Denmark Bancshares, Inc.
We have audited the consolidated financial statements
of Denmark Bancshares, Inc. (the "Corporation"), which comprise the consolidated statements of financial condition as of
December 31, 2021 and 2020 and the related consolidated statements of income, comprehensive income, changes in stockholders' equity,
and cash flows for the years then ended, and the related notes to the consolidated financial statements.
In our opinion, the accompanying consolidated
financial statements present fairly, in all material respects, the financial position of the Corporation as of December 31, 2021
and 2020 and the results of its operations and its cash flows for the years then ended in accordance with accounting principles generally
accepted in the United States of America.
We conducted our audits in accordance with auditing
standards generally accepted in the United States of America (GAAS). Our responsibilities under those standards are further described
in the Auditor's Responsibilities for the Audits of the Consolidated Financial Statements section of our report. We are required to be
independent of the Corporation and to meet our ethical responsibilities in accordance with the relevant ethical requirements relating
to our audits. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion.
Management is responsible for the preparation
and fair presentation of the consolidated financial statements in accordance with accounting principles generally accepted in the United
States of America and for the design, implementation, and maintenance of internal control relevant to the preparation and fair presentation
of consolidated financial statements that are free from material misstatement, whether due to fraud or error.
In preparing the consolidated financial statements,
management is required to evaluate whether there are conditions or events, considered in the aggregate, that raise substantial doubt about
the Corporation's ability to continue as a going concern within one year after the date that the consolidated financial statements are
issued or available to be issued.
Our objectives are to obtain reasonable assurance
about whether the consolidated financial statements as a whole are free from material misstatement, whether due to fraud or error, and
to issue an auditor's report that includes our opinion. Reasonable assurance is a high level of assurance but is not absolute assurance
and, therefore, is not a guarantee that audits conducted in accordance with GAAS will always detect a material misstatement when it exists.
The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve
collusion, forgery, intentional omissions, misrepresentations, or the override of internal control. Misstatements are considered material
if there is a substantial likelihood that, individually or in the aggregate, they would influence the judgment made by a reasonable user
based on the consolidated financial statements.
Denmark Bancshares, Inc.
We are required to communicate with those charged
with governance regarding, among other matters, the planned scope and timing of the audits, significant audit findings, and certain internal
control-related matters that we identified during the audits.
Management is responsible for the other information
included in the annual report. The other information is composed of the Selected Financial Data but does not include the consolidated
financial statements and our auditor's report thereon. Our opinion on the consolidated financial statements does not cover the other information,
and we do not express an opinion or any form of assurance thereon.
In connection with our audits of the consolidated
financial statements, our responsibility is to read the other information and consider whether a material inconsistency exists between
the other information and the consolidated financial statements or whether the other information otherwise appears to be materially misstated.
If, based on the work performed, we conclude that an uncorrected material misstatement of the other information exists, we are required
to describe it in our report.
February 14, 2022, except for Notes 12 and
15, as to which the date is March 15, 2022
The accompanying notes are an integral part of these financial statements.
The accompanying notes are an integral part of these financial statements.
The accompanying notes are an integral
part of these financial statements.
The accompanying notes are an integral part of these financial
statements.
The accompanying notes are an integral part of these financial statements.
NOTE 1 – FINANCIAL STATEMENTS
Nature of Organization
Denmark Bancshares, Inc. (“DBI”)
is a bank holding company as defined in the Bank Holding Company Act of 1956, as amended. As such, it exercises control over Denmark State
Bank (“DSB”), Denmark Agricultural Credit Corporation (“DACC”) and DBI Properties, Inc. The majority of DBI’s
assets are held by DSB. DSB, a wholly owned subsidiary of DBI, operates under a state bank charter, and provides a variety of banking
services to its customers. Denmark Investments, Inc. (“DII”) was a wholly owned subsidiary of DSB which was domiciled
in Nevada. This entity was dissolved as of December 31, 2020. DBI Properties, Inc. was formed in February 2009 for the
purpose of holding certain foreclosed properties. All activities of the wholly owned subsidiaries are reflected in the consolidated financial
statements for Denmark Bancshares, Inc. and Subsidiaries (collectively referred to as “DBI”).
DBI makes agribusiness, commercial and residential
loans to customers throughout the state, but primarily in eastern Wisconsin. DBI has a diversified loan portfolio; however, a substantial
portion of their debtors’ ability to honor their contract is dependent upon the agribusiness economic sector. The main loan and
deposit accounts are fully disclosed in Notes 3 and 7. The significant risks associated with operating DBI include interest rate risk,
credit risk, liquidity risk and concentration risk.
DACC was formed for the purpose of extending credit
for agricultural loans utilizing funding sources with a lower cost of funds than those available to DSB. Over the last several years,
DACC’s cost of funds was no longer more favorable than funding available to DSB. A cost-benefit analysis was performed during 2020
and the decision was made to put DACC into a dormant status, thereby moving all loans out of this entity and eliminating the availability
of its $30 million line of credit.
On January 19, 2022, DBI entered into an
Agreement and Plan of Merger with Bank First Corporation. Following the Merger, DSB will merge with and into Bank First, N.A., Bank First
Corporation’s wholly-owned bank subsidiary, with Bank First, N.A. continuing as the surviving bank, and all DSB branches operating
under the Bank First brand.
The Merger is targeted to take place early third
quarter 2022 and is contingent upon customary closing conditions including regulatory approval and the approval of DBI’s and Bank
First Corporation’s shareholders.
Basis of Consolidation
The consolidated financial statements include
the accounts of Denmark Bancshares, Inc. and its subsidiaries. All intercompany balances and transactions have been eliminated in
consolidation.
Use of Estimates
The preparation of financial statements in conformity
with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of
assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts
of revenues and expenses during the reporting period. Actual results could differ from those estimates. Significant estimates in the financial
statements include fair values of securities, fair values of financial instruments, valuation of deferred tax assets and the determination
of the allowance for loan losses, which are discussed specifically in the following sections of this footnote.
Comprehensive Income
Accounting principles generally require that recognized
revenue, expenses, gains and losses be included in net income. Certain changes in assets and liabilities, however, such as unrealized
gains and losses on available-for-sale securities, are reported as a direct adjustment to the equity section of the balance sheet. Such
items, along with the net income, are considered components of comprehensive income.
Cash Flows
For purposes of reporting cash flows, cash and
cash equivalents include cash on hand and amounts due from banks. Cash flows from demand deposits, NOW accounts, savings accounts, federal
funds purchased and sold, cash receipts and payments of loans and time deposits are reported net. For purposes of cash flow reporting,
income taxes paid were $2,225,000 and $1,270,000 and interest paid was $2,711,064 and $4,693,790 for the years ended December 31,
2021 and 2020, respectively.
Investment Securities
Debt investment securities are designated as available-for-sale.
Debt securities classified as available-for-sale are stated at estimated fair value, with unrealized gains and losses, net of any applicable
deferred income taxes, reported as a separate component of stockholders’ equity. Interest income is recognized at the coupon rate
adjusted for amortization and accretion of premiums and discounts. Discounts are accreted into interest income over the estimated life
of the related security and premiums are amortized against income to the earlier of the call date or weighted average life of the related
security using the interest method. Realized gains or losses on dispositions are recorded in other operating income on the trade date,
based on the net proceeds and the adjusted carrying amount of the securities sold using the specific identification method.
Declines in fair value of securities that are
deemed to be other-than-temporary, if applicable, are reflected in earnings as realized losses. In estimating other-than-temporary impairment
losses, management considers the length of time and the extent to which fair value has been less than cost, the financial condition and
near-term prospects of the issuer, and the intent and ability of DBI to retain its investment in the issuer for a period of time sufficient
to allow for any anticipated recovery in fair value.
Loans
Loans are reported at the principal amount outstanding,
net of the allowance for loan losses. Interest on loans is calculated and accrued by using the simple interest method on the daily balance
of the principal amount outstanding. During 2020 and 2021, as a result of the COVID-19 pandemic, DSB granted fully guaranteed commercial
loans totaling $68.2 million with a coupon rate of 1% to qualified customers under the Small Business Administration’s (“SBA”)
Paycheck Protection Program (“PPP”). The SBA paid origination fees that varied based on the size of the loan. DSB is recognizing
the fee income over the life of the loan which is accelerated in the event the PPP loan is forgiven.
All loans are given an internal risk rating when
the loan is originated. The internal risk ratings are defined as:
· Non-classified
loans are assigned a risk rating of 1 – 4, with a one-rated credit being the highest quality. Non-classified loans have credit
quality that ranges from well above average quality to some inherent weaknesses that may present higher than average risk due to conditions
affecting the borrower, the borrower’s industry or economic environment.
· Special
mention loans are assigned a risk rating of 5. Potential weaknesses exist that deserve management’s close attention. If left
uncorrected, the potential weaknesses may result in deterioration of repayment prospects or in DSB’s credit position at some future
date.
· Substandard
loans are assigned a risk rating of 6. These loans are inadequately protected by the current worth and borrowing capacity of the
borrower. Well-defined weaknesses exist that may jeopardize the liquidation of the debt. There is a possibility of some loss if the deficiencies
are not corrected. At this point, the loan may still be performing and accruing.
· Doubtful
loans are risk rated 7 and have all the weaknesses of a substandard credit plus the added characteristic that the weaknesses make
collection or liquidation in full on the basis of current facts, conditions and values highly questionable and improbable. The possibility
of loss is extremely high, but because of certain important and reasonable specific pending factors, which may work to the advantage
of strengthening the asset, its classification as an estimated loss is deferred until its more exact status can be determined.
· Loss
loans are internally risk rated as an 8. A loss amount has been determined and this has been charged-off against the allowance for
loan losses. All or a portion of the charge-off may be recovered in the future and any such recoveries would also be recorded through
the allowance.
DBI’s policy is to place into nonaccrual
status all loans that are contractually past due 90 days or more, along with other loans as to which reasonable doubt exists to the full
and timely collection of principal and/or interest based on management’s view of the financial condition of the borrower. Income
on such loans is then recognized only to the extent that cash is received and where the future collection of principal is probable. Interest
accruals are resumed on such loans only when they are brought current with respect to interest and principal and when, in the judgment
of management, the loans are estimated to be fully collectible as to both principal and interest.
Loan charge-offs for all loans will occur as soon
as there is a reasonable probability of loss. When the amount of the loss can be readily calculated, the charge-off will be recorded as
soon as practical within the calendar quarter the loss was identified. Loans that are partially charged-off will be placed in nonaccrual
status unless the remaining loan is restructured with adequate collateral and payments are assured and current.
A loan is impaired when, based on current information
and events, it is probable that not all amounts due will be collected according to the contractual terms of the loan agreement. Interest
income is recognized in the same manner described above for nonaccrual loans. Further detail on the analysis of impaired loans can be
found below in the discussion of the Allowance for Loan Losses.
Allowance for Loan Losses
The allowance for loan losses is an estimate of
the losses that have been incurred in the loan portfolio. The allowance is based on two basic accounting principles: (1) Financial
Accounting Standards Board (“FASB”) Accounting Standards Codification (ASC) Topic 310-10 “Receivables –
Overall,” which requires that losses be accrued when it is probable that DBI will not collect all principal and interest payments
according to the loan’s contractual terms, and (2) FASB ASC Topic 450, “Contingencies,” which requires that
losses be accrued when they are probable of occurring and estimable.
On a quarterly basis, management utilizes a systematic
methodology to determine an appropriate allowance for loan losses. This methodology includes a loan grading system that requires quarterly
reviews; identification of loans to be evaluated on an individual basis for impairment; results of independent reviews of asset quality
and the adequacy of the allowance by regulatory agencies; consideration of current trends and volumes of nonperforming, past-due, nonaccrual
and potential problem loans; as well as national and local economic trends and industry conditions.
In applying the methodology, all troubled debt
restructurings (“TDRs”), regardless of size, are considered impaired and will be individually evaluated. Nonaccrual and watchlist
commercial real estate, construction and land development, agricultural real estate, multifamily residential real estate, commercial,
and agricultural production loans over $50,000 are evaluated individually to determine if they are impaired. Nonaccrual residential real
estate or consumer loans that are larger than customary for DBI, in addition to those that have a significant collateral shortfall, will
also be considered impaired and evaluated individually as there would be no pool of similar loans to evaluate these loans under ASC
Topic 450. Impairment is measured on a loan-by-loan basis by either the present value of expected cash flows discounted at the loan’s
effective interest rate or the net realizable value of the collateral if the loan is collateral dependent. If the estimated net realizable
value of the collateral is less than the recorded investment in the loan, an impairment is recognized by creating a valuation allowance
in conjunction with ASC Topic 310-10.
Loans that are not impaired are segmented into
groups by type of loan. The following loan types are utilized so each segment of loans will have similar risk factors: (1) residential
real estate, (2) agricultural real estate, (3) commercial real estate, (4) construction and land development, (5) commercial,
(6) agricultural, (7) consumer and other, and (8) guaranteed loans. These loans are further segmented by internal risk
ratings of non-classified, special mention, substandard and doubtful, which are defined above. The guaranteed portion of loans is not
assigned any allocation in the allowance for loan losses since they are guaranteed by various government entities.
Risk factor percentages are applied to the risk
rating segments of the non-impaired loans to calculate an allowance allocation in conjunction with ASC Topic 450. The risk factor
percentages are based on historical loan loss experience for each loan type and are adjusted for current economic conditions and trends
as well as internal loan quality trends. The current economic conditions take into account items such as changes in vacancy rates for
rental properties; changes in property values based on actual sales transactions; changes in current prices such as dairy commodities;
and other available economic data. The internal loan quality trends take into account items such as changes in lending or underwriting
policies, changes in the volume and nature of the portfolio, changes in management depth and expertise, changes in loan review or oversight,
changes in effects of concentrations, and the impact of changes to the regulatory and competitive environment.
The above steps result in calculations that estimate
the credit losses inherent in the portfolio at that time. The calculations are used to confirm the adequacy and appropriateness of the
actual balance of the allowance, recognizing that the allowance represents an aggregation of judgments and estimates by management. Given
the judgments described above, DBI maintains an unallocated reserve within its allowance for loan losses which quantifies inherent uncertainty
and subjectivity of the estimate. DBI periodically evaluates the appropriateness of the unallocated reserve through review of observable
trends and other factors to ensure it’s consistent with those overall credit trends.
Loans Held for Sale
Loans originated and intended for sale in the
secondary market are carried at lower of cost or estimated fair value in the aggregate. Net unrealized losses, if any, are recognized
through a valuation allowance by charges to income.
Mortgage Servicing Rights
DBI recognizes as assets the rights to service
mortgage loans for others, known as mortgage servicing rights (“MSRs”). DBI services the single-family mortgages it sells
to the Federal National Mortgage Association (“FNMA” or “Fannie Mae”). DBI determines the fair value of MSRs at
the date the loan is sold. To determine the fair value of MSRs, DBI calculates the present value of estimated future net servicing income
using assumptions that market participants would use in estimating future net servicing income, including estimates of prepayment speeds,
discount rate, default rates, cost to service, escrow account earnings, contractual servicing fee income, ancillary income and late fees.
Subsequent to the date of transfer, DBI has elected
to measure its MSRs under the amortization method. Under this method, MSRs are amortized in proportion to, and over the period of, estimated
net servicing income. MSRs are evaluated for impairment on a quarterly basis based on the fair value of those assets. Impairment is determined
by stratifying MSRs into groupings based on predominant risk characteristics, such as interest rate, vintage and loan type. If, by individual
stratum, the carrying amount of the MSRs exceeds fair value, a valuation reserve is established through a charge to earnings. The valuation
reserve is adjusted as the fair value changes. MSRs are included in the other assets category in the accompanying Consolidated Statements
of Financial Condition.
Other Investments
Other investments are equity securities which
are carried at fair value and consist primarily of Federal Home Loan Bank (“FHLB”) stock, Farmer Mac stock, AgriBank stock
and privately-held bank stocks. Because the other investments do not have readily determinable fair values, DBI carries the securities
at cost minus impairment, if any, plus or minus changes resulting from observable price changes in orderly transactions for the security
by the same investee. Other investments are evaluated for impairment on an annual basis. As a member of the FHLB, DSB is required to hold
stock in the FHLB based on the anticipated amount of FHLB borrowings to be advanced. This stock is recorded at cost, which approximates
fair value. Transfer of the stock is substantially restricted.
Premises and Equipment
Premises and equipment owned are stated at cost
less accumulated depreciation which is computed principally on the straight-line method over the estimated useful lives of the assets.
Bank-Owned Life Insurance
Consistent with many community banking organizations,
DBI invests in bank-owned life insurance (“BOLI”) to protect itself against replacement costs and lost income associated with
the untimely death of a key member of the bank’s management, as well as to serve as a source of funding for the bank’s employee
benefit expenses. BOLI is recorded at its cash surrender value, or the amount that can be realized upon immediate liquidation.
Income Taxes
Deferred income tax assets and liabilities are
determined using the liability method. Under this method the net deferred income taxes are provided for timing differences between book
and tax bases of assets and liabilities in the consolidated financial statements and those reported for income tax purposes. A liability
may also be recognized for unrecognized tax benefits from uncertain tax positions. Unrecognized tax benefits represent the differences
between a tax position taken or expected to be taken in a tax return and the benefit recognized and measured in the financial statements.
Interest and penalties related to unrecognized tax benefits are classified as income taxes.
Treasury Stock
Treasury stock is shown at cost. During the years
ended December 31, 2021 and 2020, DBI repurchased 58,222 and 76,961 shares of common stock, respectively, at the average purchase
price of $24.94 and $24.06 per share, respectively. The shares repurchased were part of a share repurchase plan.
Stock-Based Compensation
Compensation cost is recognized for restricted
stock awards issued to employees and directors based upon the fair value of the awards at the date of the grant. Compensation cost is
recognized over the required service period, generally defined as the vesting period. In addition, the Company has an employee stock purchase
plan which allows for a 10% discount on the purchase of the Company’s common stock through periodic deferrals of participating employees’
compensation. The Company recognizes the discount as compensation cost over the period earned. Please refer to Note 10 for additional
details on the stock-based compensation plan.
Earnings per Common Share
Earnings per common share are computed based on
the weighted average number of shares of common stock outstanding during each year. DBI has a stock-based compensation plan for the executive
management team. The shares of restricted stock are issued when granted, therefore basic and diluted earnings per share are equal and
presented as one number. The number of shares used in computing basic earnings per share is 3,138,393 and 3,186,672 for the years ended
December 31, 2021 and 2020, respectively.
Community Foundation
In 2016, DSB formed the Denmark State Bank Foundation
(the “Foundation”), a donor-advised fund of a 501(c)(3) public charity under the Greater Green Bay Community Foundation.
The Foundation was formed to provide financial contributions to a variety of non-profit organizations in the communities served by the
bank, for the purpose of making a positive, long-lasting impact on those communities. There were no contributions made by DSB to the Foundation
during 2021 or 2020. The Foundation had a balance of $379,725 and $373,379 of net assets as of December 31, 2021 and 2020, respectively.
DBI’s Board of Directors authorized contributions of $80,000 from the Foundation during 2020 to assist various community organizations
that were negatively impacted by the COVID-19 pandemic.
Subsequent Events
The financial statements and related disclosures
include evaluation of events up through and including February 14, 2022 which is the date the financial statements were available
to be issued.
Upcoming Accounting Pronouncements
In June 2016, the Financial Accounting Standards
Board (“FASB”) issued ASU No. 2016-13, Financial Instruments - Credit Losses; Measurement of Credit Losses on Financial
Instruments. The ASU includes increased disclosures and various changes to the accounting and measurement of financial assets including
DBI’s loans and available-for-sale investment securities. Each financial asset presented on the statement of condition would have
a unique allowance for credit losses that is deducted from the amortized cost basis to present the net carrying value. The amendments
in this ASU also eliminate the probable initial recognition threshold in current U.S. GAAP and, instead, reflect an entity's current estimate
of all expected credit losses using reasonable and supportable forecasts. The new credit loss guidance will be effective for DBI's year
ending December 31, 2023. Upon adoption, the ASU will be applied using a modified retrospective transition method to the beginning
of the first reporting period in which the guidance is effective. Early adoption for all institutions is permitted for fiscal years beginning
after December 15, 2018, including interim periods within those fiscal years. DBI believes this standard will have an impact on the
consolidated financial statements and is assessing the significance.
NOTE 2 – INVESTMENT SECURITIES
The amortized cost and estimated fair market value
of debt securities available for sale were as follows:
| | |
December 31, 2021 | |
| | |
| | |
Gross | | |
Gross | | |
Estimated | |
| | |
Amortized | | |
Unrealized | | |
Unrealized | | |
Fair | |
| | |
Cost | | |
Gains | | |
Losses | | |
Value | |
| U.S. Government Treasuries | |
$ | 7,416,322 | | |
$ | 0 | | |
$ | (83,100 | ) | |
$ | 7,333,222 | |
| U.S. Government-sponsored agency MBS | |
| 12,803,479 | | |
| 191,591 | | |
| (75,015 | ) | |
| 12,920,055 | |
| State and local governments | |
| 15,124,564 | | |
| 323,345 | | |
| (48,894 | ) | |
| 15,399,015 | |
| Asset-backed securities | |
| 813,508 | | |
| 615 | | |
| (3,965 | ) | |
| 810,158 | |
| | |
$ | 36,157,873 | | |
$ | 515,551 | | |
$ | (210,974 | ) | |
$ | 36,462,450 | |
| | |
December 31, 2020 | |
| | |
| | |
Gross | | |
Gross | | |
Estimated | |
| | |
Amortized | | |
Unrealized | | |
Unrealized | | |
Fair | |
| | |
Cost | | |
Gains | | |
Losses | | |
Value | |
| U.S. Government-sponsored agency MBS | |
$ | 11,254,909 | | |
$ | 444,630 | | |
$ | (1,016 | ) | |
$ | 11,698,523 | |
| State and local governments | |
| 18,051,916 | | |
| 635,530 | | |
| 0 | | |
| 18,687,446 | |
| Asset-backed securities | |
| 945,718 | | |
| 0 | | |
| (2,331 | ) | |
| 943,387 | |
| | |
$ | 30,252,543 | | |
$ | 1,080,160 | | |
$ | (3,347 | ) | |
$ | 31,329,356 | |
There
were no available-for-sale securities sold during 2021 or 2020.
The amortized cost and estimated fair values of
debt securities at December 31, 2021, by maturity were as follows:
| | |
Debt Securities Available-for-Sale | |
| | |
| | |
Estimated | |
| | |
Amortized | | |
Fair | |
| Amounts Maturing | |
Cost | | |
Value | |
| Within one year | |
$ | 2,624,472 | | |
$ | 2,641,434 | |
| From one through five years | |
| 7,253,860 | | |
| 7,265,374 | |
| From five through ten years | |
| 12,662,554 | | |
| 12,825,429 | |
| After ten years | |
| 0 | | |
| 0 | |
| Subtotal | |
$ | 22,540,886 | | |
$ | 22,732,237 | |
| Mortgage and asset-backed securities | |
$ | 13,616,987 | | |
$ | 13,730,213 | |
| Total | |
$ | 36,157,873 | | |
$ | 36,462,450 | |
Information pertaining to 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, 2021
| |
Less Than Twelve Months | | |
Over Twelve Months | |
| | |
Gross | | |
Estimated | | |
Gross | | |
Estimated | |
| | |
Unrealized | | |
Fair | | |
Unrealized | | |
Fair | |
| Debt Securities Available for Sale | |
Losses | | |
Value | | |
Losses | | |
Value | |
| U.S. Government-treasuries | |
$ | 83,100 | | |
$ | 7,333,222 | | |
$ | 0 | | |
$ | 0 | |
| U.S. Government-sponsored agency MBS | |
| 74,426 | | |
| 5,845,638 | | |
| 589 | | |
| 114,604 | |
| State and local governments | |
| 48,894 | | |
| 1,726,107 | | |
| 0 | | |
| 0 | |
| Asset-backed securities | |
| 3,965 | | |
| 584,417 | | |
| 0 | | |
| 0 | |
| Total securities available for sale | |
$ | 210,385 | | |
$ | 15,489,384 | | |
$ | 589 | | |
$ | 114,604 | |
December 31, 2020
| |
Less Than Twelve Months | | |
Over Twelve Months | |
| | |
Gross | | |
Estimated | | |
Gross | | |
Estimated | |
| | |
Unrealized | | |
Fair | | |
Unrealized | | |
Fair | |
| Debt Securities Available for Sale | |
Losses | | |
Value | | |
Losses | | |
Value | |
| U.S. Government-sponsored agency MBS | |
$ | 0 | | |
$ | 0 | | |
$ | 1,016 | | |
$ | 143,844 | |
| Asset-backed securities | |
| 0 | | |
| 0 | | |
| 2,331 | | |
| 943,387 | |
| Total securities available for sale | |
$ | 0 | | |
$ | 0 | | |
$ | 3,347 | | |
$ | 1,087,231 | |
All debt securities with unrealized losses are
assessed to determine if the impairment is other-than-temporary. Factors that are evaluated include the loan types supporting the securities,
delinquency and foreclosure rates, credit support, weighted average loan-to-value, year of origination, borrower profile, existing and
projected debt burden, underlying cash flow of the borrower and exposure to risks, among others.
There were no issuers of debt securities for which
a significant concentration of investments (greater than 10 percent of stockholders’ equity) was held as of December 31, 2021.
Debt securities with an estimated fair value of
$11.5 million and $12.4 million at December 31, 2021 and 2020, respectively were pledged to secure public deposits and for other
purposes required or permitted by law.
NOTE 3 – LOANS
Major categories of loans included in the loan
portfolio are as follows:
| | |
December 31, | |
| | |
2021 | | |
2020 | |
| Real Estate: | |
| | | |
| | |
| Residential | |
$ | 88,372,489 | | |
$ | 68,705,548 | |
| Commercial | |
| 163,456,468 | | |
| 146,984,921 | |
| Construction | |
| 26,678,745 | | |
| 21,352,112 | |
| Agricultural | |
| 77,848,753 | | |
| 73,348,676 | |
| | |
| 356,356,455 | | |
| 310,391,257 | |
| | |
| | | |
| | |
| Commercial | |
| 80,678,804 | | |
| 118,640,622 | |
| Agricultural | |
| 33,447,807 | | |
| 37,873,555 | |
| Consumer and other | |
| 8,612,216 | | |
| 9,874,302 | |
| Unsecured loans | |
| 251,115 | | |
| 229,262 | |
| Total Loans Receivable | |
$ | 479,346,397 | | |
$ | 477,008,998 | |
| Allowance for loan losses | |
| (7,741,069 | ) | |
| (7,668,435 | ) |
| Deferred loan fees | |
| (289,767 | ) | |
| (1,056,333 | ) |
| Total Loans, Net | |
$ | 471,315,561 | | |
$ | 468,284,230 | |
During 2020, the SBA introduced the Paycheck Protection
Program designed to provide liquidity to small businesses during the COVID-19 pandemic. The loans are guaranteed by the SBA and loan proceeds
to borrowers are forgivable by the SBA if certain criteria are met. On January 15, 2021, the SBA re-opened the loan portal for a
second round of the PPP loan program with a May 31, 2021 deadline for applications. DSB originated PPP loans totaling $22.9 million
and $45.3 million during 2021 and 2020, respectively. As of December 31, 2021, all first round PPP loans have been forgiven and there
were approximately $5.1 million of second round PPP loans included on the balance sheet. PPP processing fees received from SBA totaling
$3.4 million were deferred and recognized as interest income using the effective yield method. Upon forgiveness of a loan and resulting
repayment by the SBA, any unrecognized net fee for a given loan is recognized as interest income. DSB recognized $2.3 million and $0.8
million of the fees in 2021 and 2020, respectively.
Recorded Investment in Loans
As of December 31,
| | |
2021 | | |
2020 | |
| | |
| | |
Ending Balance | | |
| | |
Ending Balance | |
| | |
| | |
Individually | | |
| | |
Individually | |
| | |
Ending | | |
Evaluated | | |
Ending | | |
Evaluated | |
| | |
Balance | | |
for Impairment | | |
Balance | | |
for Impairment | |
| Residential Real Estate | |
$ | 88,372,489 | | |
$ | 288,881 | | |
$ | 68,705,548 | | |
$ | 66,032 | |
| Commercial Real Estate | |
| 163,456,468 | | |
| 0 | | |
| 146,984,921 | | |
| 0 | |
| Construction & Land Dev | |
| 26,678,745 | | |
| 0 | | |
| 21,352,112 | | |
| 205,799 | |
| Agricultural Real Estate | |
| 77,848,753 | | |
| 2,214,013 | | |
| 73,348,676 | | |
| 366,029 | |
| Commercial | |
| 80,678,804 | | |
| 0 | | |
| 118,640,622 | | |
| 15,516 | |
| Agricultural | |
| 33,447,807 | | |
| 44,085 | | |
| 37,873,555 | | |
| 210,537 | |
| Consumer and other | |
| 8,863,331 | | |
| 200 | | |
| 10,103,564 | | |
| 0 | |
| Total | |
$ | 479,346,397 | | |
$ | 2,547,179 | | |
$ | 477,008,998 | | |
$ | 863,913 | |
The following tables show the investment in impaired loans and the
corresponding allowance for those loans along with the recognized interest income associated with impaired loans:
Impaired Loans
As of December 31, 2021, and 2020
| | |
| | |
Unpaid | | |
| | |
Average | | |
Interest | |
| | |
Recorded | | |
Principal | | |
Related | | |
Recorded | | |
Income | |
2021 | |
Investment | | |
Balance | | |
Allowance | | |
Investment | | |
Recognized | |
| With no related allowance: | |
| | | |
| | | |
| | | |
| | | |
| | |
| Residential Real Estate | |
$ | 288,881 | | |
$ | 352,567 | | |
$ | 0 | | |
$ | 380,540 | | |
$ | 0 | |
| Commercial Real Estate | |
| 0 | | |
| 0 | | |
| 0 | | |
| 0 | | |
| 0 | |
| Construction & Land Dev | |
| 0 | | |
| 0 | | |
| 0 | | |
| 0 | | |
| 0 | |
| Agricultural Real Estate | |
| 2,214,013 | | |
| 2,262,632 | | |
| 0 | | |
| 2,475,384 | | |
| 70,395 | |
Commercial
| |
| 0 | | |
| 0 | | |
| 0 | | |
| 0 | | |
| 0 | |
Agricultural
| |
| 44,085 | | |
| 44,085 | | |
| 0 | | |
| 56,187 | | |
| 3,371 | |
| Consumer and other | |
| 0 | | |
| 0 | | |
| 0 | | |
| 0 | | |
| 0 | |
| | |
| | | |
| | | |
| | | |
| | | |
| | |
| With a related allowance: | |
| | | |
| | | |
| | | |
| | | |
| | |
| Residential Real Estate | |
$ | 0 | | |
$ | 0 | | |
$ | 0 | | |
$ | 0 | | |
$ | 0 | |
| Commercial Real Estate | |
| 0 | | |
| 0 | | |
| 0 | | |
| 0 | | |
| 0 | |
| Construction & Land Dev | |
| 0 | | |
| 0 | | |
| 0 | | |
| 0 | | |
| 0 | |
| Agricultural Real Estate | |
| 0 | | |
| 0 | | |
| 0 | | |
| 0 | | |
| 0 | |
Commercial
| |
| 0 | | |
| 0 | | |
| 0 | | |
| 0 | | |
| 0 | |
Agricultural
| |
| 0 | | |
| 0 | | |
| 0 | | |
| 0 | | |
| 0 | |
Consumer and other
| |
| 200 | | |
| 243 | | |
| 200 | | |
| 1,049 | | |
| 0 | |
| | |
| | | |
| | | |
| | | |
| | | |
| | |
Total: | |
| | | |
| | | |
| | | |
| | | |
| | |
| Residential Real Estate | |
$ | 288,881 | | |
$ | 352,567 | | |
$ | 0 | | |
$ | 380,540 | | |
$ | 0 | |
| Commercial Real Estate | |
| 0 | | |
| 0 | | |
| 0 | | |
| 0 | | |
| 0 | |
| Construction & Land Dev | |
| 0 | | |
| 0 | | |
| 0 | | |
| 0 | | |
| 0 | |
| Agricultural Real Estate | |
| 2,214,013 | | |
| 2,262,632 | | |
| 0 | | |
| 2,475,384 | | |
| 70,395 | |
Commercial
| |
| 0 | | |
| 0 | | |
| 0 | | |
| 0 | | |
| 0 | |
Agricultural
| |
| 44,085 | | |
| 44,085 | | |
| 0 | | |
| 56,187 | | |
| 3,371 | |
Consumer and other
| |
| 200 | | |
| 243 | | |
| 200 | | |
| 1,049 | | |
| 0 | |
Total
| |
$ | 2,547,179 | | |
$ | 2,659,527 | | |
$ | 200 | | |
$ | 2,913,160 | | |
$ | 73,766 | |
| | |
| | |
Unpaid | | |
| | |
Average | | |
Interest | |
| | |
Recorded | | |
Principal | | |
Related | | |
Recorded | | |
Income | |
| 2020 | |
Investment | | |
Balance | | |
Allowance | | |
Investment | | |
Recognized | |
| With no related allowance: | |
| | | |
| | | |
| | | |
| | | |
| | |
| Residential Real Estate | |
$ | 66,032 | | |
$ | 130,055 | | |
$ | 0 | | |
$ | 146,609 | | |
$ | 1,048 | |
| Commercial Real Estate | |
| 0 | | |
| 0 | | |
| 0 | | |
| 0 | | |
| 0 | |
| Construction & Land Dev | |
| 205,800 | | |
| 205,800 | | |
| 0 | | |
| 209,634 | | |
| 0 | |
| Agricultural Real Estate | |
| 366,029 | | |
| 404,055 | | |
| 0 | | |
| 412,672 | | |
| 7,891 | |
| Commercial | |
| 15,516 | | |
| 16,907 | | |
| 0 | | |
| 22,063 | | |
| 0 | |
| Agricultural | |
| 78,289 | | |
| 85,811 | | |
| 0 | | |
| 108,411 | | |
| 4,754 | |
| Consumer and other | |
| 0 | | |
| 0 | | |
| 0 | | |
| 0 | | |
| 0 | |
| | |
| | | |
| | | |
| | | |
| | | |
| | |
| With a related allowance: | |
| | | |
| | | |
| | | |
| | | |
| | |
| Residential Real Estate | |
$ | 0 | | |
$ | 0 | | |
$ | 0 | | |
$ | 0 | | |
$ | 0 | |
| Commercial Real Estate | |
| 0 | | |
| 0 | | |
| 0 | | |
| 0 | | |
| 0 | |
| Construction & Land Dev | |
| 0 | | |
| 0 | | |
| 0 | | |
| 0 | | |
| 0 | |
| Agricultural Real Estate | |
| 0 | | |
| 0 | | |
| 0 | | |
| 0 | | |
| 0 | |
| Commercial | |
| 0 | | |
| 0 | | |
| 0 | | |
| 0 | | |
| 0 | |
| Agricultural | |
| 132,247 | | |
| 132,247 | | |
| 23,209 | | |
| 141,632 | | |
| 7,212 | |
| Consumer and other | |
| 0 | | |
| 0 | | |
| 0 | | |
| 0 | | |
| 0 | |
| | |
| | | |
| | | |
| | | |
| | | |
| | |
| Total: | |
| | | |
| | | |
| | | |
| | | |
| | |
| Residential Real Estate | |
$ | 66,032 | | |
$ | 130,055 | | |
$ | 0 | | |
$ | 146,609 | | |
$ | 1,048 | |
| Commercial Real Estate | |
| 0 | | |
| 0 | | |
| 0 | | |
| 0 | | |
| 0 | |
| Construction & Land Dev | |
| 205,799 | | |
| 205,800 | | |
| 0 | | |
| 209,634 | | |
| 0 | |
| Agricultural Real Estate | |
| 366,029 | | |
| 404,055 | | |
| 0 | | |
| 412,672 | | |
| 7,891 | |
| Commercial | |
| 15,516 | | |
| 16,907 | | |
| 0 | | |
| 22,063 | | |
| 0 | |
| Agricultural | |
| 210,537 | | |
| 218,058 | | |
| 23,209 | | |
| 250,043 | | |
| 11,966 | |
| Consumer and other | |
| 0 | | |
| 0 | | |
| 0 | | |
| 0 | | |
| 0 | |
| Total | |
$ | 863,913 | | |
$ | 974,875 | | |
$ | 23,209 | | |
$ | 1,041,021 | | |
$ | 20,905 | |
No additional funds are committed to be advanced
in connection with impaired loans.
Allowance for Loan Losses
For the Years Ended December 31, 2021 and
2020
| | |
| | |
| | |
| | |
| | |
| | |
Ending Balance | |
| | |
Beginning | | |
| | |
| | |
| | |
Ending | | |
Individually | |
| | |
Balance | | |
| | |
| | |
| | |
Balance | | |
Evaluated | |
| 2021 | |
1/1/2021 | | |
Charge-offs | | |
Recoveries | | |
Provision | | |
12/31/2021 | | |
for Impairment | |
| Residential Real Estate | |
$ | 494,346 | | |
$ | 0 | | |
$ | 33,894 | | |
$ | 99,337 | | |
$ | 627,577 | | |
$ | 0 | |
| Commercial Real Estate | |
| 2,764,964 | | |
| 0 | | |
| 0 | | |
| 471,010 | | |
| 3,235,974 | | |
| 0 | |
| Construction & Land Dev | |
| 228,880 | | |
| 0 | | |
| 0 | | |
| 24,087 | | |
| 252,967 | | |
| 0 | |
| Agricultural Real Estate | |
| 1,432,239 | | |
| 0 | | |
| 0 | | |
| (34,605 | ) | |
| 1,397,634 | | |
| 0 | |
| Commercial | |
| 1,169,473 | | |
| 0 | | |
| 4,039 | | |
| (111,412 | ) | |
| 1,062,100 | | |
| 0 | |
| Agricultural | |
| 756,559 | | |
| 0 | | |
| 33,255 | | |
| (71,996 | ) | |
| 717,818 | | |
| 0 | |
| Consumer and other | |
| 18,826 | | |
| (1,857 | ) | |
| 3,303 | | |
| (5,236 | ) | |
| 15,036 | | |
| 200 | |
| Unallocated | |
| 803,148 | | |
| 0 | | |
| 0 | | |
| (371,185 | ) | |
| 431,963 | | |
| 0 | |
| Total | |
$ | 7,668,435 | | |
$ | (1,857 | ) | |
$ | 74,491 | | |
$ | 0 | | |
$ | 7,741,069 | | |
$ | 200 | |
| | |
| | |
| | |
| | |
| | |
| | |
Ending Balance | |
| | |
Beginning | | |
| | |
| | |
| | |
Ending | | |
Individually | |
| | |
Balance | | |
| | |
| | |
| | |
Balance | | |
Evaluated | |
| 2020 | |
1/1/2020 | | |
Charge-offs | | |
Recoveries | | |
Provision | | |
12/31/2020 | | |
for Impairment | |
| Residential Real Estate | |
$ | 495,092 | | |
$ | (30,889 | ) | |
$ | 41,861 | | |
$ | (11,718 | ) | |
$ | 494,346 | | |
$ | 0 | |
| Commercial Real Estate | |
| 1,846,168 | | |
| 0 | | |
| 0 | | |
| 918,796 | | |
| 2,764,964 | | |
| 0 | |
| Construction & Land Dev | |
| 189,214 | | |
| 0 | | |
| 34,034 | | |
| 5,632 | | |
| 228,880 | | |
| 0 | |
| Agricultural Real Estate | |
| 1,608,848 | | |
| 0 | | |
| 0 | | |
| (176,609 | ) | |
| 1,432,239 | | |
| 0 | |
| Commercial | |
| 934,341 | | |
| (43,135 | ) | |
| 3,900 | | |
| 274,367 | | |
| 1,169,473 | | |
| 0 | |
| Agricultural | |
| 1,004,654 | | |
| 0 | | |
| 33,255 | | |
| (281,350 | ) | |
| 756,559 | | |
| 23,209 | |
| Consumer and other | |
| 18,401 | | |
| (3,987 | ) | |
| 7,515 | | |
| (3,103 | ) | |
| 18,826 | | |
| 0 | |
| Unallocated | |
| 794,163 | | |
| 0 | | |
| 0 | | |
| 8,985 | | |
| 803,148 | | |
| 0 | |
| Total | |
$ | 6,890,881 | | |
$ | (78,011 | ) | |
$ | 120,565 | | |
$ | 735,000 | | |
$ | 7,668,435 | | |
$ | 23,209 | |
Nonaccrual loans totaled $0.5 million at both
December 31, 2021 and 2020. They were comprised of 1-4 family residential real estate loans totaling $289,000 and agricultural real
estate loans totaling $161,000 as of December 31, 2021 and agricultural real estate loans totaling $224,000, construction and land
development loans for $206,000, 1-4 family residential real estate loans totaling $51,000, ag production loans totaling $43,000 and commercial
loans of $16,000 as of December 31, 2020. There were no loans past due ninety days or more and still accruing at December 31,
2021 or 2020. A schedule of loans by the number of days past due (including nonaccrual loans) along with a schedule of credit quality
indicators follows:
Age Analysis of Past Due Financing Receivables
| | |
30-89 Days | | |
90 Days | | |
Total | | |
| | |
Total | |
| December 31, 2021 | |
Past Due | | |
& Over | | |
Past Due | | |
Current | | |
Loans | |
| Residential Real Estate | |
$ | 0 | | |
$ | 66,599 | | |
$ | 66,599 | | |
$ | 88,305,890 | | |
$ | 88,372,489 | |
| Commercial Real Estate | |
| 0 | | |
| 0 | | |
| 0 | | |
| 163,456,468 | | |
| 163,456,468 | |
| Construction & Land Dev | |
| 0 | | |
| 0 | | |
| 0 | | |
| 26,678,745 | | |
| 26,678,745 | |
| Agricultural Real Estate | |
| 0 | | |
| 0 | | |
| 0 | | |
| 77,848,753 | | |
| 77,848,753 | |
| Commercial | |
| 0 | | |
| 0 | | |
| 0 | | |
| 80,678,804 | | |
| 80,678,804 | |
| Agricultural | |
| 0 | | |
| 0 | | |
| 0 | | |
| 33,447,807 | | |
| 33,447,807 | |
| Consumer and other | |
| 0 | | |
| 200 | | |
| 200 | | |
| 8,863,131 | | |
| 8,863,331 | |
| Total | |
$ | 0 | | |
$ | 66,799 | | |
$ | 66,799 | | |
$ | 479,279,598 | | |
$ | 479,346,397 | |
| | |
30-89 Days | | |
90 Days | | |
Total | | |
| | |
Total | |
| December 31, 2020 | |
Past Due | | |
& Over | | |
Past Due | | |
Current | | |
Loans | |
| Residential Real Estate | |
$ | 151,937 | | |
$ | 0 | | |
$ | 151,937 | | |
$ | 68,553,611 | | |
$ | 68,705,548 | |
| Commercial Real Estate | |
| 0 | | |
| 0 | | |
| 0 | | |
| 146,984,921 | | |
| 146,984,921 | |
| Construction & Land Dev | |
| 0 | | |
| 205,800 | | |
| 205,800 | | |
| 21,146,312 | | |
| 21,352,112 | |
| Agricultural Real Estate | |
| 0 | | |
| 142,727 | | |
| 142,727 | | |
| 73,205,949 | | |
| 73,348,676 | |
| Commercial | |
| 0 | | |
| 15,516 | | |
| 15,516 | | |
| 118,625,106 | | |
| 118,640,622 | |
| Agricultural | |
| 0 | | |
| 35,404 | | |
| 35,404 | | |
| 37,838,151 | | |
| 37,873,555 | |
| Consumer and other | |
| 0 | | |
| 0 | | |
| 0 | | |
| 10,103,564 | | |
| 10,103,564 | |
| Total | |
$ | 151,937 | | |
$ | 399,447 | | |
$ | 551,384 | | |
$ | 476,457,614 | | |
$ | 477,008,998 | |
Credit Quality Indicators
| | |
| | |
Special | | |
| | |
| | |
| |
| December 31, 2021 | |
Non-Classified | | |
Mention | | |
Substandard | | |
Doubtful | | |
Total | |
| Residential Real Estate | |
$ | 86,449,154 | | |
$ | 1,294,062 | | |
$ | 606,214 | | |
$ | 23,059 | | |
$ | 88,372,489 | |
| Commercial Real Estate | |
| 151,181,246 | | |
| 6,688,763 | | |
| 5,586,459 | | |
| 0 | | |
| 163,456,468 | |
| Construction & Land Dev | |
| 26,678,745 | | |
| 0 | | |
| 0 | | |
| 0 | | |
| 26,678,745 | |
| Agricultural Real Estate | |
| 57,594,628 | | |
| 14,791,550 | | |
| 5,389,329 | | |
| 73,246 | | |
| 77,848,753 | |
| Commercial | |
| 68,883,170 | | |
| 7,212,506 | | |
| 4,583,128 | | |
| 0 | | |
| 80,678,804 | |
| Agricultural | |
| 28,514,669 | | |
| 3,789,582 | | |
| 1,143,556 | | |
| 0 | | |
| 33,447,807 | |
| Consumer and other | |
| 8,825,929 | | |
| 37,202 | | |
| 0 | | |
| 200 | | |
| 8,863,331 | |
| Total | |
$ | 428,127,541 | | |
$ | 33,813,665 | | |
$ | 17,308,686 | | |
$ | 96,505 | | |
$ | 479,346,397 | |
| | |
| | |
Special | | |
| | |
| | |
| |
| December 31, 2020 | |
Non-Classified | | |
Mention | | |
Substandard | | |
Doubtful | | |
Total | |
| Residential Real Estate | |
$ | 66,836,261 | | |
$ | 1,112,712 | | |
$ | 690,544 | | |
$ | 66,031 | | |
$ | 68,705,548 | |
| Commercial Real Estate | |
| 142,559,524 | | |
| 3,778,826 | | |
| 646,571 | | |
| 0 | | |
| 146,984,921 | |
| Construction & Land Dev | |
| 19,540,491 | | |
| 0 | | |
| 1,811,621 | | |
| 0 | | |
| 21,352,112 | |
| Agricultural Real Estate | |
| 58,769,266 | | |
| 7,102,308 | | |
| 7,296,631 | | |
| 180,471 | | |
| 73,348,676 | |
| Commercial | |
| 106,584,728 | | |
| 7,228,570 | | |
| 4,811,808 | | |
| 15,516 | | |
| 118,640,622 | |
| Agricultural | |
| 34,670,706 | | |
| 793,645 | | |
| 2,309,357 | | |
| 99,847 | | |
| 37,873,555 | |
| Consumer and other | |
| 10,074,961 | | |
| 12,998 | | |
| 15,605 | | |
| 0 | | |
| 10,103,564 | |
| Total | |
$ | 439,035,937 | | |
$ | 20,029,059 | | |
$ | 17,582,137 | | |
$ | 361,865 | | |
$ | 477,008,998 | |
During the year ended December 31, 2021,
there were three agricultural real estate loans to one borrower with a recorded investment of $2.1 million both prior to and following
the modification modified as a troubled debt restructuring (“TDR”) and there no loans modified as TDRs during 2020. During
the years ended December 31, 2021 and 2020, there were no loans that were previously modified as a TDR that subsequently defaulted.
In March 2020, the Coronavirus Aid, Relief
and Economic Security (“CARES”) Act was passed into law. Among other things, the CARES act suspended the requirements related
to the accounting for TDRs for certain loan modifications related to the COVID-19 pandemic. This suspension of classification of TDRs
was extended through December 31, 2021 as part of the 2021 Consolidation Appropriations Act. As a result of the pandemic, DSB provided
a loan modification program to borrowers that included certain concessions such as interest-only or payment deferrals. There were no loans
at December 31, 2021 with modification agreements under the CARES act and there were $4.0 million of loans that remained under a
modification agreement but were not disclosed as TDRs at December 31, 2020.
NOTE 4 – OTHER INVESTMENTS
Major categories of equity investments are as
follows:
| | |
December 31, | |
| | |
2021 | | |
2020 | |
| FHLB Stock | |
$ | 656,978 | | |
$ | 656,978 | |
| Privately held bank stocks | |
| 2,380,219 | | |
| 1,593,080 | |
| Other | |
| 687,780 | | |
| 745,380 | |
| Total | |
$ | 3,724,977 | | |
$ | 2,995,438 | |
Downward adjustments to the fair value of DBI’s
equity securities were $0 and $7,254 during the years ended December 31, 2021 and 2020, respectively. The cumulative amount of downward
adjustment is $7,254. The downward adjustment in 2020 was recorded as a result of a publicly traded stock price. Upward adjustments to
the fair value of equity investments for the years ended December 31, 2021 and 2020 were $215,768 and $149,563, respectively. On
a cumulative basis, upward fair value adjustments of $1,246,182 have been recorded for DBI’s equity investments. The upward adjustments
recognized during 2021 and 2020 were the result of observable transactions as well as a publicly traded stock price. DBI adjusted the
carrying amount of these investments based on the share price indicated by these observable transactions. DBI sold two of its equity investments
during the year ended December 31, 2021 for proceeds of $245,218 for a gain of $34,478 and three of its equity investments during
the year ended December 31, 2020 for proceeds of $562,001 resulting in a gain on sale of $65,081.
NOTE 5 – PREMISES AND EQUIPMENT
Premises and equipment are summarized as follows:
| | |
December 31, | |
| | |
2021 | | |
2020 | |
| Land | |
$ | 1,121,783 | | |
$ | 1,121,783 | |
| Buildings and improvements | |
| 8,393,768 | | |
| 8,387,078 | |
| Furniture and fixtures | |
| 5,727,180 | | |
| 5,849,136 | |
| | |
$ | 15,242,731 | | |
$ | 15,357,997 | |
| Less: Accumulated depreciation | |
$ | (9,853,245 | ) | |
$ | (9,258,114 | ) |
| Net depreciated value | |
$ | 5,389,486 | | |
$ | 6,099,883 | |
| Construction in progress | |
| 188,808 | | |
| 5,411 | |
| Premises and equipment, net | |
$ | 5,578,294 | | |
$ | 6,105,294 | |
Leases are classified as operating or finance
leases at the lease commencement date. One operating lease for a financial center has a remaining term of 5.3 years, which includes two
5-year renewal options at the end of the in initial lease term. Lease extension options are included in the lease term if it is reasonably
certain DBI will exercise the option. DBI does not have any financing leases as of December 31, 2021 and 2020. DBI has elected to
not recognize leases with original lease terms of 12 months or less (short-term leases) on its balance sheet.
Lease expense for operating and short-term leases
is recognized on a straight-line basis over the lease term. Right-of-use assets represent DBI’s right to use an underlying asset
for the lease term and lease liabilities represent our obligation to make lease payments arising from the lease. Right-of-use assets and
lease liabilities are recognized at the lease commencement date based on the estimated present value of the lease payments over the lease
term. When the rate implicit in the lease is unknown, the present value of the lease payments is determined using our incremental borrowing
rate based on the FHLB amortizing advance rate, adjusted for the lease term and other factors.
DBI has real estate lease agreements with lease
and non-lease components, which are generally accounted for separately. Non-lease components such as common area maintenance charges,
real estate taxes and insurance are not included in the measurement of the lease liability since they are generally able to be segregated.
The components of total lease cost, which are
included in occupancy expenses on the consolidated statements of income, were as follows for the year ending:
| | |
December 31, | | |
December 31, | |
| | |
2021 | | |
2020 | |
| Operating lease cost | |
$ | 113,131 | | |
$ | 148,131 | |
| Short-term lease cost | |
| 45,000 | | |
| 28,974 | |
| Total lease cost | |
$ | 158,131 | | |
$ | 177,105 | |
The following table shows the future minimum rent
payments required under the leases described above as of December 31, 2021:
| Years Ending | | |
| |
| December 31, | | |
Operating Leases | |
| | 2022 | | |
$ | 113,761 | |
| | 2023 | | |
| 115,022 | |
| | 2024 | | |
| 115,022 | |
| | 2025 | | |
| 115,022 | |
| | 2026 | | |
| 115,022 | |
| | Thereafter | | |
| 38,341 | |
| | Total | | |
$ | 612,190 | |
Supplemental balance sheet information related
to leases was as follows:
| | |
December 31, | | |
December 31, | |
| | |
2021 | | |
2020 | |
| Operating lease right-of-use assets | |
$ | 560,051 | | |
$ | 708,422 | |
| Operating lease liabilities | |
$ | 568,876 | | |
$ | 715,356 | |
| | |
| | | |
| | |
| Operating lease weighted average remaining lease term (years) | |
| 5.30 | | |
| 5.98 | |
| Operating lease weighted average discount rate | |
| 2.74 | % | |
| 2.67 | % |
NOTE 6 – MORTGAGE SERVICING RIGHTS
MSRs are recognized based on the fair value of
the servicing right on the date the corresponding mortgage loan is sold. An estimate of DBI’s MSRs is determined using assumptions
that market participants would use in estimating future net servicing income, including estimates of prepayment speeds, discount rate,
default rates, cost to service, escrow account earnings, contractual servicing fee income, ancillary income and late fees. Subsequent
to the date of transfer, DBI has elected to measure its MSRs under the amortization method. Under this method, MSRs are amortized in proportion
to, and over the period of, estimated net servicing income.
DBI has recorded MSRs related to loans sold without
recourse to FNMA. DBI sells conforming, fixed-rate, closed-end, residential real estate mortgages to FNMA. The unpaid principal balances
of residential mortgage loans serviced for FNMA were $163.0 million and $134.2 million at December 31, 2021 and 2020, respectively.
The change in amortized MSRs and the related valuation
allowance is presented below:
| | |
December 31, | |
| | |
2021 | | |
2020 | |
| Mortgage servicing rights, beginning of period | |
$ | 828,720 | | |
$ | 480,322 | |
| Additions from originated servicing | |
| 506,086 | | |
| 744,931 | |
| Amortization expense | |
| (461,247 | ) | |
| (227,688 | ) |
| Change in valuation allowance | |
| 209,581 | | |
| (168,845 | ) |
| Mortgage servicing rights, end of period | |
$ | 1,083,140 | | |
$ | 828,720 | |
DBI
evaluates mortgage servicing rights for impairment on a quarterly basis. There was a valuation allowance for amortized MSRs of $35,319
and $244,900 as of December 31, 2021 and 2020, respectively. Impairment is determined by stratifying MSRs into groupings based on
predominant risk characteristics, such as interest rate and loan type. If, by individual stratum, the carrying amount of the MSRs exceeds
fair value, a valuation reserve is established. The valuation reserve is adjusted as the fair value changes. At both December 31,
2021 and 2020, fair value was determined using a discount rate of 9.0%. At December 31, 2021 and 2020, estimates of prepayment speeds
ranged from 7.75% to 29.64% and 9.78% to 35.69%, respectively.
NOTE 7 – INTEREST-BEARING DEPOSITS
Interest-bearing deposits consisted of the following:
| | |
December 31, | |
| | |
2021 | | |
2020 | |
| NOW accounts | |
$ | 81,316,405 | | |
$ | 69,244,709 | |
| Savings accounts | |
| 95,003,768 | | |
| 79,262,713 | |
| Money market accounts | |
| 175,734,361 | | |
| 149,613,460 | |
| Time deposit accounts | |
| 107,150,696 | | |
| 129,486,043 | |
| Total | |
$ | 459,205,230 | | |
$ | 427,606,925 | |
The following table shows the maturity distribution
of time deposit accounts:
| | |
December 31, | |
| | |
2021 | | |
2020 | |
| Within one year | |
$ | 56,635,496 | | |
$ | 72,723,715 | |
| One to two years | |
| 30,111,680 | | |
| 34,527,310 | |
| Two to three years | |
| 7,561,560 | | |
| 8,680,964 | |
| Three to four years | |
| 6,715,959 | | |
| 5,438,250 | |
| Over four years | |
| 6,126,001 | | |
| 8,115,804 | |
| Total | |
$ | 107,150,696 | | |
$ | 129,486,043 | |
Time deposits of $250,000 or more totaled $13.7
million and $17.5 million at December 31, 2021 and 2020, respectively.
NOTE 8 – BORROWINGS
As of December 31, 2021, DSB had available
and unused federal funds lines of credit with two correspondent institutions up to $19.6 million, as well as an unused $20 million line
at the Federal Reserve Bank’s discount window. Federal funds purchased generally mature within one day from the transaction date.
There were no federal funds purchased outstanding as of December 31, 2021 or 2020.
Long-term debt consisted of the following:
| | |
For the Years Ended December 31, | |
| | |
2021 | | |
2020 | |
| |
Rates | | |
Amount | | |
Rates | | |
Amount | |
| Federal Home Loan Bank | |
| | | |
| | | |
| | | |
| | |
| Fixed rate advances | |
| 1.79 | % | |
$ | 932,844 | | |
| 1.38% - 3.06% | | |
$ | 14,066,975 | |
| Total | |
| | | |
$ | 932,844 | | |
| | | |
$ | 14,066,975 | |
The outstanding Federal Home Loan Bank advance
at December 31, 2021 matures in 2023.
The notes payable to the FHLB are secured by residential
mortgages with a carrying amount of $83.7 million and $72.5 million, as of December 31, 2021 and 2020, respectively along with $
$0.7 million of FHLB stock for both periods.
DBI has a revolving line of credit of $20 million
with a correspondent bank that had no balance drawn as of December 31, 2021. This line has an interest rate tied to the Wall Street
Journal Prime Rate less 100 basis points and matures in October 2023. The interest rate on the line of credit would have been 2.25
percent at December 31, 2021 if DBI had any outstanding borrowings. DBI is subject to a maximum non-performing loan covenant for
this borrowing as well as a maximum limitation as a percentage of capital on the outstanding balance of the line.
As of December 31, 2021, DBI had a total
of $58.5 million of unused lines of credit with banks to be drawn upon as needed for long-term debt subject to borrowing guidelines.
NOTE 9 – INCOME TAXES
The provision for income taxes in the consolidated
statement of income is as follows:
| | |
2021 | | |
2020 | | |
2019 | |
| Current: Federal | |
$ | 1,691,152 | | |
$ | 991,092 | | |
$ | 1,008,382 | |
| State | |
| 707,165 | | |
| 438,720 | | |
| 382,071 | |
| | |
$ | 2,398,317 | | |
$ | 1,429,812 | | |
$ | 1,390,453 | |
| Deferred: Federal | |
$ | (130,445 | ) | |
$ | (115,324 | ) | |
$ | 131,080 | |
| State | |
| (32,561 | ) | |
| (44,329 | ) | |
| 127,386 | |
| | |
$ | (163,006 | ) | |
$ | (159,653 | ) | |
$ | 258,466 | |
| Total provision for income taxes | |
$ | 2,235,311 | | |
$ | 1,270,159 | | |
$ | 1,648,919 | |
Applicable income taxes for financial reporting
purposes differ from the amount computed by applying the statutory federal income tax rate for the reasons noted in the table below:
| | |
2021 | | |
2020 | |
| | |
Amount | | |
% | | |
Amount | | |
% | |
| Tax at statutory federal income tax rate | |
$ | 1,834,017 | | |
| 21 | % | |
$ | 1,085,302 | | |
| 21 | % |
| Increase (decrease) in tax resulting from: | |
| | | |
| | | |
| | | |
| | |
| Tax-exempt interest | |
| (66,795 | ) | |
| (1 | ) | |
| (66,079 | ) | |
| (1 | ) |
| State income tax, net of federal tax benefit | |
| 532,442 | | |
| 6 | | |
| 311,637 | | |
| 6 | |
| Bank-owned life insurance | |
| (73,707 | ) | |
| (1 | ) | |
| (72,513 | ) | |
| (1 | ) |
| Other, net | |
| 9,354 | | |
| 0 | | |
| 11,812 | | |
| 0 | |
| Applicable income taxes | |
$ | 2,235,311 | | |
| 26 | % | |
$ | 1,270,159 | | |
| 25 | % |
Deferred income taxes are provided for the temporary
differences between the financial reporting basis and the tax basis of the Company’s assets and liabilities. The major components
of the net deferred tax asset as of December 31, 2021 and 2020 are presented below:
| | |
2021 | | |
2020 | |
| Deferred tax assets: | |
| | | |
| | |
| Allowance for credit losses | |
$ | 1,938,896 | | |
$ | 1,780,717 | |
| State tax net operating loss carryforward | |
| 86,326 | | |
| 95,627 | |
| Deferred compensation | |
| 62,683 | | |
| 49,491 | |
| Other | |
| 0 | | |
| 0 | |
| Total deferred tax assets | |
$ | 2,087,905 | | |
$ | 1,925,835 | |
| Deferred tax liabilities: | |
| | | |
| | |
| Accumulated depreciation on fixed assets | |
$ | 296,581 | | |
$ | 433,191 | |
| Security accretion | |
| 4,549 | | |
| 3,428 | |
| Mortgage servicing rights | |
| 297,086 | | |
| 227,303 | |
| Stock dividends received | |
| 66,986 | | |
| 66,986 | |
| Appreciation on equity securities | |
| 314,219 | | |
| 275,280 | |
| Unrealized gains on available-for-sale securities | |
| 82,236 | | |
| 290,740 | |
| Other | |
| 43,254 | | |
| 17,423 | |
| Total deferred tax liabilities | |
$ | 1,104,911 | | |
$ | 1,314,351 | |
| Net deferred tax asset | |
$ | 982,994 | | |
$ | 611,484 | |
Income tax returns for the years ended 2017 through
2021 are open to examination by applicable federal and state taxing authorities. DBI has a state tax net operating loss carryforward of
$1.5 million at December 31, 2021. The net operating loss could begin to expire if unused by 2031.
NOTE 10 – EMPLOYEE BENEFIT PLAN
DBI has a 401(k) Safe Harbor plan which makes
employees who are at least eighteen years old eligible to contribute. Provisions of the 401(k) Safe Harbor plan through December 31,
2021 provide for the following:
| · | DBI will make Safe Harbor matching contributions equal to 100% of each employee’s salary deferrals
up to a maximum of 6%. Employee contributions above 6% do not receive any matching contribution. |
DBI provides no post-retirement benefits to employees
except for the 401(k) Safe Harbor plan which are currently funded. DBI expensed contributions of $510,406 and $492,535 for the years
2021 and 2020, respectively, related to this plan.
In 2016, the Board approved the Long-Term Incentive
Plan (the “Plan”) for executive officers. In 2019, the Plan was amended to include awards for the directors, as well. The
Plan allows for the issuance of restricted stock to executive officers and directors that are subject to a service period restriction.
The Plan initially allowed for the issuance of up to 36,000 shares of restricted stock. An additional 36,000 shares were authorized in
2020. There were 33,510 shares available to be issued at December 31, 2021.
| Nonvested Shares | |
Shares | | |
Weighted-
Average Grant-
Date Fair Value | |
| Nonvested at January 1, 2021 | |
| 20,598 | | |
$ | 23.16 | |
| Granted | |
| 9,478 | | |
| 24.75 | |
| Vested | |
| (6,688 | ) | |
| 23.10 | |
| Nonvested at December 31, 2021 | |
| 23,388 | | |
$ | 24.07 | |
The fair value as of the date of the grant was
$234,581, or $24.75 per share, and $174,158, or $24.30 per share, for awards granted in 2021 and 2020, respectively. At December 31,
2021 there was unrecognized compensation expense of $230,755 which will be fully recognized over the next 2.2 years.
The Company adopted the 2017 Employee Stock Purchase
Plan (the “ESPP”). The ESPP allows employees to make elective payroll contributions throughout the year not to exceed $25,000.
Payroll deferrals are used to purchase common stock of the Company at a 10% discount based on the lower of the fair value on the first
day of the year or the last day of the year. Share-based compensation expense related to the ESPP of $19,304 and $19,293 was recognized
during the year-ended December 31, 2021 and 2020, respectively.
NOTE 11 – COMMITMENTS AND CREDIT RISK
DBI and its subsidiaries are parties to financial
instruments with off-balance-sheet risk in the normal course of business to meet the financing needs of their customers. These financial
instruments include commitments to extend credit and standby letters of credit. Those instruments involve, to varying degrees, elements
of credit and interest rate risk in excess of the amount recognized in the consolidated statements of financial position. The contract
or notional amounts of those instruments reflect the extent of involvement DBI and its subsidiaries have in particular classes of financial
instruments.
| | |
Contract or | | |
| |
| | |
Notional Amount | | |
Secured | |
| | |
December 31, 2021 | | |
Portion | |
| Financial instruments whose contract amounts represent credit risk: | |
| | | |
| | |
| Commitments to extend credit | |
$ | 121,732,704 | | |
$ | 120,836,384 | |
| Standby letters of credit and financial guarantees written | |
| 890,670 | | |
| 890,670 | |
| | |
Contract or | | |
| |
| | |
Notional Amount | | |
Secured | |
| | |
December 31, 2020 | | |
Portion | |
| Financial instruments whose contract amounts represent credit risk: | |
| | | |
| | |
| Commitments to extend credit | |
$ | 123,290,700 | | |
$ | 122,379,076 | |
| Standby letters of credit and financial guarantees written | |
| 1,742,641 | | |
| 1,742,641 | |
Commitments to extend credit are agreements to
lend to a customer as long as there is no violation of any condition established in the contract. Commitments generally have fixed expiration
dates or other termination clauses and may require payment of a fee. Since many of the commitments are expected to expire without being
drawn upon, the total commitment amounts do not necessarily represent future cash requirements. DBI and its subsidiaries evaluate each
customer’s creditworthiness on a case-by-case basis. Collateral held varies but may include accounts receivable, inventory, property,
plant and equipment and income-producing commercial properties. As of December 31, 2021, variable rate commitments totaled $78.7
million.
Standby letters of credit are conditional commitments
issued by DSB to guarantee the performance of a customer to a third party. Those guarantees are primarily issued to support commercial
business transactions. When a customer fails to perform according to the terms of the agreement, DSB honors drafts drawn by the third
party in amounts up to the contract amount. A majority of the letters of credit expire within one year. The credit risk involved in issuing
letters of credit is essentially the same as that involved in extending loans to customers. Collateral held varies but may include accounts
receivable, inventory, property, plant and equipment and income-producing commercial and residential properties. All letters of credit
are secured.
NOTE 12 – RELATED PARTY TRANSACTIONS
At December 31, 2021 and 2020, certain DBI
subsidiary executive officers, directors and companies in which they have a ten percent or more beneficial interest were indebted to DBI
and its subsidiaries. Total indebtedness outstanding was $2.4 million and $2.8 million as of year-end 2021 and 2020, respectively. All
such loans were made in the ordinary course of business and at rates and terms similar to those granted to other borrowers.
| | |
12/31/2020 | | |
| | |
| | |
| | |
12/31/2021 | |
| | |
Beginning | | |
New | | |
| | |
Other | | |
Ending | |
| $(000)s | |
Balance | | |
Loans | | |
Payments | | |
Changes | | |
Balance | |
| Aggregate related party loans | |
$ | 2,797 | | |
$ | 2,635 | | |
$ | 2,988 | | |
$ | 0 | | |
$ | 2,444 | |
| | |
12/31/2019 | | |
| | |
| | |
| | |
12/31/2020 | |
| | |
Beginning | | |
New | | |
| | |
Other | | |
Ending | |
| $(000)s | |
Balance | | |
Loans | | |
Payments | | |
Changes (1) | | |
Balance | |
| Aggregate related party loans | |
$ | 1,606 | | |
$ | 2,079 | | |
$ | 385 | | |
$ | (503 | ) | |
$ | 2,797 | |
| (1) | Effects of changes in composition of related parties |
Deposit balances with DBI’s executive officers,
directors and affiliated companies in which they are principal owners were $12.5 million and $13.2 million at December 31, 2021 and
2020, respectively.
NOTE 13 – FAIR VALUE MEASUREMENT
Fair value is the exchange price that would be
received for an asset or paid to transfer a liability in the principal or most advantageous market for the asset or liability in a transaction
between market participants on the measurement date. Some assets and liabilities are measured on a recurring basis while others are measured
on a non-recurring basis, as required by U.S. GAAP, which also establishes a fair value hierarchy that requires an entity to maximize
the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. Fair value estimates are made at a
specific point in time based on relevant market information and information about the financial instrument. The three levels of inputs
defined in the standard that may be used to measure fair value are as follows:
· Level
1: Quoted prices for identical assets or liabilities in active markets that the entity has the ability to access as of the measurement
date.
· Level
2: 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, and other inputs that are observable or can be corroborated by observable market data.
· Level
3: Significant unobservable inputs that are supported by little, if any, market activity. These unobservable inputs reflect estimates
that market participants would use in pricing the assets or liability.
In instances whereby inputs used to measure fair
value fall into different levels in the above fair value hierarchy, fair value measurements in their entirety are categorized based on
the lowest level input that is significant to the valuation. DBI’s assessment of the significance of particular inputs to these
fair value measurements requires judgment and considers factors specific to each asset and liability.
It is DBI’s policy to recognize transfers
between levels of the fair value hierarchy as of the end of the reporting period. There were no transfers during the years ended December 31,
2021 or 2020.
Assets Recorded at Fair Value on a Recurring
Basis
Investment securities available for sale are recorded
at fair value on a recurring basis. The fair value measurement of most of DBI’s AFS securities is currently determined by an independent
provider using Level 2 inputs. The measurement is based upon quoted prices for similar assets, if available. If quoted prices are not
available, fair values are measured using matrix pricing models, or other model-based valuation techniques requiring observable inputs
other than quoted prices such as yield curves, prepayment speed and default rates.
Assets measured at fair value on a recurring basis,
are summarized in the table below:
| | |
December 31, 2021 | |
| | |
Fair Value Measurements Using | | |
| |
| Description | |
Level 1 | | |
Level 2 | | |
Level 3 | | |
Fair Value | |
| U.S. Government Treasuries | |
$ | 0 | | |
$ | 7,333,222 | | |
$ | 0 | | |
$ | 7,333,222 | |
| U.S. Government-sponsored agency MBS | |
| 0 | | |
| 12,920,055 | | |
| 0 | | |
| 12,920,055 | |
| State and local governments | |
| 0 | | |
| 15,399,015 | | |
| 0 | | |
| 15,399,015 | |
| Asset-backed securities | |
| 0 | | |
| 810,158 | | |
| 0 | | |
| 810,158 | |
| Total securities available for sale | |
$ | 0 | | |
$ | 36,462,450 | | |
$ | 0 | | |
$ | 36,462,450 | |
| | |
December 31, 2020 | |
| | |
Fair Value Measurements Using | | |
| |
| Description | |
Level 1 | | |
Level 2 | | |
Level 3 | | |
Fair Value | |
| U.S. Government-sponsored agency MBS | |
$ | 0 | | |
$ | 11,698,523 | | |
$ | 0 | | |
$ | 11,698,523 | |
| State and local governments | |
| 0 | | |
| 18,687,446 | | |
| 0 | | |
| 18,687,446 | |
| Asset-backed securities | |
| 0 | | |
| 943,387 | | |
| 0 | | |
| 943,387 | |
| Total securities available for sale | |
$ | 0 | | |
$ | 31,329,356 | | |
$ | 0 | | |
$ | 31,329,356 | |
Assets Recorded at Fair Value on a Nonrecurring
Basis
Other investments do not have readily determinable
fair values. DBI carries the securities at cost minus impairment, if any, plus or minus changes resulting from observable price changes
in orderly transactions for the security by the same investee. When an observable price change in an orderly transaction occurs during
the year, the investment is classified as nonrecurring Level 1 within the valuation hierarchy.
A loan is considered impaired when, based on current
information or events, it is probable that not all amounts due will be collected according to the contractual terms of the loan agreement.
Impairment is measured based on the fair value of the underlying collateral. The collateral value is determined based on appraisals and
other market valuations for similar assets. The value of impaired loans is typically 65% - 80% of appraised value. Under FASB ASC Topic
820, “Fair Value Measurements and Disclosures,” the fair value of impaired loans is reported before selling costs of the
related collateral, while FASB ASC Topic 310, “Receivables,” requires that impaired loans be reported on the balance
sheet net of estimated selling costs. Therefore, significant estimated selling costs would result in the reported fair value of impaired
loans being greater than the measurement value of impaired loans as maintained on the balance sheet. In most instances, selling costs
were estimated for real estate-secured collateral and included broker commissions, legal and title transfer fees and closing costs. Given
the valuation technique and significant unobservable inputs utilized to determine the fair value, impaired loans are classified as nonrecurring
Level 3 assets.
Assets measured at fair value on a nonrecurring
basis, are summarized in the following table:
| | |
December 31, 2021 | |
| | |
Fair Value Measurements Using | | |
| |
| Description | |
Level 1 | | |
Level 2 | | |
Level 3 | | |
Fair Value | |
| Other investments | |
$ | 416,249 | | |
$ | 0 | | |
$ | 0 | | |
$ | 416,249 | |
| Impaired loans | |
| 0 | | |
| 0 | | |
| 200 | | |
| 200 | |
| Total Assets | |
$ | 416,249 | | |
$ | 0 | | |
$ | 200 | | |
$ | 416,449 | |
| | |
December 31, 2020 | |
| | |
Fair Value Measurements Using | | |
| |
| Description | |
Level 1 | | |
Level 2 | | |
Level 3 | | |
Fair Value | |
| Other investments | |
$ | 275,280 | | |
$ | 0 | | |
$ | 0 | | |
$ | 275,280 | |
| Impaired loans | |
| 0 | | |
| 0 | | |
| 109,038 | | |
| 109,038 | |
| Total Assets | |
$ | 275,280 | | |
$ | 0 | | |
$ | 109,038 | | |
$ | 384,318 | |
The tables below summarize fair value of financial
assets and liabilities at December 31, 2021 and 2020.
| | |
December 31, 2021 | |
| | |
Carrying | | |
Fair | | |
Fair Value Hierarchy Level | |
| | |
Amount | | |
Value | | |
Level 1 | | |
Level 2 | | |
Level 3 | |
| Financial Assets | |
| | | |
| | | |
| | | |
| | | |
| | |
| Cash and federal funds sold | |
$ | 151,155,222 | | |
$ | 151,155,222 | | |
$ | 151,155,222 | | |
$ | 0 | | |
$ | 0 | |
| Investment securities | |
| 36,462,450 | | |
| 36,462,450 | | |
| 0 | | |
| 36,462,450 | | |
| 0 | |
| Loans, net of allowance for loan losses | |
| 471,315,561 | | |
| 471,310,578 | | |
| 0 | | |
| 0 | | |
| 471,310,578 | |
| Loans held for sale | |
| 82,401 | | |
| 84,960 | | |
| 0 | | |
| 84,960 | | |
| 0 | |
| Mortgage servicing rights | |
| 1,083,140 | | |
| 1,083,140 | | |
| 0 | | |
| 0 | | |
| 1,083,140 | |
| Other investments | |
| 3,724,977 | | |
| 3,724,977 | | |
| 416,249 | | |
| 0 | | |
| 3,308,728 | |
| Accrued interest receivable | |
| 1,304,890 | | |
| 1,304,890 | | |
| 0 | | |
| 1,304,890 | | |
| 0 | |
| TOTAL | |
$ | 665,128,641 | | |
$ | 665,126,217 | | |
$ | 151,571,471 | | |
$ | 37,852,300 | | |
$ | 475,702,446 | |
| Financial Liabilities | |
| | | |
| | | |
| | | |
| | | |
| | |
| Deposits | |
$ | 614,497,253 | | |
$ | 615,925,949 | | |
$ | 507,346,558 | | |
$ | 108,579,391 | | |
$ | 0 | |
| Borrowings | |
| 932,844 | | |
| 963,151 | | |
| 0 | | |
| 963,151 | | |
| 0 | |
| Accrued interest payable | |
| 161,199 | | |
| 161,199 | | |
| 0 | | |
| 161,199 | | |
| 0 | |
| TOTAL | |
$ | 615,591,296 | | |
$ | 617,050,299 | | |
$ | 507,346,558 | | |
$ | 109,703,741 | | |
$ | 0 | |
| | |
December 31, 2020 | |
| | |
Carrying | | |
Fair | | |
Fair Value Hierarchy Level | |
| | |
Amount | | |
Value | | |
Level 1 | | |
Level 2 | | |
Level 3 | |
| Financial Assets | |
| | | |
| | | |
| | | |
| | | |
| | |
| Cash and federal funds sold | |
$ | 118,310,394 | | |
$ | 118,310,394 | | |
$ | 118,310,394 | | |
$ | 0 | | |
$ | 0 | |
| Investment securities | |
| 31,329,356 | | |
| 31,329,356 | | |
| 0 | | |
| 31,329,356 | | |
| 0 | |
| Loans, net of allowance for loan losses | |
| 468,284,230 | | |
| 473,648,020 | | |
| 0 | | |
| 0 | | |
| 473,648,020 | |
| Loans held for sale | |
| 1,404,587 | | |
| 1,433,418 | | |
| 0 | | |
| 1,433,418 | | |
| 0 | |
| Mortgage servicing rights | |
| 828,720 | | |
| 828,720 | | |
| 0 | | |
| 0 | | |
| 828,720 | |
| Other investments | |
| 2,995,438 | | |
| 2,995,438 | | |
| 275,280 | | |
| 0 | | |
| 2,720,158 | |
| Accrued interest receivable | |
| 1,624,762 | | |
| 1,624,762 | | |
| 0 | | |
| 1,624,762 | | |
| 0 | |
| TOTAL | |
$ | 624,777,487 | | |
$ | 630,170,108 | | |
$ | 118,585,674 | | |
$ | 34,387,536 | | |
$ | 477,196,898 | |
| Financial Liabilities | |
| | | |
| | | |
| | | |
| | | |
| | |
| Deposits | |
$ | 563,274,508 | | |
$ | 565,911,465 | | |
$ | 433,788,465 | | |
$ | 132,123,000 | | |
$ | 0 | |
| Borrowings | |
| 14,066,975 | | |
| 14,660,147 | | |
| 0 | | |
| 14,660,147 | | |
| 0 | |
| Accrued interest payable | |
| 272,609 | | |
| 272,609 | | |
| 0 | | |
| 272,609 | | |
| 0 | |
| TOTAL | |
$ | 577,614,092 | | |
$ | 580,844,221 | | |
$ | 433,788,465 | | |
$ | 147,055,756 | | |
$ | 0 | |
NOTE 14 – REGULATORY MATTERS
DSB is subject to various regulatory capital requirements
administered by the federal and state banking agencies. Failure to meet minimum capital requirements can initiate certain mandatory and
possible additional discretionary actions by regulators that, if undertaken, could have a direct material effect on DSB’s financial
statements. Under capital adequacy guidelines and regulatory framework for prompt corrective action, DSB must meet specific capital guidelines
that involve quantitative measures of DSB’s assets, liabilities and certain off-balance sheet items as calculated under regulatory
accounting practices. DSB’s capital amounts and classification are also subject to qualitative judgments by the regulators about
components, risk weightings and other factors.
Quantitative measures established by regulation
to ensure capital adequacy require DSB to maintain minimum amounts and ratios (set forth in the table below) of Tier 1 and Total capital
to risk-weighted assets and of Tier 1 capital to average assets. In addition, DSB is also required to maintain minimum amounts and ratios
of Common Equity Tier 1 capital to risk-weighted assets. It is management’s opinion, as of December 31, 2020, that DSB meets
all applicable capital adequacy requirements. DBI will be subject to the same minimum amounts and ratios as DSB once total assets exceed
$3 billion.
As of December 31, 2020, the most recent
notification from the Federal Deposit Insurance Corporation categorized DSB as well-capitalized under the regulatory framework for prompt
corrective action. To be categorized well-capitalized DSB must maintain minimum total risk-based, tier 1 risk-based and tier 1 leverage
ratios as set forth in the table below. These tables do not include the 2.5 percent capital conservation buffer requirement. A Bank with
a capital conservation buffer greater than 2.5 percent of risk-weighted assets would not be restricted by payout limitations. However,
if the 2.5 percent threshold is not met, the Bank would be subject to increased limitations on capital distributions and discretionary
bonus payments to executive officers as the capital conservation buffer approaches zero. Capital ratios for DBI are provided for information
purposes only as there are no regulatory capital requirements for the holding company.
| | |
| | |
| | |
| | |
| | |
To Be Well Capitalized | |
| | |
| | |
| | |
| | |
| | |
Under Prompt | |
| | |
| | |
| | |
Minimum For Capital | | |
Corrective | |
| | |
Amount | | |
Adequacy Purposes: | | |
Action Provision: | |
| | |
Amount | | |
Ratio | | |
Amount | | |
Ratio | | |
Amount | | |
Ratio | |
| As of December 31, 2021 | |
| | |
| | |
| | |
| | |
| | |
| |
| Denmark Bancshares, Inc. | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
| Total Capital (to Risk-Weighted Assets) | |
$ | 74,162,766 | | |
| 14.6 | % | |
| N/A | | |
| N/A | | |
| N/A | | |
| N/A | |
| Tier 1 Capital (to Risk-Weighted Assets) | |
$ | 67,804,105 | | |
| 13.4 | % | |
| N/A | | |
| N/A | | |
| N/A | | |
| N/A | |
| Tier 1 Capital (to Average Assets)* | |
$ | 67,804,105 | | |
| 10.2 | % | |
| N/A | | |
| N/A | | |
| N/A | | |
| N/A | |
| Denmark State Bank | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
| Common Equity Tier 1 Capital (to Risk-Weighted Assets) | |
$ | 60,433,556 | | |
| 12.4 | % | |
$ | 21,951,716 | | |
| >4.5 | % | |
$ | 31,708,035 | | |
| >6.5 | % |
| Total Capital (to Risk-Weighted Assets) | |
$ | 66,551,543 | | |
| 13.6 | % | |
$ | 39,025,273 | | |
| >8.0 | % | |
$ | 48,781,592 | | |
| >10.0 | % |
| Tier 1 Capital (to Risk-Weighted Assets) | |
$ | 60,433,556 | | |
| 12.4 | % | |
$ | 29,268,955 | | |
| >6.0 | % | |
$ | 39,025,273 | | |
| >8.0 | % |
| Tier 1 Capital (to Average Assets)* | |
$ | 60,433,556 | | |
| 9.1 | % | |
$ | 26,659,975 | | |
| >4.0 | % | |
$ | 33,324,969 | | |
| >5.0 | % |
| | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
| As of December 31, 2020 | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
| Denmark Bancshares, Inc. | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
| Total Capital (to Risk-Weighted Assets) | |
$ | 70,274,205 | | |
| 14.6 | % | |
| N/A | | |
| N/A | | |
| N/A | | |
| N/A | |
| Tier 1 Capital (to Risk-Weighted Assets) | |
$ | 64,243,052 | | |
| 13.4 | % | |
| N/A | | |
| N/A | | |
| N/A | | |
| N/A | |
| Tier 1 Capital (to Average Assets)* | |
$ | 64,243,052 | | |
| 9.9 | % | |
| N/A | | |
| N/A | | |
| N/A | | |
| N/A | |
| Denmark State Bank | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
| Common Equity Tier 1 Capital (to Risk-Weighted Assets) | |
$ | 55,653,663 | | |
| 12.0 | % | |
$ | 20,842,086 | | |
| >4.5 | % | |
$ | 30,105,235 | | |
| >6.5 | % |
| Total Capital (to Risk-Weighted Assets) | |
$ | 61,466,328 | | |
| 13.3 | % | |
$ | 37,052,597 | | |
| >8.0 | % | |
$ | 46,315,747 | | |
| >10.0 | % |
| Tier 1 Capital (to Risk-Weighted Assets) | |
$ | 55,653,663 | | |
| 12.0 | % | |
$ | 27,789,448 | | |
| >6.0 | % | |
$ | 37,052,597 | | |
| >8.0 | % |
| Tier 1 Capital (to Average Assets)* | |
$ | 55,653,663 | | |
| 8.7 | % | |
$ | 25,655,250 | | |
| >4.0 | % | |
$ | 32,069,063 | | |
| >5.0 | % |
*Average assets are based on the most recent quarter’s
adjusted average total assets.
Wisconsin law provides that state chartered banks
may declare and pay dividends out of undivided profits but only after provision has been made for all expenses, losses, required reserves,
taxes and interest accrued or due from the bank. Payment of dividends in some circumstances may require the written consent of the Wisconsin
Department of Financial Institutions –Division of Banking (“WDFI”).
NOTE 15 – PARENT COMPANY ONLY INFORMATION
Following in a condensed form, are parent company
only statements of financial condition, income and cash flows of DBI. The financial information contained in this footnote is to be read
in association with the preceding accompanying notes to the consolidated financial statements.
