The following summarizes the quarterly results of operations for the years ended December 31:
First Second Third Fourth
2014 Quarter Quarter Quarter Quarter
Total Interest Income... $36,272 $37,155 $36,190 $37,110 Total Interest Expense... 11,708 11,359 11,205 11,058 Net Interest Income ... 24,564 25,796 24,985 26,052
Provision For Loan Losses... 750 750 750 750
Net Interest Income After
Provision for Loan Losses ... 23,814 25,046 24,235 25,302 Total Non-Interest Income... 3,370 3,703 3,402 4,129 Total Non-Interest Expense... 17,237 17,484 17,243 17,752 Income Before Income Taxes ... 9,947 11,265 10,394 11,679 Income Tax Expense... 2,412 2,803 2,543 2,067 Net Income ... $7,535 $8,462 $7,851 $9,612 Basic and Diluted
Net Income Per Share $ 0.28 $ 0.32 $ 0.30 $ 0.37
First Second Third Fourth
2013 Quarter Quarter Quarter Quarter
Total Interest Income... $37,863 $36,419 $36,875 $36,131 Total Interest Expense... 13,739 13,847 12,987 12,215 Net Interest Income ... 24,124 22,572 23,888 23,916
Provision For Loan Losses... 675 675 675 675
Net Interest Income After
Provision for Loan Losses ... 23,449 21,897 23,213 23,241 Total Non-Interest Income... 3,269 3,088 2,825 3,679 Total Non-Interest Expense... 17,291 17,037 17,399 17,778 Income Before Income Taxes ... 9,427 7,948 8,639 9,142 Income Tax Expense... 2,360 1,866 2,060 2,794 Net Income ... $7,067 $6,082 $6,579 $6,348 Basic and Diluted
Net Income Per Share $ 0.27 $ 0.23 $ 0.25 $ 0.24
First Second Third Fourth
2012 Quarter Quarter Quarter Quarter
Total Interest Income... $38,928 $39,188 $40,194 $38,512 Total Interest Expense... 13,828 14,164 14,304 14,203 Net Interest Income ... 25,100 25,024 25,890 24,309
Provision For Loan Losses... 600 600 600 600
Net Interest Income After
Provision for Loan Losses ... 24,500 24,424 25,290 23,709 Total Non-Interest Income... 3,203 2,659 2,743 4,162 Total Non-Interest Expense... 16,838 16,992 16,712 19,026 Income Before Income Taxes ... 10,865 10,091 11,321 8,845 Income Tax Expense... 2,696 2,529 2,975 2,575 Net Income ... $8,169 $7,562 $8,346 $6,270 Basic and Diluted
21. LEASES AND RENT EXPENSE
The Bank leases offices from non-related parties under various terms. Rental expense for these leases was $137,000 for 2014, $140,000 in 2013 and $157,000 in 2012.
Future minimum rental payments under these leases are as follows:
Year Ending December 31, 2015 ... $ 137
2016... 137
2017... 137
2018... 137
2019... 80
Thereafter ... 264
Total Minimum Lease Payments... $ 892
22. OFF BALANCE SHEET ACTIVITIES AND COMMITMENTS
Commitments to extend credit, which amounted to $88,207,000 at December 31, 2014 and $129,111,000 at December 31, 2013, represent agreements to lend to customers with fixed expiration dates or other termination clauses. Since many of the commitments are expected to expire without being funded, the total commitment amounts do not necessarily represent future liquidity requirements. Standby letters of credit are conditional commitments issued by the Bank guaranteeing the performance of a customer to a third party. Those guarantees are primarily issued to support public and private borrowing arrangements. The Bank had outstanding letters of credit in the amount of $25,806,000 in 2014 and $25,446,000 in 2013.
Our exposure to credit loss in the event of nonperformance by the other party to the financial instrument for commitments to extend credit and standby letters of credit is represented by the contractual amount of those instruments. The Bank uses the same credit policies in making commitments and unconditional obligations as it does for on-balance-sheet instruments. Unless noted oth- erwise, collateral or other security is required to support financial instruments with credit risk.
The Bank is not a member of the Federal Reserve System but is required to maintain certain levels of its cash and due from bank balances as reserves based on regulatory requirements. At December 31, 2014 and 2013, this reserve requirement was approxi- mately $31,475,000 and $33,133,000, respectively.
Federal banking regulations place certain restrictions on dividends paid by the Bank. The total amount of dividends which may be paid at any date is generally limited to the retained earnings of the Bank. In addition, dividends paid by the Bank would be pro- hibited if the effect thereof would cause the Bank’s capital to be reduced below applicable minimum capital requirements.
23. CONSOLIDATED SUBSIDIARIES
As of the date of the Bank Merger described in Note 1, the Mortgage Company of Virginia, Inc. (MCOV) became a wholly-owned subsidiary of the Bank. Prior to the merger, each bank owned 10% of the outstanding common stock. MCOV owns 100% of Bank Services of Virginia, Inc. The business of both of these companies is to provide operational support services to the Bank. These services consist of mortgage loan servicing, data processing, bookkeeping, check clearing, accounting, investment management, bank couriers, advertising programs, central purchasing and other management services. Prior to the merger, the merged banks recorded their investments in common stock of the Mortgage Company of Virginia, Inc. under the equity method of accounting due to the influence the merged banks had over the Company.
As a result of the Bank Building Merger, Carter Bank & Trust acquired four income producing properties: two anchored shopping centers, an office building and a restaurant plus lots and land. These assets are owned by C B & T Real Estate Holdings, Inc., a sep- arate wholly-owned subsidiary of Carter Bank & Trust. Regulators required these properties to be carried by a wholly-owned sub- sidiary rather than owned by the Bank itself. Those properties will be sold sometime in the future when market conditions are favorable.
The Mortgage Company of Virginia, Inc. owns 100% of Bank Services Insurance, Inc. Bank Services Insurance, Inc. provides in- surance products to the Bank and customers in the Danville area. The premiums paid to Bank Services Insurance, Inc. by Carter Bank & Trust equaled $312,000 for 2014, $626,000 for 2013 and $368,000 for 2012. The decrease in premiums was due to payment of a three-year blanket bond policy in prior years.
The merger was accounted for in the manner required by Generally Accepted Accounting Principles, which required that all business combinations be accounted for by the “purchase” method of accounting at the time of the merger. Under the purchase method of ac- counting, the assets and liabilities of Bank Building were recorded at their fair values and the excess of the purchase price over the fair value of net assets was allocated to goodwill. Financial statements of Carter Bank & Trust issued after the consummation of the merger