Document and Entity Information
Document and Entity Information - USD ($) | 12 Months Ended | ||
Dec. 31, 2019 | Feb. 29, 2020 | Jun. 30, 2019 | |
Document And Entity Information | |||
Entity Registrant Name | PEOPLES BANCORP OF NORTH CAROLINA INC | ||
Entity Central Index Key | 0001093672 | ||
Document Type | 10-K | ||
Document Period End Date | Dec. 31, 2019 | ||
Amendment Flag | false | ||
Current Fiscal Year End Date | --12-31 | ||
Is Entity a Well-known Seasoned Issuer? | No | ||
Is Entity a Voluntary Filer? | No | ||
Is Entity's Reporting Status Current? | Yes | ||
Entity Filer Category | Accelerated Filer | ||
Entity Emerging Growth Company | false | ||
Entity Small Business | true | ||
Entity Shell Company | false | ||
Entity Public Float | $ 136,593,960 | ||
Entity Common Stock, Shares Outstanding | 5,914,304 | ||
Document Fiscal Period Focus | FY | ||
Document Fiscal Year Focus | 2019 | ||
Entity Interactive Data Current | Yes | ||
Entity Incorporation, State or Country Code | NC | ||
Entity File Number | 000-27205 |
Consolidated Balance Sheets
Consolidated Balance Sheets - USD ($) $ in Thousands | Dec. 31, 2019 | Dec. 31, 2018 |
Assets | ||
Cash and due from banks, including reserve requirements of $13,210 at 12/31/19 and $8,918 at 12/31/18 | $ 48,337 | $ 40,553 |
Interest-bearing deposits | 720 | 2,817 |
Federal funds sold | 3,330 | 0 |
Cash and cash equivalents | 52,387 | 43,370 |
Investment securities available for sale | 195,746 | 194,578 |
Other investments | 4,231 | 4,361 |
Total securities | 199,977 | 198,939 |
Mortgage loans held for sale | 4,417 | 680 |
Loans | 849,874 | 804,023 |
Less allowance for loan losses | (6,680) | (6,445) |
Net loans | 843,194 | 797,578 |
Premises and equipment, net | 18,604 | 18,450 |
Cash surrender value of life insurance | 16,319 | 15,936 |
Other real estate | 0 | 27 |
Right of use lease asset | 3,622 | 0 |
Accrued interest receivable and other assets | 16,362 | 18,271 |
Total assets | 1,154,882 | 1,093,251 |
Deposits: | ||
Non-interest bearing demand | 338,004 | 298,817 |
NOW, MMDA & savings | 516,757 | 475,223 |
Time, $250,000 or more | 34,269 | 16,239 |
Other time | 77,487 | 86,934 |
Total deposits | 966,517 | 877,213 |
Securities sold under agreements to repurchase | 24,221 | 58,095 |
Junior subordinated debentures | 15,619 | 20,619 |
Lease liability | 3,647 | 0 |
Accrued interest payable and other liabilities | 10,758 | 13,707 |
Total liabilities | 1,020,762 | 969,634 |
Commitments (Note 10) | ||
Shareholders' equity: | ||
Series A preferred stock, $1,000 stated value; authorized 5,000,000 shares; no shares issued and outstanding | 0 | 0 |
Common stock, no par value; authorized 20,000,000 shares; issued and outstanding 5,912,300 shares at December 31, 2019 and 5,995,256 and December 31, 2018 | 59,813 | 62,096 |
Retained earnings | 70,663 | 60,535 |
Accumulated other comprehensive income | 3,644 | 986 |
Total shareholders' equity | 134,120 | 123,617 |
Total liabilities and shareholders' equity | $ 1,154,882 | $ 1,093,251 |
Consolidated Balance Sheets (Pa
Consolidated Balance Sheets (Parenthetical) - USD ($) $ in Thousands | Dec. 31, 2019 | Dec. 31, 2018 |
Assets | ||
Cash and due from banks, reserve requirements | $ 13,210 | $ 8,918 |
Shareholders' equity: | ||
Series A preferred stock, stated value (in dollars per share) | $ 1,000 | $ 1,000 |
Series A preferred stock, shares authorized (in shares) | 5,000,000 | 5,000,000 |
Series A preferred stock, shares issued (in shares) | 0 | 0 |
Series A preferred stock, shares outstanding (in shares) | 0 | 0 |
Common stock, par value (in dollars per share) | $ 0 | $ 0 |
Common stock, shares authorized (in shares) | 20,000,000 | 20,000,000 |
Common stock, shares issued (in shares) | 5,912,300 | 5,995,256 |
Common stock, shares outstanding (in shares) | 5,912,300 | 5,995,256 |
Consolidated Statements of Earn
Consolidated Statements of Earnings - USD ($) $ in Thousands | 12 Months Ended | ||
Dec. 31, 2019 | Dec. 31, 2018 | Dec. 31, 2017 | |
Interest income: | |||
Interest and fees on loans | $ 43,301 | $ 38,654 | $ 34,888 |
Interest on due from banks | 213 | 304 | 219 |
Interest on federal funds sold | 331 | 0 | 0 |
Interest on investment securities: | |||
U.S. Government sponsored enterprises | 2,670 | 2,333 | 2,404 |
States and political subdivisions | 2,915 | 3,877 | 4,236 |
Other | 171 | 182 | 202 |
Total interest income | 49,601 | 45,350 | 41,949 |
Interest expense: | |||
NOW, MMDA & savings deposits | 1,596 | 769 | 598 |
Time deposits | 909 | 472 | 466 |
FHLB borrowings | 205 | 0 | 662 |
Junior subordinated debentures | 844 | 790 | 590 |
Other | 203 | 115 | 61 |
Total interest expense | 3,757 | 2,146 | 2,377 |
Net interest income | 45,844 | 43,204 | 39,572 |
Provision for (reduction of) loan losses | 863 | 790 | (507) |
Net interest income after provision for loan losses | 44,981 | 42,414 | 40,079 |
Non-interest income: | |||
Service charges | 4,576 | 4,355 | 4,453 |
Other service charges and fees | 714 | 705 | 593 |
Gain on sale of securities | 226 | 15 | 0 |
Mortgage banking income | 1,264 | 851 | 1,190 |
Insurance and brokerage commissions | 877 | 824 | 761 |
Appraisal management fee income | 4,484 | 3,206 | 3,306 |
Gain (loss) on sales and write-downs of other real estate | (11) | 17 | (239) |
Miscellaneous | 5,609 | 6,193 | 5,300 |
Total non-interest income | 17,739 | 16,166 | 15,364 |
Non-interest expense: | |||
Salaries and employee benefits | 23,238 | 21,530 | 20,058 |
Occupancy | 7,364 | 7,170 | 6,701 |
Professional fees | 1,490 | 1,525 | 1,236 |
Advertising | 1,021 | 922 | 1,195 |
Debit card expense | 890 | 994 | 1,248 |
FDIC insurance | 119 | 328 | 347 |
Appraisal management fee expense | 3,421 | 2,460 | 2,526 |
Other | 7,974 | 7,645 | 7,917 |
Total non-interest expense | 45,517 | 42,574 | 41,228 |
Earnings before income taxes | 17,203 | 16,006 | 14,215 |
Income tax expense | 3,136 | 2,624 | 3,947 |
Net earnings | $ 14,067 | $ 13,382 | $ 10,268 |
Basic net earnings per share | $ 2.37 | $ 2.23 | $ 1.71 |
Diluted net earnings per share | 2.36 | 2.22 | 1.69 |
Cash dividends declared per share | $ 0.66 | $ 0.52 | $ 0.44 |
Consolidated Statements of Comp
Consolidated Statements of Comprehensive Income - USD ($) $ in Thousands | 12 Months Ended | ||
Dec. 31, 2019 | Dec. 31, 2018 | Dec. 31, 2017 | |
Statement of Comprehensive Income [Abstract] | |||
Net earnings | $ 14,067 | $ 13,382 | $ 10,268 |
Other comprehensive income (loss): | |||
Unrealized holding losses on securities available for sale | 3,677 | (3,370) | (355) |
Reclassification adjustment for gains on securities available for sale included in net earnings | (226) | (15) | 0 |
Total other comprehensive loss, before income taxes | 3,451 | (3,385) | (355) |
Income tax benefit related to other comprehensive loss: | |||
Unrealized holding losses on securities available for sale | 845 | (774) | (354) |
Reclassification adjustment for gains on securities available for sale included in net earnings | (52) | (4) | 0 |
Total income tax benefit related to other comprehensive loss | 793 | (778) | (354) |
Total other comprehensive loss, net of tax | 2,658 | (2,607) | (1) |
Total comprehensive income | $ 16,725 | $ 10,775 | $ 10,267 |
Consolidated Statements of Chan
Consolidated Statements of Changes in Shareholders' Equity - USD ($) $ in Thousands | Common Stock | Retained Earnings | Accumulated Other Comprehensive Income (Loss) | Total |
Beginning Balance, Shares at Dec. 31, 2016 | 5,417,800 | |||
Beginning Balance, Amount at Dec. 31, 2016 | $ 44,187 | $ 60,254 | $ 2,987 | $ 107,428 |
Cash dividends declared on common stock | (2,629) | (2,629) | ||
Restricted stock units exercised, Shares | 32,612 | |||
Restricted stock units exercised, Amount | $ (915) | (915) | ||
Net earnings | 10,268 | 10,268 | ||
Change in accumulated other comprehensive income due to Tax Cuts and Jobs Act | (607) | 607 | ||
Change in accumulated other comprehensive income, net of tax | (1) | (1) | ||
Ending Balance, Shares at Dec. 31, 2017 | 5,995,256 | |||
Ending Balance, Amount at Dec. 31, 2017 | $ 62,096 | 50,286 | 3,593 | 115,975 |
Common stock repurchase, Amount | (3,133) | (3,133) | ||
Restricted stock units exercised, Amount | 0 | |||
Net earnings | 13,382 | 13,382 | ||
Change in accumulated other comprehensive income, net of tax | (2,607) | (2,607) | ||
Ending Balance, Shares at Dec. 31, 2018 | 5,995,256 | |||
Ending Balance, Amount at Dec. 31, 2018 | $ 62,096 | 60,535 | 986 | 123,617 |
Common stock repurchase, Shares | (90,354) | |||
Common stock repurchase, Amount | $ (2,490) | (2,490) | ||
Cash dividends declared on common stock | (3,939) | (3,939) | ||
Restricted stock units exercised, Shares | 7,398 | |||
Restricted stock units exercised, Amount | $ 207 | 207 | ||
Net earnings | 14,067 | 14,067 | ||
Change in accumulated other comprehensive income, net of tax | 2,658 | 2,658 | ||
Ending Balance, Shares at Dec. 31, 2019 | 5,912,300 | |||
Ending Balance, Amount at Dec. 31, 2019 | $ 59,813 | $ 70,663 | $ 3,644 | $ 134,120 |
Consolidated Statements of Cash
Consolidated Statements of Cash Flows - USD ($) $ in Thousands | 12 Months Ended | ||
Dec. 31, 2019 | Dec. 31, 2018 | Dec. 31, 2017 | |
Cash flows from operating activities: | |||
Net earnings | $ 14,067 | $ 13,382 | $ 10,268 |
Adjustments to reconcile net earnings to net cash provided by operating activities: | |||
Depreciation, amortization and accretion | 3,964 | 4,571 | 5,018 |
Provision for (reduction of) loan losses | 863 | 790 | (507) |
Deferred income taxes | 176 | 78 | 2,120 |
Gain on sale of investment securities | (226) | (15) | 0 |
Gain on sale of other real estate | (6) | (17) | 0 |
Write-down of other real estate | 17 | 0 | 239 |
Gain (loss) on sale of premises and equipment | 239 | (544) | 0 |
Restricted stock expense | 270 | 85 | 592 |
Proceeds from sales of loans held for sale | 56,364 | 35,922 | 59,193 |
Origination of loans held for sale | (60,101) | (35,745) | (54,341) |
Change in: | |||
Cash surrender value of life insurance | (383) | (384) | (600) |
Right of use lease asset | 787 | 0 | 0 |
Other assets | 940 | (3,695) | (3,982) |
Lease liability | (762) | 0 | 0 |
Other liabilities | (3,012) | 2,759 | 594 |
Net cash provided by operating activities | 13,197 | 17,187 | 18,594 |
Cash flows from investing activities: | |||
Purchases of investment securities available for sale | (54,212) | (34,692) | (10,014) |
Proceeds from sales, calls and maturities of investment securities available for sale | 40,561 | 48,241 | 10,162 |
Proceeds from paydowns of investment securities available for sale | 14,489 | 15,556 | 17,202 |
Purchases of other investments | (45) | (2,611) | (45) |
Proceeds from paydowns of other investment securities | 176 | 117 | 0 |
Net change in FHLB stock | (1) | (4) | 850 |
Net change in loans | (46,505) | (45,094) | (36,748) |
Purchases of premises and equipment | (2,835) | (1,742) | (5,557) |
Proceeds from sale of premises and equipment | 149 | 1,410 | 0 |
Proceeds from sale of other real estate and repossessions | 42 | 232 | 44 |
Net cash used by investing activities | (48,181) | (18,587) | (24,106) |
Cash flows from financing activities: | |||
Net change in deposits | 89,304 | (29,739) | 14,034 |
Net change in securities sold under agreement to repurchase | (33,874) | 20,338 | 1,323 |
Proceeds from FHLB borrowings | 184,500 | 0 | 1 |
Repayments of FHLB borrowings | (184,500) | 0 | (20,001) |
Proceeds from FRB borrowings | 1 | 1 | 1 |
Repayments of FRB borrowings | (1) | (1) | (1) |
Proceeds from Fed Funds Purchased | 100,252 | 4,277 | 187 |
Repayments of Fed Funds Purchased | (100,252) | (4,277) | (187) |
Repayments of Junior Subordinated Debentures | (5,000) | 0 | 0 |
Common stock repurchased | (2,490) | 0 | 0 |
Cash dividends paid in lieu of fractional shares | 0 | 0 | (6) |
Cash dividends paid on common stock | (3,939) | (3,133) | (2,629) |
Net cash (used) provided by financing activities | 44,001 | (12,534) | (7,278) |
Net change in cash and cash equivalents | 9,017 | (13,934) | (12,790) |
Cash and cash equivalents at beginning of period | 43,370 | 57,304 | 70,094 |
Cash and cash equivalents at end of period | 52,387 | 43,370 | 57,304 |
Cash paid during the year for: | |||
Interest | 3,750 | 2,128 | 2,526 |
Income taxes | 3,206 | 1,163 | 2,408 |
Noncash investing and financing activities: | |||
Change in unrealized gain (loss) on investment securities available for sale, net | 2,658 | (2,607) | (1) |
Transfer of loans to other real estate and repossessions | 26 | 124 | 118 |
Issuance of accrued restricted stock units | 207 | 0 | (915) |
Initial recognition of lease right of use asset and lease liability recorded upon adoption of ASU 2016002 | 4,401 | 0 | 0 |
Recognition of right of use lease asset and lease liability | $ 8 | $ 0 | $ 0 |
1. Summary of Significant Accou
1. Summary of Significant Accounting Policies | 12 Months Ended |
Dec. 31, 2019 | |
Accounting Policies [Abstract] | |
1. Summary of Significant Accounting Policies | Organization Peoples Bancorp of North Carolina, Inc. (“Bancorp”) received regulatory approval to operate as a bank holding company on July 22, 1999, and became effective August 31, 1999. Bancorp is primarily regulated by the Board of Governors of the Federal Reserve System, and serves as the one-bank holding company for Peoples Bank (the “Bank”). The Bank commenced business in 1912 upon receipt of its banking charter from the North Carolina Commissioner of Banks (the “Commissioner”). The Bank is primarily regulated by the Commissioner and the Federal Deposit Insurance Corporation (the “FDIC”) and undergoes periodic examinations by these regulatory agencies. The Bank, whose main office is in Newton, North Carolina, provides a full range of commercial and consumer banking services primarily in Catawba, Alexander, Lincoln, Mecklenburg, Iredell, Wake and Durham counties in North Carolina. Peoples Investment Services, Inc. (“PIS”) is a wholly owned subsidiary of the Bank and began operations in 1996 to provide investment and trust services through agreements with an outside party. Real Estate Advisory Services, Inc. (“REAS”) is a wholly owned subsidiary of the Bank and began operations in 1997 to provide real estate appraisal and property management services to individuals and commercial customers of the Bank. Community Bank Real Estate Solutions, LLC (“CBRES”) is a wholly owned subsidiary of the Bank and began operations in 2009 as a “clearing house” for appraisal services for community banks. Other banks are able to contract with CBRES to find and engage appropriate appraisal companies in the area where the property is located. In 2019, the Company lauched PB Insurance Agency, which is part of CBRES. PB Real Estate Holdings, LLC (“PBREH”) is a wholly owned subsidiary of the Bank and began operation in 2015. PBREH acquires, manages and disposes of real property, other collateral and other assets obtained in the ordinary course of collecting debts previously contracted. The Bank operates three banking offices focused on the Latino population that were formerly operated as a division of the Bank under the name Banco de la Gente (“Banco”). These offices are now branded as Bank branches and considered a separate market territory of the Bank as they offer normal and customary banking services as are offered in the Bank’s other branches such as the taking of deposits and the making of loans. Principles of Consolidation The consolidated financial statements include the financial statements of Bancorp and its wholly owned subsidiary, the Bank, along with the Bank’s wholly owned subsidiaries, Peoples Investment Services, Inc., REAS, CBRES and PBREH (collectively called the “Company”). All significant intercompany balances and transactions have been eliminated in consolidation. Basis of Presentation The accounting principles followed by the Company, and the methods of applying these principles, conform with accounting principles generally accepted in the United States of America (“GAAP”) and with general practices in the banking industry. In preparing the financial statements in conformity with GAAP, management is required to make estimates and assumptions that affect the reported amounts in the financial statements. Actual results could differ significantly from these estimates. Material estimates common to the banking industry that are particularly susceptible to significant change in the near term include, but are not limited to, the determination of the allowance for loan losses and valuation of real estate acquired in connection with or in lieu of foreclosure on loans. Cash and Cash Equivalents Cash, due from banks, interest-bearing deposits and federal funds sold are considered cash and cash equivalents for cash flow reporting purposes. Investment Securities There are three classifications the Company is able to classify its investment securities: trading, available for sale, or held to maturity. Trading securities are bought and held principally for sale in the near term. Held to maturity securities are those securities for which the Company has the ability and intent to hold until maturity. All other securities not included in trading or held to maturity are classified as available for sale. At December 31, 2019 and 2018, the Company classified all of its investment securities as available for sale. Available for sale securities are recorded at fair value. Unrealized holding gains and losses, net of the related tax effect, are excluded from earnings and are reported as a separate component of shareholders’ equity until realized. Management evaluates investment securities for other-than-temporary impairment on an annual basis. A decline in the market value of any investment below cost that is deemed other-than-temporary is charged to earnings for the decline in value deemed to be credit related and a new cost basis in the security is established. The decline in value attributed to non-credit related factors is recognized in comprehensive income. Premiums and discounts are amortized or accreted over the life of the related security as an adjustment to the yield. Realized gains and losses for securities classified as available for sale are included in earnings and are derived using the specific identification method for determining the cost of securities sold. Other Investments Other investments include equity securities with no readily determinable fair value. These investments are carried at cost. Mortgage Loans Held for Sale Mortgage loans held for sale are carried at lower of aggregate cost or market value. The cost of mortgage loans held for sale approximates the market value. Loans Loans that management has the intent and ability to hold for the foreseeable future or until maturity are reported at the principal amount outstanding, net of the allowance for loan losses. Interest on loans is calculated by using the simple interest method on daily balances of the principal amount outstanding. The recognition of certain loan origination fee income and certain loan origination costs is deferred when such loans are originated and amortized over the life of the loan. A loan is impaired when, based on current information and events, it is probable that all amounts due according to the contractual terms of the loan will not be collected. Impaired loans are measured based on the present value of expected future cash flows, discounted at the loan’s effective interest rate, or at the loan’s observable market price, or the fair value of the collateral if the loan is collateral dependent. Accrual of interest is discontinued on a loan when management believes, after considering economic conditions and collection efforts, that the borrower’s financial condition is such that collection of interest is doubtful. Interest previously accrued but not collected is reversed against current period earnings. Allowance for Loan Losses The allowance for loan losses reflects management’s assessment and estimate of the risks associated with extending credit and its evaluation of the quality of the loan portfolio. The Bank periodically analyzes the loan portfolio in an effort to review asset quality and to establish an allowance for loan losses that management believes will be adequate in light of anticipated risks and loan losses. In assessing the adequacy of the allowance, size, quality and risk of loans in the portfolio are reviewed. Other factors considered are: ● the Bank’s loan loss experience; ● the amount of past due and non-performing loans; ● specific known risks; ● the status and amount of other past due and non-performing assets; ● underlying estimated values of collateral securing loans; ● current and anticipated economic conditions; and ● other factors which management believes affect the allowance for potential credit losses. Management uses several measures to assess and monitor the credit risks in the loan portfolio, including a loan grading system that begins upon loan origination and continues until the loan is collected or collectability becomes doubtful. Upon loan origination, the Bank’s originating loan officer evaluates the quality of the loan and assigns one of eight risk grades. The loan officer monitors the loan’s performance and credit quality and makes changes to the credit grade as conditions warrant. When originated or renewed, all loans over a certain dollar amount receive in-depth reviews and risk assessments by the Bank’s Credit Administration. Before making any changes in these risk grades, management considers assessments as determined by the third party credit review firm (as described below), regulatory examiners and the Bank’s Credit Administration. Any issues regarding the risk assessments are addressed by the Bank’s senior credit administrators and factored into management’s decision to originate or renew the loan. The Bank’s Board of Directors reviews, on a monthly basis, an analysis of the Bank’s reserves relative to the range of reserves estimated by the Bank’s Credit Administration. As an additional measure, the Bank engages an independent third party to review the underwriting, documentation and risk grading analyses. This independent third party reviews and evaluates loan relationships greater than $1.0 million, excluding loans in default, and loans in process of litigation or liquidation. The third party’s evaluation and report is shared with management and the Bank’s Board of Directors. Management considers certain commercial loans with weak credit risk grades to be individually impaired and measures such impairment based upon available cash flows and the value of the collateral. Allowance or reserve levels are estimated for all other graded loans in the portfolio based on their assigned credit risk grade, type of loan and other matters related to credit risk. Management uses the information developed from the procedures described above in evaluating and grading the loan portfolio. This continual grading process is used to monitor the credit quality of the loan portfolio and to assist management in estimating the allowance for loan losses. The provision for loan losses charged or credited to earnings is based upon management’s judgment of the amount necessary to maintain the allowance at a level appropriate to absorb probable incurred losses in the loan portfolio at the balance sheet date. The amount each quarter is dependent upon many factors, including growth and changes in the composition of the loan portfolio, net charge-offs, delinquencies, management’s assessment of loan portfolio quality, the value of collateral, and other macro-economic factors and trends. The evaluation of these factors is performed quarterly by management through an analysis of the appropriateness of the allowance for loan losses. The allowance for loan losses is comprised of three components: specific reserves, general reserves and unallocated reserves. After a loan has been identified as impaired, management measures impairment. When the measure of the impaired loan is less than the recorded investment in the loan, the amount of the impairment is recorded as a specific reserve. These specific reserves are determined on an individual loan basis based on management’s current evaluation of the Bank’s loss exposure for each credit, given the appraised value of any underlying collateral. Loans for which specific reserves are provided are excluded from the general allowance calculations as described below. The general allowance reflects reserves established under GAAP for collective loan impairment. These reserves are based upon historical net charge-offs using the greater of the last two, three, four or five years’ loss experience. This charge-off experience may be adjusted to reflect the effects of current conditions. The Bank considers information derived from its loan risk ratings and external data related to industry and general economic trends in establishing reserves. The unallocated allowance is determined through management’s assessment of probable losses that are in the portfolio but are not adequately captured by the other two components of the allowance, including consideration of current economic and business conditions and regulatory requirements. The unallocated allowance also reflects management’s acknowledgement of the imprecision and subjectivity that underlie the modeling of credit risk. Due to the subjectivity involved in determining the overall allowance, including the unallocated portion, the unallocated portion may fluctuate from period to period based on management’s evaluation of the factors affecting the assumptions used in calculating the allowance. There were no significant changes in the estimation methods or fundamental assumptions used in the evaluation of the allowance for loan losses for the year ended December 31, 2019 as compared to the year ended December 31, 2018. Revisions, estimates and assumptions may be made in any period in which the supporting factors indicate that loss levels may vary from the previous estimates. Effective December 31, 2012, certain mortgage loans from the former Banco division of the Bank were analyzed separately from other single family residential loans in the Bank’s loan portfolio. These loans are first mortgage loans made to the Latino market, primarily in Mecklenburg, North Carolina and surrounding counties. These loans are non-traditional mortgages in that the customer normally did not have a credit history, so all credit information was accumulated by the loan officers. Various regulatory agencies, as an integral part of their examination process, periodically review the Bank’s allowance for loan losses. Such agencies may require adjustments to the allowance based on their judgments of information available to them at the time of their examinations. Management believes it has established the allowance for credit losses pursuant to GAAP, and has taken into account the views of its regulators and the current economic environment. Management considers the allowance for loan losses adequate to cover the estimated losses inherent in the Bank’s loan portfolio as of the date of the financial statements. Although management uses the best information available to make evaluations, significant future additions to the allowance may be necessary based on changes in economic and other conditions, thus adversely affecting the operating results of the Company. Mortgage Banking Activities Mortgage banking income represents net gains from the sale of mortgage loans and fees received from borrowers and loan investors related to the Bank’s origination of single-family residential mortgage loans. Mortgage loans serviced for others are not included in the accompanying balance sheets. The unpaid principal balances of mortgage loans serviced for others was approximately $729,000, $866,000 and $1.0 million at December 31, 2019, 2018 and 2017, respectively. The Bank originates certain fixed rate mortgage loans and commits these loans for sale. The commitments to originate fixed rate mortgage loans and the commitments to sell these loans to a third party are both derivative contracts. The fair value of these derivative contracts is immaterial and has no effect on the recorded amounts in the financial statements. Premises and Equipment Premises and equipment are stated at cost less accumulated depreciation. Depreciation is computed primarily using the straight-line method over the estimated useful lives of the assets. When assets are retired or otherwise disposed, the cost and related accumulated depreciation are removed from the accounts, and any gain or loss is reflected in earnings for that period. The cost of maintenance and repairs that do not improve or extend the useful life of the respective asset is charged to earnings as incurred, whereas significant renewals and improvements are capitalized. The range of estimated useful lives for premises and equipment are generally as follows: Buildings and improvements 10 - 50 years Furniture and equipment 3 - 10 years Other Real Estate Foreclosed assets include all assets received in full or partial satisfaction of a loan. Foreclosed assets are reported at fair value less estimated selling costs. Any write-downs at the time of foreclosure are charged to the allowance for loan losses. Subsequent to foreclosure, valuations are periodically performed by management, and a valuation allowance is established if fair value less estimated selling costs declines below carrying value. Costs relating to the development and improvement of the property are capitalized. Revenues and expenses from operations are included in other expenses. Changes in the valuation allowance are included in loss on sale and write-down of other real estate. Income Taxes Deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases. Additionally, the recognition of future tax benefits, such as net operating loss carryforwards, is required to the extent that the realization of such benefits is more likely than not to occur. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which the assets and liabilities are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income tax expense in the period that includes the enactment date. In the event the future tax consequences of differences between the financial reporting bases and the tax bases of the Company’s assets and liabilities results in a deferred tax asset, an evaluation of the probability of being able to realize the future benefits indicated by such asset is required. A valuation allowance is provided for the portion of the deferred tax asset when it is more likely than not that some portion or all of the deferred tax asset will not be realized. In assessing the realizability of a deferred tax asset, management considers the scheduled reversals of deferred tax liabilities, projected future taxable income, and tax planning strategies. Tax effects from an uncertain tax position can be recognized in the financial statements only when it is more likely than not that the tax position will be sustained upon examination by the appropriate taxing authority that would have full knowledge of all relevant information. A tax position that meets the more likely than not recognition threshold is measured at the largest amount of benefit that is greater than fifty percent likely of being realized upon ultimate settlement. Previously recognized tax positions that no longer meet the more likely than not recognition threshold should be derecognized in the first subsequent financial reporting period in which that threshold is no longer met. The Company assessed the impact of this guidance and determined that it did not have a material impact on the Company’s financial position, results of operations or disclosures. Derivative Financial Instruments and Hedging Activities In the normal course of business, the Company enters into derivative contracts to manage interest rate risk by modifying the characteristics of the related balance sheet instruments in order to reduce the adverse effect of changes in interest rates. All material derivative financial instruments are recorded at fair value in the financial statements. The fair value of derivative contracts related to the origination of fixed rate mortgage loans and the commitments to sell these loans to a third party is immaterial and has no effect on the recorded amounts in the financial statements. The disclosure requirements for derivatives and hedging activities have the intent to provide users of financial statements with an enhanced understanding of: (a) how and why an entity uses derivative instruments, (b) how derivative instruments and related hedged items are accounted for and (c) how derivative instruments and related hedged items affect an entity’s financial position, financial performance, and cash flows. The disclosure requirements include qualitative disclosures about objectives and strategies for using derivatives, quantitative disclosures about the fair value of, and gains and losses on, derivative instruments, and disclosures about credit-risk-related contingent features in derivative instruments. On the date a derivative contract is entered into, the Company designates the derivative as a fair value hedge, a cash flow hedge, or a trading instrument. Changes in the fair value of instruments used as fair value hedges are accounted for in the earnings of the period simultaneous with accounting for the fair value change of the item being hedged. Changes in the fair value of the effective portion of cash flow hedges are accounted for in other comprehensive income rather than earnings. Changes in fair value of instruments that are not intended as a hedge are accounted for in the earnings of the period of the change. If a derivative instrument designated as a fair value hedge is terminated or the hedge designation removed, the difference between a hedged item’s then carrying amount and its face amount is recognized into income over the original hedge period. Likewise, if a derivative instrument designated as a cash flow hedge is terminated or the hedge designation removed, related amounts accumulated in other accumulated comprehensive income are reclassified into earnings over the original hedge period during which the hedged item affects income. The accounting for changes in the fair value of derivatives depends on the intended use of the derivative, whether the Company has elected to designate a derivative in a hedging relationship and apply hedge accounting and whether the hedging relationship has satisfied the criteria necessary to apply hedge accounting. Derivatives designated and qualifying as a hedge of the exposure to changes in the fair value of an asset, liability, or firm commitment attributable to a particular risk, such as interest rate risk, are considered fair value hedges. Derivatives designated and qualifying as a hedge of the exposure to variability in expected future cash flows, or other types of forecasted transactions, are considered cash flow hedges. Hedge accounting generally provides for the matching of the timing of gain or loss recognition on the hedging instrument with the recognition of the changes in the fair value of the hedged asset or liability that are attributable to the hedged risk in a fair value hedge or the earnings effect of the hedged forecasted transactions in a cash flow hedge. The Company may enter into derivative contracts that are intended to economically hedge certain of its risks, even though hedge accounting does not apply or the Company elects not to apply hedge accounting. The Company formally documents all hedging relationships, including an assessment that the derivative instruments are expected to be highly effective in offsetting the changes in fair values or cash flows of the hedged items. Advertising Costs Advertising costs are expensed as incurred. Stock-Based Compensation The Company has an Omnibus Stock Ownership and Long Term Incentive Plan that was approved by shareholders on May 7, 2009 (the “Plan”) whereby certain stock-based rights, such as stock options, restricted stock, restricted stock units, performance units, stock appreciation rights or book value shares, may be granted to eligible directors and employees. No shares were available for issuance under the Plan at December 31, 2019 as all stock-based rights under the Plan must have been granted or awarded by May 7, 2019 (i.e., ten years from the Plan effective date). The Company granted 32,465 restricted stock units under the Plan at a grant date fair value of $7.18 per share during the first quarter of 2012, of which 5,891 restricted stock units were forfeited by the executive officers of the Company as required by the agreement with the U.S. Department of the Treasury in conjunction with the Company’s participation in the Capital Purchase Program under the Troubled Asset Relief Program. In July 2012, the Company granted 5,891 restricted stock units at a grant date fair value of $7.50 per share. The Company granted 29,475 restricted stock units under the Plan at a grant date fair value of $10.82 per share during the second quarter of 2013. The Company granted 23,162 restricted stock units under the Plan at a grant date fair value of $14.27 per share during the first quarter of 2014. The Company granted 16,583 restricted stock units under the Plan at a grant date fair value of $16.34 per share during the first quarter of 2015. The Company granted 5,544 restricted stock units under the Plan at a grant date fair value of $16.91 per share during the first quarter of 2016. The Company granted 4,114 restricted stock units under the Plan at a grant date fair value of $25.00 per share during the first quarter of 2017. The Company granted 3,725 restricted stock units under the Plan at a grant date fair value of $31.43 per share during the first quarter of 2018. The Company granted 5,290 restricted stock units under the Plan at a grant date fair value of $28.43 per share during the first quarter of 2019. The number of restricted stock units granted and grant date fair values for the restricted stock units granted in 2012 through 2017 have been restated to reflect the 10% stock dividend that was paid in the fourth quarter of 2017 The Company recognized compensation expense for restricted stock units granted under the Plan of $270,000, $85,000 and $592,000 for the years ended December 31, 2019, 2018 and 2017, respectively. Net Earnings Per Share Net earnings per common share is based on the weighted average number of common shares outstanding during the period while the effects of potential common shares outstanding during the period are included in diluted earnings per common share. The average market price during the year is used to compute equivalent shares. The reconciliations of the amounts used in the computation of both “basic earnings per common share” and “diluted earnings per common share” for the years ended December 31, 2019, 2018 and 2017 are as follows: For the year ended December 31, 2019 Net Earnings Weighted Average Per Share Amount Basic earnings per share $ 14,067 5,941,873 $ 2.37 Effect of dilutive securities: Restricted stock units — 25,438 Diluted earnings per share $ 14,067 5,967,311 $ 2.36 For the year ended December 31, 2018 Net Earnings Weighted Average Per Share Amount Basic earnings per share $ 13,382 5,995,256 $ 2.23 Effect of dilutive securities: Restricted stock units — 20,240 Diluted earnings per share $ 13,382 6,015,496 $ 2.22 For the year ended December 31, 2017 Net Earnings Weighted Average Per Share Amount Basic earnings per share $ 10,268 5,988,183 $ 1.71 Effect of dilutive securities: Restricted stock units — 74,667 Diluted earnings per share $ 10,268 6,062,850 $ 1.69 Recent Accounting Pronouncements The following tables provide a summary of Accounting Standards Updates (“ASU”) issued by the Financial Accounting Standards Board (“FASB”) that the Company has recently adopted. Recently Adopted Accounting Guidance ASU Description Effective Date Effect on Financial Statements or Other Significant Matters ASU 2014-09: Revenue from Contracts with Customers Provides guidance on the recognition of revenue from contracts with customers. The core principle of this guidance is that an entity should recognize revenue to reflect the transfer of goods and services to customers in an amount equal to the consideration the entity receives or expects to receive. January 1, 2018 See section titled "ASU 2014-09" below for a description of the effect on the Company’s results of operations, financial position and disclosures. ASU 2016-01: Recognition and Measurement of Financial Assets and Financial Liabilities Addresses certain aspects of recognition, measurement, presentation, and disclosure of financial instruments. January 1, 2018 The adoption of this guidance did not have a material impact on the Company’s results of operations, financial position or disclosures. ASU 2017-07: Improving the Presentation of Net Periodic Pension Cost and Net Periodic Postretirement Benefit Costs Amended the requirements related to the income statement presentation of the components of net periodic benefit cost for an entity’s sponsored defined benefit pension and other postretirement plans. January 1, 2018 The adoption of this guidance did not have a material impact on the Company’s results of operations, financial position or disclosures. ASU 2017-09: Scope of Modification Accounting Amended the requirements related to changes to the terms or conditions of a share-based payment award. January 1, 2018 The adoption of this guidance did not have a material impact on the Company’s results of operations, financial position or disclosures. ASU 2017-14: Income Statement—Reporting Comprehensive, Income (Topic 220), Revenue Recognition (Topic 605), and Revenue from Contracts with Customers (Topic 606) Incorporates into the Accounting Standards Codification ("ASC") recent Securities and Exchange Commission ("SEC") guidance related to revenue recognition. Effective upon issuance The adoption of this guidance did not have a material impact on the Company’s results of operations, financial position or disclosures. ASU Description Effective Date Effect on Financial Statements or Other Significant Matters ASU 2018-03: Technical Corrections and Improvements to Financial Instruments—Overall (Subtopic 825-10) Recognition and Measurement of Financial Assets and Financial Liabilities Clarifies certain aspects of the guidance issued in ASU 2016-01. January 1, 2018 The adoption of this guidance did not have a material impact on the Company’s results of operations, financial position or disclosures. ASU 2018-04: Investments—Debt Securities (Topic 320) and Regulated Operations (Topic 980): Amendments to SEC Paragraphs Pursuant to SEC Staff Accounting Bulletin No. 117 and SEC Release No. 33-9273 (SEC Update) Incorporates recent SEC guidance which was issued in order to make the relevant interpretive guidance consistent with current authoritative accounting and auditing guidance and SEC rules and regulation. Effective upon issuance The adoption of this guidance did not have a material impact on the Company’s results of operations, financial position or disclosures. ASU 2018-06: Codification Improvements to Topic 942: Financial Services—Depository and Lending Eliminates a reference to the Office of the Comptroller of the Currency’s Banking Circular 202, Accounting for Net Deferred Tax Charges, from the ASC. The Office of the Comptroller of the Currency published the guidance in 1985 but has since rescinded it. Effective upon issuance The adoption of this guidance did not have a material impact on the Company’s results of operations, financial position or disclosures. ASU 2016-02: Leases Increases transparency and comparability among organizations by recognizing lease assets and lease liabilities on the balance sheet and disclosing key information about leasing arrangements. January 1, 2019 See section titled "ASU 2016-02" below for a description of the effect on the Company’s results of operations, financial position and disclosures. ASU 2017-08: Premium Amortization on Purchased Callable Debt Securities Amended the requirements related to the amortization period for certain purchased callable debt securities held at a premium. January 1, 2019 The adoption of this guidance did not have a material impact on the Company’s results of operations, financial position or disclosures. ASU 2018-11: Leases (Topic 842): Targeted Improvements Intended to reduce costs and ease implementation of ASU 2016-02. January 1, 2019 The adoption of this guidance did not have a material impact on the Company’s results of operations, financial position or disclosures. ASU 2018-20: Narrow- Scope Improvements for Lessors Provides narrow-scope improvements for lessors, that provide relief in the accounting for sales, use and similar taxes, the accounting for other costs paid by a lessee that may benefit a lessor, and variable payments when contracts have lease and non-lease components. January 1, 2019 See comments for ASU 2016-02 below. ASU 2019-07: Codification Updates to SEC Sections Guidance updated for various Topics of the Accounting Standards Codification to align the guidance in various SEC sections of the Codification with the |
2. Investment Securities
2. Investment Securities | 12 Months Ended |
Dec. 31, 2019 | |
Investments, Debt and Equity Securities [Abstract] | |
Investment Securities | Investment securities available for sale at December 31, 2019 and 2018 are as follows: (Dollars in thousands) December 31, 2019 Amortized Cost Gross Unrealized Gains Gross Unrealized Losses Estimated Fair Value Mortgage-backed securities $ 77,812 1,371 227 78,956 U.S. Government sponsored enterprises 28,265 443 311 28,397 State and political subdivisions 84,686 3,657 200 88,143 Trust preferred securities 250 — — 250 Total $ 191,013 5,471 738 195,746 (Dollars in thousands) December 31, 2018 Amortized Cost Gross Unrealized Gains Gross Unrealized Losses Estimated Fair Value Mortgage-backed securities $ 52,145 516 558 52,103 U.S. Government sponsored enterprises 35,356 71 793 34,634 State and political subdivisions 105,545 2,089 43 107,591 Trust preferred securities 250 — — 250 Total $ 193,296 2,676 1,394 194,578 The current fair value and associated unrealized losses on investments in debt securities with unrealized losses at December 31, 2019 and 2018 are summarized in the tables below, with the length of time the individual securities have been in a continuous loss position. (Dollars in thousands) December 31, 2019 Less than 12 Months 12 Months or More Total Fair Value Unrealized Losses Fair Value Unrealized Losses Fair Value Unrealized Losses Mortgage-backed securities $ 28,395 177 6,351 50 34,746 227 U.S. Government sponsored enterprises 2,899 10 6,151 301 9,050 311 State and political subdivisions 7,367 200 — — 7,367 200 Total $ 38,661 387 12,502 351 51,163 738 (Dollars in thousands) December 31, 2018 Less than 12 Months 12 Months or More Total Fair Value Unrealized Losses Fair Value Unrealized Losses Fair Value Unrealized Losses Mortgage-backed securities $ 6,932 56 17,670 502 24,602 558 U.S. Government sponsored enterprises 1,784 69 25,172 724 26,956 793 State and political subdivisions 4,815 26 1,578 17 6,393 43 Total $ 13,531 151 44,420 1,243 57,951 1,394 At December 31, 2019, unrealized losses in the investment securities portfolio relating to debt securities totaled $738,000. The unrealized losses on these debt securities arose due to changing interest rates and are considered to be temporary. From the December 31, 2019 tables above, seven out of 90 securities issued by state and political subdivisions contained unrealized losses and 24 out of 57 securities issued by U.S. Government sponsored enterprises, including mortgage-backed securities, contained unrealized losses. These unrealized losses are considered temporary because of acceptable financial condition and results of operations on each security and the repayment sources of principal and interest on U.S. Government sponsored enterprises, including mortgage-backed securities, are government backed. The Company periodically evaluates its investments for any impairment which would be deemed other-than-temporary. No investment impairments were deemed other-than-temporary in 2019, 2018 or 2017. The amortized cost and estimated fair value of investment securities available for sale at December 31, 2019, by contractual maturity, are shown below. Expected maturities of mortgage-backed securities will differ from contractual maturities because borrowers have the right to call or prepay obligations with or without call or prepayment penalties. December 31, 2019 (Dollars in thousands) Amortized Cost Estimated Fair Value Due within one year $ 5,490 5,465 Due from one to five years 56,399 58,315 Due from five to ten years 47,717 49,293 Due after ten years 3,595 3,717 Mortgage-backed securities 77,812 78,956 Total $ 191,013 195,746 During 2019, proceeds from sales of securities available for sale were $20.7 million and resulted in net gains of $226,000. During 2018, proceeds from sales of securities available for sale were $36.0 million and resulted in gross gains of $15,000. No securities available for sale were sold during the year ended December 31, 2017. Securities with a fair value of approximately $66.0 million and $93.0 million at December 31, 2019 and 2018, respectively, were pledged to secure public deposits, FHLB of Atlanta (“FHLB”) borrowings and for other purposes as required by law. GAAP establishes a framework for measuring fair value and expands disclosures about fair value measurements. There is a three-level fair value hierarchy for fair value measurements. Level 1 inputs are quoted prices in active markets for identical assets or liabilities that a company has the ability to access at the measurement date. Level 2 inputs are inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly or indirectly. Level 3 inputs are unobservable inputs for the asset or liability. The table below presents the balance of securities available for sale, which are measured at fair value on a recurring basis by level within the fair value hierarchy as of December 31, 2019 and 2018. (Dollars in thousands) December 31, 2019 Fair Value Measurements Level 1 Valuation Level 2 Valuation Level 3 Valuation Mortgage-backed securities $ 78,956 — 78,956 — U.S. Government sponsored enterprises $ 28,397 — 28,397 — State and political subdivisions $ 88,143 — 88,143 — Trust preferred securities $ 250 — — 250 (Dollars in thousands) December 31, 2018 Fair Value Measurements Level 1 Valuation Level 2 Valuation Level 3 Valuation Mortgage-backed securities $ 52,103 — 52,103 — U.S. Government sponsored enterprises $ 34,634 — 34,634 — State and political subdivisions $ 107,591 — 107,591 — Trust preferred securities $ 250 — — 250 Fair values of investment securities available for sale are determined by obtaining quoted prices on nationally recognized securities exchanges when available. If quoted prices are not available, fair value is determined using matrix pricing, which is a mathematical technique used widely in the industry to value debt securities without relying exclusively on quoted prices for the specific securities but rather by relying on the securities’ relationship to other benchmark quoted securities. The following is an analysis of fair value measurements of investment securities available for sale using Level 3, significant unobservable inputs, for the year ended December 31, 2019. (Dollars in thousands) Investment Securities Available for Sale Level 3 Valuation Balance, beginning of period $ 250 Change in book value — Change in gain/(loss) realized and unrealized — Purchases/(sales and calls) — Transfers in and/or (out) of Level 3 — Balance, end of period $ 250 Change in unrealized gain/(loss) for assets still held in Level 3 $ — |
3. Loans
3. Loans | 12 Months Ended |
Dec. 31, 2019 | |
Receivables [Abstract] | |
Loans | Major classifications of loans at December 31, 2019 and 2018 are summarized as follows: (Dollars in thousands) December 31, 2019 December 31, 2018 Real estate loans: Construction and land development $ 92,596 94,178 Single-family residential 269,475 252,983 Single-family residential - Banco de la Gente non-traditional 30,793 34,261 Commercial 291,255 270,055 Multifamily and farmland 48,090 33,163 Total real estate loans 732,209 684,640 Loans not secured by real estate: Commercial loans 100,263 97,465 Farm loans 1,033 926 Consumer loans 8,432 9,165 All other loans 7,937 11,827 Total loans 849,874 804,023 Less allowance for loan losses 6,680 6,445 Total net loans $ 843,194 797,578 The above table includes deferred costs, net of deferred fees, totaling $1.5 million and $1.6 million at December 31, 2019 and 2018, respectively. The Bank grants loans and extensions of credit primarily within the Catawba Valley region of North Carolina, which encompasses Catawba, Alexander, Iredell and Lincoln counties and also in Mecklenburg, Wake and Durham counties of North Carolina. Although the Bank has a diversified loan portfolio, a substantial portion of the loan portfolio is collateralized by improved and unimproved real estate, the value of which is dependent upon the real estate market. Risk characteristics of the major components of the Bank’s loan portfolio are discussed below: ● Construction and land development loans – The risk of loss is largely dependent on the initial estimate of whether the property’s value at completion equals or exceeds the cost of property construction and the availability of take-out financing. During the construction phase, a number of factors can result in delays or cost overruns. If the estimate is inaccurate or if actual construction costs exceed estimates, the value of the property securing the loan may be insufficient to ensure full repayment when completed through a permanent loan, sale of the property, or by seizure of collateral. As of December 31, 2019, construction and land development loans comprised approximately 11% of the Bank’s total loan portfolio. ● Single-family residential loans – Declining home sales volumes, decreased real estate values and higher than normal levels of unemployment could contribute to losses on these loans. As of December 31, 2019, single-family residential loans comprised approximately 35% of the Bank’s total loan portfolio, including Banco single-family residential non-traditional loans which were approximately 4% of the Bank’s total loan portfolio. ● Commercial real estate loans – Repayment is dependent on income being generated in amounts sufficient to cover operating expenses and debt service. These loans also involve greater risk because they are generally not fully amortizing over a loan period, but rather have a balloon payment due at maturity. A borrower’s ability to make a balloon payment typically will depend on being able to either refinance the loan or timely sell the underlying property. As of December 31, 2019, commercial real estate loans comprised approximately 34% of the Bank’s total loan portfolio. ● Commercial loans – Repayment is generally dependent upon the successful operation of the borrower’s business. In addition, the collateral securing the loans may depreciate over time, be difficult to appraise, be illiquid, or fluctuate in value based on the success of the business. As of December 31, 2019, commercial loans comprised approximately 12% of the Bank’s total loan portfolio. Loans are considered past due if the required principal and interest payments have not been received as of the date such payments were due. Loans are placed on non-accrual status when, in management’s opinion, the borrower may be unable to meet payment obligations as they become due, as well as when required by regulatory provisions. Loans may be placed on non-accrual status regardless of whether or not such loans are considered past due. When interest accrual is discontinued, all unpaid accrued interest is reversed. Interest income is subsequently recognized only to the extent cash payments are received in excess of principal due. Loans are returned to accrual status when all the principal and interest amounts contractually due are brought current and future payments are reasonably assured. The following tables present an age analysis of past due loans, by loan type, as of December 31, 2019 and 2018: December 31, 2019 (Dollars in thousands) Loans 30-89 Days Past Due Loans 90 or More Days Past Due Total Past Due Loans Total Current Loans Total Loans Accruing Loans 90 or More Days Past Due Real estate loans: Construction and land development $ 803 — 803 91,793 92,596 — Single-family residential 3,000 126 3,126 266,349 269,475 — Single-family residential - Banco de la Gente non-traditional 4,834 413 5,247 25,546 30,793 — Commercial 504 176 680 290,575 291,255 — Multifamily and farmland — — — 48,090 48,090 — Total real estate loans 9,141 715 9,856 722,353 732,209 — Loans not secured by real estate: Commercial loans 432 — 432 99,831 100,263 — Farm loans — — — 1,033 1,033 — Consumer loans 170 22 192 8,240 8,432 — All other loans — — — 7,937 7,937 — Total loans $ 9,743 737 10,480 839,394 849,874 — December 31, 2018 (Dollars in thousands) Loans 30-89 Days Past Due Loans 90 or More Days Past Due Total Past Due Loans Total Current Loans Total Loans Accruing Loans 90 or More Days Past Due Real estate loans: Construction and land development $ 3 — 3 94,175 94,178 — Single-family residential 4,162 570 4,732 248,251 252,983 — Single-family residential - Banco de la Gente non-traditional 4,627 580 5,207 29,054 34,261 — Commercial 228 — 228 269,827 270,055 — Multifamily and farmland — — — 33,163 33,163 — Total real estate loans 9,020 1,150 10,170 674,470 684,640 — Loans not secured by real estate: Commercial loans 445 90 535 96,930 97,465 — Farm loans — — — 926 926 — Consumer loans 99 4 103 9,062 9,165 — All other loans — — — 11,827 11,827 — Total loans $ 9,564 1,244 10,808 793,215 804,023 — The following table presents the Bank’s non-accrual loans as of December 31, 2019 and 2018: (Dollars in thousands) December 31, 2019 December 31, 2018 Real estate loans: Construction and land development $ — 1 Single-family residential 1,378 1,530 Single-family residential - Banco de la Gente non-traditional 1,764 1,440 Commercial 256 244 Total real estate loans 3,398 3,215 Loans not secured by real estate: Commercial loans 122 89 Consumer loans 33 10 Total $ 3,553 3,314 At each reporting period, the Bank determines which loans are impaired. Accordingly, the Bank’s impaired loans are reported at their estimated fair value on a non-recurring basis. An allowance for each impaired loan that is collateral-dependent is calculated based on the fair value of its collateral. The fair value of the collateral is based on appraisals performed by REAS, a subsidiary of the Bank. REAS is staffed by certified appraisers that also perform appraisals for other companies. Factors, including the assumptions and techniques utilized by the appraiser, are considered by management. If the recorded investment in the impaired loan exceeds the measure of fair value of the collateral, a valuation allowance is recorded as a component of the allowance for loan losses. An allowance for each impaired loan that is not collateral dependent is calculated based on the present value of projected cash flows. If the recorded investment in the impaired loan exceeds the present value of projected cash flows, a valuation allowance is recorded as a component of the allowance for loan losses. Impaired loans under $250,000 are not individually evaluated for impairment with the exception of the Bank’s troubled debt restructured (“TDR”) loans in the residential mortgage loan portfolio, which are individually evaluated for impairment. Impaired loans collectively evaluated for impairment totaled $5.3 million and $4.8 million at December 31, 2019 and 2018, respectively. Accruing impaired loans were $21.3 million and $22.8 million at December 31, 2019 and December 31, 2018, respectively. Interest income recognized on accruing impaired loans was $1.3 million for the years ended December 31, 2019 and 2018. No interest income is recognized on non-accrual impaired loans subsequent to their classification as non-accrual. The following tables present the Bank’s impaired loans as of December 31, 2019, 2018 and 2017: December 31, 2019 (Dollars in thousands) Unpaid Contractual Principal Balance Recorded Investment With No Allowance Recorded Investment With Allowance Recorded Investment in Impaired Loans Related Allowance Average Outstanding Impaired Loans YTD Interest Income Recognized Real estate loans: Construction and land development $ 183 — 183 183 7 231 12 Single-family residential 5,152 403 4,243 4,646 36 4,678 269 Single-family residential - Banco de la Gente non-traditional 15,165 — 14,371 14,371 944 14,925 956 Commercial 1,879 — 1,871 1,871 7 1,822 91 Total impaired real estate loans 22,379 403 20,668 21,071 994 21,656 1,328 Loans not secured by real estate: Commercial loans 180 92 84 176 — 134 9 Consumer loans 100 — 96 96 2 105 7 Total impaired loans $ 22,659 495 20,848 21,343 996 21,895 1,344 December 31, 2018 (Dollars in thousands) Unpaid Contractual Principal Balance Recorded Investment With No Allowance Recorded Investment With Allowance Recorded Investment in Impaired Loans Related Allowance Average Outstanding Impaired Loans YTD Interest Income Recognized Real estate loans: Construction and land development $ 281 — 279 279 5 327 19 Single-family residential 5,059 422 4,188 4,610 32 6,271 261 Single-family residential - Banco de la Gente non-traditional 16,424 — 15,776 15,776 1,042 14,619 944 Commercial 1,995 — 1,925 1,925 17 2,171 111 Total impaired real estate loans 23,759 422 22,168 22,590 1,096 23,388 1,335 Loans not secured by real estate: Commercial loans 251 89 1 90 — 96 — Consumer loans 116 — 113 113 2 137 7 Total impaired loans $ 24,126 511 22,282 22,793 1,098 23,621 1,342 December 31, 2017 (Dollars in thousands) Unpaid Contractual Principal Balance Recorded Investment With No Allowance Recorded Investment With Allowance Recorded Investment in Impaired Loans Related Allowance Average Outstanding Impaired Loans YTD Interest Income Recognized Real estate loans: Construction and land development $ 282 — 277 277 6 253 17 Single-family residential 5,226 1,135 3,686 4,821 41 5,113 265 Single-family residential - Banco de la Gente non-traditional 17,360 — 16,805 16,805 1,149 16,867 920 Commercial 2,761 807 1,661 2,468 1 3,411 148 Multifamily and farmland 78 — 12 12 — 28 — Total impaired real estate loans 25,707 1,942 22,441 24,383 1,197 25,672 1,350 Loans not secured by real estate: Commercial loans 264 100 4 104 — 149 3 Farm loans (non RE) — Consumer loans 158 — 154 154 2 194 9 All other loans (not secured by real estate) — — — — — — — Total impaired loans $ 26,129 2,042 22,599 24,641 1,199 26,015 1,362 The fair value measurements for mortgage loans held for sale, impaired loans and other real estate on a non-recurring basis at December 31, 2019 and 2018 are presented below. The Company’s valuation methodology is discussed in Note 15. (Dollars in thousands) Fair Value Measurements December 31, 2019 Level 1 Valuation Level 2 Valuation Level 3 Valuation Mortgage loans held for sale $ 4,417 — — 4,417 Impaired loans $ 20,347 — — 20,347 Other real estate $ — — — — (Dollars in thousands) Fair Value Measurements December 31, 2018 Level 1 Valuation Level 2 Valuation Level 3 Valuation Mortgage loans held for sale $ 680 — — 680 Impaired loans $ 21,695 — — 21,695 Other real estate $ 27 — — 27 Changes in the allowance for loan losses for the year ended December 31, 2019 were as follows: (Dollars in thousands) Real Estate Loans Construction and Land Development Single-Family Residential Single-Family Residential - Banco de la Gente Non-traditional Commercial Multifamily and Farmland Commercial Farm Consumer and All Other Unallocated Total Allowance for loan losses: Beginning balance $ 813 1,325 1,177 1,278 83 626 — 161 982 6,445 Charge-offs (21 ) (42 ) — (1 ) — (389 ) — (623 ) — (1,076 ) Recoveries 45 66 — 49 — 83 — 205 — 448 Provision (143 ) (75 ) (104 ) (21 ) 37 368 — 395 406 863 Ending balance $ 694 1,274 1,073 1,305 120 688 — 138 1,388 6,680 Ending balance: individually evaluated for impairment $ 2 6 925 4 — — — — — 937 Ending balance: collectively evaluated for impairment 692 1,268 148 1,301 120 688 — 138 1,388 5,743 Ending balance $ 694 1,274 1,073 1,305 120 688 — 138 1,388 6,680 Loans: Ending balance $ 92,596 269,475 30,793 291,255 48,090 100,263 1,033 16,369 — 849,874 Ending balance: individually evaluated for impairment $ 10 1,697 12,899 1,365 — 92 — — — 16,063 Ending balance: collectively evaluated for impairment $ 92,586 267,778 17,894 289,890 48,090 100,171 1,033 16,369 — 833,811 Changes in the allowance for loan losses for the year ended December 31, 2018 were as follows: (Dollars in thousands) Real Estate Loans Construction and Land Development Single-Family Residential Single-Family Residential - Banco de la Gente Non-traditional Commercial Multifamily and Farmland Commercial Farm Consumer and All Other Unallocated Total Allowance for loan losses: Beginning balance $ 804 1,812 1,280 1,193 72 574 — 155 476 6,366 Charge-offs (53 ) (116 ) — (453 ) (5 ) (54 ) — (452 ) — (1,133 ) Recoveries 10 106 — 105 1 32 — 168 — 422 Provision 52 (477 ) (103 ) 433 15 74 — 290 506 790 Ending balance $ 813 1,325 1,177 1,278 83 626 — 161 982 6,445 Ending balance: individually evaluated for impairment $ — — 1,023 15 — — — — — 1,038 Ending balance: collectively evaluated for impairment 813 1,325 154 1,263 83 626 — 161 982 5,407 Ending balance $ 813 1,325 1,177 1,278 83 626 — 161 982 6,445 Loans: Ending balance $ 94,178 252,983 34,261 270,055 33,163 97,465 926 20,992 — 804,023 Ending balance: individually evaluated for impairment $ 96 1,779 14,310 1,673 — 89 — — — 17,947 Ending balance: collectively evaluated for impairment $ 94,082 251,204 19,951 268,382 33,163 97,376 926 20,992 — 786,076 Changes in the allowance for loan losses for the year ended December 31, 2017 were as follows: (Dollars in thousands) Real Estate Loans Construction and Land Development Single-Family Residential Single-Family Residential - Banco de la Gente Non-traditional Commercial Multifamily and Farmland Commercial Farm Consumer and All Other Unallocated Total Allowance for loan losses: Beginning balance $ 1,152 2,126 1,377 1,593 52 675 — 204 371 7,550 Charge-offs — (249 ) — — (66 ) (194 ) — (473 ) — (982 ) Recoveries 14 85 — 21 — 31 — 154 — 305 Provision (362 ) (150 ) (97 ) (421 ) 86 62 — 270 105 (507 ) Ending balance $ 804 1,812 1,280 1,193 72 574 — 155 476 6,366 Ending balance: individually evaluated for impairment $ — — 1,093 37 — — — — — 1,130 Ending balance: collectively evaluated for impairment 804 1,812 187 1,156 72 574 — 155 476 5,236 Ending balance $ 804 1,812 1,280 1,193 72 574 — 155 476 6,366 Loans: Ending balance $ 84,987 246,703 37,249 248,637 28,937 89,022 1,204 23,025 — 759,764 Ending balance: individually evaluated for impairment $ 98 1,855 15,460 2,251 — 100 — — — 19,764 Ending balance: collectively evaluated for impairment $ 84,889 244,848 21,789 246,386 28,937 88,922 1,204 23,025 — 740,000 The Bank utilizes an internal risk grading matrix to assign a risk grade to each of its loans. Loans are graded on a scale of 1 to 8. These risk grades are evaluated on an ongoing basis. A description of the general characteristics of the eight risk grades is as follows: ● Risk Grade 1 – Excellent Quality: Loans are well above average quality and a minimal amount of credit risk exists. CD or cash secured loans or properly margined actively traded stock or bond secured loans would fall in this grade. ● Risk Grade 2 – High Quality: Loans are of good quality with risk levels well within the Company’s range of acceptability. The organization or individual is established with a history of successful performance though somewhat susceptible to economic changes. ● Risk Grade 3 – Good Quality: Loans of average quality with risk levels within the Company’s range of acceptability but higher than normal. This may be a new organization or an existing organization in a transitional phase (e.g. expansion, acquisition, market change). ● Risk Grade 4 – Management Attention: These loans have higher risk and servicing needs but still are acceptable. Evidence of marginal performance or deteriorating trends is observed. These are not problem credits presently, but may be in the future if the borrower is unable to change its present course. ● Risk Grade 5 – Watch: These loans are currently performing satisfactorily, but there has been some recent past due history on repayment and there are potential weaknesses that may, if not corrected, weaken the asset or inadequately protect the Company’s position at some future date. ● Risk Grade 6 – Substandard: A Substandard loan is inadequately protected by the current sound net worth and paying capacity of the obligor or the collateral pledged (if there is any). There is a well-defined weakness or weaknesses that jeopardize the liquidation of the debt. There is a distinct possibility that the Company will sustain some loss if the deficiencies are not corrected. ● Risk Grade 7 – Doubtful: Loans classified as Doubtful have all the weaknesses inherent in loans classified Substandard, plus the added characteristic that the weaknesses make collection or liquidation in full on the basis of currently existing facts, conditions, and values highly questionable and improbable. Doubtful is a temporary grade where a loss is expected but is presently not quantified with any degree of accuracy. Once the loss position is determined, the amount is charged off. ● Risk Grade 8 – Loss: Loans classified as Loss are considered uncollectable and of such little value that their continuance as bankable assets is not warranted. This classification does not mean that the asset has absolutely no recovery or salvage value, but rather that it is not practical or desirable to defer writing off this worthless loan even though partial recovery may be realized in the future. Loss is a temporary grade until the appropriate authority is obtained to charge the loan off. The following tables present the credit risk profile of each loan type based on internally assigned risk grades as of December 31, 2019 and 2018. December 31, 2019 (Dollars in thousands) Real Estate Loans Construction and Land Development Single-Family Residential Single-Family Residential - Banco de la Gente non-traditional Commercial Multifamily and Farmland Commercial Farm Consumer All Other Total 1- Excellent Quality $ — 8,819 — — — 330 — 693 — 9,842 2- High Quality 32,029 128,757 — 21,829 256 20,480 — 2,708 1,860 207,919 3- Good Quality 52,009 107,246 12,103 231,003 42,527 72,417 948 4,517 5,352 528,122 4- Management Attention 5,487 18,409 13,737 35,095 4,764 6,420 85 458 725 85,180 5- Watch 3,007 3,196 2,027 3,072 543 492 — 8 — 12,345 6- Substandard 64 3,048 2,926 256 — 124 — 48 — 6,466 7- Doubtful — — — — — — — — — — 8- Loss — — — — — — — — — — Total $ 92,596 269,475 30,793 291,255 48,090 100,263 1,033 8,432 7,937 849,874 December 31, 2018 (Dollars in thousands) Real Estate Loans Construction and Land Development Single-Family Residential Single-Family Residential - Banco de la Gente Non-traditional Commercial Multifamily and Farmland Commercial Farm Consumer All Other Total 1- Excellent Quality $ 504 5,795 — — — 605 — 673 — 7,577 2- High Quality 24,594 128,588 — 25,321 395 20,520 — 3,229 2,145 204,792 3- Good Quality 59,549 92,435 13,776 211,541 27,774 69,651 785 4,699 8,932 489,142 4- Management Attention 5,707 19,200 15,012 30,333 3,906 6,325 141 529 750 81,903 5- Watch 3,669 3,761 2,408 2,616 1,088 264 — 18 — 13,824 6- Substandard 155 3,204 3,065 244 — 100 — 17 — 6,785 7- Doubtful — — — — — — — — — — 8- Loss — — — — — — — — — — Total $ 94,178 252,983 34,261 270,055 33,163 97,465 926 9,165 11,827 804,023 TDR loans modified in 2019, past due TDR loans and non-accrual TDR loans totaled $4.3 million and $4.7 million at December 31, 2019 and December 31, 2018, respectively. The terms of these loans have been renegotiated to provide a concession to original terms, including a reduction in principal or interest as a result of the deteriorating financial position of the borrower. There were zero and $92,000 in performing loans classified as TDR loans at December 31, 2019 and December 31, 2018, respectively. There were no new TDR modifications during the year ended December 31, 2019. The following table presents an analysis of loan modifications during the year ended December 31, 2018: Year ended December 31, 2018 (Dollars in thousands) Number of Contracts Pre-Modification Outstanding Recorded Investment Post-Modification Outstanding Recorded Investment Real estate loans: Single-family residential 2 $ 94 94 Total TDR loans 2 $ 94 94 During the year ended December 31, 2018, two loans were modified that were considered to be new TDR loans. The interest rate was modified on these TDR loans. There were no TDR loans with a payment default occurring within 12 months of the restructure date, and the payment default occurring during the years ended December 31, 2019 and 2018. TDR loans are deemed to be in default if they become past due by 90 days or more. |
4. Premises and Equipment
4. Premises and Equipment | 12 Months Ended |
Dec. 31, 2019 | |
Property, Plant and Equipment [Abstract] | |
Premises and Equipment | Major classifications of premises and equipment at December 31, 2019 and 2018 are summarized as follows: (Dollars in thousands) 2019 2018 Land $ 2,793 2,889 Buildings and improvements 18,931 19,796 Furniture and equipment 24,743 22,443 Construction in process 395 381 Total premises and equipment 46,862 45,509 Less accumulated depreciation 28,258 27,059 Total net premises and equipment $ 18,604 18,450 The Company recognized approximately $2.3 million in depreciation expense for the years ended December 31, 2019 and 2018. Depreciation expense was approximately $2.1 million for the year ended December 31, 2017. The Company had $239,000 and $544,000 net losses on the sale of and write-downs on premises and equipment for the years ended December 31, 2019 and 2018, respectively. |
5. Leases
5. Leases | 12 Months Ended |
Dec. 31, 2019 | |
Leases [Abstract] | |
Leases | The Company leases various office spaces for banking and operational facilities and equipment under operating lease arrangements. Total rent expense was approximately $949,000, $785,000 and $756,000 for the years ended December 31, 2019, 2018 and 2017, respectively. As of December 31, 2019 the Company had operating ROU assets of $3.6 million and operating lease liabilities of $3.6 million. The Company maintains operating leases on land and buildings for some of the Bank’s branch facilities and loan production offices. Most leases include one option to renew, with renewal terms extending up to 15 years. The exercise of renewal options is based on the judgment of management as to whether or not the renewal option is reasonably certain to be exercised. Factors in determining whether an option is reasonably certain of exercise include, but are not limited to, the value of leasehold improvements, the value of renewal rates compared to market rates, and the presence of factors that would cause a significant economic penalty to the Company if the option is not exercised. As allowed by the standard, leases with a term of 12 months or less are not recorded on the balance sheet and instead are recognized in lease expense on a straight-line basis over the lease term. The following table presents lease cost and other lease information as of December 31, 2019. (Dollars in thousands) December 31, 2019 Operating lease cost $ 893 Other information: Cash paid for amounts included in the measurement of lease liabilities 850 Operating cash flows from operating leases — Right-of-use assets obtained in exchange for new lease liabilities - operating leases 8 Weighted-average remaining lease term - operating leases 7.27 Weighted-average discount rate - operating leases 3.19 % The following table presents lease maturities as of December 31, 2019. (Dollars in thousands) Maturity Analysis of Operating Lease Liabilities: December 31, 2019 2020 $ 823 2021 793 2022 501 2023 393 2024 304 Thereafter 1,320 Total 4,134 Less: Imputed Interest (487 ) Operating Lease Liability $ 3,647 |
6. Time Deposits
6. Time Deposits | 12 Months Ended |
Dec. 31, 2019 | |
Time Deposits [Line Items] | |
Time Deposits | At December 31, 2019, the scheduled maturities of time deposits are as follows: (Dollars in thousands) 2020 $ 53,905 2021 21,997 2022 10,919 2023 3,117 2024 and thereafter 21,818 Total $ 111,756 At December 31, 2019 and 2018, the Bank had approximately $22.3 million and $3.4 million, respectively, in time deposits purchased through third party brokers, including certificates of deposit participated through the Certificate of Deposit Account Registry Service (“CDARS”) on behalf of local customers. CDARS balances totaled $3.1 million and $3.4 million as of December 31, 2019 and 2018, respectively. The weighted average rate of brokered deposits as of December 31, 2019 and 2018 was 1.96% and 0.07%, respectively. |
7. Federal Home Loan Bank and F
7. Federal Home Loan Bank and Federal Reserve Bank Borrowings | 12 Months Ended |
Dec. 31, 2019 | |
Federal Home Loan Banks [Abstract] | |
Federal Home Loan Bank and Federal Reserve Bank Borrowings | The Bank had no borrowings from the FHLB at December 31, 2019 and 2018. FHLB borrowings are collateralized by a blanket assignment on all residential first mortgage loans, home equity lines of credit and loans secured by multi-family real estate that the Bank owns. At December 31, 2019, the carrying value of loans pledged as collateral totaled approximately $139.4 million. The remaining availability under the line of credit with the FHLB was $86.1 million at December 31, 2019. The Bank is required to purchase and hold certain amounts of FHLB stock in order to obtain FHLB borrowings. No ready market exists for the FHLB stock, and it has no quoted market value. The stock is redeemable at $100 per share subject to certain limitations set by the FHLB. The Bank owned $983,000 and $982,000 of FHLB stock, included in other investments, at December 31, 2019 and 2018, respectively. As of December 31, 2019 and 2018, the Bank had no borrowings from the Federal Reserve Bank (“FRB”). FRB borrowings are collateralized by a blanket assignment on all qualifying loans that the Bank owns which are not pledged to the FHLB. At December 31, 2019, the carrying value of loans pledged as collateral totaled approximately $452.6 million. Availability under the line of credit with the FRB was $344.7 million at December 31, 2019. |
8. Junior Subordinated Debentur
8. Junior Subordinated Debentures | 12 Months Ended |
Dec. 31, 2019 | |
Brokers and Dealers [Abstract] | |
Junior Subordinated Debentures | In June 2006, the Company formed a second wholly owned Delaware statutory trust, PEBK Capital Trust II (“PEBK Trust II”), which issued $20.0 million of guaranteed preferred beneficial interests in the Company’s junior subordinated deferrable interest debentures. All of the common securities of PEBK Trust II are owned by the Company. The proceeds from the issuance of the common securities and the trust preferred securities were used by PEBK Trust II to purchase $20.6 million of junior subordinated debentures of the Company. The proceeds received by the Company from the sale of the junior subordinated debentures were used to repay in December 2006 the trust preferred securities issued in December 2001 by PEBK Capital Trust, a wholly owned Delaware statutory trust of the Company, and for general purposes. The debentures represent the sole assets of PEBK Trust II. PEBK Trust II is not included in the consolidated financial statements. The trust preferred securities issued by PEBK Trust II accrue and pay interest quarterly at a floating rate of three-month LIBOR plus 163 basis points. The Company has guaranteed distributions and other payments due on the trust preferred securities to the extent PEBK Trust II does not have funds with which to make the distributions and other payments. The net combined effect of all the documents entered into in connection with the trust preferred securities is that the Company is liable to make the distributions and other payments required on the trust preferred securities. These trust preferred securities are mandatorily redeemable upon maturity of the debentures on June 28, 2036, or upon earlier redemption as provided in the indenture. The Company has the right to redeem the debentures purchased by PEBK Trust II, in whole or in part, which became effective on June 28, 2011. As specified in the indenture, if the debentures are redeemed prior to maturity, the redemption price will be the principal amount plus any accrued but unpaid interest. The Company redeemed $5.0 million of outstanding trust preferred securities in December 2019. |
9. Income Taxes
9. Income Taxes | 12 Months Ended |
Dec. 31, 2019 | |
Income Tax Disclosure [Abstract] | |
Income Taxes | On December 22, 2017, the President of the United States signed into law the Tax Cuts and Jobs Act (“TCJA”). The TCJA includes a number of changes to existing U.S. tax laws that impact the Company, most notably a reduction of the U.S. corporate income tax rate from 34 percent to 21 percent for tax years beginning after December 31, 2017. The Company recognized the income tax effects of the TCJA in its 2017 financial statements in accordance with Staff Accounting Bulletin No. 118, which provides SEC staff guidance for the application of ASC Topic 740, Income Taxes The provision for income taxes is summarized as follows: (Dollars in thousands) 2019 2018 2017 Current expense $ 2,960 2,546 1,827 Deferred income tax expense 176 78 2,120 Total income tax $ 3,136 2,624 3,947 The differences between the provision for income taxes and the amount computed by applying the statutory federal income tax rate to earnings before income taxes are as follows: (Dollars in thousands) 2019 2018 2017 Tax expense at statutory rate (21% in 2018 and 2019) $ 3,613 3,361 4,833 State income tax, net of federal income tax effect 327 358 307 Tax-exempt interest income (802 ) (990 ) (1,594 ) Increase in cash surrender value of life insurance (81 ) (81 ) (136 ) Nondeductible interest and other expense 40 23 46 Impact of TCJA — — 588 Other 39 (47 ) (97 ) Total $ 3,136 2,624 3,947 The following summarizes the tax effects of temporary differences that give rise to significant portions of the deferred tax assets and deferred tax liabilities. The net deferred tax asset is included as a component of other assets at December 31, 2019 and 2018. (Dollars in thousands) 2019 2018 Deferred tax assets: Allowance for loan losses $ 1,535 1,481 Accrued retirement expense 1,150 1,119 Restricted stock 217 262 Accrued bonuses 266 211 Interest income on nonaccrual loans 2 1 Total gross deferred tax assets 3,170 3,074 Deferred tax liabilities: Deferred loan fees 343 379 Accumulated depreciation 873 610 Prepaid expenses 7 10 Other 53 5 Unrealized gain on available for sale securities 1,087 294 Total gross deferred tax liabilities 2,363 1,298 Net deferred tax asset $ 807 1,776 The Company measures deferred tax assets and liabilities using enacted tax rates that will apply in the years in which the temporary differences are expected to be recovered or paid. Accordingly, the Company’s deferred tax assets and liabilities were remeasured to reflect the reduction in the U.S. corporate income tax rate from 34 percent to 21 percent, resulting in a $588,000 increase in income tax expense for the year ended December 31, 2017 and a corresponding $588,000 decrease in net deferred tax assets as of December 31, 2017. The Company has analyzed the tax positions taken or expected to be taken in its tax returns and has concluded that it has no liability related to uncertain tax positions. The Company’s Federal income tax filings for years 2016 through 2019 were at year end 2019 open to audit under statutes of limitations by the Internal Revenue Service. The Company’s North Carolina income tax returns are currently under audit for tax year 2014-2016, tax years 2017 and 2018 are open to audit under the statutes of limitations by the North Carolina Department of Revenue. |
10. Related Party Transactions
10. Related Party Transactions | 12 Months Ended |
Dec. 31, 2019 | |
Related Party Transactions [Abstract] | |
Related Party Transactions | The Company conducts transactions with its directors and executive officers, including companies in which they have beneficial interests, in the normal course of business. It is the policy of the Company that loan transactions with directors and officers are made on substantially the same terms as those prevailing at the time made for comparable loans to other persons. The following is a summary of activity for related party loans for 2019 and 2018: (Dollars in thousands) 2019 2018 Beginning balance $ 3,192 3,679 New loans 5,716 8,030 Repayments (5,436 ) (8,517 ) Ending balance $ 3,472 3,192 At December 31, 2019 and 2018, the Company had deposit relationships with related parties of approximately $30.4 million and $31.6 million, respectively. A director of the Company has a membership interest in a company that leases two branch facilities to the Bank. The Bank’s lease payments for these facilities totaled $231,000 and $230,000 during 2019 and 2018, respectively. |
11. Commitments and Contingenci
11. Commitments and Contingencies | 12 Months Ended |
Dec. 31, 2019 | |
Commitments and Contingencies Disclosure [Abstract] | |
Commitments and Contingencies | The Bank is party to financial instruments with off-balance-sheet risk in the normal course of business to meet the financing needs of its customers. These financial instruments include commitments to extend credit, standby letters of credit and financial guarantees. Those instruments involve, to varying degrees, elements of credit risk in excess of the amount recognized in the balance sheet. The contract amounts of those instruments reflect the extent of involvement the Bank has in particular classes of financial instruments. The exposure to credit loss in the event of nonperformance by the other party to the financial instrument for commitments to extend credit and standby letters of credit and financial guarantees written is represented by the contractual amount of those instruments. The Bank uses the same credit policies in making commitments and conditional obligations as it does for on-balance-sheet instruments. In most cases, the Bank requires collateral or other security to support financial instruments with credit risk. (Dollars in thousands) Contractual Amount 2019 2018 Financial instruments whose contract amount represent credit risk: Commitments to extend credit $ 276,338 268,708 Standby letters of credit and financial guarantees written $ 3,558 3,651 Commitments to extend credit are agreements to lend to a customer as long as there is no violation of any condition established in the contract. Commitments generally have fixed expiration dates and because they may expire without being drawn upon, the total commitment amount of $279.9 million does not necessarily represent future cash requirements. Standby letters of credit and financial guarantees written are conditional commitments issued by the Bank to guarantee the performance of a customer to a third party. Those guarantees are primarily issued to businesses in the Bank’s delineated market area. The credit risk involved in issuing letters of credit is essentially the same as that involved in extending loan facilities to customers. The Bank holds real estate, equipment, automobiles and customer deposits as collateral supporting those commitments for which collateral is deemed necessary. In the normal course of business, the Company is a party (both as plaintiff and defendant) to a number of lawsuits. In the opinion of management and counsel, none of these cases should have a material adverse effect on the financial position of the Company. Bancorp and the Bank have employment agreements with certain key employees. The agreements, among other things, include salary, bonus, incentive compensation, and change in control provisions. The Company has $82.5 million available for the purchase of overnight federal funds from six correspondent financial institutions as of December 31, 2019. At December 31, 2017, the Bank committed to invest $3.0 million in an income tax credit partnership owning and developing two multifamily housing developments in Charlotte, North Carolina, with $1.5 million allocated to each property. The Bank has funded $2.7 million of this commitment at December 31, 2019. |
12. Employee and Director Benef
12. Employee and Director Benefit Programs | 12 Months Ended |
Dec. 31, 2019 | |
Retirement Benefits [Abstract] | |
Employee and Director Benefit Programs | The Company has a profit sharing and 401(k) plan for the benefit of substantially all employees subject to certain minimum age and service requirements. Under the 401(k) plan, the Company matched employee contributions to a maximum of 4.00% of annual compensation in 2017, 2018 and 2019. The Company’s contribution pursuant to this formula was approximately $691,000, $670,000 and $622,000 for the years 2019, 2018 and 2017, respectively. Investments of the 401(k) plan are determined by a committee comprised of senior management. No investments in Company stock have been made by the 401(k) plan. Contributions to the 401(k) plan are vested immediately. In December 2001, the Company initiated a postretirement benefit plan to provide retirement benefits to key officers and its Board of Directors and to provide death benefits for their designated beneficiaries. Under the postretirement benefit plan, the Company purchased life insurance contracts on the lives of the key officers and each director. The increase in cash surrender value of the contracts constitutes the Company’s contribution to the postretirement benefit plan each year. Postretirement benefit plan participants are to be paid annual benefits for a specified number of years commencing upon retirement. Expenses incurred for benefits relating to the postretirement benefit plan were approximately $361,000, $423,000 and $428,000 for the years 2019, 2018 and 2017, respectively. The Company is currently paying medical benefits for certain retired employees. The Company did not incur any postretirement medical benefits expense in 2019, 2018 and 2017 due to an excess accrual balance. The following table sets forth the change in the accumulated benefit obligation for the Company’s two postretirement benefit plans described above: (Dollars in thousands) 2019 2018 Benefit obligation at beginning of period $ 4,566 4,361 Service cost 299 362 Interest cost 58 70 Benefits paid (223 ) (227 ) Benefit obligation at end of period $ 4,700 4,566 The amounts recognized in the Company’s Consolidated Balance Sheet as of December 31, 2019 and 2018 are shown in the following two tables: (Dollars in thousands) 2019 2018 Benefit obligation $ 4,700 4,566 Fair value of plan assets — — (Dollars in thousands) 2019 2018 Funded status $ (4,700 ) (4,566 ) Unrecognized prior service cost/benefit — — Unrecognized net actuarial loss — — Net amount recognized $ (4,700 ) (4,566 ) Unfunded accrued liability $ (4,700 ) (4,566 ) Intangible assets — — Net amount recognized $ (4,700 ) (4,566 ) Net periodic benefit cost of the Company’s postretirement benefit plans for the years ended December 31, 2019, 2018 and 2017 consisted of the following: (Dollars in thousands) 2019 2018 2017 Service cost $ 299 362 348 Interest cost 58 70 68 Net periodic cost $ 357 432 416 Weighted average discount rate assumption used to determine benefit obligation 5.49 % 5.49 % 5.49 % The Company paid benefits under the two postretirement plans totaling $223,000 and $227,000 during the years ended December 31, 2019 and 2018, respectively. Information about the expected benefit payments for the Company’s two postretirement benefit plans is as follows: (Dollars in thousands) Year ending December 31, 2020 $ 237 2021 $ 353 2022 $ 342 2023 $ 342 2024 $ 354 Thereafter $ 8,715 |
13. Regulatory Matters
13. Regulatory Matters | 12 Months Ended |
Dec. 31, 2019 | |
Regulatory Matters | |
Regulatory Matters | The Company is subject to various regulatory capital requirements administered by the federal banking agencies. Failure to meet minimum capital requirements can initiate certain mandatory and possibly additional discretionary actions by regulators that, if undertaken, could have a direct material effect on the Company’s financial statements. Under capital adequacy guidelines and the regulatory framework for prompt corrective action, the Company must meet specific capital guidelines that involve quantitative measures of the assets, liabilities and certain off-balance-sheet items as calculated under regulatory accounting practices. The capital amounts and classification are also subject to qualitative judgments by the regulators about components, risk weightings, and other factors. Quantitative measures established by regulation to ensure capital adequacy require the Company to maintain minimum amounts and ratios of capital in relation to both on- and off-balance sheet items at various risk weights. Total capital consists of two tiers of capital. Tier 1 capital includes common shareholders’ equity and trust preferred securities less adjustments for intangible assets. Tier 2 capital consists of the allowance for loan losses, up to 1.25% of risk-weighted assets and other adjustments. Management believes, as of December 31, 2019, that the Company and the Bank meet all capital adequacy requirements to which they are subject. As of December 31, 2019, the most recent notification from the FDIC categorized the Bank as well capitalized under the regulatory framework for prompt corrective action. To be categorized as well capitalized the Bank must maintain minimum total risk-based, Tier 1 risk-based and Tier 1 leverage ratios as set forth in the table below. There have been no conditions or events since that notification that management believes have changed the Bank’s category. In 2013, the FRB approved its final rule on the Basel III capital standards, which implement changes to the regulatory capital framework for banking organizations. The Basel III capital standards, which became effective January 1, 2015, include new risk-based capital and leverage ratios, which were phased in from 2015 to 2019. The new minimum capital level requirements applicable to the Company and the Bank under the final rules are as follows: (i) a new common equity Tier 1 capital ratio of 4.5%; (ii) a Tier 1 capital ratio of 6% (increased from 4%); (iii) a total risk based capital ratio of 8% (unchanged from previous rules); and (iv) a Tier 1 leverage ratio of 4% (unchanged from previous rules). An additional capital conservation buffer was added to the minimum requirements for capital adequacy purposes beginning on January 1, 2016 and was phased in through 2019 (increasing by 0.625% on January 1, 2016 and each subsequent January 1, until it reached 2.5% on January 1, 2019). This resulted in the following minimum ratios beginning in 2019: (i) a common equity Tier 1 capital ratio of 7.0%, (ii) a Tier 1 capital ratio of 8.5%, and (iii) a total capital ratio of 10.5%. Under the final rules, institutions would be subject to limitations on paying dividends, engaging in share repurchases, and paying discretionary bonuses if its capital level falls below the buffer amount. These limitations establish a maximum percentage of eligible retained earnings that could be utilized for such actions. The Company’s and the Bank’s actual capital amounts and ratios are presented below: (Dollars in thousands) Actual Minimum Regulatory Capital Ratio Minimum Ratio plus Capital Conservation Buffer Amount Ratio Amount Ratio Amount Ratio As of December 31, 2019: Total Capital (to Risk-Weighted Assets) Consolidated $ 152,156 16.08 % 75,710 8.00 % N/A N/A Bank $ 149,266 15.79 % 75,602 8.00 % 99,228 10.50 % Tier 1 Capital (to Risk-Weighted Assets) Consolidated $ 145,476 15.37 % 56,783 6.00 % N/A N/A Bank $ 142,586 15.09 % 56,702 6.00 % 80,328 8.50 % Tier 1 Capital (to Average Assets) Consolidated $ 145,476 11.91 % 48,872 4.00 % N/A N/A Bank $ 142,586 11.61 % 49,106 4.00 % 49,106 4.00 % Common Equity Tier 1 (to Risk-Weighted Assets) Consolidated $ 130,476 13.79 % 42,587 4.50 % N/A N/A Bank $ 142,586 15.09 % 42,526 4.50 % 66,152 7.00 % (Dollars in thousands) Actual Minimum Regulatory Capital Ratio Minimum Ratio plus Capital Conservation Buffer Amount Ratio Amount Ratio Amount Ratio As of December 31, 2018: Total Capital (to Risk-Weighted Assets) Consolidated $ 149,076 16.15 % 73,830 8.00 % N/A N/A Bank $ 146,640 15.91 % 73,717 8.00 % 91,041 9.88 % Tier 1 Capital (to Risk-Weighted Assets) Consolidated $ 142,631 15.46 % 55,372 6.00 % N/A N/A Bank $ 140,195 15.21 % 55,288 6.00 % 72,612 7.88 % Tier 1 Capital (to Average Assets) Consolidated $ 142,631 13.05 % 43,723 4.00 % N/A N/A Bank $ 140,195 12.76 % 43,950 4.00 % 43,950 4.00 % Common Equity Tier 1 (to Risk-Weighted Assets) Consolidated $ 122,631 13.29 % 41,529 4.50 % N/A N/A Bank $ 140,195 15.21 % 41,466 4.50 % 58,790 6.38 % |
14. Shareholders' Equity
14. Shareholders' Equity | 12 Months Ended |
Dec. 31, 2019 | |
Equity [Abstract] | |
Shareholders' Equity | Shareholders’ equity was $134.1 million, or 11.59% of total assets, at December 31, 2019, compared to $123.6 million, or 11.31% of total assets, at December 31, 2018. The increase in shareholders’ equity is primarily due to an increase in retained earnings due to net income. Annualized return on average equity for the year ended December 31, 2019 was 10.45% compared to 10.81% for the year ended December 31, 2018. Total cash dividends paid on common stock were $3.9 million and $3.1 million for the years ended December 31, 2019 and 2018, respectively. The Board of Directors, at its discretion, can issue shares of preferred stock up to a maximum of 5,000,000 shares. The Board is authorized to determine the number of shares, voting powers, designations, preferences, limitations and relative rights. The Board of Directors does not currently anticipate issuing shares of preferred stock. In 2019, the Company’s Board of Directors authorized a stock repurchase program, whereby up to $5 million will be allocated to repurchase the Company’s common stock. Any purchases under the Company’s stock repurchase program may be made periodically as permitted by securities laws and other legal requirements in the open market or in privately-negotiated transactions. The timing and amount of any repurchase of shares will be determined by the Company’s management, based on its evaluation of market conditions and other factors. The stock repurchase program may be suspended at any time or from time-to-time without prior notice. The Company has repurchased approximately $2.5 million, or 90,354 shares of its common stock, under this stock repurchase program as of December 31, 2019. |
15. Other Operating Income and
15. Other Operating Income and Expense | 12 Months Ended |
Dec. 31, 2019 | |
Other Income and Expenses [Abstract] | |
Other Operating Income and Expense | Miscellaneous non-interest income for the years ended December 31, 2019, 2018 and 2017 included the following items: (Dollars in thousands) 2019 2018 2017 Visa debit card income $ 4,145 3,911 3,757 Bank owned life insurance income 383 384 400 Gain (loss) on sale of premises and equipment (239 ) 544 (32 ) Other 1,320 1,354 1,175 $ 5,609 6,193 5,300 Other non-interest expense for the years ended December 31, 2019, 2018 and 2017 included the following items: (Dollars in thousands) 2019 2018 2017 ATM expense $ 579 542 673 Consulting 972 1,012 785 Data processing 616 466 426 Deposit program expense 515 586 539 Dues and subscriptions 421 421 354 FHLB advance prepayment penalty — — 508 Internet banking expense 681 603 720 Office supplies 467 503 517 Telephone 802 678 855 Other 2,921 2,834 2,540 $ 7,974 7,645 7,917 |
16. Fair Value of Financial Ins
16. Fair Value of Financial Instruments | 12 Months Ended |
Dec. 31, 2019 | |
Fair Value Disclosures [Abstract] | |
Fair Value of Financial Instruments | The Company is required to disclose fair value information about financial instruments, whether or not recognized on the face of the balance sheet, for which it is practicable to estimate that value. The assumptions used in the estimation of the fair value of the Company’s financial instruments are detailed below. Where quoted prices are not available, fair values are based on estimates using discounted cash flows and other valuation techniques. The use of discounted cash flows can be significantly affected by the assumptions used, including the discount rate and estimates of future cash flows. The following disclosures should not be considered a surrogate of the liquidation value of the Company, but rather a good faith estimate of the increase or decrease in the value of financial instruments held by the Company since purchase, origination, or issuance. The Company groups assets and liabilities at fair value in three levels, based on the markets in which the assets and liabilities are traded and the reliability of the assumptions used to determine fair value. These levels are: ● Level 1 – Valuation is based upon quoted prices for identical instruments traded in active markets. ● Level 2 – Valuation is based upon quoted prices for similar instruments in active markets, quoted prices for identical or similar instruments in markets that are not active, and model-based valuation techniques for which all significant assumptions are observable in the market. ● Level 3 – Valuation is generated from model-based techniques that use at least one significant assumption not observable in the market. These unobservable assumptions reflect estimates of assumptions that market participants would use in pricing the asset or liability. Valuation techniques include use of option pricing models, discounted cash flow models and similar techniques. Cash and Cash Equivalents For cash, due from banks and interest-bearing deposits, the carrying amount is a reasonable estimate of fair value. Cash and cash equivalents are reported in the Level 1 fair value category. Investment Securities Available for Sale Fair values of investment securities available for sale are determined by obtaining quoted prices on nationally recognized securities exchanges when available. If quoted prices are not available, fair value is determined using matrix pricing, which is a mathematical technique used widely in the industry to value debt securities without relying exclusively on quoted prices for the specific securities but rather by relying on the securities’ relationship to other benchmark quoted securities. Fair values for investment securities with quoted market prices are reported in the Level 1 fair value category. Fair value measurements obtained from independent pricing services are reported in the Level 2 fair value category. All other fair value measurements are reported in the Level 3 fair value category. Other Investments For other investments, the carrying value is a reasonable estimate of fair value. Other investments are reported in the Level 3 fair value category. Mortgage Loans Held for Sale Mortgage loans held for sale are carried at lower of aggregate cost or market value. The cost of mortgage loans held for sale approximates the market value. Mortgage loans held for sale are reported in the Level 3 fair value category. Loans The fair value of fixed rate loans is estimated by discounting the future cash flows using the current rates at which similar loans would be made to borrowers with similar credit ratings. For variable rate loans, the carrying amount is a reasonable estimate of fair value. Loans are reported in the Level 3 fair value category, as the pricing of loans is more subjective than the pricing of other financial instruments. Cash Surrender Value of Life Insurance For cash surrender value of life insurance, the carrying value is a reasonable estimate of fair value. Cash surrender value of life insurance is reported in the Level 2 fair value category. Other Real Estate The fair value of other real estate is based upon independent market prices, appraised values of the collateral or management’s estimation of the value of the collateral. Other real estate is reported in the Level 3 fair value category. Deposits The fair value of demand deposits, interest-bearing demand deposits and savings is the amount payable on demand at the reporting date. The fair value of certificates of deposit is estimated by discounting the future cash flows using the rates currently offered for deposits of similar remaining maturities. Deposits are reported in the Level 2 fair value category. Securities Sold Under Agreements to Repurchase For securities sold under agreements to repurchase, the carrying value is a reasonable estimate of fair value. Securities sold under agreements to repurchase are reported in the Level 2 fair value category. FHLB Borrowings The fair value of FHLB borrowings is estimated based upon discounted future cash flows using a discount rate comparable to the current market rate for such borrowings. FHLB borrowings are reported in the Level 2 fair value category. Junior Subordinated Debentures Because the Company’s junior subordinated debentures were issued at a floating rate, the carrying amount is a reasonable estimate of fair value. Junior subordinated debentures are reported in the Level 2 fair value category. Commitments to Extend Credit and Standby Letters of Credit Commitments to extend credit and standby letters of credit are generally short-term and at variable interest rates. Therefore, both the carrying value and estimated fair value associated with these instruments are immaterial. Limitations Fair value estimates are made at a specific point in time, based on relevant market information and information about the financial instrument. These estimates do not reflect any premium or discount that could result from offering for sale at one time the Company’s entire holdings of a particular financial instrument. Because no market exists for a significant portion of the Company’s financial instruments, fair value estimates are based on many judgments. These estimates are subjective in nature and involve uncertainties and matters of significant judgment and therefore cannot be determined with precision. Changes in assumptions could significantly affect the estimates. Fair value estimates are based on existing on and off-balance sheet financial instruments without attempting to estimate the value of anticipated future business and the value of assets and liabilities that are not considered financial instruments. Significant assets and liabilities that are not considered financial instruments include deferred income taxes and premises and equipment. In addition, the tax ramifications related to the realization of unrealized gains and losses can have a significant effect on fair value estimates and have not been considered in the estimates. The fair value presentation for recurring assets is presented in Note 2. There were no recurring liabilities at December 31, 2019 and 2018. The fair value presentation for non-recurring assets is presented in Note 3. There were no non-recurring liabilities at December 31, 2019 and 2018. The carrying amount and estimated fair value of the Company’s financial instruments at December 31, 2019 and 2018 are as follows: (Dollars in thousands) Fair Value Measurements at December 31, 2019 Carrying Amount Level 1 Level 2 Level 3 Total Assets: Cash and cash equivalents $ 52,387 52,387 — — 52,387 Investment securities available for sale $ 195,746 — 195,496 250 195,746 Other investments $ 4,231 — — 4,231 4,231 Mortgage loans held for sale $ 4,417 — — 4,417 4,417 Loans, net $ 843,194 — — 819,397 819,397 Cash surrender value of life insurance $ 16,319 — 16,319 — 16,319 Liabilities: Deposits $ 966,517 — — 955,766 955,766 Securities sold under agreements to repurchase $ 24,221 — 24,221 — 24,221 Junior subordinated debentures $ 15,619 — 15,619 — 15,619 (Dollars in thousands) Fair Value Measurements at December 31, 2018 Carrying Amount Level 1 Level 2 Level 3 Total Assets: Cash and cash equivalents $ 43,370 43,370 — — 43,370 Investment securities available for sale $ 194,578 — 194,328 250 194,578 Other investments $ 4,361 — — 4,361 4,361 Mortgage loans held for sale $ 680 — — 680 680 Loans, net $ 797,578 — — 748,917 748,917 Cash surrender value of life insurance $ 15,936 — 15,936 — 15,936 Liabilities: Deposits $ 877,213 — — 857,999 857,999 Securities sold under agreements to repurchase $ 58,095 — 58,095 — 58,095 Junior subordinated debentures $ 20,619 — 20,619 — 20,619 A-32 |
17. Peoples Bancorp of North Ca
17. Peoples Bancorp of North Carolina, Inc. (Parent Company Only) Condensed Financial Statements | 12 Months Ended |
Dec. 31, 2019 | |
Condensed Financial Information Disclosure [Abstract] | |
Peoples Bancorp of North Carolina, Inc. (Parent Company Only) Condensed Financial Statements | Balance Sheets December 31, 2019 and 2018 (Dollars in thousands) Assets 2019 2018 Cash $ 1,187 689 Interest-bearing time deposit 1,000 1,000 Investment in subsidiaries 146,230 141,181 Investment in PEBK Capital Trust II 619 619 Investment securities available for sale 250 250 Other assets 476 533 Total assets $ 149,762 144,272 Liabilities and Shareholders' Equity Junior subordinated debentures $ 15,619 20,619 Liabilities 23 36 Shareholders' equity 134,120 123,617 Total liabilities and shareholders' equity $ 149,762 144,272 Statements of Earnings For the Years Ended December 31, 2019, 2018 and 2017 (Dollars in thousands) Revenues: 2019 2018 2017 Interest and dividend income $ 12,850 4,544 1,839 Total revenues 12,850 4,544 1,839 Expenses: Interest 844 790 590 Other operating expenses 629 678 725 Total expenses 1,473 1,468 1,315 Income before income tax benefit and equity in undistributed earnings of subsidiaries 11,377 3,076 524 Income tax benefit 299 299 434 Income before equity in undistributed earnings of subsidiaries 11,676 3,375 958 Equity in undistributed earnings of subsidiaries 2,391 10,007 9,310 Net earnings $ 14,067 13,382 10,268 Statements of Cash Flows For the Years Ended December 31, 2019, 2018 and 2017 (Dollars in thousands) 2019 2018 2017 Cash flows from operating activities: Net earnings $ 14,067 13,382 10,268 Adjustments to reconcile net earnings to net cash provided by operating activities: Equity in undistributed earnings of subsidiaries (2,391 ) (10,007 ) (9,310 ) Change in: Other assets 57 13 (272 ) Other liabilities (13 ) 6 5 Net cash provided by operating activities 11,720 3,394 691 Cash flows from investing activities: Proceeds from calls and maturities of investment securities available for sale — — 500 Net cash provided by investing activities — — 500 Cash flows from financing activities: Repayment of junior subordinated debentures (5,000 ) — — Cash dividends paid on common stock (3,939 ) (3,133 ) (2,629 ) Cash in lieu stock dividend — — (6 ) Stock repurchase (2,490 ) — — Proceeds from exercise of restricted stock units 207 — 915 Net cash used by financing activities (11,222 ) (3,133 ) (1,720 ) Net change in cash 498 261 (529 ) Cash at beginning of year 689 428 957 Cash at end of year $ 1,187 689 428 Noncash investing and financing activities: — Change in unrealized gain on investment securities available for sale, net $ 2,658 (2,607 ) (1 ) |
18. Quarterly Data
18. Quarterly Data | 12 Months Ended |
Dec. 31, 2019 | |
Quarterly Financial Information Disclosure [Abstract] | |
Quarterly Data | (Dollars in thousands, except per share amounts) First Second Third Fourth First Second Third Fourth Total interest income $ 12,183 12,375 12,430 12,613 $ 10,759 11,059 11,608 11,924 Total interest expense 757 781 994 1,225 467 513 557 609 Net interest income 11,426 11,594 11,436 11,388 10,292 10,546 11,051 11,315 Provision for loan losses 178 77 422 186 31 231 110 418 Other income 4,120 4,385 4,708 4,526 3,736 4,016 3,915 4,499 Other expense 10,916 11,244 11,267 12,090 10,042 10,560 10,702 11,270 Income before income taxes 4,452 4,658 4,455 3,638 3,955 3,771 4,154 4,126 Income tax expense 785 845 834 672 652 595 687 690 Net earnings 3,667 3,813 3,621 2,966 3,303 3,176 3,467 3,436 Basic net earnings per share $ 0.61 0.64 0.62 0.50 $ 0.55 0.53 0.58 0.57 Diluted net earnings per share $ 0.61 0.64 0.61 0.50 $ 0.55 0.53 0.57 0.57 |
1. Summary of Significant Acc_2
1. Summary of Significant Accounting Policies (Policies) | 12 Months Ended |
Dec. 31, 2019 | |
Accounting Policies [Abstract] | |
Organization | Peoples Bancorp of North Carolina, Inc. (“Bancorp”) received regulatory approval to operate as a bank holding company on July 22, 1999, and became effective August 31, 1999. Bancorp is primarily regulated by the Board of Governors of the Federal Reserve System, and serves as the one-bank holding company for Peoples Bank (the “Bank”). The Bank commenced business in 1912 upon receipt of its banking charter from the North Carolina Commissioner of Banks (the “Commissioner”). The Bank is primarily regulated by the Commissioner and the Federal Deposit Insurance Corporation (the “FDIC”) and undergoes periodic examinations by these regulatory agencies. The Bank, whose main office is in Newton, North Carolina, provides a full range of commercial and consumer banking services primarily in Catawba, Alexander, Lincoln, Mecklenburg, Iredell, Wake and Durham counties in North Carolina. Peoples Investment Services, Inc. (“PIS”) is a wholly owned subsidiary of the Bank and began operations in 1996 to provide investment and trust services through agreements with an outside party. Real Estate Advisory Services, Inc. (“REAS”) is a wholly owned subsidiary of the Bank and began operations in 1997 to provide real estate appraisal and property management services to individuals and commercial customers of the Bank. Community Bank Real Estate Solutions, LLC (“CBRES”) is a wholly owned subsidiary of the Bank and began operations in 2009 as a “clearing house” for appraisal services for community banks. Other banks are able to contract with CBRES to find and engage appropriate appraisal companies in the area where the property is located. In 2019, the Company lauched PB Insurance Agency, which is part of CBRES. PB Real Estate Holdings, LLC (“PBREH”) is a wholly owned subsidiary of the Bank and began operation in 2015. PBREH acquires, manages and disposes of real property, other collateral and other assets obtained in the ordinary course of collecting debts previously contracted. The Bank operates three banking offices focused on the Latino population that were formerly operated as a division of the Bank under the name Banco de la Gente (“Banco”). These offices are now branded as Bank branches and considered a separate market territory of the Bank as they offer normal and customary banking services as are offered in the Bank’s other branches such as the taking of deposits and the making of loans. |
Principles of Consolidation | The consolidated financial statements include the financial statements of Bancorp and its wholly owned subsidiary, the Bank, along with the Bank’s wholly owned subsidiaries, Peoples Investment Services, Inc., REAS, CBRES and PBREH (collectively called the “Company”). All significant intercompany balances and transactions have been eliminated in consolidation. |
Basis of Presentation | The accounting principles followed by the Company, and the methods of applying these principles, conform with accounting principles generally accepted in the United States of America (“GAAP”) and with general practices in the banking industry. In preparing the financial statements in conformity with GAAP, management is required to make estimates and assumptions that affect the reported amounts in the financial statements. Actual results could differ significantly from these estimates. Material estimates common to the banking industry that are particularly susceptible to significant change in the near term include, but are not limited to, the determination of the allowance for loan losses and valuation of real estate acquired in connection with or in lieu of foreclosure on loans. |
Cash and Cash Equivalents | Cash, due from banks, interest-bearing deposits and federal funds sold are considered cash and cash equivalents for cash flow reporting purposes. |
Investment Securities | There are three classifications the Company is able to classify its investment securities: trading, available for sale, or held to maturity. Trading securities are bought and held principally for sale in the near term. Held to maturity securities are those securities for which the Company has the ability and intent to hold until maturity. All other securities not included in trading or held to maturity are classified as available for sale. At December 31, 2019 and 2018, the Company classified all of its investment securities as available for sale. Available for sale securities are recorded at fair value. Unrealized holding gains and losses, net of the related tax effect, are excluded from earnings and are reported as a separate component of shareholders’ equity until realized. Management evaluates investment securities for other-than-temporary impairment on an annual basis. A decline in the market value of any investment below cost that is deemed other-than-temporary is charged to earnings for the decline in value deemed to be credit related and a new cost basis in the security is established. The decline in value attributed to non-credit related factors is recognized in comprehensive income. Premiums and discounts are amortized or accreted over the life of the related security as an adjustment to the yield. Realized gains and losses for securities classified as available for sale are included in earnings and are derived using the specific identification method for determining the cost of securities sold. |
Other Investments | Other investments include equity securities with no readily determinable fair value. These investments are carried at cost. |
Mortgage Loans Held for Sale | Mortgage loans held for sale are carried at lower of aggregate cost or market value. The cost of mortgage loans held for sale approximates the market value. |
Loans | Loans that management has the intent and ability to hold for the foreseeable future or until maturity are reported at the principal amount outstanding, net of the allowance for loan losses. Interest on loans is calculated by using the simple interest method on daily balances of the principal amount outstanding. The recognition of certain loan origination fee income and certain loan origination costs is deferred when such loans are originated and amortized over the life of the loan. A loan is impaired when, based on current information and events, it is probable that all amounts due according to the contractual terms of the loan will not be collected. Impaired loans are measured based on the present value of expected future cash flows, discounted at the loan’s effective interest rate, or at the loan’s observable market price, or the fair value of the collateral if the loan is collateral dependent. Accrual of interest is discontinued on a loan when management believes, after considering economic conditions and collection efforts, that the borrower’s financial condition is such that collection of interest is doubtful. Interest previously accrued but not collected is reversed against current period earnings. |
Allowance for Loan Losses | The allowance for loan losses reflects management’s assessment and estimate of the risks associated with extending credit and its evaluation of the quality of the loan portfolio. The Bank periodically analyzes the loan portfolio in an effort to review asset quality and to establish an allowance for loan losses that management believes will be adequate in light of anticipated risks and loan losses. In assessing the adequacy of the allowance, size, quality and risk of loans in the portfolio are reviewed. Other factors considered are: ● the Bank’s loan loss experience; ● the amount of past due and non-performing loans; ● specific known risks; ● the status and amount of other past due and non-performing assets; ● underlying estimated values of collateral securing loans; ● current and anticipated economic conditions; and ● other factors which management believes affect the allowance for potential credit losses. Management uses several measures to assess and monitor the credit risks in the loan portfolio, including a loan grading system that begins upon loan origination and continues until the loan is collected or collectability becomes doubtful. Upon loan origination, the Bank’s originating loan officer evaluates the quality of the loan and assigns one of eight risk grades. The loan officer monitors the loan’s performance and credit quality and makes changes to the credit grade as conditions warrant. When originated or renewed, all loans over a certain dollar amount receive in-depth reviews and risk assessments by the Bank’s Credit Administration. Before making any changes in these risk grades, management considers assessments as determined by the third party credit review firm (as described below), regulatory examiners and the Bank’s Credit Administration. Any issues regarding the risk assessments are addressed by the Bank’s senior credit administrators and factored into management’s decision to originate or renew the loan. The Bank’s Board of Directors reviews, on a monthly basis, an analysis of the Bank’s reserves relative to the range of reserves estimated by the Bank’s Credit Administration. As an additional measure, the Bank engages an independent third party to review the underwriting, documentation and risk grading analyses. This independent third party reviews and evaluates loan relationships greater than $1.0 million, excluding loans in default, and loans in process of litigation or liquidation. The third party’s evaluation and report is shared with management and the Bank’s Board of Directors. Management considers certain commercial loans with weak credit risk grades to be individually impaired and measures such impairment based upon available cash flows and the value of the collateral. Allowance or reserve levels are estimated for all other graded loans in the portfolio based on their assigned credit risk grade, type of loan and other matters related to credit risk. Management uses the information developed from the procedures described above in evaluating and grading the loan portfolio. This continual grading process is used to monitor the credit quality of the loan portfolio and to assist management in estimating the allowance for loan losses. The provision for loan losses charged or credited to earnings is based upon management’s judgment of the amount necessary to maintain the allowance at a level appropriate to absorb probable incurred losses in the loan portfolio at the balance sheet date. The amount each quarter is dependent upon many factors, including growth and changes in the composition of the loan portfolio, net charge-offs, delinquencies, management’s assessment of loan portfolio quality, the value of collateral, and other macro-economic factors and trends. The evaluation of these factors is performed quarterly by management through an analysis of the appropriateness of the allowance for loan losses. The allowance for loan losses is comprised of three components: specific reserves, general reserves and unallocated reserves. After a loan has been identified as impaired, management measures impairment. When the measure of the impaired loan is less than the recorded investment in the loan, the amount of the impairment is recorded as a specific reserve. These specific reserves are determined on an individual loan basis based on management’s current evaluation of the Bank’s loss exposure for each credit, given the appraised value of any underlying collateral. Loans for which specific reserves are provided are excluded from the general allowance calculations as described below. The general allowance reflects reserves established under GAAP for collective loan impairment. These reserves are based upon historical net charge-offs using the greater of the last two, three, four or five years’ loss experience. This charge-off experience may be adjusted to reflect the effects of current conditions. The Bank considers information derived from its loan risk ratings and external data related to industry and general economic trends in establishing reserves. The unallocated allowance is determined through management’s assessment of probable losses that are in the portfolio but are not adequately captured by the other two components of the allowance, including consideration of current economic and business conditions and regulatory requirements. The unallocated allowance also reflects management’s acknowledgement of the imprecision and subjectivity that underlie the modeling of credit risk. Due to the subjectivity involved in determining the overall allowance, including the unallocated portion, the unallocated portion may fluctuate from period to period based on management’s evaluation of the factors affecting the assumptions used in calculating the allowance. There were no significant changes in the estimation methods or fundamental assumptions used in the evaluation of the allowance for loan losses for the year ended December 31, 2019 as compared to the year ended December 31, 2018. Revisions, estimates and assumptions may be made in any period in which the supporting factors indicate that loss levels may vary from the previous estimates. Effective December 31, 2012, certain mortgage loans from the former Banco division of the Bank were analyzed separately from other single family residential loans in the Bank’s loan portfolio. These loans are first mortgage loans made to the Latino market, primarily in Mecklenburg, North Carolina and surrounding counties. These loans are non-traditional mortgages in that the customer normally did not have a credit history, so all credit information was accumulated by the loan officers. Various regulatory agencies, as an integral part of their examination process, periodically review the Bank’s allowance for loan losses. Such agencies may require adjustments to the allowance based on their judgments of information available to them at the time of their examinations. Management believes it has established the allowance for credit losses pursuant to GAAP, and has taken into account the views of its regulators and the current economic environment. Management considers the allowance for loan losses adequate to cover the estimated losses inherent in the Bank’s loan portfolio as of the date of the financial statements. Although management uses the best information available to make evaluations, significant future additions to the allowance may be necessary based on changes in economic and other conditions, thus adversely affecting the operating results of the Company. |
Mortgage Banking Activities | Mortgage banking income represents net gains from the sale of mortgage loans and fees received from borrowers and loan investors related to the Bank’s origination of single-family residential mortgage loans. Mortgage loans serviced for others are not included in the accompanying balance sheets. The unpaid principal balances of mortgage loans serviced for others was approximately $729,000, $866,000 and $1.0 million at December 31, 2019, 2018 and 2017, respectively. The Bank originates certain fixed rate mortgage loans and commits these loans for sale. The commitments to originate fixed rate mortgage loans and the commitments to sell these loans to a third party are both derivative contracts. The fair value of these derivative contracts is immaterial and has no effect on the recorded amounts in the financial statements. |
Premises and Equipment | Premises and equipment are stated at cost less accumulated depreciation. Depreciation is computed primarily using the straight-line method over the estimated useful lives of the assets. When assets are retired or otherwise disposed, the cost and related accumulated depreciation are removed from the accounts, and any gain or loss is reflected in earnings for that period. The cost of maintenance and repairs that do not improve or extend the useful life of the respective asset is charged to earnings as incurred, whereas significant renewals and improvements are capitalized. The range of estimated useful lives for premises and equipment are generally as follows: Buildings and improvements 10 - 50 years Furniture and equipment 3 - 10 years |
Other Real Estate | Foreclosed assets include all assets received in full or partial satisfaction of a loan. Foreclosed assets are reported at fair value less estimated selling costs. Any write-downs at the time of foreclosure are charged to the allowance for loan losses. Subsequent to foreclosure, valuations are periodically performed by management, and a valuation allowance is established if fair value less estimated selling costs declines below carrying value. Costs relating to the development and improvement of the property are capitalized. Revenues and expenses from operations are included in other expenses. Changes in the valuation allowance are included in loss on sale and write-down of other real estate. |
Income Taxes | Deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases. Additionally, the recognition of future tax benefits, such as net operating loss carryforwards, is required to the extent that the realization of such benefits is more likely than not to occur. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which the assets and liabilities are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income tax expense in the period that includes the enactment date. In the event the future tax consequences of differences between the financial reporting bases and the tax bases of the Company’s assets and liabilities results in a deferred tax asset, an evaluation of the probability of being able to realize the future benefits indicated by such asset is required. A valuation allowance is provided for the portion of the deferred tax asset when it is more likely than not that some portion or all of the deferred tax asset will not be realized. In assessing the realizability of a deferred tax asset, management considers the scheduled reversals of deferred tax liabilities, projected future taxable income, and tax planning strategies. Tax effects from an uncertain tax position can be recognized in the financial statements only when it is more likely than not that the tax position will be sustained upon examination by the appropriate taxing authority that would have full knowledge of all relevant information. A tax position that meets the more likely than not recognition threshold is measured at the largest amount of benefit that is greater than fifty percent likely of being realized upon ultimate settlement. Previously recognized tax positions that no longer meet the more likely than not recognition threshold should be derecognized in the first subsequent financial reporting period in which that threshold is no longer met. The Company assessed the impact of this guidance and determined that it did not have a material impact on the Company’s financial position, results of operations or disclosures. |
Derivative Financial Instruments and Hedging Activities | In the normal course of business, the Company enters into derivative contracts to manage interest rate risk by modifying the characteristics of the related balance sheet instruments in order to reduce the adverse effect of changes in interest rates. All material derivative financial instruments are recorded at fair value in the financial statements. The fair value of derivative contracts related to the origination of fixed rate mortgage loans and the commitments to sell these loans to a third party is immaterial and has no effect on the recorded amounts in the financial statements. The disclosure requirements for derivatives and hedging activities have the intent to provide users of financial statements with an enhanced understanding of: (a) how and why an entity uses derivative instruments, (b) how derivative instruments and related hedged items are accounted for and (c) how derivative instruments and related hedged items affect an entity’s financial position, financial performance, and cash flows. The disclosure requirements include qualitative disclosures about objectives and strategies for using derivatives, quantitative disclosures about the fair value of, and gains and losses on, derivative instruments, and disclosures about credit-risk-related contingent features in derivative instruments. On the date a derivative contract is entered into, the Company designates the derivative as a fair value hedge, a cash flow hedge, or a trading instrument. Changes in the fair value of instruments used as fair value hedges are accounted for in the earnings of the period simultaneous with accounting for the fair value change of the item being hedged. Changes in the fair value of the effective portion of cash flow hedges are accounted for in other comprehensive income rather than earnings. Changes in fair value of instruments that are not intended as a hedge are accounted for in the earnings of the period of the change. If a derivative instrument designated as a fair value hedge is terminated or the hedge designation removed, the difference between a hedged item’s then carrying amount and its face amount is recognized into income over the original hedge period. Likewise, if a derivative instrument designated as a cash flow hedge is terminated or the hedge designation removed, related amounts accumulated in other accumulated comprehensive income are reclassified into earnings over the original hedge period during which the hedged item affects income. The accounting for changes in the fair value of derivatives depends on the intended use of the derivative, whether the Company has elected to designate a derivative in a hedging relationship and apply hedge accounting and whether the hedging relationship has satisfied the criteria necessary to apply hedge accounting. Derivatives designated and qualifying as a hedge of the exposure to changes in the fair value of an asset, liability, or firm commitment attributable to a particular risk, such as interest rate risk, are considered fair value hedges. Derivatives designated and qualifying as a hedge of the exposure to variability in expected future cash flows, or other types of forecasted transactions, are considered cash flow hedges. Hedge accounting generally provides for the matching of the timing of gain or loss recognition on the hedging instrument with the recognition of the changes in the fair value of the hedged asset or liability that are attributable to the hedged risk in a fair value hedge or the earnings effect of the hedged forecasted transactions in a cash flow hedge. The Company may enter into derivative contracts that are intended to economically hedge certain of its risks, even though hedge accounting does not apply or the Company elects not to apply hedge accounting. The Company formally documents all hedging relationships, including an assessment that the derivative instruments are expected to be highly effective in offsetting the changes in fair values or cash flows of the hedged items. |
Advertising Costs | Advertising costs are expensed as incurred. |
Stock-Based Compensation | The Company has an Omnibus Stock Ownership and Long Term Incentive Plan that was approved by shareholders on May 7, 2009 (the “Plan”) whereby certain stock-based rights, such as stock options, restricted stock, restricted stock units, performance units, stock appreciation rights or book value shares, may be granted to eligible directors and employees. No shares were available for issuance under the Plan at December 31, 2019 as all stock-based rights under the Plan must have been granted or awarded by May 7, 2019 (i.e., ten years from the Plan effective date). The Company granted 32,465 restricted stock units under the Plan at a grant date fair value of $7.18 per share during the first quarter of 2012, of which 5,891 restricted stock units were forfeited by the executive officers of the Company as required by the agreement with the U.S. Department of the Treasury in conjunction with the Company’s participation in the Capital Purchase Program under the Troubled Asset Relief Program. In July 2012, the Company granted 5,891 restricted stock units at a grant date fair value of $7.50 per share. The Company granted 29,475 restricted stock units under the Plan at a grant date fair value of $10.82 per share during the second quarter of 2013. The Company granted 23,162 restricted stock units under the Plan at a grant date fair value of $14.27 per share during the first quarter of 2014. The Company granted 16,583 restricted stock units under the Plan at a grant date fair value of $16.34 per share during the first quarter of 2015. The Company granted 5,544 restricted stock units under the Plan at a grant date fair value of $16.91 per share during the first quarter of 2016. The Company granted 4,114 restricted stock units under the Plan at a grant date fair value of $25.00 per share during the first quarter of 2017. The Company granted 3,725 restricted stock units under the Plan at a grant date fair value of $31.43 per share during the first quarter of 2018. The Company granted 5,290 restricted stock units under the Plan at a grant date fair value of $28.43 per share during the first quarter of 2019. The number of restricted stock units granted and grant date fair values for the restricted stock units granted in 2012 through 2017 have been restated to reflect the 10% stock dividend that was paid in the fourth quarter of 2017. The Company recognizes compensation expense on the restricted stock units over the period of time the restrictions are in place (five years from the grant date for the 2012 grants, four years from the grant date for the 2013, 2015, 2016, 2017, 2018 and 2019 grants and three years from the grant date for the 2014 grants). The amount of expense recorded each period reflects the changes in the Company’s stock price during such period. As of December 31, 2019, the total unrecognized compensation expense related to the restricted stock unit grants under the Plan was $238,000. The Company recognized compensation expense for restricted stock units granted under the Plan of $270,000, $85,000 and $592,000 for the years ended December 31, 2019, 2018 and 2017, respectively. |
Net Earnings Per Share | Net earnings per common share is based on the weighted average number of common shares outstanding during the period while the effects of potential common shares outstanding during the period are included in diluted earnings per common share. The average market price during the year is used to compute equivalent shares. The reconciliations of the amounts used in the computation of both “basic earnings per common share” and “diluted earnings per common share” for the years ended December 31, 2019, 2018 and 2017 are as follows: For the year ended December 31, 2019 Net Earnings Weighted Average Per Share Amount Basic earnings per share $ 14,067 5,941,873 $ 2.37 Effect of dilutive securities: Restricted stock units — 25,438 Diluted earnings per share $ 14,067 5,967,311 $ 2.36 For the year ended December 31, 2018 Net Earnings Weighted Average Per Share Amount Basic earnings per share $ 13,382 5,995,256 $ 2.23 Effect of dilutive securities: Restricted stock units — 20,240 Diluted earnings per share $ 13,382 6,015,496 $ 2.22 For the year ended December 31, 2017 Net Earnings Weighted Average Per Share Amount Basic earnings per share $ 10,268 5,988,183 $ 1.71 Effect of dilutive securities: Restricted stock units — 74,667 Diluted earnings per share $ 10,268 6,062,850 $ 1.69 |
Recent Accounting Pronouncements | The following tables provide a summary of Accounting Standards Updates (“ASU”) issued by the Financial Accounting Standards Board (“FASB”) that the Company has recently adopted. Recently Adopted Accounting Guidance ASU Description Effective Date Effect on Financial Statements or Other Significant Matters ASU 2014-09: Revenue from Contracts with Customers Provides guidance on the recognition of revenue from contracts with customers. The core principle of this guidance is that an entity should recognize revenue to reflect the transfer of goods and services to customers in an amount equal to the consideration the entity receives or expects to receive. January 1, 2018 See section titled "ASU 2014-09" below for a description of the effect on the Company’s results of operations, financial position and disclosures. ASU 2016-01: Recognition and Measurement of Financial Assets and Financial Liabilities Addresses certain aspects of recognition, measurement, presentation, and disclosure of financial instruments. January 1, 2018 The adoption of this guidance did not have a material impact on the Company’s results of operations, financial position or disclosures. ASU 2017-07: Improving the Presentation of Net Periodic Pension Cost and Net Periodic Postretirement Benefit Costs Amended the requirements related to the income statement presentation of the components of net periodic benefit cost for an entity’s sponsored defined benefit pension and other postretirement plans. January 1, 2018 The adoption of this guidance did not have a material impact on the Company’s results of operations, financial position or disclosures. ASU 2017-09: Scope of Modification Accounting Amended the requirements related to changes to the terms or conditions of a share-based payment award. January 1, 2018 The adoption of this guidance did not have a material impact on the Company’s results of operations, financial position or disclosures. ASU 2017-14: Income Statement—Reporting Comprehensive, Income (Topic 220), Revenue Recognition (Topic 605), and Revenue from Contracts with Customers (Topic 606) Incorporates into the Accounting Standards Codification ("ASC") recent Securities and Exchange Commission ("SEC") guidance related to revenue recognition. Effective upon issuance The adoption of this guidance did not have a material impact on the Company’s results of operations, financial position or disclosures. ASU Description Effective Date Effect on Financial Statements or Other Significant Matters ASU 2018-03: Technical Corrections and Improvements to Financial Instruments—Overall (Subtopic 825-10) Recognition and Measurement of Financial Assets and Financial Liabilities Clarifies certain aspects of the guidance issued in ASU 2016-01. January 1, 2018 The adoption of this guidance did not have a material impact on the Company’s results of operations, financial position or disclosures. ASU 2018-04: Investments—Debt Securities (Topic 320) and Regulated Operations (Topic 980): Amendments to SEC Paragraphs Pursuant to SEC Staff Accounting Bulletin No. 117 and SEC Release No. 33-9273 (SEC Update) Incorporates recent SEC guidance which was issued in order to make the relevant interpretive guidance consistent with current authoritative accounting and auditing guidance and SEC rules and regulation. Effective upon issuance The adoption of this guidance did not have a material impact on the Company’s results of operations, financial position or disclosures. ASU 2018-06: Codification Improvements to Topic 942: Financial Services—Depository and Lending Eliminates a reference to the Office of the Comptroller of the Currency’s Banking Circular 202, Accounting for Net Deferred Tax Charges, from the ASC. The Office of the Comptroller of the Currency published the guidance in 1985 but has since rescinded it. Effective upon issuance The adoption of this guidance did not have a material impact on the Company’s results of operations, financial position or disclosures. ASU 2016-02: Leases Increases transparency and comparability among organizations by recognizing lease assets and lease liabilities on the balance sheet and disclosing key information about leasing arrangements. January 1, 2019 See section titled "ASU 2016-02" below for a description of the effect on the Company’s results of operations, financial position and disclosures. ASU 2017-08: Premium Amortization on Purchased Callable Debt Securities Amended the requirements related to the amortization period for certain purchased callable debt securities held at a premium. January 1, 2019 The adoption of this guidance did not have a material impact on the Company’s results of operations, financial position or disclosures. ASU 2018-11: Leases (Topic 842): Targeted Improvements Intended to reduce costs and ease implementation of ASU 2016-02. January 1, 2019 The adoption of this guidance did not have a material impact on the Company’s results of operations, financial position or disclosures. ASU 2018-20: Narrow- Scope Improvements for Lessors Provides narrow-scope improvements for lessors, that provide relief in the accounting for sales, use and similar taxes, the accounting for other costs paid by a lessee that may benefit a lessor, and variable payments when contracts have lease and non-lease components. January 1, 2019 See comments for ASU 2016-02 below. ASU 2019-07: Codification Updates to SEC Sections Guidance updated for various Topics of the Accounting Standards Codification to align the guidance in various SEC sections of the Codification with the requirements of certain SEC final rules. Effective upon issuance The adoption of this guidance did not have a material impact on the Company’s results of operations, financial position or disclosures. ASU 2014-09 The Company has applied ASU 2014-09 using a modified retrospective approach. The Company’s revenue is comprised of net interest income and noninterest income. The scope of ASU 2014-09 explicitly excludes net interest income as well as many other revenues for financial assets and liabilities including loans, leases, securities, and derivatives. Accordingly, the majority of the Company’s revenues are not affected. Appraisal management fee income and expense from the Bank’s subsidiary, CBRES, was reported as a net amount prior to March 31, 2018, which was included in miscellaneous non-interest income. This income and expense is now reported on separate line items under non-interest income and non-interest expense. See below for additional information related to revenue generated from contracts with customers. Revenue and Method of Adoption The majority of the Company’s revenue is derived primarily from interest income from receivables (loans) and securities. Other revenues are derived from fees received in connection with deposit accounts, investment advisory, and appraisal services. On January 1, 2018, the Company adopted the requirements of ASU 2014-09. The core principle of the new standard is that a company should recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. The Company adopted ASU 2014-09 using the modified retrospective transition approach which does not require restatement of prior periods. The method was selected as there were no material changes in the timing of revenue recognition resulting in no comparability issues with prior periods. This adoption method is considered a change in accounting principle requiring additional disclosure of the nature of, and reason for, the change, which is solely a result of the adoption of the required standard. When applying the modified retrospective approach under ASU 2014-09, the Company has elected, as a practical expedient, to apply this approach only to contracts that were not completed as of January 1, 2018. A completed contract is considered to be a contract for which all (or substantially all) of the revenue was recognized in accordance with revenue guidance that was in effect before January 1, 2018. There were no uncompleted contracts as of January 1, 2018 for which application of the new standard required an adjustment to retained earnings. The following disclosures involve the Company’s material income streams derived from contracts with customers which are within the scope of ASU 2014-09. Through the Company’s wholly-owned subsidiary, PIS, the Company contracts with a registered investment advisor to perform investment advisory services on behalf of the Company’s customers. The Company receives commissions from this third party investment advisor based on the volume of business that the Company’s customers do with such investment advisor. Total revenue recognized from these contracts was $876,000 and $823,000 for the years ended December 31, 2019 and 2018, respectively. The Company utilizes third parties to contract with the Company’s customers to perform debit and credit card clearing services. These third parties pay the Company commissions based on the volume of transactions that they process on behalf of the Company’s customers. Total revenue recognized from these contracts with these third parties was $4.1 million and $3.9 million for the years ended December 31, 2019 and 2018, respectively. Through the Company’s wholly-owned subsidiary, REAS, the Company provides property appraisal services for negotiated fee amounts on a per appraisal basis. Total revenue recognized from these contracts with customers was $692,000 and $597,000 for the years ended December 31, 2019 and 2018, respectively. Through the Company’s wholly-owned subsidiary, CBRES, the Company provides appraisal management services. Total revenue recognized from these contracts with customers was $4.5 million and $3.2 million for the years ended December 31, 2019 and 2018, respectively. Due to the nature of the Company’s relationship with the customers that the Company provides services, the Company does not incur costs to obtain contracts and there are no material incremental costs to fulfill these contracts that should be capitalized. Disaggregation of Revenue Contract Balances Performance Obligations Significant Judgements ASU 2016-02 On January 1, 2019, the Company adopted the requirements of ASU 2016-02, Leases (Topic 842). Topic 842 was subsequently amended by ASU 2018-01, Land Easement Practical Expedient for Transition to Topic 842; ASU 2018-10, Codification Improvements to Topic 842, Leases; and ASU 2018-11, Targeted Improvements. The purpose of Topic 842 is to increase transparency and comparability between organizations that enter into lease agreements. The key difference of Topic 842 from the previous guidance (Topic 840) is the recognition of a right-of-use (“ROU”) asset and lease liability on the statement of financial position for those leases previously classified as operating leases under the previous guidance. Topic 842 states that a contract is or contains a lease if the contract conveys the right to control the use of identified property, plant, or equipment (an identified asset) for a period of time in exchange for consideration. The Company reviewed its material non-real estate contracts to determine if they included a lease and did not note any that would need to be considered under Topic 842. The Company’s lease agreements in which Topic 842 has been applied are primarily for retail branch real estate properties. These real estate leases have lease terms from less than 12 months to leases with options up to 15 years, and payment terms vary with some being fixed payments or based on a fixed annual increase while others are variable and the annual increases are based on market rates or other indexes. Initially transition from Topic 840 to Topic 842 required a modified retrospective approach for leases existing at, or entered into after, the beginning of the earliest comparative period presented in the financial statements. ASU 2018-11, which, among other things, provided an additional transition method that would allow entities to not apply the initial guidance of ASU 2016-02 to the comparative periods presented in the financial statements and instead recognize a cumulative-effect adjustment to the opening balance of retained earnings in the period of adoption. The Company chose the transition method of adoption provided by ASU 2018-11, therefore, the Company will apply this standard to all existing leases as of the adoption date of January 1, 2019, recording a ROU asset and a lease liability and a cumulative-effect adjustment to the opening balance of retained earnings (if applicable) in the period of adoption. With this transition method, comparative prior period disclosures will be under the previous accounting guidance for leases (Topic 840). This adoption method is considered a change in accounting principle requiring additional disclosure of the nature of and reason for the change, which is solely a result of the adoption of the required standard. Topic 842 provides a package of practical expedients in applying the lease standard to be chosen at the date of adoption. The Company has chosen to elect the package of practical expedients provided under ASU 2016-02 whereby it will not reassess (i) whether any expired or existing contracts are or contain leases, (ii) the lease classification for any expired or existing leases and (iii) initial direct costs for any existing leases. The Company has also chosen not to apply the recognition requirements of ASU 2016-02 to any short-term leases (as defined by related accounting guidance). The Company will account for lease and non-lease components separately because such amounts are readily determinable under its lease contracts. Additionally, the Company has chosen to elect the use of hindsight, when applicable, in determining the lease term, in assessing the likelihood that a lessee purchase option will be exercised; and in assessing the impairment of ROU assets. ROU assets represent the Company’s right to use an underlying asset for the lease term and lease liabilities represent the Company’s obligation to make lease payments arising from the lease. The Company determined that all of its leases are classified as operating leases under Topic 842. For operating and finance leases, lease liabilities are initially measured at commencement date based on the present value of lease payments not yet paid, discounted using the discount rate for the lease at the lease commencement date over the lease term. For operating and finance leases, ROU assets are measured at the commencement date as the amount of the initial liability, adjusted for lease payments made to the lessor at or before commencement date, minus incentives; and for any initial direct costs incurred by the lessee. Based on the transition method that the Company has chosen to follow, the initial application date of the lease term for all existing leases is January 1, 2019. For operating leases, after lease commencement, the lease liability is recorded at the present value of the unpaid lease payments discounted at the discount rate for the lease established at the commencement date. Lease expense is determined by the sum of the lease payments to be recognized on a straight-line basis over the lease term. The ROU asset is subsequently amortized as the difference between the straight line lease cost for the period and the periodic accretion of the lease liability. The lease term used for the calculation of the initial operating ROU asset and lease liability will include the initial lease term in addition to one renewal option the Company thinks it is reasonably certain to exercise or incur. Regarding the discount rate, Topic 842 requires that the implicit rate within the lease agreement be used if available. If not available, the Company should use its incremental borrowing rate in effect at the time of the lease commencement date. The Company utilized Federal Home Loan Bank (“FHLB”) Atlanta’s Fixed Rate Credit rates for terms consistent with the Company’s lease terms. The Company recorded operating ROU assets and operating lease liabilities of $4.4 million and $4.4 million, respectively at the commencement date of January 1, 2019. The Company did not have a cumulative-effect adjustment to the opening balance of retained earnings. The adoption of ASU 2016-02 did not have a material impact on the Company’s results of operations, financial position or disclosures. A director of the Company has a membership interest in a company that leases two branch facilities to the Bank. The Bank’s lease payments for these facilities totaled $231,000 and $230,000 for the years ended December 31, 2019 and 2018, respectively. The following tables provide a summary of ASU’s issued by the FASB that the Company has not adopted as of December 31, 2019, which may impact the Company’s financial statements. Recently Issued Accounting Guidance Not Yet Adopted ASU Description Effective Date Effect on Financial Statements or Other Significant Matters ASU 2016-13: Measurement of Credit Losses on Financial Instruments Provides guidance to change the accounting for credit losses and modify the impairment model for certain debt securities. January 1, 2020 Early adoption permitted The Company will apply this guidance through a cumulative-effect adjustment to retained earnings as of the beginning of the year of adoption. The Company is still evaluating the impact of this guidance on its consolidated financial statements. The Company has formed a Current Expected Credit Losses (“CECL”) committee and implemented a model from a third-party vendor for running CECL calculations. The Company is currently developing CECL model assumptions and comparing results to current allowance for loan loss calculations. The Company plans to run parallel calculations leading up to the effective date of this guidance to ensure it is prepared for implementation by the effective date. In addition to the Company’s allowance for loan losses, it will also record an allowance for credit losses on debt securities instead of applying the impairment model currently utilized. The amount of the adjustments will be impacted by each portfolio’s composition and credit quality at the adoption date as well as economic conditions and forecasts at that time. See ASU 2019-10 below. ASU 2018-13: Disclosure Framework—Changes to the Disclosure Requirements for Fair Value Measurement (Topic 820) Updates the disclosure requirements on fair value measurements in ASC 820, Fair Value Measurement. January 1, 2020 The adoption of this guidance is not expected to have a material impact on the Company’s results of operations, financial position or disclosures. ASU 2018-14: Disclosure Framework—Changes to the Disclosure Requirements for Defined Benefit Plans (Subtopic 715-20) Updates disclosure requirements for employers that sponsor defined benefit pension or other postretirement plans. January 1, 2021 The adoption of this guidance is not expected to have a material impact on the Company’s results of operations, financial position or disclosures. ASU 2018-18: Clarifying the Interaction between Topic 808 and Topic 606 Clarifies the interaction between the guidance for certain collaborative arrangements and the new revenue recognition financial accounting and reporting standard. January 1, 2020 Early adoption permitted The Company does not intend to adopt this guidance early. The adoption of this guidance is not expected to have a material impact on the Company’s results of operations, financial position or disclosures. ASU 2018-19: Codification Improvements to Topic 326, Financial Instruments—Credit Losses Aligns the implementation date of the topic for annual financial statements of nonpublic companies with the implementation date for their interim financial statements. The guidance also clarifies that receivables arising from operating leases are not within the scope of the topic, but rather, should be accounted for in accordance with the leases topic. See ASU 2019-10 below. The adoption of this guidance is not expected to have a material impact on the Company’s results of operations, financial position or disclosures. See ASU 2016-13 above. ASU Description Effective Date Effect on Financial Statements or Other Significant Matters ASU 2018-19: Leases (Topic 842): Codification Improvements Provides guidance to address concerns companies had raised about an accounting exception they would lose when assessing the fair value of underlying assets under the leases standard and clarify that lessees and lessors are exempt from a certain interim disclosure requirement associated with adopting the new standard. January 1, 2020 The adoption of this guidance is not expected to have a material impact on the Company’s results of operations, financial position or disclosures. ASU 2019-04: Codification Improvements to Topic 326, Financial Instruments—Credit Losses, Topic 815, Derivatives and Hedging, and Topic 825, Financial Instruments Addresses unintended issues accountants flagged when implementing ASU 2016-01, Recognition and Measurement of Financial Assets and Financial Liabilities, ASU 2016-13, Measurement of Credit Losses on Financial Instruments, and ASU 2017-12, Targeted Improvements to Accounting for Hedging Activities. See ASU 2019-10 below. The adoption of this guidance is not expected to have a material impact on the Company’s results of operations, financial position or disclosures. See ASU 2016-13 above. ASU 2019-05: Financial Instruments—Credit Losses (Topic 326): Targeted Transition Relief Guidance to provide entities with an option to irrevocably elect the fair value option, applied on an instrument-by-instrument basis for eligible instruments, upon adoption of ASU 2016-13, Measurement of Credit Losses on Financial Instruments. See ASU 2019-10 below. The adoption of this guidance is not expected to have a material impact on the Company’s results of operations, financial position or disclosures. See ASU 2016-13 above. ASU 2019-10: Financial Instruments—Credit Losses (Topic 326), Derivatives and Hedging (Topic 815), and Leases (Topic 842): Effective Dates Guidance to defer the effective dates for private companies, not-for-profit organizations, and certain smaller reporting companies applying standards on current expected credit losses (CECL), leases, hedging. January 1, 2023 The adoption of this guidance is not expected to have a material impact on the Company’s results of operations, financial position or disclosures. ASU 2019-11: Codification Improvements to Topic 326, Financial Instruments—Credit Losses Guidance that addresses issues raised by stakeholders during the implementation of ASU 2016-13, Financial Instruments—Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments. The amendments affect a variety of Topics in the ASC. January 1, 2023 The adoption of this guidance is not expected to have a material impact on the Company’s results of operations, financial position or disclosures. ASU 2019-12: Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes Guidance to simplify accounting for income taxes by removing specific technical exceptions that often produce information investors have a hard time understanding. The amendments also improve consistent application of and simplify GAAP for other areas of Topic 740 by clarifying and amending existing guidance. January 1, 2021 The adoption of this guidance is not expected to have a material impact on the Company’s results of operations, financial position or disclosures. ASU 2020-01: Investments—Equity Securities (Topic 321), Investments—Equity Method and Joint Ventures (Topic 323), and Derivatives and Hedging (Topic 815)—Clarifying the Interactions between Topic 321, Topic 323, and Topic 815 (a consensus of the FASB Emerging Issues Task Force) Guidance to clarify the interaction of the accounting for equity securities under Topic 321 and investments accounted for under the equity method of accounting in Topic 323 and the accounting for certain forward contracts and purchased options accounted for under Topic 815. January 1, 2021 The adoption of this guidance is not expected to have a material impact on the Company’s results of operations, financial position or disclosures. Other accounting standards that have been issued or proposed by FASB or other standards-setting bodies are not expected to have a material impact on the Company’s results of operations, financial position or disclosures. |
Reclassification | Certain amounts in the 2018 and 2017 consolidated financial statements have been reclassified to conform to the 2019 presentation. |
1. Summary of Significant Acc_3
1. Summary of Significant Accounting Policies (Tables) | 12 Months Ended |
Dec. 31, 2019 | |
Accounting Policies [Abstract] | |
Reconciliations of the amounts used in the computation of both basic earnings per common share and diluted earnings per common share | Net Earnings Weighted Average Per Share Amount Basic earnings per share $ 14,067 5,941,873 $ 2.37 Effect of dilutive securities: Restricted stock units — 25,438 Diluted earnings per share $ 14,067 5,967,311 $ 2.36 For the year ended December 31, 2018 Net Earnings Weighted Average Per Share Amount Basic earnings per share $ 13,382 5,995,256 $ 2.23 Effect of dilutive securities: Restricted stock units — 20,240 Diluted earnings per share $ 13,382 6,015,496 $ 2.22 For the year ended December 31, 2017 Net Earnings Weighted Average Per Share Amount Basic earnings per share $ 10,268 5,988,183 $ 1.71 Effect of dilutive securities: Restricted stock units — 74,667 Diluted earnings per share $ 10,268 6,062,850 $ 1.69 |
2. Investment Securities (Table
2. Investment Securities (Tables) | 12 Months Ended |
Dec. 31, 2019 | |
Investments, Debt and Equity Securities [Abstract] | |
Investment securities available for sale | Investment securities available for sale at December 31, 2019 and 2018 are as follows: (Dollars in thousands) December 31, 2019 Amortized Cost Gross Unrealized Gains Gross Unrealized Losses Estimated Fair Value Mortgage-backed securities $ 77,812 1,371 227 78,956 U.S. Government sponsored enterprises 28,265 443 311 28,397 State and political subdivisions 84,686 3,657 200 88,143 Trust preferred securities 250 — — 250 Total $ 191,013 5,471 738 195,746 (Dollars in thousands) December 31, 2018 Amortized Cost Gross Unrealized Gains Gross Unrealized Losses Estimated Fair Value Mortgage-backed securities $ 52,145 516 558 52,103 U.S. Government sponsored enterprises 35,356 71 793 34,634 State and political subdivisions 105,545 2,089 43 107,591 Trust preferred securities 250 — — 250 Total $ 193,296 2,676 1,394 194,578 |
Current fair value and associated unrealized losses on investments in debt securities with unrealized losses | December 31, 2019 Less than 12 Months 12 Months or More Total Fair Value Unrealized Losses Fair Value Unrealized Losses Fair Value Unrealized Losses Mortgage-backed securities $ 28,395 177 6,351 50 34,746 227 U.S. Government sponsored enterprises 2,899 10 6,151 301 9,050 311 State and political subdivisions 7,367 200 — — 7,367 200 Total $ 38,661 387 12,502 351 51,163 738 (Dollars in thousands) December 31, 2018 Less than 12 Months 12 Months or More Total Fair Value Unrealized Losses Fair Value Unrealized Losses Fair Value Unrealized Losses Mortgage-backed securities $ 6,932 56 17,670 502 24,602 558 U.S. Government sponsored enterprises 1,784 69 25,172 724 26,956 793 State and political subdivisions 4,815 26 1,578 17 6,393 43 Total $ 13,531 151 44,420 1,243 57,951 1,394 |
Amortized cost and estimated fair value of investment securities available for sale by contractual maturity | December 31, 2019 (Dollars in thousands) Amortized Cost Estimated Fair Value Due within one year $ 5,490 5,465 Due from one to five years 56,399 58,315 Due from five to ten years 47,717 49,293 Due after ten years 3,595 3,717 Mortgage-backed securities 77,812 78,956 Total $ 191,013 195,746 |
Available for sale securities measured at fair value on a recurring basis | (Dollars in thousands) December 31, 2019 Fair Value Measurements Level 1 Valuation Level 2 Valuation Level 3 Valuation Mortgage-backed securities $ 78,956 — 78,956 — U.S. Government sponsored enterprises $ 28,397 — 28,397 — State and political subdivisions $ 88,143 — 88,143 — Trust preferred securities $ 250 — — 250 (Dollars in thousands) December 31, 2018 Fair Value Measurements Level 1 Valuation Level 2 Valuation Level 3 Valuation Mortgage-backed securities $ 52,103 — 52,103 — U.S. Government sponsored enterprises $ 34,634 — 34,634 — State and political subdivisions $ 107,591 — 107,591 — Trust preferred securities $ 250 — — 250 |
Fair value measurements of investment securities available for sale using Level 3 significant unobservable inputs | (Dollars in thousands) Investment Securities Available for Sale Level 3 Valuation Balance, beginning of period $ 250 Change in book value - Change in gain/(loss) realized and unrealized - Purchases/(sales and calls) - Transfers in and/or (out) of Level 3 - Balance, end of period $ 250 Change in unrealized gain/(loss) for assets still held in Level 3 $ - |
3. Loans (Tables)
3. Loans (Tables) | 12 Months Ended |
Dec. 31, 2019 | |
Receivables [Abstract] | |
Major classifications of loans | December 31, 2019 December 31, 2018 Real estate loans: Construction and land development $ 92,596 94,178 Single-family residential 269,475 252,983 Single-family residential - Banco de la Gente non-traditional 30,793 34,261 Commercial 291,255 270,055 Multifamily and farmland 48,090 33,163 Total real estate loans 732,209 684,640 Loans not secured by real estate: Commercial loans 100,263 97,465 Farm loans 1,033 926 Consumer loans 8,432 9,165 All other loans 7,937 11,827 Total loans 849,874 804,023 Less allowance for loan losses 6,680 6,445 Total net loans $ 843,194 797,578 |
Age analysis of past due loans, by loan type | Loans 30-89 Days Past Due Loans 90 or More Days Past Due Total Past Due Loans Total Current Loans Total Loans Accruing Loans 90 or More Days Past Due Real estate loans: Construction and land development $ 803 — 803 91,793 92,596 — Single-family residential 3,000 126 3,126 266,349 269,475 — Single-family residential - Banco de la Gente non-traditional 4,834 413 5,247 25,546 30,793 — Commercial 504 176 680 290,575 291,255 — Multifamily and farmland — — — 48,090 48,090 — Total real estate loans 9,141 715 9,856 722,353 732,209 — Loans not secured by real estate: Commercial loans 432 — 432 99,831 100,263 — Farm loans — — — 1,033 1,033 — Consumer loans 170 22 192 8,240 8,432 — All other loans — — — 7,937 7,937 — Total loans $ 9,743 737 10,480 839,394 849,874 — December 31, 2018 (Dollars in thousands) Loans 30-89 Days Past Due Loans 90 or More Days Past Due Total Past Due Loans Total Current Loans Total Loans Accruing Loans 90 or More Days Past Due Real estate loans: Construction and land development $ 3 — 3 94,175 94,178 — Single-family residential 4,162 570 4,732 248,251 252,983 — Single-family residential - Banco de la Gente non-traditional 4,627 580 5,207 29,054 34,261 — Commercial 228 — 228 269,827 270,055 — Multifamily and farmland — — — 33,163 33,163 — Total real estate loans 9,020 1,150 10,170 674,470 684,640 — Loans not secured by real estate: Commercial loans 445 90 535 96,930 97,465 — Farm loans — — — 926 926 — Consumer loans 99 4 103 9,062 9,165 — All other loans — — — 11,827 11,827 — Total loans $ 9,564 1,244 10,808 793,215 804,023 — |
Non-accrual loans | December 31, 2019 December 31, 2018 Real estate loans: Construction and land development $ — 1 Single-family residential 1,378 1,530 Single-family residential - Banco de la Gente non-traditional 1,764 1,440 Commercial 256 244 Total real estate loans 3,398 3,215 Loans not secured by real estate: Commercial loans 122 89 Consumer loans 33 10 Total $ 3,553 3,314 |
Impaired loans | Unpaid Contractual Principal Balance Recorded Investment With No Allowance Recorded Investment With Allowance Recorded Investment in Impaired Loans Related Allowance Average Outstanding Impaired Loans YTD Interest Income Recognized Real estate loans: Construction and land development $ 183 — 183 183 7 231 12 Single-family residential 5,152 403 4,243 4,646 36 4,678 269 Single-family residential - Banco de la Gente non-traditional 15,165 — 14,371 14,371 944 14,925 956 Commercial 1,879 — 1,871 1,871 7 1,822 91 Total impaired real estate loans 22,379 403 20,668 21,071 994 21,656 1,328 Loans not secured by real estate: Commercial loans 180 92 84 176 — 134 9 Consumer loans 100 — 96 96 2 105 7 Total impaired loans $ 22,659 495 20,848 21,343 996 21,895 1,344 December 31, 2018 (Dollars in thousands) Unpaid Contractual Principal Balance Recorded Investment With No Allowance Recorded Investment With Allowance Recorded Investment in Impaired Loans Related Allowance Average Outstanding Impaired Loans YTD Interest Income Recognized Real estate loans: Construction and land development $ 281 — 279 279 5 327 19 Single-family residential 5,059 422 4,188 4,610 32 6,271 261 Single-family residential - Banco de la Gente non-traditional 16,424 — 15,776 15,776 1,042 14,619 944 Commercial 1,995 — 1,925 1,925 17 2,171 111 Total impaired real estate loans 23,759 422 22,168 22,590 1,096 23,388 1,335 Loans not secured by real estate: Commercial loans 251 89 1 90 — 96 — Consumer loans 116 — 113 113 2 137 7 Total impaired loans $ 24,126 511 22,282 22,793 1,098 23,621 1,342 December 31, 2017 (Dollars in thousands) Unpaid Contractual Principal Balance Recorded Investment With No Allowance Recorded Investment With Allowance Recorded Investment in Impaired Loans Related Allowance Average Outstanding Impaired Loans YTD Interest Income Recognized Real estate loans: Construction and land development $ 282 — 277 277 6 253 17 Single-family residential 5,226 1,135 3,686 4,821 41 5,113 265 Single-family residential - Banco de la Gente non-traditional 17,360 — 16,805 16,805 1,149 16,867 920 Commercial 2,761 807 1,661 2,468 1 3,411 148 Multifamily and farmland 78 — 12 12 — 28 — Total impaired real estate loans 25,707 1,942 22,441 24,383 1,197 25,672 1,350 Loans not secured by real estate: Commercial loans 264 100 4 104 — 149 3 Farm loans (non RE) — Consumer loans 158 — 154 154 2 194 9 All other loans (not secured by real estate) — — — — — — — Total impaired loans $ 26,129 2,042 22,599 24,641 1,199 26,015 1,362 |
Fair value measurements for mortgage loans held for sale, impaired loans and other real estate on a non-recurring basis | Fair Value Measurements December 31, 2019 Level 1 Valuation Level 2 Valuation Level 3 Valuation Mortgage loans held for sale $ 4,417 — — 4,417 Impaired loans $ 20,347 — — 20,347 Other real estate $ — — — — (Dollars in thousands) Fair Value Measurements December 31, 2018 Level 1 Valuation Level 2 Valuation Level 3 Valuation Mortgage loans held for sale $ 680 — — 680 Impaired loans $ 21,695 — — 21,695 Other real estate $ 27 — — 27 |
Changes in the allowance for loan losses | Real Estate Loans Construction and Land Development Single-Family Residential Single-Family Residential - Banco de la Gente Non-traditional Commercial Multifamily and Farmland Commercial Farm Consumer and All Other Unallocated Total Allowance for loan losses: Beginning balance $ 813 1,325 1,177 1,278 83 626 — 161 982 6,445 Charge-offs (21 ) (42 ) — (1 ) — (389 ) — (623 ) — (1,076 ) Recoveries 45 66 — 49 — 83 — 205 — 448 Provision (143 ) (75 ) (104 ) (21 ) 37 368 — 395 406 863 Ending balance $ 694 1,274 1,073 1,305 120 688 — 138 1,388 6,680 Ending balance: individually evaluated for impairment $ 2 6 925 4 — — — — — 937 Ending balance: collectively evaluated for impairment 692 1,268 148 1,301 120 688 — 138 1,388 5,743 Ending balance $ 694 1,274 1,073 1,305 120 688 — 138 1,388 6,680 Loans: Ending balance $ 92,596 269,475 30,793 291,255 48,090 100,263 1,033 16,369 — 849,874 Ending balance: individually evaluated for impairment $ 10 1,697 12,899 1,365 — 92 — — — 16,063 Ending balance: collectively evaluated for impairment $ 92,586 267,778 17,894 289,890 48,090 100,171 1,033 16,369 — 833,811 Changes in the allowance for loan losses for the year ended December 31, 2018 were as follows: (Dollars in thousands) Real Estate Loans Construction and Land Development Single-Family Residential Single-Family Residential - Banco de la Gente Non-traditional Commercial Multifamily and Farmland Commercial Farm Consumer and All Other Unallocated Total Allowance for loan losses: Beginning balance $ 804 1,812 1,280 1,193 72 574 — 155 476 6,366 Charge-offs (53 ) (116 ) — (453 ) (5 ) (54 ) — (452 ) — (1,133 ) Recoveries 10 106 — 105 1 32 — 168 — 422 Provision 52 (477 ) (103 ) 433 15 74 — 290 506 790 Ending balance $ 813 1,325 1,177 1,278 83 626 — 161 982 6,445 Ending balance: individually evaluated for impairment $ — — 1,023 15 — — — — — 1,038 Ending balance: collectively evaluated for impairment 813 1,325 154 1,263 83 626 — 161 982 5,407 Ending balance $ 813 1,325 1,177 1,278 83 626 — 161 982 6,445 Loans: Ending balance $ 94,178 252,983 34,261 270,055 33,163 97,465 926 20,992 — 804,023 Ending balance: individually evaluated for impairment $ 96 1,779 14,310 1,673 — 89 — — — 17,947 Ending balance: collectively evaluated for impairment $ 94,082 251,204 19,951 268,382 33,163 97,376 926 20,992 — 786,076 Changes in the allowance for loan losses for the year ended December 31, 2017 were as follows: (Dollars in thousands) Real Estate Loans Construction and Land Development Single-Family Residential Single-Family Residential - Banco de la Gente Non-traditional Commercial Multifamily and Farmland Commercial Farm Consumer and All Other Unallocated Total Allowance for loan losses: Beginning balance $ 1,152 2,126 1,377 1,593 52 675 — 204 371 7,550 Charge-offs — (249 ) — — (66 ) (194 ) — (473 ) — (982 ) Recoveries 14 85 — 21 — 31 — 154 — 305 Provision (362 ) (150 ) (97 ) (421 ) 86 62 — 270 105 (507 ) Ending balance $ 804 1,812 1,280 1,193 72 574 — 155 476 6,366 Ending balance: individually evaluated for impairment $ — — 1,093 37 — — — — — 1,130 Ending balance: collectively evaluated for impairment 804 1,812 187 1,156 72 574 — 155 476 5,236 Ending balance $ 804 1,812 1,280 1,193 72 574 — 155 476 6,366 Loans: Ending balance $ 84,987 246,703 37,249 248,637 28,937 89,022 1,204 23,025 — 759,764 Ending balance: individually evaluated for impairment $ 98 1,855 15,460 2,251 — 100 — — — 19,764 Ending balance: collectively evaluated for impairment $ 84,889 244,848 21,789 246,386 28,937 88,922 1,204 23,025 — 740,000 |
Credit risk profile of each loan type based on internally assigned risk grade | December 31, 2019 (Dollars in thousands) Real Estate Loans Construction and Land Development Single-Family Residential Single-Family Residential - Banco de la Gente non-traditional Commercial Multifamily and Farmland Commercial Farm Consumer All Other Total 1- Excellent Quality $ — 8,819 — — — 330 — 693 — 9,842 2- High Quality 32,029 128,757 — 21,829 256 20,480 — 2,708 1,860 207,919 3- Good Quality 52,009 107,246 12,103 231,003 42,527 72,417 948 4,517 5,352 528,122 4- Management Attention 5,487 18,409 13,737 35,095 4,764 6,420 85 458 725 85,180 5- Watch 3,007 3,196 2,027 3,072 543 492 — 8 — 12,345 6- Substandard 64 3,048 2,926 256 — 124 — 48 — 6,466 7- Doubtful — — — — — — — — — — 8- Loss — — — — — — — — — — Total $ 92,596 269,475 30,793 291,255 48,090 100,263 1,033 8,432 7,937 849,874 December 31, 2018 (Dollars in thousands) Real Estate Loans Construction and Land Development Single-Family Residential Single-Family Residential - Banco de la Gente Non-traditional Commercial Multifamily and Farmland Commercial Farm Consumer All Other Total 1- Excellent Quality $ 504 5,795 — — — 605 — 673 — 7,577 2- High Quality 24,594 128,588 — 25,321 395 20,520 — 3,229 2,145 204,792 3- Good Quality 59,549 92,435 13,776 211,541 27,774 69,651 785 4,699 8,932 489,142 4- Management Attention 5,707 19,200 15,012 30,333 3,906 6,325 141 529 750 81,903 5- Watch 3,669 3,761 2,408 2,616 1,088 264 — 18 — 13,824 6- Substandard 155 3,204 3,065 244 — 100 — 17 — 6,785 7- Doubtful — — — — — — — — — — 8- Loss — — — — — — — — — — Total $ 94,178 252,983 34,261 270,055 33,163 97,465 926 9,165 11,827 804,023 |
Analysis of TDR loans by loan type | Number of Contracts Pre-Modification Outstanding Recorded Investment Post-Modification Outstanding Recorded Investment Real estate loans: Single-family residential 2 $ 94 94 Total TDR loans 2 $ 94 94 |
4. Premises and Equipment (Tabl
4. Premises and Equipment (Tables) | 12 Months Ended |
Dec. 31, 2019 | |
Property, Plant and Equipment [Abstract] | |
Summary of premises and equipment | 2019 2018 Land $ 2,793 2,889 Buildings and improvements 18,931 19,796 Furniture and equipment 24,743 22,443 Construction in process 395 381 Total premises and equipment 46,862 45,509 Less accumulated depreciation 28,258 27,059 Total net premises and equipment $ 18,604 18,450 |
5. Leases (Tables)
5. Leases (Tables) | 12 Months Ended |
Dec. 31, 2019 | |
Leases [Abstract] | |
Lease expense | December 31, 2019 Operating lease cost $ 893 Other information: Cash paid for amounts included in the measurement of lease liabilities 850 Operating cash flows from operating leases — Right-of-use assets obtained in exchange for new lease liabilities - operating leases 8 Weighted-average remaining lease term - operating leases 7.27 Weighted-average discount rate - operating leases 3.19 % |
Maturity analysis of operating lease liabilities | Maturity Analysis of Operating Lease Liabilities: December 31, 2019 2020 $ 823 2021 793 2022 501 2023 393 2024 304 Thereafter 1,320 Total 4,134 Less: Imputed Interest (487 ) Operating Lease Liability $ 3,647 |
6. Time Deposits (Tables)
6. Time Deposits (Tables) | 12 Months Ended |
Dec. 31, 2019 | |
Time Deposits [Line Items] | |
Scheduled maturities of time deposits | 2020 $ 53,905 2021 21,997 2022 10,919 2023 3,117 2024 and thereafter 21,818 Total $ 111,756 |
9. Income Taxes (Tables)
9. Income Taxes (Tables) | 12 Months Ended |
Dec. 31, 2019 | |
Income Tax Disclosure [Abstract] | |
Components of income tax expense (benefit) | 2019 2018 2017 Current expense $ 2,960 2,546 1,827 Deferred income tax expense 176 78 2,120 Total income tax $ 3,136 2,624 3,947 |
Schedule of effective income Tax rate reconciliation | 2019 2018 2017 Tax expense at statutory rate (21% in 2018 and 2019) $ 3,613 3,361 4,833 State income tax, net of federal income tax effect 327 358 307 Tax-exempt interest income (802 ) (990 ) (1,594 ) Increase in cash surrender value of life insurance (81 ) (81 ) (136 ) Nondeductible interest and other expense 40 23 46 Impact of TCJA — — 588 Other 39 (47 ) (97 ) Total $ 3,136 2,624 3,947 |
Schedule of deferred tax assets and liabilities | 2019 2018 Deferred tax assets: Allowance for loan losses $ 1,535 1,481 Accrued retirement expense 1,150 1,119 Restricted stock 217 262 Accrued bonuses 266 211 Interest income on nonaccrual loans 2 1 Total gross deferred tax assets 3,170 3,074 Deferred tax liabilities: Deferred loan fees 343 379 Accumulated depreciation 873 610 Prepaid expenses 7 10 Other 53 5 Unrealized gain on available for sale securities 1,087 294 Total gross deferred tax liabilities 2,363 1,298 Net deferred tax asset $ 807 1,776 |
10. Related Party Transactions
10. Related Party Transactions (Tables) | 12 Months Ended |
Dec. 31, 2019 | |
Related Party Transactions [Abstract] | |
Summary of activity for related party loans | 2019 2018 Beginning balance $ 3,192 3,679 New loans 5,716 8,030 Repayments (5,436 ) (8,517 ) Ending balance $ 3,472 3,192 |
11. Commitments and Contingen_2
11. Commitments and Contingencies (Tables) | 12 Months Ended |
Dec. 31, 2019 | |
Commitments and Contingencies Disclosure [Abstract] | |
Financial instruments with credit risk | Contractual Amount 2019 2018 Financial instruments whose contract amount represent credit risk: Commitments to extend credit $ 276,338 268,708 Standby letters of credit and financial guarantees written $ 3,558 3,651 |
12. Employee and Director Ben_2
12. Employee and Director Benefit Programs (Tables) | 12 Months Ended |
Dec. 31, 2019 | |
Retirement Benefits [Abstract] | |
Change in accumulated benefit obligation | 2019 2018 Benefit obligation at beginning of period $ 4,566 4,361 Service cost 299 362 Interest cost 58 70 Benefits paid (223 ) (227 ) Benefit obligation at end of period $ 4,700 4,566 |
Amounts recognized in the Consolidated Balance Sheet | 2019 2018 Benefit obligation $ 4,700 4,566 Fair value of plan assets — — (Dollars in thousands) 2019 2018 Funded status $ (4,700 ) (4,566 ) Unrecognized prior service cost/benefit — — Unrecognized net actuarial loss — — Net amount recognized $ (4,700 ) (4,566 ) Unfunded accrued liability $ (4,700 ) (4,566 ) Intangible assets — — Net amount recognized $ (4,700 ) (4,566 ) |
Schedule of net benefit costs | 2019 2018 2017 Service cost $ 299 362 348 Interest cost 58 70 68 Net periodic cost $ 357 432 416 Weighted average discount rate assumption used to determine benefit obligation 5.49 % 5.49 % 5.49 % |
Schedule of expected benefit payments | Year ending December 31, 2020 $ 237 2021 $ 353 2022 $ 342 2023 $ 342 2024 $ 354 Thereafter $ 8,715 |
13. Regulatory Matters (Tables)
13. Regulatory Matters (Tables) | 12 Months Ended |
Dec. 31, 2019 | |
Regulatory Matters | |
Bank's actual capital amounts and ratios | (Dollars in thousands) Actual Minimum Regulatory Capital Ratio Minimum Ratio plus Capital Conservation Buffer Amount Ratio Amount Ratio Amount Ratio As of December 31, 2019: Total Capital (to Risk-Weighted Assets) Consolidated $ 152,156 16.08 % 75,710 8.00 % N/A N/A Bank $ 149,266 15.79 % 75,602 8.00 % 99,228 10.50 % Tier 1 Capital (to Risk-Weighted Assets) Consolidated $ 145,476 15.37 % 56,783 6.00 % N/A N/A Bank $ 142,586 15.09 % 56,702 6.00 % 80,328 8.50 % Tier 1 Capital (to Average Assets) Consolidated $ 145,476 11.91 % 48,872 4.00 % N/A N/A Bank $ 142,586 11.61 % 49,106 4.00 % 49,106 4.00 % Common Equity Tier 1 (to Risk-Weighted Assets) Consolidated $ 130,476 13.79 % 42,587 4.50 % N/A N/A Bank $ 142,586 15.09 % 42,526 4.50 % 66,152 7.00 % (Dollars in thousands) Actual Minimum Regulatory Capital Ratio Minimum Ratio plus Capital Conservation Buffer Amount Ratio Amount Ratio Amount Ratio As of December 31, 2018: Total Capital (to Risk-Weighted Assets) Consolidated $ 149,076 16.15 % 73,830 8.00 % N/A N/A Bank $ 146,640 15.91 % 73,717 8.00 % 91,041 9.88 % Tier 1 Capital (to Risk-Weighted Assets) Consolidated $ 142,631 15.46 % 55,372 6.00 % N/A N/A Bank $ 140,195 15.21 % 55,288 6.00 % 72,612 7.88 % Tier 1 Capital (to Average Assets) Consolidated $ 142,631 13.05 % 43,723 4.00 % N/A N/A Bank $ 140,195 12.76 % 43,950 4.00 % 43,950 4.00 % Common Equity Tier 1 (to Risk-Weighted Assets) Consolidated $ 122,631 13.29 % 41,529 4.50 % N/A N/A Bank $ 140,195 15.21 % 41,466 4.50 % 58,790 6.38 % |
15. Other Operating Income an_2
15. Other Operating Income and Expense (Tables) | 12 Months Ended |
Dec. 31, 2019 | |
Other Income and Expenses [Abstract] | |
Other operating income and expense | Miscellaneous non-interest income for the years ended December 31, 2019, 2018 and 2017 included the following items: (Dollars in thousands) 2019 2018 2017 Visa debit card income $ 4,145 3,911 3,757 Bank owned life insurance income 383 384 400 Gain(loss) on sale of premises and equipment (239 ) 544 (32 ) Other 1,320 1,354 1,175 $ 5,609 6,193 5,300 Other non-interest expense for the years ended December 31, 2019, 2018 and 2017 included the following items: (Dollars in thousands) 2019 2018 2017 ATM expense $ 579 542 673 Consulting 972 1,012 785 Data processing 616 466 426 Deposit program expense 515 586 539 Dues and subscriptions 421 421 354 FHLB advance prepayment penalty — — 508 Internet banking expense 681 603 720 Office supplies 467 503 517 Telephone 802 678 855 Other 2,921 2,834 2,540 $ 7,974 7,645 7,917 |
16. Fair Value of Financial I_2
16. Fair Value of Financial Instruments (Tables) | 12 Months Ended |
Dec. 31, 2019 | |
Fair Value Disclosures [Abstract] | |
Carrying amount and estimated fair value of the Company's financial instruments | (Dollars in thousands) Fair Value Measurements at December 31, 2019 Carrying Amount Level 1 Level 2 Level 3 Total Assets: Cash and cash equivalents $ 52,387 52,387 — — 52,387 Investment securities available for sale $ 195,746 — 195,496 250 195,746 Other investments $ 4,231 — — 4,231 4,231 Mortgage loans held for sale $ 4,417 — — 4,417 4,417 Loans, net $ 843,194 — — 819,397 819,397 Cash surrender value of life insurance $ 16,319 — 16,319 — 16,319 Liabilities: Deposits $ 966,517 — — 955,766 955,766 Securities sold under agreements to repurchase $ 24,221 — 24,221 — 24,221 Junior subordinated debentures $ 15,619 — 15,619 — 15,619 (Dollars in thousands) Fair Value Measurements at December 31, 2018 Carrying Amount Level 1 Level 2 Level 3 Total Assets: Cash and cash equivalents $ 43,370 43,370 — — 43,370 Investment securities available for sale $ 194,578 — 194,328 250 194,578 Other investments $ 4,361 — — 4,361 4,361 Mortgage loans held for sale $ 680 — — 680 680 Loans, net $ 797,578 — — 748,917 748,917 Cash surrender value of life insurance $ 15,936 — 15,936 — 15,936 Liabilities: Deposits $ 877,213 — — 857,999 857,999 Securities sold under agreements to repurchase $ 58,095 — 58,095 — 58,095 Junior subordinated debentures $ 20,619 — 20,619 — 20,619 |
17. Peoples Bancorp of North _2
17. Peoples Bancorp of North Carolina, Inc. (Parent Company Only) Condensed Financial Statements (Tables) | 12 Months Ended |
Dec. 31, 2019 | |
Condensed Financial Information Disclosure [Abstract] | |
Balance Sheets | Assets 2019 2018 Cash $ 1,187 689 Interest-bearing time deposit 1,000 1,000 Investment in subsidiaries 146,230 141,181 Investment in PEBK Capital Trust II 619 619 Investment securities available for sale 250 250 Other assets 476 533 Total assets $ 149,762 144,272 Liabilities and Shareholders' Equity Junior subordinated debentures $ 15,619 20,619 Liabilities 23 36 Shareholders' equity 134,120 123,617 Total liabilities and shareholders' equity $ 149,762 144,272 |
Statements of Earnings | Revenues: 2019 2018 2017 Interest and dividend income $ 12,850 4,544 1,839 Total revenues 12,850 4,544 1,839 Expenses: Interest 844 790 590 Other operating expenses 629 678 725 Total expenses 1,473 1,468 1,315 Income before income tax benefit and equity in undistributed earnings of subsidiaries 11,377 3,076 524 Income tax benefit 299 299 434 Income before equity in undistributed earnings of subsidiaries 11,676 3,375 958 Equity in undistributed earnings of subsidiaries 2,391 10,007 9,310 Net earnings $ 14,067 13,382 10,268 |
Statements of Cash Flows | 2019 2018 2017 Cash flows from operating activities: Net earnings $ 14,067 13,382 10,268 Adjustments to reconcile net earnings to net cash provided by operating activities: Equity in undistributed earnings of subsidiaries (2,391 ) (10,007 ) (9,310 ) Change in: Other assets 57 13 (272 ) Other liabilities (13 ) 6 5 Net cash provided by operating activities 11,720 3,394 691 Cash flows from investing activities: Proceeds from calls and maturities of investment securities available for sale — — 500 Net cash provided by investing activities — — 500 Cash flows from financing activities: Repayment of junior subordinated debentures (5,000 ) — — Cash dividends paid on common stock (3,939 ) (3,133 ) (2,629 ) Cash in lieu stock dividend — — (6 ) Stock repurchase (2,490 ) — — Proceeds from exercise of restricted stock units 207 — 915 Net cash used by financing activities (11,222 ) (3,133 ) (1,720 ) Net change in cash 498 261 (529 ) Cash at beginning of year 689 428 957 Cash at end of year $ 1,187 689 428 Noncash investing and financing activities: — Change in unrealized gain on investment securities available for sale, net $ 2,658 (2,607 ) (1 ) |
18. Quarterly Data (Tables)
18. Quarterly Data (Tables) | 12 Months Ended |
Dec. 31, 2019 | |
Quarterly Financial Information Disclosure [Abstract] | |
Schedule of quarterly financial information | (Dollars in thousands, except per share amounts) First Second Third Fourth First Second Third Fourth Total interest income $ 12,183 12,375 12,430 12,613 $ 10,759 11,059 11,608 11,924 Total interest expense 757 781 994 1,225 467 513 557 609 Net interest income 11,426 11,594 11,436 11,388 10,292 10,546 11,051 11,315 Provision for loan losses 178 77 422 186 31 231 110 418 Other income 4,120 4,385 4,708 4,526 3,736 4,016 3,915 4,499 Other expense 10,916 11,244 11,267 12,090 10,042 10,560 10,702 11,270 Income before income taxes 4,452 4,658 4,455 3,638 3,955 3,771 4,154 4,126 Income tax expense 785 845 834 672 652 595 687 690 Net earnings 3,667 3,813 3,621 2,966 3,303 3,176 3,467 3,436 Basic net earnings per share $ 0.61 0.64 0.62 0.50 $ 0.55 0.53 0.58 0.57 Diluted net earnings per share $ 0.61 0.64 0.61 0.50 $ 0.55 0.53 0.57 0.57 |
1. Summary of Significant Acc_4
1. Summary of Significant Accounting Policies (Details) - USD ($) $ / shares in Units, $ in Thousands | 3 Months Ended | 12 Months Ended | |||||||||
Dec. 31, 2019 | Sep. 30, 2019 | Jun. 30, 2019 | Mar. 31, 2019 | Dec. 31, 2018 | Sep. 30, 2018 | Jun. 30, 2018 | Mar. 31, 2018 | Dec. 31, 2019 | Dec. 31, 2018 | Dec. 31, 2017 | |
Net Earnings Available to Common Shareholders | |||||||||||
Basic earnings per common share | $ 14,067 | $ 13,382 | $ 10,268 | ||||||||
Effect of dilutive securities: Restricted stock units | 0 | 0 | 0 | ||||||||
Diluted earnings per common share | $ 14,067 | $ 13,382 | $ 10,268 | ||||||||
Common Shares | |||||||||||
Basic earnings per common share (in shares) | 5,941,873 | 5,995,256 | 5,988,183 | ||||||||
Effect of dilutive securities: Restricted stock units (in shares) | 25,438 | 20,240 | 74,667 | ||||||||
Diluted earnings per common share (in shares) | 5,967,311 | 6,015,496 | 6,062,850 | ||||||||
Per Share Amount | |||||||||||
Basic earnings per common share (in dollars per share) | $ 0.5 | $ 0.62 | $ 0.64 | $ 0.61 | $ 0.57 | $ 0.58 | $ 0.53 | $ 0.55 | $ 2.37 | $ 2.23 | $ 1.71 |
Diluted earnings per common share (in dollars per share) | $ 0.5 | $ 0.61 | $ 0.64 | $ 0.61 | $ 0.57 | $ 0.57 | $ 0.53 | $ 0.55 | $ 2.36 | $ 2.22 | $ 1.69 |
1. Summary of Significant Acc_5
1. Summary of Significant Accounting Policies (Details Narrative) - USD ($) $ in Thousands | 12 Months Ended | ||
Dec. 31, 2019 | Dec. 31, 2018 | Dec. 31, 2017 | |
Unpaid principal balances of mortgage loans serviced for others | $ 729 | $ 866 | $ 1,000 |
Compensation expense for restricted stock units | $ 270 | $ 85 | $ 592 |
Building Improvements | Minimum | |||
Estimated useful lives | 10 years | ||
Building Improvements | Maximum | |||
Estimated useful lives | 50 years | ||
Furniture and equipment | Minimum | |||
Estimated useful lives | 3 years | ||
Furniture and equipment | Maximum | |||
Estimated useful lives | 10 years |
2. Investment Securities (Detai
2. Investment Securities (Details) - USD ($) $ in Thousands | 12 Months Ended | |
Dec. 31, 2019 | Dec. 31, 2018 | |
Investment securities available for sale | ||
Amortized cost | $ 191,013 | |
Estimated fair value | 195,746 | $ 194,578 |
Mortgage-backed securities | ||
Investment securities available for sale | ||
Amortized cost | 77,812 | 52,145 |
Gross unrealized gains | 1,371 | 516 |
Gross unrealized losses | 227 | 558 |
Estimated fair value | 78,956 | 52,103 |
U.S. Government sponsored enterprises | ||
Investment securities available for sale | ||
Amortized cost | 28,265 | 35,356 |
Gross unrealized gains | 443 | 71 |
Gross unrealized losses | 311 | 793 |
Estimated fair value | 28,397 | 34,634 |
State and political subdivisions | ||
Investment securities available for sale | ||
Amortized cost | 84,686 | 105,545 |
Gross unrealized gains | 3,657 | 2,089 |
Gross unrealized losses | 200 | 43 |
Estimated fair value | 88,143 | 107,591 |
Trust preferred securities | ||
Investment securities available for sale | ||
Amortized cost | 250 | 250 |
Gross unrealized gains | 0 | 0 |
Gross unrealized losses | 0 | 0 |
Estimated fair value | 250 | 250 |
Total | ||
Investment securities available for sale | ||
Amortized cost | 191,013 | 193,296 |
Gross unrealized gains | 5,471 | 2,676 |
Gross unrealized losses | 738 | 1,394 |
Estimated fair value | $ 195,746 | $ 194,578 |
2. Investment Securities (Det_2
2. Investment Securities (Details 1) - USD ($) $ in Thousands | 12 Months Ended | |
Dec. 31, 2019 | Dec. 31, 2018 | |
Investment securities with continuous unrealized loss position | ||
Less than 12 months, fair value | $ 38,661 | $ 13,531 |
Less than 12 months, unrealized losses | 387 | 151 |
12 months or more, fair value | 12,502 | 44,420 |
12 months or more, unrealized losses | 351 | 1,243 |
Total, fair value | 51,163 | 57,951 |
Total, unrealized losses | 738 | 1,394 |
Mortgage-backed securities | ||
Investment securities with continuous unrealized loss position | ||
Less than 12 months, fair value | 28,395 | 6,932 |
Less than 12 months, unrealized losses | 177 | 56 |
12 months or more, fair value | 6,351 | 17,670 |
12 months or more, unrealized losses | 50 | 502 |
Total, fair value | 34,746 | 24,602 |
Total, unrealized losses | 227 | 558 |
U.S. Government sponsored enterprises | ||
Investment securities with continuous unrealized loss position | ||
Less than 12 months, fair value | 2,899 | 1,784 |
Less than 12 months, unrealized losses | 10 | 69 |
12 months or more, fair value | 6,151 | 25,172 |
12 months or more, unrealized losses | 301 | 724 |
Total, fair value | 9,050 | 26,956 |
Total, unrealized losses | 311 | 793 |
State and political subdivisions | ||
Investment securities with continuous unrealized loss position | ||
Less than 12 months, fair value | 7,367 | 4,815 |
Less than 12 months, unrealized losses | 200 | 26 |
12 months or more, fair value | 0 | 1,578 |
12 months or more, unrealized losses | 0 | 17 |
Total, fair value | 7,367 | 6,393 |
Total, unrealized losses | $ 200 | $ 43 |
2. Investment Securities (Det_3
2. Investment Securities (Details 2) $ in Thousands | Dec. 31, 2019USD ($) |
Amortized Cost | |
Due within one year | $ 5,490 |
Due from one to five years | 56,399 |
Due from five to ten years | 47,717 |
Due after ten years | 3,595 |
Mortgage-backed securities | 77,812 |
Total | 191,013 |
Estimated Fair Value | |
Due within one year | 5,465 |
Due from one to five years | 58,315 |
Due from five to ten years | 49,293 |
Due after ten years | 3,717 |
Mortgage-backed securities | 78,956 |
Total | $ 195,746 |
2. Investment Securities (Det_4
2. Investment Securities (Details 3) - USD ($) $ in Thousands | Dec. 31, 2019 | Dec. 31, 2018 |
Estimated fair value | $ 195,746 | $ 194,578 |
Mortgage-backed securities | ||
Estimated fair value | 78,956 | 52,103 |
Level 1 valuation | 0 | 0 |
Level 2 valuation | 78,956 | 52,103 |
Level 3 valuation | 0 | 0 |
U.S. Government sponsored enterprises | ||
Estimated fair value | 28,397 | 34,634 |
Level 1 valuation | 0 | 0 |
Level 2 valuation | 28,397 | 34,634 |
Level 3 valuation | 0 | 0 |
State and political subdivisions | ||
Estimated fair value | 88,143 | 107,591 |
Level 1 valuation | 0 | 0 |
Level 2 valuation | 88,143 | 107,591 |
Level 3 valuation | 0 | 0 |
Trust preferred securities | ||
Estimated fair value | 250 | 250 |
Level 1 valuation | 0 | 0 |
Level 2 valuation | 250 | 0 |
Level 3 valuation | $ 0 | $ 250 |
2. Investment Securities (Det_5
2. Investment Securities (Details 4) $ in Thousands | 12 Months Ended |
Dec. 31, 2019USD ($) | |
Investment Securities Available for Sale Level 3 Valuation | |
Balance, beginning of period | $ 250 |
Change in book value | 0 |
Change in gain/(loss) realized and unrealized | 0 |
Purchases/(sales and calls) | 0 |
Transfers in and/or (out) of Level 3 | 0 |
Balance, end of period | 250 |
Change in unrealized gain/(loss) for assets still held in Level 3 | $ 0 |
2. Investment Securities (Det_6
2. Investment Securities (Details Narrative) - USD ($) $ in Thousands | 12 Months Ended | ||
Dec. 31, 2019 | Dec. 31, 2018 | Dec. 31, 2017 | |
Investments, Debt and Equity Securities [Abstract] | |||
Unrealized losses in the investment securites portfolio relating to debt securities | $ 738 | $ 1,400 | $ 609 |
Proceeds from sales of investment securities available for sale | 20,700 | 36,000 | 0 |
Gains on sales of available for sale securities | 226 | 15 | 0 |
Securities pledged to secure public deposits | $ 66,000 | $ 93,000 | $ 105,600 |
3. Loans (Details)
3. Loans (Details) - USD ($) $ in Thousands | Dec. 31, 2019 | Dec. 31, 2018 | Dec. 31, 2017 | Dec. 31, 2016 |
Major classifications | ||||
Total loans | $ 849,874 | $ 804,023 | $ 759,764 | |
Less allowance for loan losses | 6,680 | 6,445 | 6,366 | $ 7,550 |
Net loans | 843,194 | 797,578 | ||
Construction and land development | ||||
Major classifications | ||||
Total loans | 92,596 | 94,178 | 84,987 | |
Less allowance for loan losses | 694 | 813 | 804 | 1,152 |
Single-family residential | ||||
Major classifications | ||||
Total loans | 269,475 | 252,983 | 246,703 | |
Less allowance for loan losses | 1,274 | 1,325 | 1,812 | 2,126 |
Single-family residential - Banco de la Gente Non-traditional | ||||
Major classifications | ||||
Total loans | 30,793 | 34,261 | 37,249 | |
Less allowance for loan losses | 1,073 | 1,177 | 1,280 | 1,377 |
Commercial | ||||
Major classifications | ||||
Total loans | 291,255 | 270,055 | 248,637 | |
Less allowance for loan losses | 1,305 | 1,278 | 1,193 | 1,593 |
Multifamily and Farmland | ||||
Major classifications | ||||
Total loans | 48,090 | 33,163 | 28,937 | |
Less allowance for loan losses | 120 | 83 | 72 | 52 |
Total real estate loans | ||||
Major classifications | ||||
Total loans | 732,209 | 684,640 | ||
Commercial loans (not secured by real estate) | ||||
Major classifications | ||||
Total loans | 100,263 | 97,465 | 89,022 | |
Less allowance for loan losses | 688 | 626 | 574 | 675 |
Farm loans (not secured by real estate) | ||||
Major classifications | ||||
Total loans | 1,033 | 926 | 1,204 | |
Less allowance for loan losses | 0 | 0 | $ 0 | $ 0 |
Consumer loans (not secured by real estate) | ||||
Major classifications | ||||
Total loans | 8,432 | 9,165 | ||
All other loans (not secured by real estate) | ||||
Major classifications | ||||
Total loans | $ 7,937 | $ 11,827 |
3. Loans (Details 1)
3. Loans (Details 1) - USD ($) $ in Thousands | Dec. 31, 2019 | Dec. 31, 2018 | Dec. 31, 2017 |
Past due loans | |||
Loans 30-89 days past due | $ 9,743 | $ 9,564 | |
Loans 90 or more days past due | 737 | 1,244 | |
Total past due loans | 10,480 | 10,808 | |
Total current loans | 839,394 | 793,215 | |
Total loans | 849,874 | 804,023 | $ 759,764 |
Accruing loans 90 or more days past due | 0 | 0 | |
Construction and land development | |||
Past due loans | |||
Loans 30-89 days past due | 803 | 3 | |
Loans 90 or more days past due | 0 | 0 | |
Total past due loans | 803 | 3 | |
Total current loans | 91,793 | 94,175 | |
Total loans | 92,596 | 94,178 | |
Accruing loans 90 or more days past due | 0 | 0 | |
Single-family residential | |||
Past due loans | |||
Loans 30-89 days past due | 3,000 | 4,162 | |
Loans 90 or more days past due | 126 | 570 | |
Total past due loans | 3,126 | 4,732 | |
Total current loans | 266,349 | 248,251 | |
Total loans | 269,475 | 252,983 | |
Accruing loans 90 or more days past due | 0 | 0 | |
Single-family residential - Banco de la Gente Non-traditional | |||
Past due loans | |||
Loans 30-89 days past due | 4,834 | 4,627 | |
Loans 90 or more days past due | 413 | 580 | |
Total past due loans | 5,247 | 5,207 | |
Total current loans | 25,546 | 29,054 | |
Total loans | 30,793 | 34,261 | |
Accruing loans 90 or more days past due | 0 | 0 | |
Commercial | |||
Past due loans | |||
Loans 30-89 days past due | 504 | 228 | |
Loans 90 or more days past due | 176 | 0 | |
Total past due loans | 680 | 228 | |
Total current loans | 290,575 | 269,827 | |
Total loans | 291,255 | 270,055 | |
Accruing loans 90 or more days past due | 0 | 0 | |
Multifamily and Farmland | |||
Past due loans | |||
Loans 30-89 days past due | 0 | 0 | |
Loans 90 or more days past due | 0 | 0 | |
Total past due loans | 0 | 0 | |
Total current loans | 48,090 | 33,163 | |
Total loans | 48,090 | 33,163 | |
Accruing loans 90 or more days past due | 0 | 0 | |
Total real estate loans | |||
Past due loans | |||
Loans 30-89 days past due | 9,141 | 9,020 | |
Loans 90 or more days past due | 715 | 1,150 | |
Total past due loans | 9,856 | 10,170 | |
Total current loans | 722,353 | 674,470 | |
Total loans | 732,209 | 684,640 | |
Accruing loans 90 or more days past due | 0 | 0 | |
Commercial loans (not secured by real estate) | |||
Past due loans | |||
Loans 30-89 days past due | 432 | 445 | |
Loans 90 or more days past due | 0 | 90 | |
Total past due loans | 432 | 535 | |
Total current loans | 99,831 | 96,930 | |
Total loans | 100,263 | 97,465 | |
Accruing loans 90 or more days past due | 0 | 0 | |
Farm loans (not secured by real estate) | |||
Past due loans | |||
Loans 30-89 days past due | 0 | 0 | |
Loans 90 or more days past due | 0 | 0 | |
Total past due loans | 0 | 0 | |
Total current loans | 1,033 | 926 | |
Total loans | 1,033 | 926 | |
Accruing loans 90 or more days past due | 0 | 0 | |
Consumer loans (not secured by real estate) | |||
Past due loans | |||
Loans 30-89 days past due | 170 | 99 | |
Loans 90 or more days past due | 22 | 4 | |
Total past due loans | 192 | 103 | |
Total current loans | 8,240 | 9,062 | |
Total loans | 8,432 | 9,165 | |
Accruing loans 90 or more days past due | 0 | 0 | |
All other loans (not secured by real estate) | |||
Past due loans | |||
Loans 30-89 days past due | 0 | 0 | |
Loans 90 or more days past due | 0 | 0 | |
Total past due loans | 0 | 0 | |
Total current loans | 7,937 | 11,827 | |
Total loans | 7,937 | 11,827 | |
Accruing loans 90 or more days past due | $ 0 | $ 0 |
3. Loans (Details 2)
3. Loans (Details 2) - USD ($) $ in Thousands | Dec. 31, 2019 | Dec. 31, 2018 |
Non-accrual loans | ||
Non-accrual loans | $ 3,553 | $ 3,314 |
Construction and land development | ||
Non-accrual loans | ||
Non-accrual loans | 0 | 1 |
Single-family residential | ||
Non-accrual loans | ||
Non-accrual loans | 1,378 | 1,530 |
Single-family residential - Banco de la Gente Non-traditional | ||
Non-accrual loans | ||
Non-accrual loans | 1,764 | 1,440 |
Commercial | ||
Non-accrual loans | ||
Non-accrual loans | 256 | 244 |
Multifamily and Farmland | ||
Non-accrual loans | ||
Non-accrual loans | 0 | 0 |
Total real estate loans | ||
Non-accrual loans | ||
Non-accrual loans | 3,398 | 3,215 |
Commercial loans (not secured by real estate) | ||
Non-accrual loans | ||
Non-accrual loans | 122 | 89 |
Consumer loans (not secured by real estate) | ||
Non-accrual loans | ||
Non-accrual loans | $ 33 | $ 10 |
3. Loans (Details 3)
3. Loans (Details 3) - USD ($) $ in Thousands | 12 Months Ended | ||
Dec. 31, 2019 | Dec. 31, 2018 | Dec. 31, 2017 | |
Impaired loans | |||
Unpaid contractual principal balance | $ 22,659 | $ 24,126 | $ 26,129 |
Recorded investment with no allowance | 495 | 511 | 2,042 |
Recorded investment with allowance | 20,848 | 22,282 | 22,599 |
Recorded investment in impaired loans | 21,343 | 22,793 | 24,641 |
Related allowance | 996 | 1,098 | 1,199 |
Average outstanding impaired loans | 21,895 | 23,621 | 26,015 |
Year-to-date interest income recognized | 1,344 | 1,342 | 1,362 |
Construction and land development | |||
Impaired loans | |||
Unpaid contractual principal balance | 183 | 281 | 282 |
Recorded investment with no allowance | 0 | 0 | 0 |
Recorded investment with allowance | 183 | 279 | 277 |
Recorded investment in impaired loans | 183 | 279 | 277 |
Related allowance | 7 | 5 | 6 |
Average outstanding impaired loans | 231 | 327 | 253 |
Year-to-date interest income recognized | 12 | 19 | 17 |
Single-family residential | |||
Impaired loans | |||
Unpaid contractual principal balance | 5,152 | 5,059 | 5,226 |
Recorded investment with no allowance | 403 | 422 | 1,135 |
Recorded investment with allowance | 4,243 | 4,188 | 3,686 |
Recorded investment in impaired loans | 4,646 | 4,610 | 4,821 |
Related allowance | 36 | 32 | 41 |
Average outstanding impaired loans | 4,678 | 6,271 | 5,113 |
Year-to-date interest income recognized | 269 | 261 | 265 |
Single-family residential - Banco de la Gente Non-traditional | |||
Impaired loans | |||
Unpaid contractual principal balance | 15,165 | 16,424 | 17,360 |
Recorded investment with no allowance | 0 | 0 | 0 |
Recorded investment with allowance | 14,371 | 15,776 | 16,805 |
Recorded investment in impaired loans | 14,371 | 15,776 | 16,805 |
Related allowance | 944 | 1,042 | 1,149 |
Average outstanding impaired loans | 14,925 | 14,619 | 16,867 |
Year-to-date interest income recognized | 956 | 944 | 920 |
Commercial | |||
Impaired loans | |||
Unpaid contractual principal balance | 1,879 | 1,995 | 2,761 |
Recorded investment with no allowance | 0 | 0 | 807 |
Recorded investment with allowance | 1,871 | 1,925 | 1,661 |
Recorded investment in impaired loans | 1,871 | 1,925 | 2,468 |
Related allowance | 7 | 17 | 1 |
Average outstanding impaired loans | 1,822 | 2,171 | 3,411 |
Year-to-date interest income recognized | 91 | 111 | 148 |
Multifamily and Farmland | |||
Impaired loans | |||
Unpaid contractual principal balance | 0 | 78 | |
Recorded investment with no allowance | 0 | 0 | |
Recorded investment with allowance | 0 | 12 | |
Recorded investment in impaired loans | 0 | 12 | |
Related allowance | 0 | 0 | |
Average outstanding impaired loans | 0 | 28 | |
Year-to-date interest income recognized | 0 | 0 | |
Total real estate loans | |||
Impaired loans | |||
Unpaid contractual principal balance | 22,379 | 23,759 | 25,707 |
Recorded investment with no allowance | 403 | 422 | 1,942 |
Recorded investment with allowance | 20,668 | 22,168 | 22,441 |
Recorded investment in impaired loans | 21,071 | 22,590 | 24,383 |
Related allowance | 994 | 1,096 | 1,197 |
Average outstanding impaired loans | 21,656 | 23,388 | 25,672 |
Year-to-date interest income recognized | 1,328 | 1,335 | 1,350 |
Commercial loans (not secured by real estate) | |||
Impaired loans | |||
Unpaid contractual principal balance | 180 | 251 | 264 |
Recorded investment with no allowance | 92 | 89 | 100 |
Recorded investment with allowance | 84 | 1 | 4 |
Recorded investment in impaired loans | 176 | 90 | 104 |
Related allowance | 0 | 0 | 0 |
Average outstanding impaired loans | 134 | 96 | 149 |
Year-to-date interest income recognized | 9 | 0 | 3 |
Consumer loans (not secured by real estate) | |||
Impaired loans | |||
Unpaid contractual principal balance | 100 | 116 | 158 |
Recorded investment with no allowance | 0 | 0 | 0 |
Recorded investment with allowance | 96 | 113 | 154 |
Recorded investment in impaired loans | 96 | 113 | 154 |
Related allowance | 2 | 2 | 2 |
Average outstanding impaired loans | 105 | 137 | 194 |
Year-to-date interest income recognized | $ 7 | $ 7 | $ 9 |
3. Loans (Details 4)
3. Loans (Details 4) - USD ($) $ in Thousands | Dec. 31, 2019 | Dec. 31, 2018 |
Mortgage loans held for sale | $ 4,417 | $ 680 |
Impaired loans | 20,347 | 21,695 |
Other real estate | 0 | 27 |
Level 1 | ||
Mortgage loans held for sale | 0 | 0 |
Impaired loans | 0 | 0 |
Other real estate | 0 | 0 |
Level 2 | ||
Mortgage loans held for sale | 0 | 0 |
Impaired loans | 0 | 0 |
Other real estate | 0 | 0 |
Level 3 | ||
Mortgage loans held for sale | 4,417 | 680 |
Impaired loans | 20,347 | 21,695 |
Other real estate | $ 0 | $ 27 |
3. Loans (Details 5)
3. Loans (Details 5) - USD ($) $ in Thousands | 12 Months Ended | ||
Dec. 31, 2019 | Dec. 31, 2018 | Dec. 31, 2017 | |
Allowance for loan losses | |||
Beginning balance | $ 6,445 | $ 6,366 | $ 7,550 |
Charge-offs | (1,076) | (1,133) | (982) |
Recoveries | 448 | 422 | 305 |
Provision | 863 | 790 | (507) |
Ending balance | 6,680 | 6,445 | 6,366 |
Ending balance: individually evaluated for impairments | 937 | 1,038 | 1,130 |
Ending balance: collectively evaluated for impairments | 5,743 | 5,407 | 5,236 |
Ending balance | 6,680 | 6,445 | 6,366 |
Loans | |||
Ending balance | 849,874 | 804,023 | 759,764 |
Ending balance: individually evaluated for impairment | 16,063 | 17,947 | 19,764 |
Ending balance: collectively evaluated for impairment | 833,811 | 786,076 | 740,000 |
Construction and land development | |||
Allowance for loan losses | |||
Beginning balance | 813 | 804 | 1,152 |
Charge-offs | (21) | (53) | 0 |
Recoveries | 45 | 10 | 14 |
Provision | (143) | 52 | (362) |
Ending balance | 694 | 813 | 804 |
Ending balance: individually evaluated for impairments | 2 | 0 | 0 |
Ending balance: collectively evaluated for impairments | 692 | 813 | 804 |
Ending balance | 694 | 813 | 804 |
Loans | |||
Ending balance | 92,596 | 94,178 | 84,987 |
Ending balance: individually evaluated for impairment | 10 | 96 | 98 |
Ending balance: collectively evaluated for impairment | 92,586 | 94,082 | 84,889 |
Single-family residential | |||
Allowance for loan losses | |||
Beginning balance | 1,325 | 1,812 | 2,126 |
Charge-offs | (42) | (116) | (249) |
Recoveries | 66 | 106 | 85 |
Provision | (75) | (477) | (150) |
Ending balance | 1,274 | 1,325 | 1,812 |
Ending balance: individually evaluated for impairments | 6 | 0 | 0 |
Ending balance: collectively evaluated for impairments | 1,268 | 1,325 | 1,812 |
Ending balance | 1,274 | 1,325 | 1,812 |
Loans | |||
Ending balance | 269,475 | 252,983 | 246,703 |
Ending balance: individually evaluated for impairment | 1,697 | 1,779 | 1,855 |
Ending balance: collectively evaluated for impairment | 267,778 | 251,204 | 244,848 |
Single-family residential - Banco de la Gente Non-traditional | |||
Allowance for loan losses | |||
Beginning balance | 1,177 | 1,280 | 1,377 |
Charge-offs | 0 | 0 | 0 |
Recoveries | 0 | 0 | 0 |
Provision | (104) | (103) | (97) |
Ending balance | 1,073 | 1,177 | 1,280 |
Ending balance: individually evaluated for impairments | 925 | 1,023 | 1,093 |
Ending balance: collectively evaluated for impairments | 148 | 154 | 187 |
Ending balance | 1,073 | 1,177 | 1,280 |
Loans | |||
Ending balance | 30,793 | 34,261 | 37,249 |
Ending balance: individually evaluated for impairment | 12,899 | 14,310 | 15,460 |
Ending balance: collectively evaluated for impairment | 17,894 | 19,951 | 21,789 |
Commercial | |||
Allowance for loan losses | |||
Beginning balance | 1,278 | 1,193 | 1,593 |
Charge-offs | (1) | (453) | 0 |
Recoveries | 49 | 105 | 21 |
Provision | (21) | 433 | (421) |
Ending balance | 1,305 | 1,278 | 1,193 |
Ending balance: individually evaluated for impairments | 4 | 15 | 37 |
Ending balance: collectively evaluated for impairments | 1,301 | 1,263 | 1,156 |
Ending balance | 1,305 | 1,278 | 1,193 |
Loans | |||
Ending balance | 291,255 | 270,055 | 248,637 |
Ending balance: individually evaluated for impairment | 1,365 | 1,673 | 2,251 |
Ending balance: collectively evaluated for impairment | 289,890 | 268,382 | 246,386 |
Multifamily and Farmland | |||
Allowance for loan losses | |||
Beginning balance | 83 | 72 | 52 |
Charge-offs | 0 | (5) | (66) |
Recoveries | 0 | 1 | 0 |
Provision | 37 | 15 | 86 |
Ending balance | 120 | 83 | 72 |
Ending balance: individually evaluated for impairments | 0 | 0 | 0 |
Ending balance: collectively evaluated for impairments | 120 | 83 | 72 |
Ending balance | 120 | 83 | 72 |
Loans | |||
Ending balance | 48,090 | 33,163 | 28,937 |
Ending balance: individually evaluated for impairment | 0 | 0 | 0 |
Ending balance: collectively evaluated for impairment | 48,090 | 33,163 | 28,937 |
Commercial loans (not secured by real estate) | |||
Allowance for loan losses | |||
Beginning balance | 626 | 574 | 675 |
Charge-offs | (389) | (54) | (194) |
Recoveries | 83 | 32 | 31 |
Provision | 368 | 74 | 62 |
Ending balance | 688 | 626 | 574 |
Ending balance: individually evaluated for impairments | 0 | 0 | 0 |
Ending balance: collectively evaluated for impairments | 688 | 626 | 574 |
Ending balance | 688 | 626 | 574 |
Loans | |||
Ending balance | 100,263 | 97,465 | 89,022 |
Ending balance: individually evaluated for impairment | 92 | 89 | 100 |
Ending balance: collectively evaluated for impairment | 100,171 | 97,376 | 88,922 |
Farm loans (not secured by real estate) | |||
Allowance for loan losses | |||
Beginning balance | 0 | 0 | 0 |
Charge-offs | 0 | 0 | 0 |
Recoveries | 0 | 0 | 0 |
Provision | 0 | 0 | 0 |
Ending balance | 0 | 0 | 0 |
Ending balance: individually evaluated for impairments | 0 | 0 | 0 |
Ending balance: collectively evaluated for impairments | 0 | 0 | 0 |
Ending balance | 0 | 0 | 0 |
Loans | |||
Ending balance | 1,033 | 926 | 1,204 |
Ending balance: individually evaluated for impairment | 0 | 0 | 0 |
Ending balance: collectively evaluated for impairment | 1,033 | 926 | 1,204 |
Consumer And All Other Loans | |||
Allowance for loan losses | |||
Beginning balance | 161 | 155 | 204 |
Charge-offs | (623) | (452) | (473) |
Recoveries | 205 | 168 | 154 |
Provision | 395 | 290 | 270 |
Ending balance | 138 | 161 | 155 |
Ending balance: individually evaluated for impairments | 0 | 0 | 0 |
Ending balance: collectively evaluated for impairments | 138 | 161 | 155 |
Ending balance | 138 | 161 | 155 |
Loans | |||
Ending balance | 16,369 | 20,992 | 23,025 |
Ending balance: individually evaluated for impairment | 0 | 0 | 0 |
Ending balance: collectively evaluated for impairment | 16,369 | 20,992 | 23,025 |
Unallocated | |||
Allowance for loan losses | |||
Beginning balance | 982 | 476 | 371 |
Charge-offs | 0 | 0 | 0 |
Recoveries | 0 | 0 | 0 |
Provision | 406 | 506 | 105 |
Ending balance | 1,388 | 982 | 476 |
Ending balance: individually evaluated for impairments | 0 | 0 | 0 |
Ending balance: collectively evaluated for impairments | 1,388 | 982 | 476 |
Ending balance | 1,388 | 982 | 476 |
Loans | |||
Ending balance | 0 | 0 | 0 |
Ending balance: individually evaluated for impairment | 0 | 0 | 0 |
Ending balance: collectively evaluated for impairment | $ 0 | $ 0 | $ 0 |
3. Loans (Details 6)
3. Loans (Details 6) - USD ($) $ in Thousands | Dec. 31, 2019 | Dec. 31, 2018 | Dec. 31, 2017 |
Credit risk profile | |||
Total loans | $ 849,874 | $ 804,023 | $ 759,764 |
Excellent Quality | |||
Credit risk profile | |||
Total loans | 9,842 | 7,577 | |
High Quality | |||
Credit risk profile | |||
Total loans | 207,919 | 204,792 | |
Good Quality | |||
Credit risk profile | |||
Total loans | 528,122 | 489,142 | |
Management Attention | |||
Credit risk profile | |||
Total loans | 85,180 | 81,903 | |
Watch | |||
Credit risk profile | |||
Total loans | 12,345 | 13,824 | |
Substandard | |||
Credit risk profile | |||
Total loans | 6,466 | 6,785 | |
Doubtful | |||
Credit risk profile | |||
Total loans | 0 | 0 | |
Loss | |||
Credit risk profile | |||
Total loans | 0 | 0 | |
Construction and land development | |||
Credit risk profile | |||
Total loans | 92,596 | 94,178 | |
Single-family residential | |||
Credit risk profile | |||
Total loans | 269,475 | 252,983 | |
Single-family residential - Banco de la Gente Non-traditional | |||
Credit risk profile | |||
Total loans | 30,793 | 34,261 | |
Commercial | |||
Credit risk profile | |||
Total loans | 291,255 | 270,055 | |
Multifamily and Farmland | |||
Credit risk profile | |||
Total loans | 48,090 | 33,163 | |
Commercial loans (not secured by real estate) | |||
Credit risk profile | |||
Total loans | 100,263 | 97,465 | |
Farm loans (not secured by real estate) | |||
Credit risk profile | |||
Total loans | 1,033 | 926 | |
Consumer loans (not secured by real estate) | |||
Credit risk profile | |||
Total loans | 8,432 | 9,165 | |
All other loans (not secured by real estate) | |||
Credit risk profile | |||
Total loans | 7,937 | 11,827 | |
Construction and land development | |||
Credit risk profile | |||
Total loans | 92,596 | 94,178 | 84,987 |
Construction and land development | Excellent Quality | |||
Credit risk profile | |||
Total loans | 0 | 504 | |
Construction and land development | High Quality | |||
Credit risk profile | |||
Total loans | 32,029 | 24,594 | |
Construction and land development | Good Quality | |||
Credit risk profile | |||
Total loans | 52,009 | 59,549 | |
Construction and land development | Management Attention | |||
Credit risk profile | |||
Total loans | 5,487 | 5,707 | |
Construction and land development | Watch | |||
Credit risk profile | |||
Total loans | 3,007 | 3,669 | |
Construction and land development | Substandard | |||
Credit risk profile | |||
Total loans | 64 | 155 | |
Construction and land development | Doubtful | |||
Credit risk profile | |||
Total loans | 0 | 0 | |
Construction and land development | Loss | |||
Credit risk profile | |||
Total loans | 0 | 0 | |
Single-family residential | |||
Credit risk profile | |||
Total loans | 269,475 | 252,983 | 246,703 |
Single-family residential | Excellent Quality | |||
Credit risk profile | |||
Total loans | 8,819 | 5,795 | |
Single-family residential | High Quality | |||
Credit risk profile | |||
Total loans | 128,757 | 128,588 | |
Single-family residential | Good Quality | |||
Credit risk profile | |||
Total loans | 107,246 | 92,435 | |
Single-family residential | Management Attention | |||
Credit risk profile | |||
Total loans | 18,409 | 19,200 | |
Single-family residential | Watch | |||
Credit risk profile | |||
Total loans | 3,196 | 3,761 | |
Single-family residential | Substandard | |||
Credit risk profile | |||
Total loans | 3,048 | 3,204 | |
Single-family residential | Doubtful | |||
Credit risk profile | |||
Total loans | 0 | 0 | |
Single-family residential | Loss | |||
Credit risk profile | |||
Total loans | 0 | 0 | |
Single-family residential - Banco de la Gente Non-traditional | |||
Credit risk profile | |||
Total loans | 30,793 | 34,261 | 37,249 |
Single-family residential - Banco de la Gente Non-traditional | Excellent Quality | |||
Credit risk profile | |||
Total loans | 0 | 0 | |
Single-family residential - Banco de la Gente Non-traditional | High Quality | |||
Credit risk profile | |||
Total loans | 0 | 0 | |
Single-family residential - Banco de la Gente Non-traditional | Good Quality | |||
Credit risk profile | |||
Total loans | 12,103 | 13,776 | |
Single-family residential - Banco de la Gente Non-traditional | Management Attention | |||
Credit risk profile | |||
Total loans | 13,737 | 15,012 | |
Single-family residential - Banco de la Gente Non-traditional | Watch | |||
Credit risk profile | |||
Total loans | 2,027 | 2,408 | |
Single-family residential - Banco de la Gente Non-traditional | Substandard | |||
Credit risk profile | |||
Total loans | 2,926 | 3,065 | |
Single-family residential - Banco de la Gente Non-traditional | Doubtful | |||
Credit risk profile | |||
Total loans | 0 | 0 | |
Single-family residential - Banco de la Gente Non-traditional | Loss | |||
Credit risk profile | |||
Total loans | 0 | 0 | |
Commercial | |||
Credit risk profile | |||
Total loans | 291,255 | 270,055 | 248,637 |
Commercial | Excellent Quality | |||
Credit risk profile | |||
Total loans | 0 | 0 | |
Commercial | High Quality | |||
Credit risk profile | |||
Total loans | 21,829 | 25,321 | |
Commercial | Good Quality | |||
Credit risk profile | |||
Total loans | 231,003 | 211,541 | |
Commercial | Management Attention | |||
Credit risk profile | |||
Total loans | 35,095 | 30,333 | |
Commercial | Watch | |||
Credit risk profile | |||
Total loans | 3,072 | 2,616 | |
Commercial | Substandard | |||
Credit risk profile | |||
Total loans | 256 | 244 | |
Commercial | Doubtful | |||
Credit risk profile | |||
Total loans | 0 | 0 | |
Commercial | Loss | |||
Credit risk profile | |||
Total loans | 0 | 0 | |
Multifamily and Farmland | |||
Credit risk profile | |||
Total loans | 48,090 | 33,163 | 28,937 |
Multifamily and Farmland | Excellent Quality | |||
Credit risk profile | |||
Total loans | 0 | 0 | |
Multifamily and Farmland | High Quality | |||
Credit risk profile | |||
Total loans | 256 | 395 | |
Multifamily and Farmland | Good Quality | |||
Credit risk profile | |||
Total loans | 42,527 | 27,774 | |
Multifamily and Farmland | Management Attention | |||
Credit risk profile | |||
Total loans | 4,764 | 3,906 | |
Multifamily and Farmland | Watch | |||
Credit risk profile | |||
Total loans | 543 | 1,088 | |
Multifamily and Farmland | Substandard | |||
Credit risk profile | |||
Total loans | 0 | 0 | |
Multifamily and Farmland | Doubtful | |||
Credit risk profile | |||
Total loans | 0 | 0 | |
Multifamily and Farmland | Loss | |||
Credit risk profile | |||
Total loans | 0 | 0 | |
Commercial loans (not secured by real estate) | |||
Credit risk profile | |||
Total loans | 100,263 | 97,465 | 89,022 |
Commercial loans (not secured by real estate) | Excellent Quality | |||
Credit risk profile | |||
Total loans | 330 | 605 | |
Commercial loans (not secured by real estate) | High Quality | |||
Credit risk profile | |||
Total loans | 20,480 | 20,520 | |
Commercial loans (not secured by real estate) | Good Quality | |||
Credit risk profile | |||
Total loans | 72,417 | 69,651 | |
Commercial loans (not secured by real estate) | Management Attention | |||
Credit risk profile | |||
Total loans | 6,420 | 6,325 | |
Commercial loans (not secured by real estate) | Watch | |||
Credit risk profile | |||
Total loans | 492 | 264 | |
Commercial loans (not secured by real estate) | Substandard | |||
Credit risk profile | |||
Total loans | 124 | 100 | |
Commercial loans (not secured by real estate) | Doubtful | |||
Credit risk profile | |||
Total loans | 0 | 0 | |
Commercial loans (not secured by real estate) | Loss | |||
Credit risk profile | |||
Total loans | 0 | 0 | |
Farm loans (not secured by real estate) | |||
Credit risk profile | |||
Total loans | 1,033 | 926 | $ 1,204 |
Farm loans (not secured by real estate) | Excellent Quality | |||
Credit risk profile | |||
Total loans | 0 | 0 | |
Farm loans (not secured by real estate) | High Quality | |||
Credit risk profile | |||
Total loans | 0 | 0 | |
Farm loans (not secured by real estate) | Good Quality | |||
Credit risk profile | |||
Total loans | 948 | 785 | |
Farm loans (not secured by real estate) | Management Attention | |||
Credit risk profile | |||
Total loans | 85 | 141 | |
Farm loans (not secured by real estate) | Watch | |||
Credit risk profile | |||
Total loans | 0 | 0 | |
Farm loans (not secured by real estate) | Substandard | |||
Credit risk profile | |||
Total loans | 0 | 0 | |
Farm loans (not secured by real estate) | Doubtful | |||
Credit risk profile | |||
Total loans | 0 | 0 | |
Farm loans (not secured by real estate) | Loss | |||
Credit risk profile | |||
Total loans | 0 | 0 | |
Consumer loans (not secured by real estate) | |||
Credit risk profile | |||
Total loans | 8,432 | 9,165 | |
Consumer loans (not secured by real estate) | Excellent Quality | |||
Credit risk profile | |||
Total loans | 693 | 673 | |
Consumer loans (not secured by real estate) | High Quality | |||
Credit risk profile | |||
Total loans | 2,708 | 3,229 | |
Consumer loans (not secured by real estate) | Good Quality | |||
Credit risk profile | |||
Total loans | 4,517 | 4,699 | |
Consumer loans (not secured by real estate) | Management Attention | |||
Credit risk profile | |||
Total loans | 458 | 529 | |
Consumer loans (not secured by real estate) | Watch | |||
Credit risk profile | |||
Total loans | 8 | 18 | |
Consumer loans (not secured by real estate) | Substandard | |||
Credit risk profile | |||
Total loans | 48 | 17 | |
Consumer loans (not secured by real estate) | Doubtful | |||
Credit risk profile | |||
Total loans | 0 | 0 | |
Consumer loans (not secured by real estate) | Loss | |||
Credit risk profile | |||
Total loans | 0 | 0 | |
All other loans (not secured by real estate) | |||
Credit risk profile | |||
Total loans | 7,937 | 11,827 | |
All other loans (not secured by real estate) | Excellent Quality | |||
Credit risk profile | |||
Total loans | 0 | 0 | |
All other loans (not secured by real estate) | High Quality | |||
Credit risk profile | |||
Total loans | 1,860 | 2,145 | |
All other loans (not secured by real estate) | Good Quality | |||
Credit risk profile | |||
Total loans | 5,352 | 8,932 | |
All other loans (not secured by real estate) | Management Attention | |||
Credit risk profile | |||
Total loans | 725 | 750 | |
All other loans (not secured by real estate) | Watch | |||
Credit risk profile | |||
Total loans | 0 | 0 | |
All other loans (not secured by real estate) | Substandard | |||
Credit risk profile | |||
Total loans | 0 | 0 | |
All other loans (not secured by real estate) | Doubtful | |||
Credit risk profile | |||
Total loans | 0 | 0 | |
All other loans (not secured by real estate) | Loss | |||
Credit risk profile | |||
Total loans | $ 0 | $ 0 |
3. Loans (Details 7)
3. Loans (Details 7) $ in Thousands | 12 Months Ended | |
Dec. 31, 2019USD ($)Integer | Dec. 31, 2018USD ($)Integer | |
TDR Loans | ||
Post-modification outstanding recorded investment | $ 4,300 | $ 4,700 |
Single-family residential | ||
TDR Loans | ||
Number of contracts | Integer | 2 | 2 |
Pre-modification outstanding recorded investment | $ 94 | $ 94 |
Post-modification outstanding recorded investment | $ 94 | $ 94 |
Total TDR Loans | ||
TDR Loans | ||
Number of contracts | Integer | 2 | 2 |
Pre-modification outstanding recorded investment | $ 94 | $ 94 |
Post-modification outstanding recorded investment | $ 94 | $ 94 |
3. Loans (Details Narrative)
3. Loans (Details Narrative) - USD ($) $ in Thousands | 12 Months Ended | |
Dec. 31, 2019 | Dec. 31, 2018 | |
Receivables [Abstract] | ||
Percentage of construction and land development loans in Bank's loan portfolio | 11.00% | 12.00% |
Percentage of single-family residential loans in Bank's loan portfolio | 35.00% | 36.00% |
Percentage of Single-family residential - Banco de la Gente Non-traditional loans in the Bank's loan portfolio | 4.00% | 4.00% |
Percentage of commercial real estate loans in Bank's loan portfolio | 34.00% | 34.00% |
Percentage of commercial loans in Bank's loan portfolio | 12.00% | 12.00% |
Deferred costs | $ 1,500 | $ 1,600 |
Accruing impaired loans | 21,300 | 22,800 |
Interest income recognized on accruing impaired loans | 1,300 | 1,300 |
TDR loan amounts | 4,300 | 4,700 |
Amount of performing TDR loans included | $ 0 | $ 92 |
4. Premises and Equipment (Deta
4. Premises and Equipment (Details) - USD ($) $ in Thousands | Dec. 31, 2019 | Dec. 31, 2018 |
Property, Plant and Equipment [Abstract] | ||
Land | $ 2,793 | $ 2,889 |
Buildings and improvements | 18,931 | 19,796 |
Furniture and equipment | 24,743 | 22,443 |
Construction in process | 395 | 381 |
Total premises and equipment | 46,862 | 45,509 |
Less accumulated depreciation | 28,258 | 27,059 |
Total net premises and equipment | $ 18,604 | $ 18,450 |
4. Premises and Equipment (De_2
4. Premises and Equipment (Details Narrative) - USD ($) $ in Thousands | 12 Months Ended | ||
Dec. 31, 2019 | Dec. 31, 2018 | Dec. 31, 2017 | |
Property, Plant and Equipment [Abstract] | |||
Depreciation expense | $ 2,300 | $ 2,300 | $ 2,100 |
Net losses on the sale of and write-downs on premises and equipment | $ 239 | $ (544) | $ 0 |
5. Leases (Details)
5. Leases (Details) $ in Thousands | 12 Months Ended |
Dec. 31, 2019USD ($) | |
Leases [Abstract] | |
Operating lease cost | $ 893 |
Cash paid for amounts included in the measurement of lease liabilities | 850 |
Operating cash flows from operating leases | 0 |
Right-of-use assets obtained in exchange for new lease liabilities - operating leases | $ 8 |
Weighted-average remaining lease term - operating leases | 7 years 3 months 7 days |
Weighted-average discount rate - operating leases | 3.19% |
5. Leases (Details 1)
5. Leases (Details 1) $ in Thousands | Dec. 31, 2019USD ($) |
Leases [Abstract] | |
2020 | $ 823 |
2021 | 793 |
2022 | 501 |
2023 | 393 |
2024 | 304 |
Thereafter | 1,320 |
Total | 4,134 |
Less: imputed interest | (487) |
Operating lease liability | $ 3,647 |
5. Leases (Details Narrative)
5. Leases (Details Narrative) - USD ($) $ in Thousands | 12 Months Ended | ||
Dec. 31, 2019 | Dec. 31, 2018 | Dec. 31, 2017 | |
Leases [Abstract] | |||
Operating ROU assets | $ 3,622 | $ 0 | $ 0 |
Operating lease liabilities | 3,647 | 0 | 0 |
Rent expense | $ 949 | $ 785 | $ 756 |
6. Time Deposits (Details)
6. Time Deposits (Details) $ in Thousands | Dec. 31, 2019USD ($) |
Time Deposits [Line Items] | |
2020 | $ 53,905 |
2021 | 21,997 |
2022 | 10,919 |
2023 | 3,117 |
2024 and thereafter | 21,818 |
Total | $ 111,756 |
6. Time Deposits (Details Narra
6. Time Deposits (Details Narrative) - USD ($) $ in Thousands | Dec. 31, 2019 | Dec. 31, 2018 |
Time Deposits [Line Items] | ||
Time deposits purchased through third party brokers, including certificates of deposit participated through the Certificate of Deposit Account Registry Service ("CDARS") on behalf of local customers | $ 22,300 | $ 3,400 |
CDARS balances | $ 3,100 | $ 3,400 |
Weighted average rate of brokered deposits | 1.96% | 0.07% |
7. Federal Home Loan Bank and_2
7. Federal Home Loan Bank and Federal Reserve Bank Borrowings (Details Narrative) - USD ($) $ in Thousands | Dec. 31, 2019 | Dec. 31, 2018 |
Federal Home Loan Banks [Abstract] | ||
Loans pledged as collateral to the FHLB | $ 139,400 | $ 140,000 |
FHLB stock owned | 983 | 982 |
Carrying value of loans pledged as collateral to the FHLB | 0 | 442,600 |
Availability under the line of credit with the FRB | $ 344,700 | $ 335,800 |
9. Income Taxes (Details)
9. Income Taxes (Details) - USD ($) $ in Thousands | 3 Months Ended | 12 Months Ended | |||||||||
Dec. 31, 2019 | Sep. 30, 2019 | Jun. 30, 2019 | Mar. 31, 2019 | Dec. 31, 2018 | Sep. 30, 2018 | Jun. 30, 2018 | Mar. 31, 2018 | Dec. 31, 2019 | Dec. 31, 2018 | Dec. 31, 2017 | |
Income Tax Disclosure [Abstract] | |||||||||||
Current expense | $ 2,960 | $ 2,546 | $ 1,827 | ||||||||
Deferred income tax expense | 176 | 78 | 2,120 | ||||||||
Total income tax | $ 672 | $ 834 | $ 845 | $ 785 | $ 690 | $ 687 | $ 595 | $ 652 | $ 3,136 | $ 2,624 | $ 3,947 |
9. Income Taxes (Details 1)
9. Income Taxes (Details 1) - USD ($) $ in Thousands | 3 Months Ended | 12 Months Ended | |||||||||
Dec. 31, 2019 | Sep. 30, 2019 | Jun. 30, 2019 | Mar. 31, 2019 | Dec. 31, 2018 | Sep. 30, 2018 | Jun. 30, 2018 | Mar. 31, 2018 | Dec. 31, 2019 | Dec. 31, 2018 | Dec. 31, 2017 | |
Income Tax Disclosure [Abstract] | |||||||||||
Tax expense at statutory rate (21% in 2018) | $ 3,613 | $ 3,361 | $ 4,833 | ||||||||
Differences: | |||||||||||
State income tax, net of federal income tax effect | 327 | 358 | 307 | ||||||||
Tax exempt interest income | (802) | (990) | (1,594) | ||||||||
Increase in cash surrender value of life insurance | (81) | (81) | (136) | ||||||||
Nondeductible interest and other expense | 40 | 23 | 46 | ||||||||
Impact of Tax Cuts and Jobs Act | 0 | 0 | 588 | ||||||||
Other | 39 | (47) | (97) | ||||||||
Total income tax | $ 672 | $ 834 | $ 845 | $ 785 | $ 690 | $ 687 | $ 595 | $ 652 | $ 3,136 | $ 2,624 | $ 3,947 |
9. Income Taxes (Details 2)
9. Income Taxes (Details 2) - USD ($) $ in Thousands | Dec. 31, 2019 | Dec. 31, 2018 |
Deferred tax assets: | ||
Allowance for loan losses | $ 1,535 | $ 1,481 |
Accrued retirement expense | 1,150 | 1,119 |
Restricted stock | 217 | 262 |
Accrued bonuses | 266 | 211 |
Interest income on nonaccrual loans | 2 | 1 |
Total gross deferred tax assets | 3,170 | 3,074 |
Deferred tax liabilities: | ||
Deferred loan fees | 343 | 379 |
Accumulated depreciation | 873 | 610 |
Prepaid expenses | 7 | 10 |
Other | 53 | 5 |
Unrealized gain on available for sale securities | 1,087 | 294 |
Total gross deferred tax liabilities | 2,363 | 1,298 |
Net deferred tax asset | $ 807 | $ 1,776 |
10. Related Party Transaction_2
10. Related Party Transactions (Details) - USD ($) $ in Thousands | 12 Months Ended | |
Dec. 31, 2019 | Dec. 31, 2018 | |
Related Party Transactions [Abstract] | ||
Beginning balance | $ 3,192 | $ 3,679 |
New loans | 5,716 | 8,030 |
Repayments | (5,436) | (8,517) |
Ending balance | $ 3,472 | $ 3,192 |
10. Related Party Transaction_3
10. Related Party Transactions (Details Narrative) - USD ($) $ in Thousands | Dec. 31, 2019 | Dec. 31, 2018 |
Related Party Transactions [Abstract] | ||
Related party deposits | $ 30,400 | $ 31,600 |
11. Commitments and Contingen_3
11. Commitments and Contingencies (Details) - USD ($) $ in Thousands | Dec. 31, 2019 | Dec. 31, 2018 |
Commitments and contingencies | ||
Commitments to extend credit | ||
Commitments and contingencies | 276,338 | 268,708 |
Standby letters of credit and financial guarantees written | ||
Commitments and contingencies | $ 3,558 | $ 3,651 |
11. Commitments and Contingen_4
11. Commitments and Contingencies (Details Narrative) $ in Thousands | Dec. 31, 2019USD ($) |
Commitments and Contingencies Disclosure [Abstract] | |
Overnight federal funds | $ 82,500 |
12. Employee and Director Ben_3
12. Employee and Director Benefit Programs (Details) - USD ($) $ in Thousands | 12 Months Ended | ||
Dec. 31, 2019 | Dec. 31, 2018 | Dec. 31, 2017 | |
Retirement Benefits [Abstract] | |||
Benefit obligation at beginning of period | $ 4,566 | $ 4,361 | |
Service cost | 299 | 362 | $ 348 |
Interest cost | 58 | 70 | 68 |
Benefits paid | (223) | (227) | |
Benefit obligation at end of period | $ 4,700 | $ 4,566 | $ 4,361 |
12. Employee and Director Ben_4
12. Employee and Director Benefit Programs (Details 1) - USD ($) $ in Thousands | 12 Months Ended | ||
Dec. 31, 2019 | Dec. 31, 2018 | Dec. 31, 2017 | |
Retirement Benefits [Abstract] | |||
Benefit obligation | $ 4,700 | $ 4,566 | $ 4,361 |
Fair value of plan assets | 0 | 0 | |
Funded status | (4,700) | (4,566) | |
Unrecognized prior service cost/benefit | 0 | 0 | |
Unrecognized net actuarial loss | 0 | 0 | |
Net amount recognized | (4,700) | (4,566) | |
Unfunded accrued liability | (4,700) | (4,566) | |
Intangible assets | 0 | 0 | |
Net amounts recognized | $ (4,700) | $ (4,566) |
12. Employee and Director Ben_5
12. Employee and Director Benefit Programs (Details 2) - USD ($) $ in Thousands | 12 Months Ended | ||
Dec. 31, 2019 | Dec. 31, 2018 | Dec. 31, 2017 | |
Retirement Benefits [Abstract] | |||
Service cost | $ 299 | $ 362 | $ 348 |
Interest cost | 58 | 70 | 68 |
Net periodic cost | $ 357 | $ 432 | $ 416 |
Weighted average discount rate assumption used to determine benefit obligation | 5.49% | 5.49% | 5.49% |
12. Employee and Director Ben_6
12. Employee and Director Benefit Programs (Details 3) $ in Thousands | Dec. 31, 2019USD ($) |
Retirement Benefits [Abstract] | |
2020 | $ 237 |
2021 | 353 |
2022 | 342 |
2023 | 342 |
2024 | 354 |
Thereafter | $ 8,715 |
12. Employee and Director Ben_7
12. Employee and Director Benefit Programs (Details Narrative) - USD ($) $ in Thousands | 12 Months Ended | ||
Dec. 31, 2019 | Dec. 31, 2018 | Dec. 31, 2017 | |
Retirement Benefits [Abstract] | |||
Matching of employee contributions, percentage | 4.00% | 4.00% | 4.00% |
Defined Benefit Plan, Contributions by Employer | $ 691 | $ 670 | $ 622 |
Expenses incurred for benefits relating to the postretirement benefit plan | 361 | 423 | 411 |
Postretirement Benefits paid | $ 223 | $ 227 | $ 229 |
13. Regulatory Matters (Details
13. Regulatory Matters (Details) - USD ($) $ in Thousands | Dec. 31, 2019 | Dec. 31, 2018 |
Total capital (to Risk-Weighted Assets) | Consolidated | ||
Actual, amount | $ 152,156 | $ 149,076 |
Actual, ratio | 16.08% | 16.15% |
For capital adequacy purposes, amount | $ 75,710 | $ 73,830 |
For capital adequacy purposes, ratio | 8.00% | 8.00% |
To be well capitalized under prompt corrective action provisions, amount | $ 0 | $ 0 |
To be well capitalized under prompt corrective action provisions, ratio | 0.00% | 0.00% |
Total capital (to Risk-Weighted Assets) | Bank | ||
Actual, amount | $ 149,266 | $ 146,640 |
Actual, ratio | 15.79% | 15.91% |
For capital adequacy purposes, amount | $ 75,602 | $ 73,717 |
For capital adequacy purposes, ratio | 8.00% | 8.00% |
To be well capitalized under prompt corrective action provisions, amount | $ 99,228 | $ 91,041 |
To be well capitalized under prompt corrective action provisions, ratio | 10.50% | 9.88% |
Tier 1 Capital (to Risk- Weighted Assets) | Consolidated | ||
Actual, amount | $ 145,476 | $ 142,631 |
Actual, ratio | 15.37% | 15.46% |
For capital adequacy purposes, amount | $ 56,783 | $ 55,372 |
For capital adequacy purposes, ratio | 6.00% | 6.00% |
To be well capitalized under prompt corrective action provisions, amount | $ 0 | $ 0 |
To be well capitalized under prompt corrective action provisions, ratio | 0.00% | 0.00% |
Tier 1 Capital (to Risk- Weighted Assets) | Bank | ||
Actual, amount | $ 142,586 | $ 140,195 |
Actual, ratio | 15.09% | 15.21% |
For capital adequacy purposes, amount | $ 56,702 | $ 55,288 |
For capital adequacy purposes, ratio | 6.00% | 6.00% |
To be well capitalized under prompt corrective action provisions, amount | $ 80,328 | $ 72,612 |
To be well capitalized under prompt corrective action provisions, ratio | 8.50% | 7.88% |
Tier 1 Capital (Average Assets) | Consolidated | ||
Actual, amount | $ 145,476 | $ 142,631 |
Actual, ratio | 11.91% | 13.05% |
For capital adequacy purposes, amount | $ 48,872 | $ 43,723 |
For capital adequacy purposes, ratio | 4.00% | 4.00% |
To be well capitalized under prompt corrective action provisions, amount | $ 0 | $ 0 |
To be well capitalized under prompt corrective action provisions, ratio | 0.00% | 0.00% |
Tier 1 Capital (Average Assets) | Bank | ||
Actual, amount | $ 142,586 | $ 140,195 |
Actual, ratio | 11.61% | 12.76% |
For capital adequacy purposes, amount | $ 49,106 | $ 43,950 |
For capital adequacy purposes, ratio | 4.00% | 4.00% |
To be well capitalized under prompt corrective action provisions, amount | $ 49,106 | $ 43,950 |
To be well capitalized under prompt corrective action provisions, ratio | 4.00% | 4.00% |
Common Equity Tier 1 (to Risk-Weighted Assets) | Consolidated | ||
Actual, amount | $ 130,476 | $ 122,631 |
Actual, ratio | 13.79% | 13.29% |
For capital adequacy purposes, amount | $ 42,587 | $ 41,529 |
For capital adequacy purposes, ratio | 4.50% | 4.50% |
To be well capitalized under prompt corrective action provisions, amount | $ 0 | $ 0 |
To be well capitalized under prompt corrective action provisions, ratio | 0.00% | 0.00% |
Common Equity Tier 1 (to Risk-Weighted Assets) | Bank | ||
Actual, amount | $ 142,586 | $ 140,195 |
Actual, ratio | 15.09% | 15.21% |
For capital adequacy purposes, amount | $ 42,526 | $ 41,466 |
For capital adequacy purposes, ratio | 4.50% | 4.50% |
To be well capitalized under prompt corrective action provisions, amount | $ 66,152 | $ 58,790 |
To be well capitalized under prompt corrective action provisions, ratio | 7.00% | 6.38% |
15. Other Operating Income an_3
15. Other Operating Income and Expense (Details) - USD ($) $ in Thousands | 12 Months Ended | ||
Dec. 31, 2019 | Dec. 31, 2018 | Dec. 31, 2017 | |
Other Income and Expenses [Abstract] | |||
Visa debit card income | $ 4,145 | $ 3,911 | $ 3,757 |
Bank owned life insurance income | 383 | 384 | 400 |
Gain (loss) on sale of premises and equipment | (239) | 544 | (32) |
Other | 1,320 | 1,354 | 1,175 |
Miscellaneous non-interest income | 5,609 | 6,193 | 5,300 |
ATM expense | 579 | 542 | 673 |
Consulting | 972 | 1,012 | 785 |
Data processing | 616 | 466 | 426 |
Deposit program expense | 515 | 586 | 539 |
Dues and subscriptions | 421 | 421 | 354 |
FHLB advance prepayment penalty | 0 | 0 | 508 |
Internet banking expense | 681 | 603 | 720 |
Office supplies | 467 | 503 | 517 |
Telephone | 802 | 678 | 855 |
Other | 2,921 | 2,834 | 2,540 |
Other non-interest expense | $ 7,974 | $ 7,645 | $ 7,917 |
16. Fair Value of Financial I_3
16. Fair Value of Financial Instruments (Details) - USD ($) $ in Thousands | Dec. 31, 2019 | Dec. 31, 2018 |
Assets: | ||
Investment securities available for sale | $ 195,746 | $ 194,578 |
Mortgage loans held for sale | 4,417 | 680 |
Carrying Amount | ||
Assets: | ||
Cash and cash equivalents | 52,387 | 43,370 |
Investment securities available for sale | 195,746 | 194,578 |
Other investments | 4,231 | 4,361 |
Mortgage loans held for sale | 4,417 | 680 |
Loans, net | 843,194 | 797,578 |
Cash surrender value of life insurance | 16,319 | 15,936 |
Liabilities: | ||
Deposits | 966,517 | 877,213 |
Securities sold under agreements to repurchase | 24,221 | 58,095 |
Junior subordinated debentures | 15,619 | 20,619 |
Level 1 | ||
Assets: | ||
Cash and cash equivalents | 52,387 | 43,370 |
Investment securities available for sale | 0 | 0 |
Other investments | 0 | 0 |
Mortgage loans held for sale | 0 | 0 |
Loans, net | 0 | 0 |
Cash surrender value of life insurance | 0 | 0 |
Liabilities: | ||
Deposits | 0 | 0 |
Securities sold under agreements to repurchase | 0 | 0 |
Junior subordinated debentures | 0 | 0 |
Level 2 | ||
Assets: | ||
Cash and cash equivalents | 0 | 0 |
Investment securities available for sale | 195,496 | 194,328 |
Other investments | 0 | 0 |
Mortgage loans held for sale | 0 | 0 |
Loans, net | 0 | 0 |
Cash surrender value of life insurance | 16,319 | 15,936 |
Liabilities: | ||
Deposits | 0 | 0 |
Securities sold under agreements to repurchase | 24,221 | 58,095 |
Junior subordinated debentures | 15,619 | 20,619 |
Level 3 | ||
Assets: | ||
Cash and cash equivalents | 0 | 0 |
Investment securities available for sale | 250 | 250 |
Other investments | 4,231 | 4,361 |
Mortgage loans held for sale | 4,417 | 680 |
Loans, net | 819,397 | 748,917 |
Cash surrender value of life insurance | 0 | 0 |
Liabilities: | ||
Deposits | 955,766 | 857,999 |
Securities sold under agreements to repurchase | 0 | 0 |
Junior subordinated debentures | 0 | 0 |
Estimated Fair Value | ||
Assets: | ||
Cash and cash equivalents | 52,387 | 43,370 |
Investment securities available for sale | 195,746 | 194,578 |
Other investments | 4,231 | 4,361 |
Mortgage loans held for sale | 4,417 | 680 |
Loans, net | 819,397 | 748,917 |
Cash surrender value of life insurance | 16,319 | 15,936 |
Liabilities: | ||
Deposits | 955,766 | 857,999 |
Securities sold under agreements to repurchase | 24,221 | 58,095 |
Junior subordinated debentures | $ 15,619 | $ 20,619 |
17. Peoples Bancorp of North _3
17. Peoples Bancorp of North Carolina, Inc. (Parent Company Only) Condensed Financial Statements (Details) - USD ($) $ in Thousands | 3 Months Ended | 12 Months Ended | |||||||||||
Dec. 31, 2019 | Sep. 30, 2019 | Jun. 30, 2019 | Mar. 31, 2019 | Dec. 31, 2018 | Sep. 30, 2018 | Jun. 30, 2018 | Mar. 31, 2018 | Dec. 31, 2019 | Dec. 31, 2018 | Dec. 31, 2017 | Dec. 31, 2019 | Dec. 31, 2018 | |
Assets | |||||||||||||
Interest-bearing time deposit | $ 720 | $ 2,817 | |||||||||||
Investment securities available for sale | 195,746 | 194,578 | |||||||||||
Total assets | 1,154,882 | 1,093,251 | |||||||||||
Liabilities and Shareholders' Equity | |||||||||||||
Junior subordinated debentures | 15,619 | 20,619 | |||||||||||
Liabilities | 1,020,762 | 969,634 | |||||||||||
Shareholders' equity | 134,120 | 123,617 | |||||||||||
Total liabilities and shareholders' equity | 1,154,882 | 1,093,251 | |||||||||||
Revenues: | |||||||||||||
Interest and dividend income | $ 12,613 | $ 12,430 | $ 12,375 | $ 12,183 | $ 11,924 | $ 11,608 | $ 11,059 | $ 10,759 | $ 49,601 | $ 45,350 | $ 41,949 | ||
Expenses: | |||||||||||||
Interest | 1,225 | 994 | 781 | 757 | 609 | 557 | 513 | 467 | 3,757 | 2,146 | 2,377 | ||
Income before income tax benefit and equity in undistributed earnings of subsidiaries | 3,638 | 4,455 | 4,658 | 4,452 | 4,126 | 4,154 | 3,771 | 3,955 | 17,203 | 16,006 | 14,215 | ||
Income tax benefit | 672 | 834 | 845 | 785 | 690 | 687 | 595 | 652 | 3,136 | 2,624 | 3,947 | ||
Net earnings | 2,966 | 3,621 | 3,813 | 3,667 | 3,436 | 3,467 | 3,176 | 3,303 | 14,067 | 13,382 | 10,268 | ||
Cash flows from operating activities: | |||||||||||||
Net earnings | 2,966 | $ 3,621 | $ 3,813 | 3,667 | 3,436 | $ 3,467 | $ 3,176 | 3,303 | 14,067 | 13,382 | 10,268 | ||
Change in: | |||||||||||||
Other assets | 940 | (3,695) | (3,982) | ||||||||||
Net cash provided by operating activities | 13,197 | 17,187 | 18,594 | ||||||||||
Cash flows from investing activities: | |||||||||||||
Proceeds from calls and maturities of investment securities available for sale | 40,561 | 48,241 | 10,162 | ||||||||||
Net cash provided by investing activities | (48,181) | (18,587) | (24,106) | ||||||||||
Cash flows from financing activities: | |||||||||||||
Repayment of junior subordinated debenture | 5,000 | 0 | 0 | ||||||||||
Cash in lieu stock dividend | 0 | 0 | (6) | ||||||||||
Net cash used by financing activities | 44,001 | (12,534) | (7,278) | ||||||||||
Net change in cash | 9,017 | (13,934) | (12,790) | ||||||||||
Noncash investing and financing activities: | |||||||||||||
Change in unrealized gain on investment securities available for sale, net | 2,658 | (2,607) | (1) | ||||||||||
Parent Company | |||||||||||||
Assets | |||||||||||||
Cash | 1,187 | 689 | 689 | 428 | 1,187 | 428 | 957 | 1,187 | 689 | ||||
Interest-bearing time deposit | 1,000 | 1,000 | |||||||||||
Investment in subsidiaries | 146,230 | 141,181 | |||||||||||
Investment in PEBK Capital Trust II | 619 | 619 | |||||||||||
Investment securities available for sale | 250 | 250 | |||||||||||
Other assets | 476 | 533 | |||||||||||
Total assets | 149,762 | 144,272 | |||||||||||
Liabilities and Shareholders' Equity | |||||||||||||
Junior subordinated debentures | 15,619 | 20,619 | |||||||||||
Liabilities | 23 | 36 | |||||||||||
Shareholders' equity | 134,120 | 123,617 | |||||||||||
Total liabilities and shareholders' equity | $ 149,762 | $ 144,272 | |||||||||||
Revenues: | |||||||||||||
Interest and dividend income | 12,850 | 4,544 | 1,839 | ||||||||||
Total revenues | 12,850 | 4,544 | 1,839 | ||||||||||
Expenses: | |||||||||||||
Interest | 844 | 790 | 590 | ||||||||||
Other operating expenses | 629 | 678 | 725 | ||||||||||
Total expenses | 1,473 | 1,468 | 1,315 | ||||||||||
Income before income tax benefit and equity in undistributed earnings of subsidiaries | 11,377 | 3,076 | 524 | ||||||||||
Income tax benefit | 299 | 299 | 434 | ||||||||||
Income before equity in undistributed earnings of subsidiaries | 11,676 | 3,375 | 958 | ||||||||||
Equity in undistributed earnings of subsidiaries | 2,391 | 10,007 | 9,310 | ||||||||||
Net earnings | 14,067 | 13,382 | 10,268 | ||||||||||
Cash flows from operating activities: | |||||||||||||
Net earnings | 14,067 | 13,382 | 10,268 | ||||||||||
Adjustments to reconcile net earnings to net cash provided by operating activities: | |||||||||||||
Equity in undistributed earnings of subsidiaries | (2,391) | (10,007) | (9,310) | ||||||||||
Change in: | |||||||||||||
Other assets | 57 | 13 | (272) | ||||||||||
Other liabilities | (13) | 6 | 5 | ||||||||||
Net cash provided by operating activities | 11,720 | 3,394 | 691 | ||||||||||
Cash flows from investing activities: | |||||||||||||
Proceeds from calls and maturities of investment securities available for sale | 0 | 0 | 500 | ||||||||||
Net cash provided by investing activities | 0 | 0 | 500 | ||||||||||
Cash flows from financing activities: | |||||||||||||
Repayment of junior subordinated debenture | (5,000) | 0 | 0 | ||||||||||
Cash dividends paid on common stock | (3,939) | (3,133) | (2,629) | ||||||||||
Cash in lieu stock dividend | 0 | 0 | (6) | ||||||||||
Stock repurchase | (2,490) | 0 | 0 | ||||||||||
Proceeds from exercise of restricted stock units | 207 | 0 | 915 | ||||||||||
Net cash used by financing activities | (11,222) | (3,133) | (1,720) | ||||||||||
Net change in cash | 498 | 261 | (529) | ||||||||||
Cash at beginning of year | $ 689 | $ 428 | 689 | 428 | 957 | ||||||||
Cash at end of year | $ 1,187 | $ 689 | 1,187 | 689 | 428 | ||||||||
Noncash investing and financing activities: | |||||||||||||
Change in unrealized gain on investment securities available for sale, net | $ 2,658 | $ (2,607) | $ (1) |
17. Quarterly Data (Details)
17. Quarterly Data (Details) - USD ($) $ / shares in Units, $ in Thousands | 3 Months Ended | 12 Months Ended | |||||||||
Dec. 31, 2019 | Sep. 30, 2019 | Jun. 30, 2019 | Mar. 31, 2019 | Dec. 31, 2018 | Sep. 30, 2018 | Jun. 30, 2018 | Mar. 31, 2018 | Dec. 31, 2019 | Dec. 31, 2018 | Dec. 31, 2017 | |
Quarterly Financial Information Disclosure [Abstract] | |||||||||||
Total interest income | $ 12,613 | $ 12,430 | $ 12,375 | $ 12,183 | $ 11,924 | $ 11,608 | $ 11,059 | $ 10,759 | $ 49,601 | $ 45,350 | $ 41,949 |
Total interest expense | 1,225 | 994 | 781 | 757 | 609 | 557 | 513 | 467 | 3,757 | 2,146 | 2,377 |
Net interest income | 11,388 | 11,436 | 11,594 | 11,426 | 11,315 | 11,051 | 10,546 | 10,292 | 45,844 | 43,204 | 39,572 |
Provision for loan losses | 186 | 422 | 77 | 178 | 418 | 110 | 231 | 31 | 863 | 790 | (507) |
Other income | 4,526 | 4,708 | 4,385 | 4,120 | 4,499 | 3,915 | 4,016 | 3,736 | 17,739 | 16,166 | 15,364 |
Other expense | 12,090 | 11,267 | 11,244 | 10,916 | 11,270 | 10,702 | 10,560 | 10,042 | 45,517 | 42,574 | 41,228 |
Income before income taxes | 3,638 | 4,455 | 4,658 | 4,452 | 4,126 | 4,154 | 3,771 | 3,955 | 17,203 | 16,006 | 14,215 |
Income tax expense | 672 | 834 | 845 | 785 | 690 | 687 | 595 | 652 | 3,136 | 2,624 | 3,947 |
Net earnings | $ 2,966 | $ 3,621 | $ 3,813 | $ 3,667 | $ 3,436 | $ 3,467 | $ 3,176 | $ 3,303 | $ 14,067 | $ 13,382 | $ 10,268 |
Basic net earnings per share | $ 0.5 | $ 0.62 | $ 0.64 | $ 0.61 | $ 0.57 | $ 0.58 | $ 0.53 | $ 0.55 | $ 2.37 | $ 2.23 | $ 1.71 |
Diluted net earnings per share | $ 0.5 | $ 0.61 | $ 0.64 | $ 0.61 | $ 0.57 | $ 0.57 | $ 0.53 | $ 0.55 | $ 2.36 | $ 2.22 | $ 1.69 |