The consolidated financial statements and
related footnotes of the Company are presented following.
Notes to Consolidated Financial Statements
Years Ended December 31, 2020 and
2019
Note 1. Summary
of Significant Accounting Policies
The accounting and reporting policies of
Village Bank and Trust Financial Corp. and subsidiary (the “Company”) conform to accounting principles generally accepted
in the United States of America (“GAAP”) and to general practice within the banking industry. The following is a description
of the more significant of those policies:
Business
The Company is the holding company of Village
Bank (the “Bank”). The Bank opened to the public on December 13, 1999 as a traditional community bank offering
deposit and loan services to individuals and businesses in the Richmond, Virginia metropolitan area. In 2017, the Bank entered
the Williamsburg, Virginia market by opening a full service branch. Village Bank Mortgage Corporation (the “Mortgage Company”)
is a full service mortgage banking company wholly-owned by the Bank.
The Bank is subject to regulations of certain
federal and state agencies and undergoes periodic examinations by those regulatory authorities. As a consequence of the extensive
regulation of commercial banking activities, the Bank’s business is susceptible to being affected by state and federal legislation
and regulations.
The majority of the Company’s real
estate loans are collateralized by properties in the Richmond, Virginia metropolitan area. Accordingly, the ultimate collectability
of those loans collateralized by real estate is particularly susceptible to changes in market conditions in the Richmond area.
Basis of presentation and consolidation
The consolidated financial statements include
the accounts of the Company, the Bank and the Mortgage Company. All material intercompany balances and transactions have been eliminated
in consolidation. Certain reclassifications have been made to the prior year financial statements to conform to current year presentation.
The results of the reclassifications are not considered material.
Use of estimates
The preparation of the consolidated financial
statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets
and liabilities and disclosure of contingent assets and liabilities as of the balance sheets dates and revenues and expenses during
the reporting period. Actual results could differ significantly from those estimates. Material estimates that are particularly
susceptible to significant change include the determination of the allowance for loan losses and its related provision, including
impaired loans, the valuation of deferred tax assets, and the estimate of the fair value of assets held for sale.
Securities
At the time of purchase, debt securities
are classified into the following categories: held to maturity, available for sale or trading. Debt securities that the Company
has both the positive intent and ability to hold to maturity are classified as held to maturity. Held to maturity securities are
stated at amortized cost adjusted for amortization of premiums and accretion of discounts on purchase using a method that approximates
the effective interest method. Investments classified as trading or available for sale are stated at fair value. Changes in fair
value of trading investments are included in current earnings while changes in fair value of available for sale investments are
excluded from current earnings and reported, net of taxes, as a separate component of other comprehensive income. Presently, the
Company does not maintain a portfolio of trading securities or held to maturity.
The fair value of investment securities
available for sale is estimated based on quoted prices for similar assets determined by bid quotations received from independent
pricing services. Declines in the fair value of securities below their amortized cost that are other than temporary are reflected
in earnings or other comprehensive income, as appropriate. For those debt securities whose fair value is less than their amortized
cost basis, we consider our intent to sell the security, whether it is more likely than not that we will be required to sell the
security before recovery and if we do not expect to recover the entire amortized cost basis of the security. In analyzing an issuer’s
financial condition, we may consider whether the securities are issued by the federal government or its agencies, whether downgrades
by bond rating agencies have occurred and the results of reviews of the issuer’s financial condition.
Restricted
stock, at cost. The Company is required to maintain an investment in the capital stock of certain correspondent banks.
The Company’s investment in these securities is recorded at cost.
Interest income is recognized when earned.
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.
Mortgage Banking and Derivatives
Loans
held for sale. The Company, through the Bank’s mortgage banking subsidiary, the Mortgage Company, originates residential
mortgage loans for sale in the secondary market. Residential mortgage loans held for sale are sold to the permanent investor with
the mortgage servicing rights released. During the first quarter of 2020, the Company elected to begin using fair value accounting
for its entire portfolio of loans held for sale (“LHFS”) in accordance with Accounting Standards Codification (“ASC”)
820 - Fair Value Measurement and Disclosures. Fair value of the Company’s LHFS is based on observable market prices for the
identical instruments traded in the secondary mortgage loan markets in which the Company conducts business and totaled $34.4 million
as of December 31, 2020, of which $32.9 million is related to unpaid principal. The Company’s portfolio of LHFS is classified
as Level 2. These loans were previously carried as of December 31, 2019 at the lower of cost or estimated fair value on an
aggregate basis as determined by outstanding commitments from investors and totaled $12.7 million.
Interest
Rate Lock Commitments and Forward Sales Commitments. The Company, through the Mortgage Company, enters into commitments
to originate residential mortgage loans in which the interest rate on the loan is determined prior to funding, termed interest
rate lock commitments (“IRLCs”). Such rate lock commitments on mortgage loans to be sold in the secondary market are
considered to be derivatives. Upon entering into a commitment to originate a loan, the Company protects itself from changes in
interest rates during the period prior to sale by requiring a firm purchase agreement from a permanent investor before a loan can
be closed (forward sales commitment). The Company locks in the loan and rate with an investor and commits to deliver the loan if
settlement occurs on a best efforts basis, thus limiting interest rate risk. Certain additional risks exist if the investor fails
to meet its purchase obligation; however, based on historical performance and the size and nature of the investors the Company
does not expect them to fail to meet their obligation. The Company determines the fair value of IRLCs based on the price
of the underlying loans obtained from an investor for loans that will be delivered on a best efforts basis while taking into consideration
the probability that the rate lock commitments will close. The fair value of these derivative instruments is reported in “Other
Assets” in the Consolidated Balance Sheet at December 31, 2020, and totaled $1.6 million, with a notional amount of
$38.9 million and total positions of 150. The fair value of IRLCs was considered immaterial at December 31, 2019. Changes
in fair value are recorded as a component of mortgage banking income, net in the Consolidated Income Statement for the period ended
December 31, 2020. The Company’s IRLCs are classified as Level 2. At December 31, 2020 and December 31, 2019,
each IRLC and all LHFS were subject to a forward sales commitment on a best efforts basis.
During the first quarter of 2020, the Company
elected to begin using fair value accounting for its forward sales commitments related to IRLCs and LHFS under ASC 825-10-15-4(b).
The fair value of forward sales commitments is reported in “Other Liabilities” in the Consolidated Balance Sheet at
December 31, 2020, and totaled $3.1 million, with a notional amount of $71.7 million and total positions of 289. The fair
value of the forward sales commitments was considered immaterial at December 31, 2019.
Transfers of financial assets
Transfers of financial assets are accounted
for as sales when control over the assets has been surrendered. Control over transferred assets is deemed to be surrendered when:
(1) the assets have been isolated from the Bank and put presumptively beyond the reach of the transferor and its creditors,
even in bankruptcy or other receivership, (2) the transferee obtains the right (free of conditions that constrain it from
taking advantage of that right) to pledge or exchange the transferred assets, and (3) the Bank does not maintain effective
control over the transferred assets through an agreement to repurchase them before their maturity or the ability to unilaterally
cause the holder to return specific assets. Our transfers of financial assets are limited to commercial loan participations sold,
which were insignificant for 2020 and 2019, and the sale of residential mortgage loans in the secondary market; the extent of which
are disclosed in the Consolidated Statements of Cash Flows.
Loans
Loans are stated at the principal amount
outstanding, net of unearned income. Loan origination fees and certain direct loan origination costs are deferred and amortized
to interest income over the life of the loan as an adjustment to the loan’s yield over the term of the loan.
A loan’s past due status is based
on the contractual due date of the most delinquent payment dates. Interest is accrued on outstanding principal balances, unless
the Company considers collection to be doubtful. Commercial and unsecured consumer loans are designated as nonaccrual when payment
is delinquent 90 days or at the point which the Company considers collection doubtful, if earlier. Mortgage loans and most other
types of consumer loans past due 90 days or more may remain on accrual status if management determines that such amounts are collectible.
When loans are placed in nonaccrual status, previously accrued and unpaid interest is reversed against interest income in the current
period and interest is subsequently recognized only to the extent cash is received as long as the remaining recorded investment
in the loan is deemed fully collectible. Loans may be placed back on accrual status when, in the opinion of management, the circumstances
warrant such action such as a history of timely payments subsequent to being placed on nonaccrual status, additional collateral
is obtained or the borrowers cash flows improve.
Standby letters of credit are written conditional
commitments issued by the Bank to guarantee the performance of a customer to a third party. The credit risk involved in issuing
letters of credit is essentially the same as that involved in extending loans to customers. The total contractual amount of standby
letters of credit, whose contract amounts represent credit risk, was approximately $4,934,000 at December 31, 2020 and approximately
$6,732,000 at December 31, 2019.
Below is a summary of the current loan
segments:
Construction
and land development loans consist primarily of loans for the purchase or refinance of unimproved lots or raw land.
Additionally, the Company finances the construction of real estate projects typically where the permanent mortgage will remain
with the Company. Specific underwriting guidelines are delineated in the Bank’s loan policies. Construction and land development
loans carry risks that the project will not be finished according to schedule, the project will not be finished according to budget
and the value of the collateral may, at any point in time, be less than the principal amount of the loan. Construction loans also
bear the risk that the general contractor, who may or may not be a loan customer, may be unable to finish the construction project
as planned because of financial pressure unrelated to the project.
Commercial
real estate loans are subject to underwriting standards and processes similar to commercial and industrial loans, in
addition to those specific to real estate loans. These loans are viewed primarily as cash flow loans and secondarily as loans secured
by real estate. Commercial real estate lending typically involves higher loan principal amounts, and the repayment of these loans
is generally largely dependent on the successful operation of the property securing the loan or the business conducted on the property
securing the loan. Commercial real estate loans may be more adversely affected by conditions in the real estate markets or in the
general economy. Management monitors and evaluates commercial real estate loans based on cash flows, collateral, geography and
risk grade criteria. Commercial real estate loans carry risks associated with the successful operation of a business or a real
estate project, in addition to other risks associated with the ownership of real estate, because the repayment of these loans may
be dependent upon the profitability and cash flows of the business or project.
Consumer
real estate loans include consumer purpose 1-to-4 family residential properties and home equity loans. Consumer purpose
loans have underwriting standards that are heavily influenced by statutory requirements, which include, but are not limited to,
documentation requirements, limits on maximum loan-to-value percentages, and collection remedies. Loans to finance 1-4 family investment
properties are primarily dependent upon rental income generated from the property and secondarily supported by the borrower’s
personal income. The Company typically originates residential mortgages through our mortgage company and these loans are sold to
secondary mortgage market correspondents. Consumer real estate loans carry risks associated with the continued credit-worthiness
of the borrower and changes in the value of the collateral.
Commercial
and industrial loans are underwritten after evaluating and understanding the borrower’s ability to operate profitably
and prudently expand its business. Management examines current and projected cash flows to determine the ability of borrowers to
repay their obligations as agreed. Commercial and industrial loans are primarily made based on the identified cash flows of the
borrower and secondarily on the underlying collateral provided by the borrower. The cash flows of borrowers, however, may not be
as expected, and the collateral securing these loans may fluctuate in value. Most commercial and industrial loans are secured by
the assets being financed or other business assets such as accounts receivable, inventory or marketable securities and may incorporate
personal guarantees; however, some short-term loans may be made on an unsecured basis. In the case of loans secured by accounts
receivable, the availability of funds for the repayment of these loans may be substantially dependent on the ability of the borrower
to collect amounts due from its customers. Government guaranteed balances represent Small Business Administration (“SBA”)
loans originated by the Bank according to SBA guidelines.
Consumer
and other loans are generally small loans spread across many borrowers and are underwritten after determining the ability
of the consumer borrower to repay their obligations as agreed. The underwriting standards are influenced by credit history, ability
to repay, and loan-to-value. Consumer loans may be secured or unsecured and are comprised of revolving lines, installment loans
and other consumer loans. Consumer and other loans carry risks associated with the continued credit-worthiness of the borrower
and the value of the collateral, or lack thereof. Consumer loans are more likely than real estate loans to be immediately adversely
affected by job loss, divorce, illness or personal bankruptcy.
Guaranteed
student loans The Bank purchases Federal Rehabilitated Student Loan portfolios when approved by the Board of Directors.
These loans are guaranteed by the U.S. Department of Education (“DOE”) which covers approximately 98% of the principal
and interest. These loans are serviced by a third party servicer that specializes in handling these types of loans.
We also purchase the guaranteed portion
of United State Department of Agriculture Loans (“USDA”) which are guaranteed by the USDA for 100% of the principal
and interest. The originating institution holds the unguaranteed portion of the loan and services the loan. These loans are typically
purchased at a premium. In the event of a loan default or early prepayment the Bank may need to write off any unamortized premium.
These loans are included in the commercial and industrial loan segment.
Allowance for loan losses
The allowance for loan losses is established
as losses are estimated to have occurred through a provision for loan losses charged to earnings. Loan losses are charged against
the allowance when management believes the uncollectibility of a loan balance is probable. Subsequent recoveries, if any, are credited
to the allowance.
The allowance represents an amount that,
in management’s judgment, will be adequate to absorb probable losses inherent in the loan portfolio. Management’s judgment
in determining the adequacy of the allowance is based on evaluations of the collectability of loans while taking into consideration
such factors as changes in the nature and volume of the loan portfolio, current economic conditions which may affect a borrower’s
ability to repay, overall portfolio quality, and review of specific potential losses. This evaluation is inherently subjective,
as it requires estimates that are susceptible to significant revision as more information becomes available.
The allowance consists of general and specific
components. The general component covers non-classified loans and is based on historical loss experience and risk characteristics
(i.e. trends in delinquencies and other nonperforming loans, changes in economic conditions on both a local and national level,
and changes in the categories of loans comprising the loan portfolio) adjusted for qualitative factors. The specific component
relates to loans that we have concluded, based on the value of collateral, guarantees and any other pertinent factors, have known
losses. For such loans that are also classified as impaired, an allowance is established when the discounted cash flows (or collateral
value or observable market price) of the impaired loan is lower than the carrying value of that loan. An unallocated component
is maintained to cover uncertainties that could affect management’s estimate of probable losses. The unallocated component
of the allowance reflects the margin of imprecision inherent in the underlying assumptions used in the methodologies for estimating
specific and general losses in the portfolio.
A loan is considered impaired when, based
on current information and events, it is probable that the Company will be unable to collect the scheduled payments of principal
or interest when due according to the contractual terms of the loan agreement. Factors considered by management in determining
impairment include payment status, collateral value, and the probability of collecting scheduled principal and interest payments
when due. Loans that experience insignificant payment delays and payment shortfalls generally are not classified as impaired. Management
determines the significance of payment delays and payment shortfalls on a case-by-case basis, taking into consideration all of
the circumstances surrounding the loan and the borrower, including the length of the delay, the reasons for the delay, the borrower’s
prior payment record, and the amount of the shortfall in relation to the principal and interest owed. Impairment is measured on
a loan by loan basis by either the present value of the expected future cash flows discounted at the loan’s effective interest
rate, the loan’s obtainable market price, or the fair value of the collateral if the loan is collateral dependent.
Troubled debt restructurings
A loan or lease is accounted for as a TDR
if we, for economic or legal reasons related to the borrower’s financial condition, grant a significant concession to the
borrower that we would not otherwise consider. A TDR may involve the receipt of assets from the debtor in partial or full satisfaction
of the loan or lease, or a modification of terms such as a reduction of the stated interest rate or balance of the loan or lease,
a reduction of accrued interest, an extension of the maturity date at a stated interest rate lower than the current market rate
for a new loan with similar risk, or some combination of these concessions. TDRs generally remain categorized as nonperforming
loans and leases until a six-month payment history has been maintained.
In accordance with current accounting guidance,
loans modified as troubled debt restructurings are, by definition, considered to be impaired loans. Impairment for these
loans is measured on a loan-by-loan basis similar to other impaired loans as described above under “Allowance for loan
losses”. Certain loans modified as TDRs may have been previously measured for impairment under a general allowance
methodology (i.e., pooling), thus at the time the loan is modified as a TDR the allowance will be impacted by the difference between
the results of these two measurement methodologies. Loans modified as TDRs that subsequently default are factored into the
determination of the allowance in the same manner as other defaulted loans.
Loan modifications made under the March 22
Joint Guidance and CARES Act, as amended by the CAA, were suspended from TDR evaluation.
Other real estate owned
Real
estate acquired through or in lieu of foreclosure is initially recorded at estimated fair value less estimated selling costs establishing
a new cost basis. Subsequent to the date of acquisition, it is carried at the lower of cost or fair value, adjusted for net selling
costs. If fair value declines subsequent to foreclosure a valuation allowance is recorded through expense. Operating costs after
acquisition are expensed as incurred. The valuation allowance was $10,000 and $52,000 at December 31, 2020 and 2019,
respectively. Costs relating to the development and improvement of such property are capitalized when appropriate, whereas those
costs relating to holding the property are expensed.
Assets held for sale
There were no assets held for sale at December 31,
2020. Assets held for sale at December 31, 2019 included a branch building we previously closed. The Company periodically
evaluates the value of assets held for sale and records an impairment charge for any subsequent declines in fair value less selling
costs.
Premises and equipment
Land is carried at cost. Premises and equipment
are carried at cost less accumulated depreciation and amortization. Depreciation of buildings and improvements is computed using
the straight-line method over the estimated useful lives of the assets of 39 years. Depreciation of equipment is computed using
the straight-line method over the estimated useful lives of the assets ranging from three to seven years. Amortization of premises
(leasehold improvements) is computed using the straight-line method over the term of the lease or estimated lives of the improvements,
whichever is shorter.
Supplemental Executive Retirement Plan
The Company recognizes the unfunded status
of its Supplemental Executive Retirement Plan (the “SERP”) as a liability in its Consolidated Balance Sheets, measured
at the projected benefit obligation as of December 31, 2020 and 2019. Net periodic pension costs are recorded each period
based on actuarially determined amounts in accordance with GAAP and recognized in salaries and employment benefits in the Consolidated
Statements of Income. Actuarial determinations of net periodic pension cost are based on assumptions related to discount rates,
employee compensation and mortality and interest crediting rates. Other changes in the status of the plan are recorded in the year
in which the changes occur through other comprehensive income.
Income taxes
Deferred income taxes are recognized for
the tax consequences of “temporary differences” by applying enacted tax rates applicable to future years to differences
between the financial statement carrying amounts and the tax bases of existing assets and liabilities. The effect on recorded deferred
income taxes of a change in tax laws or rates is recognized in income in the period that includes the enactment date. To the extent
that available evidence about the future raises doubt about the realization of a deferred income tax asset, a valuation allowance
is established. A tax position is recognized as a benefit only if it is “more likely than not” that the tax position
would be sustained in a tax examination, with a tax examination being presumed to occur. The amount recognized is the largest amount
of tax benefit that is greater than 50% likely of being realized on examination. For tax positions not meeting the “more
likely than not” test, no tax benefit is recorded. Interest and penalties associated with unrecognized tax benefits are classified
as taxes other than income in the statement of income. The Company has no uncertain tax positions.
Consolidated statements of cash flows
For purposes of reporting cash flows, cash
and cash equivalents include cash on hand, due from banks (including cash items in process of collection), interest-bearing deposits
with banks and federal funds sold. Generally, federal funds are purchased and sold for one-day periods. Cash flows from loans originated
by the Bank for investment and deposits are reported net. The Company did not pay income taxes in 2020 and 2019.
Comprehensive income
Total comprehensive income consists of
net income and other comprehensive income. At December 31, 2020 and 2019, the accumulated other comprehensive income was comprised
of unrealized gains on securities available for sale of $466,000 and $186,000 and unfunded pension liability of ($36,000) and ($44,000)
net of tax, respectively.
Earnings per common share
Basic earnings per common share represent
net income available to common shareholders, which represents net income less dividends paid or payable to preferred stock shareholders,
divided by the weighted-average number of common shares outstanding during the period, inclusive of unvested restricted shares
(Note 10). For diluted earnings per common share, net income available to common shareholders is divided by the weighted average
number of common shares issued and outstanding for each period plus amounts representing the dilutive effect of stock options,
as well as any adjustment to income that would result from the assumed issuance. The effects of stock options and warrants are
excluded from the computation of diluted earnings per common share in periods in which the effect would be antidilutive. Stock
options and warrants are antidilutive if the underlying average market price of the stock that can be purchased for the period
is less than the exercise price of the option or warrant. Potential dilutive common shares that may be issued by the Company relate
solely to outstanding stock options and warrants and are determined using the treasury stock method.
Stock incentive plan
On May 26, 2015, the Company’s
shareholders approved the adoption of the Village Bank and Trust Financial Corp. 2015 Stock Incentive Plan (the “2015 Plan”)
authorizing the issuance of up to 60,000 shares of common stock. On May 19, 2020, the Company’s shareholders approved
an amendment to the 2015 Plan authorizing the issuance of up to 120,000 shares of common stock. See Note 14 for more information
on the 2015 Plan.
Fair values of financial instruments
The fair value of an asset or liability
is the price that would be received to sell that asset or paid to transfer that liability in an orderly transaction between market
participants. A fair value measurement assumes that the transaction to sell the asset or transfer the liability occurs in the principal
market for the asset or liability or, in the absence of a principal market, the most advantageous market for the asset or liability.
The price in the principal (or most advantageous) market used to measure the fair value of the asset or liability (exit price)
shall not be adjusted for transaction costs. An orderly transaction is a transaction that assumes exposure to the market for a
period prior to the measurement date to allow for marketing activities that are usual and customary for transactions involving
such assets and liabilities; it is not a forced transaction. Market participants are buyers and sellers in the principal market
that are independent, knowledgeable, able to transact and willing to transact. See Note 18 for the methods and assumptions the
Bank uses in estimating fair values of financial instruments.
Revenue recognition
The
Company recognizes revenue as it is earned and noted no impact to its revenue recognition policies as a result of the adoption
of ASU 2014-09. The following discussion is of revenues that are within the scope of the new revenue guidance:
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Debit and credit interchange fee income
- Card processing fees consist of interchange fees from consumer debit and credit card networks and other card related services.
Interchange fees are based on purchase volumes and other factors and are recognized as transactions occur.
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Service charges on deposit accounts
- Revenue from service charges on deposit accounts is earned through deposit-related services, as well as overdraft, non-sufficient
funds, account management and other deposit related fees. Revenue is recognized for these services either over time, corresponding
with deposit accounts’ monthly cycle, or at a point in time for transactional related services and fees.
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Service charges on loan accounts -
Revenue from loan accounts consists primarily of fees earned on prepayment penalties. Revenue is recognized for the services at
a point in time for transactional related services and fees.
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Gains/Losses on sale of OREO -
The Company records a gain or loss from the sale of OREO when control of the property transfers to the buyer, which generally occurs
at the time of an executed deed. When the Company finances the sale of OREO to the buyer, the Company assesses whether the buyer
is committed to perform their obligations under the contract and whether collectability of the transaction price is probable. Once
these criteria are met, the OREO asset is derecognized and the gain or loss on sale is recorded upon the transfer of control of
the property to the buyer.
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Gains/Losses on sale of assets held
for sale – The Company records a gain or loss from the sale of assets held for sale when control of the property transfers
to the buyer, which generally occurs at the time of an executed deed. When the Company finances the sale of assets held for sale
to the buyer, the Company assess whether the buyer is committed to perform their obligations under the contract and whether collectability
of the transaction price is probably. Once these criteria are met, the asset held for sale is derecognized and the gain or loss
on sale is recorded upon transfer of control of the property to the buyer.
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Segments
The Company has two reportable segments:
traditional commercial banking and mortgage banking. Revenues from commercial banking operations consist primarily of interest
earned on loans and securities and fees from deposit services. Mortgage banking operating revenues consist principally of interest
earned on mortgage LHFS, gains on sales of loans in the secondary mortgage market, and loan origination fee income, net of commissions
paid.
The commercial banking segment provides
the mortgage banking segment with the short-term funds needed to originate mortgage loans through a warehouse line of credit and
charges the mortgage banking segment interest based on the commercial banking segment’s cost of funds. Additionally, the
mortgage banking segment leases premises from the commercial banking segment. These transactions are eliminated in the consolidation
process. See additional information at Note 19, Segment Reporting.
Recent accounting pronouncements
In June 2016, the FASB issued ASU
2016-13, “Financial Instruments—Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments.”
The amendments in this ASU, among other things, require the measurement of all expected credit losses for financial assets held
at the reporting date based on historical experience, current conditions, and reasonable and supportable forecasts. Financial institutions
and other organizations will now use forward-looking information to better inform their credit loss estimates. Many of the loss
estimation techniques applied today will still be permitted, although the inputs to those techniques will change to reflect the
full amount of expected credit losses. In addition, the ASU amends the accounting for credit losses on available-for-sale debt
securities and purchased financial assets with credit deterioration. The FASB has issued multiple updates to ASU 2016-13 as codified
in Topic 326, including ASUs 2019-04, 2019-05, 2019-10, 2019-11, 2020-02, and 2020-03. These ASUs have provided for various minor
technical corrections and improvements to the codification as well as other transition matters. Smaller reporting companies who
file with the SEC and all other entities who do not file with the SEC are required to apply the guidance for fiscal years, and
interim periods within those years, beginning after December 15, 2022. While the Company is currently evaluating the provisions
of ASU 2016-13 to determine the potential impact the new standard will have on the Company’s Consolidated Financial Statements,
it has taken steps to prepare for the implementation when it becomes effective, such as forming an internal task force, gathering
pertinent data, consulting with outside professionals, and evaluating its current IT systems. The Company is currently assessing
the impact that ASU 2016-13 will have on the Company’s consolidated financial statements.
In August 2018, the FASB issued ASU
2018-13, “Fair Value Measurement (Topic 820) - Changes to the Disclosure Requirements for Fair Value Measurement”.
ASU 2018-13 modifies the disclosure requirements on fair value measurements by requiring that Level 3 fair value disclosures include
the range and weighted average of significant unobservable inputs used to develop those fair value measurements. For certain unobservable
inputs, an entity may disclose other quantitative information in lieu of the weighted average if the entity determines that other
quantitative information would be a more reasonable and rational method to reflect the distribution of unobservable inputs used
to develop Level 3 fair value measurements. Certain disclosure requirements in Topic 820 were also removed or modified. ASU 2018-13
was effective for the Company on January 1, 2020. The adoption of ASU 2018-13 did not have a material impact on the Company’s
consolidated financial statements.
Effective November 25, 2019, the SEC
adopted Staff Accounting Bulletin (“SAB”) 119. SAB 119 updated portions of SEC interpretative guidance to align with
FASB ASC 326, “Financial Instruments – Credit Losses.” It covers topics including (1) measuring current
expected credit losses; (2) development governance, and documentation of systematic methodology; (3) documenting the
results of a systematic methodology; and (4) validating a systematic methodology.
In December 2019, the FASB issued
ASU 2019-12, “Income Taxes (Topic 740) – Simplifying the Accounting for Income Taxes.” The ASU is expected to
reduce cost and complexity related to the accounting for income taxes by removing specific exceptions to general principles in
Topic 740 (eliminating the need for an organization to analyze whether certain exceptions apply in a given period) and improving
financial statement preparers’ application of certain income tax-related guidance. This ASU is part of the FASB’s simplification
initiative to make narrow-scope simplifications and improvements to accounting standards through a series of short-term projects.
For public business entities, the amendments are effective for fiscal years beginning after December 15, 2020, and interim
periods within those fiscal years. Early adoption is permitted. The Company is currently assessing the impact that ASU 2019-12
will have on its consolidated financial statements.
In January 2020, the FASB issued 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.”
The ASU is based on a consensus of the Emerging Issues Task Force and is expected to increase comparability in accounting for these
transactions. ASU 2020-01 amends ASU 2016-01, which made targeted improvements to accounting for financial instruments, including
providing an entity the ability to measure certain equity securities without a readily determinable fair value at cost, less any
impairment, plus or minus changes resulting from observable price changes in orderly transactions for the identical or a similar
investment of the same issuer. Among other topics, the amendments in ASU 2020-01 clarify that an entity should consider observable
transactions that require it to either apply or discontinue the equity method of accounting. For public business entities, the
amendments in the ASU are effective for fiscal years beginning after December 31, 2020, and interim periods within those fiscal
years. Early adoption is permitted. The Company does not expect the adoption of ASU 2020-01 to have a material impact on its consolidated
financial statements.
In
March 2020, the FASB issued ASU 2020-04, “Reference Rate Reform (Topic 848): Facilitation of the Effects of Reference
Rate Reform on Financial Reporting.” These amendments provide temporary optional guidance to ease the potential burden in
accounting for reference rate reform. The ASU provides optional expedients and exceptions for applying generally accepted accounting
principles to contract modifications and hedging relationships, subject to meeting certain criteria, that reference LIBOR or another
reference rate expected to be discontinued. It is intended to help stakeholders during the global market-wide reference rate transition
period. The guidance is effective for all entities as of March 12, 2020 through December 31, 2022. Subsequently, in January 20201,
the FASB issued ASU 2021-01 “Reference Rate Reform (Topic 848): Scope.” This ASU clarifies that certain optional expedients
and exceptions in Topic 848 for contract modifications and hedge accounting apply to derivatives that are affected by the discounting
transition. The ASU also amends the expedients and exceptions in Topic 848 to capture the incremental consequences of the scope
clarification and to tailor the existing guidance to derivative instruments affected by the discounting transition. An entity may
elect to apply ASU No. 2021-01 on contract modifications that change the interest rate used for margining, discounting, or
contract price alignment retrospectively as of any date from the beginning of the interim period that includes March 12, 2020,
or prospectively to new modifications from any date within the interim period that includes or is subsequent to January 7,
2021, up to the date that financial statements are available to be issued. An entity may elect to apply ASU No. 2021-01 to
eligible hedging relationships existing as of the beginning of the interim period that includes March 12, 2020, and to new
eligible hedging relationships entered into after the beginning of the interim period that includes March 12, 2020.The
Company has a team to assess ASU 2020-04 and its impact on the Company’s transition away from LIBOR for its loan and other
financial instruments.
In
March 2020 (Revised in April 2020), various regulatory agencies, including the Federal Reserve and the FDIC, (“the
agencies”) issued an interagency statement on loan modifications and reporting for financial institutions working with customers
affected by COVID-19. The interagency statement was effective immediately and impacted accounting for loan modifications. Under
ASC 310-40, “Receivables – Troubled Debt Restructurings by Creditors,” a restructuring of debt constitutes a
TDR if the creditor, for economic or legal reasons related to the debtor’s financial difficulties, grants a concession to
the debtor that it would not otherwise consider. The agencies confirmed with the staff of the FASB that short-term modifications
made on a good faith basis in response to COVID-19 to borrowers who were current prior to any relief, are not to be considered
TDRs. This includes short-term (e.g., six months) modifications such as payment deferrals, fee waivers, extensions of repayment
terms, or other delays in payment that are insignificant. Borrowers considered current are those that are less than 30 days past
due on their contractual payments at the time a modification program is implemented. In August 2020, a joint statement on
additional loan modifications was issued. Among other things, the Interagency Statement addresses accounting and regulatory reporting
considerations for loan modifications, including those accounted for under Section 4013 of the Coronavirus Aid, Relief, and
Economic Security (“CARES”) Act. The CARES Act was signed into law on March 27, 2020 to help support individuals
and businesses through loans, grants, tax changes and other types of relief. The most significant impacts of the Act related to
accounting for loan modifications and establishment of the Paycheck Protection Program (“PPP”). On December 21,
2020, the Consolidated Appropriates Act of 2021 (“CAA”) was passed. The CAA extends or modifies many of the relief
programs first created by the CARES Act, including the PPP and treatment of certain loan modifications related to the COVID-19
pandemic. As of December 31 2020, the Company had a total of $3,259,000 in loans past due greater than 30 days all of which
were rehabilitated student loans which have a 98% guarantee by the DOE of principal and interest. For
more financial data and other information about loan deferrals refer to section, “Response to COVID-19” under Item
2 – “Management’s Discussion and Analysis of Financial Condition and Results of Operations”. This
interagency guidance is expected to have an impact on the Company’s financial statements; however, this impact cannot be
quantified at this time.
In
August 2020, the FASB issued ASU 2020-06 “Debt – Debt with Conversion and Other Options (Subtopic 470-20)
and Derivatives and Hedging – Contracts in Entity’s Own Equity (Subtopic 815-40): Accounting for Convertible Instruments
and Contracts in an Entity’s Own Equity.” The ASU simplifies accounting for convertible instruments by removing major
separation models required under current GAAP. Consequently, more convertible debt instruments will be reported as a single liability
instrument and more convertible preferred stock as a single equity instrument with no separate accounting for embedded conversion
features. The ASU removes certain settlement conditions that are required for equity contracts to qualify for the derivative scope
exception, which will permit more equity contracts to qualify for it. The ASU also simplifies the diluted earnings per share calculation
in certain areas. In addition, the amendment updates the disclosure requirements for convertible instruments to increase the information
transparency. For public business entities, excluding smaller reporting companies, the amendments in the ASU are effective for
fiscal years beginning after December 15, 2021, and interim periods within those fiscal years. For all other entities, including
the Company, the standard will be effective for fiscal years beginning after December 15, 2023, including interim periods
within those fiscal years. Early adoption is permitted. The Company does not expect the adoption of ASU 2020-06 to have a material
impact on its consolidated financial statements.
In
October 2020, the FASB issued ASU 2020-08, “Codification Improvements to Subtopic 310-20, Receivables – Nonrefundable
fees and Other Costs.” This ASU clarifies that an entity should reevaluate whether a callable debt security is within the
scope of ASC paragraph 310-20-35-33 for each reporting period. For public business entities, the ASU is effective for fiscal
years beginning after December 15, 2021, and interim periods within those fiscal years. Early adoption is not permitted. All
entities should apply ASU No. 2020-08 on a prospective basis as of the beginning of the period of adoption for existing or
newly purchased callable debt securities. The Company does not expect the adoption of ASU 2020-08 to have a material impact on
its consolidated financial statements.
Note 2. Investment
Securities Available for Sale
The amortized cost and fair value of investment
securities available for sale as of December 31, 2020 and 2019 are as follows (in thousands):
|
|
|
|
|
Gross
|
|
|
Gross
|
|
|
|
|
|
|
Amortized
|
|
|
Unrealized
|
|
|
Unrealized
|
|
|
|
|
|
|
Cost
|
|
|
Gains
|
|
|
Losses
|
|
|
Fair Value
|
|
December 31, 2020
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
U.S. Government agency obligations
|
|
$
|
8,048
|
|
|
$
|
94
|
|
|
$
|
-
|
|
|
$
|
8,142
|
|
Mortgage-backed securities
|
|
|
23,412
|
|
|
|
645
|
|
|
|
(51
|
)
|
|
|
24,006
|
|
Subordinated debt
|
|
|
8,795
|
|
|
|
37
|
|
|
|
(136
|
)
|
|
|
8,696
|
|
|
|
$
|
40,255
|
|
|
$
|
776
|
|
|
$
|
(187
|
)
|
|
$
|
40,844
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2019
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
U.S. Government agency obligations
|
|
$
|
14,797
|
|
|
$
|
57
|
|
|
$
|
(9
|
)
|
|
$
|
14,845
|
|
Mortgage-backed securities
|
|
|
25,124
|
|
|
|
204
|
|
|
|
(26
|
)
|
|
|
25,302
|
|
Subordinated debt
|
|
|
6,779
|
|
|
|
91
|
|
|
|
(80
|
)
|
|
|
6,790
|
|
|
|
$
|
46,700
|
|
|
$
|
352
|
|
|
$
|
(115
|
)
|
|
$
|
46,937
|
|
At December 31, 2020 and December 31,
2019, the Company had no investment securities pledged to secure borrowings from the Federal Home Loan Bank of Atlanta (“FHLB”).
Gross realized gains and losses pertaining
to available for sale securities are detailed as follows for the years ended December 31, 2020 and 2019 (in thousands):
|
|
December 31,
|
|
|
|
2020
|
|
|
2019
|
|
Gross realized gains
|
|
$
|
54
|
|
|
$
|
101
|
|
Gross realized losses
|
|
|
(42
|
)
|
|
|
-
|
|
|
|
$
|
12
|
|
|
$
|
101
|
|
The Company sold approximately $8,000,000
and $6,500,000 in 2020 and 2019, respectively, of investment securities available for sale at a gain of $12,000 in 2020 and $101,000
in 2019. The sales of these securities, which had fixed interest rates, allowed the Company to decrease its exposure to upward
movement in interest rates that would result in unrealized losses being recognized in shareholders’ equity.
Investment securities available for sale
that had an unrealized loss position at December 31, 2020 and December 31, 2019 are detailed below (in thousands):
|
|
Securities in a loss
|
|
|
Securities in a loss
|
|
|
|
|
|
|
|
|
|
position for less than
|
|
|
position for more than
|
|
|
|
|
|
|
|
|
|
12 Months
|
|
|
12 Months
|
|
|
Total
|
|
|
|
Fair
|
|
|
Unrealized
|
|
|
Fair
|
|
|
Unrealized
|
|
|
Fair
|
|
|
Unrealized
|
|
|
|
Value
|
|
|
Losses
|
|
|
Value
|
|
|
Losses
|
|
|
Value
|
|
|
Losses
|
|
December 31, 2020
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Mortgage-backed securities
|
|
|
5,475
|
|
|
|
(51
|
)
|
|
|
-
|
|
|
|
-
|
|
|
|
5,475
|
|
|
|
(51
|
)
|
Subordinated debt
|
|
|
1,747
|
|
|
|
(11
|
)
|
|
|
2,807
|
|
|
|
(125
|
)
|
|
|
4,554
|
|
|
|
(136
|
)
|
|
|
$
|
7,222
|
|
|
$
|
(62
|
)
|
|
$
|
2,807
|
|
|
$
|
(125
|
)
|
|
$
|
10,029
|
|
|
$
|
(187
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2019
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
U.S. Government agency obligations
|
|
$
|
2,001
|
|
|
$
|
(1
|
)
|
|
$
|
5,368
|
|
|
$
|
(8
|
)
|
|
$
|
7,369
|
|
|
$
|
(9
|
)
|
Mortgage-backed securities
|
|
|
2,747
|
|
|
|
(26
|
)
|
|
|
-
|
|
|
|
-
|
|
|
|
2,747
|
|
|
|
(26
|
)
|
Subordinated debt
|
|
|
759
|
|
|
|
(6
|
)
|
|
|
940
|
|
|
|
(74
|
)
|
|
|
1,699
|
|
|
|
(80
|
)
|
|
|
$
|
5,507
|
|
|
$
|
(33
|
)
|
|
$
|
6,308
|
|
|
$
|
(82
|
)
|
|
$
|
11,815
|
|
|
$
|
(115
|
)
|
As of December 31, 2020, there were
$2.8 million, or five issues, of individual available for sale securities that had been in a continuous loss position for more
than 12 months. These securities had an unrealized loss of $125,000 and consisted of Subordinated debt.
As of December 31, 2019, there were
$6.3 million, or 10 issues, of individual available for sale securities that had been in a continuous loss position for more than
12 months. These securities had an unrealized loss of $82,000 and consisted of U.S. Government agency obligations, and subordinated
debt.
All of the unrealized losses are attributable
to increases in interest rates and not to credit deterioration. Currently, the Company believes that it is probable that the Company
will be able to collect all amounts due according to the contractual terms of the investments. Because the declines in fair value
are attributable to changes in interest rates and not to credit quality, and because it is not more likely than not that the Company
will be required to sell the investments before recovery of their amortized cost bases, which may be maturity, the Company does
not consider these investments to be other than temporarily impaired at December 31, 2020.
The amortized cost and estimated fair value
of investment securities available for sale as of December 31, 2020, by contractual maturity, are as follows (in thousands):
|
|
Amortized
|
|
|
|
|
|
|
Cost
|
|
|
Fair Value
|
|
Less than one year
|
|
$
|
6,110
|
|
|
$
|
6,145
|
|
One to five years
|
|
|
310
|
|
|
|
315
|
|
Five to ten years
|
|
|
10,524
|
|
|
|
10,473
|
|
More than ten years
|
|
|
23,311
|
|
|
|
23,911
|
|
Total
|
|
$
|
40,255
|
|
|
$
|
40,844
|
|
Note 3. Loans
Loans classified by type as of December 31,
2020 and 2019 are as follows (dollars in thousands):
|
|
December 31, 2020
|
|
|
December 31, 2019
|
|
|
|
Amount
|
|
|
%
|
|
|
Amount
|
|
|
%
|
|
Construction and land development
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Residential
|
|
$
|
8,103
|
|
|
|
1.44
|
%
|
|
$
|
7,887
|
|
|
|
1.84
|
%
|
Commercial
|
|
|
21,466
|
|
|
|
3.82
|
%
|
|
|
24,063
|
|
|
|
5.60
|
%
|
|
|
|
29,569
|
|
|
|
5.26
|
%
|
|
|
31,950
|
|
|
|
7.44
|
%
|
Commercial real estate
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Owner occupied
|
|
|
99,784
|
|
|
|
17.79
|
%
|
|
|
98,353
|
|
|
|
22.91
|
%
|
Non-owner occupied
|
|
|
121,184
|
|
|
|
21.60
|
%
|
|
|
116,508
|
|
|
|
27.14
|
%
|
Multifamily
|
|
|
9,889
|
|
|
|
1.75
|
%
|
|
|
13,332
|
|
|
|
3.10
|
%
|
Farmland
|
|
|
367
|
|
|
|
0.07
|
%
|
|
|
156
|
|
|
|
0.04
|
%
|
|
|
|
231,224
|
|
|
|
41.21
|
%
|
|
|
228,349
|
|
|
|
53.19
|
%
|
Consumer real estate
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Home equity lines
|
|
|
18,394
|
|
|
|
3.28
|
%
|
|
|
21,509
|
|
|
|
5.01
|
%
|
Secured by 1-4 family residential,
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
First deed of trust
|
|
|
57,089
|
|
|
|
10.18
|
%
|
|
|
55,856
|
|
|
|
13.01
|
%
|
Second deed of trust
|
|
|
11,097
|
|
|
|
1.98
|
%
|
|
|
10,411
|
|
|
|
2.43
|
%
|
|
|
|
86,580
|
|
|
|
15.44
|
%
|
|
|
87,776
|
|
|
|
20.45
|
%
|
Commercial and industrial loans
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(except those secured by real estate)
|
|
|
181,088
|
|
|
|
32.28
|
%
|
|
|
45,074
|
|
|
|
10.50
|
%
|
Guaranteed student loans
|
|
|
29,657
|
|
|
|
5.29
|
%
|
|
|
33,525
|
|
|
|
7.81
|
%
|
Consumer and other
|
|
|
2,885
|
|
|
|
0.52
|
%
|
|
|
2,621
|
|
|
|
0.61
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total loans
|
|
|
561,003
|
|
|
|
100.0
|
%
|
|
|
429,295
|
|
|
|
100.0
|
%
|
Deferred fees and costs, net
|
|
|
(2,048
|
)
|
|
|
|
|
|
|
764
|
|
|
|
|
|
Less: allowance for loan losses
|
|
|
(3,970
|
)
|
|
|
|
|
|
|
(3,186
|
)
|
|
|
|
|
|
|
$
|
554,985
|
|
|
|
|
|
|
$
|
426,873
|
|
|
|
|
|
The Bank has a purchased portfolio of rehabilitated
student loans guaranteed by the DOE. The guarantee covers approximately 98% of principal and accrued interest. The loans are serviced
by a third-party servicer that specializes in handling the special needs of the DOE student loan programs.
The
Bank originated $185,137,000 in loans under the SBA’s Paycheck Protection Program (“PPP”) as of December 31,
2020. These loans have provided essential funds to approximately 1,500 businesses and nonprofits and protected more than 20,000
jobs in our community. The Bank is participating in the second round of PPP funding approved by Congress and signed into
law by the President of the United States of America on December 27, 2020. The processing fees earned on the PPP loans will
help to support the Bank’s loan deferral program and potential credit losses associated with the COVID-19 pandemic. Below
is a breakdown of PPP loans by loan size as of December 31, 2020 (dollars in thousands):
Loan Size
|
|
# of Loans
|
|
|
$ of Loans
|
|
< $350,000
|
|
|
1,172
|
|
|
$
|
72,526
|
|
$350,000 - $2 million
|
|
|
57
|
|
|
|
41,046
|
|
> $2 million
|
|
|
6
|
|
|
|
23,102
|
|
Total
|
|
|
1,235
|
|
|
$
|
136,674
|
|
Loans pledged as collateral with the FHLB
as part of their lending arrangements with the Company totaled $65,587,000 and $49,736,000 as of December 31, 2020 and 2019,
respectively.
The following is a summary of loans directly
or indirectly with executive officers or directors of the Company for the years ended December 31, 2020 and 2019 (in thousands):
|
|
2020
|
|
|
2019
|
|
Beginning balance
|
|
$
|
5,323
|
|
|
$
|
5,201
|
|
Additions
|
|
|
11,228
|
|
|
|
8,751
|
|
Effect of changes in composition of related parties
|
|
|
(287
|
)
|
|
|
-
|
|
Reductions
|
|
|
(11,592
|
)
|
|
|
(8,629
|
)
|
Ending balance
|
|
$
|
4,672
|
|
|
$
|
5,323
|
|
Executive officers and directors also had
unused credit lines totaling $1,507,000 and $2,806,000 at December 31, 2020 and 2019, respectively. Based on management’s
evaluation all loans and credit lines to executive officers and directors were made in the ordinary course of business at the Company’s
normal credit terms, including interest rate and collateralization prevailing at the time for comparable transactions with other
persons.
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 nonaccrual 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. 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 principal and interest amounts contractually due are brought current and future payments are reasonably assured.
The following table provides information
on nonaccrual loans segregated by type at the dates indicated (dollars in thousands):
|
|
December 31,
|
|
|
December 31,
|
|
|
|
2020
|
|
|
2019
|
|
Commercial real estate
|
|
|
|
|
|
|
|
|
Non-owner occupied
|
|
$
|
303
|
|
|
$
|
497
|
|
|
|
|
303
|
|
|
|
497
|
|
Consumer real estate
|
|
|
|
|
|
|
|
|
Home equity lines
|
|
|
300
|
|
|
|
300
|
|
Secured by 1-4 family residential
|
|
|
|
|
|
|
|
|
First deed of trust
|
|
|
630
|
|
|
|
842
|
|
Second deed of trust
|
|
|
317
|
|
|
|
63
|
|
|
|
|
1,247
|
|
|
|
1,205
|
|
Commercial and industrial loans
|
|
|
|
|
|
|
|
|
(except those secured by real estate)
|
|
|
27
|
|
|
|
166
|
|
Total loans
|
|
$
|
1,577
|
|
|
$
|
1,868
|
|
The Company assigns risk rating classifications
to its loans. These risk ratings are divided into the following groups:
|
·
|
Risk rated 1 to 4 loans are considered of sufficient quality to preclude an adverse rating. These
assets generally are well protected by the current net worth and paying capacity of the obligor or by the value of the asset or
underlying collateral;
|
|
·
|
Risk rated 5 loans are defined as having potential weaknesses that deserve management’s close
attention;
|
|
·
|
Risk rated 6 loans are inadequately protected by the current sound worth and paying capacity of
the obligor or of the collateral pledged, if any; and
|
|
·
|
Risk rated 7 loans have all the weaknesses inherent in substandard loans, with the added characteristics
that the weaknesses make collection or liquidation in full, on the basis of currently existing facts, conditions and values, highly
questionable and improbable.
|
The following tables provide information
on the risk rating of loans at the dates indicated (in thousands):
|
|
Risk Rated
|
|
|
Risk Rated
|
|
|
Risk Rated
|
|
|
Risk Rated
|
|
|
Total
|
|
|
|
1-4
|
|
|
5
|
|
|
6
|
|
|
7
|
|
|
Loans
|
|
December 31, 2020
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Construction and land development
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Residential
|
|
$
|
8,103
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
8,103
|
|
Commercial
|
|
|
21,370
|
|
|
|
96
|
|
|
|
-
|
|
|
|
-
|
|
|
|
21,466
|
|
|
|
|
29,473
|
|
|
|
96
|
|
|
|
-
|
|
|
|
-
|
|
|
|
29,569
|
|
Commercial real estate
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Owner occupied
|
|
|
88,066
|
|
|
|
9,405
|
|
|
|
2,313
|
|
|
|
-
|
|
|
|
99,784
|
|
Non-owner occupied
|
|
|
116,161
|
|
|
|
4,244
|
|
|
|
779
|
|
|
|
-
|
|
|
|
121,184
|
|
Multifamily
|
|
|
9,889
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
9,889
|
|
Farmland
|
|
|
367
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
367
|
|
|
|
|
214,483
|
|
|
|
13,649
|
|
|
|
3,092
|
|
|
|
-
|
|
|
|
231,224
|
|
Consumer real estate
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Home equity lines
|
|
|
17,298
|
|
|
|
796
|
|
|
|
300
|
|
|
|
-
|
|
|
|
18,394
|
|
Secured by 1-4 family residential
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
First deed of trust
|
|
|
53,731
|
|
|
|
2,212
|
|
|
|
1,146
|
|
|
|
-
|
|
|
|
57,089
|
|
Second deed of trust
|
|
|
9,425
|
|
|
|
1,236
|
|
|
|
436
|
|
|
|
-
|
|
|
|
11,097
|
|
|
|
|
80,454
|
|
|
|
4,244
|
|
|
|
1,882
|
|
|
|
-
|
|
|
|
86,580
|
|
Commercial and industrial loans
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(except those secured by real estate)
|
|
|
178,217
|
|
|
|
2,602
|
|
|
|
269
|
|
|
|
-
|
|
|
|
181,088
|
|
Guaranteed student loans
|
|
|
29,657
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
29,657
|
|
Consumer and other
|
|
|
2,844
|
|
|
|
41
|
|
|
|
-
|
|
|
|
-
|
|
|
|
2,885
|
|
Total loans
|
|
$
|
536,336
|
|
|
$
|
20,632
|
|
|
$
|
5,243
|
|
|
$
|
-
|
|
|
$
|
561,003
|
|
|
|
Risk Rated
|
|
|
Risk Rated
|
|
|
Risk Rated
|
|
|
Risk Rated
|
|
|
Total
|
|
|
|
1-4
|
|
|
5
|
|
|
6
|
|
|
7
|
|
|
Loans
|
|
December 31, 2019
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Construction and land development
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Residential
|
|
$
|
7,887
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
7,887
|
|
Commercial
|
|
|
23,758
|
|
|
|
-
|
|
|
|
305
|
|
|
|
-
|
|
|
|
24,063
|
|
|
|
|
31,645
|
|
|
|
-
|
|
|
|
305
|
|
|
|
-
|
|
|
|
31,950
|
|
Commercial real estate
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Owner occupied
|
|
|
90,146
|
|
|
|
8,072
|
|
|
|
135
|
|
|
|
-
|
|
|
|
98,353
|
|
Non-owner occupied
|
|
|
115,781
|
|
|
|
230
|
|
|
|
497
|
|
|
|
-
|
|
|
|
116,508
|
|
Multifamily
|
|
|
13,186
|
|
|
|
146
|
|
|
|
-
|
|
|
|
-
|
|
|
|
13,332
|
|
Farmland
|
|
|
71
|
|
|
|
85
|
|
|
|
-
|
|
|
|
-
|
|
|
|
156
|
|
|
|
|
219,184
|
|
|
|
8,533
|
|
|
|
632
|
|
|
|
-
|
|
|
|
228,349
|
|
Consumer real estate
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Home equity lines
|
|
|
20,486
|
|
|
|
723
|
|
|
|
300
|
|
|
|
-
|
|
|
|
21,509
|
|
Secured by 1-4 family residential
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
First deed of trust
|
|
|
53,200
|
|
|
|
1,660
|
|
|
|
996
|
|
|
|
-
|
|
|
|
55,856
|
|
Second deed of trust
|
|
|
10,130
|
|
|
|
167
|
|
|
|
114
|
|
|
|
-
|
|
|
|
10,411
|
|
|
|
|
83,816
|
|
|
|
2,550
|
|
|
|
1,410
|
|
|
|
-
|
|
|
|
87,776
|
|
Commercial and industrial loans
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(except those secured by real estate)
|
|
|
41,837
|
|
|
|
2,891
|
|
|
|
346
|
|
|
|
-
|
|
|
|
45,074
|
|
Guaranteed student loans
|
|
|
33,525
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
33,525
|
|
Consumer and other
|
|
|
2,621
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
2,621
|
|
Total loans
|
|
$
|
412,628
|
|
|
$
|
13,974
|
|
|
$
|
2,693
|
|
|
$
|
-
|
|
|
$
|
429,295
|
|
The following tables present the aging
of the recorded investment in past due loans as of the dates indicated (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Recorded
|
|
|
|
|
|
|
|
|
|
Greater
|
|
|
|
|
|
|
|
|
|
|
|
Investment >
|
|
|
|
30-59 Days
|
|
|
60-89 Days
|
|
|
Than
|
|
|
Total Past
|
|
|
|
|
|
Total
|
|
|
90 Days and
|
|
|
|
Past Due
|
|
|
Past Due
|
|
|
90 Days
|
|
|
Due
|
|
|
Current
|
|
|
Loans
|
|
|
Accruing
|
|
December 31, 2020
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Construction and land development
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Residential
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
8,103
|
|
|
$
|
8,103
|
|
|
$
|
-
|
|
Commercial
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
21,466
|
|
|
|
21,466
|
|
|
|
-
|
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
29,569
|
|
|
|
29,569
|
|
|
|
-
|
|
Commercial real estate
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Owner occupied
|
|
|
86
|
|
|
|
-
|
|
|
|
-
|
|
|
|
86
|
|
|
|
99,698
|
|
|
|
99,784
|
|
|
|
-
|
|
Non-owner occupied
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
121,184
|
|
|
|
121,184
|
|
|
|
-
|
|
Multifamily
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
9,889
|
|
|
|
9,889
|
|
|
|
-
|
|
Farmland
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
367
|
|
|
|
367
|
|
|
|
-
|
|
|
|
|
86
|
|
|
|
-
|
|
|
|
-
|
|
|
|
86
|
|
|
|
231,138
|
|
|
|
231,224
|
|
|
|
-
|
|
Consumer real estate
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Home equity lines
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
18,394
|
|
|
|
18,394
|
|
|
|
-
|
|
Secured by 1-4 family residential
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
First deed of trust
|
|
|
133
|
|
|
|
|
|
|
|
-
|
|
|
|
133
|
|
|
|
56,956
|
|
|
|
57,089
|
|
|
|
-
|
|
Second deed of trust
|
|
|
-
|
|
|
|
57
|
|
|
|
-
|
|
|
|
57
|
|
|
|
11,040
|
|
|
|
11,097
|
|
|
|
-
|
|
|
|
|
133
|
|
|
|
57
|
|
|
|
-
|
|
|
|
190
|
|
|
|
86,390
|
|
|
|
86,580
|
|
|
|
-
|
|
Commercial and industrial loans
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(except those secured by real estate)
|
|
|
25
|
|
|
|
-
|
|
|
|
-
|
|
|
|
25
|
|
|
|
181,063
|
|
|
|
181,088
|
|
|
|
-
|
|
Guaranteed student loans
|
|
|
1,428
|
|
|
|
1,009
|
|
|
|
2,193
|
|
|
|
4,630
|
|
|
|
25,027
|
|
|
|
29,657
|
|
|
|
2,193
|
|
Consumer and other
|
|
|
1
|
|
|
|
-
|
|
|
|
-
|
|
|
|
1
|
|
|
|
2,884
|
|
|
|
2,885
|
|
|
|
-
|
|
Total loans
|
|
$
|
1,673
|
|
|
$
|
1,066
|
|
|
$
|
2,193
|
|
|
$
|
4,932
|
|
|
$
|
556,071
|
|
|
$
|
561,003
|
|
|
$
|
2,193
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Recorded
|
|
|
|
|
|
|
|
|
|
Greater
|
|
|
|
|
|
|
|
|
|
|
|
Investment >
|
|
|
|
30-59 Days
|
|
|
60-89 Days
|
|
|
Than
|
|
|
Total Past
|
|
|
|
|
|
Total
|
|
|
90 Days and
|
|
|
|
Past Due
|
|
|
Past Due
|
|
|
90 Days
|
|
|
Due
|
|
|
Current
|
|
|
Loans
|
|
|
Accruing
|
|
December 31, 2019
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Construction and land development
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Residential
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
7,887
|
|
|
$
|
7,887
|
|
|
$
|
-
|
|
Commercial
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
24,063
|
|
|
|
24,063
|
|
|
|
-
|
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
31,950
|
|
|
|
31,950
|
|
|
|
-
|
|
Commercial real estate
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Owner occupied
|
|
|
701
|
|
|
|
-
|
|
|
|
-
|
|
|
|
701
|
|
|
|
97,652
|
|
|
|
98,353
|
|
|
|
-
|
|
Non-owner occupied
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
116,508
|
|
|
|
116,508
|
|
|
|
-
|
|
Multifamily
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
13,332
|
|
|
|
13,332
|
|
|
|
-
|
|
Farmland
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
156
|
|
|
|
156
|
|
|
|
-
|
|
|
|
|
701
|
|
|
|
-
|
|
|
|
-
|
|
|
|
701
|
|
|
|
227,648
|
|
|
|
228,349
|
|
|
|
-
|
|
Consumer real estate
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Home equity lines
|
|
|
52
|
|
|
|
-
|
|
|
|
-
|
|
|
|
52
|
|
|
|
21,457
|
|
|
|
21,509
|
|
|
|
-
|
|
Secured by 1-4 family residential
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
First deed of trust
|
|
|
290
|
|
|
|
-
|
|
|
|
-
|
|
|
|
290
|
|
|
|
55,566
|
|
|
|
55,856
|
|
|
|
-
|
|
Second deed of trust
|
|
|
133
|
|
|
|
-
|
|
|
|
-
|
|
|
|
133
|
|
|
|
10,278
|
|
|
|
10,411
|
|
|
|
-
|
|
|
|
|
475
|
|
|
|
-
|
|
|
|
-
|
|
|
|
475
|
|
|
|
87,301
|
|
|
|
87,776
|
|
|
|
-
|
|
Commercial and industrial loans
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(except those secured by real estate)
|
|
|
773
|
|
|
|
-
|
|
|
|
-
|
|
|
|
773
|
|
|
|
44,301
|
|
|
|
45,074
|
|
|
|
-
|
|
Guaranteed student loans
|
|
|
1,694
|
|
|
|
1,309
|
|
|
|
2,567
|
|
|
|
5,570
|
|
|
|
27,955
|
|
|
|
33,525
|
|
|
|
2,567
|
|
Consumer and other
|
|
|
4
|
|
|
|
-
|
|
|
|
-
|
|
|
|
4
|
|
|
|
2,617
|
|
|
|
2,621
|
|
|
|
-
|
|
Total loans
|
|
$
|
3,647
|
|
|
$
|
1,309
|
|
|
$
|
2,567
|
|
|
$
|
7,523
|
|
|
$
|
421,772
|
|
|
$
|
429,295
|
|
|
$
|
2,567
|
|
Loans greater than 90 days past due consist
of student loans that are guaranteed by the DOE which covers approximately 98% of the principal and interest. Accordingly, these
loans will not be placed on nonaccrual status and are not considered to be impaired.
Loans are considered impaired when, based
on current information and events it is probable the Company will be unable to collect all amounts due in accordance with the original
contractual terms of the loan agreement, including scheduled principal and interest payments. Loans evaluated individually for
impairment include nonperforming loans, such as loans on nonaccrual, loans past due by 90 days or more, TDRs and other loans selected
by management. The evaluations are based upon discounted expected cash flows or collateral valuations. If the evaluation shows
that a loan is individually impaired, then a specific reserve is established for the amount of impairment. Impairment is evaluated
in total for smaller-balance loans of a similar nature and on an individual loan basis for other loans. If a loan is impaired,
a specific valuation allowance is allocated, if necessary, so that the loan is reported net, at the present value of estimated
future cash flows using the loan’s existing rate or at the fair value of collateral if repayment is expected solely from
the collateral. Interest payments on impaired loans are typically applied to principal unless collectability of the principal amount
is reasonably assured, in which case interest is recognized on a cash basis. Impaired loans, or portions thereof, are charged off
when deemed uncollectible. Impaired loans are set forth in the following table as of the dates indicated (in thousands):
|
|
December 31, 2020
|
|
|
December 31, 2019
|
|
|
|
|
|
|
Unpaid
|
|
|
|
|
|
|
|
|
Unpaid
|
|
|
|
|
|
|
Recorded
|
|
|
Principal
|
|
|
Related
|
|
|
Recorded
|
|
|
Principal
|
|
|
Related
|
|
|
|
Investment
|
|
|
Balance
|
|
|
Allowance
|
|
|
Investment
|
|
|
Balance
|
|
|
Allowance
|
|
With no related allowance recorded
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Construction and land development
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commercial
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
337
|
|
|
$
|
337
|
|
|
$
|
-
|
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
337
|
|
|
|
337
|
|
|
|
-
|
|
Commercial real estate
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Owner occupied
|
|
|
2,780
|
|
|
|
2,795
|
|
|
|
-
|
|
|
|
2,089
|
|
|
|
2,104
|
|
|
|
-
|
|
Non-owner occupied
|
|
|
1,991
|
|
|
|
1,991
|
|
|
|
-
|
|
|
|
2,304
|
|
|
|
2,304
|
|
|
|
-
|
|
|
|
|
4,771
|
|
|
|
4,786
|
|
|
|
-
|
|
|
|
4,393
|
|
|
|
4,408
|
|
|
|
-
|
|
Consumer real estate
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Home equity lines
|
|
|
300
|
|
|
|
300
|
|
|
|
-
|
|
|
|
300
|
|
|
|
300
|
|
|
|
-
|
|
Secured by 1-4 family residential
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
First deed of trust
|
|
|
1,937
|
|
|
|
1,940
|
|
|
|
-
|
|
|
|
1,752
|
|
|
|
1,774
|
|
|
|
-
|
|
Second deed of trust
|
|
|
699
|
|
|
|
992
|
|
|
|
-
|
|
|
|
752
|
|
|
|
960
|
|
|
|
-
|
|
|
|
|
2,936
|
|
|
|
3,232
|
|
|
|
-
|
|
|
|
2,804
|
|
|
|
3,034
|
|
|
|
-
|
|
Commercial and industrial loans
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(except those secured by real estate)
|
|
|
141
|
|
|
|
141
|
|
|
|
-
|
|
|
|
211
|
|
|
|
373
|
|
|
|
-
|
|
|
|
|
7,848
|
|
|
|
8,159
|
|
|
|
-
|
|
|
|
7,745
|
|
|
|
8,152
|
|
|
|
-
|
|
With an allowance recorded
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commercial real estate
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Owner occupied
|
|
|
1,125
|
|
|
|
1,125
|
|
|
|
9
|
|
|
|
1,414
|
|
|
|
1,414
|
|
|
|
15
|
|
|
|
|
1,125
|
|
|
|
1,125
|
|
|
|
9
|
|
|
|
1,414
|
|
|
|
1,414
|
|
|
|
15
|
|
Consumer real estate
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Secured by 1-4 family residential
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
First deed of trust
|
|
|
74
|
|
|
|
74
|
|
|
|
8
|
|
|
|
78
|
|
|
|
78
|
|
|
|
9
|
|
|
|
|
74
|
|
|
|
74
|
|
|
|
8
|
|
|
|
78
|
|
|
|
78
|
|
|
|
9
|
|
Commercial and industrial loans
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(except those secured by real estate)
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
135
|
|
|
|
334
|
|
|
|
135
|
|
|
|
|
1,199
|
|
|
|
1,199
|
|
|
|
17
|
|
|
|
1,627
|
|
|
|
1,826
|
|
|
|
159
|
|
Total
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Construction and land development
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commercial
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
337
|
|
|
|
337
|
|
|
|
-
|
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
337
|
|
|
|
337
|
|
|
|
-
|
|
Commercial real estate
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Owner occupied
|
|
|
3,905
|
|
|
|
3,920
|
|
|
|
9
|
|
|
|
3,503
|
|
|
|
3,518
|
|
|
|
15
|
|
Non-owner occupied
|
|
|
1,991
|
|
|
|
1,991
|
|
|
|
-
|
|
|
|
2,304
|
|
|
|
2,304
|
|
|
|
-
|
|
|
|
|
5,896
|
|
|
|
5,911
|
|
|
|
9
|
|
|
|
5,807
|
|
|
|
5,822
|
|
|
|
15
|
|
Consumer real estate
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Home equity lines
|
|
|
300
|
|
|
|
300
|
|
|
|
-
|
|
|
|
300
|
|
|
|
300
|
|
|
|
-
|
|
Secured by 1-4 family residential,
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
First deed of trust
|
|
|
2,011
|
|
|
|
2,014
|
|
|
|
8
|
|
|
|
1,830
|
|
|
|
1,852
|
|
|
|
9
|
|
Second deed of trust
|
|
|
699
|
|
|
|
992
|
|
|
|
-
|
|
|
|
752
|
|
|
|
960
|
|
|
|
-
|
|
|
|
|
3,010
|
|
|
|
3,306
|
|
|
|
8
|
|
|
|
2,882
|
|
|
|
3,112
|
|
|
|
9
|
|
Commercial and industrial loans
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(except those secured by real estate)
|
|
|
141
|
|
|
|
141
|
|
|
|
-
|
|
|
|
346
|
|
|
|
707
|
|
|
|
135
|
|
|
|
$
|
9,047
|
|
|
$
|
9,358
|
|
|
$
|
17
|
|
|
$
|
9,372
|
|
|
$
|
9,978
|
|
|
$
|
159
|
|
The following is a summary of average recorded
investment in impaired loans with and without valuation allowance and interest income recognized on those loans for periods indicated
(in thousands):
|
|
December 31,
|
|
|
|
2020
|
|
|
2019
|
|
|
|
Average
|
|
|
Interest
|
|
|
Average
|
|
|
Interest
|
|
|
|
Recorded
|
|
|
Income
|
|
|
Recorded
|
|
|
Income
|
|
|
|
Investment
|
|
|
Recognized
|
|
|
Investment
|
|
|
Recognized
|
|
With no related allowance recorded
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Construction and land development
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Residential
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
81
|
|
|
$
|
-
|
|
Commercial
|
|
|
221
|
|
|
|
-
|
|
|
|
329
|
|
|
|
-
|
|
|
|
|
221
|
|
|
|
-
|
|
|
|
410
|
|
|
|
-
|
|
Commercial real estate
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Owner occupied
|
|
|
3,189
|
|
|
|
124
|
|
|
|
2,695
|
|
|
|
143
|
|
Non-owner occupied
|
|
|
1,980
|
|
|
|
89
|
|
|
|
2,434
|
|
|
|
128
|
|
|
|
|
5,169
|
|
|
|
213
|
|
|
|
5,129
|
|
|
|
271
|
|
Consumer real estate
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Home equity lines
|
|
|
300
|
|
|
|
23
|
|
|
|
318
|
|
|
|
19
|
|
Secured by 1-4 family residential
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
First deed of trust
|
|
|
2,069
|
|
|
|
66
|
|
|
|
2,280
|
|
|
|
76
|
|
Second deed of trust
|
|
|
802
|
|
|
|
46
|
|
|
|
810
|
|
|
|
40
|
|
|
|
|
3,171
|
|
|
|
135
|
|
|
|
3,408
|
|
|
|
135
|
|
Commercial and industrial loans
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(except those secured by real estate)
|
|
|
151
|
|
|
|
1
|
|
|
|
626
|
|
|
|
17
|
|
|
|
|
8,712
|
|
|
|
349
|
|
|
|
9,573
|
|
|
|
423
|
|
With an allowance recorded
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commercial real estate
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Owner occupied
|
|
|
913
|
|
|
|
32
|
|
|
|
1,432
|
|
|
|
43
|
|
|
|
|
913
|
|
|
|
32
|
|
|
|
1,432
|
|
|
|
43
|
|
Consumer real estate
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Secured by 1-4 family residential
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
First deed of trust
|
|
|
76
|
|
|
|
4
|
|
|
|
166
|
|
|
|
6
|
|
Second deed of trust
|
|
|
26
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
|
102
|
|
|
|
4
|
|
|
|
166
|
|
|
|
6
|
|
Commercial and industrial loans
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(except those secured by real estate)
|
|
|
129
|
|
|
|
-
|
|
|
|
225
|
|
|
|
1
|
|
Consumer and other
|
|
|
-
|
|
|
|
-
|
|
|
|
6
|
|
|
|
-
|
|
|
|
|
1,144
|
|
|
|
36
|
|
|
|
1,829
|
|
|
|
50
|
|
Total
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Construction and land development
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Residential
|
|
|
-
|
|
|
|
-
|
|
|
|
81
|
|
|
|
-
|
|
Commercial
|
|
|
221
|
|
|
|
-
|
|
|
|
329
|
|
|
|
-
|
|
|
|
|
221
|
|
|
|
-
|
|
|
|
410
|
|
|
|
-
|
|
Commercial real estate
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Owner occupied
|
|
|
4,102
|
|
|
|
156
|
|
|
|
4,127
|
|
|
|
186
|
|
Non-owner occupied
|
|
|
1,980
|
|
|
|
89
|
|
|
|
2,434
|
|
|
|
128
|
|
|
|
|
6,082
|
|
|
|
213
|
|
|
|
6,561
|
|
|
|
314
|
|
Consumer real estate
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Home equity lines
|
|
|
300
|
|
|
|
23
|
|
|
|
318
|
|
|
|
19
|
|
Secured by 1-4 family residential,
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
First deed of trust
|
|
|
2,145
|
|
|
|
70
|
|
|
|
2,446
|
|
|
|
82
|
|
Second deed of trust
|
|
|
828
|
|
|
|
46
|
|
|
|
810
|
|
|
|
40
|
|
|
|
|
3,273
|
|
|
|
135
|
|
|
|
3,574
|
|
|
|
141
|
|
Commercial and industrial loans
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(except those secured by real estate)
|
|
|
280
|
|
|
|
1
|
|
|
|
851
|
|
|
|
18
|
|
Consumer and other
|
|
|
-
|
|
|
|
-
|
|
|
|
6
|
|
|
|
-
|
|
|
|
$
|
9,856
|
|
|
$
|
385
|
|
|
$
|
11,402
|
|
|
$
|
473
|
|
As of December 31, 2020 and 2019,
the Company had impaired loans of $1,577,000 and $1,868,000, respectively, which were on nonaccrual status. These loans had no
valuation allowances as of December 31, 2020 and $135,000 as of December 31, 2019. Cumulative interest income that would
have been recorded had nonaccrual loans been performing would have been $84,000 and $136,000 for 2020 and 2019, respectively.
Included in impaired loans are loans classified
as TDRs. A modification of a loan’s terms constitutes a TDR if the creditor grants a concession to the borrower for economic
or legal reasons related to the borrowers financial difficulties that it would not otherwise consider. For loans classified as
impaired TDRs, the Company further evaluates the loans as performing or nonaccrual. To restore a nonaccrual loan that has been
formally restructured in a TDR to accrual status, we perform a current, well documented credit analysis supporting a return to
accrual status based on the borrower’s financial condition and prospects for repayment under the revised terms. Otherwise,
the TDR must remain in nonaccrual status. The analysis considers the borrower’s sustained historical repayment performance
for a reasonable period to the return-to-accrual date, but may take into account payments made for a reasonable period prior to
the restructuring if the payments are consistent with the modified terms. A sustained period of repayment performance generally
would be a minimum of six months and would involve payments in the form of cash or cash equivalents.
An accruing loan that is modified in a
TDR can remain in accrual status if, based on a current well-documented credit analysis, collection of principal and interest in
accordance with the modified terms is reasonably assured, and the borrower has demonstrated sustained historical repayment performance
for a reasonable period before modification. The following is a summary of performing and nonaccrual TDRs and the related specific
valuation allowance by portfolio segment as of December 31, 2020 and 2019 (dollars in thousands).
|
|
|
|
|
|
|
|
|
|
|
Specific
|
|
|
|
|
|
|
|
|
|
|
|
|
Valuation
|
|
|
|
Total
|
|
|
Performing
|
|
|
Nonaccrual
|
|
|
Allowance
|
|
December 31, 2020
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commercial real estate
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Owner occupied
|
|
$
|
3,396
|
|
|
$
|
3,396
|
|
|
$
|
-
|
|
|
$
|
-
|
|
Non-owner occupied
|
|
|
1,991
|
|
|
|
1,688
|
|
|
|
303
|
|
|
|
-
|
|
|
|
|
5,387
|
|
|
|
5,084
|
|
|
|
303
|
|
|
|
-
|
|
Consumer real estate
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Secured by 1-4 family residential
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
First deeds of trust
|
|
|
1,460
|
|
|
|
910
|
|
|
|
550
|
|
|
|
9
|
|
Second deeds of trust
|
|
|
617
|
|
|
|
556
|
|
|
|
61
|
|
|
|
8
|
|
|
|
|
2,077
|
|
|
|
1,466
|
|
|
|
611
|
|
|
|
17
|
|
Commercial and
industrial loans (except those secured by real estate)
|
|
|
27
|
|
|
|
-
|
|
|
|
27
|
|
|
|
-
|
|
|
|
$
|
7,491
|
|
|
$
|
6,550
|
|
|
$
|
941
|
|
|
$
|
17
|
|
Number of loans
|
|
|
34
|
|
|
|
27
|
|
|
|
7
|
|
|
|
2
|
|
|
|
|
|
|
|
|
|
|
|
|
Specific
|
|
|
|
|
|
|
|
|
|
|
|
|
Valuation
|
|
|
|
Total
|
|
|
Performing
|
|
|
Nonaccrual
|
|
|
Allowance
|
|
December 31, 2019
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commercial real estate
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Owner occupied
|
|
$
|
3,502
|
|
|
$
|
3,502
|
|
|
$
|
-
|
|
|
$
|
15
|
|
Non-owner occupied
|
|
|
2,304
|
|
|
|
1,807
|
|
|
|
497
|
|
|
|
-
|
|
|
|
|
5,806
|
|
|
|
5,309
|
|
|
|
497
|
|
|
|
15
|
|
Consumer real estate
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Secured by 1-4 family residential
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
First deeds of trust
|
|
|
1,641
|
|
|
|
881
|
|
|
|
760
|
|
|
|
9
|
|
Second deeds of trust
|
|
|
752
|
|
|
|
689
|
|
|
|
63
|
|
|
|
-
|
|
|
|
|
2,393
|
|
|
|
1,570
|
|
|
|
823
|
|
|
|
9
|
|
Commercial and
industrial loans (except those secured by real estate)
|
|
|
211
|
|
|
|
180
|
|
|
|
31
|
|
|
|
-
|
|
|
|
$
|
8,410
|
|
|
$
|
7,059
|
|
|
$
|
1,351
|
|
|
$
|
24
|
|
Number of loans
|
|
|
38
|
|
|
|
29
|
|
|
|
9
|
|
|
|
3
|
|
The following table provides information
about TDRs identified during the indicated periods (dollars in thousands).
|
|
December 31, 2020
|
|
|
December 31, 2019
|
|
|
|
|
|
|
Pre-
|
|
|
Post-
|
|
|
|
|
|
Pre-
|
|
|
Post-
|
|
|
|
|
|
|
Modification
|
|
|
Modification
|
|
|
|
|
|
Modification
|
|
|
Modification
|
|
|
|
Number of
|
|
|
Recorded
|
|
|
Recorded
|
|
|
Number of
|
|
|
Recorded
|
|
|
Recorded
|
|
|
|
Loans
|
|
|
Balance
|
|
|
Balance
|
|
|
Loans
|
|
|
Balance
|
|
|
Balance
|
|
Commercial real estate
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-owner occupied
|
|
|
1
|
|
|
$
|
311
|
|
|
$
|
311
|
|
|
|
1
|
|
|
$
|
515
|
|
|
$
|
515
|
|
|
|
|
1
|
|
|
$
|
311
|
|
|
$
|
311
|
|
|
|
1
|
|
|
$
|
515
|
|
|
$
|
515
|
|
There were no defaults on TDRs that were
modified as TDRs during the twelve month periods ended December 31, 2020 and 2019.
The CARES Act, as amended by the CAA, permits
financial institutions to suspend requirements under GAAP for loan modifications to borrowers affected by COVID-19 that would otherwise
be characterized as TDRs and suspend any determination related thereto if (i) the loan modification is made between March 1,
2020 and the earlier of January 1, 2022 or 60 days after the end of the COVID-19 emergency declaration and (ii) the applicable
loan was not more than 30 days past due as of December 31, 2019. In addition, federal bank regulatory authorities have issued
guidance to encourage financial institutions to make loan modifications for borrowers affected by COVID-19 and have assured financial
institutions that they will neither receive supervisory criticism for such prudent loan modifications, nor be required by examiners
to automatically categorize COVID-19-related loan modifications as TDRs. As of December 31, 2020, the Company had approximately
$38.0 million in loans still under their modified terms. The Company’s modification program primarily included payment deferrals
and interest only modifications.
Note 4. Allowance
for Loan Losses
Activity in the allowance for loan losses
was as follows for the periods indicated (in thousands):
|
|
|
|
|
Provision for
|
|
|
|
|
|
|
|
|
|
|
|
|
Beginning
|
|
|
(Recovery of)
|
|
|
|
|
|
|
|
|
Ending
|
|
|
|
Balance
|
|
|
Loan Losses
|
|
|
Charge-offs
|
|
|
Recoveries
|
|
|
Balance
|
|
Year Ended December 31, 2020
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Construction and land development
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Residential
|
|
$
|
48
|
|
|
$
|
141
|
|
|
$
|
-
|
|
|
$
|
25
|
|
|
$
|
214
|
|
Commercial
|
|
|
137
|
|
|
|
148
|
|
|
|
-
|
|
|
|
-
|
|
|
|
285
|
|
|
|
|
185
|
|
|
|
289
|
|
|
|
-
|
|
|
|
25
|
|
|
|
499
|
|
Commercial real estate
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Owner occupied
|
|
|
671
|
|
|
|
376
|
|
|
|
-
|
|
|
|
-
|
|
|
|
1,047
|
|
Non-owner occupied
|
|
|
831
|
|
|
|
590
|
|
|
|
-
|
|
|
|
-
|
|
|
|
1,421
|
|
Multifamily
|
|
|
85
|
|
|
|
(38
|
)
|
|
|
-
|
|
|
|
-
|
|
|
|
47
|
|
Farmland
|
|
|
2
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
2
|
|
|
|
|
1,589
|
|
|
|
928
|
|
|
|
-
|
|
|
|
-
|
|
|
|
2,517
|
|
Consumer real estate
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Home equity lines
|
|
|
271
|
|
|
|
(247
|
)
|
|
|
-
|
|
|
|
-
|
|
|
|
24
|
|
Secured by 1-4 family residential
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
First deed of trust
|
|
|
343
|
|
|
|
(190
|
)
|
|
|
-
|
|
|
|
13
|
|
|
|
166
|
|
Second deed of trust
|
|
|
64
|
|
|
|
45
|
|
|
|
(85
|
)
|
|
|
55
|
|
|
|
79
|
|
|
|
|
678
|
|
|
|
(392
|
)
|
|
|
(85
|
)
|
|
|
68
|
|
|
|
269
|
|
Commercial and industrial loans
(except those secured by real estate)
|
|
|
572
|
|
|
|
(58
|
)
|
|
|
(135
|
)
|
|
|
29
|
|
|
|
408
|
|
Student loans
|
|
|
108
|
|
|
|
27
|
|
|
|
(48
|
)
|
|
|
-
|
|
|
|
87
|
|
Consumer and other
|
|
|
30
|
|
|
|
26
|
|
|
|
(24
|
)
|
|
|
4
|
|
|
|
36
|
|
Unallocated
|
|
|
24
|
|
|
|
130
|
|
|
|
-
|
|
|
|
-
|
|
|
|
154
|
|
|
|
$
|
3,186
|
|
|
$
|
950
|
|
|
$
|
(292
|
)
|
|
$
|
126
|
|
|
$
|
3,970
|
|
|
|
|
|
|
Provision for
|
|
|
|
|
|
|
|
|
|
|
|
|
Beginning
|
|
|
(Recovery of)
|
|
|
|
|
|
|
|
|
Ending
|
|
|
|
Balance
|
|
|
Loan Losses
|
|
|
Charge-offs
|
|
|
Recoveries
|
|
|
Balance
|
|
Year Ended December 31, 2019
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Construction and land development
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Residential
|
|
$
|
42
|
|
|
$
|
(1
|
)
|
|
$
|
-
|
|
|
$
|
7
|
|
|
$
|
48
|
|
Commercial
|
|
|
220
|
|
|
|
(85
|
)
|
|
|
-
|
|
|
|
2
|
|
|
|
137
|
|
|
|
|
262
|
|
|
|
(86
|
)
|
|
|
-
|
|
|
|
9
|
|
|
|
185
|
|
Commercial real estate
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Owner occupied
|
|
|
673
|
|
|
|
(2
|
)
|
|
|
-
|
|
|
|
-
|
|
|
|
671
|
|
Non-owner occupied
|
|
|
673
|
|
|
|
158
|
|
|
|
-
|
|
|
|
-
|
|
|
|
831
|
|
Multifamily
|
|
|
87
|
|
|
|
(2
|
)
|
|
|
-
|
|
|
|
-
|
|
|
|
85
|
|
Farmland
|
|
|
2
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
2
|
|
|
|
|
1,435
|
|
|
|
154
|
|
|
|
-
|
|
|
|
-
|
|
|
|
1,589
|
|
Consumer real estate
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Home equity lines
|
|
|
244
|
|
|
|
50
|
|
|
|
(35
|
)
|
|
|
12
|
|
|
|
271
|
|
Secured by 1-4 family residential
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
First deed of trust
|
|
|
385
|
|
|
|
(56
|
)
|
|
|
-
|
|
|
|
14
|
|
|
|
343
|
|
Second deed of trust
|
|
|
51
|
|
|
|
(56
|
)
|
|
|
-
|
|
|
|
69
|
|
|
|
64
|
|
|
|
|
680
|
|
|
|
(62
|
)
|
|
|
(35
|
)
|
|
|
95
|
|
|
|
678
|
|
Commercial and industrial loans(except those secured by real estate)
|
|
|
308
|
|
|
|
239
|
|
|
|
(64
|
)
|
|
|
89
|
|
|
|
572
|
|
Student loans
|
|
|
121
|
|
|
|
80
|
|
|
|
(93
|
)
|
|
|
-
|
|
|
|
108
|
|
Consumer and other
|
|
|
34
|
|
|
|
(3
|
)
|
|
|
(26
|
)
|
|
|
25
|
|
|
|
30
|
|
Unallocated
|
|
|
211
|
|
|
|
(187
|
)
|
|
|
-
|
|
|
|
-
|
|
|
|
24
|
|
|
|
$
|
3,051
|
|
|
$
|
135
|
|
|
$
|
(218
|
)
|
|
$
|
218
|
|
|
$
|
3,186
|
|
The amount of the loan loss provision (recovery)
is determined by an evaluation of the level of loans outstanding, the level of nonperforming loans, historical loan loss experience,
delinquency trends, underlying collateral values, the amount of actual losses charged to the reserve in a given period and assessment
of present and anticipated economic conditions. Loans originated under PPP are not considered in the evaluation of the allowance
for loan losses because these loans carry a 100% guarantee from the SBA; however, if the collectability on the guarantee on a loan
is at risk that loan will be included in the evaluation of the allowance for loan losses.
The level of the allowance reflects changes
in the size of the portfolio or in any of its components as well as management’s continuing evaluation of industry concentrations,
specific credit risk, loan loss experience, current loan portfolio quality, and present economic, political and regulatory conditions.
Portions of the allowance may be allocated for specific credits; however, the entire allowance is available for any credit that,
in management’s judgement, should be charged off. While management utilizes its best judgement and information available,
the ultimate adequacy of the allowance is dependent upon a variety of factors beyond the Company’s control, including the
performance of the Company’s loan portfolio, the economy, changes in interest rates and the view of the regulatory authorities
toward loan classifications.
The Company recorded a provision for loan
losses of $950,000 for the year ended December 31, 2020. The provision for loan losses was driven primarily by an increase
in the qualitative factors as a result of the continued economic uncertainty surrounding COVID-19. The increase in the qualitative
factors due to COVID-19 were a result of deterioration in local economic factors such as the higher levels of unemployment and
the increased credit risk due to loan payment deferrals under the CARES Act. The Company believes the current level of allowance
for loan loss reserves are adequate to cover incurred losses. However, the full economic impact of the COVID-19 pandemic is currently
unknown and the Company must continue to monitor our loan portfolio for loss indicators which may require further provisions for
loan losses. The Company recorded a provision for loan losses of $135,000 for the year ended December 31, 2019 because of
an increase in the specific reserves associated with a relationship evaluated individually for impairment.
The allowance for loan losses at each of
the periods presented includes an amount that could not be identified to individual types of loans referred to as the unallocated
portion of the allowance. We recognize the inherent imprecision in estimates of losses due to various uncertainties and the variability
related to the factors used in calculation of the allowance. The allowance for loan losses included an unallocated portion of approximately
$154,000 and $24,000 at December 31, 2020 and December 31, 2019, respectively.
Loans were evaluated for impairment as
follows for the periods indicated (in thousands):
|
|
Recorded Investment in Loans
|
|
|
|
Allowance
|
|
|
Loans
|
|
|
|
Ending
|
|
|
|
|
|
|
|
|
Ending
|
|
|
|
|
|
|
|
|
|
Balance
|
|
|
Individually
|
|
|
Collectively
|
|
|
Balance
|
|
|
Individually
|
|
|
Collectively
|
|
Year Ended December 31, 2020
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Construction and land development
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Residential
|
|
$
|
214
|
|
|
$
|
-
|
|
|
$
|
214
|
|
|
$
|
8,103
|
|
|
$
|
-
|
|
|
$
|
8,103
|
|
Commercial
|
|
|
285
|
|
|
|
-
|
|
|
|
285
|
|
|
|
21,466
|
|
|
|
-
|
|
|
|
21,466
|
|
|
|
|
499
|
|
|
|
-
|
|
|
|
499
|
|
|
|
29,569
|
|
|
|
-
|
|
|
|
29,569
|
|
Commercial real estate
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Owner occupied
|
|
|
1,047
|
|
|
|
9
|
|
|
|
1,038
|
|
|
|
99,784
|
|
|
|
3,905
|
|
|
|
95,879
|
|
Non-owner occupied
|
|
|
1,421
|
|
|
|
-
|
|
|
|
1,421
|
|
|
|
121,184
|
|
|
|
1,991
|
|
|
|
119,193
|
|
Multifamily
|
|
|
47
|
|
|
|
-
|
|
|
|
47
|
|
|
|
9,889
|
|
|
|
-
|
|
|
|
9,889
|
|
Farmland
|
|
|
2
|
|
|
|
-
|
|
|
|
2
|
|
|
|
367
|
|
|
|
-
|
|
|
|
367
|
|
|
|
|
2,517
|
|
|
|
9
|
|
|
|
2,508
|
|
|
|
231,224
|
|
|
|
5,896
|
|
|
|
225,328
|
|
Consumer real estate
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Home equity lines
|
|
|
24
|
|
|
|
-
|
|
|
|
24
|
|
|
|
18,394
|
|
|
|
300
|
|
|
|
18,094
|
|
Secured by 1-4 family residential
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
First deed of trust
|
|
|
166
|
|
|
|
8
|
|
|
|
158
|
|
|
|
57,089
|
|
|
|
2,011
|
|
|
|
55,078
|
|
Second deed of trust
|
|
|
79
|
|
|
|
-
|
|
|
|
79
|
|
|
|
11,097
|
|
|
|
699
|
|
|
|
10,398
|
|
|
|
|
269
|
|
|
|
8
|
|
|
|
261
|
|
|
|
86,580
|
|
|
|
3,010
|
|
|
|
83,570
|
|
Commercial and industrial loans(except those secured by real estate)
|
|
|
408
|
|
|
|
-
|
|
|
|
408
|
|
|
|
181,088
|
|
|
|
141
|
|
|
|
180,947
|
|
Student loans
|
|
|
87
|
|
|
|
-
|
|
|
|
87
|
|
|
|
29,657
|
|
|
|
-
|
|
|
|
29,657
|
|
Consumer and other
|
|
|
190
|
|
|
|
-
|
|
|
|
190
|
|
|
|
2,885
|
|
|
|
-
|
|
|
|
2,885
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
3,970
|
|
|
$
|
17
|
|
|
$
|
3,953
|
|
|
$
|
561,003
|
|
|
$
|
9,047
|
|
|
$
|
551,956
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31, 2019
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Construction and land development
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Residential
|
|
$
|
48
|
|
|
$
|
-
|
|
|
$
|
48
|
|
|
$
|
7,887
|
|
|
$
|
-
|
|
|
$
|
7,887
|
|
Commercial
|
|
|
137
|
|
|
|
-
|
|
|
|
137
|
|
|
|
24,063
|
|
|
|
337
|
|
|
|
23,726
|
|
|
|
|
185
|
|
|
|
-
|
|
|
|
185
|
|
|
|
31,950
|
|
|
|
337
|
|
|
|
31,613
|
|
Commercial real estate
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Owner occupied
|
|
|
671
|
|
|
|
15
|
|
|
|
656
|
|
|
|
98,353
|
|
|
|
3,503
|
|
|
|
94,850
|
|
Non-owner occupied
|
|
|
831
|
|
|
|
-
|
|
|
|
831
|
|
|
|
116,508
|
|
|
|
2,304
|
|
|
|
114,204
|
|
Multifamily
|
|
|
85
|
|
|
|
-
|
|
|
|
85
|
|
|
|
13,332
|
|
|
|
-
|
|
|
|
13,332
|
|
Farmland
|
|
|
2
|
|
|
|
-
|
|
|
|
2
|
|
|
|
156
|
|
|
|
-
|
|
|
|
156
|
|
|
|
|
1,589
|
|
|
|
15
|
|
|
|
1,574
|
|
|
|
228,349
|
|
|
|
5,807
|
|
|
|
222,542
|
|
Consumer real estate
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Home equity lines
|
|
|
271
|
|
|
|
-
|
|
|
|
271
|
|
|
|
21,509
|
|
|
|
300
|
|
|
|
21,209
|
|
Secured by 1-4 family residential
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
First deed of trust
|
|
|
343
|
|
|
|
9
|
|
|
|
334
|
|
|
|
55,856
|
|
|
|
1,830
|
|
|
|
54,026
|
|
Second deed of trust
|
|
|
64
|
|
|
|
-
|
|
|
|
64
|
|
|
|
10,411
|
|
|
|
752
|
|
|
|
9,659
|
|
|
|
|
678
|
|
|
|
9
|
|
|
|
669
|
|
|
|
87,776
|
|
|
|
2,882
|
|
|
|
84,894
|
|
Commercial and industrial loans
(except those secured by real estate)
|
|
|
572
|
|
|
|
135
|
|
|
|
437
|
|
|
|
45,074
|
|
|
|
346
|
|
|
|
44,728
|
|
Student loans
|
|
|
108
|
|
|
|
-
|
|
|
|
108
|
|
|
|
33,525
|
|
|
|
-
|
|
|
|
33,525
|
|
Consumer and other
|
|
|
54
|
|
|
|
-
|
|
|
|
54
|
|
|
|
2,621
|
|
|
|
-
|
|
|
|
2,621
|
|
|
|
$
|
3,186
|
|
|
$
|
159
|
|
|
$
|
3,027
|
|
|
$
|
429,295
|
|
|
$
|
9,372
|
|
|
$
|
419,923
|
|
Note 5. Premises
and Equipment
The following is a summary of premises
and equipment as of December 31, 2020 and 2019 (in thousands):
|
|
2020
|
|
|
2019
|
|
Land
|
|
$
|
4,352
|
|
|
$
|
4,352
|
|
Buildings and improvements
|
|
|
10,796
|
|
|
|
10,601
|
|
Furniture, fixtures and equipment
|
|
|
7,614
|
|
|
|
7,479
|
|
Total premises and equipment
|
|
|
22,762
|
|
|
|
22,432
|
|
Less: Accumulated depreciation and amortization
|
|
|
(10,983
|
)
|
|
|
(10,396
|
)
|
Premises and equipment, net
|
|
$
|
11,779
|
|
|
$
|
12,036
|
|
Depreciation and amortization of premises
and equipment for 2020 and 2019 amounted to $586,000 and $644,000, respectively.
Note 6. Investment
in Bank Owned Life Insurance
The Bank is owner and designated beneficiary
on life insurance policies in the aggregate face amount of $13,730,000 covering certain of its directors and executive officers.
The earnings from these policies are used to offset expenses related to retirement plans. The cash surrender value of these policies
at December 31, 2020 and 2019 was approximately $7,806,000 and $7,612,000, respectively.
Note 7. Deposits
Deposits as of December 31, 2020 and
2019 were as follows (dollars in thousands):
|
|
December 31, 2020
|
|
|
December 31, 2019
|
|
|
|
Amount
|
|
|
%
|
|
|
Amount
|
|
|
%
|
|
Demand accounts
|
|
$
|
222,305
|
|
|
|
37.8
|
%
|
|
$
|
131,228
|
|
|
|
29.6
|
%
|
Interest checking accounts
|
|
|
70,342
|
|
|
|
11.9
|
%
|
|
|
48,427
|
|
|
|
10.9
|
%
|
Money market accounts
|
|
|
152,726
|
|
|
|
26.0
|
%
|
|
|
99,955
|
|
|
|
22.6
|
%
|
Savings accounts
|
|
|
38,083
|
|
|
|
6.5
|
%
|
|
|
26,396
|
|
|
|
6.0
|
%
|
Time deposits of $250,000 and over
|
|
|
16,014
|
|
|
|
2.7
|
%
|
|
|
22,327
|
|
|
|
5.0
|
%
|
Other time deposits
|
|
|
88,912
|
|
|
|
15.1
|
%
|
|
|
114,875
|
|
|
|
25.9
|
%
|
Total
|
|
$
|
588,382
|
|
|
|
100.0
|
%
|
|
$
|
443,208
|
|
|
|
100.0
|
%
|
The following are the scheduled maturities
of time deposits as of December 31, 2020 (in thousands):
|
|
|
|
|
|
Greater Than
|
|
|
|
|
Year Ending
|
|
|
Less Than
|
|
|
or Equal to
|
|
|
|
|
December 31,
|
|
|
$250,000
|
|
|
$250,000
|
|
|
Total
|
|
2021
|
|
|
$
|
64,064
|
|
|
$
|
11,349
|
|
|
$
|
75,413
|
|
2022
|
|
|
|
15,583
|
|
|
|
4,403
|
|
|
|
19,986
|
|
2023
|
|
|
|
5,786
|
|
|
|
262
|
|
|
|
6,048
|
|
2024
|
|
|
|
1,338
|
|
|
|
-
|
|
|
|
1,338
|
|
2025
|
|
|
|
2,141
|
|
|
|
-
|
|
|
|
2,141
|
|
Total
|
|
|
$
|
88,912
|
|
|
$
|
16,014
|
|
|
$
|
104,926
|
|
Deposits held at the Company by related
parties, which include officers, directors, greater than 5% shareholders and companies in which directors of the board have a
significant ownership interest, approximated $14,159,000 and $15,067,000 at December 31, 2020 and 2019, respectively.
Note 8. Borrowings
The Company uses both short-term and long-term
borrowings to supplement deposits when they are available at a lower overall cost to the Company or they can be invested at a positive
rate of return.
As a member of the Federal Home Loan Bank
of Atlanta, the Bank is required to own capital stock in the FHLB and is authorized to apply for advances from the FHLB. The Company
held $484,000 in FHLB stock at December 31, 2020 and $1,694,000 at December 31, 2019, which is held at cost. Each FHLB
credit program has its own interest rate, which may be fixed or variable, and range of maturities. The FHLB may prescribe the acceptable
uses to which the advances may be put, as well as on the size of the advances and repayment provisions. FHLB borrowings are secured
by the pledge of commercial loans and 1-4 family residential loans. The Company had no outstanding FHLB advances at December 31,
2020. The Company prepaid all of its outstanding FHLB advances during year ended December 31, 2020, which resulted in the
recognition of $696,000 in in prepayment fees. The Company had FHLB advances of $29,000,000 at December 31, 2019 maturing
through 2023.
Through the Federal Reserve Bank, the Company
can borrow funds through the Payment Protection Program Liquidity Fund (“PPPLF”) which are secured by the Company’s
PPP loans. As of December 31, 2020, the Company had $41.5 million in outstanding advances under the PPPLF. The Company’s
available borrowing capacity under the PPPLF as of December 31, 2020 was $95.2 million.
The Company had advances from the FHLB
for the periods indicated that consisted of the following (dollars in thousands):
Year Ended December 31, 2019
|
|
|
Maturity
|
|
|
Interest
|
|
|
Advance
|
|
Type
|
|
Date
|
|
|
Rate
|
|
|
Amount
|
|
Variable
|
|
|
June 29, 2020
|
|
|
|
1.780
|
%
|
|
$
|
8,000
|
|
Fixed Rate
|
|
|
June 28, 2021
|
|
|
|
2.854
|
%
|
|
|
3,000
|
|
Fixed Rate
|
|
|
July 6, 2020
|
|
|
|
2.770
|
%
|
|
|
5,000
|
|
Fixed Rate
|
|
|
September 27, 2021
|
|
|
|
3.102
|
%
|
|
|
2,000
|
|
Fixed Rate
|
|
|
September 25, 2023
|
|
|
|
3.212
|
%
|
|
|
2,000
|
|
Fixed Rate
|
|
|
November 15, 2021
|
|
|
|
3.149
|
%
|
|
|
6,500
|
|
Fixed Rate
|
|
|
December 11, 2023
|
|
|
|
3.289
|
%
|
|
|
2,500
|
|
|
|
|
|
|
|
|
|
|
|
$
|
29,000
|
|
The Company uses federal funds purchased
and repurchase agreements for short-term borrowing needs. Securities sold under agreements to repurchase are classified as borrowings
and generally mature within one to four days from the transaction date. Securities sold under agreements to repurchase are reflected
at the amount of cash received in connection with the transaction. The Company may be required to provide additional collateral
based on the fair value of the underlying securities. There were no borrowings against the lines at December 31, 2020. The
carrying value of these short term borrowing agreements was $5,317,000 at December 31, 2019.
The Company’s unused lines of credit
for future borrowings total approximately $93.1 million at December 31, 2020, which consists of $50.3 million available from
the FHLB, $10 million on revolving bank line of credit, $7.8 million under secured federal funds agreements with third party financial
institutions, $25 million in repurchase lines of credit with third party financial institutions. Additional loans and securities
are available that can be pledged as collateral for future borrowings from the Federal Reserve Bank of Richmond or the FHLB above
the current lendable collateral value.
Information related to borrowings as of
December 31, 2020 and 2019 is as follows (dollars in thousands):
|
|
Year Ended December 31,
|
|
|
|
2020
|
|
|
2019
|
|
Balance outstanding at end of year
|
|
|
|
|
|
|
|
|
Maximum outstanding during the year
|
|
|
|
|
|
|
|
|
Federal Funds Purchased
|
|
$
|
4,559
|
|
|
$
|
6,594
|
|
FHLB advances
|
|
|
51,000
|
|
|
|
31,000
|
|
PPPLF
|
|
|
45,120
|
|
|
|
-
|
|
Balance outstanding at end of year
|
|
|
|
|
|
|
|
|
Federal Funds Purchased
|
|
|
-
|
|
|
|
5,317
|
|
FHLB advances
|
|
|
-
|
|
|
|
29,000
|
|
PPPLF
|
|
|
41,529
|
|
|
|
-
|
|
Average amount outstanding during the year
|
|
|
|
|
|
|
|
|
Federal Funds Purchased
|
|
|
91
|
|
|
|
456
|
|
FHLB advances
|
|
|
27,785
|
|
|
|
22,693
|
|
PPPLF
|
|
|
28,857
|
|
|
|
-
|
|
Average interest rate during the year
|
|
|
|
|
|
|
|
|
Federal Funds Purchased
|
|
|
1.65
|
%
|
|
|
2.32
|
%
|
FHLB advances
|
|
|
2.17
|
%
|
|
|
3.05
|
%
|
PPPLF
|
|
|
0.35
|
%
|
|
|
0.00
|
%
|
Average interest rate at end of year
|
|
|
|
|
|
|
|
|
Federal Funds Purchased
|
|
|
0.00
|
%
|
|
|
2.54
|
%
|
FHLB advances
|
|
|
0.00
|
%
|
|
|
2.69
|
%
|
PPPLF
|
|
|
0.35
|
%
|
|
|
0.00
|
%
|
Note 9. Income
Taxes
The following summarizes the tax effects
of temporary differences that comprise deferred tax assets and liabilities at December 31, 2020 and 2019 (in thousands):
|
|
2020
|
|
|
2019
|
|
Deferred tax assets
|
|
|
|
|
|
|
|
|
Net operating loss carryforward
|
|
$
|
217
|
|
|
$
|
2,995
|
|
Capital loss carryforward
|
|
|
25
|
|
|
|
25
|
|
State net operating loss carryforward
|
|
|
-
|
|
|
|
97
|
|
AMT credit
|
|
|
-
|
|
|
|
11
|
|
Allowance for loan losses
|
|
|
834
|
|
|
|
669
|
|
Deferred Cost, net of fees
|
|
|
430
|
|
|
|
-
|
|
Interest on nonaccrual loans
|
|
|
18
|
|
|
|
29
|
|
Expenses and writedowns related to foreclosed
|
|
|
|
|
|
|
|
|
property
|
|
|
66
|
|
|
|
97
|
|
Stock compensation
|
|
|
34
|
|
|
|
10
|
|
Employee benefits
|
|
|
794
|
|
|
|
792
|
|
Pension expense
|
|
|
3
|
|
|
|
8
|
|
Depreciation
|
|
|
31
|
|
|
|
134
|
|
Other, net
|
|
|
29
|
|
|
|
11
|
|
|
|
|
|
|
|
|
|
|
Total deferred tax assets
|
|
|
2,481
|
|
|
|
4,878
|
|
|
|
|
|
|
|
|
|
|
Deferred tax liabilities
|
|
|
|
|
|
|
|
|
Unrealized gain on available for sale securities
|
|
|
124
|
|
|
|
50
|
|
|
|
|
|
|
|
|
|
|
Total deferred tax liabilities
|
|
|
124
|
|
|
|
50
|
|
|
|
|
|
|
|
|
|
|
Net deferred tax asset
|
|
$
|
2,357
|
|
|
$
|
4,828
|
|
The net deferred tax asset is included
in other assets on the consolidated balance sheet. ASC Topic 740, Income Taxes, requires that companies assess whether
a valuation allowance should be established against their deferred tax assets based on the consideration of all available evidence
using a “more likely than not” standard. Management considers both positive and negative evidence and analyzes changes
in near-term market conditions as well as other factors which may impact future operating results. In making such judgments, significant
weight is given to evidence that can be objectively verified. The deferred tax assets are analyzed quarterly for changes affecting
realization.
In assessing the Company’s ability
to realize its net deferred tax asset, management considers whether it is more likely than not that some portion or all of the
net deferred tax asset will or will not be realized. The Company’s ultimate realization of the net deferred tax asset
is dependent upon the generation of future taxable income during the periods in which temporary differences become deductible.
Management considers the nature and amount of historical and projected future taxable income, the scheduled reversal of deferred
tax assets and liabilities, and available tax planning strategies in making this assessment. The amount of net deferred taxes
recognized could be impacted by changes to any of these variables.
Each quarter, the Company weighs both the
positive and negative information with respect to realization of the net deferred tax asset and analyzes its position as to whether
or not a valuation allowance is required.
Given the consistent earnings and stable
asset quality, the Company’s analysis concluded that, it is more likely than not that the Company will generate sufficient
taxable income within the applicable carry-forward periods to realize its net deferred tax asset.
The net operating losses available to offset
future taxable income amounted to $1,031,000 at December 31, 2020 and will begin expiring in 2028.
The income tax expense charged to operations
for the years ended December 31, 2020 and 2019 consists of the following (in thousands):
|
|
2020
|
|
|
2019
|
|
Current tax expense (benefit)
|
|
$
|
92
|
|
|
$
|
(33
|
)
|
Deferred tax expense
|
|
|
2,393
|
|
|
|
1,197
|
|
|
|
|
|
|
|
|
|
|
Provision for income taxes
|
|
$
|
2,485
|
|
|
$
|
1,164
|
|
A reconciliation of income taxes computed
at the federal statutory income tax rate to total income taxes is as follows for the years ended December 31, 2020 and 2019
(in thousands):
|
|
2020
|
|
|
2019
|
|
Net income before income taxes
|
|
$
|
11,039
|
|
|
$
|
5,641
|
|
|
|
|
|
|
|
|
|
|
Computed "expected" tax expense
|
|
$
|
2,318
|
|
|
$
|
1,185
|
|
State taxes, net of fed
|
|
|
201
|
|
|
|
15
|
|
Cash surrender value of life insurance
|
|
|
(41
|
)
|
|
|
(37
|
)
|
Other
|
|
|
7
|
|
|
|
1
|
|
Provision for income taxes
|
|
$
|
2,485
|
|
|
$
|
1,164
|
|
Commercial banking organizations conducting
business in Virginia are not subject to Virginia income taxes. Instead, they are subject to a franchise tax based on bank capital.
The Company recorded franchise tax expense, within other operating expense, of approximately $439,000 and $385,000 for the years
ended December 31, 2020 and 2019, respectively. With few exceptions, the Company is no longer subject to U.S. Federal, State,
or local income tax examinations by tax authorities for years prior to 2017.
Note 10. Earnings
per Share
The following table presents the basic
and diluted earnings per share computations (in thousands except per share data):
|
|
2020
|
|
|
2019
|
|
Numerator
|
|
|
|
|
|
|
|
|
Net income - basic and diluted
|
|
$
|
8,554
|
|
|
$
|
4,477
|
|
|
|
|
|
|
|
|
|
|
Denominator
|
|
|
|
|
|
|
|
|
Weighted average shares outstanding - basic
|
|
|
1,459
|
|
|
|
1,445
|
|
Dilutive effect of common stock options
|
|
|
-
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
Weighted average shares outstanding - diluted
|
|
|
1,459
|
|
|
|
1,445
|
|
|
|
|
|
|
|
|
|
|
Earnings per share – basic
|
|
$
|
5.86
|
|
|
$
|
3.10
|
|
Earnings per share – diluted
|
|
$
|
5.86
|
|
|
$
|
3.10
|
|
Applicable guidance requires that outstanding,
unvested share-based payment awards that contain voting rights and rights to nonforfeitable dividends participate in undistributed
earnings with common shareholders. Accordingly, the weighted average number of shares of the Company’s common stock used
in the calculation of basic and diluted net income per common share includes unvested shares of the Company’s outstanding
restricted common stock.
The vesting of 6,573 and 4,155 restricted
stock units outstanding as of December 31, 2020 and 2019, respectively, are dependent upon meeting certain performance criteria.
As of December 31, 2020 and December 31, 2019, it was indeterminable whether these non-vested restricted stock units
will vest and as such those shares are excluded from common shares issued and outstanding at each date and are not included in
the computation of earnings per share for any period presented.
Outstanding options and warrants to purchase
common stock were considered in the computation of diluted earnings per share for the periods presented. Stock options for 592
and 555 shares were not included in computing diluted earnings per share at December 31, 2020 and 2019, respectively, because
their effects were anti-dilutive.
Note 11. Lease
Commitments
The following tables present information
about the Company’s leases (dollars in thousands):
|
|
For the years ended December 31,
|
|
|
|
2020
|
|
|
2019
|
|
Lease liabilities
|
|
$
|
930
|
|
|
$
|
1,027
|
|
Right-of-use assets
|
|
$
|
916
|
|
|
$
|
1,015
|
|
Weighted average remaining lease term
|
|
|
5.05 years
|
|
|
|
4.29 years
|
|
Weighted average discount rate
|
|
|
2.39
|
%
|
|
|
2.98
|
%
|
|
|
For the years ended December 31,
|
|
|
|
2020
|
|
|
2019
|
|
Lease cost
|
|
|
|
|
|
|
|
|
Operating lease cost
|
|
$
|
427
|
|
|
$
|
427
|
|
Total lease cost
|
|
$
|
427
|
|
|
$
|
427
|
|
A maturity analysis of operating lease
liabilities and reconciliation of the undiscounted cash flows to the total of operating lease liabilities is as follows (dollars
in thousands):
|
|
As of
|
|
|
|
December 31, 2020
|
|
Lease payments due
|
|
|
|
|
Twelve months ending December 31, 2021
|
|
$
|
337
|
|
Twelve months ending December 31, 2022
|
|
|
181
|
|
Twelve months ending December 31, 2023
|
|
|
106
|
|
Twelve months ending December 31, 2024
|
|
|
111
|
|
Twelve months ending December 31, 2025
|
|
|
102
|
|
Thereafter
|
|
|
154
|
|
Total undiscounted cash flows
|
|
$
|
991
|
|
Discount
|
|
|
61
|
|
Lease liabilities
|
|
$
|
930
|
|
Cash paid for amounts included in the measurement
of lease liabilities for the year ended December 31, 2020 and 2019 was $378,000 and $415,000, respectively. The Company recognized
lease expense of $427,000 for each of the years ended December 31, 2020 and 2019.
Note 12. Commitments
and Contingencies
Off-balance-sheet
risk – The Company is a party to financial instruments with off-balance-sheet risk in the normal course of business
to meet the financial needs of its customers. These financial instruments include commitments to extend credit and standby letters
of credit. These instruments involve, to varying degrees, elements of credit and interest-rate risk in excess of the amounts recognized
in the financial statements. The contract amounts of these instruments reflect the extent of involvement that the Company has in
particular classes of instruments.
The Company’s exposure to credit
loss in the event of nonperformance by the other party to the financial instrument for commitments to extend credit, and to potential
credit loss associated with letters of credit issued, is represented by the contractual amount of those instruments. The Company
uses the same credit policies in making commitments and conditional obligations as it does for loans and other such on-balance
sheet instruments.
At December 31, 2020 and 2019, the
Company had outstanding the following approximate off-balance-sheet financial instruments whose contract amounts represent credit
risk (in thousands):
|
|
December 31,
|
|
|
December 31,
|
|
|
|
2020
|
|
|
2019
|
|
Undisbursed credit lines
|
|
$
|
107,130
|
|
|
$
|
83,366
|
|
Commitments to extend or originate credit
|
|
|
38,910
|
|
|
|
15,722
|
|
Standby letters of credit
|
|
|
4,934
|
|
|
|
6,732
|
|
|
|
|
|
|
|
|
|
|
Total commitments to extend credit
|
|
$
|
150,974
|
|
|
$
|
105,820
|
|
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 or other termination clauses and may require the payment of a fee. Historically, any commitments expire
without being drawn upon; therefore, the total commitment amounts shown in the above table are not necessarily indicative of future
cash requirements. The Company evaluates each customer’s creditworthiness on a case-by-case basis. The amount of collateral
obtained, as deemed necessary by the Company upon extension of credit is based on management’s credit evaluation of the customer.
Collateral held varies but may include personal or income-producing commercial real estate, accounts receivable, inventory and
equipment.
Standby letters of credit are written conditional
commitments issued by the Bank to guarantee the performance of a customer to a third party. The credit risk involved in issuing
letters of credit is essentially the same as that involved in extending loans to customers.
Concentrations
of credit risk – Generally, the Company’s loans, commitments to extend credit, and standby letters of credit
have been granted to customers in the Company’s market area. Although the Company is building a diversified loan portfolio,
a substantial portion of its clients’ ability to honor contracts is reliant upon the economic stability of the Richmond,
Virginia area, including the real estate markets in the area. The concentrations of credit by type of loan are set forth in Note
3. The distribution of commitments to extend credit approximates the distribution of loans outstanding.
Note 13. Shareholders’
Equity and Regulatory Matters
Preferred Stock
On May 1, 2009, as part of the Capital
Purchase Program established by the U.S. Department of the Treasury (the “Treasury”) under the Emergency Economic Stabilization
Act of 2008, the Company sold (i) 14,738 shares of the Company’s Fixed Rate Cumulative Perpetual Preferred Stock, Series A,
par value $4.00 per share, having a liquidation preference of $1,000 per share (the “preferred stock”) and (ii) a
warrant (the “Warrant”) to purchase 499,029 shares of the Company’s common stock at an initial exercise price
of $4.43 per share, subject to certain anti-dilution and other adjustments, to the Treasury for an aggregate purchase price of
$14,738,000 in cash. During the first quarter of 2018, the Company used the proceeds from a subordinated note issuance to redeem
the remaining 5,027 outstanding shares of preferred stock plus accrued dividends of $56,554. The Warrant expired on May 1,
2019.
Accumulated Other Comprehensive Income
The following table presents the cumulative
balances of the components of accumulated other comprehensive income, net of deferred taxes of $114,000 and $38,000 as of December 31,
2020 and 2019, respectively (in thousands):
|
|
Year Ended December 31,
|
|
|
|
2020
|
|
|
2019
|
|
Net unrealized gains on securities
|
|
$
|
466
|
|
|
$
|
186
|
|
Net unrecognized losses on defined benefit plan
|
|
|
(36
|
)
|
|
|
(44
|
)
|
Total other comprehensive income
|
|
$
|
430
|
|
|
$
|
142
|
|
Regulatory Matters
The Company meets the eligibility criteria
of a small bank holding company in accordance with the Board of Governors of the Federal Reserve System’s (the “Federal
Reserve”) Small Bank Holding Company Policy Statement (the “SBHC Policy Statement”). On August 28, 2018,
the Federal Reserve issued an interim final rule required by the Economic Growth, Regulatory Relief and Consumer Protection
Act of 2018, which was signed into law on May 24, 2018 (the “EGRRCPA”), that expands the applicability of the
SBHC Policy Statement to bank holding companies with total consolidated assets of less than $3 billion (up from the prior $1 billion
threshold). Under the SBHC Policy Statement, qualifying bank holding companies, such as the Company, have additional flexibility
in the amount of debt they can issue and are also exempt from the Basel III capital framework as outlined by the Basel Committee
on Banking Supervision and certain provisions of the Dodd-Frank Act (the “Basel III Capital Rules”). The SBHC Policy
Statement does not apply to the Bank and the Bank must comply with the Basel III Capital Rules.
The Bank is required to comply with the
capital adequacy standards established by the Federal Deposit Insurance Corporation (“FDIC”). The FDIC has adopted
rules to implement the Basel III Capital Rules. The Basel III Capital Rules establish minimum capital ratios and risk
weightings that are applied to many classes of assets held by community banks, including applying higher risk weightings to certain
commercial real estate loans.
The Basel III Capital Rules require
banks to comply with the following minimum capital ratios: (1) a ratio of common equity Tier 1 capital to risk-weighted assets
of at least 4.5%, plus a 2.5% “capital conservation buffer” (effectively resulting in a minimum ratio of common equity
Tier 1 to risk-weighted assets of at least 7%); (2) a ratio of Tier 1 capital to risk-weighted assets of at least 6.0%, plus
the 2.5% capital conservation buffer (effectively resulting in a minimum Tier 1 capital ratio of 8.5%); (3) a ratio of total
capital to risk-weighted assets of at least 8.0%, plus the 2.5% capital conservation buffer (effectively resulting in a minimum
total capital ratio of 10.5%); and (4) a leverage ratio of 4%, calculated as the ratio of Tier 1 capital to balance sheet
exposures plus certain off-balance sheet exposures (computed as the average for each quarter of the month-end ratios for the quarter).
The capital conservation buffer is designed to absorb losses during periods of economic stress and was fully phased in as at January 1,
2019. Banking organizations with a ratio of common equity Tier 1 capital to risk-weighted assets above the minimum but below
the conservation buffer face constraints on dividends, equity repurchases, and compensation based on the amount of the shortfall.
As of December 31, 2020, the Bank exceeded the minimum ratios under the Basel III Capital Rules.
The Bank must also comply with the capital
requirements set forth in the “prompt corrective action” regulations pursuant to Section 38 of the Federal Deposit
Insurance Act of 1950. To be well capitalized under these regulations, a bank must have the following minimum capital ratios: (1) a
common equity Tier 1 capital ratio of at least 6.5%; (2) a Tier 1 risk-based capital ratio of at least 8.0%; (3) a
total risk-based capital ratio of at least 10.0%; and (4) a leverage ratio of at least 5.0%. As of December 31, 2020,
the Bank exceeded the minimum ratios to be classified as well capitalized.
On
September 17, 2019, the federal bank regulators issued a final rule required by the EGRRCPA that permits qualifying banks
and bank holding companies that have less than $10 billion of assets, like the Company and the Bank, to elect to be subject to
a 9% leverage ratio that would be applied using less complex leverage calculations (commonly referred to as the community bank
leverage ratio or “CBLR”). Under the rule, which became effective January 1, 2020, banks and bank holding companies
that opt into the CBLR framework and maintain a CBLR of greater than 9% would not be subject to other risk-based and leverage capital
requirements under the Basel III Capital Rules and would be deemed to have met the well capitalized ratio requirements under
the “prompt corrective action” framework. In April 2020, as required by the Coronavirus Aid, Relief, and Economic
Security Act, which was passed in response to the COVID-19 pandemic, federal bank regulators issued two interim final rules related
to the CBLR framework. One interim final rule provides that, as of the second quarter of 2020, banking organizations
with leverage ratios of 8% or greater (and that meet the other existing qualifying criteria) may elect to use the CBLR framework.
It also establishes a two-quarter grace period for qualifying community banking organizations whose leverage ratios fall below
the 8% CBLR requirement, so long as the banking organization maintains a leverage ratio of 7% or greater. The second interim final
rule provides a transition from the temporary 8% CBLR requirement to a 9% CBLR requirement. It establishes a minimum CBLR
of 8% for the second through fourth quarters of 2020, 8.5% for 2021, and 9% thereafter, and maintains a two-quarter grace period
for qualifying community banking organizations whose leverage ratios fall no more than 100 basis points below the applicable CBLR
requirement. The Bank elected not to opt into the CBLR framework as of December 31, 2020.
The capital amounts and ratios at December 31,
2020 and 2019 for the Bank are presented in the table below (dollars in thousands):
|
|
|
|
|
|
|
|
For Capital
|
|
|
|
|
|
|
|
|
|
Actual
|
|
|
Adequacy Purposes
|
|
|
To be Well Capitalized
|
|
|
|
Amount
|
|
|
Ratio
|
|
|
Amount
|
|
|
Ratio
|
|
|
Amount
|
|
|
Ratio
|
|
December 31, 2020
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total capital (to risk- weighted assets) Village Bank
|
|
$
|
65,723
|
|
|
|
14.20
|
%
|
|
$
|
37,015
|
|
|
|
8.00
|
%
|
|
$
|
46,269
|
|
|
|
10.00
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Tier 1 capital (to risk- weighted assets) Village Bank
|
|
|
61,753
|
|
|
|
13.35
|
%
|
|
|
27,761
|
|
|
|
6.00
|
%
|
|
|
37,015
|
|
|
|
8.00
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Leverage ratio (Tier 1 capital to average assets) Village Bank
|
|
|
61,753
|
|
|
|
9.28
|
%
|
|
|
26,607
|
|
|
|
4.00
|
%
|
|
|
33,259
|
|
|
|
5.00
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Common equity tier 1 (to risk- weighted assets) Village Bank
|
|
|
61,753
|
|
|
|
13.35
|
%
|
|
|
20,821
|
|
|
|
4.50
|
%
|
|
|
30,075
|
|
|
|
6.50
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2019
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total capital (to risk- weighted assets) Village Bank
|
|
$
|
54,653
|
|
|
|
12.56
|
%
|
|
$
|
34,807
|
|
|
|
8.00
|
%
|
|
$
|
43,508
|
|
|
|
10.00
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Tier 1 capital (to risk- weighted assets) Village Bank
|
|
|
52,867
|
|
|
|
12.15
|
%
|
|
|
26,015
|
|
|
|
6.00
|
%
|
|
|
34,807
|
|
|
|
8.00
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Leverage ratio (Tier 1 capital to average assets) Village Bank
|
|
|
52,867
|
|
|
|
9.69
|
%
|
|
|
21,823
|
|
|
|
4.00
|
%
|
|
|
27,278
|
|
|
|
5.00
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Common equity tier 1 (to risk- weighted assets) Village Bank
|
|
|
52,867
|
|
|
|
12.15
|
%
|
|
|
19,579
|
|
|
|
4.50
|
%
|
|
|
28,280
|
|
|
|
6.50
|
%
|
Note
14. Stock Incentive Plans
In accordance with accounting standards,
the Company measures the cost of employee services received in exchange for an award of equity instruments based on the grant-date
fair value of the award (with limited exceptions). That cost is recognized over the period during which an employee is required
to provide service in exchange for the award rather than disclosed in the financial statements.
The following table summarizes options
outstanding under the Company’s stock incentive plans at the indicated dates:
|
|
Year
Ended December 31,
|
|
|
|
2020
|
|
|
2019
|
|
|
|
|
|
|
Weighted
|
|
|
|
|
|
|
|
|
|
|
|
Weighted
|
|
|
|
|
|
|
|
|
|
|
|
|
Average
|
|
|
|
|
|
|
|
|
|
|
|
Average
|
|
|
|
|
|
|
|
|
|
|
|
|
Exercise
|
|
|
Fair
Value
|
|
|
Intrinsic
|
|
|
|
|
|
Exercise
|
|
|
Fair
Value
|
|
|
Intrinsic
|
|
|
|
Options
|
|
|
Price
|
|
|
Per
Share
|
|
|
Value
|
|
|
Options
|
|
|
Price
|
|
|
Per
Share
|
|
|
Value
|
|
Options
outstanding, beginning of period
|
|
|
734
|
|
|
$
|
25.63
|
|
|
$
|
9.76
|
|
|
|
|
|
|
|
734
|
|
|
$
|
25.63
|
|
|
$
|
9.76
|
|
|
|
|
|
Granted
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
|
|
Forfeited
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
|
|
Exercised
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
|
|
Options
outstanding, end of period
|
|
|
734
|
|
|
$
|
25.63
|
|
|
$
|
9.76
|
|
|
$
|
-
|
|
|
|
734
|
|
|
$
|
25.63
|
|
|
$
|
9.76
|
|
|
$
|
-
|
|
Options
exercisable, end of period
|
|
|
734
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
734
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The following table summarizes information
about stock options outstanding at December 31, 2020:
|
|
Outstanding
|
|
|
Exercisable
|
|
|
|
|
|
|
Weighted
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Average
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Remaining
|
|
|
Weighted
|
|
|
|
|
|
Weighted
|
|
|
|
|
|
|
Years of
|
|
|
Average
|
|
|
|
|
|
Average
|
|
Range of
|
|
Number of
|
|
|
Contractual
|
|
|
Exercise
|
|
|
Number of
|
|
|
Exercise
|
|
Exercise Prices
|
|
Options
|
|
|
Life
|
|
|
Price
|
|
|
Options
|
|
|
Price
|
|
$25.28-$25.76
|
|
|
734
|
|
|
|
2.57
|
|
|
$
|
25.63
|
|
|
|
734
|
|
|
$
|
25.63
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
734
|
|
|
|
2.57
|
|
|
|
25.63
|
|
|
|
734
|
|
|
|
25.63
|
|
During 2020, we granted certain officers
time-based restricted shares of common stock and performance-based restricted stock units. The time-based restricted shares vest
ratably over a three year period provided the officer is employed with the Company on the applicable vesting date. The performance-based
units which have a two-year performance period that began on January 2, 2021, vest based on the Company’s achievement
of performance targets related to return on tangible common equity and the adversely classified items ratio over the performance
period with possible payouts ranging from 0% to 150% of the target awards.
During 2019, we granted certain officers
time-based restricted shares of common stock and performance-based restricted stock units. The time-based shares vest ratably over
a three-year period provided that the officer is employed with the Company on the applicable vesting date. The performance-based
units, which have a two-year performance period that began on January 2, 2020, vest based on the Company’s achievement
of performance targets related to return on tangible common equity and the adversely classified items ratio with possible payouts
ranging from 0% to 150% of the target awards.
The total number of shares underlying non-vested
restricted stock was 24,529 and 12,310 at December 31, 2020 and 2019, respectively. The fair value of the stock is based on
the grant date of the award and the expense is recognized over the vesting period. Unamortized stock-based compensation related
to non-vested share-based compensation arrangements granted under the stock incentive plan as of December 31, 2020 and 2019
was $593,000 and $364,000, respectively. The time based unrecognized compensation of $455,000 is expected to be recognized over
a weighted average period of 2.28 years. During 2020 and 2019, there were forfeitures of 1,094 and 8,274 shares of restricted stock
awards, respectively.
A summary of changes in the Company’s
non-vested restricted stock awards for the year follows:
|
|
Shares
|
|
|
Weighted-
Average
Grant-Date
Fair-Value
|
|
|
Aggregate
Intrinsic Value
|
|
December 31, 2019
|
|
|
12,310
|
|
|
$
|
33.83
|
|
|
$
|
423,341
|
|
Granted
|
|
|
17,798
|
|
|
|
29.67
|
|
|
|
612,073
|
|
Vested
|
|
|
(4,731
|
)
|
|
|
33.83
|
|
|
|
(162,699
|
)
|
Forfeited
|
|
|
(1,094
|
)
|
|
|
33.82
|
|
|
|
(37,623
|
)
|
Other(1)
|
|
|
246
|
|
|
|
33.82
|
|
|
|
8,460
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2020
|
|
|
24,529
|
|
|
$
|
30.87
|
|
|
$
|
843,552
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) Represents the
incremental increase in shares that vested based on the restricted stock units vesting at the maximum potential value as opposed
to the targeted value of the award.
|
Stock-based compensation expense was $240,000
and $413,000 for the years ended December 31, 2020 and 2019, respectively.
Note 15. Trust
Preferred Securities
During the first quarter of 2005, Southern
Community Financial Capital Trust I, a wholly-owned subsidiary of the Company, was formed for the purpose of issuing redeemable
securities. On February 24, 2005, $5.2 million of Trust Preferred Capital Notes were issued through a pooled underwriting.
The securities have a LIBOR-indexed floating rate of interest (three-month LIBOR plus 2.15%) which adjusts, and is payable, quarterly.
The interest rate was 2.38% and 4.06% at December 31, 2020 and 2019, respectively. The securities were redeemable at par beginning
on March 15, 2010 and each quarter after such date until the securities mature on March 15, 2035. No amounts have been
redeemed at December 31, 2020 and there are no plans to do so. The principal asset of the Trust is $5.2 million of the Company’s
junior subordinated debt securities with like maturities and like interest rates to the Trust Preferred Capital Notes.
During the third quarter of 2007, Village
Financial Statutory Trust II, a wholly–owned subsidiary of the Company, was formed for the purpose of issuing redeemable
securities. On September 20, 2007, $3.6 million of Trust Preferred Capital Notes were issued through a pooled underwriting.
The securities have LIBOR-indexed floating rate of interest (three-month LIBOR plus 1.4%) which adjusts and is also payable quarterly.
The interest rate was 1.63% and 3.31% at December 31, 2020 and 2019, respectively. The securities may be redeemed at par at
any time commencing in December 2012 until the securities mature in 2037. No amounts have been redeemed at December 31,
2020 and there are no plans to do so. The principal asset of the Trust is $3.6 million of the Company’s junior subordinated
securities with like maturities and like interest rates to the Trust Preferred Capital Notes.
The Trust Preferred Capital Notes may be
included in Tier 1 capital for regulatory capital adequacy determination purposes up to 25% of Tier 1 capital after its inclusion.
The portion of the Trust Preferred Capital Notes not considered as Tier 1 capital may be included in Tier 2 capital.
The obligations of the Company with respect
to the issuance of the Trust Preferred Capital Notes constitute a full and unconditional guarantee by the Company of the Trust’s
obligations with respect to the Trust Preferred Capital Notes. Subject to certain exceptions and limitations, the Company may elect
from time to time to defer interest payments on the junior subordinated debt securities, which would result in a deferral of distribution
payments on the related Trust Preferred Capital Notes and require a deferral of common dividends. The Company is current on these
interest payments.
Note 16. Subordinated
Debt Offering
On March 21, 2018, the Company issued
$5,700,000 of fixed-to-floating rate subordinated notes due March 31, 2028 in a private placement. The Company received $5,539,000
in net proceeds after deducting issuance costs. The subordinated notes accrue interest at a fixed rate of 6.50% for the first five
years until March 31, 2023; thereafter, the subordinated notes will accrue interest at an annual floating rate equal to three-month
LIBOR plus a spread of 3.73% until maturity or early redemption. The Company may redeem the subordinated notes in whole or in part,
on or after March 31, 2023. The subordinated notes are unsecured and subordinated in right of payment to all of the Company’s
existing and future senior indebtedness, whether secured or unsecured, including claims of depositors and general creditors, and
rank equally in right of payment with any unsecured, subordinated indebtedness that the Company may incur in the future. At December 31,
2020, the carrying value of the notes totaled $5,628,000.
Note 17. Retirement
Plans
401K
Plan: The Bank provides a qualified 401K plan to all eligible employees which is administered through the Virginia Bankers
Association Benefits Corporation. Employees are eligible to participate in the plan after three months of employment. Eligible
employees may, subject to statutory limitations, contribute a portion of their salary to the plan through payroll deduction. Due
to economic conditions at the time, the Bank ceased its matching program in 2009; however, beginning January 2013, the Bank
reinstituted the 401K match. The Bank provided a matching contribution of 100% of the first 1% the participant contributes, and
then 50% of the next 5% of their salary, totaling a maximum 3.5%. Participants are always fully vested in their own contributions,
and the Bank’s matching contributions vest 100% after two years of service. Total contributions to the plan for the years
ended December 31, 2020 and 2019 were $420,000, and $351,000, respectively.
Supplemental
Executive Retirement Plan: The Bank established the Village Bank SERP on January 1, 2005 to provide supplemental
retirement income to certain executive officers as designated by the Personnel Committee, later replaced by the Compensation Committee,
and approved by the board of directors. The SERP is an unfunded employee pension plan under the provisions of the Employee Retirement
Income Security Act of 1974. An eligible employee, once designated by the Committee and approved by the board of directors in writing
to participate in the SERP, becomes a participant in the SERP 60 days following such approval (unless an earlier participation
date is approved). The retirement benefit to be received by a participant is determined by the Committee and approved by the board
of directors and is payable in equal monthly installments over the period specified in the SERP for each respective participant,
commencing on the first day of the month following a participant’s retirement or termination of employment, provided the
participant has been employed by the Bank for a minimum of 10 years. The Compensation Committee, in its sole discretion, may choose
to treat a participant who has experienced a termination of employment on or after attaining age 65 but prior to completing his
service requirement as having completed his service requirement. During the second quarter of 2019, the ownership of the Company’s
largest shareholder exceeded 50% of the Company’s outstanding common stock, which triggered change in control provisions
included in the SERP. The SERP provides for the acceleration of the vesting of benefits in the event of a change in control, which
resulted in the three executives participating in the plan becoming fully vested as of the date of the change in control. At December 31,
2020 and 2019, the Bank’s liability under the SERP was $2,524,000 and $2,546,000, respectively, and expense for the years
ended December 31, 2020 and 2019 was $133,000 and $513,000, respectively. The increase in other comprehensive income related
to the minimum pension adjustment was $9,000 net of tax for the years ended December 31, 2020 and 2019. The increase in cash
surrender value of the bank owned life insurance related to the participants was $194,000 and $171,000 for the years ended December 31,
2020 and 2019, respectively.
Directors’
Deferral Plan: The Bank established the Village Bank Outside Directors Deferral Plan (the “Directors Deferral
Plan”) on January 1, 2005 under which non-employee directors of the Bank have the opportunity to defer receipt of all
or a portion of certain compensation until retirement or departure from the board of directors. Deferral of compensation under
the Directors Deferral Plan is voluntary by non-employee directors and to participate in the plan a director must file a deferral
election as provided in the plan. A director shall become an active participant with respect to a plan year (as defined in the
plan) only if he is expected to have compensation during the plan year and he timely files a deferral election. A separate account
is established for each participant in the plan and each account shall, in addition to compensation deferred at the election of
the participant, be credited with interest on the balance of the account, the rate of such interest to be established by the board
of directors in its sole discretion at the beginning of each plan year. For those directors electing to purchase stock, the obligation
will only be settled by delivery of the fixed number of shares they purchased. At December 31, 2020 and 2019, the Bank’s
liability under the Directors Deferral Plan was $524,000 and $419,000, respectively, and expense for the years ended December 31,
2020 and 2019 was $111,000 and $109,000, respectively. In the first quarter of 2015 and the fourth quarter of 2013, certain directors
elected to purchase common stock with funds from their deferred compensation accounts causing the December 31, 2015 and December 31,
2013 liability to be lower than the December 31, 2014 liability. A rabbi trust was established to hold the shares. At December 31,
2020 and 2019, the trust held 37,290 and 40,875 shares, respectively, of Company common stock totaling $771,000 and $856,000, respectively.
Note
18. Fair Value
The Company determines the fair value of
its financial instruments based on the requirements established in ASC 820: Fair Value Measurements, which provides a framework
for measuring fair value under GAAP and requires an entity to maximize the use of observable inputs when measuring fair value.
ASC 820 defines fair value as the exit price, the price that would be received for an asset or paid to transfer a liability, in
the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the
measurement date under current market conditions.
ASC 820 establishes a hierarchy for valuation
inputs that gives the highest priority to quoted prices in active markets for identical assets or liabilities and the lowest priority
to unobservable inputs. The fair values hierarchy is as follows:
Level
1 Inputs — Quoted prices (unadjusted) for identical assets or liabilities in active markets that the entity has
the ability to access as of the measurement date.
Level
2 Inputs — Significant other observable inputs other than Level 1 prices such as quoted prices for similar assets
or liabilities; quoted prices in markets that are not active; or other inputs that are observable or can be corroborated by observable
market data.
Level
3 Inputs — Significant unobservable inputs that reflect a company’s own assumptions about the assumptions
that market participants would use in pricing an asset or liability.
The Company used the following methods
to determine the fair value of each type of financial instrument:
Securities:
Fair values for securities available-for-sale are obtained from an independent pricing service. The prices are not adjusted. The
independent pricing service uses industry-standard models to price U.S. Government agency obligations and mortgage backed securities
that consider various assumptions, including time value, yield curves, volatility factors, prepayment speeds, default rates, loss
severity, current market and contractual prices for the underlying financial instruments, as well as other relevant economic measures.
Securities of obligations of state and political subdivisions are valued using a type of matrix, or grid, pricing in which securities
are benchmarked against the treasury rate based on credit rating. Substantially all assumptions used by the independent pricing
service are observable in the marketplace, can be derived from observable data, or are supported by observable levels at which
transactions are executed in the marketplace (Levels 1 and 2). If the inputs used to provide the evaluation for certain securities
are unobservable and/or there is little, if any, market activity, then the security would fall to the lowest level of the hierarchy
(Level 3).
Impaired
loans: The Company does not record loans held for investment at fair value on a recurring basis. However, there are
instances when a loan is considered impaired and an allowance for loan losses is established. The Company measures impairment either
based on the fair value of the loan using the loan’s obtainable market price or the fair value of the collateral if the loan
is collateral dependent, or using the present value of expected future cash flows discounted at the loan’s effective interest
rate, which is not a fair value measurement. The Company maintains a valuation allowance to the extent that this measure of the
impaired loan is less than the recorded investment in the loan. When an impaired loan is measured at fair value based solely on
observable market prices or a current appraisal without further adjustment for unobservable inputs, the Company records the impaired
loan as a nonrecurring fair value measurement classified as Level 2. However, if based on management’s review, additional
discounts to observed market prices or appraisals are required or if observable inputs are not available, the Company records the
impaired loan as a nonrecurring fair value measurement classified as Level 3. Impaired loans that are measured based on expected
future cash flows discounted at the loan’s effective interest rate rather than the market rate of interest, are not recorded
at fair value and are therefore excluded from fair value disclosure requirements
Loans
held for sale: During the first quarter of 2020, the Company elected to begin using fair value accounting for its entire
portfolio of LHFS in accordance with ASC 820 - Fair Value Measurement and Disclosures. Fair value of the Company's LHFS is based
on observable market prices for similar instruments traded in the secondary mortgage loan markets in which the Company conducts
business. The Company's portfolio of LHFS is classified as Level 2. At December 31, 2019, these loans were carried at the
lower of cost or estimated fair value on an aggregate basis as determined by outstanding commitments from investors. Gains and
losses on the sale of loans are recorded within mortgage banking income, net on the Consolidated Statements of Income.
Derivative
asset – IRLCs: Beginning with the first quarter of 2020, the Company recognizes IRLCs at fair value based on the
price of the underlying loans obtained from an investor for loans that will be delivered on a best efforts basis while taking into
consideration the probability that the rate lock commitments will close. All of the Company's IRLCs are classified as Level 2.
The fair value of IRLC was considered immaterial at December 31, 2019.
Derivative
asset/liability – forward sale commitments: During the first quarter of 2020, the Company elected to begin using
fair value accounting for its forward sales commitments related to IRLCs and LHFS. Best efforts sale commitments are entered into
for loans intended for sale in the secondary market at the time the borrower commitment is made. The best efforts commitments are
valued using the committed price to the counter-party against the current market price of the IRLC or mortgage LHFS. All of the
Company’s forward sale commitments are classified as Level 2.
Other
Real Estate Owned: OREO assets are initially recorded at fair value less costs to sell when acquired, establishing a
new cost basis. Subsequently, OREO assets are carried at fair value less estimated costs to sell. Fair value is based upon independent
market prices, appraised values of the collateral or management’s estimation of the value of the collateral. When the fair
value of the collateral is based on an observable market price or a current appraised value, the Company records the foreclosed
asset as nonrecurring Level 2. When an appraised value is not available or management determines the fair value of the collateral
is further impaired below the appraised value and there is no observable market price, the Company records the foreclosed asset
as nonrecurring Level 3.
Assets
held for sale: Assets held for sale were transferred from premises and equipment at the lower of cost less accumulated
depreciation or fair value at the date of transfer. The Company periodically evaluates the value of assets held for sale and records
an impairment charge for any subsequent declines in fair value less selling costs. Fair value is based upon independent market
prices, appraised values of the collateral or management’s estimation of the value of the collateral. When the fair value
of the collateral is based on an observable market price or a current appraised value, the Company records the assets held for
sale as nonrecurring Level 2. When an appraised value is not available or management determines the fair value of the collateral
is further impaired below the appraised value and there is no observable market price, the Company records the asset held for sale
as nonrecurring Level 3.
Assets and liabilities measured at fair
value under Topic 820 on a recurring and non-recurring basis are summarized below for the indicated dates (in thousands):
|
|
Fair Value Measurement
|
|
|
|
at December 31, 2020 Using
|
|
|
|
|
|
|
Quoted Prices
|
|
|
|
|
|
|
|
|
|
|
|
|
in Active
|
|
|
Other
|
|
|
Significant
|
|
|
|
|
|
|
Markets for
|
|
|
Observable
|
|
|
Unobservable
|
|
|
|
Carrying
|
|
|
Identical Assets
|
|
|
Inputs
|
|
|
Inputs
|
|
|
|
Value
|
|
|
(Level 1)
|
|
|
(Level 2)
|
|
|
(Level 3)
|
|
Financial Assets – Recurring
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
US Government Agencies
|
|
$
|
8,142
|
|
|
$
|
-
|
|
|
$
|
8,142
|
|
|
$
|
-
|
|
Mortgage-backed securities
|
|
|
24,006
|
|
|
|
-
|
|
|
|
24,006
|
|
|
|
-
|
|
Subordinated debt
|
|
|
8,696
|
|
|
|
-
|
|
|
|
8,446
|
|
|
|
250
|
|
Loans held for sale
|
|
|
34,421
|
|
|
|
-
|
|
|
|
34,421
|
|
|
|
-
|
|
IRLC
|
|
|
1,552
|
|
|
|
-
|
|
|
|
1,552
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Financial Liabilities - Recurring
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Forward sales commitment
|
|
|
3,105
|
|
|
|
-
|
|
|
|
3,105
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Financial Assets - Non-Recurring
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other real estate owned
|
|
|
336
|
|
|
|
-
|
|
|
|
-
|
|
|
|
336
|
|
|
|
Fair Value Measurement
|
|
|
|
at December 31, 2019 Using
|
|
|
|
|
|
|
Quoted Prices
|
|
|
|
|
|
|
|
|
|
|
|
|
in Active
|
|
|
Other
|
|
|
Significant
|
|
|
|
|
|
|
Markets for
|
|
|
Observable
|
|
|
Unobservable
|
|
|
|
Carrying
|
|
|
Identical Assets
|
|
|
Inputs
|
|
|
Inputs
|
|
|
|
Value
|
|
|
(Level 1)
|
|
|
(Level 2)
|
|
|
(Level 3)
|
|
Financial Assets - Recurring
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
US Government Agencies
|
|
$
|
14,845
|
|
|
$
|
-
|
|
|
$
|
14,845
|
|
|
$
|
-
|
|
Mortgage-backed securities
|
|
|
25,302
|
|
|
|
-
|
|
|
|
25,302
|
|
|
|
-
|
|
Subordinated debt
|
|
|
6,790
|
|
|
|
-
|
|
|
|
6,540
|
|
|
|
250
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Financial Assets - Non-Recurring
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Impaired loans
|
|
|
1,468
|
|
|
|
-
|
|
|
|
-
|
|
|
|
1,468
|
|
Assets held for sale
|
|
|
514
|
|
|
|
-
|
|
|
|
-
|
|
|
|
514
|
|
Other real estate owned
|
|
|
526
|
|
|
|
-
|
|
|
|
-
|
|
|
|
526
|
|
The following table presents qualitative
information about Level 3 fair value measurements for financial instruments measured at fair value for the years ended December 31,
2020 and 2019 (dollars in thousands):
|
|
December 31, 2020
|
|
|
|
|
|
|
|
|
|
|
Range
|
|
|
|
Fair Value
|
|
|
Valuation
|
|
Unobservable
|
|
(Weighted
|
|
|
|
Estimate
|
|
|
Techniques
|
|
Input
|
|
Average)
|
|
Other real estate owned
|
|
$
|
336
|
|
|
Appraisal (1) or Internal Valuation (2)
|
|
Selling costs
|
|
|
6%-10% (7%)
|
|
|
(1)
|
Fair
Value is generally determined through independent appraisals of the underlying collateral, which generally includes various level
3 inputs which are not identifiable
|
|
(2)
|
Internal
valuations may be conducted to determine Fair Value for assets with nominal carrying balances
|
|
|
December 31, 2019
|
|
|
|
|
|
|
|
|
|
|
Range
|
|
|
|
Fair Value
|
|
|
Valuation
|
|
Unobservable
|
|
(Weighted
|
|
|
|
Estimate
|
|
|
Techniques
|
|
Input
|
|
Average)
|
|
Impaired loans - real estate secured
|
|
$
|
1,468
|
|
|
Appraisal (1) or Internal Valuation (2)
|
|
Selling costs
|
|
|
6%-10% (7
|
%)
|
|
|
|
|
|
|
|
|
Discount for lack of
|
|
|
|
|
|
|
|
|
|
|
|
|
marketability and age
|
|
|
|
|
|
|
|
|
|
|
|
|
of appraisal
|
|
|
6%-30% (10
|
%)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Assets held for sale
|
|
$
|
514
|
|
|
Appraisal (1) or Internal Valuation (2)
|
|
Selling costs
|
|
|
6%-10% (7
|
%)
|
|
|
|
|
|
|
|
|
Discount for lack of
|
|
|
|
|
|
|
|
|
|
|
|
|
marketability and age
|
|
|
|
|
|
|
|
|
|
|
|
|
of appraisal
|
|
|
6%-30%
(15
|
%)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other real estate owned
|
|
$
|
526
|
|
|
Appraisal (1) or Internal Valuation (2)
|
|
Selling costs
|
|
|
6%-10%
(7
|
%)
|
|
(1)
|
Fair
Value is generally determined through independent appraisals of the underlying collateral, which generally includes various level
3 inputs which are not identifiable
|
|
(2)
|
Internal
valuations may be conducted to determine Fair Value for assets with nominal carrying balances
|
FASB ASC 825, Financial Instruments, requires
disclosure about fair value of financial instruments, including those financial assets and financial liabilities that are not required
to be measured and reported at fair value on a recurring or nonrecurring basis. ASC 825 excludes certain financial instruments
and all nonfinancial instruments from its disclosure requirements. Accordingly, the aggregate fair value amounts presented may
not necessarily represent the underlying fair value of the Company. In accordance with ASU 2016-01, the Company uses the exit price
notion, rather than the entry price notion, in calculating the fair values of financial instruments not measured at fair value
on a recurring basis.
The following tables reflect the carrying
amounts and estimated fair values of the Company’s financial instruments whether or not recognized on the Consolidated Balance
Sheet at fair value.
|
|
|
|
December 31,
|
|
|
December 31,
|
|
|
|
|
|
2020
|
|
|
2019
|
|
|
|
Level in Fair
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Value
|
|
Carrying
|
|
|
Estimated
|
|
|
Carrying
|
|
|
Estimated
|
|
|
|
Hierarchy
|
|
Value
|
|
|
Fair Value
|
|
|
Value
|
|
|
Fair Value
|
|
|
|
(In thousands)
|
Financial assets
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash
|
|
Level 1
|
|
$
|
12,709
|
|
|
$
|
12,709
|
|
|
$
|
19,967
|
|
|
$
|
19,967
|
|
Cash equivalents
|
|
Level 2
|
|
|
30,742
|
|
|
|
30,742
|
|
|
|
-
|
|
|
|
-
|
|
Investment securities available for sale
|
|
Level 1
|
|
|
1,193
|
|
|
|
1,193
|
|
|
|
-
|
|
|
|
-
|
|
Investment securities available for sale
|
|
Level 2
|
|
|
39,401
|
|
|
|
39,401
|
|
|
|
46,687
|
|
|
|
46,687
|
|
Investment securities available for sale
|
|
Level 3
|
|
|
250
|
|
|
|
250
|
|
|
|
250
|
|
|
|
250
|
|
Federal Home Loan Bank stock
|
|
Level 2
|
|
|
484
|
|
|
|
484
|
|
|
|
1,694
|
|
|
|
1,694
|
|
Loans held for sale
|
|
Level 2
|
|
|
34,421
|
|
|
|
34,421
|
|
|
|
12,722
|
|
|
|
12,722
|
|
Loans
|
|
Level 3
|
|
|
561,003
|
|
|
|
562,362
|
|
|
|
427,827
|
|
|
|
429,254
|
|
Impaired loans
|
|
Level 3
|
|
|
-
|
|
|
|
-
|
|
|
|
1,468
|
|
|
|
1,468
|
|
Assets held for sale
|
|
Level 3
|
|
|
-
|
|
|
|
-
|
|
|
|
514
|
|
|
|
514
|
|
Other real estate owned
|
|
Level 3
|
|
|
336
|
|
|
|
336
|
|
|
|
526
|
|
|
|
526
|
|
Bank owned life insurance
|
|
Level 3
|
|
|
7,806
|
|
|
|
7,806
|
|
|
|
7,612
|
|
|
|
7,612
|
|
Accrued interest receivable
|
|
Level 2
|
|
|
4,943
|
|
|
|
4,943
|
|
|
|
2,597
|
|
|
|
2,597
|
|
Interest rate lock commitments
|
|
Level 2
|
|
|
1,552
|
|
|
|
1,552
|
|
|
|
-
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Financial liabilities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Deposits
|
|
Level 2
|
|
|
588,382
|
|
|
|
589,017
|
|
|
|
443,208
|
|
|
|
443,645
|
|
FHLB borrowings
|
|
Level 2
|
|
|
-
|
|
|
|
-
|
|
|
|
29,000
|
|
|
|
29,285
|
|
Trust preferred securities
|
|
Level 2
|
|
|
8,764
|
|
|
|
9,697
|
|
|
|
8,764
|
|
|
|
9,812
|
|
Other borrowings
|
|
Level 2
|
|
|
47,157
|
|
|
|
47,157
|
|
|
|
10,912
|
|
|
|
10,912
|
|
Accrued interest payable
|
|
Level 2
|
|
|
194
|
|
|
|
194
|
|
|
|
221
|
|
|
|
221
|
|
Forward sales commitment
|
|
Level 2
|
|
|
3,105
|
|
|
|
3,105
|
|
|
|
-
|
|
|
|
-
|
|
Note 19. Segment Reporting
The Company has two reportable segments:
traditional commercial banking and mortgage banking. Revenues from commercial banking operations consist primarily of interest
earned on loans and securities and fees from deposit services. Mortgage banking operating revenues consist principally of interest
earned on mortgage LHFS, gains on sales of loans in the secondary mortgage market, and loan origination fee income.
The commercial banking segment provides
the mortgage banking segment with the short-term funds needed to originate mortgage loans through a warehouse line of credit and
charges the mortgage banking segment interest based on the commercial banking segment’s cost of funds. Additionally, the
mortgage banking segment leases premises from the commercial banking segment. These transactions are eliminated in the consolidation
process.
The following table presents segment information
as of and for the years ended December 31, 2020 and 2019 (in thousands):
|
|
Commercial
|
|
|
Mortgage
|
|
|
|
|
|
Consolidated
|
|
|
|
Banking
|
|
|
Banking
|
|
|
Eliminations
|
|
|
Totals
|
|
Year Ended December 31, 2020
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenues
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest income
|
|
$
|
25,404
|
|
|
$
|
581
|
|
|
$
|
(159
|
)
|
|
$
|
25,826
|
|
Gain on sale of loans
|
|
|
-
|
|
|
|
11,703
|
|
|
|
-
|
|
|
|
11,703
|
|
Other revenues
|
|
|
2,688
|
|
|
|
1,408
|
|
|
|
(242
|
)
|
|
|
3,854
|
|
Total revenues
|
|
|
28,092
|
|
|
|
13,692
|
|
|
|
(401
|
)
|
|
|
41,383
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Expenses
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Provision for loan losses
|
|
|
950
|
|
|
|
-
|
|
|
|
-
|
|
|
|
950
|
|
Interest expense
|
|
|
4,433
|
|
|
|
159
|
|
|
|
(159
|
)
|
|
|
4,433
|
|
Salaries and benefits
|
|
|
8,867
|
|
|
|
4,053
|
|
|
|
-
|
|
|
|
12,920
|
|
Commissions
|
|
|
-
|
|
|
|
3,312
|
|
|
|
-
|
|
|
|
3,312
|
|
Other expenses
|
|
|
7,784
|
|
|
|
1,187
|
|
|
|
(242
|
)
|
|
|
8,729
|
|
Total operating expenses
|
|
|
22,034
|
|
|
|
8,711
|
|
|
|
(401
|
)
|
|
|
30,344
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income before income taxes
|
|
|
6,058
|
|
|
|
4,981
|
|
|
|
-
|
|
|
|
11,039
|
|
Income tax expense
|
|
|
1,439
|
|
|
|
1,046
|
|
|
|
-
|
|
|
|
2,485
|
|
Net income
|
|
$
|
4,619
|
|
|
$
|
3,935
|
|
|
$
|
-
|
|
|
$
|
8,554
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total assets
|
|
$
|
704,258
|
|
|
$
|
18,604
|
|
|
$
|
(16,626
|
)
|
|
$
|
706,236
|
|
|
|
Commercial
|
|
|
Mortgage
|
|
|
|
|
|
Consolidated
|
|
|
|
Banking
|
|
|
Banking
|
|
|
Eliminations
|
|
|
Totals
|
|
Year Ended December 31, 2019
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenues
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest income
|
|
$
|
23,079
|
|
|
$
|
539
|
|
|
$
|
(131
|
)
|
|
$
|
23,487
|
|
Gain on sale of loans
|
|
|
-
|
|
|
|
6,205
|
|
|
|
-
|
|
|
|
6,205
|
|
Other revenues
|
|
|
3,044
|
|
|
|
754
|
|
|
|
(220
|
)
|
|
|
3,578
|
|
Total revenues
|
|
|
26,123
|
|
|
|
7,498
|
|
|
|
(351
|
)
|
|
|
33,270
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Expenses
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Provision for loan losses
|
|
|
135
|
|
|
|
-
|
|
|
|
-
|
|
|
|
135
|
|
Interest expense
|
|
|
5,330
|
|
|
|
131
|
|
|
|
-(131)
|
|
|
|
5,330
|
|
Salaries and benefits
|
|
|
9,047
|
|
|
|
3,194
|
|
|
|
-
|
|
|
|
12,241
|
|
Commissions
|
|
|
-
|
|
|
|
1,875
|
|
|
|
-
|
|
|
|
1,875
|
|
Other expenses
|
|
|
7,209
|
|
|
|
1,059
|
|
|
|
(220
|
)
|
|
|
8,048
|
|
Total operating expenses
|
|
|
21,721
|
|
|
|
6,259
|
|
|
|
(351
|
)
|
|
|
27,629
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income before income taxes
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income tax expense
|
|
|
4,402
|
|
|
|
1,239
|
|
|
|
-
|
|
|
|
5,641
|
|
Net income
|
|
|
904
|
|
|
|
260
|
|
|
|
-
|
|
|
|
1,164
|
|
|
|
$
|
3,498
|
|
|
$
|
979
|
|
|
$
|
-
|
|
|
$
|
4,477
|
|
Total assets
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
542,053
|
|
|
$
|
10,924
|
|
|
$
|
(12,664
|
)
|
|
$
|
540,313
|
|
|
Note 20.
|
Parent Corporation Only Financial Statements
|
Village Bank and Trust Financial Corp.
(Parent Corporation Only)
Condensed Balance Sheet
(in thousands)
|
|
December 31,
|
|
|
December 31,
|
|
|
|
2020
|
|
|
2019
|
|
Assets
|
|
|
|
|
|
|
|
|
Cash and due from banks
|
|
$
|
1,549
|
|
|
$
|
1,007
|
|
Investment in subsidiaries
|
|
|
62,183
|
|
|
|
53,768
|
|
Investment in special purpose subsidiary
|
|
|
264
|
|
|
|
264
|
|
Prepaid expenses and other assets
|
|
|
2,438
|
|
|
|
2,284
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
66,434
|
|
|
$
|
57,323
|
|
|
|
|
|
|
|
|
|
|
Liabilities and Shareholders' Equity
|
|
|
|
|
|
|
|
|
Liabilities
|
|
|
|
|
|
|
|
|
Balance due to nonbank subsidiaries
|
|
$
|
8,764
|
|
|
$
|
8,764
|
|
Other borrowings
|
|
|
5,628
|
|
|
|
5,595
|
|
Accrued interest payable
|
|
|
46
|
|
|
|
47
|
|
Other liabilities
|
|
|
-
|
|
|
|
3
|
|
Total liabilities
|
|
|
14,438
|
|
|
|
14,409
|
|
|
|
|
|
|
|
|
|
|
Shareholders' equity
|
|
|
|
|
|
|
|
|
Common stock
|
|
|
5,794
|
|
|
|
5,779
|
|
Additional paid-in capital
|
|
|
54,510
|
|
|
|
54,285
|
|
Accumulated deficit
|
|
|
(8,738
|
)
|
|
|
(17,292
|
)
|
Stock in directors rabbi trust
|
|
|
(771
|
)
|
|
|
(856
|
)
|
Directors deferred fees obligation
|
|
|
771
|
|
|
|
856
|
|
Accumulated other comprehensive income
|
|
|
430
|
|
|
|
142
|
|
Total stockholders' equity
|
|
|
51,996
|
|
|
|
42,914
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
66,434
|
|
|
$
|
57,323
|
|
Village Bank and Trust Financial Corp.
(Parent Corporation Only)
Condensed Statements of Operations and Comprehensive Income
Years Ended December 31, 2020 and 2019
(in thousands)
|
|
2020
|
|
|
2019
|
|
Income
|
|
|
|
|
|
|
|
|
Interest income
|
|
$
|
4
|
|
|
$
|
3
|
|
Dividends received from subsidiaries
|
|
|
1,250
|
|
|
|
1,000
|
|
Total Income
|
|
|
1,254
|
|
|
|
1,003
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest expense
|
|
|
|
|
|
|
|
|
Interest on borrowed funds
|
|
|
631
|
|
|
|
775
|
|
Total interest expense
|
|
|
631
|
|
|
|
775
|
|
|
|
|
|
|
|
|
|
|
Net interest expense
|
|
|
623
|
|
|
|
228
|
|
|
|
|
|
|
|
|
|
|
Noninterest expense
|
|
|
|
|
|
|
|
|
Supplies
|
|
|
30
|
|
|
|
30
|
|
Professional and outside services
|
|
|
39
|
|
|
|
61
|
|
Other
|
|
|
43
|
|
|
|
42
|
|
Total noninterest expense
|
|
|
112
|
|
|
|
133
|
|
Net loss before undistributed income (loss) of subsidiary
|
|
|
511
|
|
|
|
(905
|
)
|
Undistributed income (loss) of subsidiary
|
|
|
7,888
|
|
|
|
4,192
|
|
Net income before income tax benefit
|
|
|
8,399
|
|
|
|
4,287
|
|
Income tax benefit
|
|
|
(155
|
)
|
|
|
(190
|
)
|
|
|
|
|
|
|
|
|
|
Net income
|
|
$
|
8,554
|
|
|
$
|
4,477
|
|
|
|
|
|
|
|
|
|
|
Total comprehensive income
|
|
$
|
8,842
|
|
|
$
|
5,368
|
|
Village Bank and Trust Financial Corp.
(Parent Corporation Only)
Condensed Statements of Cash Flows
Years Ended December 31, 2020 and 2019
(in thousands)
|
|
2020
|
|
|
2019
|
|
Cash Flows from Operating Activities
|
|
|
|
|
|
|
|
|
Net income
|
|
$
|
8,554
|
|
|
$
|
4,477
|
|
Adjustments to reconcile net income to net cash used in operating activities
|
|
|
|
|
|
|
|
|
Amortization of debt issuance costs
|
|
|
33
|
|
|
|
32
|
|
Undistributed income of subsidiary
|
|
|
(9,138
|
)
|
|
|
(5,192
|
)
|
Net change in:
|
|
|
|
|
|
|
|
|
Other assets
|
|
|
(154
|
)
|
|
|
(190
|
)
|
Interest Payable
|
|
|
-
|
|
|
|
-
|
|
Other liabilities
|
|
|
(3
|
)
|
|
|
3
|
|
Net cash used in operating activities
|
|
|
(708
|
)
|
|
|
(870
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash Flows from Investing Activities
|
|
|
|
|
|
|
|
|
Dividend from subsidiary
|
|
|
1,250
|
|
|
|
1,000
|
|
Net cash provided by investing activities
|
|
|
1,250
|
|
|
|
1,000
|
|
|
|
|
|
|
|
|
|
|
Cash Flows from Financing Activities
|
|
|
|
|
|
|
|
|
Net cash provided by financing activities
|
|
|
-
|
|
|
|
-
|
|
Net increase in cash
|
|
|
542
|
|
|
|
130
|
|
Cash, beginning of year
|
|
|
1,007
|
|
|
|
877
|
|
|
|
|
|
|
|
|
|
|
Cash, end of year
|
|
$
|
1,549
|
|
|
$
|
1,007
|
|