x | | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
¨ | | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
Maryland | | 52-1974638 |
(State or Other Jurisdiction of | | (I.R.S. Employer |
Incorporation or Organization) | | Identification No.) |
28969 Information Lane, Easton, Maryland | | 21601 |
(Address of Principal Executive Offices) | | (Zip Code) |
| Large accelerated filer | ¨ | Accelerated filer | ¨ |
| Non-accelerated filer | ¨ | Smaller reporting company | þ |
| (Do not check if a smaller reporting company) | | |
| | Page |
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Part I. Financial Information | | 2 |
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Item 1. Financial Statements | | 2 |
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Consolidated Balance Sheets - | | |
June 30, 2013 (unaudited) and December 31, 2012 | | 2 |
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Consolidated Statements of Operations - | | |
For the three and six months ended June 30, 2013 and 2012 (unaudited) | | 3 |
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Consolidated Statements of Comprehensive Income (Loss) - | | |
For the three and six months ended June 30, 2013 and 2012 (unaudited) | | 4 |
| | |
Consolidated Statements of Changes in Stockholders’ Equity - | | |
For the six months ended June 30, 2013 and 2012 (unaudited) | | 5 |
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Consolidated Statements of Cash Flows - | | |
For the six months ended June 30, 2013 and 2012 (unaudited) | | 6 |
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Notes to Consolidated Financial Statements (unaudited) | | 7 |
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Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations | | 27 |
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Item 3. Quantitative and Qualitative Disclosures about Market Risk | | 40 |
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Item 4. Controls and Procedures | | 40 |
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Part II. Other Information | | 41 |
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Item 1. Legal Proceedings | | 41 |
| | |
Item 1A. Risk Factors | | 41 |
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Item 2. Unregistered Sales of Equity Securities and Use of Proceeds | | 41 |
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Item 3. Defaults Upon Senior Securities | | 41 |
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Item 4. Mine Safety Disclosures | | 41 |
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Item 5. Other Information | | 41 |
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Item 6. Exhibits | | 41 |
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Signatures | | 41 |
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Exhibit Index | | 42 |
| | June 30, | | December 31, | | ||
| | 2013 | | 2012 | | ||
| | (Unaudited) | | | | | |
ASSETS | | | | | | | |
Cash and due from banks | | $ | 22,607 | | $ | 26,579 | |
Interest-bearing deposits with other banks | | | 99,332 | | | 164,864 | |
Federal funds sold | | | 2,567 | | | 8,750 | |
Investment securities: | | | | | | | |
Available for sale, at fair value | | | 95,336 | | | 145,508 | |
Held to maturity, at amortized cost fair value of $2,748 (2013) and $2,884 (2012) | | | 2,591 | | | 2,657 | |
| | | | | | | |
Loans | | | 782,188 | | | 785,082 | |
Less: allowance for credit losses | | | (15,723) | | | (15,991) | |
Loans, net | | | 766,465 | | | 769,091 | |
| | | | | | | |
Premises and equipment, net | | | 15,315 | | | 15,593 | |
Goodwill | | | 12,454 | | | 12,454 | |
Other intangible assets, net | | | 3,668 | | | 3,816 | |
Other real estate and other assets owned, net | | | 6,408 | | | 7,659 | |
Other assets | | | 27,534 | | | 28,836 | |
TOTAL ASSETS | | $ | 1,054,277 | | $ | 1,185,807 | |
| | | | | | | |
LIABILITIES | | | | | | | |
Deposits: | | | | | | | |
Noninterest-bearing | | $ | 158,562 | | $ | 153,992 | |
Interest-bearing | | | 763,545 | | | 895,281 | |
Total deposits | | | 922,107 | | | 1,049,273 | |
| | | | | | | |
Short-term borrowings | | | 10,095 | | | 13,761 | |
Other liabilities | | | 8,481 | | | 8,747 | |
TOTAL LIABILITIES | | | 940,683 | | | 1,071,781 | |
| | | | | | | |
STOCKHOLDERS’ EQUITY | | | | | | | |
Common stock, par value $.01 per share; shares authorized 35,000,000; shares issued and outstanding 8,461,289 (2013) and 8,457,359 (2012) | | | 85 | | | 85 | |
Additional paid in capital | | | 32,169 | | | 32,155 | |
Retained earnings | | | 81,661 | | | 81,078 | |
Accumulated other comprehensive (loss) income | | | (321) | | | 708 | |
TOTAL STOCKHOLDERS’ EQUITY | | | 113,594 | | | 114,026 | |
TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY | | $ | 1,054,277 | | $ | 1,185,807 | |
| | For the Three Months Ended | | For the Six Months Ended | | ||||||||
| | June 30, | | June 30, | | ||||||||
| | 2013 | | 2012 | | 2013 | | 2012 | | ||||
| | | | | | | | | | | | | |
INTEREST INCOME | | | | | | | | | | | | | |
Interest and fees on loans | | $ | 10,142 | | $ | 10,890 | | $ | 20,049 | | $ | 21,901 | |
Interest and dividends on investment securities: | | | | | | | | | | | | | |
Taxable | | | 568 | | | 707 | | | 1,211 | | | 1,464 | |
Tax-exempt | | | 4 | | | 32 | | | 9 | | | 70 | |
Interest on federal funds sold | | | 1 | | | 2 | | | 3 | | | 4 | |
Interest on deposits with other banks | | | 40 | | | 61 | | | 90 | | | 109 | |
Total interest income | | | 10,755 | | | 11,692 | | | 21,362 | | | 23,548 | |
| | | | | | | | | | | | | |
INTEREST EXPENSE | | | | | | | | | | | | | |
Interest on deposits | | | 1,748 | | | 2,643 | | | 3,870 | | | 5,284 | |
Interest on short-term borrowings | | | 6 | | | 11 | | | 14 | | | 26 | |
Interest on long-term debt | | | - | | | 5 | | | - | | | 10 | |
Total interest expense | | | 1,754 | | | 2,659 | | | 3,884 | | | 5,320 | |
| | | | | | | | | | | | | |
NET INTEREST INCOME | | | 9,001 | | | 9,033 | | | 17,478 | | | 18,228 | |
Provision for credit losses | | | 2,700 | | | 3,525 | | | 4,850 | | | 11,895 | |
| | | | | | | | | | | | | |
NET INTEREST INCOME AFTER PROVISION FOR CREDIT LOSSES | | | 6,301 | | | 5,508 | | | 12,628 | | | 6,333 | |
| | | | | | | | | | | | | |
NONINTEREST INCOME | | | | | | | | | | | | | |
Service charges on deposit accounts | | | 600 | | | 622 | | | 1,172 | | | 1,270 | |
Trust and investment fee income | | | 393 | | | 446 | | | 783 | | | 869 | |
Gains on sales of investment securities | | | 913 | | | - | | | 913 | | | - | |
Insurance agency commissions | | | 2,633 | | | 2,406 | | | 5,446 | | | 5,095 | |
Loss on termination of cash flow hedge | | | (1,306) | | | - | | | (1,306) | | | - | |
Other noninterest income | | | 729 | | | 1,103 | | | 1,444 | | | 1,917 | |
Total noninterest income | | | 3,962 | | | 4,577 | | | 8,452 | | | 9,151 | |
| | | | | | | | | | | | | |
NONINTEREST EXPENSE | | | | | | | | | | | | | |
Salaries and wages | | | 4,307 | | | 4,376 | | | 8,590 | | | 8,792 | |
Employee benefits | | | 1,006 | | | 956 | | | 2,140 | | | 2,126 | |
Occupancy expense | | | 612 | | | 638 | | | 1,209 | | | 1,325 | |
Furniture and equipment expense | | | 243 | | | 212 | | | 493 | | | 463 | |
Data processing | | | 706 | | | 694 | | | 1,409 | | | 1,360 | |
Directors’ fees | | | 55 | | | 127 | | | 176 | | | 236 | |
Amortization of other intangible assets | | | 74 | | | 96 | | | 148 | | | 222 | |
Insurance agency commissions expense | | | 458 | | | 344 | | | 919 | | | 729 | |
FDIC insurance premium expense | | | 367 | | | 344 | | | 733 | | | 617 | |
Write-downs of other real estate owned | | | 56 | | | 278 | | | 728 | | | 853 | |
Other noninterest expenses | | | 1,875 | | | 1,598 | | | 3,705 | | | 3,438 | |
Total noninterest expense | | | 9,759 | | | 9,663 | | | 20,250 | | | 20,161 | |
| | | | | | | | | | | | | |
INCOME (LOSS) BEFORE INCOME TAXES | | | 504 | | | 422 | | | 830 | | | (4,677) | |
Income tax expense (benefit) | | | 143 | | | 129 | | | 247 | | | (1,934) | |
| | | | | | | | | | | | | |
NET INCOME (LOSS) | | $ | 361 | | $ | 293 | | $ | 583 | | $ | (2,743) | |
| | | | | | | | | | | | | |
Basic net income (loss) per common share | | $ | 0.04 | | $ | 0.03 | | $ | 0.07 | | $ | (0.32) | |
Diluted net income (loss) per common share | | $ | 0.04 | | $ | 0.03 | | $ | 0.07 | | $ | (0.32) | |
Dividends paid per common share | | $ | - | | $ | - | | $ | - | | $ | 0.01 | |
| | For the Three Months Ended June 30, | | For the Six Months Ended June 30, | | ||||||||
| | 2013 | | 2012 | | 2013 | | 2012 | | ||||
| | | | | | | | | | | | | |
Net income (loss) | | $ | 361 | | $ | 293 | | $ | 583 | | $ | (2,743) | |
| | | | | | | | | | | | | |
Other comprehensive (loss) income | | | | | | | | | | | | | |
Securities available for sale: | | | | | | | | | | | | | |
Unrealized holding (losses) gains on available-for-sale securities | | | (2,560) | | | 534 | | | (2,800) | | | 915 | |
Tax effect | | | 1,034 | | | (216) | | | 1,130 | | | (369) | |
Reclassification of gains recognized in net income | | | (913) | | | - | | | (913) | | | - | |
Tax effect | | | 368 | | | - | | | 368 | | | - | |
Net of tax amount | | | (2,071) | | | 318 | | | (2,215) | | | 546 | |
| | | | | | | | | | | | | |
Cash flow hedging activities: | | | | | | | | | | | | | |
Unrealized holding gains on cash flow hedging activities | | | 265 | | | 421 | | | 681 | | | 780 | |
Tax effect | | | (106) | | | (170) | | | (274) | | | (315) | |
Reclassification of losses recognized in net income | | | 1,306 | | | - | | | 1,306 | | | - | |
Tax effect | | | (527) | | | - | | | (527) | | | - | |
Net of tax amount | | | 938 | | | 251 | | | 1,186 | | | 465 | |
Total other comprehensive (loss) income | | | (1,133) | | | 569 | | | (1,029) | | | 1,011 | |
Comprehensive (loss) income | | $ | (772) | | $ | 862 | | $ | (446) | | $ | (1,732) | |
| | | | | | | | | | | Accumulated | | | | | |
| | | | | Additional | | | | | Other | | Total | | |||
| | Common | | Paid in | | Retained | | Comprehensive | | Stockholders’ | | |||||
| | Stock | | Capital | | Earnings | | Income (Loss) | | Equity | | |||||
Balances, January 1, 2013 | | $ | 85 | | $ | 32,155 | | $ | 81,078 | | $ | 708 | | $ | 114,026 | |
Comprehensive loss: | | | | | | | | | | | | | | | | |
Net income | | | - | | | - | | | 583 | | | - | | | 583 | |
Unrealized losses on available-for-sale securities, net of reclassification adjustment, net of taxes | | | - | | | - | | | - | | | (2,215) | | | (2,215) | |
Unrealized gains on cash flow hedging activities, net of reclassification adjustment, net of taxes | | | - | | | - | | | - | | | 1,186 | | | 1,186 | |
Total comprehensive loss | | | | | | | | | | | | | | | (446) | |
| | | | | | | | | | | | | | | | |
Stock-based compensation | | | - | | | 14 | | | - | | | - | | | 14 | |
| | | | | | | | | | | | | | | | |
Balances, June 30, 2013 | | $ | 85 | | $ | 32,169 | | $ | 81,661 | | $ | (321) | | $ | 113,594 | |
| | | | | | | | | | | | | | | | |
Balances, January 1, 2012 | | $ | 85 | | $ | 32,052 | | $ | 90,801 | | $ | (1,689) | | $ | 121,249 | |
| | | | | | | | | | | | | | | | |
Comprehensive loss: | | | | | | | | | | | | | | | | |
Net loss | | | - | | | - | | | (2,743) | | | - | | | (2,743) | |
Unrealized gains on available-for-sale securities, net of taxes | | | - | | | - | | | - | | | 546 | | | 546 | |
Unrealized gains on cash flow hedging activities, net of taxes | | | - | | | - | | | - | | | 465 | | | 465 | |
Total comprehensive loss | | | | | | | | | | | | | | | (1,732) | |
| | | | | | | | | | | | | | | | |
Stock-based compensation | | | - | | | 35 | | | - | | | - | | | 35 | |
| | | | | | | | | | | | | | | | |
Cash dividends paid ($0.01 per share) | | | - | | | - | | | (85) | | | - | | | (85) | |
| | | | | | | | | | | | | | | | |
Balances, June 30, 2012 | | $ | 85 | | $ | 32,087 | | $ | 87,973 | | $ | (678) | | $ | 119,467 | |
| | For the Six Months Ended | | ||||
| | June 30, | | ||||
| | 2013 | | 2012 | | ||
CASH FLOWS FROM OPERATING ACTIVITIES: | | | | | | | |
Net income (loss) | | $ | 583 | | $ | (2,743) | |
Adjustments to reconcile net income (loss) to net cash provided by operating activities: | | | | | | | |
Provision for credit losses | | | 4,850 | | | 11,895 | |
Depreciation and amortization | | | 1,246 | | | 1,324 | |
Discount accretion on debt securities | | | (21) | | | (39) | |
Stock-based compensation expense | | | 40 | | | 141 | |
Excess tax expense from stock-based arrangements | | | (26) | | | (106) | |
Deferred income tax (benefit) expense | | | (1,006) | | | 238 | |
Gains on sales of investment securities | | | (913) | | | - | |
Gains on disposals of premises and equipment | | | - | | | (226) | |
Losses on sales and write-downs of other real estate owned | | | 911 | | | 862 | |
Loss on termination of cash flow hedge | | | 1,306 | | | - | |
Net changes in: | | | | | | | |
Accrued interest receivable | | | (55) | | | 289 | |
Other assets | | | 3,493 | | | (972) | |
Accrued interest payable | | | (53) | | | 19 | |
Other liabilities | | | (256) | | | 110 | |
Net cash provided by operating activities | | | 10,099 | | | 10,792 | |
| | | | | | | |
CASH FLOWS FROM INVESTING ACTIVITIES: | | | | | | | |
Proceeds from maturities and principal payments of investment securities available for sale | | | 18,612 | | | 21,308 | |
Proceeds from sales of investment securities available for sale | | | 40,351 | | | - | |
Purchases of investment securities available for sale | | | (12,048) | | | (24,238) | |
Proceeds from maturities and principal payments of investment securities held to maturity | | | 61 | | | 1,305 | |
Net change in loans | | | (4,680) | | | 13,529 | |
Purchases of premises and equipment | | | (203) | | | (1,381) | |
Proceeds from sales of premises and equipment | | | 4 | | | 307 | |
Proceeds from sales of other real estate owned | | | 2,838 | | | 1,395 | |
Return of investment in unconsolidated subsidiary | | | 85 | | | - | |
Net cash provided by investing activities | | | 45,020 | | | 12,225 | |
| | | | | | | |
CASH FLOWS FROM FINANCING ACTIVITIES: | | | | | | | |
Net changes in: | | | | | | | |
Noninterest-bearing deposits | | | 4,570 | | | 15,671 | |
Interest-bearing deposits | | | (131,736) | | | 7,113 | |
Short-term borrowings | | | (3,666) | | | (3,991) | |
Excess tax expense from stock-based arrangements | | | 26 | | | 106 | |
Common stock dividends paid | | | - | | | (85) | |
Net cash (used in) provided by financing activities | | | (130,806) | | | 18,814 | |
Net (decrease) increase in cash and cash equivalents | | | (75,687) | | | 41,831 | |
Cash and cash equivalents at beginning of period | | | 200,193 | | | 127,742 | |
Cash and cash equivalents at end of period | | $ | 124,506 | | $ | 169,573 | |
| | | | | | | |
Supplemental cash flows information: | | | | | | | |
Interest paid | | $ | 3,937 | | $ | 5,302 | |
Income taxes paid | | $ | 157 | | $ | 109 | |
Transfers from loans to other real estate owned | | $ | 2,456 | | $ | 4,371 | |
| | For the Three Months Ended | | For the Six Months Ended | | ||||||||
| | June 30, | | June 30, | | ||||||||
(In thousands, except per share data) | | 2013 | | 2012 | | 2013 | | 2012 | | ||||
Net income (loss) | | $ | 361 | | $ | 293 | | $ | 583 | | $ | (2,743) | |
Weighted average shares outstanding - Basic | | | 8,461 | | | 8,457 | | | 8,460 | | | 8,457 | |
Dilutive effect of common stock equivalents | | | 4 | | | - | | | - | | | - | |
Weighted average shares outstanding - Diluted | | | 8,465 | | | 8,457 | | | 8,460 | | | 8,457 | |
Earnings (loss) per common share - Basic | | $ | 0.04 | | $ | 0.03 | | $ | 0.07 | | $ | (0.32) | |
Earnings (loss) per common share - Diluted | | $ | 0.04 | | $ | 0.03 | | $ | 0.07 | | $ | (0.32) | |
| | | | | Gross | | Gross | | Estimated | | |||
| | Amortized | | Unrealized | | Unrealized | | Fair | | ||||
(Dollars in thousands) | | Cost | | Gains | | Losses | | Value | | ||||
Available-for-sale securities: | | | | | | | | | | | | | |
June 30, 2013: | | | | | | | | | | | | | |
Obligations of U.S. Government agencies and corporations | | $ | 29,718 | | $ | 46 | | $ | 331 | | $ | 29,433 | |
Mortgage-backed securities | | | 65,553 | | | 477 | | | 731 | | | 65,299 | |
Equity securities | | | 603 | | | 1 | | | - | | | 604 | |
Total | | $ | 95,874 | | $ | 524 | | $ | 1,062 | | $ | 95,336 | |
| | | | | | | | | | | | | |
December 31, 2012: | | | | | | | | | | | | | |
Obligations of U.S. Government agencies and corporations | | $ | 35,213 | | $ | 903 | | $ | 9 | | $ | 36,107 | |
Mortgage-backed securities | | | 106,524 | | | 2,464 | | | 208 | | | 108,780 | |
Equity securities | | | 596 | | | 25 | | | - | | | 621 | |
Total | | $ | 142,333 | | $ | 3,392 | | $ | 217 | | $ | 145,508 | |
| | | | | | | | | | | | | |
Held-to-maturity securities: | | | | | | | | | | | | | |
June 30, 2013: | | | | | | | | | | | | | |
Obligations of states and political subdivisions | | $ | 2,591 | | $ | 157 | | $ | - | | $ | 2,748 | |
| | | | | | | | | | | | | |
December 31, 2012: | | | | | | | | | | | | | |
Obligations of states and political subdivisions | | $ | 2,657 | | $ | 227 | | $ | - | | $ | 2,884 | |
| | Less than 12 Months | | More than 12 Months | | Total | | ||||||||||||
(Dollars in thousands) | | Fair Value | | Unrealized Losses | | Fair Value | | Unrealized Losses | | Fair Value | | Unrealized Losses | | ||||||
Available-for-sale securities: | | | | | | | | | | | | | | | | | | | |
U.S. Gov’t. agencies and corporations | | $ | 26,712 | | $ | 331 | | $ | - | | $ | - | | $ | 26,712 | | $ | 331 | |
Mortgage-backed securities | | | 38,369 | | | 731 | | | - | | | - | | | 38,369 | | | 731 | |
Total | | $ | 65,081 | | $ | 1,062 | | $ | - | | $ | - | | $ | 65,081 | | $ | 1,062 | |
| | Available for sale | | Held to maturity | | ||||||||
| | Amortized | | Estimated | | Amortized | | Estimated | | ||||
(Dollars in thousands) | | Cost | | Fair Value | | Cost | | Fair Value | | ||||
Due in one year or less | | $ | 24 | | $ | 25 | | $ | 145 | | $ | 145 | |
Due after one year through five years | | | 26,102 | | | 25,911 | | | 936 | | | 972 | |
Due after five years through ten years | | | 1,507 | | | 1,537 | | | 1,007 | | | 1,098 | |
Due after ten years | | | 67,638 | | | 67,259 | | | 503 | | | 533 | |
| | | 95,271 | | | 94,732 | | | 2,591 | | | 2,748 | |
Equity securities | | | 603 | | | 604 | | | - | | | - | |
Total | | $ | 95,874 | | $ | 95,336 | | $ | 2,591 | | $ | 2,748 | |
(Dollars in thousands) | | June 30, 2013 | | December 31, 2012 | | ||
Construction | | $ | 104,516 | | $ | 108,051 | |
Residential real estate | | | 288,494 | | | 288,011 | |
Commercial real estate | | | 321,191 | | | 314,941 | |
Commercial | | | 56,448 | | | 60,786 | |
Consumer | | | 11,539 | | | 13,293 | |
Total loans | | | 782,188 | | | 785,082 | |
Allowance for credit losses | | | (15,723) | | | (15,991) | |
Total loans, net | | $ | 766,465 | | $ | 769,091 | |
(Dollars in thousands) | | Construction | | Residential real estate | | Commercial real estate | | Commercial | | Consumer | | Unallocated | | Total | | |||||||
June 30, 2013 | | | | | | | | | | | | | | | | | | | | | | |
Loans individually evaluated for impairment | | $ | 34,638 | | $ | 22,438 | | $ | 27,258 | | $ | 711 | | $ | 51 | | $ | - | | $ | 85,096 | |
Loans collectively evaluated for impairment | | | 69,878 | | | 266,056 | | | 293,933 | | | 55,737 | | | 11,488 | | | - | | | 697,092 | |
Total loans | | $ | 104,516 | | $ | 288,494 | | $ | 321,191 | | $ | 56,448 | | $ | 11,539 | | $ | - | | $ | 782,188 | |
| | | | | | | | | | | | | | | | | | | | | | |
Allowance for credit losses allocated to: | | | | | | | | | | | | | | | | | | | | | | |
Loans individually evaluated for impairment | | $ | 717 | | $ | 377 | | $ | 2,189 | | $ | 29 | | $ | - | | $ | - | | $ | 3,312 | |
Loans collectively evaluated for impairment | | | 3,629 | | | 3,882 | | | 3,325 | | | 1,187 | | | 301 | | | 87 | | | 12,411 | |
Total allowance for credit losses | | $ | 4,346 | | $ | 4,259 | | $ | 5,514 | | $ | 1,216 | | $ | 301 | | $ | 87 | | $ | 15,723 | |
(Dollars in thousands) | | Construction | | Residential real estate | | Commercial real estate | | Commercial | | Consumer | | Unallocated | | Total | | |||||||
December 31, 2012 | | | | | | | | | | | | | | | | | | | | | | |
Loans individually evaluated for impairment | | $ | 37,029 | | $ | 18,549 | | $ | 32,447 | | $ | 715 | | $ | 87 | | $ | - | | $ | 88,827 | |
Loans collectively evaluated for impairment | | | 71,022 | | | 269,462 | | | 282,494 | | | 60,071 | | | 13,206 | | | - | | | 696,255 | |
Total loans | | $ | 108,051 | | $ | 288,011 | | $ | 314,941 | | $ | 60,786 | | $ | 13,293 | | $ | - | | $ | 785,082 | |
| | | | | | | | | | | | | | | | | | | | | | |
Allowance for credit losses allocated to: | | | | | | | | | | | | | | | | | | | | | | |
Loans individually evaluated for impairment | | $ | 941 | | $ | 598 | | $ | 614 | | $ | - | | $ | 48 | | $ | - | | $ | 2,201 | |
Loans collectively evaluated for impairment | | | 3,446 | | | 4,596 | | | 3,520 | | | 1,682 | | | 359 | | | 187 | | | 13,790 | |
Total allowance for credit losses | | $ | 4,387 | | $ | 5,194 | | $ | 4,134 | | $ | 1,682 | | $ | 407 | | $ | 187 | | $ | 15,991 | |
(Dollars in thousands) | | Unpaid principal balance | | Recorded investment with no allowance | | Recorded investment with an allowance | | Related allowance | | Quarter-to- date average recorded investment | | Year-to-date average recorded investment | | ||||||
June 30, 2013 | | | | | | | | | | | | | | | | | | | |
Impaired nonaccrual loans: | | | | | | | | | | | | | | | | | | | |
Construction | | $ | 10,961 | | $ | 3,751 | | $ | 3,744 | | $ | 600 | | $ | 7,080 | | $ | 7,401 | |
Residential real estate | | | 22,890 | | | 14,948 | | | 1,085 | | | 301 | | | 12,883 | | | 11,920 | |
Commercial real estate | | | 13,876 | | | 8,135 | | | 2,502 | | | 650 | | | 9,784 | | | 10,824 | |
Commercial | | | 1,611 | | | 573 | | | 29 | | | 29 | | | 531 | | | 537 | |
Consumer | | | 58 | | | 51 | | | - | | | - | | | 51 | | | 49 | |
Total | | | 49,396 | | | 27,458 | | | 7,360 | | | 1,580 | | | 30,329 | | | 30,731 | |
| | | | | | | | | | | | | | | | | | | |
Impaired accruing restructured loans: | | | | | | | | | | | | | | | | | | | |
Construction | | | 27,143 | | | 23,091 | | | 4,052 | | | 117 | | | 27,052 | | | 27,146 | |
Residential real estate | | | 6,405 | | | 4,554 | | | 1,851 | | | 76 | | | 6,814 | | | 6,882 | |
Commercial real estate | | | 16,621 | | | 10,503 | | | 6,118 | | | 1,539 | | | 16,414 | | | 16,903 | |
Commercial | | | 109 | | | 109 | | | - | | | - | | | 112 | | | 115 | |
Consumer | | | - | | | - | | | - | | | - | | | - | | | - | |
Total | | | 50,278 | | | 38,257 | | | 12,021 | | | 1,732 | | | 50,392 | | | 51,046 | |
| | | | | | | | | | | | | | | | | | | |
Total impaired loans: | | | | | | | | | | | | | | | | | | | |
Construction | | | 38,104 | | | 26,842 | | | 7,796 | | | 717 | | | 34,132 | | | 34,547 | |
Residential real estate | | | 29,295 | | | 19,502 | | | 2,936 | | | 377 | | | 19,697 | | | 18,802 | |
Commercial real estate | | | 30,497 | | | 18,638 | | | 8,620 | | | 2,189 | | | 26,198 | | | 27,727 | |
Commercial | | | 1,720 | | | 682 | | | 29 | | | 29 | | | 643 | | | 652 | |
Consumer | | | 58 | | | 51 | | | - | | | - | | | 51 | | | 49 | |
Total | | $ | 99,674 | | $ | 65,715 | | $ | 19,381 | | $ | 3,312 | | $ | 80,721 | | $ | 81,777 | |
(Dollars in thousands) | | Unpaid principal balance | | Recorded investment with no allowance | | Recorded investment with an allowance | | Related allowance | | Quarter-to- date average recorded investment | | Year-to-date average recorded investment | | ||||||
December 31, 2012 | | | | | | | | | | | | | | | | | | | |
Impaired nonaccrual loans: | | | | | | | | | | | | | | | | | | | |
Construction | | $ | 14,288 | | $ | 3,371 | | $ | 6,323 | | $ | 941 | | $ | 10,600 | | $ | 12,428 | |
Residential real estate | | | 17,975 | | | 9,469 | | | 2,063 | | | 598 | | | 13,294 | | | 17,472 | |
Commercial real estate | | | 19,515 | | | 11,838 | | | 2,729 | | | 614 | | | 13,554 | | | 12,975 | |
Commercial | | | 1,556 | | | 594 | | | - | | | - | | | 1,126 | | | 1,538 | |
Consumer | | | 92 | | | 39 | | | 48 | | | 48 | | | 50 | | | 55 | |
Total | | | 53,426 | | | 25,311 | | | 11,163 | | | 2,201 | | | 38,624 | | | 44,468 | |
| | | | | | | | | | | | | | | | | | | |
Impaired accruing restructured loans: | | | | | | | | | | | | | | | | | | | |
Construction | | | 27,335 | | | 27,335 | | | - | | | - | | | 27,907 | | | 21,193 | |
Residential real estate | | | 7,017 | | | 7,017 | | | - | | | - | | | 6,124 | | | 5,064 | |
Commercial real estate | | | 17,880 | | | 17,880 | | | - | | | - | | | 17,433 | | | 16,252 | |
Commercial | | | 121 | | | 121 | | | - | | | - | | | 105 | | | 87 | |
Consumer | | | - | | | - | | | - | | | - | | | - | | | - | |
Total | | | 52,353 | | | 52,353 | | | - | | | - | | | 51,569 | | | 42,596 | |
| | | | | | | | | | | | | | | | | | | |
Total impaired loans: | | | | | | | | | | | | | | | | | | | |
Construction | | | 41,623 | | | 30,706 | | | 6,323 | | | 941 | | | 38,507 | | | 33,621 | |
Residential real estate | | | 24,992 | | | 16,486 | | | 2,063 | | | 598 | | | 19,418 | | | 22,536 | |
Commercial real estate | | | 37,395 | | | 29,718 | | | 2,729 | | | 614 | | | 30,987 | | | 29,227 | |
Commercial | | | 1,677 | | | 715 | | | - | | | - | | | 1,231 | | | 1,625 | |
Consumer | | | 92 | | | 39 | | | 48 | | | 48 | | | 50 | | | 55 | |
Total | | $ | 105,779 | | $ | 77,664 | | $ | 11,163 | | $ | 2,201 | | $ | 90,193 | | $ | 87,064 | |
(Dollars in thousands) | | Number of contracts | | Premodification outstanding recorded investment | | Postmodification outstanding recorded investment | | Related allowance | | ||||
Troubled debt restructurings: | | | | | | | | | | | | | |
For the six months ended June 30, 2013 | | | | | | | | | | | | | |
Construction | | | 2 | | $ | 123 | | $ | 123 | | $ | - | |
Residential real estate | | | 3 | | | 783 | | | 798 | | | 37 | |
Commercial real estate | | | 1 | | | 474 | | | 474 | | | - | |
Commercial | | | - | | | - | | | - | | | - | |
Consumer | | | - | | | - | | | - | | | - | |
Total | | | 6 | | $ | 1,380 | | $ | 1,395 | | $ | 37 | |
| | | | | | | | | | | | | |
For the six months ended June 30, 2012 | | | | | | | | | | | | | |
Construction | | | 7 | | $ | 5,943 | | $ | 5,963 | | $ | - | |
Residential real estate | | | 8 | | | 2,613 | | | 2,276 | | | - | |
Commercial real estate | | | 3 | | | 5,351 | | | 5,514 | | | - | |
Commercial | | | - | | | - | | | - | | | - | |
Consumer | | | - | | | - | | | - | | | - | |
Total | | | 18 | | $ | 13,907 | | $ | 13,753 | | $ | - | |
(Dollars in thousands) | | Number of contracts | | Recorded investment | | Related allowance | | |||
Troubled debt restructurings that subsequently defaulted (1): | | | | | | | | | | |
For the six months ended June 30, 2013 | | | | | | | | | | |
Construction | | | - | | $ | - | | $ | - | |
Residential real estate | | | 4 | | | 1,563 | | | - | |
Commercial real estate | | | 1 | | | 1,741 | | | 74 | |
Commercial | | | - | | | - | | | - | |
Consumer | | | - | | | - | | | - | |
Total | | | 5 | | $ | 3,304 | | $ | 74 | |
| | | | | | | | | | |
Troubled debt restructurings that subsequently defaulted (2): | | | | | | | | | | |
For the six months ended June 30, 2012 | | | | | | | | | | |
Construction | | | 1 | | $ | 666 | | $ | - | |
Residential real estate | | | 3 | | | 913 | | | - | |
Commercial real estate | | | - | | | - | | | - | |
Commercial | | | - | | | - | | | - | |
Consumer | | | - | | | - | | | - | |
Total | | | 4 | | $ | 1,579 | | $ | - | |
(Dollars in thousands) | | Pass/Performing | | Special mention | | Substandard | | Doubtful | | Nonaccrual | | Total | | ||||||
June 30, 2013 | | | | | | | | | | | | | | | | | | | |
Construction | | $ | 48,038 | | $ | 23,989 | | $ | 24,994 | | $ | - | | $ | 7,495 | | $ | 104,516 | |
Residential real estate | | | 235,008 | | | 24,055 | | | 13,398 | | | - | | | 16,033 | | | 288,494 | |
Commercial real estate | | | 268,053 | | | 23,752 | | | 18,749 | | | - | | | 10,637 | | | 321,191 | |
Commercial | | | 50,938 | | | 4,097 | | | 811 | | | - | | | 602 | | | 56,448 | |
Consumer | | | 11,433 | | | 52 | | | 3 | | | - | | | 51 | | | 11,539 | |
Total | | $ | 613,470 | | $ | 75,945 | | $ | 57,955 | | $ | - | | $ | 34,818 | | $ | 782,188 | |
(Dollars in thousands) | | Pass/Performing | | Special mention | | Substandard | | Doubtful | | Nonaccrual | | Total | | ||||||
December 31, 2012 | | | | | | | | | | | | | | | | | | | |
Construction | | $ | 45,385 | | $ | 30,817 | | $ | 22,155 | | $ | - | | $ | 9,694 | | $ | 108,051 | |
Residential real estate | | | 237,299 | | | 23,657 | | | 15,090 | | | 433 | | | 11,532 | | | 288,011 | |
Commercial real estate | | | 257,418 | | | 21,554 | | | 21,402 | | | - | | | 14,567 | | | 314,941 | |
Commercial | | | 55,432 | | | 3,062 | | | 1,639 | | | 59 | | | 594 | | | 60,786 | |
Consumer | | | 13,147 | | | - | | | 59 | | | - | | | 87 | | | 13,293 | |
Total | | $ | 608,681 | | $ | 79,090 | | $ | 60,345 | | $ | 492 | | $ | 36,474 | | $ | 785,082 | |
| Accruing | | | | | | | | | | |||||||||||||||||
(Dollars in thousands) | Current | | | 30-59 days past due | | | 60-89 days past due | | | 90 days or more past due | | Total past due | | | Nonaccrual | | | Total | | ||||||||
June 30, 2013 | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Construction | | $ | 97,021 | | | $ | - | | | $ | - | | | $ | - | | $ | - | | | $ | 7,495 | | | $ | 104,516 | |
Residential real estate | | | 270,575 | | | | 1,644 | | | | 242 | | | | - | | | 1,886 | | | | 16,033 | | | | 288,494 | |
Commercial real estate | | | 309,318 | | | | 769 | | | | 467 | | | | - | | | 1,236 | | | | 10,637 | | | | 321,191 | |
Commercial | | | 55,720 | | | | 112 | | | | 14 | | | | - | | | 126 | | | | 602 | | | | 56,448 | |
Consumer | | | 11,414 | | | | 60 | | | | 11 | | | | 3 | | | 74 | | | | 51 | | | | 11,539 | |
Total | | $ | 744,048 | | | $ | 2,585 | | | $ | 734 | | | $ | 3 | | $ | 3,322 | | | $ | 34,818 | | | $ | 782,188 | |
Percent of total loans | | | 95.1 | % | | | 0.3 | % | | | 0.1 | % | | | - | | | 0.4 | % | | | 4.5 | % | | | | |
| | Accruing | | | | | | | | | | |||||||||||||||||
(Dollars in thousands) | | Current | | | 30-59 days past due | | | 60-89 days past due | | | 90 days or more past due | | | Total past due | | | Nonaccrual | | | Total | | |||||||
December 31, 2012 | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Construction | | $ | 98,221 | | | $ | 136 | | | $ | - | | | $ | - | | | $ | 136 | | | $ | 9,694 | | | $ | 108,051 | |
Residential real estate | | | 272,311 | | | | 3,116 | | | | 762 | | | | 290 | | | | 4,168 | | | | 11,532 | | | | 288,011 | |
Commercial real estate | | | 298,522 | | | | 887 | | | | 800 | | | | 165 | | | | 1,852 | | | | 14,567 | | | | 314,941 | |
Commercial | | | 59,746 | | | | 380 | | | | 66 | | | | - | | | | 446 | | | | 594 | | | | 60,786 | |
Consumer | | | 13,125 | | | | 57 | | | | 19 | | | | 5 | | | | 81 | | | | 87 | | | | 13,293 | |
Total | | $ | 741,925 | | | $ | 4,576 | | | $ | 1,647 | | | $ | 460 | | | $ | 6,683 | | | $ | 36,474 | | | $ | 785,082 | |
Percent of total loans | | | 94.5 | % | | | 0.6 | % | | | 0.2 | % | | | 0.1 | % | | | 0.9 | % | | | 4.6 | % | | | | |
(Dollars in thousands) | | Construction | | Residential real estate | | Commercial real estate | | Commercial | | Consumer | | Unallocated | | Total | | |||||||
For the three months ended June 30, 2013 | | | | | | | | | | | | | | | | | | | | | | |
Allowance for credit losses: | | | | | | | | | | | | | | | | | | | | | | |
Beginning balance | | $ | 4,116 | | $ | 4,864 | | $ | 4,374 | | $ | 1,760 | | $ | 330 | | $ | 291 | | $ | 15,735 | |
| | | | | | | | | | | | | | | | | | | | | | |
Charge-offs | | | (802) | | | (1,096) | | | (872) | | | (136) | | | (13) | | | - | | | (2,919) | |
Recoveries | | | 1 | | | 59 | | | 90 | | | 50 | | | 7 | | | - | | | 207 | |
Net charge-offs | | | (801) | | | (1,037) | | | (782) | | | (86) | | | (6) | | | - | | | (2,712) | |
| | | | | | | | | | | | | | | | | | | | | | |
Provision | | | 1,031 | | | 432 | | | 1,922 | | | (458) | | | (23) | | | (204) | | | 2,700 | |
Ending balance | | $ | 4,346 | | $ | 4,259 | | $ | 5,514 | | $ | 1,216 | | $ | 301 | | $ | 87 | | $ | 15,723 | |
(Dollars in thousands) | | Construction | | Residential real estate | | Commercial real estate | | Commercial | | Consumer | | Unallocated | | Total | | |||||||
For the three months ended June 30, 2012 | | | | | | | | | | | | | | | | | | | | | | |
Allowance for credit losses: | | | | | | | | | | | | | | | | | | | | | | |
Beginning balance | | $ | 3,344 | | $ | 4,448 | | $ | 3,549 | | $ | 1,539 | | $ | 581 | | $ | 83 | | $ | 13,544 | |
| | | | | | | | | | | | | | | | | | | | | | |
Charge-offs | | | (714) | | | (1,554) | | | (745) | | | (1,085) | | | (162) | | | - | | | (4,260) | |
Recoveries | | | - | | | 43 | | | - | | | 133 | | | 5 | | | - | | | 181 | |
Net charge-offs | | | (714) | | | (1,511) | | | (745) | | | (952) | | | (157) | | | - | | | (4,079) | |
| | | | | | | | | | | | | | | | | | | | | | |
Provision | | | 215 | | | 1,300 | | | 1,148 | | | 476 | | | 61 | | | 325 | | | 3,525 | |
Ending balance | | $ | 2,845 | | $ | 4,237 | | $ | 3,952 | | $ | 1,063 | | $ | 485 | | $ | 408 | | $ | 12,990 | |
(Dollars in thousands) | | Construction | | Residential real estate | | Commercial real estate | | Commercial | | Consumer | | Unallocated | | Total | | |||||||
For the six months ended June 30, 2013 | | | | | | | | | | | | | | | | | | | | | | |
Allowance for credit losses: | | | | | | | | | | | | | | | | | | | | | | |
Beginning balance | | $ | 4,387 | | $ | 5,194 | | $ | 4,134 | | $ | 1,682 | | $ | 407 | | $ | 187 | | $ | 15,991 | |
| | | | | | | | | | | | | | | | | | | | | | |
Charge-offs | | | (1,509) | | | (1,889) | | | (1,947) | | | (223) | | | (62) | | | - | | | (5,630) | |
Recoveries | | | 2 | | | 298 | | | 93 | | | 102 | | | 17 | | | - | | | 512 | |
Net charge-offs | | | (1,507) | | | (1,591) | | | (1,854) | | | (121) | | | (45) | | | - | | | (5,118) | |
| | | | | | | | | | | | | | | | | | | | | | |
Provision | | | 1,466 | | | 656 | | | 3,234 | | | (345) | | | (61) | | | (100) | | | 4,850 | |
Ending balance | | $ | 4,346 | | $ | 4,259 | | $ | 5,514 | | $ | 1,216 | | $ | 301 | | $ | 87 | | $ | 15,723 | |
(Dollars in thousands) | | Construction | | Residential real estate | | Commercial real estate | | Commercial | | Consumer | | Unallocated | | Total | | |||||||
For the six months ended June 30, 2012 | | | | | | | | | | | | | | | | | | | | | | |
Allowance for credit losses: | | | | | | | | | | | | | | | | | | | | | | |
Beginning balance | | $ | 3,745 | | $ | 5,014 | | $ | 3,415 | | $ | 1,498 | | $ | 594 | | $ | 22 | | $ | 14,288 | |
| | | | | | | | | | | | | | | | | | | | | | |
Charge-offs | | | (1,786) | | | (5,673) | | | (1,435) | | | (4,440) | | | (177) | | | - | | | (13,511) | |
Recoveries | | | - | | | 94 | | | 7 | | | 208 | | | 9 | | | - | | | 318 | |
Net charge-offs | | | (1,786) | | | (5,579) | | | (1,428) | | | (4,232) | | | (168) | | | - | | | (13,193) | |
| | | | | | | | | | | | | | | | | | | | | | |
Provision | | | 886 | | | 4,802 | | | 1,965 | | | 3,797 | | | 59 | | | 386 | | | 11,895 | |
Ending balance | | $ | 2,845 | | $ | 4,237 | | $ | 3,952 | | $ | 1,063 | | $ | 485 | | $ | 408 | | $ | 12,990 | |
(Dollars in thousands) | | June 30, 2013 | | December 31, 2012 | | ||
Nonmarketable investment securities | | $ | 2,286 | | $ | 2,750 | |
Accrued interest receivable | | | 2,851 | | | 2,796 | |
Insurance premiums receivable | | | 764 | | | 1,089 | |
Income taxes receivable | | | 3,885 | | | 5,160 | |
Deferred income taxes | | | 10,881 | | | 9,180 | |
Prepaid expenses | | | 1,254 | | | 2,227 | |
Other assets | | | 5,613 | | | 5,634 | |
Total | | $ | 27,534 | | $ | 28,836 | |
(Dollars in thousands) | | June 30, 2013 | | December 31, 2012 | | ||
Accrued interest payable | | $ | 286 | | $ | 339 | |
Other accounts payable | | | 3,747 | | | 3,657 | |
Deferred compensation liability | | | 2,467 | | | 2,431 | |
Other liabilities | | | 1,981 | | | 2,320 | |
Total | | $ | 8,481 | | $ | 8,747 | |
| | For the Three Months Ended | | For the Six Months Ended | | ||||||||
| | June 30, | | June 30, | | ||||||||
(Dollars in thousands) | | 2013 | | 2012 | | 2013 | | 2012 | | ||||
Stock-based compensation expense | | $ | 18 | | $ | 44 | | $ | 40 | | $ | 141 | |
Excess tax expense related to stock-based compensation | | | - | | | 23 | | | 26 | | | 106 | |
| | June 30, | | ||||
(Dollars in thousands) | | 2013 | | 2012 | | ||
Unrecognized stock-based compensation expense | | $ | 130 | | $ | 211 | |
Weighted average period unrecognized expense is expected to be recognized | | | 1.9 years | | | 2.3 years | |
| | Number | | Weighted Average Grant | | ||
| | of Shares | | Date Fair Value | | ||
Nonvested at beginning of period | | | 6,548 | | $ | 14.89 | |
Granted | | | 3,930 | | | 6.81 | |
Vested | | | (6,548) | | | 14.89 | |
Cancelled | | | - | | | - | |
Nonvested at end of period | | | 3,930 | | $ | 6.81 | |
| | | | | Weighted | | Weighted Average | | ||
| | Number | | Average | | Grant Date | | |||
| | of Shares | | Exercise Price | | Fair Value | | |||
Outstanding at beginning of period | | | 54,216 | | $ | 6.64 | | $ | 3.44 | |
Granted | | | - | | | - | | | - | |
Exercised | | | - | | | - | | | - | |
Expired/Cancelled | | | - | | | - | | | - | |
Outstanding at end of period | | | 54,216 | | $ | 6.64 | | $ | 3.44 | |
| | | | | | | | | | |
Exercisable at end of period | | | - | | $ | - | | $ | - | |
Dividend yield | | 0.60 | % |
Expected volatility | | 58.65 | % |
Risk-free interest rate | | 1.69 | % |
Expected contract life (in years) | | 5.83 | |
(Dollars in thousands) | | Unrealized holding gains (losses) on available for sale securities | | Unrealized holding gains (losses) on cash flow hedging activities | | Accumulated other comprehensive income (loss) | | |||
Balance, December 31, 2012 | | $ | 1,894 | | $ | (1,186) | | $ | 708 | |
Unrealized holding gains (losses) | | | (1,670) | | | 407 | | | (1,263) | |
Reclassification of (gains) losses recognized | | | (545) | | | 779 | | | 234 | |
Balance, June 30, 2013 | | $ | (321) | | $ | - | | $ | (321) | |
| | | | | | | | | | |
Balance, December 31, 2011 | | $ | 1,370 | | $ | (3,059) | | $ | (1,689) | |
Unrealized holding gains | | | 546 | | | 465 | | | 1,011 | |
Balance, June 30, 2012 | | $ | 1,916 | | $ | (2,594) | | $ | (678) | |
| | | | | | | | Significant | | | | | |
| | | | | | | | Other | | Significant | | ||
| | | | | Quoted | | Observable | | Unobservable | | |||
| | | | | Prices | | Inputs | | Inputs | | |||
(Dollars in thousands) | | Fair Value | | (Level 1) | | (Level 2) | | (Level 3) | | ||||
June 30, 2013 | | | | | | | | | | | | | |
Securities available for sale: | | | | | | | | | | | | | |
U.S. Government agencies | | $ | 29,433 | | $ | - | | $ | 29,433 | | $ | - | |
Mortgage-backed securities | | | 65,299 | | | - | | | 65,299 | | | - | |
Other equity securities | | | 604 | | | - | | | 604 | | | - | |
Total | | $ | 95,336 | | $ | - | | $ | 95,336 | | $ | - | |
| | | | | | | | | | | | | |
Interest rate caps | | $ | - | | $ | - | | $ | - | | $ | - | |
| | | | | | | | Significant | | | | | |
| | | | | | | | Other | | Significant | | ||
| | | | | Quoted | | Observable | | Unobservable | | |||
| | | | | Prices | | Inputs | | Inputs | | |||
(Dollars in thousands) | | Fair Value | | (Level 1) | | (Level 2) | | (Level 3) | | ||||
December 31, 2012 | | | | | | | | | | | | | |
Securities available for sale: | | | | | | | | | | | | | |
U.S. Government agencies | | $ | 36,107 | | $ | - | | $ | 36,107 | | $ | - | |
Mortgage-backed securities | | | 108,780 | | | - | | | 108,780 | | | - | |
Other equity securities | | | 621 | | | - | | | 621 | | | - | |
Total | | $ | 145,508 | | $ | - | | $ | 145,508 | | $ | - | |
| | | | | | | | | | | | | |
Interest rate caps | | $ | 14 | | $ | - | | $ | 14 | | $ | - | |
(Dollars in thousands) | | Construction | | Residential real estate | | Commercial real estate | | Commercial | | Consumer | | Total | | ||||||
For the six months ended June 30, 2013 | | | | | | | | | | | | | | | | | | | |
Impaired loans: | | | | | | | | | | | | | | | | | | | |
Beginning balance | | $ | 36,088 | | $ | 17,951 | | $ | 31,833 | | $ | 715 | | $ | 39 | | $ | 86,626 | |
Charge-offs | | | (1,509) | | | (1,830) | | | (1,660) | | | (61) | | | (38) | | | (5,098) | |
Payments | | | (1,135) | | | (1,323) | | | (2,945) | | | (12) | | | (9) | | | (5,424) | |
Transfers to other real estate owned | | | (205) | | | (592) | | | (1,601) | | | - | | | - | | | (2,398) | |
Returned to performing status | | | - | | | (380) | | | - | | | - | | | - | | | (380) | |
Changed to nonaccrual status | | | - | | | (1,626) | | | (1,741) | | | - | | | - | | | (3,367) | |
Additions | | | 458 | | | 9,640 | | | 2,758 | | | 69 | | | 11 | | | 12,936 | |
Changes in allowance | | | 224 | | | 221 | | | (1,575) | | | (29) | | | 48 | | | (1,111) | |
Ending balance | | $ | 33,921 | | $ | 22,061 | | $ | 25,069 | | $ | 682 | | $ | 51 | | $ | 81,784 | |
(Dollars in thousands) | | Construction | | Residential real estate | | Commercial real estate | | Commercial | | Consumer | | Total | | ||||||
For the six months ended June 30, 2012 | | | | | | | | | | | | | | | | | | | |
Impaired loans: | | | | | | | | | | | | | | | | | | | |
Beginning balance | | $ | 27,166 | | $ | 22,602 | | $ | 23,578 | | $ | 1,738 | | $ | 28 | | $ | 75,112 | |
Charge-offs | | | (1,775) | | | (5,356) | | | (1,435) | | | (1,264) | | | - | | | (9,830) | |
Payments | | | (715) | | | (3,185) | | | (1,375) | | | (80) | | | (3) | | | (5,358) | |
Transfers to other real estate owned | | | (1,620) | | | (763) | | | (1,334) | | | (30) | | | - | | | (3,747) | |
Returned to performing status | | | - | | | - | | | - | | | - | | | - | | | - | |
Changed to nonaccrual status | | | (666) | | | (786) | | | - | | | - | | | - | | | (1,452) | |
Additions | | | 8,776 | | | 11,600 | | | 7,279 | | | 1,313 | | | 30 | | | 28,998 | |
Changes in allowance | | | 90 | | | 876 | | | (500) | | | (30) | | | - | | | 436 | |
Ending balance | | $ | 31,256 | | $ | 24,988 | | $ | 26,213 | | $ | 1,647 | | $ | 55 | | $ | 84,159 | |
| | For the Six Months Ended | | ||||
(Dollars in thousands) | | June 30, | | ||||
| | 2013 | | 2012 | | ||
Other real estate owned: | | | | | | | |
Beginning balance | | $ | 7,659 | | $ | 9,385 | |
Sales | | | (2,979) | | | (1,404) | |
Write-downs | | | (728) | | | (853) | |
Additions | | | 2,456 | | | 4,371 | |
Ending balance | | $ | 6,408 | | $ | 11,499 | |
| | June 30, 2013 | | December 31, 2012 | | ||||||||
| | | | Estimated | | | | Estimated | | ||||
| | Carrying | | Fair | | Carrying | | Fair | | ||||
(Dollars in thousands) | | Amount | | Value | | Amount | | Value | | ||||
Financial assets | | | | | | | | | | | | | |
Level 2 inputs | | | | | | | | | | | | | |
Cash and cash equivalents | | $ | 124,506 | | $ | 124,506 | | $ | 200,193 | | $ | 200,193 | |
Investment securities held to maturity | | | 2,591 | | | 2,748 | | | 2,657 | | | 2,884 | |
Level 3 inputs | | | | | | | | | | | | | |
Loans, net | | | 766,465 | | | 792,199 | | | 769,091 | | | 798,381 | |
| | | | | | | | | | | | | |
Financial liabilities | | | | | | | | | | | | | |
Level 2 inputs | | | | | | | | | | | | | |
Deposits | | $ | 922,107 | | $ | 924,284 | | $ | 1,049,273 | | $ | 1,052,382 | |
Short-term borrowings | | | 10,095 | | | 10,095 | | | 13,761 | | | 13,761 | |
(Dollars in thousands) | | June 30, 2013 | | December 31, 2012 | | ||
Commitments to extend credit | | $ | 118,287 | | $ | 141,518 | |
Letters of credit | | | 12,621 | | | 12,817 | |
Total | | $ | 130,908 | | $ | 154,335 | |
| | Community | | Insurance Products | | Parent | | Consolidated | | ||||
(Dollars in thousands) | | Banking | | and Services | | Company | | Total | | ||||
2013 | | | | | | | | | | | | | |
Interest income | | $ | 21,331 | | $ | 31 | | $ | - | | $ | 21,362 | |
Interest expense | | | (3,884) | | | - | | | - | | | (3,884) | |
Provision for credit losses | | | (4,850) | | | - | | | - | | | (4,850) | |
Noninterest income | | | 2,619 | | | 5,841 | | | (8) | | | 8,452 | |
Noninterest expense | | | (11,672) | | | (5,031) | | | (3,547) | | | (20,250) | |
Net intersegment (expense) income | | | (2,588) | | | (358) | | | 2,946 | | | - | |
Income (loss) before taxes | | | 956 | | | 483 | | | (609) | | | 830 | |
Income tax (expense) benefit | | | (284) | | | (144) | | | 181 | | | (247) | |
Net income (loss) | | $ | 672 | | $ | 339 | | $ | (428) | | $ | 583 | |
| | | | | | | | | | | | | |
Total assets | | $ | 1,035,452 | | $ | 15,924 | | $ | 2,901 | | $ | 1,054,277 | |
| | | | | | | | | | | | | |
2012 | | | | | | | | | | | | | |
Interest income | | $ | 23,509 | | $ | 39 | | $ | - | | $ | 23,548 | |
Interest expense | | | (5,309) | | | - | | | (11) | | | (5,320) | |
Provision for credit losses | | | (11,895) | | | - | | | - | | | (11,895) | |
Noninterest income | | | 3,706 | | | 5,395 | | | 50 | | | 9,151 | |
Noninterest expense | | | (12,157) | | | (4,967) | | | (3,037) | | | (20,161) | |
Net intersegment (expense) income | | | (2,687) | | | (257) | | | 2,944 | | | - | |
(Loss) income before taxes | | | (4,833) | | | 210 | | | (54) | | | (4,677) | |
Income tax benefit (expense) | | | 2,001 | | | (89) | | | 22 | | | 1,934 | |
Net (loss) income | | $ | (2,832) | | $ | 121 | | $ | (32) | | $ | (2,743) | |
| | | | | | | | | | | | | |
Total assets | | $ | 1,156,644 | | $ | 16,903 | | $ | 1,786 | | $ | 1,175,333 | |
| | For the Three Months Ended | | | For the Three Months Ended | | ||||||||||||||
| | June 30, 2013 | | | June 30, 2012 | | ||||||||||||||
| | Average | | Income(1)/ | | Yield/ | | | Average | | Income(1)/ | | Yield/ | | ||||||
(Dollars in thousands) | | Balance | | Expense | | Rate | | | Balance | | Expense | | Rate | | ||||||
Earning assets | | | | | | | | | | | | | | | | | | | | |
Loans (2), (3) | | $ | 785,442 | | $ | 10,166 | | | 5.19 | % | | $ | 816,553 | | $ | 10,917 | | | 5.38 | % |
Investment securities | | | | | | | | | | | | | | | | | | | | |
Taxable | | | 140,614 | | | 568 | | | 1.62 | | | | 130,528 | | | 707 | | | 2.18 | |
Tax-exempt | | | 579 | | | 7 | | | 4.81 | | | | 3,771 | | | 49 | | | 5.32 | |
Federal funds sold | | | 2,992 | | | 1 | | | 0.10 | | | | 11,200 | | | 2 | | | 0.10 | |
Interest-bearing deposits | | | 75,847 | | | 40 | | | 0.21 | | | | 124,171 | | | 61 | | | 0.20 | |
Total earning assets | | | 1,005,474 | | | 10,782 | | | 4.30 | % | | | 1,086,223 | | | 11,736 | | | 4.35 | % |
Cash and due from banks | | | 22,510 | | | | | | | | | | 21,424 | | | | | | | |
Other assets | | | 66,967 | | | | | | | | | | 70,458 | | | | | | | |
Allowance for credit losses | | | (17,099) | | | | | | | | | | (14,507) | | | | | | | |
Total assets | | $ | 1,077,852 | | | | | | | | | $ | 1,163,598 | | | | | | | |
| | | | | | | | | | | | | | | | | | | | |
Interest-bearing liabilities | | | | | | | | | | | | | | | | | | | | |
Demand deposits | | $ | 162,589 | | | 61 | | | 0.15 | % | | $ | 152,685 | | | 68 | | | 0.18 | % |
Money market and savings deposits (4) | | | 225,117 | | | 376 | | | 0.67 | | | | 276,527 | | | 813 | | | 1.18 | |
Certificates of deposit $100,000 or more | | | 203,641 | | | 670 | | | 1.32 | | | | 242,662 | | | 880 | | | 1.46 | |
Other time deposits | | | 197,644 | | | 641 | | | 1.30 | | | | 205,046 | | | 882 | | | 1.73 | |
Interest-bearing deposits | | | 788,991 | | | 1,748 | | | 0.89 | | | | 876,920 | | | 2,643 | | | 1.21 | |
Short-term borrowings | | | 10,752 | | | 6 | | | 0.24 | | | | 13,818 | | | 11 | | | 0.31 | |
Long-term debt | | | - | | | - | | | - | | | | 455 | | | 5 | | | 4.63 | |
Total interest-bearing liabilities | | | 799,743 | | | 1,754 | | | 0.88 | % | | | 891,193 | | | 2,659 | | | 1.20 | % |
Noninterest-bearing deposits | | | 154,586 | | | | | | | | | | 144,210 | | | | | | | |
Other liabilities | | | 9,315 | | | | | | | | | | 9,421 | | | | | | | |
Stockholders’ equity | | | 114,208 | | | | | | | | | | 118,774 | | | | | | | |
Total liabilities and stockholders’ equity | | $ | 1,077,852 | | | | | | | | | $ | 1,163,598 | | | | | | | |
| | | | | | | | | | | | | | | | | | | | |
Net interest spread | | | | | $ | 9,028 | | | 3.42 | % | | | | | $ | 9,077 | | | 3.15 | % |
Net interest margin | | | | | | | | | 3.60 | % | | | | | | | | | 3.36 | % |
| | | | | | | | | | | | | | | | | | | | |
Tax-equivalent adjustment | | | | | | | | | | | | | | | | | | | | |
Loans | | | | | $ | 24 | | | | | | | | | $ | 27 | | | | |
Investment securities | | | | | | 3 | | | | | | | | | | 17 | | | | |
Total | | | | | $ | 27 | | | | | | | | | $ | 44 | | | | |
(1) | All amounts are reported on a tax-equivalent basis computed using the statutory federal income tax rate of 34.0% for 2013 and 2012 exclusive of the alternative minimum tax rate and nondeductible interest expense. |
(2) | Average loan balances include nonaccrual loans. |
(3) | Interest income on loans includes amortized loan fees, net of costs, and all are included in the yield calculations. |
(4) | Interest on money market and savings deposits includes an adjustment to expense related to interest rate caps and the hedged deposits associated with them. This adjustment increased interest expense by $279 thousand for the second quarter of 2013 and $502 thousand for the second quarter of 2012. The interest rate caps were terminated in June of 2013. |
| | For the Six Months Ended | | | For the Six Months Ended | | ||||||||||||||
| | June 30, 2013 | | | June 30, 2012 | | ||||||||||||||
| | Average | | Income(1)/ | | Yield/ | | | Average | | Income(1)/ | | Yield/ | | ||||||
(Dollars in thousands) | | Balance | | Expense | | Rate | | | Balance | | Expense | | Rate | | ||||||
Earning assets | | | | | | | | | | | | | | | | | | | | |
Loans (2), (3) | | $ | 784,604 | | $ | 20,098 | | | 5.17 | % | | $ | 824,569 | | $ | 21,957 | | | 5.35 | % |
Investment securities | | | | | | | | | | | | | | | | | | | | |
Taxable | | | 143,380 | | | 1,211 | | | 1.70 | | | | 130,148 | | | 1,464 | | | 2.26 | |
Tax-exempt | | | 580 | | | 14 | | | 4.83 | | | | 4,020 | | | 106 | | | 5.34 | |
Federal funds sold | | | 5,573 | | | 3 | | | 0.11 | | | | 10,497 | | | 4 | | | 0.08 | |
Interest-bearing deposits | | | 90,869 | | | 90 | | | 0.20 | | | | 117,931 | | | 109 | | | 0.19 | |
Total earning assets | | | 1,025,006 | | | 21,416 | | | 4.21 | % | | | 1,087,165 | | | 23,640 | | | 4.37 | % |
Cash and due from banks | | | 23,731 | | | | | | | | | | 19,799 | | | | | | | |
Other assets | | | 68,070 | | | | | | | | | | 69,310 | | | | | | | |
Allowance for credit losses | | | (16,849) | | | | | | | | | | (14,692) | | | | | | | |
Total assets | | $ | 1,099,958 | | | | | | | | | $ | 1,161,582 | | | | | | | |
| | | | | | | | | | | | | | | | | | | | |
Interest-bearing liabilities | | | | | | | | | | | | | | | | | | | | |
Demand deposits | | $ | 168,120 | | | 132 | | | 0.16 | % | | $ | 152,988 | | | 142 | | | 0.19 | % |
Money market and savings deposits (4) | | | 234,597 | | | 959 | | | 0.82 | | | | 277,941 | | | 1,591 | | | 1.15 | |
Certificates of deposit $100,000 or more | | | 209,929 | | | 1,410 | | | 1.35 | | | | 241,591 | | | 1,751 | | | 1.46 | |
Other time deposits | | | 199,399 | | | 1,369 | | | 1.38 | | | | 203,394 | | | 1,800 | | | 1.78 | |
Interest-bearing deposits | | | 812,045 | | | 3,870 | | | 0.96 | | | | 875,914 | | | 5,284 | | | 1.21 | |
Short-term borrowings | | | 11,366 | | | 14 | | | 0.25 | | | | 15,720 | | | 26 | | | 0.33 | |
Long-term debt | | | - | | | - | | | - | | | | 455 | | | 10 | | | 4.63 | |
Total interest-bearing liabilities | | | 823,411 | | | 3,884 | | | 0.95 | % | | | 892,089 | | | 5,320 | | | 1.20 | % |
Noninterest-bearing deposits | | | 153,285 | | | | | | | | | | 140,235 | | | | | | | |
Other liabilities | | | 9,033 | | | | | | | | | | 9,042 | | | | | | | |
Stockholders’ equity | | | 114,229 | | | | | | | | | | 120,216 | | | | | | | |
Total liabilities and stockholders’ equity | | $ | 1,099,958 | | | | | | | | | $ | 1,161,582 | | | | | | | |
| | | | | | | | | | | | | | | | | | | | |
Net interest spread | | | | | $ | 17,532 | | | 3.26 | % | | | | | $ | 18,320 | | | 3.17 | % |
Net interest margin | | | | | | | | | 3.45 | % | | | | | | | | | 3.39 | % |
| | | | | | | | | | | | | | | | | | | | |
Tax-equivalent adjustment | | | | | | | | | | | | | | | | | | | | |
Loans | | | | | $ | 49 | | | | | | | | | $ | 56 | | | | |
Investment securities | | | | | | 5 | | | | | | | | | | 36 | | | | |
Total | | | | | $ | 54 | | | | | | | | | $ | 92 | | | | |
(1) | All amounts are reported on a tax-equivalent basis computed using the statutory federal income tax rate of 34.0% for 2013 and 2012 exclusive of the alternative minimum tax rate and nondeductible interest expense. |
(2) | Average loan balances include nonaccrual loans. |
(3) | Interest income on loans includes amortized loan fees, net of costs, and all are included in the yield calculations. |
(4) | Interest on money market and savings deposits includes an adjustment to expense related to interest rate caps and the hedged deposits associated with them. This adjustment increased interest expense by $695 thousand for the first six months of 2013 and $962 thousand for the first six months of 2012. The interest rate caps were terminated in June of 2013. |
| | For the Three Months Ended | | For the Six Months Ended | | ||||||||
| | June 30, | | June 30, | | ||||||||
(Dollars in thousands) | | | 2013 | | | 2012 | | | 2013 | | | 2012 | |
Allowance balance beginning of period | | $ | 15,735 | | $ | 13,544 | | $ | 15,991 | | $ | 14,288 | |
Charge-offs: | | | | | | | | | | | | | |
Construction | | | (802) | | | (714) | | | (1,509) | | | (1,786) | |
Residential real estate | | | (1,096) | | | (1,554) | | | (1,889) | | | (5,673) | |
Commercial real estate | | | (872) | | | (745) | | | (1,947) | | | (1,435) | |
Commercial | | | (136) | | | (1,085) | | | (223) | | | (4,440) | |
Consumer | | | (13) | | | (162) | | | (62) | | | (177) | |
Totals | | | (2,919) | | | (4,260) | | | (5,630) | | | (13,511) | |
Recoveries: | | | | | | | | | | | | | |
Construction | | | 1 | | | - | | | 2 | | | - | |
Residential real estate | | | 59 | | | 43 | | | 298 | | | 94 | |
Commercial real estate | | | 90 | | | - | | | 93 | | | 7 | |
Commercial | | | 50 | | | 133 | | | 102 | | | 208 | |
Consumer | | | 7 | | | 5 | | | 17 | | | 9 | |
Totals | | | 207 | | | 181 | | | 512 | | | 318 | |
Net charge-offs | | | (2,712) | | | (4,079) | | | (5,118) | | | (13,193) | |
Provision for credit losses | | | 2,700 | | | 3,525 | | | 4,850 | | | 11,895 | |
Allowance balance end of period | | $ | 15,723 | | $ | 12,990 | | $ | 15,723 | | $ | 12,990 | |
| | | | | | | | | | | | | |
Average loans outstanding during the period | | $ | 785,442 | | $ | 816,553 | | $ | 784,604 | | $ | 824,569 | |
Net charge-offs (annualized) as a percentage of average loans outstanding during the period | | | 1.38 | % | | 2.01 | % | | 1.32 | % | | 3.22 | % |
Allowance for credit losses at period end as a percentage of average loans | | | 2.00 | % | | 1.59 | % | | 2.00 | % | | 1.58 | % |
| ⋅ | frequently contacting borrowers until the delinquency is cured or until an acceptable payment plan has been agreed upon; |
| | |
| ⋅ | obtaining updated appraisals; |
| | |
| ⋅ | provisioning for credit losses; |
| | |
| ⋅ | charging off loans; |
| | |
| ⋅ | transferring loans to other real estate owned; |
| | |
| ⋅ | aggressively marketing other real estate owned; and |
| | |
| ⋅ | potential sale of loans. |
| | June 30, | | December 31, | | ||
(Dollars in thousands) | | 2013 | | 2012 | | ||
Nonperforming assets | | | | | | | |
Nonaccrual loans | | | | | | | |
Construction | | $ | 7,495 | | $ | 9,694 | |
Residential real estate | | | 16,033 | | | 11,532 | |
Commercial real estate | | | 10,637 | | | 14,567 | |
Commercial | | | 602 | | | 594 | |
Consumer | | | 51 | | | 87 | |
Total nonaccrual loans | | | 34,818 | | | 36,474 | |
| | | | | | | |
Loans 90 days or more past due and still accruing | | | | | | | |
Construction | | | - | | | - | |
Residential real estate | | | - | | | 290 | |
Commercial real estate | | | - | | | 165 | |
Commercial | | | - | | | - | |
Consumer | | | 3 | | | 5 | |
Total loans 90 days or more past due and still accruing | | | 3 | | | 460 | |
| | | | | | | |
Accruing troubled debt restructurings | | | | | | | |
Construction | | | 27,143 | | | 27,335 | |
Residential real estate | | | 6,405 | | | 7,017 | |
Commercial real estate | | | 16,621 | | | 17,880 | |
Commercial | | | 109 | | | 121 | |
Consumer | | | - | | | - | |
Total accruing troubled debt restructurings | | | 50,278 | | | 52,353 | |
Total nonperforming loans | | | 85,099 | | | 89,287 | |
Other real estate owned | | | 6,408 | | | 7,659 | |
Total nonperforming assets | | $ | 91,507 | | $ | 96,946 | |
| | | | | | | |
As a percent of total loans: | | | | | | | |
Nonaccrual loans | | | 4.45 | % | | 4.65 | % |
Loans 90 days or more past due and still accruing | | | - | | | 0.06 | |
Accruing troubled debt restructurings | | | 6.43 | | | 6.67 | |
Total nonperforming loans | | | 10.88 | % | | 11.38 | % |
| | | | | | | |
Total nonperforming assets as a percent of total loans and other real estate owned | | | 11.60 | % | | 12.23 | % |
| | | | | | | |
As a percent of total assets: | | | | | | | |
Nonaccrual loans | | | 3.30 | % | | 3.08 | % |
Loans 90 days or more past due and still accruing | | | - | | | 0.04 | |
Accruing troubled debt restructurings | | | 4.77 | | | 4.41 | |
Total nonperforming loans | | | 8.07 | | | 7.53 | |
Other real estate owned | | | 0.61 | | | 0.65 | |
Total nonperforming assets | | | 8.68 | % | | 8.18 | % |
| | | | | | Minimum | |
| | June 30, | | December 31, | | Regulatory | |
| | 2013 | | 2012 | | Requirements | |
Tier 1 risk-based capital ratio | | 12.43 | % | 12.05 | % | 4.00 | % |
Total risk-based capital ratio | | 13.69 | % | 13.32 | % | 8.00 | % |
Leverage ratio | | 9.21 | % | 8.32 | % | 4.00 | % |
| SHORE BANCSHARES, INC. | |
| | |
Date: August 14, 2013 | By: | /s/ Lloyd L. Beatty, Jr. |
| | Lloyd L. Beatty, Jr. |
| | President & Chief Executive Officer |
| | (Principal Executive Officer) |
| | |
Date: August 14, 2013 | By: | /s/ George S. Rapp |
| | George S. Rapp |
| | Vice President & Chief Financial Officer |
| | (Principal Accounting Officer) |
Exhibit | | |
Number | | Description |
| | |
10.1 | | Stipulation and Consent to the Issuance of a Consent Order with the FDIC1 |
| | |
10.2 | | Stipulation and Consent to the Issuance of a Consent Order with the Maryland Commissioner of Financial Regulation1 |
| | |
10.3 | | Consent Order issued by the Federal Deposit Insurance Corporation1 |
| | |
10.4 | | Acknowledgement of Adoption of the Order by the Maryland Commissioner of Financial Regulation1 |
| | |
31.1 | | Certifications of the Principal Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act (filed herewith). |
| | |
31.2 | | Certifications of the Principal Accounting Officer pursuant to Section 302 of the Sarbanes-Oxley Act (filed herewith). |
| | |
32 | | Certification pursuant to Section 906 of the Sarbanes-Oxley Act (furnished herewith). |
| | |
101 | | Interactive Data File |
Date: August 14, 2013 | By: | /s/ Lloyd L. Beatty, Jr. | |
| | Lloyd L. Beatty, Jr. | |
| | President & Chief Executive Officer | |
| | (Principal Executive Officer) |
Date: August 14, 2013 | By: | /s/ George S. Rapp | |
| | George S. Rapp | |
| | Vice President & Chief Financial Officer | |
| | (Principal Accounting Officer) |
Date: August 14, 2013 | By: | /s/ Lloyd L. Beatty, Jr. | |
| | Lloyd L. Beatty, Jr. | |
| | President & Chief Executive Officer | |
| | (Principal Executive Officer) |
Date: August 14, 2013 | By: | /s/ George S. Rapp | |
| | George S. Rapp | |
| | Vice President & Chief Financial Officer | |
| | (Principal Accounting Officer) |
Fair Value Measurements
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Jun. 30, 2013
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Fair Value Disclosures [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Fair Value Disclosures [Text Block] | Note 9 Fair Value Measurements Accounting guidance under GAAP defines fair value as the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. This accounting guidance also establishes a fair value hierarchy, which requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. The Company uses fair value measurements to record fair value adjustments to certain assets and liabilities and to determine fair value disclosures. Securities available for sale and derivative assets and liabilities are recorded at fair value on a recurring basis. Additionally, from time to time, the Company may be required to record at fair value other assets on a nonrecurring basis, such as impaired loans and other real estate and other assets owned (foreclosed assets). These nonrecurring fair value adjustments typically involve application of lower of cost or market accounting or write-downs of individual assets. Under fair value accounting guidance, assets and liabilities are grouped at fair value in three levels, based on the markets in which the assets and liabilities are traded and the reliability of the assumptions used to determine their fair values. These hierarchy levels are: Level 1 inputs Unadjusted quoted prices in active markets for identical assets or liabilities that the entity has the ability to access at the measurement date. Level 2 inputs Inputs other than quoted prices included in Level 1 that are observable for the asset or liability, either directly or indirectly. These might include quoted prices for similar assets or liabilities in active markets, and inputs other than quoted prices that are observable for the asset or liability, such as interest rates and yield curves that are observable at commonly quoted intervals. Level 3 inputs Unobservable inputs for determining the fair values of assets or liabilities that reflect an entity’s own assumptions about the assumptions that market participants would use in pricing the assets or liabilities. Below is a discussion on the Company’s assets measured at fair value on a recurring basis. Investment Securities Available for Sale Fair value measurement for investment securities available for sale is based on quoted prices from an independent pricing service. The fair value measurements consider observable data that may include present value of future cash flows, prepayment assumptions, credit loss assumptions and other factors. The Company classifies its investments in U.S. Treasury securities as Level 1 in the fair value hierarchy, and it classifies its investments in U.S. Government agencies securities and mortgage-backed securities issued or guaranteed by U.S. Government sponsored entities as Level 2. Derivative Assets Derivative instruments held by the Company for risk management purposes are traded in over-the-counter markets where quoted market prices are not readily available. For those derivatives, the Company measures fair value using third-party models that use primarily market observable inputs, such as yield curves and option volatilities, and include the value associated with counterparty credit risk. The Company classifies its derivative instruments held for risk management purposes as Level 2 in the fair value hierarchy and includes them in other assets in the accompanying consolidated balance sheets. As of June 30, 2013, the Company had no derivative instruments. At December 31, 2012, the Company’s derivative instruments consisted solely of interest rate caps. The tables below present the recorded amount of assets measured at fair value on a recurring basis at June 30, 2013 and December 31, 2012. No assets were transferred from one hierarchy level to another during the first six months of 2013 or 2012.
Below is a discussion on the Company’s assets measured at fair value on a nonrecurring basis. Loans The Company does not record loans at fair value on a recurring basis; however, from time to time, a loan is considered impaired and a valuation allowance may be established if there are losses associated with the loan. Loans are considered impaired if it is probable that payment of interest and principal will not be made in accordance with contractual terms. The fair value of impaired loans can be estimated using one of several methods, including the collateral value, market value of similar debt, liquidation value and discounted cash flows. At June 30, 2013 and December 31, 2012, substantially all impaired loans were evaluated based on the fair value of the collateral and were classified as Level 3 in the fair value hierarchy. Other Real Estate and Other Assets Owned (Foreclosed Assets) Foreclosed assets are adjusted for fair value upon transfer of loans to foreclosed assets. Subsequently, foreclosed assets are carried at the lower of carrying value and fair value. Fair value is based on independent market prices, appraised value of the collateral or management’s estimation of the value of the collateral. At June 30, 2013 and December 31, 2012, foreclosed assets were classified as Level 3 in the fair value hierarchy. The tables below summarize the changes in the recorded amount of assets measured at fair value on a nonrecurring basis for the six months ended June 30, 2013 and 2012. All assets measured at fair value on a nonrecurring basis were classified as Level 3 in the fair value hierarchy for the periods presented.
The following information relates to the estimated fair values of financial assets and liabilities that are reported in the Company’s consolidated balance sheets at their carrying amounts. The discussion below describes the methods and assumptions used to estimate the fair value of each class of financial asset and liability for which it is practicable to estimate that value. Cash and Cash Equivalents Cash equivalents include interest-bearing deposits with other banks and federal funds sold. For these short-term instruments, the carrying amount is a reasonable estimate of fair value. Investment Securities Held to Maturity For all investments in debt securities, fair values are based on quoted market prices. If a quoted market price is not available, then fair value is estimated using quoted market prices for similar securities. Loans The fair values of categories of fixed rate loans, such as commercial loans, residential real estate, and other consumer loans, are estimated by discounting the future cash flows using the current rates at which similar loans would be made to borrowers with similar credit ratings and for the same remaining maturities. Other loans, including variable rate loans, are adjusted for differences in loan characteristics. Financial Liabilities The fair values of demand deposits, savings accounts, and certain money market deposits are the amounts payable on demand at the reporting date. The fair value of fixed-maturity certificates of deposit is estimated using the rates currently offered for deposits of similar remaining maturities. These estimates do not take into consideration the value of core deposit intangibles. Generally, the carrying amount of short-term borrowings is a reasonable estimate of fair value. The fair values of securities sold under agreements to repurchase (included in short-term borrowings) and long-term debt are estimated using the rates offered for similar borrowings. Commitments to Extend Credit and Standby Letters of Credit The majority of the Company’s commitments to grant loans and standby letters of credit are written to carry current market interest rates if converted to loans. In general, commitments to extend credit and letters of credit are not assignable by the Company or the borrower, so they generally have value only to the Company and the borrower. Therefore, it is impractical to assign any value to these commitments. The following table provides information on the estimated fair values of the Company’s financial assets and liabilities that are reported in the balance sheets at their carrying amounts. The financial assets and liabilities have been segregated by their classification level in the fair value hierarchy.
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Earnings/(Loss) Per Share
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Jun. 30, 2013
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Earnings Per Share [Text Block] | Note 2 Earnings/(Loss) Per Share Basic earnings/(loss) per common share is calculated by dividing net income/(loss) available to (allocable to) common stockholders by the weighted average number of common shares outstanding during the period. Diluted earnings/(loss) per common share is calculated by dividing net income/(loss) available to (allocable to) common stockholders by the weighted average number of common shares outstanding during the period, adjusted for the dilutive effect of common stock equivalents (stock-based awards). There is no dilutive effect on the loss per share during loss periods. The following table provides information relating to the calculation of earnings/(loss) per common share:
The calculations of diluted earnings/(loss) per share excluded weighted average common stock equivalents of 0 and 54 thousand for the three and six months ended June 30, 2013, respectively, and 57 thousand and 37 thousand for the three and six months ended June 30, 2012, respectively, because the effect of including them would have been antidilutive. |
Loans and allowance for credit losses (Tables)
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Jun. 30, 2013
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Receivables [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of Financing Receivables [Table Text Block] | The following table provides information about the principal classes of the loan portfolio at June 30, 2013 and December 31, 2012.
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Allowance for Credit Losses on Loans Receivables Additional Information [Table Text Block] | The following tables include impairment information relating to loans and the allowance for credit losses as of June 30, 2013 and December 31, 2012.
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Impaired Financing Receivables [Table Text Block] | The following tables provide information on impaired loans and any related allowance by loan class as of June 30, 2013 and December 31, 2012. The difference between the unpaid principal balance and the recorded investment is the amount of partial charge-offs that have been taken.
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Troubled Debt Restructurings on Financing Receivables [Table Text Block] | The following tables provide information on loans that were modified and considered troubled debt restructurings during the six months ended June 30, 2013 and June 30, 2012.
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Troubled Debt Restructurings that Defaulted on Financing Receivables [Table Text Block] | The following tables provide information on troubled debt restructurings that defaulted during the six months ended June 30, 2013 and June 30, 2012. Generally, a loan is considered in default when principal or interest is past due 30 days or more.
(1) These loans were classified as troubled debt restructurings during 2012. (2) These loans were classified as troubled debt restructurings during 2011. |
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Financing Receivable Credit Quality Indicators [Table Text Block] | The following tables provide information on loan risk ratings as of June 30, 2013 and December 31, 2012.
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Past Due Financing Receivables [Table Text Block] | The following tables provide information on the aging of the loan portfolio as of June 30, 2013 and December 31, 2012.
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Allowance for Credit Losses on Financing Receivables [Table Text Block] | The following tables provide a summary of the activity in the allowance for credit losses allocated by loan class for the three months ended June 30, 2013 and 2012. Allocation of a portion of the allowance to one loan class does not preclude its availability to absorb losses in other loan classes.
The following tables provide a summary of the activity in the allowance for credit losses allocated by loan class for the six months ended June 30, 2013 and 2012.
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Derivative Instruments and Hedging Activities
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6 Months Ended |
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Jun. 30, 2013
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Derivative Instruments and Hedging Activities Disclosure [Abstract] | |
Derivative Instruments and Hedging Activities Disclosure [Text Block] | Note 10 Derivative Instruments and Hedging Activities Accounting guidance under GAAP defines derivatives, requires that derivatives be carried at fair value on the balance sheet and provides for hedge accounting when certain conditions are met. Changes in the fair values of derivative instruments designated as “cash flow” hedges, to the extent the hedges are highly effective, are recorded in other comprehensive income, net of taxes. Ineffective portions of cash flow hedges, if any, are recognized in current period earnings. The net interest settlement on cash flow hedges is treated as an adjustment of the interest income or interest expense of the hedged assets or liabilities. The Company uses derivative instruments to hedge its exposure to changes in interest rates. The Company does not use derivatives for any trading or other speculative purposes. During the second quarter of 2009, the Company purchased interest rate caps for $7.1 million to effectively fix the interest rate at 2.97% for five years on $70 million of the Company’s money market deposit accounts. These money market deposit accounts were associated with the Promontory Insured Network Deposits Program (the “IND Program”) in which the Company participated. In December 2012, the Company decided to partially exit the IND Program in an effort to reduce its excess liquidity and, in the second quarter of 2013, the Company fully exited the IND Program. Money market deposit accounts declined $68 million from the end of 2012 to the end of June 2013 primarily due to exiting the IND Program. When the Company fully exited the IND Program, the interest rate caps used to hedge the interest rates on these deposits were terminated. Because the interest rate caps qualified for hedge accounting, a $1.3 million loss on the ineffective portion of the cash flow hedge was recognized in the second quarter of 2013. The aggregate fair value of the interest rate caps was $14 thousand at December 31, 2012. The adjustments that reduced the balance to $0 at June 30, 2013 included an increase of $681 thousand to reflect unrealized holding gains and a decrease of $695 thousand to reflect the charge to interest expense associated with the hedged money market deposit accounts. The comparable amounts for the first six months of 2012 were $780 thousand and $962 thousand, respectively. By terminating the interest rate caps associated with the deposits in the IND Program, the interest expense related to the hedged money market deposit accounts declined $267 thousand for the first six months of 2013 when compared to the first six months of 2012. The rate paid on interest-bearing liabilities decreased from 1.20% for the first six months of 2012 to 0.95% for the first six months of 2013 partially due to the lower interest expense related to the hedged money market deposits. The interest expense associated with the hedged deposits will be $1.3 million less for 2013 than for 2012. By entering into derivative instrument contracts, the Company exposes itself, from time to time, to counterparty credit risk. Counterparty credit risk is the risk that the counterparty will fail to perform under the terms of the derivative contract. When the fair value of a derivative contract is in an asset position, the counterparty has a liability to the Company, which creates credit risk for the Company. The Company attempts to minimize this risk by selecting counterparties with investment grade credit ratings, limiting its exposure to any single counterparty and regularly monitoring its market position with each counterparty. Collateral required by the counterparties, recorded in other liabilities, was $0 and $428 thousand at June 30, 2013 and December 31, 2012, respectively. |
Stock-Based Compensation (Details 1) (USD $)
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6 Months Ended |
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Jun. 30, 2013
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Number of Shares, Nonvested at beginning of period | 6,548 |
Number of Shares, Granted | 3,930 |
Number of Shares, Vested | (6,548) |
Number of Shares, Cancelled | 0 |
Number of Shares, Nonvested at end of period | 3,930 |
Weighted Average Grant Date Fair Value, Nonvested at beginning of period | $ 14.89 |
Weighted Average Grant Date Fair Value, Granted | $ 6.81 |
Weighted Average Grant Date Fair Value, Vested | $ 14.89 |
Weighted Average Grant Date Fair Value, Cancelled | $ 0 |
Weighted Average Grant Date Fair Value, Nonvested at end of period | $ 6.81 |
Stock-Based Compensation (Tables)
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6 Months Ended | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Jun. 30, 2013
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Disclosure of Compensation Related Costs, Share-based Payments [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of Share-based Compensation [Table Text Block] | The following tables provide information on stock-based compensation expense for the three and six months ended June 30, 2013 and 2012.
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Schedule of Share-based Compensation, Restricted Stock Units Award Activity [Table Text Block] | The following table summarizes restricted stock award activity for the Company under the 2006 Equity Plan for the six months ended June 30, 2013.
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Schedule of Share-based Compensation, Stock Options, Activity [Table Text Block] | The following table summarizes stock option activity for the Company under the 2006 Equity Plan for the six months ended June 30, 2013.
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Schedule of Share-based Payment Award, Stock Options, Valuation Assumptions [Table Text Block] | The following weighted average assumptions were used as inputs to the Black-Scholes valuation model for options outstanding at June 30, 2013.
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Other Liabilities (Tables)
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6 Months Ended | |||||||||||||||||||||||||||||||||||||||||||||||||
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Jun. 30, 2013
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Other Liabilities Disclosure [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of Other Liabilities [Table Text Block] | The Company had the following other liabilities at June 30, 2013 and December 31, 2012.
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