Attached files

file filename
EX-32 - EX-32 - KENTUCKY BANCSHARES INC /KY/a15-7824_1ex32.htm
EX-31.1 - EX-31.1 - KENTUCKY BANCSHARES INC /KY/a15-7824_1ex31d1.htm
EX-31.2 - EX-31.2 - KENTUCKY BANCSHARES INC /KY/a15-7824_1ex31d2.htm
EXCEL - IDEA: XBRL DOCUMENT - KENTUCKY BANCSHARES INC /KY/Financial_Report.xls

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 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:  000-52598

 

KENTUCKY BANCSHARES, INC.

(Exact name of registrant as specified in its charter)

 

Kentucky

 

61-0993464

(State or other jurisdiction of

 

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

incorporation or organization)

 

 

 

P.O. Box 157, Paris, Kentucky

 

40362-0157

(Address of principal executive offices)

 

(Zip Code)

 

Registrant’s telephone number, including area code:  (859) 987-1795

 

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.  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 (Section 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 definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.  (Check one):

 

Large accelerated filer o

 

Accelerated filer o

 

 

 

Non-accelerated filer x

 

Smaller reporting company o

(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  o  No  x

 

Number of shares of Common Stock outstanding as of April 30, 2015:  2,725,648.

 

 

 



Table of Contents

 

KENTUCKY BANCSHARES, INC.

 

Table of Contents

 

Part I - Financial Information

 

 

 

Item 1. Financial Statements

 

 

 

 

 

Consolidated Balance Sheets

3

 

 

 

 

Consolidated Statements of Income and Comprehensive Income

4

 

 

 

 

Consolidated Statement of Changes in Stockholders’ Equity

5

 

 

 

 

Consolidated Statements of Cash Flows

6

 

 

 

 

Notes to Consolidated Financial Statements

7

 

 

 

Item 2.

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

33

 

 

 

Item 3.

Quantitative and Qualitative Disclosures About Market Risk

44

 

 

 

Item 4.

Controls and Procedures

45

 

 

 

Part II - Other Information

46

 

 

 

Item 2.

Unregistered Sales of Equity Securities and Use of Proceeds

46

 

 

 

Item 6.

Exhibits

46

 

 

 

Signatures

 

47

 

2



Table of Contents

 

Item 1 - Financial Statements

 

KENTUCKY BANCSHARES, INC.

 

CONSOLIDATED BALANCE SHEETS  (unaudited)

(in thousands, except per share data)

 

 

 

3/31/2015

 

12/31/2014

 

Assets

 

 

 

 

 

Cash and due from banks

 

$

14,844

 

$

16,771

 

Federal funds sold

 

222

 

398

 

Cash and cash equivalents

 

15,066

 

17,169

 

Interest bearing time deposits

 

1,280

 

1,280

 

Securities available for sale

 

249,476

 

246,861

 

Trading Assets

 

5,409

 

5,370

 

Mortgage loans held for sale

 

940

 

776

 

Loans

 

538,644

 

538,305

 

Allowance for loan losses

 

(5,920

)

(6,012

)

Net loans

 

532,724

 

532,293

 

Federal Home Loan Bank stock

 

5,981

 

5,981

 

Real estate owned, net

 

4,219

 

4,603

 

Bank premises and equipment, net

 

16,343

 

16,479

 

Interest receivable

 

3,570

 

3,299

 

Mortgage servicing rights

 

1,227

 

1,209

 

Goodwill

 

13,117

 

13,117

 

Other intangible assets

 

146

 

177

 

Other assets

 

7,023

 

6,595

 

Total assets

 

$

856,521

 

$

855,209

 

 

 

 

 

 

 

Liabilities and Stockholders’ Equity

 

 

 

 

 

Deposits

 

 

 

 

 

Non-interest bearing

 

$

185,424

 

$

176,743

 

Time deposits, $250,000 and over

 

57,856

 

52,913

 

Other interest bearing

 

417,534

 

425,213

 

Total deposits

 

660,814

 

654,869

 

Repurchase agreements and other borrowings

 

12,121

 

12,457

 

Federal funds purchased

 

2,148

 

 

Short-term Federal Home Loan Bank advances

 

 

10,000

 

Long-term Federal Home Loan Bank advances

 

86,950

 

83,785

 

Subordinated debentures

 

7,217

 

7,217

 

Interest payable

 

602

 

642

 

Other liabilities

 

6,960

 

8,297

 

Total liabilities

 

776,812

 

777,267

 

 

 

 

 

 

 

Stockholders’ equity

 

 

 

 

 

Preferred stock, 300,000 shares authorized and unissued

 

 

 

Common stock, no par value; 10,000,000 shares authorized; 2,725,609 and 2,720,098 shares issued and outstanding on March 31, 2015 and December 31, 2014

 

12,693

 

12,662

 

Retained earnings

 

65,288

 

64,489

 

Accumulated other comprehensive income

 

1,728

 

791

 

Total stockholders’ equity

 

79,709

 

77,942

 

Total liabilities & stockholders’ equity

 

$

856,521

 

$

855,209

 

 

See Accompanying Notes

 

3



Table of Contents

 

KENTUCKY BANCSHARES, INC.

 

CONSOLIDATED STATEMENTS OF INCOME AND COMPREHENSIVE INCOME (LOSS) (unaudited)

(in thousands, except per share amounts)

 

 

 

Three Months Ending

 

 

 

3/31/2015

 

3/31/2014

 

INTEREST INCOME:

 

 

 

 

 

Loans, including fees

 

$

6,209

 

$

5,761

 

Securities

 

 

 

 

 

Taxable

 

733

 

675

 

Tax exempt

 

676

 

733

 

Trading assets

 

44

 

37

 

Other

 

69

 

76

 

Total interest income

 

7,731

 

7,282

 

INTEREST EXPENSE:

 

 

 

 

 

Deposits

 

486

 

539

 

Repurchase agreements and other borrowings

 

23

 

23

 

Federal Home Loan Bank advances

 

402

 

314

 

Subordinated debentures

 

57

 

57

 

Total interest expense

 

968

 

933

 

Net interest income

 

6,763

 

6,349

 

Provision for loan losses

 

300

 

100

 

Net interest income after provision

 

6,463

 

6,249

 

NON-INTEREST INCOME:

 

 

 

 

 

Service charges

 

904

 

1,011

 

Loan service fee income, net

 

53

 

29

 

Trust department income

 

277

 

222

 

Gain on sale of available for sale securities, net

 

8

 

188

 

Gain (loss) on trading assets

 

(5

)

71

 

Gain on sale of mortgage loans

 

327

 

157

 

Brokerage income

 

106

 

80

 

Debit card interchange income

 

541

 

479

 

Other

 

59

 

32

 

Total other income

 

2,270

 

2,269

 

NON-INTEREST EXPENSE:

 

 

 

 

 

Salaries and employee benefits

 

3,794

 

3,602

 

Occupancy expenses

 

932

 

848

 

Repossession expenses, net

 

45

 

(2

)

FDIC Insurance

 

156

 

128

 

Legal and professional fees

 

285

 

136

 

Data processing

 

367

 

337

 

Debit card expenses

 

256

 

234

 

Amortization

 

31

 

37

 

Advertising and marketing

 

213

 

209

 

Taxes other than payroll, property and income

 

230

 

225

 

Telephone

 

68

 

89

 

Postage

 

81

 

72

 

Loan fees

 

93

 

77

 

Other

 

666

 

462

 

Total other expenses

 

7,217

 

6,454

 

Income before taxes

 

1,516

 

2,064

 

Income taxes

 

1

 

293

 

Net income

 

$

1,515

 

$

1,771

 

Other Comprehensive Income, net of tax:

 

 

 

 

 

Change in Unrealized Gains on Securities

 

937

 

3,251

 

Comprehensive Income

 

$

2,452

 

$

5,022

 

Earnings per share

 

 

 

 

 

Basic

 

$

0.56

 

$

0.66

 

Diluted

 

0.56

 

0.66

 

Dividends per share

 

0.26

 

0.25

 

 

See Accompanying Notes

 

4



Table of Contents

 

KENTUCKY BANCSHARES, INC.

 

CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS’ EQUITY  (unaudited)

(in thousands, except share information)

 

 

 

 

 

 

 

 

 

Accumulated

 

 

 

 

 

 

 

 

 

 

 

Other

 

Total

 

 

 

—Common Stock(1)—

 

Retained

 

Comprehensive

 

Stockholders’

 

 

 

Shares

 

Amount

 

Earnings

 

Income/(Loss)

 

Equity

 

 

 

 

 

 

 

 

 

 

 

 

 

Balances, January 1, 2015

 

2,720,098

 

$

12,662

 

$

64,489

 

$

791

 

$

77,942

 

 

 

 

 

 

 

 

 

 

 

 

 

Common stock issued, net of forfeitures

 

5,850

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Stock based compensation expense

 

 

33

 

 

 

33

 

 

 

 

 

 

 

 

 

 

 

 

 

Common stock purchased and retired

 

(339

)

(2

)

(7

)

 

(9

)

 

 

 

 

 

 

 

 

 

 

 

 

Net change in unrealized gain (loss) on securities available for sale, net of tax and reclassifications

 

 

 

 

937

 

937

 

 

 

 

 

 

 

 

 

 

 

 

 

Net income

 

 

 

1,515

 

 

1,515

 

 

 

 

 

 

 

 

 

 

 

 

 

Dividends declared - $0.26 per share

 

 

 

(709

)

 

(709

)

 

 

 

 

 

 

 

 

 

 

 

 

Balances, March 31, 2015

 

2,725,609

 

$

12,693

 

$

65,288

 

$

1,728

 

$

79,709

 

 


(1)Common Stock has no par value; amount includes Additional Paid-in Capital

 

See Accompanying Notes

 

5



Table of Contents

 

KENTUCKY BANCSHARES, INC.

 

CONSOLIDATED STATEMENTS OF CASH FLOWS  (unaudited)

(in thousands)

 

 

 

Three Months Ending

 

 

 

3/31/2015

 

3/31/2014

 

Cash Flows From Operating Activities

 

 

 

 

 

Net Income

 

$

1,515

 

$

1,771

 

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

 

 

 

 

 

Depreciation and amortization

 

423

 

441

 

Securities amortization (accretion), net

 

240

 

150

 

Stock based compensation expense

 

33

 

27

 

Provision for loan losses

 

300

 

100

 

Securities available for sale gains, net

 

(8

)

(188

)

Net change in trading assets

 

(39

)

(5,108

)

Originations of loans held for sale

 

(8,988

)

(5,715

)

Proceeds from sale of loans

 

9,151

 

5,946

 

Losses (gains) on other real estate

 

39

 

(46

)

Gain on sale of mortgage loans

 

(327

)

(157

)

Write-downs of other real estate, net

 

26

 

 

Changes in:

 

 

 

 

 

Interest receivable

 

(271

)

134

 

Other assets

 

(745

)

1,694

 

Interest payable

 

(40

)

(27

)

Other liabilities

 

(1,869

)

(2,522

)

Net cash from operating activities

 

(560

)

(3,500

)

Cash Flows From Investing Activities

 

 

 

 

 

Purchases of securities available for sale

 

(11,797

)

(20,089

)

Proceeds from sales of securities

 

 

16,525

 

Proceeds from principal payments, sales, maturities and calls of securities

 

10,368

 

2,561

 

Net change in loans

 

(3,477

)

(5,423

)

Proceeds from redemption of Federal Home Loan Bank stock

 

 

750

 

Purchases of bank premises and equipment

 

(190

)

(316

)

Proceeds from the sale of other real estate

 

3,349

 

309

 

Net cash from investing activities

 

(1,747

)

(5,683

)

Cash Flows From Financing Activities:

 

 

 

 

 

Net change in deposits

 

5,945

 

10,604

 

Net change in repurchase agreements and other borrowings

 

1,812

 

(1,465

)

Short-term advances from Federal Home Loan Bank

 

 

10,000

 

Payment on short-term Federal Home Loan Bank advances

 

(10,000

)

(10,000

)

Long-term advances from Federal Home Loan Bank

 

4,682

 

1,635

 

Payments on long-term Federal Home Loan Bank advances

 

(1,517

)

(2,102

)

Purchase of common stock

 

(9

)

(91

)

Dividends paid

 

(709

)

(681

)

Net cash from financing activities

 

204

 

7,900

 

Net change in cash and cash equivalents

 

(2,103

)

(1,283

)

Cash and cash equivalents at beginning of period

 

17,169

 

23,160

 

Cash and cash equivalents at end of period

 

$

15,066

 

$

21,877

 

 

 

 

 

 

 

 

 

Supplemental disclosures of cash flow information

 

 

 

 

 

Cash paid during the year for:

 

 

 

 

 

Interest expense

 

$

1,008

 

$

960

 

Income taxes

 

 

 

Supplemental disclosures of non-cash investing activities

 

 

 

 

 

Real estate acquired through foreclosure

 

$

3,029

 

$

141

 

 

See Accompanying Notes

 

6



Table of Contents

 

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

 

1.              SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

 

The financial information presented as of any date other than December 31 has been prepared from the Company’s books and records without audit.  The accompanying consolidated financial statements have been prepared in accordance with the instructions to Form 10-Q and Rule 10-01 of Regulation S-X.  Certain financial information that is normally included in annual financial statements prepared in accordance with accounting principles generally accepted in the United States of America, but is not required for interim reporting purposes, has been condensed or omitted.  There have been no significant changes to the Company’s accounting and reporting policies as disclosed in the Company’s Annual Report on Form 10-K for the year ended December 31, 2014.  In the opinion of management, all adjustments, consisting of normal recurring adjustments, necessary for a fair presentation of such financial statements, have been included.  The results of operations for the interim periods are not necessarily indicative of the results to be expected for the full year.

 

For further information, refer to the consolidated financial statements and footnotes thereto included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2014.

 

Basis of Presentation:  The consolidated financial statements include the accounts of Kentucky Bancshares, Inc. (the “Company”, “we”, “our” or “us”), its wholly-owned subsidiaries, Kentucky Bank (the “Bank”) and KBI Insurance Company, Inc., and the Bank’s wholly-owned subsidiary, KB Special Assets Unit, LLC.  Intercompany transactions and balances have been eliminated in consolidation.

 

Nature of Operations:  The Bank operates under a state bank charter and provides full banking services, including trust services, to customers located in Bourbon, Clark, Elliott, Fayette, Harrison, Jessamine, Madison, Rowan, Scott, Woodford and adjoining counties in Kentucky.  Management continues to consider opportunities for branch expansion and will also consider acquisition opportunities that help advance its strategic objectives.  As a state bank, the Bank is subject to regulation by the Kentucky Department of Financial Institutions and the Federal Deposit Insurance Corporation (“FDIC”).  The Company, a bank holding company, is regulated by the Federal Reserve.  On July 9, 2014, a new subsidiary of the Company was incorporated under the name KBI Insurance Company, Inc.  KBI Insurance Company, Inc. is a subsidiary of Kentucky Bancshares, Inc. and is located in Las Vegas, Nevada.  It is a captive insurance subsidiary which provides various liability and property damage insurance policies for Kentucky Bancshares, Inc. and its related subsidiaries.  KBI Insurance Company, Inc. is regulated by the State of Nevada Division of Insurance.  Our transfer, registrar and dividend agent, Registrar and Transfer Company, was recently acquired by Computershare.  The migration to Computershare occurred October 31, 2014.

 

Estimates in the Financial Statements:  The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period.  Actual results could differ from those estimates and such differences could be material to the financial statements.

 

7



Table of Contents

 

Trading Assets:  The Company engages in trading activities for its own account.  Securities that are held principally for resale in the near term are recorded at fair value with changes in fair value included in earnings. Interest and dividends are included in net interest income.

 

Loss Contingencies:  Loss contingencies, including claims and legal actions arising in the ordinary course of business, are recorded as liabilities when the likelihood of loss is probable and an amount or range of loss can be reasonably estimated.

 

Pension Matter:  Kentucky Bancshares, Inc. (the “Company”) terminated the Kentucky Bancshares, Inc. Retirement Plan and Trust (the “Plan”) in a standard termination, with a termination date of December 31, 2008. Prior to such termination, the Pension Protection Act of 2006 (“PPA”) had amended Internal Revenue Code (“IRC”) Section 417(e)(3) in part by changing the definition of “applicable interest rate” in a manner that in most cases (when combined with other changes to IRC Section 417(e)(3)) would result in a decrease in the value of a participant’s or beneficiary’s plan benefits under pension plans such as the Company’s Plan with the new definition applicable (for most plans, including the Plan) to lump sums with annuity starting dates in or after the 2008 plan year. The Plan had determined in mid-2008 to comply with IRC Section 417(e)(3), as amended by PPA, by using the assumptions governing minimum lump sums, rather than by using the pre-PPA minimum lump sum assumptions, and operated the Plan in compliance with that decision. As permitted by the IRC, the Plan was amended on February 24, 2009 (after the termination of the Plan on December 31, 2008) to formalize that decision in accordance with Section 1107 of PPA.

 

The Internal Revenue Service issued a favorable determination as to the Plan termination in July 2010. Subsequent to Plan termination and distributions to Plan participants, the Plan was selected for audit by the PBGC. The PBGC asserted that the February, 2009 amendment to the Plan violated PBGC Regulation Section 4041.8(a) because the amendment served to lower benefits to Plan beneficiaries. The PBGC filed a Complaint in May 2013 in United States District Court (Eastern District of Kentucky) to require the Company to make additional distributions to Plan beneficiaries. On March 17, 2014, the United States District Court (Eastern District of Kentucky) issued an Opinion and Order entering judgment in favor of the PBGC and ruling that the Company must comply with the PBGC’s determination respecting the Plan. The Company appealed, but the District Court’s ruling was affirmed by the United States Court of Appeals for the Sixth Circuit on January 15, 2015.  The Company accrued approximately $1.6 million as of December 31, 2013 for this matter and made the necessary payments to the eligible individuals in March 2015.  Thus, no liability related to the pension termination existed as of March 31, 2015.  Moreover, the Company believes it has claims for contribution towards payment of this liability from professionals who assisted the Company in the termination of the Plan and had a receivable at March 31, 2015 on the balance sheet tied to a letter of credit established for the Company’s benefit for these fees.

 

Reclassifications:  Some items in the prior year financial statements were reclassified to conform to the current presentation.  Reclassifications had no effect on prior period net income or stockholders’ equity.

 

8



Table of Contents

 

Adoption of New Accounting Standards

 

In January 2014, FASB issued Accounting Standards Update 2014-04, Receivables—Troubled Debt Restructurings by Creditors (Subtopic 310-40): Reclassification of Residential Real Estate Collateralized Consumer Mortgage Loans upon Foreclosure (a consensus of the FASB Emerging Issues Task Force). The ASU clarifies when an insubstance repossession or foreclosure occurs and a creditor is considered to have received physical possession of real estate property collateralizing a consumer mortgage loan. Specifically, the new ASU requires a creditor to reclassify a collateralized consumer mortgage loan to real estate property upon obtaining legal title to the real estate collateral, or the borrower voluntarily conveying all interest in the real estate property to the lender to satisfy the loan through a deed in lieu of foreclosure or similar legal agreement. Additional disclosures are required detailing the amount of foreclosed residential real estate property held by the creditor and the recorded investment in consumer mortgages collateralized by real estate property that are in the process of foreclosure. The new guidance is effective for annual periods, and interim reporting periods within those annual periods, beginning after December 15, 2014. The adoption of this guidance did not have a material impact on the Company’s consolidated financial statements, but will result in additional disclosures.

 

In May 2014, FASB issued Accounting Standards Update 2014-09, Revenue from Contracts with Customers (Topic 606). The ASU creates a new topic, Topic 606, to provide guidance on revenue recognition for entities that enter into contracts with customers to transfer goods or services or enter into contracts for the transfer of nonfinancial assets. The core principle of the guidance is that an entity should recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. Additional disclosures are required to provide quantitative and qualitative information regarding the nature, amount, timing, and uncertainty of revenue and cash flows arising from contracts with customers. The new guidance is effective for annual reporting periods, and interim reporting periods within those annual periods, beginning after December 15, 2016. Early adoption is not permitted. Management is currently evaluating the impact of the adoption of this guidance on the Company’s financial statements.

 

9



Table of Contents

 

2.              SECURITIES

 

SECURITIES AVAILABLE FOR SALE

 

Period-end securities are as follows:

(in thousands)

 

 

 

 

 

Gross

 

Gross

 

 

 

 

 

Amortized

 

Unrealized

 

Unrealized

 

Fair

 

 

 

Cost

 

Gains

 

Losses

 

Value

 

Available for Sale

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

March 31, 2015

 

 

 

 

 

 

 

 

 

U.S. government agencies

 

$

59,270

 

$

37

 

$

(479

)

$

58,828

 

States and political subdivisions

 

90,228

 

3,074

 

(333

)

92,969

 

Mortgage-backed - residential

 

97,090

 

697

 

(406

)

97,381

 

Equity securities

 

270

 

28

 

 

298

 

Total

 

$

246,858

 

$

3,836

 

$

(1,218

)

$

249,476

 

 

 

 

 

 

 

 

 

 

 

December 31, 2014

 

 

 

 

 

 

 

 

 

U.S. government agencies

 

$

61,721

 

$

1

 

$

(1,136

)

$

60,586

 

States and political subdivisions

 

86,322

 

3,234

 

(275

)

89,281

 

Mortgage-backed - residential

 

97,349

 

267

 

(918

)

96,698

 

Equity securities

 

270

 

26

 

 

296

 

Total

 

$

245,662

 

$

3,528

 

$

(2,329

)

$

246,861

 

 

The amortized cost and fair value of securities at March 31, 2015 by contractual maturity are shown below.  Expected maturities will differ from contractual maturities because borrowers may have the right to call or prepay obligations with or without call or prepayment penalties.  Securities not due at a single maturity are shown separately.  Further discussion concerning Fair Value Measurements can be found in Note 8.

 

 

 

Amortized

 

Fair

 

(in thousands)

 

Cost

 

Value

 

Due in one year or less

 

$

40

 

$

41

 

Due after one year through five years

 

10,463

 

10,471

 

Due after five years through ten years

 

84,999

 

85,505

 

Due after ten years

 

53,996

 

55,780

 

 

 

149,498

 

151,797

 

Mortgage-backed - residential

 

97,090

 

97,381

 

Equity

 

270

 

298

 

Total

 

$

246,858

 

$

249,476

 

 

Proceeds from sales of securities during the first three months of 2015 and 2014 were $0 and $16.5 million.  Gross gains of $0 and $309 thousand and gross losses of $0 and $121 thousand were realized on those sales, respectively.  The tax provision related to these realized net gains was $0 and $64 thousand, respectively.

 

Securities with unrealized losses March 31, 2015 and at December 31, 2014 not recognized in income are as follows:

 

March 31, 2015

 

 

 

Less than 12 Months

 

12 Months or More

 

Total

 

 

 

Fair

 

Unrealized

 

Fair

 

Unrealized

 

Fair

 

Unrealized

 

Description of Securities

 

Value

 

Loss

 

Value

 

Loss

 

Value

 

Loss

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

U.S. Government agencies

 

$

11,592

 

$

(164

)

$

35,114

 

$

(315

)

$

46,706

 

$

(479

)

States and municipals

 

5,954

 

(65

)

9,413

 

(268

)

15,367

 

(333

)

Mortgage-backed - residential

 

30,748

 

(202

)

15,666

 

(204

)

46,414

 

(406

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total temporarily impaired

 

$

48,294

 

$

(431

)

$

60,193

 

$

(787

)

$

108,487

 

$

(1,218

)

 

10



Table of Contents

 

December 31, 2014

 

 

 

Less than 12 Months

 

12 Months or More

 

Total

 

 

 

Fair

 

Unrealized

 

Fair

 

Unrealized

 

Fair

 

Unrealized

 

Description of Securities

 

Value

 

Loss

 

Value

 

Loss

 

Value

 

Loss

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

U.S. Government agencies

 

$

12,528

 

$

(176

)

$

45,066

 

$

(960

)

$

57,594

 

$

(1,136

)

States and municipals

 

5,011

 

(27

)

9,738

 

(248

)

14,749

 

(275

)

Mortgage-backed - residential

 

46,685

 

(572

)

18,747

 

(346

)

65,432

 

(918

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total temporarily impaired

 

$

64,224

 

$

(775

)

$

73,551

 

$

(1,554

)

$

137,775

 

$

(2,329

)

 

The Company evaluates securities for other than temporary impairment at least on a quarterly basis, and more frequently when economic or market concerns warrant such evaluation.  In analyzing an issuer’s financial condition, we may consider many factors including, (1) whether the securities are issued by the federal government or its agencies, (2) whether downgrades by bond rating agencies have occurred, (3) the results of reviews of the issuer’s financial condition and near-term prospects, (4) the length of time and the extent to which the fair value has been less than cost, and (5) whether we intend to sell the investment security or more likely than not will be required to sell the investment security before its anticipated recovery.

 

Unrealized losses on securities included in the tables above have not been recognized into income because (1) all rated securities are investment grade and are of high credit quality, (2) management does not intend to sell and it is more likely than not that management would not be required to sell the securities prior to their anticipated recovery, (3) management believes the decline in fair value is largely due to changes in interest rates and (4) management believes the declines in fair value are temporary.  The Company believes the fair value is expected to recover as the securities approach maturity.

 

TRADING ASSETS

 

The trading assets of $5.4 million are primarily comprised of municipal securities which are held for a minimal period of time.

 

3. LOANS

 

Loans at period-end are as follows:

(in thousands)

 

 

 

3/31/15

 

12/31/14

 

 

 

 

 

 

 

Commercial

 

$

44,658

 

$

47,185

 

Real estate construction

 

17,208

 

16,938

 

Real estate mortgage:

 

 

 

 

 

1-4 family residential

 

193,309

 

189,458

 

Multi-family residential

 

33,981

 

34,415

 

Non-farm & non-residential

 

166,568

 

161,822

 

Agricultural

 

66,293

 

71,345

 

Consumer

 

16,508

 

16,863

 

Other

 

119

 

279

 

Total

 

$

538,644

 

$

538,305

 

 

11



Table of Contents

 

Activity in the allowance for loan losses for the three month periods indicated was as follows:

 

 

 

Three Months Ended March 31, 2015

 

 

 

(in thousands)

 

 

 

Beginning

 

 

 

 

 

 

 

Ending

 

 

 

Balance

 

Charge-offs

 

Recoveries 

 

Provision

 

Balance

 

 

 

 

 

 

 

 

 

 

 

 

 

Commercial

 

$

339

 

$

25

 

$

 

$

26

 

$

340

 

Real estate Construction

 

446

 

 

2

 

(10

)

438

 

Real estate mortgage:

 

 

 

 

 

 

 

 

 

 

 

1-4 family residential

 

1,829

 

32

 

3

 

25

 

1,825

 

Multi-family residential

 

495

 

 

 

4

 

499

 

Non-farm & non-residential

 

813

 

 

 

217

 

1,030

 

Agricultural

 

998

 

242

 

1

 

(34

)

723

 

Consumer

 

520

 

81

 

15

 

43

 

497

 

Other

 

32

 

242

 

209

 

35

 

34

 

Unallocated

 

540

 

 

 

(6

)

534

 

 

 

$

6,012

 

$

622

 

$

230

 

$

300

 

$

5,920

 

 

 

 

Three Months Ended March 31, 2014

 

 

 

(in thousands)

 

 

 

Beginning

 

 

 

 

 

 

 

Ending

 

 

 

Balance

 

Charge-offs

 

Recoveries

 

Provision

 

Balance

 

 

 

 

 

 

 

 

 

 

 

 

 

Commercial

 

$

230

 

$

200

 

$

 

$

178

 

$

208

 

Real estate Construction

 

358

 

 

4

 

(33

)

329

 

Real estate mortgage:

 

 

 

 

 

 

 

 

 

 

 

1-4 family residential

 

2,169

 

63

 

12

 

(7

)

2,111

 

Multi-family residential

 

427

 

 

 

(26

)

401

 

Non-farm & non-residential

 

564

 

 

367

 

(1

)

930

 

Agricultural

 

578

 

 

24

 

(49

)

553

 

Consumer

 

548

 

77

 

18

 

61

 

550

 

Other

 

51

 

97

 

87

 

(30

)

11

 

Unallocated

 

516

 

 

 

7

 

523

 

 

 

$

5,441

 

$

437

 

$

512

 

$

100

 

$

5,616

 

 

12



Table of Contents

 

The following tables present the balance in the allowance for loan losses and the recorded investment (excluding accrued interest receivable amounting to $2.2 million as of March 31, 2015 and $2.0 million at December 31, 2014) in loans by portfolio segment and based on impairment method as of March 31, 2015 and December 31, 2014:

 

As of March 31, 2015

(in thousands)

 

 

 

Individually

 

Collectively

 

 

 

 

 

Evaluated for

 

Evaluated for

 

 

 

 

 

Impairment

 

Impairment

 

Total

 

Allowance for Loan Losses:

 

 

 

 

 

 

 

Commercial

 

$

 

$

340

 

$

340

 

Real estate construction

 

 

438

 

438

 

Real estate mortgage

 

 

 

 

 

 

 

1-4 family residential

 

52

 

1,773

 

1,825

 

Multi-family residential

 

95

 

404

 

499

 

Non-farm & non-residential

 

258

 

772

 

1,030

 

Agricultural

 

394

 

329

 

723

 

Consumer

 

 

497

 

497

 

Other

 

 

34

 

34

 

Unallocated

 

 

534

 

534

 

 

 

$

799

 

$

5,121

 

$

5,920

 

Loans:

 

 

 

 

 

 

 

Commercial

 

$

 

$

44,658

 

$

44,658

 

Real estate construction

 

 

17,208

 

17,208

 

Real estate mortgage:

 

 

 

 

 

 

 

1-4 family residential

 

2,085

 

191,224

 

193,309

 

Multi-family residential

 

95

 

33,886

 

33,981

 

Non-farm & non-residential

 

2,940

 

163,628

 

166,568

 

Agricultural

 

4,428

 

61,865

 

66,293

 

Consumer

 

 

16,508

 

16,508

 

Other

 

 

119

 

119

 

 

 

$

9,548

 

$

529,096

 

$

538,644

 

 

As of December 31, 2014

(in thousands)

 

 

 

Individually

 

Collectively

 

 

 

 

 

Evaluated for

 

Evaluated for

 

 

 

 

 

Impairment

 

Impairment

 

Total

 

Allowance for Loan Losses:

 

 

 

 

 

 

 

Commercial

 

$

 

$

339

 

$

339

 

Real estate construction

 

 

446

 

446

 

Real estate mortgage:

 

 

 

 

 

 

 

1-4 family residential

 

56

 

1,773

 

1,829

 

Multi-family residential

 

94

 

401

 

495

 

Non-farm & non-residential

 

136

 

677

 

813

 

Agricultural

 

712

 

286

 

998

 

Consumer

 

 

520

 

520

 

Other

 

 

32

 

32

 

Unallocated

 

 

540

 

540

 

 

 

$

998

 

$

5,014

 

$

6,012

 

Loans:

 

 

 

 

 

 

 

Commercial

 

$

 

$

47,185

 

$

47,185

 

Real estate construction

 

 

16,938

 

16,938

 

Real estate mortgage:

 

 

 

 

 

 

 

1-4 family residential

 

2,098

 

187,360

 

189,458

 

Multi-family residential

 

264

 

34,151

 

34,415

 

Non-farm & non-residential

 

2,958

 

158,864

 

161,822

 

Agricultural

 

8,479

 

62,866

 

71,345

 

Consumer

 

 

16,863

 

16,863

 

Other

 

 

279

 

279

 

 

 

$

13,799

 

$

524,506

 

$

538,305

 

 

13



Table of Contents

 

The following table presents loans individually evaluated for impairment by class of loans as of and for the three months ended March 31, 2015 (in thousands):

 

 

 

Unpaid

 

 

 

Allowance for

 

Average

 

Interest

 

Cash Basis

 

 

 

Principal

 

Recorded

 

Loan Losses

 

Recorded

 

Income

 

Interest

 

 

 

Balance

 

Investment

 

Allocated

 

Investment

 

Recognized

 

Recognized

 

With no related allowance recorded:

 

 

 

 

 

 

 

 

 

 

 

 

 

Commercial

 

$

 

$

 

$

 

$

 

$

 

$

 

Real estate construction

 

 

 

 

 

 

 

Real estate mortgage:

 

 

 

 

 

 

 

 

 

 

 

 

 

1-4 family residential

 

1,608

 

1,608

 

 

1,613

 

13

 

13

 

Multi-family residential

 

 

 

 

 

 

 

Non-farm & non-residential

 

 

 

 

 

 

 

Agricultural

 

438

 

438

 

 

440

 

10

 

10

 

Consumer

 

 

 

 

 

 

 

Other

 

 

 

 

 

 

 

With an allowance recorded:

 

 

 

 

 

 

 

 

 

 

 

 

 

Commercial

 

 

 

 

 

 

 

Real estate construction

 

 

 

 

 

 

 

Real estate mortgage:

 

 

 

 

 

 

 

 

 

 

 

 

 

1-4 family residential

 

477

 

477

 

52

 

420

 

5

 

5

 

Multi-family residential

 

95

 

95

 

95

 

179

 

 

 

Non-farm & non-residential

 

2,940

 

2,940

 

258

 

2,949

 

30

 

30

 

Agricultural

 

3,990

 

3,990

 

394

 

5,793

 

 

 

Consumer

 

 

 

 

 

 

 

Other

 

 

 

 

 

 

 

 

Total

 

$

9,548

 

$

9,548

 

$

799

 

$

11,394

 

$

58

 

$

58

 

 

The recorded investment in loans excludes accrued interest receivable and loan origination fees, net due to immateriality.

 

14



Table of Contents

 

The following table presents loans individually evaluated for impairment by class of loans as of March 31, 2014 (in thousands):

 

 

 

 

 

Year to Date

 

Year to Date

 

 

 

Average

 

Interest

 

Cash Basis

 

 

 

Recorded

 

Income

 

Interest

 

 

 

Investment

 

Recognized

 

Recognized

 

With no related allowance recorded:

 

 

 

 

 

 

 

Commercial

 

$

 

$

 

$

 

Real estate construction

 

 

 

 

Real estate mortgage:

 

 

 

 

 

 

 

1-4 family residential

 

396

 

 

 

Multi-family residential

 

 

 

 

Non-farm & non-residential

 

401

 

 

 

 

Agricultural

 

1,413

 

4

 

4

 

Consumer

 

 

 

 

Other

 

 

 

 

With an allowance recorded:

 

 

 

 

 

 

 

Commercial

 

 

 

 

Real estate construction

 

 

 

 

 

Real estate mortgage:

 

 

 

 

 

 

 

1-4 family residential

 

1,470

 

6

 

6

 

Multi-family residential

 

275

 

4

 

4

 

Non-farm & non-residential

 

2,541

 

25

 

25

 

Agricultural

 

4,801

 

 

 

Consumer

 

 

 

 

Other

 

 

 

 

 

Total

 

$

11,297

 

$

39

 

$

39

 

 

The recorded investment in loans excludes accrued interest receivable and loan origination fees, net due to immateriality.

 

15



Table of Contents

 

The following table presents loans individually evaluated for impairment by class of loans as of and for the year ended December 31, 2014 (in thousands):

 

 

 

Unpaid

 

 

 

Allowance for

 

Average

 

Interest

 

Cash Basis

 

 

 

Principal

 

Recorded

 

Loan Losses

 

Recorded

 

Income

 

Interest

 

 

 

Balance

 

Investment

 

Allocated

 

Investment

 

Recognized

 

Recognized

 

With no related allowance recorded:

 

 

 

 

 

 

 

 

 

 

 

 

 

Commercial

 

$

 

$

 

$

 

$

 

$

 

$

 

Real estate construction

 

 

 

 

 

 

 

Real estate mortgage:

 

 

 

 

 

 

 

 

 

 

 

 

 

1-4 family residential

 

1,618

 

1,618

 

 

1,147

 

25

 

25

 

Multi-family residential

 

 

 

 

 

 

 

Non-farm & non-residential

 

 

 

 

552

 

 

 

Agricultural

 

442

 

442

 

 

2,696

 

29

 

29

 

Consumer

 

 

 

 

 

 

 

Other

 

 

 

 

 

 

 

With an allowance recorded:

 

 

 

 

 

 

 

 

 

 

 

 

 

Commercial

 

 

 

 

 

 

 

Real estate construction

 

 

 

 

 

 

 

Real estate mortgage

 

 

 

 

 

 

 

 

 

 

 

 

 

1-4 family residential

 

480

 

480

 

56

 

990

 

18

 

18

 

Multi-family residential

 

264

 

264

 

94

 

284

 

5

 

5

 

Non-farm & non-residential

 

2,958

 

2,958

 

136

 

3,173

 

115

 

115

 

Agricultural

 

8,037

 

8,037

 

712

 

5,341

 

116

 

116

 

Consumer

 

 

 

 

 

 

 

Other

 

 

 

 

 

 

 

 

Total

 

$

13,799

 

$

13,799

 

$

998

 

$

14,183

 

$

308

 

$

308

 

 

The recorded investment in loans excludes accrued interest receivable and loan origination fees, net due to immateriality.

 

16



Table of Contents

 

The following tables present the recorded investment in nonaccrual, loans past due over 90 days still on accrual and accruing troubled debt restructurings by class of loans as of March 31, 2015 and December 31, 2014:

 

As of March 31, 2015

(in thousands)

 

 

 

 

 

Loans Past Due

 

 

 

 

 

 

 

Over 90 Days

 

Accruing

 

 

 

 

 

Still

 

Troubled Debt

 

 

 

Nonaccrual

 

Accruing

 

Restructurings

 

Commercial

 

$

 

$

 

$

 

Real estate construction

 

140

 

 

 

Real estate mortgage:

 

 

 

 

 

 

 

1-4 family residential

 

1,301

 

158

 

477

 

Multi-family residential

 

225

 

 

 

Non-farm & non-residential

 

380

 

 

1,816

 

Agricultural

 

 

232

 

3,829

 

Consumer

 

4

 

46

 

 

Total

 

$

2,050

 

$

436

 

$

6,122

 

 

As of December 31, 2014

(in thousands)

 

 

 

 

 

Loans Past Due

 

 

 

 

 

 

 

Over 90 Days

 

Accruing

 

 

 

 

 

Still

 

Troubled Debt

 

 

 

Nonaccrual

 

Accruing

 

Restructurings

 

Commercial

 

$

25

 

$

 

$

 

Real estate construction

 

142

 

 

 

Real estate mortgage:

 

 

 

 

 

 

 

1-4 family residential

 

1,390

 

23

 

480

 

Multi-family residential

 

264

 

 

 

Non-farm & non-residential

 

380

 

 

1,829

 

Agricultural

 

4,371

 

 

3,829

 

Consumer

 

5

 

1

 

 

Total