Exhibit 99.4
CONSOLIDATED FINANCIAL STATEMENTS and
CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
SOUTHERN COLORADO CORP. AND SUBSIDIARY
As of June 30, 2018 and December 31, 2017
and for the six months ended June 30, 2018 and 2017
Southern Colorado Corp. and Subsidiary
CONSOLIDATED BALANCE SHEETS
|
| June 30, 2018 (Unaudited) |
|
| December 31, 2017 |
| ||
|
| (in thousands) |
| |||||
ASSETS |
|
|
|
|
|
|
|
|
Cash and due from banks |
| $ | 4,296 |
|
| $ | 2,204 |
|
Interest-bearing deposits in banks |
|
| 7,078 |
|
|
| 15,537 |
|
Total cash and cash equivalents |
|
| 11,374 |
|
|
| 17,741 |
|
Investment securities available for sale |
|
| 34,258 |
|
|
| 31,403 |
|
Federal Home Loan Bank stock, at cost |
|
| 129 |
|
|
| 127 |
|
Loans, net of allowance for loan losses of $746 at June 30, 2018 and $1,136 at December 31, 2017 |
|
| 34,832 |
|
|
| 35,461 |
|
Accrued interest receivable |
|
| 345 |
|
|
| 302 |
|
Premises and equipment, net |
|
| 1,248 |
|
|
| 1,989 |
|
Real estate held for sale |
|
| — |
|
|
| 132 |
|
Other assets |
|
| 116 |
|
|
| 141 |
|
Total assets |
| $ | 82,302 |
|
| $ | 87,296 |
|
|
|
|
|
|
|
|
|
|
LIABILITIES AND STOCKHOLDERS' EQUITY |
|
|
|
|
|
|
|
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Liabilities |
|
|
|
|
|
|
|
|
Deposits |
|
|
|
|
|
|
|
|
Noninterest-bearing |
| $ | 25,535 |
|
| $ | 26,737 |
|
Interest-bearing |
|
| 48,647 |
|
|
| 52,515 |
|
Total deposits |
|
| 74,182 |
|
|
| 79,252 |
|
Notes payable |
|
| — |
|
|
| 500 |
|
Accrued expenses and other liabilities |
|
| 205 |
|
|
| 186 |
|
Total liabilities |
|
| 74,387 |
|
|
| 79,938 |
|
Commitments and contingencies (Notes 4, 6 and 11) |
|
|
|
|
|
|
|
|
Stockholders' equity |
|
|
|
|
|
|
|
|
Common stock - $1.00 par value; 200,000 shares authorized; 160,000 shares issued and outstanding |
|
| 160 |
|
|
| 160 |
|
Additional paid-in capital |
|
| 5,370 |
|
|
| 5,370 |
|
Retained earnings |
|
| 2,654 |
|
|
| 1,980 |
|
Accumulated other comprehensive loss |
|
| (269 | ) |
|
| (152 | ) |
Total stockholders' equity |
|
| 7,915 |
|
|
| 7,358 |
|
Total liabilities and stockholders' equity |
| $ | 82,302 |
|
| $ | 87,296 |
|
See accompanying condensed notes to consolidated financial statements.
2
Southern Colorado Corp. and Subsidiary
CONSOLIDATED STATEMENTS OF INCOME
(Unaudited)
|
| Six Months Ended June 30, |
| |||||
|
| 2018 |
|
| 2017 |
| ||
|
| (in thousands) |
| |||||
Interest and dividend income |
|
|
|
|
|
|
|
|
Loans, including fees |
| $ | 966 |
|
| $ | 943 |
|
Taxable investment securities |
|
| 100 |
|
|
| 51 |
|
Tax-exempt investment securities |
|
| 256 |
|
|
| 247 |
|
Federal Home Loan Bank stock |
|
| 2 |
|
|
| 2 |
|
Interest-bearing deposits in banks |
|
| 61 |
|
|
| 38 |
|
Total interest and dividend income |
|
| 1,385 |
|
|
| 1,281 |
|
Interest expense |
|
|
|
|
|
|
|
|
Deposits |
|
| 154 |
|
|
| 86 |
|
Notes payable |
|
| 3 |
|
|
| 10 |
|
Total interest expense |
|
| 157 |
|
|
| 96 |
|
Net interest income |
|
| 1,228 |
|
|
| 1,185 |
|
Credit for loan losses |
|
| (400 | ) |
|
| — |
|
Net interest income after credit for loan losses |
|
| 1,628 |
|
|
| 1,185 |
|
Noninterest income |
|
|
|
|
|
|
|
|
Service charges on deposit accounts |
|
| 51 |
|
|
| 49 |
|
ATM and debit card |
|
| 100 |
|
|
| 88 |
|
Mortgage banking |
|
| 64 |
|
|
| 94 |
|
Net gain (loss) on sale of securities available for sale |
|
| (2 | ) |
|
| 16 |
|
Other noninterest income |
|
| 107 |
|
|
| 34 |
|
Total noninterest income |
|
| 320 |
|
|
| 281 |
|
Noninterest expense |
|
|
|
|
|
|
|
|
Salaries and employee benefits |
|
| 625 |
|
|
| 571 |
|
Occupancy and equipment |
|
| 145 |
|
|
| 146 |
|
Data processing and software |
|
| 68 |
|
|
| 72 |
|
ATM and debit card |
|
| 60 |
|
|
| 70 |
|
Management and administration fees |
|
| 69 |
|
|
| 60 |
|
Other noninterest expense |
|
| 307 |
|
|
| 235 |
|
Total noninterest expense |
|
| 1,274 |
|
|
| 1,154 |
|
|
|
|
|
|
|
|
|
|
NET INCOME |
| $ | 674 |
|
| $ | 312 |
|
See accompanying condensed notes to consolidated financial statements.
3
Southern Colorado Corp. and Subsidiary
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(Unaudited)
|
| Six Months Ended June 30, |
| |||||
|
| 2018 |
|
| 2017 |
| ||
|
| (in thousands) |
| |||||
Net income |
| $ | 674 |
|
| $ | 312 |
|
Other comprehensive income (loss) |
|
|
|
|
|
|
|
|
Change in unrealized gain/loss on securities available for sale |
|
| (119 | ) |
|
| 412 |
|
Reclassification adjustment for net (gain) loss on sale of securities available for sale realized in net income |
|
| 2 |
|
|
| (16 | ) |
Total other comprehensive income (loss) |
|
| (117 | ) |
|
| 396 |
|
|
|
|
|
|
|
|
|
|
TOTAL COMPREHENSIVE INCOME |
| $ | 557 |
|
| $ | 708 |
|
See accompanying condensed notes to consolidated financial statements.
4
Southern Colorado Corp. and Subsidiary
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY
Six Months Ended June 30, 2018 and 2017
(Unaudited)
|
| Common stock |
|
| Additional paid-in capital |
|
| Retained earnings |
|
| Accumulated other comprehensive income (loss) |
|
| Total |
| |||||
|
| (in thousands) |
| |||||||||||||||||
Balance at December 31, 2016 |
| $ | 160 |
|
| $ | 5,370 |
|
| $ | 1,315 |
|
| $ | (179 | ) |
| $ | 6,666 |
|
Net income |
|
| — |
|
|
| — |
|
|
| 312 |
|
|
| — |
|
|
| 312 |
|
Other comprehensive income |
|
| — |
|
|
| — |
|
|
| — |
|
|
| 396 |
|
|
| 396 |
|
Balance at June 30, 2017 |
| $ | 160 |
|
| $ | 5,370 |
|
| $ | 1,627 |
|
| $ | 217 |
|
| $ | 7,374 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at December 31, 2017 |
| $ | 160 |
|
| $ | 5,370 |
|
| $ | 1,980 |
|
| $ | (152 | ) |
| $ | 7,358 |
|
Net income |
|
| — |
|
|
| — |
|
|
| 674 |
|
|
| — |
|
|
| 674 |
|
Other comprehensive loss |
|
| — |
|
|
| — |
|
|
| — |
|
|
| (117 | ) |
|
| (117 | ) |
Balance at June 30, 2018 |
| $ | 160 |
|
| $ | 5,370 |
|
| $ | 2,654 |
|
| $ | (269 | ) |
| $ | 7,915 |
|
See accompanying condensed notes to consolidated financial statements.
5
Southern Colorado Corp. and Subsidiary
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
|
| Six Months Ended June 30, |
| |||||
|
| 2018 |
|
| 2017 |
| ||
|
| (in thousands) |
| |||||
Cash flows from operating activities |
|
|
|
|
|
|
|
|
Net income |
| $ | 674 |
|
| $ | 312 |
|
Adjustments to reconcile net income to net cash from operating activities |
|
|
|
|
|
|
|
|
Credit for loan losses |
|
| (400 | ) |
|
| — |
|
Depreciation and software amortization |
|
| 68 |
|
|
| 68 |
|
Net amortization on investment securities |
|
| 153 |
|
|
| 261 |
|
(Gain) loss on sale of securities available for sale |
|
| 2 |
|
|
| (16 | ) |
Federal Home Loan Bank stock dividends |
|
| (2 | ) |
|
| (2 | ) |
Net loss on disposition of premises and equipment |
|
| 2 |
|
|
| — |
|
Net gain on sales and write-downs of real estate held for sale |
|
| (92 | ) |
|
| (18 | ) |
Net change in: |
|
|
|
|
|
|
|
|
Accrued interest receivable |
|
| (43 | ) |
|
| (26 | ) |
Other asssets |
|
| 9 |
|
|
| 3 |
|
Accrued expenses and other liabilities |
|
| 19 |
|
|
| (26 | ) |
Net cash provided by operating activities |
|
| 390 |
|
|
| 556 |
|
Cash flows from investing activities |
|
|
|
|
|
|
|
|
Purchase of securities available for sale |
|
| (5,748 | ) |
|
| (3,312 | ) |
Maturities, calls and paydowns of securities available for sale |
|
| 2,463 |
|
|
| 1,153 |
|
Sale of securities available for sale |
|
| 158 |
|
|
| 217 |
|
Redemption of Federal Home Loan Bank stock |
|
| — |
|
|
| 1 |
|
Loan originations and principal collections, net |
|
| 1,029 |
|
|
| (1,681 | ) |
Acquisition of premises, equipment and software |
|
| (13 | ) |
|
| (42 | ) |
Sale of premises, equipment and software |
|
| 700 |
|
|
| — |
|
Proceeds from sale of real estate held for sale |
|
| 224 |
|
|
| 138 |
|
Net cash used in investing activities |
|
| (1,187 | ) |
|
| (3,526 | ) |
Cash flows from financing activities |
|
|
|
|
|
|
|
|
Net change in deposits |
|
| (5,070 | ) |
|
| (3,122 | ) |
Payments on notes payable |
|
| (500 | ) |
|
| — |
|
Net cash used in financing activities |
|
| (5,570 | ) |
|
| (3,122 | ) |
Change in cash and cash equivalents |
|
| (6,367 | ) |
|
| (6,092 | ) |
Cash and cash equivalents at beginning of year |
|
| 17,741 |
|
|
| 13,541 |
|
Cash and cash equivalents at end of year |
| $ | 11,374 |
|
| $ | 7,449 |
|
|
|
|
|
|
|
|
|
|
Supplemental Disclosures of Cash Flow Information |
|
|
|
|
|
|
|
|
Cash paid during the period for interest |
| $ | 161 |
|
| $ | 93 |
|
Supplemental Disclosures of Non-Cash Transactions |
|
|
|
|
|
|
|
|
Loan balances transferred to foreclosed assets |
| $ | — |
|
| $ | — |
|
See accompanying condensed notes to consolidated financial statements.
6
Southern Colorado Corp. and Subsidiary
CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
As of June 30, 2018 and 2017
and for the six months ended June 30, 2018 and 2017
(Unaudited)
NOTE 1 - SUMMARY OF ACCOUNTING POLICIES
The accounting and reporting policies of Southern Colorado Corp. and Subsidiary conform to accounting principles generally accepted in the United States of America (“U.S. GAAP”) and to general practice within the banking industry. The following is a summary of the significant accounting and reporting policies: |
Organization and Basis of Presentation
Southern Colorado Corp. (“SCC”) is a bank holding company that owns 100% of the stock of Citizens Bank of Pagosa Springs (“the Bank”). SCC and the Bank are collectively referred to as “the Company.”
The accompanying unaudited consolidated financial statements include the consolidated totals of the accounts of SCC and the Bank. All significant intercompany accounts and transactions have been eliminated in consolidation.
The unaudited consolidated financial statements and notes herein have been prepared in accordance with U.S. GAAP for interim financial information and do not include all of the information and footnotes required by U.S. GAAP for annual financial statements. However, the unaudited consolidated financial statements and notes herein reflect all normal and recurring adjustments which are, in the opinion of management, necessary for a fair presentation of the Company’s financial condition, results of operations, changes in comprehensive income and cash flows for the unaudited interim periods.
The results of operations for the six-month period ended June 30, 2018 are not necessarily indicative of the results to be expected for the year ending December 31, 2018 or any other period. The unaudited consolidated financial statements and notes herein should be read in conjunction with the Company’s audited consolidated financial statements and related notes thereto for the year ended December 31, 2017.
Nature of Operations
The Company provides a full range of banking and mortgage services to individual and business customers through its two branches located in Pagosa Springs, Colorado.
Use of Estimates
In preparing the consolidated financial statements, management is required to make estimates and assumptions that affect the reported amounts of assets and liabilities as of the date of the balance sheet and revenues and expenses for the period. Actual results could differ significantly from those estimates. |
7
Southern Colorado Corp. and Subsidiary
CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
As of June 30, 2018 and 2017
and for the six months ended June 30, 2018 and 2017
(Unaudited)
Investment Securities
Investment securities are classified as “available for sale” and are stated at estimated fair value, with unrealized gains and losses excluded from earnings and reported in other comprehensive income.
The amortized cost of debt securities classified as available for sale is adjusted for amortization of purchase premiums and accretion of purchase discounts. Premiums and discounts are recognized in interest income using the interest method over the terms of the securities. For mortgage-backed securities, the term of the security is the expected life of the security given estimated paydowns. For other securities, the term of the security is the earlier of final maturity or the expected call date. The Company believes amortization to the call date rather than the final maturity date is insignificant to the financial statements as a whole. Gains and losses on the sale of securities are determined using the specific identification method.
Management evaluates securities for other-than-temporary impairment (“OTTI”) on at least a quarterly basis, and more frequently when economic or market conditions warrant such an evaluation. For securities in an unrealized loss position, management considers the extent and duration of the unrealized loss, and the financial condition and near-term prospects of the issuer. Management also assesses whether it intends to sell, or it is more likely than not that it will be required to sell, a security in an unrealized loss position before recovery of its amortized cost basis. If either of the criteria regarding intent or requirement to sell is met, the entire difference between amortized cost and fair value is recognized as an impairment charge to earnings.
For debt securities that do not meet the aforementioned criteria, the amount of impairment is split into two components as follows: 1) OTTI related to credit loss, which is recognized as an impairment charge to earnings, and 2) OTTI related to other factors, which is recognized in other comprehensive income. The credit loss is defined as the difference between the present value of the cash flows expected to be collected and the amortized cost basis. For equity securities, the entire amount of impairment is recognized through earnings.
8
Southern Colorado Corp. and Subsidiary
CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
As of June 30, 2018 and 2017
and for the six months ended June 30, 2018 and 2017
(Unaudited)
Loans
Loans that the Company has the intent and ability to hold for the foreseeable future or until maturity or payoff are reported at their outstanding unpaid principal balances adjusted for charge-offs, the allowance for loan losses, deferred fees or costs on originated loans and purchase premiums or discounts on purchased loans. Interest income is accrued on the unpaid principal balance. Loan origination fees, net of certain direct origination costs, are deferred and recognized into interest income over the life of related loans using the interest method. |
Past due loans are any loans for which payments of interest, principal or both have not been received within the timeframes designated by the loan agreements. Loans with payments in arrears but for which borrowers have resumed making scheduled payments are considered past due until arrearages are brought current. Loans that experience insignificant payment delays or payment shortfalls generally are not considered past due. Management determines the significance of payment delays and payment shortfalls on a case-by-case basis, taking into consideration all of the circumstances surrounding the loan and the borrower, including the length of the delay, the reasons for the delay, the borrower’s prior payment record, and the amount of the shortfall in relation to the principal and interest owed.
The accrual of interest on any loan is discontinued at the time the loan is 90 days past due unless the loan is well secured and in process of collection. Additionally, loans are placed on nonaccrual at an earlier date if collection of principal or interest is considered doubtful. When placing a loan on nonaccrual status, interest accrued to date is generally reversed and is charged against the current year's interest income. Payments received on a loan on nonaccrual status are applied against the balance of the loan. A loan is returned to accrual status when principal and interest are no longer past due and collectibility is no longer doubtful.
Troubled debt restructurings are loans for which concessions in terms have been made as a result of the borrower experiencing financial difficulty. Generally, concessions granted to customers include lower interest rates and modification of the payment stream to lower or defer payments. Interest on troubled debt restructurings is accrued under the new terms if the loans are performing and full collection of principal and interest is expected. However, interest accruals are discontinued on troubled debt restructurings that meet the Company’s nonaccrual criteria.
Generally, loans are charged off in whole or in part after they become significantly past due unless the loan is in the process of restructuring or collection efforts are ongoing and deemed likely to be successful. Charge off amounts are determined based upon the carrying amount of loans and the amount estimated to be collectible as determined by analyses of expected future cash flows and the liquidation of loan collateral.
9
Southern Colorado Corp. and Subsidiary
CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
As of June 30, 2018 and 2017
and for the six months ended June 30, 2018 and 2017
(Unaudited)
The allowance for loan losses is a valuation allowance for probable incurred credit losses, and is established through a provision for loan losses charged to earnings. Loan losses are charged against the allowance when management believes the uncollectibility of a loan balance is confirmed. Subsequent recoveries, if any, are credited to the allowance.
The allowance consists of specific and general components as follows:
| 1) | The specific component relates to loans that are considered impaired, and is comprised of valuation allowances calculated on a loan-by-loan basis for impaired loans in excess of a nominal percentage of the Bank’s capital, and calculated on a pool basis for impaired loans below the percentage-of-capital threshold. Impaired loans are all specifically identified loans for which it is probable that the Company will not collect all amounts due according to the contractual terms of the loan agreement. Factors considered by management in determining whether a loan is impaired include payment status, collateral value, the borrower’s financial condition and overall loan quality as determined by an internal loan grading system. |
Included in impaired loans are all nonaccrual loans and all troubled debt restructurings. Loans that experience insignificant payment delays or payment shortfalls generally are not considered impaired. For individually evaluated impaired loans for which repayment is expected solely from the collateral, impairment is measured based on the fair value of the collateral. For other individually evaluated impaired loans, impairment may be measured based on the fair value of the collateral or on the present value of expected future cash flows discounted at the loan’s original effective interest rate. For impaired loans evaluated on a pool basis, impairment is measured based on statistics reflective of the increased risk of the loan pool. When the measure of the impaired loan is less than the recorded investment in the loan, the impairment is recorded through a valuation allowance.
| 2) | The general component relates to non-impaired loans, and is based on historical loss experience adjusted for the effects of qualitative factors that are likely to cause estimated credit losses as of the evaluation date to differ from the portfolio’s historical loss experience. Qualitative factors include the following: economic conditions; industry conditions; changes in lending policies and procedures; trends in the volume and terms of loans; the experience, ability and depth of lending staff; levels and trends in delinquencies and impaired loans; levels and trends in charge-off and recovery activity; levels and trends of loan quality as determined by an internal loan grading system; portfolio concentrations. |
Although the allowance contains a specific component, the entire allowance is available for any loan that, in management’s judgment, should be charged off.
10
Southern Colorado Corp. and Subsidiary
CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
As of June 30, 2018 and 2017
and for the six months ended June 30, 2018 and 2017
(Unaudited)
On a quarterly basis, management estimates the allowance balance required using the criteria identified above in relation to the relevant risks for each of the Company’s major loan segments. Significant overall risk factors for both the Company’s commercial and consumer portfolios include the strength of the real estate market and general economic activity in the Company’s market area.
The quality of the Company's loan portfolio is assessed as a function of the levels of past due loans and impaired loans, and internal credit quality ratings which are updated quarterly by management. The ratings on the Company’s internal credit scale are an important part of the Company's overall credit risk management process and are considered in the determination of the allowance for loan losses, and are grouped as follows:
Pass - Loans with minimal to average identified credit risk. These loans have borrowers considered creditworthy who have the ability to repay the debt in the normal course of business. Borrowers have a sound primary and secondary repayment source, with sufficient cash generation to meet ongoing debt service requirements. Loans are typically fully secured with marketable, margined collateral.
Special mention - Loans with potential credit weaknesses which deserve management’s close attention. If left uncorrected, these potential weaknesses may result in deterioration of repayment prospects or the Company’s credit position at some future date. These loans exhibit characteristics such as declining or stressed financial condition of the borrower, and declining or narrow collateral coverage.
Substandard – Loans inadequately protected by the current financial condition and paying capacity of the borrower or the collateral pledged, if any. These loans have a well-defined weakness or weaknesses that jeopardize the repayment of the debt. These loans are characterized by the distinct possibility that the Company will sustain some loss if the deficiencies are not corrected. In some instances, though not all, the weakness or weaknesses in these loans will necessitate nonaccrual treatment.
Doubtful – Loans in this category have all the weaknesses inherent in those classified as Substandard, with the added characteristic that the weaknesses make collection or liquidation in full, on the basis of currently existing facts, conditions and values, highly questionable and improbable. The probability of loss is extremely high, but because of certain important and reasonably specific factors that may work to the advantage and strengthening of the loans, classification as a loss is deferred until more exact status may be determined.
Loss – Loans considered loss are considered uncollectable and of such little value that their continuance as a bankable asset, even with a valuation allowance, is not warranted. This does not mean the loans have no recovery or salvage value, but rather it is not practical or desirable to defer a charge-off even though a partial recovery may be effected in the future. Loans classified as a loss are charged-off in the period they are deemed uncollectible.
11
Southern Colorado Corp. and Subsidiary
CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
As of June 30, 2018 and 2017
and for the six months ended June 30, 2018 and 2017
(Unaudited)
Determination of the allowance is inherently subjective as it requires estimates that are susceptible to significant revision as more information becomes available or credit conditions change. In addition, various regulatory agencies, as an integral part of their examination process, periodically review the Company's allowance. Such agencies may require the Company to recognize additional losses based on their judgments about information available to them at the time of their examination.
Income Taxes
The Company has elected taxation under the provisions of Subchapter S of the Internal Revenue Code. Under those provisions, the Company neither pays federal corporate income taxes on its taxable income nor is allowed a net operating loss carryover or carryback as a deduction. Instead, the stockholders of the Company include their respective share of the consolidated taxable income or loss in their individual income tax returns. Accordingly, no income taxes are reflected in the consolidated financial statements.
Comprehensive Income
Comprehensive income consists of net income and other comprehensive income/loss. The only component of other comprehensive income/loss consists of net unrealized holding gains and losses on available for sale securities, with no related tax effects. |
Loss Contingencies
Loss contingencies, including claims and legal actions arising in the ordinary course of business, are recorded as liabilities when the likelihood of loss is probable and an amount or range of loss can be reasonably estimated.
Fair Value Measurements
Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants, excluding transaction costs. When measuring fair value, entities should maximize the use of observable inputs and minimize the use of unobservable inputs. The following describes the three levels of inputs that may be used to measure fair value:
| ▪ | Level 1 Inputs - Unadjusted quoted prices in active markets for identical assets or liabilities that the reporting entity has the ability to access at the measurement date. |
| ▪ | Level 2 Inputs— Significant other observable inputs other than Level 1 prices 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. |
| ▪ | Level 3 Inputs—Unobservable inputs that reflect an entity’s own assumptions about the assumptions that market participants would use in pricing the assets or liabilities. |
12
Southern Colorado Corp. and Subsidiary
CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
As of June 30, 2018 and 2017
and for the six months ended June 30, 2018 and 2017
(Unaudited)
Significant Applicable Accounting Standards Updates Not Yet Effective
Accounting Standards Update 2016-13, Financial Instruments – Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments. Under the new standard, the Company will be required to convert from the existing incurred-loss model for determining the allowance for loan losses to an expected-loss model. An expected-loss model will determine the allowance for loan losses balance based upon credit losses expected to be incurred over the life of the loan portfolio, and will consider not only current credit conditions but also reasonably supportable expectations as to future credit conditions. The standard will also require securities held to maturity to be evaluated for impairment under an expected-loss model. The standard is effective for the Company beginning January 1, 2022. Management is in the processing of determining the impact of the standard on the Company’s consolidated financial statements.
Accounting Standards Update 2016-02, Leases (Topic 326). Under the new standard, the Company will be required to record a right-of-use asset for leased property and also record a corresponding lease liability. In general, rather than expense lease payments as they are made as currently done under operating lease guidance, the right-of-use asset will be amortized to expense over the lease term and lease payments will reduce the lease obligation. The standard is effective for the Company beginning January 1, 2020 and is not expected to have a significant impact on the consolidated financial statements.
Accounting Standards Update 2016-01, Financial Instruments – Overall (Subtopic 825-10): Recognition and Measurement of Financial Assets and Financial Liabilities. Under the new standard, certain equity investments are required to be carried at fair value, with changes in fair value recognized in net income. This applies to equity investments with readily determinable fair values that are not consolidated or carried on the equity method. Debt securities classified as available-for-sale will continue to be carried at fair value with changes in fair value recorded through other comprehensive income. The standard is effective for the Company beginning January 1, 2019, and is not expected to have a significant impact to the consolidated financial statements.
Accounting Standards Update 2014-09, Revenue from Contracts With Customers (Topic 606). The new standard prescribes a five-step model to determine the amount and timing of revenue recognition related to the consideration the Company expects to receive from the transfer of goods and services. The standard does not apply to financial instruments, and accordingly will not impact the Company’s recognition of interest income on its loans and investment securities, and will not impact the Company’s recognition of revenue from sales or transfers of loans and investment securities. The standard is effective for the Company beginning January 1, 2019, and is not expected to have a significant impact to the consolidated financial statements.
13
Southern Colorado Corp. and Subsidiary
CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
As of June 30, 2018 and 2017
and for the six months ended June 30, 2018 and 2017
(Unaudited)
Management evaluates events occurring subsequent to the balance sheet date, through the date the financial statements are eligible to be issued, to determine whether the events require recognition or disclosure in the financial statements. With respect to the June 30, 2018 financial statements, Management has considered subsequent events through August 29, 2018.
NOTE 2 - INVESTMENT SECURITIES
The amortized cost and fair value of investment securities, with gross unrealized gains and losses, follows: |
|
| June 30, 2018 |
| |||||||||||||
|
| Amortized Cost |
|
| Gross Unrealized Gains |
|
| Gross Unrealized Losses |
|
| Fair Value |
| ||||
|
| (in thousands) |
| |||||||||||||
Debt securities available for sale |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
U.S. Treasury |
| $ | 3,004 |
|
|
| — |
|
| $ | (8 | ) |
| $ | 2,996 |
|
State and municipal |
|
| 24,070 |
|
|
| 68 |
|
|
| (208 | ) |
|
| 23,930 |
|
Corporate |
|
| 7,392 |
|
|
| — |
|
|
| (122 | ) |
|
| 7,270 |
|
Mortgage-backed |
|
| 61 |
|
|
| 1 |
|
|
| — |
|
|
| 62 |
|
|
| $ | 34,527 |
|
| $ | 69 |
|
| $ | (338 | ) |
| $ | 34,258 |
|
|
| December 31, 2017 |
| |||||||||||||
|
| Amortized Cost |
|
| Gross Unrealized Gains |
|
| Gross Unrealized Losses |
|
| Fair Value |
| ||||
|
| (in thousands) |
| |||||||||||||
Debt securities available for sale |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
U.S. Treasury |
| $ | 1,003 |
|
|
| — |
|
| $ | (8 | ) |
| $ | 995 |
|
State and municipal |
|
| 24,816 |
|
|
| 78 |
|
|
| (182 | ) |
|
| 24,712 |
|
Corporate |
|
| 5,620 |
|
|
| 4 |
|
|
| (48 | ) |
|
| 5,576 |
|
Mortgage-backed |
|
| 116 |
|
|
| 4 |
|
|
| — |
|
|
| 120 |
|
|
| $ | 31,555 |
|
| $ | 86 |
|
| $ | (238 | ) |
| $ | 31,403 |
|
14
Southern Colorado Corp. and Subsidiary
CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
As of June 30, 2018 and 2017
and for the six months ended June 30, 2018 and 2017
(Unaudited)
The amortized cost and fair value of debt securities available for sale at June 30, 2018, by contractual maturity, are shown below.
|
| Amortized Cost |
|
| Fair Value |
| ||
|
| (in thousands) |
| |||||
Due in one year or less |
| $ | 7,639 |
|
| $ | 7,624 |
|
Due after one through five years |
|
| 22,821 |
|
|
| 22,622 |
|
Due after five years through ten years |
|
| 3,246 |
|
|
| 3,160 |
|
Due after ten years |
|
| 760 |
|
|
| 790 |
|
|
|
| 34,466 |
|
|
| 34,196 |
|
Mortgage-backed |
|
| 61 |
|
|
| 62 |
|
|
| $ | 34,527 |
|
| $ | 34,258 |
|
Investment securities may have actual maturities that differ from contractual maturities due to paydowns on the assets underlying the bonds or early call provisions.
Information pertaining to securities available-for-sale, with gross unrealized losses aggregated by investment category and length of time that individual securities have been in a continuous loss position, follows:
|
| June 30, 2018 |
| |||||||||||||
|
| Less than 12 months |
|
| Over 12 months |
| ||||||||||
|
| Gross Unrealized Losses |
|
| Fair Value |
|
| Gross Unrealized Losses |
|
| Fair Value |
| ||||
|
| (in thousands) |
| |||||||||||||
U.S. Treasury |
| $ | (4 | ) |
| $ | 1,999 |
|
| $ | (4 | ) |
| $ | 997 |
|
State and municipal |
|
| (91 | ) |
|
| 4,287 |
|
|
| (117 | ) |
|
| 11,343 |
|
Corporate |
|
| (44 | ) |
|
| 4,017 |
|
|
| (78 | ) |
|
| 3,253 |
|
|
| $ | (139 | ) |
| $ | 10,303 |
|
| $ | (199 | ) |
| $ | 15,593 |
|
15
Southern Colorado Corp. and Subsidiary
CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
As of June 30, 2018 and 2017
and for the six months ended June 30, 2018 and 2017
(Unaudited)
|
| December 31, 2017 |
| |||||||||||||
|
| Less than 12 months |
|
| Over 12 months |
| ||||||||||
|
| Gross Unrealized Losses |
|
| Fair Value |
|
| Gross Unrealized Losses |
|
| Fair Value |
| ||||
|
| (in thousands) |
| |||||||||||||
U.S. Treasury |
| $ | — |
|
| $ | — |
|
| $ | (8 | ) |
| $ | 995 |
|
State and municipal |
|
| (172 | ) |
|
| 14,166 |
|
|
| (10 | ) |
|
| 498 |
|
Corporate |
|
| (19 | ) |
|
| 2,753 |
|
|
| (29 | ) |
|
| 1,811 |
|
|
| $ | (191 | ) |
| $ | 16,919 |
|
| $ | (47 | ) |
| $ | 3,304 |
|
At June 30, 2018, unrealized losses are largely due to differences in market yields as compared to yields available at the time securities were purchased. Management has performed analyses of investment credit quality and cash flows, and does not believe that any securities are impaired due to reasons of credit quality. The Company has the ability and intent to hold investment securities for a period of time sufficient for a recovery of cost, and fair value is expected to recover as bonds approach maturity. Accordingly, as of June 30, 2018, management believes the unrealized losses detailed in the table above are temporary.
The Company realized $2,000 in losses and no gains on the sale of investment securities during the six months ended June 30, 2018. The Company realized $16,000 in gains and no losses on the sale of investment securities during the six months ended June 30, 2017. All 2017 sales were to an entity affiliated with the Company’s primary shareholder through common ownership. The sale was initiated for the purpose of removing from the Company’s books non investment-grade municipal securities, and was transacted at estimated fair value.
Investment securities with a fair value of $5,137,000 and $4,732,000 at June 30, 2018 and December 31, 2017, respectively, were pledged as collateral on public deposits and for other purposes as required or permitted by law. |
16
Southern Colorado Corp. and Subsidiary
CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
As of June 30, 2018 and 2017
and for the six months ended June 30, 2018 and 2017
(Unaudited)
NOTE 3 – LOANS AND ALLOWANCE FOR LOAN LOSSES
Major classifications of loans are as follows: |
|
| June 30, 2018 |
|
| December 31, 2017 |
| ||
|
| (in thousands) |
| |||||
Real Estate |
|
|
|
|
|
|
|
|
Commercial |
| $ | 13,063 |
|
| $ | 12,467 |
|
Residential 1-4 family |
|
| 12,587 |
|
|
| 12,751 |
|
Construction, land and land development |
|
| 4,635 |
|
|
| 5,432 |
|
Multifamily |
|
| 831 |
|
|
| 568 |
|
Farmland |
|
| 619 |
|
|
| 725 |
|
|
|
| 31,735 |
|
|
| 31,943 |
|
Commercial non real estate |
|
| 1,884 |
|
|
| 1,863 |
|
State and municipal |
|
| 337 |
|
|
| 1,366 |
|
Consumer and other |
|
| 1,721 |
|
|
| 1,498 |
|
|
|
| 35,677 |
|
|
| 36,670 |
|
Less unearned loan fees |
|
| (99 | ) |
|
| (73 | ) |
Less allowance for loan losses |
|
| (746 | ) |
|
| (1,136 | ) |
|
| $ | 34,832 |
|
| $ | 35,461 |
|
In the ordinary course of business, the Company may grant loans to its executive officers, significant shareholders, directors, and parties affiliated with those persons (collectively, “related parties”). However, the Company had no loans to related parties at June 30, 2018 and December 31, 2017.
At June 30, 2018 and December 31, 2017, residential 1-4 family real estate loans totaling $9,570,000 and $10,560,000, respectively, are pledged to secure credit facilities and credit enhancement arrangements with the Federal Home Loan Bank of Topeka.
17
Southern Colorado Corp. and Subsidiary
CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
As of June 30, 2018 and 2017
and for the six months ended June 30, 2018 and 2017
(Unaudited)
Transactions in the allowance for loan losses are as follows:
|
| Real Estate |
|
| Commercial Non Real Estate |
|
| State and Municipal |
|
| Consumer and Other |
|
| Total |
| |||||
|
| (in thousands) |
| |||||||||||||||||
Balance at December 31, 2016 |
| $ | 1,205 |
|
| $ | 63 |
|
| $ | 22 |
|
| $ | 18 |
|
| $ | 1,308 |
|
Credit for loan losses |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
(Charge-offs) |
|
| — |
|
|
| — |
|
|
| — |
|
|
| (2 | ) |
|
| (2 | ) |
Recoveries |
|
| 16 |
|
|
| — |
|
|
| — |
|
|
| 1 |
|
|
| 17 |
|
Net (charge-offs) recoveries |
|
| 16 |
|
|
| — |
|
|
| — |
|
|
| (1 | ) |
|
| 15 |
|
Balance at June 30, 2017 |
| $ | 1,221 |
|
| $ | 63 |
|
| $ | 22 |
|
| $ | 17 |
|
| $ | 1,323 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at December 31, 2017 |
| $ | 1,043 |
|
| $ | 36 |
|
| $ | 36 |
|
| $ | 21 |
|
| $ | 1,136 |
|
Credit for loan losses |
|
| (353 | ) |
|
| (16 | ) |
|
| (17 | ) |
|
| (14 | ) |
|
| (400 | ) |
(Charge-offs) |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
Recoveries |
|
| 9 |
|
|
| — |
|
|
| — |
|
|
| 1 |
|
|
| 10 |
|
Net (charge-offs) recoveries |
|
| 9 |
|
|
| — |
|
|
| — |
|
|
| 1 |
|
|
| 10 |
|
Balance at June 30, 2018 |
| $ | 699 |
|
| $ | 20 |
|
| $ | 19 |
|
| $ | 8 |
|
| $ | 746 |
|
18
Southern Colorado Corp. and Subsidiary
CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
As of June 30, 2018 and 2017
and for the six months ended June 30, 2018 and 2017
(Unaudited)
Components of the allowance for loan losses, and the related carrying amount of loans for which the allowance is determined, are as follows:
|
| June 30, 2018 |
| |||||||||||||||||
|
| Real Estate |
|
| Commercial Non Real Estate |
|
| State and Municipal |
|
| Consumer and Other |
|
| Total |
| |||||
|
| (in thousands) |
| |||||||||||||||||
Allocation of Allowance to: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Impaired loans - evaluated individually |
| $ | — |
|
| $ | — |
|
| $ | — |
|
| $ | — |
|
| $ | — |
|
Impaired loans - evaluated collectively |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
Total impaired loans |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Unimpaired loans - evaluated collectively |
|
| 699 |
|
|
| 20 |
|
|
| 19 |
|
|
| 8 |
|
|
| 746 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| $ | 699 |
|
| $ | 20 |
|
| $ | 19 |
|
| $ | 8 |
|
| $ | 746 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Recorded Investment In: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||
Impaired loans - evaluated individually |
| $ | 231 |
|
| $ | — |
|
| $ | — |
|
| $ | — |
|
| $ | 231 |
|
Impaired loans - evaluated collectively |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| - |
|
Total impaired loans |
|
| 231 |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 231 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Unimpaired loans - evaluated collectively |
|
| 31,504 |
|
|
| 1,884 |
|
|
| 337 |
|
|
| 1,721 |
|
|
| 35,446 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| $ | 31,735 |
|
| $ | 1,884 |
|
| $ | 337 |
|
| $ | 1,721 |
|
| $ | 35,677 |
|
19
Southern Colorado Corp. and Subsidiary
CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
As of June 30, 2018 and 2017
and for the six months ended June 30, 2018 and 2017
(Unaudited)
| December 31, 2017 |
| ||||||||||||||||||
|
| Real Estate |
|
| Commercial Non Real Estate |
|
| State and Municipal |
|
| Consumer and Other |
|
| Total |
| |||||
|
| (in thousands) |
| |||||||||||||||||
Allocation of Allowance to: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Impaired loans - evaluated individually |
| $ | — |
|
| $ | — |
|
| $ | — |
|
| $ | — |
|
| $ | — |
|
Impaired loans - evaluated collectively |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
Total impaired loans |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
Unimpaired loans - evaluated collectively |
|
| 1,043 |
|
|
| 36 |
|
|
| 36 |
|
|
| 21 |
|
|
| 1,136 |
|
|
| $ | 1,043 |
|
| $ | 36 |
|
| $ | 36 |
|
| $ | 21 |
|
| $ | 1,136 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Recorded Investment In: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||
Impaired loans - evaluated individually |
| $ | 242 |
|
| $ | — |
|
| $ | — |
|
| $ | — |
|
| $ | 242 |
|
Impaired loans - evaluated collectively |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
Total impaired loans |
|
| 242 |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 242 |
|
Unimpaired loans - evaluated collectively |
|
| 31,701 |
|
|
| 1,863 |
|
|
| 1,366 |
|
|
| 1,498 |
|
|
| 36,428 |
|
|
| $ | 31,943 |
|
| $ | 1,863 |
|
| $ | 1,366 |
|
| $ | 1,498 |
|
| $ | 36,670 |
|
Information relative to impaired loans is as follows:
|
| June 30, 2018 |
|
| Six Months Ended June 30, 2018 |
| ||||||||||||||||||
|
| Recorded Investment in Impaired Loans With No Valuation Allowance |
|
| Recorded Investment in Impaired Loans With A Valuation Allowance |
|
| Total Impaired Loans |
|
| Valuation Allowance on Impaired Loans |
|
| Commitments to Extend Credit on Impaired Loans |
|
| Average Impaired Loans |
| ||||||
|
| (in thousands) |
| |||||||||||||||||||||
Real Estate |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commercial |
| $ | 231 |
|
| $ | — |
|
| $ | 231 |
|
| $ | — |
|
| $ | — |
|
| $ | 237 |
|
20
Southern Colorado Corp. and Subsidiary
CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
As of June 30, 2018 and 2017
and for the six months ended June 30, 2018 and 2017
(Unaudited)
|
| December 31, 2017 |
|
| Year Ended December 31, 2017 |
| ||||||||||||||||||
|
| Recorded Investment in Impaired Loans With No Valuation Allowance |
|
| Recorded Investment in Impaired Loans With A Valuation Allowance |
|
| Total Impaired Loans |
|
| Valuation Allowance on Impaired Loans |
|
| Commitments to Extend Credit on Impaired Loans |
|
| Average Impaired Loans |
| ||||||
|
| (in thousands) |
| |||||||||||||||||||||
Real Estate |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commercial |
| $ | 242 |
|
| $ | — |
|
| $ | 242 |
|
| $ | — |
|
| $ | — |
|
| $ | 250 |
|
Residential 1-4 family |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 57 |
|
|
| $ | 242 |
|
| $ | — |
|
| $ | 242 |
|
| $ | — |
|
| $ | — |
|
| $ | 307 |
|
Impaired loans at June 30, 2018 and December 31, 2017 is comprised of a single loan which is considered a troubled debt restructuring and which is performing under the modified terms. There are no nonaccrual loans at June 30, 2018 and December 31, 2017.
Interest income recognized on impaired loans is immaterial for the six months ended June 30, 2018 and 2017.
At June 30, 2018, there are no loans in the process of foreclosure.
At June 30, 2018, there are $25,000 in commercial non real-estate loans past due between 30 and 60 days. At December 31, 2017, there are no loans past due 30 days or greater.
There were no loans modified as a troubled debt restructuring that defaulted during the six months ended June 30, 2018 and 2017 where the default occurred within 12 months of the restructuring. For the purpose of this disclosure, a default is considered a payment delinquency of 90 days or greater, or foreclosure and repossession of the applicable collateral.
21
Southern Colorado Corp. and Subsidiary
CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
As of June 30, 2018 and 2017
and for the six months ended June 30, 2018 and 2017
(Unaudited)
The following summarizes loans by credit rating:
|
| June 30, 2018 |
| |||||||||||||||||
|
| Credit Rating |
|
|
|
|
| |||||||||||||
|
| Pass |
|
| Special Mention |
|
| Substandard |
|
| Doubtful |
|
| Total loans |
| |||||
|
| (in thousands) |
| |||||||||||||||||
Real Estate |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commercial |
| $ | 12,086 |
|
| $ | 503 |
|
| $ | 474 |
|
| $ | — |
|
| $ | 13,063 |
|
Residential 1-4 family |
|
| 12,456 |
|
|
| — |
|
|
| 131 |
|
|
| — |
|
|
| 12,587 |
|
Construction, land and land development |
|
| 4,478 |
|
|
| — |
|
|
| 157 |
|
|
| — |
|
|
| 4,635 |
|
Multifamily |
|
| 831 |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 831 |
|
Farmland |
|
| 619 |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 619 |
|
Commercial non real estate |
|
| 1,871 |
|
|
| — |
|
|
| 13 |
|
|
| — |
|
|
| 1,884 |
|
State and municipal |
|
| (13 | ) |
|
| 350 |
|
|
| — |
|
|
| — |
|
|
| 337 |
|
Consumer and other |
|
| 1,721 |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 1,721 |
|
|
| $ | 34,049 |
|
| $ | 853 |
|
| $ | 775 |
|
| $ | — |
|
| $ | 35,677 |
|
|
| December 31, 2017 |
| |||||||||||||||||
|
| Credit Rating |
|
|
|
|
| |||||||||||||
|
| Pass |
|
| Special Mention |
|
| Substandard |
|
| Doubtful |
|
| Total loans |
| |||||
|
| (in thousands) |
| |||||||||||||||||
Real Estate |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commercial |
| $ | 11,446 |
|
| $ | 526 |
|
| $ | 495 |
|
| $ | — |
|
| $ | 12,467 |
|
Residential 1-4 family |
|
| 12,617 |
|
|
| — |
|
|
| 134 |
|
|
| — |
|
|
| 12,751 |
|
Construction, land and land development |
|
| 5,275 |
|
|
| — |
|
|
| 157 |
|
|
| — |
|
|
| 5,432 |
|
Multifamily |
|
| 568 |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 568 |
|
Farmland |
|
| 725 |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 725 |
|
Commercial non real estate |
|
| 1,863 |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 1,863 |
|
State and municipal |
|
| 986 |
|
|
| 380 |
|
|
| — |
|
|
| — |
|
|
| 1,366 |
|
Consumer and other |
|
| 1,484 |
|
|
| — |
|
|
| 14 |
|
|
| — |
|
|
| 1,498 |
|
|
| $ | 34,964 |
|
| $ | 906 |
|
| $ | 800 |
|
| $ | — |
|
| $ | 36,670 |
|
22
Southern Colorado Corp. and Subsidiary
CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
As of June 30, 2018 and 2017
and for the six months ended June 30, 2018 and 2017
(Unaudited)
NOTE 4– SERVICED LOANS AND CREDIT ENHANCEMENTS
At June 30, 2018 and December 31, 2017, the Company has loans totaling $17,806,000 and $18,026,000, respectively, sold to and serviced for the Federal Home Loan Bank of Topeka under the Federal Home Loan Bank’s Mortgage Partnership Finance Program. Servicing income earned by the Company was $22,000 for each of the six-month periods ended June 30, 2018 and 2017, and is included as a component of mortgage banking income. A servicing right asset has not been recorded on the basis of immateriality.
At June 30, 2018, the Company has approximately $650,000 in gross credit enhancement exposure to the Federal Home Loan Bank of Topeka relative to the serviced loan portfolio. In the event that serviced loans default, and borrower equity and private mortgage insurance amounts are depleted and loan losses occur, the credit enhancement exposure is the loss sharing amount to the Federal Home Loan Bank. The Company has not recorded a liability for the credit enhancement exposure as it believes the fair value of the credit enhancement exposure is immaterial to the consolidated financial statements due to strong credit quality and no loss history. The gross credit enhancement exposure amount is collateralized by a pledge of loans.
NOTE 5 - DEPOSITS
Deposits are comprised of the following: |
|
| June 30, 2018 |
|
| December 31, 2017 |
| ||
|
| (in thousands) |
| |||||
Noninterest-bearing accounts |
| $ | 25,535 |
|
| $ | 26,737 |
|
Interest-bearing checking and NOW accounts |
|
| 16,270 |
|
|
| 17,701 |
|
Money market accounts |
|
| 3,016 |
|
|
| 3,491 |
|
Savings accounts |
|
| 21,019 |
|
|
| 23,049 |
|
Escrow accounts |
|
| 25 |
|
|
| 96 |
|
Individual retirement accounts |
|
| 3,660 |
|
|
| 3,428 |
|
Time certificates of deposit |
|
| 4,657 |
|
|
| 4,750 |
|
|
| $ | 74,182 |
|
| $ | 79,252 |
|
At June 30, 2018, there is $20,741,000 in accounts with a balance of $250,000 or greater, including $1,130,000 in individual retirement accounts and time certificates of deposit. At December 31, 2017, there is $23,458,000 in accounts with a balance of $250,000 or greater, including $871,000 in individual retirement accounts and time certificates of deposit.
23
Southern Colorado Corp. and Subsidiary
CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
As of June 30, 2018 and 2017
and for the six months ended June 30, 2018 and 2017
(Unaudited)
Scheduled maturities of individual retirement accounts and time certificates of deposit at June 30, 2018 are as follows (in thousands):
Twelve Months Ending June 30, |
|
|
|
|
2019 |
| $ | 3,047 |
|
2020 |
|
| 1,583 |
|
2021 |
|
| 718 |
|
2022 |
|
| 1,069 |
|
2023 |
|
| 1,210 |
|
Thereafter |
|
| 690 |
|
|
| $ | 8,317 |
|
At June 30, 2018 and December 31, 2017, the Company had $693,000 and $854,000, respectively, in deposits from its executive officers, significant shareholders, directors, and parties affiliated with those persons.
NOTE 6 - FINANCIAL INSTRUMENTS WITH OFF-BALANCE SHEET RISK
The Company is a party to financial instruments with off-balance-sheet risk in the normal course of business to meet the financing needs of its customers. These financial instruments include commitments to extend credit and letters of credit. The instruments involve, to varying degrees, elements of credit and interest rate risk in excess of the amount recognized in the balance sheet. The contract amounts of those instruments reflect the extent of involvement the Company has in particular classes of financial instruments. |
|
The Company's exposure to credit loss in the event of non-performance by the other party to the financial instrument for commitments to extend credit and standby letters of credit is represented by the contractual amounts of those instruments. The Company uses the same credit policies in making commitments and conditional obligations as it does for on-balance-sheet instruments. |
Commitments to extend credit are agreements to lend to a customer as long as there is no breach of any condition established in the contract. Commitments generally have fixed expiration dates or other termination clauses and may require payment of a fee. Since many of the commitments may expire without being drawn upon, the total commitment amounts do not necessarily represent future cash requirements. The Company evaluates each customer's credit-worthiness on a case-by-case basis. The amount of collateral obtained, if deemed necessary, by the Company upon extension of credit is based on management's credit evaluation of the customer. Collateral held varies, but may include accounts receivable, inventory, property, plant and equipment and real estate. Some unfunded commitments under commercial lines of credit, revolving lines of credit and overdraft protection agreements are uncollateralized.
24
Southern Colorado Corp. and Subsidiary
CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
As of June 30, 2018 and 2017
and for the six months ended June 30, 2018 and 2017
(Unaudited)
Standby letters of credit are conditional commitments issued by the Company to guarantee the performance of a customer to a third party. The credit risk involved in issuing letters of credit is essentially the same as that involved in extending loan facilities to customers.
The following financial instruments were outstanding whose contract amounts represent risk:
|
| June 30, 2018 |
|
| December 31, 2017 |
| ||
|
| (in thousands) |
| |||||
Commitments to extend credit |
| $ | 7,224 |
|
| $ | 6,051 |
|
Standby letters of credit |
|
| 144 |
|
|
| 100 |
|
|
| $ | 7,368 |
|
| $ | 6,151 |
|
NOTE 7 - EMPLOYEE BENEFIT PLAN
The Company has a defined contribution and profit sharing plan in which substantially all full-time employees have elected to participate. Employees may contribute from 1% to 75% of their compensation to the plan, subject to certain limits based on federal tax laws. The Company may make safe harbor contributions to the plan of 3% of participants’ compensation and these contributions are immediately vested. Additionally, based on certain performance measures of the Bank, the Company may make profit sharing contributions of up to 12% of participants’ compensation. Company profit sharing contributions vest to participant’s over six years. Expense attributable to this plan for was $23,000 and $9,000 for the six months ended June 30, 2018 and 2017, respectively.
NOTE 8 - REGULATORY MATTERS
Banks and bank holding companies are subject to various regulatory capital requirements administered by state and federal banking agencies. Capital adequacy guidelines, and additionally for banks prompt corrective action regulations, involve quantitative measures of assets, liabilities, and certain off-balance-sheet items calculated under regulatory accounting practices. Capital amounts and classifications are also subject to qualitative judgments by regulators about components, risk weighting and other factors.
The Basel III Capital Rules became effective for the Bank on January 1, 2015, subject to a phase-in for certain provisions. Quantitative measures established by the Basel III Capital Rules to ensure capital adequacy require the maintenance of minimum amounts and ratios (set forth in the table below) of common equity tier 1 capital, tier 1 capital and total capital (as defined in the regulations) to risk-weighted assets (as defined), and of tier 1 capital to quarterly average assets (as defined).
25
Southern Colorado Corp. and Subsidiary
CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
As of June 30, 2018 and 2017
and for the six months ended June 30, 2018 and 2017
(Unaudited)
The Bank’s regulatory capital is comprised of the following: 1) Common equity tier 1 capital – consisting of common stock, related paid-in-capital and retained earnings; 2) Additional tier 1 capital – there are no components of tier 1 capital beyond common equity tier 1 capital; 3) Tier 2 capital - consisting of a permissible portion of the allowance for loan losses; and 4) total capital - the aggregate of all tier 1 and tier 2 capital. In connection with the adoption of the Basel III Capital Rules, the Bank elected to opt-out of the requirement to include most components of accumulated other comprehensive income/loss in common equity tier 1 capital.
When fully phased in on January 1, 2019, the Basel III capital rules will require the Bank to maintain a minimum ratio of common equity tier 1 capital to risk-weighted assets of at least 4.5%, plus a 2.5% “capital conservation buffer” (which is added to the 4.5% common equity tier 1 capital ratio as the buffer is phased in, effectively resulting in a minimum ratio of common equity tier 1 capital to risk-weighted assets of 7.0% upon full phase in). The Bank will also be required to maintain a tier 1 capital to risk-weighted assets ratio of 6.0% (8.5% including the capital conservation buffer), a total capital to risk-weighted assets ratio of 8.0% (10.5% including the capital conservation buffer), and a tier 1 capital to quarterly average assets ratio of 4.0%.
The aforementioned capital conservation buffer phases in at 0.625% annually over a four-year period beginning January 1, 2016, and is designed to absorb losses during periods of economic stress. Banking institutions with capital ratios above the base minimums but below the effective minimums (which include the buffer) will face constraints on dividends, equity repurchases and compensation based on the amount of the shortfall.
The following table presents actual and required capital ratios as of June 30, 2018 and December 31, 2017 for the Bank under the Basel III Capital Rules. The minimum required capital amounts presented include the minimum required capital levels as of June 30, 2018 and December 31, 2017 based on the phase-in provisions of the Basel III Capital Rules and the minimum required capital levels as of January 1, 2019 when the Basel III Capital rules have been fully phased-in, and include the capital conservation buffer. Capital levels required to be considered well capitalized are based on prompt corrective action regulations, as amended to reflect changes under the Basel III Capital Rules.
26
Southern Colorado Corp. and Subsidiary
CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
As of June 30, 2018 and 2017
and for the six months ended June 30, 2018 and 2017
(Unaudited)
Regulatory authorities can initiate certain mandatory actions if the Bank fails to meet the minimum capital requirements, which could have a direct and material effect on the Company’s financial statements. Management believes, as of June 30, 2018, that the Bank meets all capital adequacy requirements to which it is subject and that the Bank exceeds the minimum levels necessary to be considered “well capitalized.”
|
| Actual |
|
| Minimum required for capital adequacy purposes - Basel III phase-in schedule |
|
| Minimum required for capital adequacy purposes - Basel III fully phased-in |
|
| Required to be considered well capitalized |
| ||||||||||||||||||||
|
| Amount |
|
| Ratio |
|
| Amount |
|
| Ratio |
|
| Amount |
|
| Ratio |
|
| Amount |
|
| Ratio |
| ||||||||
|
| (dollars in thousands) |
| |||||||||||||||||||||||||||||
As of June 30, 2018 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total capital (to risk weighted assets) |
| $ | 8,218 |
|
|
| 15.09 | % |
| $ | 5,379 |
|
|
| 9.875 | % |
| $ | 5,720 |
|
|
| 10.5 | % |
| $ | 5,447 |
|
|
| 10.0 | % |
Tier 1 capital (to risk weighted assets) |
|
| 7,536 |
|
|
| 13.83 | % |
|
| 4,290 |
|
|
| 7.875 | % |
|
| 4,630 |
|
|
| 8.5 | % |
|
| 4,358 |
|
|
| 8.0 | % |
Common equity tier 1 capital (to risk weighted assets) |
|
| 7,536 |
|
|
| 13.83 | % |
|
| 3,473 |
|
|
| 6.375 | % |
|
| 3,813 |
|
|
| 7.0 | % |
|
| 3,541 |
|
|
| 6.5 | % |
Tier 1 capital (to average assets) |
|
| 7,536 |
|
|
| 9.12 | % |
|
| 3,305 |
|
|
| 4.00 | % |
|
| 3,305 |
|
|
| 4.0 | % |
|
| 4,132 |
|
|
| 5.0 | % |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As of December 31, 2017 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total capital (to risk weighted assets) |
| $ | 8,472 |
|
|
| 15.64 | % |
| $ | 5,010 |
|
|
| 9.25 | % |
| $ | 5,687 |
|
|
| 10.5 | % |
| $ | 5,417 |
|
|
| 10.0 | % |
Tier 1 capital (to risk weighted assets) |
|
| 7,789 |
|
|
| 14.38 | % |
|
| 3,927 |
|
|
| 7.25 | % |
|
| 4,604 |
|
|
| 8.5 | % |
|
| 4,333 |
|
|
| 8.0 | % |
Common equity tier 1 capital (to risk weighted assets) |
|
| 7,789 |
|
|
| 14.38 | % |
|
| 3,114 |
|
|
| 5.75 | % |
|
| 3,792 |
|
|
| 7.0 | % |
|
| 3,521 |
|
|
| 6.5 | % |
Tier 1 capital (to average assets) |
|
| 7,789 |
|
|
| 9.21 | % |
|
| 3,384 |
|
|
| 4.00 | % |
|
| 3,384 |
|
|
| 4.0 | % |
|
| 4,230 |
|
|
| 5.0 | % |
27
Southern Colorado Corp. and Subsidiary
CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
As of June 30, 2018 and 2017
and for the six months ended June 30, 2018 and 2017
(Unaudited)
Note 9 - Fair Value MEASUREMENTS AND DISCLOSURES
The following is a description of the Company’s valuation methodologies for assets and liabilities recorded at fair value:
Securities Available for Sale –Debt securities are reported at fair value based upon measurements obtained from an independent pricing service. The fair value measurements are determined by quoted market prices, if available (Level 1), or consider observable data that may include dealer quotes, market spreads, cash flows, the U.S. Treasury yield curve, market consensus prepayment speeds, credit information and the bonds’ terms and conditions, among other things (Level 2). For certain municipal securities and corporate securities, including auction rate municipal securities, market activity and observable data is highly limited. Fair value of these securities is considered to be amortized cost (level 3).
Impaired Loans - The Company does not record loans at fair value on a recurring basis. However, from time to time, valuation allowances are recorded on these loans to reflect (1) the current appraised or market-quoted value of the underlying collateral, less an estimate of cost to sell, or (2) the discounted value of expected cash flows. In some cases, the properties for which market quotes or appraised values have been obtained are located in areas where comparable sales data is limited, outdated, or unavailable. Fair value estimates for impaired loans measured for impairment based upon the value of the collateral are obtained from independent appraisers or other third-party consultants, and for other impaired loans are based on discounted cash flow analyses (Level 3).
Real Estate Held For Sale- The Company does not record real estate held for sale at fair value on a recurring basis. However, from time to time, fair value adjustments are recorded on these properties to reflect the current appraised value (less an estimate of cost to sell). In some cases, the properties for which appraised values have been obtained are located in areas where comparable sales data is limited, outdated, or unavailable. Fair value estimates for real estate held for sale are obtained from independent appraisers or other third-party consultants (level 3).
28
Southern Colorado Corp. and Subsidiary
CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
As of June 30, 2018 and 2017
and for the six months ended June 30, 2018 and 2017
(Unaudited)
The following table provides the hierarchy and fair value for each major category of assets and liabilities recorded at fair value on a recurring basis:
|
| Quoted prices in active markets for identical assets (Level 1) |
|
| Other observable inputs (Level 2) |
|
| Significant unobservable inputs (Level 3) |
|
| Carrying amount |
| ||||
|
| (in thousands) |
| |||||||||||||
June 30, 2018 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Debt Securities Available for Sale |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
U.S. Treasury |
| $ | — |
|
| $ | 2,996 |
|
| $ | — |
|
| $ | 2,996 |
|
State and municipal |
|
| — |
|
|
| 23,490 |
|
|
| 440 |
|
|
| 23,930 |
|
Corporate |
|
| — |
|
|
| 7,270 |
|
|
| — |
|
|
| 7,270 |
|
Mortgage-backed |
|
| — |
|
|
| 62 |
|
|
| — |
|
|
| 62 |
|
|
| $ | — |
|
| $ | 33,818 |
|
| $ | 440 |
|
| $ | 34,258 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2017 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Securities Available for Sale |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
U.S. Treasury |
| $ | — |
|
| $ | 995 |
|
| $ | — |
|
| $ | 995 |
|
State and municipal |
|
| — |
|
|
| 23,382 |
|
|
| 1,330 |
|
|
| 24,712 |
|
Corporate |
|
| — |
|
|
| 5,076 |
|
|
| 500 |
|
|
| 5,576 |
|
Mortgage-backed |
|
| — |
|
|
| 120 |
|
|
| — |
|
|
| 120 |
|
|
| $ | — |
|
| $ | 29,573 |
|
| $ | 1,830 |
|
| $ | 31,403 |
|
Activity for debt securities available for sale recorded at fair value on a recurring basis using significant unobservable inputs (Level 3) is immaterial to the financial statements for each of the six-month periods ended June 30, 2018 and 2017.
Assets and liabilities recorded at fair value on a non-recurring basis are comprised of impaired loans and real estate held for sale which are all valued using level 3 measurements. At June 30, 2018 and December 31, 2017, there are no impaired loans with valuation allowances. At June 30, 2018, there is no real estate held for sale. At December 31, 2017, real estate held for sale with an initial cost basis of $770,000 has a $638,000 valuation allowance, resulting in a net carrying amount of $132,000.
29
Southern Colorado Corp. and Subsidiary
CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
As of June 30, 2018 and 2017
and for the six months ended June 30, 2018 and 2017
(Unaudited)
NOTE 10–RELATED PARTY TRANSACTIONS
Related party investment transactions, loans and deposits are described in Notes 2, 3 and 5, respectively. A subsequent event involving a related party is described in Note 11.
The Company is affiliated with other banks through common ownership. The Company had loan participations sold to these affiliates of $696,000 and $1,389,000 at June 30, 2018 and December 31, 2017, respectively. The Company had loan participations purchased from these affiliates of $835,000 and $2,315,000 at June 30, 2018 and December 31, 2017, respectively.
The Company receives item processing and data processing services from First National Bank of Durango, one of the affiliated banks. Fees paid by the Company for these services totaled $32,000 in each of the six-month periods ended June 30, 2018 and 2017.
The Company is affiliated with several non-bank entities through common ownership. These affiliates provide various management and administration services to the Company. The Company paid these affiliates $69,000 and $60,000 during the six months ended June 30, 2018 and 2017, respectively.
Notes payable of $500,000 at December 31, 2017 are comprised of unsecured promissory notes payable to certain shareholders of the Company. The notes were paid off and retired in February, 2018.
NOTE 11– SALE OF COMPANY, SUBSEQUENT EVENTS AND RELATED CONTINGENCIES
Sale of Company
In the second quarter of 2018, the Company entered into a definitive agreement to be acquired by, and merged with and into, Triumph Bancorp, Inc. through the Company’s shareholders’ exchange of all the Company’s common stock for cash from Triumph (NASDAQ: TBK). The transaction is expected to close in September, 2018.
Land Sale to Related Party and Remediation Contingency
In March, 2018, the Company sold land with a carrying amount of $702,000 to a non-bank entity affiliated with the Company through common ownership. The land was vacant land held for a future branch location no longer expected to be constructed by the Company, and was sold for its estimated fair value of $700,000. The land has a drainage issue existing prior to the sale of the land which the Company believes is due to the incorrect installation of a highway drainage system by the Colorado Department of Transportation. The Town of Pagosa Springs petitioned the Company to remedy the drainage issue, citing a risk of improper drainage during a flood. It was not clear to the Company whether or not it had any responsibility for rectifying potential drainage issues; however, subsequent to June 30, 2018, the Company paid an additional $289,000 to the related party for the related party to assume the remediation contingency. The payment amount was based on an engineering estimate of remediation cost.
30
Southern Colorado Corp. and Subsidiary
CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
As of June 30, 2018 and 2017
and for the six months ended June 30, 2018 and 2017
(Unaudited)
As of June 30, 2018, the Company had not recorded any liability with respect to the remediation contingency as the Company could not reasonably determine whether it is probable that it is responsible for remediation, and the decision to convey the contingency to the related party even though responsibility for remediation has not been established was a determination made by the Company subsequent to June 30, 2018.
31
SUPPLEMENTAL CONSOLIDATING SCHEDULES
32
Southern Colorado Corp. and Subsidiary
UNAUDITED SUPPLEMENTAL CONSOLIDATING BALANCE SHEETS
|
| June 30, 2018 |
| |||||||||||||
|
| Citizens Bank of Pagosa Springs |
|
| Southern Colorado Corp. |
|
| Consolidating Entries |
|
| Consolidated |
| ||||
|
| (dollars in thousands) |
| |||||||||||||
ASSETS |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and due from banks |
| $ | 4,296 |
|
| $ | 714 |
|
| $ | (714 | ) |
| $ | 4,296 |
|
Interest-bearing deposits in banks |
|
| 7,078 |
|
|
| — |
|
|
| — |
|
|
| 7,078 |
|
Total cash and cash equivalents |
|
| 11,374 |
|
|
| 714 |
|
|
| (714 | ) |
|
| 11,374 |
|
Investment securities available for sale |
|
| 34,258 |
|
|
| — |
|
|
| — |
|
|
| 34,258 |
|
Federal Home Loan Bank stock |
|
| 129 |
|
|
| — |
|
|
| — |
|
|
| 129 |
|
Loans, net of allowance for loan losses of $746 |
|
| 34,832 |
|
|
| — |
|
|
| — |
|
|
| 34,832 |
|
Accrued interest receivable |
|
| 345 |
|
|
| — |
|
|
| — |
|
|
| 345 |
|
Premises and equipment, net |
|
| 1,248 |
|
|
| — |
|
|
| — |
|
|
| 1,248 |
|
Other assets |
|
| 116 |
|
|
| — |
|
|
| — |
|
|
| 116 |
|
Investment in Citizens Bank of Pagosa Springs |
|
| — |
|
|
| 7,267 |
|
|
| (7,267 | ) |
|
| — |
|
|
| $ | 82,302 |
|
| $ | 7,981 |
|
| $ | (7,981 | ) |
| $ | 82,302 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
LIABILITIES |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Deposits |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Noninterest-bearing |
| $ | 26,249 |
|
|
| — |
|
| $ | (714 | ) |
| $ | 25,535 |
|
Interest-bearing |
|
| 48,647 |
|
|
| — |
|
|
| — |
|
|
| 48,647 |
|
Total deposits |
|
| 74,896 |
|
|
| — |
|
|
| (714 | ) |
|
| 74,182 |
|
Accrued expenses and other liabilities |
|
| 139 |
|
|
| 66 |
|
|
| — |
|
|
| 205 |
|
Total liabilities |
|
| 75,035 |
|
|
| 66 |
|
|
| (714 | ) |
|
| 74,387 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
STOCKHOLDERS' EQUITY |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Common stock |
|
| 200 |
|
|
| 160 |
|
|
| (200 | ) |
|
| 160 |
|
Additional paid-in capital |
|
| 4,700 |
|
|
| 5,370 |
|
|
| (4,700 | ) |
|
| 5,370 |
|
Retained earnings |
|
| 2,636 |
|
|
| 2,654 |
|
|
| (2,636 | ) |
|
| 2,654 |
|
Accumulated other comprehensive loss |
|
| (269 | ) |
|
| (269 | ) |
|
| 269 |
|
|
| (269 | ) |
Total stockholders' equity |
|
| 7,267 |
|
|
| 7,915 |
|
|
| (7,267 | ) |
|
| 7,915 |
|
|
| $ | 82,302 |
|
| $ | 7,981 |
|
| $ | (7,981 | ) |
| $ | 82,302 |
|
33
Southern Colorado Corp. and Subsidiary
UNAUDITED SUPPLEMENTAL CONSOLIDATING BALANCE SHEETS
|
| December 31, 2017 |
| |||||||||||||
|
| Citizens Bank of Pagosa Springs |
|
| Southern Colorado Corp. |
|
| Consolidating Entries |
|
| Consolidated |
| ||||
|
| (dollars in thousands) |
| |||||||||||||
ASSETS |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and due from banks |
| $ | 2,204 |
|
| $ | 224 |
|
| $ | (224 | ) |
| $ | 2,204 |
|
Interest-bearing deposits in banks |
|
| 15,537 |
|
|
| — |
|
|
| — |
|
|
| 15,537 |
|
Total cash and cash equivalents |
|
| 17,741 |
|
|
| 224 |
|
|
| (224 | ) |
|
| 17,741 |
|
Investment securities available for sale |
|
| 31,403 |
|
|
| — |
|
|
| — |
|
|
| 31,403 |
|
Federal Home Loan Bank stock |
|
| 127 |
|
|
| — |
|
|
| — |
|
|
| 127 |
|
Loans, net of allowance for loan losses of $1,136 |
|
| 35,461 |
|
|
| — |
|
|
| — |
|
|
| 35,461 |
|
Accrued interest receivable |
|
| 302 |
|
|
| — |
|
|
| — |
|
|
| 302 |
|
Premises and equipment, net |
|
| 1,989 |
|
|
| — |
|
|
| — |
|
|
| 1,989 |
|
Real estate held for sale |
|
| 132 |
|
|
| — |
|
|
| — |
|
|
| 132 |
|
Other assets |
|
| 140 |
|
|
| 1 |
|
|
| — |
|
|
| 141 |
|
Investment in Citizens Bank of Pagosa Springs |
|
| — |
|
|
| 7,637 |
|
|
| (7,637 | ) |
|
| — |
|
|
| $ | 87,295 |
|
| $ | 7,862 |
|
| $ | (7,861 | ) |
| $ | 87,296 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
LIABILITIES |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Deposits |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Noninterest-bearing |
| $ | 26,961 |
|
| $ | — |
|
| $ | (224 | ) |
| $ | 26,737 |
|
Interest-bearing |
|
| 52,515 |
|
|
| — |
|
|
| — |
|
|
| 52,515 |
|
Total deposits |
|
| 79,476 |
|
|
| — |
|
|
| (224 | ) |
|
| 79,252 |
|
Notes payable |
|
| — |
|
|
| 500 |
|
|
| — |
|
|
| 500 |
|
Accrued expenses and other liabilities |
|
| 182 |
|
|
| 4 |
|
|
| — |
|
|
| 186 |
|
Total liabilities |
|
| 79,658 |
|
|
| 504 |
|
|
| (224 | ) |
|
| 79,938 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
STOCKHOLDERS' EQUITY |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Common stock |
|
| 200 |
|
|
| 160 |
|
|
| (200 | ) |
|
| 160 |
|
Additional paid-in capital |
|
| 4,700 |
|
|
| 5,370 |
|
|
| (4,700 | ) |
|
| 5,370 |
|
Retained earnings |
|
| 2,889 |
|
|
| 1,980 |
|
|
| (2,889 | ) |
|
| 1,980 |
|
Accumulated other comprehensive loss |
|
| (152 | ) |
|
| (152 | ) |
|
| 152 |
|
|
| (152 | ) |
Total stockholders' equity |
|
| 7,637 |
|
|
| 7,358 |
|
|
| (7,637 | ) |
|
| 7,358 |
|
|
| $ | 87,295 |
|
| $ | 7,862 |
|
| $ | (7,861 | ) |
| $ | 87,296 |
|
34
Southern Colorado Corp. and Subsidiary
UNAUDITED SUPPLEMENTAL CONSOLIDATING STATEMENTS OF INCOME
| Six Months Ended June 30, 2018 |
| ||||||||||||||||||||||||||||
|
| Citizens Bank of Pagosa Springs |
|
| Southern Colorado Corp. |
|
| Consolidating Entries |
|
| Consolidated |
| ||||||||||||||||||
|
| (dollars in thousands) |
| |||||||||||||||||||||||||||
Interest and dividend income |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||||
Loans, including fees |
| $ | 966 |
|
| $ | — |
|
| $ | — |
|
| $ | 966 |
| ||||||||||||||
Taxable investment securities |
|
| 100 |
|
|
| — |
|
|
| — |
|
|
| 100 |
| ||||||||||||||
Tax-exempt investment securities |
|
| 256 |
|
|
| — |
|
|
| — |
|
|
| 256 |
| ||||||||||||||
Federal Home Loan Bank stock |
|
| 2 |
|
|
| — |
|
|
| — |
|
|
| 2 |
| ||||||||||||||
Interest-bearing deposits |
|
| 61 |
|
|
| — |
|
|
| — |
|
|
| 61 |
| ||||||||||||||
Total interest and dividend income |
|
| 1,385 |
|
|
| — |
|
|
| — |
|
|
| 1,385 |
| ||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||||
Interest expense |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||||
Deposits |
|
| 154 |
|
|
| — |
|
|
| — |
|
|
| 154 |
| ||||||||||||||
Notes payable |
|
| — |
|
|
| 3 |
|
|
| — |
|
|
| 3 |
| ||||||||||||||
Total interest expense |
|
| 154 |
|
|
| 3 |
|
|
| — |
|
|
| 157 |
| ||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||||
Net interest income |
|
| 1,231 |
|
|
| (3 | ) |
|
| — |
|
|
| 1,228 |
| ||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||||
Credit for loan losses |
|
| (400 | ) |
|
| — |
|
|
| — |
|
|
| (400 | ) | ||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||||
Net interest income after provision for loan losses |
|
| 1,631 |
|
|
| (3 | ) |
|
| — |
|
|
| 1,628 |
| ||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||||
Noninterest income |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||||
Service charges on deposit accounts |
|
| 51 |
|
|
| — |
|
|
| — |
|
|
| 51 |
| ||||||||||||||
ATM and debit card |
|
| 100 |
|
|
| — |
|
|
| — |
|
|
| 100 |
| ||||||||||||||
Mortgage banking |
|
| 64 |
|
|
| — |
|
|
| — |
|
|
| 64 |
| ||||||||||||||
Net loss on sale of securities available for sale |
|
| (2 | ) |
|
| — |
|
|
| — |
|
|
| (2 | ) | ||||||||||||||
Other noninterest income |
|
| 99 |
|
|
| 8 |
|
|
| — |
|
|
| 107 |
| ||||||||||||||
|
|
| 312 |
|
|
| 8 |
|
|
| — |
|
|
| 320 |
| ||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||||
Noninterest expense |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||||
Salaries and employee benefits |
|
| 625 |
|
|
| — |
|
|
| — |
|
|
| 625 |
| ||||||||||||||
Occupancy and equipment |
|
| 145 |
|
|
| — |
|
|
| — |
|
|
| 145 |
| ||||||||||||||
Data processing and software |
|
| 68 |
|
|
| — |
|
|
| — |
|
|
| 68 |
| ||||||||||||||
ATM and debit card |
|
| 60 |
|
|
| — |
|
|
| — |
|
|
| 60 |
| ||||||||||||||
Management and administration fees |
|
| 69 |
|
|
| — |
|
|
| — |
|
|
| 69 |
| ||||||||||||||
Other noninterest expense |
|
| 230 |
|
|
| 77 |
|
|
| — |
|
|
| 307 |
| ||||||||||||||
|
|
| 1,197 |
|
|
| 77 |
|
|
| — |
|
|
| 1,274 |
| ||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||||
Income (loss) before equity in income of subsidiary |
|
| 746 |
|
|
| (72 | ) |
|
| — |
|
|
| 674 |
| ||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||||
Equity in income of subsidiary |
|
| — |
|
|
| 746 |
|
|
| (746 | ) |
|
| — |
| ||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||||
Net income |
| $ | 746 |
|
| $ | 674 |
|
| $ | (746 | ) |
| $ | 674 |
|
35
Southern Colorado Corp. and Subsidiary
UNAUDITED SUPPLEMENTAL CONSOLIDATING STATEMENTS OF INCOME
| Six Months Ended June 30, 2017 |
| ||||||||||||||||||||||||||||
|
| Citizens Bank of Pagosa Springs |
|
| Southern Colorado Corp. |
|
| Consolidating Entries |
|
| Consolidated |
| ||||||||||||||||||
|
| (dollars in thousands) |
| |||||||||||||||||||||||||||
Interest and dividend income |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||||
Loans, including fees |
| $ | 943 |
|
| $ | — |
|
| $ | — |
|
| $ | 943 |
| ||||||||||||||
Taxable investment securities |
|
| 51 |
|
|
| — |
|
|
| — |
|
|
| 51 |
| ||||||||||||||
Tax-exempt investment securities |
|
| 247 |
|
|
| — |
|
|
| — |
|
|
| 247 |
| ||||||||||||||
Federal Home Loan Bank stock |
|
| 2 |
|
|
| — |
|
|
| — |
| �� |
| 2 |
| ||||||||||||||
Interest-bearing deposits |
|
| 38 |
|
|
| — |
|
|
| — |
|
|
| 38 |
| ||||||||||||||
Total interest and dividend income |
|
| 1,281 |
|
|
| — |
|
|
| — |
|
|
| 1,281 |
| ||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||||
Interest expense |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||||
Deposits |
|
| 86 |
|
|
| — |
|
|
| — |
|
|
| 86 |
| ||||||||||||||
Notes payable |
|
| — |
|
|
| 10 |
|
|
| — |
|
|
| 10 |
| ||||||||||||||
Total interest expense |
|
| 86 |
|
|
| 10 |
|
|
| — |
|
|
| 96 |
| ||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||||
Net interest income |
|
| 1,195 |
|
|
| (10 | ) |
|
| — |
|
|
| 1,185 |
| ||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||||
Credit for loan losses |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
| ||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||||
Net interest income after provision for loan losses |
|
| 1,195 |
|
|
| (10 | ) |
|
| — |
|
|
| 1,185 |
| ||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||||
Noninterest income |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||||
Service charges on deposit accounts |
|
| 49 |
|
|
| — |
|
|
| — |
|
|
| 49 |
| ||||||||||||||
ATM and debit card |
|
| 88 |
|
|
| — |
|
|
| — |
|
|
| 88 |
| ||||||||||||||
Mortgage banking |
|
| 94 |
|
|
| — |
|
|
| — |
|
|
| 94 |
| ||||||||||||||
Net gain on sale of securities available for sale |
|
| 9 |
|
|
| 7 |
|
|
| — |
|
|
| 16 |
| ||||||||||||||
Other noninterest income |
|
| 34 |
|
|
| — |
|
|
| — |
|
|
| 34 |
| ||||||||||||||
|
|
| 274 |
|
|
| 7 |
|
|
| — |
|
|
| 281 |
| ||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||||
Noninterest expense |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||||
Salaries and employee benefits |
|
| 571 |
|
|
| — |
|
|
| — |
|
|
| 571 |
| ||||||||||||||
Occupancy and equipment |
|
| 146 |
|
|
| — |
|
|
| — |
|
|
| 146 |
| ||||||||||||||
Data processing and software |
|
| 72 |
|
|
| — |
|
|
| — |
|
|
| 72 |
| ||||||||||||||
ATM and debit card |
|
| 70 |
|
|
| — |
|
|
| — |
|
|
| 70 |
| ||||||||||||||
Management and administration fees |
|
| 60 |
|
|
| — |
|
|
| — |
|
|
| 60 |
| ||||||||||||||
Other noninterest expense |
|
| 229 |
|
|
| 6 |
|
|
| — |
|
|
| 235 |
| ||||||||||||||
|
|
| 1,148 |
|
|
| 6 |
|
|
| — |
|
|
| 1,154 |
| ||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||||
Income (loss) before equity in income of subsidiary |
|
| 321 |
|
|
| (9 | ) |
|
| — |
|
|
| 312 |
| ||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||||
Equity in income of subsidiary |
|
| — |
|
|
| 321 |
|
|
| (321 | ) |
|
| — |
| ||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||||
Net income |
| $ | 321 |
|
| $ | 312 |
|
| $ | (321 | ) |
| $ | 312 |
|
36