IMCB-2014.6.30 10Q
Table of Contents

UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 10-Q
(Mark One)
þ
 
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 2014
OR
o
 
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from            to           
COMMISSION FILE NUMBER 000-50667
INTERMOUNTAIN COMMUNITY BANCORP
(Exact name of registrant as specified in its charter)
Idaho
 
82-0499463
(State or other jurisdiction of
 
(IRS Employer
incorporation or organization)
 
Identification No.)

414 Church Street, Sandpoint, ID 83864
(Address of principal executive offices) (Zip code)
Registrant’s telephone number, including area code:
(208) 263-0505

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes þ No o
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes þ No o
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):
Large accelerated filer o
Accelerated filer o
Non-accelerated filer o
Smaller reporting company þ
 
 
(Do not check if a smaller reporting company)
 
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). Yes o No þ
The number of shares outstanding of the registrant’s Voting Common Stock, no par value per share, as of August 4, 2014 was 2,861,214 and the number of outstanding shares of Non-Voting Common Stock, no par value per share, was 3,839,688.

Table of Contents

Intermountain Community Bancorp
FORM 10-Q
For the Quarter Ended June 30, 2014
TABLE OF CONTENTS

 
 
 
 
 
Item 4 —Mine Safety Disclosure
 EX-31.1
 EX-31.2
 EX-32
 EX-101

2
Table of Contents

PART I — Financial Information
Item - 1 Financial Statements
Intermountain Community Bancorp
Consolidated Balance Sheets
(Unaudited)
 
June 30, 2014
 
December 31, 2013
 
(Dollars in thousands)
ASSETS
 
 
 
Cash and cash equivalents:
 
 
 
Interest-bearing
$
14,257

 
$
44,946

Non-interest bearing and vault
8,020

 
7,851

Total cash and cash equivalents
22,277

 
52,797

Restricted cash
10,866

 
12,333

Available-for-sale securities, at fair value
261,190

 
251,638

Held-to-maturity securities, at amortized cost
26,109

 
28,286

Federal Home Loan Bank (“FHLB”) of Seattle stock, at cost
2,146

 
2,187

Loans held for sale
2,038

 
614

Loans receivable, net
520,280

 
514,834

Accrued interest receivable
4,657

 
4,170

Office properties and equipment, net
34,113

 
34,685

Deferred tax asset, net
19,649

 
21,655

Bank-owned life insurance ("BOLI")
9,962

 
9,797

Other real estate owned (“OREO”)
3,684

 
3,684

Prepaid expenses and other assets
3,191

 
2,968

Total assets
$
920,162

 
$
939,648

LIABILITIES
 
 
 
Deposits:
 
 
 
Interest bearing deposits
$
459,019

 
$
470,257

Noninterest bearing deposits
234,869

 
235,793

Total deposits
693,888

 
706,050

Securities sold subject to repurchase agreements
77,847

 
99,888

Advances from Federal Home Loan Bank
14,000

 
4,000

Unexercised stock warrant liability
925

 
942

Cashier checks issued and payable
3,265

 
3,620

Accrued interest payable
200

 
219

Other borrowings
23,060

 
23,410

Accrued expenses and other liabilities
7,978

 
7,507

Total liabilities
821,163

 
845,636

STOCKHOLDERS’ EQUITY
 
 
 
Common stock 30,000,000 authorized; 2,861,214 and 2,701,214 shares issued and 2,651,214 and 2,651,214 shares outstanding as of June 30, 2014 and December 31, 2013, respectively
97,320

 
97,087

Common stock - non-voting 10,000,000 shares authorized; 3,839,688 and 3,839,688 shares issued and outstanding as of June 30, 2014 and December 31, 2013, respectively
31,941

 
31,941

Accumulated other comprehensive income (loss), net of tax
1,276

 
(1,182
)
Accumulated deficit
(31,538
)
 
(33,834
)
Total stockholders’ equity
98,999

 
94,012

Total liabilities and stockholders’ equity
$
920,162

 
$
939,648

The accompanying notes are an integral part of the consolidated financial statements.

3
Table of Contents

Intermountain Community Bancorp
Consolidated Statements of Income
(Unaudited)
 
Three Months Ended
 
Six Months Ended
 
June 30,
 
June 30,
 
2014
 
2013
 
2014
 
2013
 
(Dollars in thousands, except per share data)
Interest income:
 
 
 
 
 
 
 
Loans
$
6,536

 
$
6,934

 
$
12,650

 
$
13,670

Investments and cash equivalents
1,646

 
1,580

 
3,289

 
3,172

Total interest income
8,182

 
8,514

 
15,939

 
16,842

Interest expense:
 
 
 
 
 
 
 
Deposits
390

 
510

 
814

 
1,070

Other borrowings
387

 
441

 
746

 
866

Total interest expense
777

 
951

 
1,560

 
1,936

Net interest income
7,405

 
7,563

 
14,379

 
14,906

Recovery of (provision for) loan loss
3

 
(247
)
 
(99
)
 
(426
)
Net interest income after provision for loan losses
7,408

 
7,316

 
14,280

 
14,480

Other income:
 
 
 
 
 
 
 
Fees and service charges
1,212

 
1,319

 
2,333

 
2,398

Commissions & fees from trust & investment advisory services
557

 
645

 
1,098

 
1,172

Loan related fee income
403

 
586

 
707

 
1,197

Net gain on sale of securities
168

 
163

 
174

 
203

Net gain on sale of other assets
4

 
2

 
8

 
6

Other-than-temporary impairment (“OTTI”) losses on investments (1)
—

 
(21
)
 
—

 
(63
)
Bank-owned life insurance
86

 
85

 
165

 
170

Fair value adjustment on cash flow hedge
—

 
80

 
—

 
146

Unexercised warrant liability fair value adjustment
123

 
(54
)
 
17

 
2

Other
34

 
40

 
82

 
153

Total other income
2,587

 
2,845

 
4,584

 
5,384

Operating expenses:
 
 
 
 
 
 
 
Salaries and employee benefits
4,505

 
4,283

 
8,381

 
8,458

Occupancy
1,145

 
1,174

 
2,326

 
2,359

Technology
874

 
925

 
1,696

 
1,801

Advertising
136

 
180

 
285

 
294

Fees and service charges
109

 
85

 
200

 
179

Printing, postage and supplies
151

 
173

 
326

 
390

Legal and accounting
422

 
484

 
825

 
812

FDIC assessment
146

 
165

 
292

 
351

OREO operations
39

 
32

 
(24
)
 
143

Other expenses
707

 
719

 
1,363

 
1,611

Total operating expenses
8,234

 
8,220

 
15,670

 
16,398

Net income before income taxes
1,761

 
1,941

 
3,194

 
3,466

Income tax expense
(499
)
 
—

 
(898
)
 
—

Net income
1,262

 
1,941

 
2,296

 
3,466

Preferred stock dividend
—

 
460

 
—

 
918

Net income applicable to common stockholders
$
1,262

 
$
1,481

 
$
2,296

 
$
2,548

Earnings per share — basic
$
0.19

 
$
0.23

 
$
0.35

 
$
0.40

Earnings per share — diluted
$
0.19

 
$
0.23

 
$
0.34

 
$
0.39

Weighted average common shares outstanding — basic
6,697,386

 
6,443,294

 
6,619,576

 
6,443,142

Weighted average common shares outstanding — diluted
6,765,908

 
6,484,762

 
6,686,675

 
6,482,376

(1)    Consisting of $0, $0, $0 and $0 of total other-than-temporary impairment net losses, net of $0, $(21), $0 and $(63) recognized in other comprehensive income, for the three and six months ended June 30, 2014 and 2013, respectively.

The accompanying notes are an integral part of the consolidated financial statements.

4
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Intermountain Community Bancorp
Consolidated Statements of Comprehensive Income
(Unaudited)

 
Three Months Ended
 
Six Months Ended
 
June 30,
 
June 30,
 
2014
 
2013
 
2014
 
2013
 
(Dollars in thousands)
Net income
$
1,262

 
$
1,941

 
$
2,296

 
$
3,466

Other comprehensive income (loss):
 
 
 
 
 
 
 
Change in unrealized gains/losses on investments, and mortgage backed securities (“MBS”) available for sale, excluding non-credit loss on impairment of securities
2,995

 
(7,259
)
 
4,243

 
(6,763
)
Realized net gains reclassified from other comprehensive income
(168
)
 
(163
)
 
(174
)
 
(203
)
Non-credit loss on impairment on available-for-sale debt securities
—

 
21

 
—

 
63

Less deferred income tax benefit (provision) on securities
(1,120
)
 
2,931

 
(1,611
)
 
2,734

Net other comprehensive income (loss)
1,707

 
(4,470
)
 
2,458

 
(4,169
)
Comprehensive income (loss)
$
2,969

 
$
(2,529
)
 
$
4,754

 
$
(703
)
The accompanying notes are an integral part of the consolidated financial statements.


5
Table of Contents

Intermountain Community Bancorp
Consolidated Statements of Cash Flows
(Unaudited)
 
Six Months Ended
 
June 30,
 
2014
 
2013
 
(Dollars in thousands)
Cash flows from operating activities:
 
 
 
Net income
$
2,296

 
$
3,466

Adjustments to reconcile net income to net cash provided by operating activities:
 
 
 
Depreciation
1,129

 
1,194

Stock-based compensation expense
233

 
13

Net amortization of premiums on securities
2,631

 
3,291

Provision for loan losses
99

 
426

Amortization of core deposit intangibles
20

 
29

Gain on sale of loans, investments, property and equipment
(542
)
 
(978
)
Impact of hedge dedesignation and current fair value adjustment
—

 
(147
)
OTTI credit loss on available-for-sale investments
—

 
63

OREO valuation adjustments
—

 
17

Accretion of deferred gain on sale of branch property
(8
)
 
(8
)
Net accretion of loan and deposit discounts and premiums
—

 
(5
)
Increase in cash surrender value of bank-owned life insurance
(165
)
 
(170
)
Change in value of stock warrants
(17
)
 
(2
)
Change in:
 
 
 
Accrued interest receivable
(488
)
 
(143
)
Prepaid expenses and other assets
615

 
2,886

Accrued interest payable and other liabilities
(20
)
 
257

Accrued expenses and other cashiers checks
(355
)
 
254

Proceeds from sale of loans originated for sale
15,270

 
31,274

Loans originated for sale
(16,324
)
 
(29,895
)
Net cash provided by operating activities
4,374

 
11,822

Cash flows from investing activities:
 
 
 
Proceeds from redemption of FHLB Stock
41

 
41

Purchases of available-for-sale securities
(49,848
)
 
(62,574
)
Proceeds from sales, calls or maturities of available-for-sale securities
26,007

 
34,798

Principal payments on mortgage-backed securities
16,033

 
33,058

Purchases of held-to-maturity securities
(870
)
 
—

Proceeds from sales, calls or maturities of held-to-maturity securities
2,915

 
53

Origination of loans, net of principal payments
(5,630
)
 
(2,787
)
Purchase of office properties and equipment and software
(543
)
 
(1,164
)
Proceeds from sale of other real estate owned
83

 
817

Proceeds from sale of office properties and equipment
3

 
13

Net change in restricted cash
1,468

 
683

Net cash provided by investing activities
(10,341
)
 
2,938

Cash flows from financing activities:
 
 
 
Net change in demand, money market and savings deposits
(5,047
)
 
(32,033
)
Net change in certificates of deposit
(7,115
)
 
(17,380
)
Net change in repurchase agreements
(22,041
)
 
8,867

Payments on borrowings
(350
)
 
—

Proceeds from new borrowings
10,000

 
—

Retirement of treasury stock
—

 
(1
)
Payment of preferred stock dividend
—

 
(675
)
Net cash used in financing activities
(24,553
)
 
(41,222
)
Net change in cash and cash equivalents
(30,520
)
 
(26,462
)
Cash and cash equivalents, beginning of period
52,797

 
66,939

Cash and cash equivalents, end of period
$
22,277

 
$
40,477

Supplemental disclosures of cash flow information:
 
 
 
Cash paid during the period for:
 
 
 
Interest
$
1,580

 
$
2,804

Noncash investing and financing activities:
 
 
 
Loans converted to other real estate owned
$
84

 
$
394

Transfer from securities available-for-sale to securities held-to-maturity
—

 
8,234

The accompanying notes are an integral part of the consolidated financial statements.

6
Table of Contents

Intermountain Community Bancorp
Notes to Consolidated Financial Statements (Unaudited)

1. Basis of Presentation:
The foregoing unaudited interim consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X as promulgated by the Securities and Exchange Commission. Accordingly, these financial statements do not include all of the disclosures required by accounting principles generally accepted in the United States of America for complete financial statements. These unaudited interim consolidated financial statements should be read in conjunction with the audited consolidated financial statements for the year ended December 31, 2013. In the opinion of management, the unaudited interim consolidated financial statements furnished herein include adjustments, all of which are of a normal recurring nature, necessary for a fair statement of the results for the interim periods presented.
The preparation of financial statements in accordance with accounting principles generally accepted in the United States of America requires the use of estimates and assumptions that affect the reported amounts of assets and liabilities, disclosure of contingent assets and liabilities known to exist as of the date the financial statements are published, and the reported amounts of revenues and expenses during the reporting period. Uncertainties with respect to such estimates and assumptions are inherent in the preparation of Intermountain Community Bancorp’s (“Intermountain’s” or “the Company’s”) consolidated financial statements; accordingly, it is possible that the actual results could differ from these estimates and assumptions, which could have a material effect on the reported amounts of Intermountain’s consolidated financial position and results of operations.


2. Cash and Cash Equivalents:

The balances of the Company's cash and cash equivalents are as follows (in thousands):
 
6/30/2014
 
12/31/2013
Unrestricted interest-bearing cash and cash equivalents
$
14,257

 
$
44,946

Unrestricted non interest-bearing and vault cash
$
8,020

 
$
7,851

Restricted non-interest bearing cash
$
10,866

 
$
12,333

At June 30, 2014 and December 31, 2013, unrestricted interest bearing cash was deposited at the Federal Reserve ("FRB") and Federal Home Loan Bank of Seattle ("FHLB"). Unrestricted non-interest bearing cash includes overnight cash deposited at several of the Company's correspondent banks and balances kept in the vaults of its various branches. At June 30, 2014 restricted non-interest bearing cash consisted of the following:
•
At June 30, 2014, a $95,000 reserve balance was required at the FRB; a $1.6 million reserve balance was required to meet FRB reserve requirements on December 31, 2013;
•
At both June 30, 2014, $195,000 was pledged to various correspondent banks to secure interest rate swap transactions and foreign currency exchange lines; at December 31, 2013 $172,000 was pledged;
•
At both June 30, 2014 and December 31, 2013, $1.1 million was held at the Company's subsidiary Bank to be used for future tenant improvements of the Sandpoint Center, as required by the agreement executed to sell the Sandpoint Center in 2009;
•
At both June 30, 2014 and December 31, 2013, $9.5 million was held at the Company's subsidiary Bank as required by an intercompany agreement signed by the Company and the Bank as part of the Company's January 2012 capital raise, which represents a pledge of funds to the Bank to partially secure the loan made by the Bank to the third party who bought and subsequently leased the Sandpoint Center back to the Bank.

3. Investments:

The amortized cost and fair values of investments are as follows (in thousands):

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Table of Contents

 
Available-for-Sale
 
Amortized
Cost
 
Gross
Unrealized
Gains
 
Gross
Unrealized
Losses
 
Fair Value/
Carrying Value
June 30, 2014
 
 
 
 
 
 
 
Corporate Bonds
$
2,000

 
$
—

 
$
(6
)
 
$
1,994

State and municipal securities
63,182

 
1,690

 
(321
)
 
64,551

Mortgage-backed securities - Agency Pass Throughs
32,410

 
806

 
(375
)
 
32,841

Mortgage-backed securities - Agency CMO's
127,795

 
1,370

 
(950
)
 
128,215

SBA Pools
27,033

 
436

 
(14
)
 
27,455

Mortgage-backed securities - Non Agency CMO's (investment grade)
4,026

 
—

 
(175
)
 
3,851

Mortgage-backed securities - Non Agency CMO's (below investment grade)
2,387

 
39

 
(143
)
 
2,283

 
$
258,833

 
$
4,341

 
$
(1,984
)
 
$
261,190

December 31, 2013
 
 
 
 
 
 
 
Corporate Bonds
$
4,000

 
$
—

 
$
(85
)
 
$
3,915

State and municipal securities
51,335

 
469

 
(1,765
)
 
50,039

Mortgage-backed securities - Agency Pass Throughs
52,104

 
768

 
(499
)
 
52,373

Mortgage-backed securities - Agency CMO's
114,704

 
849

 
(1,542
)
 
114,011

SBA Pools
26,518

 
355

 
(46
)
 
26,827

Mortgage-backed securities - Non Agency CMO's (investment grade)
2,025

 
—

 
(65
)
 
1,960

Mortgage-backed securities - Non Agency CMO's (below investment grade)
2,654

 
31

 
(172
)
 
2,513

 
$
253,340

 
$
2,472

 
$
(4,174
)
 
$
251,638

 
Held-to-Maturity
 
Carrying Value / Amortized Cost
 
Gross Unrealized Gains
 
Gross Unrealized Losses
 
Fair Value
June 30, 2014
 
 
 
 
 
 
 
State and municipal securities
$
26,109

 
$
1,255

 
$
(10
)
 
$
27,354

December 31, 2013
 
 
 
 
 
 
 
State and municipal securities
$
28,286

 
$
857

 
$
(119
)
 
$
29,024



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The following table summarizes the duration of Intermountain’s unrealized losses on available-for-sale and held-to-maturity securities as of the dates indicated (in thousands).

 
Less Than 12 Months
 
12 Months or Longer
 
Total
June 30, 2014
Fair Value
 
Unrealized
Losses
 
Fair Value
 
Unrealized
Losses
 
Fair Value
 
Unrealized
Losses
Corporate Bonds
$
1,994

 
$
(6
)
 
$
—

 
$
—

 
$
1,994

 
$
(6
)
Residential mortgage-back securities
52,366

 
(1,017
)
 
29,865

 
(626
)
 
82,231

 
(1,643
)
SBA Pools
6,625

 
(14
)
 
—

 
—

 
6,625

 
(14
)
State and municipal securities
7,954

 
(76
)
 
10,084

 
(255
)
 
18,038

 
(331
)
Total
$
68,939

 
$
(1,113
)
 
$
39,949

 
$
(881
)
 
$
108,888

 
$
(1,994
)
December 31, 2013
Fair Value
 
Unrealized
Losses
 
Fair Value
 
Unrealized
Losses
 
Fair Value
 
Unrealized
Losses
Corporate bonds
$
3,915

 
$
(85
)
 
$
—

 
$
—

 
$
3,915

 
$
(85
)
Mortgage-backed securities & CMO's
69,297

 
(1,709
)
 
20,657

 
(569
)
 
89,954

 
(2,278
)
SBA Pools
7,206

 
(46
)
 
—

 
—

 
7,206

 
(46
)
State and municipal securities
36,615

 
(1,760
)
 
1,586

 
(124
)
 
38,201

 
(1,884
)
Total
$
117,033

 
$
(3,600
)
 
$
22,243

 
$
(693
)
 
$
139,276

 
$
(4,293
)

At June 30, 2014, the amortized cost and fair value of available-for-sale and held-to-maturity debt securities, by contractual maturity, are as follows (in thousands):

 
Available-for-Sale
 
Held-to-Maturity
 
Amortized
Cost
 
Fair
Value
 
Amortized
Cost
 
Fair
Value
One year or less
$
—

 
$
—

 
$
1,371

 
$
1,377

After one year through five years
1,528

 
1,544

 
3,971

 
4,134

After five years through ten years
5,856

 
5,834

 
15,196

 
15,915

After ten years
57,798

 
59,167

 
5,571

 
5,928

  Subtotal
65,182

 
66,545

 
26,109

 
27,354

Mortgage-backed securities
166,618

 
167,190

 
—

 
—

SBA Pools
27,033

 
27,455

 
—

 
—

  Total Securities
$
258,833

 
$
261,190

 
$
26,109

 
$
27,354


Expected maturities may differ from contractual maturities because issuers may have the right to call or prepay obligations with or without call or prepayment penalties.

Intermountain’s investment portfolios are managed to provide and maintain liquidity; to maintain a balance of high quality, diversified investments to minimize risk; to offset other asset portfolio elements in managing interest rate risk; to provide collateral for pledging; and to maximize returns. At June 30, 2014, the Company does not intend to sell any of its available-for-sale securities that have a loss position and it is not likely that it will be required to sell the available-for-sale securities before the anticipated recovery of their remaining amortized cost or maturity date. The unrealized losses on residential mortgage-backed securities without other-than-temporary impairment (“OTTI”) were considered by management to be temporary in nature.

OTTI losses for the six months ended June 30, 2014 and June 30, 2013 were $0 and $63,000, respectively. The OTTI recognized on investment securities available for sale in 2013 relates to one non-agency collateralized mortgage obligation that was sold in the fourth quarter of 2013.

On June 30, 2013, six securities with an amortized cost of $8,512,039 were transferred from the available-for-sale category to the held-to-maturity category of the portfolio. The fair market value of the securities at the time of transfer was $8,234,244. The unrealized loss of $277,795 will continue to be reported as a component of accumulated other comprehensive income, net of tax, and amortized over the remaining life of the securities as an adjustment to yield. Upon transfer to the held-to-maturity category,

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premium and discount accounts were adjusted to reflect the fair market value of the security. The resulting premiums and discounts are also being amortized as an adjustment to yield.

See Note 9 “Fair Value of Financial Instruments” for more information on the calculation of fair or carrying value for the investment securities.

4. Loans and Allowance for Loan Loss:
The components of loans receivable are as follows (in thousands):
 
June 30, 2014
 
Loans
Receivable
 
%
 
Individually
Evaluated for
Impairment
 
Collectively
Evaluated for
Impairment
Commercial
$
118,353

 
22.4
%
 
$
4,520

 
$
113,833

Commercial real estate
169,234

 
32.0

 
2,951

 
166,283

Commercial construction
12,293

 
2.3

 
—

 
12,293

Land and land development loans
34,216

 
6.5

 
1,994

 
32,222

Agriculture
105,545

 
20.0

 
2,369

 
103,176

Multifamily
13,310

 
2.5

 
—

 
13,310

Residential real estate
57,914

 
11.0

 
3,038

 
54,876

Residential construction
2,021

 
0.4

 
—

 
2,021

Consumer
8,860

 
1.7

 
54

 
8,806

Municipal
6,500

 
1.2

 
—

 
6,500

Total loans receivable
528,246

 
100.0
%
 
$
14,926

 
$
513,320

Allowance for loan losses
(7,683
)
 
 
 
 
 
 
Deferred loan fees, net of direct origination costs
(283
)
 
 
 
 
 
 
Loans receivable, net
$
520,280

 
 
 
 
 
 
Weighted average interest rate
5.08
%
 
 
 
 
 
 

 
December 31, 2013
 
Loans
Receivable
 
%
 
Individually
Evaluated for
Impairment
 
Collectively
Evaluated for
Impairment
Commercial
$
113,736

 
21.8
%
 
$
4,713

 
$
109,023

Commercial real estate
181,207

 
34.7

 
3,128

 
178,079

Commercial construction
7,383

 
1.4

 
—

 
7,383

Land and land development loans
28,946

 
5.5

 
2,487

 
26,459

Agriculture
96,584

 
18.5

 
2,868

 
93,716

Multifamily
18,205

 
3.5

 
—

 
18,205

Residential real estate
59,172

 
11.3

 
3,157

 
56,015

Residential construction
2,531

 
0.5

 
—

 
2,531

Consumer
9,033

 
1.7

 
33

 
9,000

Municipal
5,964

 
1.1

 
—

 
5,964

Total loans receivable
522,761

 
100.0
%
 
$
16,386

 
$
506,375

Allowance for loan losses
(7,687
)
 
 
 
 
 
 
Deferred loan fees, net of direct origination costs
(240
)
 
 
 
 
 
 
Loans receivable, net
$
514,834

 
 
 
 
 
 
Weighted average interest rate
5.14
%
 
 
 
 
 
 


10
Table of Contents

The components of the allowance for loan loss by types are as follows (in thousands):
 
June 30, 2014
 
December 31, 2013
 
Total
Allowance
 
Individually
Evaluated
Allowance
 
Collectively
Evaluated
Allowance
 
Total
Allowance
 
Individually
Evaluated
Allowance
 
Collectively
Evaluated
Allowance
Commercial
$
1,817

 
$
302

 
$
1,515

 
$
1,819

 
$
398

 
$
1,421

Commercial real estate
2,336

 
382

 
1,954

 
2,455

 
332

 
2,123

Commercial construction
257

 
—

 
257

 
177

 
—

 
177

Land and land development loans
941

 
77

 
864

 
1,067

 
257

 
810

Agriculture
819

 
17

 
802

 
726

 
17

 
709

Multifamily
24

 
—

 
24

 
33

 
—

 
33

Residential real estate
1,306

 
614

 
692

 
1,192

 
495

 
697

Residential construction
44

 
—

 
44

 
56

 
—

 
56

Consumer
114

 
18

 
96

 
136

 
7

 
129

Municipal
25

 
—

 
25

 
26

 
—

 
26

Total
$
7,683

 
$
1,410

 
$
6,273

 
$
7,687

 
$
1,506

 
$
6,181


A summary of current, past due and nonaccrual loans as of June 30, 2014 is as follows, (in thousands):

 
Current
 
30-89 Days
Past Due
 
90 Days or More
Past Due
and Accruing
 
Nonaccrual
 
Total
Commercial
$
115,831

 
$
317

 
$
—

 
$
2,205

 
$
118,353

Commercial real estate
169,144

 
15

 
—

 
75

 
169,234

Commercial construction
12,293

 
—

 
—

 
—

 
12,293

Land and land development loans
34,089

 
—

 
—

 
127

 
34,216

Agriculture
105,187

 
152

 
—

 
206

 
105,545

Multifamily
13,310

 
—

 
—

 
—

 
13,310

Residential real estate
56,732

 
378

 
—

 
804

 
57,914

Residential construction
2,021

 
—

 
—

 
—

 
2,021

Consumer
8,852

 
5

 
—

 
3

 
8,860

Municipal
6,500

 
—

 
—

 
—

 
6,500

Total
$
523,959

 
$
867

 
$
—

 
$
3,420

 
$
528,246



11
Table of Contents

A summary of current, past due and nonaccrual loans as of December 31, 2013 is as follows, (in thousands):

 
Current
 
30-89 Days
Past Due
 
90 Days or More
Past Due
and Accruing
 
Nonaccrual
 
Total
Commercial
$
111,353

 
$
952

 
$
—

 
$
1,431

 
$
113,736

Commercial real estate
181,028

 
12

 
—

 
167

 
181,207

Commercial construction
7,383

 
—

 
—

 
—

 
7,383

Land and land development loans
28,776

 
9

 
—

 
161

 
28,946

Agriculture
96,320

 
51

 
—

 
213

 
96,584

Multifamily
18,205

 
—

 
—

 
—

 
18,205

Residential real estate
58,238

 
241

 
—

 
693

 
59,172

Residential construction
2,531

 
—

 
—

 
—

 
2,531

Consumer
9,028

 
2

 
—

 
3

 
9,033

Municipal
5,964

 
—

 
—

 
—

 
5,964

Total
$
518,826

 
$
1,267

 
$
—

 
$
2,668

 
$
522,761


The following table provides a summary of Troubled Debt Restructurings ("TDR") outstanding at period end by performing status, (in thousands).

 
June 30, 2014
 
December 31, 2013
 
Nonaccrual
 
Accrual
 
Total
 
Nonaccrual
 
Accrual
 
Total
Commercial
$
318

 
$
1,143

 
$
1,461

 
$
249

 
$
1,590

 
$
1,839

Commercial real estate
35

 
2,165

 
2,200

 
38

 
1,931

 
1,969

Land and land development loans
43

 
1,861

 
1,904

 
46

 
2,063

 
2,109

Agriculture
—

 
2,162

 
2,162

 
—

 
2,483


2,483

Residential real estate
493

 
1,117

 
1,610

 
498

 
1,140

 
1,638

Consumer
—

 
28

 
28

 
—

 
9

 
9

Total
$
889

 
$
8,476

 
$
9,365

 
$
831

 
$
9,216

 
$
10,047


The Company's loans that were modified in the three and six month period ended June 30, 2014 and 2013 and considered a TDR are as follows (dollars in thousands):
 
Three Months Ended June 30, 2014
 
Six Months Ended June 30, 2014
 
Number
 
Pre-Modification Recorded Investment
 
Post-Modification Recorded Investment
 
Number
 
Pre-Modification Recorded Investment
 
Post-Modification Recorded Investment
Commercial
2

 
$
20

 
$
20

 
9

 
$
446

 
$
437

Commercial real estate
1

 
39

 
53

 
1

 
39

 
53

Land and land development loans
1

 
69

 
69

 
1

 
69

 
69

Agriculture
2

 
270

 
270

 
2

 
270

 
270

Consumer
1

 
23

 
23

 
1

 
23

 
23

 
7

 
$
421

 
$
435

 
14

 
$
847

 
$
852



12
Table of Contents

 
Three Months Ended June 30, 2013
 
Six Months Ended June 30, 2013
 
Number
 
Pre-Modification Recorded Investment
 
Post-Modification Recorded Investment
 
Number
 
Pre-Modification Recorded Investment
 
Post-Modification Recorded Investment
Commercial
3

 
$
2,243

 
$
2,243

 
7

 
$
2,506

 
$
2,506

Commercial real estate
4

 
392

 
392

 
4

 
392

 
392

Land and land development loans
1

 
182

 
182

 
3

 
335

 
335

Agriculture
—

 
—

 
—

 
4

 
1,216

 
1,216

Residential real estate
3

 
225

 
167

 
3

 
225

 
167

Consumer
—

 
—

 
—

 
1

 
89

 
89

 
11

 
$
3,042

 
$
2,984

 
22

 
$
4,763

 
$
4,705


The balances below provide information as to how the loans were modified as TDRs during the three and six month periods ended June 30, 2014 and 2013, (in thousands).
 
Three Months Ended June 30, 2014
 
Six Months Ended June 30, 2014
 
Adjusted Interest Rate Only
 
Other*
 
Adjusted Interest Rate Only
 
Other*
Commercial
$
—

 
$
20

 
$
—

 
$
438

Commercial real estate
—

 
53

 
—

 
52

Land and land development loans
69

 
—

 
69

 
—

Agriculture
—

 
270

 
—

 
270

Residential real estate
—

 
—

 
—

 
—

Consumer
23

 
—

 
23

 
—

 
$
92

 
$
343

 
$
92

 
$
760

(*) Other includes term or principal concessions or a combination of concessions, including interest rates.

 
Three months ended June 30, 2013
 
Six Months Ended June 30, 2013
 
Adjusted Interest Rate Only
 
Other*
 
Adjusted Interest Rate Only
 
Other*
Commercial
$
1,350

 
$
893

 
$
1,350

 
$
1,156

Commercial real estate
—

 
392

 
—

 
392

Land and land development loans
—

 
182

 
36

 
299

Agriculture
—

 
—

 
852

 
364

Residential real estate
147

 
20

 
147

 
20

Consumer
—

 
—

 
—

 
89

 
$
1,497

 
$
1,487

 
$
2,385

 
$
2,320

(*) Other includes term or principal concessions or a combination of concessions, including interest rates.


As of June 30, 2014, the Company had specific reserves of $704,000 on TDRs, and there were no TDRs in default.

The allowance for loan losses and reserve for unfunded commitments are maintained at levels considered adequate by management to provide for probable loan losses as of the reporting dates. The allowance for loan losses and reserve for unfunded commitments are based on management’s assessment of various factors affecting the loan portfolio, including problem loans, business conditions and loss experience, and an overall evaluation of the quality of the underlying collateral. Changes in the allowance for loan losses and the reserve for unfunded commitments during the three and six-month periods ended June 30, 2014 and 2013 are as follows:


13
Table of Contents

 
Allowance for Loan Losses
for the three months ended June 30, 2014
 
Balance,
Beginning of
Quarter
 
Charge-Offs
Apr 1 through June 30, 2014
 
Recoveries
Apr 1 through June 30, 2014
 
Provision
 
Balance,
End of
Quarter
 
(Dollars in thousands)
Commercial
$
1,838

 
$
(160
)
 
$
17

 
$
122

 
$
1,817

Commercial real estate
2,370

 
—

 
4

 
(38
)
 
2,336

Commercial construction
340

 
—

 
—

 
(83
)
 
257

Land and land development loans
888

 
—

 
46

 
7

 
941

Agriculture
754

 
—

 
25

 
40

 
819

Multifamily
31

 
—

 
—

 
(7
)
 
24

Residential real estate
1,402

 
(11
)
 
12

 
(97
)
 
1,306

Residential construction
34

 
—

 
2

 
8

 
44

Consumer
98

 
(46
)
 
18

 
44

 
114

Municipal
24

 
—

 
—

 
1

 
25

Allowance for loan losses
$
7,779

 
$
(217
)
 
$
124

 
$
(3
)
 
$
7,683



 
Allowance for Loan Losses
for the six months ended June 30, 2014
 
Balance,
Beginning of Period
 
Charge-Offs
Jan 1 through June 30, 2014
 
Recoveries
Jan 1 through Jun 30, 2014
 
Provision
 
Balance,
End of
Period
 
(Dollars in thousands)
Commercial
$
1,819

 
$
(232
)
 
$
60

 
$
170

 
$
1,817

Commercial real estate
2,455

 
(1
)
 
7

 
(125
)
 
2,336

Commercial construction
177

 
—

 
—

 
80

 
257

Land and land development loans
1,067

 
—

 
52

 
(178
)
 
941

Agriculture
726

 
—

 
37

 
56

 
819

Multifamily
33

 
—

 
—

 
(9
)
 
24

Residential real estate
1,192

 
(30
)
 
36

 
108

 
1,306

Residential construction
56

 
—

 
4

 
(16
)
 
44

Consumer
136

 
(87
)
 
51

 
14

 
114

Municipal
26

 
—

 
—

 
(1
)
 
25

Allowance for loan losses
$
7,687

 
$
(350
)
 
$
247

 
$
99

 
$
7,683



14
Table of Contents

 
Allowance for Loan Losses
for the three months ended June 30, 2013
 
Balance,
Beginning of
Quarter
 
Charge-Offs
Apr 1 through June 30, 2013
 
Recoveries
Apr 1 through June 30, 2013
 
Provision
 
Balance,
End of
Quarter
 
(Dollars in thousands)
Commercial
$
1,763

 
$
(132
)
 
$
310

 
$
(41
)
 
$
1,900

Commercial real estate
2,814

 
(48
)
 
20

 
(50
)
 
2,736

Commercial construction
217

 
—

 
14

 
—

 
231

Land and land development loans
1,210

 
(130
)
 
49

 
(173
)
 
956

Agriculture
241

 
—

 
23

 
428

 
692

Multifamily
55

 
—

 
—

 
(1
)
 
54

Residential real estate
1,103

 
(40
)
 
45

 
87

 
1,195

Residential construction
35

 
—

 
—

 
9

 
44

Consumer
206

 
(46
)
 
52

 
(9
)
 
203

Municipal
34

 
—

 
—

 
(3
)
 
31

Allowances for loan losses
$
7,678

 
$
(396
)
 
$
513

 
$
247

 
$
8,042


 
Allowance for Loan Losses
for the six months ended June 30, 2013
 
Balance,
Beginning of Period
 
Charge-Offs
Jan 1 through June 30, 2013
 
Recoveries
Jan 1 through June 30, 2013
 
Provision
 
Balance,
End of
Period
 
(Dollars in thousands)
Commercial
$
2,156

 
$
(221
)
 
$
489

 
$
(524
)
 
$
1,900

Commercial real estate
2,762

 
(614
)
 
27

 
561

 
2,736

Commercial construction
101

 
—

 
15

 
115

 
231

Land and land development loans
1,197

 
(137
)
 
64

 
(168
)
 
956

Agriculture
228

 
—

 
41

 
423

 
692

Multifamily
51

 
—

 
—

 
3

 
54

Residential real estate
1,144

 
(40
)
 
70

 
21

 
1,195

Residential construction
24

 
—

 
—

 
20

 
44

Consumer
202

 
(110
)
 
89

 
22

 
203

Municipal
78

 
—

 
—