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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D. C. 20549

 

FORM 10-Q

 

[x] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT   OF 1934

For the quarterly period ended March 31, 2015

[  ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

 

For the transition period from ________ to ________

Commission File Number 0-15204

 

NATIONAL BANKSHARES, INC.

 (Exact name of registrant as specified in its charter)

 

Virginia

(State or other jurisdiction of incorporation or organization)

54-1375874

(I.R.S. Employer Identification No.)

 

101 Hubbard Street

P. O. Box 90002

Blacksburg, VA

 

 

24062-9002

(Address of principal executive offices)

(Zip Code)

 

(540) 951-6300

(Registrant’s telephone number, including area code)

 

Indicate by check mark 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.  [x] Yes   [  ] No

 

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, 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). [x] Yes   [ ] No

 

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b–2 of the Exchange Act.

 

Large accelerated filer  [  ]           Accelerated filer  [x]           Non-accelerated filer  [  ]            Smaller reporting company  [  ]

               (Do not check if a smaller reporting company)

 

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b–2 of the Exchange Act). [ ] Yes   [x] No

 

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date.

 

Class

Common Stock, $1.25 Par Value

Outstanding at May 1, 2015

6,950,474

 

(This report contains 52 pages)

 

 
 

 

 

NATIONAL BANKSHARES, INC. AND SUBSIDIARIES

Form 10-Q

Index

 

Part I – Financial Information

Page

     

Item 1

Financial Statements

3

     
 

Consolidated Balance Sheets, March 31, 2015 (Unaudited) and December 31, 2014

3

     
 

Consolidated Statements of Income for the Three Months Ended March 31, 2015 and 2014 (Unaudited)

4

     
 

Consolidated Statements of Comprehensive Income for the Three Months Ended March 31, 2015 and 2014 (Unaudited)

5

     
 

Consolidated Statements of Changes in Stockholders’ Equity for the Three Months Ended March 31, 2015 and 2014 (Unaudited)

6

 

 

 
 

Consolidated Statements of Cash Flows for the Three Months Ended March 31, 2015 and 2014 (Unaudited)

7

 

 

 
 

Notes to Consolidated Financial Statements (Unaudited) 

8 – 31

     

Item 2

Management’s Discussion and Analysis of Financial Condition and Results of Operations

31 – 43

     

Item 3

Quantitative and Qualitative Disclosures About Market Risk  

43

     

Item 4

Controls and Procedures

44

     

Part II – Other Information

 
     

Item 1

Legal Proceedings

44

     

Item 1A

Risk Factors

44

     

Item 2

Unregistered Sales of Equity Securities and Use of Proceeds 

44

     

Item 3

Defaults Upon Senior Securities

44

 

 

 

Item 4

Mine Safety Disclosures

44

 

 

 

Item 5

Other Information

44

     

Item 6

Exhibits 

44

     

Signatures

 

45

     

Index of Exhibits

 

46 – 47

     

Certifications

 

48– 51

 

 
2

 

 

 

Part I

 

Item 1. Financial Statements

Financial Information

 

National Bankshares, Inc. and Subsidiaries

 

Consolidated Balance Sheets

 

      

 

   

(Unaudited)

   

(Audited)

 
   

March 31,

   

December 31,

 

$ in thousands, except per share data

 

2015

   

2014

 

Assets

               

Cash and due from banks

  $ 12,452     $ 12,894  

Interest-bearing deposits

    87,676       102,548  

Securities available for sale, at fair value

    238,496       222,844  

Securities held to maturity (fair value approximates $163,143 at March 31, 2015 and $167,703 at December 31, 2014)

    156,135       161,452  

Restricted stock, at cost

    1,129       1,089  

Loans held for sale

    1,091       291  

Loans:

               

Loans, net of unearned income and deferred fees

    622,171       605,466  

Less allowance for loan losses

    (8,257

)

    (8,263

)

Loans, net

    613,914       597,203  

Premises and equipment, net

    8,998       9,131  

Accrued interest receivable

    5,506       5,748  

Other real estate owned, net

    4,573       4,744  

Intangible assets and goodwill

    6,954       7,223  

Bank-owned life insurance

    21,946       21,797  

Other assets

    5,975       7,767  

Total assets

  $ 1,164,845     $ 1,154,731  
                 

Liabilities and Stockholders' Equity

               

Noninterest-bearing demand deposits

  $ 160,217     $ 150,744  

Interest-bearing demand deposits

    526,388       533,641  

Savings deposits

    85,615       81,297  

Time deposits

    212,737       216,746  

Total deposits

    984,957       982,428  

Accrued interest payable

    70       68  

Other liabilities

    7,096       5,932  

Total liabilities

    992,123       988,428  

Commitments and contingencies

               

Stockholders' Equity

               

Preferred stock, no par value, 5,000,000 shares authorized; none issued and outstanding

    ---       ---  

Common stock of $1.25 par value. Authorized 10,000,000 shares; issued and outstanding 6,950,474 shares at March 31, 2015 and at December 31, 2014

    8,688       8,688  

Retained earnings

    167,253       163,287  

Accumulated other comprehensive loss, net

    (3,219

)

    (5,672

)

Total stockholders' equity

    172,722       166,303  

Total liabilities and stockholders' equity

  $ 1,164,845     $ 1,154,731  

 

See accompanying notes to consolidated financial statements.

 

 
3

 

 

National Bankshares, Inc. and Subsidiaries

Consolidated Statements of Income

Three Months Ended March 31, 2015 and 2014

(Unaudited)

 

   

March 31,

   

March 31,

 

$ in thousands, except per share data

 

2015

   

2014

 

Interest Income

               

Interest and fees on loans

  $ 7,649     $ 7,935  

Interest on interest-bearing deposits

    64       65  

Interest on securities – taxable

    1,734       1,653  

Interest on securities – nontaxable

    1,386       1,500  

Total interest income

    10,833       11,153  
                 

Interest Expense

               

Interest on time deposits

    128       153  

Interest on other deposits

    959       1,162  

Total interest expense

    1,087       1,315  

Net interest income

    9,746       9,838  

Provision for loan losses

    201       103  

Net interest income after provision for loan losses

    9,545       9,735  
                 

Noninterest Income

               

Service charges on deposit accounts

    535       592  

Other service charges and fees

    71       65  

Credit card fees

    895       797  

Trust income

    289       293  

BOLI income

    170       175  

Other income

    282       277  

Realized securities gains (losses), net

    (2

)

    1  

Total noninterest income

    2,240       2,200  
                 

Noninterest Expense

               

Salaries and employee benefits

    3,072       2,999  

Occupancy and furniture and fixtures

    452       440  

Data processing and ATM

    434       363  

FDIC assessment

    135       147  

Credit card processing

    610       549  

Intangible assets amortization

    269       269  

Net costs of other real estate owned

    471       77  

Franchise taxes

    308       279  

Other operating expenses

    957       1,059  

Total noninterest expense

    6,708       6,182  

Income before income taxes

    5,077       5,753  

Income tax expense

    1,111       1,349  

Net Income

  $ 3,966     $ 4,404  

Basic net income per common share

  $ 0.57     $ 0.63  

Fully diluted net income per common share

  $ 0.57     $ 0.63  

Weighted average number of common shares outstanding – basic

    6,950,474       6,947,974  

Weighted average number of common shares outstanding – diluted

    6,955,023       6,963,865  

Dividends declared per common share

  $ ---     $ ---  

  

See accompanying notes to consolidated financial statements.

  

 
4

 

 

National Bankshares, Inc. and Subsidiaries

Consolidated Statements of Comprehensive Income

Three Months Ended March 31, 2015 and 2014

(Unaudited)

 

   

March 31,

   

March 31,

 

$ in thousands

 

2015

   

2014

 

Net Income

  $ 3,966     $ 4,404  
                 

Other Comprehensive Income, Net of Tax

               

Unrealized holding gains on available for sale securities net of tax of $1,320 and $1,681 for the periods ended March 31, 2015 and 2014, respectively

    2,452       3,121  

Reclassification adjustment, net of tax of $1 and $0 for the periods ended March 31, 2015 and 2014, respectively

    1       ---  

Other comprehensive income, net of tax of $1,321 and $1,681 for the periods ended March 31, 2015 and 2014, respectively

    2,453       3,121  

Total Comprehensive Income

  $ 6,419     $ 7,525  

 

See accompanying notes to consolidated financial statements.

 

 
5

 

 

National Bankshares, Inc. and Subsidiaries

Consolidated Statements of Changes in Stockholders’ Equity

Three Months March 31, 2015 and 2014

(Unaudited)

 

$ in thousands

 

Common

Stock

   

Retained

Earnings

   

Accumulated Other Comprehensive Loss

   

Total

 

Balances at December 31, 2013

  $ 8,685     $ 154,171     $ (16,964

)

  $ 145,892  

Net income

    ---       4,404       ---       4,404  

Other comprehensive income, net of tax $1,681

    ---       ---       3,121       3,121  

Balances at March 31, 2014

  $ 8,685     $ 158,575     $ (13,843

)

  $ 153,417  
                                 

Balances at December 31, 2014

  $ 8,688     $ 163,287     $ (5,672

)

  $ 166,303  

Net income

    ---       3,966       ---       3,966  

Other comprehensive income, net of tax $1,321

    ---       ---       2,453       2,453  

Balances at March 31, 2015

  $ 8,688     $ 167,253     $ (3,219

)

  $ 172,722  

 

See accompanying notes to consolidated financial statements.

 

 
6

 

 

National Bankshares, Inc. and Subsidiaries

Consolidated Statements of Cash Flows

Three Months Ended March 31, 2015 and 2014

(Unaudited)

   

March 31,

   

March 31,

 

$ in thousands

 

2015

   

2014

 

Cash Flows from Operating Activities

               

Net income

  $ 3,966     $ 4,404  

Adjustments to reconcile net income to net cash provided by operating activities:

               

Provision for loan losses

    201       103  

Depreciation of bank premises and equipment

    191       177  

Amortization of intangibles

    269       269  

Amortization of premiums and accretion of discounts, net

    29       42  

Losses on disposal of premises and equipment

    ---       94  

Losses on sales and calls of securities available for sale, net

    2       ---  

Gains on calls of securities held to maturity, net

    ---       (1

)

Losses and write-downs on other real estate owned, net

    386       16  

Increase in cash value of bank-owned life insurance

    (149

)

    (154

)

Net change in:

               

Loans held for sale

    (800

)

    1,276  

Accrued interest receivable

    242       56  

Other assets

    471       (661

)

Accrued interest payable

    2       (14

)

Other liabilities

    1,164       919  

Net cash provided by operating activities

    5,974       6,526  
                 

Cash Flows from Investing Activities

               

Net change interest-bearing deposits

    14,872       (11,465

)

Proceeds from calls, principal payments, sales and maturities of securities available for sale

    11,126       2,173  

Proceeds from calls, principal payments and maturities of securities held to maturity

    5,265       3,929  

Purchases of securities available for sale

    (22,983

)

    (5,375

)

Purchases of securities held to maturity

    ---       (5,381

)

Net change in restricted stock

    (40

)

    325  

Purchases of loan participations

    (994

)

    ---  

Collections of loan participations

    1,933       1,348  

Loan originations and principal collections, net

    (18,267

)

    4,702  

Proceeds from sale of other real estate owned

    148       196  

Recoveries on loans charged off

    53       158  

Proceeds from sale and purchases of premises and equipment, net

    (58

)

    254  

Net cash (used in) investing activities

    (8,945

)

    (9,136

)

                 

Cash Flows from Financing Activities

               

Net change in time deposits

    (4,009

)

    (4,649

)

Net change in other deposits

    6,538       8,699  

Net cash provided by financing activities

    2,529       4,050  

Net change in cash and due from banks

    (442

)

    1,440  

Cash and due from banks at beginning of period

    12,894       13,283  

Cash and due from banks at end of period

  $ 12,452     $ 14,723  
                 

Supplemental Disclosures of Cash Flow Information

               

Interest paid on deposits and borrowed funds

  $ 1,085     $ 1,329  

Income taxes paid

    1,310       1,472  
                 

Supplemental Disclosure of Noncash Activities

               

Loans charged against the allowance for loan losses

  $ 260     $ 191  

Loans transferred to other real estate owned

    363       401  

Unrealized net gains on securities available for sale

    3,774       4,802  

 

See accompanying notes to consolidated financial statements.

 

 
7

 

 

National Bankshares, Inc. and Subsidiaries

Notes to Consolidated Financial Statements

March 31, 2015

(Unaudited)

 

$ in thousands, except per share data

 

Note 1:  General

 

The consolidated financial statements of National Bankshares, Inc. (“NBI”) and its wholly-owned subsidiaries, The National Bank of Blacksburg (“NBB”) and National Bankshares Financial Services, Inc. (“NBFS”) (collectively, the “Company”), conform to accounting principles generally accepted in the United States of America and to general practices within the banking industry. The accompanying interim period consolidated financial statements are unaudited; however, in the opinion of management, all adjustments consisting of normal recurring adjustments, which are necessary for a fair presentation of the consolidated financial statements, have been included.  The results of operations for the three months ended March 31, 2015 are not necessarily indicative of results of operations for the full year or any other interim period.  The interim period consolidated financial statements and financial information included in this Form 10-Q should be read in conjunction with the notes to consolidated financial statements included in the Company’s 2014 Form 10-K.  The Company posts all reports required to be filed under the Securities and Exchange Act of 1934 on its web site at www.nationalbankshares.com.

Subsequent events have been considered through the date when the Form 10-Q was issued.

 

Note 2:  Stock-Based Compensation

 

The Company’s 1999 Stock Option Plan was terminated on March 9, 2009. Incentive stock options were granted annually to key employees of NBI and its subsidiaries from 1999 to 2005 and none have been granted since 2005. All of the stock options are vested.

 

Options

 

Shares

   

Weighted
Average
Exercise
Price Per Share

   

Weighted
Average
Remaining
Contractual
Term

   


Aggregate
Intrinsic
Value

 

Outstanding at January 1, 2015

    20,500     $ 23.00                  

Exercised

    ---       ---                  

Forfeited or expired

    ---       ---                  

Outstanding March 31, 2015

    20,500     $ 23.00       0.61     $ 140  

Exercisable at March 31, 2015

    20,500     $ 23.00       0.61     $ 140  

 

Options

 

Shares

   

Weighted
Average
Exercise
Price Per Share

   

Weighted
Average
Remaining
Contractual
Term

   


Aggregate
Intrinsic
Value

 

Outstanding at January 1, 2014

    46,000     $ 23.96                  

Exercised

    (2,500

)

    23.00                  

Forfeited or expired

    (23,000

)

    24.93                  

Outstanding December 31, 2014

    20,500     $ 23.00       0.85     $ 151  

Exercisable at December 31, 2014

    20,500     $ 23.00       0.85     $ 151  

 

There were no shares exercised during the three months ended March 31, 2015. There were 2,500 shares with an intrinsic value of $15 exercised in 2014.

 

 
8

 

 

Note 3:    Loan Portfolio

 

The loan portfolio, excluding loans held for sale, was comprised of the following.

 

   

March 31,

2015

   

December 31,

2014

 

Real estate construction

  $ 41,647     $ 45,562  

Consumer real estate

    145,700       147,040  

Commercial real estate

    321,838       310,762  

Commercial non real estate

    32,182       33,412  

Public sector and IDA

    53,441       41,361  

Consumer non real estate

    28,204       28,182  

Gross loans

    623,012       606,319  

Less unearned income and deferred fees

    (841

)

    (853

)

Loans, net of unearned income and deferred fees

  $ 622,171     $ 605,466  

 

Note 4:    Allowance for Loan Losses, Nonperforming Assets and Impaired Loans

 

The allowance for loan losses methodology incorporates individual evaluation of impaired loans and collective evaluation of groups of non-impaired loans. The Company performs ongoing analysis of the loan portfolio to determine credit quality and to identify impaired loans. Credit quality is rated based on the loan’s payment history, the borrower’s current financial situation and the value of the underlying collateral.

Impaired loans are those loans that have been modified in a troubled debt restructure (“TDR” or “restructure”) and larger, non-homogeneous loans that are in nonaccrual or exhibit payment history or financial status that indicate the probability that collection will not occur according to the loan’s original terms. Generally, impaired loans are given risk ratings that indicate higher risk, such as “classified” or “other assets especially mentioned.” Impaired loans are individually evaluated to determine appropriate reserves and are measured at the lower of the invested amount or the fair market value. Impaired loans that are not troubled debt restructures and for which fair value measurement indicates an impairment loss are designated nonaccrual. A restructured loan for which impairment measurement does not indicate a loss and that maintains current status for at least six months may be returned to accrual status. Please refer to Note 1 of the Company’s 2014 Form 10-K, “Summary of Significant Accounting Policies” for additional information on evaluation of impaired loans and associated specific reserves, and policies regarding nonaccruals, past due status and charge-offs.

Troubled debt restructures impact the estimation of the appropriate level of the allowance for loan losses. If the restructuring included forgiveness of a portion of principal, the charge-off is included in the historical charge-off rates applied to the collective evaluation methodology. Further, restructured loans are individually evaluated for impairment and any amount of book value that exceeds fair value is accrued in the allowance for loan losses. TDRs that experience a payment default are examined to determine whether the default indicates collateral dependency or a decline in estimates of cash flow used in the fair value measurement. TDRs, as well as all impaired loans, that are determined to be collateral dependent are charged down to fair value net of estimated costs to dispose. Deficiencies indicated by impairment measurements for TDRs that are not collateral dependent may be accrued in the allowance for loan losses or charged off if deemed uncollectible.

The Company evaluated characteristics in the loan portfolio and determined major segments and smaller classes within each segment. These characteristics include collateral type, repayment sources, and (if applicable) the borrower’s business model. The methodology for calculating reserves for collectively-evaluated loans is applied at the class level.

 

 
9

 

 

Portfolio Segments and Classes

The segments and classes used in determining the allowance for loan losses are as follows.

 

Real Estate Construction Commercial Non Real Estate
Construction, residential

Construction, other

Commercial and Industrial
 

Public Sector and IDA

Consumer Real Estate

Public sector and IDA

Equity lines

Residential closed-end first liens

 

Consumer Non Real Estate

Residential closed-end junior liens

Investor-owned residential real estate

 

Credit cards

Automobile

Other consumer loans

Commercial Real Estate

 

Multifamily real estate

Commercial real estate, owner-occupied

Commercial real estate, other

 

 

Historical Loss Rates

The Company’s allowance methodology for collectively-evaluated loans applies historical loss rates by class to current class balances as part of the process of determining required reserves. Class loss rates are calculated as the net charge-offs for the class as a percentage of average class balance. The loss rate for the current quarter is averaged with that of prior periods to obtain the historical loss rate. Two loss rates for each class are calculated: total net charge-offs for the class as a percentage of average class loan balance (“class loss rate”), and total net charge-offs for the class as a percentage of average classified loans in the class (“classified loss rate”). Classified loans are those with risk ratings of “substandard” or higher. Net charge-offs in both calculations include charge-offs and recoveries of classified and non-classified loans as well as those associated with impaired loans. Class historical loss rates are applied to non-classified loan balances at the reporting date, and classified historical loss rates are applied to classified balances at the reporting date.

 

Risk Factors

In addition to historical loss rates, risk factors pertinent to credit risk for each class are analyzed to estimate reserves for collectively-evaluated loans. Factors include changes in national and local economic and business conditions, the nature and volume of classes within the portfolio, loan quality, loan officers’ experience, lending policies and the Company’s loan review system.

The analysis of certain factors results in standard allocations to all segments and classes. These factors include loan officers’ average years of experience, the risk from changes in lending policies, and the risk from changes in loan review. Factors analyzed for each class, with resultant allocations based upon the level of risk assessed for each class, include levels of past due loans, nonaccrual loans, current class balance as a percentage of total loans, and the percentage of high risk loans (defined to be junior lien mortgages, high loan-to-value loans, and interest only loans) within the class. Additionally, factors specific to each segment are analyzed and result in allocations to the segment.

Real estate construction loans are subject to general risks from changing commercial building and housing market trends and economic conditions that may impact demand for completed properties and the costs of completion. These risks are measured by market-area unemployment rates, bankruptcy rates, housing and commercial building market trends, and interest rates.

The credit quality of consumer real estate is subject to risks associated with the borrower’s repayment ability and collateral value, measured generally by analyzing local unemployment and bankruptcy trends, local housing market trends, and interest rates.

The commercial real estate segment includes loans secured by multifamily residential real estate, commercial real estate occupied by the owner/borrower, and commercial real estate leased to non-owners. Loans in the commercial real estate segment are impacted by economic risks from changing commercial real estate markets, rental markets for multi-family housing and commercial buildings, business bankruptcy rates, local unemployment and interest rate trends that would impact the businesses housed by the commercial real estate.

Commercial non real estate loans are secured by collateral other than real estate, or are unsecured. Credit risk for commercial non real estate loans is subject to economic conditions, generally monitored by local business bankruptcy trends, and interest rates. Public sector and IDA loans are extended to municipalities and related entities. Credit risk is based upon the entity’s ability to repay and interest rate trends.

Consumer non real estate includes credit cards, automobile and other consumer loans. Credit cards and certain other consumer loans are unsecured, while collateral is obtained for automobile loans and other consumer loans. Credit risk stems primarily from the borrower’s ability to repay, measured by average unemployment, average personal bankruptcy rates and interest rates.

Factor allocations applied to each class are increased for loans rated special mention and classified. The Company allocates additional reserves for “high risk” loans. High risk loans include junior liens, interest only and high loan to value loans.

 

 
10

 

 

A detailed analysis showing the allowance roll-forward by portfolio segment and related loan balance by segment follows.

 

   

Activity in the Allowance for Loan Losses for the Three Months Ended March 31, 2015

 
   

Real Estate Construction

   

Consumer Real Estate

   

Commercial Real Estate

   

Commercial Non Real Estate

   

Public Sector and IDA

   

Consumer Non Real Estate

   

Unallocated

   

Total

 

Balance, December 31, 2014

  $ 612     $ 1,662     $ 3,537     $ 1,475     $ 327     $ 602     $ 48     $ 8,263  

Charge-offs

    ---       (72 )     (100 )     ---       ---       (88 )     ---       (260 )

Recoveries

    ---       ---       12       ---       ---       41       ---       53  

Provision for loan losses

    (145 )     30       262       (59 )     106       21       (14 )     201  

Balance, March 31, 2015

  $ 467     $ 1,620     $ 3,711     $ 1,416     $ 433     $ 576     $ 34     $ 8,257  

 

 

   

Activity in the Allowance for Loan Losses for the Three Months Ended March 31, 2014

 
   

Real Estate Construction

   

Consumer Real Estate

   

Commercial Real Estate

   

Commercial Non Real Estate

   

Public Sector and IDA

   

Consumer Non Real Estate

   

Unallocated

   

Total

 

Balance, December 31, 2013

  $ 863     $ 1,697     $ 3,685     $ 989     $ 132     $ 576     $ 285     $ 8,227  

Charge-offs

    (2

)

    (54

)

    (52

)

    ---       ---       (83

)

    ---       (191

)

Recoveries

    ---       ---       8       131       ---       19       ---       158  

Provision for loan losses

    (11

)

    171       53       (259

)

    70       17       62       103  

Balance, March 31, 2014

  $ 850     $ 1,814     $ 3,694     $ 861     $ 202     $ 529     $ 347     $ 8,297  

 

 

   

Allowance for Loan Losses as of March 31, 2015

 
   

Real Estate Construction

   

Consumer Real Estate

   

Commercial Real Estate

   

Commercial Non Real Estate

   

Public Sector and IDA

   

Consumer Non Real Estate

   

Unallocated

   

Total

 

Individually evaluated for impairment

  $ ---     $ 10     $ 216     $ 10     $ ---     $ ---     $ ---     $ 236  

Collectively evaluated for impairment

    467       1,610       3,495       1,406       433       576       34       8,021  

Total

  $ 467     $ 1,620     $ 3,711     $ 1,416     $ 433     $ 576     $ 34     $ 8,257  

 

 

   

Allowance for Loan Losses as of December 31, 2014

 
   

Real Estate Construction

   

Consumer Real Estate

   

Commercial Real Estate

   

Commercial Non Real Estate

   

Public Sector and IDA

   

Consumer Non Real Estate

   

Unallocated

   

Total

 

Individually evaluated for impairment

  $ ---     $ 14     $ 258     $ 10     $ ---     $ ---     $ ---     $ 282  

Collectively evaluated for impairment

    612       1,648       3,279       1,465       327       602       48       7,981  

Total

  $ 612     $ 1,662     $ 3,537     $ 1,475     $ 327     $ 602     $ 48     $ 8,263  

 

 
11

 

 

   

Loans as of March 31, 2015

 
   

Real Estate Construction

   

Consumer Real Estate

   

Commercial Real Estate

   

Commercial Non Real Estate

   

Public Sector and IDA

   

Consumer Non Real Estate

   

Unallocated

   

Total

 

Individually evaluated for impairment

  $ ---     $ 809     $ 13,513     $ 672     $ ---     $ ---     $ ---     $ 14,994  

Collectively evaluated for impairment

    41,647       144,891       308,325       31,510       53,441       28,204       ---       608,018  

Total loans

  $ 41,647     $ 145,700     $ 321,838     $ 32,182     $ 53,441     $ 28,204     $ ---     $ 623,012  

 

 

   

Loans as of December 31, 2014

 
   

Real Estate Construction

   

Consumer Real Estate

   

Commercial Real Estate

   

Commercial Non Real Estate

   

Public Sector and IDA

   

Consumer Non Real Estate

   

Unallocated

   

Total

 

Individually evaluated for impairment

  $ ---     $ 819     $ 13,624     $ 678     $ ---     $ ---     $ ---     $ 15,121  

Collectively evaluated for impairment

    45,562       146,221       297,138       32,734       41,361       28,182       ---       591,198  

Total

  $ 45,562     $ 147,040     $ 310,762     $ 33,412     $ 41,361     $ 28,182     $ ---     $ 606,319  

 

A summary of ratios for the allowance for loan losses follows.

 

   

As of the

Three Months Ended

March 31,

   

For the

Year Ended

December 31,

 
   

2015

   

2014

   

2014

 

Ratio of allowance for loan losses to the end of period loans, net of unearned income and deferred fees

    1.33

%

    1.41

%

    1.36 %

Ratio of net charge-offs to average loans, net of unearned income and deferred fees(1)

    0.14

%

    0.02

%

    0.27 %

 

(1)     Net charge-offs are on an annualized basis.

 

 

A summary of nonperforming assets follows.

 

   

March 31,

   

December 31,

 
   

2015

   

2014

   

2014

 

Nonperforming assets:

                       

Nonaccrual loans

  $ 3,102     $ 5,071     $ 3,999  

Restructured loans in nonaccrual

    6,123       1,007       5,288  

Total nonperforming loans

    9,225       6,078       9,287  

Other real estate owned, net

    4,573       4,901       4,744  

Total nonperforming assets

  $ 13,798     $ 10,979     $ 14,031  

Ratio of nonperforming assets to loans, net of unearned income and deferred fees, plus other real estate owned

    2.20

%

    1.85

%

    2.30

%

Ratio of allowance for loan losses to nonperforming loans(1)

    89.51

%

    136.51

%

    88.97

%

 

(1)     The Company defines nonperforming loans as nonaccrual loans. Loans 90 days or more past due and still accruing and accruing restructured loans are excluded.

 

 
12

 

 

A summary of loans past due 90 days or more and impaired loans follows.

 

   

March 31,

   

December 31,

 
   

2015

   

2014

   

2014

 

Loans past due 90 days or more and still accruing

  $ 272     $ 163     $ 207  

Ratio of loans past due 90 days or more and still accruing to loans, net of unearned income and deferred fees

    0.04

%

    0.03

%

    0.03

%

Accruing restructured loans

  $ 5,992     $ 6,145     $ 6,040  

Impaired loans:

                       

Impaired loans with no valuation allowance

  $ 11,265     $ 10,139     $ 7,615  

Impaired loans with a valuation allowance

    3,729       2,463       7,506  

Total impaired loans

  $ 14,994     $ 12,602     $ 15,121  

Valuation allowance

    (236

)

    (280

)

    (282

)

Impaired loans, net of allowance

  $ 14,758     $ 12,322     $ 14,839  

Average recorded investment in impaired loans(1)

  $ 15,192     $ 13,075     $ 16,311  

Interest income recognized on impaired loans, after designation as impaired

  $ 174     $ 99     $ 473  

Amount of income recognized on a cash basis

  $ ---     $ ---     $ ---  

 

(1)      Recorded investment is net of charge-offs and interest paid while a loan is in nonaccrual status.

 

Nonaccrual loans that meet the Company’s balance threshold of $250 and all TDRs are designated as impaired. No interest income was recognized on nonaccrual loans for the three months ended March 31, 2015 or March 31, 2014 or for the year ended December 31, 2014.

 

A detailed analysis of investment in impaired loans, associated reserves and interest income recognized, segregated by loan class follows.     

 

   

Impaired Loans as of March 31, 2015

 
   

Principal Balance

   

(A)

Total Recorded Investment(1)

   

Recorded Investment(1) in (A) for Which There is No Related Allowance

   

Recorded Investment(1) in (A) for Which There is a Related Allowance

   

Related Allowance

 

Consumer Real Estate(2)

                                       

Residential closed-end first liens

  $ 526     $ 499     $ 309     $ 190     $ 2  

Residential closed-end junior liens

    234       234       ---       234       8  

Investor-owned residential real estate

    76       76       76       ---       ---  

Commercial Real Estate(2)

                                       

Multifamily real estate

    2,907       2,705       868       1,837       148  

Commercial real estate, owner-occupied

    4,902       4,799       3,404       1,395       68  

Commercial real estate, other

    6,058       6,009       6,009       ---       ---  

Commercial Non Real Estate(2)

                                       

Commercial and Industrial

    672       672       599       73       10  

Total

  $ 15,375     $ 14,994     $ 11,265     $ 3,729     $ 236  

 

(1)     Recorded investment is net of charge-offs and interest paid while a loan is in nonaccrual status.

(2)     Only classes with impaired loans are shown.

 

 
13

 

 

   

Impaired Loans as of December 31, 2014

 
   

Principal Balance

   

(A)

Total Recorded Investment(1)

   

Recorded Investment(1) in (A) for Which There is No Related Allowance

   

Recorded Investment(1) in (A) for Which There is a Related Allowance

   

Related Allowance

 

Consumer Real Estate(2)

                                       

Residential closed-end first liens

  $ 530     $ 503     $ 311     $ 192     $ 2  

Residential closed-end junior liens

    239       239       ---       239       8  

Investor-owned residential real estate

    77       77       ---       77       4  

Commercial Real Estate(2)

                                       

Multifamily real estate

    2,911       2,735       868       1,866       170  

Commercial real estate, owner occupied

    4,919       4,821       3,314       1,508       74  

Commercial real estate, other

    6,080       6,068       3,072       2,996       14  

Commercial Non Real Estate(2)

                                       

Commercial and Industrial

    678       678       50       628       10  

Total

  $ 15,434     $ 15,121     $ 7,615     $ 7,506     $ 282  

 

(1)     Recorded investment is net of charge-offs and interest paid while a loan is in nonaccrual status.

(2)     Only classes with impaired loans are shown.

 

 
14

 

 

The following tables show the average recorded investment and interest income recognized for impaired loans.

 

   

For the Three Months Ended

March 31, 2015

 
   

Average Recorded Investment(1)

   

Interest Income Recognized

 

Consumer Real Estate(2)

               

Residential closed-end first liens

  $ 501     $ 7  

Residential closed-end junior liens

    236       4  

Investor-owned residential real estate

    76       1  

Commercial Real Estate(2)

               

Multifamily real estate

    2,708       25  

Commercial real estate, owner occupied

    4,974       58  

Commercial real estate, other

    6,023       80  

Commercial Non Real Estate(2)

               

Commercial and Industrial

    674       (1

)

Total

  $ 15,192     $ 174  

 

(1)     Recorded investment is net of charge-offs and interest paid while a loan is in nonaccrual status.

(2)     Only classes with impaired loans are shown.

 

   

For the Three Months Ended

March 31, 2014

 
   

Average Recorded Investment(1)

   

Interest Income Recognized

 

Consumer Real Estate(2)

               

Residential closed-end first liens

    561       4  

Residential closed-end junior liens

    257       5  

Investor-owned residential real estate

    79       1  

Commercial Real Estate(2)

               

Multifamily real estate

    3,386       ---  

Commercial real estate, owner occupied

    5,515       44  

Commercial real estate, other

    3,150       44  

Commercial Non Real Estate(2)

               

Commercial and Industrial

    101       1  

Consumer Non Real Estate(2)

               

Automobile

    26       ---  

Total

  $ 13,075     $ 99  

 

(1)     Recorded investment is net of charge-offs and interest paid while a loan is in nonaccrual status.

(2)     Only classes with impaired loans are shown.

 

 
15

 

 

 

The Company reviews nonaccrual loans on an individual loan basis to determine whether future payments are reasonably assured. To satisfy this criteria, the Company’s evaluation must determine that the underlying cause of the original delinquency or weakness that indicated nonaccrual status has been resolved, such as receipt of new guarantees, increased cash flows that cover the debt service or other resolution. Nonaccrual loans that demonstrate reasonable assurance of future payments and that have made at least six consecutive payments in accordance with repayment terms and timeframes may be returned to accrual status.

A restructured loan for which impairment measurement does not indicate a loss and that maintains current status for at least six months may be returned to accrual status.

 

An analysis of past due and nonaccrual loans follows.

 

March 31, 2015

                               
   

30 – 89

Days Past Due

   

90 or More

Days Past Due

   

90 or More Days Past Due and Still Accruing

   

Nonaccruals (Including Impaired Nonaccruals)

 

Real Estate Construction(1)

                               

Construction, other

  $ ---     $ ---     $ ---     $ ---  

Consumer Real Estate(1)

                               

Equity lines

    80       ---       ---       ---  

Residential closed-end first liens

    1,117       131       131       4  

Residential closed-end junior liens

    68       ---       ---       ---  

Investor-owned residential real estate

    378       ---       ---       14  

Commercial Real Estate(1)

                               

Multifamily real estate

    844       868       ---       2,705  

Commercial real estate, owner-occupied

    647       1,588       ---       2,841  

Commercial real estate, other

    ---       ---       ---       2,959  

Commercial Non Real Estate(1)

                               

Commercial and Industrial

    777       732       83       702  

Consumer Non Real Estate(1)

                               

Credit cards

    3       7       7       ---  

Automobile

    172       51       51       ---  

Other consumer loans

    19       ---       ---       ---  

Total

  $ 4,105     $ 3,377     $ 272     $ 9,225  

 

(1)     Only classes with past-due or nonaccrual loans are shown.

 

 
16

 

 

An analysis of past due and nonaccrual loans follows.

 

December 31, 2014

                               
   

30 – 89

Days Past Due 

   

90 or More

Days Past Due

   

90 or More Days Past Due and Still Accruing

   

Nonaccruals (Including Impaired Nonaccruals)

 

Real Estate Construction(1)