NEW INDEPENDENT BANCSHARES, INC. AND SUBSIDIARY Notes to the Consolidated Financial Statements
NOTE 4. LOANS( Continued)
Purchased Loans with Credit Deterioration
The following table provides a reconciliation of the purchase price of purchased loans with credit deterioration to the par value of the loans:
Purchase Price Allowance for Credit Losses Discount Attributed Par Value
$ 1,404,179( 1,007,939)
( 33,207) $ 363,033
Credit Quality
The Bank internally categorizes loans into risk categories based on relevant information about 1) the capacity of the borrower to repay the debt, 2) the character of the borrower, 3) the borrower ' s capital( for commercial lending), 4) the collateral associated with the debt, 5) the borrower ' s financial condition, and 6) the documentation associated with the debt. The information for each of the credit quality indicators is updated on a quarterly basis. The internally assigned grades are as follows:
Pass- loans in this category have strong asset quality and / or strong liquidity.
Special mention- loans are currently protected but are potentially weak. The credit risk may be relatively minor, yet constitute an increased risk in light of the circumstances surrounding a specific loan.
Substandard- loans show signs of continuing negative financial trends and unprofitability at various times, and therefore are inadequately protected by the current sound worth and paying capacity of the obliger or of the collateral pledged, if any.
Doubtful- loans are illiquid and highly leveraged, have negative net worth, cash flow, and continuing trend serious losses. The possibility of loss is extremely high, but because of certain important and reasonably specific pending factors which may work to the advantage and strengthening of the asset, its classification as loss is deferred until is more exact status may be determined.
Loss- loans are considered uncollectible and of such little value that their continuance as bankable loans is not warranted.
38 | 2025 NWSB Annual Report