Document and Entity Information
Document and Entity Information - shares | 9 Months Ended | |
Sep. 30, 2017 | Nov. 13, 2017 | |
Document and Entity Information | ||
Entity Registrant Name | MACKINAC FINANCIAL CORP /MI/ | |
Entity Central Index Key | 36,506 | |
Document Type | 10-Q | |
Document Period End Date | Sep. 30, 2017 | |
Amendment Flag | false | |
Current Fiscal Year End Date | --12-31 | |
Entity Current Reporting Status | Yes | |
Entity Filer Category | Smaller Reporting Company | |
Entity Common Stock, Shares Outstanding | 6,294,930 | |
Document Fiscal Year Focus | 2,017 | |
Document Fiscal Period Focus | Q3 |
CONDENSED CONSOLIDATED BALANCE
CONDENSED CONSOLIDATED BALANCE SHEETS - USD ($) $ in Thousands | Sep. 30, 2017 | Dec. 31, 2016 |
ASSETS | ||
Cash and due from banks | $ 52,676 | $ 44,620 |
Federal funds sold | 5,006 | 2,135 |
Cash and cash equivalents | 57,682 | 46,755 |
Interest-bearing deposits in other financial institutions | 13,374 | 14,047 |
Securities available for sale | 85,009 | 86,273 |
Federal Home Loan Bank stock | 3,250 | 2,911 |
Loans: | ||
Commercial | 572,799 | 543,573 |
Mortgage | 217,103 | 218,171 |
Consumer | 18,247 | 20,113 |
Total Loans | 808,149 | 781,857 |
Allowance for loan losses | (5,130) | (5,020) |
Net loans | 803,019 | 776,837 |
Premises and equipment | 16,619 | 15,891 |
Other real estate held for sale | 4,413 | 4,782 |
Deferred tax asset | 6,266 | 8,760 |
Deposit based intangibles | 1,985 | 2,172 |
Goodwill | 5,694 | 5,694 |
Other assets | 17,759 | 19,398 |
TOTAL ASSETS | 1,015,070 | 983,520 |
Deposits: | ||
Noninterest bearing deposits | 162,142 | 164,179 |
NOW, money market, interest checking | 275,854 | 286,622 |
Savings | 61,832 | 58,315 |
CDs less than $250,000 | 144,031 | 141,629 |
CDs more than $250,000 | 9,126 | 8,489 |
Brokered | 182,218 | 164,278 |
Total deposits | 835,203 | 823,512 |
Federal funds purchased | 6,000 | |
Borrowings | 91,397 | 67,579 |
Other liabilities | 5,821 | 7,820 |
Total liabilities | 932,421 | 904,911 |
SHAREHOLDERS' EQUITY: | ||
Common stock and additional paid in capital - No par value Authorized - 18,000,000 shares Issued and outstanding - 6,294,930 and 6,263,371 respectively | 61,881 | 61,583 |
Retained earnings | 20,439 | 17,206 |
Accumulated other comprehensive income (loss) | ||
Unrealized (losses) gains on available for sale securities | 407 | (102) |
Minimum pension liability | (78) | (78) |
Total shareholders' equity | 82,649 | 78,609 |
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY | $ 1,015,070 | $ 983,520 |
CONDENSED CONSOLIDATED BALANCE3
CONDENSED CONSOLIDATED BALANCE SHEETS (Parenthetical) - $ / shares | Sep. 30, 2017 | Dec. 31, 2016 |
CONDENSED CONSOLIDATED BALANCE SHEETS | ||
Common stock, par value | $ 0 | $ 0 |
Common stock, Authorized shares | 18,000,000 | 18,000,000 |
Common stock, Shares issued | 6,294,930 | 6,263,371 |
Common stock, Shares outstanding | 6,294,930 | 6,263,371 |
CONDENSED CONSOLIDATED STATEMEN
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS - USD ($) $ in Thousands | 3 Months Ended | 9 Months Ended | ||
Sep. 30, 2017 | Sep. 30, 2016 | Sep. 30, 2017 | Sep. 30, 2016 | |
Interest and fees on loans: | ||||
Taxable | $ 10,799 | $ 9,441 | $ 31,016 | $ 26,085 |
Tax-exempt | 21 | 19 | 73 | 34 |
Interest on securities: | ||||
Taxable | 401 | 387 | 1,195 | 953 |
Tax-exempt | 72 | 57 | 226 | 114 |
Other interest income | 230 | 91 | 475 | 212 |
Total interest income | 11,523 | 9,995 | 32,985 | 27,398 |
INTEREST EXPENSE: | ||||
Deposits | 1,157 | 870 | 3,170 | 2,410 |
Borrowings | 577 | 429 | 1,541 | 1,008 |
Total interest expense | 1,734 | 1,299 | 4,711 | 3,418 |
Net interest income | 9,789 | 8,696 | 28,274 | 23,980 |
Provision for loan losses | 200 | 200 | 400 | 350 |
Net interest income after provision for loan losses | 9,589 | 8,496 | 27,874 | 23,630 |
OTHER INCOME: | ||||
Deposit service fees | 262 | 259 | 803 | 723 |
Income from mortgage loans sold on the secondary market | 434 | 512 | 1,048 | 1,118 |
SBA/USDA loan sale gains | 278 | 551 | 426 | 717 |
Net mortgage servicing (amortization) income | (6) | (12) | (24) | (74) |
Net realized security gains | 38 | 40 | 38 | 149 |
Other | 147 | 139 | 433 | 379 |
Total other income | 1,153 | 1,489 | 2,724 | 3,012 |
OTHER EXPENSE: | ||||
Salaries and employee benefits | 3,934 | 3,687 | 11,388 | 10,592 |
Occupancy | 761 | 680 | 2,322 | 1,960 |
Furniture and equipment | 616 | 440 | 1,640 | 1,248 |
Data processing | 533 | 440 | 1,482 | 1,118 |
Advertising | 227 | 157 | 524 | 494 |
Professional service fees | 323 | 309 | 1,049 | 807 |
Loan origination expenses and deposit and card related fees | 181 | 152 | 515 | 434 |
Writedowns and losses on other real estate held for sale | 43 | 60 | 298 | 62 |
FDIC insurance assessment | 210 | 131 | 556 | 356 |
Telephone | 154 | 140 | 445 | 374 |
Transaction related expenses | 359 | 2,928 | ||
Other | 742 | 730 | 2,199 | 2,003 |
Total other expenses | 7,724 | 7,285 | 22,418 | 22,376 |
Income before provision for income taxes | 3,018 | 2,700 | 8,180 | 4,266 |
Provision for income taxes | 925 | 922 | 2,681 | 1,481 |
NET INCOME | $ 2,093 | $ 1,778 | $ 5,499 | $ 2,785 |
INCOME PER COMMON SHARE: | ||||
Basic (in dollars per share) | $ 0.33 | $ 0.29 | $ 0.88 | $ 0.45 |
Diluted (in dollars per share) | $ 0.33 | $ 0.28 | $ 0.87 | $ 0.45 |
CONDENSED CONSOLIDATED STATEME5
CONDENSED CONSOLIDATED STATEMENTS COMPREHENSIVE INCOME - USD ($) $ in Thousands | 3 Months Ended | 9 Months Ended | ||
Sep. 30, 2017 | Sep. 30, 2016 | Sep. 30, 2017 | Sep. 30, 2016 | |
CONDENSED CONSOLIDATED STATEMENTS COMPREHENSIVE INCOME | ||||
Net income | $ 2,093 | $ 1,778 | $ 5,499 | $ 2,785 |
Other comprehensive income | ||||
Unrealized gains arising during the period | (115) | (79) | 809 | 890 |
Reclassification adjustment for securities gains included in net income | (38) | (40) | (38) | (149) |
Tax effect | 52 | 40 | (262) | (252) |
Net change in unrealized gains on available for sale securities | (101) | (79) | 509 | 489 |
Total comprehensive income | $ 1,992 | $ 1,699 | $ 6,008 | $ 3,274 |
CONDENSED CONSOLIDATED STATEME6
CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS’ EQUITY - USD ($) $ in Thousands | Shares of Common Stock | Common Stock and Additional Paid in Capital | Retained Earnings | Accumulated Other Comprehensive Income (Loss) | Total |
Balance, beginning of period at Dec. 31, 2015 | $ 61,133 | $ 15,221 | $ 248 | $ 76,602 | |
Balance (in shares) at Dec. 31, 2015 | 6,217,620 | ||||
Increase (Decrease) in Shareholders' Equity | |||||
Net income for period | 2,785 | 2,785 | |||
Other comprehensive income | |||||
Net unrealized gain on securities available for sale | 489 | 489 | |||
Total comprehensive income | 2,785 | 489 | 3,274 | ||
Stock compensation | 450 | 450 | |||
Restricted stock award vesting (in shares) | 59,751 | ||||
Repurchase of common stock | (150) | (150) | |||
Repurchase of common stock (in shares) | (14,000) | ||||
Dividend on common stock | (1,891) | (1,891) | |||
Balance, end of period at Sep. 30, 2016 | 61,433 | 16,115 | 737 | 78,285 | |
Balance (in shares) at Sep. 30, 2016 | 6,263,371 | ||||
Balance, beginning of period at Dec. 31, 2015 | 61,133 | 15,221 | 248 | 76,602 | |
Balance (in shares) at Dec. 31, 2015 | 6,217,620 | ||||
Other comprehensive income | |||||
Repurchase of common stock (in shares) | (14,000) | ||||
Balance, end of period at Dec. 31, 2016 | 61,583 | 17,206 | (180) | 78,609 | |
Balance (in shares) at Dec. 31, 2016 | 6,263,371 | ||||
Increase (Decrease) in Shareholders' Equity | |||||
Net income for period | 5,499 | 5,499 | |||
Other comprehensive income | |||||
Net unrealized gain on securities available for sale | 509 | 509 | |||
Total comprehensive income | 5,499 | 509 | 6,008 | ||
Stock compensation | 298 | 298 | |||
Restricted stock award vesting (in shares) | 31,559 | ||||
Dividend on common stock | (2,266) | (2,266) | |||
Balance, end of period at Sep. 30, 2017 | $ 61,881 | $ 20,439 | $ 329 | $ 82,649 | |
Balance (in shares) at Sep. 30, 2017 | 6,294,930 |
CONDENSED CONSOLIDATED STATEME7
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS - USD ($) $ in Thousands | 9 Months Ended | |
Sep. 30, 2017 | Sep. 30, 2016 | |
Cash Flows from Operating Activities: | ||
Net income | $ 5,499 | $ 2,785 |
Adjustments to reconcile net income to net cash provided by operating activities: | ||
Depreciation and amortization | 1,801 | 1,336 |
Provision for loan losses | 400 | 350 |
Deferred tax expense, net | 1,125 | 1,481 |
Gain on sales/calls of securities | (38) | (149) |
Gain on sale of loans sold in the secondary market | (873) | (959) |
Origination of loans held for sale in the secondary market | (48,819) | (56,941) |
Proceeds from sale of loans in the secondary market | 49,692 | 57,900 |
Loss on sale of premises, equipment, and other real estate held for sale | 28 | 10 |
Writedown of other real estate held for sale | 270 | 53 |
Stock compensation | 298 | 450 |
Change in other assets | 3,382 | 12,462 |
Change in other liabilities | (1,999) | (1,174) |
Net cash provided by operating activities | 10,766 | 17,604 |
Cash Flows from Investing Activities: | ||
Net increase in loans | (28,977) | (28,118) |
Net increase in interest bearing deposits in other financial institutions | 673 | 3,015 |
Purchase of securities available for sale | (5,697) | (7,225) |
Proceeds from maturities, sales, calls or paydowns of securities available for sale | 7,441 | 16,752 |
Redemption of FHLBI stock | 192 | |
Capital expenditures | (2,195) | (1,833) |
Purchase additional FHLBI stock | (531) | |
Net cash used in Eagle acquisition and reimbursement of contract termination fee | (12,500) | |
Net cash used in Niagara acquisition | (7,325) | |
Proceeds from sale of premises, equipment, and other real estate | 2,012 | 1,143 |
Net cash used in investing activities | (27,082) | (36,091) |
Cash Flows from Financing Activities: | ||
Net increase in deposits | 11,691 | 33,159 |
Net activity on line of credit | 545 | (8,550) |
Decrease in fed funds purchased | (6,000) | |
New term debt issuance | 25,000 | 19,800 |
Principal payments on borrowings | (1,727) | (274) |
Repurchase of common stock | (150) | |
Dividend on common stock | (2,266) | (1,891) |
Net cash used in financing activities | 27,243 | 42,094 |
Net increase in cash and cash equivalents | 10,927 | 23,607 |
Cash and cash equivalents at beginning of period | 46,755 | 25,008 |
Cash and cash equivalents at end of period | 57,682 | 48,615 |
Cash paid during the year for: | ||
Interest | 4,651 | 3,273 |
Income taxes | 100 | |
Noncash Investing and Financing Activities: | ||
Transfers of Foreclosures from Loans to Other Real Estate Held for Sale | $ 2,120 | $ 1,091 |
SUMMARY OF SIGNIFICANT ACCOUNTI
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES | 9 Months Ended |
Sep. 30, 2017 | |
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES | |
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES | 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Basis of Presentation The unaudited condensed consolidated financial statements of Mackinac Financial Corporation (the “Corporation”) have been prepared in accordance with generally accepted accounting principles for interim financial information and the instructions to Form 10-Q 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. Operating results for the three and nine month periods ended September 30, 2017 are not necessarily indicative of the results that may be expected for the year ending December 31, 2017. The unaudited consolidated financial statements and footnotes thereto should be read in conjunction with the audited consolidated financial statements and footnotes thereto included in the Corporation’s Annual Report on Form 10-K for the year ended December 31, 2016. In order to properly reflect some categories of other income and other expenses, reclassifications of expense and income items have been made to prior period numbers. The “net” other income and other expenses were unchanged by these reclassifications. The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenue and expenses during the reporting period. Actual results could differ from those estimates. Material estimates that are particularly susceptible to significant change in the near term relate to the determination of the allowance for loan losses, the valuation of investment securities, the valuation of foreclosed real estate, deferred tax assets, mortgage servicing rights, and the assessment of goodwill for impairment. Acquired Loans Loans acquired with evidence of credit deterioration since inception and for which it is probable that all contractual payments will not be received are accounted for under ASC Topic 310-30, Loans and Debt Securities Acquired with Deteriorated Credit Quality (“ASC 310-30”). These loans are recorded at fair value at the time of acquisition, with no carryover of the related allowance for loan losses. Fair value of acquired loans is determined using a discounted cash flow methodology based on assumptions about the amount and timing of principal and interest payments, principal prepayments and principal defaults and losses, and current market rates. In recording the fair values of acquired impaired loans at acquisition date, management calculates a non-accretable difference (the credit component of the purchased loans) and an accretable difference (the yield component of the purchased loans). Over the life of the acquired loans, management continues to estimate cash flows expected to be collected on pools of loans sharing common risk characteristics, which are treated in the aggregate when applying various valuation techniques. Management evaluates at each balance sheet date whether the present value of our pools of loans determined using the effective interest rates has decreased significantly and if so, recognizes a provision for loan loss in our consolidated statement of income. For any significant increases in cash flows expected to be collected, we adjust the amount of the accretable yield recognized on a prospective basis over the pool’s remaining life. Performing acquired loans are accounted for under Financial Accounting Standards Board (“FASB”) Topic 310-20, Receivables – Nonrefundable Fees and Other Costs. Performance of certain loans may be monitored and based on management’s assessment of the cash flows and other facts available, portions of the accretable difference may be delayed or suspended if management deems appropriate. The Corporation’s policy for determining when to discontinue accruing interest on performing acquired loans and the subsequent accounting for such loans is essentially the same as the policy for originated loans. Allowance for Loan Losses The allowance for loan losses includes specific allowances related to loans, when they have been judged to be impaired. A loan is impaired when, based on current information, it is probable that the Corporation will not collect all amounts due in accordance with the contractual terms of the loan agreement. These specific allowances are based on discounted cash flows of expected future payments using the loan’s initial effective interest rate or the fair value of the collateral if the loan is collateral dependent. The Corporation also has an unallocated allowance for loan losses for loans not considered impaired. The allowance for loan losses is maintained at a level which management believes is adequate to provide for incurred loan losses. Management periodically evaluates the adequacy of the allowance using the Corporation’s past loan loss experience, known and inherent risks in the portfolio, composition of the portfolio, current economic conditions, and other factors. The allowance does not include the effects of expected losses related to future events or future changes in economic conditions. This evaluation is inherently subjective since it requires material estimates that may be susceptible to significant change. Loans are charged against the allowance for loan losses when management believes the collectability of the principal is unlikely. In addition, various regulatory agencies periodically review the allowance for loan losses. These agencies may require additions to the allowance for loan losses based on their judgments of collectability. In management’s opinion, the allowance for loan losses is adequate to cover probable losses relating to specifically identified loans, as well as probable losses inherent in the balance of the loan portfolio as of the balance sheet date. Stock Compensation Plans On May 22, 2012, the Corporation’s shareholders approved the Mackinac Financial Corporation 2012 Incentive Compensation Plan, under which current and prospective employees, non-employee directors and consultants may be awarded incentive stock options, non-statutory stock options, shares of restricted stock awards (“RSAs”), or stock appreciation rights. The aggregate number of shares of the Corporation’s common stock issuable under the plan is 575,000. At September 30, 2017 there were 268,836 shares available for issuance under this plan. Awards are made to certain other senior officers at the discretion of the Corporation’s management. Compensation cost equal to the fair value of the award is recognized over the vesting period. |
RECENT ACCOUNTING PRONOUNCEMENT
RECENT ACCOUNTING PRONOUNCEMENTS | 9 Months Ended |
Sep. 30, 2017 | |
RECENT ACCOUNTING PRONOUNCEMENTS | |
RECENT ACCOUNTING PRONOUNCEMENTS | 2. RECENT ACCOUNTING PRONOUNCEMENTS In May 2014, the Financial Accounting Standards Board (FASB) issued guidance on the recognition of revenue from contracts with customers. Revenue recognition will depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. The guidance also requires disclosures regarding the nature, amount, timing and uncertainty of revenue and cash flows arising from contracts with customers. The guidance permits two methods of adoption: retrospectively to each prior reporting period presented or retrospectively with the cumulative effect of initially applying the guidance recognized at the date of initial application. The guidance is effective January 1, 2018 and early adoption is permitted only as of January 1, 2017. In this regard, management has completed a preliminary analysis of the impact of implementation. The key revenue streams affected by implementation would include service charges and mortgage banking income. The new guidance is not expected to have a significant impact on the Corporation’s financial results. Interest income is outside of the scope of the new standard and will not be impacted upon adoption. In January 2016, the FASB issued ASU 2016-01, Financial Instruments – Overall (Subtopic 825-10): Recognition and Measurement of Financial Assets and Financial Liabilities (“ASU 2016-01”). ASU 2016-01 amends current guidance by requiring companies to recognize changes in fair value for equity investments that have a readily determinable fair value through net income rather than through other comprehensive income. Under ASU 2016-01, equity investments that do not have a readily determinable fair value will either be accounted for in the same manner as equity investments that have a readily determinable fair value, with changes in fair value recognized through net income or carried at cost, adjusted for changes in observable prices based on orderly transactions for identical or similar investments issued by the same issuer and further adjusted for impairment, if applicable. ASU 2016-01 also requires a qualitative assessment of impairment indicators each reporting period. If this assessment indicates that impairment exists, companies must adjust the investment to fair value and recognize an impairment loss in net income, even if the impairment is determined to be temporary. ASU 2016-01 is effective for public companies for interim and annual periods beginning after December 15, 2017. The Corporation’s adoption of ASU 2016-01 is not expected to have a material impact on the Corporation’s consolidated financial condition or results of operations. In February 2016, the FASB issued ASU 2016-02, Leases, which will supersede the current lease requirements in ASC 840. The ASU requires lessees to recognize an asset with the right of use and related lease liability for all leases, with a limited exception for short-term leases. Leases will be classified as either finance or operating, with the classification affecting the pattern of expense recognition in the statement of operations. Currently, leases are classified as either capital or operating, with only capital leases recognized on the balance sheet. The reporting of lease related expenses in the statements of operations and cash flows will be generally consistent with the current guidance. The new lease guidance will be effective for the Corporation’s year ending December 31, 2019 and will be applied using modified retrospective transition method to the beginning of the earliest period presented. The effect of applying the new lease guidance on the financial statements has not yet been determined. In September 2016, the FASB issued ASU No. 2016-13, Financial Instruments - Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments ("ASU 2016-13"). ASU 2016-13 changes how entities will measure credit losses for most financial assets and certain other instruments that are not measured at fair value through net income. ASU 2016-13 requires an entity to measure expected credit losses for financial assets over the estimated lifetime of expected credit loss and record an allowance that, when deducted from the amortized cost basis of the financial asset, presents the net amount expected to be collected on the financial asset. The standard includes the following core concepts in determining the expected credit loss. The estimate must: (a) be based on an asset’s amortized cost (including premiums or discounts, net deferred fees and costs, foreign exchange and fair value hedge accounting adjustments), (b) reflect losses expected over the remaining contractual life of an asset (considering the effect of voluntary prepayments), (c) consider available relevant information about the estimated collectability of cash flows (including information about past events, current conditions, and reasonable and supportable forecasts), and (d) reflect the risk of loss, even when that risk is remote. ASU 2016-13 also amends the recording of purchased credit-deteriorated assets. Under the new guidance, an allowance will be recognized at acquisition through a gross-up approach whereby an entity will record as the initial amortized cost the sum of (a) the purchase price and (b) an estimate of credit losses as of the date of acquisition. In addition, the guidance also requires immediate recognition in earnings of any subsequent changes, both favorable and unfavorable, in expected cash flows by adjusting this allowance. ASU 2016-13 also amends the impairment model for available-for-sale debt securities and requires entities to determine whether all or a portion of the unrealized loss on an available-for-sale debt security is a credit loss. Management may not use the length of time a security has been in an unrealized loss position as a factor in concluding whether a credit loss exists, as is currently permitted. In addition, an entity will recognize an allowance for credit losses on available-for-sale debt securities as a contra-account to the amortized cost basis rather than as a direct reduction of the amortized cost basis of the investment, as is currently required. As a result, entities will recognize improvements to credit losses on available-for-sale debt securities immediately in earnings rather than as interest income over time under current practice. New disclosures required by ASU 2016-13 include: (a) for financial assets measured at amortized cost, an entity will be required to disclose information about how it developed its allowance, including changes in the factors that influenced management’s estimate of expected credit losses and the reasons for those changes, (b) for financial receivables and net investments in leases measured at amortized cost, an entity will be required to further disaggregate the information it currently discloses about the credit quality of these assets by year or the asset’s origination or vintage for as many as five annual periods, and (c) for available-for-sale debt securities, an entity will be required to provide a roll-forward of the allowance for credit losses and an aging analysis for securities that are past due. Upon adoption of ASU 2016-13, a cumulative-effect adjustment to retained earnings will be recorded as of the beginning of the first reporting period in which the guidance is effective. ASU 2016-13 is effective for public companies for interim and annual periods beginning after December 15, 2019, with early adoption permitted for annual periods beginning after December 15, 2018. The Corporation is currently evaluating the provisions of ASU 2016-13 to determine the potential impact on the Corporation's consolidated financial condition and results of operations. |
EARNINGS PER SHARE
EARNINGS PER SHARE | 9 Months Ended |
Sep. 30, 2017 | |
EARNINGS PER SHARE | |
EARNINGS PER SHARE | 3. EARNINGS PER SHARE Diluted earnings per share, which reflects the potential dilution that could occur if stock awards were fully vested and resulted in the issuance of common stock that then shared in our earnings, is computed by dividing net income by the weighted average number of common shares outstanding and common stock equivalents, after giving effect for dilutive shares issued. The following shows the computation of basic and diluted earnings per share for the three and nine months ended September 30, 2017 and 2016 (dollars in thousands, except per share data): Three Months Ended September 30, Nine Months Ended September 30, 2017 2016 2017 2016 (Numerator): Net income $ 2,093 $ $ 5,499 $ (Denominator): Weighted average shares outstanding 6,294,930 6,286,722 Effect of dilutive stock options, and vesting of restricted stock awards 23,558 24,144 Diluted weighted average shares outstanding 6,318,488 6,259,755 6,310,866 6,260,425 Income per common share: Basic $ 0.33 $ 0.29 $ 0.88 $ 0.45 Diluted $ 0.33 $ 0.28 $ 0.87 $ 0.45 |
INVESTMENT SECURITIES
INVESTMENT SECURITIES | 9 Months Ended |
Sep. 30, 2017 | |
INVESTMENT SECURITIES | |
INVESTMENT SECURITIES | 4. INVESTMENT SECURITIES The amortized cost and estimated fair value of investment securities available for sale as of September 30, 2017 and December 31, 2016 are as follows (dollars in thousands): Gross Gross Amortized Unrealized Unrealized Estimated Cost Gains Losses Fair Value September 30, 2017 Corporate $ 24,415 $ 164 $ (20) $ 24,559 Equity 500 — — 500 US Agencies 22,468 88 (13) 22,543 US Agencies - MBS 13,765 56 (58) 13,763 Obligations of states and political subdivisions 23,244 533 (133) 23,644 Total securities available for sale $ 84,392 $ 841 $ (224) $ 85,009 December 31, 2016 Corporate $ 19,899 $ 49 $ (38) $ 19,910 Equity 500 — — 500 US Agencies 23,991 47 (86) 23,952 US Agencies - MBS 16,980 48 (195) 16,833 Obligations of states and political subdivisions 25,057 447 (426) 25,078 Total securities available for sale $ 86,427 $ 591 $ (745) $ 86,273 The Corporation has evaluated gross unrealized losses that exist within the portfolio and considers them temporary in nature. The Corporation has both the ability and the intent to hold the investment securities until their respective maturities and therefore does not anticipate the realization of the temporary losses. The amortized cost and estimated fair value of investment securities pledged to secure FHLB borrowings and customer relationships were $14.029 million and $14.038 million, respectively, at September 30, 2017. |
LOANS
LOANS | 9 Months Ended |
Sep. 30, 2017 | |
LOANS | |
LOANS | 5. LOANS The composition of loans is as follows (dollars in thousands): September 30, December 31, 2017 2016 Commercial real estate $ 409,269 $ 389,420 Commercial, financial, and agricultural 154,638 142,648 Commercial construction 8,892 11,505 One to four family residential real estate 204,419 205,945 Consumer 18,247 20,113 Consumer construction 12,684 12,226 Total loans $ 808,149 $ 781,857 The Corporation completed the acquisition of Peninsula Financial Corporation (“PFC”) on December 5, 2014, The First National Bank of Eagle River (“Eagle River”) on April 29, 2016 and Niagara Bancorporation (“Niagara”) on August 31, 2016. The PFC acquired impaired loans totaled $13.290 million, the Eagle River acquired impaired loans totaled $3.401 million, and the Niagara acquired impaired loans totaled $2.105 million. In the first nine months of 2017, the Corporation had positive resolution of acquired impaired loans, which resulted in the recognition of $.370 million of accretable interest. In the first nine months of 2016, the Corporation had positive resolution of one PFC acquired impaired loan which resulted in the recognition of approximately $96,000 of accretable interest. The table below details the outstanding balances of the PFC acquired portfolio and the fair value adjustments at acquisition date (dollars in thousands): Acquired Acquired Acquired Impaired Non-impaired Total Loans acquired - contractual payments $ 13,290 $ 53,849 $ 67,139 Nonaccretable difference (2,234) — (2,234) Expected cash flows 11,056 53,849 64,905 Accretable yield (744) (2,100) (2,844) Carrying balance at acquisition date $ 10,312 $ 51,749 $ 62,061 The table below details the outstanding balances of the Eagle River acquired portfolio and the fair value adjustments at acquisition date (dollars in thousands): Acquired Acquired Acquired Impaired Non-impaired Total Loans acquired - contractual payments $ 3,401 $ 80,737 $ 84,138 Nonaccretable difference (1,172) — (1,172) Expected cash flows 2,229 80,737 82,966 Accretable yield (391) (1,700) (2,091) Carrying balance at acquisition date $ 1,838 $ 79,037 $ 80,875 The table below details the outstanding balances of the Niagara acquired portfolio and the fair value adjustments at acquisition date (dollars in thousands): Acquired Acquired Acquired Impaired Non-impaired Total Loans acquired - contractual payments $ 2,105 $ 30,555 $ 32,660 Nonaccretable difference (265) — (265) Expected cash flows 1,840 30,555 32,395 Accretable yield (88) (600) (688) Carrying balance at acquisition date $ 1,752 $ 29,955 $ 31,707 The table below presents a rollforward of the accretable yield on acquired loans for the nine months ended September 30, 2017 (dollars in thousands): PFC Eagle River Niagara Acquired Acquired Acquired Acquired Acquired Acquired Acquired Acquired Acquired Impaired Non-impaired Total Impaired Non-impaired Total Impaired Non-impaired Total Balance, December 31, 2016 $ 282 $ 642 $ 924 $ 236 $ 1,221 $ 1,457 $ 52 $ 505 $ 557 Accretion (310) (525) (835) (50) (466) (516) (10) (169) (179) Other adjustment to nonaccretable difference 215 — 215 37 — 37 (1) — (1) Balance, September 30, 2017 $ 187 $ 117 $ 304 $ 223 $ 755 $ 978 $ 41 $ 336 $ 377 The table below presents a rollforward of the accretable yield on acquired loans for the nine months ended September 30, 2016 (dollars in thousands): PFC Eagle Niagara Acquired Acquired Acquired Acquired Acquired Acquired Acquired Acquired Acquired Impaired Non-impaired Total Impaired Non-impaired Total Impaired Non-impaired Total Balance, December 31, 2015 $ 426 $ 1,342 $ 1,768 $ — $ — $ — $ — $ — $ — Acquisitions — — — 391 1,700 2,091 88 600 688 Accretion — (525) (525) — (299) (299) — (49) (49) Reclassification from nonaccretable difference (80) — (80) (54) — (54) — — — Balance, September 30, 2016 $ 346 $ 817 $ 1,163 $ 337 $ 1,401 $ 1,738 $ 88 $ 551 $ 639 Allowance for Loan Losses An analysis of the allowance for loan losses for the nine months ended September 30, 2017 and the year ended September 30, 2016 is as follows (dollars in thousands): September 30, September 30, 2017 2016 Balance, January 1 $ 5,020 $ Recoveries on loans previously charged off 215 Loans charged off (505) Provision 400 Balance at end of period $ 5,130 $ 4,862 In the first nine months of 2017, net charge-offs were $.290 million, compared to net charge-offs of $.492 million in the same period in 2016. In the first nine months of 2017, the Corporation recorded a provision for loan loss of $.400 million compared to a $.350 million provision in the first nine months of 2016. The Corporation’s allowance for loan loss reserve policy calls for a measurement of the adequacy of the reserve at each quarter end. This process includes an analysis of the loan portfolio to take into account increases in loans outstanding and portfolio composition, historical loss rates, and specific reserve requirements of nonperforming loans. A breakdown of the allowance for loan losses and recorded balances in loans at September 30, 2017 is as follows (dollars in thousands): Commercial, One to four Commercial financial and Commercial family residential Consumer real estate agricultural construction real estate construction Consumer Unallocated Total Three Months Ended September 30, 2017 Allowance for loan loss reserve: Beginning balance ALLR $ 1,463 $ 695 $ 95 $ 259 $ 6 $ 15 $ 2,600 $ 5,133 Charge-offs — (171) — (27) — (52) — (250) Recoveries 10 31 1 1 — 4 — 47 Provision 25 187 3 4 — 59 (78) 200 Ending balance ALLR $ 1,498 $ 742 $ 99 $ 237 $ 6 $ 26 $ 2,522 $ 5,130 Nine Months Ended September 30, 2017 Allowance for loan loss reserve: Beginning balance ALLR $ 1,345 $ 614 $ 57 $ 296 $ 6 $ 90 $ 2,612 $ 5,020 Charge-offs — (264) — (76) — (165) — (505) Recoveries 72 35 2 63 — 43 — 215 Provision 81 357 40 (46) — 58 (90) 400 Ending balance ALLR $ 1,498 $ 742 $ 99 $ 237 $ 6 $ 26 $ 2,522 $ 5,130 At September 30, 2017 Loans: Ending balance $ 409,269 $ 154,638 $ 8,892 $ 204,419 $ 12,684 $ 18,247 $ — $ 808,149 Ending balance ALLR (1,498) (742) (99) (237) (6) (26) (2,522) (5,130) Net loans $ 407,771 $ 153,896 $ 8,793 $ 204,182 $ 12,678 $ 18,221 $ (2,522) $ 803,019 Ending balance ALLR: Individually evaluated $ 571 $ 331 $ 38 $ 19 $ — $ 17 $ — $ 976 Collectively evaluated 927 411 61 218 6 9 2,522 4,154 Total $ 1,498 $ 742 $ 99 $ 237 $ 6 $ 26 $ 2,522 $ 5,130 Ending balance Loans: Individually evaluated $ 1,801 $ 1,283 $ 377 $ 525 $ — $ 46 $ — $ 4,032 Collectively evaluated 405,610 153,355 8,515 202,281 12,633 18,201 — 800,595 Acquired with deteriorated credit quality 1,858 — — 1,613 51 — — 3,522 Total $ 409,269 $ 154,638 $ 8,892 $ 204,419 $ 12,684 $ 18,247 $ — $ 808,149 Impaired loans, by definition, are individually evaluated. A breakdown of the allowance for loan losses and recorded balances in loans at September 30, 2016 is as follows (dollars in thousands): Commercial, One to four Commercial financial and Commercial family residential Consumer real estate agricultural construction real estate construction Consumer Unallocated Total Three Months Ended September 30, 2016 Allowance for loan loss reserve: Beginning balance ALLR $ 1,824 $ 700 $ 78 $ 348 $ 5 $ 23 $ 1,755 $ 4,733 Charge-offs (20) — — (76) — (10) — (106) Recoveries 17 4 — 2 — 12 — 35 Provision (235) (180) (16) 133 1 49 448 200 Ending balance ALLR $ 1,586 $ 524 $ 62 $ 407 $ 6 $ 74 $ 2,203 $ 4,862 Nine Months Ended September 30, 2016 Allowance for loan loss reserve: Beginning balance ALLR $ 1,611 $ 645 $ 79 $ 274 $ 7 $ 64 $ 2,324 $ 5,004 Charge-offs (245) (206) — (125) — (36) — (612) Recoveries 40 40 — 4 7 29 — 120 Provision 180 45 (17) 254 (8) 17 (121) 350 Ending balance ALLR $ 1,586 $ 524 $ 62 $ 407 $ 6 $ 74 $ 2,203 $ 4,862 At September 30, 2016 Loans: Ending balance $ 362,858 $ 136,065 $ 14,343 $ 211,072 $ 11,768 $ 20,698 $ — $ 756,804 Ending balance ALLR (1,586) (524) (62) (407) (6) (74) (2,203) (4,862) Net loans $ 361,272 $ 135,541 $ 14,281 $ 210,665 $ 11,762 $ 20,624 $ (2,203) $ 751,942 Ending balance ALLR: Individually evaluated $ 570 $ 252 $ — $ 68 $ — $ 64 $ — $ 954 Collectively evaluated 1,016 272 62 339 6 10 2,203 3,908 Total $ 1,586 $ 524 $ 62 $ 407 $ 6 $ 74 $ 2,203 $ 4,862 Ending balance Loans: Individually evaluated $ 2,035 $ 329 $ — $ 1,038 $ — $ 288 $ — $ 3,690 Collectively evaluated 357,030 135,736 14,343 206,199 11,709 20,410 — 745,427 Acquired with deteriorated credit quality 3,793 — — 3,835 59 — — 7,687 Total $ 362,858 $ 136,065 $ 14,343 $ 211,072 $ 11,768 $ 20,698 $ — $ 756,804 As part of the management of the loan portfolio, risk ratings are assigned to all commercial loans. Through the loan review process, ratings are modified as believed to be appropriate to reflect changes in the credit. Our ability to manage credit risk depends in large part on our ability to properly identify and manage problem loans. To do so, we operate a credit risk rating system under which our credit management personnel assign a credit risk rating to each loan at the time of origination and review loans on a regular basis to determine each loan’s credit risk rating on a scale of 1 through 8, with higher scores indicating higher risk. The credit risk rating structure used is shown below. In the context of the credit risk rating structure, the term Classified is defined as a problem loan which may or may not be in a nonaccrual status, dependent upon current payment status and collectability. Strong (1) Borrower is not vulnerable to sudden economic or technological changes. They have “strong” balance sheets and are within an industry that is very typical for our markets or type of lending culture. Borrowers also have “strong” financial and cash flow performance and excellent collateral (low loan to value or readily available to liquidate collateral) in conjunction with an impeccable repayment history. Good (2) Borrower shows limited vulnerability to sudden economic change. These borrowers have “above average” financial and cash flow performance and a very good repayment history. The balance sheet of the company is also very good as compared to peer and the company is in an industry that is familiar to our markets or our type of lending. The collateral securing the deal is also very good in terms of its type, loan to value, and other relevant characteristics. Average (3) Borrower is typically a well-seasoned business, however may be susceptible to unfavorable changes in the economy, and could be somewhat affected by seasonal factors. The borrowers within this category exhibit financial and cash flow performance that appear “average” to “slightly above average” when compared to peer standards and they show an adequate payment history. Collateral securing this type of credit is good, exhibiting above average loan to values, and other relevant characteristics. Acceptable/Acceptable Watch (4) A borrower within this category exhibits financial and cash flow performance that appear adequate and satisfactory when compared to peer standards and they show a satisfactory payment history. The collateral securing the request is within supervisory limits and overall is acceptable. Borrowers rated acceptable could also be newer businesses that are typically susceptible to unfavorable changes in the economy, and more than likely could be affected by seasonal factors. Special Mention (5) The borrower may have potential weaknesses that deserve management’s close attention. If left uncorrected, these potential weaknesses may result in deterioration of the repayment prospects for the asset or in the institution’s credit position at some future date. Special mention assets are not adversely classified and do not expose an institution to sufficient risk to warrant adverse classification. Examples of this type of credit include a start-up company fully based on projections, a documentation issue that needs to be corrected or a general market condition that the borrower is working through to get corrected. Substandard (6) Substandard loans are classified assets exhibiting a number of well-defined weaknesses that jeopardize normal repayment. The assets are no longer adequately protected due to declining net worth, lack of earning capacity, or insufficient collateral offering the distinct possibility of the loss of a portion of the loan principal. Loans classified as substandard clearly represent troubled and deteriorating credit situations requiring constant supervision. Doubtful (7) Loans in this category exhibit the same, if not more pronounced weaknesses used to describe the substandard credit. Loans are frozen with collection improbable. Such loans are not yet rated as Charge-off because certain actions may yet occur which would salvage the loan. Charge-off/Loss (8) Loans in this category are largely uncollectible and should be charged against the loan loss reserve immediately. General Reserves: For loans with a credit risk rating of 5 or better and any loans with a risk rating of 6 or 7 not considered impaired, reserves are established based on the type of loan collateral, if any, and the assigned credit risk rating. Determination of the allowance is inherently subjective as it requires significant estimates, including the amounts and timing of expected future cash flows on impaired loans, estimated losses on pools of homogenous loans based on historical loss experience, and consideration of current environmental factors and economic trends, all of which may be susceptible to significant change. Using a historical average loss by loan type as a base, each loan graded as higher risk is assigned a specific percentage. The residential real estate and consumer loan portfolios are assigned a loss percentage as a homogenous group. If, however, on an individual loan the projected loss based on collateral value and payment histories is in excess of the computed allowance, the allocation is increased for the higher anticipated loss. These computations provide the basis for the allowance for loan losses as recorded by the Corporation. Below is a breakdown of loans by risk category as of September 30, 2017 (dollars in thousands): (4) (1) (2) (3) Acceptable/ (5) (6) (7) Rating Strong Good Average Acceptable Watch Special Mention Substandard Doubtful Unassigned Total Commercial real estate $ 4,058 $ 20,655 $ 156,563 $ 213,805 $ 9,529 $ 4,659 $ — $ — $ 409,269 Commercial, financial and agricultural 13,262 9,282 49,947 75,366 5,394 1,387 — — 154,638 Commercial construction — 313 3,043 1,170 377 653 — 3,336 8,892 One-to-four family residential real estate 125 1,356 2,588 5,370 1,111 3,720 — 190,149 204,419 Consumer construction — — — — — 14 — 12,670 12,684 Consumer — — — 29 6 75 — 18,137 18,247 Total loans $ 17,445 $ 31,606 $ 212,141 $ 295,740 $ 16,417 $ 10,508 $ — $ 224,292 $ 808,149 Below is a breakdown of loans by risk category as of December 31, 2016 (dollars in thousands): (4) (1) (2) (3) Acceptable/ (5) (6) (7) Rating Strong Good Average Acceptable Watch Special Mention Substandard Doubtful Unassigned Total Commercial real estate $ 3,021 $ 23,940 $ 140,618 $ 216,518 $ $ 5,323 $ — $ — $ 389,420 Commercial, financial and agricultural 10,421 13,434 49,434 67,582 1,777 — — 142,648 Commercial construction — 900 3,146 2,660 385 — 4,414 11,505 One-to-four family residential real estate 740 1,373 3,412 9,585 5,493 — 185,342 205,945 Consumer construction 28 — — — — 17 — 12,181 12,226 Consumer 20 — 15 55 103 — 19,920 20,113 Total loans $ 14,230 $ 39,647 $ 196,625 $ 296,400 $ — $ 13,098 $ — $ 221,857 $ 781,857 Impaired Loans Nonperforming loans are those which are contractually past due 90 days or more as to interest or principal payments, on nonaccrual status, or loans, the terms of which have been renegotiated to provide a reduction or deferral on interest or principal. Loans are considered impaired when, based on current information and events, it is probable the Corporation will be unable to collect all amounts due in accordance with the original contractual terms of the loan agreement, including scheduled principal and interest payments. Impairment is evaluated in total for smaller-balance loans of a similar nature and on an individual loan basis for other loans. If a loan is impaired, a specific valuation allowance is allocated, if necessary, so that the loan is reported net, at the present value of estimated future cash flows using the loan’s existing rate or at the fair value of collateral if repayment is expected solely from the collateral. Interest payments on impaired loans are typically applied to principal unless collectability of the principal amount is reasonably assured, in which case interest is recognized on a cash basis. Impaired loans, or portions thereof, are charged off when deemed uncollectible. The following is a summary of impaired loans and their effect on interest income (dollars in thousands): QTD YTD QTD YTD Nonaccrual Nonaccrual Accrual Average Average Related Interest Income Interest Income Recorded Balance Unpaid Balance Basis Investment Investment Valuation Reserve on Accrual Basis on Accrual Basis September 30, 2017 With no valuation reserve: Commercial real estate $ 697 $ 698 $ 1,858 $ 1,243 $ 1,331 $ — $ 29 $ 180 Commercial, financial and agricultural 7 8 — 29 152 — — — Commercial construction — — — 1,290 — — — — One to four family residential real estate 1,293 1,293 1,613 — 1,432 — 28 160 Consumer construction 14 14 53 14 14 — 1 3 Consumer 59 59 — 47 44 — 1 2 With a valuation reserve: Commercial real estate $ 680 $ 680 $ — $ 586 $ 426 $ 247 $ — $ — Commercial, financial and agricultural 201 201 — 169 140 49 — — Commercial construction — — — — — — — — One to four family residential real estate 114 115 — 160 178 53 — — Consumer construction — — — — — — — — Consumer — — — — — — — — Total: Commercial real estate $ 1,377 $ 1,378 $ 1,858 $ 1,829 $ 1,757 $ 247 $ 29 $ 180 Commercial, financial and agricultural 208 209 — 198 292 49 — — Commercial construction — — — 1,290 — — — — One to four family residential real estate 1,407 1,408 1,613 160 1,610 53 28 160 Consumer construction 14 14 53 14 14 — 1 3 Consumer 59 59 — 47 44 — 1 2 Total $ 3,065 $ 3,068 $ 3,524 $ 3,538 $ 3,717 $ 349 $ 59 $ 345 Nonaccrual Nonaccrual YTD YTD Recorded Unpaid Accrual Average Related Interest Income Balance Balance Basis Investment Valuation Reserve on Accrual Basis December 31, 2016 With no valuation reserve: Commercial real estate $ 1,426 $ 1,891 $ 3,234 $ 5,318 $ — $ 232 Commercial, financial and agricultural 11 11 — 116 — 3 Commercial construction — — — — — — One to four family residential real estate 1,623 2,198 2,792 4,500 — 196 Consumer construction 17 22 57 36 — 4 Consumer 82 86 4 127 — 2 With a valuation reserve: Commercial real estate $ 306 $ 328 $ — $ 103 $ 50 $ — Commercial, financial and agricultural 326 357 — 109 231 — Commercial construction — — — — — — One to four family residential real estate 333 333 — 171 94 — Consumer construction — — — — — — Consumer — — — 5 5 — Total: Commercial real estate $ 1,732 $ 2,219 $ 3,234 $ 5,421 $ 50 $ 232 Commercial, financial and agricultural 337 368 — 225 231 3 Commercial construction — — — — — — One to four family residential real estate 1,956 2,531 2,792 4,671 94 196 Consumer construction 17 22 57 36 — 4 Consumer 82 86 4 132 5 2 Total $ 4,124 $ 5,226 $ 6,087 $ 10,485 $ 380 $ 437 A summary of past due loans at September 30, 2017 and December 31, 2016 is as follows (dollars in thousands): September 30, December 31, 2017 2016 30-89 days 90+ days 30-89 days 90+ days Past Due Past Due/ Past Due Past Due/ (accruing) Nonaccrual Total (accruing) Nonaccrual Total Commercial real estate $ 247 $ 1,320 $ 1,567 $ 942 $ 1,732 $ 2,674 Commercial, financial and agricultural 478 265 743 186 337 523 Commercial construction — 14 14 — — — One to four family residential real estate 1,847 1,408 3,255 2,113 1,956 4,069 Consumer construction — — — — 17 17 Consumer 86 58 144 133 82 215 Total past due loans $ 2,658 $ 3,065 $ 5,723 $ 3,374 $ 4,124 $ 7,498 Troubled Debt Restructuring Troubled debt restructurings (“TDR”) are determined on a loan-by-loan basis. Generally restructurings are related to interest rate reductions, loan term extensions and short term payment forbearance as means to maximize collectability of troubled credits. If a portion of the TDR loan is uncollectible (including forgiveness of principal), the uncollectible amount will be charged off against the allowance at the time of the restructuring. In general, a borrower must make at least six consecutive timely payments before the Corporation would consider a return of a restructured loan to accruing status in accordance with FDIC guidelines regarding restoration of credits to accrual status. The Corporation has, in accordance with generally accepted accounting principles and applicable accounting standard updates, evaluated all loan modifications to determine the fair value impact of the underlying asset. The carrying amount of the loan is compared to the expected payments to be received, discounted at the loan’s original rate, or for collateral dependent loans, to the fair value of the collateral. There were no troubled debt restructurings that occurred during the nine months ended September 30, 2017 or September 30, 2016. Insider Loans The Bank, in the ordinary course of business, grants loans to the Corporation’s executive officers and directors, including their families and firms in which they are principal owners. Activity in such loans is summarized below (dollars in thousands): Nine Months Ended Nine Months Ended September 30, September 30, 2017 2016 Loans outstanding, January 1 $ 9,195 $ 6,887 New loans — — Net activity on revolving lines of credit 554 1,720 Repayment (476) (2,269) Loans outstanding at end of period $ 9,273 $ There were no loans to related parties classified substandard as of September 30, 2017 or September 30, 2016. In addition to the outstanding balances above, there were unfunded commitments of $1.921 million to related parties at Septemebr 30, 2017. |
GOODWILL AND OTHER INTANGIBLE A
GOODWILL AND OTHER INTANGIBLE ASSETS | 9 Months Ended |
Sep. 30, 2017 | |
GOODWILL AND OTHER INTANGIBLE ASSETS | |
GOODWILL AND OTHER INTANGIBLE ASSETS | 6. GOODWILL AND OTHER INTANGIBLE ASSETS During the fourth quarter of 2014, the Corporation recorded $3.805 million of goodwill and $1.206 million of deposit based intangible assets associated with the acquisition of PFC. During 2016, the Corporation recorded $1.839 million of goodwill and $.993 million of deposit based intangible assets associated with the acquisition of Eagle River. Also in 2016, the Corporation recorded $50,000 of goodwill and $.300 million of deposit based intangible assets associated with the acquisition of Niagara. The deposit based intangible is reported net of accumulated amortization at $1.985 million at September 30, 2017. Amortization expense in the first nine months of 2017 is $.187 million. Amortization expense for the next five years is expected to be at $.250 million per year. |
SERVICING RIGHTS
SERVICING RIGHTS | 9 Months Ended |
Sep. 30, 2017 | |
SERVICING RIGHTS | |
SERVICING RIGHTS | 7. SERVICING RIGHTS Mortgage Loans Mortgage servicing rights (“MSRs”) are recorded when loans are sold in the secondary market with servicing retained. As of September 30, 2017, the Corporation had obligations to service approximately $204.087 million of residential first mortgage loans. The valuation of MSRs is based upon the net present value of the projected revenues over the expected life of the loans being serviced, as reduced by estimated internal costs to service these loans. The fair value of the capitalized servicing rights approximates the carrying value. On a quarterly basis, management evaluates the MSRs for impairment. The key economic assumptions used in determining the fair value of the MSRs include an annual constant prepayment speed of 10.84% and a discount rate of 9.73% for September 30, 2017. In 2016, management decided to no longer regularly retain the servicing on mortgage loans sold. The following table summarizes MSRs capitalized and amortized, along with the aggregate activity in related valuation allowances (dollars in thousands): Nine Months Ended Nine Months Ended September 30, September 30, 2017 2016 Balance at beginning of period $ 1,573 $ 1,965 Additions from loans sold with servicing retained — — Acquired MSRs — 207 Amortization (411) (495) Balance at end of period $ 1,162 $ 1,677 Balance of loan servicing portfolio $ 204,087 $ 233,356 Mortgage servicing rights as % of portfolio .57% .72% Commercial Loans The Corporation also retains the servicing on certain commercial loans that have been sold. These loans were originated and underwritten under the SBA and USDA government guarantee programs, in which the guaranteed portion of the loan was sold to a third party with servicing retained. The balance of these sold loans with servicing retained at September 30, 2017 and September 30, 2016 was approximately $39.737 million and $43.2 million, respectively. The Corporation valued these servicing rights at $.117 million as of September 30, 2017 and at $.147 million as of September 30, 2016. This valuation was established in consideration of the discounted cash flow of net expected servicing income over the life of the loans. |
BORROWINGS
BORROWINGS | 9 Months Ended |
Sep. 30, 2017 | |
BORROWINGS | |
BORROWINGS | 8. BORROWINGS Borrowings consist of the following at September 30, 2017 and December 31, 2016 (dollars in thousands): September 30, December 31, 2017 2016 Federal Home Loan Bank fixed rate advances $ 70,000 $ 45,000 Correspondent bank line of credit 1,295 750 Correspondent bank term note 19,549 21,199 USDA Rural Development note 553 630 $ 91,397 $ 67,579 The Federal Home Loan Bank borrowings bear a weighted average rate of 2.09% and mature in 2017, 2018, 2019, 2020 and 2021. They are collateralized at September 30, 2017 by the following: a collateral agreement on the Corporation’s one to four family residential real estate loans with a book value of approximately $73.676 million; mortgage related and municipal securities with an amortized cost and estimated fair value of $11.976 million and $11.993 million, respectively; and Federal Home Loan Bank stock owned by the Bank totaling $3.250 million. Prepayment of the advances is subject to the provisions and conditions of the credit policy of the Federal Home Loan Bank of Indianapolis and the Federal Home Loan Bank of Chicago in effect as of September 30, 2017. The Corporation currently has one banking borrowing relationship. The relationship consists of a $5.0 million revolving line of credit and a term note. The line of credit bears interest at a rate of 90-day LIBOR plus 2.75% and has an initial term that expires on April 30, 2018. LIBOR at September 30, 2017 was 1.33%. The term note bears the same interest and matures on April 30, 2019 and requires quarterly principal payments of $.550 million, which began March 31, 2017. This relationship is secured by all of the outstanding mBank stock. The USDA Rural Development borrowing bears an interest rate of 1.00% and matures in August, 2024. It is collateralized by an assignment of a demand deposit account held by the Corporation’s wholly owned subsidiary, First Rural Relending, in the amount of $.619 million, and guaranteed by the Corporation. |
DEFINED BENEFIT PENSION PLAN
DEFINED BENEFIT PENSION PLAN | 9 Months Ended |
Sep. 30, 2017 | |
DEFINED BENEFIT PENSION PLAN | |
DEFINED BENEFIT PENSION PLAN | 9. The Corporation acquired the Peninsula Financial Corporation noncontributory defined benefit pension plan in 2014. Effective December 31, 2005, the plan was amended to freeze participation in the plan; therefore, no additional employees are eligible to become participants in the plan. The benefits are based on years of service and the employee’s compensation at the time of retirement. The Plan was amended effective December 31, 2010, to freeze benefit accrual for all participants. Expected contributions to the Plan in 2017 are $19,000. The anticipated distributions over the next five years and through December 31, 2026 are detailed in the table below (dollars in thousands): 2017 $ 128 2018 125 2019 122 2020 121 2021 120 2022-2026 723 Total $ 1,339 At September 30, 2017, the plan’s assets had a fair value of $2.049 million and the Corporation had a net unfunded liability of $1.138 million. The accumulated benefit obligation at September 30, 2017 was $3.187 million. At September 30, 2016, the plan’s assets had a fair value of $2.033 million and the Corporation had a net unfunded liability of $1.147 million. The accumulated benefit obligation at September 30, 2016 was $3.180 million. Assumptions in the actuarial valuation are: 2017 2016 Weighted average discount rate Rate of increase in future compensation levels N/A N/A Expected long-term rate of return on plan assets The expected long-term rate of return on plan assets reflects management’s expectations of long-term average rates of return on funds invested to provide for benefits included in the projected benefit obligation. The expected return is based on the outlook for inflation, fixed income returns and equity returns, while also considering historical returns, asset allocation and investment strategy. The discount rate assumption is based on investment yields available on AA rated long-term corporate bonds. The primary investment objective is to maximize growth of the pension plan assets to meet the projected obligations to the beneficiaries over a long period of time, and to do so in a manner that is consistent with the Corporation’s risk tolerance. The intention of the plan sponsor is to invest the plan assets in mutual funds with the following asset allocation; which was in place at both September 30, 2017 and December 31, 2016. Target Actual Allocation Allocation Equity securities 50% to 70% Fixed income securities 30% to 50% |
STOCK COMPENSATION PLANS
STOCK COMPENSATION PLANS | 9 Months Ended |
Sep. 30, 2017 | |
STOCK COMPENSATION PLANS | |
STOCK COMPENSATION PLANS | 10. STOCK COMPENSATION PLANS Restricted Stock Awards The Corporation’s restricted stock awards are service-based and awarded based on performance. Each award has a vesting period of four years. Compensation expense is recognized on a straight-line basis over the vesting period. Shares are subject to certain restrictions and risk of forfeiture by the participants. The Corporation has historically granted RSAs to members of the Board of Directors and management. Awards granted are set to vest equally over their award terms and are issued at no cost to the recipient. The table below summarizes each of the grant awards: Date of Award Units Granted Market Value at grant date Vesting Term March, 2014 52,774 $ 12.95 4 years March, 2015 37,730 $ 11.15 4 years May, 2015 3,000 $ 10.77 Immediate February, 2016 35,733 $ 9.91 4 years February, 2017 28,427 $ 13.39 4 years On August 31, 2013, 2014, 2015 and 2016, the Corporation issued 37,125 shares of its common stock for vested RSAs, in each year. In March 2015, the Corporation issued 13,194 shares of its common stock for vested RSAs. In May 2015, the Corporation granted 3,000 shares, which were immediately vested and issued. In March 2016, the Corporation issued 22,626 shares of its common stock for vested RSAs. In the first quarter of 2017, the Corporation issued 31,559 shares of its common stock for vested RSAs. A summary of changes in our nonvested shares for the period follows: Weighted Average Number Grant Date Outstanding Fair Value Nonvested balance at January 1, 2017 90,417 $ 11.19 Granted during the period 28,427 13.39 Vested during the period (31,559) 11.55 Nonvested balance at September 30, 2017 87,285 $ 11.78 |
INCOME TAXES
INCOME TAXES | 9 Months Ended |
Sep. 30, 2017 | |
INCOME TAXES | |
INCOME TAXES | 11. INCOME TAXES The Corporation has reported deferred tax assets of $6.266 million at September 30, 2017. A valuation allowance is provided against deferred tax assets when it is more likely than not that some or all of the deferred tax asset will not be realized. The Corporation, as of September 30, 2017 had a net operating loss and tax credit carryforwards for tax purposes of approximately $7.6 million, and $1.7 million, respectively. The Corporation evaluated the future benefits from these carryforwards as of September 30, 2017 and determined that it was “more likely than not” that they would be utilized prior to expiration. The net operating loss carryforwards expire twenty years from the date they originated. These carryforwards, if not utilized, will begin to expire in the year 2023. A portion of the NOL and credit carryforwards are subject to the limitations for utilization as set forth in Section 382 of the Internal Revenue Code. The annual limitation is $1.404 million for the NOL and the equivalent value of tax credits, which is approximately $.476 million. These limitations for use were established in conjunction with the recapitalization of the Corporation in December 2004. The Corporation will continue to evaluate the future benefits from these carryforwards in order to determine if any adjustment to the deferred tax asset is warranted. The Corporation recognized a federal income tax expense of approximately $2.681 million for the nine months ended September 30, 2017 and $1.481 million for the nine months ended September 30, 2016. |
FAIR VALUE MEASUREMENTS
FAIR VALUE MEASUREMENTS | 9 Months Ended |
Sep. 30, 2017 | |
FAIR VALUE MEASUREMENTS | |
FAIR VALUE MEASUREMENTS | 12. FAIR VALUE MEASUREMENTS Fair value estimates, methods, and assumptions are set forth below for the Corporation’s financial instruments: Cash, cash equivalents, and interest-bearing deposits - The carrying values approximate the fair values for these assets. Securities - Fair values are based on quoted market prices where available. If a quoted market price is not available, fair value is estimated using quoted market prices for similar securities and other inputs such as interest rates and yield curves that are observable at commonly quoted intervals. Federal Home Loan Bank stock – Federal Home Loan Bank stock is carried at cost, which is its redeemable value and approximates its fair value, since the market for this stock is limited. Loans - Fair values are estimated for portfolios of loans with similar financial characteristics. Loans are segregated by type such as commercial, residential mortgage, and other consumer. The fair value of loans is calculated by discounting scheduled cash flows using discount rates reflecting the credit and interest rate risk inherent in the loan. The methodology in determining fair value of nonaccrual loans is to average them into the blended interest rate at 0% interest. This has the effect of decreasing the carrying amount below the risk-free rate amount and, therefore, discounts the estimated fair value. Impaired loans are measured at the estimated fair value of the expected future cash flows at the loan’s effective interest rate or the fair value of the collateral for loans which are collateral dependent. Therefore, the carrying values of impaired loans approximate the estimated fair values for these assets. Deposits - The fair value of deposits with no stated maturity, such as noninterest-bearing demand deposits and savings, is equal to the amount payable on demand at the reporting date. The fair value of time deposits is based on the discounted value of contractual cash flows applying interest rates currently being offered on similar time deposits. Borrowings - Rates currently available for debt with similar terms and remaining maturities are used to estimate the fair value of existing debt. The fair value of borrowed funds due on demand is the amount payable at the reporting date. Accrued interest - The carrying amount of accrued interest approximates fair value. Off-balance-sheet instruments - The fair value of commitments is estimated using the fees currently charged to enter into similar agreements, taking into account the remaining terms of the agreements, the current interest rates, and the present creditworthiness of the counterparties. Since the differences in the current fees and those reflected to the off-balance-sheet instruments at year-end are immaterial, no amounts for fair value are presented. The following table presents information for financial instruments at September 30, 2017 and December 31, 2016 (dollars in thousands): September 30, 2017 December 31, 2016 Level in Fair Carrying Estimated Carrying Estimated Value Hierarchy Amount Fair Value Amount Fair Value Financial assets: Cash and cash equivalents Level 1 $ 57,682 57,682 $ 46,755 $ 46,755 Interest-bearing deposits Level 2 13,374 13,374 14,047 14,047 Securities available for sale Level 2 84,509 84,509 84,623 84,623 Securities available for sale Level 3 500 500 1,650 1,650 Federal Home Loan Bank stock Level 2 3,250 3,250 2,911 2,911 Net loans Level 3 803,019 800,352 776,837 778,377 Accrued interest receivable Level 3 2,224 2,224 2,016 2,016 Total financial assets $ 964,558 $ 961,891 $ 928,839 $ 930,379 Financial liabilities: Deposits Level 2 $ 835,203 811,066 $ 823,512 $ 815,960 Borrowings Level 2 91,397 91,697 67,579 68,293 Accrued interest payable Level 3 327 327 267 267 Total financial liabilities $ 926,927 $ 903,090 $ 891,358 $ 884,520 Limitations - Fair value estimates are made at a specific point in time based on relevant market information and information about the financial instrument. These estimates do not reflect any premium or discount that could result from offering for sale at one time the Corporation’s entire holdings of a particular financial instrument. Because no market exists for a significant portion of the Corporation’s financial instruments, fair value estimates are based on judgments regarding future expected loss experience, current economic conditions, risk characteristics of various financial instruments, and other factors. These estimates are subjective in nature and involve uncertainties and matters of significant judgment and therefore cannot be determined with precision. Changes in assumptions could significantly affect the estimates. Fair value estimates are based on existing on-and off-balance-sheet financial instruments without attempting to estimate the value of anticipated future business and the value of assets and liabilities that are not considered financial instruments. Significant assets and liabilities that are not considered financial assets or liabilities include premises and equipment, other assets, and other liabilities. In addition, the tax ramifications related to the realization of the unrealized gains and losses can have a significant effect on fair value estimates and have not been considered in the estimates. The following is information about the Corporation’s assets and liabilities measured at fair value on a recurring basis at September 30, 2017, and the valuation techniques used by the Corporation to determine those fair values. Level 1: In general, fair values determined by Level 1 inputs use quoted prices in active markets for identical assets or liabilities that the Corporation has the ability to access. Level 2: Fair values determined by Level 2 inputs use other inputs that are observable, either directly or indirectly. These Level 2 inputs include quoted prices for similar assets and liabilities in active markets, and other inputs such as interest rates and yield curves that are observable at commonly quoted intervals. Level 3: Level 3 inputs are unobservable inputs, including inputs available in situations where there is little, if any, market activity for the related asset or liability. The fair value of all investment securities at September 30, 2017 and December 31, 2016 were based on level 2 and level 3 inputs. There are no other assets or liabilities measured on a recurring basis at fair value. For additional information regarding investment securities, please refer to “Note 4 - Investment Securities.” The table below shows investment securities measured at fair value on a recurring basis (dollars in thousands): Quoted Prices Significant Significant Total (Gains) in Active Markets Other Observable Unobservable Losses for Total (Gains) Losses for Balance at for Identical Assets Inputs Inputs Three Months Ended Nine Months Ended (dollars in thousands) September 30, 2017 (Level 1) (Level 2) (Level 3) September 30, 2017 September 30, 2017 Assets Corporate $ $ — $ 24,559 $ — $ — $ — Equity — — — — US Agencies — 22,543 — — — US Agencies - MBS — 13,763 — 38 38 Obligations of state and political subdivisions 23,644 — 23,644 — — — $ 85,009 $ 38 $ 38 Quoted Prices Significant Significant in Active Markets Other Observable Unobservable Total Losses for Balance at for Identical Assets Inputs Inputs Twelve months ended (dollars in thousands) December 31, 2016 (Level 1) (Level 2) (Level 3) December 31, 2016 Assets Corporate $ $ — $ 19,910 $ — $ — Equity — — — US Agencies — 23,952 — — US Agencies - MBS — 15,683 1,150 — Obligations of state and political subdivisions 25,078 — 25,078 — — $ 86,273 $ — The Corporation had no Level 3 assets or liabilities measured at fair value on a recurring basis as of September 30, 2017, or December 31, 2016 other than as described above. In instances where inputs used to measure fair value fall into different levels in the above fair value hierarchy, fair value measurements in their entirety are categorized based on the lowest level input that is significant to the valuation. The Corporation’s assessment of the significance of particular inputs to these fair value measurements requires judgment and considers factors specific to each asset or liability. The Corporation also has assets that under certain conditions are subject to measurement at fair value on a non-recurring basis. These assets include certain impaired loans and other real estate owned. The Corporation has estimated the fair values of these assets using Level 3 inputs, specifically discounted cash flow projections. Assets Measured at Fair Value on a Nonrecurring Basis at September 30, 2017 Quoted Prices Significant Significant Total (Gains) in Active Markets Other Observable Unobservable Losses for Total (Gains) Losses for Balance at for Identical Assets Inputs Inputs Three Months Ended Nine Months Ended (dollars in thousands) September 30, 2017 (Level 1) (Level 2) (Level 3) September 30, 2017 September 30, 2017 Assets Impaired loans $ 6,589 $ — $ — $ 6,589 $ 209 $ Other real estate owned 4,413 — — 4,413 43 298 $ 252 659 Assets Measured at Fair Value on a Nonrecurring Basis at December 31, 2016 Quoted Prices Significant Significant in Active Markets Other Observable Unobservable Total Losses for Balance at for Identical Assets Inputs Inputs Twelve months ended (dollars in thousands) December 31, 2016 (Level 1) (Level 2) (Level 3) December 31, 2016 Assets Impaired loans $ $ — $ — $ $ 643 Other real estate held for sale — — 202 $ 845 Impaired loans categorized as Level 3 assets consist of non-homogeneous loans that are considered impaired. The Corporation estimates the fair value of the loans based on the present value of expected future cash flows using management’s best estimate of key assumptions. These assumptions include future payment ability, timing of payment streams, and estimated realizable values of available collateral (typically based on outside appraisals). |
SHAREHOLDERS' EQUITY
SHAREHOLDERS' EQUITY | 9 Months Ended |
Sep. 30, 2017 | |
SHAREHOLDERS' EQUITY | |
SHAREHOLDERS' EQUITY | 13. SHAREHOLDERS’ EQUITY The Corporation currently has a share repurchase program. The program is conducted under authorizations by the Board of Directors. The Corporation repurchased 14,000 shares in 2016, 102,455 shares in 2015, 13,700 shares in 2014 and 55,594 shares in 2013. The share repurchases were conducted under Board authorizations made and publically announced of $.600 million on February 27, 2013, $.600 million on December 17, 2013 and an additional $.750 million on April 28, 2015. None of these authorizations has an expiration date. As of September 30, 2017, $25,000 of the total authorization was available for future purchases. |
COMMITMENTS, CONTINGENCIES AND
COMMITMENTS, CONTINGENCIES AND CREDIT RISK | 9 Months Ended |
Sep. 30, 2017 | |
COMMITMENTS, CONTINGENCIES AND CREDIT RISK | |
COMMITMENTS, CONTINGENCIES AND CREDIT RISK | 14. COMMITMENTS, CONTINGENCIES AND CREDIT RISK Financial Instruments With Off-Balance-Sheet Risk The Corporation 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 standby letters of credit. Those instruments involve, to varying degrees, elements of credit risk in excess of the amount recognized in the consolidated balance sheets. The Corporation’s exposure to credit loss, in the event of nonperformance by the other party to the financial instrument for commitments to extend credit and standby letters of credit, is represented by the contractual amount of those instruments. The Corporation uses the same credit policies in making commitments and conditional obligations as it does for on-balance-sheet instruments. These commitments are as follows (dollars in thousands): September 30, December 31, 2017 2016 Commitments to extend credit: Variable rate $ 84,786 $ 59,496 Fixed rate 36,572 28,737 Standby letters of credit - Variable rate 8,193 8,252 Credit card commitments - Fixed rate 5,837 5,533 $ 135,388 $ 102,018 Commitments to extend credit are agreements to lend to a customer as long as there is no violation 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 are expected to expire without being drawn upon, the total commitment amounts do not necessarily represent future cash requirements. The Corporation evaluates each customer’s creditworthiness on a case-by-case basis. The amount of collateral obtained, if deemed necessary by the Corporation upon extension of credit, is based on management’s credit evaluation of the party. Collateral held varies, but may include accounts receivable, inventory, property, plant and equipment, and income-producing commercial properties. Standby letters of credit are conditional commitments issued by the Corporation to guarantee the performance of a customer to a third party. Those guarantees are primarily issued to support public and private borrowing arrangements. The credit risk involved in issuing letters of credit is essentially the same as that involved in extending loan facilities to customers. The commitments are structured to allow for 100% collateralization on all standby letters of credit. Credit card commitments are commitments on credit cards issued by the Corporation’s subsidiary and serviced by other companies. These commitments are unsecured. Legal Proceedings and Contingencies In the normal course of business, the Corporation is involved in various legal proceedings. For an expanded discussion on the Corporation’s legal proceedings, see Part II, Item 1, “Legal Proceedings” in this report. C oncentration of Credit Risk The Bank grants commercial, residential, agricultural, and consumer loans throughout Michigan and Northeastern Wisconsin. The Bank’s most prominent concentration in the loan portfolio relates to commercial real estate loans to operators of nonresidential buildings. This concentration at September 30, 2017 represents $116.526 million, or 20.56%, compared to $121.861 million, or 22.42%, of the commercial loan portfolio on December 31, 2016. The remainder of the commercial loan portfolio is diversified in such categories as hospitality and tourism, real estate agents and managers, new car dealers, gaming, petroleum, forestry, agriculture and construction. Due to the diversity of the Bank’s locations, the ability of debtors of residential and consumer loans to honor their obligations is not tied to any particular economic sector. |
BUSINESS COMBINATIONS
BUSINESS COMBINATIONS | 9 Months Ended |
Sep. 30, 2017 | |
BUSINESS COMBINATIONS | |
BUSINESS COMBINATIONS | 15. BUSINESS COMBINATIONS The First National Bank of Eagle River The Corporation completed its acquisition of The First National Bank of Eagle River (“Eagle River”) in April 2016. Eagle River had three branch offices and approximately $125 million in assets as of April 29, 2016, including total loans of $84 million and total deposits of $105 million. The results of operations due to the merger have been included in the Corporation’s results since the acquisition date. The merger was effected by a cash payment of $12.500 million. The Corporation recorded a $.933 million core deposit intangible asset and $1.839 million of goodwill in conjunction with the acquisition. Goodwill was recorded due to the synergies and economies of scale expected from combining operations of the Corporation with Eagle River. Niagara Bancorporation The Corporation completed its acquisition of Niagara Bancorporation, Inc. (“Niagara”) in August 2016. Niagara had four branch offices and approximately $67 million in assets as of August 31, 2016 including total loans of $33 million and total deposits of $59 million. The results of operations due to the merger have been included in the Corporation’s results since the acquisition date. The merger was effected by a cash payment of $7.325 million. The corporation recorded a $.300 million core deposit intangible asset and $50,000 of goodwill in conjunction with the acquisition. Goodwill was recorded due to the synergies and economies of scale expected from combining operations of the Corporation with Niagara. |
SUMMARY OF SIGNIFICANT ACCOUN23
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Policies) | 9 Months Ended |
Sep. 30, 2017 | |
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES | |
Basis of Presentation | Basis of Presentation The unaudited condensed consolidated financial statements of Mackinac Financial Corporation (the “Corporation”) have been prepared in accordance with generally accepted accounting principles for interim financial information and the instructions to Form 10-Q 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. Operating results for the three and nine month periods ended September 30, 2017 are not necessarily indicative of the results that may be expected for the year ending December 31, 2017. The unaudited consolidated financial statements and footnotes thereto should be read in conjunction with the audited consolidated financial statements and footnotes thereto included in the Corporation’s Annual Report on Form 10-K for the year ended December 31, 2016. In order to properly reflect some categories of other income and other expenses, reclassifications of expense and income items have been made to prior period numbers. The “net” other income and other expenses were unchanged by these reclassifications. The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenue and expenses during the reporting period. Actual results could differ from those estimates. Material estimates that are particularly susceptible to significant change in the near term relate to the determination of the allowance for loan losses, the valuation of investment securities, the valuation of foreclosed real estate, deferred tax assets, mortgage servicing rights, and the assessment of goodwill for impairment. |
Acquired Loans | Acquired Loans Loans acquired with evidence of credit deterioration since inception and for which it is probable that all contractual payments will not be received are accounted for under ASC Topic 310-30, Loans and Debt Securities Acquired with Deteriorated Credit Quality (“ASC 310-30”). These loans are recorded at fair value at the time of acquisition, with no carryover of the related allowance for loan losses. Fair value of acquired loans is determined using a discounted cash flow methodology based on assumptions about the amount and timing of principal and interest payments, principal prepayments and principal defaults and losses, and current market rates. In recording the fair values of acquired impaired loans at acquisition date, management calculates a non-accretable difference (the credit component of the purchased loans) and an accretable difference (the yield component of the purchased loans). Over the life of the acquired loans, management continues to estimate cash flows expected to be collected on pools of loans sharing common risk characteristics, which are treated in the aggregate when applying various valuation techniques. Management evaluates at each balance sheet date whether the present value of our pools of loans determined using the effective interest rates has decreased significantly and if so, recognizes a provision for loan loss in our consolidated statement of income. For any significant increases in cash flows expected to be collected, we adjust the amount of the accretable yield recognized on a prospective basis over the pool’s remaining life. Performing acquired loans are accounted for under Financial Accounting Standards Board (“FASB”) Topic 310-20, Receivables – Nonrefundable Fees and Other Costs. Performance of certain loans may be monitored and based on management’s assessment of the cash flows and other facts available, portions of the accretable difference may be delayed or suspended if management deems appropriate. The Corporation’s policy for determining when to discontinue accruing interest on performing acquired loans and the subsequent accounting for such loans is essentially the same as the policy for originated loans. |
Allowance for Loan Losses | Allowance for Loan Losses The allowance for loan losses includes specific allowances related to loans, when they have been judged to be impaired. A loan is impaired when, based on current information, it is probable that the Corporation will not collect all amounts due in accordance with the contractual terms of the loan agreement. These specific allowances are based on discounted cash flows of expected future payments using the loan’s initial effective interest rate or the fair value of the collateral if the loan is collateral dependent. The Corporation also has an unallocated allowance for loan losses for loans not considered impaired. The allowance for loan losses is maintained at a level which management believes is adequate to provide for incurred loan losses. Management periodically evaluates the adequacy of the allowance using the Corporation’s past loan loss experience, known and inherent risks in the portfolio, composition of the portfolio, current economic conditions, and other factors. The allowance does not include the effects of expected losses related to future events or future changes in economic conditions. This evaluation is inherently subjective since it requires material estimates that may be susceptible to significant change. Loans are charged against the allowance for loan losses when management believes the collectability of the principal is unlikely. In addition, various regulatory agencies periodically review the allowance for loan losses. These agencies may require additions to the allowance for loan losses based on their judgments of collectability. In management’s opinion, the allowance for loan losses is adequate to cover probable losses relating to specifically identified loans, as well as probable losses inherent in the balance of the loan portfolio as of the balance sheet date. |
Stock Compensation Plans | Stock Compensation Plans On May 22, 2012, the Corporation’s shareholders approved the Mackinac Financial Corporation 2012 Incentive Compensation Plan, under which current and prospective employees, non-employee directors and consultants may be awarded incentive stock options, non-statutory stock options, shares of restricted stock awards (“RSAs”), or stock appreciation rights. The aggregate number of shares of the Corporation’s common stock issuable under the plan is 575,000. At September 30, 2017 there were 268,836 shares available for issuance under this plan. Awards are made to certain other senior officers at the discretion of the Corporation’s management. Compensation cost equal to the fair value of the award is recognized over the vesting period. |
EARNINGS PER SHARE (Tables)
EARNINGS PER SHARE (Tables) | 9 Months Ended |
Sep. 30, 2017 | |
EARNINGS PER SHARE | |
Schedule showing the computation of basic and diluted earnings per share | The following shows the computation of basic and diluted earnings per share for the three and nine months ended September 30, 2017 and 2016 (dollars in thousands, except per share data): Three Months Ended September 30, Nine Months Ended September 30, 2017 2016 2017 2016 (Numerator): Net income $ 2,093 $ $ 5,499 $ (Denominator): Weighted average shares outstanding 6,294,930 6,286,722 Effect of dilutive stock options, and vesting of restricted stock awards 23,558 24,144 Diluted weighted average shares outstanding 6,318,488 6,259,755 6,310,866 6,260,425 Income per common share: Basic $ 0.33 $ 0.29 $ 0.88 $ 0.45 Diluted $ 0.33 $ 0.28 $ 0.87 $ 0.45 |
INVESTMENT SECURITIES (Tables)
INVESTMENT SECURITIES (Tables) | 9 Months Ended |
Sep. 30, 2017 | |
INVESTMENT SECURITIES | |
Schedule of carrying value and estimated fair value of securities available for sale | The amortized cost and estimated fair value of investment securities available for sale as of September 30, 2017 and December 31, 2016 are as follows (dollars in thousands): Gross Gross Amortized Unrealized Unrealized Estimated Cost Gains Losses Fair Value September 30, 2017 Corporate $ 24,415 $ 164 $ (20) $ 24,559 Equity 500 — — 500 US Agencies 22,468 88 (13) 22,543 US Agencies - MBS 13,765 56 (58) 13,763 Obligations of states and political subdivisions 23,244 533 (133) 23,644 Total securities available for sale $ 84,392 $ 841 $ (224) $ 85,009 December 31, 2016 Corporate $ 19,899 $ 49 $ (38) $ 19,910 Equity 500 — — 500 US Agencies 23,991 47 (86) 23,952 US Agencies - MBS 16,980 48 (195) 16,833 Obligations of states and political subdivisions 25,057 447 (426) 25,078 Total securities available for sale $ 86,427 $ 591 $ (745) $ 86,273 |
LOANS (Tables)
LOANS (Tables) | 9 Months Ended |
Sep. 30, 2017 | |
Schedule of composition of loans | The composition of loans is as follows (dollars in thousands): September 30, December 31, 2017 2016 Commercial real estate $ 409,269 $ 389,420 Commercial, financial, and agricultural 154,638 142,648 Commercial construction 8,892 11,505 One to four family residential real estate 204,419 205,945 Consumer 18,247 20,113 Consumer construction 12,684 12,226 Total loans $ 808,149 $ 781,857 |
Schedule of the accretable yield by acquisition | The table below presents a rollforward of the accretable yield on acquired loans for the nine months ended September 30, 2017 (dollars in thousands): PFC Eagle River Niagara Acquired Acquired Acquired Acquired Acquired Acquired Acquired Acquired Acquired Impaired Non-impaired Total Impaired Non-impaired Total Impaired Non-impaired Total Balance, December 31, 2016 $ 282 $ 642 $ 924 $ 236 $ 1,221 $ 1,457 $ 52 $ 505 $ 557 Accretion (310) (525) (835) (50) (466) (516) (10) (169) (179) Other adjustment to nonaccretable difference 215 — 215 37 — 37 (1) — (1) Balance, September 30, 2017 $ 187 $ 117 $ 304 $ 223 $ 755 $ 978 $ 41 $ 336 $ 377 The table below presents a rollforward of the accretable yield on acquired loans for the nine months ended September 30, 2016 (dollars in thousands): PFC Eagle Niagara Acquired Acquired Acquired Acquired Acquired Acquired Acquired Acquired Acquired Impaired Non-impaired Total Impaired Non-impaired Total Impaired Non-impaired Total Balance, December 31, 2015 $ 426 $ 1,342 $ 1,768 $ — $ — $ — $ — $ — $ — Acquisitions — — — 391 1,700 2,091 88 600 688 Accretion — (525) (525) — (299) (299) — (49) (49) Reclassification from nonaccretable difference (80) — (80) (54) — (54) — — — Balance, September 30, 2016 $ 346 $ 817 $ 1,163 $ 337 $ 1,401 $ 1,738 $ 88 $ 551 $ 639 |
Schedule of the allowance for loan losses | An analysis of the allowance for loan losses for the nine months ended September 30, 2017 and the year ended September 30, 2016 is as follows (dollars in thousands): September 30, September 30, 2017 2016 Balance, January 1 $ 5,020 $ Recoveries on loans previously charged off 215 Loans charged off (505) Provision 400 Balance at end of period $ 5,130 $ 4,862 |
Schedule of breakdown of the allowance for loan losses and recorded balances in loans | A breakdown of the allowance for loan losses and recorded balances in loans at September 30, 2017 is as follows (dollars in thousands): Commercial, One to four Commercial financial and Commercial family residential Consumer real estate agricultural construction real estate construction Consumer Unallocated Total Three Months Ended September 30, 2017 Allowance for loan loss reserve: Beginning balance ALLR $ 1,463 $ 695 $ 95 $ 259 $ 6 $ 15 $ 2,600 $ 5,133 Charge-offs — (171) — (27) — (52) — (250) Recoveries 10 31 1 1 — 4 — 47 Provision 25 187 3 4 — 59 (78) 200 Ending balance ALLR $ 1,498 $ 742 $ 99 $ 237 $ 6 $ 26 $ 2,522 $ 5,130 Nine Months Ended September 30, 2017 Allowance for loan loss reserve: Beginning balance ALLR $ 1,345 $ 614 $ 57 $ 296 $ 6 $ 90 $ 2,612 $ 5,020 Charge-offs — (264) — (76) — (165) — (505) Recoveries 72 35 2 63 — 43 — 215 Provision 81 357 40 (46) — 58 (90) 400 Ending balance ALLR $ 1,498 $ 742 $ 99 $ 237 $ 6 $ 26 $ 2,522 $ 5,130 At September 30, 2017 Loans: Ending balance $ 409,269 $ 154,638 $ 8,892 $ 204,419 $ 12,684 $ 18,247 $ — $ 808,149 Ending balance ALLR (1,498) (742) (99) (237) (6) (26) (2,522) (5,130) Net loans $ 407,771 $ 153,896 $ 8,793 $ 204,182 $ 12,678 $ 18,221 $ (2,522) $ 803,019 Ending balance ALLR: Individually evaluated $ 571 $ 331 $ 38 $ 19 $ — $ 17 $ — $ 976 Collectively evaluated 927 411 61 218 6 9 2,522 4,154 Total $ 1,498 $ 742 $ 99 $ 237 $ 6 $ 26 $ 2,522 $ 5,130 Ending balance Loans: Individually evaluated $ 1,801 $ 1,283 $ 377 $ 525 $ — $ 46 $ — $ 4,032 Collectively evaluated 405,610 153,355 8,515 202,281 12,633 18,201 — 800,595 Acquired with deteriorated credit quality 1,858 — — 1,613 51 — — 3,522 Total $ 409,269 $ 154,638 $ 8,892 $ 204,419 $ 12,684 $ 18,247 $ — $ 808,149 Impaired loans, by definition, are individually evaluated. A breakdown of the allowance for loan losses and recorded balances in loans at September 30, 2016 is as follows (dollars in thousands): Commercial, One to four Commercial financial and Commercial family residential Consumer real estate agricultural construction real estate construction Consumer Unallocated Total Three Months Ended September 30, 2016 Allowance for loan loss reserve: Beginning balance ALLR $ 1,824 $ 700 $ 78 $ 348 $ 5 $ 23 $ 1,755 $ 4,733 Charge-offs (20) — — (76) — (10) — (106) Recoveries 17 4 — 2 — 12 — 35 Provision (235) (180) (16) 133 1 49 448 200 Ending balance ALLR $ 1,586 $ 524 $ 62 $ 407 $ 6 $ 74 $ 2,203 $ 4,862 Nine Months Ended September 30, 2016 Allowance for loan loss reserve: Beginning balance ALLR $ 1,611 $ 645 $ 79 $ 274 $ 7 $ 64 $ 2,324 $ 5,004 Charge-offs (245) (206) — (125) — (36) — (612) Recoveries 40 40 — 4 7 29 — 120 Provision 180 45 (17) 254 (8) 17 (121) 350 Ending balance ALLR $ 1,586 $ 524 $ 62 $ 407 $ 6 $ 74 $ 2,203 $ 4,862 At September 30, 2016 Loans: Ending balance $ 362,858 $ 136,065 $ 14,343 $ 211,072 $ 11,768 $ 20,698 $ — $ 756,804 Ending balance ALLR (1,586) (524) (62) (407) (6) (74) (2,203) (4,862) Net loans $ 361,272 $ 135,541 $ 14,281 $ 210,665 $ 11,762 $ 20,624 $ (2,203) $ 751,942 Ending balance ALLR: Individually evaluated $ 570 $ 252 $ — $ 68 $ — $ 64 $ — $ 954 Collectively evaluated 1,016 272 62 339 6 10 2,203 3,908 Total $ 1,586 $ 524 $ 62 $ 407 $ 6 $ 74 $ 2,203 $ 4,862 Ending balance Loans: Individually evaluated $ 2,035 $ 329 $ — $ 1,038 $ — $ 288 $ — $ 3,690 Collectively evaluated 357,030 135,736 14,343 206,199 11,709 20,410 — 745,427 Acquired with deteriorated credit quality 3,793 — — 3,835 59 — — 7,687 Total $ 362,858 $ 136,065 $ 14,343 $ 211,072 $ 11,768 $ 20,698 $ — $ 756,804 |
Schedule of breakdown of loans by risk category | Below is a breakdown of loans by risk category as of September 30, 2017 (dollars in thousands): (4) (1) (2) (3) Acceptable/ (5) (6) (7) Rating Strong Good Average Acceptable Watch Special Mention Substandard Doubtful Unassigned Total Commercial real estate $ 4,058 $ 20,655 $ 156,563 $ 213,805 $ 9,529 $ 4,659 $ — $ — $ 409,269 Commercial, financial and agricultural 13,262 9,282 49,947 75,366 5,394 1,387 — — 154,638 Commercial construction — 313 3,043 1,170 377 653 — 3,336 8,892 One-to-four family residential real estate 125 1,356 2,588 5,370 1,111 3,720 — 190,149 204,419 Consumer construction — — — — — 14 — 12,670 12,684 Consumer — — — 29 6 75 — 18,137 18,247 Total loans $ 17,445 $ 31,606 $ 212,141 $ 295,740 $ 16,417 $ 10,508 $ — $ 224,292 $ 808,149 Below is a breakdown of loans by risk category as of December 31, 2016 (dollars in thousands): (4) (1) (2) (3) Acceptable/ (5) (6) (7) Rating Strong Good Average Acceptable Watch Special Mention Substandard Doubtful Unassigned Total Commercial real estate $ 3,021 $ 23,940 $ 140,618 $ 216,518 $ $ 5,323 $ — $ — $ 389,420 Commercial, financial and agricultural 10,421 13,434 49,434 67,582 1,777 — — 142,648 Commercial construction — 900 3,146 2,660 385 — 4,414 11,505 One-to-four family residential real estate 740 1,373 3,412 9,585 5,493 — 185,342 205,945 Consumer construction 28 — — — — 17 — 12,181 12,226 Consumer 20 — 15 55 103 — 19,920 20,113 Total loans $ 14,230 $ 39,647 $ 196,625 $ 296,400 $ — $ 13,098 $ — $ 221,857 $ 781,857 |
Summary of impaired loans and their effect on interest income | The following is a summary of impaired loans and their effect on interest income (dollars in thousands): QTD YTD QTD YTD Nonaccrual Nonaccrual Accrual Average Average Related Interest Income Interest Income Recorded Balance Unpaid Balance Basis Investment Investment Valuation Reserve on Accrual Basis on Accrual Basis September 30, 2017 With no valuation reserve: Commercial real estate $ 697 $ 698 $ 1,858 $ 1,243 $ 1,331 $ — $ 29 $ 180 Commercial, financial and agricultural 7 8 — 29 152 — — — Commercial construction — — — 1,290 — — — — One to four family residential real estate 1,293 1,293 1,613 — 1,432 — 28 160 Consumer construction 14 14 53 14 14 — 1 3 Consumer 59 59 — 47 44 — 1 2 With a valuation reserve: Commercial real estate $ 680 $ 680 $ — $ 586 $ 426 $ 247 $ — $ — Commercial, financial and agricultural 201 201 — 169 140 49 — — Commercial construction — — — — — — — — One to four family residential real estate 114 115 — 160 178 53 — — Consumer construction — — — — — — — — Consumer — — — — — — — — Total: Commercial real estate $ 1,377 $ 1,378 $ 1,858 $ 1,829 $ 1,757 $ 247 $ 29 $ 180 Commercial, financial and agricultural 208 209 — 198 292 49 — — Commercial construction — — — 1,290 — — — — One to four family residential real estate 1,407 1,408 1,613 160 1,610 53 28 160 Consumer construction 14 14 53 14 14 — 1 3 Consumer 59 59 — 47 44 — 1 2 Total $ 3,065 $ 3,068 $ 3,524 $ 3,538 $ 3,717 $ 349 $ 59 $ 345 Nonaccrual Nonaccrual YTD YTD Recorded Unpaid Accrual Average Related Interest Income Balance Balance Basis Investment Valuation Reserve on Accrual Basis December 31, 2016 With no valuation reserve: Commercial real estate $ 1,426 $ 1,891 $ 3,234 $ 5,318 $ — $ 232 Commercial, financial and agricultural 11 11 — 116 — 3 Commercial construction — — — — — — One to four family residential real estate 1,623 2,198 2,792 4,500 — 196 Consumer construction 17 22 57 36 — 4 Consumer 82 86 4 127 — 2 With a valuation reserve: Commercial real estate $ 306 $ 328 $ — $ 103 $ 50 $ — Commercial, financial and agricultural 326 357 — 109 231 — Commercial construction — — — — — — One to four family residential real estate 333 333 — 171 94 — Consumer construction — — — — — — Consumer — — — 5 5 — Total: Commercial real estate $ 1,732 $ 2,219 $ 3,234 $ 5,421 $ 50 $ 232 Commercial, financial and agricultural 337 368 — 225 231 3 Commercial construction — — — — — — One to four family residential real estate 1,956 2,531 2,792 4,671 94 196 Consumer construction 17 22 57 36 — 4 Consumer 82 86 4 132 5 2 Total $ 4,124 $ 5,226 $ 6,087 $ 10,485 $ 380 $ 437 |
Summary of past due loans | A summary of past due loans at September 30, 2017 and December 31, 2016 is as follows (dollars in thousands): September 30, December 31, 2017 2016 30-89 days 90+ days 30-89 days 90+ days Past Due Past Due/ Past Due Past Due/ (accruing) Nonaccrual Total (accruing) Nonaccrual Total Commercial real estate $ 247 $ 1,320 $ 1,567 $ 942 $ 1,732 $ 2,674 Commercial, financial and agricultural 478 265 743 186 337 523 Commercial construction — 14 14 — — — One to four family residential real estate 1,847 1,408 3,255 2,113 1,956 4,069 Consumer construction — — — — 17 17 Consumer 86 58 144 133 82 215 Total past due loans $ 2,658 $ 3,065 $ 5,723 $ 3,374 $ 4,124 $ 7,498 |
Schedule of activity in insider loans granted to the entity's executive officers and directors, including their families and firms | The Bank, in the ordinary course of business, grants loans to the Corporation’s executive officers and directors, including their families and firms in which they are principal owners. Activity in such loans is summarized below (dollars in thousands): Nine Months Ended Nine Months Ended September 30, September 30, 2017 2016 Loans outstanding, January 1 $ 9,195 $ 6,887 New loans — — Net activity on revolving lines of credit 554 1,720 Repayment (476) (2,269) Loans outstanding at end of period $ 9,273 $ |
PFC | |
Schedule of acquired portfolio at acquisition date | Acquired Acquired Acquired Impaired Non-impaired Total Loans acquired - contractual payments $ 13,290 $ 53,849 $ 67,139 Nonaccretable difference (2,234) — (2,234) Expected cash flows 11,056 53,849 64,905 Accretable yield (744) (2,100) (2,844) Carrying balance at acquisition date $ 10,312 $ 51,749 $ 62,061 |
Eagle River | |
Schedule of acquired portfolio at acquisition date | The table below details the outstanding balances of the Eagle River acquired portfolio and the fair value adjustments at acquisition date (dollars in thousands): Acquired Acquired Acquired Impaired Non-impaired Total Loans acquired - contractual payments $ 3,401 $ 80,737 $ 84,138 Nonaccretable difference (1,172) — (1,172) Expected cash flows 2,229 80,737 82,966 Accretable yield (391) (1,700) (2,091) Carrying balance at acquisition date $ 1,838 $ 79,037 $ 80,875 |
Niagara Bancorporation | |
Schedule of acquired portfolio at acquisition date | Acquired Acquired Acquired Impaired Non-impaired Total Loans acquired - contractual payments $ 2,105 $ 30,555 $ 32,660 Nonaccretable difference (265) — (265) Expected cash flows 1,840 30,555 32,395 Accretable yield (88) (600) (688) Carrying balance at acquisition date $ 1,752 $ 29,955 $ 31,707 |
SERVICING RIGHTS (Tables)
SERVICING RIGHTS (Tables) | 9 Months Ended |
Sep. 30, 2017 | |
SERVICING RIGHTS | |
Summary of mortgage servicing rights capitalized and amortized, along with the aggregate activity in related valuation allowances | The following table summarizes MSRs capitalized and amortized, along with the aggregate activity in related valuation allowances (dollars in thousands): Nine Months Ended Nine Months Ended September 30, September 30, 2017 2016 Balance at beginning of period $ 1,573 $ 1,965 Additions from loans sold with servicing retained — — Acquired MSRs — 207 Amortization (411) (495) Balance at end of period $ 1,162 $ 1,677 Balance of loan servicing portfolio $ 204,087 $ 233,356 Mortgage servicing rights as % of portfolio .57% .72% |
BORROWINGS (Tables)
BORROWINGS (Tables) | 9 Months Ended |
Sep. 30, 2017 | |
BORROWINGS | |
Schedule of borrowings | Borrowings consist of the following at September 30, 2017 and December 31, 2016 (dollars in thousands): September 30, December 31, 2017 2016 Federal Home Loan Bank fixed rate advances $ 70,000 $ 45,000 Correspondent bank line of credit 1,295 750 Correspondent bank term note 19,549 21,199 USDA Rural Development note 553 630 $ 91,397 $ 67,579 |
DEFINED BENEFIT PENSION PLAN (T
DEFINED BENEFIT PENSION PLAN (Tables) | 9 Months Ended |
Sep. 30, 2017 | |
DEFINED BENEFIT PENSION PLAN | |
Schedule of anticipated distributions over the next five years | The anticipated distributions over the next five years and through December 31, 2026 are detailed in the table below (dollars in thousands): 2017 $ 128 2018 125 2019 122 2020 121 2021 120 2022-2026 723 Total $ 1,339 |
Schedule of assumptions in the actuarial valuation | 2017 2016 Weighted average discount rate Rate of increase in future compensation levels N/A N/A Expected long-term rate of return on plan assets |
Schedule of asset allocation | Target Actual Allocation Allocation Equity securities 50% to 70% Fixed income securities 30% to 50% |
STOCK COMPENSATION PLANS (Table
STOCK COMPENSATION PLANS (Tables) | 9 Months Ended |
Sep. 30, 2017 | |
STOCK COMPENSATION PLANS | |
Summary of restricted stock units awards granted | Date of Award Units Granted Market Value at grant date Vesting Term March, 2014 52,774 $ 12.95 4 years March, 2015 37,730 $ 11.15 4 years May, 2015 3,000 $ 10.77 Immediate February, 2016 35,733 $ 9.91 4 years February, 2017 28,427 $ 13.39 4 years |
Summary of changes in nonvested shares | Weighted Average Number Grant Date Outstanding Fair Value Nonvested balance at January 1, 2017 90,417 $ 11.19 Granted during the period 28,427 13.39 Vested during the period (31,559) 11.55 Nonvested balance at September 30, 2017 87,285 $ 11.78 |
FAIR VALUE MEASUREMENTS (Tables
FAIR VALUE MEASUREMENTS (Tables) | 9 Months Ended |
Sep. 30, 2017 | |
FAIR VALUE MEASUREMENTS | |
Schedule presenting information for financial instruments | The following table presents information for financial instruments at September 30, 2017 and December 31, 2016 (dollars in thousands): September 30, 2017 December 31, 2016 Level in Fair Carrying Estimated Carrying Estimated Value Hierarchy Amount Fair Value Amount Fair Value Financial assets: Cash and cash equivalents Level 1 $ 57,682 57,682 $ 46,755 $ 46,755 Interest-bearing deposits Level 2 13,374 13,374 14,047 14,047 Securities available for sale Level 2 84,509 84,509 84,623 84,623 Securities available for sale Level 3 500 500 1,650 1,650 Federal Home Loan Bank stock Level 2 3,250 3,250 2,911 2,911 Net loans Level 3 803,019 800,352 776,837 778,377 Accrued interest receivable Level 3 2,224 2,224 2,016 2,016 Total financial assets $ 964,558 $ 961,891 $ 928,839 $ 930,379 Financial liabilities: Deposits Level 2 $ 835,203 811,066 $ 823,512 $ 815,960 Borrowings Level 2 91,397 91,697 67,579 68,293 Accrued interest payable Level 3 327 327 267 267 Total financial liabilities $ 926,927 $ 903,090 $ 891,358 $ 884,520 |
Schedule of investment securities measured at fair value on a recurring basis | The table below shows investment securities measured at fair value on a recurring basis (dollars in thousands): Quoted Prices Significant Significant Total (Gains) in Active Markets Other Observable Unobservable Losses for Total (Gains) Losses for Balance at for Identical Assets Inputs Inputs Three Months Ended Nine Months Ended (dollars in thousands) September 30, 2017 (Level 1) (Level 2) (Level 3) September 30, 2017 September 30, 2017 Assets Corporate $ $ — $ 24,559 $ — $ — $ — Equity — — — — US Agencies — 22,543 — — — US Agencies - MBS — 13,763 — 38 38 Obligations of state and political subdivisions 23,644 — 23,644 — — — $ 85,009 $ 38 $ 38 Quoted Prices Significant Significant in Active Markets Other Observable Unobservable Total Losses for Balance at for Identical Assets Inputs Inputs Twelve months ended (dollars in thousands) December 31, 2016 (Level 1) (Level 2) (Level 3) December 31, 2016 Assets Corporate $ $ — $ 19,910 $ — $ — Equity — — — US Agencies — 23,952 — — US Agencies - MBS — 15,683 1,150 — Obligations of state and political subdivisions 25,078 — 25,078 — — $ 86,273 $ — |
Schedule of assets measured at fair value on a non-recurring basis | Assets Measured at Fair Value on a Nonrecurring Basis at September 30, 2017 Quoted Prices Significant Significant Total (Gains) in Active Markets Other Observable Unobservable Losses for Total (Gains) Losses for Balance at for Identical Assets Inputs Inputs Three Months Ended Nine Months Ended (dollars in thousands) September 30, 2017 (Level 1) (Level 2) (Level 3) September 30, 2017 September 30, 2017 Assets Impaired loans $ 6,589 $ — $ — $ 6,589 $ 209 $ Other real estate owned 4,413 — — 4,413 43 298 $ 252 659 Assets Measured at Fair Value on a Nonrecurring Basis at December 31, 2016 Quoted Prices Significant Significant in Active Markets Other Observable Unobservable Total Losses for Balance at for Identical Assets Inputs Inputs Twelve months ended (dollars in thousands) December 31, 2016 (Level 1) (Level 2) (Level 3) December 31, 2016 Assets Impaired loans $ $ — $ — $ $ 643 Other real estate held for sale — — 202 $ 845 |
COMMITMENTS, CONTINGENCIES, AND
COMMITMENTS, CONTINGENCIES, AND CREDIT RISK (Tables) | 9 Months Ended |
Sep. 30, 2017 | |
COMMITMENTS, CONTINGENCIES AND CREDIT RISK | |
Schedule of commitments | These commitments are as follows (dollars in thousands): September 30, December 31, 2017 2016 Commitments to extend credit: Variable rate $ 84,786 $ 59,496 Fixed rate 36,572 28,737 Standby letters of credit - Variable rate 8,193 8,252 Credit card commitments - Fixed rate 5,837 5,533 $ 135,388 $ 102,018 |
SUMMARY OF SIGNIFICANT ACCOUN33
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Details) - shares | Sep. 30, 2017 | May 22, 2012 |
Stock Compensation Plans | ||
Shares available for grant | 268,836 | |
2012 Incentive Compensation Plan | ||
Stock Compensation Plans | ||
Total authorized share balance | 575,000 |
EARNINGS PER SHARE (Details)
EARNINGS PER SHARE (Details) - USD ($) $ / shares in Units, $ in Thousands | 3 Months Ended | 9 Months Ended | ||
Sep. 30, 2017 | Sep. 30, 2016 | Sep. 30, 2017 | Sep. 30, 2016 | |
(Numerator): | ||||
Net income | $ 2,093 | $ 1,778 | $ 5,499 | $ 2,785 |
(Denominator): | ||||
Weighted average shares outstanding | 6,294,930 | 6,238,756 | 6,286,722 | 6,226,900 |
Effect of dilutive stock options, and vesting of restricted stock awards | 23,558 | 20,999 | 24,144 | 33,525 |
Diluted weighted average shares outstanding | 6,318,488 | 6,259,755 | 6,310,866 | 6,260,425 |
Income per common share: | ||||
Basic (in dollars per share) | $ 0.33 | $ 0.29 | $ 0.88 | $ 0.45 |
Diluted (in dollars per share) | $ 0.33 | $ 0.28 | $ 0.87 | $ 0.45 |
INVESTMENT SECURITIES (Details)
INVESTMENT SECURITIES (Details) - USD ($) $ in Thousands | Sep. 30, 2017 | Dec. 31, 2016 |
SECURITIES AVAILABLE FOR SALE | ||
Amortized Cost | $ 84,392 | $ 86,427 |
Gross Unrealized Gains | 841 | 591 |
Gross Unrealized Losses | (224) | (745) |
Estimated Fair Value | 85,009 | 86,273 |
Corporate | ||
SECURITIES AVAILABLE FOR SALE | ||
Amortized Cost | 24,415 | 19,899 |
Gross Unrealized Gains | 164 | 49 |
Gross Unrealized Losses | (20) | (38) |
Estimated Fair Value | 24,559 | 19,910 |
Equity | ||
SECURITIES AVAILABLE FOR SALE | ||
Amortized Cost | 500 | 500 |
Estimated Fair Value | 500 | 500 |
US Agencies | ||
SECURITIES AVAILABLE FOR SALE | ||
Amortized Cost | 22,468 | 23,991 |
Gross Unrealized Gains | 88 | 47 |
Gross Unrealized Losses | (13) | (86) |
Estimated Fair Value | 22,543 | 23,952 |
US Agencies - MBS | ||
SECURITIES AVAILABLE FOR SALE | ||
Amortized Cost | 13,765 | 16,980 |
Gross Unrealized Gains | 56 | 48 |
Gross Unrealized Losses | (58) | (195) |
Estimated Fair Value | 13,763 | 16,833 |
Obligations of states and political subdivisions | ||
SECURITIES AVAILABLE FOR SALE | ||
Amortized Cost | 23,244 | 25,057 |
Gross Unrealized Gains | 533 | 447 |
Gross Unrealized Losses | (133) | (426) |
Estimated Fair Value | 23,644 | $ 25,078 |
FHLB borrowings and customer relationships | ||
SECURITIES AVAILABLE FOR SALE | ||
Amortized Cost | 14,029 | |
Estimated Fair Value | $ 14,038 |
LOANS (Details)
LOANS (Details) - USD ($) | 9 Months Ended | ||
Sep. 30, 2017 | Sep. 30, 2016 | Dec. 31, 2016 | |
Loans | |||
Total loans | $ 808,149,000 | $ 756,804,000 | $ 781,857,000 |
Changes in the allowance for loan losses | |||
Net charge off activity | 290,000 | 492,000 | |
PFC | |||
Acquired portfolio | |||
Loans acquired - contractual payments | 67,139,000 | ||
Nonaccretable difference | (2,234,000) | ||
Expected cash flows | 64,905,000 | ||
Accretable yield | (2,844,000) | ||
Carrying balance at acquisition date | 62,061,000 | ||
Balance at the beginning of period | 924,000 | 1,768,000 | |
Accretion | (835,000) | (525,000) | |
Reclassification from nonaccretable difference | 215,000 | 80,000 | |
Balance at the end of period | 304,000 | 1,163,000 | |
Eagle River | |||
Acquired portfolio | |||
Loans acquired - contractual payments | 84,138,000 | ||
Nonaccretable difference | (1,172,000) | ||
Expected cash flows | 82,966,000 | ||
Accretable yield | (2,091,000) | ||
Carrying balance at acquisition date | 80,875,000 | ||
Balance at the beginning of period | 1,457,000 | ||
Acquisition | 2,091,000 | ||
Accretion | (516,000) | (299,000) | |
Reclassification from nonaccretable difference | 37,000 | 54,000 | |
Balance at the end of period | 978,000 | 1,738,000 | |
Niagara Bancorporation | |||
Acquired portfolio | |||
Loans acquired - contractual payments | 32,660,000 | ||
Nonaccretable difference | (265,000) | ||
Expected cash flows | 32,395,000 | ||
Accretable yield | (688,000) | ||
Carrying balance at acquisition date | 31,707,000 | ||
Balance at the beginning of period | 557,000 | ||
Acquisition | 688,000 | ||
Accretion | (179,000) | (49,000) | |
Reclassification from nonaccretable difference | (1,000) | ||
Balance at the end of period | 377,000 | 639,000 | |
Commercial real estate | |||
Loans | |||
Total loans | 409,269,000 | 362,858,000 | 389,420,000 |
Commercial, financial, and agricultural | |||
Loans | |||
Total loans | 154,638,000 | 136,065,000 | 142,648,000 |
Commercial construction | |||
Loans | |||
Total loans | 8,892,000 | 14,343,000 | 11,505,000 |
One to four family residential real estate | |||
Loans | |||
Total loans | 204,419,000 | 211,072,000 | 205,945,000 |
Consumer | |||
Loans | |||
Total loans | 18,247,000 | 20,698,000 | 20,113,000 |
Consumer construction | |||
Loans | |||
Total loans | 12,684,000 | 11,768,000 | $ 12,226,000 |
Acquired Impaired | |||
Acquired portfolio | |||
Accretion | (370,000) | (96,000) | |
Acquired Impaired | PFC | |||
Acquired portfolio | |||
Loans acquired - contractual payments | 13,290,000 | ||
Nonaccretable difference | (2,234,000) | ||
Expected cash flows | 11,056,000 | ||
Accretable yield | (744,000) | ||
Carrying balance at acquisition date | 10,312,000 | ||
Balance at the beginning of period | 282,000 | 426,000 | |
Accretion | (310,000) | ||
Reclassification from nonaccretable difference | 215,000 | 80,000 | |
Balance at the end of period | 187,000 | 346,000 | |
Acquired Impaired | Eagle River | |||
Acquired portfolio | |||
Loans acquired - contractual payments | 3,401,000 | ||
Nonaccretable difference | (1,172,000) | ||
Expected cash flows | 2,229,000 | ||
Accretable yield | (391,000) | ||
Carrying balance at acquisition date | 1,838,000 | ||
Balance at the beginning of period | 236,000 | ||
Acquisition | 391,000 | ||
Accretion | (50,000) | ||
Reclassification from nonaccretable difference | 37,000 | 54,000 | |
Balance at the end of period | 223,000 | 337,000 | |
Acquired Impaired | Niagara Bancorporation | |||
Acquired portfolio | |||
Loans acquired - contractual payments | 2,105,000 | ||
Nonaccretable difference | (265,000) | ||
Expected cash flows | 1,840,000 | ||
Accretable yield | (88,000) | ||
Carrying balance at acquisition date | 1,752,000 | ||
Balance at the beginning of period | 52,000 | ||
Acquisition | 88,000 | ||
Accretion | (10,000) | ||
Reclassification from nonaccretable difference | (1,000) | ||
Balance at the end of period | 41,000 | 88,000 | |
Acquired Non-impaired | PFC | |||
Acquired portfolio | |||
Loans acquired - contractual payments | 53,849,000 | ||
Expected cash flows | 53,849,000 | ||
Accretable yield | (2,100,000) | ||
Carrying balance at acquisition date | 51,749,000 | ||
Balance at the beginning of period | 642,000 | 1,342,000 | |
Accretion | (525,000) | (525,000) | |
Balance at the end of period | 117,000 | 817,000 | |
Acquired Non-impaired | Eagle River | |||
Acquired portfolio | |||
Loans acquired - contractual payments | 80,737,000 | ||
Expected cash flows | 80,737,000 | ||
Accretable yield | (1,700,000) | ||
Carrying balance at acquisition date | 79,037,000 | ||
Balance at the beginning of period | 1,221,000 | ||
Acquisition | 1,700,000 | ||
Accretion | (466,000) | (299,000) | |
Balance at the end of period | 755,000 | 1,401,000 | |
Acquired Non-impaired | Niagara Bancorporation | |||
Acquired portfolio | |||
Loans acquired - contractual payments | 30,555,000 | ||
Expected cash flows | 30,555,000 | ||
Accretable yield | (600,000) | ||
Carrying balance at acquisition date | 29,955,000 | ||
Balance at the beginning of period | 505,000 | ||
Acquisition | 600,000 | ||
Accretion | (169,000) | (49,000) | |
Balance at the end of period | $ 336,000 | $ 551,000 |
LOANS - ALLOWANCE (Details)
LOANS - ALLOWANCE (Details) - USD ($) $ in Thousands | 3 Months Ended | 9 Months Ended | |||||
Sep. 30, 2017 | Sep. 30, 2016 | Sep. 30, 2017 | Sep. 30, 2016 | Sep. 30, 2017 | Dec. 31, 2016 | Sep. 30, 2016 | |
Allowance for loan loss reserve: | |||||||
Balance at beginning of period | $ 5,133 | $ 4,733 | $ 5,020 | $ 5,004 | |||
Charge-offs | (250) | (106) | (505) | (612) | |||
Recoveries | 47 | 35 | 215 | 120 | |||
Provision | 200 | 200 | 400 | 350 | |||
Balance at end of period | 5,130 | 4,862 | 5,130 | 4,862 | |||
Loans: | |||||||
Ending balance | $ 808,149 | $ 781,857 | $ 756,804 | ||||
Ending balance ALLR | (5,133) | (4,733) | (5,020) | (5,004) | (5,130) | (5,020) | (4,862) |
Net loans | 803,019 | 776,837 | 751,942 | ||||
Ending balance ALLR: | |||||||
Individually evaluated | 976 | 954 | |||||
Collectively evaluated | 4,154 | 3,908 | |||||
Total | 5,133 | 4,733 | 5,020 | 5,004 | 5,130 | 5,020 | 4,862 |
Ending balance Loans: | |||||||
Individually evaluated | 4,032 | 3,690 | |||||
Collectively evaluated | 800,595 | 745,427 | |||||
Acquired with deteriorated credit quality | 3,522 | 7,687 | |||||
Total Loans | 808,149 | 781,857 | 756,804 | ||||
Commercial real estate | |||||||
Allowance for loan loss reserve: | |||||||
Balance at beginning of period | 1,463 | 1,824 | 1,345 | 1,611 | |||
Charge-offs | (20) | (245) | |||||
Recoveries | 10 | 17 | 72 | 40 | |||
Provision | 25 | (235) | 81 | 180 | |||
Balance at end of period | 1,498 | 1,586 | 1,498 | 1,586 | |||
Loans: | |||||||
Ending balance | 409,269 | 389,420 | 362,858 | ||||
Ending balance ALLR | (1,463) | (1,824) | (1,345) | (1,611) | (1,498) | (1,345) | (1,586) |
Net loans | 407,771 | 361,272 | |||||
Ending balance ALLR: | |||||||
Individually evaluated | 571 | 570 | |||||
Collectively evaluated | 927 | 1,016 | |||||
Total | 1,463 | 1,824 | 1,345 | 1,611 | 1,498 | 1,345 | 1,586 |
Ending balance Loans: | |||||||
Individually evaluated | 1,801 | 2,035 | |||||
Collectively evaluated | 405,610 | 357,030 | |||||
Acquired with deteriorated credit quality | 1,858 | 3,793 | |||||
Total Loans | 409,269 | 389,420 | 362,858 | ||||
Commercial, financial, and agricultural | |||||||
Allowance for loan loss reserve: | |||||||
Balance at beginning of period | 695 | 700 | 614 | 645 | |||
Charge-offs | (171) | (264) | (206) | ||||
Recoveries | 31 | 4 | 35 | 40 | |||
Provision | 187 | (180) | 357 | 45 | |||
Balance at end of period | 742 | 524 | 742 | 524 | |||
Loans: | |||||||
Ending balance | 154,638 | 142,648 | 136,065 | ||||
Ending balance ALLR | (695) | (700) | (614) | (645) | (742) | (614) | (524) |
Net loans | 153,896 | 135,541 | |||||
Ending balance ALLR: | |||||||
Individually evaluated | 331 | 252 | |||||
Collectively evaluated | 411 | 272 | |||||
Total | 695 | 700 | 614 | 645 | 742 | 614 | 524 |
Ending balance Loans: | |||||||
Individually evaluated | 1,283 | 329 | |||||
Collectively evaluated | 153,355 | 135,736 | |||||
Total Loans | 154,638 | 142,648 | 136,065 | ||||
Commercial construction | |||||||
Allowance for loan loss reserve: | |||||||
Balance at beginning of period | 95 | 78 | 57 | 79 | |||
Recoveries | 1 | 2 | |||||
Provision | 3 | (16) | 40 | (17) | |||
Balance at end of period | 99 | 62 | 99 | 62 | |||
Loans: | |||||||
Ending balance | 8,892 | 11,505 | 14,343 | ||||
Ending balance ALLR | (95) | (78) | (57) | (79) | (99) | (57) | (62) |
Net loans | 8,793 | 14,281 | |||||
Ending balance ALLR: | |||||||
Individually evaluated | 38 | ||||||
Collectively evaluated | 61 | 62 | |||||
Total | 95 | 78 | 57 | 79 | 99 | 57 | 62 |
Ending balance Loans: | |||||||
Individually evaluated | 377 | ||||||
Collectively evaluated | 8,515 | 14,343 | |||||
Total Loans | 8,892 | 11,505 | 14,343 | ||||
One to four family residential real estate | |||||||
Allowance for loan loss reserve: | |||||||
Balance at beginning of period | 259 | 348 | 296 | 274 | |||
Charge-offs | (27) | (76) | (76) | (125) | |||
Recoveries | 1 | 2 | 63 | 4 | |||
Provision | 4 | 133 | (46) | 254 | |||
Balance at end of period | 237 | 407 | 237 | 407 | |||
Loans: | |||||||
Ending balance | 204,419 | 205,945 | 211,072 | ||||
Ending balance ALLR | (259) | (348) | (296) | (274) | (237) | (296) | (407) |
Net loans | 204,182 | 210,665 | |||||
Ending balance ALLR: | |||||||
Individually evaluated | 19 | 68 | |||||
Collectively evaluated | 218 | 339 | |||||
Total | 259 | 348 | 296 | 274 | 237 | 296 | 407 |
Ending balance Loans: | |||||||
Individually evaluated | 525 | 1,038 | |||||
Collectively evaluated | 202,281 | 206,199 | |||||
Acquired with deteriorated credit quality | 1,613 | 3,835 | |||||
Total Loans | 204,419 | 205,945 | 211,072 | ||||
Consumer construction | |||||||
Allowance for loan loss reserve: | |||||||
Balance at beginning of period | 6 | 5 | 6 | 7 | |||
Recoveries | 7 | ||||||
Provision | 1 | (8) | |||||
Balance at end of period | 6 | 6 | 6 | 6 | |||
Loans: | |||||||
Ending balance | 12,684 | 12,226 | 11,768 | ||||
Ending balance ALLR | (6) | (5) | (6) | (7) | (6) | (6) | (6) |
Net loans | 12,678 | 11,762 | |||||
Ending balance ALLR: | |||||||
Collectively evaluated | 6 | 6 | |||||
Total | 6 | 5 | 6 | 7 | 6 | 6 | 6 |
Ending balance Loans: | |||||||
Collectively evaluated | 12,633 | 11,709 | |||||
Acquired with deteriorated credit quality | 51 | 59 | |||||
Total Loans | 12,684 | 12,226 | 11,768 | ||||
Consumer | |||||||
Allowance for loan loss reserve: | |||||||
Balance at beginning of period | 15 | 23 | 90 | 64 | |||
Charge-offs | (52) | (10) | (165) | (36) | |||
Recoveries | 4 | 12 | 43 | 29 | |||
Provision | 59 | 49 | 58 | 17 | |||
Balance at end of period | 26 | 74 | 26 | 74 | |||
Loans: | |||||||
Ending balance | 18,247 | 20,113 | 20,698 | ||||
Ending balance ALLR | (15) | (23) | (90) | (64) | (26) | (90) | (74) |
Net loans | 18,221 | 20,624 | |||||
Ending balance ALLR: | |||||||
Individually evaluated | 17 | 64 | |||||
Collectively evaluated | 9 | 10 | |||||
Total | 15 | 23 | 90 | 64 | 26 | 90 | 74 |
Ending balance Loans: | |||||||
Individually evaluated | 46 | 288 | |||||
Collectively evaluated | 18,201 | 20,410 | |||||
Total Loans | 18,247 | 20,113 | 20,698 | ||||
Unallocated | |||||||
Allowance for loan loss reserve: | |||||||
Balance at beginning of period | 2,600 | 1,755 | 2,612 | 2,324 | |||
Provision | (78) | 448 | (90) | (121) | |||
Balance at end of period | 2,522 | 2,203 | 2,522 | 2,203 | |||
Loans: | |||||||
Ending balance ALLR | (2,600) | (1,755) | (2,612) | (2,324) | (2,522) | (2,612) | (2,203) |
Net loans | (2,522) | (2,203) | |||||
Ending balance ALLR: | |||||||
Collectively evaluated | 2,522 | 2,203 | |||||
Total | $ 2,600 | $ 1,755 | $ 2,612 | $ 2,324 | $ 2,522 | $ 2,612 | $ 2,203 |
LOANS - LOANS BY RISK CATEGORY
LOANS - LOANS BY RISK CATEGORY (Details) $ in Thousands | Sep. 30, 2017USD ($)item | Dec. 31, 2016USD ($) | Sep. 30, 2016USD ($) |
Breakdown of loans by risk category | |||
Total loans | $ 808,149 | $ 781,857 | $ 756,804 |
Minimum | |||
Breakdown of loans by risk category | |||
Credit risk rating for which reserves are established if no specific reserves made | item | 6 | ||
Maximum | |||
Breakdown of loans by risk category | |||
Credit risk rating for which general reserves are established | item | 5 | ||
Credit risk rating for which reserves are established if no specific reserves made | item | 7 | ||
Commercial real estate | |||
Breakdown of loans by risk category | |||
Total loans | $ 409,269 | 389,420 | 362,858 |
Commercial, financial, and agricultural | |||
Breakdown of loans by risk category | |||
Total loans | 154,638 | 142,648 | 136,065 |
Commercial construction | |||
Breakdown of loans by risk category | |||
Total loans | 8,892 | 11,505 | 14,343 |
One to four family residential real estate | |||
Breakdown of loans by risk category | |||
Total loans | 204,419 | 205,945 | 211,072 |
Consumer construction | |||
Breakdown of loans by risk category | |||
Total loans | 12,684 | 12,226 | 11,768 |
Consumer | |||
Breakdown of loans by risk category | |||
Total loans | 18,247 | 20,113 | $ 20,698 |
Strong (1) | |||
Breakdown of loans by risk category | |||
Total loans | 17,445 | 14,230 | |
Strong (1) | Commercial real estate | |||
Breakdown of loans by risk category | |||
Total loans | 4,058 | 3,021 | |
Strong (1) | Commercial, financial, and agricultural | |||
Breakdown of loans by risk category | |||
Total loans | 13,262 | 10,421 | |
Strong (1) | One to four family residential real estate | |||
Breakdown of loans by risk category | |||
Total loans | 125 | 740 | |
Strong (1) | Consumer construction | |||
Breakdown of loans by risk category | |||
Total loans | 28 | ||
Strong (1) | Consumer | |||
Breakdown of loans by risk category | |||
Total loans | 20 | ||
Good (2) | |||
Breakdown of loans by risk category | |||
Total loans | 31,606 | 39,647 | |
Good (2) | Commercial real estate | |||
Breakdown of loans by risk category | |||
Total loans | 20,655 | 23,940 | |
Good (2) | Commercial, financial, and agricultural | |||
Breakdown of loans by risk category | |||
Total loans | 9,282 | 13,434 | |
Good (2) | Commercial construction | |||
Breakdown of loans by risk category | |||
Total loans | 313 | 900 | |
Good (2) | One to four family residential real estate | |||
Breakdown of loans by risk category | |||
Total loans | 1,356 | 1,373 | |
Average (3) | |||
Breakdown of loans by risk category | |||
Total loans | 212,141 | 196,625 | |
Average (3) | Commercial real estate | |||
Breakdown of loans by risk category | |||
Total loans | 156,563 | 140,618 | |
Average (3) | Commercial, financial, and agricultural | |||
Breakdown of loans by risk category | |||
Total loans | 49,947 | 49,434 | |
Average (3) | Commercial construction | |||
Breakdown of loans by risk category | |||
Total loans | 3,043 | 3,146 | |
Average (3) | One to four family residential real estate | |||
Breakdown of loans by risk category | |||
Total loans | 2,588 | 3,412 | |
Average (3) | Consumer | |||
Breakdown of loans by risk category | |||
Total loans | 15 | ||
Acceptable/Acceptable Watch (4) | |||
Breakdown of loans by risk category | |||
Total loans | 295,740 | 296,400 | |
Acceptable/Acceptable Watch (4) | Commercial real estate | |||
Breakdown of loans by risk category | |||
Total loans | 213,805 | 216,518 | |
Acceptable/Acceptable Watch (4) | Commercial, financial, and agricultural | |||
Breakdown of loans by risk category | |||
Total loans | 75,366 | 67,582 | |
Acceptable/Acceptable Watch (4) | Commercial construction | |||
Breakdown of loans by risk category | |||
Total loans | 1,170 | 2,660 | |
Acceptable/Acceptable Watch (4) | One to four family residential real estate | |||
Breakdown of loans by risk category | |||
Total loans | 5,370 | 9,585 | |
Acceptable/Acceptable Watch (4) | Consumer | |||
Breakdown of loans by risk category | |||
Total loans | 29 | 55 | |
Special Mention (5) | |||
Breakdown of loans by risk category | |||
Total loans | 16,417 | ||
Special Mention (5) | Commercial real estate | |||
Breakdown of loans by risk category | |||
Total loans | 9,529 | ||
Special Mention (5) | Commercial, financial, and agricultural | |||
Breakdown of loans by risk category | |||
Total loans | 5,394 | ||
Special Mention (5) | Commercial construction | |||
Breakdown of loans by risk category | |||
Total loans | 377 | ||
Special Mention (5) | One to four family residential real estate | |||
Breakdown of loans by risk category | |||
Total loans | 1,111 | ||
Special Mention (5) | Consumer | |||
Breakdown of loans by risk category | |||
Total loans | 6 | ||
Substandard (6) | |||
Breakdown of loans by risk category | |||
Total loans | 10,508 | 13,098 | |
Substandard (6) | Commercial real estate | |||
Breakdown of loans by risk category | |||
Total loans | 4,659 | 5,323 | |
Substandard (6) | Commercial, financial, and agricultural | |||
Breakdown of loans by risk category | |||
Total loans | 1,387 | 1,777 | |
Substandard (6) | Commercial construction | |||
Breakdown of loans by risk category | |||
Total loans | 653 | 385 | |
Substandard (6) | One to four family residential real estate | |||
Breakdown of loans by risk category | |||
Total loans | 3,720 | 5,493 | |
Substandard (6) | Consumer construction | |||
Breakdown of loans by risk category | |||
Total loans | 14 | 17 | |
Substandard (6) | Consumer | |||
Breakdown of loans by risk category | |||
Total loans | 75 | 103 | |
Rating Unassigned | |||
Breakdown of loans by risk category | |||
Total loans | 224,292 | 221,857 | |
Rating Unassigned | Commercial construction | |||
Breakdown of loans by risk category | |||
Total loans | 3,336 | 4,414 | |
Rating Unassigned | One to four family residential real estate | |||
Breakdown of loans by risk category | |||
Total loans | 190,149 | 185,342 | |
Rating Unassigned | Consumer construction | |||
Breakdown of loans by risk category | |||
Total loans | 12,670 | 12,181 | |
Rating Unassigned | Consumer | |||
Breakdown of loans by risk category | |||
Total loans | $ 18,137 | $ 19,920 |
LOANS - IMPAIRED LOANS AND EFFE
LOANS - IMPAIRED LOANS AND EFFECT ON INTEREST INCOME (Details) - USD ($) $ in Thousands | 3 Months Ended | 9 Months Ended | 12 Months Ended |
Sep. 30, 2017 | Sep. 30, 2017 | Dec. 31, 2016 | |
Impaired Loans | |||
Number of days past due to be considered as nonperforming loans | 90 days | ||
Average investment | |||
Total | $ 3,538 | $ 3,717 | $ 10,485 |
Related Valuation Reserve | 349 | 349 | 380 |
Interest Income on Accrual Basis | |||
Total | 59 | 345 | 437 |
Non Accrual Recorded Balance | |||
Recorded investment | |||
Total | 3,065 | 3,065 | 4,124 |
Non Accrual Unpaid Balance | |||
Recorded investment | |||
Total | 3,068 | 3,068 | 5,226 |
Accrual Basis | |||
Recorded investment | |||
Total | 3,524 | 3,524 | 6,087 |
Commercial real estate | |||
Average investment | |||
With no valuation reserve | 1,243 | 1,331 | 5,318 |
With a valuation reserve | 586 | 426 | 103 |
Total | 1,829 | 1,757 | 5,421 |
Related Valuation Reserve | 247 | 247 | 50 |
Interest Income on Accrual Basis | |||
With no valuation reserve | 29 | 180 | 232 |
Total | 29 | 180 | 232 |
Commercial real estate | Non Accrual Recorded Balance | |||
Recorded investment | |||
With no valuation reserve | 697 | 697 | 1,426 |
With a valuation reserve | 680 | 680 | 306 |
Total | 1,377 | 1,377 | 1,732 |
Commercial real estate | Non Accrual Unpaid Balance | |||
Recorded investment | |||
With no valuation reserve | 698 | 698 | 1,891 |
With a valuation reserve | 680 | 680 | 328 |
Total | 1,378 | 1,378 | 2,219 |
Commercial real estate | Accrual Basis | |||
Recorded investment | |||
With no valuation reserve | 1,858 | 1,858 | 3,234 |
Total | 1,858 | 1,858 | 3,234 |
Commercial, financial, and agricultural | |||
Average investment | |||
With no valuation reserve | 29 | 152 | 116 |
With a valuation reserve | 169 | 140 | 109 |
Total | 198 | 292 | 225 |
Related Valuation Reserve | 49 | 49 | 231 |
Interest Income on Accrual Basis | |||
With no valuation reserve | 3 | ||
Total | 3 | ||
Commercial, financial, and agricultural | Non Accrual Recorded Balance | |||
Recorded investment | |||
With no valuation reserve | 7 | 7 | 11 |
With a valuation reserve | 201 | 201 | 326 |
Total | 208 | 208 | 337 |
Commercial, financial, and agricultural | Non Accrual Unpaid Balance | |||
Recorded investment | |||
With no valuation reserve | 8 | 8 | 11 |
With a valuation reserve | 201 | 201 | 357 |
Total | 209 | 209 | 368 |
Commercial construction | |||
Average investment | |||
With no valuation reserve | 1,290 | ||
Total | 1,290 | ||
One to four family residential real estate | |||
Average investment | |||
With no valuation reserve | 1,432 | 4,500 | |
With a valuation reserve | 160 | 178 | 171 |
Total | 160 | 1,610 | 4,671 |
Related Valuation Reserve | 53 | 53 | 94 |
Interest Income on Accrual Basis | |||
With no valuation reserve | 28 | 160 | 196 |
Total | 28 | 160 | 196 |
One to four family residential real estate | Non Accrual Recorded Balance | |||
Recorded investment | |||
With no valuation reserve | 1,293 | 1,293 | 1,623 |
With a valuation reserve | 114 | 114 | 333 |
Total | 1,407 | 1,407 | 1,956 |
One to four family residential real estate | Non Accrual Unpaid Balance | |||
Recorded investment | |||
With no valuation reserve | 1,293 | 1,293 | 2,198 |
With a valuation reserve | 115 | 115 | 333 |
Total | 1,408 | 1,408 | 2,531 |
One to four family residential real estate | Accrual Basis | |||
Recorded investment | |||
With no valuation reserve | 1,613 | 1,613 | 2,792 |
Total | 1,613 | 1,613 | 2,792 |
Consumer construction | |||
Average investment | |||
With no valuation reserve | 14 | 14 | 36 |
Total | 14 | 14 | 36 |
Interest Income on Accrual Basis | |||
With no valuation reserve | 1 | 3 | 4 |
Total | 1 | 3 | 4 |
Consumer construction | Non Accrual Recorded Balance | |||
Recorded investment | |||
With no valuation reserve | 14 | 14 | 17 |
Total | 14 | 14 | 17 |
Consumer construction | Non Accrual Unpaid Balance | |||
Recorded investment | |||
With no valuation reserve | 14 | 14 | 22 |
Total | 14 | 14 | 22 |
Consumer construction | Accrual Basis | |||
Recorded investment | |||
With no valuation reserve | 53 | 53 | 57 |
Total | 53 | 53 | 57 |
Consumer | |||
Average investment | |||
With no valuation reserve | 47 | 44 | 127 |
With a valuation reserve | 5 | ||
Total | 47 | 44 | 132 |
Related Valuation Reserve | 5 | ||
Interest Income on Accrual Basis | |||
With no valuation reserve | 1 | 2 | 2 |
Total | 1 | 2 | 2 |
Consumer | Non Accrual Recorded Balance | |||
Recorded investment | |||
With no valuation reserve | 59 | 59 | 82 |
Total | 59 | 59 | 82 |
Consumer | Non Accrual Unpaid Balance | |||
Recorded investment | |||
With no valuation reserve | 59 | 59 | 86 |
Total | $ 59 | $ 59 | 86 |
Consumer | Accrual Basis | |||
Recorded investment | |||
With no valuation reserve | 4 | ||
Total | $ 4 |
LOANS - PAST DUE (Details)
LOANS - PAST DUE (Details) - USD ($) $ in Thousands | Sep. 30, 2017 | Dec. 31, 2016 |
Past due loans | ||
30-89 days Past Due (accruing) | $ 2,658 | $ 3,374 |
90+ days Past Due/Nonaccrual | 3,065 | 4,124 |
Total | 5,723 | 7,498 |
Commercial real estate | ||
Past due loans | ||
30-89 days Past Due (accruing) | 247 | 942 |
90+ days Past Due/Nonaccrual | 1,320 | 1,732 |
Total | 1,567 | 2,674 |
Commercial, financial, and agricultural | ||
Past due loans | ||
30-89 days Past Due (accruing) | 478 | 186 |
90+ days Past Due/Nonaccrual | 265 | 337 |
Total | 743 | 523 |
Commercial construction | ||
Past due loans | ||
90+ days Past Due/Nonaccrual | 14 | |
Total | 14 | |
One to four family residential real estate | ||
Past due loans | ||
30-89 days Past Due (accruing) | 1,847 | 2,113 |
90+ days Past Due/Nonaccrual | 1,408 | 1,956 |
Total | 3,255 | 4,069 |
Consumer construction | ||
Past due loans | ||
90+ days Past Due/Nonaccrual | 17 | |
Total | 17 | |
Consumer | ||
Past due loans | ||
30-89 days Past Due (accruing) | 86 | 133 |
90+ days Past Due/Nonaccrual | 58 | 82 |
Total | $ 144 | $ 215 |
LOANS - TROUBLED DEBT RESTRUCTU
LOANS - TROUBLED DEBT RESTRUCTURING (Details) | 21 Months Ended |
Sep. 30, 2017loanitem | |
LOANS | |
Number of consecutive timely payments before being considered return to accruing status | item | 6 |
Number of troubled debt restructurings | loan | 0 |
LOANS - INSIDER LOANS (Details)
LOANS - INSIDER LOANS (Details) - USD ($) | 9 Months Ended | ||
Sep. 30, 2017 | Sep. 30, 2016 | Sep. 30, 2017 | |
Activity in insider loans granted to the entity's executive officers and directors, including their families and firms | |||
Loans outstanding, beginning of period | $ 9,195,000 | $ 6,887,000 | |
Net activity on revolving lines of credit | 554,000 | 1,720,000 | |
Repayment | (476,000) | (2,269,000) | |
Loans outstanding, end of period | 9,273,000 | 6,338,000 | |
Loans outstanding | 9,195,000 | 6,887,000 | $ 9,273,000 |
Bank | |||
Activity in insider loans granted to the entity's executive officers and directors, including their families and firms | |||
Unfunded commitments | 1,921,000 | ||
Bank | Substandard (6) | |||
Activity in insider loans granted to the entity's executive officers and directors, including their families and firms | |||
Loans outstanding, end of period | 0 | 0 | |
Loans outstanding | $ 0 | $ 0 | $ 0 |
GOODWILL AND OTHER INTANGIBLE43
GOODWILL AND OTHER INTANGIBLE ASSETS (Details) - USD ($) | 9 Months Ended | ||||
Sep. 30, 2017 | Dec. 31, 2016 | Aug. 31, 2016 | Apr. 30, 2016 | Dec. 31, 2014 | |
Goodwill | $ 5,694,000 | $ 5,694,000 | |||
Deposit based intangible assets | 1,985,000 | 2,172,000 | |||
Amortization of Intangible Assets | 187,000 | ||||
Amortization expense year one | 250,000 | ||||
Amortization expense year two | 250,000 | ||||
Amortization expense year three | 250,000 | ||||
Amortization expense year four | 250,000 | ||||
Amortization expense year five | $ 250,000 | ||||
PFC | |||||
Goodwill | $ 3,805,000 | ||||
Deposit based intangible assets | $ 1,206,000 | ||||
Eagle River | |||||
Goodwill | 1,839,000 | $ 1,839,000 | |||
Deposit based intangible assets | 993,000 | ||||
Niagara Bancorporation | |||||
Goodwill | 50,000 | $ 50,000 | |||
Deposit based intangible assets | $ 300,000 |
SERVICING RIGHTS (Details)
SERVICING RIGHTS (Details) - USD ($) $ in Thousands | 9 Months Ended | |
Sep. 30, 2017 | Sep. 30, 2016 | |
Commercial loans | ||
Commercial Loans | ||
Commercial Loans | $ 39,737 | $ 43,200 |
Servicing rights | $ 117 | 147 |
Mortgage loans | ||
Mortgage Loans | ||
Annual constant prepayment speed (as a percent) | 10.84% | |
Discount rate (as a percent) | 9.73% | |
Changes in mortgage servicing rights capitalized and amortized, along with the aggregate activity in related valuation allowances | ||
Balance at beginning of period | $ 1,573 | 1,965 |
Acquired MSRs | 207 | |
Amortization | (411) | (495) |
Balance at end of period | 1,162 | 1,677 |
Balance of loan servicing portfolio | $ 204,087 | $ 233,356 |
Mortgage servicing rights as % of portfolio | 0.57% | 0.72% |
BORROWINGS (Details)
BORROWINGS (Details) $ in Thousands | 9 Months Ended | |
Sep. 30, 2017USD ($)item | Dec. 31, 2016USD ($) | |
BORROWINGS | ||
Borrowings | $ 91,397 | $ 67,579 |
Federal Home Loan Bank Borrowing Weighted Average Interest Rate | 2.09% | |
LIBOR | ||
BORROWINGS | ||
Variable rate basis | LIBOR | |
Federal Home Loan Bank borrowings | ||
BORROWINGS | ||
Borrowings | $ 70,000 | 45,000 |
Federal Home Loan Bank borrowings | Mortgage related and municipal securities | ||
BORROWINGS | ||
Securities pledged as collateral, amortized cost | 11,976 | |
Securities pledged as collateral, fair value | 11,993 | |
Federal Home Loan Bank borrowings | FHLB stock | ||
BORROWINGS | ||
Stock owned and pledged as collateral | 3,250 | |
Federal Home Loan Bank borrowings | One to four family residential real estate | ||
BORROWINGS | ||
Loans pledged as collateral | 73,676 | |
Correspondent bank line of credit | ||
BORROWINGS | ||
Borrowings | $ 1,295 | 750 |
Number of banking borrowing relationships | item | 1 | |
Correspondent bank line of credit | LIBOR | ||
BORROWINGS | ||
Variable rate (as a percent) | 2.75% | |
Correspondent bank term note | ||
BORROWINGS | ||
Borrowings | $ 19,549 | 21,199 |
Quarterly principal payment | 550 | |
USDA Rural Development note | ||
BORROWINGS | ||
Borrowings | $ 553 | $ 630 |
Interest rate on note (as a percent) | 1.00% | |
USDA Rural Development note | First Rural Relending | ||
BORROWINGS | ||
Demand deposit account pledged as collateral | $ 619 | |
Revolving Credit Facility | ||
BORROWINGS | ||
Line of Credit | $ 5,000 | |
Revolving Credit Facility | LIBOR | ||
BORROWINGS | ||
LIBOR rate at point of time | 1.33% |
DEFINED BENEFIT PENSION PLAN (D
DEFINED BENEFIT PENSION PLAN (Details) | 9 Months Ended | 12 Months Ended | |
Sep. 30, 2017USD ($)item | Sep. 30, 2016USD ($) | Dec. 31, 2016 | |
Defined Benefit Pension Plan | |||
Expected contributions to the plan | $ 19,000 | ||
Number of years over which anticipated pension distributions disclosed | item | 5 | ||
Anticipated distributions from the plan | |||
2,017 | $ 128 | ||
2,018 | 125 | ||
2,019 | 122 | ||
2,020 | 121 | ||
2,021 | 120 | ||
2022-2026 | 723 | ||
Total | 1,339 | ||
Peninsula Financial Corporation noncontributory defined benefit pension plan | |||
Change in plan assets | |||
Fair value of plan assets | 2,049,000 | $ 2,033,000 | |
Accrued pension expense, included with other assets or liabilities | 1,138,000 | 1,147,000 | |
Accumulated benefit obligation | $ 3,187,000 | $ 3,180,000 | |
Assumptions in the actuarial valuation | |||
Weighted average discount rate | 3.78% | 3.99% | |
Expected long-term rate of return on plan assets | 8.00% | 8.00% | |
Peninsula Financial Corporation noncontributory defined benefit pension plan | Equity securities | |||
Plan assets | |||
Target Allocation, minimum | 50.00% | 50.00% | |
Target Allocation, maximum | 70.00% | 70.00% | |
Peninsula Financial Corporation noncontributory defined benefit pension plan | Equity securities | Plan | |||
Plan assets | |||
Actual Allocation | 60.00% | ||
Peninsula Financial Corporation noncontributory defined benefit pension plan | Fixed income securities | |||
Plan assets | |||
Target Allocation, minimum | 30.00% | 30.00% | |
Target Allocation, maximum | 50.00% | 50.00% | |
Peninsula Financial Corporation noncontributory defined benefit pension plan | Fixed income securities | Plan | |||
Plan assets | |||
Actual Allocation | 40.00% |
STOCK COMPENSATION PLANS (Detai
STOCK COMPENSATION PLANS (Details) - $ / shares | Aug. 31, 2016 | Aug. 31, 2015 | Aug. 31, 2014 | Aug. 31, 2013 | Feb. 28, 2017 | Mar. 31, 2016 | Feb. 29, 2016 | May 31, 2015 | Mar. 31, 2015 | Mar. 31, 2014 | Mar. 31, 2017 | Sep. 30, 2017 |
Stock Compensation Plans | ||||||||||||
Shares available for grant at end of period | 268,836 | |||||||||||
Summary of nonvested shares | ||||||||||||
Nonvested beginning balance (in shares) | 90,417 | 90,417 | ||||||||||
Granted during the period (in shares) | 28,427 | |||||||||||
Vested during the period (in shares) | (31,559) | |||||||||||
Nonvested ending balance (in shares) | 87,285 | |||||||||||
Weighted Average Grant Date Fair Value | ||||||||||||
Nonvested beginning balance (in dollars per share) | $ 11.19 | $ 11.19 | ||||||||||
Granted during the period (in dollars per share) | 13.39 | |||||||||||
Vested during the period (in dollars per share) | 11.55 | |||||||||||
Nonvested ending balance (in dollars per share) | $ 11.78 | |||||||||||
RSUs | ||||||||||||
Stock Compensation Plans | ||||||||||||
Market value at grant date (in dollars per share) | $ 13.39 | $ 9.91 | $ 10.77 | $ 11.15 | $ 12.95 | |||||||
Stock issued for vested restricted stocks | 37,125 | 37,125 | 37,125 | 37,125 | 22,626 | 3,000 | 13,194 | 31,559 | ||||
Vesting period | 4 years | 4 years | 4 years | 4 years | 4 years | |||||||
Summary of nonvested shares | ||||||||||||
Granted during the period (in shares) | 28,427 | 35,733 | 3,000 | 37,730 | 52,774 |
INCOME TAXES (Details)
INCOME TAXES (Details) - USD ($) $ in Thousands | 9 Months Ended | |
Sep. 30, 2017 | Sep. 30, 2016 | |
INCOME TAXES | ||
Deferred tax assets, net of valuation allowance | $ 6,266 | |
Net operating loss (NOL) carryforwards | 7,600 | |
Tax credit carryforwards | $ 1,700 | |
Expiration period from date of origination for net operating loss carryforwards | 20 years | |
Annual limitation for usage of NOL | $ 1,404 | |
Annual limitation for usage of tax credits | 476 | |
Deferred tax expense (benefit) | $ 2,681 | $ 1,481 |
FAIR VALUE MEASUREMENTS (Detail
FAIR VALUE MEASUREMENTS (Details) - USD ($) $ in Thousands | 9 Months Ended | |
Sep. 30, 2017 | Dec. 31, 2016 | |
Fair Value Measurements | ||
Blended interest rate for determining fair value of nonaccrual loans (as a percent) | 0.00% | |
Fair value of commitments | $ 0 | $ 0 |
Financial assets: | ||
Interest-bearing deposits | 13,374 | 14,047 |
Securities available for sale | 85,009 | 86,273 |
Carrying Amount | ||
Financial assets: | ||
Total financial assets | 964,558 | 928,839 |
Financial liabilities: | ||
Total financial liabilities | 926,927 | 891,358 |
Estimated Fair Value | ||
Financial assets: | ||
Total financial assets | 961,891 | 930,379 |
Financial liabilities: | ||
Total financial liabilities | 903,090 | 884,520 |
Level 1 | Carrying Amount | ||
Financial assets: | ||
Cash and cash equivalents | 57,682 | 46,755 |
Level 1 | Estimated Fair Value | ||
Financial assets: | ||
Cash and cash equivalents | 57,682 | 46,755 |
Level 2 | Carrying Amount | ||
Financial assets: | ||
Interest-bearing deposits | 13,374 | 14,047 |
Securities available for sale | 84,509 | 84,623 |
Federal Home Loan Bank stock | 3,250 | 2,911 |
Financial liabilities: | ||
Deposits | 835,203 | 823,512 |
Borrowings | 91,397 | 67,579 |
Level 2 | Estimated Fair Value | ||
Financial assets: | ||
Interest-bearing deposits | 13,374 | 14,047 |
Securities available for sale | 84,509 | 84,623 |
Federal Home Loan Bank stock | 3,250 | 2,911 |
Financial liabilities: | ||
Deposits | 811,066 | 815,960 |
Borrowings | 91,697 | 68,293 |
Significant Unobservable Inputs (Level 3) | Carrying Amount | ||
Financial assets: | ||
Securities available for sale | 500 | 1,650 |
Net loans | 803,019 | 776,837 |
Accrued interest receivable | 2,224 | 2,016 |
Financial liabilities: | ||
Accrued interest payable | 327 | 267 |
Significant Unobservable Inputs (Level 3) | Estimated Fair Value | ||
Financial assets: | ||
Securities available for sale | 500 | 1,650 |
Net loans | 800,352 | 778,377 |
Accrued interest receivable | 2,224 | 2,016 |
Financial liabilities: | ||
Accrued interest payable | $ 327 | $ 267 |
FAIR VALUE MEASUREMENTS - OTHER
FAIR VALUE MEASUREMENTS - OTHER ASSETS AND OTHER LIABILITIES (Details) - Recurring - USD ($) $ in Thousands | Sep. 30, 2017 | Dec. 31, 2016 |
Fair value measurements | ||
Other assets | $ 0 | $ 0 |
Other liabilities | 0 | 0 |
Significant Unobservable Inputs (Level 3) | ||
Fair value measurements | ||
Assets | 0 | 0 |
Liabilities | $ 0 | $ 0 |
FAIR VALUE MEASUREMENTS - RECUR
FAIR VALUE MEASUREMENTS - RECURRING (Details) - USD ($) $ in Thousands | Sep. 30, 2017 | Dec. 31, 2016 |
Available-for-sale Securities | $ 85,009 | $ 86,273 |
Corporate | ||
Available-for-sale Securities | 24,559 | 19,910 |
Equity | ||
Available-for-sale Securities | 500 | 500 |
US Agencies | ||
Available-for-sale Securities | 22,543 | 23,952 |
US Agencies - MBS | ||
Available-for-sale Securities | 13,763 | 16,833 |
Obligations of states and political subdivisions | ||
Available-for-sale Securities | 23,644 | 25,078 |
Recurring | ||
Available-for-sale Securities | 38 | 86,273 |
Recurring | Corporate | ||
Available-for-sale Securities | 19,910 | |
Recurring | Equity | ||
Available-for-sale Securities | 500 | |
Recurring | US Agencies | ||
Available-for-sale Securities | 23,952 | |
Recurring | US Agencies - MBS | ||
Available-for-sale Securities | 38 | 16,833 |
Recurring | Obligations of states and political subdivisions | ||
Available-for-sale Securities | 25,078 | |
Level 2 | Recurring | Corporate | ||
Available-for-sale Securities | 24,559 | 19,910 |
Level 2 | Recurring | US Agencies | ||
Available-for-sale Securities | 22,543 | 23,952 |
Level 2 | Recurring | US Agencies - MBS | ||
Available-for-sale Securities | 13,763 | 15,683 |
Level 2 | Recurring | Obligations of states and political subdivisions | ||
Available-for-sale Securities | 23,644 | 25,078 |
Significant Unobservable Inputs (Level 3) | Recurring | Equity | ||
Available-for-sale Securities | $ 500 | 500 |
Significant Unobservable Inputs (Level 3) | Recurring | US Agencies - MBS | ||
Available-for-sale Securities | $ 1,150 |
FAIR VALUE MEASUREMENTS - NONRE
FAIR VALUE MEASUREMENTS - NONRECURRING BASIS (Details) - USD ($) $ in Thousands | 3 Months Ended | 9 Months Ended | 12 Months Ended |
Sep. 30, 2017 | Sep. 30, 2017 | Dec. 31, 2016 | |
Fair value | |||
Other real estate owned | $ 4,413 | $ 4,413 | $ 4,782 |
Impaired loans | |||
Fair value | |||
Impaired loans | 361 | 361 | |
Other real estate owned | |||
Fair value | |||
Other real estate owned | 298 | 298 | |
Nonrecurring | |||
Fair value | |||
Total Losses | 252 | 659 | 845 |
Nonrecurring | Impaired loans | |||
Fair value | |||
Impaired loans | 6,589 | 6,589 | 9,856 |
Total Losses | 209 | 643 | |
Nonrecurring | Other real estate owned | |||
Fair value | |||
Other real estate owned | 4,413 | 4,413 | 4,782 |
Total Losses | 43 | 202 | |
Nonrecurring | Significant Unobservable Inputs (Level 3) | Impaired loans | |||
Fair value | |||
Impaired loans | 6,589 | 6,589 | 9,856 |
Nonrecurring | Significant Unobservable Inputs (Level 3) | Other real estate owned | |||
Fair value | |||
Other real estate owned | $ 4,413 | $ 4,413 | $ 4,782 |
SHAREHOLDERS' EQUITY (Details)
SHAREHOLDERS' EQUITY (Details) - USD ($) | 9 Months Ended | 12 Months Ended | |||||||
Sep. 30, 2016 | Dec. 31, 2016 | Dec. 31, 2015 | Dec. 31, 2014 | Dec. 31, 2013 | Sep. 30, 2017 | Apr. 28, 2015 | Dec. 17, 2013 | Feb. 27, 2013 | |
Participation in the TARP Capital Purchase Program | |||||||||
Number of shares authorized to be repurchased | $ 25,000 | $ 600,000 | $ 600,000 | ||||||
Number of additional shares authorized to be repurchased | $ 750,000 | ||||||||
Shares of Common Stock | |||||||||
Participation in the TARP Capital Purchase Program | |||||||||
Number of shares repurchased | 14,000 | 14,000 | 102,455 | 13,700 | 55,594 |
COMMITMENTS, CONTINGENCIES, A54
COMMITMENTS, CONTINGENCIES, AND CREDIT RISK (Details) - USD ($) $ in Thousands | 9 Months Ended | |
Sep. 30, 2017 | Dec. 31, 2016 | |
Financial Instruments with Off-Balance-Sheet Risk | ||
Commitments | $ 135,388 | $ 102,018 |
Commitments to extend credit | ||
Financial Instruments with Off-Balance-Sheet Risk | ||
Commitments, variable rate | 84,786 | 59,496 |
Commitments, fixed rate | 36,572 | 28,737 |
Standby letters of credit | ||
Financial Instruments with Off-Balance-Sheet Risk | ||
Commitments, variable rate | $ 8,193 | 8,252 |
Percentage collateralization on financial instruments allowed under commitments | 100.00% | |
Credit card commitments | ||
Financial Instruments with Off-Balance-Sheet Risk | ||
Commitments, fixed rate | $ 5,837 | $ 5,533 |
COMMITMENTS, CONTINGENCIES, A55
COMMITMENTS, CONTINGENCIES, AND CREDIT RISK - CREDIT RISK (Details) - USD ($) $ in Thousands | 9 Months Ended | 12 Months Ended | |
Sep. 30, 2017 | Dec. 31, 2016 | Sep. 30, 2016 | |
Concentration of Credit Risk | |||
Loan portfolio | $ 803,019 | $ 776,837 | $ 751,942 |
Commercial real estate | |||
Concentration of Credit Risk | |||
Loan portfolio | 407,771 | $ 361,272 | |
Bank | Commercial real estate | Commercial loan portfolio | Credit risk concentration | |||
Concentration of Credit Risk | |||
Loan portfolio | $ 116,526 | $ 121,861 | |
Percentage of concentration risk under a specified benchmark | 20.56% | 22.42% |
BUSINESS COMBINATIONS (Details)
BUSINESS COMBINATIONS (Details) | 1 Months Ended | 9 Months Ended | ||||
Aug. 31, 2016USD ($)item | Apr. 30, 2016USD ($) | Apr. 29, 2016USD ($)item | Sep. 30, 2016USD ($) | Sep. 30, 2017USD ($) | Dec. 31, 2016USD ($) | |
Business Acquisition [Line Items] | ||||||
Assets | $ 1,015,070,000 | $ 983,520,000 | ||||
Goodwill | $ 5,694,000 | 5,694,000 | ||||
Purchase Price: | ||||||
Cash consideration | $ 12,500,000 | |||||
Eagle River | ||||||
Business Acquisition [Line Items] | ||||||
Number of banking offices | item | 3 | |||||
Assets | $ 125,000,000 | |||||
Total loans | $ 84,000,000 | |||||
Total deposits | 105,000,000 | |||||
Deposit based intangible | 933,000 | |||||
Total purchase price | 12,500,000 | |||||
Goodwill | $ 1,839,000 | 1,839,000 | ||||
Niagara Bancorporation | ||||||
Business Acquisition [Line Items] | ||||||
Number of banking offices | item | 4 | |||||
Assets | $ 67,000,000 | |||||
Total loans | 33,000,000 | |||||
Total deposits | 59,000,000 | |||||
Deposit based intangible | 300,000 | |||||
Net cash used in Eagle acquisition and reimbursement of contract termination fee | 7,325,000 | |||||
Goodwill | $ 50,000 | $ 50,000 |