FIRST FINANCIAL NORTHWEST, INC. |
(Exact name of registrant as specified in its charter) |
Washington | 26-0610707 | |
(State or other jurisdiction of incorporation or organization | (I.R.S. Employer Identification Number) | |
201 Wells Avenue South, Renton, Washington | 98057 | |
(Address of principal executive offices) | (Zip Code) | |
Registrant’s telephone number, including area code: | (425) 255-4400 |
PART 1 - FINANCIAL INFORMATION | |
Item 1 - Financial Statements | 3 |
Item 2 - Management’s Discussion and Analysis of Financial Condition
and Results of Operations
|
31 |
Item 3 - Quantitative and Qualitative Disclosures About Market Risk | 49 |
Item 4 - Controls and Procedures | 51 |
PART II - OTHER INFORMATION | |
Item 1 - Legal Proceedings | 53 |
Item 1A - Risk Factors | 53 |
Item 2 - Unregistered Sales of Equity Securities and Use of Proceeds | 53 |
Item 3 - Defaults upon Senior Securities | 53 |
Item 4 - [Removed and Reserved] | 53 |
Item 5 - Other Information | 53 |
Item 6 - Exhibits | 53 |
SIGNATURES | 55 |
Consolidated Balance Sheets
|
||||||||
(Dollars in thousands, except share data)
|
||||||||
(Unaudited)
|
||||||||
June 30,
|
December 31,
|
|||||||
Assets
|
2011
|
2010
|
||||||
Cash on hand and in banks
|
$ | 4,364 | $ | 7,466 | ||||
Interest-bearing deposits
|
184,448 | 90,961 | ||||||
Investments available for sale
|
141,832 | 164,603 | ||||||
Loans receivable, net of allowance of $16,989 and $22,534
|
752,634 | 856,456 | ||||||
Premises and equipment, net
|
19,328 | 19,829 | ||||||
Federal Home Loan Bank stock, at cost
|
7,413 | 7,413 | ||||||
Accrued interest receivable
|
4,132 | 4,686 | ||||||
Federal income tax receivable
|
6,346 | 5,916 | ||||||
Other real estate owned ("OREO")
|
25,979 | 30,102 | ||||||
Prepaid expenses and other assets
|
5,044 | 6,226 | ||||||
Total assets
|
$ | 1,151,520 | $ | 1,193,658 | ||||
Liabilities and Stockholders' Equity
|
||||||||
Interest-bearing deposits
|
$ | 868,270 | $ | 911,526 | ||||
Noninterest-bearing deposits
|
5,427 | 8,700 | ||||||
Advances from the Federal Home Loan Bank
|
93,066 | 93,066 | ||||||
Advance payments from borrowers for taxes and insurance
|
1,948 | 2,256 | ||||||
Accrued interest payable
|
217 | 214 | ||||||
Other liabilities
|
3,339 | 3,418 | ||||||
Total liabilities
|
972,267 | 1,019,180 | ||||||
Commitments and contingencies
|
||||||||
Stockholders' Equity
|
||||||||
Preferred stock, $0.01 par value; authorized 10,000,000
|
||||||||
shares, no shares issued or outstanding
|
$ | - | $ | - | ||||
Common stock, $0.01 par value; authorized 90,000,000
|
||||||||
shares; issued and outstanding 18,805,168 shares at
|
||||||||
June 30, 2011 and December 31, 2010
|
188 | 188 | ||||||
Additional paid-in capital
|
188,064 | 187,371 | ||||||
Retained earnings (accumulated deficit), substantially restricted
|
2,387 | (305 | ) | |||||
Accumulated other comprehensive income, net of tax
|
1,310 | 484 | ||||||
Unearned Employee Stock Ownership Plan ("ESOP") shares
|
(12,696 | ) | (13,260 | ) | ||||
Total stockholders' equity
|
179,253 | 174,478 | ||||||
Total liabilities and stockholders' equity
|
$ | 1,151,520 | $ | 1,193,658 |
FIRST FINANCIAL NORTHWEST, INC. AND SUBSIDIARIES
|
||||||||||||||||
Consolidated Income Statements
|
||||||||||||||||
(Dollars in thousands, except share data)
|
||||||||||||||||
(Unaudited)
|
||||||||||||||||
Three Months Ended
|
Six Months Ended
|
|||||||||||||||
June 30,
|
June 30,
|
|||||||||||||||
2011
|
2010
|
2011
|
2010
|
|||||||||||||
Interest income
|
||||||||||||||||
Loans, including fees
|
$ | 11,891 | $ | 14,245 | $ | 24,319 | $ | 28,839 | ||||||||
Investments available for sale
|
1,262 | 1,106 | 2,467 | 2,113 | ||||||||||||
Interest-bearing deposits with banks
|
94 | 73 | 170 | 134 | ||||||||||||
Total interest income
|
$ | 13,247 | $ | 15,424 | $ | 26,956 | $ | 31,086 | ||||||||
Interest expense
|
||||||||||||||||
Deposits
|
4,220 | 6,322 | 8,733 | 12,893 | ||||||||||||
Federal Home Loan Bank advances
|
583 | 1,035 | 1,159 | 2,058 | ||||||||||||
Total interest expense
|
$ | 4,803 | $ | 7,357 | $ | 9,892 | $ | 14,951 | ||||||||
Net interest income
|
8,444 | 8,067 | 17,064 | 16,135 | ||||||||||||
Provision for loan losses
|
1,600 | 26,000 | 2,800 | 39,000 | ||||||||||||
Net interest income (loss) after
|
||||||||||||||||
provision for loan losses
|
$ | 6,844 | $ | (17,933 | ) | $ | 14,264 | $ | (22,865 | ) | ||||||
Noninterest income
|
||||||||||||||||
Net gain on sale of investments
|
751 | - | 1,262 | - | ||||||||||||
Other | 75 | 62 | 160 | 108 | ||||||||||||
Total noninterest income
|
$ | 826 | $ | 62 | $ | 1,422 | $ | 108 | ||||||||
Noninterest expense
|
||||||||||||||||
Compensation and employee benefits
|
3,214 | 2,892 | 6,503 | 6,081 | ||||||||||||
Occupancy and equipment
|
395 | 424 | 797 | 849 | ||||||||||||
Professional fees
|
502 | 487 | 982 | 946 | ||||||||||||
Data processing
|
183 | 172 | 392 | 342 | ||||||||||||
(Gain) loss on sale of OREO property, net
|
(508 | ) | (14 | ) | (1,134 | ) | 423 | |||||||||
OREO market value adjustments
|
289 | 897 | 917 | 3,168 | ||||||||||||
OREO related expenses, net
|
986 | 708 | 1,836 | 1,410 | ||||||||||||
FDIC/OTS assessments
|
612 | 515 | 1,322 | 1,095 | ||||||||||||
Insurance and bond premiums
|
248 | 150 | 495 | 299 | ||||||||||||
Marketing
|
50 | 78 | 111 | 121 | ||||||||||||
Other general and administrative
|
441 | 701 | 773 | 1,143 | ||||||||||||
Total noninterest expense
|
$ | 6,412 | $ | 7,010 | $ | 12,994 | $ | 15,877 | ||||||||
Income (loss) before provision
|
||||||||||||||||
for federal income taxes
|
1,258 | (24,881 | ) | 2,692 | (38,634 | ) | ||||||||||
Provision for federal income taxes
|
- | - | - | 3,999 | ||||||||||||
Net income (loss)
|
$ | 1,258 | $ | (24,881 | ) | $ | 2,692 | $ | (42,633 | ) | ||||||
Basic income (loss) per share
|
$ | 0.07 | $ | (1.43 | ) | $ | 0.15 | $ | (2.45 | ) | ||||||
Diluted income (loss) per share
|
$ | 0.07 | $ | (1.43 | ) | $ | 0.15 | $ | (2.45 | ) | ||||||
See accompanying notes to consolidated financial statements.
|
FIRST FINANCIAL NORTHWEST, INC. AND SUBSIDIARIES
|
||||||||||||||||||||||||||||
Consolidated Statements of Stockholders' Equity and Comprehensive Income
|
||||||||||||||||||||||||||||
(Dollars in thousands, except share data)
|
||||||||||||||||||||||||||||
(Unaudited)
|
||||||||||||||||||||||||||||
Retained
Earnings
(Accumulated
Deficit)
|
Accumulated
Other
Comprehensive
Income (Loss),
net of tax
|
|||||||||||||||||||||||||||
Shares
|
Common
Stock
|
Additional
Paid-in
Capital
|
Unearned
ESOP
Shares
|
Total
Stockholders'
Equity
|
||||||||||||||||||||||||
Balances at December 31, 2010
|
18,805,168 | $ | 188 | $ | 187,371 | $ | (305 | ) | $ | 484 | $ | (13,260 | ) | $ | 174,478 | |||||||||||||
Comprehensive income:
|
||||||||||||||||||||||||||||
Net income
|
- | - | - | 2,692 | - | - | 2,692 | |||||||||||||||||||||
Change in fair value of
|
||||||||||||||||||||||||||||
investments available for sale
|
- | - | - | - | 826 | - | 826 | |||||||||||||||||||||
Total comprehensive income
|
3,518 | |||||||||||||||||||||||||||
Compensation related to stock
|
||||||||||||||||||||||||||||
options and restricted stock
awards
|
- | - | 950 | - | - | - | 950 | |||||||||||||||||||||
Allocation of 56,426 ESOP shares
|
- | - | (257 | ) | - | - | 564 | 307 | ||||||||||||||||||||
Balances at June 30, 2011
|
18,805,168 | $ | 188 | $ | 188,064 | $ | 2,387 | $ | 1,310 | $ | (12,696 | ) | $ | 179,253 | ||||||||||||||
See accompanying notes to consolidated financial statements.
|
FIRST FINANCIAL NORTHWEST, INC. AND SUBSIDIARIES
|
||||||||
Consolidated Statements of Cash Flows
|
||||||||
(In thousands)
|
||||||||
(Unaudited)
|
||||||||
Six Months Ended June 30,
|
||||||||
2011
|
2010
|
|||||||
Cash flows from operating activities:
|
||||||||
Net income (loss)
|
$ | 2,692 | $ | (42,633 | ) | |||
Adjustments to reconcile net income (loss) to net cash provided by
|
||||||||
operating activities:
|
||||||||
Provision for loan losses
|
2,800 | 39,000 | ||||||
OREO market value adjustments
|
917 | 3,168 | ||||||
Loss (gain) on sale of OREO property, net
|
(1,134 | ) | 423 | |||||
Depreciation of premises and equipment
|
532 | 542 | ||||||
Net amortization of premiums and discounts on investments
|
1,275 | 623 | ||||||
ESOP expense
|
307 | 342 | ||||||
Compensation expense related to stock options and restricted stock awards
|
950 | 978 | ||||||
Net realized gain on investments available for sale
|
(1,262 | ) | - | |||||
Deferred federal income taxes
|
430 | 11,538 | ||||||
Changes in operating assets and liabilities:
|
||||||||
Prepaid expenses and other assets
|
1,182 | 980 | ||||||
Accrued interest receivable
|
554 | 67 | ||||||
Accrued interest payable
|
3 | (63 | ) | |||||
Other liabilities
|
(79 | ) | 372 | |||||
Federal income taxes, net
|
(430 | ) | 4,120 | |||||
Net cash provided by operating activities
|
$ | 8,737 | $ | 19,457 | ||||
Cash flows from investing activities:
|
||||||||
Proceeds from sales of investments
|
31,035 | - | ||||||
Capitalized improvements in OREO
|
(90 | ) | (286 | ) | ||||
Proceeds from sales of OREO properties
|
20,380 | 9,703 | ||||||
Principal repayments on investments
|
17,570 | 14,618 | ||||||
Purchases of investments
|
(25,451 | ) | (58,540 | ) | ||||
Net decrease in loans receivable
|
85,072 | 10,924 | ||||||
Purchases of premises and equipment
|
(31 | ) | (1,229 | ) | ||||
Net cash provided (used) by investing activities
|
$ | 128,485 | $ | (24,810 | ) | |||
Balance, carried forward
|
$ | 137,222 | $ | (5,353 | ) |
Consolidated Statements of Cash Flows
|
||||||||
(In thousands)
|
||||||||
(Unaudited)
|
||||||||
Six Months Ended June 30,
|
||||||||
2011
|
2010
|
|||||||
Balance, brought forward
|
$ | 137,222 | $ | (5,353 | ) | |||
Cash flows from financing activities:
|
||||||||
Net increase (decrease) in deposits
|
(46,529 | ) | 32,676 | |||||
Advances from the Federal Home Loan Bank
|
- | 50,000 | ||||||
Repayments of advances from the Federal Home Loan Bank
|
- | (50,000 | ) | |||||
Net increase (decrease) in advance payments from borrowers for taxes and insurance
|
(308 | ) | 45 | |||||
Repurchase and retirement of common stock
|
- | (106 | ) | |||||
Dividends paid
|
- | (1,421 | ) | |||||
Net cash provided (used) by financing activities
|
$ | (46,837 | ) | $ | 31,194 | |||
Net increase in cash
|
90,385 | 25,841 | ||||||
Cash and cash equivalents:
|
||||||||
Beginning of period
|
98,427 | 104,970 | ||||||
End of period
|
$ | 188,812 | $ | 130,811 | ||||
Supplemental disclosures of cash flow information:
|
||||||||
Cash paid during the period for:
|
||||||||
Interest
|
$ | 9,889 | $ | 15,014 | ||||
Noncash transactions:
|
||||||||
Loans, net of deferred loan fees and allowance for loan losses transferred to OREO
|
$ | 15,950 | $ | 17,666 | ||||
See accompanying notes to consolidated financial statements.
|
·
|
Maintain and preserve qualified management;
|
·
|
Increase the Board of Directors’ participation in the Bank’s affairs;
|
·
|
Obtain an independent study of management and the personnel structure of the Bank;
|
·
|
Maintain specified Capital levels;
|
·
|
Eliminate loans classified as “Loss” at its regulatory examination, and reduce the loans classified as “Doubtful” and “Substandard” as a percent of capital;
|
·
|
Revise its policy with respect to the allowance for loan losses;
|
·
|
Not extend additional credit to borrowers whose loan had been classified as “Loss” and is uncollected;
|
·
|
Revise its lending and collection policies and practices;
|
·
|
Develop a plan to reduce the amount of commercial real estate loans;
|
·
|
Enhance its written funds management and liquidity policy;
|
·
|
Develop a three-year strategic plan;
|
·
|
Not solicit brokered deposits and comply with certain deposit rate restrictions;
|
·
|
Eliminate and correct all violations of laws; and
|
·
|
Prepare and submit progress reports to the FDIC and DFI.
|
June 30, 2011
|
||||||||||||||||
Gross
|
Gross
|
|||||||||||||||
Amortized
|
Unrealized
|
Unrealized
|
||||||||||||||
Cost
|
Gains
|
Losses
|
Fair Value
|
|||||||||||||
(In thousands)
|
||||||||||||||||
Mortgage-backed investments:
|
||||||||||||||||
Fannie Mae
|
$ | 92,125 | $ | 1,246 | $ | (10 | ) | $ | 93,361 | |||||||
Freddie Mac
|
35,147 | 681 | (23 | ) | 35,805 | |||||||||||
Ginnie Mae
|
8,365 | 7 | (51 | ) | 8,321 | |||||||||||
Municipal bonds
|
2,393 | 7 | (376 | ) | 2,024 | |||||||||||
U.S. Government agencies
|
2,133 | 188 | - | 2,321 | ||||||||||||
$ | 140,163 | $ | 2,129 | $ | (460 | ) | $ | 141,832 | ||||||||
December 31, 2010
|
||||||||||||||||
Gross
|
Gross
|
|||||||||||||||
Amortized
|
Unrealized
|
Unrealized
|
||||||||||||||
Cost
|
Gains
|
Losses
|
Fair Value
|
|||||||||||||
(In thousands)
|
||||||||||||||||
Mortgage-backed investments:
|
||||||||||||||||
Fannie Mae
|
$ | 109,134 | $ | 1,291 | $ | (281 | ) | $ | 110,144 | |||||||
Freddie Mac
|
40,454 | 860 | (165 | ) | 41,149 | |||||||||||
Ginnie Mae
|
9,542 | - | (98 | ) | 9,444 | |||||||||||
Municipal bonds
|
2,395 | - | (473 | ) | 1,922 | |||||||||||
U.S. Government agencies
|
1,805 | 139 | - | 1,944 | ||||||||||||
$ | 163,330 | $ | 2,290 | $ | (1,017 | ) | $ | 164,603 |
June 30, 2011
|
||||||||||||||||||||||||
Less Than 12 Months
|
12 Months or Longer
|
Total
|
||||||||||||||||||||||
Unrealized
|
Unrealized
|
Unrealized
|
||||||||||||||||||||||
Fair Value
|
Loss
|
Fair Value
|
Loss
|
Fair Value
|
Loss
|
|||||||||||||||||||
Mortgage-backed investments:
|
(In thousands)
|
|||||||||||||||||||||||
Fannie Mae
|
$ | 4,059 | $ | (10 | ) | $ | - | $ | - | $ | 4,059 | $ | (10 | ) | ||||||||||
Freddie Mac
|
3,844 | (23 | ) | - | - | 3,844 | (23 | ) | ||||||||||||||||
Ginnie Mae
|
6,446 | (51 | ) | - | - | 6,446 | (51 | ) | ||||||||||||||||
Municipal bonds
|
- | - | 1,333 | (376 | ) | 1,333 | (376 | ) | ||||||||||||||||
$ | 14,349 | $ | (84 | ) | $ | 1,333 | $ | (376 | ) | $ | 15,682 | $ | (460 | ) | ||||||||||
December 31, 2010
|
||||||||||||||||||||||||
Less Than 12 Months
|
12 Months or Longer
|
Total
|
||||||||||||||||||||||
Unrealized
|
Unrealized
|
Unrealized
|
||||||||||||||||||||||
Fair Value
|
Loss
|
Fair Value
|
Loss
|
Fair Value
|
Loss
|
|||||||||||||||||||
Mortgage-backed investments:
|
(In thousands)
|
|||||||||||||||||||||||
Fannie Mae
|
$ | 39,801 | $ | (281 | ) | $ | - | $ | - | $ | 39,801 | $ | (281 | ) | ||||||||||
Freddie Mac
|
15,232 | (165 | ) | - | - | 15,232 | (165 | ) | ||||||||||||||||
Ginnie Mae
|
5,193 | (98 | ) | - | - | 5,193 | (98 | ) | ||||||||||||||||
Municipal bonds
|
- | - | 1,885 | (473 | ) | 1,885 | (473 | ) | ||||||||||||||||
$ | 60,226 | $ | (544 | ) | $ | 1,885 | $ | (473 | ) | $ | 62,111 | $ | (1,017 | ) |
June 30, 2011
|
||||||||
Amortized Cost
|
Fair Value
|
|||||||
(In thousands)
|
||||||||
Due within one year
|
$ | - | $ | - | ||||
Due after one year through five years
|
501 | 553 | ||||||
Due after five years through ten years
|
831 | 836 | ||||||
Due after ten years
|
3,194 | 2,956 | ||||||
4,526 | 4,345 | |||||||
Mortgage-backed investments
|
135,637 | 137,487 | ||||||
$ | 140,163 | $ | 141,832 |
June 30, 2011
|
December 31, 2010
|
|||||||||||||||||
Amount
|
Percent
|
Amount
|
Percent
|
|||||||||||||||
(Dollars in thousands)
|
||||||||||||||||||
One-to-four family residential: (1)
|
||||||||||||||||||
Permanent
|
$
|
359,846
|
46.44
|
%
|
$
|
393,334
|
44.08
|
%
|
||||||||||
Construction
|
-
|
-
|
5,356
|
0.60
|
||||||||||||||
359,846
|
46.44
|
398,690
|
44.68
|
|||||||||||||||
Multifamily:
|
||||||||||||||||||
Permanent
|
118,012
|
15.23
|
140,762
|
15.77
|
||||||||||||||
Construction
|
2,249
|
0.29
|
4,114
|
0.46
|
||||||||||||||
120,261
|
15.52
|
144,876
|
16.23
|
|||||||||||||||
Commercial real estate:
|
||||||||||||||||||
|
Permanent
|
223,630
|
28.86
|
237,708
|
26.64
|
|||||||||||||
Construction
|
17,800
|
2.30
|
28,362
|
3.18
|
||||||||||||||
Land
|
3,384
|
0.44
|
6,643
|
0.75
|
||||||||||||||
244,814
|
31.60
|
272,713
|
30.57
|
|||||||||||||||
Construction/land development:
|
||||||||||||||||||
One-to-four family residential
|
13,889
|
1.79
|
26,848
|
3.01
|
||||||||||||||
Multifamily
|
882
|
0.11
|
1,283
|
0.14
|
||||||||||||||
Commercial
|
1,104
|
0.14
|
1,108
|
0.12
|
||||||||||||||
Land development
|
18,355
|
2.37
|
27,262
|
3.06
|
||||||||||||||
34,230
|
4.41
|
56,501
|
6.33
|
|||||||||||||||
Business
|
1,819
|
0.23
|
479
|
0.05
|
||||||||||||||
Consumer
|
13,971
|
1.80
|
19,127
|
2.14
|
||||||||||||||
Total loans
|
774,941
|
100.00
|
%
|
892,386
|
100.00
|
%
|
||||||||||||
Less:
|
||||||||||||||||||
Loans in process ("LIP")
|
3,328
|
10,975
|
||||||||||||||||
Deferred loan fees, net
|
1,990
|
2,421
|
||||||||||||||||
ALLL
|
16,989
|
22,534
|
||||||||||||||||
Loans receivable, net
|
$
|
752,634
|
$
|
856,456
|
(1) Includes $158.0 million and $173.4 million of non-owner occupied loans at June 30, 2011 and December 31, 2010, respectively.
|
Three Months Ended June 30,
|
Six Months Ended June 30,
|
|||||||||||||||
2011
|
2010
|
2011
|
2010
|
|||||||||||||
(In thousands)
|
||||||||||||||||
Balance at the beginning of the period
|
$ | 20,250 | $ | 36,479 | $ | 22,534 | $ | 33,039 | ||||||||
Provision for loan losses
|
1,600 | 26,000 | 2,800 | 39,000 | ||||||||||||
Charge-offs
|
(4,976 | ) | (32,703 | ) | (8,651 | ) | (42,385 | ) | ||||||||
Recoveries
|
115 | 82 | 306 | 204 | ||||||||||||
Balance at the end of the period
|
$ | 16,989 | $ | 29,858 | $ | 16,989 | $ | 29,858 |
At or For the Three Months Ended June 30, 2011
|
||||||||||||||||||||||||||||
One-to-Four
Family
Residential
|
Multifamily
|
Commercial
Real Estate
|
Construction/
Land
Development
|
Business
|
Consumer
|
Total
|
||||||||||||||||||||||
ALLL:
|
(In thousands)
|
|||||||||||||||||||||||||||
Beginning balance
|
$ | 7,756 | $ | 1,746 | $ | 7,275 | $ | 3,067 | $ | 13 | $ | 393 | $ | 20,250 | ||||||||||||||
Charge-offs
|
(1,031 | ) | (62 | ) | (1,514 | ) | (2,256 | ) | - | (113 | ) | (4,976 | ) | |||||||||||||||
Recoveries
|
14 | - | - | 101 | - | - | 115 | |||||||||||||||||||||
Provision
|
(1,240 | ) | (700 | ) | 1,518 | 1,981 | 1 | 40 | 1,600 | |||||||||||||||||||
Ending balance
|
$ | 5,499 | $ | 984 | $ | 7,279 | $ | 2,893 | $ | 14 | $ | 320 | $ | 16,989 | ||||||||||||||
General reserve
|
$ | 5,097 | $ | 984 | $ | 7,220 | $ | 2,893 | $ | 14 | $ | 320 | $ | 16,528 | ||||||||||||||
Specific reserve
|
$ | 402 | $ | - | $ | 59 | $ | - | $ | - | $ | - | $ | 461 | ||||||||||||||
Loans (1):
|
||||||||||||||||||||||||||||
Total Loans
|
$ | 359,810 | $ | 120,023 | $ | 243,393 | $ | 32,597 | $ | 1,819 | $ | 13,971 | $ | 771,613 | ||||||||||||||
General reserve (2)
|
$ | 293,165 | $ | 116,865 | $ | 225,094 | $ | 16,918 | $ | 1,819 | $ | 13,856 | $ | 667,717 | ||||||||||||||
Specific reserve (3)
|
$ | 66,645 | $ | 3,158 | $ | 18,299 | $ | 15,679 | $ | - | $ | 115 | $ | 103,896 | ||||||||||||||
__________ | ||||||||||||||||||||||||||||
(1) Net of undisbursed funds
|
||||||||||||||||||||||||||||
(2) Loans collectively evaluated for impairment
|
||||||||||||||||||||||||||||
(3) Loans individually evaluated for impairment
|
At or For the Six Months Ended June 30, 2011
|
||||||||||||||||||||||||||||
One-to-Four
Family
Residential
|
Multifamily
|
Commercial
Real Estate
|
Construction/
Land
Development
|
Business
|
Consumer
|
Total
|
||||||||||||||||||||||
ALLL:
|
(In thousands)
|
|||||||||||||||||||||||||||
Beginning balance
|
$ | 8,302 | $ | 1,893 | $ | 6,742 | $ | 5,151 | $ | 7 | $ | 439 | $ | 22,534 | ||||||||||||||
Charge-offs
|
(1,616 | ) | (88 | ) | (3,594 | ) | (3,182 | ) | - | (171 | ) | (8,651 | ) | |||||||||||||||
Recoveries
|
19 | - | - | 286 | - | 1 | 306 | |||||||||||||||||||||
Provision
|
(1,206 | ) | (821 | ) | 4,131 | 638 | 7 | 51 | 2,800 | |||||||||||||||||||
Ending balance
|
$ | 5,499 | $ | 984 | $ | 7,279 | $ | 2,893 | $ | 14 | $ | 320 | $ | 16,989 | ||||||||||||||
General reserve
|
$ | 5,097 | $ | 984 | $ | 7,220 | $ | 2,893 | $ | 14 | $ | 320 | $ | 16,528 | ||||||||||||||
Specific reserve
|
$ | 402 | $ | - | $ | 59 | $ | - | $ | - | $ | - | $ | 461 | ||||||||||||||
Loans (1):
|
||||||||||||||||||||||||||||
Total Loans
|
$ | 359,810 | $ | 120,023 | $ | 243,393 | $ | 32,597 | $ | 1,819 | $ | 13,971 | $ | 771,613 | ||||||||||||||
General reserve (2)
|
$ | 293,165 | $ | 116,865 | $ | 225,094 | $ | 16,918 | $ | 1,819 | $ | 13,856 | $ | 667,717 | ||||||||||||||
Specific reserve (3)
|
$ | 66,645 | $ | 3,158 | $ | 18,299 | $ | 15,679 | $ | - | $ | 115 | $ | 103,896 | ||||||||||||||
_____________ | ||||||||||||||||||||||||||||
(1) Net of undisbursed funds.
|
||||||||||||||||||||||||||||
(2) Loans collectively evaluated for impairment
|
||||||||||||||||||||||||||||
(3) Loans individually evaluated for impairment
|
At or For the Year Ended December 31, 2010
|
||||||||||||||||||||||||||||
One-to-Four
Family
Residential
|
Multifamily
|
Commercial
Real Estate
|
Construction/
Land
Development
|
Business
|
Consumer
|
Total
|
||||||||||||||||||||||
ALLL:
|
(In thousands)
|
|||||||||||||||||||||||||||
Beginning balance
|
$ | 11,130 | $ | 1,896 | $ | 6,422 | $ | 13,255 | $ | 6 | $ | 330 | $ | 33,039 | ||||||||||||||
Charge-offs
|
(24,594 | ) | - | (8,012 | ) | (32,080 | ) | - | (790 | ) | (65,476 | ) | ||||||||||||||||
Recoveries
|
176 | - | 823 | 778 | - | 94 | 1,871 | |||||||||||||||||||||
Provision
|
21,590 | (3 | ) | 7,509 | 23,198 | 1 | 805 | 53,100 | ||||||||||||||||||||
Ending balance
|
$ | 8,302 | $ | 1,893 | $ | 6,742 | $ | 5,151 | $ | 7 | $ | 439 | $ | 22,534 | ||||||||||||||
General reserve
|
$ | 7,137 | $ | 1,893 | $ | 5,499 | $ | 1,819 | $ | 7 | $ | 337 | $ | 16,692 | ||||||||||||||
Specific reserve
|
$ | 1,165 | $ | - | $ | 1,243 | $ | 3,332 | $ | - | $ | 102 | $ | 5,842 | ||||||||||||||
Loans (1):
|
||||||||||||||||||||||||||||
Total Loans
|
$ | 398,583 | $ | 143,513 | $ | 266,297 | $ | 53,412 | $ | 479 | $ | 19,127 | $ | 881,411 | ||||||||||||||
General reserve (2)
|
$ | 330,651 | $ | 140,998 | $ | 248,578 | $ | 20,394 | $ | 479 | $ | 19,000 | $ | 760,100 | ||||||||||||||
Specific reserve (3)
|
$ | 67,932 | $ | 2,515 | $ | 17,719 | $ | 33,018 | $ | - | $ | 127 | $ | 121,311 | ||||||||||||||
____________ | ||||||||||||||||||||||||||||
(1) Net of undisbursed funds
|
||||||||||||||||||||||||||||
(2) Loans collectively evaluated for impairment
|
||||||||||||||||||||||||||||
(3) Loans individually evaluated for impairment
|
At or for the Three Months Ended June 30, 2011
|
|||||||||||||||||||||
Unpaid
|
Average
|
Interest
|
|||||||||||||||||||
Recorded
|
Principal
|
Related
|
Recorded
|
Income
|
|||||||||||||||||
Investment (1)
|
Balance (2)
|
Allowance
|
Investment
|
Recognized
|
|||||||||||||||||
(In thousands)
|
|||||||||||||||||||||
Loans with no related allowance:
|
|||||||||||||||||||||
One-to-four family residential:
|
|||||||||||||||||||||
Owner occupied
|
$ | 7,798 | $ | 9,278 | $ | - | $ | 6,091 | $ | 46 | |||||||||||
Non-owner occupied
|
46,229 | 49,748 | - | 43,306 | 561 | ||||||||||||||||
Multifamily
|
3,158 | 3,246 | - | 2,833 | 42 | ||||||||||||||||
Commercial real estate
|
14,555 | 19,411 | - | 11,461 | 119 | ||||||||||||||||
Construction/land development
|
15,679 | 32,176 | - | 14,145 | - | ||||||||||||||||
Consumer
|
115 | 117 | - | 130 | - | ||||||||||||||||
Total
|
87,534 | 113,976 | - | 77,966 | 768 | ||||||||||||||||
Loans with an allowance:
|
|||||||||||||||||||||
One-to-four family residential:
|
|||||||||||||||||||||
Owner occupied
|
5,293 | 5,345 | 109 | 7,058 | 60 | ||||||||||||||||
Non-owner occupied
|
7,325 | 7,377 | 293 | 11,096 | 93 | ||||||||||||||||
Multifamily
|
- | - | - | 350 | - | ||||||||||||||||
Commercial real estate
|
3,744 | 3,744 | 59 | 8,450 | 38 | ||||||||||||||||
Construction/land development
|
- | - | - | 5,438 | - | ||||||||||||||||
Consumer
|
- | - | - | 35 | - | ||||||||||||||||
Total
|
16,362 | 16,466 | 461 | 32,427 | 191 | ||||||||||||||||
Total impaired loans:
|
|||||||||||||||||||||
One-to-four family residential:
|
|||||||||||||||||||||
Owner occupied
|
13,091 | 14,623 | 109 | 13,149 | 106 | ||||||||||||||||
Non-owner occupied
|
53,554 | 57,125 | 293 | 54,402 | 654 | ||||||||||||||||
Multifamily
|
3,158 | 3,246 | - | 3,183 | 42 | ||||||||||||||||
Commercial real estate
|
18,299 | 23,155 | 59 | 19,911 | 157 | ||||||||||||||||
Construction/land development
|
15,679 | 32,176 | - | 19,583 | - | ||||||||||||||||
Consumer
|
115 | 117 | - | 165 | - | ||||||||||||||||
Total
|
$ | 103,896 | $ | 130,442 | $ | 461 | $ | 110,393 | $ | 959 | |||||||||||
___________ | |||||||||||||||||||||
(1)
|
Represents the loan balance less charge-offs
|
||||||||||||||||||||
(2)
|
Contractual loan principal balance
|
At or For the Six Months Ended June 30, 2011
|
|||||||||||||||||||||
Unpaid
|
Average
|
Interest
|
|||||||||||||||||||
Recorded
|
Principal
|
Related
|
Recorded
|
Income
|
|||||||||||||||||
Investment (1)
|
Balance (2)
|
Allowance
|
Investment
|
Recognized
|
|||||||||||||||||
(In thousands)
|
|||||||||||||||||||||
Loans with no related allowance:
|
|||||||||||||||||||||
One-to-four family residential:
|
|||||||||||||||||||||
Owner occupied
|
$ | 7,798 | $ | 9,278 | $ | - | $ | 5,948 | $ | 86 | |||||||||||
Non-owner occupied
|
46,229 | 49,748 | - | 43,065 | 1,131 | ||||||||||||||||
Multifamily
|
3,158 | 3,246 | - | 2,727 | 84 | ||||||||||||||||
Commercial real estate
|
14,555 | 19,411 | - | 10,053 | 217 | ||||||||||||||||
Construction/land development
|
15,679 | 32,176 | - | 11,618 | - | ||||||||||||||||
Consumer
|
115 | 117 | - | 102 | 1 | ||||||||||||||||
Total
|
87,534 | 113,976 | - | 73,513 | 1,519 | ||||||||||||||||
Loans with an allowance:
|
|||||||||||||||||||||
One-to-four family residential:
|
|||||||||||||||||||||
Owner occupied
|
5,293 | 5,345 | 109 | 7,150 | 136 | ||||||||||||||||
Non-owner occupied
|
7,325 | 7,377 | 293 | 11,515 | 190 | ||||||||||||||||
Multifamily
|
- | - | - | 233 | - | ||||||||||||||||
Commercial real estate
|
3,744 | 3,744 | 59 | 9,128 | 104 | ||||||||||||||||
Construction/land development
|
- | - | - | 12,443 | - | ||||||||||||||||
Consumer
|
- | - | - | 50 | - | ||||||||||||||||
Total
|
16,362 | 16,466 | 461 | 40,519 | 430 | ||||||||||||||||
Total impaired loans:
|
|||||||||||||||||||||
One-to-four family residential:
|
|||||||||||||||||||||
Owner occupied
|
13,091 | 14,623 | 109 | 13,098 | 222 | ||||||||||||||||
Non-owner occupied
|
53,554 | 57,125 | 293 | 54,580 | 1,321 | ||||||||||||||||
Multifamily
|
3,158 | 3,246 | - | 2,960 | 84 | ||||||||||||||||
Commercial real estate
|
18,299 | 23,155 | 59 | 19,181 | 321 | ||||||||||||||||
Construction/land development
|
15,679 | 32,176 | - | 24,061 | - | ||||||||||||||||
Consumer
|
115 | 117 | - | 152 | 1 | ||||||||||||||||
Total
|
$ | 103,896 | $ | 130,442 | $ | 461 | $ | 114,032 | $ | 1,949 | |||||||||||
_____________ | |||||||||||||||||||||
(1)
|
Represents the loan balance less charge-offs
|
||||||||||||||||||||
(2)
|
Contractual loan principal balance
|
At or For the Year Ended December 31, 2010
|
||||||||||||||||
Unpaid
|
Interest
|
|||||||||||||||
Recorded
|
Principal
|
Related
|
Income
|
|||||||||||||
Investment (1)(3)
|
Balance (2)(3)
|
Allowance
|
Recognized (3)
|
|||||||||||||
(In thousands)
|
||||||||||||||||
Loans with no related allowance:
|
||||||||||||||||
One-to-four family residential:
|
||||||||||||||||
Owner occupied
|
$ | 5,663 | $ | 5,997 | $ | - | $ | 178 | ||||||||
Non-owner occupied
|
42,584 | 42,947 | - | 2,920 | ||||||||||||
Multifamily
|
2,515 | 2,515 | - | 169 | ||||||||||||
Commercial real estate
|
7,236 | 7,753 | - | 350 | ||||||||||||
Construction/land development
|
6,565 | 8,607 | - | 8 | ||||||||||||
Consumer
|
48 | 547 | - | - | ||||||||||||
Total
|
64,611 | 68,366 | - | 3,625 | ||||||||||||
Loans with an allowance:
|
||||||||||||||||
One-to-four family residential:
|
||||||||||||||||
Owner occupied
|
7,333 | 8,570 | 276 | 95 | ||||||||||||
Non-owner occupied
|
12,352 | 16,722 | 889 | 130 | ||||||||||||
Commercial real estate
|
10,483 | 14,713 | 1,243 | 281 | ||||||||||||
Construction/land development
|
26,453 | 46,026 | 3,332 | - | ||||||||||||
Consumer
|
79 | 298 | 102 | 3 | ||||||||||||
Total
|
56,700 | 86,329 | 5,842 | 509 | ||||||||||||
Total impaired loans:
|
||||||||||||||||
One-to-four family residential:
|
||||||||||||||||
Owner occupied
|
12,996 | 14,567 | 276 | 273 | ||||||||||||
Non-owner occupied
|
54,936 | 59,669 | 889 | 3,050 | ||||||||||||
Multifamily
|
2,515 | 2,515 | - | 169 | ||||||||||||
Commercial real estate
|
17,719 | 22,466 | 1,243 | 631 | ||||||||||||
Construction/land development
|
33,018 | 54,633 | 3,332 | 8 | ||||||||||||
Consumer
|
127 | 845 | 102 | 3 | ||||||||||||
Total
|
$ | 121,311 | $ | 154,695 | $ | 5,842 | $ | 4,134 | ||||||||
____________ | ||||||||||||||||
(1) Represents the loan balance less charge-offs
|
||||||||||||||||
(2) Contractual loan principal balance
|
||||||||||||||||
(3) Certain amounts in the table have been reclassified to conform to the current presentation.
|
June 30,
|
December 31,
|
|||||||
2011
|
2010
|
|||||||
(In thousands)
|
||||||||
Impaired loans without a valuation allowance
|
$ | 87,534 | $ | 64,611 | ||||
Impaired loans with a valuation allowance
|
16,362 | 56,700 | ||||||
Total impaired loans
|
$ | 103,896 | $ | 121,311 | ||||
Valuation allowance related to impaired loans
|
$ | 461 | $ | 5,842 | ||||
Nonperforming assets (1):
|
||||||||
Nonaccrual loans
|
$ | 31,831 | $ | 46,637 | ||||
Nonaccrual troubled debt restructured loans
|
6,097 | 16,299 | ||||||
Total nonperforming loans
|
37,928 | 62,936 | ||||||
Other real estate owned
|
25,979 | 30,102 | ||||||
Total nonperforming assets
|
$ | 63,907 | $ | 93,038 | ||||
Performing troubled debt restructured loans
|
$ | 65,968 | $ | 58,375 | ||||
Nonaccrual troubled debt restructured loans
|
6,097 | 16,299 | ||||||
Total troubled debt restructured loans (2)
|
$ | 72,065 | $ | 74,674 | ||||
________________ | ||||||||
(1) There were no loans 90 days or more past due and still accruing interest at June 30, 2011 and December 31, 2010.
|
||||||||
(2) Troubled debt restructured loans are also considered impaired loans and are included in "Total impaired loans."
|
June 30,
|
December 31,
|
|||||||
2011
|
2010
|
|||||||
(In thousands)
|
||||||||
One-to-four family residential
|
$ | 13,684 | $ | 22,688 | ||||
Multifamily
|
638 | - | ||||||
Commercial real estate
|
7,882 | 7,306 | ||||||
Construction/land development
|
15,679 | 32,885 | ||||||
Consumer
|
45 | 57 | ||||||
Total nonaccrual loans
|
$ | 37,928 | $ | 62,936 |
Loans Past Due as of June 30, 2011
|
||||||||||||||||||||||||
30-59 Days
|
60-89 Days
|
90 Days and
Greater
|
Total
|
Current
|
Total Loans
(1) (2)
|
|||||||||||||||||||
(In thousands)
|
||||||||||||||||||||||||
Real estate:
|
||||||||||||||||||||||||
One-to-four family residential:
|
||||||||||||||||||||||||
Owner occupied
|
$ | 479 | $ | 235 | $ | 3,642 | $ | 4,356 | $ | 197,425 | $ | 201,781 | ||||||||||||
Non-owner occupied
|
135 | 895 | 7,881 | 8,911 | 149,118 | 158,029 | ||||||||||||||||||
Multifamily
|
- | - | 638 | 638 | 119,385 | 120,023 | ||||||||||||||||||
Commercial real estate
|
1,475 | 866 | 5,806 | 8,147 | 235,246 | 243,393 | ||||||||||||||||||
Construction/land development
|
729 | - | 14,950 | 15,679 | 16,918 | 32,597 | ||||||||||||||||||
Total real estate
|
2,818 | 1,996 | 32,917 | 37,731 | 718,092 | 755,823 | ||||||||||||||||||
Business
|
- | - | - | - | 1,819 | 1,819 | ||||||||||||||||||
Consumer
|
- | 49 | - | 49 | 13,922 | 13,971 | ||||||||||||||||||
Total
|
$ | 2,818 | $ | 2,045 | $ | 32,917 | $ | 37,780 | $ | 733,833 | $ | 771,613 | ||||||||||||
______________ | ||||||||||||||||||||||||
(1) There were no loans 90 days past due and still accruing interest at June 30, 2011.
|
||||||||||||||||||||||||
(2) Net of undisbursed funds.
|
Loans Past Due as of December 31, 2010
|
||||||||||||||||||||||||
30-59 Days
|
60-89 Days
|
90 Days and
Greater
|
Total
|
Current
|
Total Loans
(1) (2)
|
|||||||||||||||||||
(In thousands)
|
||||||||||||||||||||||||
Real estate:
|
||||||||||||||||||||||||
One-to-four family residential:
|
||||||||||||||||||||||||
Owner occupied
|
$ | 2,178 | $ | 780 | $ | 5,863 | $ | 8,821 | $ | 216,392 | $ | 225,213 | ||||||||||||
Non-owner occupied
|
800 | 1,996 | 11,801 | 14,597 | 158,773 | 173,370 | ||||||||||||||||||
Multifamily
|
- | - | - | - | 143,513 | 143,513 | ||||||||||||||||||
Commercial real estate
|
2,141 | 836 | 6,948 | 9,925 | 256,372 | 266,297 | ||||||||||||||||||
Construction/land development
|
133 | 265 | 32,620 | 33,018 | 20,394 | 53,412 | ||||||||||||||||||
Total real estate
|
5,252 | 3,877 | 57,232 | 66,361 | 795,444 | 861,805 | ||||||||||||||||||
Business
|
- | - | - | - | 479 | 479 | ||||||||||||||||||
Consumer
|
- | 55 | 57 | 112 | 19,015 | 19,127 | ||||||||||||||||||
Total
|
$ | 5,252 | $ | 3,932 | $ | 57,289 | $ | 66,473 | $ | 814,938 | $ | 881,411 | ||||||||||||
______________ | ||||||||||||||||||||||||
(1) There were no loans 90 days past due and still accruing interest at December 31, 2010.
|
||||||||||||||||||||||||
(2) Net of undisbursed funds.
|
June 30, 2011
|
||||||||||||||||||||||||||||
One-to-Four
Family
Residential
|
Multifamily
|
Commercial
Real Estate
|
Construction/
Land Development
|
Business
|
Consumer
|
Total (1)
|
||||||||||||||||||||||
(In thousands)
|
||||||||||||||||||||||||||||
Risk Rating:
|
||||||||||||||||||||||||||||
Pass
|
$ | 319,193 | $ | 113,936 | $ | 214,247 | $ | 16,494 | $ | 1,819 | $ | 13,704 | $ | 679,393 | ||||||||||||||
Special mention
|
22,006 | 5,449 | 10,685 | - | - | 222 | 38,362 | |||||||||||||||||||||
Substandard
|
18,611 | 638 | 18,461 | 16,103 | - | 45 | 53,858 | |||||||||||||||||||||
Doubtful
|
- | - | - | - | - | - | - | |||||||||||||||||||||
Total
|
$ | 359,810 | $ | 120,023 | $ | 243,393 | $ | 32,597 | $ | 1,819 | $ | 13,971 | $ | 771,613 | ||||||||||||||
___________ | ||||||||||||||||||||||||||||
(1) Net of undisbursed funds.
|
December 31, 2010
|
||||||||||||||||||||||||||||
One-to-Four
Family
Residential
|
Multifamily
|
Commercial
Real Estate
|
Construction/
Land Development
|
Business
|
Consumer
|
Total (1)
|
||||||||||||||||||||||
(In thousands)
|
||||||||||||||||||||||||||||
Risk Rating:
|
||||||||||||||||||||||||||||
Pass
|
$ | 360,239 | $ | 141,224 | $ | 249,576 | $ | 17,589 | $ | 479 | $ | 18,792 | $ | 787,899 | ||||||||||||||
Special mention
|
10,261 | 1,936 | 5,805 | - | - | 189 | 18,191 | |||||||||||||||||||||
Substandard
|
28,083 | 353 | 10,916 | 35,484 | - | 140 | 74,976 | |||||||||||||||||||||
Doubtful
|
- | - | - | 339 | - | 6 | 345 | |||||||||||||||||||||
Total
|
$ | 398,583 | $ | 143,513 | $ | 266,297 | $ | 53,412 | $ | 479 | $ | 19,127 | $ | 881,411 | ||||||||||||||
___________ | ||||||||||||||||||||||||||||
(1) Net of undisbursed funds.
|
June 30, 2011
|
||||||||||||||||||||||||||||
One-to-Four
Family
Residential
|
Multifamily
|
Commercial
Real Estate
|
Construction/
Land
Development
|
Business
|
Consumer
|
Total (3)
|
||||||||||||||||||||||
(In thousands)
|
||||||||||||||||||||||||||||
Performing (1)
|
$ | 346,126 | $ | 119,385 | $ | 235,511 | $ | 16,918 | $ | 1,819 | $ | 13,926 | $ | 733,685 | ||||||||||||||
Nonperforming (2)
|
13,684 | 638 | 7,882 | 15,679 | - | 45 | 37,928 | |||||||||||||||||||||
Total
|
$ | 359,810 | $ | 120,023 | $ | 243,393 | $ | 32,597 | $ | 1,819 | $ | 13,971 | $ | 771,613 |
(1) There were $197.1 million of owner-occupied one-to-four family loans and $149.0 million of non-owner occupied one-to-four family loans classified as performing.
|
(2) There were $4.7 million of owner-occupied one-to-four family loans and $9.0 million of non-owner occupied one-to-four family loans classified as nonperforming.
|
(3) Net of undisbursed funds.
|
December 31, 2010
|
||||||||||||||||||||||||||||
One-to-Four
Family Residential
|
Multifamily
|
Commercial
Real Estate
|
Construction/
Land
Development
|
Business
|
Consumer
|
Total (3)
|
||||||||||||||||||||||
(In thousands)
|
||||||||||||||||||||||||||||
Performing (1)
|
$ | 375,895 | $ | 143,513 | $ | 258,991 | $ | 20,527 | $ | 479 | $ | 19,070 | $ | 818,475 | ||||||||||||||
Nonperforming (2)
|
22,688 | - | 7,306 | 32,885 | - | 57 | 62,936 | |||||||||||||||||||||
Total
|
$ | 398,583 | $ | 143,513 | $ | 266,297 | $ | 53,412 | $ | 479 | $ | 19,127 | $ | 881,411 |
(1) There were $217.3 million of owner-occupied one-to-four family loans and $158.6 million of non-owner occupied one-to-four family loans classified as performing.
|
(2) There were $8.0 million of owner-occupied one-to-four family loans and $14.7 million of non-owner occupied one-to-four family loans classified as nonperforming.
|
(3) Net of undisbursed funds.
|
Three Months Ended
June 30,
|
Six Months Ended
June 30,
|
|||||||||||||||
2011
|
2010
|
2011
|
2010
|
|||||||||||||
(In thousands)
|
||||||||||||||||
Beginning Balance
|
$ | 31,266 | $ | 20,500 | $ | 30,102 | $ | 11,835 | ||||||||
Loans transferred to OREO
|
5,673 | 3,262 | 15,950 | 17,666 | ||||||||||||
Capitalized improvements
|
2 | 286 | 90 | 286 | ||||||||||||
Dispositions of OREO
|
(10,673 | ) | (6,658 | ) | (19,246 | ) | (10,126 | ) | ||||||||
Market value adjustments
|
(289 | ) | (897 | ) | (917 | ) | (3,168 | ) | ||||||||
Ending Balance
|
$ | 25,979 | $ | 16,493 | $ | 25,979 | $ | 16,493 |
·
|
Level 1 – Quoted prices for identical instruments in active markets.
|
·
|
Level 2 – Quoted prices for similar instruments in active markets; quoted prices for identical or similar instruments in markets that are not active; and model-derived valuations whose inputs are observable.
|
·
|
Level 3 – Instruments whose significant value drivers are unobservable.
|
Fair Value Measurements at June 30, 2011
|
||||||||||||||||
Quoted Prices in
|
Significant
|
|||||||||||||||
Active Markets
|
Other
|
Significant
|
||||||||||||||
Fair Value
|
for Identical
|
Observable
|
Unobservable
|
|||||||||||||
Measurements
|
Assets (Level 1)
|
Inputs (Level 2)
|
Inputs (Level 3)
|
|||||||||||||
(In thousands)
|
||||||||||||||||
Available for sale investments:
|
||||||||||||||||
Mortgage-backed investments:
|
||||||||||||||||
Fannie Mae
|
$ | 93,361 | $ | - | $ | 93,361 | $ | - | ||||||||
Freddie Mac
|
35,805 | - | 35,805 | - | ||||||||||||
Ginnie Mae
|
8,321 | - | 8,321 | - | ||||||||||||
Municipal bonds
|
2,024 | - | 2,024 | - | ||||||||||||
U.S. Government agencies
|
2,321 | - | 2,321 | - | ||||||||||||
$ | 141,832 | $ | - | $ | 141,832 | $ | - |
Fair Value Measurements at December 31, 2010
|
||||||||||||||||
Quoted Prices in
|
Significant
|
|||||||||||||||
Active Markets
|
Other
|
Significant
|
||||||||||||||
Fair Value
|
for Identical
|
Observable
|
Unobservable
|
|||||||||||||
Measurements
|
Assets (Level 1)
|
Inputs (Level 2)
|
Inputs (Level 3)
|
|||||||||||||
(In thousands)
|
||||||||||||||||
Available for sale investments:
|
||||||||||||||||
Mortgage-backed investments:
|
||||||||||||||||
Fannie Mae
|
$ | 110,144 | $ | - | $ | 110,144 | $ | - | ||||||||
Freddie Mac
|
41,149 | - | 41,149 | - | ||||||||||||
Ginnie Mae
|
9,444 | - | 9,444 | - | ||||||||||||
Municipal bonds
|
1,922 | - | 1,922 | - | ||||||||||||
U.S. Government agencies
|
1,944 | - | 1,944 | - | ||||||||||||
$ | 164,603 | $ | - | $ | 164,603 | $ | - |
Fair Value Measurements at June 30, 2011
|
||||||||||||||||||||
Quoted Prices in
|
Significant
|
|||||||||||||||||||
Active Markets
|
Other
|
Significant
|
||||||||||||||||||
Fair Value
|
for Identical
|
Observable
|
Unobservable
|
Total
|
||||||||||||||||
Measurements
|
Assets (Level 1)
|
Inputs (Level 2)
|
Inputs (Level 3)
|
Losses
|
||||||||||||||||
(In thousands)
|
||||||||||||||||||||
Impaired loans including undisbursed but committed funds
|
||||||||||||||||||||
of $43 (included in loans receivable, net) (1)
|
$ | 103,478 | $ | - | $ | - | $ | 103,478 | $ | 461 | ||||||||||
OREO (2)
|
25,979 | - | - | 25,979 | 289 | |||||||||||||||
$ | 129,457 | $ | - | $ | - | $ | 129,457 | $ | 750 | |||||||||||
___________ | ||||||||||||||||||||
(1) The loss represents the specific reserve against loans that were considered impaired at June 30, 2011.
|
||||||||||||||||||||
(2) The loss represents OREO market value adjustments for the quarter ended June 30, 2011.
|
Fair Value Measurements at December 31, 2010
|
||||||||||||||||||||
Quoted Prices in
|
Significant
|
|||||||||||||||||||
Active Markets
|
Other
|
Significant
|
||||||||||||||||||
Fair Value
|
for Identical
|
Observable
|
Unobservable
|
Total
|
||||||||||||||||
Measurements
|
Assets (Level 1)
|
Inputs (Level 2)
|
Inputs (Level 3)
|
Losses
|
||||||||||||||||
(In thousands)
|
||||||||||||||||||||
Impaired loans including undisbursed but committed funds
|
||||||||||||||||||||
of $1.1 million (included in loans receivable, net) (1)
|
$ | 116,543 | $ | - | $ | - | $ | 116,543 | $ | 5,842 | ||||||||||
OREO (2)
|
30,102 | - | - | 30,102 | 5,624 | |||||||||||||||
$ | 146,645 | $ | - | $ | - | $ | 146,645 | $ | 11,466 | |||||||||||
___________ | ||||||||||||||||||||
(1) The loss represents the specific reserve against loans that were considered impaired at December 31, 2010.
|
||||||||||||||||||||
(2) The loss represents OREO market value adjustments for the year ended December 31, 2010.
|
June 30, 2011
|
December 31, 2010
|
|||||||||||||||
Carrying
|
Estimated
|
Carrying
|
Estimated
|
|||||||||||||
Value
|
Fair Value
|
Value
|
Fair Value
|
|||||||||||||
(In thousands)
|
||||||||||||||||
Assets:
|
||||||||||||||||
Cash on hand and in banks
|
$ | 4,364 | $ | 4,364 | $ | 7,466 | $ | 7,466 | ||||||||
Interest-bearing deposits
|
184,448 | 184,448 | 90,961 | 90,961 | ||||||||||||
Investments available for sale
|
141,832 | 141,832 | 164,603 | 164,603 | ||||||||||||
Loans receivable, net
|
752,634 | 779,191 | 856,456 | 878,737 | ||||||||||||
Federal Home Loan Bank stock
|
7,413 | 7,413 | 7,413 | 7,413 | ||||||||||||
Accrued interest receivable
|
4,132 | 4,132 | 4,686 | 4,686 | ||||||||||||
Liabilities:
|
||||||||||||||||
Deposits
|
209,416 | 209,416 | 231,527 | 231,527 | ||||||||||||
Certificates of deposit
|
664,281 | 672,603 | 688,699 | 701,976 | ||||||||||||
Advances from the Federal Home
|
||||||||||||||||
Loan Bank
|
93,066 | 95,008 | 93,066 | 95,972 | ||||||||||||
Accrued interest payable
|
217 | 217 | 214 | 214 |
·
|
Financial instruments with book value equal to fair value: The fair value of financial instruments that are short-term or reprice frequently and that have little or no risk are considered to have a fair value equal to book value. These instruments include cash on hand and in banks, interest-bearing deposits, investments available for sale, Federal Home Loan Bank of Seattle (“FHLB”) stock, accrued interest receivable and accrued interest payable. FHLB stock is not publicly-traded, however, it may be redeemed on a dollar-for-dollar basis, for any amount the Bank is not required to hold, subject to the FHLB’s discretion.
|
·
|
Investments: The fair value of all investments, excluding FHLB stock, was based upon quoted market prices for similar investments in active markets, identical or similar investments in markets that are not active and model-derived valuations whose inputs are observable.
|
·
|
Loans receivable: For variable rate loans that reprice frequently and with no significant change in credit risk, fair values are based on carrying values. The fair value of fixed-rate loans is estimated using discounted cash flow analysis, utilizing interest rates that would be offered for loans with similar terms to borrowers of similar credit quality. As a result of current market conditions, cash flow estimates have been further discounted to include a credit factor. The fair value of nonperforming loans is estimated using the fair value of the underlying collateral.
|
·
|
Liabilities: The fair value of deposits with no stated maturity, such as statement, NOW, and money market accounts, is equal to the amount payable on demand. The fair value of certificates of deposit is based on the discounted value of contractual cash flows using current interest rates for certificates of deposit with similar remaining maturities. The fair value of FHLB advances is estimated based on discounting the future cash flows using current interest rates for debt with similar remaining maturities.
|
·
|
Off balance sheet commitments: No fair value adjustment is necessary for commitments made to extend credit, which represents commitments for loan originations or for outstanding commitments to purchase loans. These commitments are at variable rates, are for loans with terms
|
|
of less than one year and have interest rates which approximate prevailing market rates, or are set at the time of loan closing.
|
Weighted-Average
|
Weighted-Average
Remaining Contractual
|
Aggregate
Intrinsic |
Weighted-Average
Grant Date |
|||||||||||||||||
Shares
|
Exercise Price
|
Term in Years
|
Value
|
Fair Value
|
||||||||||||||||
(Dollars in thousands, except share data)
|
||||||||||||||||||||
Outstanding at January 1, 2011
|
1,383,524 | $ | 9.52 | 7.60 | $ | - | $ | 1.91 | ||||||||||||
Granted
|
- | - | - | - | - | |||||||||||||||
Exercised
|
- | - | - | - | - | |||||||||||||||
Forfeited or expired
|
(10,000 | ) | 9.78 | - | - | - | ||||||||||||||
Outstanding at June 30, 2011
|
1,373,524 | 9.52 | 7.10 | 53 | 1.91 | |||||||||||||||
Expected to vest assuming a 3% forfeiture
|
||||||||||||||||||||
rate over the vesting term
|
809,082 | 9.45 | 7.12 | 41 | - | |||||||||||||||
Exercisable at June 30, 2011
|
539,410 | 9.62 | 7.07 | 11 | - |
Non-vested Shares
|
Shares
|
Fair Value Per Share
|
||||||
Non-vested at January 1, 2011
|
456,140 | $ | 9.75 | |||||
Granted
|
- | - | ||||||
Vested
|
(12,800 | ) | 6.19 | |||||
Forfeited
|
- | - | ||||||
Non-vested at June 30, 2011
|
443,340 | 9.85 | ||||||
Expected to vest assuming a 3% forfeiture
|
||||||||
rate over the vesting term
|
430,038 |
Three Months Ended June 30,
|
Six Months Ended June 30,
|
|||||||||||||||
2011
|
2010
|
2011
|
2010
|
|||||||||||||
(Dollars in thousands, except share data)
|
||||||||||||||||
Net income (loss)
|
$ | 1,258 | $ | (24,881 | ) | $ | 2,692 | $ | (42,633 | ) | ||||||
Basic weighted-average common shares outstanding
|
17,517,051 | 17,421,031 | 17,503,025 | 17,398,285 | ||||||||||||
Plus common stock options considered outstanding
|
||||||||||||||||
for dilutive purposes (excludes antidilutive options)
|
5,966 | - | 2,999 | - | ||||||||||||
Diluted weighted-average common shares outstanding
|
17,523,017 | 17,421,031 | 17,506,024 | 17,398,285 | ||||||||||||
Basic income (loss) per share
|
$ | 0.07 | $ | (1.43 | ) | $ | 0.15 | $ | (2.45 | ) | ||||||
Diluted income (loss) per share
|
$ | 0.07 | $ | (1.43 | ) | $ | 0.15 | $ | (2.45 | ) |
·
|
Maintain and preserve qualified management;
|
·
|
Increase the Board of Directors’ participation in the Bank’s affairs;
|
·
|
Obtain an independent study of management and the personnel structure of the Bank;
|
·
|
Maintain specified capital levels;
|
·
|
Eliminate loans classified as “Loss” at its regulatory examination and reduce the loans classified as “Doubtful” and “Substandard” as a percent of capital;
|
·
|
Revise its policy with respect to the allowance for loan losses;
|
·
|
Not extend additional credit to borrowers whose loan had been classified as “Loss” and is uncollected;
|
·
|
Revise its lending and collection policies and practices;
|
·
|
Develop a plan to reduce the amount of commercial real estate loans;
|
·
|
Enhance its written funds management and liquidity policy;
|
·
|
Develop a three-year strategic plan;
|
·
|
Not solicit brokered deposits and comply with certain deposit rate restrictions;
|
·
|
Eliminate and correct all violations of laws; and
|
·
|
Prepare and submit progress reports to the FDIC and DFI.
|
Aggregate Amount
|
Number
|
|||||
Borrower (1)
|
of Loans at June 30, 2011 (2)
|
of Loans
|
||||
Real estate builder
|
$ 26.5 million
|
101 | ||||
Real estate builder
|
22.1 million
|
(3) | 109 | |||
Real estate builder
|
19.0 million
|
(4) | 91 | |||
Real estate investor
|
18.1 million
|
3 | ||||
Real estate investor
|
17.0 million
|
41 | ||||
Total
|
$102.7 million
|
345 |
_____________ |
(1) The composition of borrowers represented in the table may change from one period to the next.
|
(2) Net of undisbursed funds.
|
(3) Of this amount, $20.7 million are considered impaired loans of which $13.4 million are performing
|
and $7.3 million are nonperforming.
|
(4) Of this amount, $18.2 million are considered impaired loans of which $13.1 million are performing
|
and $5.1 million are nonperforming.
|
One-to-Four Family
|
||||||||||||||||||||
Residential
|
Multifamily
|
Commercial
|
Construction/
|
Aggregate Balance
|
||||||||||||||||
Borrower
|
(Rental Properties)
|
(Rental Properties)
|
(Rental Properties)
|
Land Development (1)
|
of Loans (1)
|
|||||||||||||||
Real estate builder
|
$
|
17.0
|
million
|
$
|
-
|
$
|
0.1
|
million
|
$
|
9.4
|
million
|
$
|
26.5
|
million
|
||||||
Real estate builder (2)
|
15.8
|
million
|
-
|
0.2
|
million
|
6.1
|
million
|
22.1
|
million
|
|||||||||||
Real estate builder (3)
|
16.9
|
million
|
-
|
0.9
|
million
|
1.2
|
million
|
19.0
|
million
|
|||||||||||
Real estate investor
|
-
|
-
|
18.1
|
million
|
-
|
18.1
|
million
|
|||||||||||||
Real estate investor
|
11.0
|
million
|
5.1
|
million
|
0.9
|
million
|
-
|
17.0
|
million
|
|||||||||||
Total
|
$
|
60.7
|
million
|
$
|
5.1
|
million
|
$
|
20.2
|
million
|
$
|
16.7
|
million
|
$
|
102.7
|
million
|
(1) Net of undisbursed funds.
|
(2) Of the $20.7 million loans considered impaired, $14.4 million are one-to-four family residential loans, $6.1 million are
|
construction/land development loans and $0.2 million are commercial loans.
|
(3) Of the $18.2 million loans considered impaired, $16.1 million are one-to-four family residential loans, $1.2 million are
|
construction/land development loans and $0.9 million are commercial loans.
|
County
|
Loan Balance (1)
|
Percent of
Loan Balance
|
Nonperforming
Loans
|
Nonperforming
Loans as a
Percent of Loan
Balance (2)
|
||||||||
(Dollars in thousands)
|
||||||||||||
King
|
$
|
10,465
|
32.1
|
%
|
$
|
2,711
|
25.9
|
%
|
||||
Pierce
|
6,859
|
21.0
|
3,272
|
47.7
|
||||||||
Thurston
|
5,048
|
15.5
|
1,808
|
35.8
|
||||||||
Whatcom (3)
|
3,635
|
11.2
|
3,635
|
100.0
|
||||||||
Kitsap
|
2,698
|
8.3
|
2,629
|
97.4
|
||||||||
All other counties
|
3,892
|
11.9
|
1,624
|
41.7
|
||||||||
Total
|
$
|
32,597
|
100.0
|
%
|
$
|
15,679
|
48.1
|
%
|
||||
___________________ | ||||||||||||
(1) Net of undisbursed funds.
|
||||||||||||
(2) Represents the percent of the loan balance by county that is nonperforming.
|
||||||||||||
(3) Represents one loan.
|
Increase /
|
||||||||||||
(Decrease)
|
Percentage
|
|||||||||||
Balance at
|
from
|
Increase /
|
||||||||||
June 30, 2011
|
December 31, 2010
|
(Decrease)
|
||||||||||
(Dollars in thousands)
|
||||||||||||
Cash on hand and in banks
|
$ | 4,364 | $ | (3,102 | ) | (41.55 | ) % | |||||
Interest-bearing deposits
|
184,448 | 93,487 | 102.78 | |||||||||
Investments available for sale
|
141,832 | (22,771 | ) | (13.83 | ) | |||||||
Loans receivable, net
|
752,634 | (103,822 | ) | (12.12 | ) | |||||||
Premises and equipment, net
|
19,328 | (501 | ) | (2.53 | ) | |||||||
FHLB stock, at cost
|
7,413 | - | - | |||||||||
Accrued interest receivable
|
4,132 | (554 | ) | (11.82 | ) | |||||||
Federal income tax receivable
|
6,346 | 430 | 7.27 | |||||||||
OREO
|
25,979 | (4,123 | ) | (13.70 | ) | |||||||
Prepaid expenses and other assets
|
5,044 | (1,182 | ) | (18.98 | ) | |||||||
Total assets
|
$ | 1,151,520 | $ | (42,138 | ) | (3.53 | ) % |
Increase /
|
||||||||||||
(Decrease)
|
Percentage
|
|||||||||||
Balance at
|
from
|
Increase /
|
||||||||||
June 30, 2011
|
December 31, 2010
|
(Decrease)
|
||||||||||
(Dollars in thousands)
|
||||||||||||
Noninterest-bearing
|
$ | 5,427 | $ | (3,273 | ) | (37.6 | ) % | |||||
NOW
|
12,642 | (816 | ) | (6.1 | ) | |||||||
Statement savings
|
16,197 | 810 | 5.3 | |||||||||
Money market
|
175,150 | (18,832 | ) | (9.7 | ) | |||||||
Certificates of deposit
|
664,281 | (24,418 | ) | (3.5 | ) | |||||||
$ | 873,697 | $ | (46,529 | ) | (5.1 | ) % |
Three Months Ended June 30, 2011
|
Six Months Ended June 30, 2011
|
|||||||||||||||||||||||
Compared to June 30, 2010 Increase (Decrease)
|
Compared to June 30, 2010 Increase (Decrease)
|
|||||||||||||||||||||||
Rate
|
Volume
|
Total
|
Rate
|
Volume
|
Total
|
|||||||||||||||||||
(In thousands)
|
||||||||||||||||||||||||
Interest-earning assets:
|
||||||||||||||||||||||||
Loans receivable, net
|
$ | 766 | $ | (3,120 | ) | $ | (2,354 | ) | $ | 1,527 | $ | (6,047 | ) | $ | (4,520 | ) | ||||||||
Investments available for sale
|
(169 | ) | 325 | 156 | (536 | ) | 890 | 354 | ||||||||||||||||
Interest-bearing deposits
|
- | 21 | 21 | - | 36 | 36 | ||||||||||||||||||
Total net change in income on
|
||||||||||||||||||||||||
interest-earning assets
|
597 | (2,774 | ) | (2,177 | ) | 991 | (5,121 | ) | (4,130 | ) | ||||||||||||||
Interest-bearing liabilities:
|
||||||||||||||||||||||||
NOW accounts
|
(10 | ) | - | (10 | ) | (18 | ) | - | (18 | ) | ||||||||||||||
Statement savings accounts
|
(39 | ) | 3 | (36 | ) | (65 | ) | 5 | (60 | ) | ||||||||||||||
Money market accounts
|
(391 | ) | (64 | ) | (455 | ) | (755 | ) | (75 | ) | (830 | ) | ||||||||||||
Certificates of deposit
|
(1,140 | ) | (461 | ) | (1,601 | ) | (2,526 | ) | (726 | ) | (3,252 | ) | ||||||||||||
Advances from the FHLB
|
(105 | ) | (347 | ) | (452 | ) | (210 | ) | (689 | ) | (899 | ) | ||||||||||||
Total net change in expense on
|
||||||||||||||||||||||||
interest-bearing liabilities
|
(1,685 | ) | (869 | ) | (2,554 | ) | (3,574 | ) | (1,485 | ) | (5,059 | ) | ||||||||||||
Change in net interest income
|
$ | 2,282 | $ | (1,905 | ) | $ | 377 | $ | 4,565 | $ | (3,636 | ) | $ | 929 |
Increase/
|
||||||||||||||||||||
Three Months Ended June 30,
|
(Decrease) in
|
|||||||||||||||||||
2011 | 2010 | Interest and | ||||||||||||||||||
Average
|
Average
|
Dividend
|
||||||||||||||||||
Balance | Yield | Balance | Yield | Income | ||||||||||||||||
(Dollars in thousands)
|
||||||||||||||||||||
Loans receivable, net
|
$ | 785,427 | 6.06% | $ | 1,005,428 | 5.67% | $ | (2,354 | ) | |||||||||||
Investments available for sale
|
157,698 | 3.20 | 121,742 | 3.63 | 156 | |||||||||||||||
Interest-bearing deposits
|
150,184 | 0.25 | 116,145 | 0.25 | 21 | |||||||||||||||
FHLB stock
|
7,413 | - | 7,413 | - | - | |||||||||||||||
Total interest-earning assets
|
$ | 1,100,722 | 4.81% | $ | 1,250,728 | 4.93% | $ | (2,177 | ) |
Six Months Ended June 30,
|
Increase/
|
|||||||||||||||||||
2011 | 2010 |
(Decrease) in
|
||||||||||||||||||
Average
|
Average
|
Interest and
|
||||||||||||||||||
Balance | Yield | Balance | Yield | Dividend Income | ||||||||||||||||
(Dollars in thousands)
|
||||||||||||||||||||
Loans receivable, net
|
$ | 806,058 | 6.03% | $ | 1,020,703 | 5.65% | $ | (4,520 | ) | |||||||||||
Investments available for sale
|
158,031 | 3.12 | 111,634 | 3.79 | 354 | |||||||||||||||
Interest-bearing deposits
|
136,748 | 0.25 | 107,518 | 0.25 | 36 | |||||||||||||||
FHLB stock
|
7,413 | - | 7,413 | - | - | |||||||||||||||
Total interest-earning assets
|
$ | 1,108,250 | 4.86% | $ | 1,247,268 | 4.98% | $ | (4,130 | ) |
Three Months Ended June 30,
|
Increase/
|
|||||||||||||||||||
2011 | 2010 |
(Decrease) in
|
||||||||||||||||||
Average
|
Average
|
Interest
|
||||||||||||||||||
Balance | Cost | Balance | Cost | Expense | ||||||||||||||||
(Dollars in thousands)
|
||||||||||||||||||||
NOW accounts
|
$ | 12,688 | 0.16% | $ | 13,046 | 0.46% | $ | (10 | ) | |||||||||||
Statement savings accounts
|
16,319 | 0.32 | 15,474 | 1.27 | (36 | ) | ||||||||||||||
Money market accounts
|
180,924 | 0.51 | 199,557 | 1.38 | (455 | ) | ||||||||||||||
Certificates of deposit
|
671,685 | 2.36 | 732,534 | 3.04 | (1,601 | ) | ||||||||||||||
Advances from the FHLB
|
93,066 | 2.51 | 139,900 | 2.96 | (452 | ) | ||||||||||||||
Total interest-bearing liabilities
|
$ | 974,682 | 1.97% | $ | 1,100,511 | 2.67% | $ | (2,554 | ) |
Six Months Ended June 30,
|
Increase/
|
|||||||||||||||||||
2011 | 2010 | (Decrease) in | ||||||||||||||||||
Average
|
Average
|
Interest
|
||||||||||||||||||
Balance | Cost | Balance | Cost | Expense | ||||||||||||||||
(Dollars in thousands)
|
||||||||||||||||||||
NOW accounts
|
$ | 12,883 | 0.19% | $ | 12,971 | 0.46% | $ | (18 | ) | |||||||||||
Statement savings accounts
|
16,096 | 0.43 | 15,298 | 1.24 | (60 | ) | ||||||||||||||
Money market accounts
|
186,352 | 0.64 | 196,706 | 1.45 | (830 | ) | ||||||||||||||
Certificates of deposit
|
679,044 | 2.38 | 725,804 | 3.13 | (3,252 | ) | ||||||||||||||
Advances from the FHLB
|
93,066 | 2.49 | 139,900 | 2.94 | (899 | ) | ||||||||||||||
Total interest-bearing liabilities
|
$ | 987,441 | 2.00% | $ | 1,090,679 | 2.74% | $ | (5,059 | ) |
June 30,
|
December 31,
|
June 30,
|
Six Month Increase /
|
One Year
Increase /
|
||||||||||||||||
2011
|
2010
|
2010
|
(Decrease)
|
(Decrease)
|
||||||||||||||||
(In thousands)
|
||||||||||||||||||||
One-to-four family
|
||||||||||||||||||||
residential (1)
|
$ | 13,684 | $ | 22,688 | $ | 48,246 | $ | (9,004 | ) | $ | (34,562 | ) | ||||||||
Multifamily
|
638 | - | - | 638 | 638 | |||||||||||||||
Commercial real estate
|
7,882 | 7,306 | 14,657 | 576 | (6,775 | ) | ||||||||||||||
Construction/land
|
||||||||||||||||||||
development
|
15,679 | 32,885 | 56,995 | (17,206 | ) | (41,316 | ) | |||||||||||||
Consumer
|
45 | 57 | 747 | (12 | ) | (702 | ) | |||||||||||||
Total nonperforming loans
|
37,928 | 62,936 | 120,645 | (25,008 | ) | (82,717 | ) | |||||||||||||
OREO
|
25,979 | 30,102 | 16,493 | (4,123 | ) | 9,486 | ||||||||||||||
Total nonperforming assets
|
$ | 63,907 | $ | 93,038 | $ | 137,138 | $ | (29,131 | ) | $ | (73,231 | ) |
June 30,
|
December 31,
|
June 30,
|
||||||||||
2011
|
2010
|
2010
|
||||||||||
(In thousands)
|
||||||||||||
Performing TDRs:
|
||||||||||||
One-to-four family residential
|
$ | 52,961 | $ | 45,244 | $ | 37,060 | ||||||
Multifamily
|
2,520 | 2,515 | 2,531 | |||||||||
Commercial real estate
|
10,417 | 10,413 | 6,645 | |||||||||
Construction/land development
|
- | 133 | 339 | |||||||||
Consumer
|
70 | 70 | - | |||||||||
Total performing TDRs:
|
65,968 | 58,375 | 46,575 | |||||||||
Nonaccrual TDRs:
|
||||||||||||
One-to-four family residential
|
4,041 | 7,510 | 14,665 | |||||||||
Commercial real estate
|
1,567 | 3,428 | 4,023 | |||||||||
Construction/land development
|
489 | 5,361 | 14,421 | |||||||||
Consumer
|
- | - | 99 | |||||||||
Total nonaccrual TDRs:
|
6,097 | 16,299 | 33,208 | |||||||||
Total TDRs:
|
$ | 72,065 | $ | 74,674 | $ | 79,783 |
King
County
|
Pierce
County
|
Snohomish
County
|
Kitsap
County
|
All other
counties
|
Total
OREO
|
Percent of
Total OREO
|
||||||||||||||||||||||
(Dollars in thousands)
|
||||||||||||||||||||||||||||
One-to-four family residential
|
$ | 3,188 | $ | 5,450 | $ | 1,110 | $ | 1,218 | $ | 515 | $ | 11,481 | 44.19 | % | ||||||||||||||
Commercial
|
563 | 4,004 | - | 1,292 | 450 | 6,309 | 24.29 | |||||||||||||||||||||
Construction/land development
|
2,725 | 3,099 | - | 202 | 2,163 | 8,189 | 31.52 | |||||||||||||||||||||
Total OREO
|
$ | 6,476 | $ | 12,553 | $ | 1,110 | $ | 2,712 | $ | 3,128 | $ | 25,979 | 100.00 | % |
Three Months Ended June 30,
|
Six Months Ended June 30,
|
|||||||||||||||
2011
|
2010
|
2011
|
2010
|
|||||||||||||
(In thousands)
|
||||||||||||||||
Beginning Balance
|
$ | 31,266 | $ | 20,500 | $ | 30,102 | $ | 11,835 | ||||||||
Loans transferred to OREO
|
5,673 | 3,262 | 15,950 | 17,666 | ||||||||||||
Capitalized improvements
|
2 | 286 | 90 | 286 | ||||||||||||
Dispositions of OREO
|
(10,673 | ) | (6,658 | ) | (19,246 | ) | (10,126 | ) | ||||||||
Market value adjustments
|
(289 | ) | (897 | ) | (917 | ) | (3,168 | ) | ||||||||
Ending Balance
|
$ | 25,979 | $ | 16,493 | $ | 25,979 | $ | 16,493 |
At or For the Six Months Ended June 30,
|
|||||||
2011
|
2010
|
||||||
(Dollars in thousands)
|
|||||||
Provision for loan losses
|
$
|
2,800
|
$
|
39,000
|
|||
Charge-offs
|
$
|
8,651
|
$
|
42,385
|
|||
Recoveries
|
$
|
306
|
$
|
204
|
|||
ALLL
|
$
|
16,989
|
$
|
29,858
|
|||
ALLL as a percent of total loans outstanding
|
|||||||
at the end of the period, net of undisbursed funds
|
2.20
|
%
|
2.97
|
%
|
|||
ALLL as a percent of nonperforming loans
|
|||||||
at the end of the period, net of undisbursed funds
|
44.79
|
%
|
24.75
|
%
|
|||
Total nonaccrual, net of undisbursed funds
|
$
|
37,928
|
$
|
120,645
|
|||
Nonaccrual and 90 days or more past due loans as a
|
|||||||
percent of total loans, net of undisbursed funds
|
4.92
|
%
|
12.01
|
%
|
|||
Total loans receivable, net of undisbursed funds
|
$
|
771,613
|
$
|
1,004,393
|
|||
Total loans originated, net of undisbursed funds
|
$
|
11,946
|
$
|
38,665
|
Increase/
|
||||||||||||
Three Months
|
(Decrease)
|
Percentage
|
||||||||||
Ended
|
from
|
Increase/
|
||||||||||
June 30, 2011
|
June 30, 2010
|
(Decrease)
|
||||||||||
(Dollars in thousands)
|
||||||||||||
Service fees on deposit accounts
|
$ | 31 | $ | (3 | ) | (8.82 | ) % | |||||
Loan service fees
|
35 | (7 | ) | (16.67 | ) | |||||||
Net gain on sale of investments
|
751 | 751 | 100.00 | |||||||||
Amortization of servicing rights
|
(18 | ) | 18 | (50.00 | ) | |||||||
Other
|
27 | 5 | 22.73 | |||||||||
Total noninterest income
|
$ | 826 | $ | 764 | 1,232.26 | % |
Increase/
|
||||||||||||
Six Months
|
(Decrease)
|
Percentage
|
||||||||||
Ended
|
from
|
Increase/
|
||||||||||
June 30, 2011
|
June 30, 2010
|
(Decrease)
|
||||||||||
(Dollars in thousands)
|
||||||||||||
Service fees on deposit accounts
|
$ | 49 | $ | (4 | ) | (7.55 | ) % | |||||
Loan service fees
|
94 | 5 | 5.62 | |||||||||
Net gain on sale of investments
|
1,262 | 1,262 | 100.00 | |||||||||
Amortization of servicing rights
|
(36 | ) | 36 | (50.00 | ) | |||||||
Other
|
53 | 15 | 39.47 | |||||||||
Total noninterest income
|
$ | 1,422 | $ | 1,314 | 1,216.67 | % |
Increase/
|
||||||||||||
Three Months
|
(Decrease)
|
Percentage
|
||||||||||
Ended
|
from
|
Increase/
|
||||||||||
June 30, 2011
|
June 30, 2010
|
(Decrease)
|
||||||||||
(Dollars in thousands)
|
||||||||||||
Compensation and benefits
|
$ | 3,214 | $ | 322 | 11.1 | % | ||||||
Occupancy and equipment
|
395 | (29 | ) | (6.8 | ) | |||||||
Professional fees
|
502 | 15 | 3.1 | |||||||||
Data processing
|
183 | 11 | 6.4 | |||||||||
(Gain) loss on sale of OREO property, net
|
(508 | ) | (494 | ) | 3,528.6 | |||||||
OREO market value adjustments
|
289 | (608 | ) | (67.8 | ) | |||||||
OREO related expenses, net
|
986 | 278 | 39.3 | |||||||||
FDIC/OTS assessments
|
612 | 97 | 18.8 | |||||||||
Insurance and bond premiums
|
248 | 98 | 65.3 | |||||||||
Marketing
|
50 | (28 | ) | (35.9 | ) | |||||||
Other general and administrative
|
441 | (260 | ) | (37.1 | ) | |||||||
Total noninterest expense
|
$ | 6,412 | $ | (598 | ) | (8.5 | ) % |
Increase/
|
||||||||||||
Six Months
|
(Decrease)
|
Percentage
|
||||||||||
Ended
|
from
|
Increase/
|
||||||||||
June 30, 2011
|
June 30, 2010
|
(Decrease)
|
||||||||||
(Dollars in thousands)
|
||||||||||||
Compensation and benefits
|
$ | 6,503 | $ | 422 | 6.9 | % | ||||||
Occupancy and equipment
|
797 | (52 | ) | (6.1 | ) | |||||||
Professional fees
|
982 | 36 | 3.8 | |||||||||
Data processing
|
392 | 50 | 14.6 | |||||||||
(Gain) loss on sale of OREO property, net
|
(1,134 | ) | (1,557 | ) | (368.1 | ) | ||||||
OREO market value adjustments
|
917 | (2,251 | ) | (71.1 | ) | |||||||
OREO related expenses, net
|
1,836 | 426 | 30.2 | |||||||||
FDIC/OTS assessments
|
1,322 | 227 | 20.7 | |||||||||
Insurance and bond premiums
|
495 | 196 | 65.6 | |||||||||
Marketing
|
111 | (10 | ) | (8.3 | ) | |||||||
Other general and administrative
|
773 | (370 | ) | (32.4 | ) | |||||||
Total noninterest expense
|
$ | 12,994 | $ | (2,883 | ) | (18.2 | ) % |
Amount of Commitment Expiration - Per Period
|
||||||||||||||||||||
After
|
After
|
|||||||||||||||||||
One
|
Three
|
|||||||||||||||||||
Total
|
Through
|
Through
|
After
|
|||||||||||||||||
Amounts
|
Through
|
Three
|
Five
|
Five
|
||||||||||||||||
Committed
|
One Year
|
Years
|
Years
|
Years
|
||||||||||||||||
(In thousands)
|
||||||||||||||||||||
Commitments to originate loans
|
$ | 3,563 | $ | 3,563 | $ | - | $ | - | $ | - | ||||||||||
Unused portion of lines of credit
|
8,701 | 260 | 1,672 | 1,221 | 5,548 | |||||||||||||||
Undisbursed portion of construction loans
|
3,328 | 1,468 | 1,365 | 495 | - | |||||||||||||||
Total commitments
|
$ | 15,592 | $ | 5,291 | $ | 3,037 | $ | 1,716 | $ | 5,548 |
June 30, 2011
|
||||
Net Interest Income Change
|
||||
Basis Point
Change in Rates
|
% Change
|
|||
+300
|
11.12
|
%
|
||
+200
|
10.28
|
|||
+100
|
9.10
|
|||
Base
|
6.42
|
|||
(100)
|
3.80
|
|||
(1)
|
(200)
|
N/A
|
||
(1)
|
(300)
|
N/A
|
||
(1)
|
The current federal funds rate is 0.25%
|
|||
making a 200 and 300 basis point drop
impossible.
|
June 30, 2011 | ||||||||||||||||
Net Portfolio as % of | ||||||||||||||||
Basis Point | Net Portfolio Value (2) |
Portfolio Value of Assets
|
Market Value | |||||||||||||
Change in Rates |
Amount
|
$ Change
|
% Change |
NPV Ratio (3)
|
% Change (4)
|
of Assets (5) | ||||||||||
(Dollars in thousands)
|
||||||||||||||||
+300 |
$
|
130,274
|
$
|
(59,721)
|
(31.43)
|
%
|
12.12
|
%
|
(5.09)
|
%
|
$
|
1,075,022
|
||||
+200 |
149,978
|
(40,017)
|
(21.06)
|
13.56
|
(3.41)
|
1,106,250
|
||||||||||
+100 |
171,161
|
(18,834)
|
(9.91)
|
15.02
|
(1.61)
|
1,139,867
|
||||||||||
Base
|
189,995
|
-
|
-
|
16.20
|
-
|
1,172,467
|
||||||||||
(100) |
201,084
|
11,089
|
5.84
|
16.85
|
0.95
|
1,193,580
|
||||||||||
(200) |
(1)
|
N/A
|
N/A
|
N/A
|
N/A
|
N/A
|
N/A
|
|||||||||
(300) |
(1)
|
N/A
|
N/A
|
N/A
|
N/A
|
N/A
|
N/A
|
(1)
|
The current federal funds rate is 0.25%, making a 200 or 300 basis point decrease in rates impossible.
|
(2)
|
The difference between the present value of discounted cash flows for assets and liabilities represents the net portfolio value or the market value of equity.
|
(3)
|
Net portfolio value divided by the market value of assets.
|
(4)
|
The increase or decrease in the net portfolio value divided by the market value of assets (base case).
|
(5)
|
Calculated based on the present value of the discounted cash flows from assets.
|
(a)
|
Evaluation of Disclosure Controls and Procedures: An evaluation of our disclosure controls and procedures (as defined in Rule 13a-15(e) of the Exchange Act) was carried out under the supervision and with the participation of our Chief Executive Officer, Chief Financial Officer (Principal Financial and Accounting Officer) and several other members of our senior management as of the end of the period covered by this report. Our Chief Executive Officer and Chief Financial Officer concluded that, as of June 30, 2011, our disclosure controls and procedures were effective in ensuring that the information required to be disclosed by us in the reports we file or submit under the Exchange Act is (i) accumulated and communicated to our management (including the Chief Executive Officer and Chief Financial Officer) in a timely manner and (ii) recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms.
|
(b)
|
Changes in Internal Controls: In the quarter ended June 30, 2011, there was no change in our internal control over financial reporting that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.
|
3.1 | Articles of Incorporation of First Financial Northwest (1) | |
3.2 | Bylaws of First Financial Northwest (1) | |
4 | Form of stock certificate of First Financial Northwest (1) | |
10.1 | Form of Employment Agreement for President and Chief Executive Officer (1) | |
10.2 | Form of Change in Control Severance Agreement for Executive Officers (1) | |
10.3 | Form of First Savings Bank Employee Severance Compensation Plan (1) | |
10.4 |
Form of Supplemental Executive Retirement Agreement entered into by First Savings Bank with Victor Karpiak, Harry A. Blencoe and Robert H. Gagnier (1)
|
|
10.5 | Form of Financial Institutions Retirement Fund (1) | |
10.6 | Form of 401(k) Retirement Plan (2) | |
10.7 | 2008 Equity Incentive Plan (3) | |
10.8 | Forms of incentive and non-qualified stock option award agreements (4) | |
10.9 | Form of restricted stock award agreement (4) | |
14 | Code of Business Conduct and Ethics (5) | |
21 | Subsidiaries of the Registrant | |
31.1 | Certification of Chief Executive Officer Pursuant to Section 302 of the Sarbanes-Oxley Act | |
31.2 | Certification of Chief Financial Officer Pursuant to Section 302 of the Sarbanes-Oxley Act | |
32 | Certification of Chief Executive Officer and Chief Financial Officer Pursuant to Section 906 of the Sarbanes-Oxley Act |
101
|
The following materials from First Financial Northwest’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2011, formatted in Extensible Business Reporting Language (XBRL): (1) Consolidated Balance Sheets; (2) Consolidated Income Statements; (3) Consolidated Statements of Changes in Stockholders’ Equity and Comprehensive Income; (4) Consolidated Statements of Cash Flows; and (5) Selected Notes to Consolidated Financial Statements.*
|
(1) | Filed as an exhibit to First Financial Northwest’s Registration Statement on Form S-1 (333-143549). |
(2)
|
Filed as an exhibit to First Financial Northwest’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2007 and incorporated herein by reference.
|
(3) | Filed as Appendix A to First Financial Northwest’s definitive proxy statement dated April 15, 2008. |
(4) | Filed as an exhibit to First Financial Northwest’s Current Report on Form 8-K dated July 1, 2008. |
(5)
|
Registrant elects to satisfy Regulation S-K §229.406 (c) by posting its code of ethics on its website at www.fsbnw.com.
|
First Financial Northwest, Inc.
|
||
Date: August 8, 2011 | /s/ Victor Karpiak | |
Victor Karpiak | ||
Chairman of the Board, President and
|
||
Chief Executive Officer
|
||
(Principal Executive Officer)
|
||
Date: August 8, 2011 | /s/ Kari Stenslie | |
Kari Stenslie | ||
Chief Financial Officer | ||
(Principal Financial and Accounting Officer) |
31.1
|
Certification of Chief Executive Officer Pursuant to Section 302 of the Sarbanes-Oxley Act
|
31.2
|
Certification of Chief Financial Officer and Principal Financial and Accounting Officer Pursuant to Section 302 of the Sarbanes-Oxley Act
|
32
|
Certification of Chief Executive Officer and Chief Financial Officer Pursuant to Section 906 of the Sarbanes-Oxley Act
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101 | The following materials from First Financial Northwest’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2011, formatted in Extensible Business Reporting Language (XBRL): (1) Consolidated Balance Sheets; (2) Consolidated Income Statements; (3) Consolidated Statements of Changes in Stockholders’ Equity and Comprehensive Income; (4) Consolidated Statements of Cash Flows; and (5) Selected Notes to Consolidated Financial Statements. |
1.
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I have reviewed this Quarterly Report on Form 10-Q of First Financial Northwest, Inc.;
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2.
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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;
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3.
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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;
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4.
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The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
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(a)
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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 quarterly report is being prepared;
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(b)
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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;
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(c)
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Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
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(d)
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Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fiscal second quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
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5.
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The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of registrant’s board of directors (or persons performing the equivalent functions):
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(a)
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All significant deficiencies and material weakness in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial data information; and
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(b)
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Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.
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Date: August 8, 2011 | /s/ Victor Karpiak | |
Victor Karpiak | ||
Chairman of the Board, President and
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Chief Executive Officer
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(Principal Executive Officer)
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1.
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I have reviewed this Quarterly Report on Form 10-Q of First Financial Northwest, Inc.;
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2.
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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;
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3.
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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;
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4.
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The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
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(a)
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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 quarterly report is being prepared;
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(b)
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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;
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(c)
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Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
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(d)
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Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fiscal second quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
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5.
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The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of registrant’s board of directors (or persons performing the equivalent functions):
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(a)
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All significant deficiencies and material weakness in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial data information; and
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(b)
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Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.
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Date: August 8, 2011 | /s/ Kari Stenslie | |
Kari Stenslie | ||
Chief Financial Officer | ||
(Principal Financial and Accounting Officer) |
1.
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the Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended; and
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2.
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the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company as of the dates and for the periods presented in the financial statements included in the Report.
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FIRST FINANCIAL NORTHWEST, INC. AND SUBSIDIARIES CONSOLIDATED INCOME STATEMENTS (USD $)
In Thousands, except Per Share data |
3 Months Ended | 6 Months Ended | ||
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Jun. 30, 2011
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Jun. 30, 2010
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Jun. 30, 2011
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Jun. 30, 2010
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Interest income | Â | Â | Â | Â |
Loans, including fees | $ 11,891 | $ 14,245 | $ 24,319 | $ 28,839 |
Investments available for sale | 1,262 | 1,106 | 2,467 | 2,113 |
Cash on hand and in banks | 94 | 73 | 170 | 134 |
Total interest income | 13,247 | 15,424 | 26,956 | 31,086 |
Interest expense | Â | Â | Â | Â |
Deposits | 4,220 | 6,322 | 8,733 | 12,893 |
Federal Home Loan Bank advances | 583 | 1,035 | 1,159 | 2,058 |
Total interest expense | 4,803 | 7,357 | 9,892 | 14,951 |
Net interest income | 8,444 | 8,067 | 17,064 | 16,135 |
Provision for loan losses | 1,600 | 26,000 | 2,800 | 39,000 |
Net interest income (loss) after provision for loan losses | 6,844 | (17,933) | 14,264 | (22,865) |
Noninterest income | Â | Â | Â | Â |
Net gain on sale of investments | 751 | Â | 1,262 | Â |
Other noninterest income | 75 | 62 | 160 | 108 |
Total noninterest income | 826 | 62 | 1,422 | 108 |
Noninterest expense | Â | Â | Â | Â |
Salaries and employee benefits | 3,214 | 2,892 | 6,503 | 6,081 |
Occupancy and equipment | 395 | 424 | 797 | 849 |
Professional fees | 502 | 487 | 982 | 946 |
Data processing | 183 | 172 | 392 | 342 |
(Gain) loss on sale of OREO property, net | (508) | (14) | (1,134) | 423 |
OREO market value adjustments | 289 | 897 | 917 | 3,168 |
OREO related expenses, net | 986 | 708 | 1,836 | 1,410 |
FDIC/OTS assessments | 612 | 515 | 1,322 | 1,095 |
Insurance and bond premiums | 248 | 150 | 495 | 299 |
Marketing | 50 | 78 | 111 | 121 |
Other general and administrative | 441 | 701 | 773 | 1,143 |
Total noninterest expense | 6,412 | 7,010 | 12,994 | 15,877 |
Income (loss) before provision for federal income taxes | 1,258 | (24,881) | 2,692 | (38,634) |
Provision for federal income taxes | Â | Â | Â | 3,999 |
Net Income (loss) | $ 1,258 | $ (24,881) | $ 2,692 | $ (42,633) |
Basic earnings (loss) per share | $ 0.07 | $ (1.43) | $ 0.15 | $ (2.45) |
Diluted earnings (loss) per share | $ 0.07 | $ (1.43) | $ 0.15 | $ (2.45) |
FIRST FINANCIAL NORTHWEST, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY AND COMPREHENSIVE INCOME (USD $)
In Thousands, except Share data |
Total
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Common Stock
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Additional Paid-in Capital
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Retained Earnings (Accumulated Deficit)
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Accumulated Other Comprehensive Income, net of tax
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Unearned ESOP Shares
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Total Stockholders' Equity
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Balances at start of period - amount at Dec. 31, 2010 | Â | $ 188 | $ 187,371 | $ (305) | $ 484 | $ (13,260) | $ 174,478 | |||
Balances at start of period - shares at Dec. 31, 2010 | Â | 18,805,168 | Â | Â | Â | Â | Â | |||
Net income | 2,692 | Â | Â | 2,692 | Â | Â | 2,692 | |||
Change in fair value of investments available for sale | Â | Â | Â | Â | 826 | Â | 826 | |||
Total comprehensive income | Â | Â | Â | Â | Â | Â | 3,518 | |||
Compensation related to stock options and restricted stock awards | 950 | Â | 950 | Â | Â | Â | 950 | |||
Allocation of ESOP shares - amount | Â | Â | (257) | Â | Â | 564 | 307 | [1] | ||
Balances at end of period - amount at Jun. 30, 2011 | Â | $ 188 | $ 188,064 | $ 2,387 | $ 1,310 | $ (12,696) | $ 179,253 | |||
Balances at end of period - shares at Jun. 30, 2011 | Â | 18,805,168 | Â | Â | Â | Â | Â | |||
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Document and Entity Information (USD $)
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3 Months Ended |
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Jun. 30, 2011
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Document and Entity Information | Â |
Entity Registrant Name | First Financial Northwest, Inc. |
Document Type | 10-Q |
Document Period End Date | Jun. 30, 2011 |
Amendment Flag | false |
Entity Central Index Key | 0001401564 |
Current Fiscal Year End Date | --12-31 |
Entity Common Stock, Shares Outstanding | 18,805,168 |
Entity Public Float | $ 95,530,253 |
Entity Filer Category | Accelerated Filer |
Entity Current Reporting Status | Yes |
Entity Voluntary Filers | No |
Entity Well-known Seasoned Issuer | No |
Document Fiscal Year Focus | 2011 |
Document Fiscal Period Focus | Q2 |
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Other Real Estate Owned
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Jun. 30, 2011
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Other Real Estate Owned |
Note 7 Other Real Estate Owned
The following table is a summary of OREO:
OREO includes properties acquired by the Bank through foreclosure or deed in lieu of foreclosure. OREO at June 30, 2011 consisted of $11.5 million in one-to-four family residential homes, $8.2 million in construction/land development projects and $6.3 million in commercial real estate buildings.
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Earnings/(Loss) Per Share
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Jun. 30, 2011
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Earnings/(Loss) Per Share | Â | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Earnings/(Loss) Per Share |
Note 12 Earnings/(Loss) Per Share
The following table presents a reconciliation of the components used to compute basic and diluted earnings (loss) per share:
For the three and six months ended June 30, 2011, 50,000 stock options were included in calculating the dilutive earnings per share. For the same period in 2010, no stock options were included in the diluted loss per share calculation because they were antidilutive.
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Basis of Presentation
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3 Months Ended |
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Jun. 30, 2011
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Basis of Presentation | Â |
Basis of Presentation |
Note 3 Basis of Presentation
The accompanying unaudited interim consolidated financial statements have been prepared pursuant to the rules and regulations of the SEC. Accordingly, they do not include all of the information and footnotes required by U.S. Generally Accepted Accounting Principles (GAAP) for complete financial statements. These unaudited consolidated financial statements should be read in conjunction with the Companys Annual Report on Form 10-K for the year ended December 31, 2010, as filed with the SEC. In our opinion, all adjustments (consisting only of normal recurring adjustments) considered necessary for a fair presentation of the consolidated financial statements in accordance with GAAP have been included. All significant intercompany balances and transactions between the Company and its subsidiaries have been eliminated in consolidation. Operating results for the three and six months ended June 30, 2011 are not necessarily indicative of the results that may be expected for the year ended December 31, 2011. In preparing the unaudited consolidated financial statements, we are required to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenues and expenses. Actual results could differ from those estimates. Material estimates that are particularly susceptible to significant change relate to the allowance for loan and lease losses (ALLL), the valuation of other real estate owned (OREO) and foreclosed assets, deferred tax assets and the fair value of financial instruments.
Certain amounts in the unaudited consolidated financial statements for prior periods have been reclassified to conform to the current unaudited financial statement presentation.
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Federal Home Loan Bank stock
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3 Months Ended |
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Jun. 30, 2011
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Federal Home Loan Bank stock | Â |
Federal Home Loan Bank stock |
Note 9 Federal Home Loan Bank stock
At June 30, 2011, we held $7.4 million of FHLB stock. FHLB stock is carried at par and does not have a readily determinable fair value. Ownership of FHLB stock is restricted to the FHLB and member institutions, and can only be purchased and redeemed at par. As a result of ongoing turmoil in the capital and mortgage markets, the FHLB has a risk-based capital deficiency largely as a result of write-downs on its private label mortgage-backed securities portfolio.
Management evaluates FHLB stock for impairment. The determination of whether this investment is impaired is based on our assessment of the ultimate recoverability of cost rather than by recognizing temporary declines in value. The determination of whether a decline affects the ultimate recoverability of cost is influenced by criteria such as: (1) the significance of any decline in net assets of the FHLB as compared to the capital stock amount for the FHLB and the length of time this situation has persisted; (2) commitments by the FHLB to make payments required by law or regulation and the level of such payments in relation to the operating performance of the FHLB; (3) the impact of legislative and regulatory changes on institutions and, accordingly, the customer base of the FHLB; and (4) the liquidity position of the FHLB.
On October 25, 2010, the FHLB agreed to the stipulation and issuance of a Consent Order by its primary regulator, the Federal Housing Finance Agency (FHFA). The Consent Order sets forth requirements for capital management, asset composition, and other operational and risk management improvements. Additionally, the FHFA and the FHLB have agreed to a Stabilization Period that ends upon the filing of the FHLBs June 30, 2011 financial statements. During this period, the FHLBs classification as undercapitalized will remain in place. Subsequently, the FHLB may begin repurchasing member stock at par and paying dividends, upon achieving and maintaining financial thresholds established by the FHFA as part of the agencys supervisory process, subject to FHFA approval.
Under FHFA regulations, a Federal Home Loan Bank that fails to meet any regulatory capital requirement may not declare a dividend or redeem or repurchase capital stock in excess of what is required for members current loans. As such, the FHLB cannot redeem, repurchase or declare dividends on stock outstanding while the risk-based capital deficiency exists. This restriction is not expected to have a material effect on our financial position, liquidity or results of operations. We have determined there is no OTTI on the FHLB stock investment as of June 30, 2011.
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Stock-Based Compensation
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Stock-Based Compensation | Â | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Stock-Based Compensation |
Note 10 - Stock-Based Compensation
In June 2008, our shareholders approved the First Financial Northwest, Inc. 2008 Equity Incentive Plan (Plan). The Plan provides for the grant of stock options, awards of restricted stock and stock appreciation rights.
Total compensation expense for the Plan was $476,000 and $480,000 for the three months ended June 30, 2011 and 2010, respectively, and the related income tax benefit was $167,000 and $168,000 for the three months ended June 30, 2011 and 2010, respectively.
Total compensation expense for the Plan was $950,000 and $978,000 for the six months ended June 30, 2011 and 2010, respectively, and the related income tax benefit was $332,000 and $342,000 for the six months ended June 30, 2011 and 2010, respectively.
Stock Options
The Plan authorized the grant of stock options totaling 2,285,280 shares to our directors, advisory directors, officers and employees. Option awards are granted with an exercise price equal to the market price of our common stock at the date of grant. These option awards have a vesting period of five years, with 20% vesting on the anniversary date of each grant date and a contractual life of ten years. Any unexercised stock options will expire ten years after the grant date or sooner in the event of the award recipients death, disability or termination of service with the Company or the Bank. We have a policy of issuing new shares from authorized but unissued common stock upon the exercise of stock options. At June 30, 2011, remaining options for 911,756 shares of common stock were available for grant under the Plan.
The fair value of each option award is estimated on the date of grant using a Black-Scholes model that uses the following assumptions. The dividend yield is based on the current quarterly dividend in effect at the time of the grant. Historical employment data is used to estimate the forfeiture rate. In previous periods, we elected to use a weighted-average of our peers historical stock price information in conjunction with our own stock price history due to the limited amount of history available regarding our stock price. Now that sufficient historical stock price information is available regarding our stock, we will utilize in future periods the historical volatility of our stock price over a specified period of time for the expected volatility assumption. We base the risk-free interest rate on the U.S. Treasury Constant Maturity Indices in effect on the date of the grant. We elected to use the Share-Based Payments method permitted by the SEC to calculate the expected term. This method uses the vesting term of an option along with the contractual term, setting the expected life at the midpoint. There were no options granted during the second quarter ended June 30, 2011.
The following is a summary of our stock option plan awards for the six months ended June 30, 2011:
As of June 30, 2011, there was $1.1 million of total unrecognized compensation cost related to non-vested stock options granted under the Plan. The cost is expected to be recognized over the remaining weighted-average vesting period of 2.1 years.
Restricted Stock Awards
The Plan authorized the grant of restricted stock awards amounting to 914,112 shares to our directors, advisory directors, officers and employees. Compensation expense is recognized over the vesting period of the awards based on the fair value of the stock at the date of grant. The restricted stock awards fair value is equal to the value on the date of grant. Shares awarded as restricted stock vest ratably over a five-year period beginning at the grant date with 20% vesting on the anniversary date of each grant date. At June 30, 2011, remaining restricted awards for 167,078 shares were available to be issued. Shares that have been repurchased totaled 443,340 and are held in trust until they are issued in connection with the agreement.
The following is a summary of changes in non-vested restricted stock awards for the six months ended June 30, 2011:
As of June 30, 2011, there was $3.1 million of total unrecognized compensation costs related to non-vested shares granted as restricted stock awards. The cost is expected to be recognized over the remaining weighted-average vesting period of 2.3 years. The total fair value of shares that vested during the quarters ended June 30, 2011 and 2010 were $26,000 and $0, respectively.
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Fair Value
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Jun. 30, 2011
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Fair Value | Â | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Fair Value |
Note 8 Fair Value
Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date.
We determined the fair values of our financial instruments based on the fair value hierarchy which requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair values. Observable inputs reflect market data obtained from independent sources, while unobservable inputs reflect our estimates for market assumptions.
Valuation inputs refer to the assumptions market participants would use in pricing a given asset or liability using one of the three valuation techniques. Inputs can be observable or unobservable. Observable inputs are those assumptions that market participants would use in pricing the particular asset or liability. These inputs are based on market data and are obtained from an independent source. Unobservable inputs are assumptions based on our own information or estimate of assumptions used by market participants in pricing the asset or liability. Unobservable inputs are based on the best and most current information available on the measurement date.
All inputs, whether observable or unobservable, are ranked in accordance with a prescribed fair value hierarchy:
The tables below present the balances of assets and liabilities measured at fair value on a recurring basis (there were no transfers between Level 1, Level 2 and Level 3 recurring measurements during the periods presented):
The estimated fair value of Level 2 investments is based on quoted prices for similar investments in active markets, identical or similar investments in markets that are not active and model-derived valuations whose inputs are observable.
The tables below present the balances of assets and liabilities measured at fair value on a nonrecurring basis:
The fair value of impaired loans is calculated using the collateral value method or on a discounted cash flow basis. Inputs used in the collateral value method include appraised values, estimates of certain completion costs and closing and selling costs. Some of these inputs may not be observable in the marketplace.
OREO properties are measured at the lower of their carrying amount or fair value, less costs to sell. Fair values are generally based on third party appraisals of the property, resulting in a Level 3 classification. In cases where the carrying amount exceeds the fair value, less costs to sell, an impairment loss is recognized.
The carrying amounts and estimated fair values of financial instruments were as follows:
Fair value estimates, methods, and assumptions are set forth below for our financial instruments.
Fair value estimates are based on existing balance sheet financial instruments without attempting to estimate the value of anticipated future business. The fair value has not been estimated for assets and liabilities that are not considered financial instruments.
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Description of Business
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3 Months Ended |
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Jun. 30, 2011
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Description of Business | Â |
Description of Business |
Note 1 Description of Business
First Financial Northwest, Inc. (First Financial Northwest or the Company), a Washington corporation, was formed on June 1, 2007 for the purpose of becoming the holding company for First Savings Bank Northwest (First Savings Bank or the Bank) in connection with the conversion from a mutual holding company structure to a stock holding company structure. First Financial Northwests business activities generally are limited to passive investment activities and oversight of its investment in First Savings Bank. Accordingly, the information presented in the consolidated financial statements and related data, relates primarily to First Savings Bank. First Financial Northwest is a savings and loan holding company and is subject to regulation by the Federal Reserve Board (FRB), as successor on July 24, 2011 to the powers and responsibilities of the Office of Thrift Supervision (OTS). First Savings Bank is regulated by the Federal Deposit Insurance Corporation (FDIC) and the Washington State Department of Financial Institutions (DFI).
First Savings Bank is a community-based savings bank primarily serving King and to a lesser extent, Pierce, Snohomish and Kitsap counties, through our full-service banking office located in Renton, Washington. First Savings Banks business consists of attracting deposits from the public and utilizing these deposits to originate one-to-four family, multifamily, commercial real estate, business, consumer and construction/land development loans.
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Recently Issued Accounting Pronouncements
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3 Months Ended |
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Jun. 30, 2011
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Recently Issued Accounting Pronouncements | Â |
Recently Issued Accounting Pronouncements |
Note 4 Recently Issued Accounting Pronouncements
In January 2011, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) No. 2011-01, Deferral of the Effective Date of Disclosures about Troubled Debt Restructurings in Update No. 2010-20. This ASU temporarily delays the effective date of the disclosures about troubled debt restructurings in Update 2010-20 for public entities. The delay is intended to allow the Board time to complete its deliberations on what constitutes a troubled debt restructuring. The effective date of the new disclosures about troubled debt restructurings for public entities and the guidance for determining what constitutes a troubled debt restructuring will then be coordinated. The guidance is effective for interim and annual periods ending after September 15, 2011. The adoption of this ASU is not expected to have a material impact on the Companys consolidated financial statements.
In April 2011, the FASB issued ASU No. 2011-02, A Creditors Determination of Whether a Restructuring is a Troubled Debt Restructuring. The update provides additional guidance relating to when creditors should classify loan modifications as troubled debt restructurings. The ASU also ends the deferral issued in January 2010 of the disclosures about troubled debt restructurings required by ASU No. 2010-20. The provisions of ASU No. 2011-02 and the disclosure requirements of ASU No. 2010-20 are effective for the Companys interim reporting period ending September 30, 2011. The guidance applies retrospectively to restructurings occurring on or after January 1, 2011. The adoption of this ASU is not expected to have a material impact on the Companys consolidated financial statements.
In April 2011, the FASB issued ASU No. 2011-03, Reconsideration of Effective Control for Repurchase Agreements. The update amends existing guidance to remove from the assessment of effective control, the criterion requiring the transferor to have the ability to repurchase or redeem the financial assets on substantially the agreed terms, even in the event of default by the transferee and, as well, the collateral maintenance implementation guidance related to that criterion. ASU No. 2011-03 is effective for the Companys reporting period beginning on or after December 15, 2011. The guidance applies prospectively to transactions or modification of existing transactions that occur on or after the effective date and early adoption is not permitted. The adoption of this ASU is not expected to have a material impact on the Companys consolidated financial statements.
In April 2011, the FASB issued ASU No. 2011-04, Amendments to Achieve Common Fair Value Measurement and Disclosure Requirements in U.S. GAAP and IFRSs. The update amends existing guidance regarding the highest and best use and valuation premise by clarifying these concepts are only applicable to measuring the fair value of nonfinancial assets. The Update also clarifies that the fair value measurement of financial assets and financial liabilities which have offsetting market risks or counterparty credit risks that are managed on a portfolio basis, when several criteria are met, can be measured at the net risk position. Additional disclosures about Level 3 fair value measurements are required including a quantitative disclosure of the unobservable inputs and assumptions used in the measurement, a description of the valuation process in place, and discussion of the sensitivity of fair value changes in unobservable inputs and interrelationships about those inputs as well as disclosure of the level of the fair value of items that are not measured at fair value in the financial statements but disclosure of fair value is required. The provisions of ASU No. 2011-04 are effective for the Companys reporting period beginning after December 15, 2011 and should be applied prospectively. The Company is currently evaluating the impact of this ASU and does not expect it to have a material impact on the Companys consolidated financial statements.
In June 2011, the FASB issued ASU No. 2011-05, Presentation of Comprehensive Income. The update amends current guidance to allow a company the option of presenting the total of comprehensive income, the components 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. The provisions do not change the items that must be reported in other comprehensive income or when an item of other comprehensive must to reclassified to net income. The amendments do not change the option for a company to present components of other comprehensive income either net of related tax effects or before related tax effects, with one amount shown for the aggregate income tax expense (benefit) related to the total of other comprehensive income items. The amendments do not affect how earnings per share is calculated or presented. The provisions of ASU No. 2011-05 are effective for the Companys reporting periods beginning after December 15, 2011 and should be applied retrospectively. Early adoption is permitted and there are no required transition disclosures. The adoption of this ASU is not expected to have a material impact on the Companys consolidated financial statements.
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Investments
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Jun. 30, 2011
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Investments {1} | Â | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Investments |
Note 5 Investments
Investment securities available for sale are summarized as follows:
The following table summarizes the aggregate fair value and gross unrealized loss by length of time those investments have been continuously in an unrealized loss position:
On a quarterly basis, management makes an assessment to determine whether there have been any events or economic circumstances to indicate that a security on which there is an unrealized loss is impaired on an other-than-temporary basis. We consider many factors including the severity and duration of the impairment, recent events specific to the issuer or industry, and for debt securities, external credit ratings and recent downgrades. Securities on which there is an unrealized loss that is deemed to be an other-than-temporary impairment (OTTI) are written down to fair value. For equity securities, the write-down is recorded as a realized loss in noninterest income on our Consolidated Income Statement. For debt securities, if we intend to sell the security or it is likely that we will be required to sell the security before recovering its cost basis, the entire impairment loss would be recognized in earnings as an OTTI. If we do not intend to sell the security and it is not likely that we will be required to sell the security but we do not expect to recover the entire amortized cost basis of the security, only the portion of the impairment loss representing credit losses would be recognized in earnings. The credit loss on a security is measured as the difference between the amortized cost basis and the present value of the cash flows expected to be collected. Projected cash flows are discounted by the original or current effective interest rate depending on the nature of the security being measured for potential OTTI. The remaining impairment related to all other factors, the difference between the present value of the cash flows expected to be collected and fair value, is recognized as a charge to other comprehensive income (OCI). Impairment losses related to all other factors are presented as separate categories within OCI. For the three and six months ended June 30, 2011, we did not have any OTTI losses on investments.
The amortized cost and estimated fair value of investments available for sale at June 30, 2011, by contractual maturity, are shown below. Expected maturities will differ from contractual maturities because borrowers may have the right to call or prepay obligations with or without call or prepayment penalties. Investments not due at a single maturity date, primarily mortgage-backed investments, are shown separately.
We sold $20.6 million of investments during the three months ended June 30, 2011, resulting in gross gains of $751,000. For the six months ended June 30, 2011, we sold $29.8 million of investments resulting in gross gains of $1.3 million.
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Segment Information
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3 Months Ended |
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Jun. 30, 2011
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Segment Information | Â |
Segment Information |
Note 13 Segment Information
Our activities are considered to be a single industry segment for financial reporting purposes. We are engaged in the business of attracting deposits from the general public and originating loans for our portfolio in our primary market area. Substantially all income is derived from a diverse base of commercial and residential real estate loans, consumer lending activities and investments.
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