SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10‑Q
☒ Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
For the quarterly period June 30, 2018
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 001-38084
FARMERS & MERCHANTS BANCORP, INC.
(Exact name of registrant as specified in its charter)
OHIO |
34-1469491 |
(State or other jurisdiction of incorporation or organization) |
(IRS Employer Identification No.) |
307 North Defiance Street, Archbold, Ohio |
43502 |
(Address of principal executive offices) |
(Zip Code) |
(419) 446-2501
Registrant’s telephone number, including area code
(Former name, former address and former fiscal year, if changed since last report.)
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 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 and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). 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. (Check one):
Large accelerated filer |
|
☐ |
|
Accelerated filer |
|
☒ |
Non-accelerated filer |
|
☐ (Do not check if a smaller reporting company) |
|
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. ☐
Indicated by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).
Yes ☐ No ☒
Indicate the number of shares of each of the issuers’ classes of common stock, as of the latest practicable date:
Common Stock, No Par Value |
9,263,910 |
Class |
Outstanding as of July 20, 2018 |
1
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10Q
FARMERS & MERCHANTS BANCORP, INC.
INDEX
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Form 10-Q Items |
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Page |
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PART I. |
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Item 1. |
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Condensed Consolidated Balance Sheets- |
3 |
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4-5 |
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Condensed Consolidated Statements of Cash Flows- |
6 |
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7-36 |
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Item 2. |
Management's Discussion and Analysis of Financial Condition |
37-52 |
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Item 3. |
53 |
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Item 4. |
54 |
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PART II. |
54 |
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Item 1. |
54 |
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Item 1A. |
54 |
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Item 2. |
54 |
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Item 3. |
54 |
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Item 4. |
54 |
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Item 5. |
54 |
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Item 6. |
55 |
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56 |
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101.INS |
XBRL Instance Document (1) |
|
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101.SCH |
XBRL Taxonomy Extension Scheme Document (1) |
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101.CAL |
XBRL Taxonomy Extension Calculation Linkbase Document (1) |
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101.DEF |
XBRL Taxonomy Extension Definition Linkbase Document (1) |
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101.LAB |
XBRL Taxonomy Extension Label Linkbase Document (1) |
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101.PRE |
XBRL Taxonomy Extension Presentation Linkbase Document (1) |
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(1) |
Pursuant to Rule 406T of Regulation S-T, the interactive Data Files in Exhibit 101 hereto are deemed not filed or part of a registration statement or prospectus for purposes of Sections 11 or 12 of the Securities act of 1933, as amended, are deemed not filed for purposes of Section 18 of the Exchange Act of 1934, as amended, and otherwise are not subject to liability under those sections. |
2
FARMERS & MERCHANTS BANCORP, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
|
|
(in thousands of dollars) |
|
|||||
|
|
June 30, 2018 |
|
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December 31, 2017 |
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||
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|
(Unaudited) |
|
|
|
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Assets |
|
|
|
|
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|
|
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Cash and due from banks |
|
$ |
31,838 |
|
|
$ |
33,480 |
|
Federal funds sold |
|
|
726 |
|
|
|
987 |
|
Total cash and cash equivalents |
|
|
32,564 |
|
|
|
34,467 |
|
Interest-bearing time deposits |
|
|
4,019 |
|
|
|
4,018 |
|
Securities - available-for-sale |
|
|
187,036 |
|
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|
196,398 |
|
Other securities, at cost |
|
|
3,717 |
|
|
|
3,717 |
|
Loans held for sale |
|
|
913 |
|
|
|
1,221 |
|
Loans, net |
|
|
824,226 |
|
|
|
816,156 |
|
Premises and equipment |
|
|
21,957 |
|
|
|
21,726 |
|
Goodwill |
|
|
4,074 |
|
|
|
4,074 |
|
Mortgage servicing rights |
|
|
2,356 |
|
|
|
2,299 |
|
Other real estate owned |
|
|
649 |
|
|
|
674 |
|
Bank owned life insurance |
|
|
14,692 |
|
|
|
14,523 |
|
Other assets |
|
|
9,129 |
|
|
|
7,736 |
|
Total Assets |
|
$ |
1,105,332 |
|
|
$ |
1,107,009 |
|
Liabilities and Stockholders' Equity |
|
|
|
|
|
|
|
|
Liabilities |
|
|
|
|
|
|
|
|
Deposits |
|
|
|
|
|
|
|
|
Noninterest-bearing |
|
$ |
200,067 |
|
|
$ |
199,114 |
|
Interest-bearing |
|
|
|
|
|
|
|
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NOW accounts |
|
|
311,185 |
|
|
|
298,711 |
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Savings |
|
|
238,167 |
|
|
|
233,949 |
|
Time |
|
|
181,347 |
|
|
|
187,566 |
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Total deposits |
|
|
930,766 |
|
|
|
919,340 |
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Federal funds purchased and securities sold under agreements to repurchase |
|
|
23,898 |
|
|
|
39,495 |
|
Federal Home Loan Bank (FHLB) advances |
|
|
5,000 |
|
|
|
5,000 |
|
Dividend payable |
|
|
1,284 |
|
|
|
1,193 |
|
Accrued expenses and other liabilities |
|
|
6,808 |
|
|
|
7,844 |
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Total liabilities |
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967,756 |
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|
|
972,872 |
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Commitments and Contingencies |
|
|
|
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|
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Stockholders' Equity |
|
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|
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Common stock - No par value 20,000,000 shares authorized; issued and outstanding 10,400,000 shares 6/30/18 and 12/31/17 (1) |
|
|
11,842 |
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11,546 |
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Treasury stock - 1,134,620 shares 6/30/18, 1,134,120 shares 12/31/17 (1) |
|
|
(12,186 |
) |
|
|
(12,160 |
) |
Retained earnings |
|
|
142,330 |
|
|
|
136,577 |
|
Accumulated other comprehensive loss |
|
|
(4,410 |
) |
|
|
(1,826 |
) |
Total stockholders' equity |
|
|
137,576 |
|
|
|
134,137 |
|
Total Liabilities and Stockholders' Equity |
|
$ |
1,105,332 |
|
|
$ |
1,107,009 |
|
(1) |
Share data has been adjusted to reflect a 2-for-1 stock split on September 20, 2017 |
See Notes to Condensed Consolidated Unaudited Financial Statements.
Note: The December 31, 2017, Condensed Consolidated Balance Sheet has been derived from the audited Consolidated Balance Sheet as of that date.
3
FARMERS & MERCHANTS BANCORP, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(Unaudited)
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(in thousands of dollars, except per share data) |
|
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(in thousands of dollars, except per share data) |
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||||||||||
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Three Months Ended |
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Six Months Ended |
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June 30, 2018 |
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June 30, 2017 |
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June 30, 2018 |
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June 30, 2017 |
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||||
Interest Income |
|
|
|
|
|
|
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|
|
|
|
|
|
|
|
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Loans, including fees |
|
$ |
10,521 |
|
|
$ |
9,120 |
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|
$ |
20,623 |
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|
$ |
17,820 |
|
Debt securities: |
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|
|
|
|
|
|
|
|
|
|
|
|
|
|
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U.S. Treasury and government agencies |
|
|
612 |
|
|
|
623 |
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1,235 |
|
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|
1,265 |
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Municipalities |
|
|
289 |
|
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|
300 |
|
|
|
570 |
|
|
|
615 |
|
Dividends |
|
|
53 |
|
|
|
44 |
|
|
|
108 |
|
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|
86 |
|
Federal funds sold and other |
|
|
62 |
|
|
|
37 |
|
|
|
137 |
|
|
|
59 |
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Total interest income |
|
|
11,537 |
|
|
|
10,124 |
|
|
|
22,673 |
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|
|
19,845 |
|
Interest Expense |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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Deposits |
|
|
1,389 |
|
|
|
1,098 |
|
|
|
2,708 |
|
|
|
2,128 |
|
Federal funds purchased and securities sold under agreements to repurchase |
|
|
118 |
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|
118 |
|
|
|
242 |
|
|
|
231 |
|
Borrowed funds |
|
|
20 |
|
|
|
37 |
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|
|
40 |
|
|
|
73 |
|
Total interest expense |
|
|
1,527 |
|
|
|
1,253 |
|
|
|
2,990 |
|
|
|
2,432 |
|
Net Interest Income - Before Provision for Loan Losses |
|
|
10,010 |
|
|
|
8,871 |
|
|
|
19,683 |
|
|
|
17,413 |
|
Provision for Loan Losses |
|
|
132 |
|
|
|
25 |
|
|
|
172 |
|
|
|
98 |
|
Net Interest Income After Provision |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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For Loan Losses |
|
|
9,878 |
|
|
|
8,846 |
|
|
|
19,511 |
|
|
|
17,315 |
|
Noninterest Income |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Customer service fees |
|
|
1,465 |
|
|
|
1,330 |
|
|
|
2,931 |
|
|
|
2,811 |
|
Other service charges and fees |
|
|
1,040 |
|
|
|
1,209 |
|
|
|
2,052 |
|
|
|
2,080 |
|
Net gain on sale of loans |
|
|
301 |
|
|
|
218 |
|
|
|
433 |
|
|
|
419 |
|
Net gain on sale of available-for-sale securities |
|
|
- |
|
|
|
16 |
|
|
|
- |
|
|
|
47 |
|
Total noninterest income |
|
|
2,806 |
|
|
|
2,773 |
|
|
|
5,416 |
|
|
|
5,357 |
|
Noninterest Expense |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Salaries and wages |
|
|
3,225 |
|
|
|
3,137 |
|
|
|
6,535 |
|
|
|
6,138 |
|
Employee benefits |
|
|
848 |
|
|
|
783 |
|
|
|
1,984 |
|
|
|
1,705 |
|
Net occupancy expense |
|
|
441 |
|
|
|
374 |
|
|
|
828 |
|
|
|
787 |
|
Furniture and equipment |
|
|
565 |
|
|
|
491 |
|
|
|
1,072 |
|
|
|
963 |
|
Data processing |
|
|
305 |
|
|
|
308 |
|
|
|
636 |
|
|
|
619 |
|
Franchise taxes |
|
|
228 |
|
|
|
225 |
|
|
|
467 |
|
|
|
450 |
|
ATM expense |
|
|
333 |
|
|
|
292 |
|
|
|
645 |
|
|
|
597 |
|
Advertising |
|
|
247 |
|
|
|
192 |
|
|
|
433 |
|
|
|
367 |
|
Net (gain) loss on sale of other assets owned |
|
|
(1 |
) |
|
|
14 |
|
|
|
16 |
|
|
|
14 |
|
FDIC assessment |
|
|
81 |
|
|
|
82 |
|
|
|
168 |
|
|
|
165 |
|
Mortgage servicing rights amortization |
|
|
95 |
|
|
|
97 |
|
|
|
180 |
|
|
|
181 |
|
Other general and administrative |
|
|
1,271 |
|
|
|
1,103 |
|
|
|
2,314 |
|
|
|
2,183 |
|
Total noninterest expense |
|
|
7,638 |
|
|
|
7,098 |
|
|
|
15,278 |
|
|
|
14,169 |
|
Income Before Income Taxes |
|
|
5,046 |
|
|
|
4,521 |
|
|
|
9,649 |
|
|
|
8,503 |
|
Income Taxes |
|
|
932 |
|
|
|
1,298 |
|
|
|
1,768 |
|
|
|
2,441 |
|
Net Income |
|
$ |
4,114 |
|
|
$ |
3,223 |
|
|
$ |
7,881 |
|
|
$ |
6,062 |
|
Net Income Per Share (1) |
|
$ |
0.44 |
|
|
$ |
0.35 |
|
|
$ |
0.85 |
|
|
$ |
0.66 |
|
Dividends Declared (1) |
|
$ |
0.14 |
|
|
$ |
0.12 |
|
|
$ |
0.27 |
|
|
$ |
0.24 |
|
(1) |
Share data has been adjusted to reflect a 2-for-1 stock split on September 20, 2017 |
See Notes to Condensed Consolidated Unaudited Financial Statements
4
FARMERS & MERCHANTS BANCORP, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(Unaudited)
|
|
(in thousands of dollars) |
|
|
(in thousands of dollars) |
|
||||||||||
|
|
Three Months Ended |
|
|
Six Months Ended |
|
||||||||||
|
|
June 30, 2018 |
|
|
June 30, 2017 |
|
|
June 30, 2018 |
|
|
June 30, 2017 |
|
||||
Net Income |
|
$ |
4,114 |
|
|
$ |
3,223 |
|
|
$ |
7,881 |
|
|
$ |
6,062 |
|
Other Comprehensive Income (Loss) (Net of Tax): |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net unrealized gain (loss) on available-for-sale securities |
|
|
(344 |
) |
|
|
2,044 |
|
|
|
(2,815 |
) |
|
|
2,456 |
|
Reclassification adjustment for gain on sale of available-for-sale securities |
|
|
- |
|
|
|
(16 |
) |
|
|
- |
|
|
|
(47 |
) |
Net unrealized gain (loss) on available-for-sale securities |
|
|
(344 |
) |
|
|
2,028 |
|
|
|
(2,815 |
) |
|
|
2,409 |
|
Tax expense (benefit) |
|
|
(72 |
) |
|
|
690 |
|
|
|
(591 |
) |
|
|
819 |
|
Other comprehensive income (loss) |
|
|
(272 |
) |
|
|
1,338 |
|
|
|
(2,224 |
) |
|
|
1,590 |
|
Comprehensive Income |
|
$ |
3,842 |
|
|
$ |
4,561 |
|
|
$ |
5,657 |
|
|
$ |
7,652 |
|
See Notes to Condensed Consolidated Unaudited Financial Statements
5
FARMERS & MERCHANTS BANCORP, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
|
|
(in thousands of dollars) |
|
|||||
|
|
Six Months Ended |
|
|||||
|
|
June 30, 2018 |
|
|
June 30, 2017 |
|
||
Cash Flows from Operating Activities |
|
|
|
|
|
|
|
|
Net income |
|
$ |
7,881 |
|
|
$ |
6,062 |
|
Adjustments to reconcile net income to net cash provided by operating activities: |
|
|
|
|
|
|
|
|
Depreciation |
|
|
922 |
|
|
|
970 |
|
Amortization on available-for-sale securities, net |
|
|
500 |
|
|
|
578 |
|
Amortization of servicing rights |
|
|
180 |
|
|
|
181 |
|
Amortization of core deposit intangible |
|
|
84 |
|
|
|
161 |
|
Compensation expense related to stock awards |
|
|
314 |
|
|
|
224 |
|
Deferred income taxes |
|
|
(592 |
) |
|
|
1,278 |
|
Provision for loan loss |
|
|
172 |
|
|
|
98 |
|
Gain on sale of loans held for sale |
|
|
(433 |
) |
|
|
(419 |
) |
Originations of loans held for sale |
|
|
(27,216 |
) |
|
|
(30,242 |
) |
Proceeds from sale of loans held for sale |
|
|
27,618 |
|
|
|
31,658 |
|
Loss on sale of other assets owned |
|
|
16 |
|
|
|
14 |
|
Gain on sales of securities available-for-sale |
|
|
- |
|
|
|
(47 |
) |
Change in other assets and other liabilities, net |
|
|
(914 |
) |
|
|
(2,189 |
) |
Net cash provided by (used in) operating activities |
|
|
8,532 |
|
|
|
8,327 |
|
Cash Flows from Investing Activities |
|
|
|
|
|
|
|
|
Activity in available-for-sale securities: |
|
|
|
|
|
|
|
|
Maturities, prepayments and calls |
|
|
8,712 |
|
|
|
14,647 |
|
Sales |
|
|
- |
|
|
|
13,562 |
|
Purchases |
|
|
(2,695 |
) |
|
|
(3,387 |
) |
Change in interest-bearing time deposits |
|
|
1 |
|
|
|
(626 |
) |
Proceeds from sale of other assets owned |
|
|
9 |
|
|
|
130 |
|
Additions to premises and equipment |
|
|
(1,262 |
) |
|
|
(469 |
) |
Loan originations and principal collections, net |
|
|
(8,644 |
) |
|
|
(34,184 |
) |
Net cash used in investing activities |
|
|
(3,879 |
) |
|
|
(10,327 |
) |
Cash Flows from Financing Activities |
|
|
|
|
|
|
|
|
Net change in deposits |
|
|
11,426 |
|
|
|
35,272 |
|
Net change in federal funds purchased and securities sold under agreements to repurchase |
|
|
(15,597 |
) |
|
|
(30,229 |
) |
Cash dividends paid on common stock |
|
|
(2,385 |
) |
|
|
(2,106 |
) |
Net cash provided by (used in) financing activities |
|
|
(6,556 |
) |
|
|
2,937 |
|
Net Increase (Decrease) in Cash and Cash Equivalents |
|
|
(1,903 |
) |
|
|
937 |
|
Cash and cash equivalents - Beginning of year |
|
|
34,467 |
|
|
|
28,322 |
|
Cash and cash equivalents - End of period |
|
$ |
32,564 |
|
|
$ |
29,259 |
|
Supplemental Information |
|
|
|
|
|
|
|
|
Cash paid during the year for: |
|
|
|
|
|
|
|
|
Interest |
|
$ |
2,993 |
|
|
$ |
2,436 |
|
Income taxes |
|
$ |
1,307 |
|
|
$ |
2,302 |
|
Noncash investing activities: |
|
|
|
|
|
|
|
|
Transfer of loans to other real estate owned |
|
$ |
- |
|
|
$ |
- |
|
See Notes to Condensed Consolidated Unaudited Financial Statements.
6
ITEM 1 NOTES TO CONDENSED CONSOLIDATED UNAUDITED FINANCIAL STATEMENTS
NOTE 1 BASIS OF PRESENTATION
The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with generally accepted accounting principles for interim financial information and with the instructions for Form 10Q and Rule 10-01 of Regulation S-X; accordingly, they do not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements. In the opinion of management, all adjustments, consisting of normal recurring accruals, considered necessary for a fair presentation have been included. Share data has been adjusted to reflect a 2-for-1 stock split on September 20, 2017. Operating results for the six months ended June 30, 2018 are not necessarily indicative of the results that are expected for the year ended December 31, 2018. The condensed consolidated balance sheet of the Company as of December 31, 2017, has been derived from the audited consolidated balance sheet of the Company as of that date. These condensed consolidated financial statements should be read in conjunction with the consolidated financial statements and footnotes thereto included in the Company's Annual Report on Form 10-K for the year ended December 31, 2017.
NOTE 2 ASSET PURCHASES
The Company purchased an office on December 13, 2013 in Custar, Ohio. Core deposit intangible assets of $1.17 million were recognized and are being amortized over its remaining economic useful life of the deposits of 7 years on a straight line basis.
The amortization expense for the year ended December 31, 2017 was $245 thousand, which included the remaining $78 thousand from the purchase of the Hicksville office on July 9, 2010. Of the $167 thousand to be expensed in 2018, $84 thousand has been expensed for the six months ended June 30, 2018.
|
|
(In Thousands) |
|
|
|
|
Custar |
|
|
2018 |
|
$ |
167 |
|
2019 |
|
|
167 |
|
2020 |
|
|
161 |
|
|
|
$ |
495 |
|
NOTE 3 SECURITIES
The amortized cost and fair value of securities, with gross unrealized gains and losses at June 30, 2018 and December 31, 2017, follows:
|
|
(In Thousands) |
|
|||||||||||||
|
|
June 30, 2018 |
|
|||||||||||||
|
|
Amortized |
|
|
Gross Unrealized |
|
|
Gross Unrealized |
|
|
Fair |
|
||||
|
|
Cost |
|
|
Gains |
|
|
Losses |
|
|
Value |
|
||||
Available-for-Sale: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
U.S. Treasury |
|
$ |
21,168 |
|
|
$ |
- |
|
|
$ |
(377 |
) |
|
$ |
20,791 |
|
U.S. Government agencies |
|
|
79,169 |
|
|
|
- |
|
|
|
(2,859 |
) |
|
|
76,310 |
|
Mortgage-backed securities |
|
|
36,416 |
|
|
|
21 |
|
|
|
(1,601 |
) |
|
|
34,836 |
|
State and local governments |
|
|
55,865 |
|
|
|
313 |
|
|
|
(1,079 |
) |
|
|
55,099 |
|
Total available-for-sale securities |
|
$ |
192,618 |
|
|
$ |
334 |
|
|
$ |
(5,916 |
) |
|
$ |
187,036 |
|
7
ITEM 1 NOTES TO CONDENSED CONSOLIDATED UNAUDITED FINANCIAL STATEMENTS (Continued)
NOTE 3 SECURITIES (Continued)
|
|
(In Thousands) |
|
|||||||||||||
|
|
December 31, 2017 |
|
|||||||||||||
|
|
Amortized |
|
|
Gross Unrealized |
|
|
Gross Unrealized |
|
|
Fair |
|
||||
|
|
Cost |
|
|
Gains |
|
|
Losses |
|
|
Value |
|
||||
Available-for-Sale: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
U.S. Treasury |
|
$ |
21,219 |
|
|
$ |
- |
|
|
$ |
(241 |
) |
|
$ |
20,978 |
|
U.S. Government agencies |
|
|
82,198 |
|
|
|
- |
|
|
|
(1,732 |
) |
|
|
80,466 |
|
Mortgage-backed securities |
|
|
40,236 |
|
|
|
64 |
|
|
|
(790 |
) |
|
|
39,510 |
|
State and local governments |
|
|
55,512 |
|
|
|
437 |
|
|
|
(505 |
) |
|
|
55,444 |
|
Total available-for-sale securities |
|
$ |
199,165 |
|
|
$ |
501 |
|
|
$ |
(3,268 |
) |
|
$ |
196,398 |
|
Investment securities will at times depreciate to an unrealized loss position. The Company utilizes the following criteria to assess whether impairment is other than temporary. No one item by itself will necessarily signal that a security should be recognized as an other than temporary impairment.
|
1. |
The fair value of the security has significantly declined from book value. |
|
2. |
A downgrade has occurred that lowered the credit rating to below investment grade (below Baa3 by Moody and BBB – by Standard and Poors.) |
|
3. |
Dividends have been reduced or eliminated or scheduled interest payments have not been made. |
|
4. |
The underwater security has longer than 10 years to maturity and the loss position had existed for more than 3 years. |
|
5. |
Management does not possess both the intent and ability to hold the security for a period of time sufficient to allow for any anticipated recovery in fair value. |
If the impairment is judged to be other than temporary, the cost basis of the individual security shall be written down to fair value, thereby establishing a new cost basis. The new cost basis shall not be changed for subsequent recoveries in fair value. The amount of the write down shall be included in current earnings as a realized loss. The recovery in fair value, if any, shall be recognized in earnings when the security is sold. The table below is presented by category of security and length of time in a continuous loss position. The Company currently does not hold any securities with other than temporary impairment.
Information pertaining to securities with gross unrealized losses at June 30, 2018 and December 31, 2017, aggregated by investment category and length of time that individual securities have been in a continuous loss position follows:
|
|
(In Thousands) |
|
|||||||||||||
|
|
June 30, 2018 |
|
|||||||||||||
|
|
Less Than Twelve Months |
|
|
Twelve Months & Over |
|
||||||||||
|
|
Gross Unrealized |
|
|
Fair |
|
|
Gross Unrealized |
|
|
Fair |
|
||||
|
|
Losses |
|
|
Value |
|
|
Losses |
|
|
Value |
|
||||
U.S. Treasury |
|
$ |
(104 |
) |
|
$ |
6,864 |
|
|
$ |
(273 |
) |
|
$ |
13,927 |
|
U.S. Government agencies |
|
|
(469 |
) |
|
|
14,664 |
|
|
|
(2,390 |
) |
|
|
61,646 |
|
Mortgage-backed securities |
|
|
(94 |
) |
|
|
5,640 |
|
|
|
(1,507 |
) |
|
|
27,975 |
|
State and local governments |
|
|
(472 |
) |
|
|
30,386 |
|
|
|
(607 |
) |
|
|
12,002 |
|
Total available-for-sale securities |
|
$ |
(1,139 |
) |
|
$ |
57,554 |
|
|
$ |
(4,777 |
) |
|
$ |
115,550 |
|
8
ITEM 1 NOTES TO CONDENSED CONSOLIDATED UNAUDITED FINANCIAL STATEMENTS (Continued)
NOTE 3 SECURITIES (Continued)
|
(In Thousands) |
|
||||||||||||||
|
|
December 31, 2017 |
|
|||||||||||||
|
|
Less Than Twelve Months |
|
|
Twelve Months & Over |
|
||||||||||
|
|
Gross Unrealized |
|
|
Fair |
|
|
Gross Unrealized |
|
|
Fair |
|
||||
|
|
Losses |
|
|
Value |
|
|
Losses |
|
|
Value |
|
||||
U.S. Treasury |
|
$ |
(36 |
) |
|
$ |
6,924 |
|
|
$ |
(205 |
) |
|
$ |
14,054 |
|
U.S. Government agencies |
|
|
(314 |
) |
|
|
27,328 |
|
|
|
(1,418 |
) |
|
|
53,139 |
|
Mortgage-backed securities |
|
|
(70 |
) |
|
|
7,149 |
|
|
|
(720 |
) |
|
|
28,080 |
|
State and local governments |
|
|
(205 |
) |
|
|
24,999 |
|
|
|
(300 |
) |
|
|
11,567 |
|
Total available-for-sale securities |
|
$ |
(625 |
) |
|
$ |
66,400 |
|
|
$ |
(2,643 |
) |
|
$ |
106,840 |
|
Unrealized losses on securities have not been recognized into income because the issuers’ bonds are of high credit quality, values have only been impacted by rate changes, and the Company has the intent and ability to hold the securities for the foreseeable future. Additionally, the decline in value is primarily due to changes in interest rates since the securities were purchased. The fair value is expected to recover as the bonds approach the maturity date.
Below are the gross realized gains and losses for the three and six months ended June 30, 2018 and June 30, 2017.
|
|
Three Months |
|
|
Six Months |
|
||||||||||
|
|
(In Thousands) |
|
|
(In Thousands) |
|
||||||||||
|
|
2018 |
|
|
2017 |
|
|
2018 |
|
|
2017 |
|
||||
Gross realized gains |
|
$ |
- |
|
|
$ |
27 |
|
|
$ |
- |
|
|
$ |
58 |
|
Gross realized losses |
|
|
- |
|
|
|
(11 |
) |
|
|
- |
|
|
|
(11 |