Exhibit 99.2

 

	Page
Financial Statements (unaudited)
Consolidated Balance Sheets as of September 30, 2017 and December 31, 2016	2
Consolidated Statements of Income for the nine months ended September 30, 2017 and 2016	3
Consolidated Statements of Income for the three months ended September 30, 2017 and 2016	4
Consolidated Statements of Comprehensive Income for the nine months ended September 30, 2017 and 2016	5
Consolidated Statements of Comprehensive Income for the three months ended September 30, 2017 and 2016	6
Consolidated Statements of Cash Flows for the nine months ended September 30, 2017 and 2016	7
Notes to Consolidated Financial Statements	9

 

 

Premara Financial, Inc. and Subsidiary

  

		September 30, 2017				December 31, 2016
Assets:		(Unaudited)				(Audited)
Cash and cash equivalents:
Cash and due from banks		$	3,154,147			$	3,222,428
Interest-bearing bank deposits			22,079,906				5,792,212
Total cash and cash equivalents			25,234,053				9,014,640
Time deposits with financial institutions			500,000				500,000
Securities available-for-sale			32,940,378				31,460,193
Securities held-to-maturity			1,250,000				1,250,000
Nonmarketable equity securities			1,893,011				1,744,493
Loans			204,346,798				200,782,266
Allowance for loan and lease losses			(2,341,171	)			(2,138,155	)
Loans, net			202,005,627				198,644,111
Premises and equipment, net			1,068,191				1,255,529
Deferred tax asset			2,589,319				2,857,861
Intangible assets			754,664				610,208
Bank owned life insurance			5,642,666				5,530,975
Accrued interest receivable			948,172				910,168
Other assets			1,170,006				1,262,532
Total assets		$	275,996,087			$	255,040,710
Liabilities:
Deposits:
Demand:
Noninterest-bearing		$	51,231,987			$	48,181,492
Interest-bearing			20,524,068				20,413,683
Savings and money market			79,041,934				75,868,981
Time deposits, under $250,000			65,318,778				57,468,248
Time deposits, $250,000 and over			4,128,055				2,715,049
Total deposits			220,244,822				204,647,453
Federal Home Loan Bank advances			29,000,000				25,000,000
Accrued interest payable			55,744				53,073
Other liabilities			916,119				830,168
Total liabilities			250,216,685				230,530,694
Stockholders’ equity:
Preferred stock, $0.01 par value; authorized 1,000,000 shares; no shares issued and outstanding			-				-
Common stock, $0.01 par value; authorized 25,000,000 shares; 3,179,808 and 3,160,268 shares issued and outstanding at September 30, 2017 and December 31, 2016, respectively			31,798				31,603
Additional paid in capital			23,757,712				23,556,468
Retained earnings			1,899,569				1,064,157
Accumulated other comprehensive income (loss)			90,323				(142,212	)
Total stockholders’ equity			25,779,402				24,510,016
Total liabilities and stockholders’ equity		$	275,996,087			$	255,040,710

 

 

Premara Financial, Inc. and Subsidiary

 

		2017				2016
Interest income:		(Unaudited)				(Unaudited)
Loans, including fees		$	7,379,985			$	6,487,232
Securities			804,350				819,144
Other interest and dividend income			48,914				86,090
Total interest income			8,233,249				7,392,466
Interest expense:
Time deposits, $250,000 and over			21,268				15,154
Other deposits			957,859				870,589
Other borrowings			257,789				151,719
Total interest expense			1,236,916				1,037,462
Net interest income			6,996,333				6,355,004
Provision for loan losses			275,000				25,000
Net interest income after provision for loan losses			6,721,333				6,330,004
Noninterest income:
Debit and ATM income			112,537				150,556
Bank owned life insurance			111,692				113,162
Gain on sale of available-for-sale securities			-				15,371
Gain on sale of premises and equipment			1,000				2,097
Gain on sale of loans			536,687				-
Service charges and other income			385,829				466,907
Total noninterest income			1,147,745				748,093
Noninterest expense:
Compensation and employee benefits			3,851,176				3,151,967
Occupancy			762,758				778,939
Furniture and equipment			206,841				283,939
Professional services			195,067				445,340
Merger-related expenses			79,868				-
Data processing			429,248				440,061
Loss on sale of other real estate owned			909				-
Advertising and marketing			114,259				77,238
FDIC insurance premiums			142,531				162,729
Other operating			1,052,554				1,020,993
Total noninterest expense			6,835,211				6,361,206
Income before income taxes			1,033,867				696,891
Income tax expense			198,455				42,416
Net income			835,412				654,475
Preferred stock dividends			-				-
Net income available to common stockholders		$	835,412			$	654,475
Net income available per common share
Basic		$	0.26			$	0.21
Diluted		$	0.26			$	0.21
Average common shares outstanding
Basic			3,162,630				3,160,268
Diluted			3,162,630				3,160,268

 

 

 

Premara Financial, Inc. and Subsidiary

 

		2017				2016
Interest income:		(Unaudited)				(Unaudited)
Loans, including fees		$	2,536,947			$	2,265,372
Securities			291,055				249,707
Other interest and dividend income			19,860				11,503
Total interest income			2,847,862				2,526,582
Interest expense:
Time deposits, $250,000 and over			9,836				6,694
Other deposits			328,944				303,091
Other borrowings			106,456				44,986
Total interest expense			445,236				354,771
Net interest income			2,402,626				2,171,811
Provision for loan losses			175,000				-
Net interest income after provision for loan losses			2,227,626				2,171,811
Noninterest income:
Debit and ATM income			37,098				40,614
Bank owned life insurance			37,515				41,055
Gain on sale of available-for-sale securities			-				5,451
Gain on sale of premises and equipment			-				2,097
Gain on sale of loans			106,074				-
Service charges and other income			116,859				155,409
Total noninterest income			297,546				244,626
Noninterest expense:
Compensation and employee benefits			1,246,416				1,113,348
Occupancy			247,560				268,896
Furniture and equipment			66,019				94,477
Professional services			71,726				123,797
Merger-related expenses			32,989				-
Data processing			153,564				145,526
Loss on sale of other real estate owned			909				-
Advertising and marketing			37,195				39,162
FDIC insurance premiums			47,748				52,930
Other operating			346,316				318,178
Total noninterest expense			2,250,442				2,156,314
Income before income taxes			274,730				260,123
Income tax expense			30,686				27,760
Net income			244,044				232,363
Preferred stock dividends			-				-
Net income available to common stockholders		$	244,044			$	232,363
Net income available per common share
Basic		$	0.08			$	0.07
Diluted		$	0.08			$	0.07
Average common shares outstanding
Basic			3,167,277				3,160,268
Diluted			3,169,042				3,160,268

 

 

Premara Financial, Inc. and Subsidiary

 

		2017				2016
		(Unaudited)				(Unaudited)
Net income		$	835,412			$	654,475
Other comprehensive income:
Investment securities available-for-sale:
Unrealized holding gains			366,913				513,249
Tax effect			(132,015	)			(184,718	)
Reclassification of gains recognized in net income			-				(15,371	)
Tax effect			-				5,632
Net of tax amount			234,898				318,792
Hedging activities:
Hedge effectiveness			(3,691	)			(414,021	)
Tax effect			1,328				151,697
Net of tax amount			(2,363	)			(262,324	)
Other comprehensive income, net of tax			232,535				56,468
Comprehensive income		$	1,067,947			$	710,943

 

 

Premara Financial, Inc. and Subsidiary

 

		2017				2016
		(Unaudited)				(Unaudited)
Net income		$	244,044			$	232,363
Other comprehensive income (loss):
Investment securities available-for-sale:
Unrealized holding gains (losses)			(146,737	)			190,607
Tax effect			52,796				(69,838	)
Reclassification of gains recognized in net income			-				(5,541	)
Tax effect			-				2,030
Net of tax amount			(93,941	)			117,258
Hedging activities:
Hedge effectiveness			16,941				(119,030	)
Tax effect			(6,095	)			43,612
Net of tax amount			10,846				(75,418	)
Other comprehensive income (loss), net of tax			(83,095	)			41,840
Comprehensive income		$	160,949			$	274,203

 

  

Premara Financial, Inc. and Subsidiary

 

		2017				2016
		(Unaudited)				(Unaudited)
Cash flows from operating activities:
Net income		$	835,412			$	654,475
Adjustments to reconcile net income to net cash provided by operating activities:
Provision for loan losses			275,000				25,000
Depreciation and amortization			327,661				416,952
Discount accretion and premium amortization, net			125,588				126,941
Gain on sale of available-for-sale securities			-				(15,371	)
Gain on sale and writedown of premises and equipment			(1,000	)			(2,097	)
Loss on sale of other real estate owned			909				-
Deferred income tax expense			137,855				34,705
Increase in servicing asset			(200,807	)			-
Intangible assets amortization			56,351				46,033
Stock compensation			14,441				14,273
Increase in bank owned life insurance			(111,691	)			(113,163	)
Originations of loans held for sale			(6,802,950	)			-
Proceeds from the sale of loans held for sale			7,339,637				-
Gain on sale of loans held for sale			(536,687	)			-
(Increase) decrease in other assets			92,526				(378,183	)
(Increase) decrease in accrued interest receivable			(38,004	)			46,026
Increase in other liabilities			82,260				219,364
Increase in accrued interest payable			2,671				2,144
Net cash provided by operating activities			1,599,172				1,077,099
Cash flows from investing activities:
Purchase of securities available-for-sale			(2,732,310	)			(3,071,976	)
Proceeds from sales, calls, prepayments and maturities of securities available-for-sale			1,493,450				8,829,830
Purchase of nonmarketable equity securities			(838,200	)			(417,200	)
Sale of nonmarketable equity securities			689,682				332,500
Net increase in loans			(3,686,516	)			(8,861,702	)
Purchase of premises and equipment			(144,249	)			(104,952	)
Proceeds from sale of premises and equipment			4,926				5,500
Proceeds from the sale of other real estate owned			49,091				-
Purchase of bank owned life insurance			-				(2,600,000	)
Net cash provided by (used in) investing activities			(5,164,126	)			(5,888,000	)
Cash flows from financing activities:
Net (decrease) increase in deposits			15,597,369				(3,004,183	)
Federal Home Loan Bank advances , net			4,000,000				1,000,000
Exercise of common stock warrants			186,998				-
Net cash provided by (used in) financing activities			19,784,367				(2,004,183	)
Net increase (decrease) in cash and cash equivalents			16,219,413				(6,815,084	)
Cash and cash equivalents, beginning			9,014,640				19,991,259
Cash and cash equivalents, ending		$	25,234,053			$	13,176,175

 

 

Premara Financial, Inc. and Subsidiary

 

		2017				2016
		(Unaudited)				(Unaudited)
Supplemental disclosures of cash flow information
Cash paid during the year for interest		$	1,234,245			$	1,035,318
Cash paid during the year for income taxes		$	133,600			$	94,756
Supplemental schedule of noncash investing and financing activity
Change in unrealized loss on securities available-for-sale		$	(366,913	)		$	513,249
Change in hedge effectiveness		$	(3,691	)		$	(414,021	)
Loans transferred to other real estate owned		$	50,000			$	-

 

  

Premara Financial, Inc. and Subsidiary

Notes to Consolidated Financial Statements (Unaudited)

  

Note 1. Summary of Significant Accounting Policies

 

Carolina Premier Bank (the “Bank”) was incorporated in North Carolina to serve as a state chartered commercial bank to provide banking services to customers located primarily in Charlotte, North Carolina and the surrounding areas. Carolina Premier Bank commenced business on August 29, 2007, and its deposits are insured by the Federal Deposit Insurance Corporation (FDIC). As a state chartered commercial bank, the Bank is subject to regulation by the Office of the North Carolina Commissioner of Banks and the Federal Deposit Insurance Corporation.

 

On May 10, 2011, the shareholders of Carolina Premier Bank approved a plan of corporate reorganization under which the Bank became a wholly-owned subsidiary of Premara Financial, Inc. (the “Company”), which was organized for that purpose by the Bank’s Board of Directors. The authorized common stock of Premara Financial, Inc. is 25,000,000 shares with $.01 par value. Pursuant to the reorganization, the Company issued all shares of its common stock in exchange for all of the outstanding common shares of the Bank on May 24, 2011. The consolidated financial statements include the accounts of the parent company and its wholly owned subsidiary after elimination of all significant intercompany balances and transactions.

 

On July 20, 2017, the Company and Select Bancorp, Inc., the holding company for Select Bank & Trust Company, entered into an Agreement and Plan of Merger and Reorganization (the “Merger Agreement”), pursuant to which the Company will merge with and into Select Bancorp, and the Bank will merge with and into Select Bank & Trust Company. The parties anticipate closing the merger during the fourth quarter of 2017.

 

The consolidated financial statements in this report (other than the Consolidated Balance Sheet at December 31, 2016) are unaudited. In the opinion of management, all adjustments (none of which were other than normal accruals) necessary for a fair presentation of the financial position and results of operations for the periods presented have been included. Management of the Company has made a number of estimates and assumptions relating to the reporting of assets and liabilities and the disclosure of contingent assets and liabilities to prepare these consolidated financial statements in conformity with generally accepted accounting principles in the United States (GAAP). Actual results could differ from those estimates.

 

The Company’s accounting policies are fundamental to understanding management’s discussion and analysis of results of operations and financial condition. Many of the Company’s accounting policies require significant judgment regarding valuation of assets and liabilities and/or significant interpretation of the specific accounting guidance. A description of the Company’s significant accounting policies can be found in Note 1 of the Notes to Consolidated Financial Statements in the Company’s 2016 Report on Consolidated Financial Statements.

 

Recently issued accounting pronouncements:

 

The following is a summary of recent authoritative pronouncements that may affect accounting, reporting, and disclosure of financial information by the Company:

 

In May 2014, the FASB issued guidance to change the recognition of revenue from contracts with customers. The core principle of the new guidance is that an entity should recognize revenue to reflect the transfer of goods and services to customers in an amount equal to the consideration the entity receives or expects to receive. The guidance will be effective for the Company for reporting periods beginning after December 15, 2017. The Company will apply the guidance using a modified retrospective approach. The Company does not expect these amendments to have a material effect on its financial statements.

 

In February 2016, the FASB amended the Leases topic of the Accounting Standards Codification to revise certain aspects of recognition, measurement, presentation, and disclosure of leasing transactions. The amendments will be effective for fiscal years beginning after December 15, 2018, including interim periods within those fiscal years. Early adoption is permitted. The Company is currently evaluating the effect that implementation of the new standard will have on its financial position, results of operations, and cash flows.

 

 

Premara Financial, Inc. and Subsidiary

Notes to Consolidated Financial Statements (Unaudited)

 

Note 1. Summary of Significant Accounting Policies, Continued

 

In June 2016, the FASB issued guidance to change the accounting for credit losses and modify the impairment model for certain debt securities. The amendments will be effective for the Company for reporting periods beginning after December 15, 2020. Early adoption is permitted for all organizations for periods beginning after December 15, 2018. The Company is currently evaluating the effect that implementation of the new standard will have on its financial position, results of operations, and cash flows.

 

In January 2017, the FASB issued guidance to clarify the definition of a business with the objective of adding guidance to assist entities with evaluating whether transactions should be accounted for as acquisitions (or disposals) of assets or businesses. The amendment to the Business Combinations Topic is intended to address concerns that the existing definition of a business has been applied too broadly and has resulted in many transactions being recorded as business acquisitions that in substance are more akin to asset acquisitions. The guidance will be effective for the Company for reporting periods beginning after December 15, 2017. Early adoption is permitted. The Company does not expect these amendments to have a material effect on its financial statements.

 

In January 2017, the FASB amended the Goodwill and Other Topic of the Accounting Standards Codification to simplify the accounting for goodwill impairment for public business entities and other entities that have goodwill reported in their financial statements and have not elected the private company alternative for the subsequent measurement of goodwill. The amendment removes Step 2 of the goodwill impairment test. A goodwill impairment will now be the amount by which a reporting unit’s carrying value exceeds its fair value, not to exceed the carrying amount of goodwill. The effective date and transition requirements for the technical corrections will be effective for the Company for reporting periods beginning after December 15, 2020. Early adoption is permitted for interim or annual goodwill impairment tests performed on testing dates after January 1, 2017. The Company does not expect these amendments to have a material effect on its financial statements.

 

In February 2017, the FASB amended the Other Income Topic of the Accounting Standards Codification to clarify the scope of the guidance on nonfinancial asset derecognition as well as the accounting for partial sales of nonfinancial assets. The amendments conform the derecognition guidance on nonfinancial assets with the model for transactions in the new revenue standard. The amendments will be effective for the Company for reporting periods beginning after December 15, 2017. The Company does not expect these amendments to have a material effect on its financial statements.

 

In March 2017, the FASB amended the requirements in the Receivables—Nonrefundable Fees and Other Costs Topic of the Accounting Standards Codification related to the amortization period for certain purchased callable debt securities held at a premium. The amendments shorten the amortization period for the premium to the earliest call date. The amendments will be effective for the Company for interim and annual periods beginning after December 15, 2018. Early adoption is permitted. The Company does not expect these amendments to have a material effect on its financial statements.

 

In May 2017, the FASB amended the requirements in the Compensation—Stock Compensation Topic of the Accounting Standards Codification related to changes to the terms or conditions of a share-based payment award. The amendments provide guidance about which changes to the terms or conditions of a share-based payment award require an entity to apply modification accounting. The amendments will be effective for the Company for annual periods, and interim periods within those annual periods, beginning after December 15, 2017. Early adoption is permitted. The Company does not expect these amendments to have a material effect on its financial statements.

 

Other accounting standards that have been issued or proposed by the FASB or other standards-setting bodies are not expected to have a material impact on the Company’s financial position, results of operations or cash flows.

 

 

Premara Financial, Inc. and Subsidiary

Notes to Consolidated Financial Statements (Unaudited)

 

Note 2. Securities

 

The amortized cost and estimated fair values of securities available-for-sale at September 30, 2017 and December 31, 2016 were:

 

		Amortized				Unrealized				Unrealized				Fair
		Cost				Gains				Losses				Value
September 30, 2017
Collateralized mortgage obligations		$	476,066			$	1,553			$	-			$	477,619
Mortgage-backed securities			7,797,647				17,701				76,707				7,738,641
Municipal bonds - nontaxable			16,121,647				316,151				3,788				16,434,009
Municipal bonds - taxable			4,417,233				169,086				80,100				4,506,219
Other securities			3,767,799				29,003				12,912				3,783,890
		$	32,580,391			$	533,494			$	173,507			$	32,940,378

 

		Amortized				Unrealized				Unrealized				Fair
		Cost				Gains				Losses				Value
December 31, 2016
Collateralized mortgage obligations		$	560,937			$	-			$	2,623			$	558,314
Mortgage-backed securities			7,188,775				702				122,632				7,066,845
Municipal bonds - nontaxable			16,178,268				129,351				76,089				16,231,530
Municipal bonds - taxable			4,524,437				89,420				32,599				4,581,258
Other securities			3,014,702				20,990				13,446				3,022,246
		$	31,467,119			$	240,463			$	247,389			$	31,460,193

 

The amortized cost and estimated fair values of securities held-to-maturity as of September 30, 2017 and December 31, 2016 were:

 

		Amortized				Unrealized				Unrealized				Fair
		Cost				Gains				Losses				Value
September 30, 2017
Other securities		$	1,250,000			$	30,940			$	-			$	1,280,940
		$	1,250,000			$	30,940			$	-			$	1,280,940

 

		Amortized				Unrealized				Unrealized				Fair
		Cost				Gains				Losses				Value
December 31, 2016
Other securities		$	1,250,000			$	34,155			$	-			$	1,284,155
		$	1,250,000			$	34,155			$	-			$	1,284,155

 

 

Premara Financial, Inc. and Subsidiary

Notes to Consolidated Financial Statements (Unaudited)

 

Note 2. Securities, Continued

 

The amortized costs and fair values of investment securities available-for-sale at September 30, 2017, by contractual maturity, are shown in the following chart. Expected maturities may differ from contractual maturities because borrowers may have the right to call or prepay obligations with or without call or prepayment penalties.

 

		Amortized
		Cost				Fair Value
Due one year or less		$	2,712,417			$	2,710,261
Due after one year through five years			8,629,149				8,628,902
Due after five years through ten years			15,298,129				15,565,575
Due after ten years			5,940,696				6,035,640
Total available-for-sale securities		$	32,580,391			$	32,940,378

 

The amortized costs and fair values of investment securities held-to-maturity at September 30, 2017, by contractual maturity, are shown in the following chart. Expected maturities may differ from contractual maturities because borrowers may have the right to call or prepay obligations with or without call or prepayment penalties.

 

		Amortized
		Cost				Fair Value
Due one year or less		$	-			$	-
Due after one year through five years			-				-
Due after five years through ten years			1,250,000				1,280,940
Due after ten years			-				-
Total held-to-maturity securities		$	1,250,000			$	1,280,940

 

No available-for-sale securities were sold during the nine months ended September 30, 2017. Proceeds from the sale of securities available-for-sale during the nine months ended September 30, 2016 were $6,493,944 and resulted in gross gains of $15,371.

 

The following tables present available-for-sale securities, gross unrealized losses and related fair values, aggregated by investment category and length of time that individual securities have been in a continuous unrealized loss position as of September 30, 2017 and December 31, 2016:

 

		Less than 12 Months								12 Months or More								Total
		Fair				Unrealized				Fair				Unrealized				Fair				Unrealized
		Value				Losses				Value				Losses				Value				Losses
September 30, 2017
Collateralized mortgage
obligations		$	-			$	-			$	-			$	-			$	-			$	-
Mortgage-backed securities			4,578,576				(45,368	)			1,234,242				(31,339	)			5,812,818				(76,707	)
Municipal bonds-non-taxable			1,630,958				(3,788	)			-				-				1,630,958				(3,788	)
Municipal bonds-taxable			-				-				518,742				(80,100	)			518,742				(80,100	)
Other securities			1,581,336				(12,912	)			-				-				1,581,336				(12,912	)
Total		$	7,790,870			$	(62,068	)		$	1,752,984			$	(111,439	)		$	9,543,854			$	(173,507	)

 

 

Premara Financial, Inc. and Subsidiary

Notes to Consolidated Financial Statements (Unaudited)

 

Note 2. Securities, Continued

 

		Less than 12 Months								12 Months or More								Total
		Fair				Unrealized				Fair				Unrealized				Fair				Unrealized
		Value				Losses				Value				Losses				Value				Losses
December 31, 2016
Collateralized mortgage
obligations		$	558,314			$	(2,623	)		$	-			$	-			$	558,314			$	(2,623	)
Mortgage-backed securities			7,014,889				(122,632	)			-				-				7,014,889				(122,632	)
Municipal bonds-non-taxable			6,117,121				(76,089	)			-				-				6,117,121				(76,089	)
Municipal bonds-taxable			367,312				(3,034	)			385,593				(29,565	)			752,905				(32,599	)
Other securities			2,261,994				(13,446	)			-				-				2,261,994				(13,446	)
Total		$	16,319,630			$	(217,824	)		$	385,593			$	(29,565	)		$	16,705,223			$	(247,389	)

 

There were no held-to-maturity securities in an unrealized loss position as of September 30, 2017 and December 31, 2016.

 

Management evaluates securities for other-than-temporary impairment at least on a quarterly basis, and more frequently when economic or market concerns warrant such evaluation. Consideration is given to (1) the length of time and the extent to which the fair value has been less than cost, (2) the financial condition and near-term prospects of the issuer, and (3) the intent and ability of the Company to retain its investment in the issuer for a period of time sufficient to allow for any anticipated recovery in fair value. The unrealized losses in the Company’s investment portfolio relate principally to current interest rates for similar types of securities. In analyzing an issuer’s financial condition, management considers whether the securities are issued by the federal government or its agencies, whether downgrades by bond rating agencies have occurred, and the results of reviews of the issuer’s financial condition. As management has the ability to hold debt securities for the foreseeable future, no declines are deemed to be other-than-temporary.

 

The amortized cost of the investment securities pledged at September 30, 2017 and December 31, 2016 were $1,484,011 and $3,072,908, respectively, and fair values were $1,545,999 and $3,115,445, respectively.

 

Note 3. Loans Receivable

 

Major classifications of loans receivable are summarized as follows:

 

		September 30, 2017				December 31, 2016
Residential real estate		$	58,501,446			$	62,935,278
Commercial real estate			95,066,743				89,211,374
Construction and land			18,968,376				19,456,283
Commercial and industrial			31,025,369				28,414,988
Consumer and other			643,623				672,064
Total gross loans			204,205,557				200,689,987
Less:  deferred loan fees (costs)			(141,241	)			(92,279	)
Less:  allowance for loan losses			2,341,171				2,138,155
Total loans, net		$	202,005,627			$	198,644,111

 

 

Premara Financial, Inc. and Subsidiary

Notes to Consolidated Financial Statements (Unaudited)

 

Note 3. Loans Receivable, Continued

 

The following tables present activity in the allowance for loan losses by portfolio segment for the nine and three months ended September 30, 2017 and 2016:

 

		Residential Real Estate				Commercial Real Estate				Construction and Land				Commercial and Industrial				Consumer and Other				Total
Nine months ended September 30, 2017:
Beginning balance		$	590,599			$	1,008,100			$	138,906			$	379,552			$	20,998			$	2,138,155
Charge-offs			(69,055	)			-				-				-				(3,880	)			(72,935	)
Recoveries			-				-				-				605				346				951
Provisions			12,101				(39,255	)			19,839				280,241				2,074				275,000
Ending balance		$	533,645			$	968,845			$	158,745			$	660,398			$	19,538			$	2,341,171
Three months ended September 30, 2017:
Beginning balance		$	537,617			$	900,661			$	196,052			$	583,715			$	17,520			$	2,235,565
Charge-offs			(66,465	)			-				-				-				(3,880	)			(70,345	)
Recoveries			-				-				-				605				346				951
Provisions			62,493				68,184				(37,307	)			76,078				5,552				175,000
Ending balance		$	533,645			$	968,845			$	158,745			$	660,398			$	19,538			$	2,341,171
Allowance for Loan Losses as of September 30, 2017: Individually evaluated for impairment		$	9,609			$	-			$	-			$	276,629			$	-			$	286,238
Collectively evaluated for impairment		$	524,036			$	968,845			$	158,745			$	383,769			$	19,538			$	2,054,933
Loans Receivable as of September 30, 2017
Ending balance - total		$	58,501,446			$	95,066,743			$	18,968,376			$	31,025,369			$	643,623			$	204,205,557
Ending balances:
Individually evaluated for impairment		$	1,494,154			$	242,330			$	-			$	1,584,952			$	-			$	3,321,436
Collectively evaluated for impairment		$	57,007,292			$	94,824,413			$	18,968,376			$	29,440,417			$	643,623			$	200,884,121

 

 

Premara Financial, Inc. and Subsidiary

Notes to Consolidated Financial Statements (Unaudited)

 

Note 3. Loans Receivable, Continued

 

		Residential Real Estate				Commercial Real Estate				Construction and Land				Commercial and Industrial				Consumer and Other				Total
Nine months ended September 30, 2016:
Beginning balance		$	714,231			$	831,678			$	128,988			$	569,003			$	48,962			$	2,292,862
Charge-offs			(56,632	)			(1,744	)			-				(318,323	)			(440	)			(377,139	)
Recoveries			37,975				1,744				-				-				70,923				110,642
Provisions			(41,975	)			(2,212	)			16,373				150,513				(97,699	)			25,000
Ending balance		$	653,599			$	829,466			$	145,361			$	401,193			$	21,746			$	2,051,365
Three months ended September 30, 2016:
Beginning balance		$	580,979			$	896,903			$	76,485			$	374,494			$	15,450			$	1,944,311
Charge-offs			-				-				-				-				(440	)			(440	)
Recoveries			37,975				1,744				-				-				67,775				107,494
Provisions			34,645				(69,181	)			68,876				26,699				(61,039	)			-
Ending balance		$	653,599			$	829,466			$	145,361			$	401,193			$	21,746			$	2,051,365
Allowance for Loan Losses as of September 30, 2016: Individually evaluated for impairment		$	62,771			$	-			$	-			$	52,896			$	-			$	115,667
Collectively evaluated for impairment		$	590,828			$	829,466			$	145,361			$	348,297			$	21,746			$	1,935,698
Loans Receivable as of September 30, 2016
Ending balance - total		$	57,900,079			$	82,080,911			$	16,319,198			$	28,214,208			$	740,279			$	185,254,675
Ending balances:
Individually evaluated for impairment		$	1,657,404			$	-			$	706,347			$	1,727,930			$	-			$	4,091,681
Collectively evaluated for impairment		$	56,242,675			$	82,080,911			$	15,612,851			$	26,486,278			$	740,279			$	181,162,994

 

The credit quality indicators presented for all classes within the loan portfolio is a widely used and standard system representing the degree of risk of nonpayment. The risk-grade categories presented in the following table are:

 

Pass – These loans have a risk profile which range from superior quality with minimal credit risk, to loans requiring management attention, but still have an acceptable risk profile, and continue to perform primarily as contracted.

 

Special mention – These credit facilities have potential developing weaknesses that deserve extra attention from the loan officer, and other management personnel. If the loan officer cannot correct or mitigate the developing weakness, there may be deterioration in the ability of the borrower to repay the bank’s debt in the future. Loan officers should not assign this grade to loans that bear certain peculiar risks normally associated with the types of financing involved, unless circumstances have caused the risk to increase to a level higher than would have been acceptable when the credit was originally approved. Loan officers should generally grade loans where actual, not potential, weaknesses or problems are clearly evident and significant in one of the categories below.

 

Substandard – This category includes loans possessing weaknesses that jeopardize the ultimate collection of principal and interest outstanding. These loans are inadequately protected by the sound worth and paying capacity of the borrower or of the pledged collateral, if any. The weaknesses require close supervision by bank management. Loss may not be evident; however, current financials or pledged collateral inadequately protect the loan. Borrowers in this category have well-defined weaknesses that jeopardize the proper liquidation of the debt. They may also have adverse trends, unless improved, that will likely result in repayment over an excessive period of time, or possibly not at all. Weaknesses that exist may indicate the indebtedness may not be current or may not in the future be repaid according to previously agreed upon terms. If loans are current, future performance may be in question. All non-accrual loans shall be graded substandard or doubtful.

 

 

Premara Financial, Inc. and Subsidiary

Notes to Consolidated Financial Statements (Unaudited)

 

 

Note 3 Loans Receivable, Continued

 

Doubtful – Loans or portions of loans in this category have one or more weaknesses, which, on the basis of currently existing facts, conditions, and values, make ultimate collection of all principal highly questionable. The possibility of loss is extremely high, and management should make specific loan loss reserve allocations. However, management does not know the amount with certainty of eventual loss because of specific pending factors. Pending factors include: litigation, proposed merger or acquisition or liquidation in progress, injection of new capital in progress or refinancing plans in progress, and pending factors still pending after 18 months must be disregarded and the loan downgraded appropriately.

 

The following tables present loan balances by credit quality indicator as of September 30, 2017 and December 31, 2016:

 

September 30, 2017		Residential Real Estate				Commercial Real Estate				Construction and Land				Commercial and Industrial				Consumer and Other				Total
Grade:
Pass		$	57,029,962			$	94,824,413			$	18,394,229			$	26,678,749			$	643,623			$	197,570,976
Special Mention			821,324				-				574,147				3,830,916				-				5,226,387
Substandard			650,160				242,330				-				515,704				-				1,408,194
Doubtful			-				-				-				-				-				-
Ending balance		$	58,501,446			$	95,066,743			$	18,968,376			$	31,025,369			$	643,623			$	204,205,557

 

December 31, 2016		Residential Real Estate				Commercial Real Estate				Construction and Land				Commercial and Industrial				Consumer and Other				Total
Grade:
Pass		$	61,026,702			$	88,038,763			$	19,456,283			$	23,281,579			$	672,064			$	192,475,391
Special Mention			385,093				1,172,611				-				2,541,207				-				4,098,911
Substandard			1,523,483				-				-				2,592,202				-				4,115,685
Doubtful			-				-				-				-				-				-
Ending balance		$	62,935,278			$	89,211,374			$	19,456,283			$	28,414,988			$	672,064			$	200,689,987

 

The following tables present an aging analysis of loans as of September 30, 2017 and December 31, 2016:

 

September 30, 2017		30-59 Days Past Due				60-89 Days Past Due				Greater Than 90 Days				Total Past Due				Current				Total Loans Receivable				Recorded Investments 90 Days and Accruing
Residential real estate		$	409,912			$	-			$	459,644			$	869,556			$	57,631,890			$	58,501,446			$	-
Commercial real estate			-				-				-				-				95,066,743				95,066,743				-
Construction and land			-				-				-				-				18,968,376				18,968,376				-
Commercial and industrial			-				-				609,281				609,281				30,416,088				31,025,369				-
Consumer and other			-				-				-				-				643,623				643,623				-
Total		$	409,912			$	-			$	1,068,925			$	1,478,837			$	202,726,720			$	204,205,557			$	-

 

December 31, 2016		30-59 Days Past Due				60-89 Days Past Due				Greater Than 90 Days				Total Past Due				Current				Total Loans Receivable				Recorded Investments 90 Days and Accruing
Residential real estate		$	121,678			$	-			$	964,051			$	1,085,729			$	61,849,549			$	62,935,278			$	47,416
Commercial real estate			275,668				183,955				988,656				1,448,279				87,763,095				89,211,374				988,656
Construction and land			-				-				-				-				19,456,283				19,456,283				-
Commercial and industrial			1,154,375				1,345,853				268,066				2,768,294				25,646,694				28,414,988				-
Consumer and other			708				-				25,000				25,708				646,356				672,064				25,000
Total		$	1,552,429			$	1,529,808			$	2,245,773			$	5,328,010			$	195,361,977			$	200,689,987			$	1,061,072

 

 

Premara Financial, Inc. and Subsidiary

Notes to Consolidated Financial Statements (Unaudited)

 

Note 3. Loans Receivable, Continued

 

The following tables present information on the investment in impaired loans as of September 30, 2017 and December 31, 2016:

 

September 30, 2017		Recorded Investment				Unpaid Principal Balance				Related Allowance
With no related allowance recorded:
Residential real estate		$	1,317,345			$	1,425,499			$	-
Commercial real estate			-				-				-
Construction and land			-				-				-
Commercial and industrial			1,345,357				1,438,807				-
Consumer and other			-				-				-
			2,662,702				2,864,306				-
With related allowance recorded:
Residential real estate			176,809				333,873				9,609
Commercial real estate			242,330				242,330				-
Construction and land			-				-				-
Commercial and industrial			239,595				274,322				276,629
Consumer and other			-				-				-
			658,734				850,525				286,238
Total:
Residential real estate			1,494,154				1,759,372				9,609
Commercial real estate			242,330				242,330				-
Construction and land			-				-				-
Commercial and industrial			1,584,952				1,713,129				276,629
Consumer and other			-				-				-
		$	3,321,436			$	3,714,831			$	286,238

 

December 31, 2016		Recorded Investment				Unpaid Principal Balance				Related Allowance
With no related allowance recorded:
Residential real estate		$	963,293			$	1,148,104			$	-
Commercial real estate			-				1,843				-
Construction and land			701,247				701,247				-
Commercial and industrial			797,669				890,691				-
Consumer and other			-				-				-
			2,462,209				2,741,885				-
With related allowance recorded:
Residential real estate			722,371				874,885				51,171
Commercial real estate			-				-				-
Construction and land			-				-				-
Commercial and industrial			868,516				895,252				48,988
Consumer and other			-				-				-
			1,590,887				1,770,137				100,159
Total:
Residential real estate			1,685,664				2,022,989				51,171
Commercial real estate			-				1,843				-
Construction and land			701,247				701,247				-
Commercial and industrial			1,666,185				1,785,943				48,988
Consumer and other			-				-				-
		$	4,053,096			$	4,512,022			$	100,159

 

 

Premara Financial, Inc. and Subsidiary

Notes to Consolidated Financial Statements (Unaudited)

  

Note 3. Loans Receivable, Continued

 

The following tables present information on the average impaired loans and interest recognized on those impaired loans, for the periods indicated:

 

		Nine Months Ended
		September 30, 2017								September 30, 2016
		Average Recorded Investment				Interest Income Recognized				Average Recorded Investment				Interest Income Recognized
With no related allowance recorded:
Residential real estate		$	576,309			$	40,443			$	845,452			$	14,370
Commercial real estate			-				-				1,059,460				-
Construction and land			693,653				-				1,564,717				31,898
Commercial and industrial			1,312,026				41,759				804,636				54,256
Consumer and other			-				-				-				-
			2,581,988				82,202				4,274,265				100,524
With related allowance recorded:
Residential real estate			386,971				-				786,443				-
Commercial real estate			-				15,298				134,944				-
Construction and land			-				-				-				-
Commercial and industrial			383,721				-				752,233				-
Consumer and other			-				-				-				-
			770,692				15,298				1,673,620				-
Total:
Residential real estate			963,281				40,443				1,631,895				14,370
Commercial real estate			-				15,298				1,194,404				-
Construction and land			693,653				-				1,564,717				31,898
Commercial and industrial			1,695,747				41,759				1,556,869				54,256
Consumer and other			-				-				-				-
		$	3,352,681			$	97,500			$	5,947,885			$	100,524

 

		Three Months Ended
		September 30, 2017								September 30, 2016
		Average Recorded Investment				Interest Income Recognized				Average Recorded Investment				Interest Income Recognized
With no related allowance recorded:
Residential real estate		$	552,048			$	14,023			$	900,909			$	6,674
Commercial real estate			-				-				538,856				-
Construction and land			688,608				-				1,221,130				11,308
Commercial and industrial			1,374,766				13,271				1,600,125				15,822
Consumer and other			-				-				-				-
			2,615,422				27,294				4,261,020				33,804
With related allowance recorded:
Residential real estate			263,887				-				558,044				-
Commercial real estate			-				4,954				-				-
Construction and land			-				-				-				-
Commercial and industrial			359,074				-				192,617				-
Consumer and other			-				-				-				-
			622,961				4,954				750,661				-
Total:
Residential real estate			815,935				14,023				1,458,953				6,674
Commercial real estate			-				4,954				538,856				-
Construction and land			688,608				-				1,221,130				11,308
Commercial and industrial			1,733,840				13,271				1,792,742				15,822
Consumer and other			-				-				-				-
		$	3,238,383			$	32,248			$	5,011,681			$	33,804

 

 

Premara Financial, Inc. and Subsidiary

Notes to Consolidated Financial Statements (Unaudited)

 

Note 3. Loans Receivable, Continued

 

The following table presents loans on nonaccrual status by loan class at September 30, 2017 and December 31, 2016:

 

		2017				2016
Residential real estate		$	655,750			$	1,523,483
Commercial real estate			-				-
Construction and land			-				-
Commercial and industrial			750,660				436,829
Consumer and other			-				-
Total		$	1,406,410			$	1,960,312

 

Troubled debt restructurings:

The following table presents loans modified during the nine and three months ended September 30, 2017 that were considered to be a troubled debt restructuring.

 

		Number of Contracts				Pre-Modification Outstanding Recorded Investment				Post-Modification Outstanding Recorded Investment
Commercial and industrial			1			$	105,874			$	105,874

 

There were no loans modified during the nine and three months ended September 30, 2016 that were considered to be a troubled debt restructuring. During the nine and three months ended September 30, 2017 and 2016 there were no loans that went into default which had previously been restructured.

In the determination of the allowance for loan losses, management considers troubled debt restructurings, and subsequent defaults in these restructurings by evaluating the potential for impairment under ASC 310, and if appropriate, a specific reserve is allocated.

 

Note 4. Stock Warrants

 

Each organizer of the Bank received stock warrants giving them the right to purchase up to 4,248 shares at a price of $11 per share. As a result of the Company’s 15% stock dividend in 2013, the warrants were adjusted to 4,885 shares at a purchase price of $9.57 per share. The warrants vested immediately and expired on August 29, 2017. During 2015, the expiration of the warrants for the five of the organizers still actively serving on the Board of Directors was extended to August 29, 2022. No expense was recognized as a result of the modification. During the three months ended September 30, 2017 organizers exercised a total of 19,540 warrants at a price of $9.57 per share. As a result of this exercise an additional $186,998 of capital was raised by the Company. There were no organizer warrants issued, exercised or canceled during the year ended December 31, 2016.

 

 

Premara Financial, Inc. and Subsidiary

Notes to Consolidated Financial Statements (Unaudited)

  

Note 5. Income per Share

 

Basic income per share is computed by dividing net income available to common stockholders by the weighted-average number of common shares outstanding. Diluted income per share is computed by dividing net income available to common stockholders by the weighted-average number of common shares outstanding and dilutive common share equivalents using the treasury stock method. Dilutive common share equivalents include common shares issuable upon exercise of outstanding stock warrants.

 

		Nine Months Ended September 30,								Three Months Ended September 30,
		2017				2016				2017				2016
Net income available to common shareholders		$	835,412			$	654,475			$	244,044			$	232,636
Weighted average shares outstanding, basic			3,162,630				3,160,268				3,167,277				3,160,268
Effect of dilutive securities			-				-				1,765				-
Weighted average shares outstanding, diluted			3,162,630				3,160,268				3,169,042				3,160,268
Basic income per common share		$	0.26			$	0.21			$	0.08			$	0.07
Dilutive income per common share		$	0.26			$	0.21			$	0.08			$	0.07

 

Note 6. Fair Value of Financial Instruments

 

Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants. A fair value measurement assumes that the transaction to sell the asset or transfer the liability occurs in the principal market for the asset or liability or, in the absence of a principal market, the most advantageous market for the asset or liability. The price in the principal (or most advantageous) market used to measure the fair value of the asset or liability shall not be adjusted for transaction costs. An orderly transaction is a transaction that assumes exposure to the market for a period prior to the measurement date to allow for marketing activities that are usual and customary for transactions involving such assets and liabilities; it is not a forced transaction. Market participants are buyers and sellers in the principal market that are (i) independent, (ii) knowledgeable, (iii) able to transact and (iv) willing to transact.

 

The use of valuation techniques that are consistent with the market approach, the income approach and/or the cost approach are required. The market approach uses prices and other relevant information generated by market transactions involving identical or comparable assets and liabilities. The income approach uses valuation techniques to convert future amounts, such as cash flows or earnings, to a single present amount on a discounted basis. The cost approach is based on the amount that currently would be required to replace the service capacity of an asset (replacement cost). Valuation techniques should be consistently applied. Inputs to valuation techniques refer to the assumptions that market participants would use in pricing the asset or liability. Inputs may be observable, meaning those that reflect the assumptions market participants would use in pricing the asset or liability developed based on market data obtained from independent sources, or unobservable, meaning those that reflect the reporting entity’s own assumptions about the assumptions market participants would use in pricing the asset or liability developed based on the best information available in the circumstances. In that regard, a fair value hierarchy is established for valuation inputs that gives the highest priority to quoted prices in active markets for identical assets or liabilities and the lowest priority to unobservable inputs.

 

 

Premara Financial, Inc. and Subsidiary

Notes to Consolidated Financial Statements (Unaudited)

  

Note 6. Fair Value of Financial Instruments, Continued

 

Fair value hierarchy:

 

	Level 1	Valuation is based upon quoted prices (unadjusted) in active markets for identical assets or liabilities that the Company has the ability to access.
	Level 2	Valuation is based upon quoted prices for similar assets and liabilities in active markets, as well as inputs that are observable for the asset or liability (other than quoted prices), such as interest rates, foreign exchange rates, and yield curves that are observable at commonly quoted intervals.
	Level 3	Valuation is generated from model-based techniques that use at least one significant assumption based on unobservable inputs for the assets or liability, which are typically based on an entity’s own assumptions, as there is little, if any, related market activity. In instances where the determination of the fair value measurement is based on inputs from different levels of the fair value hierarchy, the level in the fair value hierarchy within which the entire fair value measurement falls is based on the lowest level input that is significant to the fair value measurement in its entirety. The Company’s assessment of the significance of a particular input to the fair value measurement in its entirety requires judgment, and considers factors specific to the asset or liability.

 

The following is a description of the valuation methodologies used for assets and liabilities recorded at fair value.

 

Securities available-for-sale:

Investment securities classified as available-for-sale are recorded at fair value on a recurring basis. Fair value measurement is based upon quoted prices, if available. If quoted prices are not available, fair values are measured using independent pricing models or other model-based valuation techniques such as the present value of future cash flows, adjusted for the security's credit rating, prepayment assumptions and other factors such as credit loss assumptions. Level 1 securities include those traded on an active exchange, such as the New York Stock Exchange, U.S. Treasury securities that are traded by dealers or brokers in active over-the-counter markets and money market funds. Level 2 securities include mortgage-backed securities issued by government sponsored entities, municipal bonds and corporate debt securities. Securities classified as Level 3 may include asset-backed securities in less liquid markets.

 

Derivative assets and liabilities:

The values of derivative instruments held or issued by the Company for risk management purposes are traded in over-the-counter markets where quoted market prices are not readily available. For those derivatives, the Company measures fair value using models that use primarily market observable inputs, such as yield curves and option volatilities, and include the value associated with counterparty credit risk. The Company classifies derivative instruments as Level 2 valuation.

 

Loans:

The Company does not record loans at fair value on a recurring basis. However, from time to time, a loan is considered impaired and an allowance for loan losses is established. Loans for which it is probable that payment of interest and principal will not be made in accordance with the contractual terms of the loan agreement are considered impaired. Once a loan is identified as individually impaired, management measures impairment by estimating the fair value of the impaired loan using one of several methods; including collateral value, market value of similar debt, enterprise value, liquidation value or discounted cash flows. Those impaired loans not requiring an allowance represent loans for which the fair value of the expected repayments or collateral exceed the recorded investments in such loans.

 

 

Premara Financial, Inc. and Subsidiary

Notes to Consolidated Financial Statements (Unaudited)

 

Note 6. Fair Value of Financial Instruments, Continued

 

For impaired loans that have an allowance established based on the fair value of collateral, a classification in the fair value hierarchy is required. When the fair value of the collateral is based on an observable market price or a current appraised value, the Company records the impaired loan as nonrecurring Level 2. When an appraised value is not available or management determines the fair value of the collateral is further impaired below the appraised value and there is no observable market price, the Company records the impaired loan as nonrecurring Level 3.

 

Assets and liabilities measured at fair value on a recurring basis:

The tables below present the Company’s assets and liabilities measured at fair value on a recurring basis as of September 30, 2017 and December 31, 2016, aggregated by the level in the fair value hierarchy within which those measurements fall:

 

		Level 1				Level 2				Level 3				Total
September 30, 2017
Assets:
Securities available for sale:
Collateralized mortgage         obligations		$	-			$	477,619			$	-			$	477,619
Mortgage-backed securities			-				7,738,641				-				7,738,641
Municipal bonds - non-taxable			-				16,434,009				-				16,434,009
Municipal bonds - taxable			-				4,506,219				-				4,506,219
Other securities			-				3,783,890				-				3,783,890
Total Investments			-				32,940,378				-				32,940,378
Total assets measured at fair value on a recurring basis		$	-			$	32,940,378			$	-			$	32,940,378
Liabilities:
Derivative instruments:
Interest rate swaps		$	-			$	209,337			$	-			$	209,337
Total liabilities measured at fair value on a recurring basis		$	-			$	209,337			$	-			$	209,337

 

		Level 1				Level 2				Level 3				Total
December 31, 2016
Assets:
Securities available for sale:
Collateralized mortgage         obligations		$	-			$	558,314			$	-			$	558,314
Mortgage-backed securities			-				7,066,845				-				7,066,845
Municipal bonds - non-taxable			-				16,231,530				-				16,231,530
Municipal bonds - taxable			-				4,581,258				-				4,581,258
Other securities			-				3,022,246				-				3,022,246
Total Investments			-				31,460,193				-				31,460,193
Total assets measured at fair value on a recurring basis		$	-			$	31,460,193			$	-			$	31,460,193
Liabilities:
Derivative instruments:
Interest rate swaps		$	-			$	208,748			$	-			$	208,748
Total liabilities measured at fair value on a recurring basis		$	-			$	208,748			$	-			$	208,748

 

 

 

Premara Financial, Inc. and Subsidiary

Notes to Consolidated Financial Statements (Unaudited)

  

Note 6. Fair Value of Financial Instruments, Continued

 

Assets and liabilities measured at fair value on a non-recurring basis:

 

The table below presents the Company’s assets measured at fair value on a non-recurring basis as of September 30, 2017 and December 31, 2016, aggregated by the level in the fair value hierarchy within which those measurements fall:

 

		Level 1				Level 2				Level 3				Total
September 30, 2017
Impaired loans		$	-			$	-			$	3,035,198			$	3,035,198

 

		Level 1				Level 2				Level 3				Total
December 31, 2016
Impaired loans		$	-			$	-			$	3,952,937			$	3,952,937

 

The Company had no liabilities measured at fair value on a non-recurring basis at September 30, 2017 or December 31, 2016.

 

For Level 3 assets measured at fair value on a non-recurring basis as of September 30, 2017 and December 31, 2016, the significant unobservable inputs used in the fair value measurements were as follows:

 

Fair Value at September 30, 2017

Fair Value at December 31, 2016

Valuation Technique

Significant Unobservable Inputs

General Range of Significant Unobservable Input Values

Impaired Loans

$

3,035,198

$

3,952,937

Appraised Value/Discounted Cash Flows/ Market Value of Note

Discounts to reflect current market conditions, ultimate collectability, and estimated costs to sell

0 – 10%

 

Note 7. Subsequent Events

 

Subsequent events are events or transactions that occur after the balance sheet date, but before financial statements are issued. Recognized subsequent events are events or transactions that provide additional evidence about conditions that existed at the date of the balance sheet, including the estimates inherent in the process of preparing financial statements. Nonrecognized subsequent events are events that provide evidence about conditions that did not exist at the date of the balance sheet but arose after that date. Management has reviewed events occurring through December 21, 2017, the date the financial statements were available to be issued. An expense of $2,007,224 was recognized on December 5, 2017 for the termination of the core processing and ancillary services contract. No other subsequent events occurred requiring accrual or disclosure.