Document and Entity Information
Document and Entity Information - shares | 9 Months Ended | |
Sep. 30, 2019 | Oct. 31, 2019 | |
Document and Entity Information | ||
Entity Registrant Name | KENTUCKY BANCSHARES INC /KY/ | |
Entity Central Index Key | 0001000232 | |
Document Type | 10-Q | |
Document Period End Date | Sep. 30, 2019 | |
Amendment Flag | false | |
Current Fiscal Year End Date | --12-31 | |
Entity Current Reporting Status | Yes | |
Entity Filer Category | Accelerated Filer | |
Entity Small Business | true | |
Entity Emerging Growth Company | false | |
Entity Shell Company | false | |
Entity Common Stock, Shares Outstanding | 5,914,292 | |
Document Fiscal Year Focus | 2019 | |
Document Fiscal Period Focus | Q3 |
CONSOLIDATED BALANCE SHEETS (un
CONSOLIDATED BALANCE SHEETS (unaudited) - USD ($) $ in Thousands | Sep. 30, 2019 | Dec. 31, 2018 |
ASSETS | ||
Cash and due from banks | $ 25,063 | $ 25,835 |
Federal funds sold | 227 | 266 |
Cash and cash equivalents | 25,290 | 26,101 |
Interest bearing time deposits | 2,375 | 2,175 |
Securities available for sale | 246,542 | 315,369 |
Loans held for sale | 5,232 | 1,203 |
Loans | 732,267 | 686,144 |
Allowance for loan losses | (8,266) | (8,127) |
Net loans | 724,001 | 678,017 |
Federal Home Loan Bank stock | 7,034 | 7,034 |
Real estate owned, net | 925 | 830 |
Bank premises and equipment, net | 18,360 | 17,349 |
Interest receivable | 4,028 | 4,150 |
Mortgage servicing rights | 1,410 | 1,536 |
Goodwill | 14,001 | 14,001 |
Other intangible assets | 157 | 238 |
Bank owned life insurance | 18,020 | 10,198 |
Operating lease right of use asset | 8,410 | |
Other assets | 7,230 | 7,811 |
Total assets | 1,083,015 | 1,086,012 |
Deposits | ||
Non-interest bearing | 241,427 | 231,429 |
Time deposits, $250,000 and over | 36,228 | 59,736 |
Other interest bearing | 551,546 | 559,277 |
Total deposits | 829,201 | 850,442 |
Repurchase agreements | 6,037 | 8,077 |
Short-term Federal Home Loan Bank advances | 5,000 | 11,600 |
Long-term Federal Home Loan Bank advances | 95,677 | 88,852 |
Note payable | 1,996 | 2,718 |
Subordinated debentures | 7,217 | 7,217 |
Interest payable | 1,028 | 893 |
Operating lease liability | 8,513 | |
Other liabilities | 11,170 | 9,420 |
Total liabilities | 965,839 | 979,219 |
Stockholders’ equity | ||
Preferred stock, 300,000 shares authorized and unissued | ||
Common stock, no par value; 20,000,000 shares authorized; 5,914,292 and 5,955,242 shares issued and outstanding at September 30, 2019 and December 31, 2018 | 21,395 | 21,170 |
Retained earnings | 94,420 | 89,101 |
Accumulated other comprehensive income (loss) | 1,361 | (3,478) |
Total stockholders’ equity | 117,176 | 106,793 |
Total liabilities and stockholders’ equity | $ 1,083,015 | $ 1,086,012 |
CONSOLIDATED BALANCE SHEETS (Pa
CONSOLIDATED BALANCE SHEETS (Parenthetical) - $ / shares | Sep. 30, 2019 | Dec. 31, 2018 |
CONSOLIDATED BALANCE SHEETS | ||
Preferred stock, shares authorized | 300,000 | 300,000 |
Preferred stock, shares issued | 0 | 0 |
Common stock, par value (in dollars per share) | $ 0 | $ 0 |
Common stock, shares authorized | 20,000,000 | 20,000,000 |
Common stock, shares issued | 5,914,292 | 5,955,242 |
Common stock, shares outstanding | 5,914,292 | 5,955,242 |
CONSOLIDATED STATEMENTS OF INCO
CONSOLIDATED STATEMENTS OF INCOME (unaudited) - USD ($) $ in Thousands | 3 Months Ended | 9 Months Ended | ||
Sep. 30, 2019 | Sep. 30, 2018 | Sep. 30, 2019 | Sep. 30, 2018 | |
INTEREST INCOME: | ||||
Loans, including fees | $ 9,564 | $ 8,718 | $ 27,479 | $ 25,151 |
Securities | ||||
Taxable | 1,543 | 1,435 | 5,067 | 4,486 |
Tax exempt | 222 | 429 | 831 | 1,378 |
Other | 183 | 159 | 674 | 496 |
Total interest income | 11,512 | 10,741 | 34,051 | 31,511 |
INTEREST EXPENSE: | ||||
Deposits | 1,520 | 1,112 | 4,669 | 2,863 |
Repurchase agreements and federal funds purchased | 10 | 53 | 47 | 117 |
Federal Home Loan Bank advances | 547 | 500 | 1,637 | 1,376 |
Note payable | 28 | 39 | 93 | 101 |
Subordinated debentures | 97 | 95 | 297 | 285 |
Total interest expense | 2,202 | 1,799 | 6,743 | 4,742 |
Net interest income | 9,310 | 8,942 | 27,308 | 26,769 |
Provision for loan losses | 375 | 150 | 825 | 400 |
Net interest income after provision | 8,935 | 8,792 | 26,483 | 26,369 |
NON-INTEREST INCOME: | ||||
Service charges | 1,400 | 1,375 | 3,991 | 3,989 |
Loan service fee income (loss), net | (95) | 64 | 9 | 212 |
Trust department income | 361 | 332 | 1,036 | 967 |
Gain (loss) on sale of available for sale securities, net | 577 | 66 | 691 | (8) |
Gain on sale of loans | 541 | 472 | 1,069 | 1,291 |
Brokerage income | 110 | 192 | 381 | 542 |
Debit card interchange income | 894 | 815 | 2,587 | 2,415 |
Loss on bank premises | (9) | (9) | ||
Net increase in cash surrender value of bank-owned life insurance | 98 | 85 | 271 | 176 |
Other | 174 | 125 | 360 | 416 |
Total other income | 4,060 | 3,517 | 10,395 | 9,991 |
NON-INTEREST EXPENSE: | ||||
Salaries and employee benefits | 4,911 | 4,776 | 14,284 | 13,986 |
Occupancy expenses | 1,015 | 955 | 3,053 | 3,019 |
Repossession expenses, net | 15 | 19 | 97 | 76 |
FDIC Insurance premium | 80 | 71 | 236 | |
FDIC Insurance credits | (78) | |||
Legal and professional fees | 267 | 223 | 731 | 648 |
Data processing | 594 | 456 | 1,809 | 1,388 |
Debit card expenses | 447 | 453 | 1,506 | 1,319 |
Amortization expense of intangible assets, excluding mortgage servicing right | 24 | 31 | 81 | 102 |
Advertising and marketing | 212 | 218 | 658 | 658 |
Taxes other than payroll, property and income | 329 | 312 | 978 | 937 |
Telephone | 91 | 69 | 302 | 267 |
Postage | 29 | 69 | 92 | 241 |
Loan fees | 19 | 55 | 50 | 112 |
Other | 855 | 835 | 2,561 | 2,551 |
Total other expenses | 8,730 | 8,551 | 26,273 | 25,540 |
Income before income taxes | 4,265 | 3,758 | 10,605 | 10,820 |
Provision for income taxes | 649 | 480 | 941 | 1,326 |
Net income | $ 3,616 | $ 3,278 | $ 9,664 | $ 9,494 |
Earnings per share | ||||
Basic (in dollars per share) | $ 0.61 | $ 0.55 | $ 1.62 | $ 1.59 |
Diluted (in dollars per share) | $ 0.61 | $ 0.55 | $ 1.62 | $ 1.59 |
CONSOLIDATED STATEMENTS OF COMP
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (unaudited) - USD ($) $ in Thousands | 3 Months Ended | 9 Months Ended | ||
Sep. 30, 2019 | Sep. 30, 2018 | Sep. 30, 2019 | Sep. 30, 2018 | |
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME | ||||
Net income | $ 3,616 | $ 3,278 | $ 9,664 | $ 9,494 |
Other comprehensive income (loss) | ||||
Unrealized gains (losses) on securities arising during the period | 460 | (1,862) | 6,816 | (7,459) |
Reclassification of realized amount | (577) | (66) | (691) | 8 |
Net change in unrealized gain (loss) on securities | (117) | (1,928) | 6,125 | (7,451) |
Less: Tax impact | 25 | 405 | (1,286) | 1,565 |
Other comprehensive income (loss) | (92) | (1,523) | 4,839 | (5,886) |
Comprehensive income | $ 3,524 | $ 1,755 | $ 14,503 | $ 3,608 |
CONSOLIDATED STATEMENTS OF CHAN
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY (unaudited) - USD ($) $ in Thousands | Common Stock | Retained Earnings | Accumulated Other Comprehensive Loss | Total |
Beginning Balance at Dec. 31, 2017 | $ 20,931 | $ 80,395 | $ (997) | $ 100,329 |
Balances (in shares) at Dec. 31, 2017 | 5,943,044 | |||
Increase (Decrease) in Stockholders' Equity | ||||
Common stock issued - stock grants | $ 64 | 64 | ||
Common stock issued - stock grants (in shares) | 13,836 | |||
Stock compensation expense | $ 45 | 45 | ||
Other comprehensive loss | (3,397) | (3,397) | ||
Net income | 3,148 | 3,148 | ||
Dividends declared | (923) | (923) | ||
Ending Balance at Mar. 31, 2018 | $ 21,040 | 82,620 | (4,394) | 99,266 |
Balances (in shares) at Mar. 31, 2018 | 5,956,880 | |||
Beginning Balance at Dec. 31, 2017 | $ 20,931 | 80,395 | (997) | 100,329 |
Balances (in shares) at Dec. 31, 2017 | 5,943,044 | |||
Increase (Decrease) in Stockholders' Equity | ||||
Other comprehensive loss | (5,886) | |||
Net income | 9,494 | |||
Ending Balance at Sep. 30, 2018 | $ 21,130 | 87,118 | (6,883) | 101,365 |
Balances (in shares) at Sep. 30, 2018 | 5,956,652 | |||
Beginning Balance at Mar. 31, 2018 | $ 21,040 | 82,620 | (4,394) | 99,266 |
Balances (in shares) at Mar. 31, 2018 | 5,956,880 | |||
Increase (Decrease) in Stockholders' Equity | ||||
Stock compensation expense | $ 45 | 45 | ||
Shares forfeited (in shares) | (108) | |||
Other comprehensive loss | (966) | (966) | ||
Net income | 3,068 | 3,068 | ||
Dividends declared | (924) | (924) | ||
Ending Balance at Jun. 30, 2018 | $ 21,085 | 84,764 | (5,360) | 100,489 |
Balances (in shares) at Jun. 30, 2018 | 5,956,772 | |||
Increase (Decrease) in Stockholders' Equity | ||||
Stock compensation expense | $ 45 | 45 | ||
Shares forfeited (in shares) | (120) | |||
Other comprehensive loss | (1,523) | (1,523) | ||
Net income | 3,278 | 3,278 | ||
Dividends declared | (924) | (924) | ||
Ending Balance at Sep. 30, 2018 | $ 21,130 | 87,118 | (6,883) | 101,365 |
Balances (in shares) at Sep. 30, 2018 | 5,956,652 | |||
Beginning Balance at Dec. 31, 2018 | $ 21,170 | 89,101 | (3,478) | 106,793 |
Balances (in shares) at Dec. 31, 2018 | 5,955,242 | |||
Increase (Decrease) in Stockholders' Equity | ||||
Common stock issued - stock grants | $ 295 | 295 | ||
Common stock issued - stock grants (in shares) | 26,084 | |||
Stock compensation expense | $ 56 | 56 | ||
Other comprehensive loss | 2,769 | 2,769 | ||
Net income | 2,811 | 2,811 | ||
Dividends declared | (1,015) | (1,015) | ||
Ending Balance at Mar. 31, 2019 | $ 21,521 | 90,897 | (709) | 111,709 |
Balances (in shares) at Mar. 31, 2019 | 5,981,326 | |||
Beginning Balance at Dec. 31, 2018 | $ 21,170 | 89,101 | (3,478) | 106,793 |
Balances (in shares) at Dec. 31, 2018 | 5,955,242 | |||
Increase (Decrease) in Stockholders' Equity | ||||
Other comprehensive loss | 4,839 | |||
Net income | 9,664 | |||
Ending Balance at Sep. 30, 2019 | $ 21,395 | 94,420 | 1,361 | 117,176 |
Balances (in shares) at Sep. 30, 2019 | 5,914,292 | |||
Beginning Balance at Mar. 31, 2019 | $ 21,521 | 90,897 | (709) | 111,709 |
Balances (in shares) at Mar. 31, 2019 | 5,981,326 | |||
Increase (Decrease) in Stockholders' Equity | ||||
Stock compensation expense | $ 58 | 58 | ||
Other comprehensive loss | 2,162 | 2,162 | ||
Net income | 3,237 | 3,237 | ||
Dividends declared | (1,019) | (1,019) | ||
Ending Balance at Jun. 30, 2019 | $ 21,579 | 93,115 | 1,453 | 116,147 |
Balances (in shares) at Jun. 30, 2019 | 5,981,326 | |||
Increase (Decrease) in Stockholders' Equity | ||||
Stock compensation expense | $ 54 | 54 | ||
Common stock purchased and retired | $ (238) | (1,306) | (1,544) | |
Common stock purchased and retired (in shares) | (66,000) | |||
Shares forfeited (in shares) | (1,034) | |||
Other comprehensive loss | (92) | (92) | ||
Net income | 3,616 | 3,616 | ||
Dividends declared | (1,005) | (1,005) | ||
Ending Balance at Sep. 30, 2019 | $ 21,395 | $ 94,420 | $ 1,361 | $ 117,176 |
Balances (in shares) at Sep. 30, 2019 | 5,914,292 |
CONSOLIDATED STATEMENTS OF CH_2
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY (unaudited) (Parenthetical) - $ / shares | 3 Months Ended | |||||
Sep. 30, 2019 | Jun. 30, 2019 | Mar. 31, 2019 | Sep. 30, 2018 | Jun. 30, 2018 | Mar. 31, 2018 | |
Common stock issued for stock grants- Gross (in shares) | 23,260 | 10,674 | ||||
Common stock, forfeited (in shares) | 120 | 994 | ||||
Dividends per share (in dollars per share) | $ 0.17 | $ 0.17 | $ 0.17 | $ 0.155 | $ 0.155 | $ 0.155 |
Common stock, par value (in dollars per share) | $ 0 | $ 0 | $ 0 | $ 0 | $ 0 | $ 0 |
Director | ||||||
Common stock issued for stock grants- Gross (in shares) | 2,824 | 1,962 | ||||
Common stock issued - Stock options exercised (in shares) | 1,200 |
CONSOLIDATED STATEMENTS OF CASH
CONSOLIDATED STATEMENTS OF CASH FLOWS (unaudited) - USD ($) $ in Thousands | 9 Months Ended | |
Sep. 30, 2019 | Sep. 30, 2018 | |
Cash Flows From Operating Activities | ||
Net Income | $ 9,664 | $ 9,494 |
Adjustments to reconcile net income to net cash provided by operating activities: | ||
Depreciation | 896 | 939 |
Amortization (accretion), net | (130) | (338) |
Securities amortization (accretion), net | 581 | 669 |
Stock based compensation expense | 168 | 135 |
Provision for loan losses | 825 | 400 |
Securities losses (gains) available for sale gains, net | (691) | 8 |
Net increase in cash surrender value of bank-owned life insurance | (322) | (136) |
Originations of loans held for sale | (52,267) | (47,422) |
Proceeds from sale of loans | 49,307 | 46,245 |
Losses (gains) on sale of bank premises and equipment | 9 | |
Gain on sale of loans | (1,069) | (1,291) |
Gains on other real estate | (74) | (149) |
Write-downs of other real estate, net | 38 | |
Amortization of operating leases | 103 | |
Changes in: | ||
Interest receivable | 122 | (187) |
Other assets | (369) | (1,247) |
Interest payable | 135 | (20) |
Deferred taxes | (337) | (2) |
Other liabilities | 50 | 341 |
Net cash from operating activities | 6,630 | 7,448 |
Cash Flows From Investing Activities | ||
Net change in interest bearing time deposits | (200) | (445) |
Purchases of securities available for sale | (38,041) | (21,691) |
Purchase of bank owned life insurance | (7,500) | (10,000) |
Proceeds from sales of securities available for sale | 75,081 | 16,707 |
Proceeds from principal payments, maturities and calls securities available for sale | 39,723 | 36,458 |
Net change in loans | (46,663) | (36,988) |
Purchases of bank premises and equipment | (1,907) | (1,934) |
Capitalized expenditures for other real estate | (135) | (74) |
Proceeds from the sale of other real estate | 267 | 1,824 |
Net cash from (used in) investing activities | 20,625 | (16,143) |
Cash Flows From Financing Activities: | ||
Net change in deposits | (21,241) | 5,467 |
Net change in repurchase agreements | (2,040) | (11,652) |
Net change in short-term Federal Home Loan Bank advances | (6,600) | 3,500 |
Proceeds from long-term Federal Home Loan Bank advances | 18,500 | 16,394 |
Repayment of long-term Federal Home Loan Bank advances | (11,675) | (14,902) |
Repayment of note payable | (722) | (480) |
Proceeds from issuance of common stock | 295 | 64 |
Purchase of common stock | (1,544) | |
Dividends paid | (3,039) | (2,771) |
Net cash used in financing activities | (28,066) | (4,380) |
Net change in cash and cash equivalents | (811) | (13,075) |
Cash and cash equivalents at beginning of period | 26,101 | 39,172 |
Cash and cash equivalents at end of period | 25,290 | 26,097 |
Supplemental disclosures of cash flow information Cash paid during the year for: | ||
Interest expense | 6,608 | 4,762 |
Income taxes | 750 | 1,585 |
Supplemental disclosures of non-cash investing activities | ||
Securities transactions in process, payable | 1,700 | |
Real estate acquired through foreclosure | 191 | $ 201 |
In conjunction with the adoption of ASU 2016-02, as detailed in Note 9 of the unaudited consolidated financial statements, a net operating lease asset and a related lease liability was recognized at 1/1/2019 | 6,373 | |
Lease liability arising from obtaining right of use asset | $ 2,669 |
SECURITIES
SECURITIES | 9 Months Ended |
Sep. 30, 2019 | |
SECURITIES | |
SECURITIES | 2. SECURITIES AVAILABLE FOR SALE Period-end securities are as follows: (in thousands) Gross Gross Amortized Unrealized Unrealized Fair Cost Gains Losses Value Available for Sale September 30, 2019 U.S. treasury notes $ 2,986 $ 1 $ — $ 2,987 U.S. government agencies 22,154 76 (37) 22,193 States and political subdivisions 35,223 887 (37) 36,073 Mortgage-backed - residential 94,876 623 (184) 95,315 Mortgage-backed - commercial 53,606 645 (137) 54,114 Asset-backed 35,974 58 (172) 35,860 Total $ 244,819 $ 2,290 $ (567) $ 246,542 December 31, 2018 U.S. treasury notes $ 4,032 $ — $ $ 3,975 U.S. government agencies 41,122 515 (459) 41,178 States and political subdivisions 64,196 503 (495) 64,204 Mortgage-backed - residential 150,704 159 (3,614) 147,249 Mortgage-backed - commercial 49,484 — (921) 48,563 Asset-backed 10,234 56 (90) 10,200 Total $ 319,772 $ 1,233 $ (5,636) $ 315,369 The amortized cost and fair value of securities as of September 30, 2019 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. Amortized Fair Cost Value Due in one year or less $ 7,360 $ 7,355 Due after one year through five years 15,872 15,880 Due after five years through ten years 14,715 14,936 Due after ten years 22,416 23,082 60,363 61,253 Mortgage-backed - residential 94,876 95,315 Mortgage-backed - commercial 53,606 54,114 Asset-backed 35,974 35,860 Total $ 244,819 $ 246,542 Proceeds from the sale of available for sale securities for the nine months ended September 30, 2019 and September 30, 2018 were $75.1 million and $16.7 million. Gross gains of $732 thousand and $138 thousand and gross losses of $41 thousand and $146 were realized on those sales, respectively. The tax provision related to these realized net gains or losses was $145 thousand and $(2) thousand, respectively. Proceeds from the sale of available for sale securities for the three months ended September 30, 2019 and September 30, 2018 were $45.3 million and $2.0 million. Gross gains of $578 thousand and $72 thousand and gross losses of $1 thousand and $6 thousand were realized on those sales, respectively. The tax provision related to these realized net gains or losses was $121 thousand and $(1) thousand, respectively. Securities with unrealized losses at September 30, 2019 and at December 31, 2018 not recognized in income are as follows: September 30, 2019 Less than 12 Months 12 Months or More Total Fair Unrealized Fair Unrealized Fair Unrealized Description of Securities Value Loss Value Loss Value Loss U.S. government agencies 3,411 (7) 4,653 (30) 8,064 (37) States and political subdivisions 2,420 (9) 1,192 (28) 3,612 (37) Mortgage-backed - residential 10,925 (42) 16,263 (142) 27,188 (184) Mortgage-backed - commercial 7,683 (25) 11,270 (112) 18,953 (137) Asset-backed 22,040 (172) — — 22,040 (172) Total temporarily impaired $ 46,479 $ (255) $ 33,378 $ (312) $ 79,857 $ (567) December 31, 2018 Less than 12 Months 12 Months or More Total Fair Unrealized Fair Unrealized Fair Unrealized Description of Securities Value Loss Value Loss Value Loss U.S. treasury notes $ — $ — $ 3,975 $ (57) $ 3,975 $ (57) U.S. government agencies — — 21,102 (459) 21,102 (459) States and political subdivisions 25,540 (370) 33,547 (495) Mortgage-backed - residential 19,250 (144) 112,369 (3,470) 131,619 (3,614) Mortgage-backed - commercial — — 45,949 (921) 45,949 (921) Asset-backed 1,920 (90) — — 1,920 (90) Total temporarily impaired $ 29,177 $ (359) $ 208,935 $ (5,277) $ 238,112 $ (5,636) 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. |
LOANS
LOANS | 9 Months Ended |
Sep. 30, 2019 | |
LOANS | |
LOANS | 3. Loans at period-end are as follows: (in thousands) 9/30/2019 12/31/2018 Commercial $ 101,496 $ 86,149 Real estate construction 30,198 24,254 Real estate mortgage: 1-4 family residential 280,972 252,318 Multi-family residential 46,449 46,403 Non-farm & non-residential 191,676 196,674 Agricultural 58,734 60,049 Consumer 22,547 20,089 Other 195 208 Total $ 732,267 $ 686,144 Activity in the allowance for loan losses for the nine month period and three month period indicated was as follows: Nine Months Ended September 30, 2019 (in thousands) Beginning Ending Balance Charge-offs Recoveries Provision Balance Commercial $ 1,159 $ (191) $ 14 $ (75) $ 907 Real estate Construction 414 — — 103 517 Real estate mortgage: 1-4 family residential 2,605 (149) 15 384 2,855 Multi-family residential 733 — 15 (35) 713 Non-farm & non-residential 1,649 (17) — 42 1,674 Agricultural 420 — 6 (21) 405 Consumer 410 (272) 27 271 436 Other 58 (648) 514 160 84 Unallocated 679 — — (4) 675 $ 8,127 $ (1,277) $ 591 $ 825 $ 8,266 Three Months Ended September 30, 2019 (in thousands) Beginning Ending Balance Charge-offs Recoveries Provision Balance Commercial $ 962 $ — $ 4 $ (59) $ 907 Real estate construction 413 — — 104 517 Real estate mortgage: 1-4 family residential 2,766 (45) 3 131 2,855 Multi-family residential 743 — 15 (45) 713 Non-farm & non-residential 1,599 — — 75 1,674 Agricultural 417 — 2 (14) 405 Consumer 392 (132) 10 166 436 Other 104 (208) 166 22 84 Unallocated 680 — — (5) 675 $ 8,076 $ (385) $ 200 $ 375 $ 8,266 Nine Months Ended September 30, 2018 (in thousands) Beginning Ending Balance Charge-offs Recoveries Provision Balance Commercial $ 975 $ — $ 6 $ 163 $ 1,144 Real estate Construction 462 — — (42) 420 Real estate mortgage: 1-4 family residential 2,316 (91) 266 125 2,616 Multi-family residential 640 — 9 90 739 Non-farm & non-residential 1,554 — — 95 1,649 Agricultural 494 — 149 (186) 457 Consumer 582 (166) 37 (33) 420 Other 18 (613) 482 173 60 Unallocated 679 — — 15 694 $ 7,720 $ (870) $ 949 $ 400 $ 8,199 Three Months Ended September 30, 2018 (in thousands) Beginning Ending Balance Charge-offs Recoveries Provision Balance Commercial $ 1,183 $ — $ — $ (39) $ 1,144 Real estate Construction 398 — — 22 420 Real estate mortgage: 1-4 family residential 2,453 (28) 4 187 2,616 Multi-family residential 737 — 3 (1) 739 Non-farm & non-residential 1,604 — — 45 1,649 Agricultural 475 — 3 (21) 457 Consumer 582 (73) 15 (104) 420 Other 49 (200) 141 70 60 Unallocated 703 — — (9) 694 $ 8,184 $ (301) $ 166 $ 150 $ 8,199 The following tables present the balance in the allowance for loan losses and the recorded investment (excluding accrued interest receivable amounting to $3.0 million as of September 30, 2019 and $2.8 million at December 31, 2018) in loans by portfolio segment and based on impairment method as September 30, 2019 and December 31, 2018: Individually Collectively As of September 30, 2019 Evaluated for Evaluated for (in thousands) Impairment Impairment Total Allowance for Loan Losses: Commercial $ — $ 907 $ 907 Real estate construction — 517 517 Real estate mortgage: 1-4 family residential 7 2,848 2,855 Multi-family residential — 713 713 Non-farm & non-residential — 1,674 1,674 Agricultural — 405 405 Consumer — 436 436 Other — 84 84 Unallocated — 675 675 $ 7 $ 8,259 $ 8,266 Loans: Commercial $ — $ 101,496 $ 101,496 Real estate construction 374 29,824 30,198 Real estate mortgage: 1-4 family residential 1,753 279,219 280,972 Multi-family residential 1,292 45,157 46,449 Non-farm & non-residential — 191,676 191,676 Agricultural 522 58,212 58,734 Consumer — 22,547 22,547 Other — 195 195 Total $ 3,941 $ 728,326 $ 732,267 Individually Collectively As of December 31, 2018 Evaluated for Evaluated for (in thousands) Impairment Impairment Total Allowance for Loan Losses: Commercial $ 191 $ 968 $ 1,159 Real estate construction — 414 414 Real estate mortgage: 1-4 family residential 10 2,595 2,605 Multi-family residential — 733 733 Non-farm & non-residential — 1,649 1,649 Agricultural — 420 420 Consumer — 410 410 Other — 58 58 Unallocated — 679 679 $ 201 $ 7,926 $ 8,127 Loans: Commercial $ 191 $ 85,958 $ 86,149 Real estate construction 374 23,880 24,254 Real estate mortgage: 1-4 family residential 1,003 251,315 252,318 Multi-family residential 1,973 44,430 46,403 Non-farm & non-residential 227 196,447 196,674 Agricultural 1,164 58,885 60,049 Consumer — 20,089 20,089 Other — 208 208 Total $ 4,932 $ 681,212 $ 686,144 The following table presents loans individually evaluated for impairment by class of loans as of and for the nine months ended September 30, 2019 (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 construction $ 374 $ 374 $ - $ 374 $ - $ - Real estate mortgage: 1-4 family residential 760 760 - 380 21 21 Multi-family residential 1,292 1,292 - 1,632 54 54 Non-farm and non-residential - - 114 5 5 Agricultural 522 522 - 843 14 14 With an allowance recorded: Real estate mortgage: 1-4 family residential 993 993 7 998 11 11 Total $ 3,941 $ 3,941 $ 7 $ 4,341 $ 105 $ 105 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, 2018: 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 construction $ 94 $ 3 $ 3 Real estate mortgage: 1-4 family residential 62 4 4 Multi-family residential 523 37 37 Non-farm and non-residential 1,061 8 8 Agricultural 312 11 11 With an allowance recorded: Commercial 128 18 18 Real estate mortgage: 1-4 family residential 543 5 5 Total $ 2,723 $ 86 $ 86 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 as of and for the year ended December 31, 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 construction $ 374 $ $ — $ $ $ Real-estate mortgage: Multi-family 1,973 1,973 — 1,991 Non-farm & non-residential 227 227 — 679 12 12 Agricultural 1,164 1,164 — 724 54 54 With an allowance recorded: Commercial $ $ $ $ $ $ Real estate mortgage 1-4 family residential 1,003 1,003 10 605 13 13 Total $ 4,932 $ 4,932 $ 201 $ 4,282 $ 201 $ 201 The following tables present loans individually evaluated for impairment by class of loans for the three months ended September 30, 2019 and September 30, 2018: Three Months Ending September 30, 2019 Average Interest Cash Basis Recorded Income Interest (in thousands): Investment Recognized Recognized With no related allowance recorded: Real estate construction $ 374 $ — $ — Real estate mortgage: 1-4 family residential 441 14 Multi-family residential 1,463 — — Non-farm and non-residential 57 — — Agricultural 684 4 With an allowance recorded: Real estate mortgage: 1-4 family residential 997 1 Total $ $ 19 $ 19 Three Months Ending September 30, 2018 Average Interest Cash Basis Recorded Income Interest Investment Recognized Recognized With no related allowance recorded: Real estate construction $ 374 $ - $ - Real estate mortgage: 1-4 family residential 78 1 1 Multi-family residential 691 13 13 Non-farm and non-residential 231 2 2 Agricultural 278 3 3 With an allowance recorded: Commercial 257 - - Real estate mortgage: 1-4 family residential 138 2 2 Total $ 2,047 $ 21 $ 21 The following tables present the recorded investment in nonaccrual, loans past due over 89 days still on accrual and accruing troubled debt restructurings by class of loans as of September 30, 2019 and December 31, 2018: Loans Past Due Over 89 Days As of September 30, 2019 Still Troubled Debt (in thousands) Nonaccrual Accruing Restructurings Commercial $ — $ 70 $ — Real estate construction 374 — Real estate mortgage: 1-4 family residential 873 869 — Multi-family residential — 1,292 Non-farm & non-residential — — — Agricultural 200 — — Consumer 66 28 — Total $ 1,513 $ 2,259 $ — Loans Past Due Over 89 Days As of December 31, 2018 Still Troubled Debt (in thousands) Nonaccrual Accruing Restructurings Commercial $ 191 $ — $ — Real estate construction — 374 — Real estate mortgage: 1-4 family residential 525 784 — Non-farm & non-residential 156 14 — Agricultural 252 — — Consumer 17 10 — Total $ 1,141 $ 1,182 $ — Nonaccrual loans secured by real estate make up 95.6% of the total nonaccrual loan balances at September 30, 2019. Nonaccrual loans and loans past due over 89 days and still accruing 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. 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. The following tables present the aging of the recorded investment in past due and non-accrual loans as September 30, 2019 and December 31, 2018 by class of loans: 30–59 60–89 Greater than Total As of September 30, 2019 Days Days 89 Days Past Due & Loans Not (in thousands) Past Due Past Due Past Due Non-accrual Non-accrual Past Due Commercial $ 280 $ 560 $ 70 $ — $ 910 $ 100,586 Real estate construction 201 — — 374 575 29,623 Real estate mortgage: 1-4 family residential 1,195 199 869 873 3,136 277,836 Multi-family residential — — 1,292 — 1,292 45,157 Non-farm & non-residential 132 — — — 132 191,544 Agricultural 306 5 — 200 511 58,223 Consumer 140 70 28 66 304 22,243 Other — — — — — 195 Total $ 2,254 $ 834 $ 2,259 $ 1,513 $ 6,860 $ 725,407 30–59 60–89 Greater than Total As of December 31, 2018 Days Days 89 Days Past Due & Loans Not (in thousands) Past Due Past Due Past Due Non-accrual Non-accrual Past Due Commercial $ 10 $ 24 $ — $ 191 $ 225 $ 85,924 Real estate construction 309 — 374 — 683 23,571 Real estate mortgage: 1-4 family residential 2,158 563 784 525 4,030 248,288 Multi-family residential 951 — — — 951 45,452 Non-farm & non-residential 68 84 14 156 322 196,352 Agricultural 502 15 — 252 769 59,280 Consumer 119 15 10 17 161 19,928 Other — — — — — 208 Total $ 4,117 $ 701 $ 1,182 $ 1,141 $ 7,141 $ 679,003 Troubled Debt Restructurings: Management periodically reviews renewals and modifications of previously identified 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. The Company had no loans classified as troubled debt restructurings as of September 30, 2019 or December 31, 2018. 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 September 30, 2019 and December 31, 2018, and based on the most recent analysis performed, the risk category of loans by class of loans is as follows: As of September 30, 2019 Special (in thousands) Pass Mention Substandard Doubtful Commercial $ 99,990 $ 1,488 $ 18 $ — Real estate construction 28,719 1,084 395 — Real estate mortgage: 1-4 family residential 272,319 2,320 6,333 — Multi-family residential 42,301 2,856 1,292 — Non-farm & non-residential 185,261 6,275 140 — Agricultural 52,539 5,273 922 — Total $ 681,129 $ 19,296 $ 9,100 $ — As of December 31, 2018 Special (in thousands) Pass Mention Substandard Doubtful Commercial $ 84,911 $ 994 $ 53 $ 191 Real estate construction 23,857 — 397 — Real estate mortgage: 1-4 family residential 244,382 2,685 5,201 50 Multi-family residential 43,248 1,182 1,973 — Non-farm & non-residential 188,186 7,967 503 18 Agricultural 54,654 3,715 1,680 — Total $ 639,238 $ 16,543 $ 9,807 $ 259 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 89 days past due or on non-accrual status, and total $94 thousand at September 30, 2019 and $2 7 thousand at December 31, 201 8 . Non-consumer loans with an outstanding balance less than $200 thousand are evaluated similarly to consumer loans. Loan performance is evaluated based on delinquency status. Both are reviewed at least quarterly and credit quality grades are updated as needed |
EARNINGS PER SHARE
EARNINGS PER SHARE | 9 Months Ended |
Sep. 30, 2019 | |
EARNINGS PER SHARE | |
EARNINGS PER SHARE | 4. 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, 2019 2018 (in thousands) Basic and Diluted Earnings Per Share Net Income $ 9,664 $ 9,494 Weighted average common shares outstanding 5,930 5,956 Basic and diluted earnings per share $ 1.62 $ 1.59 Three Months Ended September 30, 2019 2018 (in thousands) Basic and Diluted Earnings Per Share Net Income $ 3,616 $ 3,278 Weighted average common shares outstanding 5,901 5,924 Basic and diluted earnings per share $ 0.61 $ 0.55 Restricted stock grants were excluded in shares outstanding for purposes of computing basic and diluted earnings per share for the both the nine months ended September 30, 2019 and September 30, 2018. |
STOCK COMPENSATION
STOCK COMPENSATION | 9 Months Ended |
Sep. 30, 2019 | |
STOCK COMPENSATION | |
STOCK COMPENSATION | 5. We have three stock based compensation plans as described below. 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 100,000. There were no shares issued during 2019 or 2018. The plan is now expired and no additional shares will be issued from the 2005 plan. There were 64 shares forfeited during the nine months ended September 30, 2019 and 178 shares were forfeited during the nine months ended September 30, 2018. A summary of changes in the Company’s nonvested shares for the year follows (in thousands, except per share data): Weighted-Average Fair Grant-Date Value Nonvested Shares Shares Fair Value Per Share Nonvested at January 1, 2019 5,924 $ 77,404 $ 13.07 Vested (4,254) (54,566) 12.83 Forfeited (64) (876) 13.69 Nonvested at September 30, 2019 1,606 $ 21,962 $ 13.67 As of September 30, 2019, unrecognized compensation cost related to nonvested shares granted under the 2005 Restricted Stock Grant Plan will be recognized over a weighted-average period of 0.25 years. Further, as of September 30, 2019, no additional shares are available for issuance under the 2005 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 300,000. There were 23,380 shares issued during the nine months ended September 30, 2019 and 11,440 shares were issued during the nine months ended September 30, 2018. There were 1,090 shares forfeited during the nine months ended September 30, 2019 and 816 shares were forfeited during the nine months ended September 30, 2018. A summary of changes in the Company’s nonvested shares for the year follows (in thousands, except per share data): Weighted-Average Fair Grant-Date Value Nonvested Shares Shares Fair Value Per Share Nonvested at January 1, 2019 25,778 $ 482,213 $ 18.71 Granted 23,380 549,430 23.50 Vested (9,242) (175,749) 19.02 Forfeited (1,090) (22,942) 21.05 Nonvested at September 30, 2019 38,826 $ 832,953 $ 21.45 As of September 30, 2019, unrecognized compensation cost related to nonvested shares granted under the 2009 Restricted Stock Grant Plan will be recognized over a weighted-average period of 3.5 years. As of September 30, 2019, 230,732 shares are available for issuance. 2019 Stock Award Plan On May 21, 2019, 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 300,000. There have been no shares issued from the 2019 Stock Award Plan as of September 30, 2019. |
REPURCHASE AGREEMENTS
REPURCHASE AGREEMENTS | 9 Months Ended |
Sep. 30, 2019 | |
REPURCHASE AGREEMENTS. | |
REPURCHASE AGREEMENTS | 6. Repurchase agreements totaled $6.0 million as of September 30, 2019. Of this, $4.0 million of balances were overnight obligations and $2.0 million of balances had terms extending through May 2021 with a weighted remaining average life of 1.1 years. The Company pledged U.S. government agency securities with a total carrying amount of $12.0 million to secure repurchase agreements as of September 30, 2019. |
OTHER BORROWINGS
OTHER BORROWINGS | 9 Months Ended |
Sep. 30, 2019 | |
OTHER BORROWINGS | |
OTHER BORROWINGS | 7. On July 20, 2015, the Company borrowed $5.0 million which had an outstanding balance of $2.0 million as of September 30, 2019. 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 September 30, 2019 is as follows (in thousands): 2019 $ 131 2020 539 2021 567 2022 596 Thereafter 163 $ 1,996 |
FAIR VALUE MEASUREMENTS
FAIR VALUE MEASUREMENTS | 9 Months Ended |
Sep. 30, 2019 | |
FAIR VALUE MEASUREMENTS | |
FAIR VALUE MEASUREMENTS | 8. 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. 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. 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 : The fair values for available for sale investment securities 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. Net adjustments totaled $(194) thousand the first nine months of 2019 and $201 for the first nine months of 2018 and resulted in a Level 3 classification of the inputs for determining fair value. Net adjustments totaled $(1) thousand for the three months ended September 30, 2019 and $(9) for the three months ended September 30, 2018 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. 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. Derivatives and Financial Instruments: The fair values of derivative financial instruments are based on derivative valuation models using market data inputs as of the valuation date (Level 2). Assets and Liabilities Measured on a Recurring Basis : Available for sale investment securities, derivatives and other financial instrument assets and equity securities included in other 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 September 30, 2019 (in thousands): Quoted Prices In Active Markets for Significant Other Significant Identical Observable Unobservable Carrying Assets Inputs Inputs Description Value (Level 1) (Level 2) (Level 3) Financial Assets U.S. treasury notes $ 2,987 $ — $ 2,987 $ — U. S. government agencies 22,193 — 22,193 — States and political subdivisions 36,073 — 36,073 — Mortgage-backed - residential 95,315 — 95,315 — Mortgage-backed-commercial 54,114 — 54,114 — Asset-backed 35,860 — 35,860 — Derivatives and financial instrument assets 290 — 290 — Other Assets 293 293 — — Total $ 247,125 $ 293 $ 246,832 $ — Financial Liabilities Derivatives and financial instrument liabilities $ 287 $ — $ 287 $ — Fair Value Measurements at December 31, 2018 (in thousands): Quoted Prices In Active Markets for Significant Other Significant Identical Observable Unobservable Carrying Assets Inputs Inputs Description Value (Level 1) (Level 2) (Level 3) U.S. treasury notes $ 3,975 $ — $ 3,975 $ — U. S. government agencies 41,178 — 41,178 — States and political subdivisions 64,204 — 64,204 — Mortgage-backed - residential 147,249 — 147,249 — Mortgage-backed - commercial 48,563 — 48,563 — Asset-backed 10,200 — 10,200 — Other Assets 284 284 — — Total $ 315,653 $ 284 $ 315,369 $ — There were no transfers between level 1 and level 2 during 2019 or 2018. Assets measured at fair value on a non-recurring basis are summarized below (in thousands): Fair Value Measurements at September 30, 2019 Using : Quoted Prices In Active Markets for Significant Other Significant Identical Observable Unobservable Carrying Assets Inputs Inputs (In thousands) Value (Level 1) (Level 2) (Level 3) Description Impaired loans: 1-4 family residential $ 993 $ — $ — $ 993 Other real estate owned, net: Commercial — — Agricultural — — Mortgage servicing rights — — Fair Value Measurements at December 31, 2018 Using : Quoted Prices In Active Markets for Significant Other Significant Identical Observable Unobservable Carrying Assets Inputs Inputs (In thousands) Value (Level 1) (Level 2) (Level 3) Description Impaired loans: Real Estate Mortgage: 1-4 family residential $ 993 $ — $ — $ 993 Other real estate owned, net: Commercial 246 — 246 Mortgage servicing rights 430 — — 430 Impaired loans measured for impairment using the fair value of the collateral for collateral dependent loans had a net carrying amount of $993 thousand, which includes a valuation allowance of $7 thousand as of September 30, 2019. Impaired loans measured for impairment using the fair value of the collateral for collateral dependent loans had a net carrying amount of $993 thousand, with a valuation allowance of $201 thousand at December 31, 2018. No additional loans were impaired at September 30, 2019 when compared to December 31, 2018 and resulted in no additional provision for loan loss expense for the nine months and three months ended September 30, 2019. Four additional loans were impaired at September 30, 2018 when compared to December 31, 2017 and resulted in additional provision for loan loss expense of $201 thousand for the nine months ended September 30, 2018 and $0 for the three months ended September 30, 2018. Other real estate owned measured at fair value less costs to sell had a net carrying amount of $479 thousand, which is made up of the outstanding balance of $924 thousand, net of a valuation allowance of $445 thousand as of September 30, 2019. Other real estate owned which was measured at fair value less costs to sell, had a net carrying amount of $246 thousand, which was made up of the outstanding balance of $653 thousand, net of a valuation allowance of $407 thousand at December 31, 2018. The Company recorded $38 thousand in write-downs of other real estate owned properties for the nine months ended September 30, 2019 and $0 for the nine months ended September 30, 2018. The Company recorded no write-downs of other real estate owned properties for the three months ended September 30, 2019 and September 30, 2018. Impaired mortgage servicing rights are carried at the lower of cost or fair value. At September 30, 2019, impaired mortgage servicing rights totaled $1.1 million, less a valuation allowance of $194 thousand, resulting in a carrying value of $902 thousand. At December 31, 2018, impaired mortgage servicing rights totaled $469 thousand, less a valuation allowance of $39 thousand, resulting in a carrying value of $430 thousand. For the nine months ended September 30, 2019, the Company recorded net writedowns of $155 thousand. For the nine months ended September 30, 2018, the Company recorded net recoveries of prior write-downs of $56 thousand. For the three months ended September 30, 2019, the Company recorded net write-downs of $114 thousand compared to net write-downs of $0 for the three months ended September 2018. The following table presents quantitative information about level 3 fair value measurements for financial instruments measured at fair value on a non-recurring basis as of September 30, 2019 and December 31, 2018: Range September 30, 2019 Fair Valuation Unobservable (Weighted (In thousands) Value Technique(s) Input(s) Average) Impaired loans Real estate mortgage: 1-4 family residential $ sales comparison adjustment for differences between the comparable sales (30)% - 10% (21)% Other real estate owned: Commercial income approach capitalization rate 10% - 10% (10)% Agricultural sales comparison adjustment for differences between the comparable sales (29)% - 41% (13)% Mortgage servicing rights discounted cash flow constant prepayment rates (8)% - (23)% (13)% Range December 31, 2018 Fair Valuation Unobservable (Weighted (In thousands) Value Technique(s) Input(s) Average) Impaired loans Real estate mortgage: 1-4 family residential $ sales comparison adjustment for differences between the comparable sales (21)% - 7% (7)% Other real estate owned: Commercial income approach capitalization rate 10% - 10% (10)% Mortgage servicing rights discounted cash flow constant prepayment rates 7% - 25% (9)% Fair Value of Financial Instruments The carrying amounts and estimated fair values of financial instruments, as of September 30, 2019 and December 31, 2018 are as follows: September 30, 2019 Carrying (in thousands) Value Level 1 Level 2 Level 3 Total Financial assets Cash and cash equivalents $ 25,290 $ 25,290 $ — $ — $ 25,290 Interest bearing time deposits 2,375 2,375 — — 2,375 Securities available for sale 246,542 — 246,542 — 246,542 Loans held for sale 5,232 — 5,289 — 5,289 Net Loans 724,001 — — 719,487 719,487 Federal Home Loan Bank stock 7,034 — — — N/A Interest receivable 4,028 — 979 3,049 4,028 Derivative and financial instruments 290 — 290 — 290 Other assets 293 293 — — 293 Financial liabilities Total deposits $ 829,201 $ 603,289 $ 225,311 $ — $ 828,600 Repurchase agreements 6,037 — 6,037 — 6,037 Short-term Federal Home Loan Bank advances 5,000 — 5,000 — 5,000 Long-term Federal Home Loan Bank advances 95,677 — 96,163 — 96,163 Note payable 1,996 2,092 2,135 Subordinated debentures 7,217 — — 7,215 7,215 Interest payable 1,028 — 1,014 14 1,028 Derivative and financial instruments — — 287 December 31, 2018 Carrying (in thousands) Value Level 1 Level 2 Level 3 Total Financial assets Cash and cash equivalents $ 26,101 $ 26,101 $ — $ — $ 26,101 Interest bearing time deposits 2,175 2,175 — — 2,175 Securities available for sale 315,369 — 315,369 — 315,369 Loans held for sale 1,203 — 1,224 — 1,224 Net Loans 678,017 — — 666,942 666,942 Federal Home Loan Bank stock 7,034 — — — N/A Interest receivable 4,150 — 1,346 2,804 4,150 Financial liabilities Total deposits $ 850,442 $ 620,885 $ 226,734 $ — $ 847,619 Repurchase agreements 8,077 — 8,009 — 8,009 Short-term Federal Home Loan Bank advances 11,600 — 11,592 — 11,592 Long-term Federal Home Loan Bank advances 88,852 — 84,983 — 84,983 Note payable 2,718 — 2,841 — 2,841 Subordinated debentures 7,217 — — 7,213 7,213 Interest payable 893 — 877 16 893 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 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 of September 30, 2019 and December 31, 2018 are based on the notion of exit price. 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. 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. 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. |
LEASES
LEASES | 9 Months Ended |
Sep. 30, 2019 | |
LEASES | |
LEASES | 9. On January 1, 2019, the Company adopted FASB issued ASU No. 2016-02, “Leases (Topic 842).” Leases (Topic 842) establishes a right of use model that requires a lessee to record a right of use (“ROU”) asset and a lease liability for all leases with terms longer 12 months. As of the adoption date, the Company was obligated under six operating leases. In the second quarter of 2019, the Company entered into one new operating lease for land in Lexington, KY which will be used to construct a new branch building on. As of September 30, 2019, the Company is obligated under seven operating leases, three of which are for building leases and four of which are for land leases, with terms extending through 2078. The Company's lease agreements include options to renew at the Company's discretion. The extensions are reasonably certain to be exercised with the exception of one lease agreement which expires in 2020 and is for additional office space. As of September 30, 2019, we do not intend to exercise the option to renew this lease and assumptions used in estimating our operating lease right of use asset and operating lease liability were updated accordingly. In prior quarterly filings during 2019, we did assume we would renew the lease. The change in assumptions had minimal impact on the recorded lease estimates recorded on the Company’s balance sheet. The lease agreements with options that we are reasonably certain will be exercised were considered in the calculation of the ROU asset and lease liability. Statement of Financial Condition Location September 30, 2019 (in thousands) Operating Lease Right of Use Asset: Gross Carrying Amount $ 8,939 Accumulated Amortization (529) Net Book Value Operating lease right of use asset $ 8,410 Operating Lease Liabilities Right of use lease obligations Operating lease liability $ 8,513 As of September 30, 2019, the weighted-average remaining lease term for operating leases was 35.8 years and the weighted- average discount rate used in the measurement of operating lease liabilities was 4.14%. The Company utilized the FHLB fixed rate advance rate as of December 31, 2018 for the term most closely aligning with the remaining lease term for lease obligations in existence as of December 31, 2018. The Company utilized the FHLB fixed rate advance rate as of April 30, 2019 as a basis for determing the discount rate for one contract which was entered into during April 2019. Nine Months Ended September 30, 2019 (in thousands) Lease Cost: Operating lease cost $ 529 Total lease cost $ 529 Other information Cash paid for amounts included in the measurement of lease liabilities: Operating cash flows from operating leases $ 250 Three Months Ended September 30, 2019 (in thousands) Lease Cost: Operating lease cost $ 282 Total lease cost $ 282 Other information Cash paid for amounts included in the measurement of lease liabilities: Operating cash flows from operating leases $ 98 Maturity analysis of liabilities under operating leases with terms longer than 12 months, are as follows at September 30, 2019: As of September 30, 2019 (in thousands) Twelve months ended September 30, 2020 $ 2021 2022 2023 2024 Thereafter 18,856 Total undiscounted lease payments $ 21,505 Amounts representing interest Lease liability $ 8,513 |
REVENUE FROM CONTRACTS WITH CUS
REVENUE FROM CONTRACTS WITH CUSTOMERS | 9 Months Ended |
Sep. 30, 2019 | |
REVENUE FROM CONTRACTS WITH CUSTOMERS. | |
REVENUE FROM CONTRACTS WITH CUSTOMERS | 10. REVENUE FROM CONTRACTS WITH CUSTOMERS The Company’s revenue from contracts with customers in the scope of Topic 606 is recognized within noninterest income. The consolidated statements of income include all categories of noninterest income. The following table reflects only the categories of noninterest income that are within the scope of Topic 606: Three Months Ended Nine Months Ended 9/30/2019 9/30/2018 9/30/2019 9/30/2018 Service charges $ $ $ $ Trust department income Brokerage income Debit card interchange income Total $ $ $ $ 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 montrepresenting the period over which we satisfy our performance obligation. 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. |
DERIVATIVES AND FINANCIAL INSTR
DERIVATIVES AND FINANCIAL INSTRUMENTS | 9 Months Ended |
Sep. 30, 2019 | |
DERIVATIVES AND FINANCIAL INSTRUMENTS | |
DERIVATIVES AND FINANCIAL INSTRUMENTS | 11. DERIVATIVES AND FINANCIAL INSTRUMENTS As part of our overall interest rate risk management, the Company uses derivative instruments, including interest rate swaps. The notional amount does not represent amounts exchanged by the parties. The amount exchanged is determined by reference to the notional amount and the other terms of the individual agreements. The notional amount of these derivative instruments was $11.7 million at September 30, 2019 and $0 at December 31, 2018. These derivative financial instruments at September 30, 2019 consisted of $11.7 million notional amount of receive-variable, pay-fixed interest rate swaps on certain mortgage loans. These hedges were entered into to manage interest rate risk. Derivative instruments are recognized in other assets and other liabilities on the balance sheet at their fair value and are not reported on a net basis. Changes to the fair value are recognized in loan interest income on the statement of income. In accordance with ASC 815-20-35-1, subsequent changes in fair value for a hedging instrument that has been designated and qualifies as part of a hedging relationship should be accounted for in the following manner: Fair value hedges: changes in fair value will be recognized concurrently in earnings. Consistent with this guidance, as long as a hedging instrument is designated and the results of the effectiveness testing support that the instrument qualifies for hedge accounting treatment, 100% of the periodic changes in fair value of the hedging instrument will be accounted for as outlined above. This is the case whether or not economic mismatches exist in the hedging relationship. As a result, there will be no periodic measurement or recognition of ineffectiveness. Rather, the full impact of hedge gains and losses will be recognized in the period in which the hedged transactions impact earnings. While separate measurement and presentation of ineffectiveness is being eliminated, paragraph 815-20-45-1A requires the change in fair value of the hedging instrument that is included in the assessment of hedge effectiveness be presented in the same income statement line item that is used to present the earnings effect of the hedged item. Commitments to fund certain mortgage loans (interest rate lock commitments) and forward commitments for the future delivery of mortgage loans to third party investors are considered derivatives. These derivative contracts do not qualify for hedge accounting. At September 30, 2019, the notional amount of the interest rate lock commitments was $9.4 million and at December 31, 2018, the notional amount of the interest rate lock commitments was $4.6 million. It is our practice to enter into forward commitments for the future delivery of residential mortgage loans to third party investors when interest rate lock commitments are entered into in order to economically hedge the effect of changes in interest rates resulting from our commitment to fund the loans. Credit risk arises from the possible inability of counterparties to meet the terms of their contracts. Kentucky Bancshare’s exposure is limited to the replacement value of the contracts rather than the notional, principal, or contract amounts. There are provisions in our agreements with the counterparties that allow for certain unsecured credit exposure up to an agreed threshold. Exposures in excess of the agreed thresholds are collateralized. In addition, we minimize credit risk through credit approvals, limits, and monitoring procedures. The direct impact to earnings for the nine months and three months ended September 30, 2019 was immaterial. |
SUMMARY OF SIGNIFICANT ACCOUNTI
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Policies) | 9 Months Ended |
Sep. 30, 2019 | |
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES | |
Basis of Presentation | Basis of Presentation : The consolidated financial statements include the accounts of Kentucky Bancshares, Inc. (the Company), its wholly-owned subsidiaries, Kentucky Bank (the Bank) and KBI Insurance Company, Inc., a captive insurance subsidiary, and the Bank’s wholly-owned subsidiary, KB Special Assets Unit, LLC. Intercompany transactions and balances have been eliminated in consolidation. |
Nature of Operations | Nature of Operations : The Bank operates under a state bank charter and provides full banking services, including trust services, to customers located in Bourbon, Clark, Elliot, Fayette, Harrison, Jessamine, Madison, Rowan, Scott, Woodford and adjoining counties in Kentucky. 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., a captive insurance subsidiary, is regulated by the State of Nevada Division of Insurance. |
Subsequent Events | Subsequent Events : The Company has evaluated subsequent events for recognition and disclosure through November 8, 2019 which is the date the financial statements were available to be issued. |
Estimates in the Financial Statements | 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. |
Cash Flows | Cash Flows : For purposes of reporting cash flows, cash and cash equivalents include cash on hand, amounts due from banks, federal funds sold, and certain short-term investments with maturities of less than three months. Generally, federal funds are sold for one-day periods. Net cash flows are reported for loan, deposit and short-term borrowing transactions. |
Interest Bearing Time Deposits | Interest Bearing Time Deposits : Interest bearing time deposits in other financial institutions have original maturities between one and three years and are carried at cost. |
Securities | Securities : The Company is required to classify its securities portfolio into one of three categories: trading securities, securities available for sale and securities held to maturity. Fair value adjustments are made to the securities based on their classification with the exception of the held to maturity category. The Company has no investments classified as trading securities or held to maturity. Securities available for sale are carried at fair value. Unrealized holding gains and losses for securities which are classified as available for sale are reported in other comprehensive income, net of deferred tax. Interest income includes amortization of purchase premium or discount. Premiums and discounts on securities are amortized on the level-yield method without anticipating prepayments, except for mortgage backed securities where prepayments are anticipated. Premiums on purchased callable debt securities are amortized to the earliest call date. Gains and losses on sales are recorded on the settlement date and determined using the specific identification method. On January 1st, 2018, the Company adopted the new accounting standard for Financial Instruments, which requires equity investments to be measured at fair value with changes in fair value recognized in net income. Equity investments are included in other assets with changes in fair value recorded in other income. Management evaluates securities for other-than-temporary impairment (“OTTI”) at least on a quarterly basis, and more frequently when economic or market conditions warrant such an evaluation. For securities in an unrealized loss position, management considers the extent and duration of the unrealized loss, and the financial condition and near-term prospects of the issuer. Management also assesses whether it intends to sell, or it is more likely than not that it will be required to sell, a security in an unrealized loss position before recovery of its amortized cost basis. If either of the criteria regarding intent or requirement to sell is met, the entire difference between amortized cost and fair value is recognized as impairment through earnings. For debt securities that do not meet the aforementioned criteria, the amount of impairment is split into two components as follows: 1) OTTI related to credit loss, which must be recognized in the income statement and 2) OTTI related to other factors, which is recognized in other comprehensive income. The credit loss is defined as the difference between the present value of the cash flows expected to be collected and the amortized cost basis. |
Loans Held for Sale | Loans Held for Sale : Loans held for sale are carried at the lower of cost or fair value as determined by outstanding commitments from investors or current secondary market prices, calculated on the aggregate loan basis. The Company also provides for any losses on uncovered commitments to lend or sell. The Company sells loans with servicing rights retained and also with servicing rights released. |
Loans | Loans : Loans that management has the intent and ability to hold for the foreseeable future or until maturity are stated at the amount of unpaid principal, net of deferred loan origination fees and costs and acquired purchase premiums and discounts, reduced by an allowance for loan losses. Interest income on loans is recognized on the accrual basis except for those loans on a nonaccrual status. Interest income on real estate mortgage (1-4 family residential and multi-family residential) and consumer loans is discontinued at the time the loan is 90 days delinquent, and interest income on real estate construction, non-farm and non-residential mortgage, agricultural and commercial loans is discontinued at the time the loan is 120 days delinquent, unless the loan is well-secured and in process of collection. Past due status is based on the contractual terms of the loan. In all cases, loans are placed on nonaccrual or charged-off at an earlier date if collection of principal or interest is considered doubtful. 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. Loan origination fees and certain direct origination costs are capitalized and recognized as an adjustment of the yield on the related loan. Recorded investment is the outstanding loan balance, excluding accrued interest receivable. When interest accrual is discontinued, interest income received on such loans is accounted for on the cash-basis or cost-recovery method, until qualifying for return to accrual. Loans are returned to accrual status when all the principal and interest amounts contractually due are brought current and future payments are reasonably assured. Typically, the Company seeks to establish a payment history of at least six consecutive payments made on a timely basis before returning a loan to accrual status. Consumer and credit card loans are typically charged off no later than 120 days past due. Loans are placed on nonaccrual or charged-off at an earlier date if collection of principal or interest is considered doubtful. |
Concentration of Credit Risk | Concentration of Credit Risk : Most of the Company’s business activity is with customers located within Bourbon, Clark, Elliott, Fayette, Harrison, Jessamine, Madison, Rowan, Scott, Woodford and surrounding counties located in Kentucky. Therefore, the Company’s exposure to credit risk is significantly affected by changes in the economy in these counties. |
Allowance for Loan Losses | Allowance for Loan Losses : The allowance for loan losses is a valuation allowance for probable incurred credit losses. Loan losses are charged against the allowance when management believes the uncollectibility of a loan balance is confirmed. Subsequent recoveries, if any, are credited to the allowance. Adjustments are made to the historical loss experience ratios based on the qualitative factors as outlined in the regulatory Interagency Policy Statement on the Allowance for Loan and Lease Losses. These qualitative factors include the nature and volume of portfolio, economic and business conditions, classification, past due and non-accrual trends. Management estimates the allowance balance required using past loan loss experience, the nature and volume of the portfolio, information about specific borrower situations and estimated collateral values, economic conditions, and other factors. Allocations of the allowance may be made for specific loans, but the entire allowance is available for any loan that, in management’s judgment, should be charged off. The allowance for loan losses is evaluated at the portfolio segment level using the same methodology for each segment. The recent historical actual net losses is the basis for the general reserve for each segment which is then adjusted for qualitative factors as outlined above (i.e., nature and volume of portfolio, economic and business conditions, classification, past due and non-accrual trends) specifically evaluated at individual segment levels. The allowance consists of specific and general components. The specific component relates to loans that are individually classified as impaired. The general component covers non-classified loans and is based on historical loss experience adjusted for current factors for non-classified loans and a migration analysis for classified loans. A loan is impaired when, based on current information and events, it is probable that the Company will be unable to collect all amounts due according to the contractual terms of the loan agreement. Loans, for which the terms have been modified, and for which the borrower is experiencing financial difficulties and has been granted a concession, are considered troubled debt restructurings and classified as impaired. Loans are charged off when available information confirms that loans, or portions thereof, are uncollectible. While management considers the number of days a loan is past due in its evaluation process, we also consider a variety of other factors. Factors considered by management in evaluating the charge-off decision include collateral value, availability of current financial information for both borrower and guarantor, and the probability of collecting contractual principal and interest payments. These considerations may result in loans being charged off before they are 90 days or more past due. This evaluation framework for determining charge-offs is consistently applied to each segment. From time to time, the Company will charge-off a portion of impaired and non-performing loans. Loans that meet the criteria under ASC 310 are evaluated individually for impairment. Management considers payment status, collateral value, availability of current financial information for the borrower and guarantor, actual and expected cash flows, and probability of collecting amounts due. If a loan’s collection status is deemed to be collateral dependent or foreclosure is imminent, the loan is charged down to the fair value of the collateral, less selling costs. In circumstances where the loan is not deemed to be collateral dependent, but we believe, after completing our evaluation process, that probable loss has been incurred, we will provide a specific allocation on that loan. The impact of recording partial charge-offs is a reduction of gross loans and a reduction of the loan loss reserve. The net loan balance is unchanged in instances where the loan had a specific allocation as a component of the allowance for loan losses. The allowance as a percentage of total loans may be lower as the allowance no longer needs to include a component for the loss, which has now been recorded, and net charge-off amounts are increased as partial charge-offs are recorded. Factors considered by management in determining impairment include payment status, collateral value, and the probability of collecting scheduled principal and interest payments when due. Loans that experience insignificant payment delays and payment shortfalls generally are not classified as impaired. Management determines the significance of payment delays and payment shortfalls on case-by-case basis, taking into consideration all of the circumstances surrounding the loan and the borrower, including the length of the delay, the reasons for the delay, the borrower’s prior payment record, and the amount of the shortfall in relation to the principal and interest owed. Commercial and real estate construction and real estate mortgage loans (multi-family residential, and non-farm and non-residential mortgage) over $200 thousand are individually evaluated for impairment. If a loan is impaired, a portion of the allowance is allocated so that the loan is reported, net, at the present value of estimated future cash flows using the loan’s existing rate or at the fair value of collateral if repayment is expected solely from the collateral. Large groups of smaller balance homogeneous loans, such as consumer and 1-4 family residential real estate loans, are collectively evaluated for impairment, and accordingly, they are not separately identified for impairment disclosures. Troubled debt restructurings are separately identified for impairment disclosures and are measured at the present value of estimated future cash flows using the loan’s effective rate at inception. If a troubled debt restructuring is considered to be a collateral dependent loan, the loan is reported, net, at the fair value of the collateral. For troubled debt restructurings that subsequently default, the Company determines the amount of reserve in accordance with the accounting policy for the allowance for loan losses. The general component covers non-impaired loans and is based on historical loss experience adjusted for current factors. The historical loss experience is determined by portfolio segment and is based on the actual loss history experienced by the Company over the most recent 5 years. This actual loss experience is supplemented with other economic factors based on the risks present for each portfolio segment. These economic factors include consideration of the following: levels of and trends in delinquencies and impaired loans; levels of and trends in charge-offs and recoveries; trends in volume and terms of loans; effects of any changes in risk selection and underwriting standards; other changes in lending policies, procedures, and practices; experience, ability, and depth of lending management and other relevant staff; national and local economic trends and conditions; industry conditions; and effects of changes in credit concentrations. A “portfolio segment” is defined as the level at which an entity develops and documents a systematic methodology to determine its allowance for loan losses. The Company has identified the following portfolio segments: commercial, real estate construction, real estate mortgage, agricultural, consumer (credit cards and other consumer) and other (overdrafts). Commercial : These loans to businesses do not have real estate as the underlying collateral. Instead of real estate, collateral could be business assets such as equipment or accounts receivable or the personal guarantee of one or more guarantors. These loans generally present a higher level of risk than loans secured by commercial real estate because in the event of default by the borrower, the business assets must be liquidated and/or guarantors pursued for deficit funds. Business assets are worth more while they are in use to produce income for the business and worth significantly less if the business is no longer in operation. Within the commercial portfolio, risk analysis is performed primarily based on the individual loan type. Real estate construction : Real estate construction consists of loans secured by real estate for additions or alterations to existing structures, as well as constructing new structures. They include fixed and floating rate loans. Real estate construction loans generally present a higher level of risk than loans secured by 1-4 family residential real estate primarily because of the length of the construction period, potential change in prices of construction, the incomplete status of the collateral and economic cycles. Because of these factors, real estate construction loans generally have higher qualitative adjustments. Real Estate Mortgage : 1-4 family residential : Loans secured by 1-4 family residential real estate represent the lowest risk of loans for the Company. They include fixed and floating rate loans as well as loans for commercial purposes or consumer purposes. The Company generally does not hold subprime residential mortgages. Borrowers with loans in this category, whether for commercial or consumer purposes, tend to make their payments timely as they do not want to risk foreclosure and loss of property. Multifamily residential : Loans secured by multifamily residential real estate consist primarily of loans secured by apartment buildings and can be either fixed or floating rate loans. Multi-family residential real estate loans generally present a higher level of risk than loans secured by 1-4 family residential real estate because the borrower’s repayment ability typically comes from rents from tenants. Local economic and employment fluctuations impact rent rolls and potentially the borrower’s repayment ability. Non-farm & non-residential : Loans secured by non-farm non-residential real estate consist of loans secured by commercial real estate that is not owner occupied. These loans generally consist of loans collateralized by property whereby rents received from commercial tenants of the borrower are the source of repayment. These loans generally present a higher level of risk than loans secured by owner occupied commercial real estate because repayment risk is expanded to be dependent on the success of multiple businesses which are paying rent to the borrower. If multiple businesses fail due to deteriorating economic conditions or poor business management skills, the borrower may not have enough rents to cover their monthly payment. Repayment risk is also increased depending on the level of surplus available commercial lease space in the local market area. Agricultural : These loans to agricultural businesses do not have real estate as the underlying collateral. Instead of real estate, collateral could be assets such as equipment or accounts receivable or the personal guarantee of one or more guarantors. These loans generally present a higher level of risk than loans secured by real estate because in the event of default by the borrower, the assets must be liquidated and/or guarantors pursued for deficit funds. Farm assets are worth more while they are in use to produce income and worth significantly less if the farm is no longer in operation. Consumer : Consumer loans are generally loans to borrowers for non-business purposes. They can be either secured or unsecured. Consumer loans are generally small in the individual amount of principal outstanding and are repaid from the borrower’s private funds earned from employment. Consumer lending risk is very susceptible to local economic trends. If there is a consumer loan default, any collateral that may be repossessed is generally not well maintained and has a diminished value. For this reason, consumer loans tend to have higher overall interest rates to cover the higher cost of repossession and charge-offs. However, due to their smaller average balance per borrower, consumer loans are collectively evaluated for impairment in determining the appropriate allowance for loan losses. Other : All other loan types are aggregated together for credit risk evaluation due to the varying nature but small number of the remaining types of loans in the Company’s loan portfolio. Loans in this segment include but are not limited to overdrafts. Due to their smaller balance, other loans are collectively evaluated for impairment in determining the appropriate allowance for loan losses. Due to the overall high level of real estate mortgage loans within the loan portfolio as a whole, as compared to other portfolio segments, for risk assessment and allowance purposes this segment was segregated into more granular pools by collateral property type. The non-farm non-residential and the multi-family real estate mortgage loan portfolio segments had the next highest level of qualitative adjustments due to the effects of local markets and economies on the underlying collateral property values, as well as for industry concentrations and risks related to the this type of property. |
Derivatives | Derivatives : At the inception of a derivative contract, the Company designates the derivative as one of three types based on the Company’s intentions and belief as to likely effectiveness as a hedge. These three types are (1) a hedge of the fair value of a recognized asset or liability or of an unrecognized firm commitment (“fair value hedge”), (2) a hedge of a forecasted transaction or the variability of cash flows to be received or paid related to a recognized asset or liability (“cash flow hedge”), or (3) an instrument with no hedging designation (“stand-alone derivative”). For a fair value hedge, the gain or loss on the derivative, as well as the offsetting loss or gain on the hedged item, are recognized in current earnings as fair value changes. Changes in the fair value of derivatives that are not highly effective in hedging are the changes in fair value of the hedged item are recognized immediately in current earnings. Net cash settlements on derivatives that qualify for hedge accounting are recorded in interest income or interest expense, based on the item being hedged. Net cash settlements on derivatives that do not qualify for hedge accounting are reported in non-interest income. The Company formally documents the relationship between derivatives and hedged items, as well as the risk-management objective and the strategy for undertaking hedge transactions at the inception of the hedging relationship. This documentation includes linking fair value hedges to specific assets and liabilities on the balance sheet or to specific firm commitments or forecasted transactions. The Company also formally assesses, both at the hedge’s inception and on an ongoing basis, whether the derivative instruments that are used are highly effective in offsetting changes in fair values or cash flows of the hedged items. The Company discontinues hedge accounting when it determines that the derivative is no longer effective in offsetting changes in the fair value of the hedged item, the derivative is settled or terminates, a hedged forecasted transaction is no longer probable, a hedged firm commitment is no longer firm, or treatment of the derivative as a hedge is no longer appropriate or intended. When hedge accounting is discontinued, subsequent changes in fair value of the derivative are recorded as non-interest income. When a fair value hedge is discontinued, the hedged asset or liability is no longer adjusted for changes in fair value and the existing basis adjustment is amortized or accreted over the remaining life of the asset or liability. |
Mortgage Banking Derivatives | Mortgage Banking Derivatives : Commitments to fund mortgage loans (interest rate locks) to be sold into the secondary market and forward commitments for the future delivery of these mortgage loans are accounted for as free standing derivatives. The fair value of the interest rate lock is recorded at the time the commitment to fund the mortgage loan is executed and is adjusted for the expected exercise of the commitment before the loan is funded. In order to hedge the change in interest rates resulting from its commitments to fund the loans, the Company enters into forward commitments for the future delivery of the mortgage loans when interest rate locks are entered into. Fair values of these mortgage derivatives are estimated based on changes in mortgage interest rates from the date the interest on the loan is locked. Changes in the fair values of these derivatives are included in net gains on the sales of loans. |
Mortgage Servicing Rights | Mortgage Servicing Rights : The Bank has sold certain residential mortgage loans to the Federal Home Loan Mortgage Corporation (FHLMC) while retaining the servicing rights. Servicing rights are recognized separately when they are acquired through sales of loans. When mortgage loans are sold, servicing rights are initially recorded at fair value with the income statement effect recorded in gain on sale of mortgage loans. Fair value is based on market prices for comparable mortgage servicing contracts, when available, or alternatively, is based on a valuation model that calculates the present value of estimated future net servicing income. The valuation model incorporates assumptions that market participants would use in estimating future net servicing income, such as the cost to service, the discount rate, the custodial earnings rate, an inflation rate, ancillary income, prepayment speeds and default rates and losses. All classes of servicing assets are subsequently measured using the amortization method which requires servicing rights to be amortized into loan service fee income, net, included in non-interest income in proportion to, and over the period of, the estimated future net servicing income of the underlying loans. Servicing assets are evaluated for impairment based upon the fair value of the rights as compared to carrying amount. Impairment is determined by stratifying rights into groupings based on predominant risk characteristics, such as interest rate, loan type and investor type. Impairment is recognized through a valuation allowance for an individual grouping, to the extent that fair value is less than the carrying amount. If the Company later determines that all or a portion of the impairment no longer exists for a particular grouping, a reduction of the allowance may be recorded as an increase to income. The fair values of servicing rights are subject to significant fluctuations as a result of changes in estimated and actual prepayment speeds and default rates and losses. Servicing fee income, which is reported on the income statement as loan service income, net, is recorded for fees earned for servicing loans. The fees are based on a contractual percentage of the outstanding principal or a fixed amount per loan and are recorded as income when earned. The amortization of mortgage servicing rights and valuation allowance are netted against loan servicing fee income. Servicing fees totaled $402 thousand for the nine months ended September 30, 2019 compared to $406 thousand for the first nine months ended September 30, 2018. Servicing fees totaled $135 thousand for the three months ended September 30, 2019 compared to $141 thousand for the three months ended September 30, 2018. Servicing fees are included in loan service fee income, net in the income statement. Late fees and ancillary fees related to loan servicing are not material. Loan service fee income (loss), net, was a loss of $95 thousand for the three months ended September 30, 2019 and $9 thousand for the nine months ended September 30, 2019. The loss for the three months ended September 30, 2019 was due to recording $114 thousand additional amortization expense to write-down the carrying value of the mortgage servicing right asset due to a decrease in the fair value of the asset. |
Federal Home Loan Bank (FHLB) Stock | Federal Home Loan Bank (FHLB) Stock : The Bank is a member of the FHLB system. Members are required to own a certain amount of stock based on the level of borrowings and other factors, and may invest in additional amounts. FHLB stock is carried at cost, classified as a restricted security, and periodically evaluated for impairment based on ultimate recovery of par value. Both cash and stock dividends are reported as income. |
Bank-Owned Life Insurance | Bank-Owned Life Insurance : The Company has purchased life insurance policies on certain key employees. 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 other charges or other amounts due that are probable at settlement. |
Bank Premises and Equipment | Bank Premises and Equipment : Land is carried at cost. Bank premises and equipment are stated at cost less accumulated depreciation. Buildings and related components are depreciated using the straight-line method with useful lives ranging from 5 to 40 years. Furniture, fixtures and equipment are depreciated using the straight-line (or accelerated) method with useful lives ranging from 3 to 10 years. |
Real Estate Owned | Real Estate Owned : Real estate acquired through foreclosure is initially recorded at fair value less costs to sell when acquired, establishing a new cost basis. These assets are subsequently accounted for at the lower of cost or fair value less estimated costs to sell. The value of the underlying loan is written down to the fair value of the real estate to be acquired by a charge to the allowance for loan losses, if necessary. Any subsequent write-downs are charged to operating expenses. Operating expenses of such properties, net of related income, and gains and losses on their disposition are included in other expenses. |
Investments in Limited Partnerships | Investments in Limited Partnerships : Investments in limited partnerships represent the Company’s investments in affordable housing projects for the primary purpose of available tax benefits. The Company is a limited partner in these investments and as such, the Company is not involved in the management or operation of such investments. These investments are amortized over the period that the Company expects to receive the tax benefits. These investments are evaluated for impairment when events indicate the carrying amount may not be recoverable. The investment recorded at September 30, 2019 was $4.4 million and $4.4 million at September 30, 2018, respectively, and is included with other assets in the balance sheet. For the nine months ended ended September 30, 2019 and September 30, 2018, the Company recognized amortization expense of $476 thousand and $468 thousand, respectively, which was included within other noninterest expense on the consolidated statements of income. For the three months ended September 30, 2019 and September 30, 2018, the Company recognized amortization expense of $159 thousand and $156 thousand, respectively, which was included within other noninterest expense on the consolidated statements of income. |
Leases | Leases : The Company adopted FASB issued ASU No. 2016-02, “Leases (Topic 842)” (“ASU 2016-02”), including the adoption of the practical expedients, on January 1, 2019. Lessees are required to recognize assets and liabilities on the balance sheet for leases with lease terms greater than 12 months. The Company recorded assets and liabilities of $8.4 million, as of September 30, 2019, as a result of recording operating lease contracts where the Company is lessee. The Company did not restate comparative periods. The operating lease right of use asset and the operating lease liability are included reported on the Company’s balance sheet in the accompanying consolidated statements of financial condition. |
Repurchase Agreements | Repurchase Agreements : Substantially all repurchase agreement liabilities represent amounts advanced by various customers. Securities are pledged to cover these liabilities, which are not covered by federal deposit insurance. |
Stock-Based Compensation | Stock-Based Compensation : Compensation cost is recognized for stock options and restricted stock awards issued to employees, based on the fair value of these awards at the date of grant. A Black-Scholes model is utilized to estimate the fair value of stock options, while the market price of the Company’s common stock at the date of grant is used for restricted stock awards. Compensation cost is recognized over the required service period, generally defined as the vesting period. For awards with graded vesting, compensation cost is recognized on a straight-line basis over the requisite service period for the entire award. |
Revenue Recognition | Revenue Recognition : The Company’s services that fall within the scope of ASC 606 are presented within Non-Interest Income and are recognized as revenue as the Company satisifies its obligation to the customer. Services within the scope of ASC 606 include trust department income, service charges, debit card interchange income and brokerage income. |
Income Taxes | Income Taxes : Income tax expense is the total of the current year income tax due or refundable and the change in deferred tax assets and liabilities. Deferred tax assets and liabilities are the expected future tax amounts for the temporary differences between carrying amounts and tax bases of assets and liabilities, computed using enacted tax rates. A valuation allowance, if needed, reduces deferred tax assets to the amount expected to be realized. A tax position is recognized as a benefit only if it is “more likely than not” that the tax position would be sustained in a tax examination, with a tax examination being presumed to occur. The amount recognized is the largest amount of tax benefit that is greater than 50% likely of being realized on examination. For tax positions not meeting the “more likely than not” test, no tax benefit is recorded. The Company recognizes interest related to income tax matters as interest expense and penalties related to income tax matters as other expense. |
Retirement Plans | Retirement Plans : Employee 401(k) and profit sharing plan expense is the amount of matching contributions. |
Goodwill and Intangible Assets | Goodwill and Intangible Assets : Goodwill and intangible assets acquired in a purchase business combination and determined to have an indefinite useful life are not amortized, but tested for impairment at least annually. The Company has selected December 31 as the date to perform the annual impairment test. Intangible assets with definite useful lives are amortized over their estimated useful lives to their estimated residual values. Goodwill is the only intangible asset with an indefinite life on our balance sheet. Intangible assets consist of core deposit intangible assets arising from whole bank and branch acquisitions. They are initially measured at fair value and then are amortized on either an accelerated or straight-line basis, over ten or fifteen years. |
Loan Commitments and Related Financial Instruments | Loan Commitments and Related Financial Instruments : Financial instruments include off-balance sheet credit instruments, such as commitments to make loans and commercial letters of credit, issued to meet customer financing needs. The face amount for these items represents the exposure to loss, before considering customer collateral or ability to repay. Such financial instruments are recorded when they are funded. |
Common Stock Repurchase Program | Common Stock Repurchase Program: On October 25, 2000, the Company announced that our Board approved a stock repurchase program and authorized the Company to purchase up to 200,000 shares of its outstanding common stock. On November 11, 2002, the Board approved andauthorized the Company’s repurchase of an additional 200,000 shares. On May 20, 2008, the Board of Directors approved and authorized the Company to purchase an additional 200,000 shares. On May 17, 2011, the Board approved and authorized the Company’s repurchase of an additional 200,000 shares. On November 18, 2016, the Board of Directors approved and authorized the Company’s repurchase of an additional 100,000 shares. Shares will be purchased from time to time in the open market depending on market prices and other considerations. Through September 30, 2019, 764,176 shares have been purchased. |
Earnings Per Common Share | Earnings Per Common 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 include the dilutive effect of additional potential common shares issuable under stock options. Earnings and dividends per share have been adjusted in all periods presented to give effect to all stock splits and dividends through the date of issuance of the financial statements. |
Stock Split | Stock Split : On November 21, 2018, the Company announced that its Board of Directors declared a two-for-one stock split (the “Stock Split”) of the Company’s issued and outstanding common stock (“Common Stock”), no par value per share, pursuant to which one (1) additional share of the Common Stock was issued for each share of Common Stock held by shareholders of record as of the close of business on December 3, 2018. The additional shares were issued on December 10, 2018. Earnings and dividends per share, and the number of shares are restated for the Stock Split through the date of issuance of the financial statements. |
Comprehensive Income (Loss) | Comprehensive Income (Loss) : Comprehensive income consists of net income and other comprehensive income. Other comprehensive income (loss) includes unrealized gains and losses on securities available for sale, which are also recognized as a separate component of equity. |
Fair Value of Financial Instruments | Fair Value of Financial Instruments : Fair values of financial instruments are estimated using relevant market information and other assumptions, as more fully disclosed in a separate note. Fair value estimates involve uncertainties and matters of significant judgment regarding interest rates, credit risk, prepayments, and other factors, especially in the absence of broad markets for particular items. Changes in assumptions or in market conditions could significantly affect the estimates. |
Operating Segments | Operating Segments : While the Company’s chief decision makers monitor the revenue streams of the various Company products and services, operations are managed and financial performance is evaluated on a Company-wide basis. Accordingly, all of the Company’s operations are considered by management to be aggregated into one reportable operating segment: banking. |
Reclassifications | Reclassifications : Some items in the prior year financial statements were reclassified to conform to the current presentation. Reclassifications had no effect on prior year net income or stockholders’ equity. |
Adoption of New Accounting Standards | Adoption of New Accounting Standards We adopted ASU 2016-02, “Leases (Topic 842),” on January 1, 2019, the effective date of the guidance, using the practical expedient transition method whereby we did not revise comparative period information or disclosure. The new standard requires lessees to record assets and liabilities on the balance sheet for all leases with terms longer than 12 months. We elected the package of practical expedients permitted under the transition guidance within the new standard, which among other things, allows us to carryforward the historical lease classification. We also elected certain optional practical expedients including the hindsight practical expedient under which we considered the actual outcomes of lease renewals and terminations when measuring the lease term at adoption, and we made an accounting policy election to keep leases with an initial term of 12 months or less off of the balance sheet. We recognize these lease payments in the consolidated statements of income on a straight-line basis over the lease term. We have lease agreements with lease and non-lease components, and we have elected the practical expedient to account for these as a single lease component. We evaluate our contracts at inception to determine if an arrangement is, or contains, a lease. Operating leases are included in operating lease right of use (ROU) assets and operating lease liabilities on our consolidated balance sheet. The Company has no finance leases. ROU assets represent our right to use an underlying asset for the lease term, and lease liabilities represent our obligation to make lease payments arising from the lease. Operating lease ROU assets and liabilities are recognized at commencement date based on the present value of lease payments over the lease term. The operating lease ROU asset also includes any initial direct costs and prepaid lease payments made less any lease incentives. Our lease terms may include options to extend or terminate the lease when it is reasonably certain that we will exercise that option. Our operating leases relate primarily to land and building leases for bank branches and office space. In conjunction with the adoption on January 1, 2019, we recognized operating lease liabilities of $6.4 million and related lease assets of $6.4 million on our balance sheet. The adoption of ASU 2016-02 had no material impact on our consolidated income statement or cash flow statement. 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 were adopted on January 1, 2019 and did not have an effect on the accounting for the Company's share-based payment awards to its Directors. FASB ASC 815 – In October 2018, the FASB issued ASU No. 2018-16, Derivatives and Hedging (Topic 815): Inclusion of the Secured Overnight Financing Rate (SOFR) Overnight Index Swap (OIS) Rate as a Benchmark Interest Rate for Hedge Accounting. In the United States, eligible benchmark interest rates under Topic 815 are interest rates on direct Treasury obligations of the U.S. government (“UST”), the London Interbank Offered Rate (“LIBOR”) swap rate, and the Overnight Index Swap (“OIS”) Rate based on the Fed Funds Effective Rate. When the FASB issued ASU No. 2017-12, Derivatives and Hedging (Topic 815): Targeted Improvements to Accounting for Hedging Activities , in August 2017, it introduced the Securities Industry and Financial Markets Association (“SIFMA”) Municipal Swap Rate as the fourth permissible U.S. benchmark rate. The new ASU adds the OIS rate based on SOFR as a U.S. benchmark interest rate to facilitate the LIBOR to SOFR transition and provide sufficient lead time for entities to prepare for changes to interest rate risk hedging strategies for both risk management and hedge accounting purposes. The amendments in this update became effective for fiscal years beginning after December 15, 2018, and interim periods within those fiscal years and the financial statement impact immediately upon adoption was immaterial. The future financial statement impact will depend on any new contracts entered into using new benchmark rates, as well as any existing contracts that get migrated from LIBOR to new benchmark interest rates. The Company has formed a working group who is developing a transition plan for all exposed contracts migrating from LIBOR to SOFR. Additionally, the working group is monitoring industry specific transition guidance around a LIBOR contract’s “fallback” language with the industry goal to minimize or eliminate value transfers resulting from the transition Accounting Standards Issued But Not Yet Adopted ASU 2016-13, “Financial Instruments-Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments.” Issued in June 2016, ASU 2016-13 added Financial Accounting Standards Board “FASB” ASC Topic 326, “Financial Instruments-Credit Losses” and finalized 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. The amendment requires the measurement of all expected credit losses for financial assets held at the reporting date based on historical experience, current conditions, and reasonable and supportable forecasts. Financial institutions and other organizations will now use forward-looking information to enhance their credit loss estimates. The amendment requires enhanced disclosures to help investors and other financial statement users better understand significant estimates and judgments used in estimating credit losses, as well as the credit quality and underwriting standards of an organization’s portfolio. In addition, the ASU amends the accounting for credit losses on available-for-sale debt securities and purchased financial assets with credit deterioration. As previously disclosed, the Company formed a steering committee to oversee the adoption of the ASU at the effective date. Appropriate members of Senior Management have developed a plan focused on understanding the ASU, researching issues, identifying data needs for modeling inputs, technology requirements, and modeling considerations. The Company is focused on the completion of its model, refining assumptions, and continued review of the model. Concurrent with this, the Company is also focused on researching and resolving interpretive accounting issues in the ASU, contemplating various related accounting policies, developing processes and related controls, and considering various reporting disclosures. As of the beginning of the first reporting period in which the new standard is effective, the Company expects to recognize a one-time cumulative effect adjustment increasing the allowance for loan losses, if any, since the ASU covers credit losses over the expected life of a loan as well as considering future changes in macroeconomic conditions. The magnitude of any such one-time adjustment or the overall impact of the new guidance on the consolidated financial statements cannot yet be reasonably estimated, however, we expect to run multiple parallel models before finalizing the adjustment amount by December 31, 2022. In December 2018, the OCC, the Board of Governors of the Federal Reserve System, and the FDIC approved a final rule to address changes to credit loss accounting under GAAP, including banking organizations’ implementation of CECL. The final rule provides banking organizations the option to phase in over a three-year period the day-one adverse effects on regulatory capital that may result from the adoption of the new accounting standard. In 2019, the Financial Accounting Standards Board approved a delay for the implementation of the current expected credit loss standard until January 2023 for certain companies. The delay would apply to smaller reporting companies (as defined by the SEC), non-SEC public companies and private companies. The delayed implementation date of January 2023 will apply to Kentucky Bancshares and the Company does not intend to early adopt. |
SECURITIES (Tables)
SECURITIES (Tables) | 9 Months Ended |
Sep. 30, 2019 | |
SECURITIES | |
Schedule of securities available for sale | Period-end securities are as follows: (in thousands) Gross Gross Amortized Unrealized Unrealized Fair Cost Gains Losses Value Available for Sale September 30, 2019 U.S. treasury notes $ 2,986 $ 1 $ — $ 2,987 U.S. government agencies 22,154 76 (37) 22,193 States and political subdivisions 35,223 887 (37) 36,073 Mortgage-backed - residential 94,876 623 (184) 95,315 Mortgage-backed - commercial 53,606 645 (137) 54,114 Asset-backed 35,974 58 (172) 35,860 Total $ 244,819 $ 2,290 $ (567) $ 246,542 December 31, 2018 U.S. treasury notes $ 4,032 $ — $ $ 3,975 U.S. government agencies 41,122 515 (459) 41,178 States and political subdivisions 64,196 503 (495) 64,204 Mortgage-backed - residential 150,704 159 (3,614) 147,249 Mortgage-backed - commercial 49,484 — (921) 48,563 Asset-backed 10,234 56 (90) 10,200 Total $ 319,772 $ 1,233 $ (5,636) $ 315,369 |
Schedule of amortized cost and fair value of securities by contractual maturity | Amortized Fair Cost Value Due in one year or less $ 7,360 $ 7,355 Due after one year through five years 15,872 15,880 Due after five years through ten years 14,715 14,936 Due after ten years 22,416 23,082 60,363 61,253 Mortgage-backed - residential 94,876 95,315 Mortgage-backed - commercial 53,606 54,114 Asset-backed 35,974 35,860 Total $ 244,819 $ 246,542 |
Schedule of securities with unrealized losses not recognized in income | September 30, 2019 Less than 12 Months 12 Months or More Total Fair Unrealized Fair Unrealized Fair Unrealized Description of Securities Value Loss Value Loss Value Loss U.S. government agencies 3,411 (7) 4,653 (30) 8,064 (37) States and political subdivisions 2,420 (9) 1,192 (28) 3,612 (37) Mortgage-backed - residential 10,925 (42) 16,263 (142) 27,188 (184) Mortgage-backed - commercial 7,683 (25) 11,270 (112) 18,953 (137) Asset-backed 22,040 (172) — — 22,040 (172) Total temporarily impaired $ 46,479 $ (255) $ 33,378 $ (312) $ 79,857 $ (567) December 31, 2018 Less than 12 Months 12 Months or More Total Fair Unrealized Fair Unrealized Fair Unrealized Description of Securities Value Loss Value Loss Value Loss U.S. treasury notes $ — $ — $ 3,975 $ (57) $ 3,975 $ (57) U.S. government agencies — — 21,102 (459) 21,102 (459) States and political subdivisions 25,540 (370) 33,547 (495) Mortgage-backed - residential 19,250 (144) 112,369 (3,470) 131,619 (3,614) Mortgage-backed - commercial — — 45,949 (921) 45,949 (921) Asset-backed 1,920 (90) — — 1,920 (90) Total temporarily impaired $ 29,177 $ (359) $ 208,935 $ (5,277) $ 238,112 $ (5,636) |
LOANS (Tables)
LOANS (Tables) | 9 Months Ended |
Sep. 30, 2019 | |
LOANS | |
Schedule of loans | Loans at period-end are as follows: (in thousands) 9/30/2019 12/31/2018 Commercial $ 101,496 $ 86,149 Real estate construction 30,198 24,254 Real estate mortgage: 1-4 family residential 280,972 252,318 Multi-family residential 46,449 46,403 Non-farm & non-residential 191,676 196,674 Agricultural 58,734 60,049 Consumer 22,547 20,089 Other 195 208 Total $ 732,267 $ 686,144 |
Schedule of allowance for loan losses and the recorded investment in loans by portfolio segment and based on impairment method | Nine Months Ended September 30, 2019 (in thousands) Beginning Ending Balance Charge-offs Recoveries Provision Balance Commercial $ 1,159 $ (191) $ 14 $ (75) $ 907 Real estate Construction 414 — — 103 517 Real estate mortgage: 1-4 family residential 2,605 (149) 15 384 2,855 Multi-family residential 733 — 15 (35) 713 Non-farm & non-residential 1,649 (17) — 42 1,674 Agricultural 420 — 6 (21) 405 Consumer 410 (272) 27 271 436 Other 58 (648) 514 160 84 Unallocated 679 — — (4) 675 $ 8,127 $ (1,277) $ 591 $ 825 $ 8,266 Three Months Ended September 30, 2019 (in thousands) Beginning Ending Balance Charge-offs Recoveries Provision Balance Commercial $ 962 $ — $ 4 $ (59) $ 907 Real estate construction 413 — — 104 517 Real estate mortgage: 1-4 family residential 2,766 (45) 3 131 2,855 Multi-family residential 743 — 15 (45) 713 Non-farm & non-residential 1,599 — — 75 1,674 Agricultural 417 — 2 (14) 405 Consumer 392 (132) 10 166 436 Other 104 (208) 166 22 84 Unallocated 680 — — (5) 675 $ 8,076 $ (385) $ 200 $ 375 $ 8,266 Nine Months Ended September 30, 2018 (in thousands) Beginning Ending Balance Charge-offs Recoveries Provision Balance Commercial $ 975 $ — $ 6 $ 163 $ 1,144 Real estate Construction 462 — — (42) 420 Real estate mortgage: 1-4 family residential 2,316 (91) 266 125 2,616 Multi-family residential 640 — 9 90 739 Non-farm & non-residential 1,554 — — 95 1,649 Agricultural 494 — 149 (186) 457 Consumer 582 (166) 37 (33) 420 Other 18 (613) 482 173 60 Unallocated 679 — — 15 694 $ 7,720 $ (870) $ 949 $ 400 $ 8,199 Three Months Ended September 30, 2018 (in thousands) Beginning Ending Balance Charge-offs Recoveries Provision Balance Commercial $ 1,183 $ — $ — $ (39) $ 1,144 Real estate Construction 398 — — 22 420 Real estate mortgage: 1-4 family residential 2,453 (28) 4 187 2,616 Multi-family residential 737 — 3 (1) 739 Non-farm & non-residential 1,604 — — 45 1,649 Agricultural 475 — 3 (21) 457 Consumer 582 (73) 15 (104) 420 Other 49 (200) 141 70 60 Unallocated 703 — — (9) 694 $ 8,184 $ (301) $ 166 $ 150 $ 8,199 |
Schedule of loans individually evaluated for impairment by class of loans | Individually Collectively As of September 30, 2019 Evaluated for Evaluated for (in thousands) Impairment Impairment Total Allowance for Loan Losses: Commercial $ — $ 907 $ 907 Real estate construction — 517 517 Real estate mortgage: 1-4 family residential 7 2,848 2,855 Multi-family residential — 713 713 Non-farm & non-residential — 1,674 1,674 Agricultural — 405 405 Consumer — 436 436 Other — 84 84 Unallocated — 675 675 $ 7 $ 8,259 $ 8,266 Loans: Commercial $ — $ 101,496 $ 101,496 Real estate construction 374 29,824 30,198 Real estate mortgage: 1-4 family residential 1,753 279,219 280,972 Multi-family residential 1,292 45,157 46,449 Non-farm & non-residential — 191,676 191,676 Agricultural 522 58,212 58,734 Consumer — 22,547 22,547 Other — 195 195 Total $ 3,941 $ 728,326 $ 732,267 Individually Collectively As of December 31, 2018 Evaluated for Evaluated for (in thousands) Impairment Impairment Total Allowance for Loan Losses: Commercial $ 191 $ 968 $ 1,159 Real estate construction — 414 414 Real estate mortgage: 1-4 family residential 10 2,595 2,605 Multi-family residential — 733 733 Non-farm & non-residential — 1,649 1,649 Agricultural — 420 420 Consumer — 410 410 Other — 58 58 Unallocated — 679 679 $ 201 $ 7,926 $ 8,127 Loans: Commercial $ 191 $ 85,958 $ 86,149 Real estate construction 374 23,880 24,254 Real estate mortgage: 1-4 family residential 1,003 251,315 252,318 Multi-family residential 1,973 44,430 46,403 Non-farm & non-residential 227 196,447 196,674 Agricultural 1,164 58,885 60,049 Consumer — 20,089 20,089 Other — 208 208 Total $ 4,932 $ 681,212 $ 686,144 The following table presents loans individually evaluated for impairment by class of loans as of and for the nine months ended September 30, 2019 (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 construction $ 374 $ 374 $ - $ 374 $ - $ - Real estate mortgage: 1-4 family residential 760 760 - 380 21 21 Multi-family residential 1,292 1,292 - 1,632 54 54 Non-farm and non-residential - - 114 5 5 Agricultural 522 522 - 843 14 14 With an allowance recorded: Real estate mortgage: 1-4 family residential 993 993 7 998 11 11 Total $ 3,941 $ 3,941 $ 7 $ 4,341 $ 105 $ 105 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, 2018: 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 construction $ 94 $ 3 $ 3 Real estate mortgage: 1-4 family residential 62 4 4 Multi-family residential 523 37 37 Non-farm and non-residential 1,061 8 8 Agricultural 312 11 11 With an allowance recorded: Commercial 128 18 18 Real estate mortgage: 1-4 family residential 543 5 5 Total $ 2,723 $ 86 $ 86 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 as of and for the year ended December 31, 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 construction $ 374 $ $ — $ $ $ Real-estate mortgage: Multi-family 1,973 1,973 — 1,991 Non-farm & non-residential 227 227 — 679 12 12 Agricultural 1,164 1,164 — 724 54 54 With an allowance recorded: Commercial $ $ $ $ $ $ Real estate mortgage 1-4 family residential 1,003 1,003 10 605 13 13 Total $ 4,932 $ 4,932 $ 201 $ 4,282 $ 201 $ 201 The following tables present loans individually evaluated for impairment by class of loans for the three months ended September 30, 2019 and September 30, 2018: Three Months Ending September 30, 2019 Average Interest Cash Basis Recorded Income Interest (in thousands): Investment Recognized Recognized With no related allowance recorded: Real estate construction $ 374 $ — $ — Real estate mortgage: 1-4 family residential 441 14 Multi-family residential 1,463 — — Non-farm and non-residential 57 — — Agricultural 684 4 With an allowance recorded: Real estate mortgage: 1-4 family residential 997 1 Total $ $ 19 $ 19 Three Months Ending September 30, 2018 Average Interest Cash Basis Recorded Income Interest Investment Recognized Recognized With no related allowance recorded: Real estate construction $ 374 $ - $ - Real estate mortgage: 1-4 family residential 78 1 1 Multi-family residential 691 13 13 Non-farm and non-residential 231 2 2 Agricultural 278 3 3 With an allowance recorded: Commercial 257 - - Real estate mortgage: 1-4 family residential 138 2 2 Total $ 2,047 $ 21 $ 21 |
Schedule of recorded investment in nonaccrual, loans past due over 90 days still on accrual and accruing troubled debt restructurings by class of loans | Loans Past Due Over 89 Days As of September 30, 2019 Still Troubled Debt (in thousands) Nonaccrual Accruing Restructurings Commercial $ — $ 70 $ — Real estate construction 374 — Real estate mortgage: 1-4 family residential 873 869 — Multi-family residential — 1,292 Non-farm & non-residential — — — Agricultural 200 — — Consumer 66 28 — Total $ 1,513 $ 2,259 $ — Loans Past Due Over 89 Days As of December 31, 2018 Still Troubled Debt (in thousands) Nonaccrual Accruing Restructurings Commercial $ 191 $ — $ — Real estate construction — 374 — Real estate mortgage: 1-4 family residential 525 784 — Non-farm & non-residential 156 14 — Agricultural 252 — — Consumer 17 10 — Total $ 1,141 $ 1,182 $ — |
Schedule of aging of the recorded investment in past due and non-accrual loans | 30–59 60–89 Greater than Total As of September 30, 2019 Days Days 89 Days Past Due & Loans Not (in thousands) Past Due Past Due Past Due Non-accrual Non-accrual Past Due Commercial $ 280 $ 560 $ 70 $ — $ 910 $ 100,586 Real estate construction 201 — — 374 575 29,623 Real estate mortgage: 1-4 family residential 1,195 199 869 873 3,136 277,836 Multi-family residential — — 1,292 — 1,292 45,157 Non-farm & non-residential 132 — — — 132 191,544 Agricultural 306 5 — 200 511 58,223 Consumer 140 70 28 66 304 22,243 Other — — — — — 195 Total $ 2,254 $ 834 $ 2,259 $ 1,513 $ 6,860 $ 725,407 30–59 60–89 Greater than Total As of December 31, 2018 Days Days 89 Days Past Due & Loans Not (in thousands) Past Due Past Due Past Due Non-accrual Non-accrual Past Due Commercial $ 10 $ 24 $ — $ 191 $ 225 $ 85,924 Real estate construction 309 — 374 — 683 23,571 Real estate mortgage: 1-4 family residential 2,158 563 784 525 4,030 248,288 Multi-family residential 951 — — — 951 45,452 Non-farm & non-residential 68 84 14 156 322 196,352 Agricultural 502 15 — 252 769 59,280 Consumer 119 15 10 17 161 19,928 Other — — — — — 208 Total $ 4,117 $ 701 $ 1,182 $ 1,141 $ 7,141 $ 679,003 |
Schedule of risk category of loans by class of loans | As of September 30, 2019 Special (in thousands) Pass Mention Substandard Doubtful Commercial $ 99,990 $ 1,488 $ 18 $ — Real estate construction 28,719 1,084 395 — Real estate mortgage: 1-4 family residential 272,319 2,320 6,333 — Multi-family residential 42,301 2,856 1,292 — Non-farm & non-residential 185,261 6,275 140 — Agricultural 52,539 5,273 922 — Total $ 681,129 $ 19,296 $ 9,100 $ — As of December 31, 2018 Special (in thousands) Pass Mention Substandard Doubtful Commercial $ 84,911 $ 994 $ 53 $ 191 Real estate construction 23,857 — 397 — Real estate mortgage: 1-4 family residential 244,382 2,685 5,201 50 Multi-family residential 43,248 1,182 1,973 — Non-farm & non-residential 188,186 7,967 503 18 Agricultural 54,654 3,715 1,680 — Total $ 639,238 $ 16,543 $ 9,807 $ 259 |
EARNINGS PER SHARE (Tables)
EARNINGS PER SHARE (Tables) | 9 Months Ended |
Sep. 30, 2019 | |
EARNINGS PER SHARE | |
Schedule of factors used in the earnings per share computation | Nine Months Ended September 30, 2019 2018 (in thousands) Basic and Diluted Earnings Per Share Net Income $ 9,664 $ 9,494 Weighted average common shares outstanding 5,930 5,956 Basic and diluted earnings per share $ 1.62 $ 1.59 Three Months Ended September 30, 2019 2018 (in thousands) Basic and Diluted Earnings Per Share Net Income $ 3,616 $ 3,278 Weighted average common shares outstanding 5,901 5,924 Basic and diluted earnings per share $ 0.61 $ 0.55 |
STOCK COMPENSATION (Tables)
STOCK COMPENSATION (Tables) | 9 Months Ended |
Sep. 30, 2019 | |
2005 Restricted Stock Grant Plan | |
Stock Based Compensation | |
Summary of changes in nonvested shares of restricted stock | A summary of changes in the Company’s nonvested shares for the year follows (in thousands, except per share data): Weighted-Average Fair Grant-Date Value Nonvested Shares Shares Fair Value Per Share Nonvested at January 1, 2019 5,924 $ 77,404 $ 13.07 Vested (4,254) (54,566) 12.83 Forfeited (64) (876) 13.69 Nonvested at September 30, 2019 1,606 $ 21,962 $ 13.67 |
2009 Stock Award Plan | |
Stock Based Compensation | |
Summary of changes in nonvested shares of restricted stock | A summary of changes in the Company’s nonvested shares for the year follows (in thousands, except per share data): Weighted-Average Fair Grant-Date Value Nonvested Shares Shares Fair Value Per Share Nonvested at January 1, 2019 25,778 $ 482,213 $ 18.71 Granted 23,380 549,430 23.50 Vested (9,242) (175,749) 19.02 Forfeited (1,090) (22,942) 21.05 Nonvested at September 30, 2019 38,826 $ 832,953 $ 21.45 |
OTHER BORROWINGS (Tables)
OTHER BORROWINGS (Tables) | 9 Months Ended |
Sep. 30, 2019 | |
OTHER BORROWINGS | |
Maturity schedule for the term loan | The maturity schedule for the term loan as of September 30, 2019 is as follows (in thousands): 2019 $ 131 2020 539 2021 567 2022 596 Thereafter 163 $ 1,996 |
FAIR VALUE MEASUREMENTS (Tables
FAIR VALUE MEASUREMENTS (Tables) | 9 Months Ended |
Sep. 30, 2019 | |
FAIR VALUE MEASUREMENTS | |
Schedule of assets measured at fair value on a recurring basis | Fair Value Measurements at September 30, 2019 (in thousands): Quoted Prices In Active Markets for Significant Other Significant Identical Observable Unobservable Carrying Assets Inputs Inputs Description Value (Level 1) (Level 2) (Level 3) Financial Assets U.S. treasury notes $ 2,987 $ — $ 2,987 $ — U. S. government agencies 22,193 — 22,193 — States and political subdivisions 36,073 — 36,073 — Mortgage-backed - residential 95,315 — 95,315 — Mortgage-backed-commercial 54,114 — 54,114 — Asset-backed 35,860 — 35,860 — Derivatives and financial instrument assets 290 — 290 — Other Assets 293 293 — — Total $ 247,125 $ 293 $ 246,832 $ — Financial Liabilities Derivatives and financial instrument liabilities $ 287 $ — $ 287 $ — Fair Value Measurements at December 31, 2018 (in thousands): Quoted Prices In Active Markets for Significant Other Significant Identical Observable Unobservable Carrying Assets Inputs Inputs Description Value (Level 1) (Level 2) (Level 3) U.S. treasury notes $ 3,975 $ — $ 3,975 $ — U. S. government agencies 41,178 — 41,178 — States and political subdivisions 64,204 — 64,204 — Mortgage-backed - residential 147,249 — 147,249 — Mortgage-backed - commercial 48,563 — 48,563 — Asset-backed 10,200 — 10,200 — Other Assets 284 284 — — Total $ 315,653 $ 284 $ 315,369 $ — |
Schedule of assets measured at fair value on a non-recurring basis | Fair Value Measurements at September 30, 2019 Using : Quoted Prices In Active Markets for Significant Other Significant Identical Observable Unobservable Carrying Assets Inputs Inputs (In thousands) Value (Level 1) (Level 2) (Level 3) Description Impaired loans: 1-4 family residential $ 993 $ — $ — $ 993 Other real estate owned, net: Commercial — — Agricultural — — Mortgage servicing rights — — Fair Value Measurements at December 31, 2018 Using : Quoted Prices In Active Markets for Significant Other Significant Identical Observable Unobservable Carrying Assets Inputs Inputs (In thousands) Value (Level 1) (Level 2) (Level 3) Description Impaired loans: Real Estate Mortgage: 1-4 family residential $ 993 $ — $ — $ 993 Other real estate owned, net: Commercial 246 — 246 Mortgage servicing rights 430 — — 430 |
Schedule of quantitative information about level 3 fair value measurements for financial instruments measured at fair value on a non-recurring basis | Range September 30, 2019 Fair Valuation Unobservable (Weighted (In thousands) Value Technique(s) Input(s) Average) Impaired loans Real estate mortgage: 1-4 family residential $ sales comparison adjustment for differences between the comparable sales (30)% - 10% (21)% Other real estate owned: Commercial income approach capitalization rate 10% - 10% (10)% Agricultural sales comparison adjustment for differences between the comparable sales (29)% - 41% (13)% Mortgage servicing rights discounted cash flow constant prepayment rates (8)% - (23)% (13)% Range December 31, 2018 Fair Valuation Unobservable (Weighted (In thousands) Value Technique(s) Input(s) Average) Impaired loans Real estate mortgage: 1-4 family residential $ sales comparison adjustment for differences between the comparable sales (21)% - 7% (7)% Other real estate owned: Commercial income approach capitalization rate 10% - 10% (10)% Mortgage servicing rights discounted cash flow constant prepayment rates 7% - 25% (9)% |
Schedule of carrying amounts and estimated fair values of financial instruments | September 30, 2019 Carrying (in thousands) Value Level 1 Level 2 Level 3 Total Financial assets Cash and cash equivalents $ 25,290 $ 25,290 $ — $ — $ 25,290 Interest bearing time deposits 2,375 2,375 — — 2,375 Securities available for sale 246,542 — 246,542 — 246,542 Loans held for sale 5,232 — 5,289 — 5,289 Net Loans 724,001 — — 719,487 719,487 Federal Home Loan Bank stock 7,034 — — — N/A Interest receivable 4,028 — 979 3,049 4,028 Derivative and financial instruments 290 — 290 — 290 Other assets 293 293 — — 293 Financial liabilities Total deposits $ 829,201 $ 603,289 $ 225,311 $ — $ 828,600 Repurchase agreements 6,037 — 6,037 — 6,037 Short-term Federal Home Loan Bank advances 5,000 — 5,000 — 5,000 Long-term Federal Home Loan Bank advances 95,677 — 96,163 — 96,163 Note payable 1,996 2,092 2,135 Subordinated debentures 7,217 — — 7,215 7,215 Interest payable 1,028 — 1,014 14 1,028 Derivative and financial instruments — — 287 December 31, 2018 Carrying (in thousands) Value Level 1 Level 2 Level 3 Total Financial assets Cash and cash equivalents $ 26,101 $ 26,101 $ — $ — $ 26,101 Interest bearing time deposits 2,175 2,175 — — 2,175 Securities available for sale 315,369 — 315,369 — 315,369 Loans held for sale 1,203 — 1,224 — 1,224 Net Loans 678,017 — — 666,942 666,942 Federal Home Loan Bank stock 7,034 — — — N/A Interest receivable 4,150 — 1,346 2,804 4,150 Financial liabilities Total deposits $ 850,442 $ 620,885 $ 226,734 $ — $ 847,619 Repurchase agreements 8,077 — 8,009 — 8,009 Short-term Federal Home Loan Bank advances 11,600 — 11,592 — 11,592 Long-term Federal Home Loan Bank advances 88,852 — 84,983 — 84,983 Note payable 2,718 — 2,841 — 2,841 Subordinated debentures 7,217 — — 7,213 7,213 Interest payable 893 — 877 16 893 |
LEASES (Tables)
LEASES (Tables) | 9 Months Ended |
Sep. 30, 2019 | |
LEASES | |
Schedule of balance sheet location | Statement of Financial Condition Location September 30, 2019 (in thousands) Operating Lease Right of Use Asset: Gross Carrying Amount $ 8,939 Accumulated Amortization (529) Net Book Value Operating lease right of use asset $ 8,410 Operating Lease Liabilities Right of use lease obligations Operating lease liability $ 8,513 |
Schedule of lease cost and other information | Nine Months Ended September 30, 2019 (in thousands) Lease Cost: Operating lease cost $ 529 Total lease cost $ 529 Other information Cash paid for amounts included in the measurement of lease liabilities: Operating cash flows from operating leases $ 250 Three Months Ended September 30, 2019 (in thousands) Lease Cost: Operating lease cost $ 282 Total lease cost $ 282 Other information Cash paid for amounts included in the measurement of lease liabilities: Operating cash flows from operating leases $ 98 |
Schedule of future minimum payments under operating leases | As of September 30, 2019 (in thousands) Twelve months ended September 30, 2020 $ 2021 2022 2023 2024 Thereafter 18,856 Total undiscounted lease payments $ 21,505 Amounts representing interest Lease liability $ 8,513 |
REVENUE FROM CONTRACTS WITH C_2
REVENUE FROM CONTRACTS WITH CUSTOMERS (Tables) | 9 Months Ended |
Sep. 30, 2019 | |
REVENUE FROM CONTRACTS WITH CUSTOMERS. | |
Schedule of noninterest income | Three Months Ended Nine Months Ended 9/30/2019 9/30/2018 9/30/2019 9/30/2018 Service charges $ $ $ $ Trust department income Brokerage income Debit card interchange income Total $ $ $ $ |
SUMMARY OF SIGNIFICANT ACCOUN_2
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Details) $ in Thousands | 3 Months Ended | 9 Months Ended | ||||
Sep. 30, 2019USD ($) | Mar. 31, 2019USD ($) | Sep. 30, 2018USD ($) | Sep. 30, 2019USD ($)payment | Sep. 30, 2018USD ($) | Dec. 31, 2018USD ($) | |
Loans | ||||||
Period for which federal funds are sold generally | 1 day | |||||
Minimum number of consecutive payments made on a timely basis before returning a loan to accrual status | payment | 6 | |||||
Activity in allowance for loan losses | ||||||
Purchased Credit Impairment | $ 194 | $ 194 | $ 39 | |||
Loan service fee income (loss), net | (95) | $ 95 | $ 64 | 9 | $ 212 | |
Additional amortization expense to write-down the carrying value of the mortgage servicing right asset | 114 | |||||
Mortgage Servicing Rights | ||||||
Servicing fees | $ 135 | $ 141 | $ 402 | $ 406 | ||
Period of historical loss experience used to determine general components of allowance for loan losses | 5 years | |||||
1-4 family residential | ||||||
Loans | ||||||
Number of days delinquent for discontinuation of interest income on loans | 90 days | |||||
Consumer | ||||||
Loans | ||||||
Number of days delinquent for discontinuation of interest income on loans | 120 days | |||||
Commercial | ||||||
Loans | ||||||
Number of days delinquent for discontinuation of interest income on loans | 120 days | |||||
Activity in allowance for loan losses | ||||||
Outstanding balance over which loans are individually evaluated for impairment | $ 200 |
SUMMARY OF SIGNIFICANT ACCOUN_3
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - INVESTMENT, TANGIBLE ASSETS AND INCOME TAXES (Details) - USD ($) $ in Thousands | 3 Months Ended | 9 Months Ended | ||
Sep. 30, 2019 | Sep. 30, 2018 | Sep. 30, 2019 | Sep. 30, 2018 | |
Investments in Limited Partnerships | ||||
Investment | $ 4,400 | $ 4,400 | $ 4,400 | $ 4,400 |
Amortization expense | $ 159 | $ 156 | $ 476 | $ 468 |
Buildings and related components | Minimum | ||||
Bank Premises and Equipment | ||||
Useful lives | 5 years | |||
Buildings and related components | Maximum | ||||
Bank Premises and Equipment | ||||
Useful lives | 40 years | |||
Furniture, fixtures and equipment | Minimum | ||||
Bank Premises and Equipment | ||||
Useful lives | 3 years | |||
Furniture, fixtures and equipment | Maximum | ||||
Bank Premises and Equipment | ||||
Useful lives | 10 years |
SUMMARY OF SIGNIFICANT ACCOUN_4
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - INTANGIBLE ASSETS AND SEGMENTS (Details) $ / shares in Units, $ in Thousands | Nov. 21, 2018$ / shares | Nov. 18, 2016shares | May 17, 2011shares | May 20, 2008shares | Nov. 11, 2002shares | Sep. 30, 2019USD ($)segment$ / sharesshares | Jun. 30, 2019$ / shares | Mar. 31, 2019$ / shares | Dec. 31, 2018$ / shares | Sep. 30, 2018$ / shares | Jun. 30, 2018$ / shares | Mar. 31, 2018$ / shares | Oct. 25, 2000shares |
Income Taxes | |||||||||||||
Tax benefit | $ | $ 0 | ||||||||||||
Common Stock repurchase [Abstract] | |||||||||||||
Authorized repurchased | 200,000 | ||||||||||||
Amount of stock repurchase plan authorized additional | 100,000 | 200,000 | 200,000 | 200,000 | |||||||||
Number of shares repurchased | 764,176 | ||||||||||||
Stock Split | |||||||||||||
Stock Split ratio | 2 | ||||||||||||
Common stock, par value (in dollars per share) | $ / shares | $ 0 | $ 0 | $ 0 | $ 0 | $ 0 | $ 0 | $ 0 | $ 0 | |||||
Operating Segments | |||||||||||||
Number of reportable operating segments | segment | 1 | ||||||||||||
Minimum | |||||||||||||
Income Taxes | |||||||||||||
Useful life of core deposit intangible assets | 10 years | ||||||||||||
Maximum | |||||||||||||
Income Taxes | |||||||||||||
Useful life of core deposit intangible assets | 15 years |
SUMMARY OF SIGNIFICANT ACCOUN_5
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - New Accounting Standards (Details) - USD ($) $ in Thousands | Sep. 30, 2019 | Jan. 01, 2019 |
Operating lease assets | $ 8,410 | |
Operating lease liability | 8,513 | |
ASU 2016-02 | ||
Operating lease assets | 8,400 | $ 6,400 |
Operating lease liability | $ 8,400 | $ 6,400 |
SECURITIES (Details)
SECURITIES (Details) - USD ($) $ in Thousands | Sep. 30, 2019 | Dec. 31, 2018 |
Debt and Equity Securities, FV-NI [Line Items] | ||
Gross Unrealized Losses | $ (567) | $ (5,636) |
Total, Amortized cost | 244,819 | 319,772 |
Total, unrealized gains | 2,290 | 1,233 |
Total, Fair value | 246,542 | 315,369 |
U.S. treasury notes | ||
Debt and Equity Securities, FV-NI [Line Items] | ||
Amortized Cost | 2,986 | 4,032 |
Gross Unrealized Gains | 1 | |
Gross Unrealized Losses | (57) | |
Securities available for sale | 2,987 | 3,975 |
U.S. government agencies | ||
Debt and Equity Securities, FV-NI [Line Items] | ||
Amortized Cost | 22,154 | 41,122 |
Gross Unrealized Gains | 76 | 515 |
Gross Unrealized Losses | (37) | (459) |
Securities available for sale | 22,193 | 41,178 |
States and political subdivisions | ||
Debt and Equity Securities, FV-NI [Line Items] | ||
Amortized Cost | 35,223 | 64,196 |
Gross Unrealized Gains | 887 | 503 |
Gross Unrealized Losses | (37) | (495) |
Securities available for sale | 36,073 | 64,204 |
Mortgage-backed - residential | ||
Debt and Equity Securities, FV-NI [Line Items] | ||
Amortized Cost | 94,876 | 150,704 |
Gross Unrealized Gains | 623 | 159 |
Gross Unrealized Losses | (184) | (3,614) |
Securities available for sale | 95,315 | 147,249 |
Mortgage-backed - commercial | ||
Debt and Equity Securities, FV-NI [Line Items] | ||
Amortized Cost | 53,606 | 49,484 |
Gross Unrealized Gains | 645 | |
Gross Unrealized Losses | (137) | (921) |
Securities available for sale | 54,114 | 48,563 |
Asset-backed | ||
Debt and Equity Securities, FV-NI [Line Items] | ||
Amortized Cost | 35,974 | 10,234 |
Gross Unrealized Gains | 58 | 56 |
Gross Unrealized Losses | (172) | (90) |
Securities available for sale | $ 35,860 | $ 10,200 |
SECURITIES - AMORTIZED COST AND
SECURITIES - AMORTIZED COST AND FAIR VALUE BY CONTRACTUAL MATURITY (Details) - USD ($) $ in Thousands | 3 Months Ended | 9 Months Ended | |||
Sep. 30, 2019 | Sep. 30, 2018 | Sep. 30, 2019 | Sep. 30, 2018 | Dec. 31, 2018 | |
Amortized Cost | |||||
Due in one year or less | $ 7,360 | $ 7,360 | |||
Due after one year through five years | 15,872 | 15,872 | |||
Due after five years through ten years | 14,715 | 14,715 | |||
Due after ten years | 22,416 | 22,416 | |||
Securities due at a single maturity date | 60,363 | 60,363 | |||
Total, Amortized cost | 244,819 | 244,819 | $ 319,772 | ||
Fair Value | |||||
Due in one year or less | 7,355 | 7,355 | |||
Due after one year through five years | 15,880 | 15,880 | |||
Due after five years through ten years | 14,936 | 14,936 | |||
Due after ten years | 23,082 | 23,082 | |||
Securities due at a single maturity date | 61,253 | 61,253 | |||
Total, Fair value | 246,542 | 246,542 | 315,369 | ||
Sales of securities | |||||
Proceeds from sales of securities available for sale | 45,300 | $ 2,000 | 75,081 | $ 16,707 | |
Gain (loss) on sale of available for sale securities, net | 577 | 66 | 691 | (8) | |
Gross gains realized on sales of securities | 578 | 72 | 732 | 138 | |
Gross losses realized on sales of securities | 1 | 6 | 41 | 146 | |
Tax provision related to realized net gains or losses | 121 | $ (1) | 145 | $ (2) | |
Mortgage-backed - residential | |||||
Amortized Cost | |||||
Available-for-sale debt securities, Amortized Cost | 94,876 | 94,876 | 150,704 | ||
Fair Value | |||||
Available-for-sale debt securities, fair value | 95,315 | 95,315 | 147,249 | ||
Mortgage-backed - commercial | |||||
Amortized Cost | |||||
Available-for-sale debt securities, Amortized Cost | 53,606 | 53,606 | 49,484 | ||
Fair Value | |||||
Available-for-sale debt securities, fair value | 54,114 | 54,114 | 48,563 | ||
Asset-backed | |||||
Amortized Cost | |||||
Available-for-sale debt securities, Amortized Cost | 35,974 | 35,974 | 10,234 | ||
Fair Value | |||||
Available-for-sale debt securities, fair value | $ 35,860 | $ 35,860 | $ 10,200 |
SECURITIES - UNREALIZED LOSSES
SECURITIES - UNREALIZED LOSSES (Details) - USD ($) $ in Thousands | Sep. 30, 2019 | Dec. 31, 2018 |
Securities with unrealized losses | ||
Less than 12 Months, Fair Value | $ 46,479 | $ 29,177 |
Less than 12 Months, Unrealized Loss | (255) | (359) |
12 Months or More, Fair Value | 33,378 | 208,935 |
12 Months or More, Unrealized Loss | (312) | (5,277) |
Total, Fair Value | 79,857 | 238,112 |
Total, Unrealized Loss | (567) | (5,636) |
U.S. treasury notes | ||
Securities with unrealized losses | ||
12 Months or More, Fair Value | 3,975 | |
12 Months or More, Unrealized Loss | (57) | |
Total, Fair Value | 3,975 | |
Total, Unrealized Loss | (57) | |
U.S. government agencies | ||
Securities with unrealized losses | ||
Less than 12 Months, Fair Value | 3,411 | |
Less than 12 Months, Unrealized Loss | (7) | |
12 Months or More, Fair Value | 4,653 | 21,102 |
12 Months or More, Unrealized Loss | (30) | (459) |
Total, Fair Value | 8,064 | 21,102 |
Total, Unrealized Loss | (37) | (459) |
States and political subdivisions | ||
Securities with unrealized losses | ||
Less than 12 Months, Fair Value | 2,420 | 8,007 |
Less than 12 Months, Unrealized Loss | (9) | (125) |
12 Months or More, Fair Value | 1,192 | 25,540 |
12 Months or More, Unrealized Loss | (28) | (370) |
Total, Fair Value | 3,612 | 33,547 |
Total, Unrealized Loss | (37) | (495) |
Mortgage-backed - residential | ||
Securities with unrealized losses | ||
Less than 12 Months, Fair Value | 10,925 | 19,250 |
Less than 12 Months, Unrealized Loss | (42) | (144) |
12 Months or More, Fair Value | 16,263 | 112,369 |
12 Months or More, Unrealized Loss | (142) | (3,470) |
Total, Fair Value | 27,188 | 131,619 |
Total, Unrealized Loss | (184) | (3,614) |
Mortgage-backed - commercial | ||
Securities with unrealized losses | ||
Less than 12 Months, Fair Value | 7,683 | |
Less than 12 Months, Unrealized Loss | (25) | |
12 Months or More, Fair Value | 11,270 | 45,949 |
12 Months or More, Unrealized Loss | (112) | (921) |
Total, Fair Value | 18,953 | 45,949 |
Total, Unrealized Loss | (137) | (921) |
Asset-backed | ||
Securities with unrealized losses | ||
Less than 12 Months, Fair Value | 22,040 | 1,920 |
Less than 12 Months, Unrealized Loss | (172) | (90) |
Total, Fair Value | 22,040 | 1,920 |
Total, Unrealized Loss | $ (172) | $ (90) |
LOANS (Details)
LOANS (Details) - USD ($) $ in Thousands | Sep. 30, 2019 | Dec. 31, 2018 |
Loans | ||
Loans | $ 732,267 | $ 686,144 |
Commercial | ||
Loans | ||
Loans | 101,496 | 86,149 |
Real estate construction | ||
Loans | ||
Loans | 30,198 | 24,254 |
1-4 family residential | ||
Loans | ||
Loans | 280,972 | 252,318 |
Multi-family residential | ||
Loans | ||
Loans | 46,449 | 46,403 |
Non-farm & non-residential | ||
Loans | ||
Loans | 191,676 | 196,674 |
Agricultural | ||
Loans | ||
Loans | 58,734 | 60,049 |
Consumer | ||
Loans | ||
Loans | 22,547 | 20,089 |
Other | ||
Loans | ||
Loans | $ 195 | $ 208 |
LOANS - ACTIVITY IN ALLOWANCE (
LOANS - ACTIVITY IN ALLOWANCE (Details) - USD ($) $ in Thousands | 3 Months Ended | 9 Months Ended | ||
Sep. 30, 2019 | Sep. 30, 2018 | Sep. 30, 2019 | Sep. 30, 2018 | |
Activity in allowance for loan losses | ||||
Beginning Balance | $ 8,076 | $ 8,184 | $ 8,127 | $ 7,720 |
Charge-offs | (385) | (301) | (1,277) | (870) |
Recoveries | 200 | 166 | 591 | 949 |
Provision | 375 | 150 | 825 | 400 |
Ending Balance | 8,266 | 8,199 | 8,266 | 8,199 |
Commercial | ||||
Activity in allowance for loan losses | ||||
Beginning Balance | 962 | 1,183 | 1,159 | 975 |
Charge-offs | (191) | |||
Recoveries | 4 | 14 | 6 | |
Provision | (59) | (39) | (75) | 163 |
Ending Balance | 907 | 1,144 | 907 | 1,144 |
Real estate construction | ||||
Activity in allowance for loan losses | ||||
Beginning Balance | 413 | 398 | 414 | 462 |
Provision | 104 | 22 | 103 | (42) |
Ending Balance | 517 | 420 | 517 | 420 |
1-4 family residential | ||||
Activity in allowance for loan losses | ||||
Beginning Balance | 2,766 | 2,453 | 2,605 | 2,316 |
Charge-offs | (45) | (28) | (149) | (91) |
Recoveries | 3 | 4 | 15 | 266 |
Provision | 131 | 187 | 384 | 125 |
Ending Balance | 2,855 | 2,616 | 2,855 | 2,616 |
Multi-family residential | ||||
Activity in allowance for loan losses | ||||
Beginning Balance | 743 | 737 | 733 | 640 |
Recoveries | 15 | 3 | 15 | 9 |
Provision | (45) | (1) | (35) | 90 |
Ending Balance | 713 | 739 | 713 | 739 |
Non-farm & non-residential | ||||
Activity in allowance for loan losses | ||||
Beginning Balance | 1,599 | 1,604 | 1,649 | 1,554 |
Charge-offs | (17) | |||
Provision | 75 | 45 | 42 | 95 |
Ending Balance | 1,674 | 1,649 | 1,674 | 1,649 |
Agricultural | ||||
Activity in allowance for loan losses | ||||
Beginning Balance | 417 | 475 | 420 | 494 |
Recoveries | 2 | 3 | 6 | 149 |
Provision | (14) | (21) | (21) | (186) |
Ending Balance | 405 | 457 | 405 | 457 |
Consumer | ||||
Activity in allowance for loan losses | ||||
Beginning Balance | 392 | 582 | 410 | 582 |
Charge-offs | (132) | (73) | (272) | (166) |
Recoveries | 10 | 15 | 27 | 37 |
Provision | 166 | (104) | 271 | (33) |
Ending Balance | 436 | 420 | 436 | 420 |
Other | ||||
Activity in allowance for loan losses | ||||
Beginning Balance | 104 | 49 | 58 | 18 |
Charge-offs | (208) | (200) | (648) | (613) |
Recoveries | 166 | 141 | 514 | 482 |
Provision | 22 | 70 | 160 | 173 |
Ending Balance | 84 | 60 | 84 | 60 |
Unallocated | ||||
Activity in allowance for loan losses | ||||
Beginning Balance | 680 | 703 | 679 | 679 |
Provision | (5) | (9) | (4) | 15 |
Ending Balance | $ 675 | $ 694 | $ 675 | $ 694 |
LOANS - ALLOWANCE FOR LOAN LOSS
LOANS - ALLOWANCE FOR LOAN LOSSES AND RECORDED INVESTMENT (Details) - USD ($) $ in Thousands | Sep. 30, 2019 | Jun. 30, 2019 | Dec. 31, 2018 | Sep. 30, 2018 | Jun. 30, 2018 | Dec. 31, 2017 |
Loans | ||||||
Accrued interest receivable | $ 3,000 | $ 2,800 | ||||
Allowance for Loan Losses: | ||||||
Individually Evaluated for Impairment | 7 | 201 | ||||
Collectively Evaluated for Impairment | 8,259 | 7,926 | ||||
Total | 8,266 | $ 8,076 | 8,127 | $ 8,199 | $ 8,184 | $ 7,720 |
Loans: | ||||||
Individually Evaluated for Impairment | 3,941 | 4,932 | ||||
Collectively Evaluated for Impairment | 728,326 | 681,212 | ||||
Purchased Credit Impairment | 902 | 430 | ||||
Total | 732,267 | 686,144 | ||||
Commercial | ||||||
Allowance for Loan Losses: | ||||||
Individually Evaluated for Impairment | 191 | |||||
Collectively Evaluated for Impairment | 907 | 968 | ||||
Total | 907 | 962 | 1,159 | 1,144 | 1,183 | 975 |
Loans: | ||||||
Individually Evaluated for Impairment | 191 | |||||
Collectively Evaluated for Impairment | 101,496 | 85,958 | ||||
Total | 101,496 | 86,149 | ||||
Real estate construction | ||||||
Allowance for Loan Losses: | ||||||
Collectively Evaluated for Impairment | 517 | 414 | ||||
Total | 517 | 413 | 414 | 420 | 398 | 462 |
Loans: | ||||||
Individually Evaluated for Impairment | 374 | 374 | ||||
Collectively Evaluated for Impairment | 29,824 | 23,880 | ||||
Total | 30,198 | 24,254 | ||||
1-4 family residential | ||||||
Allowance for Loan Losses: | ||||||
Individually Evaluated for Impairment | 7 | 10 | ||||
Collectively Evaluated for Impairment | 2,848 | 2,595 | ||||
Total | 2,855 | 2,766 | 2,605 | 2,616 | 2,453 | 2,316 |
Loans: | ||||||
Individually Evaluated for Impairment | 1,753 | 1,003 | ||||
Collectively Evaluated for Impairment | 279,219 | 251,315 | ||||
Total | 280,972 | 252,318 | ||||
Multi-family residential | ||||||
Allowance for Loan Losses: | ||||||
Collectively Evaluated for Impairment | 713 | 733 | ||||
Total | 713 | 743 | 733 | 739 | 737 | 640 |
Loans: | ||||||
Individually Evaluated for Impairment | 1,292 | 1,973 | ||||
Collectively Evaluated for Impairment | 45,157 | 44,430 | ||||
Total | 46,449 | 46,403 | ||||
Non-farm & non-residential | ||||||
Allowance for Loan Losses: | ||||||
Collectively Evaluated for Impairment | 1,674 | 1,649 | ||||
Total | 1,674 | 1,599 | 1,649 | 1,649 | 1,604 | 1,554 |
Loans: | ||||||
Individually Evaluated for Impairment | 227 | |||||
Collectively Evaluated for Impairment | 191,676 | 196,447 | ||||
Total | 191,676 | 196,674 | ||||
Agricultural | ||||||
Allowance for Loan Losses: | ||||||
Collectively Evaluated for Impairment | 405 | 420 | ||||
Total | 405 | 417 | 420 | 457 | 475 | 494 |
Loans: | ||||||
Individually Evaluated for Impairment | 522 | 1,164 | ||||
Collectively Evaluated for Impairment | 58,212 | 58,885 | ||||
Total | 58,734 | 60,049 | ||||
Consumer | ||||||
Allowance for Loan Losses: | ||||||
Collectively Evaluated for Impairment | 436 | 410 | ||||
Total | 436 | 392 | 410 | 420 | 582 | 582 |
Loans: | ||||||
Collectively Evaluated for Impairment | 22,547 | 20,089 | ||||
Total | 22,547 | 20,089 | ||||
Other | ||||||
Allowance for Loan Losses: | ||||||
Collectively Evaluated for Impairment | 84 | 58 | ||||
Total | 84 | 104 | 58 | 60 | 49 | 18 |
Loans: | ||||||
Collectively Evaluated for Impairment | 195 | 208 | ||||
Total | 195 | 208 | ||||
Unallocated | ||||||
Allowance for Loan Losses: | ||||||
Collectively Evaluated for Impairment | 675 | 679 | ||||
Total | $ 675 | $ 680 | $ 679 | $ 694 | $ 703 | $ 679 |
LOANS - INDIVIDUALLY EVALUATED
LOANS - INDIVIDUALLY EVALUATED FOR IMPAIRMENT (Details) - USD ($) $ in Thousands | 3 Months Ended | 9 Months Ended | 12 Months Ended | ||
Sep. 30, 2019 | Sep. 30, 2018 | Sep. 30, 2019 | Sep. 30, 2018 | Dec. 31, 2018 | |
Unpaid Principal Balance | |||||
Total | $ 3,941 | $ 3,941 | $ 4,932 | ||
Recorded Investment | |||||
Total | 3,941 | 3,941 | 4,932 | ||
Allowance for Loan Losses Allocated. | 7 | 7 | 201 | ||
Average Recorded Investment | |||||
Total | 4,015 | $ 2,047 | 4,341 | $ 2,723 | 4,282 |
Interest Income Recognized | |||||
Total | 19 | 21 | 105 | 86 | 201 |
Cash Basis Interest Recognized | |||||
Total | 19 | 21 | 105 | 86 | 201 |
Commercial | |||||
Unpaid Principal Balance | |||||
With an allowance recorded | 191 | ||||
Recorded Investment | |||||
With an allowance recorded | 191 | ||||
Allowance for Loan Losses Allocated. | 191 | ||||
Average Recorded Investment | |||||
With an allowance recorded | 257 | 128 | 96 | ||
Interest Income Recognized | |||||
With an allowance recorded | 18 | 18 | |||
Cash Basis Interest Recognized | |||||
With an allowance recorded | 18 | 18 | |||
Real estate construction | |||||
Unpaid Principal Balance | |||||
With no related allowance recorded | 374 | 374 | 374 | ||
Recorded Investment | |||||
With no related allowance recorded | 374 | 374 | 374 | ||
Average Recorded Investment | |||||
With no related allowance recorded | 374 | 374 | 374 | 94 | 187 |
Interest Income Recognized | |||||
With no related allowance recorded | 3 | 3 | |||
Cash Basis Interest Recognized | |||||
With no related allowance recorded | 3 | 3 | |||
1-4 family residential | |||||
Unpaid Principal Balance | |||||
With no related allowance recorded | 760 | 760 | |||
With an allowance recorded | 993 | 993 | 1,003 | ||
Recorded Investment | |||||
With no related allowance recorded | 760 | 760 | |||
With an allowance recorded | 993 | 993 | 1,003 | ||
Allowance for Loan Losses Allocated. | 7 | 7 | 10 | ||
Average Recorded Investment | |||||
With no related allowance recorded | 441 | 78 | 380 | 62 | |
With an allowance recorded | 997 | 138 | 998 | 543 | 605 |
Interest Income Recognized | |||||
With no related allowance recorded | 14 | 1 | 21 | 4 | |
With an allowance recorded | 1 | 2 | 11 | 5 | 13 |
Cash Basis Interest Recognized | |||||
With no related allowance recorded | 14 | 1 | 21 | 4 | |
With an allowance recorded | 1 | 2 | 11 | 5 | 13 |
Multi-family residential | |||||
Unpaid Principal Balance | |||||
With no related allowance recorded | 1,292 | 1,292 | 1,973 | ||
Recorded Investment | |||||
With no related allowance recorded | 1,292 | 1,292 | 1,973 | ||
Average Recorded Investment | |||||
With no related allowance recorded | 1,463 | 691 | 1,632 | 523 | 1,991 |
Interest Income Recognized | |||||
With no related allowance recorded | 13 | 54 | 37 | 101 | |
Cash Basis Interest Recognized | |||||
With no related allowance recorded | 13 | 54 | 37 | 101 | |
Non-farm & non-residential | |||||
Unpaid Principal Balance | |||||
With no related allowance recorded | 227 | ||||
Recorded Investment | |||||
With no related allowance recorded | 227 | ||||
Average Recorded Investment | |||||
With no related allowance recorded | 57 | 231 | 114 | 1,061 | 679 |
Interest Income Recognized | |||||
With no related allowance recorded | 2 | 5 | 8 | 12 | |
Cash Basis Interest Recognized | |||||
With no related allowance recorded | 2 | 5 | 8 | 12 | |
Agricultural | |||||
Unpaid Principal Balance | |||||
With no related allowance recorded | 522 | 522 | 1,164 | ||
Recorded Investment | |||||
With no related allowance recorded | 522 | 522 | 1,164 | ||
Average Recorded Investment | |||||
With no related allowance recorded | 684 | 278 | 843 | 312 | 724 |
Interest Income Recognized | |||||
With no related allowance recorded | 4 | 3 | 14 | 11 | 54 |
Cash Basis Interest Recognized | |||||
With no related allowance recorded | $ 4 | $ 3 | $ 14 | $ 11 | $ 54 |
LOANS - NONACCRUAL, LOANS PAST
LOANS - NONACCRUAL, LOANS PAST DUE OVER 90 DAYS STILL ACCRUING AND TDR (Details) - USD ($) $ in Thousands | 9 Months Ended | |
Sep. 30, 2019 | Dec. 31, 2018 | |
Loans | ||
Nonaccrual | $ 1,513 | $ 1,141 |
Loans Past Due Over 90 Days Still Accruing | $ 2,259 | 1,182 |
Percentage of nonaccrual loans secured by real estate | 95.60% | |
Maximum period past due for loans to be considered as impaired | 90 days | |
Commercial | ||
Loans | ||
Nonaccrual | 191 | |
Loans Past Due Over 90 Days Still Accruing | $ 70 | |
Real estate construction | ||
Loans | ||
Nonaccrual | 374 | |
Loans Past Due Over 90 Days Still Accruing | 374 | |
1-4 family residential | ||
Loans | ||
Nonaccrual | 873 | 525 |
Loans Past Due Over 90 Days Still Accruing | 869 | 784 |
Multi-family residential | ||
Loans | ||
Loans Past Due Over 90 Days Still Accruing | 1,292 | |
Non-farm & non-residential | ||
Loans | ||
Nonaccrual | 156 | |
Loans Past Due Over 90 Days Still Accruing | 14 | |
Agricultural | ||
Loans | ||
Nonaccrual | 200 | 252 |
Consumer | ||
Loans | ||
Nonaccrual | 66 | 17 |
Loans Past Due Over 90 Days Still Accruing | $ 28 | $ 10 |
LOANS - AGING OF RECORDED INVES
LOANS - AGING OF RECORDED INVESTMENT IN PAST DUE AND NON-ACCRUAL LOANS (Details) - USD ($) $ in Thousands | Sep. 30, 2019 | Dec. 31, 2018 |
Aging of recorded investment in past due and non-accrual loans | ||
Greater than 90 Days Past Due | $ 2,259 | $ 1,182 |
Non-accrual | 1,513 | 1,141 |
Total Past Due and Non-accrual | 6,860 | 7,141 |
Loans Not Past Due | 725,407 | 679,003 |
30 to 59 Days Past Due | ||
Aging of recorded investment in past due and non-accrual loans | ||
Recorded Investment Past Due | 2,254 | 4,117 |
60 to 89 Days Past Due | ||
Aging of recorded investment in past due and non-accrual loans | ||
Recorded Investment Past Due | 834 | 701 |
Commercial | ||
Aging of recorded investment in past due and non-accrual loans | ||
Greater than 90 Days Past Due | 70 | |
Non-accrual | 191 | |
Total Past Due and Non-accrual | 910 | 225 |
Loans Not Past Due | 100,586 | 85,924 |
Commercial | 30 to 59 Days Past Due | ||
Aging of recorded investment in past due and non-accrual loans | ||
Recorded Investment Past Due | 280 | 10 |
Commercial | 60 to 89 Days Past Due | ||
Aging of recorded investment in past due and non-accrual loans | ||
Recorded Investment Past Due | 560 | 24 |
Real estate construction | ||
Aging of recorded investment in past due and non-accrual loans | ||
Greater than 90 Days Past Due | 374 | |
Non-accrual | 374 | |
Total Past Due and Non-accrual | 575 | 683 |
Loans Not Past Due | 29,623 | 23,571 |
Real estate construction | 30 to 59 Days Past Due | ||
Aging of recorded investment in past due and non-accrual loans | ||
Recorded Investment Past Due | 201 | 309 |
1-4 family residential | ||
Aging of recorded investment in past due and non-accrual loans | ||
Greater than 90 Days Past Due | 869 | 784 |
Non-accrual | 873 | 525 |
Total Past Due and Non-accrual | 3,136 | 4,030 |
Loans Not Past Due | 277,836 | 248,288 |
1-4 family residential | 30 to 59 Days Past Due | ||
Aging of recorded investment in past due and non-accrual loans | ||
Recorded Investment Past Due | 1,195 | 2,158 |
1-4 family residential | 60 to 89 Days Past Due | ||
Aging of recorded investment in past due and non-accrual loans | ||
Recorded Investment Past Due | 199 | 563 |
Multi-family residential | ||
Aging of recorded investment in past due and non-accrual loans | ||
Greater than 90 Days Past Due | 1,292 | |
Total Past Due and Non-accrual | 1,292 | 951 |
Loans Not Past Due | 45,157 | 45,452 |
Multi-family residential | 30 to 59 Days Past Due | ||
Aging of recorded investment in past due and non-accrual loans | ||
Recorded Investment Past Due | 951 | |
Non-farm & non-residential | ||
Aging of recorded investment in past due and non-accrual loans | ||
Greater than 90 Days Past Due | 14 | |
Non-accrual | 156 | |
Total Past Due and Non-accrual | 132 | 322 |
Loans Not Past Due | 191,544 | 196,352 |
Non-farm & non-residential | 30 to 59 Days Past Due | ||
Aging of recorded investment in past due and non-accrual loans | ||
Recorded Investment Past Due | 132 | 68 |
Non-farm & non-residential | 60 to 89 Days Past Due | ||
Aging of recorded investment in past due and non-accrual loans | ||
Recorded Investment Past Due | 84 | |
Agricultural | ||
Aging of recorded investment in past due and non-accrual loans | ||
Non-accrual | 200 | 252 |
Total Past Due and Non-accrual | 511 | 769 |
Loans Not Past Due | 58,223 | 59,280 |
Agricultural | 30 to 59 Days Past Due | ||
Aging of recorded investment in past due and non-accrual loans | ||
Recorded Investment Past Due | 306 | 502 |
Agricultural | 60 to 89 Days Past Due | ||
Aging of recorded investment in past due and non-accrual loans | ||
Recorded Investment Past Due | 5 | 15 |
Consumer | ||
Aging of recorded investment in past due and non-accrual loans | ||
Greater than 90 Days Past Due | 28 | 10 |
Non-accrual | 66 | 17 |
Total Past Due and Non-accrual | 304 | 161 |
Loans Not Past Due | 22,243 | 19,928 |
Consumer | 30 to 59 Days Past Due | ||
Aging of recorded investment in past due and non-accrual loans | ||
Recorded Investment Past Due | 140 | 119 |
Consumer | 60 to 89 Days Past Due | ||
Aging of recorded investment in past due and non-accrual loans | ||
Recorded Investment Past Due | 70 | 15 |
Other | ||
Aging of recorded investment in past due and non-accrual loans | ||
Loans Not Past Due | $ 195 | $ 208 |
LOANS - TROUBLED DEBT RESTRUCTU
LOANS - TROUBLED DEBT RESTRUCTURINGS (Details) - loan | 9 Months Ended | 12 Months Ended |
Sep. 30, 2019 | Dec. 31, 2018 | |
LOANS | ||
Number of loans that met the definition of troubled debt restructurings | 0 | 0 |
LOANS - RISK CATEGORY OF LOANS
LOANS - RISK CATEGORY OF LOANS (Details) - USD ($) $ in Thousands | 9 Months Ended | |
Sep. 30, 2019 | Dec. 31, 2018 | |
Credit Quality Indicators | ||
Loans | $ 732,267 | $ 686,144 |
Maximum outstanding balance of non-consumer loans evaluated similar to consumer loans over $200,000 | 200 | |
Pass | ||
Credit Quality Indicators | ||
Loans | 681,129 | 639,238 |
Special Mention | ||
Credit Quality Indicators | ||
Loans | 19,296 | 16,543 |
Substandard | ||
Credit Quality Indicators | ||
Loans | 9,100 | 9,807 |
Doubtful | ||
Credit Quality Indicators | ||
Loans | 259 | |
Commercial | ||
Credit Quality Indicators | ||
Outstanding balance over which loans are individually evaluated for impairment | 200 | |
Loans | 101,496 | 86,149 |
Commercial | Pass | ||
Credit Quality Indicators | ||
Loans | 99,990 | 84,911 |
Commercial | Special Mention | ||
Credit Quality Indicators | ||
Loans | 1,488 | 994 |
Commercial | Substandard | ||
Credit Quality Indicators | ||
Loans | 18 | 53 |
Commercial | Doubtful | ||
Credit Quality Indicators | ||
Loans | 191 | |
Real estate construction | ||
Credit Quality Indicators | ||
Loans | 30,198 | 24,254 |
Real estate construction | Pass | ||
Credit Quality Indicators | ||
Loans | 28,719 | 23,857 |
Real estate construction | Special Mention | ||
Credit Quality Indicators | ||
Loans | 1,084 | |
Real estate construction | Substandard | ||
Credit Quality Indicators | ||
Loans | 395 | 397 |
1-4 family residential | ||
Credit Quality Indicators | ||
Loans | 280,972 | 252,318 |
1-4 family residential | Pass | ||
Credit Quality Indicators | ||
Loans | 272,319 | 244,382 |
1-4 family residential | Special Mention | ||
Credit Quality Indicators | ||
Loans | 2,320 | 2,685 |
1-4 family residential | Substandard | ||
Credit Quality Indicators | ||
Loans | 6,333 | 5,201 |
1-4 family residential | Doubtful | ||
Credit Quality Indicators | ||
Loans | 50 | |
Multi-family residential | ||
Credit Quality Indicators | ||
Loans | 46,449 | 46,403 |
Multi-family residential | Pass | ||
Credit Quality Indicators | ||
Loans | 42,301 | 43,248 |
Multi-family residential | Special Mention | ||
Credit Quality Indicators | ||
Loans | 2,856 | 1,182 |
Multi-family residential | Substandard | ||
Credit Quality Indicators | ||
Loans | 1,292 | 1,973 |
Non-farm & non-residential | ||
Credit Quality Indicators | ||
Loans | 191,676 | 196,674 |
Non-farm & non-residential | Pass | ||
Credit Quality Indicators | ||
Loans | 185,261 | 188,186 |
Non-farm & non-residential | Special Mention | ||
Credit Quality Indicators | ||
Loans | 6,275 | 7,967 |
Non-farm & non-residential | Substandard | ||
Credit Quality Indicators | ||
Loans | 140 | 503 |
Non-farm & non-residential | Doubtful | ||
Credit Quality Indicators | ||
Loans | 18 | |
Agricultural | ||
Credit Quality Indicators | ||
Loans | 58,734 | 60,049 |
Agricultural | Pass | ||
Credit Quality Indicators | ||
Loans | 52,539 | 54,654 |
Agricultural | Special Mention | ||
Credit Quality Indicators | ||
Loans | 5,273 | 3,715 |
Agricultural | Substandard | ||
Credit Quality Indicators | ||
Loans | 922 | 1,680 |
Consumer | ||
Credit Quality Indicators | ||
Loans | 22,547 | 20,089 |
Consumer | Non-performing | ||
Credit Quality Indicators | ||
Loans | $ 94 | $ 27 |
Minimum period past due for loans to be considered as non-performing | 89 days |
EARNINGS PER SHARE (Details)
EARNINGS PER SHARE (Details) - USD ($) $ / shares in Units, shares in Thousands, $ in Thousands | 3 Months Ended | 9 Months Ended | ||||||
Sep. 30, 2019 | Jun. 30, 2019 | Mar. 31, 2019 | Sep. 30, 2018 | Jun. 30, 2018 | Mar. 31, 2018 | Sep. 30, 2019 | Sep. 30, 2018 | |
Basic and Diluted Earnings Per Share | ||||||||
Net income | $ 3,616 | $ 3,237 | $ 2,811 | $ 3,278 | $ 3,068 | $ 3,148 | $ 9,664 | $ 9,494 |
Weighted average common shares outstanding | 5,901 | 5,924 | 5,930 | 5,956 | ||||
Basic and diluted earnings per share | $ 0.61 | $ 0.55 | $ 1.62 | $ 1.59 |
STOCK COMPENSATION - VESTING PE
STOCK COMPENSATION - VESTING PERIOD (Details) | 9 Months Ended |
Sep. 30, 2019plan | |
STOCK COMPENSATION | |
Number of share based compensation plans | 3 |
STOCK COMPENSATION - NONVESTED
STOCK COMPENSATION - NONVESTED SHARES (Details) - USD ($) | 9 Months Ended | 12 Months Ended | |
Sep. 30, 2019 | Sep. 30, 2018 | Dec. 31, 2018 | |
2005 Restricted Stock Grant Plan | |||
Additional disclosures | |||
Period over which cost is expected to be recognized | 3 months | ||
2005 Restricted Stock Grant Plan | Restricted stock | |||
Stock Based Compensation | |||
Number of shares authorized for issuance | 100,000 | ||
Shares available for issuance | 0 | ||
Shares | |||
Nonvested at the beginning of the period (in shares) | 5,924 | ||
Granted (in shares) | 0 | 0 | |
Vested (in shares) | (4,254) | ||
Forfeited (in shares) | (64) | (178) | |
Nonvested at the end of the period (in shares) | 1,606 | 5,924 | |
Weighted-Average Grant-Date Fair Value | |||
Nonvested shares, balance at the beginning of the period (in dollars) | $ 77,404 | ||
Vested (in dollars) | (54,566) | ||
Forfeited (in dollars) | (876) | ||
Nonvested shares, balance at the end of the period (in dollars) | $ 21,962 | $ 77,404 | |
Fair Value Per Share | |||
Nonvested shares, balance at the beginning of the period (in dollars per share) | $ 13.07 | ||
Vested (in dollars per share) | 12.83 | ||
Forfeited (in dollars per share) | 13.69 | ||
Nonvested shares, balance at the end of the period (in dollars per share) | $ 13.67 | $ 13.07 | |
2009 Stock Award Plan | |||
Stock Based Compensation | |||
Number of shares authorized for issuance | 300,000 | ||
Shares available for issuance | 230,732 | ||
Shares | |||
Nonvested at the beginning of the period (in shares) | 25,778 | ||
Granted (in shares) | 23,380 | 11,440 | |
Vested (in shares) | (9,242) | ||
Forfeited (in shares) | (1,090) | (816) | |
Nonvested at the end of the period (in shares) | 38,826 | 25,778 | |
Weighted-Average Grant-Date Fair Value | |||
Nonvested shares, balance at the beginning of the period (in dollars) | $ 482,213 | ||
Granted (in dollars) | 549,430 | ||
Vested (in dollars) | (175,749) | ||
Forfeited (in dollars) | (22,942) | ||
Nonvested shares, balance at the end of the period (in dollars) | $ 832,953 | $ 482,213 | |
Fair Value Per Share | |||
Nonvested shares, balance at the beginning of the period (in dollars per share) | $ 18.71 | ||
Granted (in dollars per share) | 23.50 | ||
Vested (in dollars per share) | 19.02 | ||
Forfeited (in dollars per share) | 21.05 | ||
Nonvested shares, balance at the end of the period (in dollars per share) | $ 21.45 | $ 18.71 | |
Additional disclosures | |||
Period over which cost is expected to be recognized | 3 years 6 months | ||
2019 Stock Award Plan | |||
Stock Based Compensation | |||
Number of shares authorized for issuance | 300,000 | ||
Shares | |||
Granted (in shares) | 0 |
REPURCHASE AGREEMENTS (Details)
REPURCHASE AGREEMENTS (Details) - USD ($) $ in Thousands | 9 Months Ended | |
Sep. 30, 2019 | Dec. 31, 2018 | |
REPURCHASE AGREEMENTS | ||
Repurchase agreements | $ 6,037 | $ 8,077 |
Carrying amount of agency-backed securities pledged to secure repurchase agreements | 12,000 | |
Overnight obligations | ||
REPURCHASE AGREEMENTS | ||
Repurchase agreements | 4,000 | |
Maturity terms extending | ||
REPURCHASE AGREEMENTS | ||
Repurchase agreements | $ 2,000 | |
Average weighted remaining life | 1 year 1 month 6 days |
OTHER BORROWINGS (Details)
OTHER BORROWINGS (Details) - USD ($) $ in Thousands | Sep. 30, 2019 | Dec. 31, 2018 | Jul. 20, 2015 |
OTHER BORROWINGS | |||
Amount outstanding | $ 1,996 | $ 2,718 | |
Term loan | |||
OTHER BORROWINGS | |||
Debt instrument, face amount | $ 5,000 | ||
Amount outstanding | 2,000 | ||
Fixed interest rate | 5.02% | ||
Maturity schedule of term loan | |||
2019 | 131 | ||
2020 | 539 | ||
2021 | 567 | ||
2022 | 596 | ||
Thereafter | 163 | ||
Total term loan maturities | $ 1,996 |
FAIR VALUE MEASUREMENTS (Detail
FAIR VALUE MEASUREMENTS (Details) - USD ($) $ in Thousands | 3 Months Ended | 9 Months Ended | |||
Sep. 30, 2019 | Sep. 30, 2018 | Sep. 30, 2019 | Sep. 30, 2018 | Dec. 31, 2018 | |
Financial Assets | |||||
Total, Fair value | $ 246,542 | $ 246,542 | $ 315,369 | ||
Financial Liabilities | |||||
Transfers from Level 1 to Level 2 | 0 | 0 | 0 | ||
Transfers from Level 2 to Level 1 | 0 | 0 | 0 | ||
Carrying Value | |||||
Financial Assets | |||||
Derivatives and financial instrument assets | 290 | 290 | |||
Other Assets | 293 | 293 | |||
Financial Liabilities | |||||
Derivatives and financial instrument liabilities | 287 | 287 | |||
Quoted Prices In Active Markets for Identical Assets (Level 1) | |||||
Financial Assets | |||||
Other Assets | 293 | 293 | |||
Significant Other Observable Inputs (Level 2) | |||||
Financial Assets | |||||
Derivatives and financial instrument assets | 290 | 290 | |||
Financial Liabilities | |||||
Derivatives and financial instrument liabilities | 287 | 287 | |||
Recurring | Carrying Value | |||||
Financial Assets | |||||
Asset-backed | 35,860 | 35,860 | 10,200 | ||
Derivatives and financial instrument assets | 290 | 290 | |||
Other Assets | 293 | 293 | 284 | ||
Total, Fair value | 247,125 | 247,125 | 315,653 | ||
Financial Liabilities | |||||
Derivatives and financial instrument liabilities | 287 | 287 | |||
Recurring | Quoted Prices In Active Markets for Identical Assets (Level 1) | |||||
Financial Assets | |||||
Other Assets | 293 | 293 | 284 | ||
Total, Fair value | 293 | 293 | 284 | ||
Recurring | Significant Other Observable Inputs (Level 2) | |||||
Financial Assets | |||||
Asset-backed | 35,860 | 35,860 | 10,200 | ||
Derivatives and financial instrument assets | 290 | 290 | |||
Total, Fair value | 246,832 | 246,832 | 315,369 | ||
Financial Liabilities | |||||
Derivatives and financial instrument liabilities | 287 | 287 | |||
Impaired Loans | |||||
Fair value on instruments on recurring basis | |||||
Net adjustments for differences between the comparable sales and income data available | (1) | $ (9) | (194) | $ 201 | |
U.S. treasury notes | Recurring | Carrying Value | |||||
Financial Assets | |||||
Investments | 2,987 | 2,987 | 3,975 | ||
U.S. treasury notes | Recurring | Significant Other Observable Inputs (Level 2) | |||||
Financial Assets | |||||
Investments | 2,987 | 2,987 | 3,975 | ||
U.S. government agencies | Recurring | Carrying Value | |||||
Financial Assets | |||||
Investments | 22,193 | 22,193 | 41,178 | ||
U.S. government agencies | Recurring | Significant Other Observable Inputs (Level 2) | |||||
Financial Assets | |||||
Investments | 22,193 | 22,193 | 41,178 | ||
States and political subdivisions | Recurring | Carrying Value | |||||
Financial Assets | |||||
Investments | 36,073 | 36,073 | 64,204 | ||
States and political subdivisions | Recurring | Significant Other Observable Inputs (Level 2) | |||||
Financial Assets | |||||
Investments | 36,073 | 36,073 | 64,204 | ||
Mortgage-backed - residential | Recurring | Carrying Value | |||||
Financial Assets | |||||
Mortgage-backed | 95,315 | 95,315 | 147,249 | ||
Mortgage-backed - residential | Recurring | Significant Other Observable Inputs (Level 2) | |||||
Financial Assets | |||||
Mortgage-backed | 95,315 | 95,315 | 147,249 | ||
Mortgage-backed - commercial | Recurring | Carrying Value | |||||
Financial Assets | |||||
Mortgage-backed | 54,114 | 54,114 | 48,563 | ||
Mortgage-backed - commercial | Recurring | Significant Other Observable Inputs (Level 2) | |||||
Financial Assets | |||||
Mortgage-backed | $ 54,114 | $ 54,114 | $ 48,563 |
FAIR VALUE MEASUREMENTS - FAIR
FAIR VALUE MEASUREMENTS - FAIR VALUE ON NON-RECURRING (Details) $ in Thousands | 3 Months Ended | 9 Months Ended | 12 Months Ended | ||
Sep. 30, 2019USD ($) | Sep. 30, 2018USD ($) | Sep. 30, 2019USD ($)loan | Sep. 30, 2018USD ($)loan | Dec. 31, 2018USD ($) | |
Impaired Loans | |||||
Valuation allowance of impaired loans | $ 7 | $ 7 | $ 201 | ||
Provision for loan loss expense | 375 | $ 150 | 825 | $ 400 | |
Other real estate owned, net: | |||||
Outstanding balance of other real estate owned | 925 | 925 | 830 | ||
Loan servicing rights | |||||
Mortgage servicing rights | 1,410 | 1,410 | 1,536 | ||
Impaired mortgage servicing rights | 1,100 | 469 | |||
valuation allowance | 194 | 194 | 39 | ||
Carrying value | 902 | 902 | 430 | ||
Non-recurring | |||||
Impaired Loans | |||||
Impaired loans, at fair value | 993 | 993 | 993 | ||
Valuation allowance of impaired loans | 7 | $ 7 | 201 | ||
Number of impaired loans. | loan | 0 | 4 | |||
Provision for loan loss expense | 0 | $ 201 | |||
Other real estate owned, net: | |||||
Other real estate owned | 479 | $ 479 | 246 | ||
Outstanding balance of other real estate owned | 924 | 924 | 653 | ||
Valuation allowance of other real estate owned | 445 | 445 | 407 | ||
Write downs of other real estate owned | 38,000 | 0 | |||
Loan servicing rights | |||||
Recovery of prior write-downs | 114 | $ 0 | 155 | $ 56 | |
Non-recurring | Carrying Value | |||||
Other real estate owned, net: | |||||
Other real estate owned | 902 | 902 | |||
Loan servicing rights | |||||
Mortgage servicing rights | 430 | ||||
Non-recurring | Significant Unobservable Inputs (Level 3) | |||||
Other real estate owned, net: | |||||
Other real estate owned | 902 | 902 | |||
Loan servicing rights | |||||
Mortgage servicing rights | 430 | ||||
Non-recurring | 1-4 family residential | Carrying Value | |||||
Impaired Loans | |||||
Impaired loans, at fair value | 993 | ||||
Other real estate owned, net: | |||||
Other real estate owned | 993 | 993 | |||
Non-recurring | 1-4 family residential | Significant Unobservable Inputs (Level 3) | |||||
Impaired Loans | |||||
Impaired loans, at fair value | 993 | ||||
Other real estate owned, net: | |||||
Other real estate owned | 993 | 993 | |||
Non-recurring | Agricultural | Carrying Value | |||||
Other real estate owned, net: | |||||
Other real estate owned | 233 | 233 | |||
Non-recurring | Agricultural | Significant Unobservable Inputs (Level 3) | |||||
Other real estate owned, net: | |||||
Other real estate owned | 233 | 233 | |||
Non-recurring | Commercial | Carrying Value | |||||
Other real estate owned, net: | |||||
Other real estate owned | 246 | 246 | 246 | ||
Non-recurring | Commercial | Significant Unobservable Inputs (Level 3) | |||||
Other real estate owned, net: | |||||
Other real estate owned | $ 246 | $ 246 | $ 246 |
FAIR VALUE MEASUREMENTS - QUANT
FAIR VALUE MEASUREMENTS - QUANTITATIVE INFORMATION (Details) $ in Thousands | Sep. 30, 2019USD ($)item | Dec. 31, 2018USD ($)item |
Fair Value Measurements | ||
Mortgage servicing rights | $ 1,410 | $ 1,536 |
Non-recurring | ||
Fair Value Measurements | ||
Impaired loans, at fair value | 993 | 993 |
Other real estate owned | 479 | 246 |
Non-recurring | Significant Unobservable Inputs (Level 3) | ||
Fair Value Measurements | ||
Other real estate owned | 902 | |
Mortgage servicing rights | 430 | |
Non-recurring | Discounted cash flow | Significant Unobservable Inputs (Level 3) | ||
Fair Value Measurements | ||
Mortgage servicing rights | 902 | 430 |
Non-recurring | 1-4 family residential | Significant Unobservable Inputs (Level 3) | ||
Fair Value Measurements | ||
Impaired loans, at fair value | 993 | |
Other real estate owned | 993 | |
Non-recurring | 1-4 family residential | Sales comparison | Significant Unobservable Inputs (Level 3) | ||
Fair Value Measurements | ||
Impaired loans, at fair value | 993 | 993 |
Non-recurring | Agricultural | Significant Unobservable Inputs (Level 3) | ||
Fair Value Measurements | ||
Other real estate owned | 233 | |
Non-recurring | Agricultural | Sales comparison | Significant Unobservable Inputs (Level 3) | ||
Fair Value Measurements | ||
Other real estate owned | 233 | |
Non-recurring | Commercial | Significant Unobservable Inputs (Level 3) | ||
Fair Value Measurements | ||
Other real estate owned | 246 | 246 |
Non-recurring | Commercial | Income approach | Significant Unobservable Inputs (Level 3) | ||
Fair Value Measurements | ||
Other real estate owned | $ 246 | $ 246 |
Non-recurring | Minimum | Discounted cash flow | Significant Unobservable Inputs (Level 3) | ||
Fair Value Measurements | ||
Servicing asset, measurement input | (0.08) | 0.07 |
Non-recurring | Minimum | 1-4 family residential | Sales comparison | Significant Unobservable Inputs (Level 3) | ||
Fair Value Measurements | ||
Impaired loans - measurement input | (0.30) | (0.21) |
Non-recurring | Minimum | Agricultural | Sales comparison | Significant Unobservable Inputs (Level 3) | ||
Fair Value Measurements | ||
Other real estate owned, measurement input | (0.29) | |
Non-recurring | Minimum | Commercial | Income approach | Significant Unobservable Inputs (Level 3) | ||
Fair Value Measurements | ||
Other real estate owned, measurement input | 0.1 | 0.10 |
Non-recurring | Maximum | Discounted cash flow | Significant Unobservable Inputs (Level 3) | ||
Fair Value Measurements | ||
Servicing asset, measurement input | item | 0.25 | |
Non-recurring | Maximum | 1-4 family residential | Sales comparison | Significant Unobservable Inputs (Level 3) | ||
Fair Value Measurements | ||
Impaired loans - measurement input | 0.10 | 0.07 |
Non-recurring | Maximum | Agricultural | Sales comparison | Significant Unobservable Inputs (Level 3) | ||
Fair Value Measurements | ||
Other real estate owned, measurement input | 0.41 | |
Non-recurring | Maximum | Residential | Sales comparison | Significant Unobservable Inputs (Level 3) | ||
Fair Value Measurements | ||
Servicing asset, measurement input | item | (0.23) | |
Non-recurring | Maximum | Commercial | Income approach | Significant Unobservable Inputs (Level 3) | ||
Fair Value Measurements | ||
Other real estate owned, measurement input | 0.1 | 0.10 |
Non-recurring | Weighted average | Discounted cash flow | Significant Unobservable Inputs (Level 3) | ||
Fair Value Measurements | ||
Servicing asset, measurement input | item | 0.13 | 0.09 |
Non-recurring | Weighted average | 1-4 family residential | Sales comparison | Significant Unobservable Inputs (Level 3) | ||
Fair Value Measurements | ||
Impaired loans - measurement input | item | 0.21 | 0.07 |
Non-recurring | Weighted average | Agricultural | Sales comparison | Significant Unobservable Inputs (Level 3) | ||
Fair Value Measurements | ||
Other real estate owned, measurement input | item | 0.13 | |
Non-recurring | Weighted average | Commercial | Income approach | Significant Unobservable Inputs (Level 3) | ||
Fair Value Measurements | ||
Other real estate owned, measurement input | item | 0.10 | 0.10 |
FAIR VALUE MEASUREMENTS - FAI_2
FAIR VALUE MEASUREMENTS - FAIR VALUE OF FINANCIAL INSTRUMENTS (Details) - USD ($) $ in Thousands | Sep. 30, 2019 | Dec. 31, 2018 |
Financial assets | ||
Interest bearing time deposits | $ 2,375 | $ 2,175 |
Loans held for sale | 5,232 | 1,203 |
Interest receivable | 4,028 | 4,150 |
Financial liabilities | ||
Short-term Federal Home Loan Bank advances | 5,000 | 11,600 |
Long-term Federal Home Loan Bank advances | 95,677 | 88,852 |
Interest payable | 1,028 | 893 |
Carrying Value | ||
Financial assets | ||
Cash and cash equivalents | 25,290 | 26,101 |
Interest bearing time deposits | 2,375 | 2,175 |
Securities available for sale | 246,542 | 315,369 |
Loans held for sale | 5,232 | 1,203 |
Net Loans | 724,001 | 678,017 |
Federal Home Loan Bank stock | 7,034 | 7,034 |
Interest receivable | 4,028 | 4,150 |
Derivatives and financial instrument assets | 290 | |
Other Assets | 293 | |
Financial liabilities | ||
Total deposits | 829,201 | 850,442 |
Repurchase agreements | 6,037 | 8,077 |
Short-term Federal Home Loan Bank advances | 5,000 | 11,600 |
Long-term Federal Home Loan Bank advances | 95,677 | 88,852 |
Note payable | 1,996 | 2,718 |
Subordinated debentures | 7,217 | 7,217 |
Interest payable | 1,028 | 893 |
Derivative and financial instruments | 287 | |
Fair Value | ||
Financial assets | ||
Cash and cash equivalents | 25,290 | 26,101 |
Interest bearing time deposits | 2,375 | 2,175 |
Securities available for sale | 246,542 | 315,369 |
Loans held for sale | 5,289 | 1,224 |
Net Loans | 719,487 | 666,942 |
Interest receivable | 4,028 | 4,150 |
Derivatives and financial instrument assets | 290 | |
Other Assets | 293 | |
Financial liabilities | ||
Total deposits | 828,600 | 847,619 |
Repurchase agreements | 6,037 | 8,009 |
Short-term Federal Home Loan Bank advances | 5,000 | 11,592 |
Long-term Federal Home Loan Bank advances | 96,163 | 84,983 |
Note payable | 2,135 | 2,841 |
Subordinated debentures | 7,215 | 7,213 |
Interest payable | 1,028 | 893 |
Derivative and financial instruments | 287 | |
Quoted Prices In Active Markets for Identical Assets (Level 1) | ||
Financial assets | ||
Cash and cash equivalents | 25,290 | 26,101 |
Interest bearing time deposits | 2,375 | 2,175 |
Other Assets | 293 | |
Financial liabilities | ||
Total deposits | 603,289 | 620,885 |
Significant Other Observable Inputs (Level 2) | ||
Financial assets | ||
Securities available for sale | 246,542 | 315,369 |
Loans held for sale | 5,289 | 1,224 |
Interest receivable | 979 | 1,346 |
Derivatives and financial instrument assets | 290 | |
Financial liabilities | ||
Total deposits | 225,311 | 226,734 |
Repurchase agreements | 6,037 | 8,009 |
Short-term Federal Home Loan Bank advances | 5,000 | 11,592 |
Long-term Federal Home Loan Bank advances | 96,163 | 84,983 |
Note payable | 2,092 | 2,841 |
Interest payable | 1,014 | 877 |
Derivative and financial instruments | 287 | |
Significant Unobservable Inputs (Level 3) | ||
Financial assets | ||
Net Loans | 719,487 | 666,942 |
Interest receivable | 3,049 | 2,804 |
Financial liabilities | ||
Subordinated debentures | 7,215 | 7,213 |
Interest payable | $ 14 | $ 16 |
LEASES (Details)
LEASES (Details) - lease | Jan. 01, 2019 | Sep. 30, 2019 | Sep. 30, 2019 |
Lessee, Lease, Description [Line Items] | |||
Number of operating leases | 6 | 7 | |
Number of buildings leases | 3 | ||
Number of land leases | 4 | ||
Options to renew | true | ||
Lexington, KY | |||
Lessee, Lease, Description [Line Items] | |||
Number of land leases | 1 |
LEASES - Balance Sheets (Detail
LEASES - Balance Sheets (Details) $ in Thousands | Sep. 30, 2019USD ($) |
Balance Sheets | |
Gross Carrying Amount | $ 8,939 |
Accumulated Amortization | (529) |
Net Book Value | $ 8,410 |
Financial position | us-gaap:OperatingLeaseRightOfUseAsset |
Right of use lease obligations | $ 8,513 |
Financial position | us-gaap:OperatingLeaseLiability |
LEASES - Other (Details)
LEASES - Other (Details) | Sep. 30, 2019 |
LEASES | |
Weighted-average remaining lease term for operating leases | 35 years 9 months 18 days |
Weighted-average discount rate for operating leases | 4.14% |
LEASES - Lease Cost and Other i
LEASES - Lease Cost and Other information (Details) - USD ($) $ in Thousands | 3 Months Ended | 9 Months Ended |
Sep. 30, 2019 | Sep. 30, 2019 | |
LEASES | ||
Operating lease cost | $ 282 | $ 529 |
Total lease cost | 282 | 529 |
Operating cash flows from operating leases | $ 98 | $ 250 |
LEASES - Future minimum payment
LEASES - Future minimum payments (Details) $ in Thousands | Sep. 30, 2019USD ($) |
Future minimum payments | |
2020 | $ 542 |
2021 | 521 |
2022 | 521 |
2023 | 535 |
2024 | 530 |
Thereafter | 18,856 |
Total undiscounted lease payments | 21,505 |
Amounts representing interest | (12,992) |
Operating lease liability | $ 8,513 |
REVENUE FROM CONTRACTS WITH C_3
REVENUE FROM CONTRACTS WITH CUSTOMERS (Details) - USD ($) $ in Thousands | 3 Months Ended | 9 Months Ended | ||
Sep. 30, 2019 | Sep. 30, 2018 | Sep. 30, 2019 | Sep. 30, 2018 | |
NON-INTEREST INCOME: | ||||
Service charges | $ 1,400 | $ 1,375 | $ 3,991 | $ 3,989 |
Trust department income | 361 | 332 | 1,036 | 967 |
Brokerage income | 110 | 192 | 381 | 542 |
Debit card interchange income | 894 | 815 | 2,587 | 2,415 |
Total other income | 4,060 | 3,517 | 10,395 | 9,991 |
ASU 2014-09 | ||||
NON-INTEREST INCOME: | ||||
Service charges | 1,400 | 1,375 | 3,991 | 3,989 |
Trust department income | 361 | 332 | 1,036 | 967 |
Brokerage income | 110 | 192 | 381 | 542 |
Debit card interchange income | 894 | 815 | 2,587 | 2,415 |
Total other income | $ 2,765 | $ 2,714 | $ 7,995 | $ 7,913 |
DERIVATIVES AND FINANCIAL INS_2
DERIVATIVES AND FINANCIAL INSTRUMENTS (Details) - USD ($) $ in Millions | 9 Months Ended | |
Sep. 30, 2019 | Dec. 31, 2018 | |
Derivative Instruments and Hedging Activities Disclosures [Line Items] | ||
Notional amount of derivative instruments | $ 11.7 | $ 0 |
Derivatives, Notional Amount | $ 11.7 | 0 |
Percentage of changes in fair value | 100.00% | |
Interest Rate | Hedging Instrument | ||
Derivative Instruments and Hedging Activities Disclosures [Line Items] | ||
Notional amount of derivative instruments | $ 9.4 | 4.6 |
Derivatives, Notional Amount | $ 9.4 | $ 4.6 |