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EX-32.2 - EXHIBIT 32.2 - Carroll Bancorp, Inc.ex32-2.htm
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EX-31.2 - EXHIBIT 31.2 - Carroll Bancorp, Inc.ex31-2.htm
EX-31.1 - EXHIBIT 31.1 - Carroll Bancorp, Inc.ex31-1.htm

United States

Securities and Exchange Commission

Washington, D.C. 20549

 

FORM 10-Q

  QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE

SECURITIES EXCHANGE ACT OF 1934

 

For the quarterly period ended September 30, 2016

or

  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     000-54422

_______________ 

CARROLL BANCORP, INC.

(Exact name of registrant as specified in its charter)

 MARYLAND

 

27-5463184

(State or other jurisdiction
of incorporation or organization)

 

(IRS Employer
Identification No.)

 

 1321 Liberty Road, Sykesville, Maryland 21784

(Address of principal executive offices) (Zip Code)

 

(410) 795-1900

(Registrant’s telephone number, including area code)

 

(Former name, former address and former fiscal year, if changed since last report)

 

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 ☒          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 (§223.405 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 ☒          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 ☐
   
Non-accelerated filer (Do not check if a smaller reporting company) 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 ☐          No ☒

 

Indicate the number shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date: 965,218 shares of common stock outstanding at November 10, 2016.

 

 

 

 

CARROLL BANCORP, INC.

Form 10-Q

Table of Contents

 

  Page
PART I - FINANCIAL INFORMATION  
   
Item 1.       Financial Statements:  
Consolidated Statements of Financial Condition as of September 30, 2016 (unaudited) and December 31, 2015 (audited) 1
Consolidated Statements of Operations for the Three and Nine Months Ended September 30, 2016 and 2015 (unaudited)  2
Consolidated Statements of Comprehensive Income for the Three and Nine Months Ended September 30, 2016 and 2015 (unaudited)  3
Consolidated Statements of Changes in Stockholders’ Equity for the Nine Months Ended September 30, 2016 and 2015 (unaudited) 4
Consolidated Statements of Cash Flows for the Nine Months Ended September 30, 2016 and 2015 (unaudited)  5
Notes to Consolidated Financial Statements (unaudited)   6
Item 2.       Management’s Discussion and Analysis of Financial Condition and Results of Operations  29

Item 3.      Quantitative and Qualitative Disclosures about Market Risk  

40
Item 4.      Controls and Procedures 40
   
PART II - OTHER INFORMATION  
   
Item 1.      Legal Proceedings  41
Item 1A.   Risk Factors   41
Item 2.      Unregistered Sales of Equity Securities and Use of Proceeds  41
Item 3.      Defaults Upon Senior Securities 41
Item 4.      Mine Safety Disclosures 41
Item 5.      Other Information 41
Item 6.      Exhibits 41
   
SIGNATURES  42

 

 

 

i

 

 

PART I – FINANCIAL INFORMATION

 

Item 1.         Financial Statements

 

Carroll Bancorp, Inc. and Subsidiary

Consolidated Statements of Financial Condition

 

   

September 30,

   

December 31,

 
   

2016

   

2015

 
   

(unaudited)

   

(audited)

 

Assets:

               

Cash and due from banks

  $ 1,287,139     $ 1,583,914  

Interest-bearing deposits with depository institutions

    18,347,957       6,623,853  

Cash and cash equivalents

    19,635,096       8,207,767  

Certificates of deposit with depository institutions

    2,450,165       2,450,248  

Securities available for sale, at fair value

    4,127,674       4,812,384  

Securities held to maturity (fair value September 30, 2016 $3,039,429 and December 31, 2015 $2,011,900)

    2,978,315       2,005,775  

Loans, net of allowance for loan losses - September 30, 2016 $959,000 and December 31, 2015 $901,000

    130,489,056       128,433,411  

Accrued interest receivable

    404,978       403,535  

Other equity securities, at cost

    816,096       869,296  

Bank-owned life insurance

    2,149,663       2,107,770  

Premises and equipment, net

    1,406,198       1,303,648  

Foreclosed assets

    146,410       199,374  

Other assets

    548,690       544,059  

Total assets

  $ 165,152,341     $ 151,337,267  
                 
                 

Liabilities:

               

Deposits

               

Noninterest-bearing

  $ 8,832,647     $ 8,718,993  

Interest-bearing

    127,061,474       113,382,169  

Total deposits

    135,894,121       122,101,162  

Federal Home Loan Bank Advances

    12,500,000       12,500,000  

Other liabilities

    461,117       442,935  

Total liabilities

    148,855,238       135,044,097  
                 

Stockholders' Equity:

               

Preferred Stock (par value $0.01); authorized 1,000,000 shares; no shares issued and outstanding

    -       -  

Common Stock (par value $0.01); authorized 9,000,000 shares; issued and outstanding 965,218 shares at September 30, 2016 and 978,279 shares at December 31, 2015

    9,652       9,783  

Additional paid-in capital

    12,602,050       12,799,995  

Unallocated ESOP shares

    (261,088 )     (261,088 )

Unearned RSP shares

    (129,032 )     (144,599 )

Retained earnings

    4,051,558       3,886,581  

Accumulated other comprehensive income

    23,963       2,498  

Total stockholders' equity

    16,297,103       16,293,170  

Total liabilities and stockholders' equity

  $ 165,152,341     $ 151,337,267  

 

 

The notes to the consolidated financial statements are an integral part of these statements.

 

1

 

 

Carroll Bancorp, Inc. and Subsidiary

Consolidated Statements of Operations

(unaudited)

 

   

For the Three Months Ended

September 30,

   

For the Nine Months Ended

September 30,

 
   

2016

   

2015

   

2016

   

2015

 

Interest income:

                               

Loans

  $ 1,383,855     $ 1,277,344     $ 4,165,048     $ 3,574,693  

Securities available for sale

    20,162       23,751       65,437       79,427  

Securities held to maturity

    28,792       13,209       80,745       39,593  

Certificates of deposit

    10,739       10,456       31,992       31,534  

Interest-earning deposits

    27,250       8,558       70,916       25,629  

Total interest income

    1,470,798       1,333,318       4,414,138       3,750,876  

Interest expense:

                               

Deposits

    221,361       126,823       591,404       376,492  

Borrowings

    46,703       34,493       140,510       95,953  

Total interest expense

    268,064       161,316       731,914       472,445  

Net interest income

    1,202,734       1,172,002       3,682,224       3,278,431  

Provision for loan losses

    2,156       35,165       39,306       93,317  

Net interest income after provision for loan losses

    1,200,578       1,136,837       3,642,918       3,185,114  

Non-interest income:

                               

Gain (loss) on sale of securities

    -       1,136       (1,061 )     1,036  

Gain on loans held for sale

    12,586       3,063       58,676       5,250  

OREO write down

    (55 )     -       (30,519 )     -  

Increase in cash surrender value - life insurance

    13,863       14,204       41,893       41,975  

Customer service fees

    28,637       23,240       78,422       63,652  

Loan fee income

    6,772       7,182       26,971       20,001  

Other income

    5,170       2,663       14,214       10,917  

Total non-interest income

    66,973       51,488       188,596       142,831  

Non-interest expense:

                               

Salaries and employee benefits

    694,102       555,580       2,004,805       1,630,713  

Premises and equipment

    138,576       111,576       404,317       292,363  

Data processing

    123,562       115,224       373,759       328,608  

Professional fees

    66,954       91,231       256,447       249,474  

FDIC insurance

    25,993       17,094       80,639       51,260  

Directors' fees

    38,025       55,000       133,150       160,700  

Corporate insurance

    12,025       10,810       36,080       31,330  

Printing and office supplies

    12,749       13,369       35,018       30,804  

Other operating expenses

    101,569       81,524       280,195       217,154  

Total non-interest expenses

    1,213,555       1,051,408       3,604,410       2,992,406  

Income before income tax expense

    53,996       136,917       227,104       335,539  

Income tax expense

    11,847       55,957       62,127       124,244  

Net income

  $ 42,149     $ 80,960     $ 164,977     $ 211,295  
                                 

Basic earnings per share

  $ 0.05     $ 0.09     $ 0.18     $ 0.24  

Diluted earnings per share

  $ 0.04     $ 0.08     $ 0.17     $ 0.23  

Basic weighted average shares outstanding

    931,974       938,982       935,586       894,969  

Diluted weighted average shares outstanding

    949,527       961,152       954,039       913,845  

 

 

The notes to the consolidated financial statements are an integral part of these statements.

 

2

 

 

Carroll Bancorp, Inc. and Subsidiary

Consolidated Statements of Comprehensive Income

(unaudited)

 

 

   

For the Three Months Ended September 30,

   

For the Nine Months Ended September 30,

 
   

2016

   

2015

   

2016

   

2015

 
                                 

Net income

  $ 42,149     $ 80,960     $ 164,977     $ 211,295  
                                 

Other comprehensive (loss) income before income tax:

                               

Securities available for sale:

                               

Net unrealized holding (losses) gains arising during the period

    (22,908 )     25,373       34,715       9,191  

Less reclassification adjustment for gain (loss) on the sale of securities available for sale included in net income

    -       1,136       (1,061 )     1,036  

Other comprehensive (loss) income before income tax

    (22,908 )     24,237       35,776       8,155  

Income tax effect

    (9,163 )     9,695       14,311       3,262  

Other comprehensive (loss) income, net of tax

    (13,745 )     14,542       21,465       4,893  

Total comprehensive income

  $ 28,404     $ 95,502     $ 186,442     $ 216,188  

 

 

The notes to the consolidated financial statements are an integral part of these statements.

 

3

 

 

Carroll Bancorp, Inc. and Subsidiary

Consolidated Statements of Changes in Stockholders’ Equity

For the Nine Months Ended September 30, 2016 and 2015

(unaudited)

 

                                           

Accumulated

         
           

Additional

   

Unallocated

   

Unallocated

           

Other

         
   

Common

   

Paid-in

   

ESOP

   

RSP

   

Retained

   

Comprehensive

         
   

Stock

   

Capital

   

Shares

   

Shares

   

Earnings

   

Income

   

Total

 
                                                         

Balances at January 1, 2016

  $ 9,783     $ 12,799,995     $ (261,088 )   $ (144,599 )   $ 3,886,581     $ 2,498     $ 16,293,170  

Net income

                                    164,977               164,977  

Other comprehensive income

                                            21,465       21,465  

RSP compensation

            35,844                                       35,844  

Restricted stock vesting

            (15,567 )             15,567                       -  

Warrants exercised

    19       25,828                                       25,847  

Stock repurchase

    (150 )     (244,050 )                                     (244,200 )

Balances at September 30, 2016

  $ 9,652     $ 12,602,050     $ (261,088 )   $ (129,032 )   $ 4,051,558     $ 23,963     $ 16,297,103  
                                                         

Balances at January 1, 2015

  $ 4,884     $ 4,873,447     $ (285,447 )   $ (170,217 )   $ 6,317,654     $ 10,176     $ 10,750,497  

Net income

                                    211,295               211,295  

Other comprehensive income

                                            4,893       4,893  

RSP compensation

            34,367                                       34,367  

Private placement offering:

                                                       

Issuance of 310,848 shares of common stock net of offering costs

    3,108       4,962,721                                       4,965,829  

Restricted stock vesting

            (2,993 )             2,993                       -  

Stock dividend:

                                                       

Issuance of 159,898 shares of common stock

    1,599       2,700,676                       (2,702,275 )             -  

Warrant exercises

    279       370,895                                       371,174  

Stock Repurchase

    (82 )     (133,381 )                                     (133,463 )

Balances at September 30, 2015

  $ 9,788     $ 12,805,732     $ (285,447 )   $ (167,224 )   $ 3,826,674     $ 15,069     $ 16,204,592  

 

 

The notes to the consolidated financial statements are an integral part of these statements.

 

4

 

 

Carroll Bancorp, Inc. and Subsidiary

Consolidated Statements of Cash Flows

(unaudited)

 

   

For the Nine Months Ended September 30,

 
   

2016

   

2015

 

Cash flows from operating activities:

               

Net income

  $ 164,977     $ 211,295  

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

               

Loss (gain) on sale of securities available for sale

    1,061       (1,036 )

Gain on sale of loans held for sale

    (58,676 )     (5,250 )

Origination of loans held for sale

    (2,422,500 )     (525,000 )

Proceeds from sale of loans held for sale

    2,481,176       530,250  

Amortization and accretion of securities, net

    42,673       96,352  

Amortization of deferred loan costs, net of origination fees

    180,681       21,566  

Provision for loan losses

    39,306       93,317  

Provision for loss on real estate acquired through foreclosure

    30,519       -  

Depreciation of premises and equipment

    141,092       115,975  

Increase in cash surrender value of bank-owned life insurance

    (41,893 )     (41,975 )

ESOP compensation expense

    22,500       19,400  

RSP compensation expense

    35,844       34,367  

Increase in deferred tax assets

    (12,180 )     (37,982 )

Increase in accrued interest receivable

    (1,443 )     (36,841 )

(Increase) decrease in other assets

    (6,761 )     13,713  

(Decrease) increase in other liabilities

    (4,317 )     52,492  

Net cash provided by operating activities

    592,059       540,643  

Cash flows from investing activities:

               

Purchase of securities held to maturity

    (978,214 )     -  

Proceeds from sale or redemption of securities available for sale

    15,000       3,174,603  

Principal collected on securities available for sale

    667,508       1,180,409  

Maturing of certificate of deposit investments

    -       200,000  

Increase in loans

    (2,275,634 )     (21,059,618 )

Purchase of premises and equipment

    (243,642 )     (160,267 )

Proceeds from the sale of real estate acquired through foreclosure

    22,446       -  

Purchase of other equity securities

    (286,800 )     (327,400 )

Redemption of other equity securities

    340,000       -  

Net cash used in investing activities

    (2,739,336 )     (16,992,273 )

Cash flows from financing activities:

               

Increase in deposits

    13,792,959       8,290,578  

Proceeds from FHLB advances

    8,000,000       23,500,000  

Repayment of FHLB advances

    (8,000,000 )     (17,000,000 )

Warrant exercise

    25,847       371,174  

Stock repurchase

    (244,200 )     (133,463 )

Proceeds from private placement offering

    -       4,965,829  

Net cash provided by financing activities

    13,574,606       19,994,118  

Net increase in cash and cash equivalents

    11,427,329       3,542,488  

Cash and cash equivalents, beginning balance

    8,207,767       6,909,391  

Cash and cash equivalents, ending balance

  $ 19,635,096     $ 10,451,879  
                 

Supplemental disclosure of cash flow information:

               

Interest paid

  $ 650,014     $ 469,642  

Income tax paid

  $ 171,946     $ 196,936  

 

 

The notes to the consolidated financial statements are an integral part of these statements.

 

 

5

 

 

CARROLL BANCORP, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(unaudited)

 

Note 1.          Summary of Significant Accounting Policies

 

 

Organization and Nature of Operations

 

Carroll Bancorp, Inc. a Maryland corporation (the “Company”) was incorporated on February 18, 2011, to serve as the holding company for Carroll Community Bank (the “Bank”), a state chartered commercial bank. On October 12, 2011, in accordance with a plan of conversion adopted by its Board of Directors and approved by its members, the Bank converted from a Maryland chartered mutual savings bank to a state chartered commercial bank. The conversion was accomplished through formation of the Company to serve as the holding company of the Bank. The Company’s common stock is quoted on the OTC Pink marketplace of the OTC Markets Group under the symbol “CROL”.

 

In accordance with applicable regulations at the time of the conversion from a mutual holding company to a stock holding company, the Bank substantially restricted its retained earnings by establishing a liquidation account. The liquidation account is maintained for the benefit of eligible account holders who keep their accounts at the Bank after conversion. The liquidation account is reduced annually to the extent that eligible account holders have reduced their qualifying deposits. Subsequent increases will not restore an eligible account holder’s interest in the liquidation account. In the event of a complete liquidation of the Bank, and only in such event, each account holder will be entitled to receive a distribution from the liquidation account in an amount proportionate to the adjusted qualifying account balances then held. The Bank may not pay dividends if those dividends would reduce equity capital below the required liquidation account amount.

 

The Bank is headquartered in Sykesville, Maryland and is a community-oriented financial institution providing financial services to individuals, families and businesses through three banking offices. The Bank is subject to the regulation, examination and supervision by the State of Maryland Department of Licensing and Regulation and the Federal Deposit Insurance Corporation (“FDIC”), our deposit insurer. Its primary deposits are certificate of deposit, savings and demand accounts and its primary lending products are residential and commercial real estate loans.

 

Principles of Consolidation

 

The consolidated financial statements include the accounts of the Company and its wholly owned subsidiary, the Bank. All significant intercompany balances and transactions between the Company and the Bank have been eliminated.

 

Use of Estimates

 

The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America (“GAAP”) 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 consolidated financial statements and the reported amounts of revenue and expenses during the reported period. Actual results could differ from those estimates.

 

Material estimates that are particularly susceptible to significant change relate to the determination of the allowance for losses on loans and the valuation of real estate acquired in connection with foreclosure or in satisfaction of loans. In connection with the determination of the allowance for losses on loans and foreclosed real estate, management obtains independent appraisals for significant properties.

 

6

 

 

Accounting Standards Pending Adoption

 

In May 2014, the Financial Accounting Standards Board (the “FASB”) issued ASU No. 2014-09, Revenue from Contracts with Customers. ASU 2014-09 provides accounting guidance for all revenue arising from contracts with customers and affects all entities that enter into contracts to provide goods or services to customers.  The guidance also provides a model for the measurement and recognition of gains and losses on the sale of certain nonfinancial assets, such as property and equipment, including real estate.  This standard may affect an entity’s financial statements, business processes and internal control over financial reporting.  The guidance is effective for the first interim or annual period beginning after December 15, 2017.  The guidance must be adopted using either a full retrospective approach for all periods presented in the period of adoption or a modified retrospective approach.  The Company is currently evaluating the provisions of ASU No. 2014-09 and will be closely monitoring developments and additional guidance to determine the potential impact the new standard will have on the Company’s financial statements.  

 

In January 2016, the FASB issued ASU No. 2016-01, Recognition and Measurement of Financial Assets and Financial Liabilities. ASU 2016-1, among other things, (i) requires equity investments, with certain exceptions, to be measured at fair value with changes in fair value recognized in net income, (ii) simplifies the impairment assessment of equity investments without readily determinable fair values by requiring a qualitative assessment to identify impairment, (iii) eliminates the requirement for public business entities to disclose the methods and significant assumptions used to estimate the fair value that is required to be disclosed for financial instruments measured at amortized cost on the balance sheet, (iv) requires public business entities to use the exit price notion when measuring the fair value of financial instruments for disclosure purposes, (v) requires an entity to present separately in other comprehensive income the portion of the total change in the fair value of a liability resulting from a change in the instrument-specific credit risk when the entity has elected to measure the liability at fair value in accordance with the fair value option for financial instruments, (vi) requires separate presentation of financial assets and financial liabilities by measurement category and form of financial asset on the balance sheet or the accompanying notes to the financial statements and (vii) clarifies that an entity should evaluate the need for a valuation allowance in a deferred tax asset related to available for sale. ASU 2016-1 will be effective for the interim and annual reporting periods beginning after December 15, 2017 and is not expected to have a significant impact on the Company’s financial statements.

 

In February 2016, the FASB issued ASU No. 2016-02, Leases, which will require organizations that lease assets – or lessees – to recognize assets and liabilities on their balance sheets for leases with lease terms of more than 12 months. Currently, the recognition, measurement, and presentation of expenses and cash flows arising from a lease for lessees primarily depends on its classification as a finance (capital) lease or operating lease. But unlike current GAAP, which requires only capital leases to be recognized on the balance sheet, the new standard requires companies to include both types of leases on their books. For finance leases, lessees will be required to (i) recognize a right-of-use asset and a lease liability, initially measured at the present value of the lease payment, in the statement of financial position, (ii) recognize interest on the lease liability separately from amortization of the right-of-use asset in the statement of comprehensive income and (iii) classify repayments of the principal portion of the lease liability within financing activities and payments of interest on the lease liability and variable lease payments within operating activities in the statement of cash flows. For operating leases, lessees will be required to (i) recognize a right-of-use asset and a lease liability, initially measured at the present value of the lease payment, in the statement of financial position, (ii) recognize a single lease cost, calculated so that the cost of the lease is allocated over the lease term on a generally straight-line basis and (iii) classify all cash payments within operating activities in the statement of cash flows. The ASU also will require disclosures to help investors and other financial statement users better understand the amounts, timing, and uncertainty of cash flows arising from leases. These disclosures include qualitative and quantitative requirements, providing additional information about the amounts recorded in the financial statements. Public companies will be required to adopt the new standard for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2018. For calendar year-end public companies, this means an adoption date of January 1, 2019, and retroactive application to previously issued annual and interim financial statements for 2018 and 2017. The Company is currently evaluating the provisions of ASU No. 2016-02 to determine the potential impact the new standard will have on the Company’s financial statements.  

 

In March 2016, the FASB issued ASU No. 2016-09, Compensation—Stock Compensation: Improvements to Employee Share-Based Payment Accounting. All excess tax benefits and tax deficiencies, including tax benefits of dividends on share-based payment awards, should be recognized as income tax expense or benefit in the income statement. The tax consequences of exercised or vested awards should be treated as discrete items in the reporting period in which they occur. An entity also should recognize excess tax benefits regardless of whether the benefit reduces taxes payable in the current period. Excess tax benefits should be classified along with other income tax cash flows as an operating activity. The amendments in this ASU take effect for annual periods beginning after December 15, 2016, and interim periods within those annual periods. Early adoption is permitted for any organization in any interim or annual period. The Company is currently evaluating the provisions of ASU No. 2016-09 to determine the potential impact the new standard will have on the Company’s financial statements.  

 

7

 

 

In June 2016, the FASB issued ASU No. 2016-13, “Measurement of Credit Losses on Financial Instruments.” This ASU significantly changes how entities will measure credit losses for most financial assets and certain other instruments that are not measured at fair value through net income. In issuing the standard, the FASB is responding to criticism that today’s guidance delays recognition of credit losses. The standard will replace today’s “incurred loss” approach with an “expected loss” model. The new model, referred to as the current expected credit loss (“CECL”) model, will apply to: (i) financial assets subject to credit losses and measured at amortized cost, and (ii) certain off-balance sheet credit exposures. This includes, but is not limited to, loans, leases, held-to-maturity securities, loan commitments, and financial guarantees. The CECL model does not apply to available-for-sale (“AFS”) debt securities. For AFS debt securities with unrealized losses, entities will measure credit losses in a manner similar to what they do today, except that the losses will be recognized as allowances rather than reductions in the amortized cost of the securities. As a result, entities will recognize improvements to estimated credit losses immediately in earnings rather than as interest income over time, as they do today. The ASU also simplifies the accounting model for purchased credit-impaired debt securities and loans. ASU 2016-13 also expands the disclosure requirements regarding an entity’s assumptions, models, and methods for estimating the allowance for loan and lease losses. In addition, entities will need to disclose the amortized cost balance for each class of financial asset by credit quality indicator, disaggregated by the year of origination. ASU No. 2016-13 is effective for interim and annual reporting periods beginning after December 15, 2019; early adoption is permitted for interim and annual reporting periods beginning after December 15, 2018. Entities will apply the standard’s provisions as a cumulative-effect adjustment to retained earnings as of the beginning of the first reporting period in which the guidance is effective (i.e., modified retrospective approach). The Company is currently evaluating the provisions of ASU No. 2016-13 to determine the potential impact the new standard will have on the Company's financial statements.

 

Other than the disclosures contained within these statements, the Company has determined that all other recently issued accounting pronouncements will not have a material impact on its consolidated financial statements or do not apply to its operations.

 

8

 

 

Note 2.          Securities

 

The amortized cost and fair value of securities available for sale and held to maturity at September 30, 2016 and December 31, 2015 are as follows:

 

   

At September 30, 2016

 
   

Amortized Cost

   

Gross Unrealized Gains

   

Gross Unrealized Losses

   

Estimated Fair Value

 

Securities available for sale:

                               

Residential mortgage-backed securities

  $ 1,851,944     $ 4,996     $ 308     $ 1,856,632  

Commercial mortgage-backed securities

    2,014,590       33,570       -       2,048,160  

Municipal bonds

    221,202       1,922       242       222,882  
    $ 4,087,736     $ 40,488     $ 550     $ 4,127,674  
                                 

Securities held to maturity:

                               

Municipal bonds

  $ 1,022,920     $ 17,603     $ 112     $ 1,040,411  

Corporate bonds

    1,955,395       43,623       -       1,999,018  
    $ 2,978,315     $ 61,226     $ 112     $ 3,039,429  

 

   

At December 31, 2015

 
   

Amortized Cost

   

Gross Unrealized Gains

   

Gross Unrealized Losses

   

Estimated Fair Value

 

Securities available for sale:

                               

Residential mortgage-backed securities

  $ 2,549,295     $ 12,146     $ 8,818     $ 2,552,623  

Commercial mortgage-backed securities

    2,017,187       -       -       2,017,187  

Municipal bonds

    241,739       2,503       1,668       242,574  
    $ 4,808,221     $ 14,649     $ 10,486     $ 4,812,384  
                                 

Securities held to maturity:

                               

Municipal bonds

  $ 500,000     $ 9,470     $ -     $ 509,470  

Corporate bonds

    1,505,775       250       3,595       1,502,430  
    $ 2,005,775     $ 9,720     $ 3,595     $ 2,011,900  

 

The Bank had no private label residential mortgage-backed securities at September 30, 2016 and December 31, 2015 or during the nine months or year then ended, respectively.

 

At September 30, 2016 and December 31, 2015 the carrying amount of securities pledged as collateral for uninsured public fund deposits was $3.1 million and $2.3 million, respectively.

 

9

 

 

The amortized cost and fair value of securities available for sale and held to maturity at September 30, 2016 and December 31, 2015, by contractual maturity, are shown below. Expected maturities for residential mortgage-backed securities will differ from contractual maturities because borrowers may have the right to call or prepay obligations with or without call or prepayment penalties.

 

   

At September 30, 2016

 
   

Securities available for sale

   

Securities held to maturity

 
   

Amortized Cost

   

Estimated Fair Value

   

Amortized Cost

   

Estimated Fair Value

 
                                 

Under 1 year

  $ -     $ -     $ -     $ -  

Over 1 year through 5 years

    2,337,143       2,372,690       -       -  

After 5 years through 10 years

    1,750,593       1,754,984       2,205,394       2,258,948  

Over 10 years

    -       -       772,921       780,481  
    $ 4,087,736     $ 4,127,674     $ 2,978,315     $ 3,039,429  

 

   

At December 31, 2015

 
   

Securities available for sale

   

Securities held to maturity

 
   

Amortized Cost

   

Estimated Fair Value

   

Amortized Cost

   

Estimated Fair Value

 
                                 

Under 1 year

  $ -     $ -     $ -     $ -  

Over 1 year through 5 years

    378,316       379,770       -       -  

After 5 years through 10 years

    3,822,110       3,816,649       1,755,775       1,756,777  

Over 10 years

    607,795       615,965       250,000       255,123  
    $ 4,808,221     $ 4,812,384     $ 2,005,775     $ 2,011,900  

 

 

The Bank sold or had called $15,000 and $3.2 million, respectively, in securities available for sale during the nine months ended September 30, 2016 and 2015. From those sale transactions, the Bank realized a net loss of $1,061 in the 2016 period and a net gain of $1,036 in the 2015 period.

 

10

 

 

 

Securities with gross unrealized losses at September 30, 2016 and December 31, 2015, aggregated by investment category and length of time individual securities have been in a continual loss position, are as follows:

 

   

At September 30, 2016

 
   

Less than 12 Months

   

12 Months or More

   

Total

 
   

Estimated Fair Value

   

Gross Unrealized Losses

   

Estimated Fair Value

   

Gross Unrealized Losses

   

Estimated Fair Value

   

Gross Unrealized Losses

 

Securities available for sale:

                                               

Residential mortgage-backed securities

  $ 636,659     $ 308     $ -     $ -     $ 636,659     $ 308  

Municipal bonds

    63,210       242       -       -       63,210       242  
    $ 699,869     $ 550     $ -     $ -     $ 699,869     $ 550  
                                                 

Securities held to maturity:

                                               

Municipal bonds

  $ 522,809     $ 112     $ -     $ -     $ 522,809     $ 112  

 

   

At December 31, 2015

 
   

Less than 12 Months

   

12 Months or More

   

Total

 
   

Estimated Fair Value

   

Gross Unrealized Losses

   

Estimated Fair Value

   

Gross Unrealized Losses

   

Estimated Fair Value

   

Gross Unrealized Losses

 

Securities available for sale:

                                               

Residential mortgage-backed securities

  $ 1,801,533     $ 8,818     $ -     $ -     $ 1,801,533     $ 8,818  

Municipal bonds

    -       -       78,916       1,668       78,916       1,668  
    $ 1,801,533     $ 8,818     $ 78,916     $ 1,668     $ 1,880,449     $ 10,486  
                                                 

Securities held to maturity:

                                               

Corporate bonds

  $ 652,180     $ 3,595     $ -     $ -     $ 652,180     $ 3,595  

 

 

Note 3.          Loans

 

Loans at September 30, 2016 and December 31, 2015 are summarized as follows:

 

   

At September 30, 2016

   

At December 31, 2015

 
           

Percent

           

Percent

 
   

Balance

   

of Total

   

Balance

   

of Total

 
                                 

Residential owner occupied - first lien

  $ 36,631,304       28.0 %   $ 44,890,154       34.9 %

Residential owner occupied - junior lien

    7,380,956       5.6 %     4,988,405       3.9 %

Residential non-owner occupied (investor)

    15,250,207       11.6 %     15,849,835       12.3 %

Commercial owner occupied

    12,281,567       9.4 %     14,717,990       11.4 %

Other commercial loans

    59,155,713       45.2 %     47,883,818       37.2 %

Consumer loans

    246,198       0.2 %     376,070       0.3 %

Total loans

    130,945,945       100.0 %     128,706,272       100.0 %

Net deferred fees, costs and purchase premiums

    502,111               628,139          

Allowance for loan losses

    (959,000 )             (901,000 )        

Total loans, net

  $ 130,489,056             $ 128,433,411          

 

Our residential one- to four-family first lien mortgage loan portfolio is pledged as collateral for our advances with the Federal Home Loan Bank of Atlanta (“FHLB”).

 

11

 

 

 

Note 4.          Credit Quality of Loans and Allowance for Loan Losses

 

Company policies, consistent with regulatory guidelines, provide for the classification of loans that are considered to be of lesser quality as substandard, doubtful, or loss. A loan is considered substandard if it is inadequately protected by the current net worth and paying capacity of the obligor or of the collateral pledged, if any. Substandard loans include those loans characterized by the distinct possibility that the Company will sustain some loss if the deficiencies are not corrected. Loans classified as doubtful have all of the weaknesses inherent in those classified substandard with the added characteristic that the weaknesses present make collection or liquidation in full, on the basis of currently existing facts, conditions and values, highly questionable and improbable. Loans (or portions of loans) classified as loss are those considered uncollectible and of such little value that their continuance as assets is not warranted. Loans that do not expose us to risk sufficient to warrant classification in one of the aforementioned categories, but which possess potential weaknesses that deserve our close attention, are required to be designated as special mention.

 

The Company maintains an allowance for loan losses at an amount estimated to equal all credit losses incurred in our loan portfolio that are both probable and reasonable at the balance sheet date. Our determination as to the classification of our assets is subject to review by the Maryland Commissioner of Financial Regulation and the FDIC. We regularly review our asset portfolio to determine whether any assets require classification in accordance with applicable regulations.

 

The Company provides for loan losses based upon the consistent application of our documented allowance for loan loss methodology. All loan losses are charged to the allowance for loan losses and all recoveries are credited to it. Additions to the allowance for loan losses are provided by charges to income based on various factors which, in our judgment, deserve current recognition in estimating probable losses. We regularly review the loan portfolio and make provisions for loan losses in order to maintain the allowance for loan losses in accordance with GAAP. The allowance for loan losses consists primarily of two components:

 

 

1)

specific allowances are established for loans classified as substandard or doubtful. For loans classified as impaired, the allowance is established when the net realizable value (collateral value less costs to sell) of the loan is lower than the carrying amount of the loan. The amount of impairment provided for as a specific allowance is represented by the deficiency, if any, between the underlying collateral value and the carrying value of the loan. Impaired loans for which the estimated fair value of the loan or the fair value of the underlying collateral, if the loan is collateral dependent, exceeds the carrying value of the loan are not considered in establishing specific allowances for loan losses; and

 

 

2)

general allowances are established for loan losses on a portfolio basis for loans that do not meet the definition of impaired loans. The portfolio is grouped into similar risk characteristics, primarily loan type and regulatory classification. We apply an estimated loss rate to each loan group. The loss rates applied are based upon our loss experience adjusted, as appropriate, for the qualitative factors discussed below. This evaluation is inherently subjective, as it requires material estimates that may be susceptible to significant revisions based upon changes in economic and real estate market conditions.

 

The allowance for loan losses is maintained at a level to provide for losses that are probable and can be reasonably estimated. Management’s periodic evaluation of the adequacy of the allowance is based on the Company’s past loan loss experience, known and inherent losses in the portfolio, adverse situations that may affect the borrower’s ability to repay, the estimated value of any underlying collateral, composition of the loan portfolio, current economic conditions and other relevant factors. This evaluation is inherently subjective as it requires material estimates that may be susceptible to significant change, including the amounts and timing of future cash flows expected to be received on impaired loans.

 

The adjustments to historical loss experience are based on our evaluation of several qualitative factors, including:

 

  changes in the types of loans in the loan portfolio and the size of the overall portfolio;
     
  changes in the levels of concentration of credit;
     
 

changes in the number and amount of non-accrual loans, classified loans, past due loans and troubled debt restructurings and other loan modifications;

     
  changes in the experience, ability and depth of lending personnel;
     
  changes in the quality of the loan review system and the degree of Board oversight;
     
  changes in lending policies and procedures;
     

 

12

 
  changes in national, state and local economic trends and business conditions; and
     
  changes in external factors such as competition and legal and regulatory oversight.

 

A loan is considered past due or delinquent when a contractual payment is not paid on the day it is due. A loan is considered impaired when, based on current information and events, it is probable that the Bank will be unable to collect the scheduled payments of principal or interest when due according to the contractual terms of the loan agreement. Factors considered by management in determining impairment include payment status, collateral value and the probability of collecting scheduled principal and interest payments when due. Loans that experience insignificant payment delays and payment shortfalls generally are not classified as impaired. Management determines the significance of payment delays and payment shortfalls on a case-by-case basis, taking into consideration all of the circumstances surrounding the loan and the borrower, including the length of the delay, the reasons for the delay, the borrower’s prior payment record and the amount of the shortfall in relation to the principal and interest owed. Impairment is measured on a loan by loan basis for all loans secured by real estate by the fair value of the collateral if the loan is collateral dependent.

 

The Bank’s charge-off policy states after all collection efforts have been exhausted, the loan is deemed to be a loss and the loss amount has been determined, the loss amount will be charged to the established allowance for loan losses. Loans secured by real estate, either residential or commercial, are evaluated for loss potential at the 60 day past due threshold. At no later than 90 days past due the loan is placed on nonaccrual status and a specific reserve is established if the net realizable value in less than the principal value of the loan balance(s). Once the actual loss value has been determined, a charge-off to the allowance for loan losses for the amount of the loss is taken. Each loss is evaluated on its specific facts regarding the appropriate timing to recognize the loss. Unsecured loans are charged-off to the allowance for loan losses at the 90 day past due threshold or when an actual loss has been determined whichever is earlier.

 

We evaluate the allowance for loan losses based upon the combined total of the specific and general components. Generally when the loan portfolio increases, absent other factors, the allowance for loan loss methodology results in a higher dollar amount of estimated probable losses than would be the case without the increase. Generally when the loan portfolio decreases, absent other factors, the allowance for loan loss methodology results in a lower dollar amount of estimated probable losses than would be the case without the decrease.

 

Commercial real estate loans generally have greater credit risks compared to one- to four-family residential mortgage loans we originate, as they typically involve larger loan balances concentrated with single borrowers or groups of related borrowers. In addition, the payment experience on loans secured by income-producing properties typically depends on the successful operation of the related business and thus may be subject to a greater extent to adverse conditions in the real estate market and in the general economy. Therefore, we expect that the percentage of the allowance for loan losses as a percentage of the loan portfolio will increase going forward as we continue our focus on the origination of commercial real estate loans.

 

13

 

 

 

The following tables summarize the activity in the allowance for loan losses by portfolio segment for the three and nine months ended September 30, 2016 and 2015.

 

   

For the Three Months Ended September 30, 2016

 
   

Residential owner occupied - first lien

   

Residential owner occupied - junior lien

   

Residential non-owner occupied (investor)

   

Commercial owner occupied

   

Other commercial loans

   

Consumer loans

   

Total

 
                                                         

Beginning balance

  $ 145,821     $ 21,923     $ 109,954     $ 95,179     $ 581,123     $ -     $ 954,000  

Charge-offs

    -       -       -       -       -       -       -  

Recoveries

    2,844       -       -       -       -       -       2,844  

Provision

    (9,356 )     7,896       (1,957 )     3,074       2,499       -       2,156  

Ending Balance

  $ 139,309     $ 29,819     $ 107,997     $ 98,253     $ 583,622     $ -     $ 959,000  

 

   

For the Three Months Ended September 30, 2015

 
   

Residential owner occupied - first lien

   

Residential owner occupied - junior lien

   

Residential non-owner occupied (investor)

   

Commercial owner occupied

   

Other commercial loans

   

Consumer loans

   

Total

 
                                                         

Beginning balance

  $ 182,964     $ 20,944     $ 50,142     $ 98,661     $ 447,289     $ -     $ 800,000  

Charge-offs

    -       -       -       -       -       -       -  

Recoveries

    6,835       -       -       -       -       -       6,835  

Provision

    (21,544 )     (479 )     5,546       20,289       31,353       -       35,165  

Ending Balance

  $ 168,255     $ 20,465     $ 55,688     $ 118,950     $ 478,642     $ -     $ 842,000  

 

   

For the Nine Months Ended September 30, 2016

 
   

Residential owner occupied - first lien

   

Residential owner occupied - junior lien

   

Residential non-owner occupied (investor)

   

Commercial owner occupied

   

Other commercial loans

   

Consumer loans

   

Total

 
                                                         

Beginning balance

  $ 206,169     $ 21,450     $ 69,898     $ 117,744     $ 485,739     $ -     $ 901,000  

Charge-offs

    -       -       -       -       -       -       -  

Recoveries

    18,694       -       -       -       -       -       18,694  

Provision

    (85,554 )     8,369       38,099       (19,491 )     97,883       -       39,306  

Ending Balance

  $ 139,309     $ 29,819     $ 107,997     $ 98,253     $ 583,622     $ -     $ 959,000  

 

   

For the Nine Months Ended September 30, 2015

 
   

Residential owner occupied - first lien

   

Residential owner occupied - junior lien

   

Residential non-owner occupied (investor)

   

Commercial owner occupied

   

Other commercial loans

   

Consumer loans

   

Total

 
                                                         

Beginning balance

  $ 228,461     $ 25,051     $ 46,047     $ 89,811     $ 332,630     $ -     $ 722,000  

Charge-offs

    -       -       -       -       -       -       -  

Recoveries

    24,939       -       1,744       -       -       -       26,683  

Provision

    (85,145 )     (4,586 )     7,897       29,139       146,012       -       93,317  

Ending Balance

  $ 168,255     $ 20,465     $ 55,688     $ 118,950     $ 478,642     $ -     $ 842,000  

 

14

 

 

The following tables set forth the balance of the allowance for loan losses by portfolio segment, disaggregated by impairment methodology, which is then further segregated by amounts evaluated for impairment collectively and individually at September 30, 2016 and December 31, 2015:

 

   

At September 30, 2016

 
   

Residential owner occupied - first lien

   

Residential owner occupied - junior lien

   

Residential non-owner occupied (investor)

   

Commercial owner occupied

   

Other commercial loans

   

Consumer loans

   

Total

 

Allowance for loan losses:

                                                 

Ending balance

  $ 139,309     $ 29,819     $ 107,997     $ 98,253     $ 583,622     $ -     $ 959,000  

Ending balance individually evaluated for impairment

  $ -     $ -     $ 48,982     $ -     $ -     $ -     $ 48,982  

Ending balance collectively evaluated for impairment

  $ 139,309     $ 29,819     $ 59,015     $ 98,253     $ 583,622     $ -     $ 910,018  

Loans:

                                                       

Ending balance

  $ 36,631,304     $ 7,380,956     $ 15,250,207     $ 12,281,567     $ 59,155,713     $ 246,198     $ 130,945,945  

Ending balance individually evaluated for impairment

  $ -     $ -     $ 211,640     $ -     $ -     $ -     $ 211,640  

Ending balance collectively evaluated for impairment

  $ 36,631,304     $ 7,380,956     $ 15,038,567     $ 12,281,567     $ 59,155,713     $ 246,198     $ 130,734,305  

 

   

At December 31, 2015

 
   

Residential owner occupied - first lien

   

Residential owner occupied - junior lien

   

Residential non-owner occupied (investor)

   

Commercial owner occupied

   

Other commercial loans

   

Consumer loans

   

Total

 

Allowance for loan losses:

                                                 

Ending balance

  $ 206,169     $ 21,450     $ 69,898     $ 117,744     $ 485,739     $ -     $ 901,000  

Ending balance individually evaluated for impairment

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

Ending balance collectively evaluated for impairment

  $ 206,169     $ 21,450     $ 69,898     $ 117,744     $ 485,739     $ -     $ 901,000  

Loans:

                                                       

Ending balance

  $ 44,890,154     $ 4,988,405     $ 15,849,835     $ 14,717,990     $ 47,883,818     $ 376,070     $ 128,706,272  

Ending balance individually evaluated for impairment

  $ -     $ -     $ 108,188     $ -     $ -     $ -     $ 108,188  

Ending balance collectively evaluated for impairment

  $ 44,890,154     $ 4,988,405     $ 15,741,647     $ 14,717,990     $ 47,883,818     $ 376,070     $ 128,598,084  

 

 

The allowance for loan losses allocated to each portfolio segment is not necessarily indicative of future losses in any particular portfolio segment and does not restrict the use of the allowance to absorb losses in other portfolio segments.

 

15

 

 

 

The following tables are a summary of the loan portfolio quality indicators by portfolio segment at September 30, 2016 and December 31, 2015:

 

   

At September 30, 2016

 
   

Residential owner occupied - first lien

   

Residential owner occupied - junior lien

   

Residential non-owner occupied (investor)

   

Commercial owner occupied

   

Other commercial loans

   

Consumer loans

   

Total

 

Pass

  $ 36,631,304     $ 7,380,956     $ 14,554,977     $ 12,281,567     $ 56,098,999     $ 246,198     $ 127,194,001  

Special Mention

    -       -       -       -       3,056,714       -       3,056,714  

Substandard

    -       -       695,230       -       -       -       695,230  

Doubtful

    -       -       -       -       -       -       -  

Total

  $ 36,631,304     $ 7,380,956     $ 15,250,207     $ 12,281,567     $ 59,155,713     $ 246,198     $ 130,945,945  

 

   

At December 31, 2015

 
   

Residential owner occupied - first lien

   

Residential owner occupied - junior lien

   

Residential non-owner occupied (investor)

   

Commercial owner occupied

   

Other commercial loans

   

Consumer loans

   

Total

 

Pass

  $ 44,890,154     $ 4,988,405     $ 15,252,037     $ 14,717,990     $ 47,883,818     $ 376,070     $ 128,108,474  

Special Mention

    -       -       -       -       -       -       -  

Substandard

    -       -       597,798       -       -       -       597,798  

Doubtful

    -       -       -       -       -       -       -  

Total

  $ 44,890,154     $ 4,988,405     $ 15,849,835     $ 14,717,990     $ 47,883,818     $ 376,070     $ 128,706,272  

 

 

Management uses a ten point internal risk rating system to monitor the credit quality of the overall loan portfolio. The first six categories are considered not criticized and are aggregated as a “Pass” rating.

 

     Pass (risk ratings 1-6) – risk ratings one to four are deemed “acceptable”. Risk rating five is “acceptable with care” and risk rating six is a “watch credit”.

 

     Special Mention (risk rating 7) - a special mention loan has potential weaknesses that deserve management’s close attention. If left uncorrected, these potential weaknesses may result in deterioration of the repayment prospects for the loan or in the institution’s credit position at some future date. Special mention loans are not adversely classified and do not expose the Bank to sufficient risk to warrant adverse classification.

 

     Substandard (risk rating 8) - substandard loans are inadequately protected by the current sound worth and paying capacity of the obligor or of the collateral pledged, if any. Loans so classified must have a well defined weakness or weaknesses that jeopardize the liquidation of the debt. They are characterized by the distinct possibility that the Bank will sustain some loss if the deficiencies are not corrected.

 

     Doubtful (risk rating 9) - loans classified as doubtful have all the weaknesses inherent in those classified as substandard with the added characteristic that the loan’s present weaknesses make collection or liquidation in full, on the basis of currently known facts, conditions and values, highly questionable and improbable.

 

     Loss (risk rating 10) - loans classified as loss are considered uncollectible and of such little value that their continuance as assets is not warranted. This classification does not mean that the loan has absolutely no recovery or salvage value but rather it is not practical or desirable to defer writing off this basically worthless asset even though partial recovery may occur in the future.

 

16

 

 

Loans classified special mention, substandard, doubtful or loss are reviewed at least quarterly to determine their appropriate classification. Non-classified commercial loan relationships greater than $50,000 are reviewed annually. Non-classified residential mortgage loans and consumer loans are not evaluated unless a specific event occurs to raise the awareness of possible credit deterioration.

 

The following tables set forth certain information with respect to our loan delinquencies by portfolio segment at September 30, 2016 and December 31, 2015:

 

   

At September 30, 2016

 
   

Residential owner occupied - first lien

   

Residential owner occupied - junior lien

   

Residential non-owner occupied (investor)

   

Commercial owner occupied

   

Other commercial loans

   

Consumer loans

   

Total

 

Current

  $ 36,180,667     $ 7,338,085     $ 15,147,849     $ 12,281,567     $ 56,600,510     $ 246,198     $ 127,794,876  

30-59 days past due

    284,944       42,871       102,358       -       2,555,203       -       2,985,376  

60-89 days past due

    165,693       -       -       -       -       -       165,693  

Greater than 90 days past due

    -       -       -       -       -       -       -  

Total past due

    450,637       42,871       102,358       -       2,555,203       -       3,151,069  

Total

  $ 36,631,304     $ 7,380,956     $ 15,250,207     $ 12,281,567     $ 59,155,713     $ 246,198     $ 130,945,945  

 

   

At December 31, 2015

 
   

Residential owner occupied - first lien

   

Residential owner occupied - junior lien

   

Residential non-owner occupied (investor)

   

Commercial owner occupied

   

Other commercial loans

   

Consumer loans

   

Total

 

Current

  $ 44,522,124     $ 4,988,405     $ 15,731,641     $ 14,717,990     $ 46,621,559     $ 376,070     $ 126,957,789  

30-59 days past due

    122,300       -       118,194       -       1,262,259       -       1,502,753  

60-89 days past due

    245,730       -       -       -       -       -       245,730  

Greater than 90 days past due

    -       -       -       -       -       -       -  

Total past due

    368,030       -       118,194       -       1,262,259       -       1,748,483  

Total

  $ 44,890,154     $ 4,988,405     $ 15,849,835     $ 14,717,990     $ 47,883,818     $ 376,070     $ 128,706,272  

 

 

17

 

 

 

The following tables are a summary of impaired loans by portfolio segment at September 30, 2016 and December 31, 2015:

 

   

At September 30, 2016

 

Impaired Loans:

 

Residential owner occupied - first lien

   

Residential owner occupied - junior lien

   

Residential non-owner occupied (investor)

   

Commercial owner occupied

   

Other commercial loans

   

Consumer loans

   

Total

 
                                                         

With no related allowance recorded:

                                                       

Recorded Investment

  $ -     $ -     $ 102,358     $ -     $ -     $ -     $ 102,358  

Unpaid Principal Balance

    -       -       102,358       -       -       -       102,358  
                                                         

With an allowance recorded:

                                                       

Recorded Investment

  $ -     $ -     $ 109,282     $ -     $ -     $ -     $ 109,282  

Unpaid Principal Balance

    -       -       116,634       -       -       -       116,634  

Related Allowance