10-Q 1 tv526312_10q.htm 10-Q

 

 

 

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 June 30, 2019

 

¨ 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: 0-50765

 

VILLAGE BANK AND TRUST FINANCIAL CORP.

(Exact name of registrant as specified in its charter)

 

Virginia   16-1694602
(State or other jurisdiction of   (I.R.S. Employer
incorporation or organization)   Identification No.)
     
13319 Midlothian Turnpike, Midlothian, Virginia   23113
(Address of principal executive offices)   (Zip code)

 

804-897-3900

(Registrant’s telephone number, including area code)

 

Title of each class   Trading Symbol(s)   Name of each exchange on which registered
Common Stock, par value $4.00 per share   VBFC   Nasdaq Capital Market

 

Indicate by check 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 ¨

 

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted 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 such files). Yes x No ¨

 

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

 

Large Accelerated Filer ¨ Accelerated Filer ¨
Non-Accelerated Filer  x Smaller Reporting Company x
Emerging growth company ¨  

 

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ¨

 

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ¨ No x

 

Securities registered pursuant to Section 12(b) of the Act:

 

Indicate the number of shares outstanding of each of the issuer’s classes of common equity, as of the latest practicable date.

 

1,453,009 shares of common stock, $4.00 par value, outstanding as of August 4, 2019

 

 

 

  

 

 

Village Bank and Trust Financial Corp.

Form 10-Q

 

TABLE OF CONTENTS

 

Part I – Financial Information  
   
Item 1.  Financial Statements  
   
Consolidated Balance Sheets June 30, 2019 (unaudited) and December 31, 2018 3
   
Consolidated Statements of Income For the Three and Six Months Ended June 30, 2019 and 2018 (unaudited) 4
   
Consolidated Statements of Comprehensive Income For the Three and Six Months Ended June 30, 2019 and 2018 (unaudited) 5
   
Consolidated Statements of Shareholders’ Equity For the Three and Six Months Ended June 30, 2019 and 2018 (unaudited) 6
   
Consolidated Statements of Cash Flows For the Six Months Ended June 30, 2019 and 2018 (unaudited) 7
   
Notes to Consolidated Financial Statements (unaudited) 8
   
Item 2.  Management’s Discussion and Analysis of Financial Condition and Results of Operations 43
   
Item 3.  Quantitative and Qualitative Disclosures About Market Risk 58
   
Item 4. Controls and Procedures 58
   
Part II – Other Information  
   
Item 1.  Legal Proceedings 59
   
Item 1A. Risk Factors 59
   
Item 2.  Unregistered Sales of Equity Securities and Use of Proceeds 59
   
Item 3.  Defaults Upon Senior Securities 59
   
Item 4.  Mine Safety Disclosures 59
   
Item 5.  Other Information 59
   
Item 6.  Exhibits 60
   
Signatures 61

 

 2 

 

 

Part I – Financial Information

 

ITEM 1 – FINANCIAL STATEMENTS

 

Village Bank and Trust Financial Corp. and Subsidiary
Consolidated Balance Sheets
June 30, 2019 (Unaudited) and December 31, 2018*
(in thousands, except share and per share data)

 

   June 30,   December 31, 
   2019   2018 
Assets          
Cash and due from banks  $15,583   $12,717 
Federal funds sold   13,169    6,826 
Total cash and cash equivalents   28,752    19,543 
Investment securities available for sale, at fair value   43,415    44,253 
Restricted stock, at cost   2,120    1,661 
Loans held for sale   13,060    6,128 
Loans          
Outstandings   419,836    414,430 
Allowance for loan losses   (3,047)   (3,051)
Deferred fees and costs, net   750    713 
Total loans, net   417,539    412,092 
Other real estate owned, net of valuation allowance   526    526 
Assets held for sale   536    554 
Premises and equipment, net   12,217    12,455 
Bank owned life insurance   7,521    7,441 
Accrued interest receivable   2,722    2,662 
Other assets   8,126    7,551 
           
   $536,534   $514,866 
           
Liabilities and Shareholders' Equity          
Liabilities          
Deposits          
Noninterest bearing demand  $132,965   $119,317 
Interest bearing   313,261    319,730 
Total deposits   446,226    439,047 
Federal Home Loan Bank advances   31,000    21,000 
Long-term debt - trust preferred securities   8,764    8,764 
Subordinated debt, net   5,579    5,563 
Accrued interest payable   231    221 
Other liabilities   5,055    3,138 
Total liabilities   496,855    477,733 
           
Shareholders' equity          
Common stock, $4 par value - 10,000,000 shares authorized;          
1,444,854 shares issued and outstanding at June 30, 2019 and          
1,435,283 shares issued and outstanding at December 31, 2018   5,779    5,707 
Additional paid-in capital   54,246    53,212 
Accumulated deficit   (20,323)   (21,769)
Common stock warrant   -    732 
Stock in directors rabbi trust   (856)   (883)
Directors deferred fees obligation   856    883 
Accumulated other comprehensive loss   (23)   (749)
Total shareholders' equity   39,679    37,133 
           
   $536,534   $514,866 

 

* Derived from audited consolidated financial statements

See accompanying notes to consolidated financial statements.

 

 3 

 

 

Village Bank and Trust Financial Corp. and Subsidiary
Consolidated Statements of Income
Three and Six Months Ended June 30, 2019 and 2018
(Unaudited)
(in thousands, except per share data)

 

   Three Months Ended   Six Months Ended 
   June 30,   June 30, 
   2019   2018   2019   2018 
Interest income                    
Loans  $5,556   $4,873   $10,921   $9,361 
Investment securities   271    259    564    522 
Federal funds sold   44    20    95    46 
Total interest income   5,871    5,152    11,580    9,929 
                     
Interest expense                    
Deposits   909    659    1,791    1,290 
Borrowed funds   410    265    771    400 
Total interest expense   1,319    924    2,562    1,690 
                     
Net interest income   4,552    4,228    9,018    8,239 
Provision for loan losses   -    -    -    - 
Net interest income after provision for loan losses   4,552    4,228    9,018    8,239 
                     
Noninterest income                    
Service charges and fees   541    482    999    939 
Mortgage banking income, net   1,196    1,120    1,982    1,937 
Gain on sale of investment securities   -    -    101    - 
Other   211    65    384    124 
Total noninterest income   1,948    1,667    3,466    3,000 
                     
Noninterest expense                    
Salaries and benefits   3,701    2,972    6,637    5,915 
Occupancy   323    345    672    675 
Equipment   210    214    436    430 
Supplies   42    47    83    104 
Professional and outside services   754    802    1,563    1,521 
Advertising and marketing   64    67    122    147 
Foreclosed assets, net   5    (5)   7    (74)
FDIC insurance premium   68    79    158    156 
Other operating expense   516    580    1,004    1,087 
Total noninterest expense   5,683    5,101    10,682    9,961 
                     
Income before income tax expense   817    794    1,802    1,278 
Income tax expense   180    153    356    225 
                     
Net income   637    641    1,446    1,053 
                     
Preferred stock dividends and amortization of discount   -    -    -    (113)
Net income available to common shareholders  $637   $641   $1,446   $940 
                     
Earnings per common share, basic  $0.44   $0.45   $1.01   $0.66 
Earnings per common share, diluted  $0.44   $0.45   $1.01   $0.66 

 

See accompanying notes to consolidated financial statements.

 

 4 

 

 

Village Bank and Trust Financial Corp. and Subsidiary
Consolidated Statements of Comprehensive Income
Three and Six Months Ended June 30, 2019 and 2018
(Unaudited)
(in thousands)

 

   Three Months Ended   Six Months Ended 
   June 30,   June 30, 
   2019   2018   2019   2018 
                 
Net income  $637   $641   $1,446   $1,053 
Other comprehensive income (loss)                    
Unrealized holding gains (losses) arising during the period   505    (189)   1,015    (727)
Tax effect   106    (39)   213    (153)
Net change in unrealized holding gains (losses) on securities available for sale, net of tax   399    (150)   802    (574)
                     
Reclassification adjustment                    
Reclassification adjustment for gains realized in income   -    -    (101)   - 
Tax effect   -    -    (21)   - 
Reclassification for gains included in net income, net of tax   -    -    (80)   - 
                     
Minimum pension adjustment   3    3    6    6 
Tax effect   1    1    2    2 
Minimum pension adjustment, net of tax   2    2    4    4 
                     
Total other comprehensive income (loss)   401    (148)   726    (570)
                     
Total comprehensive income  $1,038   $493   $2,172   $483 

 

See accompanying notes to consolidated financial statements.

 

 5 

 

 

Village Bank and Trust Financial Corp. and Subsidiary
Consolidated Statements of Shareholders' Equity
(Unaudited)
(In thousands)

 

   Three Months Ended June 30, 2019 
                           Directors   Accumulated     
           Additional       Common   Stock in   Deferred   Other     
   Preferred   Common   Paid-in   Accumulated   Stock   Directors   Fees   Comprehensive     
   Stock   Stock   Capital   Deficit   Warrant   Rabbi Trust   Obligation   Loss   Total 
                                     
Balance, March 31, 2019  $-   $5,720   $53,245   $(20,960)  $732   $(856)  $856   $(424)  $38,313 
                                              
Vesting of restricted stock   -    59    (59)   -    -    -    -    -    - 
Stock based compensation   -    -    328    -    -    -    -    -    328 
Expiration of common stock warrant   -    -    732    -    (732)   -    -    -    - 
Net income   -    -    -    637    -    -    -    -    637 
Other comprehensive income   -    -    -    -    -    -    -    401    401 
Balance, June 30, 2019   -    5,779    54,246    (20,323)   -    (856)   856    (23)   39,679 

 

   Six Months Ended June 30, 2019 
                           Directors   Accumulated     
           Additional       Common   Stock in   Deferred   Other     
   Preferred   Common   Paid-in   Accumulated   Stock   Directors   Fees   Comprehensive     
   Stock   Stock   Capital   Deficit   Warrant   Rabbi Trust   Obligation   Loss   Total 
                                     
Balance, December 31, 2018  $-   $5,707   $53,212   $(21,769)  $732   $(883)  $883   $(749)  $37,133 
                                              
Restricted stock redemption   -    -    -    -    -    27    (27)   -    - 
Vesting of restricted stock   -    72    (72)   -    -    -    -    -    - 
Stock based compensation   -    -    374    -    -    -    -    -    374 
Expiration of common stock warrant   -    -    732    -    (732)   -    -    -    - 
Net income   -    -    -    1,446    -    -    -    -    1,446 
Other comprehensive income   -    -    -    -    -    -    -    726    726 
Balance, June 30, 2019   -    5,779    54,246    (20,323)   -    (856)   856    (23)   39,679 

 

 

   Three Months Ended June 30, 2018 
                           Directors   Accumulated     
           Additional       Common   Stock in   Deferred   Other     
   Preferred   Common   Paid-in   Accumulated   Stock   Directors   Fees   Comprehensive     
   Stock   Stock   Capital   Deficit   Warrant   Rabbi Trust   Obligation   Loss   Total 
                                     
Balance, March 31, 2018  $-   $5,682   $53,084   $(24,394)  $732   $(998)  $998   $(874)  $34,230 
                                              
Vesting of restricted stock   -    1    (1)   -    -    -    -    -    - 
Stock based compensation   -    -    71    -    -    -    -    -    71 
Net income   -    -    -    641    -    -    -    -    641 
Other comprehensive income   -    -    -    -    -    -    -    (148)   (148)
Balance, June 30, 2018   -    5,683    53,154    (23,753)   732    (998)   998    (1,022)   34,794 

 

   Six Months Ended June 30, 2018 
                           Directors   Accumulated     
           Additional       Common   Stock in   Deferred   Other     
   Preferred   Common   Paid-in   Accumulated   Stock   Directors   Fees   Comprehensive     
   Stock   Stock   Capital   Deficit   Warrant   Rabbi Trust   Obligation   Loss   Total 
                                     
Balance, December 31, 2017  $20   $5,672   $58,055   $(24,693)  $732   $(1,010)  $1,010   $(452)  $39,334 
Preferred stock redemption   (20)   -    (5,007)   -    -    -    -    -    (5,027)
Preferred stock dividend   -    -    -    (113)   -    -    -    -    (113)
Restricted stock redemption   -    -    -    -    -    12    (12)   -    - 
Vesting of restricted stock   -    11    (11)   -    -    -    -    -    - 
Stock based compensation   -    -    117    -    -    -    -    -    117 
Net income   -    -    -    1,053    -    -    -    -    1,053 
Other comprehensive loss   -    -    -    -    -    -    -    (570)   (570)
Balance, June 30, 2018  $-   $5,683   $53,154   $(23,753)  $732   $(998)  $998   $(1,022)  $34,794 

 

See accompanying notes to consolidated financial statements.

 

 6 

 

 

Village Bank and Trust Financial Corp. and Subsidiary
Consolidated Statements of Cash Flows
Six Months Ended June 30, 2019 and 2018
(Unaudited)
(in thousands)

 

   2019   2018 
         
Cash Flows from Operating Activities          
Net income  $1,446   $1,053 
Adjustments to reconcile net income to net cash provided by (used in) operating activities:          
Depreciation and amortization   523    368 
Amortization of debt issuance costs   16    9 
Deferred income taxes   356    225 
Gain on sale of investment securities   (101)   - 
Gain on sales of loans held for sale   (2,405)   (2,451)
Gain on sale of other real estate owned   -    (83)
Stock compensation expense   374    117 
Proceeds from sale of mortgage loans   78,167    79,036 
Origination of mortgage loans for sale   (82,694)   (77,644)
Amortization of premiums and accretion of discounts on securities, net   81    57 
Increase in bank owned life insurance   (80)   (82)
Net change in:          
Interest receivable   (60)   156 
Other assets   (1,101)   375 
Interest payable   10    56 
Other liabilities   1,917    (328)
Net cash (used in) provided by operating activities   (3,551)   864 
           
Cash Flows from Investing Activities          
Purchases of available for sale securities   (7,088)   - 
Proceeds from the sale of available for sale securities   6,491    - 
Proceeds from maturities, calls and paydowns of available for sale securities   2,369    1,791 
Net increase in loans   (5,447)   (34,759)
Proceeds from sale of other real estate owned   -    1,139 
Purchases of premises and equipment, net   (285)   (158)
Purchase of restricted stock   (459)   - 
Net cash used in investing activities   (4,419)   (31,987)
           
Cash Flows from Financing Activities          
Redeemption of preferred stock   -    (5,027)
Payment of preferred dividends   -    (113)
Net increase in deposits   7,179    21,359 
Net increase in Federal Home Loan Bank advances   10,000    8,200 
Net increase (decrease) in other borrowings   -    (917)
Issuance of subordinated debt, net   -    5,539 
Net cash provided by financing activities   17,179    29,041 
           
Net increase (decrease) in cash and cash equivalents   9,209    (2,082)
Cash and cash equivalents, beginning of period   19,543    17,810 
           
Cash and cash equivalents, end of period  $28,752   $15,728 
           
Supplemental Disclosure of Cash Flow Information          
Cash payments for interest  $2,552   $1,634 
Supplemental Schedule of Non Cash Activities          
Unrealized gains (losses) on securities avalable for sale  $914   $(726)
Right of use assets obtained in exchage for new operating lease liabilities  $1,405   $- 

 

See accompanying notes to consolidated financial statements.

 

 7 

 

 

Village Bank and Trust Financial Corp. and Subsidiary

Notes to Consolidated Financial Statements

Three and Six Months Ended June 30, 2019 and 2018

(Unaudited)

 

Note 1 - Principles of presentation

 

Village Bank and Trust Financial Corp. (the “Company”) is the holding company of Village Bank (the “Bank”). The consolidated financial statements include the accounts of the Company, the Bank and the Bank’s subsidiary, Village Bank Mortgage Corporation. All material intercompany balances and transactions have been eliminated in consolidation.

 

In the opinion of management, the accompanying condensed consolidated financial statements of the Company have been prepared on the accrual basis in accordance with generally accepted accounting principles for interim financial information. Accordingly, they do not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements. However, all adjustments that are, in the opinion of management, necessary for a fair presentation have been included. The results of operations for the six month period ended June 30, 2019 is not necessarily indicative of the results to be expected for the full year ending December 31, 2019. The unaudited interim financial statements should be read in conjunction with the audited financial statements and notes to financial statements that are presented in the Company’s Annual Report on Form 10-K for the year ended December 31, 2018 as filed with the Securities and Exchange Commission (“SEC”).

 

On January 1, 2019, the Company adopted Accounting Standards Update (“ASU”) No. 2016-02 “Leases (Topic 842)” and all subsequent ASUs that modified Topic 842. The Company elected the optional transitional method provided by ASU 2018-11 and did not adjust prior periods for Accounting Standards Codification (“ASC”) Topic 842. The Company also elected certain practical expedients within the standard and consistent with such elections did not reassess whether any expired or existing contracts are or contain leases, did not reassess the lease classification for any expired or existing leases, and did not reassess any initial direct costs for existing leases. As stated in the Company’s 2018 Form 10-K, the implementation of the new standard resulted in recognition of a right-of-use asset and lease liability of $1.4 million at the date of adoption, which is related to the Company’s leases of premises used in operations. The right-of-use asset and lease liability are included in other assets and other liabilities, respectively, in the Consolidated Balance Sheets.

 

Lease liabilities represent the Company’s obligation to make lease payments and are presented at each reporting date as the net present value of the remaining contractual cash flows. Cash flows are discounted at the Company’s incremental borrowing rate in effect at the commencement date of the lease. Right-of-use assets represent the Company’s right to use the underlying asset for the lease term and are calculated as the sum of the lease liability and if applicable, prepaid rent, initial direct costs and any incentives received from the lessor.

 

The Company’s long-term lease agreements are all classified as operating leases. Certain of these leases offer the option to extend the lease term and the Company has included such extensions in its calculation of the lease liabilities to the extent the options are reasonably assured of being exercised. The lease agreements do not provide for residual value guarantees and have no restrictions or covenants that would impact dividends or require incurring additional financial obligations. See note 8 for additional information.

 

Note 2 - Use of estimates

 

The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America (“GAAP”) requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities as of the date of the balance sheets and statements of operations for the period. Actual results could differ significantly from those estimates. Material estimates that are particularly susceptible to significant change include the determination of the allowance for loan losses and its related provision including impaired loans and troubled debt restructurings (“TDRs”), the valuation allowance on the deferred tax asset, valuation of other real estate owned and the estimate of the fair value of assets held for sale.

 

 8 

 

 

Note 3 - Earnings per common share

 

The following table presents the basic and diluted earnings per common share computation (in thousands, except per share data):

 

   Three Months Ended June 30,   Six Months Ended June 30, 
   2019   2018   2019   2018 
Numerator                    
Net income - basic and diluted  $637   $641   $1,446   $1,053 
Preferred stock dividend   -    -    -    (113)
Net income available to common shareholders  $637   $641   $1,446   $940 
                     
Denominator                    
Weighted average shares outstanding - basic   1,439    1,435    1,437    1,433 
Dilutive effect of common stock options   -    -    -    - 
                     
Weighted average shares outstanding - diluted   1,439    1,435    1,437    1,433 
                     
Earnings per share - basic  $0.44   $0.45   $1.01   $0.66 
Earnings per share - diluted  $0.44   $0.45   $1.01   $0.66 

 

Applicable guidance requires that outstanding, unvested share-based payment awards that contain voting rights and rights to nonforfeitable dividends participate in undistributed earnings with common shareholders. Accordingly, the weighted average number of shares of the Company’s common stock used in the calculation of basic and diluted net income per common share includes unvested shares of the Company’s outstanding restricted common stock.

 

As a result of the Company’s largest shareholder’s ownership exceeding 50% during the second quarter of 2019 all non-vested restricted stock awards and units vested during the period.

 

The vesting of 6,510 of the unvested restricted units included in Note 11 “Stock incentive plan” were dependent upon meeting certain performance criteria. As of June 30, 2018, it was indeterminable whether these unvested restricted units would vest and as such those shares were excluded from common shares issued and outstanding at such date and were not included in the computation of earnings per share for such period.

 

Outstanding options and warrants to purchase common stock were considered in the computation of diluted earnings per share for the periods presented. Stock options for 536 and 571 shares were not included in computing diluted earnings per share for the three and six months ended June 30, 2019 and stock options for 1,633 and 1,699 shares were not included in computing diluted earnings per share for the three and six months ended June 30, 2018, respectively, because their effects were anti-dilutive. Additionally, the impact of warrants to acquire shares of the Company’s common stock in connection with the Company’s participation in the Troubled Asset Relief Program were not included for the three and six months ended June 30, 2018, as the warrants were anti-dilutive. The warrants expired on May 1, 2019 and as such were not included in the three and six months ended June 30, 2019.

 

 9 

 

 

Note 4 – Investment securities available for sale

 

The amortized cost and fair value of investment securities available for sale as of June 30, 2019 and December 31, 2018 are as follows (in thousands):

 

       Gross   Gross     
   Amortized   Unrealized   Unrealized     
   Cost   Gains   Losses   Fair Value 
                 
June 30, 2019                    
U.S. Government agencies  $15,174   $44   $(50)  $15,168 
Mortgage-backed securities   23,626    76    (19)   23,683 
Subordinated debt   4,582    51    (69)   4,564 
                     
   $43,382   $171   $(138)  $43,415 
                     
December 31, 2018                    
U.S. Government agencies  $14,120   $-   $(269)  $13,851 
Mortgage-backed securities   26,924    102    (576)   26,450 
Subordinated debt   4,089    11    (148)   3,952 
                     
   $45,133   $113   $(993)  $44,253 

 

At June 30, 2019 and December 31, 2018, the Company had investment securities with a fair value of approximately $8,130,000 and $8,004,000, respectively, pledged to secure borrowings from the Federal Home Loan Bank of Atlanta (“FHLB”).

 

Gross realized gains and losses pertaining to available for sale securities are detailed as follows for the periods indicated (in thousands):

 

   Three Months   Six Months 
   Ended June 30,   Ended June 30, 
   2019   2018   2019   2018 
                 
Gross realized gains  $-   $-   $101   $- 
Gross realized losses   -    -    -    - 
                     
   $-   $-   $101   $- 

 

The Company sold approximately $6.5 million of investment securities available for sale at a gross gain of $101,000 during the six months ended June 30, 2019.

 

 10 

 

 

Investment securities available for sale that have an unrealized loss position at June 30, 2019 and December 31, 2018 are detailed below (in thousands):

 

   Securities in a loss   Securities in a loss         
   position for less than   position for more than         
   12 Months   12 Months   Total 
   Fair   Unrealized   Fair   Unrealized   Fair   Unrealized 
   Value   Losses   Value   Losses   Value   Losses 
June 30, 2019                              
US Government Agencies  $-   $-   $11,677   $(50)  $11,677   $(50)
Mortgage-backed securities   2,523    (8)   8,946    (11)   11,469    (19)
Subordinated debt   1,192    (62)   510    (7)   1,702    (69)
                               
   $3,715   $(70)  $21,133   $(68)  $24,848   $(138)
                               
December 31, 2018                              
US Government Agencies  $-   $-   $13,851   $(269)  $13,851   $(269)
Mortgage-backed securities   -    -    18,397    (576)   18,397    (576)
Subordinated debt   1,915    (140)   512    (8)   2,427    (148)
                               
   $1,915   $(140)  $32,760   $(853)  $34,675   $(993)

 

 

As of June 30, 2019, there were $21.1 million, or 16 issues, of individual available for sale securities that had been in a continuous loss position for more than 12 months. These securities had an unrealized loss of $68,000 and consisted of US Government agencies, mortgage-backed securities, and subordinated debt.

 

All of the unrealized losses are attributable to increases in interest rates and not to credit deterioration. Currently, the Company believes that it is probable that the Company will be able to collect all amounts due according to the contractual terms of the investments. Because the decline in fair value is attributable to changes in interest rates and not to credit quality, and because it is not more likely than not that the Company will be required to sell the investments before recovery of their amortized cost bases, which may be maturity, the Company does not consider these investments to be other than temporarily impaired at June 30, 2019.

 

The amortized cost and estimated fair value of investment securities available for sale as of June 30, 2019, by contractual maturity, are as follows (in thousands):

 

   Amortized     
   Cost   Fair Value 
         
One to five years  $12,931   $12,909 
Five to ten years   6,390    6,365 
More than ten years   24,061    24,141 
           
Total  $43,382   $43,415 

 

 11 

 

 

Note 5 – Loans and allowance for loan losses

 

Loans classified by type as of June 30, 2019 and December 31, 2018 are as follows (dollars in thousands):

 

   June 30, 2019   December 31, 2018 
   Amount   %   Amount   % 
Construction and land development                    
Residential  $5,176    1.23%  $7,704    1.86%
Commercial   27,953    6.66%   33,904    8.18%
    33,129    7.89%   41,608    10.04%
Commercial real estate                    
Owner occupied   95,227    22.68%   98,153    23.68%
Non-owner occupied   105,099    25.03%   95,034    22.93%
Multifamily   13,291    3.17%   13,597    3.28%
Farmland   172    0.04%   185    0.04%
    213,789    50.92%   206,969    49.93%
Consumer real estate                    
Home equity lines   20,000    4.76%   20,675    4.99%
Secured by 1-4 family residential,                    
First deed of trust   59,608    14.20%   57,410    13.85%
Second deed of trust   10,513    2.50%   9,556    2.31%
    90,121    21.46%   87,641    21.15%
                     
Commercial and industrial loans                    
(except those secured by real estate)   44,450    10.59%   36,639    8.84%
Guaranteed student loans   36,126    8.61%   39,315    9.49%
Consumer and other   2,221    0.53%   2,258    0.55%
                     
Total loans   419,836    100.0%   414,430    100.0%
Deferred fees and costs, net   750         713      
Less: allowance for loan losses   (3,047)        (3,051)     
                     
   $417,539        $412,092      

 

The Bank has a purchased portfolio of rehabilitated student loans guaranteed by the Department of Education (“DOE”). The guarantee covers approximately 98% of principal and accrued interest. The loans are serviced by a third-party servicer that specializes in handling the special needs of the DOE student loan programs.

 

Loans pledged as collateral with the FHLB as part of their lending arrangement with the Company totaled $46,736,000 and $38,751,000 as of June 30, 2019 and December 31, 2018, respectively.

 

Loans are considered past due if the required principal and interest payments have not been received as of the date such payments were due. Loans are placed on nonaccrual status when, in management’s opinion, the borrower may be unable to meet payment obligations as they become due, as well as when required by regulatory provisions. Loans may be placed on nonaccrual status regardless of whether or not such loans are considered past due as long as the remaining recorded investment in the loan is deemed fully collectible. When interest accrual is discontinued, all unpaid accrued interest is reversed. Interest income is subsequently recognized only to the extent cash payments are received in excess of principal due. Loans are returned to accrual status when all principal and interest amounts contractually due are brought to current and future payments are reasonably assured.

 

 12 

 

 

The following table provides information on nonaccrual loans segregated by type at the dates indicated (in thousands):

 

   June 30,   December 31, 
   2019   2018 
Construction and land development          
Commercial  $-   $39 
    -    39 
Commercial real estate          
Non-owner occupied   507    515 
    507    515 
Consumer real estate          
Home equity lines   420    125 
Secured by 1-4 family residential,          
First deed of trust   571    1,163 
Second deed of trust   64    154 
    1,055    1,442 
Commercial and industrial loans          
(except those secured by real estate)   173    255 
Consumer and other   11    8 
           
Total loans  $1,746   $2,259 

 

The Company assigns risk rating classifications to its loans. These risk ratings are divided into the following groups:

 

·Risk rated 1 to 4 loans are considered of sufficient quality to preclude an adverse rating. These assets generally are well protected by the current net worth and paying capacity of the obligor or by the value of the asset or underlying collateral;
·Risk rated 5 loans are defined as having potential weaknesses that deserve management’s close attention;
·Risk rated 6 loans are inadequately protected by the current net worth and paying capacity of the obligor or of the collateral pledged, if any; and
·Risk rated 7 loans have all the weaknesses inherent in substandard loans, with the added characteristics that the weaknesses make collection or liquidation in full, on the basis of currently existing facts, conditions and values, highly questionable and improbable.

 

 13 

 

 

The following tables provide information on the risk rating of loans at the dates indicated (in thousands):

 

   Risk Rated   Risk Rated   Risk Rated   Risk Rated   Total 
   1-4   5   6   7   Loans 
June 30, 2019                         
Construction and land development                         
Residential  $5,176   $-   $-   $-   $5,176 
Commercial   27,640    -    313    -    27,953 
    32,816    -    313    -    33,129 
Commercial real estate                         
Owner occupied   89,695    3,271    2,261         95,227 
Non-owner occupied   104,358    234    507    -    105,099 
Multifamily   13,137    154    -    -    13,291 
Farmland   75    97    -    -    172 
    207,265    3,756    2,768    -    213,789 
Consumer real estate                         
Home equity lines   18,830    730    440    -    20,000 
Secured by 1-4 family residential                         
First deed of trust   56,733    2,148    727    -    59,608 
Second deed of trust   8,719    1,590    204    -    10,513 
    84,282    4,468    1,371    -    90,121 
Commercial and industrial loans                         
(except those secured by real estate)   40,018    3,029    1,403    -    44,450 
Guaranteed student loans   36,126    -    -    -    36,126 
Consumer and other   2,202    7    12    -    2,221 
                          
Total loans  $402,709   $11,260   $5,867   $-   $419,836 
                          
December 31, 2018                         
Construction and land development                         
Residential  $6,957   $-   $747   $-   $7,704 
Commercial   33,432    6    466    -    33,904 
    40,389    6    1,213    -    41,608 
Commercial real estate                         
Owner occupied   88,484    6,540    3,129    -    98,153 
Non-owner occupied   94,519    -    515    -    95,034 
Multifamily   13,436    161    -    -    13,597 
Farmland   81    104    -    -    185 
    196,520    6,805    3,644    -    206,969 
Consumer real estate                         
Home equity lines   19,601    934    140    -    20,675 
Secured by 1-4 family residential                         
First deed of trust   53,994    1,612    1,804    -    57,410 
Second deed of trust   9,167    175    214    -    9,556 
    82,762    2,721    2,158    -    87,641 
Commercial and industrial loans                         
(except those secured by real estate)   32,776    3,349    499    15    36,639 
Guaranteed student loans   39,315    -    -    -    39,315 
Consumer and other   2,239    8    11    -    2,258 
                          
Total loans  $394,001   $12,889   $7,525   $15   $414,430 

 

 14 

 

 

The following table presents the aging of the recorded investment in past due loans and leases as of the dates indicated (in thousands):

 

                           Recorded 
           Greater               Investment > 
   30-59 Days   60-89 Days   Than   Total Past       Total   90 Days and 
   Past Due   Past Due   90 Days   Due   Current   Loans   Accruing 
June 30, 2019                                   
Construction and land development                                   
Residential  $-   $-   $-   $-   $5,176   $5,176   $- 
Commercial   -    -    -    -    27,953    27,953    - 
    -    -    -    -    33,129    33,129    - 
Commercial real estate                                   
Owner occupied   561    -    -    561    94,666    95,227    - 
Non-owner occupied   234    -    -    234    104,865    105,099    - 
Multifamily   -    -    -    -    13,291    13,291    - 
Farmland   -    -    -    -    172    172    - 
    795    -    -    795    212,994    213,789    - 
Consumer real estate                                   
Home equity lines   187    -    -    187    19,813    20,000    - 
Secured by 1-4 family residential                                   
First deed of trust   516    -    -    516    59,092    59,608    - 
Second deed of trust   23    -    -    23    10,490    10,513    - 
    726    -    -    726    89,395    90,121    - 
Commercial and industrial loans                                   
(except those secured by real estate)   94    -    -    94    44,356    44,450    - 
Guaranteed student loans   1,930    642    4,259    6,831    29,295    36,126    4,259 
Consumer and other   7    -    -    7    2,214    2,221    - 
                                    
Total loans  $3,552   $642   $4,259   $8,453   $411,383   $419,836   $4,259 

 

                           Recorded 
           Greater               Investment > 
   30-59 Days   60-89 Days   Than   Total Past       Total   90 Days and 
   Past Due   Past Due   90 Days   Due   Current   Loans   Accruing 
December 31, 2018                                   
Construction and land development                                   
Residential  $-   $-   $-   $-   $7,704   $7,704   $- 
Commercial   118    -    -    118    33,786    33,904    - 
    118    -    -    118    41,490    41,608    - 
Commercial real estate                                   
Owner occupied   -    -    -    -    98,153    98,153    - 
Non-owner occupied   -    -    -    -    95,034    95,034    - 
Multifamily   -    -    -    -    13,597    13,597    - 
Farmland   -    -    -    -    185    185    - 
    -    -    -    -    206,969    206,969    - 
Consumer real estate                                   
Home equity lines   -    315    -    315    20,360    20,675    - 
Secured by 1-4 family residential                                   
First deed of trust   171    7    -    178    57,232    57,410    - 
Second deed of trust   162    -    -    162    9,394    9,556    - 
    333    322    -    655    86,986    87,641    - 
Commercial and industrial loans                                   
(except those secured by real estate)   312    433    -    745    35,894    36,639    - 
Guaranteed student loans   1,946    971    5,573    8,490    30,825    39,315    5,573 
Consumer and other   9    1    -    10    2,248    2,258    - 
                                    
Total loans  $2,718   $1,727   $5,573   $10,018   $404,412   $414,430   $5,573 

 

Loans greater than 90 days past due are student loans that are guaranteed by the DOE which covers approximately 98% of the principal and interest. Accordingly, these loans will not be placed on nonaccrual status and are not considered to be impaired.

 

 15 

 

 

Loans are considered impaired when, based on current information and events it is probable the Company will be unable to collect all amounts when due in accordance with the original contractual terms of the loan agreement, including scheduled principal and interest payments. Loans evaluated individually for impairment include non-performing loans, such as loans on non-accrual, loans past due by 90 days or more, restructured loans and other loans selected by management. The evaluations are based upon discounted expected cash flows or collateral valuations. If the evaluation shows that a loan is individually impaired, then a specific reserve is established for the amount of impairment. Impairment is evaluated in total for smaller-balance loans of a similar nature and on an individual loan basis for other loans. If a loan is impaired, a specific valuation allowance is allocated, if necessary, so that the loan is reported net, at the present value of estimated future cash flows using the loan’s existing rate or at the fair value of collateral if repayment is expected solely from the collateral. Interest payments on impaired loans are typically applied to principal unless collectability of the principal amount is reasonably assured, in which case interest is recognized on a cash basis. Impaired loans, or portions thereof, are charged off when deemed uncollectible.

 16 

 

 

Impaired loans are set forth in the following table as of the dates indicated (in thousands):

 

   June 30, 2019   December 31, 2018 
       Unpaid           Unpaid     
   Recorded   Principal   Related   Recorded   Principal   Related 
   Investment   Balance   Allowance   Investment   Balance   Allowance 
With no related allowance recorded                              
Construction and land development                              
Residential  $-   $-   $-   $747   $747   $- 
Commercial   313    411    -    360    458    - 
    313    411    -    1,107    1,205    - 
Commercial real estate                              
Owner occupied   3,074    3,074    -    3,703    3,703    - 
Non-owner occupied   2,536    2,536    -    2,588    2,588    - 
    5,610    5,610    -    6,291    6,291    - 
Consumer real estate                              
Home equity lines   420    420    -    684    684    - 
Secured by 1-4 family residential                              
First deed of trust   2,213    2,235    -    3,057    3,057    - 
Second deed of trust   613    821    -    721    929    - 
    3,246    3,476    -    4,462    4,670    - 
Commercial and industrial loans                              
(except those secured by real estate)   1,285    1,763    -    528    875    - 
Consumer and other   -    -    -    -    -    - 
    10,454    11,260    -    12,388    13,041    - 
                               
With an allowance recorded                              
Construction and land development                              
Commercial   -    -    -    106    106    8 
    -    -    -    106    106    8 
Commercial real estate                              
Owner occupied   1,437    1,437    21    1,459    1,459    25 
    1,437    1,437    21    1,459    1,459    25 
Consumer real estate                              
Home equity lines   -    -    -    -    -    - 
Secured by 1-4 family residential                              
First deed of trust   196    196    18    200    200    20 
Second deed of trust   158    158    2    161    161    4 
    354    354    20    361    361    24 
Commercial and industrial loans                              
(except those secured by real estate)   -    -    -    8    8    8 
Consumer and other   7    7    7    9    9    9 
    1,798    1,798    48    1,943    1,943    74 
                               
Total                              
Construction and land development                              
Residential   -    -    -    747    747    - 
Commercial   313    411    -    466    564    8 
    313    411    -    1,213    1,311    8 
Commercial real estate                              
Owner occupied   4,511    4,511    21    5,162    5,162    25 
Non-owner occupied   2,536    2,536    -    2,588    2,588    - 
    7,047    7,047    21    7,750    7,750    25 
Consumer real estate                              
Home equity lines   420    420    -    684    684    - 
Secured by 1-4 family residential,                              
First deed of trust   2,409    2,431    18    3,257    3,257    20 
Second deed of trust   771    979    2    882    1,090    4 
    3,600    3,830    20    4,823    5,031    24 
Commercial and industrial loans                              
(except those secured by real estate)   1,285    1,763    -    536    883    8 
Consumer and other   7    7    7    9    9    9 
   $12,252   $13,058   $48   $14,331   $14,984   $74 

 

 17 

 

 

The following is a summary of average recorded investment in impaired loans with and without a valuation allowance and interest income recognized on those loans for the periods indicated (in thousands):

 

   For the Three Months   For the Six Months 
   Ended June 30, 2019   Ended June 30, 2019 
   Average   Interest   Average   Interest 
   Recorded   Income   Recorded   Income 
   Investment   Recognized   Investment   Recognized 
With no related allowance recorded                    
Construction and land development                    
Residential  $162   $-   $267   $- 
Commercial   335    -    349    - 
    497    -    616    - 
Commercial real estate                    
Owner occupied   2,825    12    3,277    46 
Non-owner occupied   2,551    39    2,574    62 
    5,376    51    5,851    108 
Consumer real estate                    
Home equity lines   272    10    479    10 
Secured by 1-4 family residential                    
First deed of trust   2,586    3    2,853    45 
Second deed of trust   662    10    694    23 
    3,520    23    4,026    78 
Commercial and industrial loans                    
(except those secured by real estate)   899    7    688    15 
Consumer and other   -    1    -    1 
    10,292    82    11,181    202 
                     
With an allowance recorded                    
Construction and land development                    
Commercial   -    -    26    - 
                     
Commercial real estate                    
Owner occupied   1,444    15    1,453    30 
    1,444    15    1,453    30 
Consumer real estate                    
Home equity line   -    -    -    - 
Secured by 1-4 family residential                    
First deed of trust   197    3    198    6 
Second deed of trust   159    2    160    4 
    356    5    358    10 
Commercial and industrial loans                    
(except those secured by real estate)   -    -    77    - 
Consumer and other   8    -    12    - 
    1,808    20    1,926    40 
                     
Total                    
Construction and land development                    
Residential   162    -    267    - 
Commercial   335    -    375    - 
    497    -    642    - 
Commercial real estate                    
Owner occupied   4,269    27    4,730    76 
Non-owner occupied   2,551    39    2,574    62 
    6,820    66    7,304    138 
Consumer real estate                    
Home equity lines   272    10    479    10 
Secured by 1-4 family residential,                    
First deed of trust   2,783    6    3,051    51 
Second deed of trust   821    12    854    27 
    3,876    28    4,384    88 
Commercial and industrial loans                    
(except those secured by real estate)   899    7    765    15 
Consumer and other   8    1    12    1 
   $12,100   $102   $13,107   $242 

 

 18 

 

 

   For the Three Months   For the Six Months 
   Ended June 30, 2018   Ended June 30, 2018 
   Average   Interest   Average   Interest 
   Recorded   Income   Recorded   Income 
   Investment   Recognized   Investment   Recognized 
With no related allowance recorded                    
Construction and land development                    
Commercial  $657   $7   $478   $13 
    657    7    478    13 
Commercial real estate                    
Owner occupied   1,903    40    3,753    80 
Non-owner occupied   3,220    205    2,401    231 
    5,123    245    6,154    311 
Consumer real estate                    
Home equity lines   353    -    475    - 
Secured by 1-4 family residential                    
First deed of trust   1,345    15    3,431    46 
Second deed of trust   1,893    12    604    23 
    3,591    27    4,510    69 
Commercial and industrial loans                    
(except those secured by real estate)   220    12    455    20 
Consumer and other   2    1    2    1 
    9,593    292    11,599    414 
                     
With an allowance recorded                    
Construction and land development                    
Commercial   -    -    116    - 
                     
Commercial real estate                    
Owner occupied   735    11    1,591    22 
    735    11    1,591    22 
Consumer real estate                    
Home equity line   741    -    101    - 
Secured by 1-4 family residential                    
First deed of trust   224    8    660    15 
Second deed of trust   149    4    125    4 
    1,114    12    886    19 
Commercial and industrial loans                    
(except those secured by real estate)   283    -    665    - 
Consumer and other   462    -    10    - 
    2,594    23    3,268    41 
                     
Total                    
Construction and land development                    
Commercial   657    7    594    13 
    657    7    594    13 
Commercial real estate                    
Owner occupied   2,638    51    5,344    102 
Non-owner occupied   3,220    205    2,401    231 
    5,858    256    7,745    333 
Consumer real estate                    
Home equity lines   1,094    -    576    - 
Secured by 1-4 family residential,                    
First deed of trust   1,569    23    4,091    61 
Second deed of trust   2,042    16    729    27 
    4,705    39    5,396    88 
Commercial and industrial loans                    
(except those secured by real estate)   503    12    1,120    20 
Consumer and other   464    1    12    1 
   $12,187   $315   $14,867   $455 

 

 19 

 

 

Included in impaired loans are loans classified as TDRs. A modification of a loan’s terms constitutes a TDR if the creditor grants a concession to the borrower for economic or legal reasons related to the borrower’s financial difficulties that it would not otherwise consider. For loans classified as impaired TDRs, the Company further evaluates the loans as performing or nonaccrual. To restore a nonaccrual loan that has been formally restructured in a TDR to accrual status, we perform a current, well documented credit analysis supporting a return to accrual status based on the borrower’s financial condition and prospects for repayment under the revised terms. Otherwise, the TDR must remain in nonaccrual status. The analysis considers the borrower’s sustained historical repayment performance for a reasonable period to the return-to-accrual date, but may take into account payments made for a reasonable period prior to the restructuring if the payments are consistent with the modified terms. A sustained period of repayment performance generally would be a minimum of six months and would involve payments in the form of cash or cash equivalents.

 

An accruing loan that is modified in a TDR can remain in accrual status if, based on a current well-documented credit analysis, collection of principal and interest in accordance with the modified terms is reasonably assured, and the borrower has demonstrated sustained historical repayment performance for a reasonable period before modification. The following is a summary of performing and nonaccrual TDRs and the related specific valuation allowance by portfolio segment for the periods indicated (dollars in thousands).

 

               Specific 
               Valuation 
   Total   Performing   Nonaccrual   Allowance 
June 30, 2019                    
Commercial real estate                    
Owner occupied  $3,982   $3,982   $-   $21 
Non-owner occupied   2,536    2,029    507    - 
    6,518    6,011    507    21 
Consumer real estate                    
Secured by 1-4 family residential                    
First deeds of trust   2,214    1,726    488    18 
Second deeds of trust   771    707    64    2 
    2,985    2,433    552    20 
Commercial and industrial loans                    
(except those secured by real estate)   303    270    33    - 
   $9,806   $8,714   $1,092   $41 
                     
Number of loans   42    34    8    6 

 

 20 

 

 

               Specific 
               Valuation 
   Total   Performing   Nonaccrual   Allowance 
December 31, 2018                    
Construction and land development                    
Commercial  $-   $-   $-   $- 
    -    -    -    - 
Commercial real estate                    
Owner occupied   4,064    4,064    -    25 
Non-owner occupied   2,072    2,072    -    - 
    6,136    6,136    -    25 
Consumer real estate                    
Secured by 1-4 family residential                    
First deeds of trust   2,284    1,525    759    20 
Second deeds of trust   794    729    65    4 
    3,078    2,254    824    24 
Commercial and industrial loans                    
(except those secured by real estate)   317    282    35    - 
   $9,531   $8,672   $859   $49 
                     
Number of loans   42    33    9    6 

 

The following table provides information about TDRs identified during the indicated periods (dollars in thousands).

 

   Three Months Ended   Three Months Ended 
   June 30, 2019   June 30, 2018 
       Pre-   Post-       Pre-   Post- 
       Modification   Modification       Modification   Modification 
   Number of   Recorded   Recorded   Number of   Recorded   Recorded 
   Loans   Balance   Balance   Loans   Balance   Balance 
                         
Secured by 1-4 family residential                              
First deed of trust   -   $-   $-    1   $73   $73 
    -   $-   $-    1   $73   $73 

 

   Six Months Ended   Six Months Ended 
   June 30, 2019   June 30, 2018 
       Pre-   Post-       Pre-   Post- 
       Modification   Modification       Modification   Modification 
   Number of   Recorded   Recorded   Number of   Recorded   Recorded 
   Loans   Balance   Balance   Loans   Balance   Balance 
                         
Commercial real estate                              
Non-owner occupied   1   $507   $507    -   $-   $- 
                               
Secured by 1-4 family residential                              
First deed of trust   -    -         1    73    73 
    1   $507   $507    1   $73   $73 

 

There were no defaults on TDRs that were modified as TDRs during the prior twelve month period.

 

 21 

 

 

Activity in the allowance for loan losses is as follows for the periods indicated (in thousands):

 

       Provision for             
   Beginning   (Recovery of)           Ending 
   Balance   Loan Losses   Charge-offs   Recoveries   Balance 
                     
Three Months Ended June 30, 2019                         
Construction and land development                         
Residential  $46   $(21)  $-   $6   $31 
Commercial   173    (15)   -    1    159 
    219    (36)   -    7    190 
Commercial real estate                         
Owner occupied   710    (51)   -    -    659 
Non-owner occupied   692    55    -    -    747 
Multifamily   88    (3)   -    -    85 
Farmland   2    -    -    -    2 
    1,492    1    -    -    1,493 
Consumer real estate                         
Home equity lines   240    (13)   -    6    233 
Secured by 1-4 family residential                         
First deed of trust   395    (31)   -    3    367 
Second deed of trust   57    (3)   -    6    60 
    692    (47)   -    15    660 
Commercial and industrial loans                         
(except those secured by real estate)   352    11    -    22    385 
Student loans   121    8    (20)   -    109 
Consumer and other   30    8    (5)   1    34 
Unallocated   121    55    -    -    176 
                          
   $3,027   $-   $(25)  $45   $3,047 

 

       Provision for             
   Beginning   (Recovery of)           Ending 
   Balance   Loan Losses   Charge-offs   Recoveries   Balance 
                     
Three Months Ended June 30, 2018                         
Construction and land development                         
Residential  $26   $9   $-   $1   $36 
Commercial   189    5    -    2    196 
    215    14    -    3    232 
Commercial real estate                         
Owner occupied   662    57    -    -    719 
Non-owner occupied   537    30    -    -    567 
Multifamily   60    12    -    -    72 
Farmland   2    -    -    -    2 
    1,261    99    -    -    1,360 
Consumer real estate                         
Home equity lines   277    (41)   -    1    237 
Secured by 1-4 family residential                         
First deed of trust   527    (59)   (7)   15    476 
Second deed of trust   54    (25)   -    27    56 
    858    (125)   (7)   43    769 
Commercial and industrial loans                         
(except those secured by real estate)   604    (54)   (314)   168    404 
Student loans   107    12    (28)   -    91 
Consumer and other   27    3    -    -    30 
Unallocated   271    51    -    -    322 
                          
   $3,343   $-   $(349)  $214   $3,208 

 

 22 

 

 

       Provision for             
   Beginning   (Recovery of)           Ending 
   Balance   Loan Losses   Charge-offs   Recoveries   Balance 
                     
Six Months Ended June 30, 2019                         
Construction and land development                         
Residential  $42   $(18)  $-   $7   $31 
Commercial   220    (63)   -    2    159 
    262    (81)   -    9    190 
Commercial real estate                         
Owner occupied   673    (14)   -    -    659 
Non-owner occupied   673    74    -    -    747 
Multifamily   87    (2)   -    -    85 
Farmland   2    -    -    -    2 
    1,435    58    -    -    1,493 
Consumer real estate                         
Home equity lines   244    (23)   -    12    233 
Secured by 1-4 family residential                         
First deed of trust   385    (23)   -    5    367 
Second deed of trust   51    (1)   -    10    60 
    680    (47)   -    27    660 
Commercial and industrial loans                         
(except those secured by real estate)   308    59    (15)   33    385 
Student loans   121    41    (53)   -    109 
Consumer and other   34    5    (7)   2    34 
Unallocated   211    (35)   -    -    176 
                          
   $3,051   $-   $(75)  $71   $3,047 

 

       Provision for             
   Beginning   (Recovery of)           Ending 
   Balance   Loan Losses   Charge-offs   Recoveries   Balance 
                     
Six Months Ended June 30, 2018                         
Construction and land development                         
Residential  $32   $3   $-   $1   $36 
Commercial   165    28    -    3    196 
    197    31    -    4    232 
Commercial real estate                         
Owner occupied   624    95    -    -    719 
Non-owner occupied   500    (151)   -    218    567 
Multifamily   60    12    -    -    72 
Farmland   3    (1)   -    -    2 
    1,187    (45)   -    218    1,360 
Consumer real estate                         
Home equity lines   268    (32)   -    1    237 
Secured by 1-4 family residential                         
First deed of trust   502    (2)   (41)   17    476 
Second deed of trust   47    22    (45)   32    56 
    817    (12)   (86)   50    769 
Commercial and industrial loans                         
(except those secured by real estate)   556    (10)   (314)   172    404 
Student loans   108    43    (60)   -    91 
Consumer and other   27    18    (21)   6    30 
Unallocated   347    (25)   -    -    322 
                          
   $3,239   $-   $(481)  $450   $3,208 

 

 23 

 

 

       Provision for             
   Beginning   (Recovery of)           Ending 
   Balance   Loan Losses   Charge-offs   Recoveries   Balance 
                     
Year Ended December 31, 2018                         
Construction and land development                         
Residential  $32   $9   $-   $1   $42 
Commercial   165    49    -    6    220 
    197    58    -    7    262 
Commercial real estate                         
Owner occupied   624    49    -    -    673 
Non-owner occupied   500    (45)   -    218    673 
Multifamily   60    27    -    -    87 
Farmland   3    (1)   -    -    2 
    1,187    30    -    218    1,435 
Consumer real estate                         
Home equity lines   268    39    (64)   1    244 
Secured by 1-4 family residential                         
First deed of trust   502    (97)   (41)   21    385 
Second deed of trust   47    6    (45)   43    51 
    817    (52)   (150)   65    680 
Commercial and industrial loans                         
(except those secured by real estate)   556    (50)   (375)   177    308 
Student loans   108    118    (105)   -    121 
Consumer and other   27    32    (34)   9    34 
Unallocated   347    (136)   -    -    211 
                          
   $3,239   $-   $(664)  $476   $3,051 

 

The allowance for loan losses at each of the periods presented includes an amount that could not be identified to individual types of loans referred to as the unallocated portion of the allowance. We recognize the inherent imprecision in estimates of losses due to various uncertainties and the variability related to the factors used in calculation of the allowance. The allowance for loan losses included an unallocated portion of approximately $176,000, $211,000, and $322,000 at June 30, 2019, December 31, 2018, and June 30, 2018, respectively.

 

 24 

 

 

Loans were evaluated for impairment as follows for the periods indicated (in thousands):

 

   Recorded Investment in Loans 
   Allowance   Loans 
   Ending           Ending         
   Balance   Individually   Collectively   Balance   Individually   Collectively 
                         
As of June 30, 2019                              
Construction and land development                              
Residential  $31   $-   $31   $5,176   $-   $5,176 
Commercial   159    -    159    27,953    313    27,640 
    190    -    190    33,129    313    32,816 
Commercial real estate                              
Owner occupied   659    21    638    95,227    4,511    90,716 
Non-owner occupied   747    -    747    105,099    2,536    102,563 
Multifamily   85    -    85    13,291    -    13,291 
Farmland   2    -    2    172    -    172 
    1,493    21    1,472    213,789    7,047    206,742 
Consumer real estate                              
Home equity lines   233    -    233    20,000    420    19,580 
Secured by 1-4 family residential                              
First deed of trust   367    18    349    59,608    2,409    57,199 
Second deed of trust   60    2    58    10,513    771    9,742 
    660    20    640    90,121    3,600    86,521 
Commercial and industrial loans                              
(except those secured by real estate)   385    -    385    44,450    1,285    43,165 
Student loans   109    -    109    36,126    -    36,126 
Consumer and other   210    7    203    2,221    7    2,214 
                               
   $3,047   $48   $2,999   $419,836   $12,252   $407,584 
                               
Year Ended December 31, 2018                              
Construction and land development                              
Residential  $42   $-   $42   $7,704   $747   $6,957 
Commercial   220    8    212    33,904    466    33,438 
    262    8    254    41,608    1,213    40,395 
Commercial real estate                              
Owner occupied   673    25    648    98,153    5,162    92,991 
Non-owner occupied   673    -    673    95,034    2,588    92,446 
Multifamily   87    -    87    13,597    -    13,597 
Farmland   2    -    2    185    -    185 
    1,435    25    1,410    206,969    7,750    199,219 
Consumer real estate                              
Home equity lines   244    -    244    20,675    684    19,991 
Secured by 1-4 family residential                              
First deed of trust   385    20    365    57,410    3,257    54,153 
Second deed of trust   51    4    47    9,556    882    8,674 
    680    24    656    87,641    4,823    82,818 
Commercial and industrial loans                              
(except those secured by real estate)   308    8    300    36,639    536    36,103 
Student loans   121    -    121