Company Quick10K Filing
Quick10K
First Northern Community Bancorp
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 2019-05-17 Shareholder Vote
8-K 2019-03-31 Earnings, Regulation FD, Exhibits
8-K 2018-12-31 Earnings, Regulation FD, Other Events, Exhibits
8-K 2018-06-30 Earnings, Regulation FD, Exhibits
8-K 2018-06-21 Amend Bylaw, Exhibits
8-K 2018-05-17 Shareholder Vote
8-K 2018-03-31 Earnings, Regulation FD, Exhibits
8-K 2018-01-16 Officers
8-K 2017-12-31 Earnings, Regulation FD, Exhibits
WAT Waters 15,060
ETSY Etsy 7,300
UFPI Universal Forest Products 2,260
JRVR James River Group Holdings 1,370
PKE Park Electrochemical 330
CNST Constellation Pharmaceuticals 316
CWBR Cohbar 105
JMBA Jamba 0
ADMG Adamant Dri Processing & Minerals Group 0
GLLA Gilla 0
FNRN 2019-03-31
Part I - Financial Information
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 exhibit31_1.htm
EX-31.2 exhibit31_2.htm
EX-32.1 exhibit32_1.htm
EX-32.2 exhibit32_2.htm

First Northern Community Bancorp Earnings 2019-03-31

FNRN 10Q Quarterly Report

Balance SheetIncome StatementCash Flow

10-Q 1 form10q.htm FIRST NORTHERN COMMUNITY BANCORP FORM 10-Q  
 
UNITED STATES
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, 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 000-30707
 
FIRST NORTHERN COMMUNITY BANCORP
(Exact name of registrant as specified in its charter)
 
California
 
68-0450397
(State or other jurisdiction of incorporation or organization)
 
(I.R.S. Employer Identification Number)
 
195 N. First Street, Dixon, California
 
95620
(Address of principal executive offices)
 
(Zip Code)
 
707-678-3041
(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 Section 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports) and (2) has been subject to such filing requirements for the past 90 days.
 
Yes ☒
No ☐
 
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).
 
Yes ☒
No ☐
 
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and "emerging growth company" in Rule 12b-2 of the Exchange Act.
 
Large accelerated filer ☐
Accelerated filer ☒
Non-accelerated filer  ☐
Smaller reporting company
Emerging growth company ☐
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.
 
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).
 
Yes ☐
No ☒
 
The number of shares of Common Stock outstanding as of May 3, 2019 was 12,295,355.
1

FIRST NORTHERN COMMUNITY BANCORP
 
INDEX
 
 
Page
PART I – Financial Information
 
   
ITEM I. – Financial Statements (Unaudited)
3
   
Condensed Consolidated Balance Sheets (Unaudited)
3
   
Condensed Consolidated Statements of Income (Unaudited)
4
   
Condensed Consolidated Statements of Comprehensive Income (Unaudited)
5
   
Condensed Consolidated Statement of Stockholders’ Equity (Unaudited)
6
   
Condensed Consolidated Statements of Cash Flows (Unaudited)
7
   
Notes to Condensed Consolidated Financial Statements
8
   
ITEM 2. – MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
30
   
ITEM 3. – QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
45
   
ITEM 4. – CONTROLS AND PROCEDURES
45
   
PART II – OTHER INFORMATION
45
   
ITEM 1. – LEGAL PROCEEDINGS
45
   
ITEM 1A. – RISK FACTORS
45
   
ITEM 2. – UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
47
   
ITEM 3. – DEFAULTS UPON SENIOR SECURITIES
47
   
ITEM 4. – MINE SAFETY DISCLOSURES
47
   
ITEM 5. – OTHER INFORMATION
47
   
ITEM 6. – EXHIBITS
47
   
SIGNATURES
48
 
2

PART I – FINANCIAL INFORMATION
 
FIRST NORTHERN COMMUNITY BANCORP
 
ITEM I.    – FINANCIAL STATEMENTS (UNAUDITED)
 
CONDENSED CONSOLIDATED BALANCE SHEETS (UNAUDITED)
 
 
(in thousands, except share amounts)
 
March 31, 2019
   
December 31, 2018
 
 
           
Assets
           
 
           
Cash and cash equivalents
 
$
128,094
   
$
116,032
 
Certificates of deposit
   
10,045
     
7,595
 
Investment securities – available-for-sale
   
298,649
     
314,637
 
Loans, net of allowance for loan losses of $12,746 at March 31, 2019 and $12,822 at December 31, 2018
   
731,605
     
763,393
 
Loans held-for-sale
   
2,407
     
2,295
 
Stock in Federal Home Loan Bank and other equity securities, at cost
   
6,019
     
6,019
 
Premises and equipment, net
   
6,297
     
6,646
 
Other real estate owned
   
1,092
     
1,092
 
Interest receivable and other assets
   
34,760
     
32,136
 
 
               
Total Assets
 
$
1,218,968
   
$
1,249,845
 
 
               
Liabilities and Stockholders’ Equity
               
 
               
Liabilities:
               
 
               
Demand deposits
 
$
388,381
   
$
416,493
 
Interest-bearing transaction deposits
   
307,875
     
312,697
 
Savings and MMDA's
   
330,030
     
332,514
 
Time, $250,000 or less
   
43,730
     
46,905
 
Time, over $250,000
   
16,212
     
16,003
 
Total deposits
   
1,086,228
     
1,124,612
 
 
               
Interest payable and other liabilities
   
14,713
     
12,772
 
 
               
Total Liabilities
   
1,100,941
     
1,137,384
 
 
               
Stockholders' Equity:
               
Common stock, no par value; 16,000,000 shares authorized; 12,295,355 shares issued and outstanding at March 31, 2019 and 12,253,812 shares issued and outstanding at December 31, 2018
   
93,059
     
92,618
 
Additional paid-in capital
   
977
     
977
 
Retained earnings
   
27,549
     
23,902
 
Accumulated other comprehensive loss, net
   
(3,558
)
   
(5,036
)
Total Stockholders’ Equity
   
118,027
     
112,461
 
 
               
Total Liabilities and Stockholders’ Equity
 
$
1,218,968
   
$
1,249,845
 
 
See notes to unaudited condensed consolidated financial statements.

3

FIRST NORTHERN COMMUNITY BANCORP
 
CONDENSED CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED)
 
(in thousands, except per share amounts)
 
Three months ended
March 31, 2019
   
Three months ended
March 31, 2018
 
Interest and dividend income:
           
Loans
 
$
9,612
   
$
8,806
 
Due from banks interest bearing accounts
   
641
     
517
 
Investment securities
               
Taxable
   
1,633
     
1,308
 
Non-taxable
   
50
     
39
 
Other earning assets
   
115
     
105
 
Total interest and dividend income
   
12,051
     
10,775
 
Interest expense:
               
Deposits
   
371
     
263
 
Total interest expense
   
371
     
263
 
Net interest income
   
11,680
     
10,512
 
Provision for loan losses
   
     
525
 
Net interest income after provision for loan losses
   
11,680
     
9,987
 
Non-interest income:
               
Service charges on deposit accounts
   
480
     
488
 
Gains on sales of loans held-for-sale
   
115
     
69
 
Investment and brokerage services income
   
149
     
161
 
Mortgage brokerage income
   
59
     
6
 
Loan servicing income
   
90
     
106
 
Debit card income
   
491
     
502
 
Other income
   
475
     
472
 
Total non-interest income
   
1,859
     
1,804
 
Non-interest expenses:
               
Salaries and employee benefits
   
5,372
     
5,317
 
Occupancy and equipment
   
654
     
715
 
Data processing
   
603
     
530
 
Stationery and supplies
   
62
     
99
 
Advertising
   
68
     
88
 
Directors’ fees
   
45
     
65
 
Other real estate owned expense
   
56
     
 
Other expense
   
1,158
     
1,180
 
Total non-interest expenses
   
8,018
     
7,994
 
Income before provision for income taxes
   
5,521
     
3,797
 
Provision for income taxes
   
1,536
     
1,064
 
 
               
Net income
 
$
3,985
   
$
2,733
 
 
               
Basic earnings per common share
 
$
0.33
   
$
0.23
 
Diluted earnings per common share
 
$
0.32
   
$
0.22
 

See notes to unaudited condensed consolidated financial statements.

4

FIRST NORTHERN COMMUNITY BANCORP
 
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (UNAUDITED)

(in thousands)
 
Three months ended
March 31, 2019
   
Three months ended
March 31, 2018
 
Net income
 
$
3,985
   
$
2,733
 
Other comprehensive income (loss), net of tax:
               
Unrealized holding gains (losses) on securities:
               
Unrealized holding gains (losses) arising during the period, net of tax effect of $595 and $(731) for the three-month periods ended March 31, 2019 and March 31, 2018, respectively
   
1,478
     
(1,811
)
Other comprehensive income (loss)
 
$
1,478
   
$
(1,811
)
Comprehensive income
 
$
5,463
   
$
922
 

See notes to unaudited condensed consolidated financial statements.

5

FIRST NORTHERN COMMUNITY BANCORP
 
CONDENSED CONSOLIDATED STATEMENT OF STOCKHOLDERS’ EQUITY (UNAUDITED)

(in thousands, except share data)
 
 
Common Stock
                     
 
 
Shares
   
Amounts
   
Additional
Paid-in
Capital
   
Retained
Earnings
   
Accumulated
Other
Comprehensive
Loss
   
Total
 
 
                                   
Balance at December 31, 2017
   
11,630,129
   
$
85,583
   
$
977
   
$
17,881
   
$
(4,397
)
 
$
100,044
 
Net income
                           
2,733
             
2,733
 
Other comprehensive loss, net of tax
                                   
(1,811
)
   
(1,811
)
Stock dividend adjustment
   
628
     
240
             
(240
)
           
 
Cash in lieu of fractional shares
   
(159
)
                   
(10
)
           
(10
)
Stock-based compensation
           
108
                             
108
 
Common shares issued related to restricted stock grants
   
25,281
     
                             
 
Stock options exercised, net
   
5,978
     
                             
 
Balance at March 31, 2018
   
11,661,857
   
$
85,931
   
$
977
   
$
20,364
   
$
(6,208
)
 
$
101,064
 
                                                 
Balance at December 31, 2018
   
12,253,812
     
92,618
     
977
     
23,902
     
(5,036
)
   
112,461
 
Net income
                           
3,985
             
3,985
 
Other comprehensive income, net of tax
                                   
1,478
     
1,478
 
Stock dividend adjustment
   
1,401
     
330
             
(330
)
           
 
Cash in lieu of fractional shares
   
(116
)
                   
(8
)
           
(8
)
Stock-based compensation
           
111
                             
111
 
Common shares issued related to restricted stock grants
   
40,258
     
                             
 
Balance at March 31, 2019
   
12,295,355
   
$
93,059
   
$
977
   
$
27,549
   
$
(3,558
)
 
$
118,027
 

See notes to unaudited condensed consolidated financial statements.

6

FIRST NORTHERN COMMUNITY BANCORP
 
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
 
 
 
(in thousands)
 
 
 
Three months ended
March 31, 2019
   
Three months ended
March 31, 2018
 
Cash Flows From Operating Activities
           
Net income
 
$
3,985
   
$
2,733
 
Adjustments to reconcile net income to net cash provided by operating activities:
               
Depreciation
   
168
     
144
 
Accretion and amortization of investment securities premiums and discounts, net
   
425
     
722
 
(Decrease) increase in deferred loan origination fees and costs, net
   
(23
)
   
10
 
Provision for loan losses
   
     
525
 
Stock-based compensation
   
111
     
108
 
Gain on sale of fixed assets
   
(281
)
   
 
Operating lease payments
   
(217
)
   
(209
)
Gain on sales of loans held-for-sale
   
(115
)
   
(69
)
Proceeds from sales of loans held-for-sale
   
6,173
     
5,148
 
Originations of loans held-for-sale
   
(6,170
)
   
(4,469
)
Changes in assets and liabilities:
               
(Increase) decrease in interest receivable and other assets
   
(3,219
)
   
830
 
Net increase (decrease) in interest payable and other liabilities
   
2,158
     
(2,254
)
Net cash provided by operating activities
   
2,995
     
3,219
 
 
               
Cash Flows From Investing Activities
               
Proceeds from calls or maturities of available-for-sale securities
   
17,000
     
11,115
 
Principal repayments on available-for-sale securities
   
11,564
     
12,193
 
Purchase of available-for-sale securities
   
(10,928
)
   
(36,997
)
Net increase in certificates of deposit
   
(2,450
)
   
 
Net decrease in loans
   
31,811
     
18,018
 
Sales/disposals of premises and equipment, net
   
462
     
27
 
Net cash used in investing activities
   
47,459
     
4,356
 
 
               
Cash Flows From Financing Activities
               
Net decrease in deposits
   
(38,384
)
   
(11,946
)
Cash dividends paid in lieu of fractional shares
   
(8
)
   
(10
)
Net cash provided by financing activities
   
(38,392
)
   
(11,956
)
 
               
Net increase (decrease) in Cash and Cash Equivalents
   
12,062
     
(4,381
)
Cash and Cash Equivalents, beginning of period
   
116,032
     
152,892
 
Cash and Cash Equivalents, end of period
 
$
128,094
   
$
148,511
 
 
               
Supplemental Disclosures of Cash Flow Information:
               
Cash paid during the period for:
               
Interest
 
$
355
   
$
261
 
Supplemental disclosures of non-cash investing and financing activities:
               
Stock dividend distributed
 
$
6,610
   
$
6,046
 
Unrealized holding gains (losses) on available for sale securities, net of taxes
 
$
1,478
   
$
(1,811
)
 
See notes to unaudited condensed consolidated financial statements.
7


FIRST NORTHERN COMMUNITY BANCORP
 
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
 
March 31, 2019 and 2018 and December 31, 2018
 
1.
BASIS OF PRESENTATION
 
The accompanying unaudited condensed consolidated financial statements of First Northern Community Bancorp (the “Company”) 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 Articles 9 and 10 of Regulation S-X.  Accordingly, they do not include all of the information and notes required by GAAP for complete financial statements.  In the opinion of management, all adjustments considered necessary for a fair presentation have been included.  The results of operations for any interim period are not necessarily indicative of results expected for the full year.  These condensed consolidated financial statements should be read in conjunction with the consolidated financial statements and notes thereto contained in the Company’s Annual Report on Form 10-K for the year ended December 31, 2018 as filed with the Securities and Exchange Commission.  The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements as well as reported amounts of revenue and expense during the reporting period.  Actual results could differ from those estimates.  All material intercompany balances and transactions have been eliminated in consolidation.


2.
ACCOUNTING POLICIES

The most significant accounting policies followed by the Company are presented in Note 1 to the audited consolidated financial statements included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2018. These policies, along with the disclosures presented in the other financial statement notes and in this discussion, provide information on how significant assets and liabilities 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 allowance for loan losses accounting to be the accounting area requiring the most subjective or complex judgments, and as such the accounting area that could be most subject to revision as new information becomes available. A discussion of the factors affecting accounting for the allowance for loan losses is included in the “Asset Quality” and “Allowance for Loan Losses” discussions below. Certain amounts in prior periods have been reclassified to conform to the current presentation.
Application of these principles requires the Company to make certain estimates, assumptions, and judgments that affect the amounts reported in the financial statements and accompanying notes. These estimates, assumptions, and judgments are based on information available as of the date of the financial statements; accordingly, as this information changes, the financial statements could reflect different estimates, assumptions, and judgments. Certain accounting policies inherently have a greater reliance on the use of estimates, assumptions and judgments and as such have a greater possibility of producing results that could be materially different than originally reported. Estimates, assumptions and judgments are necessary when assets and liabilities are required to be recorded at fair value, when a decline in the value of an asset not carried on the financial statements at fair value warrants an impairment writedown or valuation reserve to be established, or when an asset or liability needs to be recorded contingent upon a future event. Carrying assets and liabilities at fair value inherently results in more financial statement volatility. The fair values and the information used to record valuation adjustments for certain assets and liabilities are based either on quoted market prices or are provided by other third-party sources, when available.

Recently Adopted Accounting Standards:

In February 2016, the Financial Accounting Standards Board (FASB) issued ASU 2016-02, Leases (Topic 842).  The Company adopted ASU 2016-02 on January 1, 2019.  The Company adopted the new guidance using the optional transition method provided in ASU 2018-11, Leases (Topic 842): Targeted Improvements.  This modified transition method allowed the Company to initially apply the new leases standard at the adoption date and allowed the Company to continue reporting comparative periods presented in the financial statements in accordance with legacy guidance in ASC 840.  See FN (11), Leases.

Recently Issued Accounting Pronouncements:

In June 2016, FASB issued ASU 2016-13, Financial Instruments – Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments.  The amendments in ASU 2016-13, among other things, require the measurement of all expected credit losses for financial assets held at the reporting date based on historical experience, current conditions, and reasonable and supportable forecasts.  Financial institutions and other organizations will now use forward-looking information to better inform their credit loss estimates.  Many of the loss estimation techniques applied today will still be permitted, although the inputs to those techniques will change to reflect the full amount of expected credit losses.  In addition, ASU 2016-13 amends the accounting for credit losses on available-for-sale debt securities and purchased financial assets with credit deterioration.  The amendments are effective for public companies for annual periods beginning after December 15, 2019.  Early application will be permitted for all organizations for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2018.  We are currently evaluating the potential impact of ASU 2016-13 on our financial statements. In that regard, we have formed a cross-functional working group, under the direction of our Chief Financial Officer and our Chief Credit Officer. The working group is comprised of individuals from various functional areas including credit risk, finance and information technology, among others. We are currently working through our implementation plan which includes assessment and documentation of processes, internal controls and data sources; model development and documentation; and system configuration, among other things. We are also in the process of implementing a third-party vendor solution to assist us in the application of ASU 2016-13. The adoption of ASU 2016-13 could result in an increase in the allowance for loan losses as a result of changing from an “incurred loss” model, which encompasses allowances for current known and inherent losses within the portfolio, to an “expected loss” model, which encompasses allowances for losses expected to be incurred over the life of the portfolio. Furthermore, ASU 2016-13 will necessitate that we establish an allowance for expected credit losses for certain debt securities and other financial assets. While we are currently unable to reasonably estimate the impact of adopting ASU 2016-13, we expect that the impact of adoption will be significantly influenced by the composition, characteristics and quality of our loan and securities portfolios as well as the prevailing economic conditions and forecasts as of the adoption date.

8

In November 2018, FASB issued ASU 2018-19, Codification Improvements to Topic 326, Financial Instruments – Credit Losses.  The guidance clarifies that receivables arising from operating leases are not within the scope of the credit losses standard, but rather should be accounted for in accordance with the leases standard.  The effective date and transition requirements are the same as the effective dates and transition requirements in the credit losses standard, ASU 2016-13.  The Company does not expect the adoption of this update to have a significant impact on its consolidated financial statements.

In March 2019, FASB issued ASU 2019-01, Leases (Topic 842): Codification Improvements.  These amendments align the guidance for fair value of the underlying asset by lessors that are not manufacturers or dealers in Topic 842 with that of existing guidance (Issue 1).  This ASU also requires lessors within the scope of Topic 942, Financial Services - Depository and Lending, to present all "principal payments received under leases" within investing activities (Issue 2).  Finally, this ASU exempts both lessees and lessors from having to provide certain interim disclosures in the fiscal year in which a company adopts the new leases standard (Issue 3).  Issue 1 and Issue 2 are effective for public companies for fiscal years beginning after December 15, 2019, and interim periods within those fiscal years.  Issue 3 is effective for public companies for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2018.  The Company adopted Issue 3 of ASU 2019-01 on January 1, 2019, which did not have a significant impact on its consolidated financial statements.  See FN (11), Leases.
9

3.  INVESTMENT SECURITIES
 
The amortized cost, unrealized gains and losses and estimated fair values of investments in debt and other securities at March 31, 2019 are summarized as follows:
 
(in thousands)
 
Amortized
cost
   
Unrealized
gains
   
Unrealized
losses
   
Estimated
fair value
 
 
                       
Investment securities available-for-sale:
                       
U.S. Treasury Securities
 
$
43,402
   
$
258
   
$
(100
)
 
$
43,560
 
Securities of U.S. government agencies and corporations
   
33,670
     
109
     
(154
)
   
33,625
 
Obligations of states and political subdivisions
   
22,663
     
272
     
(72
)
   
22,863
 
Collateralized mortgage obligations
   
66,511
     
67
     
(1,447
)
   
65,131
 
Mortgage-backed securities
   
135,755
     
295
     
(2,580
)
   
133,470
 
Total debt securities
 
$
302,001
   
$
1,001
   
$
(4,353
)
 
$
298,649
 

The amortized cost, unrealized gains and losses and estimated fair values of investments in debt and other securities at December 31, 2018 are summarized as follows:
 
(in thousands)
 
Amortized
cost
   
Unrealized
gains
   
Unrealized
losses
   
Estimated
fair value
 
 
                       
Investment securities available-for-sale:
                       
U.S. Treasury Securities
 
$
50,825
   
$
14
   
$
(157
)
 
$
50,682
 
Securities of U.S. government agencies and corporations
   
42,215
     
89
     
(228
)
   
42,076
 
Obligations of states and political subdivisions
   
19,110
     
181
     
(123
)
   
19,168
 
Collateralized mortgage obligations
   
65,615
     
34
     
(1,850
)
   
63,799
 
Mortgage-backed securities
   
142,297
     
147
     
(3,532
)
   
138,912
 
Total debt securities
 
$
320,062
   
$
465
   
$
(5,890
)
 
$
314,637
 
 
The Company had $17,000,000 and $11,115,000 proceeds from calls and maturities of available-for-sale securities for the three months ended March 31, 2019 and March 31, 2018, respectively.  There were no gross realized gains from sales/calls of available-for-sale securities for each of the three months ended March 31, 2019 and March 31, 2018.  There were no gross realized losses from sales/calls of available-for-sale securities for each of the three months ended March 31, 2019 and March 31, 2018.

The amortized cost and estimated market value of debt and other securities at March 31, 2019, by contractual and expected maturity, are shown in the following table:
 
(in thousands)
 
Amortized
cost
   
Estimated
fair value
 
 
           
Maturity in years:
           
Due in one year or less
 
$
37,748
   
$
37,645
 
Due after one year through five years
   
51,955
     
52,120
 
Due after five years through ten years
   
5,097
     
5,303
 
Due after ten years
   
4,935
     
4,980
 
Subtotal 
   
99,735
     
100,048
 
MBS & CMO
   
202,266
     
198,601
 
Total
 
$
302,001
   
$
298,649
 


Expected maturities may differ from contractual maturities because borrowers may have the right to call or prepay obligations with or without call or prepayment penalties.  In addition, factors such as prepayments and interest rates may affect the yield on the carrying value of mortgage-related securities.

10

An analysis of gross unrealized losses of the available-for-sale investment securities portfolio as of March 31, 2019, follows:
 
 
 
Less than 12 months
   
12 months or more
   
Total
 
(in thousands)
 
Fair Value
   
Unrealized
losses
   
Fair Value
   
Unrealized
losses
   
Fair Value
   
Unrealized
losses
 
 
                                   
U.S. Treasury securities
 
$
4,996
   
$
(2
)
 
$
15,407
   
$
(98
)
 
$
20,403
   
$
(100
)
Securities of U.S. government agencies and corporations
   
998
     
(1
)
   
20,576
     
(153
)
   
21,574
     
(154
)
Obligations of states and political subdivisions
   
698
     
(1
)
   
8,591
     
(71
)
   
9,289
     
(72
)
Collateralized Mortgage obligations
   
2,048
     
(2
)
   
51,133
     
(1,445
)
   
53,181
     
(1,447
)
Mortgage-backed securities
   
1,929
     
(14
)
   
106,343
     
(2,566
)
   
108,272
     
(2,580
)
Total
 
$
10,669
   
$
(20
)
 
$
202,050
   
$
(4,333
)
 
$
212,719
   
$
(4,353
)
 
No decline in value was considered “other-than-temporary” during the first three months of 2019.  Twenty securities, all considered investment grade, which had a fair value of $10,669,000 and a total unrealized loss of $20,000 have been in an unrealized loss position for less than twelve months as of March 31, 2019.  Two hundred five securities, all considered investment grade, which had a fair value of $202,050,000 and a total unrealized loss of $4,333,000 have been in an unrealized loss position for more than twelve months as of March 31, 2019.  The unrealized losses on the Company's investment securities were caused by market conditions for these types of investments, particularly changes in risk-free interest rates.  The Company does not intend to sell the securities and has concluded it is not more likely than not that we will be required to sell these securities prior to recovery of their anticipated cost basis. Therefore, the Company does not consider these investments to be other than temporarily impaired as of March 31, 2019.

The fair value of investment securities could decline in the future if the general economy deteriorates, inflation increases, credit ratings decline, the issuer's financial condition deteriorates, or the liquidity for securities declines. As a result, other than temporary impairments may occur in the future.

An analysis of gross unrealized losses of the available-for-sale investment securities portfolio as of December 31, 2018, follows:
 
 
 
Less than 12 months
   
12 months or more
   
Total
 
(in thousands)
 
Fair Value
   
Unrealized
losses
   
Fair Value
   
Unrealized
losses
   
Fair Value
   
Unrealized
losses
 
 
                                   
U.S. Treasury Securities
 
$
37,805
   
$
(67
)
 
$
5,951
   
$
(90
)
 
$
43,756
   
$
(157
)
Securities of U.S. government agencies and corporations
   
16,959
     
(39
)
   
13,540
     
(189
)
   
30,499
     
(228
)
Obligations of states and political subdivisions
   
847
     
(2
)
   
9,134
     
(121
)
   
9,981
     
(123
)
Collateralized Mortgage obligations
   
2,217
     
(6
)
   
53,217
     
(1,844
)
   
55,434
     
(1,850
)
Mortgage-backed securities
   
16,358
     
(123
)
   
105,361
     
(3,409
)
   
121,719
     
(3,532
)
Total
 
$
74,186
   
$
(237
)
 
$
187,203
   
$
(5,653
)
 
$
261,389
   
$
(5,890
)
 
Investment securities carried at $34,363,000 and $36,781,000 at March 31, 2019 and December 31, 2018, respectively, were pledged to secure public deposits or for other purposes as required or permitted by law.
11


4.  LOANS

The composition of the Company’s loan portfolio, by loan class, as of March 31, 2019 and December 31, 2018 was as follows:
 
($ in thousands)
 
March 31, 2019
   
December 31, 2018
 
 
           
Commercial
 
$
113,575
   
$
125,177
 
Commercial Real Estate
   
419,540
     
420,106
 
Agriculture
   
109,749
     
123,626
 
Residential Mortgage
   
51,682
     
51,064
 
Residential Construction
   
17,626
     
20,124
 
Consumer
   
31,435
     
35,397
 
 
   
743,607
     
775,494
 
Allowance for loan losses
   
(12,746
)
   
(12,822
)
Net deferred origination fees and costs
   
744
     
721
 
Loans, net
 
$
731,605
   
$
763,393
 

The Company manages asset quality and credit risk by maintaining diversification in its loan portfolio and through review processes that include analysis of credit requests and ongoing examination of outstanding loans and delinquencies, with particular attention to portfolio dynamics and loan mix.  The Company strives to identify loans experiencing difficulty early enough to correct the problems, to record charge-offs promptly based on realistic assessments of collectability and current collateral values and to maintain an adequate allowance for loan losses at all times.   Asset quality reviews of loans and other non-performing assets are administered using credit risk rating standards and criteria similar to those employed by state and federal banking regulatory agencies.

Commercial loans, whether secured or unsecured, generally are made to support the short-term operations and other needs of small businesses.  These loans are generally secured by the receivables, equipment, and other real property of the business and are susceptible to the related risks described above.  Problem commercial loans are generally identified by periodic review of financial information that may include financial statements, tax returns, and payment history of the borrower.  Based on this information, the Company may decide to take any of several courses of action, including demand for repayment, requiring the borrower to provide a significant principal payment and/or additional collateral or requiring similar support from guarantors. Notwithstanding, when repayment becomes unlikely based on the borrower's income and cash flow, repossession or foreclosure of the underlying collateral may become necessary.  Collateral values may be determined by appraisals obtained through Bank-approved, licensed appraisers, qualified independent third parties, purchase invoices, or other appropriate documentation.

Commercial real estate loans generally fall into two categories, owner-occupied and non-owner occupied.  Loans secured by owner-occupied real estate are primarily susceptible to changes in the market conditions of the related business.  This may be driven by, among other things, industry changes, geographic business changes, changes in the individual financial capacity of the business owner, general economic conditions and changes in business cycles. These same risks apply to Commercial loans whether secured by equipment, receivables or other personal property or unsecured.  Problem commercial real estate loans are generally identified by periodic review of financial information that may include financial statements, tax returns, payment history of the borrower, and site inspections.  Based on this information, the Company may decide to take any of several courses of action, including demand for repayment, requiring the borrower to provide a significant principal payment and/or additional collateral or requiring similar support from guarantors. Notwithstanding, when repayment becomes unlikely based on the borrower's income and cash flow, repossession or foreclosure of the underlying collateral may become necessary.  Losses on loans secured by owner occupied real estate, equipment, or other personal property generally are dictated by the value of underlying collateral at the time of default and liquidation of the collateral.  When default is driven by issues related specifically to the business owner, collateral values tend to provide better repayment support and may result in little or no loss. Alternatively, when default is driven by more general economic conditions, underlying collateral generally has devalued more and results in larger losses due to default.  Loans secured by non-owner occupied real estate are primarily susceptible to risks associated with swings in occupancy or vacancy and related shifts in lease rates, rental rates or room rates. Most often, these shifts are a result of changes in general economic or market conditions or overbuilding and resulting over-supply of space.  Losses are dependent on the value of underlying collateral at the time of default.  Values are generally driven by these same factors and influenced by interest rates and required rates of return as well as changes in occupancy costs.  Collateral values may be determined by appraisals obtained through Bank-approved, licensed appraisers, qualified independent third parties, sales invoices, or other appropriate means.

Agricultural loans, whether secured or unsecured, generally are made to producers and processors of crops and livestock.  Repayment is primarily from the sale of an agricultural product or service.  Agricultural loans are generally secured by inventory, receivables, equipment, and other real property.  Agricultural loans primarily are susceptible to changes in market demand for specific commodities.  This may be exacerbated by, among other things, industry changes, changes in the individual financial capacity of the business owner, general economic conditions and changes in business cycles, as well as adverse weather conditions such as drought or floods.  Problem agricultural loans are generally identified by periodic review of financial information that may include financial statements, tax returns, crop budgets, payment history, and crop inspections.  Based on this information, the Company may decide to take any of several courses of action, including demand for repayment, requiring the borrower to provide a significant principal payment and/or additional collateral or requiring similar support from guarantors. Notwithstanding, when repayment becomes unlikely based on the borrower's income and cash flow, repossession or foreclosure of the underlying collateral may become necessary.

12

Residential mortgage loans, which are secured by real estate, are primarily susceptible to four risks; non-payment due to diminished or lost income, over-extension of credit, a lack of borrower's cash flow to sustain payments, and shortfalls in collateral value.  In general, non-payment is usually due to loss of employment and follows general economic trends in the economy, particularly the upward movement in the unemployment rate, loss of collateral value, and demand shifts.

Construction loans, whether owner-occupied or non-owner occupied residential development loans, are not only susceptible to the related risks described above but the added risks of construction, including cost over-runs, mismanagement of the project, or lack of demand and market changes experienced at time of completion.  Losses are primarily related to underlying collateral value and changes therein as described above.  Problem construction loans are generally identified by periodic review of financial information that may include financial statements, tax returns and payment history of the borrower.  Based on this information, the Company may decide to take any of several courses of action, including demand for repayment, requiring the borrower to provide a significant principal payment and/or additional collateral or requiring similar support from guarantors, or repossession or foreclosure of the underlying collateral.  Collateral values may be determined by appraisals obtained through Bank-approved, licensed appraisers, qualified independent third parties, purchase invoices, or other appropriate documentation.

Consumer loans, whether unsecured or secured, are primarily susceptible to four risks: non-payment due to diminished or lost income, over-extension of credit, a lack of borrower's cash flow to sustain payments, and shortfall in collateral value.  In general, non-payment is usually due to loss of employment and will follow general economic trends in the economy, particularly the upward movements in the unemployment rate, loss of collateral value, and demand shifts.  

Collateral values may be determined by appraisals obtained through Bank-approved, licensed appraisers, qualified independent third parties, purchase invoices, or other appropriate documentation.  Collateral valuations are obtained at origination of the credit and periodically thereafter (generally annually but may be more frequent depending on the collateral type), once repayment is questionable, and the loan has been deemed classified.

As of March 31, 2019, approximately 15% in principal amount of the Company's loans were for general commercial uses, including professional, retail and small businesses.  Approximately 57% in principal amount of the Company’s loans were secured by commercial real estate, consisting primarily of loans secured by commercial properties and construction and land development loans.  Approximately 15% in principal amount of the Company's loans were for agriculture, approximately 7% in principal amount of the Company’s loans were residential mortgage loans, approximately 2% in principal amount of the Company’s loans were residential construction loans and approximately 4% in principal amount of the Company’s loans were consumer loans.

Once a loan becomes delinquent or repayment becomes questionable, a Company collection officer will address collateral shortfalls with the borrower and attempt to obtain additional collateral or a principal payment.  If this is not forthcoming and payment of principal and interest in accordance with the contractual terms of the loan agreement becomes unlikely, the Company will consider the loan to be impaired and will estimate its probable loss, using the present value of future cash flows discounted at the loan's effective interest rate, the loan's observable market price, or the fair value of the collateral if the loan is collateral dependent.  For collateral dependent loans, the Company will utilize a recent valuation of the underlying collateral less estimated costs of sale, and charge-off the loan down to the estimated net realizable amount.  Depending on the length of time until final collection, the Company may periodically revalue the estimated loss and take additional charge-offs or specific reserves as warranted. Revaluations may occur as often as every 3-12 months depending on the underlying collateral and volatility of values.  Final charge-offs or recoveries are taken when the collateral is liquidated and the actual loss is confirmed.  Unpaid balances on loans after or during collection and liquidation may also be pursued through legal action and attachment of wages or judgment liens on the borrower's other assets.

At March 31, 2019 and December 31, 2018, all loans were pledged under a blanket collateral lien to secure actual and potential borrowings from the Federal Home Loan Bank (“FHLB”).

13

Non-accrual and Past Due Loans

The Company’s loans by delinquency and non-accrual status, as of March 31, 2019 and December 31, 2018, were as follows:
   
($ in thousands)
 
Current & Accruing
   
30-59 Days Past Due & Accruing
   
60-89 Days Past Due & Accruing
   
90 Days or
more Past Due & Accruing
   
Nonaccrual
   
Total Loans
 
March 31, 2019
                                   
Commercial
 
$
111,929
   
$
771
   
$
   
$
662
   
$
213
   
$
113,575
 
Commercial Real Estate
   
419,173
     
     
     
     
367
     
419,540
 
Agriculture
   
104,791
     
180
     
     
     
4,778
     
109,749
 
Residential Mortgage
   
51,408
     
177
     
     
     
97
     
51,682
 
Residential Construction
   
17,626
     
     
     
     
     
17,626
 
Consumer
   
30,983
     
150
     
110
     
     
192
     
31,435
 
Total
 
$
735,910
   
$
1,278
   
$
110
   
$
662
   
$
5,647
   
$
743,607
 
 
                                               
December 31, 2018
                                               
Commercial
 
$
123,765
   
$
662
   
$
   
$
   
$
750
   
$
125,177
 
Commercial Real Estate
   
419,725
     
     
     
     
381
     
420,106
 
Agriculture
   
118,639
     
157
     
     
     
4,830
     
123,626
 
Residential Mortgage
   
50,964
     
     
     
     
100
     
51,064
 
Residential Construction
   
20,124
     
     
     
     
     
20,124
 
Consumer
   
35,054
     
114
     
38
     
     
191
     
35,397
 
Total
 
$
768,271
   
$
933
   
$
38
   
$
   
$
6,252
   
$
775,494
 
 
Non-accrual loans amounted to $5,647,000 at March 31, 2019 and were comprised of one commercial loan totaling $213,000, two commercial real estate loans totaling $367,000, five agriculture loans totaling $4,778,000, two residential mortgage loans totaling $97,000 and two consumer loans totaling $192,000.  The Company had one commercial loan totaling $662,000 that was 90 days or more past due and still accruing at March 31, 2019.  Non-accrual loans amounted to $6,252,000 at December 31, 2018 and were comprised of two commercial loans totaling $750,000, two commercial real estate loans totaling $381,000, five agriculture loans totaling $4,830,000, two residential mortgage loans totaling $100,000, and one consumer loan totaling $191,000.  All non-accrual loans are measured for impairment based upon the present value of future cash flows discounted at the loan's effective interest rate, the loan's observable market price, or the fair value of collateral, if the loan is collateral dependent.  If the measurement of the non-accrual loan is less than the recorded investment in the loan, an impairment is recognized through the establishment of a specific reserve sufficient to cover expected losses and/or a charge-off against the allowance for loan losses. If the loan is considered to be collateral dependent, it is generally the Company's policy to charge-off the portion of any non-accrual loan that the Company does not expect to collect by writing the loan down to the estimated net realizable value of the underlying collateral.  There were no commitments to lend additional funds to borrowers whose loans were on non-accrual status at March 31, 2019.
 
14

Impaired Loans
 
A loan is considered impaired when, based on current information and events, it is probable that the Company will be unable to collect all amounts due according to the contractual terms of the loan agreement, including scheduled interest payments.  Loans to be considered for impairment include non-accrual loans, troubled debt restructurings and loans with a risk rating of 5 (special mention) or worse and an aggregate exposure of $500,000 or more.  Once identified, impaired loans are measured individually for impairment using one of three methods:  present value of expected cash flows discounted at the loan's effective interest rate; the loan's observable market price; or fair value of collateral if the loan is collateral dependent.  In general, any portion of the recorded investment in a collateral dependent loan in excess of the fair value of the collateral that can be identified as uncollectible, and is, therefore, deemed a confirmed loss, is promptly charged-off against the allowance for loan losses.

Impaired loans, segregated by loan class, as of March 31, 2019 and December 31, 2018 were as follows:
 
($ in thousands)
 
Unpaid Contractual
Principal Balance
   
Recorded
Investment with no
Allowance
   
Recorded
Investment with
Allowance
   
Total Recorded
Investment
   
Related Allowance
 
March 31, 2019
                             
Commercial
 
$
2,930
   
$
213
   
$
1,961
   
$
2,174
   
$
37
 
Commercial Real Estate
   
767
     
367
     
258
     
625
     
21
 
Agriculture
   
4,779
     
4,779
     
     
4,779
     
 
Residential Mortgage
   
1,471
     
96
     
1,255
     
1,351
     
267
 
Residential Construction
   
743
     
     
743
     
743
     
48
 
Consumer
   
400
     
192
     
191
     
383
     
2
 
Total
 
$
11,090
   
$
5,647
   
$
4,408
   
$
10,055
   
$
375
 
 
                                       
December 31, 2018
                                       
Commercial
 
$
3,591
   
$
300
   
$
2,602
   
$
2,902
   
$
496
 
Commercial Real Estate
   
780
     
381
     
261
     
642
     
21
 
Agriculture
   
4,830
     
4,830
     
     
4,830
     
 
Residential Mortgage
   
1,669
     
100
     
1,451
     
1,551
     
287
 
Residential Construction
   
560
     
     
560
     
560
     
49
 
Consumer
   
403
     
191
     
198
     
389
     
2
 
Total
 
$
11,833
   
$
5,802
   
$
5,072
   
$
10,874
   
$
855
 
 
The average recorded investment in impaired loans and the amount of interest income recognized on impaired loans during the three months ended March 31, 2019 and March 31, 2018 was as follows:
 
($ in thousands)
 
Three Months Ended
March 31, 2019
   
Three Months Ended
March 31, 2018
 
 
 
Average
Recorded
Investment
   
Interest
Income
Recognized
   
Average
Recorded
Investment
   
Interest
Income
Recognized
 
Commercial
 
$
2,538
   
$
42
   
$
3,425
   
$
46
 
Commercial Real Estate
   
634
     
4
     
1,971
     
4
 
Agriculture
   
4,804
     
     
     
 
Residential Mortgage
   
1,451
     
12
     
2,234
     
15
 
Residential Construction
   
652
     
9
     
647
     
9
 
Consumer
   
386
     
3
     
470
     
3
 
Total
 
$
10,465
   
$
70
   
$
8,747
   
$
77
 
 
15

Troubled Debt Restructurings
 
The Company's loan portfolio includes certain loans that have been modified in a Troubled Debt Restructuring ("TDR"), which are loans on which concessions in terms have been granted because of the borrowers' financial difficulties and, as a result, the Company receives less than the current market-based compensation for the loan.  These concessions may include reductions in the interest rate, payment extensions, forgiveness of principal, forbearance, or other actions.  Certain TDRs are placed on non-accrual status at the time of restructure and may be returned to accruing status after considering the borrower's sustained repayment performance for a reasonable period, generally six months.
 
When a loan is modified, it is measured based upon the present value of future cash flows discounted at the contractual interest rate of the original loan agreement, or the fair value of collateral less selling costs if the loan is collateral dependent.  If the value of the modified loan is less than the recorded investment in the loan, impairment is recognized through a specific allowance or a charge-off of the loan.
 
The Company had $4,591,000 and $4,813,000 in TDR loans as of March 31, 2019 and December 31, 2018, respectively.  Specific reserves for TDR loans totaled $375,000 and $405,000 as of March 31, 2019 and December 31, 2018, respectively.  TDR loans performing in compliance with modified terms totaled $4,408,000 and $4,622,000 as of March 31, 2019 and December 31, 2018, respectively.  There were no commitments to advance additional funds on existing TDR loans as of March 31, 2019.

Loans modified as TDRs during the three months ended March 31, 2019 were as follows:

 
 
Three Months Ended March 31, 2019
 
 
 
Number of Contracts
   
Pre-modification outstanding recorded investment
   
Post-modification outstanding recorded investment
 
Residential Construction
   
2
   
$
189
   
$
189
 
Total
   
2
   
$
189
   
$
189
 


There were no loans modified as TDRs during the three months ended March 31, 2018.
  
Loan modifications generally involve reductions in the interest rate, payment extensions, forgiveness of principal, or forbearance.  There were no loans modified as a TDR within the previous twelve months and for which there was a payment default during the three months ended March 31, 2019 and March 31, 2018.

16

Credit Quality Indicators
 
All loans are rated using the credit risk ratings and criteria adopted by the Company.  Risk ratings are adjusted as future circumstances warrant.  All credits risk rated 1, 2, 3 or 4 equate to a Pass as indicated by Federal and State bank regulatory agencies; a 5 equates to a Special Mention; a 6 equates to Substandard; a 7 equates to Doubtful; and an 8 equates to a Loss.  For the definitions of each risk rating, see Note 4 to our consolidated financial statements included in our Annual Report on Form 10-K for the year ended December 31, 2018.
 
The following table presents the risk ratings by loan class as of March 31, 2019 and December 31, 2018:
 
($ in thousands)
 
Pass
   
Special
Mention
   
Substandard
   
Doubtful
   
Loss
   
Total
 
March 31, 2019
                                   
Commercial
 
$
110,899
   
$
510
   
$
2,166
   
$
   
$
   
$
113,575
 
Commercial Real Estate
   
396,130
     
14,753
     
8,657
     
     
     
419,540
 
Agriculture
   
89,670
     
13,139
     
6,940
     
     
     
109,749
 
Residential Mortgage
   
51,121
     
     
561
     
     
     
51,682
 
Residential Construction
   
17,626
     
     
     
     
     
17,626
 
Consumer
   
30,595
     
538
     
302
     
     
     
31,435
 
Total
 
$
696,041
   
$
28,940
   
$
18,626
   
$
   
$
   
$
743,607
 
 
                                               
December 31, 2018
                                               
Commercial
 
$
121,848
   
$
66
   
$
2,813
   
$
450
   
$
   
$
125,177
 
Commercial Real Estate
   
395,436
     
14,272
     
10,398
     
     
     
420,106
 
Agriculture
   
104,809
     
11,750
     
7,067
     
     
     
123,626
 
Residential Mortgage
   
50,149
     
     
915
     
     
     
51,064
 
Residential Construction
   
19,372
     
752
     
     
     
     
20,124
 
Consumer
   
34,272
     
590
     
535
     
     
     
35,397
 
Total
 
$
725,886
   
$
27,430
   
$
21,728
   
$
450
   
$
   
$
775,494
 
 
17

Allowance for Loan Losses

The following tables detail activity in the allowance for loan losses and the amount allocated to individually and collectively evaluated for impairment by loan class for the three months ended March 31, 2019 and March 31, 2018:

Three months ended March 31, 2019
 
($ in thousands)
 
Commercial
   
Commercial
Real Estate
   
Agriculture
   
Residential
Mortgage
   
Residential
Construction
   
Consumer
   
Unallocated
   
Total
 
Balance as of December 31, 2018
 
$
3,198
   
$
5,890
   
$
1,632
   
$
643
   
$
318
   
$
279
   
$
862
   
$
12,822
 
Provision for (reversal of) loan losses
   
(568
)
   
496
     
202
     
(197
)
   
(102
)
   
     
169
     
 
 
                                                               
Charge-offs
   
(150
)
   
     
     
     
     
(7
)
   
     
(157
)
Recoveries
   
19
     
     
     
56
     
1
     
5
     
     
81
 
Net charge-offs
   
(131
)
   
     
     
56
     
1
     
(2
)
   
     
(76
)
Balance as of March 31, 2019
 
$
2,499
   
$
6,386
   
$
1,834
   
$
502
   
$
217
   
$
277
   
$
1,031
   
$
12,746
 
Period-end amount allocated to:
                                                               
Loans individually evaluated for impairment
   
37
     
21
     
     
267
     
48
     
2
     
     
375
 
Loans collectively evaluated for impairment
   
2,462
     
6,365
     
1,834
     
235
     
169
     
275
     
1,031
     
12,371
 
Balance as of March 31, 2019
 
$
2,499
   
$
6,386
   
$
1,834
   
$
502
   
$
217
   
$
277
   
$
1,031
   
$
12,746
 
 
Three months ended March 31, 2018
 
($ in thousands)
 
Commercial
   
Commercial
Real Estate
   
Agriculture
   
Residential
Mortgage
   
Residential
Construction
   
Consumer
   
Unallocated
   
Total
 
Balance as of December 31, 2017
 
$
2,625
   
$
5,460
   
$
1,547
   
$
628
   
$
360
   
$
342
   
$
171
   
$
11,133
 
Provision for (reversal of) loan losses
   
(85
)
   
(46
)
   
(124
)
   
(1
)
   
(13
)
   
(68
)
   
862
     
525
 
 
                                                               
Charge-offs
   
     
     
     
     
     
(6
)
   
     
(6
)
Recoveries
   
9
     
     
     
16
     
1
     
37
     
     
63
 
Net recoveries
   
9
     
     
     
16
     
1
     
31
     
     
57
 
Balance as of March 31, 2018
 
$
2,549
   
$
5,414
   
$
1,423
   
$
643
   
$
348
   
$
305
   
$
1,033
   
$
11,715
 
Period-end amount allocated to:
                                                               
Loans individually evaluated for impairment
   
47
     
36
     
     
309
     
71
     
4
     
     
467
 
Loans collectively evaluated for impairment
   
2,502
     
5,378
     
1,423
     
334
     
277
     
301
     
1,033
     
11,248
 
Balance as of March 31, 2018
 
$
2,549
   
$
5,414
   
$
1,423
   
$
643
   
$
348
   
$
305
   
$
1,033
   
$
11,715
 
 
18

The following table details activity in the allowance for loan losses and the amount allocated to loans individually and collectively evaluated for impairment by loan class as of and for the period ended December 31, 2018.
 
Year ended December 31, 2018
 
($ in thousands)
 
Commercial
   
Commercial
Real Estate
   
Agriculture
   
Residential
Mortgage
   
Residential
Construction
   
Consumer
   
Unallocated
   
Total
 
Balance as of December 31, 2017