þ | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
o | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
Maryland | 20-5120010 | |
(State or other jurisdiction of incorporation or organization) | (IRS Employer Identification Number) |
Large accelerated filer o | Accelerated filer o | Non-Accelerated filer o (do not check if a smaller reporting company) |
Smaller reporting company þ |
2 | Page
June 30, 2011 | September 30, 2010 | |||||||
Assets |
||||||||
Cash and cash equivalents |
$ | 37,523 | $ | 72,438 | ||||
Other interest-bearing deposits |
9,543 | | ||||||
Securities available-for-sale (at fair value) |
52,861 | 41,708 | ||||||
Federal Home Loan Bank stock |
5,787 | 5,787 | ||||||
Loans receivable |
431,457 | 456,232 | ||||||
Allowance for loan losses |
(4,655 | ) | (4,145 | ) | ||||
Loans receivable net |
426,802 | 452,087 | ||||||
Office properties and equipment net |
6,888 | 7,216 | ||||||
Accrued interest receivable |
1,644 | 1,977 | ||||||
Intangible assets |
566 | 815 | ||||||
Foreclosed assets |
1,413 | 448 | ||||||
Other assets |
8,651 | 11,889 | ||||||
TOTAL ASSETS |
$ | 551,678 | $ | 594,365 | ||||
Liabilities and Stockholders Equity |
||||||||
Liabilities: |
||||||||
Deposits |
$ | 459,074 | $ | 476,302 | ||||
Federal Home Loan Bank advances |
35,300 | 64,200 | ||||||
Other liabilities |
4,364 | 3,986 | ||||||
Total liabilities |
498,738 | 544,488 | ||||||
Stockholders equity: |
||||||||
Common stock 5,123,414 and 5,113,258 shares, respectively |
51 | 51 | ||||||
Additional paid-in capital |
53,880 | 53,823 | ||||||
Retained earnings |
1,147 | 1,130 | ||||||
Unearned deferred compensation |
(55 | ) | (1 | ) | ||||
Accumulated other comprehensive loss |
(2,083 | ) | (5,126 | ) | ||||
Total stockholders equity |
52,940 | 49,877 | ||||||
TOTAL LIABILITIES AND STOCKHOLDERS EQUITY |
$ | 551,678 | $ | 594,365 | ||||
3 | Page
Three Months Ended | Nine Months Ended | |||||||||||||||
June 30, | June 30, | June 30, | June 30, | |||||||||||||
2011 | 2010 | 2011 | 2010 | |||||||||||||
Interest and dividend income: |
||||||||||||||||
Interest and fees on loans |
$ | 6,773 | $ | 7,482 | $ | 21,038 | $ | 22,114 | ||||||||
Interest on investments |
431 | 781 | 1,646 | 2,416 | ||||||||||||
Total interest and dividend income |
7,204 | 8,263 | 22,684 | 24,530 | ||||||||||||
Interest expense: |
||||||||||||||||
Interest on deposits |
1,711 | 1,979 | 5,545 | 6,208 | ||||||||||||
Interest on borrowed funds |
433 | 771 | 1,494 | 2,480 | ||||||||||||
Total interest expense |
2,144 | 2,750 | 7,039 | 8,688 | ||||||||||||
Net interest income |
5,060 | 5,513 | 15,645 | 15,842 | ||||||||||||
Provision for loan losses |
1,364 | 1,331 | 4,614 | 3,493 | ||||||||||||
Net interest income after provision for loan losses |
3,696 | 4,182 | 11,031 | 12,349 | ||||||||||||
Noninterest income: |
||||||||||||||||
Total other-than-temporary impairment (losses)/recoveries |
126 | (847 | ) | (1,288 | ) | (2,547 | ) | |||||||||
Portion of
loss/(recoveries) recognized in other comprehensive loss (before tax) |
(126 | ) | 722 | 717 | 1,336 | |||||||||||
Net gains from sale of securities |
281 | | 516 | | ||||||||||||
Net gains / (losses) on available-for-sale securities recognized in earnings |
281 | (125 | ) | (55 | ) | (1,211 | ) | |||||||||
Service charges on deposit accounts |
386 | 395 | 1,095 | 1,123 | ||||||||||||
Insurance commissions |
25 | 39 | 73 | 159 | ||||||||||||
Loan fees and service charges |
70 | 60 | 349 | 288 | ||||||||||||
Other |
4 | 4 | 8 | 9 | ||||||||||||
Total noninterest income |
766 | 373 | 1,470 | 368 | ||||||||||||
Noninterest expense: |
||||||||||||||||
Salaries and related benefits |
2,128 | 1,984 | 6,238 | 5,811 | ||||||||||||
Occupancy net |
606 | 638 | 1,915 | 1,896 | ||||||||||||
Office |
311 | 363 | 1,019 | 1,057 | ||||||||||||
Data processing |
116 | 59 | 249 | 244 | ||||||||||||
Amortization of core deposit |
84 | 84 | 250 | 250 | ||||||||||||
Advertising, marketing and public relations |
26 | 53 | 94 | 124 | ||||||||||||
FDIC premium assessment |
279 | 225 | 822 | 689 | ||||||||||||
Professional services |
299 | 329 | 865 | 899 | ||||||||||||
Other |
310 | 539 | 990 | 1,286 | ||||||||||||
Total noninterest expense |
4,159 | 4,274 | 12,442 | 12,256 | ||||||||||||
Income before provision for income tax |
303 | 281 | 59 | 461 | ||||||||||||
Provision for income taxes |
127 | 119 | 42 | 203 | ||||||||||||
Net income |
$ | 176 | $ | 162 | $ | 17 | $ | 258 | ||||||||
Per share information: |
||||||||||||||||
Basic earnings |
$ | 0.03 | $ | 0.03 | $ | | $ | 0.05 | ||||||||
Diluted earnings |
$ | 0.03 | $ | 0.03 | $ | | $ | 0.05 | ||||||||
Dividends paid |
$ | | $ | | $ | | $ | | ||||||||
4 | Page
Accumulated | ||||||||||||||||||||||||||||
Additional | Other | |||||||||||||||||||||||||||
Common Stock | Paid-in | Retained | Unearned | Comprehensive | Total | |||||||||||||||||||||||
Shares | Amount | Capital | Earnings | Compensation | Income (loss) | Equity | ||||||||||||||||||||||
Balance, September 30, 2010 |
5,113,258 | $ | 51 | $ | 53,823 | $ | 1,130 | $ | (1 | ) | $ | (5,126 | ) | $ | 49,877 | |||||||||||||
Comprehensive gain: |
||||||||||||||||||||||||||||
Net income |
17 | 17 | ||||||||||||||||||||||||||
Amortization of unrecognized prior service costs and net
gains/losses, net of tax |
| | ||||||||||||||||||||||||||
Net unrealized gain on available for sale securities, net of tax |
2,391 | 2,391 | ||||||||||||||||||||||||||
Change in unrealized gain arising from sale of securities, net of tax |
310 | 310 | ||||||||||||||||||||||||||
Change for realized losses on securities available for sale for
OTTI write-down, net of tax |
342 | 342 | ||||||||||||||||||||||||||
Total comprehensive gain |
3,060 | |||||||||||||||||||||||||||
Common stock awarded for recognition and retention plan - 10,156 shares |
10,156 | 56 | (56 | ) | ||||||||||||||||||||||||
Stock option expense |
1 | 1 | ||||||||||||||||||||||||||
Amortization of restricted stock |
2 | 2 | ||||||||||||||||||||||||||
Balance, June 30, 2011 |
5,123,414 | $ | 51 | $ | 53,880 | $ | 1,147 | $ | (55 | ) | $ | (2,083 | ) | $ | 52,940 | |||||||||||||
5 | Page
Nine Months Ended | ||||||||
June 30, | June 30, | |||||||
2011 | 2010 | |||||||
Cash flows from operating activities: |
||||||||
Net income attributable to common stockholders |
$ | 17 | $ | 258 | ||||
Adjustments
to reconcile net income to net cash provided
by operating activities: |
||||||||
Net securities amortization |
(20 | ) | (281 | ) | ||||
Depreciation |
840 | 839 | ||||||
Provision for loan losses |
4,614 | 3,493 | ||||||
Net realized gain on sale of securites |
(516 | ) | 0 | |||||
Impairment on mortgage-backed securities |
620 | 1,211 | ||||||
Amortization of core deposit intangible |
250 | 250 | ||||||
Amortization of restricted stock |
2 | 20 | ||||||
Provision for stock options |
1 | 12 | ||||||
Provision for deferred income taxes |
0 | 583 | ||||||
Decrease (increase) in accrued interest receivable and other assets |
2,287 | (3,794 | ) | |||||
Increase (decrease) in other liabilities |
378 | (89 | ) | |||||
Total adjustments |
8,456 | 2,244 | ||||||
Net cash provided by operating activities |
8,473 | 2,502 | ||||||
Cash flows from investing activities: |
||||||||
Net decrease (increase) in interest-bearing deposits |
(9,543 | ) | 2,458 | |||||
Proceeds from sale of securities available-for-sale |
45,041 | 0 | ||||||
Principal payments on securities available for sale |
9,791 | 10,328 | ||||||
Purchase of securities available-for-sale |
(60,998 | ) | 0 | |||||
Net decrease (increase) in loans |
18,959 | (18,052 | ) | |||||
Net capital expenditures |
(510 | ) | (215 | ) | ||||
Net cash provided by (used in) investing activities |
2,740 | (5,481 | ) | |||||
Cash flows from financing activities: |
||||||||
Net decrease in Federal Home Loan Bank advances |
(28,900 | ) | (31,705 | ) | ||||
Net increase (decrease) in deposits |
(17,228 | ) | 31,705 | |||||
Net cash provided by (used in) financing activities |
(46,128 | ) | 0 | |||||
Net decrease in cash and cash equivalents |
(34,915 | ) | (2,979 | ) | ||||
Cash and cash equivalents at beginning of period |
72,438 | 43,191 | ||||||
Cash and cash equivalents at end of period |
$ | 37,523 | $ | 40,212 | ||||
Supplemental cash flow information: |
||||||||
Cash paid during the year for: |
||||||||
Interest on deposits |
$ | 5,558 | $ | 6,207 | ||||
Interest on borrowings |
$ | 1,581 | $ | 2,579 | ||||
Income taxes |
$ | 8 | $ | 5 | ||||
Supplemental noncash disclosure: |
||||||||
Transfers from loans to foreclosed properties |
$ | 1,750 | $ | 394 |
6 | Page
Quoted Prices in | Significant | |||||||||||||||
Active Markets | Other | Significant | ||||||||||||||
for Identical | Observable | Unobservable | ||||||||||||||
Fair | Instruments | Inputs | Inputs | |||||||||||||
Value | (Level 1) | (Level 2) | (Level 3) | |||||||||||||
June 30, 2011: |
||||||||||||||||
Securities available for sale: |
||||||||||||||||
U.S. Agency mortgage-backed securities |
$ | 11,574 | $ | | $ | 11,574 | $ | | ||||||||
U.S. Agency floating Rate Bonds |
30,904 | | 30,904 | | ||||||||||||
Non-agency mortgage-backed securities |
10,383 | | | 10,383 | ||||||||||||
Total |
$ | 52,861 | $ | | $ | 42,478 | $ | 10,383 | ||||||||
September 30, 2010: |
||||||||||||||||
Securities available for sale: |
||||||||||||||||
U.S. Agency securities |
$ | 16,709 | $ | | $ | 16,709 | $ | | ||||||||
Non-agency mortgage-backed securities |
24,999 | | | 24,999 | ||||||||||||
Total |
$ | 41,708 | $ | | $ | 16,709 | $ | 24,999 | ||||||||
Quoted Prices in | Significant | |||||||||||||||
Active Markets | Other | Significant | ||||||||||||||
for Identical | Observable | Unobservable | ||||||||||||||
Fair | Instruments | Inputs | Inputs | |||||||||||||
Value | (Level 1) | (Level 2) | (Level 3) | |||||||||||||
June 30, 2011: |
||||||||||||||||
Foreclosed assets |
$ | 1,413 | $ | | $ | | $ | 1,413 | ||||||||
Loans restructured in a troubled debt restructuring |
6,294 | | | 6,294 | ||||||||||||
Total |
$ | 7,707 | $ | | $ | | $ | 7,707 | ||||||||
September 30, 2010: |
||||||||||||||||
Foreclosed assets |
$ | 448 | $ | | $ | | $ | 448 | ||||||||
Loans restructured in a troubled debt restructuring |
3,178 | | | 3,178 | ||||||||||||
Total |
$ | 3,626 | $ | | $ | | $ | 3,626 | ||||||||
Nine Months Ended | ||||||||
June 30, | June 30, | |||||||
2011 | 2010 | |||||||
Balance beginning of period |
$ | 24,999 | $ | 36,517 | ||||
Total gains or losses (realized/unrealized): |
||||||||
Included in earnings |
(620 | ) | (1,211 | ) | ||||
Included in other comprehensive loss |
5,417 | 40 | ||||||
Sales |
(13,633 | ) | | |||||
Payments, accretion and amortization |
(5,780 | ) | (7,848 | ) | ||||
Balance end of period |
$ | 10,383 | $ | 27,498 | ||||
June 30, | September 30, | |||||||||||||||
2011 | 2010 | |||||||||||||||
Estimated | Estimated | |||||||||||||||
Carrying | Fair | Carrying | Fair | |||||||||||||
Amount | Value | Amount | Value | |||||||||||||
Financial assets: |
||||||||||||||||
Cash and cash equivalents |
$ | 37,523 | $ | 37,523 | $ | 72,438 | $ | 72,438 | ||||||||
Interest-bearing deposits |
9,543 | 9,543 | | | ||||||||||||
Securities available for sale |
52,861 | 52,861 | 41,708 | 41,708 | ||||||||||||
Loans receivable |
426,802 | 452,272 | 452,087 | 477,039 | ||||||||||||
FHLB stock |
5,787 | 5,787 | 5,787 | 5,787 | ||||||||||||
Accrued interest receivable |
1,644 | 1,644 | 1,977 | 1,977 | ||||||||||||
Financial liabilities: |
||||||||||||||||
Deposits |
459,074 | 465,306 | 476,302 | 482,337 | ||||||||||||
FHLB advances |
35,300 | 37,927 | 64,200 | 68,290 | ||||||||||||
Accrued interest payable |
$ | 4,364 | $ | 4,364 | $ | 232 | $ | 232 |
Real Estate | Consumer | Total | ||||||||||
June 30, 2011 and
Nine Months then Ended: |
||||||||||||
Allowance for Loan Losses: |
||||||||||||
Beginning balance, October 1, 2010 |
$ | 1,562 | $ | 2,583 | $ | 4,145 | ||||||
Charge-offs |
(1,924 | ) | (2,359 | ) | (4,283 | ) | ||||||
Recoveries |
33 | 146 | 179 | |||||||||
Provision
(1) |
2,106 | 2,508 | 4,614 | |||||||||
Ending balance, June 30, 2011 |
$ | 1,777 | $ | 2,878 | $ | 4,655 | ||||||
Ending balance: individually evaluated
for impairment |
409 | $ | 287 | $ | 696 | |||||||
Ending balance: collectively evaluated
for impairment |
$ | 1,368 | $ | 2,591 | $ | 3,959 | ||||||
Loans
Receivable: |
||||||||||||
Ending balance |
$ | 266,913 | $ | 164,544 | $ | 431,457 | ||||||
Ending balance: individually evaluated
for impairment |
$ | 9,585 | $ | 2,425 | $ | 12,010 | ||||||
Ending balance: collectively evaluated
for impairment |
$ | 257,328 | $ | 162,119 | $ | 419,447 | ||||||
Sepember 30, 2010 and
Twelve Months then Ended: |
||||||||||||
Allowance for Loan Losses: |
||||||||||||
Beginning balance, October 1, 2009 |
$ | 846 | $ | 1,079 | $ | 1,925 | ||||||
Charge-offs |
(1,331 | ) | (3,445 | ) | (4,776 | ) | ||||||
Recoveries |
44 | 51 | 95 | |||||||||
Provision (1) |
2,003 | 4,898 | 6,901 | |||||||||
Ending balance, September 30, 2010 |
$ | 1,562 | $ | 2,583 | $ | 4,145 | ||||||
Ending balance: individually evaluated
for impairment |
$ | 211 | $ | 522 | $ | 733 | ||||||
Ending balance: collectively evaluated
for impairment |
$ | 1,351 | $ | 2,061 | $ | 3,412 | ||||||
Loans Receivable: |
||||||||||||
Ending balance |
$ | 261,357 | $ | 194,875 | $ | 456,232 | ||||||
Ending balance: individually evaluated
for impairment |
$ | 4,092 | $ | 4,560 | $ | 8,652 | ||||||
Ending balance: collectively evaluated
for impairment |
$ | 257,265 | $ | 190,315 | $ | 447,580 | ||||||
(1) | The Bank does not have historical data disaggregating provision for loan losses between real estate and consumer loans. Therefore, the provision for loan losses has been allocated between real estate and consumer loans for each period presented based on the ratio of real estate and consumer net loan charge-offs for that period. |
Real Estate Loans | Consumer Loans | Total Loans | ||||||||||||||||||||||
June 30, | September 30, | June 30, | September 30, | June 30, | September 30, | |||||||||||||||||||
2011 | 2010 | 2011 | 2010 | 2011 | 2010 | |||||||||||||||||||
Performing loans |
||||||||||||||||||||||||
Performing TDR loans |
$ | 3,863 | $ | 2,714 | $ | 1,058 | $ | 559 | $ | 4,921 | $ | 3,273 | ||||||||||||
Performing loans other |
257,328 | 255,110 | 162,119 | 192,765 | 419,447 | 447,875 | ||||||||||||||||||
Total performing loans |
261,191 | 257,824 | 163,177 | 193,324 | 424,368 | 451,148 | ||||||||||||||||||
Nonperforming loans (1) |
||||||||||||||||||||||||
Nonperforming TDR loans |
$ | 1,751 | | $ | 257 | | $ | 2,008 | $ | | ||||||||||||||
Nonperforming loans other |
3,971 | 3,533 | 1,110 | 1,551 | 5,081 | 5,084 | ||||||||||||||||||
Total nonperforming loans |
5,722 | 3,533 | 1,367 | 1,551 | 7,089 | 5,084 | ||||||||||||||||||
Total loans |
$ | 266,913 | $ | 261,357 | $ | 164,544 | $ | 194,875 | $ | 431,457 | $ | 456,232 | ||||||||||||
(1) | Nonperforming loans are defined as loans that (a) are 91+ days past due and nonaccruing, or (b) TDR loans restructured at a 0% interest rate that were 91+ days past due and nonaccruing at the time of restructuring. ` |
Recorded | ||||||||||||||||||||||||||||
Greater | Investment > | |||||||||||||||||||||||||||
1 Month | 2 Months | Than | Total | Total | 90 Days and | |||||||||||||||||||||||
Past Due | Past Due | 3 Months | Past Due | Current | Loans | Accruing | ||||||||||||||||||||||
June 30, 2011: |
||||||||||||||||||||||||||||
Real estate loans |
$ | 3,126 | $ | 2,091 | $ | 3,971 | $ | 9,188 | $ | 257,725 | $ | 266,913 | $ | | ||||||||||||||
Consumer loans |
2,949 | 880 | 1,110 | 4,939 | 159,605 | 164,544 | 22 | |||||||||||||||||||||
Total |
$ | 6,075 | $ | 2,971 | $ | 5,081 | $ | 14,127 | $ | 417,330 | $ | 431,457 | $ | 22 | ||||||||||||||
Sepember 30, 2010: |
||||||||||||||||||||||||||||
Real estate loans |
$ | 5,144 | $ | 1,054 | $ | 3,322 | $ | 9,520 | $ | 251,837 | $ | 261,357 | $ | | ||||||||||||||
Consumer loans |
3,920 | 1,496 | 3,535 | 8,951 | 185,924 | 194,875 | | |||||||||||||||||||||
Total |
$ | 9,064 | $ | 2,550 | $ | 6,857 | $ | 18,471 | $ | 437,761 | $ | 456,232 | $ | | ||||||||||||||
Unpaid | Average | Interest | ||||||||||||||||||
Recorded | Principal | Related | Recorded | Income | ||||||||||||||||
Investment | Balance | Allowance | Investment | Recognized | ||||||||||||||||
June 30, 2011 and
Nine Months then Ended: |
||||||||||||||||||||
With no related allowance recorded: |
||||||||||||||||||||
Real estate loans |
$ | 3,685 | $ | 3,685 | $ | | $ | 2,296 | $ | 61 | ||||||||||
Consumer loans |
366 | 366 | | $ | 289 | 9 | ||||||||||||||
With an allowance recorded: |
||||||||||||||||||||
Real estate loans |
1,929 | 1,929 | 353 | $ | 1,613 | 17 | ||||||||||||||
Consumer loans |
949 | 949 | 283 | $ | 954 | 16 | ||||||||||||||
Total: |
||||||||||||||||||||
Real estate loans |
5,614 | 5,614 | 353 | 3,909 | 78 | |||||||||||||||
Consumer loans |
$ | 1,315 | $ | 1,315 | $ | 283 | $ | 1,242 | $ | 25 | ||||||||||
Sepember 30, 2010 and
Twelve Months then Ended: |
||||||||||||||||||||
With no related allowance recorded: |
||||||||||||||||||||
Real estate loans |
$ | 907 | $ | 907 | $ | | $ | 937 | $ | 4 | ||||||||||
Consumer loans |
211 | 211 | | $ | 869 | 5 | ||||||||||||||
With an allowance recorded: |
||||||||||||||||||||
Real estate loans |
1,297 | 1,297 | 271 | $ | 1,884 | 3 | ||||||||||||||
Consumer loans |
958 | 958 | 294 | $ | 2,418 | 18 | ||||||||||||||
Total: |
||||||||||||||||||||
Real estate loans |
$ | 2,204 | $ | 2,204 | $ | 271 | $ | 2,820 | $ | 7 | ||||||||||
Consumer loans |
$ | 1,169 | $ | 1,169 | $ | 294 | $ | 3,286 | $ | 23 |
Real Estate | Consumer | Total | ||||||||||
June 30, 2011 and
Nine Months then Ended: |
||||||||||||
Accruing / Performing: |
||||||||||||
Beginning balance |
$ | 1,402 | $ | 415 | $ | 1,817 | ||||||
Principal payments |
58 | 104 | 162 | |||||||||
Charge-offs |
| 8 | 8 | |||||||||
Advances |
27 | 7 | 34 | |||||||||
New restructured |
962 | 369 | 1,331 | |||||||||
Class Transfers |
1,456 | 124 | 1,580 | |||||||||
Transfers between accrual/non-accrual |
(167 | ) | (4 | ) | (171 | ) | ||||||
Ending balance |
$ | 3,738 | $ | 1,023 | $ | 4,761 | ||||||
Non-accrual / Non-performing: |
||||||||||||
Beginning balance |
$ | 1,312 | $ | 144 | $ | 1,456 | ||||||
Principal payments |
27 | 24 | 51 | |||||||||
Charge-offs |
| 31 | 31 | |||||||||
Advances |
46 | 4 | 50 | |||||||||
New restructured |
| | | |||||||||
Class Transfers |
| | | |||||||||
Transfers between accrual/non-accrual |
491 | 88 | 579 | |||||||||
Ending balance |
$ | 1,876 | $ | 291 | $ | 2,167 | ||||||
Totals: |
||||||||||||
Beginning balance |
$ | 2,714 | $ | 559 | $ | 3,273 | ||||||
Principal payments |
85 | 128 | 213 | |||||||||
Charge-offs |
| 39 | 39 | |||||||||
Advances |
73 | 11 | 84 | |||||||||
New restructured |
962 | 369 | 1,331 | |||||||||
Class Transfers |
1,456 | 124 | 1,580 | |||||||||
Transfers between accrual/non-accrual |
324 | 84 | 408 | |||||||||
Ending balance |
$ | 5,614 | $ | 1,314 | $ | 6,928 | ||||||
Gross | Gross | |||||||||||||||
Amortized | Unrealized | Unrealized | Estimated | |||||||||||||
Description of Securities | Cost | Gains | Losses | Fair Value | ||||||||||||
June 30, 2011 |
||||||||||||||||
U.S. Agency mortgage-backed securities |
$ | 11,418 | $ | 156 | $ | | $ | 11,574 | ||||||||
U.S. Agency Floating Rate Bonds |
30,937 | 17 | 50 | 30,904 | ||||||||||||
Non-agency mortgage-backed securities |
13,739 | | 3,356 | 10,383 | ||||||||||||
Total investment securities |
$ | 56,094 | $ | 173 | $ | 3,406 | $ | 52,861 | ||||||||
September 30, 2010 |
||||||||||||||||
U.S. Agency securities |
$ | 16,240 | $ | 469 | $ | | $ | 16,709 | ||||||||
Non-agency mortgage-backed securities |
33,772 | | 8,773 | 24,999 | ||||||||||||
Total investment securities |
$ | 50,012 | $ | 469 | $ | 8,773 | $ | 41,708 | ||||||||
Nine Months | Twelve Months | |||||||
Ended | Ended | |||||||
June 30, | September 30, | |||||||
2011 | 2010 | |||||||
Beginning balance of the amount of OTTI related to credit losses |
$ | 9,497 | $ | 7,236 | ||||
Credit portion of OTTI on securities for which OTTI was not
previously recognized |
620 | 2,276 | ||||||
Cash payments received on a security in
excess of the securitys book
value adjusted for previously recognized credit portion of OTTI |
(50 | ) | (15 | ) | ||||
Credit portion of OTTI previously recognized on securities sold
during the period |
(7,659 | ) | | |||||
Ending balance of the amount of OTTI related to credit losses |
$ | 2,408 | $ | 9,497 | ||||
ITEM 2. | MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS |
Three Months Ended | Nine Months Ended | |||||||||||||||
June 30, | June 30, | |||||||||||||||
2011 | 2010 | 2011 | 2010 | |||||||||||||
Net income (loss), as reported |
$ | 176 | $ | 162 | $ | 17 | $ | 258 | ||||||||
EPS basic, as reported |
$ | 0.03 | $ | 0.03 | $ | | $ | 0.05 | ||||||||
EBS diluted, as reported |
$ | 0.03 | $ | 0.03 | $ | | $ | 0.05 | ||||||||
Cash dividends paid |
$ | | $ | | $ | | $ | | ||||||||
Return on average assets (annualized) |
0.12 | % | 0.11 | % | 0.00 | % | 0.06 | % | ||||||||
Reteurn on average equity (annualized) |
1.34 | % | 1.16 | % | 0.04 | % | 0.62 | % | ||||||||
Efficiency ratio, as reported (1) |
71.39 | % | 71.10 | % | 70.35 | % | 70.35 | % |
(1) | Non-interest expense divided by the sum of net interest income plus non-interest income, excluding net impairment losses recognized in earnings. A lower ratio indicates greater efficiency. |
| Net interest income and net interest margin decreased slightly during the three and nine months ended June 30, 2011 from the comparable periods last year. We continue to see both rate and volume related decreases in both interest income on loans and interest expense on deposits. Reductions in FHLB borrowings led to decreases in interest expense on borrowed funds of $338 and $986 for the three and nine month periods ended June 30, 2011. | ||
| Net interest income was $5,060 for the three month period ended June 30, 2011, a decrease of $453 or 8.22% from the three month period ended June 30, 2010. Net interest income was $15,645 for the nine month period ended June 30, 2011, a decrease of $197 or 1.24% from the nine month period ended June 30, 2010. |
| The net interest margin of 3.66% for the three months ended June 30, 2011 represents a 35 bp decrease from a net interest margin of 4.01% for the three months ended June 30, 2010. Net interest margins were 3.72% and 3.88% for the nine month periods ended June 30, 2011 and 2010, respectively. | ||
| Total loans were $431,457 at June 30, 2011, a decrease of $24,775, or 5.43% from September 30, 2010. Total deposits were $459,074 at June 30, 2011, a decrease of $17,228 or 3.62% from September 30, 2010. | ||
| Net loan charge-offs increased from $775 for the three months ended June 30, 2010 to $1,214 for the three months ended June 30, 2011. Net loan charge-offs increased from $1,977 for the nine months ended June 30, 2010 to $4,104 for the nine months ended June 30, 2011. Continued higher levels of net loan charge-offs and non-performing loans led to increased provision for loan losses of $1,364 and $4,614 for the three and nine month periods ended June 30, 2011, respectively. Annualized net loan charge-offs as a percentage of average loans were 1.11% for the three months ended June 30, 2011, compared to 0.58% for the three months ended June 30, 2010. Our new credit policy and more proactive charge-off and collection practices have contributed to increased loan charge-offs. Our customers ability to repay their loans has also been adversely affected by sustained higher unemployment rates. Further, depressed home prices and other collateral values have increased incidences of collateral shortfalls and have contributed to an increase in impaired loans, charge-offs and the need for higher levels of allowance for loan loss. | ||
| Non-interest income increased from $373 for the three months ended June 30, 2010 to $766 for the three months ended June 30, 2011. We also experienced an increase from the nine month period ended June 30, 2010 to the nine month period ended June 30, 2011 from $368 to $1,470. Contributors included other-than-temporary impairment (OTTI) losses on our non-agency mortgage-backed securities portfolio of $0 and $620 for the three and nine month periods ended June 30, 2011. We also experienced gains on sale of securities of $282 and $516 for the three and nine month periods ending June 30, 2011, respectively. | ||
| Non-interest expense decreased 2.69%, from $4,274 to $4,159 for the three month period ending June 30, 2010 compared to the three month period ending June 30, 2011 due to modest decreases in occupancy, office and other expenses. |
| The length of time, and extent to which, the fair value has been less than the amortized cost. | ||
| Adverse conditions specifically related to the security, industry or geographic area. | ||
| The historical and implied volatility of the fair value of the security. | ||
| The payment structure of the debt security and the likelihood of the issuer or underlying borrowers being able to make payments that may increase in the future. | ||
| The failure of the issuer of the security or the underlying borrowers to make scheduled interest or principal payments. | ||
| Any changes to the rating of the security by a rating agency. | ||
| Recoveries or additional declines in fair value subsequent to the balance sheet date. |
| Obtaining individual loan level data directly from servicers and trustees, and making assumptions regarding the frequency of foreclosure, loss severity and conditional prepayment rate (both the entire pool and the loan group pertaining to the bond we hold). |
| Projecting cash flows based on these assumptions and stressing the cash flows under different time periods and requirements based on the class structure and credit enhancement features of the bond we hold. |
| Identifying various price/yield scenarios based on the Banks book value and valuations based on both hold-to-maturity and current free market trade scenarios. Discount rates were determined based on the volatility and complexity of the security and the yields demanded by buyers in the market at the time of the valuation. |
Three months ended June 30, 2011 | Three months ended June 30, 2010 | |||||||||||||||||||||||
Interest | Average | Interest | Average | |||||||||||||||||||||
Average | Income/ | Yield/ | Average | Income/ | Yield/ | |||||||||||||||||||
Balance | Expense | Rate | Balance | Expense | Rate | |||||||||||||||||||
Average interest-earning assets: |
||||||||||||||||||||||||
Cash and cash equivalents |
$ | 44,068 | $ | 27 | 0.25 | % | $ | 40,795 | $ | 2 | 0.02 | % | ||||||||||||
Loans |
434,586 | 6,773 | 6.25 | % | 457,685 | 7,482 | 6.56 | % | ||||||||||||||||
Interest-bearing deposits |
8,438 | 17 | 0.81 | % | | | 0.00 | % | ||||||||||||||||
Securities available for sale |
61,025 | 386 | 2.54 | % | 46,577 | 779 | 6.71 | % | ||||||||||||||||
FHLB stock |
5,787 | 1 | 0.07 | % | 6,040 | | 0.00 | % | ||||||||||||||||
Total interest earning assets |
$ | 553,904 | $ | 7,204 | 5.22 | % | $ | 551,097 | $ | 8,263 | 6.01 | % | ||||||||||||
Average interest-bearing liabilities: |
||||||||||||||||||||||||
Savings Accounts |
$ | 25,194 | $ | 7 | 0.11 | % | $ | 26,415 | $ | 44 | 0.67 | % | ||||||||||||
Demand deposits |
23,488 | 1 | 0.02 | % | 22,763 | 8 | 0.14 | % | ||||||||||||||||
Money Market |
167,929 | 406 | 0.97 | % | 153,323 | 615 | 1.61 | % | ||||||||||||||||
CDs |
231,849 | 1,184 | 2.05 | % | 205,874 | 1,193 | 2.32 | % | ||||||||||||||||
IRAs |
23,911 | 113 | 1.90 | % | 18,909 | 119 | 2.52 | % | ||||||||||||||||
Total deposits |
472,371 | 1,711 | 1.45 | % | 427,284 | 1,979 | 1.85 | % | ||||||||||||||||
FHLB Advances |
39,163 | 433 | 4.43 | % | 91,013 | 771 | 3.40 | % | ||||||||||||||||
Total interest bearing deposits |
$ | 511,534 | $ | 2,144 | 1.68 | % | $ | 518,296 | $ | 2,750 | 2.13 | % | ||||||||||||
Net interest income |
$ | 5,060 | $ | 5,513 | ||||||||||||||||||||
Interest rate spread |
3.54 | % | 3.89 | % | ||||||||||||||||||||
Net interest margin |
3.66 | % | 4.01 | % | ||||||||||||||||||||
Average interest-earning assets to
average interest-bearing liabilities |
1.08 | 1.06 | ||||||||||||||||||||||
Nine months ended June 30, 2011 | Nine months ended June 30, 2010 | |||||||||||||||||||||||
Interest | Average | Interest | Average | |||||||||||||||||||||
Average | Income/ | Yield/ | Average | Income/ | Yield/ | |||||||||||||||||||
Balance | Expense | Rate | Balance | Expense | Rate | |||||||||||||||||||
Average interest-earning assets: |
||||||||||||||||||||||||
Cash and cash equivalents |
$ | 60,219 | $ | 99 | 0.22 | % | $ | 38,539 | $ | 4 | 0.01 | % | ||||||||||||
Loans |
444,327 | 21,038 | 6.33 | % | 450,971 | 22,114 | 6.56 | % | ||||||||||||||||
Interest-bearing deposits |
4,475 | 25 | 0.75 | % | 865 | 12 | 1.85 | % | ||||||||||||||||
Securities available for sale |
47,780 | 1,519 | 4.25 | % | 50,095 | 2,400 | 6.41 | % | ||||||||||||||||
FHLB stock |
5,787 | 3 | 0.07 | % | 6,040 | | 0.00 | % | ||||||||||||||||
Total interest earning assets |
562,588 | 22,684 | 5.39 | % | 546,510 | 24,530 | 6.00 | % | ||||||||||||||||
Average interest-bearing liabilities: |
||||||||||||||||||||||||
Savings Accounts |
$ | 25,462 | $ | 31 | 0.16 | % | $ | 25,575 | $ | 131 | 0.68 | % | ||||||||||||
Demand deposits |
22,701 | 7 | 0.04 | % | 21,975 | 22 | 0.13 | % | ||||||||||||||||
Money Market |
161,259 | 1,265 | 1.05 | % | 152,992 | 1,877 | 1.64 | % | ||||||||||||||||
CDs |
243,707 | 3,889 | 2.13 | % | 199,526 | 3,813 | 2.56 | % | ||||||||||||||||
IRAs |
24,075 | 353 | 1.96 | % | 18,301 | 365 | 2.67 | % | ||||||||||||||||
Total deposits |
477,204 | 5,545 | 1.55 | % | 418,368 | 6,208 | 1.98 | % | ||||||||||||||||
FHLB Advances |
45,535 | 1,494 | 4.39 | % | 95,136 | 2,480 | 3.49 | % | ||||||||||||||||
Total interest bearing deposits |
$ | 522,739 | $ | 7,039 | 1.80 | % | $ | 513,504 | $ | 8,688 | 2.26 | % | ||||||||||||
Net interest income |
$ | 15,645 | $ | 15,842 | ||||||||||||||||||||
Interest rate spread |
3.59 | % | 3.74 | % | ||||||||||||||||||||
Net interest margin |
3.72 | % | 3.88 | % | ||||||||||||||||||||
Average interest-earning assets to
average interest-bearing liabilities |
1.08 | 1.06 | ||||||||||||||||||||||
Increase (decrease) due to | ||||||||||||
Volume (1) | Rate (1) | Net | ||||||||||
Interest income: |
||||||||||||
Cash and cash equivalents |
$ | | $ | 25 | $ | 25 | ||||||
Loans |
(368 | ) | (341 | ) | (709 | ) | ||||||
Interest-bearing deposits |
17 | | 17 | |||||||||
Securities available for sale |
200 | (593 | ) | (393 | ) | |||||||
FHLB stock |
1 | | 1 | |||||||||
Total interest earning assets |
(150 | ) | (909 | ) | (1,059 | ) | ||||||
Interest expense: |
||||||||||||
Savings Accounts |
(2 | ) | (35 | ) | (37 | ) | ||||||
Demand deposits |
| (7 | ) | (7 | ) | |||||||
Money Market |
54 | (263 | ) | (209 | ) | |||||||
CDs |
142 | (151 | ) | (9 | ) | |||||||
IRAs |
28 | (34 | ) | (6 | ) | |||||||
Total deposits |
222 | (490 | ) | (268 | ) | |||||||
FHLB Advances |
(548 | ) | 210 | (338 | ) | |||||||
Total interest bearing deposits |
(326 | ) | (280 | ) | (606 | ) | ||||||
Net interest income |
$ | 176 | $ | (629 | ) | $ | (453 | ) | ||||
Increase (decrease) due to | ||||||||||||
Volume (1) | Rate (1) | Net | ||||||||||
Interest income: |
||||||||||||
Cash and cash equivalents |
$ | 3 | $ | 92 | $ | 95 | ||||||
Loans |
(322 | ) | (754 | ) | (1,076 | ) | ||||||
Interest-bearing deposits |
33 | (20 | ) | 13 | ||||||||
Securities available for sale |
(106 | ) | (775 | ) | (881 | ) | ||||||
FHLB stock |
3 | | 3 | |||||||||
Total interest earning assets |
(389 | ) | (1,457 | ) | (1,846 | ) | ||||||
Interest expense: |
||||||||||||
Savings Accounts |
(1 | ) | (99 | ) | (100 | ) | ||||||
Demand deposits |
1 | (16 | ) | (15 | ) | |||||||
Money Market |
97 | (709 | ) | (612 | ) | |||||||
CDs |
771 | (695 | ) | 76 | ||||||||
IRAs |
101 | (113 | ) | (12 | ) | |||||||
Total deposits |
969 | (1,632 | ) | (663 | ) | |||||||
FHLB Advances |
(1,563 | ) | 577 | (986 | ) | |||||||
Total interest bearing deposits |
(594 | ) | (1,055 | ) | (1,649 | ) | ||||||
Net interest income |
$ | 205 | $ | (402 | ) | $ | (197 | ) | ||||
(1) | the change in interest due to both rate and volume has been allocated in proportion to the relationship to the dollar amounts of the change in each. |
Three months ended | Nine months ended | |||||||||||||||||||||||
June 30, | % | June 30, | % | |||||||||||||||||||||
2011 | 2010 | Change | 2011 | 2010 | Change | |||||||||||||||||||
Non-interest Income (loss): |
||||||||||||||||||||||||
Net impairment losses recognized in
earnings |
$ | | $ | (125 | ) | (100.00 | %) | $ | (571 | ) | $ | (1,211 | ) | (52.85 | %) | |||||||||
Service charges on deposit accounts |
386 | 395 | (0.02 | ) | 1,095 | 1,123 | (0.02 | ) | ||||||||||||||||
Insurance commissions |
25 | 39 | (0.36 | ) | 73 | 159 | (0.54 | ) | ||||||||||||||||
Loan fees and service charges |
70 | 60 | 0.17 | 349 | 288 | 0.21 | ||||||||||||||||||
Gain on sale of securities |
281 | | NA | 516 | | NA | ||||||||||||||||||
Other |
4 | 4 | 0.00 | 8 | 9 | (0.11 | ) | |||||||||||||||||
Total non-interest income (loss) |
$ | 766 | $ | 373 | >100 | % | $ | 1,470 | $ | 368 | >100 | % | ||||||||||||
Three months ended | Nine months ended | |||||||||||||||||||||||
June 30, | % | June 30, | % | |||||||||||||||||||||
2011 | 2010 | Change | 2011 | 2010 | Change | |||||||||||||||||||
Non-interest Expense: |
||||||||||||||||||||||||
Salaries and related benefits |
$ | 2,128 | $ | 1,984 | 7.26 | % | $ | 6,238 | $ | 5,811 | 7.35 | % | ||||||||||||
Occupancy net |
606 | 638 | (0.05 | ) | 1,915 | 1,896 | 0.01 | |||||||||||||||||
Office |
311 | 363 | (0.14 | ) | 1,019 | 1,057 | (0.04 | ) | ||||||||||||||||
Data processing |
116 | 59 | 0.97 | 249 | 244 | 0.02 | ||||||||||||||||||
Amortization of core deposit |
84 | 84 | 0.00 | 250 | 250 | 0.00 | ||||||||||||||||||
Advertising, marketing and public relations |
26 | 53 | (0.51 | ) | 94 | 124 | (0.24 | ) | ||||||||||||||||
FDIC premium assessment |
279 | 225 | 0.24 | 822 | 689 | 0.19 | ||||||||||||||||||
Professional services |
299 | 329 | (0.09 | ) | 865 | 899 | (0.04 | ) | ||||||||||||||||
Other |
310 | 539 | (0.42 | ) | 990 | 1,286 | (0.23 | ) | ||||||||||||||||
Total non-interest expense |
$ | 4,159 | $ | 4,274 | (2.69 | %) | $ | 12,442 | $ | 12,256 | 1.52 | % | ||||||||||||
Non-interest expense (annualized) /
Average assets |
2.93 | % | 2.97 | % | (1.02 | %) | 2.90 | % | 2.84 | % | 2.03 | % |
June 30, | September 30, | |||||||
2011 | 2010 | |||||||
and Nine | and Twelve | |||||||
Months | Months | |||||||
Then Ended | Then Ended | |||||||
Nonperforming assets: |
||||||||
Nonaccrual loans |
$ | 5,059 | $ | 5,084 | ||||
Nonperforming troubled debt restructure loans |
1,838 | | ||||||
Accruing loans past due 90 days or more |
22 | | ||||||
Total nonperforming loans (NPLs) (1) |
6,919 | 5,084 | ||||||
Other real estate owned |
1,259 | 372 | ||||||
Other collateral owned |
154 | 76 | ||||||
Total nonperforming assets (NPAs) |
$ | 8,332 | $ | 5,532 | ||||
Average outstanding loan balance |
$ | 443,845 | $ | 452,696 | ||||
Loans, end of period |
431,457 | 456,232 | ||||||
Total assets, end of period |
551,678 | 594,365 | ||||||
ALL, at beginning of period |
4,145 | 1,925 | ||||||
Loans charged off: |
||||||||
Real estate loans |
(1,924 | ) | (1,168 | ) | ||||
Consumer loans |
(2,359 | ) | (3,608 | ) | ||||
Total loans charged off |
(4,283 | ) | (4,776 | ) | ||||
Recoveries of loans previously charged off: |
||||||||
Real estate loans |
33 | 44 | ||||||
Consumer loans |
146 | 51 | ||||||
Total recoveries of loans previously charged off: |
179 | 95 | ||||||
Net loans charged off (NCOs) |
(4,104 | ) | (4,681 | ) | ||||
Additions to ALL via provision for loan losses charged
to operations |
4,614 | 6,901 | ||||||
ALL, at end of period |
$ | 4,655 | $ | 4,145 | ||||
Ratios: |
||||||||
ALL to NCOs (annualized) |
1.13 | 0.89 | ||||||
NCOs (annualized) to average loans |
1.23 | % | 1.03 | % | ||||
ALL to total loans |
1.08 | % | 0.91 | % | ||||
NPLs to total loans |
1.60 | % | 1.11 | % | ||||
NPAs to total assets |
1.51 | % | 0.93 | % |
(1) | Included in the nonperforming loan total for June 30, 2011 and September 30, 2010 were $1,838 and $0 of troubled debt loan restructurings, respectively. As noted below the Bank now defines non-performing loans to include troubled debt restructure loans that were 91+ days past due at the time of their restructure. |
Amortized | Fair | |||||||
Cost | Value | |||||||
June 30, 2011 |
||||||||
Floating Rate Agency Bonds |
$ | 30,937 | $ | 30,904 | ||||
Residential Agency MBS |
11,418 | 11,574 | ||||||
Residential Non-agency MBS |
13,739 | 10,383 | ||||||
Totals |
$ | 56,094 | $ | 52,861 | ||||
September 30, 2010 |
||||||||
Residential Agency MBS |
$ | 16,240 | $ | 16,709 | ||||
Residential Non-agency MBS |
33,772 | 24,999 | ||||||
Totals |
$ | 50,012 | $ | 41,708 | ||||
June 30, | September 30, | |||||||||||||||
2011 | 2010 | |||||||||||||||
Amortized | Fair | Amortized | Fair | |||||||||||||
Cost | Value | Cost | Value | |||||||||||||
Floating Rate Agency Bonds |
$ | 30,937 | $ | 30,904 | $ | | $ | | ||||||||
Residential Agency MBS |
11,418 | 11,574 | 16,240 | 16,709 | ||||||||||||
AAA |
| | 4,514 | 4,380 | ||||||||||||
A |
| | 6,041 | 5,444 | ||||||||||||
B |
3,094 | 1,914 | ||||||||||||||
Below investment grade |
10,645 | 8,469 | 23,217 | 15,175 | ||||||||||||
Total |
$ | 56,094 | $ | 52,861 | $ | 50,012 | $ | 41,708 | ||||||||
September 30,
2010, balance of OTTI related to credit losses |
$ | 9,497 | ||
Credit
portion of OTTI recognized during the quarter ended December 31, 2010 |
620 | |||
Credit portion of OTTI previously recognized on securities sold
during the period |
(7,709 | ) | ||
June 30, 2011, balance of OTTI related to credit losses |
$ | 2,408 | ||
In-store | Traditional | Institutional | Total | |||||||||||||
Non-CD deposits |
$ | 3,583 | $ | 9,145 | $ | | $ | 12,728 | ||||||||
CD deposits customer |
2,726 | (9,244 | ) | | (6,518 | ) | ||||||||||
CD deposits institutional |
| | (22,903 | ) | (22,903 | ) | ||||||||||
Total deposit growth |
$ | 6,309 | $ | (99 | ) | $ | (22,903 | ) | $ | (16,693 | ) | |||||
To Be Well Capitalized | ||||||||||||||||||||||||
For Capital Adequacy | Under Prompt Corrective | |||||||||||||||||||||||
Actual | Purposes | Action Provisions | ||||||||||||||||||||||
Amount | Ratio | Amount | Ratio | Amount | Ratio | |||||||||||||||||||
As of June 30, 2011 (Unaudited) |
||||||||||||||||||||||||
Total capital (to risk weighted assets) |
$ | 57,848,000 | 13.5 | % | $ | 34,375,000>= | 8.0 | % | $ | 42,969,000>= | 10.0 | % | ||||||||||||
Tier 1 capital (to risk weighted assets) |
53,889,000 | 12.5 | % | 17,187,000>= | 4.0 | % | 25,781,000>= | 6.0 | % | |||||||||||||||
Tier 1 capital (to adjusted total assets) |
53,889,000 | 9.7 | % | 22,122,000>= | 4.0 | % | 27,653,000>= | 5.0 | % | |||||||||||||||
Tangible capital (to tangible assets) |
53,889,000 | 9.7 | % | 8,296,000>= | 1.5 | % | NA | NA | ||||||||||||||||
As of September 30, 2010 (Audited) |
||||||||||||||||||||||||
Total capital (to risk weighted assets) |
$ | 56,858,000 | 11.0 | % | $ | 41,386,000>= | 8.0 | % | $ | 51,732,000>= | 10.0 | % | ||||||||||||
Tier 1 capital (to risk weighted assets) |
53,447,000 | 10.3 | % | 20,693,000>= | 4.0 | % | 31,039,000>= | 6.0 | % | |||||||||||||||
Tier 1 capital (to adjusted total assets) |
53,447,000 | 8.9 | % | 23,941,000>= | 4.0 | % | 29,927,000>= | 5.0 | % | |||||||||||||||
Tangible capital (to tangible assets) |
53,447,000 | 8.9 | % | 8,978,000>= | 1.5 | % | NA | NA |
| originating shorter-term secured consumer loans; | ||
| managing our funding needs by focusing on core deposits and reducing our reliance on brokered deposits and borrowings; | ||
| originating first mortgage loans, with a clause allowing for payment on demand after a stated period of time; | ||
| reducing non-interest expense and managing our efficiency ratio; | ||
| realigning supervision and control of our branch network by modifying their configuration, staffing, locations and reporting structure; | ||
| improved asset and collateral disposition practices; and | ||
| focusing on sound and consistent loan underwriting practices based primarily on borrowers debt ratios, credit score and collateral values. |
Change in Interest Rates in Basis | Net Portfolio Value | Net Portfolio Value as $ of | ||||||||||||||||||
Points (bp) Rate Shock in Rates (1) | Amount | Change | Change | NPV Ratio | Change | |||||||||||||||
(Dollars in thousands) | ||||||||||||||||||||
+300 bp |
$ | 43,428 | $ | (708 | ) | (2 | %) | 7.63 | % | 6 | bps | |||||||||
+200 bp |
43,908 | (228 | ) | (1 | %) | 7.65 | % | 8 | ||||||||||||
+100 bp |
44,580 | 444 | 1 | % | 7.70 | % | 13 | |||||||||||||
+50 bp |
44,485 | 349 | 1 | % | 7.65 | % | 9 | |||||||||||||
0 bp |
44,136 | | | 7.57 | % | | ||||||||||||||
-50 bp |
43,479 | (657 | ) | (1 | %) | 7.43 | % | (13 | ) | |||||||||||
-100 bp |
43,618 | (518 | ) | (1 | %) | 7.43 | % | (14 | ) |
(1) | Assumes an instantaneous uniform change in interest rates at all maturities. |
(a) | Not applicable. | ||
(b) | Not applicable. | ||
(c) | Not applicable. |
Not applicable. |
(a) | Exhibits |
31.1 | Rule 13a-14(a) Certification of the Companys Chief Executive Officer | ||
31.2 | Rule 13a-14(a) Certification of the Companys Principal Financial and Accounting Officer | ||
32.1* | Certification of Chief Executive Officer and Principal Financial and Accounting Officer pursuant to 18 U.S.C. Section 1350 (Section 906 of the Sarbanes-Oxley Act of 2002). | ||
101 | Interactive Data File |
* | This certification is not filed for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, or incorporated by reference into any filing under the Securities Act of 1933, as amended, or the Securities Exchange Act of 1934, as amended. |
CITIZENS COMMUNITY BANCORP, INC. |
||||
Date: August 15, 2011 | By: | /s/ Edward H. Schaefer | ||
Edward H. Schaefer | ||||
Chief Executive Officer | ||||
Date: August 15, 2011 | By: | /s/ Rebecca L. Johnson | ||
Rebecca L. Johnson | ||||
Principal Financial and Accounting Officer | ||||
1) | I have reviewed this quarterly report on Form 10-Q of Citizens Community Bancorp, Inc.; | |
2) | Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; | |
3) | Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; | |
4) | The registrants other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have: |
a) | Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; | ||
b) | Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; | ||
c) | Evaluated the effectiveness of the registrants disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and | ||
d) | Disclosed in this report any change in the registrants internal control over financial reporting that occurred during the registrants most recent fiscal quarter (the registrants fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrants internal control over financial reporting; and |
5) | The registrants other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrants auditors and the audit committee of the registrants board of directors (or persons performing the equivalent functions): |
a) | All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrants ability to record, process, summarize and report financial information; and | ||
b) | Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrants internal control over financial reporting. |
Date: August 15, 2011 | By: | /s/ Edward H. Schaefer | ||
Edward H. Schaefer | ||||
Chief Executive Officer |
1) | I have reviewed this quarterly report on Form 10-Q of Citizens Community Bancorp, Inc.; | |
2) | Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; | |
3) | Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; | |
4) | The registrants other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have: |
a) | Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; | ||
b) | Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; | ||
c) | Evaluated the effectiveness of the registrants disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and | ||
d) | Disclosed in this report any change in the registrants internal control over financial reporting that occurred during the registrants most recent fiscal quarter (the registrants fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrants internal control over financial reporting; and |
5) | The registrants other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrants auditors and the audit committee of the registrants board of directors (or persons performing the equivalent functions): |
a) | All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrants ability to record, process, summarize and report financial information; and | ||
b) | Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrants internal control over financial reporting. |
Date: August 15, 2011 | By: | /s/ Rebecca L. Johnson | ||
Rebecca L. Johnson | ||||
Principal Financial and Accounting Officer |
Date: August 15, 2011 | By: | /s/ Edward H. Schaefer | ||
Edward H. Schaefer | ||||
Chief Executive Officer | ||||
Date: August 15, 2011 | By: | /s/ Rebecca L. Johnson | ||
Rebecca L. Johnson Principal Financial and Accounting Officer |
||||
Consolidated Balance Sheets (Parenthetical)
|
Jun. 30, 2011
|
Sep. 30, 2010
|
---|---|---|
Stockholders' equity: | Â | Â |
Common stock, shares outstanding | 5,123,414 | 5,113,258 |
Document and Entity Information (USD $)
|
9 Months Ended | ||
---|---|---|---|
Jun. 30, 2011
|
Aug. 15, 2011
|
Mar. 31, 2011
|
|
Document and Entity Information [Abstract] | Â | Â | Â |
Entity Registrant Name | Citizens Community Bancorp Inc. | Â | Â |
Entity Central Index Key | 0001367859 | Â | Â |
Document Type | 10-Q | Â | Â |
Document Period End Date | Jun. 30, 2011 | ||
Amendment Flag | false | Â | Â |
Document Fiscal Year Focus | 2011 | Â | Â |
Document Fiscal Period Focus | Q3 | Â | Â |
Current Fiscal Year End Date | --09-30 | Â | Â |
Entity Well-known Seasoned Issuer | No | Â | Â |
Entity Voluntary Filers | No | Â | Â |
Entity Current Reporting Status | Yes | Â | Â |
Entity Filer Category | Smaller Reporting Company | Â | Â |
Entity Public Float | Â | Â | $ 19,692,261 |
Entity Common Stock, Shares Outstanding | Â | 5,123,414 | Â |
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Fair Value Accounting
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Fair Value Accounting [Abstract] | Â | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
FAIR VALUE ACCOUNTING |
NOTE 2 — FAIR VALUE ACCOUNTING
ASC 820-10 establishes a fair value hierarchy which requires an entity to maximize the use of
observable inputs and minimize the use of unobservable inputs when measuring fair value. The
statement describes three levels of inputs that may be used to measure fair value:
Level 1- Quoted prices (unadjusted) for identical assets or liabilities in active markets
that we have the ability to access as of the measurement date.
Level 2- Significant other observable inputs other than Level 1 prices such as quoted prices
for similar assets or liabilities; quoted prices in markets that are not active; or other
inputs that are observable or can be corroborated by observable market data.
Level 3- Significant unobservable inputs that reflect our own assumptions about the
assumptions that market participants would use in pricing an asset or liability.
A financial instrument’s categorization within the valuation hierarchy is based upon the
lowest level of input within the valuation hierarchy that is significant to the fair value
measurement.
The fair value of securities available for sale is determined by obtaining market price quotes
from independent third parties wherever such quotes are available (Level 1 inputs) or matrix
pricing, which is a mathematical technique widely used in the industry to value debt securities
without relying exclusively on quoted prices for the specific securities but rather by relying on
the securities’ relationship to other benchmark quoted securities (Level 2 inputs). Where such
quotes are not available, we utilize independent third party valuation analyses to support our own
estimates and judgments in determining fair value.
Assets Measured on a Recurring Basis (000’s)
Assets Measured on a Nonrecurring Basis (000’s)
Level 3 assets measured on a recurring basis are certain investments for which little or
no market activity exists or whose value of the underlying collateral is not market observable.
Management’s valuation uses both observable as well as unobservable inputs to assist in the Level 3
valuation of mortgage backed securities held by the Bank, employing a methodology that considers
future cash flows along with risk-adjusted returns. The inputs in this methodology are as follows:
ability and intent to hold to maturities, mortgage underwriting rates, market prices/conditions,
loan type, loan-to-value, strength of borrower, loan age, delinquencies, prepayment/cash flows,
liquidity, expected future cash flows, rating agency actions, and a discount rate, which is assumed
to be approximately equal to the coupon rate for each security. We had an independent valuation of
all Level 3 securities in the current quarter. Based on this valuation, we recorded pre-tax other
than temporary impairment of $620 during the nine months ended June 30, 2011.
quotes from
independent third parties wherever such quotes are available. Where such quotes are not available,
we utilize independent third party appraisals to support our own estimates and judgments in
determining fair value.
The following table presents a reconciliation of residential mortgage-backed securities held
by the Bank measured at fair value on a recurring basis using significant unobservable inputs
(Level 3) for the nine month periods ended June 30, 2011 and 2010 (000’s):
Fair Values of Financial Instruments
ASC 825-10 and ASC 270-10, Interim Disclosures about Fair Value Financial Instruments, require
disclosures about fair value financial instruments and significant assumptions used to estimate
fair value. The estimated fair values of financial instruments not previously disclosed are as
follows:
Cash and Cash Equivalents
Due to their short-term nature, the carrying amounts of cash and cash equivalents were
considered to be a reasonable estimate of fair value.
Interest Bearing Deposits
Fair value of interest bearing deposits is estimated based on their carrying amounts.
Loans Receivable
Fair value is estimated for portfolios of loans with similar financial characteristics. Loans
are segregated by type such as real estate and consumer. The fair value of loans is calculated by
discounting scheduled cash flows through the estimated maturity date using market discount rates
reflecting the credit and interest rate risk inherent in the loan. The estimate of maturity is
based on the Bank’s repayment schedules for each loan classification.
Federal Home Loan Bank (FHLB) Stock
Federal Home Loan Bank Stock is carried at cost, which is its redeemable fair value since the
market for the stock is restricted (See Note 8 to the Company’s consolidated financial statements
included in the Company’s Form 10-K/A filed with the Securities and Exchange Commission on January
11, 2011 for additional information).
Accrued Interest Receivable and Payable
Due to their short-term nature, the carrying amounts of accrued interest receivable and
payable, respectively, were considered to be a reasonable estimate of fair value.
Deposits
The fair value of deposits with no stated maturity, such as demand deposits, savings accounts,
and money market accounts, is the amount payable on demand at the reporting date. The fair value of
certificate
accounts is calculated by using discounted cash flows applying interest rates currently being
offered on similar certificates.
Federal Home Loan Bank Advances
The fair value of long-term borrowed funds is estimated using discounted cash flows based on
the Bank’s current incremental borrowing rates for similar borrowing arrangements. The carrying
value of short-term borrowing approximates its fair value.
Off-Balance-Sheet Instruments
The fair value of off-balance sheet commitments would be estimated using the fees currently
charged to enter into similar agreements, taking into account the remaining terms of the
agreements, the current interest rates, and the present creditworthiness of the customers. Since
this amount is immaterial to the Company, no amounts for fair value are presented.
The carrying amount and estimated fair value of financial instruments were as follows (000’s):
|
Loans, Allowance For Loan Losses and Impaired Loans
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Loans, Allowance For Loan Losses and Impaired Loans [Abstract] | Â | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
LOANS, ALLOWANCE FOR LOAN LOSSES AND IMPAIRED LOANS |
NOTE 3 —LOANS, ALLOWANCE FOR LOAN LOSSES AND IMPAIRED LOANS
The ALL represents management’s estimate of probable and inherent credit losses in the Bank’s
loan portfolio. Estimating the amount of the ALL requires the exercise of significant judgment and
the use of estimates related to the amount and timing of expected future cash flows on impaired
loans, estimated losses on pools of homogeneous loans based on historical loss experience, and
consideration of other qualitative factors such as current economic trends and conditions, all of
which may be susceptible to significant change. The loan portfolio also represents the largest
asset on our consolidated balance sheet. Loan losses are charged off against the ALL, while
recoveries of amounts previously charged off are credited to the ALL. A provision for loan losses
is charged to operations based on management’s periodic evaluation of the aforementioned specific
factors as well as any other pertinent factors.
The ALL consists of a specific component on impaired loans and a general component for
non-impaired loans. The components of the ALL represent estimations pursuant to either ASC 450-10,
Accounting for Contingencies, or ASC 310-10, Accounting by Creditors for Impairment of a Loan. The
specific component of the ALL reflects estimated losses from analyses developed through review of
individual loans deemed impaired. These analyses involve a high degree of judgment in estimating
the amount of potential loss associated with
specific loans, including estimating the amount and timing of future cash flows and collateral
values. The general
component of the ALL is based on the Company’s historical loss experience which
is updated quarterly. The general component of the ALL also includes consideration for
concentrations, changes in portfolio mix and volume, changes in underwriting standards and other
qualitative factors.
There are many factors affecting the ALL; some are quantitative, while others require
qualitative judgment. The process for determining the ALL (which management believes adequately
considers potential factors which result in probable credit losses), includes subjective elements
and, therefore, may be susceptible to significant change. To the extent actual outcomes differ from
management estimates, additional provision for loan losses could be required that could adversely
affect our earnings or financial position in future periods. Allocations of the ALL may be made for
specific loans but the entire ALL is available for any loan that, in management’s judgment, should
be charged-off or for which an actual loss is realized.
Changes in the ALL for the periods presented below were as follows (dollar amounts in
thousands):
The Bank has originated substantially all loans currently recorded on its balance sheet.
The Bank has not acquired any loans since 2005.
As
an integral part of their examination process, various regulatory
agencies review the Bank’s ALL.
Such agencies may require that changes in the ALL be recognized when such regulators’ credit
evaluations differ from those of management based on information available to the regulators at the
time of their examinations.
Loans receivable as of the end of the
periods shown below are as follows (dollar amounts in thousands):
Impaired loans with a valuation allowance based upon the fair value of the underlying
collateral had a carrying amount of $2,938 at June 30, 2011 compared to $2,581 at September 30,
2010. The valuation allowance on impaired loans was $696 at June 30, 2011, compared to $733 at
September 30, 2010.
An aging analysis of the Bank’s real estate and consumer loans as of June 30, 2011 and
September 30, 2010 is as follows (dollar amounts in thousands):
A summary of the Bank’s impaired loans as of June 30, 2011 and September 30, 2010 is as
follows (dollar amounts in thousands):
Troubled Debt Restructuring — A troubled debt restructuring (“TDR”) includes a loan
modification where a borrower is experiencing financial difficulty and we grant a concession to
that borrower that we would not otherwise consider except for the borrower’s financial
difficulties. A TDR may be either accrual or nonaccrual status based upon the performance of the borrower
and management’s assessment of collectability. If a TDR is placed on nonaccrual status, it remains
there until a sufficient period of performance under the restructured terms has occurred at which
time it is returned to accrual status. A summary of loans modified in a troubled debt restructuring
as of June 30, 2011 and during the nine months then ended is as follows:
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Investment Securities
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Jun. 30, 2011
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Investment Securities [Abstract] | Â | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
INVESTMENT SECURITIES |
NOTE 4 — INVESTMENT SECURITIES
All of our investment securities are classified as available-for-sale and, as such are
reported at fair value, determined by obtaining valuations from an independent source. If the fair
value of a security is not available from a dealer or third-party pricing service, or if such data
appears unreliable, we may estimate the fair value of the security using a variety of methods
including other pricing services, discounted cash flow analysis, matrix pricing and other
fundamental analyses of observable market factors. All non-agency mortgage-backed securities
valuations were based on values provided by third-parties.
The
amortized cost, estimated fair value and related unrealized gains and losses on securities
available for sale as of June 30, 2011 and September 30, 2010, respectively, are as follows (dollar
amounts in thousands):
We evaluate securities for other-than-temporary impairment at least on a quarterly basis,
and more frequently when economic or market concerns warrant such evaluation. As part of such
monitoring, the credit quality of individual securities and their issuers are assessed. Adjustments
to market value that are considered temporary are recorded as separate components of equity, net of
tax. If an impairment of a security is identified as other-than-temporary based on information
available, such as the decline in the credit worthiness of the issuer, external market ratings, or
the anticipated or realized elimination of associated dividends, such impairments are further
analyzed to determine if credit loss exists. If there is a credit loss, it will be recorded in the
Consolidated Statement of Operations. Losses other than credit will continue to be recognized in
other comprehensive income (loss). Unrealized losses reflected in the preceding tables have not
been included in results of operations because the unrealized loss was not deemed
other-than-temporary. Management has determined that it is more likely than not, that the Bank will
not be required to sell the debt securities before their anticipated recovery and therefore, there is
no other-than-temporary impairment during the three months ended June 30, 2011. The non-agency
mortgage backed securities with continuous unrealized losses for twelve months or more consist of
six specific securities.
A summary of the amount of other-than-temporary impairment related to credit losses on
available-for-sale securities that have been recognized in earnings follows:
On June 8, 2011, the Bank sold seven agency mortgage-backed securities (“MBS”) with an
aggregate book value of approximately $20,500, resulting in a net realized gain of approximately
$250. The sale was executed in order to take advantage of current favorable market prices. The Bank
intends to reinvest the proceeds in securities of similar yields and durations when market
conditions warrant such purchases.
The Bank has pledged certain of its U.S. Agency securities as collateral against a
borrowing line with the Federal Reserve Bank. However, as of June 30, 2011, there were no
borrowings outstanding on the Federal Reserve line of credit.
|
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Stock-Based Compensation
|
18 Months Ended |
---|---|
Jun. 30, 2011
|
|
Stock-Based Compensation [Abstract] | Â |
STOCK-BASED COMPENSATION |
NOTE 5 — STOCK-BASED COMPENSATION
In February 2005, our stockholders approved the Company’s Recognition and Retention Plan.
This plan provides for the grant of up to 113,910 shares of the Company’s common stock to eligible
participants. As of June 30, 2011, 80,771 restricted shares were issued and outstanding under
this plan. During the quarter ended June 30, 2011, 10,156 shares were granted to eligible
participants under this plan; and 9,338 of previously awarded shares were forfeited. Restricted
shares are awarded at no cost to the employee and have a five-year vesting period. The fair value
of the restricted shares on the date of award was $7.04 per share for 63,783 shares, $6.18 for
6,832 shares, and $5.48 for 10,156 shares. Compensation expense related to these awards was $1 and
$2 for the three and nine months ended June 30, 2011, respectively.
In February 2005, our stockholders also approved the Company’s 2004 Stock Option and Incentive
Plan. This plan provides for the grant of nonqualified and incentive stock options and stock
appreciation rights to eligible participants. The plan provides for the grant of awards for up to
284,778 shares of the Company’s common stock. At June 30, 2011, 225,416 options had been granted
under this plan to eligible participants at a weighted-average exercise price of $6.88 per share.
Options granted vest over a five-year period. Unexercised, nonqualified stock options expire
within 15 years of the grant date and unexercised incentive stock options expire within 10 years of
the grant date. Through June 30, 2011, since the plan’s inception, options for 113,915 shares of
the Company’s common stock were vested, options for 83,724 shares were forfeited and options for
4,558 shares were exercised. Of the 225,416 options granted, 137,134 remained outstanding as of
June 30, 2011.
We account for stock-based employee compensation related to our 2004 Stock Option and
Incentive Plan using the fair-value-based method. Accordingly, we record compensation
expense based on the value of the award as measured on the grant date and recognize that cost over
the vesting period for the award. Compensation expense related to these awards was $1 and $1 for
the three and nine month periods ended June 30, 2011.
In February 2008, our stockholders approved the Company’s 2008 Equity Incentive Plan. The
aggregate number of shares of common stock reserved and available for issuance under the 2008
Equity Incentive Plan is 597,605 shares. Under the Plan, the Compensation Committee may grant
stock options and stock appreciation rights that, upon exercise, result in the issuance of 426,860
shares of the Company’s common stock. The Committee may grant restricted stock and restricted
stock units for an aggregate of 170,745 shares of Company common stock under this plan. In October
2008, the Compensation Committee suspended consideration of distributions or awards under this
plan, and as of June 30, 2011, no grants or awards have been made to eligible participants under
the 2008 Equity Incentive Plan.
|
Nature of Business and Summary of Significant Accounting Policies
|
18 Months Ended |
---|---|
Jun. 30, 2011
|
|
Nature of Business and Summary of Significant Accounting Policies [Abstract] | Â |
NATURE OF BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES |
NOTE 1 — NATURE OF BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The financial statements of Citizens Community Federal (the “Bank”) included herein have been
included by its parent company, Citizens Community Bancorp, Inc. (the “Company”), pursuant to the
rules and regulations of the Securities and Exchange Commission (“SEC”). Citizens Community Bancorp
(“CCB”) was a successor to Citizens Community Federal as a result of a regulatory restructuring
into the mutual holding company form, which was effective on March 29, 2004. Originally, Citizens
Community Federal was a credit union. In December 2001, Citizens Community Federal converted to a
federal mutual savings bank. In 2004, Citizens Community Federal reorganized into the mutual
holding company form of organization. In 2006, Citizens Community Bancorp completed its second-step
mutual to stock conversion.
The consolidated income (loss) of the Company is principally derived from the Bank’s income
(loss). The Bank originates residential and consumer loans and accepts deposits from customers,
primarily in Wisconsin, Minnesota and Michigan. The Bank operates 26 full-service offices
consisting of 7 stand-alone locations and 19 in-store branch locations.
The Bank is subject to competition from other financial institutions and non-financial
institutions providing financial products. Additionally, the Bank is subject to the regulations of
certain regulatory agencies and undergoes periodic examination by those regulatory agencies.
In preparing these financial statements, we evaluated the events and transactions that
occurred through
August 15, 2011, the date on which the financial statements were available to be issued.
The accompanying interim financial statements are unaudited. However, in the opinion of
management, all adjustments (consisting of normal recurring accruals) considered necessary for a
fair presentation have been included.
Principles of Consolidation — The accompanying consolidated financial statements include the
accounts of the Company and its wholly owned subsidiary, Citizens Community Federal. All
significant inter-company accounts and transactions have been eliminated.
Use of Estimates — Preparation of financial statements in conformity with accounting
principles generally accepted in the United States of America (U.S. GAAP) requires management to
make estimates and assumptions that affect the amounts reported in the consolidated financial
statements and accompanying disclosures. These estimates are based on management’s knowledge of
current events and actions the Company may undertake in the future. Estimates are used in
accounting for, among other items, fair value of financial instruments, the allowance for loan
losses, valuation of acquired intangible assets, useful lives for depreciation and amortization,
future cash flows associated with impairment testing for goodwill, indefinite-lived intangible
assets and long-lived assets, deferred tax assets, uncertain income tax positions and
contingencies. Actual results may ultimately differ from estimates, although management does not
generally believe such differences would materially affect the consolidated financial statements in
any individual reporting period.
Securities — Securities are classified as available-for-sale when they might be sold before
maturity. Although we generally intend to hold most of the securities in our investment portfolio
until maturity, we may, from time to time, sell any of our investment securities as part of our
overall management of our investment portfolio. As such, we classify all investment securities as
available-for-sale. Securities available-for-sale are carried at fair value, with unrealized
holding gains and losses and losses deemed other-than-temporarily impaired
due to non-credit issues being reported in other comprehensive income, net of tax. Unrealized
losses deemed other-than-temporarily impaired due to credit issues are reported in current period
operations.
Interest income includes amortization of purchase premium or accretion of purchase discount.
Amortization of premiums and accretion of discounts are recognized in interest income using the
interest method over the estimated lives of the securities.
Declines in the fair value of securities below their cost that are other than temporary due to
credit issues are reflected as “Net impairment losses recognized
in earnings” in the accompanying Consolidated Statement of
Operations. In estimating other-than-temporary impairment, management considers: (1) the length of
time and extent that fair value has been less than cost, (2) the financial condition and near-term
prospects of the issuer, and (3) the Bank’s ability and intent to hold the security for a period
sufficient to allow for any anticipated recovery in fair value. The difference between the present
values of the cash flows expected to be collected and the amortized cost basis is the credit loss.
The credit loss is the portion of the other-than-temporary impairment that is recognized in
earnings and is a reduction to the cost basis of the security. The portion of other-than-temporary
impairment related to all other factors is included in other comprehensive income (loss), net of
the related tax effect.
Loans — Loans that management has the intent and ability to hold for the foreseeable future
or until maturity or payoff are reported at the principal balance outstanding, net of unearned
interest, deferred loan fees and costs and an allowance for loan losses. Interest income is accrued
on the unpaid principal balance. Loan origination fees, net of certain direct origination costs,
are deferred and recognized in interest income using the level-yield method without anticipating
prepayments.
Interest income on mortgage and consumer loans is discontinued at the time the loan is over 91
days delinquent. Past due status is based on the contractual terms of the loan. Loans are placed on
nonaccrual or charged off at an earlier date if collection of principal or interest is considered
unlikely. All interest accrued but not received for a loan placed on non-accrual is reversed
against interest income. Interest received on such loans is accounted for on the cash basis or cost
recovery method until qualifying for return to accrual status. Loans are returned to accrual status
when payments are made that bring the loan account due date to less than 92 days delinquent.
Interest on impaired loans considered troubled debt restructurings that are not more than 91 days
delinquent is recognized as income as it accrues based on the revised terms of the loan.
Real estate loans and open ended consumer loans are charged off to estimated net realizable
value less estimated selling costs at the earlier of when (a) the loan is deemed by management to
be uncollectible, or (b) the loan becomes greater than 180 days past due. Closed end consumer loans
are charged off to net realizable value at the earlier of when (a) the loan is deemed by management
to be uncollectible, or (b) the loan becomes greater than 120 days past due.
Allowance for Loan Losses — The allowance for loan losses is a valuation allowance for
probable and inherent credit losses in the Bank’s loan portfolio. Loan losses are charged against the allowance for loan loss
(“ALL”) when management believes that the collectability of a loan balance is unlikely. Subsequent
recoveries, if any, are credited to the ALL. Management estimates the allowance balance required
using past loan loss experience; the nature, volume and composition of the loan portfolio; known
and inherent risks in the portfolio; information about specific borrowers’ ability to repay and
estimated collateral values; current economic conditions; and other relevant factors. The ALL
consists of specific and general components. The specific component relates to loans that are
individually classified as impaired. The general component covers non-impaired loans and is based
on historical loss experience adjusted for certain qualitative factors. The entire ALL balance is
available for any loan that, in management’s judgment, should be charged off.
A loan is impaired when full payment under the loan terms is not expected. Troubled debt
restructurings are individually evaluated to determine the need for a specific allowance. If a
specific allowance is warranted, a specific allowance is established so that the loan is reported,
net, at the present value of estimated future cash flows using the loan’s existing rate or at the
fair value of collateral if repayment is expected solely from the underlying collateral of the
loan. Large groups of smaller balance homogeneous loans, such as non-classified
consumer and residential real estate loans are collectively evaluated for impairment, and
accordingly, are not separately identified for impairment disclosures.
The Bank manages its loan portfolio in two segments; real estate loans and consumer loans.
Real estate loans are secured by single family or 1-4 family real estate, and include first and
second mortgage loans along with home equity lines of credit. Consumer loans consist mainly of
loans secured by personal property as collateral. Approximately 80% of the Bank’s consumer loan
portfolio consists of indirect paper loans. Indirect paper loans are secured consumer loans
originated by the Bank where the borrowers are identified through the Bank’s relationships with
various consumer product dealer networks mainly within the Bank’s market area. These loans are
approved based on the Bank’s current underwriting standards. Management believes that bifurcation
of the Bank’s loan portfolio into these two segments for credit quality, impairment and ALL
disclosures provides the most meaningful presentation, consistent with how each portfolio is
managed.
Income Taxes — The Company accounts for income taxes in accordance with ASC Topic 740,
“Income Taxes”. Under this guidance, deferred taxes are recognized for the future tax consequences
attributable to differences between the financial statement carrying amounts of existing assets and
liabilities and their respective tax bases. Deferred tax assets and liabilities are measured using
enacted tax rates that will apply to taxable income in the years in which those temporary
differences are expected to be recovered or settled. The effect on deferred tax assets and
liabilities of a change in tax rates is recognized as income or expense in the period that includes
the enactment date. See Note 14 to the Company’s consolidated financial statements included in the
Company’s Form 10-K/A filed with the Securities and Exchange Commission on January 11, 2011 for
details on the Company’s income taxes.
The Company includes in Other
Assets the tax effect of differences in recorded bases of assets and liabilities for financial reporting
and tax reporting purposes. At each measurement date, to the extent this tax effect represents a net benefit,
the Company assesses the ability to realize that net benefit based on existing tax carryback opportunities,
projected future taxable income, arid intended income tax strategies.
As of June 30, 2011 and September 30, 2010, the Company believes it is more likely than not that the aggregate amount of these considerations will be
sufficient to enable the Company to realize those benefits. Accordingly, the Company has not recorded any
valuation allowance related to this net benefit at either date.
Earnings (Loss) Per Share — Basic earnings (loss) per common share is calculated as net
income or loss divided by the weighted average number of common shares outstanding during the
period. Diluted earnings per common share include the dilutive effect of additional potential
common shares issuable during the period, consisting of stock options outstanding under the
Company’s stock incentive plan.
Reclassifications — Certain items previously reported were reclassified for consistency with
the current presentation.
Adoption of New Accounting Standards — In June 2011, the Financial Accounting Standards Board
(“FASB”) issued Accounting Standard Update (“ASU”) No. 2011-05, Comprehensive Income (Topic 220):
Presentation of Comprehensive Income. This ASU allows an entity the option to present the total of
comprehensive income, the component of net income, and the components of other comprehensive
income either in a single continuous statement of comprehensive income or in two separate but
consecutive statements. An entity is required to present each component of net income along with
total net income, each component of other comprehensive income, and a total amount for
comprehensive income. ASU 2011-05 eliminates the option to present the components of other
comprehensive income as part of the statement of changes in stockholders’ equity. The amendments to
the Codification in the ASU do not change the items that must be reported in other comprehensive
income or when an item of other comprehensive income must be reclassified to net income. The
guidance in the ASU is effective for fiscal years, and interim periods within those years,
beginning after The fair value of foreclosed assets is determined by obtaining market price
December 15, 2011. The provisions of this guidance are not expected to have a significant
impact on the Company’s consolidated financial condition, results of operation or liquidity.
In June 2011, the FASB issued ASU No. 2011-04, Fair Value Measurement (Topic 820): Amendments
to Achieve Common Fair Value Measurement and Disclosure Requirements in U.S. GAAP and IFRSs. The
amendments in this ASU are intended to result in common fair value measurement and disclosure
requirements in U.S. GAAP and IFRSs. Consequently, the amendments change the wording used to
describe many of the requirements in U.S. GAAP for measuring fair value and for disclosing
information about fair value measurements. The guidance in the ASU is effective for the first
interim or annual period beginning after December 15, 2011. The provisions of this guidance are not
expected to have a significant impact on the Company’s consolidated financial condition, results of
operation or liquidity.
In May 2011, the FASB issued ASU No. 2011-03, Transfers and Servicing (Topic 860):
Reconsideration of Effective control for Repurchase Agreements. This ASU is intended to improve
financial reporting of repurchase agreements (“repos”) and other agreements that both entitle and
obligate a transferor to repurchase or redeem financial assets before their maturity. The
amendments to the Codification in this ASU are intended to improve the accounting for these
transactions by removing from the assessment of effective control the criterion requiring the
transferor to have the ability to repurchase or redeem the financial assets. The guidance in the
ASU is effective for the first interim or annual period beginning on or after December 15, 2011.
The provisions of this guidance are not expected to have a significant impact on the Company’s
consolidated financial condition, results of operation or liquidity.
In April 2011, the FASB issued ASU No. 2011-02 Receivables (“Topic 310”): A Creditor’s
Determination of Whether a Restructuring is a Troubled Debt Restructuring. This ASU is intended to
improve financial reporting by creating greater consistency in how GAAP is applied for various
types of debt restructurings. It is intended to assist creditors in determining whether a
modification of terms of a receivable meets the criteria to be considered a troubled debt
restructuring, both for purposes of recording an impairment loss and for disclosure of troubled
debt restructurings. The new guidance is effective for interim and annual periods beginning on or
after June 15, 2011, and applies retrospectively to restructurings occurring on or after the
beginning of the fiscal year of adoption. The provisions of this guidance are not expected to have
a significant impact on our consolidated financial condition, results of operations or liquidity.
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