| 0.5 | % |
| 0.6 | % |
Board approved limit |
|
| >(4.0) | % |
| N/A |
| >(4.0) | % |
| >(10.0) | % |
The projected net interest income report summarizing the Company’s interest rate sensitivity as of June 30, 2017 is as follows:
PROJECTED NET INTEREST INCOME
(dollars in thousands)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Level |
| ||||||||||
Change in basis points: |
| - 100 |
| Rates |
| + 100 |
| + 300 |
| ||||
Year One (10/17 - 9/18) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Net interest income |
| $ | 32,881 |
| $ | 33,724 |
| $ | 33,658 |
| $ | 33,547 |
|
Net interest income dollar change |
|
| (843) |
|
| N/A |
|
| (66) |
|
| (177) |
|
Net interest income percentage change |
|
| (2.5) | % |
| N/A |
|
| (0.2) | % |
| (0.5) | % |
Board approved limit |
|
| >(4.0) | % |
| N/A |
|
| >(4.0) | % |
| >(10.0) | % |
The projected net interest income report summarizing the Company’s interest rate sensitivity as of September 30, 2016 is as follows:
PROJECTED NET INTEREST INCOME
(dollars in thousands)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Level |
|
|
|
|
|
| Level |
|
|
|
|
|
| ||||||||||
Change in basis points: |
| - 100 |
| Rates |
| + 100 |
| + 300 |
|
| - 100 |
| Rates |
| + 100 |
| + 300 |
| |||||||
Year One (10/16-9/17) |
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||
Net interest income |
| $ | 31,479 |
| $ | 32,176 |
| $ | 32,120 |
| $ | 32,038 |
| ||||||||||||
Net interest income dollar change |
|
| (697) |
|
| N/A |
|
| (56) |
|
| (138) |
| ||||||||||||
Year One (7/17-6/18) |
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||
Net interest income percentage change |
|
| (2.2) | % |
| N/A |
|
| (0.2) | % |
| (0.4) | % |
|
| (2.7) | % |
| N/A |
| 0.4 | % |
| 0.1 | % |
Board approved limit |
|
| >(4.0) | % |
| N/A |
|
| >(4.0) | % |
| >(10.0) | % |
|
| >(4.0) | % |
| N/A |
| >(4.0) | % |
| >(10.0) | % |
Projections from SeptemberJune 30, 20172018 and SeptemberJune 30, 2016,2017, year one reflected declines of 2.5%2.1% and 2.2%2.7% in net interest income assuming rates were to decline 100 basis points. Assuming an increase in rates of 100 basis points, projections reflected a 0.2% decrease0.5% increase in net interest income for both periods.as of June 30, 2018 and a 0.4% increase as of June 30, 2017.
45
EVE applies discounting techniques to future cash flows to determine the present value of assets, liabilities, and therefore equity. Based upon applying these techniques to the SeptemberJune 30, 2017,2018, balance sheet, a 100 basis point decrease in rates results in an 11.1%a 5.6% decrease in EVE. A 100 basis point increase in rates results in a 0.4% decrease0.1% increase in EVE. These are within the Board approved limits.
Item 4 - CONTROLS AND PROCEDURES
As of the end of the period covered by this report, and pursuant to Rule 13a-15(b) of the Securities Exchange Act of 1934 (“Exchange Act”), our management, including the Chief Executive Officer and the Chief Financial Officer, carried out an evaluation of the effectiveness of the design and operation of our disclosure controls and procedures (as that term is defined in Rule 13a-15(e) of the Exchange Act). Based on the foregoing, our Chief Executive Officer and Chief Financial Officer concluded that the Company’s disclosure controls and procedures were effective, in all material respects, to ensure that information required to be disclosed in the reports the Company files and submits under the Exchange Act is recorded, processed, summarized and reported as and when required.
We also conducted an evaluation of internal control over financial reporting to determine whether any changes occurred during the quarter covered by this report that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting. Based on this evaluation, there has been no such change during the quarter covered by this report.
Our management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives.
43
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
ISSUER PURCHASES OF EQUITY SECURITIES
|
|
|
|
|
|
|
|
|
|
|
|
| (a) |
|
|
|
| (c) Total Number |
| (d) Maximum Number |
|
|
| Total |
| (b) |
| of Shares (or Units) |
| (or Approximate Dollar |
| |
|
| Number of |
| Average |
| Purchased as Part |
| Value) of Shares (or |
| |
|
| Shares (or |
| Price Paid |
| of Publicly |
| Units) that May Yet Be |
| |
|
| Units) |
| Per Share |
| Announced Plans |
| Purchased Under the |
| |
Period |
| Purchased |
| (or Unit) |
| Or Programs |
| Plans or Programs |
| |
|
| — |
| $ | — |
| — |
| 100,912 | shares |
|
|
|
|
|
|
|
|
|
|
|
|
| — |
|
| — |
| — |
| 100,912 | shares |
|
|
|
|
|
|
|
|
|
|
|
|
| — |
|
| — |
| — |
| 100,912 | shares |
|
|
|
|
|
|
|
|
|
|
|
Total |
| — |
| $ | — |
| — |
| 100,912 | shares |
On October 25, 2000, we announced that our Board approved a stock repurchase program and authorized the Company to purchase up to 100,000 shares of its outstanding common stock. On November 11, 2002, the Board approved and authorized the Company’s repurchase of an additional 100,000 shares. On May 20, 2008, the Board of Directors approved and authorized the Company to purchase an additional 100,000 shares. On May 17, 2011, the Board approved and authorized the Company’s repurchase of an additional 100,000 shares. On November 18, 2016, the Board of Directors approved and authorized the Company’s repurchase of an additional 50,000 shares. Shares will be purchased from time to time in the open market depending on market prices and other considerations. Through SeptemberJune 30, 2017,2018, 349,088 shares have been purchased.
4644
Ay |
|
|
2.1 |
| |
|
|
|
2.2 |
| |
|
|
|
3.1 |
| |
|
|
|
3.2 |
| |
|
|
|
3.3 |
| |
|
|
|
31.1 |
| Certifications of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. |
|
|
|
31.2 |
| Certifications of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. |
|
|
|
32 |
| |
|
|
|
|
101 INS XBRL Instance Document
101 SCH XBRL Taxonomy Extension Scheme Document
101 CAL XBRL Taxonomy Extension Calculation Linkbase Document
101 DEF XBRL Taxonomy Extension Definition Linkbase Document
101 LAB XBRL Taxonomy Extension Label Linkbase Document
101 PRE XBRL Taxonomy Extension Presentation Linkbase Document
4745
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
|
| KENTUCKY BANCSHARES, INC. | |
|
|
|
|
Date |
|
| /s/Louis Prichard |
|
|
| Louis Prichard, President and C.E.O. |
|
|
|
|
Date |
|
| /s/Gregory J. Dawson |
|
| Gregory J. Dawson, Chief Financial Officer |
4846