Note 7 - Loans | 9 Months Ended |
Sep. 30, 2013 |
Receivables [Abstract] | ' |
Loans, Notes, Trade and Other Receivables Disclosure [Text Block] | ' |
Note 7: Loans |
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Classes of loans include: |
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| | September 30, | | | December 31, | | | | | | | | | | | | | | | | | | | | | |
2013 | 2012 | | | | | | | | | | | | | | | | | | | | |
Mortgage loans on real estate | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
One-to-four family | | $ | 39,173 | | | $ | 41,842 | | | | | | | | | | | | | | | | | | | | | |
Home equity lines of credit and other 2nd mortgages | | | 8,021 | | | | 9,431 | | | | | | | | | | | | | | | | | | | | | |
Multi-family residential | | | 118 | | | | 51 | | | | | | | | | | | | | | | | | | | | | |
Commercial | | | 20,103 | | | | 19,989 | | | | | | | | | | | | | | | | | | | | | |
Farmland | | | 14,049 | | | | 11,765 | | | | | | | | | | | | | | | | | | | | | |
Construction and land development | | | 763 | | | | 1,837 | | | | | | | | | | | | | | | | | | | | | |
Total mortgage loans on real estate | | | 82,227 | | | | 84,915 | | | | | | | | | | | | | | | | | | | | | |
Commercial and industrial | | | 5,803 | | | | 5,407 | | | | | | | | | | | | | | | | | | | | | |
Agricultural | | | 23,606 | | | | 20,096 | | | | | | | | | | | | | | | | | | | | | |
Purchased indirect automobile, net of dealer reserve | | | 7,579 | | | | 6,987 | | | | | | | | | | | | | | | | | | | | | |
Other consumer | | | 138 | | | | 117 | | | | | | | | | | | | | | | | | | | | | |
| | | 119,353 | | | | 117,522 | | | | | | | | | | | | | | | | | | | | | |
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Less | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Loans in process | | | 2 | | | | — | | | | | | | | | | | | | | | | | | | | | |
Net deferred loan fees and costs | | | (8 | ) | | | (4 | ) | | | | | | | | | | | | | | | | | | | | |
Allowance for loan losses | | | 2,500 | | | | 2,550 | | | | | | | | | | | | | | | | | | | | | |
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Net loans | | $ | 116,859 | | | $ | 114,976 | | | | | | | | | | | | | | | | | | | | | |
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The Company believes that sound loans are a necessary and desirable means of employing funds available for investment. Recognizing the Company’s obligations to its depositors and to the communities it serves, authorized personnel are expected to seek to develop and make sound, profitable loans that resources permit and that opportunity affords. The Company maintains lending policies and procedures in place designed to focus our lending efforts on the types, locations, and duration of loans most appropriate for our business model and markets. The Company’s principal lending activity is the origination of one-to four-family residential mortgage loans but also includes commercial real estate loans, farmland loans, commercial and industrial, home equity, construction, agricultural and other loans. The primary lending market is McHenry, Grundy and to a lesser extent Boone Counties in Illinois and Walworth County in Wisconsin. Generally, loans are collateralized by assets, primarily real estate, of the borrowers and guaranteed by individuals. The loans are expected to be repaid from cash flows of the borrowers or from proceeds from the sale of selected assets of the borrowers. |
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Pursuant to applicable law, the aggregate amount of loans that the Company is permitted to make to any one borrower or a group of related borrowers is generally limited to 25% of our total capital plus the allowance for loan losses. |
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Our lending is subject to written underwriting standards and origination procedures. Decisions on loan applications are made on the basis of detailed applications submitted by the prospective borrower and property valuations (consistent with our appraisal policy) prepared by outside independent licensed appraisers approved by our board of directors as well as internal evaluations, where permitted by regulations. The loan applications are designed primarily to determine the borrower’s ability to repay the requested loan, and the more significant items on the application are verified through use of credit reports, financial statements and tax returns. |
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Under our loan policy, the individual processing an application is responsible for ensuring that all documentation is obtained prior to the submission of the application to an officer for approval. An officer then reviews these materials and verifies that the requested loan meets our underwriting guidelines described below. |
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All one-to-four family residential loans up to $500,000, vacant land loans up to $250,000, and any consumer loans require approval of a quorum of our retail loan committee consisting of five officers. All such loan approvals are reported at the next board meeting following said approval. All secured commercial loans, including agricultural loans, up to $1,500,000 and unsecured loans up to $250,000 must be approved by our commercial credit management committee, which currently consists of our Chief Executive Officer, Executive Vice President, Secretary – Treasurer and our Vice President – |
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Commercial Loan Officer. These approvals are reported at the next board meeting following said approval. All other loans must be approved by the board. |
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Generally, title insurance or title searches on our mortgage loans are required as well as fire and extended coverage casualty insurance in amounts at least equal to the principal amount of the loan or the value of improvements on the property, depending on the type of loan. |
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One-to-Four Family Residential Mortgage Loans |
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The cornerstone of our lending program has long been the origination of long-term permanent loans secured by mortgages on owner-occupied one-to-four family residences. Virtually all of the residential loans originated are secured by properties located in our market area. |
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Due to consumer demand in the current low market interest rate environment, many of our recent originations are 10- to 30-year fixed-rate loans secured by one-to-four family residential real estate. The Company generally originates fixed-rate one-to-four family residential loans in accordance with secondary market standards to permit their sale. During the last several years, consistent with our asset-liability management strategy, most of the fixed rate one-to-four family residential loans we originated with original terms to maturity in excess of ten years were sold in the secondary market. |
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During recent years, as a part of our asset/liability management policy, seven-year balloon loans with up to 30-year amortization schedules secured by one-to-four family real estate have been originated. |
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In order to reduce the term to repricing of the loan portfolio, adjustable-rate one-to-four family residential mortgage loans were originated. However, our ability to originate such loans is limited in the current low interest rate environment due to low consumer demand. Our current adjustable-rate mortgage loans carry interest rates that adjust annually at a margin over the one year U.S. Treasury index. Many of our adjustable-rate one-to-four family residential mortgage loans have fixed rates for initial terms of three to five years. Such loans carry terms to maturity of up to 30 years. The adjustable-rate mortgage loans currently offered by the Company generally provide for a 200 basis point annual interest rate change cap and a lifetime cap of 600 basis points over the initial rate. |
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Although adjustable-rate mortgage loans may reduce to an extent our vulnerability to changes in market interest rates because they periodically reprice as interest rates increase, the required payments due from the borrower also increase (subject to rate caps), increasing the potential for default by the borrower. At the same time, the marketability of the underlying collateral may be adversely affected by higher interest rates. Upward adjustments of the contractual interest rate are also limited by the maximum periodic and lifetime rate adjustments permitted by our loan documents. Moreover, the interest rates on many of our adjustable-rate loans do not adjust for the first three to five years. As a result, the effectiveness of adjustable-rate mortgage loans may be limited during periods of rapidly rising interest rates. |
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The Company evaluates both the borrower’s ability to make principal, interest and escrow payments and the value of the property that will secure the loan. One-to-four family residential mortgage loans do not currently include prepayment penalties, are non-assumable and do not produce negative amortization. One-to-four family residential mortgage loans customarily include due-on-sale clauses giving the Company the right to declare the loan immediately due and payable in the event that, among other things, the borrower sells the property subject to the mortgage. Residential mortgage loans are originated for our portfolio with loan-to-value ratios of up to 75% for one-to-four family homes, with higher limits applicable to loans with private mortgage insurance on owner-occupied residences. |
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Commercial Real Estate Loans |
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In an effort to enhance the yield and reduce the term to maturity of our loan portfolio, the Company has sought to increase its commercial real estate loans. Most of the commercial real estate loans have balloon loan terms of three to ten years with amortization terms of 15 to 25 years and fixed interest rates. The maximum loan-to-value ratio of the commercial real estate loans is generally 75%. |
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The Company considers a number of factors in originating commercial real estate loans. The qualifications and financial condition of the borrower are evaluated, including credit history, profitability and expertise, as well as the value and condition of the property securing the loan. When evaluating the qualifications of the borrower, the financial resources of the borrower, the borrower’s experience in owning or managing similar property and the borrower’s payment history with the Company and other financial institutions are considered. In evaluating the property securing the loan, the factors considered include the net operating income of the mortgaged property before debt service and depreciation, the ratio of the loan amount to the appraised value of the mortgaged property and the debt service coverage ratio (the ratio of net operating income to debt service). All commercial real estate loans are appraised by outside independent appraisers approved by the board of directors or by internal evaluations, where permitted by regulation. Personal guarantees are generally obtained from the principals of commercial real estate loans. |
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Loans secured by commercial real estate generally are larger than one-to-four family residential loans and involve greater credit risk. Commercial real estate loans often involve large loan balances to single borrowers or groups of related borrowers. Repayment of these loans depends to a large degree on the results of operations and management of the properties securing the loans or the businesses conducted on such property, and may be affected to a greater extent by adverse conditions in the real estate market or the economy in general. Accordingly, the nature of these loans makes them more difficult for management to monitor and evaluate. |
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Multi-Family Real Estate Loans |
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The Company has a limited number of loans on multi-family residences in our market area. Such loans have terms and are underwritten similarly to our commercial real estate loans and are subject to similar risks. |
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Home Equity Loans |
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The Company originates variable-rate home equity lines-of-credit and, to a lesser extent, fixed-rate loans secured by junior liens on the borrower’s primary residence. Home equity lines-of-credit are generally limited to 70% of the property value less any other mortgages. Fixed rate other second mortgages are generally limited to 75% of the property value less any other mortgages. Prior to 2009, home equity loans were originated up to 90% of the property value to our customers where we serviced their first lien mortgage loan. The same underwriting standards are used for home equity lines-of-credit and loans as used for one-to-four family residential mortgage loans. The home equity line-of-credit product carries an interest rate tied to the prime rate published in the Wall Street Journal. The product has a rate ceiling of 18%. Home equity loans with fixed-rate terms typically amortize over a period of up to 20 years. Home equity lines-of-credit provide for an initial draw period of up to five years, with monthly payments of interest calculated on the outstanding balance. At the end of the initial five years, the line may be paid in full or restructured at our then current home equity program. |
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Construction and Land Development Loans |
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The Company has construction loans to builders and developers for the construction of one- to four- and multi-family residential units and to individuals for the construction of their primary or secondary residence. The Company has a limited amount of land loans to developers, primarily for the purpose of developing residential subdivisions. |
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The application process includes a submission of plans, specifications, and costs of the project to be constructed or developed. These items are used as a basis to determine the appraised value of the subject property. Loans are based on the lesser of current appraised value and/or the cost of construction (land plus building). Construction loan agreements generally provide that loan proceeds are disbursed in increments as construction progresses. Outside independent licensed appraisers or title company representatives under a construction loan escrow agreement inspect the progress of the construction of the dwelling before disbursements are made. |
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The Company has construction loans for commercial development projects such as multi-family, apartment and other commercial buildings. These loans generally have an interest-only phase during construction then convert to permanent financing. Disbursements of construction loan funds are at our discretion based on the progress of construction. The maximum loan-to-value ratio limit applicable to these loans is generally 75%. |
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The Company has loans to builders and developers for the development of one-to-four family lots in our market area. These loans have terms of five years or less. Land loans are generally made in amounts up to a maximum loan-to-value ratio of 65% on raw land and up to 75% on developed building lots based upon an independent appraisal. Personal guarantees are obtained for land loans. |
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Loans to individuals for the construction of their residences typically run for up to twelve months and then convert to permanent loans. These construction loans have rates and terms comparable to one-to-four family residential loans offered. During the construction phase, the borrower pays interest only at a fixed rate. The maximum loan-to-value ratio of owner-occupied single-family construction loans is 75%, 80% if the permanent loan has been approved to be sold in the secondary market. Residential construction loans are generally underwritten pursuant to the same guidelines used for originating permanent residential loans. |
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Construction and land lending generally affords the Company an opportunity to receive higher origination and other loan fees. In addition, such loans are generally made for relatively short terms. Nevertheless, construction and land lending to persons other than owner-occupants is generally considered to involve a higher level of credit risk than one-to-four family residential lending due to the concentration of principal in a limited number of loans and borrowers and the effects of general economic conditions on construction projects, real estate developers and managers. In addition, the nature of these loans is such that they are more difficult to evaluate and monitor. Risk of loss on a construction or land loan is dependent largely upon the accuracy of the initial estimate of the property’s value upon completion of the project and the estimated cost (including interest) of the project. If the estimate of value proves to be inaccurate, the Company may be confronted, at or prior to the maturity of the loan, with a project with a value which is insufficient to assure full repayment and/or the possibility of having to make substantial investments to complete and sell the project. Because defaults in repayment may not occur during the construction period, it may be difficult to identify problem loans at an early stage. When loan payments become due, the cash flow from the property may not be adequate to service the debt. In such cases, the Company may be required to modify the terms of the loan. |
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Farmland Loans |
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These loans are primarily secured by farmland located in our market area. Adjustable rate farmland loans have interest rates that generally adjust every one, three or five years in accordance with a designated index and are generally amortized over 15-25 years. Fixed-rate farmland loans generally are for terms of up to 15 years, although many are amortized over longer periods, and include a balloon payment at maturity. Lending policies on such loans generally limit the maximum loan-to-value ratio to 75% of the lesser of the appraised value or purchase price of the property. |
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While earning higher yields on agricultural mortgage loans than on single-family residential mortgage loans, agricultural-related lending involves a greater degree of risk than single-family residential mortgage loans because of the typically larger loan amounts and potential volatility in the market. In addition, repayments on agricultural loans are substantially dependent on the successful operation of the underlying business and the value of the property collateralizing the loan, both of which are affected by many factors, such as weather and changing market prices, outside the control of the borrower. Finally, some commentators believe that the recent sharp increases in farm land prices could make a price correction more likely. |
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Substantially all farmland loans are underwritten to conform to agency guidelines to qualify for a government guarantee of up to 90% of the original loan amount, which in turn qualifies them to be sold to a variety of investors in the secondary market. Once the government guarantee is secured from Farmers Home Loan Administration, the guarantee covers up to 90% of any loss on the loan. Longer-term fixed-rate agricultural mortgage loans may be sold in the secondary market, which the Company services for the secondary market purchaser. |
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Commercial and Industrial Loans |
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Commercial and industrial loans and lines of credit are originated to small and medium-sized companies in our primary market area. Commercial and industrial loans are generally used for working capital purposes or for acquiring equipment, inventory or furniture. Commercial and industrial loans generally carry a floating-rate indexed to the prime rate as published in The Wall Street Journal and a one-year term. All commercial and industrial loans are secured. |
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When making commercial and industrial loans, the financial statements of the borrower, the lending history of the borrower, the debt service capabilities of the borrower, the projected cash flows of the business, the value of the collateral, if any, and whether the loan is guaranteed by the principals of the borrower are considered. Commercial and industrial loans are generally secured by accounts receivable, inventory, equipment and personal guarantees. |
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Commercial and industrial loans generally have a greater credit risk than residential mortgage loans. Unlike residential mortgage loans, which generally are made on the basis of the borrower’s ability to make repayment from his or her employment and other income, and which are secured by real property whose value tends to be more easily ascertainable, commercial and industrial loans are of higher risk and typically are made on the basis of the borrower’s ability to make repayment from the cash flow of the borrower’s business. As a result, the availability of funds for the repayment of commercial and industrial loans may be substantially dependent on the success of the business itself. Further, the collateral securing the loans may depreciate over time, may be difficult to appraise and may fluctuate in value based on the success of the business. These risks are minimized through underwriting standards and personal guarantees. |
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Agricultural Loans |
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Agricultural operating lines of credit generally have terms of one year and are secured by growing crops, livestock and equipment, and mortgages on the farmland. Intermediate-term loans have terms of 2-7 years and will be secured by machinery and equipment. Generally these loans are extended to farmers in our market area for the purchase of equipment, seed, fertilizer, insecticide and other purposes in connection with agricultural production. The maximum term for equipment secured loans is tied to the useful life of the underlying collateral but generally does not exceed 10 years. The interest rate is generally increased with respect to the longer terms loans due to the rate exposure of these loans. The amount of the commitment is based on management’s review of the borrower’s business plan, prior performance, marketability of crops, and current market prices. Recent financial statements are examined and evaluate cash flow analysis and debt-to-net worth, and liquidity ratios. Loans for crop production generally require 75% or more crop insurance coverage. |
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The repayment of agricultural business loans generally is dependent on the successful operation of a farm and can be adversely affected by fluctuations in crop prices, increase in interest rates, and changes in weather conditions. These developments may result in smaller harvests and less income for farmers which may adversely affect such borrower’s ability to repay a loan. Many borrowers also have more than one agricultural business loan outstanding with us. Consequently, an adverse development with respect to one loan or one credit relationship can expose the Company to significantly greater risk of loss compared to an adverse development with respect to a one-to-four family residential mortgage loan. Finally, if the Company forecloses on an agricultural commercial loan, our holding period for the collateral, if any, typically is longer than for one-to-four family residential mortgage loans because there are fewer potential purchasers of the collateral. |
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Consumer Loans |
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The Company has secured and unsecured loans to consumers. However, during recent years, most consumer lending efforts were focused on purchases of indirect automobile loans. |
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In an effort to expand and diversify our loan portfolio and increase the overall yield on our loan portfolio, since 1999 the Company has purchased indirect loans on new and used automobiles located primarily in Cook County, Illinois. Although we do not separately underwrite each purchased loan, we thoroughly review the knowledge and experience of the originators’ management teams, their underwriting standards, and their historical loss rates. |
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Under the loan purchase arrangement, on a monthly basis the seller aggregates indirect automobile loans into separate loan pools. The pools are then segregated into risk categories with each category having predefined limits as to the maximum amounts allowed. Generally, the pools are sold without recourse. The Company receives a listing of the individual loans in the pool, including loan and borrower information prior to funding the purchase but the Company is not generally permitted to substitute loans in a pool or purchase part of a pool. |
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The seller is responsible for dealer relationships and the monitoring of their performance. The seller performs all servicing functions including the collection of principal, interest, and fees as well as repossessions and recoveries. Thus, the Company is not involved in the sale of repossessed vehicles. |
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The Company performs semi-annual reviews of newly purchased loan files and review operational procedures as part of our internal audit function. |
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Consumer loans may entail greater credit risk than residential mortgage loans, particularly in the case of consumer loans which are unsecured or are secured by rapidly depreciable assets, such as automobiles. In addition, consumer loan collections are dependent on the borrower’s continuing financial stability, and thus are more likely to be affected by adverse personal circumstances as well as the economy. Furthermore, the application of various federal and state laws, including bankruptcy and insolvency laws, may limit the amount which can be recovered on such loans. |
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The following tables present the activity in the allowance for loan losses and the recorded investment in loans based on portfolio segment and impairment method for the three and nine months ended September 30, 2013 and 2012, and the year ended December 31, 2012: |
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| | Three Months Ended September 30, 2013 | | | | | |
Mortgage Loans on Real Estate | | | | |
| | 1-4 Family | | | HELOC and | | | Multi-Family Residential | | | Commercial | | | Farmland | | | Construction | | | | | |
2nd Mortgage | and Land Development | | | | |
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Allowance for loan losses: | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Balance, beginning of period | | $ | 663 | | | $ | 306 | | | $ | 6 | | | $ | 727 | | | $ | 190 | | | $ | 63 | | | | | |
Provision charged to expense | | | (21 | ) | | | 73 | | | | — | | | | 6 | | | | 27 | | | | 75 | | | | | |
Losses charged off | | | (78 | ) | | | (63 | ) | | | — | | | | — | | | | — | | | | (91 | ) | | | | |
Recoveries | | | 29 | | | | — | | | | — | | | | — | | | | — | | | | — | | | | | |
Balance, end of period | | $ | 593 | | | $ | 316 | | | $ | 6 | | | $ | 733 | | | $ | 217 | | | $ | 47 | | | | | |
Ending balance: individually evaluated for impairment | | $ | 125 | | | $ | 44 | | | $ | — | | | $ | 277 | | | $ | — | | | $ | — | | | | | |
Ending balance: collectively evaluated for impairment | | $ | 468 | | | $ | 272 | | | $ | 6 | | | $ | 456 | | | $ | 217 | | | $ | 47 | | | | | |
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Loans: | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Ending balance | | $ | 39,173 | | | $ | 8,021 | | | $ | 118 | | | $ | 20,103 | | | $ | 14,049 | | | $ | 763 | | | | | |
Ending balance: individually evaluated for impairment | | $ | 2,390 | | | $ | 126 | | | $ | — | | | $ | 2,587 | | | $ | — | | | $ | 297 | | | | | |
Ending balance: collectively evaluated for impairment | | $ | 36,783 | | | $ | 7,895 | | | $ | 118 | | | $ | 17,516 | | | $ | 14,049 | | | $ | 466 | | | | | |
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| | Three Months Ended September 30, 2013 (Continued) | | | | | |
| | Commercial and Industrial | | | Agricultural | | | Purchased | | | Other | | | Unallocated | | | Total | | | | | |
Indirect | Consumer | | | | |
Automobile, Net | | | | | |
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Allowance for loan losses: | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Balance, beginning of period | | $ | 134 | | | $ | 347 | | | $ | 126 | | | $ | 1 | | | $ | — | | | $ | 2,563 | | | | | |
Provision charged to expense | | | (24 | ) | | | 14 | | | | — | | | | (2 | ) | | | — | | | | 148 | | | | | |
Losses charged off | | | — | | | | — | | | | (10 | ) | | | — | | | | — | | | | (242 | ) | | | | |
Recoveries | | | — | | | | — | | | | — | | | | 2 | | | | — | | | | 31 | | | | | |
Balance, end of period | | $110` | | | $ | 361 | | | $ | 116 | | | $ | 1 | | | $ | — | | | $ | 2,500 | | | | | |
Ending balance: individually evaluated for impairment | | $ | 3 | | | $ | — | | | $ | — | | | $ | 1 | | | $ | — | | | $ | 450 | | | | | |
Ending balance: collectively evaluated for impairment | | $ | 107 | | | $ | 361 | | | $ | 116 | | | $ | — | | | $ | — | | | $ | 2,050 | | | | | |
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Loans: | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Ending balance | | $ | 5,803 | | | $ | 23,606 | | | $ | 7,579 | | | $ | 138 | | | $ | — | | | $ | 119,353 | | | | | |
Ending balance: individually evaluated for impairment | | $ | 3 | | | $ | 20 | | | $ | 2 | | | $ | — | | | $ | — | | | $ | 5,425 | | | | | |
Ending balance: collectively evaluated for impairment | | $ | 5,800 | | | $ | 23,586 | | | $ | 7,577 | | | $ | 138 | | | $ | — | | | $ | 113,928 | | | | | |
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| | Three Months Ended September 30, 2012 | | | | | |
Mortgage Loans on Real Estate | | | | |
| | 1-4 Family | | | HELOC and | | | Multi-Family Residential | | | Commercial | | | Farmland | | | Construction | | | | | |
2nd Mortgage | and Land Development | | | | |
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Allowance for loan losses: | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Balance, beginning of period | | $ | 643 | | | $ | 180 | | | $ | 288 | | | $ | 609 | | | $ | 141 | | | $ | 335 | | | | | |
Provision charged to expense | | | 260 | | | | 19 | | | | (264 | ) | | | (29 | ) | | | — | | | | 135 | | | | | |
Losses charged off | | | (191 | ) | | | (20 | ) | | | — | | | | — | | | | — | | | | (117 | ) | | | | |
Recoveries | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | | |
Balance, end of period | | $ | 712 | | | $ | 179 | | | $ | 24 | | | $ | 580 | | | $ | 141 | | | $ | 353 | | | | | |
Ending balance: individually evaluated for impairment | | $ | 87 | | | $ | 45 | | | $ | — | | | $ | 103 | | | $ | — | | | $ | 157 | | | | | |
Ending balance: collectively evaluated for impairment | | $ | 625 | | | $ | 134 | | | $ | 24 | | | $ | 477 | | | $ | 141 | | | $ | 196 | | | | | |
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Loans: | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Ending balance | | $ | 42,703 | | | $ | 9,664 | | | $ | 478 | | | $ | 22,428 | | | $ | 9,978 | | | $ | 2,809 | | | | | |
Ending balance: individually evaluated for impairment | | $ | 2,289 | | | $ | 45 | | | $ | — | | | $ | 1,390 | | | $ | — | | | $ | 852 | | | | | |
Ending balance: collectively evaluated for impairment | | $ | 40,414 | | | $ | 9,619 | | | $ | 478 | | | $ | 21,038 | | | $ | 9,978 | | | $ | 1,957 | | | | | |
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| | Three Months Ended September 30, 2012 (Continued) | | | | | |
| | Commercial and Industrial | | | Agricultural | | | Purchased | | | Other | | | Unallocated | | | Total | | | | | |
Indirect | Consumer | | | | |
Automobile, Net | | | | | |
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Allowance for loan losses: | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Balance, beginning of period | | $ | 124 | | | $ | 285 | | | $ | 118 | | | $ | 2 | | | $ | — | | | $ | 2,725 | | | | | |
Provision charged to expense | | | 37 | | | | 10 | | | | 8 | | | | (2 | ) | | | — | | | | 174 | | | | | |
Losses charged off | | | (16 | ) | | | — | | | | (8 | ) | | | — | | | | — | | | | (352 | ) | | | | |
Recoveries | | | — | | | | — | | | | 2 | | | | 1 | | | | — | | | | 3 | | | | | |
Balance, end of period | | $ | 145 | | | $ | 295 | | | $ | 120 | | | $ | 1 | | | $ | — | | | $ | 2,550 | | | | | |
Ending balance: individually evaluated for impairment | | $ | 7 | | | $ | — | | | $ | 10 | | | $ | — | | | $ | — | | | $ | 409 | | | | | |
Ending balance: collectively evaluated for impairment | | $ | 138 | | | $ | 295 | | | $ | 110 | | | $ | 1 | | | $ | — | | | $ | 2,141 | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Loans: | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Ending balance | | $ | 5,014 | | | $ | 19,092 | | | $ | 7,354 | | | $ | 124 | | | $ | — | | | $ | 119,644 | | | | | |
Ending balance: individually evaluated for impairment | | $ | 7 | | | $ | — | | | $ | 38 | | | $ | — | | | $ | — | | | $ | 4,621 | | | | | |
Ending balance: collectively evaluated for impairment | | $ | 5,007 | | | $ | 19,092 | | | $ | 7,316 | | | $ | 124 | | | $ | — | | | $ | 115,023 | | | | | |
|
| | Nine Months Ended September 30, 2013 | | | | | |
Mortgage Loans on Real Estate | | | | |
| | 1-4 Family | | | HELOC and | | | Multi-Family Residential | | | Commercial | | | Farmland | | | Construction | | | | | |
2nd Mortgage | and Land Development | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Allowance for loan losses: | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Balance, beginning of period | | $ | 668 | | | $ | 333 | | | $ | 3 | | | $ | 530 | | | $ | 176 | | | $ | 275 | | | | | |
Provision charged to expense | | | 76 | | | | 52 | | | | 3 | | | | 203 | | | | 41 | | | | (77 | ) | | | | |
Losses charged off | | | (180 | ) | | | (69 | ) | | | — | | | | — | | | | — | | | | (151 | ) | | | | |
Recoveries | | | 29 | | | | — | | | | — | | | | — | | | | — | | | | — | | | | | |
Balance, end of period | | $ | 593 | | | $ | 316 | | | $ | 6 | | | $ | 733 | | | $ | 217 | | | $ | 47 | | | | | |
Ending balance: individually evaluated for impairment | | $ | 125 | | | $ | 44 | | | $ | — | | | $ | 277 | | | $ | — | | | $ | — | | | | | |
Ending balance: collectively evaluated for impairment | | $ | 468 | | | $ | 272 | | | $ | 6 | | | $ | 456 | | | $ | 217 | | | $ | 47 | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Loans: | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Ending balance | | $ | 39,173 | | | $ | 8,021 | | | $ | 118 | | | $ | 20,103 | | | $ | 14,049 | | | $ | 763 | | | | | |
Ending balance: individually evaluated for impairment | | $ | 2,390 | | | $ | 126 | | | $ | — | | | $ | 2,587 | | | $ | — | | | $ | 297 | | | | | |
Ending balance: collectively evaluated for impairment | | $ | 36,783 | | | $ | 7,895 | | | $ | 118 | | | $ | 17,516 | | | $ | 14,049 | | | $ | 466 | | | | | |
|
| | Nine Months Ended September 30, 2013 (Continued) | | | | | |
| | Commercial and Industrial | | | Agricultural | | | Purchased | | | Other | | | Unallocated | | | Total | | | | | |
Indirect | Consumer | | | | |
Automobile, Net | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Allowance for loan losses: | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Balance, beginning of period | | $ | 151 | | | $ | 301 | | | $ | 112 | | | $ | 1 | | | $ | — | | | $ | 2,550 | | | | | |
Provision charged to expense | | | (41 | ) | | | 60 | | | | 29 | | | | (5 | ) | | | — | | | | 341 | | | | | |
Losses charged off | | | — | | | | — | | | | (27 | ) | | | — | | | | — | | | | (427 | ) | | | | |
Recoveries | | | — | | | | — | | | | 2 | | | | 5 | | | | — | | | | 36 | | | | | |
Balance, end of period | | $ | 110 | | | $ | 361 | | | $ | 116 | | | $ | 1 | | | $ | — | | | $ | 2,500 | | | | | |
Ending balance: individually evaluated for impairment | | $ | 3 | | | $ | — | | | $ | — | | | $ | 1 | | | $ | — | | | $ | 450 | | | | | |
Ending balance: collectively evaluated for impairment | | $ | 107 | | | $ | 361 | | | $ | 116 | | | $ | — | | | $ | — | | | $ | 2,050 | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Loans: | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Ending balance | | $ | 5,803 | | | $ | 23,606 | | | $ | 7,579 | | | $ | 138 | | | $ | — | | | $ | 119,353 | | | | | |
Ending balance: individually evaluated for impairment | | $ | 3 | | | $ | 20 | | | $ | 2 | | | $ | — | | | $ | — | | | $ | 5,425 | | | | | |
Ending balance: collectively evaluated for impairment | | $ | 5,800 | | | $ | 23,586 | | | $ | 7,577 | | | $ | 138 | | | $ | — | | | $ | 113,928 | | | | | |
|
| | Nine Months Ended September 30, 2012 | | | | | |
Mortgage Loans on Real Estate | | | | |
| | 1-4 Family | | | HELOC and | | | Multi-Family Residential | | | Commercial | | | Farmland | | | Construction | | | | | |
2nd Mortgage | and Land Development | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Allowance for loan losses: | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Balance, beginning of period | | $ | 549 | | | $ | 248 | | | $ | 287 | | | $ | 533 | | | $ | 143 | | | $ | 374 | | | | | |
Provision charged to expense | | | 427 | | | | (47 | ) | | | (263 | ) | | | 47 | | | | (2 | ) | | | 151 | | | | | |
Losses charged off | | | (264 | ) | | | (22 | ) | | | — | | | | — | | | | — | | | | (172 | ) | | | | |
Recoveries | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | | |
Balance, end of period | | $ | 712 | | | $ | 179 | | | $ | 24 | | | $ | 580 | | | $ | 141 | | | $ | 353 | | | | | |
Ending balance: individually evaluated for impairment | | $ | 87 | | | $ | 45 | | | $ | — | | | $ | 103 | | | $ | — | | | $ | 157 | | | | | |
Ending balance: collectively evaluated for impairment | | $ | 625 | | | $ | 134 | | | $ | 24 | | | $ | 477 | | | $ | 141 | | | $ | 196 | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Loans: | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Ending balance | | $ | 42,703 | | | $ | 9,664 | | | $ | 478 | | | $ | 22,428 | | | $ | 9,978 | | | $ | 2,809 | | | | | |
Ending balance: individually evaluated for impairment | | $ | 2,289 | | | $ | 45 | | | $ | — | | | $ | 1,390 | | | $ | — | | | $ | 852 | | | | | |
Ending balance: collectively evaluated for impairment | | $ | 40,414 | | | $ | 9,619 | | | $ | 478 | | | $ | 21,038 | | | $ | 9,978 | | | $ | 1,957 | | | | | |
|
| | Nine Months Ended September 30, 2012 (Continued) | | | | | |
| | Commercial and Industrial | | | Agricultural | | | Purchased | | | Other | | | Unallocated | | | Total | | | | | |
Indirect | Consumer | | | | |
Automobile, Net | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Allowance for loan losses: | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Balance, beginning of period | | $ | 125 | | | $ | 215 | | | $ | 95 | | | $ | 6 | | | $ | — | | | $ | 2,575 | | | | | |
Provision charged to expense | | | 36 | | | | 80 | | | | 59 | | | | (6 | ) | | | — | | | | 482 | | | | | |
Losses charged off | | | (16 | ) | | | — | | | | (42 | ) | | | — | | | | — | | | | (516 | ) | | | | |
Recoveries | | | — | | | | — | | | | 8 | | | | 1 | | | | — | | | | 9 | | | | | |
Balance, end of period | | $ | 145 | | | $ | 295 | | | $ | 120 | | | $ | 1 | | | $ | — | | | $ | 2,550 | | | | | |
Ending balance: individually evaluated for impairment | | $ | 7 | | | $ | — | | | $ | 10 | | | $ | — | | | $ | — | | | $ | 409 | | | | | |
Ending balance: collectively evaluated for impairment | | $ | 138 | | | $ | 295 | | | $ | 110 | | | $ | 1 | | | $ | — | | | $ | 2,141 | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Loans: | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Ending balance | | $ | 5,014 | | | $ | 19,092 | | | $ | 7,354 | | | $ | 124 | | | $ | — | | | $ | 119,644 | | | | | |
Ending balance: individually evaluated for impairment | | $ | 7 | | | $ | — | | | $ | 38 | | | $ | — | | | $ | — | | | $ | 4,621 | | | | | |
Ending balance: collectively evaluated for impairment | | $ | 5,007 | | | $ | 19,092 | | | $ | 7,316 | | | $ | 124 | | | $ | — | | | $ | 115,023 | | | | | |
|
| | Year Ended December 31, 2012 | | | | | |
Mortgage Loans on Real Estate | | | | |
| | 1-4 Family | | | HELOC and | | | Multi-Family Residential | | | Commercial | | | Farmland | | | Construction | | | | | |
2nd Mortgage | and Land Development | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Allowance for loan losses: | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Balance, beginning of year | | $ | 549 | | | $ | 248 | | | $ | 287 | | | $ | 533 | | | $ | 143 | | | $ | 374 | | | | | |
Provision charged to expense | | | 484 | | | | 109 | | | | (284 | ) | | | (3 | ) | | | 33 | | | | 73 | | | | | |
Losses charged off | | | (365 | ) | | | (24 | ) | | | — | | | | — | | | | — | | | | (172 | ) | | | | |
Recoveries | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | | |
Balance, end of year | | $ | 668 | | | $ | 333 | | | $ | 3 | | | $ | 530 | | | $ | 176 | | | $ | 275 | | | | | |
Ending balance: individually evaluated for impairment | | $ | 112 | | | $ | 48 | | | $ | — | | | $ | 81 | | | $ | — | | | $ | 176 | | | | | |
Ending balance: collectively evaluated for impairment | | $ | 556 | | | $ | 285 | | | $ | 3 | | | $ | 449 | | | $ | 176 | | | $ | 99 | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Loans: | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Ending balance | | $ | 41,842 | | | $ | 9,431 | | | $ | 51 | | | $ | 19,989 | | | $ | 11,765 | | | $ | 1,837 | | | | | |
Ending balance: individually evaluated for impairment | | $ | 2,484 | | | $ | 166 | | | $ | — | | | $ | 1,482 | | | $ | — | | | $ | 851 | | | | | |
Ending balance: collectively evaluated for impairment | | $ | 39,358 | | | $ | 9,265 | | | $ | 51 | | | $ | 18,507 | | | $ | 11,765 | | | $ | 986 | | | | | |
|
| | Year Ended December 31, 2012 (Continued) | | | | | |
| | Commercial and Industrial | | | Agricultural | | | Purchased | | | Other | | | Unallocated | | | Total | | | | | |
Indirect | Consumer | | | | |
Automobile, Net | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Allowance for loan losses: | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Balance, beginning of year | | $ | 125 | | | $ | 215 | | | $ | 95 | | | $ | 6 | | | $ | — | | | $ | 2,575 | | | | | |
Provision charged to expense | | | 42 | | | | 86 | | | | 66 | | | | (7 | ) | | | — | | | | 599 | | | | | |
Losses charged off | | | (16 | ) | | | — | | | | (59 | ) | | | — | | | | — | | | | (636 | ) | | | | |
Recoveries | | | — | | | | — | | | | 10 | | | | 2 | | | | — | | | | 12 | | | | | |
Balance, end of year | | $ | 151 | | | $ | 301 | | | $ | 112 | | | $ | 1 | | | $ | — | | | $ | 2,550 | | | | | |
Ending balance: individually evaluated for impairment | | $ | 7 | | | $ | — | | | $ | 7 | | | $ | — | | | $ | — | | | $ | 431 | | | | | |
Ending balance: collectively evaluated for impairment | | $ | 144 | | | $ | 301 | | | $ | 105 | | | $ | 1 | | | $ | — | | | $ | 2,119 | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Loans: | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Ending balance | | $ | 5,407 | | | $ | 20,096 | | | $ | 6,987 | | | $ | 117 | | | $ | — | | | $ | 117,522 | | | | | |
Ending balance: individually evaluated for impairment | | $ | 7 | | | $ | — | | | $ | 25 | | | $ | — | | | $ | — | | | $ | 5,015 | | | | | |
Ending balance: collectively evaluated for impairment | | $ | 5,400 | | | $ | 20,096 | | | $ | 6,962 | | | $ | 117 | | | $ | — | | | $ | 112,507 | | | | | |
|
Management’s opinion as to the ultimate collectability of loans is subject to estimates regarding future cash flows from operations and the value of property, real and personal, pledged as collateral. These estimates are affected by changing economic conditions and the economic prospects of borrowers. |
|
Allowance for Loan Losses |
|
Our allowance for loan losses is the estimated amount considered necessary to reflect probable incurred credit losses in the loan portfolio at the balance sheet date. The allowance is established through the provision for loan losses, which is charged against income. In determining the allowance for loan losses, management makes significant estimates and has identified this policy as one of the most critical for the Company. The methodology for determining the allowance for loan losses is considered a critical accounting policy by management due to the high degree of judgment involved, the subjectivity of the assumptions utilized, and the potential for changes in the economic environment that could result in changes to the amount of the recorded allowance for loan losses. |
|
Since a substantial amount of our loan portfolio is collateralized by real estate, appraisals of the underlying value of property securing loans and discounted cash flow valuations of properties are critical in determining the amount of the allowance required for specific loans. Assumptions for appraisals and discounted cash flow valuations are instrumental in determining the value of properties. Overly optimistic assumptions or negative changes to assumptions could significantly impact the valuation of a property securing a loan and the related allowance determined. The assumptions supporting such appraisals and discounted cash flow valuations are carefully reviewed by management to determine that the resulting values reasonably reflect amounts realizable on the related loans. |
|
Management performs a quarterly evaluation of the allowance for loan losses. Consideration is given to a variety of factors in establishing this estimate including, but not limited to, current economic conditions, delinquency statistics, geographic and industry concentrations, the value of the underlying collateral, the financial strength of the borrower, results of internal loan reviews and other relevant factors. This evaluation is inherently subjective as it requires material estimates that may be susceptible to significant revision based on changes in economic and real estate market conditions. |
|
The analysis of the allowance for loan losses has two components: specific and general allowances. Specific allowances are made for loans that are determined to be impaired. Impairment loss is measured by determining the present value of expected future cash flows or, for collateral-dependent loans, the fair value of the collateral adjusted for market conditions and selling expenses. The general allowance is determined by segregating classified loans from the remaining loans, and then categorizing each group by type of loan. Loans within each type exhibit common characteristics including terms, collateral type, and other risk characteristics. The Company also analyzes historical loss experience, delinquency trends, general economic conditions and geographic and industry concentrations. This analysis establishes factors that are applied to the loan groups to determine the amount of the general allowances. |
|
Although the Company’s policy allows for a general valuation allowance on certain smaller-balance, homogenous pools of loans classified as substandard, the Company has historically evaluated every loan classified as substandard, regardless of size for impairment as part of the review for establishing specific allowances. The Company’s policy also allows for general valuation allowance on certain smaller-balance homogenous pools of loans which are loans criticized as special mention or watch. A separate general allowance calculation is made on these loans based on historical measured weakness, and which is no less than twice the amount of the general allowance calculated on the non-classified loans. |
|
There have been no changes to the Company’s accounting policies or methodology from the prior periods. |
|
The Company categorizes loans into risk categories based on relevant information about the ability of borrowers to service their debt such as current financial information, historical payment experience, credit documentation, public information and current economic trends, among other factors. All commercial, agricultural and land development loans are graded at inception of the loan. Subsequently, analyses are performed on an annual basis and grade changes are made as necessary. Interim grade reviews may take place if circumstances of the borrower warrant a more timely review. The Company utilizes an internal asset classification system as a means of reporting problem and potential problem loans. Under the Company’s risk rating system, the Company classifies problem and potential problem loans as “Watch,” “Substandard,” “Doubtful,” and “Loss.” The Company uses the following definitions for risk ratings: |
|
Pass – Loans classified as pass are well protected by the ability of the borrower to pay or by the value of the asset or underlying collateral. |
|
Watch – Loans classified as watch represent loans with the minimum level of acceptable credit risk and servicing requirements and the borrower has the capacity to perform according to the terms and repayment is expected. However, one or more elements of uncertainty exist. |
|
Special Mention – Loans classified as special mention have a potential weakness that deserves management’s close attention. If left uncorrected, these potential weaknesses may result in deterioration of the repayment prospects for the loan or of the Company’s credit position at some future date. |
|
Substandard – Loans classified as substandard are inadequately protected by the current net worth and paying capacity of the obligor or of the collateral pledged, if any. Loans so classified have a well defined weakness or weaknesses that jeopardize the liquidation of the debt. They are characterized by the distinct possibility that the institution will sustain some loss if the deficiencies are not corrected. |
|
Doubtful – Loans classified as doubtful have all the weaknesses inherent in those classified as substandard, with the added characteristic that the weaknesses make collection or liquidation in full, on the basis of currently existing facts, conditions and values, highly questionable and improbable. |
|
Loss – Loans classified as loss are the portion of the loan that is considered uncollectible so that its continuance as an asset is not warranted. The amount of the loss determined will be charged-off. |
|
The following tables present the credit risk profile of the Company’s loan portfolio based on rating category and payment activity as of September 30, 2013 and December 31, 2012, respectively: |
|
| | 30-Sep-13 | | | | | |
Mortgage Loans on Real Estate | | | | |
| | 1-4 Family | | | HELOC and | | | Multi-Family Residential | | | Commercial | | | Farmland | | | Construction | | | | | |
2nd Mortgage | and Land Development | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Pass | | $ | 32,136 | | | $ | 7,273 | | | $ | 118 | | | $ | 14,720 | | | $ | 13,923 | | | $ | 466 | | | | | |
Watch | | | 3,221 | | | | 397 | | | | — | | | | 2,344 | | | | 126 | | | | — | | | | | |
Special Mention | | | 1,426 | | | | 225 | | | | — | | | | 452 | | | | — | | | | — | | | | | |
Substandard | | | 2,390 | | | | 126 | | | | — | | | | 2,587 | | | | — | | | | 297 | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Total | | $ | 39,173 | | | $ | 8,021 | | | $ | 118 | | | $ | 20,103 | | | $ | 14,049 | | | $ | 763 | | | | | |
|
| | September 30, 2013 (Continued) | | | | | | | | | |
| | Commercial and Industrial | | | Agricultural | | | Purchased | | | Other | | | Total | | | | | | | | | |
Indirect | Consumer | | | | | | | | |
Automobile, Net | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Pass | | $ | 5,367 | | | $ | 23,333 | | | $ | 7,577 | | | $ | 1 | | | $ | 104,914 | | | | | | | | | |
Watch | | | 338 | | | | 253 | | | | — | | | | 127 | | | | 6,806 | | | | | | | | | |
Special Mention | | | 95 | | | | — | | | | — | | | | 10 | | | | 2,208 | | | | | | | | | |
Substandard | | | 3 | | | | 20 | | | | 2 | | | | — | | | | 5,425 | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Total | | $ | 5,803 | | | $ | 23,606 | | | $ | 7,579 | | | $ | 138 | | | $ | 119,353 | | | | | | | | | |
|
| | 31-Dec-12 | | | | | |
Mortgage Loans on Real Estate | | | | |
| | 1-4 Family | | | HELOC and | | | Multi-Family Residential | | | Commercial | | | Farmland | | | Construction | | | | | |
2nd Mortgage | and Land Development | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Pass | | $ | 37,027 | | | $ | 9,012 | | | $ | 51 | | | $ | 16,036 | | | $ | 11,765 | | | $ | 986 | | | | | |
Watch | | | 1,460 | | | | 218 | | | | — | | | | 2,386 | | | | — | | | | — | | | | | |
Special Mention | | | 871 | | | | 35 | | | | — | | | | 85 | | | | — | | | | — | | | | | |
Substandard | | | 2,484 | | | | 166 | | | | — | | | | 1,482 | | | | — | | | | 851 | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Total | | $ | 41,842 | | | $ | 9,431 | | | $ | 51 | | | $ | 19,989 | | | $ | 11,765 | | | $ | 1,837 | | | | | |
|
| | December 31, 2012 (Continued) | | | | | | | | | |
| | Commercial and Industrial | | | Agricultural | | | Purchased | | | Other | | | Total | | | | | | | | | |
Indirect | Consumer | | | | | | | | |
Automobile, Net | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Pass | | $ | 3,761 | | | $ | 20,096 | | | $ | 6,962 | | | $ | 117 | | | $ | 105,813 | | | | | | | | | |
Watch | | | 1,526 | | | | — | | | | — | | | | — | | | | 5,590 | | | | | | | | | |
Special Mention | | | 113 | | | | — | | | | — | | | | — | | | | 1,104 | | | | | | | | | |
Substandard | | | 7 | | | | — | | | | 25 | | | | — | | | | 5,015 | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Total | | $ | 5,407 | | | $ | 20,096 | | | $ | 6,987 | | | $ | 117 | | | $ | 117,522 | | | | | | | | | |
|
The accrual of interest on loans is generally discontinued at the time the loan is 90 days past due unless the credit is well-secured and in process of collection. Past due status is based on contractual terms of the loan. In all cases, loans are placed on non-accrual or charged-off at the earlier date if collection of principal and interest is considered doubtful. |
|
All interest accrued but not collected for loans that are placed on non-accrual or charged-off are reversed against interest income. The interest on these loans is accounted for on the cash-basis or cost-recovery method, until qualifying for return to accrual. Loans are returned to accrual status when all principal and interest amounts contractually due are brought current and future payments are reasonably assured. |
|
The following tables present the Company’s loan portfolio aging analysis as of September 30, 2013 and December 31, 2012, respectively: |
|
| | 30-Sep-13 | |
| | 30-59 Days Past Due | | | 60-89 Days | | | Greater Than | | | Total Past | | | Current | | | Total Loans Receivable | | | Total Loans > | |
Past Due | 90 Days | Due | 90 Days & Accruing |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Real estate loans: | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
One-to-four family | | $ | 1,532 | | | $ | 357 | | | $ | 1,708 | | | $ | 3,597 | | | $ | 35,576 | | | $ | 39,173 | | | $ | — | |
Home equity lines of credit and other 2nd mortgages | | | 155 | | | | — | | | | 34 | | | | 189 | | | | 7,832 | | | | 8,021 | | | | — | |
Multi-family | | | — | | | | — | | | | — | | | | — | | | | 118 | | | | 118 | | | | — | |
Commercial | | | — | | | | — | | | | — | | | | — | | | | 20,103 | | | | 20,103 | | | | — | |
Farmland | | | — | | | | — | | | | — | | | | — | | | | 14,049 | | | | 14,049 | | | | — | |
Construction and land development | | | — | | | | — | | | | 297 | | | | 297 | | | | 466 | | | | 763 | | | | — | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Total real estate loans | | | 1,687 | | | | 357 | | | | 2,039 | | | | 4,083 | | | | 78,144 | | | | 82,227 | | | | — | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Commercial and industrial | | | 61 | | | | — | | | | — | | | | 61 | | | | 5,742 | | | | 5,803 | | | | — | |
Agriculture | | | — | | | | — | | | | 20 | | | | 20 | | | | 23,586 | | | | 23,606 | | | | — | |
Consumer loans: | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Purchased indirect automobile | | | — | | | | — | | | | 2 | | | | 2 | | | | 7,577 | | | | 7,579 | | | | — | |
Other | | | — | | | | — | | | | — | | | | — | | | | 138 | | | | 138 | | | | — | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Total consumer loans | | | — | | | | — | | | | — | | | | 2 | | | | 7,715 | | | | 7,717 | | | | — | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Total | | $ | 1,748 | | | $ | 357 | | | $ | 2,061 | | | $ | 4,166 | | | $ | 115,187 | | | $ | 119,353 | | | $ | — | |
|
| | 31-Dec-12 | |
| | 30-59 Days Past Due | | | 60-89 Days | | | Greater Than | | | Total Past | | | Current | | | Total Loans Receivable | | | Total Loans > | |
Past Due | .90 Days | Due | 90 Days & Accruing |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Real estate loans: | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
One-to-four family | | $ | 1,464 | | | $ | 808 | | | | 1,122 | | | $ | 3,394 | | | $ | 38,448 | | | $ | 41,842 | | | $ | — | |
Home equity lines of credit and other 2nd mortgages | | | 51 | | | | 14 | | | | 35 | | | | 100 | | | | 9,331 | | | | 9,431 | | | | — | |
Multi-family | | | — | | | | — | | | | — | | | | — | | | | 51 | | | | 51 | | | | — | |
Commercial | | | — | | | | — | | | | — | | | | — | | | | 19,989 | | | | 19,989 | | | | — | |
Farmland | | | — | | | | — | | | | — | | | | — | | | | 11,765 | | | | 11,765 | | | | — | |
Construction and land development | | | — | | | | — | | | | — | | | | — | | | | 1,837 | | | | 1,837 | | | | — | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Total real estate loans | | | 1,515 | | | | 822 | | | | 1,157 | | | | 3,494 | | | | 81,421 | | | | 84,915 | | | | — | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Commercial and industrial | | | — | | | | — | | | | 7 | | | | 7 | | | | 5,400 | | | | 5,407 | | | | — | |
Agriculture | | | — | | | | — | | | | — | | | | — | | | | 20,096 | | | | 20,096 | | | | — | |
Consumer loans: | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Purchased indirect automobile | | | 25 | | | | — | | | | — | | | | 25 | | | | 6,962 | | | | 6,987 | | | | — | |
Other | | | — | | | | — | | | | — | | | | — | | | | 117 | | | | 117 | | | | — | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Total consumer loans | | | 25 | | | | — | | | | — | | | | 25 | | | | 7,079 | | | | 7,104 | | | | — | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Total | | $ | 1,540 | | | $ | 822 | | | $ | 1,164 | | | $ | 3,526 | | | $ | 113,996 | | | $ | 117,522 | | | $ | — | |
|
At September 30, 2013 and December 31, 2012, the Company held $23,606 and $20,096, respectively, in agricultural production loans and $14,049 and $11,765, respectively, in farmland loans in the Company’s geographic lending area. Generally, those loans are collateralized by assets of the borrower. The loans are expected to be repaid from cash flows or from proceeds of sale of related assets of the borrower. Declines in prices for corn, beans, livestock and farmland could significantly affect the repayment ability for many agricultural and farmland loan customers. |
|
At September 30, 2013 and December 31, 2012, the Company held $20,103 and $19,989 in commercial real estate loans and $763 and $1,837, respectively, in loans collateralized by construction and development real estate primarily in the Company’s geographic lending area. Due to national, state and local economic conditions, values for commercial and development real estate have declined significantly, and the market for these properties is depressed. |
|
Loans contractually delinquent 60-89 days or more decreased $465 from December 31, 2012 to $357 at September 30, 2013, and loans contractually delinquent 90 days or more increased $897 from December 31, 2012 to $2,061 at September 30, 2013, primarily as a result of similar movement in delinquent one-to-four family real estate loans and one commercial land development loan, a troubled debt restructuring that is now greater than 90 days past due. |
|
A loan is considered impaired, in accordance with the impairment accounting guidance (ASC 310-10-35-16), when based on current information and events, it is probable the Company will be unable to collect all amounts due from the borrower in accordance with the contractual terms of the loan. Factors considered by management in determining impairment include payment status, collateral value, and the probability of collecting scheduled principal and interest payments when due. Loans that experience insignificant payment delays and payment shortfalls generally are not classified as impaired. Management determines the significance of payment delays and payment shortfalls on a case-by-case basis, taking into consideration all of the circumstances surrounding the loans and the borrower, including the length of the delay, the reasons for the delay, the borrower’s prior payment record, and the amount of the shortfall in relation to the principal and interest owed. |
|
Impairment is measured on a loan-by-loan basis by either the present value of the expected future cash flows, the loan’s observable market value, or, for collateral-dependent loans, the fair value of the collateral adjusted for market conditions and selling expenses. Significant restructured loans are considered impaired in determining the adequacy of the allowance for loan losses. |
|
The Company actively seeks to reduce its investment in impaired loans. The primary tools to work through impaired loans are settlement with the borrowers or guarantors, foreclosure of the underlying collateral, or restructuring. |
|
The Company will restructure loans when the borrower demonstrates the inability to comply with the terms of the loan, but can demonstrate the ability to meet acceptable restructured terms. Restructurings generally include one or more of the following restructuring options; reduction in the interest rate on the loan, payment extensions, forgiveness of principal, forbearance, or other actions intended to maximize collection. Restructured loans in compliance with modified terms are initially classified as impaired. |
|
The following tables present impaired loans at September 30, 2013, September 30, 2012 and December 31, 2012, respectively: |
|
| | Nine Months Ended September 30, 2013 | | | | | |
| | Recorded | | | Unpaid | | | Specific | | | Average | | | Interest Income Recognized | | | Interest Income Recognized | | | | | |
Balance | Principal | Allowance | Investment in Impaired Loans | Cash Basis | | | | |
| Balance | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Loans without a specific allowance | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Real estate loans: | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
One-to-four family | | $ | 1,301 | | | $ | 1,559 | | | $ | — | | | $ | 1,536 | | | $ | 10 | | | $ | 10 | | | | | |
Home equity lines of credit and other 2nd mortgages | | | 34 | | | | 125 | | | | — | | | | 70 | | | | — | | | | — | | | | | |
Multi-family | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | | |
Commercial | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | | |
Farmland | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | | |
Construction and land development | | | 297 | | | | 451 | | | | — | | | | 149 | | | | 1 | | | | 1 | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Total real estate loans | | | 1,632 | | | | 2,135 | | | | — | | | | 1,755 | | | | 11 | | | | 11 | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Commercial and industrial | | | 20 | | | | 20 | | | | — | | | | 10 | | | | — | | | | — | | | | | |
Agriculture | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | | |
Consumer loans: | | | | | | | | | | | | | | | — | | | | — | | | | — | | | | | |
Purchased indirect automobile | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | | |
Other | | | — | | | | 28 | | | | — | | | | — | | | | — | | | | — | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Total consumer loans | | | — | | | | 28 | | | | — | | | | — | | | | — | | | | — | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Total loans | | $ | 1,652 | | | $ | 2,183 | | | $ | — | | | $ | 1,765 | | | $ | 11 | | | $ | 11 | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Loans with a specific allowance | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Real estate loans: | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
One-to-four family | | $ | 1,089 | | | $ | 1,224 | | | $ | 125 | | | $ | 902 | | | $ | 6 | | | $ | 6 | | | | | |
Home equity lines of credit and other 2nd mortgages | | | 92 | | | | 100 | | | | 44 | | | | 76 | | | | 1 | | | | 1 | | | | | |
Multi-family | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | | |
Commercial | | | 2,587 | | | | 3,048 | | | | 277 | | | | 2,035 | | | | 14 | | | | 14 | | | | | |
Farmland | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | | |
Construction and land development | | | — | | | | — | | | | — | | | | 426 | | | | 3 | | | | 3 | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Total real estate loans | | | 3,768 | | | | 4,372 | | | | 446 | | | | 3,439 | | | | 24 | | | | 24 | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Commercial and industrial | | | 3 | | | | 4 | | | | 3 | | | | 5 | | | | — | | | | — | | | | | |
Agriculture | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | | |
Consumer loans: | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Purchased indirect automobile | | | — | | | | — | | | | — | | | | 13 | | | | — | | | | — | | | | | |
Other | | | 2 | | | | 2 | | | | 1 | | | | 1 | | | | — | | | | — | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Total consumer loans | | | 2 | | | | 2 | | | | 1 | | | | 14 | | | | — | | | | — | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Total loans | | | 3,773 | | | | 4,378 | | | | 450 | | | | 3,458 | | | | 24 | | | | 24 | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Total | | $ | 5,425 | | | $ | 6,561 | | | $ | 450 | | | $ | 5,223 | | | $ | 35 | | | $ | 35 | | | | | |
|
| | Nine Months Ended September 30, 2012 | | | | | |
| | Recorded | | | Unpaid | | | Specific | | | Average | | | Interest Income Recognized | | | Interest Income Recognized | | | | | |
Balance | Principal | Allowance | Investment in Impaired Loans | Cash Basis | | | | |
| Balance | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Loans without a specific allowance | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Real estate loans: | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
One-to-four family | | $ | 1,143 | | | $ | 1,355 | | | $ | — | | | $ | 1,126 | | | $ | 15 | | | $ | 15 | | | | | |
Home equity lines of credit and other 2nd mortgages | | | — | | | | 18 | | | | — | | | | 56 | | | | 1 | | | | 1 | | | | | |
Multi-family | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | | |
Commercial | | | — | | | | — | | | | — | | | | 695 | | | | 9 | | | | 9 | | | | | |
Farmland | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | | |
Construction and land development | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Total real estate loans | | | 1,143 | | | | 1,373 | | | | — | | | | 1,877 | | | | 25 | | | | 25 | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Commercial and industrial | | | — | | | | 16 | | | | — | | | | — | | | | — | | | | — | | | | | |
Agriculture | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | | |
Consumer loans: | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Purchased indirect automobile | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | | |
Other | | | — | | | | 24 | | | | — | | | | — | | | | — | | | | — | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Total consumer loans | | | — | | | | 24 | | | | — | | | | — | | | | — | | | | — | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Total loans | | $ | 1,143 | | | $ | 1,413 | | | $ | — | | | $ | 1,877 | | | $ | 25 | | | $ | 25 | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Loans with a specific allowance | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Real estate loans: | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
One-to-four family | | $ | 1,146 | | | $ | 1,231 | | | $ | 87 | | | $ | 1,906 | | | $ | 25 | | | $ | 25 | | | | | |
Home equity lines of credit and other 2nd mortgages | | | 45 | | | | 45 | | | | 45 | | | | 101 | | | | 1 | | | | 1 | | | | | |
Multi-family | | | — | | | | — | | | | — | | | | 459 | | | | 6 | | | | 6 | | | | | |
Commercial | | | 1,390 | | | | 1,390 | | | | 103 | | | | 695 | | | | 9 | | | | 9 | | | | | |
Farmland | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | | |
Construction and land development | | | 852 | | | | 1,104 | | | | 157 | | | | 939 | | | | 13 | | | | 13 | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Total real estate loans | | | 3,433 | | | | 3,770 | | | | 392 | | | | 4,100 | | | | 54 | | | | 54 | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Commercial and industrial | | | 7 | | | | 7 | | | | 7 | | | | 28 | | | | 1 | | | | 1 | | | | | |
Agriculture | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | | |
Consumer loans: | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Purchased indirect automobile | | | 38 | | | | 38 | | | | 10 | | | | 24 | | | | — | | | | — | | | | | |
Other | | | — | | | | — | | | | — | | | | 2 | | | | — | | | | — | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Total consumer loans | | | 38 | | | | 38 | | | | 10 | | | | 26 | | | | — | | | | — | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Total loans | | | 3,478 | | | | 3,815 | | | | 17 | | | | 4,154 | | | | 1 | | | | 1 | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Total | | $ | 4,621 | | | $ | 5,228 | | | $ | 409 | | | $ | 6,031 | | | $ | 80 | | | $ | 80 | | | | | |
|
| | Three Months Ended September 30, 2013 | | | Three Months Ended September 30, 2012 | | | | | |
| | Average | | | Interest Income Recognized | | | Interest Income Recognized | | | Average Investment in Impaired Loans | | | Interest Income Recognized | | | Interest Income Recognized | | | | | |
Investment in Impaired Loans | Cash Basis | Cash Basis | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Loans without a specific allowance | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Real estate loans: | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
One-to-four family | | $ | 1,338 | | | $ | 3 | | | $ | 3 | | | $ | 1,043 | | | $ | 6 | | | $ | 6 | | | | | |
Home equity lines of credit and other 2nd mortgages | | | 34 | | | | — | | | | — | | | | 54 | | | | 1 | | | | 1 | | | | | |
Multi-family | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | | |
Commercial | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | | |
Farmland | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | | |
Construction and land development | | | 149 | | | | — | | | | — | | | | — | | | | — | | | | — | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Total real estate loans | | | 1,521 | | | | 3 | | | | 3 | | | | 1,097 | | | | 7 | | | | 7 | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Commercial and industrial | | | 10 | | | | — | | | | — | | | | 25 | | | | — | | | | — | | | | | |
Agriculture | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | | |
Consumer loans: | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Purchased indirect automobile | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | | |
Other | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Total consumer loans | | | — | | | | 3 | | | | 3 | | | | — | | | | — | | | | — | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Total loans | | $ | 1,531 | | | $ | 3 | | | $ | 3 | | | $ | 1,122 | | | $ | 7 | | | $ | 7 | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Loans with a specific allowance | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Real estate loans: | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
One-to-four family | | $ | 856 | | | $ | 2 | | | $ | 2 | | | $ | 1,330 | | | $ | 7 | | | $ | 7 | | | | | |
Home equity lines of credit and other 2nd mortgages | | | 89 | | | | — | | | | — | | | | 52 | | | | 1 | | | | 1 | | | | | |
Multi-family | | | — | | | | — | | | | — | | | | 453 | | | | 2 | | | | 2 | | | | | |
Commercial | | | 2,609 | | | | 6 | | | | 6 | | | | 1,390 | | | | 7 | | | | 7 | | | | | |
Farmland | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | | |
Construction and land development | | | 194 | | | | 1 | | | | 1 | | | | 911 | | | | 5 | | | | 5 | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Total real estate loans | | | 3,748 | | | | 9 | | | | 9 | | | | 4,136 | | | | 22 | | | | 22 | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Commercial and industrial | | | 4 | | | | — | | | | — | | | | 4 | | | | — | | | | — | | | | | |
Agriculture | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | | |
Consumer loans: | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Purchased indirect automobile | | | 9 | | | | — | | | | — | | | | 27 | | | | — | | | | — | | | | | |
Other | | | 1 | | | | — | | | | — | | | | — | | | | — | | | | — | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Total consumer loans | | | 10 | | | | — | | | | — | | | | 27 | | | | — | | | | — | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Total loans | | | 3,762 | | | | 9 | | | | 9 | | | | 4,167 | | | | 22 | | | | 22 | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Total | | $ | 5,293 | | | $ | 12 | | | $ | 12 | | | $ | 5,289 | | | $ | 29 | | | $ | 29 | | | | | |
|
| | 31-Dec-12 | | | | | |
| | Recorded Balance | | | Unpaid Principal Balance | | | Specific Allowance | | | Average | | | Interest Income Recognized | | | Interest Income Recognized Cash Basis | | | | | |
Investment in Impaired Loans | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Loans without a specific allowance | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Real estate loans: | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
One-to-four family | | $ | 1,770 | | | $ | 2,130 | | | $ | — | | | $ | 1,439 | | | $ | 24 | | | $ | 24 | | | | | |
Home equity lines of credit and other 2nd mortgages | | | 106 | | | | 127 | | | | — | | | | 109 | | | | 2 | | | | 2 | | | | | |
Multi-family | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | | |
Commercial | | | — | | | | — | | | | — | | | | 695 | | | | 11 | | | | 11 | | | | | |
Farmland | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | | |
Construction and land development | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Total real estate loans | | | 1,876 | | | | 2,257 | | | | — | | | | 2,243 | | | | 37 | | | | 37 | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Commercial and industrial | | | — | | | | 17 | | | | — | | | | — | | | | — | | | | — | | | | | |
Agriculture | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | | |
Consumer loans: | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Purchased indirect automobile | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | | |
Other | | | — | | | | 23 | | | | — | | | | — | | | | — | | | | — | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Total consumer loans | | | — | | | | 23 | | | | — | | | | — | | | | — | | | | — | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Total | | $ | 1,876 | | | $ | 2,297 | | | $ | — | | | $ | 2,243 | | | $ | 37 | | | $ | 37 | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Loans with a specific allowance | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Real estate loans: | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
One-to-four family | | $ | 714 | | | $ | 722 | | | $ | 112 | | | $ | 1,690 | | | $ | 28 | | | $ | 28 | | | | | |
Home equity lines of credit and other 2nd mortgages | | | 60 | | | | 60 | | | | 48 | | | | 108 | | | | 2 | | | | 2 | | | | | |
Multi-family | | | — | | | | — | | | | — | | | | 459 | | | | 8 | | | | 8 | | | | | |
Commercial | | | 1,482 | | | | 1,482 | | | | 81 | | | | 741 | | | | 12 | | | | 12 | | | | | |
Farmland | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | | |
Construction and land development | | | 851 | | | | 1,103 | | | | 176 | | | | 939 | | | | 15 | | | | 15 | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Total real estate loans | | | 3,107 | | | | 3,367 | | | | 417 | | | | 3,937 | | | | 65 | | | | 65 | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Commercial and industrial | | | 7 | | | | 7 | | | | 7 | | | | 29 | | | | 1 | | | | 1 | | | | | |
Agriculture | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | | |
Consumer loans: | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Purchased indirect automobile | | | 25 | | | | 25 | | | | 7 | | | | 17 | | | | — | | | | — | | | | | |
Other | | | — | | | | — | | | | — | | | | 2 | | | | — | | | | — | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Total consumer loans | | | 25 | | | | 25 | | | | 7 | | | | 19 | | | | — | | | | — | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Total loans | | | 3,139 | | | | 3,399 | | | | 431 | | | | 3,985 | | | | 66 | | | | 66 | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Total | | $ | 5,015 | | | $ | 5,696 | | | $ | 431 | | | $ | 6,228 | | | $ | 103 | | | $ | 103 | | | | | |
|
Interest income recognized on impaired loans includes interest accrued and collected on the outstanding balances of accruing impaired loans as well as interest cash collections on non-accruing impaired loans for which the ultimate collectability of principal is not uncertain. |
|
Included in certain loan categories in the impaired loans are troubled debt restructurings (“TDR”), where economic concessions have been granted to borrowers who have experienced financial difficulties that were classified as impaired. These concessions typically result from our loss mitigation activities and could include reductions in the interest rate, payment extensions, forgiveness of principal, forbearance or other actions. TDRs are considered impaired at the time of restructuring and typically are returned to accrual status after considering the borrower’s sustained repayment performance for a reasonable period of at least twelve months. |
|
When loans and leases are modified into a TDR, the Company evaluates any possible impairment similar to other impaired loans based on the present value of expected future cash flows, discounted at the contractual interest rate of the original loan or lease agreement, or based on the current fair value of the collateral, less selling costs for collateral dependent loans. If the Company determines that the value of the modified loan is less than the recorded investment in the loan (net of previous charge-offs, deferred loan fees or costs and unamortized premium or discount), impairment is recognized through an allowance estimate or a charge-off to the allowance. In periods subsequent to modification, the Company evaluates all TDRs, including those that have payment defaults, for possible impairment and recognizes impairment through the allowance. |
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Given the current adverse economic environment and negative outlook in the residential real estate market, the Company includes in its methodology for the valuation of loans in its real estate portfolio a methodology that applies downward “qualitative” adjustments to the real estate appraised values for residential loans that are deemed impaired. We believe that these qualitative appraisal adjustments more accurately reflect real estate values in light of the sales experience and economic conditions that we have recently observed. |
|
The following table presents the recorded balance of troubled debt restructurings as of September 30, 2013 and December 31, 2012: |
|
| | September 30, | | | December 31, | | | | | | | | | | | | | | | | | | | | | |
2013 | 2012 | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Real estate loans: | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
One-to-four family | | $ | 1,937 | | | $ | 1,814 | | | | | | | | | | | | | | | | | | | | | |
Home equity lines of credit and other 2nd mortgages | | | — | | | | 6 | | | | | | | | | | | | | | | | | | | | | |
Multi-family | | | — | | | | — | | | | | | | | | | | | | | | | | | | | | |
Commercial | | | — | | | | 1,482 | | | | | | | | | | | | | | | | | | | | | |
Farmland | | | — | | | | — | | | | | | | | | | | | | | | | | | | | | |
Construction and land development | | | 297 | | | | 851 | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Total real estate loans | | | 2,234 | | | | 4,153 | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Commercial and industrial | | | — | | | | — | | | | | | | | | | | | | | | | | | | | | |
Agriculture | | | — | | | | — | | | | | | | | | | | | | | | | | | | | | |
Consumer loans: | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Purchased indirect automobile | | | — | | | | — | | | | | | | | | | | | | | | | | | | | | |
Other | | | — | | | | — | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Total consumer loans | | | — | | | | — | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Total | | $ | 2,234 | | | $ | 4,153 | | | | | | | | | | | | | | | | | | | | | |
|
The following table represents loans modified as troubled debt restructures during the three and nine month periods ended September 30, 2013 and 2012: |
|
| | Three Months Ended | | | Three Months Ended | | | | | | | | | | | | | |
30-Sep-13 | 30-Sep-12 | | | | | | | | | | | | |
| | Number of | | | Recorded | | | Number of | | | Recorded | | | | | | | | | | | | | |
Modifications | Investment | Modifications | Investment | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Real estate loans: | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
One-to-four family | | | — | | | $ | — | | | | — | | | $ | — | | | | | | | | | | | | | |
Home equity lines of credit and other 2nd mortgages | | | — | | | | — | | | | — | | | | — | | | | | | | | | | | | | |
Multi-family | | | — | | | | — | | | | — | | | | — | | | | | | | | | | | | | |
Commercial | | | — | | | | — | | | | — | | | | — | | | | | | | | | | | | | |
Farmland | | | — | | | | — | | | | — | | | | — | | | | | | | | | | | | | |
Construction and land development | | | — | | | | — | | | | — | | | | — | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Total real estate loans | | | — | | | | — | | | | — | | | | — | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Commercial and industrial | | | — | | | | — | | | | — | | | | — | | | | | | | | | | | | | |
Agriculture | | | — | | | | — | | | | — | | | | — | | | | | | | | | | | | | |
Consumer loans: | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Purchased indirect automobile | | | — | | | | — | | | | — | | | | — | | | | | | | | | | | | | |
Other | | | — | | | | — | | | | — | | | | — | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Total consumer loans | | | — | | | | — | | | | — | | | | — | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Total | | | — | | | $ | — | | | | — | | | $ | — | | | | | | | | | | | | | |
|
| | Nine Months Ended | | | Nine Months Ended | | | | | | | | | | | | | |
30-Sep-13 | 30-Sep-12 | | | | | | | | | | | | |
| | Number of | | | Recorded | | | Number of | | | Recorded | | | | | | | | | | | | | |
Modifications | Investment | Modifications | Investment | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Real estate loans: | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
One-to-four family | | | 1 | | | $ | 245 | | | | 1 | | | $ | 65 | | | | | | | | | | | | | |
Home equity lines of credit and other 2nd mortgages | | | — | | | | — | | | | — | | | | — | | | | | | | | | | | | | |
Multi-family | | | — | | | | — | | | | — | | | | — | | | | | | | | | | | | | |
Commercial | | | — | | | | — | | | | 1 | | | | 1,390 | | | | | | | | | | | | | |
Farmland | | | — | | | | — | | | | — | | | | — | | | | | | | | | | | | | |
Construction and land development | | | — | | | | — | | | | — | | | | — | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Total real estate loans | | | 1 | | | | 245 | | | | 2 | | | | 1,455 | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Commercial and industrial | | | — | | | | — | | | | — | | | | — | | | | | | | | | | | | | |
Agriculture | | | — | | | | — | | | | — | | | | — | | | | | | | | | | | | | |
Consumer loans: | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Purchased indirect automobile | | | — | | | | — | | | | — | | | | — | | | | | | | | | | | | | |
Other | | | — | | | | — | | | | — | | | | — | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Total consumer loans | | | — | | | | — | | | | — | | | | — | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Total | | | 1 | | | $ | 245 | | | | 2 | | | $ | 1,455 | | | | | | | | | | | | | |
|
During the nine month period ended September 30, 2013, the Company modified one residential real estate loan, with a recorded investment of $245 prior to modification, which was deemed a TDR. The modification involved both an interest rate and maturity concession, which resulted in an impairment loss of $16 based upon the present value of expected future cash flows. |
|
During the nine month period ended September 30, 2012, the Company modified one residential real estate loan, with a recorded investment of $65 prior to modification, which was deemed a TDR. The modification involved both an interest rate and maturity concession, which resulted in an impairment loss of $1 based upon the present value of the expected future cash flows. During the nine months ended September 30, 2012, the Company modified one commercial real estate loan totaling $1,390 involving a maturity concession only, which resulted in no impairment loss and specific allowances of $103 based upon the fair value of the collateral. |
|
As of September 30, 2013 and December 31, 2012, the Company had one loan and no loans, respectively, in default that had been modified within the previous 12 months as TDR. As of September 30, 2013, there were three TDRs secured by one-to-four family real estate totaling $589 and one TDR secured by commercial land for development of $297, all of which were in default. |
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The following table presents the Company’s nonaccrual loans at September 30, 2013 and December 31, 2012. Nonaccrual loans include troubled debt restructurings of $1,125 and $3,219 at September 30, 2013 and December 31, 2012, respectively. |
|
| | September 30, | | | December 31, | | | | | | | | | | | | | | | | | | | | | |
2013 | 2012 | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Mortgages on real estate: | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
One-to-four family | | $ | 2,290 | | | $ | 2,484 | | | | | | | | | | | | | | | | | | | | | |
Home equity lines of credit and other 2nd mortgages | | | 126 | | | | 166 | | | | | | | | | | | | | | | | | | | | | |
Multi-family residential | | | — | | | | — | | | | | | | | | | | | | | | | | | | | | |
Commercial | | | 2,587 | | | | 1,482 | | | | | | | | | | | | | | | | | | | | | |
Construction and land development | | | 297 | | | | 851 | | | | | | | | | | | | | | | | | | | | | |
Commercial and industrial | | | 3 | | | | 7 | | | | | | | | | | | | | | | | | | | | | |
Agricultural | | | 20 | | | | — | | | | | | | | | | | | | | | | | | | | | |
Consumer Loans: | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Purchased indirect automobile | | | 2 | | | | — | | | | | | | | | | | | | | | | | | | | | |
Other consumer | | | — | | | | — | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Total | | $ | 5,325 | | | $ | 4,990 | | | | | | | | | | | | | | | | | | | | | |
|