x
|
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
|
Ohio | 31-1626393 | |
(State or other jurisdiction of | (I.R.S. Employer | |
incorporation or organization) | Identification Number) |
Large accelerated filer o
|
Accelerated filer x
|
Non-accelerated filer o (Do not check if a smaller reporting company)
|
Smaller reporting company o
|
PART I – FINANCIALINFORMATION |
2
|
|
Item 1. Financial Statements
|
2
|
|
2
|
||
3
|
||
4
|
||
5
|
||
6
|
||
7
|
||
33
|
||
34
|
||
42
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||
Item 4. Controls and Procedures
|
43
|
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Item 4T. Controls and Procedures
|
43
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PART II. OTHER INFORMATION
|
44
|
|
Item 1. Legal Proceedings
|
44
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Item 1A. Risk Factors
|
44
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44
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||
Item 3. Defaults Upon Senior Securities
|
44
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Item 4. (Removed and Reserved)
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44
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Item 5. Other Information
|
44
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Item 6. Exhibits
|
45
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|
SIGNATURES |
46
|
June 30,
2011
|
December 31,
2010
|
|||||||
(Unaudited) | ||||||||
ASSETS:
|
||||||||
Cash and due from banks
|
$ | 13,191 | 10,817 | |||||
Interest-bearing demand deposits
|
13,650 | 182 | ||||||
Total cash and cash equivalents
|
26,841 | 10,999 | ||||||
Investment securities:
|
||||||||
Available-for-sale, at fair value
|
250,769 | 235,882 | ||||||
Held-to-maturity, at cost
|
11,243 | 12,141 | ||||||
Federal Reserve Bank stock, at cost
|
941 | 939 | ||||||
Federal Home Loan Bank stock, at cost
|
2,091 | 2,091 | ||||||
Loans, net
|
454,447 | 452,350 | ||||||
Premises and equipment, net
|
17,195 | 16,017 | ||||||
Goodwill
|
5,915 | 5,915 | ||||||
Bank owned life insurance
|
14,536 | 14,242 | ||||||
Other assets
|
8,972 | 9,558 | ||||||
TOTAL ASSETS
|
$ | 792,950 | 760,134 | |||||
LIABILITIES:
|
||||||||
Deposits:
|
||||||||
Noninterest-bearing
|
$ | 98,558 | 98,994 | |||||
Interest-bearing
|
580,193 | 539,545 | ||||||
Total deposits
|
678,751 | 638,539 | ||||||
Short-term borrowings
|
12,198 | 21,691 | ||||||
Long-term debt
|
22,061 | 23,120 | ||||||
Accrued interest and other liabilities
|
5,824 | 6,077 | ||||||
TOTAL LIABILITIES
|
718,834 | 689,427 | ||||||
SHAREHOLDERS’ EQUITY:
|
||||||||
Preferred shares – no par value, authorized 1,000,000 shares,none outstanding
|
- | - | ||||||
Common shares – no par value, authorized 12,000,000 shares,issued 7,445,514 shares at June 30, 2011 and December 31, 2010
|
11,068 | 11,068 | ||||||
Surplus
|
15,469 | 15,447 | ||||||
Retained earnings
|
56,198 | 54,045 | ||||||
Treasury shares at cost, 755,771 shares at June 30, 2011 and December 31, 2010
|
(11,698 | ) | (11,698 | ) | ||||
Accumulated other comprehensive income, net of taxes
|
3,079 | 1,845 | ||||||
TOTAL SHAREHOLDERS’ EQUITY
|
74,116 | 70,707 | ||||||
TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY
|
$ | 792,950 | 760,134 |
Three Months Ended
June 30, |
Six Months Ended
June 30, |
|||||||||||||||
2011
|
2010
|
2011
|
2010
|
|||||||||||||
INTEREST INCOME:
|
||||||||||||||||
Interest and fees on loans
|
$ | 6,477 | 6,799 | 12,995 | 13,631 | |||||||||||
Interest on investment securities –
|
||||||||||||||||
Taxable
|
914 | 882 | 1,790 | 1,812 | ||||||||||||
Non-taxable
|
640 | 783 | 1,347 | 1,591 | ||||||||||||
Other short-term investments
|
68 | 68 | 97 | 100 | ||||||||||||
TOTAL INTEREST INCOME
|
8,099 | 8,532 | 16,229 | 17,134 | ||||||||||||
INTEREST EXPENSE:
|
||||||||||||||||
Interest on deposits
|
1,499 | 1,928 | 3,083 | 3,904 | ||||||||||||
Interest on short-term borrowings
|
7 | 4 | 17 | 13 | ||||||||||||
Interest on long-term debt
|
161 | 173 | 339 | 350 | ||||||||||||
TOTAL INTEREST EXPENSE
|
1,667 | 2,105 | 3,439 | 4,267 | ||||||||||||
NET INTEREST INCOME
|
6,432 | 6,427 | 12,790 | 12,867 | ||||||||||||
PROVISION FOR LOAN LOSSES
|
224 | 511 | 888 | 719 | ||||||||||||
NET INTEREST INCOME AFTER PROVISION FOR LOAN LOSSES
|
6,208 | 5,916 | 11,902 | 12,148 | ||||||||||||
NON-INTEREST INCOME:
|
||||||||||||||||
Trust income
|
536 | 441 | 1,019 | 910 | ||||||||||||
Service charges and fees on deposit accounts
|
952 | 1,005 | 1,853 | 1,931 | ||||||||||||
Net gain on sales of securities
|
124 | 51 | 419 | 128 | ||||||||||||
Bank owned life insurance income
|
148 | 944 | 294 | 1,097 | ||||||||||||
Gains from sales of mortgage loans
|
24 | 18 | 57 | 48 | ||||||||||||
Other operating income
|
72 | 55 | 145 | 153 | ||||||||||||
TOTAL NON-INTEREST INCOME
|
1,856 | 2,514 | 3,787 | 4,267 | ||||||||||||
NON-INTEREST EXPENSE:
|
||||||||||||||||
Salaries and employee benefits
|
2,955 | 2,771 | 6,007 | 5,539 | ||||||||||||
Equipment expenses
|
240 | 220 | 457 | 424 | ||||||||||||
Occupancy expense, net
|
407 | 441 | 862 | 965 | ||||||||||||
State franchise tax
|
196 | 174 | 392 | 355 | ||||||||||||
Marketing
|
110 | 126 | 225 | 202 | ||||||||||||
Intangible amortization
|
14 | 14 | 28 | 28 | ||||||||||||
FDIC insurance premiums
|
188 | 229 | 468 | 447 | ||||||||||||
Other non-interest expense
|
1,218 | 1,243 | 2,690 | 2,465 | ||||||||||||
TOTAL NON-INTEREST EXPENSE
|
5,328 | 5,218 | 11,129 | 10,425 | ||||||||||||
INCOME BEFORE INCOME TAXES
|
2,736 | 3,212 | 4,560 | 5,990 | ||||||||||||
PROVISION FOR INCOME TAXES
|
713 | 527 | 1,059 | 1,164 | ||||||||||||
INCOME FROM CONTINUING OPERATIONS
|
2,023 | 2,685 | 3,501 | 4,826 | ||||||||||||
INCOME (LOSS) FROM DISCONTINUED OPERATIONS, NET OF TAX
|
(31 | ) | 67 | 793 | 138 | |||||||||||
NET INCOME
|
$ | 1,992 | 2,752 | 4,294 | 4,964 | |||||||||||
Dividends declared per common share
|
$ | 0.16 | 0.16 | 0.32 | 0.32 | |||||||||||
Basic earnings per common share:
|
||||||||||||||||
Continuing operations
|
$ | 0.30 | 0.40 | 0.52 | 0.72 | |||||||||||
Discontinued operations
|
- | 0.01 | 0.12 | 0.02 | ||||||||||||
Diluted earnings per common share:
|
||||||||||||||||
Continuing operations
|
$ | 0.30 | 0.40 | 0.52 | 0.72 | |||||||||||
Discontinued operations
|
- | 0.01 | 0.12 | 0.02 | ||||||||||||
Weighted average common shares outstanding:
|
||||||||||||||||
Basic
|
6,689,743 | 6,687,232 | 6,689,743 | 6,687,232 | ||||||||||||
Diluted
|
6,746,791 | 6,742,663 | 6,744,375 | 6,736,435 |
Three Months Ended
June 30,
|
Six Months Ended
June 30,
|
|||||||||||||||
2011
|
2010
|
2011
|
2010
|
|||||||||||||
Net Income
|
$ | 1,992 | 2,752 | 4,294 | 4,964 | |||||||||||
Other comprehensive income:
|
||||||||||||||||
Net unrealized gain on available-for-sale securities (net of taxes of $926 and $654 for the three months ended June 30, 2011 and 2010, respectively, and $696 and $835 for the six months ended June 30, 2011 and 2010, respectively)
|
1,798 | 1,270 | 1,351 | 1,621 | ||||||||||||
Reclassification adjustment for net realized gain on sale of available-for-sale securities included in net income (net of taxes of $42 and $18 for the three months ended June 30, 2011 and 2010, respectively, and $143 and $44 for the six months ended June 30, 2011 and 2010, respectively)
|
(82 | ) | (33 | ) | (276 | ) | (84 | ) | ||||||||
Change in nonqualified pension plan unrecognized net loss (net of taxes of $2 and $6 for the three and six months ended June 30, 2011, respectively)
|
4 | - | 12 | - | ||||||||||||
Reclassification adjustment for recognition of nonqualified pension plan net loss (net of taxes of $3 and $4 for the three and six months ended June 30, 2011, respectively)
|
(5 | ) | - | (8 | ) | - | ||||||||||
Nonqualified pension plan curtailment (net of taxes of $80)
|
- | - | 155 | - | ||||||||||||
TOTAL COMPREHENSIVE INCOME
|
$ | 3,707 | 3,989 | 5,528 | 6,501 |
Common
Shares
Outstanding
|
Common
Stock
|
Surplus
|
Retained
Earnings
|
Treasury
Shares
|
Accumulated
Other Comprehensive
Income
|
Total
Shareholders’
Equity
|
||||||||||||||||||||||
Balance January 1, 2010
|
6,687,232 | $ | 11,068 | 15,407 | 48,962 | (11,737 | ) | 1,915 | 65,615 | |||||||||||||||||||
Net income
|
4,964 | 4,964 | ||||||||||||||||||||||||||
Net unrealized gain on available-for-sale securities, net of taxes
|
1,621 | 1,621 | ||||||||||||||||||||||||||
Reclassification adjustment for net realized gain on sale of available-for-sale securities included in net income, net of taxes
|
(84 | ) | (84 | ) | ||||||||||||||||||||||||
Compensation expense relating to stock options
|
19 | 19 | ||||||||||||||||||||||||||
Common stock dividends, $0.32 per share
|
(2,140 | ) | (2,140 | ) | ||||||||||||||||||||||||
Balance June 30, 2010
|
6,687,232 | 11,068 | 15,426 | 51,786 | (11,737 | ) | 3,452 | 69,995 | ||||||||||||||||||||
Balance January 1, 2011
|
6,689,743 | $ | 11,068 | 15,447 | 54,045 | (11,698 | ) | 1,845 | 70,707 | |||||||||||||||||||
Net income
|
4,294 | 4,294 | ||||||||||||||||||||||||||
Net unrealized gain (loss) on available-for-sale securities, net of taxes
|
1,351 | 1,351 | ||||||||||||||||||||||||||
Reclassification adjustment for net realized gain on sale of available-for-sale securities included in net income, net of taxes
|
(276 | ) | (276 | ) | ||||||||||||||||||||||||
Change in nonqualified pension plan unrecognized net gain (loss), net of taxes
|
12 | 12 | ||||||||||||||||||||||||||
Reclassification adjustment for recognition of nonqualified pension plan net gain, net of taxes
|
(8 | ) | (8 | ) | ||||||||||||||||||||||||
Nonqualified pension plan curtailment entry, net of taxes
|
155 | 155 | ||||||||||||||||||||||||||
Compensation expense relating to stock options
|
22 | 22 | ||||||||||||||||||||||||||
Common stock dividends, $0.32 per share
|
(2,141 | ) | (2,141 | ) | ||||||||||||||||||||||||
Balance June 30, 2011
|
6,689,743 | 11,068 | 15,469 | 56,198 | (11,698 | ) | 3,079 | 74,116 |
Six Months Ended
June 30,
|
||||||||
2011
|
2010
|
|||||||
CASH FLOWS FROM OPERATING ACTIVITIES:
|
||||||||
Net income
|
$ | 4,294 | 4,964 | |||||
Adjustments to reconcile net income to net cash flows from operating activities-
|
||||||||
Depreciation, amortization, and accretion | 1,351 | 1,262 | ||||||
Provision for loan losses
|
888 | 719 | ||||||
Curtailment charge for nonqualified defined benefit retirement plan
|
191 | - | ||||||
Increase in cash surrender value of bank owned life insurance
|
(294 | ) | (305 | ) | ||||
Bank owned life insurance death benefits in excess of cash surrender value
|
- | (792 | ) | |||||
Realized (gain) loss on sales of securities available-for-sale
|
(419 | ) | (128 | ) | ||||
Realized (gain) loss on sales of premises and equipment
|
(5 | ) | 13 | |||||
Realized gain from sale of insurance agency
|
(1,503 | ) | - | |||||
Realized gain from sale of repossessed assets
|
(31 | ) | (14 | ) | ||||
Origination of mortgage loans for sale
|
(2,698 | ) | (2,554 | ) | ||||
Realized gains from sales of mortgage loans
|
(57 | ) | (48 | ) | ||||
Proceeds from sales of mortgage loans
|
2,726 | 2,575 | ||||||
Compensation expense related to stock options
|
22 | 19 | ||||||
Partial charge-off of other real estate owned
|
- | 84 | ||||||
Changes in:
|
||||||||
Accrued income receivable
|
21 | 242 | ||||||
Other assets
|
57 | (353 | ) | |||||
Other liabilities
|
(335 | ) | (458 | ) | ||||
NET CASH FLOWS FROM OPERATING ACTIVITIES
|
4,208 | 5,226 | ||||||
CASH FLOWS FROM INVESTING ACTIVITIES:
|
||||||||
Proceeds from sales of investment securities available-for-sale
|
18,982 | 11,657 | ||||||
Proceeds from maturities and calls of investment securities:
|
||||||||
Available-for-sale
|
15,729 | 29,831 | ||||||
Held-to-maturity
|
2,628 | 1,840 | ||||||
Purchases of investment securities:
|
||||||||
Available-for-sale
|
(48,203 | ) | (40,328 | ) | ||||
Held-to-maturity
|
(1,730 | ) | (2,515 | ) | ||||
Purchase of Federal Reserve Bank stock
|
(2 | ) | - | |||||
Proceeds from redemption of Federal Reserve Bank stock
|
- | 1 | ||||||
Net (increase) decrease in loans
|
(3,281 | ) | (139 | ) | ||||
Proceeds from bank owned life insurance death benefits
|
- | 1,269 | ||||||
Proceeds from sale of repossessed assets
|
148 | 117 | ||||||
Purchases of premises and equipment
|
(1,692 | ) | (469 | ) | ||||
Proceeds from sales of premises and equipment
|
13 | 16 | ||||||
Proceeds from sale of insurance agency, net of cash disposed
|
1,523 | - | ||||||
NET CASH FLOWS FROM INVESTING ACTIVITIES
|
(15,885 | ) | 1,280 | |||||
CASH FLOWS FROM FINANCING ACTIVITIES:
|
||||||||
Net increase (decrease) in deposits
|
40,212 | 47,803 | ||||||
Net increase (decrease) in short-term borrowings
|
(9,493 | ) | (10,796 | ) | ||||
Proceeds from long-term debt
|
5,000 | - | ||||||
Principal payments on long-term debt
|
(6,059 | ) | (1,149 | ) | ||||
Cash dividends paid on common stock
|
(2,141 | ) | (2,140 | ) | ||||
NET CASH FLOWS FROM FINANCING ACTIVITIES
|
27,519 | 33,718 | ||||||
NET CHANGE IN CASH AND CASH EQUIVALENTS
|
15,842 | 40,224 | ||||||
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD
|
10,999 | 12,626 | ||||||
CASH AND CASH EQUIVALENTS AT END OF PERIOD
|
$ | 26,841 | 52,850 | |||||
SUPPLEMENTAL CASH FLOW INFORMATION:
|
||||||||
CASH PAID DURING THE YEAR FOR:
|
||||||||
Interest
|
$ | 3,514 | 4,313 | |||||
Income taxes
|
1,714 | 1,761 | ||||||
SUPPLEMENTAL DISCLOSURE OF NONCASH INVESTING ACTIVITIES:
|
||||||||
Transfer from loans to other real estate owned and repossessed assets
|
229 | 161 |
June 30, 2011
|
||||||||||||||||
Amortized
Cost
|
Unrealized
Gains
|
Unrealized
Losses
|
Fair
Value
|
|||||||||||||
U.S. Treasury notes
|
$ | 22,052 | 98 | - | 22,150 | |||||||||||
U.S. Agency notes
|
107,984 | 571 | 317 | 108,238 | ||||||||||||
U.S. Agency mortgage-backed securities
|
29,364 | 1,426 | 39 | 30,751 | ||||||||||||
Corporate securities
|
1,009 | 16 | - | 1,025 | ||||||||||||
Municipal securities:
|
||||||||||||||||
Non-taxable
|
62,971 | 2,483 | 138 | 65,316 | ||||||||||||
Taxable
|
20,196 | 483 | 79 | 20,600 | ||||||||||||
Mutual funds
|
1,580 | 1 | - | 1,581 | ||||||||||||
Trust preferred securities
|
549 | 54 | 3 | 600 | ||||||||||||
Equity securities
|
476 | 35 | 3 | 508 | ||||||||||||
$ | 246,181 | 5,167 | 579 | 250,769 |
December 31, 2010
|
||||||||||||||||
Amortized
Cost
|
Unrealized
Gains
|
Unrealized
Losses
|
Fair
Value
|
|||||||||||||
U.S. Treasury notes
|
$ | 19,724 | 16 | 155 | 19,585 | |||||||||||
U.S. Agency notes
|
83,600 | 107 | 845 | 82,862 | ||||||||||||
U.S. Agency mortgage-backed securities
|
31,786 | 1,364 | 56 | 33,094 | ||||||||||||
Corporate securities
|
2,012 | 13 | - | 2,025 | ||||||||||||
Municipal securities:
|
||||||||||||||||
Non-taxable
|
71,902 | 2,642 | 116 | 74,428 | ||||||||||||
Taxable
|
22,049 | 302 | 383 | 21,968 | ||||||||||||
Mutual fund
|
1,063 | - | 10 | 1,053 | ||||||||||||
Trust preferred securities
|
549 | 57 | 2 | 604 | ||||||||||||
Equity securities
|
249 | 18 | 4 | 263 | ||||||||||||
$ | 232,934 | 4,519 | 1,571 | 235,882 |
June 30,
2011 |
December 31,
2010 |
|||||||
Commercial and industrial
|
$ | 33,508 | 36,122 | |||||
Commercial, secured by real estate
|
206,952 | 196,136 | ||||||
Residential real estate
|
187,540 | 190,277 | ||||||
Consumer
|
16,946 | 19,691 | ||||||
Agricultural
|
2,844 | 2,966 | ||||||
Other loans, including deposit overdrafts
|
9,466 | 9,413 | ||||||
457,256 | 454,605 | |||||||
Deferred net origination costs
|
300 | 386 | ||||||
457,556 | 454,991 | |||||||
Less allowance for loan losses
|
3,109 | 2,641 | ||||||
Loans, net
|
$ | 454,447 | 452,350 |
June 30,
2011
|
December 31,
2010 |
|||||||
Non-accrual loans
|
$ | 3,086 | 3,761 | |||||
Past-due 90 days or more and still accruing
|
670 | 300 | ||||||
Restructured loans
|
9,503 | 9,088 | ||||||
Total
|
$ | 13,259 | 13,149 | |||||
Percent to total loans
|
2.90 | % | 2.89 | % |
Commercial
& Industrial
|
Commercial
Real Estate
|
Residential
Real Estate
|
Consumer
|
Agricultural
|
Other
|
Unallocated
|
Total
|
|||||||||||||||||||||||||
June 30, 2011
|
||||||||||||||||||||||||||||||||
Allowance for loan losses:
|
||||||||||||||||||||||||||||||||
Balance, beginning of year
|
$ | 305 | 1,625 | 459 | 246 | - | 6 | - | 2,641 | |||||||||||||||||||||||
Provision charged to expenses
|
321 | 279 | 250 | 23 | - | 15 | - | 888 | ||||||||||||||||||||||||
Losses charged off
|
(251 | ) | - | (132 | ) | (138 | ) | - | (58 | ) | - | (579 | ) | |||||||||||||||||||
Recoveries
|
- | 30 | 4 | 82 | - | 43 | 159 | |||||||||||||||||||||||||
Balance, end of period
|
$ | 375 | 1,934 | 581 | 213 | - | 6 | - | 3,109 | |||||||||||||||||||||||
Ending balance: individually evaluated for impairment
|
$ | 133 | 341 | 82 | - | - | - | - | 556 | |||||||||||||||||||||||
Ending balance: collectively evaluated for impairment
|
242 | 1,593 | 499 | 213 | - | 6 | - | 2,553 | ||||||||||||||||||||||||
Loans:
|
||||||||||||||||||||||||||||||||
Ending balance
|
$ | 33,508 | 206,952 | 187,540 | 16,946 | 2,844 | 9,466 | - | 457,256 | |||||||||||||||||||||||
Ending balance: individually evaluated for impairment
|
780 | 11,923 | 533 | - | - | - | - | 13,236 | ||||||||||||||||||||||||
Ending balance: collectively evaluated for impairment
|
32,728 | 195,029 | 187,007 | 16,946 | 2,844 | 9,466 | - | 444,020 |
Commercial
& Industrial
|
Commercial
Real Estate
|
Residential
Real Estate
|
Consumer
|
Agricultural
|
Other
|
Unallocated
|
Total
|
|||||||||||||||||||||||||
June 30, 2010
|
||||||||||||||||||||||||||||||||
Allowance for loan losses:
|
||||||||||||||||||||||||||||||||
Balance, beginning of year
|
$ | 546 | 1,628 | 491 | 313 | - | 9 | 11 | 2,998 | |||||||||||||||||||||||
Provision charged to expenses
|
(13 | ) | 532 | 69 | 126 | - | 16 | (11 | ) | 719 | ||||||||||||||||||||||
Losses charged off
|
(288 | ) | - | (80 | ) | (247 | ) | - | (67 | ) | - | (682 | ) | |||||||||||||||||||
Recoveries
|
- | - | 1 | 66 | - | 48 | - | 115 | ||||||||||||||||||||||||
Balance, end of period
|
$ | 245 | 2,160 | 481 | 258 | - | 6 | - | 3,150 | |||||||||||||||||||||||
Ending balance: individually evaluated for impairment
|
$ | - | 1,051 | - | - | - | - | - | 1,051 | |||||||||||||||||||||||
Ending balance: collectively evaluated for impairment
|
245 | 1,109 | 481 | 258 | - | 6 | - | 2,099 | ||||||||||||||||||||||||
Loans:
|
||||||||||||||||||||||||||||||||
Ending balance
|
$ | 37,767 | 193,311 | 193,089 | 22,442 | 3,206 | 9,446 | - | 459,261 | |||||||||||||||||||||||
Ending balance: individually evaluated for impairment
|
1,076 | 10,673 | 534 | - | - | - | - | 12,283 | ||||||||||||||||||||||||
Ending balance: collectively evaluated for impairment
|
36,691 | 182,638 | 192,555 | 22,442 | 3,206 | 9,446 | - | 446,978 |
|
·
|
Pass – loans categorized in this category are higher quality loans that do not fit any of the other categories described below.
|
|
·
|
Other Assets Especially Mentioned (OAEM) - loans in this category are currently protected but are potentially weak. These loans constitute a risk but not to the point of justifying a classification of substandard. The credit risk may be relatively minor yet constitute an undue risk in light of the circumstances surrounding a specific asset.
|
|
·
|
Substandard – loans in this category are inadequately protected by the current sound net worth and paying capacity of the obligor or of the collateral pledged, if any. Assets so classified must have a well-defined weakness or weaknesses that jeopardize the liquidation of the debt. They are characterized by the possibility that the Company will sustain some loss if the deficiencies are not corrected.
|
|
·
|
Doubtful – loans classified in this category have all the weaknesses inherent in loans classified substandard with the added characteristic that the weaknesses make collection or liquidation in full, on the basis of currently existing facts, conditions, and values, highly questionable and improbable.
|
No Grade
|
Pass
|
OAEM
|
Substandard
|
Doubtful
|
Loss
|
Total
|
||||||||||||||||||||||
June 30, 2011
|
||||||||||||||||||||||||||||
Commercial & industrial
|
$ | 1,213 | 30,193 | 1,116 | 986 | - | - | 33,508 | ||||||||||||||||||||
Commercial, secured by real estate
|
2,382 | 189,873 | 4,794 | 7,652 | 2,251 | - | 206,952 | |||||||||||||||||||||
Residential real estate
|
18,278 | 165,455 | 1,364 | 2,443 | - | - | 187,540 | |||||||||||||||||||||
Consumer
|
392 | 16,483 | - | 54 | 12 | 5 | 16,946 | |||||||||||||||||||||
Agricultural
|
299 | 2,545 | - | - | - | - | 2,844 | |||||||||||||||||||||
Other
|
99 | 9,367 | - | - | - | - | 9,466 | |||||||||||||||||||||
Total
|
$ | 22,663 | 413,916 | 7,274 | 11,135 | 2,263 | 5 | 457,256 | ||||||||||||||||||||
December 31, 2010
|
||||||||||||||||||||||||||||
Commercial & industrial
|
$ | 1,299 | 32,421 | 1,177 | 1,225 | - | - | 36,122 | ||||||||||||||||||||
Commercial, secured by real estate
|
2,053 | 179,710 | 4,897 | 8,574 | 902 | - | 196,136 | |||||||||||||||||||||
Residential real estate
|
17,346 | 170,900 | 264 | 1,702 | 65 | - | 190,277 | |||||||||||||||||||||
Consumer
|
394 | 19,144 | - | 72 | 81 | - | 19,691 | |||||||||||||||||||||
Agricultural
|
247 | 2,719 | - | - | - | - | 2,966 | |||||||||||||||||||||
Other
|
116 | 9,297 | - | - | - | - | 9,413 | |||||||||||||||||||||
Total
|
$ | 21,455 | 414,191 | 6,338 | 11,573 | 1,048 | - | 454,605 |
30-59 Days
Past Due
|
60-89 Days
Past Due
|
Greater Than
90 Days
|
Total
Past Due
|
Current
|
Total Loans
Receivable
|
Total Loans
Greater Than
90 Days and
Accruing
|
||||||||||||||||||||||
June 30, 2011 | ||||||||||||||||||||||||||||
Commercial & industrial
|
$ | - | - | - | - | 33,508 | 33,508 | - | ||||||||||||||||||||
Commercial, secured by real estate
|
85 | - | 2,366 | 2,451 | 204,501 | 206,952 | 35 | |||||||||||||||||||||
Residential real estate
|
520 | 19 | 1,207 | 1,746 | 185,794 | 187,540 | 625 | |||||||||||||||||||||
Consumer
|
98 | 57 | 10 | 165 | 16,781 | 16,946 | 10 | |||||||||||||||||||||
Agricultural
|
42 | - | - | 42 | 2,802 | 2,844 | - | |||||||||||||||||||||
Other
|
99 | - | - | 99 | 9,367 | 9,466 | - | |||||||||||||||||||||
Total
|
$ | 844 | 76 | 3,583 | 4,503 | 452,753 | 457,256 | 670 | ||||||||||||||||||||
December 31, 2010
|
||||||||||||||||||||||||||||
Commercial & industrial
|
$ | 138 | - | 595 | 733 | 35,389 | 36,122 | 1 | ||||||||||||||||||||
Commercial, secured by real estate
|
753 | - | 1,766 | 2,519 | 193,617 | 196,136 | 114 | |||||||||||||||||||||
Residential real estate
|
482 | 36 | 698 | 1,216 | 189,061 | 190,277 | 110 | |||||||||||||||||||||
Consumer
|
231 | 54 | 76 | 361 | 19,330 | 19,691 | 75 | |||||||||||||||||||||
Agricultural
|
- | - | - | - | 2,966 | 2,966 | - | |||||||||||||||||||||
Other
|
5 | - | - | 5 | 9,408 | 9,413 | - | |||||||||||||||||||||
Total
|
$ | 1,609 | 90 | 3,135 | 4,834 | 449,771 | 454,605 | 300 |
Recorded
Investment
|
Unpaid
Principal
Balance
|
Related
Allowance
|
Average
Recorded
Investment
|
Interest
Income
Recognized
|
||||||||||||||||
June 30, 2011
|
||||||||||||||||||||
With no related allowance recorded:
|
||||||||||||||||||||
Commercial & industrial
|
$ | - | - | - | - | - | ||||||||||||||
Commercial real estate
|
5,171 | 5,171 | - | 5,229 | 101 | |||||||||||||||
Residential real estate
|
332 | 332 | - | 332 | - | |||||||||||||||
Total
|
5,503 | 5,503 | - | 5,561 | 101 | |||||||||||||||
With an allowance recorded:
|
||||||||||||||||||||
Commercial & industrial
|
648 | 781 | 133 | 1,090 | 28 | |||||||||||||||
Commercial real estate
|
6,411 | 6,752 | 341 | 6,816 | 133 | |||||||||||||||
Residential real estate
|
118 | 200 | 82 | 200 | - | |||||||||||||||
Total
|
7,177 | 7,733 | 556 | 8,106 | 161 | |||||||||||||||
Total:
|
||||||||||||||||||||
Commercial & industrial
|
648 | 781 | 133 | 1,090 | 28 | |||||||||||||||
Commercial real estate
|
11,582 | 11,923 | 341 | 12,045 | 234 | |||||||||||||||
Residential real estate
|
450 | 532 | 82 | 532 | - | |||||||||||||||
Total
|
$ | 12,680 | 13,236 | 556 | 13,667 | 262 |
Recorded
Investment
|
Unpaid
Principal
Balance
|
Related
Allowance
|
Average
Recorded
Investment
|
Interest
Income
Recognized
|
||||||||||||||||
December 31, 2010
|
||||||||||||||||||||
With no related allowance recorded:
|
||||||||||||||||||||
Commercial & industrial
|
$ | 594 | 594 | - | 751 | 9 | ||||||||||||||
Commercial real estate
|
8,350 | 8,350 | - | 9,058 | 372 | |||||||||||||||
Residential real estate
|
533 | 533 | - | 534 | - | |||||||||||||||
Total
|
9,477 | 9,477 | - | 10,343 | 381 | |||||||||||||||
With an allowance recorded:
|
||||||||||||||||||||
Commercial & industrial
|
356 | 476 | 120 | 693 | 29 | |||||||||||||||
Commercial real estate
|
2,974 | 3,150 | 176 | 3,403 | 142 | |||||||||||||||
Residential real estate
|
- | - | - | - | - | |||||||||||||||
Total
|
$ | 3,330 | 3,626 | 296 | 4,096 | 171 | ||||||||||||||
Total:
|
||||||||||||||||||||
Commercial & industrial
|
$ | 950 | 1,070 | 120 | 1,444 | 38 | ||||||||||||||
Commercial real estate
|
11,324 | 11,500 | 176 | 12,461 | 514 | |||||||||||||||
Residential real estate
|
533 | 533 | - | 534 | - | |||||||||||||||
Total
|
$ | 12,807 | 13,103 | 296 | 14,439 | 552 |
June 30,
2011
|
December 31,
2010
|
|||||||
Commercial and industrial
|
$ | - | 595 | |||||
Commercial, secured by real estate
|
2,331 | 2,377 | ||||||
Residential real estate
|
755 | 789 | ||||||
3,086 | 3,761 |
Six Months Ended
June 30, |
||||||||
2011
|
2010
|
|||||||
Balance, beginning of year
|
$ | 2,088 | 2,424 | |||||
Additions
|
- | 104 | ||||||
Reductions due to valuation write downs
|
- | (84 | ) | |||||
Balance, end of period
|
$ | 2,088 | 2,444 |
Current
Interest |
June 30,
2011 |
December 31,
2010 |
||||||||||
Fixed Rate Advances, due at maturity:
|
||||||||||||
Advance due February 2011
|
2.10 | % | $ | - | 5,000 | |||||||
Advance due August 2012
|
1.99 | % | 6,000 | 6,000 | ||||||||
Advance due January 2015
|
2.00 | % | 5,000 | - | ||||||||
Advance due March 2017
|
5.25 | % | 5,000 | 5,000 | ||||||||
Fixed Rate Advances, with monthly principal and interest payments:
|
||||||||||||
Advance due March 2014
|
2.45 | % | 2,826 | 3,319 | ||||||||
Advance due March 2019
|
2.82 | % | 3,235 | 3,801 | ||||||||
$ | 22,061 | 23,120 |
June 30, 2011
|
December 31, 2010
|
|||||||||||||||
Amount
|
Rate
|
Amount
|
Rate
|
|||||||||||||
U.S. Treasury demand note
|
$ | 1,101 | - | % | 1,295 | - | % | |||||||||
Federal funds purchased
|
- | - | % | 7,000 | 0.50 | % | ||||||||||
Line of credit
|
- | - | % | 3,026 | 1.00 | % | ||||||||||
Repurchase agreements
|
11,097 | 0.25 | % | 10,370 | 0.30 | % | ||||||||||
$ | 12,198 | 0.23 | % | 21,691 | 0.44 | % |
June 30,
2011
|
December 31,
2010 |
|||||||
Commitments to extend credit:
|
||||||||
Commercial loans
|
$ | 4,385 | 1,856 | |||||
Other loans
|
||||||||
Fixed rate
|
1,101 | 1,200 | ||||||
Adjustable rate
|
345 | 480 | ||||||
Unused lines of credit:
|
||||||||
Fixed rate
|
3,023 | 1,773 | ||||||
Adjustable rate
|
56,855 | 67,038 | ||||||
Unused Bounce Protection amounts on demand and NOW accounts
|
9,961 | 10,031 | ||||||
Standby letters of credit
|
5,693 | 6,528 | ||||||
$ | 81,363 | 88,906 |
At
June 30,
|
At
December 31, |
|||||||
2011
|
2010
|
|||||||
Regulatory Capital: | ||||||||
Shareholders' equity
|
$ | 74,116 | 70,707 | |||||
Goodwill and other intangibles
|
(6,102 | ) | (6,413 | ) | ||||
Accumulated other comprehensive (income) loss
|
(3,079 | ) | (1,845 | ) | ||||
Tier 1 risk-based capital
|
64,935 | 62,449 | ||||||
Eligible allowance for loan losses
|
3,109 | 2,641 | ||||||
Total risk-based capital
|
$ | 68,044 | 65,090 | |||||
Capital ratios:
|
||||||||
Total risk-based (required 8.00%)
|
14.42 | % | 13.82 | % | ||||
Tier 1 risk-based (required 4.00%)
|
13.76 | % | 13.26 | % | ||||
Leverage (required 3.00%)
|
8.24 | % | 8.12 | % |
For the Three Months
Ended June 30, |
For the Six Months
Ended June 30,
|
|||||||||||||||
2011
|
2010
|
2011
|
2010
|
|||||||||||||
Qualified noncontributory defined benefit retirement plan
|
$ | 134 | 61 | 258 | 121 | |||||||||||
401(k) plan
|
82 | 79 | 157 | 153 |
Three Months Ended
June 30,
|
Six Months Ended
June 30,
|
|||||||||||||||
2011
|
2010
|
2011
|
2010
|
|||||||||||||
Service cost
|
$ | 22 | 44 | 66 | 87 | |||||||||||
Interest cost
|
8 | 8 | 17 | 16 | ||||||||||||
Amortization of unrecognized prior service cost
|
7 | 12 | 18 | 24 | ||||||||||||
Amortization of unrecognized net gain
|
(8 | ) | - | (12 | ) | - | ||||||||||
Net periodic pension cost
|
$ | 29 | 64 | 89 | 127 |
Outstanding Stock Options | Exercisable Stock Options | ||||||||||||||||||||||||||
Exercise
Price Range
|
Number |
Weighted
Average
Exercise
Price
|
Weighted
Average
Remaining
Contractual
Life (Years)
|
Number |
Weighted
Average
Exercise
Price
|
Weighted
Average
Remaining
Contractual
Life (Years)
|
|||||||||||||||||||||
$ | 9.00 - 10.99 | 29,110 | $ | 9.00 | 7.6 | 11,644 | $ | 9.00 | 7.6 | ||||||||||||||||||
$ | 11.00 - 12.99 | 59,799 | 11.89 | 8.6 | 12,511 | 12.20 | 7.3 | ||||||||||||||||||||
$ | 13.00 - 14.99 | 11,056 | 13.09 | 1.6 | 11,056 | 13.09 | 1.6 | ||||||||||||||||||||
$ | 17.00 - 18.99 | 24,158 | 18.16 | 4.3 | 22,535 | 18.18 | 4.2 | ||||||||||||||||||||
124,123 | 12.54 | 6.9 | 57,746 | 14.06 | 5.0 |
2011
|
2010
|
|||||||||||||||
Options
|
Weighted
Average
Exercise
Price
|
Options
|
Weighted
Average
Exercise
Price
|
|||||||||||||
Outstanding, January 1
|
99,040 | $ | 12.71 | 78,242 | $ | 13.04 | ||||||||||
Granted
|
25,083 | 11.85 | 20,798 | 11.50 | ||||||||||||
Exercised
|
- | - | - | - | ||||||||||||
Outstanding, June 30
|
124,123 | 12.54 | 99,040 | 12.71 | ||||||||||||
Exercisable, June 30
|
57,746 | 14.06 | 41,770 | 14.78 |
2011
|
2010
|
|||||||
Estimated weighted-average fair value of options granted
|
$ | 2.09 | 2.27 | |||||
Risk-free interest rate
|
2.84 | % | 3.34 | % | ||||
Average dividend yield
|
4.43 | % | 4.31 | % | ||||
Volatility factor of the expected market price of the Company's common stock
|
27.37 | % | 28.32 | % | ||||
Average life in years
|
6.5 | 7.0 |
For the Three Months
Ended June 30,
|
For the Six Months
Ended June 30,
|
|||||||||||||||
2011
|
2010
|
2011
|
2010
|
|||||||||||||
Income from continuing operations
|
$ | 2,023 | 2,685 | 3,501 | 4,826 | |||||||||||
Income from discontinued operations, net of tax
|
(31 | ) | 67 | 793 | 138 | |||||||||||
Net income
|
$ | 1,992 | 2,752 | 4,294 | 4,964 | |||||||||||
Weighted average number of shares outstanding used in the calculation of basic earnings per common share
|
6,689,743 | 6,687,232 | 6,689,743 | 6,687,232 | ||||||||||||
Add dilutive effect of:
|
||||||||||||||||
Stock options
|
4,476 | 3,403 | 4,188 | 2,817 | ||||||||||||
Restricted stock
|
- | 2,511 | - | 1,790 | ||||||||||||
Stock warrant
|
52,572 | 49,517 | 50,444 | 44,596 | ||||||||||||
57,048 | 55,431 | 54,632 | 49,203 | |||||||||||||
Adjusted weighted average number of shares outstanding used in the calculation of diluted earnings per common share
|
6,746,791 | 6,742,663 | 6,744,375 | 6,736,435 | ||||||||||||
Basic earnings per common share:
|
||||||||||||||||
Continuing operations
|
$ | 0.30 | 0.40 | 0.52 | 0.72 | |||||||||||
Discontinued operations
|
- | 0.01 | 0.12 | 0.02 | ||||||||||||
Diluted earnings per common share:
|
||||||||||||||||
Continuing operations
|
$ | 0.30 | 0.40 | 0.52 | 0.72 | |||||||||||
Discontinued operations
|
- | 0.01 | 0.12 | 0.02 |
|
·
|
Level 1 – quoted prices in active markets for identical assets or liabilities that the reporting entity has the ability to access at the reporting date.
|
|
·
|
Level 2 – inputs other than quoted prices included within level 1 that are observable for the asset or liability either directly or indirectly. Level 2 inputs may include quoted prices for similar assets in active markets, quoted prices for identical assets or liabilities in markets that are not active, inputs other than quoted prices (such as interest rates or yield curves) that are observable for the asset or liability, and inputs that are derived from or corroborated by observable market data.
|
|
·
|
Level 3 - inputs that are unobservable for the asset or liability.
|
Fair Value Measurements at Reporting Date Using
|
||||||||||||||||
Fair Value
Measurements
|
Quoted Prices
in Active
Markets for
Identical Assets
(Level 1)
|
Significant
Other
Observable
Inputs
(Level 2)
|
Significant
Unobservable
Inputs
(Level 3)
|
|||||||||||||
June 30, 2011
|
||||||||||||||||
Available-for-sale securities:
|
||||||||||||||||
U.S. Treasury notes
|
$ | 22,150 | 22,150 | - | - | |||||||||||
U.S. Agency notes
|
108,238 | - | 108,238 | - | ||||||||||||
U.S. Agency mortgage- backed securities
|
30,751 | - | 30,751 | - | ||||||||||||
Corporate securities
|
1,025 | 1,025 | - | - | ||||||||||||
Municipal securities:
|
||||||||||||||||
Non-taxable
|
65,316 | - | 65,316 | - | ||||||||||||
Taxable
|
20,600 | - | 20,600 | - | ||||||||||||
Mutual funds
|
1,581 | - | - | 1,581 | ||||||||||||
Trust preferred securities
|
600 | 600 | - | - | ||||||||||||
Equity securities
|
508 | 508 | - | - | ||||||||||||
Totals
|
$ | 250,769 | 24,283 | 224,905 | 1,581 | |||||||||||
December 31, 2010
|
||||||||||||||||
Available-for-sale securities:
|
||||||||||||||||
U.S. Treasury notes
|
$ | 19,585 | 19,585 | - | - | |||||||||||
U.S. Agency notes
|
82,862 | - | 82,862 | - | ||||||||||||
U.S. Agency mortgage- backed securities
|
33,094 | - | 33,094 | - | ||||||||||||
Corporate securities
|
2,025 | 2,025 | - | - | ||||||||||||
Municipal securities:
|
||||||||||||||||
Non-taxable
|
74,428 | - | 74,428 | - | ||||||||||||
Taxable
|
21,968 | - | 21,968 | - | ||||||||||||
Mutual fund
|
1,053 | - | - | 1,053 | ||||||||||||
Trust preferred securities
|
604 | 604 | - | - | ||||||||||||
Equity securities
|
263 | 263 | - | - | ||||||||||||
Totals
|
$ | 235,882 | 22,477 | 212,352 | 1,053 |
Mutual
Funds
|
||||
Beginning balance
|
$ | 1,053 | ||
Purchases
|
500 | |||
Dividends reinvested
|
17 | |||
Net change in unrealized gains (losses) included in other comprehensive income
|
11 | |||
Ending balance
|
$ | 1,581 |
|
Fair Value Measurements at Reporting Date Using
|
|||||||||
Fair Value
Measurements
|
Quoted Prices
in Active
Markets for
Identical
Assets
(Level 1)
|
Significant
Other
Observable
Inputs (Level 2)
|
Significant
Unobservable
Inputs
(Level 3)
|
|||||||
June 30, 2011
|
||||||||||
Impaired loans
|
$
|
7,177
|
-
|
1,074
|
6,103
|
|||||
Other real estate owned
|
2,088
|
-
|
2,088
|
-
|
||||||
Repossessed assets
|
138
|
-
|
-
|
138
|
||||||
Totals
|
$
|
9,403
|
-
|
3,162
|
6,241
|
|||||
December 31, 2010
|
||||||||||
Impaired loans
|
$
|
4,080
|
-
|
1,430
|
2,650
|
|||||
Other real estate owned
|
2,088
|
-
|
2,088
|
-
|
||||||
Repossessed assets
|
26
|
-
|
-
|
26
|
||||||
Totals
|
$
|
6,194
|
-
|
3,518
|
2,676
|
June 30, 2011
|
December 31, 2010 | |||||||||
Carrying
Amount |
Fair
Value |
Carrying
Amount |
Fair
Value |
|||||||
FINANCIAL ASSETS:
|
||||||||||
Cash and cash equivalents
|
$26,841
|
26,841
|
10,999
|
10,999
|
||||||
Investment securities:
|
||||||||||
Available-for-sale
|
250,769
|
250,769
|
235,882
|
235,882
|
||||||
Held-to-maturity
|
11,243
|
11,243
|
12,141
|
12,141
|
||||||
Federal Reserve Bank stock
|
941
|
941
|
939
|
939
|
||||||
Federal Home Loan Bank stock
|
2,091
|
2,091
|
2,091
|
2,091
|
||||||
Loans, net
|
454,447
|
468,092
|
452,350
|
465,053
|
||||||
FINANCIAL LIABILITIES:
|
||||||||||
Deposits
|
678,751
|
683,295
|
638,539
|
642,734
|
||||||
Short-term borrowings
|
12,198
|
12,198
|
21,691
|
21,691
|
||||||
Long-term debt
|
22,061
|
23,052
|
23,120
|
24,217
|
For the Three Months
Ended June 30,
|
For the Six Months
Ended June 30,
|
|||||||||||||||
2011
|
2010
|
2011
|
2010
|
|||||||||||||
Dakin Insurance Agency financial results:
|
||||||||||||||||
Revenue
|
$ | - | 424 | 381 | 845 | |||||||||||
Non-interest expenses
|
(2 | ) | 322 | 301 | 635 | |||||||||||
Income from operations before income taxes
|
2 | 102 | 80 | 210 | ||||||||||||
Gain from sale of insurance agency
|
- | - | 1,503 | - | ||||||||||||
Closing costs related to sale
|
(13 | ) | - | (60 | ) | - | ||||||||||
Curtailment expense on nonqualified defined benefit retirement plan
|
- | - | (191 | ) | - | |||||||||||
Provision for income taxes
|
(20 | ) | (35 | ) | (539 | ) | (72 | ) | ||||||||
Total income (loss) from discontinued operations, net of taxes
|
(31 | ) | 67 | 793 | 138 |
·
|
Clarification on using premiums and discounts in calculating fair value when level 2 or 3 inputs are used,
|
·
|
An expansion of disclosures about fair value measurements, and
|
·
|
The categorization by level of the fair value hierarchy for items that are not measured at fair value in the statement of financial position, but for which the fair value is required to be disclosed.
|
/s/ J.D. Cloud & Co. L.L.P.
|
||
|
|
|
Cincinnati, Ohio | ||
August 8, 2011 |
Three Months Ended June 30,
|
||||||||||||||||||||||||
2011
|
2010
|
|||||||||||||||||||||||
Average
Outstanding |
Interest
Earned/ |
Average
Yield/ |
Average
Outstanding |
Interest
Earned/ |
Average
Yield/ |
|||||||||||||||||||
(Dollars in thousands) | ||||||||||||||||||||||||
Loans (1)
|
$ | 461,448 | 6,477 | 5.63 | % | $ | 459,586 | $ | 6,799 | 5.93 | % | |||||||||||||
Interest-bearing demand deposits
|
26,263 | 17 | 0.26 | % | 27,940 | 17 | 0.24 | % | ||||||||||||||||
Federal Reserve Bank stock
|
941 | 28 | 11.93 | % | 940 | 28 | 11.95 | % | ||||||||||||||||
Federal Home Loan Bank stock
|
2,091 | 23 | 4.41 | % | 2,091 | 23 | 4.41 | % | ||||||||||||||||
Investment securities:
|
||||||||||||||||||||||||
Taxable
|
164,484 | 914 | 2.23 | % | 119,416 | 882 | 2.96 | % | ||||||||||||||||
Non-taxable (2)
|
77,029 | 970 | 5.05 | % | 83,615 | 1,186 | 5.69 | % | ||||||||||||||||
Total earnings assets
|
732,256 | 8,429 | 4.62 | % | 693,588 | 8,935 | 5.17 | % | ||||||||||||||||
Non-earning assets
|
66,961 | 67,638 | ||||||||||||||||||||||
Allowance for loan losses
|
(2,935 | ) | (3,017 | ) | ||||||||||||||||||||
Total assets
|
$ | 796,282 | $ | 758,209 | ||||||||||||||||||||
Interest-bearing deposits
|
$ | 582,606 | 1,499 | 1.03 | % | $ | 560,295 | 1,928 | 1.38 | % | ||||||||||||||
Short-term borrowings
|
11,997 | 7 | 0.23 | % | 5,256 | 4 | 0.31 | % | ||||||||||||||||
Long-term debt
|
22,176 | 161 | 2.91 | % | 23,928 | 173 | 2.90 | % | ||||||||||||||||
Total interest-bearing liabilities
|
616,779 | 1,667 | 1.08 | % | 589,479 | 2,105 | 1.43 | % | ||||||||||||||||
Demand deposits
|
101,798 | 95,092 | ||||||||||||||||||||||
Other liabilities
|
4,918 | 5,137 | ||||||||||||||||||||||
Capital
|
72,787 | 68,501 | ||||||||||||||||||||||
Total liabilities and capital
|
$ | 796,282 | $ | 758,209 | ||||||||||||||||||||
Net interest rate spread (3)
|
3.54 | % | 3.74 | % | ||||||||||||||||||||
Net interest income and net interest margin on a taxable- equivalent basis (4)
|
6,762 | 3.70 | % | $ | 6,830 | 3.95 | % | |||||||||||||||||
Ratio of interest-earning assets to interest-bearing liabilities
|
118.72 | % | 117.66 | % |
(1)
|
Includes nonaccrual loans, if any.
|
(2)
|
Income from tax-exempt securities is included in interest income on a taxable-equivalent basis. Interest income has been divided by a factor comprised of the complement of the incremental tax rate of 34%.
|
(3)
|
The net interest spread is the difference between the average rate on total interest-earning assets and interest-bearing liabilities.
|
(4)
|
The net interest margin is the taxable-equivalent net interest income divided by average interest-earning assets.
|
Three Months Ended
June 30, 2011 vs. 2010
Increase (decrease) due to: |
||||||||||||
Volume
|
Rate
|
Total
|
||||||||||
Interest-earning Assets:
|
(In thousands) | |||||||||||
Loans
|
$ | 27 | (349 | ) | (322 | ) | ||||||
Interest-bearing demand deposits
|
(1 | ) | 1 | - | ||||||||
Federal Reserve Bank stock
|
- | - | - | |||||||||
Federal Home Loan Bank stock
|
- | - | - | |||||||||
Investment securities:
|
||||||||||||
Taxable
|
283 | (251 | ) | 32 | ||||||||
Nontaxable
|
(89 | ) | (127 | ) | (216 | ) | ||||||
Total interest income
|
220 | (726 | ) | (506 | ) | |||||||
Interest-bearing Liabilities:
|
||||||||||||
Deposits
|
74 | (503 | ) | (429 | ) | |||||||
Short-term borrowings
|
4 | (1 | ) | 3 | ||||||||
Long-term debt
|
(13 | ) | 1 | (12 | ) | |||||||
Total interest expense
|
65 | (503 | ) | (438 | ) | |||||||
Net interest income
|
$ | 155 | (223 | ) | (68 | ) |
Six Months Ended June 30,
|
||||||||||||||||||||||||
2011
|
2010
|
|||||||||||||||||||||||
Average
Outstanding |
Interest
Earned/ |
Average
Yield/ |
Average
Outstanding |
Interest
Earned/ |
Average
Yield/ |
|||||||||||||||||||
(Dollars in thousands) | ||||||||||||||||||||||||
Loans (1)
|
$ | 459,428 | 12,995 | 5.70 | % | $ | 459,048 | $ | 13,631 | 5.99 | % | |||||||||||||
Interest-bearing demand deposits
|
18,540 | 22 | 0.24 | % | 21,099 | 25 | 0.24 | % | ||||||||||||||||
Federal Reserve Bank stock
|
940 | 28 | 6.01 | % | 940 | 28 | 6.01 | % | ||||||||||||||||
Federal Home Loan Bank stock
|
2,091 | 47 | 4.53 | % | 2,091 | 47 | 4.53 | % | ||||||||||||||||
Investment securities:
|
||||||||||||||||||||||||
Taxable
|
157,459 | 1,790 | 2.29 | % | 118,978 | 1,812 | 3.07 | % | ||||||||||||||||
Non-taxable (2)
|
79,903 | 2,041 | 5.15 | % | 84,835 | 2,411 | 5.73 | % | ||||||||||||||||
Total earnings assets
|
718,361 | 16,923 | 4.75 | % | 686,991 | 17,954 | 5.27 | % | ||||||||||||||||
Non-earning assets
|
66,434 | 67,229 | ||||||||||||||||||||||
Allowance for loan losses
|
(2,775 | ) | (3,010 | ) | ||||||||||||||||||||
Total assets
|
$ | 782,020 | $ | 751,210 | ||||||||||||||||||||
Interest-bearing deposits
|
$ | 569,469 | 3,083 | 1.09 | % | $ | 553,880 | 3,904 | 1.42 | % | ||||||||||||||
Short-term borrowings
|
12,384 | 17 | 0.28 | % | 6,645 | 13 | 0.39 | % | ||||||||||||||||
Long-term debt
|
23,822 | 339 | 2.87 | % | 24,249 | 350 | 2.91 | % | ||||||||||||||||
Total interest-bearing liabilities
|
605,675 | 3,439 | 1.15 | % | 584,774 | 4,267 | 1.47 | % | ||||||||||||||||
Demand deposits
|
99,346 | 93,398 | ||||||||||||||||||||||
Other liabilities
|
5,115 | 5,226 | ||||||||||||||||||||||
Capital
|
71,884 | 67,812 | ||||||||||||||||||||||
Total liabilities and capital
|
$ | 782,020 | $ | 751,210 | ||||||||||||||||||||
Net interest rate spread (3)
|
3.60 | % | 3.80 | % | ||||||||||||||||||||
Net interest income and net interest margin on a taxable- equivalent basis (4)
|
13,484 | 3.79 | % | $ | 13,687 | 4.02 | % | |||||||||||||||||
Ratio of interest-earning assets to interest-bearing liabilities
|
118.61 | % | 117.48 | % |
(1)
|
Includes nonaccrual loans, if any. Income from tax-exempt loans is included in interest income on a tax-equivalent basis, using an incremental rate of 34%.
|
(2)
|
Income from tax-exempt securities is included in interest income on a taxable-equivalent basis. Interest income has been divided by a factor comprised of the complement of the incremental tax rate of 34%.
|
(3)
|
The net interest spread is the difference between the average rate on total interest-earning assets and interest-bearing liabilities.
|
(4)
|
The net interest margin is the taxable-equivalent net interest income divided by average interest-earning assets.
|
Six Months Ended
June 30, 2011 vs. 2010
Increase (decrease) due to:
|
||||||||||||
Volume
|
Rate
|
Total
|
||||||||||
(In thousands)
|
||||||||||||
Interest-earning Assets:
|
||||||||||||
Loans
|
$ | 11 | (647 | ) | (636 | ) | ||||||
Interest-bearing demand deposits
|
(3 | ) | - | (3 | ) | |||||||
Federal Reserve Bank stock
|
- | - | - | |||||||||
Federal Home Loan Bank stock
|
- | - | - | |||||||||
Investment securities:
|
||||||||||||
Taxable
|
503 | (525 | ) | (22 | ) | |||||||
Nontaxable
|
(135 | ) | (235 | ) | (370 | ) | ||||||
Total interest income
|
376 | (1,407 | ) | (1,031 | ) | |||||||
Interest-bearing Liabilities:
|
||||||||||||
Deposits
|
107 | (928 | ) | (821 | ) | |||||||
Short-term borrowings
|
9 | (5 | ) | 4 | ||||||||
Long-term debt
|
(6 | ) | (5 | ) | (11 | ) | ||||||
Total interest expense
|
110 | (938 | ) | (828 | ) | |||||||
Net interest income
|
$ | 266 | (469 | ) | (203 | ) |
Rate Shock Scenario in
Basis Points
|
Amount
|
$ Change in
NII
|
% Change in
NII
|
|||||||||
(Dollars in thousands)
|
||||||||||||
Up 300
|
$ | 25,264 | 135 | 0.54 | % | |||||||
Up 200
|
25,189 | 60 | 0.24 | % | ||||||||
Up 100
|
25,107 | (22 | ) | -0.09 | % | |||||||
Base
|
25,129 | - | - | % | ||||||||
Down 100
|
25,240 | 111 | 0.44 | % |
Rate Shock Scenario in
Basis Points
|
Amount
|
$ Change in
EVE
|
% Change in
EVE
|
|||||||||
(Dollars in thousands)
|
||||||||||||
Up 300
|
$ | 64,228 | (22,725 | ) | -26.13 | % | ||||||
Up 200
|
71,136 | (15,817 | ) | -18.19 | % | |||||||
Up 100
|
78,644 | (8,309 | ) | -9.56 | % | |||||||
Base
|
86,953 | - | - | % | ||||||||
Down 100
|
95,164 | 8,211 | 9.44 | % |
Exhibit No. |
Exhibit Description
|
|
3.1
|
Amended and Restated Articles of Incorporation of LCNB Corp., as amended – incorporated by reference to the Registrant’s Quarterly Report on Form 10-Q for the quarterly period ended March 31, 2010, Exhibit 3.1.
|
|
3.2
|
Code of Regulations of LCNB Corp. – incorporated by reference to the Registrant’s Quarterly Report on Form 10-Q for the quarterly period ended March 31, 2005, Exhibit 3(ii).
|
|
Certification of Chief Executive Officer under Section 302 of the Sarbanes-Oxley Act of 2002.
|
||
Certification of Chief Financial Officer under Section 302 of the Sarbanes-Oxley Act of 2002.
|
||
Certification of Chief Executive Officer and Chief Financial Officer under Section 906 of the Sarbanes-Oxley Act of 2002.
|
||
101
|
The following financial information from LCNB Corp.’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2011 is formatted in Extensible Business Reporting Language: (i) the Consolidated Balance Sheets, (ii) the Consolidated Statements of Income, (iii) the Consolidated Statements of Comprehensive Income, (iv) the Consolidated Statements of Shareholders’ Equity, (v) the Consolidated Statements of Cash Flows, and (vi) the Notes to Consolidated Financial Statements, tagged as blocks of text.
|
LCNB Corp.
|
||
/s/ Stephen P. Wilson | ||
August 8, 2011 | Stephen P. Wilson, Chief Executive Officer and | |
Chairman of the Board of Directors | ||
August 8, 2011 | /s/Robert C. Haines, II | |
Robert C. Haines, II, Executive Vice President | ||
and Chief Financial Officer |
|
1)
|
I have reviewed this quarterly report on Form 10-Q of LCNB Corp.;
|
|
2)
|
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
|
|
3)
|
Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations, and cash flows of the registrant as of, and for, the periods presented in this report;
|
|
4)
|
The registrant's other certifying officer 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 registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
|
|
d.
|
Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and
|
|
5)
|
The registrant's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions):
|
|
a.
|
All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize, and report financial information; and
|
|
b.
|
Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.
|
/s/ Stephen P. Wilson
|
|
Stephen P. Wilson
|
|
Chief Executive Officer and | |
Chairman of the Board of Directors
|
|
August 8, 2011
|
|
1)
|
I have reviewed this quarterly report on Form 10-Q of LCNB Corp.;
|
|
2)
|
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
|
|
3)
|
Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations, and cash flows of the registrant as of, and for, the periods presented in this report;
|
|
4)
|
The registrant's other certifying officer 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 registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
|
|
d.
|
Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and
|
|
5)
|
The registrant's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions):
|
|
a.
|
All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize, and report financial information; and
|
|
b.
|
Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.
|
/s/ Robert C. Haines, II
|
|
Robert C. Haines, II
|
|
Executive Vice President and
|
|
Chief Financial Officer | |
August 8, 2011
|
|
(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 the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.
|
/s/ Stephen P. Wilson
|
/s/ Robert C. Haines, II
|
||
Stephen P. Wilson
|
Robert C. Haines, II
|
||
Chief Executive Officer and
|
Executive Vice President and Chief
|
||
Chairman of the Board of Directors
|
Financial Officer
|
CONSOLIDATED BALANCE SHEETS (Unaudited) (Parenthetical) (USD $)
|
Jun. 30, 2011
|
Dec. 31, 2010
|
---|---|---|
SHAREHOLDERS' EQUITY: | Â | Â |
Preferred shares - no par value, (in dollars per share) | $ 0 | $ 0 |
Preferred shares - authorized shares (in shares) | 1,000,000 | 1,000,000 |
Preferred shares - outstanding shares (in shares) | 0 | 0 |
Common shares - no par value (in dollars per share) | $ 0 | $ 0 |
Common shares - authorized shares (in shares) | 12,000,000 | 12,000,000 |
Common shares - issued shares (in shares) | 7,445,514 | 7,445,514 |
Treasury shares - shares (in shares) | 755,771 | 755,771 |
Recent Accounting Pronouncements
|
6 Months Ended | |||||||||
---|---|---|---|---|---|---|---|---|---|---|
Jun. 30, 2011
|
||||||||||
Recent Accounting Pronouncements [Abstract] | Â | |||||||||
Recent Accounting Pronouncements | Note 14 – Recent Accounting Pronouncements Accounting Standards Update No. 2011-02, “A Creditor's Determination of Whether a Restructuring Is a Troubled Debt Restructuring” was issued by the Financial Accounting Standards Board (the “FASB”) in April 2011. A loan modification is considered a Troubled Debt Restructuring when the restructuring constitutes a concession by the lender and the debtor is experiencing financial difficulties. The update provides additional guidance in determining whether a concession has been granted and whether a debtor is experiencing financial difficulty. The amendments in the update are effective for public entities for the first interim or annual period beginning on or after June 15, 2011 and are to be applied retrospectively to the beginning of the annual period of the adoption. LCNB management does not anticipate that adoption of this update will have a material effect on its consolidated financial statements. Accounting Standards Update No. 2011-04, “Fair Value Measurement (ASC Topic 820): Amendments to Achieve Common Fair Value Measurement and Disclosure Requirements in U.S. GAAP and IFRSs” was issued by the FASB in May 2011. The update does not extend the use of fair value accounting, but provides guidance on how it should be applied where its use is already required or permitted by other standards within IFRS or U.S. GAAP. It supersedes most of the guidance in ASC Topic 820, although many of the changes are clarifications of existing guidance or wording changes to align with IFRS 13. Changes to current guidance include:
The amendments in the update must be applied prospectively. For public entities, the amendments are effective during interim and annual periods beginning after Dec. 15, 2011. Early application by public entities is not permitted. Accounting Standards Update No. 2011-05, “Comprehensive Income (ASC Topic 220): Presentation of Comprehensive Income,” was issued by the FASB in June 2011. The update eliminates the option to present the components of other comprehensive income as part of the statement of shareholders' equity. Instead, a company is required to report comprehensive income in either a single continuous statement of comprehensive income which contains two sections, net income and other comprehensive income, or in two separate but consecutive statements. The amendments in the update are effective for public companies during the interim and annual periods beginning after Dec. 15, 2011 with early adoption permitted. LCNB's presentation of the Consolidated Statements of Comprehensive Income already complies with the requirements of the update. |
Document And Entity Information (USD $)
|
6 Months Ended | |
---|---|---|
Jun. 30, 2011
|
Dec. 31, 2010
|
|
Entity Registrant Name | LCNB CORP | Â |
Entity Central Index Key | 0001074902 | Â |
Current Fiscal Year End Date | --12-31 | Â |
Entity Well-known Seasoned Issuer | No | Â |
Entity Voluntary Filers | No | Â |
Entity Current Reporting Status | Yes | Â |
Entity Filer Category | Accelerated Filer | Â |
Entity Public Float | Â | $ 73,593,316.75 |
Entity Common Stock, Shares Outstanding | 6,689,743 | Â |
Document Fiscal Year Focus | 2011 | Â |
Document Fiscal Period Focus | Q2 | Â |
Document Type | 10-Q | Â |
Amendment Flag | false | Â |
Document Period End Date | Jun. 30, 2011 |
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Loans
|
6 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Jun. 30, 2011
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Loans [Abstract] | Â | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Loans | Note 3 - Loans Major classifications of loans at June 30, 2011 and December 31, 2010 are as follows (in thousands):
Non-accrual, past-due, and restructured loans as of June 30, 2011 and December 31, 2010 were as follows (in thousands):
Non-accrual loans at June 30, 2011 decreased from the balance at December 31, 2010 primarily due to the receipt of a $594,000 guarantee payment on a Small Business Administration loan during the first quarter 2011. Restructured loans at June 30, 2011 increased from the balance at December 31, 2010 primarily due to the modification of two commercial real estate loans to the same borrower totaling $626,000 during the first quarter 2011. Loans sold to and serviced for others are not included in the accompanying consolidated balance sheets. The unpaid principal balances of those loans at June 30, 2011 and December 31, 2010 were $67,942,000 and $70,705,000, respectively. Loans sold to the Federal Home Loan Mortgage Corporation during the three and six months ended June 30, 2011 totaled $976,000 and $2,698,000, respectively, and $954,000 and $2,554,000 during the three and six months ended June 30, 2010, respectively. The allowance for loan losses and recorded investment in loans for the six months ended June 30 were as follows (000's):
The Company uses a risk-rating system to quantify loan quality. A loan is assigned to a risk category based on relevant information about the ability of the borrower to service the debt including, but not limited to, current financial information, historical payment experience, credit documentation, public information, and current economic trends. The categories used are:
An analysis of the Company's loan portfolio by credit quality indicators at June 30, 2011 and December 31, 2010 is as follows (000's):
A loan portfolio aging analysis at June 30, 2011 and December 31, 2010 is as follows (000's):
Impaired loans at June 30, 2011 and December 31, 2010 were as follows (000's):
Non-accrual loans at June 30, 2011 and December 31, 2010 were as follows (000's):
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Employee Benefits
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Jun. 30, 2011
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Employee Benefits [Abstract] | Â | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Employee Benefits | Note 8 – Employee Benefits LCNB participates in a noncontributory defined benefit retirement multi-employer plan that covers substantially all regular full-time employees hired before January 1, 2009. Employees of LCNB also participate in a defined contribution retirement plan. Employees hired on or after January 1, 2009 receive a 50% employer match on their contributions into the 401(k) plan, up to a maximum LCNB contribution of 3% of each individual employee's annual compensation. Employees hired before January 1, 2009 who received a benefit reduction under certain amendments to the defined benefit retirement plan receive an automatic contribution of 5% or 7% of annual compensation, depending on the sum of an employee's age and vesting service, into the 401(k) plan, regardless of the contributions made by the employees. This contribution is made annually and these employees do not receive any employer matches to their 401(k) contributions. Funding and administrative costs of the qualified noncontributory defined benefit retirement plan and 401(k) plan charged to pension and other employee benefits in the consolidated statements of income for the three and six-month periods ended June 30, 2011 and 2010 were as follows (in thousands):
Certain highly compensated employees participate in a nonqualified defined benefit retirement plan. The nonqualified plan ensures that participants receive the full amount of benefits to which they would have been entitled under the noncontributory defined benefit retirement plan in the absence of limits on benefit levels imposed by certain sections of the Internal Revenue Code. The components of net periodic pension cost of the nonqualified defined benefit retirement plan for the three and six months ended June 30, 2011 and 2010 are summarized as follows (in thousands):
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CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY (Unaudited) (Parenthetical) (USD $)
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6 Months Ended | |
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Jun. 30, 2011
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Jun. 30, 2010
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Common stock dividends (per share) | $ 0.32 | $ 0.32 |
Retained Earnings [Member]
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Common stock dividends (per share) | $ 0.32 | $ 0.32 |
Borrowings
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Jun. 30, 2011
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Borrowings [Abstract] | Â | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Borrowings | Note 5 – Borrowings Funds borrowed from the Federal Home Loan Bank of Cincinnati at June 30, 2011 and December 31, 2010 were as follows (in thousands):
All advances from the Federal Home Loan Bank of Cincinnati are secured by a blanket pledge of LCNB's 1-4 family first lien mortgage loans in the amount of approximately $146 million and $148 million at June 30, 2011 and December 31, 2010, respectively. Additionally, LCNB was required to hold minimum levels of FHLB stock, based on the outstanding borrowings. Short-term borrowings at June 30, 2011 and December 31, 2010 are as follows (dollars in thousands):
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Earnings per Common Share
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Jun. 30, 2011
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Earnings per Common Share [Abstract] | Â | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Earnings per Common Share | Note 10 - Earnings per Common Share Basic earnings per common share is calculated by dividing net income available to common shareholders by the weighted average number of common shares outstanding during the period. Diluted earnings per common share is adjusted for the dilutive effects of stock options, warrant, and restricted stock. The diluted average number of common shares outstanding has been increased for the assumed exercise of stock options, warrant, and restricted stock with proceeds used to purchase treasury shares at the average market price for the period. The computations were as follows for the three and six months ended June 30, 2011 and 2010 (dollars in thousands, except share and per share data):
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Commitments and Contingent Liabilities
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Jun. 30, 2011
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Commitments and Contingent Liabilities [Abstract] | Â | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Commitments and Contingent Liabilities | Note 6 - Commitments and Contingent Liabilities LCNB is a party to financial instruments with off-balance-sheet risk in the normal course of business to meet the financing needs of its customers. These financial instruments included commitments to extend credit. They involve, to varying degrees, elements of credit and interest rate risk in excess of the amount recognized in the balance sheets. Exposure to credit loss in the event of nonperformance by the other parties to financial instruments for commitments to extend credit is represented by the contract amount of those instruments. LCNB offers the Bounce Protection product, a customer deposit overdraft program, which is offered as a service and does not constitute a contract between the customer and LCNB. LCNB uses the same credit policies in making commitments and conditional obligations as it does for on-balance-sheet instruments. Financial instruments whose contract amounts represent off-balance-sheet credit risk at June 30, 2011 and December 31, 2010 were as follows (in thousands):
Commitments to extend credit are agreements to lend to a customer as long as there is no violation of any condition established in the contract. Unused lines of credit include amounts not drawn in line of credit loans. Commitments to extend credit and unused lines of credit generally have fixed expiration dates or other termination clauses. Standby letters of credit are conditional commitments issued to guarantee the performance of a customer to a third party. At June 30, 2011 and December 31, 2010, outstanding guarantees of approximately $408,000 and $998,000, respectively, were issued to developers and contractors. These guarantees generally are fully secured and have varying maturities. In addition, LCNB has a participation in a letter of credit securing payment of principal and interest on a bond issue. The participation amount at June 30, 2011 and December 31, 2010 was approximately $5.3 million and $5.5 million, respectively. The agreement has a final maturity date of July 15, 2012. LCNB evaluates each customer's credit worthiness on a case-by-case basis. The amount of collateral obtained, if deemed necessary, is based on management's credit evaluation of the borrower. Collateral held varies, but may include accounts receivable; inventory; property, plant and equipment; residential realty; and income-producing commercial properties. Capital expenditures include the construction or acquisition of new office buildings, improvements to LCNB's 26 offices, purchases of furniture and equipment, and additions or improvements to LCNB's information technology system. Material commitments for capital expenditures outstanding as of June 30, 2011 totaled approximately $800,000. Management believes that LCNB has sufficient liquidity to fund its lending and capital expenditure commitments. LCNB and its subsidiaries are parties to various claims and proceedings arising in the normal course of business. Management, after consultation with legal counsel, believes that the liabilities, if any, arising from such proceedings and claims will not be material to the consolidated financial position or results of operations. |
Other Real Estate Owned
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Jun. 30, 2011
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Other Real Estate Owned [Abstract] | Â | ||||||||||||||||||||||||||||||||||||||||||||||||||||||
Other Real Estate Owned | Note 4 – Other Real Estate Owned Other real estate owned includes property acquired through foreclosure or deed-in-lieu of foreclosure and also includes property deemed to be in-substance foreclosed and are included in “other assets” in the consolidated balance sheets. Changes in other real estate owned were as follows (000's):
Other real estate owned at June 30, 2011 consisted of two commercial properties and one single-family residential home. Other real estate owned at June 30, 2010 consisted of two commercial properties and two single-family residential homes. Additions for the 2010 period consisted of one single family residential home. |
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (Unaudited) (Parenthetical) (USD $)
In Thousands |
3 Months Ended | 6 Months Ended | ||
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Jun. 30, 2011
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Jun. 30, 2010
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Jun. 30, 2011
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Jun. 30, 2010
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CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (Unaudited) [Abstract] | Â | Â | Â | Â |
Net unrealized gain on available-for-sale securities, taxes | $ 926 | $ 654 | $ 696 | $ 835 |
Reclassification adjustment for net realized gain on sale of available-for-sale securities | 42 | 18 | 143 | 44 |
Change in nonqualified pension plan unrecognized net gain (loss) | 2 | Â | 6 | Â |
Reclassification adjustment for recognition of nonqualified pension plan net (gain) loss | 3 | Â | 4 | Â |
Nonqualified pension plan curtailment | Â | Â | $ 80 | Â |
Basis of Presentation
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6 Months Ended |
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Jun. 30, 2011
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Basis of Presentation [Abstract] | Â |
Basis of Presentation | Note 1 - Basis of Presentation Substantially all of the assets, liabilities and operations of LCNB Corp. ("LCNB") are attributable to its wholly-owned subsidiary, LCNB National Bank (the "Bank"). The accompanying unaudited consolidated financial statements include the accounts of LCNB and the Bank. LCNB completed the sale of its subsidiary, Dakin Insurance Agency, Inc. (“Dakin”) on March 23, 2011. The financial results of Dakin are included as income from discontinued operations, net of tax, in the accompanying unaudited consolidated financial statements through the date of sale. The unaudited interim consolidated financial statements, which have been reviewed by J.D. Cloud & Co. L.L.P., LCNB's independent registered public accounting firm, in accordance with standards established by the Public Company Accounting Oversight Board, as indicated by their report included herein and which does not express an opinion on those statements, have been prepared in accordance with U.S. generally accepted accounting principles for interim financial information and the rules and regulations of the Securities and Exchange Commission (the “SEC”). Accordingly, they do not include all of the information and footnotes required by U.S. generally accepted accounting principles for complete financial statements. In the opinion of management, the unaudited interim consolidated financial statements include all adjustments (consisting of normal, recurring accruals) considered necessary for a fair presentation of financial position, results of operations, and cash flows for the interim periods, as required by Regulation S-X, Rule 10-01. Certain prior period data presented in the financial statements have been reclassified to conform with the current year presentation. The preparation of financial statements in conformity with U.S. generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. Results of operations for the three and six months ended June 30, 2011 are not necessarily indicative of the results to be expected for the full year ending December 31, 2011. These unaudited consolidated financial statements should be read in conjunction with the consolidated financial statements, accounting policies, and financial notes thereto included in LCNB's 2010 Annual Report on Form 10-K filed with the SEC. |
Stock Based Compensation
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Jun. 30, 2011
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Stock Based Compensation [Abstract] | Â | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Stock Based Compensation | Note 9 - Stock Based Compensation LCNB established an Ownership Incentive Plan (the "Plan") during 2002 that allows for stock-based awards to eligible employees, as determined by the Board of Directors. The awards may be in the form of stock options, share awards, and/or appreciation rights. The Plan provides for the issuance of up to 200,000 shares. Options granted to date vest ratably over a five year period and expire ten years after the date of grant. Stock options outstanding at June 30, 2011 were as follows:
The following table summarizes stock option activity for the periods indicated:
The aggregate intrinsic value (the amount by which the current market value of the underlying stock exceeds the exercise price of the option) for options outstanding at June 30, 2011 that were “in the money” (market price greater than exercise price) was $95,000. The aggregate intrinsic value at that date for only the options that were exercisable was $36,000. The intrinsic value changes based on changes in the market value of LCNB's stock. The fair value of options granted is estimated at the date of grant using the Black-Scholes option-pricing model. The following table shows the estimated weighted-average fair value and the assumptions used in calculating that value for options granted during the six month periods ended June 30:
Total expense related to options included in salaries and employee benefits in the consolidated statements of income for the three and six months ended June 30, 2011 were $11,000 and $22,000, respectively, and $10,000 and $19,000 for the three and six months ended June 30, 2010, respectively. A total of 2,511 restricted shares were granted to an executive officer in February 2010 and vested in November 2010. Until they vested, they were restricted from sale, transfer, or assignment in accordance with the terms of the agreement under which they were issued. At the date of vesting, the shares were issued from treasury stock and, therefore, did not affect the number of securities remaining available for future issuance in the table above. No restricted shares were granted prior to February 2010 or during the first six months of 2011. |
Investment Securities
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Jun. 30, 2011
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Investment Securities [Abstract] | Â | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Investment Securities | Note 2 - Investment Securities The amortized cost and estimated fair value of available-for-sale investment securities at June 30, 2011 and December 31, 2010 are summarized as follows (in thousands):
The fair value of held-to-maturity investment securities, consisting of taxable and non-taxable municipal securities, approximates amortized cost at June 30, 2011 and December 31, 2010. Substantially all securities in unrealized loss positions at June 30, 2011 have been in a loss position less than twelve months. Management has determined that the unrealized losses at June 30, 2011 are primarily due to fluctuations in market interest rates and do not reflect credit quality deterioration of the securities. Because the Company does not have the intent to sell the investments and it is more likely than not that the Company will not be required to sell the investments before recovery of their amortized cost bases, which may be at maturity, the Company does not consider these investments to be other-than-temporarily impaired. |
Discontinued Operations
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Jun. 30, 2011
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DISCONTINUED OPERATIONS [Abstract] | Â | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Discontinued Operations | Note 12 – Discontinued Operations LCNB sold its insurance agency subsidiary on March 23, 2011 and therefore its financial results are reported in the income statements as income from discontinued operations, net of taxes. Income from discontinued operations for the six months ended June 30, 2011 include the gain recognized from the sale less certain related closing costs, taxes, and a curtailment expense recognized in LCNB's nonqualified defined benefit retirement plan due to the sale. The following table summarizes income from discontinued operations for the periods indicated (in thousands):
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Subsequent Events
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6 Months Ended |
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Jun. 30, 2011
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Subsequent Events [Abstract] | Â |
Subsequent Events | Note 13 – Subsequent Events LCNB Corp. filed a Registration Statement on Form S-3 with the SEC on July 27, 2011 to register 400,000 shares for use in its Amended and Restated Dividend Reinvestment and Stock Purchase Plan (the “Amended Plan”). Formerly LCNB purchased the shares needed for its Dividend and Stock Purchase Plan in the secondary market. Under the Amended Plan, LCNB has the option of purchasing shares in the secondary market, using treasury shares, or issuing new shares. LCNB Corp. applied to NASDAQ® on July 28, 2011 for approval to move the listing of its stock from the Over the Counter Bulletin Board (OTCBB) to the NASDAQ Capital Market®. |
Regulatory Capital
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Jun. 30, 2011
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Regulatory Capital [Abstract] | Â | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Regulatory Capital | Note 7 – Regulatory Capital The Bank and LCNB are required by regulators to meet certain minimum levels of capital adequacy. These are expressed in the form of certain ratios. Capital is separated into Tier 1 capital (essentially shareholders' equity less goodwill and other intangibles) and Tier 2 capital (essentially the allowance for loan losses limited to 1.25% of risk-weighted assets). The first two ratios, which are based on the degree of credit risk in LCNB's assets, provide for weighting assets based on assigned risk factors and include off-balance sheet items such as loan commitments and stand-by letters of credit. The ratio of Tier 1 capital to risk-weighted assets must be at least 4.0% and the ratio of Total capital (Tier 1 capital plus Tier 2 capital) to risk-weighted assets must be at least 8.0%. The capital leverage ratio supplements the risk-based capital guidelines. Banks are required to maintain a minimum ratio of Tier 1 capital to adjusted quarterly average total assets of 3.0%. For various regulatory purposes, financial institutions are classified into categories based upon capital adequacy. The highest "well-capitalized" category requires capital ratios of at least 10% for total risk-based, 6% for Tier 1 risk-based, and 5% for leverage. As of the most recent notification from their regulators, The Bank and LCNB were categorized as "well-capitalized" under the regulatory framework for prompt corrective action. Management believes that no conditions or events have occurred since the last notification that would change the Bank's or LCNB's category. A summary of the regulatory capital and capital ratios of LCNB follows (dollars in thousands):
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Fair Value of Financial Instruments
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Fair Value of Financial Instruments [Abstract] | Â | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Fair Value of Financial Instruments | Note 11 - Fair Value of Financial Instruments The inputs to valuation techniques used to measure fair value are assigned to one of three broad levels:
The majority of LCNB's financial debt securities are classified as available-for-sale. The securities are reported at fair value with unrealized holding gains and losses reported net of income taxes in accumulated other comprehensive income. LCNB utilizes a pricing service for determining the fair values of most of its investment securities. Fair value for U.S. Treasury notes and corporate securities are determined based on market quotations (level 1). Fair value for most of the other investment securities is calculated using the discounted cash flow method for each security. The discount rates for these cash flows are estimated by the pricing service using rates observed in the market (level 2). Cash flow streams are dependent on estimated prepayment speeds and the overall structure of the securities given existing market conditions. The investments in mutual funds are considered to have level 3 inputs because LCNB does not have precise information about the methods used by the mutual fund companies to assign fair values or full information on the investments made by the funds. Additionally, LCNB Corp. owns trust preferred securities in various financial institutions and equity securities in non-financial companies. Market quotations (level 1) are used to determine fair values for these investments. The following table summarizes the valuation of LCNB's available-for-sale securities by input levels as of June 30, 2011 and December 31, 2010 (in thousands):
The following table is a reconciliation of the beginning and ending balances of recurring fair value measurements that use significant unobservable inputs (level 3) for the six months ended June 30, 2011 (in thousands):
Assets that may be recorded at fair value on a nonrecurring basis include impaired loans, other real estate owned, and other repossessed assets. A loan is considered impaired when management believes it is probable that payment of interest and principal will not be made in accordance with the contractual terms of the loan agreement. Impaired loans are carried at the present value of estimated future cash flows using the loan's existing rate or the fair value of collateral if the loan is collateral dependent and if this value is less than the loan balance. When the fair value of the collateral is based on an observable market price or current appraised value, the inputs are considered to be level 2. When an appraised value is not available and there is not an observable market price, the inputs are considered to be level 3. Other real estate owned is adjusted to fair value upon transfer of the loan to foreclosed assets, usually based on an appraisal of the property. Subsequently, foreclosed assets are carried at the lower of carrying value or fair value. The inputs for a valuation based on current appraised value are considered to be level 2. The table below presents LCNB's impaired loans, other real estate owned, and repossessed assets measured at fair value on a nonrecurring basis as of June 30, 2011 and December 31, 2010 by the level in the fair value hierarchy within which the inputs for these measurements fall (in thousands):
Carrying amounts and estimated fair values of financial instruments as of June 30, 2011 and December 31, 2010 were as follows (in thousand
The fair value of off-balance-sheet financial instruments at June 30, 2011 and December 31, 2010 was not material. Fair values of financial instruments are based on various assumptions, including the discount rate and estimates of future cash flows. Therefore, the fair values presented may not represent amounts that could be realized in actual transactions. In addition, because the required disclosures exclude certain financial instruments and all nonfinancial instruments, any aggregation of the fair value amounts presented would not represent the underlying value of LCNB. The following methods and assumptions were used to estimate the fair value of certain financial instruments: Cash and cash equivalents The carrying amounts presented are deemed to approximate fair value. Investment securities Fair values for securities, excluding Federal Home Loan Bank and Federal Reserve Bank stock, are based on quoted market prices, if available. If a quoted market price is not available, fair value is estimated using quoted market prices for similar securities and/or discounted cash flow analyses or other methods. The carrying value of Federal Home Loan Bank and Federal Reserve Bank stock approximates fair value based on the respective redemptive provisions. Loans Fair value is estimated by discounting the future cash flows using the current rates at which similar loans would be made to borrowers with similar credit ratings and for the same remaining maturities, incorporating assumptions of current and projected prepayment speeds. Deposits The fair value of demand deposits, savings accounts, and certain money market deposits is the amount payable on demand at the reporting date. The fair value of fixed-maturity certificates of deposit is estimated using the rates currently offered for deposits of similar remaining maturities. Borrowings The carrying amounts of federal funds purchased, repurchase agreements, and U.S. Treasury demand note borrowings are deemed to approximate fair value of short-term borrowings. For long-term debt, fair values are estimated based on the discounted value of expected net cash flows using current interest rates. |