10-Q 1 pfbx20190630_10q.htm FORM 10-Q pfbx20190630_10q.htm
 

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

FORM 10-Q

 

[ x ] QUARTERLY REPORT PURSUANT TO SECTION 13 or 15 (D) OF THE

SECURITIES EXCHANGE ACT OF 1934

 

For the quarterly period ended

June 30, 2019

or

[   ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934

 

Commission File Number

001-12103

 

PEOPLES FINANCIAL CORPORATION

(Exact name of registrant as specified in its charter)

 

Mississippi

 

    64-0709834

(State or other jurisdiction of incorporation or organization) (I.R.S. Employer Identification No.)

 

 

Lameuse and Howard Avenues, Biloxi, Mississippi

 

39533

(Address of principal executive offices) (Zip Code)

 

(228) 435-5511

(Registrant's telephone number, including area code)

 

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

 

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   No ___

 

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a 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. (Check one):

 

Large accelerated filer ___     Accelerated filer                      Smaller reporting company   X
Non-accelerated filer ____    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:

 

Title of each class 

Trading

Symbol(s)

Name of each exchange on which registered
None PFBX None

 

Indicate the number of shares outstanding of each of the issuer's classes of common stock, as of the last practicable date. Peoples Financial Corporation has only one class of common stock authorized. At July 31, 2019, there were 15,000,000 shares of $1 par value common stock authorized, with 4,943,186 shares issued and outstanding.

 

1

 

 

Part 1 – Financial Information

Item 1: Financial Statements

 

 

Peoples Financial Corporation and Subsidiaries

Consolidated Statements of Condition

(in thousands except share data)

 

   

June 30, 2019

   

December 31, 2018

 
   

(unaudited)

   

(audited)

 
                 

Assets

               

Cash and due from banks

  $ 34,054     $ 17,191  

Available for sale securities

    218,082       222,110  

Held to maturity securities, fair value of $54,964 at June 30, 2019; $53,459 at December 31, 2018

    54,254       54,598  

Other investments

    2,699       2,811  

Federal Home Loan Bank Stock, at cost

    2,103       2,069  

Loans

    266,097       273,346  

Less: Allowance for loan losses

    4,946       5,340  

Loans, net

    261,151       268,006  

Bank premises and equipment, net of accumulated depreciation

    18,240       18,879  

Other real estate

    9,012       8,943  

Accrued interest receivable

    1,937       1,956  

Cash surrender value of life insurance

    19,123       18,841  

Other assets

    1,767       1,382  

Total assets

  $ 622,422     $ 616,786  

 

2

 

 

Peoples Financial Corporation and Subsidiaries

Consolidated Statements of Condition (continued)

(in thousands except share data)

 

   

June 30, 2019

   

December 31, 2018

 
   

(unaudited)

   

(audited)

 

Liabilities and Shareholders' Equity

               

Liabilities:

               

Deposits:

               

Demand, non-interest bearing

  $ 123,571     $ 114,512  

Savings and demand, interest bearing

    281,954       278,772  

Time, $100,000 or more

    61,567       52,787  

Other time deposits

    26,543       27,435  

Total deposits

    493,635       473,506  

Borrowings from Federal Home Loan Bank

    16,052       36,142  

Employee and director benefit plans liabilities

    18,669       18,415  

Other liabilities

    1,197       1,789  

Total liabilities

    529,553       529,852  

Shareholders' Equity:

               

Common stock, $1 par value, 15,000,000 shares authorized, 4,943,186 shares issued and outstanding at June 30, 2019 and December 31, 2018

    4,943       4,943  

Surplus

    65,780       65,780  

Undivided profits

    20,351       20,324  

Accumulated other comprehensive gain (loss)

    1,795       (4,113 )

Total shareholders' equity

    92,869       86,934  

Total liabilities and shareholders' equity

  $ 622,422     $ 616,786  

 

See notes to consolidated financial statements.

 

3

 

 

 

Peoples Financial Corporation and Subsidiaries

Consolidated Statements of Operations

(in thousands except per share data)(unaudited)

 

   

Three Months Ended June 30,

   

Six Months Ended June 30,

 
   

2019

   

2018

   

2019

   

2018

 

Interest income:

                               

Interest and fees on loans

  $ 3,415     $ 3,230     $ 7,104     $ 6,463  

Interest and dividends on securities:

                               

U.S. Treasuries

    295       368       589       747  

U.S. Government agencies

    117       114       242       236  

Mortgage-backed securities

    796       623       1,618       1,173  

States and political subdivisions

    436       440       896       879  

Collateralized mortgage obligations

    38               50          

Other investments

    29       7       40       10  

Interest on balances due from depository institutions

    104       60       191       99  

Total interest income

    5,230       4,842       10,730       9,607  

Interest expense:

                               

Deposits

    810       536       1,612       1,007  

Federal funds purchased

            2               7  

Borrowings from Federal Home Loan Bank

    80       85       158       105  

Total interest expense

    890       623       1,770       1,119  

Net interest income

    4,340       4,219       8,960       8,488  

Provision for allowance for loan losses

    56       28       110       63  

Net interest income after provision for allowance for loan losses

  $ 4,284     $ 4,191     $ 8,850     $ 8,425  

 

4

 

 

Peoples Financial Corporation and Subsidiaries

Consolidated Statements of Operations (continued)

(in thousands except per share data)(unaudited)

 

   

Three Months Ended June 30,

   

Six Months Ended June 30,

 
   

2019

   

2018

   

2019

   

2018

 

Non-interest income:

                               

Trust department income and fees

  $ 415     $ 452     $ 786     $ 885  

Service charges on deposit accounts

    918       919       1,800       1,830  

Increase in cash surrender value of life insurance

    111       133       216       240  

Other income

    155       130       263       241  

Total non-interest income

    1,599       1,634       3,065       3,196  

Non-interest expense:

                               

Salaries and employee benefits

    2,777       2,725       5,511       5,554  

Net occupancy

    542       450       1,016       890  

Equipment rentals, depreciation and maintenance

    839       841       1,672       1,599  

FDIC and state banking assessments

    88       97       190       211  

Data processing

    310       330       657       657  

ATM expense

    161       134       330       272  

Other real estate expense

    440       364       490       484  

Loss from other investments

    52       60       112       99  

Other expense

    1,002       761       1,860       1,500  

Total non-interest expense

    6,211       5,762       11,838       11,266  

Income (loss) before income taxes

    (328 )     63       77       355  

Income tax

                               

Net income (loss)

  $ (328 )   $ 63     $ 77     $ 355  

Basic and diluted earnings (loss) per share

  $ ( .06 )   $ .01     $ .02     $ .07  

Dividends declared per share

  $ .01     $ .01     $ .01     $ .01  

 

See notes to consolidated financial statements.

 

5

 

 

 

Peoples Financial Corporation and Subsidiaries

Consolidated Statements of Comprehensive Income (Loss)

(in thousands)(unaudited)

 

   

Three Months Ended June 30,

   

Six Months Ended June 30,

 
   

2019

   

2018

   

2019

   

2018

 
                                 

Net income (loss)

  $ (328 )   $ 63     $ 77     $ 355  

Other comprehensive income (loss):

                               

Net unrealized gain (loss) on available for sale securities

    2,562       (491 )     5,908       (3,085 )

Total other comprehensive income (loss)

    2,562       (491 )     5,908       (3,085 )

Total comprehensive income (loss)

  $ 2,234     $ (428 )   $ 5,985     $ (2,730 )

 

See notes to consolidated financial statements.

 

6

 

 

 

Peoples Financial Corporation and Subsidiaries

Consolidated Statements of Changes in Shareholders’ Equity

(in thousands except share data)

 

                                   

Accumulated

         
   

Number of

                           

Other

         
   

Common

   

Common

           

Undivided

   

Comprehensive

         
   

Shares

   

Stock

   

Surplus

   

Profits

   

Gain (Loss)

   

Total

 
                                                 

Balance, January 1, 2018

    5,083,186     $ 5,083     $ 65,780     $ 21,563     $ (2,927 )   $ 89,499  

Net income

                            292               292  

Other comprehensive loss

                                    (2,594 )     (2,594 )

Retirement of stock

    (10,392 )     (10 )             (135 )             (145 )

Balance, March 31, 2018

    5,072,794       5,073       65,780       21,720       (5,521 )     87,052  

Net income

                            63               63  

Other comprehensive loss

                                    (491 )     (491 )

Dividends ($ .01 per share)

                            (51 )             (51 )

Retirement of stock

    (35,075 )     (35 )             (452 )             (487 )

Balance, June 30, 2018

    5,037,719     $ 5,038     $ 65,780     $ 21,280     $ (6,012 )   $ 86,086  
                                                 

Balance, January 1, 2019

    4,943,186     $ 4,943     $ 65,780     $ 20,324     $ (4,113 )   $ 86,934  

Net income

                            405               405  

Other comprehensive gain

                                    3,346       3,346  

Balance, March 31, 2019

    4,943,186       4,943       65,780       20,729       (767 )     90,685  

Net income

                            (328 )             (328 )

Other comprehensive gain

                                    2,562       2,562  

Dividends ($ .01 per share)

                            (50 )             (50 )

Balance, June 30, 2019

    4,943,186     $ 4,943     $ 65,780     $ 20,351     $ 1,795     $ 92,869  

 

Note: Balances as of January 1, 2018 and 2019 were audited.

 

See notes to consolidated financial statements.

 

7

 

 

 

Peoples Financial Corporation and Subsidiaries

Consolidated Statements of Cash Flows 

(in thousands)(unaudited)

 

   

Six Months Ended June 30,

 
   

2019

   

2018

 

Cash flows from operating activities:

               

Net income

  $ 77     $ 355  

Adjustments to reconcile net income to net cash provided by operating activities:

               

Depreciation

    964       985  

Provision for allowance for loan losses

    110       63  

Writedown of other real estate

    442       257  

(Gain) loss on sales of other real estate

    (58 )     5  

Loss from other investments

    112       99  

Amortization of held to maturity securities

    133       126  

Amortization of available for sale securities

    93       208  

Change in accrued interest receivable

    19       105  

Increase in cash surrender value of life insurance

    (216 )     (240 )

Change in other assets

    (385 )     (154 )

Change in employee and director benefit plan liabilities and other liabilities

    (338 )     (395 )

Net cash provided by operating activities

  $ 953     $ 1,414  

 

8

 

 

 Peoples Financial Corporation and Subsidiaries

Consolidated Statements of Cash Flows (continued)

(in thousands) (unaudited)

 

   

Six Months Ended June 30,

 
   

2019

   

2018

 
                 

Cash flows from investing activities:

               

Proceeds from maturities, sales and calls of available for sale securities

  $ 19,642     $ 26,989  

Proceeds from maturities of held to maturity securities

    1,740       435  

Purchases of available for sale securities

    (9,799 )     (15,638 )

Purchases of held to maturity securities

    (1,529 )     (2,155 )

Purchases of Federal Home Loan Bank stock

    (34 )     (68 )

Proceeds from sales of other real estate

    1,205       1,468  

Loans, net change

    5,087       4,560  

Acquisition of bank premises and equipment

    (325 )     (355 )

Investment in cash surrender value of life insurance

    (66 )     (53 )

Net cash provided by investing activities

    15,921       15,183  

Cash flows from financing activities:

               

Demand and savings deposits, net change

    12,241       (8,011 )

Time deposits, net change

    7,888       1,704  

Borrowings from Federal Home Loan Bank

    649,550       629,900  

Repayments to Federal Home Loan Bank

    (669,640 )     (628,928 )

Cash dividends paid

    (50 )     (51 )

Stock repurchase

            (632 )

Net cash used in financing activities

    (11 )     (6,018 )

Net increase in cash and cash equivalents

    16,863       10,579  

Cash and cash equivalents, beginning of period

    17,191       25,281  

Cash and cash equivalents, end of period

  $ 34,054     $ 35,860  

 

See notes to consolidated financial statements.

 

9

 

 

PEOPLES FINANCIAL CORPORATION AND SUBSIDIARIES

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

For the Six Months Ended June 30, 2019 and 2018

 

 

1. Basis of Presentation:

Peoples Financial Corporation (the “Company”) is a one-bank holding company headquartered in Biloxi, Mississippi. It has two operating subsidiaries, PFC Service Corp., an inactive company, and The Peoples Bank, Biloxi, Mississippi (the “Bank”). The Bank provides a full range of banking, financial and trust services to state, county and local government entities and individuals and small and commercial businesses operating in those portions of Mississippi, Louisiana and Alabama which are within a fifty mile radius of the Waveland, Wiggins and Gautier branches, the Bank’s three most outlying locations (the “trade area”).

 

The accompanying unaudited consolidated financial statements and notes thereto contain all adjustments, consisting only of normal recurring adjustments, necessary to present fairly, in accordance with accounting principles generally accepted in the United States of America (“GAAP”), the financial position of the Company and its subsidiaries as of June 30, 2019 and the results of their operations and their cash flows for the periods presented. The interim financial information should be read in conjunction with the annual consolidated financial statements and the notes thereto included in the Company’s 2018 Annual Report and Form 10-K.

 

The results of operations for the quarter or six months ended June 30, 2019, are not necessarily indicative of the results to be expected for the full year.

 

Use of Estimates - The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. Material estimates common to the banking industry that are particularly susceptible to significant change in the near term include, but are not limited to, the determination of the allowance for loan losses, the valuation of other real estate acquired in connection with foreclosure or in satisfaction of loans and valuation allowances associated with the realization of deferred tax assets, which are based on future taxable income.

 

Summary of Significant Accounting Policies - The accounting and reporting policies of the Company conform to GAAP and general practices within the banking industry. There have been no material changes or developments in the application of principles or in our evaluation of the accounting estimates and the underlying assumptions or methodologies that we believe to be Critical Accounting Policies as disclosed in our Form 10-K for the year ended December 31, 2018.

 

10

 

 

In April 2019, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update 2019-04 (“ASU 2019-04”), Codification Improvements to Topic 326, Financial Instruments – Credit Losses, Topic 815, Derivatives and Hedging, and Topic 825, Financial Instruments. ASU 2019-04 includes technical corrections relating to scope, held to maturity disclosures, measurement alternative and remeasurement of equity securities. The effective date is for fiscal years beginning after December 31, 2019, including interim periods within those fiscal years. The adoption of this ASU is not expected to have a material effect on the Company’s financial position, result of operations or cash flows.

 

ASU 2016-13, Financial Instruments-Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments, is intended to provide financial statement users with more decision-useful information related to expected credit losses on financial instruments and other commitments to extend credit by replacing the current incurred loss impairment methodology with a methodology that reflects expected credit losses and requires consideration of a broader range of reasonable and supportable information to determine credit loss estimates.   ASU 2016-13 is effective for the Company for interim and annual periods beginning after December 15, 2019 and the Company intends to adopt ASU 2016-13 during the first quarter of 2020.   The Company’s Current Expected Credit Loss (CECL) Committee continues to evaluate the impact this ASU will have on the Company’s financial position, results of operations and financial statement disclosures and determine the most appropriate method of implementing this ASU.  Management will continue to evaluate the impact this ASU will have on the Company’s consolidated financial statements through its effective date. In July, FASB issued a proposal to delay the effective date of ASU 2016-13 for certain entities, which might apply to the Company. The Company will monitor this development.

 

 

2. Earnings Per Share:

Per share data is based on the weighted average shares of common stock outstanding of 4,943,186 and 5,067,208 for the six months ended June 30, 2019 and 2018, respectively. Per share data is based on the weighted average shares of common stock outstanding of 4,943,186 and 5,054,047 for the quarters ended June 30, 2019 and 2018, respectively.

 

 

3. Statements of Cash Flows:

The Company has defined cash and cash equivalents as cash and due from banks. The Company paid $1,765,203 and $1,120,269 for the six months ended June 30, 2019 and 2018, respectively, for interest on deposits and borrowings. No income tax payments were made during the six months ended June 30, 2019 and 2018. Loans transferred to other real estate amounted to $1,658,274 and $3,385,724 during the six months ended June 30, 2019 and 2018, respectively.

 

11

 

 

 

4. Investments:

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

 

           

Gross

   

Gross

         
           

Unrealized

   

Unrealized

         

June 30, 2019

 

Amortized Cost

   

Gains

   

Losses

   

Fair Value

 

Available for sale securities:

                               

Debt securities:

                               

U.S. Treasuries

  $ 80,889     $ 19     $ (600 )   $ 80,308  

U.S. Government agencies

    12,493       56       (26 )     12,523  

Mortgage-backed securities

    110,224       1,627       (102 )     111,749  

Collateralized mortgage obligations

    4,827       231               5,058  

States and political subdivisions

    8,375       69               8,444  

Total available for sale securities

  $ 216,808     $ 2,002     $ (728 )   $ 218,082  

Held to maturity securities:

                               

U.S. Government agencies

  $ 8,185           $ (3 )   $ 8,182  

States and political subdivisions

    46,069       776       (63 )     46,782  

Total held to maturity securities

  $ 54,254     $ 776     $ (66 )   $ 54,964  

 

12

 

 

           

Gross

   

Gross

         
           

Unrealized

   

Unrealized

         

December 31, 2018

 

Amortized Cost

   

Gains

   

Losses

   

Fair Value

 

Available for sale securities:

                               

Debt securities:

                               

U.S. Treasuries

  $ 85,866     $       $ (2,443 )   $ 83,423  

U.S. Government agencies

    17,492       14       (259 )     17,247  

Mortgage-backed securities

    112,391       231       (2,278 )     110,344  

States and political subdivisions

    10,994       102               11,096  

Total available for sale securities

  $ 226,743     $ 347     $ (4,980 )   $ 222,110  

Held to maturity securities:

                               

U.S. Government agencies

  $ 8,185     $       $ (371 )   $ 7,814  

States and political subdivisions

    46,413       89       (857 )     45,645  

Total held to maturity securities

  $ 54,598     $ 89     $ (1,228 )   $ 53,459  

 

The amortized cost and fair value of debt securities at June 30, 2019 (in thousands), by contractual maturity, are shown on the following page. Expected maturities will differ from contractual maturities because borrowers may have the right to call or prepay obligations with or without call or prepayment penalties.

 

13

 

 

   

Amortized Cost

   

Fair Value

 

Available for sale securities:

               

Due in one year or less

  $ 31,850     $ 31,744  

Due after one year through five years

    62,000       61,642  

Due after five years through ten years

    9,900       10,050  

Due after ten years

    2,834       2,897  

Mortgage-backed securities

    110,224       111,749  

Totals

  $ 216,808     $ 218,082  
                 

Held to maturity securities:

               

Due in one year or less

  $ 2,718     $ 2,728  

Due after one year through five years

    18,470       18,626  

Due after five years through ten years

    19,349       19,623  

Due after ten years

    13,717       13,987  

Totals

  $ 54,254     $ 54,964  

 

14

 

 

Available for sale and held to maturity securities with gross unrealized losses at June 30, 2019 and December 31, 2018, aggregated by investment category and length of time that individual securities have been in a continuous loss position, are as follows (in thousands):

 

   

Less Than Twelve Months

   

Over Twelve Months

   

Total

 
           

Gross

           

Gross

           

Gross

 
           

Unrealized

           

Unrealized

           

Unrealized

 
June 30, 2019:  

Fair Value

   

Losses

   

Fair Value

   

Losses

   

Fair Value

   

Losses

 

U.S. Treasuries

  $       $       $ 74,300     $ 600     $ 74,300     $ 600  

U.S. Government agencies

                    9,963       29       9,963       29  

Mortgage-backed securities

                    14,872       102       14,872       102  

States and political subdivisions

    384       1       5,854       62       6,238       63  

TOTAL

  $ 384     $ 1     $ 104,989     $ 793     $ 105,373     $ 794  
                                                 

December 31, 2018:

                                               

U.S. Treasuries

  $ 999     $ 1     $ 82,424     $ 2,442     $ 83,423     $ 2,443  

U.S. Government agencies

    4,939       61       17,608       569       22,547       630  

Mortgage-backed securities

    24,834       293       55,649       1,985       80,483       2,278  

States and political subdivisions

    8,470       122       19,678       735       28,148       857  

TOTAL

  $ 39,242     $ 477     $ 175,359     $ 5,731     $ 214,601     $ 6,208  

 

At June 30, 2019, 15 of 17 securities issued by the U.S. Treasury, 2 of the 5 securities issued by U.S. Government agencies, 20 of the 136 securities issued by states and political subdivisions and 7 of the 46 mortgage-backed securities contained unrealized losses.

 

Management evaluates securities for other-than-temporary impairment on a monthly basis. In performing this evaluation, the length of time and the extent to which the fair value has been less than cost, the fact that the Company’s securities are primarily issued by U.S. Treasury and U.S. Government Agencies and the cause of the decline in value are considered. In addition, the Company does not intend to sell and it is not more likely than not that it will be required to sell these securities before maturity. While some available for sale securities have been sold for liquidity purposes or for gains, the Company has traditionally held its securities, including those classified as available for sale, until maturity. As a result of the evaluation of these securities, the Company has determined that the unrealized losses summarized in the tables above are not deemed to be other-than-temporary.

 

There were no sales or calls of available for sale securities during the six months ended June 30, 2019 and 2018.

 

15

 

 

Securities with a fair value of $251,813,256 and $206,017,056 at June 30, 2019 and December 31, 2018, respectively, were pledged to secure public deposits, federal funds purchased and other balances required by law.

 

 

5. Loans:

The composition of the loan portfolio at June 30, 2019 and December 31, 2018, is as follows (in thousands):

 

   

June 30, 2019

   

December 31, 2018

 
                 

Gaming

  $ 20,703     $ 25,767  

Hotel/Motel

    48,295       44,112  

Real estate, construction

    24,699       31,597  

Real estate, mortgage

    136,633       137,437  

Commercial and industrial

    28,205       27,505  

Other

    7,562       6,928  

Total

  $ 266,097     $ 273,346  

 

The age analysis of the loan portfolio, segregated by class of loans, as of June 30, 2019 and December 31, 2018, is as follows (in thousands):

 

16

 

 

                                                   

Loans Past

 
                                                   

Due Greater

 
   

Number of Days Past Due

                           

Than 90

 
                   

Greater

   

Total

           

Total

   

Days &

 
      30 - 59       60 - 89    

Than 90

   

Past Due

   

Current

   

Loans

   

Still Accruing

 

June 30, 2019:

                                                       

Gaming

  $             $             $ 20,703     $ 20,703     $    

Hotel/Motel

                                    48,295       48,295          

Real estate, construction

    1,358               46       1,404       23,295       24,699          

Real estate, mortgage

    3,245       958       4,904       9,107       127,526       136,633          

Commercial and industrial

    239       5       789       1,033       27,172       28,205          

Other

    64       4               68       7,494       7,562          
                                                         

Total

  $ 4,906     $ 967     $ 5,739     $ 11,612     $ 254,485     $ 266,097     $    

December 31, 2018:

                                                       

Gaming

  $             $       $       $ 25,767     $ 25,767     $    

Hotel/Motel

                                    44,112       44,112          

Real estate, construction

    1,987       340       860       3,187       28,410       31,597          

Real estate, mortgage

    2,866       7,129       1,730       11,725       125,712       137,437          

Commercial and industrial

    9       110       1,661       1,780       25,725       27,505          

Other

    107       3               110       6,818       6,928          
                                                         

Total

  $ 4,969     $ 7,582     $ 4,251     $ 16,802     $ 256,544     $ 273,346     $    

 

The Company monitors the credit quality of its loan portfolio through the use of a loan grading system. A score of 1 – 5 is assigned to the loan on factors including repayment ability, trends in net worth and/or financial condition of the borrower and guarantors, employment stability, management ability, loan to value fluctuations, the type and structure of the loan, conformity of the loan to bank policy and payment performance. Based on the total score, a loan grade of A, B, C, S, D, E or F is applied. A grade of A will generally be applied to loans for customers that are well known to the Company and that have excellent sources of repayment. A grade of B will generally be applied to loans for customers that have excellent sources of repayment which have no identifiable risk of collection. A grade of C will generally be applied to loans for customers that have adequate sources of repayment which have little identifiable risk of collection. A grade of S will generally be applied to loans for customers who meet the criteria for a grade of C but also warrant additional monitoring by placement on the watch list. A grade of D will generally be applied to loans for customers that are inadequately protected by current sound net worth, paying capacity of the borrower, or pledged collateral. Loans with a grade of D have unsatisfactory characteristics such as cash flow deficiencies, bankruptcy filing by the borrower or dependence on the sale of collateral for the primary source of repayment, causing more than acceptable levels of risk. Loans 60 to 89 days past due receive a grade of D. A grade of E will generally be applied to loans for customers with weaknesses inherent in the “D” classification and in which collection or liquidation in full is questionable. In addition, on a monthly basis the Company determines which loans are 90 days or more past due and assigns a grade of E to them. A grade of F is applied to loans which are considered uncollectible and of such little value that their continuance in an active bank is not warranted. Loans with this grade are charged off, even though partial or full recovery may be possible in the future.

 

17

 

 

An analysis of the loan portfolio by loan grade, segregated by class of loans, as of June 30, 2019 and December 31, 2018, is as follows (in thousands):

 

   

Loans With A Grade Of:

         
   

A, B or C

   

S

   

D

   

E

   

F

   

Total

 

June 30, 2019:

                                               

Gaming

  $ 20,703     $       $       $       $       $ 20,703  

Hotel/Motel

    48,295                                       48,295  

Real estate, construction

    23,911               208       580               24,699  

Real estate, mortgage

    106,992       15,027       5,973       8,641               136,633  

Commercial and industrial

    18,084       8,882       148       1,091               28,205  

Other

    7,548               12       2               7,562  

Total

  $ 225,533     $ 23,909     $ 6,341     $ 10,314     $       $ 266,097  
                                                 

December 31, 2018:

                                               

Gaming

  $ 21,080     $       $ 4,687     $       $       $ 25,767  

Hotel/Motel

    44,112                                       44,112  

Real estate, construction

    29,930               217       1,450               31,597  

Real estate, mortgage

    108,885       10,430       12,992       5,130               137,437  

Commercial and industrial

    25,335               218       1,952               27,505  

Other

    6,904               20       4               6,928  

Total

  $ 236,246     $ 10,430     $ 18,134     $ 8,536     $       $ 273,346  

 

18

 

 

A loan may be impaired but not on nonaccrual status when the loan is well secured and in the process of collection. Total loans on nonaccrual as of June 30, 2019 and December 31, 2018, are as follows (in thousands):

 

   

June 30, 2019

   

December 31, 2018

 
                 

Real estate, construction

  $ 580     $ 1,439  

Real estate, mortgage

    8,554       4,954  

Commercial and industrial

    1,007       1,855  

Other

    2       2  

Total

  $ 10,143     $ 8,250  

 

Prior to 2018, certain loans were modified by granting interest rate concessions to these customers with such loans being classified as troubled debt restructurings. During 2018 and 2019, the Company did not restructure any additional loans. Specific reserves of $63,106 and $69,000 were allocated to troubled debt restructurings as of June 30, 2019 and December 31, 2018, respectively. The Bank had no commitments to lend additional amounts to customers with outstanding loans classified as troubled debt restructurings as of June 30, 2019 and December 31, 2018.

 

19

 

 

Impaired loans, which include loans classified as nonaccrual and troubled debt restructurings, segregated by class of loans, as of June 30, 2019 and December 31, 2018, are as follows (in thousands):

 

   

Unpaid

Principal

Balance

   

Recorded

Investment

   

Related

Allowance

   

Average

Recorded

Investment

   

Interest

Income

Recognized

 

June 30, 2019:

                                       

With no related allowance recorded:

                                       

Real estate, construction

  $ 349     $ 349     $       $ 362     $    

Real estate, mortgage

    8,782       8,782               8,858       15  

Commercial and industrial

    1,189       962               1,120          

Other

    2       2               2          
                                         

Total

    10,322       10,095               10,342       15  
                                         

With a related allowance recorded:

                                       

Real estate, construction

    231       231       20       232          

Real estate, mortgage

    838       838       99       842       14  

Commercial and industrial

    45       45       4       40          
                                         

Total

    1,114       1,114       123       1,114       14  
                                         

Total by class of loans:

                                       

Real estate, construction

    580       580       20       594          

Real estate, mortgage

    9,620       9,620       99       9,700       29  

Commercial and industrial

    1,234       1,007       4       1,160          

Other

    2       2               2          
                                         

Total

  $ 11,436     $ 11,209     $ 123     $ 11,456     $ 29  

 

20

 

 

   

Unpaid

Principal

Balance

   

Recorded

Investment

   

Related

Allowance

   

Average

Recorded

Investment

   

Interest

Income

Recognized

 

December 31, 2018:

                                       

With no related allowance recorded:

                                       

Real estate, construction

  $ 1,171     $ 784     $       $ 785     $    

Real estate, mortgage

    5,508       5,474               5,826       29  

Commercial and industrial

    2,083       1,855               2,204          

Other

    2       2               3          
                                         

Total

    8,764       8,115               8,818       29  
                                         

With a related allowance recorded:

                                       

Real estate, construction

    742       655       283       633          

Real estate, mortgage

    574       574       101       589       25  
                                         

Total

    1,316       1,229       384       1,222       25  
                                         

Total by class of loans:

                                       

Real estate, construction

    1,913       1,439       283       1,418          

Real estate, mortgage

    6,082       6,048       101       6,415       54  

Commercial and industrial

    2,083       1,855               2,204          

Other

    2       2               3          
                                         

Total

  $ 10,080     $ 9,344     $ 384     $ 10,040     $ 54  

 

21

 

 

 

6. Allowance for Loan Losses:

 

Transactions in the allowance for loan losses for the quarters and six months ended June 30, 2019 and 2018, and the balances of loans, individually and collectively evaluated for impairment, as of June 30, 2019 and 2018, are as follows (in thousands):

 

   

Gaming

   

Hotel/Motel

   

Real Estate, Construction

   

Real Estate, Mortgage

   

Commercial

and Industrial

   

Other

   

Total

 

For the Six Months Ended June 30, 2019:

                                                 

Allowance for Loan Losses:

                                                       

Beginning balance

  $ 416     $ 1,443     $ 429     $ 2,443     $ 476     $ 133     $ 5,340  

Charge-offs

                    (403 )     (46 )             (139 )     (588 )

Recoveries

                    2       2       21       59       84  

Provision

    (127 )     223       193       (175 )     (57 )     53       110  

Ending Balance

  $ 289     $ 1,666     $ 221     $ 2,224     $ 440     $ 106     $ 4,946  
                                                         

For the Quarter Ended June 30, 2019:

                                                 

Allowance for Loan Losses:

                                                       

Beginning Balance

  $ 399     $ 1,617     $ 401     $ 2,360     $ 480     $ 119     $ 5,376  

Charge-offs

                    (403 )     (46 )             (63 )     (512 )

Recoveries

                                    7       19       26  

Provision

    (110 )     49       223       (90 )     (47 )     31       56  

Ending Balance

  $ 289     $ 1,666     $ 221     $ 2,224     $ 440     $ 106     $ 4,946  
                                                         

Allowance for Loan Losses, June 30, 2019:

                                                 

Ending balance: individually evaluated for impairment

  $       $       $ 20     $ 254     $ 91     $ 4     $ 369  

Ending balance: collectively evaluated for impairment

  $ 289     $ 1,666     $ 201     $ 1,970     $ 349     $ 102     $ 4,577  
                                                         

Total Loans, June 30, 2019:

                                                       

Ending balance: individually evaluated for impairment

  $       $       $ 788     $ 14,614     $ 1,239     $ 14     $ 16,655  

Ending balance: collectively evaluated for impairment

  $ 20,703     $ 48,295     $ 23,911     $ 122,019     $ 26,966     $ 7,548     $ 249,442  

 

22

 

 

   

Gaming

   

Hotel/Motel

   

Real Estate,

Construction

   

Real Estate,

Mortgage

   

Commercial

and Industrial

   

Other

   

Total

 

For the Six Months Ended June 30, 2018:

                                                 

Allowance for Loan Losses:

                                                       

Beginning balance

  $ 536     $ 936     $ 242     $ 3,369     $ 892     $ 178     $ 6,153  

Charge-offs

                            (429 )     (369 )     (156 )     (954 )

Recoveries

                    1       118       45       82       246  

Provision

    (83 )     419       (44 )     (218 )     (65 )     54       63  

Ending Balance

  $ 453     $ 1,355     $ 199     $ 2,840     $ 503     $ 158     $ 5,508  
                                                         

For the Quarter Ended June 30, 2018:

                                                 

Allowance for Loan Losses:

                                                       

Beginning Balance

  $ 438     $ 1,182     $ 230     $ 3,403     $ 798     $ 161     $ 6,212  

Charge-offs

                            (415 )     (325 )     (62 )     (802 )

Recoveries

                    1               32       37       70  

Provision

    15       173       (32 )     (148 )     (2 )     22       28  

Ending Balance

  $ 453     $ 1,355     $ 199     $ 2,840     $ 503     $ 158     $ 5,508  
                                                         

Allowance for Loan Losses, June 30, 2018:

                                                 

Ending balance: individually evaluated for impairment

  $       $       $ 118     $ 681     $ 230     $ 2     $ 1,031  

Ending balance: collectively evaluated for impairment

  $