See accompanying Notes to Unaudited Interim Consolidated Condensed Financial Statements.
See accompanying Notes to Unaudited Interim Consolidated Condensed Financial Statements.
See accompanying Notes to Unaudited Interim Consolidated Condensed Financial Statements.
See accompanying Notes to Unaudited Interim Consolidated Condensed Financial Statements.
See accompanying Notes to Unaudited Interim Consolidated Condensed Financial Statements.
See accompanying Notes to Unaudited Interim Consolidated Condensed Financial Statements.
See accompanying Notes to Unaudited Interim Consolidated Condensed Financial Statements.
NOTES TO UNAUDITED INTERIM CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
(1)
|
BASIS OF PRESENTATION
|
The accompanying unaudited interim consolidated condensed financial
statements include the accounts of HopFed Bancorp, Inc. (HopFed or the Corporation) and its subsidiaries (collectively, the Company). The Corporation is a parent holding company of Heritage Bank USA, Inc. (the
Bank). The Banks owns JBMM, LLC, a wholly owned, limited liability company, which owns and manages the Banks foreclosed assets. The Bank also owns Heritage USA Title, LLC, which sells title insurance to the Banks real estate
loan customers. The Bank owns Fort Webb LP, LLC, which owns a limited partnership interest in Fort Webb Elderly Housing LLLP, a low income senior citizen housing facility in Bowling Green, Kentucky. All significant intercompany accounts have been
eliminated.
The Bank is a Kentucky commercial bank regulated by the Kentucky Department of Financial Institutions (KDFI) and
the Federal Deposit Insurance Corporation (FDIC). HopFed Bancorp is regulated by the Federal Reserve Bank of Saint Louis (FED).
The accompanying unaudited interim consolidated condensed financial statements have been prepared in accordance with accounting principles
generally accepted in the United States of America (U.S. GAAP) for interim financial information and with the instructions to Form
10-Q
and Article 10 of Regulation
S-X.
Accordingly, they do not include all of the information and footnotes required by U.S. GAAP for complete financial statements. In the opinion of management, all adjustments (consisting of only normal
recurring accruals) necessary for fair presentation have been included. The results of operations and other data for the nine month period ended September 30, 2017 are not necessarily indicative of results that may be expected the entire fiscal
year ending December 31, 2017.
The accompanying unaudited interim consolidated condensed financial statements should be read in
conjunction with the Consolidated Financial Statements and the Notes thereto included in the Companys Annual Report on Form
10-K
as of and for the year ended December 31, 2016. The accounting
policies followed by the Company are set forth in the Summary of Significant Accounting Policies in the Companys December 31, 2016 Consolidated Financial Statements.
8
Basic earnings per share (EPS) is computed by dividing net income by the
weighted average number of common stock shares outstanding. Diluted EPS is computed by dividing net income by the weighted average number of common stock shares outstanding, adjusted for the effect of potentially dilutive stock awards outstanding
during the period. For the three and nine month periods ended September 30, 2017 and September 30, 2016, the Company has excluded all unearned shares held by the ESOP.
|
|
|
|
|
|
|
|
|
|
|
For the Three Month Periods
Ended September 30,
|
|
|
|
2017
|
|
|
2016
|
|
Basic EPS:
|
|
|
|
|
|
|
|
|
Net income
|
|
$
|
1,403,000
|
|
|
$
|
985,000
|
|
Average common shares outstanding
|
|
|
6,236,075
|
|
|
|
6,212,231
|
|
|
|
|
|
|
|
|
|
|
Earnings per share
|
|
$
|
0.22
|
|
|
$
|
0.16
|
|
|
|
|
|
|
|
|
|
|
Diluted EPS
|
|
|
|
|
|
|
|
|
Net income
|
|
$
|
1,403,000
|
|
|
$
|
985,000
|
|
Average common shares outstanding
|
|
|
6,236,075
|
|
|
|
6,212,231
|
|
Dilutive effect of stock options
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Average diluted shares outstanding
|
|
|
6,236,075
|
|
|
|
6,212,231
|
|
|
|
|
|
|
|
|
|
|
Earnings per share, diluted
|
|
$
|
0.22
|
|
|
$
|
0.16
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the nine month Periods
|
|
|
|
Ended September 30,
|
|
|
|
2017
|
|
|
2016
|
|
Basic EPS:
|
|
|
|
|
|
|
|
|
Net income
|
|
$
|
3,479,000
|
|
|
$
|
1,798,000
|
|
Average common shares outstanding
|
|
|
6,227,955
|
|
|
|
6,247,536
|
|
|
|
|
|
|
|
|
|
|
Earnings per share
|
|
$
|
0.56
|
|
|
$
|
0.29
|
|
|
|
|
|
|
|
|
|
|
Diluted EPS
|
|
|
|
|
|
|
|
|
Net income
|
|
$
|
3,479,000
|
|
|
$
|
1,798,000
|
|
Average common shares outstanding
|
|
|
6,227,955
|
|
|
|
6,247,536
|
|
Dilutive effect of stock options
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Average diluted shares outstanding
|
|
|
6,227,955
|
|
|
|
6,247,536
|
|
|
|
|
|
|
|
|
|
|
Earnings per share, diluted
|
|
$
|
0.56
|
|
|
$
|
0.29
|
|
|
|
|
|
|
|
|
|
|
9
The carrying amount of securities and their estimated fair values at
September 30, 2017 were as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
September 30, 2017
|
|
|
|
|
|
|
Gross
|
|
|
Gross
|
|
|
Estimated
|
|
|
|
Amortized
|
|
|
Unrealized
|
|
|
Unrealized
|
|
|
Fair
|
|
|
|
Cost
|
|
|
Gains
|
|
|
Losses
|
|
|
Value
|
|
|
|
(Dollars in Thousands)
|
|
Restricted:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
FHLB stock
|
|
$
|
4,428
|
|
|
|
|
|
|
|
|
|
|
|
4,428
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Available for sale:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
U.S. Agency securities
|
|
$
|
89,419
|
|
|
|
766
|
|
|
|
(356
|
)
|
|
|
89,829
|
|
Taxable municipal bonds
|
|
|
1,281
|
|
|
|
10
|
|
|
|
(6
|
)
|
|
|
1,285
|
|
Tax free municipal bonds
|
|
|
27,349
|
|
|
|
903
|
|
|
|
(21
|
)
|
|
|
28,231
|
|
Trust preferred securities
|
|
|
1,646
|
|
|
|
71
|
|
|
|
|
|
|
|
1,717
|
|
Mortgage backed securities
|
|
|
71,399
|
|
|
|
378
|
|
|
|
(552
|
)
|
|
|
71,225
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
191,094
|
|
|
|
2,128
|
|
|
|
(935
|
)
|
|
|
192,287
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
10
The carrying amount of securities and their estimated fair values at December 31, 2016 were
as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2016
|
|
|
|
|
|
|
Gross
|
|
|
Gross
|
|
|
Estimated
|
|
|
|
Amortized
|
|
|
Unrealized
|
|
|
Unrealized
|
|
|
Fair
|
|
|
|
Cost
|
|
|
Gains
|
|
|
Losses
|
|
|
Value
|
|
|
|
(Dollars in Thousands)
|
|
Restricted:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
FHLB stock
|
|
$
|
4,428
|
|
|
|
|
|
|
|
|
|
|
|
4,428
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Available for sale:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
U.S. Treasury securities
|
|
|
2,000
|
|
|
|
1
|
|
|
|
|
|
|
|
2,001
|
|
U.S. Agency securities
|
|
|
83,667
|
|
|
|
983
|
|
|
|
(638
|
)
|
|
|
84,012
|
|
Taxable municipal bonds
|
|
|
2,720
|
|
|
|
17
|
|
|
|
(10
|
)
|
|
|
2,727
|
|
Tax free municipal bonds
|
|
|
33,004
|
|
|
|
1,081
|
|
|
|
(174
|
)
|
|
|
33,911
|
|
Trust preferred securities
|
|
|
1,634
|
|
|
|
183
|
|
|
|
|
|
|
|
1,817
|
|
Mortgage-backed securities
|
|
|
85,626
|
|
|
|
437
|
|
|
|
(1,051
|
)
|
|
|
85,012
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
208,651
|
|
|
|
2,702
|
|
|
|
(1,873
|
)
|
|
|
209,480
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The scheduled maturities of debt securities available for sale at September 30, 2017 were as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Estimated
|
|
|
|
Amortized
|
|
|
Fair
|
|
|
|
Cost
|
|
|
Value
|
|
|
|
(Dollars in Thousands)
|
|
Due within one year
|
|
$
|
3,830
|
|
|
$
|
3,850
|
|
Due in one to five years
|
|
|
23,534
|
|
|
|
23,745
|
|
Due in five to ten years
|
|
|
25,505
|
|
|
|
25,847
|
|
Due after ten years
|
|
|
7,230
|
|
|
|
7,558
|
|
|
|
|
|
|
|
|
|
|
|
|
|
60,099
|
|
|
|
61,000
|
|
Amortizing agency bonds
|
|
|
59,596
|
|
|
|
60,062
|
|
Mortgage-backed securities
|
|
|
71,399
|
|
|
|
71,225
|
|
|
|
|
|
|
|
|
|
|
Total securities available for sale
|
|
$
|
191,094
|
|
|
$
|
192,287
|
|
|
|
|
|
|
|
|
|
|
11
The estimated fair value and unrealized loss amounts of temporarily impaired investments as of
September 30, 2017 were as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Less than 12 months
|
|
|
12 months or longer
|
|
|
Total
|
|
|
|
Estimated
|
|
|
Unrealized
|
|
|
Estimated
|
|
|
Unrealized
|
|
|
Estimated
|
|
|
Unrealized
|
|
|
|
Fair Value
|
|
|
Losses
|
|
|
Fair Value
|
|
|
Losses
|
|
|
Fair Value
|
|
|
Losses
|
|
|
|
(Dollars in Thousands)
|
|
Available for sale
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
U.S. Agency securities
|
|
$
|
31,029
|
|
|
|
(212
|
)
|
|
|
8,217
|
|
|
|
(144
|
)
|
|
|
39,246
|
|
|
|
(356
|
)
|
Taxable municipal bonds
|
|
|
519
|
|
|
|
(6
|
)
|
|
|
|
|
|
|
|
|
|
|
519
|
|
|
|
(6
|
)
|
Tax free municipal bonds
|
|
|
1,666
|
|
|
|
(4
|
)
|
|
|
928
|
|
|
|
(17
|
)
|
|
|
2,594
|
|
|
|
(21
|
)
|
Mortgage-backed securities
|
|
|
25,788
|
|
|
|
(171
|
)
|
|
|
17,353
|
|
|
|
(381
|
)
|
|
|
43,141
|
|
|
|
(552
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total available for sale
|
|
$
|
59,002
|
|
|
|
(393
|
)
|
|
|
26,498
|
|
|
|
(542
|
)
|
|
|
85,500
|
|
|
|
(935
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The estimated fair value and unrealized loss amounts of temporarily impaired investments as of
December 31, 2016 were as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Less than 12 months
|
|
|
12 months or longer
|
|
|
Total
|
|
|
|
Estimated
|
|
|
Unrealized
|
|
|
Estimated
|
|
|
Unrealized
|
|
|
Estimated
|
|
|
Unrealized
|
|
|
|
Fair Value
|
|
|
Losses
|
|
|
Fair Value
|
|
|
Losses
|
|
|
Fair Value
|
|
|
Losses
|
|
|
|
(Dollars in Thousands)
|
|
Available for sale
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
U.S. Agency securities
|
|
$
|
41,963
|
|
|
|
(597
|
)
|
|
|
3,459
|
|
|
|
(41
|
)
|
|
|
45,422
|
|
|
|
(638
|
)
|
Taxable municipal bonds
|
|
|
1,347
|
|
|
|
(10
|
)
|
|
|
|
|
|
|
|
|
|
|
1,347
|
|
|
|
(10
|
)
|
Tax free municipal bonds
|
|
|
7,369
|
|
|
|
(174
|
)
|
|
|
|
|
|
|
|
|
|
|
7,369
|
|
|
|
(174
|
)
|
Mortgage-backed securities
|
|
|
48,462
|
|
|
|
(796
|
)
|
|
|
7,439
|
|
|
|
(255
|
)
|
|
|
55,901
|
|
|
|
(1,051
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total available for sale
|
|
$
|
99,141
|
|
|
|
(1,577
|
)
|
|
|
10,898
|
|
|
|
(296
|
)
|
|
|
110,039
|
|
|
|
(1,873
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Management evaluates securities for other-than-temporary impairment at least on a quarterly basis, and more
frequently when economic or market concerns warrant such evaluations. Consideration is given to (1) the length of time and the extent to which the fair value has been less than cost, (2) the financial condition and near-term prospects of
the issuer, and (3) the intent and ability of the Company to retain its investment in the issuer for a period of time sufficient to allow for any anticipated recovery in fair value. At September 30, 2017, the Company has 60 securities with
unrealized losses. The losses for all securities are considered to be a direct result of the effect that the prevailing interest rate environment had on the value of debt securities and are not related to the credit worthiness of the issuers.
Furthermore, the Company has the intent and ability to retain its investments in the issuers for a period of time that management believes to be sufficient to allow for any anticipated recovery in fair value. Therefore, the Company did not recognize
any other-than-temporary impairments as of September 30, 2017.
At September 30, 2017 and December 31, 2016, securities
with a book value of approximately $117.4 million and $125.6 million and a market value of approximately $120.1 million and $128.4 million, respectively, were pledged to various municipalities for deposits in excess of FDIC
limits as required by law.
12
The Company uses the following loan segments as described below:
|
|
|
One-to-four
family first mortgages are
closed-end
loans secured by residential housing. Loans may
be either owner or
non-owner
occupied properties. If the loan is owner-occupied, the loan is analyzed and under-written as a consumer loan. Loan terms may be up to 30 years.
|
|
|
|
Home equity lines of credit may be first or second mortgages secured by
one-to-four
family properties. Home equity loans carry a variable
rate and typically are open ended for a period not to exceed ten years with a fifteen year final maturity. Loans secured by home equity lines of credit are under-written under the Companys consumer loan guidelines.
|
|
|
|
Junior liens are
closed-end
loans secured by
one-to-four
family residences with a fixed or variable
rate. Typically, the collateral for these loans are owner occupied units with a subordinate lien. Loans secured by junior liens are under-written under the Companys consumer loan guidelines.
|
|
|
|
Multi-family loans are
closed-end
loans secured by residential housing with five or more units in a single building. Multi-family loans may carry a variable rate of interest or
the interest rate on the loan is a fixed rate (usually five years). After the initial fixed rate period, the loan reverts to a variable rate or has balloon maturity. Multi-family loans have amortization terms of up to twenty years and are
under-written under the Companys commercial loan underwriting guidelines.
|
|
|
|
Constructions loans may consist of residential or commercial properties and carry a fixed or variable rate for the term of the construction period. Construction loans have a maturity of between twelve and twenty-four
months depending on the type of property. After the construction period, loans are amortized over a twenty-year period. All construction loans are under written under the Companys commercial loan underwriting guidelines for the type of
property being constructed.
|
|
|
|
Land loans consist of properties currently under development, land held for future development and land held for recreational purposes. Land loans used for recreational purposes are amortized for twenty years and
typically carry a fixed rate of interest for
one-to-five
years with a balloon maturity or floating rate period to follow and are under-written under the Companys
commercial loan underwriting guidelines.
|
|
|
|
Loans classified as farmland by the Company include properties that are used exclusively for the production of grain, livestock, poultry or swine. Loans secured by farmland have a maturity of up to twenty years and
carry a fixed rate of interest for five to ten years. Loans secured by farmland are under-written under the Companys commercial loan underwriting guidelines.
|
13
|
|
|
Non-residential
real estate loans are secured by commercial real estate properties and may be either owner or
non-owner
occupied. The loans
typically have a twenty year maturity and may be fixed for a period of five to ten years. After the initial fixed rate period, the note will either revert to a one year adjustable rate loan or have a balloon maturity. Loans secured by
non-residential
real estate are under-written under the Companys commercial loan underwriting standards.
|
|
|
|
The Company originates secured and unsecured consumer loans. Collateral for consumer loans may include deposits, brokerage accounts, automobiles and other personal items. Consumer loans are typically fixed for a term of
one to five years and are under-written using the Companys consumer loan policy.
|
|
|
|
The Company originates unsecured and secured commercial loans. Secured commercial loans may have business inventory, accounts receivable and equipment as collateral. The typical customer may include all forms of
manufacturing, retail and wholesale sales, professional services and various forms of agri-business interest. Commercial loans may be fixed or variable rate and typically have terms between one and five years.
|
Set forth below is selected data relating to the composition of the loan portfolio by type of loan at September 30, 2017 and
December 31, 2016.
|
|
|
|
|
|
|
|
|
|
|
September 30, 2017
|
|
|
December 31, 2016
|
|
|
|
(Dollars in Thousands)
|
|
Real estate loans:
|
|
|
|
|
|
|
|
|
One-to-four
family
first mortgages
|
|
$
|
165,926
|
|
|
$
|
147,962
|
|
Home equity lines of credit
|
|
|
34,995
|
|
|
|
35,684
|
|
Junior liens
|
|
|
1,402
|
|
|
|
1,452
|
|
Multi-family
|
|
|
37,321
|
|
|
|
34,284
|
|
Construction
|
|
|
25,594
|
|
|
|
39,255
|
|
Land
|
|
|
14,289
|
|
|
|
23,840
|
|
Farmland
|
|
|
37,262
|
|
|
|
47,796
|
|
Non-residential
real estate
|
|
|
216,056
|
|
|
|
182,940
|
|
|
|
|
|
|
|
|
|
|
Total mortgage loans
|
|
|
532,845
|
|
|
|
513,213
|
|
Consumer loans
|
|
|
9,222
|
|
|
|
8,717
|
|
Commercial loans
|
|
|
88,515
|
|
|
|
88,907
|
|
|
|
|
|
|
|
|
|
|
Total other loans
|
|
|
97,737
|
|
|
|
97,624
|
|
|
|
|
|
|
|
|
|
|
Total loans
|
|
|
630,582
|
|
|
|
610,837
|
|
Deferred loan fees, net of cost
|
|
|
(380
|
)
|
|
|
(439
|
)
|
Less allowance for loan losses
|
|
|
(4,799
|
)
|
|
|
(6,112
|
)
|
|
|
|
|
|
|
|
|
|
Total loans, net
|
|
$
|
625,403
|
|
|
$
|
604,286
|
|
|
|
|
|
|
|
|
|
|
14
Although the Company has a diversified loan portfolio, 84.5% and 84.0% of the portfolio was
concentrated in loans secured by real estate at September 30, 2017 and December 31, 2016, respectively. At September 30, 2017 and December 31, 2016, the majority of these loans are located within the Companys general
operating area of the United States.
The following table provides a detail of the Companys activity in the allowance for loan loss
account by loan type for the nine month period ended September 30, 2017:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Ending
|
|
|
|
Balance
|
|
|
Charge offs
|
|
|
Recoveries
|
|
|
Provision
|
|
|
Balance
|
|
|
|
12/31/2016
|
|
|
2017
|
|
|
2017
|
|
|
2017
|
|
|
9/30/2017
|
|
|
|
(Dollars in Thousands)
|
|
One-to-four
family
mortgages
|
|
$
|
852
|
|
|
|
(49
|
)
|
|
|
9
|
|
|
|
(79
|
)
|
|
|
733
|
|
Home equity line of credit
|
|
|
260
|
|
|
|
|
|
|
|
10
|
|
|
|
(86
|
)
|
|
|
184
|
|
Junior liens
|
|
|
8
|
|
|
|
|
|
|
|
2
|
|
|
|
(4
|
)
|
|
|
6
|
|
Multi-family
|
|
|
412
|
|
|
|
|
|
|
|
417
|
|
|
|
(506
|
)
|
|
|
323
|
|
Construction
|
|
|
277
|
|
|
|
|
|
|
|
|
|
|
|
(146
|
)
|
|
|
131
|
|
Land
|
|
|
1,760
|
|
|
|
(2,608
|
)
|
|
|
559
|
|
|
|
1,535
|
|
|
|
1,246
|
|
Farmland
|
|
|
778
|
|
|
|
|
|
|
|
|
|
|
|
(409
|
)
|
|
|
369
|
|
Non-residential
real estate
|
|
|
964
|
|
|
|
|
|
|
|
13
|
|
|
|
(215
|
)
|
|
|
762
|
|
Consumer loans
|
|
|
208
|
|
|
|
(200
|
)
|
|
|
70
|
|
|
|
68
|
|
|
|
146
|
|
Commercial loans
|
|
|
593
|
|
|
|
(224
|
)
|
|
|
267
|
|
|
|
263
|
|
|
|
899
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
6,112
|
|
|
|
(3,081
|
)
|
|
|
1,347
|
|
|
|
421
|
|
|
|
4,799
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The following table provides a detail of the Companys activity in the allowance for loan loss account by
loan type for the year ended December 31, 2016:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Ending
|
|
|
|
Balance
|
|
|
Charge offs
|
|
|
Recoveries
|
|
|
Provision
|
|
|
Balance
|
|
|
|
12/31/2015
|
|
|
2016
|
|
|
2016
|
|
|
2016
|
|
|
12/31/2016
|
|
|
|
(Dollars in Thousands)
|
|
One-to-four
family
mortgages
|
|
$
|
1,030
|
|
|
|
|
|
|
|
167
|
|
|
|
(345
|
)
|
|
|
852
|
|
Home equity line of credit
|
|
|
201
|
|
|
|
(30
|
)
|
|
|
14
|
|
|
|
75
|
|
|
|
260
|
|
Junior liens
|
|
|
8
|
|
|
|
|
|
|
|
14
|
|
|
|
(14
|
)
|
|
|
8
|
|
Multi-family
|
|
|
227
|
|
|
|
(421
|
)
|
|
|
|
|
|
|
606
|
|
|
|
412
|
|
Construction
|
|
|
377
|
|
|
|
|
|
|
|
|
|
|
|
(100
|
)
|
|
|
277
|
|
Land
|
|
|
1,379
|
|
|
|
|
|
|
|
|
|
|
|
381
|
|
|
|
1,760
|
|
Farmland
|
|
|
358
|
|
|
|
|
|
|
|
|
|
|
|
420
|
|
|
|
778
|
|
Non-residential
real estate
|
|
|
1,139
|
|
|
|
|
|
|
|
10
|
|
|
|
(185
|
)
|
|
|
964
|
|
Consumer loans
|
|
|
358
|
|
|
|
(422
|
)
|
|
|
293
|
|
|
|
(21
|
)
|
|
|
208
|
|
Commercial loans
|
|
|
623
|
|
|
|
(595
|
)
|
|
|
141
|
|
|
|
424
|
|
|
|
593
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
5,700
|
|
|
|
(1,468
|
)
|
|
|
639
|
|
|
|
1,241
|
|
|
|
6,112
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
15
The table below presents past due and
non-accrual
balances at September 30, 2017 by loan classification allocated between performing and
non-performing:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
30 - 89
|
|
|
|
|
|
|
|
|
Impaired Loans
|
|
|
|
|
|
|
Currently
|
|
|
Days
|
|
|
Non-accrual
|
|
|
Special
|
|
|
Currently Performing
|
|
|
|
|
|
|
Performing
|
|
|
Past Due
|
|
|
Loans
|
|
|
Mention
|
|
|
Substandard
|
|
|
Doubtful
|
|
|
Total
|
|
|
|
(Dollars in Thousands)
|
|
One-to-four
family
mortgages
|
|
$
|
164,817
|
|
|
|
582
|
|
|
|
333
|
|
|
|
51
|
|
|
|
143
|
|
|
|
|
|
|
$
|
165,926
|
|
Home equity line of credit
|
|
|
34,433
|
|
|
|
|
|
|
|
401
|
|
|
|
|
|
|
|
161
|
|
|
|
|
|
|
|
34,995
|
|
Junior liens
|
|
|
1,398
|
|
|
|
4
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,402
|
|
Multi-family
|
|
|
37,321
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
37,321
|
|
Construction
|
|
|
25,594
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
25,594
|
|
Land
|
|
|
13,724
|
|
|
|
|
|
|
|
40
|
|
|
|
|
|
|
|
525
|
|
|
|
|
|
|
|
14,289
|
|
Farmland
|
|
|
35,626
|
|
|
|
|
|
|
|
455
|
|
|
|
1,147
|
|
|
|
34
|
|
|
|
|
|
|
|
37,262
|
|
Non-residential
real estate
|
|
|
207,765
|
|
|
|
165
|
|
|
|
|
|
|
|
778
|
|
|
|
7,348
|
|
|
|
|
|
|
|
216,056
|
|
Consumer loans
|
|
|
9,066
|
|
|
|
3
|
|
|
|
5
|
|
|
|
|
|
|
|
148
|
|
|
|
|
|
|
|
9,222
|
|
Commercial loans
|
|
|
83,246
|
|
|
|
|
|
|
|
505
|
|
|
|
3,645
|
|
|
|
1,119
|
|
|
|
|
|
|
|
88,515
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
612,990
|
|
|
|
754
|
|
|
|
1,739
|
|
|
|
5,621
|
|
|
|
9,478
|
|
|
|
|
|
|
$
|
630,582
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The table below presents past due and
non-accrual
balances at
December 31, 2016 by loan classification allocated between performing and
non-performing:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
30 - 89
|
|
|
Non-
|
|
|
|
|
|
Impaired Loans
|
|
|
|
|
|
|
Currently
|
|
|
Days
|
|
|
Accrual
|
|
|
Special
|
|
|
Currently Performing
|
|
|
|
|
|
|
Performing
|
|
|
Past Due
|
|
|
Loans
|
|
|
Mention
|
|
|
Substandard
|
|
|
Doubtful
|
|
|
Total
|
|
|
|
(Dollars in Thousands)
|
|
One-to-four
family
mortgages
|
|
|
145,069
|
|
|
|
896
|
|
|
|
270
|
|
|
|
744
|
|
|
|
983
|
|
|
|
|
|
|
|
147,962
|
|
Home equity line of credit
|
|
|
35,087
|
|
|
|
22
|
|
|
|
402
|
|
|
|
25
|
|
|
|
148
|
|
|
|
|
|
|
|
35,684
|
|
Junior liens
|
|
|
1,407
|
|
|
|
4
|
|
|
|
|
|
|
|
30
|
|
|
|
11
|
|
|
|
|
|
|
|
1,452
|
|
Multi-family
|
|
|
31,280
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
3,004
|
|
|
|
|
|
|
|
34,284
|
|
Construction
|
|
|
39,255
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
39,255
|
|
Land
|
|
|
15,581
|
|
|
|
|
|
|
|
7,675
|
|
|
|
35
|
|
|
|
549
|
|
|
|
|
|
|
|
23,840
|
|
Farmland
|
|
|
44,832
|
|
|
|
|
|
|
|
|
|
|
|
674
|
|
|
|
2,290
|
|
|
|
|
|
|
|
47,796
|
|
Non-residential
real estate
|
|
|
172,395
|
|
|
|
|
|
|
|
208
|
|
|
|
3
|
|
|
|
10,334
|
|
|
|
|
|
|
|
182,940
|
|
Consumer loans
|
|
|
8,354
|
|
|
|
28
|
|
|
|
3
|
|
|
|
|
|
|
|
332
|
|
|
|
|
|
|
|
8,717
|
|
Commercial loans
|
|
|
84,913
|
|
|
|
261
|
|
|
|
516
|
|
|
|
603
|
|
|
|
2,614
|
|
|
|
|
|
|
|
88,907
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
578,173
|
|
|
|
1,211
|
|
|
|
9,074
|
|
|
|
2,114
|
|
|
|
20,265
|
|
|
|
|
|
|
|
610,837
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
At September 30, 2017 and December 31, 2016, there were no loans more than 90 days past due accruing
interest.
16
The following table presents the balance in the allowance for loan losses and the recorded
investment in loans as of September 30, 2017 and December 31, 2016, by portfolio segment and based on the impairment method.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Land
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Development /
|
|
|
Commercial
|
|
|
Residential
|
|
|
|
|
|
|
|
|
|
Commercial
|
|
|
Construction
|
|
|
Real Estate
|
|
|
Real Estate
|
|
|
Consumer
|
|
|
Total
|
|
|
|
(Dollars in Thousands)
|
|
September 30, 2017:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Allowance for loan losses:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Ending allowance balance attributable to loans:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Individually evaluated for impairment
|
|
$
|
267
|
|
|
|
|
|
|
|
19
|
|
|
|
|
|
|
|
36
|
|
|
|
322
|
|
Collectively evaluated for impairment
|
|
|
632
|
|
|
|
1,377
|
|
|
|
1,435
|
|
|
|
923
|
|
|
|
110
|
|
|
|
4,477
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total ending allowance balance
|
|
$
|
899
|
|
|
|
1,377
|
|
|
|
1,454
|
|
|
|
923
|
|
|
|
146
|
|
|
|
4,799
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loans:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loans individually evaluated for impairment
|
|
$
|
1,624
|
|
|
|
565
|
|
|
|
7,837
|
|
|
|
1,038
|
|
|
|
153
|
|
|
|
11,217
|
|
Loans collectively evaluated for impairment
|
|
|
86,891
|
|
|
|
39,318
|
|
|
|
282,802
|
|
|
|
201,285
|
|
|
|
9,069
|
|
|
|
619,365
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total ending loans balance
|
|
$
|
88,515
|
|
|
|
39,883
|
|
|
|
290,639
|
|
|
|
202,323
|
|
|
|
9,222
|
|
|
|
630,582
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Land
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Development /
|
|
|
Commercial
|
|
|
Residential
|
|
|
|
|
|
|
|
|
|
Commercial
|
|
|
Construction
|
|
|
Real Estate
|
|
|
Real Estate
|
|
|
Consumer
|
|
|
Total
|
|
|
|
(Dollars in Thousands)
|
|
December 31, 2016:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Allowance for loan losses:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Ending allowance balance attributable to loans:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Individually evaluated for impairment
|
|
$
|
28
|
|
|
|
1,036
|
|
|
|
|
|
|
|
|
|
|
|
84
|
|
|
|
1,148
|
|
Collectively evaluated for impairment
|
|
|
565
|
|
|
|
1,001
|
|
|
|
2,154
|
|
|
|
1,120
|
|
|
|
124
|
|
|
|
4,964
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total ending allowance balance
|
|
$
|
593
|
|
|
|
2,037
|
|
|
|
2,154
|
|
|
|
1,120
|
|
|
|
208
|
|
|
|
6,112
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loans:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loans individually evaluated for impairment
|
|
$
|
3,130
|
|
|
|
8,224
|
|
|
|
15,836
|
|
|
|
1,814
|
|
|
|
335
|
|
|
|
29,339
|
|
Loans collectively evaluated for impairment
|
|
|
85,777
|
|
|
|
54,871
|
|
|
|
249,184
|
|
|
|
183,284
|
|
|
|
8,382
|
|
|
|
581,498
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total ending loans balance
|
|
$
|
88,907
|
|
|
|
63,095
|
|
|
|
265,020
|
|
|
|
185,098
|
|
|
|
8,717
|
|
|
|
610,837
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The determination of the allowance for loan losses is based on managements analysis, performed on a
quarterly basis. Various factors are considered, including the growth and composition of the loan portfolio, the relationship of the allowance for loan losses to outstanding loans, historical loss experience, delinquency trends and prevailing
economic conditions and the market value of the underlying collateral. Although management believes its allowance for loan losses is adequate, there can be no assurance that additional allowances will not be required or that losses on loans will not
be incurred.
The Company utilizes a credit grading system that provides a uniform framework for establishing and monitoring credit risk
in the loan portfolio. Under this system, each loan is graded based on
pre-determined
risk metrics and categorized into one of the risk grades discussed below. The Company uses the following risk grade
definitions for commercial loans:
17
Excellent -
Loans in this category are to persons or entities of unquestioned financial
strength, a highly liquid financial position, with collateral that is liquid and well margined. These borrowers have performed without question on past obligations, and the Bank expects their performance to continue. Internally generated cash flow
covers current maturities of long-term debt by a substantial margin. Loans secured by Bank certificates of deposit and savings accounts, with appropriate holds placed on the accounts, are to be rated in this category.
Very Good -
These are loans to persons or entities with strong financial condition and above-average liquidity who have previously
satisfactorily handled their obligations with the Bank. Collateral securing the Banks debt is margined in accordance with policy guidelines. Internally generated cash flow covers current maturities of long-term debt more than adequately.
Unsecured loans to individuals supported by strong financial statements and on which repayment is satisfactory may be included in this classification.
Satisfactory -
Assets of this grade conform to substantially all the Banks underwriting criteria and evidence an average level of
credit risk; however, such assets display more susceptibility to economic, technological or political changes since they lack the above average financial strength of credits rated Very Good. Borrowers repayment capacity is considered to be
adequate. Credit is appropriately structured and serviced; payment history is satisfactory.
Acceptable -
Assets of this grade
conform to most of the Banks underwriting criteria and evidence an acceptable, though higher than average, level of credit risk; however, these loans have certain risk characteristics which could adversely affect the borrowers ability to
repay given material adverse trends. Loans in this category require an above average level of servicing and show more reliance on collateral and guaranties to preclude a loss to the Bank should material adverse trends develop. If the borrower is a
company, its earnings, liquidity and capitalization are slightly below average when compared to its peers.
Watch -
These loans are
characterized by borrowers who have marginal cash flow, marginal profitability, or have experienced an unprofitable year and a declining financial condition. The borrower has in the past satisfactorily handled debts with the Bank, but in recent
months has either been late, delinquent in making payments, or made sporadic payments. While the Bank continues to be adequately secured, margins have decreased or are decreasing, despite the borrowers continued satisfactory condition. Other
characteristics of borrowers in this class include inadequate credit information, weakness of financial statement and repayment capacity, but with collateral that appears to limit exposure. This classification includes loans to established borrowers
that are reasonably margined by collateral, but where potential for improvement in financial capacity appears limited.
Special Mention
-
Loans in this category have potential weaknesses that deserve managements close attention. If left uncorrected, these potential weaknesses may result in deteriorating prospects for the asset or in the institutions credit position
at some future date. Borrowers may be experiencing adverse operating trends or market conditions.
Non-financial
reasons for rating a credit exposure Special Mention include, but are not limited to: management
problems, pending litigations, ineffective loan agreement and/or inadequate loan documentation, structural weaknesses and/or lack of control over collateral.
Substandard -
A substandard asset is inadequately protected by the current sound worth or paying capacity of the debtor or the
collateral pledged. There exists one or more well defined weaknesses that jeopardize the liquidation of the debt. There is a distinct possibility the Bank will experience some loss if the deficiencies are not corrected.
18
Doubtful -
A loan classified as doubtful has all the weaknesses inherent in a loan
classified as substandard, with the added characteristic that the weaknesses make collection or liquidation in full, on the basis of currently existing facts, conditions, and values, highly questionable and improbable. These are poor quality loans
in which neither the collateral, if any, nor the financial condition of the borrower presently ensure collectability in full in a reasonable period of time; in fact, there is permanent impairment in the collateral securing the Banks loan.
These loans are in a
work-out
status and have a defined
work-out
strategy.
Loss
-
Loans classified as loss are considered uncollectible and of such little value that their continuance as Bankable assets
is not warranted. The Bank takes losses in the period in which they become uncollectible.
The following credit risk standards are assigned to consumer
loans:
Satisfactory -
All consumer
open-end
and
closed-end
retail loans shall have an initial risk grade assigned of 3Satisfactory.
Substandard -
All consumer
open-end
and
closed-end
retail loans past due 90 cumulative days from the contractual date will be classified as 7Substandard. If a consumer/retail loan customer files bankruptcy, the loan will be classified as 7Substandard regardless of payment history.
Loss -
All
closed-end
retail loans that become past due 120 cumulative days and
open-end
retail loans that become past due 180 cumulative days from the contractual due date will be charged off as loss assets. The charge off will be taken by the end of the month in which the
120-day
or
180-day
time period elapses. All losses in retail credit will be recognized when the affiliate becomes aware of the loss, but in no case should the charge off
exceed the time frames stated within this policy.
A loan is considered to be impaired when management determines that it is probable that
the Company will be unable to collect all principal and interest payments due in accordance with the contractual terms of the loan agreement. The value of individually impaired loans is measured based on the present value of expected payments or
using the fair value of the collateral less cost to sell if the loan is collateral dependent. Currently, it is managements practice to classify all substandard or doubtful loans as impaired.
19
A summary of the Companys loans by credit risk indicator and the related allowance at
September 30, 2017 and December 31, 2016 were as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Impaired Loans
|
|
|
|
|
|
|
|
|
|
|
September 30, 2017
|
|
Pass
|
|
|
Special
Mention
|
|
|
Substandard
|
|
|
Doubtful
|
|
|
Total
|
|
|
Specific
Allowance for
Impairment
|
|
|
Allowance for
Loans not
Impaired
|
|
|
|
(Dollars in Thousands)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
One-to-four
family
mortgages
|
|
$
|
165,399
|
|
|
|
51
|
|
|
|
476
|
|
|
|
|
|
|
|
165,926
|
|
|
|
|
|
|
|
733
|
|
Home equity line of credit
|
|
|
34,433
|
|
|
|
|
|
|
|
562
|
|
|
|
|
|
|
|
34,995
|
|
|
|
|
|
|
|
184
|
|
Junior liens
|
|
|
1,402
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,402
|
|
|
|
|
|
|
|
6
|
|
Multi-family
|
|
|
37,321
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
37,321
|
|
|
|
|
|
|
|
323
|
|
Construction
|
|
|
25,594
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
25,594
|
|
|
|
|
|
|
|
131
|
|
Land
|
|
|
13,724
|
|
|
|
|
|
|
|
565
|
|
|
|
|
|
|
|
14,289
|
|
|
|
|
|
|
|
1,246
|
|
Farmland
|
|
|
35,626
|
|
|
|
1,147
|
|
|
|
489
|
|
|
|
|
|
|
|
37,262
|
|
|
|
17
|
|
|
|
352
|
|
Non-residential
real estate
|
|
|
207,930
|
|
|
|
778
|
|
|
|
7,348
|
|
|
|
|
|
|
|
216,056
|
|
|
|
2
|
|
|
|
760
|
|
Consumer loans
|
|
|
9,069
|
|
|
|
|
|
|
|
153
|
|
|
|
|
|
|
|
9,222
|
|
|
|
36
|
|
|
|
110
|
|
Commercial loans
|
|
|
83,246
|
|
|
|
3,645
|
|
|
|
1,624
|
|
|
|
|
|
|
|
88,515
|
|
|
|
267
|
|
|
|
632
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
613,744
|
|
|
|
5,621
|
|
|
|
11,217
|
|
|
|
|
|
|
|
630,582
|
|
|
|
322
|
|
|
|
4,477
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Impaired Loans
|
|
|
|
|
|
|
|
|
|
|
December 31, 2016
|
|
Pass
|
|
|
Special
Mention
|
|
|
Substandard
|
|
|
Doubtful
|
|
|
Total
|
|
|
Specific
Allowance for
Impairment
|
|
|
Allowance for
Loans not
Impaired
|
|
|
|
(Dollars in Thousands)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
One-to-four
family
mortgages
|
|
$
|
145,965
|
|
|
|
744
|
|
|
|
1,253
|
|
|
|
|
|
|
|
147,962
|
|
|
|
|
|
|
|
852
|
|
Home equity line of credit
|
|
|
35,109
|
|
|
|
25
|
|
|
|
550
|
|
|
|
|
|
|
|
35,684
|
|
|
|
|
|
|
|
260
|
|
Junior liens
|
|
|
1,411
|
|
|
|
30
|
|
|
|
11
|
|
|
|
|
|
|
|
1,452
|
|
|
|
|
|
|
|
8
|
|
Multi-family
|
|
|
31,280
|
|
|
|
|
|
|
|
3,004
|
|
|
|
|
|
|
|
34,284
|
|
|
|
|
|
|
|
412
|
|
Construction
|
|
|
39,255
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
39,255
|
|
|
|
|
|
|
|
277
|
|
Land
|
|
|
15,581
|
|
|
|
35
|
|
|
|
8,224
|
|
|
|
|
|
|
|
23,840
|
|
|
|
1,036
|
|
|
|
724
|
|
Farmland
|
|
|
44,832
|
|
|
|
674
|
|
|
|
2,290
|
|
|
|
|
|
|
|
47,796
|
|
|
|
|
|
|
|
778
|
|
Non-residential
real estate
|
|
|
172,395
|
|
|
|
3
|
|
|
|
10,542
|
|
|
|
|
|
|
|
182,940
|
|
|
|
|
|
|
|
964
|
|
Consumer loans
|
|
|
8,382
|
|
|
|
|
|
|
|
335
|
|
|
|
|
|
|
|
8,717
|
|
|
|
84
|
|
|
|
124
|
|
Commercial loans
|
|
|
85,174
|
|
|
|
603
|
|
|
|
3,130
|
|
|
|
|
|
|
|
88,907
|
|
|
|
28
|
|
|
|
565
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
579,384
|
|
|
|
2,114
|
|
|
|
29,339
|
|
|
|
|
|
|
|
610,837
|
|
|
|
1,148
|
|
|
|
4,964
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
20
Impaired loans by classification type and the related valuation allowance amounts at
September 30, 2017 were as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
At September 30, 2017
|
|
|
For the nine month period
ended September 30, 2017
|
|
|
|
Recorded
Investment
|
|
|
Unpaid
Principal
Balance
|
|
|
Related
Allowance
|
|
|
Average
Recorded
Investment
|
|
|
Interest
Income
Recognized
|
|
|
|
(Dollars in Thousands)
|
|
Impaired loans with no specific allowance
|
|
|
|
|
One-to-four
family
mortgages
|
|
$
|
476
|
|
|
|
476
|
|
|
|
|
|
|
|
1,480
|
|
|
|
26
|
|
Home equity line of credit
|
|
|
562
|
|
|
|
562
|
|
|
|
|
|
|
|
559
|
|
|
|
25
|
|
Junior liens
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
8
|
|
|
|
|
|
Multi-family
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,419
|
|
|
|
|
|
Construction
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Land
|
|
|
565
|
|
|
|
565
|
|
|
|
|
|
|
|
918
|
|
|
|
35
|
|
Farmland
|
|
|
164
|
|
|
|
164
|
|
|
|
|
|
|
|
1,257
|
|
|
|
2
|
|
Non-residential
real estate
|
|
|
7,328
|
|
|
|
7,328
|
|
|
|
|
|
|
|
9,452
|
|
|
|
312
|
|
Consumer loans
|
|
|
9
|
|
|
|
9
|
|
|
|
|
|
|
|
10
|
|
|
|
|
|
Commercial loans
|
|
|
1,125
|
|
|
|
1,125
|
|
|
|
|
|
|
|
1,745
|
|
|
|
35
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
10,229
|
|
|
|
10,229
|
|
|
|
|
|
|
|
16,848
|
|
|
|
435
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Impaired loans with a specific allowance
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
One-to-four
family
mortgages
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Home equity line of credit
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Junior liens
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Multi-family
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Construction
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Land
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
5,008
|
|
|
|
|
|
Farmland
|
|
|
325
|
|
|
|
325
|
|
|
|
17
|
|
|
|
244
|
|
|
|
|
|
Non-residential
real estate
|
|
|
20
|
|
|
|
20
|
|
|
|
2
|
|
|
|
110
|
|
|
|
2
|
|
Consumer loans
|
|
|
144
|
|
|
|
144
|
|
|
|
36
|
|
|
|
255
|
|
|
|
|
|
Commercial loans
|
|
|
499
|
|
|
|
499
|
|
|
|
267
|
|
|
|
464
|
|
|
|
16
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
988
|
|
|
|
988
|
|
|
|
322
|
|
|
|
6,081
|
|
|
|
18
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
11,217
|
|
|
|
11,217
|
|
|
|
322
|
|
|
|
22,929
|
|
|
|
453
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
21
Impaired loans by classification type and the related valuation allowance amounts at
December 31, 2016 were as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
At December 31, 2016
|
|
|
For the year ended
December 31, 2016
|
|
|
|
Recorded
Investment
|
|
|
Unpaid
Principal
Balance
|
|
|
Related
Allowance
|
|
|
Average
Recorded
Investment
|
|
|
Interest
Income
Recognized
|
|
|
|
(Dollars in Thousands)
|
|
Impaired loans with no specific allowance
|
|
|
|
|
One-to-four
family
mortgages
|
|
$
|
1,253
|
|
|
|
1,253
|
|
|
|
|
|
|
|
1,470
|
|
|
|
67
|
|
Home equity line of credit
|
|
|
550
|
|
|
|
550
|
|
|
|
|
|
|
|
390
|
|
|
|
24
|
|
Junior liens
|
|
|
11
|
|
|
|
11
|
|
|
|
|
|
|
|
13
|
|
|
|
1
|
|
Multi-family
|
|
|
3,004
|
|
|
|
3,004
|
|
|
|
|
|
|
|
3,005
|
|
|
|
172
|
|
Construction
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Land
|
|
|
1,553
|
|
|
|
2,513
|
|
|
|
|
|
|
|
7,868
|
|
|
|
38
|
|
Farmland
|
|
|
2,290
|
|
|
|
2,290
|
|
|
|
|
|
|
|
1,563
|
|
|
|
120
|
|
Non-residential
real estate
|
|
|
10,542
|
|
|
|
10,542
|
|
|
|
|
|
|
|
9,363
|
|
|
|
485
|
|
Consumer loans
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
21
|
|
|
|
1
|
|
Commercial loans
|
|
|
2,865
|
|
|
|
2,865
|
|
|
|
|
|
|
|
3,168
|
|
|
|
112
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
22,068
|
|
|
|
23,028
|
|
|
|
|
|
|
|
26,861
|
|
|
|
1,020
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Impaired loans with a specific allowance
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
One-to-four
family
mortgages
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
452
|
|
|
|
|
|
Home equity line of credit
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Junior liens
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Multi-family
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
910
|
|
|
|
|
|
Construction
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Land
|
|
|
6,671
|
|
|
|
6,671
|
|
|
|
1,036
|
|
|
|
1,811
|
|
|
|
485
|
|
Farmland
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
533
|
|
|
|
|
|
Non-residential
real estate
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Consumer loans
|
|
|
335
|
|
|
|
335
|
|
|
|
84
|
|
|
|
273
|
|
|
|
|
|
Commercial loans
|
|
|
265
|
|
|
|
265
|
|
|
|
28
|
|
|
|
754
|
|
|
|
24
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
7,271
|
|
|
|
7,271
|
|
|
|
1,148
|
|
|
|
4,733
|
|
|
|
509
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
29,339
|
|
|
|
30,299
|
|
|
|
1,148
|
|
|
|
31,594
|
|
|
|
1,529
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
22
On a periodic basis, the Bank may modify the terms of certain loans. At December 31, 2016,
the Company had eight loans, representing three lending relationships, classified as performing TDR. During the nine month period ended September 30, 2017, the Company removed one lending relationship from TDR status and one lending
relationship had three loans to pay off. One
non-residential
real estate loan relationship, with two loans representing $2.2 million, has paid as agreed based on the original terms of their note for a
period of at least six months. For the nine month period ended September 30, 2017, no loans were added to TDR classification and all loans currently classified as TDR are current based on their revised terms.
The following table provides the number of loans remaining in each category as of September 30, 2017 and December 31, 2016 that the
Company had previously modified in a TDR:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Number of
Loans
|
|
|
Pre-Modification
Outstanding
Record Investment
|
|
|
Post Modification
Outstanding Record
Investment, net of
related allowance
|
|
September 30, 2017
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-residential
real estate
|
|
|
3
|
|
|
$
|
3,371,435
|
|
|
|
3,371,435
|
|
December 31, 2016
|
|
|
|
|
|
|
|
|
|
|
|
|
Multi-family
|
|
|
3
|
|
|
$
|
815,273
|
|
|
|
815,273
|
|
Non-residential
real estate
|
|
|
5
|
|
|
|
5,646,223
|
|
|
|
5,646,223
|
|
There were no loans as of September 30, 2017 that have been modified as TDRs and that subsequently
defaulted within twelve months on their modified terms. At September 30, 2017, there are no commitments to lend additional funds to any borrower whose loan terms have been modified in a TDR.
23
The Companys foreclosed assets have been acquired through customer
loan defaults. The property is recorded at the lower of cost or fair value less estimated cost to sell and carrying cost at the date acquired. Any difference between the book value and estimated market value is recognized as a charge off through the
allowance for loan loss account. Additional losses on foreclosed assets may be determined on individual properties at specific intervals or at the time of disposal. In general, the Company will obtain a new appraisal on all foreclosed assets with a
book balance in excess of $250,000 on an annual basis. Additional losses are recognized as a
non-interest
expense.
At September 30, 2017 and December 31, 2016, the Company had balances in foreclosed assets consisting of the following:
|
|
|
|
|
|
|
|
|
|
|
September 30, 2017
|
|
|
December 31, 2016
|
|
|
|
(Dollars in Thousands)
|
|
One-to-four
family
mortgages
|
|
$
|
1,025
|
|
|
|
135
|
|
Home equity line of credit
|
|
|
|
|
|
|
28
|
|
Multi-family real estate
|
|
|
750
|
|
|
|
1,775
|
|
Land
|
|
|
3,200
|
|
|
|
|
|
Non-residential
real estate
|
|
|
|
|
|
|
459
|
|
|
|
|
|
|
|
|
|
|
Total other assets owned
|
|
$
|
4,975
|
|
|
|
2,397
|
|
|
|
|
|
|
|
|
|
|
For the nine month period ended September 30, 2017, the Companys activity in foreclosed property
included the following:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Activity During 2017
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance
|
|
|
|
|
|
|
|
|
Reduction
|
|
|
Gain (Loss)
|
|
|
Balance
|
|
|
|
12/31/2016
|
|
|
Foreclosure
|
|
|
Sales
|
|
|
in Values
|
|
|
on Sale
|
|
|
9/30/2017
|
|
|
|
(Dollars in Thousands)
|
|
One-to-four
family
mortgages
|
|
$
|
135
|
|
|
|
1,025
|
|
|
|
(147
|
)
|
|
|
|
|
|
|
12
|
|
|
$
|
1,025
|
|
HELOC
|
|
|
28
|
|
|
|
|
|
|
|
(18
|
)
|
|
|
(10
|
)
|
|
|
|
|
|
|
|
|
Multi-family
|
|
|
1,775
|
|
|
|
|
|
|
|
(1,001
|
)
|
|
|
|
|
|
|
(24
|
)
|
|
|
750
|
|
Land
|
|
|
|
|
|
|
3,200
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
3,200
|
|
Non-residential
real estate
|
|
|
459
|
|
|
|
43
|
|
|
|
(500
|
)
|
|
|
|
|
|
|
(2
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
2,397
|
|
|
|
4,268
|
|
|
|
(1,666
|
)
|
|
|
(10
|
)
|
|
|
(14
|
)
|
|
$
|
4,975
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
24
The Companys activity in foreclosed assets for the nine month period ended
September 30, 2016 is as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Activity During 2016
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance
|
|
|
|
|
|
|
|
|
Reduction
|
|
|
Gain (Loss)
|
|
|
Balance
|
|
|
|
12/31/2015
|
|
|
Foreclosure
|
|
|
Sales
|
|
|
in Values
|
|
|
on Sale
|
|
|
9/30/2016
|
|
|
|
(Dollars in Thousands)
|
|
One-to-four
family
mortgages
|
|
$
|
55
|
|
|
|
|
|
|
|
(43
|
)
|
|
|
|
|
|
|
(12
|
)
|
|
|
|
|
Home equity line of credit
|
|
|
|
|
|
|
68
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
68
|
|
Multi-family
|
|
|
|
|
|
|
141
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
141
|
|
Land
|
|
|
943
|
|
|
|
130
|
|
|
|
(987
|
)
|
|
|
|
|
|
|
(13
|
)
|
|
|
73
|
|
Non-residential
real estate
|
|
|
738
|
|
|
|
|
|
|
|
(270
|
)
|
|
|
|
|
|
|
(9
|
)
|
|
|
459
|
|
Consumer
|
|
|
|
|
|
|
15
|
|
|
|
(19
|
)
|
|
|
|
|
|
|
4
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
1,736
|
|
|
|
354
|
|
|
|
(1,319
|
)
|
|
|
|
|
|
|
(30
|
)
|
|
$
|
741
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(6)
|
FAIR VALUE OF ASSETS AND LIABILITIES
|
Accounting Standards Codification Topic (ASC) 820
,
Fair Value Measurements,
defines fair value, establishes a framework for measuring fair value and expands disclosure about fair value. The statement establishes a fair value hierarchy which requires an entity to maximize the use of observable
input and minimize the use of unobservable inputs when measuring fair value. The standard describes three levels of inputs that may be used to measure fair value.
|
|
|
Level 1 is for assets and liabilities that management has obtained quoted prices (unadjusted for transaction cost) or identical assets or liabilities in active markets that the Company has the ability to access as
of the measurement date.
|
|
|
|
Level 2 is for assets and liabilities in which significant unobservable inputs other than Level 1 prices such as quoted prices for similar assets and liabilities; quoted prices in markets that are not active;
or other inputs that are observable or can be corroborated by observable market data.
|
|
|
|
Level 3 is for assets and liabilities in which significant unobservable inputs that reflect a reporting entitys own assumptions about the assumptions that market participants would use in pricing an asset or
liability.
|
25
The following are the significant methods and assumptions used by the Company in estimating its fair value
disclosures for financial instruments:
Cash and due from banks
The carrying amounts reported in the consolidated balance sheets for cash and cash equivalents approximate those assets fair values,
because they mature within 90 days or less and do not present credit risk concerns.
Interest-bearing deposits in banks
The carrying amounts reported in the consolidated balance sheets for interest earning deposits approximate those assets fair values,
because they are considered overnight deposits and may be withdrawn at any time without penalty and do not present credit risk concerns.
Available-for-sale
securities
Fair values for investment securities
available-for-sale
are
based on quoted market prices, where available. If quoted market prices are not available, fair values are based on quoted market prices of comparable instruments provided by a third-party pricing service. The Company reviews all securities in which
the book value is greater than the market value for impairment that is other than temporary. For securities deemed to be other than temporarily impaired, the Company reduces the book value of the security to its market value by recognizing an
impairment charge on its income statement.
FHLB stock
The fair value of FHLB stock is recognized at cost.
Loans held for sale
Mortgage loans originated and intended to be sold are carried at the lower of cost or estimated fair value as determined on a loan by loan
basis. Gains or losses are recognized at the time of ownership transfer. Net unrealized losses, if any, are recognized through a valuation allowance and charged to income.
Loans receivable
The
fair values of fixed-rate loans and variable rate loans that
re-price
on an infrequent basis is estimated using discounted cash flow analysis which considers future
re-pricing
dates and estimated repayment dates, and further using interest rates currently being offered for loans of similar type, terms to borrowers of similar credit quality. Loan fair value estimates
include judgments regarding future expected loss experience and risk characteristics. The estimated fair value of variable-rate loans that
re-price
frequently and have no significant change in credit risk is
approximately the carrying value of the loan.
Accrued interest receivable
Fair value is estimated to approximate the carrying amount because such amounts are expected to be received within 90 days or less and any
credit concerns have been previously considered in the carrying value.
26
Deposits
The fair values disclosed for deposits with no stated maturity such as demand deposits, interest-bearing checking accounts and savings accounts
are, by definition, equal to the amount payable on demand at the reporting date (that is, their carrying amounts). The fair values for certificates of deposit and other fixed maturity time deposits are estimated using a discounted cash flow
calculation that applies interest rates currently being offered on such type accounts or similar accounts to a schedule of aggregated contractual maturities or similar maturities on such time deposits.
Advances from borrowers for taxes and insurance
The carrying amount of advances from borrowers for taxes and insurance approximates its fair value.
Advances from the Federal Home Loan Bank (FHLB)
The fair value of these advances is estimated by discounting the future cash flows of these advances using the current rates at which similar
advances or similar financial instruments could be obtained.
Repurchase agreements
Overnight repurchase agreements have a fair value at book, given that they mature overnight. The fair values of longer date repurchase
agreements is estimated using discounted cash flow analysis which considers the current market pricing for repurchase agreements of similar final maturities and collateral requirements.
Subordinated debentures
The book value of subordinated debentures is cost. The subordinated debentures
re-price
quarterly at a
rate equal to three month libor plus 3.10%.
Fair Value Measurements on a Recurring Basis
Where quoted prices are available for identical securities in an active market, securities available for sale are classified within
Level 1 of the valuation hierarchy. Level 1 securities include highly liquid government securities and certain other financial products. If quoted market prices are not available, then fair values are estimated by using pricing models that
use observable inputs or quoted prices of securities with similar characteristics and are classified within Level 2 of the valuation hierarchy. In certain cases where there is limited activity or less transparency around inputs to the valuation
and more complex pricing models or discounted cash flows are used, securities are classified within Level 3 of the valuation hierarchy.
27
Assets and Liabilities Measured on a Recurring Basis
The assets and liabilities measured at fair value on a recurring basis at September 30, 2017 are summarized below:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Description
|
|
Total carrying
value in the
consolidated
balance sheet at
9/30/2017
|
|
|
Quoted Prices
In Active
Markets for
Identical
Assets
(Level 1)
|
|
|
Significant
Other
Observable
Inputs
(Level 2)
|
|
|
Significant
Unobservable
Inputs
(Level 3)
|
|
|
|
(Dollars in Thousands)
|
|
Assets
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Securities available for sale
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
U.S. Agency securities
|
|
$
|
89,829
|
|
|
|
|
|
|
|
89,829
|
|
|
|
|
|
Taxable municipals
|
|
|
1,285
|
|
|
|
|
|
|
|
1,285
|
|
|
|
|
|
Tax-free
municipals
|
|
|
28,231
|
|
|
|
|
|
|
|
28,231
|
|
|
|
|
|
Trust preferred securities
|
|
|
1,717
|
|
|
|
|
|
|
|
|
|
|
|
1,717
|
|
Mortgage backed securities
|
|
|
71,225
|
|
|
|
|
|
|
|
71,225
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
192,287
|
|
|
|
|
|
|
|
190,570
|
|
|
|
1,717
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The assets and liabilities measured at fair value on a recurring basis at December 31, 2016 are
summarized below:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total carrying
value in the
consolidated
balance sheet at
|
|
|
Quoted Prices
In Active
Markets for
Identical Assets
|
|
|
Significant
Other
Observable
Inputs
|
|
|
Significant
Unobservable
Inputs
|
|
Description
|
|
12/31/2016
|
|
|
(Level 1)
|
|
|
(Level 2)
|
|
|
(Level 3)
|
|
|
|
(Dollars in Thousands)
|
|
Assets
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Securities available for sale
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
U.S. Treasury securities
|
|
$
|
2,001
|
|
|
|
2,001
|
|
|
|
|
|
|
|
|
|
U.S. Agency securities
|
|
|
84,012
|
|
|
|
|
|
|
|
84,012
|
|
|
|
|
|
Taxable municipals
|
|
|
2,727
|
|
|
|
|
|
|
|
2,727
|
|
|
|
|
|
Tax-free
municipals
|
|
|
33,911
|
|
|
|
|
|
|
|
33,911
|
|
|
|
|
|
Trust preferred securities
|
|
|
1,817
|
|
|
|
|
|
|
|
|
|
|
|
1,817
|
|
Mortgage backed securities
|
|
|
85,012
|
|
|
|
|
|
|
|
85,012
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
209,480
|
|
|
|
2,001
|
|
|
|
205,662
|
|
|
|
1,817
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
28
The assets and liabilities measured at fair value on a
non-recurring
basis are summarized below for September 30, 2017:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total carrying
value in the
consolidated
balance sheet at
|
|
|
Quoted Prices
In Active
Markets for
Identical Assets
|
|
|
Significant
Other
Observable
Inputs
|
|
|
Significant
Unobservable
Inputs
|
|
Description
|
|
September 30, 2017
|
|
|
(Level 1)
|
|
|
(Level 2)
|
|
|
(Level 3)
|
|
|
|
(Dollars in Thousands)
|
|
Assets
|
|
|
|
|
Foreclosed assets
|
|
$
|
4,975
|
|
|
|
|
|
|
|
|
|
|
$
|
4,975
|
|
Impaired loans, net of allowance
|
|
$
|
666
|
|
|
|
|
|
|
|
|
|
|
$
|
666
|
|
The assets and liabilities measured at fair value on a
non-recurring
basis are summarized below for December 31, 2016:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total carrying
value in the
consolidated
balance sheet at
|
|
|
Quoted Prices
In Active
Markets for
Identical Assets
|
|
|
Significant
Other
Observable
Inputs
|
|
|
Significant
Unobservable
Inputs
|
|
Description
|
|
December 31, 2016
|
|
|
(Level 1)
|
|
|
(Level 2)
|
|
|
(Level 3)
|
|
|
|
(Dollars in Thousands)
|
|
Assets
|
|
|
|
|
Foreclosed assets
|
|
$
|
2,397
|
|
|
|
|
|
|
|
|
|
|
$
|
2,397
|
|
Impaired loans, net of allowance
|
|
$
|
6,123
|
|
|
|
|
|
|
|
|
|
|
$
|
6,123
|
|
29
The following table presents quantitative information about level 3 fair value measurements for
assets measured at fair value on a recurring and
non-recurring
basis at September 30, 2017 and December 31, 2016:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Level 3 Significant Unobservable Input
Assumptions
|
|
|
|
Fair
Value
|
|
|
Valuation
Technique
|
|
|
Unobservable
Input
|
|
|
Quantitative Range
of Unobservable
Inputs
|
|
|
|
(Dollars in Thousand)
|
|
|
|
|
September 30, 2017
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Assets measured on a
non-recurring
basis
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Foreclosed assets
|
|
$
|
4,975
|
|
|
|
Discount to appraised value
of collateral. Auction results
|
|
|
|
Appraisal comparability
adjustments
|
|
|
|
5% to 10%
|
|
Impaired loans
|
|
|
666
|
|
|
|
Discount to appraised
value of collateral
|
|
|
|
Appraisal comparability
adjustments
|
|
|
|
10% to 25%
|
|
Asset measured on a recurring basis
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Trust preferred securities
|
|
|
1,717
|
|
|
|
Discounted cash flow
Spread to Libor swap curve
|
|
|
|
Compare to quotes for
sale when available
|
|
|
|
One month
libor 5% to 8%
|
|
December 31, 2016
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Assets measured on a
non-recurring
basis
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Foreclosed assets
|
|
$
|
2,397
|
|
|
|
Discount to appraised
value of collateral
|
|
|
|
Appraisal comparability
adjustments
|
|
|
|
30% to 55%
|
|
Impaired loans
|
|
|
6,123
|
|
|
|
Discount to appraised
value of collateral
|
|
|
|
Appraisal comparability
adjustments
|
|
|
|
10% to 15%
|
|
Asset measured on a recurring basis
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Trust preferred securities
|
|
|
1,817
|
|
|
|
Discounted cash flow
Spread to Libor swap curve
|
|
|
|
Compare to quotes for
sale when available
|
|
|
|
One month libor
4% to 6%
|
|
30
Foreclosed assets and impaired loans are valued at fair value, less cost to sell. Fair value of a
foreclosed asset is determined by an appraised value of the underlying collateral to which a discount is applied. Management establishes the discount or adjustments based on recent sales and any unique features the collateral may possess. Management
also considers the anticipated selling cost associated with the collateral when establishing the discounted percentage. Management may adjust the discounts based on the most recent sales of comparable collateral.
The Company bases the value of its trust preferred security on a quarterly review of SEC filings by the issuer to ascertain overall financial
strength. Based on the analysis, the Company then reviews the Libor swap curve to analyze the overall yield of our investment compared to long-term swap rates. On rare occasions, the Company may receive an offer from a broker to purchase similar
type instruments and the Company will analyze these offerings compared to our investment.
The table below includes a roll-forward of the
consolidated condensed statement of financial condition items for the nine month periods ended September 30, 2017 and September 30, 2016, (including the change in fair value) for assets and liabilities classified by HopFed Bancorp, Inc.
within level 3 of the valuation hierarchy for assets and liabilities measured at fair value on a recurring basis. When a determination is made to classify an asset or liability within level 3 of the valuation hierarchy, the determination is based
upon the significance of the unobservable factors to the overall fair value measurement. However, since level 3 assets and liabilities typically include, in addition to the unobservable or level 3 components, observable components (that is
components that are actively quoted and can be validated to external sources), the gains and losses in the table below include changes in fair value due in part to observable factors that are part of the valuation methodology.
|
|
|
|
|
|
|
|
|
|
|
2017
|
|
|
2016
|
|
Nine month period ended September 30,
|
|
Other Assets
|
|
|
Other Assets
|
|
|
|
(Dollars in Thousands)
|
|
Fair value, January 1
|
|
$
|
1,817
|
|
|
|
1,865
|
|
Change in unrealized gain included in other comprehensive income for assets and liabilities still
held at September 30,
|
|
|
(113
|
)
|
|
|
105
|
|
Accretion of previously discounted amounts
|
|
|
13
|
|
|
|
13
|
|
|
|
|
|
|
|
|
|
|
Fair value, September 30
|
|
$
|
1,717
|
|
|
|
1,983
|
|
|
|
|
|
|
|
|
|
|
31
The estimated fair values of financial instruments were as follows at September 30, 2017:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Carrying
Amount
|
|
|
Estimated
Fair
Value
|
|
|
Quoted Prices
In Active Markets
for Identical
Assets
Level 1
|
|
|
Using
Significant
Other
Observable
Inputs
Level 2
|
|
|
Significant
Unobservable
Inputs
Level 3
|
|
|
|
(Dollars in Thousands)
|
|
Financial Assets:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and due from banks
|
|
$
|
23,469
|
|
|
|
23,469
|
|
|
|
23,469
|
|
|
|
|
|
|
|
|
|
Interest-bearing deposits
|
|
|
9,842
|
|
|
|
9,842
|
|
|
|
9,842
|
|
|
|
|
|
|
|
|
|
Securities available for sale
|
|
|
192,287
|
|
|
|
192,287
|
|
|
|
|
|
|
|
190,570
|
|
|
|
1,717
|
|
Federal Home Loan Bank stock
|
|
|
4,428
|
|
|
|
4,428
|
|
|
|
|
|
|
|
|
|
|
|
4,428
|
|
Loans held for sale
|
|
|
1,749
|
|
|
|
1,749
|
|
|
|
|
|
|
|
1,749
|
|
|
|
|
|
Loans receivable
|
|
|
625,403
|
|
|
|
608,134
|
|
|
|
|
|
|
|
|
|
|
|
608,134
|
|
Accrued interest receivable
|
|
|
3,414
|
|
|
|
3,414
|
|
|
|
|
|
|
|
|
|
|
|
3,414
|
|
Financial liabilities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Deposits
|
|
|
731,229
|
|
|
|
731,960
|
|
|
|
|
|
|
|
731,960
|
|
|
|
|
|
Advances from borrowers for taxes and insurance
|
|
|
1,188
|
|
|
|
1,188
|
|
|
|
|
|
|
|
1,188
|
|
|
|
|
|
Advances from Federal Home Loan Bank
|
|
|
31,000
|
|
|
|
31,069
|
|
|
|
|
|
|
|
31,069
|
|
|
|
|
|
Repurchase agreements
|
|
|
37,829
|
|
|
|
37,829
|
|
|
|
|
|
|
|
37,829
|
|
|
|
|
|
Subordinated debentures
|
|
|
10,310
|
|
|
|
10,099
|
|
|
|
|
|
|
|
|
|
|
|
10,099
|
|
32
The estimated fair values of financial instruments were as follows at December 31, 2016:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Carrying
Amount
|
|
|
Estimated
Fair
Value
|
|
|
Quoted Prices
In Active Markets
for Identical
Assets
Level 1
|
|
|
Using
Significant
Other
Observable
Inputs
Level 2
|
|
|
Significant
Unobservable
Inputs
Level 3
|
|
|
|
(Dollars in Thousands)
|
|
Financial Assets:
|
|
|
|
|
Cash and due from banks
|
|
$
|
21,779
|
|
|
|
21,779
|
|
|
|
21,779
|
|
|
|
|
|
|
|
|
|
Interest-bearing deposits
|
|
|
3,970
|
|
|
|
3,970
|
|
|
|
3,970
|
|
|
|
|
|
|
|
|
|
Securities available for sale
|
|
|
209,480
|
|
|
|
209,480
|
|
|
|
2,001
|
|
|
|
205,662
|
|
|
|
1,817
|
|
Federal Home Loan Bank stock
|
|
|
4,428
|
|
|
|
4,428
|
|
|
|
|
|
|
|
|
|
|
|
4,428
|
|
Loans held for sale
|
|
|
1,094
|
|
|
|
1,094
|
|
|
|
|
|
|
|
1,094
|
|
|
|
|
|
Loans receivable
|
|
|
604,286
|
|
|
|
593,257
|
|
|
|
|
|
|
|
|
|
|
|
593,257
|
|
Accrued interest receivable
|
|
|
3,799
|
|
|
|
3,799
|
|
|
|
|
|
|
|
|
|
|
|
3,799
|
|
Financial liabilities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Deposits
|
|
|
732,882
|
|
|
|
732,942
|
|
|
|
|
|
|
|
732,942
|
|
|
|
|
|
Advances from borrowers for taxes and insurance
|
|
|
766
|
|
|
|
766
|
|
|
|
|
|
|
|
766
|
|
|
|
|
|
Advances from Federal Home Loan Bank
|
|
|
11,000
|
|
|
|
10,979
|
|
|
|
|
|
|
|
10,979
|
|
|
|
|
|
Repurchase agreements
|
|
|
47,655
|
|
|
|
47,655
|
|
|
|
|
|
|
|
47,655
|
|
|
|
|
|
Subordinated debentures
|
|
|
10,310
|
|
|
|
10,099
|
|
|
|
|
|
|
|
|
|
|
|
10,099
|
|
(7)
|
EFFECT OF NEW ACCOUNTING PRONOUNCEMENTS
|
In May 2014, the FASB issued new guidance related to
Revenue from Contracts with Customers
. This guidance supersedes the revenue recognition requirements in ASC Topic 605,
Revenue Recognition
, and most industry-specific guidance throughout the ASC. The guidance requires an
entity to recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the company expects to be entitled in exchange for those goods or services. This guidance is
effective for interim and annual reporting periods beginning after December 15, 2016; however, the FASB has agreed to a
one-year
deferral of the effective date to December 15, 2017. Management is
currently evaluating the impact that this ASU will have on the Companys consolidated financial statements.
33
ASU
2016-01,
Financial Instruments
Overall (Subtopic
825-10):
Recognition and Measurement of Financial Assets and Financial Liabilities.
ASU
2016-01,
among other things, (i) requires equity
investments, with certain exceptions, to be measured at fair value with changes in fair value recognized in net income, (ii) simplifies the impairment assessment of equity investments without readily determinable fair values by requiring a
qualitative assessment to identify impairment, (iii) eliminates the requirement for public business entities to disclose the methods and significant assumptions used to estimate the fair value that is required to be disclosed for financial
instruments measured at amortized cost on the balance sheet, (iv) requires public business entities to use the exit price notion when measuring the fair value of financial instruments for disclosure purposes, (v) requires an entity to
present separately in other comprehensive income the portion of the total change in the fair value of a liability resulting from a change in the instrument-specific credit risk when the entity has elected to measure the liability at fair value in
accordance with the fair value option for financial instruments, (vi) requires separate presentation of financial assets and financial liabilities by measurement category and form of financial asset on the balance sheet or the accompanying
notes to the financial statements and (vii) clarifies that an entity should evaluate the need for a valuation allowance on a deferred tax asset related to
available-for-sale.
ASU
2016-01
will be effective on January 1, 2018. Management is currently evaluating the impact that
this ASU will have on the Companys consolidated financial statements.
ASU
2016-02
,
Leases (Topic 842)
. ASU
2016-02
will, among other things, require lessees to recognize a lease liability, which is a lessees obligation to make lease payments arising from a lease,
measured on a discounted basis; and a
right-of-use
asset, which is an asset that represents the lessees right to use, or control the use of, a specified asset for
the lease term. ASU
2016-02
does not significantly change lease accounting requirements applicable to lessors; however, certain changes were made to align, where necessary, lessor accounting with the lessee
accounting model and ASC Topic 606, Revenue from Contracts with Customers. ASU
2016-02
will be effective on January 1, 2019 and will require transition using a modified retrospective approach
for leases existing at, or entered into after, the beginning of the earliest comparative period presented in the financial statements. Management is currently evaluating the potential impact of ASU
2016-02
on
the Companys consolidated financial statements.
On June 16, 2016, the FASB released its finalized ASU
2016-13,
Financial Instruments Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments
. The amendments to U.S. GAAP require businesses and other organization to
measure the expected credit losses on financial assets, such as loans, securities, bond insurance, and many receivables. The accounting changes apply to instruments recorded on balance sheets at their historical cost, although there are some limited
changes to the accounting for debt instruments classified as
available-for-sale.
Write-downs will be based on historical information, current business conditions, and
forecasts, and it expects the forecasts are expected to improve the loss estimates on financial assets that are losing value. The techniques that are employed today to write down loans and other instruments can still be used, although the variables
for calculating the losses are expected to change. ASU
2016-13
will become effective for fiscal years beginning after December 15, 2020, and interim periods within fiscal years beginning after
December 15, 2021. Companies are permitted to adopt ASU
2016-13
in fiscal years beginning after December 15, 2018. Management is currently evaluating the potential impact of this ASU on the
Companys consolidated financial statements.
34
ASU
2016-15
Statement of Cash Flows (Topic
230)
is intended to reduce the diversity in practice around how certain transactions are classified within the statement of cash flows. ASU
2016-15
is effective for public companies for annual
periods beginning after December 15, 2017, including interim periods within those fiscal years. Early adoption was permitted with retrospective application. Management is evaluating the impact that the adoption of ASU
2016-15
will have on the Companys consolidated financial statements.
Other accounting standards
that have been issued or proposed by the FASB or other standards-setting bodies are not expected to have a material impact on the Companys financial position, results of operations or cash flows.
The Company files consolidated federal income tax returns and Tennessee excise
tax returns. The Company files consolidated Kentucky income tax returns. The Bank is exempt from Kentucky corporate income tax. The Company has no unrecognized tax benefits and has accrued any interest or penalties for uncertain tax positions. The
effective tax rate differs from the statutory federal rate of 35% and Tennessee excise rate of 6.5% due to investments in qualified municipal securities, Bank owned life insurance, income apportioned to Kentucky and certain
non-deductible
expenses. The Companys effective federal income tax rate varies significantly from our federal statutory tax rate for a variety of factors, including:
The Companys investment in Fort Webb LP, LLC generates tax credits and depreciation expense that the Company can use to offset taxable
income. At September 30, 2017 and December 31, 2016, the Companys balance sheet did not include any equity investment in Fort Webb. The Company has other investments that produce both tax credits and depreciation expense that may be
used to offset net income.
At September 30, 2017, the Company has $10.3 million in Bank owned life insurance policies. The
income generated from these policies increase the cash flow of the policies on a tax free basis. Life insurance proceeds are paid upon the death of a covered party. These proceeds, netted against the current cash value of the policy, result in tax
free income to the Company. For the nine month period ended September 30, 2017, the Company received additional income of approximately $160,000 from the net proceeds of a life insurance policy.
At September 30, 2017, the Companys investment portfolio includes $28.2 million of tax free municipal bonds. Interest income
on this portfolio, after netting out a disallowance for interest expense attributable to this portfolio, is tax exempt.
35
Substantially all of the Companys employees who are at least 21 years old and have
one year of employment with the Company participate in the 2015 HopFed Bancorp, Inc. Employee Stock Ownership Plan (ESOP). The ESOP purchased 600,000 shares of the Companys common stock from the Company on March 2, 2015 at
$13.14 per share. The ESOP borrowed $7.9 million from an
open-end
line of credit from the Company for the purchase of the stock, using the 600,000 shares of common stock as collateral. The Company makes
discretionary contributions to the ESOP. The ESOP utilizes these contributions along with the dividends on the 600,000 held by the ESOP to repay the loan from the Company. When loan payments are made, ESOP shares are released based on reductions in
the principal balance of the loan. The shares are allocated to participants based on relative compensation.
Employees who are not
employed on December 31st of each year are not eligible for participation in the ESOP. The Company anticipates that loan payments will be made at the end of each year. Participants receive shares at the end of employment. The Company has the option
to repurchase the shares or provide the shares directly to the employee.
The Company made its second ESOP loan payment in December 2016.
At September 30, 2017 and December 31, 2016, shares held by the ESOP were as follows:
|
|
|
|
|
|
|
|
|
|
|
September 30, 2017
|
|
|
December 31, 2016
|
|
Accrued for allocation to participants
|
|
|
32,465
|
|
|
|
|
|
Earned ESOP shares
|
|
|
101,654
|
|
|
|
101,654
|
|
Unearned ESOP shares
|
|
|
465,881
|
|
|
|
498,346
|
|
|
|
|
|
|
|
|
|
|
Total ESOP shares
|
|
|
600,000
|
|
|
|
600,000
|
|
|
|
|
|
|
|
|
|
|
Fair value of unearned shares
|
|
$
|
6,731,980
|
|
|
$
|
6,707,737
|
|
|
|
|
|
|
|
|
|
|
(10)
|
COMMITMENTS AND CONTINGENCIES
|
At September 30, 2017, the Bank had $33.3 million in
outstanding commitments on revolving home equity lines of credit, $16.0 million in outstanding commitments on revolving personal lines of credit and $50.9 million in commitments to originate loans and undisbursed commitments on commercial
lines of credit of $62.9 million. At September 30, 2017, the Company had $140,000 in standby letters of credit outstanding.
At
September 30, 2017, the Company has $38.3 million in time deposits greater than $100,000 but less than $250,000 that are schedule to mature in one year and $73.0 million in time deposits with balances greater than $250,000 that are
scheduled to mature in one year or less. Management believes that a significant percentage of such deposits will remain with the Bank.
The Banks FHLB borrowings are secured by a blanket security agreement pledging the Banks
1-4
family first mortgage loans and
non-residential
real estate loans. At September 30, 2017 and December 31, 2016, the Bank has pledged all eligible
1-4
family first mortgages. At September 30, 2017, the Bank has outstanding borrowings of $31.0 million from the FHLB. A schedule of FHLB borrowings at September 30, 2017 is provided below:
36
|
|
|
|
|
Outstanding
Balance
|
|
Rate
|
|
Maturity
|
(Dollars in Thousands,
Except Percentages)
|
$ 8,000
|
|
1.27%
|
|
Overnight
|
5,000
|
|
0.88%
|
|
10/06/2017
|
6,000
|
|
1.18%
|
|
07/06/2018
|
7,000
|
|
1.55%
|
|
01/10/2019
|
5,000
|
|
1.73%
|
|
01/10/2020
|
|
|
|
|
|
$ 31,000
|
|
1.33%
|
|
|
|
|
|
|
|
A schedule of FHLB borrowings at December 31, 2016 is provided below:
|
|
|
|
|
|
|
Outstanding
Balance
|
|
Rate
|
|
|
Maturity
|
(Dollars in Thousands, Except
Percentages)
|
$ 5,000
|
|
|
0.88
|
%
|
|
10/06/2017
|
6,000
|
|
|
1.18
|
%
|
|
07/06/2018
|
|
|
|
|
|
|
|
$ 11,000
|
|
|
1.04
|
%
|
|
|
|
|
|
|
|
|
|
The Federal Home Loan Bank of Cincinnati has issued letters of credit in the Banks name totaling
$47.6 million secured by the Banks loan portfolio to secure additional municipal deposits. At September 30, 2017, securities with a book value of $39.3 million and a fair market value of $38.1 million were sold under
agreements to repurchase from various customers.
The Company is a party to certain ordinary course litigation, and the Company intends to
vigorously defend itself in all such matters. In the opinion of the Company, based on review and consultation with legal counsel, the outcome of such ordinary course litigation should not have a material adverse effect on the Companys
consolidated financial statements or results of operations.
37
The new minimum capital level requirements applicable to Bank holding
companies and Banks subject to the rules are: (i) a new common equity Tier 1 capital ratio of 4.5%; (ii) a Tier 1 risk-based capital ratio of 6% (increased from 4%); (iii) a total risk-based capital ratio of 8% (unchanged from current rules);
(iv) a Tier 1 leverage ratio of 4% for all institutions. The rules also establish a capital conservation buffer of 2.5% (to be phased in over three years) above the new regulatory minimum risk-based capital ratios, and result in the
following minimum ratios once the capital conservation buffer is fully phased in: (i) a common equity Tier 1 risk-based capital ratio of 7%, (ii) a Tier 1 risk-based capital ratio of 8.5%, and (iii) a total risk-based capital ratio of
10.5%.
The capital conservation buffer requirement was phased in beginning in January 2016 at 0.625% of risk-weighted assets and will
increase each year until fully implemented in January 2019. For 2017, the capital conservation buffer is 1.25%. An institution is subject to limitations on paying dividends, engaging in share repurchases and paying discretionary bonuses if capital
levels fall below minimum plus the buffer amounts. These limitations establish a maximum percentage of eligible retained income that could be utilized for such actions.
Under these new rules, Tier 1 capital generally consists of common stock (plus related surplus) and retained earnings, limited amounts of
minority interest in the form of additional Tier 1 capital instruments, and
non-cumulative
preferred stock and related surplus, subject to certain eligibility standards, less goodwill and other specified
intangible assets and other regulatory deductions. Cumulative preferred stock and trust preferred securities issued after May 19, 2010 no longer qualify as Tier 1 capital, but such securities issued prior to May 19, 2010, including in the
case of bank holding companies with less than $15.0 billion in total assets, trust preferred securities issued prior to that date, continue to count as Tier 1 capital subject to certain limitations. The definition of Tier 2 capital is generally
unchanged for most banking organizations, subject to certain new eligibility criteria.
The final rules allow banks and their holding
companies with less than $250 billion in assets a
one-time
opportunity to
opt-out
of a requirement to include unrealized gains and losses in accumulated other
comprehensive income in their capital calculation. The Company has made the decision to
opt-out
of this requirement.
Quantitative measures established by regulation to ensure capital adequacy require the Bank to maintain minimum amounts and ratios (set forth
in the table below) of tangible and core capital (as defined in the regulations) to adjusted total assets (as defined), and of total capital (as defined) and Tier 1 to risk weighted assets (as defined). The minimum required capital amounts presented
include the minimum required capital levels as of September 30, 2017 and December 31, 2016 based on the
phase-in
provisions of Basel III Capital Rules. Management believes, as of September 30,
2017 and December 31, 2016, that the Bank meets all capital adequacy requirements to which it is subject.
The Companys
consolidated capital ratios and the Banks actual capital amounts and ratios as of September 30, 2017 and December 31, 2016 are presented below:
38
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Actual
|
|
|
|
|
|
Minimum Capital
Required Basel III
Phase-In
Schedule
|
|
|
|
|
|
To be Well
Capitalized for
Prompt Corrective
Action Provisions
|
|
|
|
Amount
|
|
|
Ratio
|
|
|
Amount
|
|
|
Ratio
|
|
|
Amount
|
|
|
Ratio
|
|
|
|
(Dollars in Thousands, Except Percentages)
|
|
As of September 30, 2017
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Tier 1 leverage capital to adjusted total assets
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Company
|
|
$
|
96,428
|
|
|
|
10.9
|
%
|
|
$
|
36,273
|
|
|
|
4.0
|
%
|
|
$
|
45,341
|
|
|
|
5.0
|
%
|
Bank
|
|
$
|
94,196
|
|
|
|
10.6
|
%
|
|
$
|
35,461
|
|
|
|
4.0
|
%
|
|
$
|
44,326
|
|
|
|
5.0
|
%
|
Total capital to risk weighted assets
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Company
|
|
$
|
101,228
|
|
|
|
16.3
|
%
|
|
$
|
57,354
|
|
|
|
9.25
|
%
|
|
$
|
62,005
|
|
|
|
10.0
|
%
|
Bank
|
|
$
|
98,995
|
|
|
|
16.0
|
%
|
|
$
|
57,225
|
|
|
|
9.25
|
%
|
|
$
|
61,865
|
|
|
|
10.0
|
%
|
Tier 1 capital to risk weighted assets
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Company
|
|
$
|
96,428
|
|
|
|
15.6
|
%
|
|
$
|
44,953
|
|
|
|
7.25
|
%
|
|
$
|
49,604
|
|
|
|
8.0
|
%
|
Bank
|
|
$
|
94,196
|
|
|
|
15.2
|
%
|
|
$
|
44,852
|
|
|
|
7.25
|
%
|
|
$
|
49,492
|
|
|
|
8.0
|
%
|
Common equity tier 1 capital to risk weighted assets
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Company
|
|
$
|
96,428
|
|
|
|
15.6
|
%
|
|
$
|
35,653
|
|
|
|
5.75
|
%
|
|
|
n/a
|
|
|
|
n/a
|
|
Bank
|
|
$
|
94,196
|
|
|
|
15.2
|
%
|
|
$
|
35,573
|
|
|
|
5.75
|
%
|
|
$
|
40,213
|
|
|
|
6.5
|
%
|
As of December 31, 2016
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Tier 1 leverage capital to adjusted total assets
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Company
|
|
$
|
92,803
|
|
|
|
10.8
|
%
|
|
$
|
34,392
|
|
|
|
4.0
|
%
|
|
$
|
42,990
|
|
|
|
5.0
|
%
|
Bank
|
|
$
|
91,617
|
|
|
|
10.7
|
%
|
|
$
|
34,315
|
|
|
|
4.0
|
%
|
|
$
|
42,894
|
|
|
|
5.0
|
%
|
Total capital to risk weighted assets
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Company
|
|
$
|
98,915
|
|
|
|
16.2
|
%
|
|
$
|
52,682
|
|
|
|
8.625
|
%
|
|
$
|
61,080
|
|
|
|
10.0
|
%
|
Bank
|
|
$
|
97,729
|
|
|
|
16.0
|
%
|
|
$
|
52,561
|
|
|
|
8.625
|
%
|
|
$
|
60,941
|
|
|
|
10.0
|
%
|
Tier 1 capital to risk weighted assets
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Company
|
|
$
|
92,803
|
|
|
|
15.2
|
%
|
|
$
|
40,466
|
|
|
|
6.625
|
%
|
|
$
|
48,864
|
|
|
|
8.0
|
%
|
Bank
|
|
$
|
91,617
|
|
|
|
15.0
|
%
|
|
$
|
40,373
|
|
|
|
6.625
|
%
|
|
$
|
48,753
|
|
|
|
8.0
|
%
|
Common equity tier 1 capital to risk weighted assets
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Company
|
|
$
|
92,803
|
|
|
|
15.2
|
%
|
|
$
|
31,304
|
|
|
|
5.125
|
%
|
|
|
n/a
|
|
|
|
n/a
|
|
Bank
|
|
$
|
91,617
|
|
|
|
15.0
|
%
|
|
$
|
31,232
|
|
|
|
5.125
|
%
|
|
$
|
39,611
|
|
|
|
6.5
|
%
|
On May 4, 2017, the Company, its directors, and a former director, were
named as defendants in a lawsuit filed in the Court of Chancery in the State of Delaware by Company stockholders, Stilwell Associates, L.P., Stilwell Activist Fund, L.P. and Stilwell Activist Investments, L.P. (collectively, the
Plaintiffs), concerning the adoption of Article III, Section 13 of the Companys Amended and Restated Bylaws. The Bylaw concerns qualifications for individuals to serve on the Companys Board of Directors. The Plaintiffs
sought a declaration that the Bylaw was invalid or, in the alternative, a declaration that the Bylaw may not be applied to disqualify an otherwise qualified nominee or Plaintiffs on the basis of said nominee being part of a group acting in concert
with one of the Plaintiffs. The Plaintiffs also sought an injunction enjoining the application of the Bylaw to disqualify an otherwise qualified nominee of Plaintiffs on the basis of said nominee being part of a group acting in concert with one of
the Plaintiffs and an order declaring that all but one of the Defendants breached their fiduciary duties in adopting the Bylaw. The Plaintiffs did not seek damages. See Part II, Item 1 of the Companys Quarterly Report on Form 10-Q filed on
August 9, 2017, which is incorporated herein by reference.
On October 3, 2017, upon the recommendation of the Nominating and
Corporate Governance Committee, the Board of Directors adopted amendments to Article III, Section 13 of the Bylaws. See the Companys Current Report on Form 8-K filed on October 4, 2017, which is incorporated herein by reference.
On October 25, 2017, the Court of Chancery granted the parties stipulation regarding dismissal of the lawsuit and dismissed the
lawsuit without prejudice, subject to possible consideration of a Fee and Expense Application by the Plaintiffs. On October 26, 2017, the Company disclosed the dismissal in a press release and filing of an SEC Form 8-K.
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