NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1 – BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT
ACCOUNTING POLICIES
The accompanying unaudited consolidated
financial statements of Poage Bankshares, Inc. (the “Company” or “Poage”) and its wholly owned subsidiary
Town Square Bank (which was formerly operated under the name “Home Federal Savings and Loan Association”) (the “Bank”)
have been prepared in accordance with U.S. generally accepted accounting principles (“GAAP”) for interim financial
information and with the instructions to Form 10-Q and Rule 8-03 of Regulation S-X. Accordingly, certain information and footnote
disclosures normally included in financial statements prepared in accordance with GAAP have been condensed or omitted pursuant
to such rules and regulations.
The preparation of financial statements
in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities
and disclosure of contingent assets and liabilities as of the date of the financial statements and the reported amounts of revenues
and expenses during the reporting period. Estimates used in the preparation of the financial statements are based on various
factors including the current interest rate environment and the general strength of the local economy. Changes in the overall interest
rate environment can significantly affect the Company’s net interest income and the value of its recorded assets and liabilities.
Actual results could differ from those estimates used in the preparation of the financial statements.
In the opinion of management, the accompanying
unaudited financial statements contain all adjustments (consisting only of normal recurring accruals) necessary to present fairly
the Company’s financial position as of March 31, 2018 and December 31, 2017 and the results of operations and cash flows
for the interim periods ended March 31, 2018 and 2017. All interim amounts have not been audited, and the results of operations
for the interim periods herein are not necessarily indicative of the results of operations to be expected for the year or any other
period. These consolidated financial statements should be read in conjunction with the Company’s audited consolidated financial
statements and notes thereto filed as part of the Company’s 2017 Annual Report on Form 10-K filed with the Securities and
Exchange Commission.
NOTE 2 – REVENUE RECOGNITION
In May 2014, the FASB issued an update (ASU No. 2014-09,
Revenue from Contracts with Customers
) creating FASB Topic 606,
Revenue from Contracts with Customers
. The guidance
in this update affects any entity that either enters into contracts with customers to transfer goods or services or enters into
contracts for the transfer of nonfinancial assets unless those contracts are within the scope of other standards (for example,
insurance contracts or lease contracts). The core principle of the guidance is that an entity should recognize revenue to depict
the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects
to be entitled in exchange for those goods or services. The guidance provides steps to follow to achieve the core principle. An
entity should disclose sufficient information to enable users of financial statements to understand the nature, amount, timing
and uncertainty of revenue and cash flows arising from contracts with customers. The amendments in this update become effective
for annual periods and interim periods within those annual periods beginning after December 15, 2017. We finalized our assessment
and identified the revenue line items within the scope of this new guidance. Neither the new standard, nor any of the amendments
detailed below, resulted in a material change from our current accounting for revenue because the majority of Poage’s financial
instruments are not within the scope of Topic 606, and those that are require no change in the accounting.
In March 2016, the FASB issued ASU No. 2016-08,
Revenue
from Contracts with Customers (Topic 606): Principal versus Agent Considerations (Reporting Revenue Gross versus Net)
. The
amendments relate to when another party, along with the entity, is involved in providing a good or service to a customer. Topic
606 requires an entity to determine whether the nature of its promise is to provide that good or service to the customer (that
is, the entity is a principal) or to arrange for the good or service to be provided to the customer by the other party (that is,
the entity is an agent). This determination is based upon whether the entity controls the good or the service before it is transferred
to the customer. Topic 606 includes indicators to assist in this evaluation. The amendments in this update affect the guidance
in ASU No. 2014-09 above. The effective date is the same as the effective date of ASU No. 2014-09.
In April 2016, the FASB issued ASU No. 2016-10,
Revenue
from Contracts with Customers (Topic 606): Identifying Performance Obligations and Licensing
. The amendments clarify the following
two aspects of Topic 606: identifying performance obligations, and the licensing implementation guidance. Before an entity can
identify its performance obligations in a contract with a customer, the entity first identifies the promised goods or services
in the contract. The amendments in this update are expected to reduce the cost and complexity of applying the guidance on identifying
promised goods or services. To identify performance obligations in a contract, an entity evaluates whether promised goods and services
are distinct. Topic 606 includes two criteria for assessing whether promises to transfer goods or services are distinct. One of
those criteria is that the promises are separately identifiable. This update will improve the guidance on assessing that criterion.
Topic 606 also includes implementation guidance on determining whether as entity’s promise to grant a license provides a
customer with either a right to use the entity’s intellectual property, which is satisfied at a point in time, or a right
to access the entity’s intellectual property, which is satisfied over time. The amendments in this update are intended to
improve the operability and understandability of the licensing implementation guidance. The amendments in this update affect the
guidance in ASU No. 2014-09 above. The effective date is the same as the effective date of ASU No. 2014-09.
In May 2016, the FASB issued ASU No. 2016-12,
Revenue
from Contracts with Customers (Topic 606): Narrow-Scope Improvements and Practical Expedients
. The amendments do not change
the core revenue recognition principle in Topic 606. The amendments provide clarifying guidance in certain narrow areas and add
some practical expedients.
In December 2016, the FASB issued ASU No. 2016-20,
Revenue
from Contracts with Customers (Topic 606): Technical Corrections and Improvements
. The FASB board decided to issue a separate
update for technical corrections and improvements to Topic 606 and other Topics amended by ASU No. 2014-09 to increase awareness
of the proposals and to expedite improvements to ASU No. 2014-09. The amendment affects narrow aspects of the guidance issued
in ASU No. 2014-09.
On January 1, 2018, we adopted ASU 2014-09,
Revenue
from Contracts with Customers
and all subsequent amendments to the ASU (collectively, “Topic 606”). We elected
to implement using the modified retrospective application, with the cumulative effect recorded as an adjustment to opening retained
earnings at January 1, 2018. Due to immateriality, we had no cumulative effect to record. Since interest income on loans and
securities are both excluded from this topic, a significant majority of our revenues are not subject to the new guidance. Our services
that fall within the scope of Topic 606 are presented within noninterest income and are recognized as revenue as we satisfy our
obligation to the customer. A description of the Company’s revenue that falls within the scope of Topic 606 as well as an
explanation of why they are not impacted are as follows:
Service charges on deposit accounts
: We earn fees from
our deposit customers for transaction-based, account maintenance, and overdraft services. Transaction-based fees and overdraft
fees are recognized at a point in time, since the customer generally has a right to cancel the depository arrangement at any time.
The arrangement is considered a day-to-day contract with ongoing renewals and optional purchases, so the duration of the contract
does not extend beyond the services already performed. Account maintenance fees, which relate primarily to monthly maintenance,
are earned over the course of a month, representing the period over which we satisfy our performance obligation. Service charges
on deposit accounts includes approximately $224,000 and $227,000 of revenue for the three months ended March 31, 2018 and 2017,
respectively, within the scope of Topic 606.
Debit card and ATM fees
: Debit card and ATM fees include
ATM usage fees and debit card interchange income. As with the transaction-based fees on deposit accounts, the ATM fees are recognized
at the point in time that we fulfill the customer’s request. We earn interchange fees from cardholder transactions processed
through card association networks. Interchange rates are generally set by the card associations based upon purchase volumes and
other factors. Interchange fees represent a percentage of the underlying transaction value and are recognized daily, concurrently
with the transaction processing services provided to the cardholder. Debit card and ATM fees includes approximately $235,000 and
$232,000 of revenue for the three months ended March 31, 2018 and 2017, respectively, within the scope of Topic 606.
Gains/Losses on Sales of OREO
- The Company records a
gain or loss from the sale of OREO when control of the property transfers to the buyer, which generally occurs at the time of an
executed deed. ASC 606 does not significantly change the pattern of revenue recognition unless the Company finances
the sale. There are no instances of the Company financing the sale of one of its OREO properties during the three months ended
March 31, 2018. Sales of OREO includes approximately $21,000 in net gains and $60,000 in net losses for the three months
ended March 31, 2018 and 2017, respectively, within the scope of Topic 606.
The adoption of Topic 606 did not have a material impact on
our consolidated financial position, results of operations, equity, or cash flows as of the adoption date or for the three months
ended March 31, 2018.
NOTE 3 – RECENT ACCOUNTING PRONOUNCEMENTS
Recently Adopted Accounting Pronouncements
In January 2016, the FASB issued ASU No.
2016-01,
Financial Instruments—Overall (Subtopic 825-10): Recognition and Measurement of Financial Assets and Financial
Liabilities.
This ASU addresses certain aspects of recognition, measurement, presentation, and disclosure of financial
instruments by making targeted improvements to GAAP as follows: (1) require equity investments (except those accounted for under
the equity method of accounting or those that result in consolidation of the investee) to be measured at fair value with changes
in fair value recognized in net income. However, an entity may choose to measure equity investments that do not have readily determinable
fair values at cost minus impairment, if any, plus or minus changes resulting from observable price changes in orderly transactions
for the identical or a similar investment of the same issuer; (2) simplify the impairment assessment of equity investments without
readily determinable fair values by requiring a qualitative assessment to identify impairment. When a qualitative assessment indicates
that impairment exists, an entity is required to measure the investment at fair value; (3) eliminate the requirement to disclose
the fair value of financial instruments measured at amortized cost for entities that are not public business entities; (4) eliminate
the requirement for public business entities to disclose the method(s) 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; (5) require public
business entities to use the exit price notion when measuring the fair value of financial instruments for disclosure purposes;
(6) require 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; (7) require separate presentation of financial
assets and financial liabilities by measurement category and form of financial asset (that is, securities or loans and receivables)
on the balance sheet or the accompanying notes to the financial statements; and (8) clarify that an entity should evaluate the
need for a valuation allowance on a deferred tax asset related to available-for-sale securities in combination with the entity’s
other deferred tax assets. ASU No. 2016-01 is effective for interim and annual reporting periods beginning after December 15, 2017.
Early application is permitted as of the beginning of the fiscal year of adoption only for provisions (3) and (6) above. Early
adoption of the other provisions mentioned above is not permitted. Starting with the first quarter of 2018, the Company began
using an exit price notion when measuring the fair value of its loan portfolio for disclosure purposes. The adoption of ASU
No. 2016-01 on January 1, 2018 did not have a material effect on the Company’s consolidated operating results or financial
condition.
In May 2017, the FASB issued ASU No. 2017-09,
Scope of Modification Accounting
which amends the scope of modification accounting for share-based payment arrangements.
The ASU provided guidance on the types of changes to the terms or conditions of share-based payment awards to which an entity would
be required to apply modification accounting under ASC 718,
Compensation-Stock Compensation.
Specifically, an entity would
not apply modification accounting if the fair value, vesting conditions, and classification of the awards are the same immediately
before and after the modification. The adoption of ASU No. 2017-09 on January 1, 2018 did not have a material effect on the Company’s
consolidated operating results or financial condition.
Newly Issued Accounting Standards Not
Yet Effective
In February 2016, the FASB issued
Accounting
Standards Update 2016-02 Leases
guidance requiring the recognition in the statement of financial position of lease assets
and lease liabilities by lessees for those leases classified as operating leases under previous GAAP. The guidance requires that
a lessee should recognize lease assets and lease liabilities as compared to previous GAAP that did not require lease assets and
lease liabilities to be recognized for most leases. The guidance becomes effective for us on January 1, 2019. Poage is currently
evaluating the impact on its leases to determine the impact on its consolidated financial statements.
In June 2016, the FASB issued ASU 2016-13,
Financial
Instruments - Credit Losses: Measurement of Credit Losses on Financial Instruments
(the ASU), which introduces the current
expected credit losses methodology. This ASU significantly changes how entities will measure credit losses for most financial assets
and certain other instruments that aren’t measured as fair value through net income. Among other things, the ASU requires
the measurement of all expected credit losses for financial assets, including loans and available-for-sale debt securities,
held at the reporting date based on historical experience, current conditions, and reasonable and supportable forecasts that affect
the collectability of the reported amount. In issuing the standard, the FASB is responding to criticism that today’s guidance
delays recognition of credit losses. The new model, referred to as the current expected credit loss (“CECL”) model,
will require institutions to calculate all probable and estimable losses that are expected to be incurred through the loan's entire
life. ASU 2016-13 also requires the allowance for credit losses for purchased financial assets with credit deterioration since
origination to be determined in a manner similar to that of other financial assets measured at amortized cost; however, the initial
allowance will be added to the purchase price rather than recorded as credit loss expense. The disclosure of credit quality indicators
related to the amortized cost of financing receivables will be further disaggregated by year of origination (or vintage). Institutions
are to apply the changes through a cumulative-effect adjustment to their retained earnings as of the beginning of the first reporting
period in which the standard is effective. The amendments are effective for fiscal years beginning after December 15, 2019. Early
application will be permitted for fiscal years beginning after December 15, 2018. Management has formed a CECL committee that is
evaluating the data gathering requirements, available economic forecasting and loss estimation models and potential software that
would be employed by the Company to facilitate the adoption of this guidance and its required disclosures on the Company’s
consolidated financial statements. Upon adoption, management anticipates an initial one-time increase in the allowance for loan
losses along with a corresponding decrease in capital as permitted by the standard.
In January 2017, FASB issued ASU 2017-4,
Intangible-Goodwill and Other (Topic 350)
, to simplify accounting for goodwill impairment. The new guidance will simplify
financial reporting because it eliminates the need to determine the fair value of individual assets and liabilities of a reporting
unit to measure goodwill impairment. The revised guidance is effective for fiscal years beginning after December 15, 2019. Early
adoption is permitted for any impairment tests performed after January 1, 2017. Poage is currently evaluating the impact of the
new guidance on its consolidated financial statements.
In March 2017, the FASB issued ASU No.
2017-08,
Receivables-Nonrefundable Fee and Other Costs (Subtopic 310-20), Premium Amortization on Purchased Callable Debt Securities.
The amendments affect all entities that hold investments in callable debt securities that have an amortized cost basis in excess
of the amount that is repayable by the issuer. The amendments require the premium for certain callable debt securities to be amortized
to the earliest call date. The amendments are effective for public companies for annual periods beginning after December 15, 2019.
The adoption of ASU No. 2017-08 is not expected to have a material effect on the Company’s consolidated operating results
or financial condition.
NOTE 4 - SECURITIES AVAILABLE FOR SALE
The amortized cost and fair value of securities
available for sale at March 31, 2018 and December 31, 2017 and the corresponding amounts of gross unrealized gains and losses recognized
in accumulated other comprehensive income (loss) were as follows (in thousands):
|
|
|
|
|
Gross
|
|
|
Gross
|
|
|
|
|
|
|
Amortized
|
|
|
Unrealized
|
|
|
Unrealized
|
|
|
Fair
|
|
|
|
Cost
|
|
|
Gains
|
|
|
Losses
|
|
|
Value
|
|
March 31, 2018
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
States and political subdivisions
|
|
$
|
18,629
|
|
|
$
|
127
|
|
|
$
|
(217
|
)
|
|
$
|
18,539
|
|
U.S. Government agencies and sponsored entities
|
|
|
3,500
|
|
|
|
-
|
|
|
|
(66
|
)
|
|
|
3,434
|
|
Mortgage-backed securities: residential
|
|
|
29,482
|
|
|
|
-
|
|
|
|
(619
|
)
|
|
|
28,863
|
|
Collateralized mortgage obligations
|
|
|
5,984
|
|
|
|
-
|
|
|
|
(168
|
)
|
|
|
5,816
|
|
SBA loan pools
|
|
|
10,460
|
|
|
|
-
|
|
|
|
(220
|
)
|
|
|
10,240
|
|
Total securities
|
|
$
|
68,055
|
|
|
$
|
127
|
|
|
$
|
(1,290
|
)
|
|
$
|
66,892
|
|
|
|
|
|
|
Gross
|
|
|
Gross
|
|
|
|
|
|
|
Amortized
|
|
|
Unrealized
|
|
|
Unrealized
|
|
|
Fair
|
|
|
|
Cost
|
|
|
Gains
|
|
|
Losses
|
|
|
Value
|
|
December 31, 2017
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
States and political subdivisions
|
|
$
|
19,082
|
|
|
$
|
190
|
|
|
$
|
(108
|
)
|
|
$
|
19,164
|
|
U.S. Government agencies and sponsored entities
|
|
|
3,500
|
|
|
|
-
|
|
|
|
(50
|
)
|
|
|
3,450
|
|
Mortgage-backed securities: residential
|
|
|
27,449
|
|
|
|
44
|
|
|
|
(226
|
)
|
|
|
27,267
|
|
Collateralized mortgage obligations
|
|
|
5,048
|
|
|
|
-
|
|
|
|
(93
|
)
|
|
|
4,955
|
|
SBA loan pools
|
|
|
9,379
|
|
|
|
-
|
|
|
|
(85
|
)
|
|
|
9,294
|
|
Total securities
|
|
$
|
64,458
|
|
|
$
|
234
|
|
|
$
|
(562
|
)
|
|
$
|
64,130
|
|
There were no sales of securities for the three months ended
March 31, 2018 and 2017.
The amortized cost and fair value of the
securities portfolio at March 31, 2018 are shown in the following table by contractual maturity. Expected maturities may differ
from contractual maturities if borrowers have the right to call or prepay obligations with or without call or prepayment penalties.
Securities not due at a single maturity date are shown separately (in thousands):
|
|
March 31,
|
|
|
|
2018
|
|
|
|
Amortized
|
|
|
Fair
|
|
|
|
Cost
|
|
|
Value
|
|
|
|
|
|
|
|
|
Within one year
|
|
$
|
925
|
|
|
$
|
926
|
|
One to five years
|
|
|
8,894
|
|
|
|
8,832
|
|
Five to ten years
|
|
|
8,691
|
|
|
|
8,683
|
|
Beyond ten years
|
|
|
3,619
|
|
|
|
3,532
|
|
Mortgage-backed securities and collateralized mortgage obligations
|
|
|
35,466
|
|
|
|
34,679
|
|
SBA loan pools
|
|
|
10,460
|
|
|
|
10,240
|
|
Total
|
|
$
|
68,055
|
|
|
$
|
66,892
|
|
The following table summarizes the securities
with unrealized losses at March 31, 2018 and December 31, 2017, aggregated by major security type and length of time in a continuous
unrealized loss position (in thousands):
|
|
Less Than 12 Months
|
|
|
12 Months or Longer
|
|
|
Total
|
|
|
|
Fair
|
|
|
Unrealized
|
|
|
Fair
|
|
|
Unrealized
|
|
|
Fair
|
|
|
Unrealized
|
|
|
|
Value
|
|
|
Losses
|
|
|
Value
|
|
|
Losses
|
|
|
Value
|
|
|
Losses
|
|
March 31, 2018
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
States and political subdivisions
|
|
$
|
6,923
|
|
|
$
|
(143
|
)
|
|
$
|
1,001
|
|
|
$
|
(74
|
)
|
|
$
|
7,924
|
|
|
$
|
(217
|
)
|
U.S. Government agencies and sponsored entities
|
|
|
989
|
|
|
|
(11
|
)
|
|
|
2,445
|
|
|
|
(55
|
)
|
|
|
3,434
|
|
|
|
(66
|
)
|
Mortgage-backed securities: residential
|
|
|
26,625
|
|
|
|
(535
|
)
|
|
|
2,238
|
|
|
|
(84
|
)
|
|
|
28,863
|
|
|
|
(619
|
)
|
Collateralized mortgage obligations
|
|
|
3,184
|
|
|
|
(58
|
)
|
|
|
2,632
|
|
|
|
(110
|
)
|
|
|
5,816
|
|
|
|
(168
|
)
|
SBA loan Pools
|
|
|
7,525
|
|
|
|
(163
|
)
|
|
|
2,715
|
|
|
|
(57
|
)
|
|
|
10,240
|
|
|
|
(220
|
)
|
Total available-for-sale securities
|
|
$
|
45,246
|
|
|
$
|
(910
|
)
|
|
$
|
11,031
|
|
|
$
|
(380
|
)
|
|
$
|
56,277
|
|
|
$
|
(1,290
|
)
|
|
|
Less Than 12 Months
|
|
|
12 Months or Longer
|
|
|
Total
|
|
|
|
Fair
|
|
|
Unrealized
|
|
|
Fair
|
|
|
Unrealized
|
|
|
Fair
|
|
|
Unrealized
|
|
|
|
Value
|
|
|
Losses
|
|
|
Value
|
|
|
Losses
|
|
|
Value
|
|
|
Losses
|
|
December 31, 2017
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
States and political subdivisions
|
|
$
|
5,080
|
|
|
$
|
(56
|
)
|
|
$
|
1,024
|
|
|
$
|
(52
|
)
|
|
$
|
6,104
|
|
|
$
|
(108
|
)
|
U.S. Government agencies and sponsored entities
|
|
|
992
|
|
|
|
(8
|
)
|
|
|
2,458
|
|
|
|
(42
|
)
|
|
|
3,450
|
|
|
|
(50
|
)
|
Mortgage-backed securities: residential
|
|
|
19,256
|
|
|
|
(181
|
)
|
|
|
2,394
|
|
|
|
(45
|
)
|
|
|
21,650
|
|
|
|
(226
|
)
|
Collateralized mortgage obligations
|
|
|
1,954
|
|
|
|
(15
|
)
|
|
|
3,001
|
|
|
|
(78
|
)
|
|
|
4,955
|
|
|
|
(93
|
)
|
SBA loan Pools
|
|
|
6,565
|
|
|
|
(66
|
)
|
|
|
1,343
|
|
|
|
(19
|
)
|
|
|
7,908
|
|
|
|
(85
|
)
|
Total available-for-sale securities
|
|
$
|
33,847
|
|
|
$
|
(326
|
)
|
|
$
|
10,220
|
|
|
$
|
(236
|
)
|
|
$
|
44,067
|
|
|
$
|
(562
|
)
|
Unrealized losses on bonds have not been
recognized into income because the issuers of the bonds are of high credit quality, management does not intend to sell, and it
is not more likely than not that management would be required to sell the securities prior to their anticipated recovery, and the
decline in fair value is largely due to changes in interest rates. The fair value is expected to recover as the bonds approach
maturity.
Management evaluates securities for other-than-temporary
impairment (“OTTI”) on at least a quarterly basis, and more frequently when economic or market conditions warrant such
an evaluation. For securities in an unrealized loss position, management considers the extent and duration of the unrealized
loss, and the financial condition and near-term prospects of the issuer. Management also assesses whether it intends to sell, or
it is more likely than not that it will be required to sell, a security in an unrealized loss position before recovery of its amortized
cost basis. If either of the criteria regarding intent or requirement to sell is met, the entire difference between amortized cost
and fair value is recognized as impairment through earnings. For debt securities that do not meet the aforementioned criteria,
the amount of impairment is split into two components as follows: 1) OTTI related to credit loss, which must be recognized in the
income statement, and 2) OTTI related to other factors, which is recognized in other comprehensive income. Credit loss is
defined as the difference between the present value of the cash flows expected to be collected and the amortized cost basis. For
equity securities, the entire amount of impairment is recognized through earnings.
NOTE 5 – LOANS
Loans at March 31, 2018 and December 31,
2017 were as follows (in thousands):
|
|
March 31,
|
|
|
December 31,
|
|
|
|
2018
|
|
|
2017
|
|
Real estate:
|
|
|
|
|
|
|
|
|
One to four family
|
|
$
|
165,253
|
|
|
$
|
170,754
|
|
Multi-family
|
|
|
9,009
|
|
|
|
6,505
|
|
Commercial real estate
|
|
|
85,215
|
|
|
|
84,312
|
|
Construction and land
|
|
|
9,131
|
|
|
|
10,004
|
|
|
|
|
268,608
|
|
|
|
271,575
|
|
|
|
|
|
|
|
|
|
|
Commercial and industrial
|
|
|
35,850
|
|
|
|
33,664
|
|
|
|
|
|
|
|
|
|
|
Consumer
|
|
|
|
|
|
|
|
|
Home equity loans and lines of credit
|
|
|
10,732
|
|
|
|
10,707
|
|
Motor vehicle
|
|
|
10,259
|
|
|
|
10,368
|
|
Other
|
|
|
7,301
|
|
|
|
7,420
|
|
|
|
|
28,292
|
|
|
|
28,495
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
332,750
|
|
|
|
333,734
|
|
Less: Net deferred loan fees
|
|
|
506
|
|
|
|
499
|
|
Allowance for loan losses
|
|
|
4,942
|
|
|
|
4,681
|
|
|
|
$
|
327,302
|
|
|
$
|
328,554
|
|
The following tables present the balance
in the allowance for loan losses and the recorded investment in loans by portfolio segment based on impairment method as of March
31, 2018 and December 31, 2017. Accrued interest receivable and net deferred loan fees are not considered significant and therefore
are not included in the loan balances presented in the table below (in thousands):
March 31, 2018
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Allowance
for Loan Losses
|
|
|
Loan
Balances
|
|
|
|
Individually
|
|
|
Purchased
|
|
|
Collectively
|
|
|
|
|
|
Individually
|
|
|
Purchased
|
|
|
Collectively
|
|
|
|
|
|
|
Evaluated for
|
|
|
Credit-Impaired
|
|
|
Evaluated for
|
|
|
|
|
|
Evaluated for
|
|
|
Credit-Impaired
|
|
|
Evaluated for
|
|
|
|
|
Loan Segment
|
|
Impairment
|
|
|
Loans
|
|
|
Impairment
|
|
|
Total
|
|
|
Impairment
|
|
|
Loans
|
|
|
Impairment
|
|
|
Total
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Real estate
|
|
$
|
766
|
|
|
$
|
-
|
|
|
$
|
2,350
|
|
|
$
|
3,116
|
|
|
$
|
7,698
|
|
|
$
|
1,287
|
|
|
$
|
259,623
|
|
|
$
|
268,608
|
|
Commercial and industrial
|
|
|
1,369
|
|
|
|
-
|
|
|
|
218
|
|
|
|
1,587
|
|
|
|
4,857
|
|
|
|
-
|
|
|
|
30,993
|
|
|
|
35,850
|
|
Consumer
|
|
|
4
|
|
|
|
-
|
|
|
|
235
|
|
|
|
239
|
|
|
|
57
|
|
|
|
-
|
|
|
|
28,235
|
|
|
|
28,292
|
|
Total
|
|
$
|
2,139
|
|
|
$
|
-
|
|
|
$
|
2,803
|
|
|
$
|
4,942
|
|
|
$
|
12,612
|
|
|
$
|
1,287
|
|
|
$
|
318,851
|
|
|
$
|
332,750
|
|
December 31, 2017
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Allowance for Loan Losses
|
|
|
Loan Balances
|
|
|
|
Individually
|
|
|
Purchased
|
|
|
Collectively
|
|
|
|
|
|
Individually
|
|
|
Purchased
|
|
|
Collectively
|
|
|
|
|
|
|
Evaluated for
|
|
|
Credit-Impaired
|
|
|
Evaluated for
|
|
|
|
|
|
Evaluated for
|
|
|
Credit-Impaired
|
|
|
Evaluated for
|
|
|
|
|
Loan Segment
|
|
Impairment
|
|
|
Loans
|
|
|
Impairment
|
|
|
Total
|
|
|
Impairment
|
|
|
Loans
|
|
|
Impairment
|
|
|
Total
|
|
Real estate
|
|
$
|
624
|
|
|
$
|
-
|
|
|
$
|
2,232
|
|
|
$
|
2,856
|
|
|
$
|
5,523
|
|
|
$
|
1,305
|
|
|
$
|
264,747
|
|
|
$
|
271,575
|
|
Commercial and industrial
|
|
|
1,290
|
|
|
|
-
|
|
|
|
275
|
|
|
|
1,565
|
|
|
|
2,612
|
|
|
|
-
|
|
|
|
31,052
|
|
|
|
33,664
|
|
Consumer
|
|
|
5
|
|
|
|
-
|
|
|
|
255
|
|
|
|
260
|
|
|
|
60
|
|
|
|
-
|
|
|
|
28,435
|
|
|
|
28,495
|
|
Total
|
|
$
|
1,919
|
|
|
$
|
-
|
|
|
$
|
2,762
|
|
|
$
|
4,681
|
|
|
$
|
8,195
|
|
|
$
|
1,305
|
|
|
$
|
324,234
|
|
|
$
|
333,734
|
|
The following table presents information related to impaired
loans by class of loans as of March 31, 2018 and December 31, 2017 (in thousands):
|
|
March 31, 2018
|
|
|
December 31, 2017
|
|
|
|
|
|
|
|
|
|
Allowance
|
|
|
|
|
|
|
|
|
Allowance
|
|
|
|
Unpaid
|
|
|
|
|
|
for Loan
|
|
|
Unpaid
|
|
|
|
|
|
for Loan
|
|
|
|
Principal
|
|
|
Recorded
|
|
|
Losses
|
|
|
Principal
|
|
|
Recorded
|
|
|
Losses
|
|
|
|
Balance
|
|
|
Investment
|
|
|
Allocated
|
|
|
Balance
|
|
|
Investment
|
|
|
Allocated
|
|
With no related allowance recorded:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Real Estate:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
One to four family
|
|
$
|
603
|
|
|
$
|
559
|
|
|
$
|
-
|
|
|
$
|
699
|
|
|
$
|
655
|
|
|
$
|
-
|
|
Multi-family
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
Commercial real estate
|
|
|
2,463
|
|
|
|
2,322
|
|
|
|
-
|
|
|
|
2,593
|
|
|
|
2,452
|
|
|
|
-
|
|
Construction and land
|
|
|
176
|
|
|
|
176
|
|
|
|
-
|
|
|
|
179
|
|
|
|
179
|
|
|
|
-
|
|
Commercial and industrial
|
|
|
1,136
|
|
|
|
1,136
|
|
|
|
-
|
|
|
|
136
|
|
|
|
136
|
|
|
|
-
|
|
Consumer:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Home equity and lines of credit
|
|
|
28
|
|
|
|
28
|
|
|
|
-
|
|
|
|
31
|
|
|
|
31
|
|
|
|
-
|
|
Motor vehicle
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
Other
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
Subtotal
|
|
$
|
4,406
|
|
|
$
|
4,221
|
|
|
$
|
-
|
|
|
$
|
3,638
|
|
|
$
|
3,453
|
|
|
$
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
With a related allowance recorded:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Real Estate:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
One to four family
|
|
$
|
3,276
|
|
|
$
|
3,276
|
|
|
$
|
512
|
|
|
$
|
1,091
|
|
|
$
|
988
|
|
|
$
|
367
|
|
Multi-family
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
Commercial real estate
|
|
|
1,365
|
|
|
|
1,365
|
|
|
|
254
|
|
|
|
1,249
|
|
|
|
1,249
|
|
|
|
257
|
|
Construction and land
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
Commercial and industrial
|
|
|
3,721
|
|
|
|
3,721
|
|
|
|
1,369
|
|
|
|
2,476
|
|
|
|
2,476
|
|
|
|
1,290
|
|
Consumer:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Home equity and lines of credit
|
|
|
29
|
|
|
|
29
|
|
|
|
4
|
|
|
|
29
|
|
|
|
29
|
|
|
|
5
|
|
Motor vehicle
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
Other
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
Subtotal
|
|
|
8,391
|
|
|
|
8,391
|
|
|
|
2,139
|
|
|
|
4,845
|
|
|
|
4,742
|
|
|
|
1,919
|
|
Total
|
|
$
|
12,797
|
|
|
$
|
12,612
|
|
|
$
|
2,139
|
|
|
$
|
8,483
|
|
|
$
|
8,195
|
|
|
$
|
1,919
|
|
The recorded investment in loans excludes accrued interest receivable
and loan origination fees, net, due to immateriality. For purposes of this disclosure, the unpaid balance is not reduced for partial
charge-offs.
The following
tables present the average balance of loans individually evaluated for impairment and interest income recognized on these loans
for the three months ended March 31, 2018 and 2017 (in thousands):
|
|
Three months ended March 31, 2018
|
|
|
Three months ended March 31, 2017
|
|
|
|
Average
|
|
|
Interest
|
|
|
Cash Basis
|
|
|
Average
|
|
|
Interest
|
|
|
Cash Basis
|
|
|
|
Recorded
|
|
|
Income
|
|
|
Interest
|
|
|
Recorded
|
|
|
Income
|
|
|
Interest
|
|
|
|
Investment
|
|
|
Recognized
|
|
|
Recognized
|
|
|
Investment
|
|
|
Recognized
|
|
|
Recognized
|
|
Real Estate:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
One to four family
|
|
$
|
2,739
|
|
|
$
|
40
|
|
|
$
|
31
|
|
|
$
|
1,614
|
|
|
$
|
14
|
|
|
$
|
-
|
|
Multi-family
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
Commercial real estate
|
|
|
3,694
|
|
|
|
32
|
|
|
|
25
|
|
|
|
3,325
|
|
|
|
36
|
|
|
|
-
|
|
Construction and land
|
|
|
178
|
|
|
|
2
|
|
|
|
2
|
|
|
|
119
|
|
|
|
1
|
|
|
|
-
|
|
Commercial and industrial
|
|
|
3,735
|
|
|
|
-
|
|
|
|
-
|
|
|
|
219
|
|
|
|
-
|
|
|
|
-
|
|
Consumer:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Home equity and lines of credit
|
|
|
59
|
|
|
|
-
|
|
|
|
-
|
|
|
|
33
|
|
|
|
-
|
|
|
|
-
|
|
Motor vehicle
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
Other
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
Total
|
|
$
|
10,406
|
|
|
$
|
74
|
|
|
$
|
58
|
|
|
$
|
5,310
|
|
|
$
|
51
|
|
|
$
|
-
|
|
The following tables set forth an analysis of our allowance
for loan losses for the three months ended March 31, 2018 and 2017 (in thousands):
Three months ended
|
|
|
|
|
Commercial
|
|
|
|
|
|
|
|
March 31, 2018
|
|
Real Estate
|
|
|
and Industrial
|
|
|
Consumer
|
|
|
Total
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Allowance for loan losses:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Beginning balance
|
|
$
|
2,856
|
|
|
$
|
1,565
|
|
|
$
|
260
|
|
|
$
|
4,681
|
|
Provision for loan losses
|
|
|
507
|
|
|
|
14
|
|
|
|
(24
|
)
|
|
|
497
|
|
Loans charged-off
|
|
|
(252
|
)
|
|
|
-
|
|
|
|
(32
|
)
|
|
|
(284
|
)
|
Recoveries
|
|
|
5
|
|
|
|
8
|
|
|
|
35
|
|
|
|
48
|
|
Total ending allowance balance
|
|
$
|
3,116
|
|
|
$
|
1,587
|
|
|
$
|
239
|
|
|
$
|
4,942
|
|
Three months ended
|
|
|
|
|
Commercial
|
|
|
|
|
|
|
|
March 31, 2017
|
|
Real Estate
|
|
|
and Industrial
|
|
|
Consumer
|
|
|
Total
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Allowance for loan losses:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Beginning balance
|
|
$
|
1,946
|
|
|
$
|
218
|
|
|
$
|
185
|
|
|
$
|
2,349
|
|
Provision for loan losses
|
|
|
284
|
|
|
|
20
|
|
|
|
49
|
|
|
|
353
|
|
Loans charged-off
|
|
|
(198
|
)
|
|
|
(21
|
)
|
|
|
(55
|
)
|
|
|
(274
|
)
|
Recoveries
|
|
|
3
|
|
|
|
14
|
|
|
|
18
|
|
|
|
35
|
|
Total ending allowance balance
|
|
$
|
2,035
|
|
|
$
|
231
|
|
|
$
|
197
|
|
|
$
|
2,463
|
|
Nonaccrual loans, and loans past due 90 days still on accrual
status, consist of smaller balance homogeneous loans that are collectively evaluated for impairment.
The following table presents the recorded investment in nonaccrual
and loans past due over 90 days still on accrual status, by class of loans, as of March 31, 2018 and December 31, 2017 (in thousands):
|
|
March 31, 2018
|
|
|
December 31, 2017
|
|
|
|
|
|
|
Loans Past Due
|
|
|
|
|
|
Loans Past Due
|
|
|
|
|
|
|
Over 90 Days
|
|
|
|
|
|
Over 90 Days
|
|
|
|
Nonaccrual
|
|
|
Still Accruing
|
|
|
Nonaccrual
|
|
|
Still Accruing
|
|
Real estate:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
One to four family
|
|
$
|
2,241
|
|
|
$
|
-
|
|
|
$
|
2,911
|
|
|
$
|
-
|
|
Multi-family
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
Commercial real estate
|
|
|
1,664
|
|
|
|
-
|
|
|
|
1,677
|
|
|
|
-
|
|
Construction and land
|
|
|
33
|
|
|
|
-
|
|
|
|
34
|
|
|
|
-
|
|
Commercial and industrial
|
|
|
3,637
|
|
|
|
-
|
|
|
|
1,638
|
|
|
|
-
|
|
Consumer:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Home equity loans and lines of credit
|
|
|
62
|
|
|
|
-
|
|
|
|
66
|
|
|
|
-
|
|
Motor vehicle
|
|
|
24
|
|
|
|
-
|
|
|
|
26
|
|
|
|
-
|
|
Other
|
|
|
4
|
|
|
|
-
|
|
|
|
6
|
|
|
|
-
|
|
Total
|
|
$
|
7,665
|
|
|
$
|
-
|
|
|
$
|
6,358
|
|
|
$
|
-
|
|
The following tables present the aging
of the recorded investment in past due loans as of March 31, 2018 and December 31, 2017 by class of loans. Non-accrual loans of
$7.7 million as of March 31, 2018 and $6.4 million at December 31, 2017 are included in the tables below and have been categorized
based on their payment status (in thousands):
|
|
30 - 59
|
|
|
60 - 89
|
|
|
Greater than
|
|
|
|
|
|
Purchased
|
|
|
|
|
|
|
|
|
|
Days
|
|
|
Days
|
|
|
89 Days
|
|
|
Total
|
|
|
Credit-Impaired
|
|
|
Loans Not
|
|
|
|
|
|
|
Past Due
|
|
|
Past Due
|
|
|
Past Due
|
|
|
Past Due
|
|
|
Loans
|
|
|
Past Due
|
|
|
Total
|
|
March 31, 2018
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Real estate:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
One to four family
|
|
$
|
839
|
|
|
$
|
493
|
|
|
$
|
760
|
|
|
$
|
2,092
|
|
|
$
|
578
|
|
|
$
|
162,583
|
|
|
$
|
165,253
|
|
Multi-family
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
9,009
|
|
|
|
9,009
|
|
Commercial real estate
|
|
|
361
|
|
|
|
-
|
|
|
|
1,365
|
|
|
|
1,726
|
|
|
|
709
|
|
|
|
82,780
|
|
|
|
85,215
|
|
Construction and land
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
9,131
|
|
|
|
9,131
|
|
Commercial and industrial
|
|
|
974
|
|
|
|
35
|
|
|
|
3,631
|
|
|
|
4,640
|
|
|
|
-
|
|
|
|
31,210
|
|
|
|
35,850
|
|
Consumer:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Home equity loans and lines of credit
|
|
|
-
|
|
|
|
-
|
|
|
|
29
|
|
|
|
29
|
|
|
|
-
|
|
|
|
10,703
|
|
|
|
10,732
|
|
Motor vehicle
|
|
|
3
|
|
|
|
4
|
|
|
|
21
|
|
|
|
28
|
|
|
|
-
|
|
|
|
10,231
|
|
|
|
10,259
|
|
Other
|
|
|
7
|
|
|
|
-
|
|
|
|
-
|
|
|
|
7
|
|
|
|
-
|
|
|
|
7,294
|
|
|
|
7,301
|
|
Total
|
|
$
|
2,184
|
|
|
$
|
532
|
|
|
$
|
5,806
|
|
|
$
|
8,522
|
|
|
$
|
1,287
|
|
|
$
|
322,941
|
|
|
$
|
332,750
|
|
|
|
30 - 59
|
|
|
60 - 89
|
|
|
Greater than
|
|
|
|
|
|
Purchased
|
|
|
|
|
|
|
|
|
|
Days
|
|
|
Days
|
|
|
89 Days
|
|
|
Total
|
|
|
Credit-Impaired
|
|
|
Loans Not
|
|
|
|
|
|
|
Past Due
|
|
|
Past Due
|
|
|
Past Due
|
|
|
Past Due
|
|
|
Loans
|
|
|
Past Due
|
|
|
Total
|
|
December 31, 2017
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Real estate:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
One to four family
|
|
$
|
1,615
|
|
|
$
|
628
|
|
|
$
|
1,199
|
|
|
$
|
3,442
|
|
|
$
|
590
|
|
|
$
|
166,722
|
|
|
$
|
170,754
|
|
Multi-family
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
6,505
|
|
|
|
6,505
|
|
Commercial real estate
|
|
|
249
|
|
|
|
315
|
|
|
|
1,367
|
|
|
|
1,931
|
|
|
|
715
|
|
|
|
81,666
|
|
|
|
84,312
|
|
Construction and land
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
10,004
|
|
|
|
10,004
|
|
Commercial and industrial
|
|
|
1,133
|
|
|
|
4
|
|
|
|
1,631
|
|
|
|
2,768
|
|
|
|
-
|
|
|
|
30,896
|
|
|
|
33,664
|
|
Consumer:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Home equity loans and lines of credit
|
|
|
-
|
|
|
|
-
|
|
|
|
60
|
|
|
|
60
|
|
|
|
-
|
|
|
|
10,647
|
|
|
|
10,707
|
|
Motor vehicle
|
|
|
40
|
|
|
|
-
|
|
|
|
21
|
|
|
|
61
|
|
|
|
-
|
|
|
|
10,307
|
|
|
|
10,368
|
|
Other
|
|
|
3
|
|
|
|
6
|
|
|
|
-
|
|
|
|
9
|
|
|
|
-
|
|
|
|
7,411
|
|
|
|
7,420
|
|
Total
|
|
$
|
3,040
|
|
|
$
|
953
|
|
|
$
|
4,278
|
|
|
$
|
8,271
|
|
|
$
|
1,305
|
|
|
$
|
324,158
|
|
|
$
|
333,734
|
|
Troubled Debt Restructurings
:
As of March 31, 2018, the Company had a recorded investment
in six TDRs which totaled $3.4 million. There were five TDRs which totaled $3.2 million at December 31, 2017. A less than market
rate and extended term was granted as concessions for TDRs. No additional charge-off has been made for the loan relationships.
No additional commitments to lend have been made to the borrower. The Company has allocated $153,000 of specific allowance for
the loan relationships at March 31, 2018 and December 31, 2017.
March 31, 2018
|
|
TDRs on
|
|
|
|
|
|
|
|
(in thousands)
|
|
Non-accrual
|
|
|
Other TDRs
|
|
|
Total TDRs
|
|
Real Estate:
|
|
|
|
|
|
|
|
|
|
|
|
|
One to four family
|
|
$
|
28
|
|
|
$
|
16
|
|
|
$
|
44
|
|
Multi-family
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
Commercial real estate
|
|
|
923
|
|
|
|
2,195
|
|
|
|
3,118
|
|
Construction and land
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
Commercial and industrial
|
|
|
-
|
|
|
|
246
|
|
|
|
246
|
|
Consumer:
|
|
|
|
|
|
|
|
|
|
|
|
|
Home equity loans and lines of credit
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
Motor vehicle
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
Other
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
Total
|
|
$
|
951
|
|
|
$
|
2,457
|
|
|
$
|
3,408
|
|
December 31, 2017
|
|
TDRs on
|
|
|
|
|
|
|
|
(in thousands)
|
|
Non-accrual
|
|
|
Other TDRs
|
|
|
Total TDRs
|
|
Real Estate:
|
|
|
|
|
|
|
|
|
|
|
|
|
One to four family
|
|
$
|
30
|
|
|
$
|
16
|
|
|
$
|
46
|
|
Multi-family
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
Commercial real estate
|
|
|
933
|
|
|
|
2,195
|
|
|
|
3,128
|
|
Construction and land
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
Commercial and industrial
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
Consumer:
|
|
|
|
|
|
|
|
|
|
|
|
|
Home equity loans and lines of credit
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
Motor vehicle
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
Other
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
Total
|
|
$
|
963
|
|
|
$
|
2,211
|
|
|
$
|
3,174
|
|
There were no TDRs considered to be in default within twelve
months of modification as of March 31, 2018. A loan is considered to be in payment default once it is 90 days contractually past
due under the modified terms. The following table presents TDRs that occurred during the three months ended March 31, 2018 and
2017 (dollars in thousands):
|
|
Three months ended March 31, 2018
|
|
|
Three months ended March 31, 2017
|
|
Loan Class
|
|
Number of
Loans
|
|
|
Pre-Modification
Outstanding
Recorded
Investment
|
|
|
Post-Modification
Outstanding
Recorded
Investment
|
|
|
Number of
Loans
|
|
|
Pre-Modification
Outstanding
Recorded
Investment
|
|
|
Post-Modification
Outstanding
Recorded
Investment
|
|
Real Estate:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
One to four family
|
|
|
-
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
|
1
|
|
|
$
|
114
|
|
|
$
|
114
|
|
Multi-family
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
Commercial real estate
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
Construction and land
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
Commercial and industrial
|
|
|
1
|
|
|
|
246
|
|
|
|
246
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
Consumer:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Home equity loans and lines of credit
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
Motor vehicle
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
Other
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
Total
|
|
|
1
|
|
|
$
|
246
|
|
|
$
|
246
|
|
|
|
1
|
|
|
$
|
114
|
|
|
$
|
114
|
|
CREDIT QUALITY INDICATORS:
The Company categorizes loans into risk
categories based on relevant information about the ability of borrowers to service their debt such as: current financial information,
historical payment experience, credit documentation, public information, and current economic trends, among other factors. The
Company analyzes loans individually by classifying the loans as to credit risk. This analysis includes all non-homogeneous loans,
such as commercial and commercial real estate loans. The analysis for residential real estate and consumer loans primarily includes
review of past due status. This analysis is performed on a quarterly basis. The Company uses the following definitions for risk
ratings:
Special Mention.
Loans
classified as special mention have a potential weakness that deserves management’s close attention. If left uncorrected,
these potential weaknesses may result in deterioration of the repayment prospects for the loan or of the institution’s credit
position at some future date.
Substandard.
Loans classified
as substandard are inadequately protected by the current net worth and paying capacity of the obligor or of the collateral pledged,
if any. Loans so classified have a well-defined weakness or weaknesses that jeopardize the liquidation of the debt. They are characterized
by the distinct possibility that the institution will sustain some loss if the deficiencies are not corrected.
Doubtful.
Loans classified
as doubtful have all the weaknesses inherent in those 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.
Loss.
Loans classified
as loss are considered uncollectable and of such little value that continuing to carry them as an asset is not feasible.
Loans will be classified as a loss when it is not practical or desirable to defer writing off or reserving all or a portion of
a basically worthless asset, even though partial recovery may be possible at some time in the future.
Loans not meeting the criteria above that are analyzed individually
as part of the above described process are considered to be pass rated loans.
Based on the most recent analysis performed, the risk category
of loans by class of loans is as follows (in thousands):
|
|
|
|
|
Special
|
|
|
|
|
|
|
|
|
|
|
|
|
|
March 31, 2018
|
|
Pass
|
|
|
Mention
|
|
|
Substandard
|
|
|
Doubtful
|
|
|
Loss
|
|
|
Total
|
|
One to four family
|
|
$
|
155,887
|
|
|
$
|
1,745
|
|
|
$
|
7,621
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
165,253
|
|
Multi-family
|
|
|
9,009
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
9,009
|
|
Commercial real estate
|
|
|
77,192
|
|
|
|
2,930
|
|
|
|
5,093
|
|
|
|
-
|
|
|
|
-
|
|
|
|
85,215
|
|
Construction and land
|
|
|
8,826
|
|
|
|
129
|
|
|
|
176
|
|
|
|
-
|
|
|
|
-
|
|
|
|
9,131
|
|
Commercial and industrial
|
|
|
27,514
|
|
|
|
1,403
|
|
|
|
6,933
|
|
|
|
-
|
|
|
|
-
|
|
|
|
35,850
|
|
Home equity loans and lines of credit
|
|
|
10,579
|
|
|
|
-
|
|
|
|
153
|
|
|
|
-
|
|
|
|
-
|
|
|
|
10,732
|
|
Motor vehicle
|
|
|
10,208
|
|
|
|
9
|
|
|
|
42
|
|
|
|
-
|
|
|
|
-
|
|
|
|
10,259
|
|
Other
|
|
|
7,297
|
|
|
|
-
|
|
|
|
4
|
|
|
|
-
|
|
|
|
-
|
|
|
|
7,301
|
|
Total
|
|
$
|
306,512
|
|
|
$
|
6,216
|
|
|
$
|
20,022
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
332,750
|
|
|
|
|
|
|
Special
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2017
|
|
Pass
|
|
|
Mention
|
|
|
Substandard
|
|
|
Doubtful
|
|
|
Loss
|
|
|
Total
|
|
One to four family
|
|
$
|
163,709
|
|
|
$
|
1,673
|
|
|
$
|
5,372
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
170,754
|
|
Multi-family
|
|
|
6,505
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
6,505
|
|
Commercial real estate
|
|
|
76,226
|
|
|
|
2,957
|
|
|
|
5,129
|
|
|
|
-
|
|
|
|
-
|
|
|
|
84,312
|
|
Construction and land
|
|
|
9,825
|
|
|
|
-
|
|
|
|
179
|
|
|
|
-
|
|
|
|
-
|
|
|
|
10,004
|
|
Commercial and industrial
|
|
|
25,891
|
|
|
|
2,602
|
|
|
|
5,171
|
|
|
|
-
|
|
|
|
-
|
|
|
|
33,664
|
|
Home equity loans and lines of credit
|
|
|
10,549
|
|
|
|
0
|
|
|
|
158
|
|
|
|
-
|
|
|
|
-
|
|
|
|
10,707
|
|
Motor vehicle
|
|
|
10,291
|
|
|
|
9
|
|
|
|
68
|
|
|
|
-
|
|
|
|
-
|
|
|
|
10,368
|
|
Other
|
|
|
7,413
|
|
|
|
-
|
|
|
|
7
|
|
|
|
-
|
|
|
|
-
|
|
|
|
7,420
|
|
Total
|
|
$
|
310,409
|
|
|
$
|
7,241
|
|
|
$
|
16,084
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
333,734
|
|
There were $1.1 million and $1.1 million purchased credit impaired
(“PCI”) loans included in substandard loans at March 31, 2018 and December 31, 2017, respectively.
The Company holds purchased loans without
evidence of credit quality deterioration. In addition, the Company holds purchased loans for which there was, at their acquisition
date, evidence of deterioration of credit quality since their origination and it was probable that all contractually required payments
would not be collected. A summary of non-impaired purchased loans and credit-impaired purchased loans with the carrying amount
of those loans is as follows at March 31, 2018 and December 31, 2017 (in thousands):
|
|
Non-impaired
|
|
|
Credit-impaired
|
|
|
|
Purchased
|
|
|
Purchased
|
|
Purchased Loans as of March 31, 2018
|
|
Loans
|
|
|
Loans
|
|
Real estate:
|
|
|
|
|
|
|
|
|
One to four family
|
|
$
|
24,701
|
|
|
$
|
578
|
|
Multi-family
|
|
|
1,808
|
|
|
|
-
|
|
Commercial real estate
|
|
|
14,259
|
|
|
|
709
|
|
Construction and land
|
|
|
496
|
|
|
|
-
|
|
Commercial and industrial
|
|
|
1,262
|
|
|
|
-
|
|
Consumer loans:
|
|
|
|
|
|
|
|
|
Home equity loans and lines of credit
|
|
|
926
|
|
|
|
-
|
|
Motor vehicle
|
|
|
27
|
|
|
|
-
|
|
Other
|
|
|
480
|
|
|
|
-
|
|
Total loans
|
|
$
|
43,959
|
|
|
$
|
1,287
|
|
|
|
Non-impaired
|
|
|
Credit-impaired
|
|
|
|
Purchased
|
|
|
Purchased
|
|
Purchased Loans as of December 31, 2017
|
|
Loans
|
|
|
Loans
|
|
Real estate:
|
|
|
|
|
|
|
|
|
One to four family
|
|
$
|
25,437
|
|
|
$
|
590
|
|
Multi-family
|
|
|
1,829
|
|
|
|
-
|
|
Commercial real estate
|
|
|
15,157
|
|
|
|
715
|
|
Construction and land
|
|
|
510
|
|
|
|
-
|
|
Commercial and industrial
|
|
|
1,359
|
|
|
|
-
|
|
Consumer loans:
|
|
|
|
|
|
|
|
|
Home equity loans and lines of credit
|
|
|
959
|
|
|
|
-
|
|
Motor vehicle
|
|
|
43
|
|
|
|
-
|
|
Other
|
|
|
521
|
|
|
|
-
|
|
Total loans
|
|
$
|
45,815
|
|
|
$
|
1,305
|
|
For the purchased loans disclosed above, the Company did not
increase the allowance for loan losses for the three months ended March 31, 2018 and 2017.
The following table presents the composition
of the acquired loans at March 31, 2018:
As of March 31, 2018
|
|
|
|
|
|
|
|
|
|
|
|
Contractual
|
|
|
Remaining
|
|
|
Carrying
|
|
(in thousands)
|
|
Amount
|
|
|
Discount
|
|
|
Amount
|
|
Real estate:
|
|
|
|
|
|
|
|
|
|
|
|
|
One to four family
|
|
$
|
25,550
|
|
|
$
|
(271
|
)
|
|
$
|
25,279
|
|
Multi-family
|
|
|
1,809
|
|
|
|
(1
|
)
|
|
|
1,808
|
|
Commercial real estate
|
|
|
15,121
|
|
|
|
(153
|
)
|
|
|
14,968
|
|
Construction and land
|
|
|
497
|
|
|
|
(1
|
)
|
|
|
496
|
|
Commercial and industrial
|
|
|
1,262
|
|
|
|
-
|
|
|
|
1,262
|
|
Consumer loans:
|
|
|
|
|
|
|
|
|
|
|
|
|
Home equity loans and lines of credit
|
|
|
927
|
|
|
|
(1
|
)
|
|
|
926
|
|
Motor vehicle
|
|
|
27
|
|
|
|
-
|
|
|
|
27
|
|
Other
|
|
|
480
|
|
|
|
-
|
|
|
|
480
|
|
Total loans
|
|
$
|
45,673
|
|
|
$
|
(427
|
)
|
|
$
|
45,246
|
|
As of December 31, 2017
|
|
|
|
|
|
|
|
|
|
|
|
Contractual
|
|
|
Remaining
|
|
|
Carrying
|
|
(in thousands)
|
|
Amount
|
|
|
Discount
|
|
|
Amount
|
|
Real estate:
|
|
|
|
|
|
|
|
|
|
|
|
|
One to four family
|
|
$
|
26,335
|
|
|
$
|
(308
|
)
|
|
$
|
26,027
|
|
Multi-family
|
|
|
1,832
|
|
|
|
(3
|
)
|
|
|
1,829
|
|
Commercial real estate
|
|
|
16,050
|
|
|
|
(178
|
)
|
|
|
15,872
|
|
Construction and land
|
|
|
511
|
|
|
|
(1
|
)
|
|
|
510
|
|
Commercial and industrial
|
|
|
1,360
|
|
|
|
(1
|
)
|
|
|
1,359
|
|
Consumer loans:
|
|
|
|
|
|
|
|
|
|
|
|
|
Home equity loans and lines of credit
|
|
|
962
|
|
|
|
(3
|
)
|
|
|
959
|
|
Motor vehicle
|
|
|
44
|
|
|
|
(1
|
)
|
|
|
43
|
|
Other
|
|
|
522
|
|
|
|
(1
|
)
|
|
|
521
|
|
Total loans
|
|
$
|
47,616
|
|
|
$
|
(496
|
)
|
|
$
|
47,120
|
|
The following tables presents the purchased
loans that are included within the scope of ASC Topic 310-30,
Loans and Debt Securities Acquired with Deteriorated Credit Quality,
as of March 31, 2018 and December 31, 2017.
(in thousands)
|
|
March 31, 2018
|
|
|
December 31, 2017
|
|
|
|
|
|
|
|
|
Carrying amount
|
|
$
|
1,287
|
|
|
$
|
1,305
|
|
Non-accretable difference
|
|
|
210
|
|
|
|
214
|
|
Accretable yield
|
|
|
94
|
|
|
|
100
|
|
Contractually-required principal and interest payments
|
|
$
|
1,591
|
|
|
$
|
1,619
|
|
The Company adjusted interest income to recognize $6,000 and
$12,000 of accretable yield on credit-impaired purchased loans for the three months ended March 31, 2018 and 2017, respectively.
Accretable yield, or income expected to be collected, is as
follows for the three months ended March 31, 2018 and 2017 (in thousands):
|
|
2018
|
|
|
2017
|
|
|
|
|
|
|
|
|
Balance at January 1
|
|
$
|
100
|
|
|
$
|
146
|
|
New Loans Purchased
|
|
|
-
|
|
|
|
-
|
|
Accretion of income
|
|
|
(6
|
)
|
|
|
(12
|
)
|
Reclassifications from nonaccretable difference
|
|
|
-
|
|
|
|
-
|
|
Disposals
|
|
|
-
|
|
|
|
-
|
|
Balance at March 31
|
|
$
|
94
|
|
|
$
|
134
|
|
NOTE 6 – FEDERAL HOME LOAN BANK ADVANCES AND OTHER
BORROWINGS
Advances from the FHLB at March 31, 2018 and December 31, 2017
were as follows (dollars in thousands):
|
|
March 31, 2018
|
|
|
December 31, 2017
|
|
Maturities July 2018 through January 2029, fixed rate at rates from 2.16% to 4.27%, weighted average rate of 2.44% at March 31, 2018 and 1.97% at December 31, 2017
|
|
$
|
6,988
|
|
|
$
|
7,419
|
|
Payments contractually required over the next five years are
as follows as of March 31, 2018 (in thousands):
remainder for year ending 2018
|
|
$
|
6,324
|
|
2019
|
|
|
223
|
|
2020
|
|
|
88
|
|
2021
|
|
|
74
|
|
2022
|
|
|
63
|
|
Thereafter
|
|
|
216
|
|
Total
|
|
$
|
6,988
|
|
There were no other borrowings at March 31, 2018 and December
31, 2017. On June 16, 2016, Poage Bankshares, Inc. executed a $2.0 million commercial line of credit secured with Town Square Bank
common stock, with an unaffiliated lender. The initial variable rate on the line of credit was 4.0% with an interest rate equal
to the Wall Street Prime plus 0.50%. At March 31, 2018, the interest rate on the line of credit was 5.25%. The line of credit matures
June 16, 2018.
NOTE 7 – FAIR VALUE
Fair value is the exchange price that would
be received for an asset or paid to transfer a liability (exit price) in the principal or most advantageous market for the asset
or liability in an orderly transaction between market participants on the measurement date. There are three levels of inputs that
may be used to measure fair values:
Level 1 – Quoted prices (unadjusted)
for identical assets or liabilities in active markets that the entity has the ability to access as of the measurement date.
Level 2 – Significant other observable
inputs other than Level 1 prices such as quoted prices for similar assets or 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 – Significant unobservable
inputs that reflect a company’s own assumptions about the assumptions that market participants would use in pricing an asset
or liability.
The Company used the following methods
and significant assumptions to estimate fair value:
Securities
: The fair values for
securities are determined by quoted market prices, if available (Level 1). If quoted market prices are not available, fair values
are based on quoted market prices of similar securities (Level 2). This includes the use of “matrix pricing” used to
value debt securities absent the exclusive use of quoted prices. For securities where quoted prices or market prices of similar
securities are not available, fair values are calculated using discounted cash flows (Level 3).
Impaired Loans
: The fair value of
impaired loans with specific allocations of the allowance for loan losses is generally based on recent real estate appraisals.
Adjustments are routinely made in the appraisal process by the independent appraisers to adjust for differences between the comparable
sales and income data available for similar loans and collateral underlying such loans. Non-real estate collateral may be valued
using an appraisal, net book value per the borrower’s financial statements, or aging reports, adjusted or discounted based
on management’s historical knowledge, changes in market conditions from the time of the valuation, and management’s
expertise and knowledge of the client and client’s business, resulting in a Level 3 fair value classification. Impaired loans
are evaluated on a quarterly basis for additional impairment and adjusted in accordance with the allowance policy.
Other Real Estate Owned
: Nonrecurring
adjustments to certain commercial and residential real estate properties classified as other real estate owned (OREO) are measured
at the lower of carrying amount or fair value, less estimated costs to sell. Fair values are generally based on third party appraisals
of the property resulting in a Level 3 classification. In cases where the carrying amount exceeds the fair value, less estimated
costs to sell, an impairment loss is recognized.
Assets and liabilities measured at fair value on a recurring
basis, at March 31, 2018 and December 31, 2017, are as follows (in thousands):
|
|
Fair Value Measurements at
|
|
|
|
March 31, 2018 Using:
|
|
|
|
|
|
|
Quoted Prices in
|
|
|
Significant
|
|
|
Significant
|
|
|
|
|
|
|
Active Markets for
|
|
|
Other Observable
|
|
|
Unobservable
|
|
|
|
Carrying
|
|
|
Identical Assets
|
|
|
Inputs
|
|
|
Inputs
|
|
|
|
Value
|
|
|
(Level 1)
|
|
|
(Level 2)
|
|
|
(Level 3)
|
|
Financial Assets
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Securities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
States and political subdivisions
|
|
$
|
18,539
|
|
|
$
|
-
|
|
|
$
|
18,539
|
|
|
$
|
-
|
|
U.S. Government agencies and sponsored entities
|
|
|
3,434
|
|
|
|
-
|
|
|
|
3,434
|
|
|
|
-
|
|
Mortgage backed securities: residential
|
|
|
28,863
|
|
|
|
-
|
|
|
|
28,863
|
|
|
|
-
|
|
Collateralized mortgage obligations
|
|
|
5,816
|
|
|
|
-
|
|
|
|
5,816
|
|
|
|
-
|
|
SBA loan pools
|
|
|
10,240
|
|
|
|
-
|
|
|
|
10,240
|
|
|
|
-
|
|
Total securities
|
|
$
|
66,892
|
|
|
$
|
-
|
|
|
$
|
66,892
|
|
|
$
|
-
|
|
|
|
Fair Value Measurements at
|
|
|
|
December 31, 2017 Using:
|
|
|
|
|
|
|
Quoted Prices in
|
|
|
Significant
|
|
|
Significant
|
|
|
|
|
|
|
Active Markets for
|
|
|
Other Observable
|
|
|
Unobservable
|
|
|
|
Carrying
|
|
|
Identical Assets
|
|
|
Inputs
|
|
|
Inputs
|
|
|
|
Value
|
|
|
(Level 1)
|
|
|
(Level 2)
|
|
|
(Level 3)
|
|
Financial Assets
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Securities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
States and political subdivisions
|
|
$
|
19,164
|
|
|
$
|
-
|
|
|
$
|
19,164
|
|
|
$
|
-
|
|
U.S. Government agencies and sponsored entities
|
|
|
3,450
|
|
|
|
-
|
|
|
|
3,450
|
|
|
|
-
|
|
Mortgage backed securities: residential
|
|
|
27,267
|
|
|
|
-
|
|
|
|
27,267
|
|
|
|
-
|
|
Collateralized mortgage obligations
|
|
|
4,955
|
|
|
|
-
|
|
|
|
4,955
|
|
|
|
-
|
|
SBA loan pools
|
|
|
9,294
|
|
|
|
-
|
|
|
|
9,294
|
|
|
|
-
|
|
Total securities
|
|
$
|
64,130
|
|
|
$
|
-
|
|
|
$
|
64,130
|
|
|
$
|
-
|
|
There were no transfers between Level 1 and Level 2 during the
three months ended March 31, 2018.
Assets measured at fair value on a non-recurring
basis at March 31, 2018 and December 31, 2017 are summarized below (in thousands):
|
|
Fair Value Measurements at
|
|
|
|
March 31, 2018 Using:
|
|
|
|
|
|
|
Quoted Prices in
|
|
|
Significant
|
|
|
Significant
|
|
|
|
|
|
|
Active Markets for
|
|
|
Other Observable
|
|
|
Unobservable
|
|
|
|
Carrying
|
|
|
Identical Assets
|
|
|
Inputs
|
|
|
Inputs
|
|
|
|
Value
|
|
|
(Level 1)
|
|
|
(Level 2)
|
|
|
(Level 3)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Impaired loans
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Residential real estate, net
|
|
$
|
2,848
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
2,848
|
|
Commercial real estate, net
|
|
|
1,203
|
|
|
|
-
|
|
|
|
-
|
|
|
|
1,203
|
|
Commercial and industrial, net
|
|
|
2,106
|
|
|
|
-
|
|
|
|
-
|
|
|
|
2,106
|
|
Consumer loan HELOC, net
|
|
|
25
|
|
|
|
-
|
|
|
|
-
|
|
|
|
25
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other real estate owned
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Residential real estate, net
|
|
$
|
142
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
142
|
|
|
|
Fair Value Measurements at
|
|
|
|
December 31, 2017 Using:
|
|
|
|
|
|
|
Quoted Prices in
|
|
|
Significant
|
|
|
Significant
|
|
|
|
|
|
|
Active Markets for
|
|
|
Other Observable
|
|
|
Unobservable
|
|
|
|
Carrying
|
|
|
Identical Assets
|
|
|
Inputs
|
|
|
Inputs
|
|
|
|
Value
|
|
|
(Level 1)
|
|
|
(Level 2)
|
|
|
(Level 3)
|
|
Impaired loans
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Residential real estate, net
|
|
$
|
621
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
621
|
|
Commercial real estate, net
|
|
|
992
|
|
|
|
-
|
|
|
|
-
|
|
|
|
992
|
|
Commercial and industrial, net
|
|
|
1,186
|
|
|
|
-
|
|
|
|
-
|
|
|
|
1,186
|
|
Consumer loan HELOC, net
|
|
|
24
|
|
|
|
-
|
|
|
|
-
|
|
|
|
24
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other real estate owned
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Residential real estate, net
|
|
$
|
610
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
610
|
|
Commercial and residential real estate
properties classified as OREO are measured at fair value, less estimated costs to sell. Fair values are based on recent real estate
appraisals. These appraisals may use a single valuation approach or a combination of approaches including comparable sales and
the income approach. Adjustments are routinely made in the appraisal process by the independent appraisers to adjust for differences
between the comparable sales and income data available. Such adjustments are usually significant and typically result in a Level
3 classification of the inputs for determining fair value. Appraisals for real estate properties classified as other real estate
owned are performed by certified general appraisers (for commercial properties) or certified residential appraisers (for residential
properties) whose qualifications and licenses have been reviewed and verified by the Bank’s management. The appraisal values
are discounted to allow for estimated selling expenses and fees, and the discounts range from 5% to 10%.
At March 31, 2018, impaired loans recorded
at fair value had a net carrying amount of $6.1 million equal to the outstanding balance of $8.3 million, net of a valuation allowance
of $2.2 million. At December 31, 2017, impaired loans recorded at fair value had a net carrying amount of $2.8 million equal to
the outstanding balance of $4.7 million, net of a valuation allowance of $1.9 million. There were charge-offs of $0 and $13,000
for the three months ended March 31, 2018 and 2017, respectively. The change in specific reserve on impaired loans resulted in
an increase to the provision for loan losses of $555,000 and $71,000 for the three months ended March 31, 2018 and 2017, respectively.
At March 31, 2018, OREO recorded at fair
value had a net carrying amount of $142,000 equal to the outstanding balance of $237,000, net of a valuation allowance of $95,000.
There were $3,000 in write-downs for the three months ended March 31, 2018. There were $10,000 in write-downs for the three months
ended March 31, 2017. At December 31, 2017, other real estate owned recorded at fair value had a net carrying amount of $610,000,
equal to the outstanding balance of $1.03 million, net of a valuation allowance of $420,000.
The carrying amounts and estimated fair values of financial
instruments at March 31, 2018 and December 31, 2017 are as follows (in thousands):
|
|
|
|
|
Fair Value Measurements
|
|
|
|
Carrying
|
|
|
|
|
|
|
|
|
|
|
|
|
|
March 31, 2018
|
|
Value
|
|
|
Level 1
|
|
|
Level 2
|
|
|
Level 3
|
|
|
Total
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Financial assets
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents
|
|
$
|
23,320
|
|
|
$
|
23,320
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
23,320
|
|
Interest bearing deposits
|
|
|
3,237
|
|
|
|
-
|
|
|
|
3,237
|
|
|
|
-
|
|
|
|
3,237
|
|
Securities
|
|
|
66,892
|
|
|
|
-
|
|
|
|
66,892
|
|
|
|
-
|
|
|
|
66,892
|
|
Restricted stock
|
|
|
3,276
|
|
|
|
N/A
|
|
|
|
N/A
|
|
|
|
N/A
|
|
|
|
N/A
|
|
Loans held for sale
|
|
|
291
|
|
|
|
-
|
|
|
|
291
|
|
|
|
-
|
|
|
|
291
|
|
Loans, net
|
|
|
327,302
|
|
|
|
-
|
|
|
|
-
|
|
|
|
327,975
|
|
|
|
327,975
|
|
Accrued interest receivable
|
|
|
1,288
|
|
|
|
-
|
|
|
|
337
|
|
|
|
951
|
|
|
|
1,288
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Financial liabilities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Deposits
|
|
$
|
374,658
|
|
|
$
|
217,086
|
|
|
$
|
155,004
|
|
|
$
|
-
|
|
|
$
|
372,090
|
|
Federal Home Loan Bank advances
|
|
|
6,988
|
|
|
|
4,999
|
|
|
|
1,976
|
|
|
|
-
|
|
|
|
6,975
|
|
Subordinated debenture
|
|
|
2,906
|
|
|
|
-
|
|
|
|
2,873
|
|
|
|
-
|
|
|
|
2,873
|
|
Accrued interest payable
|
|
|
30
|
|
|
|
-
|
|
|
|
30
|
|
|
|
-
|
|
|
|
30
|
|
|
|
|
|
|
Fair Value Measurements
|
|
|
|
Carrying
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2017
|
|
Value
|
|
|
Level 1
|
|
|
Level 2
|
|
|
Level 3
|
|
|
Total
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Financial assets
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents
|
|
$
|
20,499
|
|
|
$
|
20,499
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
20,499
|
|
Interest bearing deposits
|
|
|
2,988
|
|
|
|
-
|
|
|
|
2,988
|
|
|
|
-
|
|
|
|
2,988
|
|
Securities
|
|
|
64,130
|
|
|
|
-
|
|
|
|
64,130
|
|
|
|
-
|
|
|
|
64,130
|
|
Restricted stock
|
|
|
3,276
|
|
|
|
N/A
|
|
|
|
N/A
|
|
|
|
N/A
|
|
|
|
N/A
|
|
Loans held for sale
|
|
|
256
|
|
|
|
-
|
|
|
|
256
|
|
|
|
-
|
|
|
|
256
|
|
Loans, net
|
|
|
328,554
|
|
|
|
-
|
|
|
|
-
|
|
|
|
328,236
|
|
|
|
328,236
|
|
Accrued interest receivable
|
|
|
1,413
|
|
|
|
-
|
|
|
|
333
|
|
|
|
1,080
|
|
|
|
1,413
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Financial liabilities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Deposits
|
|
$
|
370,050
|
|
|
$
|
212,625
|
|
|
$
|
154,859
|
|
|
$
|
-
|
|
|
$
|
367,484
|
|
Federal Home Loan Bank advances
|
|
|
7,419
|
|
|
|
4,999
|
|
|
|
2,404
|
|
|
|
-
|
|
|
|
7,403
|
|
Subordinated debenture
|
|
|
2,890
|
|
|
|
-
|
|
|
|
2,873
|
|
|
|
-
|
|
|
|
2,873
|
|
Accrued interest payable
|
|
|
24
|
|
|
|
-
|
|
|
|
24
|
|
|
|
-
|
|
|
|
24
|
|
The methods and assumptions, not previously presented, used
to estimate fair values are described as follows:
Cash and Cash Equivalents:
The carrying amounts of cash and short-term instruments approximate
fair values and are classified as Level 1.
Restricted Stock:
It is not practical to determine the fair value of FHLB and
Bankers Bank of Kentucky stock due to restrictions placed on their transferability.
Loans:
Fair values of loans, excluding loans held
for sale, are estimated as follows: ASU 2016-1, "Recognition and Measurement of Financial Assets and Financial Liabilities,"
requires the Company to use the exit price notion when measuring fair value of financial instruments for disclosure purposes effective
January 1, 2018, therefore the fair value presented in the following table may not be comparable to prior period. For
performing loans, the fair value is determined based on a discounted cash flow analysis (income approach). The discounted
cash flow was based on contractual maturity of the loan and market indications of rates, prepayment speeds, defaults and credit
risk resulting in Level 3 classification. For non-performing loans, the fair value is determined based on the estimated
values of the underlying collateral or individual analysis of receipts (asset approach) resulting in Level 3 classification. At
December 31, 2017, the fair values of loans, excluding loans held for sale, were estimated as follows: for variable rate loans
that reprice frequently and with no significant change in credit risk, fair values were based on carrying values resulting in a
Level 3 classification. Fair values for other loans were estimated using discounted cash flow analyses, using interest rates currently
being offered for loans with similar terms to borrowers of similar credit quality resulting in a Level 3 classification. Impaired
loans were valued as described previously.
The fair value of loans held for sale is
based upon estimated values received from independent third party purchasers. These loans are intended for sale and the Company
believes that the fair value is the best indicator of the resolution of these loans resulting in a Level 2 classification.
Deposits:
The fair values disclosed for demand deposits
(e.g., interest and non-interest checking, passbook savings, and certain types of money market accounts) are by definition equal
to the amount payable on demand at the reporting date (i.e., their carrying amount) resulting in a Level 1 classification. The
carrying amounts of variable rate, fixed-term money market accounts and certificates of deposit approximate their fair values at
the reporting date resulting in a Level 1 classification. Fair values for fixed rate certificates of deposit are estimated using
a discounted cash flows calculation that applies interest rates currently being offered on certificates to a schedule of aggregated
expected monthly maturities on time deposits resulting in a Level 2 classification.
Other borrowings, Federal Home Loan Bank advances and Subordinate
debenture:
The fair values of the Company’s
long-term borrowings are estimated using discounted cash flow analyses based on the current borrowing rates for similar types of
borrowing arrangements resulting in a Level 2 classification.
Accrued Interest Receivable/Payable:
The carrying amounts of accrued interest
approximate fair value and are classified by level consistent with the level of the related assets or liabilities.
NOTE 8 - ESOP
Employees participate in an Employee Stock
Ownership Plan (“ESOP”). The ESOP borrowed from the Company to purchase 269,790 shares of the Company’s common
stock at $10 per share. The Company makes discretionary contributions to the ESOP, and pays dividends on unallocated shares to
the ESOP, and the ESOP uses funds it receives to repay the loan. When loan payments are made, ESOP shares are allocated to participants
based on relative compensation and expense is recorded. Dividends on allocated shares increase participant accounts. Participants
receive the shares at the end of employment.
There were no contributions to the ESOP
for the three months ended March 31, 2018 and 2017.
Shares held by the ESOP at March 31, 2018 and December 31, 2017
were as follows (dollars in thousands):
|
|
March 31,
|
|
|
December 31,
|
|
|
|
2018
|
|
|
2017
|
|
Allocated to participants
|
|
|
64,148
|
|
|
|
64,148
|
|
Committed to be released
|
|
|
16,907
|
|
|
|
13,538
|
|
Unearned
|
|
|
182,051
|
|
|
|
185,420
|
|
Total ESOP shares
|
|
|
263,106
|
|
|
|
263,106
|
|
|
|
|
|
|
|
|
|
|
Fair value of unearned shares
|
|
$
|
3,526
|
|
|
$
|
3,894
|
|
NOTE 9 – EARNINGS PER SHARE
The factors used in the earnings per share
computation for the three months ended March 31, 2018 and 2017, were as follows (dollar amounts in thousands, except per share
data):
|
|
Three months ended
|
|
|
|
March 31,
|
|
|
|
2018
|
|
|
2017
|
|
Basic
|
|
|
|
|
|
|
|
|
Net income
|
|
$
|
229
|
|
|
$
|
463
|
|
Less: Earnings allocated to participating securities
|
|
|
2
|
|
|
|
4
|
|
Net income available to common shareholders
|
|
$
|
227
|
|
|
$
|
459
|
|
|
|
|
|
|
|
|
|
|
Weighted average common shares outstanding
|
|
|
3,509,880
|
|
|
|
3,697,374
|
|
Less: Average unallocated ESOP shares
|
|
|
184,253
|
|
|
|
197,792
|
|
Average participating shares
|
|
|
15,222
|
|
|
|
30,471
|
|
Average shares
|
|
|
3,310,405
|
|
|
|
3,469,111
|
|
|
|
|
|
|
|
|
|
|
Basic earnings per common share
|
|
$
|
0.07
|
|
|
$
|
0.13
|
|
|
|
|
|
|
|
|
|
|
Diluted
|
|
|
|
|
|
|
|
|
Net income available to common shareholders
|
|
$
|
227
|
|
|
$
|
459
|
|
|
|
|
|
|
|
|
|
|
Weighted average common shares outstanding for basic earnings per common share
|
|
|
3,310,405
|
|
|
|
3,469,111
|
|
Add: Dilutive effects of assumed exercises of stock options
|
|
|
31,192
|
|
|
|
31,657
|
|
Average shares and dilutive potential common shares
|
|
|
3,341,597
|
|
|
|
3,500,768
|
|
|
|
|
|
|
|
|
|
|
Diluted earnings per common share
|
|
$
|
0.07
|
|
|
$
|
0.13
|
|
There were no stock options considered
antidilutive for the three months ended March 31, 2018 and 2017.
NOTE 10 – STOCK BASED COMPENSATION
On January 8, 2013, the shareholders of
Poage Bankshares, Inc. approved the Poage Bankshares, Inc. 2013 Equity Incentive Plan (the “Plan”) for employees and
directors of the Company. The Plan authorizes the issuance of up to 472,132 shares of the Company’s common stock, with no
more than 134,895 of shares as restricted stock awards and 337,237 as stock options, either incentive stock options or non-qualified
stock options. The exercise price of options granted under the Plan may not be less than the fair market value on the date the
stock option is granted. The compensation committee of the board of directors has sole discretion to determine the amount and to
whom equity incentive awards are granted.
The following table summarizes stock option activity for the
three months ended March 31, 2018:
|
|
|
|
|
Weighted
Average
|
|
|
|
Options
|
|
|
Exercise Price
|
|
|
|
|
|
|
|
|
Outstanding -December 31, 2017
|
|
|
141,850
|
|
|
$
|
14.99
|
|
Granted
|
|
|
-
|
|
|
|
-
|
|
Exercised and settled
|
|
|
-
|
|
|
|
-
|
|
Forfeited
|
|
|
-
|
|
|
|
-
|
|
Outstanding -March 31, 2018
|
|
|
141,850
|
|
|
$
|
14.99
|
|
|
|
|
|
|
|
|
|
|
Fully vested and exercisable at March 31, 2018
|
|
|
103,600
|
|
|
|
|
|
Fully vested and exercisable at December 31, 2017
|
|
|
99,600
|
|
|
|
|
|
Expected to vest in future periods
|
|
|
38,250
|
|
|
|
|
|
Stock options are assumed to be earned
ratably over their respective vesting periods and charged to compensation expense based upon their grant date fair value and the
number of options assumed to be earned. At March 31, 2018, 141,850 options were outstanding and 103,600 options were fully vested
and exercisable with intrinsic value of $621,000 and $454,000, respectively. At December 31, 2017, 141,850 options were outstanding
and 99,600 options were fully vested and exercisable with intrinsic value of $853,000 and $599,000, respectively.
During the three months ended March 31,
2018, 4,000 options vested. Stock-based compensation expense for stock options included in salaries and benefits for the three
months ended March 31, 2018 and 2017 was $18,000 and $18,000, respectively. Total unrecognized compensation cost related to non-vested
stock options was $21,000 at March 31, 2018 and is expected to be recognized over a period of 2.1 years.
The following table summarizes non-vested restricted stock activity
for the three months ended March 31, 2018:
Balance -December 31, 2017
|
|
|
15,222
|
|
Granted
|
|
|
-
|
|
Forfeited
|
|
|
-
|
|
Vested
|
|
|
-
|
|
Balance -March 31, 2018
|
|
|
15,222
|
|
The fair value of the restricted stock
awards is amortized to compensation expense over the vesting period (generally five years) and is based on the market price of
the Company’s common stock at the date of the grant multiplied by the number of shares granted that are expected to vest.
Stock-based compensation expense for the restricted stock included in salaries and benefits for the three months ended March 31,
2018 and 2017 was $58,000 and $58,000, respectively. Unrecognized compensation expense for non-vested restricted stock awards was
$11,000 at March 31, 2018 and is expected to be recognized over a weighted-average period of 8 months.
NOTE 11 – ACCUMULATED OTHER COMPREHENSIVE INCOME
The following table is changes in Accumulated Other Comprehensive
Income by component, net of tax, for the three months ended March 31, 2018 and 2017 (in thousands):
|
|
Unrealized Gains and Losses on
Available-for-Sale Securities
|
|
|
|
Three months ended
|
|
|
|
March 31,
|
|
|
|
2018
|
|
|
2017
|
|
Beginning balance
|
|
$
|
(260
|
)
|
|
$
|
(153
|
)
|
|
|
|
|
|
|
|
|
|
Other comprehensive income (loss), net of tax before reclassification
|
|
|
(659
|
)
|
|
|
285
|
|
|
|
|
|
|
|
|
|
|
Amounts reclassified from accumulated other comprehensive income for loss on call of securities, net of tax expense of $0, and $0 respectively
|
|
|
-
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
Net current period other comprehensive income (loss)
|
|
|
(659
|
)
|
|
|
285
|
|
|
|
|
|
|
|
|
|
|
Ending Balance
|
|
$
|
(919
|
)
|
|
$
|
132
|
|