Texas
|
001-38895
|
75-2453320
|
(State or other jurisdiction of incorporation)
|
(Commission File Number)
|
(IRS Employer Identification No.)
|
5219 City Bank Parkway
Lubbock, Texas
|
79407
|
|
(Address of principal executive offices)
|
(Zip Code)
|
☐ |
Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
|
☐ |
Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
|
☐ |
Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
|
☐ |
Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))
|
Title of each class
|
Trading Symbol(s)
|
Name of each exchange on which registered
|
Common Stock, par value $1.00 per share
|
SPFI
|
The Nasdaq Stock Market LLC
|
Item 9.01 |
Financial Statements and Exhibits.
|
(a) |
Financial Statements of Businesses Acquired.
|
(b) |
Pro Forma Financial Information.
|
(d) |
Exhibits.
|
23.1 |
Consent of Weaver and Tidwell, L.L.P.
|
99.1 |
Audited financial statements of West Texas State Bank as of and for the year ended December 31, 2018.
|
99.2 |
Unaudited financial statements of West Texas State Bank as of June 30, 2019 and for the six months ended June 30, 2019 and 2018.
|
99.3 |
Unaudited pro forma combined condensed consolidated balance sheet of South Plains Financial, Inc. as of June 30, 2019 and unaudited pro forma combined condensed consolidated statements of income of South Plains Financial, Inc. for
the six months ended June 30, 2019 and the year ended December 31, 2018.
|
SOUTH PLAINS FINANCIAL, INC.
|
||
Dated: January 28, 2020
|
By:
|
/s/ Curtis C. Griffith
|
Curtis C. Griffith
|
||
Chairman and Chief Executive Officer
|
Page
|
|
Independent Auditor’s Report
|
1
|
Financial Statements
|
|
Statement of Financial Condition
|
3
|
|
|
Statement of Income
|
4
|
|
|
Statement of Comprehensive Income
|
5
|
|
|
Statement of Changes in Stockholders’ Equity
|
6
|
|
|
Statement of Cash Flows
|
7
|
|
|
Notes to Financial Statements
|
9
|
ASSETS
|
||||
ASSETS
|
||||
Cash and due from banks
|
$
|
10,534,120
|
||
Interest-bearing deposits in banks
|
41,372,326
|
|||
Federal funds sold
|
31,000,000
|
|||
Total cash and cash equivalents
|
82,906,446
|
|||
Certificate of deposits held in other banks
|
23,887,000
|
|||
Loans receivable, net of allowance for loan losses of $3,849,681
|
210,060,017
|
|||
Trading securities
|
-
|
|||
Securities available for sale, at estimated fair value (amortized cost of $81,465,067)
|
79,462,822
|
|||
Securities held to maturity, at amortized cost (estimated fair value of $1,088,167)
|
1,086,617
|
|||
Restricted investments held at cost
|
615,858
|
|||
Premises and equipment, net
|
4,355,539
|
|||
Goodwill
|
370,000
|
|||
Accrued interest receivable
|
1,062,167
|
|||
Cash surrender value of life insurance
|
11,195,338
|
|||
Other assets
|
2,566,195
|
|||
TOTAL ASSETS
|
$
|
417,567,999
|
||
LIABILITIES AND STOCKHOLDERS’ EQUITY
|
||||
LIABILITIES
|
||||
Non-interest-bearing demand deposits
|
$
|
205,041,167
|
||
Interest-bearing deposits
|
161,762,459
|
|||
Total deposits
|
366,803,626
|
|||
Accrued interest payable and other liabilities
|
1,282,995
|
|||
Total liabilities
|
368,086,621
|
|||
STOCKHOLDERS’ EQUITY
|
||||
Common stock - $5 par value; 200,000 shares authorized, 134,280 issued and outstanding
|
671,400
|
|||
Additional paid in capital
|
15,328,600
|
|||
Retained earnings
|
35,483,623
|
|||
Accumulated other comprehensive loss
|
(2,002,245
|
)
|
||
Total stockholders’ equity
|
49,481,378
|
|||
TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY
|
$
|
417,567,999
|
INTEREST INCOME
|
||||
Loans, including fees
|
$
|
13,501,704
|
||
Securities available for sale and held to maturity
|
1,376,329
|
|||
Tax exempt securities
|
320,647
|
|||
Due from banks
|
511,562
|
|||
Federal funds sold
|
804,156
|
|||
Interest on certificate of deposits held in other banks
|
446,726
|
|||
Total interest income
|
16,961,124
|
|||
INTEREST EXPENSE
|
||||
Deposits
|
523,746
|
|||
NET INTEREST INCOME
|
16,437,378
|
|||
Provision for loan losses
|
220,000
|
|||
Net interest income after provision for loan losses
|
16,217,378
|
|||
NONINTEREST INCOME
|
||||
Service charges on deposits
|
1,140,224
|
|||
Cash surrender value of life insurance appreciation
|
286,447
|
|||
Other income
|
599,909
|
|||
Trading securities gains
|
63,065
|
|||
Total noninterest income
|
2,089,645
|
|||
NONINTEREST EXPENSES
|
||||
Salaries and employee benefits
|
6,898,746
|
|||
Occupancy expenses
|
1,049,150
|
|||
Director’s fees
|
129,250
|
|||
Data and check processing
|
1,488,170
|
|||
Professional services
|
1,350,106
|
|||
Office expense
|
535,851
|
|||
Advertising and contributions
|
181,640
|
|||
Training, travel and periodicals
|
334,622
|
|||
Federal deposit insurance premium
|
250,864
|
|||
Amortization of core deposit intangible assets
|
27,000
|
|||
Net realized loss on sale of available for sale securities
|
211,642
|
|||
Loss on sale of foreclosed assets
|
3,228
|
|||
Other expenses
|
522,191
|
|||
Total noninterest expenses
|
12,982,460
|
|||
Income before income taxes
|
5,324,563
|
|||
Income tax expense
|
19,919
|
|||
NET INCOME
|
$
|
5,304,644
|
NET INCOME
|
$
|
5,304,644
|
||
OTHER ITEMS OF COMPREHENSIVE INCOME
|
||||
Change in unrealized depreciation on investment securities available for sale
|
(1,192,598
|
)
|
||
Reclassification adjustment for realized losses on investment securities included in net income
|
211,642
|
|||
Total other items of comprehensive income
|
(980,956
|
)
|
||
COMPREHENSIVE INCOME BEFORE TAX
|
4,323,688
|
|||
Income tax expense related to other items of comprehensive income
|
-
|
|||
COMPREHENSIVE INCOME
|
$
|
4,323,688
|
Common Stock
|
Additional
Paid-In
|
Retained
|
Accumulated
Other
Comprehensive
|
Total
Stockholders’
|
||||||||||||||||||||
Shares
|
Amount
|
Capital
|
Earnings
|
Loss
|
Equity
|
|||||||||||||||||||
BALANCE, December 31, 2017
|
134,280
|
$
|
671,400
|
$
|
15,328,600
|
$
|
30,178,979
|
$
|
(1,021,289
|
)
|
$
|
45,157,690
|
||||||||||||
Net income
|
-
|
-
|
-
|
5,304,644
|
-
|
5,304,644
|
||||||||||||||||||
Change in net unrealized losses on available for sale securities
|
-
|
-
|
-
|
-
|
(980,956
|
)
|
(980,956
|
)
|
||||||||||||||||
BALANCE, December 31, 2018
|
134,280
|
$
|
671,400
|
$
|
15,328,600
|
$
|
35,483,623
|
$
|
(2,002,245
|
)
|
$
|
49,481,378
|
CASH FLOWS FROM OPERATING ACTIVITIES
|
||||
Net income
|
$
|
5,304,644
|
||
Adjustments to reconcile net income to net cash provided by operating activities
|
||||
Depreciation
|
347,802
|
|||
Amortization of core deposit intangible assets
|
27,000
|
|||
Provision for loan losses
|
220,000
|
|||
Net amortization of security discounts and premiums
|
1,166,534
|
|||
Net realized loss on sale of available for sale securities
|
211,642
|
|||
Appreciation in cash surrender value of life insurance
|
(286,447
|
)
|
||
Loss on sale of foreclosed assets
|
3,228
|
|||
Trading securities gains
|
(63,065
|
)
|
||
(Increase) decrease in assets
|
||||
Accrued interest receivable
|
(46,020
|
)
|
||
Other assets
|
(809,373
|
)
|
||
Increase (decrease) in liabilities
|
||||
Accrued interest payable and other liabilities
|
905,222
|
|||
|
||||
Net cash provided by operating activities
|
6,981,167
|
|||
CASH FLOWS FROM INVESTING ACTIVITIES
|
||||
Net change in certificate of deposits held in other banks
|
(6,709,000
|
)
|
||
Activity in available for sale securities
|
||||
Sales
|
4,739,346
|
|||
Purchases
|
(88,120,280
|
)
|
||
Proceeds from paydowns, calls and maturities
|
77,764,816
|
|||
Activity in held to maturity securities
|
||||
Proceeds from paydowns, calls and maturities
|
1,403,288
|
|||
Purchases
|
(1,091,450
|
)
|
||
Proceeds from the sale of trading securities
|
6,696,785
|
|||
Loan originations and principal collections, net
|
(8,231,094
|
)
|
||
Additions to premises and equipment
|
(364,532
|
)
|
||
Proceeds from sales of foreclosed real estate
|
212,658
|
|||
Net change in restricted investments held at cost
|
(3,200
|
)
|
||
|
||||
Net cash used in investing activities
|
(13,702,663
|
)
|
CASH FLOWS FROM FINANCING ACTIVITIES
|
||||
Net decrease in deposits
|
13,873,901
|
|||
|
||||
Net cash provided by financing activities
|
13,873,901
|
|||
|
||||
Net change in cash and cash equivalents
|
7,152,405
|
|||
|
||||
CASH AND CASH EQUIVALENTS, beginning of year
|
75,754,041
|
|||
CASH AND CASH EQUIVALENTS, end of year
|
$
|
82,906,446
|
||
SUPPLEMENTARY DISCLOSURE OF CASH FLOW INFORMATION
|
||||
Interest paid
|
$
|
467,498
|
||
|
||||
Income taxes paid
|
$
|
19,919
|
||
SUPPLEMENTARY DISCLOSURE OF NONCASH INVESTING AND FINANCING ACTIVITIES
|
||||
Transfers from loans to foreclosed real estate
|
$
|
-
|
||
|
||||
Change in unrealized gain on securities
|
$
|
(980,956
|
)
|
Note 1. |
Nature of Operations and Summary of Significant Accounting Policies
|
Level 1: |
Unadjusted quoted prices in active markets for identical assets or liabilities.
|
Level 2: |
Inputs other than Level 1 inputs that are observable, either directly or indirectly, such as quoted prices for similar assets or liabilities, quoted prices in markets that are not active or other inputs that are observable or can be
corroborated by observable market data for substantially the full term of the assets or liabilities.
|
Level 3: |
Unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities. Level 3 assets and liabilities include financial instruments whose nature is determined
using pricing models, discounted cash flow methodologies, or similar techniques, as well as instruments for which the determination of fair value requires significant management judgment or estimation.
|
Note 2. |
Restrictions on Cash and Due from Bank Accounts
|
Note 3. |
Securities
|
Amortized
Cost
|
Gross
Unrealized
Gains
|
Gross
Unrealized
Losses
|
Fair
Value
|
|||||||||||||
Available for sale
|
||||||||||||||||
U.S. Government Bonds
|
$
|
27,828,136
|
$
|
6,795
|
$
|
(26,962
|
)
|
$
|
27,807,969
|
|||||||
Mortgage-backed & CMO securities
|
53,636,931
|
-
|
(1,982,078
|
)
|
51,654,853
|
|||||||||||
|
||||||||||||||||
Total available for sale
|
81,465,067
|
6,795
|
(2,009,040
|
)
|
79,462,822
|
|||||||||||
Held to maturity
|
||||||||||||||||
CMO securities
|
1,086,617
|
1,550
|
-
|
1,088,167
|
||||||||||||
Total
|
$
|
82,551,684
|
$
|
8,345
|
$
|
(2,009,040
|
)
|
$
|
80,550,989
|
Available for Sale
|
Held to Maturity
|
|||||||||||||||
Amortized
Cost
|
Fair
Value
|
Amortized
Cost
|
Fair
Value
|
|||||||||||||
Due in one year or less
|
$
|
7,931,110
|
$
|
7,917,500
|
$
|
-
|
$
|
-
|
||||||||
Due from one year to five years
|
19,897,026
|
19,890,469
|
-
|
-
|
||||||||||||
Due from five to ten years
|
-
|
-
|
-
|
-
|
||||||||||||
Due after ten years
|
-
|
-
|
-
|
-
|
||||||||||||
Mortgage-backed & CMO securities
|
53,636,931
|
51,654,853
|
1,086,617
|
1,088,167
|
||||||||||||
Total
|
$
|
81,465,067
|
$
|
79,462,822
|
$
|
1,086,617
|
$
|
1,088,167
|
Less Than 12 Months
|
12 Months or Greater
|
Total
|
||||||||||||||||||||||
Category
(number of securities) |
Fair
Value |
Gross
Unrealized
Losses |
Fair
Value |
Gross
Unrealized
Losses |
Fair
Value |
Gross
Unrealized
Losses |
||||||||||||||||||
Available for sale
|
||||||||||||||||||||||||
U.S. Government Bonds (5)
|
$
|
19,841,094
|
$
|
(26,962
|
)
|
$
|
-
|
$
|
-
|
$
|
19,841,094
|
$
|
(26,962
|
)
|
||||||||||
Mortgage-backed &CMO securities (39,9)
|
6,180,183
|
(77,441
|
)
|
45,280,868
|
(1,904,637
|
)
|
51,461,051
|
(1,982,078
|
)
|
|||||||||||||||
Total
|
$
|
26,021,277
|
$
|
(104,403
|
)
|
$
|
45,280,868
|
$
|
(1,904,637
|
)
|
$
|
71,302,145
|
$
|
(2,009,040
|
)
|
Note 4. |
Loans Receivable
|
Percent
|
||||||||
Real estate
|
$
|
138,349,901
|
65
|
%
|
||||
Commercial
|
71,232,953
|
33
|
%
|
|||||
Consumer and other
|
4,326,844
|
2
|
%
|
|||||
Subtotal
|
213,909,698
|
100
|
%
|
|||||
Less: allowance for loan losses
|
(3,849,681
|
)
|
||||||
Net loans receivable
|
$
|
210,060,017
|
Loans that are ninety days or more past due and still accruing interest
|
$
|
-
|
||
Loans whose accrual of interest had been discontinued
|
722,653
|
|||
Interest income that would have been recorded if such loans had been on full-accrual status
|
18,066
|
|||
Foreclosed and repossessed assets other than real estate
|
-
|
|||
Overdraft balances classified as consumer loans
|
55,429
|
December 31, 2018
|
||||||
Recorded
Investment
|
Valuation
Allowance
|
|||||
$
|
9,488,000
|
$
|
390,000
|
Real estate
|
$
|
-
|
||
Commercial
|
720,749
|
|||
Consumer and other
|
1,904
|
|||
Total
|
$
|
722,653
|
December 31, 2018
|
Unpaid
Contractual
Principal
Balance
|
Recorded
Investment
With No
Allowance
|
Recorded
Investment
With
Allowance
|
Total
Recorded
Investment
|
Related
Allowance
|
Average
Recorded
Investment
|
||||||||||||||||||
Real estate
|
$
|
-
|
$
|
-
|
$
|
-
|
$
|
-
|
$
|
-
|
$
|
-
|
||||||||||||
Commercial
|
9,488,000
|
8,240,000
|
1,248,000
|
9,488,000
|
390,000
|
6,052,500
|
||||||||||||||||||
Consumer and other
|
-
|
-
|
-
|
-
|
-
|
-
|
||||||||||||||||||
Total
|
$
|
9,488,000
|
$
|
8,240,000
|
$
|
1,248,000
|
$
|
9,488,000
|
$
|
390,000
|
$
|
6,052,500
|
December 31, 2018
|
Pass
|
Special
Mention
|
Substandard
|
Doubtful
|
Total
|
|||||||||||||||
Real estate
|
$
|
138,349,901
|
$
|
-
|
$
|
-
|
$
|
-
|
$
|
138,349,901
|
||||||||||
Commercial
|
61,744,953
|
-
|
9,228,000
|
260,000
|
71,232,953
|
|||||||||||||||
Consumer and other
|
4,326,844
|
-
|
-
|
-
|
4,326,844
|
|||||||||||||||
Total
|
$
|
204,421,698
|
$
|
-
|
$
|
9,228,000
|
$
|
260,000
|
$
|
213,909,698
|
December 31, 2018
|
30-59 Days
Past Due
|
60-89 Days
Past Due
|
Greater
Than
90 Days
|
Total
Past Due
|
Total
Current
|
Total
Loans
|
Total 90
Days Past
Due Still
Accruing |
|||||||||||||||||||||
Real estate
|
$
|
314
|
$
|
-
|
$
|
-
|
$
|
314
|
$
|
138,349,587
|
$
|
138,349,901
|
$
|
-
|
||||||||||||||
Commercial
|
165,449
|
5,100
|
-
|
170,549
|
71,062,404
|
71,232,953
|
-
|
|||||||||||||||||||||
Consumer and other
|
13,025
|
-
|
-
|
13,025
|
4,313,819
|
4,326,844
|
-
|
|||||||||||||||||||||
Total
|
$
|
178,788
|
$
|
5,100
|
$
|
-
|
$
|
183,888
|
$
|
213,725,810
|
$
|
213,909,698
|
$
|
-
|
Allowance for loan losses provided for:
|
||||
Loans specifically evaluated as impaired
|
$
|
390,000
|
||
Remaining portfolio
|
3,459,681
|
|||
Total allowance for loan losses
|
$
|
3,849,681
|
December 31, 2018
|
Real Estate
|
Commercial
|
Consumer
and Other
|
Total
|
||||||||||||
Loans individually evaluated for impairment
|
$
|
-
|
$
|
-
|
$
|
-
|
$
|
-
|
||||||||
Loans collectively evaluated for impairment
|
522,871
|
3,010,190
|
316,620
|
3,849,681
|
||||||||||||
$
|
522,871
|
$
|
3,010,190
|
$
|
316,620
|
$
|
3,849,681
|
Balance, January 1
|
$
|
4,462,680
|
||
Loans charged off
|
(1,785,767
|
)
|
||
Recoveries
|
952,768
|
|||
Net loans charged off
|
(832,999
|
)
|
||
Provision for loan losses
|
220,000
|
|||
Balance, December 31
|
$
|
3,849,681
|
December 31, 2018
|
Real Estate
|
Commercial
|
Consumer
and Other
|
Total
|
||||||||||||
Beginning balance
|
$
|
522,871
|
$
|
3,617,701
|
$
|
322,108
|
$
|
4,462,680
|
||||||||
Provision for loan losses
|
-
|
205,850
|
14,150
|
220,000
|
||||||||||||
Recoveries
|
-
|
919,963
|
32,805
|
952,768
|
||||||||||||
Charge-offs
|
-
|
(1,733,324
|
)
|
(52,443
|
)
|
(1,785,767
|
)
|
|||||||||
Ending balance
|
$
|
522,871
|
$
|
3,010,190
|
$
|
316,620
|
$
|
3,849,681
|
December 31, 2018
|
Real Estate
|
Commercial
|
Consumer
and Other
|
Total
|
||||||||||||
Loans individually evaluated for impairment
|
$
|
-
|
$
|
9,488,000
|
$
|
-
|
$
|
9,488,000
|
||||||||
Loans collectively evaluated for impairment
|
138,349,901
|
61,744,953
|
4,326,844
|
204,421,698
|
||||||||||||
Total
|
$
|
138,349,901
|
$
|
71,232,953
|
$
|
4,326,844
|
$
|
213,909,698
|
Note 5. |
Premises and Equipment
|
Bank premises
|
$
|
3,977,570
|
||
Furniture and fixtures
|
1,128,830
|
|||
Autos
|
41,792
|
|||
Software
|
3,170,259
|
|||
Depreciable assets
|
8,318,451
|
|||
Land
|
2,638,234
|
|||
Total cost
|
10,956,685
|
|||
Less: accumulated depreciation
|
6,601,146
|
|||
Net book value
|
$
|
4,355,539
|
Note 6. |
Goodwill and Other Intangibles
|
Note 7. |
Deposits
|
Savings deposits, IRA’s and NOW accounts
|
$
|
117,401,459
|
||
Time deposits less than $100,000
|
7,608,000
|
|||
Time deposits of $100,000 or more
|
36,753,000
|
|||
Deposits
|
$
|
161,762,459
|
Due in
|
Balance of
Time
Deposits
|
Percent
|
||||||
One year or less
|
$
|
43,094,000
|
97
|
%
|
||||
One through three years
|
1,267,000
|
3
|
%
|
|||||
Over three years
|
-
|
0
|
%
|
|||||
Total
|
$
|
44,361,000
|
100
|
%
|
Note 8. |
Commitments and Contingencies
|
Contract
Amount
|
||||
Commitments to extend credit
|
$
|
35,383,000
|
Contract
Amount
|
||||
Standby letters of credit
|
$
|
1,485,000
|
Note 9. |
Lines of Credit
|
Note 10. |
401(K) Plan
|
Note 11. |
Related-Party Transactions
|
Note 12. |
Fair Value Measurements
|
Total Fair
Value
|
Level 1
|
Level 2
|
Level 3
|
|||||||||||||
Financial assets
|
||||||||||||||||
Securities available for sale
|
$
|
79,462,822
|
$
|
-
|
$
|
79,462,822
|
$
|
-
|
||||||||
Securities held to maturity
|
1,088,167
|
-
|
1,088,167
|
-
|
||||||||||||
|
||||||||||||||||
Total assets
|
$
|
80,550,989
|
$
|
-
|
$
|
80,550,989
|
$
|
-
|
a)
|
Cash and cash equivalents and certificates of deposits held in other banks. The estimated fair value approximates carrying (book) value based on the
short-term nature of the instrument.
|
b)
|
Accrued interest receivable and accrued interest payable. The estimated fair value approximates carrying value based on the short-term nature of the
instrument.
|
c)
|
Restricted investments held at cost. No ready market exists for the stocks and it has no quoted market value. The
carrying value of the stock is accounted for using the cost basis of accounting, which approximates fair value as that is the amount it will be repurchased by the FHLB or TIB.
|
d)
|
Loans, net of allowance for loan losses. The estimated fair value approximates carrying value for variable rate loans that re-price frequently and with no
significant change in credit risk. The fair value of fixed rate loans and variable rate loans which re-price on an infrequent basis is estimated by discounting future cash flows using the current interest rates at which similar loans with
similar terms would be made to borrowers of similar credit quality. An overall valuation adjustment is made for specific credit risks as well as general portfolio credit risk.
|
e)
|
Deposits. The estimated fair value approximates carrying value for demand deposits, savings and NOW deposits. The fair value of time deposits is estimated by
discounting future cash flows using the interest rates currently offered for deposits of similar remaining maturities. The estimated fair value of deposits does not take into account the Company’s long-term relationships with depositors,
commonly known as core deposit intangibles, which are separate intangible assets, and not considered financial instruments. Nonetheless, the Company would likely realize a core deposit premium if its portfolio were sold in the principal
market for such deposits.
|
Book
Value
|
Estimated
Fair Value
|
|||||||
Financial assets:
|
||||||||
Cash and cash equivalents
|
$
|
82,906,446
|
$
|
82,906,446
|
||||
Certificate of deposits held in other banks
|
23,887,000
|
23,887,000
|
||||||
Securities available for sale
|
79,462,822
|
79,462,822
|
||||||
Securities held to maturity
|
1,086,617
|
1,088,167
|
||||||
Loans, net
|
210,060,017
|
205,935,718
|
||||||
Accrued interest receivable
|
1,062,167
|
1,062,167
|
||||||
Restricted investments held at cost
|
615,858
|
615,858
|
||||||
Financial liabilities:
|
||||||||
Deposits
|
366,803,626
|
345,307,975
|
||||||
Accrued interest payable
|
80,375
|
80,375
|
Note 13. |
Regulatory Matters
|
As of December 31, 2018
|
Actual
|
Minimum Capital
Required - Basel III
Phase-In
Schedule |
Minimum Capital
Required - Basel III
Fully
Phased-In |
Required to be
Considered Well
Capitalized |
||||||||||||||||||||||||||||
(in thousands)
|
Amount
|
Ratio
|
Amount
|
Ratio
|
Amount
|
Ratio
|
Amount
|
Ratio
|
||||||||||||||||||||||||
Common Equity Tier 1
|
$
|
51,023
|
18.69
|
%
|
$
|
17,400
|
6.38
|
%
|
$
|
19,136
|
7.00
|
%
|
$
|
17,741
|
6.50
|
%
|
||||||||||||||||
(to risk-weighted assets)
|
||||||||||||||||||||||||||||||||
Total Capital
|
||||||||||||||||||||||||||||||||
(to risk-weighted assets)
|
$
|
54,440
|
19.95
|
%
|
$
|
21,835
|
8.00
|
%
|
$
|
28,704
|
10.50
|
%
|
$
|
27,294
|
10.00
|
%
|
||||||||||||||||
Tier I Capital
|
||||||||||||||||||||||||||||||||
(to risk-weighted assets)
|
$
|
51,023
|
18.69
|
%
|
$
|
16,376
|
6.00
|
%
|
$
|
23,237
|
8.50
|
%
|
$
|
21,835
|
8.00
|
%
|
||||||||||||||||
Tier I Capital
|
||||||||||||||||||||||||||||||||
(to average assets)
|
$
|
51,023
|
12.04
|
%
|
$
|
16,954
|
4.00
|
%
|
$
|
16,954
|
4.00
|
%
|
$
|
21,192
|
5.00
|
%
|
Page
|
|
Financial Statements (Unaudited):
|
|
Statements of Financial Condition
|
3
|
Statements of Income
|
4
|
Statements of Comprehensive Income
|
5
|
Statements of Changes in Stockholders’ Equity
|
6
|
Statements of Cash Flows
|
7
|
Notes to Unaudited Financial Statements
|
9
|
June 30,
2019
|
December 31,
2018
|
|||||||
ASSETS
|
||||||||
Cash and due from banks
|
$
|
10,200
|
$
|
10,534
|
||||
Interest-bearing deposits in banks
|
64,304
|
41,372
|
||||||
Federal funds sold
|
27,700
|
31,000
|
||||||
Total cash and cash equivalents
|
102,204
|
82,906
|
||||||
Certificate of deposits held in other banks
|
26,223
|
23,887
|
||||||
Loans receivable, net of allowance for loan losses of $4,173 and $3,850
|
200,617
|
210,060
|
||||||
Securities available for sale, at estimated fair value (amortized cost of $77,237 and $81,465)
|
77,206
|
79,463
|
||||||
Securities held to maturity, at amortized cost (estimated fair value of $2,331 and $1,088)
|
2,240
|
1,087
|
||||||
Restricted investments held at cost
|
618
|
616
|
||||||
Premises and equipment, net
|
4,145
|
4,356
|
||||||
Goodwill
|
370
|
370
|
||||||
Accrued interest receivable
|
1,023
|
1,062
|
||||||
Cash surrender value of life insurance
|
11,331
|
11,195
|
||||||
Other assets
|
3,339
|
2,566
|
||||||
Total assets
|
$
|
429,316
|
$
|
417,568
|
||||
LIABILITIES AND STOCKHOLDERS’ EQUITY
|
||||||||
Non-interest-bearing demand deposits
|
$
|
214,174
|
$
|
205,041
|
||||
Interest-bearing deposits
|
161,981
|
161,763
|
||||||
Total deposits
|
376,155
|
366,804
|
||||||
Accrued interest payable and other liabilities
|
954
|
1,283
|
||||||
Total liabilities
|
377,109
|
368,087
|
||||||
Stockholders’ equity:
|
||||||||
Common stock - $5 par value; 200,000 shares authorized, 134,280 issued and outstanding
|
671
|
671
|
||||||
Additional paid-in capital
|
15,329
|
15,329
|
||||||
Retained earnings
|
36,238
|
35,483
|
||||||
Accumulated other comprehensive loss
|
(31
|
)
|
(2,002
|
)
|
||||
Total stockholders’ equity
|
52,207
|
49,481
|
||||||
|
||||||||
Total liabilities and stockholders’ equity
|
$
|
429,316
|
$
|
417,568
|
Six Months Ended June 30,
|
||||||||
2019
|
2018
|
|||||||
Interest income
|
||||||||
Loans, including fees
|
$
|
6,455
|
$
|
6,140
|
||||
Securities available for sale and held to maturity
|
819
|
755
|
||||||
Tax exempt securities
|
410
|
28
|
||||||
Due from banks
|
329
|
221
|
||||||
Federal funds sold and interest bearing deposits in banks
|
741
|
594
|
||||||
Total interest income
|
8,754
|
7,738
|
||||||
Interest expense:
|
||||||||
Deposits
|
375
|
216
|
||||||
Net interest income
|
8,379
|
7,522
|
||||||
Provision for loan losses
|
30
|
60
|
||||||
Net interest income after provision for loan losses
|
8,349
|
7,462
|
||||||
Noninterest income:
|
||||||||
Service charges on deposit accounts
|
556
|
571
|
||||||
Cash surrender value of life insurance appreciation
|
136
|
143
|
||||||
Other income
|
657
|
243
|
||||||
Total noninterest income
|
1,349
|
957
|
||||||
Noninterest expense:
|
||||||||
Salaries and employee benefits
|
3,560
|
3,458
|
||||||
Occupancy expenses
|
467
|
322
|
||||||
Data and check processing
|
599
|
774
|
||||||
Professional services
|
699
|
715
|
||||||
Other expenses
|
1,598
|
1,113
|
||||||
Total noninterest expense
|
6,923
|
6,382
|
||||||
Income before income taxes
|
2,775
|
2,037
|
||||||
Income tax
|
6
|
9
|
||||||
Net income
|
$
|
2,769
|
$
|
2,028
|
Six Months Ended June 30,
|
||||||||
2019
|
2018
|
|||||||
Net income
|
$
|
2,769
|
$
|
2,028
|
||||
Other items of comprehensive income
|
||||||||
Change in unrealized appreciation/(depreciation) on investment securities available for sale
|
1,378
|
(1,221
|
)
|
|||||
Reclassification adjustment for realized losses on investment securities included in net income
|
593
|
155
|
||||||
Total other items of comprehensive income (loss)
|
1,971
|
(1,066
|
)
|
|||||
Comprehensive income
|
$
|
4,740
|
$
|
962
|
Common Stock |
Additional
Paid-in
|
Retained |
Accumulated
Other
Comprehensive
|
|||||||||||||||||||||
Shares |
Amount
|
Capital |
Earnings
|
Income (Loss)
|
Total |
|||||||||||||||||||
Balance, December 31, 2017
|
134,280
|
$
|
671
|
$
|
15,329
|
$
|
30,179
|
$
|
(1,021
|
)
|
$
|
45,158
|
||||||||||||
Net income
|
-
|
-
|
-
|
2,028
|
-
|
2,028
|
||||||||||||||||||
Change in net unrealized losses on available for sale securities
|
-
|
-
|
-
|
-
|
(1,066
|
)
|
(1,066
|
)
|
||||||||||||||||
|
||||||||||||||||||||||||
Balance, June 30, 2018
|
134,280
|
$
|
671
|
$
|
15,329
|
$
|
32,207
|
$
|
(2,087
|
)
|
$
|
46,120
|
||||||||||||
|
||||||||||||||||||||||||
Balance, December 31, 2018
|
134,280
|
$
|
671
|
$
|
15,329
|
$
|
35,483
|
$
|
(2,002
|
)
|
49,481
|
|||||||||||||
Net income
|
-
|
-
|
-
|
2,769
|
-
|
2,769
|
||||||||||||||||||
Cash divideds on common stock
|
(2,014
|
)
|
(2,014
|
)
|
||||||||||||||||||||
Change in net unrealized gains on available for sale securities
|
-
|
-
|
-
|
-
|
1,971
|
1,971
|
||||||||||||||||||
|
||||||||||||||||||||||||
Balance, June 30, 2019
|
134,280
|
$
|
671
|
$
|
15,329
|
$
|
36,238
|
$
|
(31
|
)
|
$
|
52,207
|
Six Months Ended June 30,
|
||||||||
2019
|
2018
|
|||||||
Cash flows from operating activities
|
||||||||
Net income
|
$
|
2,769
|
$
|
2,028
|
||||
Adjustments to reconcile net income to net cash provided by operating activities
|
||||||||
Depreciation
|
138
|
174
|
||||||
Amortization of core deposit intangible assets
|
14
|
14
|
||||||
Provision for loan losses
|
30
|
60
|
||||||
Net amortization of security discounts and premiums
|
350
|
605
|
||||||
Net realized loss on sale of available for sale securities
|
593
|
-
|
||||||
Net realized loss on trading securities
|
-
|
155
|
||||||
Net realized gain on sale of premises and equipment
|
(328
|
)
|
-
|
|||||
Appreciation in cash surrender value of life insurance
|
(136
|
)
|
(143
|
)
|
||||
(Increase) decrease in assets
|
||||||||
Accrued interest receivable and other assets
|
(748
|
)
|
221
|
|||||
Increase (decrease) in liabilities
|
||||||||
Accrued interest payable and other liabilities
|
(329
|
)
|
505
|
|||||
Net cash provided by operating activities
|
2,353
|
3,619
|
||||||
Cash flows from investing activities
|
||||||||
Net change in certificate of deposits held in other banks
|
(2,338
|
)
|
(6,967
|
)
|
||||
Activity in available for sale securities
|
||||||||
Purchases
|
(89,592
|
)
|
(27,874
|
)
|
||||
Proceeds from the sale of securities
|
36,951
|
-
|
||||||
Proceeds from paydowns, calls and maturities
|
55,947
|
31,472
|
||||||
Activity in held to maturity securities
|
||||||||
Proceeds from paydowns, calls and maturities
|
-
|
14
|
||||||
Purchases
|
(1,174
|
)
|
-
|
|||||
Proceeds from the sale of trading securities
|
-
|
6,479
|
||||||
Loan originations and principal collections, net
|
9,413
|
(7,414
|
)
|
|||||
Additions to premises and equipment
|
(93
|
)
|
(487
|
)
|
||||
Proceeds from the sale of premises and equipment
|
494
|
-
|
||||||
Net change in restricted investments held at cost
|
-
|
(2
|
)
|
|||||
Net cash provided by (used in) investing activities
|
9,608
|
(4,779
|
)
|
Six Months Ended June 30,
|
||||||||
2019
|
2018
|
|||||||
Cash flows from financing activities
|
||||||||
Net increase in deposits
|
9,351
|
19,674
|
||||||
Cash dividends paid on common stock
|
(2,014
|
)
|
-
|
|||||
Net cash provided by financing activities
|
7,337
|
19,674
|
||||||
Net change in cash and cash equivalents
|
19,298
|
18,514
|
||||||
Cash and cash equivalents, beginning
|
82,906
|
75,754
|
||||||
Cash and cash equivalents, end
|
$
|
102,204
|
$
|
94,268
|
||||
Supplementary disclosure of cash flow information | ||||||||
Interest paid
|
$
|
375
|
$
|
230
|
||||
Supplementary disclosure of noncash investing and financing activities
|
|
|
|
|||||
Change in unrealized gain (loss) on securities
|
1,971 |
(1,066
|
) |
1.
|
NATURE OF OPERATIONS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
|
2. |
SECURITIES
|
Amortized
Cost
|
Gross
Unrealized
Gains
|
Gross
Unrealized
Losses
|
Fair
Value
|
|||||||||||||
June 30, 2019
|
||||||||||||||||
Available for sale
|
||||||||||||||||
U.S. Government Bonds
|
$
|
63,753
|
$
|
127
|
$
|
-
|
$
|
63,880
|
||||||||
State and municipal
|
600
|
-
|
-
|
600
|
||||||||||||
Mortgage-backed & CMO securities
|
12,884
|
10
|
(168
|
)
|
12,726
|
|||||||||||
$
|
77,237
|
$
|
137
|
$
|
(168
|
)
|
$
|
77,206
|
||||||||
Held to maturity CMO securities
|
$
|
2,240
|
$
|
91
|
$
|
-
|
$
|
2,331
|
||||||||
December 31, 2018
|
||||||||||||||||
Available for sale
|
||||||||||||||||
U.S. Government Bonds
|
$
|
27,828
|
$
|
7
|
$
|
(27
|
)
|
$
|
27,808
|
|||||||
Mortgage-backed & CMO securities
|
53,637
|
-
|
(1,982
|
)
|
51,655
|
|||||||||||
$
|
81,465
|
$
|
7
|
$
|
(2,009
|
)
|
$
|
79,463
|
||||||||
Held to maturity CMO securities
|
$
|
1,087
|
$
|
1
|
$
|
-
|
$
|
1,088
|
Available for Sale
|
Held to Maturity
|
|||||||||||||||
Amortized
Cost
|
Fair
Value
|
Amortized
Cost
|
Fair
Value
|
|||||||||||||
Due in one year or less
|
$
|
60,355
|
$
|
60,448
|
$
|
-
|
$
|
-
|
||||||||
Due from one year to five years
|
3,998
|
4,032
|
-
|
-
|
||||||||||||
Due from five to ten years
|
-
|
-
|
2,240
|
2,331
|
||||||||||||
Due after ten years
|
-
|
-
|
-
|
-
|
||||||||||||
Mortgage-backed & CMO securities
|
12,884
|
12,726
|
-
|
-
|
||||||||||||
$
|
77,237
|
$
|
77,206
|
$
|
2,240
|
$
|
2,331
|
Less than 12 Months
|
12 Months or More
|
Total
|
||||||||||||||||||||||
Fair Value
|
Unrealized Loss
|
Fair Value
|
Unrealized
Loss
|
Fair Value
|
Unrealized
Loss
|
|||||||||||||||||||
June 30, 2019
|
||||||||||||||||||||||||
Available for sale
|
||||||||||||||||||||||||
U.S. Government Bonds
|
$
|
-
|
$
|
-
|
$
|
-
|
$
|
-
|
$
|
-
|
$
|
-
|
||||||||||||
Mortgage-backed & CMO Securities
|
721
|
(1
|
)
|
9,428
|
(167
|
)
|
10,149
|
(168
|
)
|
|||||||||||||||
$
|
721
|
$
|
(1
|
)
|
$
|
9,428
|
$
|
(167
|
)
|
$
|
10,149
|
$
|
(168
|
)
|
||||||||||
December 31, 2018
|
||||||||||||||||||||||||
Available for sale
|
||||||||||||||||||||||||
U.S. Government Bonds
|
$
|
19,841
|
$
|
(27
|
)
|
$
|
-
|
$
|
-
|
$
|
19,841
|
$
|
(27
|
)
|
||||||||||
Mortgage-backed & CMO Securities
|
6,180
|
(77
|
)
|
45,281
|
(1,905
|
)
|
51,461
|
(1,982
|
)
|
|||||||||||||||
$
|
26,021
|
$
|
(104
|
)
|
$
|
45,281
|
$
|
(1,905
|
)
|
$
|
71,302
|
$
|
(2,009
|
)
|
3. |
LOANS RECEIVABLE
|
June 30,
2019
|
December 31,
2018
|
|||||||
Real estate
|
$
|
130,692
|
$
|
138,350
|
||||
Commercial
|
66,635
|
71,233
|
||||||
Consumer and other
|
7,463
|
4,327
|
||||||
204,790
|
213,910
|
|||||||
Less: allowance for loan losses
|
(4,173
|
)
|
(3,850
|
)
|
||||
Net loans receivable
|
$
|
200,617
|
$
|
210,060
|
June 30,
2019
|
December 31,
2018
|
|||||||
Loans that are ninety days or more past due and still accruing interest
|
$
|
100
|
$
|
-
|
||||
Loans whose accrual of interest had been discontinued
|
334
|
723
|
||||||
Interest income that would have been recorded if such loans had been on full-accrual status
|
21
|
18
|
||||||
Foreclosed and repossesed assets other than real estate
|
-
|
-
|
||||||
Overdraft balances classified as consumer loans
|
40
|
55
|
June 30,
2019
|
December 31,
2018
|
|||||||
Recorded investment
|
$
|
6,817
|
$
|
9,488
|
||||
Valuation allowance
|
$
|
65
|
$
|
390
|
June 30,
2019
|
December 31,
2018
|
|||||||
Real estate
|
$
|
-
|
$
|
-
|
||||
Commercial
|
334
|
721
|
||||||
Consumer and other
|
-
|
2
|
||||||
$
|
334
|
$
|
723
|
Unpaid
Contractual
Principal
Balance
|
Recorded
Investment
With No
Allowance
|
Recorded
Investment
With
Allowance
|
Total
Recorded
Investment
|
Related
Allowance
|
Average
Recorded
Investment |
|||||||||||||||||||
June 30, 2019
|
||||||||||||||||||||||||
Real estate
|
$
|
3,796
|
$
|
3,796
|
$
|
-
|
$
|
3,796
|
$
|
-
|
$
|
1,898
|
||||||||||||
Commercial
|
2,994
|
1,159
|
1,835
|
2,994
|
62
|
6,241
|
||||||||||||||||||
Consumer and other
|
27
|
27
|
-
|
27
|
3
|
13
|
||||||||||||||||||
Total
|
$
|
6,817
|
$
|
4,982
|
$
|
1,835
|
$
|
6,817
|
$
|
65
|
$
|
8,152
|
||||||||||||
December 31, 2018
|
||||||||||||||||||||||||
Real estate
|
$
|
-
|
$
|
-
|
$
|
-
|
$
|
-
|
$
|
-
|
$
|
-
|
||||||||||||
Commercial
|
9,488
|
8,240
|
1,248
|
9,488
|
390
|
6,053
|
||||||||||||||||||
Consumer and other
|
-
|
-
|
-
|
-
|
-
|
-
|
||||||||||||||||||
Total
|
$
|
9,488
|
$
|
8,240
|
$
|
1,248
|
$
|
9,488
|
$
|
390
|
$
|
6,053
|
Pass
|
Special
Mention
|
Substandard
|
Doubtful
|
Total
|
||||||||||||||||
June 30, 2019
|
||||||||||||||||||||
Real Estate
|
$
|
127,907
|
$
|
-
|
$
|
2,785
|
$
|
-
|
$
|
130,692
|
||||||||||
Commercial
|
62,630
|
-
|
4,000
|
5
|
66,635
|
|||||||||||||||
Consumer and other
|
7,436
|
-
|
27
|
-
|
7,463
|
|||||||||||||||
Total
|
$
|
197,973
|
$
|
-
|
$
|
6,812
|
$
|
5
|
$
|
204,790
|
||||||||||
December 31, 2018
|
||||||||||||||||||||
Real Estate
|
$
|
138,350
|
$
|
-
|
$
|
-
|
$
|
-
|
$
|
138,350
|
||||||||||
Commercial
|
61,745
|
-
|
9,228
|
260
|
71,233
|
|||||||||||||||
Consumer and other
|
4,327
|
-
|
-
|
-
|
4,327
|
|||||||||||||||
Total
|
$
|
204,422
|
$
|
-
|
$
|
9,228
|
$
|
260
|
$
|
213,910
|
30-89 Days Past
Due
|
90 Days or More
Past Due and Still
Accruing
|
Nonaccrual
|
||||||||||
June 30, 2019
|
||||||||||||
Real estate
|
$
|
440
|
$
|
100
|
$
|
-
|
||||||
Commercial
|
566
|
-
|
334
|
|||||||||
Consumer and other
|
11
|
-
|
-
|
|||||||||
Total
|
$
|
1,017
|
$
|
100
|
$
|
334
|
||||||
December 31, 2018
|
||||||||||||
Real estate
|
$
|
-
|
$
|
-
|
$
|
-
|
||||||
Commercial
|
171
|
-
|
721
|
|||||||||
Consumer and other
|
13
|
-
|
2
|
|||||||||
Total
|
$
|
184
|
$
|
-
|
$
|
723
|
Real Estate
|
Commercial
|
Consumer
and Other
|
Total
|
|||||||||||||
June 30, 2019
|
||||||||||||||||
Loans indivdually evaluated for impairment
|
$
|
-
|
$
|
65
|
$
|
-
|
$
|
65
|
||||||||
Loans collectively evaluated for impairment
|
592
|
3,203
|
313
|
4,108
|
||||||||||||
$
|
592
|
$
|
3,268
|
$
|
313
|
$
|
4,173
|
|||||||||
December 31, 2018
|
||||||||||||||||
Loans indivdually evaluated for impairment
|
$
|
-
|
$
|
390
|
$
|
-
|
$
|
390
|
||||||||
Loans collectively evaluated for impairment
|
523
|
2,620
|
317
|
3,460
|
||||||||||||
$
|
523
|
$
|
3,010
|
$
|
317
|
$
|
3,850
|
Beginning
Balance
|
Provision for
loan losses
|
Charge-offs
|
Recoveries
|
Ending
Balance
|
||||||||||||||||
For the six months ended
|
||||||||||||||||||||
June 30, 2019
|
||||||||||||||||||||
Real Estate
|
$
|
523
|
$
|
3
|
$
|
-
|
$
|
66
|
$
|
592
|
||||||||||
Commercial
|
3,010
|
24
|
(230
|
)
|
464
|
3,268
|
||||||||||||||
Consumer and other
|
317
|
3
|
(8
|
)
|
1
|
313
|
||||||||||||||
Total
|
$
|
3,850
|
$
|
30
|
$
|
(238
|
)
|
$
|
531
|
$
|
4,173
|
|||||||||
For the six months ended
|
||||||||||||||||||||
June 30, 2018
|
||||||||||||||||||||
Real Estate
|
$
|
523
|
$
|
3
|
$
|
-
|
$
|
-
|
$
|
526
|
||||||||||
Commercial
|
3,618
|
54
|
(956
|
)
|
229
|
2,945
|
||||||||||||||
Consumer and other
|
322
|
3
|
(16
|
)
|
4
|
313
|
||||||||||||||
Total
|
$
|
4,463
|
$
|
60
|
$
|
(972
|
)
|
$
|
233
|
$
|
3,784
|
Recorded Investment
|
||||||||
Individually
Evaluated
|
Collectively
Evaluated
|
|||||||
June 30, 2019
|
||||||||
Real Estate
|
$
|
3,796
|
$
|
142,766
|
||||
Commercial
|
2,994
|
49,358
|
||||||
Consumer and other
|
27
|
5,849
|
||||||
Total
|
$
|
6,817
|
$
|
197,973
|
||||
December 31, 2018
|
||||||||
Real Estate
|
$
|
-
|
$
|
138,350
|
||||
Commercial
|
9,488
|
61,745
|
||||||
Consumer and other
|
-
|
4,327
|
||||||
Total
|
$
|
9,488
|
$
|
204,422
|
4. |
COMMITMENTS AND CONTINGENCIES
|
June 30,
2019
|
December 31,
2018
|
|||||||
Commitments to extend credit
|
$
|
33,769
|
$
|
35,383
|
||||
Standby letters of credit
|
3,234
|
1,485
|
5. |
LINES OF CREDIT
|
6. |
RELATED-PARTY TRANSACTIONS
|
7. |
FAIR VALUE MEASUREMENTS
|
Total Fair
Value
|
Level 1
|
Level 2
|
Level 3
|
|||||||||||||
June 30, 2019
|
||||||||||||||||
Financial assets
|
||||||||||||||||
Securities available for sale
|
$
|
77,206
|
$
|
-
|
$
|
77,206
|
$
|
-
|
||||||||
Securities held to maturity
|
2,331
|
-
|
2,331
|
-
|
||||||||||||
$
|
79,537
|
$
|
-
|
$
|
79,537
|
$
|
-
|
|||||||||
December 31, 2018
|
||||||||||||||||
Financial assets
|
||||||||||||||||
Securities available for sale
|
$
|
79,463
|
$
|
-
|
$
|
79,463
|
$
|
-
|
||||||||
Securities held to maturity
|
1,088
|
-
|
1,088
|
-
|
||||||||||||
$
|
80,551
|
$
|
-
|
$
|
80,551
|
$
|
-
|
a) |
Cash and cash equivalents and certificates of deposits held in other banks. The estimated fair value approximates carrying (book) value based on the short-term nature of the instrument.
|
b) |
Accrued interest receivable and accrued interest payable. The estimated fair value approximates carrying value based on the short-term nature of the instrument.
|
c) |
Restricted investments held at cost. No ready market exists for the stocks and it has no quoted market value. The carrying value of the stock is
accounted for using the cost basis of accounting, which approximates fair value as that is the amount it will be repurchased by the FHLB or TIB.
|
d) |
Loans, net of allowance for loan losses. The estimated fair value approximates carrying value for variable rate loans that re-price frequently and with no significant change in credit
risk. The fair value of fixed rate loans and variable rate loans which re-price on an infrequent basis is estimated by discounting future cash flows using the current interest rates at which similar loans with similar terms would be made
to borrowers of similar credit quality. An overall valuation adjustment is made for specific credit risks as well as general portfolio credit risk.
|
e) |
Deposits. The estimated fair value approximates carrying value for demand deposits, savings and NOW deposits. The fair value of time deposits is estimated by discounting future cash flows
using the interest rates currently offered for deposits of similar remaining maturities. The estimated fair value of deposits does not take into account the Company’s long-term relationships with depositors, commonly known as core deposit
intangibles, which are separate intangible assets, and not considered financial instruments. Nonetheless, the Company would likely realize a core deposit premium if its portfolio were sold in the principal market for such deposits.
|
Book
Value
|
Estimated
Fair Value
|
|||||||
June 30, 2019
|
||||||||
Financial assets:
|
||||||||
Cash and cash equivalents
|
$
|
102,204
|
$
|
102,204
|
||||
Certificate of deposits held in other banks
|
26,223
|
26,223
|
||||||
Securities available for sale
|
77,206
|
77,206
|
||||||
Securities held to maturity
|
2,240
|
2,331
|
||||||
Loans, net
|
200,617
|
196,386
|
||||||
Accrued interest receivable
|
1,023
|
1,023
|
||||||
Restricted investments held at cost
|
618
|
618
|
||||||
Financial liabilites:
|
||||||||
Deposits
|
376,155
|
354,104
|
||||||
Accrued interest paybale
|
125
|
125
|
Book
Value
|
Estimated
Fair Value
|
|||||||
December 31, 2018
|
||||||||
Financial assets:
|
||||||||
Cash and cash equivalents
|
$
|
82,906
|
$
|
82,906
|
||||
Certificate of deposits held in other banks
|
23,887
|
23,887
|
||||||
Securities available for sale
|
79,463
|
79,463
|
||||||
Securities held to maturity
|
1,087
|
1,088
|
||||||
Loans, net
|
210,060
|
205,936
|
||||||
Accrued interest receivable
|
1,062
|
1,062
|
||||||
Restricted investments held at cost
|
616
|
616
|
||||||
Financial liabilites:
|
||||||||
Deposits
|
366,804
|
345,308
|
||||||
Accrued interest paybale
|
80
|
80
|
8. |
REGULATORY MATTERS
|
Actual
|
Minimum Required
Under BASEL III
Fully Phased-In
|
To Be Well
Capitalized Under
Prompt Corrective
Action Provisions
|
||||||||||||||||||||||
Amount
|
Ratio
|
Amount
|
Ratio
|
Amount
|
Ratio
|
|||||||||||||||||||
June 30, 2019
|
||||||||||||||||||||||||
Common Equity Tier 1 (to risk-weighted assets)
|
$
|
51,791
|
21.1
|
%
|
$
|
17,184
|
7.0
|
%
|
$
|
15,956
|
6.5
|
%
|
||||||||||||
Total Capital (to risk-weighted assets)
|
$
|
54,873
|
22.3
|
%
|
$
|
25,775
|
10.5
|
%
|
$
|
24,258
|
10.0
|
%
|
||||||||||||
Tier 1 Capital (to risk-weighted assets)
|
$
|
51,791
|
21.1
|
%
|
$
|
20,866
|
8.5
|
%
|
$
|
19,638
|
8.0
|
%
|
||||||||||||
Tier 1 Capital (to average assets)
|
$
|
51,791
|
12.1
|
%
|
$
|
17,083
|
4.0
|
%
|
$
|
21,353
|
5.0
|
%
|
||||||||||||
December 31, 2018
|
||||||||||||||||||||||||
Common Equity Tier 1 (to risk-weighted assets)
|
$
|
51,023
|
18.7
|
%
|
$
|
19,136
|
7.0
|
%
|
$
|
17,741
|
6.5
|
%
|
||||||||||||
Total Capital (to risk-weighted assets)
|
$
|
54,440
|
20.0
|
%
|
$
|
28,704
|
10.5
|
%
|
$
|
27,294
|
10.0
|
%
|
||||||||||||
Tier 1 Capital (to risk-weighted assets)
|
$
|
51,023
|
18.7
|
%
|
$
|
23,337
|
8.5
|
%
|
$
|
21,835
|
8.0
|
%
|
||||||||||||
Tier 1 Capital (to average assets)
|
$
|
51,023
|
12.0
|
%
|
$
|
16,954
|
4.0
|
%
|
$
|
21,192
|
5.0
|
%
|
• |
SPFI’s Quarterly Report filed on Form 10-Q for the three months ended June 30, 2019;
|
• |
WTSB’s unaudited financial statements for the six months ended June 30, 2019;
|
• |
SPFI’s audited consolidated financial statements, and notes thereto, for the year ended December 31, 2018 in its prospectus filed with the SEC pursuant to Rule 424(b) of the Securities Act of 1933, as amended, on May 9, 2019; and
|
• |
WTSB’s audited financial statements for the year ended December 31, 2018.
|
SPFI
|
WTSB
|
WTSB
Acquisition
Adjustments
|
Post Merger
Pro Forma
Combined
Company
|
||||||||||||||
ASSETS
|
|||||||||||||||||
Cash,cash equivalents and other deposits
|
$
|
408,116
|
$
|
128,427
|
$
|
(82,409
|
)
|
(a)
|
$
|
454,134
|
|||||||
Securities available-for-sale
|
263,564
|
77,206
|
-
|
340,770
|
|||||||||||||
Securities held-to-maturity
|
-
|
2,240
|
-
|
2,240
|
|||||||||||||
Loans held for sale
|
38,932
|
-
|
-
|
38,932
|
|||||||||||||
Loans
|
1,935,653
|
204,790
|
(4,178
|
)
|
(b)
|
2,136,265
|
|||||||||||
ALLL
|
(24,171
|
)
|
(4,173
|
)
|
4,173
|
(c)
|
(24,171
|
)
|
|||||||||
Premises and equipment, net
|
59,705
|
4,145
|
660
|
(d)
|
64,510
|
||||||||||||
Goodwill
|
-
|
370
|
19,804
|
(e)
|
20,174
|
||||||||||||
Core deposit intangible
|
-
|
78
|
8,693
|
(f)
|
8,771
|
||||||||||||
BOLI
|
57,794
|
11,331
|
-
|
69,125
|
|||||||||||||
Deferred tax asset
|
7,232
|
-
|
(1,088
|
)
|
(g)
|
6,144
|
|||||||||||
Other assets
|
30,345
|
4,902
|
-
|
35,247
|
|||||||||||||
|
|||||||||||||||||
Total assets
|
$
|
2,777,170
|
$
|
429,316
|
$
|
(54,345
|
)
|
$
|
3,152,141
|
||||||||
|
|||||||||||||||||
LIABILITIES AND STOCKHOLDERS’ EQUITY
|
|||||||||||||||||
Noninterest-bearing deposits
|
513,383
|
214,174
|
-
|
727,557
|
|||||||||||||
Interest-bearing deposits
|
1,768,475
|
161,981
|
-
|
1,930,456
|
|||||||||||||
Short-term borrowings
|
8,810
|
-
|
-
|
8,810
|
|||||||||||||
Other liabilities
|
27,524
|
954
|
-
|
28,478
|
|||||||||||||
Other borrowings
|
167,865
|
-
|
-
|
167,865
|
|||||||||||||
|
|||||||||||||||||
Total liabilities
|
2,486,057
|
377,109
|
-
|
2,863,166
|
|||||||||||||
Stockholders’ equity:
|
|||||||||||||||||
Common stock
|
17,979
|
671
|
(671
|
)
|
(h)
|
17,979
|
|||||||||||
Additional paid-in capital
|
140,189
|
15,329
|
(15,329
|
)
|
(h)
|
140,189
|
|||||||||||
Retained earnings
|
129,408
|
36,238
|
(38,376
|
)
|
(h)
|
127,270
|
|||||||||||
Other comprehensive Income
|
3,537
|
(31
|
)
|
31
|
(h)
|
3,537
|
|||||||||||
Total stockholders’ equity
|
291,113
|
52,207
|
(54,345
|
)
|
288,975
|
||||||||||||
Total liabilities and stockholders’ equity
|
$
|
2,777,170
|
$
|
429,316
|
$
|
(54,345
|
)
|
$
|
3,152,141
|
(a) |
Purchase price of $76.1 million and $6.3 million in estimated transaction expenses.
|
(b) |
Estimated fair market value adjustment on the acquired loan portfolio. This fair market value adjustment will be accreted into interest income on a straigh-line basis over a ten year average life of the portfolio.
|
(c) |
Eliminate acquiree’s allowance for loan losses.
|
(d) |
Estimated fair market value adjustment on premises acquired based upon tax appraisal values. Depreciation on the fair value adjustment will be taken over an estimated life of 20 years on a straight-line basis.
|
(e) |
Record goodwill for amount of consideration and liabilities assumed over fair value of the assets received.
|
(f) |
Estimated core deposit intangible calculated as 2.5% of non time deposits. Amortization of core deposit intangible will occur over a ten year life using the sum of the years digits method.
|
(g) |
Estimated fair market value adjustment on acquired deferred tax assets and liabilities, net using a 21.0% enacted tax rate. The significant components of the proforma adjustments to the deferred tax
asset and liability are related to the acquired loans fair value adjustment of $877 thousand, an adjustment for premises and equipment of $139 thousand and an adjustment related to core deposit intangible of $1.8 million.
|
(h) |
Eliminate acquiree capital accounts. Adjustment to retained earnings includes $2.1 million in closing costs.
|
Assets of acquired bank:
|
||||
Cash and cash equivalents
|
$
|
124,256
|
||
Securities available for sale
|
77,206
|
|||
Securities held to maturity
|
2,240
|
|||
Loans
|
200,612
|
|||
Premises and equipment
|
4,805
|
|||
Core deposit intangible
|
8,771
|
|||
Deferred tax asset, net
|
(1,088
|
)
|
||
Other assets
|
16,233
|
|||
Total assets acquired
|
433,035
|
|||
Liabilities of acquired bank:
|
||||
Deposits
|
376,155
|
|||
Other liabilities
|
954
|
|||
Total liabilities assumed
|
377,109
|
|||
Net assets acquired
|
$
|
55,926
|
||
Cash paid
|
$
|
76,100
|
||
Excess consideration paid over fair value of net assets acquired - Goodwill
|
$
|
20,174
|
SPFI
|
WTSB
|
Acquisition
Pro Forma
Adjustments
|
Pro Forma
Combined
Company
|
||||||||||||||
Interest income:
|
|||||||||||||||||
Loans
|
$
|
105,710
|
$
|
13,502
|
$
|
418
|
(a)
|
$
|
119,630
|
||||||||
Securities and other
|
12,384
|
3,459
|
-
|
15,843
|
|||||||||||||
Total interest income
|
118,094
|
16,961
|
418
|
135,473
|
|||||||||||||
Interest expense:
|
|||||||||||||||||
Deposits
|
17,561
|
524
|
-
|
18,085
|
|||||||||||||
Other borrowings
|
4,921
|
-
|
-
|
4,921
|
|||||||||||||
Total interest expense
|
22,482
|
524
|
-
|
23,006
|
|||||||||||||
Net interest income
|
95,612
|
16,437
|
418
|
112,467
|
|||||||||||||
Provision for loan losses
|
6,901
|
220
|
-
|
7,121
|
|||||||||||||
Net interest income after provision for loan losses
|
88,711
|
16,217
|
418
|
105,346
|
|||||||||||||
Noninterest income:
|
|||||||||||||||||
Service charges on deposit accounts
|
7,813
|
1,140
|
-
|
8,953
|
|||||||||||||
Income from insurance activities
|
7,128
|
-
|
-
|
7,128
|
|||||||||||||
Net gain on loans sold
|
19,703
|
-
|
-
|
19,703
|
|||||||||||||
Other
|
17,477
|
947
|
-
|
18,424
|
|||||||||||||
Total noninterest income
|
52,121
|
2,087
|
-
|
54,208
|
|||||||||||||
Noninterest expense:
|
|||||||||||||||||
Salaries and employee benefits
|
71,778
|
6,899
|
-
|
78,677
|
|||||||||||||
Occupancy & equipment expense
|
13,571
|
1,049
|
33
|
(b)
|
14,653
|
||||||||||||
Other
|
30,094
|
5,031
|
1,594
|
(c)
|
36,719
|
||||||||||||
Total noninterest expense
|
115,443
|
12,979
|
1,627
|
130,049
|
|||||||||||||
Net income before income taxes
|
25,389
|
5,325
|
(1,209
|
)
|
29,505
|
||||||||||||
Income tax expense
|
(3,901
|
)
|
20
|
(254
|
)
|
(d)
|
(4,135
|
)
|
|||||||||
Net income
|
$
|
29,290
|
$
|
5,305
|
$
|
(955
|
)
|
$
|
33,640
|
||||||||
Share and per share data:
|
|||||||||||||||||
Earnings per common share:
|
|||||||||||||||||
Basic
|
$
|
1.98
|
$
|
39.51
|
$
|
2.28
|
|||||||||||
Diluted
|
$
|
1.98
|
$
|
39.51
|
$
|
2.28
|
|||||||||||
Weighted average common shares outstanding:
|
|||||||||||||||||
Basic
|
14,771,520
|
$
|
134,280
|
14,771,520
|
|||||||||||||
Diluted
|
14,771,520
|
$
|
134,280
|
14,771,520
|
|||||||||||||
Reported net income
|
$
|
29,290
|
$
|
5,305
|
$
|
(955
|
)
|
$
|
33,640
|
||||||||
Income tax expense adjustment *
|
8,533
|
1,068
|
-
|
9,601
|
|||||||||||||
Adjusted net income
|
$
|
20,757
|
$
|
4,237
|
$
|
(955
|
)
|
$
|
24,039
|
||||||||
Adjusted earnings per common share:
|
|||||||||||||||||
Basic
|
$
|
1.41
|
$
|
31.55
|
$
|
1.63
|
|||||||||||
Diluted
|
$
|
1.41
|
$
|
31.55
|
$
|
1.63
|
(a) |
Adjustment to interest income for accretion on acquired loans based on expected fair market value.
|
(b) |
Additional depreciation related to fair market value adjustment on premises.
|
(c) |
Adjustment to amortize core deposit intangible based on a 10 year life using the sum of the years digits method.
|
(d) |
Tax adjustment related to other pro forma adjustments, calculated at a 21% rate.
|
* - |
Adjustment to show effect of each company being taxed as a subchapter C corporation beginning as of January 1, 2018. SPFI was a subchapter S corporation until May 31, 2018. WTSB was a subchapter S corporation for all periods
presented.
|
SPFI
|
WTSB
|
Acquisition
Pro Forma
Adjustments
|
Pro Forma
Combined
Company
|
||||||||||||||
Interest income:
|
|||||||||||||||||
Loans
|
$
|
56,690
|
$
|
6,455
|
$
|
209
|
(a)
|
$
|
63,354
|
||||||||
Securities and other
|
7,823
|
2,299
|
-
|
10,122
|
|||||||||||||
Total interest income
|
64,513
|
8,754
|
209
|
73,476
|
|||||||||||||
Interest expense:
|
|||||||||||||||||
Deposits
|
12,028
|
375
|
-
|
12,403
|
|||||||||||||
Other borrowings
|
3,102
|
-
|
-
|
3,102
|
|||||||||||||
Total interest expense
|
15,130
|
375
|
-
|
15,505
|
|||||||||||||
Net interest income
|
49,383
|
8,379
|
209
|
57,971
|
|||||||||||||
Provision for loan losses
|
1,483
|
30
|
-
|
1,513
|
|||||||||||||
Net interest income after provision for loan losses
|
47,900
|
8,349
|
209
|
56,458
|
|||||||||||||
Noninterest income:
|
|||||||||||||||||
Service charges on deposit accounts
|
3,884
|
556
|
-
|
4,440
|
|||||||||||||
Income from insurance activities
|
2,960
|
-
|
-
|
2,960
|
|||||||||||||
Net gain on loans sold
|
10,895
|
-
|
-
|
10,895
|
|||||||||||||
Other
|
8,039
|
840
|
-
|
8,879
|
|||||||||||||
Total noninterest income
|
25,778
|
1,396
|
-
|
27,174
|
|||||||||||||
Noninterest expense:
|
|||||||||||||||||
Salaries and employee benefits
|
37,909
|
3,607
|
-
|
41,516
|
|||||||||||||
Occupancy & equipment expense
|
6,823
|
467
|
17
|
(b)
|
7,307
|
||||||||||||
Other
|
15,234
|
2,892
|
718
|
(c)
|
18,844
|
||||||||||||
Total noninterest expense
|
59,966
|
6,966
|
735
|
67,667
|
|||||||||||||
Net income before income taxes
|
13,712
|
2,779
|
(526
|
)
|
15,965
|
||||||||||||
Income tax expense
|
2,859
|
10
|
(110
|
)
|
(d)
|
2,759
|
|||||||||||
Net income
|
$
|
10,853
|
$
|
2,769
|
$
|
(416
|
)
|
$
|
13,206
|
||||||||
Share and per share data:
|
|||||||||||||||||
Earnings per common share:
|
|||||||||||||||||
Basic
|
$
|
0.69
|
$
|
20.62
|
$
|
0.85
|
|||||||||||
Diluted
|
$
|
0.69
|
$
|
20.62
|
$
|
0.84
|
|||||||||||
Weighted average common shares outstanding:
|
|||||||||||||||||
Basic
|
15,620,106
|
$
|
134,280
|
15,620,106
|
|||||||||||||
Diluted
|
15,724,321
|
$
|
134,280
|
15,724,321
|
|||||||||||||
Reported net income
|
$
|
10,853
|
$
|
2,769
|
$
|
(416
|
)
|
$
|
13,206
|
||||||||
Income tax expense adjustment *
|
-
|
581
|
-
|
581
|
|||||||||||||
Adjusted net income
|
$
|
10,853
|
$
|
2,188
|
$
|
(416
|
)
|
$
|
12,625
|
||||||||
Adjusted earnings per common share:
|
|||||||||||||||||
Basic
|
$
|
0.69
|
$
|
16.29
|
$
|
0.81
|
|||||||||||
Diluted
|
$
|
0.69
|
$
|
16.29
|
$
|
0.80
|
(a) |
Adjustment to interest income for accretion on acquired loans based on expected fair market value.
|
(b) |
Additional depreciation related to fair market value adjustment on premises.
|
(c) |
Adjustment to amortize core deposit intangible based on a 10 year life using the sum of the years digits method.
|
(d) |
Tax adjustment related to other pro forma adjustments, calculated at a 21% rate.
|