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EX-32 - FIRST COMMUNITY CORP /SC/e17268_ex32.htm
EX-31.2 - FIRST COMMUNITY CORP /SC/e17268_ex31-2.htm
EX-31.1 - FIRST COMMUNITY CORP /SC/e17268_ex31-1.htm

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

FORM 10-Q

 

 

 (Mark One)  
x  Quarterly report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 for the quarterly period ended March 31, 2017  
     
o  Transition report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 for the transition period from ____ to _____  

 

Commission File No. 000-28344

 

FIRST COMMUNITY CORPORATION
(Exact name of registrant as specified in its charter)
 
South Carolina 57-1010751

(State or other jurisdiction of incorporation
or organization)

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

5455 Sunset Boulevard, Lexington, South Carolina 29072

(Address of principal executive offices)      (Zip Code)

 

(803) 951-2265

(Registrant’s telephone number, including area code)

 

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

 

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 o

 

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 (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).   x Yes   o 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 o   Accelerated filer x  
Non-accelerated filer   o (Do not check if a smaller reporting company) Smaller reporting company o  
    Emerging growth company o  

 

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. o

 

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

 

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date: On May 9, 2017, 6,697,130 shares of the issuer’s common stock, par value $1.00 per share, were issued and outstanding.

 
 

TABLE OF CONTENTS

   
  Page
PART I - FINANCIAL INFORMATION 3

Item 1. Financial Statements

3
Consolidated Balance Sheets 3
  Consolidated Statements of Income 4
  Consolidated Statements of Comprehensive Income 5
  Consolidated Statements of Changes in Shareholders’ Equity 6
  Consolidated Statements of Cash Flows 7
  Notes to Consolidated Financial Statements 8
Item 2.  Management’s Discussion and Analysis of Financial Condition and Results of Operations 35
Item 3.  Quantitative and Qualitative Disclosures About Market Risk   49
Item 4.  Controls and Procedures 49
     
PART II – OTHER INFORMATION 50
Item 1.  Legal Proceedings 50
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 50
     
SIGNATURES 51
INDEX TO EXHIBITS  
EX-31.1 RULE 13A-14(A) CERTIFICATION OF PRINCIPAL EXECUTIVE OFFICER  
EX-31.2 RULE 13A-14(A) CERTIFICATION OF PRINCIPAL FINANCIAL OFFICER  
EX-32 SECTION 1350 CERTIFICATIONS  
 
 

PART I - FINANCIAL INFORMATION

Item 1. Financial Statements

FIRST COMMUNITY CORPORATION
CONSOLIDATED BALANCE SHEETS
 
   March 31,     
(Dollars in thousands, except par value)  2017   December 31, 
   (Unaudited)   2016 
ASSETS          
Cash and due from banks  $12,022   $11,925 
Interest-bearing bank balances   17,435    9,475 
Federal funds sold and securities purchased under agreements to resell   600    599 
Investment securities held-to-maturity   17,148    17,193 
Investment securities available-for-sale   242,896    253,394 
Other investments, at cost   2,494    1,809 
Loans held for sale   4,191    5,707 
Loans   555,298    546,709 
Less, allowance for loan losses   5,368    5,214 
Net loans   549,930    541,495 
Property, furniture and equipment - net   30,765    29,833 
Land held for sale   1,055    1,055 
Bank owned life insurance   21,050    20,905 
Other real estate owned   1,156    1,146 
Intangible assets   1,027    1,102 
Goodwill   5,078    5,078 
Other assets   8,066    14,077 
Total assets  $914,913   $914,793 
LIABILITIES          
Deposits:          
Non-interest bearing  $192,165   $182,915 
Interest bearing   583,446    583,707 
Total deposits   775,611    766,622 
Securities sold under agreements to repurchase   19,388    19,527 
Federal Home Loan Bank advances   15,548    24,035 
Junior subordinated debt   14,964    14,964 
Other liabilities   6,271    7,784 
Total liabilities   831,782    832,932 
SHAREHOLDERS’ EQUITY          
Preferred stock, par value $1.00 per share, 10,000,000 shares authorized; none issued and outstanding        
Common stock, par value $1.00 per share; 10,000,000 shares authorized; issued and outstanding 6,697,130 at March 31, 2017 6,708,393 at December 31, 2016   6,697    6,708 
Common stock warrants issued   46    46 
Nonvested restricted stock   (256)   (220)
Additional paid in capital   75,786    75,991 
Retained earnings   1,732    573 
Accumulated other comprehensive loss   (874)   (1,237)
Total shareholders’ equity   83,131    81,861 
Total liabilities and shareholders’ equity  $914,913   $914,793 

 

See Notes to Consolidated Financial Statements

3
 
FIRST COMMUNITY CORPORATION
CONSOLIDATED STATEMENTS OF INCOME (Unaudited)
         
(Dollars in thousands, except per share amounts)  Three Months ended March 31, 
   2017   2016 
Interest and dividend income:          
Loans, including fees  $6,326   $5,681 
Investment securities - taxable   945    948 
Investment securities - non taxable   473    485 
Federal funds sold and securities purchased under resale agreements   19    14 
Other   10    9 
Total interest income   7,773    7,137 
Interest expense:          
Deposits   442    448 
Federal funds sold and securities sold under agreement to repurchase   10    10 
Other borrowed money   260    342 
Total interest expense   712    800 
Net interest income   7,061    6,337 
Provision for loan losses   116    140 
Net interest income after provision for loan losses   6,945    6,197 
Non-interest income:          
Deposit service charges   320    347 
Mortgage banking income   670    665 
Investment advisory and non-deposit commissions   258    291 
Gain on sale of securities   54    59 
Gain on sale of other real estate owned   20    3 
Loss on early extinguishment of debt   (58)    
Other   714    724 
Total non-interest income   1,978    2,089 
Non-interest expense:          
Salaries and employee benefits   4,086    3,751 
Occupancy   527    559 
Equipment   446    429 
Marketing and public relations   221    94 
FDIC Assessment   78    138 
Other real estate expense   27    51 
Amortization of intangibles   75    83 
Other   1,260    1,237 
Total non-interest expense   6,720    6,342 
Net income before tax   2,203    1,944 
Income taxes   447    476 
Net income  $1,756   $1,468 
           
Basic earnings per common share  $0.27   $0.22 
Diluted earnings per common share  $0.26   $0.22 
           

See Notes to Consolidated Financial Statements

4
 
FIRST COMMUNITY CORPORATION

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(Unaudited) 

        
 (Dollars in thousands)  Three months ended March 31, 
   2017   2016 
         
Net income  $1,756   $1,468 
           
Other comprehensive income:          
Unrealized gain during the period on available-for-sale securities, net of tax of $206 and $946, respectively   399    1,836 
           
Less: Reclassification adjustment for gain on available-for-sale securities included in net income, net of tax expense of $18 and $20, respectively   (36)   (39)
           
Other comprehensive income   363    1,797 
Comprehensive income  $2,119   $3,265 
           

See Notes to Consolidated Financial Statements

5
 

FIRST COMMUNITY CORPORATION

Consolidated Statements of Changes in Shareholders’ Equity
Three Months ended March 31, 2017 and March 31, 2016
(Unaudited)

                                 
                          Accumulated      
   Common      Common   Additional   Nonvested   Retained   Other      
  Shares   Common   Stock   Paid-in   Restricted   Earnings   Comprehensive     
(Dollars in thousands)  Issued   Stock   Warrants   Capital   Stock   (Deficit)   Income   Total 
Balance December 31, 2015   6,690   $6,690   $46   $75,761   $(297)  $(3,992)  $830   $79,038 
Net income                            1,468         1,468 
Other comprehensive income net of tax of $926                                 1,797    1,797 
Issuance of restricted stock    22    22        268   (290             
Amortization of compensation on  restricted stock                       97              97 
Shares retired   (26)   (26)        (327)                  (353)
Issuance of common stock   1    1         13                   14 
Dividends: Common  ($0.08 per share)                            (527)        (527)
Dividend reinvestment plan   6    6         71                   77 
Balance March 31, 2016   6,693   $6,693   $46   $75,786   $(490)  $(3,051)  $2,627   $81,611 
                                         
Balance December 31, 2016   6,708   $6,708   $46   $75,991   $(220)  $573   $(1,237)  $81,861 
Net income                            1,756         1,756 
Other comprehensive income net of tax of $188                                 363    363 
Issuance of restricted stock   5    5         100    (105)              
Amortization of compensation on  restricted stock                       60              60 
Shares forfeited   (2)   (2)        (27)   9              (20)
Shares retired   (19)   (19)        (369)                  (388)
Dividends: Common  ($0.09 per share)                            (597)        (597)
Dividend reinvestment plan   5    5         91                  96 
Balance March 31, 2017   6,697   $6,697   $46   $75,786   $(256)  $1,732   $(874)  $83,131 

                                                                 

See Notes to Consolidated Financial Statements

6
 
FIRST COMMUNITY CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
 
   Three months ended
March 31,
 
(Dollars in thousands)  2017   2016 
Cash flows from operating activities:          
   Net income  $1,756   $1,468 
   Adjustments to reconcile net income to net cash provided from operating activities:          
       Depreciation   357    325 
       Premium amortization   871    976 
       Provision for loan losses   116    140 
       Write-down of other real estate owned   11    5 
       Gain on sale of other real estate owned   (20)   (3)
       Origination of  loans held-for-sale   (19,162)   (18,184)
       Sale of loans held-for-sale   20,678    18,601 
       Amortization of intangibles   75    83 
       Accretion on acquired loans   (70)   (235)
       Writedown of land held for sale   90     
       Gain on sale of securities   (54)   (59)
       Loss on extinguishment of debt   58     
       (Increase) Decrease in other assets   5,768    (5)
       Decrease in other liabilities   (1,512)   (290)
           Net cash provided from operating activities   8,962    2,822 
Cash flows from investing activities:          
   Purchase of investment securities available-for-sale   (1,733)   (20,362)
   Maturity/call of investment securities available-for-sale   8,679    8,614 
   Proceeds from sale of securities available-for-sale   2,414    11,479 
   Proceeds from sale of other securities   314     
   Increase in loans   (8,596)   (4,668)
   Proceeds from sale of other real estate owned   5    981 
   Purchase of property and equipment   (1,379)   (580)
           Net cash used in investing activities   (296)   (4,536)
Cash flows from financing activities:          
   Increase in deposit accounts   9,003    6,085 
   Decrease in securities sold under agreements to repurchase   (139)   (336)
   Advances from the Federal Home Loan Bank   14,000    30,500 
   Repayment of advances from Federal Home Loan Bank   (22,563)   (30,861)
   Issuance of common stock       14 
   Shares forfeited   (20)    
   Shares retired   (388)   (353)
   Dividends paid:  Common Stock   (597)   (527)
   Dividend reinvestment plan   96    77 
           Net cash (used) provided from financing activities   (608)   4,599 
Net increase in cash and cash equivalents   8,058    2,885 
Cash and cash equivalents at beginning of period   21,999    22,940 
Cash and cash equivalents at end of period  $30,057   $25,825 
Supplemental disclosure:          
   Cash paid during the period for:          
      Interest  $705   $782 
      Income taxes  $275   $50 
   Non-cash investing and financing activities:          
      Unrealized gain on securities  $363   $1,797 
      Transfer of loans to foreclosed property  $26   $11 
           

See Notes to Consolidated Financial Statements 

7
 

Notes to Consolidated Financial Statements (Unaudited)

 

Note 1 - Basis of Presentation

 

In the opinion of management, the accompanying unaudited consolidated balance sheets, and the consolidated statements of income, comprehensive income, changes in shareholders’ equity, and the cash flows of First Community Corporation (the “Company”), present fairly in all material respects the Company’s financial position at March 31, 2017 and December 31, 2016, and the Company’s results of operations and cash flows for the three months ended March 31, 2017 and 2016. The results of operations for the three months ended March 31, 2017 are not necessarily indicative of the results that may be expected for the year ending December 31, 2017.

 

In the opinion of management, all adjustments necessary to fairly present the consolidated financial position and consolidated results of operations have been made. All such adjustments are of a normal, recurring nature. All significant intercompany accounts and transactions have been eliminated in consolidation. The consolidated financial statements and notes thereto are presented in accordance with the instructions for Form 10-Q. The information included in the Company’s 2016 Annual Report on Form 10-K should be referred to in connection with these unaudited interim financial statements.    

8
 

Note 2 – Earnings Per Common Share

 

The following reconciles the numerator and denominator of the basic and diluted earnings per common share computation:

 

(In thousands except average market price)

   Three months 
   ended March 31, 
   2017   2016 
         
Numerator (Net income available to common shareholders)  $1,756   $1,468 
           
Denominator          
Weighted average common shares outstanding for:          
Basic shares   6,619    6,573 
Dilutive securities:          
Deferred compensation   55    36 
Warrants/Restricted stock -Treasury stock method   140    142 
Diluted shares   6,814    6,751 
The average market price used in calculating assumed number of shares  $20.42   $13.64 

 

There were no options outstanding as of March 31, 2017 and March 31, 2016.

 

In the fourth quarter of 2011, we issued $2.5 million in 8.75% subordinated notes maturing December 16, 2019. On November 15, 2012, the subordinated notes were redeemed in full at par. Warrants for 107,500 shares of common stock at $5.90 per share were issued in connection with the issuance of the subordinated debt. There were 97,180 warrants outstanding at March 31, 2017. These warrants expire December 16, 2019 and are included in dilutive securities in the table above.

 

The Company has issued a total of 138,000 restricted shares under the terms of its compensation plans and employment agreements. The employee shares cliff vest over a three year period; the non-employee director shares vest one year after issuance. The unrecognized compensation cost at March 31, 2017 for non-vested shares amounts to $256 thousand. In February 2017, the Company issued 353 stock units, to an employee, that cliff vest over three years. Each unit is convertible into one share of common stock at the time the units vest. The related compensation cost is accrued over the vesting period.

 

In 2006, the Company established a Non-Employee Director Deferred Compensation Plan, whereby a director may elect to defer all or any part of annual retainer and monthly meeting fees payable with respect to service on the board of directors or a committee of the board. Units of common stock are credited to the director’s account at the time compensation is earned and are included in dilutive securities in the table above. At March 31, 2017 and December 31, 2016, there were 105,909 and 101,888 units in the plan, respectively. The accrued liability at March 31, 2017 and December 31, 2016 amounted to $1.1 million and $966 thousand, respectively, and is included in “Other liabilities” on the balance sheet. 

9
 

Note 3—Investment Securities

 

The amortized cost and estimated fair values of investment securities are summarized below:

AVAILABLE-FOR-SALE:

(Dollars in thousands)  Amortized
Cost
   Gross
Unrealized
Gains
   Gross
Unrealized
Losses
   Fair Value 
March 31, 2017:                    
US Treasury securities  $1,536   $   $15   $1,521 
Government sponsored enterprises    953    38        991 
Mortgage-backed securities    138,663    479    1,508    137,634 
Small Business Administration pools    48,353    170    532    47,991 
State and local government    53,902    1,087    1,085    53,904 
Corporate and other securities    932        77    855 
   $244,339   $1,774   $3,217   $242,896 
December 31, 2016:                    
US Treasury securities  $1,538   $   $18   $1,520 
Government sponsored enterprises    959    38        997 
Mortgage-backed securities    145,696    480    1,878    144,298 
Small Business Administration pools    50,560    208    584    50,184 
State and local government    54,702    907    1,075    54,534 
Corporate and other securities    1,932        71    1,861 
   $255,387   $1,633   $3,626   $253,394 

 

HELD-TO-MATURITY:

(Dollars in thousands)  Amortized
Cost
   Gross
Unrealized
Gains
   Gross
Unrealized
Losses
   Fair Value 
March 31, 2017:                    
State and local government   $17,148   $132   $52   $17,228 
   $17,148   $132   $52   $17,228 
December 31, 2016:                    
State and local government   $17,193   $54   $133   $17,114 
   $17,193   $54   $133   $17,114 

 

During the three months ended March 31, 2017 and March 31, 2016, the Company received proceeds of $2.4 million and $11.5 million, respectively, from the sale of investment securities available-for-sale. For the three months ended March 31, 2017, gross realized gains from the sale of investment securities available-for-sale amounted to $73.5 thousand and gross realized losses amounted to $19.2 thousand. Gross realized gains amounted to $58.8 thousand and there were no gross losses from the sale of investment securities for the three months ended March 31, 2016. 

10
 

Note 3—Investment Securities – continued

At March 31, 2017, corporate and other securities available-for-sale included the following at fair value: mutual funds at $795.0 thousand and foreign debt of $60.2 thousand. At December 31, 2016, corporate and other securities available-for-sale included the following at fair value: mutual funds at $801.1 thousand, foreign debt of $60.1 thousand, and corporate preferred stock in the amount of $1.0 million. Other investments, at cost include Federal Home Loan Bank (“FHLB”) stock in the amount of $1.5 million and corporate stock in the amount of $1.0 million at March 31, 2017. The Company held $1.8 million of FHLB stock at December 31, 2016.

The following tables show gross unrealized losses and fair values, aggregated by investment category and length of time that individual securities have been in a continuous loss position, at March 31, 2017 and December 31, 2016. 

   Less than 12 months   12 months or more   Total 
March 31, 2017
(Dollars in thousands)
  Fair Value   Unrealized
Loss
   Fair Value   Unrealized
Loss
   Fair Value   Unrealized
Loss
 
Available-for-sale securities:                              
US Treasury  $1,521   $15   $   $   $1,521   $15 
Government Sponsored Enterprise mortgage-backed securities    63,743    1,297    17,222    211    80,965    1,508 
Small Business Administration pools    13,931    192    22,556    340    36,487    532 
State and local government   18,070    1,085            18,070    1,085 
Corporate bonds and other            795    77    795    77 
Total   $97,265   $2,589   $40,573   $628   $137,838   $3,217 

 

   Less than 12 months   12 months or more   Total 
March 31, 2017
(Dollars in thousands)
  Fair Value   Unrealized
Loss
   Fair Value   Unrealized
Loss
   Fair Value   Unrealized
Loss
 
Held-to-maturity securities:                              
State and local government  $4,511   $52   $   $   $4,511   $52 
Total   $4,511   $52   $   $   $4,511   $52 

 

   Less than 12 months   12 months or more   Total 
December 31, 2016
(Dollars in thousands)
  Fair Value   Unrealized
Loss
   Fair Value   Unrealized
Loss
   Fair Value   Unrealized
Loss
 
Available-for-sale securities:                              
US Treasury  $1,520   $18   $   $   $1,520   $18 
Government Sponsored Enterprise mortgage-backed securities    77,389    1,597    16,655    281    94,044    1,878 
Small Business Administration pools    15,213    206    23,382    378    38,595    584 
State and local government   17,502    1,075            17,502    1,075 
Corporate bonds and other            801    71    801    71 
Total   $111,624   $2,896   $40,838   $730   $152,462   $3,626 
11
 

Note 3—Investment Securities – continued

   Less than 12 months   12 months or more   Total 
December 31, 2016
(Dollars in thousands)
  Fair Value   Unrealized
Loss
   Fair Value   Unrealized
Loss
   Fair Value   Unrealized
Loss
 
Held-to-maturity securities:                              
State and local government  $10,245   $133   $   $   $10,245   $133 
Total   $10,245   $133   $   $   $10,245   $133 

Government Sponsored Enterprise, Mortgage-Backed Securities: The Company owned mortgage-backed securities (“MBSs”), including collateralized mortgage obligations (“CMOs”), issued by government sponsored enterprises (“GSEs”) with an amortized cost of $138.7 million and $145.3 million and approximate fair value of $137.6 million and $143.9 million at March 31, 2017 and December 31, 2016, respectively. As of March 31, 2017 and December 31, 2016, all of the MBSs issued by GSEs were classified as “Available for Sale.” Unrealized losses on certain of these investments are not considered to be “other than temporary,” and we have the intent and ability to hold these until they mature or recover the current book value. The contractual cash flows of the investments are guaranteed by the GSE. Accordingly, it is expected that the securities would not be settled at a price less than the amortized cost of the Company’s investment. Because the Company does not intend to sell these securities and it is more likely than not the Company will not be required sell these securities before a recovery of its amortized cost, which may be maturity, the Company does not consider the investments to be other-than-temporarily impaired at March 31, 2017.

Non-agency Mortgage Backed Securities: The Company held private label mortgage-backed securities (“PLMBSs”), including CMOs, at March 31, 2017 with an amortized cost of $255.8 thousand and approximate fair value of $258.9 thousand. The Company held PLMBSs, including CMOs, at December 31, 2016 with an amortized cost of $427.2 thousand and approximate fair value of $436.5 thousand. Management monitors each of these securities on a quarterly basis to identify any deterioration in the credit quality, collateral values and credit support underlying the investments.

State and Local Governments and Other: Management monitors these securities on a quarterly basis to identify any deterioration in the credit quality. Included in the monitoring is a review of the credit rating, a financial analysis and certain demographic data on the underlying issuer. The Company does not consider these securities to be other-than-temporarily impaired at March 31, 2017.

The following sets forth the amortized cost and fair value of investment securities at March 31, 2017 by contractual maturity. Expected maturities differ from contractual maturities because borrowers may have the right to call or prepay the obligations with or without prepayment penalties. MBSs are based on average life at estimated prepayment speeds.

 

   Available-for-sale   Held-to-maturity 
(Dollars in thousands)  Amortized
Cost
   Fair
Value
   Amortized
Cost
   Fair
Value
 
Due in one year or less   $8,454   $8,552   $   $ 
Due after one year through five years    137,965    138,059    6,942    7,001 
Due after five years through ten years    91,784    90,284    10,206    10,227 
Due after ten years    6,136    6,001         
   $244,339   $242,896   $17,148   $17,228 
12
 

Note 4—Loans

 

Loans summarized by category as of March 31, 2017, December 31, 2016 and March 31, 2016 are as follows:

   March 31,   December 31,   March 31, 
(Dollars in thousands)  2017   2016   2016 
Commercial, financial and agricultural   $40,537   $42,704   $39,092 
Real estate:               
Construction    32,438    45,746    39,311 
Mortgage-residential   46,668    47,472    47,768 
Mortgage-commercial   397,179    371,112    329,093 
Consumer:               
Home equity    30,481    31,368    30,419 
Other    7,995    8,307    8,338 
Total  $555,298   $546,709   $494,021 
13
 

Note 4—Loans-continued

 

The detailed activity in the allowance for loan losses and the recorded investment in loans receivable as of and for the three months ended March 31, 2017 and March 31, 2016 and for the year ended December 31, 2016 is as follows:

 

                                
           Real estate   Real estate                 
       Real estate   Mortgage   Mortgage   Consumer   Consumer         
(Dollars in thousands)  Commercial   Construction   Residential   Commercial   Home equity   Other   Unallocated   Total 
March 31, 2017                                        
Allowance for loan losses:                                        
Beginning balance
December 31, 2016
  $145   $104   $438   $2,793   $153   $127   $1,454   $5,214 
Charge-offs               (24)       (27)       (51
Recoveries   2        1    81    1    4        89 
Provisions   (7)   (33)   (41)   8    9    55    125    116 
Ending balance
March 31, 2017
  $140   $71   $398   $2,858   $163   $159   $1,579   $5,368 
                                         
Ending balances:                                        
                                         
Individually evaluated for impairment  $   $   $2   $5   $   $   $   $7 
                                         
Collectively evaluated for impairment   140    71    396    2,853    163    159    1,579    5,361 
                                         
March 31, 2017
Loans receivable:
                                        
Ending balance-total  $40,537   $32,438   $46,668   $397,179   $30,481   $7,995   $   $555,298 
                                         
Ending balances:                                        
Individually evaluated for impairment           731    4,441    56            5,228 
                                         
Collectively evaluated for impairment  $40,537   $32,438   $45,937   $392,738   $30,425   $7,995   $   $550,070 

 

14
 

Note 4—Loans-continued

                                
           Real estate   Real estate                 
       Real estate   Mortgage   Mortgage   Consumer   Consumer         
(Dollars in thousands)  Commercial   Construction   Residential   Commercial   Home equity   Other   Unallocated   Total 
March 31, 2016                                        
Allowance for loan losses:                                        
Beginning balance
December 31, 2015
  $75   $51   $223   $2,036   $127   $37   $2,047   $4,596 
Charge-offs               (45)       (18)       (63)
Recoveries   2        2    6    1    3        14 
Provisions   (4)   6    12    4    (41)   4    159    140 
Ending balance
March 31, 2016
  $73   $57   $237   $2,001   $87   $26   $2,206   $4,687 
                                         
Ending balances:                                        
                                        
Individually evaluated for impairment  $   $   $   $3   $   $   $   $3 
                                         
Collectively evaluated for impairment   73    57    237    1,998    87    26    2,206    4,684 
                                         
March 31, 2016
Loans receivable:
                                        
Ending balance-total  $39,092   $39,311   $47,768   $329,093   $30,419   $8,338   $   $494,021 
                                         
Ending balances:                                        
                                        
Individually evaluated for impairment   3        877    7,165                8,045 
                                         
Collectively evaluated for impairment  $39,089   $39,311   $46,891   $321,928   $30,419   $8,338   $   $485,976 
15
 

Note 4—Loans-continued

                                
           Real estate   Real estate                 
       Real estate   Mortgage   Mortgage   Consumer   Consumer         
(Dollars in thousands)  Commercial   Construction   Residential   Commercial   Home equity   Other   Unallocated   Total 
December 31, 2016                                        
Allowance for loan losses:                                        
Beginning balance December 31, 2015  $75   $51   $223   $2,036   $127   $37   $2,047   $4,596 
Charge-offs           (11)   (136)   (20)   (72)       (239)
Recoveries   5        40    21    3    14        83 
Provisions   65    53    186    872    43    148    (593)   774 
Ending balance December 31, 2016  $145   $104   $438   $2,793   $153   $127   $1,454   $5,214 
                                         
Ending balances:                                        
Individually evaluated for impairment  $   $   $2   $4   $   $   $   $6 
                                         
Collectively evaluated for impairment   145    104    436    2,789    153    127    1,454    5,208 
                                         
Loans receivable:                                        
Ending balance-total  $42,704   $45,746   $47,472   $371,112   $31,368   $8,307   $   $546,709 
                                         
Ending balances:                                        
                                         
Individually evaluated for impairment           639    5,124    56            5,819 
                                         
Collectively evaluated for impairment  $42,704   $45,746   $46,833   $365,988   $31,312   $8,307   $   $540,890 
                                         

 

Related party loans and lines of credit are made on substantially the same terms, including interest rates and collateral, as those prevailing at the time for comparable transactions with unrelated persons and generally do not involve more than the normal risk of collectability. The following table presents related party loan transactions for the three months ended March 31, 2017 and March 31, 2016:

(Dollars in thousands)  2017   2016 
Beginning Balance December 31,  $6,103   $7,037 
New Loans   2    5 
Less loan repayments   519    179 
Ending Balance March 31,  $5,586   $6,863 
16
 

Note 4—Loans-continued

 

The following table presents at March 31, 2017 and December 31, 2016 loans individually evaluated and considered impaired under Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) 310 “Accounting by Creditors for Impairment of a Loan.” Impairment includes performing troubled debt restructurings (“TDRs”).

 

(Dollars in thousands)  March 31,   December 31, 
   2017   2016 
Total loans considered impaired   $5,228   $5,819 
Loans considered impaired for which there is a related allowance for loan loss:          
Outstanding loan balance    221    224 
Related allowance    7    6 
Loans considered impaired and previously written down to fair value    5,007    5,595 
Average impaired loans    8,454    8,727 

 

The following tables are by loan category and present at March 31, 2017, December 31, 2016 and March 31, 2016 loans individually evaluated and considered impaired under FASB ASC 310 “Accounting by Creditors for Impairment of a Loan.” Impairment includes performing TDRs.

 

(Dollars in thousands)              Three months ended 
March 31, 2017       Unpaid       Average   Interest 
  Recorded   Principal   Related   Recorded   Income 
   Investment   Balance   Allowance   Investment   Recognized 
With no allowance recorded:                         
  Commercial  $   $   $   $   $ 
  Real estate:                         
    Construction                    
    Mortgage-residential   686    696        749    5 
    Mortgage-commercial   4,265    6,711        7,428    75 
  Consumer:                         
    Home Equity   56    56        56     
    Other                    
                          
With an allowance recorded:                         
  Commercial                    
  Real estate:                         
    Construction                    
    Mortgage-residential   45    45    2    45    1 
    Mortgage-commercial   176    176    5    176    4 
  Consumer:                         
    Home Equity                    
    Other                    
                          
Total:                         
  Commercial                    
  Real estate:                         
    Construction                    
    Mortgage-residential   731    741    2    794    6 
    Mortgage-commercial   4,441    6,887    5    7,604    79 
  Consumer:                         
    Home Equity   56    56        56     
    Other                    
   $5,228   $7,684   $7   $8,454   $85 
17
 

Note 4—Loans-continued

(Dollars in thousands)              Three months ended 
March 31, 2016       Unpaid       Average   Interest 
  Recorded   Principal   Related   Recorded   Income 
   Investment   Balance   Allowance   Investment   Recognized 
With no allowance recorded:                         
  Commercial  $3   $3   $   $8   $ 
  Real estate:                         
    Construction                    
    Mortgage-residential   829    859        1,049    1 
    Mortgage-commercial   7,165    9,902        11,665    25 
  Consumer:                         
    Home Equity                    
    Other                    
                          
With an allowance recorded:                         
  Commercial