HOPFED BANCORP INC (HFBC) Form 10-Q for Period Ending 3/31/2016
: 6.22.4
 
Document and Entity Information - shares
3 Months Ended
Mar. 31, 2016
May. 06, 2016
Document And Entity Information [Abstract]
  
Document Type
10-Q 
 
Amendment Flag
false 
 
Document Period End Date
Mar. 31, 2016 
 
Document Fiscal Year Focus
2016 
 
Document Fiscal Period Focus
Q1 
 
Trading Symbol
HFBC 
 
Entity Registrant Name
HOPFED BANCORP INC 
 
Entity Central Index Key
0001041550 
 
Current Fiscal Year End Date
--12-31 
 
Entity Filer Category
Accelerated Filer 
 
Entity Common Stock, Shares Outstanding
 
6,775,640 
Consolidated Condensed Statements of Financial Condition - USD ($)
$ in Thousands
Mar. 31, 2016
Dec. 31, 2015
Assets
  
Cash and due from banks
$ 27,393 
$ 46,926 
Interest-earning deposits
14,798 
7,772 
Cash and cash equivalents
42,191 
54,698 
Federal Home Loan Bank stock, at cost
4,428 
4,428 
Securities available for sale
237,829 
237,177 
Loans held for sale
1,339 
2,792 
Loans receivable, net of allowance for loan losses of $6,163 at March 31, 2016, and $5,700 at December 31, 2015
554,727 
556,349 
Accrued interest receivable
3,871 
4,139 
Real estate and other assets owned
1,457 
1,736 
Bank owned life insurance
10,403 
10,319 
Premises and equipment, net
23,975 
24,034 
Deferred tax assets
1,857 
2,642 
Other assets
3,753 
4,840 
Total assets
885,830 
903,154 
Deposits:
  
Non-interest-bearing accounts
127,067 
125,070 
Interest-bearing accounts
  
Interest bearing checking accounts
216,817 
203,779 
Savings and money market accounts
95,906 
95,893 
Other time deposits
285,163 
314,664 
Total deposits
724,953 
739,406 
Advances from Federal Home Loan Bank
11,000 
15,000 
Repurchase agreements
46,940 
45,770 
Subordinated debentures
10,310 
10,310 
Advances from borrowers for taxes and insurance
754 
614 
Dividends payable
286 
287 
Accrued expenses and other liabilities
2,819 
4,137 
Total liabilities
$ 797,062 
$ 815,524 
Stockholders' equity
  
Preferred stock, par value $0.01 per share; authorized - 500,000 shares; no shares issued and outstanding at March 31, 2016, and December 31, 2015.
  
Common stock, par value $.01 per share; authorized 15,000,000 shares; 7,962,308 issued and 6,800,763 outstanding at March 31, 2016, and 7,951,699 issued and 6,865,811 outstanding at December 31, 2015
$ 80 
$ 79 
Additional paid-in-capital
58,618 
58,604 
Retained earnings
47,382 
47,124 
Treasury stock
(14,372)
(13,471)
Unallocated ESOP shares (at cost, 535,671 shares at March 31, 2016, and 546,413 shares at December 31, 2015)
(7,039)
(7,180)
Accumulated other comprehensive Income, net of taxes
4,099 
2,474 
Total stockholders' equity
88,768 
87,630 
Total liabilities and stockholders' equity
$ 885,830 
$ 903,154 
Consolidated Condensed Statements of Financial Condition (Parenthetical) - USD ($)
$ in Thousands
Mar. 31, 2016
Dec. 31, 2015
Statement of Financial Position [Abstract]
  
Loans receivable, allowance for loan losses
$ 6,163 
$ 5,700 
Preferred stock, par value
$ 0.01 
$ 0.01 
Preferred stock, shares authorized
500,000 
500,000 
Preferred stock, shares issued
Preferred stock, shares outstanding
Common stock, par value
$ 0.01 
$ 0.01 
Common stock, shares authorized
15,000,000 
15,000,000 
Common stock, shares issued
7,962,308 
7,951,699 
Common stock, shares outstanding
6,800,763 
6,865,811 
Treasury stock, shares
1,161,545 
1,085,888 
Unallocated ESOP shares
535,671 
546,413 
Consolidated Condensed Statements of Income - USD ($)
3 Months Ended
$ in Thousands
Mar. 31, 2016
Mar. 31, 2015
Interest and dividend income:
  
Loans receivable
$ 6,465 
$ 6,290 
Investment in securities, taxable
1,247 
2,448 
Investment in securities, non-taxable
353 
453 
Interest-earning deposits
16 
Total interest and dividend income
8,081 
9,195 
Interest expense:
  
Deposits
1,095 
1,260 
Advances from Federal Home Loan Bank
73 
69 
Repurchase agreements
143 
120 
Subordinated debentures
94 
184 
Total interest expense
1,405 
1,633 
Net interest income
6,676 
7,562 
Provision for loan losses
458 
215 
Net interest income after provision for loan losses
6,218 
7,347 
Non-interest income:
  
Service charges
677 
714 
Merchant card income
291 
270 
Mortgage origination revenue
368 
177 
Gain on sale of securities
291 
366 
Income from bank owned life insurance
84 
71 
Financial services commission
133 
159 
Other operating income
176 
156 
Total non-interest income
2,020 
1,913 
Non-interest expenses:
  
Salaries and benefits
3,988 
4,184 
Occupancy expense
787 
738 
Data processing expense
727 
692 
Other state taxes
248 
248 
Intangible amortization expense
 
16 
Professional services expense
335 
329 
Deposit insurance and examination expense
173 
117 
Advertising expense
320 
306 
Postage and communications expense
155 
132 
Supplies expense
149 
146 
Loss (Gain) on sale of real estate owned
(7)
Real estate owned expenses
59 
137 
Other operating expenses
733 
432 
Total non-interest expense
7,683 
7,470 
Income before income tax expense
555 
1,790 
Income tax expense
46 
435 
Net income
$ 509 
$ 1,355 
Net income per share
  
Basic
$ 0.08 
$ 0.20 
Fully diluted
0.08 
0.20 
Dividend per share
$ 0.04 
$ 0.04 
Weighted average shares outstanding - basic
6,297,755 
6,732,456 
Weighted average shares outstanding - diluted
6,297,755 
6,732,456 
Consolidated Condensed Statements of Comprehensive Income - USD ($)
3 Months Ended
$ in Thousands
Mar. 31, 2016
Mar. 31, 2015
Statement of Comprehensive Income [Abstract]
  
Net income
$ 509 
$ 1,355 
Other comprehensive income, net of tax:
  
Unrealized gain (loss) on non other than temporary impaired investment securities available for sale, net of taxes of ($897) and ($632) for the three month periods ended March 31, 2016 and March 31, 2015, respectively.
1,745 
1,227 
Unrealized gain on OTTI securities, net of taxes of ($37) for the three month period ended March 31, 2016
72 
 
Unrealized gain on derivatives, net of taxes of ($32) for the three month period ended March 31, 2015.
 
64 
Reclassification adjustment for gains and accretion included in net income, net of taxes
(192)
(242)
Total other comprehensive income
1,625 
1,049 
Comprehensive income
$ 2,134 
$ 2,404 
Consolidated Condensed Statements of Comprehensive Income (Parenthetical) - USD ($)
3 Months Ended
$ in Thousands
Mar. 31, 2016
Mar. 31, 2015
Statement of Comprehensive Income [Abstract]
  
Unrealized gain on investment securities available for sale, tax effect
$ (897)
$ (632)
Unrealized gain on OTTI securities, tax effect
$ (37)
 
Unrealized gain on derivatives, tax effect
 
$ (32)
Consolidated Condensed Statement of Stockholders' Equity - USD ($)
$ in Thousands
Total
Common Stock [Member]
Additional Capital Surplus [Member]
Retained Earnings [Member]
Treasury Stock Common [Member]
Unearned ESOP Shares [Member]
Accumulated Other Comprehensive Income [Member]
Beginning balance at Dec. 31, 2014
$ 98,402 
$ 79 
$ 58,466 
$ 45,729 
$ (9,429)
 
$ 3,557 
Beginning balance, Shares at Dec. 31, 2014
 
7,171,282 
     
Consolidated net income
1,355 
  
1,355 
   
Treasury stock reissued
    
7,884 
$ (7,884)
 
Treasury stock reissued, shares
 
600,000 
     
Repurchase of treasury stock
(9,722)
   
(9,722)
  
Repurchase of treasury stock, shares
 
(725,341)
     
Compensation expense, restricted stock awards
49 
 
49 
    
Net change in unrealized gain on securities available for sale, net of income taxes
985 
     
985 
Net change in unrealized loss on derivatives, net of income taxes
64 
     
64 
Cash dividend to common stockholders
(257)
  
(257)
   
Ending balance at Mar. 31, 2015
90,876 
$ 79 
58,515 
46,827 
(11,267)
(7,884)
4,606 
Ending balance, Shares at Mar. 31, 2015
 
7,045,941 
     
Beginning balance at Dec. 31, 2015
87,630 
$ 79 
58,604 
47,124 
(13,471)
$ (7,180)
2,474 
Beginning balance, Shares at Dec. 31, 2015
 
6,865,811 
     
Consolidated net income
509 
  
509 
   
Issue of restricted stock
$ 1 
     
Issue of restricted stock, shares
 
10,609 
     
Repurchase of treasury stock
(901)
   
(901)
  
Repurchase of treasury stock, shares
 
(75,657)
     
ESOP Shares earned
125 
 
(16)
    
ESOP Shares earned (in shares)
     
141,000 
 
Compensation expense, restricted stock awards
30 
 
30 
    
Net change in unrealized gain on securities available for sale, net of income taxes
1,625 
     
1,625 
Cash dividend to common stockholders
(251)
  
(251)
   
Ending balance at Mar. 31, 2016
$ 88,768 
$ 80 
$ 58,618 
$ 47,382 
$ (14,372)
$ (7,039)
$ 4,099 
Ending balance, Shares at Mar. 31, 2016
 
6,800,763 
     
Consolidated Condensed Statement of Stockholders' Equity (Parenthetical) - USD ($)
3 Months Ended
$ in Thousands
Mar. 31, 2016
Mar. 31, 2015
Net change in unrealized gain on securities available for sale, net of income taxes
$ (838)
$ (508)
Net change in unrealized loss on derivatives, net of income taxes benefit
 
32 
Accumulated Other Comprehensive Income [Member]
  
Net change in unrealized gain on securities available for sale, net of income taxes
$ (838)
(508)
Net change in unrealized loss on derivatives, net of income taxes benefit
 
$ 32 
Consolidated Condensed Statements of Cash Flows - USD ($)
3 Months Ended
$ in Thousands
Mar. 31, 2016
Mar. 31, 2015
Cash flows from operating activities:
  
Net cash provided by operating activities
$ 817 
$ 1,673 
Cash flows from investing activities
  
Proceeds from sales, calls and maturities of securities available for sale
16,764 
59,190 
Purchase of securities available for sale
(15,021)
(14,075)
Net (increase) decrease in loans
3,259 
(10,155)
Proceeds from sale of foreclosed assets
282 
46 
Purchase of premises and equipment
(313)
(655)
Net cash used in investing activities
4,971 
34,351 
Cash flows from financing activities:
  
Net increase (decrease) in demand deposits
15,048 
(4,223)
Net increase (decrease) in time and other deposits
(29,501)
124 
Increase (decrease) in advances from borrowers for taxes and insurance
140 
280 
Repayment of advances from Federal Home Loan Bank
(4,000)
(15,000)
Net increase (decrease) in repurchase agreements
1,170 
(11,892)
Cash used to repurchase treasury stock
(901)
(9,722)
Dividends paid on common stock
(251)
(281)
Net cash provided by financing activities
(18,295)
(40,714)
Increase (decrease) in cash and cash equivalents
(12,507)
(4,690)
Cash and cash equivalents, beginning of period
54,698 
40,439 
Cash and cash equivalents, end of period
42,191 
35,749 
Supplemental disclosures of cash flow information:
  
Interest paid
1,509 
1,662 
Income taxes paid
Supplemental disclosures of non-cash investing and financing activities:
  
Loans charged off
83 
403 
Foreclosures and in substance foreclosures of loans during period
 
464 
Net unrealized gains (losses) on investment securities classified as available for sale
2,460 
1,493 
Increase (decrease) in deferred tax asset related to unrealized gains on investments
(838)
(508)
Dividends declared and payable
286 
272 
Issue of common stock to ESOP
 
$ 7,884 
Issue of restricted common stock
$ 125 
 
Basis of Presentation
3 Months Ended
Mar. 31, 2016
Organization, Consolidation and Presentation of Financial Statements [Abstract]
 
Basis of Presentation
(1) BASIS OF PRESENTATION

HopFed Bancorp, Inc. (the “Company”) was formed at the direction of Heritage Bank USA Inc., formerly Hopkinsville Federal Savings Bank (the “Bank”), to become the holding company of the Bank upon the conversion of the Bank from a federally chartered mutual savings bank to a federally chartered stock savings bank. The conversion was consummated on February 6, 1998. The Company’s primary assets are the outstanding capital stock of the converted Bank, and its sole business is that of the converted Bank.

On June 5, 2013, the Bank’s legal name became Heritage Bank USA Inc. and the Bank was granted a commercial bank charter by the Kentucky Department of Financial Institutions (“KDFI”). On June 5, 2013, the Bank became subject to regulation by the KDFI and the Federal Deposit Insurance Corporation (“FDIC”). On the same day, HopFed Bancorp was granted a bank holding company charter by the Federal Reserve Bank of Saint Louis (“FED”) and as such regulated by the FED.

The Bank operates a mortgage division, Heritage Mortgage Services, in Clarksville, Tennessee with agents located in several of its markets. The Bank has a financial services division, Heritage Solutions, with offices in Murray, Kentucky, Kingston Springs, Tennessee, and Pleasant View, Tennessee. Heritage Solutions agents travel throughout western Kentucky and middle Tennessee offering fixed and variable annuities, mutual funds and brokerage services. In October of 2014, the Bank opened a loan production office in Nashville, Tennessee.

The accompanying unaudited financial statements have been prepared in accordance with accounting principles generally accepted (“GAAP”) in the United States of America for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by U.S. GAAP for complete financial statements. In the opinion of management, all adjustments (consisting of only normal recurring accruals) necessary for fair representation have been included. The results of operations and other data for the three month period ended March 31, 2016, are not necessarily indicative of results that may be expected for the entire fiscal year ending December 31, 2016.

The accompanying unaudited financial statements should be read in conjunction with the Consolidated Financial Statements and the Notes thereto included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2015. The accounting policies followed by the Company are set forth in the Summary of Significant Accounting Policies in the Company’s December 31, 2015, Consolidated Financial Statements.

Income Per Share
3 Months Ended
Mar. 31, 2016
Earnings Per Share [Abstract]
 
Income Per Share
(2) INCOME PER SHARE

The following schedule reconciles the numerators and denominators of the basic and diluted income per share (“IPS”) computations for the three month periods ended March 31, 2016, and March 31, 2015. Diluted common shares arise from the potentially dilutive effect of the Company’s stock options and warrants outstanding. For the three month periods ended March 31, 2016, and March 31, 2015, the Company has excluded all unearned shares held by the ESOP.

 

     March 31,  
     2016      2015  

Basic IPS:

     

Net income

   $ 509,000       $ 1,355,000   

Average common shares outstanding

     6,297,755         6,732,456   
  

 

 

    

 

 

 

Net income per share

   $ 0.08       $ 0.20   
  

 

 

    

 

 

 

Diluted IPS:

     

Net Income

   $ 509,000       $ 1,355,000   

Average common shares outstanding

     6,297,755         6,732,456   
  

 

 

    

 

 

 

Dilutive effect of stock options

     —           —     
  

 

 

    

 

 

 

Average diluted shares outstanding

     6,297,755         6,732,456   
  

 

 

    

 

 

 

Net income per share, diluted

   $ 0.08       $ 0.20   
  

 

 

    

 

 

 
Stock Compensation
3 Months Ended
Mar. 31, 2016
Disclosure of Compensation Related Costs, Share-based Payments [Abstract]
 
Stock Compensation
(3) STOCK COMPENSATION

The Company incurred compensation cost related to the HopFed Bancorp, Inc. 2004 Long Term Incentive Plan of $30,000 for the three month period ended March 31, 2016, and $49,000 for the three month period ended March 31, 2015, respectively. The Company issued 10,609 shares of restricted stock in the three month period ended March 31, 2016. The Company did not issue any shares of restricted stock during the three month periods ended March 31, 2015. The table below provides a detail of the Company’s future compensation expense related to restricted stock vesting at March 31, 2016:

 

Year Ending    Future  

December 31,

   Expense  

2016

   $ 123,788   

2017

     86,323   

2018

     50,939   

2019

     4,975   
  

 

 

 

Total

   $ 266,025   
  

 

 

 

The compensation committee may make additional awards of restricted stock, thereby increasing the future expense related to this plan. In addition, award vesting may be accelerated due to certain events as outlined in the restricted stock award agreement. Any acceleration of vesting will change the timing of, but not the aggregate amount of, compensation expense incurred.

Securities
3 Months Ended
Mar. 31, 2016
Cash and Cash Equivalents [Abstract]
 
Securities
(4) SECURITIES

Management evaluates securities for other-than-temporary impairment at least on a quarterly basis, and more frequently when economic or market concerns warrant such evaluations. Consideration is given to (1) the length of time and the extent to which the fair value has been less than cost, (2) the financial condition and near-term prospects of the issuer, and (3) the intent and ability of the Company to retain its investment in the issuer for a period of time sufficient to allow for any anticipated recovery in fair value.

At March 31, 2016, the Company has 27 securities with unrealized losses. The carrying amount of securities and their estimated fair values at March 31, 2016, were as follows:

 

     March 31, 2016  
            Gross      Gross      Estimated  
     Amortized      Unrealized      Unrealized      Fair  
     Cost      Gains      Losses      Value  
     (Dollars in Thousands)  

Restricted:

           

FHLB stock

   $ 4,428         —           —           4,428   
  

 

 

    

 

 

    

 

 

    

 

 

 

Available for sale:

           

U.S. Treasury securities

   $ 2,001         4         —           2,005   

U.S. Agency securities

     89,094         2,714         (46      91,762   

Taxable municipal bonds

     6,174         99         (7      6,266   

Tax free municipal bonds

     38,573         2,271         (15      40,829   

Trust preferred securities

     1,621         353         —           1,974   

Mortgage-backed securities:

           

GNMA

     28,305         318         (111      28,512   

FNMA

     32,510         571         (35      33,046   

FHLMC

     10,711         74         (7      10,778   

NON-AGENCY CMO

     3,757         —           (237      3,520   

AGENCY CMO

     18,872         265         —           19,137   
  

 

 

    

 

 

    

 

 

    

 

 

 
   $ 231,618         6,669         (458      237,829   
  

 

 

    

 

 

    

 

 

    

 

 

 

 

The carrying amount of securities and their estimated fair values at December 31, 2015, was as follows:

 

     December 31, 2015  
            Gross      Gross      Estimated  
     Amortized      Unrealized      Unrealized      Fair  
     Cost      Gains      Losses      Value  
     (Dollars in Thousands)  

Restricted:

           

FHLB stock

   $ 4,428         —           —           4,428   
  

 

 

    

 

 

    

 

 

    

 

 

 

Available for sale:

           

U.S. Treasury securities

   $ 2,001         —           (1      2,000   

U.S. Agency securities

     91,694         1,727         (488      92,933   

Tax free municipal bonds

     42,237         2,481         (59      44,659   

Taxable municipal bonds

     6,190         52         (65      6,177   

Trust preferred securities

     1,617         248         —           1,865   

Mortgage-backed securities:

           

GNMA

     29,990         239         (239      29,990   

FNMA

     28,189         266         (152      28,303   

FHLMC

     8,113         24         (51      8,086   

Non-Agency CMO

     3,828         —           (174      3,654   

AGENCY CMO

     19,570         71         (131      19,510   
  

 

 

    

 

 

    

 

 

    

 

 

 
   $ 233,429         5,108         (1,360      237,177   
  

 

 

    

 

 

    

 

 

    

 

 

 

The scheduled maturities of debt securities available for sale at March 31, 2016, were as follows:

 

            Estimated  
     Amortized      Fair  
     Cost      Value  

Due within one year

   $ —         $ —     

Due in one to five years

     21,013         21,525   

Due in five to ten years

     42,557         43,739   

Due after ten years

     16,294         17,671   
  

 

 

    

 

 

 
     79,864         82,935   

Amortizing agency bonds

     57,599         59,900   

Mortgage-backed securities

     94,155         94,994   
  

 

 

    

 

 

 

Total unrestricted securities available for sale

   $ 231,618       $ 237,829   
  

 

 

    

 

 

 

 

The scheduled maturities of debt securities available for sale at December 31, 2015, were as follows:

 

            Estimated  
     Amortized      Fair  
     Cost      Value  

Due within one year

   $ —         $ —     

Due in one to five years

     17,939         18,304   

Due in five to ten years

     42,151         42,793   

Due after ten years

     22,702         24,088   
  

 

 

    

 

 

 
     82,792         85,185   

Amortizing agency bonds

     60,947         62,449   

Mortgage-backed securities

     89,690         89,543   
  

 

 

    

 

 

 

Total unrestricted securities available for sale

   $ 233,429       $ 237,177   
  

 

 

    

 

 

 

The estimated fair value and unrealized loss amounts of temporarily impaired investments as of March 31, 2016, are as follows:

 

     Less than 12 months     12 months or longer     Total  
     Estimated      Unrealized     Estimated      Unrealized     Estimated      Unrealized  
     Fair Value      Losses     Fair Value      Losses     Fair Value      Losses  
     (Dollars in Thousands)  

Available for sale

               

U.S. Agency securities

   $ 6,091         (10     2,956         (36     9,047         (46

Taxable municipals

     561         (7     —           —          561         (7

Tax free municipals

     1,326         (3     1,313         (12     2,639         (15

Mortgage-backed securities:

               

GNMA

     1,688         (24     5,771         (87     7,459         (111

FNMA

     5,763         (21     3,079         (14     8,842         (35

FHLMC

     2,966         (7     —           —          2,966         (7

NON-AGENCY CMOs

     —           —          3,520         (237     3,520         (237
  

 

 

    

 

 

   

 

 

    

 

 

   

 

 

    

 

 

 

Total available for sale

   $ 18,395         (72     16,639         (386     35,034         (458
  

 

 

    

 

 

   

 

 

    

 

 

   

 

 

    

 

 

 

 

The estimated fair value and unrealized loss amounts of temporarily impaired investments as of December 31, 2015, were as follows:

 

     Less than 12 months     12 months or longer     Total  
     Estimated      Unrealized     Estimated      Unrealized     Estimated      Unrealized  
     Fair Value      Losses     Fair Value      Losses     Fair Value      Losses  

Available for sale

               

U.S. Treasury securities

   $ 2,000         (1     —           —          2,000         (1

U.S. Agency securities

     26,499         (203     16,224         (285     42,723         (488

Taxable municipals

     2,159         (32     1,887         (33     4,046         (65

Tax free municipals

     —           —          3,878         (59     3,878         (59

Mortgage-backed securities:

               

GNMA

     10,840         (105     11,508         (134     22,348         (239

FNMA

     11,484         (87     3,036         (65     14,520         (152

FHLMC

     7,336         (51     —           —          7,336         (51

Non-Agency CMOs

     —           —          3,654         (174     3,654         (174

AGENCY CMOs

     9,781         (90     1,991         (41     11,772         (131
  

 

 

    

 

 

   

 

 

    

 

 

   

 

 

    

 

 

 

Total Available for Sale

   $ 70,099         (569     42,178         (791     112,277         (1,360
  

 

 

    

 

 

   

 

 

    

 

 

   

 

 

    

 

 

 

At March 31, 2016, securities with a book value of approximately $125.2 million and a market value of approximately $130.5 million were pledged to various municipalities for deposits in excess of FDIC limits as required by law. The Federal Home Loan Bank of Cincinnati has issued letters of credit in the Bank’s name totaling $32.5 million secured by the Bank’s loan portfolio to secure additional municipal deposits.

At March 31, 2016, securities with a book and market value of $40.9 million were sold under agreements to repurchase from various customers. Furthermore, the Company has a wholesale repurchase agreement with third party secured by investments with a combined book value of $6.4 million and a market value of $6.5 million. The repurchase agreement is in the amount of $6.0 million and has a maturity of September 18, 2016, and is currently callable on a quarterly basis by the issuer and has a fixed rate of interest of 4.36%.

Loans
3 Months Ended
Mar. 31, 2016
Receivables [Abstract]
 
Loans
(5) LOANS

Set forth below is selected data relating to the composition of the loan portfolio by type of loan at March 31, 2016, and December 31, 2015. At March 31, 2016, and December 31, 2015, there were no concentrations of loans exceeding 10% of total loans other than as disclosed below:

 

     March 31, 2016     March 31, 2016     December 31, 2015     December 31, 2015  
     Amount     Percent     Amount     Percent  
     (Dollars in thousands, except percentages)  

Real estate loans:

  

One-to-four family (closed end) first mortgages

   $ 145,936        26.0   $ 145,999        26.0

Second mortgages (closed end)

     1,623        0.3     1,771        0.3

Home equity lines of credit

     32,269        5.8     33,644        6.0

Multi-family

     29,311        5.2     24,725        4.4

Construction

     36,074        6.4     34,878        6.2

Land

     22,138        3.9     22,453        4.0

Farmland

     41,521        7.4     42,246        7.5

Non-residential real estate

     148,292        26.4     149,711        26.6
  

 

 

   

 

 

   

 

 

   

 

 

 

Total mortgage loans

     457,164        81.4     455,427        81.0

Consumer loans

     20,764        3.7     20,324        3.6

Commercial loans

     83,355        14.9     86,743        15.4
  

 

 

   

 

 

   

 

 

   

 

 

 

Total other loans

     104,119        18.6     107,067        19.0
  

 

 

   

 

 

   

 

 

   

 

 

 

Total loans, gross

     561,283        100.0     562,494        100.0
    

 

 

     

 

 

 

Deferred loan cost, net of income

     (393       (445  

Less allowance for loan losses

     (6,163       (5,700  
  

 

 

     

 

 

   

Total loans

   $ 554,727        $ 556,349     
  

 

 

     

 

 

   

The allowance for loan losses totaled $6.2 million at March 31, 2016, $5.7 million at December 31, 2015, and $6.2 million at March 31, 2015, respectively. The ratio of the allowance for loan losses to total loans was 1.10% at March 31, 2016, 1.01% at December 31, 2015, and 1.11% at March 31, 2015. The following table indicates the type and level of non-accrual loans at the periods indicated below:

 

     March 31, 2016      December 31, 2015      March 31, 2015  
    

(Dollars in Thousands)

 

One-to-four family mortgages

   $ 198         2,234         1,235   

Home equity line of credit

     74         48         —     

Junior lien

     —           —           —     

Multi-family

     1,926         1,968         —     

Land

     1,515         1,553         —     

Non-residential real estate

     28         247         542   

Farmland

     166         166         —     

Consumer loans

     —           8         —     

Commercial loans

     1,122         1,198         347   
  

 

 

    

 

 

    

 

 

 

Total non-accrual loans

   $ 5,029         7,422         2,124   
  

 

 

    

 

 

    

 

 

 

 

The following table provides a detail of the Company’s activity in the allowance for loan loss account by loan type for the three month period ended March 31, 2016:

 

                         General     Specific     Ending  
     Balance      Charge off     Recovery      Provision     Provision     Balance  
     12/31/2015      2015     2015      2015     2015     3/31/2016  

One-to-four family mortgages

   $ 1,030         —          8         (6     187        1,219   

Home equity line of credit

     201         —          4         37        (4     238   

Junior liens

     8         —          1         —          (1     8   

Multi-family

     227         —          —           27        64        318   

Construction

     377         —          —           74        —          451   

Land

     1,379         —          —           (106     40        1,313   

Non-residential real estate

     1,139         —          —           (55     (17     1,067   

Farmland

     358         —          —           205        —          563   

Consumer loans

     358         (83     51         (38     52        340   

Commercial loans

     623         —          24         190        (191     646   
  

 

 

    

 

 

   

 

 

    

 

 

   

 

 

   

 

 

 
   $ 5,700         (83     88         328        130        6,163   
  

 

 

    

 

 

   

 

 

    

 

 

   

 

 

   

 

 

 

The following table provides a detail of the Company’s activity in the allowance for loan loss account by loan type for the year ended December 31, 2015:

 

                         General     Specific     Ending  
     Balance      Charge off     Recovery      Provision     Provision     Balance  
     12/31/2014      2015     2015      2015     2015     12/31/2015  

One-to-four family mortgages

   $ 1,198         (143     39         (176     112        1,030   

Home equity line of credit

     181         (92     10         20        82        201   

Junior liens

     14         —          4         (6     (4     8   

Multi-family

     85         —          —           4        138        227   

Construction

     146         —          —           231        —          377   

Land

     1,123         (911     —           850        317        1,379   

Non-residential real estate

     2,083         (222     2         (944     220        1,139   

Farmland

     461         —          —           500        (603     358   

Consumer loans

     494         (298     118         (123     167        358   

Commercial loans

     504         (201     54         (61     327        623   
  

 

 

    

 

 

   

 

 

    

 

 

   

 

 

   

 

 

 
   $ 6,289         (1,867     227         295        756        5,700   
  

 

 

    

 

 

   

 

 

    

 

 

   

 

 

   

 

 

 

 

The table below presents past due and non-accrual balances at March 31, 2016, by loan classification allocated between performing and non-performing:

 

            30 - 89                    Impaired Loans         
     Currently      Days      Non-accrual      Special      Currently Performing         
     Performing      Past Due      Loans      Mention      Substandard      Doubtful      Total  
     (Dollars in Thousands)  

One-to-four family mortgages

   $ 142,092         928         198         102         2,616         —         $ 145,936   

Home equity line of credit

     32,002         24         74         23         146         —           32,269   

Junior liens

     1,573         —           —           34         16         —           1,623   

Multi-family

     26,278         —           1,926         —           1,107         —           29,311   

Construction

     36,074         —           —           —           —           —           36,074   

Land

     11,440         7,248         1,515         40         1,895         —           22,138   

Farmland

     40,901         48         166         —           406         —           41,521   

Non-residential real estate

     137,334         137         28         2,737         8,056         —           148,292   

Consumer loans

     20,457         23         —           —           284         —           20,764   

Commercial loans

     80,843         333         1,122         311         746         —           83,355   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total

   $ 528,994         8,741         5,029         3,247         15,272         —         $ 561,283   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

The table below presents past due and non-accrual balances at December 31, 2015, by loan classification allocated between performing and non-performing:

 

            30 - 89                    Impaired Loans         
     Currently      Days      Non-accrual      Special      Currently Performing         
     Performing      Past Due      Loans      Mention      Substandard      Doubtful      Total  

One-to-four family mortgages

   $ 142,058         671         2,234         41         995         —         $ 145,999   

Home equity line of credit

     33,396         79         48         —           121         —           33,644   

Junior liens

     1,720         —           —           35         16         —           1,771   

Multi-family

     21,638         6         1,968         —           1,113         —           24,725   

Construction

     34,878         —           —           —           —           —           34,878   

Land

     11,047         747         1,553         41         9,065         —           22,453   

Non-residential real estate

     138,637         228         247         2,489         8,110         —           149,711   

Farmland

     41,853         64         166         —           163         —           42,246   

Consumer loans

     20,108         15         8         —           193         —           20,324   

Commercial loans

     84,272         45         1,198         352         876         —           86,743   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total

   $ 529,607         1,855         7,422         2,958         20,652         —           562,494   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

 

 

The following table presents the balance in the allowance for loan losses and the recorded investment in loans as of March 31, 2016, and December 31, 2015, by portfolio segment and based on the impairment method as of March 31, 2016, and December 31, 2015.

 

            Land                              
            Development /      Commercial      Residential                
     Commercial      Construction      Real Estate      Real Estate      Consumer      Total  

March 31, 2016:

                 

Allowance for loan losses:

                 

Ending allowance balance attributable to loans:

                 

Individually evaluated for impairment

   $ 14         108         319         255         69       $ 765   

Collectively evaluated for impairment

     632         1,656         1,629         1,210         271         5,398   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total ending allowance balance

   $ 646         1,764         1,948         1,465         340       $ 6,163   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Loans:

                 

Loans individually evaluated for impairment

   $ 1,868         10,571         11,689         3,050         284       $ 27,462   

Loans collectively evaluated for impairment

     81,487         47,641         207,435         176,778         20,480         533,821   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total ending loans balance

   $ 83,355         58,212         219,124         179,828         20,764       $ 561,283   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 
            Land                              
            Development /      Commercial      Residential                
     Commercial      Construction      Real Estate      Real Estate      Consumer      Total  

December 31, 2015:

                 

Allowance for loan losses:

                 

Ending allowance balance attributable to loans:

                 

Individually evaluated for impairment

   $ 180         69         272         60         49       $ 630   

Collectively evaluated for impairment

     443         1,687         1,452         1,179         309         5,070   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total ending allowance balance

   $ 623         1,756         1,724         1,239         358       $ 5,700   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Loans:

                 

Loans individually evaluated for impairment

   $ 2,074         10,618         11,767         3,414         201       $ 28,074   

Loans collectively evaluated for impairment

     84,669         46,713         204,915         178,000         20,123         534,420   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total ending loans balance

   $ 86,743         57,331         216,682         181,414         20,324       $ 562,494   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

 

All loans listed as 30-89 days past due and non-accrual are not performing as agreed. Loans listed as special mentioned, substandard and doubtful are paying as agreed. However, the customer’s financial statements may indicate weaknesses in their current cash flow, the customer’s industry may be in decline due to current economic conditions, collateral values used to secure the loan may be declining, or the Company may be concerned about the customer’s future business prospects.

The Company does not originate loans it considers sub-prime and is not aware of any exposure to the additional credit concerns associated with sub-prime lending in either the Company’s loan or investment portfolios. The Company does have a significant amount of construction and land development loans. Management reports to the Company’s Board of Directors on the status of the Company’s specific construction and development loans as well as the market trends in those markets in which the Company actively participates.

The Company’s annualized net charge off ratios for three month periods ended March 31, 2016, March 31, 2015, and the year ended December 31, 2015, was 0.00%, 0.24% and 0.29%, respectively. The ratios of allowance for loan losses to non-accrual loans at March 31, 2016, March 31, 2015, and December 31, 2015, were 122.54%, 290.51%, and 76.80%, respectively.

The determination of the allowance for loan losses is based on management’s analysis, performed on a quarterly basis. Various factors are considered, including the market value of the underlying collateral, growth and composition of the loan portfolio, the relationship of the allowance for loan losses to outstanding loans, historical loss experience, delinquency trends and prevailing economic conditions. Although management believes its allowance for loan losses is adequate, there can be no assurance that additional allowances will not be required or that losses on loans will not be incurred.

The Company conducts annual reviews on all loan relationships above one million to ascertain the borrowers continued ability to service their debt as agreed. In addition to the credit relationships mentioned above, management may classify any credit relationship once it becomes aware of adverse credit trends for that customer. Typically, the annual review consists of updated financial statements for borrowers and any guarantors, a review of the borrower’s credit history with the Company and other creditors, and current income tax information.

As a result of this review, management will classify loans based on their credit risk. Additionally, the Company provides a risk grade for all loans past due more than ninety days. The Company uses the following risk definitions for commercial loan risk grades:

Excellent - Loans in this category are to persons or entities of unquestioned financial strength, a highly liquid financial position, with collateral that is liquid and well margined. These borrowers have performed without question on past obligations, and the bank expects their performance to continue. Internally generated cash flow covers current maturities of long-term debt by a substantial margin. Loans secured by bank certificates of deposit and savings accounts, with appropriate holds placed on the accounts, are to be rated in this category.

 

Very Good - These are loans to persons or entities with strong financial condition and above- average liquidity who have previously satisfactorily handled their obligations with the bank. Collateral securing the bank’s debt is margined in accordance with policy guidelines. Internally generated cash flow covers current maturities of long-term debt more than adequately. Unsecured loans to individuals supported by strong financial statements and on which repayment is satisfactory may be included in this classification.

Satisfactory - Assets of this grade conform to substantially all the Bank’s underwriting criteria and evidence an average level of credit risk; however, such assets display more susceptibility to economic, technological or political changes since they lack the above average financial strength of credits rated Very Good. Borrower’s repayment capacity is considered to be adequate. Credit is appropriately structured and serviced; payment history is satisfactory.

Acceptable - Assets of this grade conform to most of the Bank’s underwriting criteria and evidence an acceptable, though higher than average, level of credit risk; however, these loans have certain risk characteristics which could adversely affect the borrower’s ability to repay given material adverse trends. Loans in this category require an above average level of servicing and show more reliance on collateral and guaranties to preclude a loss to the Bank should material adverse trends develop. If the borrower is a company, its earnings, liquidity and capitalization are slightly below average when compared to its peers.

Watch - These loans are characterized by borrowers who have marginal cash flow, marginal profitability, or have experienced an unprofitable year and a declining financial condition. The borrower has in the past satisfactorily handled debts with the bank, but in recent months has either been late, delinquent in making payments, or made sporadic payments. While the bank continues to be adequately secured, margins have decreased or are decreasing, despite the borrower’s continued satisfactory condition. Other characteristics of borrowers in this class include inadequate credit information, weakness of financial statement and repayment capacity, but with collateral that appears to limit exposure. This classification includes loans to established borrowers that are reasonably margined by collateral, but where potential for improvement in financial capacity appears limited.

Special Mention - Loans in this category have potential weaknesses that deserve management’s close attention. If left uncorrected, these potential weaknesses may result in deteriorating prospects for the asset or in the institution’s credit position at some future date. Borrowers may be experiencing adverse operating trends or market conditions. Non- financial reasons for rating a credit exposure Special Mention include, but are not limited to: management problems, pending litigations, ineffective loan agreement and/or inadequate loan documentation, structural weaknesses and/or lack of control over collateral.

 

Substandard - A substandard asset is inadequately protected by the current sound worth or paying capacity of the debtor or the collateral pledged. There exists one or more well defined weaknesses that jeopardize the liquidation of the debt. There is a distinct possibility the Bank will experience some loss if the deficiencies are not corrected. Generally, the asset is considered collectible as to both principal and interest primarily because of collateral coverage or enterprise value. Generally, the asset is current and marginally secured.

Doubtful - A loan classified as doubtful has all the weaknesses inherent in a loan classified as substandard, with the added characteristic that the weaknesses make collection or liquidation in full, on the basis of currently existing facts, conditions, and values, highly questionable and improbable. These are poor quality loans in which neither the collateral, if any, nor the financial condition of the borrower presently ensure collectability in full in a reasonable period of time; in fact, there is permanent impairment in the collateral securing the bank’s loan. These loans are in a work-out status and have a defined work-out strategy.

Loss - Loans classified as loss are considered uncollectible and of such little value that their continuance as bankable assets is not warranted. The bank takes losses in the period in which they become uncollectible.

The following credit risk standards are assigned to consumer loans.

Satisfactory - All consumer open-end and closed-end retail loans shall have an initial risk grade assigned of 3 - Satisfactory.

Substandard Assets -All consumer open-end and closed-end retail loans past due 90 cumulative days from the contractual date will be classified as 7 - Substandard. If a consumer/retail loan customer files bankruptcy, the loan will be classified as 7 - Substandard regardless of payment history.

Loss Assets - All closed-end retail loans that become past due 120 cumulative days and open-end retail loans that become past due 180 cumulative days from the contractual due date will be charged off as loss assets. The charge off will be taken by the end of the month in which the 120-day or 180-day time period elapses. All losses in retail credit will be recognized when the affiliate becomes aware of the loss, but in no case should the charge off exceed the time frames stated within this policy.

A loan is considered to be impaired when management determines that it is possible that the Company will be unable to collect all principal and interest payments due in accordance with the contractual terms of the loan agreement. The value of individually impaired loans is measured based on the present value of expected payments or using the fair value of the collateral less cost to sell if the loan is collateral dependent. Currently, it is management’s practice to classify all substandard or doubtful loans as impaired.

 

At March 31, 2016, December 31, 2015, and March 31, 2015, the Company’s impaired loans totaled $27.5 million, $28.1 million and $31.9 million, respectively. At March 31, 2016, December 31, 2015 and March 31, 2015, the Company’s specific reserve for impaired loans totaled $765,000, $630,000 and $1.8 million respectively. At March 31, 2016, one land loan 30-89 days past due in the amount $7,121 is classified as substandard. A summary of the Company’s impaired loans, including their respective regulatory classification and their respective specific reserve at March 31, 2016, and December 31, 2015, were as follows:

 

                                        Specific     

Allowance

 
                                       

allowance

     for  

March 31, 2016

          Special      Impaired Loans             for      Performing  
     Pass      Mention      Substandard      Doubtful      Total      Impairment      Loans  
     (Dollars in Thousands)  

One-to-four family mortgages

     143,020         102         2,814         —           145,936         255         964   

Home equity line of credit

     32,026         23         220         —           32,269         —           238   

Junior liens

     1,573         34         16         —           1,623         —           8   

Multi-family

     26,278         —           3,033         —           29,311         201         116   

Construction

     36,074         —           —           —           36,074         —           451   

Land

     11,527         40         10,571         —           22,138         108         1,205   

Non-residential real estate

     137,471         2,737         8,084         —           148,292         118         949   

Farmland

     40,949         —           572         —           41,521         —           564   

Consumer loans

     20,480         —           284         —           20,764         69         271   

Commercial loans

     81,176         311         1,868         —           83,355         14         632   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total

     530,574         3,247         27,462         —           561,283         765         5,398   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

December 31, 2015

          Special      Impaired Loans             Specific
Allowance
for
     Allowance for
Loans not
 
     Pass      Mention      Substandard      Doubtful      Total      Impairment      Impaired  

One-to-four family mortgages

   $ 142,729         41         3,229         —           145,999         60         970   

Home equity line of credit

     33,475         —           169         —           33,644         —           201   

Junior lien

     1,720         35         16         —           1,771         —           8   

Multi-family

     21,644         —           3,081         —           24,725         138         89   

Construction

     34,878         —           —           —           34,878         —           377   

Land

     11,794         41         10,618         —           22,453         69         1,310   

Non-residential real estate

     138,865         2,489         8,357         —           149,711         134         1,005   

Farmland

     41,917         —           329         —           42,246         —           358   

Consumer loans

     20,123         —           201         —           20,324         49         309   

Commercial loans

     84,317         352         2,074         —           86,743         180         443   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total

   $ 531,462         2,958         28,074         —           562,494         630         5,070   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

 

Impaired loans by classification type and the related valuation allowance amounts at March 31, 2016, were as follows:

 

                          For the three month period ended  
     At March 31, 2016      March 31, 2016  
            Unpaid             Average      Interest  
     Recorded      Principal      Related      Recorded      Income  
     Investment      Balance      Allowance      Investment      Recognized  

Impaired loans with no recorded reserve

              

One-to-four family mortgages

   $ 1,561         1,561         —           2,526         20   

Home equity line of credit

     220         220         —           169         2   

Junior liens

     16         16         —           16         —     

Multi-family

     2,102         2,102         —           2,128         27   

Construction

     —           —           —           —           —     

Land

     9,999         10,956         —           9,995         1   

Farmland

     572         572         —           3,985         —     

Non-residential real estate

     7,371         7,371         —           3,850         110   

Consumer loans

     8         8         —           7         —     

Commercial loans

     1,084         1,084         —           1,179         15   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total

     22,933         23,890         —           23,855         175   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 
Impaired loans with a specific allowance:               

One-to-four family mortgages

     1,253         1,253         255         978         20   

Home equity line of credit

     —           —           —           —           —     

Junior liens

     —           —           —           —           —     

Multi-family

     931         931         201         942         19   

Construction

     —           —           —           —           —     

Land

     572         572         108         640         10   

Farmland

     —           —           —           —           —     

Non-residential real estate

     713         713         118         715         8   

Consumer loans

     276         276         69         236         —     

Commercial loans

     784         784         14         792         8   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total

     4,529         4,529         765         4,303         65   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total impaired loans

   $ 27,462         28,419         765         28,158         240   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

 

 

Impaired loans by classification type and the related valuation allowance amounts at December 31, 2015, were as follows:

 

                          For the year ended  
     At December 31, 2015      December 31, 2015  
            Unpaid             Average      Interest  
     Recorded      Principal      Related      Recorded      Income  
     Investment      Balance      Allowance      Investment      Recognized  

Impaired loans with no specific allowance

              

One-to-four family mortgages

   $ 2,526         2,526         —           2,389         80   

Home equity line of credit

     169         169         —           457         7   

Junior liens

     16         16         —           17         1   

Multi-family

     2,128         2,128         —           2,797         126   

Construction

     —           —           —           —           —     

Land

     10,038         10,998         —           8,520         671   

Non-residential real estate

     7,640         7,640         —           283         404   

Farmland

     329         329         —           7,774         19   

Consumer loans

     5         5         —           3         —     

Commercial loans

     1,274         1,274         —           1,599         73   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total

     24,125         25,085         —           23,839         1,381   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Impaired loans with a specific allowance

              

One-to-four family mortgages

   $ 703         703         60         709         40   

Home equity line of credit

     —           —           —           —           —     

Junior liens

     —           —           —           —           —     

Multi-family

     953         953         138         318         17   

Construction

     —           —           —           —           —     

Land

     580         580         69         1,707         46   

Non-residential real estate

     717         717         134         836         28   

Farmland

     —           —           —           —           —     

Consumer loans

     196         196         49         194         —     

Commercial loans

     800         800         180         514         15   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total

     3,949         3,949         630         4,278         146   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total impaired loans

   $ 28,074         29,034         630         28,117         1,527   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

 

On a periodic basis, the Bank may modify the terms of certain loans. In evaluating whether a restructuring constitutes a troubled debt restructuring (TDR), Financial Accounting Standards Board has issued Accounting Standards Update 310 (ASU 310), A Creditor’s Determination of Whether a Restructuring is a Troubled Debt Restructuring. In evaluating whether a restructuring constitutes a TDR, the Bank must separately conclude that both of the following exist:

 

    The restructuring constitutes a concession

 

    The debtor is experiencing financial difficulties

ASU 310 provides the following guidance for the Bank’s evaluation of whether it has granted a concession as follows:

 

  1. If a debtor does not otherwise have access to funds at a market interest rate for debt with similar risk characteristics as the restructured debt, the restructured debt would be considered a below market rate, which may indicate that the Bank may have granted a concession. In that circumstance, the Bank should consider all aspects of the restructuring in determining whether it has granted a concession, the creditor must make a separate assessment about whether the debtor is experiencing financial difficulties to determine whether the restructuring constitutes a TDR.

 

  2. A temporary or permanent increase in the interest rate on a loan as a result of a restructuring does not eliminate the possibility of the restructuring from being considered a concession if the new interest rate on the loan is below the market interest rate for loans of similar risk characteristics.

 

  3. A restructuring that results in a delay in payment that is insignificant is not a concession. However, the Bank must consider a variety of factors in assessing whether a restructuring resulting in a delay in payment is insignificant.

At December 31, 2015, the Company had eight loans, representing two lending relationships, classified as performing TDR’s. During the three month period ended March 31, 2016, the Company added four loans to TDR status, representing one additional lending relationship, as a performing TDR. The loans added to TDR classification are paying interest only for one year while the customer markets the collateral for sale. A summary of the activity in loans classified as TDRs for the three month period ended March 31, 2016, is as follows:

 

     Balance at
12/31/15
     New
TDR
     Loss or
Foreclosure
     Loan
Amortization
    Removed
from
(Taken to)
Non-accrual
     Balance at
3/31/16
 
     (Dollars in Thousands)  

Multi-family real estate

     —           816         —           —          —           816   

Non-residential real estate

   $ 5,536         228         —           (36     —         $ 5,728   
  

 

 

    

 

 

    

 

 

    

 

 

   

 

 

    

 

 

 

Total performing TDR

   $ 5,536         1,044         —           (36     —         $ 6,544   
  

 

 

    

 

 

    

 

 

    

 

 

   

 

 

    

 

 

 

 

A summary of the activity in loans classified as TDRs for the twelve month period ended December 31, 2015, is as follows:

 

     Balance at
12/31/14
     New
TDR
     Loss or
Foreclosure
     Loan
Amortization
    Removed
from
(Taken to)
Non-accrual
     Balance
at
12/31/15
 
     (Dollars in Thousands)  

Non-residential real estate

   $ 3,284         2,265         —           (13     —         $ 5,536   
  

 

 

    

 

 

    

 

 

    

 

 

   

 

 

    

 

 

 

Total performing TDR

   $ 3,284         2,265         —           (13     —         $ 5,536   
  

 

 

    

 

 

    

 

 

    

 

 

   

 

 

    

 

 

 

 

Real Estate and Other Assets Owned
3 Months Ended
Mar. 31, 2016
Text Block [Abstract]
 
Real Estate and Other Assets Owned
(6) REAL ESTATE AND OTHER ASSETS OWNED

The Company’s real estate and other assets owned represent properties and personal collateral acquired through customer loan defaults. The property is recorded at the lower of cost or fair value less estimated cost to sell and carrying cost at the date acquired. Any difference between the book value and estimated market value is recognized as a charge off through the allowance for loan loss account. Additional real estate owned and other asset losses may be determined on individual properties at specific intervals or at the time of disposal. In general, the Company will obtain a new appraisal on all real estate owned with a book balance in excess of $250,000 on an annual basis. Additional losses are recognized as a non-interest expense.

At March 31, 2016, December 31, 2015, and March 31, 2015, the Company had balances in other real estate and assets owned and non-accrual loans consisting of the following:

 

     March 31, 2016     December 31, 2015     March 31, 2015  
     (Dollars in Thousands)  

One-to-four family mortgages

   $ 55        55        175   

Land

     943        943        1,768   

Non-residential real estate

     459        738        409   
  

 

 

   

 

 

   

 

 

 

Total other assets owned

   $ 1,457        1,736        2,352   
  

 

 

   

 

 

   

 

 

 

Total non-accrual loans

   $ 5,029        7,422        2,124   
  

 

 

   

 

 

   

 

 

 

Total non-performing assets

   $ 6,486        9,158        4,476   
  

 

 

   

 

 

   

 

 

 

Non-performing assets /Average assets

     0.73     1.02     0.50
  

 

 

   

 

 

   

 

 

 

 

The following is a summary of the activity in the Company’s real estate and other assets owned for the three month period ending March 31, 2016:

 

            Activity During 2016                     
     Balance                   Reduction      Gain (Loss)     Balance  
     12/31/2015      Foreclosures      Proceeds     in Values      on Sale     3/31/2016  
     (Dollars in Thousands)  

One-to-four family mortgages

   $ 55         —           —          —           —        $ 55   

Land

     943         —           —          —           —          943   

Non-residential real estate

     738         —           (270     —           (9     459   

Consumer

     —           12         (12     —           —          —     
  

 

 

    

 

 

    

 

 

   

 

 

    

 

 

   

 

 

 

Total

   $ 1,736         12         (282     —           (9   $ 1,457   
  

 

 

    

 

 

    

 

 

   

 

 

    

 

 

   

 

 

 

The following is a summary of the activity in the Company’s real estate and other assets owned for the year ended December 31, 2015:

 

     Activity During 2015  
     Balance                   Reduction      Gain (Loss)     Balance  
     12/31/2014      Foreclosures      Proceeds     in Values      on Sale     12/31/2015  
     (Dollars in Thousands)  

One-to-four family mortgages

   $ 159         105         (194     —           (15   $ 55   

Land

     1,768         —           (124     —           (701     943   

Non-residential real estate

     —           738         —          —           —          738   
  

 

 

    

 

 

    

 

 

   

 

 

    

 

 

   

 

 

 

Total

   $ 1,927         843         (318     —           (716   $ 1,736   
  

 

 

    

 

 

    

 

 

   

 

 

    

 

 

   

 

 

 
Investments in Affiliated Companies
3 Months Ended
Mar. 31, 2016
Investments in and Advances to Affiliates, Schedule of Investments [Abstract]
 
Investments in Affiliated Companies
(7) INVESTMENTS IN AFFILIATED COMPANIES

Investments in affiliated companies accounted for under the equity method consist of 100% of the common stock of HopFed Capital Trust 1 (“Trust”), a wholly-owned statutory business trust. The Trust was formed on September 25, 2003. Summary financial information for the Trust follows (dollars in thousands):

Summary Statements of Financial Condition

 

     At      At  
     March 31, 2016      December 31, 2015  

Assets - investment in subordinated debentures issued by HopFed Bancorp, Inc.

   $ 10,310         10,310   
  

 

 

    

 

 

 

Liabilities

     —           —     

Stockholder’s equity – trust preferred securities

     10,000         10,000   

Common stock (100% Owned by HopFed Bancorp, Inc.)

     310         310   
  

 

 

    

 

 

 

Total stockholders’ equity

   $ 10,310         10,310   
  

 

 

    

 

 

 

Summary Statements of Income

 

     Three Month Periods  
     Ended March 31,  
     2016      2015  

Income – interest income from subordinated debentures issued by HopFed Bancorp, Inc.

   $ 97         85   
  

 

 

    

 

 

 

Net income

   $ 97         85   
  

 

 

    

 

 

 

Summary Statement of Stockholders’ Equity

 

     Trust                    Total  
     Preferred      Common      Retained      Stockholders’  
     Securities      Stock      Earnings      Equity  

Beginning balances, December 31, 2015

   $ 10,000         310         —           10,310   

Net income

     —           —           97         97   

Dividends:

           

Trust preferred securities

     —           —           (94      (94

Common paid to HopFed Bancorp, Inc.

     —           —           (3      (3
  

 

 

    

 

 

    

 

 

    

 

 

 

Ending balances, March 31, 2016

   $ 10,000         310         —           10,310   
  

 

 

    

 

 

    

 

 

    

 

 

 
Fair Value of Assets and Liabilities
3 Months Ended
Mar. 31, 2016
Fair Value Disclosures [Abstract]
 
Fair Value of Assets and Liabilities
(8) FAIR VALUE OF ASSETS AND LIABILITIES

In September 2006, the FASB issued ASC 820-10, Fair Value Measurements. This Statement defines fair value, establishes a framework for measuring fair value and expands disclosure about fair value. The statement establishes a fair value hierarchy which requires an entity to maximize the use of observable input and minimize the use of unobservable inputs when measuring fair value. The standard describes three levels of inputs that may be used to measure fair value.

 

    Level 1 is for assets and liabilities that management has obtained quoted prices (unadjusted for transaction cost) or identical assets or liabilities in active markets that the Company has the ability to access as of the measurement date.

 

    Level 2 is for assets and liabilities in which significant unobservable inputs other than Level 1 prices such as quoted prices for similar assets and liabilities; quoted prices in markets that are not active; or other inputs that are observable or can be corroborated by observable market data.

 

    Level 3 is for assets and liabilities in which significant unobservable inputs that reflect a reporting entity’s own assumptions about the assumptions that market participants would use in pricing an asset or liability.

The fair values of securities available for sale are determined by a matrix pricing, which is a mathematical technique that is widely used in the industry to value debt securities without exclusively using quoted prices for the individual securities in the Company’s portfolio but rather by relying on the securities relationship to other benchmark quoted securities. Impaired loans are valued at the net present value of expected payments using the fair value of any assigned collateral. The values for bank owned life insurance are obtained from stated values from the respective insurance companies. The liability associated with the Company’s derivative is obtained from a quoted value supplied by our correspondent banker. The value of real estate owned is obtained from appraisals completed on properties at the time of acquisition and annually thereafter.

 

Assets and Liabilities Measured on a Recurring Basis

The assets and liabilities measured at fair value on a recurring basis at March 31, 2016, are summarized below:

 

     Total carrying      Quoted Prices      Significant         
     value in the      In Active      Other      Significant  
     consolidated      Markets for      Observable      Unobservable  
     balance sheet at      Identical Assets      Inputs      Inputs  

Description

   March 31, 2016      (Level 1)      (Level 2)      (Level 3)  
Assets            

Available for sale securities

   $ 237,829         2,005         233,850         1,974   

The assets and liabilities measured at fair value on a recurring basis at December 31, 2015, are summarized below

 

     Total carrying      Quoted Prices      Significant         
     value in the      In Active      Other      Significant  
     consolidated      Markets for      Observable      Unobservable  
     balance sheet at      Identical Assets      Inputs      Inputs  

Description

   December 31, 2015      (Level 1)      (Level 2)      (Level 3)  
Assets            

Available for sale securities

   $ 237,177         2,000         233,312         1,865   

 

The assets and liabilities measured at fair value on a non-recurring basis are summarized below for March 31, 2016:

 

     Total carrying      Quoted Prices      Significant         
     value in the      In Active      Other      Significant  
     consolidated      Markets for      Observable      Unobservable  
     balance sheet at      Identical Assets      Inputs      Inputs  

Description

   3/ 31/ 2016      (Level 1)      (Level 2)      (Level 3)  
     (Dollars in Thousands)  
Assets   

Other real estate and other assets owned

   $ 1,457         —           —         $ 1,457   

Impaired loans, net of reserve of $765

   $ 3,764         —           —         $ 3,764   

The assets and liabilities measured at fair value on a non-recurring basis are summarized below for December 31, 2015:

 

     Total carrying      Quoted Prices      Significant         
     value in the      In Active      Other      Significant  
     consolidated      Markets for      Observable      Unobservable  
     balance sheet at      Identical Assets      Inputs      Inputs  

Description

   12/31/2015      (Level 1)      (Level 2)      (Level 3)  
     (Dollars in Thousands)  
Assets            

Other real estate and other assets owned

   $ 1,736         —           —         $ 1,736   

Impaired loans, net of reserve of $630

   $ 3,319         —           —         $ 3,319   

 

 

The table below includes a roll-forward of the consolidated condensed statement of financial condition items for the three month periods ended March 31, 2016, and March 31, 2015, (including the change in fair value) for assets and liabilities classified by HopFed Bancorp, Inc. within level 3 of the valuation hierarchy for assets and liabilities measured at fair value on a recurring basis. When a determination is made to classify an asset or liability within level 3 of the valuation hierarchy, the determination is based upon the significance of the unobservable factors to the overall fair value measurement. However, since level 3 assets and liabilities typically include, in addition to the unobservable or level 3 components, observable components (that is components that are actively quoted and can be validated to external sources), the gains and losses in the table below include changes in fair value due in part to observable factors that are part of the valuation methodology.

 

     2016      2015  

Three month period ended March 31,

   Other Assets      Other Liabilities      Other Assets      Other Liabilities  
     (Dollars in
Thousands)
                      

Fair value, January 1,

   $ 1,865         —           1,489         —     

Change in unrealized losses included in other comprehensive income for assets and liabilities still held at March 31,

     105         —           306         —     

Accretion of previous discounted amounts

     4            4      

Purchases, issuances and settlements, net

     —           —           —           —     

Transfers in and/or out of Level 3

     —           —           —           —     
  

 

 

    

 

 

    

 

 

    

 

 

 

Fair value, March 31,

   $ 1,974         —           1,799         —     
  

 

 

    

 

 

    

 

 

    

 

 

 

 

The estimated fair values of financial instruments were as follows at March 31, 2016:

 

                          Using         
                   Quoted Prices      Significant         
                   In Active Markets      Other      Significant  
            Estimated      for Identical      Observable      Unobservable  
     Carrying      Fair      Assets      Inputs      Inputs  
     Amount      Value      Level 1      Level 2      Level 3  

Financial Assets:

              

Cash and due from banks

   $ 27,393         27,393       $ 27,393         —           —     

Interest-earning deposits

     14,798         14,798         14,798         —           —     

Securities available for sale

     237,829         237,829         2,005         233,850         1,974   

Federal Home Loan Bank stock

     4,428         4,428         —           4,428         —     

Loans held for sale

     1,339         1,339         —           1,339         —     

Loans receivable

     554,727         550,201         —           —           550,201   

Accrued interest receivable

     3,871         3,871         —           3,871         —     

Financial liabilities:

              

Deposits

     724,953         711,263         —           711,263         —     

Advances from borrowers for taxes and insurance

     754         754         —           754         —     

Advances from Federal Home Loan Bank

     11,000         10,976         —           10,976         —     

Repurchase agreements

     46,940         47,043         —           47,043         —     

Subordinated debentures

     10,310         10,099         —           —           10,099   

 

The estimated fair values of financial instruments were as follows at December 31, 2015:

 

                          Using         
                   Quoted Prices      Significant         
                   In Active Markets      Other      Significant  
            Estimated      for Identical      Observable      Unobservable  
     Carrying      Fair      Assets      Inputs      Inputs  
     Amount      Value      Level 1      Level 2      Level 3  
Financial Assets:                                   

Cash and due from banks

   $ 46,926         46,926       $ 46,926         —           —     

Interest-earning deposits

     7,772         7,772         7,772         —           —     

Securities available for sale

     237,177         237,177         2,000         233,312         1,865   

Federal Home Loan Bank stock

     4,428         4,428         —           4,428         —     

Loans held for sale

     2,792         2,792         —           2,792         —     

Loans receivable

     556,349         552,981         —           —           552,981   

Accrued interest receivable

     4,139         4,139         —           4,139         —     

Financial liabilities:

              

Deposits

     739,406         724,877         —           724,877         —     

Advances from borrowers for taxes and insurance

     614         614         —           614         —     

Advances from Federal Home Loan Bank

     15,000         14,985         —           14,985         —     

Repurchase agreements

     45,770         45,931         —           45,931         —     

Subordinated debentures

     10,310         10,099         —           —           10,099   

 

Effect of New Accounting Pronouncements
3 Months Ended
Mar. 31, 2016
Accounting Changes and Error Corrections [Abstract]
 
Effect of New Accounting Pronouncements
(9) EFFECT OF NEW ACCOUNTING PRONOUNCEMENTS

ASU 2015-01, “Income Statement - Extraordinary and Unusual Items (Subtopic 225-20) – Simplifying Income Statement Presentation by Eliminating the Concept of Extraordinary Items.”ASU 2015-01 eliminates from U.S. GAAP the concept of extraordinary items, which, among other things, required an entity to segregate extraordinary items considered to be unusual and infrequent from the results of ordinary operations and show the item separately in the income statement, net of tax, after income from continuing operations. ASU 2015-01 was effective for the Company beginning January 1, 2016, though early adoption is permitted. The implementation of ASU 2015-01 did not have a significant impact on the Company’s Consolidated Financial Statements.

 

ASU No. 2015-02, “Amendments to the Consolidation Analysis.”This ASU affects reporting entities that are required to evaluate whether they should consolidate certain legal entities. Specifically, the amendments: (1) Modify the evaluation of whether limited partnerships and similar legal entities are variable interest entities (“VIEs”) or voting interest entities; (2) Eliminate the presumption that a general partner should consolidate a limited partnership; (3) Affect the consolidation analysis of reporting entities that are involved with VIEs, particularly those that have fee arrangements and related party relationships; and (4) Provide a scope exception from consolidation guidance for reporting entities with interests in legal entities that are required to comply with or operate in accordance with requirements that are similar to those in Rule 2a-7 of the Investment Company Act of 1940 for registered money market funds. ASU No. 2015-02 was effective for interim and annual reporting periods beginning after December 15, 2015. The provisions of ASU No. 2015-02 did not have a material impact on the Company’s Consolidated Financial Statements.

In May 2014, the FASB issued new guidance related to Revenue from Contracts with Customers. This guidance supersedes the revenue recognition requirements in Accounting Standards Codification Topic 605, Revenue Recognition, and most industry-specific guidance throughout the Accounting Standards Codification. The guidance requires an entity to recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the company expects to be entitled in exchange for those goods or services. This guidance is effective for interim and annual reporting periods beginning after December 15, 2016; however, the FASB has agreed to a one year deferral of the effective date to December 15, 2017. The Company is currently evaluating this guidance to determine the impact on its consolidated financial statements.

On June 12, 2014, the FASB issued ASU 2014-11, which makes limited amendments to the guidance in ASC 860 on accounting for certain repurchase agreements (“repos”). ASU 2014-11 requires entities to account for repurchase-to-maturity transactions as secured borrowings (rather than as sales with forward repurchase agreements), (2) eliminates accounting guidance on linked repurchase financing transactions, and (3) expands disclosure requirements related to certain transfers of financial assets that are accounted for as sales and certain transfers (specifically, repos, securities lending transactions, and repurchase-to-maturity transactions) accounted for as secured borrowings. ASU 2014-11 also amends ASC 860 to clarify that repos and securities lending transactions that do not meet all of the de-recognition criteria in ASC 860-10-40-5 should be accounted for as secured borrowings. In addition, the ASU provides examples of repurchase and securities lending arrangements that illustrate whether a transferor has maintained effective control over the transferred financial assets. For public business entities, the accounting changes were effective beginning after January 1, 2015. The implementation of ASU 2014-11 did not have a material impact on the Company’s Consolidated Financial Statements.

 

In September 2015, the FASB issued Accounting Standards Update No. 2015-16, Simplifying the Accounting for Measurement-Period Adjustments. The guidance in this update eliminates the requirement to restate prior period financial statements for measurement period adjustments. The new guidance requires that the cumulative impact of a measurement period adjustment (including the impact on prior periods) be recognized in the reporting period in which the adjustment is identified. The new guidance is intended to reduce complexity in financial reporting. The elimination of the restatement requirement should simplify financial reporting for many entities. However, recognizing the entire impact of a measurement period adjustment in a single reporting period may introduce earnings volatility and reduce comparability between periods when the adjustments are material. The accounting changes in this update are effective for public companies for annual periods, and the interim periods within those annual periods, beginning after December 15, 2015. Early application is permitted for financial statements that have not been issued. The implementation of ASU 2015-16 did not have a material impact on the Company’s Consolidated Financial Statements.

In January 2014, the FASB issued ASU No. 2014-04, Receivables-Troubled Debt Restructurings by Creditors (Subtopic 310-40): Reclassification of Residential Real Estate Collateralized Consumer Mortgage Loans upon Foreclosure. These amendments are intended to clarify when a creditor should be considered to have received physical possession of residential real estate property collateralizing a consumer mortgage loan such that the loan should be derecognized and the real estate recognized. The amendments clarify that an in substance repossession or foreclosure occurs, and a creditor is considered to have received physical possession of residential real estate property collateralizing a consumer mortgage loan, upon either: (1) the creditor obtaining legal title to the residential real estate property upon completion of residential foreclosure, or (2) the borrower conveying all interest in the residential real estate property to the creditor to satisfy that loan through completion of a deed in lieu of foreclosure or through a similar legal agreement. Additional disclosures about such activities are required by these amendments. The amendments in this ASU became effective for public companies for annual periods and interim periods within those annual periods beginning after December 15, 2014. The Company’s implementation of ASU 2014-04 did not have a material impact on the Company’s Consolidated Financial Statements.

ASU 2015-02, “Consolidation (Topic 810) – Amendments to the Consolidation Analysis.”ASU 2015-02 implements changes to both the variable interest consolidation model and the voting interest consolidation model. ASU 2015-02 (i) eliminates certain criteria that must be met when determining when fees paid to a decision maker or service provider do not represent a variable interest, (ii) amends the criteria for determining whether a limited partnership is a variable interest entity and (iii) eliminates the presumption that a general partner controls a limited partnership in the voting model. ASU 2015-02 was effective on January 1, 2016, and did not have a significant impact on the Company’s Consolidated Financial Statements.

 

ASU 2015-15, “Interest – Imputation of Interest (Subtopic 835-30) – Presentation and Subsequent Measurement of Debt Issuance Costs Associated with Line-of-Credit Arrangements. Amendments to SEC Paragraphs Pursuant to Staff Announcement at June 18, 2015 EITF Meeting.” ASU 2015-15 adds SEC paragraphs pursuant to an SEC Staff Announcement that given the absence of authoritative guidance within ASU 2015-03 for debt issuance costs related to line-of-credit arrangements, the SEC staff would not object to an entity deferring and presenting debt issuance costs as an asset and subsequently amortizing the deferred debt issuance costs ratably over the term of the line-of-credit arrangement, regardless of whether there are any outstanding borrowings on the line-of-credit arrangement. ASU 2015-15 did not have a significant impact on the Company’s Consolidated Financial Statements.

ASU 2016-1, “No. 2016-01, Financial Instruments – Overall (Subtopic 825-10): Recognition and Measurement of Financial Assets and Financial Liabilities. ASU 2016-1, among other things, (i) requires equity investments, with certain exceptions, to be measured at fair value with changes in fair value recognized in net income, (ii) simplifies the impairment assessment of equity investments without readily determinable fair values by requiring a qualitative assessment to identify impairment, (iii) eliminates the requirement for public business entities to disclose the methods and significant assumptions used to estimate the fair value that is required to be disclosed for financial instruments measured at amortized cost on the balance sheet, (iv) requires public business entities to use the exit price notion when measuring the fair value of financial instruments for disclosure purposes, (v) requires an entity to present separately in other comprehensive income the portion of the total change in the fair value of a liability resulting from a change in the instrument-specific credit risk when the entity has elected to measure the liability at fair value in accordance with the fair value option for financial instruments, (vi) requires separate presentation of financial assets and financial liabilities by measurement category and form of financial asset on the balance sheet or the accompanying notes to the financial statements and (viii) clarifies that an entity should evaluate the need for a valuation allowance on a deferred tax asset related to available-for-sale. ASU 2016-1 will be effective on January 1, 2018, and is not expected to have a significant impact on the Company’s financial statements.

ASU 2015-05, “Intangibles – Goodwill and Other – Internal-Use Software (Subtopic 350-40) – Customer’s Accounting for Fees Paid in a Cloud Computing Arrangement.” ASU 2015-05 addresses accounting for fees paid by a customer in cloud computing arrangements such as (i) software as a service, (ii) platform as a service, (iii) infrastructure as a service and (iv) other similar hosting arrangements. ASU 2015-05 provides guidance to customers about whether a cloud computing arrangement includes a software license. If a cloud computing arrangement includes a software license, then the customer should account for the software license element of the arrangement consistent with the acquisition of other software licenses. If a cloud computing arrangement does not include a software license, the customer should account for the arrangement as a service contract. ASU 2015-05 was effective on January 1, 2016, and did not have a material impact on the Company’s Consolidated Financial Statements.

ASU 2016-09, “Improvements to Employee Share-Based Payment Accounting.” This ASU simplifies several aspects of the accounting for employee share-based payment transactions, including the income tax consequences, classification of awards as either equity or liabilities, and classification on the statement of cash flows. For public business entities, this ASU is effective for financial statements issued for fiscal years beginning after December 15, 2016, and interim periods therein. The Company is evaluating the impact of this ASU on its financial statements and disclosures.

In March 2016, the FASB issued an update (ASU 2016-06, Derivatives and Hedging: Contingent Put and Call Options in Debt Instruments) which clarifies that an assessment of whether an embedded contingent put or call option is clearly and closely related to the debt host requires only an analysis of the four-step decision sequence in ASC 815-15-25-42. Entities are required to apply the guidance to existing debt instruments (or hybrid financial instruments that are determined to have a debt host) using a modified retrospective transition method as of the period of adoption. The guidance in this ASU will become effective for interim and annual reporting periods beginning after December 15, 2016, with early adoption permitted. The Company does not anticipate this update will have a material impact on its Consolidated Financial Statements.

In March 2016, the FASB issued an update (ASU 2016-07, Investments-Equity Method and Joint Ventures: Simplifying the Transition to the Equity Method of Accounting) which will eliminate the requirement to retrospectively apply the equity method when an investment that had been accounted for utilizing another method qualifies for use of the equity method. The guidance in this ASU will become effective for interim and annual reporting periods beginning after December 15, 2016, with early adoption permitted. The Company does not anticipate this update will have a material impact on its Consolidated Financial Statements.

 

Other accounting standards that have been issued or proposed by the FASB or other standards-setting bodies are not expected to have a material impact on the Company’s financial position, results of operations or cash flows.

Income Taxes
3 Months Ended
Mar. 31, 2016
Income Tax Disclosure [Abstract]
 
Income Taxes
(10) INCOME TAXES

The Company and its subsidiaries file consolidated federal income tax returns and Tennessee excise tax returns. The Company and its non-bank subsidiaries filed consolidated Kentucky income tax returns. The Bank is exempt from Kentucky corporate income tax. The Company has no unrecognized tax benefits and has accrued any interest or penalties for uncertain tax positions. The effective tax rate differs from the statutory federal rate of 35% and Tennessee excise rate of 6.50% due to investments in qualified municipal securities; bank owned life insurance, income apportioned to Kentucky and certain non-deductible expenses.

Other Assets
3 Months Ended
Mar. 31, 2016
Deferred Costs, Capitalized, Prepaid, and Other Assets Disclosure [Abstract]
 
Other Assets
(11) OTHER ASSETS

The Company has invested in two flow-through limited liability entities that manage and invest in affordable housing projects that qualify for historic, low-income and elderly housing tax credits. At March 31, 2016, the Company’s total investment in each entity was $118,000 and $923,000, respectively. The Company has no future capital commitments to either entity. The expenses recognized in net income for these investments for the three-month periods below include:

 

For the Three Months Ended
March 31,
 
2016      2015  
$ 55       $ 55   
  —         $ 24   

 

Esop
3 Months Ended
Mar. 31, 2016
Text Block [Abstract]
 
Esop
(12) ESOP

All Company employees participate in the 2015 HopFed Bancorp, Inc. Employee Stock Ownership Plan (“ESOP”). The ESOP purchased 600,000 shares of the Company’s common stock from the Company on March 2, 2015, at $13.14 per share. The ESOP borrowed $7.9 million from an open-end line of credit from the Company for the purchase of the stock, using the 600,000 shares of common stock as collateral. The Company makes discretionary contributions to the ESOP. The ESOP utilizes these contributions along with the dividends on the 600,000 held by the ESOP to repay the loan from the Company. When loan payments are made, ESOP shares are released based on reduction in the principal balance of the loan. The shares are allocated to participants based on relative compensation. Employees who are not employed at the December 31st of each year are not eligible for participation in the ESOP. The Company anticipates that loan payments will be made at the end of each year. Participants receive shares at the end of employment. The Company has the option to repurchase the shares or provide the shares directly to the employee.

The Company made its first ESOP loan payment in December 2015. In January 2016, the ESOP and Company revised the loan to the ESOP converting the loan to a closed end note with total payments of approximately $780,000 per year for a term of eleven year. At March 31, 2016, the Company’s accrued liability for the loan payment is $195,000. At March 31, 2016, shares held by the ESOP were as follows:

 

Accrued to allocation to participants

     10,742   

Earned ESOP shares

     53,587   

Unearned ESOP shares

     535,671   
  

 

 

 

Total ESOP shares

     600,000   
  

 

 

 

Fair value of unearned shares

   $ 6,256,637   
  

 

 

 
Commitments and Contingencies
3 Months Ended
Mar. 31, 2016
Commitments and Contingencies Disclosure [Abstract]
 
Commitments and Contingencies
(13) COMMITMENTS AND CONTINGENCIES

At March 31, 2016, the Bank had $22.4 million in outstanding commitments to originate loans and undisbursed commitments on loans outstanding of $114.2 million. Management believes that the Bank’s sources of funds are sufficient to fund all of its outstanding commitments. Certificates of deposits scheduled to mature in one year or less from March 31, 2016, totaled $133.2 million. At March 31, 2016, the Company has $28.3 million in times deposits greater than $100,000 but less than $250,000 that are schedule to mature in one year and $44.4 million in time deposits greater than $250,000 that are scheduled to mature in one year or less. Management believes that a significant percentage of such deposits will remain with the Bank.

The Bank’s FHLB borrowings are secured by a blanket security agreement pledging the Bank’s 1-4 family first mortgage loans and non-residential real estate loans. At March 31, 2016, the Bank has pledged all eligible 1-4 family first mortgages.

At March 31, 2016, the Company had the following off-balance sheet commitments (in thousands):

 

Standby letters of credit

   $ 69   

Unused home equity lines of credit

   $ 30,307   

Unused commercial lines of credit

   $ 55,315   

Unused unsecured personal lines of credit

   $ 28,537   

Unfunded commitments on commercial loans

   $ 22,439   

 

At March 31, 2016, the Bank had $53.1 million in additional borrowing capacity with the FHLB which includes an overnight line of credit of $30.0 million. The Bank has an $8 million unsecured overnight borrowing capacity from a correspondent bank.

 

Outstanding
Balance
     Rate     Maturity  
(Dollars in Thousands)  
$ 5,000         0.88     10/06/2017   
  6,000         1.18     07/06/2018   

 

 

    

 

 

   

 

 

 
$ 11,000         1.04  

 

 

    

 

 

   

 

Regulatory Matters
3 Months Ended
Mar. 31, 2016
Banking and Thrift [Abstract]
 
Regulatory Matters
(14) REGULATORY MATTERS

In July 2013, the Federal Reserve Board and the FDIC approved final rules that substantially amend the regulatory capital rules applicable to Heritage Bank USA, Inc. and HopFed Bancorp, Inc. The final rules implement the regulatory capital reforms of the Basel Committee on Banking Supervision reflected in “Basel III: A Global Regulatory Framework for More Resilient Banks and Banking Systems” (Basel III) and changes required by the Dodd-Frank Act.

Under these rules, the leverage and risk-based capital ratios of bank holding companies may not be lower than the leverage and risk-based capital ratios for insured depository institutions. The final rules implementing the Basel III regulatory capital reforms became effective for the Company and Bank on January 1, 2015, and include new minimum risk-based capital and leverage ratios. Moreover, these rules refine the definition of what constitutes “capital” for purposes of calculating those ratios, including the definitions of Tier 1 capital and Tier 2 capital. The new minimum capital level requirements applicable to bank holding companies and banks subject to the rules are: (i) a new common equity Tier 1 capital ratio of 4.5%; (ii) a Tier 1 risk-based capital ratio of 6% (increased from 4%); (iii) a total risk-based capital ratio of 8% (unchanged from current rules); (iv) a Tier 1 leverage ratio of 4% for all institutions. The rules also establish a “capital conservation buffer” of 2.5% (to be phased in over three years) above the new regulatory minimum risk-based capital ratios, and result in the following minimum ratios once the capital conservation buffer is fully phased in: (i) a common equity Tier 1 risk-based capital ratio of 7%, (ii) a Tier 1 risk-based capital ratio of 8.5%, and (iii) a total risk-based capital ratio of 10.5%. The capital conservation buffer requirement is being phased in beginning in January 2016 at 0.625% of risk-weighted assets and will increase each year until fully implemented in January 2019. An institution is subject to limitations on paying dividends, engaging in share repurchases and paying discretionary bonuses if capital levels fall below minimum plus the buffer amounts. These limitations establish a maximum percentage of eligible retained income that could be utilized for such actions.

Under these new rules, Tier 1 capital generally consist of common stock (plus related surplus) and retained earnings, limited amounts of minority interest in the form of additional Tier 1 capital instruments, and non-cumulative preferred stock and related surplus, subject to certain eligibility standards, less goodwill and other specified intangible assets and other regulatory deductions. Cumulative preferred stock and trust preferred securities issued after May 19, 2010, will no longer qualify as Tier 1 capital, but such securities issued prior to May 19, 2010, including in the case of bank holding companies with less than $15.0 billion in total assets, trust preferred securities issued prior to that date, will continue to count as Tier 1 capital subject to certain limitations. The definition of Tier 2 capital is generally unchanged for most banking organizations, subject to certain new eligibility criteria.

Common equity Tier 1 capital generally consist of common stock (plus related surplus) and retained earnings plus limited amounts of minority interest in the form of common stock, less goodwill and other specified intangible assets and other regulatory deductions. The final rules allow banks and their holding companies with less than $250 billion in assets a one-time opportunity to opt-out of a requirement to include unrealized gains and losses in accumulated other comprehensive income in their capital calculation. The Company has made the decision to opt-out of this requirement.

The Federal Reserve has adopted regulations applicable to bank holding companies with assets over $10 billion that require such holding companies and banks to conduct annual stress tests and report the results to the applicable regulators and publicly disclose a summary of certain capital information and results including pro forma changes in regulatory capital ratios. The Board of Directors and senior management are required to consider the results of the stress test in the normal course of business, including but not limited to capital planning and an assessment of capital adequacy in accordance with management’s policies. The FDIC has adopted all guidelines applicable to state nonmember banks in each case. At March 31, 2016, the Bank exceeded all regulatory capital requirements. The table below presents certain information relating to the Company’s and Bank’s capital compliance at March 31, 2016:

 

     Company     Bank  
     Amount      Percent     Amount      Percent  
     (Dollars in Thousands)  

Common Equity Tier 1 Ratio

   $ 94,670         16.76   $ 91,913         16.36

Tier 1 leverage ratio

   $ 94,670         10.75   $ 91,913         10.46

Tier 1 risk-based capital ratio

   $ 94,670         16.76   $ 91,913         16.36

Total risk based capital ratio

   $ 100,832         17.85   $ 98,076         17.45
Subsequent Event
3 Months Ended
Mar. 31, 2016
Subsequent Events [Abstract]
 
Subsequent Event
(15) SUBSEQUENT EVENT

On May 3, 2016, Your Community Bankshares, Inc. (Nasdaq “YCB”) announced an agreement to be purchased by WesBanco, Inc. (Nasdaq “WSBC”). At March 31, 2016, the Company owns a trust preferred security with a market value of $2.0 million that was originally issued to First Financial Services Corporation (“FFKY”). FFKY was acquired by YCB in January 2015 and YCB assumed the liability of the trust preferred, bring all past due interest payments current. The Company has not yet determined how the proposed transaction of YCB and WSBC will affect the value of our trust preferred investment.

Loans (Policies)
3 Months Ended
Mar. 31, 2016
Fair Value Disclosures [Abstract]
 
Troubled Debt Restructuring
Fair Value Measurement
Income Statement - Extraordinary and Unusual Items
Amendments to the Consolidation Analysis
Revenue from Contracts with Customers
Repurchase Agreements
Simplifying Accounting for Measurement-Period Adjustments
Receivables-Troubled Debt Restructurings by Creditors
Interest - Imputation of Interest - Presentation and Subsequent Measurement of Debt Issuance Costs Associated with Line-of-Credit Arrangements
Financial Instruments
Intangibles - Goodwill and Other
Improvements to Employee Share-Based Payment Accounting
Derivatives and Hedging
In March 2016, the FASB issued an update (ASU 2016-06, Derivatives and Hedging: Contingent Put and Call Options in Debt Instruments) which clarifies that an assessment of whether an embedded contingent put or call option is clearly and closely related to the debt host requires only an analysis of the four-step decision sequence in ASC 815-15-25-42. Entities are required to apply the guidance to existing debt instruments (or hybrid financial instruments that are determined to have a debt host) using a modified retrospective transition method as of the period of adoption. The guidance in this ASU will become effective for interim and annual reporting periods beginning after December 15, 2016, with early adoption permitted. The Company does not anticipate this update will have a material impact on its Consolidated Financial Statements. 
Investments-Equity Method and Joint Ventures
In March 2016, the FASB issued an update (ASU 2016-07, Investments-Equity Method and Joint Ventures: Simplifying the Transition to the Equity Method of Accounting) which will eliminate the requirement to retrospectively apply the equity method when an investment that had been accounted for utilizing another method qualifies for use of the equity method. The guidance in this ASU will become effective for interim and annual reporting periods beginning after December 15, 2016, with early adoption permitted. The Company does not anticipate this update will have a material impact on its Consolidated Financial Statements. 

On a periodic basis, the Bank may modify the terms of certain loans. In evaluating whether a restructuring constitutes a troubled debt restructuring (TDR), Financial Accounting Standards Board has issued Accounting Standards Update 310 (ASU 310), A Creditor’s Determination of Whether a Restructuring is a Troubled Debt Restructuring. In evaluating whether a restructuring constitutes a TDR, the Bank must separately conclude that both of the following exist:

 

    The restructuring constitutes a concession

 

    The debtor is experiencing financial difficulties

ASU 310 provides the following guidance for the Bank’s evaluation of whether it has granted a concession as follows:

 

  1. If a debtor does not otherwise have access to funds at a market interest rate for debt with similar risk characteristics as the restructured debt, the restructured debt would be considered a below market rate, which may indicate that the Bank may have granted a concession. In that circumstance, the Bank should consider all aspects of the restructuring in determining whether it has granted a concession, the creditor must make a separate assessment about whether the debtor is experiencing financial difficulties to determine whether the restructuring constitutes a TDR.

 

  2. A temporary or permanent increase in the interest rate on a loan as a result of a restructuring does not eliminate the possibility of the restructuring from being considered a concession if the new interest rate on the loan is below the market interest rate for loans of similar risk characteristics.

 

  3. A restructuring that results in a delay in payment that is insignificant is not a concession. However, the Bank must consider a variety of factors in assessing whether a restructuring resulting in a delay in payment is insignificant.

In September 2006, the FASB issued ASC 820-10, Fair Value Measurements. This Statement defines fair value, establishes a framework for measuring fair value and expands disclosure about fair value. The statement establishes a fair value hierarchy which requires an entity to maximize the use of observable input and minimize the use of unobservable inputs when measuring fair value. The standard describes three levels of inputs that may be used to measure fair value.

 

    Level 1 is for assets and liabilities that management has obtained quoted prices (unadjusted for transaction cost) or identical assets or liabilities in active markets that the Company has the ability to access as of the measurement date.

 

    Level 2 is for assets and liabilities in which significant unobservable inputs other than Level 1 prices such as quoted prices for similar assets and liabilities; quoted prices in markets that are not active; or other inputs that are observable or can be corroborated by observable market data.

 

    Level 3 is for assets and liabilities in which significant unobservable inputs that reflect a reporting entity’s own assumptions about the assumptions that market participants would use in pricing an asset or liability.

The fair values of securities available for sale are determined by a matrix pricing, which is a mathematical technique that is widely used in the industry to value debt securities without exclusively using quoted prices for the individual securities in the Company’s portfolio but rather by relying on the securities relationship to other benchmark quoted securities. Impaired loans are valued at the net present value of expected payments using the fair value of any assigned collateral. The values for bank owned life insurance are obtained from stated values from the respective insurance companies. The liability associated with the Company’s derivative is obtained from a quoted value supplied by our correspondent banker. The value of real estate owned is obtained from appraisals completed on properties at the time of acquisition and annually thereafter.

ASU 2015-01, “Income Statement - Extraordinary and Unusual Items (Subtopic 225-20) – Simplifying Income Statement Presentation by Eliminating the Concept of Extraordinary Items.”ASU 2015-01 eliminates from U.S. GAAP the concept of extraordinary items, which, among other things, required an entity to segregate extraordinary items considered to be unusual and infrequent from the results of ordinary operations and show the item separately in the income statement, net of tax, after income from continuing operations. ASU 2015-01 was effective for the Company beginning January 1, 2016, though early adoption is permitted. The implementation of ASU 2015-01 did not have a significant impact on the Company’s Consolidated Financial Statements.

ASU No. 2015-02, “Amendments to the Consolidation Analysis.”This ASU affects reporting entities that are required to evaluate whether they should consolidate certain legal entities. Specifically, the amendments: (1) Modify the evaluation of whether limited partnerships and similar legal entities are variable interest entities (“VIEs”) or voting interest entities; (2) Eliminate the presumption that a general partner should consolidate a limited partnership; (3) Affect the consolidation analysis of reporting entities that are involved with VIEs, particularly those that have fee arrangements and related party relationships; and (4) Provide a scope exception from consolidation guidance for reporting entities with interests in legal entities that are required to comply with or operate in accordance with requirements that are similar to those in Rule 2a-7 of the Investment Company Act of 1940 for registered money market funds. ASU No. 2015-02 was effective for interim and annual reporting periods beginning after December 15, 2015. The provisions of ASU No. 2015-02 did not have a material impact on the Company’s Consolidated Financial Statements.

ASU 2015-02, “Consolidation (Topic 810) – Amendments to the Consolidation Analysis.”ASU 2015-02 implements changes to both the variable interest consolidation model and the voting interest consolidation model. ASU 2015-02 (i) eliminates certain criteria that must be met when determining when fees paid to a decision maker or service provider do not represent a variable interest, (ii) amends the criteria for determining whether a limited partnership is a variable interest entity and (iii) eliminates the presumption that a general partner controls a limited partnership in the voting model. ASU 2015-02 was effective on January 1, 2016, and did not have a significant impact on the Company’s Consolidated Financial Statements.

In May 2014, the FASB issued new guidance related to Revenue from Contracts with Customers. This guidance supersedes the revenue recognition requirements in Accounting Standards Codification Topic 605, Revenue Recognition, and most industry-specific guidance throughout the Accounting Standards Codification. The guidance requires an entity to recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the company expects to be entitled in exchange for those goods or services. This guidance is effective for interim and annual reporting periods beginning after December 15, 2016; however, the FASB has agreed to a one year deferral of the effective date to December 15, 2017. The Company is currently evaluating this guidance to determine the impact on its consolidated financial statements.

On June 12, 2014, the FASB issued ASU 2014-11, which makes limited amendments to the guidance in ASC 860 on accounting for certain repurchase agreements (“repos”). ASU 2014-11 requires entities to account for repurchase-to-maturity transactions as secured borrowings (rather than as sales with forward repurchase agreements), (2) eliminates accounting guidance on linked repurchase financing transactions, and (3) expands disclosure requirements related to certain transfers of financial assets that are accounted for as sales and certain transfers (specifically, repos, securities lending transactions, and repurchase-to-maturity transactions) accounted for as secured borrowings. ASU 2014-11 also amends ASC 860 to clarify that repos and securities lending transactions that do not meet all of the de-recognition criteria in ASC 860-10-40-5 should be accounted for as secured borrowings. In addition, the ASU provides examples of repurchase and securities lending arrangements that illustrate whether a transferor has maintained effective control over the transferred financial assets. For public business entities, the accounting changes were effective beginning after January 1, 2015. The implementation of ASU 2014-11 did not have a material impact on the Company’s Consolidated Financial Statements.

In September 2015, the FASB issued Accounting Standards Update No. 2015-16, Simplifying the Accounting for Measurement-Period Adjustments. The guidance in this update eliminates the requirement to restate prior period financial statements for measurement period adjustments. The new guidance requires that the cumulative impact of a measurement period adjustment (including the impact on prior periods) be recognized in the reporting period in which the adjustment is identified. The new guidance is intended to reduce complexity in financial reporting. The elimination of the restatement requirement should simplify financial reporting for many entities. However, recognizing the entire impact of a measurement period adjustment in a single reporting period may introduce earnings volatility and reduce comparability between periods when the adjustments are material. The accounting changes in this update are effective for public companies for annual periods, and the interim periods within those annual periods, beginning after December 15, 2015. Early application is permitted for financial statements that have not been issued. The implementation of ASU 2015-16 did not have a material impact on the Company’s Consolidated Financial Statements.

In January 2014, the FASB issued ASU No. 2014-04, Receivables-Troubled Debt Restructurings by Creditors (Subtopic 310-40): Reclassification of Residential Real Estate Collateralized Consumer Mortgage Loans upon Foreclosure. These amendments are intended to clarify when a creditor should be considered to have received physical possession of residential real estate property collateralizing a consumer mortgage loan such that the loan should be derecognized and the real estate recognized. The amendments clarify that an in substance repossession or foreclosure occurs, and a creditor is considered to have received physical possession of residential real estate property collateralizing a consumer mortgage loan, upon either: (1) the creditor obtaining legal title to the residential real estate property upon completion of residential foreclosure, or (2) the borrower conveying all interest in the residential real estate property to the creditor to satisfy that loan through completion of a deed in lieu of foreclosure or through a similar legal agreement. Additional disclosures about such activities are required by these amendments. The amendments in this ASU became effective for public companies for annual periods and interim periods within those annual periods beginning after December 15, 2014. The Company’s implementation of ASU 2014-04 did not have a material impact on the Company’s Consolidated Financial Statements.

ASU 2015-15, “Interest – Imputation of Interest (Subtopic 835-30) – Presentation and Subsequent Measurement of Debt Issuance Costs Associated with Line-of-Credit Arrangements. Amendments to SEC Paragraphs Pursuant to Staff Announcement at June 18, 2015 EITF Meeting.” ASU 2015-15 adds SEC paragraphs pursuant to an SEC Staff Announcement that given the absence of authoritative guidance within ASU 2015-03 for debt issuance costs related to line-of-credit arrangements, the SEC staff would not object to an entity deferring and presenting debt issuance costs as an asset and subsequently amortizing the deferred debt issuance costs ratably over the term of the line-of-credit arrangement, regardless of whether there are any outstanding borrowings on the line-of-credit arrangement. ASU 2015-15 did not have a significant impact on the Company’s Consolidated Financial Statements.

ASU 2016-1, “No. 2016-01, Financial Instruments – Overall (Subtopic 825-10): Recognition and Measurement of Financial Assets and Financial Liabilities. ASU 2016-1, among other things, (i) requires equity investments, with certain exceptions, to be measured at fair value with changes in fair value recognized in net income, (ii) simplifies the impairment assessment of equity investments without readily determinable fair values by requiring a qualitative assessment to identify impairment, (iii) eliminates the requirement for public business entities to disclose the methods and significant assumptions used to estimate the fair value that is required to be disclosed for financial instruments measured at amortized cost on the balance sheet, (iv) requires public business entities to use the exit price notion when measuring the fair value of financial instruments for disclosure purposes, (v) requires an entity to present separately in other comprehensive income the portion of the total change in the fair value of a liability resulting from a change in the instrument-specific credit risk when the entity has elected to measure the liability at fair value in accordance with the fair value option for financial instruments, (vi) requires separate presentation of financial assets and financial liabilities by measurement category and form of financial asset on the balance sheet or the accompanying notes to the financial statements and (viii) clarifies that an entity should evaluate the need for a valuation allowance on a deferred tax asset related to available-for-sale. ASU 2016-1 will be effective on January 1, 2018, and is not expected to have a significant impact on the Company’s financial statements.

ASU 2015-05, “Intangibles – Goodwill and Other – Internal-Use Software (Subtopic 350-40) – Customer’s Accounting for Fees Paid in a Cloud Computing Arrangement.”ASU 2015-05 addresses accounting for fees paid by a customer in cloud computing arrangements such as (i) software as a service, (ii) platform as a service, (iii) infrastructure as a service and (iv) other similar hosting arrangements. ASU 2015-05 provides guidance to customers about whether a cloud computing arrangement includes a software license. If a cloud computing arrangement includes a software license, then the customer should account for the software license element of the arrangement consistent with the acquisition of other software licenses. If a cloud computing arrangement does not include a software license, the customer should account for the arrangement as a service contract. ASU 2015-05 was effective on January 1, 2016, and did not have a material impact on the Company’s Consolidated Financial Statements.

ASU 2016-09, “Improvements to Employee Share-Based Payment Accounting.” This ASU simplifies several aspects of the accounting for employee share-based payment transactions, including the income tax consequences, classification of awards as either equity or liabilities, and classification on the statement of cash flows. For public business entities, this ASU is effective for financial statements issued for fiscal years beginning after December 15, 2016, and interim periods therein. The Company is evaluating the impact of this ASU on its financial statements and disclosures.
Income Per Share (Tables)
3 Months Ended
Mar. 31, 2016
Earnings Per Share [Abstract]
 
Reconciliation of Basic and Diluted Income Per Share
Reconciliation of Basic and Diluted Income Per Share

The following schedule reconciles the numerators and denominators of the basic and diluted income per share (“IPS”) computations for the three month periods ended March 31, 2016, and March 31, 2015. Diluted common shares arise from the potentially dilutive effect of the Company’s stock options and warrants outstanding. For the three month periods ended March 31, 2016, and March 31, 2015, the Company has excluded all unearned shares held by the ESOP.

 

     March 31,  
     2016      2015  

Basic IPS:

     

Net income

   $ 509,000       $ 1,355,000   

Average common shares outstanding

     6,297,755         6,732,456   
  

 

 

    

 

 

 

Net income per share

   $ 0.08       $ 0.20   
  

 

 

    

 

 

 

Diluted IPS:

     

Net Income

   $ 509,000       $ 1,355,000   

Average common shares outstanding

     6,297,755         6,732,456   
  

 

 

    

 

 

 

Dilutive effect of stock options

     —           —     
  

 

 

    

 

 

 

Average diluted shares outstanding

     6,297,755         6,732,456   
  

 

 

    

 

 

 

Net income per share, diluted

   $ 0.08       $ 0.20   
  

 

 

    

 

 

 
Stock Compensation (Tables)
3 Months Ended
Mar. 31, 2016
Disclosure of Compensation Related Costs, Share-based Payments [Abstract]
 
Company's Future Compensation Expense Related to Restricted Stock Vesting
Company's Future Compensation Expense Related to Restricted Stock Vesting

during the three month periods ended March 31, 2015. The table below provides a detail of the Company’s future compensation expense related to restricted stock vesting at March 31, 2016:

 

Year Ending    Future  

December 31,

   Expense  

2016

   $ 123,788   

2017

     86,323   

2018

     50,939   

2019