10-Q 1 cban20150630_10q.htm FORM 10-Q cban20150630_10q.htm

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

 

WASHINGTON, DC 20549

 

FORM 10-Q

 

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

EXCHANGE ACT OF 1934

 

 

FOR QUARTER ENDED JUNE 30, 2015

 

COMMISSION FILE NUMBER 0-12436

 

COLONY BANKCORP, INC.

(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)

 

GEORGIA

 

58-1492391

(STATE OR OTHER JURISDICTION OF

INCORPORATION OR ORGANIZATION)

 

(I.R.S. EMPLOYER

IDENTIFICATION NUMBER)

 

115 SOUTH GRANT STREET, FITZGERALD, GEORGIA 31750

ADDRESS OF PRINCIPAL EXECUTIVE OFFICES

 

229/426-6000

REGISTRANT’S TELEPHONE NUMBER INCLUDING AREA CODE

 

INDICATE BY CHECK MARK WHETHER THE REGISTRANT (1) HAS FILED REPORTS REQUIRED TO BE FILED BY SECTIONS 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 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

 

INDICATE BY CHECK MARK WHETHER THE REGISTRANT IS A LARGE ACCELERATED FILER, AN ACCELERATED FILER, A NON-ACCELERATED FILER OR A SMALLER REPORTING COMPANY.   SEE DEFINITIONS OF “ACCELERATED FILER”, “LARGE ACCELERATED FILER” AND “SMALLER REPORTING COMPANY” IN RULE 12b-2 OF THE EXCHANGE ACT.

 

LARGE ACCELERATED FILER  

ACCELERATED FILER  

NON-ACCELERATED FILER  

SMALLER REPORTING COMPANY   X

(DO NOT CHECK IF A SMALLER REPORTING COMPANY)

 

INDICATE BY CHECK MARK WHETHER THE REGISTRANT IS A SHELL COMPANY (AS DEFINED IN RULE 12B-2 OF THE EXCHANGE ACT).

 

YES          NO   X

 

INDICATE THE NUMBER OF SHARES OUTSTANDING OF EACH OF THE ISSUER’S CLASSES OF COMMON STOCK, AS OF THE LATEST PRACTICABLE DATE.

 

 

 CLASS   

 OUTSTANDING AT AUGUST 3, 2015

 

 COMMON STOCK, $1 PAR VALUE   

 8,439,258

 

 

 
 

 

 

TABLE OF CONTENTS

 

    Page
     

PART I – Financial Information

 
     

Forward Looking Statement Disclosure  

3
     

Item 1.

Financial Statements

5

Item 2.

Management’s Discussion and Analysis of Financial Condition and Results of Operations

40

Item 3.

Quantitative and Qualitative Disclosures About Market Risk

53

Item 4.

Controls and Procedures

54

     
     

PART II – Other Information

 
     

Item 1.

Legal Proceedings

55

Item 1A.

Risk Factors

55

Item 2.

Unregistered Sales of Equity Securities and Use of Proceeds

55

Item 3.

Defaults Upon Senior Securities

55

Item 4.

(Removed and Reserved)

55

Item 5.

Other Information

55

Item 6.

Exhibits

56

Signatures

 

58

 

 
2

 

 

Forward Looking Statement Disclosure

 

Certain statements contained in this Quarterly Report that are not statements of historical fact constitute forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995 (the Act), not withstanding that such statements are not specifically identified. In addition, certain statements may be contained in the Company’s future filings with the SEC, in press releases, and in oral and written statements made by or with the approval of the Company that are not statements of historical fact and constitute forward-looking statements within the meaning of the Act. Examples of forward-looking statements include, but are not limited to: (i) projections of revenues, income or loss, earnings or loss per share, the payment or nonpayment of dividends, capital structure and other financial items; (ii) statements of plans and objectives of Colony Bankcorp, Inc. or its management or Board of Directors, including those relating to products or services; (ii) statements of future economic performance; and (iv) statements of assumptions underlying such statements. Words such as “believes,” “anticipates,” “expects,” “intends,” “targeted,” and similar expressions are intended to identify forward-looking statements but are not the exclusive means of identifying such statements.

 

Forward-looking statements involve risks and uncertainties that may cause actual results to differ materially from those in such statements. Factors that could cause actual results to differ from those discussed in the forward-looking statements include, but are not limited to:

 

 

Loss and regional economic conditions and the impact they may have on the Company and its customers and the Company’s assessment of that impact.

 

 

Changes in estimates of future reserve requirements based upon the periodic review thereof under relevant regulatory and accounting requirements.

 

 

The effects of and changes in trade, monetary and fiscal policies and laws, including interest rate policies of the Federal Reserve Board.

 

 

Inflation, interest rate, market and monetary fluctuations.

 

 

Political instability.

 

 

Acts of war or terrorism.

 

 

The timely development and acceptance of new products and services and perceived overall value of these products and services by users.

 

 

Changes in consumer spending, borrowings and savings habits.

 

 

Technological changes.

 

 

Acquisitions and integration of acquired businesses.

 

 

The ability to increase market share and control expenses.

 

 

The effect of changes in laws and regulations (including laws and regulations concerning taxes, banking, securities and insurance) with which the Company and its subsidiary must comply.

 

 

The effect of changes in accounting policies and practices, as may be adopted by the regulatory agencies, as well as the Financial Accounting Standards Board and other accounting standard setters.

 

 

Changes in the Company’s organization, compensation and benefit plans.

 

 

The costs and effects of litigation and of unexpected or adverse outcomes in such litigation.

 

 

Greater than expected costs or difficulties related to the integration of new lines of business.

 

 

The Company’s success at managing the risks involved in the foregoing items.

 

 
3

 

 

Forward-looking statements speak only as of the date on which such statements are made. The Company undertakes no obligation to update any forward-looking statement to reflect events or circumstances after the date on which such statement is made, or to reflect the occurrence of unanticipated events.

 

Readers should carefully review all disclosures we file from time to time with the Securities and Exchange Commission (SEC).

 

 
4

 

 

PART 1. FINANCIAL INFORMATION

ITEM 1 

 

FINANCIAL STATEMENTS

 

THE FOLLOWING FINANCIAL STATEMENTS ARE PROVIDED FOR COLONY BANKCORP, INC. AND ITS WHOLLY-OWNED SUBSIDIARY BANK, COLONY BANK

 

 

A.

CONSOLIDATED BALANCE SHEETS – JUNE 30, 2015 (UNAUDITED) AND DECEMBER 31, 2014 (AUDITED).

 

 

B.

CONSOLIDATED STATEMENTS OF INCOME – FOR THE THREE MONTHS ENDED JUNE 30, 2015 AND 2014 AND FOR THE SIX MONTHS ENDED JUNE 30, 2015 AND 2014 (UNAUDITED).

 

 

C.

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME – FOR THE THREE MONTHS ENDED JUNE 30, 2015 AND 2014 AND FOR THE SIX MONTHS ENDED JUNE 30, 2015 AND 2014 (UNAUDITED).

 

 

D.

CONSOLIDATED STATEMENTS OF CASH FLOWS – FOR THE SIX MONTHS ENDED JUNE 30, 2015 AND 2014 (UNAUDITED).

 

THE CONSOLIDATED FINANCIAL STATEMENTS FURNISHED HAVE NOT BEEN AUDITED BY INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS, BUT REFLECT, IN THE OPINION OF MANAGEMENT, ALL ADJUSTMENTS (CONSISTING SOLELY OF NORMAL RECURRING ADJUSTMENTS) NECESSARY FOR A FAIR PRESENTATION OF THE RESULTS OF OPERATIONS FOR THE PERIODS PRESENTED.

 

THE RESULTS OF OPERATIONS FOR THE SIX MONTH PERIOD ENDED JUNE 30, 2015 ARE NOT NECESSARILY INDICATIVE OF THE RESULTS TO BE EXPECTED FOR THE FULL YEAR.

 

 
5

 

 

Part I (Continued)

Item 2 (Continued)

 

COLONY BANKCORP, INC. AND SUBSIDIARY

CONSOLIDATED BALANCE SHEETS

JUNE 30, 2015 AND DECEMBER 31, 2014

(DOLLARS IN THOUSANDS)

 

   

June 30, 2015

   

December 31, 2014

 

 

 

(Unaudited)

   

(Audited)

 
ASSETS            
                 

Cash and Cash Equivalents

               

Cash and Due from Banks

  $ 19,550     $ 24,473  

Federal Funds Sold

    -       20,132  
      19,550       44,605  

Interest-Bearing Deposits

    24,323       21,206  

Investment Securities

               

Available for Sale, at Fair Value

    273,878       274,594  

Held to Maturity, at Cost (Fair Value of $27 and $30, as of June 30, 2015 and December 31, 2014, Respectively)

    27       30  
      273,905       274,624  
                 

Federal Home Loan Bank Stock, at Cost

    2,731       2,831  

Loans

    760,078       746,094  

Allowance for Loan Losses

    (8,480 )     (8,802 )

Unearned Interest and Fees

    (388 )     (362 )
      751,210       736,930  

Premises and Equipment

    24,465       24,960  

Other Real Estate (Net of Allowance of $3,222 and $3,320 as of June 30, 2015 and December 31, 2014, Respectively)

    12,031       10,402  

Other Intangible Assets

    134       152  

Other Assets

    30,701       31,188  

Total Assets

  $ 1,139,050     $ 1,146,898  
                 

LIABILITIES AND STOCKHOLDERS' EQUITY

               

Deposits

               

Noninterest-Bearing

  $ 125,541     $ 128,340  

Interest-Bearing

    843,093       850,963  
      968,634       979,303  

Borrowed Money

               

Subordinated Debentures

    24,229       24,229  

Other Borrowed Money

    40,000       40,000  
      64,229       64,229  
                 

Other Liabilities

    3,528       4,339  
                 

Stockholders' Equity

               

Preferred Stock, Stated Value $1,000 a Share; Authorized 10,000,000 Shares, Issued 28,000 Shares

    28,000       28,000  

Common Stock, Par Value $1 a Share; Authorized 20,000,000 Shares, Issued 8,439,258 Shares as of June 30, 2015 and December 31, 2014

    8,439       8,439  

Paid-In Capital

    29,145       29,145  

Retained Earnings

    41,097       38,288  

Accumulated Other Comprehensive (Loss), Net of Tax Benefits

    (4,022 )     (4,845 )
      102,659       99,027  

Total Liabilities and Stockholders' Equity

  $ 1,139,050     $ 1,146,898  

 

The accompanying notes are an integral part of these statements.

 

 
6

 

 

Part I (Continued)

Item 2 (Continued)

 

COLONY BANKCORP, INC. AND SUBSIDIARY

CONSOLIDATED STATEMENTS OF INCOME

THREE MONTHS ENDED JUNE 30, 2015 AND 2014

AND SIX MONTHS ENDED JUNE 30, 2015 AND 2014

(UNAUDITED)

(DOLLARS IN THOUSANDS)

 

   

Three Months Ended

   

Six Months Ended

 
   

June 30, 2015

   

June 30, 2014

   

June 30, 2015

   

June 30, 2014

 

Interest Income

                               

Loans, Including Fees

  $ 9,873     $ 9,956     $ 19,582     $ 19,645  

Federal Funds Sold

    -       8       15       17  

Deposits with Other Banks

    24       10       41       23  

U.S. Government Agencies

    978       1,225       2,048       2,409  

State, County and Municipal

    25       23       50       51  

Dividends on Other Investments

    30       29       60       59  
      10,930       11,251       21,796       22,204  

Interest Expense

                               

Deposits

    1,219       1,288       2,438       2,609  

Borrowed Money

    464       435       909       873  
      1,683       1,723       3,347       3,482  
                                 

Net Interest Income

    9,247       9,528       18,449       18,722  

Provision for Loan Losses

    129       481       491       808  

Net Interest Income After Provision for Loan Losses

    9,118       9,047       17,958       17,914  
                                 

Noninterest Income

                               

Service Charges on Deposits

    1,040       1,087       2,051       2,183  

Other Service Charges, Commissions and Fees

    664       623       1,302       1,175  

Mortgage Fee Income

    134       114       247       181  

Securities Gains (Losses)

    -       1       3       1  

Other

    520       421       967       768  
      2,358       2,246       4,570       4,308  

Noninterest Expenses

                               

Salaries and Employee Benefits

    4,407       4,305       8,875       8,717  

Occupancy and Equipment

    1,017       1,000       2,010       2,020  

Other

    2,896       2,986       5,721       6,420  
      8,320       8,291       16,606       17,157  
                                 

Income Before Income Taxes

    3,156       3,002       5,922       5,065  

Income Taxes

    971       986       1,854       1,592  

Net Income

    2,185       2,016       4,068       3,473  

Preferred Stock Dividends

    630       681       1,260       1,324  

Net Income Available to Common Stockholders

  $ 1,555     $ 1,335     $ 2,808     $ 2,149  

Net Income Per Share of Common Stock

                               

Basic

  $ 0.18     $ 0.16     $ 0.33     $ 0.25  

Diluted

  $ 0.18     $ 0.16     $ 0.33     $ 0.25  

Cash Dividends Declared Per Share of Common Stock

  $ -     $ -     $ -     $ -  

Weighted Average Basic Shares Outstanding

    8,439,258       8,439,258       8,439,258       8,439,258  

Weighted Average Diluted Shares Outstanding

    8,441,628       8,439,258       8,440,443       8,439,258  

 

The accompanying notes are an integral part of these statements.

 

 
7

 

 

Part I (Continued)

Item 2 (Continued)

 

COLONY BANKCORP, INC. AND SUBSIDIARY

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

THREE MONTHS ENDED JUNE 30, 2015 AND 2014

AND SIX MONTHS ENDED JUNE 30, 2015 AND 2014

(UNAUDITED)

(DOLLARS IN THOUSANDS)

 

   

Three Months Ended

   

Six Months Ended

 
   

June 30, 2015

   

June 30, 2014

   

June 30, 2015

   

June 30, 2014

 
                                 

Net Income

  $ 2,185     $ 2,016     $ 4,068     $ 3,473  
                                 

Other Comprehensive Income:

                               
                                 

Gains on Securities Arising During the Year

    (1,908 )     2,314       1,250       4,708  

Tax Effect

    649       (787 )     (425 )     (1,601 )

Realized (Losses) on Sale of AFS Securities

    -       -       (3 )     -  

Tax Effect

    -       -       1       -  
                                 

Change in Unrealized Gains (Losses) on Securities

Available for Sale, Net of Reclassification Adjustment and Tax Effects

    (1,259 )     1,527       823       3,107  
                                 

Comprehensive Income

  $ 926     $ 3,543     $ 4,891     $ 6,580  

 

The accompanying notes are an integral part of these statements.

 

 
8

 

 

Part I (Continued)

Item 2 (Continued)

 

COLONY BANKCORP, INC. AND SUBSIDIARY

CONSOLIDATED STATEMENTS OF CASH FLOWS

SIX MONTHS ENDED JUNE 30, 2015 AND 2014

(UNAUDITED)

(DOLLARS IN THOUSANDS)

 

   

Six Months Ended

 
   

June 30, 2015

   

June 30, 2014

 

CASH FLOWS FROM OPERATING ACTIVITIES

               

Net Income

  $ 4,068     $ 3,473  

Adjustments to Reconcile Net Income to Net Cash Provided by Operating Activities:

               

Depreciation

    821       797  

Provision for Loan Losses

    491       808  

Securities (Gains) Losses

    (3 )     (1 )

Amortization and Accretion

    931       628  

Losses on Sale of Other Real Estate and Repossessions

    (71 )     509  

Provision for Losses on Other Real Estate

    18       245  

Increase in Cash Surrender Value of Life Insurance

    (26 )     (325 )

Other Prepaids, Deferrals and Accruals, Net

    (747 )     2,641  
      5,482       8,775  

CASH FLOWS FROM INVESTING ACTIVITIES

               

Purchases of Investment Securities Available for Sale

    (51,849 )     (25,034 )

Proceeds from Maturities, Calls, and Paydowns of  Investment Securities:

               

Available for Sale

    27,751       16,349  

Held for Maturity

    5       8  

Proceeds from Sale of Investment Securities

               

Available for Sale

    25,173       -  

Interest-Bearing Deposits in Other Banks

    (3,117 )     10,588  

Net Loans to Customers

    (20,253 )     10,863  

Purchase of Premises and Equipment

    (354 )     (871 )

Proceeds from Sale of Other Real Estate and Repossessions

    3,907       5,008  

Proceeds from Sale of Federal Home Loan Bank Stock

    100       333  

Proceeds from Sale of Fixed Assets

    29       3  
      (18,608 )     17,247  

CASH FLOWS FROM FINANCING ACTIVITIES

               

Noninterest-Bearing Customer Deposits

    (2,799 )     (504 )

Interest-Bearing Customer Deposits

    (7,870 )     (38,757 )

Dividends Paid for Preferred Stock

    (1,260 )     -  
      (11,929 )     (39,261 )
                 

Net Decrease in Cash and Cash Equivalents

    (25,055 )     (13,239 )

Cash and Cash Equivalents at Beginning of Period

    44,605       46,187  

Cash and Cash Equivalents at End of Period

  $ 19,550     $ 32,948  

 

The accompanying notes are an integral part of these statements.

 

 
9

 

 

Part I (Continued)

Item 2 (Continued)

 

COLONY BANKCORP, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

 

(1) Summary of Significant Accounting Policies

 

Presentation

 

Colony Bankcorp, Inc. (the Company) is a bank holding company located in Fitzgerald, Georgia. The consolidated financial statements include the accounts of Colony Bankcorp, Inc. and its wholly-owned subsidiary, Colony Bank, Fitzgerald, Georgia. All significant intercompany accounts have been eliminated in consolidation. The accounting and reporting policies of Colony Bankcorp, Inc. conform to generally accepted accounting principles and practices utilized in the commercial banking industry.

 

All dollars in notes to consolidated financial statements are rounded to the nearest thousand, except for per share amounts.

 

The consolidated financial statements in this report are unaudited, except for the December 31, 2014 consolidated balance sheet. All adjustments consisting of normal recurring accruals which are, in the opinion of management, necessary for fair presentation of the interim consolidated financial statements have been included and fairly and accurately present the financial position, results of operations and cash flows of the Company. The results of operations for the six months ended June 30, 2015, are not necessarily indicative of the results which may be expected for the entire year.

 

Nature of Operations

 

The Bank provides a full range of retail and commercial banking services for consumers and small- to medium-size businesses located primarily in central, south and coastal Georgia. Colony Bank is headquartered in Fitzgerald, Georgia with banking offices in Albany, Ashburn, Broxton, Centerville, Chester, Columbus, Cordele, Douglas, Eastman, Fitzgerald, Leesburg, Moultrie, Pitts, Quitman, Rochelle, Savannah, Soperton, Sylvester, Thomaston, Tifton, Valdosta and Warner Robins. Lending and investing activities are funded primarily by deposits gathered through its retail banking office network.

 

Use of Estimates

 

In preparing the financial statements, management is required to make estimates and assumptions that affect the reported amounts of assets and liabilities as of the balance sheet date and revenues and expenses for the period. Actual results could differ significantly from those estimates. Material estimates that are particularly susceptible to significant change in the near term relate to the determination of the allowance for loan losses and the valuation of real estate acquired in connection with foreclosures or in satisfaction of loans.

 

Reclassifications

 

In certain instances, amounts reported in prior years’ consolidated financial statements have been reclassified to conform to statement presentations selected for 2015. Such reclassifications had no effect on previously reported stockholders’ equity or net income.

 

Concentrations of Credit Risk

 

Concentrations of credit risk can exist in relation to individual borrowers or groups of borrowers, certain types of collateral, certain types of industries, or certain geographic regions. The Company has a concentration in real estate loans as well as a geographic concentration that could pose an adverse credit risk, particularly with the current economic downturn in the real estate market. At June 30, 2015, approximately 86 percent of the Company’s loan portfolio was concentrated in loans secured by real estate. A substantial portion of borrowers’ ability to honor their contractual obligations is dependent upon the viability of the real estate economic sector. Declining collateral real estate values that secure land development, construction and speculative real estate loans in the Company’s larger MSA markets have resulted in high loan loss provisions in recent years. In addition, a large portion of the Company’s foreclosed assets are also located in these same geographic markets, making the recovery of the carrying amount of foreclosed assets susceptible to changes in market conditions. Management continues to monitor these concentrations and has considered these concentrations in its allowance for loan loss analysis.

 

 
10

 

 

Part I (Continued)

Item 2 (Continued)

 

(1) Summary of Significant Accounting Policies (Continued)

 

Concentrations of Credit Risk (Continued)

 

The success of the Company is dependent, to a certain extent, upon the economic conditions in the geographic markets it serves. Adverse changes in the economic conditions in these geographic markets would likely have a material adverse effect on the Company’s results of operations and financial condition. The operating results of Colony depend primarily on its net interest income. Accordingly, operations are subject to risks and uncertainties surrounding the exposure to changes in the interest rate environment.

 

At times, the Company may have cash and cash equivalents at financial institutions in excess of federal deposit insurance limits. The Company places its cash and cash equivalents with high credit quality financial institutions whose credit ratings are monitored by management to minimize credit risk.

 

Investment Securities

 

The Company classifies its investment securities as trading, available for sale or held to maturity. Securities that are held principally for resale in the near term are classified as trading. Trading securities are carried at fair value, with realized and unrealized gains and losses included in noninterest income. Currently, no securities are classified as trading. Securities acquired with both the intent and ability to be held to maturity are classified as held to maturity and reported at amortized cost. All securities not classified as trading or held to maturity are considered available for sale. Securities available for sale are reported at estimated fair value. Unrealized gains and losses on securities available for sale are excluded from earnings and are reported, net of deferred taxes, in accumulated other comprehensive income (loss), a component of stockholders’ equity. Gains and losses from sales of securities available for sale are computed using the specific identification method. Securities available for sale includes securities, which may be sold to meet liquidity needs arising from unanticipated deposit and loan fluctuations, changes in regulatory capital requirements, or unforeseen changes in market conditions.

 

The Company evaluates each held to maturity and available for sale security in a loss position for other-than-temporary impairment (OTTI). In estimating other-than-temporary impairment losses, management considers such factors as the length of time and the extent to which the market value has been below cost, the financial condition of the issuer and the Company’s intent to sell and whether it is more likely than not that the Company will be required to sell the security before anticipated recovery of the amortized cost basis. If the Company intends to sell or if it is more likely than not that the Company will be required to sell the security before recovery, the OTTI write-down is recognized in earnings. If the Company does not intend to sell the security or it is not more likely than not that it will be required to sell the security before recovery, the OTTI write-down is separated into an amount representing credit loss, which is recognized in earnings and an amount related to all other factors, which is recognized in other comprehensive income (loss).

 

Federal Home Loan Bank Stock

 

Investment in stock of a Federal Home Loan Bank (FHLB) is required for every federally insured institution that utilizes its services. FHLB stock is considered restricted, as defined in the accounting standards. The FHLB stock is reported in the consolidated financial statements at cost. Dividend income is recognized when earned.

 

Loans

 

Loans that the Company has the ability and intent to hold for the foreseeable future or until maturity are recorded at their principal amount outstanding, net of unearned interest and fees. Loan origination fees, net of certain direct origination costs, are deferred and amortized over the estimated terms of the loans using the straight-line method. Interest income on loans is recognized using the effective interest method.

 

A loan is considered to be delinquent when payments have not been made according to contractual terms, typically evidenced by nonpayment of a monthly installment by the due date.

 

When management believes there is sufficient doubt as to the collectibility of principal or interest on any loan or generally when loans are 90 days or more past due, the accrual of applicable interest is discontinued and the loan is designated as nonaccrual, unless the loan is well secured and in the process of collection. Interest payments received on nonaccrual loans are either applied against principal or reported as income, according to management’s judgment as to the collectibility of principal. Loans are returned to an accrual status when factors indicating doubtful collectibility on a timely basis no longer exist.

 

 
11

 

 

Part I (Continued)

Item 2 (Continued)

 

(1) Summary of Significant Accounting Policies (Continued)

 

Loans Modified in a Troubled Debt Restructuring (TDR) 

 

Loans are considered to have been modified in a TDR when, due to a borrower’s financial difficulty, the Company makes certain concessions to the borrower that it would not otherwise consider for new debt with similar risk characteristics. Modifications may include interest rate reductions, principal or interest forgiveness, forbearance, and other actions intended to minimize economic loss and to avoid foreclosure or repossession of the collateral. Generally, a non-accrual loan that has been modified in a TDR remains on non-accrual status for a period of 6 months to demonstrate that the borrower is able to meet the terms of the modified loan. However, performance prior to the modification, or significant events that coincide with the modification, are included in assessing whether the borrower can meet the new terms and may result in the loan being returned to accrual status at the time of loan modification or after a shorter performance period. If the borrower’s ability to meet the revised payment schedule is uncertain, the loan remains on non-accrual status. Once a loan is modified in a troubled debt restructuring it is accounted for as an impaired loan, regardless of its accrual status, until the loan is paid in full, sold or charged off.

 

Allowance for Loan Losses

 

The allowance for loan losses is established as losses are estimated to have occurred through a provision for loan losses charged to earnings. Loan losses are charged against the allowance when management believes the uncollectibility of a loan balance is confirmed. Subsequent recoveries, if any, are credited to the allowance.

 

The allowance for loan losses is evaluated on a regular basis by management and is based upon management’s periodic review of the collectibility of the loans in light of historical experience, the nature and volume of the loan portfolio, adverse situations that may affect the borrower’s ability to repay, estimated value of any underlying collateral and prevailing economic conditions. This evaluation is inherently subjective, as it requires estimates that are susceptible to significant revisions as more information becomes available.

 

The allowance consists of specific, historical and general components. The specific component relates to loans that are classified as either doubtful, substandard or special mention. For such loans that are also classified as impaired, an allowance is established when the discounted cash flows (or collateral value or observable market price) of the impaired loan is lower than the carrying value of that loan. The historical component covers nonclassified loans and is based on historical loss experience adjusted for qualitative factors. A general component is maintained to cover uncertainties that could affect management’s estimate of probable losses. The general component of the allowance reflects the margin of imprecision inherent in the underlying assumptions used in the methodologies for estimating specific and historical losses in the portfolio. General valuation allowances are based on internal and external qualitative risk factors such as (i) changes in the composition of the loan portfolio, (ii) the extent of loan concentrations within the portfolio, (iii) the effectiveness of the Company’s lending policies, procedures and internal controls, (iv) the experience, ability and effectiveness of the Company’s lending management and staff, and (v) national and local economics and business conditions.

 

Loans identified as losses by management, internal loan review and/or regulatory agencies are charged off.

 

A loan is considered impaired when, based on current information and events, it is probable that the Company will be unable to collect the scheduled payments of principal or interest when due according to the contractual terms of the loan agreement. Factors considered by management in determining impairment include payment status, collateral value and the probability of collecting scheduled principal and interest payments when due. Loans that experience insignificant payment delays and payment shortfalls generally are not classified as impaired. Management determines the significance of payment delays and payment shortfalls on a case-by-case basis, taking into consideration all of the circumstances surrounding the loan and the borrower, including the length of the delay, the reasons for the delay, the borrower’s prior payment record and the amount of the shortfall in relation to the principal and interest owed. Impairment is measured on a loan-by-loan basis by either the present value of expected future cash flows discounted at the loan’s effective interest rate, the loan’s obtainable market price or the fair value of the collateral if the loan is collateral dependent.

 

A significant portion of the Company’s impaired loans are deemed to be collateral dependent. Management therefore measures impairment on these loans based on the fair value of the collateral. Collateral values are determined based on appraisals performed by qualified licensed appraisers hired by the Company or by senior members of the Company’s credit administration staff. The decision whether or not to obtain an external third-party appraisal usually depends on the type of property being evaluated. External appraisals are usually obtained on more complex, income producing properties such as hotels, shopping centers and businesses. Less complex properties such as residential lots, farm land and single family houses may be evaluated internally by senior credit administration staff.

 

 
12

 

 

Part I (Continued)

Item 2 (Continued)

 

(1) Summary of Significant Accounting Policies (Continued)

 

Allowance for Loan Losses (Continued)

 

When the Company does obtain appraisals from external third-parties, the values utilized in the impairment calculation are “as is” or current market values. The appraisals, whether prepared internally or externally, may utilize a single valuation approach or a combination of approaches including the comparable sales, income and cost approach. Appraised amounts used in the impairment calculation are typically discounted 10 percent to account for selling and marketing costs, if the repayment of the loan is to come from the sale of the collateral. Although appraisals are not obtained each year on all impaired loans, the collateral values used in the impairment calculations are evaluated quarterly by management. Based on management’s knowledge of the collateral and the current real estate market conditions, appraised values may be further discounted to reflect facts and circumstances known to management since the most recent appraisal was performed.

 

Adjustments are routinely made in the appraisal process by the appraisers to adjust for differences between the comparable sales and income data available. Such adjustments are typically significant and result in a level 3 classification of the inputs for determining fair value. Because of the high degree of judgment required in estimating the fair value of collateral underlying impaired loans and because of the relationship between fair value and general economic conditions, we consider the fair value of impaired loans to be highly sensitive to changes in market conditions.

 

Premises and Equipment

 

Premises and equipment are recorded at acquisition cost net of accumulated depreciation.

 

Depreciation is charged to operations over the estimated useful lives of the assets. The estimated useful lives and methods of depreciation are as follows:

 

Description 

 

Life in Years

  Method

Banking Premises

    15 - 40  

Straight-Line and Accelerated

Furniture and Equipment

    5 - 10  

Straight-Line and Accelerated

 

Expenditures for major renewals and betterments are capitalized. Maintenance and repairs are charged to operations as incurred. When property and equipment are retired or sold, the cost and accumulated depreciation are removed from the respective accounts and any gain or loss is reflected in other income or expense.

 

Intangible Assets

 

Intangible assets consist of core deposit intangibles acquired in connection with a business combination. The core deposit intangible is initially recognized based on a valuation performed as of the consummation date. The core deposit intangible is amortized by the straight-line method over the average remaining life of the acquired customer deposits.

 

Transfers of Financial Assets

 

Transfers of financial assets are accounted for as sales, when control over the assets has been surrendered. Control over transferred assets is deemed to be surrendered when (1) the assets have been isolated from the Company, (2) the transferee obtains the right (free of conditions that constrain it from taking advantage of that right) to pledge or exchange the transferred assets and (3) the Company does not maintain effective control over the transferred assets through an agreement to repurchase them before their maturity.

 

Statement of Cash Flows

 

For reporting cash flows, cash and cash equivalents include cash on hand, noninterest-bearing amounts due from banks and federal funds sold. Cash flows from demand deposits, interest-bearing checking accounts, savings accounts, loans and certificates of deposit are reported net.

 

Advertising Costs

 

The Company expenses the cost of advertising in the periods in which those costs are incurred.

 

 
13

 

 

Part I (Continued)

Item 2 (Continued)

 

(1) Summary of Significant Accounting Policies (Continued)

 

Income Taxes

 

The provision for income taxes is based upon income for financial statement purposes, adjusted for nontaxable income and nondeductible expenses. Deferred income taxes have been provided when different accounting methods have been used in determining income for income tax purposes and for financial reporting purposes.

 

Deferred tax assets and liabilities are recognized based on future tax consequences attributable to differences arising from the financial statement carrying values of assets and liabilities and their tax bases. The differences relate primarily to depreciable assets (use of different depreciation methods for financial statement and income tax purposes) and allowance for loan losses (use of the allowance method for financial statement purposes and the direct write-off method for tax purposes). In the event of changes in the tax laws, deferred tax assets and liabilities are adjusted in the period of the enactment of those changes, with effects included in the income tax provision. Deferred tax assets are reduced by a valuation allowance when, in the opinion of management, it is more likely than not that some portion or all of the deferred tax assets will not be realized. The Company and its subsidiary file a consolidated federal income tax return. The subsidiary pays its proportional share of federal income taxes to the Company based on its taxable income.

 

Positions taken in the Company’s tax returns may be subject to challenge by the taxing authorities upon examination. Uncertain tax positions are initially recognized in the consolidated financial statements when it is more likely than not the position will be sustained upon examination by the tax authorities. Such tax positions are both initially and subsequently measured as the largest amount of tax benefit that is greater than 50 percent likely of being realized upon settlement with the tax authority, assuming full knowledge of the position and all relevant facts. The Company provides for interest and, in some cases, penalties on tax positions that may be challenged by the taxing authorities. Interest expense is recognized beginning in the first period that such interest would begin accruing. Penalties are recognized in the period that the Company claims the position in the tax return. Interest and penalties on income tax uncertainties are classified within income tax expense in the consolidated statement of income.

 

Other Real Estate

 

Other real estate generally represents real estate acquired through foreclosure and is initially recorded at estimated fair value at the date of acquisition less the cost of disposal. Losses from the acquisition of property in full or partial satisfaction of debt are recorded as loan losses. Properties are evaluated regularly to ensure the recorded amounts are supported by current fair values, and valuation allowances are recorded as necessary to reduce the carrying amount to fair value less estimated cost of disposal. Routine holding costs and gains or losses upon disposition are included in other noninterest expense.

 

Bank-Owned Life Insurance

 

The Company has purchased life insurance on the lives of certain key members of management and directors. The life insurance policies are recorded at the amount that can be realized under the insurance contract at the balance sheet date, which is the cash surrender value adjusted for other charges or amounts due that are probable at settlement, if applicable. Increases in the cash surrender value are recorded as other income in the consolidated statements of income. The cash surrender value of the insurance contracts is recorded in other assets on the consolidated balance sheets in the amount of $14,557 and $14,531 as of June 30, 2015 and December 31, 2014, respectively.

 

Comprehensive Income

 

Accounting principles generally require that recognized revenue, expenses, gains and losses be included in net income. Certain changes in assets and liabilities, such as unrealized gains and losses on securities available for sale, represent equity changes from economic events of the period other than transactions with owners and are not reported in the consolidated statements of operations but as a separate component of the equity section of the consolidated balance sheets. Such items are considered components of other comprehensive income (loss). Accounting standards codification requires the presentation in the consolidated financial statements of net income and all items of other comprehensive income (loss) as total comprehensive income (loss).

 

Off-Balance Sheet Credit Related Financial Instruments

 

In the ordinary course of business, the Company has entered into commitments to extend credit, commercial letters of credit and standby letters of credit. Such financial instruments are recorded when they are funded.

 

 
14

 

 

Part I (Continued)

Item 2 (Continued)

 

(1) Summary of Significant Accounting Policies (Continued)

 

Changes in Accounting Principles and Effects of New Accounting Pronouncements

 

Adoption of New Accounting Standards

 

In May 2014, the FASB issued an update ASU No. 2014-09, Revenue from Contracts with Customers creating FASB Topic 606, Revenue from Contracts with Customers.  The guidance in this update affects any entity that either enters into contracts with customers to transfer goods or services or enters into contracts for the transfer of nonfinancial assets unless those contracts are within the scope of other standards (for example, insurance contracts or lease contracts).  The core principle of the guidance is that an entity should recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services.  The guidance provides steps to follow to achieve the core principle.  An entity should disclose sufficient information to enable users of financial statements to understand the nature, amount, timing and uncertainty of revenue and cash flows arising from contracts with customers.  Qualitative and quantitative information is required about contracts with customers, significant judgments and changes in judgments, and assets recognized from the costs to obtain or fulfill a contract.  The amendments in this update are effective for interim and annual reporting periods beginning after December 15, 2017.  We are currently evaluating the impact of adopting the new guidance on the consolidated financial statements.

 

(2) Investment Securities

 

Investment securities as of June 30, 2015 and December 31, 2014 are summarized as follows:

 

June 30, 2015

         

Gross

   

Gross

         
   

Amortized

   

Unrealized

   

Unrealized

   

Fair

 
   

Cost

   

Gains

   

Losses

   

Value

 

Securities Available for Sale:

                               
U.S. Government Agencies                                

Mortgage-Backed

  $ 276,068     $ 218     $ (6,303 )   $ 269,983  

State, County & Municipal

    3,903       27       (35 )     3,895  
    $ 279,971     $ 245     $ (6,338 )   $ 273,878  

Securities Held to Maturity:

                               

State, County and Municipal

  $ 27     $ -     $ -     $ 27  

 

December 31, 2014

         

Gross

   

Gross

         
   

Amortized

   

Unrealized

   

Unrealized

   

Fair

 
   

Cost

   

Gains

   

Losses

   

Value

 

Securities Available for Sale:

                               
U.S. Government Agencies                                

Mortgage-Backed

  $ 278,419     $ 156     $ (7,511 )   $ 271,064  

State, County & Municipal

    3,516       27       (13 )     3,530  
    $ 281,935     $ 183     $ (7,524 )   $ 274,594  

Securities Held to Maturity:

                               

State, County and Municipal

  $ 30     $ -     $ -     $ 30  

 

 
15

 

 

Part I (Continued)

Item 2 (Continued)

 

(2) Investment Securities (Continued)

 

The amortized cost and fair value of investment securities as of June 30, 2015, by contractual maturity, are shown hereafter. Expected maturities will differ from contractual maturities because issuers have the right to call or prepay obligations with or without call or prepayment penalties. This is often the case with mortgage-backed securities, which are disclosed separately in the table below.

 

   

Securities

 
   

Available for Sale

   

Held to Maturity

 
   

Amortized Cost

   

Fair Value

   

Amortized Cost

   

Fair Value

 
                                 

Due In One Year or Less

  $ -     $ -     $ 27     $ 27  

Due After One Year Through Five Years

    1,118       1,125       -       -  

Due After Five Years Through Ten Years

    1,606       1,621       -       -  

Due After Ten Years

    1,179       1,149       -       -  
    $ 3,903     $ 3,895     $ 27     $ 27  
                                 

Mortgage-Backed Securities

    276,068       269,983       -       -  
    $ 279,971     $ 273,878     $ 27     $ 27  

 

Proceeds from the sale of investments available for sale during the first six months of 2015 totaled $25,173 compared to $0 for the first six months of 2014. The sale of investments available for sale during the first six months of 2015 resulted in gross realized gains of $199 and losses of $196.

 

Investment securities having a carry value approximating $123,419 and $135,532 as of June 30, 2015 and December 31, 2014, respectively, were pledged to secure public deposits and for other purposes.

 

Information pertaining to securities with gross unrealized losses at June 30, 2015 and December 31, 2014 aggregated by investment category and length of time that individual securities have been in a continuous loss position, follows:

 

   

Less Than 12 Months

   

12 Months or Greater

   

Total

 
                                                 
           

Gross

           

Gross

           

Gross

 
   

Fair

   

Unrealized

   

Fair

   

Unrealized

   

Fair

   

Unrealized

 
   

Value

   

Losses

   

Value

   

Losses

   

Value

   

Losses

 
                                                 

June 30, 2015

                                               

U.S. Government Agencies

                                               

Mortgage-Backed

  $ 77,965     $ (537 )   $ 151,542     $ (5,766 )   $ 229,507     $ (6,303 )

State, County and Municipal

    2,108       (35 )     -       -       2,108       (35 )
    $ 80,073     $ (572 )   $ 151,542     $ (5,766 )   $ 231,615     $ (6,338 )
                                                 

December 31, 2014

                                               

U.S. Government Agencies

                                               

Mortgage-Backed

  $ 66,609     $ (397 )   $ 183,646     $ (7,114 )   $ 250,255     $ (7,511 )

State, County and Municipal

    -       -       1,379       (13 )     1,379       (13 )
    $ 66,609     $ (397 )   $ 185,025     $ (7,127 )   $ 251,634     $ (7,524 )

 

 
16

 

 

Part I (Continued)

Item 2 (Continued)

 

(2) Investments (Continued)

 

Management evaluates securities for other-than-temporary impairment at least on a quarterly basis, and more frequently when economic or market concerns warrant such evaluation. Consideration is given to (1) the length of time and the extent to which the fair value has been less than cost, (2) the financial condition and near-term prospects of the issuer and (3) the intent and ability of the Company to retain its investment in the issuer for a period of time sufficient to allow for any anticipated recovery in fair value.

 

At June 30, 2015, the debt securities with unrealized losses have depreciated 2.66 percent from the Company’s amortized cost basis. These securities are guaranteed by either the U.S. Government, other governments or U.S. corporations. In analyzing an issuer’s financial condition, management considers whether the securities are issued by the federal government or its agencies, whether downgrades by bond rating agencies have occurred and the results of reviews of the issuer’s financial condition. The unrealized losses are largely due to increases in market interest rates over the yields available at the time the underlying securities were purchased. As management has the ability to hold debt securities until maturity, or for the foreseeable future if classified as available-for-sale, no declines are deemed to be other than temporary.

 

(3) Loans

 

The following table presents the composition of loans segregated by class of loans, as of June 30, 2015 and December 31, 2014.

 

   

June 30, 2015

   

December 31, 2014

 

Commercial and Agricultural

               

Commercial

  $ 52,506     $ 50,960  

Agricultural

    24,019       16,689  
                 

Real Estate

               

Commercial Constuction

    46,699       51,259  

Residential Construction

    11,327       11,221  

Commercial

    341,167       332,231  

Residential

    202,805       203,753  

Farmland

    54,135       49,951  
                 

Consumer and Other

               

Consumer

    21,371       22,820  

Other

    6,049       7,210  
                 

Total Loans

  $ 760,078     $ 746,094  

 

Commercial and industrial loans are extended to a diverse group of businesses within the Company’s market area. These loans are often underwritten based on the borrower’s ability to service the debt from income from the business. Real estate construction loans often require loan funds to be advanced prior to completion of the project. Due to uncertainties inherent in estimating construction costs, changes in interest rates and other economic conditions, these loans often pose a higher risk than other types of loans. Consumer loans are originated at the bank level. These loans are generally smaller loan amounts spread across many individual borrowers to help minimize risk.

 

Credit Quality Indicators. As part of the ongoing monitoring of the credit quality of the loan portfolio, management tracks certain credit quality indicators including trends related to (i) the risk grade assigned to commercial and consumer loans, (ii) the level of classified commercial loans, (iii) net charge-offs, (iv) nonperforming loans, and (v) the general economic conditions in the Company’s geographic markets.

 

The Company uses a risk grading matrix to assign a risk grade to each of its loans. Loans are graded on a scale of 1 to 8. A description of the general characteristics of the grades is as follows:

 

 
17

 

 

Part I (Continued)

Item 2 (Continued)

 

(3) Loans (Continued)

 

 

Grades 1 and 2 – Borrowers with these assigned grades range in risk from virtual absence of risk to minimal risk. Such loans may be secured by Company-issued and controlled certificates of deposit or properly margined equity securities or bonds. Other loans comprising these grades are made to companies that have been in existence for a long period of time with many years of consecutive profits and strong equity, good liquidity, excellent debt service ability and unblemished past performance, or to exceptionally strong individuals with collateral of unquestioned value that fully secures the loans. Loans in this category fall into the “pass” classification.

 

 

Grades 3 and 4 – Loans assigned these “pass” risk grades are made to borrowers with acceptable credit quality and risk. The risk ranges from loans with no significant weaknesses in repayment capacity and collateral protection to acceptable loans with one or more risk factors considered to be more than average.

 

 

Grade 5 – This grade includes “special mention” loans on management’s watch list and is intended to be used on a temporary basis for pass grade loans where risk-modifying action is intended in the short-term.

 

 

Grade 6 – This grade includes “substandard” loans in accordance with regulatory guidelines. This category includes borrowers with well-defined weaknesses that jeopardize the payment of the debt in accordance with the agreed terms. Loans considered to be impaired are assigned this grade, and these loans often have assigned loss allocations as part of the allowance for loan and lease losses. Generally, loans on which interest accrual has been stopped would be included in this grade.

 

 

Grades 7 and 8 – These grades correspond to regulatory classification definitions of “doubtful” and “loss,” respectively. In practice, any loan with these grades would be for a very short period of time, and generally the Company has no loans with these assigned grades. Management manages the Company’s problem loans in such a way that uncollectible loans or uncollectible portions of loans are charged off immediately with any residual, collectible amounts assigned a risk grade of 6.

 

The following table presents the loan portfolio by credit quality indicator (risk grade) as of June 30, 2015 and December 31, 2014. Those loans with a risk grade of 1, 2, 3 or 4 have been combined in the pass column for presentation purposes.

 

June 30, 2015

                               
   

Pass

   

Special Mention

   

Substandard

   

Total Loans

 

Commercial and Agricultural

                               

Commercial

  $ 49,301     $ 1,400     $ 1,805     $ 52,506  

Agricultural

    23,831       27       161       24,019  
                                 

Real Estate

                               

Commercial Construction

    40,923       1,476       4,300       46,699  

Residential Construction

    11,327       -       -       11,327  

Commercial

    321,278       9,713       10,176       341,167  

Residential

    180,884       12,726       9,195       202,805  

Farmland

    52,192       380       1,563       54,135  
                                 

Consumer and Other

                               

Consumer

    20,749       204       418       21,371  

Other

    6,047       1       1       6,049  
                                 

Total Loans

  $ 706,532     $ 25,927     $ 27,619     $ 760,078  

 

 
18

 

 

Part I (Continued)

Item 2 (Continued)

 

(3) Loans (Continued)

 

December 31, 2014

                               
   

Pass

   

Special Mention

   

Substandard

   

Total Loans

 

Commercial and Agricultural

                               

Commercial

  $ 46,230     $ 2,905     $ 1,825     $ 50,960  

Agricultural

    16,504       27       158       16,689  
                                 

Real Estate

                               

Commercial Construction

    45,063       1,741       4,455       51,259  

Residential Construction

    11,221       -       -       11,221  

Commercial

    309,828       11,220       11,183       332,231  

Residential

    180,550       10,582       12,621       203,753  

Farmland

    47,548       415       1,988       49,951  
                                 

Consumer and Other

                               

Consumer

    22,115       249       456       22,820  

Other

    7,013       -       197       7,210  
                                 

Total Loans

  $ 686,072     $ 27,139     $ 32,883     $ 746,094  

 

A loan’s risk grade is assigned at the inception of the loan and is based on the financial strength of the borrower and the type of collateral. Loan risk grades are subject to reassessment at various times throughout the year as part of the Company’s ongoing loan review process. Loans with an assigned risk grade of 6 or below and an outstanding balance of $250,000 or more are reassessed on a quarterly basis. During this reassessment process individual reserves may be identified and placed against certain loans which are not considered impaired.

 

In assessing the overall economic condition of the markets in which it operates, the Company monitors the unemployment rates for its major service areas. The unemployment rates are reviewed on a quarterly basis as part of the allowance for loan loss determination.

 

Loans are considered past due if the required principal and interest payments have not been received as of the date such payments were due. Generally, loans are placed on nonaccrual status if principal or interest payments become 90 days past due or 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 provision. Loans may be placed on nonaccrual status regardless of whether or not such loans are considered past due.

 

 
19

 

 

Part I (Continued)

Item 2 (Continued)

 

(3) Loans (Continued)

 

The following table represents an age analysis of past due loans and nonaccrual loans, segregated by class of loans, as of June 30, 2015 and December 31, 2014:

 

June 30, 2015

                                               
   

Accruing Loans

                         
           

90 Days

                                 
   

30-89 Days

   

or More

   

Total Accruing

   

Nonaccrual

                 
   

Past Due

   

Past Due

   

Loans Past Due

   

Loans

   

Current Loans

   

Total Loans

 

Commercial and Agricultural

                                               

Commercial

  $ 423     $ -     $ 423     $ 739     $ 51,344     $ 52,506  

Agricultural

    99       -       99       162       23,758       24,019  
                                                 

Real Estate

                                               

Commercial Construction

    84       -       84       3,152       43,463       46,699  

Residential Construction

    255       -       255       -       11,072       11,327  

Commercial

    1,379       -       1,379       4,905       334,883       341,167  

Residential

    4,098       -       4,098       3,516       195,191       202,805  

Farmland

    468       -       468       1,442       52,225       54,135  
                                                 

Consumer and Other

                                               

Consumer

    416       8       424       204       20,743       21,371  

Other

    -       -       -       -       6,049       6,049  
                                                 

Total Loans

  $ 7,222     $ 8     $ 7,230     $ 14,120     $ 738,728     $ 760,078  

 

 

December 31, 2014

                                               
   

Accruing Loans

                         
           

90 Days

                                 
   

30-89 Days

   

or More

   

Total Accruing

   

Nonaccrual

                 
   

Past Due

   

Past Due

   

Loans Past Due

   

Loans

   

Current Loans

   

Total Loans

 

Commercial and Agricultural

                                               

Commercial

  $ 872     $ -     $ 872     $ 405     $ 49,683     $ 50,960  

Agricultural

    -       -       -       45       16,644       16,689  
                                                 

Real Estate

                                               

Commercial Construction

    142       -       142       3,251       47,866       51,259  

Residential Construction

    -       -       -       -       11,221       11,221  

Commercial

    2,309       -       2,309       5,325       324,597       332,231  

Residential

    5,783       -       5,783       7,462       190,508       203,753  

Farmland

    282       -       282       1,449       48,220       49,951  
                                                 

Consumer and Other

                                               

Consumer

    313       7       320       202       22,298       22,820  

Other

    -       -       -       195       7,015       7,210  
                                                 

Total Loans

  $ 9,701     $ 7     $ 9,708     $ 18,334     $ 718,052     $ 746,094  

 

 
20

 

 

Part I (Continued)

Item 2 (Continued)

 

(3) Loans (Continued)

 

The following table details impaired loan data as of June 30, 2015:

 

June 30, 2015

                                               
   

Unpaid

                                         
   

Contractual

                   

Average

   

Interest

   

Interest

 
   

Principal

   

Impaired

   

Related

   

Recorded

   

Income

   

Income

 
   

Balance

   

Balance

   

Allowance

   

Investment

   

Recognized

   

Collected

 
                                                 

With No Related Allowance Recorded

                                               

Commercial

  $ 710     $ 648     $ -     $ 555     $ (11 )   $ 16  

Agricultural

    179       161       -       159       (10 )     10  

Commercial Construction

    9,613       3,408       -       3,418       13       14  

Residential Construction

    -       -       -       -       -       -  

Commercial Real Estate

    15,149       15,149       -       16,093       281       261  

Residential Real Estate

    5,612       4,691       -       4,943       115       105  

Farmland

    1,444       1,442       -       1,430       3       4  

Consumer

    244       204       -       198       (4 )     8  

Other

    -       -       -       97       -       -  
                                                 
      32,951       25,703       -       26,893       387       418  
                                                 

With An Allowance Recorded

                                               

Commercial

    92       92       92       93       -       -  

Agricultural

    -       -       -       -       -       -  

Commercial Construction