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Section 1: 8-K/A (8-K/A)

tbk-8ka_20181105.htm

 

 

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

Washington, D.C.  20549

 

FORM 8-K/A

AMENDMENT NO. 1

 

 

CURRENT REPORT

PURSUANT TO SECTION 13 OR 15(D)

OF THE SECURITIES EXCHANGE ACT OF 1934

Date of Report (Date of earliest event reported):  September 7, 2018

 

Triumph Bancorp, Inc.

(Exact name of registrant as specified in its charter)

 

Texas

001-36722

20-0477066

(State or other jurisdiction
of incorporation)

(Commission File No.)

(I.R.S. Employer Identification No.)

 

12700 Park Central Drive, Suite 1700

 

Dallas, Texas

75251

(Address of principal executive offices)

(Zip Code)

 

 

(214) 365-6900

(Registrant’s telephone number, including area code)  

(Former name or former address, if changed since last report)

 

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2 below):

Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2b)

Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4c)

Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (17 CFR 230.405) or Rule 12b-2 of the Securities Exchange Act of 1934 (17 CFR 240.12b-2).

Emerging growth company  

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.  

 

 

 

 

 

 

 


 

As previously disclosed, on September 7, 2018, Triumph Bancorp, Inc. (the “Company”) completed its previously announced acquisitions of First Bancorp of Durango, Inc. (“FBD”) and Southern Colorado Corp. (“SCC”). This Current Report on Form 8-K/A (Amendment No. 1) (this “Report”) amends and supplements the Current Report on Form 8-K filed by the Company with the Securities and Exchange Commission (the “SEC”) on September 7, 2018 to include under Item 9.01 the required financial statements of businesses acquired and pro forma financial information relating to the acquisitions.

Item 9.01 Financial Statement and Exhibits.

 

(a)

Financial statements of businesses acquired

 

(i)

The audited consolidated balance sheets of FBD as of December 31, 2017 and 2016, and the related consolidated statements of income, comprehensive income, stockholders’ equity, and cash flows for the years then ended, and the related notes and independent auditor’s report thereto, are included as Exhibit 99.1 and incorporated by reference herein.

 

(ii)

The audited consolidated statement of financial condition of SCC as of December 31, 2017, and the related consolidated statements of income, comprehensive income, changes in stockholders’ equity, and cash flows for the year then ended, and the related notes and independent auditor’s report thereto, are included as Exhibit 99.2 and incorporated by reference herein.

 

(iii)

The unaudited consolidated balance sheets of FBD as of June 30, 2018 and the related consolidated statements of income, comprehensive income, changes in stockholders’ equity, and cash flows for the six months ended June 30, 2018 and 2017, and the related notes thereto, are included as Exhibit 99.3 and incorporated by reference herein.

 

(iv)

The unaudited consolidated balance sheets of SCC as of June 30, 2018 and the related consolidated statements of income, comprehensive income, changes in stockholders’ equity, and cash flows for the six months ended June 30, 2018 and 2017, and the related notes thereto, are included as Exhibit 99.4 and incorporated by reference herein.

 

(b)

Pro forma financial information

 

(i)

The unaudited pro forma combined balance sheets as of June 30, 2018 and the unaudited pro forma combined statements of income for the six months ended June 30, 2018 and the year ended December 31, 2017, and the related notes thereto, are included as Exhibit 99.5 and incorporated by reference herein.

Forward-Looking Statements

This Report may contain forward-looking statements within the meaning of the federal securities laws.  Investors are cautioned that such statements, including statements with respect to the expected benefits of the transactions, are predictions and that actual events or results may differ materially. These forward-looking statements are not guarantees of future results and are subject to factors that could cause actual results to differ materially from those we may expect, including, but not limited to: economic, political and market conditions and fluctuations; competition; the possibility that the expected benefits related to the transactions may not materialize as expected; and other factors identified in our filings with the SEC.  For a discussion of such risks and uncertainties, which could cause actual results to differ from those contained in the forward-looking statements, see “Risk Factors” and the forward-looking statement disclosure contained in the Company’s Annual Report on Form 10-K, filed with the SEC on February 13, 2018.  Forward-looking statements speak only as of the date made and the Company undertakes no duty to update such information.

 


 

(d)Exhibits

Exhibit No.

 

Description

23.1

 

Consent of Fortner, Bayens, Levkulich, & Garrison, P.C.

23.2

 

Consent of Fortner, Bayens, Levkulich, & Garrison, P.C.

99.1

 

Audited Consolidated Financial Statements of First Bancorp of Durango, Inc. as of and for the years ended December 31, 2017 and 2016

99.2

 

Audited Consolidated Financial Statements of Southern Colorado Corp. as of and for the year ended December 31, 2017

99.3

 

Unaudited Consolidated Financial Statements of First Bancorp of Durango, Inc. as of June 30, 2018 and for the six months ended June 30, 2018 and 2017

99.4

 

Unaudited Consolidated Financial Statements of Southern Colorado Corp. as of June 30, 2018 and for the six months ended June 30, 2018 and 2017

99.5

 

Unaudited Pro Forma Combined Financial Statements

 

 


 


 

EXHIBIT INDEX

Exhibit No.

 

Description

23.1

 

Consent of Fortner, Bayens, Levkulich, & Garrison, P.C.

23.2

 

Consent of Fortner, Bayens, Levkulich, & Garrison, P.C.

99.1

 

Audited Consolidated Financial Statements of First Bancorp of Durango, Inc. as of and for the years ended December 31, 2017 and 2016

99.2

 

Audited Consolidated Financial Statements of Southern Colorado Corp. as of and for the year ended December 31, 2017

99.3

 

Unaudited Consolidated Financial Statements of First Bancorp of Durango, Inc. as of June 30, 2018 and for the six months ended June 30, 2018 and 2017

99.4

 

Unaudited Consolidated Financial Statements of Southern Colorado Corp. as of June 30, 2018 and for the six months ended June 30, 2018 and 2017

99.5

 

Unaudited Pro Forma Combined Financial Statements

 


 


 

SIGNATURE

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, hereunto duly authorized.

 

 

 

 

 

 

 

 

 

 

TRIUMPH BANCORP, INC.

 

 

 

 

By:

/s/ Adam D. Nelson

 

 

Name: Adam D. Nelson

Title: Executive Vice President and General Counsel

 

Date: November 5, 2018

 

(Back To Top)

Section 2: EX-23.1 (EX-23.1)

tbk-ex231_11.htm

Exhibit 23.1

 

Consent of Independent Registered Public Accounting Firm

 

 

We consent to the incorporation by reference in the Registration Statements on Form S-3 (333-223411) and on Form S-8 (No. 333-200456) of Triumph Bancorp, Inc. of our report dated March 23, 2018, with respect to the consolidated balance sheets of First Bancorp of Durango, Inc. and Subsidiaries as of December 31, 2017 and 2016, and the related consolidated statements of income, comprehensive income, stockholders’ equity, and cash flows for the years then ended, which report is included in the Form 8-K/A of Triumph Bancorp, Inc. filed on November 5, 2018.

 

 

 

/s/ Fortner, Bayens, Levkulich, & Garrison, P.C.

 

Denver, Colorado

November 5, 2018

 

(Back To Top)

Section 3: EX-23.2 (EX-23.2)

tbk-ex232_295.htm

Exhibit 23.2

 

Consent of Independent Registered Public Accounting Firm

 

 

We consent to the incorporation by reference in the Registration Statements on Form S-3 (333-223411) and on Form S-8 (No. 333-200456) of Triumph Bancorp, Inc. of our report dated July 10, 2018, with respect to the consolidated statement of financial condition of Southern Colorado Corp. and Subsidiary as of December 31, 2017, and the related consolidated statements of income, comprehensive income, changes in stockholders’ equity and cash flows for the year then ended, which report is included in the Form 8-K/A of Triumph Bancorp, Inc. filed on November 5, 2018.

 

 

 

/s/ Fortner, Bayens, Levkulich, & Garrison, P.C.

 

Denver, Colorado

November 5, 2018

 

 

(Back To Top)

Section 4: EX-99.1 (EX-99.1)

tbk-ex991_1183.htm

 

Exhibit 99.1

 

 

 

CONSOLIDATED FINANCIAL STATEMENTS

AND INDEPENDENT AUDITORS' REPORT

 

First Bancorp of Durango, Inc. and Subsidiaries

 

December 31, 2017 and 2016

 

 

 

 

 


 

 

 

INDEPENDENT AUDITORS' REPORT

 

Board of Directors

First Bancorp of Durango, Inc.

Inverness, Illinois

 

 

We have audited the accompanying consolidated financial statements of First Bancorp of Durango, Inc. and Subsidiaries, which are comprised of  the consolidated balance sheets as of  December 31, 2017 and 2016, and the related consolidated statements of income, comprehensive income, stockholders’ equity and cash flows for the years then ended, and the related notes to the consolidated financial statements.

 

Management’s Responsibility for the Consolidated Financial Statements

Management is responsible for the preparation and fair presentation of these financial statements in accordance with accounting principles generally accepted in the United States of America; this includes the design, implementation and maintenance of internal control relevant to the preparation and fair presentation of financial statements that are free from material misstatement, whether due to fraud or error.

 

Auditors’ Responsibility

Our responsibility is to express an opinion on these financial statements based on our audits.  We conducted our audits in accordance with auditing standards generally accepted in the United States of America.  Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free from material misstatement.

 

An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements.  The procedures selected depend on the auditor's judgment, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the entity's preparation and fair presentation of the financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity's internal control. Accordingly, we express no such opinion. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of significant accounting estimates made by management, as well as evaluating the overall presentation of the financial statements.

 

We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion.

 

Opinion

In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of First Bancorp of Durango, Inc. and Subsidiaries at December 31, 2017 and 2016 and the results of their operations and their cash flows for the years then ended, in conformity with accounting principles generally accepted in the United States of America.

 


 


 

Report on Consolidating Information

Our audits were conducted for the purpose of forming an opinion on the 2017 and 2016 consolidated financial statements as a whole.  The accompanying consolidating schedules on pages 40 through 43 are presented for purposes of additional analysis of the consolidated financial statements rather than to present the financial position and results of operations of the individual companies, and are not a required part of the consolidated financial statements.  The supplemental consolidating schedules are the responsibility of management and were derived from and relate directly to the underlying accounting and other records used to prepare the consolidated financial statements.  The supplemental consolidating schedules have been subjected to the auditing procedures applied in the audits of the consolidated financial statements and certain additional procedures, including comparing and reconciling the information directly to the underlying accounting records used to prepare the consolidated financial statements and to the consolidated financial statements themselves, and other additional procedures in accordance with auditing standards generally accepted in the United States of America.  In our opinion, the supplemental consolidating schedules are fairly stated in all material respects in relation to the consolidated financial statements as a whole.

 

 

/s/ Fortner, Bayens, Levkulich, & Garrison, P.C.

 

Denver, Colorado

March 23, 2018

 

 


First Bancorp of Durango, Inc. and Subsidiaries

 

CONSOLIDATED BALANCE SHEETS

 

 

 

December 31,

 

 

 

2017

 

 

2016

 

 

 

(in thousands)

 

ASSETS

 

 

 

 

 

 

 

 

Cash and due from banks

 

$

18,204

 

 

$

15,243

 

Interest-bearing deposits

 

 

38,757

 

 

 

73,391

 

Cash and cash equivalents

 

 

56,961

 

 

 

88,634

 

Securities available for sale

 

 

300,820

 

 

 

324,060

 

Nonmarketable equity securities

 

 

825

 

 

 

807

 

Loans held for sale

 

 

2,949

 

 

 

806

 

Loans

 

 

267,708

 

 

 

232,994

 

Less allowance for loan losses

 

 

(4,120

)

 

 

(4,193

)

Total loans

 

 

263,588

 

 

 

228,801

 

Premises and equipment, net

 

 

13,538

 

 

 

13,495

 

Accrued interest receivable

 

 

2,728

 

 

 

2,909

 

Real estate held for sale

 

 

1,882

 

 

 

2,047

 

Intangible assets

 

 

2,154

 

 

 

2,208

 

Other assets

 

 

775

 

 

 

752

 

 

 

$

646,220

 

 

$

664,519

 

LIABILITIES AND STOCKHOLDERS' EQUITY

 

 

 

 

 

 

 

 

Liabilities

 

 

 

 

 

 

 

 

Deposits

 

 

 

 

 

 

 

 

Noninterest-bearing

 

$

106,538

 

 

$

105,400

 

Interest-bearing

 

 

467,474

 

 

 

486,740

 

Total deposits

 

 

574,012

 

 

 

592,140

 

Repurchase agreements

 

 

631

 

 

 

4,372

 

Accrued interest payable

 

 

121

 

 

 

109

 

Federal Home Loan Bank borrowings

 

 

655

 

 

 

688

 

Other liabilities

 

 

2,236

 

 

 

2,159

 

Total liabilities

 

 

577,655

 

 

 

599,468

 

Commitments (notes 5 and 13)

 

 

 

 

 

 

 

 

Stockholders' equity

 

 

 

 

 

 

 

 

Preferred stock - nonvoting cumulative; $100 par value

   100,000 shares authorized, none issued and outstanding

 

 

 

 

 

 

Common stock; no par value, stated value of $16.67 per share;

   90,700 shares authorized; 23,066 shares issued and

   outstanding at December 31, 2017 and 2016

 

 

384

 

 

 

384

 

Additional paid-in capital

 

 

14,068

 

 

 

14,068

 

Retained earnings

 

 

53,999

 

 

 

49,506

 

Note receivable for issuance of common stock

 

 

(471

)

 

 

(475

)

Accumulated other comprehensive income

 

 

585

 

 

 

1,568

 

Total stockholders' equity

 

 

68,565

 

 

 

65,051

 

 

 

$

646,220

 

 

$

664,519

 

 

 

The accompanying notes are an integral part of these consolidated statements.

4

 


First Bancorp of Durango, Inc. and Subsidiaries

 

CONSOLIDATED STATEMENTS OF INCOME

 

 

 

Years Ended December 31,

 

 

 

2017

 

 

2016

 

 

 

(in thousands)

 

Interest income:

 

 

 

 

 

 

 

 

Loans, including fees

 

$

12,704

 

 

$

11,269

 

Taxable investment securities

 

 

2,673

 

 

 

2,359

 

Tax-exempt investment securities

 

 

4,484

 

 

 

4,824

 

Interest-bearing deposits

 

 

532

 

 

 

216

 

Dividends on nonmarketable equity securities

 

 

20

 

 

 

20

 

Total interest income

 

 

20,413

 

 

 

18,688

 

Interest expense:

 

 

 

 

 

 

 

 

Deposits

 

 

920

 

 

 

785

 

Repurchase agreements and federal funds purchased

 

 

2

 

 

 

2

 

Federal Home Loan Bank borrowings

 

 

42

 

 

 

44

 

Total interest expense

 

 

964

 

 

 

831

 

Net interest income

 

 

19,449

 

 

 

17,857

 

Provision (reverse provision) for loan losses

 

 

(17

)

 

 

(443

)

Net interest income after provision for loan losses

 

 

19,466

 

 

 

18,300

 

Noninterest income:

 

 

 

 

 

 

 

 

Service charges on deposit accounts

 

 

1,338

 

 

 

1,332

 

ATM and debit card

 

 

2,019

 

 

 

1,861

 

Mortgage banking

 

 

559

 

 

 

477

 

Investment services

 

 

481

 

 

 

423

 

Net gain (loss) on sale of investment securities

 

 

282

 

 

 

(62

)

Other

 

 

314

 

 

 

306

 

 

 

 

4,993

 

 

 

4,337

 

Noninterest expense:

 

 

 

 

 

 

 

 

Salaries and employee benefits

 

 

9,909

 

 

 

9,145

 

Occupancy and equipment

 

 

2,241

 

 

 

2,029

 

Data processing

 

 

1,166

 

 

 

908

 

ATM and debit card

 

 

960

 

 

 

819

 

Marketing and business development

 

 

617

 

 

 

529

 

Professional and advisory fees

 

 

1,247

 

 

 

1,643

 

Regulatory assessments and deposit insurance

 

 

369

 

 

 

457

 

Foreclosed real estate, net

 

 

49

 

 

 

328

 

Investment services

 

 

311

 

 

 

269

 

Amortization of intangibles

 

 

54

 

 

 

58

 

Other

 

 

1,843

 

 

 

1,882

 

 

 

 

18,766

 

 

 

18,067

 

NET INCOME

 

$

5,693

 

 

$

4,570

 

 

 

The accompanying notes are an integral part of these consolidated statements.

5

 


First Bancorp of Durango, Inc. and Subsidiaries

 

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

 

 

 

Years ended December 31,

 

 

 

2017

 

 

2016

 

 

 

(in thousands)

 

Net income

 

$

5,693

 

 

$

4,570

 

Other comprehensive loss

 

 

 

 

 

 

 

 

Net unrealized losses on securities available for sale

 

 

(701

)

 

 

(1,474

)

Reclassification adjustment for (gains) losses realized in net income

 

 

(282

)

 

 

62

 

Total other comprehensive loss

 

 

(983

)

 

 

(1,412

)

TOTAL COMPREHENSIVE INCOME

 

$

4,710

 

 

$

3,158

 

 

 

The accompanying notes are an integral part of these consolidated statements.

6

 


First Bancorp of Durango, Inc. and Subsidiaries

 

CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

 

Years Ended December 31, 2017 and 2016

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Accumulated

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Additional

 

 

 

 

 

 

Note recievable

 

 

other

 

 

 

 

 

 

 

Common stock

 

 

paid-in

 

 

Retained

 

 

for issuance

 

 

comprehensive

 

 

 

 

 

 

 

Shares

 

 

Amount

 

 

capital

 

 

earnings

 

 

of common stock

 

 

income

 

 

Total

 

 

 

(dollars in thousands)

 

Balance at December 31, 2015

 

 

23,066

 

 

$

384

 

 

$

14,068

 

 

$

46,136

 

 

$

(479

)

 

$

2,980

 

 

$

63,089

 

Loan payments

 

 

 

 

 

 

 

 

 

 

 

 

 

 

4

 

 

 

 

 

 

4

 

Net income

 

 

 

 

 

 

 

 

 

 

 

4,570

 

 

 

 

 

 

 

 

 

4,570

 

Other comprehensive loss

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(1,412

)

 

 

(1,412

)

Cash dividends paid

   ($52.00 per share)

 

 

 

 

 

 

 

 

 

 

 

(1,200

)

 

 

 

 

 

 

 

 

(1,200

)

Balance at December 31, 2016

 

 

23,066

 

 

 

384

 

 

 

14,068

 

 

 

49,506

 

 

 

(475

)

 

 

1,568

 

 

 

65,051

 

Loan payments

 

 

 

 

 

 

 

 

 

 

 

 

 

 

4

 

 

 

 

 

 

4

 

Net income

 

 

 

 

 

 

 

 

 

 

 

5,693

 

 

 

 

 

 

 

 

 

5,693

 

Other comprehensive loss

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(983

)

 

 

(983

)

Cash dividends paid

   ($52.00 per share)

 

 

 

 

 

 

 

 

 

 

 

(1,200

)

 

 

 

 

 

 

 

 

(1,200

)

Balance at December 31, 2017

 

 

23,066

 

 

$

384

 

 

$

14,068

 

 

$

53,999

 

 

$

(471

)

 

$

585

 

 

$

68,565

 

 

 

The accompanying notes are an integral part of these consolidated statements.

7

 


First Bancorp of Durango, Inc. and Subsidiaries

 

CONSOLIDATED STATEMENTS OF CASH FLOWS

 

 

 

Years Ended December 31,

 

 

 

2017

 

 

2016

 

 

 

(in thousands)

 

Cash flows from operating activities

 

 

 

 

 

 

 

 

Net income

 

$

5,693

 

 

$

4,570

 

Adjustments to reconcile net income to net cash provided

   by operating activities

 

 

 

 

 

 

 

 

Net (gain) loss on sale of investment securities

 

 

(282

)

 

 

62

 

Net amortization of investment securities

 

 

3,100

 

 

 

3,862

 

Stock dividend on nonmarketable equity securities

 

 

(6

)

 

 

(6

)

Reverse provision for loan losses

 

 

(17

)

 

 

(443

)

Depreciation and amortization

 

 

1,117

 

 

 

943

 

Net loss on disposition of fixed assets

 

 

5

 

 

 

 

Valuation allowances on real estate held for sale

 

 

 

 

 

257

 

Net loss on sales of real estate held for sale

 

 

35

 

 

 

 

Amortization of intangible assets

 

 

54

 

 

 

58

 

Net change in

 

 

 

 

 

 

 

 

Loans held for sale

 

 

(2,143

)

 

 

(461

)

Other assets and liabilities

 

 

262

 

 

 

424

 

Net cash provided by operating activities

 

 

7,818

 

 

 

9,266

 

Cash flows from investing activities

 

 

 

 

 

 

 

 

Purchases of securities available for sale

 

 

(63,202

)

 

 

(41,984

)

Proceeds from sales of securities available for sale

 

 

4,568

 

 

 

8,619

 

Maturities, calls and prepayments of securities available for sale

 

 

78,073

 

 

 

65,210

 

Purchase of nonmarketable equity securities

 

 

(12

)

 

 

 

Redemption of nonmarketable equity securities

 

 

 

 

 

12

 

Loan originations and principal collections, net

 

 

(34,770

)

 

 

(30,338

)

Purchases of premises and equipment

 

 

(1,180

)

 

 

(1,831

)

Proceeds from sale of real estate held for sale

 

 

130

 

 

 

1,031

 

Net cash provided by (used by) investing activities

 

 

(16,393

)

 

 

719

 

Cash flows from financing activities

 

 

 

 

 

 

 

 

Net change in deposits

 

 

(18,128

)

 

 

17,056

 

Net change in repurchase agreements

 

 

(3,741

)

 

 

734

 

Payments on Federal Home Loan Bank borrowings

 

 

(33

)

 

 

(33

)

Payments on note receivable for issuance of common stock

 

 

4

 

 

 

4

 

Dividends paid

 

 

(1,200

)

 

 

(1,200

)

Net cash provided by (used by) financing activities

 

 

(23,098

)

 

 

16,561

 

Net change in cash and cash equivalents

 

 

(31,673

)

 

 

26,546

 

Cash and cash equivalents at beginning of year

 

 

88,634

 

 

 

62,088

 

Cash and cash equivalents at end of year

 

$

56,961

 

 

$

88,634

 

Supplemental Disclosures of Cash Flow Information:

 

 

 

 

 

 

 

 

Cash paid during the year for interest expense

 

$

952

 

 

$

843

 

 

 

The accompanying notes are an integral part of these consolidated statements.

8

 


First Bancorp of Durango, Inc. and Subsidiaries

 

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

 

December 31, 2017 and 2016

 

 

NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

 

The accounting and reporting policies of First Bancorp of Durango, Inc. and Subsidiaries conform to accounting principles generally accepted in the United States of America and to general practice within the banking industry.  The following is a summary of the significant accounting and reporting policies:

 

Organization and Principles of Consolidation

 

First Bancorp of Durango, Inc. (“FBD”) is a multi-bank holding company that owns 100% of the common stock of The First National Bank of Durango (“FNB") and 100% of the common stock of Bank of New Mexico (“BNM”).  The entities are collectively referred to as "the Company.”  The accompanying consolidated financial statements include the consolidated totals of the accounts of FBD and its subsidiaries.  All significant intercompany accounts and transactions have been eliminated in consolidation.  Certain items in the prior year financial statements were reclassified to conform to the current year presentation.  

 

Nature of Operations

 

The Company provides a full range of banking and mortgage services to individual and business customers, principally in La Plata County, Colorado, and in Cibola, McKinley and Bernalillo Counties, New Mexico.  In 2017, the Company also opened a loan production office in Littleton, Colorado, and closed a branch facility in Milan, New Mexico.  Loan and deposit relationships at the closed branch were transferred to the nearby branch in Grants, New Mexico.  The Company is subject to competition from other financial institutions, and from non-financial institutions that provide financial products and services, for loans and deposit accounts. The Company is also subject to regulation by certain governmental agencies and undergoes periodic examinations by those regulatory agencies.

 

Use of Estimates

 

The financial statements have been prepared in conformity with accounting principles generally accepted in the United States of America.  In preparing the financial statements, management is required to make estimates and assumptions that affect the reported amounts of assets and liabilities as of the date of the balance sheet and revenues and expenses for the period.  Actual results could differ significantly from those estimates.

 

Material estimates that are particularly susceptible to significant change in the near-term relate to the determination of the allowance for loan losses, the valuation of real estate held for sale and the fair value of investment securities.  In connection with the determination of the allowance for loan losses and the valuation of real estate held for sale, management obtains independent appraisals for significant properties and assesses estimated future cash flows from borrowers’ operations and the liquidation of loan collateral.  In connection with the determination of the fair value of investment securities, management obtains valuations from third-party investment accounting service providers except for certain securities internally valued using level 3 inputs (see note 16 on fair value measurement).

 

Management believes that the allowance for loan losses is adequate.  While management uses available information to recognize losses on loans, changes in economic conditions may necessitate revisions in future years.  In addition, various regulatory agencies, as an integral part of their examination process, periodically review the Company's allowance for loan losses.  Such agencies may require the Company to recognize additional losses based on their judgments about information available to them at the time of their examination.

9

 


First Bancorp of Durango, Inc. and Subsidiaries

 

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

 

December 31, 2017 and 2016

 

Significant Group Concentrations of Credit Risk

 

 

 

A majority of the Company's loans are related to real estate.  Borrowers' abilities to honor their loans are dependent upon the continued economic viability of the areas in which the Company lends. Note 4 discusses the types of lending in which the Company engages.  Note 2 discusses the types of securities in which the Company invests.  

 

Cash and Cash Equivalents

 

 

Cash and cash equivalents include cash, transaction accounts at other financial institutions, interest-bearing balances at the Federal Reserve Bank (including reserve requirements and excess reserves), interest-bearing balances at the Federal Home Loan Bank of Topeka and interest-bearing balances at the Federal Home Loan Bank of Dallas. For the Statement of Cash Flows, net cash flows are reported for customer loan and deposit transactions.

 

Balances in transaction accounts at other financial institutions and the Federal Home Loan Banks may exceed amounts covered by federal deposit insurance.  Management regularly evaluates the credit risk associated with other financial institutions and believes that the Company is not exposed to any significant credit risks on cash and cash equivalents.

 

Investment Securities

 

Debt securities are classified as “available for sale.”  Available for sale securities are stated at estimated fair value, with unrealized gains and losses excluded from earnings and reported in other comprehensive income.

 

The amortized cost of debt securities classified as available for sale is adjusted for amortization of purchase premiums and accretion of purchase discounts.  Premiums and discounts are recognized in interest income using the interest method over the terms of the securities or to the call date, if earlier.  Gains and losses on the sale of securities are determined using the specific identification method.

 

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 an impairment charge to 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 is recognized as an impairment charge to earnings, and 2) OTTI related to other factors, which is recognized in other comprehensive income.  The 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.


10

 


First Bancorp of Durango, Inc. and Subsidiaries

 

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

 

December 31, 2017 and 2016

 

Nonmarketable Equity Securities

 

The Company, as a member of the Federal Reserve and Federal Home Loan Bank systems, is required to maintain investments in the capital stock of the Federal Reserve, the Federal Home Loan Bank of Topeka and the Federal Home Loan Bank of Dallas.  Also, the Company maintains an investment in the capital stock of Bankers’ Bank of the West Bancorp, Inc.  No ready market exists for these stocks, and they have no quoted market value.  For reporting purposes, such stock is considered restricted and is carried at cost under the caption “nonmarketable equity securities.”

 

Loans Held for Sale

 

Loans originated and intended for sale in the secondary market are carried at the lower of aggregate cost or fair value.  Net unrealized losses, if any, are recognized through a valuation allowance charged to earnings.  Income from sales of loans is recognized at the time of sale, and consists of origination fees, service release premiums and documentation fees.  All loans are sold with recourse limited to certain events of default occurring within 120 days of the loans’ origination dates.  The Company does not retain servicing rights on loans sold.

 

Loans

 

Loans that the Company has the intent and ability to hold for the foreseeable future or until maturity or payoff are reported at their outstanding unpaid principal balances adjusted for charge-offs, the allowance for loan losses, deferred fees or costs on originated loans and purchase premiums or discounts on purchased loans.  Interest income is accrued on the unpaid principal balance.  Loan origination fees, net of certain direct origination costs, are deferred and recognized into interest income over the life of related loans using the interest method.

 

Past due loans are any loans for which payments of interest, principal or both have not been received within the timeframes designated by the loan agreements.  Loans with payments in arrears but for which borrowers have resumed making scheduled payments are considered past due until arrearages are brought current. Loans that experience insignificant payment delays or payment shortfalls generally are not considered past due. Management determines the significance of payment delays and payment shortfalls on a case-by-case basis, taking into consideration all of the circumstances surrounding the loan and the borrower, including the length of the delay, the reasons for the delay, the borrower’s prior payment record, and the amount of the shortfall in relation to the principal and interest owed.

 

The accrual of interest on any loan is discontinued at the time a loan is 90 days past due unless the loan is well secured and in process of collection.  Additionally, loans are placed on nonaccrual at an earlier date if collection of principal or interest is considered doubtful.  When placing a loan on nonaccrual status, interest accrued to date is generally reversed and is charged against the current year's interest income.  Payments received on a loan on nonaccrual status are applied against the balance of the loan. A loan is returned to accrual status when principal and interest are no longer past due and collectibility is no longer doubtful.  

 

Troubled debt restructurings are loans for which concessions in terms have been made as a result of the borrower experiencing financial difficulty.  Generally, concessions granted to customers include lower interest rates and modification of the payment stream to lower or defer payments.  Interest on troubled debt restructurings is accrued under the new terms if the loans are performing and full collection of principal and interest is expected.  However, interest accruals are discontinued on troubled debt restructurings that meet the Company’s nonaccrual criteria.


11

 


First Bancorp of Durango, Inc. and Subsidiaries

 

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

 

December 31, 2017 and 2016

 

Generally, loans are charged off in whole or in part after they become significantly past due unless the loan is in the process of restructuring.  Charge-offs are determined on a loan-by-loan basis and are based upon management’s monthly review of the carrying amount of loans and the amount estimated to be collectible as determined by analyses of expected future cash flows and the liquidation of loan collateral.

 

Allowance for Loan Losses

 

The allowance for loan losses is a valuation allowance for probable incurred credit losses, and is established through a provision for loan losses charged to earnings.  Loan losses are charged against the allowance when management believes the uncollectibility of a loan balance is confirmed.  Subsequent recoveries, if any, are credited to the allowance.  The allowance consists of specific and general components as follows:

 

 

1)

The specific component relates to loans that are considered impaired, and is comprised of valuation allowances calculated on a loan-by-loan basis for impaired loans in excess of a nominal percentage of each Banks’ capital, and calculated on a pool basis for impaired loans below the percentage-of-capital thresholds. Impaired loans are all specifically identified loans for which it is probable that the Company will not collect all amounts due according to the contractual terms of the loan agreement.  Factors considered by management in determining whether a loan is impaired include payment status, collateral value, the borrower’s financial condition and overall loan quality as determined by an internal loan grading system.

 

Included in impaired loans are all nonaccrual loans and all troubled debt restructurings.  Loans that experience insignificant payment delays or payment shortfalls generally are not considered impaired.  For individually evaluated impaired loans for which repayment is expected solely from the collateral, impairment is measured based on the fair value of the collateral.  For other individually evaluated impaired loans, impairment may be measured based on the fair value of the collateral or on the present value of expected future cash flows discounted at the loan’s original effective interest rate.  For impaired loans evaluated on a pool basis, impairment is measured based on statistics reflective of the increased risk of the loan pool.   When the measure of the impaired loan is less than the recorded investment in the loan, the impairment is recorded through a valuation allowance.

 

 

2)

The general component relates to non-impaired loans, and is based on historical loss experience adjusted for the effects of qualitative factors that are likely to cause estimated credit losses as of the evaluation date to differ from the portfolio’s historical loss experience.  Qualitative factors include the following: economic conditions; industry conditions; changes in lending policies and procedures; trends in the volume and terms of loans; the experience, ability and depth of lending staff; levels and trends in delinquencies and impaired loans; levels and trends in charge-off and recovery activity; levels and trends of loan quality as determined by an internal loan grading system; portfolio concentrations.

 

Although the allowance contains a specific component, the entire allowance is available for any loan that, in management’s judgment, should be charged off.  

 

On a quarterly basis, management estimates the allowance balance required using the criteria identified above in relation to the relevant risks for each of the Company’s major loan segments.  The most significant overall risk factors for both the Company’s commercial and consumer portfolios is the strength of the real estate market in the Company’s lending areas.

  


12

 


First Bancorp of Durango, Inc. and Subsidiaries

 

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

 

December 31, 2017 and 2016

 

The quality of the Company's loan portfolio is assessed as a function of the levels of past due loans and impaired loans, and internal credit quality ratings which are updated quarterly by management. The ratings on the Company’s internal credit scale are broadly grouped into the categories “non-classified” and “classified.”  Non-classified loans are those loans with minimal identified credit risk, as well as loans with potential credit weaknesses which deserve management’s attention but for which full collection of contractual principal and interest is not significantly at risk.  Classified loans are those loans that have well-defined weakness that put full collection of contractual principal or interest at risk, and classified loans for which it is probable that the Company will not collect all contractual principal or interest are also considered impaired. The credit quality ratings are an important part of the Company's overall credit risk management process and are considered in the determination of the allowance for loan losses.

 

Determination of the allowance is inherently subjective as it requires estimates that are susceptible to significant revision as new information becomes available. In addition, various regulatory agencies, as an integral part of their examination process, periodically review the Company's allowance.  Such agencies may require the Company to recognize additional losses based on their judgments about information available to them at the time of their examination.

 

Premises and Equipment

 

Land is carried at cost.  Buildings, building improvements, leasehold improvements, furniture and equipment are stated at cost less accumulated depreciation and amortization.  Depreciation and amortization is computed using the straight-line method over the estimated useful lives of the assets or the lease term, if shorter.  Maintenance and repairs, which do not extend the useful lives of premises and equipment, are charged to expense as incurred.

 

Real Estate Held for Sale

 

Assets acquired through, or in lieu of, loan foreclosure are held for sale and are initially recorded at fair value when acquired (less an estimate of cost to sell), establishing a new cost basis.    Bank premises transferred to real estate held for sale are also initially recorded at fair value.  If fair value declines subsequent to acquisition or transfer, a valuation allowance is recorded through earnings.  Operating expenses relative to real estate held for sale are expensed as incurred, while certain improvements may be capitalized if the expenditures are likely to be recaptured upon disposition of the real estate.   Gain or loss on sale, if any, is recognized at the time of sale.  

 

Intangible Assets

 

Core Deposit Intangibles

 

Core deposit intangibles result from business acquisitions and represent the excess of the fair value of deposits acquired over their book value.  Core deposit intangibles are amortized over their estimated economic lives which range from periods of seven to twelve years.  In addition, core deposit intangibles are assessed at least annually for impairment, and any impairment losses are recognized in earnings in the period identified.

 

Goodwill

 

Goodwill results from business acquisitions and represents the excess of the purchase price over the fair value of acquired tangible assets and liabilities and identifiable intangible assets. Goodwill is assessed at least annually for impairment, and any impairment losses are recognized in earnings in the period identified.


13

 


First Bancorp of Durango, Inc. and Subsidiaries

 

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

 

December 31, 2017 and 2016

 

Income Taxes

 

The Company is taxed under the provisions of Subchapter S of the Internal Revenue Code.  Under those provisions, subject to certain exceptions, the Company neither pays corporate income taxes on its taxable income nor is allowed to carry back losses to claim refunds for previously paid income taxes.  Instead, the stockholders of the Company include their respective shares of consolidated taxable income or loss in their individual income tax returns. Accordingly, no income taxes are reflected in the consolidated financial statements.

 

The Company is no longer subject to examination by federal tax authorities for years before 2014.

 

Comprehensive Income

 

Comprehensive income consists of net income and other comprehensive income. Other comprehensive income for the Company consists of entirely of changes in the unrealized gains and losses on securities available for sale, with no related tax effects.  

 

Note Receivable for Issuance of Common Stock

 

The Company has extended a loan to an executive officer to facilitate the officer’s purchase of Company stock.  The loan is secured by the stock purchased, and accordingly the outstanding balance of the loan is offset against the equity issued such that equity balances reflect only amounts for which the Company does not have a collateral interest in its own stock.

 

Off- Balance Sheet Financial Instruments

 

In the ordinary course of business, the Company enters into off-balance-sheet financial instruments consisting of commitments to extend credit, unused lines of credit, standby letters of credit and undisbursed loans in process.  These financial instruments are recorded in the consolidated financial statements when they are funded.

 

The Company is exposed to credit risk on its off-balance sheet financial instruments.  In conjunction with the determination of the allowance for loan losses, and using the same criteria, the Company estimates an allowance for probable incurred credit losses on off- balance sheet credit exposures.  Provisions for the allowance are recorded as a component of other noninterest expense, and the allowance is carried as a component of other liabilities.

 

Transfers of Financial Assets

 

Transfers of financial assets are accounted for as sales when control over the assets has been relinquished and, for loan participations sold, incoming cash flows on the base loan are allocated to all participants on a pro-rata basis. Control over transferred assets is deemed to be relinquished when the assets have been isolated from the Company, the transferee obtains the right (free of conditions that constrain it from taking advantage of that right) to pledge or exchange the transferred assets, and the Company does not maintain effective control over the transferred assets through an agreement to repurchase them before their maturity.


14

 


First Bancorp of Durango, Inc. and Subsidiaries

 

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

 

December 31, 2017 and 2016

 

Loss Contingencies

 

Loss contingencies, including claims and legal actions arising in the ordinary course of business, are recorded as liabilities when the likelihood of loss is probable and an amount or range of loss can be reasonably estimated.  Management does not believe there now are such matters that will have a material effect on the consolidated financial statements.

 

Fair Value Measurements

 

Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants, excluding transaction costs. When measuring fair value, entities should maximize the use of observable inputs and minimize the use of unobservable inputs. The following describes the three levels of inputs that may be used to measure fair value:

 

 

Level 1 Inputs - Unadjusted quoted prices in active markets for identical assets or liabilities that the reporting entity has the ability to access at the measurement date.

 

 

Level 2 Inputs— 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 Inputs—Unobservable inputs that reflect an entity’s own assumptions about the assumptions that market participants would use in pricing the assets or liabilities.

 

Significant Applicable Accounting Standards Updates Not Yet Effective

 

Accounting Standards Update 2016-13, Financial Instruments – Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments.   Under the new standard, the Company will be required to convert from the existing incurred-loss model for determining the allowance for loan losses to an expected-loss model.  An expected-loss model will determine the allowance for loan losses balance based upon credit losses expected to be incurred over the life of the loan portfolio, and will consider not only current credit conditions but also reasonably supportable expectations as to future credit conditions.  The standard will also require securities held to maturity to be evaluated for impairment under an expected-loss model.  The standard is effective for the Company beginning January 1, 2021.  Management is in the processing of determining the impact of the standard on the Company’s consolidated financial statements.

 

Accounting Standards Update 2016-02, Leases (Topic 326).   Under the new standard, the Company will be required to record a right-of-use asset for leased property and also record a corresponding lease liability.   In general, rather than expense lease payments as they are made as currently done under operating lease guidance, the right-of-use asset will be amortized to expense over the lease term and lease payments will reduce the lease obligation.   The standard is effective for the Company beginning January 1, 2020, and is not expected to have a significant impact on the consolidated financial statements.


15

 


First Bancorp of Durango, Inc. and Subsidiaries

 

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

 

December 31, 2017 and 2016

 

The Financial Accounting Standards Board recently issued Accounting Standards Update 2016-01, Financial Instruments – Overall (Subtopic 825-10): Recognition and Measurement of Financial Assets and Financial Liabilities.  Under the new standard, certain equity investments are required to be carried at fair value, with changes in fair value recognized in net income. This applies to equity investments with readily determinable fair values that are not consolidated or carried on the equity method.  Debt securities classified as available-for-sale will continue to be carried at fair value with changes in fair value recorded through other comprehensive income.  The standard is effective for the Company beginning January 1, 2019, and is not expected to have a significant impact to the consolidated financial statements.  

 

Accounting Standards Update 2014-09, Revenue from Contracts With Customers (Topic 606).  The new standard prescribes a five-step model to determine the amount and timing of revenue recognition related to the consideration the Company expects to receive from the transfer of goods and services.  The standard does not apply to financial instruments, and accordingly will not impact the Company’s recognition of interest income on its loans and investment securities, and will not impact the Company’s recognition of revenue from sales or transfers of loans and investment securities.  The standard is effective for the Company beginning January 1, 2019, and is not expected to have a significant impact to the consolidated financial statements.

 

Subsequent Events

 

Management evaluates events occurring subsequent to the balance sheet date, through the date the financial statements are eligible to be issued, to determine whether the events require recognition or disclosure in the financial statements.  With respect to the December 31, 2017 financial statements, Management has considered subsequent events through March 23, 2018.

 


16

 


First Bancorp of Durango, Inc. and Subsidiaries

 

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

 

December 31, 2017 and 2016

 

NOTE 2 - INVESTMENT SECURITIES

 

The amortized cost and fair value of investment securities available for sale, with gross unrealized gains and losses, follows:

 

 

 

December 31, 2017

 

 

 

Amortized Cost

 

 

Gross Unrealized Gains

 

 

Gross Unrealized Losses

 

 

Fair Value

 

 

 

(in thousands)

 

Debt securities

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

U.S. government agency

 

$

4,401

 

 

$

 

 

$

(33

)

 

$

4,368

 

State and municipal

 

 

200,878

 

 

 

1,507

 

 

 

(685

)

 

 

201,700

 

Corporate and foreign

 

 

89,685

 

 

 

109

 

 

 

(429

)

 

 

89,365

 

Pass-through

 

 

5,271

 

 

 

132

 

 

 

(16

)

 

 

5,387

 

 

 

$

300,235

 

 

$

1,748

 

 

$

(1,163

)

 

$

300,820

 

 

 

 

December 31, 2016

 

 

 

Amortized Cost

 

 

Gross Unrealized Gains

 

 

Gross Unrealized Losses

 

 

Fair Value

 

 

 

(in thousands)

 

Debt securities

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

U.S. government agency

 

$

4,401

 

 

$

5

 

 

$

(43

)

 

$

4,363

 

State and municipal

 

 

222,149

 

 

 

2,523

 

 

 

(682

)

 

 

223,990

 

Corporate and foreign

 

 

88,192

 

 

 

184

 

 

 

(425

)

 

 

87,951

 

Pass-through

 

 

6,533

 

 

 

149

 

 

 

(54

)

 

 

6,628

 

Total debt securities

 

 

321,275

 

 

 

2,861

 

 

 

(1,204

)

 

 

322,932

 

Equity securities

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Exchange traded gold fund

 

 

1,217

 

 

 

 

 

 

(89

)

 

 

1,128

 

 

 

$

322,492

 

 

$

2,861

 

 

$

(1,293

)

 

$

324,060

 


17

 


First Bancorp of Durango, Inc. and Subsidiaries

 

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

 

December 31, 2017 and 2016

 

Pass-through securities listed above are comprised of a mix of mortgage-backed securities, SBA loan pools and student loan pools.

 

The amortized cost and fair value of debt securities available for sale at December 31, 2017, by contractual maturity, follows:

 

 

 

Available-for-Sale

 

 

 

Amortized Cost

 

 

Fair Value

 

 

 

(in thousands)

 

Due in one year or less

 

$

85,766

 

 

$

85,810

 

Due after one through five years

 

 

179,636

 

 

 

179,637

 

Due after five years through ten years

 

 

28,822

 

 

 

29,260

 

Due after ten years

 

 

6,011

 

 

 

6,113

 

 

 

$

300,235

 

 

$

300,820

 

 

Various investments, including pass-though securities, may have actual maturities that differ from contractual maturities due to paydowns on the assets underlying the bonds or early call provisions.

 

Information pertaining to securities available for sale, with gross unrealized losses aggregated by investment category and length of time that individual securities have been in a continuous loss position, follows:

 

 

 

 

December 31, 2017

 

 

 

Less than 12 months

 

 

Over 12 months

 

 

 

Gross Unrealized Losses

 

 

Fair Value

 

 

Gross Unrealized Losses

 

 

Fair Value

 

 

 

(in thousands)

 

U.S. government agency

 

$

2

 

 

$

1,399

 

 

$

31

 

 

$

2,969

 

State and municipal

 

 

574

 

 

 

94,724

 

 

 

111

 

 

 

16,211

 

Corporate and foreign

 

 

342

 

 

 

49,364

 

 

 

87

 

 

 

9,539

 

Pass-through

 

 

10

 

 

 

1,113

 

 

 

6

 

 

 

751

 

 

 

$

928

 

 

$

146,600

 

 

$

235

 

 

$

29,470

 


18

 


First Bancorp of Durango, Inc. and Subsidiaries

 

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

 

December 31, 2017 and 2016

 

 

 

December 31, 2016

 

 

 

Less than 12 months

 

 

Over 12 months

 

 

 

Gross Unrealized Losses

 

 

Fair Value

 

 

Gross Unrealized Losses

 

 

Fair Value

 

 

 

(in thousands)

 

U.S. government agency

 

$

43

 

 

$

2,956

 

 

$

 

 

$

 

State and municipal

 

 

654

 

 

 

105,592

 

 

 

28

 

 

 

9,309

 

Corporate and foreign

 

 

260

 

 

 

34,328

 

 

 

165

 

 

 

9,868

 

Pass-through

 

 

7

 

 

 

849

 

 

 

47

 

 

 

2,193

 

Exchange traded gold fund

 

 

 

 

 

 

 

 

89

 

 

 

1,128

 

 

 

$

964

 

 

$

143,725

 

 

$

329

 

 

$

22,498

 

At December 31, 2017, unrealized losses are largely due to differences in market yields as compared to yields available at the time securities were purchased. Management has performed analyses of investment credit quality and cash flows, and does not believe that any securities are impaired due to reasons of credit quality other than securities for which impairment charges have already been recognized through earnings.  The Company has the ability and intent to hold investment securities for a period of time sufficient for a recovery of cost, and fair value is expected to recover as bonds approach maturity.  Accordingly, as of December 31, 2017, management believes the impairments detailed in the table above are temporary.

 

Investment securities with carrying values of $70,391,000 and $82,237,000 at December 31, 2017 and 2016, respectively, were pledged as collateral on public deposits and for other purposes.

 

Gross realized gains and losses on sales of securities available for sale are as follows:

  

 

 

 

Year Ended December 31,

 

 

 

2017

 

 

2016

 

 

 

(in thousands)