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Section 1: 10-Q (QUARTERLY REPORT)

 

 

 

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549

 

FORM 10-Q
 

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

 

 

 

For the quarterly period ended March 31, 2020

 

 

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

 

 

 

For the transition period from                 to                

 

Commission File Number: 000-19202

 

ChoiceOne Financial Services, Inc.
(Exact Name of Registrant as Specified in its Charter)

 

Michigan
(State or Other Jurisdiction of
Incorporation or Organization)

 

38-2659066
(I.R.S. Employer Identification No.)

 

 

 

109 East Division
Sparta, Michigan
(Address of Principal Executive Offices)

 

 


49345
(Zip Code)

 

 

 

(616) 887-7366
(Registrant’s Telephone Number, including Area Code)

 

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

Yes ☒        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 ☒        No ☐

 

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company, 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 

Smaller reporting company ☒

 

 

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.  

 

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

 

Title of each class

Trading symbol(s)

Name of each exchange on which registered

Common stock

COFS

NASDAQ Capital Market

 

As of April 30, 2020, the Registrant had outstanding 7,253,576 shares of common stock.

 

 

 

 

 

PART I.  FINANCIAL INFORMATION

 

Item 1.  Financial Statements.

 

ChoiceOne Financial Services, Inc.
CONSOLIDATED BALANCE SHEETS

 

 

 

March 31,

 

 

December 31,

 

(Dollars in thousands)

 

2020

 

 

2019

 

 

 

(Unaudited)

 

 

(Audited)

 

Assets

 

 

 

 

 

 

 

 

Cash and due from banks

 

$

45,221

 

 

$

59,308

 

Time deposits in other financial institutions

 

 

250

 

 

 

250

 

Cash and cash equivalents

 

 

45,471

 

 

 

59,558

 

 

 

 

 

 

 

 

 

 

Equity securities at fair value (Note 2)

 

 

2,462

 

 

 

2,851

 

Securities available for sale (Note 2)

 

 

361,904

 

 

 

339,579

 

Federal Home Loan Bank stock

 

 

3,524

 

 

 

3,524

 

Federal Reserve Bank stock

 

 

2,946

 

 

 

2,934

 

Loans held for sale

 

 

7,385

 

 

 

3,095

 

Loans to other financial institutions

 

 

39,421

 

 

 

51,048

 

Loans (Note 3)

 

 

811,577

 

 

 

802,048

 

Allowance for loan losses (Note 3)

 

 

(4,790

)

 

 

(4,057

)

Loans, net

 

 

806,787

 

 

 

797,991

 

 

 

 

 

 

 

 

 

 

Premises and equipment, net

 

 

24,087

 

 

 

24,265

 

Other real estate owned, net

 

 

926

 

 

 

929

 

Cash value of life insurance policies

 

 

32,171

 

 

 

31,979

 

Goodwill

 

 

52,593

 

 

 

52,870

 

Core deposit intangible

 

 

5,653

 

 

 

6,006

 

Other assets

 

 

13,160

 

 

 

9,499

 

Total assets

 

$

1,398,490

 

 

$

1,386,128

 

 

 

 

 

 

 

 

 

 

Liabilities

 

 

 

 

 

 

 

 

Deposits – noninterest-bearing

 

$

283,434

 

 

$

287,460

 

Deposits – interest-bearing

 

 

889,965

 

 

 

867,142

 

Total deposits

 

 

1,173,399

 

 

 

1,154,602

 

 

 

 

 

 

 

 

 

 

Advances from Federal Home Loan Bank

 

 

23,188

 

 

 

33,198

 

Other liabilities

 

 

6,101

 

 

 

6,189

 

Total liabilities

 

 

1,202,688

 

 

 

1,193,989

 

 

 

 

 

 

 

 

 

 

Shareholders’ Equity

 

 

 

 

 

 

 

 

Preferred stock; shares authorized: 100,000; shares outstanding: none

 

 

 

 

 

 

Common stock and paid-in capital, no par value; shares authorized: 12,000,000; shares outstanding: 7,249,533 at March 31, 2020 and 7,245,088 at December 31, 2019

 

 

162,745

 

 

 

162,610

 

Retained earnings

 

 

29,856

 

 

 

28,051

 

Accumulated other comprehensive income, net

 

 

3,201

 

 

 

1,478

 

Total shareholders’ equity

 

 

195,802

 

 

 

192,139

 

Total liabilities and shareholders’ equity

 

$

1,398,490

 

 

$

1,386,128

 

 

See accompanying notes to interim consolidated financial statements. 

 

2

 

 

ChoiceOne Financial Services, Inc.
CONSOLIDATED STATEMENTS OF INCOME (Unaudited)

 

(Dollars in thousands, except per share data)

 

Three Months Ended
March 31,

 

 

 

2020

 

 

2019

 

Interest income

 

 

 

 

 

 

 

 

Loans, including fees

 

$

10,075

 

 

$

5,280

 

Securities:

 

 

 

 

 

 

 

 

Taxable

 

 

1,857

 

 

 

760

 

Tax exempt

 

 

368

 

 

 

369

 

Other

 

 

194

 

 

 

68

 

Total interest income

 

 

12,494

 

 

 

6,477

 

 

 

 

 

 

 

 

 

 

Interest expense

 

 

 

 

 

 

 

 

Deposits

 

 

1,385

 

 

 

851

 

Advances from Federal Home Loan Bank

 

 

136

 

 

 

116

 

Other

 

 

2

 

 

 

14

 

Total interest expense

 

 

1,523

 

 

 

981

 

 

 

 

 

 

 

 

 

 

Net interest income

 

 

10,971

 

 

 

5,496

 

Provision for loan losses

 

 

775

 

 

 

 

Net interest income after provision for loan losses

 

 

10,196

 

 

 

5,496

 

 

 

 

 

 

 

 

 

 

Noninterest income

 

 

 

 

 

 

 

 

Customer service charges

 

 

1,845

 

 

 

1,033

 

Insurance and investment commissions

 

 

126

 

 

 

63

 

Gains on sales of loans

 

 

1,743

 

 

 

246

 

Net gains on sales of securities

 

 

2

 

 

 

1

 

Net gains on sales and write-downs of other assets

 

 

2

 

 

 

13

 

Earnings on life insurance policies

 

 

192

 

 

 

96

 

Trust income

 

 

170

 

 

 

 

Change in market value of equity securities

 

 

(389

)

 

 

187

 

Other

 

 

408

 

 

 

119

 

Total noninterest income

 

 

4,099

 

 

 

1,758

 

 

 

 

 

 

 

 

 

 

Noninterest expense

 

 

 

 

 

 

 

 

Salaries and benefits

 

 

5,128

 

 

 

2,777

 

Occupancy and equipment

 

 

1,270

 

 

 

771

 

Data processing

 

 

1,484

 

 

 

556

 

Professional fees

 

 

762

 

 

 

517

 

Supplies and postage

 

 

225

 

 

 

100

 

Advertising and promotional

 

 

148

 

 

 

44

 

Intangible amortization

 

 

353

 

 

 

 

FDIC insurance

 

 

68

 

 

 

 

Other

 

 

978

 

 

 

569

 

Total noninterest expense

 

 

10,416

 

 

 

5,334

 

 

 

 

 

 

 

 

 

 

Income before income tax

 

 

3,879

 

 

 

1,920

 

Income tax expense

 

 

625

 

 

 

283

 

 

 

 

 

 

 

 

 

 

Net income

 

$

3,254

 

 

$

1,637

 

 

 

 

 

 

 

 

 

 

Basic earnings per share (Note 4)

 

$

0.45

 

 

$

0.45

 

Diluted earnings per share (Note 4)

 

$

0.45

 

 

$

0.45

 

Dividends declared per share

 

$

0.20

 

 

$

0.20

 

 

See accompanying notes to interim consolidated financial statements. 

 

3

 

 

ChoiceOne Financial Services, Inc.
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS) (Unaudited)

 

(Dollars in thousands)

 

Three Months Ended
March 31,

 

 

 

2020

 

 

2019

 

Net income

 

$

3,254

 

 

$

1,637

 

 

 

 

 

 

 

 

 

 

Other comprehensive income:

 

 

 

 

 

 

 

 

Changes in net unrealized gains (losses) on investment securities available for sale, net of tax expense of $458 and $323 for the three months ended March 31, 2020 and March 31, 2019, respectively

 

 

1,725

 

 

 

1,215

 

 

 

 

 

 

 

 

 

 

Reclassification adjustment for realized gain on sale of investment securities available for sale included in net income, net of tax expense of $0 and $0 for the periods ended March 31, 2020 and 2019, respectively

 

 

(2

)

 

 

(1

)

 

 

 

 

 

 

 

 

 

Other comprehensive income (loss), net of tax

 

 

1,723

 

 

 

1,214

 

 

 

 

 

 

 

 

 

 

Comprehensive income

 

$

4,977

 

 

$

2,851

 

 

See accompanying notes to interim consolidated financial statements. 

 

4

 

 

ChoiceOne Financial Services, Inc.
CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS’ EQUITY (Unaudited)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(Dollars in thousands, except per share data)

 

Number of
Shares

 

 

Common
Stock and
Paid in
Capital

 

 

Retained
Earnings

 

 

Accumulated
Other
Comprehensive
Income/(Loss),
Net

 

 

Total

 

Balance, January 1, 2019

 

 

3,616,483

 

 

$

54,523

 

 

$

26,686

 

 

$

(732

)

 

$

80,477

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net income

 

 

 

 

 

 

 

 

 

 

1,637

 

 

 

 

 

 

 

1,637

 

Other comprehensive income

 

 

 

 

 

 

 

 

 

 

 

 

 

 

1,214

 

 

 

1,214

 

Shares issued

 

 

2,004

 

 

 

47

 

 

 

 

 

 

 

 

 

 

 

47

 

Effect of employee stock purchases

 

 

 

 

 

 

4

 

 

 

 

 

 

 

 

 

 

 

4

 

Stock-based compensation expense

 

 

 

 

 

 

57

 

 

 

 

 

 

 

 

 

 

 

57

 

Restricted stock units issued

 

 

1,023

 

 

 

(10

)

 

 

 

 

 

 

 

 

 

 

(10

)

Cash dividends declared ($0.20 per share)

 

 

 

 

 

 

 

 

 

 

(724

)

 

 

 

 

 

 

(724

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Balance, March 31, 2019

 

 

3,619,510

 

 

$

54,621

 

 

$

27,599

 

 

$

482

 

 

$

82,702

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Balance, January 1, 2020

 

 

7,245,088

 

 

$

162,610

 

 

$

28,051

 

 

$

1,478

 

 

$

192,139

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net income

 

 

 

 

 

 

 

 

 

 

3,254

 

 

 

 

 

 

 

3,254

 

Other comprehensive income

 

 

 

 

 

 

 

 

 

 

 

 

 

 

1,723

 

 

 

1,723

 

Shares issued

 

 

3,656

 

 

 

106

 

 

 

 

 

 

 

 

 

 

 

106

 

Effect of employee stock purchases

 

 

 

 

 

 

4

 

 

 

 

 

 

 

 

 

 

 

4

 

Stock options exercised and issued (1)

 

 

789

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Stock-based compensation expense

 

 

 

 

 

 

25

 

 

 

 

 

 

 

 

 

 

 

25

 

Cash dividends declared ($0.20 per share)

 

 

 

 

 

 

 

 

 

 

(1,449

)

 

 

 

 

 

 

(1,449

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Balance, March 31, 2020

 

 

7,249,533

 

 

 

162,745

 

 

 

29,856

 

 

 

3,201

 

 

 

195,802

 

 

(1) The amount shown represents the number of shares issued in cashless transactions where some taxes are netted on a portion of the exercises. 

 

See accompanying notes to interim consolidated financial statements. 

 

5

 

 

ChoiceOne Financial Services, Inc.
CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)

 

(Dollars in thousands)

 

Three Months Ended
March 31,

 

 

 

2020

 

 

2019

 

Cash flows from operating activities:

 

 

 

 

 

 

 

 

Net income

 

$

3,254

 

 

$

1,637

 

Adjustments to reconcile net income to net cash from operating activities:

 

 

 

 

 

 

 

 

Provision for loan losses

 

 

775

 

 

 

 

Depreciation

 

 

563

 

 

 

351

 

Amortization

 

 

718

 

 

 

216

 

Compensation expense on employee and director stock purchases, stock options, and restricted stock units

 

 

112

 

 

 

79

 

Net gains on sales of securities

 

 

(2

)

 

 

(1

)

Net change in market value of equity securities

 

 

389

 

 

 

(187

)

Gains on sales of loans

 

 

(1,743

)

 

 

(246

)

Loans originated for sale

 

 

(32,372

)

 

 

(6,944

)

Proceeds from loan sales

 

 

29,614

 

 

 

6,279

 

Earnings on bank-owned life insurance

 

 

(192

)

 

 

(96

)

(Gains)/losses on sales of other real estate owned

 

 

 

 

 

(8

)

Proceeds from sales of other real estate owned

 

 

64

 

 

 

53

 

Costs capitalized to other real estate

 

 

(19

)

 

 

 

Deferred federal income tax (benefit)/expense

 

 

(281

)

 

 

6

 

Net change in:

 

 

 

 

 

 

 

 

Other assets

 

 

(3,355

)

 

 

(313

)

Other liabilities

 

 

(17

)

 

 

(99

)

Net cash from operating activities

 

 

(2,491

)

 

 

727

 

 

 

 

 

 

 

 

 

 

Cash flows from investing activities:

 

 

 

 

 

 

 

 

Maturities, prepayments and calls of securities available for sale

 

 

9,633

 

 

 

4,547

 

Purchases of securities available for sale

 

 

(29,954

)

 

 

(4,789

)

Loan originations and payments, net

 

 

1,776

 

 

 

(318

)

Additions to premises and equipment

 

 

(412

)

 

 

(484

)

Net cash from investing activities

 

 

(18,957

)

 

 

(1,044

)

 

 

 

 

 

 

 

 

 

Cash flows from financing activities:

 

 

 

 

 

 

 

 

Net change in deposits

 

 

18,797

 

 

 

(12,564

)

Net change in fed funds purchased

 

 

 

 

 

(4,800

)

Proceeds from Federal Home Loan Bank advances

 

 

 

 

 

30,000

 

Payments on Federal Home Loan Bank advances

 

 

(10,010

)

 

 

(15,008

)

Issuance of common stock

 

 

23

 

 

 

19

 

Cash dividends

 

 

(1,449

)

 

 

(724

)

Net cash from financing activities

 

 

7,361

 

 

 

(3,077

)

 

 

 

 

 

 

 

 

 

Net change in cash and cash equivalents

 

 

(14,087

)

 

 

(3,394

)

Beginning cash and cash equivalents

 

 

59,558

 

 

 

19,690

 

 

 

 

 

 

 

 

 

 

Ending cash and cash equivalents

 

$

45,471

 

 

$

16,296

 

 

 

 

 

 

 

 

 

 

Supplemental disclosures of cash flow information:

 

 

 

 

 

 

 

 

Cash paid for interest

 

$

1,508

 

 

$

1,015

 

Loans transferred to other real estate owned

 

 

42

 

 

 

64

 

 

See accompanying notes to interim consolidated financial statements.

 

6

 

 

ChoiceOne Financial Services, Inc.
NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS

 

NOTE 1 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

 

Principles of Consolidation

 

The consolidated financial statements include ChoiceOne Financial Services, Inc. ("ChoiceOne"), its wholly-owned subsidiary, ChoiceOne Bank, and ChoiceOne Bank’s wholly-owned subsidiary, ChoiceOne Insurance Agencies, Inc. For periods after September 30, 2020, the consolidated financial statements also include ChioceOne's wholly owned subsidiary, Lakestone Bank & Trust (together with ChoiceOne Bank, the "Banks") and Lakestone Bank & Trust's wholly-owned subsidiary, Lakestone Financial Services, Inc., as a result of the merger of County Bank Corp. with and into ChoiceOne. Intercompany transactions and balances have been eliminated in consolidation.

 

The consolidated financial statements have been prepared in accordance with generally accepted accounting principles for interim financial information, prevailing practices within the banking industry and the instructions to Form 10-Q. Accordingly, they do not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements.

 

The accompanying consolidated financial statements reflect all adjustments ordinary in nature which are, in the opinion of management, necessary for a fair presentation of the Consolidated Balance Sheets as of March 31, 2020 and December 31, 2019, the Consolidated Statements of Income for the three-month periods ended March 31, 2020 and March 31, 2019, the Consolidated Statements of Comprehensive Income for the three-month periods ended March 31, 2020 and March 31, 2019, the Consolidated Statements of Changes in Shareholders’ Equity for the three-month periods ended March 31, 2020 and March 31, 2019, and the Consolidated Statements of Cash Flows for the three-month periods ended March 31, 2020 and March 31, 2019. Operating results for the three months ended March 31, 2020 are not necessarily indicative of the results that may be expected for the year ending December 31, 2020.

 

The accompanying consolidated financial statements should be read in conjunction with the consolidated financial statements and footnotes thereto included in ChoiceOne’s Annual Report on Form 10-K for the year ended December 31, 2019.

 

Loans to Other Financial Institutions 

The Banks entered into agreements with another financial institution to fund mortgage loans. Loans to other financial institutions are purchased participating interests in individual advances made to mortgage bankers nation-wide from an unaffiliated originating bank. The originating bank services these loans and cash flows on the individual advances (principal, interest, and fees) which are allocated pro-rata based on ownership in the participating interest, less fees paid for the servicing activity. The underlying collateral is generally made up of 1-4 family first residential mortgages owned by the mortgage banker and held for sale in the secondary market and have been underwritten using secondary market underwriting standards prior to purchasing the participating interest. Once the mortgage banker delivers the loan to the secondary market, the advance is required to be paid off, including the Bank’s participating interest. If the advance (in which one of the Banks has a participating interest) is outstanding over 90 days, the originating bank has the right to request the participating interest be paid off by the mortgage banker. The participating interests are subject to concentration risk to 15 different mortgage bankers, with the largest creditor outstanding representing 15% of the total at March 31, 2020.

 

Credit risk associated with the participating interest is measured as an allowance for loan loss when necessary. Losses are charged off against the allowance when incurred and recoveries of loan charge-offs are recorded when received. At least quarterly, the Banks review the portfolios of participating interests for potential losses including any participating interest that is outstanding over 90 days (even if the advance and participating interest is current). At March 31, 2020, 11 of the 322 participating interests with principal balances totaling $2.3 million had balances outstanding over 30 days. During the first three months of 2020, there were no losses or charge-offs of participating interests.

 

Allowance for Loan Losses

The allowance for loan losses is maintained at a level believed adequate by management to absorb probable incurred losses inherent in the consolidated loan portfolio. Management’s evaluation of the adequacy of the allowance is an estimate based on reviews of individual loans, assessments of the impact of current economic conditions on the portfolio and historical loss experience of seasoned loan portfolios. See Note 3 to the interim consolidated financial statements for additional information.

 

Management believes the accounting estimate related to the allowance for loan losses is a “critical accounting estimate” because (1) the estimate is highly susceptible to change from period to period because of assumptions concerning the changes in the types and volumes of the portfolios and economic conditions and (2) the impact of recognizing an impairment or loan loss could have a material effect on ChoiceOne’s assets reported on the balance sheets as well as its net income.

 

7

 

 

Stock Transactions

A total of 2,615 shares of common stock were issued to ChoiceOne’s Board of Directors for a cash price of $83,000 under the terms of the Directors’ Stock Purchase Plan in the first quarter of 2020. A total of 1,041 shares for a cash price of $23,000 were issued under the Employee Stock Purchase Plan in the first quarter of 2020. Shares issued upon the exercise of stock options, net of shares withheld for payment for the options, totaled 789 in the first quarter of 2020.

 

Stock-Based Compensation

ChoiceOne grants restricted stock units to a select group of employees under the Stock Incentive Plan of 2012. All of the restricted stock units are initially unvested and vest in three annual installments on each of the next three anniversaries of the grant date. Certain additional vesting provisions apply. Each unit, once vested, is settled by delivery of one share of ChoiceOne common stock.

 

Reclassifications 

Certain amounts presented in prior periods have been reclassified to conform to the current presentation.

 

Recent Accounting Pronouncements

The FASB issued ASU No. 2016-13, Financial Instruments—Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments. This ASU provides financial statement users with more decision-useful information about the expected credit losses on financial instruments and other commitments to extend credit held by a reporting entity at each reporting date by replacing the incurred loss impairment methodology in current generally accepted accounting principles (GAAP) with a methodology that reflects expected credit losses and requires consideration of a broader range of reasonable and supportable information to inform credit loss estimates. The new guidance attempts to reflect an entity’s current estimate of all expected credit losses and broadens the information that an entity must consider in developing its expected credit loss estimate for assets measured either collectively or individually to include forecasted information, as well as past events and current conditions. There is no specified method for measuring expected credit losses, and an entity may apply methods that reasonably reflect its expectations of the credit loss estimate. Although an entity may still use its current systems and methods for recording the allowance for credit losses, under the new rules, the inputs used to record the allowance for credit losses generally will need to change to appropriately reflect an estimate of all expected credit losses and the use of reasonable and supportable forecasts. Additionally, credit losses on available-for-sale debt securities will have to be presented as an allowance rather than as a write-down. This ASU is effective for fiscal years beginning after December 15, 2022, and for interim periods within those years for companies considered a smaller reporting company with the Securities and Exchange Commission. ChoiceOne was classified as a smaller reporting company as of December 31, 2019. Management is currently evaluating the impact of this new ASU on its consolidated financial statements which may be significant.

FASB pronouncement ASU 2017-04 (topic 350) is effective for fiscal years beginning after December 15, 2019. To simplify the subsequent measurement of goodwill, the Board eliminated Step 2 from the goodwill impairment test. Previously, in computing the implied fair value of goodwill under Step 2, an entity had to perform procedures to determine the fair value at the impairment testing date of its assets and liabilities (including unrecognized assets and liabilities) following the procedure that would be required in determining the fair value of assets acquired and liabilities assumed in a business combination. Instead, under the amendments in ASU 2017-04, an entity should perform its annual, or interim, goodwill impairment test by comparing the fair value of a reporting unit with its carrying amount. An entity should recognize an impairment charge for the amount by which the carrying amount exceeds the reporting unit’s fair value; however, the loss recognized should not exceed the total amount of goodwill allocated to that reporting unit. Additionally, an entity should consider income tax effects from any tax-deductible goodwill on the carrying amount of the reporting unit when measuring the goodwill impairment loss, if applicable. The Board also eliminated the requirements for any reporting unit with a zero or negative carrying amount to perform a qualitative assessment and, if it fails that qualitative test, to perform Step 2 of the goodwill impairment test. Therefore, the same impairment assessment applies to all reporting units. An entity is required to disclose the amount of goodwill allocated to each reporting unit with a zero or negative carrying amount of net assets. ChoiceOne performed a step zero during the current quarter and determined no impairment was necessary. Refer to testing performed in the Goodwill section below.

Goodwill

ChoiceOne evaluates goodwill annually for impairment. Accounting pronouncements allow a company to first perform a qualitative assessment for goodwill prior to a quantitative assessment (Step 1 assessment). If the results of the qualitative assessment indicate that it is more likely than not that goodwill is impaired, then a quantitative assessment must be performed. If not, there is no further assessment required.

 

Management performed its annual qualitative assessment of goodwill as of June 30, 2019. As a result of the impact of the emergence of the COVID-19 pandemic in the first quarter of 2020, management believed it was prudent to perform an interim qualitative assessment as of March 31, 2020. The analysis consisted of a review of ChoiceOne’s current and expected future financial performance, the potential impact of COVID-19 on the ability of ChoiceOne’s borrowers to comply with loan terms, and the impact that reductions in both short-term and long-term interest rates have had and may continue to have on net interest margin and mortgage sales activity. The share price and book value of ChoiceOne’s stock were also compared to the prior year. Upon completion of the qualitative assessment, ChoiceOne believed that it was more likely than not that the fair value of ChoiceOne’s equity exceeded the carrying value as of March 31, 2020 and there was no further quantitative assessment necessary. If COVID-19 causes a prolonged economic downturn, ChoiceOne may perform additional interim assessments of its goodwill balance in future periods.

 

8

 

 

NOTE 2 – SECURITIES

 

The fair value of equity securities and the related gross unrealized gains(losses) recognized in noninterest income were as follows:

 

 

 

March 31, 2020

 

(Dollars in thousands)

 

Amortized
Cost

 

 

Gross
Unrealized
Gains

 

 

Gross
Unrealized
Losses

 

 

Fair
Value

 

Equity securities

 

$

2,636

 

 

$

 

 

$

(174

)

 

$

2,462

 

 

 

 

December 31, 2019

 

(Dollars in thousands)

 

Amortized
Cost

 

 

Gross
Unrealized
Gains

 

 

Gross
Unrealized
Losses

 

 

Fair
Value

 

Equity securities

 

$

2,636

 

 

$

215

 

 

$

 

 

$

2,851

 

 

The fair value of securities available for sale and the related unrealized gains and losses recognized in accumulated other comprehensive income were as follows:

 

 

 

March 31, 2020

 

(Dollars in thousands)

 

Amortized
Cost

 

 

Gross
Unrealized
Gains

 

 

Gross
Unrealized
Losses

 

 

Fair
Value

 

U.S. Government and federal agency

 

$

17,003

 

 

$

126

 

 

$

 

 

$

17,129

 

U.S. Treasury notes and bonds

 

 

1,995

 

 

 

79

 

 

 

 

 

 

2,074

 

State and municipal

 

 

186,586

 

 

 

4,142

 

 

 

(589

)

 

 

190,139

 

Mortgage-backed

 

 

148,577

 

 

 

1,707

 

 

 

(1,581

)

 

 

148,703

 

Corporate

 

 

2,850

 

 

 

45

 

 

 

(36

)

 

 

2,859

 

Trust preferred securities

 

 

1,000

 

 

 

 

 

 

 

 

 

1,000

 

 Total

 

$

358,011

 

 

$

6,099

 

 

$

(2,206

)

 

$

361,904

 

 

 

 

December 31, 2019

 

(Dollars in thousands)

 

Amortized
Cost

 

 

Gross
Unrealized
Gains

 

 

Gross
Unrealized
Losses

 

 

Fair
Value

 

U.S. Government and federal agency

 

$

17,231

 

 

$

23

 

 

$

(39

)

 

$

17,215

 

U.S. Treasury notes and bonds

 

 

1,994

 

 

 

14

 

 

 

 

 

 

2,008

 

State and municipal

 

 

172,487

 

 

 

2,694

 

 

 

(1,257

)

 

 

173,924

 

Mortgage-backed

 

 

142,504

 

 

 

585

 

 

 

(329

)

 

 

142,760

 

Corporate

 

 

2,649

 

 

 

24

 

 

 

(1

)

 

 

2,672

 

Trust preferred securities

 

 

1,000

 

 

 

 

 

 

 

 

 

1,000

 

 Total

 

$

337,865

 

 

$

3,340

 

 

$

(1,626

)

 

$

339,579

 

 

ChoiceOne reviews its securities portfolio on a quarterly basis to determine whether unrealized losses are considered to be temporary or other-than-temporary. No other-than-temporary impairment charges were recorded in the first quarter of 2020. ChoiceOne believes that unrealized losses on securities were temporary in nature and were due to changes in interest rates and reduced market liquidity and not as a result of credit quality issues.

 

Presented below is a schedule of maturities of securities as of March 31, 2020, the fair value of securities as of March 31, 2020 and December 31, 2019, and the weighted average yields of securities as of March 31, 2020:

 

9

 

 

 

 

Securities maturing within:

 

 

 

 

 

 

 

(Dollars in thousands)

 

Less than
1 Year

 

 

1 Year -
5 Years

 

 

5 Years -
10 Years

 

 

More than
10 Years

 

 

Fair Value
at March 31,
2020

 

 

Fair Value
at Dec. 31,
2019

 

U.S. Government and federal agency

 

$

8,015

 

 

$

2,073

 

 

$

7,041

 

 

$

 

 

$

17,129

 

 

$

17,215

 

U.S. Treasury notes and bonds

 

 

 

 

 

2,074

 

 

 

 

 

 

 

 

 

2,074

 

 

 

2,008

 

State and municipal (1)

 

 

19,795

 

 

 

46,750

 

 

 

97,211

 

 

 

26,383

 

 

 

190,139

 

 

 

173,924

 

Corporate

 

 

464

 

 

 

2,395

 

 

 

 

 

 

 

 

 

2,859

 

 

 

2,672

 

Trust preferred securities

 

 

1,000

 

 

 

 

 

 

 

 

 

 

 

 

1,000

 

 

 

1,000

 

Total debt securities

 

 

29,274

 

 

 

53,292

 

 

 

104,252

 

 

 

26,383

 

 

 

213,201

 

 

 

196,819

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Mortgage-backed securities

 

 

333

 

 

 

85,655

 

 

 

60,229

 

 

 

2,486

 

 

 

148,703

 

 

 

142,760

 

Equity securities (2)

 

 

 

 

 

 

 

 

935

 

 

 

1,527

 

 

 

2,462

 

 

 

2,851

 

Total

 

$

29,607

 

 

$

138,947

 

 

$

165,416

 

 

$

30,396

 

 

$

364,366

 

 

$

342,430

 

 

 

 

 

 Weighted average yields:

 

 

 

Less than
1 Year

 

 

1 Year -
5 Years

 

 

5 Years -
10 Years

 

 

More than
10 Years

 

 

 Total

 

U.S. Government and federal agency

 

 

1.76

%

 

 

1.98

%

 

 

2.41

%

 

 

 

 

2.06

%

U.S. Treasury notes and bonds

 

 

 

 

 

1.85

 

 

 

 

 

 

 

 

 

1.85

 

State and municipal (1)

 

 

2.27

 

 

 

2.91

 

 

 

2.78

 

 

 

2.84

 

 

 

2.77

 

Corporate

 

 

3.10

 

 

 

2.74

 

 

 

 

 

 

 

 

 

2.80

 

Trust preferred securities

 

 

4.50

 

 

 

 

 

 

 

 

 

 

 

 

4.50

 

Mortgage-backed securities

 

 

0.80

 

 

 

2.24

 

 

 

2.09

 

 

 

3.21

 

 

 

2.19

 

Equity securities (2)

 

 

 

 

 

 

 

 

4.56

 

 

 

 

 

 

0.76

 

 

Following is information regarding unrealized gains and losses on equity securities for the three-month periods ending March 31:

 

 

 

Three Months Ended
March 31,

 

 

 

2020

 

 

2019

 

 

 

 

 

 

 

 

 

 

Net gains and losses recognized during the period

 

$

(389

)

 

$

187

 

Less: Net gains and losses recognized during the period on

securities sold

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Unrealized gains and losses recognized during the reporting period


on securities still held at the reporting date

 

$

(389

)

 

$

187

 

 

10

 

 

 

NOTE 3 – LOANS AND ALLOWANCE FOR LOAN LOSSES

 

Activity in the allowance for loan losses and balances in the loan portfolio were as follows:

 

(Dollars in thousands)

 

Agricultural

 

 

Commercial
and
Industrial

 

 

Consumer

 

 

Commercial
Real Estate

 

 

Construction
Real Estate

 

 

Residential
Real Estate

 

 

Unallocated

 

 

Total

 

Allowance for Loan Losses Three Months Ended March 31, 2020

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Beginning balance

 

$

471

 

 

$

655

 

 

$

270

 

 

$

1,663

 

 

$

76

 

 

$

640

 

 

$

282

 

 

$

4,057

 

Charge-offs

 

 

 

 

 

 

 

 

(89

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(89

)

Recoveries

 

 

 

 

 

1

 

 

 

44

 

 

 

 

 

 

 

 

 

2

 

 

 

 

 

 

47

 

Provision

 

 

(124

)

 

 

197

 

 

 

(5

)

 

 

297

 

 

 

48

 

 

 

419

 

 

 

(57

)

 

 

775

 

Ending balance

 

$

347

 

 

$

853

 

 

$

220

 

 

$

1,960

 

 

$

124

 

 

$

1,061

 

 

$

225

 

 

$

4,790

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Individually evaluated for impairment

 

$

98

 

 

$

 

 

$

1

 

 

$

13

 

 

$

 

 

$

266

 

 

$

 

 

$

378

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Collectively evaluated for impairment

 

$

249

 

 

$

853

 

 

$

219

 

 

$

1,947

 

 

$

124

 

 

$

795

 

 

$

225

 

 

$

4,412

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

December 31, 2019

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Individually evaluated for impairment

 

$

103

 

 

$

 

 

$

4

 

 

$

13

 

 

$

 

 

$

235

 

 

$

 

 

$

355

 

                                                                 

Collectively evaluated for impairment

 

$

368

 

 

$

655

 

 

$

266

 

 

$

1,650

 

 

$

76

 

 

$

405

 

 

$

282

 

 

$

3,702

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Three Months Ended                                                                
March 31, 2019                                                                

Beginning balance

 

$

481

 

 

$

892

 

 

$

254

 

 

$

1,926

 

 

$

38

 

 

$

537

 

 

$

545

 

 

$

4,673

 

Charge-offs

 

 

 

 

 

 

 

 

(106

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(106

)

Recoveries

 

 

 

 

 

17

 

 

 

143

 

 

 

2

 

 

 

 

 

 

1

 

 

 

 

 

 

163

 

Provision

 

 

(57

)

 

 

(52

)

 

 

45

 

 

 

(65

)

 

 

2

 

 

 

20

 

 

 

107

 

 

 

 

Ending balance

 

$

424

 

 

$

857

 

 

$

336

 

 

$

1,863

 

 

$

40

 

 

$

558

 

 

$

652

 

 

$

4,730

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Individually evaluated for impairment

 

$

85

 

 

$

4

 

 

$

12

 

 

$

19

 

 

$

 

 

$

179

 

 

$

 

 

$

299

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Collectively evaluated for impairment

 

$

339

 

 

$

853

 

 

$

324

 

 

$

1,844

 

 

$

40

 

 

$

379

 

 

$

652

 

 

$

4,431

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Loans

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

March 31, 2020

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Individually evaluated for impairment

 

$

379

 

 

$

259

 

 

$

16

 

 

$

2,272

 

 

$

 

 

$

2,449

 

 

 

 

 

 

$

5,375

 

Collectively evaluated for impairment

 

 

50,104

 

 

 

136,989

 

 

 

34,236

 

 

 

348,365

 

 

 

17,525

 

 

 

213,706

 

 

 

 

 

 

 

800,925

 

Acquired with deteriorated credit quality

 

 

 

 

 

3,953

 

 

 

 

 

 

1,116

 

 

 

 

 

 

208

 

 

 

 

 

 

 

5,277

 

Ending balance

 

$

50,483

 

 

$

141,201

 

 

$

34,252

 

 

$

351,753

 

 

$

17,525

 

 

$

216,363

 

 

 

 

 

 

$

811,577

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

December 31, 2019

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Individually evaluated for impairment

 

$

924

 

 

$

259

 

 

$

17

 

 

$

2,288

 

 

$

 

 

$

2,434

 

 

 

 

 

 

$

5,922

 

Collectively evaluated for impairment

 

 

56,415

 

 

 

141,583

 

 

 

38,524

 

 

 

323,358

 

 

 

13,411

 

 

 

215,106

 

 

 

 

 

 

 

788,397

 

Acquired with deteriorated credit quality

 

 

 

 

 

6,241

 

 

 

313

 

 

 

733

 

 

 

 

 

 

442

 

 

 

 

 

 

 

7,729

 

Ending balance

 

$

57,339

 

 

$

148,083

 

 

$

38,854

 

 

$

326,379

 

 

$

13,411

 

 

$

217,982

 

 

 

 

 

 

$

802,048

 

 

11

 

 

The provision for loan losses was $775,000 in the first quarter of 2020, compared to $0 in the same period in the prior year. The first quarter of 2020 provision was deemed prudent due to growth in ChoiceOne’s loan portfolio, loans originated by Lakestone Bank & Trust in the two quarters since the merger with County Bank Corp., and the uncertainty of the future impact of the global coronavirus (COVID-19) pandemic upon ChoiceOne’s borrowers and their ability to repay loans. While it is difficult to predict the impact that COVID-19 will have in future quarters, ChoiceOne expects increased levels of past due loans, nonperforming loans and loan losses.

 

The process to monitor the credit quality of ChoiceOne’s loan portfolio includes tracking (1) the risk ratings of business loans, (2) the level of classified business loans, and (3) delinquent and nonperforming consumer loans. Business loans are risk rated on a scale of 1 to 8. A description of the characteristics of the ratings follows:

 

Risk ratings 1 and 2: These loans are considered pass credits. They exhibit good to exceptional credit risk and demonstrate the ability to repay the loan from normal business operations.

 

Risk rating 3: These loans are considered pass credits. They exhibit acceptable credit risk and demonstrate the ability to repay the loan from normal business operations.

 

Risk rating 4: These loans are considered pass credits. However, they have potential developing weaknesses that, if not corrected, may cause deterioration in the ability of the borrower to repay the loan. While a loss is possible for a loan with this rating, it is not anticipated.

 

Risk rating 5: These loans are considered special mention credits. Loans in this risk rating are considered to be inadequately protected by the net worth and debt service coverage of the borrower or of any pledged collateral. These loans have well defined weaknesses that may jeopardize the borrower’s ability to repay the loan. If the weaknesses are not corrected, loss of principal and interest could be probable.

 

Risk rating 6: These loans are considered substandard credits. These loans have well defined weaknesses, the severity of which makes collection of principal and interest in full questionable. Loans in this category may be placed on nonaccrual status.

 

Risk rating 7: These loans are considered doubtful credits. Some loss of principal and interest has been determined to be probable. The estimate of the amount of loss could be affected by factors such as the borrower’s ability to provide additional capital or collateral. Loans in this category are on nonaccrual status.

 

Risk rating 8: These loans are considered loss credits. They are considered uncollectible and will be charged off against the allowance for loan losses.

 

12

 

 

 

Information regarding the Banks’ credit exposure was as follows:

 

Corporate Credit Exposure - Credit Risk Profile By Creditworthiness Category

 

(Dollars in thousands)

 

Agricultural

 

 

Commercial and Industrial

 

 

Commercial Real Estate

 

 

 

March 31,
2020

 

 

December 31,
2019

 

 

March 31,
2020

 

 

December 31,
2019

 

 

March 31,
2020

 

 

December 31,
2019

 

Risk ratings 1 and 2

 

$

10,977

 

 

$

14,173

 

 

$

16,405

 

 

$

14,920

 

 

$

11,561

 

 

$

11,051

 

Risk rating 3

 

 

25,759

 

 

 

27,163

 

 

 

96,714

 

 

 

105,656

 

 

 

293,759

 

 

 

271,120

 

Risk rating 4

 

 

12,906

 

 

 

14,530

 

 

 

27,005

 

 

 

26,152

 

 

 

42,244

 

 

 

39,934

 

Risk rating 5

 

 

462

 

 

 

1,094

 

 

 

804

 

 

 

1,081

 

 

 

1,310

 

 

 

1,332

 

Risk rating 6

 

 

379

 

 

 

379

 

 

 

273

 

 

 

274

 

 

 

2,879

 

 

 

2,942

 

 

 

$

50,483

 

 

$

57,339

 

 

$

141,201

 

 

$

148,083

 

 

$

351,753

 

 

$

326,379

 

 

Consumer Credit Exposure - Credit Risk Profile Based On Payment Activity

 

(Dollars in thousands)

 

Consumer

 

 

Construction Real Estate

 

 

Residential Real Estate

 

 

 

March 31,
2020

 

 

December 31,
2019

 

 

March 31,
2020

 

 

December 31,
2019

 

 

March 31,
2020

 

 

December 31,
2019

 

Performing

 

$

34,236

 

 

$

38,838

 

 

$

17,525

 

 

$

13,411

 

 

$

215,434

 

 

$

216,651

 

Nonperforming

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Nonaccrual

 

 

16

 

 

 

16

 

 

 

 

 

 

 

 

 

929

 

 

 

1,331

 

 

 

$

34,252

 

 

$

38,854

 

 

$

17,525

 

 

$

13,411

 

 

$

216,363

 

 

$

217,982

 

 

There were no loans that were considered troubled debt restructurings (“TDRs”) that were modified during the three months ended March 31, 2020 and March 31, 2019. The Banks may agree to modify the terms of a loan in order to improve the Banks’ ability to collect amounts due. These modifications may include reduction of the interest rate, extension of the loan term, or in some cases, reduction of the principal balance.

 

There were no loans that were considered TDRs as of March 31, 2020 and 2019 where the borrower was past due with respect to principal and/or interest for 30 days or more during the three-month periods ended March 31, 2020 and March 31, 2019 that had been modified during the year prior to the default.

 

The federal banking agencies issued an “Interagency Statement on Loan Modifications and Reporting for Financial Institutions Working with Customers Affected by the Coronavirus” on March 22, 2020 and subsequently issued a revised statement on April 7, 2020. These statements encourage financial institutions to work constructively with borrowers affected by COVID-19, and provide that short-term modifications to loans made on a good faith basis to borrowers who were current as of the implementation date of the statements are not considered troubled debt restructurings (“TDRs”). Further, Section 4013 of the Coronavirus Aid, Relief and Economic Security (“CARES”) Act, passed by Congress on March 27, 2020, states that COVID-19 related modifications on loans that were current as of December 31, 2019 are not TDRs. As of April 30, 2020, ChoiceOne had granted modifications on approximately 600 loans which, in reliance on the statements of federal banking agencies and the CARES Act, are not reflected as TDRs in this report. ChoiceOne anticipates that additional such modifications will be made in the second quarter of 2020.

 

13

 

 

 

Impaired loans by loan category follow:

 

(Dollars in thousands)

 

 

Recorded
Investment

 

 

Unpaid
Principal
Balance

 

 

Related
Allowance

 

March 31, 2020

 

 

 

 

 

 

 

 

 

With no related allowance recorded

 

 

 

 

 

 

 

 

 

 

 

 

 Agricultural

 

$

 

 

$

 

 

$

 

 Commercial and industrial

 

 

259

 

 

 

259

 

 

 

 

 Consumer

 

 

 

 

 

 

 

 

 

 Construction real estate

 

 

 

 

 

 

 

 

 

 Commercial real estate

 

 

1,882

 

 

 

1,882

 

 

 

 

 Residential real estate

 

 

76

 

 

 

76

 

 

 

 

 Subtotal

 

 

2,217

 

 

 

2,217

 

 

 

 

With an allowance recorded

 

 

 

 

 

 

 

 

 

 

 

 

 Agricultural

 

 

379

 

 

 

477

 

 

 

98

 

 Commercial and industrial

 

 

 

 

 

 

 

 

 

 Consumer

 

 

16

 

 

 

17

 

 

 

1

 

 Construction real estate

 

 

 

 

 

 

 

 

 

 Commercial real estate

 

 

390

 

 

 

403

 

 

 

13

 

 Residential real estate

 

 

2,373

 

 

 

2,639

 

 

 

266

 

 Subtotal

 

 

3,158

 

 

 

3,536

 

 

 

378

 

Total

 

 

 

 

 

 

 

 

 

 

 

 

 Agricultural

 

 

379

 

 

 

477

 

 

 

98

 

 Commercial and industrial

 

 

259

 

 

 

259

 

 

 

 

 Consumer

 

 

16

 

 

 

17

 

 

 

1

 

 Construction real estate

 

 

 

 

 

 

 

 

 

 Commercial real estate

 

 

2,272

 

 

 

2,285

 

 

 

13

 

 Residential real estate

 

 

2,449

 

 

 

2,715

 

 

 

266

 

 Total

 

$

5,375

 

 

$

5,753

 

 

$

378

 

 

(Dollars in thousands)

 

 

Recorded
Investment

 

 

Unpaid
Principal
Balance

 

 

Related
Allowance

 

December 31, 2019

 

 

 

 

 

 

 

 

 

With no related allowance recorded

 

 

 

 

 

 

 

 

 

 

 

 

 Agricultural

 

$

545

 

 

$

545

 

 

$

 

 Commercial and industrial

 

 

259

 

 

 

340

 

 

 

 

 Consumer

 

 

 

 

 

 

 

 

 

 Construction real estate

 

 

 

 

 

 

 

 

 

 Commercial real estate

 

 

1,882

 

 

 

2,471

 

 

 

 

 Residential real estate

 

 

42

 

 

 

42

 

 

 

 

 Subtotal

 

 

2,728

 

 

 

3,398

 

 

 

 

With an allowance recorded

 

 

 

 

 

 

 

 

 

 

 

 

 Agricultural

 

 

379

 

 

 

439

 

 

 

103

 

 Commercial and industrial

 

 

 

 

 

 

 

 

 

 Consumer

 

 

17

 

 

 

18

 

 

 

4

 

 Construction real estate

 

 

 

 

 

 

 

 

 

 Commercial real estate

 

 

406

 

 

 

406

 

 

 

13

 

 Residential real estate

 

 

2,392

 

 

 

2,460

 

 

 

235

 

 Subtotal

 

 

3,194

 

 

 

3,323

 

 

 

355

 

Total

 

 

 

 

 

 

 

 

 

 

 

 

 Agricultural

 

 

924

 

 

 

984

 

 

 

103

 

 Commercial and industrial

 

 

259

 

 

 

340

 

 

 

 

 Consumer

 

 

18

 

 

 

18

 

 

 

4

 

 Construction real estate

 

 

 

 

 

 

 

 

 

 Commercial real estate

 

 

2,287

 

 

 

2,877

 

 

 

13

 

 Residential real estate

 

 

2,434

 

 

 

2,502

 

 

 

235

 

 Total

 

$

5,922

 

 

$

6,721

 

 

$

355

 

 

14

 

 

The following schedule provides information regarding average balances of impaired loans and interest recognized on impaired loans for the three months ended March 31, 2020 and 2019:

 

 

 

Average

 

 

Interest

 

(Dollars in thousands)

 

Recorded

 

 

Income

 

 

 

Investment

 

 

Recognized

 

Three Months ended March 31, 2020

 

 

 

 

 

 

 

 

With no related allowance recorded

 

 

 

 

 

 

 

 

 Agricultural

 

$

272

 

 

$

 

 Commercial and industrial

 

 

259

 

 

 

 

 Consumer

 

 

 

 

 

 

 Construction real estate

 

 

 

 

 

 

 Commercial real estate

 

 

1,882

 

 

 

 

 Residential real estate

 

 

59

 

 

 

 

 Subtotal

 

 

2,472

 

 

 

 

With an allowance recorded

 

 

 

 

 

 

 

 

 Agricultural

 

 

379

 

 

 

 

 Commercial and industrial

 

 

7

 

 

 

 

 Consumer

 

 

16

 

 

 

 

 Construction real estate

 

 

 

 

 

 

 Commercial real estate

 

 

391

 

 

 

7

 

 Residential real estate

 

 

2,383

 

 

 

30

 

 Subtotal

 

 

3,176

 

 

 

37

 

Total

 

 

 

 

 

 

 

 

 Agricultural

 

 

651

 

 

 

 

 Commercial and industrial

 

 

266

 

 

 

 

 Consumer

 

 

16

 

 

 

 

 Construction real estate

 

 

 

 

 

 

 Commercial real estate

 

 

2,273

 

 

 

7

 

 Residential real estate

 

 

2,442

 

 

 

30

 

 Total

 

$

5,648

 

 

$

37

 

 

 

 

 

Average

 

 

Interest

 

(Dollars in thousands)

 

Recorded

 

 

Income

 

 

 

Investment

 

 

Recognized

 

Three Months ended March 31, 2019

 

 

 

 

 

 

 

 

With no related allowance recorded

 

 

 

 

 

 

 

 

 Agricultural

 

$

92

 

 

$

 

 Commercial and industrial

 

 

 

 

 

 

 Consumer

 

 

1

 

 

 

 

 Construction real estate

 

 

 

 

 

 

 Commercial real estate

 

 

73

 

 

 

7

 

 Residential real estate

 

 

203

 

 

 

23

 

 Subtotal

 

 

369

 

 

 

30

 

With an allowance recorded

 

 

 

 

 

 

 

 

 Agricultural

 

 

391

 

 

 

 

 Commercial and industrial

 

 

23

 

 

 

 

 Consumer

 

 

76

 

 

 

 

 Construction real estate

 

 

 

 

 

 

 Commercial real estate

 

 

541

 

 

 

 

 Residential real estate

 

 

2,499

 

 

 

1

 

 Subtotal

 

 

3,530

 

 

 

1

 

Total

 

 

 

 

 

 

 

 

 Agricultural

 

 

483

 

 

 

 

 Commercial and industrial

 

 

23

 

 

 

 

 Consumer

 

 

78

 

 

 

 

 Construction real estate

 

 

 

 

 

 

 Commercial real estate

 

 

613

 

 

 

7

 

 Residential real estate

 

 

2,702

 

 

 

24

 

 Total

 

$

3,899

 

 

$

31

 

 

 

15

 

 

An aging analysis of loans by loan category follows:

 

 

 

 

 

 

 

 

 

Loans

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Loans

 

 

Loans

 

 

Past Due

 

 

 

 

 

 

 

 

 

 

 

Loans

 

 

 

Past Due

 

 

Past Due

 

 

Greater

 

 

 

 

 

 

 

 

 

 

 

90 Days Past

 

(Dollars in thousands)

 

30 to 59

 

 

60 to 89

 

 

Than 90

 

 

 

 

 

Loans Not

 

 

Total

 

 

Due and

 

 

 

Days (1)

 

 

Days (1)

 

 

Days (1)

 

 

Total (1)

 

 

Past Due

 

 

Loans

 

 

Accruing

 

March 31, 2020

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Agricultural

 

$

 

 

$

 

 

$

379

 

 

$

379

 

 

$

50,104

 

 

$

50,483

 

 

$

 

Commercial and industrial

 

 

56

 

 

 

99

 

 

 

259

 

 

 

414

 

 

 

140,787

 

 

 

141,201

 

 

 

 

Consumer

 

 

43

 

 

 

 

 

 

 

 

 

43

 

 

 

34,209

 

 

 

34,252

 

 

 

 

Commercial real estate

 

 

1,268

 

 

 

32

 

 

 

1,882

 

 

 

3,182

 

 

 

348,571

 

 

 

351,753