Isabella Bank Corporation (ISBA)

FORM 10-Q | Quarterly Report
ISABELLA BANK Corp (Form: 10-Q, Received: 08/07/2018 15:57:27)
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
 
FORM 10-Q
 
ý
Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
For the quarterly period ended June 30, 2018
or
¨
Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
For the transition period from                      to                     
Commission File Number: 0-18415
 
Isabella Bank Corporation
(Exact name of registrant as specified in its charter)
 
Michigan
 
38-2830092
(State or other jurisdiction of
incorporation or organization)
 
(I.R.S. Employer
Identification No.)
 
 
 
401 N. Main St, Mt. Pleasant, MI
 
48858
(Address of principal executive offices)
 
(Zip code)
(989) 772-9471
(Registrant’s telephone number, including area code)
N/A
(Former name, former address and former fiscal year, if changed since last report)
 
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.     ý   Yes     ¨   No
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (Section 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).     ý   Yes     ¨   No
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and "emerging growth company" in Rule 12b-2 of the Exchange Act.
Large accelerated filer
 
¨
 
Accelerated filer
 
ý
 
 
 
 
 
Non-accelerated filer
 
¨   (Do not check if a smaller reporting company)
 
Smaller reporting company
 
¨
 
 
 
 
 
 
 
 
 
Emerging growth company
 
¨
 
 
 
 
 
 
 
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.
 
¨
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).      ¨   Yes     ý   No
The number of common shares outstanding of the registrant’s Common Stock (no par value) was 7,845,606 as of August 1, 2018 .



ISABELLA BANK CORPORATION
QUARTERLY REPORT ON FORM 10-Q
Table of Contents
 
 
 
 
 
 
Item 1.
 
 
 
 
 
 
 
Item 2.
 
 
 
 
 
 
 
Item 3.
 
 
 
 
 
 
 
Item 4.
 
 
 
 
 
 
 
 
 
 
 
 
 
Item 1.
 
 
 
 
 
 
 
Item 1A.
 
 
 
 
 
 
 
Item 2.
 
 
 
 
 
 
 
Item 3.
 
 
 
 
 
 
 
Item 4.
 
 
 
 
 
 
 
Item 5.
 
 
 
 
 
 
 
Item 6.
 
 
 
 
 
 
 
 
 
 

2


Forward Looking Statements
This report contains certain forward looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Rule 175 promulgated thereunder, and Section 21E of the Securities Exchange Act of 1934, as amended and Rule 3b-6 promulgated thereunder. We intend such forward looking statements to be covered by the safe harbor provisions for forward looking statements contained in the Private Securities Litigation Reform Act of 1995, and are included in this statement for purposes of these safe harbor provisions. Forward looking statements, which are based on certain assumptions and describe future plans, strategies and expectations, are generally identifiable by use of the words “believe,” “expect,” “intend,” “anticipate,” “estimate,” “project,” or similar expressions. Our ability to predict results or the actual effect of future plans or strategies is inherently uncertain. Factors which could have a material adverse effect on the operations and future prospects include, but are not limited to, changes in: interest rates, general economic conditions, federal or state tax laws, monetary and fiscal policy, the quality or composition of the loan or investment portfolios, demand for loan products, fluctuation in the value of collateral securing our loan portfolio, deposit flows, competition, cyber-security risk, demand for financial services in our market area, and accounting principles, policies and guidelines. These risks and uncertainties should be considered in evaluating forward looking statements and undue reliance should not be placed on such statements. Further information concerning our business, including additional factors that could materially affect our financial results, is included in our filings with the SEC .
Glossary of Acronyms and Abbreviations
The acronyms and abbreviations identified below may be used throughout this Quarterly Report on Form 10-Q or in our other SEC filings. You may find it helpful to refer back to this page while reading this report.
AFS: Available-for-sale
 
GAAP: U.S. generally accepted accounting principles
ALLL: Allowance for loan and lease losses
 
GLB Act: Gramm-Leach-Bliley Act of 1999
AOCI: Accumulated other comprehensive income
 
IFRS: International Financial Reporting Standards
ASC: FASB Accounting Standards Codification
 
IRR: Interest rate risk
ASU: FASB Accounting Standards Update
 
ISDA: International Swaps and Derivatives Association
ATM: Automated Teller Machine
 
JOBS Act: Jumpstart our Business Startups Act
BHC Act: Bank Holding Company Act of 1956
 
LIBOR: London Interbank Offered Rate
CECL: Current Expected Credit Losses
 
N/A: Not applicable
CFPB: Consumer Financial Protection Bureau
 
N/M: Not meaningful
CIK: Central Index Key
 
NASDAQ: NASDAQ Stock Market Index
CRA: Community Reinvestment Act
 
NASDAQ Banks: NASDAQ Bank Stock Index
DIF: Deposit Insurance Fund
 
NAV: Net asset value
DIFS: Department of Insurance and Financial Services
 
NOW: Negotiable order of withdrawal
Directors Plan: Isabella Bank Corporation and Related Companies Deferred Compensation Plan for Directors
 
NSF: Non-sufficient funds
Dividend Reinvestment Plan: Isabella Bank Corporation Stockholder Dividend Reinvestment Plan and Employee Stock Purchase Plan
 
OCI: Other comprehensive income (loss)
Dodd-Frank Act: Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010
 
OMSR: Originated mortgage servicing rights
ESOP: Employee Stock Ownership Plan
 
OREO: Other real estate owned
Exchange Act: Securities Exchange Act of 1934
 
OTTI: Other-than-temporary impairment
FASB: Financial Accounting Standards Board
 
PBO: Projected benefit obligation
FDI Act: Federal Deposit Insurance Act
 
PCAOB: Public Company Accounting Oversight Board
FDIC: Federal Deposit Insurance Corporation
 
Rabbi Trust: A trust established to fund the Directors Plan
FFIEC: Federal Financial Institutions Examinations Council
 
SEC: U.S. Securities and Exchange Commission
FRB: Federal Reserve Bank
 
SOX: Sarbanes-Oxley Act of 2002
FHLB: Federal Home Loan Bank
 
Tax Act: Tax Cuts and Jobs Act, enacted December 22, 2017
Freddie Mac: Federal Home Loan Mortgage Corporation
 
TDR: Troubled debt restructuring
FTE: Fully taxable equivalent
 
XBRL: eXtensible Business Reporting Language

3


PART I – FINANCIAL INFORMATION
Item 1. Financial Statements.
INTERIM CONDENSED CONSOLIDATED BALANCE SHEETS (UNAUDITED)
( Dollars in thousands )

June 30
2018
 
December 31
2017
ASSETS
 
 
 
Cash and cash equivalents
 
 
 
Cash and demand deposits due from banks
$
22,055

 
$
25,267

Interest bearing balances due from banks
158

 
5,581

Total cash and cash equivalents
22,213

 
30,848

AFS securities, at fair value
524,108

 
548,730

Equity securities, at fair value

 
3,577

Mortgage loans AFS
1,420

 
1,560

Loans
 
 
 
Commercial
691,623

 
634,759

Agricultural
125,249

 
128,269

Residential real estate
273,607

 
272,368

Consumer
61,277

 
56,123

Gross loans
1,151,756

 
1,091,519

Less allowance for loan and lease losses
8,200

 
7,700

Net loans
1,143,556

 
1,083,819

Premises and equipment
28,267

 
28,450

Corporate owned life insurance policies
27,377

 
27,026

Accrued interest receivable
5,684

 
7,063

Equity securities without readily determinable fair values
23,743

 
23,454

Goodwill and other intangible assets
48,497

 
48,547

Other assets
12,090

 
10,056

TOTAL ASSETS
$
1,836,955

 
$
1,813,130

LIABILITIES AND SHAREHOLDERS’ EQUITY
 
 
 
Deposits
 
 
 
Noninterest bearing
$
234,377

 
$
237,511

NOW accounts
222,678

 
231,666

Certificates of deposit under $250 and other savings
745,065

 
728,090

Certificates of deposit over $250
72,642

 
67,991

Total deposits
1,274,762

 
1,265,258

Borrowed funds
362,496

 
344,878

Accrued interest payable and other liabilities
7,748

 
8,089

Total liabilities
1,645,006

 
1,618,225

Shareholders’ equity
 
 
 
Common stock — no par value 15,000,000 shares authorized; issued and outstanding 7,933,250 shares (including 21,652 shares held in the Rabbi Trust) in 2018 and 7,857,293 shares (including 31,769 shares held in the Rabbi Trust) in 2017
142,489

 
140,277

Shares to be issued for deferred compensation obligations
5,423

 
5,502

Retained earnings
54,204

 
51,728

Accumulated other comprehensive income (loss)
(10,167
)
 
(2,602
)
Total shareholders’ equity
191,949

 
194,905

TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY
$
1,836,955

 
$
1,813,130



See notes to interim condensed consolidated financial statements (unaudited).

4


INTERIM CONDENSED CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED)
( Dollars in thousands except per share amounts )

Three Months Ended 
 June 30
 
Six Months Ended 
 June 30
 
2018
 
2017
 
2018
 
2017
Interest income
 
 
 
 
 
 
 
Loans, including fees
$
12,076

 
$
10,685

 
$
23,372

 
$
20,805

AFS securities
 
 
 
 
 
 
 
Taxable
2,110

 
2,188

 
4,232

 
4,301

Nontaxable
1,331

 
1,413

 
2,713

 
2,828

Federal funds sold and other
196

 
212

 
517

 
425

Total interest income
15,713

 
14,498

 
30,834

 
28,359

Interest expense
 
 
 
 
 
 
 
Deposits
2,230

 
1,615

 
4,276

 
3,155

Borrowings
1,511

 
1,413

 
2,866

 
2,704

Total interest expense
3,741

 
3,028

 
7,142

 
5,859

Net interest income
11,972

 
11,470

 
23,692

 
22,500

Provision for loan losses
328

 
9

 
712

 
36

Net interest income after provision for loan losses
11,644

 
11,461

 
22,980

 
22,464

Noninterest income
 
 
 
 
 
 
 
Service charges and fees
1,488

 
1,405

 
2,976

 
2,935

Net gain on sale of mortgage loans
87

 
199

 
168

 
354

Earnings on corporate owned life insurance policies
181

 
183

 
351

 
363

Net gains on sale of AFS securities

 
142

 

 
142

Other
980

 
859

 
1,728

 
1,610

Total noninterest income
2,736

 
2,788

 
5,223

 
5,404

Noninterest expenses
 
 
 
 
 
 
 
Compensation and benefits
5,679

 
4,817

 
11,173

 
10,374

Furniture and equipment
1,571

 
1,352

 
3,050

 
2,696

Occupancy
807

 
815

 
1,631

 
1,652

Other
2,727

 
2,523

 
5,026

 
4,736

Total noninterest expenses
10,784

 
9,507

 
20,880

 
19,458

Income before federal income tax expense
3,596

 
4,742

 
7,323

 
8,410

Federal income tax expense
263

 
898

 
528

 
1,430

NET INCOME
$
3,333

 
$
3,844

 
$
6,795

 
$
6,980

Earnings per common share
 
 
 
 
 
 
 
Basic
$
0.42

 
$
0.49

 
$
0.86

 
$
0.89

Diluted
$
0.41

 
$
0.48

 
$
0.84

 
$
0.87

Cash dividends per common share
$
0.26

 
$
0.25

 
$
0.52

 
$
0.50








See notes to interim condensed consolidated financial statements (unaudited).

5


INTERIM CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (UNAUDITED)
( Dollars in thousands )

Three Months Ended 
 June 30
 
Six Months Ended 
 June 30
 
2018
 
2017
 
2018
 
2017
Net income
$
3,333

 
$
3,844

 
$
6,795

 
$
6,980

Unrealized gains (losses) on AFS securities
 
 
 
 
 
 
 
Unrealized gains (losses) on AFS securities arising during the period
(1,978
)
 
2,570

 
(10,035
)
 
4,247

Reclassification adjustment for net (gains) losses included in net income

 
(142
)
 

 
(142
)
Tax effect (1)
442

 
(762
)
 
2,126

 
(1,212
)
Unrealized gains (losses) on AFS securities, net of tax
(1,536
)
 
1,666

 
(7,909
)
 
2,893

Unrealized gains (losses) on derivative instruments arising during the period
31

 
(61
)
 
153

 
(44
)
Tax effect (1)
(6
)
 
21

 
(32
)
 
15

Unrealized gains (losses) on derivative instruments, net of tax
25

 
(40
)
 
121

 
(29
)
Other comprehensive income (loss), net of tax
(1,511
)
 
1,626

 
(7,788
)
 
2,864

Comprehensive income
$
1,822

 
$
5,470

 
$
(993
)
 
$
9,844

(1)  
See “ Note 11 – Accumulated Other Comprehensive Income ” for tax effect reconciliation.



















See notes to interim condensed consolidated financial statements (unaudited).

6


INTERIM CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS’ EQUITY (UNAUDITED)
( Dollars in thousands except per share amounts )
 
Common Stock
 
 
 
 
 
 
 
 

Common Shares
Outstanding
 
Amount
 
Common Shares to be
Issued for
Deferred
Compensation
Obligations
 
Retained
Earnings
 
Accumulated
Other
Comprehensive
Income (Loss)
 
Totals
Balance, January 1, 2017
7,821,069

 
$
139,525

 
$
5,038

 
$
46,114

 
$
(2,778
)
 
$
187,899

Comprehensive income (loss)

 

 

 
6,980

 
2,864

 
9,844

Issuance of common stock
135,516

 
3,764

 

 

 

 
3,764

Common stock transferred from the Rabbi Trust to satisfy deferred compensation obligations

 
176

 
(176
)
 

 

 

Share-based payment awards under equity compensation plan

 

 
302

 

 

 
302

Common stock purchased for deferred compensation obligations

 
(197
)
 

 

 

 
(197
)
Common stock repurchased pursuant to publicly announced repurchase plan
(94,032
)
 
(2,622
)
 

 

 

 
(2,622
)
Cash dividends paid ($0.50 per common share)

 

 

 
(3,920
)
 

 
(3,920
)
Balance, June 30, 2017
7,862,553

 
$
140,646

 
$
5,164

 
$
49,174

 
$
86

 
$
195,070

Balance, January 1, 2018
7,857,293

 
$
140,277

 
$
5,502

 
$
51,728

 
$
(2,602
)
 
$
194,905

Comprehensive income (loss)

 

 

 
6,795

 
(7,788
)
 
(993
)
Adoption of ASU 2016-01

 

 

 
(223
)
 
223

 

Issuance of common stock
121,437

 
3,272

 

 

 

 
3,272

Common stock transferred from the Rabbi Trust to satisfy deferred compensation obligations

 
383

 
(383
)
 

 

 

Share-based payment awards under equity compensation plan

 

 
304

 

 

 
304

Common stock purchased for deferred compensation obligations

 
(205
)
 

 

 

 
(205
)
Common stock repurchased pursuant to publicly announced repurchase plan
(45,480
)
 
(1,238
)
 

 

 

 
(1,238
)
Cash dividends paid ($0.52 per common share)

 

 

 
(4,096
)
 

 
(4,096
)
Balance, June 30, 2018
7,933,250

 
$
142,489

 
$
5,423

 
$
54,204

 
$
(10,167
)
 
$
191,949














See notes to interim condensed consolidated financial statements (unaudited).

7


INTERIM CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
( Dollars in thousands )

Six Months Ended 
 June 30
 
2018
 
2017
OPERATING ACTIVITIES
 
 
 
Net income
$
6,795

 
$
6,980

Reconciliation of net income to net cash provided by operating activities:
 
 
 
Provision for loan losses
712

 
36

Impairment of foreclosed assets

 
28

Depreciation
1,448

 
1,440

Amortization of OMSR
153

 
170

Amortization of acquisition intangibles
50

 
62

Net amortization of AFS securities
969

 
1,062

Net unrealized (gains) losses on equity securities, at fair value
41

 

Net (gains) losses on sale of AFS securities

 
(142
)
Net (gains) losses on sale of equity securities, at fair value
(1
)
 

Net gain on sale of mortgage loans
(168
)
 
(354
)
Increase in cash value of corporate owned life insurance policies
(351
)
 
(363
)
Share-based payment awards under equity compensation plan
304

 
302

Origination of loans held-for-sale
(10,178
)
 
(19,081
)
Proceeds from loan sales
10,486

 
19,769

Net changes in operating assets and liabilities which provided (used) cash:
 
 
 
Accrued interest receivable
1,379

 
894

Other assets
(353
)
 
(1,734
)
Accrued interest payable and other liabilities
(341
)
 
(382
)
Net cash provided by (used in) operating activities
10,945

 
8,687

INVESTING ACTIVITIES
 
 
 
Activity in AFS securities
 
 
 
Sales

 
12,827

Maturities, calls, and principal payments
39,609

 
45,021

Purchases
(25,991
)
 
(64,429
)
Sale of equity securities, at fair value
3,537

 

Net loan principal (originations) collections
(60,517
)
 
(37,842
)
Proceeds from sales of foreclosed assets
192

 
98

Purchases of premises and equipment
(1,265
)
 
(805
)
Net cash provided by (used in) investing activities
(44,435
)
 
(45,130
)

8


INTERIM CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (continued)
( Dollars in thousands )
 
Six Months Ended 
 June 30
 
2018
 
2017
FINANCING ACTIVITIES
 
 
 
Net increase (decrease) in deposits
$
9,504

 
$
15,112

Net increase (decrease) in borrowed funds
17,618

 
23,246

Cash dividends paid on common stock
(4,096
)
 
(3,920
)
Proceeds from issuance of common stock
3,272

 
3,764

Common stock repurchased
(1,238
)
 
(2,622
)
Common stock purchased for deferred compensation obligations
(205
)
 
(197
)
Net cash provided by (used in) financing activities
24,855

 
35,383

Increase (decrease) in cash and cash equivalents
(8,635
)
 
(1,060
)
Cash and cash equivalents at beginning of period
30,848

 
22,894

Cash and cash equivalents at end of period
$
22,213


$
21,834

SUPPLEMENTAL CASH FLOWS INFORMATION:
 
 
 
Interest paid
$
7,120

 
$
5,872

Income taxes paid
$

 
$
1,630

SUPPLEMENTAL NONCASH INFORMATION:
 
 
 
Transfers of loans to foreclosed assets
$
68

 
$
124




















See notes to interim condensed consolidated financial statements (unaudited).

9


NOTES TO INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
( Dollars in thousands except per share amounts )
Note 1 – Basis of Presentation
As used in these notes, as well as in Management's Discussion and Analysis of Financial Condition and Results of Operations , references to “Isabella,” the “Corporation,” “we,” “our,” “us,” and similar terms refer to the consolidated entity consisting of Isabella Bank Corporation and its subsidiaries. Isabella Bank Corporation refers solely to the parent holding company, and Isabella Bank or the “Bank” refers to Isabella Bank Corporation ’s subsidiary, Isabella Bank .
The accompanying unaudited interim condensed consolidated financial statements have been prepared in accordance with GAAP 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 GAAP for complete financial statements. In our opinion, all adjustments considered necessary for a fair presentation have been included. Operating results for the three and six month periods ended June 30, 2018 are not necessarily indicative of the results that may be expected for the year ending December 31, 2018 . For further information, refer to our Annual Report on Form 10-K for the year ended December 31, 2017 .
Our accounting policies are materially the same as those discussed in Note 1 to the Consolidated Financial Statements included in our Annual Report on Form 10-K for the year ended December 31, 2017 .
Reclassifications: Certain amounts reported in the interim 2017 consolidated financial statements have been reclassified to conform with the 2018 presentation.
Note 2 – Accounting Standards Updates
Recently Adopted Accounting Standards Updates
ASU No. 2014-09: “Revenue from Contracts with Customers”
In May 2014, ASU No. 2014-09 was issued and created new Topic 606 to provide a common revenue standard to achieve consistency and clarification to the revenue recognition principles. The guidance outlines steps to achieve the core principle that an entity should recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. These steps consist of: (1) identify the contract(s) with a customer, (2) identify the performance obligations in the contract, (3) determine the transaction price, (4) allocate the transaction price to the performance obligations in the contract, and (5) recognize revenue when (or as) the entity satisfies a performance obligation.
The new authoritative guidance, as amended, was effective on January 1, 2018. We reviewed our contracts related to trust and investment services and those related to other noninterest income to determine if changes in income recognition were required as a result of this guidance. Implementation of this guidance did not have a significant impact on our operating results for the three and six month periods ended June 30, 2018 .
ASU No. 2016-01: “Financial Instruments - Overall (Subtopic 825-10): Recognition and Measurement of Financial Assets and Liabilities” and ASU No. 2018-03: “Technical Corrections and Improvements to Financial Instruments - Overall (Subtopic 825-10: Recognition and Measurement of Financial Assets and Financial Liabilities”
In January 2016, ASU No. 2016-01 was issued and set forth the following: 1) requires equity investments, with certain exceptions, to be measured at fair value with changes in fair value recognized in net income; 2) simplifies the impairment assessment of equity investments without readily determinable fair values by requiring a qualitative assessment to identify impairment and requiring measurement of the investment at fair value when an impairment exists; 3) for public entities, eliminates the requirement to disclose the method(s) 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; 4) for public entities, requires the use of exit price notion when measuring the fair value of financial instruments for disclosure purposes; 5) 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; 6) 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 7) clarifies that an entity should evaluate the need for a valuation allowance on a deferred tax asset related to available-for-sale securities in combination with the entity's other deferred tax assets.

10


The new authoritative guidance is effective for interim and annual periods beginning after December 15, 2017. As a result of this guidance, the change in the fair value of equity investments has been recorded in net income beginning on January 1, 2018. Equity securities are now recorded separately from AFS securities and are recorded at a fair value which approximates an exit price notion. Adoption of this guidance had an insignificant impact on our operations and its future impact will depend on the fair value of these investments at the future measurement dates. The disclosures related to equity investment securities reflect a fully retrospective presentation for comparative purposes.
For discussion of the fair value measurement of financial instruments, refer to “ Note 12 – Fair Value ”.
In February 2018, ASU No. 2018-03 was issued and sets forth correction or improvement amendments for specific issues that may arise within the scope of ASU 2016-01. These amendments have been adopted and did not have a significant impact on our operating results or financial statement disclosures.
ASU No. 2017-09: Compensation - Stock Compensation (Topic 718): Scope of Modification Accounting”
In May 2017, ASU No. 2017-09 was issued and provided guidance about which changes to the terms or conditions of a share-based payment award require an entity to apply modification accounting under Topic 718. The current disclosure requirements in Topic 718 apply regardless of whether an entity is required to apply modification accounting under the amendments in this update. An entity should account for the effects of a modification unless all of the following are met:
1. The fair value (or calculated value or intrinsic value, if such an alternative measurement method is used) of the modified award is the same as the fair value (or calculated value or intrinsic value, if such an alternative measurement method is used) of the original award immediately before the original award is modified. If the modification does not affect any of the inputs to the valuation technique that the entity uses to value the award, the entity is not required to estimate the value immediately before and after the modification.
2. The vesting conditions of the modified award are the same as the vesting conditions of the original award immediately before the original award is modified.
3. The classification of the modified award as an equity instrument or a liability instrument is the same as the classification of the original award immediately before the original award is modified.
The new authoritative guidance is effective for interim and annual periods beginning after December 15, 2017 and did not have a significant impact on our operating results or financial statement disclosures.
Pending Accounting Standards Updates
ASU No. 2016-02: “Leases (Topic 842)”
In February 2016, ASU No. 2016-02 was issued to create Topic 842 - Leases which will require recognition of lease assets and lease liabilities on the balance sheet for leases previously classified as operating leases. Accounting guidance is set forth for both lessee and lessor accounting. Under lessee accounting, a lessee should recognize in the statement of financial position a liability to make lease payments (the lease liability) and a right-of-use asset representing its right to use the underlying asset for the lease term.
For finance leases, a lessee is required to do the following: 1) recognize a right-of-use asset and a lease liability, initially measured at the present value of the lease payments, in the statement of financial position; 2) recognize interest on the lease liability separately from amortization of the right-of-use asset in the statement of comprehensive income; and 3) classify repayments of the principal portion of the lease liability within financing activities and payments of interest on the lease liability and variable lease payments within operating activities in the statement of cash flows. For operating leases, a lessee is required to do the following: 1) recognize a right-of-use asset and a lease liability, initially measured at the present value of the lease payments, in the statement of financial position; 2) recognize a single lease cost, calculated so that the cost of the lease is allocated over the lease term on a generally straight-line basis; and 3) classify all cash payments within operating activities in the statement of cash flows.
The accounting applied by a lessor is largely unchanged from that applied under previous GAAP. The new authoritative guidance is effective for interim and annual periods beginning after December 15, 2018. We have and will continue to review our lease agreements to determine the appropriate treatment under this guidance. We do not expect these changes to have a significant impact on our operating results or financial statement disclosures.

11


ASU No. 2016-13: “Financial Instruments - Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments”
In June 2016, ASU No. 2016-13 was issued and updated the measurement for credit losses for AFS debt securities and assets measured at amortized cost which include loans, trade receivables, and any other financial assets with the contractual right to receive cash. Current GAAP requires an “incurred loss” methodology for recognizing credit losses that delays recognition until it is probable a loss has been incurred. Under the incurred loss approach, entities are limited to a probable initial recognition threshold when credit losses are measured under GAAP; an entity generally only considers past events and current conditions in measuring the incurred loss.
Under the new guidance, the incurred loss impairment methodology in current GAAP is replaced with a methodology that reflects current expected credit losses (CECL). This methodology requires consideration of a broader range of reasonable and supportable information to calculate credit loss estimates. The measurement of expected credit losses is based on relevant information about past events, including historical experience, current conditions, and reasonable and supportable forecasts that affect the collectability of the reported amount. An entity must use judgment in determining the relevant information and estimation methods that are appropriate in its circumstances which applies to assets measured either collectively or individually.
The update allows an entity to revert to historical loss information that is reflective of the contractual term (considering the effect of prepayments) for periods that are beyond the time frame for which the entity is able to develop reasonable and supportable forecasts. In addition, the disclosures of credit quality indicators in relation to the amortized cost of financing receivables, a current disclosure requirement, are further disaggregated by year of origination (or vintage). The vintage information will be useful for financial statement users to better assess changes in underwriting standards and credit quality trends in asset portfolios over time and the effect of those changes on credit losses.
Overall, the update will allow entities the ability to measure expected credit losses without the restriction of incurred or probable losses that exist under current GAAP. For users of the financial statements, the update provides decision-useful information about the expected credit losses on financial instruments and other commitments to extend credit held by a reporting entity at each reporting date. The new authoritative guidance is effective for interim and annual periods beginning after December 15, 2019 and may have a significant impact on our operations and financial statement disclosures as well as that of the banking industry as a whole.
We have invested a considerable amount of effort toward this guidance and will continue to invest considerable effort until its effective date. A committee was formed and has developed a road map to implementation. This committee will monitor progress to ensure timely and accurate adoption of the guidance. We have identified and collected required borrower and loan level data, as we recognize that quality data is key to properly identify loan segments and then apply the most appropriate methodology to each segment. We’ve identified a software solution that will support us in estimating the ALLL under CECL guidance and are currently in contract negotiations with the vendor that will enable us to run parallel models during 2019. This will allow us to solidify our methodology for implementation in 2020.
Note 3 – AFS Securities
The amortized cost and fair value of AFS securities , with gross unrealized gains and losses, are as follows at:
 
June 30, 2018

Amortized
Cost
 
Gross
Unrealized
Gains
 
Gross
Unrealized
Losses
 
Fair
Value
Government sponsored enterprises
$
194

 
$

 
$
4

 
$
190

States and political subdivisions
200,976

 
1,857

 
560

 
202,273

Auction rate money market preferred
3,200

 

 
65

 
3,135

Mortgage-backed securities
204,411

 
41

 
6,815

 
197,637

Collateralized mortgage obligations
124,544

 
50

 
3,721

 
120,873

Total
$
533,325

 
$
1,948

 
$
11,165

 
$
524,108


12


 
December 31, 2017

Amortized
Cost
 
Gross
Unrealized
Gains
 
Gross
Unrealized
Losses
 
Fair
Value
Government sponsored enterprises
$
217

 
$

 
$
1

 
$
216

States and political subdivisions
204,131

 
4,486

 
143

 
208,474

Auction rate money market preferred
3,200

 

 
151

 
3,049

Mortgage-backed securities
210,757

 
390

 
2,350

 
208,797

Collateralized mortgage obligations
129,607

 
160

 
1,573

 
128,194

Total
$
547,912

 
$
5,036

 
$
4,218

 
$
548,730

The amortized cost and fair value of AFS securities by contractual maturity at June 30, 2018 are as follows:
 
Maturing
 
Securities with Variable Monthly Payments or Noncontractual Maturities
 
 

Due in
One Year
or Less
 
After One
Year But
Within
Five Years
 
After Five
Years But
Within
Ten Years
 
After
Ten Years
 
 
Total
Government sponsored enterprises
$

 
$
194

 
$

 
$

 
$

 
$
194

States and political subdivisions
27,593

 
81,665

 
62,446

 
29,272

 

 
200,976

Auction rate money market preferred

 

 

 

 
3,200

 
3,200

Mortgage-backed securities

 

 

 

 
204,411

 
204,411

Collateralized mortgage obligations

 

 

 

 
124,544

 
124,544

Total amortized cost
$
27,593

 
$
81,859

 
$
62,446

 
$
29,272

 
$
332,155

 
$
533,325

Fair value
$
27,640

 
$
82,336

 
$
63,199

 
$
29,288

 
$
321,645

 
$
524,108

Expected maturities for government sponsored enterprises and states and political subdivisions may differ from contractual maturities because issuers may have the right to call or prepay obligations.
As the auction rate money market preferred stocks have continual call dates, they are not reported by a specific maturity group. Because of their variable monthly payments, mortgage-backed securities and collateralized mortgage obligations are not reported by a specific maturity group.
A summary of the sales activity of AFS securities was as follows for the:
 
Three Months Ended June 30
 
Six Months Ended June 30
 
2018
 
2017
 
2018
 
2017
Proceeds from sales of AFS securities
$

 
$
12,827

 
$

 
$
12,827

Gross realized gains (losses)
$

 
$
142

 
$

 
$
142

Applicable income tax expense (benefit)
$

 
$
48

 
$

 
$
48


13


The following information pertains to AFS securities with gross unrealized losses at June 30, 2018 and December 31, 2017 , aggregated by investment category and length of time that individual securities have been in a continuous loss position.
 
June 30, 2018
 
Less Than Twelve Months
 
Twelve Months or More
 
 

Gross
Unrealized
Losses
 
Fair
Value
 
Gross
Unrealized
Losses
 
Fair
Value
 
Total
Unrealized
Losses
Government sponsored enterprises
$
4

 
$
190

 
$

 
$

 
$
4

States and political subdivisions
378

 
32,949

 
182

 
9,012

 
560

Auction rate money market preferred

 

 
65

 
3,135

 
65

Mortgage-backed securities
3,265

 
125,130

 
3,550

 
69,214

 
6,815

Collateralized mortgage obligations
2,490

 
94,355

 
1,231

 
22,523

 
3,721

Total
$
6,137

 
$
252,624

 
$
5,028

 
$
103,884

 
$
11,165

Number of securities in an unrealized loss position:
 
 
159

 
 
 
91

 
250

 
December 31, 2017
 
Less Than Twelve Months
 
Twelve Months or More
 
 

Gross
Unrealized
Losses
 
Fair
Value
 
Gross
Unrealized
Losses
 
Fair
Value
 
Total
Unrealized
Losses
Government sponsored enterprises
$
1

 
$
216

 
$

 
$

 
$
1

States and political subdivisions
142

 
16,139

 
1

 
188

 
143

Auction rate money market preferred

 

 
151

 
3,049

 
151

Mortgage-backed securities
454

 
72,007

 
1,896

 
76,065

 
2,350

Collateralized mortgage obligations
701

 
76,435

 
872

 
25,308

 
1,573

Total
$
1,298

 
$
164,797

 
$
2,920

 
$
104,610

 
$
4,218

Number of securities in an unrealized loss position:
 
 
81

 
 
 
24

 
105

Unrealized losses on our AFS securities portfolio are the result of recent increases in intermediate-term and long-term benchmark interest rates and not credit issues.
As of June 30, 2018 and December 31, 2017 , we conducted an analysis to determine whether any AFS securities currently in an unrealized loss position should be other-than-temporarily impaired. Such analyses considered, among other factors, the following criteria:
Has the value of the investment declined more than what is deemed to be reasonable based on a risk and maturity adjusted discount rate?
Is the investment credit rating below investment grade?
Is it probable the issuer will be unable to pay the amount when due?
Is it more likely than not that we will have to sell the security before recovery of its cost basis?
Has the duration of the investment been extended?
During the fourth quarter of 2016, we identified one municipal bond as other-than-temporarily impaired. While management estimated the OTTI to be realized, we also engaged the services of an independent investment valuation firm to estimate the amount of impairment as of December 31, 2016 . The valuation calculated the estimated market value utilizing two different approaches:
1) Market - Appraisal and Comparable Investments
2) Income - Discounted Cash Flow Method
The two methods were then weighted, with a higher weighting applied to the Market approach, to determine the estimated impairment. As a result of this analysis, we reduced the carrying value to $230 which required us to recognized an OTTI of $770 in earnings for the year ended December 31, 2016 . Based on internal analysis of this bond as of June 30, 2018 , there was no additional OTTI recognized as of June 30, 2018 and the carrying value of this bond remained at $230 .
Based on our analysis which included the criteria outlined above, the fact that we have asserted that we do not have the intent to sell AFS securities in an unrealized loss position, and considering it is unlikely that we will have to sell any AFS securities in

14


an unrealized loss position before recovery of their cost basis, we do not believe that the values of any other AFS securities are other-than-temporarily impaired as of June 30, 2018 or December 31, 2017 , with the exception of the one municipal bond discussed above.
Note 4 – Loans and ALLL
We grant commercial, agricultural, residential real estate, and consumer loans to customers situated primarily in Clare, Gratiot, Isabella, Mecosta, Midland, Montcalm, and Saginaw counties in Michigan. The ability of the borrowers to honor their repayment obligations is often dependent upon the real estate, agricultural, manufacturing, retail, gaming, tourism, higher education, and general economic conditions of this region. Substantially all of our consumer and residential real estate loans are secured by various items of property, while commercial loans are secured primarily by real estate, business assets, and personal guarantees. Some loans are unsecured.
Loans that we have the intent and ability to hold in our portfolio are reported at their outstanding principal balance adjusted for any charge-offs , the ALLL , and any deferred fees or costs. Interest income is accrued over the term of the loan based on the principal amount outstanding. Loan origination fees and certain direct loan origination costs are capitalized and recognized as a component of interest income over the term of the loan using the level yield method.
The accrual of interest on commercial, agricultural, and residential real estate loans is discontinued at the time the loan is 90 days or more past due unless the credit is well-secured and in the process of collection. Upon transferring the loans to nonaccrual status, we perform an evaluation to determine the net realizable value of the underlying collateral. This evaluation is used to help determine if any charge-offs are necessary. Consumer loans are typically charged-off no later than 180 days past due. Past due status is based on contractual terms of the loan. In all cases, loans are placed on nonaccrual status or charged-off at an earlier date if collection of principal or interest is considered doubtful.
For loans that are placed on nonaccrual status or charged-off , all interest accrued in the current calendar year, but not collected, is reversed against interest income while interest accrued in prior calendar years, but not collected, is charged against the ALLL . Loans may be returned to accrual status after six months of continuous performance and achievement of current payment status.
Commercial and agricultural loans include loans for commercial real estate, commercial operating loans, advances to mortgage brokers, farmland and agricultural production, and loans to states and political subdivisions. Repayment of these loans is dependent upon the successful operation and management of a business. We minimize our risk by limiting the amount of direct credit exposure to any one borrower to $15,000 . Borrowers with direct credit needs of more than $15,000 are serviced through the use of loan participations with other commercial banks. Commercial and agricultural real estate loans commonly require loan-to-value limits of 80% or less. Depending upon the type of loan, past credit history, and current operating results, we may require the borrower to pledge accounts receivable, inventory, and property and equipment. Personal guarantees are generally required from the owners of closely held corporations, partnerships, and sole proprietorships. In addition, we require annual financial statements, prepare cash flow analyses, and review credit reports.
We entered into a mortgage purchase program in 2016 with a financial institution where we participate in advances to mortgage brokers ("advances"). The mortgage brokers originate residential mortgage loans with the intent to sell them on the secondary market. We participate in the advance to the mortgage broker, which is secured by the underlying mortgage loan, until it is ultimately sold on the secondary market. As such, the average life of each participated advance is approximately 20 - 30 days. Funds from the sale of the loan are used to pay off our participation in the advance to the mortgage broker. We classify these advances as commercial loans and include the outstanding balance in commercial loans on our consolidated balance sheet. Under the participation agreement, we committed to a maximum outstanding aggregate amount of $30,000 . The difference between our outstanding balances and the maximum outstanding aggregate amount is classified as “ Unfunded commitments under lines of credit ” in the “ Contractual Obligations and Loan Commitments ” section of the Management's Discussion and Analysis of Financial Condition and Results of Operations of this report.
We offer adjustable rate mortgages, construction loans, and fixed rate residential real estate loans which have amortization periods up to a maximum of 30 years. We consider the anticipated direction of interest rates, balance sheet duration, the sensitivity of our balance sheet to changes in interest rates, our liquidity needs, and overall loan demand to determine whether or not to sell fixed rate loans to Freddie Mac .
Our lending policies generally limit the maximum loan-to-value ratio on residential real estate loans to 100% of the lower of the appraised value of the property or the purchase price. Private mortgage insurance is typically required on loans with loan-to-value ratios in excess of 80% unless the loan qualifies for government guarantees.

15


Underwriting criteria for originated residential real estate loans generally include:
Evaluation of the borrower’s ability to make monthly payments.
Evaluation of the value of the property securing the loan.
Ensuring the payment of principal, interest, taxes, and hazard insurance does not exceed 28% of a borrower’s gross income.
Ensuring all debt servicing does not exceed 40% of income.
Verification of acceptable credit reports.
Verification of employment, income, and financial information.
Appraisals are performed by independent appraisers and reviewed for appropriateness. All mortgage loan requests are reviewed by our mortgage loan committee or through a secondary market underwriting system; loans in excess of $500 require the approval of our Internal Loan Committee, the Executive Loan Committee, the Board of Directors’ Loan Committee, or the Board of Directors.
Consumer loans include secured and unsecured personal loans. Loans are amortized for a period of up to 15 years based on the age and value of the underlying collateral. The underwriting emphasis is on a borrower’s perceived intent and ability to pay rather than collateral value. No consumer loans are sold to the secondary market.
The ALLL is established as losses are estimated to have occurred through a provision for loan losses charged to earnings. Loan losses are charged against the ALLL when we believe the uncollectability of the loan balance is confirmed. Subsequent recoveries, if any, are credited to the ALLL .
The appropriateness of the ALLL is evaluated on a quarterly basis and is based upon a periodic review of the collectability of the loans in light of historical experience, the nature and volume of the loan portfolio, adverse situations that may affect the borrower’s ability to repay, estimated value of any underlying collateral, and prevailing economic conditions. This evaluation is inherently subjective as it requires estimates that are susceptible to significant revision as more information becomes available.
The primary factors behind the determination of the level of the ALLL are specific allocations for impaired loans, historical loss percentages, as well as unallocated components. Specific allocations for impaired loans are primarily determined based on the difference between the loan’s outstanding balance and the present value of expected future cash flows discounted at the loan’s effective interest rate, the loan’s obtainable market price, or the fair value of the collateral, less cost to sell. Historical loss allocations are calculated at the loan class and segment levels based on a migration analysis of the loan portfolio, with the exception of advances to mortgage brokers, over the preceding five years. With no historical losses on advances to mortgage brokers, there is no allocation in the commercial segment displayed in the following tables based on historical loss factors. The unallocated component of the allowance reflects the margin of imprecision inherent in the underlying assumptions used in the methodologies for estimating specific and general losses in the portfolio.
A summary of changes in the ALLL and the recorded investment in loans by segments follows:
 
Allowance for Loan Losses
 
Three Months Ended June 30, 2018

Commercial
 
Agricultural
 
Residential Real Estate
 
Consumer
 
Unallocated
 
Total
April 1, 2018
$
1,840

 
$
1,224

 
$
2,482

 
$
795

 
$
1,859

 
$
8,200

Charge-offs
(489
)
 

 
(29
)
 
(48
)
 

 
(566
)
Recoveries
101

 

 
69

 
68

 

 
238

Provision for loan losses
745

 
(242
)
 
(355
)
 
67

 
113

 
328

June 30, 2018
$
2,197

 
$
982

 
$
2,167

 
$
882

 
$
1,972

 
$
8,200

 
Allowance for Loan Losses

Six Months Ended June 30, 2018

Commercial

Agricultural

Residential Real Estate

Consumer

Unallocated

Total
January 1, 2018
$
1,706


$
611


$
2,563


$
900


$
1,920


$
7,700

Charge-offs
(494
)



(39
)

(136
)



(669
)
Recoveries
204




125


128




457

Provision for loan losses
781


371


(482
)

(10
)

52


712

June 30, 2018
$
2,197


$
982


$
2,167


$
882


$
1,972


$
8,200


16


 
Allowance for Loan Losses and Recorded Investment in Loans
 
June 30, 2018

Commercial
 
Agricultural
 
Residential Real Estate
 
Consumer
 
Unallocated
 
Total
ALLL
 
 
 
 
 
 
 
 
 
 
 
Individually evaluated for impairment
$
506

 
$
102

 
$
1,451

 
$

 
$

 
$
2,059

Collectively evaluated for impairment
1,691

 
880

 
716

 
882

 
1,972

 
6,141

Total
$
2,197

 
$
982

 
$
2,167

 
$
882

 
$
1,972

 
$
8,200

Loans
 
 
 
 
 
 
 
 
 
 
 
Individually evaluated for impairment
$
10,030

 
$
12,894

 
$
7,748

 
$
11

 
 
 
$
30,683

Collectively evaluated for impairment
681,593

 
112,355

 
265,859

 
61,266

 
 
 
1,121,073

Total
$
691,623

 
$
125,249

 
$
273,607

 
$
61,277

 
 
 
$
1,151,756

 
Allowance for Loan Losses
 
Three Months Ended June 30, 2017

Commercial
 
Agricultural
 
Residential Real Estate
 
Consumer
 
Unallocated
 
Total
April 1, 2017
$
1,771

 
$
527

 
$
3,098

 
$
671

 
$
1,433

 
$
7,500

Charge-offs
(25
)
 

 

 
(44
)
 

 
(69
)
Recoveries
55

 

 
63

 
42

 

 
160

Provision for loan losses
177

 
(52
)
 
(563
)
 
(86
)
 
533

 
9

June 30, 2017
$
1,978

 
$
475

 
$
2,598

 
$
583

 
$
1,966

 
$
7,600

 
Allowance for Loan Losses
 
Six Months Ended June 30, 2017

Commercial
 
Agricultural
 
Residential Real Estate
 
Consumer
 
Unallocated
 
Total
January 1, 2017
$
1,814

 
$
884

 
$
2,664

 
$
624

 
$
1,414

 
$
7,400

Charge-offs
(52
)
 

 
(43
)
 
(118
)
 

 
(213
)
Recoveries
188

 

 
99

 
90

 

 
377

Provision for loan losses
28

 
(409
)
 
(122
)
 
(13
)
 
552

 
36

June 30, 2017
$
1,978

 
$
475

 
$
2,598

 
$
583

 
$
1,966

 
$
7,600

 
Allowance for Loan Losses and Recorded Investment in Loans
 
December 31, 2017

Commercial
 
Agricultural
 
Residential Real Estate
 
Consumer
 
Unallocated
 
Total
ALLL
 
 
 
 
 
 
 
 
 
 
 
Individually evaluated for impairment
$
650

 
$

 
$
1,480

 
$

 
$

 
$
2,130

Collectively evaluated for impairment
1,056

 
611

 
1,083

 
900

 
1,920

 
5,570

Total
$
1,706

 
$
611

 
$
2,563

 
$
900

 
$
1,920

 
$
7,700

Loans
 
 
 
 
 
 
 
 
 
 
 
Individually evaluated for impairment
$
8,099

 
$
10,598

 
$
7,939

 
$
17

 
 
 
$
26,653

Collectively evaluated for impairment
626,660

 
117,671

 
264,429

 
56,106

 
 
 
1,064,866

Total
$
634,759


$
128,269

 
$
272,368

 
$
56,123

 
 
 
$
1,091,519


17


The following table displays the credit quality indicators for commercial and agricultural credit exposures based on internally assigned credit risk ratings as of:
 
June 30, 2018
 
Commercial
 
Agricultural
 
 

Real Estate
 
Other
 
Advances to Mortgage Brokers
 
Total
 
Real Estate
 
Other
 
Total
 
Total
Rating
 
 
 
 
 
 
 
 
 
 
 
 

 
 
1 - Excellent
$
23

 
$
30

 
$

 
$
53

 
$

 
$
34

 
$
34

 
$
87

2 - High quality
6,144

 
19,832

 

 
25,976

 
3,026

 
521

 
3,547

 
29,523

3 - High satisfactory
117,355

 
55,626

 
23,864

 
196,845

 
19,751

 
7,037

 
26,788

 
223,633

4 - Low satisfactory
353,308

 
91,678

 

 
444,986

 
45,287

 
17,964

 
63,251

 
508,237

5 - Special mention
12,205

 
2,171

 

 
14,376

 
9,970

 
5,245

 
15,215

 
29,591

6 - Substandard
5,368

 
2,073

 

 
7,441

 
6,623

 
6,034

 
12,657

 
20,098

7 - Vulnerable
1,646

 
300

 

 
1,946

 
2,152

 
1,605

 
3,757

 
5,703

8 - Doubtful

 

 

 

 

 

 

 

Total
$
496,049

 
$
171,710

 
$
23,864

 
$
691,623

 
$
86,809

 
$
38,440

 
$
125,249

 
$
816,872

 
December 31, 2017
 
Commercial
 
Agricultural
 
 

Real Estate
 
Other
 
Advances to Mortgage Brokers
 
Total
 
Real Estate
 
Other
 
Total
 
Total
Rating
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
1 - Excellent
$
24

 
$
316

 
$

 
$
340

 
$

 
$
34

 
$
34

 
$
374

2 - High quality
8,402

 
12,262

 

 
20,664

 
2,909

 
1,024

 
3,933

 
24,597

3 - High satisfactory
131,826

 
46,668

 
12,081

 
190,575

 
21,072

 
8,867

 
29,939

 
220,514

4 - Low satisfactory
326,166

 
75,591

 

 
401,757

 
47,835

 
18,467

 
66,302

 
468,059

5 - Special mention
8,986

 
3,889

 

 
12,875

 
10,493

 
8,546

 
19,039

 
31,914

6 - Substandard
5,521

 
2,298

 

 
7,819

 
4,325

 
2,747