U.S. Securities and Exchange Commission
Washington, D.C. 20549
Form 10-Q
x Quarterly Report Pursuant to Section 13 or 15(d)
of the Securities Exchange Act of 1934
For the quarterly period ended June 30, 2017
or
¨ Transition Report Pursuant to Section 13 or 15(d)
of the Securities Exchange Act of 1934
For the transition period ended from to
Commission File Number 000-50400
Select Bancorp, Inc.
(Exact name of Registrant as specified in its charter)
North Carolina | 20-0218264 | |
(State or other jurisdiction of | (I.R.S. Employer Identification No.) | |
incorporation or organization) | ||
700 W. Cumberland Street | ||
Dunn, North Carolina | 28334 | |
(Address of principal executive offices) | (Zip Code) |
Registrant's telephone number, including area code (910) 892-7080
Indicate by check mark whether the Registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes x No ¨
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes x No ¨
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, 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 x |
Non-accelerated filer ¨ (Do not check if a smaller reporting company) | 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 by Rule 12b-2 of the Exchange Act). Yes ¨ No x
As of August 4, 2017, the Registrant had outstanding 11,662,621 shares of Common Stock, $1.00 par value per share.
2 |
CONSOLIDATED BALANCE SHEETS
June 30, 2017 | December 31, | |||||||
(Unaudited) | 2016* | |||||||
(In thousands, except share | ||||||||
and per share data) | ||||||||
ASSETS | ||||||||
Cash and due from banks | $ | 13,791 | $ | 14,372 | ||||
Interest-earning deposits in other banks | 43,512 | 40,342 | ||||||
Certificates of deposit | 1,000 | 1,000 | ||||||
Investment securities available for sale, at fair value | 56,852 | 62,257 | ||||||
Loans | 738,021 | 677,195 | ||||||
Allowance for loan losses | (8,488 | ) | (8,411 | ) | ||||
NET LOANS | 729,533 | 668,784 | ||||||
Accrued interest receivable | 2,646 | 2,768 | ||||||
Stock in Federal Home Loan Bank of Atlanta (“FHLB”), at cost | 2,141 | 2,251 | ||||||
Other non-marketable securities | 666 | 703 | ||||||
Foreclosed real estate | 2,702 | 599 | ||||||
Premises and equipment, net | 17,517 | 17,931 | ||||||
Bank owned life insurance | 22,466 | 22,183 | ||||||
Goodwill | 6,931 | 6,931 | ||||||
Core deposit intangible (“CDI”) | 629 | 810 | ||||||
Assets held for sale | 846 | 846 | ||||||
Other assets | 5,292 | 4,863 | ||||||
TOTAL ASSETS | $ | 906,524 | $ | 846,640 | ||||
LIABILITIES AND SHAREHOLDERS’ EQUITY | ||||||||
Deposits: | ||||||||
Demand | $ | 168,635 | $ | 163,569 | ||||
Savings | 35,162 | 38,394 | ||||||
Money market and NOW | 174,169 | 174,205 | ||||||
Time | 361,687 | 303,493 | ||||||
TOTAL DEPOSITS | 739,653 | 679,661 | ||||||
Short-term debt | 33,559 | 37,090 | ||||||
Long-term debt | 22,839 | 23,039 | ||||||
Accrued interest payable | 241 | 221 | ||||||
Accrued expenses and other liabilities | 2,215 | 2,356 | ||||||
TOTAL LIABILITIES | 798,507 | 742,367 | ||||||
Shareholders’ Equity: | ||||||||
Preferred stock, no par value, 5,000,000 shares authorized; 0 shares issued and outstanding at June 30, 2017 and December 31, 2016 | - | - | ||||||
Common stock, $1.00 par value, 25,000,000 shares authorized; 11,662,471 and 11,645,413 shares issued and outstanding at June 30, 2017 and December 31, 2016, respectively | 11,662 | 11,645 | ||||||
Additional paid-in capital | 69,725 | 69,597 | ||||||
Retained earnings | 26,124 | 22,673 | ||||||
Common stock issued to deferred compensation trust, at cost; 284,972 and 280,432 shares at June 30, 2017 and December 31, 2016, respectively | (2,397 | ) | (2,340 | ) | ||||
Directors’ Deferred Compensation Plan Rabbi Trust | 2,397 | 2,340 | ||||||
Accumulated other comprehensive income | 506 | 358 | ||||||
TOTAL SHAREHOLDERS’ EQUITY | 108,017 | 104,273 | ||||||
TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY | $ | 906,524 | $ | 846,640 |
* Derived from audited consolidated financial statements.
See accompanying notes.
3 |
CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited)
Three Months Ended | Six Months Ended | |||||||||||||||
June 30, | June 30, | |||||||||||||||
2017 | 2016 | 2017 | 2016 | |||||||||||||
(In thousands, except share and per share data) | ||||||||||||||||
INTEREST INCOME | ||||||||||||||||
Loans | $ | 9,024 | $ | 8,242 | $ | 17,731 | $ | 16,207 | ||||||||
Federal funds sold and interest-earning deposits in other banks | 119 | 60 | 207 | 137 | ||||||||||||
Investments | 326 | 343 | 656 | 733 | ||||||||||||
TOTAL INTEREST INCOME | 9,469 | 8,645 | 18,594 | 17,077 | ||||||||||||
INTEREST EXPENSE | ||||||||||||||||
Money market, NOW and savings deposits | 117 | 94 | 220 | 193 | ||||||||||||
Time deposits | 880 | 647 | 1,639 | 1,308 | ||||||||||||
Short-term debt | 63 | 106 | 118 | 140 | ||||||||||||
Long-term debt | 137 | 65 | 267 | 198 | ||||||||||||
TOTAL INTEREST EXPENSE | 1,197 | 912 | 2,244 | 1,839 | ||||||||||||
NET INTEREST INCOME | 8,272 | 7,733 | 16,350 | 15,238 | ||||||||||||
PROVISION FOR LOAN LOSSES | 1,083 | 158 | 889 | 510 | ||||||||||||
NET INTEREST INCOME AFTER PROVISION FOR LOAN LOSSES | 7,189 | 7,575 | 15,461 | 14,728 | ||||||||||||
NON-INTEREST INCOME | ||||||||||||||||
Gain on sale of investment securities | - | - | - | 22 | ||||||||||||
Service charges on deposit accounts | 216 | 246 | 431 | 493 | ||||||||||||
Other fees and income | 562 | 585 | 1,077 | 1,182 | ||||||||||||
TOTAL NON-INTEREST INCOME | 778 | 831 | 1,508 | 1,697 | ||||||||||||
NON-INTEREST EXPENSE | ||||||||||||||||
Personnel | 3,702 | 3,087 | 7,116 | 6,289 | ||||||||||||
Occupancy and equipment | 492 | 607 | 1,064 | 1,181 | ||||||||||||
Deposit insurance | 75 | 135 | 147 | 261 | ||||||||||||
Professional fees | 251 | 252 | 571 | 487 | ||||||||||||
CDI amortization | 88 | 111 | 181 | 227 | ||||||||||||
Information systems | 534 | 524 | 1,038 | 1,033 | ||||||||||||
Foreclosed-related expenses | (25 | ) | 24 | (9 | ) | 63 | ||||||||||
Other | 863 | 779 | 1,677 | 1,598 | ||||||||||||
TOTAL NON-INTEREST EXPENSE | 5,980 | 5,519 | 11,785 | 11,139 | ||||||||||||
INCOME BEFORE INCOME TAX | 1,987 | 2,887 | 5,184 | 5,286 | ||||||||||||
INCOME TAXES | 651 | 980 | 1,733 | 1,876 | ||||||||||||
NET INCOME | 1,336 | 1,907 | 3,451 | 3,410 | ||||||||||||
DIVIDENDS ON PREFERRED STOCK | - | - | - | 4 | ||||||||||||
NET INCOME AVAILABLE TO COMMON SHAREHOLDERS | $ | 1,336 | $ | 1,907 | $ | 3,451 | $ | 3,406 | ||||||||
NET INCOME PER COMMON SHARE | ||||||||||||||||
Basic | $ | 0.11 | $ | 0.16 | $ | 0.30 | $ | 0.29 | ||||||||
Diluted | $ | 0.11 | $ | 0.16 | $ | 0.29 | $ | 0.29 | ||||||||
WEIGHTED AVERAGE COMMON SHARES OUTSTANDING | ||||||||||||||||
Basic | 11,662,117 | 11,594,995 | 11,657,391 | 11,589,217 | ||||||||||||
Diluted | 11,727,110 | 11,642,726 | 11,720,841 | 11,638,669 |
See accompanying notes.
4 |
SELECT BANCORP, INC.
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (Unaudited)
Three Months Ended | Six Months Ended | |||||||||||||||
June 30, | June 30, | |||||||||||||||
2017 | 2016 | 2017 | 2016 | |||||||||||||
(In thousands) | ||||||||||||||||
Net income | $ | 1,336 | $ | 1,907 | $ | 3,451 | $ | 3,410 | ||||||||
Other comprehensive income (loss): | ||||||||||||||||
Unrealized gain on investment securities available for sale | 151 | 338 | 233 | 1,099 | ||||||||||||
Tax effect | (55 | ) | (113 | ) | (85 | ) | (397 | ) | ||||||||
96 | 225 | 148 | 702 | |||||||||||||
Reclassification adjustment for gain included in net income | - | - | - | (22 | ) | |||||||||||
Tax effect | - | - | - | 8 | ||||||||||||
- | - | - | (14 | ) | ||||||||||||
Total | 96 | 225 | 148 | 688 | ||||||||||||
Total comprehensive income | $ | 1,432 | $ | 2,132 | $ | 3,599 | $ | 4,098 |
See accompanying notes.
5 |
CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS’ EQUITY (Unaudited)
(in thousands, except share data)
Common | ||||||||||||||||||||||||||||||||||||||||
Stock | Accumulated | |||||||||||||||||||||||||||||||||||||||
Issued | Other | |||||||||||||||||||||||||||||||||||||||
Additional | to Deferred | Compre- | Total | |||||||||||||||||||||||||||||||||||||
Preferred Stock | Common Stock | paid-in | Retained | Compensation | Deferred | hensive | Shareholders’ | |||||||||||||||||||||||||||||||||
Shares | Amount | Shares | Amount | Capital | Earnings | Trust | Comp Plan | Income | Equity | |||||||||||||||||||||||||||||||
Balance at December 31, 2015 | 7,645 | $ | 7,645 | 11,583,011 | $ | 11,583 | $ | 69,061 | $ | 15,923 | $ | (2,139 | ) | $ | 2,139 | $ | 490 | $ 104,702 | ||||||||||||||||||||||
Net income | - | - | - | - | - | 3,410 | - | - | - | 3,410 | ||||||||||||||||||||||||||||||
Other comprehensive income, net | - | - | - | - | - | - | - | - | 688 | 688 | ||||||||||||||||||||||||||||||
Preferred stock dividends paid | - | - | - | - | - | (4 | ) | - | - | - | (4 | ) | ||||||||||||||||||||||||||||
Preferred stock redemption | (7,645 | ) | (7,645 | ) | - | - | - | - | - | - | - | (7,645 | ) | |||||||||||||||||||||||||||
Stock option exercises | - | - | 36,173 | 36 | 308 | - | - | - | - | 344 | ||||||||||||||||||||||||||||||
Stock based compensation | - | - | - | - | 36 | - | - | - | - | 36 | ||||||||||||||||||||||||||||||
Director equity incentive plan, net | - | - | - | - | - | - | (85 | ) | 85 | - | - | |||||||||||||||||||||||||||||
Balance at June 30, 2016 | - | $ | - | 11,619,184 | $ | 11,619 | $ | 69,405 | $ | 19,329 | $ | (2,224 | ) | $ | 2,224 | $ | 1,178 | $ | 101,531 | |||||||||||||||||||||
Balance at December 31, 2016 | - | $ | - | 11,645,413 | $ | 11,645 | $ | 69,597 | $ | 22,673 | $ | (2,340 | ) | $ | 2,340 | $ | 358 | $ | 104,273 | |||||||||||||||||||||
Net income | - | - | - | - | - | 3,451 | - | - | - | 3,451 | ||||||||||||||||||||||||||||||
Other comprehensive income, net | - | - | - | - | - | - | - | - | 148 | 148 | ||||||||||||||||||||||||||||||
Stock option exercises | - | - | 17,058 | 17 | 85 | - | - | - | - | 102 | ||||||||||||||||||||||||||||||
Stock based compensation | - | - | - | - | 43 | - | - | - | - | 43 | ||||||||||||||||||||||||||||||
Director equity incentive plan, net | - | - | - | - | - | - | (57 | ) | 57 | - | - | |||||||||||||||||||||||||||||
Balance at June 30, 2017 | - | $ | - | 11,662,471 | $ | 11,662 | $ | 69,725 | $ | 26,124 | $ | (2,397 | ) | $ | 2,397 | $ | 506 | $ | 108,017 |
See accompanying notes.
6 |
CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)
Six Months Ended | ||||||||
June 30, | ||||||||
2017 | 2016 | |||||||
(In thousands) | ||||||||
CASH FLOWS FROM OPERATING ACTIVITIES | ||||||||
Net income | $ | 3,451 | $ | 3,410 | ||||
Adjustments to reconcile net income to net cash provided by operating activities: | ||||||||
Provision for loan losses | 889 | 510 | ||||||
Depreciation and amortization of premises and equipment | 575 | 520 | ||||||
Amortization and accretion of investment securities | 282 | 400 | ||||||
Amortization of deferred loan fees and costs | (291 | ) | (236 | ) | ||||
Amortization of core deposit intangible | 181 | 227 | ||||||
Stock-based compensation | 43 | 36 | ||||||
Accretion on acquired loans | (450 | ) | (534 | ) | ||||
Amortization of acquisition premium on time deposits | (161 | ) | (385 | ) | ||||
Net accretion of acquisition discount on borrowings | (87 | ) | (153 | ) | ||||
Increase in cash surrender value of bank owned life insurance | (283 | ) | (296 | ) | ||||
Net (gain) loss on sale and write-downs of foreclosed real estate | (61 | ) | 48 | |||||
Gain on sale of premises and equipment | (9 | ) | - | |||||
Net gain on investment security sales | - | (22 | ) | |||||
Change in assets and liabilities: | ||||||||
Net change in accrued interest receivable | 122 | (56 | ) | |||||
Net change in other assets | (514 | ) | 7 | |||||
Net change in accrued expenses and other liabilities | (121 | ) | 2,087 | |||||
NET CASH PROVIDED BY OPERATING ACTIVITIES | 3,566 | 5,563 | ||||||
CASH FLOWS FROM INVESTING ACTIVITIES | ||||||||
Purchase (redemption) of FHLB stock | 110 | (206 | ) | |||||
Purchase (redemption) of non-marketable security | 37 | (52 | ) | |||||
Purchase of investment securities available for sale | (759 | ) | (1,517 | ) | ||||
Maturities of investment securities available for sale | 3,255 | 7,434 | ||||||
Mortgage-backed securities pay-downs | 2,860 | 5,010 | ||||||
Proceeds from sale of investment securities available for sale | - | 624 | ||||||
Net change in loans outstanding | (63,323 | ) | (14,436 | ) | ||||
Proceeds from sale of foreclosed real estate | 384 | 1,215 | ||||||
Proceeds from sale of premises and equipment | (247 | ) | - | |||||
Purchases of premises and equipment | 95 | (456 | ) | |||||
NET CASH USED BY INVESTING ACTIVITIES | (57,588 | ) | (2,384 | ) |
See accompanying notes.
7 |
SELECT BANCORP, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited) (Continued)
Six Months Ended | ||||||||
June 30, | ||||||||
2017 | 2016 | |||||||
(In thousands) | ||||||||
CASH FLOWS FROM FINANCING ACTIVITIES | ||||||||
Net change in deposits | $ | 60,153 | $ | 10,498 | ||||
Proceeds from short-term debt | - | 16,000 | ||||||
Repayments on short-term debt | (3,444 | ) | (14,390 | ) | ||||
Repayments on long-term debt | (200 | ) | (913 | ) | ||||
Preferred stock dividends paid | - | (4 | ) | |||||
Redemption of preferred stock | - | (7,645 | ) | |||||
Proceeds from stock option exercises | 102 | 344 | ||||||
NET CASH PROVIDED BY FINANCING ACTIVITIES | 56,611 | 3,890 | ||||||
NET CHANGE IN CASH AND CASH EQUIVALENTS | 2,589 | 7,069 | ||||||
CASH AND CASH EQUIVALENTS, BEGINNING | 55,714 | 63,409 | ||||||
CASH AND CASH EQUIVALENTS, ENDING | $ | 58,303 | $ | 70,478 | ||||
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION | ||||||||
Cash paid during the period for: | ||||||||
Interest | $ | 2,224 | $ | 1,820 | ||||
Taxes | 1,768 | - | ||||||
Non-cash transactions: | ||||||||
Unrealized gains on investment securities available for sale, net of tax | 148 | 688 | ||||||
Transfers from loans to foreclosed real estate | 2,426 | 578 | ||||||
Transfers from premises and equipment to assets held for sale | - | 400 |
See accompanying notes.
8 |
Notes to Consolidated Financial Statements (Unaudited)
NOTE A - BASIS OF PRESENTATION
Select Bancorp, Inc. (“Company”) is a bank holding company whose principal business activity consists of ownership of Select Bank & Trust Company (referred to as the “Bank”). In 2004, the Company formed New Century Statutory Trust I, which issued trust preferred securities to provide additional capital for general corporate purposes, including the current and future expansion of the Company. New Century Statutory Trust I is not a consolidated subsidiary of the Company. On July 25, 2014 the Company changed its name from New Century Bancorp, Inc. to Select Bancorp, Inc. following its acquisition by merger of Select Bancorp, Inc., Greenville, NC (which we refer to herein as “Legacy Select”). The Company is subject to the rules and regulations of the Board of Governors of the Federal Reserve System and the North Carolina Commissioner of Banks.
Select Bank & Trust Company was originally incorporated as New Century Bank on May 19, 2000 and began banking operations on May 24, 2000. On July 25, 2014, in connection with the Company’s acquisition of Legacy Select, the Bank changed its name from New Century Bank to Select Bank & Trust Company following the merger of the two banking corporations. The Bank is the only banking subsidiary of the Company, and its headquarters and operations center are located in Dunn, NC. The Bank is engaged in general commercial and retail banking in central and eastern North Carolina and operates under the banking laws of North Carolina and the rules and regulations of the Federal Deposit Insurance Corporation and the North Carolina Commissioner of Banks. The Bank undergoes periodic examinations by those regulatory authorities
All significant inter-company transactions and balances have been eliminated in consolidation. In management’s opinion, the financial information, which is unaudited, reflects all adjustments (consisting solely of normal recurring adjustments) necessary for a fair presentation of the financial information as of and for the three and six month periods ended June 30, 2017 and 2016, in conformity with accounting principles generally accepted in the United States of America (“GAAP”).
The preparation of consolidated financial statements requires management to make estimates and assumptions that affect reported amounts of assets and liabilities at the date of the financial statements, as well as the amounts of income and expense during the reporting period. Actual results could differ from those estimates. Operating results for the three and six month periods ended June 30, 2017 are not necessarily indicative of the results that may be expected for the fiscal year ending December 31, 2017.
The organization and business of the Company, accounting policies followed by the Company and other relevant information are contained in the notes to the financial statements filed as part of the Company’s 2016 Annual Report on Form 10-K, filed with the Securities and Exchange Commission (“SEC”) on March 14, 2017. This quarterly report should be read in conjunction with the Annual Report.
Certain reclassifications of the information in prior periods were made to conform to the June 30, 2017 presentation. Such reclassifications had no effect on shareholders’ equity or net income as previously reported.
9 |
SELECT BANCORP, INC.
Notes to Consolidated Financial Statements (Unaudited)
NOTE B - PER SHARE RESULTS
Basic net income per share is computed based upon the weighted average number of shares of common stock outstanding during the period. Diluted net income per share includes the dilutive effect of stock options outstanding during the period. At June 30, 2017 and 2016 there were 23,300 and 123,800 anti-dilutive options outstanding, respectively.
Three Months Ended | Six Months Ended | |||||||||||||||
June 30, | June 30, | |||||||||||||||
2017 | 2016 | 2017 | 2016 | |||||||||||||
Weighted average shares used for basic net income available to common shareholders | 11,662,117 | 11,594,995 | 11,657,391 | 11,589,217 | ||||||||||||
Effect of dilutive stock options | 64,993 | 47,731 | 63,450 | 49,452 | ||||||||||||
Weighted average shares used for diluted net income available to common shareholders | 11,727,110 | 11,642,726 | 11,720,841 | 11,638,669 |
NOTE C - RECENT ACCOUNTING PRONOUNCEMENTS
The following summarizes recent accounting pronouncements and their expected impact on the Company:
In May 2014, the FASB issued ASU No. 2014-09, Revenue from Contracts with Customers (Topic 606). ASU No. 2014-09 addresses the recognition of revenue from contracts with customers with the core principle being for companies to recognize revenue to depict the transfer of goods or services to customers in amounts that reflect the consideration to which the company expects to be entitled in exchange for those goods or services. The new standard also results in enhanced disclosures about revenue, provides guidance for transactions that were not previously addressed comprehensively and improves guidance for multiple-element arrangements. In March 2016, the FASB issued ASU 2016-08, Revenue from Contracts with Customers (Topic 606): Principal versus Agent Considerations, to improve the operability and understandability of the implementation guidance on principal versus agent considerations. In April 2016, the FASB issued ASU 2016-10, Revenue from Contracts with Customers (Topic 606): Identifying Performance Obligations and Licensing, to clarify guidance for identifying performance obligations and licensing implementation. The Company is currently evaluating the impact on additional disclosure requirements as each of the standards is adopted, however it does not expect these amendments to have a material effect on its financial position, results of operations or cash flows.
In May 2016, the FASB issued ASU 2016-12, Revenue from Contracts with Customers (Topic 606): Narrow-Scope Improvements and Practical Expedients, to clarify and improve the guidance for certain aspects of Topic 606. The amendments will be effective for the Company for reporting periods beginning after December 15, 2017. The Company does not expect these amendments to have a material effect on its financial statements.
In August 2015, the FASB deferred the effective date of ASU 2014-09, Revenue from Contracts with Customers. As a result of the deferral, the guidance in ASU 2014-09 will be effective for the Company for reporting periods beginning after December 15, 2017. The Company does not expect these amendments to have a material effect on its financial statements.
10 |
SELECT BANCORP, INC.
Notes to Consolidated Financial Statements (Unaudited)
NOTE C - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
Recent Accounting Pronouncements (Continued)
In April 2016, the FASB amended the Revenue from Contracts with Customers topic of the Accounting Standards Codification to clarify guidance related to identifying performance obligations and accounting for licenses of intellectual property. The amendments will be effective for the Company for reporting periods beginning after December 15, 2017. The Company does not expect these amendments to have a material effect on its financial statements.
In March 2016, the FASB issued ASU 2016-09, Compensation-Stock Compensation (Topic 718): Improvements to Employee Share-based Payment Accounting, to simplify several aspects of the accounting for share-based payment award transactions including the income tax consequences, the classification of awards as either equity or liabilities, including the tax effect of forfeitures and the classification on the statement of cash flows. Additionally, the guidance simplifies two areas specific to entities other than public business entities allowing them to apply a practical expedient to estimate the expected term for all awards with performance or service conditions that have certain characteristics and also allowing them to make a one-time election to switch from measuring all liability-classified awards at fair value to measuring them at intrinsic value. The amendments were effective for the Company for annual periods beginning after December 15, 2016 and interim periods within those annual periods. The Company has adopted these amendments to its financial statements during the first quarter of 2017 with a positive impact to net earnings as an excess tax benefit of $4,000 was recorded through the income statement rather than additional paid in capital.
In January 2016, the FASB issued ASU 2016-01, Recognition and Measurement of Financial Assets and Financial Liabilities, amending the Financial Instruments topic of the Accounting Standards Codification to address certain aspects of recognition, measurement, presentation, and disclosure of financial instruments. The amendments will be effective for fiscal years beginning after December 15, 2017, including interim periods within those fiscal years. The Company will apply the guidance by means of a cumulative-effect adjustment to the balance sheet as of the beginning of the fiscal year of adoption. The amendments related to equity securities without readily determinable fair values will be applied prospectively to equity investments that exist as of the date of adoption of the amendments. The Company does not expect these amendments to have a material effect on its financial statements.
In February 2016, the FASB issued ASU 2016-02, Leases (Topic 842). ASU 2016-02 applies a right-of-use (ROU) model that requires a lessee to record, for all leases with a lease term of more than 12 months, an asset representing its right to use the underlying asset and a liability to make lease payments. For leases with a term of 12 months or less, a practical expedient is available whereby a lessee may elect, by class of underlying asset, not to recognize an ROU asset or lease liability. At inception, lessees must classify all leases as either finance or operating based on five criteria. Balance sheet recognition of finance and operating leases is similar, but the pattern of expense recognition in the income statement, as well as the effect on the statement of cash flows, differs depending on the lease classification. For public business entities, the amendments in ASU 2016-02 are effective for interim and annual periods beginning after December 15, 2018. In transition, lessees and lessors are required to recognize and measure leases at the beginning of the earliest period presented using a modified retrospective approach which includes a number of optional practical expedients that entities may elect to apply. The Company has reviewed its outstanding lease agreements and has centrally documented the terms of its leases. The Company is currently evaluating the provisions of ASU 2016-02 in relation to its outstanding leases to determine the potential impact the new standard will have to the Company’s consolidated financial statements.
11 |
SELECT BANCORP, INC.
Notes to Consolidated Financial Statements (Unaudited)
NOTE C - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
Recent Accounting Pronouncements (Continued)
In June 2016, the FASB issued ASU 2016-13, Financial Instruments – Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments guidance to change the accounting for credit losses and modify the impairment model for certain debt securities. ASU 2016-13 requires an entity to utilize a new impairment model known as the current expected credit loss ("CECL") model to estimate its lifetime "expected credit loss" and record an allowance that, when deducted from the amortized cost basis of the financial asset, presents the net amount expected to be collected on the financial asset. The CECL model is expected to result in earlier recognition of credit losses. ASU 2016-13 also requires new disclosures for financial assets measured at amortized cost, loans and available-for-sale debt securities. The updated guidance is effective for interim and annual reporting periods beginning after December 15, 2019, including interim periods within those fiscal years. Early adoption is permitted. Entities will apply the standard's provisions as a cumulative-effect adjustment to retained earnings as of the beginning of the first reporting period in which the guidance is adopted. The Company has dedicated staff and resources in place evaluating the Company’s options including evaluating the appropriate model options and collecting and reviewing loan data for use in these models. The Company is still assessing the impact that this new guidance will have on its consolidated financial statements.
In August 2016, the FASB amended the Statement of Cash Flows topic of the Accounting Standards Codification to clarify how certain cash receipts and cash payments are presented and classified in the statement of cash flows. The amendments will be effective for the Company for fiscal years beginning after December 15, 2017 including interim periods within those fiscal years. The Company does not expect these amendments to have a material effect on its financial statements.
In January 2017, the FASB issued guidance to simplify the accounting related to goodwill impairment. ASU 2017-04, Simplifying the Test for Goodwill Impairment, removes Step 2 of the current goodwill impairment test, which requires a hypothetical purchase price allocation. A goodwill impairment will now be the amount by which a reporting unit’s carrying value exceeds its fair value. All other goodwill impairment guidance will remain largely unchanged and entities will continue to have the option to perform a qualitative assessment to determine if a quantitative impairment test is necessary. The Company does not expect these amendments to have a material effect on its financial statements.
In January 2017, the FASB updated the Accounting Changes and Error Corrections and the Investments—Equity Method and Joint Ventures Topics of the Accounting Standards Codification. The ASU incorporates into the Accounting Standards Codification recent SEC guidance about disclosing, under SEC SAB Topic 11.M, the effect on financial statements of adopting the revenue, leases, and credit losses standards. The ASU was effective upon issuance. The Company is currently evaluating the impact on additional disclosure requirements as each of the standards is adopted, however it does not expect these amendments to have a material effect on its financial position, results of operations or cash flows.
In January 2017, the FASB amended the Goodwill and Other Topic of the Accounting Standards Codification to simplify the accounting for goodwill impairment for public business entities and other entities that have goodwill reported in their financial statements and have not elected the private company alternative for the subsequent measurement of goodwill. The amendment removes Step 2 of the goodwill impairment test. A goodwill impairment will now be the amount by which a reporting unit’s carrying value exceeds its fair value, not to exceed the carrying amount of goodwill. The effective date and transition requirements for the technical corrections will be effective for the Company for reporting periods beginning after December 15, 2019. Early adoption is permitted for interim or annual goodwill impairment tests performed on testing dates after January 1, 2017. The Company does not expect these amendments to have a material effect on its financial statements.
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SELECT BANCORP, INC.
Notes to Consolidated Financial Statements (Unaudited)
NOTE C - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
Recent Accounting Pronouncements (Continued)
In February 2017, the FASB amended the Other Income Topic of the Accounting Standards Codification to clarify the scope of the guidance on nonfinancial asset derecognition as well as the accounting for partial sales of nonfinancial assets. The amendments conform the derecognition guidance on nonfinancial assets with the model for transactions in the new revenue standard. The amendments will be effective for the Company for reporting periods beginning after December 15, 2017. The Company does not expect these amendments to have a material effect on its financial statements.
In May 2017, the FASB amended the requirements in the Compensation—Stock Compensation Topic of the Accounting Standards Codification related to changes to the terms or conditions of a share-based payment award. The amendments provide guidance about which changes to the terms or conditions of a share-based payment award require an entity to apply modification accounting. The amendments will be effective for the Company for annual periods, and interim periods within those annual periods, beginning after December 15, 2017. Early adoption is permitted. The Company does not expect these amendments to have a material effect on its financial statements.
From time to time, the FASB issues exposure drafts for proposed statements of financial accounting standards. Such exposure drafts are subject to comment from the public, to revisions by the FASB and to final issuance by the FASB as statements of financial accounting standards. Management considers the effect of the proposed statements on the consolidated financial statements of the Company and monitors the status of changes to and proposed effective dates of exposure drafts.
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SELECT BANCORP, INC.
Notes to Consolidated Financial Statements (Unaudited)
NOTED D - FAIR VALUE MEASUREMENTS
Accounting Standards Codification (“ASC”) 820 defines fair value, establishes a framework for measuring fair value, and expands disclosures about fair value measurements. ASC 820 does not require any new fair value measurements, but clarifies and standardizes some divergent practices that have emerged since prior guidance was issued. ASC 820 creates a three-level hierarchy under which individual fair value estimates are to be ranked based on the relative reliability of the inputs used in the valuation.
Fair value estimates are made at a specific moment in time, based on relevant market information and information about the financial instrument. These estimates do not reflect any premium or discount that could result from offering for sale at one time the Company’s entire holdings of a particular financial instrument.
Because no active market readily exists for a portion of the Company’s financial instruments, fair value estimates are based on judgments regarding future expected loss experience, current economic conditions, risk characteristics of various financial instruments, and other factors. These estimates are subjective in nature and involve uncertainties and matters of significant judgment and, therefore, cannot be determined with precision. Changes in assumptions could significantly affect the estimates.
The following methods and assumptions were used to estimate the fair value of each class of financial instruments for which it is practicable to estimate that value:
Fair Value Hierarchy
The Company groups assets and liabilities at fair value in three levels, based on the markets in which the assets and liabilities are traded and the reliability of the assumptions used to determine fair value. These levels are:
· | Level 1 – Valuation is based upon quoted prices for identical instruments traded in active markets. |
· | Level 2 – Valuation is based upon quoted prices for similar instruments in active markets, quoted prices for identical or similar instruments in markets that are not active and model-based valuation techniques for which all significant assumptions are observable in the market. |
· | Level 3 – Valuation is generated from model-based techniques that use at least one significant assumption not observable in the market. These unobservable assumptions reflect estimates of assumptions that market participants would use in pricing the asset or liability. Valuation techniques include use of option pricing models, discounted cash flow models and similar techniques. |
The following is a description of valuation methodologies used for assets and liabilities recorded at fair value on a recurring basis.
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SELECT BANCORP, INC.
Notes to Consolidated Financial Statements (Unaudited)
NOTE D – FAIR VALUE MEASUREMENTS (continued)
Investment Securities Available-for-Sale (“AFS”)
Investment securities available-for-sale are recorded at fair value on a recurring basis. Fair value measurement is based upon quoted prices, if available. If quoted prices are not available, fair values are measured using independent pricing models or other model-based valuation techniques such as the present value of future cash flows, adjusted for the security’s credit rating, prepayment assumptions and other factors such as credit loss assumptions. Level 1 securities include those traded on an active exchange, such as the New York Stock Exchange, U.S. Treasury securities that are traded by dealers or brokers in active over-the-counter markets and money market funds. Level 2 securities include U.S. government agency securities, mortgage-backed securities issued by government sponsored entities, and municipal bonds. There have been no changes in valuation techniques for the three and six months ended June 30, 2017. Valuation techniques are consistent with techniques used in prior periods.
The following tables summarize quantitative disclosures about the fair value measurement for each category of assets carried at fair value on a recurring basis as of June 30, 2017 and December 31, 2016 (in thousands):
Investment securities available for sale June 30, 2017 | Fair value | Quoted Prices in Active Markets for Identical Assets (Level 1) | Significant Other Observable Inputs (Level 2) | Significant Unobservable Inputs (Level 3) | ||||||||||||
U.S. government agencies – GSE's | $ | 12,577 | $ | - | $ | 12,577 | $ | - | ||||||||
Mortgage-backed securities - GSE’s | 30,084 | - | 30,084 | - | ||||||||||||
Municipal bonds | 14,191 | - | 14,191 | - | ||||||||||||
Total | $ | 56,852 | $ | - | $ | 56,852 | $ | - |
Investment securities available for sale December 31, 2016 | Fair value | Quoted Prices in Active Markets for Identical Assets (Level 1) | Significant Other Observable Inputs (Level 2) | Significant Unobservable Inputs (Level 3) | ||||||||||||
U.S. government agencies – GSE's | $ | 14,159 | $ | - | $ | 14,159 | $ | - | ||||||||
Mortgage-backed securities - GSE’s | 32,363 | - | 32,363 | - | ||||||||||||
Municipal bonds | 15,735 | - | 15,735 | - | ||||||||||||
Total | $ | 62,257 | $ | - | $ | 62,257 | $ | - |
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SELECT BANCORP, INC.
Notes to Consolidated Financial Statements (Unaudited)
NOTE D – FAIR VALUE MEASUREMENTS (continued)
The following is a description of valuation methodologies used for assets recorded at fair value on a non-recurring basis.
Loans
The Company does not record loans at fair value on a recurring basis. However, from time to time, a loan is considered impaired and an allowance for loan losses is established. Loans for which it is probable that payment of interest and principal will not be made in accordance with the contractual terms of the loan agreement are considered impaired. Once a loan is identified as individually impaired, management measures impairment in accordance with ASC 310 “Receivables”. The fair value of impaired loans is estimated using one of several methods, including collateral value, market value of similar debt, enterprise value, or liquidation value and discounted cash flows. Those impaired loans not requiring an allowance represent loans for which the fair value of the expected repayments or collateral exceed the recorded investments in such loans. At June 30, 2017 and December 31, 2016, substantially all of the total impaired loans were evaluated based on the fair value of the collateral. Impaired loans where an allowance is established based on the fair value of collateral require classification in the fair value hierarchy. When the fair value of the collateral is based on an observable market price or a current appraised value, the Company records the impaired loan as non-recurring Level 2. When an appraised value is not available or management determines the fair value of the collateral is further impaired below the appraised value and there is no observable market price, the Company records the impaired loan as non-recurring Level 3. The significant unobservable input used in the fair value measurement of the Company’s impaired loans is the discount applied to appraised values to account for expected liquidation and selling costs. At June 30, 2017, the discounts to appraised value used are weighted between 6% and 61%. There were no transfers between levels from the prior reporting periods and there have been no changes in valuation techniques for the three months ended June 30, 2017.
Foreclosed Real Estate
Foreclosed real estate are properties recorded at estimated fair value less estimated selling costs. Inputs include appraised values on the properties or recent sales activity for similar assets in the property’s market. Therefore, foreclosed real estate is classified within Level 3 of the hierarchy. The significant unobservable input used in the fair value measurement of the Company’s foreclosed real estate is the discount applied to appraised values to account for expected liquidation and selling costs. At June 30, 2017, the discounts used ranged between 6% and 10%. There have been no changes in valuation techniques for the three months ended June 30, 2017.
Assets held for sale
During 2015, a branch facility was taken out of service as part of the Company’s branch restructuring plan and reclassified as held for sale. The property is recorded at the remaining book balance of the asset or an estimated fair value less estimated selling costs, whichever is less. Inputs include appraised values on the properties or recent sales activity for similar assets in the property’s market. The significant unobservable input used is the discount applied to appraised values to account for expected liquidation and selling costs ranged between 1% and 25 % at June 30, 2017. There have been no changes in the valuation techniques for the three months ended June 30, 2017.
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SELECT BANCORP, INC.
Notes to Consolidated Financial Statements (Unaudited)
NOTE D – FAIR VALUE MEASUREMENTS (continued)
The following tables summarize quantitative disclosures about the fair value measurement for each category of assets carried at fair value on a non-recurring basis as of June 30, 2017 and December 31, 2016 (in thousands):
Asset Category June 30, 2017 | Fair value | Quoted Prices in Active Markets for Identical Assets (Level 1) | Significant Other Observable Inputs (Level 2) | Significant Unobservable Inputs (Level 3) | ||||||||||||
Impaired loans | $ | 2,943 | $ | - | $ | - | $ | 2,943 | ||||||||
Assets held for sale | 846 | - | - | 846 | ||||||||||||
Foreclosed real estate | 2,702 | - | - | 2,702 | ||||||||||||
Total | $ | 6,491 | $ | - | $ | - | $ | 6,491 |
Asset Category December 31, 2016 | Fair value | Quoted Prices in Active Markets for Identical Assets (Level 1) | Significant Other Observable Inputs (Level 2) | Significant Unobservable Inputs (Level 3) | ||||||||||||
Impaired loans | $ | 5,805 | $ | - | $ | - | $ | 5,805 | ||||||||
Asset held for sale | 846 | - | - | 846 | ||||||||||||
Foreclosed real estate | 599 | - | - | 599 | ||||||||||||
Total | $ | 7,250 | $ | - | $ | - | $ | 7,250 |
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SELECT BANCORP, INC.
Notes to Consolidated Financial Statements (Unaudited)
NOTE D – FAIR VALUE MEASUREMENTS (continued)
The following table presents the carrying values and estimated fair values of the Company's financial instruments at June 30, 2017 and December 31, 2016:
June 30, 2017 | ||||||||||||||||||||
Carrying | Estimated | |||||||||||||||||||
Amount | Fair Value | Level 1 | Level 2 | Level 3 | ||||||||||||||||
(In thousands) | ||||||||||||||||||||
Financial assets: | ||||||||||||||||||||
Cash and due from banks | $ | 13,791 | $ | 13,791 | $ | 13,791 | $ | - | $ | - | ||||||||||
Certificates of deposit | 1,000 | 1,000 | 1,000 | - | - | |||||||||||||||
Interest-earning deposits in other banks | 43,512 | 43,512 | 43,512 | - | - | |||||||||||||||
Investment securities available for sale | 56,852 | 56,852 | - | 56,852 | - | |||||||||||||||
Loans, net | 729,533 | 734,564 | - | - | 734,564 | |||||||||||||||
Accrued interest receivable | 2,646 | 2,646 | - | 2,646 | - | |||||||||||||||
Stock in FHLB | 2,141 | 2,141 | - | - | 2,141 | |||||||||||||||
Other non-marketable securities | 666 | 666 | - | - | 666 | |||||||||||||||
Financial liabilities: | ||||||||||||||||||||
Deposits | $ | 739,653 | $ | 738,037 | $ | - | $ | 738,037 | $ | - | ||||||||||
Short-term debt | 33,559 | 33,559 | - | 33,559 | - | |||||||||||||||
Long-term debt | 22,839 | 17,449 | - | 17,449 | - | |||||||||||||||
Accrued interest payable | 241 | 241 | - | 241 | - |
December 31, 2016 | ||||||||||||||||||||
Carrying | Estimated | |||||||||||||||||||
Amount | Fair Value | Level 1 | Level 2 | Level 3 | ||||||||||||||||
(in thousands) | ||||||||||||||||||||
Financial assets: | ||||||||||||||||||||
Cash and due from banks | $ | 14,372 | $ | 14,372 | $ | 14,372 | $ | - | $ | - | ||||||||||
Certificates of deposits | 1,000 | 1,000 | 1,000 | - | - | |||||||||||||||
Interest-earning deposits in other banks | 40,342 | 40,342 | 40,342 | - | - | |||||||||||||||
Investment securities available for sale | 62,257 | 62,257 | - | 62,257 | - | |||||||||||||||
Loans, net | 668,784 | 671,208 | - | - | 671,208 | |||||||||||||||
Accrued interest receivable | 2,768 | 2,768 | - | 2,768 | - | |||||||||||||||
Stock in the FHLB | 2,251 | 2,251 | - | - | 2,251 | |||||||||||||||
Other non-marketable securities | 703 | 703 | - | - | 703 | |||||||||||||||
Financial liabilities: | ||||||||||||||||||||
Deposits | $ | 679,661 | $ | 678,328 | $ | - | $ | 678,328 | $ | - | ||||||||||
Short-term debt | 37,090 | 37,177 | - | 37,177 | - | |||||||||||||||
Long-term debt | 23,039 | 17,649 | - | 17,649 | - | |||||||||||||||
Accrued interest payable | 221 | 221 | - | 221 | - |
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SELECT BANCORP, INC.
Notes to Consolidated Financial Statements (Unaudited)
NOTE D – FAIR VALUE MEASUREMENTS (continued)
Cash and Due from Banks, Certificates of Deposit, Interest-Earning Deposits in Other Banks and Federal Funds Sold
The carrying amounts for cash and due from banks, certificates of deposit, interest-earning deposits in other banks and federal funds sold approximate fair value because of the short maturities of those instruments.
Investment Securities Available for Sale
Fair value for investment securities available for sale equals quoted market price if such information is available. If a quoted market price is not available, fair value is estimated using prices quoted for similar investments or quoted market prices obtained from independent pricing services.
Loans
For certain homogenous categories of loans, such as residential mortgages, fair value is estimated using the quoted market prices for securities backed by similar loans, adjusted for differences in loan characteristics. The fair value of other types of loans is estimated by discounting the future cash flows using the current rates at which similar loans would be made to borrowers with similar credit ratings and for the same remaining maturities. However, the values likely do not represent exit prices due to distressed market conditions.
Stock in Federal Home Loan Bank of Atlanta
The fair value for FHLB stock approximates carrying value, based on the redemption provisions of the FHLB stock.
Other Non-Marketable Securities
The fair value of equity instruments in other non-marketable securities is assumed to approximate carrying value.
Deposits
The fair value of demand, savings, and money market and NOW deposits is the amount payable on demand at the reporting date. The fair values of time deposits are estimated using the rates currently offered for instruments of similar remaining maturities.
Short-term Debt
Short-term debt consists of repurchase agreements and FHLB advances with maturities of less than twelve months. The carrying values of these instruments is a reasonable estimate of fair value.
Long-term Debt
The fair values of long-term debt are based on discounted expected cash flows at the interest rate for debt with the same or similar remaining maturities and collateral requirements.
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SELECT BANCORP, INC.
Notes to Consolidated Financial Statements (Unaudited)
NOTE D – FAIR VALUE MEASUREMENTS (continued)
Accrued Interest Receivable and Accrued Interest Payable
The carrying amounts of accrued interest receivable and payable approximate fair value because of the short maturities of these instruments.
Financial Instruments with Off-Balance Sheet Risk
With regard to financial instruments with off-balance sheet risk, it is not practicable to estimate the fair value of future financing commitments.
NOTE E - INVESTMENT SECURITIES
The amortized cost and fair value of available for sale investments (“AFS”), with gross unrealized gains and losses, follow:
June 30, 2017 | ||||||||||||||||
Gross | Gross | |||||||||||||||
Amortized | unrealized | unrealized | Fair | |||||||||||||
cost | gains | losses | value | |||||||||||||
(dollars in thousands) | ||||||||||||||||
Securities available for sale: | ||||||||||||||||
U.S. government agencies – GSE’s | $ | 12,426 | $ | 160 | $ | (9 | ) | $ | 12,577 | |||||||
Mortgage-backed securities – GSE’s | 29,727 | 395 | (38 | ) | 30,084 | |||||||||||
Municipal bonds | 13,904 | 287 | - | 14,191 | ||||||||||||
$ | 56,057 | $ | 842 | $ | (47 | ) | $ | 56,852 |
As of June 30, 2017, accumulated other comprehensive income included net unrealized gains totaling $795,000. Deferred tax liabilities resulting from these net unrealized gains totaled $289,000.
The amortized cost and fair value of available for sale investments (“AFS”), with gross unrealized gains and losses, follow:
December 31, 2016 | ||||||||||||||||
Gross | Gross | |||||||||||||||
Amortized | unrealized | unrealized | Fair | |||||||||||||
cost | gains | losses | value | |||||||||||||
(in thousands) | ||||||||||||||||
Securities available for sale: | ||||||||||||||||
U.S. government agencies – GSE’s | $ | 14,086 | $ | 98 | $ | (25 | ) | $ | 14,159 | |||||||
Mortgage-backed securities – GSE’s | 32,082 | 382 | (101 | ) | 32,363 | |||||||||||
Municipal bonds | 15,527 | 209 | (1 | ) | 15,735 | |||||||||||
$ | 61,695 | $ | 689 | $ | (127 | ) | $ | 62,257 |
As of December 31, 2016, accumulated other comprehensive income included net unrealized gains totaling $562,000. Deferred tax liabilities resulting from these net unrealized gains totaled $204,000.
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SELECT BANCORP, INC.
Notes to Consolidated Financial Statements (Unaudited)
NOTE E - INVESTMENT SECURITIES (continued)
The scheduled maturities of securities available for sale, with gross unrealized gains and losses, were as follows:
June 30, 2017 | ||||||||||||||||
Gross | Gross | |||||||||||||||
Amortized | unrealized | unrealized | Fair | |||||||||||||
cost | gains | losses | value | |||||||||||||
(In thousands) | ||||||||||||||||
Securities available for sale: | ||||||||||||||||
Within 1 year | $ | 1,554 | $ | 7 | $ | - | $ | 1,561 | ||||||||
After 1 year but within 5 years | 41,301 | 572 | (47 | ) | 41,826 | |||||||||||
After 5 years but within 10 years | 6,943 | 142 | - | 7,085 | ||||||||||||
After 10 years | 6,259 | 121 | - | 6,380 | ||||||||||||
$ | 56,057 | $ | 842 | $ | (47 | ) | $ | 56,852 |
December 31, 2016 | ||||||||||||||||
Gross | Gross | |||||||||||||||
Amortized | unrealized | unrealized | Fair | |||||||||||||
cost | gains | losses | value | |||||||||||||
(in thousands) | ||||||||||||||||
Securities available for sale: | ||||||||||||||||
Within 1 year | $ | 3,735 | $ | 12 | $ | - | $ | 3,747 | ||||||||
After 1 year but within 5 years | 37,615 | 424 | (110 | ) | 37,929 | |||||||||||
After 5 years but within 10 years | 10,695 | 109 | (12 | ) | 10,792 | |||||||||||
After 10 years | 9,650 | 144 | (5 | ) | 9,789 | |||||||||||
$ | 61,695 | $ | 689 | $ | (127 | ) | $ | 62,257 |
Securities with a carrying value of $19.6 million and $34.3 million at June 30, 2017 and December 31, 2016, respectively, were pledged to secure public monies on deposit as required by law, customer repurchase agreements, and access to the Federal Reserve Discount Window.
None of the unrealized losses relate to the liquidity of the securities or the issuer’s ability to honor redemption obligations and the Company has the intent and ability to hold these securities to recovery, no other than temporary impairments were identified for these investments having unrealized losses for the periods ended June 30, 2017 and December 31, 2016. In 2016 the Company realized a gain on the disposal of eleven securities and has not incurred any gains or losses related to securities sales in 2017.
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SELECT BANCORP, INC.
Notes to Consolidated Financial Statements (Unaudited)
NOTE E- INVESTMENT SECURITIES (continued)
The following tables show investments’ gross unrealized losses and fair value, aggregated by investment category and length of time that the individual securities have been in a continuous unrealized loss position, at June 30, 2017 and December 31, 2016.
June 30, 2017 | ||||||||||||||||||||||||
Less Than 12 Months | 12 Months or More | Total | ||||||||||||||||||||||
Fair | Unrealized | Fair | Unrealized | Fair | Unrealized | |||||||||||||||||||
value | losses | value | losses | value | losses | |||||||||||||||||||
(dollars in thousands) | ||||||||||||||||||||||||
Securities available for sale: | ||||||||||||||||||||||||
U.S. government agencies – GSEs | $ | 1,433 | $ | (9 | ) | $ | - | $ | - | $ | 1,433 | $ | (9 | ) | ||||||||||
Mortgage-backed securities- GSEs | 5,420 | (38 | ) | - | - | 5,420 | (38 | ) | ||||||||||||||||
Municipal bonds | 110 | - | - | - | 110 | - | ||||||||||||||||||
Total temporarily impaired securities | $ | 6,963 | $ | (47 | ) | $ | - | $ | - | $ | 6,963 | $ | (47 | ) |
At June 30, 2017, the Company had no AFS securities with an unrealized loss for twelve or more consecutive months. One U.S. government agency GSE, one municipal and six mortgage-backed GSEs had unrealized losses for less than twelve months totaling $47,000 at June 30, 2017. All unrealized losses are attributable to the general trend of interest rates. During the first six months of 2017 there were no investment security sales. During the first quarter of 2016 gross proceeds of investment sales amounted to $624,000 and gains of $22,000. There were no sales of investment securities in the second quarter of 2016.
December 31, 2016 | ||||||||||||||||||||||||
Less Than 12 Months | 12 Months or More | Total | ||||||||||||||||||||||
Fair | Unrealized | Fair | Unrealized | Fair | Unrealized | |||||||||||||||||||
value | losses | value | losses | value | losses | |||||||||||||||||||
(in thousands) | ||||||||||||||||||||||||
Securities available for sale: | ||||||||||||||||||||||||
U.S. government agencies – GSEs | $ | 2,748 | $ | (13 | ) | $ | 1,651 | $ | (12 | ) | $ | 4,399 | $ | (25 | ) | |||||||||
Mortgage-backed securities- GSEs | 8,778 | (101 | ) | - | - | 8,778 | (101 | ) | ||||||||||||||||
Municipal bonds | 110 | (1 | ) | - | - | 110 | (1 | ) | ||||||||||||||||
Total temporarily impaired securities | $ | 11,636 | $ | (115 | ) | $ | 1,651 | $ | (12 | ) | $ | 13,287 | $ | (127 | ) |
At December 31, 2016, the Company had two U.S. government agency GSEs with unrealized losses for more than twelve months totaling $12,000. Two U.S. government agency GSEs, one municipal and eight mortgage-backed GSEs had unrealized losses for less than twelve months totaling $115,000 at December 31, 2016. All unrealized losses are attributable to the general trend of interest rates and the abnormal spreads of all debt instruments to U.S. Treasury securities. The Company did not incur a loss on any securities sold during 2016.
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SELECT BANCORP, INC.
Notes to Consolidated Financial Statements (Unaudited)
NOTE F - LOANS
Following is a summary of the composition of the Company’s loan portfolio at June 30, 2017 and December 31, 2016:
June 30, | December 31, | |||||||||||||||
Total Loans: | 2017 | 2016 | ||||||||||||||
Percent | Percent | |||||||||||||||
Amount | of total | Amount | of total | |||||||||||||
(dollars in thousands) | ||||||||||||||||
Real estate loans: | ||||||||||||||||
1-to-4 family residential | $ | 103,644 | 14.04 | % | $ | 97,978 | 14.47 | % | ||||||||
Commercial real estate | 297,406 | 40.30 | % | 281,723 | 41.60 | % | ||||||||||
Multi-family residential | 71,066 | 9.63 | % | 56,119 | 8.29 | % | ||||||||||
Construction | 126,265 | 17.11 | % | 100,911 | 14.90 | % | ||||||||||
Home equity lines of credit (“HELOC”) | 42,305 | 5.73 | % | 41,158 | 6.08 | % | ||||||||||
Total real estate loans | 640,686 | 86.81 | % | 577,889 | 85.34 | % | ||||||||||
Other loans: | ||||||||||||||||
Commercial and industrial | 88,206 | 11.95 | % | 90,678 | 13.39 | % | ||||||||||
Loans to individuals | 10,365 | 1.40 | % | 9,756 | 1.44 | % | ||||||||||
Overdrafts | 57 | 0.01 | % | 71 | 0.01 | % | ||||||||||
Total other loans | 98,628 | 13.36 | % | 100,505 | 14.84 | % | ||||||||||
Gross loans | 739,314 | 678,394 | ||||||||||||||
Less deferred loan origination fees, net | (1,293 | ) | (0.17 | )% | (1,199 | ) | (0.18 | )% | ||||||||
Total loans | 738,021 | 100.00 | % | 677,195 | 100.00 | % | ||||||||||
Allowance for loan losses | (8,488 | ) | (8,411 | ) | ||||||||||||
Total loans, net | $ | 729,533 | $ | 668,784 |
Loans are primarily secured by real estate located in eastern and central North Carolina. Real estate loans can be affected by the condition of the local real estate market and by local economic conditions.
At June 30, 2017, the Company had pre-approved but unused lines of credit for customers totaling $135.8 million. In management’s opinion, these commitments, and undisbursed proceeds on loans reflected above, represent no more than normal lending risk to the Company and will be funded from normal sources of liquidity.
A floating lien of $92.2 million of loans was pledged to the FHLB to secure borrowings at June 30, 2017.
23 |
SELECT BANCORP, INC.
Notes to Consolidated Financial Statements (Unaudited)
NOTE F - LOANS (continued)
A description of the various loan products provided by the Bank is presented below.
1-to-4 Family Residential Loans
Residential 1-to-4 family loans are mortgage loans secured by residential real estate within the Bank’s market areas. These loans may also include loans that convert from construction loans into permanent financing and are secured by properties within the Bank’s market areas.
Commercial Real Estate Loans
Commercial real estate loans are underwritten based on the borrower’s ability to generate adequate cash flow to repay the subject debt within reasonable terms. Commercial real estate loans typically include both owner and non-owner occupied properties with higher principal loan amounts. The repayment of these loans is generally dependent on the successful management of the property. Commercial real estate loans are sensitive to market and general economic conditions. Repayment analysis must be performed and consists of an identified primary/cash flow source of repayment and a secondary/liquidation source of repayment. The primary source of repayment is cash flow from income generated from rental or lease of the property. However, the cash flow can be supplemented with the borrower's and guarantor's global cash flow position. Other credit issues such as the business fundamentals and financial strength of the borrower/guarantor can be considered in determining adequacy of repayment ability. The secondary source of repayment is liquidation of the collateral, supplemented by a liquidation cushion provided by the financial assets of the borrower/guarantor. Management monitors and evaluates commercial real estate loans based on collateral, cash flow, market area, and risk grade.
Multi-family Residential Loans
Multi-family residential loans are typically non-farm properties with 5 or more dwelling units in structures which include apartment buildings used primarily to accommodate households on a more or less permanent basis. Successful performance of these types of loans is primarily dependent on occupancy rates, rental rates, and property management.
Construction Loans
Construction loans are non-revolving extensions of credit secured by real property of which the proceeds are used to acquire and develop land and to construct commercial or residential buildings. The primary source of repayment for these types of loans is the sale of the improved property or permanent financing in which case the property is expected to generate the cash flow necessary for repayment on a permanent loan basis. Property cash flow may be supplemented with financial support from the borrowers/guarantors. Proper underwriting of a construction loan consists of the initial process of obtaining, analyzing, and approving various aspects of information pertaining to: the analysis of the permanent financing source, creditworthiness of the borrower and guarantors, ability of the contractor to perform under the terms of the contract, and the feasibility, marketability, and valuation of the project.
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SELECT BANCORP, INC.
Notes to Consolidated Financial Statements (Unaudited)
NOTE F - LOANS (continued)
Also, consideration is given to the cost of the project and sources of funds needed to complete construction as well as identifying any sources of equity funding. Construction loans are traditionally considered to be higher risk loans involving technical and legal requirements inherently different from other types of loans; however with thorough credit underwriting, proper loan structure, and diligent loan servicing, these risks can often be mitigated. Some examples of risks inherent in this type of lending include: underestimated costs, inflation of material and labor costs, site difficulties (i.e. rock, soil), project not built to plans, weather delays and natural disasters, borrower/contractor/subcontractor disputes which prompt liens, and interest rates increasing beyond budget.
Home Equity Lines of Credit
Home equity lines of credit are consumer-purpose revolving extensions of credit which are secured by first or second liens on owner-occupied residential real estate. Appropriate risk management and compliance practices are exercised to ensure that loan-to-value, lien perfection, and compliance risks are addressed and managed within the Bank’s established guidelines. The degree of utilization of revolving commitments within this loan segment is reviewed periodically to identify changes in the behavior of this borrowing group.
Commercial and Industrial Loans
Commercial and industrial loans are underwritten after evaluating and understanding the borrower’s ability to generate positive cash flow, operate profitably and prudently expand its business. Underwriting standards are designed to promote relationships to include a full range of loan, deposit, and cash management services. Commercial and industrial loans are primarily made based on the identified cash flows of the borrower and secondarily on the underlying collateral provided by the borrower and the guarantors. The cash flows of the borrower, however, may not be as expected and the collateral securing these loans may fluctuate in value. In the case of loans secured by accounts receivable, the availability of funds for repayment can be impacted by the borrower’s ability to collect amounts due from its customers.
Loans to Individuals & Overdrafts
Consumer loans are approved using Bank policies and procedures established to evaluate each credit request. All lending decisions and credit risks are required to be clearly documented. Several factors are considered in making these decisions such as credit score, adjusted net worth, liquidity, debt ratio, disposable income, credit history, and loan-to-value of the collateral. This process, combined with the relatively smaller loan amounts spreads the risk among many individual borrowers. Overdrafts on customer accounts are classified as loans for reporting purposes.
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SELECT BANCORP, INC.
Notes to Consolidated Financial Statements (Unaudited)
NOTE F - LOANS (continued)
The following tables present an age analysis of past due loans, segregated by class of loans as of June 30, 2017 and December 31, 2016, respectively:
Total Loans: | June 30, 2017 | |||||||||||||||||||
30+ | Non- | Total | ||||||||||||||||||
Days | Accrual | Past | Total | |||||||||||||||||
Past Due | Loans | Due | Current | Loans | ||||||||||||||||
(dollars in thousands) | ||||||||||||||||||||
Commercial and industrial | $ | 19 | $ | 70 | $ | 89 | $ | 88,117 | $ | 88,206 | ||||||||||
Construction | 207 | 91 | 298 | 125,967 | 126,265 | |||||||||||||||
Multi-family residential | - | 48 | 48 | 71,018 | 71,066 | |||||||||||||||
Commercial real estate | 118 | 1,442 | 1,560 | 295,846 | 297,406 | |||||||||||||||
Loans to individuals & overdrafts | 32 | 6 | 38 | 10,384 | 10,422 | |||||||||||||||
1-to-4 family residential | 26 | 921 | 947 | 102,697 | 103,644 | |||||||||||||||
HELOC | 117 | 365 | 482 | 41,823 | 42,305 | |||||||||||||||
Deferred loan (fees) cost, net | - | - | - | - | (1,293 | ) | ||||||||||||||
$ | 519 | $ | 2,943 | $ | 3,462 | $ | 735,852 | $ | 738,021 |
There were five loans that amounted to $956,000 that were more than 90 days past due and still accruing interest at June 30, 2017.
December 31, 2016 | ||||||||||||||||||||
30+ | Non- | Total | ||||||||||||||||||
Days | Accrual | Past | Total | |||||||||||||||||
Past Due | Loans | Due | Current | Loans | ||||||||||||||||
(in thousands) | ||||||||||||||||||||
Total Loans | ||||||||||||||||||||
Commercial and industrial | $ | 1,459 | $ | 73 | $ | 1,532 | $ | 89,146 | $ | 90,678 | ||||||||||
Construction | 221 | 151 | 372 | 100,539 | 100,911 | |||||||||||||||
Multi-family residential | 46 | 346 | 392 | 55,727 | 56,119 | |||||||||||||||
Commercial real estate | 589 | 3,807 | 4,396 | 277,327 | 281,723 | |||||||||||||||
Loans to individuals & overdrafts | 23 | 46 | 69 | 9,758 | 9,827 | |||||||||||||||
1-to-4 family residential | 631 | 602 | 1,233 | 96,745 | 97,978 | |||||||||||||||
HELOC | 24 | 780 | 804 | 40,354 | 41,158 | |||||||||||||||
Deferred loan (fees) cost, net | - | - | - | - | (1,199 | ) | ||||||||||||||
$ | 2,993 | $ | 5,805 | $ | 8,798 | $ | 669,596 | $ | 677,195 |
There were three loans in the aggregate amount of $529,000 greater than 90 days past due and still accruing interest at December 31, 2016.
26 |
SELECT BANCORP, INC.
Notes to Consolidated Financial Statements (Unaudited)
NOTE F - LOANS (continued)
Impaired Loans
The following tables present information on loans that were considered to be impaired as of June 30, 2017 and December 31, 2016:
Three months ended | Six months ended | |||||||||||||||||||||||||||
As of June 30, 2017 | June 30, 2017 | June 30, 2017 | ||||||||||||||||||||||||||
Contractual | Interest Income | Interest Income | ||||||||||||||||||||||||||
Unpaid | Average | Recognized on | Average | Recognized on | ||||||||||||||||||||||||
Recorded | Principal | Related | Recorded | Impaired | Recorded | Impaired | ||||||||||||||||||||||
Investment | Balance | Allowance | Investment | Loans | Investment | Loans | ||||||||||||||||||||||
(In thousands) | ||||||||||||||||||||||||||||
With no related allowance recorded: | ||||||||||||||||||||||||||||
Commercial and industrial | $ | 1,053 | $ | 1,063 | $ | - | $ | 1,077 | $ | 21 | $ | 1,119 | $ | 40 | ||||||||||||||
Construction | 164 | 251 | - | 169 | 1 | 198 | 5 | |||||||||||||||||||||
Commercial real estate | 3,674 | 4,867 | - | 3,958 | 54 | 4,019 | 113 | |||||||||||||||||||||
Loans to individuals & overdrafts | - | - | - | - | - | - | - | |||||||||||||||||||||
Multi-family residential | 48 | 48 | - | 48 | - | 197 | - | |||||||||||||||||||||
1-to-4 family residential | 1,222 | 1,435 | - | 1,022 | 20 | 1,111 | 33 | |||||||||||||||||||||
HELOC | 648 | 832 | - | 654 | 12 | 844 | 22 | |||||||||||||||||||||
Subtotal: | 6,809 | 8,496 | - | 6,928 | 108 | 7,488 | 213 | |||||||||||||||||||||
With an allowance recorded: | ||||||||||||||||||||||||||||
Commercial and industrial | - | - | - | - | - | 1 | - | |||||||||||||||||||||
Construction | - | - | - | - | - | - | - | |||||||||||||||||||||
Commercial real estate | 630 | 686 | 12 | 1,429 | 10 | 1,563 | 20 | |||||||||||||||||||||
Loans to individuals & overdrafts | - | - | - | - | - | - | - | |||||||||||||||||||||
Multi-family residential | - | - | - | - | - | - | - | |||||||||||||||||||||
1-to-4 family residential | 300 | 304 | 16 | 302 | 5 | 298 | 11 | |||||||||||||||||||||
HELOC | 33 | 35 | - | 16 | - | 33 | - | |||||||||||||||||||||
Subtotal: | 963 | 1,025 | 28 | 1,747 | 15 | 1,895 | 31 | |||||||||||||||||||||
Totals: | ||||||||||||||||||||||||||||
Commercial | 5,569 | 6,915 | 13 | 6,681 | 86 | 7,097 | 178 | |||||||||||||||||||||
Consumer | - | - | - | - | - | - | - | |||||||||||||||||||||
Residential | 2,203 | 2,606 | 15 | 1,994 | 37 | 2,286 | 66 | |||||||||||||||||||||
Grand Total: | $ | 7,772 | $ | 9,521 | $ | 28 | $ | 8,675 | $ | 123 | $ | 9,383 | $ | 244 |
Impaired loans at June 30, 2017 were approximately $7.8 million and were composed of $2.9 million in nonaccrual loans and $4.9 million in loans that were still accruing interest. Recorded investment represents the current principal balance of the loan. Approximately $963,000 in impaired loans had specific allowances provided for them while the remaining $6.8 million had no specific allowances recorded at June 30, 2017. Of the $6.8 million with no allowance recorded, $1.4 million of those loans have had partial charge-offs recorded.
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SELECT BANCORP, INC.
Notes to Consolidated Financial Statements (Unaudited)
NOTE G - LOANS (continued)
Impaired Loans (continued)
Three months ended | Six months ended | |||||||||||||||||||||||||||
As of December 31, 2016 | June 30, 2016 | June 30, 2016 | ||||||||||||||||||||||||||
Contractual | Interest Income | Interest Income | ||||||||||||||||||||||||||
Unpaid | Average | Recognized on | Average | Recognized on | ||||||||||||||||||||||||
Recorded | Principal | Related | Recorded | Impaired | Recorded | Impaired | ||||||||||||||||||||||
Investment | Balance | Allowance | Investment | Loans | Investment | Loans | ||||||||||||||||||||||
(In thousands) | ||||||||||||||||||||||||||||
With no related allowance recorded: | ||||||||||||||||||||||||||||
Commercial and industrial | $ | 46 | $ | 46 | $ | - | $ | 469 | $ | 2 | $ | 237 | $ | 8 | ||||||||||||||
Construction | 231 | 318 | - | 558 | 2 | 563 | 6 | |||||||||||||||||||||
Commercial real estate | 4,364 | 5,983 | - | 3,304 | 29 | 4,378 | 72 | |||||||||||||||||||||
Loans to individuals & overdrafts | 1,139 | 1,144 | - | - | - | - | - | |||||||||||||||||||||
Multi-family residential | 346 | 365 | - | 368 | 3 | 397 | 8 | |||||||||||||||||||||
1 to 4 family residential | 1,000 | 1,278 | - | 1,257 | 36 | 1,656 | 52 | |||||||||||||||||||||
HELOC | 1,041 | 1,378 | - | 658 | 10 | 661 | 18 | |||||||||||||||||||||
Subtotal: | 8,167 | 10,512 | - | 6,614 | 82 | 7,892 | 164 | |||||||||||||||||||||
With an allowance recorded: | ||||||||||||||||||||||||||||
Commercial and industrial | - | - | - | 35 | - | 39 | 1 | |||||||||||||||||||||
Construction | - | - | - | - | - | - | - | |||||||||||||||||||||
Commercial real estate | 2,496 | 2,905 | 80 | 3,389 | 4 | 2,165 | 18 | |||||||||||||||||||||
Loans to individuals & overdrafts | 1 | 1 | 1 | - | - | 2 | - | |||||||||||||||||||||
Multi-family residential | - | - | - | - | - | - | - | |||||||||||||||||||||
1 to 4 family residential | 296 | 296 | 17 | 314 | 2 | 284 | 8 | |||||||||||||||||||||
HELOC | 34 | 35 | 19 | 41 | - | 16 | - | |||||||||||||||||||||
Subtotal: | 2,827 | 3,237 | 117 | 3,779 | 6 | 2,506 | 27 | |||||||||||||||||||||
Totals: | ||||||||||||||||||||||||||||
Commercial | 7,483 | 9,617 | 80 | 8,123 | 40 | 7,779 | 113 | |||||||||||||||||||||
Consumer | 1,140 | 1,145 | 1 | - | - | 2 | - | |||||||||||||||||||||
Residential | 2,371 | 2,987 | 36 | 2,270 | 48 | 2,617 | 78 | |||||||||||||||||||||
Grand Total: | $ | 10,994 | $ | 13,749 | $ | 117 | $ | 10,393 | $ | 88 | $ | 10,398 | $ | 191 |
Impaired loans at December 31, 2016 were approximately $11.0 million and consisted of $5.8 million in non-accrual loans and $5.2 million in loans still in accruing status. Recorded investment represents the current principal balance for the loan. Approximately, $2.8 million of the $11.0 million in impaired loans at December 31, 2016 had specific allowances aggregating $117,000 while the remaining $8.2 million had no specific allowances recorded. Of the $8.2 million with no allowance recorded, partial charge-offs to date amounted to $2.3 million.
Loans are placed on non-accrual status when it has been determined that all contractual principal and interest will not be received. Any payments received on these loans are applied to principal first and then to interest only after all principal has been collected. In the case of an impaired loan that is still on accrual basis, payments are applied to both principal and interest.
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SELECT BANCORP, INC.
Notes to Consolidated Financial Statements (Unaudited)
NOTE G - LOANS (continued)
Troubled Debt Restructurings
The following table presents loans that were modified as troubled debt restructurings (“TDRs”) with a breakdown of the types of concessions made by loan class during the three and six months ended June 30, 2017 and 2016:
Three months ended June 30, 2017 | Six months ended June 30, 2017 | |||||||||||||||||||||||
Pre- | Post- | Pre- | Post- | |||||||||||||||||||||
Modification | Modification | Modification | Modification | |||||||||||||||||||||
Outstanding | Outstanding | Outstanding | Outstanding | |||||||||||||||||||||
Number | Recorded | Recorded | Number | Recorded | Recorded | |||||||||||||||||||
of loans | Investment | Investment | of loans | Investment | Investment | |||||||||||||||||||
(Dollars in thousands) | ||||||||||||||||||||||||
Extended payment terms: | ||||||||||||||||||||||||
1-to-4 family residential | 1 | $ | 17 | $ | 17 | 1 | $ | 17 | $ | 17 | ||||||||||||||
Commercial & industrial | 1 | 44 | 44 | 1 | 44 | 44 | ||||||||||||||||||
Total | 2 | $ | 61 | $ | 61 | 2 | $ | 61 | $ | 61 |
Three months ended June 30, 2016 | Six months ended June 30, 2016 | |||||||||||||||||||||||
Pre- | Post- | Pre- | Post- | |||||||||||||||||||||
Modification | Modification | Modification | Modification | |||||||||||||||||||||
Outstanding | Outstanding | Outstanding | Outstanding | |||||||||||||||||||||
Number | Recorded | Recorded | Number | Recorded | Recorded | |||||||||||||||||||
of loans | Investment | Investment | of loans | Investment | Investment | |||||||||||||||||||
(Dollars in thousands) | ||||||||||||||||||||||||
Extended payment terms: | ||||||||||||||||||||||||
1-to-4 family residential | 1 | $ | 49 | $ | 49 | 1 | $ | 49 | $ | 49 | ||||||||||||||
Commercial & industrial | 2 | 251 | 160 | 3 | 296 | 206 | ||||||||||||||||||
Loans to individuals | 1 | 4 | 4 | 1 | 4 | 4 | ||||||||||||||||||
Total | 4 | $ | 304 | $ | 213 | 5 | $ | 349 | $ | 259 |
Loans may be considered troubled debt restructurings for reasons other than below market interest rates, extended payment terms or forgiveness of principal.
29 |
SELECT BANCORP, INC.
Notes to Consolidated Financial Statements (Unaudited)
NOTE G - LOANS (continued)
Troubled Debt Restructurings (continued)
The following table presents loans that were modified as TDRs within the past twelve months with a breakdown of the types for which there was a payment default during that period together with concessions made by loan class during the twelve month period ended June 30, 2017 and 2016:
Twelve months ended | Twelve months ended | |||||||||||||||
June 30, 2017 | June 30, 2016 | |||||||||||||||
Number | Recorded | Number | Recorded | |||||||||||||
of loans | investment | of loans | investment | |||||||||||||
(Dollars in thousands) | ||||||||||||||||
Extended payment terms: | ||||||||||||||||
Commercial real estate | - | $ | - | 3 | $ | 206 | ||||||||||
Commercial & industrial | 2 | $ | 927 | - | - | |||||||||||
Loans to individuals | - | - | 1 | 4 | ||||||||||||
Multi-family residential | - | - | 1 | 370 | ||||||||||||
1-to-4 family residential | 1 | 77 | 1 | 49 | ||||||||||||
Total | 3 | $ | 1,004 | 6 | $ | 629 |
At June 30, 2017, the Bank had thirty two loans with an aggregate balance of $4.7 million that were considered to be troubled debt restructurings. Of those TDRs, seventeen loans with a balance totaling $3.2 million were still accruing as of June 30, 2017. The remaining TDRs with balances totaling $1.5 million as of June 30, 2017 were in non-accrual status.
At June 30, 2016, the Bank had thirty five loans with an aggregate balance of $4.2 million that were considered to be troubled debt restructurings. Of those TDRs, twenty-six loans with a balance totaling $2.9 million were still accruing as of June 30, 2016. The remaining TDRs with balances totaling $1.3 million as of June 30, 2016 were in non-accrual status.
Credit Quality Indicators
As part of the on-going monitoring of the credit quality of the loan portfolio, management utilizes a risk grading matrix to assign a risk grade to each of the Company’s loans. All non-consumer loans are graded on a scale of 1 to 9. A description of the general characteristics of these nine different risk grades is as follows:
· | Risk Grade 1 (Superior) - Credits in this category are virtually risk-free and are well-collateralized by cash-equivalent instruments. The repayment program is well-defined and achievable. Repayment sources are numerous. No material documentation deficiencies or exceptions exist. |
· | Risk Grade 2 (Very Good) - This grade is reserved for loans secured by readily marketable collateral, or loans within guidelines to borrowers with liquid financial statements. A liquid financial statement is a financial statement with substantial liquid assets relative to debts. These loans have excellent sources of repayment, with no significant identifiable risk of collection, and conform in all respects to Bank policy, guidelines, underwriting standards, and Federal and State regulations (no exceptions of any kind). |
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SELECT BANCORP, INC.
Notes to Consolidated Financial Statements (Unaudited)
NOTE G - LOANS (continued)
Credit Quality Indicators (continued)
· | Risk Grade 3 (Good) - These loans have excellent sources of repayment, with no significant identifiable risk of collection. Generally, these loans will be in conformity in all respects with Bank policy, guidelines, underwriting standards, and Federal and State regulations (no exceptions of any kind). Loans assigned this risk grade will demonstrate the following characteristics: |
o | Documented historical cash flow that meets or exceeds required minimum Bank guidelines, or that can be supplemented with verifiable cash flow from other sources. |
o | Adequate secondary sources to liquidate the debt, including combinations of liquidity, liquidation of collateral, or liquidation value to the net worth of the borrower or guarantor. |
· | Risk Grade 4 (Acceptable) - This grade is given to acceptable loans. These loans have adequate sources of repayment, with little identifiable risk of collection. Loans assigned this risk grade will demonstrate the following characteristics: |
o | General conformity to the Bank's policy requirements, product guidelines and underwriting standards, with limited exceptions. Any exceptions that are identified during the underwriting and approval process have been adequately mitigated by other factors. |
o | Documented historical cash flow that meets or exceeds required minimum Bank guidelines, or that can be supplemented with verifiable cash flow from other sources. |
o | Adequate secondary sources to liquidate the debt, including combinations of liquidity, liquidation of collateral, or liquidation value to the net worth of the borrower or guarantor. |
· | Risk Grade 5 (Acceptable With Care) - This grade is given to acceptable loans that show signs of weakness in either adequate sources of repayment or collateral, but have demonstrated mitigating factors that minimize the risk of delinquency or loss. Loans assigned this grade may demonstrate some or all of the following characteristics: |
o | Additional exceptions to the Bank's policy requirements, product guidelines or underwriting standards that present a higher degree of risk to the Bank. Although the combination and/or severity of identified exceptions is greater, all exceptions have been properly mitigated by other factors. |
o | Unproven, insufficient or marginal primary sources of repayment that appear sufficient to service the debt at this time. Repayment weaknesses may be due to minor operational issues, financial trends, or reliance on projected (not historic) performance. |
o | Marginal or unproven secondary sources to liquidate the debt, including combinations of liquidation of collateral and liquidation value to the net worth of the borrower or guarantor. |
· | Risk Grade 6 (Watch List or Special Mention) – Loans in this category can have the following characteristics: |
o | Loans with underwriting guideline tolerances and/or exceptions and with no mitigating factors. |
o | Extending loans that are currently performing satisfactorily but with potential weaknesses that may, if not corrected, weaken the asset or inadequately protect the Bank's position at some future date. Potential weaknesses are the result of deviations from prudent lending practices. |
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SELECT BANCORP, INC.
Notes to Consolidated Financial Statements (Unaudited)
NOTE G - LOANS (continued)
Credit Quality Indicators (continued)
o | Loans where adverse economic conditions that develop subsequent to the loan origination that do not jeopardize liquidation of the debt but do substantially increase the level of risk may also warrant this rating. |
· | Risk Grade 7 (Substandard) - A Substandard loan is inadequately protected by the current sound net worth and paying capacity of the obligor or of the collateral pledged, if any. Loans classified as Substandard must have a well-defined weakness or weaknesses that jeopardize the liquidation of the debt; they are characterized by the distinct possibility that the institution will sustain some loss if the deficiencies are not corrected. Loans consistently not meeting the repayment schedule should be downgraded to substandard. Loans in this category are characterized by deterioration in quality exhibited by any number of well-defined weaknesses requiring corrective action. |
· | Risk Grade 8 (Doubtful) - Loans classified Doubtful have all the weaknesses inherent in loans classified Substandard, plus the added characteristic that the weaknesses make collection or liquidation in full on the basis of currently existing facts, conditions, and values highly questionable and improbable. However, these loans are not yet rated as loss because certain events may occur which would salvage the debt. |
· | Risk Grade 9 (Loss) - Loans classified as Loss are considered uncollectable and of such little value that their continuance as bankable assets is not warranted. This classification does not mean that the asset 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 affected in the future. |
Consumer loans are graded on a scale of 1 to 9. A description of the general characteristics of the nine risk grades is as follows:
· | Risk Grades 1 – 5 (Pass) – The loans in this category range from loans secured by cash with no risk of principal deterioration (Risk Grade 1) to loans that show signs of weakness in either adequate sources of repayment or collateral but have demonstrated mitigating factors that minimize the risk of delinquency or loss (Risk Grade 5). |
· | Risk Grade 6 (Watch List or Special Mention) - Watch List or Special Mention loans include the following characteristics: |
o | Loans within guideline tolerances or with exceptions of any kind that have not been mitigated by other economic or credit factors. |
o | Extending loans that are currently performing satisfactorily but with potential weaknesses that may, if not corrected, weaken the asset or inadequately protect the Bank's position at some future date. Potential weaknesses are the result of deviations from prudent lending practices. |
o | Loans where adverse economic conditions that develop subsequent to the loan origination that don't jeopardize liquidation of the debt but do substantially increase the level of risk may also warrant this rating. |
· | Risk Grade 7 (Substandard) - A Substandard loan is inadequately protected by the current sound net worth and paying capacity of the obligor or of the collateral pledged, if any. Loans classified as Substandard must have a well-defined weakness or weaknesses that jeopardize the liquidation of the debt; they are characterized by the distinct possibility that the institution will sustain some loss if the deficiencies are not corrected. |
32 |
SELECT BANCORP, INC.
Notes to Consolidated Financial Statements (Unaudited)
NOTE G - LOANS (continued)
Credit Quality Indicators (continued)
· | Risk Grade 8 (Doubtful) - Loans classified Doubtful have all the weaknesses inherent in loans classified Substandard, plus the added characteristic that the weaknesses make collection or liquidation in full on the basis of currently existing facts, conditions, and values highly questionable and improbable. However, these loans are not yet rated as loss because certain events may occur which would salvage the debt. |
· | Risk Grade 9 (Loss) - Loans classified Loss are considered uncollectable and of such little value that their continuance as bankable assets is not warranted. This classification does not mean that the asset has absolutely no recovery or salvage value, but rather that it is not practical or desirable to defer writing off this worthless loan even though partial recovery may be affected in the future. |
33 |
SELECT BANCORP, INC.
Notes to Consolidated Financial Statements (Unaudited)
NOTE G - LOANS (continued)
The following tables present information on risk ratings of the commercial and consumer loan portfolios, segregated by loan class as of June 30, 2017 and December 31, 2016, respectively:
Total loans:
June 30, 2017 | ||||||||||||||||
Commercial | ||||||||||||||||
Credit | ||||||||||||||||
Exposure By | Commercial | Commercial | ||||||||||||||
Internally | and | real | Multi-family | |||||||||||||
Assigned Grade | industrial | Construction | estate | residential | ||||||||||||
(In thousands) | ||||||||||||||||
Superior | $ | 402 | $ | - | $ | - | $ | - | ||||||||
Very good | 815 | 260 | 440 | - | ||||||||||||
Good | 10,680 | 6,089 | 38,673 | 10,732 | ||||||||||||
Acceptable | 31,509 | 18,517 | 168,342 | 40,469 | ||||||||||||
Acceptable with care | 43,124 | 100,869 | 84,288 | 19,578 | ||||||||||||
Special mention | 1,444 | 302 | 2,175 | - | ||||||||||||
Substandard | 232 | 228 | 3,488 | 287 | ||||||||||||
Doubtful | - | - | - | - | ||||||||||||
Loss | - | - | - | - | ||||||||||||
$ | 88,206 | $ | 126,265 | $ | 297,406 | $ | 71,066 |
Consumer Credit | ||||||||
Exposure By | ||||||||
Internally | 1-to-4 family | |||||||
Assigned Grade | residential | HELOC | ||||||
Pass | $ | 97,834 | $ | 40,717 | ||||
Special mention | 2,934 | 485 | ||||||
Substandard | 2,876 | 1,103 | ||||||
$ | 103,644 | $ | 42,305 |
Consumer Credit | ||||
Exposure Based | Loans to | |||
On Payment | individuals & | |||
Activity | overdrafts | |||
Pass | $ | 10,411 | ||
Non –pass | 11 | |||
$ | 10,422 |
34 |
SELECT BANCORP, INC.
Notes to Consolidated Financial Statements (Unaudited)
NOTE G - LOANS (continued)
Total Loans:
December 31, 2016 | ||||||||||||||||
Commercial | ||||||||||||||||
Credit | ||||||||||||||||
Exposure By | Commercial | Commercial | ||||||||||||||
Internally | and | real | Multi-family | |||||||||||||
Assigned Grade | industrial | Construction | estate | residential | ||||||||||||
(in thousands) | ||||||||||||||||
Superior | $ | 435 | $ | - | $ | - | $ | - | ||||||||
Very good | 326 | 245 | 460 | - | ||||||||||||
Good | 13,632 | 4,506 | 36,501 | 12,139 | ||||||||||||
Acceptable | 35,720 | 12,922 | 152,608 | 29,873 | ||||||||||||
Acceptable with care | 37,351 | 82,771 | 81,231 | 13,467 | ||||||||||||
Special mention | 2,905 | 173 | 4,868 | - | ||||||||||||
Substandard | 309 | 294 | 6,055 | 640 | ||||||||||||
Doubtful | - | - | - | - | ||||||||||||
Loss | - | - | - | - | ||||||||||||
$ | 90,678 | $ | 100,911 | $ | 281,723 | $ | 56,119 |
Consumer Credit | ||||||||
Exposure By | ||||||||
Internally | 1-to-4 family | |||||||
Assigned Grade | residential | HELOC | ||||||
Pass | $ | 92,115 | $ | 39,554 | ||||
Special mention | 3,015 | 439 | ||||||
Substandard | 2,848 | 1,165 | ||||||
$ | 97,978 | $ | 41,158 |
Consumer Credit | ||||
Exposure Based | Loans to | |||
On Payment | individuals & | |||
Activity | overdrafts | |||
Pass | $ | 9,820 | ||
Non-pass | 7 | |||
$ | 9,827 |
35 |
SELECT BANCORP, INC.
Notes to Consolidated Financial Statements (Unaudited)
NOTE G - LOANS (continued)
Determining the fair value of Purchased Credit Impaired (PCI) loans at acquisition required the Company to estimate cash flows expected to result from those loans and to discount those cash flows at appropriate rates of interest. For such loans, the excess of cash flows expected to be collected at acquisition over the estimated fair value is recognized as interest income over the remaining lives of the loans and is called the accretable yield. The difference between contractually required payments at acquisition and the cash flows expected to be collected at acquisition reflects the impact of estimated credit losses and is called the nonaccretable difference. In accordance with GAAP, there was no carry-over of previously established allowance for credit losses from the acquired company.
The following table documents changes to the amount of the accretable yield on PCI loans for the three and six months ended June 30, 2017 (dollars in thousands):
Three Months | Six Months | |||||||
Ended June 30, | Ended June 30, | |||||||
2017 | 2017 | |||||||
(Dollars in thousands) | ||||||||
Accretable yield, beginning of period | $ | 2,465 | $ | 2,626 | ||||
Accretion | (260 | ) | (520 | ) | ||||
Reclassification from (to) nonaccretable difference | 72 | 79 | ||||||
Other changes, net | 3 | 95 | ||||||
Accretable yield, end of period | $ | 2,280 | $ | 2,280 |
Allowance for Loan Losses
The allowance for loan losses is a reserve established through provisions for loan losses charged to income and represents management’s best estimate of probable loan losses that have been incurred within the existing portfolio of loans. The allowance, in the judgment of management, is necessary to reserve for estimated losses and risk inherent in the loan portfolio. The Company’s allowance for loan loss methodology is based on historical loss experience by type of credit and internal risk grade, specific homogeneous risk pools and specific loss allocations, with adjustments for current events and conditions. The Company’s process for determining the appropriate level of reserves is designed to account for changes in credit quality as they occur. The provision for loan losses reflects loan quality trends, including the levels of and trends related to past due loans and economic conditions at the local and national levels. It also considers the quality and risk characteristics of the Company’s loan origination and servicing policies and practices.
Individual reserves are calculated according to ASC Section 310-10-35 against loans evaluated individually and deemed to most likely be impaired. Impaired loans include all loans in non-accrual status, all troubled debt restructures, all substandard loans that are deemed to be collateral dependent, and other loans that management determines require reserves.
The Company’s allowance for loan losses model calculates historical loss rates by using a loss migration analysis associating losses to the risk-graded pool to which they relate for each of the previous twelve quarters. Then, using the twelve quarter look back period, loss factors are calculated for each risk-graded pool. The model incorporates various internal and external qualitative and environmental factors as described in the Interagency Policy Statement on the Allowance for Loan and Lease Losses, dated
36 |
SELECT BANCORP, INC.
Notes to Consolidated Financial Statements (Unaudited)
NOTE G - LOANS (continued)
Allowance for Loan Losses (continued)
December 2006. Input for these factors is determined on the basis of management observation, judgment, and experience. The factors utilized by the Company in the model for all loan classes are as follows:
Internal Factors
· | Concentrations – Measures the increased risk derived from concentration of credit exposure in particular industry segments within the portfolio. |
· | Policy exceptions – Measures the risk derived from granting terms outside of underwriting guidelines. |
· | Compliance exceptions– Measures the risk derived from granting terms outside of regulatory guidelines. |
· | Document exceptions– Measures the risk exposure resulting from the inability to collect due to improperly executed documents and collateral imperfections. |
· | Financial information monitoring – Measures the risk associated with not having current borrower financial information. |
· | Nonaccrual – Reflects increased risk of loans with characteristics that merit nonaccrual status. |
· | Delinquency – Reflects the increased risk deriving from higher delinquency rates. |
· | Personnel turnover – Reflects staff competence in various types of lending. |
· | Portfolio growth – Measures the impact of growth and potential risk derived from new loan production. |
External Factors
· | GDP growth rate – Impact of general economic factors that affect the portfolio. |
· | North Carolina unemployment rate – Impact of local economic factors that affect the portfolio. |
· | Peer group delinquency rate – Measures risk associated with the credit requirements of competitors. |
· | Prime rate change – Measures the effect on the portfolio in the event of changes in the prime lending rate. |
Each pool is assigned an adjustment to the potential loss percentage by assessing its characteristics against each of the factors listed above.
Reserves are generally divided into three allocation segments:
1. | Individual reserves. These are calculated according to ASC Section 310-10-35 against loans evaluated individually and deemed to be most likely impaired. All loans in non-accrual status and all substandard loans that are deemed to be collateral dependent are assessed for impairment. Loans are deemed uncollectible based on a variety of credit, collateral, documentation and other issues. In the case of uncollectible receivables, the collateral is considered unsecured and therefore fully charged off. |
2. | Formula reserves. Formula reserves are held against loans evaluated collectively. Loans are grouped by type or by risk grade, or some combination of the two. Loss estimates are based on historical loss rates for each respective loan group. Formula reserves represent the Company’s best estimate of losses that may be inherent, or embedded, within the group of loans, even if it is not apparent at this time which loans within any group or pool represent those embedded losses. |
37 |
SELECT BANCORP, INC.
Notes to Consolidated Financial Statements (Unaudited)
NOTE G - LOANS (continued)
Allowance for Loan Losses (continued)
3. | Qualitative and external reserves. If individual reserves represent estimated losses tied to specific loans, and formula reserves represent estimated losses tied to a pool of loans but not yet to any specific loan, then these reserves represent an estimate of likely incurred losses, but are not yet tied to any loan or group of loans. |
All information related to the calculation of the three segments, including data analysis, assumptions, and calculations are documented. Assigning specific individual reserve amounts, formula reserve factors, or unallocated amounts based on unsupported assumptions or conclusions is not permitted.
38 |
SELECT BANCORP, INC.
Notes to Consolidated Financial Statements (Unaudited)
NOTE G - LOANS (continued)
Allowance for Loan Losses (Continued)
The following tables present a roll forward of the Company’s allowance for loan losses by loan class for the three and six month periods ended June 30, 2017, respectively:
Three months ended June 30, 2017 | ||||||||||||||||||||||||||||||||
Commercial | 1 to 4 | Loans to | Multi- | |||||||||||||||||||||||||||||
and | Commercial | family | individuals & | family | ||||||||||||||||||||||||||||
Allowance for loan losses | industrial | Construction | real estate | residential | HELOC | overdrafts | residential | Total | ||||||||||||||||||||||||
(Dollars in thousands) | ||||||||||||||||||||||||||||||||
Loans – excluding PCI | ||||||||||||||||||||||||||||||||
Balance, beginning of period | $ | 958 | $ | 1,177 | $ | 3,169 | $ | 770 | $ | 589 | $ | 465 | $ | 583 | $ | 7,711 | ||||||||||||||||
Provision for loan losses | (119 | ) | 111 | 1,110 | 143 | (28 | ) | (294 | ) | 149 | 1,072 | |||||||||||||||||||||
Loans charged-off | (35 | ) | - | (373 | ) | - | - | (34 | ) | - | (442 | ) | ||||||||||||||||||||
Recoveries | 91 | 4 | 7 | 10 | 2 | 5 | - | 119 | ||||||||||||||||||||||||
Balance, end of period | $ | 895 | $ | 1,292 | $ | 3,913 | $ | 923 | $ | 563 | $ | 142 | $ | 732 | $ | 8,460 | ||||||||||||||||
PCI Loans | ||||||||||||||||||||||||||||||||
Balance, beginning of period | $ | 5 | $ | - | $ | 294 | $ | - | $ | 12 | $ | - | $ | - | $ | 311 | ||||||||||||||||
Provision for loan losses | (5 | ) | - | 12 | 16 | (12 | ) | - | - | 11 | ||||||||||||||||||||||
Loans charged-off | - | - | (294 | ) | - | - | - | - | (294 | ) | ||||||||||||||||||||||
Recoveries | - | - | - | - | - | - | - | - | ||||||||||||||||||||||||
Balance, end of period | $ | - | $ | - | $ | 12 | $ | 16 | $ | - | $ | - | $ | - | $ | 28 | ||||||||||||||||
Total Loans | ||||||||||||||||||||||||||||||||
Balance, beginning of period | $ | 963 | $ | 1,177 | $ | 3,463 | $ | 770 | $ | 601 | $ | 465 | $ | 583 | $ | 8,022 | ||||||||||||||||
Provision for loan losses | (124 | ) | 111 | 1,122 | 159 | (40 | ) | (294 | ) | 149 | 1,083 | |||||||||||||||||||||
Loans charged-off | (35 | ) | - | (667 | ) | - | - | (34 | ) | - | (736 | ) | ||||||||||||||||||||
Recoveries | 91 | 4 | 7 | 10 | 2 | 5 | - | 119 | ||||||||||||||||||||||||
Balance, end of period | $ | 895 | $ | 1,292 | $ | 3,925 | $ | 939 | $ | 563 | $ | 142 | $ | 732 | $ | 8,488 | ||||||||||||||||
Ending Balance: individually evaluated for impairment | $ | - | $ | - | $ | 12 | $ | 16 | $ | - | $ | - | $ | - | $ | 28 | ||||||||||||||||
Ending Balance: collectively evaluated for impairment | $ | 895 | $ | 1,292 | $ | 3,913 | $ | 923 | $ | 563 | $ | 142 | $ | 732 | $ | 8,460 | ||||||||||||||||
Loans: | ||||||||||||||||||||||||||||||||
Ending Balance: collectively evaluated for impairment | $ | 87,153 | $ | 126,101 | $ | 293,102 | $ | 102,122 | $ | 41,624 | $ | 10,422 | $ | 71,018 | $ | 731,542 | ||||||||||||||||
Ending Balance: individually evaluated for impairment | $ | 1,053 | $ | 164 | $ | 4,304 | $ | 1,522 | $ | 681 | $ | - | $ | 48 | $ | 7,772 | ||||||||||||||||
Ending Balance | $ | 88,206 | $ | 126,265 | $ | 297,406 | $ | 103,644 | $ | 42,305 | $ | 10,422 | $ | 71,066 | $ | 739,314 |
39 |
SELECT BANCORP, INC.
Notes to Consolidated Financial Statements (Unaudited)
Six months ended June 30, 2017 | ||||||||||||||||||||||||||||||||
Commercial | 1 to 4 | Loans to | Multi- | |||||||||||||||||||||||||||||
and | Commercial | family | individuals & | family | ||||||||||||||||||||||||||||
Allowance for loan losses | industrial | Construction | real estate | residential | HELOC | overdrafts | residential | Total | ||||||||||||||||||||||||
(Dollars in thousands) | ||||||||||||||||||||||||||||||||
Loans – excluding PCI | ||||||||||||||||||||||||||||||||
Balance, beginning of period | $ | 1,211 | $ | 1,301 | $ | 3,448 | $ | 846 | $ | 611 | $ | 317 | $ | 628 | $ | 8,362 | ||||||||||||||||
Provision for loan losses | (466 | ) | (18 | ) | 1,081 | 58 | (2 | ) | (139 | ) | 102 | 616 | ||||||||||||||||||||
Loans charged-off | (37 | ) | - | (623 | ) | - | (69 | ) | (50 | ) | - | (779 | ) | |||||||||||||||||||
Recoveries | 187 | 9 | 7 | 19 | 23 | 14 | 2 | 261 | ||||||||||||||||||||||||
Balance, end of period | $ | 895 | $ | 1,292 | $ | 3,913 | $ | 923 | $ | 563 | $ | 142 | $ | 732 | $ | 8,460 | ||||||||||||||||
PCI Loans | ||||||||||||||||||||||||||||||||
Balance, beginning of period | $ | 37 | $ | - | $ | - | $ | - | $ | 12 | $ | - | $ | - | $ | 49 | ||||||||||||||||
Provision for loan losses | (37 | ) | - | 306 | 16 | (12 | ) | - | - | 273 | ||||||||||||||||||||||
Loans charged-off | - | - | (294 | ) | - | - | - | - | (294 | ) | ||||||||||||||||||||||
Recoveries | - | - | - | - | - | - | - | - | ||||||||||||||||||||||||
Balance, end of period | $ | - | $ | - | $ | 12 | $ | 16 | $ | - | $ | - | $ | - | $ | 28 | ||||||||||||||||
Total Loans | ||||||||||||||||||||||||||||||||
Balance, beginning of period | $ | 1,248 | $ | 1,301 | $ | 3,448 | $ | 846 | $ | 623 | $ | 317 | $ | 628 | $ | 8,411 | ||||||||||||||||
Provision for loan losses | (503 | ) | (18 | ) | 1,387 | 74 | (14 | ) | (139 | ) | 102 | 889 | ||||||||||||||||||||
Loans charged-off | (37 | ) | - | (917 | ) | - | (69 | ) | (50 | ) | - | (1,073 | ) | |||||||||||||||||||
Recoveries | 187 | 9 | 7 | 19 | 23 | 14 | 2 | 261 | ||||||||||||||||||||||||
Balance, end of period | $ | 895 | $ | 1,292 | $ | 3,925 | $ | 939 | $ | 563 | $ | 142 | $ | 732 | $ | 8,488 |
40 |
SELECT BANCORP, INC.
Notes to Consolidated Financial Statements (Unaudited)
NOTE G - LOANS (continued)
Allowance for Loan Losses (Continued)
The following tables present a roll forward of the Company’s allowance for loan losses by loan class for the three and six month periods ended June 30, 2016, respectively:
Three months ended June 30, 2016 | ||||||||||||||||||||||||||||||||
Commercial | 1 to 4 | Loans to | Multi- | |||||||||||||||||||||||||||||
and | Commercial | family | individuals & | family | ||||||||||||||||||||||||||||
Allowance for loan losses | industrial | Construction | real estate | residential | HELOC | overdrafts | residential | Total | ||||||||||||||||||||||||
(Dollars in thousands) | ||||||||||||||||||||||||||||||||
Loans – excluding PCI | ||||||||||||||||||||||||||||||||
Balance, beginning of period | $ | 1,055 | $ | 1,401 | $ | 3,217 | $ | 688 | $ | 585 | $ | 150 | $ | 422 | $ | 7,518 | ||||||||||||||||
Provision for loan losses | 66 | 107 | 49 | (101 | ) | (102 | ) | 22 | 101 | 142 | ||||||||||||||||||||||
Loans charged-off | (40 | ) | (1 | ) | (185 | ) | - | (1 | ) | (9 | ) | - | (236 | ) | ||||||||||||||||||
Recoveries | 5 | 4 | 32 | 185 | 11 | 6 | - | 243 | ||||||||||||||||||||||||
Balance, end of period | $ | 1,086 | $ | 1,511 | $ | 3,113 | $ | 772 | $ | 493 | $ | 169 | $ | 523 | $ | 7,667 | ||||||||||||||||
PCI Loans | ||||||||||||||||||||||||||||||||
Balance, beginning of period | $ | - | $ | - | $ | - | $ | - | $ | 9 | $ | - | $ | - | $ | 9 | ||||||||||||||||
Provision for loan losses | 16 | - | - | - | - | - | - | 16 | ||||||||||||||||||||||||
Loans charged-off | - | - | - | - | - | - | - | - | ||||||||||||||||||||||||
Recoveries | - | - | - | - | - | - | - | - | ||||||||||||||||||||||||
Balance, end of period | $ | 16 | $ | - | $ | - | $ | - | $ | 9 | $ | - | $ | - | $ | 25 | ||||||||||||||||
Total Loans | ||||||||||||||||||||||||||||||||
Balance, beginning of period | $ | 1,055 | $ | 1,401 | $ | 3,217 | $ | 688 | $ | 594 | $ | 150 | $ | 422 | $ | 7,527 | ||||||||||||||||
Provision for loan losses | 82 | 107 | 49 | (101 | ) | (102 | ) | 22 | 101 | 158 | ||||||||||||||||||||||
Loans charged-off | (40 | ) | (1 | ) | (185 | ) | - | (1 | ) | (9 | ) | - | (236 | ) | ||||||||||||||||||
Recoveries | 5 | 4 | 32 | 185 | 11 | 6 | - | 243 | ||||||||||||||||||||||||
Balance, end of period | $ | 1,102 | $ | 1,511 | $ | 3,113 | $ | 772 | $ | 502 | $ | 169 | $ | 523 | $ | 7,692 | ||||||||||||||||
Ending Balance: individually evaluated for impairment | $ | 7 | $ | - | $ | 96 | $ | 12 | $ | - | $ | - | $ | - | $ | 115 | ||||||||||||||||
Ending Balance: collectively evaluated for impairment | $ | 1,095 | $ | 1,511 | $ | 3,017 | $ | 760 | $ | 502 | $ | 169 | $ | 523 | $ | 7,577 | ||||||||||||||||
Loans: | ||||||||||||||||||||||||||||||||
Ending Balance: collectively evaluated for impairment | $ | 79,719 | $ | 112,768 | $ | 241,091 | $ | 93,463 | $ | 41,399 | $ | 8,554 | $ | 45,928 | $ | 622,922 | ||||||||||||||||
Ending Balance: individually evaluated for impairment | $ | 435 | $ | 511 | $ | 6,831 | $ | 1,527 | $ | 656 | $ | - | $ | 367 | $ | 10,327 | ||||||||||||||||
Ending Balance | $ | 80,154 | $ | 113,279 | $ | 247,922 | $ | 94,990 | $ | 42,055 | $ | 8,554 | $ | 46,295 | $ | 633,249 |
41 |
SELECT BANCORP, INC.
Notes to Consolidated Financial Statements (Unaudited)
Six months ended June 30, 2016 | ||||||||||||||||||||||||||||||||
Commercial | 1 to 4 | Loans to | Multi- | |||||||||||||||||||||||||||||
and | Commercial | family | individuals & | family | ||||||||||||||||||||||||||||
Allowance for loan losses | industrial | Construction | real estate | residential | HELOC | overdrafts | residential | Total | ||||||||||||||||||||||||
(Dollars in thousands) | ||||||||||||||||||||||||||||||||
Loans – excluding PCI | ||||||||||||||||||||||||||||||||
Balance, beginning of period | $ | 922 | $ | 1,386 | $ | 3,005 | $ | 605 | $ | 564 | $ | 137 | $ | 393 | $ | 7,012 | ||||||||||||||||
Provision for loan losses | 198 | 116 | 219 | (114 | ) | (96 | ) | 41 | 130 | 494 | ||||||||||||||||||||||
Loans charged-off | (41 | ) | (2 | ) | (185 | ) | - | (1 | ) | (18 | ) | - | (247 | ) | ||||||||||||||||||
Recoveries | 7 | 11 | 74 | 281 | 26 | 9 | - | 408 | ||||||||||||||||||||||||
Balance, end of period | $ | 1,086 | $ | 1,511 | $ | 3,113 | $ | 772 | $ | 493 | $ | 169 | $ | 523 | $ | 7,667 | ||||||||||||||||
PCI Loans | ||||||||||||||||||||||||||||||||
Balance, beginning of period | $ | - | $ | - | $ | - | $ | - | $ | 9 | $ | - | $ | - | $ | 9 | ||||||||||||||||
Provision for loan losses | 16 | - | - | - | - | - | - | 16 | ||||||||||||||||||||||||
Loans charged-off | - | - | - | - | - | - | - | - | ||||||||||||||||||||||||
Recoveries | - | - | - | - | - | - | - | - | ||||||||||||||||||||||||
Balance, end of period | $ | 16 | $ | - | $ | - | $ | - | $ | 9 | $ | - | $ | 2 | $ | 25 | ||||||||||||||||
Total Loans | ||||||||||||||||||||||||||||||||
Balance, beginning of period | $ | 922 | $ | 1,386 | $ | 3,005 | $ | 605 | $ | 573 | $ | 137 | $ | 393 | $ | 7,021 | ||||||||||||||||
Provision for loan losses | 214 | 116 | 219 | (114 | ) | (96 | ) | 41 | 130 | 510 | ||||||||||||||||||||||
Loans charged-off | (41 | ) | (2 | ) | (185 | ) | - | (1 | ) | (18 | ) | - | (247 | ) | ||||||||||||||||||
Recoveries | 7 | 11 | 74 | 281 | 26 | 9 | - | 408 | ||||||||||||||||||||||||
Balance, end of period | $ | 1,102 | $ | 1,511 | $ | 3,113 | $ | 772 | $ | 502 | $ | 169 | $ | 523 | $ | 7,692 |
42 |
SELECT BANCORP, INC.
Notes to Consolidated Financial Statements (Unaudited)
NOTE H – ACCUMULATED OTHER COMPREHENSIVE INCOME
The following table presents changes in accumulated other comprehensive income for the three and six months ended June 30, 2017 and 2016.
Three Months Ended | Six Months Ended | |||||||||||||||
June 30, | June 30, | |||||||||||||||
2017 | 2016 | 2017 | 2016 | |||||||||||||
(In thousands) | ||||||||||||||||
Beginning balance | $ | 410 | $ | 953 | $ | 358 | $ | 490 | ||||||||
Unrealized gain (loss) on investment securities available for sale | 151 | 338 | 233 | 1,099 | ||||||||||||
Tax effect | (55 | ) | (113 | ) | (85 | ) | (397 | ) | ||||||||
Other comprehensive gain (loss) before reclassification | 96 | 225 | 148 | 702 | ||||||||||||
Amounts reclassified from accumulated comprehensive income: | ||||||||||||||||
Realized gains on investment securities included in net income | - | - | - | (22 | ) | |||||||||||
Tax effect | - | - | - | 8 | ||||||||||||
Total reclassifications net of tax | - | - | - | (14 | ) | |||||||||||
Net current period other comprehensive income | 96 | 225 | 148 | 688 | ||||||||||||
Ending balance | $ | 506 | $ | 1,178 | $ | 506 | $ | 1,178 |
The income statement line items impacted by the reclassifications of realized gains (losses) on investment securities are the gain on the sale of securities and income tax expense line items in the consolidated statement of operations.
NOTE I - REPURCHASE AGREEMENTS
We utilize securities sold under agreements to repurchase to facilitate the needs of our customers and secure long-term funding needs. Repurchase agreements are transactions whereby we offer to sell to a counterparty an undivided interest in an eligible security at an agreed upon purchase price, and which obligates the Company to repurchase the security on an agreed upon date at an agreed upon repurchase price plus interest at an agreed upon rate. Securities sold under agreements to repurchase are recorded at the amount of cash received in connection with the transaction and are reflected as short-term borrowings.
We monitor collateral levels on a continuous basis and maintain records of each transaction specifically describing the applicable security and the counterparty’s fractional interest in that security, and we segregate the security from its general assets in accordance with regulations governing custodial holdings of securities. The primary risk with our repurchase agreements is market risk associated with the investments securing the transactions, as we may be required to provide additional collateral based on fair value changes of the underlying investments. Securities pledged as collateral under repurchase agreements are maintained with our safekeeping agents. The carrying value of available for sale investment securities pledged as collateral under repurchase agreements totaled $12.7 million and $12.0 million at June 30, 2017 and December 31, 2016, respectively.
43 |
SELECT BANCORP, INC.
Notes to Consolidated Financial Statements (Unaudited)
NOTE I - REPURCHASE AGREEMENTS (continued)
The remaining contractual maturity of the securities sold under agreements to repurchase by class of collateral pledged included in short-term borrowings as of June 30, 2017 and December 31, 2016 is presented in the following tables.
June 30, 2017 | ||||||||||||||||||||
Remaining Contractual Maturity of the Agreements | ||||||||||||||||||||
Overnight and | Up to 30 | 30-90 | Greater than | |||||||||||||||||
(Dollars in thousands) | continuous | Days | Days | 90 Days | Total | |||||||||||||||
Repurchase agreements | ||||||||||||||||||||
U.S. government agencies-GSE’s | $ | 6,222 | $ | - | $ | - | $ | - | $ | 6,222 | ||||||||||
Mortgage-backed Securities-GSEs | 6,432 | - | - | - | 6,432 | |||||||||||||||
Total borrowings | $ | 12,654 | $ | - | $ | - | $ | - | $ | 12,654 | ||||||||||
Gross amount of recognized liabilities for repurchase agreements | $ | 11,560 |
December 31, 2016 | ||||||||||||||||||||
Remaining Contractual Maturity of the Agreements | ||||||||||||||||||||
Overnight and | Up to 30 | 30-90 | Greater than | |||||||||||||||||
(in thousands) | continuous | Days | Days | 90 Days | Total | |||||||||||||||
Repurchase agreements | ||||||||||||||||||||
U.S. government agencies-GSE’s | $ | 5,568 | $ | - | $ | - | $ | - | $ | 5,568 | ||||||||||
Mortgage-backed Securities-GSEs | 6,496 | - | - | - | 6,496 | |||||||||||||||
Total borrowings | $ | 12,064 | $ | - | $ | - | $ | - | $ | 12,064 | ||||||||||
Gross amount of recognized liabilities for repurchase agreements | $ | 12,003 |
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SELECT BANCORP, INC.
Notes to Consolidated Financial Statements (Unaudited)
NOTE J – OTHER REAL ESTATE OWNED
The following table explains changes in other real estate owned during the six months ended June 30, 2017 and 2016 (dollars in thousands):
Six Months | Six Months | |||||||
Ended June 30, | Ended June 30, | |||||||
2017 | 2016 | |||||||
(Dollars in thousands) | ||||||||
Beginning balance January 1 | $ | 599 | $ | 1,401 | ||||
Sales | (384 | ) | (1,215 | ) | ||||
Write-downs | 61 | (48 | ) | |||||
Transfers | 2,426 | 578 | ||||||
Ending balance | $ | 2,702 | $ | 716 |
At June 30, 2017 and December 31, 2016, the Company had $2.7 million and $599,000, respectively, of foreclosed residential real estate property in OREO. The recorded investment in consumer mortgage loans collateralized by residential real estate property in the process of foreclosure totaled $135,000 and none at June 30, 2017 and December 31, 2016, respectively.
NOTE K – SUBSEQUENT EVENTS
The Company and Bank have entered into an Agreement and Plan of Merger and Reorganization dated as of July 20, 2017, with Premara Financial, Inc. (“Premara”) and its subsidiary bank, Carolina Premier Bank, Charlotte, NC. Pursuant to the terms of the merger agreement, the Company would acquire Carolina Premier Bank through the merger of Premara with and into the Company, with the Company as the surviving corporation. Immediately following the parent company merger, Carolina Premier Bank would be merged with and into the Bank, with the Bank as the surviving banking corporation in the bank merger. The transaction is subject to various closing conditions, including the receipt of requisite shareholder approvals and required approvals of State and Federal banking regulators.
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Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations
Management’s discussion and analysis is intended to assist readers in the understanding and evaluation of the financial condition and results of operations of Select Bancorp, Inc. (the “Company”). This report contains “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995 relating to, without limitation, our future economic performance, plans and objectives for future operations, and projections of revenues and other financial items that are based on our beliefs and assumptions and information currently available to us. The words “may,” “will,” “anticipate,” “should,” “would,” “believe,” “contemplate,” “could,” “project,” “predict,” “expect,” “estimate,” “continue,” and “intend,” as well as other similar words and expressions of the future, are intended to identify forward-looking statements. Our actual results, performance or achievements may differ materially from the results expressed or implied by our forward-looking statements. Factors that could influence actual results, performance or achievements include, among other things: changes in national, regional and local market conditions; changes in legislative and regulatory conditions; changes in the interest rate environment; breaches of security or failures of our technology systems due to technological or other factors and cybersecurity threats; adverse change in credit quality trends; and diversion of management’s time and attention to merger-related issues.
Overview
The Company is a commercial bank holding company and has one banking subsidiary, Select Bank & Trust Company (referred to as the “Bank”), and one unconsolidated subsidiary, New Century Statutory Trust I, which issued trust preferred securities in 2004 to provide additional capital for general corporate purposes. The Company’s only business activity is the ownership of the Bank and New Century Statutory Trust I. This discussion focuses primarily on the financial condition and operating results of the Bank.
The Bank’s lending activities are oriented to the consumer/retail customer as well as to the small- to medium-sized businesses located in Harnett, Brunswick, New Hanover, Carteret, Cumberland, Johnston, Pitt, Robeson, Sampson, Wake, Pasquotank, Martin, Alamance, and Wayne counties in North Carolina. The Bank offers the standard complement of commercial, consumer, and mortgage lending products, as well as the ability to structure products to fit specialized needs. The deposit services offered by the Bank include small business and personal checking accounts, savings accounts and certificates of deposit. The Bank concentrates on customer relationships in building its customer deposit base and competes aggressively in the area of transaction accounts.
The Company was formerly known as New Century Bancorp, Inc. On July 25, 2014, New Century Bancorp, Inc. acquired Select Bancorp, Inc. (“Legacy Select”) by merger. The combined company is now known as Select Bancorp, Inc., which we refer to in this report as the Company. Legacy Select was a bank holding company headquartered in Greenville, North Carolina, whose wholly owned subsidiary, Select Bank & Trust Company, was a state-chartered commercial bank with approximately $276.9 million in assets. The merger expanded the Company’s North Carolina presence with the addition of six branches located in Greenville (two), Elizabeth City, Washington, Gibsonville, and Burlington. During 2015, Gibsonville and Burlington were combined into a new location in Burlington.
We closed our branch located at 6390 Ramsey Street, Fayetteville, North Carolina and transferred accounts to our Fayetteville branch located at 2818 Raeford Road during September 2015. The property that housed our former Ramsey Street branch is included in assets held for sale on the consolidated balance sheet as of June 30, 2017.
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Comparison of Financial Condition at
June 30, 2017 and December 31, 2016
During the first six months of 2017, total assets increased by $59.9 million to $906.5 million as of June 30, 2017. The increase in assets was due primarily to loan growth funded by demand deposits accounts and time deposits. Earning assets at June 30, 2017 totaled $833.7 million and consisted of $729.5 million in net loans, $56.9 million in investment securities, $44.5 million in overnight investments and interest-bearing deposits in other banks and $2.8 million in non-marketable equity securities, of which $2.1 million is FHLB stock. Total deposits and shareholders’ equity at the end of the second quarter of 2017 were $739.7 million and $108.0 million, respectively.
Since the end of 2016, gross loans have increased by $60.8 million to $738.0 million as of June 30, 2017. At June 30, 2017, gross loans consisted of $88.2 million in commercial and industrial loans, $297.4 million in commercial real estate loans, $71.1 million in multi-family residential loans, $10.4 million in loans to individuals, $103.6 million in 1-to-4 family residential real estate loans, $42.3 million in HELOCs, and $126.3 million in construction loans. Deferred loan fees, net of costs, on these loans were $1.3 million at June 30, 2017.
At June 30, 2017 and December 31, 2016, there were no federal funds sold and no repurchase agreements. Interest-earning deposits in other banks were $44.5 million at June 30, 2017, a $3.2 million increase from December 31, 2016. The Company’s investment securities at June 30, 2017 were $56.9 million, a decrease of $5.4 million from December 31, 2016 in order to provide funding for higher yielding loans. The investment portfolio as of June 30, 2017 consisted of $12.6 million in government agency debt securities, $30.1 million in mortgage-backed securities and $14.2 million in municipal securities. The net unrealized gain on these securities was $795,000.
At June 30, 2017, the Company had an investment of $2.1 million in FHLB stock, which decreased by $110,000 from December 31, 2016. Also, the Company had $666,000 in other non-marketable securities at June 30, 2017, which decreased by $37,000 from December, 31, 2016.
At June 30, 2017, non-earning assets were $72.8 million, an increase of $1.5 million from $71.3 million as of December 31, 2016. Non-earning assets included $13.8 million in cash and due from banks, bank premises and equipment of $17.5 million, goodwill of $6.9 million, core deposit intangible of $629,000, accrued interest receivable of $2.6 million, foreclosed real estate of $2.7 million, $22.5 million in bank owned life insurance (“BOLI”), $846,000 of assets held for sale, and other assets of $5.3 million which included $2.7 million in deferred tax assets. Since the income on BOLI is included in non-interest income, this asset is not included in the Company’s calculation of earning assets. The increase in non-earning assets was due primarily to the increase in deposits and the corresponding increase in on-balance sheet cash.
Total deposits at June 30, 2017 were $739.7 million and consisted of $168.6 million in non-interest-bearing demand deposits, $174.2 million in money market and NOW accounts, $35.2 million in savings accounts, and $361.7 million in time deposits. Total deposits increased by $60.0 million from $679.7 million as of December 31, 2016, due primarily to an increase in CD deposits from a deposit program and wholesale deposits. The Bank had no brokered demand deposits and $72.6 million in brokered time deposits as of June 30, 2017.
As of June 30, 2017, the Company had $33.6 million of short-term debt of which $11.6 million was repurchase agreements with local customers, $32.5 million (of which $10.5 million is identified as long-term debt) in FHLB borrowings, and $12.4 million in junior subordinated debentures that are classified as long-term debt.
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Total shareholders’ equity at June 30, 2017 was $108.0 million, an increase of $3.7 million from $104.3 million as of December 31, 2016. This increase is primarily due to year to date earnings of $3.5 million. Accumulated other comprehensive income relating to available for sale securities increased $148,000 during the six months ended June 30, 2017. Other changes in shareholders’ equity included increases of $43,000 in stock-based compensation and $102,000 from the exercise of stock options.
Past Due Loans, Non-performing Assets, and Asset Quality
At June 30, 2017, the Company had $519,000 in loans that were 30 to 89 days past due. This represented 0.07% of gross loans outstanding on that date. This is a decrease from December 31, 2016 when there were $3.0 million in loans that were 30-89 days past due or 0.44% of gross loans outstanding. Non-accrual loans decreased from $5.8 million at December 31, 2016 to $2.9 million at June 30, 2017. Past dues have decreased due to timely payments from customers and nonaccruals decreased primarily as a result of foreclosure on two loans.
The percentage of non-performing loans (non-accrual loans and accruing troubled debt restructurings) to total loans decreased from 1.39% at December 31, 2016 to 0.83% at June 30, 2017. The Company has experienced a decrease in non-accruals from $5.8 million at December 31, 2016 to $2.9 million as of June 30, 2017 and a decrease in accruing troubled debt restructurings from $3.6 million at December 31, 2016 to $3.2 million as of June 30, 2017. Of the $2.9 million decrease in non-accrual loans in the first half of the year, the decrease is related primarily to a reduction of $2.4 million in Commercial Real Estate, $415,000 in HELOCs, $298,000 in Multi-family which was netted against an increase of $319,000 in 1-to-4 Family Residential loan pool classifications.
At June 30, 2017, the Company had thirty-two loans totaling $4.7 million that were considered to be troubled debt restructurings. Seventeen of these loans totaling $3.2 million were still in accruing status with the remaining TDRs included in non-accrual loans. All TDRs are considered impaired loans regardless of accrual status and have been included as non-performing assets in the table below.
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The table below sets forth, for the periods indicated, information about the Company’s non-accrual loans, loans past due 90 days or more and still accruing interest, total non-performing loans (non-accrual loans plus accruing TDRs), and total non-performing assets.
For Periods Ended | ||||||||
June 30, | December 31, | |||||||
2017 | 2016 | |||||||
(Dollars in thousands) | ||||||||
Non-accrual loans | $ | 2,943 | $ | 5,805 | ||||
Accruing TDRs | 3,216 | 3,625 | ||||||
Total non-performing loans | 6,159 | 9,430 | ||||||
Foreclosed real estate | 2,702 | 599 | ||||||
Total non-performing assets | $ | 8,861 | $ | 10,029 | ||||
Accruing loans past due 90 days or more | $ | 956 | $ | 529 | ||||
Allowance for loan losses | $ | 8,488 | $ | 8,411 | ||||
Non-performing loans to period end loans | 0.83 | % | 1.39 | % | ||||
Non-performing loans and accruing loans past due 90 days or more to period end loans | 0.96 | % | 1.47 | % | ||||
Allowance for loans losses to period end loans | 1.15 | % | 1.24 | % | ||||
Allowance for loan losses to non-performing loans | 138 | % | 89 | % | ||||
Allowance for loan losses to non-performing assets | 96 | % | 84 | % | ||||
Allowance for loan losses to non-performing assets and accruing loans past due 90 days or more | 86 | % | 80 | % | ||||
Non-performing assets to total assets | 0.98 | % | 1.18 | % | ||||
Non-performing assets and accruing loans past due 90 days or more to total assets | 1.08 | % | 1.25 | % |
Total non-performing assets (non-accrual loans, accruing TDRs, and foreclosed real estate) at June 30, 2017 and December 31, 2016 were $8.9 million and $10.0 million, respectively. The allowance for loan losses at June 30, 2017 represented 96% of non-performing assets compared to 84% at December 31, 2016.
Total impaired loans at June 30, 2017 were $7.8 million. This includes $2.9 million in loans that were classified as impaired because they were in non-accrual status and $4.9 million in loans that were determined to be impaired for other reasons. Of these loans, $963,000 required a specific reserve of $28,000 at June 30, 2017.
Total impaired loans at December 31, 2016 were $11.0 million. This includes $5.8 million in loans that were considered to be impaired due to being in non-accrual status and $5.2 million in loans that were deemed to be impaired for other reasons. Of these loans, $2.8 million required a specific reserve of $117,000 at December 31, 2016.
The allowance for loan losses was $8.5 million at June 30, 2017 or 1.15% of gross loans outstanding. This is a decrease from the 1.24% reported as a percentage of gross loans at December 31, 2016. The Legacy Select loans were recorded at estimated fair value as of the acquisition date and the related credit risk reflected as a fair value adjustment rather than separately in the allowance for losses as required in acquisition accounting. This required accounting under generally accepted accounting principles has resulted in a lower percentage of the allowance for loan losses to gross loans at June 30, 2017 for all periods post acquisition of Legacy Select. The allowance for loan losses at June 30, 2017 and December 31, 2016 represented 138% and 89%, respectively, of non-performing loans. It is management’s assessment that the allowance for loan losses as of June 30, 2017 is appropriate in light of the risk inherent within the Company’s loan portfolio. No assurances, however, can be given that further adjustments to the allowance for loan losses may not be deemed necessary in the future.
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Other Lending Risk Factors
Besides monitoring non-performing loans and past due loans, management also monitors trends in the loan portfolio that may indicate more than normal risk. A discussion of certain other risk factors follows. Some loans or groups of loans may contain one or more of these individual loan risk factors. Therefore, an accumulation of the amounts or percentages of the individual loan risk factors may not necessarily be an indication of the cumulative risk in the total loan portfolio.
Regulatory Loan to Value
The Company monitors its exposure to loans that exceed the guidelines established by regulators for loan to value (“LTV”) ratios.
At June 30, 2017 and December 31, 2016, the Company had $17.7 million and $21.7 million in non 1-to-4 family residential loans that exceeded the regulatory LTV limits, respectively. At June 30, 2017 and December 31, 2016, the Company had $6.3 million and $4.8 million of 1-to-4 family residential loans that exceeded the regulatory LTV limits, respectively. The total amount of these loans represented 20.7% and 23.6% of total risk-based capital as of June 30, 2017 and December 31, 2016, which is less than the 100% maximum allowed. These loans may present more than ordinary risk to the Company if the real estate market weakens in terms of market activity or collateral valuations.
Business Sector Concentrations
Loan concentrations in certain business sectors can be impacted by lower than normal retail sales, higher unemployment, higher vacancy rates, and a weakening in real estate market conditions. The Company has established an internal commercial real estate guideline of 40% of risk-based capital for any single product line.
At June 30, 2017 the Company had three product type groups which exceeded this guideline; Real Estate Construction – Speculative and Presold, which represented 45% of risk-based capital, or $52.6 million, 1-4 Family Rental, which represented 57%, or $66.3 million and Multifamily Residential, which represented 60% of risk-based capital, or $69.5 million. All other commercial real estate groups were at or below the 40% threshold. At December 31, 2016, the Company exceeded the 40% guideline in two product types. The 1-to-4 Family Residential Rental category represented 66% of Risk-Based Capital or $74.2 million and the Multi-family Residential category represented 49% of Risk-Based Capital or $54.5 million at December 31, 2016. All other commercial real estate product types were under the 40% threshold.
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Acquisition, Development, and Construction Loans (“ADC”)
The tables below provide information regarding loans the Company originates for the purpose of acquisition, development, and construction of both residential and commercial properties as of June 30, 2017 and December 31, 2016.
Acquisition, Development and Construction Loans
(Dollars in thousands)
June 30, 2017 | December 31, 2016 | |||||||||||||||||||||||
Land and Land | Land and Land | |||||||||||||||||||||||
Construction | Development | Total | Construction | Development | Total | |||||||||||||||||||
Total ADC loans | $ | 99,743 | $ | 26,522 | $ | 126,265 | $ | 76,037 | $ | 24,874 | $ | 100,911 | ||||||||||||
Average Loan Size | $ | 195 | $ | 305 | $ | 166 | $ | 350 | ||||||||||||||||
Percentage of total loans | 13.51 | % | 3.76 | % | 17.27 | % | 11.23 | % | 3.67 | % | 14.90 | % | ||||||||||||
Non-accrual loans | $ | 134 | $ | 21 | $ | 155 | $ | 151 | $ | - | $ | 151 |
Management closely monitors the ADC portfolio by reviewing funding based on project completeness, monthly and quarterly inspections as required by the project, collateral value, geographic concentrations, spec-to-presold ratios and performance of similar loans in the Company’s market area.
Geographic Concentrations
Certain risks exist arising from the geographic location of specific types of higher than normal risk real estate loans. Below is a table showing geographic concentrations for ADC and HELOC loans at June 30, 2017 and December 31, 2016.
June 30, 2017 | December 31, 2016 | |||||||||||||||||||||||||||||||
ADC Loans | Percent | HELOC | Percent | ADC Loans | Percent | HELOC | Percent | |||||||||||||||||||||||||
(Dollars in thousands) | ||||||||||||||||||||||||||||||||
Harnett County | $ | 5,429 | 4.30 | % | $ | 5,854 | 13.84 | % | $ | 4,505 | 4.46 | % | $ | 5,817 | 14.13 | % | ||||||||||||||||
Alamance County | 1,657 | 1.31 | % | 1,250 | 2.96 | % | 1,169 | 1.16 | % | 1,065 | 2.59 | % | ||||||||||||||||||||
Beaufort County | 165 | 0.13 | % | 1,212 | 2.86 | % | 182 | 0.18 | % | 1,026 | 2.49 | % | ||||||||||||||||||||
Brunswick County | 8,291 | 6.57 | % | 1,713 | 4.05 | % | 4,506 | 4.46 | % | 1,899 | 4.61 | % | ||||||||||||||||||||
Carteret County | 2,083 | 1.65 | % | 2,309 | 5.46 | % | 585 | 0.58 | % | 2,350 | 5.71 | % | ||||||||||||||||||||
Craven County | 1,075 | 0.85 | % | 445 | 1.05 | % | - | -% | - | -% | ||||||||||||||||||||||
Cumberland County | 21,823 | 17.28 | % | 4,202 | 9.93 | % | 22,610 | 22.41 | % | 5,278 | 12.82 | % | ||||||||||||||||||||
Pasquotank County | 1,018 | 0.81 | % | 1,581 | 3.74 | % | 947 | 0.94 | % | 1,258 | 3.06 | % | ||||||||||||||||||||
Pitt County | 15,081 | 11.94 | % | 6,151 | 14.54 | % | 13,697 | 13.57 | % | 5,151 | 12.52 | % | ||||||||||||||||||||
Robeson County | 655 | 0.52 | % | 3,832 | 9.06 | % | 803 | 0.80 | % | 3,709 | 9.01 | % | ||||||||||||||||||||
Sampson County | 26 | 0.02 | % | 1,702 | 4.02 | % | 71 | 0.07 | % | 1,574 | 3.83 | % | ||||||||||||||||||||
Wake County | 18,518 | 14.67 | % | 1,381 | 3.26 | % | 15,689 | 15.55 | % | 1,536 | 3.73 | % | ||||||||||||||||||||
Wayne County | 10,424 | 8.25 | % | 4,045 | 9.56 | % | 9,734 | 9.65 | % | 4,281 | 10.40 | % | ||||||||||||||||||||
All other locations | 40,020 | 31.70 | % | 6,628 | 15.67 | % | 26,413 | 26.17 | % | 6,214 | 15.10 | % | ||||||||||||||||||||
Total | $ | 126,265 | 100.00 | % | $ | 42,305 | 100.00 | % | $ | 100,911 | 100.00 | % | $ | 41,158 | 100.00 | % |
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Interest Only Payments
Another risk factor that exists in the total loan portfolio pertains to loans with interest only payment terms. At June 30, 2017, the Company had $193.0 million in loans that had terms permitting interest only payments. This represented 26.2% of the total loan portfolio. At December 31, 2016, the Company had $161.5 million in loans that had terms permitting interest only payments. This represented 23.8% of the total loan portfolio. Notwithstanding the risk inherent with interest only loans, it is customary and general industry practice that loans in the ADC portfolio permit interest only payments during the acquisition, development, and construction phases of such projects.
Large Dollar Concentrations
Concentrations of high dollar loans or large customer relationships may pose additional risk in the total loan portfolio. The Company’s ten largest loans or lines of credit totaled $64.0 million, or 8.7% of total loans, at June 30, 2017 compared to $62.9 million, or 8.4% of total loans, at December 31, 2016. The Company’s ten largest customer relationships totaled $83.3 million, or 11.2% of total loans, at June 30, 2017 compared to $80.9 million, or 11.9% of total loans, at December 31, 2016. Deterioration or loss in any one or more of these high dollar loan or customer concentrations could have an immediate, significant adverse impact on the Company’s capital position.
Comparison of Results of Operations for the
Three months ended June 30, 2017 and 2016
General. During the second quarter of 2017, the Company had net income of $1.3 million as compared with net income of $1.9 million for the second quarter of 2016. Net income per common share for the second quarter of 2017 was $0.11, basic and diluted, compared with net income per common share of $0.16, basic and diluted, for the second quarter of 2016. Results of operations for the second quarter of 2017 were primarily impacted by an increase of $539,000 in net interest income, and an increase in non-interest expenses and an increase in the provision for loan losses of $925,000. Noninterest expenses increased $461,000 which was primarily related to increased personnel expense of $615,000 and other expenses of $84,000 which were offset by a reduction in occupancy expense of $115,000, deposit insurance expense of $60,000 and core deposit intangible amortization of $23,000 and other associated expenses. The Company recorded a provision of loan losses of $1.1 million for the second quarter of 2017 due primarily to loan growth and the charge offs related to three loans compared to $158,000 in the second quarter of 2016. Net interest margin of 4.18% in the second quarter of 2017 decreased 6 basis points from the same period in 2016 resulting from the accretion of the credit mark associated with the acquired loan portfolio.
Net Interest Income. Net interest income increased to $8.3 million for the second quarter of 2017 from $7.7 million for the second quarter of 2016. The Company’s total interest income was primarily affected by the increase in loan balances due to growth. Average total interest-earning assets were $799.2 million in the second quarter of 2017 compared with $739.0 million during the same period in 2016, while the yield on those assets increased 4 basis points from 4.74% to 4.78% which was primarily due to the yield accretion on the acquired loans and increase of rates on recently originated loans.
The Company’s average interest-bearing liabilities increased by $44.1 million to $606.6 million for the quarter ended June 30, 2017 from $562.5 million for the same period one year earlier and the cost of those funds increased from 0.65% to 0.79%, or 14 basis points. During the second quarter of 2017, the Company’s net interest margin was 4.18% and net interest spread was 3.99%. In the same quarter ended one year earlier, net interest margin was 4.24% and net interest spread was 4.08%.
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Provision for Loan Losses. Provisions for loan losses are charged to income to bring the allowance for loan losses to a level deemed appropriate by management. In evaluating the allowance for loan losses, management considers factors that include growth, composition and industry diversification of the portfolio, historical loan loss experience, current delinquency levels, adverse situations that may affect a borrower’s ability to repay, estimated value of any underlying collateral, prevailing economic conditions and other relevant factors. In determining the loss history to be applied to its ASC 450 loan pools within the allowance for loan losses, the Company previously used loss history based on the weighted average net charge off history for the most recent fourteen consecutive quarters, based on the risk-graded pool to which the loss was assigned. Historical loss rates are calculated by using a loss migration analysis associating losses to the risk-graded pool to which they relate for each of the previous twelve quarters. Then, using a twelve quarter look back period, loss factors are calculated for each risk-graded pool. During the second quarter of 2017, the Company recorded a provision for loan losses of $1.1 million based primarily on loan growth and charge offs on three loans, which was an increase of approximately $925,000 compared to the provision for loan losses recorded in the second quarter of 2016. The Company, however, has seen a general trend of improving credit metrics for past dues, non-accruals and TDRs during 2017.
Non-Interest Income. Non-interest income for the quarter ended June 30, 2017 was $778,000, a decrease from $831,000 in the second quarter of 2016. Service charges on deposit accounts decreased $30,000 to $216,000 for the quarter ended June 30, 2017 from $246,000 for the same period in 2016. Other non-deposit fees and income decreased $23,000 from the second quarter of 2016 to the second quarter of 2017 due primarily to debit card fees transactions. The Company did not sell any investment securities in the second quarter of 2017 or 2016.
Non-Interest Expenses. Non-interest expenses increased by $461,000 to $6.0 million for the quarter ended June 30, 2017, from $5.5 million for the same period in 2016. In general, categories of non-interest expenses that increased were offset by decreases in other areas. The following are highlights of the significant categories of non-interest expenses during the second quarter of 2017 compared to the same period in 2016:
· | Personnel expenses increased $615,000 to $3.7 million, due to increased staff, employment taxes and benefits costs. |
· | Deposit insurance expense decreased $60,000, due to reduced rates. |
· | Core Deposit intangible decreased $23,000 as scheduled. |
· | Occupancy and equipment decreased by $115,000 to $492,000, due to branch restructuring. |
· | Other non-interest expenses increased by $84,000, due to increases in several categories of other non-interest expenses. |
Provision for Income Taxes. The Company’s effective tax rate was 32.8% and 34.0% for the quarters ended June 30, 2017 and 2016, respectively. The effective tax rate for the second quarter of 2017 compared to the same quarter in 2016 was impacted by an adjustment to reduce the Company’s deferred tax asset resulting from enacted lower corporate tax rates for the State of North Carolina in 2017.
As of June 30, 2017 and December, 31, 2016, the Company had a net deferred tax asset in the amount of $2.7 million and $3.1 million, respectively. In evaluating whether the Company will realize the full benefit of the net deferred tax asset, management considered both positive and negative evidence, including among other things, recent earnings trends, projected earnings, and asset quality. As of June 30, 2017 and December 31, 2016, management concluded that the net deferred tax assets were fully realizable. The Company will continue to monitor deferred tax assets closely to evaluate whether the full benefit of the net deferred tax asset will require a valuation allowance. Significant negative trends in credit quality or losses from operations, among other trends, could impact the realization of the deferred tax asset in the future.
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Comparison of Results of Operations for the
Six months ended June 30, 2017 and 2016
General. During the first six months of 2017, the Company had net income of $3.5 million as compared with net income of $3.4 million for the first six months of 2016. Net income per share for the first six months of 2017 was $0.30, basic and $0.29 diluted, compared with net income per share of $0.29, basic and diluted, for the first six months of 2016. Results of operations for the first six months of 2017 compared to 2016 was primarily impacted by an increase of $1.5 million in interest income offset by an increase in interest expense of $405,000 and provision for loan losses of $379,000, a decrease of $189,000 in non-interest income and increased non-interest expenses of $646,000. Net interest margin of 4.21% in the first six months of 2017 increased 2 basis points from the same period in 2016.
Net Interest Income. Net interest income increased to $16.4 million for the first six months of 2017 from $15.2 million for the first six months of 2016. The Company’s total interest income was affected by the increase in total loan balances. Average total interest-earning assets were $787.9 million in the first six months of 2017 compared with $736.9 million during the same period in 2016, while the yield on those assets increased 10 basis points from 4.69% to 4.79% as a result of increases in the prime interest rate which contributed to the increase in loan yield.
The Company’s average interest-bearing liabilities increased by $29.1 million to $595.2 million for the six months ended June 30, 2017 from $566.1 million for the same period one year earlier and the cost of those funds increased from 0.65% to 0.76%, or 11 basis points. During the first six months of 2017, the Company’s net interest margin was 4.21% and net interest spread was 4.03%. In the same period ended one year earlier, net interest margin was 4.19% and net interest spread was 4.04%.
Provision for Loan Losses. Provisions for loan losses are charged to income to bring the allowance for loan losses to a level deemed appropriate by management. In evaluating the allowance for loan losses, management considers factors that include growth, composition and industry diversification of the portfolio, historical loan loss experience, current delinquency levels, adverse situations that may affect a borrower’s ability to repay, estimated value of any underlying collateral, prevailing economic conditions and other relevant factors. In determining the loss history to be applied to its ASC 450 loan pools within the allowance for loan losses, the Company has previously used loss history based on the weighted average net charge off history for the most recent fourteen consecutive quarters, based on the risk-graded pool to which the loss was assigned. Historical loss rates are now calculated by using a loss migration analysis associating losses to the risk-graded pool to which they relate for each of the previous twelve quarters. Then, using a twelve quarter look back period, loss factors are calculated for each risk-graded pool. Loan growth was the primary contributor to the 2017 provision expense.
Non-Interest Income. Non-interest income for the six months ended June 30, 2017 was $1.5 million, a decrease of $189,000 from the first six months of 2016. Service charges on deposit accounts decreased $62,000 to $431,000 for the six months ended June 30, 2017 from $493,000 for the same period in 2016, primarily due to a decrease in overdraft charges. Other non-deposit fees and income decreased $105,000 from the first six months of 2016 to the first six months of 2017, primarily due to decreases in debit card activity. The Company recognized a gain on sale of investment securities of $22,000 for the first six months of 2016 compared to none for the first six months of 2017.
54 |
Non-Interest Expenses. Non-interest expenses increased by $646,000 to $11.8 million for the six months ended June 30, 2017, from $11.1 million for the same period in 2016. The following are highlights of the significant categories of non-interest expenses during the first six months of 2017 versus the same period in 2016:
· | Personnel expenses increased $827,000 to $7.1 million, due to additions in staff, employment taxes and benefits costs. |
· | Occupancy and equipment expenses decreased by $117,000 due to branch restructuring. |
· | Professional fees increased by $84,000 in the first six months of 2017 to $571,000 compared to $487,000 in the 2016 period primarily due to contracted internal audit and consulting fees. |
· | Deposit insurance expense decreased $114,000 due to rate reductions. |
· | Other non-interest expenses increased by $79,000, due to small increases in several categories of other non-interest expenses. |
Provision for Income Taxes. The Company’s effective tax rate was 33.4% and 35.5% for the six months ended June 30, 2017 and 2016, respectively. The effective tax rate for the first six months of 2017 was impacted by North Carolina corporate income tax rate reductions compared to 2016 tax rates.
As of June 30, 2017 and December, 31, 2016, the Company had a net deferred tax asset in the amount of $2.7 million and $3.1 million, respectively. In evaluating whether the Company will realize the full benefit of the net deferred tax asset, management considered both positive and negative evidence, including among other things recent earnings trends, projected earnings, and asset quality. As of June 30, 2017 and December 31, 2016, management concluded that the net deferred tax asset was fully realizable. The Company will continue to monitor deferred tax assets closely to evaluate whether the full benefit of the net deferred tax asset will require a valuation allowance. Significant negative trends in credit quality or losses from operations, among other trends, could impact the realization of the deferred tax asset in the future.
Liquidity
The Company’s liquidity is a measure of its ability to fund loans, withdrawals and maturities of deposits, and other cash outflows in a cost effective manner. The principal sources of liquidity are deposits, scheduled payments and prepayments of loan principal, maturities of investment securities, access to liquid deposits, and funds provided by operations. While scheduled loan payments and maturing investments are relatively predictable sources of funds, deposit flows and loan prepayments are greatly influenced by general interest rates, economic conditions, and competition. Liquid assets (consisting of cash and due from banks, interest-earning deposits with other banks, federal funds sold and investment securities classified as available for sale) represented 12.7% of total assets at June 30, 2017 and decreased as compared to 13.9% as of December 31, 2016. This reduction in liquid assets to total assets resulted primarily from loan growth and letting higher rate deposits roll off.
The Company has been a net seller of federal funds since its inception and strives to maintain a position of liquidity sufficient to fund future loan demand and to satisfy fluctuations in deposit levels. Should the need arise, the Company would have the capability to sell securities classified as available for sale or to borrow funds as necessary. As of June 30, 2017, the Company had existing credit lines with other financial institutions to purchase up to $135.8 million in federal funds. Also, as a member of the FHLB of Atlanta, the Company may obtain advances of up to 10% of total assets, subject to available collateral. A floating lien of $92.1 million of qualifying loans is pledged to the FHLB to secure borrowings. At June 30, 2017, the Company had $32.5 million in FHLB advances outstanding. Another source of short-term borrowings is securities sold under agreements to repurchase. At June 30, 2017, in addition to FHLB advances, total borrowings consisted of securities sold under agreements to repurchase of $11.6 million and junior subordinated debentures of $12.4 million.
55 |
Total deposits were $739.7 million at June 30, 2017. Time deposits, which are the only deposit accounts that have stated maturity dates, are generally considered to be rate sensitive. Time deposits represented 48.9% of total deposits at June 30, 2017. Time deposits of $250,000 or more represented 10.3% of the Company’s total deposits at June 30, 2017. At quarter-end, the Company had $72.6 million in brokered time deposits and no brokered demand deposits. Management believes most other time deposits are relationship-oriented. While the Bank will need to pay competitive rates to retain these deposits at their maturities, there are other subjective factors that will determine their continued retention. Based upon prior experience, the Company anticipates that a substantial portion of outstanding certificates of deposit will renew upon maturity.
Management believes that current sources of funds provide adequate liquidity for the Bank’s current cash flow needs. The Company maintains minimal cash balances at the parent holding company level. Management believes that the current cash balances will provide adequate liquidity for the Company’s current cash flow needs.
Capital Resources
A significant measure of the strength of a financial institution is its capital base. Federal regulations have classified and defined capital into the following components: (1) Tier 1 capital, which includes common shareholders’ equity and qualifying preferred equity, and (2) Tier 2 capital, which includes a portion of the allowance for loan losses, certain qualifying long-term debt and preferred stock which does not qualify as Tier 1 capital. Commencing in the first quarter of 2015, financial institutions and their holding companies became subject to the BASEL III capital requirements. A new part of the capital ratios profile under the Basel III rules is the Common Equity Tier 1 risk-based ratio which does not include limited life components such as trust preferred securities and SBLF preferred stock in this calculation. Minimum capital levels are regulated by risk-based capital adequacy guidelines, which require a financial institution to maintain capital as a percentage of its assets, and certain off-balance sheet items adjusted for predefined credit risk factors (risk-adjusted assets). The Company’s equity to assets ratio was 11.9% at June 30, 2017.
As the following table indicates, at June 30, 2017, the Company and the Bank both exceeded minimum regulatory capital requirements as specified in the tables below.
Actual | Minimum | |||||||
Select Bancorp, Inc. | Ratio | Requirement | ||||||
Total risk-based capital ratio | 14.47 | % | 8.00 | % | ||||
Tier 1 risk-based capital ratio | 13.45 | % | 6.00 | % | ||||
Leverage ratio | 12.75 | % | 4.00 | % | ||||
Common equity Tier 1 risk-based capital ratio | 12.01 | % | 4.50 | % |
Regulatory | ||||||||||||
Actual | Minimum | Well-Capitalized | ||||||||||
Select Bank & Trust | Ratio | Requirement | Requirement | |||||||||
Total risk-based capital ratio | 13.94 | % | 8.00 | % | 10.00 | % | ||||||
Tier 1 risk-based capital ratio | 12.92 | % | 6.00 | % | 8.00 | % | ||||||
Leverage ratio | 12.25 | % | 4.00 | % | 5.00 | % | ||||||
Common equity Tier 1 risk-based capital ratio | 12.92 | % | 4.50 | % | 6.50 | % |
56 |
During 2004, the Company issued $12.4 million of junior subordinated debentures to a newly formed subsidiary, New Century Statutory Trust I, which in turn issued $12.0 million of trust preferred securities. The proceeds from the sale of the trust preferred securities provided additional capital for the growth and expansion of the Bank. Under the current applicable regulatory guidelines, all of the proceeds from the issuance of these trust preferred securities qualify as Tier 1 capital as of June 30, 2017. On January 20, 2016, all outstanding shares of the Company’s Series A stock were redeemed. While the redemption reduced the capital ratios for the Company and the Bank, both the Company and the Bank continue to meet the definition of “well-capitalized”.
Management expects that the Bank will remain “well-capitalized” for regulatory purposes, although there can be no assurance that additional capital will not be required in the future.
Item 3. Quantitative and Qualitative Disclosures about Market Risk
The Company intends to reach its strategic financial objectives through the effective management of market risk. Like many financial institutions, the Company’s most significant market risk exposure is interest rate risk. The Company's primary goal in managing interest rate risk is to minimize the effect that changes in market interest rates have on earnings and capital. This goal is accomplished through the active management of the balance sheet. The goal of these activities is to structure the maturity and repricing of assets and liabilities to produce stable net interest income despite changing interest rates. The Company's overall interest rate risk position is governed by policies approved by the Board of Directors and guidelines established and monitored by the Bank’s Asset/Liability Committee (“ALCO”).
To measure, monitor, and report on interest rate risk, the Company begins with two models: (1) net interest income ("NII") at risk, which measures the impact on NII over the next twelve and twenty-four months to immediate changes in interest rates and (2) net economic value of equity ("EVE"), which measures the impact on the present value of net assets to immediate changes in interest rates. NII at risk is designed to measure the potential short-term impact of changes in interest rates on NII. EVE is a long-term measure of interest rate risk to the Company's balance sheet, or equity. Gap analysis, which is the difference between the amount of balance sheet assets and liabilities repricing within a specified time period, is used as a secondary measure of the Company's interest rate risk position. All of these models are subject to ALCO guidelines and are monitored regularly.
In calculating NII at risk, the Company begins with a base amount of NII that is projected over the next twelve and twenty-four months, assuming that the balance sheet is static and the yield curve remains unchanged over the period. The current yield curve is then “shocked,” or moved immediately, ±1.0 percent, ±2.0 percent, ±3.0 percent and ±4.0 percent in a parallel fashion, or at all points along the yield curve. New twelve-month and twenty four-month NII projections are then developed using the same balance sheet but with the new yield curves and these results are compared to the base scenario. The Company also models other scenarios to evaluate potential NII at risk such as a gradual ramp in interest rates, a flattening yield curve, a steepening yield curve, and others that management deems appropriate.
EVE at risk is based on the change in the present value of all assets and liabilities under different interest rate scenarios. The present value of existing cash flows with the current yield curve serves as the base case. The Company then applies an immediate parallel shock to that yield curve of ±1.0 percent, ±2.0 percent, ±3.0 percent and ±4.0 percent and recalculates the cash flows and related present values.
57 |
Key assumptions used in the models described above include the timing of cash flows, the maturity and repricing of assets and liabilities, changes in market conditions, and interest-rate sensitivities of the Company's non-maturity deposits with respect to interest rates paid and the level of balances. These assumptions are inherently uncertain and, as a result, the models cannot precisely calculate future NII or predict the impact of changes in interest rates on NII and EVE. Actual results could differ from simulated results due to the timing, magnitude and frequency of changes in interest rates and market conditions, changes in spreads and management strategies, among other factors. Projections of NII are assessed as part of the Company's forecasting process.
NII and EVE Analysis. The following table presents the estimated exposure to NII for the next twelve months due to immediate changes in interest rates and the estimated exposure to EVE due to immediate changes in interest rates. All information is presented as of March 31, 2017.
March 31, 2017 | ||||||||
(Dollars in thousands) | Estimated Exposure to NII | Estimated Exposure to EVE | ||||||
Immediate change in interest rates: | ||||||||
+ 4.0% | 16.4 | % | 7.1 | % | ||||
+ 3.0% | 13.2 | 6.2 | ||||||
+ 2.0% | 9.1 | 4.7 | ||||||
+ 1.0% | 4.2 | 2.5 | ||||||
No change | - | - | ||||||
- 1.0% | (5.2 | ) | (4.9 | ) |
While the measures presented in the table above are not a prediction of future NII or EVE valuations, they do suggest that if all other variables remained constant, immediate increases in interest rates at all points on the yield curve may produce higher NII in the short term. Other important factors that impact the levels of NII are balance sheet size and mix, interest rate spreads, the slope of the yield curve, the speed of interest rates changes, and management actions taken in response to the preceding conditions.
Item 4. Controls and Procedures
Disclosure Controls and Procedures. At the end of the period covered by this report, the Company carried out an evaluation, under the supervision and with the participation of the Company’s management, including the Company’s Chief Executive Officer and Chief Financial Officer, of the effectiveness of the design and operation of the Company’s disclosure controls and procedures pursuant to Securities Exchange Act Rule 13a-14.
Based upon that evaluation, the Chief Executive Officer and Chief Financial Officer have concluded that the Company’s disclosure controls and procedures were effective (1) to provide reasonable assurance that information required to be disclosed by the Company in the reports filed or submitted by it under the Securities Exchange Act was recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms, and (2) to provide reasonable assurance that information required to be disclosed by the Company in such reports is accumulated and communicated to the Company’s management, including its Chief Executive Officer and Chief Financial Officer, as appropriate to allow for timely decisions regarding required disclosure.
Changes in internal control over financial reporting. Management of the Company has evaluated, with the participation of the Company's Chief Executive Officer and Chief Financial Officer, changes in the Company's internal controls over financial reporting (as defined in Rule 13a−15(f) and 15d−15(f) of the Exchange Act) during the second quarter of 2017. In connection with such evaluation, the Company has determined that there have been no changes in internal control over financial reporting during the second quarter of 2017 that have materially affected or are reasonably likely to materially affect, the Company's internal control over financial reporting.
58 |
The Company is not currently engaged in, nor are any of its properties subject to, any material legal proceedings. From time to time, the Bank is a party to legal proceedings in the ordinary course of business wherein it attempts to collect loans, enforce its security interest in loans, or other matters of similar nature.
There are no material changes from the risk factors set forth under Part II, Item 1A. “Risk Factors” in our Quarterly Report on Form 10-Q for the quarter ended March 31, 2017.
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
The Company announced a repurchase program on August 31, 2016, by which management was authorized to repurchase up to 581,518 shares of Company common stock in the open market and through privately negotiated transactions. There were no share repurchase transactions conducted during the three-month period covered by this Report.
Item 3. Defaults Upon Senior Securities
None.
Item 4. Mine Safety Disclosures
Not applicable.
Exhibit
Number |
Description of Exhibit | |
31.1 | Certification of Principal Executive Officer Pursuant to Section 302 of the Sarbanes-Oxley Act | |
31.2 | Certification of Chief Financial Officer Pursuant to Section 302 of the Sarbanes-Oxley Act | |
32.1 | Certification of Principal Executive Officer Pursuant to Section 906 of the Sarbanes-Oxley Act | |
32.2 | Certification of Chief Financial Officer Pursuant to Section 906 of the Sarbanes-Oxley Act | |
101 | Interactive data files providing financial information from the Registrant’s Quarterly Report on Form 10-Q for the quarterly period ended June 30, 2017, in XBRL (eXtensible Business Reporting Language) |
59 |
Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
SELECT BANCORP, INC. | ||
Date: August 9, 2017 | By: | /s/ William L. Hedgepeth II |
William L. Hedgepeth II | ||
President and Chief Executive Officer | ||
Date: August 9, 2017 | By: | /s/ Mark A. Jeffries |
Mark A. Jeffries | ||
Executive Vice President and Chief Financial Officer |
60 |
Exhibit Index
Exhibit Number |
Description of Exhibit | |
31.1 | Certification of Principal Executive Officer Pursuant to Section 302 of the Sarbanes-Oxley Act | |
31.2 | Certification of Chief Financial Officer Pursuant to Section 302 of the Sarbanes-Oxley Act | |
32.1 | Certification of Principal Executive Officer Pursuant to Section 906 of the Sarbanes-Oxley Act | |
32.2 | Certification of Chief Financial Officer Pursuant to Section 906 of the Sarbanes-Oxley Act | |
101 | Interactive data files providing financial information from the Registrant’s Quarterly Report on Form 10-Q for the quarterly period ended June 30, 2017, in XBRL (eXtensible Business Reporting Language) |
61 |
Exhibit 31.1
CERTIFICATION OF PRINCIPAL EXECUTIVE OFFICER
Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
I, William L. Hedgepeth II, certify that:
(1) | I have reviewed this quarterly report for the quarter ended June 30, 2017 on Form 10-Q of Select Bancorp, Inc. (the "Registrant"); |
(2) | Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; |
(3) | Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the Registrant as of, and for, the periods presented in this report; |
(4) | The Registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)), and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the Registrant and have: |
(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the Registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
(b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
(c) Evaluated the effectiveness of the Registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
(d) Disclosed in this report any change in the Registrant’s internal control over financial reporting that occurred during the Registrant’s most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, the Registrant’s internal control over financial reporting; and
(5) | The Registrant's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the Registrant's auditors and the audit committee of the Registrant's board of directors (or persons performing the equivalent functions): |
(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the Registrant's ability to record, process, summarize and report financial information; and
(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the Registrant's internal control over financial reporting.
Date: August 9, 2017 | By: | /s/ William L. Hedgepeth II |
William L. Hedgepeth II | ||
President and Chief Executive Officer |
Exhibit 31.2
CERTIFICATION OF CHIEF FINANCIAL OFFICER
Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
I, Mark A. Jeffries, certify that:
(1) | I have reviewed this quarterly report for the quarter ended June 30, 2017 on Form 10-Q of Select Bancorp, Inc. (the "Registrant"); |
(2) | Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; |
(3) | Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the Registrant as of, and for, the periods presented in this report; |
(4) | The Registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)), and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the Registrant and have: |
(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the Registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
(b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
(c) Evaluated the effectiveness of the Registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
(d) Disclosed in this report any change in the Registrant’s internal control over financial reporting that occurred during the Registrant’s most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, the Registrant’s internal control over financial reporting; and
(5) | The Registrant's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the Registrant's auditors and the audit committee of the Registrant's board of directors (or persons performing the equivalent functions): |
(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the Registrant's ability to record, process, summarize and report financial information; and
(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the Registrant's internal control over financial reporting.
Date: August 9, 2017 | By: | /s/ Mark A. Jeffries |
Mark A. Jeffries | ||
Executive Vice President and Chief Financial Officer |
Exhibit 32.1
Certification Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
The undersigned hereby certifies that (i) the Form 10-Q filed by Select Bancorp, Inc. (the "Issuer") for the quarter ended June 30, 2017, fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934, and (ii) the information contained in that report fairly presents, in all material respects, the financial condition and results of operations of the Issuer on the dates and for the periods presented therein.
Date: August 9, 2017 | By: | /s/ William L. Hedgepeth II |
William L. Hedgepeth II | ||
President and Chief Executive Officer |
Exhibit 32.2
Certification Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
The undersigned hereby certifies that (i) the Form 10-Q filed by Select Bancorp, Inc. (the "Issuer") for the quarter ended June 30, 2017, fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934, and (ii) the information contained in that report fairly presents, in all material respects, the financial condition and results of operations of the Issuer on the dates and for the periods presented therein.
Date: August 9, 2017 | By: | /s/ Mark A. Jeffries |
Mark A. Jeffries | ||
Executive Vice President and Chief Financial Officer |
Document And Entity Information - shares |
6 Months Ended | |
---|---|---|
Jun. 30, 2017 |
Aug. 04, 2017 |
|
Document Information [Line Items] | ||
Document Type | 10-Q | |
Amendment Flag | false | |
Document Period End Date | Jun. 30, 2017 | |
Document Fiscal Year Focus | 2017 | |
Document Fiscal Period Focus | Q2 | |
Entity Registrant Name | SELECT BANCORP, INC. | |
Entity Central Index Key | 0001263762 | |
Current Fiscal Year End Date | --12-31 | |
Entity Filer Category | Accelerated Filer | |
Trading Symbol | SLCT | |
Entity Common Stock, Shares Outstanding | 11,662,621 |
CONSOLIDATED BALANCE SHEETS [Parenthetical] - $ / shares |
Jun. 30, 2017 |
Dec. 31, 2016 |
---|---|---|
Preferred stock, shares authorized | 5,000,000 | 5,000,000 |
Preferred Stock, Shares Issued | 0 | 0 |
Preferred Stock, Shares Outstanding | 0 | 0 |
Common stock, par value (in dollars per share) | $ 1.00 | $ 1.00 |
Common stock, shares authorized | 25,000,000 | 25,000,000 |
Common stock, shares issued | 11,662,471 | 11,645,413 |
Common stock, shares outstanding | 11,662,471 | 11,645,413 |
Deferred Compensation, Share-based Payments [Member] | ||
Common stock, shares issued | 284,972 | 280,432 |
CONSOLIDATED STATEMENTS OF OPERATIONS - USD ($) $ in Thousands |
3 Months Ended | 6 Months Ended | ||
---|---|---|---|---|
Jun. 30, 2017 |
Jun. 30, 2016 |
Jun. 30, 2017 |
Jun. 30, 2016 |
|
INTEREST INCOME | ||||
Loans | $ 9,024 | $ 8,242 | $ 17,731 | $ 16,207 |
Federal funds sold and interest-earning deposits in other banks | 119 | 60 | 207 | 137 |
Investments | 326 | 343 | 656 | 733 |
TOTAL INTEREST INCOME | 9,469 | 8,645 | 18,594 | 17,077 |
INTEREST EXPENSE | ||||
Money market, NOW and savings deposits | 117 | 94 | 220 | 193 |
Time deposits | 880 | 647 | 1,639 | 1,308 |
Short-term debt | 63 | 106 | 118 | 140 |
Long-term debt | 137 | 65 | 267 | 198 |
TOTAL INTEREST EXPENSE | 1,197 | 912 | 2,244 | 1,839 |
NET INTEREST INCOME | 8,272 | 7,733 | 16,350 | 15,238 |
PROVISION FOR LOAN LOSSES | 1,083 | 158 | 889 | 510 |
NET INTEREST INCOME AFTER PROVISION FOR LOAN LOSSES | 7,189 | 7,575 | 15,461 | 14,728 |
NON-INTEREST INCOME | ||||
Gain on sale of investment securities | 0 | 0 | 0 | 22 |
Service charges on deposit accounts | 216 | 246 | 431 | 493 |
Other fees and income | 562 | 585 | 1,077 | 1,182 |
TOTAL NON-INTEREST INCOME | 778 | 831 | 1,508 | 1,697 |
NON-INTEREST EXPENSE | ||||
Personnel | 3,702 | 3,087 | 7,116 | 6,289 |
Occupancy and equipment | 492 | 607 | 1,064 | 1,181 |
Deposit insurance | 75 | 135 | 147 | 261 |
Professional fees | 251 | 252 | 571 | 487 |
CDI amortization | 88 | 111 | 181 | 227 |
Information systems | 534 | 524 | 1,038 | 1,033 |
Foreclosed-related expenses | (25) | 24 | (9) | 63 |
Other | 863 | 779 | 1,677 | 1,598 |
TOTAL NON-INTEREST EXPENSE | 5,980 | 5,519 | 11,785 | 11,139 |
INCOME BEFORE INCOME TAX | 1,987 | 2,887 | 5,184 | 5,286 |
INCOME TAXES | 651 | 980 | 1,733 | 1,876 |
NET INCOME | 1,336 | 1,907 | 3,451 | 3,410 |
DIVIDENDS ON PREFERRED STOCK | 0 | 0 | 0 | 4 |
NET INCOME AVAILABLE TO COMMON SHAREHOLDERS | $ 1,336 | $ 1,907 | $ 3,451 | $ 3,406 |
NET INCOME PER COMMON SHARE | ||||
Basic (in dollars per share) | $ 0.11 | $ 0.16 | $ 0.3 | $ 0.29 |
Diluted (in dollars per share) | $ 0.11 | $ 0.16 | $ 0.29 | $ 0.29 |
WEIGHTED AVERAGE COMMON SHARES OUTSTANDING | ||||
Basic (in shares) | 11,662,117 | 11,594,995 | 11,657,391 | 11,589,217 |
Diluted (in shares) | 11,727,110 | 11,642,726 | 11,720,841 | 11,638,669 |
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME - USD ($) $ in Thousands |
3 Months Ended | 6 Months Ended | ||
---|---|---|---|---|
Jun. 30, 2017 |
Jun. 30, 2016 |
Jun. 30, 2017 |
Jun. 30, 2016 |
|
Net income | $ 1,336 | $ 1,907 | $ 3,451 | $ 3,410 |
Other comprehensive income (loss): | ||||
Unrealized gain on investment securities available for sale | 151 | 338 | 233 | 1,099 |
Tax effect | (55) | (113) | (85) | (397) |
Other Comprehensive Income (Loss), Unrealized Holding Gain (Loss) on Securities Arising During Period, Net of Tax | 96 | 225 | 148 | 702 |
Reclassification adjustment for gain included in net income | 0 | 0 | 0 | (22) |
Tax effect | 0 | 0 | 0 | 8 |
Other Comprehensive Income (Loss), Reclassification Adjustment for Sale of Securities Included in Net Income, Net of Tax | 0 | 0 | 0 | (14) |
Total | 96 | 225 | 148 | 688 |
Total comprehensive income | $ 1,432 | $ 2,132 | $ 3,599 | $ 4,098 |
CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY - USD ($) $ in Thousands |
Total |
Preferred Stock [Member] |
Common Stock [Member] |
Additional paid-in Capital [Member] |
Retained Earnings [Member] |
Common Stock Issued to Deferred Compensation Trust [Member] |
Deferred Comp Plan [Member] |
Accumulated Other Comprehensive Income (Loss) [Member] |
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Balance at Dec. 31, 2015 | $ 104,702 | $ 7,645 | $ 11,583 | $ 69,061 | $ 15,923 | $ (2,139) | $ 2,139 | $ 490 |
Balance (in shares) at Dec. 31, 2015 | 7,645 | 11,583,011 | ||||||
Net income | 3,410 | $ 0 | $ 0 | 0 | 3,410 | 0 | 0 | 0 |
Other comprehensive income, net | 688 | 0 | 0 | 0 | 0 | 0 | 0 | 688 |
Preferred stock dividends paid | (4) | 0 | 0 | 0 | (4) | 0 | 0 | 0 |
Preferred stock redemption | (7,645) | $ (7,645) | $ 0 | 0 | 0 | 0 | 0 | 0 |
Preferred stock redemption (in shares) | (7,645) | 0 | ||||||
Stock option exercises | 344 | $ 0 | $ 36 | 308 | 0 | 0 | 0 | 0 |
Stock option exercises (in shares) | 0 | 36,173 | ||||||
Stock based compensation | 36 | $ 0 | $ 0 | 36 | 0 | 0 | 0 | 0 |
Director equity incentive plan, net | 0 | 0 | 0 | 0 | 0 | (85) | 85 | 0 |
Balance at Jun. 30, 2016 | 101,531 | $ 0 | $ 11,619 | 69,405 | 19,329 | (2,224) | 2,224 | 1,178 |
Balance (in shares) at Jun. 30, 2016 | 0 | 11,619,184 | ||||||
Balance at Dec. 31, 2016 | 104,273 | $ 0 | $ 11,645 | 69,597 | 22,673 | (2,340) | 2,340 | 358 |
Balance (in shares) at Dec. 31, 2016 | 0 | 11,645,413 | ||||||
Net income | 3,451 | $ 0 | $ 0 | 0 | 3,451 | 0 | 0 | 0 |
Other comprehensive income, net | 148 | 0 | 0 | 0 | 0 | 0 | 0 | 148 |
Stock option exercises | 102 | $ 0 | $ 17 | 85 | 0 | 0 | 0 | 0 |
Stock option exercises (in shares) | 0 | 17,058 | ||||||
Stock based compensation | 43 | $ 0 | $ 0 | 43 | 0 | 0 | 0 | 0 |
Director equity incentive plan, net | 0 | 0 | 0 | 0 | 0 | (57) | 57 | 0 |
Balance at Jun. 30, 2017 | $ 108,017 | $ 0 | $ 11,662 | $ 69,725 | $ 26,124 | $ (2,397) | $ 2,397 | $ 506 |
Balance (in shares) at Jun. 30, 2017 | 0 | 11,662,471 |
CONSOLIDATED STATEMENTS OF CASH FLOWS - USD ($) $ in Thousands |
6 Months Ended | |
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Jun. 30, 2017 |
Jun. 30, 2016 |
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CASH FLOWS FROM OPERATING ACTIVITIES | ||
Net income | $ 3,451 | $ 3,410 |
Adjustments to reconcile net income to net cash provided by operating activities: | ||
Provision for loan losses | 889 | 510 |
Depreciation and amortization of premises and equipment | 575 | 520 |
Amortization and accretion of investment securities | 282 | 400 |
Amortization of deferred loan fees and costs | (291) | (236) |
Amortization of core deposit intangible | 181 | 227 |
Stock-based compensation | 43 | 36 |
Accretion on acquired loans | (450) | (534) |
Amortization of acquisition premium on time deposits | (161) | (385) |
Net accretion of acquisition discount on borrowings | (87) | (153) |
Increase in cash surrender value of bank owned life insurance | (283) | (296) |
Net (gain) loss on sale and write-downs of foreclosed real estate | (61) | 48 |
Gain on sale of premises and equipment | (9) | 0 |
Net gain on investment security sales | 0 | (22) |
Change in assets and liabilities: | ||
Net change in accrued interest receivable | 122 | (56) |
Net change in other assets | (514) | 7 |
Net change in accrued expenses and other liabilities | (121) | 2,087 |
NET CASH PROVIDED BY OPERATING ACTIVITIES | 3,566 | 5,563 |
CASH FLOWS FROM INVESTING ACTIVITIES | ||
Purchase (redemption) of FHLB stock | 110 | (206) |
Purchase (redemption) of non-marketable security | 37 | (52) |
Purchase of investment securities available for sale | (759) | (1,517) |
Maturities of investment securities available for sale | 3,255 | 7,434 |
Mortgage-backed securities pay-downs | 2,860 | 5,010 |
Proceeds from sale of investment securities available for sale | 0 | 624 |
Net change in loans outstanding | (63,323) | (14,436) |
Proceeds from sale of foreclosed real estate | 384 | 1,215 |
Proceeds from sale of premises and equipment | (247) | 0 |
Purchases of premises and equipment | 95 | (456) |
NET CASH USED BY INVESTING ACTIVITIES | (57,588) | (2,384) |
CASH FLOWS FROM FINANCING ACTIVITIES | ||
Net change in deposits | 60,153 | 10,498 |
Proceeds from short-term debt | 0 | 16,000 |
Repayments on short-term debt | (3,444) | (14,390) |
Repayments on long-term debt | (200) | (913) |
Preferred stock dividends paid | 0 | (4) |
Redemption of preferred stock | 0 | (7,645) |
Proceeds from stock option exercises | 102 | 344 |
NET CASH PROVIDED BY FINANCING ACTIVITIES | 56,611 | 3,890 |
NET CHANGE IN CASH AND CASH EQUIVALENTS | 2,589 | 7,069 |
CASH AND CASH EQUIVALENTS, BEGINNING | 55,714 | 63,409 |
CASH AND CASH EQUIVALENTS, ENDING | 58,303 | 70,478 |
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION | ||
Cash paid during the period for: Interest | 2,224 | 1,820 |
Cash paid during the period for: Taxes | 1,768 | 0 |
Non-cash transactions: | ||
Unrealized gains on investment securities available for sale, net of tax | 148 | 688 |
Transfers from loans to foreclosed real estate | 2,426 | 578 |
Transfers from premises and equipment to assets held for sale | $ 0 | $ 400 |
BASIS OF PRESENTATION |
6 Months Ended | |
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Jun. 30, 2017 | ||
Organization, Consolidation and Presentation of Financial Statements [Abstract] | ||
Organization, Consolidation and Presentation of Financial Statements Disclosure [Text Block] | NOTE A - BASIS OF PRESENTATION Select Bancorp, Inc. (“Company”) is a bank holding company whose principal business activity consists of ownership of Select Bank & Trust Company (referred to as the “Bank”). In 2004, the Company formed New Century Statutory Trust I, which issued trust preferred securities to provide additional capital for general corporate purposes, including the current and future expansion of the Company. New Century Statutory Trust I is not a consolidated subsidiary of the Company. On July 25, 2014 the Company changed its name from New Century Bancorp, Inc. to Select Bancorp, Inc. following its acquisition by merger of Select Bancorp, Inc., Greenville, NC (which we refer to herein as “Legacy Select”). The Company is subject to the rules and regulations of the Board of Governors of the Federal Reserve System and the North Carolina Commissioner of Banks. Select Bank & Trust Company was originally incorporated as New Century Bank on May 19, 2000 and began banking operations on May 24, 2000. On July 25, 2014, in connection with the Company’s acquisition of Legacy Select, the Bank changed its name from New Century Bank to Select Bank & Trust Company following the merger of the two banking corporations. The Bank is the only banking subsidiary of the Company, and its headquarters and operations center are located in Dunn, NC. The Bank is engaged in general commercial and retail banking in central and eastern North Carolina and operates under the banking laws of North Carolina and the rules and regulations of the Federal Deposit Insurance Corporation and the North Carolina Commissioner of Banks. The Bank undergoes periodic examinations by those regulatory authorities All significant inter-company transactions and balances have been eliminated in consolidation. In management’s opinion, the financial information, which is unaudited, reflects all adjustments (consisting solely of normal recurring adjustments) necessary for a fair presentation of the financial information as of and for the three and six month periods ended June 30, 2017 and 2016, in conformity with accounting principles generally accepted in the United States of America (“GAAP”). The preparation of consolidated financial statements requires management to make estimates and assumptions that affect reported amounts of assets and liabilities at the date of the financial statements, as well as the amounts of income and expense during the reporting period. Actual results could differ from those estimates. Operating results for the three and six month periods ended June 30, 2017 are not necessarily indicative of the results that may be expected for the fiscal year ending December 31, 2017. The organization and business of the Company, accounting policies followed by the Company and other relevant information are contained in the notes to the financial statements filed as part of the Company’s 2016 Annual Report on Form 10-K, filed with the Securities and Exchange Commission (“SEC”) on March 14, 2017. This quarterly report should be read in conjunction with the Annual Report. Certain reclassifications of the information in prior periods were made to conform to the June 30, 2017 presentation. Such reclassifications had no effect on shareholders’ equity or net income as previously reported. |
PER SHARE RESULTS |
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Earnings Per Share [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Earnings Per Share [Text Block] | NOTE B - PER SHARE RESULTS Basic net income per share is computed based upon the weighted average number of shares of common stock outstanding during the period. Diluted net income per share includes the dilutive effect of stock options outstanding during the period. At June 30, 2017 and 2016 there were 23,300 and 123,800 anti-dilutive options outstanding, respectively.
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RECENT ACCOUNTING PRONOUNCEMENTS |
6 Months Ended | |
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Jun. 30, 2017 | ||
New Accounting Pronouncements and Changes in Accounting Principles [Abstract] | ||
New Accounting Pronouncements and Changes in Accounting Principles [Text Block] | NOTE C - RECENT ACCOUNTING PRONOUNCEMENTS The following summarizes recent accounting pronouncements and their expected impact on the Company: In May 2014, the FASB issued ASU No. 2014-09, Revenue from Contracts with Customers (Topic 606). ASU No. 2014-09 addresses the recognition of revenue from contracts with customers with the core principle being for companies to recognize revenue to depict the transfer of goods or services to customers in amounts that reflect the consideration to which the company expects to be entitled in exchange for those goods or services. The new standard also results in enhanced disclosures about revenue, provides guidance for transactions that were not previously addressed comprehensively and improves guidance for multiple-element arrangements. In March 2016, the FASB issued ASU 2016-08, Revenue from Contracts with Customers (Topic 606): Principal versus Agent Considerations, to improve the operability and understandability of the implementation guidance on principal versus agent considerations. In April 2016, the FASB issued ASU 2016-10, Revenue from Contracts with Customers (Topic 606): Identifying Performance Obligations and Licensing, to clarify guidance for identifying performance obligations and licensing implementation. The Company is currently evaluating the impact on additional disclosure requirements as each of the standards is adopted, however it does not expect these amendments to have a material effect on its financial position, results of operations or cash flows. In May 2016, the FASB issued ASU 2016-12, Revenue from Contracts with Customers (Topic 606): Narrow-Scope Improvements and Practical Expedients, to clarify and improve the guidance for certain aspects of Topic 606. The amendments will be effective for the Company for reporting periods beginning after December 15, 2017. The Company does not expect these amendments to have a material effect on its financial statements. In August 2015, the FASB deferred the effective date of ASU 2014-09, Revenue from Contracts with Customers. As a result of the deferral, the guidance in ASU 2014-09 will be effective for the Company for reporting periods beginning after December 15, 2017. The Company does not expect these amendments to have a material effect on its financial statements. In April 2016, the FASB amended the Revenue from Contracts with Customers topic of the Accounting Standards Codification to clarify guidance related to identifying performance obligations and accounting for licenses of intellectual property. The amendments will be effective for the Company for reporting periods beginning after December 15, 2017. The Company does not expect these amendments to have a material effect on its financial statements. In March 2016, the FASB issued ASU 2016-09, Compensation-Stock Compensation (Topic 718): Improvements to Employee Share-based Payment Accounting, to simplify several aspects of the accounting for share-based payment award transactions including the income tax consequences, the classification of awards as either equity or liabilities, including the tax effect of forfeitures and the classification on the statement of cash flows. Additionally, the guidance simplifies two areas specific to entities other than public business entities allowing them to apply a practical expedient to estimate the expected term for all awards with performance or service conditions that have certain characteristics and also allowing them to make a one-time election to switch from measuring all liability-classified awards at fair value to measuring them at intrinsic value. The amendments were effective for the Company for annual periods beginning after December 15, 2016 and interim periods within those annual periods. The Company has adopted these amendments to its financial statements during the first quarter of 2017 with a positive impact to net earnings as an excess tax benefit of $4,000 was recorded through the income statement rather than additional paid in capital. In January 2016, the FASB issued ASU 2016-01, Recognition and Measurement of Financial Assets and Financial Liabilities, amending the Financial Instruments topic of the Accounting Standards Codification to address certain aspects of recognition, measurement, presentation, and disclosure of financial instruments. The amendments will be effective for fiscal years beginning after December 15, 2017, including interim periods within those fiscal years. The Company will apply the guidance by means of a cumulative-effect adjustment to the balance sheet as of the beginning of the fiscal year of adoption. The amendments related to equity securities without readily determinable fair values will be applied prospectively to equity investments that exist as of the date of adoption of the amendments. The Company does not expect these amendments to have a material effect on its financial statements. In February 2016, the FASB issued ASU 2016-02, Leases (Topic 842). ASU 2016-02 applies a right-of-use (ROU) model that requires a lessee to record, for all leases with a lease term of more than 12 months, an asset representing its right to use the underlying asset and a liability to make lease payments. For leases with a term of 12 months or less, a practical expedient is available whereby a lessee may elect, by class of underlying asset, not to recognize an ROU asset or lease liability. At inception, lessees must classify all leases as either finance or operating based on five criteria. Balance sheet recognition of finance and operating leases is similar, but the pattern of expense recognition in the income statement, as well as the effect on the statement of cash flows, differs depending on the lease classification. For public business entities, the amendments in ASU 2016-02 are effective for interim and annual periods beginning after December 15, 2018. In transition, lessees and lessors are required to recognize and measure leases at the beginning of the earliest period presented using a modified retrospective approach which includes a number of optional practical expedients that entities may elect to apply. The Company has reviewed its outstanding lease agreements and has centrally documented the terms of its leases. The Company is currently evaluating the provisions of ASU 2016-02 in relation to its outstanding leases to determine the potential impact the new standard will have to the Company’s consolidated financial statements. In June 2016, the FASB issued ASU 2016-13, Financial Instruments Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments guidance to change the accounting for credit losses and modify the impairment model for certain debt securities. ASU 2016-13 requires an entity to utilize a new impairment model known as the current expected credit loss ("CECL") model to estimate its lifetime "expected credit loss" and record an allowance that, when deducted from the amortized cost basis of the financial asset, presents the net amount expected to be collected on the financial asset. The CECL model is expected to result in earlier recognition of credit losses. ASU 2016-13 also requires new disclosures for financial assets measured at amortized cost, loans and available-for-sale debt securities. The updated guidance is effective for interim and annual reporting periods beginning after December 15, 2019, including interim periods within those fiscal years. Early adoption is permitted. Entities will apply the standard's provisions as a cumulative-effect adjustment to retained earnings as of the beginning of the first reporting period in which the guidance is adopted. The Company has dedicated staff and resources in place evaluating the Company’s options including evaluating the appropriate model options and collecting and reviewing loan data for use in these models. The Company is still assessing the impact that this new guidance will have on its consolidated financial statements. In August 2016, the FASB amended the Statement of Cash Flows topic of the Accounting Standards Codification to clarify how certain cash receipts and cash payments are presented and classified in the statement of cash flows. The amendments will be effective for the Company for fiscal years beginning after December 15, 2017 including interim periods within those fiscal years. The Company does not expect these amendments to have a material effect on its financial statements. In January 2017, the FASB issued guidance to simplify the accounting related to goodwill impairment. ASU 2017-04, Simplifying the Test for Goodwill Impairment, removes Step 2 of the current goodwill impairment test, which requires a hypothetical purchase price allocation. A goodwill impairment will now be the amount by which a reporting unit’s carrying value exceeds its fair value. All other goodwill impairment guidance will remain largely unchanged and entities will continue to have the option to perform a qualitative assessment to determine if a quantitative impairment test is necessary. The Company does not expect these amendments to have a material effect on its financial statements. In January 2017, the FASB updated the Accounting Changes and Error Corrections and the InvestmentsEquity Method and Joint Ventures Topics of the Accounting Standards Codification. The ASU incorporates into the Accounting Standards Codification recent SEC guidance about disclosing, under SEC SAB Topic 11.M, the effect on financial statements of adopting the revenue, leases, and credit losses standards. The ASU was effective upon issuance. The Company is currently evaluating the impact on additional disclosure requirements as each of the standards is adopted, however it does not expect these amendments to have a material effect on its financial position, results of operations or cash flows. In January 2017, the FASB amended the Goodwill and Other Topic of the Accounting Standards Codification to simplify the accounting for goodwill impairment for public business entities and other entities that have goodwill reported in their financial statements and have not elected the private company alternative for the subsequent measurement of goodwill. The amendment removes Step 2 of the goodwill impairment test. A goodwill impairment will now be the amount by which a reporting unit’s carrying value exceeds its fair value, not to exceed the carrying amount of goodwill. The effective date and transition requirements for the technical corrections will be effective for the Company for reporting periods beginning after December 15, 2019. Early adoption is permitted for interim or annual goodwill impairment tests performed on testing dates after January 1, 2017. The Company does not expect these amendments to have a material effect on its financial statements. In February 2017, the FASB amended the Other Income Topic of the Accounting Standards Codification to clarify the scope of the guidance on nonfinancial asset derecognition as well as the accounting for partial sales of nonfinancial assets. The amendments conform the derecognition guidance on nonfinancial assets with the model for transactions in the new revenue standard. The amendments will be effective for the Company for reporting periods beginning after December 15, 2017. The Company does not expect these amendments to have a material effect on its financial statements. In May 2017, the FASB amended the requirements in the CompensationStock Compensation Topic of the Accounting Standards Codification related to changes to the terms or conditions of a share-based payment award. The amendments provide guidance about which changes to the terms or conditions of a share-based payment award require an entity to apply modification accounting. The amendments will be effective for the Company for annual periods, and interim periods within those annual periods, beginning after December 15, 2017. Early adoption is permitted. The Company does not expect these amendments to have a material effect on its financial statements. From time to time, the FASB issues exposure drafts for proposed statements of financial accounting standards. Such exposure drafts are subject to comment from the public, to revisions by the FASB and to final issuance by the FASB as statements of financial accounting standards. Management considers the effect of the proposed statements on the consolidated financial statements of the Company and monitors the status of changes to and proposed effective dates of exposure drafts. |
FAIR VALUE MEASUREMENTS |
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Fair Value Disclosures [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Fair Value Disclosures [Text Block] | NOTED D - FAIR VALUE MEASUREMENTS Accounting Standards Codification (“ASC”) 820 defines fair value, establishes a framework for measuring fair value, and expands disclosures about fair value measurements. ASC 820 does not require any new fair value measurements, but clarifies and standardizes some divergent practices that have emerged since prior guidance was issued. ASC 820 creates a three-level hierarchy under which individual fair value estimates are to be ranked based on the relative reliability of the inputs used in the valuation. Fair value estimates are made at a specific moment in time, based on relevant market information and information about the financial instrument. These estimates do not reflect any premium or discount that could result from offering for sale at one time the Company’s entire holdings of a particular financial instrument. Because no active market readily exists for a portion of the Company’s financial instruments, fair value estimates are based on judgments regarding future expected loss experience, current economic conditions, risk characteristics of various financial instruments, and other factors. These estimates are subjective in nature and involve uncertainties and matters of significant judgment and, therefore, cannot be determined with precision. Changes in assumptions could significantly affect the estimates. The following methods and assumptions were used to estimate the fair value of each class of financial instruments for which it is practicable to estimate that value: Fair Value Hierarchy The Company groups assets and liabilities at fair value in three levels, based on the markets in which the assets and liabilities are traded and the reliability of the assumptions used to determine fair value. These levels are:
The following is a description of valuation methodologies used for assets and liabilities recorded at fair value on a recurring basis. Investment Securities Available-for-Sale (“AFS”) Investment securities available-for-sale are recorded at fair value on a recurring basis. Fair value measurement is based upon quoted prices, if available. If quoted prices are not available, fair values are measured using independent pricing models or other model-based valuation techniques such as the present value of future cash flows, adjusted for the security’s credit rating, prepayment assumptions and other factors such as credit loss assumptions. Level 1 securities include those traded on an active exchange, such as the New York Stock Exchange, U.S. Treasury securities that are traded by dealers or brokers in active over-the-counter markets and money market funds. Level 2 securities include U.S. government agency securities, mortgage-backed securities issued by government sponsored entities, and municipal bonds. There have been no changes in valuation techniques for the three and six months ended June 30, 2017. Valuation techniques are consistent with techniques used in prior periods. The following tables summarize quantitative disclosures about the fair value measurement for each category of assets carried at fair value on a recurring basis as of June 30, 2017 and December 31, 2016 (in thousands):
The following is a description of valuation methodologies used for assets recorded at fair value on a non-recurring basis. Loans The Company does not record loans at fair value on a recurring basis. However, from time to time, a loan is considered impaired and an allowance for loan losses is established. Loans for which it is probable that payment of interest and principal will not be made in accordance with the contractual terms of the loan agreement are considered impaired. Once a loan is identified as individually impaired, management measures impairment in accordance with ASC 310 “Receivables”. The fair value of impaired loans is estimated using one of several methods, including collateral value, market value of similar debt, enterprise value, or liquidation value and discounted cash flows. Those impaired loans not requiring an allowance represent loans for which the fair value of the expected repayments or collateral exceed the recorded investments in such loans. At June 30, 2017 and December 31, 2016, substantially all of the total impaired loans were evaluated based on the fair value of the collateral. Impaired loans where an allowance is established based on the fair value of collateral require classification in the fair value hierarchy. When the fair value of the collateral is based on an observable market price or a current appraised value, the Company records the impaired loan as non-recurring Level 2. When an appraised value is not available or management determines the fair value of the collateral is further impaired below the appraised value and there is no observable market price, the Company records the impaired loan as non-recurring Level 3. The significant unobservable input used in the fair value measurement of the Company’s impaired loans is the discount applied to appraised values to account for expected liquidation and selling costs. At June 30, 2017, the discounts to appraised value used are weighted between 6% and 61%. There were no transfers between levels from the prior reporting periods and there have been no changes in valuation techniques for the three months ended June 30, 2017. Foreclosed Real Estate Foreclosed real estate are properties recorded at estimated fair value less estimated selling costs. Inputs include appraised values on the properties or recent sales activity for similar assets in the property’s market. Therefore, foreclosed real estate is classified within Level 3 of the hierarchy. The significant unobservable input used in the fair value measurement of the Company’s foreclosed real estate is the discount applied to appraised values to account for expected liquidation and selling costs. At June 30, 2017, the discounts used ranged between 6% and 10%. There have been no changes in valuation techniques for the three months ended June 30, 2017. Assets held for sale During 2015, a branch facility was taken out of service as part of the Company’s branch restructuring plan and reclassified as held for sale. The property is recorded at the remaining book balance of the asset or an estimated fair value less estimated selling costs, whichever is less. Inputs include appraised values on the properties or recent sales activity for similar assets in the property’s market. The significant unobservable input used is the discount applied to appraised values to account for expected liquidation and selling costs ranged between 1% and 25 % at June 30, 2017. There have been no changes in the valuation techniques for the three months ended June 30, 2017. The following tables summarize quantitative disclosures about the fair value measurement for each category of assets carried at fair value on a non-recurring basis as of June 30, 2017 and December 31, 2016 (in thousands):
The following table presents the carrying values and estimated fair values of the Company's financial instruments at June 30, 2017 and December 31, 2016:
Cash and Due from Banks, Certificates of Deposit, Interest-Earning Deposits in Other Banks and Federal Funds Sold The carrying amounts for cash and due from banks, certificates of deposit, interest-earning deposits in other banks and federal funds sold approximate fair value because of the short maturities of those instruments. Investment Securities Available for Sale Fair value for investment securities available for sale equals quoted market price if such information is available. If a quoted market price is not available, fair value is estimated using prices quoted for similar investments or quoted market prices obtained from independent pricing services. Loans For certain homogenous categories of loans, such as residential mortgages, fair value is estimated using the quoted market prices for securities backed by similar loans, adjusted for differences in loan characteristics. The fair value of other types of loans is estimated by discounting the future cash flows using the current rates at which similar loans would be made to borrowers with similar credit ratings and for the same remaining maturities. However, the values likely do not represent exit prices due to distressed market conditions. Stock in Federal Home Loan Bank of Atlanta The fair value for FHLB stock approximates carrying value, based on the redemption provisions of the FHLB stock. Other Non-Marketable Securities The fair value of equity instruments in other non-marketable securities is assumed to approximate carrying value. Deposits The fair value of demand, savings, and money market and NOW deposits is the amount payable on demand at the reporting date. The fair values of time deposits are estimated using the rates currently offered for instruments of similar remaining maturities. Short-term Debt Short-term debt consists of repurchase agreements and FHLB advances with maturities of less than twelve months. The carrying values of these instruments is a reasonable estimate of fair value. Long-term Debt The fair values of long-term debt are based on discounted expected cash flows at the interest rate for debt with the same or similar remaining maturities and collateral requirements. Accrued Interest Receivable and Accrued Interest Payable The carrying amounts of accrued interest receivable and payable approximate fair value because of the short maturities of these instruments. Financial Instruments with Off-Balance Sheet Risk With regard to financial instruments with off-balance sheet risk, it is not practicable to estimate the fair value of future financing commitments. |
INVESTMENT SECURITIES |
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Investments, Debt and Equity Securities [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Investments in Debt and Marketable Equity Securities (and Certain Trading Assets) Disclosure [Text Block] | NOTE E - INVESTMENT SECURITIES The amortized cost and fair value of available for sale investments (“AFS”), with gross unrealized gains and losses, follow:
As of June 30, 2017, accumulated other comprehensive income included net unrealized gains totaling $795,000. Deferred tax liabilities resulting from these net unrealized gains totaled $289,000. The amortized cost and fair value of available for sale investments (“AFS”), with gross unrealized gains and losses, follow:
As of December 31, 2016, accumulated other comprehensive income included net unrealized gains totaling $562,000. Deferred tax liabilities resulting from these net unrealized gains totaled $204,000. The scheduled maturities of securities available for sale, with gross unrealized gains and losses, were as follows:
Securities with a carrying value of $19.6 million and $34.3 million at June 30, 2017 and December 31, 2016, respectively, were pledged to secure public monies on deposit as required by law, customer repurchase agreements, and access to the Federal Reserve Discount Window. None of the unrealized losses relate to the liquidity of the securities or the issuer’s ability to honor redemption obligations and the Company has the intent and ability to hold these securities to recovery, no other than temporary impairments were identified for these investments having unrealized losses for the periods ended June 30, 2017 and December 31, 2016. In 2016 the Company realized a gain on the disposal of eleven securities and has not incurred any gains or losses related to securities sales in 2017. The following tables show investments’ gross unrealized losses and fair value, aggregated by investment category and length of time that the individual securities have been in a continuous unrealized loss position, at June 30, 2017 and December 31, 2016.
At June 30, 2017, the Company had no AFS securities with an unrealized loss for twelve or more consecutive months. One U.S. government agency GSE, one municipal and six mortgage-backed GSEs had unrealized losses for less than twelve months totaling $47,000 at June 30, 2017. All unrealized losses are attributable to the general trend of interest rates. During the first six months of 2017 there were no investment security sales. During the first quarter of 2016 gross proceeds of investment sales amounted to $624,000 and gains of $22,000. There were no sales of investment securities in the second quarter of 2016.
At December 31, 2016, the Company had two U.S. government agency GSEs with unrealized losses for more than twelve months totaling $12,000. Two U.S. government agency GSEs, one municipal and eight mortgage-backed GSEs had unrealized losses for less than twelve months totaling $115,000 at December 31, 2016. All unrealized losses are attributable to the general trend of interest rates and the abnormal spreads of all debt instruments to U.S. Treasury securities. The Company did not incur a loss on any securities sold during 2016. |
LOANS |
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Loans and Leases Receivable Disclosure [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Loans, Notes, Trade and Other Receivables Disclosure [Text Block] | NOTE F - LOANS Following is a summary of the composition of the Company’s loan portfolio at June 30, 2017 and December 31, 2016:
Loans are primarily secured by real estate located in eastern and central North Carolina. Real estate loans can be affected by the condition of the local real estate market and by local economic conditions. At June 30, 2017, the Company had pre-approved but unused lines of credit for customers totaling $135.8 million. In management’s opinion, these commitments, and undisbursed proceeds on loans reflected above, represent no more than normal lending risk to the Company and will be funded from normal sources of liquidity. A floating lien of $92.2 million of loans was pledged to the FHLB to secure borrowings at June 30, 2017. A description of the various loan products provided by the Bank is presented below. 1-to-4 Family Residential Loans Residential 1-to-4 family loans are mortgage loans secured by residential real estate within the Bank’s market areas. These loans may also include loans that convert from construction loans into permanent financing and are secured by properties within the Bank’s market areas. Commercial Real Estate Loans Commercial real estate loans are underwritten based on the borrower’s ability to generate adequate cash flow to repay the subject debt within reasonable terms. Commercial real estate loans typically include both owner and non-owner occupied properties with higher principal loan amounts. The repayment of these loans is generally dependent on the successful management of the property. Commercial real estate loans are sensitive to market and general economic conditions. Repayment analysis must be performed and consists of an identified primary/cash flow source of repayment and a secondary/liquidation source of repayment. The primary source of repayment is cash flow from income generated from rental or lease of the property. However, the cash flow can be supplemented with the borrower's and guarantor's global cash flow position. Other credit issues such as the business fundamentals and financial strength of the borrower/guarantor can be considered in determining adequacy of repayment ability. The secondary source of repayment is liquidation of the collateral, supplemented by a liquidation cushion provided by the financial assets of the borrower/guarantor. Management monitors and evaluates commercial real estate loans based on collateral, cash flow, market area, and risk grade. Multi-family Residential Loans Multi-family residential loans are typically non-farm properties with 5 or more dwelling units in structures which include apartment buildings used primarily to accommodate households on a more or less permanent basis. Successful performance of these types of loans is primarily dependent on occupancy rates, rental rates, and property management. Construction Loans Construction loans are non-revolving extensions of credit secured by real property of which the proceeds are used to acquire and develop land and to construct commercial or residential buildings. The primary source of repayment for these types of loans is the sale of the improved property or permanent financing in which case the property is expected to generate the cash flow necessary for repayment on a permanent loan basis. Property cash flow may be supplemented with financial support from the borrowers/guarantors. Proper underwriting of a construction loan consists of the initial process of obtaining, analyzing, and approving various aspects of information pertaining to: the analysis of the permanent financing source, creditworthiness of the borrower and guarantors, ability of the contractor to perform under the terms of the contract, and the feasibility, marketability, and valuation of the project. Also, consideration is given to the cost of the project and sources of funds needed to complete construction as well as identifying any sources of equity funding. Construction loans are traditionally considered to be higher risk loans involving technical and legal requirements inherently different from other types of loans; however with thorough credit underwriting, proper loan structure, and diligent loan servicing, these risks can often be mitigated. Some examples of risks inherent in this type of lending include: underestimated costs, inflation of material and labor costs, site difficulties (i.e. rock, soil), project not built to plans, weather delays and natural disasters, borrower/contractor/subcontractor disputes which prompt liens, and interest rates increasing beyond budget. Home Equity Lines of Credit Home equity lines of credit are consumer-purpose revolving extensions of credit which are secured by first or second liens on owner-occupied residential real estate. Appropriate risk management and compliance practices are exercised to ensure that loan-to-value, lien perfection, and compliance risks are addressed and managed within the Bank’s established guidelines. The degree of utilization of revolving commitments within this loan segment is reviewed periodically to identify changes in the behavior of this borrowing group. Commercial and Industrial Loans Commercial and industrial loans are underwritten after evaluating and understanding the borrower’s ability to generate positive cash flow, operate profitably and prudently expand its business. Underwriting standards are designed to promote relationships to include a full range of loan, deposit, and cash management services. Commercial and industrial loans are primarily made based on the identified cash flows of the borrower and secondarily on the underlying collateral provided by the borrower and the guarantors. The cash flows of the borrower, however, may not be as expected and the collateral securing these loans may fluctuate in value. In the case of loans secured by accounts receivable, the availability of funds for repayment can be impacted by the borrower’s ability to collect amounts due from its customers. Loans to Individuals & Overdrafts Consumer loans are approved using Bank policies and procedures established to evaluate each credit request. All lending decisions and credit risks are required to be clearly documented. Several factors are considered in making these decisions such as credit score, adjusted net worth, liquidity, debt ratio, disposable income, credit history, and loan-to-value of the collateral. This process, combined with the relatively smaller loan amounts spreads the risk among many individual borrowers. Overdrafts on customer accounts are classified as loans for reporting purposes. The following tables present an age analysis of past due loans, segregated by class of loans as of June 30, 2017 and December 31, 2016, respectively:
There were five loans that amounted to $956,000 that were more than 90 days past due and still accruing interest at June 30, 2017.
There were three loans in the aggregate amount of $529,000 greater than 90 days past due and still accruing interest at December 31, 2016. Impaired Loans The following tables present information on loans that were considered to be impaired as of June 30, 2017 and December 31, 2016:
Impaired loans at June 30, 2017 were approximately $7.8 million and were composed of $2.9 million in nonaccrual loans and $4.9 million in loans that were still accruing interest. Recorded investment represents the current principal balance of the loan. Approximately $963,000 in impaired loans had specific allowances provided for them while the remaining $6.8 million had no specific allowances recorded at June 30, 2017. Of the $6.8 million with no allowance recorded, $1.4 million of those loans have had partial charge-offs recorded.
Impaired loans at December 31, 2016 were approximately $11.0 million and consisted of $5.8 million in non-accrual loans and $5.2 million in loans still in accruing status. Recorded investment represents the current principal balance for the loan. Approximately, $2.8 million of the $11.0 million in impaired loans at December 31, 2016 had specific allowances aggregating $117,000 while the remaining $8.2 million had no specific allowances recorded. Of the $8.2 million with no allowance recorded, partial charge-offs to date amounted to $2.3 million. Loans are placed on non-accrual status when it has been determined that all contractual principal and interest will not be received. Any payments received on these loans are applied to principal first and then to interest only after all principal has been collected. In the case of an impaired loan that is still on accrual basis, payments are applied to both principal and interest. Troubled Debt Restructurings The following table presents loans that were modified as troubled debt restructurings (“TDRs”) with a breakdown of the types of concessions made by loan class during the three and six months ended June 30, 2017 and 2016:
Loans may be considered troubled debt restructurings for reasons other than below market interest rates, extended payment terms or forgiveness of principal. The following table presents loans that were modified as TDRs within the past twelve months with a breakdown of the types for which there was a payment default during that period together with concessions made by loan class during the twelve month period ended June 30, 2017 and 2016:
At June 30, 2017, the Bank had thirty two loans with an aggregate balance of $4.7 million that were considered to be troubled debt restructurings. Of those TDRs, seventeen loans with a balance totaling $3.2 million were still accruing as of June 30, 2017. The remaining TDRs with balances totaling $1.5 million as of June 30, 2017 were in non-accrual status. At June 30, 2016, the Bank had thirty five loans with an aggregate balance of $4.2 million that were considered to be troubled debt restructurings. Of those TDRs, twenty-six loans with a balance totaling $2.9 million were still accruing as of June 30, 2016. The remaining TDRs with balances totaling $1.3 million as of June 30, 2016 were in non-accrual status. Credit Quality Indicators As part of the on-going monitoring of the credit quality of the loan portfolio, management utilizes a risk grading matrix to assign a risk grade to each of the Company’s loans. All non-consumer loans are graded on a scale of 1 to 9. A description of the general characteristics of these nine different risk grades is as follows:
Consumer loans are graded on a scale of 1 to 9. A description of the general characteristics of the nine risk grades is as follows:
The following tables present information on risk ratings of the commercial and consumer loan portfolios, segregated by loan class as of June 30, 2017 and December 31, 2016, respectively: Total loans:
Total Loans:
Determining the fair value of Purchased Credit Impaired (PCI) loans at acquisition required the Company to estimate cash flows expected to result from those loans and to discount those cash flows at appropriate rates of interest. For such loans, the excess of cash flows expected to be collected at acquisition over the estimated fair value is recognized as interest income over the remaining lives of the loans and is called the accretable yield. The difference between contractually required payments at acquisition and the cash flows expected to be collected at acquisition reflects the impact of estimated credit losses and is called the nonaccretable difference. In accordance with GAAP, there was no carry-over of previously established allowance for credit losses from the acquired company. The following table documents changes to the amount of the accretable yield on PCI loans for the three and six months ended June 30, 2017 (dollars in thousands):
Allowance for Loan Losses The allowance for loan losses is a reserve established through provisions for loan losses charged to income and represents management’s best estimate of probable loan losses that have been incurred within the existing portfolio of loans. The allowance, in the judgment of management, is necessary to reserve for estimated losses and risk inherent in the loan portfolio. The Company’s allowance for loan loss methodology is based on historical loss experience by type of credit and internal risk grade, specific homogeneous risk pools and specific loss allocations, with adjustments for current events and conditions. The Company’s process for determining the appropriate level of reserves is designed to account for changes in credit quality as they occur. The provision for loan losses reflects loan quality trends, including the levels of and trends related to past due loans and economic conditions at the local and national levels. It also considers the quality and risk characteristics of the Company’s loan origination and servicing policies and practices. Individual reserves are calculated according to ASC Section 310-10-35 against loans evaluated individually and deemed to most likely be impaired. Impaired loans include all loans in non-accrual status, all troubled debt restructures, all substandard loans that are deemed to be collateral dependent, and other loans that management determines require reserves. The Company’s allowance for loan losses model calculates historical loss rates by using a loss migration analysis associating losses to the risk-graded pool to which they relate for each of the previous twelve quarters. Then, using the twelve quarter look back period, loss factors are calculated for each risk-graded pool. The model incorporates various internal and external qualitative and environmental factors as described in the Interagency Policy Statement on the Allowance for Loan and Lease Losses, dated December 2006. Input for these factors is determined on the basis of management observation, judgment, and experience. The factors utilized by the Company in the model for all loan classes are as follows: Internal Factors
External Factors
Each pool is assigned an adjustment to the potential loss percentage by assessing its characteristics against each of the factors listed above. Reserves are generally divided into three allocation segments:
All information related to the calculation of the three segments, including data analysis, assumptions, and calculations are documented. Assigning specific individual reserve amounts, formula reserve factors, or unallocated amounts based on unsupported assumptions or conclusions is not permitted. The following tables present a roll forward of the Company’s allowance for loan losses by loan class for the three and six month periods ended June 30, 2017, respectively:
The following tables present a roll forward of the Company’s allowance for loan losses by loan class for the three and six month periods ended June 30, 2016, respectively:
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ACCUMULATED OTHER COMPREHENSIVE INCOME |
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Accumulated Other Comprehensive Income (Loss) [Text Block] | NOTE H ACCUMULATED OTHER COMPREHENSIVE INCOME The following table presents changes in accumulated other comprehensive income for the three and six months ended June 30, 2017 and 2016.
The income statement line items impacted by the reclassifications of realized gains (losses) on investment securities are the gain on the sale of securities and income tax expense line items in the consolidated statement of operations. |
REPURCHASE AGREEMENTS |
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Banking and Thrift [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Remaining Contractual Maturity Of The Securities Sold Under Agreements To Repurchase By Class Of Collateral Pledged [Text Block] | NOTE I - REPURCHASE AGREEMENTS We utilize securities sold under agreements to repurchase to facilitate the needs of our customers and secure long-term funding needs. Repurchase agreements are transactions whereby we offer to sell to a counterparty an undivided interest in an eligible security at an agreed upon purchase price, and which obligates the Company to repurchase the security on an agreed upon date at an agreed upon repurchase price plus interest at an agreed upon rate. Securities sold under agreements to repurchase are recorded at the amount of cash received in connection with the transaction and are reflected as short-term borrowings. We monitor collateral levels on a continuous basis and maintain records of each transaction specifically describing the applicable security and the counterparty’s fractional interest in that security, and we segregate the security from its general assets in accordance with regulations governing custodial holdings of securities. The primary risk with our repurchase agreements is market risk associated with the investments securing the transactions, as we may be required to provide additional collateral based on fair value changes of the underlying investments. Securities pledged as collateral under repurchase agreements are maintained with our safekeeping agents. The carrying value of available for sale investment securities pledged as collateral under repurchase agreements totaled $12.7 million and $12.0 million at June 30, 2017 and December 31, 2016, respectively. The remaining contractual maturity of the securities sold under agreements to repurchase by class of collateral pledged included in short-term borrowings as of June 30, 2017 and December 31, 2016 is presented in the following tables.
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OTHER REAL ESTATE OWNED |
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Banking and Thrift [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Real Estate Owned [Text Block] | NOTE J OTHER REAL ESTATE OWNED The following table explains changes in other real estate owned during the six months ended June 30, 2017 and 2016 (dollars in thousands):
At June 30, 2017 and December 31, 2016, the Company had $2.7 million and $599,000, respectively, of foreclosed residential real estate property in OREO. The recorded investment in consumer mortgage loans collateralized by residential real estate property in the process of foreclosure totaled $135,000 and none at June 30, 2017 and December 31, 2016, respectively. |
SUBSEQUENT EVENTS |
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Subsequent Events [Abstract] | ||
Subsequent Events [Text Block] | NOTE K SUBSEQUENT EVENTS The Company and Bank have entered into an Agreement and Plan of Merger and Reorganization dated as of July 20, 2017, with Premara Financial, Inc. (“Premara”) and its subsidiary bank, Carolina Premier Bank, Charlotte, NC. Pursuant to the terms of the merger agreement, the Company would acquire Carolina Premier Bank through the merger of Premara with and into the Company, with the Company as the surviving corporation. Immediately following the parent company merger, Carolina Premier Bank would be merged with and into the Bank, with the Bank as the surviving banking corporation in the bank merger. The transaction is subject to various closing conditions, including the receipt of requisite shareholder approvals and required approvals of State and Federal banking regulators. |
PER SHARE RESULTS (Tables) |
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Schedule of Earnings Per Share, Basic and Diluted [Table Text Block] | Basic net income per share is computed based upon the weighted average number of shares of common stock outstanding during the period. Diluted net income per share includes the dilutive effect of stock options outstanding during the period. At June 30, 2017 and 2016 there were 23,300 and 123,800 anti-dilutive options outstanding, respectively.
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FAIR VALUE MEASUREMENTS (Tables) |
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Fair Value, Assets Measured on Recurring Basis [Table Text Block] | The following tables summarize quantitative disclosures about the fair value measurement for each category of assets carried at fair value on a recurring basis as of June 30, 2017 and December 31, 2016 (in thousands):
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Fair Value Measurements, Nonrecurring [Table Text Block] | The following tables summarize quantitative disclosures about the fair value measurement for each category of assets carried at fair value on a non-recurring basis as of June 30, 2017 and December 31, 2016 (in thousands):
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Schedule of Fair Value, Off-balance Sheet Risks [Table Text Block] | The following table presents the carrying values and estimated fair values of the Company's financial instruments at June 30, 2017 and December 31, 2016:
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INVESTMENT SECURITIES (Tables) |
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Investments, Debt and Equity Securities [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of Available-for-sale Securities Reconciliation [Table Text Block] | The amortized cost and fair value of available for sale investments (“AFS”), with gross unrealized gains and losses, follow:
The amortized cost and fair value of available for sale investments (“AFS”), with gross unrealized gains and losses, follow:
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Investments Classified by Contractual Maturity Date [Table Text Block] | The scheduled maturities of securities available for sale, with gross unrealized gains and losses, were as follows:
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Schedule of Unrealized Loss on Investments [Table Text Block] | The following tables show investments’ gross unrealized losses and fair value, aggregated by investment category and length of time that the individual securities have been in a continuous unrealized loss position, at June 30, 2017 and December 31, 2016.
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LOANS (Tables) |
6 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Receivables [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of Accounts, Notes, Loans and Financing Receivable [Table Text Block] | Following is a summary of the composition of the Company’s loan portfolio at June 30, 2017 and December 31, 2016:
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Past Due Financing Receivables [Table Text Block] | The following tables present an age analysis of past due loans, segregated by class of loans as of June 30, 2017 and December 31, 2016, respectively:
There were five loans that amounted to $956,000 that were more than 90 days past due and still accruing interest at June 30, 2017.
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Impaired Financing Receivables [Table Text Block] | The following tables present information on loans that were considered to be impaired as of June 30, 2017 and December 31, 2016:
Impaired loans at June 30, 2017 were approximately $7.8 million and were composed of $2.9 million in nonaccrual loans and $4.9 million in loans that were still accruing interest. Recorded investment represents the current principal balance of the loan. Approximately $963,000 in impaired loans had specific allowances provided for them while the remaining $6.8 million had no specific allowances recorded at June 30, 2017. Of the $6.8 million with no allowance recorded, $1.4 million of those loans have had partial charge-offs recorded.
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Troubled Debt Restructurings on Financing Receivables [Table Text Block] | The following table presents loans that were modified as troubled debt restructurings (“TDRs”) with a breakdown of the types of concessions made by loan class during the three and six months ended June 30, 2017 and 2016:
The following table presents loans that were modified as TDRs within the past twelve months with a breakdown of the types for which there was a payment default during that period together with concessions made by loan class during the twelve month period ended June 30, 2017 and 2016:
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Financing Receivable Credit Quality Indicators [Table Text Block] | The following tables present information on risk ratings of the commercial and consumer loan portfolios, segregated by loan class as of June 30, 2017 and December 31, 2016, respectively: Total loans:
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Schedule Of Certain Loans Acquired In Transfer Accounted For As Debt Securities Accretable Yield [Table Text Block] | The following table documents changes to the amount of the accretable yield on PCI loans for the three and six months ended June 30, 2017 (dollars in thousands):
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Allowance for Credit Losses on Financing Receivables [Table Text Block] | The following tables present a roll forward of the Company’s allowance for loan losses by loan class for the three and six month periods ended June 30, 2017, respectively:
The following tables present a roll forward of the Company’s allowance for loan losses by loan class for the three and six month periods ended June 30, 2016, respectively:
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ACCUMULATED OTHER COMPREHENSIVE INCOME (Tables) |
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Jun. 30, 2017 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Accumulated Other Comprehensive Income (Loss), Net of Tax [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of Accumulated Other Comprehensive Income (Loss) [Table Text Block] | The following table presents changes in accumulated other comprehensive income for the three and six months ended June 30, 2017 and 2016.
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REPURCHASE AGREEMENTS (Tables) |
6 Months Ended | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Banking and Thrift [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Remaining Contractual Maturity Of The Securities Sold Under Agreements To Repurchase By Class Of Collateral Pledged [Table Text Block] | The remaining contractual maturity of the securities sold under agreements to repurchase by class of collateral pledged included in short-term borrowings as of June 30, 2017 and December 31, 2016 is presented in the following tables.
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OTHER REAL ESTATE OWNED (Tables) |
6 Months Ended | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Jun. 30, 2017 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Banking and Thrift [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule Of Real Estate Owned Properties [Table Text Block] | The following table explains changes in other real estate owned during the six months ended June 30, 2017 and 2016 (dollars in thousands):
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PER SHARE RESULTS (Details) - shares |
3 Months Ended | 6 Months Ended | ||
---|---|---|---|---|
Jun. 30, 2017 |
Jun. 30, 2016 |
Jun. 30, 2017 |
Jun. 30, 2016 |
|
Weighted average shares used for basic net income available to common shareholders | 11,662,117 | 11,594,995 | 11,657,391 | 11,589,217 |
Effect of dilutive stock options | 64,993 | 47,731 | 63,450 | 49,452 |
Weighted average shares used for diluted net income available to common shareholders | 11,727,110 | 11,642,726 | 11,720,841 | 11,638,669 |
PER SHARE RESULTS (Details Textual) - shares |
6 Months Ended | |
---|---|---|
Jun. 30, 2017 |
Jun. 30, 2016 |
|
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items] | ||
Antidilutive Securities Excluded from Computation of Earnings Per Share, Amount | 23,300 | 123,800 |
RECENT ACCOUNTING PRONOUNCEMENTS (Details Textual) |
3 Months Ended |
---|---|
Mar. 31, 2017
USD ($)
| |
Accounting Standards Update 2016-09 [Member] | |
Excess Tax Benefit from Share-based Compensation, Operating Activities | $ 4,000 |
FAIR VALUE MEASUREMENTS (Details) - USD ($) $ in Thousands |
Jun. 30, 2017 |
Dec. 31, 2016 |
---|---|---|
Assets, Fair Value Disclosure, Recurring | $ 56,852 | $ 62,257 |
US Government Agencies Debt Securities [Member] | ||
Assets, Fair Value Disclosure, Recurring | 12,577 | 14,159 |
Mortgage-backed Securities, Issued by US Government Sponsored Enterprises [Member] | ||
Assets, Fair Value Disclosure, Recurring | 30,084 | 32,363 |
Municipal Bonds [Member] | ||
Assets, Fair Value Disclosure, Recurring | 14,191 | 15,735 |
Fair Value, Inputs, Level 1 [Member] | ||
Assets, Fair Value Disclosure, Recurring | 0 | 0 |
Fair Value, Inputs, Level 1 [Member] | US Government Agencies Debt Securities [Member] | ||
Assets, Fair Value Disclosure, Recurring | 0 | 0 |
Fair Value, Inputs, Level 1 [Member] | Mortgage-backed Securities, Issued by US Government Sponsored Enterprises [Member] | ||
Assets, Fair Value Disclosure, Recurring | 0 | 0 |
Fair Value, Inputs, Level 1 [Member] | Municipal Bonds [Member] | ||
Assets, Fair Value Disclosure, Recurring | 0 | 0 |
Fair Value, Inputs, Level 2 [Member] | ||
Assets, Fair Value Disclosure, Recurring | 56,852 | 62,257 |
Fair Value, Inputs, Level 2 [Member] | US Government Agencies Debt Securities [Member] | ||
Assets, Fair Value Disclosure, Recurring | 12,577 | 14,159 |
Fair Value, Inputs, Level 2 [Member] | Mortgage-backed Securities, Issued by US Government Sponsored Enterprises [Member] | ||
Assets, Fair Value Disclosure, Recurring | 30,084 | 32,363 |
Fair Value, Inputs, Level 2 [Member] | Municipal Bonds [Member] | ||
Assets, Fair Value Disclosure, Recurring | 14,191 | 15,735 |
Fair Value, Inputs, Level 3 [Member] | ||
Assets, Fair Value Disclosure, Recurring | 0 | 0 |
Fair Value, Inputs, Level 3 [Member] | US Government Agencies Debt Securities [Member] | ||
Assets, Fair Value Disclosure, Recurring | 0 | 0 |
Fair Value, Inputs, Level 3 [Member] | Mortgage-backed Securities, Issued by US Government Sponsored Enterprises [Member] | ||
Assets, Fair Value Disclosure, Recurring | 0 | 0 |
Fair Value, Inputs, Level 3 [Member] | Municipal Bonds [Member] | ||
Assets, Fair Value Disclosure, Recurring | $ 0 | $ 0 |
FAIR VALUE MEASUREMENTS (Details 1) - USD ($) $ in Thousands |
Jun. 30, 2017 |
Dec. 31, 2016 |
---|---|---|
Assets, Fair Value Disclosure, Nonrecurring | $ 6,491 | $ 7,250 |
Impaired Loans [Member] | ||
Assets, Fair Value Disclosure, Nonrecurring | 2,943 | 5,805 |
Assets held for sale [Member] | ||
Assets, Fair Value Disclosure, Nonrecurring | 846 | 846 |
Foreclosed Real Estate [Member] | ||
Assets, Fair Value Disclosure, Nonrecurring | 2,702 | 599 |
Fair Value, Inputs, Level 1 [Member] | ||
Assets, Fair Value Disclosure, Nonrecurring | 0 | 0 |
Fair Value, Inputs, Level 1 [Member] | Impaired Loans [Member] | ||
Assets, Fair Value Disclosure, Nonrecurring | 0 | 0 |
Fair Value, Inputs, Level 1 [Member] | Assets held for sale [Member] | ||
Assets, Fair Value Disclosure, Nonrecurring | 0 | 0 |
Fair Value, Inputs, Level 1 [Member] | Foreclosed Real Estate [Member] | ||
Assets, Fair Value Disclosure, Nonrecurring | 0 | 0 |
Fair Value, Inputs, Level 2 [Member] | ||
Assets, Fair Value Disclosure, Nonrecurring | 0 | 0 |
Fair Value, Inputs, Level 2 [Member] | Impaired Loans [Member] | ||
Assets, Fair Value Disclosure, Nonrecurring | 0 | 0 |
Fair Value, Inputs, Level 2 [Member] | Assets held for sale [Member] | ||
Assets, Fair Value Disclosure, Nonrecurring | 0 | 0 |
Fair Value, Inputs, Level 2 [Member] | Foreclosed Real Estate [Member] | ||
Assets, Fair Value Disclosure, Nonrecurring | 0 | 0 |
Fair Value, Inputs, Level 3 [Member] | ||
Assets, Fair Value Disclosure, Nonrecurring | 6,491 | 7,250 |
Fair Value, Inputs, Level 3 [Member] | Impaired Loans [Member] | ||
Assets, Fair Value Disclosure, Nonrecurring | 2,943 | 5,805 |
Fair Value, Inputs, Level 3 [Member] | Assets held for sale [Member] | ||
Assets, Fair Value Disclosure, Nonrecurring | 846 | 846 |
Fair Value, Inputs, Level 3 [Member] | Foreclosed Real Estate [Member] | ||
Assets, Fair Value Disclosure, Nonrecurring | $ 2,702 | $ 599 |
FAIR VALUE MEASUREMENTS (Details 2) - USD ($) $ in Thousands |
Jun. 30, 2017 |
Dec. 31, 2016 |
|||
---|---|---|---|---|---|
Financial assets: | |||||
Cash and due from banks | $ 13,791 | $ 14,372 | [1] | ||
Certificates of deposits | 1,000 | 1,000 | |||
Interest-earning deposits in other banks | 43,512 | 40,342 | |||
Investment securities available for sale | 56,852 | 62,257 | |||
Loans, net | 729,533 | 668,784 | |||
Accrued interest receivable | 2,646 | 2,768 | [1] | ||
Stock in the FHLB | 2,141 | 2,251 | [1] | ||
Other non-marketable securities | 666 | 703 | |||
Financial liabilities: | |||||
Deposits | 739,653 | 679,661 | [1] | ||
Short-term debt | 33,559 | 37,090 | [1] | ||
Long-term debt | 22,839 | 23,039 | [1] | ||
Accrued interest payable | 241 | 221 | [1] | ||
Estimate of Fair Value Measurement [Member] | |||||
Financial assets: | |||||
Cash and due from banks | 13,791 | 14,372 | |||
Certificates of deposits | 1,000 | 1,000 | |||
Interest-earning deposits in other banks | 43,512 | 40,342 | |||
Investment securities available for sale | 56,852 | 62,257 | |||
Loans, net | 734,564 | 671,208 | |||
Accrued interest receivable | 2,646 | 2,768 | |||
Stock in the FHLB | 2,141 | 2,251 | |||
Other non-marketable securities | 666 | 703 | |||
Financial liabilities: | |||||
Deposits | 738,037 | 678,328 | |||
Short-term debt | 33,559 | 37,177 | |||
Long-term debt | 17,449 | 17,649 | |||
Accrued interest payable | 241 | 221 | |||
Fair Value, Inputs, Level 1 [Member] | |||||
Financial assets: | |||||
Cash and due from banks | 13,791 | 14,372 | |||
Certificates of deposits | 1,000 | 1,000 | |||
Interest-earning deposits in other banks | 43,512 | 40,342 | |||
Investment securities available for sale | 0 | 0 | |||
Loans, net | 0 | 0 | |||
Accrued interest receivable | 0 | 0 | |||
Stock in the FHLB | 0 | 0 | |||
Other non-marketable securities | 0 | 0 | |||
Financial liabilities: | |||||
Deposits | 0 | 0 | |||
Short-term debt | 0 | 0 | |||
Long-term debt | 0 | 0 | |||
Accrued interest payable | 0 | 0 | |||
Fair Value, Inputs, Level 2 [Member] | |||||
Financial assets: | |||||
Cash and due from banks | 0 | 0 | |||
Certificates of deposits | 0 | 0 | |||
Interest-earning deposits in other banks | 0 | 0 | |||
Investment securities available for sale | 56,852 | 62,257 | |||
Loans, net | 0 | 0 | |||
Accrued interest receivable | 2,646 | 2,768 | |||
Stock in the FHLB | 0 | 0 | |||
Other non-marketable securities | 0 | 0 | |||
Financial liabilities: | |||||
Deposits | 738,037 | 678,328 | |||
Short-term debt | 33,559 | 37,177 | |||
Long-term debt | 17,449 | 17,649 | |||
Accrued interest payable | 241 | 221 | |||
Fair Value, Inputs, Level 3 [Member] | |||||
Financial assets: | |||||
Cash and due from banks | 0 | 0 | |||
Certificates of deposits | 0 | 0 | |||
Interest-earning deposits in other banks | 0 | 0 | |||
Investment securities available for sale | 0 | 0 | |||
Loans, net | 734,564 | 671,208 | |||
Accrued interest receivable | 0 | 0 | |||
Stock in the FHLB | 2,141 | 2,251 | |||
Other non-marketable securities | 666 | 703 | |||
Financial liabilities: | |||||
Deposits | 0 | 0 | |||
Short-term debt | 0 | 0 | |||
Long-term debt | 0 | 0 | |||
Accrued interest payable | $ 0 | $ 0 | |||
|
FAIR VALUE MEASUREMENTS (Details Textual) |
Jun. 30, 2017 |
---|---|
Minimum [Member] | |
Percentage Of Discount From Impaired Loans | 6.00% |
Percentage Of Discount From Assets held for sale | 1.00% |
Minimum [Member] | Fair Value, Measurements, Nonrecurring [Member] | |
Percentage Of Discount From Foreclosed Real Estate | 6.00% |
Maximum [Member] | |
Percentage Of Discount From Impaired Loans | 61.00% |
Percentage Of Discount From Assets held for sale | 25.00% |
Maximum [Member] | Fair Value, Measurements, Nonrecurring [Member] | |
Percentage Of Discount From Foreclosed Real Estate | 10.00% |
INVESTMENT SECURITIES (Details) - USD ($) $ in Thousands |
Jun. 30, 2017 |
Dec. 31, 2016 |
|||
---|---|---|---|---|---|
Securities available for sale: | |||||
Amortized cost | $ 56,057 | $ 61,695 | |||
Gross unrealized gains | 842 | 689 | |||
Gross unrealized Losses | (47) | (127) | |||
Fair value | 56,852 | 62,257 | [1] | ||
U.S. government agencies - GSE’s [Member] | |||||
Securities available for sale: | |||||
Amortized cost | 12,426 | 14,086 | |||
Gross unrealized gains | 160 | 98 | |||
Gross unrealized Losses | (9) | (25) | |||
Fair value | 12,577 | 14,159 | |||
Mortgage-backed securities - GSE’s [Member] | |||||
Securities available for sale: | |||||
Amortized cost | 29,727 | 32,082 | |||
Gross unrealized gains | 395 | 382 | |||
Gross unrealized Losses | (38) | (101) | |||
Fair value | 30,084 | 32,363 | |||
Municipal bonds [Member] | |||||
Securities available for sale: | |||||
Amortized cost | 13,904 | 15,527 | |||
Gross unrealized gains | 287 | 209 | |||
Gross unrealized Losses | 0 | (1) | |||
Fair value | $ 14,191 | $ 15,735 | |||
|
INVESTMENT SECURITIES (Details 1) - USD ($) $ in Thousands |
6 Months Ended | 12 Months Ended | |||
---|---|---|---|---|---|
Jun. 30, 2017 |
Dec. 31, 2016 |
||||
Schedule of Available-for-sale Securities [Line Items] | |||||
Amortized Cost, Due within one year | $ 1,554 | $ 3,735 | |||
Fair Value, Due within one year | 1,561 | 3,747 | |||
Amortized Cost, Due after one but within five years | 41,301 | 37,615 | |||
Fair Value, Due after one but within five years | 41,826 | 37,929 | |||
Amortized Cost, Due after five but within ten years | 6,943 | 10,695 | |||
Fair Value, Due after five but within ten years | 7,085 | 10,792 | |||
Amortized Cost, Due after ten years | 6,259 | 9,650 | |||
Fair Value, Due after ten years | 6,380 | 9,789 | |||
Available-for-sale Securities, Amortized Cost Total | 56,057 | 61,695 | |||
Available-for-sale Securities, Fair Value Total | 56,852 | 62,257 | [1] | ||
Gross Unrealized Gains, Due within one year | 7 | 12 | |||
Gross Unrealized Losses, Due within one year | 0 | 0 | |||
Gross Unrealized Gains, Due after one but within five years | 572 | 424 | |||
Gross Unrealized Losses, Due after one but within five years | (47) | (110) | |||
Gross Unrealized Gains, Due after five but within ten years | 142 | 109 | |||
Gross Unrealized Losses, Due after five but within ten years | 0 | (12) | |||
Gross Unrealized Gains, Due after ten years | 121 | 144 | |||
Gross Unrealized Losses, Due after ten years | 0 | (5) | |||
Available-for-sale Securities, Gross Unrealized Gain | 842 | 689 | |||
Available-for-sale Securities, Gross Unrealized Loss | $ (47) | $ (127) | |||
|
INVESTMENT SECURITIES (Details 2) - USD ($) $ in Thousands |
Jun. 30, 2017 |
Dec. 31, 2016 |
---|---|---|
U.S. government agencies - GSE’s [Member] | ||
Securities available for sale: | ||
Less Than 12 Months Fair value | $ 1,433 | $ 2,748 |
Less Than 12 Months Unrealized losses | (9) | (13) |
12 Months or More Fair value | 0 | 1,651 |
12 Months or More Unrealized losses | 0 | (12) |
Total Fair value | 1,433 | 4,399 |
Total Unrealized losses | (9) | (25) |
Mortgage-backed securities - GSE’s [Member] | ||
Securities available for sale: | ||
Less Than 12 Months Fair value | 5,420 | 8,778 |
Less Than 12 Months Unrealized losses | (38) | (101) |
12 Months or More Fair value | 0 | 0 |
12 Months or More Unrealized losses | 0 | 0 |
Total Fair value | 5,420 | 8,778 |
Total Unrealized losses | (38) | (101) |
Municipal bonds [Member] | ||
Securities available for sale: | ||
Less Than 12 Months Fair value | 110 | 110 |
Less Than 12 Months Unrealized losses | 0 | (1) |
12 Months or More Fair value | 0 | 0 |
12 Months or More Unrealized losses | 0 | 0 |
Total Fair value | 110 | 110 |
Total Unrealized losses | 0 | (1) |
Total temporarily impaired securities [Member] | ||
Securities available for sale: | ||
Less Than 12 Months Fair value | 6,963 | 11,636 |
Less Than 12 Months Unrealized losses | (47) | (115) |
12 Months or More Fair value | 0 | 1,651 |
12 Months or More Unrealized losses | 0 | (12) |
Total Fair value | 6,963 | 13,287 |
Total Unrealized losses | $ (47) | $ (127) |
INVESTMENT SECURITIES (Details Textual) - USD ($) |
3 Months Ended | 6 Months Ended | 12 Months Ended | |||
---|---|---|---|---|---|---|
Jun. 30, 2017 |
Jun. 30, 2016 |
Mar. 31, 2016 |
Jun. 30, 2017 |
Jun. 30, 2016 |
Dec. 31, 2016 |
|
Schedule of Available-for-sale Securities [Line Items] | ||||||
Available-for-sale Securities, Gross Unrealized Gain (Loss) | $ 795,000 | $ 562,000 | ||||
Deferred Income Taxes and Other Liabilities, Noncurrent | $ 289,000 | 289,000 | 204,000 | |||
US Government Securities, at Carrying Value | 19,600,000 | 19,600,000 | 34,300,000 | |||
Gain (Loss) on Sale of Securities, Net | 0 | $ 0 | $ 22,000 | 0 | $ 22,000 | |
Proceeds from Sale of Available-for-sale Securities, Total | $ 624,000 | 0 | $ 624,000 | |||
Temporarily Impaired Securities [Member] | ||||||
Schedule of Available-for-sale Securities [Line Items] | ||||||
Available-for-sale Securities, Continuous Unrealized Loss Position, 12 Months or Longer, Accumulated Loss | 0 | 0 | 12,000 | |||
Available-for-sale Securities, Continuous Unrealized Loss Position, Less than 12 Months, Accumulated Loss | $ 47,000 | $ 47,000 | $ 115,000 |
LOANS (Details) - USD ($) $ in Thousands |
Jun. 30, 2017 |
Dec. 31, 2016 |
Jun. 30, 2016 |
Mar. 31, 2016 |
Dec. 31, 2015 |
|||
---|---|---|---|---|---|---|---|---|
Accounts, Notes, Loans and Financing Receivable [Line Items] | ||||||||
Gross loans | $ 739,314 | $ 678,394 | ||||||
Less deferred loan origination fees, net | (1,293) | (1,199) | ||||||
Total loans | 738,021 | 677,195 | [1] | $ 633,249 | ||||
Allowance for loan losses | (8,488) | (8,411) | [1] | (25) | $ (9) | |||
Total loans, net | $ 729,533 | $ 668,784 | [1] | |||||
Less Percentage of deferred loan origination fees, net | (0.17%) | (0.18%) | ||||||
Percent of total | 100.00% | 100.00% | ||||||
1- to- 4 family residential Real estate loans [Member] | ||||||||
Accounts, Notes, Loans and Financing Receivable [Line Items] | ||||||||
Total loans | $ 103,644 | $ 97,978 | 94,990 | |||||
Allowance for loan losses | 0 | $ 0 | ||||||
Percent of total | 14.04% | 14.47% | ||||||
Commercial Real Estate [Member] | ||||||||
Accounts, Notes, Loans and Financing Receivable [Line Items] | ||||||||
Total loans | $ 297,406 | $ 281,723 | 247,922 | |||||
Allowance for loan losses | 0 | 0 | ||||||
Percent of total | 40.30% | 41.60% | ||||||
Multi-family residential Real estate loans [Member] | ||||||||
Accounts, Notes, Loans and Financing Receivable [Line Items] | ||||||||
Total loans | $ 71,066 | $ 56,119 | 46,295 | |||||
Allowance for loan losses | 0 | 0 | ||||||
Percent of total | 9.63% | 8.29% | ||||||
Construction Real estate loans [Member] | ||||||||
Accounts, Notes, Loans and Financing Receivable [Line Items] | ||||||||
Total loans | $ 126,265 | $ 100,911 | 113,279 | |||||
Allowance for loan losses | 0 | |||||||
Percent of total | 17.11% | 14.90% | ||||||
Home Equity Line of Credit [Member] | ||||||||
Accounts, Notes, Loans and Financing Receivable [Line Items] | ||||||||
Total loans | $ 42,305 | $ 41,158 | 42,055 | |||||
Allowance for loan losses | (9) | $ (9) | ||||||
Percent of total | 5.73% | 6.08% | ||||||
Total real estate loans [Member] | ||||||||
Accounts, Notes, Loans and Financing Receivable [Line Items] | ||||||||
Total loans | $ 640,686 | $ 577,889 | ||||||
Percent of total | 86.81% | 85.34% | ||||||
Commercial and industrial Other loans [Member] | ||||||||
Accounts, Notes, Loans and Financing Receivable [Line Items] | ||||||||
Total loans | $ 88,206 | $ 90,678 | $ 80,154 | |||||
Percent of total | 11.95% | 13.39% | ||||||
Loans to individuals Other loans [Member] | ||||||||
Accounts, Notes, Loans and Financing Receivable [Line Items] | ||||||||
Total loans | $ 10,365 | $ 9,756 | ||||||
Percent of total | 1.40% | 1.44% | ||||||
Overdrafts Other loans [Member] | ||||||||
Accounts, Notes, Loans and Financing Receivable [Line Items] | ||||||||
Total loans | $ 57 | $ 71 | ||||||
Percent of total | 0.01% | 0.01% | ||||||
Total other loans [Member] | ||||||||
Accounts, Notes, Loans and Financing Receivable [Line Items] | ||||||||
Total loans | $ 98,628 | $ 100,505 | ||||||
Percent of total | 13.36% | 14.84% | ||||||
|
LOANS (Details 1) - USD ($) $ in Thousands |
Jun. 30, 2017 |
Dec. 31, 2016 |
Jun. 30, 2016 |
|||
---|---|---|---|---|---|---|
Financing Receivable, Recorded Investment, Past Due [Line Items] | ||||||
Non-Accrual Loans | $ 2,943 | $ 5,805 | ||||
Total Past | 3,462 | 8,798 | ||||
Current | 735,852 | 669,596 | ||||
Deferred loan (fees) cost, net | (1,293) | (1,199) | ||||
Total Loans | 738,021 | 677,195 | [1] | $ 633,249 | ||
Total Loans [Member] | ||||||
Financing Receivable, Recorded Investment, Past Due [Line Items] | ||||||
Non-Accrual Loans | 0 | 0 | ||||
Total Past | 0 | 0 | ||||
Current | 0 | 0 | ||||
Deferred loan (fees) cost, net | (1,293) | (1,199) | ||||
Total Loans [Member] | Financing Receivables, 30 to 59 Days Past Due [Member] | ||||||
Financing Receivable, Recorded Investment, Past Due [Line Items] | ||||||
Total Past | 519 | 2,993 | ||||
Deferred loan (fees) cost, net | 0 | 0 | ||||
Commercial and Industrial [Member] | ||||||
Financing Receivable, Recorded Investment, Past Due [Line Items] | ||||||
Total Loans | 88,206 | 90,678 | 80,154 | |||
Commercial and Industrial [Member] | Total Loans [Member] | ||||||
Financing Receivable, Recorded Investment, Past Due [Line Items] | ||||||
Non-Accrual Loans | 70 | 73 | ||||
Total Past | 89 | 1,532 | ||||
Current | 88,117 | 89,146 | ||||
Total Loans | 88,206 | 90,678 | ||||
Commercial and Industrial [Member] | Total Loans [Member] | Financing Receivables, 30 to 59 Days Past Due [Member] | ||||||
Financing Receivable, Recorded Investment, Past Due [Line Items] | ||||||
Total Past | 19 | 1,459 | ||||
Construction Loans Real Estate [Member] | ||||||
Financing Receivable, Recorded Investment, Past Due [Line Items] | ||||||
Total Loans | 126,265 | 100,911 | 113,279 | |||
Construction Loans Real Estate [Member] | Total Loans [Member] | ||||||
Financing Receivable, Recorded Investment, Past Due [Line Items] | ||||||
Non-Accrual Loans | 91 | 151 | ||||
Total Past | 298 | 372 | ||||
Current | 125,967 | 100,539 | ||||
Total Loans | 126,265 | 100,911 | ||||
Construction Loans Real Estate [Member] | Total Loans [Member] | Financing Receivables, 30 to 59 Days Past Due [Member] | ||||||
Financing Receivable, Recorded Investment, Past Due [Line Items] | ||||||
Total Past | 207 | 221 | ||||
Multi Family Residential Real Estate [Member] | ||||||
Financing Receivable, Recorded Investment, Past Due [Line Items] | ||||||
Total Loans | 71,066 | 56,119 | 46,295 | |||
Multi Family Residential Real Estate [Member] | Total Loans [Member] | ||||||
Financing Receivable, Recorded Investment, Past Due [Line Items] | ||||||
Non-Accrual Loans | 48 | 346 | ||||
Total Past | 48 | 392 | ||||
Current | 71,018 | 55,727 | ||||
Total Loans | 71,066 | 56,119 | ||||
Multi Family Residential Real Estate [Member] | Total Loans [Member] | Financing Receivables, 30 to 59 Days Past Due [Member] | ||||||
Financing Receivable, Recorded Investment, Past Due [Line Items] | ||||||
Total Past | 0 | 46 | ||||
Commercial Real Estate [Member] | ||||||
Financing Receivable, Recorded Investment, Past Due [Line Items] | ||||||
Total Loans | 297,406 | 281,723 | 247,922 | |||
Commercial Real Estate [Member] | Total Loans [Member] | ||||||
Financing Receivable, Recorded Investment, Past Due [Line Items] | ||||||
Non-Accrual Loans | 1,442 | 3,807 | ||||
Total Past | 1,560 | 4,396 | ||||
Current | 295,846 | 277,327 | ||||
Total Loans | 297,406 | 281,723 | ||||
Commercial Real Estate [Member] | Total Loans [Member] | Financing Receivables, 30 to 59 Days Past Due [Member] | ||||||
Financing Receivable, Recorded Investment, Past Due [Line Items] | ||||||
Total Past | 118 | 589 | ||||
Loans to Individuals and Overdrafts [Member] | ||||||
Financing Receivable, Recorded Investment, Past Due [Line Items] | ||||||
Total Loans | 10,422 | 9,827 | 8,554 | |||
Loans to Individuals and Overdrafts [Member] | Total Loans [Member] | ||||||
Financing Receivable, Recorded Investment, Past Due [Line Items] | ||||||
Non-Accrual Loans | 6 | 46 | ||||
Total Past | 38 | 69 | ||||
Current | 10,384 | 9,758 | ||||
Total Loans | 10,422 | 9,827 | ||||
Loans to Individuals and Overdrafts [Member] | Total Loans [Member] | Financing Receivables, 30 to 59 Days Past Due [Member] | ||||||
Financing Receivable, Recorded Investment, Past Due [Line Items] | ||||||
Total Past | 32 | 23 | ||||
Family Residential Real Estate 1 to 4 [Member] | ||||||
Financing Receivable, Recorded Investment, Past Due [Line Items] | ||||||
Total Loans | 103,644 | 97,978 | 94,990 | |||
Family Residential Real Estate 1 to 4 [Member] | Total Loans [Member] | ||||||
Financing Receivable, Recorded Investment, Past Due [Line Items] | ||||||
Non-Accrual Loans | 921 | 602 | ||||
Total Past | 947 | 1,233 | ||||
Current | 102,697 | 96,745 | ||||
Total Loans | 103,644 | 97,978 | ||||
Family Residential Real Estate 1 to 4 [Member] | Total Loans [Member] | Financing Receivables, 30 to 59 Days Past Due [Member] | ||||||
Financing Receivable, Recorded Investment, Past Due [Line Items] | ||||||
Total Past | 26 | 631 | ||||
Home Equity Line of Credit [Member] | ||||||
Financing Receivable, Recorded Investment, Past Due [Line Items] | ||||||
Total Loans | 42,305 | 41,158 | $ 42,055 | |||
Home Equity Line of Credit [Member] | Total Loans [Member] | ||||||
Financing Receivable, Recorded Investment, Past Due [Line Items] | ||||||
Non-Accrual Loans | 365 | 780 | ||||
Total Past | 482 | 804 | ||||
Current | 41,823 | 40,354 | ||||
Total Loans | 42,305 | 41,158 | ||||
Home Equity Line of Credit [Member] | Total Loans [Member] | Financing Receivables, 30 to 59 Days Past Due [Member] | ||||||
Financing Receivable, Recorded Investment, Past Due [Line Items] | ||||||
Total Past | $ 117 | $ 24 | ||||
|
LOANS (Details 2) - USD ($) $ in Thousands |
3 Months Ended | 6 Months Ended | |||
---|---|---|---|---|---|
Jun. 30, 2017 |
Jun. 30, 2016 |
Jun. 30, 2017 |
Jun. 30, 2016 |
Dec. 31, 2016 |
|
Financing Receivable, Impaired [Line Items] | |||||
With no related allowance, Recorded Investment | $ 6,809 | $ 6,809 | $ 8,167 | ||
With no related allowance, Contractual Unpaid Principal Balance | 8,496 | 8,496 | 10,512 | ||
With no related allowance, Average Recorded Investment | 6,928 | $ 6,614 | 7,488 | $ 7,892 | |
With no related allowance, Interest Income Recognized on Impaired Loans | 108 | 82 | 213 | 164 | |
With an related allowance, Recorded Investment | 963 | 963 | 2,827 | ||
With an related allowance, Contractual Unpaid Principal Balance | 1,025 | 1,025 | 3,237 | ||
Related Allowance | 28 | 28 | 117 | ||
With an related allowance, Average Recorded Investment | 1,747 | 3,779 | 1,895 | 2,506 | |
With an related allowance, Interest Income Recognized on Impaired Loans | 15 | 6 | 31 | 27 | |
Recorded Investment Total | 7,772 | 7,772 | 10,994 | ||
Contractual Unpaid Principal Balance Total | 9,521 | 9,521 | 13,749 | ||
Average Recorded Investment Total | 8,675 | 10,393 | 9,383 | 10,398 | |
Interest Income Recognized on impaired Loans Total | 123 | 88 | 244 | 191 | |
Residential Real Estate [Member] | |||||
Financing Receivable, Impaired [Line Items] | |||||
Related Allowance | 15 | 15 | 36 | ||
Recorded Investment Total | 2,203 | 2,203 | 2,371 | ||
Contractual Unpaid Principal Balance Total | 2,606 | 2,606 | 2,987 | ||
Average Recorded Investment Total | 1,994 | 2,270 | 2,286 | 2,617 | |
Interest Income Recognized on impaired Loans Total | 37 | 48 | 66 | 78 | |
Commercial Loan [Member] | |||||
Financing Receivable, Impaired [Line Items] | |||||
Related Allowance | 13 | 13 | 80 | ||
Recorded Investment Total | 5,569 | 5,569 | 7,483 | ||
Contractual Unpaid Principal Balance Total | 6,915 | 6,915 | 9,617 | ||
Average Recorded Investment Total | 6,681 | 8,123 | 7,097 | 7,779 | |
Interest Income Recognized on impaired Loans Total | 86 | 40 | 178 | 113 | |
Consumer Loan [Member] | |||||
Financing Receivable, Impaired [Line Items] | |||||
Related Allowance | 0 | 0 | 1 | ||
Recorded Investment Total | 0 | 0 | 1,140 | ||
Contractual Unpaid Principal Balance Total | 0 | 0 | 1,145 | ||
Average Recorded Investment Total | 0 | 0 | 0 | 2 | |
Interest Income Recognized on impaired Loans Total | 0 | 0 | 0 | 0 | |
Commercial and Industrial [Member] | |||||
Financing Receivable, Impaired [Line Items] | |||||
With no related allowance, Recorded Investment | 1,053 | 1,053 | 46 | ||
With no related allowance, Contractual Unpaid Principal Balance | 1,063 | 1,063 | 46 | ||
With no related allowance, Average Recorded Investment | 1,077 | 469 | 1,119 | 237 | |
With no related allowance, Interest Income Recognized on Impaired Loans | 21 | 2 | 40 | 8 | |
With an related allowance, Recorded Investment | 0 | 0 | 0 | ||
With an related allowance, Contractual Unpaid Principal Balance | 0 | 0 | 0 | ||
Related Allowance | 0 | 0 | 0 | ||
With an related allowance, Average Recorded Investment | 0 | 35 | 1 | 39 | |
With an related allowance, Interest Income Recognized on Impaired Loans | 0 | 0 | 0 | 1 | |
Construction Loans Real Estate [Member] | |||||
Financing Receivable, Impaired [Line Items] | |||||
With no related allowance, Recorded Investment | 164 | 164 | 231 | ||
With no related allowance, Contractual Unpaid Principal Balance | 251 | 251 | 318 | ||
With no related allowance, Average Recorded Investment | 169 | 558 | 198 | 563 | |
With no related allowance, Interest Income Recognized on Impaired Loans | 1 | 2 | 5 | 6 | |
With an related allowance, Recorded Investment | 0 | 0 | 0 | ||
With an related allowance, Contractual Unpaid Principal Balance | 0 | 0 | 0 | ||
Related Allowance | 0 | 0 | 0 | ||
With an related allowance, Average Recorded Investment | 0 | 0 | 0 | 0 | |
With an related allowance, Interest Income Recognized on Impaired Loans | 0 | 0 | 0 | 0 | |
Commercial Real Estate [Member] | |||||
Financing Receivable, Impaired [Line Items] | |||||
With no related allowance, Recorded Investment | 3,674 | 3,674 | 4,364 | ||
With no related allowance, Contractual Unpaid Principal Balance | 4,867 | 4,867 | 5,983 | ||
With no related allowance, Average Recorded Investment | 3,958 | 3,304 | 4,019 | 4,378 | |
With no related allowance, Interest Income Recognized on Impaired Loans | 54 | 29 | 113 | 72 | |
With an related allowance, Recorded Investment | 630 | 630 | 2,496 | ||
With an related allowance, Contractual Unpaid Principal Balance | 686 | 686 | 2,905 | ||
Related Allowance | 12 | 12 | 80 | ||
With an related allowance, Average Recorded Investment | 1,429 | 3,389 | 1,563 | 2,165 | |
With an related allowance, Interest Income Recognized on Impaired Loans | 10 | 4 | 20 | 18 | |
Loans to Individuals and Overdrafts [Member] | |||||
Financing Receivable, Impaired [Line Items] | |||||
With no related allowance, Recorded Investment | 0 | 0 | 1,139 | ||
With no related allowance, Contractual Unpaid Principal Balance | 0 | 0 | 1,144 | ||
With no related allowance, Average Recorded Investment | 0 | 0 | 0 | 0 | |
With no related allowance, Interest Income Recognized on Impaired Loans | 0 | 0 | 0 | 0 | |
With an related allowance, Recorded Investment | 0 | 0 | 1 | ||
With an related allowance, Contractual Unpaid Principal Balance | 0 | 0 | 1 | ||
Related Allowance | 0 | 0 | 1 | ||
With an related allowance, Average Recorded Investment | 0 | 0 | 0 | 2 | |
With an related allowance, Interest Income Recognized on Impaired Loans | 0 | 0 | 0 | 0 | |
Multi Family Residential Real Estate [Member] | |||||
Financing Receivable, Impaired [Line Items] | |||||
With no related allowance, Recorded Investment | 48 | 48 | 346 | ||
With no related allowance, Contractual Unpaid Principal Balance | 48 | 48 | 365 | ||
With no related allowance, Average Recorded Investment | 48 | 368 | 197 | 397 | |
With no related allowance, Interest Income Recognized on Impaired Loans | 0 | 3 | 0 | 8 | |
With an related allowance, Recorded Investment | 0 | 0 | 0 | ||
With an related allowance, Contractual Unpaid Principal Balance | 0 | 0 | 0 | ||
Related Allowance | 0 | 0 | 0 | ||
With an related allowance, Average Recorded Investment | 0 | 0 | 0 | 0 | |
With an related allowance, Interest Income Recognized on Impaired Loans | 0 | 0 | 0 | 0 | |
Home Equity Line of Credit [Member] | |||||
Financing Receivable, Impaired [Line Items] | |||||
With no related allowance, Recorded Investment | 648 | 648 | 1,041 | ||
With no related allowance, Contractual Unpaid Principal Balance | 832 | 832 | 1,378 | ||
With no related allowance, Average Recorded Investment | 654 | 658 | 844 | 661 | |
With no related allowance, Interest Income Recognized on Impaired Loans | 12 | 10 | 22 | 18 | |
With an related allowance, Recorded Investment | 33 | 33 | 34 | ||
With an related allowance, Contractual Unpaid Principal Balance | 35 | 35 | 35 | ||
Related Allowance | 0 | 0 | 19 | ||
With an related allowance, Average Recorded Investment | 16 | 41 | 33 | 16 | |
With an related allowance, Interest Income Recognized on Impaired Loans | 0 | 0 | 0 | 0 | |
Family Residential Real Estate 1 to 4 [Member] | |||||
Financing Receivable, Impaired [Line Items] | |||||
With no related allowance, Recorded Investment | 1,222 | 1,222 | 1,000 | ||
With no related allowance, Contractual Unpaid Principal Balance | 1,435 | 1,435 | 1,278 | ||
With no related allowance, Average Recorded Investment | 1,022 | 1,257 | 1,111 | 1,656 | |
With no related allowance, Interest Income Recognized on Impaired Loans | 20 | 36 | 33 | 52 | |
With an related allowance, Recorded Investment | 300 | 300 | 296 | ||
With an related allowance, Contractual Unpaid Principal Balance | 304 | 304 | 296 | ||
Related Allowance | 16 | 16 | $ 17 | ||
With an related allowance, Average Recorded Investment | 302 | 314 | 298 | 284 | |
With an related allowance, Interest Income Recognized on Impaired Loans | $ 5 | $ 2 | $ 11 | $ 8 |
LOANS (Details 3) $ in Thousands |
3 Months Ended | 6 Months Ended | 12 Months Ended | |||
---|---|---|---|---|---|---|
Jun. 30, 2017
USD ($)
|
Jun. 30, 2016
USD ($)
|
Jun. 30, 2017
USD ($)
|
Jun. 30, 2016
USD ($)
|
Jun. 30, 2017
USD ($)
Number
|
Jun. 30, 2016
USD ($)
Number
|
|
Financing Receivable, Modifications [Line Items] | ||||||
Number of loans | 2 | 4 | 2 | 5 | 3 | 6 |
Pre-Modification Outstanding Recorded Investment | $ 61 | $ 304 | $ 61 | $ 349 | ||
Post-Modification Outstanding Recorded Investment | $ 61 | $ 213 | $ 61 | $ 259 | ||
Recorded investment | $ 1,004 | $ 629 | ||||
Commercial and Inustrial Extended Payment Term [Member] | ||||||
Financing Receivable, Modifications [Line Items] | ||||||
Number of loans | Number | 2 | 0 | ||||
Recorded investment | $ 927 | $ 0 | ||||
Commercial Real Estate Extended Payment Term [Member] | ||||||
Financing Receivable, Modifications [Line Items] | ||||||
Number of loans | Number | 0 | 3 | ||||
Recorded investment | $ 0 | $ 206 | ||||
Residential 1 to 4 Family Extended Payment Term [Member] | ||||||
Financing Receivable, Modifications [Line Items] | ||||||
Number of loans | Number | 1 | 1 | ||||
Recorded investment | $ 77 | $ 49 | ||||
Multi Family Residential Extended Payment Term [Member] | ||||||
Financing Receivable, Modifications [Line Items] | ||||||
Number of loans | Number | 0 | 1 | ||||
Recorded investment | $ 0 | $ 370 | ||||
Commercial and Industrial Other [Member] | ||||||
Financing Receivable, Modifications [Line Items] | ||||||
Number of loans | 1 | 2 | 1 | 3 | ||
Pre-Modification Outstanding Recorded Investment | $ 44 | $ 251 | $ 44 | $ 296 | ||
Post-Modification Outstanding Recorded Investment | $ 44 | $ 160 | $ 44 | $ 206 | ||
Residential 1 to 4 Family Other [Member] | ||||||
Financing Receivable, Modifications [Line Items] | ||||||
Number of loans | 1 | 1 | 1 | 1 | ||
Pre-Modification Outstanding Recorded Investment | $ 17 | $ 49 | $ 17 | $ 49 | ||
Post-Modification Outstanding Recorded Investment | $ 17 | $ 49 | $ 17 | $ 49 | ||
Loans To Individuals [Member] | ||||||
Financing Receivable, Modifications [Line Items] | ||||||
Number of loans | 1 | 1 | 0 | 1 | ||
Pre-Modification Outstanding Recorded Investment | $ 4 | $ 4 | ||||
Post-Modification Outstanding Recorded Investment | $ 4 | $ 4 | ||||
Recorded investment | $ 0 | $ 4 |
LOANS (Details 4) - USD ($) $ in Thousands |
Jun. 30, 2017 |
Dec. 31, 2016 |
Jun. 30, 2016 |
|||
---|---|---|---|---|---|---|
Financing Receivable, Recorded Investment [Line Items] | ||||||
Loans | $ 738,021 | $ 677,195 | [1] | $ 633,249 | ||
Commercial and Industrial [Member] | ||||||
Financing Receivable, Recorded Investment [Line Items] | ||||||
Loans | 88,206 | 90,678 | 80,154 | |||
Commercial and Industrial [Member] | Total Loans [Member] | ||||||
Financing Receivable, Recorded Investment [Line Items] | ||||||
Loans | 88,206 | 90,678 | ||||
Commercial and Industrial [Member] | Superior [Member] | Total Loans [Member] | ||||||
Financing Receivable, Recorded Investment [Line Items] | ||||||
Loans | 402 | 435 | ||||
Commercial and Industrial [Member] | Very Good [Member] | Total Loans [Member] | ||||||
Financing Receivable, Recorded Investment [Line Items] | ||||||
Loans | 815 | 326 | ||||
Commercial and Industrial [Member] | Good [Member] | Total Loans [Member] | ||||||
Financing Receivable, Recorded Investment [Line Items] | ||||||
Loans | 10,680 | 13,632 | ||||
Commercial and Industrial [Member] | Acceptable [Member] | Total Loans [Member] | ||||||
Financing Receivable, Recorded Investment [Line Items] | ||||||
Loans | 31,509 | 35,720 | ||||
Commercial and Industrial [Member] | Acceptable With Care [Member] | Total Loans [Member] | ||||||
Financing Receivable, Recorded Investment [Line Items] | ||||||
Loans | 43,124 | 37,351 | ||||
Commercial and Industrial [Member] | Special Mention [Member] | Total Loans [Member] | ||||||
Financing Receivable, Recorded Investment [Line Items] | ||||||
Loans | 1,444 | 2,905 | ||||
Commercial and Industrial [Member] | Substandard [Member] | Total Loans [Member] | ||||||
Financing Receivable, Recorded Investment [Line Items] | ||||||
Loans | 232 | 309 | ||||
Commercial and Industrial [Member] | Doubtful [Member] | Total Loans [Member] | ||||||
Financing Receivable, Recorded Investment [Line Items] | ||||||
Loans | 0 | 0 | ||||
Commercial and Industrial [Member] | Loss [Member] | Total Loans [Member] | ||||||
Financing Receivable, Recorded Investment [Line Items] | ||||||
Loans | 0 | 0 | ||||
Construction Loans [Member] | ||||||
Financing Receivable, Recorded Investment [Line Items] | ||||||
Loans | 126,265 | 100,911 | ||||
Construction Loans [Member] | Superior [Member] | Total Loans [Member] | ||||||
Financing Receivable, Recorded Investment [Line Items] | ||||||
Loans | 0 | 0 | ||||
Construction Loans [Member] | Very Good [Member] | Total Loans [Member] | ||||||
Financing Receivable, Recorded Investment [Line Items] | ||||||
Loans | 260 | 245 | ||||
Construction Loans [Member] | Good [Member] | Total Loans [Member] | ||||||
Financing Receivable, Recorded Investment [Line Items] | ||||||
Loans | 6,089 | 4,506 | ||||
Construction Loans [Member] | Acceptable [Member] | Total Loans [Member] | ||||||
Financing Receivable, Recorded Investment [Line Items] | ||||||
Loans | 18,517 | 12,922 | ||||
Construction Loans [Member] | Acceptable With Care [Member] | Total Loans [Member] | ||||||
Financing Receivable, Recorded Investment [Line Items] | ||||||
Loans | 100,869 | 82,771 | ||||
Construction Loans [Member] | Special Mention [Member] | Total Loans [Member] | ||||||
Financing Receivable, Recorded Investment [Line Items] | ||||||
Loans | 302 | 173 | ||||
Construction Loans [Member] | Substandard [Member] | Total Loans [Member] | ||||||
Financing Receivable, Recorded Investment [Line Items] | ||||||
Loans | 228 | 294 | ||||
Construction Loans [Member] | Doubtful [Member] | Total Loans [Member] | ||||||
Financing Receivable, Recorded Investment [Line Items] | ||||||
Loans | 0 | 0 | ||||
Construction Loans [Member] | Loss [Member] | Total Loans [Member] | ||||||
Financing Receivable, Recorded Investment [Line Items] | ||||||
Loans | 0 | 0 | ||||
Commercial Real Estate [Member] | ||||||
Financing Receivable, Recorded Investment [Line Items] | ||||||
Loans | 297,406 | 281,723 | 247,922 | |||
Commercial Real Estate [Member] | Total Loans [Member] | ||||||
Financing Receivable, Recorded Investment [Line Items] | ||||||
Loans | 297,406 | 281,723 | ||||
Commercial Real Estate [Member] | Superior [Member] | Total Loans [Member] | ||||||
Financing Receivable, Recorded Investment [Line Items] | ||||||
Loans | 0 | 0 | ||||
Commercial Real Estate [Member] | Very Good [Member] | Total Loans [Member] | ||||||
Financing Receivable, Recorded Investment [Line Items] | ||||||
Loans | 440 | 460 | ||||
Commercial Real Estate [Member] | Good [Member] | Total Loans [Member] | ||||||
Financing Receivable, Recorded Investment [Line Items] | ||||||
Loans | 38,673 | 36,501 | ||||
Commercial Real Estate [Member] | Acceptable [Member] | Total Loans [Member] | ||||||
Financing Receivable, Recorded Investment [Line Items] | ||||||
Loans | 168,342 | 152,608 | ||||
Commercial Real Estate [Member] | Acceptable With Care [Member] | Total Loans [Member] | ||||||
Financing Receivable, Recorded Investment [Line Items] | ||||||
Loans | 84,288 | 81,231 | ||||
Commercial Real Estate [Member] | Special Mention [Member] | Total Loans [Member] | ||||||
Financing Receivable, Recorded Investment [Line Items] | ||||||
Loans | 2,175 | 4,868 | ||||
Commercial Real Estate [Member] | Substandard [Member] | Total Loans [Member] | ||||||
Financing Receivable, Recorded Investment [Line Items] | ||||||
Loans | 3,488 | 6,055 | ||||
Commercial Real Estate [Member] | Doubtful [Member] | Total Loans [Member] | ||||||
Financing Receivable, Recorded Investment [Line Items] | ||||||
Loans | 0 | 0 | ||||
Commercial Real Estate [Member] | Loss [Member] | Total Loans [Member] | ||||||
Financing Receivable, Recorded Investment [Line Items] | ||||||
Loans | 0 | 0 | ||||
Multi Family Residential Real Estate [Member] | ||||||
Financing Receivable, Recorded Investment [Line Items] | ||||||
Loans | 71,066 | 56,119 | 46,295 | |||
Multi Family Residential Real Estate [Member] | Total Loans [Member] | ||||||
Financing Receivable, Recorded Investment [Line Items] | ||||||
Loans | 71,066 | 56,119 | ||||
Multi Family Residential Real Estate [Member] | Superior [Member] | Total Loans [Member] | ||||||
Financing Receivable, Recorded Investment [Line Items] | ||||||
Loans | 0 | 0 | ||||
Multi Family Residential Real Estate [Member] | Very Good [Member] | Total Loans [Member] | ||||||
Financing Receivable, Recorded Investment [Line Items] | ||||||
Loans | 0 | 0 | ||||
Multi Family Residential Real Estate [Member] | Good [Member] | Total Loans [Member] | ||||||
Financing Receivable, Recorded Investment [Line Items] | ||||||
Loans | 10,732 | 12,139 | ||||
Multi Family Residential Real Estate [Member] | Acceptable [Member] | Total Loans [Member] | ||||||
Financing Receivable, Recorded Investment [Line Items] | ||||||
Loans | 40,469 | 29,873 | ||||
Multi Family Residential Real Estate [Member] | Acceptable With Care [Member] | Total Loans [Member] | ||||||
Financing Receivable, Recorded Investment [Line Items] | ||||||
Loans | 19,578 | 13,467 | ||||
Multi Family Residential Real Estate [Member] | Special Mention [Member] | Total Loans [Member] | ||||||
Financing Receivable, Recorded Investment [Line Items] | ||||||
Loans | 0 | 0 | ||||
Multi Family Residential Real Estate [Member] | Substandard [Member] | Total Loans [Member] | ||||||
Financing Receivable, Recorded Investment [Line Items] | ||||||
Loans | 287 | 640 | ||||
Multi Family Residential Real Estate [Member] | Doubtful [Member] | Total Loans [Member] | ||||||
Financing Receivable, Recorded Investment [Line Items] | ||||||
Loans | 0 | 0 | ||||
Multi Family Residential Real Estate [Member] | Loss [Member] | Total Loans [Member] | ||||||
Financing Receivable, Recorded Investment [Line Items] | ||||||
Loans | 0 | 0 | ||||
Loans to Individuals and Overdrafts [Member] | ||||||
Financing Receivable, Recorded Investment [Line Items] | ||||||
Loans | 10,422 | 9,827 | 8,554 | |||
Loans to Individuals and Overdrafts [Member] | Total Loans [Member] | ||||||
Financing Receivable, Recorded Investment [Line Items] | ||||||
Loans | 10,422 | 9,827 | ||||
Loans to Individuals and Overdrafts [Member] | Pass [Member] | Total Loans [Member] | ||||||
Financing Receivable, Recorded Investment [Line Items] | ||||||
Loans | 10,411 | 9,820 | ||||
Loans to Individuals and Overdrafts [Member] | Non-Pass [Member] | Total Loans [Member] | ||||||
Financing Receivable, Recorded Investment [Line Items] | ||||||
Loans | 11 | 7 | ||||
Family Residential Real Estate 1 to 4 [Member] | ||||||
Financing Receivable, Recorded Investment [Line Items] | ||||||
Loans | 103,644 | 97,978 | 94,990 | |||
Family Residential Real Estate 1 to 4 [Member] | Total Loans [Member] | ||||||
Financing Receivable, Recorded Investment [Line Items] | ||||||
Loans | 103,644 | 97,978 | ||||
Family Residential Real Estate 1 to 4 [Member] | Pass [Member] | Total Loans [Member] | ||||||
Financing Receivable, Recorded Investment [Line Items] | ||||||
Loans | 97,834 | 92,115 | ||||
Family Residential Real Estate 1 to 4 [Member] | Special Mention [Member] | Total Loans [Member] | ||||||
Financing Receivable, Recorded Investment [Line Items] | ||||||
Loans | 2,934 | 3,015 | ||||
Family Residential Real Estate 1 to 4 [Member] | Substandard [Member] | Total Loans [Member] | ||||||
Financing Receivable, Recorded Investment [Line Items] | ||||||
Loans | 2,876 | 2,848 | ||||
Home Equity Line Of Credit [Member] | ||||||
Financing Receivable, Recorded Investment [Line Items] | ||||||
Loans | 42,305 | 41,158 | $ 42,055 | |||
Home Equity Line Of Credit [Member] | Total Loans [Member] | ||||||
Financing Receivable, Recorded Investment [Line Items] | ||||||
Loans | 42,305 | 41,158 | ||||
Home Equity Line Of Credit [Member] | Pass [Member] | Total Loans [Member] | ||||||
Financing Receivable, Recorded Investment [Line Items] | ||||||
Loans | 40,717 | 39,554 | ||||
Home Equity Line Of Credit [Member] | Special Mention [Member] | Total Loans [Member] | ||||||
Financing Receivable, Recorded Investment [Line Items] | ||||||
Loans | 485 | 439 | ||||
Home Equity Line Of Credit [Member] | Substandard [Member] | Total Loans [Member] | ||||||
Financing Receivable, Recorded Investment [Line Items] | ||||||
Loans | $ 1,103 | $ 1,165 | ||||
|
LOANS (Details 5) - USD ($) $ in Thousands |
3 Months Ended | 6 Months Ended |
---|---|---|
Jun. 30, 2017 |
Jun. 30, 2017 |
|
Schedule Of Certain Loans Acquired In Transfer Accounted For As Debt Securities Accretable Yield [Line Items] | ||
Accretable yield, beginning of period | $ 2,465 | $ 2,626 |
Accretion | (260) | (520) |
Reclassification from (to) nonaccretable difference | 72 | 79 |
Other changes, net | 3 | 95 |
Accretable yield, end of period | $ 2,280 | $ 2,280 |
LOANS (Details 6) - USD ($) $ in Thousands |
3 Months Ended | 6 Months Ended | |||||||
---|---|---|---|---|---|---|---|---|---|
Jun. 30, 2017 |
Jun. 30, 2016 |
Jun. 30, 2017 |
Jun. 30, 2016 |
Dec. 31, 2016 |
|||||
Financing Receivable, Allowance for Credit Losses [Line Items] | |||||||||
Allowance for loan losses, Balance, beginning of period | $ 9 | $ 8,411 | [1] | ||||||
Provision for loan losses | 16 | ||||||||
Loans charged-off | 0 | ||||||||
Recoveries | 0 | ||||||||
Allowance for loan losses, Balance, end of period | $ 8,488 | 25 | 8,488 | $ 25 | |||||
Ending Balance: individually evaluated for impairment | 28 | 115 | 28 | 115 | |||||
Ending Balance: collectively evaluated for impairment | 8,460 | 7,577 | 8,460 | 7,577 | |||||
Loans | |||||||||
Ending balance: collectively evaluated for impairment | 731,542 | 622,922 | 731,542 | 622,922 | |||||
Ending balance: individually evaluated for impairment | 7,772 | 10,327 | 7,772 | 10,327 | |||||
Ending balance | 738,021 | 633,249 | 738,021 | 633,249 | $ 677,195 | [1] | |||
Excluding Purchase Credit Impairment Loans [Member] | |||||||||
Financing Receivable, Allowance for Credit Losses [Line Items] | |||||||||
Allowance for loan losses, Balance, beginning of period | 7,711 | 7,518 | 8,362 | 7,012 | |||||
Provision for loan losses | 1,072 | 142 | 616 | 494 | |||||
Loans charged-off | (442) | (236) | (779) | (247) | |||||
Recoveries | 119 | 243 | 261 | 408 | |||||
Allowance for loan losses, Balance, end of period | 8,460 | 7,667 | 8,460 | 7,667 | |||||
Purchase Credit Impairment Loans [Member] | |||||||||
Financing Receivable, Allowance for Credit Losses [Line Items] | |||||||||
Allowance for loan losses, Balance, beginning of period | 311 | 49 | 9 | ||||||
Provision for loan losses | 11 | 273 | 16 | ||||||
Loans charged-off | (294) | (294) | 0 | ||||||
Recoveries | 0 | 0 | 0 | ||||||
Allowance for loan losses, Balance, end of period | 28 | 25 | 28 | 25 | |||||
Total Loans [Member] | |||||||||
Financing Receivable, Allowance for Credit Losses [Line Items] | |||||||||
Allowance for loan losses, Balance, beginning of period | 8,022 | 7,527 | 8,411 | 7,021 | |||||
Provision for loan losses | 1,083 | 158 | 889 | 510 | |||||
Loans charged-off | (736) | (236) | (1,073) | (247) | |||||
Recoveries | 119 | 243 | 261 | 408 | |||||
Allowance for loan losses, Balance, end of period | 8,488 | 7,692 | 8,488 | 7,692 | |||||
Commercial and Industrial [Member] | |||||||||
Financing Receivable, Allowance for Credit Losses [Line Items] | |||||||||
Ending Balance: individually evaluated for impairment | 0 | 7 | 0 | 7 | |||||
Ending Balance: collectively evaluated for impairment | 895 | 1,095 | 895 | 1,095 | |||||
Loans | |||||||||
Ending balance: collectively evaluated for impairment | 87,153 | 79,719 | 87,153 | 79,719 | |||||
Ending balance: individually evaluated for impairment | 1,053 | 435 | 1,053 | 435 | |||||
Ending balance | 88,206 | 80,154 | 88,206 | 80,154 | 90,678 | ||||
Commercial and Industrial [Member] | Excluding Purchase Credit Impairment Loans [Member] | |||||||||
Financing Receivable, Allowance for Credit Losses [Line Items] | |||||||||
Allowance for loan losses, Balance, beginning of period | 958 | 1,055 | 1,211 | 922 | |||||
Provision for loan losses | (119) | 66 | (466) | 198 | |||||
Loans charged-off | (35) | (40) | (37) | (41) | |||||
Recoveries | 91 | 5 | 187 | 7 | |||||
Allowance for loan losses, Balance, end of period | 895 | 1,086 | 895 | 1,086 | |||||
Commercial and Industrial [Member] | Purchase Credit Impairment Loans [Member] | |||||||||
Financing Receivable, Allowance for Credit Losses [Line Items] | |||||||||
Allowance for loan losses, Balance, beginning of period | 5 | 0 | 37 | 0 | |||||
Provision for loan losses | (5) | 16 | (37) | 16 | |||||
Loans charged-off | 0 | 0 | 0 | 0 | |||||
Recoveries | 0 | 0 | 0 | 0 | |||||
Allowance for loan losses, Balance, end of period | 0 | 16 | 0 | 16 | |||||
Commercial and Industrial [Member] | Total Loans [Member] | |||||||||
Financing Receivable, Allowance for Credit Losses [Line Items] | |||||||||
Allowance for loan losses, Balance, beginning of period | 963 | 1,055 | 1,248 | 922 | |||||
Provision for loan losses | (124) | 82 | (503) | 214 | |||||
Loans charged-off | (35) | (40) | (37) | (41) | |||||
Recoveries | 91 | 5 | 187 | 7 | |||||
Allowance for loan losses, Balance, end of period | 895 | 1,102 | 895 | 1,102 | |||||
Loans | |||||||||
Ending balance | 88,206 | 88,206 | 90,678 | ||||||
Construction Loans Real Estate [Member] | |||||||||
Financing Receivable, Allowance for Credit Losses [Line Items] | |||||||||
Provision for loan losses | 0 | ||||||||
Loans charged-off | 0 | ||||||||
Recoveries | 0 | ||||||||
Allowance for loan losses, Balance, end of period | 0 | 0 | |||||||
Ending Balance: individually evaluated for impairment | 0 | 0 | 0 | 0 | |||||
Ending Balance: collectively evaluated for impairment | 1,292 | 1,511 | 1,292 | 1,511 | |||||
Loans | |||||||||
Ending balance: collectively evaluated for impairment | 126,101 | 112,768 | 126,101 | 112,768 | |||||
Ending balance: individually evaluated for impairment | 164 | 511 | 164 | 511 | |||||
Ending balance | 126,265 | 113,279 | 126,265 | 113,279 | 100,911 | ||||
Construction Loans Real Estate [Member] | Excluding Purchase Credit Impairment Loans [Member] | |||||||||
Financing Receivable, Allowance for Credit Losses [Line Items] | |||||||||
Allowance for loan losses, Balance, beginning of period | 1,177 | 1,401 | 1,301 | 1,386 | |||||
Provision for loan losses | 111 | 107 | (18) | 116 | |||||
Loans charged-off | 0 | (1) | 0 | (2) | |||||
Recoveries | 4 | 4 | 9 | 11 | |||||
Allowance for loan losses, Balance, end of period | 1,292 | 1,511 | 1,292 | 1,511 | |||||
Construction Loans Real Estate [Member] | Purchase Credit Impairment Loans [Member] | |||||||||
Financing Receivable, Allowance for Credit Losses [Line Items] | |||||||||
Allowance for loan losses, Balance, beginning of period | 0 | 0 | 0 | 0 | |||||
Provision for loan losses | 0 | 0 | 0 | ||||||
Loans charged-off | 0 | 0 | 0 | ||||||
Recoveries | 0 | 0 | 0 | ||||||
Allowance for loan losses, Balance, end of period | 0 | 0 | 0 | 0 | |||||
Construction Loans Real Estate [Member] | Total Loans [Member] | |||||||||
Financing Receivable, Allowance for Credit Losses [Line Items] | |||||||||
Allowance for loan losses, Balance, beginning of period | 1,177 | 1,401 | 1,301 | 1,386 | |||||
Provision for loan losses | 111 | 107 | (18) | 116 | |||||
Loans charged-off | 0 | (1) | 0 | (2) | |||||
Recoveries | 4 | 4 | 9 | 11 | |||||
Allowance for loan losses, Balance, end of period | 1,292 | 1,511 | 1,292 | 1,511 | |||||
Loans | |||||||||
Ending balance | 126,265 | 126,265 | 100,911 | ||||||
Commercial Real Estate [Member] | |||||||||
Financing Receivable, Allowance for Credit Losses [Line Items] | |||||||||
Allowance for loan losses, Balance, beginning of period | 0 | ||||||||
Provision for loan losses | 0 | ||||||||
Loans charged-off | 0 | ||||||||
Recoveries | 0 | ||||||||
Allowance for loan losses, Balance, end of period | 0 | 0 | |||||||
Ending Balance: individually evaluated for impairment | 12 | 96 | 12 | 96 | |||||
Ending Balance: collectively evaluated for impairment | 3,913 | 3,017 | 3,913 | 3,017 | |||||
Loans | |||||||||
Ending balance: collectively evaluated for impairment | 293,102 | 241,091 | 293,102 | 241,091 | |||||
Ending balance: individually evaluated for impairment | 4,304 | 6,831 | 4,304 | 6,831 | |||||
Ending balance | 297,406 | 247,922 | 297,406 | 247,922 | 281,723 | ||||
Commercial Real Estate [Member] | Excluding Purchase Credit Impairment Loans [Member] | |||||||||
Financing Receivable, Allowance for Credit Losses [Line Items] | |||||||||
Allowance for loan losses, Balance, beginning of period | 3,169 | 3,217 | 3,448 | 3,005 | |||||
Provision for loan losses | 1,110 | 49 | 1,081 | 219 | |||||
Loans charged-off | (373) | (185) | (623) | (185) | |||||
Recoveries | 7 | 32 | 7 | 74 | |||||
Allowance for loan losses, Balance, end of period | 3,913 | 3,113 | 3,913 | 3,113 | |||||
Commercial Real Estate [Member] | Purchase Credit Impairment Loans [Member] | |||||||||
Financing Receivable, Allowance for Credit Losses [Line Items] | |||||||||
Allowance for loan losses, Balance, beginning of period | 294 | 0 | 0 | ||||||
Provision for loan losses | 12 | 306 | 0 | ||||||
Loans charged-off | (294) | (294) | 0 | ||||||
Recoveries | 0 | 0 | 0 | ||||||
Allowance for loan losses, Balance, end of period | 12 | 0 | 12 | 0 | |||||
Commercial Real Estate [Member] | Total Loans [Member] | |||||||||
Financing Receivable, Allowance for Credit Losses [Line Items] | |||||||||
Allowance for loan losses, Balance, beginning of period | 3,463 | 3,217 | 3,448 | 3,005 | |||||
Provision for loan losses | 1,122 | 49 | 1,387 | 219 | |||||
Loans charged-off | (667) | (185) | (917) | (185) | |||||
Recoveries | 7 | 32 | 7 | 74 | |||||
Allowance for loan losses, Balance, end of period | 3,925 | 3,113 | 3,925 | 3,113 | |||||
Loans | |||||||||
Ending balance | 297,406 | 297,406 | 281,723 | ||||||
Family Residential Real Estate 1 to 4 [Member] | |||||||||
Financing Receivable, Allowance for Credit Losses [Line Items] | |||||||||
Allowance for loan losses, Balance, beginning of period | 0 | ||||||||
Provision for loan losses | 0 | ||||||||
Loans charged-off | 0 | ||||||||
Recoveries | 0 | ||||||||
Allowance for loan losses, Balance, end of period | 0 | 0 | |||||||
Ending Balance: individually evaluated for impairment | 16 | 12 | 16 | 12 | |||||
Ending Balance: collectively evaluated for impairment | 923 | 760 | 923 | 760 | |||||
Loans | |||||||||
Ending balance: collectively evaluated for impairment | 102,122 | 93,463 | 102,122 | 93,463 | |||||
Ending balance: individually evaluated for impairment | 1,522 | 1,527 | 1,522 | 1,527 | |||||
Ending balance | 103,644 | 94,990 | 103,644 | 94,990 | 97,978 | ||||
Family Residential Real Estate 1 to 4 [Member] | Excluding Purchase Credit Impairment Loans [Member] | |||||||||
Financing Receivable, Allowance for Credit Losses [Line Items] | |||||||||
Allowance for loan losses, Balance, beginning of period | 770 | 688 | 846 | 605 | |||||
Provision for loan losses | 143 | (101) | 58 | (114) | |||||
Loans charged-off | 0 | 0 | 0 | 0 | |||||
Recoveries | 10 | 185 | 19 | 281 | |||||
Allowance for loan losses, Balance, end of period | 923 | 772 | 923 | 772 | |||||
Family Residential Real Estate 1 to 4 [Member] | Purchase Credit Impairment Loans [Member] | |||||||||
Financing Receivable, Allowance for Credit Losses [Line Items] | |||||||||
Allowance for loan losses, Balance, beginning of period | 0 | 0 | 0 | ||||||
Provision for loan losses | 16 | 16 | 0 | ||||||
Loans charged-off | 0 | 0 | 0 | ||||||
Recoveries | 0 | 0 | 0 | ||||||
Allowance for loan losses, Balance, end of period | 16 | 0 | 16 | 0 | |||||
Family Residential Real Estate 1 to 4 [Member] | Total Loans [Member] | |||||||||
Financing Receivable, Allowance for Credit Losses [Line Items] | |||||||||
Allowance for loan losses, Balance, beginning of period | 770 | 688 | 846 | 605 | |||||
Provision for loan losses | 159 | (101) | 74 | (114) | |||||
Loans charged-off | 0 | 0 | 0 | 0 | |||||
Recoveries | 10 | 185 | 19 | 281 | |||||
Allowance for loan losses, Balance, end of period | 939 | 772 | 939 | 772 | |||||
Loans | |||||||||
Ending balance | 103,644 | 103,644 | 97,978 | ||||||
Home Equity Line of Credit [Member] | |||||||||
Financing Receivable, Allowance for Credit Losses [Line Items] | |||||||||
Allowance for loan losses, Balance, beginning of period | 9 | ||||||||
Provision for loan losses | 0 | ||||||||
Loans charged-off | 0 | ||||||||
Recoveries | 0 | ||||||||
Allowance for loan losses, Balance, end of period | 9 | 9 | |||||||
Ending Balance: individually evaluated for impairment | 0 | 0 | 0 | 0 | |||||
Ending Balance: collectively evaluated for impairment | 563 | 502 | 563 | 502 | |||||
Loans | |||||||||
Ending balance: collectively evaluated for impairment | 41,624 | 41,399 | 41,624 | 41,399 | |||||
Ending balance: individually evaluated for impairment | 681 | 656 | 681 | 656 | |||||
Ending balance | 42,305 | 42,055 | 42,305 | 42,055 | 41,158 | ||||
Home Equity Line of Credit [Member] | Excluding Purchase Credit Impairment Loans [Member] | |||||||||
Financing Receivable, Allowance for Credit Losses [Line Items] | |||||||||
Allowance for loan losses, Balance, beginning of period | 589 | 585 | 611 | 564 | |||||
Provision for loan losses | (28) | (102) | (2) | (96) | |||||
Loans charged-off | 0 | (1) | (69) | (1) | |||||
Recoveries | 2 | 11 | 23 | 26 | |||||
Allowance for loan losses, Balance, end of period | 563 | 493 | 563 | 493 | |||||
Home Equity Line of Credit [Member] | Purchase Credit Impairment Loans [Member] | |||||||||
Financing Receivable, Allowance for Credit Losses [Line Items] | |||||||||
Allowance for loan losses, Balance, beginning of period | 12 | 12 | 9 | ||||||
Provision for loan losses | (12) | (12) | 0 | ||||||
Loans charged-off | 0 | 0 | 0 | ||||||
Recoveries | 0 | 0 | 0 | ||||||
Allowance for loan losses, Balance, end of period | 0 | 9 | 0 | 9 | |||||
Home Equity Line of Credit [Member] | Total Loans [Member] | |||||||||
Financing Receivable, Allowance for Credit Losses [Line Items] | |||||||||
Allowance for loan losses, Balance, beginning of period | 601 | 594 | 623 | 573 | |||||
Provision for loan losses | (40) | (102) | (14) | (96) | |||||
Loans charged-off | 0 | (1) | (69) | (1) | |||||
Recoveries | 2 | 11 | 23 | 26 | |||||
Allowance for loan losses, Balance, end of period | 563 | 502 | 563 | 502 | |||||
Loans | |||||||||
Ending balance | 42,305 | 42,305 | 41,158 | ||||||
Loans to Individuals and Overdrafts [Member] | |||||||||
Financing Receivable, Allowance for Credit Losses [Line Items] | |||||||||
Allowance for loan losses, Balance, beginning of period | 0 | ||||||||
Provision for loan losses | 0 | ||||||||
Loans charged-off | 0 | ||||||||
Recoveries | 0 | ||||||||
Allowance for loan losses, Balance, end of period | 0 | 0 | |||||||
Ending Balance: individually evaluated for impairment | 0 | 0 | 0 | 0 | |||||
Ending Balance: collectively evaluated for impairment | 142 | 169 | 142 | 169 | |||||
Loans | |||||||||
Ending balance: collectively evaluated for impairment | 10,422 | 8,554 | 10,422 | 8,554 | |||||
Ending balance: individually evaluated for impairment | 0 | 0 | 0 | 0 | |||||
Ending balance | 10,422 | 8,554 | 10,422 | 8,554 | 9,827 | ||||
Loans to Individuals and Overdrafts [Member] | Excluding Purchase Credit Impairment Loans [Member] | |||||||||
Financing Receivable, Allowance for Credit Losses [Line Items] | |||||||||
Allowance for loan losses, Balance, beginning of period | 465 | 150 | 317 | 137 | |||||
Provision for loan losses | (294) | 22 | (139) | 41 | |||||
Loans charged-off | (34) | (9) | (50) | (18) | |||||
Recoveries | 5 | 6 | 14 | 9 | |||||
Allowance for loan losses, Balance, end of period | 142 | 169 | 142 | 169 | |||||
Loans to Individuals and Overdrafts [Member] | Purchase Credit Impairment Loans [Member] | |||||||||
Financing Receivable, Allowance for Credit Losses [Line Items] | |||||||||
Allowance for loan losses, Balance, beginning of period | 0 | 0 | 0 | ||||||
Provision for loan losses | 0 | 0 | 0 | ||||||
Loans charged-off | 0 | 0 | 0 | ||||||
Recoveries | 0 | 0 | 0 | ||||||
Allowance for loan losses, Balance, end of period | 0 | 0 | 0 | 0 | |||||
Loans to Individuals and Overdrafts [Member] | Total Loans [Member] | |||||||||
Financing Receivable, Allowance for Credit Losses [Line Items] | |||||||||
Allowance for loan losses, Balance, beginning of period | 465 | 150 | 317 | 137 | |||||
Provision for loan losses | (294) | 22 | (139) | 41 | |||||
Loans charged-off | (34) | (9) | (50) | (18) | |||||
Recoveries | 5 | 6 | 14 | 9 | |||||
Allowance for loan losses, Balance, end of period | 142 | 169 | 142 | 169 | |||||
Loans | |||||||||
Ending balance | 10,422 | 10,422 | 9,827 | ||||||
Multi Family Residential Real Estate [Member] | |||||||||
Financing Receivable, Allowance for Credit Losses [Line Items] | |||||||||
Allowance for loan losses, Balance, beginning of period | 0 | ||||||||
Provision for loan losses | 0 | ||||||||
Loans charged-off | 0 | ||||||||
Recoveries | 0 | ||||||||
Allowance for loan losses, Balance, end of period | 0 | 0 | |||||||
Ending Balance: individually evaluated for impairment | 0 | 0 | 0 | 0 | |||||
Ending Balance: collectively evaluated for impairment | 732 | 523 | 732 | 523 | |||||
Loans | |||||||||
Ending balance: collectively evaluated for impairment | 71,018 | 45,928 | 71,018 | 45,928 | |||||
Ending balance: individually evaluated for impairment | 48 | 367 | 48 | 367 | |||||
Ending balance | 71,066 | 46,295 | 71,066 | 46,295 | 56,119 | ||||
Multi Family Residential Real Estate [Member] | Excluding Purchase Credit Impairment Loans [Member] | |||||||||
Financing Receivable, Allowance for Credit Losses [Line Items] | |||||||||
Allowance for loan losses, Balance, beginning of period | 583 | 422 | 628 | 393 | |||||
Provision for loan losses | 149 | 101 | 102 | 130 | |||||
Loans charged-off | 0 | 0 | 0 | 0 | |||||
Recoveries | 0 | 0 | 2 | 0 | |||||
Allowance for loan losses, Balance, end of period | 732 | 523 | 732 | 523 | |||||
Multi Family Residential Real Estate [Member] | Purchase Credit Impairment Loans [Member] | |||||||||
Financing Receivable, Allowance for Credit Losses [Line Items] | |||||||||
Allowance for loan losses, Balance, beginning of period | 0 | 0 | 0 | ||||||
Provision for loan losses | 0 | 0 | 0 | ||||||
Loans charged-off | 0 | 0 | 0 | ||||||
Recoveries | 0 | 0 | 0 | ||||||
Allowance for loan losses, Balance, end of period | 0 | 2 | 0 | 2 | |||||
Multi Family Residential Real Estate [Member] | Total Loans [Member] | |||||||||
Financing Receivable, Allowance for Credit Losses [Line Items] | |||||||||
Allowance for loan losses, Balance, beginning of period | 583 | 422 | 628 | 393 | |||||
Provision for loan losses | 149 | 101 | 102 | 130 | |||||
Loans charged-off | 0 | 0 | 0 | 0 | |||||
Recoveries | 0 | 0 | 2 | 0 | |||||
Allowance for loan losses, Balance, end of period | 732 | $ 523 | 732 | $ 523 | |||||
Loans | |||||||||
Ending balance | $ 71,066 | $ 71,066 | $ 56,119 | ||||||
|
LOANS (Details Textual) - USD ($) |
6 Months Ended | ||
---|---|---|---|
Jun. 30, 2017 |
Dec. 31, 2016 |
Jun. 30, 2016 |
|
Financing Receivable, Allowance for Credit Losses [Line Items] | |||
Impaired Financing Receivable, Recorded Investment | $ 7,772,000 | $ 10,994,000 | |
Impaired Loans Required for Specific Reserves | 963,000 | ||
With no related allowance, Recorded Investment | 6,809,000 | 8,167,000 | |
Financing Receivable, Recorded Investment, Past Due, Total | 3,462,000 | 8,798,000 | |
Allowance for Loan and Lease Losses Write-offs, Net | 1,400,000 | ||
Federal Home Loan Bank, Advances, General Debt Obligations, Disclosures, Collateral Pledged | 92,200,000 | ||
Financing Receivables, Equal to Greater than 90 Days Past Due [Member] | |||
Financing Receivable, Allowance for Credit Losses [Line Items] | |||
Financing Receivable, Recorded Investment, Past Due, Total | 956,000 | $ 529,000 | |
Nonaccrual Impaired Loans [Member] | |||
Financing Receivable, Allowance for Credit Losses [Line Items] | |||
Impaired Financing Receivable, Recorded Investment | 2,900,000 | ||
Accrual Impaired Loans [Member] | |||
Financing Receivable, Allowance for Credit Losses [Line Items] | |||
Impaired Financing Receivable, Recorded Investment | 4,900,000 | ||
Troubled Debt Restructurings [Member] | |||
Financing Receivable, Allowance for Credit Losses [Line Items] | |||
Impaired Financing Receivable, Recorded Investment | 4,700,000 | $ 4,200,000 | |
Troubled Debt Restructuring Accrual Status [Member] | |||
Financing Receivable, Allowance for Credit Losses [Line Items] | |||
Impaired Financing Receivable, Recorded Investment | 3,200,000 | 2,900,000 | |
Troubled Debt Restructuring Nonaccrual Status [Member] | |||
Financing Receivable, Allowance for Credit Losses [Line Items] | |||
Impaired Financing Receivable, Recorded Investment | 1,500,000 | $ 1,300,000 | |
Unused Lines of Credit [Member] | |||
Financing Receivable, Allowance for Credit Losses [Line Items] | |||
Line of Credit Facility, Maximum Amount Outstanding During Period | $ 135,800,000 |
ACCUMULATED OTHER COMPREHENSIVE INCOME (Details) - USD ($) $ in Thousands |
3 Months Ended | 6 Months Ended | |||||
---|---|---|---|---|---|---|---|
Jun. 30, 2017 |
Jun. 30, 2016 |
Jun. 30, 2017 |
Jun. 30, 2016 |
||||
Beginning balance | $ 410 | $ 953 | $ 358 | [1] | $ 490 | ||
Unrealized gain (loss) on investment securities available for sale | 151 | 338 | 233 | 1,099 | |||
Tax effect | (55) | (113) | (85) | (397) | |||
Other comprehensive gain (loss) before reclassification | 96 | 225 | 148 | 702 | |||
Amounts reclassified from accumulated comprehensive income: | |||||||
Realized gains on investment securities included in net income | 0 | 0 | 0 | (22) | |||
Tax effect | 0 | 0 | 0 | 8 | |||
Total reclassifications net of tax | 0 | 0 | 0 | (14) | |||
Net current period other comprehensive income | 96 | 225 | 148 | 688 | |||
Ending balance | $ 506 | $ 1,178 | $ 506 | $ 1,178 | |||
|
REPURCHASE AGREEMENTS (Details) - USD ($) $ in Thousands |
6 Months Ended | 12 Months Ended | |||
---|---|---|---|---|---|
Jun. 30, 2017 |
Dec. 31, 2016 |
||||
Available-for-sale Securities, Total | $ 56,852 | $ 62,257 | [1] | ||
Repurchase Agreements [Member] | |||||
Available-for-sale Securities, Total | 12,654 | 12,064 | |||
Gross amount of recognized liabilities for repurchase agreements | 11,560 | 12,003 | |||
U.S. Government agencies-GSE’s [Member] | |||||
Available-for-sale Securities, Total | 12,577 | 14,159 | |||
U.S. Government agencies-GSE’s [Member] | Repurchase Agreements [Member] | |||||
Available-for-sale Securities, Total | 6,222 | 5,568 | |||
Mortgage-backed Securities-GSE’s [Member] | |||||
Available-for-sale Securities, Total | 30,084 | 32,363 | |||
Mortgage-backed Securities-GSE’s [Member] | Repurchase Agreements [Member] | |||||
Available-for-sale Securities, Total | 6,432 | 6,496 | |||
Overnight and continuous [Member] | Repurchase Agreements [Member] | |||||
Available-for-sale Securities, Total | 12,654 | 12,064 | |||
Overnight and continuous [Member] | U.S. Government agencies-GSE’s [Member] | Repurchase Agreements [Member] | |||||
Available-for-sale Securities, Total | 6,222 | 5,568 | |||
Overnight and continuous [Member] | Mortgage-backed Securities-GSE’s [Member] | Repurchase Agreements [Member] | |||||
Available-for-sale Securities, Total | 6,432 | 6,496 | |||
Maturity Less than 30 Days [Member] | Repurchase Agreements [Member] | |||||
Available-for-sale Securities, Total | 0 | 0 | |||
Maturity Less than 30 Days [Member] | U.S. Government agencies-GSE’s [Member] | Repurchase Agreements [Member] | |||||
Available-for-sale Securities, Total | 0 | 0 | |||
Maturity Less than 30 Days [Member] | Mortgage-backed Securities-GSE’s [Member] | Repurchase Agreements [Member] | |||||
Available-for-sale Securities, Total | 0 | 0 | |||
Maturity 30 to 90 Days [Member] | Repurchase Agreements [Member] | |||||
Available-for-sale Securities, Total | 0 | 0 | |||
Maturity 30 to 90 Days [Member] | U.S. Government agencies-GSE’s [Member] | Repurchase Agreements [Member] | |||||
Available-for-sale Securities, Total | 0 | 0 | |||
Maturity 30 to 90 Days [Member] | Mortgage-backed Securities-GSE’s [Member] | Repurchase Agreements [Member] | |||||
Available-for-sale Securities, Total | 0 | 0 | |||
Maturity Greater than 90 Days [Member] | Repurchase Agreements [Member] | |||||
Available-for-sale Securities, Total | 0 | 0 | |||
Maturity Greater than 90 Days [Member] | U.S. Government agencies-GSE’s [Member] | Repurchase Agreements [Member] | |||||
Available-for-sale Securities, Total | 0 | 0 | |||
Maturity Greater than 90 Days [Member] | Mortgage-backed Securities-GSE’s [Member] | Repurchase Agreements [Member] | |||||
Available-for-sale Securities, Total | $ 0 | $ 0 | |||
|
REPURCHASE AGREEMENTS (Details Textual) - USD ($) $ in Millions |
Jun. 30, 2017 |
Dec. 31, 2016 |
---|---|---|
Securities Sold under Agreements to Repurchase [Member] | ||
Available For Sale Securities Pledged As Collateral Carrying Value | $ 12.7 | $ 12.0 |
OTHER REAL ESTATE OWNED (Details) - USD ($) $ in Thousands |
6 Months Ended | ||||
---|---|---|---|---|---|
Jun. 30, 2017 |
Jun. 30, 2016 |
||||
Schedule Of Real Estate Owned Properties [Line Items] | |||||
Beginning balance January 1 | $ 599 | [1] | $ 1,401 | ||
Sales | (384) | (1,215) | |||
Write-downs | 61 | (48) | |||
Transfers | 2,426 | 578 | |||
Ending balance | $ 2,702 | $ 716 | |||
|
OTHER REAL ESTATE OWNED (Details Textual) - USD ($) |
Jun. 30, 2017 |
Dec. 31, 2016 |
Jun. 30, 2016 |
Dec. 31, 2015 |
|||
---|---|---|---|---|---|---|---|
Schedule Of Real Estate Owned Properties [Line Items] | |||||||
Real Estate Acquired Through Foreclosure | $ 2,702,000 | $ 599,000 | [1] | $ 716,000 | $ 1,401,000 | ||
Mortgage Loans in Process of Foreclosure, Amount | $ 135,000 | $ 0 | |||||
|
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