SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
| ☑ | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the quarterly period ended March 31, 2016
OR
| ☐ | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
| FOR THE TRANSITION PERIOD FROM ________ TO ________ |
Commission file number 0-24751
SALISBURY BANCORP, INC.
(Exact name of registrant as specified in its charter)
| Connecticut | 06-1514263 | |
| (State or other jurisdiction | (I.R.S. Employer | |
| of incorporation or organization) | Identification No.) | |
| 5 Bissell Street, Lakeville, CT | 06039 | |
| (Address of principal executive offices) | (Zip code) |
(860) 435-9801
(Registrant's telephone number, including area code)
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 ☑ No ☐
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate website, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).
Yes ☑ No ☐
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer or a smaller reporting company. See the definitions of “large accelerated filer”, “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act). (Check one):
Large accelerated filer ☐ Accelerated filer ☐ Non-accelerated filer ☐ Smaller reporting company ☑
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).
Yes ☐ No ☑
The number of shares of Common Stock outstanding as of May 16, 2016 is 2,753,426.
TABLE OF CONTENTS
Page
| PART I. FINANCIAL INFORMATION | ||
| Item 1. | Financial Statements (unaudited) | |
| CONSOLIDATED BALANCE SHEETS AS OF MARCH 31, 2016 (unaudited) AND DECEMBER 31, 2015 | 3 | |
| CONSOLIDATED STATEMENTS OF INCOME FOR THE THREE MONTHS ENDED MARCH 31, 2016 AND 2015(unaudited) | 4 | |
| CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME FOR THE THREE MONTHS ENDED MARCH 31, 2016 AND 2015 (unaudited) | 5 | |
| CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY FOR THE THREE MONTHS ENDED MARCH 31, 2016 AND 2015 (unaudited) | 5 | |
| CONSOLIDATED STATEMENTS OF CASH FLOWS FOR THE THREE MONTHS ENDED MARCH 31, 2016 AND 2015 (unaudited) | 6 | |
| NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS | 8 | |
| Item 2. | MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS | 31 |
| Item 3. | QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK | 47 |
| Item 4. | CONTROLS AND PROCEDURES | 48 |
| PART II. OTHER INFORMATION | ||
| Item 1. | LEGAL PROCEEDINGS | 49 |
| Item 1A. | RISK FACTORS | 50 |
| Item 2. | UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS | 50 |
| Item 3. | DEFAULTS UPON SENIOR SECURITIES | 50 |
| Item 4. | MINE SAFETY DISCLOSURES | 50 |
| Item 5. | OTHER INFORMATION | 50 |
| Item 6. | EXHIBITS | 51 |
PART I - FINANCIAL INFORMATION
Salisbury Bancorp, Inc. and Subsidiary
CONSOLIDATED BALANCE SHEETS
| (in thousands, except share data) | March 31, 2016 | December 31, 2015 | ||||||
| ASSETS | (unaudited) | |||||||
| Cash and due from banks | $ | 9,309 | $ | 14,891 | ||||
| Interest bearing demand deposits with other banks | 22,194 | 47,227 | ||||||
| Total cash and cash equivalents | 31,503 | 62,118 | ||||||
| Securities | ||||||||
| Available-for-sale at fair value | 79,034 | 76,694 | ||||||
| Federal Home Loan Bank of Boston stock at cost | 3,117 | 3,176 | ||||||
| Loans held-for-sale | 183 | 763 | ||||||
| Loans receivable, net (allowance for loan losses: $5,877 and $5,716) | 728,845 | 699,018 | ||||||
| Bank premises and equipment, net | 14,632 | 14,307 | ||||||
| Goodwill | 12,552 | 12,552 | ||||||
| Intangible assets (net of accumulated amortization: $3,064 and $2,909) | 2,183 | 2,338 | ||||||
| Accrued interest receivable | 2,451 | 2,307 | ||||||
| Cash surrender value of life insurance policies | 13,775 | 13,685 | ||||||
| Deferred taxes | 2,013 | 1,989 | ||||||
| Other assets | 1,516 | 2,245 | ||||||
| Total Assets | $ | 891,804 | $ | 891,192 | ||||
| LIABILITIES and SHAREHOLDERS' EQUITY | ||||||||
| Deposits | ||||||||
| Demand (non-interest bearing) | $ | 192,184 | $ | 201,340 | ||||
| Demand (interest bearing) | 122,814 | 125,465 | ||||||
| Money market | 192,357 | 183,783 | ||||||
| Savings and other | 126,214 | 119,651 | ||||||
| Certificates of deposit | 122,089 | 124,294 | ||||||
| Total deposits | 755,658 | 754,533 | ||||||
| Repurchase agreements | 2,620 | 3,914 | ||||||
| Federal Home Loan Bank of Boston advances | 27,031 | 26,979 | ||||||
| Subordinated debt(1) | 9,770 | 9,764 | ||||||
| Note payable | 365 | 376 | ||||||
| Capital lease liability | 420 | 422 | ||||||
| Accrued interest and other liabilities | 4,538 | 4,630 | ||||||
| Total Liabilities | 800,402 | 800,618 | ||||||
| Shareholders' Equity | ||||||||
| Common stock - $.10 per share par value | ||||||||
| Authorized: 5,000,000 | ||||||||
| Issued: 2,753,426 and 2,733,576 | 275 | 273 | ||||||
| Paid-in capital | 41,915 | 41,364 | ||||||
| Retained earnings | 48,662 | 47,922 | ||||||
| Unearned compensation - restricted stock awards | (529 | ) | (110 | ) | ||||
| Accumulated other comprehensive income | 1,079 | 1,125 | ||||||
| Total Shareholders' Equity | 91,402 | 90,574 | ||||||
| Total Liabilities and Shareholders' Equity | $ | 891,804 | $ | 891,192 | ||||
(1) Net of issuance costs, which are capitalized and amortized as a component of interest expense over a period of 10 years.
| 3 |
Salisbury Bancorp, Inc. and Subsidiary
CONSOLIDATED STATEMENTS OF INCOME (unaudited)
| Three months ended March 31, (in thousands except per share amounts) | 2016 | 2015 | ||||||
| Interest and dividend income | ||||||||
| Interest and fees on loans | $ | 7,925 | $ | 7,922 | ||||
| Interest on debt securities | ||||||||
| Taxable | 293 | 326 | ||||||
| Tax exempt | 286 | 390 | ||||||
| Other interest and dividends | 74 | 33 | ||||||
| Total interest and dividend income | 8,578 | 8,671 | ||||||
| Interest expense | ||||||||
| Deposits | 508 | 444 | ||||||
| Repurchase agreements | 1 | 1 | ||||||
| Capital lease | 18 | 18 | ||||||
| Note payable | 5 | — | ||||||
| Subordinated debt | 156 | — | ||||||
| Federal Home Loan Bank of Boston advances | 231 | 282 | ||||||
| Total interest expense | 919 | 745 | ||||||
| Net interest and dividend income | 7,659 | 7,926 | ||||||
| Provision (benefit) for loan losses | 463 | (200 | ) | |||||
| Net interest and dividend income after provision (benefit) for loan losses | 7,196 | 8,126 | ||||||
| Non-interest income | ||||||||
| Trust and wealth advisory | 784 | 822 | ||||||
| Service charges and fees | 730 | 731 | ||||||
| Gains on sales of mortgage loans, net | 39 | 94 | ||||||
| Mortgage servicing, net | 12 | (40 | ) | |||||
| Gains on sales and calls of available-for-sale securities, net | 2 | 175 | ||||||
| Other | 117 | 114 | ||||||
| Total non-interest income | 1,684 | 1,896 | ||||||
| Non-interest expense | ||||||||
| Salaries | 2,574 | 2,540 | ||||||
| Employee benefits | 1,088 | 1,005 | ||||||
| Premises and equipment | 895 | 908 | ||||||
| Data processing | 447 | 474 | ||||||
| Professional fees | 380 | 650 | ||||||
| Collections and OREO | 157 | 244 | ||||||
| FDIC insurance | 134 | 198 | ||||||
| Marketing and community support | 200 | 110 | ||||||
| Amortization of core deposit intangibles | 155 | 169 | ||||||
| Other | 810 | 537 | ||||||
| Total non-interest expense | 6,840 | 6,835 | ||||||
| Income before income taxes | 2,040 | 3,187 | ||||||
| Income tax provision | 528 | 953 | ||||||
| Net income | $ | 1,512 | $ | 2,234 | ||||
| Net income available to common shareholders | $ | 1,512 | $ | 2,194 | ||||
| Basic earnings per common share | $ | 0.55 | $ | 0.81 | ||||
| Weighted average common shares outstanding, to calculate basic earnings per share | 2,723 | 2,699 | ||||||
| Diluted earnings per common share | $ | 0.55 | $ | 0.80 | ||||
| Weighted average common shares outstanding, to calculate diluted earnings per share | 2,741 | 2,716 | ||||||
| Common dividends per share | $ | 0.28 | $ | 0.28 |
| 4 |
Salisbury Bancorp, Inc. and Subsidiary
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (unaudited)
| Three months ended March 31, (in thousands) | 2016 | 2015 | ||||||
| Net income | $ | 1,512 | $ | 2,234 | ||||
| Other comprehensive loss | ||||||||
| Net unrealized losses on securities available-for-sale | (68 | ) | (193 | ) | ||||
| Reclassification of net realized gains in net income(1) | (2 | ) | (175 | ) | ||||
| Unrealized losses on securities available-for-sale | (70 | ) | (368 | ) | ||||
| Income tax benefit | 24 | 128 | ||||||
| Unrealized losses on securities available-for-sale, net of tax | (46 | ) | (240 | ) | ||||
| Comprehensive income | $ | 1,466 | $ | 1,994 |
(1) Reclassification adjustments include realized security gains and losses. The gains and losses have been reclassified out of other comprehensive loss and have affected certain lines in the consolidated statements of income as follows: The pre-tax amount is reflected as gains on sales and calls of available-for-sale securities, net, the tax effect is included in the income tax provision and the after tax amount is included in net income.
Salisbury Bancorp, Inc. and Subsidiary
CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY (unaudited)
| (dollars in thousands) | Common Stock | Preferred stock | Paid-in capital | Retained earnings | Unearned compensation - restricted stock awards | Accumulated other comp- rehensive income | Total share- holders' equity | |||||||||||||||||||||||||
| Shares | Amount | |||||||||||||||||||||||||||||||
| Balances at December 31, 2014 | 2,720,766 | $ | 272 | $ | 16,000 | $ | 41,077 | $ | 42,677 | $ | (313 | ) | $ | 2,108 | $ | 101,821 | ||||||||||||||||
| Net income | — | — | — | — | 2,234 | — | — | 2,234 | ||||||||||||||||||||||||
| Other comprehensive loss, net of tax | — | — | — | — | — | — | (240 | ) | (240 | ) | ||||||||||||||||||||||
| Common stock dividends declared | — | — | — | — | (761 | ) | — | — | (761 | ) | ||||||||||||||||||||||
| Preferred stock dividends declared | — | — | — | — | (40 | ) | — | — | (40 | ) | ||||||||||||||||||||||
| Stock options exercised | 6,750 | 1 | — | 125 | — | — | — | 126 | ||||||||||||||||||||||||
| Issuance of common stock for executives | 1,000 | — | — | 29 | — | — | — | 29 | ||||||||||||||||||||||||
| Stock based compensation-restricted stock awards | — | — | — | — | — | 42 | — | 42 | ||||||||||||||||||||||||
| Balances at March 31, 2015 | 2,728,516 | $ | 273 | $ | 16,000 | $ | 41,231 | $ | 44,110 | $ | (271 | ) | $ | 1,868 | $ | 103,211 | ||||||||||||||||
| Balances at December 31, 2015 | 2,733,576 | $ | 273 | $ | — | $ | 41,364 | $ | 47,922 | $ | (110 | ) | $ | 1,125 | $ | 90,574 | ||||||||||||||||
| Net income | — | — | — | — | 1,512 | — | — | 1,512 | ||||||||||||||||||||||||
| Other comprehensive loss, net of tax | — | — | — | — | — | — | (46 | ) | (46 | ) | ||||||||||||||||||||||
| Common stock dividends declared | — | — | — | — | (772 | ) | — | — | (772 | ) | ||||||||||||||||||||||
| Stock options exercised | 4,050 | — | — | 87 | — | — | — | 87 | ||||||||||||||||||||||||
| Issuance of restricted stock awards | 15,800 | 2 | — | 464 | — | — | — | 466 | ||||||||||||||||||||||||
| Stock based compensation-restricted stock awards | — | — | — | — | — | (419 | ) | — | (419 | ) | ||||||||||||||||||||||
| Balances at March 31, 2016 | 2,753,426 | $ | 275 | $ | — | $ | 41,915 | $ | 48,662 | $ | (529 | ) | $ | 1,079 | $ | 91,402 | ||||||||||||||||
| 5 |
Salisbury Bancorp, Inc. and Subsidiary
CONSOLIDATED STATEMENTS OF CASH FLOWS (unaudited)
| Three months ended March 31, (in thousands) | 2016 | 2015 | ||||||
| Operating Activities | ||||||||
| Net income | $ | 1,512 | $ | 2,234 | ||||
| Adjustments to reconcile net income to net cash provided by operating activities: | ||||||||
| (Accretion), amortization and depreciation: | ||||||||
| Securities | 60 | 38 | ||||||
| Bank premises and equipment | 306 | 311 | ||||||
| Core deposit intangible | 155 | 169 | ||||||
| Mortgage servicing rights | 51 | 119 | ||||||
| Fair value adjustment on loans | (586 | ) | (650 | ) | ||||
| Fair value adjustment on deposits | (38 | ) | (135 | ) | ||||
| Debt issuance costs | 6 | — | ||||||
| (Gains) and losses, including write-downs | ||||||||
| Gain on sales and calls of securities available-for-sale, net | (2 | ) | (175 | ) | ||||
| Gain on sales of loans, excluding capitalized servicing rights | (19 | ) | (32 | ) | ||||
| Write-downs of other real estate owned | — | 127 | ||||||
| Loss on sale/disposals of premises and equipment | 13 | 45 | ||||||
| Provision (benefit) for loan losses | 463 | (200 | ) | |||||
| Proceeds from loans sold | 1,787 | 2,134 | ||||||
| Loans originated for sale | (1,188 | ) | (1,862 | ) | ||||
| Increase in deferred loan origination fees and costs, net | (44 | ) | (3 | ) | ||||
| Mortgage servicing rights originated | (20 | ) | (62 | ) | ||||
| Increase in mortgage servicing rights impairment reserve | 20 | 10 | ||||||
| Increase in interest receivable | (144 | ) | (22 | ) | ||||
| Deferred tax benefit | — | (13 | ) | |||||
| Decrease (increase) in prepaid expenses | 47 | (126 | ) | |||||
| Increase in cash surrender value of life insurance policies | (90 | ) | (92 | ) | ||||
| Decrease in income tax receivable | 506 | — | ||||||
| Increase in income taxes payable | — | 55 | ||||||
| Decrease in other assets | 125 | 64 | ||||||
| Decrease in accrued expenses | (113 | ) | (184 | ) | ||||
| Decrease in interest payable | (30 | ) | — | |||||
| Increase in other liabilities | 51 | 161 | ||||||
| Stock based compensation-restricted stock awards | 47 | 71 | ||||||
| Net cash provided by operating activities | 2,875 | 1,982 | ||||||
| Investing Activities | ||||||||
| Redemption of Federal Home Loan Bank of Boston stock | 59 | — | ||||||
| Purchases of securities available-for-sale | (10,072 | ) | (3 | ) | ||||
| Proceeds from sales of securities available-for-sale | — | 3,861 | ||||||
| Proceeds from calls of securities available-for-sale | 5,351 | 3,740 | ||||||
| Proceeds from maturities of securities available-for-sale | 2,253 | 2,304 | ||||||
| Loan originations and principal collections, net | (29,674 | ) | (3,011 | ) | ||||
| Recoveries of loans previously charged off | 14 | 460 | ||||||
| Capital expenditures | (644 | ) | (186 | ) | ||||
| Net cash (utilized) provided by investing activities | (32,713 | ) | 7,165 |
| 6 |
Salisbury Bancorp, Inc. and Subsidiary
CONSOLIDATED STATEMENTS OF CASH FLOWS (unaudited) (Continued)
| Three months ended March 31, (in thousands) | 2016 | 2015 | ||||||
| Financing Activities | ||||||||
| Increase in deposit transaction accounts, net | 3,330 | 9,556 | ||||||
| (Decrease) increase in time deposits, net | (2,167 | ) | 63 | |||||
| Decrease in securities sold under agreements to repurchase, net | (1,294 | ) | (885 | ) | ||||
| Principal payments on Federal Home Loan Bank of Boston advances | (6 | ) | (410 | ) | ||||
| Modification fees on Federal Home Loan Bank of Boston advances | 58 | — | ||||||
| Principal payments on note payable | (11 | ) | — | |||||
| Decrease in capital lease obligation | (2 | ) | (1 | ) | ||||
| Stock options exercised | 87 | 126 | ||||||
| Common stock dividends paid | (772 | ) | (761 | ) | ||||
| Series B preferred stock dividends paid | — | (40 | ) | |||||
| Net cash (utilized) provided by financing activities | (777 | ) | 7,648 | |||||
| Net (decrease) increase in cash and cash equivalents | (30,615 | ) | 16,795 | |||||
| Cash and cash equivalents, beginning of period | 62,118 | 36,105 | ||||||
| Cash and cash equivalents, end of period | $ | 31,503 | $ | 52,900 | ||||
| Cash paid during period | ||||||||
| Interest | $ | 760 | $ | 745 | ||||
| Income taxes | 258 | 911 |
| 7 |
Salisbury Bancorp, Inc. and Subsidiary
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1 - BASIS OF PRESENTATION
The interim (unaudited) consolidated financial statements of Salisbury Bancorp, Inc. ("Salisbury") include those of Salisbury and its wholly owned subsidiary, Salisbury Bank and Trust Company (the "Bank"). In the opinion of management, the interim unaudited consolidated financial statements include all adjustments (consisting of normal recurring adjustments) necessary to present fairly the financial position of Salisbury and the statements of income, comprehensive income, shareholders’ equity and cash flows for the interim periods presented.
The financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (GAAP). In preparing the financial statements, management is required to make extensive use of estimates and assumptions that affect the reported amounts of assets and liabilities as of the date of the balance sheet, and revenues and expenses for the period. Actual results could differ significantly from those estimates. Material estimates that are particularly susceptible to significant change in the near term relate to the determination of the allowance for loan losses, expected cash flows from loans acquired in a business combination, other-than-temporary impairment of securities and impairment of goodwill and intangibles.
Certain financial information, which is normally included in financial statements prepared in accordance with generally accepted accounting principles, but which is not required for interim reporting purposes, has been condensed or omitted. Operating results for the interim period ended March 31, 2016 are not necessarily indicative of the results that may be expected for the year ending December 31, 2016. The accompanying condensed financial statements should be read in conjunction with the financial statements and notes thereto included in Salisbury's 2015 Annual Report on Form 10-K for the year ended December 31, 2015.
The allowance for loan losses is a significant accounting policy and is presented in the Notes to Consolidated Financial Statements and in Management’s Discussion and Analysis, which provides information on how significant assets are valued in the financial statements and how those values are determined. Based on the valuation techniques used and the sensitivity of financial statement amounts to the methods, assumptions and estimates underlying those amounts, management has identified the determination of the allowance for loan losses to be the accounting area that requires the most subjective judgments, and as such could be most subject to revision as new information becomes available.
Impact of New Accounting Pronouncements Issued
In January 2016, the FASB issued ASU No. 2016-01, Financial Instruments – overall (subtopic 825-10): "Recognition and Measurement of Financial Assets and Financial Liabilities." This ASU addresses certain aspects of recognition, measurement, presentation, and disclosure of financial instruments by making targeted improvements to GAAP as follows: (1) require equity investments (except those accounted for under the equity method of accounting or those that result in consolidation of the investee) to be measured at fair value with changes in fair value recognized in net income. However, an entity may choose to measure equity investments that do not have readily determinable fair values at cost minus impairment, if any, plus or minus changes resulting from observable price changes in orderly transactions for the identical or a similar investment of the same issuer; (2) simplify the impairment assessment of equity investments without readily determinable fair values by requiring a qualitative assessment to identify impairment. When a qualitative assessment indicates that impairment exists, an entity is required to measure the investment at fair value; (3) eliminate the requirement to disclose the fair value of financial instruments measured at amortized cost for entities that are not public business entities; (4) eliminate the requirement for public business entities to disclose the method(s) and significant assumptions used to estimate the fair value that is required to be disclosed for financial instruments measured at amortized cost on the balance sheet; (5) require public business entities to use the exit price notion when measuring the fair value of financial instruments for disclosure purposes; (6) require an entity to present separately in other comprehensive income the portion of the total change in the fair value of a liability resulting from a change in the instrument-specific credit risk when the entity has elected to measure the liability at fair value in accordance with the fair value option for financial instruments; (7) require separate presentation of financial assets and financial liabilities by measurement category and form of financial asset (that is, securities or loans and receivables) on the balance sheet or the accompanying notes to the financial statements; and (8) clarify that an entity should evaluate the need for a valuation allowance on a deferred tax asset related to available-for-sale securities in combination with the entity’s other deferred tax assets. ASU No. 2016-01 is effective for interim and annual reporting periods beginning after December 15, 2017. Early application is permitted as of the beginning of the fiscal year of adoption only for provisions (3) and (6) above. Early adoption of the other provisions mentioned above is not permitted. Salisbury does not expect ASU No. 2016-01 to have a material impact on the Company's Consolidated Financial Statements; however, the Company will continue to closely monitor developments and additional guidance.
| 8 |
In February 2016, the FASB issued ASU No. 2016-02, "Leases" (Topic 842). Under the new guidance, lessees will be required to recognize the following for all leases (with the exception of short-term leases): 1) a lease liability, which is the present value of a lessee's obligation to make lease payments, and 2) a right-of-use asset, which is an asset that represents the lessee's right to use, or control the use of, a specified asset for the lease term. Lessor accounting under the new guidance remains largely unchanged as it is substantially equivalent to existing guidance for sales-type leases, direct financing leases, and operating leases. Leveraged leases have been eliminated, although lessors can continue to account for existing leveraged leases using the current accounting guidance. Other limited changes were made to align lessor accounting with the lessee accounting model and the new revenue recognition standard. All entities will classify leases to determine how to recognize lease-related revenue and expense. Quantitative and qualitative disclosures will be required by lessees and lessors to meet the objective of enabling users of financial statements to assess the amount, timing, and uncertainty of cash flows arising from leases. The intention is to require enough information to supplement the amounts recorded in the financial statements so that users can understand more about the nature of an entity’s leasing activities. ASU No. 2016-02 is effective for interim and annual reporting periods beginning after December 15, 2018; early adoption is permitted. All entities are required to use a modified retrospective approach for leases that exist or are entered into after the beginning of the earliest comparative period in the financial statements. They have the option to use certain relief; full retrospective application is prohibited. The Company is currently evaluating this ASU to determine the impact on its consolidated financial statements. In March 2016, the FASB issued ASU No. 2016-09, Compensation–Stock Compensation (Topic 718): "Improvements to Employee Share-Based Payment Accounting.” This ASU includes provisions intended to simplify various aspects related to how share-based payments are accounted for and presented in the financial statements. Some of the key provisions of this new ASU include: (1) companies will no longer record excess tax benefits and certain tax deficiencies in additional paid-in capital (“APIC”). Instead, they will record all excess tax benefits and tax deficiencies as income tax expense or benefit in the income statement, and APIC pools will be eliminated. The guidance also eliminates the requirement that excess tax benefits be realized before companies can recognize them. In addition, the guidance requires companies to present excess tax benefits as an operating activity on the statement of cash flows rather than as a financing activity; (2) increase the amount an employer can withhold to cover income taxes on awards and still qualify for the exception to liability classification for shares used to satisfy the employer’s statutory income tax withholding obligation. The new guidance will also require an employer to classify the cash paid to a tax authority when shares are withheld to satisfy its statutory income tax withholding obligation as a financing activity on its statement of cash flows (current guidance did not specify how these cash flows should be classified); and (3) permit companies to make an accounting policy election for the impact of forfeitures on the recognition of expense for share-based payment awards. Forfeitures can be estimated, as required today, or recognized when they occur. ASU No. 2016-09 is effective for interim and annual reporting periods beginning after December 15, 2016. Early adoption is permitted, but all of the guidance must be adopted in the same period. Salisbury is currently evaluating the provisions of ASU No. 2016-09 to determine the potential impact the new standard will have on the Company's Consolidated Financial Statements.
NOTE 2 - SECURITIES
The composition of securities is as follows:
| (in thousands) | Amortized cost (1) | Gross
un- realized gains | Gross
un- realized losses | Fair value | |||||||||||||
| March 31, 2016 | |||||||||||||||||
| Available-for-sale | |||||||||||||||||
| U.S. Treasury notes | $ | 7,497 | $ | 33 | $ | (1 | ) | $ | 7,529 | ||||||||
| Municipal bonds | 24,893 | 495 | — | 25,388 | |||||||||||||
| Mortgage-backed securities: | |||||||||||||||||
| U.S. Government agencies and U.S. Government- sponsored enterprises | 35,328 | 497 | (23 | ) | 35,802 | ||||||||||||
| Collateralized mortgage obligations: | |||||||||||||||||
| U.S. Government agencies | 1,850 | 12 | — | 1,862 | |||||||||||||
| Non-agency | 4,198 | 382 | (12 | ) | 4,568 | ||||||||||||
| SBA bonds | 2,843 | 28 | — | 2,871 | |||||||||||||
| CRA mutual funds | 770 | 9 | — | 779 | |||||||||||||
| Preferred stock | 20 | 215 | — | 235 | |||||||||||||
| Total securities available-for-sale | $ | 77,399 | $ | 1,671 | $ | (36 | ) | $ | 79,034 | ||||||||
| Non-marketable securities | |||||||||||||||||
| Federal Home Loan Bank of Boston stock | $ | 3,117 | $ | — | $ | — | $ | 3,117 | |||||||||
| 9 |
| (in thousands) | Amortized cost (1) | Gross
un- realized gains | Gross
un- realized losses | Fair value | |||||||||||
| December 31, 2015 | |||||||||||||||
| Available-for-sale | |||||||||||||||
| U.S. Treasury notes | $ | 2,499 | $ | 42 | $ | — | $ | 2,541 | |||||||
| U.S. Government agency notes | 498 | — | — | 498 | |||||||||||
| Municipal bonds | 29,752 | 633 | — | 30,385 | |||||||||||
| Mortgage-backed securities: | |||||||||||||||
| U.S. Government agencies and U.S. Government- sponsored enterprises | 31,900 | 385 | (83 | ) | 32,202 | ||||||||||
| Collateralized mortgage obligations: | |||||||||||||||
| U.S. Government agencies | 2,002 | 12 | — | 2,014 | |||||||||||
| Non-agency | 4,487 | 468 | (7 | ) | 4,948 | ||||||||||
| SBA bonds | 3,065 | 31 | — | 3,096 | |||||||||||
| CRA mutual funds | 766 | — | (2 | ) | 764 | ||||||||||
| Preferred stock | 20 | 226 | — | 246 | |||||||||||
| Total securities available-for-sale | $ | 74,989 | $ | 1,797 | $ | (92 | ) | $ | 76,694 | ||||||
| Non-marketable securities | |||||||||||||||
| Federal Home Loan Bank of Boston stock | $ | 3,176 | $ | — | $ | — | $ | 3,176 | |||||||
| (1) | Net of other-than-temporary impairment write-downs recognized in earnings. |
Salisbury did not sell any available-for-sale securities during the three month period ended March 31, 2016, and sold $3.9 million in available-for-sale securities during the three month period ended March 31, 2015, for a gain of $165,000. The after tax gain totaled $150,000.
The following table summarizes, for all securities in an unrealized loss position, including debt securities for which a portion of other-than-temporary impairment (OTTI) has been recognized in other comprehensive loss, the aggregate fair value and gross unrealized loss of securities that have been in a continuous unrealized loss position as of the date presented:
| (in thousands) | Less than 12 Months | 12 Months or Longer | Total | |||||||||||||||||||||
| Fair value | Unrealized losses | Fair value | Unrealized losses | Fair value | Unrealized losses | |||||||||||||||||||
| March 31, 2016 | ||||||||||||||||||||||||
| Available-for-sale | ||||||||||||||||||||||||
| Municipal bonds | $ | 4,997 | $ | (1 | ) | $ | — | $ | — | $ | 4,997 | $ | (1 | ) | ||||||||||
| Mortgage-backed securities | 7,096 | (18 | ) | 177 | (5 | ) | 7,273 | (23 | ) | |||||||||||||||
| Collateralized mortgage obligations: | ||||||||||||||||||||||||
| Non-agency | 343 | (2 | ) | 211 | (6 | ) | 554 | (8 | ) | |||||||||||||||
| Total temporarily impaired securities | 12,436 | (21 | ) | 388 | (11 | ) | 12,824 | (32 | ) | |||||||||||||||
| Other-than-temporarily impaired securities | ||||||||||||||||||||||||
| Collateralized mortgage obligations: | ||||||||||||||||||||||||
| Non-agency | 217 | (4 | ) | — | — | 217 | (4 | ) | ||||||||||||||||
| Total temporarily impaired and other-than-temporarily impaired securities | $ | 12,653 | $ | (25 | ) | $ | 388 | $ | (11 | ) | $ | 13,041 | $ | (36 | ) | |||||||||
Salisbury evaluates securities for OTTI where the fair value of a security is less than its amortized cost basis at the balance sheet date. As part of this process, Salisbury considers whether it has the intent to sell each debt security and whether it is more likely than not that it will be required to sell the security before its anticipated recovery. If either of these conditions is met, Salisbury recognizes an OTTI charge to earnings equal to the entire difference between the security’s amortized cost basis and its fair value at the balance sheet date. For securities that meet neither of these conditions, an analysis is performed to determine if any of these securities are at risk for OTTI.
| 10 |
The following summarizes, by security type, the basis for evaluating if the applicable securities were OTTI at March 31, 2016.
U.S. Government agency mortgage-backed securities: The contractual cash flows are guaranteed by U.S. government agencies and U.S. government-sponsored enterprises. Changes in fair values are a function of changes in investment spreads and interest rate movements and not changes in credit quality. Management expects to recover the entire amortized cost basis of these securities. Furthermore, Salisbury evaluates these securities for strategic fit and may reduce its position in these securities, although it is not more likely than not that Salisbury will be required to sell these securities before recovery of their cost basis, which may be maturity, and does not intend to sell these securities. Therefore, management does not consider these securities to be OTTI at March 31, 2016.
Municipal bonds: Contractual cash flows are performing as expected. Salisbury’s portfolio is mostly comprised of tax-exempt general obligation bonds or public-purpose revenue bonds for schools, municipal offices, sewer infrastructure and fire houses, for small towns and municipalities across the United States. In the wake of the financial crisis, most monoline bond insurers had their ratings downgraded or withdrawn because of excessive exposure to insurance for collateralized debt obligations. Where appropriate, Salisbury performs credit underwriting reviews of unrated issuers, including some that have had their ratings withdrawn and are insured by insurers that have had their ratings withdrawn, to assess default risk. For all completed reviews, pass credit risk ratings have been assigned. Management expects to recover the entire amortized cost basis of these securities. It is not more likely than not that Salisbury will be required to sell these securities before recovery of their cost basis, which may be at maturity, and Salisbury does not intend to sell these securities. Therefore, management does not consider these securities to be OTTI at March 31, 2016.
Non-agency CMOs: Salisbury performed a detailed cash flow analysis of its non-agency CMOs at March 31, 2016, to assess whether any of the securities were OTTI. Salisbury uses cash flow forecasts for each security based on a variety of market driven assumptions and securitization terms, including prepayment speed, default or delinquency rate, and default severity for losses including interest, legal fees, property repairs, expenses and realtor fees, that, together with the loan amount are subtracted from collateral sales proceeds to determine severity. In 2009, Salisbury determined that five non-agency CMO securities reflected OTTI and recognized losses for deterioration in credit quality of $1,128,000. Salisbury judged the four remaining securities not to have additional OTTI and all other CMO securities not to be OTTI as of March 31, 2016. It is possible that future loss assumptions could change necessitating Salisbury to recognize future OTTI for further deterioration in credit quality. Salisbury evaluates these securities for strategic fit and depending upon such factor could reduce its position in these securities, although it has no present intention to do so, and it is not more likely than not that Salisbury will be required to sell these securities before recovery of their cost bases.
The following table presents activity related to credit losses recognized into earnings on the non-agency CMOs held by Salisbury for which a portion of an OTTI charge was recognized in accumulated other comprehensive income:
| Three months ended March 31 (in thousands) | 2016 | 2015 | ||||||
| Balance, beginning of period | $ | 1,128 | $ | 1,128 | ||||
| Credit component on debt securities in which OTTI was not previously recognized | — | — | ||||||
| Balance, end of period | $ | 1,128 | $ | 1,128 |
The Federal Home Loan Bank of Boston (FHLBB) is a cooperative that provides services, including funding in the form of advances, to its member banking institutions. As a requirement of membership, the Bank must own a minimum amount of FHLBB stock, calculated periodically based primarily on its level of borrowings from the FHLBB. No market exists for shares of the FHLBB and therefore, they are carried at par value. FHLBB stock may be redeemed at par value five years following termination of FHLBB membership, subject to limitations which may be imposed by the FHLBB or its regulator, the Federal Housing Finance Board, to maintain capital adequacy of the FHLBB. While the Bank currently has no intentions to terminate its FHLBB membership, the ability to redeem its investment in FHLBB stock would be subject to the conditions imposed by the FHLBB. Based on the capital adequacy and the liquidity position of the FHLBB, management believes there is no impairment related to the carrying amount of the Bank’s FHLBB stock as of March 31, 2016. Deterioration of the FHLBB’s capital levels may require the Bank to deem its restricted investment in FHLBB stock to be OTTI. If evidence of impairment exists in the future, the FHLBB stock would reflect fair value using either observable or unobservable inputs. The Bank will continue to monitor its investment in FHLBB stock.
| 11 |
NOTE 3 – LOANS
The composition of loans receivable and loans held-for-sale is as follows:
| March 31, 2016 | December 31, 2015 | |||||||||||||||||||||||
| (In thousands) | Business Activities Loans | Acquired Loans | Total | Business Activities Loans | Acquired Loans | Total | ||||||||||||||||||
| Residential 1-4 family | $ | 274,881 | $ | 7,443 | $ | 282,324 | $ | 261,495 | $ | 7,799 | $ | 269,294 | ||||||||||||
| Residential 5+ multifamily | 8,095 | 6,050 | 14,145 | 6,411 | 6,136 | 12,547 | ||||||||||||||||||
| Construction of residential 1-4 family | 9,332 | — | 9,332 | 7,998 | — | 7,998 | ||||||||||||||||||
| Home equity lines of credit | 34,329 | — | 34,329 | 35,017 | — | 35,017 | ||||||||||||||||||
| Residential real estate | 326,637 | 13,493 | 340,130 | 310,921 | 13,935 | 324,856 | ||||||||||||||||||
| Commercial | 136,315 | 86,500 | 222,815 | 129,446 | 88,829 | 218,275 | ||||||||||||||||||
| Construction of commercial | 10,145 | 4,903 | 15,048 | 6,525 | 4,874 | 11,399 | ||||||||||||||||||
| Commercial real estate | 146,460 | 91,403 | 237,863 | 135,971 | 93,703 | 229,674 | ||||||||||||||||||
| Farm land | 4,007 | — | 4,007 | 3,193 | — | 3,193 | ||||||||||||||||||
| Vacant land | 8,198 | — | 8,198 | 8,563 | — | 8,563 | ||||||||||||||||||
| Real estate secured | 485,302 | 104,896 | 590,198 | 458,648 | 107,638 | 566,286 | ||||||||||||||||||
| Commercial and industrial | 92,528 | 35,517 | 128,045 | 74,657 | 46,764 | 121,421 | ||||||||||||||||||
| Municipal | 9,364 | — | 9,364 | 9,566 | — | 9,566 | ||||||||||||||||||
| Consumer | 5,806 | 76 | 5,882 | 6,195 | 77 | 6,272 | ||||||||||||||||||
| Loans receivable, gross | 593,000 | 140,489 | 733,489 | 549,066 | 154,479 | 703,545 | ||||||||||||||||||
| Deferred loan origination fees and costs, net | 1,233 | — | 1,233 | 1,189 | — | 1,189 | ||||||||||||||||||
| Allowance for loan losses | (5,573 | ) | (304 | ) | (5,877 | ) | (5,481 | ) | (235 | ) | (5,716 | ) | ||||||||||||
| Loans receivable, net | $ | 588,660 | $ | 140,185 | $ | 728,845 | $ | 544,774 | $ | 154,244 | $ | 699,018 | ||||||||||||
| Loans held-for-sale | ||||||||||||||||||||||||
| Residential 1-4 family | $ | 183 | $ | — | $ | 183 | $ | 763 | $ | — | $ | 763 | ||||||||||||
Concentrations of Credit Risk
Salisbury's loans consist primarily of residential and commercial real estate loans located principally in northwestern Connecticut, New York and Massachusetts towns, which constitute Salisbury's service area. Salisbury offers a broad range of loan and credit facilities to borrowers in its service area, including residential mortgage loans, commercial real estate loans, construction loans, working capital loans, equipment loans, and a variety of consumer loans, including home equity lines of credit, and installment and collateral loans. All residential and commercial mortgage loans are collateralized by first or second mortgages on real estate. The ability of single family residential and consumer borrowers to honor their repayment commitments is generally dependent on the level of overall economic activity within the market area and real estate values. The ability of commercial borrowers to honor their repayment commitments is dependent on the general economy as well as the health of the real estate economic sector in Salisbury’s market area.
| 12 |
Loan Credit Quality
The composition of loans receivable by risk rating grade is as follows:
Business Activities Loans
| (in thousands) | Pass | Special mention | Substandard | Doubtful | Loss | Total | ||||||||||||||||||
| March 31, 2016 | ||||||||||||||||||||||||
| Residential 1-4 family | $ | 260,994 | $ | 6,386 | $ | 7,411 | $ | 90 | $ | — | $ | 274,881 | ||||||||||||
| Residential 5+ multifamily | 6,075 | 1,931 | 89 | — | — | 8,095 | ||||||||||||||||||
| Construction of residential 1-4 family | 8,445 | 887 | — | — | — | 9,332 | ||||||||||||||||||
| Home equity lines of credit | 32,954 | 510 | 865 | — | — | 34,329 | ||||||||||||||||||
| Residential real estate | 308,468 | 9,714 | 8,365 | 90 | — | 326,637 | ||||||||||||||||||
| Commercial | 125,703 | 5,269 | 5,343 | — | — | 136,315 | ||||||||||||||||||
| Construction of commercial | 10,025 | — | 120 | — | — | 10,145 | ||||||||||||||||||
| Commercial real estate | 135,728 | 5,269 | 5,463 | — | — | 146,460 | ||||||||||||||||||
| Farm land | 2,983 | — | 1,024 | — | — | 4,007 | ||||||||||||||||||
| Vacant land | 5,207 | 67 | 2,924 | — | — | 8,198 | ||||||||||||||||||
| Real estate secured | 452,386 | 15,050 | 17,776 | 90 | — | 485,302 | ||||||||||||||||||
| Commercial and industrial | 88,953 | 2,995 | 578 | 2 | — | 92,528 | ||||||||||||||||||
| Municipal | 9,364 | — | — | — | — | 9,364 | ||||||||||||||||||
| Consumer | 5,788 | 17 | 1 | — | — | 5,806 | ||||||||||||||||||
| Loans receivable, gross | $ | 556,491 | $ | 18,062 | $ | 18,355 | $ | 92 | $ | — | $ | 593,000 | ||||||||||||
Acquired Loans
| (in thousands) | Pass | Special mention | Substandard | Doubtful | Loss | Total | ||||||||||||||||||
| March 31, 2016 | ||||||||||||||||||||||||
| Residential 1-4 family | $ | 6,663 | $ | — | $ | 780 | $ | — | $ | — | $ | 7,443 | ||||||||||||
| Residential 5+ multifamily | 5,927 | — | 123 | — | — | 6,050 | ||||||||||||||||||
| Construction of residential 1-4 family | — | — | — | — | — | — | ||||||||||||||||||
| Home equity lines of credit | — | — | — | — | — | — | ||||||||||||||||||
| Residential real estate | 12,590 | — | 903 | — | — | 13,493 | ||||||||||||||||||
| Commercial | 77,995 | 3,067 | 5,438 | — | — | 86,500 | ||||||||||||||||||
| Construction of commercial | 4,645 | — | 258 | — | — | 4,903 | ||||||||||||||||||
| Commercial real estate | 82,640 | 3,067 | 5,696 | — | — | 91,403 | ||||||||||||||||||
| Farm land | — | — | — | — | — | — | ||||||||||||||||||
| Vacant land | — | — | — | — | — | — | ||||||||||||||||||
| Real estate secured | 95,230 | 3,067 | 6,599 | — | — | 104,896 | ||||||||||||||||||
| Commercial and industrial | 34,007 | 917 | 509 | 84 | — | 35,517 | ||||||||||||||||||
| Municipal | — | — | — | — | — | — | ||||||||||||||||||
| Consumer | 71 | 5 | — | — | — | 76 | ||||||||||||||||||
| Loans receivable, gross | $ | 129,308 | $ | 3,989 | $ | 7,108 | $ | 84 | $ | — | $ | 140,489 | ||||||||||||
| 13 |
Business Activities Loans
| (in thousands) | Pass | Special mention | Substandard | Doubtful | Loss | Total | ||||||||||||||||||
| December 31, 2015 | ||||||||||||||||||||||||
| Residential 1-4 family | $ | 248,027 | $ | 6,933 | $ | 6,444 | $ | 91 | $ | — | $ | 261,495 | ||||||||||||
| Residential 5+ multifamily | 4,507 | 1,815 | 89 | — | — | 6,411 | ||||||||||||||||||
| Construction of residential 1-4 family | 7,111 | 887 | — | — | — | 7,998 | ||||||||||||||||||
| Home equity lines of credit | 33,687 | 545 | 785 | — | — | 35,017 | ||||||||||||||||||
| Residential real estate | 293,332 | 10,180 | 7,318 | 91 | — | 310,921 | ||||||||||||||||||
| Commercial | 120,903 | 4,801 | 3,742 | — | — | 129,446 | ||||||||||||||||||
| Construction of commercial | 6,525 | — | — | — | — | 6,525 | ||||||||||||||||||
| Commercial real estate | 127,428 | 4,801 | 3,742 | — | — | 135,971 | ||||||||||||||||||
| Farm land | 2,162 | — | 1,031 | — | — | 3,193 | ||||||||||||||||||
| Vacant land | 5,567 | 69 | 2,927 | — | — | 8,563 | ||||||||||||||||||
| Real estate secured | 428,489 | 15,050 | 15,018 | 91 | — | 458,648 | ||||||||||||||||||
| Commercial and industrial | 72,887 | 1,214 | 555 | 1 | — | 74,657 | ||||||||||||||||||
| Municipal | 9,566 | — | — | — | — | 9,566 | ||||||||||||||||||
| Consumer | 6,171 | 18 | 6 | — | — | 6,195 | ||||||||||||||||||
| Loans receivable, gross | $ | 517,113 | $ | 16,282 | $ | 15,579 | $ | 92 | $ | — | $ | 549,066 | ||||||||||||
Acquired Loans
| (in thousands) | Pass | Special mention | Substandard | Doubtful | Loss | Total | ||||||||||||||||||
| December 31, 2015 | ||||||||||||||||||||||||
| Residential 1-4 family | $ | 6,824 | $ | 199 | $ | 776 | $ | — | $ | — | $ | 7,799 | ||||||||||||
| Residential 5+ multifamily | 6,136 | — | — | — | — | 6,136 | ||||||||||||||||||
| Construction of residential 1-4 family | — | — | — | — | — | — | ||||||||||||||||||
| Home equity lines of credit | — | — | — | — | — | — | ||||||||||||||||||
| Residential real estate | 12,960 | 199 | 776 | — | — | 13,935 | ||||||||||||||||||
| Commercial | 80,406 | 4,005 | 4,418 | — | — | 88,829 | ||||||||||||||||||
| Construction of commercial | 4,612 | — | 262 | — | — | 4,874 | ||||||||||||||||||
| Commercial real estate | 85,018 | 4,005 | 4,680 | — | — | 93,703 | ||||||||||||||||||
| Farm land | — | — | — | — | — | — | ||||||||||||||||||
| Vacant land | — | — | — | — | — | — | ||||||||||||||||||
| Real estate secured | 97,978 | 4,204 | 5,456 | — | — | 107,638 | ||||||||||||||||||
| Commercial and industrial | 45,363 | 875 | 443 | 83 | — | 46,764 | ||||||||||||||||||
| Municipal | — | — | — | — | — | — | ||||||||||||||||||
| Consumer | 71 | 6 | — | — | — | 77 | ||||||||||||||||||
| Loans receivable, gross | $ | 143,412 | $ | 5,085 | $ | 5,899 | $ | 83 | $ | — | $ | 154,479 | ||||||||||||
| 14 |
The composition of loans receivable by delinquency status is as follows:
Business Activities Loans
| Past due | ||||||||||||||||||||||||||||||||||||
| 180 | 30 | |||||||||||||||||||||||||||||||||||
| (in thousands) | Current | 1-29 | 30-59 | 60-89 | 90-179 | days | days | Accruing | Non- | |||||||||||||||||||||||||||
| days | days | days | days | and | and | 90 days | accrual | |||||||||||||||||||||||||||||
| over | over | and over | ||||||||||||||||||||||||||||||||||
| March 31, 2016 | ||||||||||||||||||||||||||||||||||||
| Residential 1-4 family | $ | 267,101 | $ | 1,334 | $ | 3,509 | $ | 75 | $ | — | $ | 2,862 | $ | 6,446 | $ | — | $ | 5,834 | ||||||||||||||||||
| Residential 5+ multifamily | 7,946 | 60 | — | — | — | 89 | 89 | — | — | |||||||||||||||||||||||||||
| Construction of residential 1-4 family | 9,160 | 172 | — | — | — | — | — | — | — | |||||||||||||||||||||||||||
| Home equity lines of credit | 33,395 | 434 | 218 | 43 | 150 | 89 | 500 | — | 701 | |||||||||||||||||||||||||||
| Residential real estate | 317,602 | 2,000 | 3,727 | 118 | 150 | 3,040 | 7,035 | — | 6,535 | |||||||||||||||||||||||||||
| Commercial | 133,401 | 156 | 833 | 668 | 342 | 915 | 2,758 | — | 2,557 | |||||||||||||||||||||||||||
| Construction of commercial | 10,145 | — | — | — | — | — | — | — | — | |||||||||||||||||||||||||||
| Commercial real estate | 143,546 | 156 | 833 | 668 | 342 | 915 | 2,758 | — | 2,557 | |||||||||||||||||||||||||||
| Farm land | 2,983 | 301 | — | — | — | 723 | 723 | — | 1,024 | |||||||||||||||||||||||||||
| Vacant land | 5,371 | — | 4 | — | — | 2,823 | 2,827 | — | 2,854 | |||||||||||||||||||||||||||
| Real estate secured | 469,502 | 2,457 | 4,564 | 786 | 492 | 7,501 | 13,343 | — | 12,970 | |||||||||||||||||||||||||||
| Commercial and industrial | 90,851 | 398 | 973 | 288 | — | 18 | 1,279 | — | 447 | |||||||||||||||||||||||||||
| Municipal | 9,364 | — | — | — | — | — | — | — | — | |||||||||||||||||||||||||||
| Consumer | 5,763 | 24 | 15 | 4 | — | — | 19 | — | — | |||||||||||||||||||||||||||
| Loans receivable, gross | $ | 575,480 | $ | 2,879 | $ | 5,552 | $ | 1,078 | $ | 492 | $ | 7,519 | $ | 14,641 | $ | — | $ | 13,417 | ||||||||||||||||||
Acquired Loans
| Past due | ||||||||||||||||||||||||||||||||||||
| 180 | 30 | |||||||||||||||||||||||||||||||||||
| (in thousands) | Current | 1-29 | 30-59 | 60-89 | 90-179 | days | days | Accruing | Non- | |||||||||||||||||||||||||||
| days | days | days | days | and | and | 90 days | accrual | |||||||||||||||||||||||||||||
| over | over | and over | ||||||||||||||||||||||||||||||||||
| March 31, 2016 | ||||||||||||||||||||||||||||||||||||
| Residential 1-4 family | $ | 6,664 | $ | — | $ | — | $ | — | $ | — | $ | 779 | $ | 779 | $ | — | $ | 779 | ||||||||||||||||||
| Residential 5+ multifamily | 5,168 | 759 | — | — | 123 | — | 123 | — | 123 | |||||||||||||||||||||||||||
| Construction of residential 1-4 family | — | — | — | — | — | — | — | — | — | |||||||||||||||||||||||||||
| Home equity lines of credit | — | — | — | — | — | — | — | — | — | |||||||||||||||||||||||||||
| Residential real estate | 11,832 | 759 | — | — | 123 | 779 | 902 | — | 902 | |||||||||||||||||||||||||||
| Commercial | 80,481 | 2,635 | 1,605 | — | — | 1,779 | 3,384 | — | 1,839 | |||||||||||||||||||||||||||
| Construction of commercial | 4,645 | — | — | — | — | 258 | 258 | — | 258 | |||||||||||||||||||||||||||
| Commercial real estate | 85,126 | 2,635 | 1,605 | — | — | 2,037 | 3,642 | — | 2,097 | |||||||||||||||||||||||||||
| Farm land | — | — | — | — | — | — | — | — | — | |||||||||||||||||||||||||||
| Vacant land | — | — | — | — | — | — | — | — | — | |||||||||||||||||||||||||||
| Real estate secured | 96,958 | 3,394 | 1,605 | — | 123 | 2,816 | 4,544 | — | 2,999 | |||||||||||||||||||||||||||
| Commercial and industrial | 33,725 | 844 | 123 | 825 | — | — | 948 | — | 414 | |||||||||||||||||||||||||||
| Municipal | — | — | — | — | — | — | — | — | — | |||||||||||||||||||||||||||
| Consumer | 72 | 4 | — | — | — | — | — | — | — | |||||||||||||||||||||||||||
| Loans receivable, gross | $ | 130,755 | $ | 4,242 | $ | 1,728 | $ | 825 | $ | 123 | $ | 2,816 | $ | 5,492 | $ | — | $ | 3,413 | ||||||||||||||||||
| 15 |
The composition of loans receivable by delinquency status is as follows:
Business Activities Loans
| Past due | ||||||||||||||||||||||||||||||||||||
| 180 | 30 | |||||||||||||||||||||||||||||||||||
| (in thousands) | Current | 1-29 | 30-59 | 60-89 | 90-179 | days | days | Accruing | Non- | |||||||||||||||||||||||||||
| days | days | days | days | and | and | 90 days | accrual | |||||||||||||||||||||||||||||
| over | over | and over | ||||||||||||||||||||||||||||||||||
| December 31, 2015 | ||||||||||||||||||||||||||||||||||||
| Residential 1-4 family | $ | 254,152 | $ | 1,781 | $ | 1,931 | $ | 683 | $ | 973 | $ | 1,975 | $ | 5,562 | $ | — | $ | 5,671 | ||||||||||||||||||
| Residential 5+ multifamily | 6,254 | — | 68 | — | — | 89 | 157 | — | 89 | |||||||||||||||||||||||||||
| Construction of residential 1-4 family | 7,826 | 172 | — | — | — | — | — | — | — | |||||||||||||||||||||||||||
| Home equity lines of credit | 33,744 | 363 | 306 | 101 | 113 | 390 | 910 | — | 601 | |||||||||||||||||||||||||||
| Residential real estate | 301,976 | 2,316 | 2,305 | 784 | 1,086 | 2,454 | 6,629 | — | 6,361 | |||||||||||||||||||||||||||
| Commercial | 126,440 | 1,618 | 474 | — | 233 | 681 | 1,388 | — | 2,349 | |||||||||||||||||||||||||||
| Construction of commercial | 6,525 | — | — | — | — | — | — | — | — | |||||||||||||||||||||||||||
| Commercial real estate | 132,965 | 1,618 | 474 | — | 233 | 681 | 1,388 | — | 2,349 | |||||||||||||||||||||||||||
| Farm land | 2,172 | 298 | — | — | — | 723 | 723 | — | 1,031 | |||||||||||||||||||||||||||
| Vacant land | 5,734 | — | 6 | — | — | 2,823 | 2,829 | — | 2,855 | |||||||||||||||||||||||||||
| Real estate secured | 442,847 | 4,232 | 2,785 | 784 | 1,319 | 6,681 | 11,569 | — | 12,596 | |||||||||||||||||||||||||||
| Commercial and industrial | 73,698 | 906 | 35 | — | — | 18 | 53 | — | 461 | |||||||||||||||||||||||||||
| Municipal | 9,566 | — | — | — | — | — | — | — | — | |||||||||||||||||||||||||||
| Consumer | 6,096 | 61 | 21 | 17 | — | — | 38 | — | 80 | |||||||||||||||||||||||||||
| Loans receivable, gross | $ | 532,207 | $ | 5,199 | $ | 2,841 | $ | 801 | $ | 1,319 | $ | 6,699 | $ | 11,660 | $ | — | $ | 13,137 | ||||||||||||||||||
Acquired Loans | ||||||||||||||||||||||||||||||||||||
| Past due | ||||||||||||||||||||||||||||||||||||
| 180 | 30 | |||||||||||||||||||||||||||||||||||
| (in thousands) | Current | 1-29 | 30-59 | 60-89 | 90-179 | days | days | Accruing | Non- | |||||||||||||||||||||||||||
| days | days | days | days | and | and | 90 days | accrual | |||||||||||||||||||||||||||||
| over | over | and over | ||||||||||||||||||||||||||||||||||
| December 31, 2015 | ||||||||||||||||||||||||||||||||||||
| Residential 1-4 family | $ | 6,823 | $ | — | $ | — | $ | 110 | $ | — | $ | 866 | $ | 976 | $ | 90 | $ | 776 | ||||||||||||||||||
| Residential 5+ multifamily | 6,136 | — | — | — | — | — | — | — | — | |||||||||||||||||||||||||||
| Construction of residential 1-4 family | — | — | — | — | — | — | — | — | — | |||||||||||||||||||||||||||
| Home equity lines of credit | — | — | — | — | — | — | — | — | — | |||||||||||||||||||||||||||
| Residential real estate | 12,959 | — | — | 110 | — | 866 | 976 | 90 | 776 | |||||||||||||||||||||||||||
| Commercial | 81,140 | 4,848 | 916 | — | — | 1,925 | 2,841 | — | 2,000 | |||||||||||||||||||||||||||
| Construction of commercial | 4,612 | — | — | — | — | 262 | 262 | — | 262 | |||||||||||||||||||||||||||
| Commercial real estate | 85,752 | 4,848 | 916 | — | — | 2,187 | 3,103 | — | 2,262 | |||||||||||||||||||||||||||
| Farm land | — | — | — | — | — | — | — | — | — | |||||||||||||||||||||||||||
| Vacant land | — | — | — | — | — | — | — | — | — | |||||||||||||||||||||||||||
| Real estate secured | 98,711 | 4,848 | 916 | 110 | — | 3,053 | 4,079 | 90 | 3,038 | |||||||||||||||||||||||||||
| Commercial and industrial | 46,128 | 471 | 83 | 82 | — | — | 165 | — | — | |||||||||||||||||||||||||||
| Municipal | — | — | — | — | — | — | — | — | — | |||||||||||||||||||||||||||
| Consumer | 77 | — | — | — | — | — | — | — | — | |||||||||||||||||||||||||||
| Loans receivable, gross | $ | 144,916 | $ | 5,319 | $ | 999 | $ | 192 | $ | — | 3,053 | $ | 4,244 | $ | 90 | $ | 3,038 | |||||||||||||||||||
Interest on non-accrual loans that would have been recorded as additional interest income for the quarters ended March 31, 2016 and 2015 had the loans been current in accordance with their original terms totaled $365,000 and $135,000, respectively.
| 16 |
Troubled Debt Restructurings
Troubled debt restructurings occurring during the periods are as follows:
Business Activities Loans
| March 31, 2016 | March 31, 2015 | |||||||||||||||||||||||
| (in thousands) | Quantity | Pre- modification balance | Post- modification balance | Quantity | Pre- modification balance | Post- modification balance | ||||||||||||||||||
| Residential real estate | 1 | $ | 89 | $ | 89 | 1 | $ | 51 | $ | 51 | ||||||||||||||
| Commercial real estate | — | — | — | 1 | 297 | 297 | ||||||||||||||||||
| Home equity lines of credit | — | — | — | — | — | — | ||||||||||||||||||
| Troubled debt restructurings | 1 | $ | 89 | $ | 89 | 2 | $ | 348 | $ | 348 | ||||||||||||||
| Refinance | 1 | $ | 89 | $ | 89 | — | — | — | ||||||||||||||||
| Rate reduction and term extension | — | — | — | 1 | $ | 297 | $ | 297 | ||||||||||||||||
| Debt consolidation and term extension | — | — | — | — | — | — | ||||||||||||||||||
| Debt consolidation, rate reduction, term extension and note bifurcation | — | — | — | 1 | 51 | 51 | ||||||||||||||||||
| Term extension | — | — | — | — | — | — | ||||||||||||||||||
| Troubled debt restructurings | 1 | $ | 89 | $ | 89 | 2 | $ | 348 | $ | 348 | ||||||||||||||
Acquired Loans
| March 31, 2016 | March 31, 2015 | |||||||||||||||||||||||
| (in thousands) | Quantity | Pre- modification balance | Post- modification balance | Quantity | Pre- modification balance | Post- modification balance | ||||||||||||||||||
| Commercial real estate | — | $ | — | $ | — | — | $ | — | $ | — | ||||||||||||||
| Troubled debt restructurings | — | $ | — | $ | — | — | $ | — | $ | — | ||||||||||||||
| Rate reduction and term extension | — | $ | — | $ | — | — | $ | — | $ | — | ||||||||||||||
| Troubled debt restructurings | — | $ | — | $ | — | — | $ | — | $ | — | ||||||||||||||
One loan has been modified as a troubled debt restructure during 2016 and was not past due at March 31, 2016.
Allowance for Loan Losses
Changes in the allowance for loan losses are as follows:
| Business Activities Loans | Acquired Loans | |||||||||||||||||||||||||||||||||||||||
| (in thousands) | March 31, 2016 | March 31, 2016 | ||||||||||||||||||||||||||||||||||||||
| Beginning balance | Provision (benefit) | Charge- offs | Reco- veries | Ending balance | Beginning balance | Provision (benefit) | Charge- offs | Reco- veries | Ending balance | |||||||||||||||||||||||||||||||
| Residential | $ | 2,477 | $ | 86 | $ | (106 | ) | $ | 1 | $ | 2,458 | $ | 79 | $ | (10 | ) | $ | — | $ | — | $ | 69 | ||||||||||||||||||
| Commercial | 1,466 | 154 | (36 | ) | 1 | 1,585 | 132 | 56 | (96 | ) | 2 | 94 | ||||||||||||||||||||||||||||
| Land | 188 | (1 | ) | (23 | ) | — | 164 | — | — | — | — | — | ||||||||||||||||||||||||||||
| Real estate | 4,131 | 239 | (165 | ) | 2 | 4,207 | 211 | 46 | (96 | ) | 2 | 163 | ||||||||||||||||||||||||||||
| Commercial and industrial | 683 | 125 | (31 | ) | 4 | 781 | 24 | 114 | (1 | ) | 4 | 141 | ||||||||||||||||||||||||||||
| Municipal | 61 | (2 | ) | — | — | 59 | — | — | — | — | — | |||||||||||||||||||||||||||||
| Consumer | 124 | 11 | (23 | ) | 2 | 114 | — | — | — | — | — | |||||||||||||||||||||||||||||
| Unallocated | 482 | (70 | ) | — | — | 412 | — | — | — | — | — | |||||||||||||||||||||||||||||
| Totals | $ | 5,481 | $ | 303 | $ | (219 | ) | $ | 8 | $ | 5,573 | $ | 235 | $ | 160 | $ | (97 | ) | $ | 6 | $ | 304 | ||||||||||||||||||
| 17 |
| Business Activities Loans | Acquired Loans | |||||||||||||||||||||||||||||||||||||||
| (in thousands) | December 31, 2015 | December 31, 2015 | ||||||||||||||||||||||||||||||||||||||
| Beginning balance | Provision (benefit) | Charge- offs | Reco- veries | Ending balance | Beginning balance | Provision (benefit) | Charge- offs | Reco- veries | Ending balance | |||||||||||||||||||||||||||||||
| Residential | $ | 2,306 | $ | 746 | $ | (698 | ) | $ | 123 | $ | 2,477 | $ | — | $ | 79 | $ | — | $ | — | $ | 79 | |||||||||||||||||||
| Commercial | 1,697 | (18 | ) | (214 | ) | 1 | 1,466 | 7 | 136 | (16 | ) | 5 | 132 | |||||||||||||||||||||||||||
| Land | 164 | 157 | (133 | ) | — | 188 | — | — | — | — | — | |||||||||||||||||||||||||||||
| Real estate | 4,167 | 885 | (1,045 | ) | 124 | 4,131 | 7 | 215 | (16 | ) | 5 | 211 | ||||||||||||||||||||||||||||
| Commercial and industrial | 583 | (295 | ) | (69 | ) | 464 | 683 | 14 | (24 | ) | — | 34 | 24 | |||||||||||||||||||||||||||
| Municipal | 61 | — | — | — | 61 | — | — | — | — | — | ||||||||||||||||||||||||||||||
| Consumer | 117 | 71 | (82 | ) | 18 | 124 | — | (8 | ) | — | 8 | — | ||||||||||||||||||||||||||||
| Unallocated | 409 | 73 | — | — | 482 | — | — | — | — | — | ||||||||||||||||||||||||||||||
| Totals | $ | 5,337 | $ | 734 | $ | (1,196 | ) | $ | 606 | $ | 5,481 | $ | 21 | $ | 183 | $ | (16 | ) | $ | 47 | $ | 235 | ||||||||||||||||||
The composition of loans receivable and the allowance for loan losses is as follows:
Business Activities Loans
| (in thousands) | Collectively evaluated | Individually evaluated | Total portfolio | |||||||||||||||||||||
| Loans | Allowance | Loans | Allowance | Loans | Allowance | |||||||||||||||||||
| March 31, 2016 | ||||||||||||||||||||||||
| Residential 1-4 family | $ | 266,482 | $ | 1,534 | $ | 8,399 | $ | 474 | $ | 274,881 | $ | 2,008 | ||||||||||||
| Residential 5+ multifamily | 6,330 | 45 | 1,765 | — | 8,095 | 45 | ||||||||||||||||||
| Construction of residential 1-4 family | 9,332 | 75 | — | — | 9,332 | 75 | ||||||||||||||||||
| Home equity lines of credit | 33,511 | 309 | 818 | 21 | 34,329 | 330 | ||||||||||||||||||
| Residential real estate | 315,655 | 1,963 | 10,982 | 495 | 326,637 | 2,458 | ||||||||||||||||||
| Commercial | 132,084 | 1,377 | 4,231 | 80 | 136,315 | 1,457 | ||||||||||||||||||
| Construction of commercial | 10,025 | 127 | 120 | 1 | 10,145 | 128 | ||||||||||||||||||
| Commercial real estate | 142,109 | 1,504 | 4,351 | 81 | 146,460 | 1,585 | ||||||||||||||||||
| Farm land | 2,983 | 24 | 1,024 | 1 | 4,007 | 25 | ||||||||||||||||||
| Vacant land | 5,125 | 120 | 3,073 | 19 | 8,198 | 139 | ||||||||||||||||||
| Real estate secured | 465,872 | 3,611 | 19,430 | 596 | 485,302 | 4,207 | ||||||||||||||||||
| Commercial and industrial | 92,019 | 780 | 509 | 1 | 92,528 | 781 | ||||||||||||||||||
| Municipal | 9,364 | 59 | — | — | 9,364 | 59 | ||||||||||||||||||
| Consumer | 5,806 | 114 | — | — | 5,806 | 114 | ||||||||||||||||||
| Unallocated allowance | — | 412 | — | — | — | 412 | ||||||||||||||||||
| Totals | $ | 573,061 | $ | 4,976 | $ | 19,939 | $ | 597 | $ | 593,000 | $ | 5,573 | ||||||||||||
| 18 |
Acquired Loans
| (in thousands) | Collectively evaluated | Individually evaluated | ASC 310-30 loans | Total portfolio | ||||||||||||||||||||||||||||
| Loans | Allowance | Loans | Allowance | Loans | Allowance | Loans | Allowance | |||||||||||||||||||||||||
| March 31, 2016 | ||||||||||||||||||||||||||||||||
| Residential 1-4 family | $ | 6,664 | $ | — | $ | 779 | $ | 69 | $ | — | $ | — | $ | 7,443 | $ | 69 | ||||||||||||||||
| Residential 5+ multifamily | 5,927 | — | 123 | — | — | — | 6,050 | — | ||||||||||||||||||||||||
| Construction of residential 1-4 family | — | — | — | — | — | — | — | — | ||||||||||||||||||||||||
| Home equity lines of credit | — | — | — | — | — | — | — | — | ||||||||||||||||||||||||
| Residential real estate | 12,591 | — | 902 | 69 | — | — | 13,493 | 69 | ||||||||||||||||||||||||
| Commercial | 79,134 | 19 | 2,585 | 27 | 4,781 | 44 | 86,500 | 90 | ||||||||||||||||||||||||
| Construction of commercial | 4,645 | 4 | 258 | — | — | — | 4,903 | 4 | ||||||||||||||||||||||||
| Commercial real estate | 83,779 | 23 | 2,843 | 27 | 4,781 | 44 | 91,403 | 94 | ||||||||||||||||||||||||
| Farm land | — | — | — | — | — | — | — | — | ||||||||||||||||||||||||
| Vacant land | — | — | — | — | — | — | — | — | ||||||||||||||||||||||||
| Real estate secured | 96,370 | 23 | 3,745 | 96 | 4,781 | 44 | 104,896 | 163 | ||||||||||||||||||||||||
| Commercial and industrial | 34,475 | 21 | 414 | 114 | 628 | 6 | 35,517 | 141 | ||||||||||||||||||||||||
| Municipal | — | — | — | — | — | — | — | — | ||||||||||||||||||||||||
| Consumer | 60 | — | — | — | 16 | — | 76 | — | ||||||||||||||||||||||||
| Unallocated allowance | — | — | — | — | — | — | — | — | ||||||||||||||||||||||||
| Totals | $ | 130,905 | $ | 44 | $ | 4,159 | $ | 210 | $ | 5,425 | $ | 50 | $ | 140,489 | $ | 304 | ||||||||||||||||
Business Activities Loans
| (in thousands) | Collectively evaluated | Individually evaluated | Total portfolio | |||||||||||||||||||||
| Loans | Allowance | Loans | Allowance | Loans | Allowance | |||||||||||||||||||
| December 31, 2015 | ||||||||||||||||||||||||
| Residential 1-4 family | $ | 253,156 | $ | 1,415 | $ | 8,339 | $ | 610 | $ | 261,495 | $ | 2,025 | ||||||||||||
| Residential 5+ multifamily | 4,640 | 33 | 1,771 | — | 6,411 | 33 | ||||||||||||||||||
| Construction of residential 1-4 family | 7,998 | 65 | — | — | 7,998 | 65 | ||||||||||||||||||
| Home equity lines of credit | 34,298 | 286 | 719 | 68 | 35,017 | 354 | ||||||||||||||||||
| Residential real estate | 300,092 | 1,799 | 10,829 | 678 | 310,921 | 2,477 | ||||||||||||||||||
| Commercial | 125,173 | 1,265 | 4,273 | 113 | 129,446 | 1,378 | ||||||||||||||||||
| Construction of commercial | 6,403 | 87 | 122 | 1 | 6,525 | 88 | ||||||||||||||||||
| Commercial real estate | 131,576 | 1,352 | 4,395 | 114 | 135,971 | 1,466 | ||||||||||||||||||
| Farm land | 2,162 | 23 | 1,031 | 14 | 3,193 | 37 | ||||||||||||||||||
| Vacant land | 5,486 | 122 | 3,077 | 29 | 8,563 | 151 | ||||||||||||||||||
| Real estate secured | 439,316 | 3,296 | 19,332 | 835 | 458,648 | 4,131 | ||||||||||||||||||
| Commercial and industrial | 74,131 | 673 | 526 | 10 | 74,657 | 683 | ||||||||||||||||||
| Municipal | 9,566 | 61 | — | — | 9,566 | 61 | ||||||||||||||||||
| Consumer | 6,115 | 124 | 80 | — | 6,195 | 124 | ||||||||||||||||||
| Unallocated allowance | — | 482 | — | — | — | 482 | ||||||||||||||||||
| Totals | $ | 529,128 | $ | 4,636 | $ | 19,938 | $ | 845 | $ | 549,066 | $ | 5,481 | ||||||||||||
| 19 |
Acquired Loans
| (in thousands) | Collectively evaluated | Individually evaluated | ASC 310-30 loans | Total portfolio | ||||||||||||||||||||||||||||
| Loans | Allowance | Loans | Allowance | Loans | Allowance | Loans | Allowance | |||||||||||||||||||||||||
| December 31, 2015 | ||||||||||||||||||||||||||||||||
| Residential 1-4 family | $ | 7,023 | $ | — | $ | 776 | $ | 79 | $ | — | $ | — | $ | 7,799 | $ | 79 | ||||||||||||||||
| Residential 5+ multifamily | 6,136 | — | — | — | — | — | 6,136 | — | ||||||||||||||||||||||||
| Construction of residential 1-4 family | — | — | — | — | — | — | — | — | ||||||||||||||||||||||||
| Home equity lines of credit | — | — | — | — | — | — | — | — | ||||||||||||||||||||||||
| Residential real estate | 13,159 | — | 776 | 79 | — | — | 13,935 | 79 | ||||||||||||||||||||||||
| Commercial | 81,300 | 19 | 2,742 | 107 | 4,787 | 2 | 88,829 | 128 | ||||||||||||||||||||||||
| Construction of commercial | 4,612 | 4 | 262 | — | — | — | 4,874 | 4 | ||||||||||||||||||||||||
| Commercial real estate | 85,912 | 23 | 3,004 | 107 | 4,787 | 2 | 93,703 | 132 | ||||||||||||||||||||||||
| Farm land | — | — | — | — | — | — | — | — | ||||||||||||||||||||||||
| Vacant land | — | — | — | — | — | — | — | — | ||||||||||||||||||||||||
| Real estate secured | 99,071 | 23 | 3,780 | 186 | 4,787 | 2 | 107,638 | 211 | ||||||||||||||||||||||||
| Commercial and industrial | 45,650 | 24 | — | — | 1,114 | — | 46,764 | 24 | ||||||||||||||||||||||||
| Municipal | — | — | — | — | — | — | — | — | ||||||||||||||||||||||||
| Consumer | 61 | — | — | — | 16 | — | 77 | — | ||||||||||||||||||||||||
| Unallocated allowance | — | — | — | — | — | — | — | — | ||||||||||||||||||||||||
| Totals | $ | 144,782 | $ | 47 | $ | 3,780 | $ | 186 | $ | 5,917 | $ | 2 | $ | 154,479 | $ | 235 | ||||||||||||||||
The credit quality segments of loans receivable and the allowance for loan losses are as follows:
Business Activities Loans
| March 31, 2016 (in thousands) | Collectively evaluated | Individually evaluated | Total portfolio | |||||||||||||||||||||
| Loans | Allowance | Loans | Allowance | Loans | Allowance | |||||||||||||||||||
| Performing loans | $ | 569,493 | $ | 4,429 | $ | — | $ | — | $ | 569,493 | $4,429 | |||||||||||||
| Potential problem loans | 3,568 | 135 | — | — | 3,568 | 135 | ||||||||||||||||||
| Impaired loans | — | — | 19,939 | 597 | 19,939 | 597 | ||||||||||||||||||
| Unallocated allowance | — | 412 | — | — | — | 412 | ||||||||||||||||||
| Totals | $ | 573,061 | $ | 4,976 | $ | 19,939 | $ | 597 | $ | 593,000 | $5,573 | |||||||||||||
Acquired Loans
| March 31, 2016 (in thousands) | Collectively evaluated | Individually evaluated | Total portfolio | |||||||||||||||||||||
| Loans | Allowance | Loans | Allowance | Loans | Allowance | |||||||||||||||||||
| Performing loans | $ | 133,381 | $ | 51 | $ | — | $ | — | $ | 133,381 | $ | 51 | ||||||||||||
| Potential problem loans | 2,949 | 42 | — | — | 2,949 | 42 | ||||||||||||||||||
| Impaired loans | — | — | 4,159 | 211 | 4,159 | 211 | ||||||||||||||||||
| Unallocated allowance | — | — | — | — | — | — | ||||||||||||||||||
| Totals | $ | 136,330 | $ | 93 | $ | 4,159 | $ | 211 | $ | 140,489 | $ | 304 | ||||||||||||
Business Activities Loans
| December 31, 2015 (in thousands) | Collectively evaluated | Individually evaluated | Total portfolio | |||||||||||||||||||||
| Loans | Allowance | Loans | Allowance | Loans | Allowance | |||||||||||||||||||
| Performing loans | $ | 527,905 | $ | 4,110 | $ | — | $ | — | $ | 527,905 | $ | 4,110 | ||||||||||||
| Potential problem loans | 1,223 | 44 | — | — | 1,223 | 44 | ||||||||||||||||||
| Impaired loans | — | — | 19,938 | 845 | 19,938 | 845 | ||||||||||||||||||
| Unallocated allowance | — | 482 | — | — | — | 482 | ||||||||||||||||||
| Totals | $ | 529,128 | $ | 4,636 | $ | 19,938 | $ | 845 | $ | 549,066 | $ | 5,481 | ||||||||||||
| 20 |
Acquired Loans
| December 31, 2015 (in thousands) | Collectively evaluated | Individually evaluated | Total portfolio | |||||||||||||||||||||
| Loans | Allowance | Loans | Allowance | Loans | Allowance | |||||||||||||||||||
| Performing loans | $ | 148,580 | $ | 46 | $ | — | $ | — | $ | 148,580 | $ | 46 | ||||||||||||
| Potential problem loans | 2,119 | 2 | — | — | 2,119 | 2 | ||||||||||||||||||
| Impaired loans | — | — | 3,780 | 187 | 3,780 | 187 | ||||||||||||||||||
| Unallocated allowance | — | — | — | — | — | — | ||||||||||||||||||
| Totals | $ | 150,699 | $ | 48 | $ | 3,780 | $ | 187 | $ | 154,479 | $ | 235 | ||||||||||||
A specific valuation allowance is established for the impairment amount of each impaired loan, calculated using the fair value of expected cash flows or collateral, in accordance with the most likely means of recovery. Certain data with respect to loans individually evaluated for impairment is as follows:
Business Activities Loans
| Impaired loans with specific allowance | Impaired loans with no specific allowance | |||||||||||||||||||||||||||||||||||
| (in thousands) | Loan balance | Specific | Income | Loan balance | Income | |||||||||||||||||||||||||||||||
| Book | Note | Average | allowance | recognized | Book | Note | Average | recognized | ||||||||||||||||||||||||||||
| March 31, 2016 | ||||||||||||||||||||||||||||||||||||
| Residential | $ | 7,155 | $ | 7,787 | $ | 8,032 | $ | 474 | $ | 18 | $ | 3,009 | $ | 3,230 | $ | 2,740 | $ | 20 | ||||||||||||||||||
| Home equity lines of credit | 488 | 513 | 503 | 21 | — | 330 | 347 | 296 | — | |||||||||||||||||||||||||||
| Residential real estate | 7,643 | 8,300 | 8,535 | 495 | 18 | 3,339 | 3,577 | 3,036 | 20 | |||||||||||||||||||||||||||
| Commercial | 3,095 | 3,412 | 3,058 | 80 | 13 | 1,136 | 1,403 | 1,195 | 7 | |||||||||||||||||||||||||||
| Construction of commercial | 120 | 126 | 121 | 1 | 2 | — | — | — | — | |||||||||||||||||||||||||||
| Farm land | 11 | 13 | 372 | 1 | — | 1,013 | 1,109 | 656 | — | |||||||||||||||||||||||||||
| Vacant land | 2,870 | 3,859 | 2,870 | 19 | 1 | 203 | 238 | 205 | — | |||||||||||||||||||||||||||
| Real estate secured | 13,739 | 15,710 | 14,956 | 596 | 34 | 5,691 | 6,327 | 5,092 | 27 | |||||||||||||||||||||||||||
| Commercial and industrial | 94 | 98 | 95 | 1 | — | 415 | 468 | 421 | 1 | |||||||||||||||||||||||||||
| Consumer | — | — | — | — | — | — | — | 20 | — | |||||||||||||||||||||||||||
| Totals | $ | 13,833 | $ | 15,808 | $ | 15,051 | $ | 597 | $ | 34 | $ | 6,106 | $ | 6,795 | $ | 5,533 | $ | 28 | ||||||||||||||||||
Acquired Loans
| Impaired loans with specific allowance | Impaired loans with no specific allowance | |||||||||||||||||||||||||||||||||||
| (in thousands) | Loan balance | Specific | Income | Loan balance | Income | |||||||||||||||||||||||||||||||
| Book | Note | Average | allowance | recognized | Book | Note | Average | recognized | ||||||||||||||||||||||||||||
| March 31, 2016 | ||||||||||||||||||||||||||||||||||||
| Residential | $ | 602 | $ | 716 | $ | 645 | $ | 69 | $ | — | $ | 300 | $ | 300 | $ | 263 | $ | — | ||||||||||||||||||
| Home equity lines of credit | — | — | — | — | — | — | — | — | — | |||||||||||||||||||||||||||
| Residential real estate | 602 | 716 | 645 | 69 | — | 300 | 300 | 263 | — | |||||||||||||||||||||||||||
| Commercial | 331 | 723 | 547 | 27 | 4 | 2,255 | 2,853 | 2,176 | 13 | |||||||||||||||||||||||||||
| Construction of commercial | — | — | — | — | — | 258 | 271 | 259 | — | |||||||||||||||||||||||||||
| Farm land | — | — | — | — | — | — | — | — | — | |||||||||||||||||||||||||||
| Vacant land | — | — | — | — | — | — | — | — | — | |||||||||||||||||||||||||||
| Real estate secured | 933 | 1,439 | 1,192 | 96 | 4 | 2,813 | 3,424 | 2,698 | 13 | |||||||||||||||||||||||||||
| Commercial and industrial | 332 | 439 | 83 | 114 | — | — | — | — | — | |||||||||||||||||||||||||||
| Consumer | — | — | — | — | — | — | — | — | — | |||||||||||||||||||||||||||
| Totals | $ | 1,265 | $ | 1,878 | $ | 1,275 | $ | 210 | $ | 4 | $ | 2,813 | $ | 3,424 | $ | 2,698 | $ | 13 | ||||||||||||||||||
| 21 |
Business Activities Loans
| Impaired loans with specific allowance | Impaired loans with no specific allowance | |||||||||||||||||||||||||||||||||||
| (in thousands) | Loan balance | Specific | Income | Loan balance | Income | |||||||||||||||||||||||||||||||
| Book | Note | Average | allowance | recognized | Book | Note | Average | recognized | ||||||||||||||||||||||||||||
| December 31, 2015 | ||||||||||||||||||||||||||||||||||||
| Residential 1-4 family | $ | 7,482 | $ | 8,094 | $ | 6,449 | $ | 610 | $ | 167 | $ | 2,628 | $ | 2,770 | $ | 3,089 | $ | 98 | ||||||||||||||||||
| Home equity lines of credit | 535 | 659 | 260 | 68 | 9 | 184 | 199 | 423 | 2 | |||||||||||||||||||||||||||
| Residential real estate | 8,017 | 8,753 | 6,709 | 678 | 176 | 2,812 | 2,969 | 3,512 | 100 | |||||||||||||||||||||||||||
| Commercial | 3,131 | 3,405 | 2,850 | 113 | 123 | 1,142 | 1,393 | 1,624 | 49 | |||||||||||||||||||||||||||
| Construction of commercial | 122 | 128 | 9 | 1 | 7 | — | — | 116 | — | |||||||||||||||||||||||||||
| Farm land | 733 | 773 | 400 | 14 | 25 | 298 | 352 | 461 | — | |||||||||||||||||||||||||||
| Vacant land | 2,870 | 3,836 | 3,015 | 29 | 3 | 207 | 241 | 72 | 9 | |||||||||||||||||||||||||||
| Real estate secured | 14,873 | 16,895 | 12,983 | 835 | 334 | 4,459 | 4,955 | 5,785 | 158 | |||||||||||||||||||||||||||
| Commercial and industrial | 95 | 98 | 145 | 10 | 4 | 431 | 481 | 383 | 22 | |||||||||||||||||||||||||||
| Consumer | — | — | — | — | — | 80 | 108 | 12 | 1 | |||||||||||||||||||||||||||
| Totals | $ | 14,968 | $ | 16,993 | $ | 13,128 | $ | 845 | $ | 338 | $ | 4,970 | $ | 5,544 | $ | 6,180 | $ | 181 | ||||||||||||||||||
Acquired Loans
| Impaired loans with specific allowance | Impaired loans with no specific allowance | |||||||||||||||||||||||||||||||||||
| (in thousands) | Loan balance | Specific | Income | Loan balance | Income | |||||||||||||||||||||||||||||||
| Book | Note | Average | allowance | recognized | Book | Note | Average | recognized | ||||||||||||||||||||||||||||
| December 31, 2015 | ||||||||||||||||||||||||||||||||||||
| Residential 1-4 family | $ | 599 | $ | 716 | $ | 273 | $ | 79 | $ | — | $ | 177 | $ | 177 | $ | 376 | $ | 7 | ||||||||||||||||||
| Home equity lines of credit | — | — | — | — | — | — | — | — | — | |||||||||||||||||||||||||||
| Residential real estate | 599 | 716 | 273 | 79 | — | 177 | 177 | 376 | 7 | |||||||||||||||||||||||||||
| Commercial | 675 | 826 | 698 | 107 | 34 | 2,067 | 2,843 | 2,011 | 32 | |||||||||||||||||||||||||||
| Construction of commercial | — | — | — | — | — | 262 | 273 | 167 | 22 | |||||||||||||||||||||||||||
| Farm land | — | — | — | — | — | — | — | — | — | |||||||||||||||||||||||||||
| Vacant land | — | — | — | — | — | — | — | — | — | |||||||||||||||||||||||||||
| Real estate secured | 1,274 | 1,542 | 971 | 186 | 34 | 2,506 | 3,293 | 2,554 | 61 | |||||||||||||||||||||||||||
| Commercial and industrial | — | — | 6 | — | — | — | 4 | — | — | |||||||||||||||||||||||||||
| Consumer | — | — | — | — | ||||||||||||||||||||||||||||||||