FIRST WESTERN FINANCIAL, INC.
CONSOLIDATED FINANCIAL STATEMENTS
AND INDEPENDENT AUDITORS' REPORT
TETON FINANCIAL SERVICES, INC.
AND SUBSIDIARY
December 31, 2020 and 2019
INDEPENDENT AUDITORS' REPORT
Board of Directors
Teton Financial Services, Inc.
Jackson, Wyoming
We have audited the accompanying consolidated financial statements of Teton Financial Services, Inc. and Subsidiary, which are comprised of the consolidated balance sheets as of December 31, 2020 and 2019, and the related consolidated statements of income, comprehensive income, stockholders' equity and cash flows for the years then ended, and the related notes to the consolidated financial statements.
Management's Responsibility for the Consolidated Financial Statements
Management is responsible for the preparation and fair presentation of these financial statements in accordance with accounting principles generally accepted in the United States of America; this includes the design, implementation and maintenance of internal control relevant to the preparation and fair presentation of financial statements that are free from material misstatement, whether due to fraud or error.
Auditors' Responsibility
Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits in accordance with auditing standards generally accepted in the United States of America. Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the financial statements are free from material misstatement.
An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on the auditor's judgment, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the entity's preparation and fair presentation of the financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity's internal control. Accordingly, we express no such opinion. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of significant accounting estimates made by management, as well as evaluating the overall presentation of the financial statements.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion.
Opinion
In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of Teton Financial Services, Inc. and Subsidiary at December 31, 2020 and 2019 and the results of their operations and their cash flows for the years then ended, in conformity with accounting principles generally accepted in the United States of America.
1580 Lincoln Street • Suite 700 • Denver, CO 80203
303/296-6033 • FAX 303/296-8553
Certified Public Accountants •A Professional Corporation
Report on Consolidating Information
Our audits were conducted for the purpose of forming an opinion on the 2020 and 2019 consolidated financial statements as a whole. The accompanying consolidating schedules on pages 42 through 45 are presented for purposes of additional analysis of the consolidated financial statements rather than to present the financial position and results of operations of the individual companies, and are not a required part of the consolidated financial statements. The supplemental consolidating schedules are the responsibility of management and were derived from and relate directly to the underlying accounting and other records used to prepare the consolidated financial statements. The supplemental consolidating schedules have been subjected to the auditing procedures applied in the audit of the consolidated financial statements and certain additional procedures, including comparing and reconciling the information directly to the underlying accounting records used to prepare the consolidated financial statements and to the consolidated financial statements themselves, and other additional procedures in accordance with auditing standards generally accepted in the United States of America. In our opinion, the supplemental consolidating schedules are fairly stated in all material respects in relation to the consolidated financial statements as a whole.
Denver, Colorado
March 16, 2021
Teton Financial Services, Inc. and Subsidiary
CONSOLIDATED BALANCE SHEETS
December 31, | ||||
2020 | 2019 | |||
(in thousands) | ||||
ASSETS | ||||
Cash and due from banks | $ | 3,426 | $ | 5,981 |
Interest-bearing deposits | 109,392 | 33,114 | ||
Federal funds sold | 456 | 724 | ||
Total cash and cash equivalents | 113,274 | 39,819 | ||
Certificates of deposit in banks | 980 | 1,220 | ||
Investment securities available for sale | 13,269 | 14,851 | ||
Investment securities held to maturity | - | 2,596 | ||
Nonmarketable equity securities | 1,304 | 1,307 | ||
Loans held for sale | 11,773 | 4,219 | ||
Loans | 253,740 | 235,108 | ||
Less allowance for loan losses | (5,699 | ) | (2,832 | ) |
Net loans | 248,041 | 232,276 | ||
Premises and equipment, net | 13,802 | 14,057 | ||
Real estate held for sale | - | 306 | ||
Intangible assets | 2,150 | 2,182 | ||
Accrued interest receivable | 911 | 855 | ||
Other assets | 2,048 | 1,546 | ||
$ | 407,552 | $ | 315,234 | |
LIABILITIES AND STOCKHOLDERS' EQUITY | ||||
Liabilities | ||||
Deposits | ||||
Noninterest-bearing | $ | 39,508 | $ | 33,561 |
Interest-bearing | 323,679 | 240,539 | ||
Total deposits | 363,187 | 274,100 | ||
Debentures payable | 3,593 | 3,593 | ||
Accrued interest payable | 37 | 63 | ||
Other liabilities | 3,159 | 1,016 | ||
Total liabilities | 369,976 | 278,772 | ||
Commitments (note 14) | ||||
Stockholders' equity | ||||
Common stock - no par value; 50,000,000 shares authorized; 29,477,707 shares issued and outstanding | 30,250 | 30,152 | ||
Retained earnings | 9,062 | 8,210 | ||
Note receivable for common stock | (2,120 | ) | (2,120 | ) |
Accumulated other comprehensive income | 384 | 220 | ||
Total stockholders' equity | 37,576 | 36,462 | ||
$ | 407,552 | $ | 315,234 |
The accompanying notes are an integral part of these consolidated statements.
Teton Financial Services, Inc. and Subsidiary
CONSOLIDATED STATEMENTS OF INCOME
Years ended December 31, | ||||
2020 | 2019 | |||
(in thousands) | ||||
Interest income | ||||
Loans, including fees | $ | 12,930 | $ | 13,013 |
Taxable investment securities | 506 | 432 | ||
Nonmarketable equity securities | 67 | 68 | ||
Certificates of deposit in banks | 35 | 39 | ||
Interest-bearing cash and cash equivalents | 208 | 1,002 | ||
Total interest income | 13,746 | 14,554 | ||
Interest expense | ||||
Deposits | 1,690 | 2,174 | ||
Debentures payable | 216 | 216 | ||
Total interest expense | 1,906 | 2,390 | ||
Net interest income | 11,840 | 12,164 | ||
Provision for loan losses | 4,600 | 2,410 | ||
Net interest income after provision for loan losses | 7,240 | 9,754 | ||
Noninterest income | ||||
Service charges on deposit accounts | 152 | 171 | ||
Mortgage banking | 1,020 | 488 | ||
Net loss on redemption of investment securities | (80 | ) | - | |
Other noninterest income | 742 | 701 | ||
1,834 | 1,360 | |||
Noninterest expense | ||||
Salaries and employee benefits | 4,534 | 4,089 | ||
Occupancy and equipment | 743 | 712 | ||
Data processing and software | 1,140 | 908 | ||
Real estate held for sale, net | 181 | 78 | ||
Amortization of core deposit intangible | 31 | 188 | ||
Other noninterest expense | 1,339 | 1,377 | ||
7,968 | 7,352 | |||
Income before income tax expense | 1,106 | 3,762 | ||
Income tax expense | 254 | 788 | ||
NET INCOME | $ | 852 | $ | 2,974 |
The accompanying notes are an integral part of these consolidated statements.
Teton Financial Services, Inc. and Subsidiary
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
Years ended December 31, | ||||
2020 | 2019 | |||
(in thousands) | ||||
Net income | $ | 852 | $ | 2,974 |
Other comprehensive income | ||||
Net change in unrealized gains and losses on securities available for sale | 207 | 266 | ||
Tax effect | (43 | ) | (56 | ) |
Total other comprehensive income | 164 | 210 | ||
TOTAL COMPREHENSIVE INCOME | $ | 1,016 | $ | 3,184 |
The accompanying notes are an integral part of these consolidated statements.
Teton Financial Services, Inc. and Subsidiary
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
Years Ended December 31, 2020 and 2019
Common |
Retained |
Note |
Accumulated | Total | ||||||||||||||||
(in thousands) | ||||||||||||||||||||
Balance at December 31, 2018 | $ | 28,019 | $ | 5,486 | $ | - | $ | 10 | $ | 33,515 | ||||||||||
Net income | - | 2,974 | - | - | 2,974 | |||||||||||||||
Other comprehensive income | - | - | - | 210 | 210 | |||||||||||||||
Issuance of 1,473,885 shares of common stock in exchange for a note receivable | 2,120 | - | (2,120 | ) | - | - | ||||||||||||||
Stock-based compensation expense | 13 | - | - | - | 13 | |||||||||||||||
Dividends paid | - | (250 | ) | - | - | (250 | ) | |||||||||||||
Balance at December 31, 2019 | 30,152 | 8,210 | (2,120 | ) | 220 | 36,462 | ||||||||||||||
Net income | - | 852 | - | - | 852 | |||||||||||||||
Other comprehensive income | - | - | - | 164 | 164 | |||||||||||||||
Stock-based compensation expense | 98 | - | - | - | 98 | |||||||||||||||
Balance at December 31, 2020 | $ | 30,250 | $ | 9,062 | $ | (2,120 | ) | $ | 384 | $ | 37,576 |
The accompanying notes are an integral part of these consolidated statements.
Teton Financial Services, Inc. and Subsidiary
CONSOLIDATED STATEMENTS OF CASH FLOWS
Years ended December 31, | ||||||||
2020 | 2019 | |||||||
(in thousands) | ||||||||
Cash flows from operating activities | ||||||||
Net income | $ | 852 | $ | 2,974 | ||||
Adjustments to reconcile net loss to net cash from operating activities | ||||||||
Depreciation and software amortization | 585 | 621 | ||||||
Amortization of core deposit intangible | 32 | 188 | ||||||
Net amortization on investment securities | 38 | 81 | ||||||
Provision for loan losses | 4,600 | 2,410 | ||||||
Net loss on sale and redemptions of investment securities | 80 | - | ||||||
Deferred income tax expense (benefit) | (642 | ) | 53 | |||||
Valuation allowances on real estate held for sale | 306 | 51 | ||||||
Gain on sale of real estate held for sale | (141 | ) | (1 | ) | ||||
Stock-based compensation expense | 98 | 13 | ||||||
Net change in loans held for sale | (7,554 | ) | (4,219 | ) | ||||
Net change in other assets and liabilities | 2,244 | (278 | ) | |||||
Net cash provided by operating activities | 498 | 1,893 | ||||||
Cash flows from investing activities | ||||||||
Redemption of certificates of deposit in banks | 240 | 225 | ||||||
Purchase of securities available for sale | (5,553 | ) | (2,056 | ) | ||||
Maturities, calls and paydowns of securities available for sale | 7,322 | 3,148 | ||||||
Purchase of securities held to maturity | - | (2,600 | ) | |||||
Maturities, calls and paydowns of securities held to maturity | 2,498 | - | ||||||
Purchase of nonmarketable equity securities | - | (30 | ) | |||||
Redemption of nonmarketable equity securities | 3 | - | ||||||
Loan originations and principal collections, net | (21,680 | ) | (24,633 | ) | ||||
Proceeds from sale of real estate held for sale | 1,456 | 116 | ||||||
Acquisition of premises, equipment and software | (416 | ) | (147 | ) | ||||
Net cash used in investing activities | (16,130 | ) | (25,977 | ) | ||||
Cash flows from financing activities | ||||||||
Net change in deposits | 89,087 | (5,655 | ) | |||||
Dividends paid | - | (250 | ) | |||||
Net cash provided by (used in) investing activities | 89,087 | (5,905 | ) | |||||
Change in cash and cash equivalents | 73,455 | (29,989 | ) | |||||
Cash and cash equivalents at beginning of year | 39,819 | 69,808 | ||||||
Cash and cash equivalents at end of year | $ | 113,274 | $ | 39,819 | ||||
Supplemental Disclosures of Cash Flow Information | ||||||||
Cash paid during the year for interest | $ | 1,932 | $ | 2,374 | ||||
Cash paid during the year for income taxes | 688 | 940 | ||||||
Supplemental Disclosures of Non-Cash Transactions | ||||||||
Loan balances transferred to real estate held for sale | $ | 1,315 | $ | 115 |
The accompanying notes are an integral part of these consolidated statements.
Teton Financial Services, Inc. and Subsidiary
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2020 and 2019
NOTE 1 - SUMMARY OF ACCOUNTING POLICIES
The accounting and reporting policies of Teton Financial Services, Inc. and Subsidiary conform to accounting principles generally accepted in the United States of America and to general practice within the banking industry. The following is a summary of the significant accounting and reporting policies:
Organization and Principles of Consolidation
Teton Financial Services, Inc. ("TFS") is a bank holding company that owns 100% of the stock of Rocky Mountain Bank ("the Bank"). TFS and the Bank are collectively referred to as "the Company." The accompanying consolidated financial statements include the consolidated totals of the accounts of TFS and the Bank. All significant intercompany accounts and transactions have been eliminated in consolidation.
Nature of Operations
The Company provides a full range of banking and mortgage services to individual and business customers through its three branches located in Jackson, Pinedale and Rock Springs, Wyoming.
The Company is subject to competition from other financial institutions for loans and deposit accounts. The Company is also subject to regulation by certain governmental agencies and undergoes periodic examinations by those regulatory agencies. The Bank's primary regulators are the State of Wyoming - Division of Banking and the Federal Reserve. TFS's primary regulator is the Federal Reserve.
Use of Estimates
In preparing the financial statements, management is required to make estimates and assumptions that affect the reported amounts of assets and liabilities as of the date of the balance sheet and revenues and expenses for the period. Actual results could differ significantly from those estimates.
Material estimates that are particularly susceptible to significant change in the near-term relate to the determination of the allowance for loan losses, the valuation of real estate held for sale and the fair value of financial instruments. In connection with the determination of the allowance for loan losses and the valuation of real estate held for sale, management obtains independent appraisals for significant properties and assesses estimated future cash flows from borrowers' operations and the liquidation of loan collateral. In connection with the determination of the fair value of financial instruments, management obtains valuations from a third-party investment pricing and interest rate risk modeling provider.
Management believes that the allowance for loan losses is adequate. While management uses available information to recognize losses on loans, changes in economic conditions may necessitate revisions in future years. In addition, various regulatory agencies, as an integral part of their examination process, periodically review the Company's allowance for loan losses. Such agencies may require the Company to recognize additional losses based on their judgments about information available to them at the time of their examination.
Significant Group Concentrations of Credit Risk
Most of the Company's activities are with customers located within the Company's areas of operations. A majority of the Company's loans are related to real estate, and borrowers' abilities to honor their loans are dependent upon the continued economic viability of the areas in which the Company lends. Additionally, a significant portion of loans not related to real estate involves purchased participations in consumer loans. Note 4 discusses the types of lending in which the Company engages.
Cash and Cash Equivalents
Cash and cash equivalents include cash, transaction accounts at other financial institutions, interest-bearing balances at the Federal Reserve Bank, interest-bearing balances at the Federal Home Loan Bank of Des Moines, interest-bearing deposits purchased through the Insured Cash Sweep (ICS) network, and federal funds sold. For the Statement of Cash Flows, net cash flows are reported for customer loan and deposit transactions. Balances in transaction accounts at other financial institutions and at the Federal Home Loan Bank may exceed amounts covered by federal deposit insurance. Additionally, federal funds sold are unsecured. Management regularly evaluates the credit risk associated with other financial institutions and believes that the Company is not exposed to any significant credit risks on cash and cash equivalents.
Certificates of Deposit in Banks
Certificates of deposit in banks are carried at cost, are fully covered by federal deposit insurance, and generally mature within five years. At December 31, 2020 there are $980,000 of certificates of deposit in banks pledged as collateral on public deposits and for other purposes as required or permitted by law.
Investment Securities Available for Sale and Held to Maturity
Investment securities are all debt securities and are classified "available for sale" or "held to maturity." Available for sale securities are carried at estimated fair value, with unrealized gains and losses excluded from earnings and reported in other comprehensive income. Held to maturity securities are carried at amortized cost. The amortized cost of all investment securities is adjusted for amortization of purchase premiums and accretion of purchase discounts. Premiums and discounts are recognized in interest income using the interest method over the terms of the securities. Gains and losses on the sale of securities are determined using the specific identification method.
Management evaluates securities for other-than-temporary impairment ("OTTI") on at least a quarterly basis, and more frequently when economic or market conditions warrant such an evaluation. For securities in an unrealized loss position, management considers the extent and duration of the unrealized loss, and the financial condition and near-term prospects of the issuer. Management also assesses whether it intends to sell, or it is more likely than not that it will be required to sell, a security in an unrealized loss position before recovery of its amortized cost basis. If either of the criteria regarding intent or requirement to sell is met, the entire difference between amortized cost and fair value is recognized as an impairment charge to earnings. For securities that do not meet the aforementioned criteria, the amount of impairment is split into two components as follows: 1) OTTI related to credit loss, which is recognized as an impairment charge to earnings, and 2) OTTI related to other factors, which is recognized in other comprehensive income.
Nonmarketable Equity Securities
The Company, as a member of the Federal Reserve and Federal Home Loan Bank systems, is required to maintain an investment in these entities. No ready market exists for these stocks, they have no quoted market value and may only be redeemed by the Federal Reserve and Federal Home Loan Bank at par. For reporting purposes, such stock is considered restricted and is carried at cost under the caption "nonmarketable equity securities."
Loans Held for Sale
Loans originated and intended for sale in the secondary market are carried at the lower of aggregate cost or estimated fair value. Net unrealized losses, if any, are recognized through a valuation allowance charged to earnings. Gains and losses on sales of loans are recognized at the time of sale and are based on the difference between the selling price and the carrying value of loans sold. The Company does not retain servicing rights on loans sold.
Loans
The Company grants real estate, commercial and consumer loans to customers. A substantial portion of the loan portfolio is represented by various types of real estate secured loans in the Company's market areas. The ability of the Company's borrowers to honor their contracts is dependent upon the real estate and general economic conditions in these areas. The Company also operates a specialty lending unit which originates commercial loans to customers who may be out of the Company's immediate market area, and originates commercial loans with specialized purposes and/or collateral.
Loans that management has the intent and ability to hold for the foreseeable future or until maturity or pay-off generally are reported at their outstanding unpaid principal balances adjusted for charge-offs and the allowance for loan losses. Interest income is accrued on the unpaid principal balance. Loan origination fees, net of certain direct origination costs, are deferred and recognized as an adjustment of the related loan yield using the interest method.
Past due loans are any loans for which payments of interest, principal or both have not been received within the timeframes designated by the loan agreements. Loans with payments in arrears but for which borrowers have resumed making scheduled payments are considered past due until arrearages are brought current. Loans that experience insignificant payment delays or payment shortfalls generally are not considered past due. Management determines the significance of payment delays and payment shortfalls on a case-by-case basis, taking into consideration all of the circumstances surrounding the loan and the borrower, including the length of the delay, the reasons for the delay, the borrower's prior payment record, and the amount of the shortfall in relation to the principal and interest owed.
The accrual of interest on any loan is discontinued at the time the loan is 90 days past due unless the loan is well secured and in process of collection. Additionally, loans are placed on nonaccrual at an earlier date if collection of principal or interest is considered doubtful. Notwithstanding the preceding, certain consumer loans may accrue interest if they are more than 90 days past due but these loans are subject to automatic charge-off when they become 120 days past due. When placing a loan on nonaccrual status, interest accrued to date is generally reversed and is charged against the current year's interest income. Payments received on a loan on nonaccrual status are applied against the balance of the loan. A loan is returned to accrual status when principal and interest are no longer past due and collectibility is no longer doubtful.
Troubled debt restructurings are loans for which concessions in terms have been made as a result of the borrower experiencing financial difficulty. Generally, concessions granted to customers include lower interest rates and modification of the payment stream to lower or defer payments. Interest on troubled debt restructurings is accrued under the new terms if the loans are performing and full collection of principal and interest is expected. However, interest accruals are discontinued on troubled debt restructurings that meet the Company's nonaccrual criteria.
Generally, loans are charged off in whole or in part no later than 120 days after they become past due unless the loan is in the process of restructuring or collection and such actions are deemed likely to be successful. Charge off amounts are determined based upon the carrying amount of loans and the amount estimated to be collectible as determined by analyses of expected future cash flows and the liquidation of loan collateral.
Allowance for Loan Losses
The allowance for loan losses is a valuation allowance for probable incurred credit losses, and is established through a provision for loan losses charged to earnings. Loan losses are charged against the allowance when management believes the uncollectibility of a loan balance is confirmed. Subsequent recoveries, if any, are credited to the allowance.
The allowance consists of specific and general components as follows:
The specific component relates to loans that are considered impaired, and is comprised of valuation allowances calculated on a loan-by-loan basis. Impaired loans are all specifically identified loans for which it is probable that the Company will not collect all amounts due according to the contractual terms of the loan agreement. Factors considered by management in determining whether a loan is impaired include payment status, collateral value, the borrower's financial condition and overall loan quality as determined by an internal loan grading system. Included in impaired loans are all nonaccrual loans and all accruing troubled debt restructurings, and loans considered "classified" (as defined below) where collateral values are less than the loan carrying amount regardless of the loan's past due or nonaccrual status. Loans that experience insignificant payment delays or payment shortfalls generally are not considered impaired. For impaired loans for which repayment is expected solely from the collateral, impairment is measured based on the fair value of the collateral. For other impaired loans, impairment may be measured based on the fair value of the collateral or on the present value of expected future cash flows discounted at the loan's original effective interest rate. When the measure of the impaired loan is less than the recorded investment in the loan, the impairment is recorded through a valuation allowance.
The general component relates to non-impaired loans, and is based on historical loss experience adjusted for the effects of qualitative factors that are likely to cause estimated credit losses as of the evaluation date to differ from the portfolio's historical loss experience. Qualitative factors include the following: economic conditions; industry conditions; changes in lending policies and procedures; trends in the volume and terms of loans; the experience, ability and depth of lending staff; levels and trends in delinquencies and impaired loans; levels and trends in charge-off and recovery activity; levels and trends of loan quality as determined by an internal loan grading system; portfolio concentrations.
Although the allowance contains a specific component, the entire allowance is available for any loan that, in management's judgment, should be charged off.
On a quarterly basis, management estimates the allowance balance required using the criteria identified above in relation to the relevant risks for each of the Company's major loan segments. Significant overall risk factors for both the Company's commercial and consumer portfolios include the strength of the real estate market, the strength of tourism and the strength of energy and extraction activities in the Company's lending areas. Beginning in 2020, the impact of the COVID-19 pandemic on borrowers is also a significant risk as the ultimate impact is uncertain and many of the qualitative factors discussed above are lagging indicators. Also beginning in 2020, uncertainty surrounding the performance of the Company's specialty lending unit is a significant risk.
The quality of the Company's loan portfolio is assessed as a function of the levels of past due loans and impaired loans, and internal credit quality ratings which are updated quarterly by management. The ratings on the Company's internal credit scale are broadly grouped into the categories "non-classified," "criticized" and "classified." Non-classified loans are those loans with minimal identified credit risk, criticized loans are those with potential credit weaknesses which deserve management's attention but for which full collection of contractual principal and interest is not significantly at risk. Classified loans are those loans that have well-defined weaknesses that put full collection of contractual principal or interest at risk, and classified loans for which it is probable that the Company will not collect all contractual principal or interest are considered impaired. The credit quality ratings are an important part of the Company's overall credit risk management process and are considered in the determination of the allowance for loan losses.
Determination of the allowance is inherently subjective as it requires estimates that are susceptible to significant revision as more information becomes available. In addition, various regulatory agencies, as an integral part of their examination process, periodically review the Company's allowance. Such agencies may require the Company to recognize additional losses based on their judgments about information available to them at the time of their examination.
Premises and Equipment
Land is carried at cost. Buildings, land improvements and equipment are stated at cost less accumulated depreciation. Depreciation and amortization expense is computed using the straight-line method over the estimated useful lives of the assets. Maintenance and repairs, which do not extend the useful lives of premises and equipment, are charged to expense as incurred.
Real Estate Held for Sale
Real estate acquired through (or in lieu of) foreclosure is initially recorded at fair value when acquired, less an estimate of cost to sell, establishing a new cost basis. If fair value declines subsequent to acquisition a valuation allowance is recorded through earnings. Operating expenses relative to foreclosed real estate are expensed as incurred, while certain improvements may be capitalized if the expenditures are likely to be recaptured upon disposition of the real estate. Gain or loss on sale, if any, is recognized at the time of sale.
Intangible Assets
Core Deposit Intangible
The core deposit intangible resulted from TFS's acquisition of the Bank in 2012, and represents the excess of the fair value of deposits acquired over their book value at the time of acquisition. The core deposit intangible is amortized to expense over an eight-year period using the straight-line method. In addition, the core deposit intangible is assessed at least annually for impairment, and any impairment losses are recognized in earnings in the period identified.
Goodwill
Goodwill resulted from TFS's acquisition of the Bank in 2012, and represents the excess of the purchase price over the fair value of acquired tangible assets and liabilities and identifiable intangible assets. Goodwill is assessed at least annually for impairment, and any impairment losses are recognized in earnings in the period identified.
Income Taxes
Income tax expense is the total of the current year income tax due or refundable, and the change in deferred tax assets and liabilities (excluding deferred tax assets and liabilities related to other comprehensive income). Deferred tax assets and liabilities are the expected future tax amounts for the temporary differences between carrying amounts and tax bases of assets and liabilities, computed using enacted tax rates. Realization of deferred tax assets is dependent upon the generation of a sufficient level of future taxable income and recoverable taxes paid in prior years. Management periodically assesses deferred tax assets, and a valuation allowance is recorded if the full amount is not expected to be realized.
A tax position is recognized as a benefit only if it is "more likely than not" that the tax position would be sustained in a tax examination, with a tax examination presumed to occur. Tax benefits recognized are the amount of the benefit that is greater than 50% likely of being realized upon examination. No tax benefits are recognized if they do not meet the "more likely than not" test.
The Company files a consolidated income tax return inclusive of both TFS and the Bank; however, income tax expense is allocated to the entities on a separate-entity basis.
Comprehensive Income
Comprehensive income consists of net income and other comprehensive income. The only component of other comprehensive income consists of net unrealized holding gains and losses on available for sale securities, net of related tax effects.
Noninterest Income
Noninterest income is substantially comprised of service charges on deposit accounts, mortgage banking income, and ATM and debit card income. Service charges on deposit accounts consist of monthly account fees, stop payment charges, and charges for deposit items returned for non-sufficient funds or paid as an overdraft (net of fees waived or refunded). ATM and debit card income is comprised of ATM withdrawal fees and debit card interchange income. Mortgage banking income is comprised of origination fees and service release premiums on loans sold. In all instances, noninterest income is recognized concurrent with the Company's satisfaction of the underlying performance obligation, which typically occurs at a single point in time as a sale, transaction or statement cycle is completed.
Off- Balance Sheet Financial Instruments
In the ordinary course of business, the Company enters into off-balance-sheet financial instruments consisting of commitments to extend credit, unused lines of credit, standby letters of credit and undisbursed loans in process. These financial instruments are recorded in the financial statements when they are funded.
In conjunction with the determination of the allowance for loan losses, and using the same criteria, the Company determines the extent of credit risk on its off-balance sheet financial instruments and whether there are probable incurred credit losses on those instruments for which a loss provision is necessary. The Company has determined that there is minimal credit risk on its off-balance sheet financial instruments, and accordingly has not recorded a loss provision or allowance for those instruments.
Transfers of Financial Assets
Transfers of financial assets are accounted for as sales when control over the assets has been relinquished and, for loan participations sold, incoming cash flows on the base loan are allocated to all participants on a pro-rata basis. Control over transferred assets is deemed to be relinquished when the assets have been isolated from the Company, the transferee obtains the right (free of conditions that constrain it from taking advantage of that right) to pledge or exchange the transferred assets, and the Company does not maintain effective control over the transferred assets through an agreement to repurchase them before their maturity.
Loss Contingencies
Loss contingencies, including claims and legal actions arising in the ordinary course of business, are recorded as liabilities when the likelihood of loss is probable and an amount or range of loss can be reasonably estimated.
Fair Value Measurements
Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants, excluding transaction costs. When measuring fair value, entities should maximize the use of observable inputs and minimize the use of unobservable inputs. The following describes the three levels of inputs that may be used to measure fair value:
• | Level 1 Inputs - Unadjusted quoted prices in active markets for identical assets or liabilities that the reporting entity has the ability to access at the measurement date. |
• | Level 2 Inputs - Significant other observable inputs other than Level 1 prices such as quoted prices for similar assets or liabilities; quoted prices in markets that are not active; or other inputs that are observable or can be corroborated by observable market data. |
• | Level 3 Inputs - Unobservable inputs that reflect an entity's own assumptions about the assumptions that market participants would use in pricing the assets or liabilities. |
Adoption of New Accounting Standards
In 2019, the Company adopted Accounting Standards Update 2016-02, Leases (Topic 842). Under the standard, the Company is required to record a right-of-use asset for leased property and also record a corresponding lease liability. In general, rather than expense lease payments as they are made as currently done under operating lease guidance, the right-of-use asset will be amortized to expense over the lease term and lease payments will reduce the lease obligation. Adoption of the standard did not impact the consolidated financial statements as the Company's facilities are owned and equipment leases are immaterial and accordingly not capitalized.
Significant Accounting Standards Updates Not Yet Effective
The Financial Accounting Standards Board issued Accounting Standards Update 2016-13, Financial Instruments - Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments. Under the new standard, the Company will be required to convert from the existing incurred-loss model for determining the allowance for loan losses to an expected-loss model. An expected-loss model will determine the allowance for loan losses balance based upon credit losses expected to be incurred over the life of the loan portfolio, and will consider not only current credit conditions but also reasonably supportable expectations as to future credit conditions. The standard will also require securities held to maturity to be evaluated for impairment under an expected-loss model. The standard is effective for the Company beginning January 1, 2023. The Company is currently evaluating the impact on its consolidated financial statements and its accounting and reporting practices.
Subsequent Events
Management evaluates events occurring subsequent to the balance sheet date, through the date the financial statements are eligible to be issued, to determine whether the events require recognition or disclosure in the financial statements. With respect to the December 31, 2020 financial statements, Management has considered subsequent events through March 16, 2021.
NOTE 2 - INVESTMENT SECURITIES
The amortized cost and fair value of investment securities, with gross unrealized gains and losses, follows:
December 31, 2020 | ||||||||
Amortized |
Gross |
Gross |
Fair | |||||
(in thousands) | ||||||||
Debt securities available for sale | ||||||||
U.S. government agencies | $ | 998 | $ | 23 | $ | - | $ | 1,021 |
U.S. Treasury | 1,000 | - | - | 1,000 | ||||
SBA loan pools | 2,945 | 77 | (20 | ) | 3,002 | |||
U.S. agency mortgage-backed | 7,840 | 409 | (3 | ) | 8,246 | |||
$ | 12,783 | $ | 509 | $ | (23 | ) | $ | 13,269 |
December 31, 2019 | |||||||||
Amortized |
Gross |
Gross |
Fair | ||||||
(in thousands) | |||||||||
Debt securities available for sale | |||||||||
U.S. government agencies | $ | 1,495 | $ | 14 | $ | (1 | ) | $ | 1,508 |
SBA loan pools | 3,710 | 40 | (31 | ) | 3,719 | ||||
U.S. agency mortgage-backed | 9,367 | 262 | (5 | ) | 9,624 | ||||
14,572 | 316 | (37 | ) | 14,851 | |||||
Debt securities held to maturity | |||||||||
Private issue short-tem notes | 2,596 | - | - | 2,596 | |||||
$ | 17,168 | $ | 316 | $ | (37 | ) | $ | 17,447 |
The amortized cost and fair value of debt securities at December 31, 2020, by contractual maturity, are shown below:
Available for Sale | ||||
Amortized | Fair Value | |||
(in thousands) | ||||
Due in one year or less | $ | 1,499 | $ | 1,502 |
Due after one through five years | 499 | 519 | ||
Due after five years through ten years | - | - | ||
Due after ten years | - | - | ||
1,998 | 2,021 | |||
Mortgage-backed and SBA loan pools | 10,785 | 11,248 | ||
$ | 12,783 | $ | 13,269 |
Information pertaining to investment securities, with gross unrealized losses aggregated by investment category and length of time that individual securities have been in a continuous loss position, follows:
December 31, 2020 | |||||||||
Less than 12 months | Over 12 months | ||||||||
Gross | Fair Value |
Gross | Fair Value | ||||||
(in thousands) | |||||||||
Debt securities available for sale | |||||||||
SBA loan pools | $ | - | $ | - | $ | (20 | ) | $ | 1,503 |
U.S. agency mortgage-backed | (3 | ) | 1,051 | - | - | ||||
$ | (3 | ) | $ | 1,051 | $ | (20 | ) | $ | 1,503 |
December 31, 2019 | |||||||||
Less than 12 months | Over 12 months | ||||||||
Gross | Fair Value |
Gross | Fair Value | ||||||
(in thousands) | |||||||||
Debt securities available for sale | |||||||||
U.S. government agencies | $ | - | $ | - | $ | (1 | ) | $ | 499 |
SBA loan pools | (1 | ) | 115 | (30 | ) | 1,961 | |||
U.S. agency mortgage-backed | (5 | ) | 1,589 | - | - | ||||
$ | (6 | ) | $ | 1,704 | $ | (31 | ) | $ | 2,460 |
At December 31, 2020 and 2019, unrealized losses are largely due to differences in market yields as compared to yields available at the time securities were purchased. Management has performed analyses of investment credit quality and cash flows, and does not believe that any securities are impaired due to reasons of credit quality. The Company has the ability and intent to hold investment securities for a period of time sufficient for a recovery of cost, and fair value is expected to recover as bonds approach maturity. Accordingly, as of December 31, 2020 and 2019, management believes the unrealized losses detailed in the table above are temporary.
The Company realized no gains and $80,000 in losses on sales and early redemptions of investment securities in 2020. The losses realized in 2020 were on the redemption of the securities classified as held to maturity. The Company realized no gains or losses on sales and early redemptions of investment securities in 2019.
Investment securities with a carrying value of $12,776,000 and $13,786,000 at December 31, 2020 and 2019, respectively, were pledged as collateral on public deposits and for other purposes as required or permitted by law.
NOTE 3 - NONMARKETABLE EQUITY SECURITIES
The Company's investment in nonmarketable equity securities is as follows:
December 31, | ||||
2020 | 2019 | |||
(in thousands) | ||||
Federal Reserve Bank - capital stock | $ | 926 | $ | 926 |
Federal Home Loan Bank of Des Moines - common stock | 378 | 381 | ||
$ | 1,304 | $ | 1,307 |
NOTE 4 - LOANS AND ALLOWANCE FOR LOAN LOSSES
Major classifications of loans are as follows:
December 31, | ||||
2020 | 2019 | |||
(in thousands) | ||||
Real Estate | ||||
Commercial | $ | 68,326 | $ | 63,861 |
Construction, land and land development | 29,818 | 21,868 | ||
Residential 1 - 4 family | 61,326 | 76,570 | ||
Residential multifamily | 5,715 | 7,238 | ||
Farmland | 1,901 | 2,097 | ||
167,086 | 171,634 | |||
Commercial, non real estate | 62,131 | 19,474 | ||
Consumer participations | 22,959 | 41,444 | ||
Consumer | 1,299 | 2,037 | ||
Other | 24 | 878 | ||
Total loans | 253,499 | 235,467 | ||
Less net deferred loan fees (costs) | 241 | (359 | ) | |
$ | 253,740 | $ | 235,108 |
At December 31, 2020 and 2019, various real estate and commercial loans totaling $70,868,000, and $111,047,000, respectively, are pledged to secure borrowing facilities from the Federal Home Loan Bank.
In the ordinary course of business, the Company has granted loans to its executive officers, significant stockholders and directors and parties affiliated with those persons (collectively, "insiders"). The Company has loan commitments to insiders aggregating $1,233,000 and $697,000 at December 31, 2020 and 2019, respectively, of which $406,000 and $478,000 was outstanding at December 31, 2020 and 2019, respectively. In management's opinion, the terms of these loans, including interest rates and collateral, were comparable to terms afforded non-insider borrowers.
At December 31, 2020, there are no loans in the process of foreclosure.
Transactions in the allowance for loan losses are as follows:
Construction, |
Commercial |
Residential | Other | Total | ||||||
(in thousands) | ||||||||||
Balance at December 31, 2018 | $ | 115 | $ | 356 | $ | 685 | $ | 2,037 | $ | 3,193 |
Provision (credit) for loan losses | (5 | ) | 1,138 | 36 | 1,241 | 2,410 | ||||
(Charge-offs) | - | (800 | ) | - | (2,307 | ) | (3,107 | ) | ||
Recoveries | - | - | - | 336 | 336 | |||||
Net (charge-offs) recoveries | - | (800 | ) | - | (1,971 | ) | (2,771 | ) | ||
Balance at December 31, 2019 | 110 | 694 | 721 | 1,307 | 2,832 | |||||
Provision (credit) for loan losses | 97 | (79 | ) | (129 | ) | 4,711 | 4,600 | |||
(Charge-offs) | - | - | - | (2,060 | ) | (2,060 | ) | |||
Recoveries | - | - | - | 327 | 327 | |||||
Net (charge-offs) recoveries | - | - | - | (1,733 | ) | (1,733 | ) | |||
Balance at December 31, 2020 | $ | 207 | $ | 615 | $ | 592 | $ | 4,285 | $ | 5,699 |
Components of the allowance for loan losses, and the related carrying amount of loans for which the allowance is determined, are as follows:
December 31, 2020 | ||||||||||
Construction, |
Commercial |
Residential | Other | Total | ||||||
(in thousands) | ||||||||||
Allocation of Allowance to: | ||||||||||
Impaired loans - evaluated individually | $ | - | $ | - | $ | - | $ | - | $ | - |
Impaired loans - evaluated collectively | - | - | - | - | - | |||||
Total impaired loans | - | - | - | - | - | |||||
Unimpaired loans - evaluated collectively | 207 | 615 | 592 | 4,285 | 5,699 | |||||
$ | 207 | $ | 615 | $ | 592 | $ | 4,285 | $ | 5,699 | |
Recorded Investment In: | ||||||||||
Impaired loans - evaluated individually | $ | - | $ | 73 | $ | - | $ | 7 | $ | 80 |
Impaired loans - evaluated collectively | - | - | - | - | - | |||||
Total impaired loans | - | 73 | - | 7 | 80 | |||||
Unimpaired loans - evaluated collectively | 29,818 | 70,154 | 67,041 | 86,406 | 253,419 | |||||
$ | 29,818 | $ | 70,227 | $ | 67,041 | $ | 86,413 | $ | 253,499 |
At December 31, 2020, approximately $2,031,000 of the $5,699,000 allowance for loan losses relates to uncertainty surrounding the impact of the COVID-19 pandemic, of which $1,527,000 is allocated to the "Other" loan segment.
Teton Financial Services, Inc. and Subsidiary
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2020 and 2019
December 31, 2019 | ||||||||||
Construction, |
Commercial |
Residential | Other | Total | ||||||
(in thousands) | ||||||||||
Allocation of Allowance to: | ||||||||||
Impaired loans - evaluated individually | $ | - | $ | - | $ | - | $ | - | $ | - |
Impaired loans - evaluated collectively | - | - | - | - | - | |||||
Total impaired loans | - | - | - | - | - | |||||
Unimpaired loans - evaluated collectively | 110 | 694 | 721 | 1,307 | 2,832 | |||||
$ | 110 | $ | 694 | $ | 721 | $ | 1,307 | $ | 2,832 | |
Recorded Investment In: | ||||||||||
Impaired loans - evaluated individually | $ | - | $ | 1,396 | $ | 1 | $ | 17 | $ | 1,414 |
Impaired loans - evaluated collectively | - | - | - | - | - | |||||
Total impaired loans | - | 1,396 | 1 | 17 | 1,414 | |||||
Unimpaired loans - evaluated collectively | 21,868 | 64,562 | 83,807 | 63,816 | 234,053 | |||||
$ | 21,868 | $ | 65,958 | $ | 83,808 | $ | 63,833 | $ | 235,467 |
Information relative to impaired loans is as follows:
December 31, 2020 |
Year Ended | |||||||||||
Recorded |
Recorded |
Total |
Valuation |
Commitments |
Average Impaired | |||||||
(in thousands) | ||||||||||||
Commercial Real Estate Non-owner occupied | $ | - | $ | - | $ | - | $ | - | $ | - | $ | 698 |
Residential Real Estate 1 - 4 family first lien | - | - | - | - | - | 1 | ||||||
Other Consumer and other | 7 | - | 7 | - | - | 12 | ||||||
$ | 7 | $ | - | $ | 7 | $ | - | $ | - | $ | 711 |
December 31, 2019 |
Year Ended | |||||||||||
Recorded |
Recorded |
Total |
Valuation |
Commitments |
Average | |||||||
(in thousands) | ||||||||||||
Commercial Real Estate | ||||||||||||
Non-owner occupied | $ | 1,396 | $ | - | $ | 1,396 | $ | - | $ | - | $ | 746 |
Residential Real Estate | ||||||||||||
1 - 4 family first lien | 1 | - | 1 | - | - | 64 | ||||||
Other | ||||||||||||
Commerical | - | - | - | - | - | 957 | ||||||
Consumer and other | 17 | - | 17 | - | - | 22 | ||||||
$ | 1,414 | $ | - | $ | 1,414 | $ | - | $ | - | $ | 1,789 |
The Company does not separately evaluate or identify consumer participation loans for impairment as these loans are automatically considered classified once they become 90 days past due and are charged-off if they become 120 days past due.
Interest income recognized on impaired loans is immaterial to the financial statements for 2020 and 2019.
Troubled debt restructurings included in impaired loans, and the related valuation allowance thereon, are as follows:
December 31, 2020 | December 31, 2019 | |||||||
Recorded |
Valuation |
Recorded |
Valuation | |||||
(in thousands) | ||||||||
Commercial Real Estate | ||||||||
Non-owner occupied | $ | 73 | $ | - | $ | 80 | $ | - |
Residential Real Estate | ||||||||
1 - 4 family first lien | - | - | 1 | - | ||||
$ | 73 | $ | - | $ | 81 | $ | - |
The carrying amounts of loans by performance status and credit quality indicator are as follows:
December 31, 2020 | ||||||||||||||||||
Loans By Past Due and Performance Status | Loans By Credit Quality Indicator | |||||||||||||||||
Accruing Loans | Classified | |||||||||||||||||
Current |
30 - 89 Days |
90 Days |
Nonaccrual | Total Loans |
Non- | Criticized | Unimpaired | Impaired | ||||||||||
(in thousands) | ||||||||||||||||||
Construction, Land and Development | ||||||||||||||||||
1 - 4 family | $ | 9,809 | $ | - | $ | - | $ | - | $ | 9,809 | $ | 9,809 | $ | - | $ | - | $ | - |
Other | 20,009 | - | - | - | 20,009 | 20,009 | - | - | - | |||||||||
Commercial Real Estate | ||||||||||||||||||
Owner occupied | 29,935 | - | - | - | 29,935 | 29,935 | - | - | - | |||||||||
Non-owner occupied | 38,391 | - | - | - | 38,391 | 38,318 | - | - | 73 | |||||||||
Farmland | 1,901 | - | - | - | 1,901 | 1,901 | - | - | - | |||||||||
Residential Real Estate | ||||||||||||||||||
1 - 4 family first lien | 48,318 | - | - | - | 48,318 | 48,318 | - | - | - | |||||||||
Multifamily | 5,715 | - | - | - | 5,715 | 5,715 | - | - | - | |||||||||
Other | 13,008 | - | - | - | 13,008 | 13,008 | - | - | - | |||||||||
Other | ||||||||||||||||||
Commerical | 62,131 | - | - | - | 62,131 | 61,695 | - | 436 | - | |||||||||
Consumer participations | 22,672 | 194 | 93 | - | 22,959 | 22,866 | - | 93 | - | |||||||||
Consumer and other | 1,316 | - | - | 7 | 1,323 | 1,316 | - | - | 7 | |||||||||
$ | 253,205 | $ | 194 | $ | 93 | $ | 7 | $ | 253,499 | $ | 252,890 | $ | - | $ | 529 | $ | 80 |
December 31, 2019 | ||||||||||||||||||
Loans By Past Due and Performance Status | Loans By Credit Quality Indicator | |||||||||||||||||
Accruing Loans | Classified | |||||||||||||||||
Current |
30 - 89 Days |
90 Days |
Nonaccrual | Total Loans |
Non- | Criticized | Unimpaired | Impaired | ||||||||||
(in thousands) | ||||||||||||||||||
Construction, Land and Development | ||||||||||||||||||
1 - 4 family | $ | 6,537 | $ | - | $ | - | $ | - | $ | 6,537 | $ | 6,537 | $ | - | $ | - | $ | - |
Other | 15,331 | - | - | - | 15,331 | 15,331 | - | - | - | |||||||||
Commercial Real Estate | ||||||||||||||||||
Owner occupied | 34,139 | - | - | - | 34,139 | 34,139 | - | - | - | |||||||||
Non-owner occupied | 28,406 | - | - | 1,316 | 29,722 | 28,326 | - | - | 1,396 | |||||||||
Farmland | 2,097 | - | - | - | 2,097 | 2,097 | - | - | - | |||||||||
Residential Real Estate | ||||||||||||||||||
1 - 4 family first lien | 65,637 | - | - | - | 65,637 | 65,636 | - | - | 1 | |||||||||
Multifamily | 7,238 | - | - | - | 7,238 | 7,238 | - | - | - | |||||||||
Other | 10,933 | - | - | - | 10,933 | 10,933 | - | - | - | |||||||||
Other | ||||||||||||||||||
Commerical | 19,474 | - | - | - | 19,474 | 19,474 | - | - | - | |||||||||
Consumer participations | 40,752 | 436 | 256 | - | 41,444 | 41,188 | - | 256 | - | |||||||||
Consumer and other | 2,898 | - | - | 17 | 2,915 | 2,898 | - | - | 17 | |||||||||
$ | 233,442 | $ | 436 | $ | 256 | $ | 1,333 | $ | 235,467 | $ | 233,797 | $ | - | $ | 256 | $ | 1,414 |
NOTE 5 - PREMISES AND EQUIPMENT
Premises and equipment are as follows:
December 31, | ||||
2020 | 2019 | |||
(in thousands) | ||||
Land | $ | 4,610 | $ | 4,610 |
Land improvements | 290 | 284 | ||
Buildings | 11,993 | 11,993 | ||
Furniture and equipment | 1,692 | 1,646 | ||
Construction in progress | 249 | 5 | ||
18,834 | 18,538 | |||
Less accumulated depreciation | (5,032 | ) | (4,481 | ) |
$ | 13,802 | $ | 14,057 |
Starting in 2020, certain employees who work remotely away from the Company's primary market areas utilize workspace under a shared-office membership arrangement. The membership commitment is month-to-month, and expense attributable to the membership was $18,000 in 2020.
NOTE 6 - REAL ESTATE HELD FOR SALE
Activity in real estate held for sale is as follows:
Year Ended December 31, | ||||
2020 | 2019 | |||
(in thousands) | ||||
Balance at beginning of year | $ | 306 | $ | 357 |
Transfers from loans | 1,315 | 115 | ||
Valuation allowances recorded | (306 | ) | (51 | ) |
Dispositions | (1,315 | ) | (115 | ) |
Balance at end of year | $ | - | $ | 306 |
Changes in the valuation allowance on real estate held for sale are as follows:
Year Ended December 31, | ||||
2020 | 2019 | |||
(in thousands) | ||||
Balance at beginning of year | $ | 441 | $ | 390 |
Valuation allowances recorded | 306 | 51 | ||
Valuation allowances realized | - | - | ||
Balance at end of year | $ | 747 | $ | 441 |
Net expense from real estate held for sale is comprised of the following;
Year Ended December 31, | ||||
2020 | 2019 | |||
(in thousands) | ||||
Valuation allowances recorded | $ | 306 | $ | 51 |
Gain on sale | (141 | ) | (1 | ) |
Net operating expenses | 16 | 28 | ||
Net expense | $ | 181 | $ | 78 |
NOTE 7 - INTANGIBLE ASSETS
Intangible assets consisted of the following:
December 31, | ||||
2020 | 2019 | |||
(in thousands) | ||||
Goodwill | $ | 2,150 | $ | 2,150 |
Core deposit intangible | 1,505 | 1,505 | ||
Less accumulated amortization | (1,505 | ) | (1,473 | ) |
- | 32 | |||
$ | 2,150 | $ | 2,182 |
All intangible assets were acquired in 2012 in connection with the acquisition of the Bank by TFS.
NOTE 8 - INCOME TAXES
Allocation of federal income tax expense between current and deferred portions is as follows:
Year Ended December 31, | ||||
2020 | 2019 | |||
(in thousands) | ||||
Current expense | $ | 896 | $ | 735 |
Deferred expense (benefit) | (642 | ) | 53 | |
$ | 254 | $ | 788 |
There are no state income taxes as the state of Wyoming does not assess corporate income taxes.
The following table reconciles income tax expense calculated on pre-tax income to actual income tax expense:
Year Ended December 31, | ||||
2020 | 2019 | |||
(in thousands) | ||||
Taxes at 21% statutory federal tax rate | $ | 232 | $ | 790 |
Tax-exempt interest | (19 | ) | (9 | ) |
Stock-based compensation expense | 21 | 3 | ||
Other nondeductible expenses | 20 | 4 | ||
Income tax expense | $ | 254 | $ | 788 |
The components of the net deferred tax asset, included as a component of other assets, are as follows:
December 31, | ||||
2020 | 2019 | |||
(in thousands) | ||||
Deferred tax assets: | ||||
Allowance for loan losses | $ | 1,197 | $ | 595 |
Premises and equipment | 286 | 280 | ||
Core deposit intangible | 130 | 144 | ||
Real estate held for sale | 157 | 93 | ||
1,770 | 1,112 | |||
Deferred tax liabilities: | ||||
Unrealized gain on investment securities | (102 | ) | (59 | ) |
Goodwill | (140 | ) | (124 | ) |
(242 | ) | (183 | ) | |
Net deferred tax asset | $ | 1,528 | $ | 929 |
NOTE 9 - DEPOSITS
Interest-bearing deposits consisted of the following:
December 31, | ||||
2020 | 2019 | |||
(in thousands) | ||||
Interest-bearing checking and NOW acounts | $ | 114,072 | $ | 76,730 |
Money market accounts | 136,036 | 112,839 | ||
Savings accounts | 33,049 | 19,730 | ||
Time deposits | ||||
$250,000 and greater | 19,552 | 15,088 | ||
Less than $250,000 | 20,970 | 16,152 | ||
Total time deposits | 40,522 | 31,240 | ||
$ | 323,679 | $ | 240,539 |
Scheduled maturities of time deposits at December 31, 2020 are as follows:
Year Ending December 31, | (in thousands) | |
2021 | $ | 23,816 |
2022 | 12,252 | |
2023 | 2,765 | |
2024 | 827 | |
2025 | 862 | |
$ | 40,522 |
Certain of the Company's time deposits are purchased from wholesale brokers. At December 31, 2020 and 2019, brokered time deposits totaled $14,660,000 and $6,687,000, respectively.
The Company has executive officers, significant stockholders and directors and parties affiliated with those persons (collectively, "insiders") who maintain deposit accounts at the Company. Deposits from insiders totaled $61,426,000 and $59,996,000 at December 31, 2020 and 2019, respectively. Of these amounts, one account comprised $49,023,000 and $48,539,000 of the balances, respectively.
NOTE 10 - FEDERAL HOME LOAN BANK BORROWINGS
The Company has no outstanding Federal Home Loan Bank ("FHLB") borrowings at December 31, 2020 and 2019.
The Company is eligible to borrow from the FHLB based upon the level of loan collateral pledged to the FHLB, subject to certain maximums based on Company asset size. At December 31, 2020, the maximum the Company is eligible to borrow is $54,875,000.
NOTE 11 - DEBENTURES PAYABLE
In 2016, the Company issued $3,593,000 of debentures in an offering to stockholders of the Company at the time. Interest on the debentures accrues at a fixed rate of 6% and is due quarterly. Principal is due at maturity in 2021. The debentures are unsecured.
NOTE 12 - FEDERAL FUNDS PURCHASED
The Company has unsecured federal funds lines at correspondent banks with a maximum credit limit of $10,000,000 at December 31, 2020. No amounts were outstanding under the lines at December 31, 2020 and 2019. The federal funds lines are uncommitted, and funding requests made by the Company are subject to the lending institutions' approval and funding availability at the time of request.
NOTE 13 - STOCKHOLDERS' EQUITY and STOCK-BASED COMPENSATION
Shareholder Agreement
The stockholders of the Company are bound to the Shareholder Agreement ("the Agreement"). Under the terms of the Agreement, stockholders must obtain the written consent of the Board of Directors to transfer stock, subject to limited exemptions requiring only written notification to the Board. Such consent is at the sole and absolute discretion of the Board. The Agreement also provides stockholders preemptive participation rights in the event the Company sells additional stock.
Dividends
Various restrictions limit the extent to which dividends may be paid by the Bank to TFS. Generally, regulatory approval is required for the Bank to pay dividends in any calendar year that exceed the Bank's net profit for that year combined with its retained profits for the preceding two years. In addition, dividends paid by the Bank would be prohibited if the effect thereof would cause the Bank's capital to be reduced below applicable minimum capital requirements.
Note Receivable for Common Stock and Related Stock-Based Compensation
In 2019, the Company issued 1,473,885 shares of common stock to an executive of the Company in exchange for a $2,120,000 promissory note payable from the executive to the Company. The note is recorded as a contra-equity account such that equity will only increase as principal payments are received.
Principal on the note is due at maturity in 2026, and interest on the note accrues at a fixed rate of 2.13% and is due annually. The note is secured by the stock issued.
In accordance with regulatory accounting guidance, interest accrued on the note is not recorded to income but rather is creditable directly to equity when paid. Interest of $46,000 and $11,000 was accrued on the note in 2020 and 2019, respectively. However, the amounts credited to equity for 2020 and 2019 totaled $46,000 and $-0-, respectively, due to accrued but unpaid interest of $11,000 at both December 31, 2020 and 2019.
The interest rate on the loan is below the estimated fair market rate of 5.125% at the time of issuance, and results in stock-based compensation expense equal to the difference between the fair value of the stock issued (the note's principal amount) and the present value of the note using the fair market rate. Total compensation cost is $362,000 and is recognized straight line over the term of the note. In 2020 and 2019, compensation cost recognized was $52,000 and $13,000, respectively. At December 31, 2020, there is $297,000 of compensation cost that will be recognized in years 2021 through 2026.
Total stock-based compensation expense credited to equity, including the interest and discount discussed above, is $98,000 for 2020 and $13,000 for 2019.
The Company has the right, but not the obligation, to repurchase the stock at fair value should the executive cease to be an employee of the Company for any reason, and to offset repurchase amounts against the outstanding balance of the note.
NOTE 14 - FINANCIAL INSTRUMENTS WITH OFF-BALANCE SHEET RISK
The Company is a party to financial instruments with off-balance-sheet risk in the normal course of business to meet the financing needs of its customers. These financial instruments include commitments to extend credit and letters of credit. The instruments involve, to varying degrees, elements of credit and interest rate risk in excess of the amount recognized in the balance sheet. The contract amounts of those instruments reflect the extent of involvement the Company has in particular classes of financial instruments.
The Company's exposure to credit loss in the event of non-performance by the other party to the financial instrument for commitments to extend credit and standby letters of credit is represented by the contractual amounts of those instruments. The Company uses the same credit policies in making commitments and conditional obligations as it does for on-balance-sheet instruments.
Commitments to extend credit are agreements to lend to a customer as long as there is no breach of any condition established in the contract. Commitments generally have fixed expiration dates or other termination clauses and may require payment of a fee. Since many of the commitments may expire without being drawn upon, the total commitment amounts do not necessarily represent future cash requirements. The Company evaluates each customer's credit-worthiness on a case-by-case basis. The amount of collateral obtained, if deemed necessary, by the Company upon extension of credit is based on management's credit evaluation of the customer. Collateral held varies, but may include accounts receivable, inventory, property, plant and equipment and real estate.
Standby letters of credit are conditional commitments issued by the Company to guarantee the performance of a customer to a third party. The credit risk involved in issuing letters of credit is essentially the same as that involved in extending loan facilities to customers.
The following financial instruments were outstanding whose contract amounts represent risk:
December 31, | ||||
2020 | 2019 | |||
(in thousands) | ||||
Commitments to extend credit | $ | 40,128 | $ | 29,730 |
Standby letters of credit | 15 | 15 | ||
$ | 40,143 | $ | 29,745 |
NOTE 15 - EMPLOYEE BENEFIT PLAN
The Company has a 401(k) Plan ("the Plan") in which substantially all employees may participate. The Plan allows employees to make salary deferrals and allows the Company to make safe harbor matching contributions (up to 4.5% of eligible compensation, with 100% matching on the first 3% of employee deferrals and 50% matching on the next 3% of employee deferrals) and discretionary profit-sharing contributions. Employees are immediately 100% vested in matching contributions, while profit-sharing contributions vest over a six year period. Expense attributable to the plan totaled $135,000 and $118,000 in 2020 and 2019, respectively.
NOTE 16 - REGULATORY MATTERS
Banks and bank holding companies are subject to various regulatory capital requirements administered by state and federal banking agencies. Capital adequacy guidelines, and additionally for banks prompt corrective action regulations, involve quantitative measures of assets, liabilities, and certain off-balance-sheet items calculated under regulatory accounting practices. Capital amounts and classifications are also subject to qualitative judgments by regulators about components, risk weighting and other factors.
Quantitative measures established by the Basel III Capital Rules to ensure capital adequacy require the maintenance of minimum amounts and ratios (set forth in the table below) of common equity tier 1 capital, tier 1 capital and total capital (as defined in the regulations) to risk-weighted assets (as defined), and of tier 1 capital to quarterly average assets (as defined). The Basel III capital rules require the Bank to maintain a minimum ratio of common equity tier 1 capital to risk-weighted assets of at least 4.5%, plus a 2.5% "capital conservation buffer" (which is added to the 4.5% common equity tier 1 capital ratio, effectively resulting in a minimum ratio of common equity tier 1 capital to risk-weighted assets of 7%). The Bank is also required to maintain a tier 1 capital to risk-weighted assets ratio of 6.0% (8.5% including the capital conservation buffer), a total capital to risk-weighted assets ratio of 8.0% (10.5% including the capital conservation buffer), and a tier 1 capital to quarterly average assets ratio of 4.0%.
The aforementioned capital conservation buffer is designed to absorb losses during periods of economic stress. Banking institutions with capital ratios above the base minimums but below the effective minimums (which include the buffer) will face constraints on dividends, equity repurchases and compensation based on the amount of the shortfall.
The Bank's regulatory capital is comprised of the following: 1) Common equity tier 1 capital - consisting of common stock, related paid-in-capital and retained earnings, less goodwill and core deposit intangible asset balances; 2) Additional tier 1 capital - there are no components of tier 1 capital beyond common equity tier 1 capital; 3) Tier 2 capital - consisting of a permissible portion of the allowance for loan losses; and 4) total capital - the aggregate of all tier 1 and tier 2 capital. In connection with the adoption of the Basel III Capital Rules, the Company elected to opt-out of the requirement to include most components of accumulated other comprehensive income in common equity tier 1 capital.
The following table presents the Bank's actual and required capital ratios as of December 31, 2020 and 2019 under the Basel III Capital Rules. The minimum required capital amounts presented include the include the capital conservation buffer. Capital levels required to be considered well capitalized, based on prompt corrective action regulations as amended to reflect changes under the Basel III Capital Rules, are also presented.
Actual |
Minimum required |
Required to be | ||||||||||
Amount | Ratio | Amount | Ratio | Amount | Ratio | |||||||
(dollars in thousands) | ||||||||||||
As of December 31, 2020 | ||||||||||||
Total capital (to risk weighted assets) | $ | 41,547 | 16.5 | % | $ | 26,445 | 10.5 | % | $ | 25,186 | 10.0 | % |
Tier 1 capital (to risk weighted assets) | 38,367 | 15.2 | % | 21,408 | 8.5 | % | 20,149 | 8.0 | % | |||
Common equity tier 1 capital (to risk weighted assets) | 38,367 | 15.2 | % | 17,630 | 7.0 | % | 16,371 | 6.5 | % | |||
Tier 1 capital (to average assets) | 38,367 | 9.3 | % | 16,580 | 4.0 | % | 20,725 | 5.0 | % | |||
As of December 31, 2019 | ||||||||||||
Total capital (to risk weighted assets) | $ | 40,067 | 16.6 | % | $ | 25,298 | 10.5 | % | $ | 24,094 | 10.0 | % |
Tier 1 capital (to risk weighted assets) | 37,235 | 15.5 | % | 20,479 | 8.5 | % | 19,275 | 8.0 | % | |||
Common equity tier 1 capital (to risk weighted assets) | 37,235 | 15.5 | % | 16,865 | 7.0 | % | 15,661 | 6.5 | % | |||
Tier 1 capital (to average assets) | 37,235 | 11.8 | % | 12,671 | 4.0 | % | 15,839 | 5.0 | % |
Regulatory authorities can initiate certain mandatory actions if the Bank fails to meet the minimum capital requirements, which could have a direct and material effect on the Company's financial statements.
Management believes, as of December 31, 2020 and 2019, that the Bank meets all capital adequacy requirements to which it is subject and that the Bank exceeds the minimum levels necessary to be considered "well capitalized."
NOTE 17 - FAIR VALUE MEASUREMENTS AND DISCLOSURES
The following is a description of the Company's valuation methodologies for assets and liabilities recorded at fair value:
Securities Available for Sale - Debt securities are reported at fair value based upon measurements obtained from an independent pricing service. The fair value measurements for debt securities are determined by quoted market prices, if available (Level 1), or consider observable data that may include dealer quotes, market spreads, cash flows, the U.S. Treasury yield curve, market consensus prepayment speeds, credit information and the bonds' terms and conditions, among other things (Level 2).
Loans Held For Sale - The Company does not record loans held for sale at fair value on a recurring basis. However, from time to time, fair value adjustments are recorded on these loans to reflect declines in value based on commitments in hand from investors or prevailing investor yield requirements (Level 2).
Impaired Loans - The Company does not record loans at fair value on a recurring basis. However, from time to time, valuation allowances are recorded on these loans to reflect (1) the current appraised or market-quoted value of the underlying collateral, or (2) the discounted value of expected cash flows. In some cases, the properties for which market quotes or appraised values have been obtained are located in areas where comparable sales data is limited, outdated, or unavailable. Fair value estimates for impaired loans measured for impairment based upon the value of the collateral are obtained from independent appraisers or other third-party consultants, and for other impaired loans are based on discounted cash flow analyses (Level 3).
Real Estate Held for Sale - The Company does not record real estate held for sale at fair value on a recurring basis. However, from time to time, fair value adjustments are recorded on these properties to reflect the current appraised value (less an estimate of cost to sell). In some cases, the properties for which appraised values have been obtained are located in areas where comparable sales data is limited, outdated, or unavailable. Fair value estimates for real estate held for sale are obtained from independent appraisers (Level 3).
The following table provides the hierarchy and fair value for each major category of assets and liabilities recorded at fair value on a recurring basis:
Quoted |
Other |
Significant |
Carrying | |||||
(in thousands) | ||||||||
December 31, 2020 | ||||||||
Securities Available for Sale | ||||||||
U.S. Government agency | $ | - | $ | 1,021 | $ | - | $ | 1,021 |
U.S. Treasury | - | 1,000 | - | 1,000 | ||||
SBA loan pools | - | 3,002 | - | 3,002 | ||||
U.S. agency mortgage-backed | - | 8,246 | - | 8,246 | ||||
$ | - | $ | 13,269 | $ | - | $ | 13,269 |
Quoted |
Other |
Significant |
Carrying | |||||
(in thousands) | ||||||||
December 31, 2019 | ||||||||
Securities Available for Sale | ||||||||
U.S. Government agency | $ | - | $ | 1,508 | $ | - | $ | 1,508 |
SBA loan pools | - | 3,719 | - | 3,719 | ||||
U.S. agency mortgage-backed | - | 9,624 | - | 9,624 | ||||
$ | - | $ | 14,851 | $ | - | $ | 14,851 |
During 2020 and 2019 there were no changes or amounts in Level 3 assets or liabilities recorded at fair value on a recurring basis.
The following table provides the hierarchy and fair value for each major category of assets and liabilities recorded at fair value on a non-recurring basis:
Quoted |
Other |
Significant |
Carrying | |||||
(in thousands) | ||||||||
December 31, 2020 | ||||||||
Loans held for sale | $ | - | $ | - | $ | 11,773 | $ | 11,773 |
Impaired loans | - | - | 7 | 7 | ||||
Real estate held for sale | - | - | - | - | ||||
December 31, 2019 | ||||||||
Loans held for sale | - | - | 4,219 | 4,219 | ||||
Impaired loans | $ | - | $ | - | 1,414 | $ | 1,414 | |
Real estate held for sale | - | - | 306 | 306 |
At December 31, 2020 and 2019, there are no valuation allowances on loans held for sale.
At December 31, 2020 and 2019, there are no impaired loans with valuation allowances.
At December 31, 2020, real estate held for sale with an initial cost basis of $747,000 has a full valuation allowance of $747,000. At December 31, 2019, real estate held for sale with an initial cost basis of $747,000 has a $441,000 valuation allowance. Valuation allowances on real estate held for sale have been recorded through net expense from foreclosed real estate.
The following presents the estimated fair value and carrying amount of the Company's financial instruments:
December 31, 2020 | ||||||||||
Quoted |
Other |
Significant |
Total Fair |
Carrying | ||||||
(in thousands) | ||||||||||
Financial Assets: | ||||||||||
Cash and cash equivalents | $ | 113,274 | $ | - | $ | - | $ | 113,274 | $ | 113,274 |
Certificates of deposits in banks | - | 980 | - | 980 | 980 | |||||
Investment securities available for sale | - | 13,269 | - | 13,269 | 13,269 | |||||
Nonmarketable equity securities | - | 1,304 | - | 1,304 | 1,304 | |||||
Loans held for sale | - | 11,773 | - | 11,773 | 11,773 | |||||
Loans, net of allowance for loan losses | - | - | 246,801 | 246,801 | 248,041 | |||||
Accrued interest receivable | - | 911 | - | 911 | 911 | |||||
Financial Liabilities: | ||||||||||
Noninterest-bearing deposits | - | 39,508 | - | 39,508 | 39,508 | |||||
Interest-bearing deposits (non-maturity) | - | 283,157 | - | 283,157 | 283,157 | |||||
Interest-bearing deposits (time deposits) | - | - | 40,968 | 40,968 | 40,522 | |||||
Debentures payable | - | - | 3,593 | 3,593 | 3,593 | |||||
Accrued interest payable | - | 37 | - | 37 | 37 |
December 31, 2019 | ||||||||||
Quoted |
Other |
Significant |
Total Fair |
Carrying | ||||||
(in thousands) | ||||||||||
Financial Assets: | ||||||||||
Cash and cash equivalents | $ | 39,819 | $ | - | $ | - | $ | 39,819 | $ | 39,819 |
Certificates of deposits in banks | - | 1,220 | - | 1,220 | 1,220 | |||||
Investment securities available for sale | - | 14,851 | - | 14,851 | 14,851 | |||||
Investment securities held to maturity | - | - | 2,596 | 2,596 | 2,596 | |||||
Nonmarketable equity securities | - | 1,307 | - | 1,307 | 1,307 | |||||
Loans held for sale | - | 4,219 | - | 4,219 | 4,219 | |||||
Loans, net of allowance for loan losses | - | - | 232,603 | 232,603 | 232,276 | |||||
Accrued interest receivable | - | 855 | - | 855 | 855 |
December 31, 2019 | |||||
Quoted |
Other |
Significant |
Total Fair |
Carrying | |
(in thousands) | |||||
Financial Liabilities: | |||||
Noninterest-bearing deposits | - | 33,561 | - | 33,561 | 33,561 |
Interest-bearing deposits (non-maturity) | - | 209,299 | - | 209,299 | 209,299 |
Interest-bearing deposits (time deposits) | - | - | 31,284 | 31,284 | 31,240 |
Debentures payable | - | - | 3,593 | 3,593 | 3,593 |
Accrued interest payable | - | 63 | - | 63 | 63 |
The following summary presents the methodologies and assumptions used to estimate the fair value of the Company's financial instruments. The Company operates as a going concern and, except for investment securities available for sale and loans held for sale, no active market exists for its financial instruments. Much of the information used to determine the fair value is highly subjective and judgmental in nature and, therefore, the results may not be precise. The subjective factors include, among other things, estimates of cash flows, risk characteristics, credit quality and interest rates, all of which are subject to change. Since the fair value is estimated as of the balance sheet date, the amounts that will actually be realized or paid upon settlement or maturity of the various financial instruments could be significantly different.
Cash and Cash Equivalents, Accrued Interest Receivable and Accrued Interest Payable
Fair value approximates the carrying amount as these are assets held for the short term, or liabilities payable in the short term, which are expected to be realized or paid at their carrying amount.
Certificates of Deposit in Banks
Fair value is estimated by discounting future contractual cash flows using interest rates currently offered for certificates of similar remaining maturities.
Investment Securities Available for Sale
Fair value is provided by a third-party investment accounting provider and considers observable data that may include dealer quotes, market spreads, cash flows, the U.S. Treasury yield curve, market consensus prepayment speeds, credit information and the bonds' terms and conditions, among other things.
Investment Securities Held to Maturity
Fair value approximates carrying amount based on the short term nature of these instruments.
Nonmarketable Equity Securities
Fair value approximates carrying amount based on the securities' redemption provisions.
Loans Held for Sale
Fair value is based on commitments in hand from investors or prevailing investor yield requirements.
Loans, Net
For fixed rate loans, fair value is estimated by discounting contractual future cash flows using current rates at which similar loans would be made to borrowers with similar credit ratings and for the same remaining securities. For variable rate loans, fair value is estimated to be carrying amount due to the re-pricing provisions. Loans are presented net of the allowance for loan losses.
Deposits
Fair value for noninterest-bearing accounts and interest-bearing accounts with no stated maturity approximates carrying amount as these deposits are payable on demand and can be re-priced at any time. Fair value of interest-bearing time deposits is estimated by discounting future contractual cash flows using interest rates currently offered for time deposits of similar remaining maturities. Fair value measurements for deposits do not contemplate the value of any core deposit intangibles.
Debentures Payable
Fair value approximates carrying value as the rate and terms of the debentures are similar to those the Company would expect to receive for a current offering.
Off-Balance-Sheet Instruments
Fair value for off-balance-sheet instruments such as unfunded loan commitments and letters of credit is not estimated because of the difficulty in assessing the likelihood and timing of advances, and management believes that it is not feasible or practical to fairly and accurately disclose a fair value for these instruments.
NOTE 18 - TRUST SERVICES
At December 31, 2020, the Company has six trust accounts with $208,519,000 in assets. These assets are not included in the consolidated financial statements as they are not assets of the Company.
SUPPLEMENTAL CONSOLIDATING SCHEDULES
Teton Financial Services, Inc. and Subsidiary
SUPPLEMENTAL CONSOLIDATING BALANCE SHEETS
December 31,2020 | |||||||||
Rocky Mountain |
Teton Financial |
Consolidating | Consolidated | ||||||
(in thousands) | |||||||||
ASSETS | |||||||||
Cash and due from banks | $ | 3,426 | $ | 395 | $ | (395 | ) | $ | 3,426 |
Interest-bearing deposits | 109,392 | - | - | 109,392 | |||||
Federal funds sold | 456 | - | - | 456 | |||||
Cash and cash equivalents | 113,274 | 395 | (395 | ) | 113,274 | ||||
Certificates of deposit in banks | 980 | - | - | 980 | |||||
Investment securities available for sale | 13,269 | - | - | 13,269 | |||||
Nonmarketable equity securities | 1,304 | - | - | 1,304 | |||||
Loans held for sale | 11,773 | - | - | 11,773 | |||||
Loans | 253,740 | - | - | 253,740 | |||||
Less allowance for loan losses | (5,699 | ) | - | - | (5,699 | ) | |||
Net loans | 248,041 | - | - | 248,041 | |||||
Premises and equipment, net | 13,802 | - | - | 13,802 | |||||
Intangible assets | 2,150 | - | - | 2,150 | |||||
Accrued interest receivable | 911 | - | - | 911 | |||||
Other assets | 2,048 | 13 | (13 | ) | 2,048 | ||||
Investment in Rocky Mountain Bank | - | 40,761 | (40,761 | ) | - | ||||
$ | 407,552 | $ | 41,169 | $ | (41,169 | ) | $ | 407,552 | |
LIABILITIES | |||||||||
Deposits | |||||||||
Noninterest-bearing | $ | 39,903 | $ | - | $ | (395 | ) | $ | 39,508 |
Interest-bearing | 323,679 | - | - | 323,679 | |||||
Total deposits | 363,582 | - | (395 | ) | 363,187 | ||||
Debentures payable | - | 3,593 | - | 3,593 | |||||
Accrued interest payable | 37 | - | - | 37 | |||||
Other liabilities | 3,172 | - | (13 | ) | 3,159 | ||||
Total liabilities | 366,791 | 3,593 | (408 | ) | 369,976 | ||||
STOCKHOLDERS' EQUITY | |||||||||
Common stock | 929 | 30,250 | (929 | ) | 30,250 | ||||
Capital surplus | 29,991 | - | (29,991 | ) | - | ||||
Retained earnings | 9,457 | 9,062 | (9,457 | ) | 9,062 | ||||
Note receivable for common stock | - | (2,120 | ) | - | (2,120 | ) | |||
Accumulated other comprehensive income | 384 | 384 | (384 | ) | 384 | ||||
Total stockholders' equity | 40,761 | 37,576 | (40,761 | ) | 37,576 | ||||
$ | 407,552 | $ | 41,169 | $ | (41,169 | ) | $ | 407,552 |
Teton Financial Services, Inc. and Subsidiary
SUPPLEMENTAL CONSOLIDATING BALANCE SHEETS
December 31 2019 | |||||||||
Rocky Mountain |
Teton Financial |
Consolidating | Consolidated | ||||||
(in thousands) | |||||||||
ASSETS | |||||||||
Cash and due from banks | $ | 5,981 | $ | 356 | $ | (356 | ) | $ | 5,981 |
Interest-bearing deposits | 33,114 | - | - | 33,114 | |||||
Federal funds sold | 724 | - | - | 724 | |||||
Cash and cash equivalents | 39,819 | 356 | (356 | ) | 39,819 | ||||
Certificates of deposit in banks | 1,220 | - | - | 1,220 | |||||
Investment securities available for sale | 14,851 | - | - | 14,851 | |||||
Investment securities held to maturity | 2,596 | - | - | 2,596 | |||||
Nonmarketable equity securities | 1,307 | - | - | 1,307 | |||||
Loans held for sale | 4,219 | - | - | 4,219 | |||||
Loans | 235,108 | - | - | 235,108 | |||||
Less allowance for loan losses | (2,832 | ) | - | - | (2,832 | ) | |||
Net loans | 232,276 | - | - | 232,276 | |||||
Premises and equipment, net | 14,057 | - | - | 14,057 | |||||
Real estate held for sale | 306 | - | - | 306 | |||||
Intangible assets | 2,182 | - | - | 2,182 | |||||
Accrued interest receivable | 855 | - | - | 855 | |||||
Other assets | 1,434 | 187 | (75 | ) | 1,546 | ||||
Investment in Rocky Mountain Bank | - | 39,512 | (39,512 | ) | - | ||||
$ | 315,122 | $ | 40,055 | $ | (39,943 | ) | $ | 315,234 | |
LIABILITIES | |||||||||
Deposits | |||||||||
Noninterest-bearing | $ | 33,917 | $ | - | $ | (356 | ) | $ | 33,561 |
Interest-bearing | 240,539 | - | - | 240,539 | |||||
Total deposits | 274,456 | - | (356 | ) | 274,100 | ||||
Debentures payable | - | 3,593 | - | 3,593 | |||||
Accrued interest payable | 63 | - | - | 63 | |||||
Other liabilities | 1,091 | - | (75 | ) | 1,016 | ||||
Total liabilities | 275,610 | 3,593 | (431 | ) | 278,772 | ||||
STOCKHOLDERS' EQUITY | |||||||||
Common stock | 929 | 30,152 | (929 | ) | 30,152 | ||||
Capital surplus | 29,939 | - | (29,939 | ) | - | ||||
Retained earnings | 8,424 | 8,210 | (8,424 | ) | 8,210 | ||||
Note receivable for common stock | - | (2,120 | ) | - | (2,120 | ) | |||
Accumulated other comprehensive income | 220 | 220 | (220 | ) | 220 | ||||
Total stockholders' equity | 39,512 | 36,462 | (39,512 | ) | 36,462 | ||||
$ | 315,122 | $ | 40,055 | $ | (39,943 | ) | $ | 315,234 |
Teton Financial Services, Inc. and Subsidiary
SUPPLEMENTAL CONSOLIDATING STATEMENTS OF INCOME
Year Ended December 31, 2020 | |||||||||
Rocky Mountain |
Teton Financial |
Consolidating | Consolidated | ||||||
(in thousands) | |||||||||
Interest income | |||||||||
Loans, including fees | $ | 12,930 | $ | - | $ | - | $ | 12,930 | |
Taxable investment securities | 506 | - | - | 506 | |||||
Nonmarketable equity securities | 67 | - | - | 67 | |||||
Certificates of deposit in banks | 35 | - | - | 35 | |||||
Interest-bearing cash and cash equivalents | 208 | - | - | 208 | |||||
Total interest income | 13,746 | - | - | 13,746 | |||||
Interest expense | |||||||||
Deposits | 1,690 | - | - | 1,690 | |||||
Debentures payable | - | 216 | - | 216 | |||||
Total interest expense | 1,690 | 216 | - | 1,906 | |||||
Net interest income (loss) | 12,056 | (216 | ) | - | 11,840 | ||||
Provision for loan losses | 4,600 | - | - | 4,600 | |||||
Net interest income after provision for loan losses | 7,456 | (216 | ) | - | 7,240 | ||||
Noninterest income | |||||||||
Service charges on deposit accounts | 152 | - | - | 152 | |||||
Mortgage banking | 1,020 | - | - | 1,020 | |||||
Net loss on sale of investment securities | (80 | ) | - | - | (80 | ) | |||
Other noninterest income | 742 | - | - | 742 | |||||
1,834 | - | - | 1,834 | ||||||
Noninterest expense | |||||||||
Salaries and employee benefits | 4,534 | - | - | 4,534 | |||||
Occupancy and equipment | 743 | - | - | 743 | |||||
Data processing and software | 1,140 | - | - | 1,140 | |||||
Real estate held for sale, net | 181 | - | - | 181 | |||||
Amortization of core deposit intangible | 31 | - | - | 31 | |||||
Other noninterest expense | 1,338 | 1 | - | 1,339 | |||||
7,967 | 1 | - | 7,968 | ||||||
Income (loss) before income tax expense | 1,323 | (217 | ) | - | 1,106 | ||||
Income tax expense (benefit) | 290 | (36 | ) | - | 254 | ||||
Income (loss) before equity in income of subsidiary | 1,033 | (181 | ) | - | 852 | ||||
Equity in income of subsidiary | - | 1,033 | (1,033 | ) | - | ||||
Net income | $ | 1,033 | $ | 852 | $ | (1,033 | ) | $ | 852 |
Teton Financial Services, Inc. and Subsidiary
SUPPLEMENTAL CONSOLIDATING STATEMENTS OF INCOME
Year Ended December 31, 2019 | |||||||||
Rocky Mountain |
Teton Financial |
Consolidating | Consolidated | ||||||
(in thousands) | |||||||||
Interest income | |||||||||
Loans, including fees | $ | 13,013 | $ | - | $ | - | $ | 13,013 | |
Taxable investment securities | 432 | - | - | 432 | |||||
Nonmarketable equity securities | 68 | - | - | 68 | |||||
Certificates of deposit in banks | 39 | - | - | 39 | |||||
Interest-bearing cash and cash equivalents | 1,002 | - | - | 1,002 | |||||
Total interest income | 14,554 | - | - | 14,554 | |||||
Interest expense | |||||||||
Deposits | 2,174 | - | - | 2,174 | |||||
Debentures payable | - | 216 | - | 216 | |||||
Total interest expense | 2,174 | 216 | - | 2,390 | |||||
Net interest income (loss) | 12,380 | (216 | ) | - | 12,164 | ||||
Provision for loan losses | 2,410 | - | - | 2,410 | |||||
Net interest income after provision for loan losses | 9,970 | (216 | ) | - | 9,754 | ||||
Noninterest income | |||||||||
Service charges on deposit accounts | 171 | - | - | 171 | |||||
Mortgage banking | 488 | - | - | 488 | |||||
Other noninterest income | 701 | - | - | 701 | |||||
1,360 | - | - | 1,360 | ||||||
Noninterest expense | |||||||||
Salaries and employee benefits | 4,089 | - | - | 4,089 | |||||
Occupancy and equipment | 712 | - | - | 712 | |||||
Data processing and software | 908 | - | - | 908 | |||||
Real estate held for sale, net | 78 | - | - | 78 | |||||
Amortization of core deposit intangible | 188 | - | - | 188 | |||||
Other noninterest expense | 1,316 | 61 | - | 1,377 | |||||
7,291 | 61 | - | 7,352 | ||||||
Income (loss) before income tax expense | 4,039 | (277 | ) | - | 3,762 | ||||
Income tax expense (benefit) | 844 | (56 | ) | - | 788 | ||||
Income (loss) before equity in income of subsidiary | 3,195 | (221 | ) | - | 2,974 | ||||
Equity in income of subsidiary | - | 3,195 | (3,195 | ) | - | ||||
Net income | $ | 3,195 | $ | 2,974 | $ | (3,195 | ) | $ | 2,974 |
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First Western Financial Inc. published this content on 10 March 2022 and is solely responsible for the information contained therein. Distributed by Public, unedited and unaltered, on 10 March 2022 21:16:44 UTC.
