Company Quick10K Filing
Quick10K
Eagle Financial Services
10-Q 2019-03-31 Quarter: 2019-03-31
10-K 2018-12-31 Annual: 2018-12-31
10-Q 2018-09-30 Quarter: 2018-09-30
10-Q 2018-06-30 Quarter: 2018-06-30
10-Q 2018-03-31 Quarter: 2018-03-31
10-K 2017-12-31 Annual: 2017-12-31
10-Q 2017-09-30 Quarter: 2017-09-30
10-Q 2017-06-30 Quarter: 2017-06-30
10-Q 2017-03-31 Quarter: 2017-03-31
10-K 2016-12-31 Annual: 2016-12-31
10-Q 2016-09-30 Quarter: 2016-09-30
10-Q 2016-06-30 Quarter: 2016-06-30
10-Q 2016-03-31 Quarter: 2016-03-31
10-K 2015-12-31 Annual: 2015-12-31
10-Q 2015-09-30 Quarter: 2015-09-30
10-Q 2015-06-30 Quarter: 2015-06-30
10-Q 2015-03-31 Quarter: 2015-03-31
10-K 2014-12-31 Annual: 2014-12-31
10-Q 2014-09-30 Quarter: 2014-09-30
10-Q 2014-06-30 Quarter: 2014-06-30
10-Q 2014-03-31 Quarter: 2014-03-31
10-K 2013-12-31 Annual: 2013-12-31
8-K 2019-05-14 Shareholder Vote, Regulation FD, Exhibits
8-K 2019-05-02 Officers
8-K 2019-04-17 Earnings, Exhibits
8-K 2019-01-30 Earnings, Exhibits
8-K 2019-01-16 Officers, Exhibits
8-K 2019-01-16 Other Events, Exhibits
8-K 2018-10-18 Earnings, Exhibits
8-K 2018-07-18 Earnings, Exhibits
8-K 2018-05-17 Shareholder Vote
8-K 2018-05-16 Regulation FD, Exhibits
8-K 2018-04-19 Earnings, Exhibits
8-K 2018-01-25 Earnings, Exhibits
8-K 2018-01-17 Officers, Other Events, Exhibits
EC Ecopetrol 38,220
GWW Grainger W W 15,160
FICO Fair Isaac 8,330
LOPE Grand Canyon Education 5,650
RGEN Repligen 3,070
TR Tootsie Roll 1,500
FRBK Republic First Bancorp 284
HALL Hallmark Financial Services 197
UGU UGI Utilities 0
LAKF Lake Forest Minerals 0
EFSI 2019-03-31
Part I - Financial Information
Item 1. Financial Statements
Note 1. General
Note 2. Stock-Based Compensation Plan
Note 3. Earnings per Common Share
Note 4. Securities
Note 5. Loans and Allowance for Loan Losses
Note 6. Troubled Debt Restructurings
Note 7. Deposits
Note 8. Leases
Note 9. Fair Value Measurements
Note 10. Change in Accumulated Other Comprehensive Income (Loss)
Note 11. Other Real Estate Owned
Note 12. Qualified Affordable Housing Project Investments
Note 13. Recent Accounting Pronouncements
Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations
Item 3. Quantitative and Qualitative Disclosures About Market Risk
Item 4. Controls and Procedures
Part II - Other Information
Item 1. Legal Proceedings
Item 1A. Risk Factors
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
Item 3. Defaults Upon Senior Securities
Item 4. Mine Safety Disclosures
Item 5. Other Information
Item 6. Exhibits
EX-31.1 efsi-20190331exhibit311.htm
EX-31.2 efsi-20190331exhibit312.htm
EX-32.1 efsi-20190331exhibit321.htm

Eagle Financial Services Earnings 2019-03-31

EFSI 10Q Quarterly Report

Balance SheetIncome StatementCash Flow

10-Q 1 efsi-20190331x10q.htm 10-Q Document



UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549 
FORM 10-Q
(Mark One)
ý
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 2019
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: 0-20146 
EAGLE FINANCIAL SERVICES, INC.
(Exact name of registrant as specified in its charter)
Virginia
 
54-1601306
(State or other jurisdiction of
incorporation or organization)
 
(I.R.S. Employer
Identification No.)
 
 
2 East Main Street
P.O. Box 391
Berryville, Virginia
 
22611
(Address of principal executive offices)
 
(Zip Code)
(540) 955-2510
(Registrant’s telephone number, including area code) 

Securities registered pursuant to Section 12(b) of the Act:
Title of each class
Trading Symbol(s)
Name of each exchange on which registered
None

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  ý    No  ¨
Indicate by check mark whether the registrant has submitted electronically every Interactive Date File required to be submitted pursuant to Rule 405 of Regulation S-T (232.405 of this Chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).    Yes  ý    No  ¨
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and "emerging growth company" in Rule 12b-2 of the Exchange Act.
Large accelerated filer
 
¨
  
Accelerated filer
 
ý
 
 
 
 
Non-accelerated filer
 
¨
 
Smaller reporting company
 
ý
 
 
 
 
Emerging growth company
 
¨

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.

 
¨


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

The number of shares of the registrant’s Common Stock ($2.50 par value) outstanding as of May 2, 2019 was 3,420,994.




TABLE OF CONTENTS
 
 
 
 
PART I - FINANCIAL INFORMATION
 
 
 
 
Item 1.
Financial Statements:
 
 
Consolidated Balance Sheets at March 31, 2019 and December 31, 2018
 
Consolidated Statements of Income for the Three Months Ended March 31, 2019 and 2018
 
Consolidated Statements of Comprehensive Income for the Three Months Ended March 31, 2019 and 2018
 
Consolidated Statements of Changes in Shareholders’ Equity for the Three Months Ended March 31, 2019 and 2018
 
Consolidated Statements of Cash Flows for the Three Months Ended March 31, 2019 and 2018
 
Notes to Consolidated Financial Statements
Item 2.
Management’s Discussion and Analysis of Financial Condition and Results of Operations
Item 3.
Quantitative and Qualitative Disclosures about Market Risk
Item 4.
Controls and Procedures
 
 
PART II - OTHER INFORMATION
 
 
 
 
Item 1.
Legal Proceedings
Item 1A.
Risk Factors
Item 2.
Unregistered Sales of Equity Securities and Use of Proceeds
Item 3.
Defaults Upon Senior Securities
Item 4.
Mine Safety Disclosures
Item 5.
Other Information
Item 6.
Exhibits




PART I - FINANCIAL INFORMATION
 
Item 1.        Financial Statements

EAGLE FINANCIAL SERVICES, INC.
Consolidated Balance Sheets
(dollars in thousands, except per share amounts)
 
 
March 31,
2019
 
December 31,
2018
 
(Unaudited)
 
 
Assets
 
 
 
Cash and due from banks
$
8,747

 
$
12,358

Interest-bearing deposits with other institutions
3,468

 
5,995

Total cash and cash equivalents
12,215

 
18,353

Securities available for sale, at fair value
143,975

 
144,298

Restricted investments
1,170

 
1,170

Loans
619,208

 
606,827

Allowance for loan losses
(5,685
)
 
(5,456
)
Net Loans
613,523

 
601,371

Bank premises and equipment, net
19,208

 
19,083

Other real estate owned, net of allowance
106

 
106

Other assets
18,520

 
15,236

Total assets
$
808,717

 
$
799,617

Liabilities and Shareholders’ Equity
 
 
 
Liabilities
 
 
 
Deposits:
 
 
 
Noninterest bearing demand deposits
$
255,567

 
$
251,184

Savings and interest bearing demand deposits
336,109

 
336,778

Time deposits
115,763

 
115,142

Total deposits
$
707,439

 
$
703,104

Federal funds purchased
355

 
1,871

Other liabilities
9,738

 
7,043

Total liabilities
$
717,532

 
$
712,018

 
 
 
 
Commitments and contingencies
 
 
 
 
 
 
 
Shareholders’ Equity
 
 
 
Preferred stock, $10 par value; 500,000 shares authorized and unissued
$

 
$

Common stock, $2.50 par value; authorized 10,000,000 shares; issued and outstanding 2019, 3,459,549 including 18,151 shares of unvested restricted stock; issued and outstanding 2018, 3,445,914 including 16,701 shares of unvested restricted stock
8,604

 
8,573

Surplus
12,116

 
11,992

Retained earnings
70,328

 
68,587

Accumulated other comprehensive income (loss)
137

 
(1,553
)
Total shareholders’ equity
$
91,185

 
$
87,599

Total liabilities and shareholders’ equity
$
808,717

 
$
799,617

See Notes to Consolidated Financial Statements

1



EAGLE FINANCIAL SERVICES, INC.
Consolidated Statements of Income (Unaudited)
(dollars in thousands, except per share amounts)
 
 
Three Months Ended
 
March 31,
 
2019
 
2018
Interest and Dividend Income
 
 
 
Interest and fees on loans
$
7,518

 
$
6,541

Interest and dividends on investment securities:
 
 
 
Taxable interest income
785

 
605

Interest income exempt from federal income taxes
242

 
262

Dividends
16

 
13

Interest on deposits with other institutions
31

 
53

Interest on federal funds sold
1

 
1

Total interest and dividend income
$
8,593

 
$
7,475

Interest Expense
 
 
 
Interest on deposits
$
944

 
$
426

Interest on federal funds purchased
25

 

Total interest expense
$
969

 
$
426

Net interest income
$
7,624

 
$
7,049

Provision for Loan Losses
194

 
205

Net interest income after provision for loan losses
$
7,430

 
$
6,844

Noninterest Income
 
 
 
Income from fiduciary activities
$
282

 
$
444

Service charges on deposit accounts
285

 
308

Other service charges and fees
1,071

 
961

(Loss) gain on sale of securities
(3
)
 
11

Gain (loss) on disposal of bank premises and equipment
120

 
(3
)
Other operating income
89

 
80

Total noninterest income
$
1,844

 
$
1,801

Noninterest Expenses
 
 
 
Salaries and employee benefits
$
3,542

 
$
3,526

Occupancy expenses
428

 
371

Equipment expenses
202

 
219

Advertising and marketing expenses
218

 
185

Stationery and supplies
29

 
56

ATM network fees
230

 
206

Other real estate owned expense

 
130

(Gain) on other real estate owned

 
(397
)
FDIC assessment
53

 
58

Computer software expense
110

 
139

Bank franchise tax
146

 
134

Professional fees
385

 
275

Data processing fees
240

 
125

Other operating expenses
648

 
603

Total noninterest expenses
$
6,231

 
$
5,630

Income before income taxes
$
3,043

 
$
3,015

Income Tax Expense
472

 
476

Net income
$
2,571

 
$
2,539

Earnings Per Share
 
 
 
Net income per common share, basic
$
0.74

 
$
0.73

Net income per common share, diluted
$
0.74

 
$
0.73

See Notes to Consolidated Financial Statements

2



EAGLE FINANCIAL SERVICES, INC.
Consolidated Statements of Comprehensive Income (Loss)
(Unaudited)
(dollars in thousands)
 
 
Three Months Ended
 
March 31,
 
2019
 
2018
Net income
$
2,571

 
$
2,539

Other comprehensive income (loss):
 
 
 
Unrealized gain (loss) on available for sale securities net of reclassification adjustments, and net of deferred income tax of $450 and ($689) for the three months ended, respectively
1,690

 
(2,593
)
Total other comprehensive income (loss)
$
1,690

 
$
(2,593
)
Total comprehensive income (loss)
$
4,261

 
$
(54
)
See Notes to Consolidated Financial Statements

3



EAGLE FINANCIAL SERVICES, INC.
Consolidated Statements of Changes in Shareholders’ Equity (Unaudited)
(dollars in thousands, except per share amounts)
 
 
Common
Stock
 
Surplus
 
Retained
Earnings
 
Accumulated
Other
Comprehensive
Income (Loss)
 
Total
Balance, December 31, 2017
$
8,587

 
$
12,075

 
$
62,845

 
$
310

 
$
83,817

Net income
 
 
 
 
2,539

 
 
 
2,539

Other comprehensive (loss)
 
 
 
 
 
 
(2,593
)
 
(2,593
)
Vesting of restricted stock awards, stock incentive plan (9,109 shares)
23

 
(23
)
 
 
 
 
 

Stock-based compensation expense
 
 
81

 
 
 
 
 
81

Issuance of common stock, dividend investment plan (5,681 shares)
14

 
166

 
 
 
 
 
180

Repurchase and retirement of common stock (5,000 shares)
(13
)
 
(144
)
 
 
 
 
 
(157
)
Dividends declared ($0.23 per share)
 
 
 
 
(796
)
 
 
 
(796
)
Balance, March 31, 2018
$
8,611

 
$
12,155

 
$
64,588

 
$
(2,283
)
 
$
83,071

 
 
 
 
 
 
 
 
 
 
Balance, December 31, 2018
$
8,573

 
$
11,992

 
$
68,587

 
$
(1,553
)
 
87,599

Net income
 
 
 
 
2,571

 
 
 
2,571

Other comprehensive income
 
 
 
 
 
 
1,690

 
1,690

Vesting of restricted stock awards, stock incentive plan (10,000 shares)
25

 
(25
)
 
 
 
 
 

Stock-based compensation expense
 
 
86

 
 
 
 
 
86

Issuance of common stock, dividend investment plan (3,685 shares)
9

 
107

 
 
 
 
 
116

Repurchase and retirement of common stock (1,500 shares)
(3
)
 
(44
)
 
 
 
 
 
(47
)
Dividends declared ($0.24 per share)
 
 
 
 
(830
)
 
 
 
(830
)
Balance, March 31, 2019
$
8,604

 
$
12,116

 
$
70,328

 
$
137

 
$
91,185

See Notes to Consolidated Financial Statements

4



EAGLE FINANCIAL SERVICES, INC.
Consolidated Statements of Cash Flows (Unaudited)
(dollars in thousands)
 
 
Three Months Ended
 
March 31,
 
2019
 
2018
Cash Flows from Operating Activities
 
 
 
Net income
$
2,571

 
$
2,539

Adjustments to reconcile net income to net cash provided by (used in) operating activities:
 
 
 
Depreciation
231

 
234

Amortization of other assets
58

 
45

Provision for loan losses
194

 
205

(Gain) on other real estate owned

 
(397
)
(Gain) loss on the sale and disposal of premises and equipment
(120
)
 
3

Loss (gain) on the sale of securities
3

 
(11
)
Stock-based compensation expense
86

 
81

Premium amortization on securities, net
99

 
149

Changes in assets and liabilities:
 
 
 
(Increase) in other assets
(47
)
 
(60
)
(Decrease) in other liabilities
(1,050
)
 
(11,373
)
Net cash provided by (used in) operating activities
$
2,025

 
$
(8,585
)
Cash Flows from Investing Activities
 
 
 
Proceeds from maturities, calls, and principal payments of securities available for sale
$
2,431

 
$
5,181

Proceeds from the sale of securities available for sale
3,818

 
3,464

Purchases of securities available for sale
(3,888
)
 
(8,319
)
Purchases of restricted investments

 
(59
)
Purchases of bank premises and equipment
(494
)
 
(132
)
Proceeds from the sale of bank premises and equipment

258

 

Net (increase) in loans
(12,346
)
 
(15,673
)
Net cash (used in) investing activities
$
(10,221
)
 
$
(15,538
)
Cash Flows from Financing Activities
 
 
 
Net increase in noninterest bearing demand deposits, savings, and interest bearing demand deposits
$
3,714

 
$
22,861

Net increase (decrease) in time deposits
621

 
(629
)
Net (decrease) in federal funds purchased
(1,516
)
 

Repurchase and retirement of common stock
(47
)
 
(157
)
Cash dividends paid
(714
)
 
(616
)
Net cash provided by financing activities
$
2,058

 
$
21,459



5



EAGLE FINANCIAL SERVICES, INC.
Consolidated Statements of Cash Flows (Unaudited)
(dollars in thousands)
(continued)
 
 
Three Months Ended
 
March 31,
 
2019
 
2018
(Decrease) in cash and cash equivalents
$
(6,138
)
 
$
(2,664
)
Cash and Cash Equivalents
 
 
 
Beginning
18,353

 
35,848

Ending
$
12,215

 
$
33,184

Supplemental Disclosures of Cash Flow Information
 
 
 
Cash payments for:
 
 
 
Interest
$
954

 
$
410

Income taxes
$

 
$

Supplemental Schedule of Noncash Investing and Financing Activities:
 
 
 
Unrealized gain (loss) on securities available for sale
$
2,140

 
$
(3,282
)
Other real estate and repossessed assets acquired in settlement of loans
$

 
$
2,799

Issuance of common stock, dividend investment plan
$
116

 
$
180

Lease liabilities arising from right-of-use assets

$
3,751

 
$

See Notes to Consolidated Financial Statements


6



EAGLE FINANCIAL SERVICES, INC.
Notes to Consolidated Financial Statements (Unaudited)
March 31, 2019
NOTE 1. General

The accompanying unaudited financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”) for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by GAAP.

In the opinion of management, the accompanying financial statements contain all adjustments (consisting of only normal recurring accruals) necessary to present fairly the financial position at March 31, 2019 and December 31, 2018, the results of operations for the three months ended March 31, 2019 and 2018, and cash flows for the three months ended March 31, 2019 and 2018. The results of operations for the three months ended March 31, 2019 are not necessarily indicative of the results to be expected for the full year. These financial statements should be read in conjunction with the Notes to Consolidated Financial Statements included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2018 (the “2018 Form 10-K”).

Eagle Financial Services, Inc. (the "Company") owns 100% of Bank of Clarke County (the “Bank”). The consolidated financial statements include the accounts of the Company and its wholly-owned subsidiary. All significant intercompany accounts and transactions between the Company and the Bank have been eliminated.

Certain amounts in the consolidated financial statements have been reclassified to conform to current year presentations. None of the reclassifications were of a material nature and they had no effect on prior year net income or shareholders' equity.

NOTE 2. Stock-Based Compensation Plan

During 2014, the Company’s shareholders approved a stock incentive plan which allows key employees and directors to increase their personal financial interest in the Company. This plan permits the issuance of incentive stock options and non-qualified stock options and the award of stock appreciation rights, common stock, restricted stock, and phantom stock. The plan authorizes the issuance of up to 500,000 shares of common stock.

The Company periodically grants restricted stock to its directors, executive officers and certain non-executive officers. Restricted stock provides grantees with rights to shares of common stock upon completion of a service period or achievement of Company performance measures. During the restriction period, all shares are considered outstanding and dividends are paid to the grantee. In general, outside directors are periodically granted restricted shares which vest over a period of less than 9 months. Beginning during 2006, executive officers were granted restricted shares which vest over a 3 year service period and restricted shares which vest based on meeting annual performance measures over a 1 year period. Beginning in 2018, certain non-executive officers also were granted restricted shares which vest over a 3 year service period. The Company recognizes compensation expense over the restricted period based on the fair value of the Company's stock on the grant date. The Company's policy is to recognize forfeitures as they occur. As of March 31, 2019, there was $275 thousand of unrecognized compensation cost related to nonvested restricted stock.

The following table presents restricted stock activity for the three months ended March 31, 2019 and 2018:
 
 
Three Months Ended
 
March 31,
 
2019
 
2018
 
Shares
 
Weighted
Average
Grant Date
Fair Value
 
Shares
 
Weighted
Average
Grant Date
Fair Value
Nonvested, beginning of period
16,701

 
$
29.72

 
14,401

 
$
24.68

Granted
11,450

 
30.51

 
11,450

 
32.00

Vested
(10,000
)
 
29.38

 
(9,109
)
 
24.63

Forfeited

 

 
(41
)
 
25.50

Nonvested, end of period
18,151

 
30.40

 
16,701

 
29.72




7



NOTE 3. Earnings Per Common Share

Basic earnings per share represents income available to common shareholders divided by the weighted average number of common shares outstanding during the period. Nonvested restricted shares are included in the weighted average number of common shares used to compute basic earnings per share because of dividend participation and voting rights. Diluted earnings per share reflects additional common shares that would have been outstanding if dilutive potential common shares had been issued, as well as any adjustment to income that would result from the assumed issuance. The number of potential common shares is determined using the treasury method.

The following table shows the weighted average number of shares used in computing earnings per share for the three months ended March 31, 2019 and 2018. During 2019 and 2018, there were no potentially dilutive securities outstanding.
 
Three Months Ended
 
March 31,
 
2019
 
2018
Weighted average number of common shares outstanding used to calculate basic and diluted earnings per share
3,458,213

 
3,463,118


NOTE 4. Securities

Amortized costs and fair values of securities available for sale at March 31, 2019 and December 31, 2018 were as follows:
 
 
Amortized
Cost
 
Gross
Unrealized
Gains
 
Gross
Unrealized
(Losses)
 
Fair
Value
 
March 31, 2019
 
(in thousands)
Obligations of U.S. government corporations and agencies
$
23,807

 
$
122

 
$
(235
)
 
$
23,694

Mortgage-backed securities
77,868

 
373

 
(597
)
 
77,644

Obligations of states and political subdivisions
42,180

 
628

 
(171
)
 
42,637

 
$
143,855

 
$
1,123

 
$
(1,003
)
 
$
143,975

 
December 31, 2018
 
(in thousands)
Obligations of U.S. government corporations and agencies
$
22,183

 
$
29

 
$
(481
)
 
$
21,731

Mortgage-backed securities
77,976

 
145

 
(1,638
)
 
76,483

Obligations of states and political subdivisions
46,159

 
394

 
(469
)
 
46,084

 
$
146,318

 
$
568

 
$
(2,588
)
 
$
144,298


During the three months ended March 31, 2019, the Company received proceeds of $3.8 million on sales of available for sale securities for gross gains of $6 thousand and gross losses of $9 thousand. During the three months ended March 31, 2018, the Company sold $3.5 million of available for sale securities for gross gains of $54 thousand. There were $43 thousand in gross losses on the sale of available for sale securities during the three months ended March 31, 2018.

8



The fair value and gross unrealized losses for securities available for sale, totaled by the length of time that individual securities have been in a continuous gross unrealized loss position, at March 31, 2019 and December 31, 2018 were as follows:
 
 
Less than 12 months
 
12 months or more
 
Total
 
Fair Value
 
Gross
Unrealized
Losses
 
Fair Value
 
Gross
Unrealized
Losses
 
Fair Value
 
Gross
Unrealized
Losses
 
March 31, 2019
 
(in thousands)
Obligations of U.S. government corporations and agencies
$

 
$

 
$
12,751

 
$
235

 
$
12,751

 
$
235

Mortgage-backed securities

 

 
46,111

 
597

 
46,111

 
597

Obligations of states and political subdivisions

 

 
9,195

 
171

 
9,195

 
171

 
$

 
$

 
$
68,057

 
$
1,003

 
$
68,057

 
$
1,003

 
December 31, 2018
 
(in thousands)
Obligations of U.S. government corporations and agencies
$
1,973

 
$
6

 
$
13,710

 
$
475

 
$
15,683

 
$
481

Mortgage-backed securities
16,659

 
332

 
42,966

 
1,306

 
59,625

 
1,638

Obligations of states and political subdivisions
3,594

 
52

 
12,864

 
417

 
16,458

 
469

 
$
22,226

 
$
390

 
$
69,540

 
$
2,198

 
$
91,766

 
$
2,588



9



Gross unrealized losses on available for sale securities included sixty-four (64) and ninety-five (95) debt securities at March 31, 2019 and December 31, 2018, respectively. The Company evaluates securities for other-than-temporary impairment on at least a quarterly basis, and more frequently when economic or market concerns warrant such evaluation. Consideration is given to the length of time and the amount of an unrealized loss, the financial condition of the issuer, and the intent and ability of the Company to retain its investment in the issuer long enough to allow for an anticipated recovery in fair value. The fair value of a security reflects its liquidity as compared to similar instruments, current market rates on similar instruments, and the creditworthiness of the issuer. Absent any change in the liquidity of a security or the creditworthiness of the issuer, prices will decline as market rates rise and vice-versa. The primary cause of the unrealized losses at March 31, 2019 and December 31, 2018 was changes in market interest rates and not credit concerns of the issuers. Since the losses can be primarily attributed to changes in market interest rates and not expected cash flows or an issuer’s financial condition and management does not intend to sell and it is likely that management will not be required to sell the securities prior to their anticipated recovery, the unrealized losses were deemed to be temporary. The Company’s mortgage-backed securities are issued by U.S. government agencies, which guarantee payments to investors regardless of the status of the underlying mortgages. The Company monitors the financial condition of these issuers continuously and will record other-than-temporary impairment if the recovery of value is unlikely.

The Company’s securities are exposed to various risks, such as interest rate, market, currency and credit risks. Due to the level of risk associated with certain securities and the level of uncertainty related to changes in the value of securities, it is at least reasonably possible that changes in risks in the near term would materially affect securities reported in the financial statements.

Securities having a carrying value of $2.9 million at March 31, 2019 were pledged for various purposes required by law.

The composition of restricted investments at March 31, 2019 and December 31, 2018 was as follows:
 
 
March 31, 2019
 
December 31, 2018
 
(in thousands)
Federal Reserve Bank Stock
$
344

 
$
344

Federal Home Loan Bank Stock
686

 
686

Community Bankers’ Bank Stock
140

 
140

 
$
1,170

 
$
1,170




10



NOTE 5. Loans and Allowance for Loan Losses

The composition of loans at March 31, 2019 and December 31, 2018 was as follows:
 
 
March 31,
 
December 31,
 
 
2019
 
2018
 
 
(in thousands)
Mortgage loans on real estate:
 
 
 
 
Construction and land development
 
$
59,707

 
$
54,675

Secured by farmland
 
8,921

 
7,251

Secured by 1-4 family residential properties
 
226,672

 
221,861

Multifamily
 
9,485

 
7,923

Commercial
 
263,857

 
265,595

Commercial and industrial loans
 
34,798

 
33,086

Consumer installment loans
 
8,056

 
8,470

All other loans
 
8,116

 
8,454

Total loans
 
$
619,612

 
$
607,315

Net deferred loan fees
 
(404
)
 
(488
)
Allowance for loan losses
 
(5,685
)
 
(5,456
)
Net Loans
 
$
613,523

 
$
601,371

 
 
 
 
 

Changes in the allowance for loan losses for the three months ended March 31, 2019 and 2018 and the year ended December 31, 2018 were as follows:
 
 
Three Months Ended
 
Year Ended
 
Three Months Ended
 
March 31,
 
December 31,
 
March 31,
 
2019
 
2018
 
2018
 
 
 
(in thousands)
 
 
Balance, beginning
$
5,456

 
$
4,411

 
$
4,411

Provision for loan losses
194

 
777

 
205

Recoveries added to the allowance
45

 
504

 
52

Loan losses charged to the allowance
(10
)
 
(236
)
 
(138
)
Balance, ending
$
5,685

 
$
5,456

 
$
4,530



11



Nonaccrual and past due loans by class at March 31, 2019 and December 31, 2018 were as follows:
 
 
March 31, 2019
 
(in thousands)
 
30 - 59
Days
Past Due
 
60 - 89
Days
Past Due
 
90 or More
Days
Past Due
 
Total Past
Due
 
Current
 
Total Loans
 
90 or More
Days Past 
Due Still Accruing
 
Nonaccrual
Loans
Commercial - Non Real Estate:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Commercial & Industrial
$
126

 
$
35

 
$

 
$
161

 
$
34,637

 
$
34,798

 
$

 
$
1,011

Commercial Real Estate:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Owner Occupied

 
809

 

 
809

 
135,090

 
135,899

 

 

Non-owner occupied

 

 

 

 
127,958

 
127,958

 

 
356

Construction and Farmland:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Residential

 

 

 

 
6,361

 
6,361

 

 

Commercial
280

 

 

 
280

 
61,987

 
62,267

 

 

Consumer:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Installment
11

 

 

 
11

 
8,045

 
8,056

 

 

Residential:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Equity Lines

 

 

 

 
33,621

 
33,621

 

 
86

Single family
2,594

 
127

 
1,253

 
3,974

 
189,077

 
193,051

 

 
1,817

Multifamily

 

 

 

 
9,485

 
9,485

 

 

All Other Loans

 

 

 

 
8,116

 
8,116

 

 

Total
$
3,011

 
$
971

 
$
1,253

 
$
5,235

 
$
614,377

 
$
619,612

 
$

 
$
3,270

 
 
December 31, 2018
 
(in thousands)
 
30 - 59
Days
Past Due
 
60 - 89
Days
Past Due
 
90 or More
Days
Past Due
 
Total Past
Due
 
Current
 
Total Loans
 
90 or More
Past Due 
Still
Accruing
 
Nonaccrual
Loans
Commercial - Non Real Estate:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Commercial & Industrial
$
127

 
$

 
$

 
$
127

 
$
32,959

 
$
33,086

 
$

 
$
1,081

Commercial Real Estate:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Owner Occupied

 

 

 

 
136,309

 
136,309

 

 

Non-owner occupied

 

 

 

 
129,286

 
129,286

 

 
364

Construction and Farmland:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Residential

 

 

 

 
6,706

 
6,706

 

 

Commercial

 

 

 

 
55,220

 
55,220

 

 

Consumer:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Installment
4

 

 

 
4

 
8,466

 
8,470

 

 

Residential:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Equity Lines

 

 

 

 
32,815

 
32,815

 

 
92

Single family
960

 
196

 
900

 
2,056

 
186,990

 
189,046

 
695

 
581

Multifamily

 

 

 

 
7,923

 
7,923

 

 

All Other Loans

 

 

 

 
8,454

 
8,454

 

 

Total
$
1,091

 
$
196

 
$
900

 
$
2,187

 
$
605,128

 
$
607,315

 
$
695

 
$
2,118



12



Allowance for loan losses by segment at March 31, 2019 and December 31, 2018 were as follows:
 
 
As of and for the Three Months Ended
 
March 31, 2019
 
(in thousands)
 
Construction
and Farmland
 
Residential
 
Commercial
Real Estate
 
Commercial - Non Real Estate
 
Consumer
 
All Other
Loans
 
Unallocated
 
Total
Allowance for credit losses:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Beginning Balance
$
583

 
$
1,788

 
$
1,988

 
$
919

 
$
53

 
$
97

 
$
28

 
$
5,456

Charge-Offs

 

 

 

 
(2
)
 
(8
)
 

 
(10
)
Recoveries
2

 
13

 
6

 
13

 
10

 
1

 

 
45

Provision for (recovery of) loan losses
58

 
74

 
(35
)
 
(49
)
 
(13
)
 
1

 
158

 
194

Ending balance
$
643

 
$
1,875

 
$
1,959

 
$
883

 
$
48

 
$
91

 
$
186

 
$
5,685

Ending balance: Individually evaluated for impairment
$

 
$
95

 
$
182

 
$
600

 
$

 
$

 
$

 
$
877

Ending balance: collectively evaluated for impairment
$
643

 
$
1,780

 
$
1,777

 
$
283

 
$
48

 
$
91

 
$
186

 
$
4,808

Loans:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Ending balance
$
68,628

 
$
236,157

 
$
263,857

 
$
34,798

 
$
8,056

 
$
8,116

 
$

 
$
619,612

Ending balance individually evaluated for impairment
$
272

 
$
4,213

 
$
2,806

 
$
1,236

 
$

 
$

 
$

 
$
8,527

Ending balance collectively evaluated for impairment
$
68,356

 
$
231,944

 
$
261,051

 
$
33,562

 
$
8,056

 
$
8,116

 
$

 
$
611,085

 
 
As of and for the Twelve Months Ended
 
December 31, 2018
 
(in thousands)
 
Construction
and Farmland
 
Residential
 
Commercial
Real Estate
 
Commercial - Non Real Estate
 
Consumer
 
All Other
Loans
 
Unallocated
 
Total
Allowance for credit losses:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Beginning Balance
$
332

 
$
1,754

 
$
1,627

 
$
570

 
$
69

 
$
29

 
$
30

 
$
4,411

Charge-Offs

 
(24
)
 

 
(139
)
 
(33
)
 
(40
)
 

 
(236
)
Recoveries
266

 
28

 
78

 
100

 
19

 
13

 

 
504

Provision for (recovery of) loan losses
(15
)
 
30

 
283

 
388

 
(2
)
 
95

 
(2
)
 
777

Ending balance
$
583

 
$
1,788

 
$
1,988

 
$
919

 
$
53

 
$
97

 
$
28

 
$
5,456

Ending balance: Individually evaluated for impairment
$

 
$
119

 
$
193

 
$
650

 
$

 
$

 
$

 
$
962

Ending balance: collectively evaluated for impairment
$
583

 
$
1,669

 
$
1,795

 
$
269

 
$
53

 
$
97

 
$
28

 
$
4,494

Loans:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Ending balance
$
61,926

 
$
229,784

 
$
265,595

 
$
33,086

 
$
8,470

 
$
8,454

 
$

 
$
607,315

Ending balance individually evaluated for impairment
$
280

 
$
4,044

 
$
2,919

 
$
1,316

 
$

 
$

 
$

 
$
8,559

Ending balance collectively evaluated for impairment
$
61,646

 
$
225,740

 
$
262,676

 
$
31,770

 
$
8,470

 
$
8,454

 
$

 
$
598,756




13



Impaired loans by class as of and for the periods ended March 31, 2019 and December 31, 2018 were as follows:
 
As of and for the Three Months Ended
 
March 31, 2019
 
(in thousands)
 
Unpaid
Principal
Balance
 
Recorded
Investment (1)
 
Related
Allowance
 
Average
Recorded
Investment
 
Interest
Income
Recognized
With no related allowance:
 
 
 
 
 
 
 
 
 
Commercial - Non Real Estate:
 
 
 
 
 
 
 
 
 
Commercial & Industrial
$
530

 
$
327

 
$

 
$
346

 
$
5

Commercial Real Estate:
 
 
 
 
 
 
 
 
 
Owner Occupied

 

 

 

 

Non-owner occupied
452

 
394

 

 
398

 
1

Construction and Farmland:
 
 
 
 
 
 
 
 
 
Residential

 

 

 

 

Commercial
324

 
273

 

 
277

 
6

Consumer:
 
 
 
 
 
 
 
 
 
Installment

 

 

 

 

Residential:
 
 
 
 
 
 
 
 
 
Equity lines
468

 
86

 

 
86

 

Single family
2,512

 
2,381

 

 
2,396

 
17

Multifamily
379

 
380

 

 
382

 
5

Other Loans

 

 

 

 

 
$
4,665

 
$
3,841

 
$

 
$
3,885

 
$
34

With an allowance recorded:
 
 
 
 
 
 
 
 
 
Commercial - Non Real Estate:
 
 
 
 
 
 
 
 
 
Commercial & Industrial
$
935

 
$
910

 
$
600

 
$
922

 
$

Commercial Real Estate:
 
 
 
 
 
 
 
 
 
Owner Occupied

 

 

 

 

Non-owner occupied
2,413

 
2,420

 
182

 
2,423

 
26

Construction and Farmland:
 
 
 
 
 
 
 
 
 
Residential

 

 

 

 

Commercial

 

 

 

 

Consumer:
 
 
 
 
 
 
 
 
 
       Installment

 

 

 

 

Residential:
 
 
 
 
 
 
 
 
 
Equity lines

 

 

 

 

Single family
1,433

 
1,376

 
95

 
1,380

 
11

Multifamily

 

 

 

 

Other Loans

 

 

 

 

 
$
4,781

 
$
4,706

 
$
877

 
$
4,725

 
$
37

Total:
 
 
 
 
 
 
 
 
 
Commercial
$
1,465

 
$
1,237

 
$
600

 
$
1,268

 
$
5

Commercial Real Estate
2,865

 
2,814

 
182

 
2,821

 
27

Construction and Farmland
324

 
273

 

 
277

 
6

Consumer

 

 

 

 

Residential
4,792

 
4,223

 
95

 
4,244

 
33

Other

 

 

 

 

Total
$
9,446

 
$
8,547

 
$
877

 
$
8,610

 
$
71


14



(1) Recorded investment is defined as the summation of the outstanding principal balance, accrued interest, net deferred loan fees or costs, and any partial charge-offs. Accrued interest and net deferred loan fees or costs totaled $20 thousand at March 31, 2019.
 
As of and for the Twelve Months End
 
December 31, 2018
 
(in thousands)
 
Unpaid
Principal
Balance
 
Recorded
Investment (1)
 
Related
Allowance
 
Average
Recorded
Investment
 
Interest
Income
Recognized
With no related allowance:
 
 
 
 
 
 
 
 
 
Commercial - Non Real Estate:
 
 
 
 
 
 
 
 
 
Commercial & Industrial
$
564

 
$
356

 
$

 
$
422

 
$
25

Commercial Real Estate:
 
 
 
 
 
 
 
 
 
Owner Occupied

 

 

 

 

Non-owner occupied
558

 
501

 

 
511

 
4

Construction and Farmland:
 
 
 
 
 
 
 
 
 
Residential

 

 

 

 

Commercial
332

 
281

 

 
297

 
27

Consumer:
 
 
 
 
 
 
 
 
 
Installment

 

 

 

 

Residential: