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Table of Contents

 

 

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

 


 

FORM 10-Q

 


 

(Mark One)

 

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

 

Or

 

o         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: 001-33126

 


 

CITIZENS FIRST CORPORATION

(Exact name of registrant as specified in its charter)

 


 

Kentucky

 

61-0912615

(State or other jurisdiction of

incorporation or organization)

 

(I.R.S. Employer

Identification No.)

 

 

 

1065 Ashley Street, Bowling Green, Kentucky

 

42103

(Address of principal executive offices)

 

(Zip Code)

 

(270) 393-0700

(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 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.  Yes  x  No  o

 

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).  Yes  x  No  o

 

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   o

 

Accelerated filer   o

 

 

 

Non-accelerated filer  o

 

Smaller reporting company   x

 

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

 

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

 

1,968,777 shares of Common Stock, no par value, were outstanding at May 11, 2015.

 

 

 




Table of Contents

 

Part 1. Financial Information

Item 1. Financial Statements

 

Citizens First Corporation

Consolidated Balance Sheets

 

 

 

(In Thousands, Except Share Data)

 

 

 

March 31,
2015

 

December 31,
2014

 

 

 

Unaudited

 

 

 

Assets

 

 

 

 

 

Cash and due from financial institutions

 

$

8,513

 

$

7,962

 

Federal funds sold

 

19,905

 

3,360

 

Cash and cash equivalents

 

28,418

 

11,322

 

Available-for-sale securities

 

58,913

 

58,986

 

Loans held for sale

 

310

 

 

Loans, net of allowance for loan losses of $4,947 and $4,885 at March 31, 2015 and December 31, 2014, respectively

 

314,685

 

313,592

 

Premises and equipment, net

 

10,776

 

10,758

 

Bank owned life insurance (BOLI)

 

8,039

 

7,993

 

Federal Home Loan Bank (FHLB) stock, at cost

 

2,025

 

2,025

 

Accrued interest receivable

 

1,443

 

1,527

 

Deferred income taxes

 

1,350

 

1,479

 

Goodwill

 

4,097

 

4,097

 

Core deposit intangible

 

318

 

336

 

Other real estate owned

 

267

 

198

 

Other assets

 

491

 

501

 

Total Assets

 

$

431,132

 

$

412,814

 

Liabilities

 

 

 

 

 

Deposits

 

 

 

 

 

Noninterest bearing

 

$

44,664

 

$

41,975

 

Savings, NOW and money market

 

153,781

 

148,935

 

Time

 

166,920

 

150,874

 

Total deposits

 

365,365

 

341,784

 

FHLB advances and other borrowings

 

19,500

 

25,500

 

Subordinated debentures

 

5,000

 

5,000

 

Accrued interest payable

 

242

 

231

 

Other liabilities

 

1,674

 

1,851

 

Total Liabilities

 

391,781

 

374,366

 

Stockholders’ Equity

 

 

 

 

 

6.5% cumulative convertible preferred stock; no par value, authorized 250 shares, aggregate liquidation preference of $7,998; issued and outstanding 250 shares at March 31, 2015 and December 31, 2014, respectively

 

7,659

 

7,659

 

Common stock, no par value, authorized 5,000,000 shares; issued and outstanding 1,968,777 shares at March 31, 2015 and December 31, 2014, respectively

 

27,072

 

27,072

 

Retained earnings

 

4,027

 

3,373

 

Accumulated other comprehensive income (loss)

 

593

 

344

 

Total stockholders’ equity

 

39,351

 

38,448

 

Total liabilities and stockholders’ equity

 

$

431,132

 

$

412,814

 

 

See Notes to Unaudited Consolidated Financial Statements

 

3



Table of Contents

 

Citizens First Corporation
Unaudited Consolidated Statements of Income

 

 

 

Three months ended

 

 

 

(In Thousands, Except Per Share Data)

 

 

 

March 31, 2015

 

March 31, 2014

 

Interest and dividend income

 

 

 

 

 

Loans

 

$

3,949

 

$

3,844

 

Taxable securities

 

152

 

141

 

Non-taxable securities

 

176

 

164

 

Federal funds sold and other

 

29

 

32

 

Total interest and dividend income

 

4,306

 

4,181

 

Interest expense

 

 

 

 

 

Deposits

 

549

 

543

 

FHLB advances and other

 

71

 

117

 

Subordinated debentures

 

24

 

23

 

Total interest expense

 

644

 

683

 

Net interest income

 

3,662

 

3,498

 

Provision for loan losses

 

80

 

125

 

Net interest income after provision for loan losses

 

3,582

 

3,373

 

Non-interest income

 

 

 

 

 

Service charges on deposit accounts

 

317

 

261

 

Other service charges and fees

 

135

 

153

 

Gain on sale of mortgage loans

 

31

 

24

 

Non-deposit brokerage fees

 

92

 

69

 

Lease income

 

73

 

75

 

BOLI income

 

45

 

47

 

Total non-interest income

 

693

 

629

 

Non-interest expenses

 

 

 

 

 

Salaries and employee benefits

 

1,648

 

1,527

 

Net occupancy expense

 

528

 

482

 

Advertising and public relations

 

52

 

83

 

Professional fees

 

164

 

153

 

Data processing services

 

239

 

233

 

Franchise shares and deposit tax

 

146

 

146

 

FDIC insurance

 

59

 

77

 

Core deposit intangible amortization

 

18

 

84

 

Postage and office supplies

 

40

 

51

 

Other

 

309

 

226

 

Total non-interest expenses

 

3,203

 

3,062

 

Income before income taxes

 

1,072

 

940

 

Income taxes

 

290

 

249

 

Net income

 

782

 

691

 

Dividends on preferred stock

 

128

 

132

 

Net income available for common stockholders

 

$

654

 

$

559

 

Basic earnings per common share

 

$

0.33

 

$

0.28

 

Diluted earnings per common share

 

$

0.29

 

$

0.27

 

 

See Notes to Unaudited Consolidated Financial Statements

 

4



Table of Contents

 

Citizens First Corporation

Unaudited Consolidated Statements of Comprehensive Income

In thousands, except share data

 

 

 

Three months ended

 

 

 

(In Thousands, Except Per Share Data)

 

 

 

March 31, 2015

 

March 31, 2014

 

Comprehensive income (loss), net of tax

 

 

 

 

 

Net income

 

$

782

 

$

691

 

Other comprehensive income (loss)

 

 

 

 

 

Change in unrealized gain on available for sale securities, net of $129 taxes in 2015 and $141 in 2014

 

249

 

273

 

Total other comprehensive income

 

249

 

273

 

Comprehensive income

 

$

1,031

 

$

964

 

 

See Notes to Unaudited Consolidated Financial Statements

 

5



Table of Contents

 

Citizens First Corporation

Unaudited Consolidated Statements of Changes in Stockholders’ Equity

In thousands, except share data

 

 

 

Preferred
Stock

 

Common
Stock

 

Retained
Earnings

 

Accumulated Other
Comprehensive
Income (Loss)

 

Total

 

Balance, January 1, 2015

 

$

7,659

 

$

27,072

 

$

3,373

 

$

344

 

$

38,448

 

Net income

 

 

 

 

 

782

 

 

 

782

 

Change in accumulated other comprehensive income

 

 

 

 

 

 

 

249

 

249

 

Dividend declared and paid on preferred stock

 

 

 

 

 

(128

)

 

 

(128

)

 

 

 

 

 

 

 

 

 

 

 

 

Balance, March 31, 2015

 

$

7,659

 

$

27,072

 

$

4,027

 

$

593

 

$

39,351

 

 

 

 

Preferred
Stock

 

Common
Stock

 

Retained
Earnings
(Deficit)

 

Accumulated Other
Comprehensive
Income (Loss)

 

Total

 

Balance, January 1, 2014

 

$

10,925

 

$

27,072

 

$

653

 

$

(303

)

$

38,347

 

Net income

 

 

 

 

 

691

 

 

 

691

 

Redemption of Series A preferred stock

 

(3,266

)

 

 

 

 

 

 

(3,266

)

Change in accumulated other comprehensive loss

 

 

 

 

 

 

 

273

 

273

 

Dividend declared and paid on preferred stock

 

 

 

 

 

(132

)

 

 

(132

)

 

 

 

 

 

 

 

 

 

 

 

 

Balance, March 31, 2014

 

$

7,659

 

$

27,072

 

$

1,212

 

$

(30

)

$

35,913

 

 

6



Table of Contents

 

Citizens First Corporation

Unaudited Consolidated Statements of Cash Flows

 

 

 

Three months ended

 

 

 

(In Thousands)

 

 

 

March 31, 2015

 

March 31, 2014

 

Operating Activities

 

 

 

 

 

Net income

 

$

782

 

$

691

 

Items not requiring (providing) cash:

 

 

 

 

 

Depreciation and amortization

 

137

 

144

 

Provision for loan losses

 

80

 

125

 

Amortization of premiums and discounts on securities

 

86

 

68

 

Amortization of core deposit intangible

 

18

 

84

 

Deferred income taxes

 

80

 

799

 

BOLI income

 

(45

)

(47

)

Proceeds from sale of mortgage loans

 

1,591

 

982

 

Origination of mortgage loans held for sale

 

(1,870

)

(1,044

)

Gains on sales of mortgage loans

 

(31

)

(24

)

Write-downs and losses on sale of other real estate owned

 

10

 

11

 

Gain on sale premises and equipment

 

(4

)

(7

)

Changes in:

 

 

 

 

 

Accrued interest receivable

 

84

 

110

 

Other assets

 

(70

)

(641

)

Accrued interest payable and other liabilities

 

(166

)

(158

)

Net cash provided by operating activities

 

682

 

1,093

 

Investing Activities

 

 

 

 

 

Loan originations and payments, net

 

(1,252

)

(6,485

)

Purchase of premises and equipment

 

(151

)

(72

)

Proceeds from maturities of available-for-sale securities

 

1,373

 

1,429

 

Proceeds from sales of other real estate owned

 

 

191

 

Purchase of available-for-sale securities

 

(1,009

)

(4,124

)

Proceeds from sales of premises and equipment

 

 

19

 

Net cash used in investing activities

 

(1,039

)

(9,042

)

Financing Activities

 

 

 

 

 

Net change in demand deposits, money market, NOW and savings accounts

 

7,535

 

4,214

 

Net change in time deposits

 

16,046

 

5,032

 

Repayment of FHLB advances

 

(6,000

)

 

Repayment of TARP preferred stock

 

 

(3,266

)

Proceeds from other borrowings

 

 

3,300

 

Dividends paid on preferred stock

 

(128

)

(132

)

Net cash provided by financing activities

 

17,453

 

9,148

 

Increase in Cash and Cash Equivalents

 

17,096

 

1,199

 

Cash and Cash Equivalents, Beginning of Year

 

11,322

 

37,062

 

Cash and Cash Equivalents, End of Quarter

 

$

28,418

 

$

38,261

 

Supplemental Cash Flows Information

 

 

 

 

 

Interest paid

 

$

633

 

$

685

 

Income taxes paid

 

$

210

 

$

 

Loans transferred to other real estate owned

 

$

80

 

$

 

 

7



Table of Contents

 

Citizens First Corporation

Notes to Unaudited Consolidated Financial Statements

 

Note 1 — Nature of Operations and Summary of Significant Accounting Policies

 

The accounting and reporting policies of Citizens First Corporation (the “Company”) and its subsidiary, Citizens First Bank, Inc. (the “Bank”), conform to U.S. generally accepted accounting principles and general practices within the banking industry.  The consolidated financial statements include the accounts of the Company and the Bank.  All significant intercompany transactions and accounts have been eliminated in consolidation.

 

Certain information and note disclosures normally included in the Company’s annual financial statements prepared in accordance with U.S. generally accepted accounting principles have been condensed or omitted.  These consolidated financial statements should be read in conjunction with the consolidated financial statements and notes thereto included in the Company’s 2014 Annual Report on Form 10-K filed with the Securities and Exchange Commission.

 

The preparation of financial statements in conformity with U.S. generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities as of the date of the financial statements and the reported amounts of revenues and expenses during the reporting period.  Estimates used in the preparation of the financial statements are based on various factors including the current interest rate environment and the general strength of the local economy.  Changes in the overall interest rate environment can significantly affect the Company’s net interest income and the value of its recorded assets and liabilities.  Actual results could differ from those estimates used in the preparation of the financial statements.

 

In the opinion of management, all adjustments considered necessary for a fair presentation have been reflected in the accompanying unaudited financial statements.  Those adjustments consist only of normal recurring adjustments. Results of interim periods are not necessarily indicative of results to be expected for the full year.  The consolidated balance sheet of the Company as of December 31, 2014 has been derived from the audited consolidated balance sheet of the Company as of that date.

 

Recent Accounting PronouncementsIn May 2014 the FASB amended existing guidance related to revenue from contracts with customers. This amendment supersedes and replaces nearly all existing revenue recognition guidance, including industry-specific guidance, establishes a new control-based revenue recognition model, changes the basis for deciding when revenue is recognized over time or at a point in time, provides new and more detailed guidance on specific topics and expands and improves disclosures about revenue. In addition, this amendment specifies the accounting for some costs to obtain or fulfill a contract with a customer. These amendments are effective for annual reporting periods beginning after December 15,

 

8



Table of Contents

 

2016, including interim periods within that reporting period. The FASB has proposed an amendment to delay the effective date of the amended guidance until 2017. The Bank is currently evaluating the impact of this new accounting standard on the consolidated financial statements.

 

Note 2 -  Reclassifications

 

Certain reclassifications have been made to the consolidated financial statements of prior periods to conform to the current period presentation.  These reclassifications do not affect net income or total stockholders’ equity as previously reported.

 

Note 3 - Available-For-Sale Securities

 

The following table summarizes the amortized cost and fair value of the available-for sale securities portfolio at March 31, 2015 and December 31, 2014 and the corresponding amounts of gross unrealized gains and losses recognized in accumulated other comprehensive income(loss):

 

 

 

(Dollars in Thousands)

 

 

 

 

 

Gross

 

Gross

 

 

 

 

 

Amortized

 

Unrealized

 

Unrealized

 

Fair

 

 

 

Cost

 

Gains

 

Losses

 

Value

 

March 31, 2015

 

 

 

 

 

 

 

 

 

U. S. government agencies and government sponsored entities

 

$

2,999

 

$

8

 

$

(14

)

$

2,993

 

Agency mortgage-backed securities: residential

 

26,804

 

489

 

(17

)

27,276

 

State and municipal

 

25,334

 

889

 

(36

)

26,187

 

Trust preferred security

 

1,877

 

 

(427

)

1,450

 

Corporate bonds

 

1,000

 

7

 

 

1,007

 

Total Available-for-Sale Securities

 

$

58,014

 

$

1,393

 

$

(494

)

$

58,913

 

 

 

 

 

 

 

 

 

 

 

December 31, 2014

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

U. S. government agencies and government sponsored entities

 

$

2,999

 

$

 

$

(51

)

$

2,948

 

Agency mortgage-backed securities: residential

 

27,241

 

309

 

(31

)

27,519

 

State and municipal

 

25,350

 

793

 

(104

)

26,039

 

Trust preferred security

 

1,876

 

 

(396

)

1,480

 

Corporate bonds

 

1,000

 

 

 

1000

 

Total Available-for-Sale Securities

 

$

58,466

 

$

1,102

 

$

(582

)

$

58,986

 

 

9



Table of Contents

 

The amortized cost and fair value of investment securities at March 31, 2015 by contractual maturity were as follows.  Securities not due at a single maturity date, primarily mortgage-backed securities, are shown separately.

 

 

 

March 31, 2015

 

 

 

(Dollars in Thousands)

 

 

 

Available-For-Sale

 

 

 

Amortized Cost

 

Fair Value

 

Due in one year or less

 

$

535

 

$

536

 

Due from one to five years

 

11,545

 

11,752

 

Due from five to ten years

 

11,708

 

12,062

 

Due after ten years

 

7,422

 

7,287

 

Agency mortgage-backed: residential

 

26,804

 

27,276

 

Total

 

$

58,014

 

$

58,913

 

 

The following table summarizes the investment securities with unrealized losses by portfolio segment at March 31, 2015 and December 31, 2014, aggregated by investment category and length of time that individual securities have been in continuous unrealized loss position:

 

 

 

(Dollars in Thousands)

 

 

 

Less than 12 Months

 

12 Months or More

 

Total

 

Description of
Securities

 

Fair Value

 

Unrealized
Losses

 

Fair Value

 

Unrealized
Losses

 

Fair Value

 

Unrealized
Losses

 

March 31, 2015:

 

 

 

 

 

 

 

 

 

 

 

 

 

U.S. government agencies and government sponsored entities

 

$

 

$

 

$

1,985

 

$

(14

)

$

1,985

 

$

(14

)

Agency mortgage-backed: residential

 

 

 

1,637

 

(17

)

1,637

 

(17

)

State and municipal

 

2,562

 

(8

)

603

 

(28

)

3,165

 

(36

)

Trust preferred security

 

 

 

1,450

 

(427

)

1,450

 

(427

)

Total temporarily impaired

 

$

2,562

 

$

(8

)

$

5,675

 

$

(486

)

$

8,237

 

$

(494

)

 

10



Table of Contents

 

 

 

(Dollars in Thousands)

 

 

 

Less than 12 Months

 

12 Months or More

 

Total

 

Description of
Securities

 

Fair Value

 

Unrealized
Losses

 

Fair Value

 

Unrealized
Losses

 

Fair Value

 

Unrealized
Losses

 

December 31, 2014:

 

 

 

 

 

 

 

 

 

 

 

 

 

U.S. government agencies and government sponsored entities 

 

$

992

 

$

(8

)

$

1,955

 

$

(43

)

$

2,947

 

$

(51

)

Agency mortgage-backed: residential

 

1,134

 

(2

)

1,678

 

(29

)

2,812

 

(31

)

State and municipal

 

4,891

 

(24

)

2,530

 

(80

)

7,421

 

(104

)

Trust preferred security

 

 

 

1,480

 

(396

)

1,480

 

(396

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total temporarily impaired

 

$

7,017

 

$

(34

)

$

7,643

 

$

(548

)

$

14,660

 

$

(582

)

 

Other-Than-Temporary-Impairment

 

Management evaluates securities for other-than-temporary impairment (“OTTI”) at least on a quarterly basis, and more frequently when economic or market conditions warrant such an evaluation.  Investment securities classified as available-for-sale are generally evaluated for OTTI under ASC Topic 320, “Investments - Debt and Equity Securities.”

 

In determining OTTI under the ASC Topic 320 model, management considers many factors, including: (1) the length of time and the extent to which the fair value has been less than cost, (2) the financial condition and near-term prospects of the issuer, (3) whether the market decline was affected by macroeconomic conditions, and (4) whether the entity has the intent to sell the debt security or more likely than not will be required to sell the debt security before its anticipated recovery.  The assessment of whether an other-than-temporary decline exists involves a high degree of subjectivity and judgment and is based on the information available to management at a point in time.

 

All rated securities are investment grade.  For those that are not rated, the financial condition has been evaluated and no adverse conditions were identified related to repayment.  Declines in fair value are a function of rate differences in the market and market illiquidity.  The Company does not intend or is not expected to be required to sell these securities before recovery of their amortized cost basis.

 

Approximately 88% of the Company’s unrealized losses 12 months or more relate to its investment in a single trust preferred security.  The security is a single-issuer trust preferred that is not rated. No impairment charge is being taken as no loss of principal or interest is anticipated. All principal and interest payments are being received as scheduled.  On a quarterly basis, we evaluate the creditworthiness of the issuer, a bank holding company with operations in the state of Kentucky.  Based on the issuer’s continued profitability and well-capitalized position, we do not deem that there is credit loss.  The decline in fair value is primarily attributable to illiquidity affecting these

 

11



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markets and not the expected cash flows of the individual securities.  We have evaluated the financial condition and near term prospects of the issuer and expect to fully recover our cost basis.  This security continues to pay interest as agreed and future payments are expected to be made as agreed.  This security is not considered to be other-than-temporarily impaired.

 

Note 4 - Loans and Allowance for Loan Losses

 

Categories of loans include:

 

 

 

(Dollars in Thousands)

 

 

 

March 31, 2015

 

December 31, 2014

 

Commercial

 

$

42,680

 

$

43,439

 

Commercial real estate:

 

 

 

 

 

Construction

 

20,862

 

18,064

 

Other

 

173,860

 

174,032

 

Residential real estate

 

77,651

 

78,270

 

Consumer:

 

 

 

 

 

Auto

 

1,604

 

1,820

 

Other

 

2,975

 

2,852

 

Total Loans

 

319,632

 

318,477

 

Less Allowance for loan losses

 

(4,947

)

(4,885

)

Net loans

 

$

314,685

 

$

313,592

 

 

The following table sets forth an analysis of our allowance for loan losses for the three months ending March 31, 2015 and 2014.

 

 

 

(Dollars in Thousands)

 

 

 

Commercial

 

Commercial
Real Estate

 

Residential
Real Estate

 

Consumer

 

Unallocated

 

Total

 

March 31, 2015

 

 

 

 

 

 

 

 

 

 

 

 

 

Allowance for loan losses:

 

 

 

 

 

 

 

 

 

 

 

 

 

Beginning balance

 

$

1,029

 

$

3,088

 

$

582

 

$

45

 

$

141

 

$

4,885

 

Provision for loan losses

 

(15

)

135

 

(43

)

(2

)

5

 

80

 

Loans charged-off

 

 

(17

)

(24

)

(3

)

 

(44

)

Recoveries

 

21

 

 

4

 

1

 

 

26

 

Total ending allowance balance

 

$

1,035

 

$

3,206

 

$

519

 

$

41

 

$

146

 

$

4,947

 

 

12



Table of Contents

 

 

 

(Dollars in Thousands)

 

March 31, 2014

 

Commercial

 

Commercial
Real Estate

 

Residential
Real Estate

 

Consumer

 

Unallocated

 

Total

 

Allowance for loan losses:

 

 

 

 

 

 

 

 

 

 

 

 

 

Beginning balance

 

$

1,420

 

$

2,079

 

$

703

 

$

86

 

$

365

 

$

4,653

 

Provision for loan losses

 

(500

)

887

 

9

 

(13

)

(258

)

125

 

Loans charged-off

 

 

 

(19

)

(3

)

 

(22

)

Recoveries

 

17

 

47

 

6

 

1

 

 

71

 

Total ending allowance balance

 

$

937

 

$

3,013

 

$

699

 

$

71

 

$

107

 

$

4,827

 

 

The following tables present the balance in the allowance for loan losses and the recorded investment in loans by portfolio segment and based on the impairment method as of March 31, 2015 and December 31, 2014, which includes net deferred loan fees.  As of March 31, 2015 and December 31, 2014, accrued interest receivable of $1.1 million and $1.2 million, respectively, are not considered significant and therefore not included in the recorded investment in loans presented in the following tables.

 

 

 

(Dollars in Thousands)

 

March 31, 2015

 

Commercial

 

Commercial
Real Estate

 

Residential
Real Estate

 

Consumer

 

Unallocated

 

Total

 

Allowance for loan losses:

 

 

 

 

 

 

 

 

 

 

 

 

 

Ending allowance balance attributable to loans:

 

 

 

 

 

 

 

 

 

 

 

 

 

Individually evaluated for impairment

 

$

388

 

$

203

 

$

4

 

$

6

 

$

 

$

601

 

Collectively evaluated

 

647

 

3,003

 

515

 

35

 

146

 

4,346

 

Total ending allowance balance

 

$

1,035

 

$

3,206

 

$

519

 

$

41

 

$

146

 

$

4,947

 

Loans:

 

 

 

 

 

 

 

 

 

 

 

 

 

Individually evaluated for impairment

 

$

2,536

 

$

1,187

 

$

1,018

 

$

17

 

$

 

$

4,758

 

Collectively evaluated

 

40,144

 

193,535

 

76,633

 

4,562

 

 

314,874

 

Total ending loans balance

 

$

42,680

 

$

194,722

 

$

77,651

 

$

4,579

 

$

 

$

319,632

 

 

13



Table of Contents

 

 

 

(Dollars in Thousands)

 

December 31, 2014

 

Commercial

 

Commercial
Real Estate

 

Residential
Real Estate

 

Consumer

 

Unallocated

 

Total

 

Allowance for loan losses:

 

 

 

 

 

 

 

 

 

 

 

 

 

Ending allowance balance attributable to loans:

 

 

 

 

 

 

 

 

 

 

 

 

 

Individually evaluated for impairment

 

$

342

 

$

220

 

$

7

 

$

10

 

$

 

$

579

 

Collectively evaluated

 

687

 

2,868

 

575

 

35

 

141

 

4,306

 

Total ending allowance balance

 

$

1,029

 

$

3,088

 

$

582

 

$

45

 

$

141

 

$

4,885

 

Loans:

 

 

 

 

 

 

 

 

 

 

 

 

 

Individually evaluated for impairment

 

$

2,696

 

$

1,057

 

$

1,098

 

$

22

 

$

 

$

4,873

 

Collectively evaluated

 

40,743

 

191,039

 

77,172

 

4,650

 

 

313,604

 

Total ending loans balance

 

$

43,439

 

$

192,096

 

$

78,270

 

$

4,672

 

$

 

$

318,477

 

 

The following table presents information related to impaired loans by class of loans as of March 31, 2015 and December 31, 2014. In this table presentation the unpaid principal balance of the loans has not been reduced by partial net charge-offs and the recorded investment of the loans was reduced by partial net charge-offs.

 

14



Table of Contents

 

 

 

(Dollars in Thousands)

 

(Dollars in Thousands)

 

 

 

March 31, 2015

 

December 31, 2014

 

 

 

Unpaid
Principal
Balance

 

Recorded
Investment

 

Allowance
for Loan
Losses
Allocated

 

Unpaid
Principal
Balance

 

Recorded
Investment

 

Allowance
for Loan
Losses
Allocated

 

With no related allowance recorded:

 

 

 

 

 

 

 

 

 

 

 

 

 

Commercial

 

$

999

 

$

999

 

$

 

$

1,129

 

$

1,129

 

$

 

Commercial real estate:

 

 

 

 

 

 

 

 

 

 

 

 

 

Construction

 

 

 

 

 

 

 

Other

 

181

 

181

 

 

 

 

 

Residential real estate

 

949

 

949

 

 

1,026

 

1,026

 

 

Consumer:

 

 

 

 

 

 

 

 

 

 

 

 

Auto

 

 

 

 

 

 

 

Other

 

 

 

 

 

 

 

Subtotal

 

$

2,129

 

$

2,129

 

$

 

$

2,155

 

$

2,155

 

$

 

With an allowance recorded:

 

 

 

 

 

 

 

 

 

 

 

 

 

Commercial

 

$

1,537

 

$

1,537

 

$

388

 

$

1,567

 

$

1,567

 

$

342

 

Commercial real estate:

 

 

 

 

 

 

 

 

 

 

 

 

 

Construction

 

 

 

 

 

 

 

Other

 

1,006

 

1,006

 

203

 

1,057

 

1,057

 

220

 

Residential real estate

 

69

 

69

 

4

 

72

 

72

 

7

 

Consumer:

 

 

 

 

 

 

 

 

 

 

 

 

 

Auto

 

6

 

6

 

6

 

10

 

10

 

10

 

Other

 

11

 

11

 

 

12

 

12

 

 

Subtotal

 

$

2,629

 

$

2,629

 

$

601

 

$

2,718

 

$

2,718

 

$

579

 

Total

 

$

4,758

 

$

4,758

 

$

601

 

$

4,873

 

$

4,873

 

$

579

 

 

Information on impaired loans for the three months ending March 31, 2015 and 2014 is as follows:

 

15



Table of Contents

 

 

 

(Dollars in Thousands)

 

(Dollars in Thousands)

 

 

 

March 31, 2015

 

March 31, 2014

 

 

 

Average
Recorded
Investment

 

Interest
Income
Recognized

 

Cash Basis
Interest
Recognized

 

Average
Recorded
Investment

 

Interest
Income
Recognized

 

Cash Basis
Interest
Recognized

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Commercial

 

$

2,616

 

$

34

 

$

24

 

$

2,944

 

$

32

 

$

27

 

Commercial real estate:

 

 

 

 

 

 

 

 

 

 

 

 

 

Construction

 

 

 

 

 

 

 

Other

 

1,199

 

14

 

13

 

1,777

 

20

 

14

 

Residential real estate

 

1,023

 

12

 

8

 

1,366

 

18

 

10

 

Consumer:

 

 

 

 

 

 

 

 

 

 

 

 

 

Auto

 

7

 

 

 

20

 

 

 

Other

 

11

 

 

 

14

 

 

 

Total

 

$

4,856

 

$

60

 

$

45

 

$

6,121

 

$

70

 

$

51

 

 

The recorded investment in nonaccrual and loans past due over 90 days still on accrual by class of loans as of March 31, 2015 and December 31, 2014 are summarized below:

 

 

 

(Dollars in Thousands)

 

(Dollars in Thousands)

 

 

 

March 31, 2015

 

December 31, 2014

 

 

 

Loans Past Due
Over 90 Days and 
Still Accruing

 

Nonaccrual

 

Loans Past Due
Over 90 Days and
Still Accruing

 

Nonaccrual

 

 

 

 

 

 

 

 

 

 

 

Commercial

 

$

 

$

734

 

$

 

$

748

 

Commercial real estate:

 

 

 

 

 

 

 

 

 

Construction

 

 

 

 

 

Other

 

 

181

 

 

45

 

Residential real estate

 

 

291

 

 

364

 

Consumer:

 

 

 

 

 

 

 

 

 

Auto

 

 

6

 

 

10

 

Other

 

 

 

 

 

Total

 

$

 

$

1,212

 

$

 

$

1,167

 

 

Nonaccrual loans and loans past due 90 days still on accrual include individually classified impaired loans.

 

The following tables present the aging of the recorded investment in past due loans as of March 31, 2015 and December 31, 2014 by class of loans.  Non-accrual loans are included and have been categorized based on their payment status:

 

16



Table of Contents

 

 

 

(Dollars in Thousands)

 

 

 

30-59
Days Past
Due

 

60-89
Days Past
Due

 

Over 90
Days Past
Due

 

Total Past
Due

 

Current

 

Total

 

March 31, 2015

 

 

 

 

 

 

 

 

 

 

 

 

 

Commercial

 

$

35

 

$

 

$

644

 

$

679

 

$

42,001

 

$

42,680

 

Commercial real estate:

 

 

 

 

 

 

 

 

 

 

 

 

 

Construction

 

 

 

 

 

20,862

 

20,862

 

Other

 

 

949

 

27

 

976

 

172,884

 

173,860

 

Residential real estate

 

95

 

48

 

254

 

397

 

77,254

 

77,651

 

Consumer:

 

 

 

 

 

 

 

 

 

 

 

 

 

Auto

 

 

 

 

 

1,604

 

1,604

 

Other

 

43

 

 

 

43

 

2,932

 

2,975

 

Subtotal

 

$

173

 

$

997

 

$

925

 

$

2,095

 

$

317,537

 

$

319,632

 

 

 

 

(Dollars in Thousands)

 

 

 

30-59
Days Past
Due

 

60-89
Days Past
Due

 

Over 90
Days Past
Due

 

Total Past
Due

 

Current

 

Total

 

December 31, 2014

 

 

 

 

 

 

 

 

 

 

 

 

 

Commercial

 

$

 

$

 

$

645

 

$

645

 

$

42,794

 

$

43,439

 

Commercial real estate:

 

 

 

 

 

 

 

 

 

 

 

 

 

Construction

 

 

 

 

 

18,064

 

18,064

 

Other

 

 

 

45

 

45

 

173,987

 

174,032

 

Residential real estate

 

31

 

 

362

 

393

 

77,877

 

78,270

 

Consumer:

 

 

 

 

 

 

 

 

 

 

 

 

 

Auto

 

 

 

 

 

1,820

 

1,820

 

Other

 

 

 

 

 

2,852

 

2,852

 

Subtotal

 

$

31

 

$

 

$

1,052

 

$

1,083

 

$

317,394

 

$

318,477

 

 

Troubled Debt Restructurings:

 

The Company reported total troubled debt restructurings of $4.3 million and $4.4 million as of March 31, 2015 and December 31, 2014, respectively.  The Company has no commitments to lend additional amounts to customers with outstanding loans that are classified as troubled debt restructurings.  Troubled debt restructurings are included in impaired loans. The modifications of the terms of these loans included reducing the interest rate, granting an interest only payment period, or extending the terms of the debt for customers experiencing financial difficulties. Of the 14 troubled debt restructurings reported at quarter end, 12 loans totaling $3.5 million were accruing and 2 loans totaling $715,000 were on nonaccrual status.

 

17



Table of Contents

 

The following table presents the pre-modification and post-modification outstanding recorded balances for loans by class modified as troubled debt restructurings that were reported at period end for March 31, 2015 and December 31, 2014:

 

 

 

 

 

(Dollars in Thousands)

 

 

 

(Dollars in Thousands)

 

 

 

Number
of Loans

 

Pre-
Modification
Outstanding
Recorded
Investment

 

Post-
Modification
Outstanding
Recorded
Investment

 

Number
of Loans

 

Pre-Modification
Outstanding
Recorded
Investment

 

Post-
Modification
Outstanding
Recorded
Investment

 

 

 

March 31, 2015

 

December 31, 2014

 

Troubled Debt Restructurings:

 

 

 

 

 

 

 

 

 

 

 

 

 

Commercial

 

7

 

$

3,970

 

$

3,970

 

7

 

$

3,970

 

$

3,970

 

Commercial real estate:

 

 

 

 

 

 

 

 

 

 

 

 

 

Other

 

2

 

1,017

 

1,017

 

2

 

1,017

 

1,017

 

Residential real estate

 

4

 

757

 

759

 

4

 

757

 

759

 

Consumer

 

1

 

16

 

15

 

1

 

16

 

15

 

Total

 

14

 

$

5,760

 

$

5,761

 

14

 

$

5,760

 

$

5,761

 

 

The following table presents loans by class modified as troubled debt restructurings that occurred during the quarter ending March 31, 2015 and 2014:

 

 

 

 

 

(Dollars in Thousands)

 

 

 

(Dollars in Thousands)

 

 

 

Number
of Loans

 

Pre-
Modification
Outstanding
Recorded
Investment

 

Post-
Modification
Outstanding
Recorded
Investment

 

Number
of Loans

 

Pre-
Modification
Outstanding
Recorded
Investment

 

Post-
Modification
Outstanding
Recorded
Investment

 

 

 

March 31, 2015

 

March 31, 2014

 

Troubled Debt Restructurings:

 

 

 

 

 

 

 

 

 

 

 

 

 

Commercial

 

 

$

 

$

 

 

$

 

$

 

Commercial real estate:

 

 

 

 

 

 

 

 

 

 

Other

 

 

 

 

 

 

 

Residential real estate

 

 

 

 

1

 

15

 

15

 

Consumer

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total

 

 

$

 

$

 

1

 

$

15

 

$

15

 

 

Specific allocations of $591,000 and $547,000 were reported for troubled debt restructurings as of March 31, 2015 and December 31, 2014. Specific allocations of $362,000 were reported for the troubled debt restructurings as of March 31, 2014. No payment defaults were reported for troubled debt restructurings during the three months ending March 31, 2015 or March 31, 2014. No charge offs were taken on troubled debt restructurings during the three months ending March 31, 2015 or March 31, 2014.

 

The terms of certain other loans were modified during the three months ending March 31, 2015 and 2014 that did not meet the definition of a troubled debt restructuring.

 

18



Table of Contents

 

These loans modified during the three months ending March 31, 2015 have a total recorded investment of $9.5 million as of March 31, 2015.The loans modified during the three months ending March 31, 2014 have a total recorded investment of $3.7 million as of March 31, 2014. The modification of these loans involved either a modification of the terms of a loan to borrowers who were not experiencing financial difficulties or a delay in a payment that was considered to be insignificant.

 

In order to determine whether a borrower is experiencing financial difficulty, an evaluation is performed of the probability that the borrower will be in payment default on any of its debt in the foreseeable future without the modification. This evaluation is performed under the Company’s internal underwriting policy.

 

Credit Quality Indicators:

 

The Company categorizes loans into risk categories based on relevant information about the ability of borrowers to service their debt such as current financial information, historical payment experience, credit documentation, public information, and current economic trends, among other factors.  The Company analyzes loans individually by classifying the loans as to credit risk.  This analysis includes commercial and commercial real estate loans with an outstanding balance greater than $25 thousand and is reviewed on a monthly basis. For residential real estate and consumer loans the analysis primarily involves monitoring the past due status of these loans and at such time that these loans are past due, the Company evaluates the loans to determine if a change in risk category is warranted. The Company uses the following definitions for risk ratings:

 

Special Mention.  Loans classified as special mention have a potential weakness that deserves management’s close attention. If left uncorrected, these potential weaknesses may result in deterioration of the repayment prospects for the loan or of the institution’s credit position at some future date.

 

Substandard.  Loans classified as substandard are inadequately protected by the current net worth and paying capacity of the obligor or of the collateral pledged, if any. Loans so classified have a well-defined weakness or weaknesses that jeopardize the liquidation of the debt. They are characterized by the distinct possibility that the institution will sustain some loss if the deficiencies are not corrected.

 

Doubtful.  Loans classified as doubtful have all the weaknesses inherent in those classified as substandard, with the added characteristic that the weaknesses make collection or liquidation in full, on the basis of currently existing facts, conditions, and values, highly questionable and improbable.

 

Loans not meeting the criteria above that are analyzed individually as part of the above described process are considered to be Pass rated loans.  All loans in all loan categories are assigned risk ratings.  Based on the most recent analyses performed, the risk category of loans by class of loans is as follows:

 

19



Table of Contents

 

 

 

Pass

 

Special
Mention

 

Substandard

 

Doubtful

 

Total

 

March 31, 2015

 

 

 

 

 

 

 

 

 

 

 

Commercial

 

$

39,281

 

$

543

 

$

2,856

 

$

 

$

42,680

 

Commercial real estate:

 

 

 

 

 

 

 

 

 

 

 

Construction

 

20,862

 

 

 

 

20,862

 

Other

 

164,180

 

4,961

 

4,719

 

 

173,860

 

Residential real estate

 

76,265

 

709

 

677

 

 

77,651

 

Consumer:

 

 

 

 

 

 

 

 

 

 

 

Auto