10-Q 1 npbs11071610q.htm

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

 

FORM 10-Q

 

[X] Quarterly Report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

 

For the quarterly period ended September 30, 2016

 

[ ] Transition Report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

 

For the transition period from ____________ to _____________

 

Commission file number: 000-33411

 

NEW PEOPLES BANKSHARES, INC.

(Exact name of registrant as specified in its charter)

 

     

Virginia

(State or other jurisdiction of

incorporation or organization)

 

 

31-1804543

(I.R.S. Employer

Identification No.)

 
       

67 Commerce Drive

Honaker, Virginia

(Address of principal executive offices)

 

 

24260

(Zip Code)

 
         

 

(Registrant’s telephone number,including area code) (276) 873-7000

 

n/a

(Former name, former address and former fiscal year, if changed since last report)

 

 

 
 

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.

 

         
Yes [X]   No [ ]

 

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).

 

Yes [X]   No [ ]

 

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):

     
Large accelerated filer  [ ]   Accelerated filer  [ ]
Non-accelerated filer  [ ]   Smaller reporting company  [X]

 

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

 

         
Yes [ ]   No [X]

 

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date:

     
Class   Outstanding at November 11, 2016
Common Stock, $2.00 par value   23,354,257

 

 

 
 

NEW PEOPLES BANKSHARES, INC.

 

  INDEX  
     
    Page
PART I FINANCIAL INFORMATION 2
Item 1. Financial Statements 2
  Consolidated Statements of Income – Nine Months  
  Ended September 30, 2016 and 2015 (Unaudited) 2
     
  Consolidated Statements of Income – Three Months  
  Ended September 30, 2016 and 2015 (Unaudited) 4
     
  Consolidated Statements of Comprehensive Income – Three and Nine Months  
  Ended September 30, 2016 and 2015 (Unaudited) 6
     
  Consolidated Balance Sheets – September 30, 2016 (Unaudited) and December 31, 2015 7
     
  Consolidated Statements of Changes in Stockholders’ Equity -  
  Nine Months Ended September 30, 2016 and 2015 (Unaudited) 9
     
  Consolidated Statements of Cash Flows – Nine Months  
  Ended September 30, 2016 and 2015 (Unaudited) 10
     
  Notes to Consolidated Financial Statements 12
     
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations 33
     
Item 3. Quantitative and Qualitative Disclosures about Market Risk 41
     
Item 4. Controls and Procedures 41
     
PART II  OTHER INFORMATION 41
     
Item 1. Legal Proceedings 41
     
Item 1A.  Risk Factors 41
     
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds 41
     
Item 3. Defaults upon Senior Securities 41
     
Item 4. Mine Safety Disclosures 41
     
Item 5. Other Information 41
     
Item 6. Exhibits 41
     
SIGNATURES   42

 

 
 

Part I Financial Information

Item 1 Financial Statements

 

NEW PEOPLES BANKSHARES, INC.

CONSOLIDATED STATEMENTS OF INCOME

FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2016 AND 2015

(IN THOUSANDS EXCEPT SHARE AND PER SHARE DATA)

(UNAUDITED)

         
INTEREST AND DIVIDEND INCOME   2016   2015
Loans including fees   $ 16,910     $ 17,595  
Federal funds sold     —         2  
Interest-earning deposits with banks     67       73  
Investments     1,161       1,306  
Dividends on equity securities (restricted)     99       98  
Total Interest and Dividend Income     18,237       19,074  
                 
INTEREST EXPENSE                
Deposits                
  Demand     37       28  
  Savings     122       129  
  Time deposits below $100,000     808       1,062  
  Time deposits above $100,000     480       735  
FHLB advances     109       113  
Federal funds purchased     2       —    
Trust preferred securities     373       328  
Total Interest Expense     1,931       2,395  
                 
NET INTEREST INCOME     16,306       16,679  
                 
PROVISION FOR LOAN LOSSES     (500 )     (1,200 )
                 
NET INTEREST INCOME AFTER                
PROVISION FOR LOAN LOSSES     16,806       17,879  
                 
NONINTEREST INCOME                
Service charges     1,926       1,667  
Fees, commissions and other income     2,694       2,333  
Insurance and investment fees     404       411  
Net realized gains on sale of investment securities     240       35  
Life insurance investment income     118       316  
Total Noninterest Income     5,382       4,762  
                 
NONINTEREST EXPENSES                
Salaries and employee benefits     9,954       8,816  
Occupancy and equipment expense     3,042       2,767  
Advertising and public relations     332       240  
Data processing and telecommunications     1,726       1,552  
FDIC insurance premiums     407       652  
Other real estate owned and repossessed vehicles, net     599       1,398  
Other operating expenses     4,208       3,822  
Total Noninterest Expenses     20,268       19,247  

 

 

INCOME BEFORE INCOME TAXES     1,920       3,394  
                 
INCOME TAX EXPENSE (BENEFIT)     (6 )     17  
                 
NET INCOME   $ 1,926     $ 3,377  
                 
Income Per Share                
Basic   $ 0.08     $ 0.15  
Fully Diluted   $ 0.08     $ 0.15  
                 
Average Weighted Shares of Common Stock                
Basic     23,354,092       22,878,654  
Fully Diluted     23,354,092       22,878,654  

 

The accompanying notes are an integral part of this statement.

 

 

NEW PEOPLES BANKSHARES, INC.

CONSOLIDATED STATEMENTS OF INCOME

FOR THE THREE MONTHS ENDED SEPTEMBER 30, 2016 AND 2015

(IN THOUSANDS EXCEPT SHARE AND PER SHARE DATA)

(UNAUDITED)

         
         
INTEREST AND DIVIDEND INCOME   2016   2015
Loans including fees   $ 5,732     $ 5,889  
Federal funds sold     —         —    
Interest-earning deposits with banks     23       18  
Investments     334       457  
Dividends on equity securities (restricted)     35       32  
Total Interest and Dividend Income     6,124       6,396  
                 
INTEREST EXPENSE                
Deposits                
  Demand     13       10  
  Savings     44       44  
  Time deposits below $100,000     273       315  
  Time deposits above $100,000     168       213  
FHLB Advances     45       35  
Federal funds purchased     —         —    
Trust Preferred Securities     128       111  
Total Interest Expense     671       728  
                 
NET INTEREST INCOME     5,453       5,668  
                 
PROVISION FOR LOAN LOSSES     —         (1,200 )
                 
NET INTEREST INCOME AFTER                
PROVISION FOR LOAN LOSSES     5,453       6,868  
                 
NONINTEREST INCOME                
Service charges     854       579  
Fees, commissions and other income     1,031       796  
Insurance and investment fees     103       155  
Net realized gains on sale of investment securities     —         —    
Life insurance investment income     55       247  
Total Noninterest Income     2,043       1,777  
                 
NONINTEREST EXPENSES                
Salaries and employee benefits     3,405       2,992  
Occupancy and equipment expense     1,121       905  
Advertising and public relations     99       111  
Data processing and telecommunications     569       550  
FDIC insurance premiums     137       213  
Other real estate owned and repossessed vehicles, net     347       332  
Other operating expenses     1,477       1,235  
Total Noninterest Expenses     7,155       6,338  

 

 

INCOME BEFORE INCOME TAXES     341       2,307  
                 
INCOME TAX EXPENSE (BENEFIT)     (5 )     14  
                 
NET INCOME   $ 346     $ 2,293  
                 
Income Per Share                
Basic   $ 0.01     $ 0.10  
Fully Diluted   $ 0.01     $ 0.10  
                 
Weighted Average Shares of Common Stock                
Basic     23,354,111       22,878,654  
Fully Diluted     23,354,111       22,878,654  

 

The accompanying notes are an integral part of this statement.

 

 

NEW PEOPLES BANKSHARES, INC.

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2016 AND 2015

(IN THOUSANDS)

(UNAUDITED)

 

                 
                 
   

For the three months ended

September 30,

 

For the nine months ended

September 30,

    2016   2015   2016   2015
                 
NET INCOME   $ 346     $ 2,293     $ 1,926     $ 3,377  
                                 
Other comprehensive income (loss):                                
  Investment Securities Activity                                
    Unrealized gains (losses) arising during the period     (70 )     576       1,409       309  
    Tax related to unrealized gains (losses)     24       (196 )     (479 )     (105 )
    Reclassification of realized gains during the period     —         —         (240 )     (35 )
    Tax related to realized gains     —         —         82       12  
TOTAL OTHER COMPREHENSIVE INCOME (LOSS)     (46 )     380       772       181  
TOTAL COMPREHENSIVE INCOME   $ 300     $ 2,673     $ 2,698     $ 3,558  

    

The accompanying notes are an integral part of this statement.

 

NEW PEOPLES BANKSHARES, INC.

CONSOLIDATED BALANCE SHEETS

(IN THOUSANDS EXCEPT PER SHARE AND SHARE DATA)

         
ASSETS   September 30,   December 31,
    2016   2015
    (Unaudited)   (Audited)
                 
Cash and due from banks   $ 16,625     $ 15,087  
Interest-bearing deposits with banks     15,776       11,251  
Federal funds sold     36       —    
Total Cash and Cash Equivalents     32,437       26,338  
                 
Investment securities available-for-sale     74,561       101,642  
                 
Loans receivable     464,721       441,169  
Allowance for loan losses     (6,358 )     (7,493 )
Net Loans     458,363       433,676  
                 
Bank premises and equipment, net     30,259       28,148  
Equity securities (restricted)     2,613       2,441  
Other real estate owned     13,194       12,398  
Accrued interest receivable     1,924       1,816  
Life insurance investments     12,223       12,105  
Deferred taxes, net     4,819       5,121  
Other assets     3,474       2,213  
                 
        Total Assets   $ 633,867     $ 625,898  
                 
LIABILITIES                
                 
Deposits:                
Demand deposits:                
Noninterest bearing   $ 152,930     $ 149,714  
Interest-bearing     40,623       30,251  
Savings deposits     115,007       121,076  
Time deposits     247,956       256,978  
        Total Deposits     556,516       558,019  
                 
Federal Home Loan Bank advances     9,058       2,958  
Accrued interest payable     294       288  
Accrued expenses and other liabilities     2,718       2,050  
Trust preferred securities     16,496       16,496  
                 
Total Liabilities     585,082       579,811  
                 
Commitments and contingencies     —         —    

 

 

STOCKHOLDERS’ EQUITY                
                 
Common stock - $2.00 par value; 50,000,000 shares authorized;     46,708       46,708  
23,354,257 and 23,354,082 shares issued and outstanding at                
September 30, 2016 and December 31, 2015, respectively                
Common stock warrants     764       764  
Additional paid-in-capital     13,965       13,965  
Retained deficit     (13,097 )     (15,023 )
Accumulated other comprehensive income (loss)     445       (327 )
                 
Total Stockholders’ Equity     48,785       46,087  
                 
Total Liabilities and Stockholders’ Equity   $ 633,867     $ 625,898  

 

 

The accompanying notes are an integral part of this statement.

 


NEW PEOPLES BANKSHARES, INC.

CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY

FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2016 AND 2015

(IN THOUSANDS INCLUDING SHARE DATA)

(UNAUDITED)

 

                             
    Shares of Common Stock   Common Stock   Common Stock Warrants   Additional Paid-in- Capital   Retained  Deficit  

Accum-ulated Other

Compre-hensive Income (Loss)

  Total Stockholders’ Equity
                                                         
Balance, December 31, 2014     22,878     $ 45,757     $ 1,176     $ 13,672     $ (17,685 )   $ (69 )   $ 42,851  
                                                         
Net income     —         —         —         —         3,377       —         3,377  
Other comprehensive loss,
net of tax
    —         —         —         —         —         181       181  
Balance, September 30, 2015     22,878     $ 45,757     $ 1,176     $ 13,672     $ (14,308 )   $ 112     $ 46,409  
                                                         
Balance, December 31, 2015     23,354     $ 46,708     $ 764     $ 13,965     $ (15,023 )   $ (327 )   $ 46,087  
                                                         
Net income     —         —         —         —         1,926       —         1,926  
                                                         
Other comprehensive income,
net of tax
    —         —         —         —         —         772       772  
Balance, September 30, 2016*     23,354     $ 46,708     $ 764     $ 13,965     $ (13,097 )   $ 445     $ 48,785  
                                                         

 

 

*During the third quarter of 2016, 175 shares of common stock were issued in connection with common stock warrants being exercised.

 

 

NEW PEOPLES BANKSHARES, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2016 AND 2015

(IN THOUSANDS)

(UNAUDITED)

 

         
    2016   2015
CASH FLOWS FROM OPERATING ACTIVITIES                
Net income   $ 1,926     $ 3,377  
Adjustments to reconcile net income to net cash                
provided by operating activities:                
Depreciation     1,815       1,571  
Provision for loan losses     (500 )     (1,200 )
Income on life insurance     (118 )     (316 )
Gain on sale of securities available-for-sale     (240 )     (35 )
Gain on sale of premises and equipment     (67 )     (67 )
Gain on sale of foreclosed assets     (290 )     (10 )
Net write-down of carrying value of foreclosed real estate     165       784  
Accretion of bond premiums/discounts     711       867  
Deferred tax benefit     (95 )     —    
Net change in:                
Interest receivable     (108 )     140  
Other assets     (1,261 )     110  
Accrued interest payable     6       35  
Accrued expenses and other liabilities     668       550  
Net Cash Provided by Operating Activities     2,612       5,806  
                 
CASH FLOWS FROM INVESTING ACTIVITIES                
Net (increase) decrease in loans     (27,362 )     15,686  
Purchase of securities available-for-sale     (9,708 )     (25,202 )
Proceeds from sales and maturities of securities available-for-sale     37,487       22,330  
Net Purchase of equity securities (restricted)     (172 )     (72 )
Payments for the purchase of premises and equipment     (4,469 )     (1,325 )
Payments for the purchase of other real estate owned     —         (5 )
Payments for premiums on life insurance investments     —         (65 )
Proceeds from life insurance investment     —         1,793  
Proceeds from sales of premises and equipment     735       181  
Proceeds from insurance on other real estate owned     —         57  
Proceeds from sales of other real estate owned     2,379       1,084  
Net Cash Provided by (Used in) Investing Activities     (1,110 )     14,462  
                 
CASH FLOWS FROM FINANCING ACTIVITIES                
Net increase (decrease) in Federal Home Loan Bank advances     6,100       (900 )
Net change in:                
Demand deposits     13,588       2,064  
Savings deposits     (6,069 )     11,129  
Time deposits     (9,022 )     (33,762 )
Net Cash Provided by (Used in) Financing Activities     4,597       (21,469 )
                 

 

 

Net increase (decrease) in cash and cash equivalents     6,099       (1,201 )
Cash and Cash Equivalents, Beginning of Period     26,338       35,560  
Cash and Cash Equivalents, End of Period   $ 32,437     $ 34,359  
                 
Supplemental Disclosure of Cash Paid During the Period for:                
     Interest   $ 1,925     $ 2,360  
     Taxes   $ 95     $ —    
                 
Supplemental Disclosure of Non Cash Transactions:                
     Other real estate acquired in settlement of foreclosed loans   $ 3,851     $ 2,249  
     Loans made to finance sale of foreclosed real estate   $ 676     $ 193  
     Transfer of other real estate to premises and equipment   $ 125     $ —    
     Change in unrealized gains on securities available-for-sale   $ 1,169     $ 274  

  

The accompanying notes are an integral part of this statement.

 

NEW PEOPLES BANKSHARES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

 

NOTE 1 NATURE OF OPERATIONS:

 

New Peoples Bankshares, Inc. (“The Company”) is a financial holding company whose principal activity is the ownership and management of a community bank. New Peoples Bank, Inc. (“Bank”) was organized and incorporated under the laws of the Commonwealth of Virginia on December 9, 1997. The Bank commenced operations on October 28, 1998, after receiving regulatory approval. As a state-chartered member bank, the Bank is subject to regulation by the Virginia Bureau of Financial Institutions, the Federal Deposit Insurance Corporation and the Federal Reserve Bank. The Bank provides general banking services to individuals, small and medium size businesses and the professional community of southwestern Virginia, southern West Virginia, and eastern Tennessee. On June 9, 2003, the Company formed two wholly-owned subsidiaries; NPB Financial Services, Inc. and NPB Web Services, Inc. On July 7, 2004 the Company established NPB Capital Trust I for the purpose of issuing trust preferred securities. On September 27, 2006, the Company established NPB Capital Trust 2 for the purpose of issuing additional trust preferred securities. NPB Financial Services, Inc. was a subsidiary of the Company until January 1, 2009 when it became a subsidiary of the Bank. In June 2012 the name of NPB Financial Services, Inc. was changed to NPB Insurance Services, Inc. which operates solely as an insurance agency. On March 4, 2016 the Federal Reserve Bank of Richmond approved the Company’s election to become a financial holding company. In July 2016, the Bank and its wholly-owned subsidiary NPB Insurance Services, Inc. announced by press release it is teaming up with The Hilb Group of Virginia dba CSE Insurance Services, a division of the Hilb Group, LLC (“CSE”), located in Abingdon, Virginia, to provide insurance services for its current and future customers. Effective July 1, 2016, NPB Insurance Services, Inc. sold its existing book of business to CSE. These customers will be serviced by CSE and the Bank will refer future insurance needs of its bank customers to CSE.

 

NOTE 2 ACCOUNTING PRINCIPLES:

 

These consolidated financial statements conform to U. S. generally accepted accounting principles and to general industry practices. In the opinion of management, the accompanying consolidated financial statements contain all adjustments (consisting of only normal recurring accruals) necessary to present fairly the Company’s financial position at September 30, 2016 and December 31, 2015, and the results of operations for the three and nine month periods ended September 30, 2016 and 2015. The notes included herein should be read in conjunction with the notes to the consolidated financial statements included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2015. The results of operations for the three and nine month periods ended September 30, 2016 and 2015 are not necessarily indicative of the results to be expected for the full year.

 

The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. The determination of the adequacy of the allowance for loan losses and the determination of the deferred tax asset and related valuation allowance are based on estimates that are particularly susceptible to significant changes in the economic environment and market conditions.

 

NOTE 3 FORMAL WRITTEN AGREEMENT:

 

The Company and the Bank had previously entered into the Written Agreement with the Federal Reserve Bank of Richmond and the Virginia State Corporation Commission Bureau of Financial Institutions under which the Company and the Bank were required to take certain actions and implement certain plans. On February 2, 2016, the Company and the Bank announced that they had successfully complied with all of the requirements of the Written Agreement and accordingly, effective January 20, 2016, the agreement had been terminated.

 

 

NOTE 4 CAPITAL:

 

Capital Requirements and Ratios

 

The Bank is subject to various capital requirements administered by federal banking agencies. Failure to meet minimum capital requirements can initiate certain mandatory and, possibly, additional discretionary actions by regulators that, if undertaken, could have a direct material effect on the Bank’s financial statements. Under capital adequacy guidelines and the regulatory framework for prompt corrective action, the Bank must meet specific capital guidelines that involve quantitative measures of assets, liabilities, and certain off-balance sheet items as calculated under regulatory accounting practices. The capital amounts and classification are also subject to qualitative judgments by the regulators about components, risk weightings, and other factors.

 

Quantitative measures established by regulation to ensure capital adequacy require the Bank to maintain minimum amounts and ratios (set forth in the following table) of total and Tier 1 capital (as defined) to risk-weighted assets (as defined), Tier 1 capital (as defined) to average assets (as defined), and Common Equity Tier 1 capital (as defined) to risk-weighted assets (as defined). As of September 30, 2016, the Bank meets all capital adequacy requirements to which it is subject.

 

The Company meets eligibility criteria of a small bank holding company in accordance with the Federal Reserve Board’s Small Bank Holding Company Policy Statement issued in February 2015, and is no longer obligated to report consolidated regulatory capital. The Bank continues to be subject to various capital requirements administered by banking agencies. The Bank’s actual capital amounts and ratios are presented in the following table as of September 30, 2016 and December 31, 2015, respectively. These ratios comply with Federal Reserve rules to align with the Basel III Capital requirements effective January 1, 2015.

                         
    Actual   Minimum Capital Requirement   Minimum to Be Well Capitalized Under Prompt Corrective Action Provisions
(Dollars are in thousands)   Amount   Ratio   Amount   Ratio   Amount   Ratio
September 30, 2016:
Total Capital to Risk Weighted Assets:
New Peoples Bank, Inc.     68,259       16.98 %   $ 32,168       8.0 %     40,209       10.0 %
Tier 1 Capital to Risk Weighted Assets:                                                
New Peoples Bank, Inc.     63,216       15.72 %     24,126       6.0 %     32,168       8.0 %
Tier 1 Capital to Average Assets:                                                
New Peoples Bank, Inc.     63,216       10.00 %     25,287       4.0 %     31,609       5.0 %
Common Equity Tier 1 Capital
to Risk Weighted Assets:
                                               
New Peoples Bank, Inc.     63,216       15.72 %     18,094       4.5 %     26,136       6.5 %
                                                 
 December 31, 2015:                                                
Total Capital to Risk Weighted Assets:                                                
New Peoples Bank, Inc.     65,713       17.55 %   $ 29,954       8.0 %     37,443       10.0 %
Tier 1 Capital to Risk Weighted Assets:                                                
New Peoples Bank, Inc.     60,998       16.29 %     22,466       6.0 %     29,954       8.0 %
Tier 1 Capital to Average Assets:                                                
New Peoples Bank, Inc.     60,998       9.67 %     25,239       4.0 %     31,549       5.0 %
Common Equity Tier 1 Capital
to Risk Weighted Assets:
                                               
New Peoples Bank, Inc.     60,998       16.29 %     16,849       4.5 %     24,338       6.5 %

 

 

As of September 30, 2016, the Bank was well capitalized under the regulatory framework for prompt corrective action. To be categorized as well capitalized, an institution must maintain minimum total risk-based, Tier 1 risk-based, Tier 1 leverage, and Common Equity Tier 1 ratios as set forth in the above tables. There are no conditions or events since the notification that management believes have changed the Bank’s category.

 

Beginning January 1, 2016, a capital conservation buffer of 0.625% became effective. The capital conservation buffer will be gradually increased through January 1, 2019 to 2.5%. Banks will be required to maintain levels that meet the required minimum plus the capital conservation buffer in order to make distributions, such as dividends, or discretionary bonus payments.


NOTE 5 INVESTMENT SECURITIES:

 

The amortized cost and estimated fair value of securities (all available-for-sale (“AFS”)) are as follows:

 

                 
  Gross   Gross   Approximate
  Amortized   Unrealized   Unrealized   Fair
(Dollars are in thousands) Cost   Gains   Losses   Value
September 30, 2016
U.S. Government Agencies $ 26,995 $ 314 $ 51 $ 27,258
Taxable municipals 2,401 73 - 2,474
Corporate bonds 3,100 186 - 3,286
Mortgage backed securities 41,392 239 88 41,543
Total Securities AFS $ 73,888 $ 812 $ 139 $ 74,561
 
December 31, 2015
U.S. Government Agencies $ 41,488 $ 244 $ 209 $ 41,523
Taxable municipals 3,337 5 61 3,281
Corporate bonds 1,944 15 20 1,939
Mortgage backed securities 55,369 41 511 54,899
Total Securities AFS $ 102,138 $ 305 $ 801 $ 101,642

 

The following table details unrealized losses and related fair values in the available-for-sale portfolio. This information is aggregated by the length of time that individual securities have been in a continuous unrealized loss position as of September 30, 2016 and December 31, 2015.

 

                         
    Less than 12 Months   12 Months or More   Total
(Dollars are in thousands)   Fair Value   Unrealized
Losses
  Fair
Value
  Unrealized
Losses
  Fair
Value
  Unrealized
Losses
September 30, 2016                        
U.S. Government Agencies   $ 3,724     $ 42     $ 1,794     $ 9     $ 5,518     $ 51  
Mtg. backed securities     7,915       45       4,938       43       12,853       88  
Total Securities AFS   $ 11,639     $ 87     $ 6,732     $ 52     $ 18,371     $ 139  
                                                 
December 31, 2015                                                
U.S. Government Agencies   $ 14,995     $ 81     $ 7,708     $ 128     $ 22,073     $ 209  
Taxable municipals     2,136       57       278       4       2,414       61  
Corporate bonds     923       20       —         —         923       20  
Mtg. backed securities     38,945       354       8,719       157       47,664       511  
Total Securities AFS   $ 56,999     $ 512     $ 16,705     $ 289     $ 73,074     $ 801  

 

 

At September 30, 2016, the available-for-sale portfolio included forty two investments for which the fair market value was less than amortized cost. At December 31, 2015, the available-for-sale portfolio included one hundred and thirty four investments for which the fair market value was less than amortized cost. Management evaluates securities for other-than-temporary impairment at least on a quarterly basis, or more frequently when economic or market concerns warrant such evaluation. Consideration is given to (1) the length of time and the extent to which the fair value has been less than cost, (2) the financial conditions 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. Based on the Company’s analysis, the Company concluded that no securities had an other-than-temporary impairment.

 

Investment securities with a carrying value of $11.8 million and $15.4 million at September 30, 2016 and December 31, 2015, respectively, were pledged as collateral to secure public deposits and for other purposes required by law.

 

Gross proceeds on the sale of investment securities were $24.8 million and $7.1 million, respectively, for the nine months ended September 30, 2016 and 2015. Gross realized gains and losses pertaining to the sale of investment securities available for sale are detailed as follows:

 

                 
    For the three months
ended September 30,
  For the nine months
ended September 30,
(Dollars are in thousands)   2016   2015   2016   2015
Gross gains realized   $ —       $ —       $ 275     $ 62  
Gross losses realized     —         —         (35 )     (27 )
Net realized gains   $ —       $ —       $ 240     $ 35  

 

The amortized cost and fair value of investment securities at September 30, 2016, by contractual maturity, are shown in the following schedule. Expected maturities will differ from contractual maturities because borrowers may have the right to call or prepay obligations with or without call or prepayment penalties.

             
  Weighted
(Dollars are in thousands) Amortized   Fair   Average
Securities Available-for-Sale Cost   Value   Yield
Due in one year or less $ 1,221 $ 1,225   0.91%
Due after one year through five years 656 657 1.84%
Due after five years through ten years   12,836   13,107   2.50%
Due after ten years   59,175   59,572   1.80%
Total $ 73,888 $ 74,561   1.91%

 

The Bank, as a member of the Federal Reserve Bank and the Federal Home Loan Bank, is required to hold stock in each. The Bank also owns stock in CBB Financial Corp., which is a correspondent of the Bank. These equity securities are restricted from trading and are recorded at a cost of $2.6 million and $2.4 million as of September 30, 2016 and December 31, 2015, respectively.

 

NOTE 6 LOANS:

 

Loans receivable outstanding are summarized as follows:

 

 

         
(Dollars are in thousands)   September 30, 2016   December 31, 2015
Real estate secured:                
Commercial   $ 102,997     $ 98,569  
Construction and land development     22,749       14,672  
Residential 1-4 family     248,042       242,916  
Multifamily     13,205       12,954  
Farmland     23,828       22,174  
Total real estate loans     410,821       391,285  
Commercial     26,246       21,469  
Agriculture     4,459       3,793  
Consumer installment loans     23,177       24,568  
All other loans     18       54  
Total loans   $ 464,721     $ 441,169  

 

Loans receivable on nonaccrual status are summarized as follows:

         
         
(Dollars are in thousands)   September 30, 2016   December 31, 2015
Real estate secured:                
Commercial   $ 3,671     $ 4,358  
Construction and land development     354       436  
Residential 1-4 family     8,145       8,338  
Multifamily     169       430  
Farmland     930       1,170  
Total real estate loans     13,269       14,732  
Commercial     3       65  
Agriculture     83       9  
Consumer installment loans     93       41  
All other loans     —         —    
Total loans receivable on nonaccrual status   $ 13,448     $ 14,847  

 

Total interest income not recognized on nonaccrual loans for the nine months ended September 30, 2016 and 2015 was $397 thousand and $486 thousand, respectively.

 

The following table presents information concerning the Company’s investment in loans considered impaired as of September 30, 2016 and December 31, 2015:

 

             

 

 

As of September 30, 2016

(Dollars are in thousands)

Recorded
Investment
  Unpaid Principal Balance   Related
Allowance
With no related allowance recorded:                      
Real estate secured:                      
Commercial   3,533     $ 3,959     $ —    
Construction and land development   7       7       —    
Residential 1-4 family   3,590       3,888       —    
Multifamily   305       346       —    
Farmland   4,358       5,050       —    
Commercial   —         —         —    
Agriculture   19       19       —    
Consumer installment loans   —         —         —    
All other loans   —         —         —    
With an allowance recorded:                      
Real estate secured:                      
Commercial   1,589       1,680       172  
Construction and land development   253       477       119  
Residential 1-4 family   644       652       88  
Multifamily   —         —         —    
Farmland   502       512       293  
Commercial   67       67       19  
Agriculture   8       8       8  
Consumer installment loans   53       53       20  
All other loans   —         —         —    
Total   14,928     $ 16,718     $ 719  

 

 

As of December 31, 2015

(Dollars are in thousands)

 

 

 

Recorded

Investment

     

 

Unpaid Principal Balance

     

 

 

Related

Allowance

 
With no related allowance recorded:                      
Real estate secured:                      
Commercial   4,212     $ 5,173     $ —    
Construction and land development   10       10       —    
Residential 1-4 family   3,037       3,150       —    
Multifamily   430       471       —    
Farmland   3,983       4,620       —    
Commercial   —         —         —    
Agriculture   36       36       —    
Consumer installment loans   11       11       —    
All other loans   —         —         —    
With an allowance recorded:                      
Real estate secured:                      
Commercial   2,503       2,849       288  
Construction and land development   289       499       155  
Residential 1-4 family   1,920       2,121       168  
Multifamily   —         —         —    
Farmland   761       778       328  
Commercial   69       69       24  
Agriculture   18       18       18  
Consumer installment loans   45       45       2  
All other loans   —         —         —    
Total   17,324     $ 19,850     $ 983  

 

 

  

The following table presents information concerning the Company’s average impaired loans and interest recognized on those impaired loans, for the periods indicated:

                 
    Nine Months Ended
    September 30, 2016   September 30, 2015

 

 

(Dollars are in thousands)

  Average
Recorded
Investment
  Interest
Income
Recognized
  Average
Recorded
Investment
  Interest
Income
Recognized
With no related allowance recorded:                                
Real estate secured:                                
Commercial   $ 4,222     $ 77     $ 4,615     $ 102  
Construction and land development     89       —         13       1  
Residential 1-4 family     3,716       140       3,623       140  
Multifamily     288       14       543       5  
Farmland     4,211       163       5,346       94  
Commercial     —         —         333       —    
Agriculture     29       2       44       3  
Consumer installment loans     24       —         36       4  
All other loans     —         —         —         —    
With an allowance recorded:                                
Real estate secured:                                
Commercial     1,539       6       3,043       58  
Construction and land development     271       —         394       —    
Residential 1-4 family     939       18       2,294       84  
Multifamily     100       —         28       —    
Farmland     572       18       942       28  
Commercial     71       2       83       3  
Agriculture     107       1       26       1  
Consumer installment loans     30       1       13       —    
All other loans     —         —         —         —    
Total   $ 16,208     $ 442     $ 21,376     $ 523  
                                 

 

 

    Three Months Ended
    September 30, 2016   September 30, 2015

 

 

(Dollars are in thousands)

  Average
Recorded
Investment
  Interest
Income
Recognized
  Average
Recorded
Investment
  Interest
Income
Recognized
With no related allowance recorded:                                
Real estate secured:                                
Commercial   $ 3,965     $ 4     $ 4,916     $ 43  
Construction and land development     7       —         12       1  
Residential 1-4 family     3,833       37       3,674       47  
Multifamily     307       3       434       3  
Farmland     4,274       61       4,963       42  
Commercial     —         —         105       (2 )
Agriculture     23       —         36       —    
Consumer installment loans     22       (2 )     59       1  
All other loans     —         —         —         —    
With an allowance recorded:                                
Real estate secured:                                
Commercial     1,309       6       2,411       18  
Construction and land development     259       —         407       —    
Residential 1-4 family     606       7       2,162       31  
Multifamily     83       (4 )     —         —    
Farmland     504       6       781       9  
Commercial     68       —         82       1  
Agriculture     97       3       23       —    
Consumer installment loans     32       1       —         —    
All other loans     —         —         —         —    
Total   $ 15,389     $ 122     $ 20,065     $ 194  

 

An age analysis of past due loans receivable was as follows:

 

 

 

 

 

 

As of September 30, 2016

(Dollars are in thousands)

  Loans
30-59
Days
Past
Due
  Loans
60-89
Days
Past
Due
  Loans
90 or
More
Days
Past
Due
  Total
Past
Due
Loans
  Current
Loans
  Total
Loans
  Accruing
Loans
90 or
More
Days
Past
Due
Real estate secured:                                                        
Commercial   $ 747     $ 305     $ 1,819     $ 2,871     $ 100,126     $ 102,997     $ —    
Construction and land
development
    100       —         64       164       22,585       22,749       —    
Residential 1-4 family     4,099       1,312       1,669       7,080       240,962       248,042       —    
Multifamily     1,720       —         67       1,787       11,418       13,205       —    
Farmland     82       —         —         82       23,746       23,828       —    
Total real estate loans     6,748       1,617       3,619       11,984       398,837       410,821       —    
Commercial     —         —         —         —         26,246       26,246       —    
Agriculture     15       —         79       94       4,365       4,459       —    
Consumer installment
Loans
    91       —         68       159       23,018       23,177       —    
All other loans     —         —         —         —         18       18       —    
Total loans   $ 6,854     $ 1,617     $ 3,766     $ 12,237     $ 452,484     $ 464,721     $ —    

 

 

 

 

 

 

 

As of December 31, 2015

(Dollars are in thousands)

  Loans
30-59
Days
Past
Due
  Loans
60-89
Days
Past
Due
  Loans
90 or
More
Days
Past
Due
  Total
Past
Due
Loans
  Current
Loans
  Total
Loans
  Accruing
Loans
90 or
More
Days
Past
Due
Real estate secured:                                                        
Commercial   $ 311     $ 105     $ 2,534     $ 2,950     $ 95,619     $ 98,569     $ —    
Construction and land
development
    144       —         17       161       14,511       14,672       —    
Residential 1-4 family     4,694       1,487       2,891       9,072       233,844       242,916       —    
Multifamily     47       —         320       367       12,587       12,954       —    
Farmland     363       —         251       614       21,560       22,174       —    
Total real estate loans     5,559       1,592       6,013       13,164       378,121       391,285       —    
Commercial     18       1       64       83       21,386       21,469       —    
Agriculture     —         —         —         —         3,793       3,793       —    
Consumer installment
Loans
    113       1       27       141       24,427       24,568       —    
All other loans     6       —         —         6       48       54       —    
Total loans   $ 5,696     $ 1,594     $ 6,104     $ 13,394     $ 427,775     $ 441,169     $ —