California | 33-0937517 |
(State of Incorporation) | (IRS Employer Identification No) |
Large accelerated filer £ | Accelerated filer R |
Non-accelerated filer £ (Do not check if a smaller reporting company) | Smaller Reporting Company £ |
| Page |
Part I - Financial Information | 1 |
Item 1. Financial Statements (Unaudited) | 1 |
Consolidated Balance Sheets | 1 |
Consolidated Statements of Income | 2 |
Consolidated Statements of Comprehensive Income | 3 |
Consolidated Statements of Cash Flows | 4 |
Notes to Unaudited Consolidated Financial Statements | 5 |
| |
Item 2. Management's Discussion & Analysis of Financial Condition & Results of Operations | 26 |
Forward-Looking Statements | 26 |
Critical Accounting Policies | 26 |
Overview of the Results of Operations and Financial Condition | 27 |
Earnings Performance | 28 |
Net Interest Income and Net Interest Margin | 28 |
Provision for Loan and Lease Losses | 32 |
Non-interest Income and Non-Interest Expense | 33 |
Provision for Income Taxes | 35 |
Balance Sheet Analysis | 36 |
Earning Assets | 36 |
Investments | 36 |
Loan Portfolio | 37 |
Nonperforming Assets | 39 |
Allowance for Loan and Lease Losses | 40 |
Off-Balance Sheet Arrangements | 42 |
Other Assets | 42 |
Deposits and Interest-Bearing Liabilities | 43 |
Deposits | 43 |
Other Interest-Bearing Liabilities | 44 |
Non-Interest Bearing Liabilities | 45 |
Liquidity and Market Risk Management | 45 |
Capital Resources | 47 |
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Item 3. Qualitative & Quantitative Disclosures about Market Risk | 49 |
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Item 4. Controls and Procedures | 49 |
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Part II - Other Information | 50 |
Item 1. - Legal Proceedings | 50 |
Item 1A. - Risk Factors | 50 |
Item 2. - Unregistered Sales of Equity Securities and Use of Proceeds | 50 |
Item 3. - Defaults upon Senior Securities | 50 |
Item 4. - (Removed and Reserved) | 50 |
Item 5. - Other Information | 50 |
Item 6. - Exhibits | 51 |
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Signatures | 52 |
| | June 30, 2013 | | December 31, 2012 | | ||
| | (unaudited) | | (audited) | | ||
ASSETS | | | | | | | |
Cash and due from banks | | $ | 41,863 | | $ | 42,079 | |
Interest-bearing deposits in banks | | | 25,119 | | | 19,739 | |
Total Cash & Cash Equivalents | | | 66,982 | | | 61,818 | |
Investment securities available for sale | | | 393,576 | | | 380,188 | |
Loans held for sale | | | 523 | | | 210 | |
Loans and leases: | | | | | | | |
Gross loans and leases | | | 810,194 | | | 879,795 | |
Allowance for loan and lease losses | | | (12,180) | | | (13,873) | |
Deferred loan and lease fees, net | | | 1,237 | | | 1,156 | |
Net Loans and Leases | | | 799,251 | | | 867,078 | |
Premises and equipment, net | | | 20,932 | | | 21,830 | |
Operating leases, net | | | - | | | 12 | |
Foreclosed assets | | | 10,834 | | | 19,754 | |
Goodwill | | | 5,544 | | | 5,544 | |
Other assets | | | 80,782 | | | 81,469 | |
TOTAL ASSETS | | $ | 1,378,424 | | $ | 1,437,903 | |
| | | | | | | |
LIABILITIES AND SHAREHOLDERS' EQUITY | | | | | | | |
LIABILITIES | | | | | | | |
Deposits: | | | | | | | |
Non-interest bearing | | $ | 357,540 | | $ | 352,597 | |
Interest bearing | | | 797,476 | | | 821,437 | |
Total Deposits | | | 1,155,016 | | | 1,174,034 | |
Federal funds purchased and repurchase agreements | | | 1,963 | | | 1,419 | |
Short-term borrowings | | | - | | | 36,650 | |
Long-term borrowings | | | - | | | 5,000 | |
Junior subordinated debentures | | | 30,928 | | | 30,928 | |
Other liabilities | | | 15,346 | | | 15,980 | |
TOTAL LIABILITIES | | | 1,203,253 | | | 1,264,011 | |
SHAREHOLDERS' EQUITY | | | | | | | |
Common stock, no par value; 24,000,000 shares authorized; 14,144,439 and 14,106,959 shares issued and outstanding at June 30, 2013 and December 31, 2012, respectively | | | 64,855 | | | 64,384 | |
Additional paid in capital | | | 2,707 | | | 2,660 | |
Retained earnings | | | 107,566 | | | 103,128 | |
Accumulated other comprehensive income | | | 43 | | | 3,720 | |
TOTAL SHAREHOLDERS' EQUITY | | | 175,171 | | | 173,892 | |
| | | | | | | |
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY | | $ | 1,378,424 | | $ | 1,437,903 | |
| Three Months Ended June 30, | | Six Months Ended June 30, | | ||||||||
| 2013 | | 2012 | | 2013 | | 2012 | | ||||
Interest income: | | | | | | | | | | | | |
Interest and fees on loans | $ | 11,368 | | $ | 11,154 | | $ | 22,275 | | $ | 22,297 | |
Interest on investment securities: | | | | | | | | | | | | |
Taxable | | 1,034 | | | 1,751 | | | 2,196 | | | 3,635 | |
Tax-exempt | | 672 | | | 685 | | | 1,291 | | | 1,352 | |
Interest on federal funds sold and interest-bearing deposits | | 16 | | | 22 | | | 44 | | | 37 | |
Total interest income | | 13,090 | | | 13,612 | | | 25,806 | | | 27,321 | |
| | | | | | | | | | | | |
Interest expense: | | | | | | | | | | | | |
Interest on deposits | | 628 | | | 809 | | | 1,288 | | | 1,694 | |
Interest on short-term borrowings | | 8 | | | 13 | | | 12 | | | 18 | |
Interest on long-term borrowings | | - | | | 49 | | | 33 | | | 180 | |
Interest on mandatorily redeemable trust preferred securities | | 179 | | | 193 | | | 356 | | | 393 | |
Total interest expense | | 815 | | | 1,064 | | | 1,689 | | | 2,285 | |
| | | | | | | | | | | | |
Net Interest Income | | 12,275 | | | 12,548 | | | 24,117 | | | 25,036 | |
| | | | | | | | | | | | |
Provision for loan losses | | 450 | | | 3,160 | | | 2,050 | | | 5,910 | |
| | | | | | | | | | | | |
Net Interest Income after Provision for Loan Losses | | 11,825 | | | 9,388 | | | 22,067 | | | 19,126 | |
| | | | | | | | | | | | |
Non-interest income: | | | | | | | | | | | | |
Service charges on deposit accounts | | 2,215 | | | 2,417 | | | 4,288 | | | 4,704 | |
Gains on investment securities available-for-sale | | - | | | 1 | | | 6 | | | 71 | |
Other income, net | | 1,807 | | | 1,704 | | | 3,844 | | | 3,448 | |
Total non-interest income | | 4,022 | | | 4,122 | | | 8,138 | | | 8,223 | |
| | | | | | | | | | | | |
Non-interest expense: | | | | | | | | | | | | |
Salaries and employee benefits | | 5,403 | | | 4,911 | | | 11,323 | | | 10,576 | |
Occupancy expense | | 1,596 | | | 1,563 | | | 3,147 | | | 3,052 | |
Other | | 3,718 | | | 4,009 | | | 8,068 | | | 8,894 | |
Total non-interest expenses | | 10,717 | | | 10,483 | | | 22,538 | | | 22,522 | |
| | | | | | | | | | | | |
Income before income taxes | | 5,130 | | | 3,027 | | | 7,667 | | | 4,827 | |
| | | | | | | | | | | | |
Provision for income taxes | | 1,331 | | | 454 | | | 1,535 | | | 375 | |
| | | | | | | | | | | | |
Net Income | $ | 3,799 | | $ | 2,573 | | $ | 6,132 | | $ | 4,452 | |
| | | | | | | | | | | | |
PER SHARE DATA | | | | | | | | | | | | |
Book value | $ | 12.38 | | $ | 12.23 | | $ | 12.38 | | $ | 12.23 | |
Cash dividends | $ | 0.06 | | $ | 0.06 | | $ | 0.12 | | $ | 0.12 | |
Earnings per share basic | $ | 0.27 | | $ | 0.18 | | $ | 0.43 | | $ | 0.32 | |
Earnings per share diluted | $ | 0.27 | | $ | 0.18 | | $ | 0.43 | | $ | 0.32 | |
Average shares outstanding, basic | | 14,128,146 | | | 14,103,209 | | | 14,120,865 | | | 14,102,544 | |
Average shares outstanding, diluted | | 14,227,335 | | | 14,107,640 | | | 14,211,910 | | | 14,107,416 | |
| | | | | | | | | | | | |
Total shareholder Equity (in thousands) | $ | 175,171 | | $ | 172,537 | | $ | 175,171 | | $ | 172,537 | |
Shares outstanding | | 14,144,439 | | | 14,103,209 | | | 14,144,439 | | | 14,103,209 | |
Dividends Paid | $ | 847,358 | | $ | 846,193 | | $ | 1,694,024 | | $ | 1,692,289 | |
| | Three Months Ended June 30, | | Six Months Ended June 30, | | ||||||||
| | 2013 | | 2012 | | 2013 | | 2012 | | ||||
| | | | | | | | | | | | | |
Net Income | | $ | 3,799 | | $ | 2,573 | | $ | 6,132 | | $ | 4,452 | |
Other comprehensive income, before tax: | | | | | | | | | | | | | |
Unrealized gains on securities: | | | | | | | | | | | | | |
Unrealized holding (losses) gains arising during period | | | (6,157) | | | 604 | | | (6,242) | | | 1,709 | |
Less: reclassification adjustment for gains (1) | | | - | | | (1) | | | (6) | | | (71) | |
Other comprehensive (loss) income, before tax | | | (6,157) | | | 603 | | | (6,248) | | | 1,638 | |
Income tax expense related to items of other comprehensive (loss) income, net of tax | | | 2,534 | | | (246) | | | 2,571 | | | (678) | |
Other comprehensive (loss) income | | | (3,623) | | | 357 | | | (3,677) | | | 960 | |
| | | | | | | | | | | | | |
Comprehensive income | | $ | 176 | | $ | 2,930 | | $ | 2,455 | | $ | 5,412 | |
| | Six Months Ended June 30, | | ||||
| | 2013 | | 2012 | | ||
Cash flows from operating activities: | | | | | | | |
Net income | | $ | 6,132 | | $ | 4,452 | |
Adjustments to reconcile net income to net cash provided by operating activities: | | | | | | | |
Gain on investment of securities | | | (6) | | | (71) | |
Gain on sales of loans | | | (68) | | | (94) | |
Gain on disposal of fixed assets | | | (15) | | | - | |
Loss on sale on foreclosed assets | | | 269 | | | 177 | |
Writedowns on foreclosed assets | | | 188 | | | 1,395 | |
Share-based compensation expense | | | 150 | | | 122 | |
Provision for loan losses | | | 2,050 | | | 5,910 | |
Depreciation and amortization | | | 1,151 | | | 1,190 | |
Net amortization on securities premiums and discounts | | | 4,337 | | | 4,019 | |
Increase in unearned net loan fees | | | (81) | | | (324) | |
Increase in cash surrender value of life insurance policies | | | (933) | | | (861) | |
Proceeds from sales of loans portfolio | | | 2,288 | | | 3,954 | |
Net Increase in loans held-for-sale | | | (2,533) | | | (3,007) | |
Decrease (Increase) in interest receivable and other assets | | | 3,641 | | | (314) | |
Decrease in other liabilities | | | (633) | | | (172) | |
Net Decrease in FHLB Stock | | | 438 | | | 634 | |
Deferred Income Tax Provision | | | 8 | | | 88 | |
Excess tax benefit from equity based compensation | | | (103) | | | (36) | |
Net cash provided by operating activities | | | 16,280 | | | 17,062 | |
| | | | | | | |
Cash flows from investing activities: | | | | | | | |
Maturities of securities available for sale | | | 439 | | | 135 | |
Proceeds from sales/calls of securities available for sale | | | 1,221 | | | 7,000 | |
Purchases of securities available for sale | | | (77,966) | | | (73,752) | |
Principal pay downs on securities available for sale | | | 52,339 | | | 48,591 | |
Net Decrease (Increase) in loans receivable, net | | | 63,776 | | | (80,230) | |
Purchases of premises and equipment, net | | | (226) | | | (2,481) | |
Proceeds from sales of foreclosed assets | | | 10,546 | | | 10,569 | |
Net cash provided by (used in) investing activities | | | 50,129 | | | (90,168) | |
| | | | | | | |
Cash flows from financing activities: | | | | | | | |
(Decrease) Increase in deposits | | | (19,019) | | | 63,265 | |
Decrease in borrowed funds | | | (41,650) | | | (2,480) | |
Increase (Decrease) in repurchase agreements | | | 544 | | | (147) | |
Cash dividends paid | | | (1,694) | | | (1,692) | |
Stock options exercised | | | 471 | | | 14 | |
Excess tax benefit from equity based compensation | | | 103 | | | 36 | |
Net cash (used in) provided by financing activities | | | (61,245) | | | 58,996 | |
| | | | | | | |
Increase (Decrease) in cash and due from banks | | | 5,164 | | | (14,110) | |
| | | | | | | |
Cash and Cash Equivalents | | | | | | | |
Beginning of period | | | 61,818 | | | 63,036 | |
End of period | | $ | 66,982 | | $ | 48,926 | |
| | June 30, 2013 | | December 31, 2012 | | ||
Commitments to extend credit | | $ | 387,241 | | $ | 225,400 | |
Standby letters of credit | | $ | 8,316 | | $ | 6,690 | |
Commercial letters of credit | | $ | 8,533 | | $ | 8,539 | |
| ⋅ | 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 observable inputs other than Level 1 prices, such as quoted prices for similar assets or liabilities, quoted prices in markets that are not active, and 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 factors that market participants would likely consider in pricing an asset or liability. |
| ⋅ | Cash and cash equivalents and fed funds sold: For cash and cash equivalents and fed funds sold, the carrying amount is estimated to be fair value. |
| | |
| ⋅ | Investment securities: The fair values of investment securities are determined by obtaining quoted prices on nationally recognized securities exchanges or by matrix pricing, which is a mathematical technique used widely in the industry to value debt securities by relying on their relationship to other benchmark quoted securities when quoted prices for specific securities are not readily available. |
| | |
| ⋅ | Loans and leases: For variable-rate loans and leases that re-price frequently with no significant change in credit risk or interest rate spread, fair values are based on carrying values. Fair values for other loans and leases are estimated by discounting projected cash flows at interest rates being offered at each reporting date for loans and leases with similar terms, to borrowers of comparable creditworthiness. The carrying amount of accrued interest receivable approximates its fair value. |
| | |
| ⋅ | Loans held for sale: Since loans designated by the Company as available-for-sale are typically sold shortly after making the decision to sell them, realized gains or losses are usually recognized within the same period and fluctuations in fair values are thus not relevant for reporting purposes. If available-for-sale loans stay on our books for an extended period of time, the fair value of those loans is determined using quoted secondary-market prices. |
| | |
| ⋅ | Collateral-dependent impaired loans: Impaired loans carried at fair value are those for which it is probable that the bank will be unable to collect all amounts due according to the contractual terms of the original loan agreement, and the carrying value has been written down to the fair value of the loan. The carrying value is equivalent to the fair value of the collateral, net of expected disposition costs where applicable, for collateral-dependent loans. |
| | |
| ⋅ | Cash surrender value of life insurance policies: The fair values are based on net cash surrender values at each reporting date. |
| | |
| ⋅ | Investments in, and capital commitments to, limited partnerships: The fair values of our investments in WNC Institutional Tax Credit Fund Limited Partnerships and any other limited partnerships are estimated using quarterly indications of value provided by the general partner. The fair values of undisbursed capital commitments are assumed to be the same as their book values. |
| | |
| ⋅ | Other investments: Certain investments for which no secondary market exists are carried at cost unless an impairment analysis indicates the need for adjustments, and the carrying amount for those investments approximates their estimated fair value. |
| | |
| ⋅ | Deposits: Fair values for demand deposits and other non-maturity deposits are equal to the amount payable on demand at the reporting date, which is the carrying amount. Fair values for fixed-rate certificates of deposit are estimated using a cash flow analysis, discounted at interest rates being offered at each reporting date by the Bank for certificates with similar remaining maturities. The carrying amount of accrued interest payable approximates its fair value. |
| ⋅ | Short-term borrowings: The carrying amounts approximate fair values for federal funds purchased, overnight FHLB advances, borrowings under repurchase agreements, and other short-term borrowings maturing within ninety days of the reporting dates. Fair values of other short-term borrowings are estimated by discounting projected cash flows at the Company's current incremental borrowing rates for similar types of borrowing arrangements. |
| ⋅ | Long-term borrowings: The fair values of the Company's long-term borrowings are estimated using projected cash flows discounted at the Company's current incremental borrowing rates for similar types of borrowing arrangements. |
| ⋅ | Subordinated debentures: The fair values of subordinated debentures are determined based on the current market value for like instruments of a similar maturity and structure. |
| ⋅ | Commitments to extend credit and letters of credit: If funded, the carrying amounts for currently unused commitments would approximate fair values for the newly created financial assets at the funding date. However, because of the high degree of uncertainty with regard to whether or not those commitments will ultimately be funded, fair values for loan commitments and letters of credit in their current undisbursed state cannot reasonably be estimated, and only notional values are disclosed in the table below. |
Fair Value of Financial Instruments | | | | | | | | | | | | | | | | |
(dollars in thousands, unaudited) | | June 30, 2013 | | |||||||||||||
| | | | Estimated Fair Value | | |||||||||||
| | Carrying Amount | | Quoted Prices in Active Markets for Identical Assets (Level 1) | | Significant Observable Inputs (Level 2) | | Significant Unobservable Inputs (Level 3) | | Total | | |||||
Financial Assets: | | | | | | | | | | | | | | | | |
Cash and cash equivalents | | $ | 66,982 | | $ | 66,982 | | $ | - | | $ | - | | $ | 66,982 | |
Investment securities available for sale | | | 393,576 | | | 2,234 | | | 391,342 | | | - | | | 393,576 | |
Loans and leases, net | | | 785,219 | | | - | | | 831,835 | | | - | | | 831,835 | |
Collateral dependent impaired loans | | | 14,032 | | | - | | | 14,032 | | | - | | | 14,032 | |
Loans held-for-sale | | | 523 | | | 523 | | | - | | | - | | | 523 | |
Cash surrender value of life insurance policies | | | 38,940 | | | - | | | 38,940 | | | - | | | 38,940 | |
Other investments | | | 5,932 | | | - | | | 5,932 | | | - | | | 5,932 | |
Investment in Limited Partnership | | | 9,826 | | | - | | | 9,826 | | | - | | | 9,826 | |
Accrued interest receivable | | | 4,935 | | | - | | | 4,935 | | | - | | | 4,935 | |
| | | | | | | | | | | | | | | | |
Financial Liabilities: | | | | | | | | | | | | | | | | |
Deposits: | | | | | | | | | | | | | | | | |
Noninterest-bearing | | $ | 357,540 | | $ | 357,540 | | $ | - | | $ | - | | $ | 357,540 | |
Interest-bearing | | | 797,476 | | | - | | | 797,833 | | | - | | | 797,833 | |
Fed Funds Purchased and Repurchase Agreements | | | 1,963 | | | - | | | 1,963 | | | - | | | 1,963 | |
Short-term borrowings | | | - | | | - | | | - | | | - | | | - | |
Long-term borrowings | | | - | | | - | | | - | | | - | | | - | |
Subordinated debentures | | | 30,928 | | | - | | | 19,304 | | | - | | | 19,304 | |
Limited partnership capital commitment | | | 951 | | | - | | | 951 | | | - | | | 951 | |
Accrued Interest Payable | | | 200 | | | - | | | 200 | | | - | | | 200 | |
| | | | | | | | | | | | | | | | |
| | Notional Amount | | | | | | | | | | | | | | |
Off-balance-sheet financial instruments: | | | | | | | | | | | | | | | | |
Commitments to extend credit | | $ | 387,241 | | | | | | | | | | | | | |
Standby letters of credit | | | 8,316 | | | | | | | | | | | | | |
Commercial lines of credit | | | 8,533 | | | | | | | | | | | | | |
| | December 31, 2012 | | |||||||||||||
| | | | | Estimated Fair Value | | ||||||||||
| | Carrying Amount | | Quoted Prices in Active Markets for Identical Assets (Level 1) | | Significant Observable Inputs (Level 2) | | Significant Unobservable Inputs (Level 3) | | Total | | |||||
Financial Assets: | | | | | | | | | | | | | | | | |
Cash and cash equivalents | | $ | 61,818 | | $ | 61,818 | | $ | - | | $ | - | | $ | 61,818 | |
Investment securities available for sale | | | 380,188 | | | 1,809 | | | 378,379 | | | - | | | 380,188 | |
Loans and leases, net | | | 839,629 | | | - | | | 873,309 | | | - | | | 873,309 | |
Collateral dependent impaired loans | | | 27,449 | | | - | | | 27,449 | | | - | | | 27,449 | |
Loans held-for-sale | | | 210 | | | 210 | | | - | | | - | | | 210 | |
Cash surrender value of life insurance policies | | | 38,007 | | | - | | | 38,007 | | | - | | | 38,007 | |
Other Investments | | | 6,370 | | | - | | | 6,370 | | | - | | | 6,370 | |
Investment in Limited Partnership | | | 10,316 | | | - | | | 10,316 | | | - | | | 10,316 | |
Accrued Interest Receivable | | | 5,095 | | | - | | | 5,095 | | | - | | | 5,095 | |
| | | | | | | | | | | | | | | | |
Financial Liabilities: | | | | | | | | | | | | | | | | |
Deposits: | | | | | | | | | | | | | | | | |
Noninterest-bearing | | $ | 352,597 | | $ | 352,597 | | $ | - | | $ | - | | $ | 352,597 | |
Interest-bearing | | | 821,437 | | | - | | | 821,911 | | | - | | | 821,911 | |
Fed Funds Purchased and Repurchase Agreements | | | 1,419 | | | - | | | 1,419 | | | - | | | 1,419 | |
Short-term borrowings | | | 36,650 | | | - | | | 36,650 | | | - | | | 36,650 | |
Long-term borrowings | | | 5,000 | | | - | | | 5,038 | | | - | | | 5,038 | |
Subordinated debentures | | | 30,928 | | | - | | | 12,141 | | | - | | | 12,141 | |
Limited partnership capital commitment | | | 962 | | | - | | | 962 | | | - | | | 962 | |
Accrued Interest Payable | | | 304 | | | - | | | 304 | | | - | | | 304 | |
| | | | | | | | | | | | | | | | |
| | Notional Amount | | | | | | | | | | | | | | |
Off-balance-sheet financial instruments: | | | | | | | | | | | | | | | | |
Commitments to extend credit | | $ | 225,400 | | | | | | | | | | | | | |
Standby letters of credit | | | 6,690 | | | | | | | | | | | | | |
Commercial lines of credit | | | 8,539 | | | | | | | | | | | | | |
| ⋅ | Investment Securities: The fair values of securities available for sale are determined by obtaining quoted prices on nationally recognized securities exchanges or by matrix pricing, which is a mathematical technique used widely in the industry to value debt securities by relying on the their relationship to other benchmark quoted securities. |
| ⋅ | Collateral Dependent Impaired loans: Impaired loans carried at fair value are those for which it is probable that the bank will be unable to collect all amounts due (including both interest and principal) according to the contractual terms of the original loan agreement, and the carrying value has been written down to the fair value of the loan. The carrying value is equivalent to the fair value of the collateral based on current appraisals, net of expected disposition costs where applicable, for collateral-dependent loans. |
| ⋅ | Foreclosed assets: Repossessed real estate (OREO) and other assets are carried at the lower of cost or fair value. Fair value is the appraised value less expected selling costs for OREO and some other assets such as mobile homes, and for all other assets fair value is represented by the estimated sales proceeds as determined using reasonably available sources. Foreclosed assets for which appraisals can be feasibly obtained are periodically measured for impairment using updated appraisals. Fair values for other foreclosed assets are adjusted as necessary, subsequent to a periodic re-evaluation of expected cash flows and the timing of resolution. If impairment is determined to exist, the book value of a foreclosed asset is immediately written down to its estimated impaired value through the income statement, thus the carrying amount is equal to the fair value and there is no valuation allowance. |
| | Fair Value Measurements at June 30, 2013, Using | | ||||||||||
| | Quoted Prices in Active Markets for Identical Assets (Level 1) | | Significant Observable Inputs (Level 2) | | Significant Unobservable Inputs (Level 3) | | Total | | ||||
Investment Securities | | | | | | | | | | | | | |
U.S. Government agencies | | $ | - | | $ | 4,293 | | $ | - | | $ | 4,293 | |
Obligations of states and political subdivisions | | | - | | | 87,405 | | | - | | | 87,405 | |
U.S. Government agencies collateralized by mortgage obligations | | | - | | | 299,644 | | | - | | | 299,644 | |
Other Securities | | | 2,234 | | | - | | | - | | | 2,234 | |
| | | | | | | | | | | | | |
Total availabe-for-sale securities | | $ | 2,234 | | $ | 391,342 | | $ | - | | $ | 393,576 | |
| | Fair Value Measurements at December 31, 2012, Using | | ||||||||||
| | Quoted Prices in Active Markets for Identical Assets (Level 1) | | Significant Observable Inputs (Level 2) | | Significant Unobservable Inputs (Level 3) | | Total | | ||||
Investment Securities | | | | | | | | | | | | | |
U.S. Government agencies | | $ | - | | $ | 2,973 | | $ | - | | $ | 2,973 | |
Obligations of states and political subdivisions | | | - | | | 73,986 | | | - | | | 73,986 | |
U.S. Government agencies collateralized by mortgage obligations | | | - | | | 301,389 | | | - | | | 301,389 | |
Other Securities | | | 1,809 | | | 31 | | | - | | | 1,840 | |
| | | | | | | | | | | | | |
Total availabe-for-sale securities | | $ | 1,809 | | $ | 378,379 | | $ | - | | $ | 380,188 | |
Fair Value Measurements - Nonrecurring | | | | | | | | | | | | | |
(dollars in thousands, unaudited) | | | | | | | | | | | | | |
| | Fair Value Measurements at June 30, 2013, Using | | ||||||||||
| | Quoted Prices in Active Markets for Identical Assets (Level 1) | | Significant Observable Inputs (Level 2) | | Significant Unobservable Inputs (Level 3) | | Total | | ||||
Collateral Dependent Impaired Loans | | $ | - | | $ | 14,032 | | $ | - | | $ | 14,032 | |
Foreclosed Assets | | $ | - | | $ | 10,834 | | $ | - | | $ | 10,834 | |
| | Fair Value Measurements at December 31, 2012, Using | | ||||||||||
| | Quoted Prices in Active Markets for Identical Assets (Level 1) | | Significant Observable Inputs (Level 2) | | Significant Unobservable Inputs (Level 3) | | Total | | ||||
Collateral Dependent Impaired Loans | | $ | - | | $ | 27,449 | | $ | - | | $ | 27,449 | |
Foreclosed Assets | | $ | - | | $ | 19,754 | | $ | - | | $ | 19,754 | |
| | June 30, 2013 | | ||||||||||
| | Amortized Cost | | Gross Unrealized Gains | | Gross Unrealized Losses | | Estimated Fair Value | | ||||
| | | | | | | | | | | | | |
U.S. Government agencies | | $ | 4,363 | | $ | 4 | | $ | (74) | | $ | 4,293 | |
Obligations of state and political subdivisions | | | 87,237 | | | 2,138 | | | (1,970) | | | 87,405 | |
U.S. Government agencies collateralized by mortgage obligations | | | 300,565 | | | 2,096 | | | (3,017) | | | 299,644 | |
Equity Securities | | | 1,336 | | | 898 | | | - | | | 2,234 | |
| | $ | 393,501 | | $ | 5,136 | | $ | (5,061) | | $ | 393,576 | |
| | December 31, 2012 | | ||||||||||
| | Amortized Cost | | Gross Unrealized Gains | | Gross Unrealized Losses | | Estimated Fair Value | | ||||
U.S. Government agencies | | $ | 2,987 | | $ | 3 | | $ | (17) | | $ | 2,973 | |
Obligations of state and political subdivisions | | | 70,736 | | | 3,430 | | | (180) | | | 73,986 | |
U.S. Government agencies collateralized by mortgage obligations | | | 298,806 | | | 3,547 | | | (964) | | | 301,389 | |
Equity Securities | | | 1,336 | | | 508 | | | (4) | | | 1,840 | |
| | $ | 373,865 | | $ | 7,488 | | $ | (1,165) | | $ | 380,188 | |
| | June 30, 2013 | | ||||||||||
| | Less than Twelve Months | | Over Twelve Months | | ||||||||
| | Gross | | | | | Gross | | | | | ||
| | Unrealized | | | | | Unrealized | | | | | ||
| | Losses | | Fair Value | | Losses | | Fair Value | | ||||
U.S. Government Agencies | | $ | (74) | | $ | 2,615 | | $ | - | | $ | - | |
Obligations of State and Political Subdivisions | | | (1,948) | | | 36,167 | | | (22) | | | 309 | |
U.S. Government agencies collateralized by mortgage obligations | | | (2,786) | | | 179,242 | | | (231) | | | 12,838 | |
Other Securities | | | - | | | - | | | - | | | - | |
Total | | $ | (4,808) | | $ | 218,024 | | $ | (253) | | $ | 13,147 | |
| | December 31, 2012 | | ||||||||||
| | Less than Twelve Months | | Over Twelve Months | | ||||||||
| | Gross Unrealized Losses | | Fair Value | | Gross Unrealized Losses | | Fair Value | | ||||
| | | | | | | | | | | | | |
U.S. Government Agencies | | $ | (17) | | $ | 1,996 | | $ | - | | $ | - | |
Obligations of State and Political Subdivisions | | | (180) | | | 9,324 | | | - | | | - | |
U.S. Government agencies collateralized by mortgage obligations | | | (903) | | | 106,799 | | | (61) | | | 6,965 | |
Other Securities | | | (4) | | | 242 | | | - | | | - | |
Total | | $ | (1,104) | | $ | 118,361 | | $ | (61) | | $ | 6,965 | |
| · | Pass: Larger non-homogeneous loans not meeting the risk rating definitions below, and smaller homogeneous loans that are not assessed on an individual basis. |
| | |
| · | Special Mention: Loans which have potential issues that deserve the close attention of management. If left uncorrected, those potential weaknesses could eventually diminish the prospects for full repayment of principal and interest according to the contractual terms of the loan agreement, or could result in deterioration of the Company's credit position at some future date. |
| | |
| · | Substandard: Loans that have at least one clear and well-defined weakness which could jeopardize the ultimate recoverability of all principal and interest, such as a borrower displaying a highly leveraged position, unfavorable financial operating results and/or trends, uncertain repayment sources or a deteriorated financial condition. |
| | |
| · | Impaired: A loan is considered impaired when, based on current information and events, it is probable that the Company will be unable to collect all amounts due according to the contractual terms of the loan agreement. Impaired loans include all nonperforming loans, loans classified as restructured troubled debt, and certain other loans that are still being maintained on accrual status. If the Bank grants a concession to a borrower in financial difficulty, the loan falls into the category of a troubled debt restructuring (TDR). A TDR may be nonperforming or performing, depending on its accrual status and the demonstrated ability of the borrower to comply with restructured terms. |
| | June 30, 2013 | | |||||||||||||
| | Pass | | Special Mention | | Substandard | | Impaired | | Total | | |||||
Real Estate: | | | | | | | | | | | | | | | | |
1-4 Family residential construction | | $ | 1,226 | | $ | 258 | | $ | 131 | | $ | - | | $ | 1,615 | |
Other construction/Land | | | 14,273 | | | 740 | | | 370 | | | 7,411 | | | 22,794 | |
1-4 Family - closed end | | | 67,551 | | | 1,329 | | | 830 | | | 21,775 | | | 91,485 | |
Equity Lines | | | 54,288 | | | 83 | | | 1,896 | | | 1,089 | | | 57,356 | |
Multi-family residential | | | 5,944 | | | 429 | | | - | | | - | | | 6,373 | |
Commercial real estate - owner occupied | | | 138,154 | | | 19,053 | | | 6,462 | | | 9,627 | | | 173,296 | |
Commercial real estate - non-owner occupied | | | 80,269 | | | 4,212 | | | 409 | | | 13,944 | | | 98,834 | |
Farmland | | | 99,137 | | | 2,080 | | | 2,457 | | | 456 | | | 104,130 | |
Total Real Estate | | | 460,842 | | | 28,184 | | | 12,555 | | | 54,302 | | | 555,883 | |
| | | | | | | | | | | | | | | | |
Agricultural | | | 23,005 | | | 420 | | | - | | | 20 | | | 23,445 | |
Commercial and Industrial | | | 175,595 | | | 2,671 | | | 323 | | | 4,253 | | | 182,842 | |
Small Business Administration | | | 14,342 | | | 995 | | | 1,129 | | | 3,027 | | | 19,493 | |
Direct finance leases | | | 3,400 | | | 27 | | | 2 | | | 60 | | | 3,489 | |
Consumer loans | | | 20,578 | | | 299 | | | 211 | | | 3,954 | | | 25,042 | |
Total Gross Loans and Leases | | $ | 697,762 | | $ | 32,596 | | $ | 14,220 | | $ | 65,616 | | $ | 810,194 | |
| | December 31, 2012 | | |||||||||||||
| | Pass | | Special Mention | | Substandard | | Impaired | | Total | | |||||
Real Estate: | | | | | | | | | | | | | | | | |
1-4 Family residential construction | | $ | 1,599 | | $ | 1,333 | | $ | 89 | | $ | 153 | | $ | 3,174 | |
Other construction/Land | | | 13,270 | | | 952 | | | 1,132 | | | 12,648 | | | 28,002 | |
1-4 Family - closed end | | | 73,003 | | | 2,484 | | | 1,208 | | | 23,222 | | | 99,917 | |
Equity Lines | | | 58,160 | | | 96 | | | 1,949 | | | 1,258 | | | 61,463 | |
Multi-family residential | | | 5,351 | | | 609 | | | - | | | - | | | 5,960 | |
Commercial real estate - owner occupied | | | 144,207 | | | 22,895 | | | 6,562 | | | 8,950 | | | 182,614 | |
Commercial real estate - non-owner occupied | | | 67,407 | | | 6,864 | | | 568 | | | 17,969 | | | 92,808 | |
Farmland | | | 64,176 | | | 2,216 | | | 3,526 | | | 1,933 | | | 71,851 | |
Total Real Estate | | | 427,173 | | | 37,449 | | | 15,034 | | | 66,133 | | | 545,789 | |
| | | | | | | | | | | | | | | | |
Agricultural | | | 21,333 | | | 462 | | | 24 | | | 663 | | | 22,482 | |
Commercial and Industrial | | | 248,157 | | | 5,020 | | | 1,845 | | | 3,656 | | | 258,678 | |
Small Business Administration | | | 15,002 | | | 1,551 | | | 743 | | | 3,227 | | | 20,523 | |
Direct finance leases | | | 4,076 | | | 22 | | | - | | | 135 | | | 4,233 | |
Consumer loans | | | 23,099 | | | 445 | | | 198 | | | 4,348 | | | 28,090 | |
Total Gross Loans and Leases | | $ | 738,840 | | $ | 44,949 | | $ | 17,844 | | $ | 78,162 | | $ | 879,795 | |
| | June 30, 2013 | | |||||||||||||||||||
| | 30-59 Days Past Due | | 60-89 Days Past Due | | 90 Days Or More Past Due(2) | | Total Past Due | | Current | | Total Financing Receivables | | Non-Accrual Loans(1) | | |||||||
Real Estate: | | | | | | | | | | | | | | | | | | | | | | |
1-4 Family residential construction | | $ | - | | $ | - | | $ | - | | $ | - | | $ | 1,615 | | $ | 1,615 | | $ | - | |
Other construction/Land | | | 263 | | | 159 | | | 103 | | | 525 | | | 22,269 | | | 22,794 | | | 6,160 | |
1-4 Family - closed end | | | 372 | | | 514 | | | 1,199 | | | 2,085 | | | 89,400 | | | 91,485 | | | 15,162 | |
Equity Lines | | | 22 | | | - | | | 401 | | | 423 | | | 56,933 | | | 57,356 | | | 887 | |
Multi-family residential | | | - | | | - | | | - | | | - | | | 6,373 | | | 6,373 | | | - | |
Commercial real estate - owner occupied | | | 4,276 | | | 1,022 | | | 2,710 | | | 8,008 | | | 165,288 | | | 173,296 | | | 6,844 | |
Commercial real estate - non- owner occupied | | | 197 | | | 3,424 | | | 7,291 | | | 10,912 | | | 87,922 | | | 98,834 | | | 7,713 | |
Farmland | | | 122 | | | - | | | - | | | 122 | | | 104,008 | | | 104,130 | | | 455 | |
Total Real Estate | | | 5,252 | | | 5,119 | | | 11,704 | | | 22,075 | | | 533,808 | | | 555,883 | | | 37,221 | |
| | | | | | | | | | | | | | | | | | | | | | |
Agricultural | | | 248 | | | - | | | - | | | 248 | | | 23,197 | | | 23,445 | | | 21 | |
Commercial and Industrial | | | 842 | | | 218 | | | 900 | | | 1,960 | | | 180,882 | | | 182,842 | | | 1,836 | |
Small Business Administration | | | 939 | | | 116 | | | 1,363 | | | 2,418 | | | 17,075 | | | 19,493 | | | 1,996 | |
Direct finance leases | | | 27 | | | 60 | | | 2 | | | 89 | | | 3,400 | | | 3,489 | | | 60 | |
Consumer loans | | | 134 | | | 80 | | | 92 | | | 306 | | | 24,736 | | | 25,042 | | | 1,175 | |
Total Gross Loans and Leases | | $ | 7,442 | | $ | 5,593 | | $ | 14,061 | | $ | 27,096 | | $ | 783,098 | | $ | 810,194 | | $ | 42,309 | |
| | December 31, 2012 | | |||||||||||||||||||
| | 30-59 Days Past Due | | 60-89 Days Past Due | | 90 Days Or More Past Due(2) | | Total Past Due | | Current | | Total Financing Receivables | | Non-Accrual Loans(1) | | |||||||
Real Estate: | | | | | | | | | | | | | | | | | | | | | | |
1-4 Family residential construction | | $ | - | | $ | - | | $ | 153 | | $ | 153 | | $ | 3,021 | | $ | 3,174 | | $ | 153 | |
Other construction/Land | | | 374 | | | 211 | | | - | | | 585 | | | 27,417 | | | 28,002 | | | 11,163 | |
1-4 Family - closed end | | | 1,335 | | | 88 | | | 376 | | | 1,799 | | | 98,118 | | | 99,917 | | | 15,381 | |
Equity Lines | | | 473 | | | 40 | | | 66 | | | 579 | | | 60,884 | | | 61,463 | | | 1,026 | |
Multi-family residential | | | 177 | | | - | | | - | | | 177 | | | 5,783 | | | 5,960 | | | - | |
Commercial real estate - owner occupied | | | 1,372 | | | 813 | | | 1,289 | | | 3,474 | | | 179,140 | | | 182,614 | | | 5,314 | |
Commercial real estate - non - owner occupied | | | 7,831 | | | - | | | 1,499 | | | 9,330 | | | 83,478 | | | 92,808 | | | 11,642 | |
Farmland | | | 231 | | | - | | | 1,679 | | | 1,910 | | | 69,941 | | | 71,851 | | | 1,933 | |
Total Real Estate | | | 11,793 | | | 1,152 | | | 5,062 | | | 18,007 | | | 527,782 | | | 545,789 | | | 46,612 | |
| | | | | | | | | | | | | | | | | | | | | | |
Agricultural | | | 24 | | | 157 | | | 506 | | | 687 | | | 21,795 | | | 22,482 | | | 664 | |
Commercial and Industrial | | | 1,419 | | | 518 | | | 7 | | | 1,944 | | | 256,734 | | | 258,678 | | | 2,386 | |
Small Business Administration | | | 905 | | | - | | | 1,574 | | | 2,479 | | | 18,044 | | | 20,523 | | | 2,159 | |
Direct finance leases | | | - | | | 34 | | | 123 | | | 157 | | | 4,076 | | | 4,233 | | | 135 | |
Consumer loans | | | 238 | | | 189 | | | 87 | | | 514 | | | 27,576 | | | 28,090 | | | 1,138 | |
Total Gross Loans and Leases | | $ | 14,379 | | $ | 2,050 | | $ | 7,359 | | $ | 23,788 | | $ | 856,007 | | $ | 879,795 | | $ | 53,094 | |
| | For the Six Months Ended June 30, 2013 | | ||||||||||||||||||||||
| | Rate Modification | | Term Modification | | Interest Only Modification | | Rate & Term Modification | | Rate & Interest Only Modification | | Term & Interest Only Modification | | Rate, Term & Interest Only Modification | | Total | | ||||||||
Trouble Debt Restructurings | | | | | | | | | | | | | | | | | | | | | | | | | |
Real Estate: | | | | | | | | | | | | | | | | | | | | | | | | | |
Other construction/Land | | $ | - | | $ | 247 | | $ | - | | $ | - | | $ | - | | $ | - | | $ | - | | $ | 247 | |
1-4 family - closed-end | | | - | | | 3,338 | | | - | | | 30 | | | - | | | - | | | - | | | 3,368 | |
Commercial real estate - owner occupied | | | - | | | - | | | - | | | - | | | - | | | - | | | - | | | - | |
Commercial real estate - non- owner occupied | | | - | | | - | | | - | | | - | | | - | | | - | | | - | | | - | |
Total Real Estate Loans | | | - | | | 3,585 | | | - | | | 30 | | | - | | | - | | | - | | | 3,615 | |
Commercial and Industrial | | | - | | | 1,507 | | | - | | | - | | | - | | | - | | | - | | | 1,507 | |
Consumer loans | | | - | | | 284 | | | - | | | - | | | - | | | - | | | - | | | 284 | |
Small Business Administration Loans | | | - | | | - | | | - | | | - | | | - | | | - | | | - | | | - | |
| | $ | - | | $ | 5,376 | | $ | - | | $ | 30 | | $ | - | | $ | - | | $ | - | | $ | 5,406 | |
| | For the Year Ended December 31, 2012 | | ||||||||||||||||||||||
| | Rate Modification | | Term Modification | | Interest Only Modification | | Rate & Term Modification | | Rate & Interest Only Modification | | Term & Interest Only Modification | | Rate, Term & Interest Only Modification | | Total | | ||||||||
Trouble Debt Restructurings | | | | | | | | | | | | | | | | | | | | | | | | | |
Real Estate: | | | | | | | | | | | | | | | | | | | | | | | | | |
Other construction/Land | | $ | - | | $ | 458 | | $ | - | | $ | 375 | | $ | - | | $ | - | | $ | - | | $ | 833 | |
1-4 family - closed-end | | | - | | | 313 | | | - | | | 200 | | | - | | | 222 | | | 616 | | | 1,351 | |
Equity Lines | | | - | | | 29 | | | - | | | - | | | - | | | - | | | - | | | 29 | |
Commercial real estate - owner occupied | | | - | | | 1,006 | | | - | | | 1,184 | | | - | | | - | | | - | | | 2,190 | |
Commercial real estate - non- owner occupied | | | - | | | 330 | | | - | | | 60 | | | - | | | - | | | - | | | 390 | |
Total Real Estate Loans | | | - | | | 2,136 | | | - | | | 1,819 | | | - | | | 222 | | | 616 | | | 4,793 | |
Commercial and Industrial | | | - | | | 625 | | | 2 | | | 658 | | | - | | | - | | | - | | | 1,285 | |
Consumer loans | | | - | | | 1,328 | | | - | | | 269 | | | - | | | - | | | 117 | | | 1,714 | |
Small Business Administration Loans | | | - | | | 200 | | | - | | | 475 | | | - | | | - | | | - | | | 675 | |
| | $ | - | | $ | 4,289 | | $ | 2 | | $ | 3,221 | | $ | - | | $ | 222 | | $ | 733 | | $ | 8,467 | |
| | For the Three Months Ended June 30, 2013 | | ||||||||||||
| | Number of Loans | | Pre- Modification Outstanding Recorded Investment | | Post- Modification Outstanding Recorded Investment | | Reserve Difference(1) | | Reserve | | ||||
Real Estate: | | | | | | | | | | | | | | | |
Other Construction/Land | | - | | $ | - | | $ | - | | $ | - | | $ | - | |
1-4 family - closed-end | | 2 | | | 129 | | | 129 | | | 17 | | | 17 | |
Commercial RE- owner occupied | | - | | | - | | | - | | | - | | | - | |
Commercial RE- non-owner occupied | | - | | | - | | | - | | | - | | | - | |
Total Real Estate Loans | | | | | 129 | | | 129 | | | 17 | | | 17 | |
| | | | | | | | | | | | | | | |
Commercial and Industrial | | 1 | | | 50 | | | 50 | | | 18 | | | 20 | |
Small Business Administration Loans | | - | | | - | | | - | | | - | | | - | |
Consumer loans | | 2 | | | 20 | | | 20 | | | 2 | | | 6 | |
| | | | $ | 199 | | $ | 199 | | $ | 37 | | $ | 43 | |
| | For the Six Months Ended June 30, 2013 | | ||||||||||||
| | Number of Loans | | Pre- Modification Outstanding Recorded Investment | | Post- Modification Outstanding Recorded Investment | | Reserve Difference(1) | | Reserve | | ||||
Real Estate: | | | | | | | | | | | | | | | |
Other Construction/Land | | 1 | | $ | 249 | | $ | 247 | | $ | 6 | | $ | - | |
1-4 family - closed-end | | 3 | | | 3,369 | | | 3,368 | | | 17 | | | 17 | |
Commercial RE- owner occupied | | - | | | - | | | - | | | - | | | - | |
Commercial RE- non-owner occupied | | - | | | - | | | - | | | - | | | - | |
Total Real Estate Loans | | | | | 3,618 | | | 3,615 | | | 23 | | | 17 | |
| | | | | | | | | | | | | | | |
Commercial and Industrial | | 4 | | | 1,507 | | | 1,507 | | | (20) | | | 69 | |
Small Business Administration Loans | | - | | | - | | | - | | | - | | | - | |
Consumer loans | | 7 | | | 284 | | | 284 | | | 33 | | | 38 | |
| | | | $ | 5,409 | | $ | 5,406 | | $ | 36 | | $ | 124 | |
| | Subsequent default three months ended June 30, 2013 | | ||||||
| | Number of Loans | | Recorded Investment | | Charge-Offs | | ||
Real Estate: | | | | | | | | | |
Other Construction/Land | | - | | $ | - | | $ | - | |
1-4 family - closed-end | | 2 | | | 779 | | | 94 | |
Equity Lines | | - | | | - | | | - | |
Commercial real estate- owner occupied | | 1 | | | 308 | | | 210 | |
Total Real Estate Loans | | | | | 1,087 | | | 304 | |
| | | | | | | | | |
Commercial and Industrial | | 2 | | | 65 | | | - | |
Small Business Administration Loans | | - | | | - | | | - | |
Consumer Loans | | 3 | | | 65 | | | 64 | |
| | | | $ | 1,217 | | $ | 368 | |
| | Subsequent default six months ended June 30, 2013 | | ||||||
| | Number of Loans | | Recorded Investment | | Charge-Offs | | ||
Real Estate: | | | | | | | | | |
Other Construction/Land | | 1 | | $ | 152 | | $ | 47 | |
1-4 family - closed-end | | 2 | | | 779 | | | 94 | |
Equity Lines | | - | | | - | | | - | |
Commercial real estate- owner occupied | | 1 | | | 308 | | | 210 | |
Total Real Estate Loans | | | | | 1,239 | | | 351 | |
| | | | | | | | | |
Commercial and Industrial | | 5 | | | 239 | | | 174 | |
Small Business Administration Loans | | - | | | - | | | - | |
Consumer Loans | | 4 | | | 67 | | | 66 | |
| | | | $ | 1,545 | | $ | 591 | |
Impaired Loans | | | | | | | | | | | | | | | | |
(dollars in thousands, unaudited) | | June 30, 2013 | | |||||||||||||
| | Unpaid Principal Balance(1) | | Recorded Investment(2) | | Related Allowance | | Average Recorded Investment | | Interest Income Recognized(3) | | |||||
With an Allowance Recorded | | | | | | | | | | | | | | | | |
Real Estate: | | | | | | | | | | | | | | | | |
1-4 family residential construction | | $ | - | | $ | - | | $ | - | | $ | - | | $ | - | |
Other Construction/Land | | | 5,619 | | | 5,619 | | | 1,290 | | | 5,666 | | | 46 | |
1-4 Family - closed-end | | | 15,901 | | | 15,901 | | | 1,338 | | | 15,959 | | | 209 | |
Equity Lines | | | 496 | | | 496 | | | 54 | | | 497 | | | 7 | |
Commercial real estate- owner occupied | | | 5,765 | | | 4,473 | | | 462 | | | 4,500 | | | 83 | |
Commercial real estate- non-owner occupied | | | 6,390 | | | 6,230 | | | 1,301 | | | 6,298 | | | 182 | |
Farmland | | | - | | | - | | | - | | | - | | | - | |
Total Real Estate | | | 34,171 | | | 32,719 | | | 4,445 | | | 32,920 | | | 527 | |
Agriculture | | | - | | | - | | | - | | | - | | | - | |
Commercial and Industrial | | | 1,944 | | | 1,908 | | | 744 | | | 1,984 | | | 44 | |
Small Business Administration | | | 2,450 | | | 2,255 | | | 1,147 | | | 2,254 | | | 29 | |
Direct finance leases | | | 60 | | | 60 | | | 30 | | | 60 | | | - | |
Consumer loans | | | 3,969 | | | 3,902 | | | 784 | | | 3,995 | | | 90 | |
| | | 42,594 | | | 40,844 | | | 7,150 | | | 41,213 | | | 690 | |
With no Related Allowance Recorded | | | | | | | | | | | | | | | | |
Real Estate: | | | | | | | | | | | | | | | | |
1-4 family residential construction | | $ | - | | $ | - | | $ | - | | $ | - | | $ | - | |
Other Construction/Land | | | 1,879 | | | 1,792 | | | - | | | 2,636 | | | - | |
1-4 Family - closed-end | | | 6,597 | | | 5,874 | | | - | | | 6,209 | | | - | |
Equity Lines | | | 760 | | | 593 | | | - | | | 594 | | | - | |
Commercial real estate- owner occupied | | | 5,560 | | | 5,154 | | | - | | | 5,183 | | | - | |
Commercial real estate- non-owner occupied | | | 7,832 | | | 7,714 | | | - | | | 7,719 | | | - | |
Farmland | | | 456 | | | 456 | | | - | | | 460 | | | - | |
Total Real Estate | | | 23,084 | | | 21,583 | | | - | | | 22,801 | | | - | |
Agriculture | | | 21 | | | 20 | | | - | | | 22 | | | - | |
Commercial and Industrial | | | 2,463 | | | 2,345 | | | - | | | 2,470 | | | 24 | |
Small Business Administration | | | 1,100 | | | 772 | | | - | | | 773 | | | - | |
Direct finance leases | | | - | | | - | | | - | | | - | | | - | |
Consumer loans | | | 181 | | | 52 | | | - | | | 60 | | | - | |
| | | 26,849 | | | 24,772 | | | - | | | 26,126 | | | 24 | |
Total | | $ | 69,443 | | $ | 65,616 | | $ | 7,150 | | $ | 67,339 | | $ | 714 | |
| | December 31, 2012 | | |||||||||||||
| | Unpaid Principal Balance(1) | | Recorded Investment(2) | | Related Allowance | | Average Recorded Investment | | Interest Income Recognized(3) | | |||||
With an Allowance Recorded | | | | | | | | | | | | | | | | |
Real Estate: | | | | | | | | | | | | | | | | |
1-4 family residential construction | | $ | 153 | | $ | 153 | | $ | 23 | | $ | 91 | | $ | - | |
Other Construction/Land | | | 10,313 | | | 10,313 | | | 1,244 | | | 10,755 | | | 86 | |
1-4 Family - closed-end | | | 19,218 | | | 18,910 | | | 955 | | | 19,024 | | | 401 | |
Equity Lines | | | 1,142 | | | 1,142 | | | 163 | | | 1,144 | | | 9 | |
Commercial real estate- owner occupied | | | 5,846 | | | 5,585 | | | 563 | | | 5,666 | | | 126 | |
Commercial real estate- non-owner occupied | | | 18,539 | | | 17,579 | | | 1,230 | | | 18,079 | | | 481 | |
Farmland | | | 254 | | | 254 | | | 2 | | | 259 | | | - | |
Total Real Estate | | | 55,465 | | | 53,936 | | | 4,180 | | | 55,018 | | | 1,103 | |
Agriculture | | | 28 | | | 28 | | | 28 | | | 28 | | | - | |
Commercial and Industrial | | | 2,955 | | | 2,920 | | | 934 | | | 3,100 | | | 51 | |
Small Business Administration | | | 2,704 | | | 2,507 | | | 1,038 | | | 2,507 | | | 53 | |
Direct finance leases | | | 135 | | | 135 | | | 67 | | | 135 | | | - | |
Consumer loans | | | 4,349 | | | 4,344 | | | 878 | | | 4,493 | | | 183 | |
| | | 65,636 | | | 63,870 | | | 7,125 | | | 65,281 | | | 1,390 | |
With no Related Allowance Recorded | | | | | | | | | | | | | | | | |
Real Estate: | | | | | | | | | | | | | | | | |
1-4 family residential construction | | $ | - | | $ | - | | $ | - | | $ | - | | $ | - | |
Other Construction/Land | | | 2,335 | | | 2,335 | | | - | | | 2,346 | | | - | |
1-4 Family - closed-end | | | 4,312 | | | 4,312 | | | - | | | 4,491 | | | - | |
Equity Lines | | | 116 | | | 116 | | | - | | | 155 | | | 1 | |
Commercial real estate- owner occupied | | | 4,298 | | | 3,365 | | | - | | | 3,540 | | | - | |
Commercial real estate- non-owner occupied | | | 390 | | | 390 | | | - | | | 421 | | | 3 | |
Farmland | | | 1,679 | | | 1,679 | | | - | | | 1,686 | | | - | |
Total Real Estate | | | 13,130 | | | 12,197 | | | - | | | 12,639 | | | 4 | |
Agriculture | | | 1,008 | | | 635 | | | - | | | 1,017 | | | - | |
Commercial and Industrial | | | 735 | | | 736 | | | - | | | 740 | | | - | |
Small Business Administration | | | 1,008 | | | 720 | | | - | | | 720 | | | - | |
Direct finance leases | | | - | | | - | | | - | | | - | | | - | |
Consumer loans | | | 4 | | | 4 | | | - | | | 7 | | | - | |
| | | 15,885 | | | 14,292 | | | - | | | 15,123 | | | 4 | |
Total | | $ | 81,521 | | $ | 78,162 | | $ | 7,125 | | $ | 80,404 | | $ | 1,394 | |
Impaired Loans | | | | | | | |
(dollars in thousands, unaudited) | | | | | | | |
| | June 30, 2013 | | December 31, 2012 | | ||
| | | | | | | |
Impaired loans without a valuation allowance | | $ | 24,772 | | $ | 14,292 | |
Impaired loans with a valuation allowance | | $ | 40,844 | | $ | 63,870 | |
Total impaired loans (1) | | $ | 65,616 | | $ | 78,162 | |
Valuation allowance related to impaired loans | | $ | 7,150 | | $ | 7,125 | |
Total non-accrual loans | | $ | 42,309 | | $ | 53,094 | |
Total loans past-due ninety days or more and still accruing | | $ | 2 | | $ | - | |
| 1) | a new regulatory capital component referred to as “Common Equity Tier 1 capital”, and threshold ratios for this new component; |
| 2) | a “capital conservation buffer” above the minimum required level of Common Equity Tier 1 capital, and restrictions on dividend payments, share buybacks, and certain discretionary bonus payments to executive officers if a capital conservation buffer of at least 2.5% of risk-weighted assets is not achieved; |
| 3) | the inclusion of accumulated other comprehensive income (AOCI) in Tier 1 capital, although banks with less than $250 billion in total assets will be allowed a one-time opt-out from this requirement; |
| 4) | additional constraints on the inclusion of minority interests, mortgage servicing assets, and deferred tax assets in regulatory capital; |
| 5) | increased risk-weightings for certain assets, including equity exposures, certain acquisition/development and construction loans, and certain loans that are more than 90-days past due or are on non-accrual status; and |
| 6) | an increase in minimum required risk-based capital ratios over a phase-in period, and an increase in the threshold for a “well-capitalized” classification for the Tier 1 Risk-Based Capital Ratio. |
| | For the Three Months Ended June 30, 2013 | | |||||||||||||||||||
| | Real Estate | | Agricultural Products | | Commercial and Industrial | | Small Business Administration | | Direct Finance Leases | | Consumer | | Total | | |||||||
| | | | | | | | | | | | | | | | | | | | | | |
Allowance for credit losses: | | | | | | | | | | | | | | | | | | | | | | |
Beginning Balance | | $ | 6,488 | | $ | 404 | | $ | 3,084 | | $ | 1,410 | | $ | 85 | | $ | 1,728 | | $ | 13,199 | |
Charge-offs | | | (1,138) | | | - | | | (424) | | | (7) | | | (86) | | | (298) | | | (1,953) | |
Recoveries | | | 139 | | | - | | | 291 | | | 1 | | | 4 | | | 49 | | | 484 | |
Provision | | | 1,368 | | | (342) | | | (805) | | | 246 | | | 36 | | | (53) | | | 450 | |
| | | | | | | | | | | | | | | | | | | | | | |
Ending Balance | | $ | 6,857 | | $ | 62 | | $ | 2,146 | | $ | 1,650 | | $ | 39 | | $ | 1,426 | | $ | 12,180 | |
| | For the Six Months Ended June 30, 2013 | | |||||||||||||||||||
| | Real Estate | | Agricultural Products | | Commercial and Industrial | | Small Business Administration | | Direct Finance Leases | | Consumer | | Total | | |||||||
| | | | | | | | | | | | | | | | | | | | | | |
Allowance for credit losses: | | | | | | | | | | | | | | | | | | | | | | |
Beginning Balance | | $ | 8,034 | | $ | 258 | | $ | 2,797 | | $ | 1,246 | | $ | 165 | | $ | 1,373 | | $ | 13,873 | |
Charge-offs | | | (2,560) | | | (28) | | | (1,315) | | | (44) | | | (106) | | | (605) | | | (4,658) | |
Recoveries | | | 304 | | | - | | | 529 | | | 1 | | | 5 | | | 76 | | | 915 | |
Provision | | | 1,079 | | | (168) | | | 135 | | | 447 | | | (25) | | | 582 | | | 2,050 | |
| | | | | | | | | | | | | | | | | | | | | | |
Ending Balance | | $ | 6,857 | | $ | 62 | | $ | 2,146 | | $ | 1,650 | | $ | 39 | | $ | 1,426 | | $ | 12,180 | |
| | | | | | | | | | | | | | | | | | | | | | |
Reserves: | | | | | | | | | | | | | | | | | | | | | | |
Specific | | $ | 4,445 | | $ | - | | $ | 744 | | $ | 1,147 | | $ | 30 | | $ | 784 | | $ | 7,150 | |
General | | | 2,412 | | | 62 | | | 1,402 | | | 503 | | | 9 | | | 642 | | | 5,030 | |
| | | | | | | | | | | | | | | | | | | | | | |
Ending Balance | | $ | 6,857 | | $ | 62 | | $ | 2,146 | | $ | 1,650 | | $ | 39 | | $ | 1,426 | | $ | 12,180 | |
| | | | | | | | | | | | | | | | | | | | | | |
Loans evaluated for impairment: | | | | | | | | | | | | | | | | | | | | | | |
Individually | | $ | 54,302 | | $ | 20 | | $ | 4,253 | | $ | 3,027 | | $ | 60 | | $ | 3,954 | | $ | 65,616 | |
Collectively | | | 501,581 | | | 23,425 | | | 178,589 | | | 16,466 | | | 3,429 | | | 21,088 | | | 744,578 | |
| | | | | | | | | | | | | | | | | | | | | | |
Ending Balance | | $ | 555,883 | | $ | 23,445 | | $ | 182,842 | | $ | 19,493 | | $ | 3,489 | | $ | 25,042 | | $ | 810,194 | |
| | For the Year Ended December 31, 2012 | | |||||||||||||||||||
| | Real Estate | | Agricultural Products | | Commercial and Industrial | | Small Business Administration | | Direct Finance Leases | | Consumer | | Total | | |||||||
| | | | | | | | | | | | | | | | | | | | | | |
Allowance for credit losses: | | | | | | | | | | | | | | | | | | | | | | |
Beginning Balance | | $ | 8,260 | | $ | 19 | | $ | 4,638 | | $ | 1,447 | | $ | 311 | | $ | 2,608 | | $ | 17,283 | |
Charge-offs | | | (11,108) | | | (634) | | | (4,283) | | | (753) | | | (198) | | | (1,802) | | | (18,778) | |
Recoveries | | | 302 | | | - | | | 589 | | | 95 | | | - | | | 172 | | | 1,158 | |
Provision | | | 10,580 | | | 873 | | | 1,853 | | | 457 | | | 52 | | | 395 | | | 14,210 | |
| | | | | | | | | | | | | | | | | | | | | | |
Ending Balance | | $ | 8,034 | | $ | 258 | | $ | 2,797 | | $ | 1,246 | | $ | 165 | | $ | 1,373 | | $ | 13,873 | |
| | | | | | | | | | | | | | | | | | | | | | |
Reserves: | | | | | | | | | | | | | | | | | | | | | | |
Specific | | $ | 4,180 | | $ | 28 | | $ | 934 | | $ | 1,038 | | $ | 67 | | $ | 878 | | $ | 7,125 | |
General | | | 3,854 | | | 230 | | | 1,863 | | | 208 | | | 98 | | | 495 | | | 6,748 | |
| | | | | | | | | | | | | | | | | | | | | | |
Ending Balance | | $ | 8,034 | | $ | 258 | | $ | 2,797 | | $ | 1,246 | | $ | 165 | | $ | 1,373 | | $ | 13,873 | |
| | | | | | | | | | | | | | | | | | | | | | |
Loans evaluated for impairment: | | | | | | | | | | | | | | | | | | | | | | |
Individually | | $ | 66,133 | | $ | 663 | | $ | 3,656 | | $ | 3,227 | | $ | 135 | | $ | 4,348 | | $ | 78,162 | |
Collectively | | | 479,656 | | | 21,819 | | | 255,022 | | | 17,296 | | | 4,098 | | | 23,742 | | | 801,633 | |
| | | | | | | | | | | | | | | | | | | | | | |
Ending Balance | | $ | 545,789 | | $ | 22,482 | | $ | 258,678 | | $ | 20,523 | | $ | 4,233 | | $ | 28,090 | | $ | 879,795 | |
⋅ | Net interest income was down $273,000, or 2%, due to a 21 basis point drop in the Company's net interest margin that was partially offset by the impact of a $33 million increase in average interest-earning assets. |
| |
⋅ | The largest impact on the increase in net income in the second quarter of 2013 came from a reduction of $2.710 million, or 86%, in our loan loss provision. |
| |
⋅ | Total non-interest income fell by $100,000, or 2%, due to an increase in pass-through operating costs associated with tax credit investments, which are netted out of non-interest income, partially offset by higher income on bank-owned life insurance (BOLI). |
| |
⋅ | Total non-interest expense increased by $234,000, or 2%, due mainly to an increase in salaries and benefits that was partially offset by a reduction in net OREO expense and other credit-related costs. |
| |
⋅ | The Company's provision for income taxes was 26% of pre-tax income in the second quarter of 2013 and 15% in the second quarter of 2012, with the higher tax provisioning rate for 2013 resulting from an increase in taxable income relative to a slight decline in available tax credits. |
⋅ | Net interest income declined $919,000, or 4%, due to a 30 basis point drop in the Company's net interest margin partially offset by a the impact of a $45 million increase in average interest-earning assets. |
| |
⋅ | The loan loss provision was reduced by $3.860 million, or 65%. |
| |
⋅ | Total non-interest income declined by $85,000, or 1%, in the first half of 2013, due primarily to the previously-noted increase in tax credit investment costs and investment gains of $71,000 in the first quarter of 2012, partially offset by an increase in income on bank-owned life insurance (BOLI) and a $100,000 non-recurring signing incentive received in the first quarter of 2013 in conjunction with our conversion to a new merchant processing vendor. |
| |
⋅ | Total non-interest expense increased by only $16,000, as higher personnel expense and increased occupancy costs were largely offset by lower credit-related costs. |
| |
⋅ | The Company's provision for income taxes was 20% of pre-tax income for the first half of 2013, relative to 8% for the first half of 2012. |
⋅ | The Company's assets totaled $1.378 billion at June 30, 2013, a drop of $59 million, or 4%, relative to total assets of $1.438 billion at December 31, 2012, due to a $70 million drop in gross loan balances that was partially offset by growth in investment securities and higher cash balances. |
| |
⋅ | Loan volume was largely impacted by a $66 million decline in mortgage warehouse loans resulting from lower credit line utilization, but an $11 million reduction in nonperforming loans also contributed to the decline in total loans. |
| |
⋅ | Total nonperforming assets, including nonperforming loans and foreclosed assets, were reduced by $20 million, or 27%, to $53 million at June 30, 2013 from $73 million at December 31, 2012. |
| |
⋅ | The Company's allowance for loan and lease losses was $12.2 million as of June 30, 2013, a drop of $1.7 million, or 12%, relative to year-end 2012 due mainly to a lower general reserve for unimpaired loans. The ratio of the allowance to gross loans declined slightly to 1.50% at June 30, 2013 from 1.58% at December 31, 2012. |
| |
⋅ | Despite a $6 million drop in the net unrealized gain on investments, investment securities reflect a net increase of $13 million, or 4%, for the first six months of 2013 due primarily to the addition of municipal securities. |
| |
⋅ | Cash and cash equivalents increased by $5 million, or 8%, as the result of higher interest-earning balances in our Federal Reserve Bank account. |
| |
⋅ | Total deposits were down $19 million, or 2%, due to the maturity of a $5 million wholesale brokered time deposit and the runoff of $23 million in other time deposits, partially offset by a $9 million increase in non-maturity deposits. |
| |
⋅ | There was no change in the balance of junior subordinated debentures (trust preferred securities), but other interest-bearing liabilities, comprised primarily of Federal Home Loan Bank borrowings, were reduced by a net $41 million, or 95%, during the first six months of 2013. |
| |
⋅ | Total capital increased by about $1 million, or 1%, during the first half of 2013, ending the period with a balance of $175 million. Risk-based capital ratios increased, as well, due in large part to the drop in risk-adjusted assets. Our consolidated total risk-based capital ratio increased to 20.87% at June 30, 2013 from 19.36% at year-end 2012. Our tier one risk-based capital ratio was 19.62% and our tier one leverage ratio was 13.82% at June 30, 2013. |
Average Balances and Rates | | For the Three Months Ended | | | For the Three Months Ended | | | ||||||||||||||
(dollars in thousands, except per share data) | | Ended June 30, 2013 | | Ended June 30, 2012 | | | |||||||||||||||
| | Average Balance (1) | | Income/ Expense | | Average Rate/Yield (2)(3) | | | Average Balance (1) | | Income/ Expense | | Average Rate/Yield (2)(3) | | | ||||||
Assets | | | | | | | | | | | | | | | | | | | | | |
Investments: | | | | | | | | | | | | | | | | | | | | | |
Federal funds sold/Due from time | | $ | 26,115 | | $ | 16 | | | 0.24 | % | | $ | 33,483 | | $ | 22 | | | 0.26 | % | |
Taxable | | | 314,191 | | | 1,034 | | | 1.30 | % | | | 344,961 | | | 1,722 | | | 1.97 | % | |
Non-taxable | | | 86,626 | | | 672 | | | 4.65 | % | | | 76,602 | | | 685 | | | 5.36 | % | |
Equity | | | 2,143 | | | - | | | - | | | | 1,773 | | | 29 | | | 6.47 | % | |
Total Investments | | | 429,075 | | | 1,722 | | | 1.91 | % | | | 456,819 | | | 2,458 | | | 2.43 | % | |
| | | | | | | | | | | | | | | | | | | | | |
Loans and Leases:(4) | | | | | | | | | | | | | | | | | | | | | |
Agricultural | | | 24,218 | | | 248 | | | 4.11 | % | | | 15,848 | | | 189 | | | 4.80 | % | |
Commercial | | | 210,376 | | | 2,789 | | | 5.32 | % | | | 139,768 | | | 2,001 | | | 5.76 | % | |
Real Estate | | | 515,428 | | | 7,849 | | | 6.11 | % | | | 526,267 | | | 8,348 | | | 6.38 | % | |
Consumer | | | 24,960 | | | 442 | | | 7.10 | % | | | 30,920 | | | 555 | | | 7.22 | % | |
Direct Financing Leases | | | 3,013 | | | 40 | | | 5.32 | % | | | 4,380 | | | 61 | | | 5.60 | % | |
Other | | | 45,948 | | | - | | | - | | | | 46,288 | | | - | | | - | | |
Total Loans and Leases | | | 823,943 | | | 11,368 | | | 5.53 | % | | | 763,471 | | | 11,154 | | | 5.88 | % | |
Total Interest Earning Assets (5) | | | 1,253,018 | | | 13,090 | | | 4.30 | % | | | 1,220,290 | | | 13,612 | | | 4.60 | % | |
Other Earning Assets | | | 6,168 | | | | | | | | | | 6,569 | | | | | | | | |
Non-Earning Assets | | | 139,604 | | | | | | | | | | 142,796 | | | | | | | | |
Total Assets | | $ | 1,398,790 | | | | | | | | | $ | 1,369,655 | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | |
Liabilities and Shareholders' Equity | | | | | | | | | | | | | | | | | | | | | |
Interest Bearing Deposits: | | | | | | | | | | | | | | | | | | | | | |
Demand Deposits | | $ | 87,828 | | $ | 77 | | | 0.35 | % | | $ | 71,736 | | $ | 63 | | | 0.35 | % | |
NOW | | | 194,194 | | | 95 | | | 0.20 | % | | | 195,037 | | | 140 | | | 0.29 | % | |
Savings Accounts | | | 131,341 | | | 71 | | | 0.22 | % | | | 106,422 | | | 60 | | | 0.23 | % | |
Money Market | | | 70,607 | | | 24 | | | 0.14 | % | | | 80,394 | | | 32 | | | 0.16 | % | |
CDAR's | | | 13,212 | | | 7 | | | 0.21 | % | | | 18,749 | | | 12 | | | 0.26 | % | |
Certificates of Deposit<$100,000 | | | 91,450 | | | 107 | | | 0.47 | % | | | 100,530 | | | 154 | | | 0.62 | % | |
Certificates of Deposit>$100,000 | | | 212,486 | | | 210 | | | 0.40 | % | | | 225,730 | | | 298 | | | 0.53 | % | |
Brokered Deposits | | | 10,000 | | | 37 | | | 1.48 | % | | | 15,000 | | | 50 | | | 1.34 | % | |
Total Interest Bearing Deposits | | | 811,118 | | | 628 | | | 0.31 | % | | | 813,598 | | | 809 | | | 0.40 | % | |
Borrowed Funds: | | | | | | | | | | | | | | | | | | | | | |
Federal Funds Purchased | | | 2 | | | - | | | - | | | | 1 | | | - | | | - | | |
Repurchase Agreements | | | 2,020 | | | 3 | | | 0.60 | % | | | 3,578 | | | 6 | | | 0.67 | % | |
Short Term Borrowings | | | 12,058 | | | 5 | | | 0.17 | % | | | 12,676 | | | 7 | | | 0.22 | % | |
Long Term Borrowings | | | - | | | - | | | - | | | | 5,000 | | | 49 | | | 3.94 | % | |
TRUPS | | | 30,928 | | | 179 | | | 2.32 | % | | | 30,928 | | | 193 | | | 2.51 | % | |
Total Borrowed Funds | | | 45,008 | | | 187 | | | 1.67 | % | | | 52,183 | | | 255 | | | 1.97 | % | |
Total Interest Bearing Liabilities | | | 856,126 | | | 815 | | | 0.38 | % | | | 865,781 | | | 1,064 | | | 0.49 | % | |
Demand Deposits | | | 346,866 | | | | | | | | | | 316,498 | | | | | | | | |
Other Liabilities | | | 19,029 | | | | | | | | | | 15,589 | | | | | | | | |
Shareholders' Equity | | | 176,769 | | | | | | | | | | 171,787 | | | | | | | | |
Total Liabilities and Shareholders' Equity | | $ | 1,398,790 | | | | | | | | | $ | 1,369,655 | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | |
Interest Income/Interest Earning Assets | | | | | | | | | 4.30 | % | | | | | | | | | 4.60 | % | |
Interest Expense/Interest Earning Assets | | | | | | | | | 0.26 | % | | | | | | | | | 0.35 | % | |
Net Interest Income and Margin(6) | | | | | $ | 12,275 | | | 4.04 | % | | | | | $ | 12,548 | | | 4.25 | % | |
(1) | Average balances are obtained from the best available daily or monthly data and are net of deferred fees and related direct costs. |
(2) | Yields and net interest margin have been computed on a tax equivalent basis utilizing a 34% effective tax rate. |
(3) | Annualized |
(4) | Loan costs have been included in the calculation of interest income. Loan costs were approximately $(29) thousand and $(9) thousand for the quarters ended June 30, 2013 and 2012. |
| Loans are gross of the allowance for possible loan losses. |
(5) | Non-accrual loans have been included in total loans for purposes of total earning assets. |
(6) | Net interest margin represents net interest income as a percentage of average interest-earning assets. |
Average Balances and Rates | | For the Six Months | | | For the Six Months | | | ||||||||||||
(dollars in thousands, except per share data) | | Ended June 30, 2013 | | | Ended June 30, 2012 | | | ||||||||||||
| | Average Balance (1) | | Income/ Expense | | Average Rate/Yield (2)(3) | | | Average Balance (1) | | Income/ Expense | | Average Rate/Yield (2)(3) | | | ||||
Assets | | | | | | | | | | | | | | | | | | | |
Investments: | | | | | | | | | | | | | | | | | | | |
Federal funds sold/Due from time | | $ | 35,634 | | $ | 44 | | 0.25 | % | | $ | 28,633 | | $ | 37 | | 0.26 | % | |
Taxable | | | 312,642 | | | 2,179 | | 1.39 | % | | | 341,841 | | | 3,602 | | 2.08 | % | |
Non-taxable | | | 81,593 | | | 1,291 | | 4.77 | % | | | 74,935 | | | 1,352 | | 5.41 | % | |
Equity | | | 2,041 | | | 17 | | 1.66 | % | | | 1,625 | | | 33 | | 4.02 | % | |
Total Investments | | | 431,910 | | | 3,531 | | 1.93 | % | | | 447,034 | | | 5,024 | | 2.53 | % | |
| | | | | | | | | | | | | | | | | | | |
Loans and Leases:(4) | | | | | | | | | | | | | | | | | | | |
Agricultural | | | 23,999 | | | 481 | | 4.04 | % | | | 15,015 | | | 361 | | 4.83 | % | |
Commercial | | | 208,848 | | | 5,471 | | 5.28 | % | | | 125,147 | | | 3,761 | | 6.04 | % | |
Real Estate | | | 505,224 | | | 15,323 | | 6.12 | % | | | 528,616 | | | 16,924 | | 6.44 | % | |
Consumer | | | 25,708 | | | 916 | | 7.19 | % | | | 31,768 | | | 1,125 | | 7.12 | % | |
Direct Financing Leases | | | 3,140 | | | 84 | | 5.39 | % | | | 4,635 | | | 126 | | 5.47 | % | |
Nonperforming Loans | | | 49,518 | | | - | | - | | | | 50,719 | | | - | | - | | |
Total Loans and Leases | | | 816,437 | | | 22,275 | | 5.50 | % | | | 755,900 | | | 22,297 | | 5.93 | % | |
Total Interest Earning Assets (5) | | | 1,248,347 | | | 25,806 | | 4.28 | % | | | 1,202,934 | | | 27,321 | | 4.68 | % | |
Other Earning Assets | | | 6,268 | | | | | | | | | 6,782 | | | | | | | |
Non-Earning Assets | | | 141,081 | | | | | | | | | 141,154 | | | | | | | |
Total Assets | | $ | 1,395,696 | | | | | | | | $ | 1,350,870 | | | | | | | |
| | | | | | | | | | | | | | | | | | | |
Liabilities and Shareholders' Equity | | | | | | | | | | | | | | | | | | | |
Interest Bearing Deposits: | | | | | | | | | | | | | | | | | | | |
Demand Deposits | | $ | 85,470 | | $ | 152 | | 0.36 | % | | $ | 68,130 | | $ | 131 | | 0.39 | % | |
NOW | | | 195,894 | | | 193 | | 0.20 | % | | | 193,649 | | | 334 | | 0.35 | % | |
Savings Accounts | | | 127,194 | | | 136 | | 0.22 | % | | | 102,631 | | | 117 | | 0.23 | % | |
Money Market | | | 73,138 | | | 54 | | 0.15 | % | | | 80,428 | | | 65 | | 0.16 | % | |
CDAR's | | | 13,994 | | | 20 | | 0.29 | % | | | 18,489 | | | 27 | | 0.29 | % | |
Certificates of Deposit<$100,000 | | | 95,897 | | | 224 | | 0.47 | % | | | 102,078 | | | 325 | | 0.64 | % | |
Certificates of Deposit>$100,000 | | | 213,778 | | | 428 | | 0.40 | % | | | 223,133 | | | 595 | | 0.54 | % | |
Brokered Deposits | | | 11,575 | | | 81 | | 1.41 | % | | | 15,000 | | | 100 | | 1.34 | % | |
Total Interest Bearing Deposits | | | 816,940 | | | 1,288 | | 0.32 | % | | | 803,538 | | | 1,694 | | 0.42 | % | |
Borrowed Funds: | | | | | | | | | | | | | | | | | | | |
Federal Funds Purchased | | | 1 | | | - | | - | | | | - | | | - | | - | | |
Repurchase Agreements | | | 1,836 | | | 6 | | 0.66 | % | | | 3,266 | | | 10 | | 0.62 | % | |
Short Term Borrowings | | | 7,051 | | | 6 | | 0.17 | % | | | 7,236 | | | 8 | | 0.22 | % | |
Long Term Borrowings | | | 2,100 | | | 33 | | 3.17 | % | | | 8,956 | | | 180 | | 4.04 | % | |
TRUPS | | | 30,928 | | | 356 | | 2.32 | % | | | 30,928 | | | 393 | | 2.56 | % | |
Total Borrowed Funds | | | 41,916 | | | 401 | | 1.93 | % | | | 50,386 | | | 591 | | 2.36 | % | |
Total Interest Bearing Liabilities | | | 858,856 | | | 1,689 | | 0.40 | % | | | 853,924 | | | 2,285 | | 0.54 | % | |
Non-interest Bearing Demand Deposits | | | 342,294 | | | | | | | | | 308,453 | | | | | | | |
Other Liabilities | | | 18,841 | | | | | | | | | 17,447 | | | | | | | |
Shareholders' Equity | | | 175,705 | | | | | | | | | 171,046 | | | | | | | |
Total Liabilities and Shareholders' Equity | | $ | 1,395,696 | | | | | | | | $ | 1,350,870 | | | | | | | |
| | | | | | | | | | | | | | | | | | | |
Interest Income/Interest Earning Assets | | | | | | | | 4.28 | % | | | | | | | | 4.68 | % | |
Interest Expense/Interest Earning Assets | | | | | | | | 0.28 | % | | | | | | | | 0.38 | % | |
Net Interest Income and Margin(6) | | | | | $ | 24,117 | | 4.00 | % | | | | | $ | 25,036 | | 4.30 | % | |
(1) | Average balances are obtained from the best available daily or monthly data and are net of deferred fees and related direct costs. |
(2) | Yields and net interest margin have been computed on a tax equivalent basis utilizing a 34% effective tax rate. |
(3) | Annualized |
(4) | Loan costs have been included in the calculation of interest income. Loan costs were approximately $32 thousand and $230 thousand for the six months ended June 30, 2013 and 2012. |
| Loans are gross of the allowance for possible loan losses. |
(5) | Non-accrual loans have been included in total loans for purposes of total earning assets. |
(6) | Net interest margin represents net interest income as a percentage of average interest-earning assets. |
Volume & Rate Variances | | Three Months Ended June 30, | | Six Months Ended June 30, | | ||||||||||||||
(dollars in thousands) | | 2013 over 2012 | | 2013 over 2012 | | ||||||||||||||
| | Increase(decrease) due to | | Increase(decrease) due to | | ||||||||||||||
| | Volume | | Rate | | Net | | Volume | | Rate | | Net | | ||||||
Assets: | | | | | | | | | | | | | | | | | | | |
Investments: | | | | | | | | | | | | | | | | | | | |
Federal funds sold / Due from time | | $ | (5) | | $ | (1) | | $ | (6) | | $ | 9 | | $ | (2) | | $ | 7 | |
Taxable | | | (154) | | | (534) | | | (688) | | | (308) | | | (1,115) | | | (1,423) | |
Non-taxable(1) | | | 90 | | | (103) | | | (13) | | | 120 | | | (181) | | | (61) | |
Equity | | | 6 | | | (35) | | | (29) | | | 8 | | | (24) | | | (16) | |
Total Investments | | | (63) | | | (673) | | | (736) | | | (171) | | | (1,322) | | | (1,493) | |
Loans and Leases: | | | | | | | | | | | | | | | | | | | |
Agricultural | | | 100 | | | (41) | | | 59 | | | 216 | | | (96) | | | 120 | |
Commercial | | | 1,011 | | | (223) | | | 788 | | | 2,515 | | | (805) | | | 1,710 | |
Real Estate | | | (172) | | | (327) | | | (499) | | | (749) | | | (852) | | | (1,601) | |
Consumer | | | (107) | | | (6) | | | (113) | | | (215) | | | 6 | | | (209) | |
Direct Financing Leases | | | (19) | | | (2) | | | (21) | | | (41) | | | (1) | | | (42) | |
Total Loans and Leases | | | 814 | | | (600) | | | 214 | | | 1,726 | | | (1,748) | | | (22) | |
Total Interest Earning Assets | | $ | 750 | | $ | (1,272) | | $ | (522) | | $ | 1,555 | | $ | (3,070) | | $ | (1,515) | |
Liabilities | | | | | | | | | | | | | | | | | | | |
Interest Bearing Deposits: | | | | | | | | | | | | | | | | | | | |
Demand Deposits | | $ | 14 | | $ | - | | $ | 14 | | $ | 33 | | $ | (12) | | $ | 21 | |
NOW | | | (1) | | | (44) | | | (45) | | | 4 | | | (145) | | | (141) | |
Savings Accounts | | | 14 | | | (3) | | | 11 | | | 28 | | | (9) | | | 19 | |
Money Market | | | (4) | | | (4) | | | (8) | | | (6) | | | (5) | | | (11) | |
CDAR's | | | (4) | | | (1) | | | (5) | | | (7) | | | (0) | | | (7) | |
Certificates of Deposit < $100,000 | | | (14) | | | (33) | | | (47) | | | (20) | | | (81) | | | (101) | |
Certificates of Deposit > $100,000 | | | (17) | | | (71) | | | (88) | | | (25) | | | (142) | | | (167) | |
Brokered Deposits | | | (17) | | | 4 | | | (13) | | | (23) | | | 4 | | | (19) | |
Total Interest Bearing Deposits | | | (29) | | | (152) | | | (181) | | | (16) | | | (390) | | | (406) | |
Borrowed Funds: | | | | | | | | | | | | | | | | | | | |
Repurchase Agreements | | | (4) | | | 1 | | | (3) | | | (4) | | | - | | | (4) | |
Short Term Borrowings | | | - | | | (2) | | | (2) | | | - | | | (2) | | | (2) | |
Long Term Borrowings | | | (49) | | | - | | | (49) | | | (138) | | | (9) | | | (147) | |
TRUPS | | | - | | | (14) | | | (14) | | | - | | | (37) | | | (37) | |
Total Borrowed Funds | | | (53) | | | (15) | | | (68) | | | (142) | | | (48) | | | (190) | |
Total Interest Bearing Liabilities | | | (82) | | | (167) | | | (249) | | | (158) | | | (438) | | | (596) | |
Net Interest Margin/Income | | $ | 832 | | $ | (1,105) | | $ | (273) | | $ | 1,713 | | $ | (2,632) | | $ | (919) | |
Non Interest Income/Expense | | | | | | | | ||||||||||||||||||||||||||
(dollars in thousands, unaudited) | | | | | | | | ||||||||||||||||||||||||||
| | Three Months Ended June 30, | | | Six Months Ended June 30, | | | ||||||||||||||||||||||||||
| | 2013 | | | % of Total | | | 2012 | | | % of Total | | | 2013 | | | % of Total | | | 2012 | | | % of Total | | | ||||||||
NON-INTEREST INCOME: | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Service charges on deposit accounts | | $ | 2,215 | | | | 55.07 | % | | $ | 2,417 | | | | 58.64 | % | | $ | 4,288 | | | | 52.69 | % | | $ | 4,704 | | | | 57.21 | % | |
Other service charges, commissions & fees | | | 1,411 | | | | 35.08 | % | | | 1,461 | | | | 35.44 | % | | | 2,862 | | | | 35.17 | % | | | 2,514 | | | | 30.57 | % | |
Gains on sales of loans | | | 32 | | | | 0.80 | % | | | 44 | | | | 1.07 | % | | | 68 | | | | 0.84 | % | | | 94 | | | | 1.14 | % | |
Gains on securities | | | - | | | | 0.00 | % | | | 1 | | | | 0.02 | % | | | 6 | | | | 0.07 | % | | | 71 | | | | 0.86 | % | |
Loan servicing income | | | - | | | | 0.00 | % | | | 1 | | | | 0.02 | % | | | 3 | | | | 0.04 | % | | | 6 | | | | 0.07 | % | |
Bank owned life insurance | | | 317 | | | | 7.88 | % | | | 157 | | | | 3.82 | % | | | 824 | | | | 10.13 | % | | | 742 | | | | 9.02 | % | |
Other | | | 47 | | | | 1.17 | % | | | 41 | | | | 0.99 | % | | | 87 | | | | 1.06 | % | | | 92 | | | | 1.13 | % | |
Total non-interest income | | $ | 4,022 | | | | 100.00 | % | | $ | 4,122 | | | | 100.00 | % | | $ | 8,138 | | | | 100.00 | % | | $ | 8,223 | | | | 100.00 | % | |
As a % of average interest-earning assets (1) | | | | | | | 1.29 | % | | | | | | | 1.36 | % | | | | | | | 1.31 | % | | | | | | | 1.37 | % | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
NON-INTEREST EXPENSE: | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Salaries and employee benefits | | $ | 5,403 | | | | 50.42 | % | | $ | 4,911 | | | | 46.85 | % | | $ | 11,323 | | | | 50.24 | % | | $ | 10,576 | | | | 46.96 | % | |
Occupancy costs | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Furniture & equipment | | | 531 | | | | 4.95 | % | | | 521 | | | | 4.97 | % | | | 1,034 | | | | 4.59 | % | | | 1,004 | | | | 4.46 | % | |
Premises | | | 1,065 | | | | 9.94 | % | | | 1,042 | | | | 9.94 | % | | | 2,113 | | | | 9.38 | % | | | 2,048 | | | | 9.09 | % | |
Advertising and marketing costs | | | 421 | | | | 3.93 | % | | | 480 | | | | 4.58 | % | | | 843 | | | | 3.74 | % | | | 951 | | | | 4.22 | % | |
Data processing costs | | | 482 | | | | 4.50 | % | | | 429 | | | | 4.09 | % | | | 976 | | | | 4.33 | % | | | 847 | | | | 3.76 | % | |
Deposit services costs | | | 506 | | | | 4.72 | % | | | 591 | | | | 5.64 | % | | | 999 | | | | 4.43 | % | | | 1,169 | | | | 5.19 | % | |
Loan services costs | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Loan processing | | | 218 | | | | 2.03 | % | | | 290 | | | | 2.77 | % | | | 372 | | | | 1.65 | % | | | 558 | | | | 2.48 | % | |
Foreclosed assets | | | 18 | | | | 0.17 | % | | | 516 | | | | 4.92 | % | | | 792 | | | | 3.51 | % | | | 1,644 | | | | 7.30 | % | |
Other operating costs | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Telephone & data communications | | | 448 | | | | 4.18 | % | | | 384 | | | | 3.66 | % | | | 873 | | | | 3.87 | % | | | 731 | | | | 3.25 | % | |
Postage & mail | | | 163 | | | | 1.52 | % | | | 162 | | | | 1.55 | % | | | 342 | | | | 1.52 | % | | | 342 | | | | 1.52 | % | |
Other | | | 160 | | | | 1.49 | % | | | 185 | | | | 1.76 | % | | | 288 | | | | 1.28 | % | | | 374 | | | | 1.67 | % | |
Professional services costs | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Legal & accounting | | | 521 | | | | 4.86 | % | | | 361 | | | | 3.44 | % | | | 953 | | | | 4.23 | % | | | 723 | | | | 3.21 | % | |
Other professional service | | | 552 | | | | 5.15 | % | | | 323 | | | | 3.08 | % | | | 1,160 | | | | 5.15 | % | | | 974 | | | | 4.32 | % | |
Stationery & supply costs | | | 144 | | | | 1.35 | % | | | 204 | | | | 1.95 | % | | | 313 | | | | 1.39 | % | | | 411 | | | | 1.82 | % | |
Sundry & tellers | | | 85 | | | | 0.79 | % | | | 84 | | | | 0.80 | % | | | 157 | | | | 0.69 | % | | | 170 | | | | 0.75 | % | |
Total non-interest expense | | $ | 10,717 | | | | 100.00 | % | | $ | 10,483 | | | | 100.00 | % | | $ | 22,538 | | | | 100.00 | % | | $ | 22,522 | | | | 100.00 | % | |
As a % of average interest-earning assets (1) | | | | | | | 3.43 | % | | | | | | | 3.46 | % | | | | | | | 3.64 | % | | | | | | | 3.77 | % | |
Efficiency Ratio (2) | | | 63.82 | % | | | | | | | 61.28 | % | | | | | | | 67.67 | % | | | | | | | 65.77 | % | | | | | |
Investment Portfolio | | | | | | ||||||||
(dollars in thousands, unaudited) | | June 30, 2013 | | December 31, 2012 | | ||||||||
| | Amortized | | Fair Market | | Amortized | | Fair Market | | ||||
| | Cost | | Value | | Cost | | Value | | ||||
Available for Sale | | | | | | | | | | | | | |
US Government Agencies & Corporations | | $ | 4,363 | | $ | 4,293 | | $ | 2,987 | | $ | 2,973 | |
Mortgage-backed securities | | | 300,565 | | | 299,644 | | | 298,806 | | | 301,389 | |
State & political subdivisions | | | 87,237 | | | 87,405 | | | 70,736 | | | 73,986 | |
Equity securities | | | 1,336 | | | 2,234 | | | 1,336 | | | 1,840 | |
Total Investment Securities | | $ | 393,501 | | $ | 393,576 | | $ | 373,865 | | $ | 380,188 | |
| | June 30, 2013 | | | December 31, 2012 | | ||
Real Estate: | | | | | | | | |
1-4 family residential construction | | $ | 1,615 | | | $ | 3,174 | |
Other Construction/Land | | | 22,794 | | | | 28,002 | |
1-4 family - closed-end | | | 91,485 | | | | 99,917 | |
Equity Lines | | | 57,356 | | | | 61,463 | |
Multi-family residential | | | 6,373 | | | | 5,960 | |
Commercial real estate- owner occupied | | | 173,296 | | | | 182,614 | |
Commercial real estate- non-owner occupied | | | 98,834 | | | | 92,808 | |
Farmland | | | 104,130 | | | | 71,851 | |
Total Real Estate | | | 555,883 | | | | 545,789 | |
Agricultural products | | | 23,445 | | | | 22,482 | |
Commercial and Industrial | | | 78,638 | | | | 88,354 | |
Mortgage Warehouse Lines | | | 104,204 | | | | 170,324 | |
Small Business Administration Loans | | | 19,493 | | | | 20,523 | |
Direct finance leases | | | 3,489 | | | | 4,233 | |
Consumer loans | | | 25,042 | | | | 28,090 | |
Total Loans and Leases | | $ | 810,194 | | | $ | 879,795 | |
Percentage of Total Loans and Leases | | | | | | | | |
Real Estate: | | | | | | | | |
1-4 family residential construction | | | 0.20 | % | | | 0.35 | % |
Other Construction/land | | | 2.81 | % | | | 3.18 | % |
1-4 family - closed-end | | | 11.29 | % | | | 11.36 | % |
Equity Lines | | | 7.08 | % | | | 6.99 | % |
Multi-family residential | | | 0.79 | % | | | 0.68 | % |
Commercial real estate- owner occupied | | | 21.39 | % | | | 20.76 | % |
Commercial real estate- non-owner occupied | | | 12.20 | % | | | 10.55 | % |
Farmland | | | 12.85 | % | | | 8.17 | % |
Total Real Estate | | | 68.61 | % | | | 62.04 | % |
Agricultural products | | | 2.89 | % | | | 2.56 | % |
Commercial and Industrial | | | 9.71 | % | | | 10.04 | % |
Mortgage Warehouse Lines | | | 12.86 | % | | | 19.36 | % |
Small Business Administration Loans | | | 2.41 | % | | | 2.33 | % |
Direct finance leases | | | 0.43 | % | | | 0.48 | % |
Consumer loans | | | 3.09 | % | | | 3.19 | % |
Total Loans and Leases | | | 100.00 | % | | | 100.00 | % |
(dollars in thousands, unaudited) | | June 30, 2013 | | | December 31, 2012 | | | June 30, 2012 | | |||
NON-ACCRUAL LOANS: | | | | | | | | | | | | |
Real Estate: | | | | | | | | | | | | |
1-4 family residential construction | | $ | - | | | $ | 153 | | | $ | 1,974 | |
Other Construction/Land | | | 6,160 | | | | 11,163 | | | | 4,055 | |
1-4 family - closed-end | | | 15,162 | | | | 15,381 | | | | 5,985 | |
Equity Lines | | | 887 | | | | 1,026 | | | | 488 | |
Multi-family residential | | | - | | | | - | | | | 1,780 | |
Commercial real estate- owner occupied | | | 6,844 | | | | 5,314 | | | | 5,537 | |
Commercial real estate- non-owner occupied | | | 7,713 | | | | 11,642 | | | | 10,262 | |
Farmland | | | 455 | | | | 1,933 | | | | 269 | |
TOTAL REAL ESTATE | | $ | 37,221 | | | $ | 46,612 | | | $ | 30,350 | |
Agriculture Products | | | 21 | | | | 664 | | | | 99 | |
Commercial and Industrial | | | 1,836 | | | | 2,386 | | | | 1,848 | |
Small Business Administration Loans | | | 1,996 | | | | 2,159 | | | | 2,793 | |
Direct finance leases | | | 60 | | | | 135 | | | | 322 | |
Consumer loans | | | 1,175 | | | | 1,138 | | | | 1,303 | |
TOTAL NONPERFORMING LOANS | | $ | 42,309 | | | $ | 53,094 | | | $ | 36,715 | |
| | | | | | | | | | | | |
Foreclosed assets | | | 10,834 | | | | 19,754 | | | | 14,423 | |
Total nonperforming assets | | $ | 53,143 | | | $ | 72,848 | | | $ | 51,138 | |
Performing TDR's (1) | | $ | 17,657 | | | $ | 18,652 | | | $ | 35,998 | |
Nonperforming loans as a % of total gross loans and leases | | | 5.22 | % | | | 6.03 | % | | | 4.49 | % |
Nonperforming assets as a % of total gross loans and leases and foreclosed assets | | | 6.47 | % | | | 8.10 | % | | | 6.15 | % |
(dollars in thousands, unaudited) | | For the Three Months | | | For the Three Months | | | For the Six Months | | | For the Six Months | | | For the Year | | |||||
| | Ended June 30, | | | Ended June 30, | | | Ended June 30, | | | Ended June 30, | | | Ended December 31, | | |||||
| | 2013 | | | 2012 | | | 2013 | | | 2012 | | | 2012 | | |||||
Balances: | | | | | | | | | | | | | | | | | | | | |
Average gross loans and leases outstanding during period (1) | | $ | 823,943 | | | $ | 763,471 | | | $ | 816,437 | | | $ | 755,900 | | | $ | 789,333 | |
Gross loans and leases outstanding at end of period | | $ | 810,194 | | | $ | 817,600 | | | $ | 810,194 | | | $ | 817,600 | | | $ | 879,795 | |
| | | | | | | | | | | | | | | | | | | | |
Allowance for Loan and Lease Losses: | | | | | | | | | | | | | | | | | | | | |
Balance at beginning of period | | $ | 13,199 | | | $ | 17,408 | | | $ | 13,873 | | | $ | 17,283 | | | $ | 17,283 | |
Provision charged to expense | | | 450 | | | | 3,160 | | | | 2,050 | | | | 5,910 | | | | 14,210 | |
Charge-offs | | | | | | | | | | | | | | | | | | | | |
Real Estate | | | | | | | | | | | | | | | | | | | | |
1-4 family residential construction | | | - | | | | - | | | | - | | | | - | | | | 46 | |
Other Construction/Land | | | 27 | | | | 461 | | | | 291 | | | | 739 | | | | 1,994 | |
1-4 family - closed-end | | | 211 | | | | 659 | | | | 368 | | | | 1,034 | | | | 1,763 | |
Equity Lines | | | 19 | | | | 684 | | | | 515 | | | | 922 | | | | 1,234 | |
Multi-family residential | | | - | | | | 1,160 | | | | - | | | | 1,160 | | | | 1,262 | |
Commercial real estate- owner occupied | | | 342 | | | | 561 | | | | 442 | | | | 624 | | | | 2,117 | |
Commercial real estate- non-owner occupied | | | - | | | | 751 | | | | 405 | | | | 751 | | | | 2,522 | |
Farmland | | | 539 | | | | 170 | | | | 539 | | | | 170 | | | | 170 | |
TOTAL REAL ESTATE | | $ | 1,138 | | | $ | 4,446 | | | $ | 2,560 | | | $ | 5,400 | | | $ | 11,108 | |
Agricultural products | | | - | | | | - | | | | 28 | | | | - | | | | 634 | |
Commercial & industrial loans | | | 424 | | | | 1,569 | | | | 1,315 | | | | 2,780 | | | | 4,283 | |
Small Business Administration Loans | | | 7 | | | | 332 | | | | 44 | | | | 418 | | | | 753 | |
Direct Finance Leases | | | 86 | | | | - | | | | 106 | | | | 198 | | | | 198 | |
Consumer Loans | | | 298 | | | | 602 | | | | 605 | | | | 1,107 | | | | 1,802 | |
Total | | $ | 1,953 | | | $ | 6,949 | | | $ | 4,658 | | | $ | 9,903 | | | $ | 18,778 | |
Recoveries | | | | | | | | | | | | | | | | | | | | |
Real Estate | | | | | | | | | | | | | | | | | | | | |
1-4 family residential construction | | | - | | | | - | | | | - | | | | - | | | | 7 | |
Other Construction/Land | | | 1 | | | | 1 | | | | 111 | | | | 3 | | | | 61 | |
1-4 family - closed-end | | | 2 | | | | 12 | | | | 4 | | | | 23 | | | | 40 | |
Equity Lines | | | 3 | | | | 12 | | | | 4 | | | | 13 | | | | 21 | |
Multi-family residential | | | - | | | | - | | | | - | | | | - | | | | - | |
Commercial real estate- owner occupied | | | 4 | | | | - | | | | 13 | | | | 91 | | | | 104 | |
Commercial real estate- non-owner occupied | | | 129 | | | | - | | | | 172 | | | | - | | | | 12 | |
Farmland | | | - | | | | 32 | | | | - | | | | 58 | | | | 57 | |
TOTAL REAL ESTATE | | $ | 139 | | | $ | 57 | | | $ | 304 | | | $ | 188 | | | $ | 302 | |
Agricultural products | | | - | | | | - | | | | - | | | | - | | | | - | |
Commercial and Industrial | | | 291 | | | | 95 | | | | 529 | | | | 245 | | | | 589 | |
Small Business Administration Loans | | | 1 | | | | 47 | | | | 1 | | | | 47 | | | | 95 | |
Direct Finance Leases | | | 4 | | | | - | | | | 5 | | | | - | | | | - | |
Consumer Loans | | | 49 | | | | 45 | | | | 76 | | | | 93 | | | | 172 | |
Total | | $ | 484 | | | $ | 244 | | | $ | 915 | | | $ | 573 | | | $ | 1,158 | |
Net loan charge offs (recoveries) | | $ | 1,469 | | | $ | 6,705 | | | $ | 3,743 | | | $ | 9,330 | | | $ | 17,620 | |
Balance at end of period | | $ | 12,180 | | | $ | 13,863 | | | $ | 12,180 | | | $ | 13,863 | | | $ | 13,873 | |
| | | | | | | | | | | | | | | | | | | | |
RATIOS | | | | | | | | | | | | | | | | | | | | |
Net Charge-offs to Average Loans and Leases (annualized) | | | 0.72 | % | | | 3.53 | % | | | 0.92 | % | | | 2.48 | % | | | 2.23 | % |
Allowance for Loan Losses to Gross Loans and Leases at End of Period | | | 1.50 | % | | | 1.70 | % | | | 1.50 | % | | | 1.70 | % | | | 1.58 | % |
Allowance for Loan Losses to NonPerforming Loans | | | 28.79 | % | | | 37.76 | % | | | 28.79 | % | | | 37.76 | % | | | 26.13 | % |
Net Loan Charge-offs to Allowance for Loan Losses at End of Period | | | 12.06 | % | | | 48.37 | % | | | 30.73 | % | | | 67.30 | % | | | 127.01 | % |
Net Loan Charge-offs to Provision for Loan Losses | | | 326.44 | % | | | 212.18 | % | | | 182.59 | % | | | 157.87 | % | | | 124.00 | % |
Deposit Distribution | | | | | | | | | |
(dollars in thousands, unaudited) | | | | | | | | | |
| | June 30, 2013 | | | December 31, 2012 | | | ||
Interest Bearing Demand Deposits | | $ | 84,025 | | | $ | 84,655 | | |
Non-interest Bearing Demand Deposits | | | 357,540 | | | | 352,597 | | |
NOW | | | 193,888 | | | | 196,771 | | |
Savings | | | 131,187 | | | | 118,547 | | |
Money Market | | | 66,497 | | | | 71,222 | | |
CDAR's < $100,000 | | | 484 | | | | 791 | | |
CDAR's > $100,000 | | | 13,054 | | | | 14,274 | | |
Customer Time deposit < $100,000 | | | 87,927 | | | | 101,893 | | |
Customer Time deposits > $100,000 | | | 210,414 | | | | 218,284 | | |
Brokered Deposits | | | 10,000 | | | | 15,000 | | |
Total Deposits | | $ | 1,155,016 | | | $ | 1,174,034 | | |
| | | | | | | | | |
Percentage of Total Deposits | | | | | | | | | |
Interest Bearing Demand Deposits | | | 7.27 | % | | | 7.21 | % | |
Non-interest Bearing Demand Deposits | | | 30.96 | % | | | 30.03 | % | |
NOW | | | 16.79 | % | | | 16.76 | % | |
Savings | | | 11.36 | % | | | 10.10 | % | |
Money Market | | | 5.76 | % | | | 6.07 | % | |
CDAR's < $100,000 | | | 0.04 | % | | | 0.07 | % | |
CDAR's > $100,000 | | | 1.13 | % | | | 1.22 | % | |
Customer Time deposit < $100,000 | | | 7.61 | % | | | 8.68 | % | |
Customer Time deposits > $100,000 | | | 18.21 | % | | | 18.58 | % | |
Brokered Deposits | | | 0.87 | % | | | 1.28 | % | |
Total | | | 100.00 | % | | | 100.00 | % | |
| | Immediate Change in Rate | | |||||||||||||||||||||||||
| | -300 b.p. | | | -200 b.p. | | | -100 b.p. | | | +100 b.p. | | | +200 b.p. | | | +300 b.p. | | | +400 b.p. | | |||||||
Change in Net Int. Inc. (in $000's) | | $ | -13,158 | | | $ | -9,480 | | | $ | -4,888 | | | $ | +2,496 | | | $ | +4,530 | | | $ | +6,166 | | | $ | +7,341 | |
% Change | | | -25.91 | % | | | -18.67 | % | | | -9.62 | % | | | +4.91 | % | | | +8.92 | % | | | +12.14 | % | | | +14.45 | % |
| | Immediate Change in Rate | | | |||||||||||||||||||||
| | -300 b.p. | | | -200 b.p. | | | -100 b.p. | | | +100 b.p. | | | +200 b.p. | | | +300 b.p. | | | ||||||
Change in EVE (in $000's) | | $ | -36,068 | | | $ | -55,070 | | | $ | -31,258 | | | $ | +40,723 | | | $ | +56,805 | | | $ | +68,440 | | |
% Change | | | -11.31 | % | | | -17.27 | % | | | -9.80 | % | | | +12.77 | % | | | +17.82 | % | | | +21.46 | % | |
Regulatory Capital Ratios | | June 30, | | | December 31, | | | ||
| | 2013 | | | 2012 | | | ||
Sierra Bancorp | | | | | | | | | |
Total Capital to Total Risk-weighted Assets | | | 20.87 | % | | | 19.36 | % | |
Tier 1 Capital to Total Risk-weighted Assets | | | 19.62 | % | | | 18.11 | % | |
Tier 1 Leverage Ratio | | | 13.82 | % | | | 13.34 | % | |
| | | | | | | | | |
Bank of the Sierra | | | | | | | | | |
Total Capital to Total Risk-weighted Assets | | | 20.43 | % | | | 19.14 | % | |
Tier 1 Capital to Total Risk-weighted Assets | | | 19.18 | % | | | 17.88 | % | |
Tier 1 Leverage Ratio | | | 13.51 | % | | | 13.17 | % | |
(c) | Stock Repurchases |
Exhibit # | | Description |
3.1 | | Restated Articles of Incorporation of Sierra Bancorp (1) |
3.2 | | Amended and Restated By-laws of the Company (2) |
10.1 | | 1998 Stock Option Plan (3) |
10.2 | | Salary Continuation Agreement for Kenneth R. Taylor (4) |
10.3 | | Salary Continuation Agreement for James C. Holly (4) |
10.4 | | Salary Continuation Agreement and Split Dollar Agreement for James F. Gardunio (5) |
10.5 | | Split Dollar Agreement for Kenneth R. Taylor (6) |
10.6 | | Split Dollar Agreement and Amendment thereto for James C. Holly (6) |
10.7 | | Director Retirement Agreement and Split dollar Agreement for Vincent Jurkovich (6) |
10.8 | | Director Retirement Agreement and Split dollar Agreement for Robert Fields (6) |
10.9 | | Director Retirement Agreement and Split dollar Agreement for Gordon Woods (6) |
10.10 | | Director Retirement Agreement and Split dollar Agreement for Morris Tharp (6) |
10.11 | | Director Retirement Agreement and Split dollar Agreement for Albert Berra (6) |
10.12 | | 401 Plus Non-Qualified Deferred Compensation Plan (6) |
10.13 | | Indenture dated as of March 17, 2004 between U.S. Bank N.A., as Trustee, and Sierra Bancorp, as Issuer (7) |
10.14 | | Amended and Restated Declaration of Trust of Sierra Statutory Trust II, dated as of March 17, 2004 (7) |
10.15 | | Guarantee Agreement between Sierra Bancorp and U.S. Bank National Association dated as of March 17, 2004 (7) |
10.16 | | Indenture dated as of June 15, 2006 between Wilmington Trust Co., as Trustee, and Sierra Bancorp, as Issuer (8) |
10.17 | | Amended and Restated Declaration of Trust of Sierra Capital Trust III, dated as of June 15, 2006 (8) |
10.18 | | Guarantee Agreement between Sierra Bancorp and Wilmington Trust Company dated as of June 15, 2006 (8) |
10.19 | | 2007 Stock Incentive Plan (9) |
10.20 | | Sample Retirement Agreement Entered into with Each Non-Employee Director Effective January 1, 2007 (10) |
10.21 | | Salary Continuation Agreement for Kevin J. McPhaill (10) |
10.22 | | First Amendment to the Salary Continuation Agreement for Kenneth R. Taylor (10) |
11 | | Statement of Computation of Per Share Earnings (11) |
31.1 | | Certification of Chief Executive Officer (Section 302 Certification) |
31.2 | | Certification of Chief Financial Officer (Section 302 Certification) |
32 | | Certification of Periodic Financial Report (Section 906 Certification) |
| (1) | Filed as Exhibit 3.1 to the Form 10-Q filed with the SEC on August 7, 2009 and incorporated herein by reference. |
| (2) | Filed as an Exhibit to the Form 8-K filed with the SEC on February 21, 2007 and incorporated herein by reference. |
| (3) | Filed as an Exhibit to the Registration Statement of Sierra Bancorp on Form S-4 filed with the Securities and Exchange Commission ("SEC") (Registration No. 333-53178) on January 4, 2001 and incorporated herein by reference. |
| (4) | Filed as Exhibits 10.5 and 10.7 to the Form 10-Q filed with the SEC on May 15, 2003 and incorporated herein by reference. |
| (5) | Filed as an Exhibit to the Form 8-K filed with the SEC on August 11, 2005 and incorporated herein by reference. |
| (6) | Filed as Exhibits 10.10, 10.12, and 10.15 through 10.20 to the Form 10-K filed with the SEC on March 15, 2006 and incorporated herein by reference. |
| (7) | Filed as Exhibits 10.9 through 10.11 to the Form 10-Q filed with the SEC on May 14, 2004 and incorporated herein by reference. |
| (8) | Filed as Exhibits 10.26 through 10.28 to the Form 10-Q filed with the SEC on August 9, 2006 and incorporated herein by reference. |
| (9) | Filed as Exhibit 10.20 to the Form 10-K filed with the SEC on March 15, 2007 and incorporated herein by reference. |
| (10) | Filed as an Exhibit to the Form 8-K filed with the SEC on January 8, 2007 and incorporated herein by reference. |
| (11) | Computation of earnings per share is incorporated by reference to Note 6 of the Financial Statements included herein. |
August 7, 2013 | /s/ James C. Holly |
Date | SIERRA BANCORP |
| James C. Holly |
| President & Chief Executive Officer |
| (Principal Executive Officer) |
| |
August 7, 2013 | /s/ Kenneth R. Taylor |
Date | SIERRA BANCORP |
| Kenneth R. Taylor |
| Chief Financial Officer |
| (Principal Financial and Principal Accounting Officer) |
Date: August 7, 2013 | |
| |
/s/ Kenneth R. Taylor | |
Kenneth R. Taylor | |
Chief Financial Officer & | |
Chief Accounting Officer | |
August 7, 2013 | /s/ James C. Holly |
Date | James C. Holly |
| President & |
| Chief Executive Officer |
| |
August 7, 2013 | /s/ Kenneth R. Taylor |
Date | Kenneth R. Taylor |
| Chief Financial Officer & |
| Chief Accounting Officer |
Credit Quality and Nonperforming Assets
|
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Non Performing Assets [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Credit Quality and Nonperforming Assets | Note 11 Credit Quality and Nonperforming Assets Credit Quality Classifications The Company monitors the credit quality of loans on a continuous basis using the regulatory and accounting classifications of pass, special mention, substandard and impaired to characterize the associated credit risk. Balances classified as "loss" are immediately charged off. The Company conforms to the following definitions for risk classifications utilized:
Credit quality classifications for the Company's loan balances were as follows, as of the dates indicated: Credit Quality Classifications (dollars in thousands, unaudited)
Past Due and Nonperforming Assets Nonperforming assets are comprised of loans for which the Company is no longer accruing interest, and foreclosed assets, including mobile homes and other real estate owned ("OREO"). OREO consists of properties acquired by foreclosure or similar means, which the Company is offering or will offer for sale. Nonperforming loans and leases result when reasonable doubt surfaces with regard to the ability of the Company to collect all principal and interest. At that point, we stop accruing interest on the loan or lease in question, and reverse any previously-recognized interest to the extent that it is uncollected or associated with interest-reserve loans. Any asset for which principal or interest has been in default for 90 days or more is also placed on non-accrual status, even if interest is still being received, unless the asset is both well secured and in the process of collection. An aging of the Company's loan balances, by number of days past due as of the indicated dates, is presented in the following tables: Loan Portfolio Aging (dollars in thousands, unaudited)
(1) Included in Total Financing Receivables (2) Includes finance lease loans over 90 days past due and still accruing in the amount of $2,122.
(1) Included in Total Financing Receivables (2) As of December 31, 2012 there were no loans over 90 days past due and still accruing. Troubled Debt Restructurings A loan that is modified for a borrower who is experiencing financial difficulty is classified as a troubled debt restructuring ("TDR"), if the modification constitutes a concession. At June 30, 2013, the Company had a total of $43.8 million in TDR's, including $26.1 million in TDR's that were on non-accrual status. Generally, a non-accrual loan that has been modified as a TDR remains on non-accrual status for a period of at least six months to demonstrate the borrower's ability to comply with the modified terms. However, performance prior to the modification, or significant events that coincide with the modification, could result in a loan's return to accrual status after a shorter performance period or even at the time of loan modification. TDR's may have the TDR designation removed in the calendar year following the restructuring, if the loan is in compliance with all modified terms and is yielding a market rate of interest. Regardless of the period of time that has elapsed, if the borrower's ability to meet the revised payment schedule is uncertain then the loan will be kept on non-accrual status. Moreover, a TDR is generally considered to be in default when it appears that the customer will not likely be able to repay all principal and interest pursuant to the terms of the restructured agreement. The Company may agree to different types of concessions when modifying a loan or lease. The tables below summarize TDR's which were modified during the noted periods, by type of concession: Troubled Debt Restructurings, by Type of Loan Modification (dollars in thousands, unaudited)
The following tables present, by class, additional details related to loans classified as TDR's during the referenced periods, including the recorded investment in the loan both before and after modification and balances that were modified during the period: Troubled Debt Restructurings (dollars in thousands, unaudited)
(1) This represents the change in the ALL reserve for these credits measured as the difference between the specific post-modification impairment reserve and the pre-modification reserve calculated under our general allowance for loan loss methodology.
(1)This represents the change in the ALL reserve for these credits measured as the difference between the specific post-modification impairment reserve and the pre-modification reserve calculated under our general allowance for loan loss methodology. The table below summarizes TDR's that defaulted during the period noted, and any charge-offs on those TDR's resulting from such default. Troubled Debt Restructurings (dollars in thousands, unaudited)
|
CONSOLIDATED STATEMENTS OF INCOME (USD $)
In Thousands, except Share data, unless otherwise specified |
3 Months Ended | 6 Months Ended | ||
---|---|---|---|---|
Jun. 30, 2013
|
Jun. 30, 2012
|
Jun. 30, 2013
|
Jun. 30, 2012
|
|
Interest income: | ||||
Interest and fees on loans | $ 11,368 | $ 11,154 | $ 22,275 | $ 22,297 |
Interest on investment securities: | ||||
Taxable | 1,034 | 1,751 | 2,196 | 3,635 |
Tax-exempt | 672 | 685 | 1,291 | 1,352 |
Interest on federal funds sold and interest-bearing deposits | 16 | 22 | 44 | 37 |
Total interest income | 13,090 | 13,612 | 25,806 | 27,321 |
Interest expense: | ||||
Interest on deposits | 628 | 809 | 1,288 | 1,694 |
Interest on short-term borrowings | 8 | 13 | 12 | 18 |
Interest on long-term borrowings | 0 | 49 | 33 | 180 |
Interest on mandatorily redeemable trust preferred securities | 179 | 193 | 356 | 393 |
Total interest expense | 815 | 1,064 | 1,689 | 2,285 |
Net Interest Income | 12,275 | 12,548 | 24,117 | 25,036 |
Provision for loan losses | 450 | 3,160 | 2,050 | 5,910 |
Net Interest Income after Provision for Loan Losses | 11,825 | 9,388 | 22,067 | 19,126 |
Non-interest income: | ||||
Service charges on deposit accounts | 2,215 | 2,417 | 4,288 | 4,704 |
Gains on investment securities available-for-sale | 0 | 1 | 6 | 71 |
Other income, net | 1,807 | 1,704 | 3,844 | 3,448 |
Total non-interest income | 4,022 | 4,122 | 8,138 | 8,223 |
Non-interest expense: | ||||
Salaries and employee benefits | 5,403 | 4,911 | 11,323 | 10,576 |
Occupancy expense | 1,596 | 1,563 | 3,147 | 3,052 |
Other | 3,718 | 4,009 | 8,068 | 8,894 |
Total non-interest expenses | 10,717 | 10,483 | 22,538 | 22,522 |
Income before income taxes | 5,130 | 3,027 | 7,667 | 4,827 |
Provision for income taxes | 1,331 | 454 | 1,535 | 375 |
Net Income | 3,799 | 2,573 | 6,132 | 4,452 |
PER SHARE DATA | ||||
Book value | $ 12.38 | $ 12.23 | $ 12.38 | $ 12.23 |
Cash dividends | $ 0.06 | $ 0.06 | $ 0.12 | $ 0.12 |
Earnings per share basic | $ 0.27 | $ 0.18 | $ 0.43 | $ 0.32 |
Earnings per share diluted | $ 0.27 | $ 0.18 | $ 0.43 | $ 0.32 |
Average shares outstanding, basic | 14,128,146 | 14,103,209 | 14,120,865 | 14,102,544 |
Average shares outstanding, diluted | 14,227,335 | 14,107,640 | 14,211,910 | 14,107,416 |
Total shareholder Equity (in thousands) | 175,171 | 172,537 | 175,171 | 172,537 |
Shares outstanding | 14,144,439 | 14,103,209 | 14,144,439 | 14,103,209 |
Dividends Paid | $ 847,358 | $ 846,193 | $ 1,694 | $ 1,692 |
Supplemental Disclosure of Cash Flow Information
|
6 Months Ended |
---|---|
Jun. 30, 2013
|
|
Supplemental Cash Flow Information [Abstract] | |
Supplemental Disclosure of Cash Flow Information | Note 4 Supplemental Disclosure of Cash Flow Information During the six months ended June 30, 2013 and 2012, cash paid for interest due on interest-bearing liabilities was $1.794 million and $2.117 million, respectively. There was no cash paid for income taxes during the six months ended June 30, 2013 and 2012. Assets totaling $2.622 million and $11.206 million were acquired in settlement of loans for the six months ended June 30, 2013 and June 30, 2012, respectively. We received $10.156 million in cash from the sale of foreclosed assets during the first six months of 2013 relative to $6.886 million during the first six months of 2012, which represents sales proceeds less loans extended to finance such sales totaling $390,000 for the first six months of 2013 and $3.684 million for the first six months of 2012. |
Allowance for Loan and Lease Losses (Tables)
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Jun. 30, 2013
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Provision for Loan and Lease Losses [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Impaired Loans |
(1)Contractual principal balance due from customer. (2)Principal balance on Company's books, less any direct charge offs. (3)Interest income is recognized on performing balances on a regular accrual basis.
(1)Contractual principal balance due from customer. (2)Principal balance on Company's books, less any direct charge offs. (3)Interest income is recognized on performing balances on a regular accrual basis. |
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Impaired Loans, Condensed Information Impaired Loans | Similar but condensed information is provided in the following table, as of the dates noted:
(1) Principal balance on Company's books less any direct charge-off |
Allowance for Loan and Lease Losses
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Jun. 30, 2013
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Provision for Loan and Lease Losses [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Allowance for Loan and Lease Losses | Note 12 Allowance for Loan and Lease Losses The allowance for loan and lease losses, a contra-asset, is established through a provision for loan and lease losses. It is maintained at a level that is considered adequate to absorb probable losses on certain specifically identified loans, as well as probable incurred losses inherent in the remaining loan portfolio. Specifically identifiable and quantifiable losses are immediately charged off against the allowance; recoveries are generally recorded only when cash payments are received subsequent to the charge off. We employ a systematic methodology, consistent with FASB guidelines on loss contingencies and impaired loans, for determining the appropriate level of the allowance for loan and lease losses and adjusting it at least quarterly. Pursuant to that methodology, impaired loans and leases are individually analyzed and a criticized asset action plan is completed specifying the financial status of the borrower and, if applicable, the characteristics and condition of collateral and any associated liquidation plan. A specific loss allowance is created for each impaired loan, if necessary. The following tables disclose the unpaid principal balance, recorded investment (including accrued interest), average recorded investment, and interest income recognized for impaired loans on our books as of the dates indicated. Balances are shown by loan type, and are further broken out by those that required an allowance and those that did not, with the associated allowance disclosed for those that required such. Included in the valuation allowance for impaired loans shown in the tables below are specific reserves allocated to TDR's, totaling $4.408 million at June 30, 2013 and $4.140 million at December 31, 2012.
(1)Contractual principal balance due from customer. (2)Principal balance on Company's books, less any direct charge offs. (3)Interest income is recognized on performing balances on a regular accrual basis.
(1)Contractual principal balance due from customer. (2)Principal balance on Company's books, less any direct charge offs. (3)Interest income is recognized on performing balances on a regular accrual basis. Similar but condensed information is provided in the following table, as of the dates noted:
(1) Principal balance on Company's books less any direct charge-off The specific loss allowance for an impaired loan generally represents the difference between the face value of the loan and either the fair value of underlying collateral less estimated disposition costs, or the loan’s net present value as determined by a discounted cash flow analysis. The discounted cash flow approach is typically used to measure impairment on loans for which it is anticipated that repayment will be provided from cash flows other than those generated solely by the disposition or operation of underlying collateral. However, historical loss rates may be used to determine a specific loss allowance if they indicate a higher potential reserve need than the discounted cash flow analysis. Any change in impairment attributable to the passage of time is accommodated by adjusting the loss allowance accordingly. For loans where repayment is expected to be provided by the disposition or operation of the underlying collateral, impairment is measured using the fair value of the collateral. If the collateral value, net of the expected costs of disposition where applicable, is less than the loan balance, then a specific loss reserve is established for the shortfall in collateral coverage. If the discounted collateral value is greater than or equal to the loan balance, no specific loss reserve is required. At the time a collateral-dependent loan is designated as nonperforming, a new appraisal is ordered and typically received within 30 to 60 days if a recent appraisal is not already available. We generally use external appraisals to determine the fair value of the underlying collateral for nonperforming real estate loans, although the Company's licensed staff appraisers may update older appraisals based on current market conditions and property value trends. Until an updated appraisal is received, the Company uses the existing appraisal to determine the amount of the specific loss allowance that may be required, and adjusts the specific loss allowance, as necessary, once a new appraisal is received. Updated appraisals are generally ordered at least annually for collateral-dependent loans that remain impaired. Current appraisals were available for 92% of the Company's impaired real estate loan balances at June 30, 2013. Furthermore, the Company analyzes collateral-dependent loans on at least a quarterly basis, to determine if any portion of the recorded investment in such loans can be identified as uncollectible and would therefore constitute a confirmed loss. All amounts deemed to be uncollectible are promptly charged off against the Company's allowance for loan and lease losses, with the loan then carried at the fair value of the collateral, as appraised, less estimated costs of disposition if applicable. Once a charge-off or write-down is recorded, it will not be restored to the loan balance on the Company's accounting books. Our methodology also provides that a "general" allowance be established for probable incurred losses inherent in loans and leases that are not impaired. Unimpaired loan balances are segregated by credit quality, and are then evaluated in pools with common characteristics. At the present time, pools are based on the same segmentation of loan types presented in our regulatory filings. While this methodology utilizes historical loss data and other measurable information, the classification of loans and the establishment of the allowance for loan and lease losses are both to some extent based on management's judgment and experience. Our methodology incorporates a variety of risk considerations, both quantitative and qualitative, in establishing an allowance for loan and lease losses that management believes is appropriate at each reporting date. Quantitative information includes our historical loss experience, delinquency and charge-off trends, and current collateral values. Qualitative factors include the general economic environment in our markets and, in particular, the condition of the agricultural industry and other key industries in the Central San Joaquin Valley. Lending policies and procedures (including underwriting standards), the experience and abilities of lending staff, the quality of loan review, credit concentrations (by geography, loan type, industry and collateral type), the rate of loan portfolio growth, and changes in legal or regulatory requirements are additional factors that are considered. The total general reserve established for probable incurred losses on unimpaired loans was $5.0 million at June 30, 2013. During the three months ended June 30, 2013, there were no material changes to the methodology used to determine our allowance for loan and lease losses. As we add new products and expand our geographic coverage, and as the economic environment changes, we expect to continue to enhance our methodology to keep pace with the size and complexity of the loan and lease portfolio and respond to pressures created by external forces. We engage outside firms on a regular basis to assess our methodology and perform independent credit reviews of our loan and lease portfolio. In addition, the Company's external auditors, the FDIC, and the California DFI review the allowance for loan and lease losses as an integral part of their audit and examination processes. Management believes that the current methodology is appropriate given our size and level of complexity. The tables that follow detail the activity in the allowance for loan and lease losses for the periods noted: |
Supplemental Disclosure Of Cash Flow Information - Additional Information (Detail) (USD $)
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6 Months Ended | |
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Jun. 30, 2013
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Jun. 30, 2012
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Schedule Of Cash Flow Supplemental [Line Items] | ||
Cash paid for interest due on interest-bearing liabilities | $ 1,794,000 | $ 2,117,000 |
Cash paid for income taxes | 0 | 0 |
Assets acquired in settlement of loans | 2,622,000 | 11,206,000 |
Proceeds from sales of foreclosed assets less loans extended to finance sales | 10,156,000 | 6,886,000 |
Loans extended to finance the sale of foreclosed assets | $ 390,000 | $ 3,684,000 |
The Business of Sierra Bancorp - Additional Information (Detail)
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Jun. 30, 2013
Number
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Organization Consolidation and Presentation of Financial Statements Disclosure [Line Items] | |
Number of full service branch offices | 25 |
Non-branch ATM locations | 6 |
Allowance for Loan and Lease Losses - Additional Information (Detail) (USD $)
In Thousands, unless otherwise specified |
6 Months Ended | |||
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Jun. 30, 2013
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Dec. 31, 2012
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Jun. 30, 2013
Minimum
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Jun. 30, 2013
Maximum
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Accounts, Notes, Loans and Financing Receivable [Line Items] | ||||
Troubled debt restructuring reserves amount | $ 4,408 | $ 4,140 | ||
Appraisal receiving period | 30 days | 60 days | ||
Percentage collateral to impaired loan balances | 92.00% | |||
General | $ 5,030 | $ 6,748 |
Financial Instruments with Off-Balance-Sheet Risk - Additional Information (Detail) (USD $)
In Millions, unless otherwise specified |
Jun. 30, 2013
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Fair Value, Off-balance Sheet Risks, Disclosure Information [Line Items] | |
Letter of credit | $ 79 |
Credit Quality and Nonperforming Assets - Additional Information (Detail) (USD $)
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6 Months Ended | 12 Months Ended |
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Jun. 30, 2013
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Dec. 31, 2012
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Accounts, Notes, Loans and Financing Receivable [Line Items] | ||
Loan, classified as troubled debt restructuring | $ 43,800,000 | |
Loan, classified as troubled debt restructuring, non-accrual status | 26,100,000 | |
Loans Accruals Due | 90 days | 90 days |
Finance lease loans over 90 days past due and still accruing | $ 2,122 |
Recent Developments (Tables)
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Jun. 30, 2013
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Recent Developments [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Allowance for Credit Losses and Recorded Investment in Financing Receivables | Allowance for Credit Losses and Recorded Investment in Financing Receivables (dollars in thousands, unaudited)
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Basis of Presentation
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6 Months Ended |
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Jun. 30, 2013
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Basis Of Presentation [Abstract] | |
Basis of Presentation | Note 2 Basis of Presentation The accompanying unaudited consolidated financial statements have been prepared in a condensed format, and therefore do not include all of the information and footnotes required by U.S. generally accepted accounting principles (GAAP) for complete financial statements. The information furnished in these interim statements reflects all adjustments that are, in the opinion of management, necessary for a fair statement of the results for such period. Such adjustments are of a normal recurring nature, unless otherwise disclosed in this Form 10-Q. In preparing the accompanying consolidated financial statements, management has taken subsequent events into consideration and recognized them where appropriate. The results of operations in the interim statements are not necessarily indicative of the results that may be expected for any other quarter, or for the full year. Certain amounts reported for 2012 have been reclassified to be consistent with the reporting for 2013. The interim financial information should be read in conjunction with the Company's Annual Report on Form 10-K for the year ended December 31, 2012, as filed with the Securities and Exchange Commission. |
Share Based Compensation
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6 Months Ended |
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Jun. 30, 2013
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Share-based Compensation [Abstract] | |
Share Based Compensation | Note 5 Share Based Compensation The 2007 Stock Incentive Plan (the "2007 Plan") was adopted by the Company in 2007. Our 1998 Stock Option Plan (the "1998 Plan") was concurrently terminated, although options to purchase 164,950 shares that were granted prior to the termination of the 1998 Plan were still outstanding as of June 30, 2013 and remain unaffected by the termination. The 2007 Plan provides for the issuance of both "incentive" and "nonqualified" stock options to officers and employees, and of "nonqualified" stock options to non-employee directors of the Company. The 2007 Plan also provides for the potential issuance of restricted stock awards to these same classes of eligible participants, on such terms and conditions as are established at the discretion of the Board of Directors or the Compensation Committee. The total number of shares of the Company's authorized but unissued stock reserved for issuance pursuant to awards under the 2007 Plan was initially 1,500,000 shares, although the number remaining available for grant as of June 30, 2013 was 762,620. The dilutive impact of stock options outstanding is discussed below in Note 6, Earnings per Share. No restricted stock awards have been issued by the Company. Pursuant to FASB's standards on stock compensation, the value of each option granted is reflected in our income statement as employee compensation or directors' expense, by amortizing the value over the vesting period of such option or by expensing it as of the grant date for immediately vested options. The Company is utilizing the Black-Scholes model to value stock options, and the "multiple option" approach is used to allocate the resulting valuation to actual expense. Under the multiple option approach, an employee's options for each vesting period are separately valued and amortized. This appears to be the preferred method for option grants with multiple vesting periods, which is the case for most options granted by the Company. A pre-tax charge of $57,000 was reflected in the Company's income statement during the second quarter of 2013 and $55,000 was charged during the second quarter of 2012, as expense related to stock options. For the first half, the charges amounted to $151,000 in 2013 and $122,000 in 2012. |
Current Accounting Developments
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6 Months Ended |
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Jun. 30, 2013
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New Accounting Pronouncements and Changes in Accounting Principles [Abstract] | |
Current Accounting Developments | Note 3 Current Accounting Developments In February 2013, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update ("ASU") 2013-02, Reporting of Amounts Reclassified Out of Accumulated Other Comprehensive Income, with the objective of improving the reporting of reclassifications out of accumulated other comprehensive income. ASU 2013-02 requires an entity to provide information about the amounts reclassified out of accumulated other comprehensive income, by component. In addition, if the amount reclassified is required under U.S. GAAP to be reclassified to net income in its entirety in the same reporting period, an entity is required to present significant amounts reclassified out of accumulated other comprehensive income by the respective line items of net income. For other amounts that are not required under U.S. GAAP to be reclassified in their entirety to net income, an entity is required to cross-reference to other disclosures that provide additional detail about those amounts. For public entities, this update is effective prospectively for reporting periods beginning after December 15, 2012. We adopted ASU 2013-02 effective the first quarter of 2013, thus enhancing our disclosures with regard to items reclassified out of accumulated comprehensive income. |
Share Based Compensation - Additional Information (Detail) (USD $)
In Thousands, except Share data, unless otherwise specified |
3 Months Ended | 6 Months Ended | ||
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Jun. 30, 2013
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Jun. 30, 2012
|
Jun. 30, 2013
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Jun. 30, 2012
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Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ||||
Share-based compensation expense | $ 57 | $ 55 | $ 150 | $ 122 |
1998 Plan
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Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ||||
Number of Shares Outstanding | 164,950 | 164,950 | ||
2007 Plan
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Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ||||
Shares authorized but unissued | 1,500,000 | |||
Number of remaining shares available for grant | 762,620 | 762,620 |
Estimated Fair Values of Financial Instruments (Detail) (USD $)
In Thousands, unless otherwise specified |
Jun. 30, 2013
|
Dec. 31, 2012
|
---|---|---|
Financial Assets: | ||
Cash and cash equivalents | $ 66,982 | $ 61,818 |
Investment securities available for sale | 393,576 | 380,188 |
Loans and leases, net | 831,835 | 873,309 |
Collateral dependent impaired loans | 14,032 | 27,449 |
Loans held-for-sale | 523 | 210 |
Cash surrender value of life insurance policies | 38,940 | 38,007 |
Other investments | 5,932 | 6,370 |
Investment in Limited Partnership | 9,826 | 10,316 |
Accrued interest receivable | 4,935 | 5,095 |
Financial Liabilities: | ||
Noninterest-bearing | 357,540 | 352,597 |
Interest-bearing | 797,833 | 821,911 |
Fed Funds Purchased and Repurchase Agreements | 1,963 | 1,419 |
Short-term borrowings | 0 | 36,650 |
Long-term borrowings | 0 | 5,038 |
Subordinated debentures | 19,304 | 12,141 |
Limited partnership capital commitment | 951 | 962 |
Accrued Interest Payable | 200 | 304 |
Commitments to extend credit
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||
Off-balance-sheet financial instruments: | ||
Notional Amount | 387,241 | 225,400 |
Standby Letters of Credit
|
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Off-balance-sheet financial instruments: | ||
Notional Amount | 8,316 | 6,690 |
Commercial lines of credit
|
||
Off-balance-sheet financial instruments: | ||
Notional Amount | 8,533 | 8,539 |
Fair Value, Inputs, Level 1
|
||
Financial Assets: | ||
Cash and cash equivalents | 66,982 | 61,818 |
Investment securities available for sale | 2,234 | 1,809 |
Loans and leases, net | 0 | 0 |
Collateral dependent impaired loans | 0 | 0 |
Loans held-for-sale | 523 | 210 |
Cash surrender value of life insurance policies | 0 | 0 |
Other investments | 0 | 0 |
Investment in Limited Partnership | 0 | 0 |
Accrued interest receivable | 0 | 0 |
Financial Liabilities: | ||
Noninterest-bearing | 357,540 | 352,597 |
Interest-bearing | 0 | 0 |
Fed Funds Purchased and Repurchase Agreements | 0 | 0 |
Short-term borrowings | 0 | 0 |
Long-term borrowings | 0 | 0 |
Subordinated debentures | 0 | 0 |
Limited partnership capital commitment | 0 | 0 |
Accrued Interest Payable | 0 | 0 |
Fair Value, Inputs, Level 2
|
||
Financial Assets: | ||
Cash and cash equivalents | 0 | 0 |
Investment securities available for sale | 391,342 | 378,379 |
Loans and leases, net | 831,835 | 873,309 |
Collateral dependent impaired loans | 14,032 | 27,449 |
Loans held-for-sale | 0 | 0 |
Cash surrender value of life insurance policies | 38,940 | 38,007 |
Other investments | 5,932 | 6,370 |
Investment in Limited Partnership | 9,826 | 10,316 |
Accrued interest receivable | 4,935 | 5,095 |
Financial Liabilities: | ||
Noninterest-bearing | 0 | 0 |
Interest-bearing | 797,833 | 821,911 |
Fed Funds Purchased and Repurchase Agreements | 1,963 | 1,419 |
Short-term borrowings | 0 | 36,650 |
Long-term borrowings | 0 | 5,038 |
Subordinated debentures | 19,304 | 12,141 |
Limited partnership capital commitment | 951 | 962 |
Accrued Interest Payable | 200 | 304 |
Fair Value, Inputs, Level 3
|
||
Financial Assets: | ||
Cash and cash equivalents | 0 | 0 |
Investment securities available for sale | 0 | 0 |
Loans and leases, net | 0 | 0 |
Collateral dependent impaired loans | 0 | 0 |
Loans held-for-sale | 0 | 0 |
Cash surrender value of life insurance policies | 0 | 0 |
Other investments | 0 | 0 |
Investment in Limited Partnership | 0 | 0 |
Accrued interest receivable | 0 | 0 |
Financial Liabilities: | ||
Noninterest-bearing | 0 | 0 |
Interest-bearing | 0 | 0 |
Fed Funds Purchased and Repurchase Agreements | 0 | 0 |
Short-term borrowings | 0 | 0 |
Long-term borrowings | 0 | 0 |
Subordinated debentures | 0 | 0 |
Limited partnership capital commitment | 0 | 0 |
Accrued Interest Payable | 0 | 0 |
Carrying Amount
|
||
Financial Assets: | ||
Cash and cash equivalents | 66,982 | 61,818 |
Investment securities available for sale | 393,576 | 380,188 |
Loans and leases, net | 785,219 | 839,629 |
Collateral dependent impaired loans | 14,032 | 27,449 |
Loans held-for-sale | 523 | 210 |
Cash surrender value of life insurance policies | 38,940 | 38,007 |
Other investments | 5,932 | 6,370 |
Investment in Limited Partnership | 9,826 | 10,316 |
Accrued interest receivable | 4,935 | 5,095 |
Financial Liabilities: | ||
Noninterest-bearing | 357,540 | 352,597 |
Interest-bearing | 797,476 | 821,437 |
Fed Funds Purchased and Repurchase Agreements | 1,963 | 1,419 |
Short-term borrowings | 0 | 36,650 |
Long-term borrowings | 0 | 5,000 |
Subordinated debentures | 30,928 | 30,928 |
Limited partnership capital commitment | 951 | 962 |
Accrued Interest Payable | $ 200 | $ 304 |
Investment Securities with Unrealized Gross Losses (Detail) (USD $)
In Thousands, unless otherwise specified |
6 Months Ended | 12 Months Ended |
---|---|---|
Jun. 30, 2013
|
Dec. 31, 2012
|
|
Schedule of Available-for-sale Securities [Line Items] | ||
Gross Unrealized Losses, Less Than Twelve Months | $ (4,808) | $ (1,104) |
Fair Value, Less Than Twelve Months | 218,024 | 118,361 |
Gross Unrealized Losses, Over Twelve Months | (253) | (61) |
Fair Value, Over Twelve Months | 13,147 | 6,965 |
U.S. Government agencies
|
||
Schedule of Available-for-sale Securities [Line Items] | ||
Gross Unrealized Losses, Less Than Twelve Months | (74) | (17) |
Fair Value, Less Than Twelve Months | 2,615 | 1,996 |
Gross Unrealized Losses, Over Twelve Months | 0 | 0 |
Fair Value, Over Twelve Months | 0 | 0 |
Obligations of State and Political Subdivisions
|
||
Schedule of Available-for-sale Securities [Line Items] | ||
Gross Unrealized Losses, Less Than Twelve Months | (1,948) | (180) |
Fair Value, Less Than Twelve Months | 36,167 | 9,324 |
Gross Unrealized Losses, Over Twelve Months | (22) | 0 |
Fair Value, Over Twelve Months | 309 | 0 |
U.S. Government agencies collateralized by mortgage obligations
|
||
Schedule of Available-for-sale Securities [Line Items] | ||
Gross Unrealized Losses, Less Than Twelve Months | (2,786) | (903) |
Fair Value, Less Than Twelve Months | 179,242 | 106,799 |
Gross Unrealized Losses, Over Twelve Months | (231) | (61) |
Fair Value, Over Twelve Months | 12,838 | 6,965 |
Other Securities
|
||
Schedule of Available-for-sale Securities [Line Items] | ||
Gross Unrealized Losses, Less Than Twelve Months | 0 | (4) |
Fair Value, Less Than Twelve Months | 0 | 242 |
Gross Unrealized Losses, Over Twelve Months | 0 | 0 |
Fair Value, Over Twelve Months | $ 0 | $ 0 |
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