XML 22 R11.htm IDEA: XBRL DOCUMENT v3.10.0.1
Loans and Allowance for Loan Losses
9 Months Ended
Sep. 30, 2018
Receivables [Abstract]  
Loans and Allowance for Loan Losses

Note 3: Loans and Allowance for Loan Losses

Major classifications of loans (net of deferred loan fees of $159,418 as of September 30, 2018 and $152,047 as of December 31, 2017) are as follows:

 

   

September 30,

2018

    December 31,
2017
 
Commercial loans   $ 55,372,741     $ 51,723,237  
Commercial real estate:                
Construction     4,997,437       2,317,857  
Other     140,978,428       140,186,324  
Consumer:                
Real estate     68,179,290       70,797,973  
Other     5,099,907       5,155,249  
      274,627,803       270,180,640  
Allowance for loan losses     (4,105,930 )     (3,875,398 )
Loans, net   $  270,521,873     $ 266,305,242  

 

We had $99.9 million and $113.4 million of loans pledged as collateral to secure funding with the Federal Reserve Bank (“FRB”) Discount Window as of September 30, 2018 and as of December 31, 2017, respectively.

Our portfolio grading analysis estimates the capability of the borrower to repay the contractual obligations of the loan agreements as scheduled. Our internal credit risk grading system is based on experience with similarly graded loans, industry best practices, and regulatory guidance. Our portfolio is graded in its entirety.

 

Our internally assigned grades pursuant to the Board-approved lending policy are as follows:

 

  Excellent (1) The borrowing entity has more than adequate cash flow, unquestionable strength, strong earnings and capital, and where applicable, no overdrafts.

 

  Good (2) The borrowing entity has dependable cash flow, better than average financial condition, good capital and usually no overdrafts.

 

  Satisfactory (3) The borrowing entity has adequate cash flow, satisfactory financial condition, and explainable overdrafts (if any).

 

  Watch (4) The borrowing entity has generally adequate, yet inconsistent cash flow, cyclical earnings, weak capital, loan to/from stockholders, and infrequent overdrafts. The borrower has consistent yet sometimes unpredictable sales and growth.

 

  OAEM (5) The borrowing entity has marginal cash flow, occasional past dues, and frequent and unexpected working capital needs.

 

  Substandard (6) The borrowing entity has a cash flow barely sufficient to service debt, deteriorated financial condition, and bankruptcy is a possibility. The borrowing entity has declining sales, rising costs, and may need to look for secondary source of repayment.

 

  Doubtful (7) The borrowing entity has negative cash flow. Survival of the business is at risk, full repayment is unlikely, and there are frequent and unexplained overdrafts. The borrowing entity shows declining trends and no operating profits.

 

  Loss (8) The borrowing entity has negative cash flow with no alternatives. Survival of the business is unlikely.

 

The following tables illustrate credit quality by class and internally assigned grades as of September 30, 2018 and December 31, 2017. “Pass” includes loans internally graded as excellent, good and satisfactory.

September 30, 2018
   Commercial 

Commercial
Real Estate -

Construction

 

Commercial
Real Estate -

Other

  Consumer
Real Estate
  Consumer
Other
  Total
 Pass   $52,477,930   $4,997,437   $136,098,726   $65,689,519   $4,796,814   $264,060,426 
 Watch    1,047,571    —      2,907,641    1,610,019    212,117    5,777,348 
 OAEM    —      —      593,359    —      —      593,359 
 Substandard    1,847,240    —      1,378,702    879,752    90,976    4,196,670 
 Doubtful    —      —      —      —      —      —   
 Loss    —      —      —      —      —      —   
 Total   $55,372,741   $4,997,437   $140,978,428   $68,179,290   $5,099,907   $274,627,803 

 

December 31, 2017
   Commercial 

Commercial

Real Estate -

Construction

 

Commercial

Real Estate -

Other

 

Consumer

Real Estate

  Consumer Other  Total
 Pass   $47,456,205   $1,936,335   $134,401,977   $68,570,298   $4,933,696   $257,298,511 
 Watch    2,403,978    381,522    3,605,621    1,934,802    185,746    8,511,669 
 OAEM    —      —      610,806    —      —      610,806 
 Substandard    1,863,054    —      1,567,920    292,873    35,807    3,759,654 
 Doubtful    —      —      —      —      —      —   
 Loss    —      —      —      —      —      —   
 Total   $51,723,237   $2,317,857   $140,186,324   $70,797,973   $5,155,249   $270,180,640 

 

The following tables include an aging analysis of the recorded investment in loans segregated by class:

 

  September 30, 2018
   30-59 Days Past Due  60-89 Days Past Due  Greater than 90 Days 

Total

Past Due

  Current  Total Loans Receivable  Recorded Investment ≥
90 Days and Accruing
Commercial  $284,995   $229,396   $—     $514,391   $54,858,350   $55,372,741   $—   
Commercial Real Estate - Construction   —      —      —      —      4,997,437    4,997,437    —   
Commercial Real Estate - Other   209,806    —      571,292    781,098    140,197,330    140,978,428    —   
Consumer Real Estate   —      —      —      —      68,179,290    68,179,290    —   
Consumer Other   13,622    —      —      13,622    5,086,285    5,099,907    —   
Total  $508,423   $229,396   $571,292   $1,309,111   $273,318,692   $274,627,803   $—   

 

 December 31, 2017
   30-59 Days
Past Due
  60-89 Days
Past Due
 

Greater Than

90 Days

  Total
Past Due
  Current  Total  Recorded
Investment ≥
90 Days and
Accruing
Commercial  $3,531   $192,846   $—     $196,377   $51,526,860   $51,723,237   $—   
Commercial Real Estate - Construction   —      —      —      —      2,317,857    2,317,857    —   
Commercial Real Estate - Other   —      —      651,578    651,578    139,534,746    140,186,324    —   
Consumer Real Estate   —      —      —      —      70,797,973    70,797,973    —   
Consumer Other   10,302    —      34,107    44,409    5,110,840    5,155,249    34,107 
Total  $13,833   $192,846   $685,685   $892,364   $269,288,276   $270,180,640   $34,107 

 

There were no loans as of September 30, 2018 and two loans as of December 31, 2017 over 90 days past due and still accruing.

The following table summarizes the balances of non-accrual loans:

 

    Loans Receivable on Non-Accrual
    September 30,
2018
    December 31,
2017
 
Commercial  $27,230   $41,651 
Commercial Real Estate - Construction   —      —   
Commercial Real Estate - Other   571,292    790,208 
Consumer Real Estate   —      —   
Consumer Other   3,405    —   
           
Total  $601,927   $831,859 

 

The following tables set forth the changes in the allowance for loan losses and an allocation of the allowance for loan losses by class for the three and nine months ended September 30, 2018 and September 30, 2017. The allowance for loan losses consists of specific and general components. The specific component relates to loans that are individually classified as impaired. The general component covers non-impaired loans and is based on historical loss experience adjusted for current economic factors.

 

Three Months Ended September 30, 2018
   Commercial  Commercial
Real Estate - Construction
  Commercial
Real Estate - Other
  Consumer
Real Estate
  Consumer
Other
  Total
Allowance for Loan Losses:                              
Beginning Balance  $1,343,760   $29,091   $972,038   $589,051   $1,073,524   $4,007,464 
Charge-offs   —      —      —      —      (12,794)   (12,794)
Recoveries   11,000    —      —      —      260    11,260 
Provisions   146,752    4,404    10,334    (84,365)   22,875    100,000 
Ending Balance  $1,501,512   $33,495   $982,372   $504,686   $1,083,865   $4,105,930 
                               

 

Nine Months Ended September 30, 2018
   Commercial  Commercial
Real Estate - Construction
  Commercial
Real Estate - Other
  Consumer
Real Estate
  Consumer
Other
  Total
Allowance for Loan Losses:                              
Beginning Balance  $1,403,588   $23,638   $1,549,755   $796,918   $101,499   $3,875,398 
Charge-offs   (31,250)   —      —      —      (84,637)   (115,887)
Recoveries   13,500    —      56,827    45,412    680    116,419 
Provisions   115,674    9,857    (624,210)   (337,644)   1,066,323    230,000 
Ending Balance  $1,501,512   $33,495   $982,372   $504,686   $1,083,865   $4,105,930 

 

Three Months Ended September 30, 2017
   Commercial  Commercial
Real Estate - Construction
  Commercial
Real Estate - Other
  Consumer
Real Estate
  Consumer
Other
  Total
Allowance for Loan Losses:                              
Beginning Balance  $1,628,672   $52,763   $1,382,919   $771,853   $91,308   $3,927,515 
Charge-offs   —      —      —      (80,787)   (2,489)   (83,276)
Recoveries   —      —      —      21,000    1,720    22,720 
Provisions   403,920    (7,235)   (209,108)   (150,697)   (16,880)   20,000 
Ending Balance  $2,032,592   $45,528   $1,173,811   $561,369   $73,659   $3,886,959 

 

Nine Months Ended September 30, 2017
   Commercial  Commercial
Real Estate - Construction
  Commercial
Real Estate - Other
  Consumer
Real Estate
  Consumer
Other
  Total
Allowance for Loan Losses:                              
Beginning Balance  $1,545,188   $51,469   $1,374,706   $726,391   $153,863   $3,851,617 
Charge-offs   —      —      —      (80,786)   (4,863)   (85,649)
Recoveries   —      —      —      63,000    5,491    68,491 
Provisions   487,404    (5,941)   (200,895)   (147,236)   (80,832)   52,500 
Ending Balance  $2,032,592   $45,528   $1,173,811   $561,369   $73,659   $3,886,959 

 

The following tables present, by class and reserving methodology, the allocation of the allowance for loan losses and the gross investment in loans:

 

September 30, 2018
   Commercial  Commercial
Real Estate - Construction
  Commercial
Real Estate - Other
  Consumer
Real Estate
  Consumer
Other
  Total
Allowance for Loan Losses                              
Individually evaluated for impairment  $918,694   $—     $40,614   $—     $23,046   $982,354 
Collectively evaluated for impairment   582,818    33,495    941,758    504,686    1,060,819    3,123,576 
Total Allowance for Loan Losses  $1,501,512   $33,495   $982,372   $504,686   $1,083,865   $4,105,930 
Loans Receivable                              
Individually evaluated for impairment  $1,807,958   $—     $1,390,661   $879,753   $23,046   $4,101,418 
Collectively evaluated for impairment   53,564,783    4,997,437    139,587,767    67,299,537    5,076,861    270,526,385 
Total Loans Receivable  $55,372,741   $4,997,437   $140,978,428   $68,179,290   $5,099,907   $274,627,803 

    

 

December 31, 2017
   Commercial  Commercial
Real Estate -
Construction
 

Commercial

Real Estate -
Other

  Consumer
Real Estate
 

Consumer

Other

  Total
Allowance for Loan Losses                              
Individually evaluated for impairment  $832,571   $—     $99,523   $43,042   $34,107   $1,009,243 
Collectively evaluated for impairment   571,017    23,638    1,450,232    753,876    67,392    2,866,155 
Total Allowance for Losses  $1,403,588   $23,638   $1,549,755   $796,918   $101,499   $3,875,398 
Loans Receivable                              
Individually evaluated for impairment  $1,812,461   $—     $1,584,821   $292,873   $34,107   $3,724,262 
Collectively evaluated for impairment   49,910,776    2,317,857    138,601,503    70,505,100    5,121,142    266,456,378 
Total Loans Receivable  $51,723,237   $2,317,857   $140,186,324   $70,797,973   $5,155,249   $270,180,640 

 

As of September 30, 2018 and December 31, 2017, loans individually evaluated for impairment and the corresponding allowance for loan losses are presented in the following table:

 

   Impaired and Restructured Loans As of
   September 30, 2018  December 31, 2017
    

Unpaid

Principal

Balance

    Recorded
Investment
    

Related

Allowance

    

Unpaid

Principal Balance  

    Recorded Investment    Related Allowance 
With no related allowance recorded:                              
Commercial  $124,983   $124,983    —     $152,490   $152,490   $—   
Commercial Real Estate - Construction   —      —      —      —      —      —   
Commercial Real Estate - Other   981,021    981,021    —      1,058,601    1,058,601    —   
Consumer Real Estate   879,753    879,753    —      249,754    249,754    —   
Consumer Other   —      —      —      —      —      —   
Total   1,985,757    1,985,757    —      1,460,845    1,460,845    —   
                               
With an allowance recorded:                              
Commercial   1,682,975    1,682,975    918,694    1,659,971    1,659,971    832,571 
Commercial Real Estate - Construction   —      —      —      —      —      —   
Commercial Real Estate - Other   409,640    309,839    40,614    626,021    526,220    99,523 
Consumer Real Estate   —      —      —      43,119    43,119    43,042 
Consumer Other   23,046    23,046    23,046    34,107    34,107    34,107 
Total   2,115,661    2,015,860    982,354    2,363,218    2,263,417    1,009,243 
                               
Total                              
Commercial   1,807,958    1,807,958    918,694    1,812,461    1,812,461    832,571 
Commercial Real Estate - Construction   —      —      —      —      —      —   
Commercial Real Estate - Other   1,390,661    1,290,860    40,614    1,684,622    1,584,821    99,523 
Consumer Real Estate   879,753    879,753    —      292,873    292,873    43,042 
Consumer Other   23,046    23,046    23,046    34,107    34,107    34,107 
Total  $4,101,418   $4,001,617   $982,354   $3,824,063   $3,724,262   $1,009,243 

 

The following table presents average impaired loans and interest income recognized on those impaired loans, by class, for the periods indicated:

 

   Three Months Ended September 30,
   2018  2017
  

Average

Recorded Investment

 

Interest

Income Recognized

 

Average

Recorded Investment

 

Interest

Income Recognized

With no related allowance recorded:                    
Commercial  $128,953   $2,178   $165,274   $2,429 
Commercial Real Estate - Construction   —      —      —      —   
Commercial Real Estate - Other   984,499    10,378    1,276,906    9,999 
Consumer Real Estate   879,753    8,562    451,318    5,972 
Consumer Other   —      —      —      —   
Total  1,993,205   21,118   1,893,498   18,400 
                     
With an allowance recorded:                    
Commercial  1,702,976    26,195    1,685,930    26,484 
Commercial Real Estate - Construction   —      —      —      —   
Commercial Real Estate - Other   411,107    2,739    933,243    2,792 
Consumer Real Estate   —      —      43,119    462 
Consumer Other   24,518    329    34,579    463 
Total  2,138,601    29,263    2,696,871    30,201 
                    
Commercial  1,831,929    28,373    1,851,204    28,913 
Commercial Real Estate - Construction   —      —      —      —   
Commercial Real Estate - Other   1,395,606    13,117    2,210,149    12,791 
Consumer Real Estate   879,753    8,562    494,437    6,434 
Consumer Other   24,518    329    34,579    463 
Total  $4,131,806   $50,381   $4,590,369   $48,601 

 

   Nine Months Ended September 30,
   2018  2017
  

Average

Recorded Investment

 

Interest

Income Recognized

 

Average

Recorded Investment

 

Interest

Income Recognized

With no related allowance recorded:                    
Commercial  $137,445   $6,551   $173,964   $7,416 
Commercial Real Estate - Construction   —      —      —      —   
Commercial Real Estate - Other   983,516    29,724    1,275,402    23,084 
Consumer Real Estate   879,753    37,847    451,025    16,938 
Consumer Other   —      —      —      —   
Total   2,000,714    74,122    1,900,391    47,438 
                     
With an allowance recorded:                    
Commercial   1,742,743    81,553    1,711,259    76,544 
Commercial Real Estate - Construction   —      —      —      —   
Commercial Real Estate - Other   419,231    8,209    930,420    5,367 
Consumer Real Estate   —      —      43,119    1,296 
Consumer Other   27,469    1,084    36,056    1,419 
Total   2,189,443    90,846    2,720,854    84,626 
                    
Commercial   1,880,188    88,104    1,885,223    83,960 
Commercial Real Estate - Construction   —      —      —      —   
Commercial Real Estate - Other   1,402,747    37,933    2,205,822    28,451 
Consumer Real Estate   879,753    37,847    494,144    18,234 
Consumer Other   27,469    1,084    36,056    1,419 
Total  $4,190,157   $164,968   $4,621,245   $ 132,064 

 

In general, the modification or restructuring of a debt is considered a troubled debt restructuring (“TDR”) if we, for economic or legal reasons related to a borrower’s financial difficulties, grant a concession to the borrower that we would not otherwise consider. As of September 30, 2018, there was one TDR with a balance of $23,046, compared to one TDR with a total balance of $33,300 as of December 31, 2017. These TDRs were granted extended payment terms with no principal reduction. All TDRs were performing as agreed as of September 30, 2018 and December 31, 2017, respectively. No TDRs defaulted during the nine months ended September 30, 2018 and 2017, which were modified within the previous twelve months.