Notes to Consolidated Financial Statements (Unaudited)
Note 1: General
Bay Banks of Virginia, Inc. (the
Company) owns 100% of Virginia Commonwealth Bank, formerly named Bank of Lancaster (refer to Note 2) (the Bank), 100% of Bay Trust Company, Inc. (the Trust Company) and 100% of Steptoes Holdings, LLC
(Steptoes Holdings). The consolidated financial statements include the accounts of the Bank, the Trust Company, Steptoes Holdings and Bay Banks of Virginia, Inc. Since the business combination was effective on April 1, 2017 these March
31, 2017 consolidated financial statements do not yet reflect combined operations.
The accounting and reporting policies of the Company conform to
accounting principles generally accepted in the United States of America (GAAP) and to the general practices within the banking industry. In managements opinion, all adjustments, consisting only of normal recurring adjustments
necessary for a fair presentation of the consolidated financial statements, have been included. The results of operations for the interim periods are not necessarily indicative of the results to be expected for the full year or for any other interim
periods. These consolidated financial statements should be read in conjunction with the consolidated financial statements and notes to the consolidated financial statements included in the Companys Annual Report on Form
10-K
for the year ended December 31, 2016.
Certain amounts presented in the consolidated financial statements of
prior periods have been reclassified to conform to current year presentations. The reclassifications had no effect on net income, net income per share or shareholders equity as previously reported.
Note 2: Business Combination
On April 1, 2017, the
Company and Virginia BanCorp, Inc. (Virginia BanCorp), a bank holding company conducting substantially all of its operations through its subsidiary Virginia Commonwealth Bank, completed a merger pursuant to the Agreement and Plan of
Merger, dated as of November 2, 2016, by and between the Company and Virginia BanCorp. The Company is the surviving corporation in the merger and the former shareholders of Virginia BanCorp received 1.178 shares of the Companys common stock
for each share of Virginia BanCorp common stock they owned immediately prior to the merger, for a total issuance of 4,586,221 shares of the Companys common stock valued at approximately $40.5 million. As of the completion of the merger, the
Companys legacy shareholders owned approximately 51% of the outstanding common stock of the Company and Virginia BanCorps former shareholders owned approximately 49% of the outstanding common stock of the Company. After the merger of
Virginia BanCorp with and into the Company, Virginia BanCorps subsidiary bank was merged with and into Bank of Lancaster, and immediately thereafter Bank of Lancaster changed its name to Virginia Commonwealth Bank. Bank operating systems are
being consolidated and are expected to be completed during the fourth quarter of 2017.
Note 3: Significant Accounting Policies
Loans
The Company grants mortgage loans on real estate,
commercial and industrial loans, and consumer and other loans to customers. A substantial portion of the loan portfolio is represented by mortgage loans on real estate. The ability of the Companys debtors to honor their contracts is dependent
upon the real estate and general economic conditions in the Companys market areas.
Loans are reported at their recorded investment, which is the
outstanding principal balance net of any unearned income, such as deferred fees and costs, and charge-offs. Interest on loans is recognized over the term of the loan and is calculated using the interest method on principal amounts outstanding. Loan
origination fees and certain direct origination costs are deferred and recognized as an adjustment of the related loan yield over the contractual term of the loan, adjusted for early
pay-offs,
where
applicable.
The accrual of interest is generally discontinued at the time a loan is 90 days or more past due, or earlier, if collection is uncertain
based on an evaluation of the net realizable value of the collateral and the financial strength of the borrower. Payments received for loans no longer accruing interest are applied to the unpaid principal balance. Loans greater than 90 days past due
may remain on accrual status if the credit is well-secured and in process of collection. Personal loans are typically charged off no later than 180 days past due. Past due status is based on the contractual terms of the loan. In all cases, loans are
charged off at an earlier date if collection of principal or interest is considered doubtful. Nonaccrual and past due policies are materially the same for all types of loans.
All interest accrued but not collected for loans that are placed on
non-accrual
or charged off are reversed against
interest income. Any subsequent interest received on these loans is accounted for on the cash basis or cost recovery method until qualifying for return to accrual. Generally, a loan is returned to accrual status when all the principal and interest
amounts contractually due are brought current and future payments are reasonably assured, or it becomes well secured and in the process of collection.
Allowance for loan losses (ALL)
The ALL
reflects managements judgment of probable loan losses inherent in the portfolio at the balance sheet date. Management uses a disciplined process and methodology to establish the ALL each quarter. To determine the total ALL, the Company
estimates the reserves needed for each homogenous segment and class of the portfolio, plus any loans analyzed individually for impairment. Depending on the nature of each segment and class, considerations include historical loss experience, adverse
situations that may affect a borrowers ability to repay, credit scores, past due history, estimated value of any underlying collateral, prevailing local and national economic conditions, and internal policies and procedures including credit
risk management and underwriting. This evaluation is inherently subjective, as it requires estimates that are susceptible to significant revision as conditions change.
8
Management employs a risk rating system to evaluate and consistently categorize loan portfolio credit risk. Loans
assigned risk rating grades include all commercial loans not secured by real estate, commercial mortgages, residential mortgages greater than $1 million, smaller residential mortgages which are impaired, loans to real estate developers and
contractors, consumer loans greater than $250 thousand with chronic delinquency, and troubled debt restructures (TDRs). The grading analysis estimates the capability of the borrower to repay the contractual obligations of the loan
agreements as scheduled. Risk grades are evaluated as new information becomes available for each borrowing relationship or at least quarterly. All other loans not specifically assigned a risk rating grade are monitored as a discrete pool of loans
generally based on delinquency status. Risk rating categories are as follows:
Pass
Borrower is strong or sound and
collateral securing the loan, if any, is adequate.
Watch
Borrower exhibits some signs of financial stress but is generally
believed to be a satisfactory customer and collateral, if any, may be in excess of 90% of the loan balance.
Special Mention
Adverse trends in the borrowers financial position are evident and warrant managements close attention. Any collateral may not be fully adequate to secure the loan balance.
Substandard
A loan in this category has a well-defined weakness in the primary repayment source that jeopardizes the timely
collection of the debt. There is a distinct possibility that a loss may result if the weakness is not corrected.
Doubtful
Default has already occurred and it is likely that foreclosure or repossession procedures have begun or will begin in the near future. Weaknesses make collection or liquidation in full, based on currently existing information, highly questionable
and improbable.
Loss
Uncollectible and of such little value that continuance as a bankable asset is not warranted.
The ALL consists of specific, general, and unallocated components. The specific component is determined by identifying impaired loans (as described below)
then evaluating each one to calculate the amount of impairment. Impaired loans measured for impairment generally include:
(1) non-accruing
Special mention, Substandard and Doubtful loans in excess of
$250,000; (2) Substandard and Doubtful loans in excess of $500,000; (3) Special Mention loans in excess of $500,000 if any of the loans in the relationship are more than 30 days past due or if the borrower has filed for bankruptcy; and (4) all
TDRs. A specific allowance arises 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. The general component collectively evaluates smaller commercial
loans, residential mortgages and consumer loans, grouped into segments and classes. Historical loss experience is calculated and applied to each segment or class, then adjusted for qualitative factors. Qualitative factors include changes in local
and national economic indicators, such as unemployment rates, interest rates, gross domestic product growth and real estate market trends; the level of past due and nonaccrual loans; risk ratings on individual loans; strength of credit policies and
procedures; loan officer experience; borrower credit scores; and other intrinsic risks related to the types and geographic locations of loans. These qualitative adjustments reflect managements judgment of risks inherent in the segments. An
unallocated component is maintained if needed to cover uncertainties that could affect managements 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. Changes in the allowance for loan losses and the related provision expense can materially affect net income.
The specific component of the ALL calculation accounts for the loan loss reserve necessary on impaired loans. 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
considered 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 borrowers prior payment record, and the amount of the shortfall in relation to the principal and interest owed. Accrual of
interest may or may not be discontinued for any given impaired loan. Impairment is measured by either the present value of expected future cash flows discounted at the loans effective interest rate, the loans obtainable market price, or
the fair value of the collateral if the loan is collateral dependent. Because large groups of smaller balance homogeneous loans are collectively evaluated for impairment, the Company does not generally separately identify smaller balance individual
consumer and residential loans for impairment disclosures, unless such loans are the subject of a troubled debt restructuring agreement.
The general
component of the ALL calculation collectively evaluates groups of loans in segments and classes, as noted above. The segments are: (1) Mortgage loans on real estate; (2) Commercial and industrial loans; and (3) Consumer and other
loans. The segment for Mortgage loans on real estate is disaggregated into the following classes: (1) Construction, land and land development; (2) Farmland; (3) Residential first mortgages; (4) Residential revolving and junior
mortgages; (5) Commercial mortgages
(non-owner-occupied);
and (6) Commercial mortgages (owner-occupied). Loans in segment 1 are secured by real estate. Loans in segments 2 and 3 are secured by other
types of collateral or are unsecured. A given segment or class may not reflect the purpose of a loan. For example, a business owner may provide his residence as collateral for a loan to his company, in which case the loan would be grouped in a
residential mortgage class. Historical loss factors are calculated for the prior 20 quarters by segment and class, and then applied to the current balances in each segment and class. Finally, qualitative factors are applied to each segment and
class.
9
Construction and development loans carry risks that the project will not be finished according to schedule or
according to budget and the value of the collateral, at any point in time, may be less than the principal amount of the loan. These loans also bear the risk that the general contractor may face financial pressure unrelated to the project. Loans
secured by land, farmland and residential mortgages carry the risk of continued credit-worthiness of the borrower and changes in value of the underlying real estate collateral. Commercial mortgages and commercial and industrial loans carry risks
associated with the profitable operation of a business and its related cash flows. Additionally, commercial and industrial loans carry risks associated with the value of collateral other than real estate which may depreciate over time. Consumer
loans carry risks associated with the continuing credit-worthiness of the borrower and are more likely than real estate loans to be adversely affected by divorce, unemployment, personal illness or bankruptcy of an individual. Consumer loans secured
by automobiles carry risks associated with rapidly depreciating collateral. Consumer loans have historically included credit cards, which are unsecured. The credit card portfolio was sold to an unaffiliated third party in the third quarter of 2016.
The summation of the specific, general and unallocated components results in the total estimated ALL. Management may also include an unallocated
component to cover uncertainties in the level of probable losses. This estimate is inherently subjective and actual losses could be greater or less than the estimates.
Additions to the ALL are made by charges to earnings through the provision for loan losses. Charge-offs result from credit exposures deemed to be
uncollectible and the ALL is reduced by these. Recoveries of previously charged off amounts are credited back to the ALL.
Charge-off
policies are materially the same for all types of loans.
Note 4: Amendments to the Accounting Standards Codification
In January 2017, the Financial Accounting Standards Board (FASB) issued Accounting Update Standard (ASU)
2017-03,
Accounting Changes and Error Corrections (Topic 250) and Investments
- Equity Method and Joint Ventures (Topic 323): Amendments to SEC Paragraphs Pursuant to Staff Announcements at
the September
22, 2016 and November
17, 2016 EITF Meetings
. This ASU requires Securities and Exchange Commission (SEC) registrants to disclose the effect that recently issued accounting standards
will have on their financial statements when adopted in a future period. In cases where a registrant cannot reasonably estimate the impact of the adoption, additional qualitative disclosures should be considered to assist the reader in assessing the
significance of the standards impact on its financial statements. The Company adopted ASU
2017-03
in the first quarter of 2017. The adoption of the standard resulted in enhanced disclosures regarding the
impact that recently issued accounting standards adopted in a future period will have on the Companys financial statements and disclosures.
In June
2016, the FASB issued ASU
2016-13,
Financial Instruments Credit Losses (Topic 326),
which is new guidance for the accounting for credit losses on instruments within its scope. It introduces a new
model for current expected credit losses (CECL) which will apply to financial assets subject to credit losses and measured at amortized cost and certain
off-balance
sheet credit exposures. This
will include loans,
held-to-maturity
debt securities, loan commitments, financial guarantees, net investments in leases, reinsurance and trade receivables. The CECL
model requires an entity to estimate the credit losses expected over the life of an exposure (or pool of exposures). The estimate of expected credit losses should consider historical information, current information and reasonable and supportable
forecasts, including estimates of prepayments. In addition, ASU
2016-13
replaces the current
available-for-sale
debt securities
other-than-temporary impairment model with an estimate of expected credit losses only when the fair value falls below the amortized cost of the asset. Credit losses on
available-for-sale
debt securities will be limited to the difference between the securitys amortized cost basis and its fair value. The
available-for-sale
debt security model will also require the use of an allowance to record estimated credit losses and subsequent recoveries. The ASU also addresses purchased
financial assets with credit deterioration. Disclosure requirements are expanded regarding an entitys assumptions, models and methods for estimating the ALL. The ASU is effective for interim and annual reporting periods beginning after
December 15, 2019. The Company is evaluating the impact that ASU
2016-13
will have on its consolidated financial statements. Periodic historical loan data is being accumulated which will allow for
migration analysis of risk ratings, past due and
non-accrual
status, plus other various individual loan characteristics.
In March 2016, the FASB issued ASU
2016-09,
Compensation Stock Compensation (Topic 718): Improvements
to Employee Shares-Based Payment Accounting.
The amendments in this ASU simplify several aspects of the accounting for share-based payment award transactions including: (1) income tax consequences; (2) classification of awards as
either equity or liabilities; (3) diluted earnings per share; and (4) classification on the statement of cash flows. The amendments are effective for public companies for annual periods beginning after December 15, 2016, and interim
periods within those annual periods. The adoption of ASU
2016-09
did not have a material impact on the Companys consolidated financial statements.
In February 2016, the FASB issued ASU
2016-02,
Leases (Topic 842)
. This ASU increases transparency and
comparability among organizations by recognizing lease assets and lease liabilities on the balance sheet and requiring more disclosures related to leasing transactions. ASU
2016-02
will be effective for the
Company for the fiscal years beginning after December 15, 2018, with early adoption permitted. The Company expects to adopt ASU
2016-02
in the first quarter of 2019. The Company is evaluating the impact
of the standard and expects a minimal increase in assets and liabilities; however, the Company does not expect the guidance to have a material effect on its financial statements.
In January 2016, the FASB issued ASU
2016-01,
Financial Instruments Overall
(Subtopic
825-10)
which requires equity investments, other than those accounted for using the equity method, to be measured at fair value through earnings. There will no longer be an
available-for-sale
classification measured (changes in fair value reported in other comprehensive income) for equity securities with readily determinable fair values. The cost method is also eliminated for
equity instruments without a readily determinable fair value. For these
10
investments, companies can elect to record the investment at cost, less impairment, plus or minus subsequent adjustments for observable price changes. This election only applies to equity
investments that do not qualify for the net asset value practical expedient. Public companies will be required to use the exit price when measuring the fair value of financial instruments measured at amortized cost for disclosure purposes. In
addition, the ASU requires financial assets and financial liabilities to be presented separately in the notes to the financial statements, grouped by measurement category and form of financial asset. The classification and measurement guidance is
effective for periods beginning after December 15, 2017. The Companys primary
available-for
sale investments are debt securities and are therefore not included in the scope of ASU
2016-01.
The Company is continuing to evaluate the impact that ASU
2016-01
will have on its consolidated financial statements.
In May 2014, the FASB issued ASU
2014-09,
Revenue from Contracts with Customers
(Topic 606). The amendments in
this ASU modify the guidance companies use to recognize revenue from contracts with customers for transfers of goods or services and transfers of nonfinancial assets, unless those contracts are within the scope of other standards. The ASU requires
that entities apply a specific method to recognize revenue reflecting the consideration expected from customers in exchange for the transfer of goods and services. The guidance also requires new qualitative and quantitative disclosures, including
information about contract balances and performance obligations. Entities are also required to disclose significant judgments and changes in judgments for determining the satisfaction of performance obligations. In August 2015, the FASB issued ASU
2014-09
changing the effective date for ASU
2014-09
to annual reporting periods beginning after December 15, 2017 from December 15, 2016. The Companys primary
source of revenue is interest income from loans and their fees and investments. As these items are outside the scope of the guidance, this income is not expected to be impacted by implementation of ASU
2014-09.
The Company is still reviewing other sources of income such as fiduciary fees, secondary market lending fees and other deposit account fees to evaluate the impact of ASU
2014-09.
The Company continues to evaluate the impact that ASU
2014-09
will have on its consolidated financial statements.
Note 5: Securities
The aggregate amortized costs and
fair values of the
available-for-sale
securities portfolio are as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(Dollars in thousands)
|
|
|
|
|
|
|
|
|
|
|
|
|
Available-for-sale
securities
March 31, 2017
|
|
Amortized
Cost
|
|
|
Gross
Unrealized
Gains
|
|
|
Gross
Unrealized
(Losses)
|
|
|
Fair
Value
|
|
Corporate bonds
|
|
$
|
6,695
|
|
|
$
|
20
|
|
|
$
|
|
|
|
$
|
6,715
|
|
U.S. Government agencies
|
|
|
24,615
|
|
|
|
49
|
|
|
|
(429
|
)
|
|
|
24,235
|
|
State and municipal obligations
|
|
|
19,229
|
|
|
|
77
|
|
|
|
(430
|
)
|
|
|
18,876
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
50,539
|
|
|
$
|
146
|
|
|
$
|
(859
|
)
|
|
$
|
49,826
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Available-for-sale
securities
December 31, 2016
|
|
Amortized
Cost
|
|
|
Gross
Unrealized
Gains
|
|
|
Gross
Unrealized
(Losses)
|
|
|
Fair
Value
|
|
Corporate bonds
|
|
$
|
7,695
|
|
|
$
|
14
|
|
|
$
|
(5
|
)
|
|
$
|
7,704
|
|
U.S. Government agencies
|
|
|
25,668
|
|
|
|
53
|
|
|
|
(408
|
)
|
|
|
25,313
|
|
State and municipal obligations
|
|
|
18,566
|
|
|
|
49
|
|
|
|
(459
|
)
|
|
|
18,156
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
51,929
|
|
|
$
|
116
|
|
|
$
|
(872
|
)
|
|
$
|
51,173
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross realized gains and gross realized losses on sales and calls of securities were as follows:
|
|
|
|
|
|
|
|
|
|
|
For the three months ended
|
|
|
|
March 31,
|
|
(Dollars in thousands)
|
|
2017
|
|
|
2016
|
|
Gross realized gains
|
|
$
|
|
|
|
$
|
15
|
|
Gross realized losses
|
|
|
(5
|
)
|
|
|
(9
|
)
|
|
|
|
|
|
|
|
|
|
Net realized (losses) gains
|
|
$
|
(5
|
)
|
|
$
|
6
|
|
|
|
|
|
|
|
|
|
|
Aggregate proceeds
|
|
$
|
995
|
|
|
$
|
2,702
|
|
|
|
|
|
|
|
|
|
|
Average yields (taxable equivalent) on securities were 3.22% and 3.03% for the three months ended March 31, 2017 and
2016, respectively.
Securities with a market value of $10.7 million and $19.1 million were pledged as collateral for repurchase agreements and
for other purposes as required by law as of March 31, 2017 and December 31, 2016, respectively. As of March 31, 2017 and December 31, 2016, all the securities pledged to repurchase agreements were state and municipal obligations.
All the repurchase agreements had remaining contractual maturities that were overnight and continuous. Securities sold under repurchase agreements were $8.5 million and $18.3 million as of March 31, 2017 and December 31,
2016, respectively, and included in liabilities on the consolidated balance sheets. The securities pledged to each agreement are reviewed daily and can be changed at the option of the Bank with minimal risk of loss due to fair value.
11
Securities in an unrealized loss position at March 31, 2017 and December 31, 2016, by duration of the
unrealized loss, are shown below. The unrealized loss positions were directly related to interest rate movements as there is minimal credit risk exposure in these investments. All agency securities, and states and municipal securities, are
investment grade or better and their losses are considered temporary. Management does not intend to sell the securities and does not expect to be required to sell the securities. Furthermore, all amortized cost bases are expected to be recovered.
Bonds with unrealized loss positions at March 31, 2017 included 39 federal agencies and 35 municipals. Bonds with unrealized loss positions at December 31, 2016 included 37 federal agencies, one corporate bond and 39 municipals. The tables
are shown below.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(Dollars in thousands)
|
|
Less than 12 months
|
|
|
12 months or more
|
|
|
Total
|
|
|
|
Fair
|
|
|
Unrealized
|
|
|
Fair
|
|
|
Unrealized
|
|
|
Fair
|
|
|
Unrealized
|
|
March 31, 2017
|
|
Value
|
|
|
Loss
|
|
|
Value
|
|
|
Loss
|
|
|
Value
|
|
|
Loss
|
|
U.S. Government agencies
|
|
$
|
21,463
|
|
|
$
|
(418
|
)
|
|
$
|
1,248
|
|
|
$
|
(11
|
)
|
|
$
|
22,711
|
|
|
$
|
(429
|
)
|
States and municipal obligations
|
|
|
12,409
|
|
|
|
(430
|
)
|
|
|
|
|
|
|
|
|
|
|
12,409
|
|
|
|
(430
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total temporarily impaired securities
|
|
$
|
33,872
|
|
|
$
|
(848
|
)
|
|
$
|
1,248
|
|
|
$
|
(11
|
)
|
|
$
|
35,120
|
|
|
$
|
(859
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Less than 12 months
|
|
|
12 months or more
|
|
|
Total
|
|
|
|
Fair
|
|
|
Unrealized
|
|
|
Fair
|
|
|
Unrealized
|
|
|
Fair
|
|
|
Unrealized
|
|
December 31, 2016
|
|
Value
|
|
|
Loss
|
|
|
Value
|
|
|
Loss
|
|
|
Value
|
|
|
Loss
|
|
Corporate bonds
|
|
$
|
995
|
|
|
$
|
(5
|
)
|
|
$
|
|
|
|
$
|
|
|
|
$
|
995
|
|
|
$
|
(5
|
)
|
U.S. Government agencies
|
|
|
20,933
|
|
|
|
(396
|
)
|
|
|
1,308
|
|
|
|
(12
|
)
|
|
|
22,241
|
|
|
|
(408
|
)
|
States and municipal obligations
|
|
|
12,888
|
|
|
|
(459
|
)
|
|
|
|
|
|
|
|
|
|
|
12,888
|
|
|
|
(459
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total temporarily impaired securities
|
|
$
|
34,816
|
|
|
$
|
(860
|
)
|
|
$
|
1,308
|
|
|
$
|
(12
|
)
|
|
$
|
36,124
|
|
|
$
|
(872
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The Companys investment in Federal Home Loan Bank of Atlanta (FHLB) stock totaled $3.0 million and
$1.9 million at March 31, 2017 and December 31, 2016, respectively. The Company also had an investment in Federal Reserve Bank of Richmond (FRB) stock which totaled $595 thousand and $580 thousand at
March 31, 2017 and December 31, 2016, respectively. The investments in both FHLB and FRB stock are required investments related to the Banks membership with the FHLB and FRB. These securities do not have a readily determinable fair
value as their ownership is restricted, and they lack an active market for trading. Additionally, per charter provisions related to the FHLB and FRB stock, all repurchase transactions of such stock must occur at par. Accordingly, these securities
are carried at cost, and are periodically evaluated for impairment. The Companys determination as to whether its investment in FHLB and FRB stock is impaired is based on managements assessment of the ultimate recoverability of its par
value rather than recognizing temporary declines in its value. The determination of whether the decline affects the ultimate recoverability of the investments is influenced by available information regarding various factors. These factors include,
among others, the significance of the decline in net assets of the issuing banks as compared to the capital stock amount reported by these banks, and the length of time a decline has persisted; commitments by such banks to make payments required by
law or regulation and the level of such payments in relation to the operating performance of the issuing bank; and the overall liquidity position of the issuing bank. Based on its most recent analysis of publicly available information regarding the
financial condition of the issuing banks, management concluded that no impairment existed in the carrying value of FHLB and FRB stock.
Note 6: Low
Income Housing Tax Credits
The Company had investments in three separate housing equity funds at March 31, 2017. The general purpose of these
funds is to encourage and assist participants in investing in
low-income
residential rental properties located in the Commonwealth of Virginia, develop and implement strategies to maintain projects as
low-income
housing, deliver federal low income housing tax credits to investors, allocate tax losses and other possible tax benefits to investors, and to preserve and protect project assets. The investments in these
funds were recorded as other assets on the consolidated balance sheets and were $1.5 million as of March 31, 2017. These investments and related tax benefits have expected terms through 2029. Tax credits and other tax benefits recognized
related to these investments during the three months ended March 31, 2017 was $17 thousand. Total projected tax credits to be received for 2017 are $68 thousand, which is based on the most recent quarterly estimates received from the
funds. Additional capital calls expected for the funds totaled $1.5 million at March 31, 2017 and are included in other liabilities on the consolidated balance sheets.
12
Note 7: Loans
The following is a summary of the balances of loans:
|
|
|
|
|
|
|
|
|
(Dollars in thousands)
|
|
March 31, 2017
|
|
|
December 31, 2016
|
|
Mortgage loans on real estate:
|
|
|
|
|
|
|
|
|
Construction, Land and Land Development
|
|
$
|
44,119
|
|
|
$
|
39,818
|
|
Farmland
|
|
|
994
|
|
|
|
1,023
|
|
Commercial Mortgages
(Non-Owner
Occupied)
|
|
|
35,464
|
|
|
|
35,343
|
|
Commercial Mortgages (Owner Occupied)
|
|
|
42,550
|
|
|
|
41,825
|
|
Residential First Mortgages
|
|
|
205,106
|
|
|
|
194,007
|
|
Residential Revolving and Junior Mortgages
|
|
|
27,090
|
|
|
|
26,425
|
|
Commercial and Industrial loans
|
|
|
46,205
|
|
|
|
43,024
|
|
Consumer Loans
|
|
|
3,324
|
|
|
|
3,544
|
|
|
|
|
|
|
|
|
|
|
Total loans
|
|
|
404,852
|
|
|
|
385,009
|
|
Net unamortized deferred loan costs
|
|
|
409
|
|
|
|
391
|
|
Allowance for loan losses
|
|
|
(3,993
|
)
|
|
|
(3,863
|
)
|
|
|
|
|
|
|
|
|
|
Loans, net
|
|
$
|
401,268
|
|
|
$
|
381,537
|
|
|
|
|
|
|
|
|
|
|
The recorded investment in past due and
non-accruing
loans is shown in the following
table. A loan past due by more than 90 days is generally placed on nonaccrual unless it is both well secured and in the process of collection.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
90 Days or
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
30-89
|
|
|
More Past
|
|
|
|
|
|
Total Past
|
|
|
|
|
|
|
|
(Dollars in thousands)
|
|
Days
|
|
|
Due and
|
|
|
|
|
|
Due and
|
|
|
|
|
|
Total
|
|
March 31, 2017
|
|
Past Due
|
|
|
Still Accruing
|
|
|
Nonaccruals
|
|
|
Nonaccruals
|
|
|
Current
|
|
|
Loans
|
|
Mortgage Loans on Real Estate:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Construction, Land and Land Development
|
|
$
|
|
|
|
$
|
|
|
|
$
|
547
|
|
|
$
|
547
|
|
|
$
|
43,572
|
|
|
$
|
44,119
|
|
Farmland
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
994
|
|
|
|
994
|
|
Commercial Mortgages
(Non-Owner
Occupied)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
35,464
|
|
|
|
35,464
|
|
Commercial Mortgages (Owner Occupied)
|
|
|
|
|
|
|
|
|
|
|
2,148
|
|
|
|
2,148
|
|
|
|
40,402
|
|
|
|
42,550
|
|
Residential First Mortgages
|
|
|
402
|
|
|
|
|
|
|
|
1,975
|
|
|
|
2,377
|
|
|
|
202,729
|
|
|
|
205,106
|
|
Residential Revolving and Junior Mortgages
|
|
|
|
|
|
|
|
|
|
|
1,039
|
|
|
|
1,039
|
|
|
|
26,051
|
|
|
|
27,090
|
|
Commercial and Industrial
|
|
|
603
|
|
|
|
|
|
|
|
111
|
|
|
|
714
|
|
|
|
45,491
|
|
|
|
46,205
|
|
Consumer Loans
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
3,324
|
|
|
|
3,324
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
1,005
|
|
|
$
|
|
|
|
$
|
5,820
|
|
|
$
|
6,825
|
|
|
$
|
398,027
|
|
|
$
|
404,852
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
90 Days or
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
30-89
|
|
|
More Past
|
|
|
|
|
|
Total Past
|
|
|
|
|
|
|
|
|
|
Days
|
|
|
Due and
|
|
|
|
|
|
Due and
|
|
|
|
|
|
Total
|
|
December 31, 2016
|
|
Past Due
|
|
|
Still Accruing
|
|
|
Nonaccruals
|
|
|
Nonaccruals
|
|
|
Current
|
|
|
Loans
|
|
Mortgage Loans on Real Estate:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Construction, Land and Land Development
|
|
$
|
|
|
|
$
|
|
|
|
$
|
623
|
|
|
$
|
623
|
|
|
$
|
39,195
|
|
|
$
|
39,818
|
|
Farmland
|
|
|
57
|
|
|
|
|
|
|
|
|
|
|
|
57
|
|
|
|
966
|
|
|
|
1,023
|
|
Commercial Mortgages
(Non-Owner
Occupied)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
35,343
|
|
|
|
35,343
|
|
Commercial Mortgages (Owner Occupied)
|
|
|
188
|
|
|
|
|
|
|
|
2,270
|
|
|
|
2,458
|
|
|
|
39,367
|
|
|
|
41,825
|
|
Residential First Mortgages
|
|
|
1,546
|
|
|
|
|
|
|
|
2,155
|
|
|
|
3,701
|
|
|
|
190,306
|
|
|
|
194,007
|
|
Residential Revolving and Junior Mortgages
|
|
|
480
|
|
|
|
|
|
|
|
160
|
|
|
|
640
|
|
|
|
25,785
|
|
|
|
26,425
|
|
Commercial and Industrial
|
|
|
408
|
|
|
|
|
|
|
|
92
|
|
|
|
500
|
|
|
|
42,524
|
|
|
|
43,024
|
|
Consumer Loans
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
3,544
|
|
|
|
3,544
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
2,679
|
|
|
$
|
|
|
|
$
|
5,300
|
|
|
$
|
7,979
|
|
|
$
|
377,030
|
|
|
$
|
385,009
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
13
Note 8: Allowance for Loan Losses
Loans Evaluated for Impairment
Loan receivables evaluated
for impairment individually and collectively by segment as of March 31, 2017 and December 31, 2016 are as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(Dollars in thousands)
|
|
Mortgage
Loans
|
|
|
Commercial
and
|
|
|
Consumer
and Other
|
|
|
|
|
As of March 31, 2017
|
|
on Real Estate
|
|
|
Industrial
|
|
|
Loans
|
|
|
Total
|
|
Individually evaluated for impairment
|
|
$
|
9,940
|
|
|
$
|
92
|
|
|
$
|
|
|
|
$
|
10,032
|
|
Collectively evaluated for impairment
|
|
|
345,383
|
|
|
|
46,113
|
|
|
|
3,324
|
|
|
|
394,820
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Gross Loans
|
|
$
|
355,323
|
|
|
$
|
46,205
|
|
|
$
|
3,324
|
|
|
$
|
404,852
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As of December 31, 2016
|
|
|
|
|
|
|
|
|
|
|
|
|
Individually evaluated for impairment
|
|
$
|
10,323
|
|
|
$
|
92
|
|
|
$
|
|
|
|
$
|
10,415
|
|
Collectively evaluated for impairment
|
|
|
328,118
|
|
|
|
42,932
|
|
|
|
3,544
|
|
|
|
374,594
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Gross Loans
|
|
$
|
338,441
|
|
|
$
|
43,024
|
|
|
$
|
3,544
|
|
|
$
|
385,009
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Allowance for Loan Losses
The allowance for loan losses disaggregated based on loan receivables evaluated for impairment individually and collectively by segment as of March 31,
2017 and December 31, 2016 are as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(Dollars in thousands)
|
|
Mortgage
Loans
|
|
|
Commercial
and
|
|
|
Consumer
|
|
|
|
|
As of March 31, 2017
|
|
on Real Estate
|
|
|
Industrial
|
|
|
Loans
|
|
|
Total
|
|
Individually evaluated for impairment
|
|
$
|
694
|
|
|
$
|
92
|
|
|
$
|
|
|
|
$
|
786
|
|
Collectively evaluated for impairment
|
|
|
2,727
|
|
|
|
436
|
|
|
|
44
|
|
|
|
3,207
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total allowance for loan losses
|
|
$
|
3,421
|
|
|
$
|
528
|
|
|
$
|
44
|
|
|
$
|
3,993
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As of December 31, 2016
|
|
Mortgage
Loans
on Real Estate
|
|
|
Commercial
and
Industrial
|
|
|
Consumer
Loans
|
|
|
Total
|
|
Individually evaluated for impairment
|
|
$
|
803
|
|
|
$
|
92
|
|
|
$
|
|
|
|
$
|
895
|
|
Collectively evaluated for impairment
|
|
|
2,515
|
|
|
|
401
|
|
|
|
52
|
|
|
|
2,968
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total allowance for loan losses
|
|
$
|
3,318
|
|
|
$
|
493
|
|
|
$
|
52
|
|
|
$
|
3,863
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
A disaggregation and an analysis of the change in the allowance for loan losses by segment is shown below.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(Dollars in thousands)
For the Three
Months Ended
March 31, 2017
|
|
Mortgage
Loans on
Real Estate
|
|
|
Commercial
and
Industrial
|
|
|
Consumer
Loans
|
|
|
Total
|
|
ALLOWANCE FOR LOAN LOSSES:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Beginning Balance
|
|
$
|
3,318
|
|
|
$
|
493
|
|
|
$
|
52
|
|
|
$
|
3,863
|
|
(Charge-offs)
|
|
|
(132
|
)
|
|
|
|
|
|
|
(8
|
)
|
|
|
(140
|
)
|
Recoveries
|
|
|
78
|
|
|
|
|
|
|
|
2
|
|
|
|
80
|
|
Provision
|
|
|
157
|
|
|
|
35
|
|
|
|
(2
|
)
|
|
|
190
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Ending Balance
|
|
$
|
3,421
|
|
|
$
|
528
|
|
|
$
|
44
|
|
|
$
|
3,993
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the Three Months Ended
March 31,
2016
|
|
Mortgage
Loans on
Real Estate
|
|
|
Commercial
and
Industrial
|
|
|
Consumer
Loans
|
|
|
Total
|
|
ALLOWANCE FOR LOAN LOSSES:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Beginning Balance
|
|
$
|
3,502
|
|
|
$
|
599
|
|
|
$
|
122
|
|
|
$
|
4,223
|
|
(Charge-offs)
|
|
|
(83
|
)
|
|
|
|
|
|
|
(11
|
)
|
|
|
(94
|
)
|
Recoveries
|
|
|
6
|
|
|
|
5
|
|
|
|
2
|
|
|
|
13
|
|
(Recovery) provision
|
|
|
(15
|
)
|
|
|
(25
|
)
|
|
|
5
|
|
|
|
(35
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Ending Balance
|
|
$
|
3,410
|
|
|
$
|
579
|
|
|
$
|
118
|
|
|
$
|
4,107
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Internal Risk Rating Grades
Internal risk rating grades are generally assigned to commercial loans not secured by real estate, commercial mortgages, residential mortgages greater than
$1 million, smaller residential mortgages which are impaired, loans to real estate developers and contractors, consumer loans greater than $250,000 with chronic delinquency, and TDRs, as shown in the following table. The grading analysis
estimates the capability of the borrower to repay the contractual obligations of the loan agreements as scheduled. Risk grades (refer to Note 3) are evaluated as new information becomes available for each borrowing relationship or at least
quarterly.
14
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Construction,
|
|
|
|
|
|
Commercial
|
|
|
Commercial
|
|
|
|
|
|
|
|
|
|
Land and
|
|
|
|
|
|
Mortgages
|
|
|
Mortgages
|
|
|
Commercial
|
|
|
|
|
(Dollars in thousands)
|
|
Land
|
|
|
|
|
|
(Non-Owner
|
|
|
(Owner
|
|
|
and
|
|
|
|
|
As of March 31, 2017
|
|
Development
|
|
|
Farmland
|
|
|
Occupied)
|
|
|
Occupied)
|
|
|
Industrial
|
|
|
Total
|
|
Grade:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Pass
|
|
$
|
36,423
|
|
|
$
|
994
|
|
|
$
|
30,571
|
|
|
$
|
32,412
|
|
|
$
|
44,441
|
|
|
$
|
144,841
|
|
Watch
|
|
|
5,762
|
|
|
|
|
|
|
|
4,375
|
|
|
|
7,732
|
|
|
|
1,538
|
|
|
|
19,407
|
|
Special mention
|
|
|
179
|
|
|
|
|
|
|
|
270
|
|
|
|
|
|
|
|
40
|
|
|
|
489
|
|
Substandard
|
|
|
1,755
|
|
|
|
|
|
|
|
248
|
|
|
|
2,406
|
|
|
|
186
|
|
|
|
4,595
|
|
Doubtful
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
44,119
|
|
|
$
|
994
|
|
|
$
|
35,464
|
|
|
$
|
42,550
|
|
|
$
|
46,205
|
|
|
$
|
169,332
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Construction,
|
|
|
|
|
|
Commercial
|
|
|
Commercial
|
|
|
|
|
|
|
|
|
|
Land and
|
|
|
|
|
|
Mortgages
|
|
|
Mortgages
|
|
|
Commercial
|
|
|
|
|
|
|
Land
|
|
|
|
|
|
(Non-Owner
|
|
|
(Owner
|
|
|
and
|
|
|
|
|
As of December 31, 2016
|
|
Development
|
|
|
Farmland
|
|
|
Occupied)
|
|
|
Occupied)
|
|
|
Industrial
|
|
|
Total
|
|
Grade:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Pass
|
|
$
|
32,009
|
|
|
$
|
1,023
|
|
|
$
|
30,639
|
|
|
$
|
31,191
|
|
|
$
|
40,841
|
|
|
$
|
135,703
|
|
Watch
|
|
|
5,795
|
|
|
|
|
|
|
|
4,184
|
|
|
|
6,652
|
|
|
|
1,891
|
|
|
|
18,522
|
|
Special mention
|
|
|
180
|
|
|
|
|
|
|
|
272
|
|
|
|
1,453
|
|
|
|
125
|
|
|
|
2,030
|
|
Substandard
|
|
|
1,834
|
|
|
|
|
|
|
|
248
|
|
|
|
2,529
|
|
|
|
167
|
|
|
|
4,778
|
|
Doubtful
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
39,818
|
|
|
$
|
1,023
|
|
|
$
|
35,343
|
|
|
$
|
41,825
|
|
|
$
|
43,024
|
|
|
$
|
161,033
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loans not assigned internal risk rating grades are comprised of smaller residential mortgages and smaller consumer loans.
Payment activity of these loans is reviewed monthly by management. However, some of these loans are graded when the borrowers total exposure to the Bank exceeds the limits noted above. Loans are considered to be nonperforming when they are
delinquent by 90 days or more or
non-accruing
and credit risk is primarily evaluated by delinquency status, as shown in the table below.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Residential
|
|
|
|
|
|
|
|
(Dollars in thousands)
|
|
Residential
|
|
|
Revolving
|
|
|
|
|
|
|
|
As of March 31, 2017
|
|
First
|
|
|
and Junior
|
|
|
Consumer
|
|
|
|
|
PAYMENT ACTIVITY STATUS
|
|
Mortgages (1)
|
|
|
Mortgages (2)
|
|
|
Loans (3)
|
|
|
Total
|
|
Performing
|
|
$
|
203,131
|
|
|
$
|
26,051
|
|
|
$
|
3,324
|
|
|
$
|
232,506
|
|
Nonperforming
|
|
|
1,975
|
|
|
|
1,039
|
|
|
|
|
|
|
|
3,014
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
205,106
|
|
|
$
|
27,090
|
|
|
$
|
3,324
|
|
|
$
|
235,520
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Residential
|
|
|
|
|
|
|
|
|
|
Residential
|
|
|
Revolving
|
|
|
|
|
|
|
|
As of December 31, 2016
|
|
First
|
|
|
and Junior
|
|
|
Consumer
|
|
|
|
|
PAYMENT ACTIVITY STATUS
|
|
Mortgages (4)
|
|
|
Mortgages (5)
|
|
|
Loans (6)
|
|
|
Total
|
|
Performing
|
|
$
|
191,852
|
|
|
$
|
26,265
|
|
|
$
|
3,544
|
|
|
$
|
221,661
|
|
Nonperforming
|
|
|
2,155
|
|
|
|
160
|
|
|
|
|
|
|
|
2,315
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
194,007
|
|
|
$
|
26,425
|
|
|
$
|
3,544
|
|
|
$
|
223,976
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1)
|
Residential First Mortgages which have been assigned a risk rating grade of Substandard totaled $3.1million as of March 31, 2017.
|
(2)
|
Residential Revolving and Junior Mortgages which have been assigned a risk rating grade of Substandard totaled $1.9 million as of March 31, 2017.
|
(3)
|
No Consumer Loans had been assigned a risk rating grade of Substandard as of March 31, 2017.
|
(4)
|
Residential First Mortgages which have been assigned a risk rating grade of Substandard totaled $3.3 million as of December 31, 2016.
|
(5)
|
Residential Revolving and Junior Mortgages which have been assigned a risk rating grade of Substandard totaled $1.1 million as of December 31, 2016.
|
(6)
|
No Consumer Loans had been assigned a risk rating grade of Substandard as of December 31, 2016.
|
Impaired Loans
The following tables show the
Companys recorded investment and the customers unpaid principal balances for impaired
loans, with the associated allowance amount, if applicable, as of March 31, 2017 and December 31, 2016, along with the average
recorded investment and interest income recognized for the three months ended March 31, 2017 and 2016, respectively.
15
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As of March 31, 2017
|
|
|
As of December 31, 2016
|
|
(Dollars in thousands)
IMPAIRED LOANS
|
|
Recorded
Investment
|
|
|
Customers Unpaid
Principal Balance
|
|
|
Related
Allowance
|
|
|
Recorded
Investment
|
|
|
Customers Unpaid
Principal Balance
|
|
|
Related
Allowance
|
|
With no related allowance:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Construction, Land and Land Development
|
|
$
|
1,455
|
|
|
$
|
1,535
|
|
|
$
|
|
|
|
$
|
1,531
|
|
|
$
|
1,539
|
|
|
$
|
|
|
Residential First Mortgages
|
|
|
2,104
|
|
|
|
2,171
|
|
|
|
|
|
|
|
2,112
|
|
|
|
2,176
|
|
|
|
|
|
Residential Revolving and Junior Mortgages (1)
|
|
|
995
|
|
|
|
999
|
|
|
|
|
|
|
|
995
|
|
|
|
999
|
|
|
|
|
|
Commercial Mortgages
(Non-owner
occupied)
|
|
|
248
|
|
|
|
248
|
|
|
|
|
|
|
|
248
|
|
|
|
248
|
|
|
|
|
|
Commercial Mortgages (Owner occupied)
|
|
|
2,030
|
|
|
|
2,351
|
|
|
|
|
|
|
|
1,860
|
|
|
|
2,178
|
|
|
|
|
|
Commercial and Industrial
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
6,832
|
|
|
|
7,304
|
|
|
|
|
|
|
|
6,746
|
|
|
|
7,140
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
With an allowance recorded:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Construction, Land and Land Development
|
|
|
239
|
|
|
|
285
|
|
|
|
140
|
|
|
|
243
|
|
|
|
286
|
|
|
|
145
|
|
Residential First Mortgages
|
|
|
1,942
|
|
|
|
1,942
|
|
|
|
338
|
|
|
|
1,951
|
|
|
|
1,951
|
|
|
|
367
|
|
Residential Revolving and Junior Mortgages (1)
|
|
|
526
|
|
|
|
528
|
|
|
|
175
|
|
|
|
544
|
|
|
|
546
|
|
|
|
199
|
|
Commercial Mortgages
(Non-owner
occupied)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commercial Mortgages (Owner occupied)
|
|
|
401
|
|
|
|
421
|
|
|
|
41
|
|
|
|
839
|
|
|
|
854
|
|
|
|
92
|
|
Commercial and Industrial
|
|
|
92
|
|
|
|
101
|
|
|
|
92
|
|
|
|
92
|
|
|
|
101
|
|
|
|
92
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
3,200
|
|
|
|
3,277
|
|
|
|
786
|
|
|
|
3,669
|
|
|
|
3,738
|
|
|
|
895
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Impaired Loans:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Construction, Land and Land Development
|
|
|
1,694
|
|
|
|
1,820
|
|
|
|
140
|
|
|
|
1,774
|
|
|
|
1,825
|
|
|
|
145
|
|
Residential First Mortgages
|
|
|
4,046
|
|
|
|
4,113
|
|
|
|
338
|
|
|
|
4,063
|
|
|
|
4,127
|
|
|
|
367
|
|
Residential Revolving and Junior Mortgages (1)
|
|
|
1,521
|
|
|
|
1,527
|
|
|
|
175
|
|
|
|
1,539
|
|
|
|
1,545
|
|
|
|
199
|
|
Commercial Mortgages
(Non-owner
occupied)
|
|
|
248
|
|
|
|
248
|
|
|
|
|
|
|
|
248
|
|
|
|
248
|
|
|
|
|
|
Commercial Mortgages (Owner occupied)
|
|
|
2,431
|
|
|
|
2,772
|
|
|
|
41
|
|
|
|
2,699
|
|
|
|
3,032
|
|
|
|
92
|
|
Commercial and Industrial
|
|
|
92
|
|
|
|
101
|
|
|
|
92
|
|
|
|
92
|
|
|
|
101
|
|
|
|
92
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
10,032
|
|
|
$
|
10,581
|
|
|
$
|
786
|
|
|
$
|
10,415
|
|
|
$
|
10,878
|
|
|
$
|
895
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Notes:
(1)
|
Junior mortgages include equity lines.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the three months ended
|
|
|
|
March 31, 2017
|
|
|
March 31, 2016
|
|
(Dollars in thousands)
|
|
Average
Recorded
Investment
|
|
|
Interest
Income
Recognized
|
|
|
Average
Recorded
Investment
|
|
|
Interest
Income
Recognized
|
|
With no related allowance:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Construction, land and land development
|
|
$
|
1,493
|
|
|
$
|
13
|
|
|
$
|
991
|
|
|
$
|
14
|
|
Residential First Mortgages
|
|
|
2,108
|
|
|
|
5
|
|
|
|
2,783
|
|
|
|
26
|
|
Residential Revolving and Junior Mortgages (1)
|
|
|
995
|
|
|
|
10
|
|
|
|
468
|
|
|
|
9
|
|
Commercial Mortgages
(Non-owner
occupied)
|
|
|
248
|
|
|
|
4
|
|
|
|
256
|
|
|
|
4
|
|
Commercial Mortgages (Owner occupied)
|
|
|
2,159
|
|
|
|
5
|
|
|
|
1,090
|
|
|
|
17
|
|
Commercial and Industrial
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
7,003
|
|
|
|
37
|
|
|
|
5,588
|
|
|
|
70
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
With an allowance recorded:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Construction, land and land development
|
|
|
241
|
|
|
|
1
|
|
|
|
260
|
|
|
|
1
|
|
Residential First Mortgages
|
|
|
1,946
|
|
|
|
24
|
|
|
|
2,905
|
|
|
|
21
|
|
Residential Revolving and Junior Mortgages (1)
|
|
|
527
|
|
|
|
5
|
|
|
|
309
|
|
|
|
4
|
|
Commercial Mortgages
(Non-owner
occupied)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commercial Mortgages (Owner occupied)
|
|
|
406
|
|
|
|
|
|
|
|
2,208
|
|
|
|
14
|
|
Commercial and Industrial
|
|
|
92
|
|
|
|
|
|
|
|
280
|
|
|
|
1
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
3,212
|
|
|
|
30
|
|
|
|
5,962
|
|
|
|
41
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Construction, land and land development
|
|
|
1,734
|
|
|
|
14
|
|
|
|
1,251
|
|
|
|
15
|
|
Residential First Mortgages
|
|
|
4,054
|
|
|
|
29
|
|
|
|
5,688
|
|
|
|
47
|
|
Residential Revolving and Junior Mortgages (1)
|
|
|
1,522
|
|
|
|
15
|
|
|
|
777
|
|
|
|
13
|
|
Commercial Mortgages
(Non-owner
occupied)
|
|
|
248
|
|
|
|
4
|
|
|
|
256
|
|
|
|
4
|
|
Commercial Mortgages (Owner occupied)
|
|
|
2,565
|
|
|
|
5
|
|
|
|
3,298
|
|
|
|
31
|
|
Commercial and Industrial
|
|
|
92
|
|
|
|
|
|
|
|
280
|
|
|
|
1
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
10,215
|
|
|
$
|
67
|
|
|
$
|
11,550
|
|
|
$
|
111
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1)
|
Junior mortgages include equity lines.
|
Smaller
non-accruing
loans and
non-accruing
loans that are not graded because they are included in homogenous pools generally do not meet the criteria for impairment testing, and are therefore excluded from impaired loan disclosures. At
March 31, 2017 and December 31, 2016,
non-accruing
loans excluded from impaired loan disclosure totaled $671 thousand and $465 thousand, respectively. If interest on these
non-accruing
loans had been accrued, such income would have totaled $6 thousand and $2 thousand during the three months ended March 31, 2017 and 2016, respectively.
16
Loan Modifications
Loans modified as TDRs are considered impaired and are individually evaluated for the amount of impairment in the ALL. There were no new loans modified as TDRs
in the first quarter of 2017 or the first quarter of 2016. In addition, no TDRs subsequently defaulted in the first quarter of 2017 or the first quarter of 2016.
Other Real Estate Owned
The table below details the
properties included in other real estate owned (OREO) as of March 31, 2017 and December 31, 2016. There were no collateralized consumer residential mortgage loans in the process of foreclosure as of March 31, 2017.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As of March 31, 2017
|
|
|
As of December 31, 2016
|
|
|
|
No. of
|
|
|
Carrying
|
|
|
No. of
|
|
|
Carrying
|
|
(Dollars in thousands)
|
|
Properties
|
|
|
Value
|
|
|
Properties
|
|
|
Value
|
|
Residential
|
|
|
2
|
|
|
$
|
831
|
|
|
|
2
|
|
|
$
|
891
|
|
Land lots
|
|
|
7
|
|
|
|
586
|
|
|
|
7
|
|
|
|
547
|
|
Convenience store
|
|
|
1
|
|
|
|
60
|
|
|
|
1
|
|
|
|
59
|
|
Restaurant
|
|
|
1
|
|
|
|
55
|
|
|
|
1
|
|
|
|
55
|
|
Commerical properties
|
|
|
3
|
|
|
|
904
|
|
|
|
3
|
|
|
|
942
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
14
|
|
|
$
|
2,436
|
|
|
|
14
|
|
|
$
|
2,494
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Included in other assets as of March 31, 2017 and December 31, 2016, is one residential property purchased in 2013
from a related party with a value of $708 thousand and a former branch, which was closed April 30, 2015, with a value of $403 thousand.
Note 9: Earnings per share
The following table shows the
weighted average number of shares used in computing earnings per share and the effect on the weighted average number of shares of dilutive potential common stock.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the three months ended
|
|
|
|
March 31, 2017
|
|
|
March 31, 2016
|
|
|
|
Average
|
|
|
Per share
|
|
|
Average
|
|
|
Per share
|
|
|
|
Shares
|
|
|
Amount
|
|
|
Shares
|
|
|
Amount
|
|
Basic earnings per share
|
|
|
4,776,800
|
|
|
$
|
(0.04
|
)
|
|
|
4,774,856
|
|
|
$
|
0.11
|
|
Effect of dilutive securities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stock options
|
|
|
|
|
|
|
|
|
|
|
16,283
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted earnings per share
|
|
|
4,776,800
|
|
|
$
|
(0.04
|
)
|
|
|
4,791,139
|
|
|
$
|
0.11
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the three months ended March 31, 2017 and 2016, options on 91,368 and 68,473 shares, respectively, were not included
in computing diluted earnings per share because their effects were anti-dilutive.
Note 10: Stock-Based Compensation
On June 28, 2013, the Company registered with the SEC a stock-based compensation plan, which superseded all other plans. There are 317,209 shares
available for grant under this plan at March 31, 2017.
Stock-based compensation expense related to stock awards for the three month periods ended
March 31, 2017 and 2016 was $59 thousand and $16 thousand, respectively. Compensation expense for stock options is the estimated fair value of options on the date granted using the Black-Scholes Model amortized on a straight-line
basis over the vesting period of the award. There was no unrecognized compensation expense related to stock options as of March 31, 2017.
Options
for a total of 8,500 shares were granted and vested during the three months ended March 31, 2017. The aggregate fair value of options granted during the three months ended March 31, 2017 was $16 thousand. Options for a total of 7,500
shares were granted and vested during the three months ended March 31, 2016. The aggregate fair value of options granted during the three months ended March 31, 2016 was $16 thousand.
17
The variables used in these calculations of the fair value of the options are as follows:
|
|
|
|
|
|
|
|
|
|
|
For the three months ended March 31,
|
|
|
|
2017
|
|
|
2016
|
|
Risk free interest rate (5 year Treasury)
|
|
|
1.93
|
%
|
|
|
1.49
|
%
|
Expected dividend yield
|
|
|
0
|
%
|
|
|
0
|
%
|
Expected term (years)
|
|
|
5
|
|
|
|
5
|
|
Expected volatility
|
|
|
21.7
|
%
|
|
|
40.1
|
%
|
Stock option activity for the three months ended March 31, 2017 is summarized below:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted
|
|
|
|
|
|
|
|
|
|
|
|
|
Average
|
|
|
|
|
|
|
|
|
|
Weighted Average
|
|
|
Remaining
|
|
|
Aggregate
|
|
|
|
|
|
|
Exercise
|
|
|
Contractual
|
|
|
Intrinsic
|
|
|
|
Shares
|
|
|
Price
|
|
|
Life (in years)
|
|
|
Value (1)
|
|
Options outstanding, January 1, 2017
|
|
|
218,300
|
|
|
$
|
6.35
|
|
|
|
5.9
|
|
|
|
|
|
Granted
|
|
|
8,500
|
|
|
|
8.30
|
|
|
|
|
|
|
|
|
|
Forfeited
|
|
|
(1,195
|
)
|
|
|
8.43
|
|
|
|
|
|
|
|
|
|
Exercised
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Expired
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Options outstanding and exercisable, March 31, 2017
|
|
|
225,605
|
|
|
$
|
6.41
|
|
|
|
5.9
|
|
|
$
|
737,512
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1)
|
The aggregate intrinsic value of a stock option in the table above represents the total
pre-tax
intrinsic value (the amount by which the current market value of the underlying
stock exceeds the exercise price of the option) that would have been received by the option holders had all option holders exercised their options on March 31, 2017. This amount changes based on changes in the market value of the Companys
common stock.
|
In the first quarter of 2017, 12,500 shares of restricted stock were granted to two executives. Of these shares, 5,000 shares
vested immediately and $43 thousand of compensation expense was recorded. Another 2,500 shares of restricted stock will vest over two years and $20 thousand of compensation expense is expected to be recorded over that period. The final 5,000
shares of restricted stock will vest over three years and $40 thousand of compensation expense is expected to be recorded over that period.
Note
11: Employee Benefit Plans
The Company has a
non-contributory,
defined benefit pension plan for full-time
employees who were over 21 years of age and vested in the plan as of December 31, 2012, when the plan was frozen. Each participants account balance grows based on monthly interest credits. The Company funds pension costs in accordance
with the funding provisions of the Employee Retirement Income Security Act.
The Company sponsors a post-retirement benefit plan covering current and
future retirees who acquire age 55 and 10 years of service or age 65 and 5 years of service. The post-retirement benefit plan provides coverage toward a retirees eligible medical and life insurance benefits expenses. The plan is unfunded and
funded as benefits are due.
Components of Net Periodic (Benefit) Cost
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(Dollars in thousands)
|
|
Pension Benefits
|
|
|
Post-Retirement Benefits
|
|
Three months ended March
31,
|
|
2017
|
|
|
2016
|
|
|
2017
|
|
|
2016
|
|
Service cost
|
|
$
|
|
|
|
$
|
|
|
|
$
|
5
|
|
|
$
|
6
|
|
Interest cost
|
|
|
31
|
|
|
|
35
|
|
|
|
5
|
|
|
|
7
|
|
Expected return on plan assets
|
|
|
(45
|
)
|
|
|
(48
|
)
|
|
|
|
|
|
|
|
|
Settlement loss
|
|
|
13
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Amortization of net gain
|
|
|
|
|
|
|
|
|
|
|
(2
|
)
|
|
|
|
|
Recognized net actuarial loss
|
|
|
19
|
|
|
|
19
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net periodic cost
|
|
$
|
18
|
|
|
$
|
6
|
|
|
$
|
8
|
|
|
$
|
13
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The Company expects to make no contribution to its pension plan and $5 thousand to its post-retirement benefit plan
during the remainder of 2017. The Company has contributed $1 thousand towards the post-retirement plan during the first three months of 2017.
18
Note 12: Long Term Debt
FHLB Debt
As of March 31, 2017, the Bank had
$60.0 million of outstanding FHLB debt, consisting of nine advances. As of December 31, 2016, five advances totaling $35.0 million were outstanding. The Company drew four new advances totaling $25.0 million during the first
quarter of 2017.
The nine advances are shown in the following table.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Description
|
|
Balance
|
|
|
Originated
|
|
|
Current
Interest Rate
|
|
|
Maturity
Date
|
|
Adjustable Rate Hybrid
|
|
$
|
10,000,000
|
|
|
|
4/12/2013
|
|
|
|
3.40178
|
%
|
|
|
4/13/2020
|
|
Fixed Rate Credit
|
|
|
5,000,000
|
|
|
|
12/21/2015
|
|
|
|
0.99000
|
%
|
|
|
6/15/2017
|
|
Fixed Rate Credit
|
|
|
5,000,000
|
|
|
|
12/22/2015
|
|
|
|
1.08000
|
%
|
|
|
9/15/2017
|
|
Fixed Rate Credit
|
|
|
5,000,000
|
|
|
|
1/17/2017
|
|
|
|
0.91000
|
%
|
|
|
10/1/2017
|
|
Fixed Rate Credit
|
|
|
5,000,000
|
|
|
|
1/20/2017
|
|
|
|
0.99500
|
%
|
|
|
12/20/2017
|
|
Fixed Rate Credit
|
|
|
10,000,000
|
|
|
|
3/1/2017
|
|
|
|
0.79000
|
%
|
|
|
5/29/2017
|
|
Fixed Rate Credit
|
|
|
5,000,000
|
|
|
|
3/6/2017
|
|
|
|
0.71000
|
%
|
|
|
4/5/2017
|
|
Fixed Rate Credit
|
|
|
10,000,000
|
|
|
|
3/30/2017
|
|
|
|
0.90000
|
%
|
|
|
4/28/2017
|
|
Fixed Rate Credit
|
|
|
5,000,000
|
|
|
|
3/31/2017
|
|
|
|
0.89000
|
%
|
|
|
5/1/2017
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
60,000,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Advances on the FHLB lines are secured by a blanket lien on qualified 1 to 4 family residential real estate loans. Immediate
available credit, as of March 31, 2017, was $54.8 million against a total line of credit of $120.8 million.
As of March 31, 2017 and
December 31, 2016, the Company had $60.0 million and $35.0 million, respectively, in FHLB debt outstanding with a weighted average interest rate of 1.31% and 1.49%, respectively.
Subordinated Debt
On May 28, 2015, the Company
issued an aggregate of $7,000,000 of subordinated notes (the Notes). The Notes have a maturity date of May 28, 2025. The Notes bear interest, payable on the 1st of March and September of each year, commencing September 1, 2015,
at a fixed interest rate of 6.50% per year. The Notes are not convertible into common stock or preferred stock, and are not callable by the holders. The Company has the right to redeem the Notes, in whole or in part, without premium or penalty, at
any interest payment date on or after May 28, 2020 and prior to the maturity date, but in all cases in a principal amount with integral multiples of $1,000, plus interest accrued and unpaid through the date of redemption. If an event of default
occurs, such as the bankruptcy of the Company, the holder of a Note may declare the principal amount of the Note to be due and immediately payable. The Notes are unsecured, subordinated obligations of the Company and will rank junior in right of
payment to the Companys existing and future senior indebtedness. The Notes qualify as Tier 2 capital for regulatory reporting.
|
|
|
|
|
(Dollars in thousands)
|
|
Balance as of
|
|
|
March 31, 2017
|
|
6.5% Subordinated Debt
|
|
$
|
7,000
|
|
Less: Issuance costs
|
|
|
(136
|
)
|
|
|
|
|
|
|
|
$
|
6,864
|
|
|
|
|
|
|
Note 13: Fair Value Measurements
The Company uses fair value to record certain assets and liabilities and to determine fair value disclosures. Authoritative accounting guidance clarifies that
fair value of certain assets and liabilities is an exit price, representing the amount that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants.
Authoritative accounting guidance specifies a hierarchy of valuation techniques based on whether the inputs to those valuation techniques are observable or
unobservable. Observable inputs reflect market data obtained from independent sources, while unobservable inputs reflect the Companys market assumptions. The three levels of the fair value hierarchy based on these two types of inputs are as
follows:
|
|
|
Level 1
|
|
Valuation is based on quoted prices in active markets for identical assets and liabilities.
|
|
|
Level 2
|
|
Valuation is based on observable inputs including quoted prices in active markets for similar assets and liabilities, quoted prices for identical or similar assets and liabilities in less active markets, and model-based valuation
techniques for which significant assumptions can be derived primarily from or corroborated by observable data in the market.
|
|
|
Level 3
|
|
Valuation is based on model-based techniques that use one or more significant inputs or assumptions that are unobservable in the market.
|
19
The following describes the valuation techniques used by the Company to measure certain financial assets and
liabilities recorded at fair value on a recurring basis in the financial statements:
Securities
available-for-sale
: Securities
available-for-sale
are recorded at fair value on a recurring basis. Fair value measurement is
based upon quoted market prices, when available (Level 1). If quoted market prices are not available, fair values are measured utilizing independent valuation techniques of identical or similar securities for which significant assumptions are
derived primarily from or corroborated by observable market data. Third party vendors compile prices from various sources and may determine the fair value of identical or similar securities by using pricing models that consider observable market
data (Level 2). In certain cases where there is limited activity or less transparency around inputs to the valuation, securities are classified within Level 3 of the valuation hierarchy.
Defined benefit plan assets
: Defined benefit plan assets are recorded at fair value on an annual basis at year end.
Mortgage servicing rights
: MSRs are recorded at fair value on a recurring basis, with changes in fair value recorded in the results of operations. A
model is used to determine fair value, which establishes pools of performing loans, calculates cash flows for each pool and applies a discount rate to each pool. Loans are segregated into 14 pools based on each loans term and seasoning (age).
All loans have fixed interest rates. Cash flows are then estimated by utilizing assumed service costs and prepayment speeds. Service costs were assumed to be $6.00 per loan as of both March 31, 2017 and December 31, 2016. Prepayment speeds
are determined primarily based on the average interest rate of the loans in each pool. The prepayment scale used is the Public Securities Association (PSA) model, where 100% PSA means prepayments are zero in the first month,
then increase by 0.2% of the loan balance each month until reaching 6.0% in month 30. Thereafter, the 100% PSA model assumes an annual prepayment of 6.0% of the remaining loan balance. The average PSA speed assumption in the fair value model is 139%
and 150% as of March 31, 2017 and December 31, 2016, respectively. A discount rate of 14% was then applied to each pool as of March 31, 2017 and 14.0% as of December 31, 2016. This discount rate is intended to represent the
estimated market yield for the highest quality grade of comparable servicing. MSRs are classified as Level 3.
20
The following table presents the balances of financial assets and liabilities measured at fair value on a
recurring basis as of
March 31, 2017 and December 31, 2016:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(Dollars in thousands)
|
|
Fair Value Measurements at March 31, 2017 Using
|
|
Description
|
|
Balance
|
|
|
Level 1
|
|
|
Level 2
|
|
|
Level 3
|
|
Securities
available-for-sale:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Corporate bonds
|
|
$
|
6,715
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
6,715
|
|
U. S. Government agencies
|
|
|
24,235
|
|
|
|
|
|
|
|
24,235
|
|
|
|
|
|
State and municipal obligations
|
|
|
18,876
|
|
|
|
|
|
|
|
18,876
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total securities
available-for-sale:
|
|
$
|
49,826
|
|
|
$
|
|
|
|
$
|
43,111
|
|
|
$
|
6,715
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Mortgage servicing rights
|
|
$
|
692
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
692
|
|
|
|
|
|
|
Defined benefit plan assets:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents
|
|
$
|
3
|
|
|
$
|
3
|
|
|
$
|
|
|
|
$
|
|
|
Mutual funds - fixed income
|
|
|
1,043
|
|
|
|
1,043
|
|
|
$
|
|
|
|
$
|
|
|
Mutual funds - equity
|
|
|
1,577
|
|
|
|
1,577
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total defined benefit plan assets
|
|
$
|
2,623
|
|
|
$
|
2,623
|
|
|
$
|
|
|
|
$
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fair Value Measurements at December 31, 2016 Using
|
|
Description
|
|
Balance
|
|
|
Level 1
|
|
|
Level 2
|
|
|
Level 3
|
|
Securities
available-for-sale:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Corporate bonds
|
|
$
|
7,704
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
7,704
|
|
U. S. Government agencies
|
|
|
25,313
|
|
|
|
|
|
|
|
25,313
|
|
|
|
|
|
State and municipal obligations
|
|
|
18,156
|
|
|
|
|
|
|
|
18,156
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total securities
available-for-sale:
|
|
$
|
51,173
|
|
|
$
|
|
|
|
$
|
43,469
|
|
|
$
|
7,704
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Mortgage servicing rights
|
|
$
|
671
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
671
|
|
|
|
|
|
|
Defined benefit plan assets:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Mutual funds - fixed income
|
|
$
|
1,041
|
|
|
$
|
1,041
|
|
|
$
|
|
|
|
$
|
|
|
Mutual funds - equity
|
|
|
1,649
|
|
|
|
1,649
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total defined benefit plan assets
|
|
$
|
2,690
|
|
|
$
|
2,690
|
|
|
$
|
|
|
|
$
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The reconciliation of items using Level 3 inputs is as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Corporate
|
|
(Dollars in thousands)
|
|
MSRs
|
|
|
Bonds
|
|
Balance, January 1, 2017
|
|
$
|
671
|
|
|
$
|
7,704
|
|
Purchases
|
|
|
|
|
|
|
|
|
Impairments
|
|
|
|
|
|
|
|
|
Fair value adjustments
|
|
|
21
|
|
|
|
11
|
|
Sales
|
|
|
|
|
|
|
(1,000
|
)
|
|
|
|
|
|
|
|
|
|
Balance, March 31, 2017
|
|
$
|
692
|
|
|
$
|
6,715
|
|
|
|
|
|
|
|
|
|
|
Certain assets are measured at fair value on a nonrecurring basis in accordance with GAAP. Adjustments to the fair value of
these assets usually result from the application of
lower-of-cost-or-market
accounting or
write-downs of individual assets.
The following describes the valuation techniques used by the Company to measure certain assets recorded at fair value
on a nonrecurring basis in the financial statements:
Impaired Loans:
Loans are designated as impaired when, in the judgment of management based on
current information and events, it is probable that all amounts due according to the contractual terms of the loan agreement will not be collected. The measurement of loss associated with impaired loans can be based on either the observable market
price of the loan or the fair value of the collateral. Collateral may be in the form of real estate or business assets including equipment, inventory, and accounts receivable. Any given loan may have multiple types of collateral. The vast majority
of the collateral is real estate. The value of real estate collateral is determined utilizing a market valuation approach based on an appraisal conducted by an independent, licensed appraiser outside of the Company using observable market data
(Level 2). However, if the collateral value is significantly adjusted due to differences in the comparable properties, or is discounted by the Company because of marketability, then the fair value is considered Level 3. The value of business
equipment is based upon an outside appraisal if deemed significant, or the net book value on the applicable business financial statements if not considered
21
significant. Likewise, values for inventory and accounts receivables collateral are based on financial statement balances or aging reports (Level 3). Impaired loans allocated to the ALL are
measured at fair value on a nonrecurring basis. Any fair value adjustments are recorded in the period incurred as provision for loan losses on the Consolidated Statements of Income.
Other Real Estate Owned:
OREO is measured at fair value less estimated costs to sell, based on an appraisal conducted by an independent, licensed
appraiser outside of the Company. If the collateral value is significantly adjusted due to differences in the comparable properties, or is discounted by the Company because of marketability, then the fair value is considered Level 3. OREO is
measured at fair value on a nonrecurring basis. The initial fair value of OREO is based on an appraisal done at the time of foreclosure. Subsequent fair value adjustments are recorded in the period incurred and included in other noninterest income
on the Consolidated Statements of Income.
The following table summarizes the Companys assets that were measured at fair value on a nonrecurring
basis at the end of the respective period.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fair Value Measurements at March 31, 2017 Using
|
|
(Dollars in thousands)
Description
|
|
Balance as of
March 31, 2017
|
|
|
Level 1
|
|
|
Level 2
|
|
|
Level 3
|
|
Impaired Loans, net
|
|
$
|
2,414
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
2,414
|
|
Other real estate owned, net
|
|
|
2,436
|
|
|
|
|
|
|
|
|
|
|
|
2,436
|
|
|
|
|
|
|
|
|
|
Fair Value Measurements at December 31, 2016 Using
|
|
Description
|
|
Balance as of
December 31, 2016
|
|
|
Level 1
|
|
|
Level 2
|
|
|
Level 3
|
|
Impaired loans, net
|
|
|
2,774
|
|
|
|
|
|
|
|
|
|
|
|
2,774
|
|
Other real estate owned, net
|
|
$
|
2,494
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
2,494
|
|
The following table displays quantitative information about Level 3 Fair Value Measurements as of March 31, 2017:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Range
|
|
|
|
Balance as of
|
|
|
Valuation
|
|
|
Unobservable
|
|
|
(Weighted
|
|
(Dollars in thousands)
|
|
March
31, 2017
|
|
|
Technique
|
|
|
Input
|
|
|
Average)
|
|
Impaired Loans, net
|
|
$
|
2,414
|
|
|
|
Discounted appraised value
|
|
|
|
Selling Cost
|
|
|
|
0% - 20% (15%
|
)
|
|
|
|
|
|
|
|
|
|
|
|
Lack of Marketability
|
|
|
|
50% - 100% (96%
|
)
|
|
|
|
|
|
Other real estate owned, net
|
|
|
2,436
|
|
|
|
Discounted appraised value
|
|
|
|
Selling Cost
|
|
|
|
3% - 13% (5%
|
)
|
|
|
|
|
|
|
|
|
|
|
|
Lack of Marketability
|
|
|
|
10% -20% (11%
|
)
|
The following table displays quantitative information about Level 3 Fair Value Measurements as of December 31, 2016:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Range
|
|
|
|
Balance as of
|
|
|
Valuation
|
|
|
Unobservable
|
|
|
(Weighted
|
|
(Dollars in thousands)
|
|
December 31, 2016
|
|
|
Technique
|
|
|
Input
|
|
|
Average)
|
|
Impaired Loans, net
|
|
$
|
2,774
|
|
|
|
Discounted appraised value
|
|
|
|
Selling Cost
|
|
|
|
10% - 20% (16%
|
)
|
|
|
|
|
|
|
|
|
|
|
|
Lack of Marketability
|
|
|
|
50% (50%
|
)
|
|
|
|
|
|
Other real estate owned, net
|
|
$
|
2,494
|
|
|
|
Discounted appraised value
|
|
|
|
Selling Cost
|
|
|
|
3% - 13% (5%
|
)
|
|
|
|
|
|
|
|
|
|
|
|
Lack of Marketability
|
|
|
|
10% - 20% (11%
|
)
|
22
The estimated fair values of financial instruments are shown in the following table. The carrying amounts in the
table are included in the balance sheet under the applicable captions.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fair Value Measurements at March 31, 2017 Using
|
|
(Dollars in thousands)
Description
|
|
Balance as of
March 31, 2017
|
|
|
Fair Value as of
March 31, 2017
|
|
|
Level 1
|
|
|
Level 2
|
|
|
Level 3
|
|
Financial Assets:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and due from banks
|
|
$
|
5,087
|
|
|
$
|
5,087
|
|
|
$
|
5,087
|
|
|
$
|
|
|
|
$
|
|
|
Interest-bearing deposits
|
|
|
6,826
|
|
|
|
6,826
|
|
|
|
6,826
|
|
|
|
|
|
|
|
|
|
Certificates of deposit
|
|
|
3,472
|
|
|
|
3,472
|
|
|
|
|
|
|
|
3,472
|
|
|
|
|
|
Federal funds sold
|
|
|
336
|
|
|
|
336
|
|
|
|
336
|
|
|
|
|
|
|
|
|
|
Securities
available-for-sale
|
|
|
49,826
|
|
|
|
49,826
|
|
|
|
|
|
|
|
43,111
|
|
|
|
6,715
|
|
Restricted securities
|
|
|
3,756
|
|
|
|
3,756
|
|
|
|
|
|
|
|
|
|
|
|
3,756
|
|
Loans, net
|
|
|
401,268
|
|
|
|
400,988
|
|
|
|
|
|
|
|
|
|
|
|
400,988
|
|
Accrued interest receivable
|
|
|
1,321
|
|
|
|
1,321
|
|
|
|
|
|
|
|
1,321
|
|
|
|
|
|
Bank owned life insurance
|
|
|
9,944
|
|
|
|
9,944
|
|
|
|
9,944
|
|
|
|
|
|
|
|
|
|
Mortgage servicing rights
|
|
|
692
|
|
|
|
692
|
|
|
|
|
|
|
|
|
|
|
|
692
|
|
|
|
|
|
|
|
Financial Liabilities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-interest-bearing
liabilities
|
|
$
|
77,369
|
|
|
$
|
77,369
|
|
|
$
|
77,369
|
|
|
$
|
|
|
|
$
|
|
|
Savings and other interest-bearing deposits
|
|
|
169,027
|
|
|
|
167,027
|
|
|
|
|
|
|
|
167,027
|
|
|
|
|
|
Time deposits
|
|
|
136,104
|
|
|
|
135,662
|
|
|
|
|
|
|
|
|
|
|
|
135,662
|
|
Securities sold under repurchase agreements
|
|
|
8,489
|
|
|
|
8,489
|
|
|
|
|
|
|
|
8,489
|
|
|
|
|
|
FHLB advances
|
|
|
60,000
|
|
|
|
59,352
|
|
|
|
|
|
|
|
59,352
|
|
|
|
|
|
Subordinated debt
|
|
|
6,864
|
|
|
|
7,000
|
|
|
|
|
|
|
|
|
|
|
|
7,000
|
|
Accrued interest payable
|
|
|
225
|
|
|
|
225
|
|
|
|
|
|
|
|
225
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fair Value Measurements at December 31, 2016 Using
|
|
(Dollars in thousands)
Description
|
|
Balance as of
December 31, 2016
|
|
|
Fair Value as of
December 31, 2016
|
|
|
Level 1
|
|
|
Level 2
|
|
|
Level 3
|
|
Financial Assets:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and due from banks
|
|
$
|
4,851
|
|
|
$
|
4,851
|
|
|
$
|
4,851
|
|
|
$
|
|
|
|
$
|
|
|
Interest-bearing deposits
|
|
|
7,501
|
|
|
|
7,501
|
|
|
|
7,501
|
|
|
|
|
|
|
|
|
|
Certificates of deposit
|
|
|
4,216
|
|
|
|
4,216
|
|
|
|
|
|
|
|
4,216
|
|
|
|
|
|
Federal funds sold
|
|
|
2,350
|
|
|
|
2,350
|
|
|
|
2,350
|
|
|
|
|
|
|
|
|
|
Securities
available-for-sale
|
|
|
51,173
|
|
|
|
51,173
|
|
|
|
|
|
|
|
43,469
|
|
|
|
7,704
|
|
Restricted securities
|
|
|
2,649
|
|
|
|
2,649
|
|
|
|
|
|
|
|
|
|
|
|
2,649
|
|
Loans, net
|
|
|
381,537
|
|
|
|
384,468
|
|
|
|
|
|
|
|
|
|
|
|
384,468
|
|
Loans held for sale
|
|
|
276
|
|
|
|
276
|
|
|
|
|
|
|
|
|
|
|
|
276
|
|
Accrued interest receivable
|
|
|
1,372
|
|
|
|
1,372
|
|
|
|
|
|
|
|
1,372
|
|
|
|
|
|
Bank owned life insurance
|
|
|
9,869
|
|
|
|
9,869
|
|
|
|
9,869
|
|
|
|
|
|
|
|
|
|
Mortgage servicing rights
|
|
|
671
|
|
|
|
671
|
|
|
|
|
|
|
|
|
|
|
|
671
|
|
|
|
|
|
|
|
Financial Liabilities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-interest-bearing
liabilities
|
|
$
|
74,799
|
|
|
$
|
74,799
|
|
|
$
|
74,799
|
|
|
$
|
|
|
|
$
|
|
|
Savings and other interest-bearing deposits
|
|
|
178,869
|
|
|
|
178,869
|
|
|
|
|
|
|
|
178,869
|
|
|
|
|
|
Time deposits
|
|
|
128,050
|
|
|
|
127,497
|
|
|
|
|
|
|
|
|
|
|
|
127,497
|
|
Securities sold under repurchase agreements
|
|
|
18,310
|
|
|
|
18,310
|
|
|
|
|
|
|
|
18,310
|
|
|
|
|
|
FHLB advances
|
|
|
35,000
|
|
|
|
35,668
|
|
|
|
|
|
|
|
35,668
|
|
|
|
|
|
Subordinated debt
|
|
|
6,860
|
|
|
|
7,000
|
|
|
|
|
|
|
|
|
|
|
|
7,000
|
|
Accrued interest payable
|
|
|
331
|
|
|
|
331
|
|
|
|
|
|
|
|
331
|
|
|
|
|
|
The carrying amounts of cash and due from banks, interest-bearing deposits, federal funds sold or purchased, accrued interest
receivable, loans held for sale and
non-interest-bearing
deposits, are payable on demand, or are of such short duration that carrying value approximates market value.
Securities
available-for-sale
are carried at quoted market prices, when
available (Level 1). If quoted market prices are not available, fair values are measured utilizing independent valuation techniques of identical or similar securities for which significant assumptions are derived primarily from or corroborated by
observable market data. Third party vendors compile prices from various sources and may determine the fair value of identical or similar securities by using pricing models that consider observable market data (Level 2). In certain cases where there
is limited activity or less transparency around inputs to the valuation, securities are classified within Level 3 of the valuation hierarchy.
The
carrying value of restricted securities approximates fair value based on the redemption provisions of the issuer.
23
Bank owned life insurance is carried at its cash surrender value.
MSRs are carried at fair value. As described above, a valuation model is used to determine fair value. This model utilizes a discounted cash flow analysis
with servicing costs and prepayment assumptions based on comparable instruments and a discount rate.
The fair value of performing loans is estimated by
discounting the future cash flows using the current rates at which similar loans would be made to borrowers with similar remaining maturities. This calculation ignores loan fees and certain factors affecting the interest rates charged on various
loans such as the borrowers creditworthiness and compensating balances and dissimilar types of real estate held as collateral. The fair value of impaired loans is measured as described within the Impaired Loans section of this note. The fair
value of loans does not consider the lack of liquidity and uncertainty in the market that would affect the valuation.
Time deposits are presented at
estimated fair value by discounting the future cash flows using interest rates offered for deposits of similar remaining maturities.
The fair value of
the Companys subordinated debt is estimated by utilizing observable market prices for comparable securities. Qualitative factors like asset quality, market factors and liquidity are also considered.
The fair value of the FHLB advances is estimated by discounting the future cash flows using the current interest rates offered for similar advances.
The fair value of commitments to extend credit is estimated using the fees currently charged to enter similar agreements, taking into account the remaining
terms of the agreements and the present credit worthiness of the counter parties. For fixed-rate loan commitments, fair value also considers the difference between current levels of interest rates and the committed rates. The fair value of standby
letters of credit is based on fees currently charged for similar agreements or on the estimated cost to terminate them or otherwise settle the obligations with the counter parties at the reporting date. At March 31, 2017 and December 31,
2016, the fair value of loan commitments and standby letters of credit was immaterial and therefore, they are not included in the table above.
The
Company assumes interest rate risk (the risk that general interest rate levels will change) as a result of its normal operations. As a result, the fair value of the Companys financial instruments will change when interest rate levels change
and that change may be either favorable or unfavorable to the Company. Management attempts to match maturities of assets and liabilities to the extent believed necessary to minimize interest rate risk. However, borrowers with fixed rate obligations
are less likely to prepay in a rising rate environment. Conversely, depositors who are receiving fixed rates are more likely to withdraw funds before maturity in a rising rate environment and less likely to do so in a falling rate environment.
Management monitors rates and maturities of assets and liabilities and attempts to minimize interest rate risk by adjusting terms of new loans and deposits and by investing in securities with terms that mitigate the Companys overall interest
rate risk.
Note 14: Changes in Accumulated Other Comprehensive Income (Loss)
The balances in accumulated other comprehensive income (loss) are shown in the following tables:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the Three Months Ended March 31, 2017
|
|
|
|
Net Unrealized
|
|
|
Pension and
|
|
|
Accumulated Other
|
|
|
|
Gains (Losses)
|
|
|
Post-retirement
|
|
|
Comprehensive
|
|
(Dollars in thousands)
|
|
on Securities
|
|
|
Benefit Plans
|
|
|
Income (Loss)
|
|
Balance January 1, 2017
|
|
$
|
(520
|
)
|
|
$
|
(715
|
)
|
|
$
|
(1,235
|
)
|
Change in net unrealized holding gains on securities, before reclassification, net of tax expense
of $13
|
|
|
27
|
|
|
|
|
|
|
|
27
|
|
Reclassification for previously unrealized net losses recognized in income, net of tax benefit of
$2
|
|
|
3
|
|
|
|
|
|
|
|
3
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance March 31, 2017
|
|
$
|
(490
|
)
|
|
$
|
(715
|
)
|
|
$
|
(1,205
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the Three Months Ended March 31, 2016
|
|
|
|
Net Unrealized
|
|
|
Pension and
|
|
|
Accumulated Other
|
|
|
|
Gains (Losses)
|
|
|
Post-retirement
|
|
|
Comprehensive
|
|
(Dollars in thousands)
|
|
on Securities
|
|
|
Benefit Plans
|
|
|
Income (Loss)
|
|
Balance January 1, 2016
|
|
$
|
107
|
|
|
$
|
(883
|
)
|
|
$
|
(776
|
)
|
Change in net unrealized holding gains on securities, before reclassification, net of tax expense
of $173
|
|
|
335
|
|
|
|
|
|
|
|
335
|
|
Reclassification for previously unrealized net gains recognized in income, net of tax expense of
$2
|
|
|
(4
|
)
|
|
|
|
|
|
|
(4
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance March 31, 2016
|
|
$
|
438
|
|
|
$
|
(883
|
)
|
|
$
|
(445
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
24
Reclassification for previously unrealized gains (losses) and impairments on securities are reported in the
Consolidated Statements of (Loss) Income as follows. No unrealized gains (losses) on pension and post-employment related costs were reclassified to the Consolidated Statements of (Loss) Income in the three months ended March 31, 2017 and 2016.
Accumulated Other Comprehensive Income (Loss)
Reclassification for the Three Months Ended
Holding (Losses) Gains on Securities
|
|
|
|
|
|
|
|
|
(Dollars in thousands)
|
|
March 31, 2017
|
|
|
March 31, 2016
|
|
Net (losses) gains on sale of securities
available-for-securities
|
|
$
|
(5
|
)
|
|
$
|
6
|
|
Tax benefit (expense)
|
|
|
2
|
|
|
|
(2
|
)
|
|
|
|
|
|
|
|
|
|
Impact on net (loss) income
|
|
$
|
(3
|
)
|
|
$
|
4
|
|
|
|
|
|
|
|
|
|
|
25