x | ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
¨ | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
Michigan | 38-2830092 | |
(State or other jurisdiction of incorporation or organization) | (I.R.S. Employer identification No.) |
Title of each class | Trading Symbol(s) | Name of each exchange on which registered |
None | N/A | N/A |
Large accelerated filer | ¨ | Accelerated filer | x | |||
Non-accelerated filer | ¨ | Smaller reporting company | x | |||
Emerging growth company | ¨ |
PART I | ||||
Item 1. | ||||
Item 1A. | ||||
Item 1B. | ||||
Item 2. | ||||
Item 3. | ||||
Item 4. | ||||
PART II | ||||
Item 5. | ||||
Item 6. | ||||
Item 7. | ||||
Item 7A. | ||||
Item 8. | ||||
Item 9. | ||||
Item 9A. | ||||
Item 9B. | ||||
PART III | ||||
Item 10. | ||||
Item 11. | ||||
Item 12. | ||||
Item 13. | ||||
Item 14. | ||||
PART IV | ||||
Item 15. | ||||
Item 16. | ||||
SIGNATURES |
ACL: Allowance for credit losses | GAAP: U.S. generally accepted accounting principles | |
AFS: Available-for-sale | IFRS: International Financial Reporting Standards | |
ALLL: Allowance for loan and lease losses | IRR: Interest rate risk | |
AOCI: Accumulated other comprehensive income | ISDA: International Swaps and Derivatives Association | |
ASC: FASB Accounting Standards Codification | JOBS Act: Jumpstart our Business Startups Act | |
ASU: FASB Accounting Standards Update | LIBOR: London Interbank Offered Rate | |
ATM: Automated teller machine | N/A: Not applicable | |
BHC Act: Bank Holding Company Act of 1956 | N/M: Not meaningful | |
CECL: Current expected credit losses | NASDAQ: NASDAQ Stock Market Index | |
CFPB: Consumer Financial Protection Bureau | NASDAQ Banks: NASDAQ Bank Stock Index | |
CIK: Central Index Key | NAV: Net asset value | |
CRA: Community Reinvestment Act | NSF: Non-sufficient funds | |
DIF: Deposit Insurance Fund | OCI: Other comprehensive income (loss) | |
DIFS: Department of Insurance and Financial Services | OMSR: Originated mortgage servicing rights | |
Directors Plan: Isabella Bank Corporation and Related Companies Deferred Compensation Plan for Directors | OREO: Other real estate owned | |
Dividend Reinvestment Plan: Isabella Bank Corporation Stockholder Dividend Reinvestment Plan and Employee Stock Purchase Plan | OTTI: Other-than-temporary impairment | |
Dodd-Frank Act: Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010 | PBO: Projected benefit obligation | |
Exchange Act: Securities Exchange Act of 1934 | PCAOB: Public Company Accounting Oversight Board | |
FASB: Financial Accounting Standards Board | Rabbi Trust: A trust established to fund our Directors Plan | |
FDI Act: Federal Deposit Insurance Act | SEC: U.S. Securities and Exchange Commission | |
FDIC: Federal Deposit Insurance Corporation | SOX: Sarbanes-Oxley Act of 2002 | |
FFIEC: Federal Financial Institutions Examinations Council | Tax Act: Tax Cuts and Jobs Act, enacted December 22, 2017 | |
FRB: Federal Reserve Bank | TDR: Troubled debt restructuring | |
FHLB: Federal Home Loan Bank | XBRL: eXtensible Business Reporting Language | |
Freddie Mac: Federal Home Loan Mortgage Corporation | Yield Curve: U.S. Treasury Yield Curve | |
FTE: Fully taxable equivalent |
Number of Common Shares | Sale Price | |||||||||
Low | High | |||||||||
2019 | ||||||||||
First Quarter | 83,313 | $ | 22.25 | $ | 24.50 | |||||
Second Quarter | 192,402 | 22.25 | 23.75 | |||||||
Third Quarter | 138,808 | 22.01 | 23.45 | |||||||
Fourth Quarter | 224,864 | 22.25 | 24.80 | |||||||
639,387 | ||||||||||
2018 | ||||||||||
First Quarter | 65,782 | $ | 26.11 | $ | 28.25 | |||||
Second Quarter | 78,922 | 26.25 | 27.25 | |||||||
Third Quarter | 86,032 | 26.05 | 27.65 | |||||||
Fourth Quarter | 73,364 | 22.50 | 27.00 | |||||||
304,100 |
Per Share | |||||||
2019 | 2018 | ||||||
First Quarter | $ | 0.26 | $ | 0.26 | |||
Second Quarter | 0.26 | 0.26 | |||||
Third Quarter | 0.26 | 0.26 | |||||
Fourth Quarter | 0.27 | 0.26 | |||||
Total | $ | 1.05 | $ | 1.04 |
Common Shares Repurchased | Total Number of Common Shares Purchased as Part of Publicly Announced Plan or Program | Maximum Number of Common Shares That May Yet Be Purchased Under the Plans or Programs | ||||||||||
Number | Average Price Per Common Share | |||||||||||
Balance, September 30 | 75,398 | |||||||||||
October 1 - 31 | 5,445 | $ | 22.59 | 5,445 | 69,953 | |||||||
November 1 - 30 | 27,796 | 23.89 | 27,796 | 42,157 | ||||||||
December 1 - 23 | 24,011 | 24.32 | 24,011 | 18,146 | ||||||||
Additional Authorization (250,000 shares) | — | — | — | 268,146 | ||||||||
December 24 - 31 | 20,240 | 24.31 | 20,240 | 247,906 | ||||||||
Balance, December 31 | 77,492 | $ | 24.04 | 77,492 | 247,906 |
2019 | 2018 | 2017 | |||||||||
INCOME STATEMENT DATA | |||||||||||
Interest income | $ | 67,306 | $ | 63,864 | $ | 58,413 | |||||
Interest expense | 17,861 | 15,631 | 12,494 | ||||||||
Net interest income | 49,445 | 48,233 | 45,919 | ||||||||
Provision for loan losses | 30 | 978 | 253 | ||||||||
Noninterest income | 8,039 | 10,981 | 10,840 | ||||||||
Noninterest expenses | 43,050 | 42,852 | 40,253 | ||||||||
Federal income tax expense (1) | 1,380 | 1,363 | 3,016 | ||||||||
Net income | $ | 13,024 | $ | 14,021 | $ | 13,237 | |||||
PER SHARE | |||||||||||
Basic earnings | $ | 1.65 | $ | 1.78 | $ | 1.69 | |||||
Diluted earnings | $ | 1.61 | $ | 1.74 | $ | 1.65 | |||||
Dividends | $ | 1.05 | $ | 1.04 | $ | 1.02 | |||||
Tangible book value | $ | 20.45 | $ | 18.68 | $ | 18.63 | |||||
Quoted market value | |||||||||||
High | $ | 24.80 | $ | 28.25 | $ | 29.95 | |||||
Low | $ | 22.01 | $ | 22.50 | $ | 27.60 | |||||
Close (2) | $ | 24.31 | $ | 22.56 | $ | 28.25 | |||||
Common shares outstanding (2) | 7,910,804 | 7,870,969 | 7,857,293 | ||||||||
PERFORMANCE RATIOS | |||||||||||
Return on average total assets | 0.72 | % | 0.77 | % | 0.75 | % | |||||
Return on average shareholders' equity | 6.25 | % | 7.26 | % | 6.75 | % | |||||
Return on average tangible shareholders' equity | 8.17 | % | 9.74 | % | 9.04 | % | |||||
Net interest margin yield (FTE) (1) | 3.07 | % | 2.98 | % | 3.04 | % | |||||
BALANCE SHEET DATA (2) | |||||||||||
Gross loans | $ | 1,186,570 | $ | 1,128,707 | $ | 1,091,519 | |||||
AFS securities | $ | 429,839 | $ | 494,834 | $ | 548,730 | |||||
Total assets | $ | 1,814,198 | $ | 1,842,502 | $ | 1,813,130 | |||||
Deposits | $ | 1,313,851 | $ | 1,292,693 | $ | 1,265,258 | |||||
Borrowed funds | $ | 275,999 | $ | 340,299 | $ | 344,878 | |||||
Shareholders' equity | $ | 210,182 | $ | 195,519 | $ | 194,905 | |||||
Gross loans to deposits | 90.31 | % | 87.31 | % | 86.27 | % | |||||
ASSETS UNDER MANAGEMENT (2) | |||||||||||
Loans sold with servicing retained | $ | 259,375 | $ | 259,481 | $ | 266,789 | |||||
Assets managed by our Investment and Trust Services Department | $ | 436,181 | $ | 447,487 | $ | 478,146 | |||||
Total assets under management | $ | 2,509,754 | $ | 2,549,470 | $ | 2,558,065 | |||||
ASSET QUALITY (2) | |||||||||||
Nonperforming loans to gross loans | 0.55 | % | 0.65 | % | 0.31 | % | |||||
Nonperforming assets to total assets | 0.39 | % | 0.42 | % | 0.20 | % | |||||
ALLL to gross loans | 0.67 | % | 0.74 | % | 0.71 | % | |||||
CAPITAL RATIOS (2) | |||||||||||
Shareholders' equity to assets | 11.59 | % | 10.64 | % | 10.75 | % | |||||
Tier 1 leverage | 9.01 | % | 8.72 | % | 8.54 | % | |||||
Common equity tier 1 capital | 12.56 | % | 12.58 | % | 12.23 | % | |||||
Tier 1 risk-based capital | 12.56 | % | 12.58 | % | 12.23 | % | |||||
Total risk-based capital | 13.18 | % | 13.26 | % | 12.86 | % |
Quarter to Date | |||||||||||||||||||||||||||||||
December 31 2019 | September 30 2019 | June 30 2019 | March 31 2019 | December 31 2018 | September 30 2018 | June 30 2018 | March 31 2018 | ||||||||||||||||||||||||
Total interest income | $ | 16,849 | $ | 17,161 | $ | 16,815 | $ | 16,481 | $ | 16,611 | $ | 16,419 | $ | 15,713 | $ | 15,121 | |||||||||||||||
Total interest expense | 4,492 | 4,550 | 4,527 | 4,292 | 4,258 | 4,231 | 3,741 | 3,401 | |||||||||||||||||||||||
Net interest income | 12,357 | 12,611 | 12,288 | 12,189 | 12,353 | 12,188 | 11,972 | 11,720 | |||||||||||||||||||||||
Provision for loan losses | (18 | ) | 193 | (179 | ) | 34 | 342 | (76 | ) | 328 | 384 | ||||||||||||||||||||
Noninterest income | (725 | ) | 3,274 | 3,011 | 2,479 | 2,865 | 2,878 | 2,740 | 2,498 | ||||||||||||||||||||||
Noninterest expenses | 10,892 | 10,620 | 10,749 | 10,789 | 10,870 | 11,087 | 10,788 | 10,107 | |||||||||||||||||||||||
Federal income tax expense (benefit) | (140 | ) | 630 | 541 | 349 | 476 | 359 | 263 | 265 | ||||||||||||||||||||||
Net income | $ | 898 | $ | 4,442 | $ | 4,188 | $ | 3,496 | $ | 3,530 | $ | 3,696 | $ | 3,333 | $ | 3,462 | |||||||||||||||
PER SHARE | |||||||||||||||||||||||||||||||
Basic earnings | $ | 0.12 | $ | 0.56 | $ | 0.53 | $ | 0.44 | $ | 0.45 | $ | 0.47 | $ | 0.42 | $ | 0.44 | |||||||||||||||
Diluted earnings | 0.11 | 0.55 | 0.52 | 0.43 | 0.44 | 0.46 | 0.41 | 0.43 | |||||||||||||||||||||||
Dividends | 0.27 | 0.26 | 0.26 | 0.26 | 0.26 | 0.26 | 0.26 | 0.26 | |||||||||||||||||||||||
Quoted market value (1) | 24.31 | 22.30 | 23.25 | 23.75 | 22.56 | 26.75 | 26.65 | 27.40 | |||||||||||||||||||||||
Tangible book value | 20.45 | 20.65 | 20.17 | 19.47 | 18.68 | 19.44 | 19.36 | 19.16 |
Year Ended December 31 | ||||||||||||||||||||||||||||||||
2019 | 2018 | 2017 | ||||||||||||||||||||||||||||||
Average Balance | Tax Equivalent Interest | Average Yield / Rate | Average Balance | Tax Equivalent Interest | Average Yield / Rate | Average Balance | Tax Equivalent Interest | Average Yield / Rate | ||||||||||||||||||||||||
INTEREST EARNING ASSETS | ||||||||||||||||||||||||||||||||
Loans | $ | 1,162,210 | $ | 54,192 | 4.66 | % | $ | 1,120,021 | $ | 49,229 | 4.40 | % | $ | 1,040,630 | $ | 43,537 | 4.18 | % | ||||||||||||||
Taxable investment securities (1) | 296,758 | 7,185 | 2.42 | % | 341,095 | 8,294 | 2.43 | % | 361,783 | 8,564 | 2.37 | % | ||||||||||||||||||||
Nontaxable investment securities | 169,049 | 6,380 | 3.77 | % | 191,281 | 7,115 | 3.72 | % | 202,375 | 9,126 | 4.51 | % | ||||||||||||||||||||
Fed funds sold | 64 | 2 | 2.48 | % | 4 | — | — | % | 663 | 5 | 0.75 | % | ||||||||||||||||||||
Other | 38,549 | 1,199 | 3.11 | % | 28,255 | 1,062 | 3.76 | % | 19,423 | 737 | 3.79 | % | ||||||||||||||||||||
Total earning assets | 1,666,630 | 68,958 | 4.14 | % | 1,680,656 | 65,700 | 3.91 | % | 1,624,874 | 61,969 | 3.81 | % | ||||||||||||||||||||
NONEARNING ASSETS | ||||||||||||||||||||||||||||||||
Allowance for loan losses | (8,256 | ) | (8,094 | ) | (7,607 | ) | ||||||||||||||||||||||||||
Cash and demand deposits due from banks | 20,057 | 19,770 | 19,309 | |||||||||||||||||||||||||||||
Premises and equipment | 27,035 | 28,349 | 28,933 | |||||||||||||||||||||||||||||
Accrued income and other assets | 108,073 | 95,359 | 106,848 | |||||||||||||||||||||||||||||
Total assets | $ | 1,813,539 | $ | 1,816,040 | $ | 1,772,357 | ||||||||||||||||||||||||||
INTEREST BEARING LIABILITIES | ||||||||||||||||||||||||||||||||
Interest bearing demand deposits | $ | 230,570 | $ | 305 | 0.13 | % | $ | 229,411 | $ | 267 | 0.12 | % | $ | 213,648 | $ | 232 | 0.11 | % | ||||||||||||||
Savings deposits | 388,821 | 2,572 | 0.66 | % | 361,743 | 1,698 | 0.47 | % | 356,963 | 1,091 | 0.31 | % | ||||||||||||||||||||
Time deposits | 429,745 | 8,731 | 2.03 | % | 454,916 | 7,296 | 1.60 | % | 433,562 | 5,486 | 1.27 | % | ||||||||||||||||||||
Borrowed funds | 304,888 | 6,253 | 2.05 | % | 344,352 | 6,370 | 1.85 | % | 352,400 | 5,685 | 1.61 | % | ||||||||||||||||||||
Total interest bearing liabilities | 1,354,024 | 17,861 | 1.32 | % | 1,390,422 | 15,631 | 1.12 | % | 1,356,573 | 12,494 | 0.92 | % | ||||||||||||||||||||
NONINTEREST BEARING LIABILITIES | ||||||||||||||||||||||||||||||||
Demand deposits | 237,675 | 224,777 | 208,988 | |||||||||||||||||||||||||||||
Other | 13,337 | 7,597 | 10,641 | |||||||||||||||||||||||||||||
Shareholders’ equity | 208,503 | 193,244 | 196,155 | |||||||||||||||||||||||||||||
Total liabilities and shareholders’ equity | $ | 1,813,539 | $ | 1,816,040 | $ | 1,772,357 | ||||||||||||||||||||||||||
Net interest income (FTE) | $ | 51,097 | $ | 50,069 | $ | 49,475 | ||||||||||||||||||||||||||
Net yield on interest earning assets (FTE) | 3.07 | % | 2.98 | % | 3.04 | % |
2019 Compared to 2018 Increase (Decrease) Due to | 2018 Compared to 2017 Increase (Decrease) Due to | ||||||||||||||||||||||
Volume | Rate | Net | Volume | Rate | Net | ||||||||||||||||||
Changes in interest income | |||||||||||||||||||||||
Loans | $ | 1,898 | $ | 3,065 | $ | 4,963 | $ | 3,423 | $ | 2,269 | $ | 5,692 | |||||||||||
Taxable investment securities | (1,074 | ) | (35 | ) | (1,109 | ) | (499 | ) | 229 | (270 | ) | ||||||||||||
Nontaxable investment securities | (838 | ) | 103 | (735 | ) | (479 | ) | (1,532 | ) | (2,011 | ) | ||||||||||||
Fed Funds Sold | — | 2 | 2 | — | (5 | ) | (5 | ) | |||||||||||||||
Other | 342 | (205 | ) | 137 | 332 | (7 | ) | 325 | |||||||||||||||
Total changes in interest income | 328 | 2,930 | 3,258 | 2,777 | 954 | 3,731 | |||||||||||||||||
Changes in interest expense | |||||||||||||||||||||||
Interest bearing demand deposits | 1 | 37 | 38 | 18 | 17 | 35 | |||||||||||||||||
Savings deposits | 135 | 739 | 874 | 15 | 592 | 607 | |||||||||||||||||
Time deposits | (422 | ) | 1,857 | 1,435 | 281 | 1,529 | 1,810 | ||||||||||||||||
Borrowed funds | (771 | ) | 654 | (117 | ) | (132 | ) | 817 | 685 | ||||||||||||||
Total changes in interest expense | (1,057 | ) | 3,287 | 2,230 | 182 | 2,955 | 3,137 | ||||||||||||||||
Net change in interest margin (FTE) | $ | 1,385 | $ | (357 | ) | $ | 1,028 | $ | 2,595 | $ | (2,001 | ) | $ | 594 |
Average Yield / Rate for the Three Month Periods Ended: | ||||||||||||||
December 31 2019 | September 30 2019 | June 30 2019 | March 31 2019 | December 31 2018 | ||||||||||
Total earning assets | 4.13 | % | 4.23 | % | 4.15 | % | 4.05 | % | 4.03 | % | ||||
Total interest bearing liabilities | 1.34 | % | 1.35 | % | 1.33 | % | 1.25 | % | 1.23 | % | ||||
Net yield on interest earning assets (FTE) | 3.06 | % | 3.13 | % | 3.06 | % | 3.02 | % | 3.02 | % |
Quarter to Date Net Interest Income (FTE) | |||||||||||||||||||
December 31 2019 | September 30 2019 | June 30 2019 | March 31 2019 | December 31 2018 | |||||||||||||||
Total interest income (FTE) | $ | 17,245 | $ | 17,567 | $ | 17,231 | $ | 16,915 | $ | 17,005 | |||||||||
Total interest expense | 4,492 | 4,550 | 4,527 | 4,292 | 4,258 | ||||||||||||||
Net interest income (FTE) | $ | 12,753 | $ | 13,017 | $ | 12,704 | $ | 12,623 | $ | 12,747 |
December 31 2019 | September 30 2019 | June 30 2019 | March 31 2019 | December 31 2018 | |||||||||||||||
Total charge-offs | $ | 334 | $ | 143 | $ | 333 | $ | 138 | $ | 253 | |||||||||
Total recoveries | 122 | 82 | 151 | 127 | 186 | ||||||||||||||
Net loan charge-offs (recoveries) | 212 | 61 | 182 | 11 | 67 | ||||||||||||||
Net loan charge-offs (recoveries) to average loans outstanding | 0.02 | % | 0.01 | % | 0.02 | % | — | % | 0.01 | % | |||||||||
Provision for loan losses | $ | (18 | ) | $ | 193 | $ | (179 | ) | $ | 34 | $ | 342 | |||||||
Provision for loan losses to average loans outstanding | — | % | 0.02 | % | (0.02 | )% | — | % | 0.03 | % | |||||||||
ALLL | $ | 7,939 | $ | 8,169 | $ | 8,037 | $ | 8,398 | $ | 8,375 | |||||||||
ALLL as a % of loans at end of period | 0.67 | % | 0.69 | % | 0.68 | % | 0.73 | % | 0.74 | % |
2019 | 2018 | 2017 | 2016 | 2015 | |||||||||||||||
ALLL at beginning of period | $ | 8,375 | $ | 7,700 | $ | 7,400 | $ | 7,400 | $ | 10,100 | |||||||||
Charge-offs | |||||||||||||||||||
Commercial | 143 | 575 | 263 | 57 | 89 | ||||||||||||||
Agricultural | 240 | 51 | 2 | — | 45 | ||||||||||||||
Residential real estate | 99 | 151 | 200 | 574 | 397 | ||||||||||||||
Consumer | 466 | 324 | 306 | 285 | 373 | ||||||||||||||
Total charge-offs | 948 | 1,101 | 771 | 916 | 904 | ||||||||||||||
Recoveries | |||||||||||||||||||
Commercial | 123 | 325 | 449 | 445 | 474 | ||||||||||||||
Agricultural | 3 | 3 | 4 | 95 | 75 | ||||||||||||||
Residential real estate | 189 | 261 | 206 | 287 | 220 | ||||||||||||||
Consumer | 167 | 209 | 159 | 224 | 206 | ||||||||||||||
Total recoveries | 482 | 798 | 818 | 1,051 | 975 | ||||||||||||||
Provision for loan losses | 30 | 978 | 253 | (135 | ) | (2,771 | ) | ||||||||||||
ALLL at end of period | $ | 7,939 | $ | 8,375 | $ | 7,700 | $ | 7,400 | $ | 7,400 | |||||||||
Net loan charge-offs (recoveries) | $ | 466 | $ | 303 | $ | (47 | ) | $ | (135 | ) | $ | (71 | ) | ||||||
Net loan charge-offs (recoveries) to average loans outstanding | 0.04 | % | 0.03 | % | — | % | (0.01 | )% | (0.01 | )% | |||||||||
ALLL as a% of loans at end of period | 0.67 | % | 0.74 | % | 0.71 | % | 0.73 | % | 0.87 | % |
December 31 2019 | September 30 2019 | June 30 2019 | March 31 2019 | December 31 2018 | |||||||||||||||
ALLL | |||||||||||||||||||
Individually evaluated for impairment | $ | 1,114 | $ | 1,333 | $ | 1,479 | $ | 1,509 | $ | 1,938 | |||||||||
Collectively evaluated for impairment | 6,825 | 6,836 | 6,558 | 6,889 | 6,437 | ||||||||||||||
Total | $ | 7,939 | $ | 8,169 | $ | 8,037 | $ | 8,398 | $ | 8,375 | |||||||||
ALLL to gross loans | |||||||||||||||||||
Individually evaluated for impairment | 0.09 | % | 0.11 | % | 0.13 | % | 0.13 | % | 0.17 | % | |||||||||
Collectively evaluated for impairment | 0.58 | % | 0.58 | % | 0.55 | % | 0.60 | % | 0.57 | % | |||||||||
Total | 0.67 | % | 0.69 | % | 0.68 | % | 0.73 | % | 0.74 | % |
Total Past Due and Nonaccrual Loans as of December 31 | |||||||||||||||||||
2019 | 2018 | 2017 | 2016 | 2015 | |||||||||||||||
Commercial | $ | 2,477 | $ | 2,722 | $ | 2,518 | $ | 3,347 | $ | 1,015 | |||||||||
Agricultural | 4,285 | 5,377 | 2,367 | 1,251 | 1,232 | ||||||||||||||
Residential real estate | 4,572 | 3,208 | 4,881 | 2,716 | 2,520 | ||||||||||||||
Consumer | 71 | 105 | 70 | 115 | 31 | ||||||||||||||
Total | $ | 11,405 | $ | 11,412 | $ | 9,836 | $ | 7,429 | $ | 4,798 | |||||||||
Total past due and nonaccrual loans to gross loans | 0.96 | % | 1.01 | % | 0.90 | % | 0.74 | % | 0.56 | % |
Accruing Interest | Nonaccrual | Total | ||||||||||||||||||
Number of Loans | Balance | Number of Loans | Balance | Number of Loans | Balance | |||||||||||||||
January 1, 2018 | 147 | $ | 23,284 | 13 | $ | 2,913 | 160 | $ | 26,197 | |||||||||||
New modifications | 27 | 6,623 | 18 | 1,733 | 45 | 8,356 | ||||||||||||||
Principal advances (payments) | — | (1,456 | ) | — | (714 | ) | — | (2,170 | ) | |||||||||||
Loans paid off | (35 | ) | (4,361 | ) | (7 | ) | (819 | ) | (42 | ) | (5,180 | ) | ||||||||
Partial charge-offs | — | — | — | (39 | ) | — | (39 | ) | ||||||||||||
Balances charged-off | — | — | (1 | ) | (7 | ) | (1 | ) | (7 | ) | ||||||||||
Transfers to OREO | — | — | (1 | ) | (206 | ) | (1 | ) | (206 | ) | ||||||||||
Transfers to accrual status | 1 | 520 | (1 | ) | (520 | ) | — | — | ||||||||||||
Transfers to nonaccrual status | (7 | ) | (1,210 | ) | 7 | 1,210 | — | — | ||||||||||||
December 31, 2018 | 133 | 23,400 | 28 | 3,551 | 161 | 26,951 | ||||||||||||||
New modifications | 11 | 4,491 | — | — | 11 | 4,491 | ||||||||||||||
Principal advances (payments) | — | (1,295 | ) | — | (382 | ) | — | (1,677 | ) | |||||||||||
Loans paid off | (25 | ) | (3,319 | ) | (15 | ) | (1,596 | ) | (40 | ) | (4,915 | ) | ||||||||
Partial charge-offs | — | — | — | (65 | ) | — | (65 | ) | ||||||||||||
Transfers to OREO | — | — | (1 | ) | (48 | ) | (1 | ) | (48 | ) | ||||||||||
Transfers to accrual status | 9 | 1,219 | (9 | ) | (1,219 | ) | — | — | ||||||||||||
Transfers to nonaccrual status | (6 | ) | (3,302 | ) | 6 | 3,302 | — | — | ||||||||||||
December 31, 2019 | 122 | $ | 21,194 | 9 | $ | 3,543 | 131 | $ | 24,737 |
2019 | 2018 | 2017 | |||||||||||||||||||||||||||||||||
Accruing Interest | Nonaccrual | Total | Accruing Interest | Nonaccrual | Total | Accruing Interest | Nonaccrual | Total | |||||||||||||||||||||||||||
Current | $ | 20,847 | $ | 507 | $ | 21,354 | $ | 21,794 | $ | 2,673 | $ | 24,467 | $ | 21,234 | $ | — | $ | 21,234 | |||||||||||||||||
Past due 30-59 days | 346 | — | 346 | 899 | — | 899 | 1,778 | 805 | 2,583 | ||||||||||||||||||||||||||
Past due 60-89 days | 1 | — | 1 | 707 | — | 707 | 219 | 708 | 927 | ||||||||||||||||||||||||||
Past due 90 days or more | — | 3,036 | 3,036 | — | 878 | 878 | 53 | 1,400 | 1,453 | ||||||||||||||||||||||||||
Total | $ | 21,194 | $ | 3,543 | $ | 24,737 | $ | 23,400 | $ | 3,551 | $ | 26,951 | $ | 23,284 | $ | 2,913 | $ | 26,197 |
2016 | 2015 | ||||||||||||||||||||||
Accruing Interest | Nonaccrual | Total | Accruing Interest | Nonaccrual | Total | ||||||||||||||||||
Current | $ | 17,557 | $ | 559 | $ | 18,116 | $ | 20,550 | $ | 146 | $ | 20,696 | |||||||||||
Past due 30-59 days | 2,898 | 230 | 3,128 | 357 | — | 357 | |||||||||||||||||
Past due 60-89 days | 138 | — | 138 | 24 | — | 24 | |||||||||||||||||
Past due 90 days or more | — | — | — | — | 248 | 248 | |||||||||||||||||
Total | $ | 20,593 | $ | 789 | $ | 21,382 | $ | 20,931 | $ | 394 | $ | 21,325 |
2019 | 2018 | ||||||||||||||||||||||
Recorded Balance | Unpaid Principal Balance | Valuation Allowance | Recorded Balance | Unpaid Principal Balance | Valuation Allowance | ||||||||||||||||||
TDRs | |||||||||||||||||||||||
Commercial real estate | $ | 5,325 | $ | 5,643 | $ | 15 | $ | 6,507 | $ | 6,840 | $ | 437 | |||||||||||
Commercial other | 1,156 | 1,156 | — | 1,713 | 1,713 | — | |||||||||||||||||
Agricultural real estate | 9,182 | 9,181 | 12 | 7,452 | 7,452 | 112 | |||||||||||||||||
Agricultural other | 4,421 | 4,421 | 14 | 5,288 | 5,331 | — | |||||||||||||||||
Residential real estate senior liens | 4,641 | 4,923 | 922 | 5,923 | 6,205 | 1,181 | |||||||||||||||||
Residential real estate junior liens | — | — | — | 12 | 12 | 2 | |||||||||||||||||
Home equity lines of credit | 12 | 312 | — | 47 | 347 | — | |||||||||||||||||
Consumer secured | — | — | — | 9 | 9 | — | |||||||||||||||||
Total TDRs | 24,737 | 25,636 | 963 | 26,951 | 27,909 | 1,732 | |||||||||||||||||
Other impaired loans | |||||||||||||||||||||||
Commercial real estate | 153 | 216 | — | 256 | 318 | — | |||||||||||||||||
Commercial other | 1,231 | 1,231 | — | 1,423 | 1,530 | 6 | |||||||||||||||||
Agricultural real estate | 699 | 750 | — | 557 | 558 | — | |||||||||||||||||
Agricultural other | 538 | 538 | — | 1,001 | 1,000 | 20 | |||||||||||||||||
Residential real estate senior liens | 760 | 907 | 151 | 911 | 1,084 | 180 | |||||||||||||||||
Home equity lines of credit | 73 | 73 | — | — | — | — | |||||||||||||||||
Total other impaired loans | 3,454 | 3,715 | 151 | 4,148 | 4,490 | 206 | |||||||||||||||||
Total impaired loans | $ | 28,191 | $ | 29,351 | $ | 1,114 | $ | 31,099 | $ | 32,399 | $ | 1,938 |
2019 | 2018 | 2017 | 2016 | 2015 | |||||||||||||||
Nonaccrual status loans | $ | 6,535 | $ | 7,260 | $ | 3,027 | $ | 1,060 | $ | 792 | |||||||||
Accruing loans past due 90 days or more | — | 113 | 395 | 633 | — | ||||||||||||||
Total nonperforming loans | 6,535 | 7,373 | 3,422 | 1,693 | 792 | ||||||||||||||
Foreclosed assets | 456 | 355 | 291 | 231 | 421 | ||||||||||||||
Total nonperforming assets | $ | 6,991 | $ | 7,728 | $ | 3,713 | $ | 1,924 | $ | 1,213 | |||||||||
Nonperforming loans as a % of total loans | 0.55 | % | 0.65 | % | 0.31 | % | 0.17 | % | 0.09 | % | |||||||||
Nonperforming assets as a % of total assets | 0.39 | % | 0.42 | % | 0.20 | % | 0.11 | % | 0.07 | % |
2019 | 2018 | 2017 | 2016 | 2015 | |||||||||||||||
Commercial | 1,621 | 1,757 | 729 | 4 | 211 | ||||||||||||||
Agricultural | 4,285 | 4,949 | 1,950 | 533 | 146 | ||||||||||||||
Residential real estate | 629 | 554 | 348 | 523 | 435 | ||||||||||||||
Total | $ | 6,535 | $ | 7,260 | $ | 3,027 | $ | 1,060 | $ | 792 |
2019 | 2018 | 2017 | 2016 | 2015 | |||||||||||||||
Commercial | $ | 390 | $ | 160 | $ | 729 | $ | — | $ | 86 | |||||||||
Agricultural | 3,048 | 3,391 | 1,950 | 405 | 146 | ||||||||||||||
Residential real estate | 105 | — | 234 | 384 | 162 | ||||||||||||||
Total | $ | 3,543 | $ | 3,551 | $ | 2,913 | $ | 789 | $ | 394 |
Change | Change | ||||||||||||||||||||||||
2019 | 2018 | $ | % | 2017 | $ | % | |||||||||||||||||||
Service charges and fees | |||||||||||||||||||||||||
ATM and debit card fees | $ | 3,239 | $ | 2,888 | $ | 351 | 12.15 | % | $ | 2,756 | $ | 132 | 4.79 | % | |||||||||||
Service charges and fees on deposit accounts | 2,328 | 2,276 | 52 | 2.28 | % | 2,203 | 73 | 3.31 | % | ||||||||||||||||
Freddie Mac servicing fee | 626 | 651 | (25 | ) | (3.84 | )% | 671 | (20 | ) | (2.98 | )% | ||||||||||||||
Net OMSR income (loss) | (170 | ) | 25 | (195 | ) | (780.00 | )% | 103 | (78 | ) | (75.73 | )% | |||||||||||||
Other fees for customer services | 324 | 370 | (46 | ) | (12.43 | )% | 280 | 90 | 32.14 | % | |||||||||||||||
Total service charges and fees | 6,347 | 6,210 | 137 | 2.21 | % | 6,013 | 197 | 3.28 | % | ||||||||||||||||
Investment and Trust advisory fees | 2,792 | 2,836 | (44 | ) | (1.55 | )% | 2,607 | 229 | 8.78 | % | |||||||||||||||
Earnings on corporate owned life insurance policies | 764 | 742 | 22 | 2.96 | % | 756 | (14 | ) | (1.85 | )% | |||||||||||||||
Net gain on sale of mortgage loans | 650 | 525 | 125 | 23.81 | % | 647 | (122 | ) | (18.86 | )% | |||||||||||||||
Net gains on foreclosed assets | 162 | 49 | 113 | 230.61 | % | 50 | (1 | ) | (2.00 | )% | |||||||||||||||
Net gains on sale of AFS securities | 6 | — | 6 | N/M | 142 | (142 | ) | (100.00 | )% | ||||||||||||||||
Net income (loss) on joint venture investment | (3,108 | ) | 274 | (3,382 | ) | N/M | 164 | 110 | 67.07 | % | |||||||||||||||
Other | 426 | 345 | 81 | 23.48 | % | 461 | (116 | ) | (25.16 | )% | |||||||||||||||
Total noninterest income | $ | 8,039 | $ | 10,981 | $ | (2,942 | ) | (26.79 | )% | $ | 10,840 | $ | 141 | 1.30 | % |
Change | Change | ||||||||||||||||||||||||
2019 | 2018 | $ | % | 2017 | $ | % | |||||||||||||||||||
Compensation and benefits | $ | 23,205 | $ | 22,609 | $ | 596 | 2.64 | % | $ | 21,525 | $ | 1,084 | 5.04 | % | |||||||||||
Furniture and equipment | 5,866 | 6,055 | (189 | ) | (3.12 | )% | 5,407 | 648 | 11.98 | % | |||||||||||||||
Occupancy | 3,418 | 3,263 | 155 | 4.75 | % | 3,133 | 130 | 4.15 | % | ||||||||||||||||
Other | |||||||||||||||||||||||||
Audit, consulting, and legal fees | 1,884 | 2,222 | (338 | ) | (15.21 | )% | 2,017 | 205 | 10.16 | % | |||||||||||||||
ATM and debit card fees | 1,210 | 1,036 | 174 | 16.80 | % | 1,181 | (145 | ) | (12.28 | )% | |||||||||||||||
Donations and community relations | 1,026 | 710 | 316 | 44.51 | % | 657 | 53 | 8.07 | % | ||||||||||||||||
Loan underwriting fees | 905 | 1,016 | (111 | ) | (10.93 | )% | 556 | 460 | 82.73 | % | |||||||||||||||
Director fees | 788 | 858 | (70 | ) | (8.16 | )% | 856 | 2 | 0.23 | % | |||||||||||||||
Marketing costs | 762 | 596 | 166 | 27.85 | % | 568 | 28 | 4.93 | % | ||||||||||||||||
FDIC insurance premiums | 211 | 726 | (515 | ) | (70.94 | )% | 642 | 84 | 13.08 | % | |||||||||||||||
All other | 3,775 | 3,761 | 14 | 0.37 | % | 3,711 | 50 | 1.35 | % | ||||||||||||||||
Total other | 10,561 | 10,925 | (364 | ) | (3.33 | )% | 10,188 | 737 | 7.23 | % | |||||||||||||||
Total noninterest expenses | $ | 43,050 | $ | 42,852 | $ | 198 | 0.46 | % | $ | 40,253 | $ | 2,599 | 6.46 | % |
Change | ||||||||||||||
2019 | 2018 | $ | % | |||||||||||
ASSETS | ||||||||||||||
Cash and cash equivalents | $ | 60,572 | $ | 73,471 | $ | (12,899 | ) | (17.56 | )% | |||||
AFS securities | ||||||||||||||
Amortized cost of AFS securities | 423,980 | 501,245 | (77,265 | ) | (15.41 | )% | ||||||||
Unrealized gains (losses) on AFS securities | 5,859 | (6,411 | ) | 12,270 | N/M | |||||||||
AFS securities | 429,839 | 494,834 | (64,995 | ) | (13.13 | )% | ||||||||
Mortgage loans AFS | 904 | 358 | 546 | 152.51 | % | |||||||||
Loans | ||||||||||||||
Gross loans | 1,186,570 | 1,128,707 | 57,863 | 5.13 | % | |||||||||
Less allowance for loan and lease losses | 7,939 | 8,375 | (436 | ) | (5.21 | )% | ||||||||
Net loans | 1,178,631 | 1,120,332 | 58,299 | 5.20 | % | |||||||||
Premises and equipment | 26,242 | 27,815 | (1,573 | ) | (5.66 | )% | ||||||||
Corporate owned life insurance policies | 28,455 | 27,733 | 722 | 2.60 | % | |||||||||
Accrued interest receivable | 6,501 | 6,928 | (427 | ) | (6.16 | )% | ||||||||
Equity securities without readily determinable fair values | 21,629 | 24,948 | (3,319 | ) | (13.30 | )% | ||||||||
Goodwill and other intangible assets | 48,379 | 48,451 | (72 | ) | (0.15 | )% | ||||||||
Other assets | 13,046 | 17,632 | (4,586 | ) | (26.01 | )% | ||||||||
TOTAL ASSETS | $ | 1,814,198 | $ | 1,842,502 | $ | (28,304 | ) | (1.54 | )% | |||||
LIABILITIES AND SHAREHOLDERS’ EQUITY | ||||||||||||||
Liabilities | ||||||||||||||
Deposits | $ | 1,313,851 | $ | 1,292,693 | $ | 21,158 | 1.64 | % | ||||||
Borrowed funds | 275,999 | 340,299 | (64,300 | ) | (18.90 | )% | ||||||||
Accrued interest payable and other liabilities | 14,166 | 13,991 | 175 | 1.25 | % | |||||||||
Total liabilities | 1,604,016 | 1,646,983 | (42,967 | ) | (2.61 | )% | ||||||||
Shareholders’ equity | 210,182 | 195,519 | 14,663 | 7.50 | % | |||||||||
TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY | $ | 1,814,198 | $ | 1,842,502 | $ | (28,304 | ) | (1.54 | )% |
2019 | 2018 | 2017 | |||||||||
Government sponsored enterprises | $ | — | $ | 170 | $ | 216 | |||||
States and political subdivisions | 169,752 | 190,866 | 208,474 | ||||||||
Auction rate money market preferred | 3,119 | 2,554 | 3,049 | ||||||||
Mortgage-backed securities | 140,204 | 184,484 | 208,797 | ||||||||
Collateralized mortgage obligations | 116,764 | 116,760 | 128,194 | ||||||||
Total | $ | 429,839 | $ | 494,834 | $ | 548,730 |
Maturing | |||||||||||||||||||||||||||||
Within One Year | After One Year But Within Five Years | After Five Years But Within Ten Years | After Ten Years | Securities with Variable Monthly Payments or Noncontractual Maturities | |||||||||||||||||||||||||
Amount | Yield (%) | Amount | Yield (%) | Amount | Yield (%) | Amount | Yield (%) | Amount | Yield (%) | ||||||||||||||||||||
States and political subdivisions | $ | 29,091 | 3.09 | $ | 72,332 | 3.35 | $ | 39,875 | 3.75 | $ | 28,454 | 4.08 | $ | — | — | ||||||||||||||
Mortgage-backed securities | — | — | — | — | — | — | — | — | 140,204 | 2.28 | |||||||||||||||||||
Collateralized mortgage obligations | — | — | — | — | — | — | — | — | 116,764 | 2.38 | |||||||||||||||||||
Auction rate money market preferred | — | — | — | — | — | — | — | — | 3,119 | 6.20 | |||||||||||||||||||
Total | $ | 29,091 | 3.09 | $ | 72,332 | 3.35 | $ | 39,875 | 3.75 | $ | 28,454 | 4.08 | $ | 260,087 | 2.37 |
2019 | 2018 | 2017 | 2016 | 2015 | |||||||||||||||
Commercial | $ | 700,941 | $ | 659,529 | $ | 634,759 | $ | 575,664 | $ | 448,381 | |||||||||
Agricultural | 116,920 | 127,161 | 128,269 | 126,492 | 115,911 | ||||||||||||||
Residential real estate | 298,569 | 275,343 | 272,368 | 266,050 | 251,501 | ||||||||||||||
Consumer | 70,140 | 66,674 | 56,123 | 42,409 | 34,699 | ||||||||||||||
Total | $ | 1,186,570 | $ | 1,128,707 | $ | 1,091,519 | $ | 1,010,615 | $ | 850,492 |
2019 | 2018 | 2017 | ||||||||||||||||||
$ Change | % Change | $ Change | % Change | $ Change | % Change | |||||||||||||||
Commercial | $ | 41,412 | 6.28 | % | $ | 24,770 | 3.90 | % | $ | 59,095 | 10.27 | % | ||||||||
Agricultural | (10,241 | ) | (8.05 | )% | (1,108 | ) | (0.86 | )% | 1,777 | 1.40 | % | |||||||||
Residential real estate | 23,226 | 8.44 | % | 2,975 | 1.09 | % | 6,318 | 2.37 | % | |||||||||||
Consumer | 3,466 | 5.20 | % | 10,551 | 18.80 | % | 13,714 | 32.34 | % | |||||||||||
Total | $ | 57,863 | 5.13 | % | $ | 37,188 | 3.41 | % | $ | 80,904 | 8.01 | % |
2019 | 2018 | 2017 | |||||||||
Noninterest bearing demand deposits | $ | 249,152 | $ | 236,534 | $ | 237,511 | |||||
Interest bearing demand deposits | 229,865 | 235,287 | 231,666 | ||||||||
Savings deposits | 427,215 | 387,252 | 342,815 | ||||||||
Certificates of deposit | 365,049 | 358,127 | 347,279 | ||||||||
Brokered certificates of deposit | 27,458 | 62,148 | 87,247 | ||||||||
Internet certificates of deposit | 15,112 | 13,345 | 18,740 | ||||||||
Total | $ | 1,313,851 | $ | 1,292,693 | $ | 1,265,258 |
2019 | 2018 | ||||||||||||
$ Change | % Change | $ Change | % Change | ||||||||||
Noninterest bearing demand deposits | $ | 12,618 | 5.33 | % | $ | (977 | ) | (0.41 | )% | ||||
Interest bearing demand deposits | (5,422 | ) | (2.30 | )% | 3,621 | 1.56 | % | ||||||
Savings deposits | 39,963 | 10.32 | % | 44,437 | 12.96 | % | |||||||
Certificates of deposit | 6,922 | 1.93 | % | 10,848 | 3.12 | % | |||||||
Brokered certificates of deposit | (34,690 | ) | (55.82 | )% | (25,099 | ) | (28.77 | )% | |||||
Internet certificates of deposit | 1,767 | 13.24 | % | (5,395 | ) | (28.79 | )% | ||||||
Total | $ | 21,158 | 1.64 | % | $ | 27,435 | 2.17 | % |
Maturity | |||
Within 3 months | $ | 22,626 | |
Within 3 to 6 months | 7,804 | ||
Within 6 to 12 months | 17,014 | ||
Over 12 months | 48,367 | ||
Total | $ | 95,811 |
2019 | 2018 | 2017 | |||||||||
FHLB advances | $ | 245,000 | $ | 300,000 | $ | 290,000 | |||||
Securities sold under agreements to repurchase without stated maturity dates | 30,999 | 40,299 | 54,878 | ||||||||
Total | $ | 275,999 | $ | 340,299 | $ | 344,878 |
2019 | 2018 | ||||||||||||||||
Actual | Minimum Required - BASEL III | Required to be Considered Well Capitalized | Actual | Minimum Required - BASEL III | Required to be Considered Well Capitalized | ||||||||||||
Common equity tier 1 capital | 12.56 | % | 7.000 | % | 6.500 | % | 12.58 | % | 6.375 | % | 6.500 | % | |||||
Tier 1 capital | 12.56 | % | 8.500 | % | 8.000 | % | 12.58 | % | 7.875 | % | 8.000 | % | |||||
Total capital | 13.18 | % | 10.500 | % | 10.000 | % | 13.26 | % | 9.875 | % | 10.000 | % | |||||
Tier 1 leverage | 9.01 | % | 4.000 | % | 5.000 | % | 8.72 | % | 4.000 | % | 5.000 | % |
2019 | 2018 | $ Variance | |||||||||
Net cash provided by (used in) operating activities | $ | 23,303 | $ | 21,963 | $ | 1,340 | |||||
Net cash provided by (used in) investing activities | 15,480 | 6,517 | 8,963 | ||||||||
Net cash provided by (used in) financing activities | (51,682 | ) | 14,143 | (65,825 | ) | ||||||
Increase (decrease) in cash and cash equivalents | (12,899 | ) | 42,623 | (55,522 | ) | ||||||
Cash and cash equivalents January 1 | 73,471 | 30,848 | 42,623 | ||||||||
Cash and cash equivalents December 31 | $ | 60,572 | $ | 73,471 | $ | (12,899 | ) |
1 Year or Less | 1 to 5 Years | Over 5 Years | Total | ||||||||||||
Commercial and agricultural | $ | 151,183 | $ | 426,141 | $ | 240,537 | $ | 817,861 | |||||||
Interest sensitivity | |||||||||||||||
Loans maturing after one year that have: | |||||||||||||||
Fixed interest rates | $ | 354,845 | $ | 137,086 | |||||||||||
Variable interest rates | 71,296 | 103,451 | |||||||||||||
Total | $ | 426,141 | $ | 240,537 |
Report of Independent Registered Public Accounting Firm |
Consolidated Balance Sheets |
Consolidated Statements of Changes in Shareholders’ Equity |
Consolidated Statements of Income |
Consolidated Statements of Comprehensive Income (Loss) |
Consolidated Statements of Cash Flows |
Notes to Consolidated Financial Statements |
December 31 | |||||||
2019 | 2018 | ||||||
ASSETS | |||||||
Cash and cash equivalents | |||||||
Cash and demand deposits due from banks | $ | 20,311 | $ | 23,534 | |||
Interest bearing balances due from banks | 40,261 | 49,937 | |||||
Total cash and cash equivalents | 60,572 | 73,471 | |||||
AFS securities, at fair value | 429,839 | 494,834 | |||||
Mortgage loans AFS | 904 | 358 | |||||
Loans | |||||||
Commercial | 700,941 | 659,529 | |||||
Agricultural | 116,920 | 127,161 | |||||
Residential real estate | 298,569 | 275,343 | |||||
Consumer | 70,140 | 66,674 | |||||
Gross loans | 1,186,570 | 1,128,707 | |||||
Less allowance for loan and lease losses | 7,939 | 8,375 | |||||
Net loans | 1,178,631 | 1,120,332 | |||||
Premises and equipment | 26,242 | 27,815 | |||||
Corporate owned life insurance policies | 28,455 | 27,733 | |||||
Accrued interest receivable | 6,501 | 6,928 | |||||
Equity securities without readily determinable fair values | 21,629 | 24,948 | |||||
Goodwill and other intangible assets | 48,379 | 48,451 | |||||
Other assets | 13,046 | 17,632 | |||||
TOTAL ASSETS | $ | 1,814,198 | $ | 1,842,502 | |||
LIABILITIES AND SHAREHOLDERS’ EQUITY | |||||||
Deposits | |||||||
Noninterest bearing | $ | 249,152 | $ | 236,534 | |||
Interest bearing demand deposits | 229,865 | 235,287 | |||||
Certificates of deposit under $250 and other savings | 739,023 | 744,944 | |||||
Certificates of deposit over $250 | 95,811 | 75,928 | |||||
Total deposits | 1,313,851 | 1,292,693 | |||||
Borrowed funds | 275,999 | 340,299 | |||||
Accrued interest payable and other liabilities | 14,166 | 13,991 | |||||
Total liabilities | 1,604,016 | 1,646,983 | |||||
Shareholders’ equity | |||||||
Common stock — no par value 15,000,000 shares authorized; issued and outstanding 7,910,804 shares (including 27,069 shares held in the Rabbi Trust) in 2019 and 7,870,969 shares (including 16,673 shares held in the Rabbi Trust) in 2018 | 141,069 | 140,416 | |||||
Shares to be issued for deferred compensation obligations | 5,043 | 5,431 | |||||
Retained earnings | 62,099 | 57,357 | |||||
Accumulated other comprehensive income (loss) | 1,971 | (7,685 | ) | ||||
Total shareholders’ equity | 210,182 | 195,519 | |||||
TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY | $ | 1,814,198 | $ | 1,842,502 |
Common Stock | ||||||||||||||||||||||
Common Shares Outstanding | Amount | Common Shares to be Issued for Deferred Compensation Obligations | Retained Earnings | Accumulated Other Comprehensive Income (Loss) | Totals | |||||||||||||||||
Balance, January 1, 2017 | 7,821,069 | $ | 139,525 | $ | 5,038 | $ | 46,114 | $ | (2,778 | ) | $ | 187,899 | ||||||||||
Comprehensive income (loss) | — | — | — | 13,237 | 543 | 13,780 | ||||||||||||||||
Reclassification resulting from the enactment of the Tax Act | — | — | — | 367 | (367 | ) | — | |||||||||||||||
Issuance of common stock | 220,510 | 6,177 | — | — | — | 6,177 | ||||||||||||||||
Common stock transferred from the Rabbi Trust to satisfy deferred compensation obligations | — | 176 | (176 | ) | — | — | — | |||||||||||||||
Share-based payment awards under equity compensation plan | — | — | 640 | — | — | 640 | ||||||||||||||||
Common stock purchased for deferred compensation obligations | — | (420 | ) | — | — | — | (420 | ) | ||||||||||||||
Common stock repurchased pursuant to publicly announced repurchase plan | (184,286 | ) | (5,181 | ) | — | — | — | (5,181 | ) | |||||||||||||
Cash dividends paid ($1.02 per common share) | — | — | — | (7,990 | ) | — | (7,990 | ) | ||||||||||||||
Balance, December 31, 2017 | 7,857,293 | 140,277 | 5,502 | 51,728 | (2,602 | ) | 194,905 | |||||||||||||||
Comprehensive income (loss) | — | — | — | 14,021 | (5,306 | ) | 8,715 | |||||||||||||||
Adoption of ASU 2016-01 | — | — | — | (223 | ) | 223 | — | |||||||||||||||
Issuance of common stock | 261,693 | 6,864 | — | — | — | 6,864 | ||||||||||||||||
Common stock transferred from the Rabbi Trust to satisfy deferred compensation obligations | — | 683 | (683 | ) | — | — | — | |||||||||||||||
Share-based payment awards under equity compensation plan | — | — | 612 | — | — | 612 | ||||||||||||||||
Common stock purchased for deferred compensation obligations | — | (401 | ) | — | — | — | (401 | ) | ||||||||||||||
Common stock repurchased pursuant to publicly announced repurchase plan | (248,017 | ) | (7,007 | ) | — | — | — | (7,007 | ) | |||||||||||||
Cash dividends paid ($1.04 per common share) | — | — | — | (8,169 | ) | — | (8,169 | ) | ||||||||||||||
Balance, December 31, 2018 | 7,870,969 | 140,416 | 5,431 | 57,357 | (7,685 | ) | 195,519 | |||||||||||||||
Comprehensive income (loss) | — | — | — | 13,024 | 9,656 | 22,680 | ||||||||||||||||
Issuance of common stock | 209,583 | 4,876 | — | — | — | 4,876 | ||||||||||||||||
Common stock transferred from the Rabbi Trust to satisfy deferred compensation obligations | — | 911 | (911 | ) | — | — | — | |||||||||||||||
Share-based payment awards under equity compensation plan | — | — | 523 | — | — | 523 | ||||||||||||||||
Common stock purchased for deferred compensation obligations | — | (1,131 | ) | — | — | — | (1,131 | ) | ||||||||||||||
Common stock repurchased pursuant to publicly announced repurchase plan | (169,748 | ) | (4,003 | ) | — | — | — | (4,003 | ) | |||||||||||||
Cash dividends paid ($1.05 per common share) | — | — | — | (8,282 | ) | — | (8,282 | ) | ||||||||||||||
Balance, December 31, 2019 | 7,910,804 | $ | 141,069 | $ | 5,043 | $ | 62,099 | $ | 1,971 | $ | 210,182 |
Year Ended December 31 | |||||||||||
2019 | 2018 | 2017 | |||||||||
Interest income | |||||||||||
Loans, including fees | $ | 54,192 | $ | 49,229 | $ | 43,537 | |||||
AFS securities | |||||||||||
Taxable | 7,185 | 8,239 | 8,410 | ||||||||
Nontaxable | 4,728 | 5,279 | 5,570 | ||||||||
Federal funds sold and other | 1,201 | 1,117 | 896 | ||||||||
Total interest income | 67,306 | 63,864 | 58,413 | ||||||||
Interest expense | |||||||||||
Deposits | 11,608 | 9,261 | 6,809 | ||||||||
Borrowings | 6,253 | 6,370 | 5,685 | ||||||||
Total interest expense | 17,861 | 15,631 | 12,494 | ||||||||
Net interest income | 49,445 | 48,233 | 45,919 | ||||||||
Provision for loan losses | 30 | 978 | 253 | ||||||||
Net interest income after provision for loan losses | 49,415 | 47,255 | 45,666 | ||||||||
Noninterest income | |||||||||||
Service charges and fees | 6,347 | 6,210 | 6,013 | ||||||||
Investment and Trust advisory fees | 2,792 | 2,836 | 2,607 | ||||||||
Earnings on corporate owned life insurance policies | 764 | 742 | 756 | ||||||||
Net gain on sale of mortgage loans | 650 | 525 | 647 | ||||||||
Net gains on foreclosed assets | 162 | 49 | 50 | ||||||||
Net gains on sale of AFS securities | 6 | — | 142 | ||||||||
Net income (loss) on joint venture investment | (3,108 | ) | 274 | 164 | |||||||
Other | 426 | 345 | 461 | ||||||||
Total noninterest income | 8,039 | 10,981 | 10,840 | ||||||||
Noninterest expenses | |||||||||||
Compensation and benefits | 23,205 | 22,609 | 21,525 | ||||||||
Furniture and equipment | 5,866 | 6,055 | 5,407 | ||||||||
Occupancy | 3,418 | 3,263 | 3,133 | ||||||||
Other | 10,561 | 10,925 | 10,188 | ||||||||
Total noninterest expenses | 43,050 | 42,852 | 40,253 | ||||||||
Income before federal income tax expense | 14,404 | 15,384 | 16,253 | ||||||||
Federal income tax expense | 1,380 | 1,363 | 3,016 | ||||||||
NET INCOME | $ | 13,024 | $ | 14,021 | $ | 13,237 | |||||
Earnings per common share | |||||||||||
Basic | $ | 1.65 | $ | 1.78 | $ | 1.69 | |||||
Diluted | $ | 1.61 | $ | 1.74 | $ | 1.65 | |||||
Cash dividends per common share | $ | 1.05 | $ | 1.04 | $ | 1.02 |
Year Ended December 31 | |||||||||||
2019 | 2018 | 2017 | |||||||||
Net income | $ | 13,024 | $ | 14,021 | $ | 13,237 | |||||
Unrealized gains (losses) on AFS securities | |||||||||||
Unrealized gains (losses) arising during the period | 12,276 | (7,229 | ) | 289 | |||||||
Reclassification adjustment for net realized (gains) losses included in net income | (6 | ) | — | (142 | ) | ||||||
Comprehensive income (loss) before income tax (expense) benefit | 12,270 | (7,229 | ) | 147 | |||||||
Tax effect (1) | (2,458 | ) | 1,415 | 89 | |||||||
Unrealized gains (losses) on AFS securities, net of tax | 9,812 | (5,814 | ) | 236 | |||||||
Unrealized gains (losses) on derivative instruments | |||||||||||
Unrealized gains (losses) on derivative instruments arising during the period | (256 | ) | 33 | 43 | |||||||
Tax effect (1) | 54 | (7 | ) | (15 | ) | ||||||
Unrealized gains (losses) on derivative instruments, net of tax | (202 | ) | 26 | 28 | |||||||
Change in unrecognized pension cost on defined benefit pension plan | |||||||||||
Change in unrecognized pension cost arising during the period | (210 | ) | 265 | 11 | |||||||
Reclassification adjustment for net periodic benefit cost included in net income | 268 | 345 | 412 | ||||||||
Net change in unrecognized pension cost | 58 | 610 | 423 | ||||||||
Tax effect (1) | (12 | ) | (128 | ) | (144 | ) | |||||
Change in unrealized pension cost, net of tax | 46 | 482 | 279 | ||||||||
Other comprehensive income (loss), net of tax | 9,656 | (5,306 | ) | 543 | |||||||
Comprehensive income (loss) | $ | 22,680 | $ | 8,715 | $ | 13,780 |
(1) | See “Note 17 – Accumulated Other Comprehensive Income (Loss)” in the accompanying notes to consolidated financial statements for tax effect reconciliation. |
Year Ended December 31 | |||||||||||
2019 | 2018 | 2017 | |||||||||
OPERATING ACTIVITIES | |||||||||||
Net income | $ | 13,024 | $ | 14,021 | $ | 13,237 | |||||
Reconciliation of net income to net cash provided by operating activities: | |||||||||||
Undistributed earnings of equity securities without readily determinable fair values | 3,320 | (144 | ) | 40 | |||||||
Provision for loan losses | 30 | 978 | 253 | ||||||||
Depreciation | 2,908 | 2,940 | 2,902 | ||||||||
Amortization of OMSR | 307 | 218 | 340 | ||||||||
Amortization of acquisition intangibles | 72 | 96 | 119 | ||||||||
Net amortization of AFS securities | 1,784 | 1,873 | 2,144 | ||||||||
Net unrealized (gains) losses on equity securities, at fair value | — | 41 | — | ||||||||
Net (gains) losses on sale of AFS securities | (6 | ) | — | (142 | ) | ||||||
Net (gains) losses on sale of equity securities, at fair value | — | (1 | ) | — | |||||||
Net gain on sale of mortgage loans | (650 | ) | (525 | ) | (647 | ) | |||||
Net gains on foreclosed assets | (162 | ) | (49 | ) | (50 | ) | |||||
Increase in cash value of corporate owned life insurance policies, net of expenses | (722 | ) | (707 | ) | (726 | ) | |||||
Share-based payment awards under equity compensation plan | 523 | 612 | 640 | ||||||||
Deferred income tax expense (benefit) | 408 | 275 | 2,836 | ||||||||
Origination of loans held-for-sale | (39,937 | ) | (29,242 | ) | (36,276 | ) | |||||
Proceeds from loan sales | 40,041 | 30,969 | 37,179 | ||||||||
Net changes in operating assets and liabilities which provided (used) cash: | |||||||||||
Accrued interest receivable | 427 | 135 | (483 | ) | |||||||
Other assets | 1,299 | 115 | 799 | ||||||||
Accrued interest payable and other liabilities | 637 | 358 | (2,497 | ) | |||||||
Net cash provided by (used in) operating activities | 23,303 | 21,963 | 19,668 | ||||||||
INVESTING ACTIVITIES | |||||||||||
Activity in AFS securities | |||||||||||
Sales | 33,840 | — | 12,827 | ||||||||
Maturities, calls, and principal payments | 81,543 | 80,005 | 97,617 | ||||||||
Purchases | (39,896 | ) | (35,211 | ) | (106,510 | ) | |||||
Sale of equity securities, at fair value | — | 3,537 | — | ||||||||
Net loan principal (originations) collections | (58,974 | ) | (37,958 | ) | (81,188 | ) | |||||
Proceeds from sales of foreclosed assets | 706 | 450 | 322 | ||||||||
Purchases of premises and equipment | (1,335 | ) | (2,305 | ) | (2,038 | ) | |||||
Purchases of FHLB Stock | — | (1,350 | ) | (1,800 | ) | ||||||
Funding of low income housing tax credit investments | (404 | ) | (651 | ) | (932 | ) | |||||
Net cash provided by (used in) investing activities | 15,480 | 6,517 | (81,702 | ) |
Year Ended December 31 | |||||||||||
2019 | 2018 | 2017 | |||||||||
FINANCING ACTIVITIES | |||||||||||
Net increase (decrease) in deposits | $ | 21,158 | $ | 27,435 | $ | 70,218 | |||||
Net increase (decrease) in borrowed funds | (64,300 | ) | (4,579 | ) | 7,184 | ||||||
Cash dividends paid on common stock | (8,282 | ) | (8,169 | ) | (7,990 | ) | |||||
Proceeds from issuance of common stock | 4,876 | 6,864 | 6,177 | ||||||||
Common stock repurchased | (4,003 | ) | (7,007 | ) | (5,181 | ) | |||||
Common stock purchased for deferred compensation obligations | (1,131 | ) | (401 | ) | (420 | ) | |||||
Net cash provided by (used in) financing activities | (51,682 | ) | 14,143 | 69,988 | |||||||
Increase (decrease) in cash and cash equivalents | (12,899 | ) | 42,623 | 7,954 | |||||||
Cash and cash equivalents at beginning of period | 73,471 | 30,848 | 22,894 | ||||||||
Cash and cash equivalents at end of period | $ | 60,572 | $ | 73,471 | $ | 30,848 | |||||
SUPPLEMENTAL CASH FLOWS INFORMATION: | |||||||||||
Interest paid | $ | 17,827 | $ | 15,485 | $ | 12,388 | |||||
Income taxes paid | 745 | 50 | 3,120 | ||||||||
SUPPLEMENTAL NONCASH INFORMATION: | |||||||||||
Transfers of loans to foreclosed assets | $ | 645 | $ | 467 | $ | 331 |
Level 1: | Valuation is based upon quoted prices for identical instruments traded in active markets. |
Level 2: | Valuation is based upon quoted prices for similar instruments in active markets, quoted prices for identical or similar instruments in markets that are not active and model based valuation techniques for which all significant assumptions are observable in the market. |
Level 3: | Valuation is generated from model based techniques that use at least one significant assumption not observable in the market. These unobservable assumptions reflect estimates of assumptions that market participants would use in pricing the asset or liability. |
1. | There has been a charge-off of its principal balance; |
2. | The loan has been classified as a TDR; or |
3. | The loan is in nonaccrual status. |
2019 | 2018 | ||||||
FHLB Stock | $ | 15,050 | $ | 15,050 | |||
Investment in joint venture | 4,246 | 7,565 | |||||
FRB Stock | 1,999 | 1,999 | |||||
Other | 334 | 334 | |||||
Total | $ | 21,629 | $ | 24,948 |
2019 | |||||||||||||||
Amortized Cost | Gross Unrealized Gains | Gross Unrealized Losses | Fair Value | ||||||||||||
States and political subdivisions | $ | 165,005 | $ | 4,747 | $ | — | $ | 169,752 | |||||||
Auction rate money market preferred | 3,200 | — | 81 | 3,119 | |||||||||||
Mortgage-backed securities | 139,831 | 933 | 560 | 140,204 | |||||||||||
Collateralized mortgage obligations | 115,944 | 1,007 | 187 | 116,764 | |||||||||||
Total | $ | 423,980 | $ | 6,687 | $ | 828 | $ | 429,839 |
2018 | |||||||||||||||
Amortized Cost | Gross Unrealized Gains | Gross Unrealized Losses | Fair Value | ||||||||||||
Government sponsored enterprises | $ | 172 | $ | — | $ | 2 | $ | 170 | |||||||
States and political subdivisions | 188,992 | 2,125 | 251 | 190,866 | |||||||||||
Auction rate money market preferred | 3,200 | — | 646 | 2,554 | |||||||||||
Mortgage-backed securities | 189,688 | 76 | 5,280 | 184,484 | |||||||||||
Collateralized mortgage obligations | 119,193 | 71 | 2,504 | 116,760 | |||||||||||
Total | $ | 501,245 | $ | 2,272 | $ | 8,683 | $ | 494,834 |
Maturing | Securities with Variable Monthly Payments or Noncontractual Maturities | ||||||||||||||||||||||
Due in One Year or Less | After One Year But Within Five Years | After Five Years But Within Ten Years | After Ten Years | Total | |||||||||||||||||||
States and political subdivisions | $ | 28,932 | $ | 70,795 | $ | 38,342 | $ | 26,936 | $ | — | $ | 165,005 | |||||||||||
Auction rate money market preferred | — | — | — | — | 3,200 | 3,200 | |||||||||||||||||
Mortgage-backed securities | — | — | — | — | 139,831 | 139,831 | |||||||||||||||||
Collateralized mortgage obligations | — | — | — | — | 115,944 | 115,944 | |||||||||||||||||
Total amortized cost | $ | 28,932 | $ | 70,795 | $ | 38,342 | $ | 26,936 | $ | 258,975 | $ | 423,980 | |||||||||||
Fair value | $ | 29,091 | $ | 72,332 | $ | 39,875 | $ | 28,454 | $ | 260,087 | $ | 429,839 |
2019 | 2018 | 2017 | |||||||||
Proceeds from sales of AFS securities | $ | 33,840 | $ | — | $ | 12,827 | |||||
Realized gains (losses) | $ | 6 | $ | — | $ | 142 | |||||
Applicable income tax expense (benefit) (1) | $ | 1 | $ | — | $ | 48 |
2019 | |||||||||||||||||||
Less Than Twelve Months | Twelve Months or More | ||||||||||||||||||
Gross Unrealized Losses | Fair Value | Gross Unrealized Losses | Fair Value | Total Unrealized Losses | |||||||||||||||
States and political subdivisions | $ | — | $ | — | $ | — | $ | — | $ | — | |||||||||
Auction rate money market preferred | — | — | 81 | 3,119 | 81 | ||||||||||||||
Mortgage-backed securities | 3 | 3,974 | 557 | 49,701 | 560 | ||||||||||||||
Collateralized mortgage obligations | 43 | 20,262 | 144 | 13,309 | 187 | ||||||||||||||
Total | $ | 46 | $ | 24,236 | $ | 782 | $ | 66,129 | $ | 828 | |||||||||
Number of securities in an unrealized loss position: | 9 | 19 | 28 |
2018 | |||||||||||||||||||
Less Than Twelve Months | Twelve Months or More | ||||||||||||||||||
Gross Unrealized Losses | Fair Value | Gross Unrealized Losses | Fair Value | Total Unrealized Losses | |||||||||||||||
Government sponsored enterprises | $ | — | $ | — | $ | 2 | $ | 170 | $ | 2 | |||||||||
States and political subdivisions | 83 | 14,732 | 168 | 15,090 | 251 | ||||||||||||||
Auction rate money market preferred | — | — | 646 | 2,554 | 646 | ||||||||||||||
Mortgage-backed securities | 896 | 43,485 | 4,384 | 124,253 | 5,280 | ||||||||||||||
Collateralized mortgage obligations | 199 | 21,886 | 2,305 | 87,929 | 2,504 | ||||||||||||||
Total | $ | 1,178 | $ | 80,103 | $ | 7,505 | $ | 229,996 | $ | 8,683 | |||||||||
Number of securities in an unrealized loss position: | 66 | 102 | 168 |
• | Has the value of the investment declined more than what is deemed to be reasonable based on a risk and maturity adjusted discount rate? |
• | Is the investment credit rating below investment grade? |
• | Is it probable the issuer will be unable to pay the amount when due? |
• | Is it more likely than not that we will have to sell the security before recovery of its cost basis? |
• | Has the duration of the investment been extended? |
• | Evaluation of the borrower’s ability to make monthly payments. |
• | Evaluation of the value of the property securing the loan. |
• | Ensuring the payment of principal, interest, taxes, and hazard insurance does not exceed 28% of a borrower’s gross income. |
• | Ensuring all debt servicing does not exceed 40% of income. |
• | Verification of acceptable credit reports. |
• | Verification of employment, income, and financial information. |
Allowance for Loan Losses | |||||||||||||||||||||||
Year Ended December 31, 2019 | |||||||||||||||||||||||
Commercial | Agricultural | Residential Real Estate | Consumer | Unallocated | Total | ||||||||||||||||||
January 1, 2019 | $ | 2,563 | $ | 775 | $ | 1,992 | $ | 857 | $ | 2,188 | $ | 8,375 | |||||||||||
Charge-offs | (143 | ) | (240 | ) | (99 | ) | (466 | ) | — | (948 | ) | ||||||||||||
Recoveries | 123 | 3 | 189 | 167 | — | 482 | |||||||||||||||||
Provision for loan losses | (629 | ) | 96 | (35 | ) | 364 | 234 | 30 | |||||||||||||||
December 31, 2019 | $ | 1,914 | $ | 634 | $ | 2,047 | $ | 922 | $ | 2,422 | $ | 7,939 |
Allowance for Loan Losses | |||||||||||||||||||||||
Year Ended December 31, 2018 | |||||||||||||||||||||||
Commercial | Agricultural | Residential Real Estate | Consumer | Unallocated | Total | ||||||||||||||||||
January 1, 2018 | $ | 1,706 | $ | 611 | $ | 2,563 | $ | 900 | $ | 1,920 | $ | 7,700 | |||||||||||
Charge-offs | (575 | ) | (51 | ) | (151 | ) | (324 | ) | — | (1,101 | ) | ||||||||||||
Recoveries | 325 | 3 | 261 | 209 | — | 798 | |||||||||||||||||
Provision for loan losses | 1,107 | 212 | (681 | ) | 72 | 268 | 978 | ||||||||||||||||
December 31, 2018 | $ | 2,563 | $ | 775 | $ | 1,992 | $ | 857 | $ | 2,188 | $ | 8,375 |
Allowance for Loan Losses and Recorded Investment in Loans | |||||||||||||||||||||||
As of December 31, 2019 | |||||||||||||||||||||||
Commercial | Agricultural | Residential Real Estate | Consumer | Unallocated | Total | ||||||||||||||||||
ALLL | |||||||||||||||||||||||
Individually evaluated for impairment | $ | 15 | $ | 26 | $ | 1,073 | $ | — | $ | — | $ | 1,114 | |||||||||||
Collectively evaluated for impairment | 1,899 | 608 | 974 | 922 | 2,422 | 6,825 | |||||||||||||||||
Total | $ | 1,914 | $ | 634 | $ | 2,047 | $ | 922 | $ | 2,422 | $ | 7,939 | |||||||||||
Loans | |||||||||||||||||||||||
Individually evaluated for impairment | $ | 7,865 | $ | 14,840 | $ | 5,486 | $ | — | $ | 28,191 | |||||||||||||
Collectively evaluated for impairment | 693,076 | 102,080 | 293,083 | 70,140 | 1,158,379 | ||||||||||||||||||
Total | $ | 700,941 | $ | 116,920 | $ | 298,569 | $ | 70,140 | $ | 1,186,570 |
Allowance for Loan Losses and Recorded Investment in Loans | |||||||||||||||||||||||
As of December 31, 2018 | |||||||||||||||||||||||
Commercial | Agricultural | Residential Real Estate | Consumer | Unallocated | Total | ||||||||||||||||||
ALLL | |||||||||||||||||||||||
Individually evaluated for impairment | $ | 443 | $ | 132 | $ | 1,363 | $ | — | $ | — | $ | 1,938 | |||||||||||
Collectively evaluated for impairment | 2,120 | 643 | 629 | 857 | 2,188 | 6,437 | |||||||||||||||||
Total | $ | 2,563 | $ | 775 | $ | 1,992 | $ | 857 | $ | 2,188 | $ | 8,375 | |||||||||||
Loans | |||||||||||||||||||||||
Individually evaluated for impairment | $ | 9,899 | $ | 14,298 | $ | 6,893 | $ | 9 | $ | 31,099 | |||||||||||||
Collectively evaluated for impairment | 649,630 | 112,863 | 268,450 | 66,665 | 1,097,608 | ||||||||||||||||||
Total | $ | 659,529 | $ | 127,161 | $ | 275,343 | $ | 66,674 | $ | 1,128,707 |
2019 | |||||||||||||||||||||||||||||||
Commercial | Agricultural | ||||||||||||||||||||||||||||||
Real Estate | Other | Advances to Mortgage Brokers | Total | Real Estate | Other | Total | Total | ||||||||||||||||||||||||
Rating | |||||||||||||||||||||||||||||||
1 - Excellent | $ | — | $ | 390 | $ | — | $ | 390 | $ | — | $ | — | $ | — | $ | 390 | |||||||||||||||
2 - High quality | 2,582 | 8,844 | — | 11,426 | 1,452 | 99 | 1,551 | 12,977 | |||||||||||||||||||||||
3 - High satisfactory | 109,737 | 42,858 | 35,523 | 188,118 | 16,765 | 6,769 | 23,534 | 211,652 | |||||||||||||||||||||||
4 - Low satisfactory | 377,198 | 94,847 | — | 472,045 | 42,798 | 20,861 | 63,659 | 535,704 | |||||||||||||||||||||||
5 - Special mention | 15,372 | 3,470 | — | 18,842 | 7,165 | 3,754 | 10,919 | 29,761 | |||||||||||||||||||||||
6 - Substandard | 4,874 | 3,625 | — | 8,499 | 9,136 | 3,836 | 12,972 | 21,471 | |||||||||||||||||||||||
7 - Vulnerable | 390 | 1,231 | — | 1,621 | 2,711 | 1,574 | 4,285 | 5,906 | |||||||||||||||||||||||
8 - Doubtful | — | — | — | — | — | — | — | — | |||||||||||||||||||||||
9 - Loss | — | — | — | — | — | — | — | — | |||||||||||||||||||||||
Total | $ | 510,153 | $ | 155,265 | $ | 35,523 | $ | 700,941 | $ | 80,027 | $ | 36,893 | $ | 116,920 | $ | 817,861 |
2018 | |||||||||||||||||||||||||||||||
Commercial | Agricultural | ||||||||||||||||||||||||||||||
Real Estate | Other | Advances to Mortgage Brokers | Total | Real Estate | Other | Total | Total | ||||||||||||||||||||||||
Rating | |||||||||||||||||||||||||||||||
1 - Excellent | $ | 21 | $ | 31 | $ | — | $ | 52 | $ | 51 | $ | 28 | $ | 79 | $ | 131 | |||||||||||||||
2 - High quality | 4,564 | 13,473 | — | 18,037 | 2,729 | 613 | 3,342 | 21,379 | |||||||||||||||||||||||
3 - High satisfactory | 127,573 | 43,199 | 11,793 | 182,565 | 18,325 | 7,039 | 25,364 | 207,929 | |||||||||||||||||||||||
4 - Low satisfactory | 344,920 | 84,634 | — | 429,554 | 46,636 | 19,344 | 65,980 | 495,534 | |||||||||||||||||||||||
5 - Special mention | 12,847 | 5,287 | — | 18,134 | 10,520 | 5,624 | 16,144 | 34,278 | |||||||||||||||||||||||
6 - Substandard | 7,428 | 2,002 | — | 9,430 | 6,343 | 4,960 | 11,303 | 20,733 | |||||||||||||||||||||||
7 - Vulnerable | 334 | 1,423 | — | 1,757 | 2,716 | 2,233 | 4,949 | 6,706 | |||||||||||||||||||||||
8 - Doubtful | — | — | — | — | — | — | — | — | |||||||||||||||||||||||
9 - Loss | — | — | — | — | — | — | — | — | |||||||||||||||||||||||
Total | $ | 497,687 | $ | 150,049 | $ | 11,793 | $ | 659,529 | $ | 87,320 | $ | 39,841 | $ | 127,161 | $ | 786,690 |
• | High liquidity, strong cash flow, low leverage. |
• | Unquestioned ability to meet all obligations when due. |
• | Experienced management, with management succession in place. |
• | Secured by cash. |
• | Favorable liquidity and leverage ratios. |
• | Ability to meet all obligations when due. |
• | Management with successful track record. |
• | Steady and satisfactory earnings history. |
• | If loan is secured, collateral is of high quality and readily marketable. |
• | Access to alternative financing. |
• | Well defined primary and secondary source of repayment. |
• | If supported by guaranty, the financial strength and liquidity of the guarantor(s) are clearly evident. |
• | Working capital adequate to support operations. |
• | Cash flow sufficient to pay debts as scheduled. |
• | Management experience and depth appear favorable. |
• | Loan performing according to terms. |
• | If loan is secured, collateral is acceptable and loan is fully protected. |
• | Would include most start-up businesses. |
• | Occasional instances of trade slowness or repayment delinquency – may have been 10-30 days slow within the past year. |
• | Management’s abilities are apparent yet unproven. |
• | Weakness in primary source of repayment with adequate secondary source of repayment. |
• | Loan structure generally in accordance with policy. |
• | If secured, loan collateral coverage is marginal. |
• | Downward trend in sales, profit levels, and margins. |
• | Impaired working capital position. |
• | Cash flow is strained in order to meet debt repayment. |
• | Loan delinquency (30-60 days) and overdrafts may occur. |
• | Shrinking equity cushion. |
• | Diminishing primary source of repayment and questionable secondary source. |
• | Management abilities are questionable. |
• | Weak industry conditions. |
• | Litigation pending against the borrower. |
• | Loan may need to be restructured to improve collateral position or reduce payments. |
• | Collateral or guaranty offers limited protection. |
• | Negative debt service coverage, however the credit is well collateralized and payments are current. |
• | Sustained losses have severely eroded the equity and cash flow. |
• | Deteriorating liquidity. |
• | Serious management problems or internal fraud. |
• | Original repayment terms liberalized. |
• | Likelihood of bankruptcy. |
• | Inability to access other funding sources. |
• | Reliance on secondary source of repayment. |
• | Litigation filed against borrower. |
• | Interest non-accrual may be warranted. |
• | Collateral provides little or no value. |
• | Requires excessive attention of the loan officer. |
• | Borrower is uncooperative with loan officer. |
• | Insufficient cash flow to service debt. |
• | Minimal or no payments being received. |
• | Limited options available to avoid the collection process. |
• | Transition status, expect action will take place to collect loan without immediate progress being made. |
• | Normal operations are severely diminished or have ceased. |
• | Seriously impaired cash flow. |
• | Original repayment terms materially altered. |
• | Secondary source of repayment is inadequate. |
• | Survivability as a “going concern” is impossible. |
• | Collection process has begun. |
• | Bankruptcy petition has been filed. |
• | Judgments have been filed. |
• | Portion of the loan balance has been charged-off. |
• | Liquidation or reorganization under Bankruptcy, with poor prospects of collection. |
• | Fraudulently overstated assets and/or earnings. |
• | Collateral has marginal or no value. |
• | Debtor cannot be located. |
• | Over 120 days delinquent. |
2019 | |||||||||||||||||||||||||||
Accruing Interest and Past Due: | Total Past Due and Nonaccrual | ||||||||||||||||||||||||||
30-59 Days | 60-89 Days | 90 Days or More | Nonaccrual | Current | Total | ||||||||||||||||||||||
Commercial | |||||||||||||||||||||||||||
Commercial real estate | $ | 139 | $ | 30 | $ | — | $ | 390 | $ | 559 | $ | 509,594 | $ | 510,153 | |||||||||||||
Commercial other | 531 | 156 | — | 1,231 | 1,918 | 153,347 | 155,265 | ||||||||||||||||||||
Advances to mortgage brokers | — | — | — | — | — | 35,523 | 35,523 | ||||||||||||||||||||
Total commercial | 670 | 186 | — | 1,621 | 2,477 | 698,464 | 700,941 | ||||||||||||||||||||
Agricultural | |||||||||||||||||||||||||||
Agricultural real estate | — | — | — | 2,711 | 2,711 | 77,316 | 80,027 | ||||||||||||||||||||
Agricultural other | — | — | — | 1,574 | 1,574 | 35,319 | 36,893 | ||||||||||||||||||||
Total agricultural | — | — | — | 4,285 | 4,285 | 112,635 | 116,920 | ||||||||||||||||||||
Residential real estate | |||||||||||||||||||||||||||
Senior liens | 3,463 | 258 | — | 557 | 4,278 | 253,894 | 258,172 | ||||||||||||||||||||
Junior liens | 65 | — | — | — | 65 | 5,766 | 5,831 | ||||||||||||||||||||
Home equity lines of credit | 157 | — | — | 72 | 229 | 34,337 | 34,566 | ||||||||||||||||||||
Total residential real estate | 3,685 | 258 | — | 629 | 4,572 | 293,997 | 298,569 | ||||||||||||||||||||
Consumer | |||||||||||||||||||||||||||
Secured | 68 | — | — | — | 68 | 66,547 | 66,615 | ||||||||||||||||||||
Unsecured | 3 | — | — | — | 3 | 3,522 | 3,525 | ||||||||||||||||||||
Total consumer | 71 | — | — | — | 71 | 70,069 | 70,140 | ||||||||||||||||||||
Total | $ | 4,426 | $ | 444 | $ | — | $ | 6,535 | $ | 11,405 | $ | 1,175,165 | $ | 1,186,570 |
2018 | |||||||||||||||||||||||||||
Accruing Interest and Past Due: | Total Past Due and Nonaccrual | ||||||||||||||||||||||||||
30-59 Days | 60-89 Days | 90 Days or More | Nonaccrual | Current | Total | ||||||||||||||||||||||
Commercial | |||||||||||||||||||||||||||
Commercial real estate | $ | 60 | $ | — | $ | — | $ | 334 | $ | 394 | $ | 497,293 | $ | 497,687 | |||||||||||||
Commercial other | 277 | 628 | — | 1,423 | 2,328 | 147,721 | 150,049 | ||||||||||||||||||||
Advances to mortgage brokers | — | — | — | — | — | 11,793 | 11,793 | ||||||||||||||||||||
Total commercial | 337 | 628 | — | 1,757 | 2,722 | 656,807 | 659,529 | ||||||||||||||||||||
Agricultural | |||||||||||||||||||||||||||
Agricultural real estate | 428 | — | — | 2,716 | 3,144 | 84,176 | 87,320 | ||||||||||||||||||||
Agricultural other | — | — | — | 2,233 | 2,233 | 37,608 | 39,841 | ||||||||||||||||||||
Total agricultural | 428 | — | — | 4,949 | 5,377 | 121,784 | 127,161 | ||||||||||||||||||||
Residential real estate | |||||||||||||||||||||||||||
Senior liens | 2,254 | 203 | 113 | 554 | 3,124 | 233,438 | 236,562 | ||||||||||||||||||||
Junior liens | 2 | 6 | — | — | 8 | 6,001 | 6,009 | ||||||||||||||||||||
Home equity lines of credit | 76 | — | — | — | 76 | 32,696 | 32,772 | ||||||||||||||||||||
Total residential real estate | 2,332 | 209 | 113 | 554 | 3,208 | 272,135 | 275,343 | ||||||||||||||||||||
Consumer | |||||||||||||||||||||||||||
Secured | 95 | — | — | — | 95 | 62,721 | 62,816 | ||||||||||||||||||||
Unsecured | 10 | — | — | — | 10 | 3,848 | 3,858 | ||||||||||||||||||||
Total consumer | 105 | — | — | — | 105 | 66,569 | 66,674 | ||||||||||||||||||||
Total | $ | 3,202 | $ | 837 | $ | 113 | $ | 7,260 | $ | 11,412 | $ | 1,117,295 | $ | 1,128,707 |
1. | There has been a charge-off of its principal balance (in whole or in part); |
2. | The loan has been classified as a TDR; or |
3. | The loan is in nonaccrual status. |
2019 | |||||||||||||||||||
Recorded Balance | Unpaid Principal Balance | Valuation Allowance | Average Recorded Balance | Interest Income Recognized | |||||||||||||||
Impaired loans with a valuation allowance | |||||||||||||||||||
Commercial real estate | $ | 517 | $ | 635 | $ | 15 | $ | 2,044 | $ | 61 | |||||||||
Commercial other | — | — | — | 10 | — | ||||||||||||||
Agricultural real estate | 1,509 | 1,509 | 12 | 1,091 | 100 | ||||||||||||||
Agricultural other | 1,355 | 1,355 | 14 | 832 | 55 | ||||||||||||||
Residential real estate senior liens | 5,401 | 5,830 | 1,073 | 6,210 | 114 | ||||||||||||||
Residential real estate junior liens | — | — | — | 11 | — | ||||||||||||||
Total impaired loans with a valuation allowance | 8,782 | 9,329 | 1,114 | 10,198 | 330 | ||||||||||||||
Impaired loans without a valuation allowance | |||||||||||||||||||
Commercial real estate | 4,961 | 5,224 | 4,247 | 91 | |||||||||||||||
Commercial other | 2,387 | 2,387 | 2,697 | 46 | |||||||||||||||
Agricultural real estate | 8,372 | 8,422 | 7,404 | 171 | |||||||||||||||
Agricultural other | 3,604 | 3,604 | 4,623 | 258 | |||||||||||||||
Home equity lines of credit | 85 | 385 | 58 | 6 | |||||||||||||||
Consumer secured | — | — | 5 | — | |||||||||||||||
Total impaired loans without a valuation allowance | 19,409 | 20,022 | 19,034 | 572 | |||||||||||||||
Impaired loans | |||||||||||||||||||
Commercial | 7,865 | 8,246 | 15 | 8,998 | 198 | ||||||||||||||
Agricultural | 14,840 | 14,890 | 26 | 13,950 | 584 | ||||||||||||||
Residential real estate | 5,486 | 6,215 | 1,073 | 6,279 | 120 | ||||||||||||||
Consumer | — | — | — | 5 | — | ||||||||||||||
Total impaired loans | $ | 28,191 | $ | 29,351 | $ | 1,114 | $ | 29,232 | $ | 902 |
2018 | |||||||||||||||||||
Recorded Balance | Unpaid Principal Balance | Valuation Allowance | Average Recorded Balance | Interest Income Recognized | |||||||||||||||
Impaired loans with a valuation allowance | |||||||||||||||||||
Commercial real estate | $ | 3,969 | $ | 4,211 | $ | 437 | $ | 4,589 | $ | 129 | |||||||||
Commercial other | 12 | 12 | 6 | 1,040 | 55 | ||||||||||||||
Agricultural real estate | 392 | 392 | 112 | 606 | 50 | ||||||||||||||
Agricultural other | 44 | 44 | 20 | 168 | 46 | ||||||||||||||
Residential real estate senior liens | 6,834 | 7,289 | 1,361 | 7,545 | 126 | ||||||||||||||
Residential real estate junior liens | 12 | 12 | 2 | 25 | — | ||||||||||||||
Total impaired loans with a valuation allowance | 11,263 | 11,960 | 1,938 | 13,973 | 406 | ||||||||||||||
Impaired loans without a valuation allowance | |||||||||||||||||||
Commercial real estate | 2,794 | 2,947 | 2,728 | 74 | |||||||||||||||
Commercial other | 3,124 | 3,231 | 1,533 | 43 | |||||||||||||||
Agricultural real estate | 7,618 | 7,618 | 7,559 | 585 | |||||||||||||||
Agricultural other | 6,244 | 6,287 | 4,636 | 279 | |||||||||||||||
Home equity lines of credit | 47 | 347 | 64 | 5 | |||||||||||||||
Consumer secured | 9 | 9 | 12 | — | |||||||||||||||
Total impaired loans without a valuation allowance | 19,836 | 20,439 | 16,532 | 986 | |||||||||||||||
Impaired loans | |||||||||||||||||||
Commercial | 9,899 | 10,401 | 443 | 9,890 | 301 | ||||||||||||||
Agricultural | 14,298 | 14,341 | 132 | 12,969 | 960 | ||||||||||||||
Residential real estate | 6,893 | 7,648 | 1,363 | 7,634 | 131 | ||||||||||||||
Consumer | 9 | 9 | — | 12 | — | ||||||||||||||
Total impaired loans | $ | 31,099 | $ | 32,399 | $ | 1,938 | $ | 30,505 | $ | 1,392 |
1. | Agreeing to interest rates below prevailing market rates for debt with similar risk characteristics. |
2. | Extending the amortization period beyond typical lending guidelines for loans with similar risk characteristics. |
3. | Agreeing to an interest only payment structure and delaying principal payments. |
4. | Forgiving principal. |
5. | Forgiving accrued interest. |
1. | The borrower is currently in default on any of their debt. |
2. | The borrower would likely default on any of their debt if the concession is not granted. |
3. | The borrower’s cash flow is insufficient to service all of their debt if the concession is not granted. |
4. | The borrower has declared, or is in the process of declaring, bankruptcy. |
5. | The borrower is unlikely to continue as a going concern (if the entity is a business). |
2019 | 2018 | ||||||||||||||||||||
Number of Loans | Pre-Modification Recorded Investment | Post-Modification Recorded Investment | Number of Loans | Pre-Modification Recorded Investment | Post-Modification Recorded Investment | ||||||||||||||||
Commercial other | 3 | $ | 1,188 | $ | 1,188 | 4 | $ | 1,360 | $ | 1,360 | |||||||||||
Agricultural other | 7 | 3,286 | 3,286 | 31 | 6,318 | 6,295 | |||||||||||||||
Residential real estate | 1 | 17 | 17 | 10 | 701 | 701 | |||||||||||||||
Total | 11 | $ | 4,491 | $ | 4,491 | 45 | $ | 8,379 | $ | 8,356 |
2019 | 2018 | ||||||||||||||||||||||||||
Below Market Interest Rate | Below Market Interest Rate and Extension of Amortization Period | Below Market Interest Rate | Below Market Interest Rate and Extension of Amortization Period | ||||||||||||||||||||||||
Number of Loans | Pre-Modification Recorded Investment | Number of Loans | Pre-Modification Recorded Investment | Number of Loans | Pre-Modification Recorded Investment | Number of Loans | Pre-Modification Recorded Investment | ||||||||||||||||||||
Commercial other | — | $ | — | 3 | $ | 1,188 | 1 | $ | 174 | 3 | $ | 1,186 | |||||||||||||||
Agricultural other | 2 | 1,189 | 5 | 2,097 | 18 | 2,625 | 13 | 3,693 | |||||||||||||||||||
Residential real estate | — | — | 1 | 17 | 3 | 203 | 7 | 498 | |||||||||||||||||||
Total | 2 | $ | 1,189 | 9 | $ | 3,302 | 22 | $ | 3,002 | 23 | $ | 5,377 |
2019 | 2018 | ||||||
TDRs | $ | 24,737 | $ | 26,951 |
2019 | 2018 | ||||||
Land | $ | 6,336 | $ | 6,336 | |||
Buildings and improvements | 30,257 | 30,100 | |||||
Furniture and equipment | 35,121 | 34,825 | |||||
Total | 71,714 | 71,261 | |||||
Less: accumulated depreciation | 45,472 | 43,446 | |||||
Premises and equipment, net | $ | 26,242 | $ | 27,815 |
December 31 | |||||||
2019 | 2018 | ||||||
ASSETS | |||||||
Cash and cash equivalents | $ | 2,054 | $ | 1,844 | |||
Escrow funds | 1,659 | 3,337 | |||||
Accounts receivable | 1,823 | 1,629 | |||||
Premises and equipment | 562 | 466 | |||||
Goodwill | 2,010 | 3,063 | |||||
Title plants | 132 | 6,212 | |||||
Other assets | 878 | 1,010 | |||||
TOTAL ASSETS | $ | 9,118 | $ | 17,561 | |||
LIABILITIES AND SHAREHOLDERS’ EQUITY | |||||||
Escrow funds payable | $ | 1,659 | $ | 3,337 | |||
Notes payable | 416 | 465 | |||||
Other liabilities | 200 | 211 | |||||
Members' equity | 6,843 | 13,548 | |||||
TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY | $ | 9,118 | $ | 17,561 |
Year Ended December 31 | |||||||||||
2019 | 2018 | 2017 | |||||||||
Income | |||||||||||
Title premiums and other fees | $ | 3,645 | $ | 3,013 | $ | 3,533 | |||||
Property reports | 2,046 | 1,822 | 1,425 | ||||||||
Appraisals | 9,370 | 9,526 | 9,121 | ||||||||
Other income | 2,898 | 2,871 | 2,318 | ||||||||
Total income | 17,959 | 17,232 | 16,397 | ||||||||
Expenses | |||||||||||
Cost of services | |||||||||||
Property reports | $ | 1,101 | $ | 1,029 | $ | 821 | |||||
Appraisals | 7,372 | 7,466 | 7,152 | ||||||||
Other | 2,607 | 2,307 | 2,029 | ||||||||
Compensation and benefits | 4,203 | 4,138 | 4,391 | ||||||||
Occupancy and equipment | 836 | 804 | 739 | ||||||||
Impairment of goodwill and title plants | 7,133 | — | — | ||||||||
Other | 988 | 1,024 | 960 | ||||||||
Total expenses | 24,240 | 16,768 | 16,092 | ||||||||
Net (loss) income | $ | (6,281 | ) | $ | 464 | $ | 305 |
2019 | |||||||||||
Gross Intangible Assets | Accumulated Amortization | Net Intangible Assets | |||||||||
Core deposit premium resulting from acquisitions | $ | 5,579 | $ | 5,482 | $ | 97 |
2018 | |||||||||||
Gross Intangible Assets | Accumulated Amortization | Net Intangible Assets | |||||||||
Core deposit premium resulting from acquisitions | $ | 5,579 | $ | 5,410 | $ | 169 |
Estimated Amortization Expense | |||
2020 | $ | 48 | |
2021 | 29 | ||
2022 | 15 | ||
2023 | 2 | ||
2024 | 2 | ||
Thereafter | 1 | ||
Total | $ | 97 |
Scheduled Maturities of Time Deposits | |||
2020 | $ | 173,677 | |
2021 | 114,036 | ||
2022 | 68,950 | ||
2023 | 30,805 | ||
2024 | 18,314 | ||
Thereafter | 1,837 | ||
Total | $ | 407,619 |
2019 | 2018 | ||||||||||||
Amount | Rate | Amount | Rate | ||||||||||
FHLB advances | $ | 245,000 | 2.32 | % | $ | 300,000 | 2.20 | % | |||||
Securities sold under agreements to repurchase without stated maturity dates | 30,999 | 0.09 | % | 40,299 | 0.11 | % | |||||||
Total | $ | 275,999 | 2.07 | % | $ | 340,299 | 1.95 | % |
2019 | 2018 | ||||||||||||
Amount | Rate | Amount | Rate | ||||||||||
Fixed rate due 2019 | $ | — | — | % | $ | 100,000 | 1.94 | % | |||||
Fixed rate due 2020 | 55,000 | 2.18 | % | 55,000 | 2.18 | % | |||||||
Fixed rate due 2021 | 50,000 | 1.91 | % | 50,000 | 1.91 | % | |||||||
Variable rate due 2021 (1) | 10,000 | 2.20 | % | 10,000 | 2.93 | % | |||||||
Fixed rate due 2022 | 20,000 | 1.97 | % | 20,000 | 1.97 | % | |||||||
Fixed rate due 2023 | 45,000 | 2.97 | % | 35,000 | 3.17 | % | |||||||
Fixed rate due 2024 | 55,000 | 2.68 | % | 20,000 | 2.96 | % | |||||||
Fixed rate due 2026 | 10,000 | 1.17 | % | 10,000 | 1.17 | % | |||||||
Total | $ | 245,000 | 2.32 | % | $ | 300,000 | 2.20 | % |
2019 | 2018 | ||||||||||||||||||||
Maximum Month End Balance | Average Balance | Weighted Average Interest Rate During the Period | Maximum Month End Balance | Average Balance | Weighted Average Interest Rate During the Period | ||||||||||||||||
Securities sold under agreements to repurchase without stated maturity dates | $ | 37,441 | $ | 31,406 | 0.10 | % | $ | 63,133 | $ | 38,036 | 0.10 | % | |||||||||
Federal funds purchased | 7,070 | 687 | 2.60 | % | 16,200 | 3,741 | 1.90 | % |
2019 | 2018 | ||||||
Pledged to secure borrowed funds | $ | 368,310 | $ | 431,430 | |||
Pledged to secure repurchase agreements | 31,020 | 40,316 | |||||
Pledged for public deposits and for other purposes necessary or required by law | 59,537 | 58,107 | |||||
Total | $ | 458,867 | $ | 529,853 |
2019 | 2018 | ||||||
States and political subdivisions | $ | 31,020 | $ | 23,268 | |||
Mortgage-backed securities | — | 10,736 | |||||
Collateralized mortgage obligations | — | 6,312 | |||||
Total | $ | 31,020 | $ | 40,316 |
2019 | ||||||||||||||||
Pay Rate | Receive Rate | Remaining Life (Years) | Notional Amount | Balance Sheet Location | Fair Value | |||||||||||
Derivatives designated as hedging instruments | ||||||||||||||||
Cash Flow Hedges: | ||||||||||||||||
Interest rate swaps | 1.56 | % | 3-Month LIBOR | 1.3 | $ | 10,000 | Other Assets | $ | 67 |
2018 | ||||||||||||||||
Pay Rate | Receive Rate | Remaining Life (Years) | Notional Amount | Balance Sheet Location | Fair Value | |||||||||||
Derivatives designated as hedging instruments | ||||||||||||||||
Cash Flow Hedges: | ||||||||||||||||
Interest rate swaps | 1.56 | % | 3-Month LIBOR | 2.3 | $ | 10,000 | Other Assets | $ | 323 |
2019 | 2018 | ||||||
Unfunded commitments under lines of credit | $ | 202,871 | $ | 199,652 | |||
Commercial and standby letters of credit | 4,575 | 1,723 | |||||
Commitments to grant loans | 20,778 | 13,225 | |||||
Total | $ | 228,224 | $ | 214,600 |
Actual | Minimum Capital Requirement | Minimum To Be Well Capitalized Under Prompt Corrective Action Provisions | ||||||||||||||||||
Amount | Ratio | Amount | Ratio | Amount | Ratio | |||||||||||||||
December 31, 2019 | ||||||||||||||||||||
Common equity Tier 1 capital to risk weighted assets | ||||||||||||||||||||
Isabella Bank | $ | 150,093 | 11.86 | % | $ | 88,587 | 7.000 | % | $ | 82,260 | 6.50 | % | ||||||||
Consolidated | 159,794 | 12.56 | % | 89,090 | 7.000 | % | N/A | N/A | ||||||||||||
Tier 1 capital to risk weighted assets | ||||||||||||||||||||
Isabella Bank | 150,093 | 11.86 | % | 107,570 | 8.500 | % | 101,243 | 8.00 | % | |||||||||||
Consolidated | 159,794 | 12.56 | % | 108,180 | 8.500 | % | N/A | N/A | ||||||||||||
Total capital to risk weighted assets | ||||||||||||||||||||
Isabella Bank | 158,032 | 12.49 | % | 132,881 | 10.500 | % | 126,554 | 10.00 | % | |||||||||||
Consolidated | 167,733 | 13.18 | % | 133,635 | 10.500 | % | N/A | N/A | ||||||||||||
Tier 1 capital to average assets | ||||||||||||||||||||
Isabella Bank | 150,093 | 8.54 | % | 70,288 | 4.00 | % | 87,861 | 5.00 | % | |||||||||||
Consolidated | 159,794 | 9.01 | % | 70,945 | 4.00 | % | N/A | N/A |
Actual | Minimum Capital Requirement | Minimum To Be Well Capitalized Under Prompt Corrective Action Provisions | ||||||||||||||||||
Amount | Ratio | Amount | Ratio | Amount | Ratio | |||||||||||||||
December 31, 2018 | ||||||||||||||||||||
Common equity Tier 1 capital to risk weighted assets | ||||||||||||||||||||
Isabella Bank | $ | 143,429 | 11.75 | % | $ | 77,826 | 6.375 | % | $ | 79,352 | 6.50 | % | ||||||||
Consolidated | 154,705 | 12.58 | % | 78,431 | 6.375 | % | N/A | N/A | ||||||||||||
Tier 1 capital to risk weighted assets | ||||||||||||||||||||
Isabella Bank | 143,429 | 11.75 | % | 96,138 | 7.875 | % | 97,664 | 8.00 | % | |||||||||||
Consolidated | 154,705 | 12.58 | % | 96,885 | 7.875 | % | N/A | N/A | ||||||||||||
Total capital to risk weighted assets | ||||||||||||||||||||
Isabella Bank | 151,804 | 12.43 | % | 120,554 | 9.875 | % | 122,080 | 10.00 | % | |||||||||||
Consolidated | 163,080 | 13.26 | % | 121,491 | 9.875 | % | N/A | N/A | ||||||||||||
Tier 1 capital to average assets | ||||||||||||||||||||
Isabella Bank | 143,429 | 8.07 | % | 71,085 | 4.000 | % | 88,856 | 5.00 | % | |||||||||||
Consolidated | 154,705 | 8.72 | % | 70,996 | 4.000 | % | N/A | N/A |
2019 | 2018 | 2017 | |||||||||
Average number of common shares outstanding for basic calculation | 7,909,794 | 7,872,077 | 7,841,451 | ||||||||
Average potential effect of common shares in the Directors Plan (1) | 185,248 | 200,771 | 192,286 | ||||||||
Average number of common shares outstanding used to calculate diluted earnings per common share | 8,095,042 | 8,072,848 | 8,033,737 | ||||||||
Net income | $ | 13,024 | $ | 14,021 | $ | 13,237 | |||||
Earnings per common share | |||||||||||
Basic | $ | 1.65 | $ | 1.78 | $ | 1.69 | |||||
Diluted | $ | 1.61 | $ | 1.74 | $ | 1.65 |
2019 | 2018 | ||||||
Change in benefit obligation | |||||||
Benefit obligation, January 1 | $ | 9,412 | $ | 11,381 | |||
Interest cost | 378 | 388 | |||||
Actuarial loss (gain) | 1,216 | (1,194 | ) | ||||
Benefits paid, including plan expenses | (797 | ) | (1,163 | ) | |||
Benefit obligation, December 31 | 10,209 | 9,412 | |||||
Change in plan assets | |||||||
Fair value of plan assets, January 1 | 7,765 | 9,469 | |||||
Investment return (loss) | 1,384 | (541 | ) | ||||
Contributions | — | — | |||||
Benefits paid, including plan expenses | (797 | ) | (1,163 | ) | |||
Fair value of plan assets, December 31 | 8,352 | 7,765 | |||||
Deficiency in funded status at December 31, included on the consolidated balance sheets in accrued interest payable and other liabilities | $ | (1,857 | ) | $ | (1,647 | ) |
2019 | 2018 | ||||||
Change in accrued pension benefit costs | |||||||
Accrued benefit cost at January 1 | $ | (1,647 | ) | $ | (1,912 | ) | |
Contributions | — | — | |||||
Net periodic benefit cost | (268 | ) | (345 | ) | |||
Net change in unrecognized actuarial loss and prior service cost | 58 | 610 | |||||
Accrued pension benefit cost at December 31 | $ | (1,857 | ) | $ | (1,647 | ) |
2019 | 2018 | 2017 | |||||||||
Interest cost on benefit obligation | $ | 378 | $ | 388 | $ | 444 | |||||
Expected return on plan assets | (452 | ) | (554 | ) | (546 | ) | |||||
Amortization of unrecognized actuarial net loss | 214 | 242 | 279 | ||||||||
Settlement loss | 128 | 269 | 235 | ||||||||
Net periodic benefit cost | $ | 268 | $ | 345 | $ | 412 |
2019 | 2018 | 2017 | ||||||
Discount rate | 3.07 | % | 4.11 | % | 3.48 | % | ||
Expected long-term rate of return on plan assets | 6.00 | % | 6.00 | % | 6.00 | % |
2019 | 2018 | 2017 | ||||||
Discount rate | 4.11 | % | 3.48 | % | 3.96 | % | ||
Expected long-term rate of return on plan assets | 6.00 | % | 6.00 | % | 6.00 | % |
• | Historical long-term rates of return for broad asset classes. |
• | Actual past rates of return achieved by the plan. |
• | The general mix of assets held by the plan. |
• | The stated investment policy for the plan. |
2019 | 2018 | ||||||||||||||
Total | (Level 2) | Total | (Level 2) | ||||||||||||
Short-term investments | $ | 218 | $ | 218 | $ | 98 | $ | 98 | |||||||
Common collective trusts | |||||||||||||||
Fixed income | 3,823 | 3,823 | 2,924 | 2,924 | |||||||||||
Equity investments | 4,311 | 4,311 | 4,743 | 4,743 | |||||||||||
Total | $ | 8,352 | $ | 8,352 | $ | 7,765 | $ | 7,765 |
• | Short-term investments: Shares of a money market portfolio valued at amortized cost, which approximates fair value. |
• | Common collective trusts: These investments are public investment securities valued using the NAV provided by a third party investment advisor. The NAV is quoted on a private market that is not active; however, the unit price is based on underlying investments which are traded on an active market. |
December 31, 2020 | |||
Interest cost on projected benefit obligation | $ | 306 | |
Expected return on plan assets | (488 | ) | |
Amortization of unrecognized actuarial net loss | 205 | ||
Net periodic benefit cost | $ | 23 |
Estimated Benefit Payments | ||||
2020 | $ | 466 | ||
2021 | 459 | |||
2022 | 462 | |||
2023 | 460 | |||
2024 | 454 | |||
2025 - 2029 | 2,465 |
2019 | 2018 | ||||||||||||
Eligible Shares | Market Value | Eligible Shares | Market Value | ||||||||||
Unissued | 177,935 | $ | 4,326 | 203,498 | $ | 4,591 | |||||||
Shares held in Rabbi Trust | 27,069 | 658 | 16,673 | 376 | |||||||||
Total | 205,004 | $ | 4,984 | 220,171 | $ | 4,967 |
2019 | 2018 | 2017 | |||||||||
Debit card income | $ | 2,667 | $ | 2,487 | $ | 2,435 | |||||
Trust service fees | 2,269 | 2,134 | 1,928 | ||||||||
Investment advisory fees | 523 | 702 | 679 | ||||||||
Service charges and fees related to deposit accounts | 317 | 332 | 343 |
2019 | 2018 | 2017 | |||||||||
Audit, consulting, and legal fees | $ | 1,884 | $ | 2,222 | $ | 2,017 | |||||
ATM and debit card fees | 1,210 | 1,036 | 1,181 | ||||||||
Donations and community relations | 1,026 | 710 | 657 | ||||||||
Loan underwriting fees | 905 | 1,016 | 556 | ||||||||
Director fees | 788 | 858 | 856 | ||||||||
Marketing costs | 762 | 596 | 568 | ||||||||
FDIC insurance premiums | 211 | 726 | 642 | ||||||||
All other | 3,775 | 3,761 | 3,711 | ||||||||
Total other | $ | 10,561 | $ | 10,925 | $ | 10,188 |
2019 | 2018 | 2017 | |||||||||
Currently payable | $ | 972 | $ | 1,088 | $ | 180 | |||||
Deferred expense | 408 | 275 | 2,836 | ||||||||
Income tax expense | $ | 1,380 | $ | 1,363 | $ | 3,016 |
2019 | 2018 | 2017 | |||||||||
Income taxes at statutory rate | $ | 3,025 | $ | 3,231 | $ | 5,526 | |||||
Effect of nontaxable income | |||||||||||
Interest income on tax exempt municipal securities | (990 | ) | (1,106 | ) | (1,889 | ) | |||||
Earnings on corporate owned life insurance policies | (160 | ) | (148 | ) | (247 | ) | |||||
Deferred tax adjustment resulting from the statutory rate reduction pursuant to the Tax Act | — | — | 319 | ||||||||
Other | 283 | 231 | 34 | ||||||||
Total effect of nontaxable income | (867 | ) | (1,023 | ) | (1,783 | ) | |||||
Effect of nondeductible expenses | 108 | 113 | 149 | ||||||||
Effect of tax credits | (984 | ) | (958 | ) | (876 | ) | |||||
Unrecognized deferred tax benefit on joint venture investment | 98 | — | — | ||||||||
Federal income tax expense | $ | 1,380 | $ | 1,363 | $ | 3,016 |
2019 | 2018 | ||||||
Deferred tax assets | |||||||
Allowance for loan losses | $ | 1,255 | $ | 1,304 | |||
Deferred directors’ fees | 1,615 | 1,667 | |||||
Employee benefit plans | 77 | 81 | |||||
Core deposit premium and acquisition expenses | 742 | 752 | |||||
Net unrecognized actuarial losses on pension plan | 717 | 729 | |||||
Net unrealized losses on available-for-sale securities | — | 1,211 | |||||
Life insurance death benefit payable | 497 | 497 | |||||
Alternative minimum tax | — | 710 | |||||
Other | 771 | 716 | |||||
Total deferred tax assets | 5,674 | 7,667 | |||||
Deferred tax liabilities | |||||||
Prepaid pension cost | 327 | 383 | |||||
Premises and equipment | 1,859 | 1,548 | |||||
Accretion on securities | 37 | 41 | |||||
Core deposit premium and acquisition expenses | 872 | 946 | |||||
Net unrealized gains on available-for-sale securities | 1,247 | — | |||||
Net unrealized gains on derivative instruments | 14 | 68 | |||||
Other | 1,157 | 1,696 | |||||
Total deferred tax liabilities | 5,513 | 4,682 | |||||
Net deferred tax assets (liabilities) | $ | 161 | $ | 2,985 |
Unrealized Gains (Losses) on AFS Securities | Unrealized Gains (Losses) on Derivative Instruments | Change in Unrecognized Pension Cost on Defined Benefit Pension Plan | Total | ||||||||||||
Balance, January 1, 2017 | $ | 30 | $ | 164 | $ | (2,972 | ) | $ | (2,778 | ) | |||||
OCI before reclassifications | 289 | 43 | 11 | 343 | |||||||||||
Amounts reclassified from AOCI | (142 | ) | — | 412 | 270 | ||||||||||
Subtotal | 147 | 43 | 423 | 613 | |||||||||||
Tax effect | 89 | (15 | ) | (144 | ) | (70 | ) | ||||||||
OCI, net of tax | 236 | 28 | 279 | 543 | |||||||||||
One-time non-cash tax rate adjustment due to the Tax Act | 125 | 38 | (530 | ) | (367 | ) | |||||||||
Balance, December 31, 2017 | 391 | 230 | (3,223 | ) | (2,602 | ) | |||||||||
OCI before reclassifications | (7,229 | ) | 33 | 265 | (6,931 | ) | |||||||||
Amounts reclassified from AOCI | — | — | 345 | 345 | |||||||||||
Subtotal | (7,229 | ) | 33 | 610 | (6,586 | ) | |||||||||
Tax effect | 1,415 | (7 | ) | (128 | ) | 1,280 | |||||||||
OCI, net of tax | (5,814 | ) | 26 | 482 | (5,306 | ) | |||||||||
Adoption of ASU 2016-01 | 223 | — | — | 223 | |||||||||||
Balance, December 31, 2018 | (5,200 | ) | 256 | (2,741 | ) | (7,685 | ) | ||||||||
OCI before reclassifications | 12,276 | (256 | ) | (210 | ) | 11,810 | |||||||||
Amounts reclassified from AOCI | (6 | ) | — | 268 | 262 | ||||||||||
Subtotal | 12,270 | (256 | ) | 58 | 12,072 | ||||||||||
Tax effect | (2,458 | ) | 54 | (12 | ) | (2,416 | ) | ||||||||
OCI, net of tax | 9,812 | (202 | ) | 46 | 9,656 | ||||||||||
Balance, December 31, 2019 | $ | 4,612 | $ | 54 | $ | (2,695 | ) | $ | 1,971 |
2019 | 2018 | 2017 | |||||||||||||||||||||||||||||||||
Auction Rate Money Market Preferred Stocks | All Other AFS Securities | Total | Auction Rate Money Market Preferred Stocks | All Other AFS Securities | Total | Auction Rate Money Market Preferred and Preferred Stocks | All Other AFS securities | Total | |||||||||||||||||||||||||||
Unrealized gains (losses) arising during the period | $ | 565 | $ | 11,711 | $ | 12,276 | $ | (495 | ) | $ | (6,734 | ) | $ | (7,229 | ) | $ | 407 | $ | (118 | ) | $ | 289 | |||||||||||||
Reclassification adjustment for net (gains) losses included in net income | — | (6 | ) | (6 | ) | — | — | — | — | (142 | ) | (142 | ) | ||||||||||||||||||||||
Net unrealized gains (losses) | 565 | 11,705 | 12,270 | (495 | ) | (6,734 | ) | (7,229 | ) | 407 | (260 | ) | 147 | ||||||||||||||||||||||
Tax effect (1) | — | (2,458 | ) | (2,458 | ) | — | 1,415 | 1,415 | — | 89 | 89 | ||||||||||||||||||||||||
Unrealized gains (losses), net of tax | $ | 565 | $ | 9,247 | $ | 9,812 | $ | (495 | ) | $ | (5,319 | ) | $ | (5,814 | ) | $ | 407 | $ | (171 | ) | $ | 236 |
Details about AOCI components | Amount Reclassified from AOCI | Affected Line Item in the Consolidated Statements of Income | |||||||||||
2019 | 2018 | 2017 | |||||||||||
Unrealized gains (losses) on AFS securities | |||||||||||||
$ | 6 | $ | — | $ | 142 | Net gains on sale of AFS securities | |||||||
1 | — | 48 | Federal income tax expense (1) | ||||||||||
$ | 5 | $ | — | $ | 94 | Net income | |||||||
Change in unrecognized pension cost on defined benefit pension plan | |||||||||||||
$ | 268 | $ | 345 | $ | 412 | Other noninterest expenses | |||||||
56 | 72 | 140 | Federal income tax expense (1) | ||||||||||
$ | 212 | $ | 273 | $ | 272 | Net income |
Level 1: | Valuation is based upon quoted prices for identical instruments traded in active markets. |
Level 2: | Valuation is based upon quoted prices for similar instruments in active markets, quoted prices for identical or similar instruments in markets that are not active and model based valuation techniques for which all significant assumptions are observable in the market. |
Level 3: | Valuation is generated from model based techniques that use at least one significant assumption not observable in the market. These unobservable assumptions reflect estimates of assumptions that market participants would use in pricing the asset or liability. |
December 31, 2019 | ||||
Valuation Technique | Fair Value | Unobservable Input | Actual Range | |
Discount applied to collateral: | ||||
Real Estate | 20% - 30% | |||
Equipment | 20% - 40% | |||
Discounted value | $19,135 | Cash crop inventory | 40% | |
Livestock | 30% | |||
Other inventory | 50% | |||
Accounts receivable | 25% - 50% |
December 31, 2018 | ||||
Valuation Technique | Fair Value | Unobservable Input | Actual Range | |
Discount applied to collateral: | ||||
Real Estate | 20% - 30% | |||
Equipment | 20% - 40% | |||
Cash crop inventory | 30% - 40% | |||
Discounted value | $20,045 | Livestock | 30% | |
Other inventory | 45% - 50% | |||
Accounts receivable | 50% | |||
Liquor license | 75% | |||
Furniture, fixtures & equipment | 35% - 45% |
2019 | |||||||||||||||||||
Carrying Value | Estimated Fair Value | Level 1 | Level 2 | Level 3 | |||||||||||||||
ASSETS | |||||||||||||||||||
Cash and cash equivalents | $ | 60,572 | $ | 60,572 | $ | 60,572 | $ | — | $ | — | |||||||||
Mortgage loans AFS | 904 | 925 | — | 925 | — | ||||||||||||||
Gross loans | 1,186,570 | 1,170,370 | — | — | 1,170,370 | ||||||||||||||
Less allowance for loan and lease losses | 7,939 | 7,939 | — | — | 7,939 | ||||||||||||||
Net loans | 1,178,631 | 1,162,431 | — | — | 1,162,431 | ||||||||||||||
Accrued interest receivable | 6,501 | 6,501 | 6,501 | — | — | ||||||||||||||
Equity securities without readily determinable fair values (1) | 21,629 | N/A | — | — | — | ||||||||||||||
OMSR | 2,264 | 2,264 | — | 2,264 | — | ||||||||||||||
LIABILITIES | |||||||||||||||||||
Deposits without stated maturities | 906,232 | 906,232 | 906,232 | — | — | ||||||||||||||
Deposits with stated maturities | 407,619 | 409,600 | — | 409,600 | — | ||||||||||||||
Borrowed funds | 275,999 | 278,761 | — | 278,761 | — | ||||||||||||||
Accrued interest payable | 860 | 860 | 860 | — | — |
2018 | |||||||||||||||||||
Carrying Value | Estimated Fair Value | Level 1 | Level 2 | Level 3 | |||||||||||||||
ASSETS | |||||||||||||||||||
Cash and cash equivalents | $ | 73,471 | $ | 73,471 | $ | 73,471 | $ | — | $ | — | |||||||||
Mortgage loans AFS | 358 | 365 | — | 365 | — | ||||||||||||||
Gross loans | 1,128,707 | 1,099,645 | — | — | 1,099,645 | ||||||||||||||
Less allowance for loan and lease losses | 8,375 | 8,375 | — | — | 8,375 | ||||||||||||||
Net loans | 1,120,332 | 1,091,270 | — | — | 1,091,270 | ||||||||||||||
Accrued interest receivable | 6,928 | 6,928 | 6,928 | — | — | ||||||||||||||
Equity securities without readily determinable fair values (1) | 24,948 | N/A | — | — | — | ||||||||||||||
OMSR | 2,434 | 2,602 | — | 2,602 | — | ||||||||||||||
LIABILITIES | |||||||||||||||||||
Deposits without stated maturities | 859,073 | 859,073 | 859,073 | — | — | ||||||||||||||
Deposits with stated maturities | 433,620 | 425,993 | — | 425,993 | — | ||||||||||||||
Borrowed funds | 340,299 | 333,829 | — | 333,829 | — | ||||||||||||||
Accrued interest payable | 826 | 826 | 826 | — | — |
2019 | 2018 | ||||||||||||||||||||||||||||||
Total | Level 1 | Level 2 | Level 3 | Total | Level 1 | Level 2 | Level 3 | ||||||||||||||||||||||||
Recurring items | |||||||||||||||||||||||||||||||
AFS securities | |||||||||||||||||||||||||||||||
Government-sponsored enterprises | $ | — | $ | — | $ | — | $ | — | $ | 170 | $ | — | $ | 170 | $ | — | |||||||||||||||
States and political subdivisions | 169,752 | — | 169,752 | — | 190,866 | — | 190,866 | — | |||||||||||||||||||||||
Auction rate money market preferred | 3,119 | — | 3,119 | — | 2,554 | — | 2,554 | — | |||||||||||||||||||||||
Mortgage-backed securities | 140,204 | — | 140,204 | — | 184,484 | — | 184,484 | — | |||||||||||||||||||||||
Collateralized mortgage obligations | 116,764 | — | 116,764 | — | 116,760 | — | 116,760 | — | |||||||||||||||||||||||
Total AFS securities | 429,839 | — | 429,839 | — | 494,834 | — | 494,834 | — | |||||||||||||||||||||||
Derivative instruments | 67 | — | 67 | — | 323 | — | 323 | — | |||||||||||||||||||||||
Nonrecurring items | |||||||||||||||||||||||||||||||
Impaired loans (net of the ALLL) | 19,135 | — | — | 19,135 | 20,045 | — | — | 20,045 | |||||||||||||||||||||||
OMSR | 2,264 | — | — | 2,264 | 2,434 | — | — | 2,434 | |||||||||||||||||||||||
Investment in CSS | 4,246 | — | — | 4,246 | 7,565 | — | — | 7,565 | |||||||||||||||||||||||
Foreclosed assets | 456 | — | — | 456 | 355 | — | — | 355 | |||||||||||||||||||||||
Total | $ | 456,007 | $ | — | $ | 429,906 | $ | 26,101 | $ | 525,556 | $ | — | $ | 495,157 | $ | 30,399 | |||||||||||||||
Percent of assets and liabilities measured at fair value | — | % | 94.28 | % | 5.72 | % | — | % | 94.22 | % | 5.78 | % |
2019 | 2018 | ||||||
Balance, January 1 | $ | 3,343 | $ | 4,335 | |||
New loans | 1,584 | 1,184 | |||||
Repayments | (1,232 | ) | (2,176 | ) | |||
Balance, December 31 | $ | 3,695 | $ | 3,343 |
2019 | 2018 | 2017 | |||||||||
Total assets | $ | 1,678 | $ | 1,731 | $ | 2,162 | |||||
Donations | $ | 50 | $ | — | $ | — |
December 31 | |||||||
2019 | 2018 | ||||||
ASSETS | |||||||
Cash on deposit at the Bank | $ | 1,360 | $ | 2,499 | |||
Investments in subsidiaries | 157,415 | 143,942 | |||||
Premises and equipment | 1,539 | 1,912 | |||||
Other assets | 49,887 | 51,674 | |||||
TOTAL ASSETS | $ | 210,201 | $ | 200,027 | |||
LIABILITIES AND SHAREHOLDERS’ EQUITY | |||||||
Other liabilities | $ | 19 | $ | 4,508 | |||
Shareholders' equity | 210,182 | 195,519 | |||||
TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY | $ | 210,201 | $ | 200,027 |
Year Ended December 31 | |||||||||||
2019 | 2018 | 2017 | |||||||||
Income | |||||||||||
Dividends from subsidiaries | $ | 7,800 | $ | 13,100 | $ | 9,600 | |||||
Interest income | 7 | 1 | 2 | ||||||||
Net income (loss) on CSS joint venture | (3,108 | ) | 274 | 164 | |||||||
Other income | — | 2,756 | 6,299 | ||||||||
Total income | 4,699 | 16,131 | 16,065 | ||||||||
Expenses | |||||||||||
Compensation and benefits | — | 4,132 | 5,196 | ||||||||
Occupancy and equipment | 59 | 513 | 1,779 | ||||||||
Audit, consulting, and legal fees | 477 | 774 | 824 | ||||||||
Director fees | 368 | 413 | 382 | ||||||||
Other | 1,165 | 796 | 1,887 | ||||||||
Total expenses | 2,069 | 6,628 | 10,068 | ||||||||
Income before income tax benefit and equity in undistributed earnings of subsidiaries | 2,630 | 9,503 | 5,997 | ||||||||
Federal income tax benefit | 984 | 749 | 91 | ||||||||
Income before equity in undistributed earnings of subsidiaries | 3,614 | 10,252 | 6,088 | ||||||||
Undistributed earnings of subsidiaries | 9,410 | 3,769 | 7,149 | ||||||||
Net income | $ | 13,024 | $ | 14,021 | $ | 13,237 |
Year Ended December 31 | |||||||||||
2019 | 2018 | 2017 | |||||||||
Operating activities | |||||||||||
Net income | $ | 13,024 | $ | 14,021 | $ | 13,237 | |||||
Adjustments to reconcile net income to cash provided by operations | |||||||||||
Undistributed earnings of subsidiaries | (9,410 | ) | (3,769 | ) | (7,149 | ) | |||||
Undistributed earnings of equity securities without readily determinable fair values | 3,320 | (144 | ) | 40 | |||||||
Share-based payment awards under equity compensation plan | 523 | 612 | 640 | ||||||||
Depreciation | 46 | 134 | 154 | ||||||||
Deferred income tax expense (benefit) | 114 | (31 | ) | 792 | |||||||
Changes in operating assets and liabilities which provided (used) cash | |||||||||||
Other assets | (285 | ) | 1,237 | 42 | |||||||
Other liabilities | 69 | (937 | ) | (1,590 | ) | ||||||
Net cash provided by (used in) operating activities | 7,401 | 11,123 | 6,166 | ||||||||
Investing activities | |||||||||||
Maturities, calls, principal payments, and sales of AFS securities | — | — | 249 | ||||||||
Purchases of premises and equipment | — | (96 | ) | (113 | ) | ||||||
Net cash provided by (used in) investing activities | — | (96 | ) | 136 | |||||||
Financing activities | |||||||||||
Cash dividends paid on common stock | (8,282 | ) | (8,169 | ) | (7,990 | ) | |||||
Proceeds from the issuance of common stock | 4,876 | 6,864 | 6,177 | ||||||||
Common stock repurchased | (4,003 | ) | (7,007 | ) | (5,181 | ) | |||||
Common stock purchased for deferred compensation obligations | (1,131 | ) | (401 | ) | (420 | ) | |||||
Net cash provided by (used in) financing activities | (8,540 | ) | (8,713 | ) | (7,414 | ) | |||||
Increase (decrease) in cash and cash equivalents | (1,139 | ) | 2,314 | (1,112 | ) | ||||||
Cash and cash equivalents at beginning of period | 2,499 | 185 | 1,297 | ||||||||
Cash and cash equivalents at end of period | $ | 1,360 | $ | 2,499 | $ | 185 |
• | A documented organizational structure and division of responsibility; |
• | Established policies and procedures, including a code of conduct to foster a strong ethical climate which is communicated throughout our Corporation; |
• | Internal auditors that monitor the operation of the internal control system and report findings and recommendations to management and the Audit Committee; |
• | Procedures for taking action in response to an internal audit finding or recommendation; |
• | Regular reviews of our consolidated financial statements by qualified individuals; and |
• | The careful selection, training and development of our people. |
By: |
/s/ Jae A. Evans |
Jae A. Evans |
President, Chief Executive Officer |
(Principal Executive Officer) |
March 13, 2020 |
/s/ Neil M. McDonnell |
Neil M. McDonnell |
Chief Financial Officer |
(Principal Financial Officer) |
March 13, 2020 |
Plan Category | Number of Securities to be Issued Upon Exercise of Outstanding Options, Warrants, and Rights (A) | Weighted Average Exercise Price of Outstanding Options, Warrants, and Rights (B) | Number of Securities Remaining Available for Future Issuance Under Equity Compensation Plans (Excluding Securities Reflected in Column (A)) (C) | ||||||||
Equity compensation plans approved by shareholders: | |||||||||||
None | — | — | — | ||||||||
Equity compensation plans not approved by shareholders: | |||||||||||
Deferred director compensation plan (1) | 177,935 | (3) | — | (5) | — | (6) | |||||
Stock Award Incentive Plan (2) | 7,890 | (4) | — | (5) | — | (6) | |||||
Total | 185,825 |
(a) | (1) | Financial Statements: The following documents are filed as part of Item 8 of this report: | |
Report of Independent Registered Public Accounting Firm | |||
Consolidated Balance Sheets | |||
Consolidated Statements of Changes in Shareholders’ Equity | |||
Consolidated Statements of Income | |||
Consolidated Statements of Comprehensive Income (Loss) | |||
Consolidated Statements of Cash Flows | |||
Notes to Consolidated Financial Statements | |||
(2) | Financial Statement Schedules: All schedules are omitted because they are neither applicable nor required, or because the required information is included in the consolidated financial statements or related notes. | ||
(3) | See the exhibits listed below under Item 15(b): | ||
(b) | The following exhibits required by Item 601 of Regulation S-K are filed as part of this report: | ||
3(a) | Amended Articles of Incorporation (1) | ||
3(b) | Amendment to the Articles of Incorporation (2) | ||
3(c) | Amendment to the Articles of Incorporation (3) | ||
3(d) | Amendment to the Articles of Incorporation (4) | ||
3(e) | Amendment to the Articles of Incorporation (7) | ||
3(f) | Amended Bylaws (5) | ||
3(g) | Amendment to Bylaws (6) | ||
3(h) | Amendment to Bylaws (9) | ||
3(i) | Amendment to Bylaws (10) | ||
10(a) | Isabella Bank Corporation and Related Companies Deferred Compensation Plan for Directors* (8) | ||
10(b) | Isabella Bank Corporation Split Dollar Plan* (12) | ||
10(c) | Isabella Bank Corporation Retirement Bonus Plan* (11) | ||
10(d) | Isabella Bank Corporation Supplemental Executive Retirement Plan* (13) | ||
10(e) | Amendment to the Isabella Bank Corporation Supplemental Executive Retirement Plan* (14) | ||
10(f) | Isabella Bank Corporation Stock Award Incentive Plan* (14) | ||
101.INS | XBRL Interactive Data File** | ||
101.SCH | XBRL Interactive Data File** | ||
101.CAL | XBRL Interactive Data File** | ||
101.LAB | XBRL Interactive Data File** | ||
101.PRE | XBRL Interactive Data File** | ||
101.DEF | XBRL Interactive Data File** |
* | Management Contract or Compensatory Plan or Arrangement. | |
** | As provided by Rule 406T in Regulation S-T, this information is furnished and not filed for purposes of Sections 11 and 12 of the Securities Act of 1933 and Section 18 of the Exchange Act | |
(1) | Previously filed as an Exhibit to the Isabella Bank Corporation Form 10-K, filed March 12, 1991, and incorporated herein by reference | |
(2) | Previously filed as an Exhibit to the Isabella Bank Corporation Form 10-K, filed March 26, 1994, and incorporated herein by reference. | |
(3) | Previously filed as an Exhibit to Isabella Bank Corporation Form 10-K, filed March 22, 2000, and incorporated herein by reference. | |
(4) | Previously filed as an Exhibit to Isabella Bank Corporation Form 10-K, filed March 27, 2001, and incorporated herein by reference. | |
(5) | Previously filed as an Exhibit to Isabella Bank Corporation Form 10-K, filed March 16, 2005, and incorporated herein by reference. | |
(6) | Previously filed as an Exhibit to Isabella Bank Corporation Form 8-K, filed November 22, 2006, and incorporated herein by reference. | |
(7) | Previously filed as an Exhibit to Isabella Bank Corporation Form 8-K, filed May 16, 2008, and incorporated herein by reference. | |
(8) | Previously filed as an Exhibit to Isabella Bank Corporation Form 8-K, filed March 13, 2019, and incorporated herein by reference. | |
(9) | Previously filed as an Exhibit to Isabella Bank Corporation Form 8-K, filed August 28, 2009, and incorporated herein by reference. | |
(10) | Previously filed as an Exhibit to Isabella Bank Corporation Form 8-K, filed December 23, 2009, and incorporated herein by reference. | |
(11) | Previously filed as an Exhibit to Isabella Bank Corporation Form 8-K, filed December 19, 2008, and incorporated herein by reference. | |
(12) | Previously filed as an Exhibit to Isabella Bank Corporation Form 8-K, filed March 31, 2015, and incorporated herein by reference. | |
(13) | Previously filed as an Exhibit to Isabella Bank Corporation Form 8-K, filed April 27, 2015, and incorporated herein by reference. | |
(14) | Previously filed as an Exhibit to Isabella Bank Corporation Form 8-K, filed February 12, 2019, and incorporated herein by reference. |
By: | /s/ Jae A. Evans | Date: | March 13, 2020 | |||
Jae A. Evans | ||||||
President, Chief Executive Officer | ||||||
(Principal Executive Officer) |
Signatures | Capacity | Date | ||
/s/ Dr. Jeffrey J. Barnes | Director | March 13, 2020 | ||
Dr. Jeffrey J. Barnes | ||||
/s/ Jill Bourland | Director | March 13, 2020 | ||
Jill Bourland | ||||
/s/ Jae A. Evans | President, Chief Executive Officer (Principal Executive Officer), and Director | March 13, 2020 | ||
Jae A. Evans | ||||
/s/ G. Charles Hubscher | Director | March 13, 2020 | ||
G. Charles Hubscher | ||||
/s/ Thomas L. Kleinhardt | Director | March 13, 2020 | ||
Thomas L. Kleinhardt | ||||
/s/ David J. Maness | Director | March 13, 2020 | ||
David J. Maness | ||||
/s/ W. Joseph Manifold | Director | March 13, 2020 | ||
W. Joseph Manifold | ||||
/s/ Neil M. McDonnell | Chief Financial Officer (Principal Financial Officer) | March 13, 2020 | ||
Neil M. McDonnell | ||||
/s/ Sarah R. Opperman | Director | March 13, 2020 | ||
Sarah R. Opperman | ||||
/s/ Vicki L. Rupp | Director | March 13, 2020 | ||
Vicki L. Rupp | ||||
/s/ Jerome Schwind | Isabella Bank President and Director | March 13, 2020 | ||
Jerome Schwind | ||||
/s/ Rhonda S. Tudor | Controller | March 13, 2020 | ||
Rhonda S. Tudor | ||||
/s/ Gregory V. Varner | Director | March 13, 2020 | ||
Gregory V. Varner |
/s/ Rehmann Robson LLC | ||
Saginaw, Michigan | ||
March 16, 2020 |
1. | I have reviewed this Annual Report on Form 10-K of Isabella Bank Corporation (the “registrant”). |
2. | Based on my knowledge, this Annual Report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this Annual Report. |
3. | Based on my knowledge, the financial statements, and other financial information included in this Annual Report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this Annual Report. |
4. | The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have: |
a) | designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under my supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this Annual Report is being prepared; |
b) | designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under my supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; |
c) | evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and |
d) | disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and |
5. | The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of registrant’s board of directors: |
a) | all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and |
b) | any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting. |
Date: | March 13, 2020 | /s/ Jae A. Evans | |
President, Chief Executive Officer | |||
(Principal Executive Officer) |
1. | I have reviewed this Annual Report on Form 10-K of Isabella Bank Corporation (the “registrant”). |
2. | Based on my knowledge, this Annual Report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this Annual Report. |
3. | Based on my knowledge, the financial statements, and other financial information included in this Annual Report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this Annual Report. |
4. | The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have: |
a) | designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under my supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this Annual Report is being prepared; |
b) | designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under my supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; |
c) | evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and |
d) | disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and |
5. | The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of registrant’s board of directors: |
a) | all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and |
b) | any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting. |
Date: | March 13, 2020 | /s/ Neil M. McDonnell | |
Chief Financial Officer | |||
(Principal Financial Officer) |
(1) | The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and |
(2) | The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Corporation. |
/s/ Jae A. Evans |
President, Chief Executive Officer |
(Principal Executive Officer) |
March 13, 2020 |
/s/ Neil M. McDonnell |
Chief Financial Officer |
(Principal Financial Officer) |
March 13, 2020 |
Federal Income Taxes (Reconciliation of the provision for federal income taxes) (Details) - USD ($) $ in Thousands |
12 Months Ended | ||
---|---|---|---|
Dec. 31, 2019 |
Dec. 31, 2018 |
Dec. 31, 2017 |
|
Income Tax Disclosure [Abstract] | |||
Federal statutory tax rate | 21.00% | 21.00% | 34.00% |
Income taxes at 34% statutory rate | $ 3,025 | $ 3,231 | $ 5,526 |
Interest income on tax exempt municipal securities | (990) | (1,106) | (1,889) |
Earnings on corporate owned life insurance policies | (160) | (148) | (247) |
Income Tax Expense (Benefit), Continuing Operations, Adjustment of Deferred Tax (Asset) Liability | 0 | 0 | 319 |
Other | 283 | 231 | 34 |
Total effect of nontaxable income | (867) | (1,023) | (1,783) |
Effect of nondeductible expenses | 108 | 113 | 149 |
Effect of tax credits | (984) | (958) | (876) |
Unrecognized Deferred Tax Benefit on Joint Venture Investment | 98 | 0 | 0 |
Federal income tax expense | $ 1,380 | $ 1,363 | $ 3,016 |
Foreclosed Assets (Summary of Foreclosed Assets) (Details) - USD ($) $ in Thousands |
Dec. 31, 2019 |
Dec. 31, 2018 |
---|---|---|
Banking and Thrift [Abstract] | ||
Total | $ 456 | $ 355 |
Joint Venture Investment (Details) - USD ($) $ in Thousands |
12 Months Ended | ||
---|---|---|---|
Dec. 31, 2019 |
Dec. 31, 2018 |
Dec. 31, 2017 |
|
Schedule of Equity Method Investments [Line Items] | |||
Investments in joint venture, write down | $ 3,566 | $ 0 | |
CSS | |||
Schedule of Equity Method Investments [Line Items] | |||
Equity method investment, ownership percentage | 50.00% | ||
Impairment of intangible assets | $ 7,133 | $ 0 | $ 0 |
Related Party Transactions (Annual activity) (Details) - USD ($) $ in Thousands |
12 Months Ended | |
---|---|---|
Dec. 31, 2019 |
Dec. 31, 2018 |
|
Annual activity | ||
Balance, January 1 | $ 3,343 | $ 4,335 |
New loans | 1,584 | 1,184 |
Repayments | (1,232) | (2,176) |
Balance, December 31 | $ 3,695 | $ 3,343 |
Loans and ALLL (Summary of TDR loan balances) (Details) - USD ($) $ in Thousands |
Dec. 31, 2019 |
Dec. 31, 2018 |
---|---|---|
Receivables [Abstract] | ||
Troubled debt restructurings | $ 24,737 | $ 26,951 |
Parent Company Only Financial Information (Interim Condensed Balance Sheets) (Details) - USD ($) $ in Thousands |
Dec. 31, 2019 |
Dec. 31, 2018 |
Dec. 31, 2017 |
Dec. 31, 2016 |
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ASSETS | ||||
AFS securities | $ 429,839 | $ 494,834 | ||
Premises and equipment | 26,242 | 27,815 | ||
Other assets | 13,046 | 17,632 | ||
TOTAL ASSETS | 1,814,198 | 1,842,502 | ||
LIABILITIES AND SHAREHOLDERS' EQUITY | ||||
Shareholders' equity | 210,182 | 195,519 | $ 194,905 | $ 187,899 |
TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY | 1,814,198 | 1,842,502 | ||
Parent Company [Member] | ||||
ASSETS | ||||
Cash on deposit at subsidiary Bank | 1,360 | 2,499 | ||
Investments in subsidiaries | 157,415 | 143,942 | ||
Premises and equipment | 1,539 | 1,912 | ||
Other assets | 49,887 | 51,674 | ||
TOTAL ASSETS | 210,201 | 200,027 | ||
LIABILITIES AND SHAREHOLDERS' EQUITY | ||||
Other liabilities | 19 | 4,508 | ||
Shareholders' equity | 210,182 | 195,519 | ||
TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY | $ 210,201 | $ 200,027 |
Revenue (Details) - USD ($) $ in Thousands |
12 Months Ended | ||
---|---|---|---|
Dec. 31, 2019 |
Dec. 31, 2018 |
Dec. 31, 2017 |
|
Debit Card [Member] | |||
Disaggregation of Revenue [Line Items] | |||
Revenue from Contract with Customer, Excluding Assessed Tax | $ 2,667 | $ 2,487 | $ 2,435 |
Fiduciary and Trust [Member] | |||
Disaggregation of Revenue [Line Items] | |||
Revenue from Contract with Customer, Excluding Assessed Tax | 2,269 | 2,134 | 1,928 |
Investment Advice [Member] | |||
Disaggregation of Revenue [Line Items] | |||
Revenue from Contract with Customer, Excluding Assessed Tax | 523 | 702 | 679 |
Service Charges And Deposit Account Fees [Member] | |||
Disaggregation of Revenue [Line Items] | |||
Revenue from Contract with Customer, Excluding Assessed Tax | $ 317 | $ 332 | $ 343 |
Other Noninterest Expenses (Tables) |
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Summary of expenses included in other noninterest expenses | A summary of expenses included in other noninterest expenses is as follows for the years ended December 31:
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Off-Balance-Sheet Activities (Tables) |
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Notional amount of financial instrument | The following table summarizes our credit related financial instruments with off-balance-sheet risk as of December 31:
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Revenue (Notes) |
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Revenue from Contract with Customer [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Revenue from Contract with Customer [Text Block] | Revenue Our revenue is comprised primarily of interest income, service charges and fees, gains on the sale of loans and AFS securities, earnings on corporate owned life insurance policies, and other noninterest income. Other noninterest income is typically service and performance driven in nature and comprised primarily of investment and trust advisory fees. We recognize revenue, excluding interest income, in accordance with ASC 606, Revenue From Contracts with Customers. Revenue is recognized when our performance obligation has been satisfied according to our contractual obligation. We record receivables when revenue is unpaid and collectability is reasonably assured. Accounts receivable balances primarily represent amounts due from customers for which revenue has been recognized. Accounts receivable balances are recorded in the consolidated balance sheets in accrued interest receivable and other assets. For the years ended December 31, 2019, 2018 and 2017, we satisfied our performance obligations pursuant to contracts with customers. As a result, we have not recorded any contract assets or liabilities. We estimate no returns or allowances for the years ended December 31, 2019, 2018 and 2017. Our contracts with customers define our performance obligations with clearly established pricing which did not require us to allocate or disaggregate revenue by performance obligation. A summary of revenue recognized for each major category of contracts with customers, subject to ASC 606, is as follows for the years ended December 31:
A large portion of our revenue consists of interest income which is not subject to the requirements set forth in ASC 606. |
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Disaggregation of Revenue [Table Text Block] | A summary of revenue recognized for each major category of contracts with customers, subject to ASC 606, is as follows for the years ended December 31:
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Fair Value |
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Fair Value Disclosures [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Fair Value | Fair Value Under fair value measurement and disclosure authoritative guidance, we group assets and liabilities measured at fair value into three levels, based on the markets in which the assets and liabilities are traded, and the reliability of the assumptions used to determine fair value, based on the prioritization of inputs in the valuation techniques. These levels are:
The asset’s or liability’s fair value measurement level within the fair value hierarchy is based on the lowest level of any input that is significant to the fair value measurement. Valuation techniques maximize the use of observable inputs and minimize the use of unobservable inputs. Transfers between measurement levels are recognized at the end of reporting periods. Fair value measurement requires the use of an exit price notion which may differ from entrance pricing. Generally, we believe our assets and liabilities classified as Level 1 or Level 2 approximate an exit price notion. Following is a description of the valuation methodologies, key inputs, and an indication of the level of the fair value hierarchy in which the assets or liabilities are classified. AFS securities: AFS securities are recorded at fair value on a recurring basis. Level 1 fair value measurement is based upon quoted prices for identical instruments. Level 2 fair value measurement is based upon quoted prices for similar instruments. If quoted prices are not available, fair values are measured using independent pricing models or other model based valuation techniques such as the present value of future cash flows, adjusted for the security’s credit rating, prepayment assumptions and other factors such as credit loss and liquidity assumptions. The values for Level 1 and Level 2 investment securities are generally obtained from an independent third party. On a quarterly basis, we compare the values provided to alternative pricing sources. Loans: We do not record loans at fair value on a recurring basis. However, from time to time, loans are classified as impaired and a specific allowance for loan losses may be established. Loans for which it is probable that payment of interest and principal will be significantly different than the contractual terms of the original loan agreement are considered impaired. Once a loan is identified as impaired, we measure the estimated impairment. The fair value of impaired loans is estimated using one of several methods, including the present value of expected future cash flows discounted at the loan’s effective interest rate, or the fair value of the collateral, less costs to sell, if the loan is collateral dependent. Those impaired loans not requiring an allowance represent loans for which the fair value of the expected repayments or collateral exceed the recorded investments in such loans. We review the net realizable values of the underlying collateral for collateral dependent impaired loans on at least a quarterly basis for all loan types. To determine the collateral value, we utilize independent appraisals, broker price opinions, or internal evaluations. We review these valuations to determine whether an additional discount should be applied given the age of market information that may have been considered as well as other factors such as costs to sell an asset if it is determined that the collateral will be liquidated in connection with the ultimate settlement of the loan. We use these valuations to determine if any specific reserves or charge-offs are necessary. We may obtain new valuations in certain circumstances, including when there has been significant deterioration in the condition of the collateral, if the foreclosure process has begun, or if the existing valuation is deemed to be outdated. The following tables list the quantitative fair value information about impaired loans as of:
Collateral discount rates may have ranges to accommodate differences in the age of the independent appraisal, broker price opinion, or internal evaluation. Derivative instruments: Derivative instruments, consisting solely of interest rate swaps, are recorded at fair value on a recurring basis. Derivatives qualifying as cash flow hedges, when highly effective, are reported at fair value in other assets or other liabilities on our Consolidated Balance Sheets with changes in value recorded in OCI. Should the hedge no longer be considered effective, the ineffective portion of the change in fair value is recorded directly in earnings in the period in which the change occurs. The fair value of a derivative is determined by quoted market prices and model-based valuation techniques. As such, we classify derivative instruments as Level 2. OMSR: OMSR (which are included in other assets) are subject to impairment testing. To test for impairment, we utilize a discounted cash flow analysis using interest rates and prepayment speed assumptions currently quoted for comparable instruments and discount rates. If the valuation model reflects a value less than the carrying value, OMSR are adjusted to fair value through a valuation allowance as determined by the model. As such, we classify OMSR subject to nonrecurring fair value adjustments as Level 2. Equity securities without readily determinable fair values: Equity securities without readily determinable fair values include our holdings in FHLB stock and FRB stock as well as our ownership interest in CSS. As a 50% investor of the membership units in CSS, we account for our investment under the equity method of accounting. The General Manager of CSS, through the normal course of business, chose to evaluate its operations of the company and obtained an independent, third-party valuation of the company during the fourth quarter of 2019. As of December 31, 2019, our recorded investment in CSS relied on assumptions and use of estimates pursuant to the valuation. As such, we classify such equity securities instruments as Level 3 with the related impairment in 2019 a nonrecurring Level 3 fair value adjustment. The preceding methods described may produce a fair value calculation that may not be indicative of net realizable value or reflective of future fair values. Although we believe our valuation methods are appropriate and consistent with other market participants, the use of different methodologies or assumptions to determine the fair value of certain financial instruments could result in a different fair value measurement. Estimated Fair Values of Financial Instruments Not Recorded at Fair Value in their Entirety on a Recurring Basis Disclosure of the estimated fair values of financial instruments, which differ from carrying values, often requires the use of estimates. In cases where quoted market values in an active market are not available, we use present value techniques and other valuation methods to estimate the fair values of our financial instruments. These valuation methods require considerable judgment and the resulting estimates of fair value can be significantly affected by the assumptions made and methods used. The carrying amount and estimated fair value of financial instruments not recorded at fair value in their entirety on a recurring basis were as follows as of December 31:
Financial Instruments Recorded at Fair Value The table below presents the recorded amount of assets and liabilities measured at fair value on December 31:
We recorded $111 and $0 through earnings related to fair value changes in foreclosed assets for the years ended December 31, 2019 and 2018. We recorded an impairment related to OMSR of $214 and $0 through earnings for the years ended December 31, 2019 and 2018. We recorded a reduction to our investment in CSS of $3,566 and $0 through earnings for the years ended December 31, 2019 and 2018. We had no other assets or liabilities recorded at fair value with changes in fair value recognized through earnings, on a recurring basis or nonrecurring basis, as of December 31, 2019 and 2018. |
Loans and ALLL (Tables) |
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Receivables [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Summary of changes in the ALLL and the recorded investment in loans by segments | A summary of changes in the ALLL and the recorded investment in loans by segments follows:
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Allowance for Loan Losses and Recorded Investment in Loans |
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Credit quality indicators for commercial and agricultural credit exposures | The following tables display the credit quality indicators for commercial and agricultural credit exposures based on internally assigned credit risk ratings as of December 31:
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Summary of past due and current loans | Our primary credit quality indicator for residential real estate and consumer loans is the individual loan’s past due aging. The following tables summarize the past due and current loans for the entire loan portfolio as of December 31:
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Information pertaining to impaired loans | The following summarizes information pertaining to impaired loans as of, and for the years ended, December 31:
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Information pertaining to TDR's | The following is a summary of TDR loan balances as of December 31:
The following is a summary of information pertaining to TDRs granted in the years ended December 31:
The following table summarizes the nature of the concessions we granted to borrowers in financial difficulty in the years ended December 31:
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Nature of Operations and Summary of Significant Accounting Policies (Policies) |
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Accounting Policies [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
BASIS OF PRESENTATION AND CONSOLIDATION | BASIS OF PRESENTATION AND CONSOLIDATION: The consolidated financial statements include the accounts of Isabella Bank Corporation, a financial services holding company, and its wholly owned subsidiary, Isabella Bank. All intercompany balances and accounts have been eliminated in consolidation. |
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USE OF ESTIMATES | USE OF ESTIMATES: In preparing consolidated financial statements in conformity with accounting principles generally accepted in the United States of America, we make estimates and assumptions that affect the reported amounts of assets and liabilities as of the date of the consolidated balance sheet and reported amounts of revenues and expenses during the reporting year. Actual results could differ from those estimates. Material estimates that are particularly susceptible to significant change in the near term relate to the determination of the ALLL, the fair value of AFS investment securities, the valuation of goodwill and other intangible assets and equity securities without readily determinable fair values related to our ownership interest in Corporate Settlement Solutions, LLC (“CSS”). |
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FAIR VALUE MEASUREMENTS | FAIR VALUE MEASUREMENTS: Fair value refers to the price that would be received to sell an asset or paid to transfer a liability (an exit price) in an orderly transaction between market participants in the market in which the reporting entity transacts such sales or transfers based on the assumptions market participants would use when pricing an asset or liability. Assumptions are developed based on prioritizing information within a fair value hierarchy that gives the highest priority to quoted prices in active markets and the lowest priority to unobservable data, such as the reporting entity’s own data. We may choose to measure eligible items at fair value at specified election dates. For assets and liabilities recorded at fair value, it is our policy to maximize the use of observable inputs and minimize the use of unobservable inputs when developing fair value measurements for those financial instruments for which there is an active market. In cases where the market for a financial asset or liability is not active, we include appropriate risk adjustments that market participants would make for nonperformance and liquidity risks when developing fair value measurements. Fair value measurements for assets and liabilities for which limited or no observable market data exists are accordingly based primarily upon estimates, are often calculated based on the economic and competitive environment, the characteristics of the asset or liability and other factors. Therefore, the results cannot be determined with precision and may not be realized in an actual sale or immediate settlement of the asset or liability. Additionally, there may be inherent weaknesses in any calculation technique, and changes in the underlying assumptions used, including discount rates and estimates of future cash flows, could significantly affect the results of current or future values. We utilize fair value measurements to record fair value adjustments to certain assets and liabilities and to determine fair value disclosures. Investment securities AFS and derivative instruments are recorded at fair value on a recurring basis. Additionally, from time to time, we may be required to record other assets and liabilities at fair value on a nonrecurring basis, such as mortgage loans AFS, impaired loans, foreclosed assets, OMSR, goodwill, and certain other assets and liabilities. These nonrecurring fair value adjustments typically involve the application of lower of cost or market accounting or write downs of individual assets. Fair Value Hierarchy Under fair value measurement and disclosure authoritative guidance, we group assets and liabilities measured at fair value into three levels, based on the markets in which the assets and liabilities are traded, and the reliability of the assumptions used to determine fair value, based on the prioritization of inputs in the valuation techniques. These levels are:
The asset’s or liability’s fair value measurement level within the fair value hierarchy is based on the lowest level of any input that is significant to the fair value measurement. Valuation techniques maximize the use of observable inputs and minimize the use of unobservable inputs. Transfers between measurement levels are recognized at the end of reporting periods. For further discussion of fair value considerations, refer to “Note 18 – Fair Value.” Under fair value measurement and disclosure authoritative guidance, we group assets and liabilities measured at fair value into three levels, based on the markets in which the assets and liabilities are traded, and the reliability of the assumptions used to determine fair value, based on the prioritization of inputs in the valuation techniques. These levels are:
The asset’s or liability’s fair value measurement level within the fair value hierarchy is based on the lowest level of any input that is significant to the fair value measurement. Valuation techniques maximize the use of observable inputs and minimize the use of unobservable inputs. Transfers between measurement levels are recognized at the end of reporting periods. Fair value measurement requires the use of an exit price notion which may differ from entrance pricing. Generally, we believe our assets and liabilities classified as Level 1 or Level 2 approximate an exit price notion. |
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SIGNIFICANT GROUP CONCENTRATIONS OF CREDIT RISK | SIGNIFICANT GROUP CONCENTRATIONS OF CREDIT RISK: Most of our activities are conducted with customers located within the central Michigan area. A significant amount of our outstanding loans are secured by commercial and residential real estate. Other than these types of loans, there is no significant concentration to any other industry or any one customer. Internally assigned credit risk ratings are reviewed, at a minimum, when loans are renewed or when management has knowledge of improvements or deterioration of the credit quality of individual credits. Descriptions of the internally assigned credit risk ratings for commercial and agricultural loans are as follows: 1. EXCELLENT – Substantially Risk Free Credit has strong financial condition and solid earnings history, characterized by:
2. HIGH QUALITY – Limited Risk Credit with sound financial condition and a positive trend in earnings supplemented by:
3. HIGH SATISFACTORY – Reasonable Risk Credit with satisfactory financial condition and further characterized by:
4. LOW SATISFACTORY – Acceptable Risk Credit with bankable risks, although some signs of weaknesses are shown:
To be classified as less than satisfactory, only one of the following criteria must be met. 5. SPECIAL MENTION – Criticized Credit constitutes an undue and unwarranted credit risk but not to the point of justifying a classification of substandard. The credit risk may be relatively minor yet constitutes an unwarranted risk in light of the circumstances surrounding a specific loan:
6. SUBSTANDARD – Classified Credit is inadequately protected by the current net worth and paying capacity of the borrower or of the collateral pledged. There is a distinct possibility we will implement collection procedures if the loan deficiencies are not corrected. Any commercial loan placed in nonaccrual status will be rated “7” or worse. In addition, the following characteristics may apply:
7. VULNERABLE – Classified Credit is considered “Substandard” and warrants placing in nonaccrual status. Risk of loss is being evaluated and exit strategy options are under review. Other characteristics that may apply:
8. DOUBTFUL – Workout Credit has all the weaknesses inherent in a “Substandard” loan with the added characteristic that collection and/or liquidation is pending. The possibility of a loss is extremely high, but its classification as a loss is deferred until liquidation procedures are completed, or reasonably estimable. Other characteristics that may apply:
9. LOSS – Charge-off Credit is considered uncollectible and of such little value that their continuance as bankable assets is not warranted. This classification is for charged-off loans but does not mean that the asset has absolutely no recovery or salvage value. These loans are further characterized by:
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CASH AND CASH EQUIVALENTS | CASH AND CASH EQUIVALENTS: For purposes of the consolidated statements of cash flows, cash and cash equivalents include cash and balances due from banks, federal funds sold, and other deposit accounts. Generally, federal funds sold are for a one day period. We maintain deposit accounts in various financial institutions which generally exceed federally insured limits or are not insured. We do not believe we are exposed to any significant interest, credit or other financial risk as a result of these deposits. |
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AFS SECURITIES | AFS SECURITIES: Purchases of investment securities are generally classified as AFS. However, we may elect to classify securities as either held to maturity or trading. Securities classified as AFS debt securities are recorded at fair value, with unrealized gains and losses, net of the effect of deferred income taxes, excluded from earnings and reported in other comprehensive income. Included in AFS securities are auction rate money market preferred securities. These investments, for federal income tax purposes, have no federal income tax impact given the nature of the investments. Auction rate money market preferred securities are recorded at fair value, with unrealized gains and losses excluded from earnings and reported in other comprehensive income. Purchase premiums and discounts are recognized in interest income using the interest method over the term of the securities. Realized gains and losses on the sale of AFS securities are determined using the specific identification method. AFS securities are reviewed quarterly for possible OTTI. In determining whether an OTTI exists for debt securities, we assert that: (a) we do not have the intent to sell the security; and (b) it is more likely than not we will not have to sell the security before recovery of its cost basis. If these conditions are not met, we recognize an OTTI charge through earnings for the difference between the debt security’s amortized cost basis and its fair value, and such amount is included in noninterest income. For debt securities that do not meet the above criteria, and we do not expect to recover the security’s amortized cost basis, the security is considered other-than-temporarily impaired. For these debt securities, we separate the total impairment into the credit risk loss component and the amount of the loss related to market and other risk factors. In order to determine the amount of the credit loss for a debt security, we calculate the recovery value by performing a discounted cash flow analysis based on the current cash flows and future cash flows we expect to recover. The amount of the total OTTI related to the credit risk is recognized in earnings and is included in noninterest income. The amount of the total OTTI related to other risk factors is recognized as a component of other comprehensive income. For debt securities that have recognized OTTI through earnings, if through subsequent evaluation there is a significant increase in the cash flow expected, the difference between the amortized cost basis and the cash flows expected to be collected is accreted as interest income. As of December 31, 2019 and 2018, we conducted an analysis to determine whether any AFS securities currently in an unrealized loss position should be identified as other-than-temporarily impaired. Such analyses considered, among other factors, the following criteria:
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LOANS | LOANS: Loans that we have the intent and ability to hold for the foreseeable future or until maturity or payoff are reported at their outstanding principal balance adjusted for any charge-offs, the ALLL, and any deferred fees or costs. Interest income on loans is accrued over the term of the loan based on the principal amount outstanding. Loan origination fees and certain direct loan origination costs are capitalized and recognized as a component of interest income over the term of the loan using the appropriate yield methods. The accrual of interest on agricultural, commercial and mortgage loans is discontinued at the time the loan is 90 days or more past due unless the credit is well secured and in the process of collection. Consumer loans are typically charged-off no later than 180 days past due. Past due status is based on contractual terms of the loan. In all cases, loans are placed in nonaccrual or charged-off at an earlier date if collection of principal or interest is considered doubtful. For loans that are placed on nonaccrual status or charged-off, all interest accrued in the current calendar year, but not collected, is reversed against interest income while interest accrued in prior calendar years, but not collected is charged against the ALLL. Interest income on loans in nonaccrual status is not recognized until qualifying for return to accrual status. Loans are returned to accrual status when all principal and interest amounts contractually due are brought current and future payments are reasonably assured. For impaired loans not classified as nonaccrual, interest income continues to be accrued over the term of the loan based on the principal amount outstanding. Commercial and agricultural loans include loans for commercial real estate, commercial operating loans, advances to mortgage brokers, farmland and agricultural production, and loans to states and political subdivisions. Repayment of these loans is dependent upon the successful operation and management of a business. We minimize our risk by limiting the amount of direct credit exposure to any one borrower to $15,000. Borrowers with direct credit needs of more than $15,000 may be serviced through the use of loan participations with other commercial banks. Commercial and agricultural real estate loans commonly require loan-to-value limits of 80% or less. Depending upon the type of loan, past credit history, and current operating results, we may require the borrower to pledge accounts receivable, inventory, property, or equipment. Personal guarantees are generally required from the owners of closely held corporations, partnerships, and sole proprietorships. In addition, we may require annual financial statements, prepare cash flow analyses, and review credit reports. We entered into a mortgage purchase program in 2016 with a financial institution where we participate in advances to mortgage brokers (“advances”). The mortgage brokers originate residential mortgage loans with the intent to sell them on the secondary market. We participate in the advance to the mortgage broker, which is secured by the underlying mortgage loan, until it is ultimately sold on the secondary market. As such, the average life of each participated advance is approximately 20-30 days. Funds from the sale of the loan are used to pay off our participation in the advance to the mortgage broker. We classify these advances as commercial loans and include the outstanding balance in commercial loans on our consolidated balance sheets. Under the participation agreement, we committed to a maximum outstanding aggregate amount of $50,000. The difference between our outstanding balance and the maximum outstanding aggregate amount is classified as “Unfunded commitments under lines of credit” in the “Contractual Obligations and Loan Commitments” section of the Management's Discussion and Analysis of Financial Condition and Results of Operations of this report. We offer adjustable rate mortgages, construction loans, and fixed rate residential real estate loans which have amortization periods up to a maximum of 30 years. We consider the anticipated direction of interest rates, balance sheet duration, the sensitivity of our balance sheet to changes in interest rates, our liquidity needs, and overall loan demand to determine whether or not to sell fixed rate loans to Freddie Mac. Our lending policies generally limit the maximum loan-to-value ratio on residential real estate loans to 100% of the lower of the appraised value of the property or the purchase price. Private mortgage insurance is typically required on loans with loan-to-value ratios in excess of 80% unless the loan qualifies for government guarantees. Underwriting criteria for residential real estate loans generally include:
Appraisals are performed by independent appraisers and are reviewed for appropriateness. Generally, mortgage loan requests are reviewed by our mortgage loan committee or through a secondary market underwriting system; loans in excess of $1,000 require the approval of our Internal Loan Committee, the Executive Loan Committee, the Board of Directors’ Loan Committee, or the Board of Directors. Consumer loans include secured and unsecured personal loans. Loans are amortized for a period of up to 15 years based on the age and value of the underlying collateral. The underwriting emphasis is on a borrower’s perceived intent and ability to pay rather than collateral value. No consumer loans are sold to the secondary market. |
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ALLOWANCE FOR LOAN LOSSES | ALLOWANCE FOR LOAN AND LEASE LOSSES: The ALLL 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 we believe the uncollectability of the loan balance is confirmed. Subsequent recoveries, if any, are credited to the allowance. We evaluate the ALLL on a regular basis. Our periodic review of the collectability of loans considers 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 revision as more information becomes available. The ALLL consists of specific, general, and unallocated components. The specific component relates to loans that are deemed to be impaired. For such loans that are analyzed for specific allowance allocations, an allowance is established when the discounted cash flows or collateral value, less costs to sell, of the impaired loan is lower than the carrying value of that loan. The general component covers non-impaired loans and is based on historical loss experience adjusted for current conditions. An unallocated component is maintained to cover uncertainties that we believe affect our estimate of probable losses based on qualitative factors. The unallocated component of the allowance reflects the margin of imprecision inherent in the underlying assumptions used in the methodologies for estimating specific and general losses in the portfolio. Loans may be classified as impaired if they meet one or more of the following criteria:
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, or the fair value of the collateral, less costs to sell, if the loan is collateral dependent. Large groups of smaller-balance, homogeneous loans are collectively evaluated for impairment. The primary factors behind the determination of the level of the ALLL are specific allocations for impaired loans, historical loss percentages, as well as unallocated components. Specific allocations for impaired loans are primarily determined based on the difference between the loan’s outstanding balance and the present value of expected future cash flows discounted at the loan’s effective interest rate, or the fair value of the collateral, less costs to sell, if the loan is collateral dependent. Historical loss allocations are calculated at the loan class and segment levels based on a migration analysis of the loan portfolio, with the exception of advances to mortgage brokers, over the preceding five years. With no historical losses on advances to mortgage brokers, there is no allocation in the commercial segment displayed in the following tables. The unallocated component of the allowance reflects the margin of imprecision inherent in the underlying assumptions used in the methodologies for estimating specific and general losses in the portfolio. |
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LOANS HELD FOR SALE | LOANS HELD FOR SALE: Mortgage loans held for sale on the secondary market are carried at the lower of cost or fair value as determined by aggregating outstanding commitments from investors or current investor yield requirements. Net unrealized losses, if any, would be recognized as a component of other noninterest expenses. Mortgage loans held for sale are sold with the mortgage servicing rights retained by us. Gains or losses on sales of mortgage loans are recognized based on the difference between the selling price and the carrying value of the related mortgage loans sold. |
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TRANSFERS OF FINANCIAL ASSETS | TRANSFERS OF FINANCIAL ASSETS: Transfers of financial assets, including mortgage loans and participation loans, are accounted for as sales when control over the assets has been surrendered. Control over transferred assets is determined to be surrendered when 1) the assets have been legally isolated from us, 2) the transferee obtains the right (free of conditions that constrain it from taking advantage of the right) to pledge or exchange the transferred assets, and 3) we do not maintain effective control over the transferred assets through an agreement to repurchase them before their maturity. Other than servicing, we have no substantive continuing involvement related to these loans. |
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SERVICING | SERVICING: Servicing assets are recognized as separate assets when rights are acquired through purchase or through sale of financial assets. We have no purchased servicing rights. For sales of mortgage loans, a portion of the cost of originating the loan is allocated to the servicing right based on relative fair value. Fair value is based on market prices for comparable mortgage servicing contracts, when available, or alternatively, is based on a valuation model that calculates the present value of estimated future net servicing income. The valuation model incorporates assumptions that market participants would use in estimating future net servicing income, such as the cost to service, the discount rate, the custodial earnings rate, an inflation rate, ancillary income, prepayment speeds and default rates and losses. Servicing assets are evaluated for impairment based upon the fair value of the rights as compared to amortized cost. Impairment is determined by stratifying rights into tranches based on predominant risk characteristics, such as interest rate, loan type, and investor type. Impairment is recognized through a valuation allowance for an individual tranche, to the extent that fair value is less than the capitalized amount for the tranche. If we later determine that all or a portion of the impairment no longer exists for a particular tranche, a reduction of the valuation allowance may be recorded as an increase to income. Capitalized servicing rights are reported in other assets and are amortized into noninterest income in proportion to, and over the period of, the estimated future net servicing income of the underlying financial assets. The unpaid principal balance of mortgages serviced for others was $259,375 and $259,481 with capitalized servicing rights of $2,264 and $2,434 at December 31, 2019 and 2018, respectively, which are included in other assets. Servicing fee income is recorded for fees earned for servicing loans for others. The fees are based on a contractual percentage of the outstanding principal or a fixed amount per loan and are recorded as income when earned. We recorded servicing fee revenue of $626, $651, and $671 related to residential mortgage loans serviced for others during 2019, 2018, and 2017, respectively, which is included in other noninterest income. |
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FORECLOSED ASSETS | FORECLOSED ASSETS: Assets acquired through, or in lieu of, loan foreclosure are held for sale and are initially recorded at the lower of our carrying amount or fair value less estimated selling costs at the date of transfer, establishing a new cost basis. Any write downs based on the asset’s fair value at the date of acquisition are charged to the ALLL. After foreclosure, property held for sale is carried at the lower of the new cost basis or fair value less costs to sell. Impairment losses on property to be held and used are measured at the amount by which the carrying amount of property exceeds its fair value. Costs relating to holding these assets are expensed as incurred. We periodically perform valuations and any subsequent write downs are recorded as a charge to operations, if necessary, to reduce the carrying value of a property to the lower of our carrying amount or fair value less costs to sell. Foreclosed assets of $456 and $355 as of December 31, 2019 and 2018, respectively, are included in other assets. |
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PREMISES AND EQUIPMENT | PREMISES AND EQUIPMENT: Land is carried at cost. Buildings and equipment are carried at cost, less accumulated depreciation which is computed principally by the straight-line method based upon the estimated useful lives of the related assets, which range from 3 to 40 years. Major improvements are capitalized and appropriately amortized based upon the useful lives of the related assets or the expected terms of the leases, if shorter, using the straight-line method. Maintenance, repairs and minor alterations are charged to current operations as expenditures occur. We annually review these assets to determine whether carrying values have been impaired. |
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EQUITY SECURITIES WITHOUT READILY DETERMINABLE FAIR VALUES | EQUITY SECURITIES WITHOUT READILY DETERMINABLE FAIR VALUES: Included in equity securities without readily determinable fair values are our holdings in FHLB stock and FRB stock as well as our joint venture investment in CSS. Our investment in CSS was made in 2008. We are not the managing entity of CSS and account for our investment under the equity method of accounting. Equity securities without readily determinable fair values consist of the following holdings as of December 31:
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EQUITY COMPENSATION PLAN | EQUITY COMPENSATION PLAN: At December 31, 2019, the Directors Plan had 205,004 shares eligible to be issued to participants, for which the Rabbi Trust held 27,069 shares. We had 220,171 shares to be issued at December 31, 2018, with 16,673 shares held in the Rabbi Trust. Compensation costs relating to share-based payment transactions are recognized as the services are rendered, with the cost measured based on the fair value of the equity or liability instruments issued (see “Note 13 – Benefit Plans”). |
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CORPORATE OWNED LIFE INSURANCE | CORPORATE OWNED LIFE INSURANCE: We have purchased life insurance policies on key members of management, partially for the purpose of funding certain post-retirement benefits. In the event of death of one of these individuals, we would receive a specified cash payment equal to the face value of the policy. Such policies are recorded at their cash surrender value, or the amount that can be realized on the balance sheet date. Increases in cash surrender value in excess of single premiums paid are reported as other noninterest income. Of the purchased life insurance policies, we hold post retirement benefits with a present value estimated to be $2,875 and $2,751 as of December 31, 2019 and 2018, respectively, which is included in accrued interest payable and other liabilities. The expenses associated with these policies totaled $125, $0, and $577 for 2019, 2018, and 2017, respectively. |
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ACQUISITION INTANGIBLES AND GOODWILL | ACQUISITION INTANGIBLES AND GOODWILL: We previously acquired branch facilities and related deposits in business combinations accounted for as a purchase. The acquisitions included amounts related to the valuation of customer deposit relationships (core deposit intangibles). Core deposit intangibles arising from acquisitions are included in goodwill and other intangible assets are being amortized over their estimated lives and evaluated for potential impairment on at least an annual basis. Goodwill, which represents the excess of the purchase price over identifiable assets, is not amortized but is evaluated for impairment on at least an annual basis. Acquisition intangibles and goodwill are typically qualitatively evaluated to determine if it is more likely than not that the carrying balance is impaired. If it is determined that the carrying balance is more likely than not to be impaired, we perform a cash flow valuation to determine the extent of the potential impairment. This valuation method requires a significant degree of our judgment. In the event the projected undiscounted net operating cash flows for these intangible assets are less than the carrying value, the asset is recorded at fair value as determined by the valuation model. |
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OFF BALANCE SHEET CREDIT RELATED FINANCIAL INSTRUMENTS | OFF BALANCE SHEET CREDIT RELATED FINANCIAL INSTRUMENTS: In the ordinary course of business, we have entered into commitments to extend credit, including commitments under credit card arrangements, commercial lines of credit, home equity lines of credit, commercial letters of credit, and standby letters of credit. Such financial instruments are recorded only when funded. |
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Revenue Recognition, Policy [Policy Text Block] | REVENUE RECOGNITION: Our revenue is comprised primarily of interest income, service charges and fees, gains on the sale of loans and AFS securities, earnings on corporate owned life insurance policies, and other noninterest income. Other noninterest income is typically service and performance driven in nature and comprised primarily of investment and trust advisory fees. We recognize revenue, excluding interest income and other income specifically scoped out, in accordance with ASC 606, Revenue From Contracts with Customers. Revenue is recognized when our performance obligation has been satisfied according to our contractual obligation. |
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FEDERAL INCOME TAXES | FEDERAL INCOME TAXES: Deferred income tax assets and liabilities are determined using the liability (or balance sheet) method. Under this method, the net deferred tax assets or liabilities are determined based on the tax effects of the temporary differences between the book and tax basis on the various balance sheet assets and liabilities and gives current recognition to changes in tax rates and laws. Valuation allowances are established, where necessary, to reduce deferred tax assets to the amount expected to be realized. Income tax expense is the tax payable or refundable for the year plus or minus the change during the year in deferred tax assets and liabilities. On December 22, 2017, the Tax Act was enacted. The law established a flat corporate federal statutory income tax rate of 21%. In accordance with ASC 740, Income Taxes, the effect of income tax law changes on deferred taxes was recognized as a component of income tax expense related to continuing operations in the period in which the law was enacted. As such, federal income tax expense for the year ended December 31, 2017 reflects the effect of the tax rate change on net deferred tax assets and liabilities (see “Note 16 – Federal Income Taxes” and “Note 17 – Accumulated Other Comprehensive Income (Loss)”). We analyze our filing positions in the jurisdictions where we are required to file income tax returns, as well as all open tax years in these jurisdictions. We also treat interest and penalties attributable to income taxes, to the extent they arise, as a component of our noninterest expenses. |
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DEFINED BENEFIT PENSION PLAN | DEFINED BENEFIT PENSION PLAN: We maintain a noncontributory defined benefit pension plan, which was curtailed effective March 1, 2007. The service cost component of the defined benefit pension plan is included in “compensation and benefits” on the consolidated statements of income and is funded consistent with the requirements of federal laws and regulations. All other costs related to the defined benefit pension plan are included in “other” noninterest expenses on the consolidated statements of income. The current benefit obligation is included in "accrued interest payable and other liabilities" on the consolidated balance sheets. Inherent in the determination of defined benefit pension costs are assumptions concerning future events that will affect the amount and timing of required benefit payments under the plan. These assumptions include demographic assumptions such as mortality, a discount rate used to determine the current benefit obligation and a long-term expected rate of return on plan assets. Net periodic benefit cost includes the interest cost based on the assumed discount rate, an expected return on plan assets based on an actuarially derived market-related value of assets, and amortization of unrecognized net actuarial gains or losses. Actuarial gains and losses result from experience different from that assumed and from changes in assumptions (excluding asset gains and losses not yet reflected in market-related value). Amortization of actuarial gains and losses is included as a component of net periodic defined benefit pension cost. For additional information, see “Note 13 – Benefit Plans.” We maintain a noncontributory defined benefit pension plan, which was curtailed effective March 1, 2007. As a result of the curtailment, future salary increases are no longer considered (the projected benefit obligation is equal to the accumulated benefit obligation), and plan benefits are based on years of service and the individual employee’s five highest consecutive years of compensation out of the last ten years of service through March 1, 2007. |
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MARKETING COSTS | MARKETING COSTS: Marketing costs are expensed as incurred (see “Note 15 – Other Noninterest Expenses”). |
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RECLASSIFICATIONS | RECLASSIFICATIONS: Certain amounts reported in the 2018 and 2017 consolidated financial statements have been reclassified to conform with the 2019 presentation. Other assets and other liabilities on the consolidated balance sheets were increased by $5,195 as of December 31, 2018 to reclassify pension and income tax related liabilities (pension: $3,470, income taxes: $1,725). This resulted in a $5,195 increase in total assets and total liabilities as of December 31, 2018. All other balances and ratios were not materially impacted. |
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EARNINGS PER SHARE | Basic earnings per common share represents income available to common shareholders divided by the weighted average number of common shares outstanding during the period. Diluted earnings per common share includes additional common shares that would have been outstanding if dilutive potential common shares had been issued. Potential common shares that may be issued relate solely to outstanding shares in the Directors Plan, see "Note 13 – Benefit Plans." |
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NONACCRUAL LOAN STATUS | The accrual of interest on commercial and agricultural loans, as well as residential real estate loans, is discontinued at the time a loan is 90 days or more past due unless the credit is well-secured and in the process of short-term collection. Upon transferring a loan to nonaccrual status, we perform an evaluation to determine the net realizable value of the underlying collateral. This evaluation is used to help determine if a charge-off is necessary. Consumer loans are typically charged-off no later than 180 days past due. Past due status is based on the contractual term of the loan. In all cases, a loan is placed in nonaccrual status or charged-off at an earlier date if collection of principal or interest is considered doubtful. When a loan is placed in nonaccrual status or charged-off, all interest accrued in the current calendar year, but not collected, is reversed against interest income while interest accrued in prior calendar years, but not collected, is charged against the ALLL. Loans may be returned to accrual status after six months of continuous performance and achievement of current payment status. |
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IMPAIRED LOANS | Loans may be classified as impaired if they meet one or more of the following criteria:
Impairment is measured on a loan-by-loan basis for commercial and agricultural loans by comparing the loan’s outstanding balance to the present value of expected future cash flows discounted at the loan’s effective interest rate, or the fair value of the collateral, less costs to sell, if the loan is collateral dependent. Large groups of smaller-balance, homogeneous residential real estate and consumer loans are collectively evaluated for impairment by comparing the loan’s unpaid principal balance to the present value of expected future cash flows discounted at the loan’s effective interest rate. We do not recognize interest income on impaired loans in nonaccrual status. For impaired loans not classified as nonaccrual, interest income is recognized daily, as earned, according to the terms of the loan agreement and the principal amount outstanding. |
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TROUBLED DEBT RESTRUCTURINGS | A loan modification is considered to be a TDR when the modification includes terms outside of normal lending practices to a borrower who is experiencing financial difficulties. Typical concessions granted include, but are not limited to:
To determine if a borrower is experiencing financial difficulties, factors we consider include:
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Commitments and Other Matters |
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Dec. 31, 2019 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Commitments and Contingencies Disclosure [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Commitments and Other Matters | Off-Balance-Sheet Activities, Commitments and Other Matters Credit-Related Financial Instruments We are party to credit related financial instruments with off-balance-sheet risk. These financial instruments are entered into in the normal course of business to meet the financing needs of our customers. These financial instruments involve, to varying degrees, elements of credit and IRR in excess of the amounts recognized in the consolidated balance sheets. The contractual or notional amounts of these instruments reflect the extent of involvement we have in a particular class of financial instrument. The following table summarizes our credit related financial instruments with off-balance-sheet risk as of December 31:
Unfunded commitments under lines of credit are commitments for possible future extensions of credit to existing customers. These commitments may expire without being drawn upon and do not necessarily represent future cash requirements. Advances to mortgage brokers are also included in unfunded commitments under lines of credit. The unfunded commitment amount is the difference between our outstanding balances and maximum outstanding aggregate amount. Commitments to grant loans are agreements to lend to a customer as long as there is no violation of any condition established in the contract. Commitments generally have fixed expiration dates or other termination clauses and may require payment of a fee. The amount of collateral obtained, if it is deemed necessary, is based on management's credit evaluation of the customer. Commitments to grant loans include residential mortgage loans that may be committed to be sold to the secondary market. Commercial and standby letters of credit are conditional commitments we issued to guarantee the performance of a customer to a third party. Those guarantees are primarily issued to support private borrowing arrangements, including commercial paper, bond financing, and similar transactions. These commitments to extend credit and letters of credit generally mature within one year. The credit risk involved in these transactions is essentially the same as that involved in extending loans to customers. We evaluate each customer’s credit worthiness on a case-by-case basis. The amount of collateral obtained, if deemed necessary upon the extension of credit, is based on our credit evaluation of the borrower. While we consider standby letters of credit to be guarantees, the amount of the liability related to such guarantees on the commitment date is not significant and a liability related to such guarantees is not recorded on the consolidated balance sheets. Our exposure to credit-related loss in the event of nonperformance by the counter parties to the financial instruments for commitments to extend credit and standby letters of credit could be up to the contractual notional amount of those instruments. We use the same credit policies as we do for extending loans to customers. No significant losses are anticipated as a result of these commitments. Derivative Loan Commitments Mortgage loan commitments are referred to as derivative loan commitments if the loan that will result from exercise of the commitment will be held for sale upon funding. We enter into commitments to fund residential mortgage loans at specific times in the future, with the intention that these loans will subsequently be sold in the secondary market. A mortgage loan commitment binds us to lend funds to a potential borrower at a specified interest rate within a specified period of time, generally up to 60 days after inception of the rate lock. Outstanding derivative loan commitments expose us to the risk that the price of the loans arising from the exercise of the loan commitment might decline from the inception of the rate lock to funding of the loan due to increases in mortgage interest rates. If interest rates increase, the value of these loan commitments decreases. Conversely, if interest rates decrease, the value of these loan commitments increase. The notional amount of undesignated interest rate lock commitments was $618 and $1,088 at December 31, 2019 and 2018, respectively. Forward Loan Sale Commitments To protect against the price risk inherent in derivative loan commitments, we utilize both “mandatory delivery” and “best efforts” forward loan sale commitments to mitigate the risk of potential decreases in the values of loan that would result from the exercise of the derivative loan commitments. With a “mandatory delivery” contract, we commit to deliver a certain principal amount of mortgage loans to an investor at a specified price on or before a specified date. If we fail to deliver the amount of mortgages necessary to fulfill the commitment by the specified date, we are obligated to pay a “pair-off” fee, based on then current market prices, to the investor to compensate the investor for the shortfall. With a “best efforts” contract, we commit to deliver an individual mortgage loan of a specified principal amount and quality to an investor if the loan to the underlying borrower closes. Generally, the price the investor will pay the seller for an individual loan is specified prior to the loan being funded (e.g. on the same day the lender commits to lend funds to a potential borrower). We expect that these forward loan sale commitments will experience changes in fair value opposite to the change in fair value of derivative loan commitments. The notional amount of undesignated forward loan sale commitments was $1,332 and $1,089 at December 31, 2019 and 2018, respectively. The fair value of these forward loan sale commitments was $1,353 and $1,109 at December 31, 2019 and 2018, respectively. The fair values of the rate lock loan commitments related to the origination of mortgage loans that will be held for sale and the forward loan sale commitments are deemed insignificant by management and, accordingly, are not recorded in our consolidated financial statements. Other Matters Banking regulations require us to maintain cash reserve balances in currency or deposits with the FRB. At December 31, 2019 and 2018, the reserve balances amounted to $1,341 and $1,220, respectively. Additionally, correspondent banks may require us to maintain minimum cash reserve balances. At December 31, 2019 and 2018, the reserve balances related to correspondent banks amounted to $400. Banking regulations limit the transfer of assets in the form of dividends, loans, or advances from the Bank to the Corporation. At December 31, 2019, substantially all of the Bank’s assets were restricted from transfer to the Corporation in the form of loans or advances. Bank dividends are the principal source of funds for the Corporation. Payment of dividends without regulatory approval is limited to the current year’s retained net income plus retained net income for the preceding two years, less any required transfers to common stock. At January 1, 2020, the amount available to the Corporation for dividends from the Bank, without regulatory approval, was approximately $20,300. |
AFS Securities |
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Investments, Debt and Equity Securities [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
AFS Securities | AFS Securities The amortized cost and fair value of AFS securities, with gross unrealized gains and losses, are as follows as of December 31:
The amortized cost and fair value of AFS securities by contractual maturity at December 31, 2019 are as follows:
Expected maturities for government sponsored enterprises and states and political subdivisions may differ from contractual maturities because issuers may have the right to call or prepay obligations. As the auction rate money market preferred investments have continual call dates, they are not reported by a specific maturity group. Because of their variable monthly payments, mortgage-backed securities and collateralized mortgage obligations are not reported by a specific maturity group. A summary of the sales activity of AFS securities during the years ended December 31 is displayed in the following table.
The following information pertains to AFS securities with gross unrealized losses at December 31 aggregated by investment category and length of time that individual securities have been in a continuous loss position.
The reduction in unrealized losses on our AFS securities portfolio resulted from recent decreases in intermediate-term and long-term benchmark interest rates. As of December 31, 2019 and 2018, we conducted an analysis to determine whether any AFS securities currently in an unrealized loss position should be identified as other-than-temporarily impaired. Such analyses considered, among other factors, the following criteria:
Based on our analysis, which included the criteria outlined above and the fact that we have asserted that we do not have to sell any AFS securities in an unrealized loss position, we do not believe that the values of any AFS securities are other-than-temporarily impaired as of December 31, 2019 and 2018, with the exception of one municipal bond previously identified which had no activity during the period. |
Deposits |
12 Months Ended | ||||||||||||||||||||||||||||||||||||||||
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Dec. 31, 2019 | |||||||||||||||||||||||||||||||||||||||||
Banking and Thrift [Abstract] | |||||||||||||||||||||||||||||||||||||||||
Deposits | Deposits Scheduled annual maturities of time deposits for each of the next five years, and thereafter, are as follows:
Interest expense on time deposits greater than $250 was $2,001 in 2019, $1,280 in 2018 and $825 in 2017. |
On-Balance Sheet Activities (Narrative) (Details) - USD ($) $ in Thousands |
Dec. 31, 2019 |
Dec. 31, 2018 |
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Derivative [Line Items] | ||
Derivative Asset, Fair Value of Collateral | $ 1,353 | $ 1,109 |
Not Designated as Hedging Instrument [Member] | Interest Rate Lock Commitments [Member] | ||
Derivative [Line Items] | ||
Notional Amount of undesignated commitments | 618 | 1,088 |
Not Designated as Hedging Instrument [Member] | Forward Contracts [Member] | ||
Derivative [Line Items] | ||
Notional Amount of undesignated commitments | $ 1,332 | $ 1,089 |
Deposits (Narrative) (Details) - USD ($) $ in Thousands |
12 Months Ended | ||
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Dec. 31, 2019 |
Dec. 31, 2018 |
Dec. 31, 2017 |
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Banking and Thrift [Abstract] | |||
Interest Expense, Time Deposits, Greater than $250,000 | $ 2,001 | $ 1,280 | $ 825 |
Joint Venture Investment Balance Sheet (Details) - USD ($) $ in Thousands |
Dec. 31, 2019 |
Dec. 31, 2018 |
Dec. 31, 2017 |
Dec. 31, 2016 |
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Assets [Abstract] | ||||
Cash and cash equivalents | $ 60,572 | $ 73,471 | $ 30,848 | $ 22,894 |
Premises and equipment | 26,242 | 27,815 | ||
Goodwill | 48,282 | 48,282 | ||
Other assets | 13,046 | 17,632 | ||
TOTAL ASSETS | 1,814,198 | 1,842,502 | ||
Liabilities and Equity [Abstract] | ||||
TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY | 1,814,198 | 1,842,502 | ||
CSS | ||||
Assets [Abstract] | ||||
Cash and cash equivalents | 2,054 | 1,844 | ||
Escrow funds | 1,659 | 3,337 | ||
Accounts receivable | 1,823 | 1,629 | ||
Premises and equipment | 562 | 466 | ||
Goodwill | 2,010 | 3,063 | ||
Title plants | 132 | 6,212 | ||
Other assets | 878 | 1,010 | ||
TOTAL ASSETS | 9,118 | 17,561 | ||
Liabilities and Equity [Abstract] | ||||
Escrow funds payable | 1,659 | 3,337 | ||
Notes payable | 416 | 465 | ||
Other liabilities | 200 | 211 | ||
Members' equity | 6,843 | 13,548 | ||
TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY | $ 9,118 | $ 17,561 |
Fair Value (Changes in fair value of assets and liabilities) (Details) - USD ($) $ in Thousands |
12 Months Ended | |
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Dec. 31, 2019 |
Dec. 31, 2018 |
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Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | ||
OMSR Impairment | $ 214 | $ 0 |
Investments in joint venture, write down | 3,566 | 0 |
Foreclosed Asset | ||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | ||
Change in fair value recorded through earnings | $ 111 | $ 0 |
Benefit Plans (Changes in the defined benefit pension plan) (Details) - USD ($) $ in Thousands |
12 Months Ended | ||
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Dec. 31, 2019 |
Dec. 31, 2018 |
Dec. 31, 2017 |
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Change in benefit obligation | |||
Benefit obligation, January 1 | $ 9,412 | $ 11,381 | |
Interest cost | 378 | 388 | $ 444 |
Actuarial (gain) loss | 1,216 | (1,194) | |
Defined Benefit Plan, Benefit Obligation, Benefits Paid | 797 | 1,163 | |
Benefit obligation, December 31 | 10,209 | 9,412 | 11,381 |
Change in plan assets | |||
Fair value of plan assets, January 1 | 7,765 | 9,469 | |
Investment return | 1,384 | (541) | |
Contributions | 0 | 0 | |
Defined Benefit Plan, Plan Assets, Benefits Paid | 797 | 1,163 | |
Fair value of plan assets, December 31 | 8,352 | 7,765 | 9,469 |
Deficiency in funded status at December31, included on the consolidated balance sheets in accrued interest payable and other liabilities | (1,857) | (1,647) | |
Accrued benefit cost at January 1 | (1,647) | (1,912) | |
Contributions | 0 | 0 | |
Net periodic cost for the year | (268) | (345) | (412) |
Net change in unrecognized actuarial loss and prior service cost | 58 | 610 | 423 |
Accrued benefit cost at December 31 | $ (1,857) | $ (1,647) | $ (1,912) |
Consolidated Statements of Cash Flows - USD ($) $ in Thousands |
12 Months Ended | ||
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Dec. 31, 2019 |
Dec. 31, 2018 |
Dec. 31, 2017 |
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OPERATING ACTIVITIES | |||
Net income | $ 13,024 | $ 14,021 | $ 13,237 |
Reconciliation of net income to net cash provided by operating activities: | |||
Undistributed Earnings Of Equity Method And Other Investments | 3,320 | (144) | 40 |
Provision for loan losses | 30 | 978 | 253 |
Depreciation | 2,908 | 2,940 | 2,902 |
Amortization of OMSR | 307 | 218 | 340 |
Amortization of acquisition intangibles | 72 | 96 | 119 |
Net amortization of AFS securities | 1,784 | 1,873 | 2,144 |
Unrealized Gain (Loss) on Securities | 0 | 41 | 0 |
Debt Securities, Available-for-sale, Realized Gain (Loss) | (6) | 0 | (142) |
Equity Securities, FV-NI, Realized Gain (Loss) | 0 | (1) | 0 |
Net gain on sale of mortgage loans | (650) | (525) | (647) |
Impairments | (162) | (49) | (50) |
Increase in cash value of corporate owned life insurance policies | (722) | (707) | (726) |
Share-based payment awards under equity compensation plan | 523 | 612 | 640 |
Deferred income tax expense (benefit) | 408 | 275 | 2,836 |
Origination of loans held for sale | (39,937) | (29,242) | (36,276) |
Proceeds from loan sales | 40,041 | 30,969 | 37,179 |
Net changes in operating assets and liabilities which provided (used) cash: | |||
Accrued interest receivable | 427 | 135 | (483) |
Other assets | 1,299 | 115 | 799 |
Accrued interest payable and other liabilities | 637 | 358 | (2,497) |
Net cash provided by (used in) operating activities | 23,303 | 21,963 | 19,668 |
Activity in AFS securities | |||
Sales | 33,840 | 0 | 12,827 |
Maturities, calls, and principal payments | 81,543 | 80,005 | 97,617 |
Purchases | (39,896) | (35,211) | (106,510) |
Proceeds from Sale of Available-for-sale Securities, Equity | 0 | 3,537 | 0 |
Loan principal (originations) collections, net | (58,974) | (37,958) | (81,188) |
Proceeds from sales of foreclosed assets | 706 | 450 | 322 |
Purchases of premises and equipment | (1,335) | (2,305) | (2,038) |
Payments to Acquire Federal Home Loan Bank Stock | 0 | (1,350) | (1,800) |
Payments to Acquire Other Investments | (404) | (651) | (932) |
Net cash provided by (used in) investing activities | 15,480 | 6,517 | (81,702) |
FINANCING ACTIVITIES | |||
Net increase (decrease) in deposits | 21,158 | 27,435 | 70,218 |
Net increase (decrease) in borrowed funds | (64,300) | (4,579) | 7,184 |
Cash dividends paid on common stock | (8,282) | (8,169) | (7,990) |
Proceeds from issuance of common stock | 4,876 | 6,864 | 6,177 |
Common stock repurchased | (4,003) | (7,007) | (5,181) |
Common stock purchased for deferred compensation obligations | (1,131) | (401) | (420) |
Net cash provided by (used in) financing activities | (51,682) | 14,143 | 69,988 |
Increase (decrease) in cash and cash equivalents | (12,899) | 42,623 | 7,954 |
Cash and cash equivalents at beginning of period | 73,471 | 30,848 | 22,894 |
Cash and cash equivalents at end of period | 60,572 | 73,471 | 30,848 |
SUPPLEMENTAL CASH FLOWS INFORMATION: | |||
Interest paid | 17,827 | 15,485 | 12,388 |
Federal income taxes paid | 745 | 50 | 3,120 |
SUPPLEMENTAL NONCASH INFORMATION: | |||
Transfers of loans to foreclosed assets | $ 645 | $ 467 | $ 331 |
Nature of Operations and Summary of Significant Accounting Policies (Narrative) (Details) $ in Thousands |
12 Months Ended | ||
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Dec. 31, 2019
USD ($)
Location
shares
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Dec. 31, 2018
USD ($)
shares
|
Dec. 31, 2017
USD ($)
|
|
Accounting Policies [Abstract] | |||
Other Real Estate, Foreclosed Assets, and Repossessed Assets | $ 456 | $ 355 | |
Number of location of banking operations | Location | 30 | ||
Period for federal fund sold | 1 day | ||
Accounts, Notes, Loans and Financing Receivable [Line Items] | |||
Unpaid principal balance of mortgages serviced for others | $ 259,375 | 259,481 | |
Capitalized mortgage loans on real estate carrying amount | 2,264 | 2,434 | |
Corporation recorded servicing fee revenue | 626 | 651 | $ 671 |
Deferred Compensation Arrangement with Individual, Share-based Payments [Line Items] | |||
Present value of the post retirement benefits payable | 2,875 | 2,751 | |
Periodic policy maintenance costs | $ 125 | $ 0 | $ 577 |
Director [Member] | |||
Deferred Compensation Arrangement with Individual, Share-based Payments [Line Items] | |||
Eligible shares, total | shares | 205,004 | 220,171 | |
Common stock, shares held in Rabbi Trust | shares | 27,069 | 16,673 | |
Minimum [Member] | |||
Property, Plant and Equipment [Line Items] | |||
Useful lives of the related assets | 3 years | ||
Maximum [Member] | |||
Property, Plant and Equipment [Line Items] | |||
Useful lives of the related assets | 40 years | ||
Commercial, Agricultural, and Residential Portfolio Segments [Member] | |||
Accounts, Notes, Loans and Financing Receivable [Line Items] | |||
Number of days past due (or more), accrual of interest discontinued | 90 days | ||
Consumer [Member] | |||
Accounts, Notes, Loans and Financing Receivable [Line Items] | |||
Maximum days of consumer loan charged off | 180 days |
AFS Securities (AFS securities with gross unrealized losses) (Details) $ in Thousands |
Dec. 31, 2019
USD ($)
Securities
|
Dec. 31, 2018
USD ($)
Securities
|
---|---|---|
Debt Securities, Available-for-sale [Line Items] | ||
Gross Unrealized Losses, Less Than Twelve Months | $ 46 | $ 1,178 |
Fair Value, Less Than Twelve Months | 24,236 | 80,103 |
Gross Unrealized Losses, Twelve Months or More | 782 | 7,505 |
Fair Value, Twelve Months or More | 66,129 | 229,996 |
Total Unrealized Losses | $ 828 | $ 8,683 |
Number of Securities in an unrealized loss position, Less Than Twelve Months, Fair Value | Securities | 9 | 66 |
Number of Securities in an unrealized loss position, Twelve Months or More, Fair Value | Securities | 19 | 102 |
Number of Securities in an unrealized loss position, Total Unrealized Losses | Securities | 28 | 168 |
Government sponsored enterprises [Member] | ||
Debt Securities, Available-for-sale [Line Items] | ||
Gross Unrealized Losses, Less Than Twelve Months | $ 0 | |
Fair Value, Less Than Twelve Months | 0 | |
Gross Unrealized Losses, Twelve Months or More | 2 | |
Fair Value, Twelve Months or More | 170 | |
Total Unrealized Losses | 2 | |
States and political subdivisions [Member] | ||
Debt Securities, Available-for-sale [Line Items] | ||
Gross Unrealized Losses, Less Than Twelve Months | $ 0 | 83 |
Fair Value, Less Than Twelve Months | 0 | 14,732 |
Gross Unrealized Losses, Twelve Months or More | 0 | 168 |
Fair Value, Twelve Months or More | 0 | 15,090 |
Total Unrealized Losses | 0 | 251 |
Auction rate money market preferred [Member] | ||
Debt Securities, Available-for-sale [Line Items] | ||
Gross Unrealized Losses, Less Than Twelve Months | 0 | 0 |
Fair Value, Less Than Twelve Months | 0 | 0 |
Gross Unrealized Losses, Twelve Months or More | 81 | 646 |
Fair Value, Twelve Months or More | 3,119 | 2,554 |
Total Unrealized Losses | 81 | 646 |
Mortgage-backed securities [Member] | ||
Debt Securities, Available-for-sale [Line Items] | ||
Gross Unrealized Losses, Less Than Twelve Months | 3 | 896 |
Fair Value, Less Than Twelve Months | 3,974 | 43,485 |
Gross Unrealized Losses, Twelve Months or More | 557 | 4,384 |
Fair Value, Twelve Months or More | 49,701 | 124,253 |
Total Unrealized Losses | 560 | 5,280 |
Collateralized mortgage obligations [Member] | ||
Debt Securities, Available-for-sale [Line Items] | ||
Gross Unrealized Losses, Less Than Twelve Months | 43 | 199 |
Fair Value, Less Than Twelve Months | 20,262 | 21,886 |
Gross Unrealized Losses, Twelve Months or More | 144 | 2,305 |
Fair Value, Twelve Months or More | 13,309 | 87,929 |
Total Unrealized Losses | $ 187 | $ 2,504 |
Premises and Equipment (Tables) |
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Property, Plant and Equipment [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Summary of premises and equipment | A summary of premises and equipment at December 31 follows:
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Fair Value Fair Value Measurement, Policy (Policies) |
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Dec. 31, 2019 | |||||||||||||||||||||
Fair Value Measurement, Policy [Abstract] | |||||||||||||||||||||
Fair Value Measurement, Policy [Policy Text Block] | FAIR VALUE MEASUREMENTS: Fair value refers to the price that would be received to sell an asset or paid to transfer a liability (an exit price) in an orderly transaction between market participants in the market in which the reporting entity transacts such sales or transfers based on the assumptions market participants would use when pricing an asset or liability. Assumptions are developed based on prioritizing information within a fair value hierarchy that gives the highest priority to quoted prices in active markets and the lowest priority to unobservable data, such as the reporting entity’s own data. We may choose to measure eligible items at fair value at specified election dates. For assets and liabilities recorded at fair value, it is our policy to maximize the use of observable inputs and minimize the use of unobservable inputs when developing fair value measurements for those financial instruments for which there is an active market. In cases where the market for a financial asset or liability is not active, we include appropriate risk adjustments that market participants would make for nonperformance and liquidity risks when developing fair value measurements. Fair value measurements for assets and liabilities for which limited or no observable market data exists are accordingly based primarily upon estimates, are often calculated based on the economic and competitive environment, the characteristics of the asset or liability and other factors. Therefore, the results cannot be determined with precision and may not be realized in an actual sale or immediate settlement of the asset or liability. Additionally, there may be inherent weaknesses in any calculation technique, and changes in the underlying assumptions used, including discount rates and estimates of future cash flows, could significantly affect the results of current or future values. We utilize fair value measurements to record fair value adjustments to certain assets and liabilities and to determine fair value disclosures. Investment securities AFS and derivative instruments are recorded at fair value on a recurring basis. Additionally, from time to time, we may be required to record other assets and liabilities at fair value on a nonrecurring basis, such as mortgage loans AFS, impaired loans, foreclosed assets, OMSR, goodwill, and certain other assets and liabilities. These nonrecurring fair value adjustments typically involve the application of lower of cost or market accounting or write downs of individual assets. Fair Value Hierarchy Under fair value measurement and disclosure authoritative guidance, we group assets and liabilities measured at fair value into three levels, based on the markets in which the assets and liabilities are traded, and the reliability of the assumptions used to determine fair value, based on the prioritization of inputs in the valuation techniques. These levels are:
The asset’s or liability’s fair value measurement level within the fair value hierarchy is based on the lowest level of any input that is significant to the fair value measurement. Valuation techniques maximize the use of observable inputs and minimize the use of unobservable inputs. Transfers between measurement levels are recognized at the end of reporting periods. For further discussion of fair value considerations, refer to “Note 18 – Fair Value.” Under fair value measurement and disclosure authoritative guidance, we group assets and liabilities measured at fair value into three levels, based on the markets in which the assets and liabilities are traded, and the reliability of the assumptions used to determine fair value, based on the prioritization of inputs in the valuation techniques. These levels are:
The asset’s or liability’s fair value measurement level within the fair value hierarchy is based on the lowest level of any input that is significant to the fair value measurement. Valuation techniques maximize the use of observable inputs and minimize the use of unobservable inputs. Transfers between measurement levels are recognized at the end of reporting periods. Fair value measurement requires the use of an exit price notion which may differ from entrance pricing. Generally, we believe our assets and liabilities classified as Level 1 or Level 2 approximate an exit price notion. |
Pending Accounting Standards Updates |
12 Months Ended |
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Dec. 31, 2019 | |
New Accounting Pronouncements and Changes in Accounting Principles [Abstract] | |
Pending Accounting Standards Updates | Accounting Standards Updates Recently Adopted Accounting Standards Updates ASU No. 2016-02: “Leases (Topic 842)” In February 2016, ASU No. 2016-02 was issued to create Topic 842 - Leases which requires recognition of lease assets and lease liabilities on the balance sheet for leases previously classified as operating leases. Accounting guidance is for both lessee and lessor accounting. Under lessee accounting, a lessee should recognize in the statement of financial position a liability to make lease payments (the lease liability) and a right-of-use asset representing its right to use the underlying asset for the lease term. For finance leases, a lessee is required to do the following: 1) recognize a right-of-use asset and a lease liability, initially measured at the present value of the lease payments, in the statement of financial position; 2) recognize interest on the lease liability separately from amortization of the right-of-use asset in the statement of comprehensive income; and 3) classify repayments of the principal portion of the lease liability within financing activities and payments of interest on the lease liability and variable lease payments within operating activities in the statement of cash flows. For operating leases, a lessee is required to do the following: 1) recognize a right-of-use asset and a lease liability, initially measured at the present value of the lease payments, in the statement of financial position; 2) recognize a single lease cost, calculated so that the cost of the lease is allocated over the lease term on a generally straight-line basis; and 3) classify all cash payments within operating activities in the statement of cash flows. The accounting applied by a lessor is largely unchanged from that applied under previous GAAP. The new authoritative guidance was effective on January 1, 2019. We reviewed our lease agreements to determine the appropriate treatment under this guidance. These changes resulted in the recognition of a $72 operating lease asset and liability on the consolidated balance sheet as of January 1, 2019 which was restated prospectively. Given the current insignificant impact to our operating results, further financial statement disclosures were not considered necessary as of December 31, 2019. Pending Accounting Standards Updates ASU No. 2016-13: “Financial Instruments - Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments” In June 2016, ASU No. 2016-13 was issued and updated the measurement for credit losses for AFS debt securities and assets measured at amortized cost which include loans, trade receivables, and any other financial assets with the contractual right to receive cash. Current GAAP requires an “incurred loss” methodology for recognizing credit losses that delays recognition until it is probable a loss has been incurred. Under the incurred loss approach, entities are limited to a probable initial recognition threshold when credit losses are measured under GAAP; an entity generally only considers past events and current conditions in measuring the incurred loss. Under the new guidance, the incurred loss impairment methodology in current GAAP is replaced with a methodology that reflects current expected credit losses (CECL). This methodology requires consideration of a broader range of reasonable and supportable information to calculate credit loss estimates. The measurement of expected credit losses is based on relevant information about past events, including historical experience, current conditions, and reasonable and supportable forecasts that affect the collectability of the reported amount. An entity must use judgment in determining the relevant information and estimation methods that are appropriate in its circumstances which applies to assets measured either collectively or individually. The update allows an entity to revert to historical loss information that is reflective of the contractual term (considering the effect of prepayments) for periods that are beyond the time frame for which the entity is able to develop reasonable and supportable forecasts. In addition, the disclosures of credit quality indicators in relation to the amortized cost of financing receivables, a current disclosure requirement, are further disaggregated by year of origination (or vintage). The vintage information will be useful for financial statement users to better assess changes in underwriting standards and credit quality trends in asset portfolios over time and the effect of those changes on credit losses. Overall, the update will allow entities the ability to measure expected credit losses without the restriction of incurred or probable losses that exist under current GAAP. For users of the financial statements, the update requires disclosure of decision-useful information about the expected credit losses on financial instruments and other commitments to extend credit held by a reporting entity at each reporting date. The new authoritative guidance was effective for interim and annual periods beginning after December 15, 2019 for select filers. Effective October 16, 2019, the FASB approved changes to the implementation date of this guidance for some filers. As a small reporting company, as defined by the SEC, our implementation date was delayed from January 1, 2020 to January 1, 2023. Early adoption continues to be permissible under the revised implementation date; currently we have no plans for early adoption. This guidance may have a significant impact on our operations and financial statement disclosures as well as that of the banking industry as a whole. We have invested a considerable amount of effort toward this guidance and will continue to invest considerable effort until our implementation date. A committee was formed and is accountable for timely and accurate adoption of the guidance. A service provider that has focused on the ALLL for more than 10 years and serves hundreds of financial institutions has been engaged to provide us with education, advisory, and software solutions exclusively related to the ACL. We will run parallel processes which will help to ensure we are ready to calculate, review, and report the ACL by the required implementation date. ASU No. 2018-13: “Fair Value Measurement (Topic 820): Disclosure Framework-Changes to the Disclosure Requirements for Fair Value Measurement” In August 2018, ASU No. 2018-13 was issued and provided an updated framework related to fair value disclosures. For entities required to make disclosures about recurring or nonrecurring fair value measurements, the update provides disclosure modifications which include the removal, modification and addition of specific disclosure requirements. The new authoritative guidance is effective for interim and annual periods beginning after December 15, 2019 and will impact our financial statement disclosures. ASU No. 2018-14: “Compensation - Retirement Benefits - Defined Pension Plans - General (Subtopic 715-20): Disclosure Framework - Changes to the Disclosure Requirements for Defined Benefit Plans” In August 2018, ASU No. 2018-14 was issued and provided an updated framework related to defined benefit plans. For employers that sponsor defined benefit pension or other postretirement plans, the update provides disclosure modifications which include the removal of six specific requirements, the addition of two specific requirements and clarification to existing requirements. Disclosure additions include 1) the weighted-average interest crediting rates for cash balance plans and other plans with promised interest crediting rates; 2) an explanation of the reasons for significant gains and losses related to changes in the benefit obligation for the period. Clarification items relate to 1) the projected benefit obligation (PBO) and fair value of plan assets for plans with PBOs in excess of plan assets; and 2) the accumulated benefit obligation (ABO) and fair value of plan assets for plans with ABOs in excess of plan assets. The new authoritative guidance is effective for fiscal years ending after December 15, 2020, with early adoption permitted, and will likely impact our financial statement disclosures. ASU No. 2018-15: “Intangibles - Goodwill and Other - Internal-Use Software (Subtopic 350-40): Customer’s Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement That Is a Service Contract” In August 2018, ASU No. 2018-15 was issued and provided guidance on the accounting for implementation, setup, and other upfront costs (collectively referred to as implementation costs) for entities that are a customer in a hosting arrangement that is a service contract. The guidance also provides clarification on requirements to capitalize implementation costs and the required accounting for expenses related to capitalization of implementation costs. The new authoritative guidance is effective for interim and annual periods beginning after December 15, 2019. Based on prospective approach, we will review future arrangements to determine the appropriate treatment under this guidance. These changes are not expected to have a significant impact on our operating results or financial statement disclosures upon adoption. |
Joint Venture Investment (Notes) |
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Equity Method Investments and Joint Ventures [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Equity Method Investments and Joint Ventures Disclosure | Investment in Joint Venture In 2008, we merged the assets of our wholly owned subsidiary, IBT Title and Insurance Agency, Inc. (“IBT Title”) into a 50/50 joint venture with Corporate Title Agency, LLC, a third-party business based in Traverse City, Michigan, to form CSS. The purpose of the joint venture was to help IBT Title expand its service area and to take advantage of economies of scale. As a 50% owner of the membership units of this entity, we account for our investment under the equity method of accounting, and our share of income and loss from the joint venture is included in noninterest income. The following tables provide financial information for CSS. Condensed Balance Sheets
Condensed Statements of Income
CSS is a limited liability company. Therefore, federal taxable income and deductions are passed through to the members, and no provision for federal income taxes is reflected in the condensed statements of income. During the second half of 2019, a new line of business was proposed by the CSS General Manager which did not interest us as it was unrelated to the Bank's core business. Subsequently, the General Manager of CSS chose to have a company valuation performed during the fourth quarter of 2019 for purposes of investor planning, and the independent, third-party valuation identified that CSS’ intangible assets required an impairment of $7,133. As a 50% owner of the membership units of CSS, we recognized the reduced value of our investment which resulted in a reduction to income of $3,566 in the fourth quarter of 2019. While we continually analyze all investments, there are no current plans to change our ownership or investment in CSS. |
Off-Balance-Sheet Activities |
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Dec. 31, 2019 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Commitments and Contingencies Disclosure [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Off-Balance-Sheet Activities | Off-Balance-Sheet Activities, Commitments and Other Matters Credit-Related Financial Instruments We are party to credit related financial instruments with off-balance-sheet risk. These financial instruments are entered into in the normal course of business to meet the financing needs of our customers. These financial instruments involve, to varying degrees, elements of credit and IRR in excess of the amounts recognized in the consolidated balance sheets. The contractual or notional amounts of these instruments reflect the extent of involvement we have in a particular class of financial instrument. The following table summarizes our credit related financial instruments with off-balance-sheet risk as of December 31:
Unfunded commitments under lines of credit are commitments for possible future extensions of credit to existing customers. These commitments may expire without being drawn upon and do not necessarily represent future cash requirements. Advances to mortgage brokers are also included in unfunded commitments under lines of credit. The unfunded commitment amount is the difference between our outstanding balances and maximum outstanding aggregate amount. Commitments to grant loans are agreements to lend to a customer as long as there is no violation of any condition established in the contract. Commitments generally have fixed expiration dates or other termination clauses and may require payment of a fee. The amount of collateral obtained, if it is deemed necessary, is based on management's credit evaluation of the customer. Commitments to grant loans include residential mortgage loans that may be committed to be sold to the secondary market. Commercial and standby letters of credit are conditional commitments we issued to guarantee the performance of a customer to a third party. Those guarantees are primarily issued to support private borrowing arrangements, including commercial paper, bond financing, and similar transactions. These commitments to extend credit and letters of credit generally mature within one year. The credit risk involved in these transactions is essentially the same as that involved in extending loans to customers. We evaluate each customer’s credit worthiness on a case-by-case basis. The amount of collateral obtained, if deemed necessary upon the extension of credit, is based on our credit evaluation of the borrower. While we consider standby letters of credit to be guarantees, the amount of the liability related to such guarantees on the commitment date is not significant and a liability related to such guarantees is not recorded on the consolidated balance sheets. Our exposure to credit-related loss in the event of nonperformance by the counter parties to the financial instruments for commitments to extend credit and standby letters of credit could be up to the contractual notional amount of those instruments. We use the same credit policies as we do for extending loans to customers. No significant losses are anticipated as a result of these commitments. Derivative Loan Commitments Mortgage loan commitments are referred to as derivative loan commitments if the loan that will result from exercise of the commitment will be held for sale upon funding. We enter into commitments to fund residential mortgage loans at specific times in the future, with the intention that these loans will subsequently be sold in the secondary market. A mortgage loan commitment binds us to lend funds to a potential borrower at a specified interest rate within a specified period of time, generally up to 60 days after inception of the rate lock. Outstanding derivative loan commitments expose us to the risk that the price of the loans arising from the exercise of the loan commitment might decline from the inception of the rate lock to funding of the loan due to increases in mortgage interest rates. If interest rates increase, the value of these loan commitments decreases. Conversely, if interest rates decrease, the value of these loan commitments increase. The notional amount of undesignated interest rate lock commitments was $618 and $1,088 at December 31, 2019 and 2018, respectively. Forward Loan Sale Commitments To protect against the price risk inherent in derivative loan commitments, we utilize both “mandatory delivery” and “best efforts” forward loan sale commitments to mitigate the risk of potential decreases in the values of loan that would result from the exercise of the derivative loan commitments. With a “mandatory delivery” contract, we commit to deliver a certain principal amount of mortgage loans to an investor at a specified price on or before a specified date. If we fail to deliver the amount of mortgages necessary to fulfill the commitment by the specified date, we are obligated to pay a “pair-off” fee, based on then current market prices, to the investor to compensate the investor for the shortfall. With a “best efforts” contract, we commit to deliver an individual mortgage loan of a specified principal amount and quality to an investor if the loan to the underlying borrower closes. Generally, the price the investor will pay the seller for an individual loan is specified prior to the loan being funded (e.g. on the same day the lender commits to lend funds to a potential borrower). We expect that these forward loan sale commitments will experience changes in fair value opposite to the change in fair value of derivative loan commitments. The notional amount of undesignated forward loan sale commitments was $1,332 and $1,089 at December 31, 2019 and 2018, respectively. The fair value of these forward loan sale commitments was $1,353 and $1,109 at December 31, 2019 and 2018, respectively. The fair values of the rate lock loan commitments related to the origination of mortgage loans that will be held for sale and the forward loan sale commitments are deemed insignificant by management and, accordingly, are not recorded in our consolidated financial statements. Other Matters Banking regulations require us to maintain cash reserve balances in currency or deposits with the FRB. At December 31, 2019 and 2018, the reserve balances amounted to $1,341 and $1,220, respectively. Additionally, correspondent banks may require us to maintain minimum cash reserve balances. At December 31, 2019 and 2018, the reserve balances related to correspondent banks amounted to $400. Banking regulations limit the transfer of assets in the form of dividends, loans, or advances from the Bank to the Corporation. At December 31, 2019, substantially all of the Bank’s assets were restricted from transfer to the Corporation in the form of loans or advances. Bank dividends are the principal source of funds for the Corporation. Payment of dividends without regulatory approval is limited to the current year’s retained net income plus retained net income for the preceding two years, less any required transfers to common stock. At January 1, 2020, the amount available to the Corporation for dividends from the Bank, without regulatory approval, was approximately $20,300. |
Fair Value (Recorded amount of assets and liabilities measured at fair value) (Details) - USD ($) $ in Thousands |
Dec. 31, 2019 |
Dec. 31, 2018 |
---|---|---|
AFS Securities | ||
AFS securities | $ 429,839 | $ 494,834 |
Debt Securities, Available-for-sale | 429,839 | 494,834 |
Fair value, total | 456,007 | 525,556 |
Level 1 [Member] | ||
AFS Securities | ||
Fair value, total | $ 0 | $ 0 |
Percent of assets and liabilities measured at fair value | 0.00% | 0.00% |
Level 2 [Member] | ||
AFS Securities | ||
Fair value, total | $ 429,906 | $ 495,157 |
Percent of assets and liabilities measured at fair value | 94.28% | 94.22% |
Level 3 [Member] | ||
AFS Securities | ||
Fair value, total | $ 26,101 | $ 30,399 |
Percent of assets and liabilities measured at fair value | 5.72% | 5.78% |
Recurring items [Member] | ||
AFS Securities | ||
AFS securities | $ 429,839 | $ 494,834 |
Derivative Assets (Liabilities), at Fair Value, Net | 67 | 323 |
Recurring items [Member] | Government sponsored enterprises [Member] | ||
AFS Securities | ||
AFS securities | 0 | 170 |
Recurring items [Member] | States and political subdivisions [Member] | ||
AFS Securities | ||
AFS securities | 169,752 | 190,866 |
Recurring items [Member] | Auction rate money market preferred [Member] | ||
AFS Securities | ||
AFS securities | 3,119 | 2,554 |
Recurring items [Member] | Mortgage-backed securities [Member] | ||
AFS Securities | ||
AFS securities | 140,204 | 184,484 |
Recurring items [Member] | Collateralized mortgage obligations [Member] | ||
AFS Securities | ||
AFS securities | 116,764 | 116,760 |
Recurring items [Member] | Level 1 [Member] | ||
AFS Securities | ||
AFS securities | 0 | 0 |
Derivative Assets (Liabilities), at Fair Value, Net | 0 | 0 |
Recurring items [Member] | Level 1 [Member] | Government sponsored enterprises [Member] | ||
AFS Securities | ||
Debt Securities, Available-for-sale | 0 | 0 |
Recurring items [Member] | Level 1 [Member] | States and political subdivisions [Member] | ||
AFS Securities | ||
Debt Securities, Available-for-sale | 0 | 0 |
Recurring items [Member] | Level 1 [Member] | Auction rate money market preferred [Member] | ||
AFS Securities | ||
Debt Securities, Available-for-sale | 0 | 0 |
Recurring items [Member] | Level 1 [Member] | Mortgage-backed securities [Member] | ||
AFS Securities | ||
Debt Securities, Available-for-sale | 0 | 0 |
Recurring items [Member] | Level 1 [Member] | Collateralized mortgage obligations [Member] | ||
AFS Securities | ||
Debt Securities, Available-for-sale | 0 | 0 |
Recurring items [Member] | Level 2 [Member] | ||
AFS Securities | ||
AFS securities | 429,839 | 494,834 |
Derivative Assets (Liabilities), at Fair Value, Net | 67 | 323 |
Recurring items [Member] | Level 2 [Member] | Government sponsored enterprises [Member] | ||
AFS Securities | ||
Debt Securities, Available-for-sale | 0 | 170 |
Recurring items [Member] | Level 2 [Member] | States and political subdivisions [Member] | ||
AFS Securities | ||
Debt Securities, Available-for-sale | 169,752 | 190,866 |
Recurring items [Member] | Level 2 [Member] | Auction rate money market preferred [Member] | ||
AFS Securities | ||
Debt Securities, Available-for-sale | 3,119 | 2,554 |
Recurring items [Member] | Level 2 [Member] | Mortgage-backed securities [Member] | ||
AFS Securities | ||
Debt Securities, Available-for-sale | 140,204 | 184,484 |
Recurring items [Member] | Level 2 [Member] | Collateralized mortgage obligations [Member] | ||
AFS Securities | ||
Debt Securities, Available-for-sale | 116,764 | 116,760 |
Recurring items [Member] | Level 3 [Member] | ||
AFS Securities | ||
AFS securities | 0 | 0 |
Derivative Assets (Liabilities), at Fair Value, Net | 0 | 0 |
Recurring items [Member] | Level 3 [Member] | Government sponsored enterprises [Member] | ||
AFS Securities | ||
Debt Securities, Available-for-sale | 0 | 0 |
Recurring items [Member] | Level 3 [Member] | States and political subdivisions [Member] | ||
AFS Securities | ||
Debt Securities, Available-for-sale | 0 | 0 |
Recurring items [Member] | Level 3 [Member] | Auction rate money market preferred [Member] | ||
AFS Securities | ||
Debt Securities, Available-for-sale | 0 | 0 |
Recurring items [Member] | Level 3 [Member] | Mortgage-backed securities [Member] | ||
AFS Securities | ||
Debt Securities, Available-for-sale | 0 | 0 |
Recurring items [Member] | Level 3 [Member] | Collateralized mortgage obligations [Member] | ||
AFS Securities | ||
Debt Securities, Available-for-sale | 0 | 0 |
Nonrecurring items [Member] | ||
AFS Securities | ||
Impaired loans (net of the allowance for loan losses) | 19,135 | 20,045 |
OMSR | 2,264 | 2,434 |
Investment in CSS | 4,246 | 7,565 |
Foreclosed assets | 456 | 355 |
Nonrecurring items [Member] | Level 1 [Member] | ||
AFS Securities | ||
Impaired loans (net of the allowance for loan losses) | 0 | 0 |
OMSR | 0 | 0 |
Investment in CSS | 0 | 0 |
Foreclosed assets | 0 | 0 |
Nonrecurring items [Member] | Level 2 [Member] | ||
AFS Securities | ||
Impaired loans (net of the allowance for loan losses) | 0 | 0 |
OMSR | 0 | 0 |
Investment in CSS | 0 | 0 |
Foreclosed assets | 0 | 0 |
Nonrecurring items [Member] | Level 3 [Member] | ||
AFS Securities | ||
Impaired loans (net of the allowance for loan losses) | 19,135 | 20,045 |
OMSR | 2,264 | 2,434 |
Investment in CSS | 4,246 | 7,565 |
Foreclosed assets | $ 456 | $ 355 |
Borrowed Funds (Short-term borrowings) (Details) - USD ($) $ in Thousands |
12 Months Ended | |
---|---|---|
Dec. 31, 2019 |
Dec. 31, 2018 |
|
Securities Sold under Agreements to Repurchase [Member] | ||
Short-term Debt [Line Items] | ||
Maximum Month End Balance | $ 37,441 | $ 63,133 |
Quarter to Date Average Balance | $ 31,406 | $ 38,036 |
Weighted Average Interest Rate During the Period | 0.10% | 0.10% |
Federal Funds Purchased [Member] | ||
Short-term Debt [Line Items] | ||
Maximum Month End Balance | $ 7,070 | $ 16,200 |
Quarter to Date Average Balance | $ 687 | $ 3,741 |
Weighted Average Interest Rate During the Period | 2.60% | 1.90% |
Benefit Plans (Components of net periodic benefit cost) (Details) - USD ($) $ in Thousands |
12 Months Ended | |||
---|---|---|---|---|
Dec. 31, 2020 |
Dec. 31, 2019 |
Dec. 31, 2018 |
Dec. 31, 2017 |
|
Defined Benefit Plan Disclosure [Line Items] | ||||
Interest cost on benefit obligation | $ 378 | $ 388 | $ 444 | |
Expected return on plan assets | (452) | (554) | (546) | |
Amortization of unrecognized actuarial net loss | 214 | 242 | 279 | |
Settlement loss | 128 | 269 | 235 | |
Net periodic benefit cost | $ 268 | $ 345 | $ 412 | |
Scenario, Forecast [Member] | ||||
Defined Benefit Plan Disclosure [Line Items] | ||||
Interest cost on benefit obligation | $ 306 | |||
Expected return on plan assets | (488) | |||
Amortization of unrecognized actuarial net loss | 205 | |||
Net periodic benefit cost | $ 23 |
Nature of Operations and Summary of Significant Accounting Policies |
12 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Dec. 31, 2019 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Accounting Policies [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Nature of Operations and Summary of Significant Accounting Policies | Nature of Operations and Summary of Significant Accounting Policies BASIS OF PRESENTATION AND CONSOLIDATION: The consolidated financial statements include the accounts of Isabella Bank Corporation, a financial services holding company, and its wholly owned subsidiary, Isabella Bank. All intercompany balances and accounts have been eliminated in consolidation. References to “the Corporation”, “Isabella”, “we”, “our”, “us”, and similar terms refer to the consolidated entity consisting of Isabella Bank Corporation and its subsidiary. References to Isabella Bank or the “Bank” refers to Isabella Bank Corporation’s subsidiary, Isabella Bank. For additional information, see “Note 19 – Related Party Transactions.” NATURE OF OPERATIONS: Isabella Bank Corporation is a financial services holding company offering a wide array of financial products and services in several mid-Michigan counties. Our banking subsidiary, Isabella Bank, offers banking services through 30 locations, 24 hour banking services locally and nationally through shared automatic teller machines, 24 hour online banking, mobile banking, and direct deposits to businesses, institutions, individuals and their families. Lending services offered include commercial loans, agricultural loans, residential real estate loans, and consumer loans. Deposit services include interest and noninterest bearing checking accounts, savings accounts, money market accounts, certificates of deposit, direct deposits, cash management services, mobile and internet banking, electronic bill pay services, and automated teller machines. Other related financial products include trust and investment services, safe deposit box rentals, and credit life insurance. Active competition, principally from other commercial banks, savings and loan associations, mortgage brokers, finance companies, credit unions, and retail brokerage firms exists in all of our principal markets. Our results of operations can be significantly affected by changes in interest rates, changes in the local economic environment and changes in regulations. USE OF ESTIMATES: In preparing consolidated financial statements in conformity with accounting principles generally accepted in the United States of America, we make estimates and assumptions that affect the reported amounts of assets and liabilities as of the date of the consolidated balance sheet and reported amounts of revenues and expenses during the reporting year. Actual results could differ from those estimates. Material estimates that are particularly susceptible to significant change in the near term relate to the determination of the ALLL, the fair value of AFS investment securities, the valuation of goodwill and other intangible assets and equity securities without readily determinable fair values related to our ownership interest in Corporate Settlement Solutions, LLC (“CSS”). FAIR VALUE MEASUREMENTS: Fair value refers to the price that would be received to sell an asset or paid to transfer a liability (an exit price) in an orderly transaction between market participants in the market in which the reporting entity transacts such sales or transfers based on the assumptions market participants would use when pricing an asset or liability. Assumptions are developed based on prioritizing information within a fair value hierarchy that gives the highest priority to quoted prices in active markets and the lowest priority to unobservable data, such as the reporting entity’s own data. We may choose to measure eligible items at fair value at specified election dates. For assets and liabilities recorded at fair value, it is our policy to maximize the use of observable inputs and minimize the use of unobservable inputs when developing fair value measurements for those financial instruments for which there is an active market. In cases where the market for a financial asset or liability is not active, we include appropriate risk adjustments that market participants would make for nonperformance and liquidity risks when developing fair value measurements. Fair value measurements for assets and liabilities for which limited or no observable market data exists are accordingly based primarily upon estimates, are often calculated based on the economic and competitive environment, the characteristics of the asset or liability and other factors. Therefore, the results cannot be determined with precision and may not be realized in an actual sale or immediate settlement of the asset or liability. Additionally, there may be inherent weaknesses in any calculation technique, and changes in the underlying assumptions used, including discount rates and estimates of future cash flows, could significantly affect the results of current or future values. We utilize fair value measurements to record fair value adjustments to certain assets and liabilities and to determine fair value disclosures. Investment securities AFS and derivative instruments are recorded at fair value on a recurring basis. Additionally, from time to time, we may be required to record other assets and liabilities at fair value on a nonrecurring basis, such as mortgage loans AFS, impaired loans, foreclosed assets, OMSR, goodwill, and certain other assets and liabilities. These nonrecurring fair value adjustments typically involve the application of lower of cost or market accounting or write downs of individual assets. Fair Value Hierarchy Under fair value measurement and disclosure authoritative guidance, we group assets and liabilities measured at fair value into three levels, based on the markets in which the assets and liabilities are traded, and the reliability of the assumptions used to determine fair value, based on the prioritization of inputs in the valuation techniques. These levels are:
The asset’s or liability’s fair value measurement level within the fair value hierarchy is based on the lowest level of any input that is significant to the fair value measurement. Valuation techniques maximize the use of observable inputs and minimize the use of unobservable inputs. Transfers between measurement levels are recognized at the end of reporting periods. For further discussion of fair value considerations, refer to “Note 18 – Fair Value.” SIGNIFICANT GROUP CONCENTRATIONS OF CREDIT RISK: Most of our activities are conducted with customers located within the central Michigan area. A significant amount of our outstanding loans are secured by commercial and residential real estate. Other than these types of loans, there is no significant concentration to any other industry or any one customer. CASH AND CASH EQUIVALENTS: For purposes of the consolidated statements of cash flows, cash and cash equivalents include cash and balances due from banks, federal funds sold, and other deposit accounts. Generally, federal funds sold are for a one day period. We maintain deposit accounts in various financial institutions which generally exceed federally insured limits or are not insured. We do not believe we are exposed to any significant interest, credit or other financial risk as a result of these deposits. AFS SECURITIES: Purchases of investment securities are generally classified as AFS. However, we may elect to classify securities as either held to maturity or trading. Securities classified as AFS debt securities are recorded at fair value, with unrealized gains and losses, net of the effect of deferred income taxes, excluded from earnings and reported in other comprehensive income. Included in AFS securities are auction rate money market preferred securities. These investments, for federal income tax purposes, have no federal income tax impact given the nature of the investments. Auction rate money market preferred securities are recorded at fair value, with unrealized gains and losses excluded from earnings and reported in other comprehensive income. Purchase premiums and discounts are recognized in interest income using the interest method over the term of the securities. Realized gains and losses on the sale of AFS securities are determined using the specific identification method. AFS securities are reviewed quarterly for possible OTTI. In determining whether an OTTI exists for debt securities, we assert that: (a) we do not have the intent to sell the security; and (b) it is more likely than not we will not have to sell the security before recovery of its cost basis. If these conditions are not met, we recognize an OTTI charge through earnings for the difference between the debt security’s amortized cost basis and its fair value, and such amount is included in noninterest income. For debt securities that do not meet the above criteria, and we do not expect to recover the security’s amortized cost basis, the security is considered other-than-temporarily impaired. For these debt securities, we separate the total impairment into the credit risk loss component and the amount of the loss related to market and other risk factors. In order to determine the amount of the credit loss for a debt security, we calculate the recovery value by performing a discounted cash flow analysis based on the current cash flows and future cash flows we expect to recover. The amount of the total OTTI related to the credit risk is recognized in earnings and is included in noninterest income. The amount of the total OTTI related to other risk factors is recognized as a component of other comprehensive income. For debt securities that have recognized OTTI through earnings, if through subsequent evaluation there is a significant increase in the cash flow expected, the difference between the amortized cost basis and the cash flows expected to be collected is accreted as interest income. LOANS: Loans that we have the intent and ability to hold for the foreseeable future or until maturity or payoff are reported at their outstanding principal balance adjusted for any charge-offs, the ALLL, and any deferred fees or costs. Interest income on loans is accrued over the term of the loan based on the principal amount outstanding. Loan origination fees and certain direct loan origination costs are capitalized and recognized as a component of interest income over the term of the loan using the appropriate yield methods. The accrual of interest on agricultural, commercial and mortgage loans is discontinued at the time the loan is 90 days or more past due unless the credit is well secured and in the process of collection. Consumer loans are typically charged-off no later than 180 days past due. Past due status is based on contractual terms of the loan. In all cases, loans are placed in nonaccrual or charged-off at an earlier date if collection of principal or interest is considered doubtful. For loans that are placed on nonaccrual status or charged-off, all interest accrued in the current calendar year, but not collected, is reversed against interest income while interest accrued in prior calendar years, but not collected is charged against the ALLL. Interest income on loans in nonaccrual status is not recognized until qualifying for return to accrual status. Loans are returned to accrual status when all principal and interest amounts contractually due are brought current and future payments are reasonably assured. For impaired loans not classified as nonaccrual, interest income continues to be accrued over the term of the loan based on the principal amount outstanding. ALLOWANCE FOR LOAN AND LEASE LOSSES: The ALLL 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 we believe the uncollectability of the loan balance is confirmed. Subsequent recoveries, if any, are credited to the allowance. We evaluate the ALLL on a regular basis. Our periodic review of the collectability of loans considers 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 revision as more information becomes available. The ALLL consists of specific, general, and unallocated components. The specific component relates to loans that are deemed to be impaired. For such loans that are analyzed for specific allowance allocations, an allowance is established when the discounted cash flows or collateral value, less costs to sell, of the impaired loan is lower than the carrying value of that loan. The general component covers non-impaired loans and is based on historical loss experience adjusted for current conditions. An unallocated component is maintained to cover uncertainties that we believe affect our estimate of probable losses based on qualitative factors. The unallocated component of the allowance reflects the margin of imprecision inherent in the underlying assumptions used in the methodologies for estimating specific and general losses in the portfolio. Loans may be classified as impaired if they meet one or more of the following criteria:
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, or the fair value of the collateral, less costs to sell, if the loan is collateral dependent. Large groups of smaller-balance, homogeneous loans are collectively evaluated for impairment. LOANS HELD FOR SALE: Mortgage loans held for sale on the secondary market are carried at the lower of cost or fair value as determined by aggregating outstanding commitments from investors or current investor yield requirements. Net unrealized losses, if any, would be recognized as a component of other noninterest expenses. Mortgage loans held for sale are sold with the mortgage servicing rights retained by us. Gains or losses on sales of mortgage loans are recognized based on the difference between the selling price and the carrying value of the related mortgage loans sold. TRANSFERS OF FINANCIAL ASSETS: Transfers of financial assets, including mortgage loans and participation loans, are accounted for as sales when control over the assets has been surrendered. Control over transferred assets is determined to be surrendered when 1) the assets have been legally isolated from us, 2) the transferee obtains the right (free of conditions that constrain it from taking advantage of the right) to pledge or exchange the transferred assets, and 3) we do not maintain effective control over the transferred assets through an agreement to repurchase them before their maturity. Other than servicing, we have no substantive continuing involvement related to these loans. SERVICING: Servicing assets are recognized as separate assets when rights are acquired through purchase or through sale of financial assets. We have no purchased servicing rights. For sales of mortgage loans, a portion of the cost of originating the loan is allocated to the servicing right based on relative fair value. Fair value is based on market prices for comparable mortgage servicing contracts, when available, or alternatively, is based on a valuation model that calculates the present value of estimated future net servicing income. The valuation model incorporates assumptions that market participants would use in estimating future net servicing income, such as the cost to service, the discount rate, the custodial earnings rate, an inflation rate, ancillary income, prepayment speeds and default rates and losses. Servicing assets are evaluated for impairment based upon the fair value of the rights as compared to amortized cost. Impairment is determined by stratifying rights into tranches based on predominant risk characteristics, such as interest rate, loan type, and investor type. Impairment is recognized through a valuation allowance for an individual tranche, to the extent that fair value is less than the capitalized amount for the tranche. If we later determine that all or a portion of the impairment no longer exists for a particular tranche, a reduction of the valuation allowance may be recorded as an increase to income. Capitalized servicing rights are reported in other assets and are amortized into noninterest income in proportion to, and over the period of, the estimated future net servicing income of the underlying financial assets. The unpaid principal balance of mortgages serviced for others was $259,375 and $259,481 with capitalized servicing rights of $2,264 and $2,434 at December 31, 2019 and 2018, respectively, which are included in other assets. Servicing fee income is recorded for fees earned for servicing loans for others. The fees are based on a contractual percentage of the outstanding principal or a fixed amount per loan and are recorded as income when earned. We recorded servicing fee revenue of $626, $651, and $671 related to residential mortgage loans serviced for others during 2019, 2018, and 2017, respectively, which is included in other noninterest income. FORECLOSED ASSETS: Assets acquired through, or in lieu of, loan foreclosure are held for sale and are initially recorded at the lower of our carrying amount or fair value less estimated selling costs at the date of transfer, establishing a new cost basis. Any write downs based on the asset’s fair value at the date of acquisition are charged to the ALLL. After foreclosure, property held for sale is carried at the lower of the new cost basis or fair value less costs to sell. Impairment losses on property to be held and used are measured at the amount by which the carrying amount of property exceeds its fair value. Costs relating to holding these assets are expensed as incurred. We periodically perform valuations and any subsequent write downs are recorded as a charge to operations, if necessary, to reduce the carrying value of a property to the lower of our carrying amount or fair value less costs to sell. Foreclosed assets of $456 and $355 as of December 31, 2019 and 2018, respectively, are included in other assets. PREMISES AND EQUIPMENT: Land is carried at cost. Buildings and equipment are carried at cost, less accumulated depreciation which is computed principally by the straight-line method based upon the estimated useful lives of the related assets, which range from 3 to 40 years. Major improvements are capitalized and appropriately amortized based upon the useful lives of the related assets or the expected terms of the leases, if shorter, using the straight-line method. Maintenance, repairs and minor alterations are charged to current operations as expenditures occur. We annually review these assets to determine whether carrying values have been impaired. EQUITY SECURITIES WITHOUT READILY DETERMINABLE FAIR VALUES: Included in equity securities without readily determinable fair values are our holdings in FHLB stock and FRB stock as well as our joint venture investment in CSS. Our investment in CSS was made in 2008. We are not the managing entity of CSS and account for our investment under the equity method of accounting. Equity securities without readily determinable fair values consist of the following holdings as of December 31:
For further discussion of our joint venture investment, refer to “Note 6 – Investment in Joint Venture.” EQUITY COMPENSATION PLAN: At December 31, 2019, the Directors Plan had 205,004 shares eligible to be issued to participants, for which the Rabbi Trust held 27,069 shares. We had 220,171 shares to be issued at December 31, 2018, with 16,673 shares held in the Rabbi Trust. Compensation costs relating to share-based payment transactions are recognized as the services are rendered, with the cost measured based on the fair value of the equity or liability instruments issued (see “Note 13 – Benefit Plans”). CORPORATE OWNED LIFE INSURANCE: We have purchased life insurance policies on key members of management, partially for the purpose of funding certain post-retirement benefits. In the event of death of one of these individuals, we would receive a specified cash payment equal to the face value of the policy. Such policies are recorded at their cash surrender value, or the amount that can be realized on the balance sheet date. Increases in cash surrender value in excess of single premiums paid are reported as other noninterest income. Of the purchased life insurance policies, we hold post retirement benefits with a present value estimated to be $2,875 and $2,751 as of December 31, 2019 and 2018, respectively, which is included in accrued interest payable and other liabilities. The expenses associated with these policies totaled $125, $0, and $577 for 2019, 2018, and 2017, respectively. ACQUISITION INTANGIBLES AND GOODWILL: We previously acquired branch facilities and related deposits in business combinations accounted for as a purchase. The acquisitions included amounts related to the valuation of customer deposit relationships (core deposit intangibles). Core deposit intangibles arising from acquisitions are included in goodwill and other intangible assets are being amortized over their estimated lives and evaluated for potential impairment on at least an annual basis. Goodwill, which represents the excess of the purchase price over identifiable assets, is not amortized but is evaluated for impairment on at least an annual basis. Acquisition intangibles and goodwill are typically qualitatively evaluated to determine if it is more likely than not that the carrying balance is impaired. If it is determined that the carrying balance is more likely than not to be impaired, we perform a cash flow valuation to determine the extent of the potential impairment. This valuation method requires a significant degree of our judgment. In the event the projected undiscounted net operating cash flows for these intangible assets are less than the carrying value, the asset is recorded at fair value as determined by the valuation model. OFF BALANCE SHEET CREDIT RELATED FINANCIAL INSTRUMENTS: In the ordinary course of business, we have entered into commitments to extend credit, including commitments under credit card arrangements, commercial lines of credit, home equity lines of credit, commercial letters of credit, and standby letters of credit. Such financial instruments are recorded only when funded. REVENUE RECOGNITION: Our revenue is comprised primarily of interest income, service charges and fees, gains on the sale of loans and AFS securities, earnings on corporate owned life insurance policies, and other noninterest income. Other noninterest income is typically service and performance driven in nature and comprised primarily of investment and trust advisory fees. We recognize revenue, excluding interest income and other income specifically scoped out, in accordance with ASC 606, Revenue From Contracts with Customers. Revenue is recognized when our performance obligation has been satisfied according to our contractual obligation. FEDERAL INCOME TAXES: Deferred income tax assets and liabilities are determined using the liability (or balance sheet) method. Under this method, the net deferred tax assets or liabilities are determined based on the tax effects of the temporary differences between the book and tax basis on the various balance sheet assets and liabilities and gives current recognition to changes in tax rates and laws. Valuation allowances are established, where necessary, to reduce deferred tax assets to the amount expected to be realized. Income tax expense is the tax payable or refundable for the year plus or minus the change during the year in deferred tax assets and liabilities. On December 22, 2017, the Tax Act was enacted. The law established a flat corporate federal statutory income tax rate of 21%. In accordance with ASC 740, Income Taxes, the effect of income tax law changes on deferred taxes was recognized as a component of income tax expense related to continuing operations in the period in which the law was enacted. As such, federal income tax expense for the year ended December 31, 2017 reflects the effect of the tax rate change on net deferred tax assets and liabilities (see “Note 16 – Federal Income Taxes” and “Note 17 – Accumulated Other Comprehensive Income (Loss)”). We analyze our filing positions in the jurisdictions where we are required to file income tax returns, as well as all open tax years in these jurisdictions. We also treat interest and penalties attributable to income taxes, to the extent they arise, as a component of our noninterest expenses. DEFINED BENEFIT PENSION PLAN: We maintain a noncontributory defined benefit pension plan, which was curtailed effective March 1, 2007. The service cost component of the defined benefit pension plan is included in “compensation and benefits” on the consolidated statements of income and is funded consistent with the requirements of federal laws and regulations. All other costs related to the defined benefit pension plan are included in “other” noninterest expenses on the consolidated statements of income. The current benefit obligation is included in "accrued interest payable and other liabilities" on the consolidated balance sheets. Inherent in the determination of defined benefit pension costs are assumptions concerning future events that will affect the amount and timing of required benefit payments under the plan. These assumptions include demographic assumptions such as mortality, a discount rate used to determine the current benefit obligation and a long-term expected rate of return on plan assets. Net periodic benefit cost includes the interest cost based on the assumed discount rate, an expected return on plan assets based on an actuarially derived market-related value of assets, and amortization of unrecognized net actuarial gains or losses. Actuarial gains and losses result from experience different from that assumed and from changes in assumptions (excluding asset gains and losses not yet reflected in market-related value). Amortization of actuarial gains and losses is included as a component of net periodic defined benefit pension cost. For additional information, see “Note 13 – Benefit Plans.” MARKETING COSTS: Marketing costs are expensed as incurred (see “Note 15 – Other Noninterest Expenses”). RECLASSIFICATIONS: Certain amounts reported in the 2018 and 2017 consolidated financial statements have been reclassified to conform with the 2019 presentation. Other assets and other liabilities on the consolidated balance sheets were increased by $5,195 as of December 31, 2018 to reclassify pension and income tax related liabilities (pension: $3,470, income taxes: $1,725). This resulted in a $5,195 increase in total assets and total liabilities as of December 31, 2018. All other balances and ratios were not materially impacted. |
Commitments and Other Matters (Narrative) (Details) - USD ($) $ in Thousands |
Dec. 31, 2019 |
Dec. 31, 2018 |
---|---|---|
Commitments and Contingencies Disclosure [Abstract] | ||
Cash reserve balances | $ 1,341 | $ 1,220 |
Cash reserve balance, correspondent banks | 400 | $ 400 |
Amount available for dividends without regulatory approval | $ 20,300 |
Document and Entity Information - USD ($) |
12 Months Ended | ||
---|---|---|---|
Dec. 31, 2019 |
Mar. 12, 2020 |
Jun. 30, 2019 |
|
Document and Entity Information [Abstract] | |||
Entity Registrant Name | ISABELLA BANK CORP | ||
Entity Central Index Key | 0000842517 | ||
Document Type | 10-K | ||
Document Period End Date | Dec. 31, 2019 | ||
Amendment Flag | false | ||
Document Fiscal Year Focus | 2019 | ||
Document Fiscal Period Focus | FY | ||
Current Fiscal Year End Date | --12-31 | ||
Entity Filer Category | Accelerated Filer | ||
Entity Emerging Growth Company | false | ||
Entity Small Business | true | ||
Entity Shell Company | false | ||
Entity Common Stock, Shares Outstanding | 7,920,186 | ||
Entity Well-known Seasoned Issuer | No | ||
Entity Voluntary Filers | No | ||
Entity Current Reporting Status | Yes | ||
Entity Public Float | $ 170,605,000 |
Goodwill and Other Intangible Assets (Estimated amortization expense) (Details) $ in Thousands |
Dec. 31, 2019
USD ($)
|
---|---|
Summary of estimated amortization expense associated with identifiable intangibles | |
2016 | $ 48 |
2017 | 29 |
2018 | 15 |
2018 | 2 |
2019 | 2 |
Thereafter | 1 |
Net Intangible Assets | $ 97 |
Fair Value (Narrative) (Details) - Level 3 [Member] |
12 Months Ended |
---|---|
Dec. 31, 2018
USD ($)
| |
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | |
Impairments recorded on equity securities without readily determinable fair values | $ 0 |
Impairments recorded on goodwill and other acquisition intangibles | $ 0 |
Federal Income Taxes (Significant components of our deferred tax assets and liabilities) (Details) - USD ($) $ in Thousands |
Dec. 31, 2019 |
Dec. 31, 2018 |
---|---|---|
Deferred tax assets | ||
Allowance for loan losses | $ 1,255 | $ 1,304 |
Deferred directors' fees | 1,615 | 1,667 |
Employee benefit plans | 77 | 81 |
Core deposit premium and acquisition expenses | 742 | 752 |
Net unrecognized actuarial loss on pension plan | 717 | 729 |
Deferred Tax Assets, Unrealized Losses on Available-for-Sale Securities, Net | 0 | 1,211 |
Life insurance death benefit payable | 497 | 497 |
Alternative minimum tax | 0 | 710 |
Other | 771 | 716 |
Total deferred tax assets | 5,674 | 7,667 |
Deferred tax liabilities | ||
Prepaid pension cost | 327 | 383 |
Premises and equipment | 1,859 | 1,548 |
Accretion on securities | 37 | 41 |
Core deposit premium and acquisition expenses | 872 | 946 |
Net unrealized gains on available-for-sale securities | 1,247 | 0 |
Deferred Tax Assets, Derivative Instruments | 14 | 68 |
Other | 1,157 | 1,696 |
Total deferred tax liabilities | 5,513 | 4,682 |
Net deferred tax assets | $ 161 | $ 2,985 |
Joint Venture Investment Income Statement (Details) - USD ($) $ in Thousands |
12 Months Ended | ||
---|---|---|---|
Dec. 31, 2019 |
Dec. 31, 2018 |
Dec. 31, 2017 |
|
Expenses | |||
Compensation and benefits | $ 23,205 | $ 22,609 | $ 21,525 |
Occupancy and equipment | 3,418 | 3,263 | 3,133 |
Other | 10,561 | 10,925 | 10,188 |
Net income | 43,050 | 42,852 | 40,253 |
Net income | 13,024 | 14,021 | 13,237 |
CSS | |||
Income | |||
Total income | 17,959 | 17,232 | 16,397 |
Expenses | |||
Compensation and benefits | 4,203 | 4,138 | 4,391 |
Occupancy and equipment | 836 | 804 | 739 |
Impairment of intangible assets | 7,133 | 0 | 0 |
Other | 988 | 1,024 | 960 |
Net income | 24,240 | 16,768 | 16,092 |
Net income | (6,281) | 464 | 305 |
Title premiums and other fees | CSS | |||
Income | |||
Title premiums and other fees | 3,645 | 3,013 | 3,533 |
Property reports | CSS | |||
Income | |||
Total income | 2,046 | 1,822 | 1,425 |
Expenses | |||
Cost of services | 1,101 | 1,029 | 821 |
Appraisals | CSS | |||
Income | |||
Total income | 9,370 | 9,526 | 9,121 |
Expenses | |||
Cost of services | 7,372 | 7,466 | 7,152 |
Other | CSS | |||
Income | |||
Total income | 2,898 | 2,871 | 2,318 |
Expenses | |||
Cost of services | $ 2,607 | $ 2,307 | $ 2,029 |
Consolidated Statements of Changes in Shareholders' Equity (Parenthetical) - $ / shares |
12 Months Ended | ||
---|---|---|---|
Dec. 31, 2019 |
Dec. 31, 2018 |
Dec. 31, 2017 |
|
Statement of Stockholders' Equity [Abstract] | |||
Cash dividends per share (in dollars per share) | $ 1.05 | $ 1.04 | $ 1.02 |
Borrowed Funds (Derivatives) (Details) - Cash Flow Hedging [Member] - Interest Rate Swap [Member] - Designated as Hedging Instrument [Member] - London Interbank Offered Rate (LIBOR) [Member] - USD ($) $ in Thousands |
12 Months Ended | |
---|---|---|
Dec. 31, 2019 |
Dec. 31, 2018 |
|
Derivatives, Fair Value [Line Items] | ||
Derivative, Remaining Maturity | 2 years 3 months 16 days | 3 years 3 months 16 days |
Pay Rate | 1.56% | 1.56% |
Notional Amount | $ 10,000 | $ 10,000 |
Other Assets [Member] | ||
Derivatives, Fair Value [Line Items] | ||
Fair Value | $ (67) | $ (323) |
Nature of Operations and Summary of Significant Accounting Policies (Equity Securities) (Details) - USD ($) $ in Thousands |
Dec. 31, 2019 |
Dec. 31, 2018 |
---|---|---|
Accounting Policies [Abstract] | ||
FHLB Stock | $ 15,050 | $ 15,050 |
FRB Stock | 1,999 | 1,999 |
Other | 334 | 334 |
Total | 21,629 | 24,948 |
Investment in Corporate Settlement Solutions [Member] | ||
Schedule of Equity Method Investments [Line Items] | ||
Equity method investments | $ 4,246 | $ 7,565 |
AFS Securities (Activity related to sales of AFS securities) (Details) - USD ($) $ in Thousands |
12 Months Ended | ||
---|---|---|---|
Dec. 31, 2019 |
Dec. 31, 2018 |
Dec. 31, 2017 |
|
Investments, Debt and Equity Securities [Abstract] | |||
Proceeds from sales of AFS of securities | $ 33,840 | $ 0 | $ 12,827 |
Gross realized gains (losses) | 6 | 0 | 142 |
Applicable income tax expense | $ 1 | $ 0 | $ 48 |
Benefit Plans (Actuarial assumptions used) (Details) |
12 Months Ended | ||
---|---|---|---|
Dec. 31, 2019 |
Dec. 31, 2018 |
Dec. 31, 2017 |
|
Retirement Benefits [Abstract] | |||
Defined Benefit Plan, Assumptions Used Calculating Benefit Obligation, Discount Rate | 3.07% | 4.11% | 3.48% |
Defined Benefit Plan, Assumptions Used Calculating Net Periodic Benefit Cost, Discount Rate | 4.11% | 3.48% | 3.96% |
Actuarial weighted average assumptions used in determining the net periodic pension costs | |||
Expected long-term return on plan assets | 6.00% | 6.00% | 6.00% |
Loans and ALLL (Credit quality indicators for commercial and agricultural credit exposures) (Details) - USD ($) $ in Thousands |
Dec. 31, 2019 |
Dec. 31, 2018 |
---|---|---|
Financing Receivable, Recorded Investment [Line Items] | ||
Total | $ 1,186,570 | $ 1,128,707 |
Total commercial [Member] | ||
Financing Receivable, Recorded Investment [Line Items] | ||
Total | 700,941 | 659,529 |
Commercial real estate [Member] | ||
Financing Receivable, Recorded Investment [Line Items] | ||
Total | 510,153 | 497,687 |
Commercial other [Member] | ||
Financing Receivable, Recorded Investment [Line Items] | ||
Total | 155,265 | 150,049 |
Commercial Advances to Mortgage Brokers Segment [Member] | ||
Financing Receivable, Recorded Investment [Line Items] | ||
Total | 35,523 | 11,793 |
Total agricultural [Member] | ||
Financing Receivable, Recorded Investment [Line Items] | ||
Total | 116,920 | 127,161 |
Agricultural real estate [Member] | ||
Financing Receivable, Recorded Investment [Line Items] | ||
Total | 80,027 | 87,320 |
Agricultural other [Member] | ||
Financing Receivable, Recorded Investment [Line Items] | ||
Total | 36,893 | 39,841 |
Commercial And Agricultural Portfolio Segment [Member] | ||
Financing Receivable, Recorded Investment [Line Items] | ||
Total | 817,861 | 786,690 |
1 - Excellent [Member] | Total commercial [Member] | ||
Financing Receivable, Recorded Investment [Line Items] | ||
Total | 390 | 52 |
1 - Excellent [Member] | Commercial real estate [Member] | ||
Financing Receivable, Recorded Investment [Line Items] | ||
Total | 0 | 21 |
1 - Excellent [Member] | Commercial other [Member] | ||
Financing Receivable, Recorded Investment [Line Items] | ||
Total | 390 | 31 |
1 - Excellent [Member] | Commercial Advances to Mortgage Brokers Segment [Member] | ||
Financing Receivable, Recorded Investment [Line Items] | ||
Total | 0 | 0 |
1 - Excellent [Member] | Total agricultural [Member] | ||
Financing Receivable, Recorded Investment [Line Items] | ||
Total | 0 | 79 |
1 - Excellent [Member] | Agricultural real estate [Member] | ||
Financing Receivable, Recorded Investment [Line Items] | ||
Total | 0 | 51 |
1 - Excellent [Member] | Agricultural other [Member] | ||
Financing Receivable, Recorded Investment [Line Items] | ||
Total | 0 | 28 |
1 - Excellent [Member] | Commercial And Agricultural Portfolio Segment [Member] | ||
Financing Receivable, Recorded Investment [Line Items] | ||
Total | 390 | 131 |
2 - High quality [Member] | Total commercial [Member] | ||
Financing Receivable, Recorded Investment [Line Items] | ||
Total | 11,426 | 18,037 |
2 - High quality [Member] | Commercial real estate [Member] | ||
Financing Receivable, Recorded Investment [Line Items] | ||
Total | 2,582 | 4,564 |
2 - High quality [Member] | Commercial other [Member] | ||
Financing Receivable, Recorded Investment [Line Items] | ||
Total | 8,844 | 13,473 |
2 - High quality [Member] | Commercial Advances to Mortgage Brokers Segment [Member] | ||
Financing Receivable, Recorded Investment [Line Items] | ||
Total | 0 | 0 |
2 - High quality [Member] | Total agricultural [Member] | ||
Financing Receivable, Recorded Investment [Line Items] | ||
Total | 1,551 | 3,342 |
2 - High quality [Member] | Agricultural real estate [Member] | ||
Financing Receivable, Recorded Investment [Line Items] | ||
Total | 1,452 | 2,729 |
2 - High quality [Member] | Agricultural other [Member] | ||
Financing Receivable, Recorded Investment [Line Items] | ||
Total | 99 | 613 |
2 - High quality [Member] | Commercial And Agricultural Portfolio Segment [Member] | ||
Financing Receivable, Recorded Investment [Line Items] | ||
Total | 12,977 | 21,379 |
3 - High satisfactory [Member] | Total commercial [Member] | ||
Financing Receivable, Recorded Investment [Line Items] | ||
Total | 188,118 | 182,565 |
3 - High satisfactory [Member] | Commercial real estate [Member] | ||
Financing Receivable, Recorded Investment [Line Items] | ||
Total | 109,737 | 127,573 |
3 - High satisfactory [Member] | Commercial other [Member] | ||
Financing Receivable, Recorded Investment [Line Items] | ||
Total | 42,858 | 43,199 |
3 - High satisfactory [Member] | Commercial Advances to Mortgage Brokers Segment [Member] | ||
Financing Receivable, Recorded Investment [Line Items] | ||
Total | 35,523 | 11,793 |
3 - High satisfactory [Member] | Total agricultural [Member] | ||
Financing Receivable, Recorded Investment [Line Items] | ||
Total | 23,534 | 25,364 |
3 - High satisfactory [Member] | Agricultural real estate [Member] | ||
Financing Receivable, Recorded Investment [Line Items] | ||
Total | 16,765 | 18,325 |
3 - High satisfactory [Member] | Agricultural other [Member] | ||
Financing Receivable, Recorded Investment [Line Items] | ||
Total | 6,769 | 7,039 |
3 - High satisfactory [Member] | Commercial And Agricultural Portfolio Segment [Member] | ||
Financing Receivable, Recorded Investment [Line Items] | ||
Total | 211,652 | 207,929 |
4 - Low satisfactory [Member] | Total commercial [Member] | ||
Financing Receivable, Recorded Investment [Line Items] | ||
Total | 472,045 | 429,554 |
4 - Low satisfactory [Member] | Commercial real estate [Member] | ||
Financing Receivable, Recorded Investment [Line Items] | ||
Total | 377,198 | 344,920 |
4 - Low satisfactory [Member] | Commercial other [Member] | ||
Financing Receivable, Recorded Investment [Line Items] | ||
Total | 94,847 | 84,634 |
4 - Low satisfactory [Member] | Commercial Advances to Mortgage Brokers Segment [Member] | ||
Financing Receivable, Recorded Investment [Line Items] | ||
Total | 0 | 0 |
4 - Low satisfactory [Member] | Total agricultural [Member] | ||
Financing Receivable, Recorded Investment [Line Items] | ||
Total | 63,659 | 65,980 |
4 - Low satisfactory [Member] | Agricultural real estate [Member] | ||
Financing Receivable, Recorded Investment [Line Items] | ||
Total | 42,798 | 46,636 |
4 - Low satisfactory [Member] | Agricultural other [Member] | ||
Financing Receivable, Recorded Investment [Line Items] | ||
Total | 20,861 | 19,344 |
4 - Low satisfactory [Member] | Commercial And Agricultural Portfolio Segment [Member] | ||
Financing Receivable, Recorded Investment [Line Items] | ||
Total | 535,704 | 495,534 |
5 - Special mention [Member] | Total commercial [Member] | ||
Financing Receivable, Recorded Investment [Line Items] | ||
Total | 18,842 | 18,134 |
5 - Special mention [Member] | Commercial real estate [Member] | ||
Financing Receivable, Recorded Investment [Line Items] | ||
Total | 15,372 | 12,847 |
5 - Special mention [Member] | Commercial other [Member] | ||
Financing Receivable, Recorded Investment [Line Items] | ||
Total | 3,470 | 5,287 |
5 - Special mention [Member] | Commercial Advances to Mortgage Brokers Segment [Member] | ||
Financing Receivable, Recorded Investment [Line Items] | ||
Total | 0 | 0 |
5 - Special mention [Member] | Total agricultural [Member] | ||
Financing Receivable, Recorded Investment [Line Items] | ||
Total | 10,919 | 16,144 |
5 - Special mention [Member] | Agricultural real estate [Member] | ||
Financing Receivable, Recorded Investment [Line Items] | ||
Total | 7,165 | 10,520 |
5 - Special mention [Member] | Agricultural other [Member] | ||
Financing Receivable, Recorded Investment [Line Items] | ||
Total | 3,754 | 5,624 |
5 - Special mention [Member] | Commercial And Agricultural Portfolio Segment [Member] | ||
Financing Receivable, Recorded Investment [Line Items] | ||
Total | 29,761 | 34,278 |
6 - Substandard [Member] | Total commercial [Member] | ||
Financing Receivable, Recorded Investment [Line Items] | ||
Total | 8,499 | 9,430 |
6 - Substandard [Member] | Commercial real estate [Member] | ||
Financing Receivable, Recorded Investment [Line Items] | ||
Total | 4,874 | 7,428 |
6 - Substandard [Member] | Commercial other [Member] | ||
Financing Receivable, Recorded Investment [Line Items] | ||
Total | 3,625 | 2,002 |
6 - Substandard [Member] | Commercial Advances to Mortgage Brokers Segment [Member] | ||
Financing Receivable, Recorded Investment [Line Items] | ||
Total | 0 | 0 |
6 - Substandard [Member] | Total agricultural [Member] | ||
Financing Receivable, Recorded Investment [Line Items] | ||
Total | 12,972 | 11,303 |
6 - Substandard [Member] | Agricultural real estate [Member] | ||
Financing Receivable, Recorded Investment [Line Items] | ||
Total | 9,136 | 6,343 |
6 - Substandard [Member] | Agricultural other [Member] | ||
Financing Receivable, Recorded Investment [Line Items] | ||
Total | 3,836 | 4,960 |
6 - Substandard [Member] | Commercial And Agricultural Portfolio Segment [Member] | ||
Financing Receivable, Recorded Investment [Line Items] | ||
Total | 21,471 | 20,733 |
7 - Vulnerable [Member] | Total commercial [Member] | ||
Financing Receivable, Recorded Investment [Line Items] | ||
Total | 1,621 | 1,757 |
7 - Vulnerable [Member] | Commercial real estate [Member] | ||
Financing Receivable, Recorded Investment [Line Items] | ||
Total | 390 | 334 |
7 - Vulnerable [Member] | Commercial other [Member] | ||
Financing Receivable, Recorded Investment [Line Items] | ||
Total | 1,231 | 1,423 |
7 - Vulnerable [Member] | Commercial Advances to Mortgage Brokers Segment [Member] | ||
Financing Receivable, Recorded Investment [Line Items] | ||
Total | 0 | 0 |
7 - Vulnerable [Member] | Total agricultural [Member] | ||
Financing Receivable, Recorded Investment [Line Items] | ||
Total | 4,285 | 4,949 |
7 - Vulnerable [Member] | Agricultural real estate [Member] | ||
Financing Receivable, Recorded Investment [Line Items] | ||
Total | 2,711 | 2,716 |
7 - Vulnerable [Member] | Agricultural other [Member] | ||
Financing Receivable, Recorded Investment [Line Items] | ||
Total | 1,574 | 2,233 |
7 - Vulnerable [Member] | Commercial And Agricultural Portfolio Segment [Member] | ||
Financing Receivable, Recorded Investment [Line Items] | ||
Total | 5,906 | 6,706 |
8 - Doubtful [Member] | Total commercial [Member] | ||
Financing Receivable, Recorded Investment [Line Items] | ||
Total | 0 | 0 |
8 - Doubtful [Member] | Commercial real estate [Member] | ||
Financing Receivable, Recorded Investment [Line Items] | ||
Total | 0 | 0 |
8 - Doubtful [Member] | Commercial other [Member] | ||
Financing Receivable, Recorded Investment [Line Items] | ||
Total | 0 | 0 |
8 - Doubtful [Member] | Commercial Advances to Mortgage Brokers Segment [Member] | ||
Financing Receivable, Recorded Investment [Line Items] | ||
Total | 0 | 0 |
8 - Doubtful [Member] | Total agricultural [Member] | ||
Financing Receivable, Recorded Investment [Line Items] | ||
Total | 0 | 0 |
8 - Doubtful [Member] | Agricultural real estate [Member] | ||
Financing Receivable, Recorded Investment [Line Items] | ||
Total | 0 | 0 |
8 - Doubtful [Member] | Agricultural other [Member] | ||
Financing Receivable, Recorded Investment [Line Items] | ||
Total | 0 | 0 |
8 - Doubtful [Member] | Commercial And Agricultural Portfolio Segment [Member] | ||
Financing Receivable, Recorded Investment [Line Items] | ||
Total | 0 | 0 |
Loss [Member] | Total commercial [Member] | ||
Financing Receivable, Recorded Investment [Line Items] | ||
Total | 0 | 0 |
Loss [Member] | Commercial real estate [Member] | ||
Financing Receivable, Recorded Investment [Line Items] | ||
Total | 0 | 0 |
Loss [Member] | Commercial other [Member] | ||
Financing Receivable, Recorded Investment [Line Items] | ||
Total | 0 | 0 |
Loss [Member] | Commercial Advances to Mortgage Brokers Segment [Member] | ||
Financing Receivable, Recorded Investment [Line Items] | ||
Total | 0 | 0 |
Loss [Member] | Total agricultural [Member] | ||
Financing Receivable, Recorded Investment [Line Items] | ||
Total | 0 | 0 |
Loss [Member] | Agricultural real estate [Member] | ||
Financing Receivable, Recorded Investment [Line Items] | ||
Total | 0 | 0 |
Loss [Member] | Agricultural other [Member] | ||
Financing Receivable, Recorded Investment [Line Items] | ||
Total | 0 | 0 |
Loss [Member] | Commercial And Agricultural Portfolio Segment [Member] | ||
Financing Receivable, Recorded Investment [Line Items] | ||
Total | $ 0 | $ 0 |
Related Party Transactions (Ending balances of, and contributions to the Isabella Bank Foundation) (Details) - USD ($) $ in Thousands |
Dec. 31, 2019 |
Dec. 31, 2018 |
Dec. 31, 2017 |
---|---|---|---|
Related Party Transaction [Line Items] | |||
Ending assets | $ 1,814,198 | $ 1,842,502 | |
Affiliated Entity [Member] | Isabella Bank Foundation [Member] | |||
Related Party Transaction [Line Items] | |||
Common Stock, Shares Held by Related Party | 44,350 | 44,350 | |
Affiliated Entity [Member] | Isabella Bank Foundation [Member] | |||
Related Party Transaction [Line Items] | |||
Ending assets | $ 1,678 | $ 1,731 | $ 2,162 |
Donations | $ 50 | $ 0 | $ 0 |
Parent Company Only Financial Information (Interim Condensed Statements of Income) (Details) - USD ($) $ in Thousands |
12 Months Ended | ||
---|---|---|---|
Dec. 31, 2019 |
Dec. 31, 2018 |
Dec. 31, 2017 |
|
Income | |||
Net income (loss) on joint venture investment | $ (3,108) | $ 274 | $ 164 |
Expenses | |||
Compensation and benefits | 23,205 | 22,609 | 21,525 |
Occupancy and equipment | 3,418 | 3,263 | 3,133 |
Professional Fees | 1,884 | 2,222 | 2,017 |
Noninterest Expense Directors Fees | 788 | 858 | 856 |
Other | 10,561 | 10,925 | 10,188 |
Federal income tax benefit | (1,380) | (1,363) | (3,016) |
NET INCOME | 13,024 | 14,021 | 13,237 |
Parent Company [Member] | |||
Income | |||
Dividends from subsidiaries | 7,800 | 13,100 | 9,600 |
Interest income | 7 | 1 | 2 |
Net income (loss) on joint venture investment | (3,108) | 274 | 164 |
Management fee and other | 0 | 2,756 | 6,299 |
Total income | 4,699 | 16,131 | 16,065 |
Expenses | |||
Compensation and benefits | 0 | 4,132 | 5,196 |
Occupancy and equipment | 59 | 513 | 1,779 |
Professional Fees | 477 | 774 | 824 |
Noninterest Expense Directors Fees | 368 | 413 | 382 |
Other | 1,165 | 796 | 1,887 |
Total expenses | 2,069 | 6,628 | 10,068 |
Income before income tax benefit and equity in undistributed earnings of subsidiaries | 2,630 | 9,503 | 5,997 |
Federal income tax benefit | 984 | 749 | 91 |
Income before equity in undistributed earnings of subsidiaries | 3,614 | 10,252 | 6,088 |
Undistributed earnings of subsidiaries | 9,410 | 3,769 | 7,149 |
NET INCOME | $ 13,024 | $ 14,021 | $ 13,237 |
Loans and ALLL (Summary of Defaulted TDRs) (Details) - loan |
12 Months Ended | |
---|---|---|
Dec. 31, 2019 |
Dec. 31, 2018 |
|
Financing Receivable, Modifications [Line Items] | ||
Financing Receivable, Modifications, Subsequent Default, Number of Contracts | 0 | 0 |
Benefit Plans (Narrative) (Details) - USD ($) $ in Thousands |
12 Months Ended | |||
---|---|---|---|---|
Mar. 01, 2007 |
Dec. 31, 2019 |
Dec. 31, 2018 |
Dec. 31, 2017 |
|
Retirement Benefits [Abstract] | ||||
Employees contribution | 100.00% | |||
Corporation matching contribution, percent | 100.00% | |||
Employee contribution, percent | 5.00% | |||
Defined Contribution Plan Disclosure [Line Items] | ||||
Performance bonus expense | $ 1,070 | $ 500 | $ 454 | |
Defined Benefit Plan, Net Periodic Benefit Cost (Credit), Gain (Loss) Due to Settlement | (128) | (269) | (235) | |
Plan expenses | 764 | 743 | 713 | |
Highest consecutive years of compensation | 5 years | |||
Years of service | 10 years | |||
Accumulated other comprehensive income includes net unrecognized pension cost before income taxes | 3,412 | |||
Accumulated other comprehensive income expected to be amortized into benefit cost | 23 | |||
Allocated Share-based Compensation Expense | 171 | 45 | 38 | |
Corporation self-funded medical plan | 75 | |||
Medical expenses | 2,445 | 2,695 | 2,324 | |
Other Postretirement Benefits Plan [Member] | ||||
Defined Contribution Plan Disclosure [Line Items] | ||||
Plan expenses | $ 355 | $ 356 | $ 473 | |
Safe Harbor 401(k) [Member] | ||||
Defined Contribution Plan Disclosure [Line Items] | ||||
Vesting percentage | 100.00% | |||
Fixed Income Funds [Member] | ||||
Defined Benefit Plan Disclosure [Line Items] | ||||
Investment allocation in securities | 50.00% | |||
Equity Collective Trust [Member] | ||||
Defined Benefit Plan Disclosure [Line Items] | ||||
Investment allocation in securities | 50.00% |
Federal Income Taxes (Components of the consolidated provision for federal income taxes) (Details) - USD ($) $ in Thousands |
12 Months Ended | ||
---|---|---|---|
Dec. 31, 2019 |
Dec. 31, 2018 |
Dec. 31, 2017 |
|
Income Tax Disclosure [Abstract] | |||
Currently payable | $ 972 | $ 1,088 | $ 180 |
Deferred (benefit) expense | 408 | 275 | 2,836 |
Income tax expense | $ 1,380 | $ 1,363 | $ 3,016 |
Premises and Equipment (Narrative) (Details) - USD ($) $ in Thousands |
12 Months Ended | ||
---|---|---|---|
Dec. 31, 2019 |
Dec. 31, 2018 |
Dec. 31, 2017 |
|
Property, Plant and Equipment [Abstract] | |||
Depreciation expense | $ 2,908 | $ 2,940 | $ 2,902 |
Foreclosed Assets (Foreclosed Assets Rollforward) (Details) - USD ($) $ in Thousands |
12 Months Ended | ||
---|---|---|---|
Dec. 31, 2019 |
Dec. 31, 2018 |
Dec. 31, 2017 |
|
Banking and Thrift [Abstract] | |||
Balance, January 1 | $ 355 | ||
Impairments | (162) | $ (49) | $ (50) |
Balance, December 31 | $ 456 | $ 355 |
Federal Income Taxes (Tables) |
12 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Dec. 31, 2019 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Income Tax Disclosure [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Components of the consolidated provision for federal income taxes | Components of the consolidated provision for federal income taxes are as follows for the years ended December 31:
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Summary of federal income tax expense | The reconciliation of the provision for federal income taxes and the amount computed at the federal statutory tax rate of income before federal income tax expense is as follows for the year ended December 31:
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Summary of deferred tax assets and liabilities | Significant components of our deferred tax assets and liabilities, measured at the 21% statutory rate, included in other assets and other liabilities in the accompanying consolidated balance sheets, are as follows as of December 31:
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Minimum Regulatory Capital Requirements (Tables) |
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Banking and Thrift [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Summary of compliance with regulatory capital requirements | Our actual capital amounts and ratios are also presented in the table.
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Benefit Plans |
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Retirement Benefits [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Benefit Plans | Benefit Plans 401(k) Plan We have a 401(k) plan in which substantially all employees are eligible to participate. Employees may contribute up to 100% of their compensation subject to certain limits based on federal tax laws. The plan was amended in 2013 to provide a matching safe harbor contribution for all eligible employees equal to 100% of the first 5.0% of an employee's compensation contributed to the Plan during the year. Employees are 100% vested in the safe harbor matching contributions. For 2019, 2018 and 2017, expenses attributable to the Plan were $764, $743, and $713, respectively. Defined Benefit Pension Plan We maintain a noncontributory defined benefit pension plan, which was curtailed effective March 1, 2007. As a result of the curtailment, future salary increases are no longer considered (the projected benefit obligation is equal to the accumulated benefit obligation), and plan benefits are based on years of service and the individual employee’s five highest consecutive years of compensation out of the last ten years of service through March 1, 2007. Changes in the projected benefit obligation and plan assets during each year, the funded status of the plan, and the net amount recognized in our consolidated balance sheets using an actuarial measurement date of December 31, are summarized as follows during the years ended December 31:
We have recorded the funded status of the plan in our consolidated balance sheets. We adjust the underfunded status in a liability account to reflect the current funded status of the plan. Any gains or losses that arise during the year but are not recognized as components of net periodic benefit cost are recognized as a component of other comprehensive income (loss). The components of net periodic benefit cost are as follows for the years ended December 31:
During 2019, 2018 and 2017, settlement losses of $128, $269 and $235 were recognized in connection with lump-sum benefit distributions, respectively. Many plan participants elect to receive their retirement benefit payments in the form of lump-sum settlements. Pro rata settlement losses, which can occasionally occur as a result of these lump-sum distributions, are recognized only in years when the total of such distributions exceed the sum of the service and interest expense components of net periodic benefit cost. Accumulated other comprehensive income at December 31, 2019 includes net unrecognized pension costs before income taxes of $3,412, of which $23 is expected to be amortized into benefit cost during 2020. The actuarial assumptions used in determining the benefit obligation are as follows for the years ended December 31:
The actuarial weighted average assumptions used in determining the net periodic pension costs are as follows for the years ended December 31:
As a result of the curtailment of the Plan, there is no rate of compensation increase considered in the above assumptions. The expected long-term rate of return is an estimate of anticipated future long-term rates of return on plan assets as measured on a market value basis. Factors considered in arriving at this assumption include:
The selected rate of return is net of anticipated investment related expenses. Pension Plan Assets Our overall investment strategy is to moderately grow the portfolio by investing 50% of the portfolio in equity securities and 50% in fixed income securities. This strategy is designed to generate a long-term rate of return of 6.00%. Equity securities primarily consist of the S&P 500 Index with a smaller allocation to the Small Cap and International Index. Fixed income securities are invested in the Bond Market Index. The Plan has appropriate assets invested in short-term investments to meet near term benefit payments. The asset mix and the sector weighting of the investments are determined by our benefits committee, which is comprised of members of our management. To manage the Plan, we retain a third party investment advisor to conduct consultations. We review the performance of the advisor at least annually. The fair values of our pension plan assets by asset category were as follows as of December 31:
The following is a description of the valuation methodologies used for assets measured at fair value. There have been no changes in the methodologies used at December 31, 2019 and 2018:
We anticipate contributions to the Plan in 2020 to approximate net contribution costs. The components of projected net periodic benefit cost are as follows for the year ending:
Estimated future benefit payments are as follows for the next ten years:
Directors Plan Pursuant to the terms of the Directors Plan, our directors are required to invest at least 25% of their board fees in our common stock. These stock investments can be made either through deferred fees or through the purchase of shares through the Dividend Reinvestment Plan. Deferred fees, under the Directors Plan, are converted on a quarterly basis into stock units of our common stock based on the fair value of a share of our common stock as of the relevant valuation date. Stock units credited to a participant’s account are eligible for stock and cash dividends as declared. Dividend Reinvestment Plan shares are purchased pursuant to the Dividend Reinvestment Plan. Distribution of deferred fees from the Directors Plan occurs when the participant retires from the Board or upon the occurrence of certain other events. The participant is eligible to receive a distribution in the form of shares of our common stock of all of the stock units that are then in his or her account, and any unconverted cash will be converted to and rounded up to whole shares of stock and distributed, as well. The Directors Plan does not allow for cash settlement, and therefore, such share-based payment awards qualify for classification as equity. We may use authorized but unissued shares or purchase shares of common stock on the open market to meet our obligations under the Directors Plan. We maintain the Rabbi Trust to fund the Directors Plan. The Rabbi Trust is an irrevocable grantor trust to which we may contribute assets for the limited purpose of funding a nonqualified deferred compensation plan. Although we may not use the assets of the Rabbi Trust for any purpose other than meeting our obligations under the Directors Plan, the assets of the Rabbi Trust remain subject to the claims of our creditors and are included in the consolidated financial statements. We may contribute cash or common stock to the Rabbi Trust from time to time for the sole purpose of funding the Directors Plan. The Rabbi Trust will use any cash that we contribute to purchase shares of our common stock on the open market. Shares held in the Rabbi Trust are included in the calculation of earnings per share. The components of shares eligible to be issued under the Directors Plan were as follows as of December 31:
Cash Incentive Plans We provide cash incentive plans to reward employees above and beyond their base salaries when our performance and operating profitability exceed established annual targets. Incentives are also awarded for achievement of personal performance goals. Expenses related to this plan for 2019, 2018 and 2017 were $1,070, $500, and $454, respectively. Stock Award Incentive Plan We maintain an equity incentive plan for the purpose of promoting growth and operating profitability, as well as attracting and retaining executive officers of outstanding competence, through ownership of equity. Stock may be granted to specified individuals subject to certain conditions, and transfer of shares granted under the plan is restricted. Expenses related to this plan for 2019, 2018 and 2017 were $171, $45, and $38, respectively. Other Employee Benefit Plans We maintain nonqualified defined contribution retirement plans to provide supplemental retirement benefits to specified participants. Expenses related to these programs for 2019, 2018 and 2017 were $355, $356, and $473, respectively. Expenses are recognized over the participants’ expected years of service. We maintain a self-funded medical plan under which we are responsible for the first $75 per year of claims made by a covered family. Expenses are accrued based on estimates of the aggregate liability for claims incurred and our experience. Expenses were $2,445 in 2019, $2,695 in 2018 and $2,324 in 2017. |
Accumulated Other Comprehensive Income (Loss) |
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Equity [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Accumulated Other Comprehensive Income (Loss) | Accumulated Other Comprehensive Income (Loss) AOCI includes net income as well as unrealized gains and losses, net of tax, on AFS securities and derivative instruments, as well as changes in the funded status of our defined benefit pension plan. Unrealized gains and losses and changes in the funded status of the pension plan, net of tax, are excluded from net income, and are reflected as a direct charge or credit to shareholders’ equity. Comprehensive income (loss) and the related components are disclosed in the consolidated statements of comprehensive income. The following table provides a roll-forward of the changes in AOCI by component for the years ended December 31, 2017, 2018 and 2019 (net of tax):
Included in OCI for the year ended December 31, 2017 are changes in unrealized gains and losses related to auction rate money market preferred stocks and preferred stocks, or equity securities. Changes in unrealized gains and losses related to equity securities were not included in OCI after the adoption of ASU 2016-01, effective January 1, 2018. Auction rate money market preferred stocks, for federal income tax purposes, have no deferred federal income taxes related to unrealized gains or losses given the nature of the investments. In accordance with the Tax Act, the effect of income tax law changes on deferred taxes also applies to items recognized in other comprehensive income. In January 2018, FASB issued ASU 2018-02 which allowed for the "stranded" tax effects in AOCI to be reclassified to retained earnings rather than income tax expense. We early adopted this guidance and applied this accounting alternative in our consolidated statements of changes in shareholders equity as of December 31, 2017. A summary of the components of unrealized gains on AFS securities included in OCI follows for the years ended December 31:
The following table details reclassification adjustments and the related affected line items in our consolidated statements of income for the years ended December 31:
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Loans and ALLL |
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Receivables [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Loans and ALLL | Loans and ALLL We grant commercial, agricultural, residential real estate, and consumer loans to customers situated primarily in Clare, Gratiot, Isabella, Mecosta, Midland, Montcalm, and Saginaw counties in Michigan. The ability of the borrowers to honor their repayment obligations is often dependent upon the real estate, agricultural, manufacturing, retail, gaming, tourism, higher education, and general economic conditions of this region. Substantially all of our consumer and residential real estate loans are secured by various items of property, while commercial loans are secured primarily by real estate, business assets, and personal guarantees. A portion of loans are unsecured. Loans that we have the intent and ability to hold in our portfolio are reported at their outstanding principal balance adjusted for any charge-offs, the ALLL, and any deferred fees or costs. Interest income is accrued over the term of the loan based on the principal amount outstanding. Loan origination fees and certain direct loan origination costs are capitalized and recognized as a component of interest income over the term of the loan using the appropriate amortization methods. The accrual of interest on commercial and agricultural loans, as well as residential real estate loans, is discontinued at the time a loan is 90 days or more past due unless the credit is well-secured and in the process of short-term collection. Upon transferring a loan to nonaccrual status, we perform an evaluation to determine the net realizable value of the underlying collateral. This evaluation is used to help determine if a charge-off is necessary. Consumer loans are typically charged-off no later than 180 days past due. Past due status is based on the contractual term of the loan. In all cases, a loan is placed in nonaccrual status or charged-off at an earlier date if collection of principal or interest is considered doubtful. When a loan is placed in nonaccrual status or charged-off, all interest accrued in the current calendar year, but not collected, is reversed against interest income while interest accrued in prior calendar years, but not collected, is charged against the ALLL. Loans may be returned to accrual status after six months of continuous performance and achievement of current payment status. Commercial and agricultural loans include loans for commercial real estate, commercial operating loans, advances to mortgage brokers, farmland and agricultural production, and loans to states and political subdivisions. Repayment of these loans is dependent upon the successful operation and management of a business. We minimize our risk by limiting the amount of direct credit exposure to any one borrower to $15,000. Borrowers with direct credit needs of more than $15,000 may be serviced through the use of loan participations with other commercial banks. Commercial and agricultural real estate loans commonly require loan-to-value limits of 80% or less. Depending upon the type of loan, past credit history, and current operating results, we may require the borrower to pledge accounts receivable, inventory, property, or equipment. Personal guarantees are generally required from the owners of closely held corporations, partnerships, and sole proprietorships. In addition, we may require annual financial statements, prepare cash flow analyses, and review credit reports. We entered into a mortgage purchase program in 2016 with a financial institution where we participate in advances to mortgage brokers (“advances”). The mortgage brokers originate residential mortgage loans with the intent to sell them on the secondary market. We participate in the advance to the mortgage broker, which is secured by the underlying mortgage loan, until it is ultimately sold on the secondary market. As such, the average life of each participated advance is approximately 20-30 days. Funds from the sale of the loan are used to pay off our participation in the advance to the mortgage broker. We classify these advances as commercial loans and include the outstanding balance in commercial loans on our consolidated balance sheets. Under the participation agreement, we committed to a maximum outstanding aggregate amount of $50,000. The difference between our outstanding balance and the maximum outstanding aggregate amount is classified as “Unfunded commitments under lines of credit” in the “Contractual Obligations and Loan Commitments” section of the Management's Discussion and Analysis of Financial Condition and Results of Operations of this report. We offer adjustable rate mortgages, construction loans, and fixed rate residential real estate loans which have amortization periods up to a maximum of 30 years. We consider the anticipated direction of interest rates, balance sheet duration, the sensitivity of our balance sheet to changes in interest rates, our liquidity needs, and overall loan demand to determine whether or not to sell fixed rate loans to Freddie Mac. Our lending policies generally limit the maximum loan-to-value ratio on residential real estate loans to 100% of the lower of the appraised value of the property or the purchase price. Private mortgage insurance is typically required on loans with loan-to-value ratios in excess of 80% unless the loan qualifies for government guarantees. Underwriting criteria for residential real estate loans generally include:
Appraisals are performed by independent appraisers and are reviewed for appropriateness. Generally, mortgage loan requests are reviewed by our mortgage loan committee or through a secondary market underwriting system; loans in excess of $1,000 require the approval of our Internal Loan Committee, the Executive Loan Committee, the Board of Directors’ Loan Committee, or the Board of Directors. Consumer loans include secured and unsecured personal loans. Loans are amortized for a period of up to 15 years based on the age and value of the underlying collateral. The underwriting emphasis is on a borrower’s perceived intent and ability to pay rather than collateral value. No consumer loans are sold to the secondary market. The ALLL is established as losses are estimated to have occurred through a provision for loan losses charged to earnings. Loan losses are charged against the ALLL when we believe the uncollectability of the loan balance is probable. Subsequent recoveries, if any, are credited to the ALLL. The ALLL is evaluated on a regular basis for appropriateness. Our periodic review of the collectability of a loan considers 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 revision as more information becomes available. The primary factors behind the determination of the level of the ALLL are specific allocations for impaired loans, historical loss percentages, as well as unallocated components. Specific allocations for impaired loans are primarily determined based on the difference between the loan’s outstanding balance and the present value of expected future cash flows discounted at the loan’s effective interest rate, or the fair value of the collateral, less costs to sell, if the loan is collateral dependent. Historical loss allocations are calculated at the loan class and segment levels based on a migration analysis of the loan portfolio, with the exception of advances to mortgage brokers, over the preceding five years. With no historical losses on advances to mortgage brokers, there is no allocation in the commercial segment displayed in the following tables. The unallocated component of the allowance reflects the margin of imprecision inherent in the underlying assumptions used in the methodologies for estimating specific and general losses in the portfolio. A summary of changes in the ALLL and the recorded investment in loans by segments follows:
The following tables display the credit quality indicators for commercial and agricultural credit exposures based on internally assigned credit risk ratings as of December 31:
Internally assigned credit risk ratings are reviewed, at a minimum, when loans are renewed or when management has knowledge of improvements or deterioration of the credit quality of individual credits. Descriptions of the internally assigned credit risk ratings for commercial and agricultural loans are as follows: 1. EXCELLENT – Substantially Risk Free Credit has strong financial condition and solid earnings history, characterized by:
2. HIGH QUALITY – Limited Risk Credit with sound financial condition and a positive trend in earnings supplemented by:
3. HIGH SATISFACTORY – Reasonable Risk Credit with satisfactory financial condition and further characterized by:
4. LOW SATISFACTORY – Acceptable Risk Credit with bankable risks, although some signs of weaknesses are shown:
To be classified as less than satisfactory, only one of the following criteria must be met. 5. SPECIAL MENTION – Criticized Credit constitutes an undue and unwarranted credit risk but not to the point of justifying a classification of substandard. The credit risk may be relatively minor yet constitutes an unwarranted risk in light of the circumstances surrounding a specific loan:
6. SUBSTANDARD – Classified Credit is inadequately protected by the current net worth and paying capacity of the borrower or of the collateral pledged. There is a distinct possibility we will implement collection procedures if the loan deficiencies are not corrected. Any commercial loan placed in nonaccrual status will be rated “7” or worse. In addition, the following characteristics may apply:
7. VULNERABLE – Classified Credit is considered “Substandard” and warrants placing in nonaccrual status. Risk of loss is being evaluated and exit strategy options are under review. Other characteristics that may apply:
8. DOUBTFUL – Workout Credit has all the weaknesses inherent in a “Substandard” loan with the added characteristic that collection and/or liquidation is pending. The possibility of a loss is extremely high, but its classification as a loss is deferred until liquidation procedures are completed, or reasonably estimable. Other characteristics that may apply:
9. LOSS – Charge-off Credit is considered uncollectible and of such little value that their continuance as bankable assets is not warranted. This classification is for charged-off loans but does not mean that the asset has absolutely no recovery or salvage value. These loans are further characterized by:
Our primary credit quality indicator for residential real estate and consumer loans is the individual loan’s past due aging. The following tables summarize the past due and current loans for the entire loan portfolio as of December 31:
Impaired Loans Loans may be classified as impaired if they meet one or more of the following criteria:
Impairment is measured on a loan-by-loan basis for commercial and agricultural loans by comparing the loan’s outstanding balance to the present value of expected future cash flows discounted at the loan’s effective interest rate, or the fair value of the collateral, less costs to sell, if the loan is collateral dependent. Large groups of smaller-balance, homogeneous residential real estate and consumer loans are collectively evaluated for impairment by comparing the loan’s unpaid principal balance to the present value of expected future cash flows discounted at the loan’s effective interest rate. We do not recognize interest income on impaired loans in nonaccrual status. For impaired loans not classified as nonaccrual, interest income is recognized daily, as earned, according to the terms of the loan agreement and the principal amount outstanding. The following summarizes information pertaining to impaired loans as of, and for the years ended, December 31:
We had committed to advance $175 and $542 in additional funds to be disbursed in connection with impaired loans, which includes TDRs, as of December 31, 2019 and 2018, respectively. Troubled Debt Restructurings A loan modification is considered to be a TDR when the modification includes terms outside of normal lending practices to a borrower who is experiencing financial difficulties. Typical concessions granted include, but are not limited to:
To determine if a borrower is experiencing financial difficulties, factors we consider include:
The following is a summary of information pertaining to TDRs granted in the years ended December 31:
The following table summarizes the nature of the concessions we granted to borrowers in financial difficulty in the years ended December 31:
We did not restructure any loans by forgiving principal or accrued interest during 2019 or 2018. Based on our historical loss experience, losses associated with TDRs are not significantly different than other impaired loans within the same loan segment. As such, TDRs, including TDRs that have been modified in the past 12 months that subsequently defaulted, are analyzed in the same manner as other impaired loans within their respective loan segment. We had no loans that defaulted in the years ended December 31, 2019 and 2018, which were modified within 12 months prior to the default date. The following is a summary of TDR loan balances as of December 31:
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Goodwill and Other Intangible Assets |
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Goodwill and Other Intangible Assets | Goodwill and Other Intangible Assets The carrying amount of goodwill was $48,282 at December 31, 2019 and 2018. Identifiable intangible assets were as follows as of December 31:
Amortization expense associated with identifiable intangible assets was $72, $96, and $119 in 2019, 2018, and 2017, respectively. Estimated amortization expense associated with identifiable intangibles for each of the next five years succeeding December 31, 2019, and thereafter is as follows:
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AFS Securities (Tables) |
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Investments, Debt and Equity Securities [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Amortized cost and fair value of available-for-sale securities | The amortized cost and fair value of AFS securities, with gross unrealized gains and losses, are as follows as of December 31:
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Amortized cost and fair value of available-for-sale securities by contractual maturity | The amortized cost and fair value of AFS securities by contractual maturity at December 31, 2019 are as follows:
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Summary of the activity related to sales of available-for-sale securities | A summary of the sales activity of AFS securities during the years ended December 31 is displayed in the following table.
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Available-for-sale securities with gross unrealized losses | The following information pertains to AFS securities with gross unrealized losses at December 31 aggregated by investment category and length of time that individual securities have been in a continuous loss position.
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Subsequent Events (Notes) |
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Dec. 31, 2019 | |
Subsequent Events [Abstract] | |
Subsequent Events [Text Block] | Subsequent Events We evaluated subsequent events for potential recognition and disclosure through the date the consolidated financial statements were issued. Events or transactions occurring after December 31, 2019, but prior to the date the consolidated financial statements were issued, include anticipated proceeds from the redemption of a corporate owned life insurance policy. Proceeds, from the death benefit on an insurance policy on the life of a former executive officer, are estimated at $500 and will be recognized as noninterest income during 2020. |
Deposits (Tables) |
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Scheduled maturities of time deposits | Scheduled annual maturities of time deposits for each of the next five years, and thereafter, are as follows:
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Loans and ALLL (Summary of changes in ALLL by segments) (Details) - USD ($) $ in Thousands |
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Dec. 31, 2017 |
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Financing Receivable, Allowance for Credit Losses [Line Items] | |||
Loans and Leases Receivable, Allowance | $ 7,939 | $ 8,375 | |
Summary of changes in the ALLL and the recorded investment in loans by segments | |||
Allowance for loan losses, Beginning Balance | 8,375 | 7,700 | |
Allowance for loan losses, Charge-offs | (948) | (1,101) | |
Allowance for loan losses, Recoveries | 482 | 798 | |
Allowance for loan losses, Provision for loan losses | 30 | 978 | $ 253 |
Allowance for loan losses, Ending Balance | 7,939 | 8,375 | 7,700 |
Commercial [Member] | |||
Summary of changes in the ALLL and the recorded investment in loans by segments | |||
Allowance for loan losses, Beginning Balance | 2,563 | 1,706 | |
Allowance for loan losses, Charge-offs | (143) | (575) | |
Allowance for loan losses, Recoveries | 123 | 325 | |
Allowance for loan losses, Provision for loan losses | (629) | 1,107 | |
Allowance for loan losses, Ending Balance | 1,914 | 2,563 | 1,706 |
Agricultural [Member] | |||
Summary of changes in the ALLL and the recorded investment in loans by segments | |||
Allowance for loan losses, Beginning Balance | 775 | 611 | |
Allowance for loan losses, Charge-offs | (240) | (51) | |
Allowance for loan losses, Recoveries | 3 | 3 | |
Allowance for loan losses, Provision for loan losses | 96 | 212 | |
Allowance for loan losses, Ending Balance | 634 | 775 | 611 |
Residential Real Estate [Member] | |||
Summary of changes in the ALLL and the recorded investment in loans by segments | |||
Allowance for loan losses, Beginning Balance | 1,992 | 2,563 | |
Allowance for loan losses, Charge-offs | (99) | (151) | |
Allowance for loan losses, Recoveries | 189 | 261 | |
Allowance for loan losses, Provision for loan losses | (35) | (681) | |
Allowance for loan losses, Ending Balance | 2,047 | 1,992 | 2,563 |
Consumer [Member] | |||
Summary of changes in the ALLL and the recorded investment in loans by segments | |||
Allowance for loan losses, Beginning Balance | 857 | 900 | |
Allowance for loan losses, Charge-offs | (466) | (324) | |
Allowance for loan losses, Recoveries | 167 | 209 | |
Allowance for loan losses, Provision for loan losses | 364 | 72 | |
Allowance for loan losses, Ending Balance | 922 | 857 | 900 |
Unallocated [Member] | |||
Summary of changes in the ALLL and the recorded investment in loans by segments | |||
Allowance for loan losses, Beginning Balance | 2,188 | 1,920 | |
Allowance for loan losses, Charge-offs | 0 | 0 | |
Allowance for loan losses, Recoveries | 0 | 0 | |
Allowance for loan losses, Provision for loan losses | 234 | 268 | |
Allowance for loan losses, Ending Balance | $ 2,422 | $ 2,188 | $ 1,920 |
Related Party Transactions (Tables) |
12 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Dec. 31, 2019 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Related Party Transactions [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of related party transactions | The following table displays total assets of, and our donations to, the Foundation as of, and for the years ended December 31:
Annual activity consisted of the following for the years ended December 31:
|
AFS Securities (Amortized cost and fair value of AFS securities, with gross unrealized gains and losses) (Details) - USD ($) $ in Thousands |
Dec. 31, 2019 |
Dec. 31, 2018 |
---|---|---|
Debt Securities, Available-for-sale [Line Items] | ||
Amortized Cost | $ 423,980 | $ 501,245 |
Gross Unrealized Gains | 6,687 | 2,272 |
Gross Unrealized Losses | 828 | 8,683 |
AFS securities | 429,839 | 494,834 |
Debt Securities, Available-for-sale | 429,839 | 494,834 |
Government sponsored enterprises [Member] | ||
Debt Securities, Available-for-sale [Line Items] | ||
Debt Securities, Available-for-sale, Amortized Cost | 172 | |
Debt Securities, Available-for-sale, Accumulated Gross Unrealized Gain, before Tax | 0 | |
Debt Securities, Available-for-sale, Accumulated Gross Unrealized Loss, before Tax | 2 | |
Debt Securities, Available-for-sale | 170 | |
States and political subdivisions [Member] | ||
Debt Securities, Available-for-sale [Line Items] | ||
Debt Securities, Available-for-sale, Amortized Cost | 165,005 | 188,992 |
Amortized Cost | 165,005 | |
Debt Securities, Available-for-sale, Accumulated Gross Unrealized Gain, before Tax | 4,747 | 2,125 |
Debt Securities, Available-for-sale, Accumulated Gross Unrealized Loss, before Tax | 0 | 251 |
Debt Securities, Available-for-sale | 169,752 | 190,866 |
Auction rate money market preferred [Member] | ||
Debt Securities, Available-for-sale [Line Items] | ||
Debt Securities, Available-for-sale, Amortized Cost | 3,200 | 3,200 |
Amortized Cost | 3,200 | |
Debt Securities, Available-for-sale, Accumulated Gross Unrealized Gain, before Tax | 0 | 0 |
Debt Securities, Available-for-sale, Accumulated Gross Unrealized Loss, before Tax | 81 | 646 |
Debt Securities, Available-for-sale | 3,119 | 2,554 |
Mortgage-backed securities [Member] | ||
Debt Securities, Available-for-sale [Line Items] | ||
Debt Securities, Available-for-sale, Amortized Cost | 139,831 | 189,688 |
Amortized Cost | 139,831 | |
Debt Securities, Available-for-sale, Accumulated Gross Unrealized Gain, before Tax | 933 | 76 |
Debt Securities, Available-for-sale, Accumulated Gross Unrealized Loss, before Tax | 560 | 5,280 |
Debt Securities, Available-for-sale | 140,204 | 184,484 |
Collateralized mortgage obligations [Member] | ||
Debt Securities, Available-for-sale [Line Items] | ||
Debt Securities, Available-for-sale, Amortized Cost | 115,944 | 119,193 |
Amortized Cost | 115,944 | |
Debt Securities, Available-for-sale, Accumulated Gross Unrealized Gain, before Tax | 1,007 | 71 |
Debt Securities, Available-for-sale, Accumulated Gross Unrealized Loss, before Tax | 187 | 2,504 |
Debt Securities, Available-for-sale | $ 116,764 | $ 116,760 |
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