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Section 1: 10-Q (RICHMOND MUTUAL BANCORPORATION, INC. FORM 10-Q)


UNITED STATES SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

FORM 10-Q

 

[X]QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 

For the quarterly period ended March 31, 2020

 

[   ]TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 

For the transition period from _______ to ________

 

Commission file number: 001-38956

 

RICHMOND MUTUAL BANCORPORATION, INC.

(Exact name of registrant as specified in its charter)

 

Maryland

 

36-4926041

(State or other jurisdiction of incorporation of organization)

 

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

 

31 North 9th Street, Richmond, Indiana 47374

(Address of principal executive offices; Zip Code)

 

(765) 962-2581

(Registrant's telephone number, including area code)

 

None

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

 

Securities registered pursuant to Section 12(b) of the Act:

Title of each class

Trading Symbol(s)

Name of each exchange on which registered

Common Stock, par value $0.01 per share

RMBI

The NASDAQ Stock Market LLC

 

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 and 15(d) of the Exchange Act 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 every Interactive Data File required to be submitted 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 such files).   Yes [X] No [  ]

 

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

 

Large accelerated filer           [   ]

 

 

 

Accelerated filer                    [   ]

 

 

Non-accelerated filer             [X]

Smaller reporting company   [X]

 

 

Emerging growth company   [X]

 

 

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.

[   ]

 

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).  Yes [   ] No [X]

 

There were 13,526,625 shares of Registrant’s common stock, par value of $0.01 per share, issued and outstanding as of May 15, 2020.




RICHMOND MUTUAL BANCORPORATION, INC. AND SUBSIDIARY

10-Q

TABLE OF CONTENTS

 

 

 

Page

Number

PART I     FINANCIAL INFORMATION

1

 

 

 

Item 1.

Financial Statements

1

 

 

 

 

 

 

Condensed Consolidated Balance Sheets at March 31, 2020 (Unaudited) and December 31, 2019

1

 

 

 

 

 

 

Condensed Consolidated Statements of Income (Unaudited) for the Three Months Ended March 31, 2020 and 2019

2

 

 

 

 

 

 

Condensed Consolidated Statements of Comprehensive Income (Unaudited) for the Three Months
  Ended March 31, 2020 and 2019

3

 

 

 

 

 

 

Condensed Consolidated Statements of Changes in Stockholders' Equity (Unaudited) for the Three Months
  Ended March 31, 2020 and 2019

4

 

 

 

 

 

 

Condensed Consolidated Statements of Cash Flows (Unaudited) for the Three Months Ended March 31, 2020 and 2019

5

 

 

 

 

 

 

Notes to Condensed Consolidated Financial Statements

6

 

 

 

 

Item 2.

Management's Discussion and Analysis of Financial Condition and Results of Operations

26

 

 

 

 

Item 3.

Quantitative and Qualitative Disclosures about Market Risk

36

 

 

 

 

Item 4.

Controls and Procedures

36

 

 

 

 

PART II     OTHER INFORMATION

38

 

 

 

 

Item 1.

Legal Proceedings

38

 

 

 

 

Item 1A.

Risk Factors

38

 

 

 

 

Item 2.

Unregistered Sales of Equity Securities and Use of Proceeds

39

 

 

 

 

Item 3.

Defaults Upon Senior Securities

39

 

 

 

 

Item 4.

Mine Safety Disclosures

39

 

 

 

 

Item 5

Other Information

39

 

 

 

 

Item 6.

Exhibits

39

 

 

 

 

SIGNATURES

40




PART I.  FINANCIAL INFORMATION

 

ITEM 1.FINANCIAL STATEMENTS 

 

Richmond Mutual Bancorporation, Inc.

Condensed Consolidated Balance Sheets

 

 

 

March 31, 2020

 

December 31, 2019

 

 

(Unaudited)

 

 

 

 

 

 

 

 

 

Assets

 

 

 

 

 

 

  Cash and due from banks

$

10,510,456

 

 $

9,088,398

 

  Interest-bearing demand deposits

 

16,945,289

 

 

31,508,479

 

       Cash and cash equivalents

 

27,455,745

 

 

40,596,877

 

 Investment securities - available for sale

 

238,891,137

 

 

201,783,851

 

 Investment securities - held to maturity

 

13,770,210

 

 

15,917,394

 

 

 

 

 

 

 

 

Loans and leases, net of allowance for losses of $7,306,000 and 

   $7,089,000, respectively

 

687,053,651

 

 

687,258,190

 

 Premises and equipment, net

 

14,007,080

 

 

14,087,169

 

 Federal Home Loan Bank stock

 

8,630,800

 

 

7,600,400

 

 Interest receivable

 

3,248,041

 

 

3,052,380

 

 Mortgage-servicing rights

 

911,402

 

 

1,033,217

 

 Cash surrender value of life insurance

 

3,870,017

 

 

3,839,911

 

 Other assets

 

9,777,676

 

 

10,872,682

 

 

 

 

 

 

 

 

Total assets

$

1,007,615,759

 

$

986,042,071

 

 

 

 

 

 

 

 

Liabilities

 

 

 

 

 

 

 Non-interest bearing deposits

$

62,491,325

 

60,297,443

 

 Interest bearing deposits

 

542,744,053

 

 

556,921,370

 

Total deposits

 

605,235,378

 

 

617,218,813

 

 Federal Home Loan Bank advances

 

182,000,000

 

 

154,000,000

 

 Advances by borrowers for taxes and insurance

 

613,571

 

 

545,498

 

 Interest payable

 

350,466

 

 

296,774

 

 Multi-employer pension plan liability

 

17,454,709

 

 

17,454,709

 

 Other liabilities

 

8,765,381

 

 

8,738,831

 

Total liabilities

 

814,419,505

 

 

798,254,625

 

 

 

 

 

 

 

 

Commitments and Contingent Liabilities

 

-

 

 

-

 

 

 

 

 

 

 

 

Stockholders' Equity

 

 

 

 

 

 

Common stock, $.01 par value
       Authorized – 90,000,000 shares
       Issued and outstanding - 13,526,625 shares

 

135,266

 

 

135,266

 

Additional paid-in capital

 

132,604,734

 

 

132,601,876

 

Retained earnings

 

72,563,580

 

 

70,111,434

 

Unearned employee stock ownership plan (ESOP)

 

(14,216,557

)

 

(14,400,386

)

Accumulated other comprehensive income (loss)

 

2,109,231

 

 

(660,744

)

Total stockholders' equity

 

193,196,254

 

 

187,787,446

 

 

 

 

 

 

 

 

Total liabilities and stockholders' equity

$

1,007,615,759

 

$

986,042,071

 

 

See Notes to Condensed Consolidated Statements.


1



Richmond Mutual Bancorporation, Inc.

Condensed Consolidated Statements of Income

(Unaudited)

 

 

 

Three Months Ended March 31,

 

 

2020

 

 

2019

 

 

 

 

Interest Income

 

 

 

 

 

 Loans and leases

$

9,063,567

 

$

8,766,129

 Investment securities

 

1,262,937

 

 

941,661

 Other

 

125,030

 

 

49,107

   Total interest income

 

10,451,534

 

 

9,756,897

 

 

 

 

 

 

Interest Expense

 

 

 

 

 

 Deposits

 

1,824,698

 

 

1,886,700

 Borrowings

 

739,341

 

 

750,262

    Total interest expense

 

2,564,039

 

 

2,636,962

 

 

 

 

 

 

Net Interest Income

 

7,887,495

 

 

7,119,935

 Provision for losses on loans and leases

 

210,000

 

 

525,000

 

 

 

 

 

 

Net Interest Income After Provision for Losses

  on Loans and Leases

 

7,677,495

 

 

6,594,935

 

 

 

 

 

 

Non-Interest Income

 

 

 

 

 

 Service charges on deposit accounts

 

254,651

 

 

231,649

 Card fee income

 

179,607

 

 

166,586

 Loan and lease servicing fees

 

(65,692

)

 

 

113,272

 Net gains on securities (includes $69,139 and

    $24,806 for the three months

    ended March 31, 2020 and 2019, respectively,

    related to accumulated other comprehensive

    loss reclassifications)

 

69,139

 

 

24,806

 Net gains on loan and lease sales

 

228,208

 

 

87,225

 Other loan fees

 

82,874

 

 

154,640

 Other income

 

204,281

 

 

126,277

    Total non-interest income

 

953,068

 

 

904,455

 

 

 

 

 

 

Non-Interest Expenses

 

 

 

 

 

 Salaries and employee benefits

 

3,363,685

 

 

3,475,733

 Net occupancy expenses

 

290,009

 

 

293,381

 Equipment expenses

 

255,848

 

 

242,145

 Data processing fees

 

476,803

 

 

414,192

 Deposit insurance expense

 

56,000

 

 

135,000

 Printing and office supplies

 

26,543

 

 

41,758

 Legal and professional fees

 

241,366

 

 

296,779

 Advertising expense

 

109,557

 

 

123,417

 Bank service charges

 

37,355

 

 

31,676

 Real estate owned expense

 

2,177

 

 

14,820

 Other expenses

 

664,274

 

 

736,140

    Total non-interest expenses

 

5,523,617

 

 

5,805,041

 

 

 

 

 

 

Income Before Income Tax Expense

 

3,106,946

 

 

1,694,349

Provision for income taxes (includes $17,522 and

  $6,483 for the three months ended March 31,

  2020 and 2019  respectively, related to income

  tax expense from  reclassification of items)

 

654,800

 

 

322,100

Net Income

$

2,452,146

 

$

1,372,249

Earnings Per Share

 

 

 

 

 

  Basic

$

0.20

 

$

N/A

  Diluted

$

0.20

 

$

N/A

 

 

 

 

 

 

See Notes to Condensed Consolidated Statements.


2



Richmond Mutual Bancorporation, Inc.

Condensed Consolidated Statements of Comprehensive Income

(Unaudited)

 

 

 

 

Three Months Ended March 31,

 

 

2020

 

 

2019

 

 

 

 

 

 

Net Income

$

2,452,146

 

$

1,372,249

 

 

 

 

 

 

Other Comprehensive Income

 

 

 

 

 

 Unrealized gain on available-for-sale securities,

   net of tax expense of $957,976 and $677,903 for

   the three months ended March 31, 2020 and 2019, respectively.

 

2,821,591

 

 

1,915,947

 Less:  reclassification adjustment for realized gains included in

   net income, net of tax expense of $17,523 and  $6,483 for the three

   months ended March 31, 2020 and 2019, respectively.

 

51,616

 

 

18,323

 

 

2,769,975

 

 

1,897,624

 

 

 

 

 

 

Comprehensive Income

$

5,222,121

 

$

3,269,873

 

See Notes to Condensed Consolidated Statements.


3



Richmond Mutual Bancorporation, Inc.

Condensed Consolidated Statements of Changes in Stockholders’ Equity

(Unaudited)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Accumulated

 

 

 

 

 

Common Stock

 

 

Additional

 

 

 

 

 

Unearned

 

 

 

Other

 

 

 

 

 

Shares

 

 

 

 

 

Paid-in

 

 

Retained

 

 

ESOP

 

 

 

Comprehensive

 

 

 

 

 

Outstanding

 

 

Amount

 

 

Capital

 

 

Earnings

 

 

Shares

 

 

 

Loss

 

 

 

Total

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Balances, December 31, 2019

13,526,625

 

$

135,266

 

$

132,601,876

 

$

70,111,434

 

$

(14,400,386

)

 

$

(660,744

)

 

$

187,787,446

 Net income

 

 

 

 

 

 

2,452,146

 

 

 

 

 

 

 

 

2,452,146

 Other comprehensive income

 

 

 

 

 

 

 

 

 

 

 

2,769,975

 

 

 

2,769,975

 ESOP shares earned

 

 

 

 

2,858

 

 

 

 

183,829

 

 

 

 

 

 

186,687

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Balances, March 31, 2020

13,526,625

 

$

135,266

 

$

132,604,734

 

$

72,563,580

 

$

(14,216,557

)

 

$

2,109,231

 

 

$

193,196,254

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Accumulated

 

 

 

 

 

Common Stock 

 

 

Additional

 

 

 

 

 

Unearned

 

 

 

Other

 

 

 

 

 

Shares

 

 

 

 

 

Paid-in

 

 

Retained

 

 

ESOP

 

 

 

Comprehensive

 

 

 

 

 

Outstanding

 

 

Amount

 

 

Capital

 

 

Earnings

 

 

Shares

 

 

 

Loss

 

 

 

Total

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Balances, December 31, 2018

100

 

$

1

 

$

12,750,999

 

$

77,480,318

 

$

 

 

$

(4,378,286

)

 

$

85,853,032

 Net income

 

 

 

 

 

 

1,372,249

 

 

 

 

 

 

 

 

1,372,249

 Other comprehensive income

 

 

 

 

 

 

 

 

 

 

 

1,897,624

 

 

 

1,897,624

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Balances, March 31, 2019

100

 

$

1

 

$

12,750,999

 

$

78,852,567

 

$

 

 

$

(2,480,662

)

 

$

89,122,905

 

 

 

 

 

 

 

 

 

See Notes to Condensed Consolidated Statements.


4



Richmond Mutual Bancorporation, Inc.

Condensed Consolidated Statements of Cash Flows

(Unaudited)

 

 

 

Three Months Ended March 31,

 

 

2020

 

 

 

2019

 

 

 

 

 

 

 

 

 

Operating Activities

 

 

 

 

 

 

 

Net income

$

2,452,146

 

 

$

1,372,249

 

Items not requiring (providing) cash

 

 

 

 

 

 

 

Provision for loan losses

 

210,000

 

 

 

525,000

 

Depreciation and amortization

 

238,330

 

 

 

233,529

 

Deferred income tax

 

(84,000

)

 

 

(361,000

)

Investment securities (accretion) amortization, net

 

486,500

 

 

 

123,814

 

Investment securities gains

 

(69,139

)

 

 

(24,806

)

Gain on sale of loans and leases held for sale

 

(228,208

)

 

 

(87,225

)

Accretion of loan origination fees

 

(38,827

)

 

 

(40,049

)

Amortization of mortgage-servicing rights

 

67,132

 

 

 

32,833

 

ESOP shares expense

 

186,687

 

 

 

 

Increase in cash surrender value of life insurance

 

(30,106

)

 

 

(29,548

)

Loans originated for sale

 

(6,807,172

)

 

 

(3,468,463

)

Proceeds on loans sold

 

8,147,368

 

 

 

3,342,763

 

Net change in

 

 

 

 

 

 

 

Interest receivable

 

(195,661

)

 

 

(19,196

)

Other assets

 

354,702

 

 

 

1,265,581

 

Other liabilities

 

26,550

 

 

 

(1,309,293

)

Interest payable

 

53,692

 

 

 

105,898

 

Net cash provided by operating activities

 

4,769,994

 

 

 

1,662,087

 

 

 

 

 

 

 

 

 

Investing Activities

 

 

 

 

 

 

 

Purchases of securities available for sale

 

(70,744,743

)

 

 

(12,886,237

)

Proceeds from maturities and paydowns of securities available for sale

 

25,505,906

 

 

 

2,068,535

 

Proceeds from sales of securities available for sale

 

11,461,388

 

 

 

11,467,522

 

Proceeds from maturities and paydowns of securities held to maturity

 

2,140,036

 

 

 

1,320,000

 

Net change in loans

 

(1,169,710

)

 

 

(17,599,648

)

Purchases of premises and equipment

 

(158,241

)

 

 

(191,206

)

Purchase of FHLB stock

 

(1,030,400

)

 

 

(404,900

)

Net cash used in investing activities

 

(33,995,764

)

 

 

(16,225,934

)

 

 

 

 

 

 

 

 

Financing Activities

 

 

 

 

 

 

 

Net change in

 

 

 

 

 

 

 

Demand and savings deposits

 

(8,410,494

)

 

 

13,720,129 

 

Certificates of deposit

 

(3,572,941

)

 

 

7,726,151

 

Advances by borrowers for taxes and insurance

 

68,073

 

 

 

89,384

 

Proceeds from FHLB advances

 

30,000,000

 

 

 

37,000,000

 

Repayment of FHLB advances

 

(2,000,000

)

 

 

(28,000,000

)

Net cash provided by financing activities

 

16,084,638

 

 

 

30,535,664

 

 

 

 

 

 

 

 

 

Net Change in Cash and Cash Equivalents

 

(13,141,132

)

 

 

15,971,817

 

 

 

 

 

 

 

 

 

Cash and Cash Equivalents, Beginning of Period

 

40,596,877

 

 

 

14,971,170

 

 

 

 

 

 

 

 

 

Cash and Cash Equivalents, End of Period

$

27,455,745

 

 

$

30,942,987

 

 

 

 

 

 

 

 

 

Additional Cash Flows and Supplementary Information

 

 

 

 

 

 

 

Interest paid

$

2,510,347

 

 

$

2,531,064

 

Transfers from loans to other real estate owned

 

31,548

 

 

 

 

 

 

See Notes to Condensed Consolidated Statements.


5



Richmond Mutual Bancorporation, Inc.

Notes to Condensed Consolidated Financial Statements

(Unaudited)

(Table Dollar Amounts in Thousands)

 

 

Note 1:  Basis of Presentation

 

On July 1, 2019, Richmond Mutual Bancorporation, Inc., a Delaware corporation (“RMB-Delaware”), completed its reorganization from a mutual holding company form of organization to a stock form of organization (“corporate reorganization”). RMB-Delaware, which owned 100% of First Bank Richmond (the “Bank”), was succeeded by Richmond Mutual Bancorporation, Inc., a new Maryland corporation (“the Company”). As part of the corporate reorganization, First Mutual of Richmond, Inc.’s (“MHC”) ownership interest in RMB-Delaware was sold in a public offering. Gross proceeds from the offering were $130.3 million.  In conjunction with the corporate reorganization, the Company contributed 500,000 shares and $1.25 million of cash to a newly formed charitable foundation, First Bank Richmond, Inc. Community Foundation (the “Foundation”).  Additionally, a “liquidation account” was established for the benefit of certain depositors of the Bank in an amount equal to MHC’s ownership interest in the retained earnings of RMB-Delaware as of December 31, 2017 and March 31, 2019.

 

The costs of the corporate reorganization and the issuance of the common stock have been deducted from the sales proceeds of the offering.

 

The accompanying unaudited consolidated financial statements were prepared in accordance with instructions for Form 10-Q and, therefore, do not include information or note disclosures necessary for a complete presentation of financial position, results of operations, and cash flows in conformity with generally accepted accounting principles. Accordingly, these financial statements should be read in conjunction with the consolidated financial statements and notes thereto included in the Company’s Annual Report on Form 10-K for year ended December 31, 2019 filed with the Securities and Exchange Commission (“SEC”) on March 30, 2020 (SEC File No. 001-38956). However, in the opinion of management, all adjustments which are necessary for a fair presentation of the consolidated financial statements have been included. Those adjustments consist only of normal recurring adjustments.

 

The interim consolidated financial statements at and for the three months ended March 31, 2020 and 2019 have not been audited by independent accountants, but in the opinion of management, reflect all adjustments necessary to present fairly the financial position, results of operations and cash flows for such periods. The results of operations for the period are not necessarily indicative of the results to be expected for the full year.

 

In certain circumstances, where appropriate, the terms “we”, “us” and “our” refer collectively to (i) RMB-Delaware and First Bank Richmond with respect to discussions in this document involving matters occurring prior to completion of the corporate reorganization and (ii) the Company and First Bank Richmond with respect to discussions in this document involving matters occurring post-corporate reorganization, in each case unless the context indicates another meaning.

 

Loans

 

For all loan classes, the accrual of interest is discontinued at the time the loan is 90 days past due unless the credit is well-secured and in process of collection.  Past due status is based on contractual terms of the loan.  For all loan classes, the entire balance of the loan is considered past due if the minimum payment contractually required to be paid is not received by the contractual due date.  For all loan classes, loans are placed on nonaccrual or charged off at an earlier date if collection of principal or interest is considered doubtful.

 

The Company charges off residential and consumer loans, or portions thereof, when the Company reasonably determines the amount of the loss.  The Company adheres to timeframes established by applicable regulatory guidance, which provides for the charge-down of 1-4 family first and junior lien mortgages to the net realizable value, less costs to sell when the loan is 120 days past due, charge-off of unsecured open-end loans when the loan is 90 days past due, and charge down to the net realizable value when other secured loans are 90 days past due.  Loans at these respective delinquency thresholds for which the Company can clearly document that the loan is both well-secured and in the process of collection, such that collection will occur regardless of delinquency status, need not be charged off.

 

For all classes, all interest accrued but not collected for loans that are placed on nonaccrual or charged off is reversed against interest income.  The interest on these loans is accounted for on the cash-basis or cost-recovery method, until qualifying for return to accrual.  Nonaccrual loans are returned to accrual status when, in the opinion of management, the financial position of


6



the borrower indicates there is no longer any reasonable doubt as to the timely collection of interest or principal.  The Company requires a period of satisfactory performance of not less than six months before returning a nonaccrual loan to accrual status.

When cash payments are received on impaired loans in each loan class, the Company records the payment as interest income unless collection of the remaining recorded principal amount is doubtful, at which time payments are used to reduce the principal balance of the loan.  Troubled debt restructured loans recognize interest income on an accrual basis at the renegotiated rate if the loan is in compliance with the modified terms, no principal reduction has been granted and the loan has demonstrated the ability to perform in accordance with the renegotiated terms for a period of at least six months.

 

 

Note 2:  Accounting Pronouncements

 

The JOBS Act, which was enacted in April 2012, has made numerous changes to the federal securities laws to facilitate access to capital markets. Under the JOBS Act, a company with total annual gross revenues of less than $1.07 billion during its most recently completed fiscal year qualifies as an “emerging growth company.” The Company qualifies as and has elected to be an emerging growth company under the JOBS Act. An emerging growth company may elect to comply with new or amended accounting pronouncements in the same manner as a private company, but must make such election when the company is first required to file a registration statement. Such an election is irrevocable during the period a company is an emerging growth company.  The Company has elected to comply with new or amended accounting pronouncements in the same manner as a private company.

 

In June 2016, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No. 2016-13, Financial Instruments-Credit Losses (Topic 326). The ASU is intended to improve financial reporting by requiring timelier recording of credit losses on loans and other financial instruments held by financial institutions and other organizations. The ASU requires the measurement of all expected credit losses for financial assets held at the reporting date based on historical experience, current conditions, and reasonable and supportable forecasts. Financial institutions and other organizations will now use forward-looking information to better inform their credit loss estimates. Many of the loss estimation techniques applied today will still be permitted, although the inputs to those techniques will change to reflect the full amount of expected credit losses. Organizations will continue to use judgment to determine which loss estimation method is appropriate for their circumstances. The ASU requires enhanced disclosures to help investors and other financial statement users better understand significant estimates and judgments used in estimating credit losses, as well as the credit quality and underwriting standards of an organization’s portfolio. These disclosures include qualitative and quantitative requirements that provide additional information about the amounts recorded in the financial statements.  In May 2019, the FASB issued ASU No. 2019-05, “Financial Instruments-Credit Losses (Topic 326): Targeted Transition Relief” (ASU 2019-05).  This ASU provides transition relief for entities adopting the FASB’s credit losses standard, ASU 2016-13 and allows companies to irrevocably elect, upon adoption of ASU 2016-13, the fair value option for certain financial instruments. In April 2019, the FASB issued ASU No. 2019-04, “Codification Improvements to Topic 326, Financial Instruments-Credit Losses, Topic 815, Derivatives and Hedging, and Topic 825, Financial Instruments” (ASU 2019-04).  This ASU clarifies certain aspects of accounting for credit losses, hedging activities, and financial instruments. The amendments in these ASUs are effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2022, assuming the adoption of an ASU implementing the FASB board decision in November 2019 extending the adoption date for certain registrants, including the Company, with early adoption permitted. The Company is evaluating its current expected loss methodology on the loan and investment portfolios to identify the necessary modifications in accordance with this standard. The Company has not quantified the impact of these ASUs.  The Company is in the early stages of evaluating its historical data available for use in adoption of the new credit loss standards.  Additionally, we are forming an implementation team that will meet on a regular basis to coordinate efforts of our accounting, credit and operations areas.  We will continue to evaluate methodologies available to us under the new standard.

 

In March 2020, the FASB issued ASU No. 2020-04, Reference Rate Reform (Topic 848): Facilitation of the Effects of reference Rate Reform on Financial Reporting. This ASU applies to contracts, hedging relationships and other transactions that reference LIBOR or other rate references expected to be discontinued because of reference rate reform. The ASU permits an entity to make necessary modifications to eligible contracts or transactions without requiring contract remeasurement or reassessment of a previous accounting determination. This ASU is effective for all entities as of March 12, 2020 through December 31, 2022. The Company does not expect the adoption of ASU 2020-04 to have a material impact on its consolidated financial statements.

 

In December 2019, the FASB issued ASU 2019-12, Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes . ASU 2019-12 provides that state franchise or similar taxes that are based, at least in part on an entity’s income, be included in an entity’s income tax recognized as income-based taxes. The ASU further clarifies that the effect of any change in tax laws or rates used in the computation of the annual effective tax rate are required to be reflected in the first interim period that includes the enactment date of the legislation. Technical changes to eliminate exceptions to Topic 740 related to intra-period tax allocations for entities with losses from continuing operations, deferred tax liabilities related to change in ownership of foreign entities, and interim-period tax allocations for businesses with losses where the losses are expected to be realized. The


7



amendments in ASU 2019-12 are effective for public business entities with fiscal years, and interim periods within those fiscal years, beginning after December 15, 2020. The Company does not expect ASU 2019-12 to have a material impact on its consolidated financial statement.

 

In August 2018, the FASB issued ASU No. 2018-13, Fair Value Measurement (Topic 820): Disclosure Framework – Changes to the Disclosure Requirements for Fair Value Measurement. This ASU contains some technical adjustments related to the fair value disclosure requirements of public companies. Included in this ASU is the additional disclosure requirement of unrealized gains and losses for the period in recurring level 3 fair value disclosures and the range and weighted average of significant unobservable inputs, among other technical changes. The Company adopted ASU 2018-13 on January 1, 2020. The adoption of ASU 2018-13 did not have a material impact on the Company’s consolidated financial statements.

 

In August 2018, the FASB issued ASU No. 2018-15, Customer’s Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement That Is a Service Contract. The amendments in this ASU broaden the scope of ASC Subtopic 350-40 to include costs incurred to implement a hosting arrangement that is a service contract. The amendments align the requirements for capitalizing implementation costs incurred in a hosting arrangement that is a service contract with the requirements for capitalizing implementation costs incurred to develop or obtain internal-use software (and hosting arrangements that include an internal-use software license). The costs are capitalized or expensed depending on the nature of the costs and the project stage during which they are incurred, consistent with the accounting for costs for internal-use software. The amendments in this ASU result in consistent capitalization of implementation costs of a hosting arrangement that is a service contract and implementation costs incurred to develop or obtain internal-use software (and hosting arrangements that include an internal-use software license). The accounting for the service element of a hosting arrangement that is a service contract is not affected by the amendments in this ASU. The Company adopted this ASU on January 1, 2020, with no material impact on its consolidated financial statements.

 

The FASB has issued ASU No. 2016-02, Leases (Topic 842). Under the new guidance, lessees will be required to recognize the following for all leases, with the exception of short-term leases, at the commencement date: (1) a lease liability, which is a lessee’s obligation to make lease payments arising from a lease, measured on a discounted basis; and (2) a right-of-use asset, which is an asset that represents the lessee’s right to use, or control the use of, a specified asset for the lease term. Under the new guidance, lessor accounting is largely unchanged. For the Company, the amendments in this update become effective for annual periods and interim periods within those annual periods beginning after December 15, 2020. Based on leases outstanding as of December 31, 2019, the new standard will not have a material impact on the Company’s balance sheet or income statement.  We will begin evaluating the current leases and their respective lease term and conditions to quantify the potential impact to our financial statements upon adoption.

 

In July 2018, the FASB issued ASU No. 2018-11, Leases (Topic 842), Targeted Improvements, which provide entities with an additional (and optional) transition method to adopt the new lease standard. Under this new transition method, an entity initially applies the new lease standard at the adoption date and recognizes a cumulative-effect adjustment to the opening balance of retained earnings in the period of adoption. Consequently, an entity’s reporting for the comparative periods presented in the financial statements in which it adopts the new lease standard will continue to be in accordance with current GAAP (Topic 842, Leases). The amendments in ASU 2018-11 also provide lessors with a practical expedient, by class of underlying asset, to not separate non-lease components from the associated lease component and, instead, to account for those components as a single component if the non-lease components otherwise would be accounted for under the new revenue guidance (Topic 606) and certain criteria are met.


8



Note 3:  Investment Securities

 

The amortized cost and approximate fair values, together with gross unrealized gains and losses, of securities are as follows:

 

 

March 31, 2020

 

 

 

Gross

 

Gross

 

 

 

Amortized

 

Unrealized

 

Unrealized

 

Fair

 

Cost

 

Gains

 

Losses

 

Value

Available for sale

 

 

 

 

 

 

 

SBA Pools

$

24,867

 

$

 

$

210

 

$

24,657

Federal agencies

11,519

 

35

 

11

 

11,543

State and municipal obligations

53,631

 

644

 

320

 

53,954

Mortgage-backed securities –

         government-sponsored enterprises

         (GSE) residential

146,013

 

2,789

 

79

 

148,724

Equity securities

13

 

 

 

13

 

236,043

 

3,468

 

620

 

238,891

Held to maturity

 

 

 

 

 

 

 

State and municipal obligations

13,770

 

209

 

5

 

13,974

 

13,770

 

209

 

5

 

13,974

 

 

 

 

 

 

 

 

Total investment securities

$     

249,813

 

$             

3,677

 

$          

625

 

$      

252,865

 

 

December 31, 2019

 

 

 

Gross

 

Gross

 

 

 

Amortized

 

Unrealized

 

Unrealized

 

Fair

 

Cost

 

Gains

 

Losses

 

Value

Available for sale

 

 

 

 

 

 

 

U.S. Treasury securities

$          

2,997

 

$                 

 

$                 

6

 

$          

2,991

SBA Pools

14,497

 

 

114

 

14,383

Federal agencies

21,765

 

 

119

 

21,646

State and municipal obligations

45,635

 

357

 

152

 

45,840

Mortgage-backed securities –

      government-sponsored enterprises

      (GSE) residential

117,769

 

111

 

969

 

116,911

Equity securities

13

 

 

 

13

 

202,676

 

468

 

1,360

 

201,784

Held to maturity

 

 

 

 

 

 

 

State and municipal obligations

15,917

 

244

 

5

 

16,156

 

15,917

 

244

 

5

 

16,156

 

 

 

 

 

 

 

 

Total investment securities

$     

218,593

 

$             

712

 

$          

1,365

 

$      

217,940


9



The amortized cost and fair value of securities at March 31, 2020, by contractual maturity, are shown below.  Expected maturities will differ from contractual maturities because issuers may have the right to call or prepay obligations with or without call or prepayment penalties.

 

 

Available for Sale

 

Held to Maturity

 

Amortized

 

Fair

 

Amortized

 

Fair

 

Cost

 

Value

 

Cost

 

Value

 

 

 

 

 

 

 

 

Within one year

$

483

 

$

484

 

$

2,629

 

$

2,485

One to five years

8,074

 

7,054

 

7,911

 

8,164

Five to ten years

35,085

 

35,145

 

2,170

 

2,246

After ten years

46,375

 

47,471

 

1,060

 

1,079

 

90,017

 

90,154

 

13,770

 

13,974

Mortgage-backed securities –

                  GSE residential

146,013

 

148,724

 

 

Equity securities

13

 

13

 

 

 

 

 

 

 

 

 

 

Totals

$

236,043

 

$

238,891

 

$

13,770

 

$

13,974

 

 

Securities with a carrying value of $149,743,000 and $114,907,000 were pledged at March 31, 2020 and December 31, 2019, respectively, to secure certain deposits and for other purposes as permitted or required by law.

 

Proceeds from sales of securities available for sale for the three months ended March 31, 2020 and 2019 were $11,461,388 and $11,467,522, respectively. Gross gains were recognized on the sale of securities available-for-sale for the three months ended March 31, 2020 and 2019 of $74,000 and $25,000, respectively. Gross losses were recognized on the sale of securities available for sale for the three months ended March 31, 2020 and 2019 of $5,000 and $0, respectively.

 

Certain investments in debt securities are reported in the consolidated financial statements and notes at an amount less than their historical cost.  Total fair value of these investments at March 31, 2020 and December 31, 2019 and was $54,643,000 and $138,391,000, which is approximately 21% and 63%, respectively, of the Company’s available-for-sale and held-to-maturity investment portfolio.  These declines primarily resulted from changes in market interest rates since their purchase.

 

Based on evaluation of available evidence, including recent changes in market interest rates, credit rating information and information obtained from regulatory filings, management believes the declines in fair value for these securities are temporary.

Should the impairment of any other securities become other-than-temporary, the cost basis of the investment will be reduced and the resulting loss recognized in net income in the period the other-than-temporary impairment is identified.

 

The following tables show the Company’s investments by gross unrealized losses and fair value, aggregated by investment category and length of time that individual securities have been in a continuous unrealized loss position at March 31, 2020 and December 31, 2019:

 

 

March 31, 2020

 

Less Than 12 Months

 

12 Months or More

 

Total

Description of

Fair

 

Unrealized

 

Fair

 

Unrealized

 

Fair

 

Unrealized

Securities

Value

 

Losses

 

Value

 

Losses

 

Value

 

Losses

 

 

 

 

 

 

 

 

 

 

 

 

Available-for-sale

 

 

 

 

 

 

 

 

 

 

 

SBA Pools

$

21,562

 

$

210

 

$

 

$

 

$

21,562

 

$

210

Federal agencies

4,243

 

11

 

 

 

4,243

 

11

State and municipal obligations

14,684

 

316

 

821

 

4

 

15,505

 

320

Mortgage-backed securities –

         GSE residential

11,212

 

75

 

1,312

 

4

 

12,524

 

79

Total available-for-sale

51,701

 

612

 

2,133

 

8

 

53,834

 

620

 

 

 

 

 

 

 

 

 

 

 

 

Held-to-maturity

 

 

 

 

 

 

 

 

 

 

 

State and municipal obligations

171

 

 

638

 

5

 

809

 

5

 

 

 

 

 

 

 

 

 

 

 

 

Total temporarily

              impaired securities

$

51,872

 

$

612

 

$

2,771

 

$

13

 

$

54,643

 

$

625

 

 

 

 

 

 

 

 

 

 

 

 


10



 

December 31, 2019

 

Less Than 12 Months

 

12 Months or More

 

Total

Description of

Fair

 

Unrealized

 

Fair

 

Unrealized

 

Fair

 

Unrealized

Securities

Value

 

Losses

 

Value

 

Losses

 

Value

 

Losses

 

 

 

 

 

 

 

 

 

 

 

 

Available-for-sale

 

 

 

 

 

 

 

 

 

 

 

U.S. Treasury securities

$

2,991

 

$

6

 

$

 

$

 

$

2,991

 

$

6

SBA Pools

14,262

 

114

 

 

 

14,262

 

114

Federal agencies

9,657

 

109

 

2,990

 

10

 

12,647

 

119

State and municipal obligations

12,606

 

130

 

2,948

 

22

 

15,554

 

152

 

 

 

 

 

 

 

 

 

 

 

 

Mortgage-backed securities –

          GSE residential

57,928

 

464

 

34,344

 

505

 

92,272

 

969

Total available-for-sale

97,444

 

823

 

40,282

 

537

 

137,726

 

1,360

 

 

 

 

 

 

 

 

 

 

 

 

Held-to-maturity

 

 

 

 

 

 

 

 

 

 

 

State and municipal obligations

665

 

5

 

 

 

665

 

5

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total temporarily

                  impaired securities

$

98,109

 

$

828

 

$

40,282

 

$

537

 

$

138,391

 

$

1,365

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Federal Agencies.  The unrealized losses on the Company’s investments in direct obligations of U.S. federal agencies were caused by interest rate changes.  The contractual terms of those investments do not permit the issuer to settle the securities at a price less than the amortized cost basis of the investments.  Because the Company does not intend to sell the investments and it is not more likely than not the Company will be required to sell the investments before recovery of their amortized cost basis, which may be maturity, the Company does not consider those investments to be other-than-temporarily impaired at March 31, 2020.

 

Mortgage-Backed Securities – GSE Residential and SBA Pools.  The unrealized losses on the Company’s investment in mortgage-backed securities and SBA Pools were caused by interest rate changes and illiquidity.  The Company expects to recover the amortized cost basis over the term of the securities.  Because the decline in market value is attributable to changes in interest rates and not credit quality, and because the Company does not intend to sell the investments and it is not more likely than not the Company will be required to sell the investments before recovery of their amortized cost basis, which may be maturity, the Company does not consider those investments to be other-than-temporarily impaired at March 31, 2020.

 

State and Municipal Obligations.  The unrealized losses on the Company’s investments in securities of state and municipal obligations were caused by interest rate changes and illiquidity.  The contractual terms of those investments do not permit the issuer to settle the securities at a price less than the amortized cost basis of the investments.  Because the Company does not intend to sell the investments and it is not more likely than not the Company will be required to sell the investments before recovery of their amortized cost basis, which may be maturity, the Company does not consider those investments to be other-than-temporarily impaired at March 31, 2020.


11



Note 4:  Loans, Leases and Allowance

 

Categories of loans at March 31, 2020 and December 31, 2019 include:

 

 

 

March 31,

 

 

December 31,

 

 

2020

 

 

2019

 

 

 

 

 

 

Commercial mortgage

$

238,878

 

$

229,410

Commercial and industrial

 

76,002

 

 

84,549

Construction and development

 

58,051

 

 

53,426

Multi-family

 

58,101

 

 

66,002

Residential mortgage

 

132,662

 

 

131,294

Home equity

 

6,606

 

 

6,996

Direct financing leases

 

111,691

 

 

109,592

Consumer

 

12,828

 

 

13,534

 

 

694,819

 

 

694,803

Less

 

 

 

 

 

Allowance for loan and lease losses

 

7,306

 

 

7,089

Deferred loan fees

 

459

 

 

456

 

 

 

 

 

 

 

$

687,054

 

$

687,258

 

 

 

 

 

 

 

 

The following tables present the activity in the allowance for loan and lease losses for the three months ended March 31, 2020 and 2019.

 

 

 

 

 

Commercial

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Commercial

 

 

and

 

 

Residential

 

 

 

 

 

 

 

 

 

 

 

Mortgage

 

 

Industrial

 

 

Mortgage

 

 

Leases

 

 

Consumer

 

 

Total

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Three Months Ended March 31, 2020:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Balance, beginning of period

$

4,564

 

 

$

1,852

 

 

$

109

 

 

$

426

 

 

$

138

 

 

$

7,089

 

Provision (credit) for losses

72

 

 

(87

)

 

38

 

 

190

 

 

(4

)

 

210

 

Charge-offs

 

 

 

 

(15

)

 

(55

)

 

(5

)

 

(75

)

Recoveries

32

 

 

7

 

 

16

 

 

22

 

 

6

 

 

82

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Balance, end of period

$

4,668

 

 

$

1,772

 

 

$

148

 

 

$

583

 

 

$

135

 

 

$

7,306

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Three Months Ended March 31, 2019:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Balance, beginning of period

$

3,147

 

 

$

1,817

 

 

$

139

 

 

$

389

 

 

$

108

 

 

$

5,600

 

Provision (credit) for losses

269

 

 

221

 

 

(37

)

 

38

 

 

34

 

 

525

 

Charge-offs

 

 

(250

)

 

(2

)

 

(82

)

 

(34

)

 

(368

)

Recoveries

4

 

 

2

 

 

17

 

 

47

 

 

9

 

 

79

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Balance, end of period

$

3,420

 

 

$

1,790

 

 

$

117

 

 

$

392

 

 

$

117

 

 

$

5,836

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 


12



The following tables present the balance in the allowance for loan and lease losses and the recorded investment in loans and leases based on portfolio segment and impairment method as of March 31, 2020 and December 31, 2019:

 

 

March 31, 2020

 

 

 

Commercial

 

 

 

 

 

 

 

 

 

Commercial

 

and

 

Residential

 

 

 

 

 

 

 

Mortgage

 

Industrial

 

Mortgage

 

Leases

 

Consumer

 

Total

 

 

 

 

 

 

 

 

 

 

 

 

Allowance for loan and lease losses:

 

 

 

 

 

 

 

 

 

 

 

 Individually evaluated
   for impairment

$

 

$

202

 

$

 

$

 

$

 

$

202

 Collectively evaluated
   for impairment

4,668

 

1,570

 

148

 

583

 

135

 

7,104

 

 

 

 

 

 

 

 

 

 

 

 

   Balance, March 31

$

4,668

 

$

1,772

 

$

148

 

$

583

 

$

135

 

$

7,306

 

 

 

 

 

 

 

 

 

 

 

 

Loans and leases:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 Individually evaluated
   for impairment

$

792

 

$

673

 

$

306

 

$

 

$

 

$

1,771

 Collectively evaluated
   for impairment

378,709

 

72,378

 

112,860

 

111,691

 

17,410

 

693,048

 Ending balance:
   March 31

$

379,501

 

$

73,051

 

$

113,166

 

$

111,691

 

$

17,410

 

$

694,819

 

 

December 31, 2019

 

 

 

Commercial

 

 

 

 

 

 

 

 

 

Commercial

 

and

 

Residential

 

 

 

 

 

 

 

Mortgage

 

Industrial

 

Mortgage

 

Leases

 

Consumer

 

Total

 

 

 

 

 

 

 

 

 

 

 

 

Allowance for loan and lease losses:

 

 

 

 

 

 

 

 

 

 

 

 Individually evaluated
   for impairment

$

 

$

202

 

$

 

$

 

$

 

$

202

 Collectively evaluated
   for impairment

4,564

 

1,650

 

109

 

426

 

138

 

6,887

 

 

 

 

 

 

 

 

 

 

 

 

 Balance, December 31

$

4,564

 

$

1,852

 

$

109

 

$

426

 

$

138

 

$

7,089

 

 

 

 

 

 

 

 

 

 

 

 

Loans and leases:

 

 

 

 

 

 

 

 

 

 

 

 Individually evaluated
   for impairment

$

803

 

$

694

 

$

347

 

$

 

$

 

$

1,844

 Collectively evaluated
   for impairment

377,494

 

73,920

 

114,061

 

109,592

 

17,892

 

692,959

 Ending balance:
   December 31

$

378,297

 

$

74,614

 

$

114,408

 

$

109,592

 

$

17,892

 

$

694,803

 

 

The Company rates all loans by credit quality using the following designations:

 

Grade 1 – Exceptional

 

Exceptional loans are top-quality loans to individuals whose financial credentials are well known to the Company.  These loans have excellent sources of repayment, are well documented and/or virtually free of risk (i.e., CD secured loans).

 

Grade 2 – Quality Loans

 

These loans have excellent sources of repayment with no identifiable risk of collection, and they conform in all respects to Company policy and Indiana Department of Financial Institutions (“IDFI”) and Federal Deposit Insurance Corporation (“FDIC”) regulations.  Documentation exceptions are minimal or are in the process of being corrected and are not of a type that could subsequently expose the Company to risk of loss.

 

Grade 3 – Acceptable Loans

 

This category is for “average” quality loans.  These loans have adequate sources of repayment with little identifiable risk of collection and they conform to Company policy and IDFI/FDIC regulations.


13



Grade 4 – Acceptable but Monitored

 

Loans in this category may have a greater than average risk due to financial weakness or uncertainty but do not appear to require classification as special mention or substandard loans.  Loans rated “4” need to be monitored on a regular basis to ascertain that the reasons for placing them in this category do not advance or worsen.

 

Grade 5 – Special Mention

 

Loans in this category have potential weaknesses that deserve management’s close attention.  If left uncorrected, these potential weaknesses may result in deterioration of the repayment prospects for the loan or in the Company’s credit position at some future date.  Special Mention loans are not adversely classified and do not expose the Company to sufficient risk to warrant adverse classification.  This special mention rating is designed to identify a specific level of risk and concern about an asset’s quality.  Although a special mention loan has a higher probability of default than a pass rated loan, its default is not imminent.

 

Grade 6 – Substandard

 

Loans in this category are inadequately protected by the current net worth and paying capacity of the obligor or of the collateral pledged, if any.  Loans so classified must have a well-defined weakness, or weaknesses, that jeopardize the liquidation of the debt.  They are characterized by the distinct possibility that the Company will sustain some loss if the deficiencies are not corrected.

 

Substandard loans have a high probability of payment default, or they have other well-defined weaknesses.  Such loans have a distinct potential for loss; however, an individual loan’s potential for loss does not have to be distinct for the loan to be rated substandard.  

 

The following are examples of situations that might cause a loan to be graded a “6”:

 

Cash flow deficiencies (losses) jeopardize future loan payments. 

 

Sale of non-collateral assets has become a primary source of loan repayment. 

 

 

The relationship has deteriorated to the point that sale of collateral is now the Company’s primary source of repayment, unless this was the original source of loan repayment. 

 

 

The borrower is bankrupt or for any other reason future repayment is dependent on court action. 

 

 

Grade 7 – Doubtful

 

A loan classified as doubtful has all the weaknesses inherent in one classified substandard with the added characteristic that the weaknesses make collection or liquidation in full, on the basis of current existing facts, conditions, and values, highly questionable and improbable.  A doubtful loan has a high probability of total or substantial loss.  Doubtful borrowers are usually in default, lack adequate liquidity or capital, and lack the resources necessary to remain an operating entity.  Because of high probability of loss, nonaccrual accounting treatment will be required for doubtful loans.

 

Grade 8 – Loss

 

Loans classified loss are considered uncollectible and of such little value that their continuance as bankable assets is not warranted.  This classification does not mean that the loan has absolutely no recovery or salvage value, but rather that it is not practical or desirable to defer writing off the loan even though partial recovery may be effected in the future.

 

The risk characteristics of each loan portfolio segment are as follows:

 

Commercial and Industrial

 

Commercial and industrial loans are primarily based on the identified cash flows of the borrower and secondarily on the underlying collateral provided by the borrower.  The cash flows of borrowers, however, may not be as expected and the collateral securing these loans may fluctuate in value.  Most commercial loans are secured by the assets being financed or other


14



business assets, such as accounts receivable or inventory, and may include a personal guarantee.  Short-term loans may be made on an unsecured basis.  In the case of loans secured by accounts receivable, the availability of funds for the repayment of these loans may be substantially dependent on the ability of the borrower to collect amounts due from its customers.

 

Commercial Mortgage including Construction

 

Loans in this segment include commercial loans, commercial construction loans, and multi-family loans. This segment also includes loans secured by 1-4 family residences which were made for investment purposes.  Commercial real estate loans are viewed primarily as cash flow loans and secondarily as loans secured by real estate. Commercial real estate lending typically involves higher loan principal amounts and the repayment of these loans is generally dependent on the successful operation of the property securing the loan or the business conducted on the property securing the loan.  Commercial real estate loans may be more adversely affected by conditions in the real estate markets or in the general economy. The characteristics of properties securing the Company’s commercial real estate portfolio are diverse, but with geographic location almost entirely in the Company’s market area. Management monitors and evaluates commercial real estate loans based on collateral, geography and risk grade criteria. In general, the Company avoids financing single purpose projects unless other underwriting factors are present to help mitigate risk. In addition, management tracks the level of owner-occupied commercial real estate versus nonowner-occupied loans.

 

Construction loans are underwritten utilizing feasibility studies, independent appraisal reviews and financial analysis of the developers and property owners. Construction loans are generally based on estimates of costs and value associated with the complete project. These estimates may be inaccurate. Construction loans often involve the disbursement of substantial funds with repayment substantially dependent on the success of the ultimate project. Sources of repayment for these types of loans may be pre-committed permanent loans from approved long-term lenders, sales of developed property or an interim loan commitment from the Company until permanent financing is obtained. These loans are closely monitored by on-site inspections and are considered to have higher risks than other real estate loans due to their ultimate repayment being sensitive to interest rate changes, governmental regulation of real property, general economic conditions and the availability of long-term financing.

 

Residential, Brokered and Consumer

 

Residential, brokered and consumer loans consist of three segments – residential mortgage loans, brokered mortgage loans and personal loans. For residential mortgage loans that are secured by 1-4 family residences and are generally owner-occupied, the Company generally establishes a maximum loan-to-value ratio and requires private mortgage insurance if that ratio is exceeded. Brokered mortgages are purchased residential mortgage loans meeting the Company’s criteria established for originating residential mortgage loans. Home equity loans are typically secured by a subordinate interest in 1-4 family residences, and consumer personal loans are secured by consumer personal assets, such as automobiles or recreational vehicles. Some consumer personal loans are unsecured, such as small installment loans and certain lines of credit. Repayment of these loans is primarily dependent on the personal income of the borrowers, which can be impacted by economic conditions in their market areas, such as unemployment levels. Repayment can also be impacted by changes in property values on residential properties. Risk is mitigated by the fact that the loans are of smaller individual amounts and spread over a large number of borrowers.

 

Leases

 

Lease financing consists of direct financing leases and are used by commercial customers to finance capital purchases of equipment.  The credit decisions for these transactions are based upon an assessment of the overall financial capacity of the applicant.  A determination is made as to the applicant’s financial condition and ability to repay in accordance with the proposed terms as well as an overall assessment of the risks involved.

 

The following tables present the credit risk profile of the Company’s loan and lease portfolio based on rating category and payment activity as of March 31, 2020 and December 31, 2019:

 

 

March 31, 2020

 

 

Commercial

Construction

 

 

 

 

 

 

 

Commercial

 and

and

 Multi-

Residential

Home

 

 

 

 

Mortgage

Industrial

Development

Family

Mortgage

Equity

Leases

Consumer

Total

 

 

 

 

 

 

 

 

 

 

1-4  Pass

$

229,760

$

68,932

$

58,051

$

58,101

$

129,702

$

6,344

$

111,499

$

12,653

$

675,042

  5  Special Mention

7,452

4,107

-—

183

64

11,806

  6  Substandard

1,666

2,963

2,777

198

131

175

7,910

  7  Doubtful

61

61

  8  Loss

 

 

 

 

 

 

 

 

 

 

 

$

238,878

$

76,002

$

58,051

$

58,101

$

132,662

$

6,606

$

111,691

$

12,828

$

694,819


15



 

December 31, 2019

 

 

Commercial

Construction

 

 

 

 

 

 

 

Commercial

 and

and

 Multi-

Residential

Home

 

 

 

 

Mortgage

Industrial

Development

Family

Mortgage

Equity

Leases

Consumer

Total

 

 

 

 

 

 

 

 

 

 

1-4  Pass

$

220,240

$

   75,814

$

53,426

$

66,002

$

127,888

$

6,871

$

109,424

$

13,519

$

673,184

 5  Special Mention

7,489

5,731

189

64

13,473

  6  Substandard

1,681

3,004

3,217

61

94

15

8,072

  7  Doubtful

74

74

  8  Loss

 

 

 

 

 

 

 

 

 

 

 

$

229,410

$

84,549

$

53,426

$

66,002

$

131,294

$

6,996

$

109,592

$

13,534

$

694,803

 

 

The following tables present the Company’s loan and lease portfolio aging analysis of the recorded investment in loans and leases as of March 31, 2020 and December 31, 2019:

 

 

March 31, 2020

 

 

 

 

 

Total

 

Total Loans

 

Delinquent Loans

 

 

 

Portfolio

 

and Leases

 

30-59 Days

 

60-89 Days

 

90 Days and

 

Total Past

 

 

 

Loans and

 

> 90 Days

 

Past Due

 

Past Due

 

Over

 

Due

 

Current

 

Leases

 

Accruing

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Commercial mortgage

$

78

 

$

462

 

$

401

 

$

941

 

$

237,937

 

$

238,878

 

$

217

Commercial and industrial

91

 

193

 

424

 

708

 

75,294

 

76,002

 

424

Construction and development

 

 

 

 

58,051

 

58,051

 

Multi-family

 

1,047

 

 

1,047

 

57,054

 

58,101

 

Residential mortgage

908

 

322

 

2,241

 

3,471

 

129,191

 

132,662

 

2,048

Home equity

57

 

 

154

 

211

 

6,395

 

6,606

 

154

Leases

276

 

 

73

 

349

 

111,342

 

111,691

 

73

Consumer

80

 

22

 

175

 

277

 

12,551

 

12,828

 

175

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Totals

$

1,490

 

$

2,046

 

$

3,468

 

$

7,004

 

$

687,815

 

$

694,819

 

$

3,091

 

 

December 31, 2019

 

 

 

 

 

Total

 

Total Loans

 

Delinquent Loans

 

 

 

Portfolio

 

and Leases

 

30-59 Days

 

60-89 Days

 

90 Days and

 

Total Past

 

 

 

Loans and

 

> 90 Days

 

Past Due

 

Past Due

 

Over

 

Due

 

Current

 

Leases

 

Accruing

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Commercial mortgage

$

217

 

$

 

$

184

 

$

401

 

$

229,009

 

$

229,410

 

$

Commercial and industrial

220

 

1,092

 

438

 

1,750

 

82,799

 

84,549

 

3

Construction and development

 

257

 

249

 

506

 

52,920

 

53,426

 

249

Multi-family

 

 

 

 

66,002

 

66,002

 

Residential mortgage

762

 

240

 

2,452

 

3,454

 

127,840

 

131,294

 

2,256

Home equity

189

 

36

 

15

 

240

 

6,756

 

6,996

 

15

Leases

108

 

29

 

79

 

216

 

109,376

 

109,592

 

49

Consumer

271

 

35

 

15

 

321

 

13,213

 

13,534

 

15

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Totals

$

1,767

 

$

1,689

 

$

3,432

 

$

6,888

 

$

687,915

 

$

694,803

 

$

2,587


16



The following tables present the Company’s impaired loans and specific valuation allowance at March 31, 2020 and December 31, 2019:

 

 

March 31, 2020

 

 

 

Unpaid

 

 

 

Recorded

 

Principal

 

Specific

 

Balance

 

Balance

 

Allowance

 

 

 

 

 

 

Loans without a specific

 

 

 

 

 

valuation allowance

 

 

 

 

 

Commercial mortgage

$           

792

 

$           

872

 

$                 

Commercial and industrial

422

 

791

 

Residential mortgage

306

 

559

 

 

 

 

 

 

 

 

$        

1,520

 

$        

2,222

 

$                 

 

 

 

 

 

 

Loans with a specific

 

 

 

 

 

valuation allowance

 

 

 

 

 

Commercial and industrial

$           

251

 

$           

259

 

$            

202

 

 

 

 

 

 

 

$           

251

 

$        

259

 

$            

202

 

 

 

 

 

 

Total impaired loans

 

 

 

 

 

Commercial mortgage

$           

792

 

$           

872

 

$            

Commercial and industrial

673

 

1,050

 

202

Residential mortgage

306

 

559

 

 

 

 

 

 

 

Total impaired loans

$        

1,771

 

$        

2,481

 

$            

202

 

 

 

 

 

 

 

 

December 31, 2019

 

 

 

Unpaid

 

 

 

Recorded

 

Principal

 

Specific

 

Balance

 

Balance

 

Allowance

 

 

 

 

 

 

Loans without a specific

 

 

 

 

 

valuation allowance

 

 

 

 

 

Commercial mortgage

$           

803

 

$           

1,256

 

$                 

Commercial and industrial

435

 

3,220

 

Residential mortgage

347

 

614

 

 

 

 

 

 

 

 

$        

1,585

 

$        

5,090

 

$                 

 

 

 

 

 

 

Loans with a specific

 

 

 

 

 

valuation allowance

 

 

 

 

 

Commercial and industrial

$           

259

 

$           

266

 

$            

202

 

 

 

 

 

 

 

$           

259

 

$        

266

 

$            

202

 

 

 

 

 

 

Total impaired loans

 

 

 

 

 

Commercial mortgage

$           

803

 

$           

1,256

 

$            

Commercial and industrial

694

 

3,486

 

202

Residential mortgage

347

 

614

 

 

 

 

 

 

 

Total impaired loans

$        

1,844

 

$        

5,356

 

$            

202

 

 

 

 

 

 


17



The following tables present the Company’s average investment in impaired loans and interest income recognized for the three months ended March 31, 2020 and 2019.

 

 

 

Average

 

 

 

 

Investment in

 

Interest

 

 

Impaired

 

Income

 

 

Loans

 

Recognized

 

 

 

 

 

Three Months Ended March 31, 2020:

 

 

 

 

Total impaired loans

 

 

 

 

Commercial mortgage

 

$

797

 

$

7

Commercial and industrial

 

684

 

14

Residential mortgage

 

326

 

5

 

 

 

 

 

Total impaired loans

 

$

1,807

 

$

26

 

 

 

 

 

 

 

 

Average

 

 

 

 

Investment in

 

Interest

 

 

Impaired

 

Income

 

 

Loans

 

Recognized

 

 

 

 

 

Three Months Ended March 31, 2019:

 

 

 

 

Total impaired loans

 

 

 

 

Commercial mortgage

 

$

728

 

$

15

Commercial and industrial

 

1,043

 

10

Residential mortgage

 

386

 

4

 

 

 

 

 

Total impaired loans

 

$

2,157

 

$

29

 

 

 

 

 

 

 

The following table presents the Company’s nonaccrual loans and leases at March 31, 2020 and December 31, 2019:

 

 

 

March 31,

 

December 31,

 

 

2020

 

2019

 

 

 

 

 

Commercial mortgage

 

$

330

 

$

342

Commercial and industrial

 

480

 

494

Residential mortgage

 

305

 

315

Leases

 

61

 

74

 

 

 

 

 

 

 

$

1,176

 

$

1,225

 

 

During the three months ended March 31, 2020 and 2019, there were no newly classified troubled debt restructured loans or leases (“TDRs”). For the three months ended March 31, 2020 and 2019, the Company recorded no charge-offs related to TDRs. As of March 31, 2020 and December 31, 2019, TDRs had a related allowance of $52,000. During the three months ended March 31, 2020, there were no TDRs for which there was a payment default within the first 12 months of the modification.

 

The Coronavirus Aid, Relief, and Economic Security Act of 2020 ("CARES Act") provided guidance around the modification of loans as a result of the COVID-19 pandemic, which outlined, among other criteria, that short-term modifications made on a good faith basis to borrowers who were current as defined under the CARES Act prior to any relief, are not TDRs. This includes short-term (e.g. six months) modifications such as payment deferrals, fee waivers, extensions of repayment terms, or other delays in payment that are insignificant. Borrowers are considered current under the CARES Act if they are less than 30 days past due on their contractual payments at the time a modification program is implemented.

 

At March 31, 2020 and December 31, 2019, the balance of real estate owned includes $32,000 and $0, respectively, of foreclosed residential real estate properties recorded as a result of obtaining physical possession of the property.  At March 31, 2020 and December 31, 2019, the recorded investment of consumer mortgage loans secured by residential real estate properties for which formal foreclosure proceeds were in process was $159,000 and $190,000, respectively.


18



The following lists the components of the net investment in direct financing leases:

 

 

 

March 31,

 

 

December 31,

 

 

 

2020

 

 

2019

 

 

 

 

 

 

 

 

Total minimum lease payments to be received

 

$

123,152

 

 

$

120,570

 

  Initial direct costs

 

5,804

 

 

5,720

 

 

 

128,956

 

 

126,290

 

   Less: Unearned income

 

(17,265

)

 

(16,698

)

 

 

 

 

 

 

 

     Net investment in direct finance leases

 

$

111,691

 

 

$

109,592

 

 

 

 

 

 

 

 

 

 

The amount of leases serviced by First Bank Richmond for the benefit of others was approximately $507,000 and $715,000 at March 31, 2020 and December 31, 2019, respectively.  Additionally, certain leases have been sold with partial recourse. First Bank Richmond estimates and records its obligation based upon historical loss percentages.  At March 31, 2020 and December 31, 2019, First Bank Richmond has recorded a recourse obligation on leases sold with recourse of $0, and has a maximum exposure of $411,000 and $411,000, respectively, for these leases.

 

 

The following table summarizes the future minimum lease payments receivable subsequent to March 31, 2020:

 

 

 

 

2020

$

35,114

2021

 

39,360

2022

 

26,220

2023

 

14,987

2024

 

6,758

Thereafter

 

713

 

 

 

 

$

123,152

 

 

 

Note 5:  Fair Value of Financial Instruments

 

Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date.  Fair value measurements must maximize the use of observable inputs and minimize the use of unobservable inputs.  There is a hierarchy of three levels of inputs that may be used to measure fair value:

 

Level 1Quoted prices in active markets for identical assets or liabilities 

 

Level 2Observable 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 for substantially the full term of the assets or liabilities 

 

Level 3Unobservable inputs supported by little or no market activity that are significant to the fair value of the assets or liabilities 

 

 

 

 

Recurring Measurements

 

The following tables present the fair value measurements of assets recognized in the accompanying consolidated balance sheets measured at fair value on a recurring basis and the level within the fair value hierarchy in which the fair value measurements fall at March 31, 2020 and December 31, 2019:

 


19



 

 

 

Fair Value Measurements Using

 

 

 

Quoted Prices

 

 

 

 

 

 

 

in Active

 

Significant

 

 

 

 

 

Markets for

 

Other   

 

Significant    

 

 

 

Identical  

 

Observable

 

Unobservable

 

Fair

 

Assets

 

Inputs

 

Inputs

 

Value

 

(Level 1)

 

(Level 2)

 

(Level 3)

 

 

 

 

 

 

 

 

 

 

 

 

March 31, 2020

 

 

 

 

 

 

 

 

 

 

 

Available-for-sale securities

 

 

 

 

 

 

 

 

 

 

 

SBA Pools

$

24,657

 

$

 

$

24,657

 

$

Federal agencies

 

11,543

 

 

 

 

11,543

 

 

State and municipal obligations

 

53,954

 

 

 

 

53,954

 

 

Mortgage-backed securities -

 

 

 

 

 

 

 

 

 

 

 

GSE residential

 

148,724

 

 

 

 

148,724

 

 

Equity securities

 

13

 

 

13

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

$

238,891

 

$                    

13

 

$

238,878

 

$

 

 

 

 

Fair Value Measurements Using

 

 

 

Quoted Prices

 

 

 

 

 

 

 

in Active

 

Significant

 

 

 

 

 

Markets for

 

Other   

 

Significant    

 

 

 

Identical  

 

Observable

 

Unobservable

 

Fair

 

Assets

 

Inputs

 

Inputs

 

Value

 

(Level 1)

 

(Level 2)

 

(Level 3)

 

 

 

 

 

 

 

 

 

 

 

 

December 31, 2019

 

 

 

 

 

 

 

 

 

 

 

Available-for-sale securities

 

 

 

 

 

 

 

 

 

 

 

U.S. Treasury securities

$

2,991

 

$

 

$

2,991

 

$

SBA Pools

 

14,383

 

 

 

 

14,383

 

 

Federal agencies

 

21,646

 

 

 

 

21,646

 

 

State and municipal obligations

 

45,840

 

 

 

 

45,840

 

 

Mortgage-backed securities -

 

 

 

 

 

 

 

 

 

 

 

GSE residential

 

116,911

 

 

 

 

116,911

 

 

Equity securities

 

13

 

 

13

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

$

201,784

 

$

13

 

$

201,771

 

$

 

 

Following is a description of the valuation methodologies and inputs used for assets measured at fair value on a recurring basis and recognized in the accompanying consolidated balance sheets, as well as the general classification of such assets pursuant to the valuation hierarchy.  There have been no significant changes in the valuation techniques during the three months ended March 31, 2020.

 

 

Available-for-Sale Securities

 

Where quoted market prices are available in an active market, securities are classified within Level 1 of the valuation hierarchy, which includes equity securities.  If quoted market prices are not available, then fair values are estimated by using pricing models, quoted prices of securities with similar characteristics or discounted cash flows.  Level 2 securities include agency securities, obligations of state and political subdivisions, and mortgage-backed securities.  Matrix pricing is a mathematical technique widely used in the banking industry to value investment securities without relying exclusively on quoted prices for specific investment securities but rather relying on the investment securities’ relationship to other benchmark quoted investment securities.  In certain cases where Level 1 or Level 2 inputs are not available, securities are classified within Level 3 of the hierarchy.

 

Nonrecurring Measurements

 

The following table presents the fair value measurement of assets and liabilities measured at fair value on a nonrecurring basis and the level within the fair value hierarchy in which the fair value measurements fall at March 31, 2020 and December 31, 2019:

 


20



 

 

 

Fair Value Measurements Using

 

 

 

Quoted Prices

 

 

 

 

 

 

 

in Active

 

Significant

 

 

 

 

 

Markets for

 

Other   

 

Significant    

 

 

 

Identical  

 

Observable

 

Unobservable

 

Fair

 

Assets

 

Inputs

 

Inputs

 

Value

 

(Level 1)

 

(Level 2)

 

(Level 3)

 

 

 

 

 

 

 

 

 

 

 

 

March 31, 2020

 

 

 

 

 

 

 

 

 

 

 

Impaired loans, collateral dependent

$

49

 

$

 

$

 

$

49

Mortgage-servicing rights

 

911

 

 

 

 

 

 

911

 

 

 

 

 

 

 

 

 

 

 

 

December 31, 2019

 

 

 

 

 

 

 

 

 

 

 

Impaired loans, collateral dependent

$

57

 

$

 

$

 

$

57

Mortgage-servicing rights

 

1,033

 

 

 

 

 

 

1,033

 

 

Following is a description of the valuation methodologies and inputs used for assets measured at fair value on a nonrecurring basis and recognized in the accompanying consolidated balance sheets, as well as the general classification of such assets pursuant to the valuation hierarchy.  For assets classified within Level 3 of the fair value hierarchy, the process used to develop the reported fair value is described below.

 

Collateral-Dependent Impaired Loans, Net of ALLL

 

The estimated fair value of collateral-dependent impaired loans is based on the appraised fair value of the collateral, less estimated cost to sell.  Collateral-dependent impaired loans are classified within Level 3 of the fair value hierarchy.  

 

The Company considers the appraisal or evaluation as the starting point for determining fair value and then considers other factors and events in the environment that may affect the fair value.  Appraisals of the collateral underlying collateral-dependent loans are obtained when the loan is determined to be collateral-dependent and subsequently as deemed necessary by management.  Appraisals are reviewed for accuracy and consistency by management.  Appraisers are selected from the list of approved appraisers maintained by management.  The appraised values are reduced by discounts to consider lack of marketability and estimated cost to sell if repayment or satisfaction of the loan is dependent on the sale of the collateral.  These discounts and estimates are developed by management by comparison to historical results.

 

Loans for which it is probable that the Company will not collect all principal and interest due according to contractual terms are measured for impairment.  Allowable methods for determining the amount of impairment include estimating fair value using the fair value of the collateral for collateral-dependent loans.

 

Mortgage-Servicing Rights

 

Mortgage-servicing rights do not trade in an active, open market with readily observable prices.  Accordingly, fair value is estimated using discounted cash flow models having significant inputs of discount rate, prepayment speed and default rate.  Due to the nature of the valuation inputs, mortgage-servicing rights are classified within Level 3 of the hierarchy.

 

Mortgage-servicing rights are tested for impairment on a quarterly basis based on an independent valuation.  The valuation is reviewed by management for accuracy and for potential impairment.

 

 

 

 

 

 

 

 

Unobservable (Level 3) Inputs

 

The following tables present the fair value measurement of assets recognized in the accompanying consolidated balance sheets measured at fair value on a nonrecurring basis and the level within the fair value hierarchy in which the fair value measurements fall at March 31, 2020 and December 31, 2019:

 


21



 

Fair Value at

 

 

 

 

 

 

 

March 31,

 

Valuation

 

Unobservable

 

 

 

2020

 

Technique

 

Inputs

 

Range

 

 

 

Collateral-dependent

$49

 

Appraisal

 

Marketability

 

0% - 78%

   impaired loans

 

 

 

 

discount

 

 

 

 

 

 

 

 

 

 

Mortgage-servicing rights

$911

 

Discounted cash flow

 

Discount rate

 

10%

 

 

 

 

 

 

 

 

 

 

Fair Value at

 

 

 

 

 

 

 

December 31,

 

Valuation

 

Unobservable

 

 

 

2019

 

Technique

 

Inputs

 

Range

 

 

 

Collateral-dependent

$57

 

Appraisal

 

Marketability

 

0% - 75%

   impaired loans

 

 

 

 

discount

 

 

 

 

 

 

 

 

 

 

Mortgage-servicing rights

$1,033

 

Discounted cash flow

 

Discount rate

 

10%

 

 

Fair Value of Financial Instruments

 

The following tables present estimated fair values of the Company’s financial instruments at March 31, 2020 and December 31, 2019.

 

 

 

 

Fair Value Measurements Using

 

 

 

Quoted Prices

 

 

 

 

 

 

 

in Active

 

Significant

 

 

 

 

 

Markets for

 

Other

 

Significant

 

 

 

Identical  

 

Observable

 

Unobservable

 

Carrying

 

Assets

 

Inputs

 

Inputs

 

Value

 

(Level 1)

 

(Level 2)

 

(Level 3)

March 31, 2020

 

 

 

 

 

 

 

 

 

 

 

 Financial assets

 

 

 

 

 

 

 

 

 

 

 

     Cash and cash equivalents

$

27,456

 

$

12,456

 

$

-

 

$

-

     Available-for-sale securities

 

238,891

 

 

13

 

 

238,878

 

 

-

     Held-to-maturity securities

 

13,770

 

 

-

 

 

13,974

 

 

-

     Loans and leases receivable, net

 

687,054

 

 

-

 

 

 

 

702,681

     Federal Reserve and FHLB stock

 

8,631

 

 

-

 

 

8,631

 

 

-

     Interest receivable

 

3,248

 

 

-

 

 

3,248

 

 

-

 

 

 

 

 

 

 

 

 

 

 

 

 Financial liabilities

 

 

 

 

 

 

 

 

 

 

 

     Deposits

 

605,235

 

 

-

 

 

609,100

 

 

-

     FHLB advances

 

182,000

 

 

-

 

 

189,200

 

 

-

     Interest payable

 

350

 

 

-

 

 

350

 

 

-

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Fair Value Measurements Using

 

 

 

Quoted Prices

 

 

 

 

 

 

 

in Active

 

Significant

 

 

 

 

 

Markets for

 

Other

 

Significant

 

 

 

Identical  

 

Observable

 

Unobservable

 

Carrying

 

Assets

 

Inputs

 

Inputs


22



 

Value

 

(Level 1)

 

(Level 2)

 

(Level 3)

December 31, 2019

 

 

 

 

 

 

 

 

 

 

 

  Financial assets

 

 

 

 

 

 

 

 

 

 

 

     Cash and cash equivalents

$

40,597

 

$

40,597

 

$

-

 

$

-

     Available-for-sale securities

 

201,784

 

 

13

 

 

201,771

 

 

-

     Held-to-maturity securities

 

15,917

 

 

-

 

 

16,156

 

 

-

     Loans and leases receivable, net

 

687,258

 

 

-

 

 

-

 

 

687,789

     Federal Reserve and FHLB stock

 

7,600

 

 

-

 

 

7,600

 

 

-

     Interest receivable

 

3,052

 

 

-

 

 

3,052

 

 

-

 

 

 

 

 

 

 

 

 

 

 

 

  Financial liabilities