R
|
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
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£
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TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
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Indiana
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35-2042093
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|||
(State or other jurisdiction
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(I.R.S. Employer
|
|||
of incorporation or organization)
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Identification No.)
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|||
707 Ridge Road, Munster, Indiana
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46321
|
|||
(Address of principal executive offices)
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(Zip code)
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|||
(219) 836-2960
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||||
(Registrant’s telephone number, including area code)
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Large accelerated filer £
|
Accelerated filer £
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|
Non-accelerated filer £ (Do not check if a smaller reporting company)
|
Smaller reporting company R
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Page
|
||
PART I - FINANCIAL INFORMATION
|
||
Financial Statements (Unaudited)
|
||
Condensed Consolidated Statements of Condition
|
3
|
|
Condensed Consolidated Statements of Income
|
4
|
|
Condensed Consolidated Statements of Changes in Shareholders’ Equity
|
5
|
|
Condensed Consolidated Statements of Cash Flows
|
6
|
|
Notes to Condensed Consolidated Financial Statements
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7
|
|
Management’s Discussion and Analysis of Financial Condition and Results of Operations
|
35
|
|
Quantitative and Qualitative Disclosures about Market Risk
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63
|
|
Controls and Procedures
|
65
|
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PART II - OTHER INFORMATION
|
||
Legal Proceedings
|
65
|
|
Risk Factors
|
66
|
|
Unregistered Sales of Equity Securities and Use of Proceeds
|
67
|
|
Defaults Upon Senior Securities
|
67
|
|
(Removed and Reserved)
|
67
|
|
Other Information
|
67
|
|
Exhibits
|
68
|
|
69
|
||
Certifications of Principal Executive Officer and Principal Financial Officer | ||
Exhibit 31.1 | ||
Exhibit 31.2 | ||
Exhibit 32.0 | ||
|
June 30,
2011
|
December 31,
2010
|
|||||||
(Unaudited)
|
||||||||
ASSETS
|
(Dollars in thousands)
|
|||||||
Cash and amounts due from depository institutions
|
$ | 33,075 | $ | 24,624 | ||||
Interest-bearing deposits
|
14,423 | 37,130 | ||||||
Cash and cash equivalents
|
47,498 | 61,754 | ||||||
Investment securities available-for-sale, at fair value
|
234,121 | 197,101 | ||||||
Investment securities held-to-maturity, at cost
|
14,837 | 17,201 | ||||||
Federal Home Loan Bank stock, at cost
|
8,638 | 20,282 | ||||||
Loans receivable
|
737,516 | 732,584 | ||||||
Allowance for loan losses
|
(17,039 | ) | (17,179 | ) | ||||
Net loans
|
720,477 | 715,405 | ||||||
Loans held for sale
|
211 | — | ||||||
Bank-owned life insurance
|
35,880 | 35,463 | ||||||
Accrued interest receivable
|
3,148 | 3,162 | ||||||
Other real estate owned
|
21,164 | 22,324 | ||||||
Office properties and equipment
|
18,163 | 20,464 | ||||||
Net deferred tax assets
|
16,714 | 17,923 | ||||||
Other assets
|
7,168 | 10,597 | ||||||
Total assets
|
$ | 1,128,019 | $ | 1,121,676 | ||||
LIABILITIES AND SHAREHOLDERS’ EQUITY
|
||||||||
Deposits
|
$ | 964,527 | $ | 945,884 | ||||
Borrowed funds
|
38,835 | 53,550 | ||||||
Advance payments by borrowers for taxes and insurance
|
4,387 | 4,618 | ||||||
Other liabilities
|
4,104 | 4,696 | ||||||
Total liabilities
|
1,011,853 | 1,008,748 | ||||||
Commitments and contingencies
|
||||||||
Shareholders’ equity:
|
||||||||
Preferred stock, $.01 par value; 15,000,000 shares authorized
|
— | — | ||||||
Common stock, $.01 par value; 85,000,000 shares authorized;
23,423,306 shares issued; 10,867,802 and 10,850,040 shares outstanding
|
234 | 234 | ||||||
Additional paid-in capital
|
187,133 | 187,164 | ||||||
Retained earnings
|
85,080 | 83,592 | ||||||
Treasury stock, at cost; 12,555,504 and 12,573,266 shares
|
(154,877 | ) | (155,112 | ) | ||||
Accumulated other comprehensive loss, net of tax
|
(1,404 | ) | (2,950 | ) | ||||
Total shareholders’ equity
|
116,166 | 112,928 | ||||||
Total liabilities and shareholders’ equity
|
$ | 1,128,019 | $ | 1,121,676 |
Three Months Ended
June 30,
|
Six Months Ended
June 30,
|
||||||||||||||
2011 | 2010 | 2011 | 2010 | ||||||||||||
(Unaudited)
|
|||||||||||||||
(Dollars in thousands, except share and per share data)
|
|||||||||||||||
Interest income:
|
|||||||||||||||
Loans receivable
|
$ |
9,016
|
$ |
9,626
|
$ |
17,827
|
$ |
19,304
|
|||||||
Investment securities
|
2,040
|
2,163
|
4,085
|
4,376
|
|||||||||||
Other interest-earning assets
|
164
|
123
|
321
|
247
|
|||||||||||
Total interest income
|
11,220
|
11,912
|
22,233
|
23,927
|
|||||||||||
Interest expense:
|
|||||||||||||||
Deposits
|
1,777
|
2,146
|
3,670
|
4,199
|
|||||||||||
Borrowed funds
|
256
|
437
|
519
|
956
|
|||||||||||
Total interest expense
|
2,033
|
2,583
|
4,189
|
5,155
|
|||||||||||
Net interest income
|
9,187
|
9,329
|
18,044
|
18,772
|
|||||||||||
Provision for loan losses
|
996
|
817
|
1,899
|
2,527
|
|||||||||||
Net interest income after provision for loan losses
|
8,191
|
8,512
|
16,145
|
16,245
|
|||||||||||
Non-interest income:
|
|||||||||||||||
Service charges and other fees
|
1,174
|
1,320
|
2,250
|
2,540
|
|||||||||||
Card-based fees
|
520
|
486
|
995
|
923
|
|||||||||||
Commission income
|
78
|
46
|
123
|
100
|
|||||||||||
Net gain on sale of:
|
|||||||||||||||
Investment securities
|
173
|
―
|
692
|
456
|
|||||||||||
Loans receivable
|
26
|
―
|
58
|
―
|
|||||||||||
Other real estate owned
|
2,238
|
11
|
2,233
|
12
|
|||||||||||
Income from bank-owned life insurance
|
210
|
262
|
416
|
485
|
|||||||||||
Other income
|
119
|
118
|
222
|
268
|
|||||||||||
Total non-interest income
|
4,538
|
2,243
|
6,989
|
4,784
|
|||||||||||
Non-interest expense:
|
|||||||||||||||
Compensation and employee benefits
|
5,047
|
4,550
|
10,286
|
9,219
|
|||||||||||
Net occupancy expense
|
670
|
651
|
1,435
|
1,406
|
|||||||||||
FDIC insurance premiums and OTS assessments
|
504
|
669
|
1,157
|
1,269
|
|||||||||||
Professional fees
|
334
|
744
|
722
|
1,337
|
|||||||||||
Furniture and equipment expense
|
454
|
526
|
917
|
1,059
|
|||||||||||
Data processing
|
441
|
443
|
883
|
873
|
|||||||||||
Marketing
|
270
|
216
|
457
|
330
|
|||||||||||
Other real estate owned related expense, net
|
2,011
|
255
|
2,603
|
886
|
|||||||||||
Loan collection expense
|
233
|
153
|
353
|
322
|
|||||||||||
Severance and early retirement expense
|
―
|
437
|
―
|
440
|
|||||||||||
Other general and administrative expenses
|
1,107
|
952
|
2,225
|
1,922
|
|||||||||||
Total non-interest expense
|
11,071
|
9,596
|
21,038
|
19,063
|
|||||||||||
Income before income taxes
|
1,658
|
1,159
|
2,096
|
1,966
|
|||||||||||
Income tax expense
|
425
|
178
|
391
|
287
|
|||||||||||
Net income
|
$ |
1,233
|
$ |
981
|
$ |
1,705
|
$ |
1,679
|
|||||||
Per share data:
|
|||||||||||||||
Basic earnings per share
|
$ |
.12
|
$ |
.09
|
$ |
.16
|
$ |
.16
|
|||||||
Diluted earnings per share
|
.11
|
.09
|
.16
|
.16
|
|||||||||||
Cash dividends declared per share
|
.01
|
.01
|
.02
|
.02
|
|||||||||||
WWeighted-average common and common share equivalents outstanding:
|
|||||||||||||||
Basic
|
10,691,424
|
10,640,347
|
10,671,196
|
10,611,220
|
|||||||||||
Diluted
|
10,759,332
|
10,721,909
|
10,733,149
|
10,697,976
|
Accumulated
|
||||||||||||||||||||||||
Additional
|
Other
|
|||||||||||||||||||||||
Common
|
Paid-In
|
Retained
|
Treasury
|
Comprehensive
|
||||||||||||||||||||
Stock
|
Capital
|
Earnings
|
Stock
|
Loss
|
Total
|
|||||||||||||||||||
(Unaudited)
|
||||||||||||||||||||||||
(Dollars in thousands)
|
||||||||||||||||||||||||
Balance at January 1, 2010
|
$ | 234 | $ | 188,930 | $ | 80,564 | $ | (157,041 | ) | $ | (2,314 | ) | $ | 110,373 | ||||||||||
Net income
|
— | — | 1,679 | — | — | 1,679 | ||||||||||||||||||
Other comprehensive income:
|
||||||||||||||||||||||||
Change in unrealized appreciation on investment securities available-for-sale, net of reclassification and tax
|
— | — | — | — | 772 | 772 | ||||||||||||||||||
Total comprehensive income
|
— | — | — | — | — | 2,451 | ||||||||||||||||||
Net distribution of Rabbi Trust shares
|
— | (320 | ) | — | 320 | — | — | |||||||||||||||||
Forfeiture of restricted stock awards
|
— | 273 | 3 | (273 | ) | — | 3 | |||||||||||||||||
Vesting of restricted stock awards
|
— | 164 | — | — | — | 164 | ||||||||||||||||||
Unearned compensation restricted stock awards
|
— | (395 | ) | — | 395 | — | — | |||||||||||||||||
Reclassification of treasury stock issuances of restricted stock at average cost
|
— | (1,431 | ) | — | 1,431 | — | — | |||||||||||||||||
Dividends declared on common stock ($.02 per share)
|
— | — | (218 | ) | — | — | (218 | ) | ||||||||||||||||
Balance at June 30, 2010
|
$ | 234 | $ | 187,221 | $ | 82,028 | $ | (155,168 | ) | $ | (1,542 | ) | $ | 112,773 | ||||||||||
Balance at January 1, 2011
|
$ | 234 | $ | 187,164 | $ | 83,592 | $ | (155,112 | ) | $ | (2,950 | ) | $ | 112,928 | ||||||||||
Net income
|
— | — | 1,705 | — | — | 1,705 | ||||||||||||||||||
Other comprehensive income:
|
||||||||||||||||||||||||
Change in unrealized appreciation on investment securities available-for-sale, net of reclassification and tax
|
— | — | — | — | 1,546 | 1,546 | ||||||||||||||||||
Total comprehensive income
|
— | — | — | — | — | 3,251 | ||||||||||||||||||
Forfeiture of restricted stock awards
|
— | 437 | 2 | (437 | ) | — | 2 | |||||||||||||||||
Vesting of restricted stock awards
|
— | 204 | — | — | — | 204 | ||||||||||||||||||
Unearned compensation restricted stock awards
|
— | (672 | ) | — | 672 | — | — | |||||||||||||||||
Dividends declared on common stock ($.02 per share)
|
— | — | (219 | ) | — | — | (219 | ) | ||||||||||||||||
Balance at June 30, 2011
|
$ | 234 | $ | 187,133 | $ | 85,080 | $ | (154,877 | ) | $ | (1,404 | ) | $ | 116,166 |
Six Months Ended
|
||||||||
June 30,
|
||||||||
2011
|
2010
|
|||||||
(Unaudited)
|
||||||||
(Dollars in thousands)
|
||||||||
OPERATING ACTIVITIES:
|
||||||||
Net income
|
$ | 1,705 | $ | 1,679 | ||||
Adjustments to reconcile net income to net cash provided by operating activities:
|
||||||||
Provision for loan losses
|
1,899 | 2,527 | ||||||
Depreciation and amortization
|
755 | 806 | ||||||
Net discount accretion on investment securities available-for-sale
|
(52 | ) | (307 | ) | ||||
Net premium amortization on investment securities held-to-maturity
|
81 | 51 | ||||||
Net gain on sale of:
|
||||||||
Loans held-for-sale
|
(58 | ) | — | |||||
Investment securities
|
(692 | ) | (456 | ) | ||||
Other real estate owned
|
(2,233 | ) | (12 | ) | ||||
Write downs on other real estate owned
|
1,785 | 432 | ||||||
Write downs on transfer of future branch sites to other real estate owned
|
396 | — | ||||||
Write down on construction in process
|
106 | — | ||||||
Deferred income tax expense
|
334 | 55 | ||||||
Proceeds from sale of loans held-for-sale
|
2,434 | — | ||||||
Origination of loans held-for-sale
|
(2,299 | ) | — | |||||
Increase in cash surrender value of bank-owned life insurance
|
(416 | ) | (485 | ) | ||||
Decrease in other assets
|
2,879 | 901 | ||||||
Increase in other liabilities
|
109 | 649 | ||||||
Net cash flows provided by operating activities
|
6,733 | 5,840 | ||||||
INVESTING ACTIVITIES:
|
||||||||
Proceeds from sale of:
|
||||||||
Investment securities, available-for-sale
|
19,463 | 9,603 | ||||||
Other real estate owned
|
6,130 | 1,004 | ||||||
Proceeds from maturities and paydowns of:
|
||||||||
Investment securities, available-for-sale
|
29,644 | 44,843 | ||||||
Investment securities, held-to-maturity
|
2,283 | 1,199 | ||||||
Purchases of:
|
||||||||
Investment securities, available-for-sale
|
(82,965 | ) | (54,612 | ) | ||||
Investment securities, held-to-maturity
|
— | (8,456 | ) | |||||
Properties and equipment
|
(67 | ) | (807 | ) | ||||
Redemption of Federal Home Loan Bank stock
|
11,645 | — | ||||||
Net loan repayments (fundings)
|
(10,550 | ) | (2,013 | ) | ||||
Net cash flows used in investing activities
|
(24,417 | ) | (9,239 | ) | ||||
FINANCING ACTIVITIES:
|
||||||||
Net increase (decrease) in:
|
||||||||
Deposit accounts
|
18,593 | 49,670 | ||||||
Advance payments by borrowers for taxes and insurance
|
(231 | ) | (136 | ) | ||||
Short-term borrowed funds
|
378 | (10,615 | ) | |||||
Proceeds from Federal Home Loan Bank advances
|
— | 18,000 | ||||||
Repayments of Federal Home Loan Bank advances
|
(15,093 | ) | (46,087 | ) | ||||
Dividends paid on common stock
|
(219 | ) | (218 | ) | ||||
Net cash flows provided by financing activities
|
3,428 | 10,614 | ||||||
Increase (decrease) in cash and cash equivalents
|
(14,256 | ) | 7,215 | |||||
Cash and cash equivalents at beginning of period
|
61,754 | 24,428 | ||||||
Cash and cash equivalents at end of period
|
$ | 47,498 | $ | 31,643 | ||||
Supplemental disclosures:
|
||||||||
Loans and land transferred to other real estate owned
|
$ | 4,522 | $ | 4,007 | ||||
Cash paid for interest on deposits
|
3,670 | 4,182 | ||||||
Cash paid for interest on borrowed funds
|
549 | 986 | ||||||
Cash paid for income taxes
|
— | 1,075 |
1.
|
Basis of Presentation
|
2.
|
Earnings Per Share
|
Three Months Ended
June 30,
|
Six Months Ended
June 30,
|
|||||||||||||||
2011
|
2010
|
2011
|
2010
|
|||||||||||||
(Dollars in thousands, except per share data)
|
||||||||||||||||
Net income
|
$ | 1,233 | $ | 981 | $ | 1,705 | $ | 1,679 | ||||||||
Weighted-average common shares:
|
||||||||||||||||
Outstanding
|
10,691,424 | 10,640,347 | 10,671,196 | 10,611,220 | ||||||||||||
Equivalents (1)
|
67,908 | 81,562 | 61,953 | 86,756 | ||||||||||||
Total
|
10,759,332 | 10,721,909 | 10,733,149 | 10,697,976 | ||||||||||||
Earnings per share:
|
||||||||||||||||
Basic
|
$ | .12 | $ | .09 | $ | .16 | $ | .16 | ||||||||
Diluted
|
.11 | .09 | .16 | .16 | ||||||||||||
Number of anti-dilutive stock options excluded from the diluted earnings per share calculation
|
516,495 | 651,995 | 581,882 | 696,249 | ||||||||||||
Weighted-average exercise price of anti-dilutive option shares
|
$ | 14.01 | $ | 12.95 | $ | 13.71 | $ | 13.10 |
(1)
|
|
Assumes exercise of dilutive stock options, a portion of the unearned restricted stock awards, and treasury shares held in Rabbi Trust accounts.
|
Gross
|
Gross
|
|||||||||||||||||||
Par
|
Amortized
|
Unrealized
|
Unrealized
|
Fair
|
||||||||||||||||
Value
|
Cost
|
Gains
|
Losses
|
Value
|
||||||||||||||||
(Dollars in thousands)
|
||||||||||||||||||||
At June 30, 2011:
|
||||||||||||||||||||
Available-for-sale investment securities:
|
||||||||||||||||||||
U.S. Treasury securities
|
$ | 21,000 | $ | 20,946 | $ | 355 | $ | — | $ | 21,301 | ||||||||||
Government sponsored entity (GSE) securities
|
65,800 | 66,531 | 1,485 | (17 | ) | 67,999 | ||||||||||||||
Corporate bonds
|
4,000 | 3,661 | 68 | — | 3,729 | |||||||||||||||
Collateralized mortgage obligations
|
50,284 | 47,079 | 1,638 | (187 | ) | 48,530 | ||||||||||||||
Commercial mortgage-backed securities
|
71,696 | 72,873 | 1,401 | (98 | ) | 74,176 | ||||||||||||||
Pooled trust preferred securities
|
28,159 | 25,396 | — | (7,025 | ) | 18,371 | ||||||||||||||
GSE preferred stock
|
200 | — | 15 | — | 15 | |||||||||||||||
Total available-for-sale securities
|
$ | 241,139 | $ | 236,486 | $ | 4,962 | $ | (7,327 | ) | $ | 234,121 | |||||||||
Held-to-maturity investment securities:
|
||||||||||||||||||||
Asset backed securities
|
$ | 9,031 | $ | 9,367 | $ | 263 | $ | — | $ | 9,630 | ||||||||||
Municipal securities
|
5,470 | 5,470 | 102 | — | 5,572 | |||||||||||||||
Total held-to-maturity investment securities
|
$ | 14,501 | $ | 14,837 | $ | 365 | $ | — | $ | 15,202 |
Gross
|
Gross
|
|||||||||||||||||||
Par
|
Amortized
|
Unrealized
|
Unrealized
|
Fair
|
||||||||||||||||
Value
|
Cost
|
Gains
|
Losses
|
Value
|
||||||||||||||||
(Dollars in thousands)
|
||||||||||||||||||||
At December 31, 2010:
|
||||||||||||||||||||
Available-for-sale investment securities:
|
||||||||||||||||||||
U.S. Treasury securities
|
$ | 15,000 | $ | 14,975 | $ | 3 | $ | (159 | ) | $ | 14,819 | |||||||||
Government sponsored entity (GSE) securities
|
30,800 | 30,717 | 421 | (118 | ) | 31,020 | ||||||||||||||
Corporate bonds
|
4,000 | 3,629 | — | (43 | ) | 3,586 | ||||||||||||||
Collateralized mortgage obligations
|
62,512 | 59,037 | 2,071 | (353 | ) | 60,755 | ||||||||||||||
Commercial mortgage-backed securities
|
66,282 | 67,052 | 1,804 | (158 | ) | 68,698 | ||||||||||||||
Pooled trust preferred securities
|
29,409 | 26,473 | — | (8,348 | ) | 18,125 | ||||||||||||||
GSE preferred stock
|
5,837 | — | 98 | — | 98 | |||||||||||||||
Total available-for-sale securities
|
$ | 213,840 | $ | 201,883 | $ | 4,397 | $ | (9,179 | ) | $ | 197,101 | |||||||||
Held-to-maturity investment securities:
|
||||||||||||||||||||
Asset backed securities
|
$ | 9,844 | $ | 10,261 | $ | 126 | $ | (7 | ) | $ | 10,380 | |||||||||
Municipal securities
|
6,940 | 6,940 | 106 | — | 7,046 | |||||||||||||||
Total held-to-maturity investment securities
|
$ | 16,784 | $ | 17,201 | $ | 232 | $ | (7 | ) | $ | 17,426 |
June 30, 2011
|
||||||||||||||||||||||||
Less than 12 Months
|
12 Months or More
|
Total
|
||||||||||||||||||||||
Fair
|
Unrealized
|
Fair
|
Unrealized
|
Fair
|
Unrealized
|
|||||||||||||||||||
Value
|
Losses
|
Value
|
Losses
|
Value
|
Losses
|
|||||||||||||||||||
(Dollars in thousands)
|
||||||||||||||||||||||||
U.S. Treasury securities
|
$ | — | $ | — | $ | — | $ | — | $ | — | $ | — | ||||||||||||
GSE securities
|
3,032 | (17 | ) | — | — | 3,032 | (17 | ) | ||||||||||||||||
Corporate bonds
|
— | — | — | — | — | — | ||||||||||||||||||
Collateralized mortgage obligations
|
8,567 | (171 | ) | 34 | (16 | ) | 8,601 | (187 | ) | |||||||||||||||
Commercial mortgage-backed securities
|
6,430 | (98 | ) | — | — | 6,430 | (98 | ) | ||||||||||||||||
Pooled trust preferred securities
|
— | — | 18,371 | (7,025 | ) | 18,371 | (7,025 | ) | ||||||||||||||||
$ | 18,029 | $ | (286 | ) | $ | 18,405 | $ | (7,041 | ) | $ | 36,434 | $ | (7,327 | ) |
December 31, 2010
|
||||||||||||||||||||||||
Less than 12 Months
|
12 Months or More
|
Total
|
||||||||||||||||||||||
Fair
|
Unrealized
|
Fair
|
Unrealized
|
Fair
|
Unrealized
|
|||||||||||||||||||
Value
|
Losses
|
Value
|
Losses
|
Value
|
Losses
|
|||||||||||||||||||
(Dollars in thousands)
|
||||||||||||||||||||||||
U.S. Treasury securities
|
$ | 11,905 | $ | (159 | ) | $ | — | $ | — | $ | 11,905 | $ | (159 | ) | ||||||||||
GSE securities
|
5,870 | (118 | ) | — | — | 5,870 | (118 | ) | ||||||||||||||||
Corporate bonds
|
3,586 | (43 | ) | — | — | 3,586 | (43 | ) | ||||||||||||||||
Collateralized mortgage obligations
|
8,538 | (323 | ) | 1,204 | (30 | ) | 9,742 | (353 | ) | |||||||||||||||
Commercial mortgage-backed securities
|
10,255 | (158 | ) | — | — | 10,255 | (158 | ) | ||||||||||||||||
Pooled trust preferred securities
|
— | — | 18,125 | (8,348 | ) | 18,125 | (8,348 | ) | ||||||||||||||||
$ | 40,154 | $ | (801 | ) | $ | 19,329 | $ | (8,378 | ) | $ | 59,483 | $ | (9,179 | ) |
Available-for-Sale
|
||||||||
Amortized
|
Fair
|
|||||||
Cost
|
Value
|
|||||||
(Dollars in thousands)
|
||||||||
U.S. Treasury securities:
|
||||||||
Due in one year or less
|
$ | 3,009 | $ | 3,013 | ||||
Due after one year through five years
|
17,937 | 18,288 | ||||||
GSE securities — Due after one year through five years
|
66,531 | 67,999 | ||||||
Corporate bonds — Due after five years
|
3,661 | 3,729 | ||||||
Collateralized mortgage obligations:
|
||||||||
Due after one year through five years
|
920 | 924 | ||||||
Due after five years
|
46,159 | 47,606 | ||||||
Commercial mortgage-backed securities
|
72,873 | 74,176 | ||||||
Pooled trust preferred securities
|
25,396 | 18,371 | ||||||
GSE preferred stock
|
— | 15 | ||||||
$ | 236,486 | $ | 234,121 |
Held-to-Maturity
|
||||||||
Amortized
|
Fair
|
|||||||
Cost
|
Value
|
|||||||
(Dollars in thousands)
|
||||||||
Asset backed securities — Due after five years
|
$ | 9,367 | $ | 9,630 | ||||
Municipal securities:
|
||||||||
Due in one year or less
|
2,500 | 2,536 | ||||||
Due after one year through five years
|
2,970 | 3,036 | ||||||
$ | 14,837 | $ | 15,202 |
Three Months Ended | Six Months Ended | ||||||||||||||
June 30,
2011
|
June 30,
2010
|
June 30,
2011
|
June 30,
2010
|
||||||||||||
(Dollars in thousands)
|
|||||||||||||||
Available-for-sale securities:
|
|||||||||||||||
Gross realized gains
|
$ |
173
|
$ |
—
|
$ |
692
|
$ |
456
|
|||||||
Gross realized losses
|
—
|
—
|
—
|
—
|
|||||||||||
Net realized gains
|
$ |
173
|
$ |
—
|
$ |
692
|
$ |
456
|
|||||||
Income tax expense on realized gains
|
$ |
64
|
$ |
—
|
$ |
253
|
$ |
155
|
June 30,
2011
|
December 31,
2010
|
|||||||
(Dollars in thousands)
|
||||||||
Commercial loans:
|
||||||||
Commercial and industrial
|
$ | 83,082 | $ | 74,940 | ||||
Commercial real estate:
|
||||||||
Owner occupied
|
102,315 | 99,435 | ||||||
Non-owner occupied
|
187,380 | 191,998 | ||||||
Multifamily
|
77,562 | 72,080 | ||||||
Commercial construction and land development
|
23,424 | 24,310 | ||||||
Commercial participations
|
21,194 | 23,594 | ||||||
Total commercial loans
|
494,957 | 486,357 | ||||||
Retail loans:
|
||||||||
One-to-four family residential
|
183,269 | 185,321 | ||||||
Home equity lines of credit
|
54,975 | 56,177 | ||||||
Retail construction
|
2,095 | 3,176 | ||||||
Other
|
2,670 | 2,122 | ||||||
Total retail loans
|
243,009 | 246,796 | ||||||
Total loans receivable
|
737,966 | 733,153 | ||||||
Net deferred loan fees
|
(450 | ) | (569 | ) | ||||
Total loans receivable, net of deferred loan fees
|
$ | 737,516 | $ | 732,584 |
Commercial
|
Commercial Real Estate
|
Construction
|
One-to-four
|
Total
|
||||||||||||||||||||||||||||||||||||||||
and
|
Owner
|
Non-Owner
|
and Land
|
Commercial
|
Family
|
Retail
|
Loans
|
|||||||||||||||||||||||||||||||||||||
Industrial
|
Occupied
|
Occupied
|
Multifamily
|
Development
|
Participations
|
Residential
|
HELOC
|
Construction
|
Other
|
Receivable
|
||||||||||||||||||||||||||||||||||
(Dollars in thousands)
|
||||||||||||||||||||||||||||||||||||||||||||
Allowance for loan losses:
|
||||||||||||||||||||||||||||||||||||||||||||
Balance at March 31, 2011
|
$ | 1,268 | $ | 1,012 | $ | 6,717 | $ | 461 | $ | 154 | $ | 4,719 | $ | 1,323 | $ | 1,327 | $ | 9 | $ | 105 | $ | 17,095 | ||||||||||||||||||||||
Provision for loan losses
|
435 | (58 | ) | (208 | ) | (20 | ) | (61 | ) | 673 | 230 | (44 | ) | (4 | ) | 53 | 996 | |||||||||||||||||||||||||||
Loans charged-off
|
(153 | ) | (125 | ) | — | — | — | (605 | ) | (168 | ) | — | — | (22 | ) | (1,073 | ) | |||||||||||||||||||||||||||
Recoveries
|
4 | — | 6 | — | — | — | 2 | 1 | — | 8 | 21 | |||||||||||||||||||||||||||||||||
Balance at June 30, 2011
|
$ | 1,554 | $ | 829 | $ | 6,515 | $ | 441 | $ | 93 | $ | 4,787 | $ | 1,387 | $ | 1,284 | $ | 5 | $ | 144 | $ | 17,039 | ||||||||||||||||||||||
Allowance for loan losses:
|
||||||||||||||||||||||||||||||||||||||||||||
Balance at December 31, 2010
|
$ | 1,279 | $ | 1,090 | $ | 6,906 | $ | 350 | $ | 188 | $ | 4,559 | $ | 1,356 | $ | 1,309 | $ | 7 | $ | 135 | $ | 17,179 | ||||||||||||||||||||||
Provision for loan losses
|
422 | (136 | ) | (405 | ) | 295 | (91 | ) | 1,536 | 219 | 21 | (2 | ) | 40 | 1,899 | |||||||||||||||||||||||||||||
Loans charged-off
|
(153 | ) | (125 | ) | — | (204 | ) | (4 | ) | (1,308 | ) | (191 | ) | (52 | ) | — | (50 | ) | (2,087 | ) | ||||||||||||||||||||||||
Recoveries
|
6 | — | 14 | — | — | — | 3 | 6 | — | 19 | 48 | |||||||||||||||||||||||||||||||||
Balance at June 30, 2011
|
$ | 1,554 | $ | 829 | $ | 6,515 | $ | 441 | $ | 93 | $ | 4,787 | $ | 1,387 | $ | 1,284 | $ | 5 | $ | 144 | $ | 17,039 | ||||||||||||||||||||||
Ending allowance balance:
|
||||||||||||||||||||||||||||||||||||||||||||
Individually evaluated
for impairment
|
$ | — | $ | 155 | $ | 4,266 | $ | — | $ | — | $ | 3,572 | $ | — | $ | — | $ | — | $ | — | $ | 7,993 | ||||||||||||||||||||||
Collectively evaluated
for impairment
|
1,554 | 674 | 2,249 | 441 | 93 | 1,215 | 1,387 | 1,284 | 5 | 144 | 9,046 | |||||||||||||||||||||||||||||||||
Total evaluated for
impairment at
June 30, 2011
|
$ | 1,554 | $ | 829 | $ | 6,515 | $ | 441 | $ | 93 | $ | 4,787 | $ | 1,387 | $ | 1,284 | $ | 5 | $ | 144 | $ | 17,039 | ||||||||||||||||||||||
Loans receivable:
|
||||||||||||||||||||||||||||||||||||||||||||
Individually evaluated
for impairment
|
$ | 2,926 | $ | 15,515 | $ | 24,048 | $ | 677 | $ | 7,171 | $ | 8,191 | $ | — | $ | — | $ | — | $ | — | $ | 58,528 | ||||||||||||||||||||||
Collectively evaluated
for impairment
|
80,156 | 86,800 | 163,332 | 76,885 | 16,253 | 13,003 | 183,269 | 54,975 | 2,095 | 2,670 | 679,438 | |||||||||||||||||||||||||||||||||
Balance at June 30, 2011
|
$ | 83,082 | $ | 102,315 | $ | 187,380 | $ | 77,562 | $ | 23,424 | $ | 21,194 | $ | 183,269 | $ | 54,975 | $ | 2,095 | $ | 2,670 | $ | 737,966 |
Commercial
|
Commercial Real Estate
|
Construction
|
One-to-four
|
Total
|
||||||||||||||||||||||||||||||||||||||||
and
|
Owner
|
Non-Owner
|
and Land
|
Commercial
|
Family
|
Retail
|
Loans
|
|||||||||||||||||||||||||||||||||||||
Industrial
|
Occupied
|
Occupied
|
Multifamily
|
Development
|
Participations
|
Residential
|
HELOC
|
Construction
|
Other
|
Receivable
|
||||||||||||||||||||||||||||||||||
(Dollars in thousands)
|
||||||||||||||||||||||||||||||||||||||||||||
Allowance for loan losses:
|
||||||||||||||||||||||||||||||||||||||||||||
Balance at December 31, 2010
|
$ | 1,279 | $ | 1,090 | $ | 6,906 | $ | 350 | $ | 188 | $ | 4,559 | $ | 1,356 | $ | 1,309 | $ | 7 | $ | 135 | $ | 17,179 | ||||||||||||||||||||||
Ending allowance balance:
|
||||||||||||||||||||||||||||||||||||||||||||
Individually evaluated
for impairment
|
$ | — | $ | 433 | $ | 4,492 | $ | — | $ | — | $ | 3,497 | $ | — | $ | — | $ | — | $ | — | $ | 8,422 | ||||||||||||||||||||||
Collectively evaluated
for impairment
|
1,279 | 657 | 2,414 | 350 | 188 | 1,062 | 1,356 | 1,309 | 7 | 135 | 8,757 | |||||||||||||||||||||||||||||||||
Total evaluated for
impairment at
December 31, 2010
|
$ | 1,279 | $ | 1,090 | $ | 6,906 | $ | 350 | $ | 188 | $ | 4,559 | $ | 1,356 | $ | 1,309 | $ | 7 | $ | 135 | $ | 17,179 | ||||||||||||||||||||||
Loans receivable:
|
||||||||||||||||||||||||||||||||||||||||||||
Individually evaluated
for impairment
|
$ | 3,692 | $ | 11,135 | $ | 21,218 | $ | 264 | $ | 9,183 | $ | 9,499 | $ | — | $ | — | $ | — | $ | — | $ | 54,991 | ||||||||||||||||||||||
Collectively evaluated
for impairment
|
71,248 | 88,300 | 170,780 | 71,816 | 15,127 | 14,095 | 185,321 | 56,177 | 3,176 | 2,122 | 678,162 | |||||||||||||||||||||||||||||||||
Balance at December 31, 2010
|
$ | 74,940 | $ | 99,435 | $ | 191,998 | $ | 72,080 | $ | 24,310 | $ | 23,594 | $ | 185,321 | $ | 56,177 | $ | 3,176 | $ | 2,122 | $ | 733,153 |
●
|
Pass. Loans that meet the conservative underwriting guidelines that include core credit attributes noted above as measured by the loan grading matrices at levels that are in excess of the minimum amounts required to adequately service the loans.
|
●
|
Pass Watch. Loans which are performing per their contractual terms and are not necessarily demonstrating signs of credit or operational weakness, including but not limited to delinquency. Loans in this category are monitored by management for timely payments. Current financial information may be pending or, based upon the most recent analysis of the loan, possess credit attributes that are sufficient to adequately service the loan, but are less than the parameters required for a pass risk rating. This rating is considered transitional because management does not have current financial information to determine the appropriate risk grade or the quality of the loan appears to be changing. Loans may be graded as pass watch when a single event may have occurred that could be indicative of an emerging issue or indicate trending that would warrant a change in the risk rating.
|
●
|
Special Mention. Loans that have a potential weakness that will be closely monitored by management. A credit graded special mention does not expose the Company to elevated risk that would warrant an adverse classification.
|
●
|
Substandard. Loans that are inadequately protected by the current net worth and paying capacity of the borrower, guarantor, or the collateral pledged. Loans classified as substandard have a well-defined weakness or weaknesses, characterized by the distinct possibility that the Company will sustain some loss if the deficiencies are not corrected.
|
●
|
Doubtful. Loans that have the same weaknesses as those classified as substandard with the added characteristic that the weaknesses make collection or liquidation in full, on the basis of currently existing facts, conditions, and values, highly questionable and improbable.
|
Risk Rating at June 30, 2011
|
||||||||||||||||||||||||
Special
|
||||||||||||||||||||||||
Pass
|
Pass Watch
|
Mention
|
Substandard
|
Doubtful
|
Total
|
|||||||||||||||||||
(Dollars in thousands)
|
||||||||||||||||||||||||
Commercial loans:
|
||||||||||||||||||||||||
Commercial and industrial
|
$ | 75,329 | $ | 6,111 | $ | 970 | $ | 666 | $ | 6 | $ | 83,082 | ||||||||||||
Commercial real estate:
|
||||||||||||||||||||||||
Owner occupied
|
71,173 | 14,138 | 291 | 16,713 | — | 102,315 | ||||||||||||||||||
Non-owner occupied
|
146,690 | 15,857 | 2,700 | 22,133 | — | 187,380 | ||||||||||||||||||
Multifamily
|
72,880 | 3,264 | — | 1,418 | — | 77,562 | ||||||||||||||||||
Commercial construction and
land development
|
10,819 | 1,055 | 3,843 | 7,707 | — | 23,424 | ||||||||||||||||||
Commercial participations
|
13,003 | — | — | 8,191 | — | 21,194 | ||||||||||||||||||
Total commercial loans
|
389,894 | 40,425 | 7,804 | 56,828 | 6 | 494,957 | ||||||||||||||||||
Retail loans:
|
||||||||||||||||||||||||
One-to-four family residential
|
179,076 | — | — | 4,193 | — | 183,269 | ||||||||||||||||||
Home equity lines of credit
|
54,386 | — | — | 589 | — | 54,975 | ||||||||||||||||||
Retail construction
|
1,926 | — | — | 169 | — | 2,095 | ||||||||||||||||||
Other
|
2,670 | — | — | — | — | 2,670 | ||||||||||||||||||
Total retail loans
|
238,058 | — | — | 4,951 | — | 243,009 | ||||||||||||||||||
Total loans
|
$ | 627,952 | $ | 40,425 | $ | 7,804 | $ | 61,779 | $ | 6 | $ | 737,966 |
Special
|
||||||||||||||||||||||||
Pass
|
Pass Watch
|
Mention
|
Substandard
|
Doubtful
|
Total
|
|||||||||||||||||||
(Dollars in thousands)
|
||||||||||||||||||||||||
Current
|
$ | 617,034 | $ | 37,999 | $ | 5,108 | $ | 16,045 | $ | 6 | $ | 676,192 | ||||||||||||
Delinquent:
|
||||||||||||||||||||||||
30-59 days
|
7,258 | 2,426 | 2,422 | 355 | — | 12,461 | ||||||||||||||||||
60-89 days
|
3,251 | — | 274 | 4,591 | — | 8,116 | ||||||||||||||||||
90 days or more
|
409 | — | — | 40,788 | — | 41,197 | ||||||||||||||||||
Total loans
|
$ | 627,952 | $ | 40,425 | $ | 7,804 | $ | 61,779 | $ | 6 | $ | 737,966 |
Risk Rating at December 31, 2010
|
||||||||||||||||||||||||
Special
|
||||||||||||||||||||||||
Pass
|
Pass Watch
|
Mention
|
Substandard
|
Doubtful
|
Total
|
|||||||||||||||||||
(Dollars in thousands)
|
||||||||||||||||||||||||
Commercial loans:
|
||||||||||||||||||||||||
Commercial and industrial
|
$ | 62,969 | $ | 3,908 | $ | 7,813 | $ | 228 | $ | 22 | $ | 74,940 | ||||||||||||
Commercial real estate:
|
||||||||||||||||||||||||
Owner occupied
|
65,768 | 20,239 | 4,310 | 9,118 | — | 99,435 | ||||||||||||||||||
Non-owner occupied
|
142,636 | 25,191 | 2,448 | 21,723 | — | 191,998 | ||||||||||||||||||
Multifamily
|
61,822 | 8,238 | 708 | 1,312 | — | 72,080 | ||||||||||||||||||
Commercial construction and
land development
|
10,138 | 4,989 | — | 9,183 | — | 24,310 | ||||||||||||||||||
Commercial participations
|
14,095 | — | — | 9,499 | — | 23,594 | ||||||||||||||||||
Total commercial loans
|
357,428 | 62,565 | 15,279 | 51,063 | 22 | 486,357 | ||||||||||||||||||
Retail loans:
|
||||||||||||||||||||||||
One-to-four family residential
|
181,991 | — | 107 | 3,223 | — | 185,321 | ||||||||||||||||||
Home equity lines of credit
|
55,688 | — | — | 489 | — | 56,177 | ||||||||||||||||||
Retail construction
|
2,973 | — | — | 203 | — | 3,176 | ||||||||||||||||||
Other
|
2,118 | — | — | 4 | — | 2,122 | ||||||||||||||||||
Total retail loans
|
242,770 | — | 107 | 3,919 | — | 246,796 | ||||||||||||||||||
Total loans
|
$ | 600,198 | $ | 62,565 | $ | 15,386 | $ | 54,982 | $ | 22 | $ | 733,153 |
Special
|
||||||||||||||||||||||||
Pass
|
Pass Watch
|
Mention
|
Substandard
|
Doubtful
|
Total
|
|||||||||||||||||||
(Dollars in thousands)
|
||||||||||||||||||||||||
Current
|
$ | 589,067 | $ | 61,449 | $ | 11,857 | $ | 13,770 | $ | 22 | $ | 676,165 | ||||||||||||
Delinquent:
|
||||||||||||||||||||||||
30-59 days
|
5,347 | 457 | 415 | 540 | — | 6,759 | ||||||||||||||||||
60-89 days
|
5,322 | 536 | 768 | 321 | — | 6,947 | ||||||||||||||||||
90 days or more
|
462 | 123 | 2,346 | 40,351 | — | 43,282 | ||||||||||||||||||
Total loans
|
$ | 600,198 | $ | 62,565 | $ | 15,386 | $ | 54,982 | $ | 22 | $ | 733,153 |
Delinquency at June 30, 2011
|
||||||||||||||||||||||||||||
Loans
|
||||||||||||||||||||||||||||
30-59 | 60-89 |
Greater
|
Total
|
Total
|
> 90 Days
|
|||||||||||||||||||||||
Days Past
|
Days Past
|
Than 90
|
Past
|
Loans
|
And
|
|||||||||||||||||||||||
Due
|
Due
|
Days
|
Due
|
Current
|
Receivable
|
Accruing
|
||||||||||||||||||||||
(Dollars in thousands)
|
||||||||||||||||||||||||||||
Commercial loans:
|
||||||||||||||||||||||||||||
Commercial and industrial
|
$ | 342 | $ | 524 | $ | 384 | $ | 1,250 | $ | 81,832 | $ | 83,082 | $ | — | ||||||||||||||
Commercial real estate:
|
||||||||||||||||||||||||||||
Owner occupied
|
1,378 | 1,861 | 11,426 | 14,665 | 87,650 | 102,315 | — | |||||||||||||||||||||
Non-owner occupied
|
1,824 | 3,390 | 8,736 | 13,950 | 173,430 | 187,380 | 405 | |||||||||||||||||||||
Multifamily
|
1,732 | — | 385 | 2,117 | 75,445 | 77,562 | — | |||||||||||||||||||||
Commercial construction and
land development
|
2,665 | — | 7,707 | 10,372 | 13,052 | 23,424 | — | |||||||||||||||||||||
Commercial participations
|
— | — | 8,191 | 8,191 | 13,003 | 21,194 | — | |||||||||||||||||||||
Total commercial loans
|
7,941 | 5,775 | 36,829 | 50,545 | 444,412 | 494,957 | 405 | |||||||||||||||||||||
Retail loans:
|
||||||||||||||||||||||||||||
One-to-four family residential
|
3,547 | 2,167 | 3,606 | 9,320 | 173,949 | 183,269 | — | |||||||||||||||||||||
Home equity lines of credit
|
749 | 174 | 589 | 1,512 | 53,463 | 54,975 | — | |||||||||||||||||||||
Retail construction
|
196 | — | 169 | 365 | 1,730 | 2,095 | — | |||||||||||||||||||||
Other
|
28 | — | 4 | 32 | 2,638 | 2,670 | — | |||||||||||||||||||||
Total retail loans
|
4,520 | 2,341 | 4,368 | 11,229 | 231,780 | 243,009 | — | |||||||||||||||||||||
Total loans receivable
|
$ | 12,461 | $ | 8,116 | $ | 41,197 | $ | 61,774 | $ | 676,192 | $ | 737,966 | $ | 405 |
Delinquency at December 31, 2010
|
||||||||||||||||||||||||||||
Loans
|
||||||||||||||||||||||||||||
30-59 | 60-89 |
Greater
|
Total
|
Total
|
> 90 Days
|
|||||||||||||||||||||||
Days Past
|
Days Past
|
Than 90
|
Past
|
Loans
|
And
|
|||||||||||||||||||||||
Due
|
Due
|
Days
|
Due
|
Current
|
Receivable
|
Accruing
|
||||||||||||||||||||||
(Dollars in thousands)
|
||||||||||||||||||||||||||||
Commercial loans:
|
||||||||||||||||||||||||||||
Commercial and industrial
|
$ | 448 | $ | 664 | $ | 180 | $ | 1,292 | $ | 73,648 | $ | 74,940 | $ | — | ||||||||||||||
Commercial real estate:
|
||||||||||||||||||||||||||||
Owner occupied
|
678 | 3,691 | 11,464 | 15,833 | 83,602 | 99,435 | 2,346 | |||||||||||||||||||||
Non-owner occupied
|
361 | 216 | 9,081 | 9,658 | 182,340 | 191,998 | 123 | |||||||||||||||||||||
Multifamily
|
656 | — | 436 | 1,092 | 70,988 | 72,080 | — | |||||||||||||||||||||
Commercial construction and
land development
|
— | 536 | 9,023 | 9,559 | 14,751 | 24,310 | — | |||||||||||||||||||||
Commercial participations
|
— | — | 9,660 | 9,660 | 13,934 | 23,594 | — | |||||||||||||||||||||
Total commercial loans
|
2,143 | 5,107 | 39,844 | 47,094 | 439,263 | 486,357 | 2,469 | |||||||||||||||||||||
Retail loans:
|
||||||||||||||||||||||||||||
One-to-four family residential
|
4,229 | 1,832 | 2,589 | 8,650 | 176,671 | 185,321 | — | |||||||||||||||||||||
Home equity lines of credit
|
386 | 8 | 642 | 1,036 | 55,141 | 56,177 | — | |||||||||||||||||||||
Retail construction
|
— | — | 203 | 203 | 2,973 | 3,176 | — | |||||||||||||||||||||
Other
|
1 | — | 4 | 5 | 2,117 | 2,122 | — | |||||||||||||||||||||
Total retail loans
|
4,616 | 1,840 | 3,438 | 9,894 | 236,902 | 246,796 | — | |||||||||||||||||||||
Total loans receivable
|
$ | 6,759 | $ | 6,947 | $ | 43,282 | $ | 56,988 | $ | 676,165 | $ | 733,153 | $ | 2,469 |
June 30,
|
December 31,
|
|||||||
2011
|
2010
|
|||||||
(Dollars in thousands)
|
||||||||
Commercial loans:
|
||||||||
Commercial and industrial
|
$ | 665 | $ | 228 | ||||
Commercial real estate:
|
||||||||
Owner occupied
|
14,852 | 9,119 | ||||||
Non-owner occupied
|
19,844 | 21,512 | ||||||
Multifamily
|
1,002 | 1,071 | ||||||
Commercial construction and land development
|
7,707 | 9,183 | ||||||
Commercial participations
|
8,191 | 9,499 | ||||||
Total commercial loans
|
52,261 | 50,612 | ||||||
Retail loans:
|
||||||||
One-to-four family residential
|
4,194 | 2,955 | ||||||
Home equity lines of credit
|
589 | 718 | ||||||
Retail construction
|
169 | 203 | ||||||
Other
|
4 | 4 | ||||||
Total retail loans
|
4,956 | 3,880 | ||||||
Total non-accrual loans
|
$ | 57,217 | $ | 54,492 |
Three months ended
|
Six months ended
|
|||||||||||||||||||||||||||||||
At June 30, 2011
|
June 30, 2011
|
June 30, 2011
|
||||||||||||||||||||||||||||||
Unpaid
|
Partial
|
Average
|
Interest
|
Average
|
Interest
|
|||||||||||||||||||||||||||
Recorded
|
Principal
|
Charge-offs
|
Related
|
Recorded
|
Income
|
Recorded
|
Income
|
|||||||||||||||||||||||||
Investment
|
Balance
|
to Date
|
Allowance
|
Investment
|
Recognized
|
Investment
|
Recognized
|
|||||||||||||||||||||||||
(Dollars in thousands)
|
||||||||||||||||||||||||||||||||
Loans without a specific valuation
allowance:
|
||||||||||||||||||||||||||||||||
Commercial and industrial
|
$ | 2,926 | $ | 2,926 | $ | ― | $ | ― | $ | 3,208 | $ | 44 | $ | 3,574 | $ | 90 | ||||||||||||||||
Commercial real estate:
|
||||||||||||||||||||||||||||||||
Owner occupied
|
12,943 | 13,176 | 125 | ― | 13,092 | ― | 13,130 | ― | ||||||||||||||||||||||||
Non-owner occupied
|
7,052 | 7,295 | 140 | ― | 7,557 | 98 | 7,695 | 145 | ||||||||||||||||||||||||
Multifamily
|
677 | 677 | ― | ― | 678 | 13 | 678 | 17 | ||||||||||||||||||||||||
Commercial construction and
land development
|
7,171 | 9,103 | 1,931 | ― | 7,171 | ― | 7,171 | ― | ||||||||||||||||||||||||
Commercial participations
|
2,889 | 8,012 | 5,061 | ― | 3,487 | ― | 3,833 | ― | ||||||||||||||||||||||||
Retail
|
7,560 | 7,689 | 129 | ― | 7,654 | 61 | 7,667 | 106 | ||||||||||||||||||||||||
Total
|
$ | 41,218 | $ | 48,878 | $ | 7,386 | $ | ― | $ | 42,847 | $ | 216 | $ | 43,748 | $ | 358 | ||||||||||||||||
Loans with a specific valuation
allowance:
|
||||||||||||||||||||||||||||||||
Commercial real estate:
|
||||||||||||||||||||||||||||||||
Owner occupied
|
$ | 2,572 | $ | 3,078 | $ | — | $ | 155 | $ | 2,639 | $ | ― | $ | 2,709 | $ | ― | ||||||||||||||||
Non-owner occupied
|
16,996 | 17,710 | ― | 4,266 | 17,102 | ― | 17,172 | ― | ||||||||||||||||||||||||
Commercial participations
|
5,302 | 5,443 | ― | 3,572 | 5,302 | ― | 5,302 | ― | ||||||||||||||||||||||||
Total
|
$ | 24,870 | $ | 26,231 | $ | ― | $ | 7,993 | $ | 25,043 | $ | ― | $ | 25,183 | $ | ― | ||||||||||||||||
Total impaired loans:
|
||||||||||||||||||||||||||||||||
Commercial
|
$ | 58,528 | $ | 67,420 | $ | 7,257 | $ | 7,993 | $ | 60,236 | $ | 155 | $ | 61,264 | $ | 252 | ||||||||||||||||
Retail
|
7,560 | 7,689 | 129 | ― | 7,654 | 61 | 7,667 | 106 | ||||||||||||||||||||||||
Total
|
$ | 66,088 | $ | 75,109 | $ | 7,386 | $ | 7,993 | $ | 67,890 | $ | 216 | $ | 68,931 | $ | 358 |
Twelve months ended
|
||||||||||||||||||||||||
At December 31, 2010
|
December 31, 2010
|
|||||||||||||||||||||||
Unpaid
|
Partial
|
Average
|
Interest
|
|||||||||||||||||||||
Recorded
|
Principal
|
Charge-offs
|
Related
|
Recorded
|
Income
|
|||||||||||||||||||
Investment
|
Balance
|
to Date
|
Allowance
|
Investment
|
Recognized
|
|||||||||||||||||||
(Dollars in thousands)
|
||||||||||||||||||||||||
Loans without a specific valuation
allowance:
|
||||||||||||||||||||||||
Commercial and industrial
|
$ | 3,692 | $ | 3,976 | $ | 1,506 | $ | — | $ | 4,738 | $ | 128 | ||||||||||||
Commercial real estate:
|
||||||||||||||||||||||||
Owner occupied
|
5,041 | 5,082 | — | — | 5,059 | — | ||||||||||||||||||
Non-owner occupied
|
6,664 | 6,834 | 140 | — | 6,695 | 144 | ||||||||||||||||||
Multifamily
|
264 | 264 | — | — | 268 | 4 | ||||||||||||||||||
Commercial construction and
land development
|
9,183 | 11,498 | 2,314 | — | 9,313 | — | ||||||||||||||||||
Commercial participations
|
4,197 | 8,012 | 3,753 | — | 4,397 | — | ||||||||||||||||||
Retail
|
2,847 | 2,891 | 90 | — | 2,758 | 122 | ||||||||||||||||||
Total
|
$ | 31,888 | $ | 38,557 | $ | 7,803 | $ | — | $ | 33,228 | $ | 398 | ||||||||||||
Loans with a specific valuation
allowance:
|
||||||||||||||||||||||||
Commercial real estate:
|
||||||||||||||||||||||||
Owner occupied
|
$ | 2,798 | $ | 3,168 | $ | — | $ | 433 | $ | 2,900 | $ | — | ||||||||||||
Non-owner occupied
|
17,850 | 18,311 | — | 4,492 | 18,066 | — | ||||||||||||||||||
Commercial participations
|
5,302 | 5,443 | — | 3,497 | 5,302 | — | ||||||||||||||||||
Total
|
$ | 25,950 | $ | 26,922 | $ | — | $ | 8,422 | $ | 26,268 | $ | — | ||||||||||||
Total impaired loans:
|
||||||||||||||||||||||||
Commercial
|
$ | 54,991 | $ | 62,588 | $ | 7,713 | $ | 8,422 | $ | 56,738 | $ | 276 | ||||||||||||
Retail
|
2,847 | 2,891 | 90 | — | 2,758 | 122 | ||||||||||||||||||
Total
|
$ | 57,838 | $ | 65,479 | $ | 7,803 | $ | 8,422 | $ | 59,496 | $ | 398 |
June 30, 2011
|
December 31, 2010
|
|||||||||||||||||||||||
Accruing
|
Non-accruing
|
Total
|
Accruing
|
Non-accruing
|
Total
|
|||||||||||||||||||
(Dollars in thousands)
|
||||||||||||||||||||||||
Commercial:
|
||||||||||||||||||||||||
Commercial and industrial
|
$ | 2,341 | $ | — | $ | 2,341 | $ | 3,575 | $ | — | $ | 3,575 | ||||||||||||
Commercial real estate:
|
||||||||||||||||||||||||
Owner occupied
|
— | 3,346 | 3,346 | — | 3,051 | 3,051 | ||||||||||||||||||
Non-owner occupied
|
3,833 | 18,320 | 22,153 | 3,296 | 19,234 | 22,530 | ||||||||||||||||||
Multifamily
|
262 | — | 262 | 264 | — | 264 | ||||||||||||||||||
Commercial construction and
land development
|
— | — | — | — | 2,012 | 2,012 | ||||||||||||||||||
Commercial participations
|
— | 5,302 | 5,302 | — | 5,302 | 5,302 | ||||||||||||||||||
Total commercial
|
6,436 | 26,968 | 33,404 | 7,135 | 29,599 | 36,734 | ||||||||||||||||||
Retail:
|
||||||||||||||||||||||||
One-to-four family residential
|
2,604 | 443 | 3,047 | 2,619 | 228 | 2,847 | ||||||||||||||||||
Home equity lines of credit
|
— | — | — | — | — | — | ||||||||||||||||||
Retail construction
|
— | — | — | — | — | — | ||||||||||||||||||
Other
|
— | — | — | — | — | — | ||||||||||||||||||
Total retail
|
2,604 | 443 | 3,047 | 2,619 | 228 | 2,847 | ||||||||||||||||||
Total troubled debt restructurings
|
$ | 9,040 | $ | 27,411 | $ | 36,451 | $ | 9,754 | $ | 29,827 | $ | 39,581 |
June 30, 2011
|
|||||||||||||||||||||||||
Rate Reduction
|
Payment Extension
|
Rate Reduction & Payment Extension
|
Rate Reduction & Interest Only
|
Forebearance
|
Total
|
||||||||||||||||||||
(Dollars in thousands)
|
|||||||||||||||||||||||||
Commercial:
|
|||||||||||||||||||||||||
Commercial and industrial
|
$ | — | $ | 2,341 | $ | — | $ | — | $ | — | $ | 2,341 | |||||||||||||
Commercial real estate:
|
|||||||||||||||||||||||||
Owner occupied
|
— | 3,346 | — | — | — | 3,346 | |||||||||||||||||||
Non-owner occupied
|
— | 2,101 | 549 | 12,696 | 6,807 | 22,153 | |||||||||||||||||||
Multifamily
|
— | — | 262 | — | — | 262 | |||||||||||||||||||
Commercial participations
|
— | — | — | — | 5,302 | 5,302 | |||||||||||||||||||
Total commercial
|
— | 7,788 | 811 | 12,696 | 12,109 | 33,404 | |||||||||||||||||||
Retail - One-to-four family residential
|
513 | 1,070 | 1,464 | — | — | 3,047 | |||||||||||||||||||
Total troubled debt restructurings
|
$ | 513 | $ | 8,858 | $ | 2,275 | $ | 12,696 | $ | 12,109 | $ | 36,451 |
December 31, 2010
|
|||||||||||||||||||||||||
Rate Reduction
|
Payment Extension
|
Rate Reduction & Payment Extension
|
Rate Reduction & Interest Only
|
Forebearance
|
Total
|
||||||||||||||||||||
(Dollars in thousands)
|
|||||||||||||||||||||||||
Commercial:
|
|||||||||||||||||||||||||
Commercial and industrial
|
$ | — | $ | 3,575 | $ | — | $ | — | $ | — | $ | 3,575 | |||||||||||||
Commercial real estate:
|
|||||||||||||||||||||||||
Owner occupied
|
— | 3,051 | — | — | — | 3,051 | |||||||||||||||||||
Non-owner occupied
|
— | 2,113 | 566 | 12,955 | 6,896 | 22,530 | |||||||||||||||||||
Multifamily
|
— | — | 264 | — | — | 264 | |||||||||||||||||||
Commercial construction and
land development
|
— | — | — | — | 2,012 | 2,012 | |||||||||||||||||||
Commercial participations
|
— | — | — | — | 5,302 | 5,302 | |||||||||||||||||||
Total commercial
|
— | 8,739 | 830 | 12,955 | 14,210 | 36,734 | |||||||||||||||||||
Retail - One-to-four family residential
|
396 | 1,043 | 1,408 | — | — | 2,847 | |||||||||||||||||||
Total troubled debt restructurings
|
$ | 396 | $ | 9,782 | $ | 2,238 | $ | 12,955 | $ | 14,210 | $ | 39,581 |
Fair Value Measurements at June 30, 2011
|
||||||||||||||||
Fair Value
|
Quoted Prices in Active Markets for Identical Assets
(Level 1)
|
Significant Other Observable Inputs
(Level 2)
|
Significant Unobservable Inputs
(Level 3)
|
|||||||||||||
(Dollars in thousands)
|
||||||||||||||||
Investment securities available-for-sale:
|
||||||||||||||||
U.S. Treasury securities
|
$ | 21,301 | $ | — | $ | 21,301 | $ | — | ||||||||
GSE securities
|
67,999 | — | 67,999 | — | ||||||||||||
Corporate bonds
|
3,729 | — | 3,729 | — | ||||||||||||
Collateralized mortgage obligations
|
48,530 | — | 48,530 | — | ||||||||||||
Commercial mortgage-backed securities
|
74,176 | — | 74,176 | — | ||||||||||||
Pooled trust preferred securities
|
18,371 | — | — | 18,371 | ||||||||||||
GSE preferred stock
|
15 | 15 | — | — |
Fair Value Measurements at December 31, 2010
|
||||||||||||||||
Fair Value
|
Quoted Prices in Active Markets for Identical Assets
(Level 1)
|
Significant Other Observable Inputs
(Level 2)
|
Significant Unobservable Inputs
(Level 3)
|
|||||||||||||
(Dollars in thousands)
|
||||||||||||||||
Investment securities available-for-sale:
|
||||||||||||||||
U.S. Treasury securities
|
$ | 14,819 | $ | — | $ | 14,819 | $ | — | ||||||||
GSE securities
|
31,020 | — | 31,020 | — | ||||||||||||
Corporate bonds
|
3,586 | — | 3,586 | — | ||||||||||||
Collateralized mortgage obligations
|
60,755 | — | 60,755 | — | ||||||||||||
Commercial mortgage-backed securities
|
68,698 | — | 68,698 | — | ||||||||||||
Pooled trust preferred securities
|
18,125 | — | — | 18,125 | ||||||||||||
GSE preferred stock
|
98 | 98 | — | — |
Investment Securities Available-for-Sale
|
||||||||
Three Months
Ended
|
Six Months
Ended
|
|||||||
June 30, 2011
|
June 30, 2011
|
|||||||
(Dollars in thousands)
|
||||||||
Beginning balance
|
$ | 19,262 | $ | 18,125 | ||||
Total realized and unrealized gains and losses:
|
||||||||
Included in accumulated other comprehensive income (loss)
|
99 | 1,322 | ||||||
Principal repayments
|
(990 | ) | (1,076 | ) | ||||
Ending balance
|
$ | 18,371 | $ | 18,371 |
Investment Securities Available-for-Sale
|
||||||||
Three Months
Ended
|
Six Months
Ended
|
|||||||
June 30, 2010
|
June 30, 2010
|
|||||||
(Dollars in thousands)
|
||||||||
Beginning balance
|
$ | 19,901 | $ | 20,012 | ||||
Total realized and unrealized gains and losses:
|
||||||||
Included in accumulated other comprehensive income (loss)
|
333 | 336 | ||||||
Principal repayments
|
(110 | ) | (224 | ) | ||||
Ending balance
|
$ | 20,124 | $ | 20,124 |
Fair Value Measurements at June 30, 2011
|
||||||||||||||||
Fair Value
|
Quoted Prices in Active Markets for Identical Assets
(Level 1)
|
Significant Other Observable Inputs
(Level 2)
|
Significant Unobservable Inputs
(Level 3)
|
|||||||||||||
(Dollars in thousands)
|
||||||||||||||||
Impaired loans
|
$ | 2,958 | $ | — | $ | — | $ | 2,958 | ||||||||
Other real estate owned
|
1,400 | — | — | 1,400 |
Fair Value Measurements at December 31, 2010
|
||||||||||||||||
Fair Value
|
Quoted Prices in Active Markets for Identical Assets
(Level 1)
|
Significant Other Observable Inputs
(Level 2)
|
Significant Unobservable Inputs
(Level 3)
|
|||||||||||||
(Dollars in thousands)
|
||||||||||||||||
Impaired loans
|
$ | 15,258 | $ | — | $ | — | $ | 15,258 | ||||||||
Other real estate owned
|
4,837 | — | — | 4,837 |
June 30, 2011
|
December 31, 2010
|
|||||||||||||||
Carrying
|
Fair
|
Carrying
|
Fair
|
|||||||||||||
Amount
|
Value
|
Amount
|
Value
|
|||||||||||||
(Dollars in thousands)
|
||||||||||||||||
Financial Assets:
|
||||||||||||||||
Cash and cash equivalents
|
$ | 47,498 | $ | 47,498 | $ | 61,754 | $ | 61,754 | ||||||||
Investment securities, available-for-sale
|
234,130 | 234,130 | 197,101 | 197,101 | ||||||||||||
Investment securities, held-to-maturity
|
14,837 | 15,202 | 17,201 | 17,426 | ||||||||||||
Federal Home Loan Bank stock
|
8,638 | 8,638 | 20,282 | 20,282 | ||||||||||||
Loans receivable, including loans held for sale, net of
allowance for loan losses
|
720,688 | 724,493 | 715,405 | 718,556 | ||||||||||||
Interest receivable
|
3,148 | 3,148 | 3,162 | 3,162 | ||||||||||||
Total financial assets
|
$ | 1,028,939 | $ | 1,033,109 | $ | 1,014,905 | $ | 1,018,281 | ||||||||
Financial Liabilities:
|
||||||||||||||||
Deposits
|
$ | 964,527 | $ | 966,193 | $ | 945,884 | $ | 948,804 | ||||||||
Borrowed funds
|
38,835 | 41,103 | 53,550 | 55,572 | ||||||||||||
Interest payable
|
77 | 77 | 106 | 106 | ||||||||||||
Total financial liabilities
|
$ | 1,003,439 | $ | 1,007,373 | $ | 999,540 | $ | 1,004,482 |
7.
|
Share-Based Compensation
|
Weighted-Average
|
||||||||||||
Number of
|
Grant-Date
|
|||||||||||
Shares
|
Fair Value
|
|||||||||||
Unvested at December 31, 2010
|
188,027 | $ | 4.98 | |||||||||
2011 Awards:
|
||||||||||||
Granted
|
54,915 | 5.62 | ||||||||||
Forfeited
|
— | — | ||||||||||
Net 2011 grant awards
|
54,915 | 5.62 | ||||||||||
Vested
|
(30,160 | ) | 7.90 | |||||||||
Forfeited
|
(35,745 | ) | 3.53 | |||||||||
Unvested as of June 30, 2011
|
177,037 | $ | 4.97 |
2011
|
||||||||
Weighted-
|
||||||||
Average
|
||||||||
Number of
|
Exercise
|
|||||||
Options
|
Price
|
|||||||
Options outstanding and exercisable at December 31, 2010
|
650,995 | $ | 13.44 | |||||
Granted
|
— | — | ||||||
Exercised
|
— | — | ||||||
Forfeited
|
(2,000 | ) | 14.24 | |||||
Expired unexercised
|
(132,500 | ) | 11.25 | |||||
Options outstanding and exercisable at June 30, 2011
|
516,495 | $ | 14.01 |
8.
|
Other Comprehensive Income
|
Three Months Ended
|
Six Months Ended
|
|||||||||||||||
June 30,
|
June 30,
|
|||||||||||||||
2011
|
2010
|
2011
|
2010
|
|||||||||||||
(Dollars in thousands)
|
||||||||||||||||
Unrealized holding gains arising during the period:
|
||||||||||||||||
Unrealized net gains
|
$ | 1,859 | $ | 839 | $ | 3,109 | $ | 1,641 | ||||||||
Related tax expense
|
(675 | ) | (296 | ) | (1,124 | ) | (568 | ) | ||||||||
Net unrealized gains
|
1,184 | 543 | 1,985 | 1,073 | ||||||||||||
Less: reclassification adjustment for net gains realized
during the period:
|
||||||||||||||||
Realized net gains
|
173 | ― | 692 | 456 | ||||||||||||
Related tax expense
|
(64 | ) | ― | (253 | ) | (155 | ) | |||||||||
Net realized gains
|
109 | ― | 439 | 301 | ||||||||||||
Total other comprehensive income
|
$ | 1,075 | $ | 543 | $ | 1,546 | $ | 772 |
9.
|
Recent Accounting Pronouncements
|
Three Months Ended
June 30,
|
Six Months Ended
June 30,
|
|||||||||||||||||||
2011
|
2010
|
2011
|
2010
|
|||||||||||||||||
(Dollars in thousands)
|
||||||||||||||||||||
Net income
|
$ | 1,233 | $ | 981 | $ | 1,705 | $ | 1,679 | ||||||||||||
Diluted earnings per share
|
.11 | .09 | .16 | .16 | ||||||||||||||||
Pre-tax, pre-provision earnings from core operations (1)
|
2,487 | 2,810 | 4,026 | 5,673 | ||||||||||||||||
Return on average assets (2)
|
.43 | % | .36 | % | .30 | % | .31 | % | ||||||||||||
Return on average equity (2)
|
4.27 | 3.52 | 3.00 | 3.04 | ||||||||||||||||
Average interest-earning assets
|
$ | 1,026,940 | $ | 987,801 | $ | 1,019,726 | $ | 985,230 | ||||||||||||
Net interest income
|
9,187 | 9,329 | 18,044 | 18,772 | ||||||||||||||||
Net interest margin
|
3.59 | % | 3.79 | % | 3.57 | % | 3.84 | % | ||||||||||||
Non-interest income
|
$ | 4,538 | $ | 2,243 | $ | 6,989 | $ | 4,784 | ||||||||||||
Non-interest expense
|
11,071 | 9,596 | 21,038 | 19,063 | ||||||||||||||||
Efficiency ratio (3)
|
81.69 | % | 82.93 | % | 86.43 | % | 82.53 | % | ||||||||||||
|
||||||||||||||||||||
(1) See “Non-GAAP Financial Information” on page 42.
|
||||||||||||||||||||
(2) Annualized.
|
||||||||||||||||||||
(3) The efficiency ratio is calculated by dividing non-interest expense by the sum of net interest income and non-interest income, excluding net gain on sales of investment securities.
|
June 30,
2011
|
December 31,
2010
|
June 30,
2010
|
||||||||||
Book value per share
|
$ | 10.69 | $ | 10.41 | $ | 10.40 | ||||||
Shareholders’ equity to total assets
|
10.30 | % | 10.07 | % | 10.30 | % | ||||||
Tangible capital ratio (Bank only)
|
9.17 | 9.07 | 9.05 | |||||||||
Core capital ratio (Bank only)
|
9.17 | 9.07 | 9.05 | |||||||||
Risk based capital ratio (Bank only)
|
13.29 | 13.32 | 12.81 |
Three Months Ended
June 30,
|
Six Months Ended
June 30,
|
||||||||||||||
2011 | 2010 | 2011 | 2010 | ||||||||||||
(Dollars in thousands) | |||||||||||||||
Reconciliation of Income Before Income Taxes to Pre-Tax,
Pre-Provision Earnings from Core Operations:
|
|||||||||||||||
Income before income taxes
|
$ |
1,658
|
$ |
1,159
|
$ |
2,096
|
$ |
1,966
|
|||||||
Provision for loan losses
|
996
|
817
|
1,899
|
2,527
|
|||||||||||
Pre-tax, pre-provision earnings
|
2,654
|
1,976
|
3,995
|
4,493
|
|||||||||||
Add back (subtract):
|
|||||||||||||||
Net (gain) loss on sale of:
|
|||||||||||||||
Investment securities
|
(173
|
) |
|
―
|
(692
|
)
|
(456
|
)
|
|||||||
Other real estate owned
|
(2,238
|
) |
|
(11
|
) |
|
(2,233
|
)
|
(12
|
)
|
|||||
Other real estate owned related expense, net
|
2,011
|
255
|
2,603
|
886
|
|||||||||||
Loan collection expense
|
233
|
153
|
353
|
322
|
|||||||||||
Severance and early retirement expense
|
―
|
437
|
―
|
440
|
|||||||||||
Pre-tax, pre-provision earnings from core operations
|
$ |
2,487
|
$ |
2,810
|
$ |
4,026
|
$ |
5,673
|
|||||||
Pre-tax, pre-provision earnings from core operations to average assets
|
.87
|
% |
|
1.03
|
% |
|
.71
|
%
|
1.05
|
%
|
Three Months Ended June 30,
|
||||||||||||||||||||||||
2011
|
2010
|
|||||||||||||||||||||||
Average
|
Average
|
Average
|
Average
|
|||||||||||||||||||||
Balance
|
Interest
|
Yield/Cost
|
Balance
|
Interest
|
Yield/Cost
|
|||||||||||||||||||
(Dollars in thousands)
|
||||||||||||||||||||||||
Interest-earning assets:
|
||||||||||||||||||||||||
Loans receivable (1)
|
$ | 732,746 | $ | 9,016 | 4.94 | % | $ | 757,478 | $ | 9,626 | 5.10 | % | ||||||||||||
Investment securities (2)
|
267,984 | 2,040 | 3.01 | 201,735 | 2,163 | 4.24 | ||||||||||||||||||
Other interest-earning assets (3)
|
26,210 | 164 | 2.51 | 28,588 | 123 | 1.73 | ||||||||||||||||||
Total interest-earning assets
|
1,026,940 | 11,220 | 4.38 | 987,801 | 11,912 | 4.84 | ||||||||||||||||||
Non-interest earning assets
|
114,987 | 102,063 | ||||||||||||||||||||||
Total assets
|
$ | 1,141,927 | $ | 1,089,864 | ||||||||||||||||||||
Interest-bearing liabilities:
|
||||||||||||||||||||||||
Deposits:
|
||||||||||||||||||||||||
Checking accounts
|
$ | 160,299 | 107 | .27 | $ | 132,870 | 51 | .15 | ||||||||||||||||
Money market accounts
|
189,307 | 227 | .48 | 156,937 | 261 | .67 | ||||||||||||||||||
Savings accounts
|
128,609 | 72 | .22 | 118,691 | 99 | .33 | ||||||||||||||||||
Certificates of deposit
|
399,080 | 1,371 | 1.38 | 396,378 | 1,735 | 1.76 | ||||||||||||||||||
Total deposits
|
877,295 | 1,777 | .81 | 804,876 | 2,146 | 1.07 | ||||||||||||||||||
Borrowed funds:
|
||||||||||||||||||||||||
Other short-term borrowed funds
|
13,378 | 15 | .45 | 13,663 | 16 | .47 | ||||||||||||||||||
FHLB advances
|
25,112 | 241 | 3.81 | 60,121 | 421 | 2.77 | ||||||||||||||||||
Total borrowed funds
|
38,490 | 256 | 2.64 | 73,784 | 437 | 2.34 | ||||||||||||||||||
Total interest-bearing liabilities
|
915,785 | 2,033 | .89 | 878,660 | 2,583 | 1.18 | ||||||||||||||||||
Non-interest bearing deposits
|
99,941 | 88,914 | ||||||||||||||||||||||
Non-interest bearing liabilities
|
10,434 | 10,446 | ||||||||||||||||||||||
Total liabilities
|
1,026,160 | 978,020 | ||||||||||||||||||||||
Shareholders’ equity
|
115,767 | 111,844 | ||||||||||||||||||||||
Total liabilities and shareholders’ equity
|
$ | 1,141,927 | $ | 1,089,864 | ||||||||||||||||||||
Net interest-earning assets
|
$ | 111,155 | $ | 109,141 | ||||||||||||||||||||
Net interest income / interest rate spread
|
$ | 9,187 | 3.49 | % | $ | 9,329 | 3.66 | % | ||||||||||||||||
Net interest margin
|
3.59 | % | 3.79 | % | ||||||||||||||||||||
Ratio of average interest-earning assets to
|
||||||||||||||||||||||||
average interest-bearing liabilities
|
112.14 | % | 112.42 | % |
(1)
|
The average balance of loans receivable includes loans held for sale and non-performing loans, interest
on which is recognized on a cash basis.
|
|
(2)
|
Average balances of investment securities are based on amortized cost.
|
|
(3)
|
Includes FHLB stock and interest-earning bank deposits.
|
Six Months Ended June 30,
|
||||||||||||||||||||||||
2011
|
2010
|
|||||||||||||||||||||||
Average
|
Average
|
Average
|
Average
|
|||||||||||||||||||||
Balance
|
Interest
|
Yield/Cost
|
Balance
|
Interest
|
Yield/Cost
|
|||||||||||||||||||
(Dollars in thousands)
|
||||||||||||||||||||||||
Interest-earning assets:
|
||||||||||||||||||||||||
Loans receivable (1)
|
$ | 730,099 | $ | 17,827 | 4.92 | % | $ | 759,141 | $ | 19,304 | 5.13 | % | ||||||||||||
Investment securities (2)
|
253,607 | 4,085 | 3.20 | 198,292 | 4,376 | 4.39 | ||||||||||||||||||
Other interest-earning assets (3)
|
36,020 | 321 | 1.80 | 27,797 | 247 | 1.79 | ||||||||||||||||||
Total interest-earning assets
|
1,019,726 | 22,233 | 4.40 | 985,230 | 23,927 | 4.90 | ||||||||||||||||||
Non-interest earning assets
|
116,308 | 101,377 | ||||||||||||||||||||||
Total assets
|
$ | 1,136,034 | $ | 1,086,607 | ||||||||||||||||||||
Interest-bearing liabilities:
|
||||||||||||||||||||||||
Deposits:
|
||||||||||||||||||||||||
Checking accounts
|
$ | 159,047 | 219 | .28 | $ | 133,787 | 118 | .18 | ||||||||||||||||
Money market accounts
|
186,386 | 476 | .52 | 154,936 | 507 | .66 | ||||||||||||||||||
Savings accounts
|
126,365 | 148 | .24 | 117,103 | 193 | .33 | ||||||||||||||||||
Certificates of deposit
|
401,762 | 2,827 | 1.42 | 382,320 | 3,381 | 1.78 | ||||||||||||||||||
Total deposits
|
873,560 | 3,670 | .85 | 788,146 | 4,199 | 1.07 | ||||||||||||||||||
Borrowed funds:
|
||||||||||||||||||||||||
Other short-term borrowed funds
|
13,786 | 33 | .48 | 15,179 | 37 | .49 | ||||||||||||||||||
FHLB advances
|
25,383 | 486 | 3.81 | 70,079 | 919 | 2.61 | ||||||||||||||||||
Total borrowed funds
|
39,169 | 519 | 2.64 | 85,258 | 956 | 2.23 | ||||||||||||||||||
Total interest-bearing liabilities
|
912,729 | 4,189 | .93 | 873,404 | 5,155 | 1.19 | ||||||||||||||||||
Non-interest bearing deposits
|
97,781 | 91,254 | ||||||||||||||||||||||
Non-interest bearing liabilities
|
10,939 | 10,435 | ||||||||||||||||||||||
Total liabilities
|
1,021,449 | 975,093 | ||||||||||||||||||||||
Shareholders’ equity
|
114,585 | 111,514 | ||||||||||||||||||||||
Total liabilities and shareholders’ equity
|
$ | 1,136,034 | $ | 1,086,607 | ||||||||||||||||||||
Net interest-earning assets
|
106,997 | $ | 111,826 | |||||||||||||||||||||
Net interest income / interest rate spread
|
$ | 18,044 | 3.47 | % | $ | 18,772 | 3.71 | % | ||||||||||||||||
Net interest margin
|
3.57 | % | 3.84 | % | ||||||||||||||||||||
Ratio of average interest-earning assets to
|
||||||||||||||||||||||||
average interest-bearing liabilities
|
111.72 | % | 112.80 | % |
(1)
|
The average balance of loans receivable includes loans held for sale and non-performing loans, interest
on which is recognized on a cash basis.
|
|
(2)
|
Average balances of investment securities are based on amortized cost.
|
|
(3)
|
Includes FHLB stock and interest-earning bank deposits.
|
|
Rate / Volume Analysis
|
Three Months Ended June 30,
|
||||||||||||
2011 Compared to 2010
|
||||||||||||
Change
due to
Rate
|
Change
due to
Volume
|
Total
Change
|
||||||||||
(Dollars in thousands)
|
||||||||||||
Interest income:
|
||||||||||||
Loans receivable
|
$ | (301 | ) | $ | (309 | ) | $ | (610 | ) | |||
Investment securities
|
(724 | ) | 601 | (123 | ) | |||||||
Other interest-earning assets
|
52 | (11 | ) | 41 | ||||||||
Total
|
(973 | ) | 281 | (692 | ) | |||||||
Interest expense:
|
||||||||||||
Deposits:
|
||||||||||||
Checking accounts
|
43 | 13 | 56 | |||||||||
Money market accounts
|
(82 | ) | 48 | (34 | ) | |||||||
Savings accounts
|
(34 | ) | 7 | (27 | ) | |||||||
Certificates of deposit
|
(377 | ) | 12 | (365 | ) | |||||||
Total deposits
|
(450 | ) | 80 | (370 | ) | |||||||
Borrowed funds:
|
||||||||||||
Other short-term borrowed funds
|
(1 | ) | ― | (1 | ) | |||||||
FHLB advances
|
122 | (301 | ) | (179 | ) | |||||||
Total borrowed funds
|
121 | (301 | ) | (180 | ) | |||||||
Total
|
(329 | ) | (221 | ) | (550 | ) | ||||||
Net change in net interest income
|
$ | (644 | ) | $ | 502 | $ | (142 | ) |
Six Months Ended June 30,
|
||||||||||||
2011 Compared to 2010
|
||||||||||||
Change
due to
Rate
|
Change
due to
Volume
|
Total
Change
|
||||||||||
(Dollars in thousands)
|
||||||||||||
Interest income:
|
||||||||||||
Loans receivable
|
$ | (752 | ) | $ | (725 | ) | $ | (1,477 | ) | |||
Investment securities
|
(1,344 | ) | 1,053 | (291 | ) | |||||||
Other interest-earning assets
|
1 | 73 | 74 | |||||||||
Total
|
(2,095 | ) | 401 | (1,694 | ) | |||||||
Interest expense:
|
||||||||||||
Deposits:
|
||||||||||||
Checking accounts
|
76 | 25 | 101 | |||||||||
Money market accounts
|
(123 | ) | 92 | (31 | ) | |||||||
Savings accounts
|
(59 | ) | 14 | (45 | ) | |||||||
Certificates of deposit
|
(719 | ) | 165 | (554 | ) | |||||||
Total deposits
|
(825 | ) | 296 | (529 | ) | |||||||
Borrowed funds:
|
||||||||||||
Other short-term borrowed funds
|
(1 | ) | (3 | ) | (4 | ) | ||||||
FHLB advances
|
310 | (743 | ) | (433 | ) | |||||||
Total borrowed funds
|
309 | (746 | ) | (437 | ) | |||||||
Total
|
(516 | ) | (450 | ) | (966 | ) | ||||||
Net change in net interest income
|
$ | (1,579 | ) | $ | 851 | $ | (728 | ) |
Three Months Ended
June 30,
|
|||||||||||||||
2011 | 2010 | $ Change | % Change | ||||||||||||
(Dollars in thousands) | |||||||||||||||
Service charges and other fees
|
$ |
1,174
|
$ |
1,320
|
$ |
(146
|
) |
|
(11.1
|
)%
|
|||||
Card-based fees
|
520
|
486
|
34
|
7.0
|
|||||||||||
Commission income
|
78
|
46
|
32
|
69.6
|
|||||||||||
Subtotal fee based revenues
|
1,772
|
1,852
|
(80
|
) |
|
(4.3
|
)
|
||||||||
Income from bank-owned life insurance
|
210
|
262
|
(52
|
) |
|
(19.8
|
)
|
||||||||
Other income
|
119
|
118
|
1
|
.8
|
|||||||||||
Subtotal
|
2,101
|
2,232
|
(131
|
) |
|
(5.9
|
)
|
||||||||
Net gain on sale of:
|
|||||||||||||||
Investment securities
|
173
|
―
|
173
|
NM
|
|||||||||||
Loans receivable
|
26
|
―
|
26
|
NM
|
|||||||||||
Other real estate owned
|
2,238
|
11
|
2,227
|
NM
|
|||||||||||
Total non-interest income
|
$ |
4,538
|
$ |
2,243
|
$ |
2,295
|
102.3
|
%
|
Six Months Ended
June 30,
|
|||||||||||||||
2011 | 2010 | $ Change | % Change | ||||||||||||
(Dollars in thousands) | |||||||||||||||
Service charges and other fees
|
$ |
2,250
|
$ |
2,540
|
$ |
(290
|
) |
(11.4
|
)%
|
||||||
Card-based fees
|
995
|
923
|
72
|
7.8
|
|||||||||||
Commission income
|
123
|
100
|
23
|
23.0
|
|||||||||||
Subtotal fee based revenues
|
3,368
|
3,563
|
(195
|
) |
|
(5.5
|
)
|
||||||||
Income from bank-owned life insurance
|
416
|
485
|
(69
|
) |
|
(14.2
|
)
|
||||||||
Other income
|
222
|
268
|
(46
|
) |
|
(17.2
|
)
|
||||||||
Subtotal
|
4,006
|
4,316
|
(310
|
) |
|
(7.2
|
)
|
||||||||
Net gain on sale of:
|
|||||||||||||||
Investment securities
|
692
|
456
|
236
|
51.8
|
|||||||||||
Loans receivable
|
58
|
―
|
58
|
NM
|
|||||||||||
Other real estate owned
|
2,233
|
12
|
2,221
|
NM
|
|||||||||||
Total non-interest income
|
$ |
6,989
|
$ |
4,784
|
$ |
2,205
|
46.1
|
%
|
Three Months Ended June 30, | |||||||||||||||
2011 | 2010 | $ Change | % Change | ||||||||||||
(Dollars in thousands) | |||||||||||||||
Compensation and mandatory benefits
|
$ |
4,194
|
$ |
4,095
|
$ |
99
|
2.4
|
%
|
|||||||
Retirement and stock related compensation
|
216
|
194
|
22
|
11.3
|
|||||||||||
Medical and life benefits
|
620
|
250
|
370
|
148.0
|
|||||||||||
Other employee benefits
|
17
|
11
|
6
|
54.5
|
|||||||||||
Subtotal compensation and employee benefits
|
5,047
|
4,550
|
497
|
10.9
|
|||||||||||
Net occupancy expense
|
670
|
651
|
19
|
2.9
|
|||||||||||
FDIC insurance premiums and OTS assessments
|
504
|
669
|
(165
|
) |
|
(24.7
|
)
|
||||||||
Professional fees
|
334
|
744
|
(410
|
) |
|
(55.1
|
)
|
||||||||
Furniture and equipment expense
|
454
|
526
|
(72
|
) |
|
(13.7
|
)
|
||||||||
Data processing
|
441
|
443
|
(2
|
) |
|
(.5
|
)
|
||||||||
Marketing
|
270
|
216
|
54
|
25.0
|
|||||||||||
Other real estate owned related expense, net
|
2,011
|
255
|
1,756
|
688.6
|
|||||||||||
Loan collection expense
|
233
|
153
|
80
|
52.3
|
|||||||||||
Severance and early retirement expense
|
―
|
437
|
(437
|
) |
|
NM
|
|||||||||
Other general and administrative expenses
|
1,107
|
952
|
155
|
16.3
|
|||||||||||
Total non-interest expense
|
$ |
11,071
|
$ |
9,596
|
$ |
1,475
|
15.4
|
%
|
Six Months Ended June 30, | |||||||||||||||
2011 | 2010 | $ Change | % Change | ||||||||||||
(Dollars in thousands) | |||||||||||||||
Compensation and mandatory benefits
|
$ |
8,663
|
$ |
8,175
|
$ |
488
|
6.0
|
%
|
|||||||
Retirement and stock related compensation
|
429
|
389
|
40
|
10.3
|
|||||||||||
Medical and life benefits
|
1,167
|
625
|
542
|
86.7
|
|||||||||||
Other employee benefits
|
27
|
30
|
(3
|
) |
|
(10.0
|
)
|
||||||||
Subtotal compensation and employee benefits
|
10,286
|
9,219
|
1,067
|
11.6
|
|||||||||||
Net occupancy expense
|
1,435
|
1,406
|
29
|
2.1
|
|||||||||||
FDIC insurance premiums and OTS assessments
|
1,157
|
1,269
|
(112
|
) |
|
(8.8
|
)
|
||||||||
Professional fees
|
722
|
1,337
|
(615
|
) |
|
(46.0
|
)
|
||||||||
Furniture and equipment expense
|
917
|
1,059
|
(142
|
) |
|
(13.4
|
)
|
||||||||
Data processing
|
883
|
873
|
10
|
1.1
|
|||||||||||
Marketing
|
457
|
330
|
127
|
38.5
|
|||||||||||
Other real estate owned related expense, net
|
2,603
|
886
|
1,717
|
193.8
|
|||||||||||
Loan collection expense
|
353
|
322
|
31
|
9.6
|
|||||||||||
Severance and early retirement expense
|
―
|
440
|
(440
|
) |
|
NM
|
|||||||||
Other general and administrative expenses
|
2,225
|
1,922
|
303
|
15.8
|
|||||||||||
Total non-interest expense
|
$ |
21,038
|
$ |
19,063
|
$ |
1,975
|
10.4
|
%
|
June 30,
2011
|
December 31,
2010
|
$ Change
|
% Change
|
|||||||||||||
(Dollars in thousands)
|
||||||||||||||||
Assets:
|
||||||||||||||||
Cash and cash equivalents
|
$ | 47,498 | $ | 61,754 | $ | (14,256 | ) | (23.1 | )% | |||||||
Investment securities available-for-sale, at fair value
|
234,121 | 197,101 | 37,020 | 18.8 | ||||||||||||
Investment securities held-to-maturity, at cost
|
14,837 | 17,201 | (2,364 | ) | (13.7 | ) | ||||||||||
Federal Home Loan Bank stock, at cost
|
8,638 | 20,282 | (11,644 | ) | (57.4 | ) | ||||||||||
Loans receivable, net
|
720,477 | 715,405 | 5,072 | .7 | ||||||||||||
Bank-owned life insurance
|
35,880 | 35,463 | 417 | 1.2 | ||||||||||||
Other real estate owned
|
21,164 | 22,324 | (1,160 | ) | (5.2 | ) | ||||||||||
Other assets
|
45,404 | 52,146 | (6,742 | ) | (12.9 | ) | ||||||||||
Total assets
|
$ | 1,128,019 | $ | 1,121,676 | $ | 6,343 | .6 | % | ||||||||
Liabilities and Equity:
|
||||||||||||||||
Deposits
|
$ | 964,527 | $ | 945,884 | $ | 18,643 | 2.0 | % | ||||||||
Borrowed funds
|
38,835 | 53,550 | (14,715 | ) | (27.5 | ) | ||||||||||
Other liabilities
|
8,491 | 9,314 | (823 | ) | (8.8 | ) | ||||||||||
Total liabilities
|
1,011,853 | 1,008,748 | 3,105 | .3 | ||||||||||||
Shareholders’ equity
|
116,166 | 112,928 | 3,238 | 2.9 | ||||||||||||
Total liabilities and equity
|
$ | 1,128,019 | $ | 1,121,676 | $ | 6,343 | .6 | % |
June 30, 2011
|
December 31, 2010
|
|||||||||||||||||||
Amount
|
% of Total
|
Amount
|
% of Total
|
% Change
|
||||||||||||||||
(Dollars in thousands)
|
||||||||||||||||||||
Commercial loans:
|
||||||||||||||||||||
Commercial and industrial
|
$ | 83,082 | 11.3 | % | $ | 74,940 | 10.3 | % | 10.9 | % | ||||||||||
Commercial real estate:
|
||||||||||||||||||||
Owner occupied
|
102,315 | 13.8 | 99,435 | 13.6 | 2.9 | |||||||||||||||
Non-owner occupied
|
187,380 | 25.4 | 191,998 | 26.2 | (2.4 | ) | ||||||||||||||
Multifamily
|
77,562 | 10.5 | 72,080 | 9.8 | 7.6 | |||||||||||||||
Commercial construction and land development
|
23,424 | 3.2 | 24,310 | 3.3 | (3.6 | ) | ||||||||||||||
Commercial participations
|
21,194 | 2.9 | 23,594 | 3.2 | (10.2 | ) | ||||||||||||||
Total commercial loans
|
494,957 | 67.1 | 486,357 | 66.4 | 1.8 | |||||||||||||||
Retail loans:
|
||||||||||||||||||||
One-to-four family residential
|
183,269 | 24.8 | 185,321 | 25.3 | (1.1 | ) | ||||||||||||||
Home equity lines of credit
|
54,975 | 7.5 | 56,177 | 7.7 | (2.1 | ) | ||||||||||||||
Retail construction
|
2,095 | .3 | 3,176 | .4 | (34.0 | ) | ||||||||||||||
Other
|
2,670 | .4 | 2,122 | .3 | 25.8 | |||||||||||||||
Total retail loans
|
243,009 | 33.0 | 246,796 | 33.7 | (1.5 | ) | ||||||||||||||
Total loans receivable
|
737,966 | 100.1 | 733,153 | 100.1 | .7 | |||||||||||||||
Net deferred loan fees
|
(450 | ) | (.1 | ) | (569 | ) | (.1 | ) | (20.9 | ) | ||||||||||
Total loans receivable, net of deferred loan fees
|
$ | 737,516 | 100.0 | % | $ | 732,584 | 100.0 | % | .7 | % |
June 30, 2011
|
December 31, 2010
|
|||||||||||||||||||
Amount
|
% of Total
|
Amount
|
% of Total
|
% Change
|
||||||||||||||||
(Dollars in thousands)
|
||||||||||||||||||||
Commercial and industrial
|
$ | 205 | 1.0 | % | $ | 226 | 1.0 | % | (9.3 | )% | ||||||||||
Commercial real estate:
|
||||||||||||||||||||
Owner occupied
|
104 | .5 | 83 | .3 | 25.3 | |||||||||||||||
Non-owner occupied
|
17,996 | 84.9 | 19,064 | 80.8 | (5.6 | ) | ||||||||||||||
Commercial construction and land development
|
2,889 | 13.6 | 4,221 | 17.9 | (31.6 | ) | ||||||||||||||
Total commercial participations
|
$ | 21,194 | 100.0 | % | $ | 23,594 | 100.0 | % | (10.2 | )% |
June 30, 2011
|
December 31, 2010
|
|||||||||||||||||||
Amount
|
% of Total
|
Amount
|
% of Total
|
% Change
|
||||||||||||||||
(Dollars in thousands)
|
||||||||||||||||||||
Illinois
|
$ | 3,824 | 18.0 | % | $ | 4,988 | 21.1 | % | (23.3 | )% | ||||||||||
Indiana
|
5,765 | 27.2 | 5,774 | 24.5 | (.2 | ) | ||||||||||||||
Ohio
|
7,108 | 33.5 | 7,332 | 31.1 | (3.1 | ) | ||||||||||||||
Florida
|
1,140 | 5.4 | 1,843 | 7.8 | (38.1 | ) | ||||||||||||||
Colorado
|
1,816 | 8.6 | 2,075 | 8.8 | (12.5 | ) | ||||||||||||||
Texas
|
1,541 | 7.3 | 1,582 | 6.7 | (2.6 | ) | ||||||||||||||
Total commercial participations
|
$ | 21,194 | 100.0 | % | $ | 23,594 | 100.0 | % | (10.2 | )% |
Gross
|
Gross
|
|||||||||||||||||||
Par
|
Amortized
|
Unrealized
|
Unrealized
|
Fair
|
||||||||||||||||
Value
|
Cost
|
Gains
|
Losses
|
Value
|
||||||||||||||||
(Dollars in thousands)
|
||||||||||||||||||||
At June 30, 2011:
|
||||||||||||||||||||
U.S. Treasury securities
|
$ | 21,000 | $ | 20,946 | $ | 355 | $ | — | $ | 21,301 | ||||||||||
Government sponsored entity (GSE)
securities
|
65,800 | 66,531 | 1,485 | (17 | ) | 67,999 | ||||||||||||||
Corporate bonds
|
4,000 | 3,661 | 68 | — | 3,729 | |||||||||||||||
Collateralized mortgage obligations
|
50,284 | 47,079 | 1,638 | (187 | ) | 48,530 | ||||||||||||||
Commercial mortgage-backed securities
|
71,696 | 72,873 | 1,401 | (98 | ) | 74,176 | ||||||||||||||
Pooled trust preferred securities
|
28,159 | 25,396 | — | (7,025 | ) | 18,371 | ||||||||||||||
GSE preferred stock
|
200 | — | 15 | — | 15 | |||||||||||||||
$ | 241,139 | $ | 236,486 | $ | 4,962 | $ | (7,327 | ) | $ | 234,121 |
Gross
|
Gross
|
|||||||||||||||||||
Par
|
Amortized
|
Unrealized
|
Unrealized
|
Fair
|
||||||||||||||||
Value
|
Cost
|
Gains
|
Losses
|
Value
|
||||||||||||||||
(Dollars in thousands)
|
||||||||||||||||||||
At December 31, 2010:
|
||||||||||||||||||||
U.S. Treasury securities
|
$ | 15,000 | $ | 14,975 | $ | 3 | $ | (159 | ) | $ | 14,819 | |||||||||
Government sponsored entity (GSE)
securities
|
30,800 | 30,717 | 421 | (118 | ) | 31,020 | ||||||||||||||
Corporate bonds
|
4,000 | 3,629 | — | (43 | ) | 3,586 | ||||||||||||||
Collateralized mortgage obligations
|
62,512 | 59,037 | 2,071 | (353 | ) | 60,755 | ||||||||||||||
Commercial mortgage-backed securities
|
66,282 | 67,052 | 1,804 | (158 | ) | 68,698 | ||||||||||||||
Pooled trust preferred securities
|
29,409 | 26,473 | — | (8,348 | ) | 18,125 | ||||||||||||||
GSE preferred stock
|
5,837 | — | 98 | — | 98 | |||||||||||||||
$ | 213,840 | $ | 201,883 | $ | 4,397 | $ | (9,179 | ) | $ | 197,101 |
June 30, 2011
|
December 31, 2010
|
|||||||||||||||||||
Amount
|
% of Total
|
Amount
|
% of Total
|
% Change
|
||||||||||||||||
(Dollars in thousands)
|
||||||||||||||||||||
Checking accounts:
|
||||||||||||||||||||
Non-interest bearing
|
$ | 98,377 | 10.2 | % | $ | 90,315 | 9.5 | % | 8.9 | % | ||||||||||
Interest-bearing
|
154,401 | 16.0 | 149,948 | 15.9 | 3.0 | |||||||||||||||
Money market accounts
|
188,942 | 19.6 | 177,566 | 18.8 | 6.4 | |||||||||||||||
Savings accounts
|
128,902 | 13.4 | 121,504 | 12.8 | 6.1 | |||||||||||||||
Core deposits
|
570,622 | 59.2 | 539,333 | 57.0 | 5.8 | |||||||||||||||
Certificates of deposit accounts
|
393,905 | 40.8 | 406,551 | 43.0 | (3.1 | ) | ||||||||||||||
Total deposits
|
$ | 964,527 | 100.0 | % | $ | 945,884 | 100.0 | % | 2.0 | % |
June 30, 2011
|
December 31, 2010
|
|||||||||||||||
Weighted-
|
Weighted-
|
|||||||||||||||
Average
|
Average
|
|||||||||||||||
Contractual
|
Contractual
|
|||||||||||||||
Amount
|
Rate
|
Amount
|
Rate
|
|||||||||||||
(Dollars in thousands)
|
||||||||||||||||
Advances from FHLB of Indianapolis:
|
||||||||||||||||
Fixed rate advances due in:
|
||||||||||||||||
2011
|
$ | — | — | % | $ | 15,000 | 3.75 | % | ||||||||
2013
|
15,000 | 2.22 | 15,000 | 2.22 | ||||||||||||
2014 (1)
|
1,096 | 6.71 | 1,096 | 6.71 | ||||||||||||
2018 (1)
|
2,513 | 5.54 | 2,513 | 5.54 | ||||||||||||
2019 (1)
|
6,496 | 6.30 | 6,589 | 6.30 | ||||||||||||
Total FHLB advances
|
25,105 | 3.80 | 40,198 | 3.79 | ||||||||||||
Short-term variable-rate borrowed funds - repo sweep accounts
|
13,730 | .45 | 13,352 | .50 | ||||||||||||
Total borrowed funds
|
$ | 38,835 | 2.62 | % | $ | 53,550 | 2.97 | % |
(1)
|
|
These are amortizing advances and are listed by their contractual final maturity date.
|
June 30,
2011
|
March 31,
2011
|
December 31,
2010
|
||||||||||
(Dollars in thousands)
|
||||||||||||
Non-performing loans:
|
||||||||||||
Commercial loans:
|
||||||||||||
Commercial and industrial
|
$ | 665 | $ | 578 | $ | 228 | ||||||
Commercial real estate:
|
||||||||||||
Owner occupied
|
14,852 | 13,748 | 9,119 | |||||||||
Non-owner occupied
|
19,844 | 21,320 | 21,512 | |||||||||
Multifamily
|
1,002 | 855 | 1,071 | |||||||||
Commercial construction and land development
|
7,707 | 9,719 | 9,183 | |||||||||
Commercial participations
|
8,191 | 8,796 | 9,499 | |||||||||
Total commercial loans
|
52,261 | 55,016 | 50,612 | |||||||||
Retail loans:
|
||||||||||||
One-to-four family residential
|
4,194 | 3,862 | 2,955 | |||||||||
Home equity lines of credit
|
589 | 610 | 718 | |||||||||
Retail construction
|
169 | 169 | 203 | |||||||||
Other
|
4 | 4 | 4 | |||||||||
Total retail loans
|
4,956 | 4,645 | 3,880 | |||||||||
Total non-performing loans
|
57,217 | 59,661 | 54,492 | |||||||||
Other real estate owned, net
|
21,164 | 23,567 | 22,324 | |||||||||
Total non-performing assets
|
78,381 | 83,228 | 76,816 | |||||||||
90 days past due loans still accruing interest
|
405 | 1,424 | 2,469 | |||||||||
Total non-performing assets plus 90 days past due
|
||||||||||||
loans still accruing interest
|
$ | 78,786 | $ | 84,652 | $ | 79,285 | ||||||
Non-performing assets to total assets
|
6.95 | % | 7.27 | % | 6.85 | % | ||||||
Non-performing loans to total loans, net of deferred fees
|
7.76 | 8.24 | 7.44 |
June 30,
2011
|
March 31,
2011
|
December 31,
2010
|
% Change
from
December 31
to June 30
|
|||||||||||||
(Dollars in thousands)
|
||||||||||||||||
Commercial real estate – non-owner occupied
|
$ | 5,302 | $ | 5,302 | $ | 5,302 | ― | % | ||||||||
Commercial construction and land development
|
2,889 | 3,494 | 4,197 | (31.2 | ) | |||||||||||
Total non-performing syndications and
purchased participations
|
$ | 8,191 | $ | 8,796 | $ | 9,499 | (13.8 | )% | ||||||||
Illinois
|
$ | 1,749 | $ | 2,354 | $ | 2,354 | (25.7 | )% | ||||||||
Indiana
|
5,302 | 5,302 | 5,302 | ― | ||||||||||||
Florida
|
1,140 | 1,140 | 1,843 | (38.1 | ) | |||||||||||
Total non-performing syndications and
purchased participations
|
$ | 8,191 | $ | 8,796 | $ | 9,499 | (13.8 | )% | ||||||||
Percentage of total non-performing loans
|
14.3 | % | 14.7 | % | 17.4 | % | ||||||||||
Percentage of total syndications and purchased
participations
|
38.6 | 39.2 | 40.3 |
Three Months Ended
June 30,
|
Six Months Ended
June 30,
|
|||||||||||||||
2011
|
2010
|
2011
|
2010
|
|||||||||||||
(Dollars in thousands)
|
||||||||||||||||
Balance at beginning of period
|
$ | 17,095 | $ | 20,402 | $ | 17,179 | $ | 19,461 | ||||||||
Loan charge-offs
|
(1,073 | ) | (3,633 | ) | (2,087 | ) | (4,515 | ) | ||||||||
Recoveries of loans previously charged-off
|
21 | 22 | 48 | 135 | ||||||||||||
Net loan charge-offs
|
(1,052 | ) | (3,611 | ) | (2,039 | ) | (4,380 | ) | ||||||||
Provision for loan losses
|
996 | 817 | 1,899 | 2,527 | ||||||||||||
Balance at end of period
|
$ | 17,039 | $ | 17,608 | $ | 17,039 | $ | 17,608 |
June 30,
2011
|
December 31,
2010
|
June 30,
2010
|
||||||||||
(Dollars in thousands)
|
||||||||||||
Allowance for loan losses
|
$ | 17,039 | $ | 17,179 | $ | 17,608 | ||||||
Total loans receivable, net of unearned fees
|
737,516 | 732,584 | 756,052 | |||||||||
Allowance for loan losses to total loans
|
2.31 | % | 2.34 | % | 2.33 | % | ||||||
Allowance for loan losses to non-performing loans
|
29.78 | 31.53 | 31.17 |
|
•
|
deposits and Repo Sweeps;
|
|
•
|
scheduled payments of amortizing loans and mortgage-backed investment securities;
|
|
•
|
prepayments and maturities of outstanding loans and mortgage-backed investment securities;
|
|
•
|
maturities of investment securities and other short-term investments;
|
|
•
|
funds provided from operations;
|
|
•
|
federal funds line of credit; and
|
|
•
|
borrowed funds from the FHLB and Federal Reserve Bank.
|
•
|
purchases of investment securities totaling $83.0 million;
|
|
•
|
net loan fundings totaling $10.6 million; and
|
|
•
|
repayment of FHLB advances totaling $15.1 million.
|
•
|
increases in deposit accounts totaling $18.6 million;
|
|
•
|
proceeds from sales, maturities, and paydowns of investment securities aggregating $51.4 million;
|
|
•
|
redemption of FHLB stock of $11.6 million; and
|
|
•
|
proceeds from the sale of other real estate owned totaling $6.1 million.
|
Payments Due By Period
|
||||||||||||||||||||
Over One
|
Over Three
|
Over
|
||||||||||||||||||
One Year
|
through
|
through
|
Five
|
|||||||||||||||||
or less
|
Three Years
|
Five Years
|
Years
|
Total
|
||||||||||||||||
(Dollars in thousands)
|
||||||||||||||||||||
Certificates of deposit
|
$ | 275,756 | $ | 92,940 | $ | 24,597 | $ | 612 | $ | 393,905 | ||||||||||
FHLB advances (1)
|
339 | 15,752 | 1,796 | 7,218 | 25,105 | |||||||||||||||
Short-term borrowed funds (2)
|
13,730 |
—
|
—
|
—
|
13,730 | |||||||||||||||
Service bureau contract
|
1,663 | 3,326 | 3,326 |
—
|
8,315 | |||||||||||||||
Operating leases
|
389 | 416 | 259 | 1,935 | 2,999 | |||||||||||||||
Dividends payable on common stock
|
109 |
—
|
—
|
—
|
109 | |||||||||||||||
$ | 291,986 | $ | 112,434 | $ | 29,978 | $ | 9,765 | $ | 444,163 |
Over One
|
||||||||||||||||||||
through
|
Over Three
|
Over
|
||||||||||||||||||
One Year
|
Three
|
through
|
Five
|
|||||||||||||||||
or Less
|
Years
|
Five Years
|
Years
|
Total
|
||||||||||||||||
(Dollars in thousands)
|
||||||||||||||||||||
Commitments to extend credit:
|
||||||||||||||||||||
Commercial and industrial
|
$ | 13,628 | $ | 31 | $ | — | $ | 39 | $ | 13,698 | ||||||||||
Commercial real estate:
|
||||||||||||||||||||
Owner occupied
|
9,577 | — | 135 | — | 9,712 | |||||||||||||||
Non-owner occupied
|
1,699 | — | — | — | 1,699 | |||||||||||||||
Multifamily
|
1,915 | — | — | — | 1,915 | |||||||||||||||
Commercial construction and land development
|
2,276 | 131 | — | — | 2,407 | |||||||||||||||
Commercial participations
|
— | 48 | — | — | 48 | |||||||||||||||
Retail
|
1,795 | — | — | — | 1,795 | |||||||||||||||
Commitments to fund unused:
|
||||||||||||||||||||
Equity lines of credit
|
15,926 | — | — | 40,851 | 56,777 | |||||||||||||||
Commercial business lines
|
46,318 | 4,506 | — | 16 | 50,840 | |||||||||||||||
Construction loans
|
2,709 | — | 3,425 | — | 6,134 | |||||||||||||||
Credit enhancements
|
3,984 | — | — | 13,543 | 17,527 | |||||||||||||||
Letters of credit
|
4,312 | 257 | — | — | 4,569 | |||||||||||||||
$ | 104,139 | $ | 4,973 | $ | 3,560 | $ | 54,449 | $ | 167,121 |
To Be Well Capitalized
|
||||||||||||||||||||
For Capital Adequacy
|
Under Prompt Corrective
|
|||||||||||||||||||
Actual
|
Purposes
|
Action Provisions
|
||||||||||||||||||
Amount
|
Ratio
|
Amount
|
Ratio
|
Amount
|
Ratio
|
|||||||||||||||
(Dollars in thousands)
|
||||||||||||||||||||
As of June 30, 2011:
|
||||||||||||||||||||
Tangible capital to adjusted total assets
|
$ | 102,549 | 9.17 | % | $ | 16,768 | >=1.5 | % | $ | 22,357 | >=2.0 | % | ||||||||
Tier 1 (core) capital to adjusted total assets
|
102,549 | 9.17 | 44,714 |
>=4.0
|
55,893 |
>=5.0
|
||||||||||||||
Tier 1 (core) capital to risk-weighted assets
|
102,549 | 12.22 | 33,576 |
>=4.0
|
50,363 |
>=6.0
|
||||||||||||||
Total capital to risk-weighted assets
|
111,574 | 13.29 | 67,151 |
>=8.0
|
83,939 |
>=10.0
|
||||||||||||||
As of December 31, 2010:
|
||||||||||||||||||||
Tangible capital to adjusted total assets
|
$ | 101,144 | 9.07 | % | $ | 16,719 | >=1.5 | % | $ | 22,292 | >=2.0 | % | ||||||||
Tier 1 (core) capital to adjusted total assets
|
101,144 | 9.07 | 44,583 |
>=4.0
|
55,729 |
>=5.0
|
||||||||||||||
Tier 1 (core) capital to risk-weighted assets
|
101,144 | 12.26 | 33,005 |
>=4.0
|
49,508 |
>=6.0
|
||||||||||||||
Total capital to risk-weighted assets
|
109,869 | 13.32 | 66,011 |
>=8.0
|
82,514 |
>=10.0
|
Tangible
|
Core
|
Risk-Based
|
||||||||||
(Dollars in thousands)
|
||||||||||||
Shareholders’ equity of the Bank
|
$ | 114,538 | $ | 114,538 | $ | 114,538 | ||||||
Disallowed deferred tax asset
|
(12,573 | ) | (12,573 | ) | (12,573 | ) | ||||||
Adjustment for unrealized losses on available-for-sale securities
|
1,413 | 1,413 | 1,413 | |||||||||
Other
|
(829 | ) | (829 | ) | (829 | ) | ||||||
General allowance for loan losses
|
― | ― | 9,025 | |||||||||
Regulatory capital of the Bank
|
$ | 102,549 | $ | 102,549 | $ | 111,574 |
Net Portfolio Value
|
||||||||||||||||||||||||||
At June 30, 2011
|
At December 31, 2010
|
|||||||||||||||||||||||||
$ Amount
|
$ Change
|
% Change
|
$ Amount
|
$ Change
|
% Change
|
|||||||||||||||||||||
(Dollars in thousands)
|
||||||||||||||||||||||||||
Assumed Change in Interest Rates
|
||||||||||||||||||||||||||
(Basis Points)
|
|
|
||||||||||||||||||||||||
+300 | $ | 133,026 | $ | 5,685 | 4.5 | % | $ | 135,273 | $ | 5,530 | 4.3 | % | ||||||||||||||
+200 | 133,141 | 5,799 | 4.6 | 135,380 | 5,637 | 4.3 | ||||||||||||||||||||
+100 | 131,554 | 4,213 | 3.3 | 132,500 | 2,757 | 2.1 | ||||||||||||||||||||
0 | 127,341 | ― | ― | 129,743 | — | — | ||||||||||||||||||||
-100 | 116,163 | (11,178 | ) | (8.8 | ) | 119,664 | (10,079 | ) | (7.8 | ) | ||||||||||||||||
-200 | 107,585 | (19,756 | ) | (15.5 | ) | 111,927 | (17,816 | ) | (13.7 | ) |
Change in
|
||||||||||||||||||
Net Interest Income
|
||||||||||||||||||
Over a Twelve
|
||||||||||||||||||
Month Period
|
||||||||||||||||||
June 30, 2011
|
December 31, 2010
|
|||||||||||||||||
$ Change
|
% Change
|
$ Change
|
% Change
|
|||||||||||||||
Assumed Change in Interest Rates
|
||||||||||||||||||
(Basis Points)
|
||||||||||||||||||
+300 | $ | (515 | ) | (1.3 | )% | $ | (504 | ) | (1.3 | )% | ||||||||
+200 | (380 | ) | (1.0 | ) | (334 | ) | (.9 | ) | ||||||||||
+100 | (335 | ) | (.9 | ) | (231 | ) | (.6 | ) | ||||||||||
-100 | 1,003 | 2.6 | 1,276 | 3.4 | ||||||||||||||
-200 | 636 | 1.6 | 808 | 2.2 |
(a)
|
Not applicable.
|
(b)
|
Not applicable.
|
(c)
|
We did not repurchase any shares of our common stock during the quarter ended June 30, 2011. Under our repurchase plan publicly announced on March 20, 2008 for 530,000 shares, we have 448,612 shares that may yet be purchased. We are currently prohibited from repurchasing our common stock without prior approval pursuant to an informal regulatory agreement.
|
(a)
|
None.
|
(b)
|
Not applicable.
|
(a)
|
Not applicable.
|
(b)
|
None.
|
(a)
|
List of exhibits (filed herewith unless otherwise noted).
|
3.1
|
Articles of Incorporation of CFS Bancorp, Inc. (1)
|
3.2
|
Amended and Restated Bylaws of CFS Bancorp, Inc. (2)
|
4.0
|
Form of Stock Certificate of CFS Bancorp, Inc. (3)
|
31.1
|
Rule 13a-14(a) Certification of Chief Executive Officer
|
31.2
|
Rule 13a-14(a) Certification of Chief Financial Officer
|
32.0
|
Section 1350 Certifications
|
101.0
|
The following financial statements from the CFS Bancorp, Inc. Quarterly Report on Form 10-Q for the quarter ended June 30, 2011, filed on August 9, 2011, formatted in Extensive Business Reporting Language (XBRL): (i) condensed consolidated statements of condition, (ii) condensed consolidated statements of income, (iii) condensed consolidated statements of changes in shareholders’ equity, (iv) condensed consolidated statements of cash flows, and (v) the notes to condensed consolidated financial statements (4)
|
|
____________
|
|
(1)
|
Incorporated herein by Reference to the Company’s Definitive Proxy Statement from the Annual Meeting of Shareholders filed with the SEC on March 25, 2005 (File No. 000-24611).
|
|
(2)
|
Incorporated herein by Reference to the Company’s Form 8-K filed with the SEC on December 17, 2010.
|
|
(3)
|
Incorporated herein by Reference to the Company’s Annual Report on Form 10-K for the year ended December 31, 2006 filed with the SEC on March 15, 2007.
|
|
(4)
|
As provided in Rule 406T of Regulation S-T, this information is furnished and not filed for purposes of Sections 11 and 12 of the Securities Act of 1033 and Section 18 of the Securities Exchange Act of 1934.
|
Date: August 9, 2011
|
By:
|
/s/ Thomas F. Prisby
|
Thomas F. Prisby, Chairman of the Board and
|
||
Chief Executive Officer
|
||
Date: August 9, 2011
|
By:
|
/s/ Jerry A. Weberling
|
Jerry A. Weberling, Executive Vice President
|
||
and Chief Financial Officer
|
1.
|
I have reviewed this quarterly report on Form 10-Q of CFS Bancorp, Inc. (Registrant);
|
2.
|
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
|
3.
|
Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations, and cash flows of the Registrant as of, and for, the periods presented in this report;
|
4.
|
The Registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the Registrant and have:
|
|
(a)
|
Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the Registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
|
|
(b)
|
Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
|
|
(c)
|
Evaluated the effectiveness of the Registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
|
|
(d)
|
Disclosed in this report any change in the Registrant’s internal control over financial reporting that occurred during the Registrant’s most recent fiscal quarter (the Registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the Registrant’s internal control over financial reporting; and
|
5.
|
The Registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the Registrant’s auditors and the audit committee of Registrant’s board of directors (or persons performing the equivalent functions):
|
|
(a)
|
All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the Registrant’s ability to record, process, summarize, and report financial information; and
|
|
(b)
|
Any fraud, whether or not material, that involves management or other employees who have a significant role in the Registrant’s internal control over financial reporting.
|
Date: August 9, 2011
|
/s/ Thomas F. Prisby
|
Thomas F. Prisby
|
|
Chairman of the Board and Chief Executive Officer
|
1.
|
I have reviewed this quarterly report on Form 10-Q of CFS Bancorp, Inc. (Registrant);
|
2.
|
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
|
3.
|
Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations, and cash flows of the Registrant as of, and for, the periods presented in this report;
|
4.
|
The Registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the Registrant and have:
|
|
(a)
|
Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the Registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
|
|
(b)
|
Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
|
|
(c)
|
Evaluated the effectiveness of the Registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
|
|
(d)
|
Disclosed in this report any change in the Registrant’s internal control over financial reporting that occurred during the Registrant’s most recent fiscal quarter (the Registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the Registrant’s internal control over financial reporting; and
|
5.
|
The Registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the Registrant’s auditors and the audit committee of Registrant’s board of directors (or persons performing the equivalent functions):
|
|
(a)
|
All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the Registrant’s ability to record, process, summarize, and report financial information; and
|
|
(b)
|
Any fraud, whether or not material, that involves management or other employees who have a significant role in the Registrant’s internal control over financial reporting.
|
Date: August 9, 2011
|
/s/ Jerry A. Weberling
|
Jerry A. Weberling
|
|
Executive Vice President and Chief Financial Officer
|
|
(1)
|
The Quarterly Report on Form 10-Q of the Company for the three months ended June 30, 2011 (Report) fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934 (15 U.S.C 78m(a) or 78o(d)), and
|
|
(2)
|
The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.
|
Date:
|
August 9, 2011
|
By:
|
/s/ Thomas F. Prisby
|
Thomas F. Prisby
|
|||
Chairman of the Board and
Chief Executive Officer
|
|||
Date:
|
August 9, 2011
|
By:
|
/s/ Jerry A. Weberling
|
Jerry A. Weberling
|
|||
Executive Vice President and
Chief Financial Officer
|
Condensed Consolidated Statements of Condition (Unaudited) Parenthetical (USD $)
|
Jun. 30, 2011
|
Dec. 31, 2010
|
---|---|---|
Shareholders' equity: | Â | Â |
Preferred stock, par value (in dollars per share) | $ 0.01 | $ 0.01 |
Preferred stock, shares authorized (in shares) | 15,000,000 | 15,000,000 |
Common stock, par value (in dollars per share) | $ 0.01 | $ 0.01 |
Common stock, shares authorized (in shares) | 85,000,000 | 85,000,000 |
Common stock, shares issued (in shares) | 23,423,306 | 23,423,306 |
Common stock, shares outstanding (in shares) | 10,867,802 | 10,850,040 |
Treasury stock, at cost (in shares) | 12,555,504 | 12,573,266 |
Condensed Consolidated Statements of Income (Unaudited) (USD $)
In Thousands, except Share data |
3 Months Ended | 6 Months Ended | ||
---|---|---|---|---|
Jun. 30, 2011
|
Jun. 30, 2010
|
Jun. 30, 2011
|
Jun. 30, 2010
|
|
Interest income: | Â | Â | Â | Â |
Loans receivable | $ 9,016 | $ 9,626 | $ 17,827 | $ 19,304 |
Investment securities | 2,040 | 2,163 | 4,085 | 4,376 |
Other interest-earning assets | 164 | 123 | 321 | 247 |
Total interest income | 11,220 | 11,912 | 22,233 | 23,927 |
Interest expense: | Â | Â | Â | Â |
Deposits | 1,777 | 2,146 | 3,670 | 4,199 |
Borrowed funds | 256 | 437 | 519 | 956 |
Total interest expense | 2,033 | 2,583 | 4,189 | 5,155 |
Net interest income | 9,187 | 9,329 | 18,044 | 18,772 |
Provision for loan losses | 996 | 817 | 1,899 | 2,527 |
Net interest income after provision for loan losses | 8,191 | 8,512 | 16,145 | 16,245 |
Non-interest income: | Â | Â | Â | Â |
Service charges and other fees | 1,174 | 1,320 | 2,250 | 2,540 |
Card-based fees | 520 | 486 | 995 | 923 |
Commission income | 78 | 46 | 123 | 100 |
Net gain on sale of: | Â | Â | Â | Â |
Investment securities | 173 | 0 | 692 | 456 |
Loans receivable | 26 | 0 | 58 | 0 |
Other real estate owned | 2,238 | 11 | 2,233 | 12 |
Income from bank-owned life insurance | 210 | 262 | 416 | 485 |
Other income | 119 | 118 | 222 | 268 |
Total non-interest income | 4,538 | 2,243 | 6,989 | 4,784 |
Non-interest expense: | Â | Â | Â | Â |
Compensation and employee benefits | 5,047 | 4,550 | 10,286 | 9,219 |
Net occupancy expense | 670 | 651 | 1,435 | 1,406 |
FDIC insurance premiums and OTS assessments | 504 | 669 | 1,157 | 1,269 |
Professional fees | 334 | 744 | 722 | 1,337 |
Furniture and equipment expense | 454 | 526 | 917 | 1,059 |
Data processing | 441 | 443 | 883 | 873 |
Marketing | 270 | 216 | 457 | 330 |
Other real estate owned related expense, net | 2,011 | 255 | 2,603 | 886 |
Loan collection expense | 233 | 153 | 353 | 322 |
Severance and early retirement expense | 0 | 437 | 0 | 440 |
Other general and administrative expenses | 1,107 | 952 | 2,225 | 1,922 |
Total non-interest expense | 11,071 | 9,596 | 21,038 | 19,063 |
Income before income taxes | 1,658 | 1,159 | 2,096 | 1,966 |
Income tax expense | 425 | 178 | 391 | 287 |
Net income | $ 1,233 | $ 981 | $ 1,705 | $ 1,679 |
Per share data: | Â | Â | Â | Â |
Basic earnings per share | $ 0.12 | $ 0.09 | $ 0.16 | $ 0.16 |
Diluted earnings per share | $ 0.11 | $ 0.09 | $ 0.16 | $ 0.16 |
Cash dividends declared per share | $ 0.01 | $ 0.01 | $ 0.02 | $ 0.02 |
Weighted-average common and common share equivalents outstanding: | Â | Â | Â | Â |
Basic | 10,691,424 | 10,640,347 | 10,671,196 | 10,611,220 |
Diluted | 10,759,332 | 10,721,909 | 10,733,149 | 10,697,976 |
Document And Entity Information (USD $)
|
6 Months Ended | |
---|---|---|
Jun. 30, 2011
|
Jun. 30, 2010
|
|
Entity Registrant Name | CFS Bancorp Inc | Â |
Entity Central Index Key | 0001058438 | Â |
Current Fiscal Year End Date | --12-31 | Â |
Entity Well-known Seasoned Issuer | No | Â |
Entity Voluntary Filers | No | Â |
Entity Current Reporting Status | No | Â |
Entity Filer Category | Smaller Reporting Company | Â |
Entity Public Float | Â | $ 44,100,000 |
Entity Common Stock, Shares Outstanding | 10,867,802 | Â |
Document Fiscal Year Focus | 2010 | Â |
Document Fiscal Period Focus | Q2 | Â |
Document Type | 10-Q | Â |
Amendment Flag | false | Â |
Document Period End Date | Jun. 30, 2011 |
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Allowance for Loan Losses
|
6 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Jun. 30, 2011
|
|||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Notes to Financial Statements [Abstract] | Â | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Allowance for Loan Losses | 5. Allowance for Loan Losses The Company maintains an allowance for loan losses at a level management believes is appropriate in relation to the estimated risk inherent in the loan portfolio. The allowance for loan losses represents the Company’s estimate of probable incurred losses in our loan portfolio at each statement of condition date and is based on the review of available and relevant information. The first component of the allowance for loan losses contains allocations for probable incurred losses that we have identified relating to impaired loans pursuant to ASC 310-10, Receivables. The Company individually evaluates for impairment all loans classified substandard and over $750,000. Loans are considered impaired when, based on current information and events, it is probable that the borrower will not be able to fulfill its obligation according to the contractual terms of the loan agreement. The impairment loss, if any, is generally measured based on the present value of expected cash flows discounted at the loan’s effective interest rate. As a practical expedient, impairment may be measured based on the loan’s observable market price, or the fair value of the collateral, if the loan is collateral-dependent. A loan is considered collateral-dependent when the repayment of the loan will be provided solely by the underlying collateral and there are no other available and reliable sources of repayment. If management determines a loan is collateral-dependent, management will charge-off any identified collateral short fall against the allowance for loan losses. If foreclosure is probable, the Company is required to measure the impairment based on the fair value of the collateral. The fair value of the collateral is generally obtained from appraisals or estimated using an appraisal-like methodology. When current appraisals are not available, management estimates the fair value of the collateral giving consideration to several factors including the price at which individual unit(s) could be sold in the current market, the period of time over which the unit(s) could be sold, the estimated cost to complete the unit(s), the risks associated with completing and selling the unit(s), the required return on the investment a potential acquirer may have, and the current market interest rates. The analysis of each loan involves a high degree of judgment in estimating the amount of the loss associated with the loan, including the estimation of the amount and timing of future cash flows and collateral values. The second component of the Company’s allowance for loan losses contains allocations for probable incurred losses within various pools of loans with similar characteristics pursuant to ASC 450-10, Contingencies. This component is based in part on certain loss factors applied to various stratified loan pools excluding loans evaluated individually for impairment. In determining the appropriate loss factors for these loan pools, management considers historical charge-offs and recoveries; levels of and trends in delinquencies, impaired loans, and other classified loans; concentrations of credit within the commercial loan portfolios; volume and type of lending; and current and anticipated economic conditions. Loan losses are charged-off against the allowance when the loan balance or a portion of the loan balance is no longer covered by the paying capacity of the borrower based on an evaluation of available cash resources and collateral value, while recoveries of amounts previously charged-off are credited to the allowance. The Company assesses the appropriateness of the allowance for loan losses on a quarterly basis and adjusts the allowance for loan losses by recording a provision for loan losses in an amount sufficient to maintain the allowance at a level deemed appropriate by management. The evaluation of the appropriateness of the allowance for loan losses is inherently subjective as it requires estimates that are susceptible to significant revision as additional information becomes available or as future events occur. To the extent that actual outcomes differ from management’s estimates, an additional provision for loan losses could be required which could adversely affect earnings or the Company’s financial position in future periods. Prior to December 31, 2010, the allowance was calculated using a static four year historical net charge-off factor for each regulatory reporting loan category without segregation of purchased participation loans. At December 31, 2010, management determined that a rolling eight quarter loss history ending with the current quarter was more indicative of the current inherent losses in the loan portfolio at December 31, 2010 and more consistent with trends in the banking industry. In addition, the purchased participation loans were segregated as a separate loan category. These changes in the allowance methodology resulted in a reduction in the historical loss factor percentages applied to most of the directly originated loan portfolio categories and a larger historical loss factor percentage applied to the purchased participation portfolio. The net effect of these changes was a decrease in the provision and the allowance for loan losses at December 31, 2010 of $1.2 million. The effect of the change in the methodology on the provision for loan losses for the three and six months ended June 30, 2011 from the three and six months ended June 30, 2010 was deemed to be immaterial. The risk characteristics of each loan portfolio segment are as follows: Commercial and Industrial Loans (C&I) C&I loans are primarily based on the identified historic and/or the projected cash flows of the borrower and secondarily on the underlying collateral provided by the borrower. The cash flows of borrowers, however, do fluctuate based on changes in the company’s internal and external environment including management, human and capital resources, economic conditions, competition, regulation and product innovation/obsolescence. The collateral securing these loans may also fluctuate in value and generally has advance rates between 50-80% of the collateral value. Most C&I loans are secured by business assets being financed such as equipment, accounts receivable, and/or inventory and generally incorporate a secured or unsecured personal guarantee. Occasionally, some short-term loans may be made on an unsecured basis. In the case of loans secured by accounts receivable and/or inventory, the collateral securing the advances is generally monitored through a Borrowing Base Certificate submitted by the borrower which may identify a deterioration in collateral value. The ability of the borrower to collect amounts due from its customers may be affected by its customers’ economic and financial condition. The availability of funds for the repayment of these loans may be substantially dependent on each of the factors described above. Commercial Real Estate – Owner-Occupied, Non-Owner Occupied, and Multifamily These types of commercial real estate loans are viewed primarily as cash flow loans and secondarily as loans secured by real estate. Commercial real estate lending typically involves higher loan principal amounts and the repayment of these loans is generally dependent upon the cash flows from the successful operation of the property securing the loan or the cash flows from the owner occupied business conducted on the property securing the loan. A borrower’s business and/or the property securing the loan may be adversely affected by business conditions generally, and fluctuations in the real estate markets or in the general economy, which if adverse, can negatively affect the borrowers’ ability to repay the loan. The value and cash flow of the property can be influenced by changes in market rental rates, changes in interest rates or investors’ required rates of return, the condition of the property, zoning or environmental issues. The properties securing the commercial real estate portfolio are diverse in terms of type and are generally located in the Chicagoland/Northwest Indiana market. Owner occupied loans are generally a borrower purchased building where the borrower occupies at least 50% of the space with the primary source of repayment dependent on sources other than the underlying collateral. Non-owner occupied and single tenant properties may have higher risk than owner occupied loans since the primary source of repayment is dependent upon the ability to lease out the collateral as well as the financial stability of the businesses occupying the collateral. Management monitors and evaluates commercial real estate loan portfolio concentrations based upon cash flow, collateral, geography, and risk grade criteria. As a general rule, management avoids financing single purpose projects unless other underwriting factors mitigate the credit risk to an acceptable level. The Company’s loan policy generally requires lower loan-to-value ratios against these types of properties. Commercial Construction and Land Development Loans Construction loans are underwritten utilizing feasibility studies, independent appraisals, sensitivity analysis of absorption and lease rates, presale or prelease/Letters of Intent analysis, and financial analysis of the developers and property owners. Construction loans are generally based on the estimated cost to construct and cash flows associated with the completed project or stabilized value. These estimates are subjective in nature and if erroneous, may preclude the borrower from being able to repay the loan. Construction loans often involve the disbursement of substantial funds with repayment dependent on the success of the completed project. These loans are closely monitored by on-site inspections and are considered to have higher risks than other real estate loans due to their ultimate repayment being sensitive to interest rate changes, governmental regulation of real property, general economic conditions, the ability to sell the property, and the availability of long-term financing. Commercial Participation Loans Participation loans generally have very large principal balances, portions of which are sold to multiple participant banks in order to spread credit risk. The collateral securing these loans is often real estate and is often located outside of the Company’s geographic footprint. Loans outside of the Company’s geographical footprint pose additional risk due to the lack of knowledge of general economic conditions where the project is located along with various project specific risks regarding buyer demand and project specific risks regarding project competition risks. The participant banks are required to underwrite these credits utilizing their own internal analysis techniques and to their own credit standards. However, the participant banks are reliant upon the information about the borrowers and the collateral provided by the lead bank. These loans carry higher levels of risk due to the participant banks being dependent on the lead bank for monitoring and managing the credit relationship, including the workout and/or foreclosure process should the borrower default. Retail Loans The Company’s retail loans include one-to-four family residential mortgage loans, home equity loans and lines of credit, retail construction, and other consumer loans. Management has established a maximum loan-to-value ratio (LTV) of 80% for one-to-four family residential mortgages and home equity loans and lines of credit that are secured by a first or second mortgage on owner and non-owner occupied residences. Loan applications exceeding 80% LTV require private mortgage insurance (PMI) from a mortgage insurance company deemed acceptable by management. The following tables present the activity in the allowance for loan losses for the three and six months ended June 30, 2011 and the balance in the allowance for loan losses and loan balances by portfolio segment and impairment method at June 30, 2011 and December 31, 2010.
The Company, as a matter of good risk management practices, utilizes objective loan grading matrices to assign risk ratings to all commercial loans. The risk rating criteria is clearly supported by core credit attributes that emphasize debt service coverage, operating trends, collateral, and guarantor liquidity, and further removes subjective criteria and bias from the analysis. Retail loans are rated pass until they become 90 days or more delinquent, put on non-accrual status, and generally rated substandard. The Company uses the following definitions for risk ratings:
The Company’s loans receivable portfolio is summarized by risk rating category as follows:
For all loan categories, past due status is based on the contractual terms of the loan. Interest income is generally not accrued on loans which are delinquent 90 days or more, or for loans which management believes, after giving consideration to a number of factors, including economic and business conditions and collection efforts, collection of interest is doubtful. In all cases, loans are placed on non-accrual status or charged-off at an earlier date if collection of principal or interest is considered doubtful. All interest accrued but not received for loans placed on non-accrual is reversed against interest income. Interest subsequently received on non-accrual loans is accounted for using the cost-recovery basis for commercial loans and the cash-basis for retail loans until qualifying for return to accrual status. Commercial loans are generally placed on non-accrual once they become 90 days past due. Management reviews all current financial information of the borrower and guarantor(s) and action plans to bring the loan current before determining if the loan should be placed on non-accrual. Management requires appropriate justification to maintain a commercial loan on accrual status once 90 days past due. Occasionally commercial loans are placed on non-accrual status before the loan becomes significantly past due if current information indicates that future repayment of principal and interest may be questionable. Commercial loans are returned to accrual status only when the loan has been paid as agreed for a minimum of six months. A detailed analysis of the borrower and guarantor’s ability to service the loan is completed and must meet the Company’s underwriting standards and conform to Company policy before the loan can be returned to accrual status. Retail loans are returned to accrual status primarily based on the payment status of the loan. A retail loan is automatically placed on non-accrual status immediately upon becoming 90 days past due. The loan remains on non-accrual status, with interest income recognized on a cash basis when a payment is made, until the loan is paid current. Once current, the loan is automatically returned to accrual status. If management identifies other information to indicate that future repayment of the loan balance may still be questionable, the loan may be manually moved to non-accrual status until management determines otherwise. The Company’s loan portfolio delinquency status is summarized as follows:
Non-accrual loans are summarized as follows:
The Company’s impaired loans are summarized as follows with the majority of the interest income recognized on a cash basis at the time the payment is received:
The Company may grant a concession or modification for economic or legal reasons related to a borrower’s financial condition that it would not otherwise consider resulting in a modified loan which is then identified as a troubled debt restructuring (TDR). The loan modifications include rate reductions, short-term extensions of maturity, interest only payments, or payment modifications to better match the timing of cash flows due under the modified terms with the cash flows from the borrowers’ operations. The modifications are intended to minimize the economic loss and to avoid foreclosure or repossession of the collateral. The Company identifies loans for potential restructure primarily through direct communication with the borrower and evaluation of the borrower’s financial statements, revenue projections, tax returns, and credit reports. Even if the borrower is not presently in default, management will consider the likelihood that cash flow shortages, adverse economic conditions, and negative trends may result in a payment default in the near future. For one-to-four family residential and home equity lines of credit, a restructure often occurs with past due loans and may be offered as an alternative to foreclosure. There are other situations where borrowers, who are not past due, experience a sudden job loss, become over-extended with credit obligations, or other problems, have indicated that they will be unable to make the required monthly payment and request payment relief. When considering a loan restructure, management will determine if: (i) the financial distress is short or long term; (ii) loan concessions are necessary; and (iii) the restructure is a viable solution. The tables below summarize the Company’s TDRs by loan category an accrual status:
Management monitors the TDRs based on the type of modification or concession granted to the borrower. These types of modifications may include rate reductions, payment/term extensions, forgiveness of principal, forbearance, and other applicable actions. Of the various noted concessions, management predominantly utilizes rate reductions and lower monthly payments, either from a longer amortization period or interest only repayment schedule, because these concessions provide needed payment relief without risking the loss of principal. Management will also agree to a forbearance agreement when it is deemed appropriate to avoid foreclosure. The following tables set forth our TDRs by portfolio segment to quantify the type of modification or concession provided:
At June 30, 2011, TDRs totaled $36.5 million, of which $6.9 million were performing in accordance with their modified terms and accruing. At June 30, 2011, commercial TDRs included $33.4 million loans that were restructured, of which $27.0 million were on nonaccrual status. Of the $3.0 million retail TDRs, $2.6 million were still performing in accordance with their agreements and $443,000 were on nonaccrual status. The decrease in TDRs since December 31, 2010 was primarily due to one $2.0 million commercial construction and land development relationship that had been previously restructured being transferred to other real estate owned. In addition, one $261,000 one-to-four family mortgage loan that had been previously restructured was paid off in full with no loss to the Bank. There have been no other significant changes in the status of the TDRs listed at December 31, 2010. When a loan is restructured, the new terms often require a reduced monthly debt service payment. No TDRs that were on non-accrual status at the time the concessions were granted have been returned to accrual status. For commercial loans, management completes an analysis of the operating entity’s ability to repay the debt. If the operating entity is capable of servicing the new debt service requirements and the underlying collateral value is believed to be sufficient to repay the debt in the event of a future default, the new loan is generally placed on accrual status. To date, there have been no commercial loans restructured and immediately placed on accrual status after the execution of the TDR. For retail loans, an analysis of the individual’s ability to service the new required payments is performed. If the borrower is capable of servicing the new debt and the underlying collateral value is believed to be sufficient to repay the debt in the event of a future default, the new loan is generally placed on accrual status. The reason for the TDR is also considered, such as paying past due real estate taxes or payments caused by a temporary job loss, when determining whether a retail TDR loan could be returned to accrual status. Retail TDRs remain on nonaccrual status until sufficient payments have been made to bring the past due principal and interest current at which point the loan would be transferred to accrual status. |
Basis of Presentation
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Organization, Consolidation and Presentation of Financial Statements [Abstract] | Â | ||
Basis of Presentation |
The accompanying unaudited condensed consolidated financial statements have been prepared in conformity with U.S. generally accepted accounting principles for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all of the information or footnotes necessary for a complete presentation of financial condition, results of operations, or cash flows in accordance with U.S. generally accepted accounting principles. In our opinion, all adjustments (consisting only of normal recurring adjustments) necessary for a fair presentation have been included. The results of operations for the three and six months ended June 30, 2011 are not necessarily indicative of the results expected for the year ending December 31, 2011. The June 30, 2011 condensed consolidated financial statements should be read in conjunction with the consolidated financial statements and notes for the year ended December 31, 2010 included in the Company’s Annual Report on Form 10-K. The preparation of the condensed consolidated financial statements in conformity with U.S. generally accepted accounting principles requires management to make estimates, judgments, or assumptions that could have a material effect on the carrying value of certain assets and liabilities. These estimates, judgments, and assumptions affect the amounts reported in the condensed consolidated financial statements and the disclosures provided. The determination of the allowance for loan losses, valuations and impairments of investment securities, and the accounting for income tax expense are highly dependent on management’s estimates, judgments, and assumptions where changes in any of these could have a significant impact on the financial statements. The condensed consolidated financial statements include the accounts of CFS Bancorp, Inc. (the Company), its wholly-owned subsidiary, Citizens Financial Bank (the Bank), and its wholly-owned subsidiaries, CFS Holdings, LTD and WHCC, LLC. All material intercompany balances and transactions have been eliminated in consolidation. Certain items in the condensed consolidated financial statements of prior periods have been reclassified to conform to the current period’s presentation. |
Share-Based Compensation
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Share-Based Compensation |
The Company accounts for its stock options in accordance with ASC 718-10, Compensation – Stock Based Compensation. ASC 718-10 addresses all forms of share-based payment awards, including shares under employee stock purchase plans, stock options, restricted stock, and stock appreciation rights. ASC 718-10 requires all share-based payments to be recognized as expense, based upon their fair values, in the financial statements over the service period of the awards. For additional details on the Company’s share-based compensation plans and related disclosures, see “Note 9. Share-Based Compensation” in the consolidated financial statements as presented in the Company’s 2010 Annual Report on Form 10-K. Omnibus Equity Incentive Plan The Company’s 2008 Omnibus Equity Incentive Plan (Equity Incentive Plan) authorized the issuance of 270,000 shares of its common stock. In addition, there were 64,500 shares that had not yet been issued or were forfeited, cancelled, or unexercised at the end of the option term under the 2003 Stock Option Plan that are available for any type of stock-based awards in the future under the Equity Incentive Plan. At June 30, 2011, 165,420 shares were available for future grants under the Equity Incentive Plan. Restricted Stock The following table presents the activity for restricted stock for the six months ended June 30, 2011.
The compensation expense related to restricted stock for the three months ended June 30, 2011 and 2010 totaled $79,000 and $57,000, respectively. The compensation expense related to restricted stock for the six months ended June 30, 2011 and 2010 totaled $145,000 and $118,000, respectively. At June 30, 2011, the remaining unamortized cost of the restricted stock awards was reflected as a reduction in additional paid-in capital and totaled $879,000. This cost is expected to be recognized over a weighted-average period of 4.2 years which is subject to the actual number of shares earned and vested. Stock Options The Company has stock option plans under which shares of Company common stock were reserved for the grant of both incentive and non-qualified stock options to directors, officers, and employees. These plans were frozen in conjunction with the approval of the Equity Incentive Plan in 2003 and no new awards will be made under these plans. The stock option vesting periods and exercise and expiration dates were determined by the Compensation Committee at the time of the grant. The exercise price of the stock options is equal to the fair market value of the common stock on the grant date. The following table presents the activity under the Company’s stock option plans for the six months ended June 30, 2011.
For stock options outstanding at June 30, 2011, the range of exercise prices was $13.48 to $14.76 and the weighted-average remaining contractual term was 2.5 years. At June 30, 2011, all of the Company’s outstanding stock options were out-of-the-money and had no intrinsic value. There were no stock options exercised during the six months ended June 30, 2011 and 2010. The Company reissues treasury shares to satisfy option exercises. |
Other Comprehensive Income
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Other Comprehensive Income |
The related income tax effect and reclassification adjustments to the components of other comprehensive income for the periods indicated are as follows:
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Fair Value Measurements
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Fair Value Disclosures [Abstract] | Â | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Fair Value Measurements | 6. Fair Value Measurements The Company measures fair value according to ASC 820-10: Fair Value Measurements and Disclosures. ASC 820-10 establishes a fair value hierarchy that prioritizes the inputs used in valuation techniques, but not the valuation techniques themselves. The fair value hierarchy is designed to indicate the relative reliability of the fair value measure. The highest priority is given to quoted prices in active markets and the lowest to unobservable data such as the Company’s internal information. ASC 820-10 defines fair value as “the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date.” There are three levels of inputs into the fair value hierarchy (Level 1 being the highest priority and Level 3 being the lowest priority): Level 1 – Unadjusted quoted prices for identical instruments in active markets; Level 2 – Quoted prices for similar instruments in active markets; quoted prices for identical or similar instruments in markets that are not active; and model-derived valuations whose inputs are observable or whose significant value drivers are observable; and Level 3 – Instruments whose significant value drivers or assumptions are unobservable and that are significant to the fair value of the assets or liabilities. A financial instrument’s level within the fair value hierarchy is based on the lowest level of input that is significant to the fair value measurement. The following tables set forth the Company’s financial assets by level within the fair value hierarchy that were measured at fair value on a recurring basis at the dates indicated.
Investment securities available-for-sale are measured at fair value on a recurring basis. Level 1 investment securities are valued using quoted prices in active markets for identical assets. The Company uses Level 1 prices for its GSE preferred stock. Level 2 investment securities are valued by a third party pricing service commonly used in the banking industry utilizing observable inputs. The pricing provider utilizes evaluated pricing models that vary based on asset class. These models incorporate available market information including quoted prices of investment securities with similar characteristics and, because many fixed-income investment securities do not trade on a daily basis, apply available information through processes such as benchmark yield curves, benchmarking of like investment securities, sector groupings, and matrix pricing. In addition, model processes, such as an option adjusted spread model, are used to develop prepayment estimates and interest rate scenarios for investment securities with prepayment features. Management uses a recognized third-party pricing service to obtain market values for the Company’s fixed income securities portfolio. Documentation is maintained as to the methodology and summary of inputs used by the pricing service for the various types of securities, and management notes that the servicer maximizes the use of relevant observable inputs and minimizes the use of unobservable inputs. Management does not have access to all of the individual specific assumptions and inputs used for each security. The significant observable inputs include benchmark yields, reported trades, broker/dealer quotes, issuer spreads, two-sided markets, benchmark securities, bids, offers, and reference data including market research publications. Management validates the market values against fair market curves and other available pricing sources. Bloomberg pricing is used to compare the reasonableness of the third-party pricing service prices for U.S. Treasury securities and government sponsored entity (GSE) bonds. For all securities, the Company’s Investment Officer, who is in the market on a regular basis, monitors the market and is familiar with where similar securities are trading and where specific bonds in specific sectors should be priced. All monthly output from the third-party provider is reviewed against expectations as to pricing based on fair market curves, ratings, coupon, structure, and recent trade reports or offerings. Based on management’s review of the methodology and summary of inputs used, management has concluded these assets are properly classified as Level 2 assets. Level 3 models are utilized when quoted prices are not available for certain investment securities or in markets where trading activity has slowed or ceased. When quoted prices are not available and are not provided by third party pricing services, management judgment is necessary to determine fair value. As such, fair value is determined by using discounted cash flow analysis models, incorporating default rate assumptions, estimations of prepayment characteristics, and implied volatilities. The Company determined that Level 3 pricing models should be utilized for valuing its pooled trust preferred investment securities. The markets for these securities and for similar securities at June 30, 2011 were illiquid. There have been a limited number of observable transactions in the secondary market, however, a new issue market does not exist. Management has determined a valuation approach that maximizes the use of relevant observable inputs and minimizes the use of unobservable inputs will be more representative of fair value than the market approach valuation technique. For its Level 3 pricing model, the Company uses externally produced fair values provided by a third party and compares them to other external pricing sources. Other external sources provided similar prices, both higher and lower, than those used by the Company. The external model uses observed prices from limited transactions on similar securities to estimate liquidation values. The following is a reconciliation of the beginning and ending balances for the periods indicated of recurring fair value measurements recognized in the accompanying consolidated statements of condition using Level 3 inputs:
The following table sets forth the Company’s financial and non-financial assets by level within the fair value hierarchy that were measured at fair value on a non-recurring basis at the dates indicated.
Loans for which it is probable that the Bank will not collect all principal and interest due according to contractual terms are measured for impairment. Allowable methods for determining the amount of impairment include estimating fair value using the fair value of the collateral for collateral-dependent loans. If the impaired loan is identified as collateral-dependent, then the fair value method of measuring the amount of impairment is utilized. The Bank generally obtains and reviews annual appraisals for collateral dependent loans. Management had previously discounted older appraisals based on estimated changes in market values, but ceased utilizing this technique in early 2009 due to the continued softness in the real estate markets. For purchased participation loans, management is dependent upon the lead bank to order and provide appraisals, which occasionally are broker’s opinions. In determining the estimated fair value of the real estate, senior liens such as unpaid and current real estate taxes and any perfected liens are subtracted from the value. In addition, the Company generally applies a 10% discount to the current appraisal to allow for reasonable selling expenses, including sales commissions and closing costs. Impaired loans that are collateral-dependent are classified within Level 3 of the fair value hierarchy when impairment is determined using the fair value method. Fair value measurements for impaired loans are performed pursuant to ASC 310-10, Receivables, and are measured on a non-recurring basis. Certain impaired loans were partially charged-off or re-evaluated during the second quarter of 2011. These impaired loans were carried at fair value as estimated using current and prior appraisals, discounting factors, the borrowers’ financial results, estimated cash flows generated from the property, and other factors. The change in the fair value of impaired loans that were valued based upon Level 3 inputs was approximately $771,000 and $3.0 million for the three months ended June 30, 2011 and 2010, respectively and $1.6 million and $3.6 million for the six months ended June 30, 2011 and 2010, respectively. These losses are not recorded directly as an adjustment to current earnings or other comprehensive income (loss), but rather as a component in determining the overall adequacy of the allowance for loan losses. These adjustments to the estimated fair value of impaired loans may result in increases or decreases to the provision for loan losses recorded in future earnings. The fair value of the Company’s other real estate owned is determined by using Level 3 inputs which include current and prior appraisals and estimated costs to sell. The reduction in fair value of other real estate owned was $1.8 million and $15,000 for the three months ended June 30, 2011 and 2010, respectively, and $2.2 million and $432,000 for the six months ended June 30, 2011 and 2010, respectively. The changes were recorded as adjustments to current earnings through other real estate owned related expenses. The Company has the option to measure financial instruments and certain other assets and liabilities at fair value on an instrument-by-instrument basis (the Fair Value Option) according to ASC 825-10, Financial Instruments. The Company is not currently engaged in any hedging activities and, as a result, did not elect to measure any financial instruments at fair value under ASC 825-10. Disclosure of fair value information about financial instruments, whether or not recognized in the consolidated statement of condition, for which it is practicable to estimate their value, is summarized below. The aggregate fair value amounts presented do not represent the underlying value of the Company. The carrying amounts and fair values of financial instruments consist of the following:
The carrying amount is the estimated fair value for cash and cash equivalents and accrued interest receivable and payable. Investment securities fair values are based on quotes received from a third-party pricing source and discounted cash flow analysis models. The fair value of Federal Home Loan Bank stock is based on its redemption value. The fair values for loans receivable are estimated using discounted cash flow analyses. Cash flows are adjusted for estimated prepayments where appropriate and are discounted using interest rates currently being offered for loans with similar terms and collateral to borrowers of similar credit quality. The fair value of checking, savings, and money market accounts is the amount payable on demand at the reporting date. The fair value of fixed-maturity certificates of deposit is estimated by discounting the future cash flows using the rates currently offered for deposits of similar remaining maturities. The fair value of borrowed funds is estimated based on rates currently available to the Company for debt with similar terms and remaining maturities. The fair value of the Company’s off-balance sheet instruments, including lending commitments, letters of credit, and credit enhancements, approximates their book value and is not included in the above table. |
Condensed Consolidated Statements of Changes in Shareholders' Equity (Unaudited) Parenthetical (USD $)
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Condensed Consolidated Statements of Changes in Shareholders' Equity (Unaudited) [Abstract] | Â | Â | Â | Â |
Dividends declared on common stock (in dollars per share) | $ 0.01 | $ 0.01 | $ 0.02 | $ 0.02 |
Earnings Per Share
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Earnings Per Share |
Basic earnings per common share (EPS) is computed by dividing net income by the weighted-average number of common shares outstanding during the year. Restricted stock shares which have not vested and shares held in Rabbi Trust accounts are not considered to be outstanding for purposes of calculating basic EPS. Diluted EPS is computed by dividing net income by the average number of common shares outstanding during the year and includes the dilutive effect of stock options, unearned restricted stock awards, and treasury shares held in Rabbi Trust accounts pursuant to deferred compensation plans. The dilutive common stock equivalents are computed based on the treasury stock method using the average market price for the period. The following table sets forth the computation of basic and diluted earnings per share:
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Investment Securities
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Investments, Debt and Equity Securities [Abstract] | Â | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Investment Securities | 3. Investment Securities The amortized cost of investment securities and their fair values are as follows for the periods indicated:
The Company’s investments in collateralized mortgage obligations consisted of $5.7 million and $13.5 million of GSE issued investment securities and $42.8 million and $47.3 million of non-agency (private issued) residential investment securities at June 30, 2011 and December 31, 2010, respectively. Investment securities available-for-sale with unrealized losses aggregated by investment category and length of time that individual investment securities have been in a continuous unrealized loss position are presented in the following tables for the dates indicated.
We evaluate all investment securities on a quarterly basis, and more frequently when economic conditions warrant additional evaluations, for determining if an other-than-temporary impairment (OTTI) exists pursuant to guidelines established in the Financial Accounting Standards Board Accounting Standards Codification (ASC) 320-10, Investments – Debt and Equity Securities. Current accounting guidance generally provides that if a marketable security is in an unrealized loss position, whether due to general market conditions or industry or issuer-specific factors, the holder of the investment securities must assess whether the impairment is other-than-temporary. In management’s belief, the decline in value of the Company’s investment in collateralized mortgage obligations is minimal and primarily attributable to changes in market interest rates and macroeconomic conditions affecting liquidity and not necessarily the expected cash flows of the individual investment securities. The fair value of these investment securities is expected to recover as macroeconomic conditions improve, interest rates rise, and the investment securities approach their maturity date. At June 30, 2011, the Company’s pooled trust preferred investment securities consisted of “Super Senior” securities backed by senior securities issued mainly by bank and thrift holding companies. Due to the structure of the securities, as deferrals and defaults on the underlying collateral increase, cash flows are increasingly diverted from mezzanine and subordinate tranches to pay down principal on the “Super Senior” tranches. In management’s belief, the decline in value is primarily attributable to macroeconomic conditions affecting liquidity of these securities and not necessarily the expected cash flows of the individual securities. The fair value of these securities is expected to recover as the securities approach their maturity date. Unrealized losses on collateralized mortgage obligations and pooled trust preferred investment securities have not been recognized in income because management does not have the intent to sell these securities and has the ability to hold these securities for a period of time sufficient to allow for any anticipated recovery in fair value. We may, from time to time, dispose of an impaired security in response to asset/liability management decisions, future market movements, business plan changes, or if the net proceeds could be reinvested at a rate of return that is expected to recover the loss within a reasonable period of time. The Company concluded that the unrealized losses that existed at June 30, 2011 did not constitute other-than-temporary impairments. The amortized cost and fair value of investment securities at June 30, 2011, by contractual maturity, are shown in the following tables. Expected maturities may differ from contractual maturities because issuers may have the right to call or prepay obligations with or without call or prepayment penalties. Investment securities not due at a single maturity date are shown separately.
The following table provides information as to the amount of gross gains and losses realized through the sales of investment securities available-for-sale:
The carrying value of investment securities pledged as collateral to secure public deposits and for other purposes at June 30, 2011 and December 31, 2010 was $53.7 million and $47.9 million, respectively. Other than the U.S. Government, its agencies, and GSEs, there were no other holdings of investment securities of any one issuer in an amount greater than 10% of shareholders’ equity. |
Loans Receivable
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Loans Receivable | 4. Loans Receivable Loans receivable are summarized as follows:
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Recent Accounting Pronouncements
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New Accounting Pronouncements and Changes in Accounting Principles [Abstract] | Â | ||
Recent Accounting Pronouncements |
In June 2011, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) No. 2011-05, Comprehensive Income (Topic 22): Presentation of Comprehensive Income. ASU 2011-05 requires companies to present the components of net income and other comprehensive income either as one continuous statement or as two consecutive statements. The ASU eliminates the option to present components of other comprehensive income as part of the statement of changes in shareholders’ equity. ASU 2011-05 does not change the items which must be reported in other comprehensive income, how such items are measured, or when they must be reclassified to net income. This ASU is effective for interim and annual periods beginning after December 15, 2011. The Company intends to adopt the disclosures required by this ASU by the date required and it will have no impact on the Company’s financial condition, results of operations, or cash flows. In May 2011, the FASB issued ASU No. 2011-04, Fair Value Measurement (Topic 820): Amendments to Achieve Common Fair Value Measurement and Disclosure Requirements in U.S. GAAP and IFRSs. ASU 2011-04 is intended to result in convergence between United States Generally Accepted Accounting Principles (U.S. GAAP) and International Financial Reporting Standards (IFRS) requirements for measurement of and disclosures about fair value. The amendments are not expected to have a significant impact on companies applying U.S. GAAP. Key provisions of the amendment include: a prohibition on grouping financial instruments for purposes of determining fair value, except when an entity manages market and credit risks on the basis of the entity’s net exposure to the group; an extension of the prohibition against the use of a blockage factor to all fair value measurements (that prohibition currently applies only to financial instruments with quoted prices in active markets); and a requirement that for recurring Level 3 fair value measurements, entities disclosure quantitative information about unobservable inputs, a description of the valuation process used and qualitative details about the sensitivity of the measurements. In addition, for items not carried at fair value but for which fair value is disclosed, entities will be required to disclose the level within the fair value hierarchy that applies to the fair value measurement disclosed. This ASU is effective for interim and annual periods beginning after December 15, 2011. The adoption of this ASU is not expected to have a significant impact on the Company’s fair value measurements, financial condition, results of operations, or cash flows. In April 2011, the FASB issued ASU No. 2011-03, Transfers and Servicing (Topic 860): Reconsideration of Effective Control for Repurchase Agreements. AUS 2011-03 amends the sale accounting requirement concerning a transferor’s ability to repurchase transferred financial assets even in the event of default by the transferee, which typically is facilitated in a repurchase agreement by the presence of a collateral maintenance provision. Specifically, the level of cash collateral received by a transferor will no longer be relevant in determining whether a repurchase agreement constitutes a sale. As a result of this amendment, more repurchase agreements will be treated as secured financings rather than sales. This ASU is effective prospectively for new transfers and existing transactions that are modified in the first interim or annual period beginning on or after December 15, 2011. Because essentially all repurchase agreements entered into by the Company have historically been deemed to constitute secured financing transactions, this amendment is expected to have no impact on the Company’s characterization of such transactions and therefore is not expected to have any impact on the Company’s financial condition, results of operation, or cash flows. In April 2011, the FASB issued ASU No. 2011-02, Receivables (Topic 310): A Creditor’s Determination of Whether a Restructuring Is a Troubled Debt Restructuring. ASU 2011-02 clarifies the guidance in ASC 310-40 Receivables: Troubled Debt Restructurings by Creditors. Creditors are required to identify a restructuring as a troubled debt restructuring if the restructuring constitutes a concession and the debtor is experiencing financial difficulties. ASU 2011-02 clarifies guidance on whether a creditor has granted a concession and clarifies the guidance on a creditor’s evaluation of whether a debtor is experiencing financial difficulties. In addition, ASU 2011-02 also precludes the creditor from using the effective interest rate test in the debtor’s guidance on restructuring of payables when evaluating whether a restructuring constitutes a troubled debt restructuring. The effective date of ASU 2011-2 for public entities is effective for the first interim or annual period beginning on or after June 15, 2011, and should be applied retrospectively to the beginning of the annual period of adoption. If, as a result of adoption, an entity identifies newly impaired receivables, an entity should apply the amendments for purposes of measuring impairment prospectively for the first interim or annual period beginning on or after June 15, 2011. The Company adopted the methodologies prescribed by this ASU on July 1, 2011 and is currently reviewing the impact of adoption on its financial condition, results of operation, and cash flows. |