þ | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
o | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
Delaware | 34-1877137 | |
(State or other jurisdiction of | (IRS Employer | |
incorporation or organization) | Identification No.) |
Large accelerated filer o | Accelerated filer o | Non-accelerated filer o | Smaller reporting company þ |
September 30, | December 31, | |||||||
2011 | 2010 | |||||||
(unaudited) | ||||||||
ASSETS |
||||||||
Cash and cash equivalents |
$ | 63,816 | $ | 34,275 | ||||
Interest-bearing deposits in other financial institutions |
1,984 | | ||||||
Securities available for sale |
20,024 | 28,798 | ||||||
Loans held for sale |
2,262 | 1,953 | ||||||
Loans, net of allowance of $6,955 and $9,758 |
158,496 | 190,767 | ||||||
FHLB stock |
1,942 | 1,942 | ||||||
Loan servicing rights |
37 | 57 | ||||||
Foreclosed assets, net |
2,370 | 4,509 | ||||||
Premises and equipment, net |
5,758 | 6,016 | ||||||
Assets held for sale |
| 535 | ||||||
Other intangible assets |
99 | 129 | ||||||
Bank owned life insurance |
4,239 | 4,143 | ||||||
Accrued interest receivable and other assets |
4,361 | 2,108 | ||||||
$ | 265,388 | $ | 275,232 | |||||
LIABILITIES AND STOCKHOLDERS EQUITY |
||||||||
Deposits |
||||||||
Noninterest bearing |
$ | 20,116 | $ | 20,392 | ||||
Interest bearing |
206,628 | 206,989 | ||||||
Total deposits |
226,744 | 227,381 | ||||||
Long-term FHLB advances |
15,742 | 23,942 | ||||||
Advances by borrowers for taxes and insurance |
49 | 213 | ||||||
Accrued interest payable and other liabilities |
6,267 | 2,552 | ||||||
Subordinated debentures |
5,155 | 5,155 | ||||||
Total liabilities |
253,957 | 259,243 | ||||||
Stockholders equity |
||||||||
Preferred stock, Series A, $.01 par value; aggregate
liquidation value $7,595 in 2011, $7,225 in 2010
1,000,000 shares authorized; 7,225 shares issued |
7,107 | 7,069 | ||||||
Common stock, $.01 par value,
shares authorized; 12,000,000
shares issued; 4,686,331 in 2011 and 2010 |
47 | 47 | ||||||
Common stock warrant |
217 | 217 | ||||||
Additional paid-in capital |
27,575 | 27,542 | ||||||
Accumulated deficit |
(20,696 | ) | (16,313 | ) | ||||
Accumulated other comprehensive income |
426 | 672 | ||||||
Treasury stock, at cost; 558,533 shares |
(3,245 | ) | (3,245 | ) | ||||
Total stockholders equity |
11,431 | 15,989 | ||||||
$ | 265,388 | $ | 275,232 | |||||
3
Three months ended | Nine months ended | |||||||||||||||
September 30, | September 30, | |||||||||||||||
2011 | 2010 | 2011 | 2010 | |||||||||||||
Interest and dividend income |
||||||||||||||||
Loans, including fees |
$ | 2,165 | $ | 2,863 | $ | 6,957 | $ | 9,083 | ||||||||
Securities |
68 | 154 | 379 | 522 | ||||||||||||
FHLB stock dividends |
20 | 22 | 63 | 65 | ||||||||||||
Federal funds sold and other |
38 | 18 | 109 | 41 | ||||||||||||
2,291 | 3,057 | 7,508 | 9,711 | |||||||||||||
Interest expense |
||||||||||||||||
Deposits |
681 | 785 | 2,133 | 2,594 | ||||||||||||
Long-term FHLB advances and other debt |
111 | 172 | 419 | 526 | ||||||||||||
Subordinated debentures |
41 | 44 | 124 | 125 | ||||||||||||
833 | 1,001 | 2,676 | 3,245 | |||||||||||||
Net interest income |
1,458 | 2,056 | 4,832 | 6,466 | ||||||||||||
Provision for loan losses |
405 | 617 | 2,256 | 7,303 | ||||||||||||
Net interest income (loss) after provision
for loan losses |
1,053 | 1,439 | 2,576 | (837 | ) | |||||||||||
Noninterest income |
||||||||||||||||
Service charges on deposit accounts |
69 | 81 | 199 | 225 | ||||||||||||
Net gains on sales of loans |
158 | 244 | 222 | 575 | ||||||||||||
Loan servicing fees, net |
1 | 5 | 13 | 15 | ||||||||||||
Net gains on sales of securities |
232 | 228 | 232 | 468 | ||||||||||||
Earnings on bank owned life insurance |
31 | 28 | 96 | 94 | ||||||||||||
Other |
15 | 1 | 42 | 13 | ||||||||||||
506 | 587 | 804 | 1,390 | |||||||||||||
Noninterest expense |
||||||||||||||||
Salaries and employee benefits |
1,004 | 1,113 | 3,078 | 3,226 | ||||||||||||
Occupancy and equipment |
64 | 47 | 218 | 160 | ||||||||||||
Data processing |
142 | 150 | 431 | 469 | ||||||||||||
Franchise taxes |
63 | 75 | 193 | 253 | ||||||||||||
Professional fees |
177 | 305 | 736 | 783 | ||||||||||||
Director fees |
44 | 45 | 135 | 97 | ||||||||||||
Postage, printing and supplies |
20 | 24 | 107 | 126 | ||||||||||||
Advertising and promotion |
10 | 30 | 34 | 85 | ||||||||||||
Telephone |
17 | 28 | 57 | 79 | ||||||||||||
Loan expenses |
9 | 12 | 39 | 55 | ||||||||||||
Foreclosed assets, net |
| | 1,185 | 1 | ||||||||||||
Depreciation |
93 | 126 | 311 | 390 | ||||||||||||
FDIC premiums |
177 | 170 | 527 | 420 | ||||||||||||
Amortization of intangibles |
10 | 10 | 30 | 30 | ||||||||||||
Regulatory assessment |
46 | 37 | 121 | 82 | ||||||||||||
Other insurance |
42 | 17 | 93 | 47 | ||||||||||||
Other |
76 | 31 | 151 | 122 | ||||||||||||
1,994 | 2,220 | 7,446 | 6,425 | |||||||||||||
Loss before income taxes |
(435 | ) | (194 | ) | (4,066 | ) | (5,872 | ) | ||||||||
Income tax expense |
| 38 | | 8 | ||||||||||||
Net loss |
(435 | ) | (232 | ) | (4,066 | ) | (5,880 | ) | ||||||||
Preferred stock dividends and accretion of
discount on preferred stock |
(107 | ) | (103 | ) | (317 | ) | (307 | ) | ||||||||
Net loss attributable to common stockholders |
$ | (542 | ) | $ | (335 | ) | $ | (4,383 | ) | $ | (6,187 | ) | ||||
Loss per common share: |
||||||||||||||||
Basic |
$ | (0.13 | ) | $ | (0.08 | ) | $ | (1.06 | ) | $ | (1.51 | ) | ||||
Diluted |
$ | (0.13 | ) | $ | (0.08 | ) | $ | (1.06 | ) | $ | (1.51 | ) |
4
Accumulated | ||||||||||||||||||||||||||||||||
Common | Additional | Other | Total | |||||||||||||||||||||||||||||
Preferred | Common | Stock | Paid-In | Accumulated | Comprehensive | Treasury | Stockholders | |||||||||||||||||||||||||
Stock | Stock | Warrant | Capital | Deficit | Income | Stock | Equity | |||||||||||||||||||||||||
Balance at January 1, 2011 |
$ | 7,069 | $ | 47 | $ | 217 | $ | 27,542 | $ | (16,313 | ) | $ | 672 | $ | (3,245 | ) | $ | 15,989 | ||||||||||||||
Comprehensive loss: |
||||||||||||||||||||||||||||||||
Net loss |
(4,066 | ) | (4,066 | ) | ||||||||||||||||||||||||||||
Change in unrealized gain (loss) on securities available for sale |
(246 | ) | (246 | ) | ||||||||||||||||||||||||||||
Total comprehensive loss |
(4,312 | ) | ||||||||||||||||||||||||||||||
Accretion of discount on preferred stock |
38 | (38 | ) | | ||||||||||||||||||||||||||||
Release of 9,134 stock-based incentive plan shares, net of
forfeitures |
20 | 20 | ||||||||||||||||||||||||||||||
Stock option expense, net of forfeitures |
13 | 13 | ||||||||||||||||||||||||||||||
Preferred stock dividends |
(279 | ) | (279 | ) | ||||||||||||||||||||||||||||
Balance at September 30, 2011 |
$ | 7,107 | $ | 47 | $ | 217 | $ | 27,575 | $ | (20,696 | ) | $ | 426 | $ | (3,245 | ) | $ | 11,431 | ||||||||||||||
5
Accumulated | ||||||||||||||||||||||||||||||||
Common | Additional | Other | Total | |||||||||||||||||||||||||||||
Preferred | Common | Stock | Paid-In | Accumulated | Comprehensive | Treasury | Stockholders | |||||||||||||||||||||||||
Stock | Stock | Warrant | Capital | Deficit | Income | Stock | Equity | |||||||||||||||||||||||||
Balance at January 1, 2010 |
$ | 7,021 | $ | 47 | $ | 217 | $ | 27,517 | $ | (9,034 | ) | $ | 704 | $ | (3,245 | ) | $ | 23,227 | ||||||||||||||
Comprehensive loss: |
||||||||||||||||||||||||||||||||
Net loss |
(5,880 | ) | (5,880 | ) | ||||||||||||||||||||||||||||
Change in unrealized gain (loss) on securities available
for sale |
(490 | ) | (490 | ) | ||||||||||||||||||||||||||||
Total comprehensive loss |
(6,370 | ) | ||||||||||||||||||||||||||||||
Accretion of discount on preferred stock |
36 | (36 | ) | | ||||||||||||||||||||||||||||
Release of (385) stock based incentive plan shares, net of
forfeitures |
(3 | ) | 1 | (2 | ) | |||||||||||||||||||||||||||
Tax effect from vesting of stock based incentive plan shares |
(30 | ) | (30 | ) | ||||||||||||||||||||||||||||
Stock option expense, net of forfeitures |
(3 | ) | (3 | ) | ||||||||||||||||||||||||||||
Preferred stock dividends |
(271 | ) | (271 | ) | ||||||||||||||||||||||||||||
Balance at September 30, 2010 |
$ | 7,057 | $ | 47 | $ | 217 | $ | 27,481 | $ | (15,220 | ) | $ | 214 | $ | (3,245 | ) | $ | 16,551 | ||||||||||||||
6
Nine months ended September 30, | ||||||||
2011 | 2010 | |||||||
Net loss |
$ | (4,066 | ) | $ | (5,880 | ) | ||
Adjustments to reconcile net loss to net cash from operating activities: |
||||||||
Provision for loan losses |
2,256 | 7,303 | ||||||
Valuation allowance on foreclosed assets |
1,139 | | ||||||
Valuation (gain) loss on mortgage servicing rights |
(2 | ) | 2 | |||||
Depreciation |
311 | 390 | ||||||
Amortization, net |
632 | 284 | ||||||
Net realized gain on sales of securities |
(232 | ) | (468 | ) | ||||
Originations of loans held for sale |
(27,562 | ) | (57,088 | ) | ||||
Proceeds from sale of loans held for sale |
27,475 | 57,473 | ||||||
Net gain on sale of loans |
(222 | ) | (575 | ) | ||||
Loss on disposal of premises and equipment |
| 1 | ||||||
Loss on sale of assets held for sale |
2 | |||||||
Gain on sale of foreclosed assets |
(8 | ) | | |||||
Stock based compensation expense |
33 | (4 | ) | |||||
Change in deferred income taxes (net of change in valuation allowance) |
| (30 | ) | |||||
Net change in: |
||||||||
Bank owned life insurance |
(96 | ) | (94 | ) | ||||
Accrued interest receivable and other assets |
(609 | ) | (159 | ) | ||||
Accrued interest payable and other liabilities |
860 | 1,378 | ||||||
Net cash from operating activities |
(89 | ) | 2,533 | |||||
Cash flows from investing activities |
||||||||
Net decrease in interest-bearing deposits in other financial institutions |
(1,984 | ) | | |||||
Available-for-sale securities: |
||||||||
Sales |
6,390 | 13,633 | ||||||
Maturities, prepayments and calls |
7,331 | 4,291 | ||||||
Purchases |
(4,550 | ) | (26,484 | ) | ||||
Loan originations and payments, net |
30,027 | 8,853 | ||||||
Proceeds from sale of portfolio loans |
| 10,074 | ||||||
Additions to premises and equipment |
(53 | ) | (49 | ) | ||||
Proceeds from the sale of premises and equipment |
533 | | ||||||
Proceeds from the sale of foreclosed assets |
1,000 | | ||||||
Net cash from investing activities |
38,694 | 10,318 | ||||||
Cash flows from financing activities |
||||||||
Net change in deposits |
(700 | ) | 26,595 | |||||
Net change in short-term borrowings from the FHLB and other debt |
| (2,065 | ) | |||||
Repayments on long-term FHLB advances and other debt |
(8,200 | ) | (6,000 | ) | ||||
Net change in advances by borrowers for taxes and insurance |
(164 | ) | (68 | ) | ||||
Cash dividends paid on preferred stock |
| (271 | ) | |||||
Net cash from financing activities |
(9,064 | ) | 18,191 | |||||
Net change in cash and cash equivalents |
29,541 | 31,042 | ||||||
Beginning cash and cash equivalents |
34,275 | 2,973 | ||||||
Ending cash and cash equivalents |
$ | 63,816 | $ | 34,015 | ||||
Supplemental cash flow information: |
||||||||
Interest paid |
$ | 2,523 | $ | 3,167 | ||||
Supplemental noncash disclosures: |
||||||||
Transfers from loans to repossessed assets |
$ | | $ | 2,348 | ||||
Loans transferred from portfolio to held for sale |
| 91 |
7
Three months ended September 30, | Nine months ended September 30, | |||||||||||||||
2011 | 2010 | 2011 | 2010 | |||||||||||||
Basic |
||||||||||||||||
Net loss |
$ | (435 | ) | $ | (232 | ) | $ | (4,066 | ) | $ | (5,880 | ) | ||||
Less: Preferred dividends and accretion of discount on preferred stock |
(107 | ) | (103 | ) | (317 | ) | (307 | ) | ||||||||
Less: Net loss allocated to unvested share-based payment awards |
3 | 2 | 27 | 17 | ||||||||||||
Net loss allocated to common stockholders |
$ | (539 | ) | $ | (333 | ) | (4,356 | ) | $ | (6,170 | ) | |||||
Weighted average common shares outstanding |
4,104,320 | 4,092,908 | 4,101,328 | 4,094,698 | ||||||||||||
Basic loss per common share |
$ | (0.13 | ) | $ | (0.08 | ) | $ | (1.06 | ) | $ | (1.51 | ) | ||||
Diluted |
||||||||||||||||
Net loss allocated to common stockholders |
$ | (539 | ) | $ | (333 | ) | $ | (4,356 | ) | $ | (6,170 | ) | ||||
Weighted average common shares outstanding for basic loss per common share |
4,104,320 | 4,092,908 | 4,101,328 | 4,094,698 | ||||||||||||
Add: Dilutive effects of assumed exercises of stock options |
| | | | ||||||||||||
Add: Dilutive effects of assumed exercises of stock warrant |
| | | | ||||||||||||
Average shares and dilutive potential common shares |
4,104,320 | 4,092,908 | 4,101,328 | 4,094,698 | ||||||||||||
Diluted loss per common share |
$ | (0.13 | ) | $ | (0.08 | ) | $ | (1.06 | ) | $ | (1.51 | ) | ||||
8
Three months ended September 30, | Nine months ended September 30, | |||||||||||||||
2011 | 2010 | 2011 | 2010 | |||||||||||||
Stock options |
223,280 | 231,702 | 223,280 | 255,133 | ||||||||||||
Stock warrant |
336,568 | 336,568 | 336,568 | 336,568 |
9
10
Gross | Gross | |||||||||||||||
Amortized | Unrealized | Unrealized | Fair | |||||||||||||
Cost | Gains | Losses | Value | |||||||||||||
September 30, 2011 |
||||||||||||||||
Issued by U.S. government-sponsored entities and agencies: |
||||||||||||||||
Mortgage-backed securities residential |
$ | 1,624 | $ | 208 | $ | | $ | 1,832 | ||||||||
Collateralized mortgage obligations |
17,974 | 255 | 37 | 18,192 | ||||||||||||
Total |
$ | 19,598 | $ | 463 | $ | 37 | $ | 20,024 | ||||||||
Gross | Gross | |||||||||||||||
Amortized | Unrealized | Unrealized | Fair | |||||||||||||
Cost | Gains | Losses | Value | |||||||||||||
December 31, 2010 |
||||||||||||||||
Issued by U.S. government-sponsored entities and agencies: |
||||||||||||||||
Mortgage-backed securities residential |
$ | 1,884 | $ | 223 | $ | | $ | 2,107 | ||||||||
Collateralized mortgage obligations |
26,242 | 463 | 14 | 26,691 | ||||||||||||
Total |
$ | 28,126 | $ | 686 | $ | 14 | $ | 28,798 | ||||||||
Three months ended September 30, | Nine months ended September 30, | |||||||||||||||
2011 | 2010 | 2011 | 2010 | |||||||||||||
Proceeds |
$ | 8,036 | $ | 4,602 | $ | 8,036 | $ | 13,633 | ||||||||
Gross gains |
232 | 228 | 232 | 468 | ||||||||||||
Gross losses |
| | | | ||||||||||||
Tax effect expense |
$ | | $ | 78 | $ | | $ | 159 |
11
September 30, | December 31, | |||||||
2011 | 2010 | |||||||
Pledged as collateral for: |
||||||||
FHLB advances |
$ | 10,298 | $ | 10,657 | ||||
Public deposits |
2,804 | 4,210 | ||||||
Customer repurchase agreements |
5,087 | 2,465 | ||||||
Interest-rate swaps |
1,744 | 1,589 | ||||||
Total |
$ | 19,933 | $ | 18,921 | ||||
September 30, 2011 | Less than 12 Months | 12 Months or More | Total | |||||||||||||||||||||
Unrealized | Unrealized | Unrealized | ||||||||||||||||||||||
Description of Securities | Fair Value | Loss | Fair Value | Loss | Fair Value | Loss | ||||||||||||||||||
Issued by U.S. government-sponsored
entities and agencies: |
||||||||||||||||||||||||
Collateralized mortgage obligations |
$ | 3,560 | $ | 37 | $ | | $ | | $ | 3,560 | $ | 37 | ||||||||||||
Total temporarily impaired |
$ | 3,560 | $ | 37 | $ | | $ | | $ | 3,560 | $ | 37 | ||||||||||||
December 31, 2010 | Less than 12 Months | 12 Months or More | Total | |||||||||||||||||||||
Unrealized | Unrealized | Unrealized | ||||||||||||||||||||||
Description of Securities | Fair Value | Loss | Fair Value | Loss | Fair Value | Loss | ||||||||||||||||||
Issued by U.S. government-sponsored
entities and agencies: |
||||||||||||||||||||||||
Collateralized mortgage obligations |
$ | 2,091 | $ | 14 | $ | | $ | | $ | 2,091 | $ | 14 | ||||||||||||
Total temporarily impaired |
$ | 2,091 | $ | 14 | $ | | $ | | $ | 2,091 | $ | 14 | ||||||||||||
12
13
September 30, | December 31, | |||||||
2011 | 2010 | |||||||
Commercial |
$ | 28,755 | $ | 38,194 | ||||
Real estate: |
||||||||
Single-family residential |
18,916 | 23,273 | ||||||
Multi-family residential |
29,081 | 35,308 | ||||||
Commercial |
72,049 | 80,725 | ||||||
Construction |
| 4,919 | ||||||
Consumer: |
||||||||
Home equity lines of credit |
15,400 | 16,316 | ||||||
Other |
1,250 | 1,790 | ||||||
Subtotal |
165,451 | 200,525 | ||||||
Less: Allowance for loan losses (ALLL) |
(6,955 | ) | (9,758 | ) | ||||
Loans, net |
$ | 158,496 | $ | 190,767 | ||||
14
Three months ended September 30, 2011 | ||||||||||||||||||||||||||||
Real Estate | Consumer | |||||||||||||||||||||||||||
Home equity lines | ||||||||||||||||||||||||||||
Commercial | Single-family | Multi-family | Commercial | of credit | Other | Total | ||||||||||||||||||||||
Beginning balance |
$ | 2,754 | $ | 242 | $ | 2,183 | $ | 2,632 | $ | 220 | $ | 19 | $ | 8,050 | ||||||||||||||
Addition to (reduction in ) provision for loan losses |
(266 | ) | (54 | ) | 1,015 | (387 | ) | 100 | (3 | ) | 405 | |||||||||||||||||
Charge-offs |
| | (867 | ) | (580 | ) | (149 | ) | | (1,596 | ) | |||||||||||||||||
Recoveries |
29 | 2 | | 47 | 15 | 1 | 94 | |||||||||||||||||||||
Reclass of ALLL on loan-related commitments (1) |
2 | | | | | | 2 | |||||||||||||||||||||
Ending balance |
$ | 2,519 | $ | 190 | $ | 2,331 | $ | 1,712 | $ | 186 | $ | 17 | $ | 6,955 | ||||||||||||||
(1) | Reclassified from (to) accrued interest payable and other liabilities in the consolidated balance sheet |
15
Nine months ended September 30, 2011 | ||||||||||||||||||||||||||||||||
Real Estate | Consumer | |||||||||||||||||||||||||||||||
Home equity | ||||||||||||||||||||||||||||||||
Commercial | Single-family | Multi-family | Commercial | Construction | lines of credit | Other | Total | |||||||||||||||||||||||||
Beginning balance |
$ | 1,879 | $ | 241 | $ | 2,520 | $ | 4,719 | $ | 74 | $ | 303 | $ | 22 | $ | 9,758 | ||||||||||||||||
Addition to (reduction in ) provision for loan losses |
1,679 | (43 | ) | 1,926 | (1,247 | ) | (74 | ) | 12 | 3 | 2,256 | |||||||||||||||||||||
Charge-offs |
(1,140 | ) | (14 | ) | (2,117 | ) | (1,930 | ) | | (149 | ) | (18 | ) | (5,368 | ) | |||||||||||||||||
Recoveries |
100 | 6 | 2 | 170 | | 20 | 10 | 308 | ||||||||||||||||||||||||
Reclass of ALLL on loan-related commitments (1) |
1 | | | | | | | 1 | ||||||||||||||||||||||||
Ending balance |
$ | 2,519 | $ | 190 | $ | 2,331 | $ | 1,712 | $ | | $ | 186 | $ | 17 | $ | 6,955 | ||||||||||||||||
(1) | Reclassified from (to) accrued interest payable and other liabilities in the consolidated balance sheet |
Three months ended | Nine months ended | |||||||
September 30, | September 30, | |||||||
2010 | 2010 | |||||||
Beginning balance |
$ | 10,074 | $ | 7,090 | ||||
Provision for loan losses |
617 | 7,303 | ||||||
Loans charged-off |
(702 | ) | (4,515 | ) | ||||
Recoveries |
68 | 179 | ||||||
Ending balance |
$ | 10,057 | $ | 10,057 | ||||
16
Real Estate | Consumer | |||||||||||||||||||||||||||
Home equity lines of | ||||||||||||||||||||||||||||
Commercial | Single-family | Multi-family | Commercial | credit | Other | Total | ||||||||||||||||||||||
ALLL: |
||||||||||||||||||||||||||||
Ending allowance balance attributable to loans: |
||||||||||||||||||||||||||||
Individually evaluated for impairment |
$ | 628 | $ | | $ | 951 | $ | 140 | $ | | $ | | $ | 1,719 | ||||||||||||||
Collectively evaluated for impairment |
1,891 | 190 | 1,380 | 1,572 | 186 | 17 | 5,236 | |||||||||||||||||||||
Total ending allowance balance |
$ | 2,519 | $ | 190 | $ | 2,331 | $ | 1,712 | $ | 186 | $ | 17 | $ | 6,955 | ||||||||||||||
Loans: |
||||||||||||||||||||||||||||
Individually evaluated for impairment |
$ | 1,690 | $ | | $ | 3,222 | $ | 5,446 | $ | 135 | $ | | $ | 10,493 | ||||||||||||||
Collectively evaluated for impairment |
27,065 | 18,916 | 25,859 | 66,603 | 15,265 | 1,250 | 154,958 | |||||||||||||||||||||
Total ending loan balance |
$ | 28,755 | $ | 18,916 | $ | 29,081 | $ | 72,049 | $ | 15,400 | $ | 1,250 | $ | 165,451 | ||||||||||||||
17
Real Estate | Consumer | |||||||||||||||||||||||||||||||
Home | ||||||||||||||||||||||||||||||||
equity lines | ||||||||||||||||||||||||||||||||
Commercial | Single-family | Multi-family | Commercial | Construction | of credit | Other | Total | |||||||||||||||||||||||||
ALLL: |
||||||||||||||||||||||||||||||||
Ending allowance balance attributable to loans: |
||||||||||||||||||||||||||||||||
Individually evaluated for impairment |
$ | 332 | $ | | $ | 1,296 | $ | 1,276 | $ | | $ | | $ | | $ | 2,904 | ||||||||||||||||
Collectively evaluated for impairment |
1,547 | 241 | 1,224 | 3,443 | 74 | 303 | 22 | 6,854 | ||||||||||||||||||||||||
Total ending allowance balance |
$ | 1,879 | $ | 241 | $ | 2,520 | $ | 4,719 | $ | 74 | $ | 303 | $ | 22 | $ | 9,758 | ||||||||||||||||
Loans: |
||||||||||||||||||||||||||||||||
Individually evaluated for impairment |
$ | 2,223 | $ | 142 | $ | 3,985 | $ | 4,250 | $ | | $ | 138 | $ | | $ | 10,738 | ||||||||||||||||
Collectively evaluated for impairment |
35,971 | 23,131 | 31,323 | 76,475 | 4,919 | 16,178 | 1,790 | 189,787 | ||||||||||||||||||||||||
Total ending loan balance |
$ | 38,194 | $ | 23,273 | $ | 35,308 | $ | 80,725 | $ | 4,919 | $ | 16,316 | $ | 1,790 | $ | 200,525 | ||||||||||||||||
18
As of September 30, 2011 | Three months ended September 30, 2011 | Nine months ended September 30, 2011 | ||||||||||||||||||||||||||
Unpaid Principal | Recorded | ALLL | Average Recorded | Interest Income | Average Recorded | Interest Income | ||||||||||||||||||||||
Balance | Investment | Allocated | Investment | Recognized | Investment | Recognized | ||||||||||||||||||||||
With no related allowance recorded: |
||||||||||||||||||||||||||||
Commercial |
$ | 1,416 | $ | 1,016 | $ | | $ | 1,248 | $ | 7 | $ | 515 | $ | 7 | ||||||||||||||
Real estate: |
||||||||||||||||||||||||||||
Single-family residential |
| | | | | 32 | | |||||||||||||||||||||
Multi-family residential |
96 | 96 | | 787 | 1 | 262 | 1 | |||||||||||||||||||||
Commercial: |
||||||||||||||||||||||||||||
Non-owner occupied |
2,983 | 1,422 | | 2,236 | 9 | 796 | 9 | |||||||||||||||||||||
Owner occupied |
1,294 | 1,294 | | 1,314 | 21 | 438 | 21 | |||||||||||||||||||||
Land |
798 | 682 | | 684 | 11 | 688 | 32 | |||||||||||||||||||||
Consumer: |
||||||||||||||||||||||||||||
Home equity lines of credit: |
||||||||||||||||||||||||||||
Originated for portfolio |
135 | 135 | | 135 | | 136 | | |||||||||||||||||||||
Total with no allowance recorded |
6,722 | 4,645 | | 6,404 | 49 | 2,867 | 70 | |||||||||||||||||||||
With an allowance recorded: |
||||||||||||||||||||||||||||
Commercial |
1,564 | 674 | 628 | 515 | 8 | 1,163 | 8 | |||||||||||||||||||||
Real estate: |
||||||||||||||||||||||||||||
Single-family residential |
| | | | | | | |||||||||||||||||||||
Multi-family residential |
3,926 | 3,126 | 951 | 2,278 | | 3,048 | | |||||||||||||||||||||
Commercial: |
||||||||||||||||||||||||||||
Non-owner occupied |
2,156 | 2,048 | 140 | 1,379 | 31 | 1,752 | 31 | |||||||||||||||||||||
Owner occupied |
| | | 350 | | 817 | | |||||||||||||||||||||
Total with an allowance recorded |
7,646 | 5,848 | 1,719 | 4,522 | 39 | 6,780 | 39 | |||||||||||||||||||||
Total |
$ | 14,368 | $ | 10,493 | $ | 1,719 | $ | 10,926 | $ | 88 | $ | 9,647 | $ | 109 | ||||||||||||||
19
Unpaid Principal | Recorded | |||||||||||
Balance | Investment | ALLL Allocated | ||||||||||
With no related allowance recorded: |
||||||||||||
Commercial |
$ | 937 | $ | 587 | $ | | ||||||
Real estate: |
||||||||||||
Single-family residential |
461 | 142 | | |||||||||
Commercial: |
||||||||||||
Owner occupied |
78 | 78 | | |||||||||
Land |
695 | 700 | | |||||||||
Consumer: |
||||||||||||
Home equity lines of credit: |
||||||||||||
Originated for portfolio |
138 | 138 | | |||||||||
Total with no allowance recorded |
2,309 | 1,645 | | |||||||||
With an allowance recorded: |
||||||||||||
Commercial |
2,035 | 1,636 | 332 | |||||||||
Real estate: |
||||||||||||
Multi-family residential |
3,996 | 3,985 | 1,296 | |||||||||
Commercial: |
||||||||||||
Non-owner occupied |
2,551 | 2,419 | 1,244 | |||||||||
Owner occupied |
1,055 | 1,053 | 32 | |||||||||
Total with an allowance recorded |
9,637 | 9,093 | 2,904 | |||||||||
Total |
$ | 11,946 | $ | 10,738 | $ | 2,904 | ||||||
Three months | Nine months | |||||||
ended | ended | |||||||
September 30, | September 30, | |||||||
2010 | 2010 | |||||||
Average of individually impaired loans during the period |
$ | 11,342 | $ | 11,822 | ||||
Interest income recognized during impairment |
10 | 25 | ||||||
Cash-basis interest income recognized |
| |
20
September 30, 2011 | December 31, 2010 | |||||||
Nonaccrual loans: |
||||||||
Commercial |
$ | 274 | $ | 2,084 | ||||
Real estate: |
||||||||
Single-family residential |
707 | 266 | ||||||
Multi-family residential |
3,126 | 3,986 | ||||||
Commercial: |
||||||||
Non-owner occupied |
913 | 2,419 | ||||||
Owner occupied |
| 1,131 | ||||||
Consumer: |
||||||||
Home equity lines of credit: |
||||||||
Originated for portfolio |
159 | 161 | ||||||
Purchased for portfolio |
101 | | ||||||
Other consumer |
| 10 | ||||||
Total nonaccrual loans |
5,280 | 10,057 | ||||||
Total nonperforming loans |
$ | 5,280 | $ | 10,057 | ||||
30 - 59 Days | 60 - 89 Days | Greater than 90 | Loans Not Past | Nonaccrual Loans Not | ||||||||||||||||||||
Past Due | Past Due | Days Past Due | Total Past Due | Due | > 90 days Past Due | |||||||||||||||||||
Commercial |
$ | | $ | | $ | | $ | | $ | 28,755 | $ | 274 | ||||||||||||
Real estate: |
||||||||||||||||||||||||
Single-family residential |
| 773 | 535 | 1,308 | 17,608 | 172 | ||||||||||||||||||
Multi-family residential |
| | 3,126 | 3,126 | 25,955 | | ||||||||||||||||||
Commercial: |
||||||||||||||||||||||||
Non-owner occupied |
| 53 | 828 | 881 | 36,911 | 85 | ||||||||||||||||||
Owner occupied |
| | | | 28,680 | | ||||||||||||||||||
Land |
| | | | 5,577 | | ||||||||||||||||||
Consumer: |
||||||||||||||||||||||||
Home equity lines of
credit: |
||||||||||||||||||||||||
Originated for portfolio |
| | 159 | 159 | 12,258 | | ||||||||||||||||||
Purchased for portfolio |
| | 101 | 101 | 2,882 | | ||||||||||||||||||
Other |
2 | 31 | | 33 | 1,217 | | ||||||||||||||||||
Total |
$ | 2 | $ | 857 | $ | 4,749 | $ | 5,608 | $ | 159,843 | $ | 531 | ||||||||||||
21
30 - 59 Days | 60 - 89 Days | Greater than 90 | Loans Not Past | Nonaccrual Loans | ||||||||||||||||||||
Past Due | Past Due | Days Past Due | Total Past Due | Due | Not Past Due | |||||||||||||||||||
Commercial |
$ | 449 | $ | | $ | | $ | 449 | $ | 37,745 | $ | 1,635 | ||||||||||||
Real estate: |
||||||||||||||||||||||||
Single-family residential |
1,104 | 444 | 266 | 1,814 | 21,459 | | ||||||||||||||||||
Multi-family residential |
| | 1,242 | 1,242 | 34,066 | 2,744 | ||||||||||||||||||
Commercial: |
||||||||||||||||||||||||
Non-owner occupied |
1,188 | | 2,419 | 3,607 | 36,687 | | ||||||||||||||||||
Owner occupied |
| | 1,053 | 1,053 | 33,516 | 78 | ||||||||||||||||||
Land |
| | | | 5,862 | | ||||||||||||||||||
Construction |
| | | | 4,919 | | ||||||||||||||||||
Consumer: |
||||||||||||||||||||||||
Home equity lines of credit: |
||||||||||||||||||||||||
Originated for portfolio |
1 | 54 | | 55 | 12,850 | 161 | ||||||||||||||||||
Purchased for portfolio |
| | | | 3,411 | | ||||||||||||||||||
Other |
23 | 41 | | 64 | 1,726 | | ||||||||||||||||||
Total |
$ | 2,765 | $ | 539 | $ | 4,980 | $ | 8,284 | $ | 192,241 | $ | 4,618 | ||||||||||||
September 30, 2011 | December 31, 2010 | |||||||
Commercial |
$ | 273 | $ | 1,597 | ||||
Real estate: |
||||||||
Single-family residential |
| 142 | ||||||
Multi-family residential |
719 | 2,744 | ||||||
Total |
$ | 992 | $ | 4,483 | ||||
22
Pre-Modification | Post-Modification | |||||||||||
Outstanding Recorded | Outstanding Recorded | |||||||||||
Number of Loans | Investment | Investment | ||||||||||
TDRs: |
||||||||||||
Commercial |
4 | $ | 1,774 | $ | 1,524 | |||||||
Real estate: |
||||||||||||
Multi-family residential |
1 | 99 | 100 | |||||||||
Commercial: |
||||||||||||
Non-owner occupied |
4 | 2,586 | 2,586 | |||||||||
Owner occupied |
3 | 1,355 | 1,355 | |||||||||
Total |
12 | $ | 5,814 | $ | 5,565 | |||||||
23
24
Not Rated | Pass | Special Mention | Substandard | Total | ||||||||||||||||
Commercial |
$ | 427 | $ | 21,009 | $ | 3,540 | $ | 3,779 | $ | 28,755 | ||||||||||
Real estate: |
||||||||||||||||||||
Single-family residential |
18,209 | | | 707 | 18,916 | |||||||||||||||
Multi-family residential |
| 18,566 | 5,143 | 5,372 | 29,081 | |||||||||||||||
Commercial: |
||||||||||||||||||||
Non-owner occupied |
379 | 26,082 | 4,161 | 7,170 | 37,792 | |||||||||||||||
Owner occupied |
| 22,822 | 4,389 | 1,469 | 28,680 | |||||||||||||||
Land |
959 | 1,202 | | 3,416 | 5,577 | |||||||||||||||
Consumer: |
||||||||||||||||||||
Home equity lines of credit: |
||||||||||||||||||||
Originated for portfolio |
12,258 | | | 159 | 12,417 | |||||||||||||||
Purchased for portfolio |
2,303 | | 579 | 101 | 2,983 | |||||||||||||||
Other |
1,250 | | | | 1,250 | |||||||||||||||
$ | 35,785 | $ | 89,681 | $ | 17,812 | $ | 22,173 | $ | 165,451 | |||||||||||
25
Not Rated | Pass | Special Mention | Substandard | Total | ||||||||||||||||
Commercial |
$ | 473 | $ | 26,102 | $ | 6,281 | $ | 5,338 | $ | 38,194 | ||||||||||
Real estate: |
||||||||||||||||||||
Single-family residential |
23,007 | | | 266 | 23,273 | |||||||||||||||
Multi-family residential |
| 21,021 | 4,529 | 9,758 | 35,308 | |||||||||||||||
Commercial: |
||||||||||||||||||||
Non-owner occupied |
91 | 27,412 | 4,247 | 8,544 | 40,294 | |||||||||||||||
Owner occupied |
499 | 27,253 | 5,090 | 1,727 | 34,569 | |||||||||||||||
Land |
1,089 | 1,985 | | 2,788 | 5,862 | |||||||||||||||
Construction |
| 4,919 | | | 4,919 | |||||||||||||||
Consumer: |
||||||||||||||||||||
Home equity lines of credit: |
||||||||||||||||||||
Originated for portfolio |
12,744 | | | 161 | 12,905 | |||||||||||||||
Purchased for portfolio |
2,572 | | 839 | | 3,411 | |||||||||||||||
Other |
1,780 | | | 10 | 1,790 | |||||||||||||||
$ | 42,255 | $ | 108,692 | $ | 20,986 | $ | 28,592 | $ | 200,525 | |||||||||||
26
September 30, 2011 | December 31, 2010 | |||||||
Commercial |
$ | | $ | 1,000 | ||||
Commercial real estate |
3,509 | 3,509 | ||||||
Subtotal |
3,509 | 4,509 | ||||||
Valuation allowance |
(1,139 | ) | | |||||
Total |
$ | 2,370 | $ | 4,509 | ||||
27
28
Fair Value | ||||
Measurements at | ||||
September 30, 2011 | ||||
Using Significant Other | ||||
Observable Inputs | ||||
(Level 2) | ||||
Financial Assets: |
||||
Securities available for sale: |
||||
Issued by U.S. government-sponsored entities and agencies: |
||||
Mortgage-backed securities residential |
$ | 1,832 | ||
Collateralized mortgage obligations |
18,192 | |||
Total securities available for sale |
$ | 20,024 | ||
Loans held for sale |
$ | 2,262 | ||
Yield maintenance provisions (embedded derivatives) |
$ | 1,023 | ||
Interest rate lock commitments |
$ | 39 | ||
Financial Liabilities: |
||||
Interest-rate swaps |
$ | 1,023 | ||
Fair Value | ||||
Measurements at | ||||
December 31, 2010 | ||||
Using Significant Other | ||||
Observable Inputs | ||||
(Level 2) | ||||
Financial Assets: |
||||
Securities available for sale: |
||||
Issued by U.S. government-sponsored entities and agencies: |
||||
Mortgage-backed securities residential |
$ | 2,107 | ||
Collateralized mortgage obligations |
26,691 | |||
Total securities available for sale |
$ | 28,798 | ||
Loans held for sale |
$ | 1,953 | ||
Yield maintenance provisions (embedded derivatives) |
$ | 686 | ||
Interest rate lock commitments |
$ | 41 | ||
Financial Liabilities: |
||||
Interest-rate swaps |
$ | 686 | ||
29
Fair Value Measurements at September 30, 2011 Using | ||||||||
Significant Other | Significant | |||||||
Observable Inputs | Unobservable Inputs | |||||||
(Level 2) | (Level 3) | |||||||
Loan servicing rights |
$ | 7 | ||||||
Impaired loans: |
||||||||
Commercial |
$ | 246 | ||||||
Real Estate: |
||||||||
Multi-family residential |
2,175 | |||||||
Commercial: |
||||||||
Non-owner occupied |
2,640 | |||||||
Land |
240 | |||||||
Total impaired loans |
$ | 5,301 | ||||||
Foreclosed assets: |
||||||||
Land |
$ | 1,209 | ||||||
Fair Value Measurements at December 31, 2010 Using | ||||||||
Significant Other | Significant | |||||||
Observable Inputs | Unobservable Inputs | |||||||
(Level 2) | (Level 3) | |||||||
Loan servicing rights |
$ | 17 | ||||||
Impaired loans: |
||||||||
Commercial |
$ | 1,591 | ||||||
Real estate: |
||||||||
Single-family residential |
142 | |||||||
Multi-family residential |
2,690 | |||||||
Commercial: |
||||||||
Non-owner occupied |
1,176 | |||||||
Owner occupied |
1,020 | |||||||
Total impaired loans |
$ | 6,619 | ||||||
30
September 30, 2011 | December 31, 2010 | |||||||||||||||
Carrying | Fair | Carrying | Fair | |||||||||||||
Amount | Value | Amount | Value | |||||||||||||
Financial assets |
||||||||||||||||
Cash and cash equivalents |
$ | 63,816 | $ | 63,816 | $ | 34,275 | $ | 34,275 | ||||||||
Interest-bearing deposits in other financial institutions |
1,984 | 1,984 | | | ||||||||||||
Securities available for sale |
20,024 | 20,024 | 28,798 | 28,798 | ||||||||||||
Loans held for sale |
2,262 | 2,262 | 1,953 | 1,953 | ||||||||||||
Loans, net |
158,496 | 162,883 | 190,767 | 194,970 | ||||||||||||
FHLB stock |
1,942 | n/a | 1,942 | n/a | ||||||||||||
Accrued interest receivable |
96 | 96 | 119 | 119 | ||||||||||||
Yield maintenance provisions (embedded derivatives) |
1,023 | 1,023 | 686 | 686 | ||||||||||||
Interest rate lock commitments |
39 | 39 | 41 | 41 | ||||||||||||
Financial liabilities |
||||||||||||||||
Deposits |
$ | (226,744 | ) | $ | (229,516 | ) | $ | (227,381 | ) | $ | (228,859 | ) | ||||
FHLB advances |
(15,742 | ) | (16,391 | ) | (23,942 | ) | (24,656 | ) | ||||||||
Subordinated debentures |
(5,155 | ) | (2,546 | ) | (5,155 | ) | (2,653 | ) | ||||||||
Accrued interest payable |
(342 | ) | (342 | ) | (191 | ) | (191 | ) | ||||||||
Interest-rate swaps |
(1,023 | ) | (1,023 | ) | (686 | ) | (686 | ) |
31
September 30, | December 31, | |||||||||||
Rate | 2011 | 2010 | ||||||||||
Fixed-rate advances: |
||||||||||||
Maturing March 2011 |
1.90 | % | $ | | $ | 2,200 | ||||||
Maturing April 2011 |
2.88 | % | | 3,000 | ||||||||
Maturing July 2011 |
3.85 | % | | 3,000 | ||||||||
Maturing April 2012 |
2.30 | % | 5,000 | 5,000 | ||||||||
Maturing June 2012 |
2.05 | % | 742 | 742 | ||||||||
Maturing January 2014 |
3.12 | % | 5,000 | 5,000 | ||||||||
Maturing May 2014 |
3.06 | % | 5,000 | 5,000 | ||||||||
Total |
$ | 15,742 | $ | 23,942 | ||||||||
September 30, | December 31, | |||||||
2011 | 2010 | |||||||
First mortgage loans under a blanket lien arrangement |
$ | 11,567 | $ | 14,922 | ||||
Multi-family mortgage loans |
4,010 | 10,670 | ||||||
Commercial real estate loans |
3,415 | 1,985 | ||||||
Securities |
10,298 | 10,657 | ||||||
Cash |
800 | 800 | ||||||
Total |
$ | 30,090 | $ | 39,034 | ||||
32
Payments over the next five years are as follow: |
||||
September 30, 2012 |
$ | 5,742 | ||
September 30, 2014 |
10,000 | |||
Total |
$ | 15,742 | ||
September 30, 2011 | December 31, 2010 | |||||||
Commercial loans |
$ | 7,088 | $ | 13,131 | ||||
Commercial real estate loans |
21,503 | 26,214 | ||||||
$ | 28,591 | 39,345 | ||||||
33
34
Three months ended September 30, | Nine months ended September 30, | |||||||||||||||
2011 | 2010 | 2011 | 2010 | |||||||||||||
Risk-free interest rate |
n/a | 2.38 | % | 2.98 | % | 2.38 | % | |||||||||
Expected term (years) |
n/a | 7 | 7 | 7 | ||||||||||||
Expected stock price volatility |
n/a | 47 | % | 46 | % | 47 | % | |||||||||
Dividend yield |
n/a | 3.45 | % | 1.41 | % | 3.45 | % |
35
Weighted Average | ||||||||||||||||
Remaining | ||||||||||||||||
Weighted Average | Contractual Term | |||||||||||||||
Shares | Exercise Price | (Years) | Intrinsic Value | |||||||||||||
Outstanding at beginning of year |
269,776 | $ | 6.04 | |||||||||||||
Granted |
6,300 | 1.70 | ||||||||||||||
Exercised |
| | ||||||||||||||
Expired |
| | ||||||||||||||
Cancelled or Forfeited |
(52,796 | ) | 10.58 | |||||||||||||
Outstanding at end of year |
223,280 | $ | 4.84 | 6.7 | $ | | ||||||||||
Expected to vest |
89,350 | $ | 0.97 | 9.1 | $ | | ||||||||||
Exercisable at end of period |
133,930 | $ | 7.43 | 5.1 | $ | | ||||||||||
Three months ended September 30, | Nine months ended September 30, | |||||||||||||||
2011 | 2010 | 2011 | 2010 | |||||||||||||
Weighted average
fair value of
options granted |
n/a | $ | 0.51 | $ | 0.75 | $ | 0.51 |
36
Weighted Average | ||||||||
Grant-Date Fair | ||||||||
Nonvested Shares | Shares | Value | ||||||
Nonvested at January 1, 2011 |
38,418 | $ | 1.54 | |||||
Granted |
| | ||||||
Vested |
(14,418 | ) | 1.82 | |||||
Forfeited |
| | ||||||
Nonvested at September 30, 2011 |
24,000 | $ | 1.38 | |||||
37
38
39
40
To Be Well | ||||||||||||||||||||||||||||||||
Capitalized Under | Required | |||||||||||||||||||||||||||||||
For Capital | Prompt Corrective | By Terms Of | ||||||||||||||||||||||||||||||
Actual | Adequacy Purposes | Action Regulations | CFBank Order | |||||||||||||||||||||||||||||
Amount | Ratio | Amount | Ratio | Amount | Ratio | Amount | Ratio | |||||||||||||||||||||||||
September 30, 2011 |
||||||||||||||||||||||||||||||||
Total Capital to risk weighted assets |
$ | 16,675 | 10.41 | % | $ | 12,820 | 8.00 | % | $ | 16,025 | 10.00 | % | $ | 19,230 | 12.00 | % | ||||||||||||||||
Tier 1 (Core) Capital to risk
weighted assets |
14,624 | 9.13 | % | 6,410 | 4.00 | % | 9,615 | 6.00 | % | N/A | N/A | |||||||||||||||||||||
Tier 1 (Core) Capital to
adjusted total assets |
14,624 | 5.55 | % | 10,536 | 4.00 | % | 13,170 | 5.00 | % | 21,072 | 8.00 | % | ||||||||||||||||||||
Tangible Capital to
adjusted total assets |
14,624 | 5.55 | % | 3,951 | 1.50 | % | N/A | N/A | N/A | N/A |
To Be Well | ||||||||||||||||||||||||
Capitalized Under | ||||||||||||||||||||||||
For Capital | Prompt Corrective | |||||||||||||||||||||||
Actual | Adequacy Purposes | Action Regulations | ||||||||||||||||||||||
Amount | Ratio | Amount | Ratio | Amount | Ratio | |||||||||||||||||||
December 31, 2010 |
||||||||||||||||||||||||
Total Capital to risk
weighted assets |
$ | 20,428 | 10.68 | % | $ | 15,296 | 8.0 | % | $ | 19,120 | 10.0 | % | ||||||||||||
Tier 1 (Core) Capital to risk
weighted assets |
17,983 | 9.41 | % | 7,648 | 4.0 | % | 11,472 | 6.0 | % | |||||||||||||||
Tier 1 (Core) Capital to
adjusted total assets |
17,983 | 6.59 | % | 10,909 | 4.0 | % | 13,637 | 5.0 | % | |||||||||||||||
Tangible Capital to
adjusted total assets |
17,983 | 6.59 | % | 4,091 | 1.5 | % | N/A | N/A |
41
42
September 30, | December 31, | |||||||
2011 | 2010 | |||||||
Notional amount |
$ | 7,998 | $ | 8,278 | ||||
Weighted average pay rate on interest-rate swaps |
3.86 | % | 4.02 | % | ||||
Weighted average receive rate on interest-rate swaps |
0.26 | % | 0.27 | % | ||||
Weighted average maturity (years) |
5.8 | 7.4 | ||||||
Fair value of interest-rate swaps |
$ | (1,023 | ) | $ | (686 | ) | ||
Fair value of yield maintenance provisions |
1,023 | 686 |
43
Three months ended September 30, | Nine months ended September 30, | |||||||||||||||
2011 | 2010 | 2011 | 2010 | |||||||||||||
Change in unrealized holding gains (losses) on securities
available for sale |
$ | (98 | ) | $ | (57 | ) | $ | (14 | ) | $ | (22 | ) | ||||
Reclassification adjustment for gains realized in income |
(232 | ) | (228 | ) | (232 | ) | (468 | ) | ||||||||
Net change in unrealized gains (losses) |
(330 | ) | (285 | ) | (246 | ) | (490 | ) | ||||||||
Tax effect |
| | | | ||||||||||||
Net of tax amount |
$ | (330 | ) | $ | (285 | ) | $ | (246 | ) | $ | (490 | ) | ||||
Balance at | ||||||||||||
December 31, | Current period | September 30, | ||||||||||
2010 | change | 2011 | ||||||||||
Unrealized gains (losses) on securities available for sale |
$ | 672 | $ | (246 | ) | $ | 426 | |||||
44
| a continuation of current high unemployment rates and difficult economic conditions or
adverse changes in general economic conditions and economic conditions in the markets we
serve, any of which may affect, among other things, our level of nonperforming assets,
charge-offs and provision for loan loss expense; |
| changes in interest rates that may reduce net interest margin and impact funding
sources; |
| our ability to maintain sufficient liquidity to continue to fund our operations; |
| changes in market rates and prices, including real estate values, which may adversely
impact the value of financial products including securities, loans and deposits; |
| the possibility of other-than-temporary impairment of securities held in CFBanks
securities portfolio; |
| results of examinations of the Holding Company and CFBank by the regulators, including
the possibility that the regulators may, among other things, require CFBank to increase
its allowance for loan losses or write down assets; |
| our ability to meet the requirements of the Holding Company and CFBank Cease and
Desist Orders issued by regulators; |
| the uncertainties arising from the Companys participation in the TARP Capital
Purchase Program, including the impacts on employee recruitment and retention and other
business and practices, and uncertainties concerning the potential redemption by us of
Treasurys preferred stock investment under the program, including the timing of,
regulatory approvals for, and conditions placed upon, any such redemption; |
| changes in tax laws, rules and regulations; |
| various monetary and fiscal policies and regulations, including those determined by
the Federal Reserve Board, the Federal Deposit Insurance Corporation (FDIC) and the
Office of the Comptroller of the Currency (OCC); |
| competition with other local and regional commercial banks, savings banks, credit
unions and other non-bank financial institutions; |
| our ability to grow our core businesses; |
| technological factors which may affect our operations, pricing, products and services; |
| unanticipated litigation, claims or assessments; and |
| managements ability to manage these and other risks. |
45
46
1. | Because the CFBank Order requires CFBank to have 8% core capital and 12% total
risk-based capital, CFBank is no longer considered well-capitalized under the prompt
corrective action regulations and is deemed adequately capitalized so long as it maintains
at least 4% core capital, 4% tier 1 risk-based capital and 8% total risk-based capital. At
September 30, 2011, CFBank had 5.55% core capital, 9.13% tier 1 risk-based capital and
10.41% total risk-based capital. If CFBank capital falls below the levels to be considered
adequately capitalized, it may be subject to substantially more regulatory scrutiny. |
2. | Because CFBank is no longer considered to be well-capitalized, it is prohibited from
accepting or renewing brokered deposits without FDIC approval and is subject to market
rates published by the FDIC when
offering deposits to the general public. See the section titled
Financial Condition -
Deposits and the section titled Liquidity and Capital Resources for additional
information regarding these regulatory restrictions. |
47
3. | The growth and lending limitations in the CFBank Order limit our ability to make
commercial business and property loans, which carry a higher yield than residential and
consumer loans. This will negatively impact our ability to improve core earnings. |
4. | The Holding Companys primary source of funds is cash dividends from CFBank, which are
prohibited under the CFBank Order without regulatory approval. It is not likely that any
dividends will be approved by regulators until CFBank meets its new individual minimum
capital requirements under the CFBank Order. |
48
49
50
September 30, 2011 | December 31, 2010 | |||||||||||||||
Number of | Number of | |||||||||||||||
loans | Balance | loans | Balance | |||||||||||||
(Dollars in thousands) | ||||||||||||||||
Commercial |
2 | $ | 274 | 5 | $ | 2,084 | ||||||||||
Single-family residential real estate |
9 | 707 | 3 | 266 | ||||||||||||
Multi-family residential real estate |
3 | 3,126 | 3 | 3,986 | ||||||||||||
Commercial real estate |
4 | 913 | 5 | 3,550 | ||||||||||||
Home equity lines of credit |
4 | 260 | 2 | 161 | ||||||||||||
Other consumer loans |
| | 1 | 10 | ||||||||||||
Total |
22 | $ | 5,280 | 19 | $ | 10,057 | ||||||||||
51
52
53
54
55
56
57
For the three months ended September 30, | ||||||||
2011 | 2010 | |||||||
(Dollars in thousands) | ||||||||
Commercial |
$ | (29 | ) | $ | 406 | |||
Single-family residential real estate |
(2 | ) | (16 | ) | ||||
Multi-family residential real estate |
867 | 175 | ||||||
Commercial real estate |
533 | 72 | ||||||
Home equity lines of credit |
134 | | ||||||
Other consumer loans |
(1 | ) | (3 | ) | ||||
Total |
$ | 1,502 | $ | 634 | ||||
58
59
60
61
For the nine months ended September 30, | ||||||||
2011 | 2010 | |||||||
(Dollars in thousands) | ||||||||
Commercial |
$ | 1,040 | $ | 356 | ||||
Single-family residential real estate |
8 | 1 | ||||||
Multi-family residential real estate |
2,115 | 249 | ||||||
Commercial real estate |
1,760 | 2,828 | ||||||
Home equity lines of credit |
129 | 823 | ||||||
Other consumer loans |
8 | 79 | ||||||
Total |
$ | 5,060 | $ | 4,336 | ||||
62
63
64
For the Three Months Ended September 30, | ||||||||||||||||||||||||
2011 | 2010 | |||||||||||||||||||||||
Average | Interest | Average | Average | Interest | Average | |||||||||||||||||||
Outstanding | Earned/ | Yield/ | Outstanding | Earned/ | Yield/ | |||||||||||||||||||
Balance | Paid | Rate | Balance | Paid | Rate | |||||||||||||||||||
(Dollars in thousands) | ||||||||||||||||||||||||
Interest-earning assets: |
||||||||||||||||||||||||
Securities (1) (2) |
$ | 23,471 | $ | 68 | 1.19 | % | $ | 25,771 | $ | 154 | 2.45 | % | ||||||||||||
Loans and loans held for sale (3) |
163,247 | 2,165 | 5.30 | % | 207,682 | 2,863 | 5.51 | % | ||||||||||||||||
Other earning assets |
58,962 | 38 | 0.26 | % | 28,484 | 18 | 0.25 | % | ||||||||||||||||
FHLB stock |
1,942 | 20 | 4.12 | % | 1,942 | 22 | 4.53 | % | ||||||||||||||||
Total interest-earning assets |
247,622 | 2,291 | 3.71 | % | 263,879 | 3,057 | 4.64 | % | ||||||||||||||||
Noninterest-earning assets |
19,112 | 23,950 | ||||||||||||||||||||||
Total assets |
$ | 266,734 | $ | 287,829 | ||||||||||||||||||||
Interest-bearing liabilities: |
||||||||||||||||||||||||
Deposits |
$ | 209,963 | 681 | 1.30 | % | $ | 218,307 | 785 | 1.44 | % | ||||||||||||||
FHLB advances and other borrowings |
20,897 | 152 | 2.91 | % | 29,097 | 216 | 2.97 | % | ||||||||||||||||
Total interest-bearing liabilities |
230,860 | 833 | 1.44 | % | 247,404 | 1,001 | 1.62 | % | ||||||||||||||||
Noninterest-bearing liabilities |
24,060 | 23,602 | ||||||||||||||||||||||
Total liabilities |
254,920 | 271,006 | ||||||||||||||||||||||
Equity |
11,814 | 16,823 | ||||||||||||||||||||||
Total liabilities and equity |
$ | 266,734 | $ | 287,829 | ||||||||||||||||||||
Net interest-earning assets |
$ | 16,762 | $ | 16,475 | ||||||||||||||||||||
Net interest income/interest rate spread |
$ | 1,458 | 2.27 | % | $ | 2,056 | 3.02 | % | ||||||||||||||||
Net interest margin |
2.36 | % | 3.12 | % | ||||||||||||||||||||
Average interest-earning assets
to average interest-bearing liabilities |
107.26 | % | 106.66 | % | ||||||||||||||||||||
(1) | Average balance is computed using the carrying value of securities.
Average yield is computed using the historical amortized cost average balance for available for
sale securities. |
|
(2) | Average yields and interest earned are stated on a fully taxable equivalent basis. |
|
(3) | Average balance is computed using the recorded investment in loans net of the ALLL
and includes nonperforming loans. |
65
For the Nine Months Ended September 30, | ||||||||||||||||||||||||
2011 | 2010 | |||||||||||||||||||||||
Average | Interest | Average | Average | Interest | Average | |||||||||||||||||||
Outstanding | Earned/ | Yield/ | Outstanding | Earned/ | Yield/ | |||||||||||||||||||
Balance | Paid | Rate | Balance | Paid | Rate | |||||||||||||||||||
(Dollars in thousands) | ||||||||||||||||||||||||
Interest-earning assets: |
||||||||||||||||||||||||
Securities (1) (2) |
$ | 25,349 | $ | 379 | 2.05 | % | $ | 23,625 | $ | 522 | 3.03 | % | ||||||||||||
Loans and loans held for sale (3) |
174,586 | 6,957 | 5.31 | % | 219,116 | 9,083 | 5.53 | % | ||||||||||||||||
Other earning assets |
57,429 | 109 | 0.25 | % | 21,619 | 41 | 0.25 | % | ||||||||||||||||
FHLB stock |
1,942 | 63 | 4.33 | % | 1,942 | 65 | 4.46 | % | ||||||||||||||||
Total interest-earning assets |
259,306 | 7,508 | 3.87 | % | 266,302 | 9,711 | 4.87 | % | ||||||||||||||||
Noninterest-earning assets |
20,219 | 20,027 | ||||||||||||||||||||||
Total assets |
$ | 279,525 | $ | 286,329 | ||||||||||||||||||||
Interest-bearing liabilities: |
||||||||||||||||||||||||
Deposits |
$ | 218,541 | 2,133 | 1.30 | % | $ | 213,459 | 2,594 | 1.62 | % | ||||||||||||||
FHLB advances and other borrowings |
24,553 | 543 | 2.95 | % | 29,319 | 651 | 2.96 | % | ||||||||||||||||
Total interest-bearing liabilities |
243,094 | 2,676 | 1.47 | % | 242,778 | 3,245 | 1.78 | % | ||||||||||||||||
Noninterest-bearing liabilities |
23,082 | 23,190 | ||||||||||||||||||||||
Total liabilities |
266,176 | 265,968 | ||||||||||||||||||||||
Equity |
13,349 | 20,361 | ||||||||||||||||||||||
Total liabilities and equity |
$ | 279,525 | $ | 286,329 | ||||||||||||||||||||
Net interest-earning assets |
$ | 16,212 | $ | 23,524 | ||||||||||||||||||||
Net interest income/interest rate spread |
$ | 4,832 | 2.40 | % | $ | 6,466 | 3.09 | % | ||||||||||||||||
Net interest margin |
2.49 | % | 3.25 | % | ||||||||||||||||||||
Average interest-earning assets
to average interest-bearing liabilities |
106.67 | % | 109.69 | % | ||||||||||||||||||||
(1) | Average balance is computed using the carrying value of securities.
Average yield is computed using the historical amortized cost average balance for available for
sale securities. |
|
(2) | Average yields and interest earned are stated on a fully taxable equivalent basis. |
|
(3) | Average balance is computed using the recorded investment in loans net of the ALLL
and includes nonperforming loans. |
66
Three Months Ended | Nine Months Ended | |||||||||||||||||||||||
September 30, 2011 | September 30, 2011 | |||||||||||||||||||||||
Compared to Three Months Ended | Compared to Nine Months Ended | |||||||||||||||||||||||
September 30, 2010 | September 30, 2010 | |||||||||||||||||||||||
Increase (decrease) | Increase (decrease) | |||||||||||||||||||||||
due to | due to | |||||||||||||||||||||||
Rate | Volume | Net | Rate | Volume | Net | |||||||||||||||||||
(Dollars in thousands) | ||||||||||||||||||||||||
Interest-earning assets: |
||||||||||||||||||||||||
Securities (1) |
$ | (73 | ) | $ | (13 | ) | $ | (86 | ) | $ | (202 | ) | $ | 59 | $ | (143 | ) | |||||||
Loans and loans held for sale |
(105 | ) | (593 | ) | (698 | ) | (340 | ) | (1,786 | ) | (2,126 | ) | ||||||||||||
Other earning assets |
| 20 | 20 | | 68 | 68 | ||||||||||||||||||
FHLB stock |
(2 | ) | | (2 | ) | (2 | ) | | (2 | ) | ||||||||||||||
Total interest-earning assets |
(180 | ) | (586 | ) | (766 | ) | (544 | ) | (1,659 | ) | (2,203 | ) | ||||||||||||
Interest-bearing liabilities: |
||||||||||||||||||||||||
Deposits |
(75 | ) | (29 | ) | (104 | ) | (558 | ) | 97 | (461 | ) | |||||||||||||
FHLB advances and other borrowings |
(4 | ) | (60 | ) | (64 | ) | (2 | ) | (106 | ) | (108 | ) | ||||||||||||
Total interest-bearing liabilities |
(79 | ) | (89 | ) | (168 | ) | (560 | ) | (9 | ) | (569 | ) | ||||||||||||
Net change in net interest income |
$ | (101 | ) | $ | (497 | ) | $ | (598 | ) | $ | 16 | $ | (1,650 | ) | $ | (1,634 | ) | |||||||
(1) | Securities amounts are presented on a fully taxable equivalent basis. |
67
68
69
September 30, 2011 | December 31, 2010 | |||||||
(Dollars in thousands) | ||||||||
Cash and unpledged securities |
$ | 65,091 | $ | 43,352 | ||||
Additional borrowing capacity at the FHLB |
3,882 | 426 | ||||||
Additional borrowing capacity at the FRB |
14,992 | 25,977 | ||||||
Unused commercial bank lines of credit |
1,000 | 3,000 | ||||||
Total |
$ | 84,965 | $ | 72,755 | ||||
70
71
72
73
Item 2. | Unregistered Sales of Equity Securities and Use of Proceeds |
Item 6. | Exhibits. |
74
CENTRAL FEDERAL CORPORATION | ||||||
Dated: November 10, 2011
|
By: | /s/ Eloise L. Mackus
|
||||
Chief Executive Officer, | ||||||
General Counsel and Corporate Secretary | ||||||
Dated: November 10, 2011
|
By: | /s/ Therese Ann Liutkus
|
||||
President, Treasurer and Chief Financial Officer |
75
Exhibit | ||||
Number | Description of Exhibit | |||
3.1 | Certificate of Incorporation of the registrant (incorporated by reference to Exhibit
3.1 to the registrants Registration Statement on Form SB-2 No. 333-64089, filed with
the Commission on September 23, 1998) |
|||
3.2 | Amendment to Certificate of Incorporation of the registrant (incorporated by
reference to Exhibit 3.2 to the registrants Registration Statement on Form S-2 No.
333-129315, filed with the Commission on October 28, 2005) |
|||
3.3 | Second Amended and Restated Bylaws of the registrant (incorporated by reference to
Exhibit 3.3 to the registrants Form 10-K for the fiscal year ended December 31,
2007, filed with the Commission on March 27, 2008) |
|||
3.4 | Amendment to Certificate of Incorporation of the registrant (incorporated by
reference to Exhibit 3.4 to the registrants Form 10-Q for the quarter ended June 30,
2009, filed with the Commission on August 14, 2009) |
|||
3.5 | Amendment to Certificate of Incorporation of the registrant |
|||
4.1 | Form of Stock Certificate of Central Federal Corporation (incorporated by reference
to Exhibit 4.0 to the registrants Registration Statement on Form SB-2 No. 333-64089,
filed with the Commission on September 23, 1998) |
|||
4.2 | Certificate of Designations of Fixed Rate Cumulative Perpetual Preferred Stock,
Series A, of Central Federal Corporation (incorporated by reference to Exhibit 3.1 to
the registrants Current Report on Form 8-K, filed with the Commission on December 5,
2008) |
|||
4.3 | Warrant, dated December 5, 2008, to purchase shares of common stock of the Registrant
(incorporated by reference to Exhibit 4.1 to the registrants Current Report on Form
8-K, filed with the Commission on December 5, 2008) |
|||
10.1 | Form of Standby Purchase Agreement (incorporated by reference to Exhibit 10.1 to the
registrants Current Report on Form 8-K, filed with the Commission on August 10,
2011) |
|||
11.1 | Statement Re: Computation of Per Share Earnings |
|||
31.1 | Rule 13a-14(a) Certifications of the Chief Executive Officer |
|||
31.2 | Rule 13a-14(a) Certifications of the Chief Financial Officer |
|||
32.1 | Section 1350 Certifications of the Chief Executive Officer and Chief Financial Officer |
|||
101.1 | Interactive Data File (XBRL) |
76
Exhibit 3.5
Amendment to
Certificate of Incorporation
CERTIFICATE OF
AMENDMENT
OF
CERTIFICATE OF INCORPORATION
OF
CENTRAL FEDERAL
CORPORATION
Central Federal Corporation, a corporation organized and existing under and by virtue of the laws of the State of Delaware (the “Corporation”), in accordance with the provisions of Section 151 of the Delaware General Corporation Law, does hereby certify:
FIRST: That by unanimous written consent dated as of August 29, 2011 and at a meeting on September 15, 2011 and in accordance with the Certificate of Incorporation and Bylaws of the Corporation and applicable law, the Board of Directors of the Corporation adopted resolutions setting forth a proposed amendment of the Certificate of Incorporation of the Corporation to increase the number of shares of authorized common stock by 38,000,000 shares from 12,000,000 shares to 50,000,000 shares, declaring the amendment to be advisable and calling a special meeting of the stockholders of the Corporation for consideration of the amendment. The resolution setting forth the proposed amendment is as follows:
RESOLVED, that a proposal be made to the stockholders of Central Federal Corporation, at a special meeting, to amend Article Fourth, subparagraph A.2 of the Company’s Certificate of Incorporation, as amended (the “Incorporation Certificate”), to read as follows:
Fifty million (50,000,000) shares of Common Stock, par value one cent ($.01) per share (the “Common Stock”).
SECOND: That thereafter, the Board of Directors called and held a Special Meeting of Stockholders of the Corporation on October 20, 2011 in accordance with the notice required in Section 222 of the General Corporation Law of the State of Delaware, at which meeting the necessary number of shares as required by statute were voted in favor of the amendment.
THIRD: That the amendment was duly adopted in accordance with the provisions of Section 242 of the General Corporation Law of the State of Delaware as reflected in the certified copy of the Report of the Inspector of Election.
IN WITNESS WHEREOF, the Corporation has caused this certificate to be signed this 8th day of November 2011.
By: /s/ Eloise L.
Mackus
Eloise L.
Mackus
Chief Executive Officer
1. | I have reviewed this report on Form 10-Q of Central Federal Corporation; |
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 registrants other certifying officer 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 controls 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 registrants 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 registrants internal
control over financial reporting that occurred during the registrants most recent
fiscal quarter that has materially affected, or is reasonably likely to materially
affect, the registrants internal control over financial reporting; and |
5. | The registrants other certifying officer and I have disclosed, based on our most
recent evaluation of internal control over financial reporting, to the registrants
auditors and the audit committee of registrants board of directors: |
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 registrants 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 registrants internal control over
financial reporting. |
Date: November 10, 2011
|
/s/ Eloise L. Mackus
|
|||
Chief Executive Officer, General Counsel and | ||||
Corporate Secretary |
1. | I have reviewed this report on Form 10-Q of Central Federal Corporation; |
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 registrants other certifying officer 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 controls 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 registrants 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 registrants internal
control over financial reporting that occurred during the registrants most recent
fiscal quarter that has materially affected, or is reasonably likely to materially
affect, the registrants internal control over financial reporting; and |
5. | The registrants other certifying officer and I have disclosed, based on our most
recent evaluation of internal control over financial reporting, to the registrants
auditors and the audit committee of registrants board of directors: |
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 registrants 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 registrants internal control over
financial reporting. |
Date: November 10, 2011
|
/s/ Therese Ann Liutkus
|
|||
President, Treasurer and Chief Financial Officer |
(1) | The Report fully complies with the requirements of Section 13(a) or 15(d)
of the Securities Exchange Act of 1934; and |
(2) | The information contained in this Report fairly presents, in all
material respects, the financial condition and results of operations of the Company
as of and for the period covered by this Report. |
Dated: November 10, 2011
|
By: | /s/ Eloise L. Mackus
|
||||
Chief Executive Officer, | ||||||
General Counsel and Corporate Secretary | ||||||
Dated: November 10, 2011
|
By: | /s/ Therese Ann Liutkus
|
||||
President, Treasurer and Chief Financial Officer |
Consolidated Balance Sheets (Parenthetical) (USD $) In Thousands, except Share data | Sep. 30, 2011 | Dec. 31, 2010 |
---|---|---|
ASSETS | ||
Allowance for loans | $ 6,955 | $ 9,758 |
Stockholders' equity | ||
Preferred stock, par value | $ 0.01 | $ 0.01 |
Preferred stock, aggregate liquidation | $ 7,595 | $ 7,225 |
Preferred stock, share authorized | 1,000,000 | 1,000,000 |
Preferred stock, share issued | 7,225 | 7,225 |
Common stock, par value | $ 0.01 | $ 0.01 |
Common stock, share authorized | 12,000,000 | 12,000,000 |
Common stock, share issued | 4,686,331 | 4,686,331 |
Treasury stock, shares | 558,533 | 558,533 |
Document and Entity Information (USD $) In Millions, except Share data | 9 Months Ended | ||
---|---|---|---|
Sep. 30, 2011 | Oct. 31, 2011 | Jun. 30, 2010 | |
Document and Entity Information [Abstract] | |||
Entity Registrant Name | CENTRAL FEDERAL CORP | ||
Entity Central Index Key | 0001070680 | ||
Document Type | 10-Q | ||
Document Period End Date | Sep. 30, 2011 | ||
Amendment Flag | false | ||
Document Fiscal Year Focus | 2011 | ||
Document Fiscal Period Focus | Q3 | ||
Current Fiscal Year End Date | --12-31 | ||
Entity Well-known Seasoned Issuer | No | ||
Entity Voluntary Filers | No | ||
Entity Current Reporting Status | Yes | ||
Entity Filer Category | Smaller Reporting Company | ||
Entity Public Float | $ 5.3 | ||
Entity Common Stock, Shares Outstanding | 4,127,798 |
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Fair Value | 9 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Fair Value [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
FAIR VALUE |
NOTE 5 — FAIR VALUE
Fair value is the exchange price that would be received for an asset or paid to transfer a
liability (exit price) in the principal or most advantageous market for the asset or liability in
an orderly transaction between market participants on the measurement date. There are three levels
of inputs that may be used to measure fair values:
Level 1 — Quoted prices (unadjusted) for identical assets or liabilities in active markets
that the entity has the ability to access as of the measurement date.
Level 2 — Significant other observable inputs other than Level 1 prices such as quoted prices
for similar assets or liabilities, quoted prices in markets that are not active, or other inputs
that are observable or can be corroborated by observable market data.
Level 3 — Significant unobservable inputs that reflect a company’s own assumptions about the
assumptions that market participants would use in pricing an asset or liability.
The Company used the following methods and significant assumptions to estimate the fair value of
each type of asset and liability:
Securities available for sale: The fair value of securities available for sale is
determined using pricing models that vary based on asset class and include available trade, bid,
and other market information or matrix pricing, which is a mathematical technique widely used in
the industry to value debt securities without relying exclusively on quoted prices for the specific
securities but rather by relying on the securities’ relationship to other benchmark quoted
securities (Level 2).
Derivatives: The fair value of derivatives is based on valuation models using observable
market data as of the measurement date (Level 2).
Impaired loans: The fair value of impaired loans with specific allocations of the ALLL is
generally based on recent real estate appraisals. These appraisals may utilize a single valuation
approach or a combination of approaches including comparable sales and the income approach.
Adjustments are routinely made in the appraisal process by the appraisers to adjust for differences
between the comparable sales and income data available. Such adjustments are usually significant
and typically result in a Level 3 classification of the inputs for determining fair value.
Loan servicing rights: Fair value is based on a valuation model that calculates the
present value of estimated future net servicing income (Level 2).
Loans held for sale: Loans held for sale are carried at fair value as determined by
outstanding commitments from third party
investors (Level 2).
Foreclosed assets: Nonrecurring adjustments to certain commercial real estate properties
classified as foreclosed assets are measured at fair value, less costs to sell. Fair values are
based on recent real estate appraisals. These appraisals may use a single valuation approach or a
combination of approaches including comparable sales and the income approach. Adjustments are
routinely made in the appraisal process by the independent appraisers to adjust for differences
between the comparable sales and income data available. Such adjustments are usually significant
and typically result in a Level 3 classification of the inputs for determining fair value.
Assets and Liabilities Measured on a Recurring Basis
Assets and liabilities measured at fair value on a recurring basis are summarized below:
No assets or liabilities measured at fair value on a recurring basis were measured using Level 1 or
Level 3 inputs at September 30, 2011 or December 31, 2010.
Assets Measured on a Non-Recurring Basis
Assets and liabilities measured at fair value on a non-recurring basis are summarized below:
At September 30, 2011 and December 31, 2010, the Company had no assets or liabilities measured at
fair value on a non-recurring basis that were measured using Level 1 inputs.
Impaired loan servicing rights, which are carried at fair value, were carried at $7, which was made
up of the amortized cost of $9, net of a valuation allowance of $2 at September 30, 2011. At
December 31, 2010, impaired loan servicing rights were carried at $17, which was made up of the
amortized cost of $22, net of a valuation allowance of $5. There was no charge against earnings
with respect to servicing rights for the three months ended September 30, 2011, and a $3 increase
in earnings for the nine months ended September 30, 2011. There was a $1 charge against earnings
with respect to servicing rights for the three months ended September 30, 2010, and a $3 charge
against earnings for the nine months ended September 30, 2010.
Impaired loans carried at the fair value of the collateral for collateral dependent loans, had an
unpaid principal balance of $10,887 with a valuation allowance of $1,719, resulting in a $379
additional provision recorded for impairment charges for the quarter ended September 30, 2011, and
a $1,179 reduction in the valuation allowance for the nine months ended September 30, 2011.
Impaired loans carried at the fair value of collateral had an unpaid principal balance of $10,693
with a valuation allowance of $2,898 at December 31, 2010. For the quarter ended September 30, 2010
there was an additional provision recorded for impairment charges of $171, and an additional
provision of $936 recorded for impairment charges for the nine months ended September 30, 2010.
Foreclosed assets which are carried at fair value less costs to sell, were carried at $1,209, which
was made up of the outstanding balance of $2,348, net of a valuation allowance of $1,139 at
September 30, 2011, resulting in a charge of $1,139 for the nine months ended September 30, 2011.
There was no charge against earnings for the three months ended September 30, 2011. There were no
foreclosed assets measured at fair value in the prior year periods.
During the nine months ended September 30, 2011, the Company did not have any significant transfers
of assets or liabilities between those measured using Level 1 or 2 inputs. The Company recognizes
transfers of assets and liabilities between Level 1 and 2 inputs based on the information relating
to those assets and liabilities at the end of the reporting period.
The carrying amounts and estimated fair values of financial instruments at September 30, 2011 and
December 31, 2010 were as follows:
The methods and assumptions used to estimate fair value are described as follows:
Carrying amount is the estimated fair value for cash and cash equivalents, interest-bearing
deposits in other financial institutions, short-term borrowings, accrued interest receivable and
payable, demand deposits, short-term debt, and variable rate loans or deposits that reprice
frequently and fully. The methods for determining the fair values for securities were described
previously. Fair value of loans held for sale is based on binding quotes from third party
investors. For fixed rate loans or deposits and for variable rate loans with infrequent repricing
or repricing limits, fair value is based on discounted cash flows using current market rates
applied to the estimated life and credit risk. Fair value of Federal Home Loan Bank (FHLB)
advances and other borrowings are based on current rates for similar financing. Fair value of
subordinated debentures is based on discounted cash flows using current market rates for similar
debt. It was not practicable to determine the fair value of FHLB stock due to restrictions placed
on its transferability. The method for determining the fair values for derivatives (interest-rate
swaps, interest rate lock commitments and yield maintenance provisions) was described previously.
The fair value of off-balance sheet items is not considered material.
|
Preferred Stock | 9 Months Ended |
---|---|
Sep. 30, 2011 | |
Preferred Stock and Other Comprehensive Income (Loss) [Abstract] | |
PREFERRED STOCK |
NOTE 10 — PREFERRED STOCK
On December 5, 2008, in connection with the Troubled Asset Relief Program (TARP) Capital Purchase
Program, the Company issued to Treasury 7,225 shares of Central Federal Corporation Fixed Rate
Cumulative Perpetual Preferred Stock, Series A (Preferred Stock) for $7,225. The Preferred Stock
initially pays quarterly dividends at a five percent annual rate, which increases to nine percent
after February 14, 2014, on a liquidation preference of $1,000 per share.
The Preferred Stock has preference over the Company’s common stock with respect to the payment of
dividends and distribution of the Company’s assets in the event of a liquidation or dissolution.
Except in certain circumstances, the holders of Preferred Stock have no voting rights. If any
quarterly dividend payable on the Preferred Stock is in arrears for six or more quarterly dividend
periods (whether consecutive or not), the holders will be entitled to vote for the election of two
additional directors. These voting rights terminate when the Company has paid the dividends in
full. The Holding Company’s Board of Directors elected to defer the dividends beginning with the
dividend payable on November 15, 2010 in order to preserve cash at the Holding Company. As of
September 30, 2011, four quarterly dividend payments had been deferred. Cumulative deferred
dividends totaled $370 at September 30, 2011 and $90 at December 31, 2010. Although deferred, the
dividends have been accrued with an offsetting charge to accumulated deficit.
As required under the TARP Capital Purchase Program in connection with the sale of the Preferred
Stock to Treasury, dividend payments on, and repurchases of, the Company’s outstanding preferred
and common stock are subject to certain restrictions. For as long as any Preferred Stock is
outstanding, no dividends may be declared or paid on the Company’s outstanding common stock until
all accrued and unpaid dividends on Preferred Stock are fully paid. In addition, Treasury’s
consent is required on any increase in quarterly dividends declared on shares of common stock in
excess of $.05 per share before December 5, 2011, the third anniversary of the issuance of the
Preferred Stock, unless the Preferred Stock is redeemed by the Company or transferred in whole by
Treasury. Further, Treasury’s consent is required for any repurchase of any equity securities or
trust preferred securities, except for repurchases of Preferred Stock or repurchases of common
shares in connection with benefit plans consistent with past practice, before December 5, 2011, the
third anniversary of the issuance of the Preferred Stock, unless redeemed by the Company or
transferred in whole by Treasury.
As a recipient of funding under the TARP Capital Purchase Program, the Company must comply with the
executive compensation and corporate governance standards imposed by the American Recovery and
Reinvestment Act of 2009 for as long as Treasury holds the above securities.
Pursuant to the Holding Company Order, the Holding Company may not declare, make, or pay any cash
dividends (including dividends on the Preferred Stock, or its common stock) or other capital
distributions or purchase, repurchase or redeem or commit to purchase, repurchase, or redeem any
Holding Company equity stock without the prior written non-objection of the Board of Governors of
the Federal Reserve System.
|
Summary of Significant Accounting Policies | 9 Months Ended | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Sep. 30, 2011 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Summary of Significant Accounting Policies [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES |
NOTE 1 — SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of Presentation:
The consolidated financial statements include Central Federal Corporation (the Holding Company) and
its wholly owned subsidiaries, CFBank, Ghent Road, Inc., and Smith Ghent LLC, together with the
Holding Company referred to as “the Company.” The accompanying unaudited interim consolidated
financial statements have been prepared pursuant to the rules and regulations of the Securities and
Exchange Commission (the SEC) and in compliance with U.S. generally accepted accounting principles
(GAAP). Because this report is based on an interim period, certain information and footnote
disclosures normally included in financial statements prepared in accordance with GAAP have been
condensed or omitted.
In the opinion of the management of the Company, the accompanying unaudited interim consolidated
financial statements include all adjustments necessary for a fair presentation of the Company’s
financial condition and the results of operations for the periods presented. These adjustments are
of a normal recurring nature, unless otherwise disclosed in this Form 10-Q. The financial
performance reported for the Company for the three and nine months ended September 30, 2011 is not
necessarily indicative of the results that may be expected for the full year. This information
should be read in conjunction with the Company’s latest Annual Report to Stockholders and Form
10-K. Reference is made to the accounting policies of the Company described in Note 1 of the Notes
to Consolidated Financial Statements contained in the Company’s 2010 Annual Report that was filed
as Exhibit 13.1 to the Company’s Form 10-K for the year ended December 31, 2010. The Company has
consistently followed those policies in preparing this Form 10-Q.
Reclassifications: Some items in the prior period financial statements were reclassified
to conform to the current presentation. Reclassifications did not impact prior period net loss or
stockholders’ equity.
Earnings (Loss) Per Common Share: Basic earnings (loss) per common share is net income
(loss) available to common stockholders divided by the weighted average number of common shares
outstanding during the period. Diluted earnings per common share includes the dilutive effect of
additional potential common shares issuable under stock options and the stock warrant.
The following potential average common shares were anti-dilutive and not considered in computing
diluted loss per common share because the Company reported a net loss for the periods presented.
Adoption of New Accounting Standards:
In April 2011, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update
(ASU) No. 2011-02 to Receivables (ASC 310), A Creditor’s Determination of Whether a Restructuring
is a Troubled Debt Restructuring. This ASU amended existing guidance for assisting a creditor in
determining whether a restructuring is a troubled debt restructuring (TDR). The amendments clarify
the guidance for a creditor’s evaluation of whether it has granted a concession and whether a
debtor is experiencing financial difficulties. With regard to determining whether a concession has
been granted, the ASU clarifies that creditors are precluded from using the effective interest
method to determine whether a concession has been granted. In the absence of using the effective
interest method, a creditor must now focus on other considerations such as the value of the
underlying collateral, evaluation of other collateral or guarantees, the debtor’s ability to access
other funds at market rates, interest rate increases and whether the restructuring results in a
delay in payment that is insignificant. This guidance is effective for interim and annual
reporting periods beginning after June 15, 2011 and should be applied retrospectively to the
beginning of the annual period of adoption. For purposes of measuring impairment on newly
identified TDRs, the amendments should be applied prospectively for the first interim or annual
period beginning on or after June 15, 2011. As a result of adopting the amendments in ASU No.
2011-02, CFBank reassessed all restructurings that occurred on or after the beginning of the
current fiscal year (January 1, 2011) for identification as TDRs. CFBank identified as TDRs certain
receivables for which the allowance for credit losses had previously been measured under a general
allowance for credit losses methodology. Upon identifying those receivables as TDRs, CFBank
identified them as impaired under the guidance in Section 310-10-35. The amendments in ASU No.
2011-02 require prospective application of the impairment measurement guidance in Section 310-10-35
for those receivables newly identified as impaired. At the end of the first interim period of
adoption (September 30, 2011), the recorded investment in receivables for which the allowance for
credit losses was previously measured under a general allowance for credit losses methodology and
are now impaired under Section 310-10-35 was $4,763, and the allowance for credit losses associated
with those receivables, on the basis of a current valuation of loss, was $685.
Effect of Newly Issued But Not Yet Effective Accounting Standards:
In May 2011, the FASB issued ASU No. 2011-04 to Fair Value Measurement (ASC 820), Amendments to
Achieve Common Fair Value Measurement and Disclosure Requirements is U.S. GAAP and IFRSs. This ASU
amends existing guidance to achieve common fair value measurement and disclosure requirements
between U.S. and International accounting principles. Overall, the guidance is consistent with
existing U.S. accounting principles; however, there are some amendments that change a particular
principle or requirement for measuring fair value or for disclosing information about fair value
measurements. The amendments in this guidance are effective for interim and annual reporting
periods beginning after December 15, 2011. The Company is currently evaluating the impact of this
amendment on the consolidated financial statements.
In June 2011, the FASB issued ASU No. 2011-05 to Comprehensive Income (ASC 220), Presentation of
Comprehensive Income. This ASU amended existing guidance and eliminated the option to present the
components of other comprehensive income as part of the statement of changes in stockholder’s
equity. The amendment requires that comprehensive income be presented in either a single continuous
statement or in two separate consecutive statements. The amendments in this update are effective
for fiscal years, and interim periods within those years, beginning after December 15, 2011 and are
to be applied retrospectively. Early adoption is permitted. The adoption of this amendment will
change the Company’s presentation of the components of other comprehensive income, which is
currently shown as part of the consolidated statement of changes in stockholder’s equity.
In September 2011, the FASB issued ASU No. 2011-09 to Compensation — Retirement Benefits —
Multiemployer Plans, (ASC 715), Disclosures about an Employer’s Participation in a Multiemployer
Plan. The amendments in this ASU require that employers who participate in multiemployer pension
plans provide additional quantitative and qualitative disclosures. The amended disclosures will
provide users with more detailed information about an employer’s involvement in multiemployer
pension plans, including: the plan names and identifying numbers, the level of an employer’s
participation in the plans including contributions, the financial health of the multiemployer plans
including the funded status, and the nature of the employer commitments to the plan. The amendments
in this update are effective for annual periods for fiscal years ending after December 15, 2011,
with early adoption permitted. The amendments should be applied retrospectively for all prior
periods presented. The adoption of this ASU is not expected to have a material impact on the
Company’s consolidated financial statements.
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Other Borrowings | 9 Months Ended | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Sep. 30, 2011 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Other Borrowings [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
OTHER BORROWINGS |
NOTE 7 — OTHER BORROWINGS
There were no outstanding borrowings with the Federal Reserve Bank (FRB) at September 30, 2011 or
at December 31, 2010.
Assets pledged as collateral with the FRB were as follows:
Based on the collateral pledged, CFBank was eligible to borrow up to $14,993 from the FRB at
September 30, 2011. The decline in the pledged loan balances at September 30, 2011 was related to
a decline in eligible loans due to principal reductions, payoffs and credit downgrades compared to
December 31, 2010. In April 2011, CFBank was notified by the FRB that, due to regulatory
considerations, it was no longer eligible for borrowings under the FRB’s Primary Credit Program,
but was only eligible to borrow under the FRB’s Secondary Credit Program. Under the FRB’s Primary
Credit Program, CFBank had access to short-term funds at any time, for any reason based on the
collateral pledged. Under the Secondary Credit Program, which involves a higher level of
administration, each borrowing request must be individually underwritten and approved by the FRB,
CFBank’s collateral is automatically reduced by 10% and the cost of borrowings is 50bp higher.
CFBank has a line of credit with one commercial bank, totaling $1,000 at September 30, 2011. At
September 30, 2011 there was no outstanding balance on this line of credit. CFBank had a line of
credit with another commercial bank, totaling $3,000 at December 31, 2010, which was terminated by
the commercial bank in March 2011 due to CFBank’s financial performance. At December 31, 2010 and
at termination, there was no outstanding balance on this line of credit.
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Sep. 30, 2011 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
FHLB Advances and Regulatory Matters [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
REGULATROY MATTERS |
NOTE 12 — REGULATORY MATTERS
CFBank is subject to regulatory capital requirements administered by federal banking agencies.
Capital adequacy guidelines and, additionally for banks, prompt corrective action regulations,
involve quantitative measures of assets, liabilities, and certain off-balance-sheet items
calculated under regulatory accounting practices. Capital amounts and classifications are also
subject to qualitative judgments by regulators. Failure to meet capital requirements can initiate
regulatory action.
Prompt corrective action regulations provide five classifications: well capitalized, adequately
capitalized, undercapitalized, significantly undercapitalized, and critically undercapitalized,
although these terms are not used to represent overall financial condition. If adequately
capitalized, regulatory approval is required to accept brokered deposits. If undercapitalized,
capital distributions are limited, as is asset growth and expansion, and capital restoration plans
are required.
On May 25, 2011, the Holding Company and CFBank each consented to the issuance of an Order to Cease
and Desist (the Holding Company Order and the CFBank Order, respectively, and collectively, the
Orders) by the Office of Thrift Supervision (OTS), the primary regulator of the Holding Company and
CFBank at the time the Orders were issued. In July 2011, in accordance with the Dodd-Frank Wall
Street Reform and Consumer Protection Act (the Dodd-Frank Act), the Board of Governors of the
Federal Reserve System replaced the OTS as the primary regulator of the Holding Company and the
Comptroller of the Currency (OCC) replaced the OTS as the primary regulator of CFBank.
The Holding Company Order requires it, among other things, to: (i) submit by June 30, 2011 a
capital plan to regulators that establishes a minimum tangible capital ratio commensurate with the
Holding Company’s consolidated risk profile, reduces the risk from current debt levels and
addresses the Holding Company’s cash flow needs; (ii) not pay cash dividends, redeem stock or make
any other capital distributions without prior regulatory approval; (iii) not pay interest or
principal on any debt or increase any Holding Company debt or guarantee the debt of any entity
without prior regulatory approval; (iv) obtain prior regulatory approval for changes in directors
and senior executive officers; and (v) not enter into any new contractual arrangement related to
compensation or benefits with any director or senior executive officer without prior notification
to regulators.
The CFBank Order requires it, among other things, to: (i) have by September 30, 2011, and maintain
thereafter, 8% core capital and 12% total risk-based capital, after establishing an adequate
allowance for loan and lease losses; (ii) submit by June 30, 2011 a capital and business plan to
regulators that describes strategies to meet these required capital ratios and contains operating
strategies to achieve realistic core earnings; (iii) submit a contingency plan providing for a
merger or voluntary dissolution of CFBank if capital does not reach the required levels; (iv) not
originate, participate in or acquire any nonresidential real estate loans or commercial loans
without regulatory approval; (v) adopt a revised credit administration policy, problem asset
reduction plan, management succession plan and liquidity management policy; (vi) limit asset growth
to net interest credited on deposit liabilities absent prior regulatory approval for additional
growth; (vii) not pay cash dividends or make any other capital distributions without prior
regulatory approval; (viii) obtain prior regulatory approval for changes in directors and senior
executive officers; and (ix) not enter into any new contractual arrangement related to compensation
or benefits with any director or senior executive officer without prior notification to regulators;
(x) not enter into any significant arrangement or contract with a third party service provider
without prior regulatory approval; and (xi) comply with the Federal Deposit Insurance Corporation
(FDIC) limits on brokered deposits. As a result of the CFBank Order, CFBank is considered
“adequately capitalized” for regulatory purposes.
The requirements of the Orders will remain in effect until terminated, modified or suspended by
regulators.
Because CFBank is no longer considered to be well-capitalized, it is prohibited from accepting or
renewing brokered deposits without FDIC approval. CFBank received a limited waiver from the
prohibition on renewal of brokered deposits from the FDIC, which expired on September 20, 2011, and
a second limited waiver was requested and received, which expires on December 19, 2011. The
current waiver allows CFBank to rollover/renew core deposits in the Certificate of Deposit Account
Registry Service® (CDARS) program that have yet to mature or have matured and remained with CFBank
between September 21, 2011 and December 19, 2011. The prohibition on brokered deposits
significantly limits CFBank’s ability to participate in the CDARS program and impacts our liquidity
management. As a result of the losses in 2009, 2010 and the first quarter of 2011, management had
been concerned that CFBank would be restricted from accepting or renewing brokered deposits, in
addition to other regulatory restrictions, and moved aggressively in 2011, prior to receipt of the
CFBank Order, to build on-balance-sheet liquidity to deal with scheduled brokered deposit
maturities and the potential impact of other regulatory restrictions on liquidity. At September 30,
2011, CFBank had $56,383 in brokered deposits with maturity dates from October 2011 through August
2016. At September 30, 2011, cash and unpledged securities totaled $65,091, which was sufficient to
cover all brokered deposit maturities.
The Company announced the terms of a proposed registered common stock offering of up to $30,000,
consisting of a $25,000 rights offering and a $5,000 offering to a group of standby purchasers, on
August 9, 2011. Under the terms of the rights offering, all record holders of the Company’s common
stock as of a date to be determined will receive, at no charge, one subscription right for each
share of common stock held as of the record date. Each subscription right will entitle the holder
of the right to purchase 6.0480 shares of Company common stock at a subscription price of $1.00 per
share. The rights offering will commence as soon as practicable after SEC review of the
registration statement relating to the offering. Any shares not subscribed for in the rights
offering may be offered in a public offering. In addition, for each four shares of common stock
purchased, purchasers will receive, at no charge, one warrant to purchase one additional share of
common stock at a purchase price of $1.00 per share. The warrants will be exercisable for three
years. The Company has separately entered into a series of standby purchase agreements with a
group of investors led by Timothy T. O’Dell, Thad R. Perry and Robert E. Hoeweler. Under the
standby purchase agreements the standby purchasers will acquire 5.0 million shares of Company
common stock at a price of $1.00 per share and receive warrants with the same terms and conditions
as all purchasers in the rights offering. The standby purchasers have conditioned their purchase
of shares of common stock upon the receipt by the Company of at least $16,500 in net proceeds from
the rights offering. The registration statement is on file with the SEC, but is not yet effective.
We have taken such actions as we believe are necessary to comply with all requirements of the
Orders which are currently effective and we are continuing to work toward compliance with the
provisions of the Orders having future compliance dates. Although we did not comply with the
higher capital ratio requirements by the September 30, 2011 required date, based on informal
discussions with our regulators and due to the pendency of the stock offering, management does not
expect that any additional material restrictions or penalties will be imposed by regulators as a
result of not complying with the September 30, 2011 deadline, assuming we are able to raise
sufficient capital in the stock offering in a reasonable period of time.
Actual and required capital amounts and ratios of CFBank are presented below:
The CFBank Order required CFBank to have by September 30, 2011, and maintain thereafter, 8%
Tier 1 (Core) Capital to adjusted total assets and 12% Total Capital to risk weighted assets.
CFBank will not be considered well-capitalized as long as it is subject to individual minimum
capital requirements.
The Qualified Thrift Lender test requires at least 65% of assets be maintained in housing-related
finance and other specified areas. If this test is not met, limits are placed on growth,
branching, new investments, FHLB advances and dividends, or CFBank must convert to a commercial
bank charter. Management believes that this test has been and continues to be met at September 30,
2011.
CFBank converted from a mutual to a stock institution in 1998, and a “liquidation account” was
established at $14,300, which was the net worth reported in the conversion prospectus. The
liquidation account represents a calculated amount for the purposes described below, and it does
not represent actual funds included in the consolidated financial statements of the Company.
Eligible depositors who have maintained their accounts, less annual reductions to the extent they
have reduced their deposits, would receive a distribution from this account if CFBank liquidated.
Dividends may not reduce CFBank’s stockholder’s equity below the required liquidation account
balance.
Dividend Restrictions
The Holding Company’s principal source of funds for dividend payments is dividends received from
CFBank. Banking regulations limit the amount of dividends that may be paid without prior approval
of regulatory agencies. Under these regulations, the amount of dividends that may be paid in any
calendar year is limited to the current year’s net profits, combined with the retained net profits
of the preceding two years, subject to the capital requirements described above. CFBank must
receive regulatory approval prior to any dividend payments. See Note 10 — Preferred Stock for a
description of restrictions on the payment of dividends on the Company’s common stock as a result
of participation in the TARP Capital Purchase Program and pursuant to the Holding Company Order.
The Holding Company’s available cash at September 30, 2011 is sufficient to cover operating
expenses, at their current level, for approximately 8 months. The Board of Directors elected to
defer scheduled dividend payments related to the Preferred Stock beginning with the November 15,
2010 payment, and the interest payments on the subordinated debentures beginning with the December
30, 2010 payment, in order to preserve cash at the Holding Company. The Company expects that the
Board will also elect to defer future payments and, pursuant to the Holding Company Order, the
Holding Company may not pay dividends on the Preferred Stock without the prior written notice to
and written non-objection from the Board of Governors of the Federal Reserve System.
As of September 30, 2011, pursuant to the CFBank Order, CFBank may not declare or pay dividends or
make any other capital distributions without receiving the prior written approval of the OCC.
Future dividend payments by CFBank to the Holding Company would be based on future earnings and the
approval of the OCC. The Holding Company is significantly dependent on dividends from CFBank to
provide the liquidity necessary to meet its obligations. Assuming we are able to raise sufficient
capital in the stock offering, a portion of the proceeds from the stock offering are expected to be
retained at the Holding Company for general corporate purposes, and are expected to be sufficient
to support the Holding Company’s cash requirements. Given the uncertainty surrounding CFBank’s
future ability to pay dividends to the Holding Company, the current levels of problem assets, the
continuing depressed economy, the prohibition on origination of nonresidential real estate loans
and commercial loans contained in the CFBank Order and the longer periods of time necessary to
workout problem assets in the current economy, the Board of Directors and management are exploring
additional funding sources to support its working capital needs. In the current economic
environment, however, there can be no assurance that it will be able to do so or, if it can, what
the cost of doing so will be.
|
Subordinated Debentures | 9 Months Ended |
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Sep. 30, 2011 | |
Subordinated Debentures [Abstract] | |
SUBORDINATED DEBENTURES |
NOTE 8 — SUBORDINATED DEBENTURES
In December 2003, Central Federal Capital Trust I, a trust formed by the Company, closed a pooled
private offering of 5,000 trust preferred securities with a liquidation amount of $1 per security.
The Company issued $5,155 of subordinated debentures to the trust in exchange for ownership of all
of the common stock of the trust and the proceeds of the preferred securities sold by the trust.
The Company is not considered the primary beneficiary of this trust (variable interest entity);
therefore, the trust is not consolidated in the Company’s financial statements, but rather the
subordinated debentures are shown as a liability. The Company’s investment in the common stock of
the trust was $155 and is included in other assets.
The Company may redeem the subordinated debentures, in whole or in part, in a principal amount with
integral multiples of $1, on or after December 30, 2008 at 100% of the principal amount, plus
accrued and unpaid interest. The subordinated debentures mature on December 30, 2033. The
subordinated debentures are also redeemable in whole or in part, from time to time, upon the
occurrence of specific events defined within the trust indenture. There are no required principal
payments on the subordinated debentures over the next five years. The Company has the option to
defer interest payments on the subordinated debentures from time to time for a period not to exceed
five consecutive years. The Company’s Board of Directors elected to defer interest payments
beginning with the quarterly payment due on December 31, 2010 in order to preserve cash at the
Holding Company. As of September 30, 2011, four quarterly interest payments had been deferred.
Cumulative deferred interest payments totaled $166 at September 30, 2011 and $40 at December 31,
2010.
The trust preferred securities and subordinated debentures have a variable rate of interest, reset
quarterly, equal to the three-month London Interbank Offered Rate (LIBOR) plus 2.85%. The total
rate in effect was 3.10% at September 30, 2011 and 3.15% at December 31, 2010.
Pursuant to the Holding Company Order, as defined in Note 12 — Regulatory Matters, the Holding
Company may not, directly or indirectly, incur, issue, renew, rollover, or pay interest or
principal on any debt (including the subordinated debentures) or commit to do so, increase any
current lines of credit, or guarantee the debt of any entity, without prior written notice to and
written non-objection from the Board of Governors of the Federal Reserve System.
|
FHLB Advances | 9 Months Ended | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Sep. 30, 2011 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
FHLB Advances and Regulatory Matters [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
FHLB ADVANCES |
NOTE 6 —FHLB ADVANCES
Advances from the FHLB were as follows:
Each advance is payable at its maturity date, with a prepayment penalty for fixed-rate advances.
The advances were collateralized as follows:
Based on the collateral pledged to FHLB and CFBank’s holdings of FHLB stock, CFBank was eligible to
borrow up to a total of $20,601 from the FHLB at September 30, 2011. In May 2011, CFBank was
notified by the FHLB that, due to regulatory considerations, CFBank is only eligible for future
advances with a maximum maturity of one year.
Payment information
|
Consolidated Statement of Changes in Stockholders' Equity (Unaudited) (Parenthetical) In Thousands | 9 Months Ended | |
---|---|---|
Sep. 30, 2011 | Sep. 30, 2010 | |
Stock-based incentive plan, shares | 9,134 | 385 |
Additional Paid-In Capital | ||
Stock-based incentive plan, shares | 9,134 | 385 |
Accumulated Deficit | ||
Stock-based incentive plan, shares | 385 |
Securities | 9 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Sep. 30, 2011 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Securities [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
SECURITIES |
NOTE 2 — SECURITIES
The following table summarizes the amortized cost and fair value of the available-for-sale
securities portfolio at September 30, 2011 and December 31, 2010 and the corresponding amounts of
unrealized gains and losses recognized in accumulated other comprehensive income (loss):
There was no other-than-temporary impairment recognized in accumulated other comprehensive
income (loss) for securities available for sale at September 30, 2011 or December 31, 2010.
The proceeds from sales and calls of securities and the associated gains for the three and nine
months ended September 30, 2011 and 2010 are listed below.
At September 30, 2011 and December 31, 2010, there were no debt securities contractually due at a
single maturity date. The amortized cost and fair value of mortgage-backed securities and
collateralized mortgage obligations which do not have a single maturity date, totaled $19,598 and
$20,024 at September 30, 2011, respectively, and $28,126 and $28,798 at December 31, 2010,
respectively.
Fair value of securities pledged was as follows:
At September 30, 2011 and December 31, 2010, there were no holdings of securities of any one
issuer, other than U.S. government-sponsored entities and agencies, in an amount greater than 10%
of stockholders’ equity.
The following table summarizes securities with unrealized losses at September 30, 2011 and December
31, 2010 aggregated by major security type and length of time in a continuous unrealized loss
position.
The unrealized loss at September 30, 2011 is related to two Ginnie Mae collateralized mortgage
obligations, and the unrealized loss at December 31, 2010 is related to one Ginnie Mae
collateralized mortgage obligation. These securities carry the full faith and credit guarantee of
the U.S. government. Because the decline in fair value is attributable to changes in interest
rates, and not credit quality, and because the Company does not have the intent to sell these
securities and it is likely that it will not be required to sell these securities before their
anticipated recovery, the Company does not consider these securities to be other-than-temporarily
impaired at September 30, 2011.
|
Loans | 9 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Sep. 30, 2011 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Loans [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
LOANS |
NOTE 3 — LOANS
The following table presents the recorded investment in loans by portfolio segment. The recorded
investment in loans includes the principal balance outstanding adjusted for purchase premiums and
discounts, deferred loan fees and costs and includes accrued interest.
Construction loans consisted of $2,324 in single-family residential loans and $2,595 in commercial
real estate loans at December 31, 2010. There were no construction loans at September 30, 2011.
The ALLL is a valuation allowance for probable incurred credit losses in the loan portfolio
based on management’s evaluation of various factors including past loan loss experience, the
nature and volume of the portfolio, information about specific borrower situations and
estimated collateral values, economic conditions and other factors. A provision for loan
losses is charged to operations based on management’s periodic evaluation of these and other
pertinent factors described in Note 1 of the Notes to Consolidated Financial Statements
contained in the Company’s 2010 Annual Report that was filed as Exhibit 13.1 to the Company’s
Form 10-K for the year ended December 31, 2010.
The following tables present the activity in the ALLL by portfolio segment for the three and nine
months ended September 30, 2011:
Activity in the ALLL for the three and nine months ended September 30, 2010 was as follows:
The following table presents the balance in the ALLL and the recorded investment in loans by
portfolio segment and based on the impairment method as of September 30, 2011:
The following table presents the balance in the ALLL and the recorded investment in loans by
portfolio segment and based on the impairment method as of December 31, 2010:
The following table presents loans individually evaluated for impairment by class of loans at
September 30, 2011. The unpaid principal balance is the contractual principal balance outstanding.
The recorded investment is the unpaid principal balance adjusted for partial charge-offs, purchase
premiums and discounts, deferred loan fees and costs and includes accrued interest. There was no
cash-basis interest income recognized during the three and nine months ended September 30, 2011.
The following table presents loans individually evaluated for impairment by class of loans as of
December 31, 2010:
The following table presents the recorded investment in nonaccrual loans by class of loans:
Nonaccrual loans include both smaller balance single-family mortgage and consumer loans that are
collectively evaluated for impairment and individually classified impaired loans. There were no
loans 90 days or more past due and still accruing interest at September 30, 2011 or December 31,
2010.
The following table presents the aging of the recorded investment in past due loans as of September
30, 2011 by class of loans:
The following table presents the aging of the recorded investment in past due loans as of December
31, 2010 by class of loans:
Nonaccrual loans include some loans that were modified and identified as TDRs, where
concessions had been granted to borrowers experiencing financial difficulties. These concessions
could have included a reduction in the interest rate, payment extensions, principal forgiveness,
and other actions intended to maximize collection.
Nonaccrual TDRs were as follows:
The Company allocated $70 and $714 of specific reserves to loans whose terms have been modified in
TDRs and were nonaccrual as of September 30, 2011 and December 31, 2010, respectively. The Company
has not committed to lend additional amounts as of September 30, 2011 or December 31, 2010 to
customers with outstanding loans that are classified as nonaccrual TDRs.
Nonaccrual loans at September 30, 2011 and December 31, 2010, do not include $6,046 and $839,
respectively of TDRs where customers have established a sustained period of repayment performance,
generally six months, loans are current according to their modified terms and repayment of the
remaining contractual payments is expected. These loans are included in impaired loan totals.
During the nine months ended September 30, 2011, the terms of certain loans were modified as TDRs.
The modification of the terms of such loans may have included one or a combination of the
following: a reduction of the stated interest rate of the loan; an increase in the stated rate of
interest lower than the current market rate for new debt with similar risk; an extension of the
maturity date; or a change in the payment terms.
Modifications involving a reduction of the stated interest rate of the loan were for periods
ranging from 1 to 6 years. Modifications involving an extension of the maturity date were for
periods ranging from 9 months to 10 years.
The following table presents loans by class modified as TDRs that occurred during the nine months
ended September 30, 2011:
The TDRs described above increased the allowance for loan losses by $685 and did not result in any
charge-offs during the nine months ended September 30, 2011.
There was one multi-family residential real estate loan with a total recorded investment of $718 at
September 30, 2011 which had been modified as a TDR in October 2010 for which there was a payment
default within twelve months following the modification during the nine months ended September 30,
2011. A loan is considered to be in payment default once it is 90 days contractually past due
under the modified terms, at which time the loan is re-evaluated to determine whether an impairment
loss should be recognized, either through a write-off or specific valuation allowance, so that the
loan is reported, net, at the present value of estimated future cash flows, or at the fair value of
collateral, less cost to sell, if repayment is expected solely from the collateral. The TDR that
subsequently defaulted resulted in a charge-off of $800 during the three months ended September 30,
2011.
The terms of certain other loans were modified during the period ended September 30, 2011 that did
not meet the definition of a TDR. These loans have a total recorded investment as of September 30,
2011 of $16,032. The modification of these loans involved either a modification of the terms of a
loan to borrowers who were not experiencing financial difficulties, a delay in a payment that was
considered to be insignificant or there were no concessions granted.
In order to determine whether a borrower is experiencing financial difficulty, an evaluation is
performed of the probability that the borrower will be in payment default on any of its debt in the
foreseeable future without the modification. This evaluation is performed under the Company’s
internal underwriting policy.
Certain loans which were modified during the nine months ended September 30, 2011 and did not meet
the definition of a TDR as the modification was a delay in a payment that was considered to be
insignificant had delays in payment ranging from 15 days to 6 months.
Credit Quality Indicators:
The Company categorizes loans into risk categories based on relevant information about the ability
of borrowers to service their debt, such as current financial information, historical payment
experience, credit documentation, public information, and current economic trends, among other
factors. Management analyzes loans individually by classifying the loans as to credit risk. This
analysis includes commercial, commercial real estate, and multi-family loans. Groups of homogenous
loans, such as single-family mortgage loans and consumer loans, are not risk-rated. This analysis
is performed on an ongoing basis. The following definitions are used for risk ratings:
Special Mention. Loans classified as special mention have a potential weakness that
deserves management’s close attention. If left uncorrected, these potential weaknesses may result
in deterioration of the repayment prospects for the loan or of CFBank’s credit position at some
future date.
Substandard. Loans classified as substandard are inadequately protected by the current net
worth and paying capacity of the obligor or of the collateral pledged, if any. Loans so classified
have a well-defined weakness or weaknesses that jeopardize the liquidation of the debt. They are
characterized by the distinct possibility that there will be some loss if the deficiencies are not
corrected.
Doubtful. Loans classified as doubtful have all the weaknesses inherent in those
classified as substandard, with the added characteristic that the weaknesses make collection or
liquidation in full, on the basis of currently existing facts, condition, and values, highly
questionable and improbable.
Loans not meeting the criteria to be classified into one of the above categories are considered to
be pass-rated loans. Loans listed as not rated are primarily groups of homogeneous loans. Past
due information is the primary credit indicator for groups of homogenous loans. The recorded
investment in loans by risk category and by class of loans as of September 30, 2011 and based on
the most recent analysis performed follows. There were no loans rated doubtful at September 30,
2011.
The recorded investment in loans by risk category and by class of loans as of December 31, 2010
follows. There were no loans rated doubtful at December 31, 2010.
Management’s loan review process includes the identification of substandard loans where
accrual of interest continues because the loans are under 90 days delinquent and/or the loans are
well secured, a complete documentation review had been performed, and the loans are in the active
process of being collected, but the loans exhibit some type of weakness that could lead to
nonaccrual status in the future. At September 30, 2011, in addition to the nonperforming loans
discussed previously, twelve commercial loans totaling $3,505, three multi-family residential real
estate loans totaling $2,246 and seventeen commercial real estate loans totaling $11,142 were
classified as substandard. None of these loans was 30 days or more past due at September 30, 2011.
At December 31, 2010, in addition to the nonperforming loans discussed previously, nine commercial
loans totaling $3,250, six multi-family residential real estate loans totaling $5,781 and eight
commercial real estate loans totaling $9,504 were classified as substandard. One of these loans,
totaling $1,183 was 37 days delinquent at December 31, 2010 and none of the remaining loans was 30
days or more past due.
|
Common Stock Warrant | 9 Months Ended |
---|---|
Sep. 30, 2011 | |
Common Stock Warrant [Abstract] | |
COMMON STOCK WARRANT |
NOTE 11 — COMMON STOCK WARRANT
In connection with the issuance of the Preferred Stock, the Company also issued to Treasury a
warrant to purchase 336,568 shares of the Company’s common stock at an exercise price of $3.22 per
share, which would represent an aggregate investment, if exercised for cash, of approximately
$1,100 in Company common stock. The exercise price may be paid either by withholding a number of
shares of common stock issuable upon exercise of the warrant equal to the value of the aggregate
exercise price of the warrant, determined by reference to the market price of the Company’s common
stock on the trading day on which the warrant is exercised, or, if agreed to by the Company and the
warrant holder, by the payment of cash equal to the aggregate exercise price. The warrant may be
exercised any time before December 5, 2018.
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Foreclosed Assets | 9 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Sep. 30, 2011 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Foreclosed Assets [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
FORECLOSED ASSETS |
NOTE 4 — FORECLOSED ASSETS
Foreclosed assets at September 30, 2011 and December 31, 2010 included three commercial real
estate properties, while foreclosed assets at December 31, 2010 also included inventory related to
a commercial loan. During the nine months ended September 30, 2011, a $1,139 valuation allowance
was established on one of the commercial real estate properties, undeveloped commercial real estate
located in Columbus, Ohio, due to a decline in real estate values. A $1,139 charge resulting from
this valuation allowance is included in foreclosed assets expense in the consolidated statement of
operations.
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Other Comprehensive Income (Loss) | 9 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Sep. 30, 2011 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Preferred Stock and Other Comprehensive Income (Loss) [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
OTHER COMPREHENSIVE INCOME (LOSS) |
NOTE 14 — OTHER COMPREHENSIVE INCOME (LOSS)
Other comprehensive income (loss) and related tax effects are as follows for the three and nine
months ended September 30, 2011 and 2010.
The following is a summary of the accumulated other comprehensive income balances net of tax.
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Contingent Liabilities | 9 Months Ended |
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Sep. 30, 2011 | |
Contingent Liabilities [Abstract] | |
CONTINGENT LIABILITIES |
NOTE 15 — CONTINGENT LIABILITIES
CFBank participates in a multi-employer contributory trusteed pension plan. On August 10, 2011,
CFBank was notified by the trustees of the plan that, due to CFBank’s financial performance and the
CFBank Order, it will be required make a contribution or provide a letter of credit in the amount
of the funding shortfall plus estimated cost of annuitization of benefits in the plan, which was
determined to be $579. CFBank obtained a letter of credit from the
FHLB for this amount. The cost of obtaining the letter credit was $1. CFBank may be
required to make additional contributions or provide additional amounts via an expanded letter of
credit if the funding shortfall increases in the future. If CFBank’s financial condition should
worsen in the future, the trustee may execute the letter of credit, resulting in a charge to
CFBank.
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Stock-Based Compensation | 9 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Sep. 30, 2011 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Stock-Based Compensation [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
STOCK-BASED COMPENSATION |
NOTE 9 — STOCK-BASED COMPENSATION
The Company has three stock-based compensation plans (the Plans), as described below, under which
awards have been or may be issued. Total compensation cost that was charged against income for
those Plans totaled $8 and $34, respectively, for the three and nine months ended September 30,
2011. Total compensation cost that was charged (credited) to income for those Plans was $6 and
($6), respectively, for the three and nine months ended September 30, 2010. Compensation cost
resulted in a credit to income for the nine months ended September 30, 2010 due to forfeitures of
previous stock option grants and restricted stock awards in excess of the cost of those earned
during the periods. The total income tax (expense) benefit was $1 and $7, respectively, for the
three and nine months ended September 30, 2011, and $1 and ($1), respectively, for the three and
nine months ended September 30, 2010.
The Plans, which are stockholder-approved, provide for stock option grants and restricted stock
awards to directors, officers and employees. The 1999 Stock-Based Incentive Plan, which expired
July 13, 2009, provided 193,887 shares for stock option grants and 77,554 shares for restricted
stock awards. The 2003 Equity Compensation Plan (2003 Plan), as amended and restated, provided an
aggregate of 500,000 shares for stock option grants and restricted stock awards, of which up to
150,000 shares could be awarded in the form of restricted stock awards. The 2009 Equity
Compensation Plan, which was approved by stockholders on May 21, 2009, replaced the 2003 Plan and
provides 1,000,000 shares, plus any remaining shares available to grant or that are later forfeited
or expire under the 2003 Plan, that may be issued as stock option grants, stock appreciation rights
or restricted stock awards.
Stock Options
The Plans permit the grant of stock options to directors, officers and employees for up to
1,693,887 shares of common stock, net of restricted stock awards. Option awards are granted with
an exercise price equal to the market price of the Company’s common stock on the date of grant,
generally have vesting periods ranging from one to three years and are exercisable for ten years
from the date of grant. Unvested stock options immediately vest upon a change in control.
The fair value of each option award is estimated on the date of grant using a closed form option
valuation (Black-Scholes) model that uses the assumptions noted in the table below. Expected
volatilities are based on historical volatilities of the Company’s common stock. The Company uses
historical data to estimate option exercise and post-vesting termination behavior. Management and
other employee stock options are tracked separately. The expected term of options granted is based
on historical data and represents the period of time that options granted are expected to be
outstanding, which takes into account that the options are not transferable. The risk-free
interest rate for the expected term of the option is based on the U.S. Department of the Treasury
(Treasury) yield curve in effect at the time of the grant.
The fair value of the options granted during the three and nine months ended September 30, 2011 and
2010 was determined using the following weighted-average assumptions as of the grant dates.
A summary of stock option activity in the Plans for the nine months ended September 30, 2011
follows:
During the nine months ended September 30, 2011, there were 52,796 stock options canceled or
forfeited. Previously recognized expense associated with nonvested forfeited shares is reversed.
Information related to the Plans during the three and nine months ended September 30, 2011 and 2010
follows.
As of September 30, 2011, there was $13 of total unrecognized compensation cost related to
nonvested stock options granted under the Plans. The cost is expected to be recognized over a
weighted-average period of 1.5 years. Substantially all of the 89,350 nonvested stock options at
September 30, 2011 are expected to vest.
Restricted Stock Awards
The Plans permit the grant of restricted stock awards to directors, officers and employees.
Compensation is recognized over the vesting period of the shares based on the fair value of the
stock at grant date. The fair value of the stock was determined using the closing share price on
the date of grant and shares have vesting periods ranging from one to three years. There were
1,151,158 shares available to be issued, net of option awards under the Plans at September 30,
2011. There were no shares issued during the nine months ended September 30, 2011.
A summary of changes in the Company’s nonvested restricted shares for the nine months ended
September 30, 2011 follows:
As of September 30, 2011, there was $16 of total unrecognized compensation cost related to
nonvested shares granted under the Plans. The cost is expected to be recognized over a
weighted-average period of 1.4 years. The total fair value of shares vested during the three and
nine months ended September 30, 2011 was $2 and $14, respectively. The total fair value of shares
vested during the nine months ended September 30, 2010 was $24. There were no shares vested during
the three months ended September 30, 2010.
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Derivative Instruments | 9 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Sep. 30, 2011 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Derivative Instruments [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
DERIVATIVE INSTRUMENTS |
NOTE 13 — DERIVATIVE INSTRUMENTS
Interest-rate swaps
CFBank utilizes interest-rate swaps as part of its asset/liability management strategy to help
manage its interest rate risk position, and does not use derivatives for trading purposes. The
notional amount of the interest-rate swaps does not represent amounts exchanged by the parties.
The amount exchanged is determined by reference to the notional amount and the other terms of the
individual interest-rate swap agreements. CFBank was party to interest-rate swaps with a combined
notional amount of $7,998 at September 30, 2011 and $8,278 at December 31, 2010.
The objective of the interest-rate swaps is to protect the related fixed rate commercial real
estate loans from changes in fair value due to changes in interest rates. CFBank has a program
whereby it lends to its borrowers at a fixed rate with the loan agreement containing a two-way
yield maintenance provision, which will be invoked in the event of prepayment of the loan, and is
expected to exactly offset the fair value of unwinding the swap. The yield maintenance provision
represents an embedded derivative which is bifurcated from the host loan contract and, as such, the
swaps and embedded derivatives are not designated as hedges. Accordingly, both instruments are
carried at fair value and changes in fair value are reported in current period earnings. CFBank
currently does not have any derivatives designated as hedges.
Contingent Features: The counterparty to CFBank’s interest-rate swaps is exposed to credit risk
whenever the interest-rate swaps are in a liability position. At September 30, 2011, CFBank had
pledged $1,744 in securities as collateral for these derivatives. Should the liability increase,
CFBank will be required to pledge additional collateral, and has additional collateral available to
pledge, if required.
Additionally, CFBank’s interest-rate swap instruments contain provisions that require CFBank to
remain well capitalized under regulatory capital standards. The interest-rate swaps could be called
by the counterparty as a result of CFBank’s failure to maintain well-capitalized status due to the
CFBank Order. While the counterparty has not requested payment at this time, it may elect to do so
at any time while CFBank’s capital is less than required for well-capitalized status. If the
counterparty elected to request payment, CFBank would incur an expense of $1,023 based on the
September 30, 2011 valuation of the interest-rate swaps. The yield maintenance provisions may not
be unwound to offset the expense associated with repayment of the interest-rate swaps, as they may
only be invoked in the event of prepayment of the borrowers’ loans. Should interest rates decrease
from September 30, 2011 levels, the expense may increase in the event the swaps are called.
Summary information about the derivative instruments is as follows:
The fair value of the yield maintenance provisions and interest-rate swaps is recorded in other
assets and other liabilities, respectively, in the consolidated balance sheet. Changes in the fair
value of the yield maintenance provisions and interest-rate swaps are reported currently in
earnings, as other noninterest income in the consolidated statements of operations. There were no
net gains or losses recognized in earnings related to yield maintenance provisions and
interest-rate swaps for the three or nine months ended September 30, 2011 or 2010.
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