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 September 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 every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit 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

 

  

  

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

9,285,261

Class

Outstanding as of October 19, 2018

 

 

1


 

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10Q

 

FARMERS & MERCHANTS BANCORP, INC.

INDEX

 

 

Form 10-Q Items

 

Page

 

PART I.

FINANCIAL INFORMATION

 

 

 

 

 

 

Item   1.

Financial Statements (Unaudited)

 

 

 

 

 

 

 

Condensed Consolidated Balance Sheets-
September 30, 2018 and December 31, 2017

3

 

 

 

 

 

 

Condensed Consolidated Statements of Income & Comprehensive Income -
Three and Nine Months Ended September 30, 2018 and September 30, 2017

4-5

 

 

 

 

 

 

Condensed Consolidated Statements of Cash Flows-
Nine Months Ended September 30, 2018 and September 30, 2017

6

 

 

 

 

 

 

Notes to Condensed Consolidated Financial Statements

7-36

 

 

 

 

 

Item   2.

Management's Discussion and Analysis of Financial Condition
and Results of Operations

37-52

 

 

 

 

 

Item   3.

Qualitative and Quantitative Disclosures About Market Risk

53

 

 

 

 

 

Item   4.

Controls and Procedures

54

 

 

 

 

 

PART II.

OTHER INFORMATION

54

 

 

 

 

 

Item   1.

Legal Proceedings

54

 

 

 

 

 

Item 1A.

Risk Factors

54

 

 

 

 

 

Item   2.

Unregistered Sales of Equity Securities and Use of Proceeds

54

 

 

 

 

 

Item   3.

Defaults Upon Senior Securities

54

 

 

 

 

 

Item   4.

Mine Safety Disclosures

54

 

 

 

 

 

Item   5.

Other Information

54

 

 

 

 

 

Item   6.

Exhibits

55

 

 

 

 

 

Signatures

 

56

 

 

 

 

 

101.INS

XBRL Instance Document (1)

 

 

101.SCH

XBRL Taxonomy Extension Scheme Document (1)

 

 

101.CAL

XBRL Taxonomy Extension Calculation Linkbase Document (1)

 

 

101.DEF

XBRL Taxonomy Extension Definition Linkbase Document (1)

 

 

101.LAB

XBRL Taxonomy Extension Label Linkbase Document (1)

 

 

101.PRE

XBRL Taxonomy Extension Presentation Linkbase Document (1)

 

 

(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


 

ITEM 1 FINANCIAL STATEMENTS

FARMERS & MERCHANTS BANCORP, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

 

 

 

(in thousands of dollars)

 

 

 

September 30, 2018

 

 

December 31, 2017

 

 

 

(Unaudited)

 

 

 

 

 

Assets

 

 

 

 

 

 

 

 

Cash and due from banks

 

$

28,782

 

 

$

33,480

 

Federal funds sold

 

 

939

 

 

 

987

 

Total cash and cash equivalents

 

 

29,721

 

 

 

34,467

 

Interest-bearing time deposits

 

 

4,019

 

 

 

4,018

 

Securities - available-for-sale

 

 

183,075

 

 

 

196,398

 

Other securities, at cost

 

 

3,717

 

 

 

3,717

 

Loans held for sale

 

 

1,679

 

 

 

1,221

 

Loans, net

 

 

831,943

 

 

 

816,156

 

Premises and equipment

 

 

22,117

 

 

 

21,726

 

Goodwill

 

 

4,074

 

 

 

4,074

 

Mortgage servicing rights

 

 

2,373

 

 

 

2,299

 

Other real estate owned

 

 

717

 

 

 

674

 

Bank owned life insurance

 

 

14,799

 

 

 

14,523

 

Other assets

 

 

9,778

 

 

 

7,736

 

Total Assets

 

$

1,108,012

 

 

$

1,107,009

 

Liabilities and Stockholders' Equity

 

 

 

 

 

 

 

 

Liabilities

 

 

 

 

 

 

 

 

Deposits

 

 

 

 

 

 

 

 

Noninterest-bearing

 

$

197,088

 

 

$

199,114

 

Interest-bearing

 

 

 

 

 

 

 

 

NOW accounts

 

 

314,873

 

 

 

298,711

 

Savings

 

 

230,306

 

 

 

233,949

 

Time

 

 

186,592

 

 

 

187,566

 

Total deposits

 

 

928,859

 

 

 

919,340

 

Federal funds purchased and securities sold under agreements to

   repurchase

 

 

27,026

 

 

 

39,495

 

Federal Home Loan Bank (FHLB) advances

 

 

5,000

 

 

 

5,000

 

Dividend payable

 

 

1,287

 

 

 

1,193

 

Accrued expenses and other liabilities

 

 

6,493

 

 

 

7,844

 

Total liabilities

 

 

968,665

 

 

 

972,872

 

Commitments and Contingencies

 

 

 

 

 

 

 

 

Stockholders' Equity

 

 

 

 

 

 

 

 

Common stock - No par value 20,000,000 shares authorized; issued and

   outstanding 10,400,000 shares 9/30/18 and 12/31/17

 

 

10,589

 

 

 

11,546

 

Treasury stock - 1,114,739 shares 9/30/18, 1,134,120 shares 12/31/17

 

 

(12,409

)

 

 

(12,160

)

Retained earnings

 

 

146,072

 

 

 

136,577

 

Accumulated other comprehensive loss

 

 

(4,905

)

 

 

(1,826

)

Total stockholders' equity

 

 

139,347

 

 

 

134,137

 

Total Liabilities and Stockholders' Equity

 

$

1,108,012

 

 

$

1,107,009

 

 

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)

 

 

(in thousands of dollars, except per share data)

 

 

(in thousands of dollars, except per share data)

 

 

 

Three Months Ended

 

 

Nine Months Ended

 

 

 

September 30, 2018

 

 

September 30, 2017

 

 

September 30, 2018

 

 

September 30, 2017

 

Interest Income

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Loans, including fees

 

$

10,725

 

 

$

9,547

 

 

$

31,348

 

 

$

27,367

 

Debt securities:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

U.S. Treasury and government agencies

 

 

613

 

 

 

605

 

 

 

1,848

 

 

 

1,870

 

Municipalities

 

 

275

 

 

 

290

 

 

 

845

 

 

 

905

 

Dividends

 

 

56

 

 

 

49

 

 

 

164

 

 

 

135

 

Federal funds sold and other

 

 

84

 

 

 

44

 

 

 

221

 

 

 

103

 

Total interest income

 

 

11,753

 

 

 

10,535

 

 

 

34,426

 

 

 

30,380

 

Interest Expense

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Deposits

 

 

1,611

 

 

 

1,161

 

 

 

4,319

 

 

 

3,289

 

Federal funds purchased and securities sold under agreements to repurchase

 

 

134

 

 

 

135

 

 

 

376

 

 

 

366

 

Borrowed funds

 

 

20

 

 

 

37

 

 

 

60

 

 

 

110

 

Total interest expense

 

 

1,765

 

 

 

1,333

 

 

 

4,755

 

 

 

3,765

 

Net Interest Income - Before Provision for Loan Losses

 

 

9,988

 

 

 

9,202

 

 

 

29,671

 

 

 

26,615

 

Provision for Loan Losses

 

 

47

 

 

 

99

 

 

 

219

 

 

 

197

 

Net Interest Income After Provision

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

For Loan Losses

 

 

9,941

 

 

 

9,103

 

 

 

29,452

 

 

 

26,418

 

Noninterest Income

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Customer service fees

 

 

1,392

 

 

 

1,320

 

 

 

4,323

 

 

 

4,131

 

Other service charges and fees

 

 

1,097

 

 

 

1,134

 

 

 

3,149

 

 

 

3,214

 

Net gain on sale of loans

 

 

184

 

 

 

181

 

 

 

617

 

 

 

600

 

Net gain on sale of available-for-sale securities

 

 

10

 

 

 

-

 

 

 

10

 

 

 

47

 

Total noninterest income

 

 

2,683

 

 

 

2,635

 

 

 

8,099

 

 

 

7,992

 

Noninterest Expense

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Salaries and wages

 

 

3,391

 

 

 

3,236

 

 

 

9,926

 

 

 

9,374

 

Employee benefits

 

 

1,029

 

 

 

943

 

 

 

3,013

 

 

 

2,648

 

Net occupancy expense

 

 

478

 

 

 

434

 

 

 

1,306

 

 

 

1,221

 

Furniture and equipment

 

 

588

 

 

 

493

 

 

 

1,660

 

 

 

1,456

 

Data processing

 

 

364

 

 

 

300

 

 

 

1,000

 

 

 

919

 

Franchise taxes

 

 

243

 

 

 

226

 

 

 

710

 

 

 

676

 

ATM expense

 

 

327

 

 

 

256

 

 

 

972

 

 

 

853

 

Advertising

 

 

236

 

 

 

181

 

 

 

669

 

 

 

548

 

Net loss on sale of other assets owned

 

 

1

 

 

 

13

 

 

 

17

 

 

 

27

 

FDIC assessment

 

 

81

 

 

 

82

 

 

 

249

 

 

 

247

 

Mortgage servicing rights amortization

 

 

84

 

 

 

85

 

 

 

264

 

 

 

266

 

Other general and administrative

 

 

1,304

 

 

 

1,108

 

 

 

3,618

 

 

 

3,291

 

Total noninterest expense

 

 

8,126

 

 

 

7,357

 

 

 

23,404

 

 

 

21,526

 

Income Before Income Taxes

 

 

4,498

 

 

 

4,381

 

 

 

14,147

 

 

 

12,884

 

Income Taxes

 

 

623

 

 

 

1,159

 

 

 

2,391

 

 

 

3,600

 

Net Income

 

$

3,875

 

 

$

3,222

 

 

$

11,756

 

 

$

9,284

 

Basic and Diluted Earnings Per Share

 

$

0.42

 

 

$

0.35

 

 

$

1.27

 

 

$

1.01

 

Dividends Declared

 

$

0.14

 

 

$

0.13

 

 

$

0.41

 

 

$

0.37

 

 

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

 

 

Nine Months Ended

 

 

 

September 30, 2018

 

 

September 30, 2017

 

 

September 30, 2018

 

 

September 30, 2017

 

Net Income

 

$

3,875

 

 

$

3,222

 

 

$

11,756

 

 

$

9,284

 

Other Comprehensive Income (Loss) (Net of Tax):

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net unrealized gain (loss) on available-for-sale

   securities

 

 

(617

)

 

 

(472

)

 

 

(3,432

)

 

 

1,984

 

Reclassification adjustment for gain on sale of

   available-for-sale securities

 

 

(10

)

 

 

-

 

 

 

(10

)

 

 

(47

)

Net unrealized gain (loss) on available-for-sale

   securities

 

 

(627

)

 

 

(472

)

 

 

(3,442

)

 

 

1,937

 

Tax expense (benefit)

 

 

(132

)

 

 

(160

)

 

 

(723

)

 

 

659

 

Other comprehensive income (loss)

 

 

(495

)

 

 

(312

)

 

 

(2,719

)

 

 

1,278

 

Comprehensive Income

 

$

3,380

 

 

$

2,910

 

 

$

9,037

 

 

$

10,562

 

 

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)

 

 

 

Nine Months Ended

 

 

 

September 30, 2018

 

 

September 30, 2017

 

Cash Flows from Operating Activities

 

 

 

 

 

 

 

 

Net income

 

$

11,756

 

 

$

9,284

 

Adjustments to reconcile net income to net cash provided by operating activities:

 

 

 

 

 

 

 

 

Depreciation

 

 

1,411

 

 

 

1,426

 

Amortization on available-for-sale securities, net

 

 

743

 

 

 

843

 

Amortization of servicing rights

 

 

264

 

 

 

266

 

Amortization of core deposit intangible

 

 

126

 

 

 

203

 

Compensation expense related to stock awards

 

 

497

 

 

 

346

 

Deferred income taxes

 

 

(723

)

 

 

1,116

 

Provision for loan loss

 

 

219

 

 

 

197

 

Gain on sale of loans held for sale

 

 

(617

)

 

 

(600

)

Originations of loans held for sale

 

 

(40,814

)

 

 

(42,601

)

Proceeds from sale of loans held for sale

 

 

39,435

 

 

 

44,574

 

Loss on sale of other assets owned

 

 

17

 

 

 

27

 

Gain on sales of securities available-for-sale

 

 

(10

)

 

 

(47

)

Change in other assets and other liabilities, net

 

 

(2,531

)

 

 

(2,918

)

Net cash provided by operating activities

 

 

9,773

 

 

 

12,116

 

Cash Flows from Investing Activities

 

 

 

 

 

 

 

 

Activity in available-for-sale securities:

 

 

 

 

 

 

 

 

Maturities, prepayments and calls

 

 

11,754

 

 

 

16,682

 

Sales

 

 

6,781

 

 

 

13,562

 

Purchases

 

 

(9,416

)

 

 

(3,387

)

Change in interest-bearing time deposits

 

 

1

 

 

 

(626

)

Proceeds from sale of other assets owned

 

 

8

 

 

 

133

 

Additions to premises and equipment

 

 

(1,911

)

 

 

(1,459

)

Loan originations and principal collections, net

 

 

(14,627

)

 

 

(39,195

)

Net cash used in investing activities

 

 

(7,410

)

 

 

(14,290

)

Cash Flows from Financing Activities

 

 

 

 

 

 

 

 

Net change in deposits

 

 

9,519

 

 

 

61,163

 

Net change in federal funds purchased and securities sold under agreements

   to repurchase

 

 

(12,469

)

 

 

(34,774

)

Purchase of treasury stock

 

 

(490

)

 

 

(183

)

Cash dividends paid on common stock

 

 

(3,669

)

 

 

(3,250

)

Net cash provided by (used in) financing activities

 

 

(7,109

)

 

 

22,956

 

Net Increase (Decrease) in Cash and Cash Equivalents

 

 

(4,746

)

 

 

20,782

 

Cash and cash equivalents - Beginning of year

 

 

34,467

 

 

 

28,322

 

Cash and cash equivalents - End of period

 

$

29,721

 

 

$

49,104

 

Supplemental Information

 

 

 

 

 

 

 

 

Cash paid during the year for:

 

 

 

 

 

 

 

 

Interest

 

$

4,706

 

 

$

3,735

 

Income taxes

 

$

2,407

 

 

$

3,802

 

Noncash investing activities:

 

 

 

 

 

 

 

 

Transfer of loans to other real estate owned

 

$

68

 

 

$

-

 

 

See Notes to Condensed Consolidated Unaudited Financial Statements.

 

6


 

ITEM 1 NOTES TO CONDENSED CONSOLIDATED UNAUDITED FINANCIAL STATEMENTS

NOTE 1 BASIS OF PRESENTATION AND OTHER

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 nine months ended September 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.

The Company recognizes revenues as they are earned based on contractual terms, as transactions occur, or as services are provided and collectability is reasonably assured.  The Company’s principal source of revenue is interest income from loans and investment securities.  The Company also earns noninterest income from various banking and financial services offered primarily through Farmers & Merchants State Bank.  Interest income is primarily recognized on an accrual basis according to nondiscretionary formulas written in contracts, such as loan agreements or investment security contracts.  The Company also earns noninterest income from various banking and financial services provided to business and consumer clients such as deposit account, debit card, and mortgage banking services.  Revenue is recorded for noninterest income based on the contractual terms for the service or transaction performed.

 

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, $126 thousand has been expensed for the nine months ended September 30, 2018.

 

 

 

(In Thousands)

 

 

 

Custar

 

2018

 

$

167

 

2019

 

 

167

 

2020

 

 

161

 

 

 

$

495

 

 

NOTE 3 SECURITIES

 

Mortgage-backed securities, as shown in the following tables, are all government sponsored enterprises.  The amortized cost and fair value of securities, with gross unrealized gains and losses at September 30, 2018 and December 31, 2017,  follows:

 

 

 

(In Thousands)

 

 

 

September 30, 2018

 

 

 

Amortized

 

 

Gross Unrealized

 

 

Gross Unrealized

 

 

Fair

 

 

 

Cost

 

 

Gains

 

 

Losses

 

 

Value

 

Available-for-Sale:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

U.S. Treasury

 

$

21,141

 

 

$

-

 

 

$

(370

)

 

$

20,771

 

U.S. Government agencies

 

 

78,753

 

 

 

-

 

 

 

(2,986

)

 

 

75,767

 

Mortgage-backed securities

 

 

36,350

 

 

 

11

 

 

 

(1,761

)

 

 

34,600

 

State and local governments

 

 

53,040

 

 

 

199

 

 

 

(1,302

)

 

 

51,937

 

Total available-for-sale securities

 

$

189,284

 

 

$

210

 

 

$

(6,419

)

 

$

183,075

 

 

 

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 September 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)

 

 

 

September 30, 2018

 

 

 

Less Than  Twelve Months

 

 

Twelve Months  & Over

 

 

 

Gross Unrealized

 

 

Fair

 

 

Gross Unrealized

 

 

Fair

 

 

 

Losses

 

 

Value

 

 

Losses

 

 

Value

 

U.S. Treasury

 

$

(111

)

 

$

6,860

 

 

$

(259

)

 

$

13,910

 

U.S. Government agencies

 

 

(166

)

 

 

7,424

 

 

 

(2,820

)

 

 

68,344

 

Mortgage-backed securities

 

 

(132

)

 

 

7,220

 

 

 

(1,629

)

 

 

26,657

 

State and local governments

 

 

(350

)

 

 

23,413

 

 

 

(952

)

 

 

20,371

 

Total available-for-sale securities

 

$

(759

)

 

$

44,917

 

 

$

(5,660

)

 

$

129,282

 

 

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 nine months ended September 30, 2018 and September 30, 2017.

 

 

 

Three Months

 

 

Nine Months

 

 

 

(In Thousands)

 

 

(In Thousands)

 

 

 

2018

 

 

2017

 

 

2018

 

 

2017

 

Gross realized gains

 

$

51

 

 

$

-

 

 

$

51

 

 

$

58

 

Gross realized losses

 

 

(41

)