10-Q 1 f10qhbi033113.htm FORM 10-Q f10qhbi033113.htm


 
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C.  20549
FORM 10-Q

[X] Quarterly Report Pursuant to Section 13 or 15(d)
of the Securities Exchange Act of 1934

For the quarterly period ended March 31, 2013

[   ] 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:  0-27622

HIGHLANDS BANKSHARES, INC.
(Exact name of registrant as specified in its charter)


Virginia
(State or other jurisdiction of
incorporation or organization)
54-1796693
(I.R.S. Employer
Identification No.)
 
P.O. Box 1128
Abingdon, Virginia
(Address of principal executive offices)
 
 
24212-1128
(Zip Code)

276-628-9181
(Registrant’s telephone number, including area code)

 Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.  Yes x  No o

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).   Yes x  No o

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer or smaller reporting company (See definition of “large accelerated filer, accelerated filer and smaller reporting company” in Rule 12b-2 of the Act).
 
 Large Accelerated Filer   o  Accelerated Filer   o
 Non-Accelerated Filer  o (Do not check if a smaller reporting company)  Smaller Reporting Company   x
 
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes o  No x

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date.
5,011,152 shares of common stock, par value $0.625 per share,
outstanding as of May 14, 2013
 
 


 
1


Highlands Bankshares, Inc.

FORM 10-Q
For the Quarter Ended March 31, 2013

   
PAGE
   
 
   
 
 
   
   
   
   
   
   
   
 
 
 
   
   
   
   
   
   
   
   


 
2


 

(Amounts in thousands)
   
(Unaudited)
March 31, 2013
   
(Note 1)
December 31, 2012
 
ASSETS
           
Cash and due from banks
  $ 12,929     $ 15,220  
Federal funds sold
    70,411       65,988  
                 
   Total Cash and Cash Equivalents
    83,340       81,208  
                 
Investment securities available for sale  (amortized cost $60,546 at  March 31, 2013, $60,234 at December 31, 2012)
    57,573       57,400  
Other investments, at cost
    4,710       4,930  
Loans, net of allowance for loan losses of  $7,435 at March 31, 2013, $7,449 at December 31, 2012
    387,752       383,049  
Premises and equipment, net
    21,034       21,176  
Deferred tax assets
    8,232       8,298  
Interest receivable
    2,346       2,314  
Bank owned life Insurance
    13,802       13,689  
Other real estate owned, net
    15,593       16,639  
Other assets
    3,494       3,793  
                 
    Total Assets
  $ 597,876     $ 592,496  
                 
LIABILITIES AND STOCKHOLDERS’ EQUITY
               
                 
LIABILITIES
               
                 
Deposits:
               
  Non-interest bearing
  $ 105,247     $ 105,960  
  Interest bearing
    384,945       379,380  
                 
    Total Deposits
    490,192       485,340  
                 
Interest, taxes and other liabilities
    2,269       2,066  
Other short-term borrowings
    20,164       20,170  
Long-term debt
    51,258       51,298  
Capital securities
    3,150       3,150  
                 
    Total Other Liabilities
    76,841       76,684  
                 
    Total Liabilities
    567,033       562,024  
                 
STOCKHOLDERS’ EQUITY
               
                 
Common stock (5,011 shares issued and outstanding)
    3,132       3,132  
Additional paid-in capital
    7,783       7,783  
Retained earnings
    21,892       21,428  
Accumulated other comprehensive income (loss)
    (1,964 )     (1,871 )
                 
  Total Stockholders’ Equity
    30,843       30,472  
                 
    Total Liabilities and Stockholders’ Equity
  $ 597,876     $ 592,496  
                 
See accompanying Notes to Consolidated Financial Statements

 
3


(Amounts in thousands, except per share data)
(Unaudited)
   
Three Months Ended
March 31, 2013
   
Three Months Ended
 March 31, 2012
 
INTEREST INCOME
           
Loans receivable and fees on loans
  $ 5,403     $ 5,930  
Securities available for sale:
               
  Taxable
    203       234  
  Exempt from taxable income
    141       200  
Other investment income
    30       21  
Federal funds sold
    40       42  
                 
    Total Interest Income
    5,817       6,427  
                 
INTEREST EXPENSE
               
Deposits
    785       1,297  
Other borrowed funds
    715       845  
                 
    Total Interest Expense
    1,500       2,142  
                 
    Net Interest Income
    4,317       4,285  
                 
Provision for Loan Losses
    219       505  
                 
    Net Interest Income after Provision for                   Loan Losses
    4,098       3,780  
                 
NON-INTEREST INCOME
               
Securities gains (losses), net
    (4 )     3  
Service charges on deposit accounts
    499       491  
Other service charges, commissions and fees
    407       504  
Other  operating income
    165       228  
Other than temporary impairment charge
    -       (167 )
 
               
    Total Non-Interest Income
    1,067       1,059  
                 
NON-INTEREST EXPENSE
               
Salaries and employee benefits
    2,403       2,267  
Occupancy expense of bank premises
    303       277  
Furniture and equipment expense
    310       333  
Other operating expense
    1,351       1,263  
Foreclosed Assets – Write-down and Operating Expenses
    218       229  
                 
    Total Non-Interest Expense
    4,585       4,369  
                 
    Income Before Income Taxes
    580       470  
                 
Income Tax Expense (Note 3)
    116       56  
                 
    Net Income
  $ 464     $ 414  
                 
Basic Earnings  Per Common Share (Note 6)
  $ 0.09     $ 0.08  
                 
Earnings Per Common Share – Assuming Dilution
  $ 0.09     $ 0.08  
                 
Dividends Per Share
  $ -     $ -  

See accompanying Notes to Consolidated Financial Statements

 
4


(Amounts in thousands)
(Unaudited)
   
Three Months Ended
March 31, 2013
   
Three Months Ended
March 31, 2012
 
             
             
Net Income
  $ 464     $ 414  
                 
     Other Comprehensive Income
               
  Unrealized gains  (losses) on securities during  the period
    (142 )     579  
  Less: reclassification adjustment for (gains) losses  included in net income
    4       (3 )
          Other Comprehensive Income, before tax
    (138 )     576  
           Income tax expense (benefit) related to other
           comprehensive income
    (45 )     196  
    Other Comprehensive Income (Loss)
    (93 )     380  
Comprehensive Income
  $ 371     $ 794  
                 

See accompanying Notes to Consolidated Financial Statements


























 
5

 
(Amounts in thousands)
(Unaudited)
   
Three Months Ended
   
Three Months Ended
 
   
March 31, 2013
   
March 31, 2012
 
CASH FLOWS FROM OPERATING  ACTIVITIES:
           
Net income (loss)
  $ 464     $ 414  
Adjustments to reconcile net income  (loss) to net cash provided by operating activities
               
Provision for loan losses
    219       505  
Depreciation and amortization
    236       254  
Net realized (gains) losses on available for sale securities
    4       (3 )
Net amortization on securities
    179       170  
             Other than temporary impairment charge
    -       167  
Amortization of Capital issue costs
    1       1  
            Increase in interest receivable
    (32 )     (16 )
Valuation adjustment of other real estate owned
    61       -  
Decrease in other assets
    319       673  
Increase (decrease) in interest, taxes and other liabilities
    203       (294 )
                 
Net cash provided by operating activities
     1,654        1,871  
                 
CASH FLOWS FROM INVESTING ACTIVITIES:
               
Securities available for sale:
               
       Proceeds from sale of securities
    1,341       506  
Proceeds from maturities of debt and equity securities
    2,359       4,200  
Purchase of debt and equity securities
    (4,195 )     (1,650 )
Redemption of other investments
    220       -  
Net (increase) decrease in loans
    (5,262 )     4,780  
Proceeds from sales of other real estate owned
    1,300       2,119  
Premises and equipment expenditures
    (91 )     (168 )
                 
Net cash (used) provided by investing activities
    (4,328 )     9,787  
                 
CASH FLOWS FROM FINANCING ACTIVITIES:
               
Net decrease in time deposits
    (6,656 )     (22,671 )
Net increase in demand, savings and other deposits
    11,508       13,320  
Increase (decrease) in short-term borrowings
    (6 )     1  
Decrease in long-term debt
    (40 )     (44 )
                 
Net cash (used) provided by in financing activities
    4,806       (9,394 )
                 
Net increase in cash and cash equivalents
    2,132       2,264  
CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR
    81,208       86,075  
                 
CASH AND CASH EQUIVALENTS AT END OF PERIOD
  $ 83,340     $ 88,339  
                 
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION
               
Cash paid during the year for:
               
Interest
  $ 1,504     $ 1,973  
Income taxes
  $ -     $ -  
                 
       SUPPLEMENTAL DISCLOSURE OF NONCASH TRANSACTIONS
               
Transfer of loans to other real estate owned
  $ 339     $ 1,125  
Loans originated from sales of other real estate owned
  $ 271     $ -  

See accompanying Notes to Consolidated Financial Statements

 
6

 
(Amounts in thousands)
(Unaudited)
                           
Accumulated
       
               
Additional
         
Other
   
Total
 
   
Common Stock
   
Paid-in
   
Retained
   
Comprehensive
   
Stockholders’
 
   
Shares
   
Par Value
   
Capital
   
Earnings
   
Income
   
Equity
 
                                     
Balance, December 31, 2011
    5,011     $ 3,132     $ 7,783     $ 19,406     $ (2,059 )   $ 28,262  
                                                 
Net income / (loss)
    -       -       -       414       -       414  
                                                 
Other comprehensive income
    -       -       -       -       380       380  
                                                 
                                                 
Balance, March 31, 2012
    5,011     $ 3,132     $ 7,783     $ 19,820     $ (1,679 )   $ 29,056  
                                                 
Balance, December 31, 2012
    5,011     $ 3,132     $ 7,783     $ 21,428     $ (1,871 )   $ 30,472  
                                                 
Net income / (loss)
    -       -       -       464       -       464  
                                                 
Other comprehensive income (loss)
    -       -       -       -       (93 )     (93 )
                                                 
                                                 
Balance, March 31, 2013
    5,011     $ 3,132     $ 7,783     $ 21,892     $ (1,964 )   $ 30,843  
                                                 
                                                 

See accompanying Notes to Consolidated Financial Statements



















 
7


 
 
Note 1  -  General

The consolidated financial statements of Highlands Bankshares, Inc. (the “Company”) conform to United States generally accepted accounting principles and to banking industry practices. The accompanying consolidated interim financial statements are unaudited. In the opinion of management, all adjustments necessary for a fair presentation of the consolidated financial statements have been included. All such adjustments are of a normal and recurring nature. The consolidated balance sheet as of December 31, 2012 has been extracted from the audited financial statements included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2012 (the “2012 Form 10-K”). The notes included herein should be read in conjunction with the notes to consolidated financial statements included in the 2012 Form 10-K. The results of operations for the three-month period ended March 31, 2013 are not necessarily indicative of the results to be expected for the full year.

The preparation of financial statements requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.

Note 2  -  Loans and Allowance for Loan Losses  (amounts in thousands)
 
 The composition of net loans is as follows:

   
March 31, 2013
   
December 31, 2012
 
Real Estate Secured:
           
Residential 1-4 family
  $ 168,238     $ 167,777  
Multifamily
    18,030       17,348  
Construction and Land Loans
    19,479       19,161  
Commercial, Owner Occupied
    66,221       64,504  
Commercial, Non-owner occupied
    36,876       35,536  
Second mortgages
    8,811       9,298  
Equity lines of credit
    8,576       8,287  
Farmland
    12,522       11,180  
      338,753       333,091  
                 
Secured (other) and unsecured
               
Personal
    21,590       22,358  
Commercial
    31,636       31,927  
Agricultural
    3,541       3,372  
      56,767       57,657  
                 
Overdrafts
    219       297  
                 
      395,739       391,045  
Less:
               
  Allowance for loan losses
    7,435       7,449  
  Net deferred fees
    552       547  
      7,987       7,996  
                 
Loans, net
  $ 387,752     $ 383,049  

 
 
8


Notes to Consolidated Financial Statements
(Unaudited)
(in thousands, except share, per share and percentage data)

The following table is an analysis of past due loans as of March 31, 2013:

   
30-59 Days Past Due
   
60-89 Days Past Due
   
Greater Than 90 Days
   
Total Past Due
   
Current
   
Total Financing Receivables
   
Recorded Investment > 90 Days and Accruing
 
                                           
Real Estate Secured
                                         
Residential 1-4 family
  $ 5,450     $ 1,158     $ 4,100     $ 10,708     $ 157,530     $ 168,238     $ -  
Equity lines of credit
    -       -       271       271       8,305       8,576       -  
Multifamily
    -       -       -       -       18,030       18,030       -  
Farmland
    179       23       184       386       12,136       12,522       -  
Construction, Land Development, Other Land Loans
    556       25       1,942       2,523       16,956       19,479       -  
Commercial Real Estate- Owner Occupied
    2,540       311       2,888       5,739       60,482       66,221       -  
Commercial Real Estate- Non Owner Occupied
    391       535       1,873       2,799       34,077       36,876       -  
Second Mortgages
    335       5       206       546       8,265       8,811       -  
Non Real Estate Secured
                                                       
Personal
    409       141       37       587       21,222       21,809       -  
Business
    289       69       744       1,102       30,534       31,636       -  
Agricultural
    2       -       -       2       3,539       3,541       -  
                                                         
          Total
  $ 10,151     $ 2,267     $ 12,245     $ 24,663     $ 371,076     $ 395,739     $ -  
                                                         

The following table is an analysis of past due loans as of December 31, 2012:

   
30-59 Days Past Due
   
60-89 Days Past Due
   
Greater Than 90 Days
   
Total Past Due
   
Current
   
Total Financing Receivables
   
Recorded Investment > 90 Days and Accruing
 
                                           
Real Estate Secured
                                         
Residential 1-4 family
  $ 4,894     $ 956     $ 4,029     $ 9,879     $ 157,898     $ 167,777     $ -  
Equity lines of credit
    -       -       -       -       8,287       8,287       -  
Multifamily
    -       -       -       -       17,348       17,348       -  
Farmland
    133       28       129       290       10,890       11,180       -  
Construction,  Land Development, Other Land Loans
    209       78       1,953       2,240       16,921       19,161       -  
Commercial Real Estate- Owner Occupied
    221       21       2,888       3,130       61,374       64,504       -  
Commercial Real Estate- Non Owner Occupied
    239       2,115       290       2,644       32,892       35,536       -  
Second Mortgages
    374       9       495       878       8,420       9,298       -  
Non Real Estate Secured
                                                       
Personal
    307       155       56       518       22,137       22,655       6  
Commercial
    402       205       526       1,133       30,794       31,927       -  
Agricultural
    3       -       -       3       3,369       3,372       -  
                                                         
          Total
  $ 6,782     $ 3,567     $ 10,366     $ 20,715     $ 370,330     $ 391,045     $ 6  
                                                         



 
9


Notes to Consolidated Financial Statements
(Unaudited)
(in thousands, except share, per share and percentage data)

Loans are considered delinquent when payments have not been made according to the terms of the contract. The accrual of interest on loans is discontinued at the time the loan is 90 days delinquent unless the credit is well-secured and in process of collection.  Credit card loans and other personal loans are typically charged off no later than 180 days past due.   In all cases, loans are placed on non-accrual or charged-off at an earlier date if collection of principal or interest is considered doubtful.

The following is a summary of non-accrual loans at March 31, 2013 and December 31, 2012:
   
March 31, 2013
   
December 31, 2012
 
Real Estate Secured
           
Residential 1-4 Family
  $ 4,100     $ 4,213  
Multifamily
    -       -  
Construction and Land Loans
    1,942       1,953  
Commercial-Owner Occupied
    2,888       2,888  
Commercial- Non Owner Occupied
    1,873       290  
Second Mortgages
    206       495  
Equity Lines of Credit
    271       -  
Farmland
    184       129  
Secured (other) and Unsecured
               
Personal
    37       50  
Commercial
    744       526  
Agricultural
    -       -  
                 
Total
  $ 12,245     $ 10,544  












 
10


Notes to Consolidated Financial Statements
(Unaudited)
(in thousands, except share, per share and percentage data)

The following tables represent a summary of credit quality indicators of the Company’s loan portfolio at March 31, 2013 and December 31, 2012.  The grades are assigned and/or modified by the Company’s credit review and credit analysis departments based on the creditworthiness of the borrower and the overall strength of the loan.

Credit Risk Profile by Internally Assigned Grade as of March 31, 2013
Grade (1)
 
Residential 1-4 Family
   
Multifamily
   
Farmland
   
Construction, Land Loans
   
Commercial Real Estate- Owner Occupied
   
Commercial Real Estate Non-Owner Occupied
 
                                     
Quality
    33,366       978       986       3,433       4,205       1,108  
Satisfactory
    81,795       12,672       4,617       6,468       25,787       15,719  
Acceptable
    36,308       3,093       6,414       6,251       20,668       10,484  
Special Mention
    2,945       883       8       1,613       5,562       4,567  
Substandard
    13,824       404       497       1,714       9,999       4,998  
Doubtful
    -       -       -       -       -       -  
                                                 
     Total
  $ 168,238     $ 18,030     $ 12,522     $ 19,479     $ 66,221     $ 36,876  

Credit Risk Profile by Internally Assigned Grade as of December 31, 2012
Grade (1)
 
Residential 1-4 Family
   
Multifamily
   
Farmland
   
Construction, Land Loans
   
Commercial Real Estate- Owner Occupied
   
Commercial Real Estate Non-Owner Occupied
 
                                     
Quality
    34,201       994       1,001       3,768       5,016       1,168  
Satisfactory
    81,500       12,328       3,589       5,765       25,485       14,539  
Acceptable
    35,202       2,731       6,078       6,059       19,683       11,048  
Special Mention
    4,481       890       9       1,698       5,686       2,353  
Substandard
    12,393       405       503       1,871       8,634       6,428  
Doubtful
    -       -       -       -       -       -  
                                                 
     Total
  $ 167,777     $ 17,348     $ 11,180     $ 19,161     $ 64,504     $ 35,536  


(1)  Quality--This grade is reserved for the Bank’s top quality loans. These loans have excellent sources of repayment, with no significant identifiable risk of collection.  Generally, loans assigned this rating will demonstrate the following characteristics:
 
 
·
Conformity in all respects with Bank policy, guidelines, underwriting standards, and Federal and State regulations (no exceptions of any kind).
 
·
Documented historical cash flow that meets or exceeds required minimum Bank guidelines, or that can be supplemented with verifiable cash flow from other sources.
 
·
Adequate secondary sources to liquidate the debt, including combinations of liquidity, liquidation of collateral, or liquidation value to the net worth of the borrower or guarantor.
 
For existing loans, all of the requirements above apply plus all payments have been made as agreed, current financial information on all borrowers and guarantors has been obtained and analyzed, and overall business operating trends are either stable or improving.
 
Satisfactory-This grade is given to performing loans. These loans have adequate sources of repayment, with little identifiable risk of collection. Loans assigned this rating will demonstrate the following characteristics:
 
 
·
General conformity to the Bank's policy requirements, product guidelines and underwriting standards.  Any exceptions that are identified during the underwriting and approval process have been adequately mitigated by other factors.
 
·
Documented historical cash flow that meets or exceeds required minimum Bank guidelines, or that can be supplemented with verifiable cash flow from other sources.  
 
 
11


Notes to Consolidated Financial Statements
(Unaudited)
(in thousands, except share, per share and percentage data)
 
 
·
Adequate secondary sources to liquidate the debt, including combinations of liquidity, liquidation of collateral, or liquidation value to the net worth of the borrower or guarantor
 
For existing loans, all of the requirements outlined above will apply, plus all payments have been made as agreed, current financial information on all borrowers and guarantors has been obtained and analyzed, and overall business operating trends are stable with any declines considered minor and temporary.
 
Acceptable-This grade is given to loans that show signs of weakness in either adequate sources of repayment or collateral, but have demonstrated mitigating factors that minimize the risk of delinquency or loss.  Loans assigned this rating may demonstrate some or all of the following characteristics:
 
 
·
Additional exceptions to the Bank's policy requirements, product guidelines or underwriting standards that present a higher degree of risk to the Bank.  Although the combination and/or severity of identified exceptions is greater, all exceptions have been properly mitigated by other factors.
 
·
Unproved, insufficient or marginal primary sources of repayment that appear sufficient to service the debt at this time.  Repayment weaknesses may be due to minor operational issues, financial trends, or reliance on projected (not historic) performance.
 
·
Marginal or unproven secondary sources to liquidate the debt, including combinations of liquidation of collateral and liquidation value to the net worth of the borrower or guarantor.
 
For existing loans, payments have generally been made as agreed with only minor and isolated delinquencies.
 
Special Mention -This grade is given to Watch List loans that include the following characteristics:
 
 
·
Loans with underwriting guideline tolerances and/or exceptions with no identifiable mitigating factors.
 
·
Extending loans that are currently performing satisfactorily but with potential weaknesses that may, if not corrected, weaken the asset or inadequately protect the Bank's position at some future date. Potential weaknesses are the result of deviations from prudent lending practices.
 
·
Loans where adverse economic conditions that develop subsequent to the loan origination do not jeopardize liquidation of the debt, but do substantially increase the level of risk may also warrant this rating.
 
Substandard-Loans in this category are characterized by deterioration in quality exhibited by any number of well-defined weaknesses requiring corrective action. A substandard loan is inadequately protected by the current sound net worth and paying capacity of the obligor or of the collateral pledged, if any. Loans classified as substandard must have a well-defined weakness or weaknesses that jeopardize the liquidation of the debt; they are characterized by the distinct possibility that the institution will sustain some loss if the deficiencies are not corrected.
 
 The weaknesses may include, but are not limited to:
 
 
·
High debt to worth ratios and or declining or negative earnings trends
 
·
Declining or inadequate liquidity
 
·
Improper loan structure  or questionable repayment sources
 
·
Lack of well-defined secondary repayment source, and
 
·
Unfavorable competitive comparisons.
 
Such loans are no longer considered to be adequately protected due to the borrower's declining net worth, lack of earnings capacity, declining collateral margins and/or unperfected collateral positions. A possibility of loss of a portion of the loan balance cannot be ruled out. The repayment ability of the borrower is marginal or weak and the loan may have exhibited excessive overdue status or extensions and/or renewals.
 
 
12

Notes to Consolidated Financial Statements
(Unaudited)
(in thousands, except share, per share and percentage data)

Doubtful -Loans classified Doubtful have all the weaknesses inherent in loans classified Substandard, plus the added characteristic that the weaknesses make collection or liquidation in full on the basis of currently existing facts, conditions, and values highly questionable and improbable. The ability of the borrower to service the debt is extremely weak, overdue status is constant, the debt has been placed on non-accrual status, and no definite repayment schedule exists.
 
However, these loans are not yet rated as loss because certain events may occur which would salvage the debt. Among these events are:
 
 
·
Injection of capital
 
·
Alternative financing
 
·
Liquidation of assets or the pledging of additional collateral.
 
Credit Risk Profile based on payment activity as of  March 31, 2013:
   
Consumer - Non Real Estate
   
Equity Line of Credit / Second Mortgages
   
Commercial - Non Real Estate
   
Agricultural - Non Real Estate
 
                         
Performing
  $ 21,772     $ 16,910     $ 30,892     $ 3,541  
Nonperforming (>90 days past due)
    37       477       744       -  
                                 
     Total
  $ 21,809     $ 17,387     $ 31,636     $ 3,541  
                                 

Credit Risk Profile based on payment activity as of December 31, 2012
   
Consumer - Non Real Estate
   
Equity Line of Credit /Jr. liens
   
Commercial - Non Real Estate
   
Agricultural - Non Real Estate
 
                         
Performing
  $ 22,599     $ 17,090     $ 31,401     $ 3,372  
Nonperforming (>90 days past due)
    56       495       526       -  
                                 
     Total
  $ 22,655     $ 17,585     $ 31,927     $ 3,372  
                                 



 
13


Notes to Consolidated Financial Statements
(Unaudited)
(in thousands, except share, per share and percentage data)

The following tables reflect the Bank’s impaired loans at March 31, 2013:
 
   
Recorded Investment
   
Unpaid Principal Balance
   
Related Allowance
   
Average Recorded Investment
   
Interest Income Recognized
 
With No Related Allowance
                             
Real Estate Secured
                             
Residential 1-4 family
  $ 5,977     $ 5,977     $ -     $ 6,268     $ 42  
Equity lines of credit
    -       -       -       -       -  
Multifamily
    -       -       -       -       -  
Farmland
    295       295       -       297       3  
Construction, Land Development, Other Land Loans
    1,734       1,734       -       1,697       -  
Commercial Real Estate- Owner Occupied
    5,694       5,694       -       5,352       72  
Commercial Real Estate- Non Owner Occupied
    7,541       7,541       -       5,487       73  
Second Mortgages
    461       461       -       391       2  
Non Real Estate Secured
                                       
Personal /Consumer
    11       11       -       10       -  
Business Commercial
    141       141       -       105       1  
Agricultural
    20       20       -       20       -  
                                         
          Total
  $ 21,874     $ 21,874     $ -     $ 19,627     $ 193  
 

   
Recorded Investment
   
Unpaid Principal Balance
   
Related Allowance
   
Average Recorded Investment
   
Interest Income Recognized
 
With an Allowance Recorded
                             
Real Estate Secured
                             
Residential 1-4 family
  $ 3,493     $ 3,493     $ 268     $ 3,867     $ 33  
Equity lines of credit
    -       -       -       -       -  
Multifamily
    -       -       -       203       -  
Farmland
    -       -       -       102       -  
Construction, Land Development, Other Land Loans
    104       104       64       52       -  
Commercial Real Estate- Owner Occupied
    2,698       2,698       323       2,698       -  
Commercial Real Estate- Non Owner Occupied
    3,801       3,801       814       3,398       4  
Second Mortgages
    199       199       33       100       -  
Non Real Estate Secured
                                       
Personal /Consumer
    82       82       66       52       1  
Business Commercial
    1,018       1,018       801       838       -  
Agricultural
    587       604       158       652       8  
                                         
          Total
  $ 11,982     $ 11,982     $ 2,527     $ 11,962     $ 46  
 
 
14


Notes to Consolidated Financial Statements
(Unaudited)
(in thousands, except share, per share and percentage data)

The following tables reflect the Bank’s impaired loans at December 31, 2012:

   
Recorded Investment
   
Unpaid Principal Balance
   
Related Allowance
   
Average Recorded Investment
   
Interest Income Recognized
 
12/31/12 With no Related Allowance
                             
Real Estate Secured
                             
Residential 1-4 family
  $ 6,559     $ 6,559     $ -     $ 7,797     $ 237  
Equity lines of credit
    -       -       -       -       -  
Multifamily
    -       -       -       460       -  
Farmland
    299       299       -       291       15  
Construction, Land Development, Other Land Loans
    1,660       1,730       -       2,074       40  
Commercial Real Estate- Owner Occupied
    5,010       5,010       -       7,083       138  
Commercial Real Estate- Non Owner Occupied
    3,432       3,432       -       4,146       136  
Second Mortgages
    321       321       -       456       14  
Non Real Estate Secured
                                       
Personal
    9       9       -       20       1  
Commercial
    68       68       -       1,257       5  
Agricultural
    20       20       -       10       1  
                                         
          Total
  $ 17,378     $ 17,448     $ -     $ 23,594     $ 587  

   
Recorded Investment
   
Unpaid Principal Balance
   
Related Allowance
   
Average Recorded Investment
   
Interest Income Recognized
 
12/31/12 With an Allowance Recorded
                             
Real Estate Secured
                             
Residential 1-4 family
  $ 4,486     $ 4,486     $ 491     $ 4,146     $ 165  
Equity lines of credit
    -       -       -       -       -  
Multifamily
    405       405       5       526       17  
Farmland
    203       203       2       255       13  
Construction, Land Development, Other Land Loans
    -       -       -       1,269       -  
Commercial Real Estate- Owner Occupied
    2,698       2,698       369       2,342       15  
Commercial Real Estate- Non Owner Occupied
    2,995       2,995       494       3,739       88  
Second Mortgages
    -       -       -       54       -  
Non Real Estate Secured
                                       
Personal
    22       22       1       48       2  
Commercial
    658       658       585       757       15  
Agricultural
    716       735       232       358       68  
                                         
          Total
  $ 12,183     $ 12,202     $ 2,179     $ 13,494     $ 383  
 
 
15


Notes to Consolidated Financial Statements
(Unaudited)
(in thousands, except share, per share and percentage data)


The following tables present the balance in the allowance for loan losses and the recorded investment in loans by loan category and is segregated by impairment
evaluation method as of March 31, 2013 and March 31, 2012.

Three  months ended March 31, 2013
 
Residential
1-4 Family
   
Multifamily
   
Construction and Land Loans
   
Commercial Owner Occupied
   
Commercial Non-Owner Occupied
   
Second Mortgages
   
Equity Line of Credit
   
Farmland
   
Personal and Overdrafts
   
Commercial and Agricultural
   
Unallocated
   
Total
 
Allowance for Credit Losses:
                                                                       
Beginning Balance December 31,  2012
  $ 1,242     $ 280     $ 823     $ 1,039     $ 1,075     $ 161     $ 30     $ 97     $ 486     $ 1,530     $ 686       7,449  
Provision for Credit Losses
    (212 )     -       (130 )     (45 )     279       34       1       12       134       261       (115 )     219  
Charge-offs
    33       -       31       -       -       11       -       -       88       101       -       264  
Recoveries
    4       -       1       -       -       -       -       -       19       7       -       31  
Net Charge-offs
    29       -       30       -       -       11       -       -