Attached files
| file | filename |
|---|---|
| EX-31.1 - EXHIBIT 31-1 - HILLS BANCORPORATION | ex31.htm |
| EX-32 - EXHIBIT 32 - HILLS BANCORPORATION | ex32.htm |
| EX-31.2 - EXHIBIT 31-2 - HILLS BANCORPORATION | ex31-2.htm |
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 2011
Commission file number: 0-12668
Hills Bancorporation
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Incorporated in Iowa
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I.R.S. Employer Identification
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No. 42-1208067
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131 MAIN STREET, HILLS, IOWA 52235
Telephone number: (319) 679-2291
Indicate by checkmark whether the Registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
þYes o No
Indicate by checkmark whether the Registrant has submitted electronically and posted on its corporate website, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the Registrant was required to submit and post such files).
þ Yes o No
Indicate by checkmark whether the Registrant is a large accelerated filer, an accelerated filer, or a non-accelerated filer, or smaller reporting company. See definition of “large accelerated filer,” “accelerated filer” and “small reporting company” in Rule 12b-2 of the Exchange Act.
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Large accelerated filer o
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Accelerated Filer þ
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Non-accelerated filer o
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Small Reporting Company o
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Indicate by checkmark whether the Registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).
oYes þNo
APPLICABLE ONLY TO CORPORATE ISSUERS:
Indicate the number of shares outstanding of each of the issuer's classes of common stock, as of the latest practical date.
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SHARES OUTSTANDING
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CLASS
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At April 30, 2011
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Common Stock, no par value
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4,395,489
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Page 1
HILLS BANCORPORATION
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Part I
FINANCIAL INFORMATION
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Page
Number
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Item 1.
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Financial Statements
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3
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4
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5
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6
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7
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9
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Item 2.
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26
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Item 3.
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42
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Item 4.
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42
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Part II
OTHER INFORMATION
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Item 1.
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43
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Item 1A.
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43
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Item 2.
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43
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Item 3.
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43
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Item 4.
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43
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Item 5.
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43
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Item 6
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43
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HILLS BANCORPORATION
CONSOLIDATED BALANCE SHEETS
(Amounts In Thousands, Except Shares)
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||||||||
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ASSETS
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March 31, 2011 (Unaudited)
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December 31, 2010
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||||||
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Cash and cash equivalents
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$ | 116,366 | $ | 62,978 | ||||
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Investment securities available for sale at fair value (amortized cost March 31, 2011 $209,231; December 31, 2010 $200,995)
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214,336 | 205,498 | ||||||
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Stock of Federal Home Loan Bank
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10,640 | 11,105 | ||||||
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Loans held for sale
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1,344 | 10,390 | ||||||
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Loans, net of allowance for loan losses (March 31, 2011 $29,820; December 31, 2010 $29,230)
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1,575,810 | 1,561,430 | ||||||
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Property and equipment, net
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26,915 | 26,806 | ||||||
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Tax credit real estate
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20,639 | 20,960 | ||||||
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Accrued interest receivable
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9,466 | 8,686 | ||||||
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Deferred income taxes, net
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9,878 | 9,870 | ||||||
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Other real estate
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2,427 | 2,233 | ||||||
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Goodwill
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2,500 | 2,500 | ||||||
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Prepaid FDIC insurance
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4,435 | 5,038 | ||||||
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Other assets
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3,852 | 3,789 | ||||||
| $ | 1,998,608 | $ | 1,931,283 | |||||
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LIABILITIES AND STOCKHOLDERS' EQUITY
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Liabilities
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Noninterest-bearing deposits
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$ | 191,456 | $ | 198,791 | ||||
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Interest-bearing deposits
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1,359,194 | 1,281,950 | ||||||
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Total deposits
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$ | 1,550,650 | $ | 1,480,741 | ||||
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Short-term borrowings
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48,487 | 46,928 | ||||||
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Federal Home Loan Bank borrowings
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185,000 | 195,000 | ||||||
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Accrued interest payable
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1,858 | 1,996 | ||||||
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Other liabilities
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19,408 | 15,404 | ||||||
| $ | 1,805,403 | $ | 1,740,069 | |||||
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Redeemable Common Stock Held by Employee Stock Ownership Plan (ESOP)
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$ | 26,011 | $ | 24,945 | ||||
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STOCKHOLDERS' EQUITY
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Capital stock, no par value; authorized 10,000,000 shares; issued March 31, 2011 4,625,439 shares; December 31, 2010 4,624,519 shares
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$ | - | $ | - | ||||
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Paid in capital
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14,918 | 14,875 | ||||||
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Retained earnings
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187,191 | 185,412 | ||||||
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Accumulated other comprehensive income
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3,152 | 2,781 | ||||||
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Treasury stock at cost (March 31, 2011 229,528 shares; December 31, 2010 226,182 shares)
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(12,056 | ) | (11,854 | ) | ||||
| $ | 193,205 | $ | 191,214 | |||||
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Less maximum cash obligation related to ESOP shares
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26,011 | 24,945 | ||||||
| $ | 167,194 | $ | 166,269 | |||||
| $ | 1,998,608 | $ | 1,931,283 | |||||
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See Notes to Consolidated Financial Statements
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HILLS BANCORPORATION
CONSOLIDATED STATEMENTS OF INCOME (Unaudited)
(Amounts In Thousands, Except Per Share Amounts)
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Three Months Ended March 31,
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2011
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2010
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Interest income:
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Loans, including fees
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$ | 21,365 | $ | 21,799 | ||||
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Investment securities:
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Taxable
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765 | 875 | ||||||
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Nontaxable
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859 | 824 | ||||||
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Federal funds sold
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32 | 2 | ||||||
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Total interest income
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$ | 23,021 | $ | 23,500 | ||||
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Interest expense:
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Deposits
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$ | 4,308 | $ | 5,098 | ||||
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Short-term borrowings
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95 | 143 | ||||||
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FHLB borrowings
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1,981 | 2,063 | ||||||
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Total interest expense
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$ | 6,384 | $ | 7,304 | ||||
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Net interest income
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$ | 16,637 | $ | 16,196 | ||||
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Provision for loan losses
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1,465 | 2,065 | ||||||
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Net interest income after provision for loan losses
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$ | 15,172 | $ | 14,131 | ||||
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Other income:
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Net gain on sale of loans
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$ | 482 | $ | 545 | ||||
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Trust fees
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1,089 | 960 | ||||||
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Service charges and fees
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1,811 | 1,922 | ||||||
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Rental revenue on tax credit real estate
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283 | 462 | ||||||
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Other noninterest income
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669 | 1,079 | ||||||
| $ | 4,334 | $ | 4,968 | |||||
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Other expenses:
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Salaries and employee benefits
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$ | 5,550 | $ | 5,442 | ||||
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Occupancy
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831 | 761 | ||||||
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Furniture and equipment
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965 | 1,015 | ||||||
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Office supplies and postage
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337 | 345 | ||||||
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Advertising and business development
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329 | 357 | ||||||
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Outside services
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1,726 | 1,892 | ||||||
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Rental expenses on tax credit real estate
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234 | 512 | ||||||
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FDIC insurance assessment
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700 | 774 | ||||||
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Net (gain) loss on sale of other real estate owned and other repossessed assets
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(1 | ) | 141 | |||||
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Other noninterest expense
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254 | 317 | ||||||
| $ | 10,925 | $ | 11,556 | |||||
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Income before income taxes
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$ | 8,581 | $ | 7,543 | ||||
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Income taxes
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2,403 | 2,158 | ||||||
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Net income
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$ | 6,178 | $ | 5,385 | ||||
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Earnings per share:
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Basic
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$ | 1.40 | $ | 1.22 | ||||
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Diluted
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1.40 | 1.21 | ||||||
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See Notes to Consolidated Financial Statements.
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HILLS BANCORPORATION
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (Unaudited)
(Amounts In Thousands)
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Three Months Ended March 31,
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2011
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2010
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Net income
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$ | 6,178 | $ | 5,385 | ||||
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Other comprehensive income:
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Unrealized holding gains (losses) arising during the period
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$ | 602 | $ | (658 | ) | |||
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Income tax effect of unrealized (gains) losses
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(231 | ) | 251 | |||||
| $ | 371 | $ | (407 | ) | ||||
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Comprehensive income
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$ | 6,549 | $ | 4,978 | ||||
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See Notes to Consolidated Financial Statements.
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HILLS BANCORPORATION
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY (Unaudited)
(Amounts In Thousands, Except Share Amounts)
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Paid In Capital
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Retained Earnings
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Accumulated Other Comprehensive Income
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Maximum Cash Obligation Related to ESOP Shares
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Treasury Stock
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Total
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Balance, December 31, 2009
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$ | 14,582 | $ | 166,120 | $ | 4,200 | $ | (22,900 | ) | $ | (10,227 | ) | $ | 151,775 | ||||||||||
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Issuance of 302 shares of common stock
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16 | - | - | - | - | 16 | ||||||||||||||||||
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Forfeiture of 250 shares of common stock
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(11 | ) | - | - | - | - | (11 | ) | ||||||||||||||||
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Share-based compensation
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4 | - | - | - | - | 4 | ||||||||||||||||||
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Change related to ESOP shares
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- | - | - | (400 | ) | - | (400 | ) | ||||||||||||||||
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Net income
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- | 5,385 | - | - | - | 5,385 | ||||||||||||||||||
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Cash dividends ($.91 per share)
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- | (4,024 | ) | - | - | - | (4,024 | ) | ||||||||||||||||
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Purchase of 5,643 shares of common stock
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- | - | - | - | (300 | ) | (300 | ) | ||||||||||||||||
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Other comprehensive loss
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- | - | (407 | ) | - | - | (407 | ) | ||||||||||||||||
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Balance, March 31, 2010
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$ | 14,591 | $ | 167,481 | $ | 3,793 | $ | (23,300 | ) | $ | (10,527 | ) | $ | 152,038 | ||||||||||
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Balance, December 31, 2010
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$ | 14,875 | $ | 185,412 | $ | 2,781 | $ | (24,945 | ) | $ | (11,854 | ) | $ | 166,269 | ||||||||||
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Issuance of 1,071 shares of common stock
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33 | - | - | - | - | 33 | ||||||||||||||||||
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Forfeiture of 151 shares of common stock
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(8 | ) | - | - | - | - | (8 | ) | ||||||||||||||||
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Share-based compensation
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4 | - | - | - | - | 4 | ||||||||||||||||||
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Income tax benefit related to share- based compensation
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14 | - | - | - | - | 14 | ||||||||||||||||||
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Change related to ESOP shares
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- | - | - | (1,066 | ) | - | (1,066 | ) | ||||||||||||||||
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Net income
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- | 6,178 | - | - | - | 6,178 | ||||||||||||||||||
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Cash dividends ($1.00 per share)
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- | (4,399 | ) | - | - | - | (4,399 | ) | ||||||||||||||||
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Purchase of 3,346 shares of common stock
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- | - | - | - | (202 | ) | (202 | ) | ||||||||||||||||
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Other comprehensive income
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- | - | 371 | - | - | 371 | ||||||||||||||||||
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Balance, March 31, 2011
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$ | 14,918 | $ | 187,191 | $ | 3,152 | $ | (26,011 | ) | $ | (12,056 | ) | $ | 167,194 | ||||||||||
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See Notes to Consolidated Financial Statements.
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HILLS BANCORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)
(Amounts In Thousands)
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Three Months Ended March 31,
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2011
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2010
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Cash Flows from Operating Activities
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Net income
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$ | 6,178 | $ | 5,385 | ||||
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Adjustments to reconcile net income to net cash and cash equivalents provided by operating activities:
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Depreciation
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621 | 626 | ||||||
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Provision for loan losses
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1,465 | 2,065 | ||||||
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Share-based compensation
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4 | 4 | ||||||
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Forfeiture of common stock
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(8 | ) | (11 | ) | ||||
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Compensation expensed through issuance of common stock
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33 | 16 | ||||||
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Excess tax benefits related to share-based compensation
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14 | - | ||||||
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Provision for deferred income taxes
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(239 | ) | (305 | ) | ||||
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Net (gain) loss on sale of other real estate owned and other repossessed assets
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(1 | ) | 141 | |||||
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Increase in accrued interest receivable
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(780 | ) | (220 | ) | ||||
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Amortization of discount on investment securities, net
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230 | 209 | ||||||
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Decrease in prepaid FDIC insurance
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603 | 468 | ||||||
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(Increase) decrease in other assets
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(77 | ) | 389 | |||||
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Increase in accrued interest payable and other liabilities
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3,866 | 3,846 | ||||||
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Loans originated for sale
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(27,964 | ) | (38,853 | ) | ||||
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Proceeds on sales of loans
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37,492 | 43,513 | ||||||
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Net gain on sales of loans
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(482 | ) | (545 | ) | ||||
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Net cash and cash equivalents provided by operating activities
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$ | 20,955 | $ | 16,728 | ||||
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Cash Flows from Investing Activities
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Proceeds from maturities of investment securities available for sale
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$ | 9,840 | $ | 14,378 | ||||
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Purchases of investment securities available for sale
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(17,841 | ) | (10,783 | ) | ||||
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Loans made to customers, net of collections
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(16,454 | ) | (4,962 | ) | ||||
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Proceeds on sale of other real estate owned and other repossessed assets
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416 | 349 | ||||||
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Purchases of property and equipment
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(730 | ) | (991 | ) | ||||
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Investment in tax credit real estate, net
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321 | 674 | ||||||
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Net cash and cash equivalents used in investing activities
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$ | (24,448 | ) | $ | (1,335 | ) | ||
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Cash Flows from Financing Activities
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Net increase in deposits
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$ | 69,909 | $ | 110,462 | ||||
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Net increase (decrease) in short-term borrowings
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1,559 | (35,192 | ) | |||||
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Borrowings from FHLB
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- | 10,000 | ||||||
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Payments on FHLB borrowings
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(10,000 | ) | (40,000 | ) | ||||
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Excess tax benefits related to share-based compensation
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14 | - | ||||||
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Purchase of treasury stock
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(202 | ) | (300 | ) | ||||
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Dividends paid
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(4,399 | ) | (4,024 | ) | ||||
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Net cash and cash equivalents provided by financing activities
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$ | 56,881 | $ | 40,946 | ||||
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(Continued)
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HILLS BANCORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)
(Continued) (Amounts In Thousands)
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Three Months Ended March 31,
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2011
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2010
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Increase in cash and cash equivalents
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$ | 53,388 | $ | 56,339 | ||||
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Cash and cash equivalents:
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Beginning of year
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62,978 | 24,095 | ||||||
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End of period
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$ | 116,366 | $ | 80,434 | ||||
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Supplemental Disclosures
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Cash payments for:
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Interest paid to depositors
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$ | 4,446 | $ | 5,210 | ||||
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Interest paid on other obligations
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2,076 | 2,205 | ||||||
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Income taxes paid
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578 | - | ||||||
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Noncash financing activities:
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Increase in maximum cash obligation related to ESOP shares
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$ | 1,066 | $ | 400 | ||||
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Transfers to other real estate owned
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609 | 1,033 | ||||||
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See Notes to Consolidated Financial Statements.
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HILLS BANCORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
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Note 1.
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Basis of Presentation |
The accompanying unaudited consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America for interim financial reporting and with instructions for Form 10-Q and Regulation S-X. These financial statements include all adjustments (consisting of normal recurring accruals) which in the opinion of management are considered necessary for the fair presentation of the financial position and results of operations for the periods shown. Certain prior year amounts may be reclassified to conform to the current year presentation. The Company considers that it operates as one business segment, a commercial bank.
Operating results for the three month period ended March 31, 2011 are not necessarily indicative of the results that may be expected for the fiscal year ending December 31, 2011. For further information, refer to the consolidated financial statements and footnotes thereto included in the Form 10-K Annual Report of Hills Bancorporation and subsidiary (the “Company”) for the year ended December 31, 2010 filed with the Securities Exchange Commission on March 10, 2011.
The Company evaluated subsequent events through the filing date of its quarterly report on Form 10-Q with the SEC.
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Note 2.
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Earnings Per Share
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Basic earnings per share amounts are computed by dividing net income (the numerator) by the weighted average number of common shares outstanding (the denominator) during the period. Diluted per share amounts assume the conversion, exercise or issuance of all potential common stock equivalents unless the effect is to reduce the loss or increase the income per common share from continuing operations.
The computation of basic and diluted earnings per share for the periods presented is as follows:
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Three months ended
March 31,
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||||||||
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2011
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2010
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Common shares outstanding at the beginning of the period
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4,398,337 | 4,422,274 | ||||||
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Weighted average number of net shares redeemed
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(819 | ) | (2,864 | ) | ||||
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Weighted average shares outstanding (basic)
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4,397,518 | 4,419,410 | ||||||
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Weighted average of potential dilutive shares attributable to stock options granted, computed under the treasury stock method
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11,345 | 12,930 | ||||||
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Weighted average number of shares
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4,408,863 | 4,432,340 | ||||||
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Net income (In Thousands)
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$ | 6,178 | $ | 5,385 | ||||
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Earnings per share:
|
||||||||
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Basic
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$ | 1.40 | $ | 1.22 | ||||
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Diluted
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$ | 1.40 | $ | 1.21 | ||||
HILLS BANCORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
(Unaudited)
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Note 3.
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Recent Accounting Pronouncements and Recent Legislative Developments
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Recent Accounting Pronouncements
On April 5, 2011, the FASB issued ASU No. 2011-02 (“ASU”), A Creditor’s Determination of Whether a Restructuring is a Troubled Debt Restructuring, which provides additional guidance clarifying when the restructuring of a receivable should be considered a troubled debt restructuring (“TDR”). The ASU provides additional guidance for determining whether the creditor has granted a concession and whether the debtor is experiencing financial difficulty. The ASU also ends the deferral of activity based disclosures about TDRs and public entities will be required to disclose activity based information beginning in the period the ASU is adopted. For the Company, this ASU is effective for interim and annual reporting periods beginning on or after June 15, 2011. The Company is currently evaluating the impact the recently issued guidance will have to the consolidated financial statements.
Recent Legislative Developments
Dodd-Frank Wall Street Reform and Consumer Protection Act. The Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010 (the “Dodd-Frank Act”) was signed into law on July 21, 2010. The Dodd-Frank Act represents the most sweeping financial services industry reform since the 1930’s. Generally, the Dodd-Frank Act is effective the day after it was signed into law, but different effective dates apply to specific sections of the Dodd-Frank Act. The Dodd-Frank Act is expected to be fully phased in over twelve years. Among other things, the Dodd-Frank Act may result in added costs of doing business and regulatory compliance burdens and affect competition among financial services entities. Uncertainty exists as to the ultimate impact of many provisions of the Dodd-Frank Act, which could have a material adverse impact on the financial services industry as a whole and on the Company’s business, results of operations and financial condition. Additional information, including a summary of certain provisions of the Dodd-Frank Act, is available on the Federal Deposit Insurance Corporation website at www.fdic.gov/regulations/reform/index.html.
HILLS BANCORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
(Unaudited)
|
Note 4.
|
Loans
|
The composition of loans is as follows:
|
March 31, 2011
|
December 31, 2010
|
|||||||
|
(Amounts In Thousands)
|
||||||||
|
Agricultural
|
$ | 63,173 | $ | 65,004 | ||||
|
Commercial and financial
|
141,213 | 141,619 | ||||||
|
Real estate:
|
||||||||
|
Construction, 1 to 4 family residential
|
22,587 | 25,232 | ||||||
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Construction, land development and commercial
|
89,899 | 86,552 | ||||||
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Mortgage, farmland
|
94,045 | 90,448 | ||||||
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Mortgage, 1 to 4 family first liens
|
530,275 | 519,533 | ||||||
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Mortgage, 1 to 4 family junior liens
|
107,820 | 109,036 | ||||||
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Mortgage, multi-family
|
205,569 | 202,630 | ||||||
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Mortgage, commercial
|
300,520 | 302,020 | ||||||
|
Loans to individuals
|
21,891 | 23,627 | ||||||
|
Tax exempt
|
28,638 | 24,959 | ||||||
| $ | 1,605,630 | $ | 1,590,660 | |||||
|
Less allowance for loan losses
|
29,820 | 29,230 | ||||||
| $ | 1,575,810 | $ | 1,561,430 | |||||
Changes in the allowance for loan losses and the allowance for loan losses balance applicable to impaired loans and the related loan balance of impaired loans for the three months ended March 31, 2011 are as follows:
|
Agricultural
|
Commercial and Financial
|
Real Estate:
Construction and land development
|
Real Estate:
Mortgage, farmland
|
Real Estate:
Mortgage, 1 to 4 family
|
Real Estate:
Mortgage, multi-family and commercial
|
Other
|
Total
|
|||||||||||||||||||||||||
|
(Amounts In Thousands)
|
||||||||||||||||||||||||||||||||
|
March 31, 2011
|
||||||||||||||||||||||||||||||||
|
Allowance for loan losses:
|
||||||||||||||||||||||||||||||||
|
Beginning balance
|
$ | 2,170 | $ | 6,742 | $ | 4,394 | $ | 1,482 | $ | 7,952 | $ | 5,657 | $ | 833 | $ | 29,230 | ||||||||||||||||
|
Charge-offs
|
- | (740 | ) | (20 | ) | - | (629 | ) | (50 | ) | (62 | ) | (1,501 | ) | ||||||||||||||||||
|
Recoveries
|
22 | 259 | 1 | - | 240 | 51 | 53 | 626 | ||||||||||||||||||||||||
|
Provision
|
(433 | ) | 511 | 33 | (13 | ) | 1,277 | 85 | 5 | 1,465 | ||||||||||||||||||||||
|
Ending balance
|
$ | 1,759 | $ | 6,772 | $ | 4,408 | $ | 1,469 | $ | 8,840 | $ | 5,743 | $ | 829 | $ | 29,820 | ||||||||||||||||
|
Ending balance, individually evaluated for impairment
|
- | 69 | 17 | 2 | 89 | 60 | - | 237 | ||||||||||||||||||||||||
|
Ending balance, collectively evaluated for impairment
|
1,759 | 6,703 | 4,391 | 1,467 | 8,751 | 5,683 | 829 | 29,583 | ||||||||||||||||||||||||
|
Loans:
|
||||||||||||||||||||||||||||||||
|
Ending balance
|
63,173 | 141,213 | 112,486 | 94,045 | 638,095 | 506,089 | 50,529 | 1,605,630 | ||||||||||||||||||||||||
|
Ending balance, individually evaluated for impairment
|
- | 3,566 | 1,936 | 227 | 4,273 | 16,785 | 9 | 26,796 | ||||||||||||||||||||||||
|
Ending balance, collectively evaluated for impairment
|
63,173 | 137,647 | 110,550 | 93,818 | 633,822 | 489,304 | 50,520 | 1,578,834 | ||||||||||||||||||||||||
HILLS BANCORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
(Unaudited)
|
Note 4.
|
Loans (continued)
|
Changes in the allowance for loan losses for the three months ended March 31, 2010 (amount in thousands) is as follows:
|
Balance, beginning
|
$ | 29,160 | ||
|
Charge-offs:
|
||||
|
Agricultural
|
8 | |||
|
Commercial and financial
|
884 | |||
|
Real estate:
|
||||
|
Construction and land development
|
156 | |||
|
Mortgage, farmland
|
13 | |||
|
Mortgage, 1 to 4 family
|
418 | |||
|
Mortgage, multi-family and commercial
|
188 | |||
|
Other
|
81 | |||
| $ | 1,748 | |||
|
Recoveries:
|
||||
|
Agricultural
|
2 | |||
|
Commercial and financial
|
151 | |||
|
Real estate:
|
||||
|
Construction and land development
|
1 | |||
| Mortgage, farmland | - | |||
|
Mortgage, 1 to 4 family
|
84 | |||
|
Mortgage, multi-family and commercial
|
31 | |||
|
Other
|
94 | |||
| $ | 363 | |||
|
Net charge-offs
|
1,385 | |||
|
Provision charged to expense
|
2,065 | |||
|
Balance, ending
|
$ | 29,840 |
HILLS BANCORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
(Unaudited)
|
Note 4.
|
Loans (continued)
|
The following table presents the credit quality indicators by type of loans in each category as of March 31, 2011 and December 31, 2010, respectively:
|
Agricultural
|
Commercial
and Financial
|
Real Estate:
Construction, 1 to 4
family residential
|
Real Estate:
Construction, land development and
commercial
|
|||||||||||||
|
March 31, 2011
|
||||||||||||||||
|
Grade:
|
||||||||||||||||
|
Pass
|
$ | 51,344 | $ | 110,921 | $ | 17,671 | $ | 68,489 | ||||||||
|
Potential Watch
|
950 | 4,050 | - | 3,634 | ||||||||||||
|
Watch
|
6,273 | 14,164 | 3,890 | 6,614 | ||||||||||||
|
Substandard
|
4,606 | 12,078 | 1,026 | 11,162 | ||||||||||||
|
Total
|
$ | 63,173 | $ | 141,213 | $ | 22,587 | $ | 89,899 | ||||||||
|
Real Estate:
Mortgage, farmland
|
Real Estate:
Mortgage, 1 to 4
family first liens
|
Real Estate:
Mortgage, 1 to 4
family junior liens
|
Real Estate:
Mortgage, multi-family
|
|||||||||||||
|
March 31, 2011
|
||||||||||||||||
|
Grade:
|
||||||||||||||||
|
Pass
|
$ | 83,102 | $ | 471,402 | $ | 96,624 | $ | 170,620 | ||||||||
|
Potential Watch
|
3,258 | 12,809 | 2,873 | 8,746 | ||||||||||||
|
Watch
|
2,969 | 22,107 | 4,293 | 13,560 | ||||||||||||
|
Substandard
|
4,716 | 23,957 | 4,030 | 12,643 | ||||||||||||
|
Total
|
$ | 94,045 | $ | 530,275 | $ | 107,820 | $ | 205,569 | ||||||||
|
Real Estate:
Mortgage, commercial
|
Loans to individuals
|
Tax exempt
|
Total
|
|||||||||||||
|
March 31, 2011
|
||||||||||||||||
|
Grade:
|
||||||||||||||||
|
Pass
|
$ | 249,925 | $ | 20,981 | $ | 28,566 | $ | 1,369,645 | ||||||||
|
Potential Watch
|
8,574 | 291 | - | 45,185 | ||||||||||||
|
Watch
|
33,314 | 305 | 72 | 107,561 | ||||||||||||
|
Substandard
|
8,707 | 314 | - | 83,239 | ||||||||||||
|
Total
|
$ | 300,520 | $ | 21,891 | $ | 28,638 | $ | 1,605,630 | ||||||||
HILLS BANCORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
(Unaudited)
|
Note 4.
|
Loans (continued)
|
|
Agricultural
|
Commercial and Financial
|
Real Estate:
Construction, 1 to 4
family residential
|
Real Estate:
Construction, land
development and
commercial
|
|||||||||||||
|
December 31, 2010
|
||||||||||||||||
|
Grade:
|
||||||||||||||||
|
Pass
|
$ | 53,240 | $ | 109,345 | $ | 20,448 | $ | 65,494 | ||||||||
|
Potential Watch
|
465 | 2,818 | - | 3,620 | ||||||||||||
|
Watch
|
5,325 | 16,411 | 3,967 | 6,621 | ||||||||||||
|
Substandard
|
5,974 | 13,045 | 817 | 10,817 | ||||||||||||
|
Total
|
$ | 65,004 | $ | 141,619 | $ | 25,232 | $ | 86,552 | ||||||||
|
Real Estate:
Mortgage, farmland
|
Real Estate:
Mortgage, 1 to 4
family first liens
|
Real Estate:
Mortgage, 1 to 4
family junior liens
|
Real Estate:
Mortgage, multi-family
|
|||||||||||||
|
December 31, 2010
|
||||||||||||||||
|
Grade:
|
||||||||||||||||
|
Pass
|
$ | 80,860 | $ | 459,651 | $ | 97,831 | $ | 167,254 | ||||||||
|
Potential Watch
|
3,453 | 12,658 | 3,071 | 8,808 | ||||||||||||
|
Watch
|
2,317 | 21,330 | 4,244 | 14,614 | ||||||||||||
|
Substandard
|
3,818 | 25,894 | 3,890 | 11,954 | ||||||||||||
|
Total
|
$ | 90,448 | $ | 519,533 | $ | 109,036 | $ | 202,630 | ||||||||
|
Real Estate:
Mortgage, commercial
|
Loans to individuals
|
Tax Exempt
|
Total
|
|||||||||||||
|
December 31, 2010
|
||||||||||||||||
|
Grade:
|
||||||||||||||||
|
Pass
|
$ | 248,805 | $ | 22,669 | $ | 24,887 | $ | 1,350,484 | ||||||||
|
Potential Watch
|
8,893 | 261 | - | 44,047 | ||||||||||||
|
Watch
|
36,002 | 404 | 72 | 111,307 | ||||||||||||
|
Substandard
|
8,320 | 293 | - | 84,822 | ||||||||||||
|
Total
|
$ | 302,020 | $ | 23,627 | $ | 24,959 | $ | 1,590,660 | ||||||||
HILLS BANCORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
(Unaudited)
|
Note 4.
|
Loans (continued)
|
The below are descriptions of the credit quality indicators:
Pass – Pass rated loans are supported by sound payment capacity, are adequately collateralized and have no apparent weaknesses that would affect the full repayment of the loan under the established terms and conditions.
Potential Watch – Potential watch rated loans are supported by adequate payment capacity, are adequately collateralized and are performing according to the established terms and conditions. However, the loan requires more than average monitoring due to a potential weakness. The potential watch indicator assists the Company in identifying and monitoring loans for which credit quality could deteriorate.
Watch – Watch rated loans are supported by a marginal payment capacity and are marginally collateralized. There are identified weaknesses that if not monitored and corrected may adversely affect the Company’s credit position. A watch credit would typically have a weakness in one of the general categories (cash flow, collateral position or payment history) but not in all categories.
Substandard – Substandard loans are not adequately supported by the paying capacity of the borrower and may be inadequately collateralized. These loans have a well defined weakness or weaknesses. For these loans, it is more probable than not that the Company could sustain some loss if the deficiency(ies) is not corrected.
Past due loans as of March 31, 2011 and December 31, 2010 were as follows:
|
30 - 59 Days
Past Due |
60 - 89 Days
Past Due |
Greater
Than |
Total Past
Due |
Current
|
Total
Loans |
Accruing loans
past due |
||||||||||||||||||||||
|
(Amounts In Thousands)
|
||||||||||||||||||||||||||||
|
March 31, 2011:
|
||||||||||||||||||||||||||||
|
Agriculture
|
$ | 70 | $ | - | $ | - | $ | 70 | $ | 63,103 | $ | 63,173 | $ | - | ||||||||||||||
|
Commercial and financial
|
1,262 | 801 | 1,247 | 3,310 | 137,903 | 141,213 | 853 | |||||||||||||||||||||
|
Real estate:
|
||||||||||||||||||||||||||||
|
Construction, 1 to 4 family residential
|
535 | - | 349 | 884 | 21,703 | 22,587 | - | |||||||||||||||||||||
| Construction, land development | ||||||||||||||||||||||||||||
|
and commercial
|
1,373 | 264 | 1,502 | 3,139 | 86,760 | 89,899 | 144 | |||||||||||||||||||||
|
Mortgage, farmland
|
208 | - | 83 | 291 | 93,754 | 94,045 | 83 | |||||||||||||||||||||
|
Mortgage, 1 to 4 family first liens
|
4,750 | 732 | 2,770 | 8,252 | 522,023 | 530,275 | 2,087 | |||||||||||||||||||||
|
Mortgage, 1 to 4 family junior liens
|
542 | 51 | 550 | 1,143 | 106,677 | 107,820 | 248 | |||||||||||||||||||||
|
Mortgage, multi-family
|
374 | - | 1,984 | 2,358 | 203,211 | 205,569 | 147 | |||||||||||||||||||||
|
Mortgage, commercial
|
1,780 | 252 | 257 | 2,289 | 298,231 | 300,520 | 208 | |||||||||||||||||||||
|
Loans to individuals
|
56 | 24 | - | 80 | 21,811 | 21,891 | 9 | |||||||||||||||||||||
|
Tax exempt
|
1,333 | - | - | 1,333 | 27,305 | 28,638 | - | |||||||||||||||||||||
| $ | 12,283 | $ | 2,124 | $ | 8,742 | $ | 23,149 | $ | 1,582,481 | $ | 1,605,630 | $ | 3,779 | |||||||||||||||
|
December 31, 2010:
|
||||||||||||||||||||||||||||
|
Agriculture
|
$ | 77 | $ | 20 | $ | 104 | $ | 201 | $ | 64,803 | $ | 65,004 | $ | 104 | ||||||||||||||
|
Commercial and financial
|
643 | 141 | 1,464 | 2,248 | 139,371 | 141,619 | 1,045 | |||||||||||||||||||||
|
Real estate:
|
||||||||||||||||||||||||||||
|
Construction, 1 to 4 family residential
|
944 | - | 271 | 1,215 | 24,017 | 25,232 | 271 | |||||||||||||||||||||
| Construction, land development | ||||||||||||||||||||||||||||
|
and commercial
|
5,140 | 60 | 1,605 | 6,805 | 79,747 | 86,552 | 145 | |||||||||||||||||||||
|
Mortgage, farmland
|
391 | - | - | 391 | 90,057 | 90,448 | - | |||||||||||||||||||||
|
Mortgage, 1 to 4 family first liens
|
5,620 | 2,134 | 4,470 | 12,224 | 507,309 | 519,533 | 3,053 | |||||||||||||||||||||
|
Mortgage, 1 to 4 family junior liens
|
843 | 199 | 509 | 1,551 | 107,485 | 109,036 | 483 | |||||||||||||||||||||
|
Mortgage, multi-family
|
- | - | 1,837 | 1,837 | 200,793 | 202,630 | - | |||||||||||||||||||||
|
Mortgage, commercial
|
1,110 | 366 | 230 | 1,706 | 300,314 | 302,020 | 229 | |||||||||||||||||||||
|
Loans to individuals
|
38 | 5 | 15 | 58 | 23,569 | 23,627 | 15 | |||||||||||||||||||||
|
Tax exempt
|
19 | - | - | 19 | 24,940 | 24,959 | - | |||||||||||||||||||||
| $ | 14,825 | $ | 2,925 | $ | 10,505 | $ | 28,255 | $ | 1,562,405 | $ | 1,590,660 | $ | 5,345 | |||||||||||||||
The Company does not have a significant amount of loans that are past due less than 90 days where there are serious doubts as to the ability of the borrowers to comply with the loan repayment terms.
HILLS BANCORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
(Unaudited)
|
Note 4.
|
Loans (continued)
|
The following table summarizes the Company’s impaired loans and non-performing assets at March 31, 2011 and December 31, 2010:
|
March
31, 2011
|
December 31, 2010
|
|||||||
|
(Amounts in thousands)
|
||||||||
|
Non-accrual loans
|
$ | 8,464 | $ | 8,246 | ||||
|
Accruing loans past due 90 days or more
|
3,779 | 5,345 | ||||||
|
Restructured loans (1)
|
14,553 | 17,957 | ||||||
|
Total impaired loans
|
26,796 | 31,548 | ||||||
|
Other real estate
|
2,427 | 2,233 | ||||||
|
Non-performing assets (includes impaired loans and other real estate)
|
29,223 | 33,781 | ||||||
|
Loans held for investment
|
1,605,630 | 1,590,660 | ||||||
|
Ratio of allowance for loan losses to loans held for investment
|
1.86 | % | 1.84 | % | ||||
|
Ratio of allowance for loan losses to impaired loans
|
111.29 | 92.65 | ||||||
|
Ratio of impaired loans to total loans held for investment
|
1.67 | 1.98 | ||||||
|
Ratio of non-performing assets to total assets
|
1.46 | 1.75 | ||||||
| (1) Total restructured loans were $18.9 million and $22.4 million as of March 31, 2011 and December 31, 2010, respectively. Included in the total restructured loans were $4.4 million of non-accrual loans as of March 31, 2011 and Decemeber 31, 2010. | ||||||||
Certain impaired loan information by loan type at March 31, 2011 and December 31, 2010, was as follows:
|
March 31, 2011
|
December 31, 2010
|
|||||||||||||||||||||||
|
Non-accrual loans
|
Accruing loans past due 90 days
|
Restructured loans (1)
|
Non-accrual
loans
|
Accruing loans past due 90 days
|
Restructured loans (1)
|
|||||||||||||||||||
|
(Amounts In Thousands)
|
(Amounts In Thousands)
|
|||||||||||||||||||||||
|
Agriculture
|
$ | - | $ | - | $ | - | $ | - | $ | 104 | $ | - | ||||||||||||
|
Commercial and financial
|
2,622 | 853 | 90 | 2,647 | 1,045 | - | ||||||||||||||||||
|
Real estate:
|
||||||||||||||||||||||||
|
Construction, 1 to 4 family residential
|
271 | - | - | - | 271 | - | ||||||||||||||||||
| Construction, land development and | ||||||||||||||||||||||||
|
commercial
|
1,521 | 144 | - | 1,546 | 145 | |||||||||||||||||||