x
|
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
|
|
For the Quarterly Period Ended September 30, 2011
|
o
|
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
|
|
For the Transition Period from _______ to _______
|
Maryland
|
|
80-0643149
|
(State or other jurisdiction of incorporation or organization)
|
|
(I.R.S. Employer Identification No.)
|
803 Main Street, Willimantic, Connecticut
|
|
06226
|
(Address of principal executive offices)
|
|
(Zip Code)
|
Large Accelerated Filer o | Accelerated Filer o | ||
Non-Accelerated Filer x | Smaller Reporting Company o |
Page No.
|
|||
PART I. FINANCIAL INFORMATION
|
|||
Item 1.
|
Financial Statements (Unaudited):
|
||
|
|||
1
|
|||
2
|
|||
3
|
|||
4
|
|||
6
|
|||
Item 2.
|
35
|
||
Item 3.
|
46
|
||
Item 4.
|
48
|
||
PART II. OTHER INFORMATION
|
|||
Item 1.
|
48
|
||
Item 1A.
|
48
|
||
Item 2.
|
48
|
||
Item 3.
|
49
|
||
Item 4.
|
49
|
||
Item 5.
|
49
|
||
Item 6.
|
49
|
||
50
|
September 30,
2011 |
December 31,
2010 |
|||||||
ASSETS:
|
||||||||
Cash and due from banks:
|
||||||||
Noninterest-bearing
|
$ | 13,110 | $ | 11,204 | ||||
Interest-bearing
|
18,552 | 2,287 | ||||||
Federal funds sold
|
- | 64,830 | ||||||
Total cash and cash equivalents
|
31,662 | 78,321 | ||||||
Trading securities, at fair value
|
- | 248 | ||||||
Available for sale securities, at fair value
|
244,228 | 180,036 | ||||||
Loans held for sale
|
1,588 | 7,371 | ||||||
Loans receivable (net of allowance for loan losses of $5,218 at September 30, 2011and $4,799 at December 31, 2010)
|
615,729 | 606,214 | ||||||
Federal Home Loan Bank stock, at cost
|
8,388 | 8,388 | ||||||
Bank-owned life insurance
|
8,939 | 9,024 | ||||||
Premises and equipment, net
|
12,425 | 12,123 | ||||||
Goodwill and other intangibles
|
4,110 | 4,126 | ||||||
Accrued interest receivable
|
3,653 | 3,113 | ||||||
Deferred tax asset, net
|
5,293 | 5,729 | ||||||
Other real estate owned, net
|
1,069 | 1,285 | ||||||
Prepaid FDIC deposit insurance assessment
|
2,076 | 2,576 | ||||||
Other assets
|
6,162 | 7,855 | ||||||
Total assets
|
$ | 945,322 | $ | 926,409 | ||||
LIABILITIES AND SHAREHOLDERS' EQUITY:
|
||||||||
Liabilities:
|
||||||||
Deposits:
|
||||||||
Noninterest-bearing
|
$ | 77,124 | $ | 66,845 | ||||
Interest-bearing
|
617,237 | 593,869 | ||||||
Total deposits
|
694,361 | 660,714 | ||||||
Mortgagors' and investors' escrow accounts
|
1,584 | 3,425 | ||||||
Federal Home Loan Bank advances
|
100,069 | 114,169 | ||||||
Junior subordinated debt owed to unconsolidated trust
|
8,248 | 8,248 | ||||||
Stock offering escrow
|
- | 48,325 | ||||||
Accrued expenses and other liabilities
|
11,011 | 10,424 | ||||||
Total liabilities
|
815,273 | 845,305 | ||||||
Shareholders' Equity:
|
||||||||
Preferred stock ($.01 par value; 1,000,000 shares authorized; none issued)
|
- | - | ||||||
Common stock ($.01 par value; 35,000,000 and 67,357,500 shares authorized; 10,576,849 and 11,283,503 shares
issued; 10,576,302 and 10,577,369 shares outstanding at September 30, 2011 and December 31, 2010, respectively (1) |
106 | 126 | ||||||
Additional paid-in-capital
|
94,593 | 52,198 | ||||||
Unallocated common shares held by ESOP
|
(5,688 | ) | (2,907 | ) | ||||
Unearned restricted shares
|
(41 | ) | (25 | ) | ||||
Retained earnings
|
41,622 | 40,859 | ||||||
Accumulated other comprehensive loss
|
(538 | ) | (1,108 | ) | ||||
Treasury stock, at cost (547 and 706,134 shares at September 30, 2011 and December 31, 2010, respectively)
|
(5 | ) | (8,039 | ) | ||||
Total shareholders' equity
|
130,049 | 81,104 | ||||||
Total liabilities and shareholders' equity
|
$ | 945,322 | $ | 926,409 |
(1)
|
Common shares for December 31, 2010 have been restated to reflect the January 12, 2011 stock conversion at an exchange ratio of 0.8981.
|
Three Months Ended
September 30, |
Nine Months Ended
September 30, |
|||||||||||||||
2011
|
2010
|
2011
|
2010
|
|||||||||||||
Interest and dividend income:
|
||||||||||||||||
Loans, including fees
|
$ | 7,688 | $ | 8,309 | $ | 23,402 | $ | 25,165 | ||||||||
Securities:
|
||||||||||||||||
Taxable interest
|
1,734 | 1,522 | 5,033 | 4,844 | ||||||||||||
Tax-exempt interest
|
2 | 7 | 4 | 36 | ||||||||||||
Dividends
|
17 | 6 | 60 | 17 | ||||||||||||
Other
|
10 | 32 | 56 | 81 | ||||||||||||
Total interest and dividend income
|
9,451 | 9,876 | 28,555 | 30,143 | ||||||||||||
Interest expense:
|
||||||||||||||||
Deposits
|
1,790 | 2,262 | 5,579 | 7,379 | ||||||||||||
Federal Home Loan Bank advances
|
941 | 1,051 | 2,909 | 3,163 | ||||||||||||
Subordinated debt
|
84 | 44 | 251 | 124 | ||||||||||||
Total interest expense
|
2,815 | 3,357 | 8,739 | 10,666 | ||||||||||||
Net interest income
|
6,636 | 6,519 | 19,816 | 19,477 | ||||||||||||
Provision for loan losses
|
210 | 270 | 610 | 692 | ||||||||||||
Net interest income after provision for loan losses
|
6,426 | 6,249 | 19,206 | 18,785 | ||||||||||||
Noninterest income:
|
||||||||||||||||
Total other-than-temporary impairment losses on securities
|
- | (160 | ) | - | (492 | ) | ||||||||||
Portion of losses recognized in other comprehensive income
|
- | - | - | - | ||||||||||||
Net impairment losses recognized in earnings
|
- | (160 | ) | - | (492 | ) | ||||||||||
Service fees
|
1,233 | 1,248 | 3,624 | 3,825 | ||||||||||||
Wealth management fees
|
989 | 1,011 | 3,106 | 3,065 | ||||||||||||
Increase in cash surrender value of bank-owned life insurance
|
72 | 73 | 215 | 216 | ||||||||||||
Net gain on sale of securities
|
122 | 197 | 340 | 878 | ||||||||||||
Mortgage banking fees
|
189 | 221 | 491 | 576 | ||||||||||||
Net gain (loss) in fair value on trading securities and derivatives
|
71 | (129 | ) | 279 | (129 | ) | ||||||||||
Net loss on disposal of equipment
|
(33 | ) | (5 | ) | (41 | ) | (5 | ) | ||||||||
Other
|
54 | 69 | 228 | 141 | ||||||||||||
Total noninterest income
|
2,697 | 2,525 | 8,242 | 8,075 | ||||||||||||
Noninterest expenses:
|
||||||||||||||||
Salaries and employee benefits
|
4,057 | 3,684 | 12,433 | 11,895 | ||||||||||||
Occupancy and equipment
|
1,450 | 1,433 | 4,373 | 4,197 | ||||||||||||
Computer and electronic banking services
|
986 | 958 | 2,929 | 2,852 | ||||||||||||
Outside professional services
|
273 | 210 | 854 | 746 | ||||||||||||
Marketing and advertising
|
205 | 179 | 606 | 569 | ||||||||||||
Supplies
|
104 | 112 | 371 | 377 | ||||||||||||
FDIC deposit insurance and regulatory assessments
|
110 | 321 | 718 | 989 | ||||||||||||
Contribution to SI Financial Group Foundation
|
- | - | 500 | - | ||||||||||||
Other
|
862 | 777 | 2,286 | 2,351 | ||||||||||||
Total noninterest expenses
|
8,047 | 7,674 | 25,070 | 23,976 | ||||||||||||
Income before income tax provision
|
1,076 | 1,100 | 2,378 | 2,884 | ||||||||||||
Income tax provision
|
336 | 262 | 722 | 840 | ||||||||||||
Net income
|
$ | 740 | $ | 838 | $ | 1,656 | $ | 2,044 | ||||||||
Net income per share:
|
||||||||||||||||
Basic
|
$ | 0.07 | $ | 0.08 | $ | 0.17 | $ | 0.20 | ||||||||
Diluted
|
$ | 0.07 | $ | 0.08 | $ | 0.17 | $ | 0.20 |
Common Stock
|
Additional
Paid-in |
Unallocated
Common |
Unearned
Restricted |
Retained
|
Accumulated
Other |
Treasury
|
Total
Shareholders' |
|||||||||||||||||||||||||||||
Shares
|
Dollars
|
Capital
|
by ESOP
|
Shares
|
Earnings
|
Loss
|
Stock
|
Equity
|
||||||||||||||||||||||||||||
Balance at December 31, 2010
|
12,563,750 | $ | 126 | $ | 52,198 | $ | (2,907 | ) | $ | (25 | ) | $ | 40,859 | $ | (1,108 | ) | $ | (8,039 | ) | $ | 81,104 | |||||||||||||||
Exchange of common stock pursuant to reorganization and concurrent second-step stock offering
|
(1,986,901 | ) | (20 | ) | 42,311 | - | - | - | - | 8,039 | 50,330 | |||||||||||||||||||||||||
Comprehensive income:
|
||||||||||||||||||||||||||||||||||||
Net income
|
- | - | - | - | - | 1,656 | - | - | 1,656 | |||||||||||||||||||||||||||
Net unrealized gain on available for sale securities, net of reclassification adjustment and tax effects
|
- | - | - | - | - | - | 802 | - | 802 | |||||||||||||||||||||||||||
Net unrealized loss on interest-rate swap derivative
|
- | - | - | - | - | - | (232 | ) | - | (232 | ) | |||||||||||||||||||||||||
Total comprehensive income
|
2,226 | |||||||||||||||||||||||||||||||||||
Cash dividends declared ($.09 per share)
|
- | - | - | - | - | (893 | ) | - | - | (893 | ) | |||||||||||||||||||||||||
Restricted shares activity
|
- | - | 22 | - | (22 | ) | - | - | - | - | ||||||||||||||||||||||||||
Equity incentive plan shares earned
|
- | - | 66 | - | 6 | - | - | - | 72 | |||||||||||||||||||||||||||
Shares purchased for ESOP pursuant to reorganization (392,670 shares)
|
- | - | - | (3,141 | ) | - | - | - | - | (3,141 | ) | |||||||||||||||||||||||||
Allocation of 36,477 ESOP shares
|
- | - | (6 | ) | 360 | - | - | - | - | 354 | ||||||||||||||||||||||||||
Tax benefit from share-based compensation
|
- | - | 2 | - | - | - | - | - | 2 | |||||||||||||||||||||||||||
Treasury stock purchased (547 shares)
|
- | - | - | - | - | - | - | (5 | ) | (5 | ) | |||||||||||||||||||||||||
Balance at September 30, 2011
|
10,576,849 | $ | 106 | $ | 94,593 | $ | (5,688 | ) | $ | (41 | ) | $ | 41,622 | $ | (538 | ) | $ | (5 | ) | $ | 130,049 |
Nine Months Ended September 30,
|
||||||||
2011
|
2010
|
|||||||
Cash flows from operating activities:
|
||||||||
Net income
|
$ | 1,656 | $ | 2,044 | ||||
Adjustments to reconcile net income to net cash provided by operating activities:
|
||||||||
Provision for loan losses
|
610 | 692 | ||||||
Employee stock ownership plan expense
|
354 | 150 | ||||||
Equity incentive plan expense
|
72 | 241 | ||||||
Excess tax benefit from share-based compensation
|
(2 | ) | - | |||||
Amortization of investment premiums and discounts, net
|
372 | 318 | ||||||
Amortization of loan premiums and discounts, net
|
1,077 | 513 | ||||||
Depreciation and amortization of premises and equipment
|
1,443 | 1,472 | ||||||
Amortization of core deposit intangible
|
16 | 24 | ||||||
Net gain on sale of securities
|
(340 | ) | (878 | ) | ||||
Net (gain) loss on trading securities and derivatives
|
(279 | ) | 129 | |||||
Deferred income tax provision (benefit)
|
140 | (846 | ) | |||||
Loans originated for sale
|
(26,665 | ) | (34,812 | ) | ||||
Proceeds from sale of loans held for sale
|
32,485 | 28,270 | ||||||
Net gain on sale of loans
|
(346 | ) | (419 | ) | ||||
Net loss on disposal of equipment
|
41 | 5 | ||||||
Net loss on sales or write-downs of other real estate owned
|
212 | 330 | ||||||
Increase in cash surrender value of bank-owned life insurance
|
(215 | ) | (216 | ) | ||||
Gain on bank-owned life insurance proceeds
|
(122 | ) | - | |||||
Other-than-temporary impairment losses on securities
|
- | 492 | ||||||
Change in operating assets and liabilities:
|
||||||||
Accrued interest receivable
|
(540 | ) | 48 | |||||
Other assets
|
1,830 | 1,073 | ||||||
Accrued expenses and other liabilities
|
58 | 1,783 | ||||||
Net cash provided by operating activities
|
11,857 | 413 | ||||||
Cash flows from investing activities:
|
||||||||
Purchases of available for sale securities
|
(133,780 | ) | (71,538 | ) | ||||
Proceeds from sales of available for sale securities
|
36,400 | 40,144 | ||||||
Proceeds from maturities of and principal repayments on available for sale securities
|
34,803 | 44,992 | ||||||
Net decrease in loans
|
29,526 | 29,421 | ||||||
Purchases of loans
|
(41,197 | ) | (29,337 | ) | ||||
Proceeds from sale of other real estate owned
|
473 | 2,888 | ||||||
Purchases of premises and equipment
|
(1,786 | ) | (690 | ) | ||||
Proceeds from bank-owned life insurance
|
602 | - | ||||||
Net cash (used in) provided by investing activities
|
(74,959 | ) | 15,880 | |||||
Cash flows from financing activities:
|
||||||||
Net increase in deposits
|
33,647 | 15,511 | ||||||
Net decrease in mortgagors' and investors' escrow accounts
|
(1,841 | ) | (1,895 | ) | ||||
Proceeds from Federal Home Loan Bank advances
|
19,000 | 23,355 | ||||||
Repayments of Federal Home Loan Bank advances
|
(33,100 | ) | (25,286 | ) | ||||
Net proceeds from common stock offering
|
2,774 | - | ||||||
Excess tax benefit from share-based compensation
|
2 | - | ||||||
Purchase of shares by ESOP pursuant to reorganization
|
(3,141 | ) | - | |||||
Cash dividends on common stock
|
(893 | ) | (250 | ) | ||||
Treasury stock purchased
|
(5 | ) | (74 | ) | ||||
Net cash provided by financing activities
|
16,443 | 11,361 |
Nine Months Ended September 30,
|
||||||||
2011
|
2010
|
|||||||
Net change in cash and cash equivalents
|
(46,659 | ) | 27,654 | |||||
Cash and cash equivalents at beginning of period
|
78,321 | 24,204 | ||||||
Cash and cash equivalents at end of period
|
$ | 31,662 | $ | 51,858 | ||||
Supplemental cash flow information:
|
||||||||
Interest paid
|
$ | 8,766 | $ | 10,672 | ||||
Income taxes paid, net
|
510 | 204 | ||||||
Transfer of stock offering escrow for issuance of common shares
|
47,556 | - | ||||||
Transfer of loans to other real estate owned
|
469 | 1,794 |
|
o
|
Specific allowance for identified impaired loans. For loans that are identified as impaired, an allowance is established when the present value of expected cash flows (or observable market price of loan or fair value of the collateral if the loan is collateral dependent) of the impaired loan is lower than the carrying value of that loan.
|
|
o
|
General valuation allowance. The general component represents a valuation allowance on the remainder of the loan portfolio, after excluding impaired loans. For this portion of the allowance, loans are segregated by category and assigned an allowance percentage based on historical loan loss experience adjusted for qualitative factors stratified by the following loan segments: residential one- to four-family, multi-family and commercial real estate, construction, commercial business and consumer.
|
|
o
|
Unallocated allowance. An unallocated component is maintained to cover uncertainties that could affect management’s estimate of probable losses. The unallocated component of the allowance reflects the margin of imprecision inherent in the underlying assumptions used in the methodologies for estimating specific and general losses in the portfolio.
|
Three Months Ended
September 30, |
Nine Months Ended
September 30, |
|||||||||||||||
2011
|
2010
|
2011
|
2010
|
|||||||||||||
(In Thousands, Except Share Amounts)
|
||||||||||||||||
Net income
|
$ | 740 | $ | 838 | $ | 1,656 | $ | 2,044 | ||||||||
Weighted average common shares outstanding:(1)
|
||||||||||||||||
Basic
|
9,947,040 | 10,301,905 | 9,998,136 | 10,299,858 | ||||||||||||
Effect of dilutive stock options
|
20,656 | 4,066 | 20,940 | 2,052 | ||||||||||||
Diluted
|
9,967,696 | 10,305,971 | 10,019,076 | 10,301,910 | ||||||||||||
Net income per share: (1)
|
||||||||||||||||
Basic
|
$ | 0.07 | $ | 0.08 | $ | 0.17 | $ | 0.20 | ||||||||
Diluted
|
$ | 0.07 | $ | 0.08 | $ | 0.17 | $ | 0.20 |
(1)
|
The number of shares outstanding, and resulting net income per share, for the three and nine months ended September 30, 2010 has been restated to reflect that on January 12, 2011, each outstanding share was converted to 0.8981 shares of Company common stock in connection with the Conversion.
|
September 30, 2011
|
||||||||||||||||
Amortized
Cost (1) |
Gross
Unrealized |
Gross
Unrealized |
Fair
Value |
|||||||||||||
(In Thousands)
|
||||||||||||||||
Debt securities:
|
||||||||||||||||
U.S. Government and agency obligations
|
$ | 84,912 | $ | 499 | $ | (169 | ) | $ | 85,242 | |||||||
Government-sponsored enterprises
|
25,154 | 562 | - | 25,716 | ||||||||||||
Mortgage-backed securities:(2)
|
||||||||||||||||
Agency - residential
|
93,076 | 3,541 | (111 | ) | 96,506 | |||||||||||
Non-agency - residential
|
8,553 | 39 | (892 | ) | 7,700 | |||||||||||
Non-agency - HELOC
|
3,312 | - | (613 | ) | 2,699 | |||||||||||
Corporate debt securities
|
14,114 | 254 | (251 | ) | 14,117 | |||||||||||
Collateralized debt obligations
|
6,349 | - | (3,317 | ) | 3,032 | |||||||||||
Obligations of state and political subdivisions
|
6,643 | 292 | - | 6,935 | ||||||||||||
Tax-exempt securities
|
140 | 2 | - | 142 | ||||||||||||
Foreign government securities
|
75 | - | - | 75 | ||||||||||||
Total debt securities
|
242,328 | 5,189 | (5,353 | ) | 242,164 | |||||||||||
Equity securities:
|
||||||||||||||||
Equity securities - financial services
|
538 | 67 | (62 | ) | 543 | |||||||||||
Equity securities - other
|
1,696 | 39 | (214 | ) | 1,521 | |||||||||||
Total equity securities
|
2,234 | 106 | (276 | ) | 2,064 | |||||||||||
Total available for sale securities
|
$ | 244,562 | $ | 5,295 | $ | (5,629 | ) | $ | 244,228 |
(1)
|
Net of OTTI write-downs recognized in earnings.
|
(2)
|
Agency securities refer to debt obligations issued or guaranteed by government corporations or government-sponsored enterprises (“GSEs”). Non-agency securities, or private-label securities, are the sole obligation of their issuer and are not guaranteed by one of the GSEs or the U.S. Government.
|
December 31, 2010
|
||||||||||||||||
Amortized
Cost (1) |
Gross
Unrealized |
Gross
Unrealized |
Fair
Value |
|||||||||||||
(In Thousands)
|
||||||||||||||||
Debt securities:
|
||||||||||||||||
U.S. Government and agency obligations
|
$ | 23,399 | $ | 197 | $ | (13 | ) | $ | 23,583 | |||||||
Government-sponsored enterprises
|
29,912 | 283 | (202 | ) | 29,993 | |||||||||||
Mortgage-backed securities:(2)
|
||||||||||||||||
Agency - residential
|
84,408 | 3,132 | (170 | ) | 87,370 | |||||||||||
Non-agency - residential
|
11,039 | 127 | (711 | ) | 10,455 | |||||||||||
Non-agency - HELOC
|
3,797 | - | (598 | ) | 3,199 | |||||||||||
Corporate debt securities
|
14,502 | 252 | (37 | ) | 14,717 | |||||||||||
Collateralized debt obligations
|
6,466 | - | (3,934 | ) | 2,532 | |||||||||||
Obligations of state and political subdivisions
|
6,800 | 157 | (52 | ) | 6,905 | |||||||||||
Tax-exempt securities
|
140 | 4 | - | 144 | ||||||||||||
Foreign government securities
|
100 | - | - | 100 | ||||||||||||
Total debt securities
|
180,563 | 4,152 | (5,717 | ) | 178,998 | |||||||||||
Equity securities:
|
||||||||||||||||
Equity securities - financial services
|
1,024 | 27 | (13 | ) | 1,038 | |||||||||||
Total available for sale securities
|
$ | 181,587 | $ | 4,179 | $ | (5,730 | ) | $ | 180,036 |
(1)
|
Net of OTTI write-downs recognized in earnings.
|
(2)
|
Agency securities refer to debt obligations issued or guaranteed by government corporations or GSEs. Non-agency securities, or private-label securities, are the sole obligation of their issuer and are not guaranteed by one of the GSEs or the U.S. Government.
|
Amortized
Cost |
Fair
Value |
|||||||
(In Thousands)
|
||||||||
Within 1 year
|
$ | 6,593 | $ | 6,661 | ||||
After 1 but within 5 years
|
37,529 | 38,271 | ||||||
After 5 but within 10 years
|
12,053 | 12,104 | ||||||
After 10 years
|
81,212 | 78,223 | ||||||
137,387 | 135,259 | |||||||
Mortgage-backed securities
|
104,941 | 106,905 | ||||||
Total debt securities
|
$ | 242,328 | $ | 242,164 |
Three Months Ended
September 30, |
Nine Months Ended
September 30, |
|||||||||||||||
2011
|
2010
|
2011
|
2010
|
|||||||||||||
(In Thousands)
|
(In Thousands)
|
|||||||||||||||
Gross gains on sales
|
$ | 147 | $ | 197 | $ | 413 | $ | 1,096 | ||||||||
Gross losses on sales
|
(25 | ) | - | (73 | ) | (218 | ) | |||||||||
Net gain on sale of securities
|
$ | 122 | $ | 197 | $ | 340 | $ | 878 |
Less Than 12 Months
|
12 Months Or More
|
Total
|
||||||||||||||||||||||
September 30, 2011:
|
Fair
Value |
Unrealized
Losses |
Fair
Value |
Unrealized
Losses |
Fair
Value |
Unrealized
Losses |
||||||||||||||||||
(In Thousands)
|
||||||||||||||||||||||||
U.S. Government and agency obligations
|
$ | 43,564 | $ | 163 | $ | 458 | $ | 6 | $ | 44,022 | $ | 169 | ||||||||||||
Mortgage-backed securities:
|
||||||||||||||||||||||||
Agency - residential
|
4,464 | 31 | 2,916 | 80 | 7,380 | 111 | ||||||||||||||||||
Non-agency - residential
|
328 | 7 | 5,314 | 885 | 5,642 | 892 | ||||||||||||||||||
Non-agency - HELOC
|
- | - | 2,699 | 613 | 2,699 | 613 | ||||||||||||||||||
Corporate debt securities
|
3,465 | 246 | 995 | 5 | 4,460 | 251 | ||||||||||||||||||
Collateralized debt obligations
|
- | - | 3,032 | 3,317 | 3,032 | 3,317 | ||||||||||||||||||
Equity securities - financial services
|
188 | 62 | - | - | 188 | 62 | ||||||||||||||||||
Equity securities - other
|
1,005 | 214 | - | - | 1,005 | 214 | ||||||||||||||||||
Total
|
$ | 53,014 | $ | 723 | $ | 15,414 | $ | 4,906 | $ | 68,428 | $ | 5,629 |
Less Than 12 Months
|
12 Months Or More
|
Total
|
||||||||||||||||||||||
December 31, 2010:
|
Fair
Value |
Unrealized
Losses |
Fair
Value |
Unrealized
Losses |
Fair
Value |
Unrealized
Losses |
||||||||||||||||||
(In Thousands)
|
||||||||||||||||||||||||
U.S. Government and agency obligations
|
$ | 2,053 | $ | 4 | $ | 858 | $ | 9 | $ | 2,911 | $ | 13 | ||||||||||||
Government-sponsored enterprises
|
16,636 | 202 | - | - | 16,636 | 202 | ||||||||||||||||||
Mortgage-backed securities:
|
||||||||||||||||||||||||
Agency - residential
|
15,881 | 170 | - | - | 15,881 | 170 | ||||||||||||||||||
Non-agency - residential
|
2,805 | 9 | 6,512 | 702 | 9,317 | 711 | ||||||||||||||||||
Non-agency - HELOC
|
- | - | 3,198 | 598 | 3,198 | 598 | ||||||||||||||||||
Corporate debt securities
|
3,667 | 37 | - | - | 3,667 | 37 | ||||||||||||||||||
Collateralized debt obligations
|
28 | 60 | 2,504 | 3,874 | 2,532 | 3,934 | ||||||||||||||||||
Obligations of state and political subdivisions
|
1,493 | 52 | - | - | 1,493 | 52 | ||||||||||||||||||
Equity securities - financial services
|
- | - | 747 | 13 | 747 | 13 | ||||||||||||||||||
Total
|
$ | 42,563 | $ | 534 | $ | 13,819 | $ | 5,196 | $ | 56,382 | $ | 5,730 |
Security
|
Class (1)
|
Amortized
Cost |
Gross
Unrealized |
Gross
Unrealized |
Fair
Value |
Lowest
Credit |
Total
Credit- |
Credit
Support |
||||||||||||||||||
|
||||||||||||||||||||||||||
MBS 1
|
SSNR, AS
|
$ | 2,354 | $ | - | $ | 576 | $ | 1,778 |
CCC
|
$ | - | 0.49 | |||||||||||||
MBS 2
|
SSUP, AS
|
56 | 27 | - | 83 |
CC
|
1,059 | 0.00 | ||||||||||||||||||
MBS 3
|
PT, AS
|
335 | - | 7 | 328 |
CC
|
- | 0.72 | ||||||||||||||||||
MBS 4
|
CSTR
|
3,845 | - | 309 | 3,536 |
BB-
|
- | 2.64 | ||||||||||||||||||
MBS 5
|
PT, AS
|
1,751 | 10 | - | 1,761 |
B
|
- | 1.40 | ||||||||||||||||||
$ | 8,341 | $ | 37 | $ | 892 | $ | 7,486 | $ | 1,059 |
(1)
|
Class definitions: PT – Pass Through, AS – Accelerated, SSNR – Super Senior, SSUP – Senior Support and CSTR – Collateral Strip Interest.
|
(2)
|
The Company utilized credit ratings provided by Moody’s, S&P and Fitch in its evaluation of issuers.
|
(3)
|
The OTTI amounts provided in the table represent cumulative credit loss amounts through September 30, 2011.
|
(4)
|
The credit support coverage ratio, which is the ratio that determines the multiple of credit support, is based on assumptions for the performance of loans within the delinquency pipeline. The assumptions used are: current collateral support/((60 day delinquencies x .60) + (90 day delinquencies x .70) + (foreclosures x 1.00) + (other real estate x 1.00)) x .40 for loss severity.
|
Security
|
Class
|
Amortized
Cost |
Gross
Unrealized |
Gross
Unrealized |
Fair
Value |
Lowest
Credit |
Total
Credit- |
% of Current
Performing |
|||||||||||||||||||||
|
|||||||||||||||||||||||||||||
CDO 1
|
B1 | $ | 1,000 | $ | - | $ | 787 | $ | 213 |
CCC-
|
$ | - | 102.2 | ||||||||||||||||
CDO 2
|
B3 | 1,000 | - | 785 | 215 |
CCC-
|
- | 102.2 | |||||||||||||||||||||
CDO 3
|
A2 | 2,640 | - | 1,196 | 1,444 |
CCC-
|
- | 110.9 | |||||||||||||||||||||
CDO 4
|
A1 | 1,709 | - | 549 | 1,160 |
CCC
|
- | 143.9 | |||||||||||||||||||||
$ | 6,349 | $ | - | $ | 3,317 | $ | 3,032 | $ | - |
(1)
|
The Company utilized credit ratings provided by Moody’s, S&P and Fitch in its evaluation of issuers.
|
Three Months Ended
September 30, 2011 |
Nine Months Ended
September 30, 2011 |
|||||||
(In Thousands)
|
||||||||
Balance at beginning of period
|
$ | 1,059 | $ | 1,093 | ||||
Amounts related to credit for which OTTI losses were not previously recognized
|
- | - | ||||||
Additional credit losses for which OTTI losses were previously recognized
|
- | - | ||||||
Reduction for securities sold during the period (realized)
|
- | (34 | ) | |||||
Balance at end of period
|
$ | 1,059 | $ | 1,059 |
September 30,
2011 |
December 31,
2010 |
|||||||
(In Thousands)
|
||||||||
Real estate loans:
|
||||||||
Residential - 1 to 4 family
|
$ | 255,816 | $ | 270,923 | ||||
Multi-family and commercial
|
150,969 | 160,015 | ||||||
Construction
|
13,353 | 6,952 | ||||||
Total real estate loans
|
420,138 | 437,890 | ||||||
Commercial business loans:
|
||||||||
SBA & USDA guaranteed
|
140,959 | 116,492 | ||||||
Other
|
27,385 | 26,310 | ||||||
Total commercial business loans
|
168,344 | 142,802 | ||||||
Consumer loans:
|
||||||||
Home equity
|
28,082 | 25,533 | ||||||
Other
|
2,730 | 3,167 | ||||||
Total consumer loans
|
30,812 | 28,700 | ||||||
Total loans
|
619,294 | 609,392 | ||||||
Deferred loan origination costs, net of fees
|
1,653 | 1,621 | ||||||
Allowance for loan losses
|
(5,218 | ) | (4,799 | ) | ||||
Loans receivable, net
|
$ | 615,729 | $ | 606,214 |
Three Months Ended
September 30, 2011 |
Residential -
1 to 4 Family |
Multi-family
and Commercial |
Construction
|
Commercial
Business |
Consumer
|
Total
|
||||||||||||||||||
(In Thousands)
|
||||||||||||||||||||||||
Balance at beginning of period
|
$ | 904 | $ | 2,508 | $ | 156 | $ | 776 | $ | 417 | $ | 4,761 | ||||||||||||
Provision (benefit) for loan losses
|
35 | 160 | (107 | ) | 109 | 13 | 210 | |||||||||||||||||
Loans charged-off
|
(22 | ) | (26 | ) | - | (16 | ) | (1 | ) | (65 | ) | |||||||||||||
Recoveries of loans previously charged-off
|
- | 15 | 265 | 31 | 1 | 312 | ||||||||||||||||||
Balance at end of period
|
$ | 917 | $ | 2,657 | $ | 314 | $ | 900 | $ | 430 | $ | 5,218 |
Nine Months Ended
September 30, 2011 |
Residential -
1 to 4 Family |
Multi-family
and Commercial |
Construction
|
Commercial
Business |
Consumer
|
Total
|
||||||||||||||||||
(In Thousands)
|
||||||||||||||||||||||||
Balance at beginning of period
|
$ | 915 | $ | 2,700 | $ | 64 | $ | 790 | $ | 330 | $ | 4,799 | ||||||||||||
Provision for loan losses
|
313 | - | 49 | 123 | 125 | 610 | ||||||||||||||||||
Loans charged-off
|
(311 | ) | (58 | ) | (83 | ) | (47 | ) | (26 | ) | (525 | ) | ||||||||||||
Recoveries of loans previously charged-off
|
- | 15 | 284 | 34 | 1 | 334 | ||||||||||||||||||
Balance at end of period
|
$ | 917 | $ | 2,657 | $ | 314 | $ | 900 | $ | 430 | $ | 5,218 |
Three Months Ended
September 30, 2010 |
Residential -
1 to 4 Family |
Multi-family
and Commercial |
Construction
|
Commercial
Business |
Consumer
|
Total
|
||||||||||||||||||
(In Thousands)
|
||||||||||||||||||||||||
Balance at beginning of period
|
$ | 984 | $ | 2,593 | $ | 159 | $ | 833 | $ | 309 | $ | 4,878 | ||||||||||||
Provision (benefit) for loan losses
|
38 | 162 | (13 | ) | 45 | 38 | 270 | |||||||||||||||||
Loans charged-off
|
(114 | ) | - | - | (33 | ) | (16 | ) | (163 | ) | ||||||||||||||
Recoveries of loans previously charged-off
|
- | 11 | - | - | - | 11 | ||||||||||||||||||
Balance at end of period
|
$ | 908 | $ | 2,766 | $ | 146 | $ | 845 | $ | 331 | $ | 4,996 |
Nine Months Ended
September 30, 2010 |
Residential -
1 to 4 Family |
Multi-family
and Commercial |
Construction
|
Commercial
Business |
Consumer
|
Total
|
||||||||||||||||||
(In Thousands)
|
||||||||||||||||||||||||
Balance at beginning of period
|
$ | 1,028 | $ | 2,443 | $ | 221 | $ | 906 | $ | 293 | $ | 4,891 | ||||||||||||
Provision (benefit) for loan losses
|
137 | 531 | (75 | ) | 19 | 80 | 692 | |||||||||||||||||
Loans charged-off
|
(258 | ) | (222 | ) | - | (81 | ) | (44 | ) | (605 | ) | |||||||||||||
Recoveries of loans previously charged-off
|
1 | 14 | - | 1 | 2 | 18 | ||||||||||||||||||
Balance at end of period
|
$ | 908 | $ | 2,766 | $ | 146 | $ | 845 | $ | 331 | $ | 4,996 |
September 30, 2011
|
Residential -
1 to 4 Family |
Multi-family
and Commercial |
Construction
|
Commercial
Business |
Consumer
|
Total
|
||||||||||||||||||
(In Thousands)
|
||||||||||||||||||||||||
Allowance for loans individually evaluated for impairment
|
$ | 283 | $ | 503 | $ | - | $ | 118 | $ | 14 | $ | 918 | ||||||||||||
Allowance for loans collectively evaluated for impairment
|
634 | 2,154 | 314 | 782 | 416 | 4,300 | ||||||||||||||||||
Total loan loss allowance
|
$ | 917 | $ | 2,657 | $ | 314 | $ | 900 | $ | 430 | $ | 5,218 | ||||||||||||
Loans individually evaluated for impairment
|
$ | 6,184 | $ | 9,313 | $ | - | $ | 929 | $ | 332 | $ | 16,758 | ||||||||||||
Loans collectively evaluated for impairment
|
249,632 | 141,656 | 13,353 | 167,415 | 30,480 | 602,536 | ||||||||||||||||||
Total loans
|
$ | 255,816 | $ | 150,969 | $ | 13,353 | $ | 168,344 | $ | 30,812 | $ | 619,294 |
December 31, 2010
|
Residential -
1 to 4 Family |
Multi-family
and Commercial |
Construction
|
Commercial
Business |
Consumer
|
Total
|
||||||||||||||||||
(In Thousands)
|
||||||||||||||||||||||||
Allowance for loans individually evaluated for impairment
|
$ | 212 | $ | 290 | $ | - | $ | - | $ | - | $ | 502 | ||||||||||||
Allowance for loans collectively evaluated for impairment
|
703 | 2,410 | 64 | 790 | 330 | 4,297 | ||||||||||||||||||
Total loan loss allowance
|
$ | 915 | $ | 2,700 | $ | 64 | $ | 790 | $ | 330 | $ | 4,799 | ||||||||||||
Loans individually evaluated for impairment
|
$ | 3,768 | $ | 6,169 | $ | 82 | $ | 116 | $ | 51 | $ | 10,186 | ||||||||||||
Loans collectively evaluated for impairment
|
267,155 | 153,846 | 6,870 | 142,686 | 28,649 | 599,206 | ||||||||||||||||||
Total loans
|
$ | 270,923 | $ | 160,015 | $ | 6,952 | $ | 142,802 | $ | 28,700 | $ | 609,392 |
September 30, 2011
|
30-59
Days
Past Due |
60-89
Days
Past Due |
Greater Than
90 Days |
Total 30
Days or More |
Current
|
Total
Loans |
Past Due 90
Days or More |
|||||||||||||||||||||
(In Thousands)
|
||||||||||||||||||||||||||||
Real Estate:
|
||||||||||||||||||||||||||||
Residential - 1 to 4 family
|
$ | - | $ | 782 | $ | 3,981 | $ | 4,763 | $ | 251,053 | $ | 255,816 | $ | - | ||||||||||||||
Multi-family and commercial
|
1,565 | 1,011 | 2,250 | 4,826 | 146,143 | 150,969 | - | |||||||||||||||||||||
Construction
|
- | - | - | - | 13,353 | 13,353 | - | |||||||||||||||||||||
Commercial Business:
|
||||||||||||||||||||||||||||
SBA & USDA guaranteed
|
2,516 | 119 | - | 2,635 | 138,324 | 140,959 | - | |||||||||||||||||||||
Other
|
- | 31 | 865 | 896 | 26,489 | 27,385 | - | |||||||||||||||||||||
Consumer:
|
||||||||||||||||||||||||||||
Home equity
|
- | - | 284 | 284 | 27,798 | 28,082 | - | |||||||||||||||||||||
Other
|
29 | - | - | 29 | 2,701 | 2,730 | - | |||||||||||||||||||||
Total
|
$ | 4,110 | $ | 1,943 | $ | 7,380 | $ | 13,433 | $ | 605,861 | $ | 619,294 | $ | - |
December 31, 2010
|
30-59
Days
Past Due |
60-89
Days
Past Due |
Greater Than
90 Days |
Total 30
Days or More |
Current
|
Total
Loans |
Past Due 90
Days or More |
|||||||||||||||||||||
(In Thousands)
|
||||||||||||||||||||||||||||
Real Estate:
|
||||||||||||||||||||||||||||
Residential - 1 to 4 family
|
$ | 2,387 | $ | 1,291 | $ | 2,364 | $ | 6,042 | $ | 264,881 | $ | 270,923 | $ | - | ||||||||||||||
Multi-family and commercial
|
597 | - | 44 | 641 | 159,374 | 160,015 | - | |||||||||||||||||||||
Construction
|
- | - | 82 | 82 | 6,870 | 6,952 | - | |||||||||||||||||||||
Commercial Business:
|
||||||||||||||||||||||||||||
SBA & USDA guaranteed
|
10,718 | - | - | 10,718 | 105,774 | 116,492 | - | |||||||||||||||||||||
Other
|
- | - | 46 | 46 | 26,264 | 26,310 | - | |||||||||||||||||||||
Consumer:
|
||||||||||||||||||||||||||||
Home equity
|
25 | 50 | - | 75 | 25,458 | 25,533 | - | |||||||||||||||||||||
Other
|
10 | 1 | - | 11 | 3,156 | 3,167 | - | |||||||||||||||||||||
Total
|
$ | 13,737 | $ | 1,342 | $ | 2,536 | $ | 17,615 | $ | 591,777 | $ | 609,392 | $ | - |
Impaired Loans
|
||||||||||||||||
September 30, 2011
|
Recorded
Investment |
Unpaid
Principal |
Related
Allowance |
Nonaccrual
Loans |
||||||||||||
(In Thousands)
|
||||||||||||||||
Impaired loans without valuation allowance:
|
||||||||||||||||
Residential - 1 to 4 family
|
$ | 4,426 | $ | 4,426 | $ | - | $ | 3,561 | ||||||||
Multi-family and commercial
|
3,184 | 3,184 | - | 1,631 | ||||||||||||
Commercial business - Other
|
699 | 784 | - | 699 | ||||||||||||
Consumer - Home equity
|
232 | 232 | - | 232 | ||||||||||||
Total impaired loans without valuation allowance
|
8,541 | 8,626 | - | 6,123 | ||||||||||||
Impaired loans with valuation allowance:
|
||||||||||||||||
Residential - 1 to 4 family
|
1,758 | 1,758 | 283 | 1,758 | ||||||||||||
Multi-family and commercial
|
6,129 | 6,129 | 503 | 1,220 | ||||||||||||
Commercial business - Other
|
230 | 230 | 118 | 230 | ||||||||||||
Consumer - Home equity
|
100 | 100 | 14 | 100 | ||||||||||||
Total impaired loans with valuation allowance
|
8,217 | 8,217 | 918 | 3,308 | ||||||||||||
Total impaired loans
|
$ | 16,758 | $ | 16,843 | $ | 918 | $ | 9,431 |
Impaired Loans
|
||||||||||||||||
December 31, 2010
|
Recorded
Investment |
Unpaid
Principal |
Related
Allowance |
Nonaccrual
Loans |
||||||||||||
(In Thousands)
|
||||||||||||||||
Impaired loans without valuation allowance:
|
||||||||||||||||
Residential - 1 to 4 family
|
$ | 3,212 | $ | 3,212 | $ | - | $ | 2,345 | ||||||||
Multi-family and commercial
|
1,513 | 1,513 | - | 853 | ||||||||||||
Construction
|
82 | 990 | - | 82 | ||||||||||||
Commercial business - Other
|
116 | 201 | - | 116 | ||||||||||||
Consumer - Home equity
|
51 | 51 | - | 51 | ||||||||||||
Total impaired loans without valuation allowance
|
4,974 | 5,967 | - | 3,447 | ||||||||||||
Impaired loans with valuation allowance:
|
||||||||||||||||
Residential - 1 to 4 family
|
556 | 556 | 212 | 556 | ||||||||||||
Multi-family and commercial
|
4,656 | 4,656 | 290 | 922 | ||||||||||||
Total impaired loans with valuation allowance
|
5,212 | 5,212 | 502 | 1,478 | ||||||||||||
Total impaired loans
|
$ | 10,186 | $ | 11,179 | $ | 502 | $ | 4,925 |
Three Months Ended September 30, 2011
|
Nine Months Ended September 30, 2011
|
|||||||||||||||||||||||
Average Recorded
Investment in |
Interest Income
Recognized on |
Cash Interest
Income Received |
Average Recorded
Investment in |
Interest Income
Recognized on |
Cash Interest
Income Received |
|||||||||||||||||||
(In Thousands)
|
||||||||||||||||||||||||
Residential - 1 to 4 family
|
$ | 6,210 | $ | 27 | $ | 71 | $ | 5,284 | $ | 51 | $ | 152 | ||||||||||||
Multi-family and commercial
|
8,329 | 73 | 93 | 7,414 | 211 | 278 | ||||||||||||||||||
Construction
|
- | - | - | 20 | - | - | ||||||||||||||||||
Commercial business - Other
|
490 | - | 2 | 287 | - | 2 | ||||||||||||||||||
Consumer - Home equity
|
234 | - | 2 | 117 | - | 2 | ||||||||||||||||||
Total
|
$ | 15,263 | $ | 100 | $ | 168 | $ | 13,122 | $ | 262 | $ | 434 |
Three Months Ended September 30, 2010
|
Nine Months Ended September 30, 2010
|
|||||||||||||||||||||||
Average Recorded
Investment in |
Interest Income
Recognized on |
Cash Interest
Income Received |
Average Recorded
Investment in |
Interest Income
Recognized on |
Cash Interest
Income Received |
|||||||||||||||||||
(In Thousands)
|
||||||||||||||||||||||||
Residential - 1 to 4 family
|
$ | 2,739 | $ | - | $ | 9 | $ | 2,782 | $ | 1 | $ | 32 | ||||||||||||
Multi-family and commercial
|
3,510 | - | 14 | 2,419 | 76 | 105 | ||||||||||||||||||
Construction
|
375 | - | - | 375 | - | - | ||||||||||||||||||
Commercial business - Other
|
295 | 2 | 1 | 177 | 3 | 5 | ||||||||||||||||||
Total
|
$ | 6,919 | $ | 2 | $ | 24 | $ | 5,753 | $ | 80 | $ | 142 |
|
o
|
Pass (Ratings 1-4): Loans in these categories are considered low to average risk.
|
|
o
|
Special Mention (Rating 5): Loans in this category are starting to show signs of potential weakness and are being closely monitored by management.
|
|
o
|
Substandard (Rating 6): Generally, a loan is considered substandard if it is inadequately protected by the current net worth and paying capacity of the obligors and/or the collateral pledged. There is a distinct possibility that the Company will sustain some loss if the weakness is not corrected.
|
|
o
|
Doubtful (Rating 7): Loans classified as doubtful have all the weaknesses inherent in those classified substandard with the added characteristic that the weaknesses make collection or liquidation in full, on the basis of currently existing facts, highly questionable and improbable.
|
|
o
|
Loss (Rating 8): Loans in this category are considered uncollectible and of such little value that their continuance as loans is not warranted.
|
Real Estate Loans
|
Commercial Business
|
Consumer
|
||||||||||||||||||||||||||||||
September 30, 2011
|
Residential -
1 to 4 Family |
Multi-family
and Commercial |
Construction
|
SBA &
USDA
|
Other
|
Home
Equity |
Other
|
Total
Loans |
||||||||||||||||||||||||
(In Thousands)
|
||||||||||||||||||||||||||||||||
Not Rated
|
$ | - | $ | - | $ | - | $ | 140,959 | $ | - | $ | - | $ | - | $ | 140,959 | ||||||||||||||||
Pass
|
249,493 | 124,868 | 12,605 | - | 21,498 | 27,750 | 2,730 | 438,944 | ||||||||||||||||||||||||
Special Mention
|
823 | 12,903 | 748 | - | 2,007 | - | - | 16,481 | ||||||||||||||||||||||||
Substandard
|
5,500 | 13,198 | - | - | 3,849 | 332 | - | 22,879 | ||||||||||||||||||||||||
Doubtful
|
- | - | - | - | 31 | - | - | 31 | ||||||||||||||||||||||||
Loss
|
- | - | - | - | - | - | - | - | ||||||||||||||||||||||||
Total
|
$ | 255,816 | $ | 150,969 | $ | 13,353 | $ | 140,959 | $ | 27,385 | $ | 28,082 | $ | 2,730 | $ | 619,294 |
Real Estate Loans
|
Commercial Business
|
Consumer
|
||||||||||||||||||||||||||||||
December 31, 2010
|
Residential -
1 to 4 Family |
Multi-family
and Commercial |
Construction
|
SBA &
USDA |
Other
|
Home
Equity
|
Other
|
Total
Loans |
||||||||||||||||||||||||
(In Thousands)
|
||||||||||||||||||||||||||||||||
Not Rated
|
$ | - | $ | - | $ | - | $ | 116,492 | $ | - | $ | - | $ | - | $ | 116,492 | ||||||||||||||||
Pass
|
267,023 | 134,484 | 6,504 | - | 20,105 | 25,483 | 3,166 | 456,765 | ||||||||||||||||||||||||
Special Mention
|
834 | 16,260 | 366 | - | 2,896 | - | - | 20,356 | ||||||||||||||||||||||||
Substandard
|
3,066 | 9,271 | 82 | - | 3,239 | 50 | 1 | 15,709 | ||||||||||||||||||||||||
Doubtful
|
- | - | - | - | 70 | - | - | 70 | ||||||||||||||||||||||||
Loss
|
- | - | - | - | - | - | - | - | ||||||||||||||||||||||||
Total
|
$ | 270,923 | $ | 160,015 | $ | 6,952 | $ | 116,492 | $ | 26,310 | $ | 25,533 | $ | 3,167 | $ | 609,392 |
Three Months Ended September 30, 2011
|
Nine Months Ended September 30, 2011
|
|||||||||||||||||||||||
Number
of Loans |
Recorded
Investment |
Allowance for
Loan Losses |
Number
of Loans |
Recorded
Investment |
Allowance for
Loan Losses |
|||||||||||||||||||
(Dollars In Thousands)
|
||||||||||||||||||||||||
Residential - 1 to 4 family
|
- | $ | - | $ | - | 2 | $ | 865 | $ | - | ||||||||||||||
Multi-family and commercial
|
2 | 1,656 | 21 | 10 | 7,357 | 477 | ||||||||||||||||||
Total
|
2 | $ | 1,656 | $ | 21 | 12 | $ | 8,222 | $ | 477 |
Three Months Ended
September 30, 2011 |
Nine Months Ended
September 30, 2011 |
|||||||
(In Thousands)
|
||||||||
Interest Rate Adjustments
|
$ | - | $ | 2,504 | ||||
Principal Deferrals (1)
|
439 | 3,150 | ||||||
Combination of Rate and Payment (2)
|
1,217 | 2,568 | ||||||
Total
|
$ | 1,656 | $ | 8,222 |
|
(1)
|
Terms of modifications include temporary interest-only payments with deferral of principal.
|
|
(2)
|
Terms include combination of interest rate adjustments and interest-only payments with deferral of principal.
|
September 30,
2011 |
December 31,
2010 |
|||||||
(In Thousands)
|
||||||||
Land
|
$ | 2,098 | $ | 2,098 | ||||
Buildings
|
6,109 | 6,077 | ||||||
Leasehold improvements
|
7,807 | 7,786 | ||||||
Furniture and equipment
|
12,157 | 11,388 | ||||||
Construction in process
|
1 | 21 | ||||||
28,172 | 27,370 | |||||||
Accumulated depreciation and amortization
|
(15,747 | ) | (15,247 | ) | ||||
Premises and equipment, net
|
$ | 12,425 | $ | 12,123 |
September 30, 2011
|
||||||||||||
Before Tax
Amount |
Tax
Effects |
Net of Tax
Amount |
||||||||||
(In Thousands)
|
||||||||||||
Securities:
|
||||||||||||
Unrealized holding gains on available for sale securities
|
$ | 1,578 | $ | (538 | ) | $ | 1,040 | |||||
Noncredit portion of OTTI on available for sale securities
|
(21 | ) | 7 | (14 | ) | |||||||
Reclassification adjustment for gains realized in net income
|
(340 | ) | 116 | (224 | ) | |||||||
Unrealized holding gains on available for sale securities, net of taxes
|
1,217 | (415 | ) | 802 | ||||||||
Derivative instrument:
|
||||||||||||
Change in fair value of effective cash flow hedging derivative
|
(351 | ) | 119 | (232 | ) | |||||||
Other comprehensive income
|
$ | 866 | $ | (296 | ) | $ | 570 |
September 30, 2011
|
||||||||||||
Before Tax
Amount |
Tax
Effects |
Net of Tax
Amount |
||||||||||
(In Thousands)
|
||||||||||||
Net unrealized loss on available for sale securities
|
$ | (361 | ) | $ | 122 | $ | (239 | ) | ||||
Noncredit portion of OTTI on available for sale securities
|
27 | (9 | ) | 18 | ||||||||
Net unrealized loss on effective cash flow hedging derivative
|
(480 | ) | 163 | (317 | ) | |||||||
Accumulated other comprehensive loss
|
$ | (814 | ) | $ | 276 | $ | (538 | ) |
December 31, 2010
|
||||||||||||
Before Tax
Amount |
Tax
Effects |
Net of Tax
Amount |
||||||||||
(In Thousands)
|
||||||||||||
Net unrealized loss on available for sale securities
|
$ | (1,599 | ) | $ | 544 | $ | (1,055 | ) | ||||
Noncredit portion of OTTI on available for sale securities
|
48 | (16 | ) | 32 | ||||||||
Net unrealized loss on effective cash flow hedging derivative
|
(129 | ) | 44 | (85 | ) | |||||||
Accumulated other comprehensive loss
|
$ | (1,680 | ) | $ | 572 | $ | (1,108 | ) |
September 30, 2011
|
Actual
|
For Capital
Adequacy |
To Be Well
Capitalized Under |
|||||||||||||||||||||
(Dollars in Thousands)
|
Amount
|
Ratio
|
Amount
|
Ratio
|
Amount
|
Ratio
|
||||||||||||||||||
Total Risk-based Capital Ratio
|
$ | 106,417 | 23.33 | % | $ | 36,491 | 8.00 | % | $ | 45,614 | 10.00 | % | ||||||||||||
Tier I Risk-based Capital Ratio
|
101,750 | 22.31 | 18,243 | 4.00 | 27,364 | 6.00 | ||||||||||||||||||
Tier I Capital Ratio
|
101,750 | 11.02 | 36,933 | 4.00 | 46,166 | 5.00 | ||||||||||||||||||
Tangible Equity Ratio
|
101,750 | 11.02 | 13,850 | 1.50 | N/A | N/A |
December 31, 2010
|
Actual
|
For Capital
Adequacy |
To Be Well
Capitalized Under |
|||||||||||||||||||||
(Dollars in Thousands)
|
Amount
|
Ratio
|
Amount
|
Ratio
|
Amount
|
Ratio
|
||||||||||||||||||
Total Risk-based Capital Ratio
|
$ | 75,823 | 15.34 | % | $ | 39,543 | 8.00 | % | $ | 49,428 | 10.00 | % | ||||||||||||
Tier I Risk-based Capital Ratio
|
71,173 | 14.40 | 19,770 | 4.00 | 29,655 | 6.00 | ||||||||||||||||||
Tier I Capital Ratio
|
71,173 | 7.81 | 36,452 | 4.00 | 45,565 | 5.00 | ||||||||||||||||||
Tangible Equity Ratio
|
71,173 | 7.81 | 13,670 | 1.50 | N/A | N/A |
Level 1:
|
Valuation is based on quoted prices in active markets for identical assets or liabilities. Level 1 assets and liabilities generally include debt and equity securities that are traded in an active exchange market. Valuations are obtained from readily available pricing sources for markettransactions involving identical assets or liabilities.
|
Level2:
|
Valuation is based on observable inputs other than Level 1 prices, such as quoted prices for similar assets or liabilities; quoted prices in markets that are not active; or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities.
|
Level3:
|
Valuation is based on unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities. Level 3 assets and liabilities include financial instruments whose value is determined using unobservable inputs to pricing models, discounted cash flow methodologies, or similar techniques, as well as instruments for which the determination of fair value requires significant management judgment or estimation.
|
|
o
|
Cash and cash equivalents. The carrying amounts of cash and short-term instruments approximate the fair values based on the short-term nature of the assets.
|
|
o
|
Trading securities. The Company held two securities designated as trading securities, which were sold during the second quarter of 2011. The determination of the fair value for these securities was determined based on a discounted cash flow methodology. Certain inputs to the fair value calculation are unobservable and management determined that since an orderly and active market for these securities did not exist, the securities meet the definition of Level 3 securities.
|
|
o
|
Securities available for sale. Included in the available for sale category are both debt and equity securities. The securities measured at fair value in Level 1 are based on quoted market prices in an active exchange market. Securities measured at fair value in Level 2 are based on pricing models that consider standard input factors such as observable market data, benchmark yields, interest rate volatilities, broker/dealer quotes, credit spreads and new issue data. The Company utilizes Interactive Data Corporation (“IDC”), a third-party, nationally-recognized pricing service to estimate fair value measurements for the majority of its portfolio. The pricing service evaluates each asset class based on relevant market information considering observable data but these prices do not represent binding quotes. The fair value prices on all investments are reviewed for reasonableness by management. Securities measured at fair value in Level 3 include collateralized debt obligations that are backed by trust preferred securities issued by banks, thrifts and insurance companies. Management determined that an orderly and active market for these securities and similar securities did not exist based on a significant reduction in trading volume and widening spreads relative to historical levels. The Company estimates future cash flows discounted using a rate management believes is representative of current market conditions. Factors in determining the discount rate include the current level of deferrals and/or defaults, changes in credit rating and the financial condition of the debtors within the underlying securities, broker quotes for securities with similar structure and credit risk, interest rate movements and pricing for new issuances.
|
|
o
|
Federal Home Loan Bank stock. The carrying value of Federal Home Loan Bank (“FHLB”) stock approximates fair value based on the redemption provisions of the FHLB.
|
|
o
|
Loans held for sale. The fair value of loans held for sale is estimated using quoted market prices.
|
|
o
|
Loans receivable. For variable rate loans which reprice frequently and have no significant change in credit risk, fair values are based on carrying values. The fair value of fixed-rate loans are estimated by discounting the future cash flows using the rates at the end of the period in which similar loans would be made to borrowers with similar credit ratings and for the same remaining maturities.
|
|
o
|
Accrued interest receivable. The carrying amount of accrued interest approximates fair value.
|
|
o
|
Deposits. The fair value of demand deposits, negotiable orders of withdrawal, regular savings, certain money market deposits and mortgagors’ and investors’ escrow accounts is the amount payable on demand at the reporting date. The fair value of certificates of deposit and other time deposits is estimated using a discounted cash flow calculation that applies interest rates currently being offered for deposits of similar remaining maturities to a schedule of aggregated expected maturities on such deposits.
|
|
o
|
Federal Home Loan Bank advances. The fair value of the advances is estimated using a discounted cash flow calculation that applies current FHLB interest rates for advances of similar maturity to a schedule of maturities of such advances.
|
|
o
|
Junior subordinated debt owed to unconsolidated trust. Rates currently available for debt with similar terms and remaining maturities are used to estimate fair value of existing debt.
|
|
o
|
Interest rate swap agreement. The fair value of the Company’s interest rate swap is obtained from a third-party pricing service and is determined using a discounted cash flow analysis on the expected cash flows of the derivative. The pricing analysis is based on observable inputs for the contractual term of the derivative, including the period to maturity and interest rate curves.
|
|
o
|
Forward loan sale commitments and derivative loan commitments. Forward loan sale commitments and derivative loan commitments are based on the fair values of the underlying mortgage loans and the probability of such commitments being exercised. Significant management judgment and estimation is required in determining these fair value measurements.
|
|
o
|
Off-balance sheet instruments. Fair values for off-balance sheet lending commitments are based on fees currently charged to enter into similar agreements, taking into account the remaining terms of the agreements and the counterparties' credit standings.
|
September 30, 2011
|
||||||||||||||||
Level 1
|
Level 2
|
Level 3
|
Total
|
|||||||||||||
(In Thousands)
|
||||||||||||||||
Assets:
|
||||||||||||||||
U.S. Government and agency obligations
|
$ | 1,052 | $ | 84,190 | $ | - | $ | 85,242 | ||||||||
Government-sponsored enterprises
|
- | 25,716 | - | 25,716 | ||||||||||||
Mortgage-backed securities
|
- | 106,905 | - | 106,905 | ||||||||||||
Corporate debt securities
|
- | 14,117 | - | 14,117 | ||||||||||||
Collateralized debt obligations
|
- | - | 3,032 | 3,032 | ||||||||||||
Obligations of state and political subdivisions
|
- | 6,935 | - | 6,935 | ||||||||||||
Tax-exempt securities
|
- | 142 | - | 142 | ||||||||||||
Foreign government securities
|
- | 75 | - | 75 | ||||||||||||
Equity securities - financial services
|
543 | - | - | 543 | ||||||||||||
Equity securities - other
|
1,521 | - | - | 1,521 | ||||||||||||
Forward loan sale commitments and derivative loan commitments
|
- | - | 98 | 98 | ||||||||||||
Total assets
|
$ | 3,116 | $ | 238,080 | $ | 3,130 | $ | 244,326 | ||||||||
Liabilities:
|
||||||||||||||||
Forward loan sale commitments and derivative loan commitments
|
$ | - | $ | - | $ | 22 | $ | 22 | ||||||||
Interest rate swap agreement
|
- | 480 | - | 480 | ||||||||||||
Total liabilities
|
$ | - | $ | 480 | $ | 22 | $ | 502 |
December 31, 2010
|
||||||||||||||||
Level 1
|
Level 2
|
Level 3
|
Total
|
|||||||||||||
(In Thousands)
|
||||||||||||||||
Assets:
|
||||||||||||||||
Trading securities
|
$ | - | $ | - | $ | 248 | $ | 248 | ||||||||
U.S. Government and agency obligations
|
1,025 | 22,558 | - | 23,583 | ||||||||||||
Government-sponsored enterprises
|
- | 29,993 | - | 29,993 | ||||||||||||
Mortgage-backed securities
|
- | 101,024 | - | 101,024 | ||||||||||||
Corporate debt securities
|
- | 14,717 | - | 14,717 | ||||||||||||
Collateralized debt obligations
|
- | - | 2,532 | 2,532 | ||||||||||||
Obligations of state and political subdivisions
|
- | 6,905 | - | 6,905 | ||||||||||||
Tax-exempt securities
|
- | 144 | - | 144 | ||||||||||||
Foreign government securities
|
- | 100 | - | 100 | ||||||||||||
Equity securities
|
299 | 739 | - | 1,038 | ||||||||||||
Forward loan sale commitments and derivative loan commitments
|
- | - | 163 | 163 | ||||||||||||
Total assets
|
$ | 1,324 | $ | 176,180 | $ | 2,943 | $ | 180,447 | ||||||||
Liabilities:
|
||||||||||||||||
Forward loan sale commitments and derivative loan commitments
|
$ | - | $ | - | $ | 184 | $ | 184 | ||||||||
Interest rate swap agreement
|
- | 129 | - | 129 | ||||||||||||
Total liabilities
|
$ | - | $ | 129 | $ | 184 | $ | 313 |
Collateralized
Debt |
Forward Loan Sale
Commitments and |
|||||||
(In Thousands)
|
||||||||
Balance at December 31, 2010
|
$ | 2,780 | $ | (21 | ) | |||
Change in fair value included in net income
|
182 | 97 | ||||||
Increase in fair value included in other comprehensive income
|
544 | - | ||||||
Sales
|
(474 | ) | - | |||||
Balance at September 30, 2011
|
$ | 3,032 | $ | 76 |
At September 30, 2011
|
Three Months Ended
September 30, 2011 |
Nine Months Ended
September 30, 2011 |
||||||||||||||||||
Level 1
|
Level 2
|
Level 3
|
Total Losses
|
Total Losses
|
||||||||||||||||
(In Thousands)
|
||||||||||||||||||||
Impaired loans
|
$ | - | $ | - | $ | 2,431 | $ | 463 | $ | 671 | ||||||||||
Other real estate owned
|
- | - | 1,069 | 35 | 175 | |||||||||||||||
Total assets
|
$ | - | $ | - | $ | 3,500 | $ | 498 | $ | 846 |
At September 30, 2010
|
Three Months Ended
September 30, 2010 |
Nine Months Ended
September 30, 2010 |
||||||||||||||||||
Level 1
|
Level 2
|
Level 3
|
Total (Gains) Losses
|
Total Losses
|
||||||||||||||||
(In Thousands)
|
||||||||||||||||||||
Impaired loans
|
$ | - | $ | - | $ | 1,093 | $ | (17 | ) | $ | 380 | |||||||||
Other real estate owned
|
- | - | 2,256 | 40 | 282 | |||||||||||||||
Total assets
|
$ | - | $ | - | $ | 3,349 | $ | 23 | $ | 662 |
September 30, 2011
|
December 31, 2010
|
|||||||||||||||
Carrying
Amount |
Fair
Value |
Carrying
Amount |
Fair
Value |
|||||||||||||
(In Thousands)
|
||||||||||||||||
Financial Assets:
|
||||||||||||||||
Cash and cash equivalents
|
$ | 31,662 | $ | 31,662 | $ | 78,321 | $ | 78,321 | ||||||||
Trading securities
|
- | - | 248 | 248 | ||||||||||||
Available for sale securities
|
224,228 | 224,228 | 180,036 | 180,036 | ||||||||||||
Loans held for sale
|
1,588 | 1,617 | 7,371 | 7,460 | ||||||||||||
Loans receivable, net
|
615,729 | 629,062 | 606,214 | 608,935 | ||||||||||||
Federal Home Loan Bank stock
|
8,388 | 8,388 | 8,388 | 8,388 | ||||||||||||
Accrued interest receivable
|
3,653 | 3,653 | 3,113 | 3,113 | ||||||||||||
Forward loan sale commitments and derivative loan commitments
|
98 | 98 | 163 | 163 | ||||||||||||
Financial Liabilities:
|
||||||||||||||||
Savings deposits
|
38,208 | 38,208 | 56,495 | 56,495 | ||||||||||||
Demand deposits, negotiable orders of withdrawal and money market accounts
|
383,433 | 383,433 | 314,656 | 314,656 | ||||||||||||
Certificates of deposit
|
272,720 | 274,899 | 289,563 | 293,035 | ||||||||||||
Mortgagors' and investors' escrow accounts
|
1,584 | 1,584 | 3,425 | 3,425 | ||||||||||||
Federal Home Loan Bank advances
|
100,069 | 106,147 | 114,169 | 118,799 | ||||||||||||
Junior subordinated debt owed to unconsolidated trust
|
8,248 | 5,230 | 8,248 | 6,115 | ||||||||||||
Forward loan sale commitments and derivative loan commitments
|
22 | 22 | 184 | 184 | ||||||||||||
Interest rate swap agreement
|
480 | 480 | 129 | 129 |
Notional amount
|
$ | 8,000 | ||
Weighted average fixed pay rate
|
2.44 | % | ||
Weighted average variable receive rate
|
0.35 | % | ||
Weighted average maturity in years
|
4.3 | |||
Unrealized loss relating to interest rate swap
|
$ | 317 |
|
o
|
Residential Loans. Residential mortgage loans comprised 41.3% of the total loan portfolio at September 30, 2011. Residential mortgage loans decreased $15.1 million, or 5.6%, primarily due to the sale of $32.5 million of longer-term fixed-rate residential mortgage loans. Loan originations for residential loans decreased $8.5 million for the first nine months of 2011 over the comparable period in 2010.
|
|
o
|
Commercial Loans. The commercial loan portfolio, which includes multi-family and commercial real estate and commercial business loans, represented 51.6% of total loans. Multi-family and commercial real estate loans decreased $9.0 million, or 5.7%. Loan originations for commercial real estate loans increased $12.5 million during the first nine months of 2011 compared to the same period in 2010 as a result of the addition of new commercial loan originators. Commercial business loans increased $25.5 million, or 17.9%, for the first nine months of 2011 from the comparable period in 2010 primarily due to the purchase of $41.2 million in SBA and USDA loans that are fully guaranteed by the U.S. Government. Loan originations for commercial business loans increased $3.3 million during the first nine months of 2011, resulting from the addition of several new commercial lenders.
|
|
o
|
Construction Loans. Construction loans, which include both residential and commercial construction loans, increased $6.4 million. The increase primarily related to two commercial construction loans that will convert to permanent commercial real estate loans upon the completion of the construction projects.
|
|
o
|
Consumer Loans. Consumer loans represent 5.0% of the Company’s total loan portfolio. Consumer loans increased $2.1 million during the first nine months of 2011. Increases in home equity loans of $2.5 million were offset by a decrease of $437,000 in other consumer loans. Loan originations for consumer loans decreased $2.2 million for the nine months ended September 30, 2011 from the comparable period in 2010.
|
September 30,
2011 |
December 31,
2010 |
|||||||
(Dollars in Thousands)
|
||||||||
Nonaccrual loans:
|
||||||||
Real estate loans
|
||||||||
Residential - 1 to 4 family
|
$ | 5,319 | $ | 2,901 | ||||
Multi-family and commercial
|
2,851 | 1,775 | ||||||
Construction
|
- | 82 | ||||||
Total real estate loans
|
8,170 | 4,758 | ||||||
Commercial business loans
|
929 | 116 | ||||||
Consumer loans
|
332 | 51 | ||||||
Total nonaccrual loans
|
9,431 | 4,925 | ||||||
Accruing loans past due 90 days or more
|
- | - | ||||||
Total nonperforming loans
|
9,431 | 4,925 | ||||||
Other real estate owned, net (1)
|
1,069 | 1,285 | ||||||
Total nonperforming assets
|
10,500 | 6,210 | ||||||
Accruing troubled debt restructurings
|
7,327 | 5,261 | ||||||
Total nonperforming assets and troubled debt restructurings
|
$ | 17,827 | $ | 11,471 | ||||
Allowance for loan losses as a percent of nonperforming loans
|
55.33 | % | 97.44 | % | ||||
Total nonperforming loans to total loans
|
1.52 | % | 0.80 | % | ||||
Total nonperforming loans to total assets
|
1.00 | % | 0.53 | % | ||||
Total nonperforming assets and troubled debt restructurings to total assets
|
1.89 | % | 1.24 | % |
(1)
|
Other real estate owned balances are shown net of related write-downs or valuation allowance.
|
At or For the Three Months Ended September 30,
|
||||||||||||||||||||||||
2011
|
2010
|
|||||||||||||||||||||||
Average
Balance |
Interest &
Dividends |
Average
Yield/ |
Average
Balance |
Interest &
Dividends |
Average
Yield/ |
|||||||||||||||||||
(Dollars in Thousands)
|
||||||||||||||||||||||||
Interest-earning assets:
|
||||||||||||||||||||||||
Loans (1) (2)
|
$ | 625,138 | $ | 7,688 | 4.88 | % | $ | 612,138 | $ | 8,309 | 5.39 | % | ||||||||||||
Securities (3)
|
241,661 | 1,753 | 2.88 | 188,839 | 1,537 | 3.23 | ||||||||||||||||||
Other interest-earning assets
|
33,067 | 10 | 0.12 | 39,415 | 32 | 0.32 | ||||||||||||||||||
Total interest-earning assets
|
899,866 | 9,451 | 4.17 | 840,392 | 9,878 | 4.66 | ||||||||||||||||||
Noninterest-earning assets
|
49,241 | 50,895 | ||||||||||||||||||||||
Total assets
|
$ | 949,107 | $ | 891,287 | ||||||||||||||||||||
Interest-bearing liabilities:
|
||||||||||||||||||||||||
Deposits:
|
||||||||||||||||||||||||
NOW and money market
|
$ | 295,417 | 313 | 0.42 | $ | 245,843 | 375 | 0.61 | ||||||||||||||||
Savings (4)
|
44,748 | 41 | 0.36 | 64,617 | 67 | 0.41 | ||||||||||||||||||
Certificates of deposit (5)
|
277,154 | 1,436 | 2.06 | 301,512 | 1,820 | 2.39 | ||||||||||||||||||
Total interest-bearing deposits
|
617,319 | 1,790 | 1.15 | 611,972 | 2,262 | 1.47 | ||||||||||||||||||
Federal Home Loan Bank advances
|
107,681 | 941 | 3.47 | 114,169 | 1,051 | 3.65 | ||||||||||||||||||
Subordinated debt
|
8,248 | 84 | 4.04 | 8,248 | 44 | 2.12 | ||||||||||||||||||
Total interest-bearing liabilities
|
733,248 | 2,815 | 1.52 | 734,389 | 3,357 | 1.81 | ||||||||||||||||||
Noninterest-bearing liabilities
|
85,012 | 74,899 | ||||||||||||||||||||||
Total liabilities
|
818,260 | 809,288 | ||||||||||||||||||||||
Total shareholders' equity
|
130,847 | 81,999 | ||||||||||||||||||||||
Total liabilities and shareholders' equity
|
$ | 949,107 | $ | 891,287 | ||||||||||||||||||||
Net interest-earning assets
|
$ | 166,618 | $ | 106,003 | ||||||||||||||||||||
Tax equivalent net interest income (3)
|
6,636 | 6,521 | ||||||||||||||||||||||
Tax equivalent interest rate spread (6)
|
2.65 | % | 2.85 | % | ||||||||||||||||||||
Tax equivalent net interest margin as a percentage of interest-earning assets (7)
|
2.93 | % | 3.08 | % | ||||||||||||||||||||
Average of interest-earning assets to average interest-bearing liabilities
|
122.72 | % | 114.43 | % | ||||||||||||||||||||
Less tax equivalent adjustment (3)
|
- | (2 | ) | |||||||||||||||||||||
Net interest income
|
$ | 6,636 | $ | 6,519 |
|
(1)
|
Amount is net of deferred loan origination fees and costs. Average balances include nonaccrual loans and loans held for sale.
|
|
(2)
|
Loan fees are included in interest income and are immaterial.
|
|
(3)
|
Municipal securities income and net interest income are presented on a tax equivalent basis using a tax rate of 34%. The tax equivalent adjustment is deducted from tax equivalent net interest income to agree to the amounts reported in the statements of income.
|
|
(4)
|
Includes mortgagors’ and investors’ escrow accounts.
|
|
(5)
|
Includes brokered deposits.
|
|
(6)
|
Tax equivalent net interest rate spread represents the difference between the weighted average yield on interest-earning assets and the weighted average cost of interest-bearing liabilities.
|
|
(7)
|
Tax equivalent net interest margin represents tax equivalent net interest income divided by average interest-earning assets.
|
At or For the Nine Months Ended September 30,
|
||||||||||||||||||||||||
2011
|
2010
|
|||||||||||||||||||||||
Average
Balance |
Interest &
Dividends |
Average
Yield/ |
Average
Balance |
Interest &
Dividends |
Average
Yield/ |
|||||||||||||||||||
(Dollars in Thousands)
|
||||||||||||||||||||||||
Interest-earning assets:
|
||||||||||||||||||||||||
Loans (1) (2)
|
$ | 620,368 | $ | 23,402 | 5.04 | % | $ | 609,598 | $ | 25,165 | 5.52 | % | ||||||||||||
Securities (3)
|
228,048 | 5,098 | 2.99 | 192,670 | 4,909 | 3.41 | ||||||||||||||||||
Other interest-earning assets
|
42,373 | 56 | 0.18 | 30,375 | 81 | 0.36 | ||||||||||||||||||
Total interest-earning assets
|
890,789 | 28,556 | 4.29 | 832,643 | 30,155 | 4.84 | ||||||||||||||||||
Noninterest-earning assets
|
52,297 | 52,313 | ||||||||||||||||||||||
Total assets
|
$ | 943,086 | $ | 884,956 | ||||||||||||||||||||
Interest-bearing liabilities:
|
||||||||||||||||||||||||
Deposits:
|
||||||||||||||||||||||||
NOW and money market
|
$ | 277,964 | 1,019 | 0.49 | $ | 238,285 | 1,279 | 0.72 | ||||||||||||||||
Savings (4)
|
51,076 | 153 | 0.40 | 64,227 | 228 | 0.47 | ||||||||||||||||||
Certificates of deposit (5)
|
280,679 | 4,407 | 2.10 | 305,447 | 5,872 | 2.57 | ||||||||||||||||||
Total interest-bearing deposits
|
609,719 | 5,579 | 1.22 | 607,959 | 7,379 | 1.62 | ||||||||||||||||||
Federal Home Loan Bank advances
|
110,078 | 2,909 | 3.53 | 115,483 | 3,163 | 3.66 | ||||||||||||||||||
Subordinated debt
|
8,248 | 251 | 4.07 | 8,248 | 124 | 2.01 | ||||||||||||||||||
Total interest-bearing liabilities
|
728,045 | 8,739 | 1.60 | 731,690 | 10,666 | 1.95 | ||||||||||||||||||
Noninterest-bearing liabilities
|
84,530 | 72,520 | ||||||||||||||||||||||
Total liabilities
|
812,575 | 804,210 | ||||||||||||||||||||||
Total shareholders' equity
|
130,511 | 80,746 | ||||||||||||||||||||||
Total liabilities and shareholders' equity
|
$ | 943,086 | $ | 884,956 | ||||||||||||||||||||
Net interest-earning assets
|
$ | 162,744 | $ | 100,953 | ||||||||||||||||||||
Tax equivalent net interest income (3)
|
19,817 | 19,489 | ||||||||||||||||||||||
Tax equivalent interest rate spread (6)
|
2.69 | % | 2.89 | % | ||||||||||||||||||||
Tax equivalent net interest margin as a percentage of interest-earning assets (7)
|
2.97 | % | 3.13 | % | ||||||||||||||||||||
Average of interest-earning assets to average interest-bearing liabilities
|
122.35 | % | 113.80 | % | ||||||||||||||||||||
Less tax equivalent adjustment (3)
|
(1 | ) | (12 | ) | ||||||||||||||||||||
Net interest income
|
$ | 19,816 | $ | 19,477 |
|
(1)
|
Amount is net of deferred loan origination fees and costs. Average balances include nonaccrual loans and loans held for sale.
|
|
(2)
|
Loan fees are included in interest income and are immaterial.
|
|
(3)
|
Municipal securities income and net interest income are presented on a tax equivalent basis using a tax rate of 34%. The tax equivalent adjustment is deducted from tax equivalent net interest income to agree to the amounts reported in the statements of income.
|
|
(4)
|
Includes mortgagors’ and investors’ escrow accounts.
|
|
(5)
|
Includes brokered deposits.
|
|
(6)
|
Tax equivalent net interest rate spread represents the difference between the weighted average yield on interest-earning assets and the weighted average cost of interest-bearing liabilities.
|
|
(7)
|
Tax equivalent net interest margin represents tax equivalent net interest income divided by average interest-earning assets.
|
Three Months Ended
September 30, 2011 and 2010 |
Nine Months Ended
September 30, 2011 and 2010 |
|||||||||||||||||||||||
Increase (Decrease) Due To
|
Increase (Decrease) Due To
|
|||||||||||||||||||||||
Rate
|
Volume
|
Net
|
Rate
|
Volume
|
Net
|
|||||||||||||||||||
(In Thousands)
|
(In Thousands)
|
|||||||||||||||||||||||
Interest-earning assets:
|
||||||||||||||||||||||||
Interest and dividend income:
|
||||||||||||||||||||||||
Loans (1)(2)
|
$ | (794 | ) | $ | 173 | $ | (621 | ) | $ | (2,201 | ) | $ | 438 | $ | (1,763 | ) | ||||||||
Securities (3)
|
(180 | ) | 396 | 216 | (646 | ) | 835 | 189 | ||||||||||||||||
Other interest-earning assets
|
(18 | ) | (4 | ) | (22 | ) | (50 | ) | 25 | (25 | ) | |||||||||||||
Total interest-earning assets
|
(992 | ) | 565 | (427 | ) | (2,897 | ) | 1,298 | (1,599 | ) | ||||||||||||||
Interest-bearing liabilities:
|
||||||||||||||||||||||||
Interest expense:
|
||||||||||||||||||||||||
Deposits (4)
|
(381 | ) | (91 | ) | (472 | ) | (1,499 | ) | (301 | ) | (1,800 | ) | ||||||||||||
Federal Home Loan Bank advances
|
(52 | ) | (58 | ) | (110 | ) | (109 | ) | (145 | ) | (254 | ) | ||||||||||||
Subordinated debt
|
40 | - | 40 | 127 | - | 127 | ||||||||||||||||||
Total interest-bearing liabilities
|
(393 | ) | (149 | ) | (542 | ) | (1,481 | ) | (446 | ) | (1,927 | ) | ||||||||||||
Change in net interest income (5)
|
$ | (599 | ) | $ | 714 | $ | 115 | $ | (1,416 | ) | $ | 1,744 | $ | 328 |
|
(1)
|
Amount is net of deferred loan origination fees and costs. Average balances include nonaccrual loans and loans held for sale.
|
|
(2)
|
Loan fees are included in interest income and are immaterial.
|
|
(3)
|
Municipal securities income and net interest income are presented on a tax equivalent basis using a tax rate of 34%. The tax equivalent adjustment is deducted from tax equivalent net interest income to agree to the amount reported in the statements of income.
|
|
(4)
|
Includes mortgagors’ and investors’ escrow accounts.
|
|
(5)
|
Presented on a tax equivalent basis using a tax rate of 34%.
|
Three Months
Ended September 30, |
Change
|
Nine Months
Ended September 30, |
Change
|
|||||||||||||||||||||||||||||
2011
|
2010
|
Dollars
|
Percent
|
2011
|
2010
|
Dollars
|
Percent
|
|||||||||||||||||||||||||
(Dollars in Thousands)
|
||||||||||||||||||||||||||||||||
Service fees
|
$ | 1,233 | $ | 1,248 | $ | (15 | ) | (1.2 | )% | $ | 3,624 | $ | 3,825 | $ | (201 | ) | (5.3 | )% | ||||||||||||||
Wealth management fees
|
989 | 1,011 | (22 | ) | (2.2 | ) | 3,106 | 3,065 | 41 | 1.3 | ||||||||||||||||||||||
Increase in cash surrender value of bank-owned life insurance
|
72 | 73 | (1 | ) | (1.4 | ) | 215 | 216 | (1 | ) | (0.5 | ) | ||||||||||||||||||||
Net gain on sale of securities
|
122 | 197 | (75 | ) | (38.1 | ) | 340 | 878 | (538 | ) | (61.3 | ) | ||||||||||||||||||||
Net impairment losses recognized in earnings
|
- | (160 | ) | 160 | (100.0 | ) | - | (492 | ) | 492 | (100.0 | ) | ||||||||||||||||||||
Mortgage banking fees
|
189 | 221 | (32 | ) | (14.5 | ) | 491 | 576 | (85 | ) | (14.8 | ) | ||||||||||||||||||||
Net gain (loss) in fair value on trading securities and derivatives
|
71 | (129 | ) | 200 | (155.0 | ) | 279 | (129 | ) | 408 | (316.3 | ) | ||||||||||||||||||||
Net loss on disposal of equipment
|
(33 | ) | (5 | ) | (28 | ) | 560.0 | (41 | ) | (5 | ) | (36 | ) | 720.0 | ||||||||||||||||||
Other
|
54 | 69 | (15 | ) | (21.7 | ) | 228 | 141 | 87 | 61.7 | ||||||||||||||||||||||
Total noninterest income
|
$ | 2,697 | $ | 2,525 | $ | 172 | 6.8 | % | $ | 8,242 | $ | 8,075 | $ | 167 | 2.1 | % |
Three Months
Ended September 30, |
Change
|
Nine Months
Ended September 30, |
Change
|
|||||||||||||||||||||||||||||
2011
|
2010
|
Dollars
|
Percent
|
2011
|
2010
|
Dollars
|
Percent
|
|||||||||||||||||||||||||
(Dollars in Thousands)
|
||||||||||||||||||||||||||||||||
Salaries and employee benefits
|
$ | 4,057 | $ | 3,684 | $ | 373 | 10.1 | % | $ | 12,433 | $ | 11,895 | $ | 538 | 4.5 | % | ||||||||||||||||
Occupancy and equipment
|
1,450 | 1,433 | 17 | 1.2 | 4,373 | 4,197 | 176 | 4.2 | ||||||||||||||||||||||||
Computer and electronic banking services
|
986 | 958 | 28 | 2.9 | 2,929 | 2,852 | 77 | 2.7 | ||||||||||||||||||||||||
Outside professional services
|
273 | 210 | 63 | 30.0 | 854 | 746 | 108 | 14.5 | ||||||||||||||||||||||||
Marketing and advertising
|
205 | 179 | 26 | 14.5 | 606 | 569 | 37 | 6.5 | ||||||||||||||||||||||||
Supplies
|
104 | 112 | (8 | ) | (7.1 | ) | 371 | 377 | (6 | ) | (1.6 | ) | ||||||||||||||||||||
FDIC deposit insurance and regulatory assessments
|
110 | 321 | (211 | ) | (65.7 | ) | 718 | 989 | (271 | ) | (27.4 | ) | ||||||||||||||||||||
Contribution to SI Financial
|
||||||||||||||||||||||||||||||||
Group Foundation
|
- | - | - | N/A | 500 | - | 500 | N/A | ||||||||||||||||||||||||
Other
|
862 | 777 | 85 | 10.9 | 2,286 | 2,351 | (65 | ) | (2.8 | ) | ||||||||||||||||||||||
Total noninterest expenses
|
$ | 8,047 | $ | 7,674 | $ | 373 | 4.9 | % | $ | 25,070 | $ | 23,976 | $ | 1,094 | 4.6 | % |
September 30,
2011 |
December 31,
2010 |
|||||||
(In Thousands)
|
||||||||
Commitments to extend credit:
|
||||||||
Future loan commitments
|
$ | 33,199 | $ | 10,166 | ||||
Undisbursed construction loans
|
6,544 | 6,708 | ||||||
Undisbursed home equity lines of credit
|
21,726 | 21,106 | ||||||
Undisbursed commercial lines of credit
|
21,204 | 12,239 | ||||||
Overdraft protection lines
|
1,262 | 1,311 | ||||||
Standby letters of credit
|
34 | 115 | ||||||
Total commitments
|
$ | 83,969 | $ | 51,645 |
Percentage Change in Estimated
Net Interest Income Over |
||||||||
12 Months
|
24 Months
|
|||||||
300 basis point increase in rates
|
0.61 | % | 0.95 | % | ||||
Modified 300 basis point increase in rates
|
(0.55 | ) | (1.16 | ) | ||||
50 basis point decrease in rates
|
(3.21 | ) | (4.04 | ) |
3.1
|
Articles of Incorporation of SI Financial Group, Inc. (1)
|
3.2
|
Bylaws of SI Financial Group, Inc. (2)
|
4.0
|
Specimen Stock Certificate of SI Financial Group, Inc. (1)
|
Rule 13a-14(a)/15d-14(a) Certification of Chief Executive Officer
|
|
Rule 13a-14(a)/15d-14(a) Certification of Chief Financial Officer
|
|
18 U.S.C. Section 1350 Certifications
|
|
101
|
The following materials from the SI Financial Group, Inc., Quarterly Report on Form 10-Q for the quarter ended September 30, 2011 formatted in eXtensible Business Reporting Language (XBRL): (i) the Condensed Consolidated Statements of Income, (ii) the Condensed Consolidated Balance Sheets, (iii) the Condensed Consolidated Statements of Cash Flows (iv) the Condensed Statement of Changes in Shareholders’ Equity and (v) related notes, tagged as blocks of text. (3)
|
(1)
|
Incorporated herein by reference into this document from the Exhibits on the Registration Statement on Form S-1 (File No. 333-169302), and any amendments thereto, filed with the Securities and Exchange Commission on September 10, 2010.
|
(2)
|
Incorporated herein by reference into this document from the Exhibits to the Company’s Current Report on Form 8-K (File No. 000-54241) filed with the Securities and Exchange Commission on February 17, 2011.
|
(3)
|
This exhibit shall not be deemed “filed” for purposes of Section 18 of the Securities and Exchange Act of 1934, or otherwise subject to the liability of that section, and shall not be deemed to be incorporated by reference into any filing under the Securities Act of 1933 or the Securities Act of 1934. As provided in Rule 406T of Regulation S-T, this information is furnished and not filed for purposes of Sections 11 and 12 of the Securities Act of 1933 and Section 18 of the Securities Act of 1934.
|
SI FINANCIAL GROUP, INC. | |
Date: November 9, 2011
|
/s/ Rheo A. Brouillard |
Rheo A. Brouillard | |
President and Chief Executive Officer | |
(principal executive officer) |
Date: November 9, 2011
|
/s/ Brian J. Hull |
Brian J. Hull | |
Executive Vice President, Chief Financial Officer, | |
Treasurer and Chief Operating Officer | |
(principal financial and accounting officer) |
1.
|
I have reviewed this report on Form 10-Q of SI Financial Group, Inc.;
|
2.
|
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
|
3.
|
Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
|
4.
|
The 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:
|
5.
|
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 the registrant’s board of directors (or persons performing the equivalent functions):
|
/s/ Rheo A. Brouillard
|
|
Rheo A. Brouillard
|
|
President and Chief Executive Officer
|
|
November 9, 2011
|
1.
|
I have reviewed this report on Form 10-Q of SI Financial Group, Inc.;
|
2.
|
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
|
3.
|
Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
|
4.
|
The 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:
|
5.
|
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 the registrant’s board of directors (or persons performing the equivalent functions):
|
/s/ Brian J. Hull
|
|
Brian J. Hull
|
|
Executive Vice President, Chief Financial Officer,
|
|
Treasurer and Chief Operating Officer | |
November 9, 2011
|
1.
|
The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
|
2.
|
The information contained in this Report fairly presents, in all material respects, the consolidated financial condition and results of operations of the Company as of and for the period covered by this Report.
|
By:/s/ Rheo A. Brouillard
|
|
Rheo A. Brouillard
|
|
President and Chief Executive Officer
|
|
November 9, 2011
|
By:/s/ Brian J. Hull
|
|
Brian J. Hull
|
|
Executive Vice President, Chief Financial Officer,
|
|
Treasurer and Chief Operating Officer | |
November 9, 2011
|
CONSOLIDATED BALANCE SHEETS (Unaudited) (Parenthetical) (USD $) In Thousands, except Share data | Sep. 30, 2011 | Dec. 31, 2010 |
---|---|---|
ASSETS: | ||
Loans receivable, net of allowance for loan losses | $ 5,218 | $ 4,799 |
Shareholders' Equity | ||
Preferred stock, par value (in dollars per share) | $ 0.01 | $ 0.01 |
Preferred stock, authorized (in shares) | 1,000,000 | 1,000,000 |
Preferred stock, issued (in shares) | 0 | 0 |
Common stock, par value (in dollars per share) | $ 0.01 | $ 0.01 |
Common stock, authorized (in shares) | 35,000,000 | 67,357,500 |
Common stock, issued (in shares) | 10,576,849 | 11,283,503 |
Common stock, outstanding (in shares) | 10,576,302 | 10,577,369 |
Treasury stock, at cost (in shares) | 547 | 706,134 |
Document And Entity Information (USD $) | 9 Months Ended | |
---|---|---|
Sep. 30, 2011 | Nov. 04, 2011 | |
Entity Registrant Name | SI Financial Group, Inc. | |
Entity Central Index Key | 0001500213 | |
Current Fiscal Year End Date | --12-31 | |
Entity Well-known Seasoned Issuer | No | |
Entity Voluntary Filers | No | |
Entity Current Reporting Status | Yes | |
Entity Filer Category | Non-accelerated Filer | |
Entity Public Float | $ 89,000,000 | |
Entity Common Stock, Shares Outstanding | 10,576,302 | |
Document Fiscal Year Focus | 2011 | |
Document Fiscal Period Focus | Q3 | |
Document Type | 10-Q | |
Amendment Flag | false | |
Document Period End Date | Sep. 30, 2011 |
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PREMISES AND EQUIPMENT | 9 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Sep. 30, 2011 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
PREMISES AND EQUIPMENT [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
PREMISES AND EQUIPMENT | NOTE 5. PREMISES AND EQUIPMENT Premises and equipment at September 30, 2011 and December 31, 2010 are summarized as follows:
At September 30, 2011 and December 31, 2010, construction in process related to incidental branch improvements. |
NATURE OF BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES | 9 Months Ended | |||||||||
---|---|---|---|---|---|---|---|---|---|---|
Sep. 30, 2011 | ||||||||||
NATURE OF BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES [Abstract] | ||||||||||
NATURE OF BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES | NOTE 1. NATURE OF BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Nature of Business SI Financial Group, Inc. (the “Company”) is the holding company for Savings Institute Bank and Trust Company (the “Bank”). Established in 1842, the Bank is a community-oriented financial institution headquartered in Willimantic, Connecticut. The Bank provides a variety of financial services to individuals, businesses and municipalities through its twenty-one offices in eastern Connecticut. Its primary products include savings, checking and certificate of deposit accounts, residential and commercial mortgage loans, commercial business loans and consumer loans. In addition, wealth management services, which include trust, financial planning, life insurance and investment services, are offered to individuals and businesses through the Bank's offices. SI Trust Servicing, a third-party provider of trust outsourcing services for community banks, expands the wealth management products offered by the Bank, and offers trust services to other community banks. The Company does not conduct any material business other than owning all of the stock of the Bank and making payments on the subordinated debentures held by the Company. Effective January 12, 2011, the Company completed its public stock offering in connection with the conversion of the Bank from the mutual holding company form of organization to the stock form of organization (the “Conversion”). A total of 6,544,493 shares of common stock were sold at $8.00 per share, including 392,670 shares purchased by the Bank's Employee Stock Ownership Plan (the “ESOP”). Additional shares totaling 4,032,356 were issued in exchange for shares of the former SI Financial Group, Inc., at an exchange ratio of 0.8981. Shares outstanding after the stock offering and the exchange totaled 10,576,849. Proceeds received from the stock offering totaled $50.3 million, net of costs of $2.0 million. Net income per share and the weighted average shares outstanding for the three and nine months ended September 30, 2010 have been restated to reflect the stock offering and the exchange. Principles of Consolidation The accompanying consolidated financial statements include the accounts of the Company and its wholly-owned subsidiary, the Bank, and the Bank's wholly-owned subsidiaries, 803 Financial Corp., SI Mortgage Company and SI Realty Company, Inc. All significant intercompany accounts and transactions have been eliminated. Basis of Financial Statement Presentation The interim consolidated financial statements and related notes have been prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”) for interim financial information, with the instructions to Form 10-Q and Rule 8-03 of Regulation S-X of the Securities and Exchange Commission (“SEC”) and general practices within the banking industry. Accordingly, certain information and footnote disclosures required by GAAP for complete financial statements have been omitted. Information in the accompanying interim consolidated financial statements and notes to the financial statements of the Company as of September 30, 2011 and for the three and nine months ended September 30, 2011 and 2010 is unaudited. These unaudited interim consolidated financial statements and related notes should be read in conjunction with the audited financial statements of the Company and the accompanying notes for the year ended December 31, 2010 contained in the Company's Form 10-K. Interim financial statements are subject to possible adjustment in connection with the annual audit of the Company. In the opinion of management, the accompanying unaudited interim consolidated financial statements reflect all of the adjustments, consisting only of normal and recurring adjustments, necessary for a fair presentation of the financial condition, results of operations and cash flows as of and for the period covered herein. The results of operations for the three and nine months ended September 30, 2011 are not necessarily indicative of the operating results for the year ending December 31, 2011. In preparing the consolidated financial statements, management is required to make estimates and assumptions that affect the reported amounts of assets and liabilities, and disclosures of contingent assets and liabilities, as of the date of the balance sheets and reported amounts of revenues and expenses for the periods presented. Actual results could differ from those estimates. Material estimates that are particularly susceptible to significant change in the near term relate to the determination of the allowance for loan losses, other-than-temporary impairment (“OTTI”) of securities, deferred income taxes and the valuation of intangible assets. Reclassifications Certain amounts in the Company's 2010 consolidated financial statements have been reclassified to conform to the 2011 presentation. Such reclassifications had no effect on net income. Loans Receivable Loans receivable are stated at current unpaid principal balances, net of the allowance for loan losses and deferred loan origination fees and costs. Management has the ability and intent to hold its loans receivable for the foreseeable future or until maturity or pay-off. A loan is impaired when it is probable the Company will be unable to collect all contractual principal and interest payments due in accordance with the terms of the loan agreement. Impairment is measured on a loan by loan basis for residential and commercial mortgage loans and commercial business loans by either the present value of expected future cash flows discounted at the loan's effective interest rate or, as a practical expedient, at the loan's observable market price or the fair value of the collateral if the loan is collateral dependent. Large groups of smaller balance homogeneous loans are collectively evaluated for impairment. Accordingly, the Company does not typically identify individual consumer loans for impairment disclosures, unless such loans are subject to a troubled debt restructuring agreement. The Company periodically may agree to modify the contractual terms of loans. When a loan is modified and concessions have been made to the original contractual terms, such as reductions of interest rates or deferral of interest or principal payments due to the borrower's financial condition, the modification is considered a troubled debt restructuring (“TDR”). All TDRs are initially classified as impaired. Management considers all nonaccrual loans to be impaired. In most cases, loan payments less than 90 days past due are considered minor collection delays and the related loans are generally not considered impaired. Allowance for Loan Losses The allowance for loan losses, a material estimate which could change significantly in the near-term, is established through a provision for loan losses charged to earnings to account for losses that are inherent in the loan portfolio and estimated to occur, and is maintained at a level that management considers adequate to absorb losses in the loan portfolio. Loan losses are charged against the allowance for loan losses when management believes that the uncollectibility of the principal loan balance is confirmed. Subsequent recoveries, if any, are credited to the allowance for loan losses when received. In the determination of the allowance for loan losses, management may obtain independent appraisals for significant properties, if necessary. Management's judgment in determining the adequacy of the allowance is inherently subjective as it requires estimates that are susceptible to significant revision as more information becomes available. The allowance for loan losses is evaluated on a monthly basis by management and is based on the evaluation of the known and inherent risk characteristics and size and composition of the loan portfolio, the assessment of current economic and real estate market conditions, adverse situations that may affect the borrower's ability to repay, estimated value of any underlying collateral, historical loan loss experience and evaluations of loans and other relevant factors. The allowance for loan losses consists of the following key elements:
Management uses a rolling average of historical losses based on the time frame appropriate to capture relevant loss data for each loan segment. This historical loss factor is adjusted for the following qualitative factors: levels/trends in delinquencies; level of charge-offs and nonperforming loans; trends in terms of loans; effects of changes in risk selection and underwriting standards and other changes in lending policies, procedures and practices; experience/ability and depth of lending management and staff and national and local economic trends and conditions. The qualitative factors are determined based on the following various risk characteristics for each loan segment: Residential – 1 to 4 Family – The Company does not originate conventional loans with loan-to-value ratios exceeding 95% and generally originates loans with loan-to-value ratios in excess of 80% only when secured by first liens on owner-occupied one- to four-family residences. All loans in this segment are collateralized by owner-occupied residential real estate and repayment is dependent on the credit quality of the individual borrower. The overall health of the economy, including unemployment rates and housing prices, will have an effect on the credit quality of this segment. Multi-family and Commercial Real Estate – Loans in this segment are originated for the purpose of acquiring, developing, improving or refinancing multi-family and commercial real estate where the property is the primary collateral securing the loan, and the income generated from the property is the primary repayment source. The underlying cash flows generated by the properties are adversely impacted by a downturn in the economy as evidenced by increased vacancy rates, which in turn, will have an effect on the credit quality in this segment. Payments on loans secured by income-producing properties often depend on the successful operation and management of the properties. Management continually monitors the cash flows of these loans. Construction – This segment includes loans to individuals, and to a lesser extent builders, to finance the construction of residential dwellings. The Bank also originates construction loans for commercial development projects. Upon the completion of construction, the loan generally converts to a permanent mortgage loan. Credit risk is affected by cost overruns, time to sell at an adequate price and market conditions. Commercial Business – Loans in this segment are made to businesses and are generally secured by assets of the business. Repayment is expected from the cash flows of the business. A weakened economy and reduced viability of the industry in which the customer operates will have a negative impact on the credit quality in this segment. Consumer – Loans in this segment primarily include home equity lines of credit (representing both first and second liens), and, to a lesser extent, loans secured by marketable securities, passbook or certificate accounts, motorcycles, automobiles and recreational vehicles, as well as unsecured loans. Consumer loan collections depend on the borrower's continuing financial stability, and therefore are more likely to be adversely affected by job loss, divorce, illness or personal bankruptcy.
In computing the allowance for loan losses, we do not assign a general valuation allowance to the Small Business Administration (“SBA”) and United States Department of Agriculture (“USDA”) loans that we purchase as such loans are fully guaranteed. These loans are included in commercial business loans. The majority of the Company's loans are collateralized by real estate located in eastern Connecticut. Accordingly, the collateral value of a substantial portion of the Company's loan portfolio and real estate acquired through foreclosure is susceptible to changes in market conditions. Although management believes that it uses the best information available to establish the allowance for loan losses, future adjustments to the allowance for loan losses may be necessary and the Company's results of operations could be adversely affected if circumstances differ substantially from the assumptions used in making the determinations. Furthermore, while management believes it has established the allowance for loan losses in conformity with GAAP, our regulators, in reviewing the loan portfolio, may request us to increase our allowance for loan losses based on judgments different from ours. In addition, because future events affecting borrowers and collateral cannot be predicted with certainty, the existing allowance for loan losses may not be adequate or increases may be necessary should the quality of any loans deteriorate as a result of the factors discussed above. Any material increase in the allowance for loan losses would adversely affect the Company's financial condition and results of operations. Interest and Fees on Loans Interest on loans is accrued and included in net interest income based on contractual rates applied to principal amounts outstanding. Accrual of interest is discontinued when loan payments are 90 days or more past due, based on contractual terms, or when, in the judgment of management, collectibility of the loan or loan interest becomes uncertain. Subsequent recognition of income occurs only to the extent payment is received subject to management's assessment of the collectibility of the remaining interest and principal. A nonaccrual loan is restored to accrual status when it is no longer delinquent and collectibility of interest and principal is no longer in doubt and the borrower has made regular payments in accordance with the terms of the loan over a period of at least six months. Interest collected on nonaccrual loans and impaired loans is recognized only to the extent cash payments are received, and may be recorded as a reduction to principal if the collectibility of the principal balance of the loan is unlikely. Loan origination fees and direct loan origination costs are deferred, and the net amount is recognized as an adjustment of the related loan's yield utilizing the interest method over the contractual life of the loan. Recent Accounting Pronouncements Credit Quality of Financing Receivables and the Allowance for Credit Losses – In July 2010, the FASB issued guidance requiring additional disclosures that facilitate financial statement users' evaluation of: (1) the nature of credit risk inherent in the entity's portfolio of financing receivables, (2) how that risk is analyzed and assessed in arriving at the allowance for credit losses and (3) the changes and reasons for those changes in the allowance for credit losses. For public entities, the disclosures as of the end of a reporting period were effective for interim and annual reporting periods ending on or after December 15, 2010 and the disclosures about activity that occurs during a reporting period were effective for interim and annual reporting periods beginning on or after December 15, 2010. The adoption of this amendment had a significant impact on the Company's loan disclosures. See Note 4 for additional disclosures. A Creditor's Determination of Whether a Restructuring is a Troubled Debt Restructuring – In April 2011, the FASB issued additional guidance to creditors in evaluating whether a modification or restructuring of a loan is a troubled debt restructuring to limit diversity in the application of GAAP which could adversely affect comparability of financial statements. The update provides guidance on (1) how to determine whether a creditor has granted a concession and (2) whether a borrower is experiencing financial difficulty. For public entities, the amendments were effective for the first interim or annual period beginning on or after June 15, 2011 and should be applied retrospectively to restructurings occurring on or after the beginning of the annual period of adoption. The adoption of this amendment did not have a material impact on the Company's consolidated financial statements. See Note 4 for additional disclosures. Reconsideration of Effective Control for Repurchase Agreements – In April 2011, the FASB issued guidance which affects all entities that enter into agreements to transfer financial assets that both entitle and obligate the transferor to repurchase or redeem the financial assets before their maturity. The amendment removes from the assessment of effective control (1) 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 (2) the collateral maintenance implementation guidance related to that criterion. The amendment is effective for the first interim or annual period beginning on or after December 15, 2011 and should be applied prospectively to transactions or modifications of existing transactions that occur on or after the effective date. This amendment will have no impact on the Company's consolidated financial statements. Amendments to Achieve Common Fair Value Measurement and Disclosure Requirements – In May 2011, the FASB amended its standard related to fair value measurement and disclosure requirements in accordance with GAAP and International Financial Reporting Standards. The amendments (1) change the wording used to describe many of the requirements in GAAP for measuring fair value and for disclosing information about fair value measurement, (2) clarify the intent of the application of existing fair value measurement requirements and (3) change the requirements for measuring fair value and for disclosing information about fair value. The amendments are not intended to change the application of existing requirements for fair value measurement. The amendments should be applied prospectively effective during the first interim and annual periods beginning after December 15, 2011. The adoption of these amendments is not expected to have a material impact on the Company's consolidated financial statements. Presentation of Comprehensive Income – In June 2011, the FASB amended its standard related to the presentation of comprehensive income. Under this amendment, an entity will have the option to present the total of comprehensive income, the components of net income and the components of other comprehensive income in a single continuous statement or in two separate but consecutive statements. Regardless of which method an entity chooses, the entity is required to present on the face of the financial statements reclassification adjustments for items that are reclassified from other comprehensive income to net income in the statement(s) where the components of net income and other comprehensive income are presented. The amendments in this update should be applied retrospectively effective for fiscal years and interim periods within those years, beginning after December 15, 2011. Early adoption is permitted. The adoption of this amendment is not expected to have a material impact on the Company's consolidated financial statements. Testing of Goodwill for Impairment – In September 2011, the FASB amended its standard related to how entities test goodwill for impairment. Under this amendment, an entity is now permitted to first assess qualitative factors to determine whether it is more likely than not that the fair value of a reporting unit is less than its carrying amount as a basis for determining whether it is necessary to perform the two-step goodwill impairment test. If after assessing the totality of events and circumstances, an entity determines it is not more likely than not that the fair value of the reporting unit is less than its carrying amount, then performing the two-step impairment test is unnecessary. Under this amendment, an entity is no longer permitted to carry forward its detailed calculation of a reporting unit's fair value from a prior year. The amendments in this update are effective for annual and interim goodwill impairment tests performed for fiscal years beginning after December 15, 2011. Early adoption is permitted. The adoption of this amendment is not expected to have a material impact on the Company's consolidated financial statements. |
REGULATORY CAPITAL | 9 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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REGULATORY CAPITAL [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
REGULATORY CAPITAL | NOTE 7. REGULATORY CAPITAL The Bank is subject to various regulatory capital requirements administered by the federal banking agencies. Failure to meet minimum capital requirements can initiate certain mandatory, and possibly additional discretionary, actions by regulators that, if undertaken, could have a direct material effect on the Company's consolidated financial statements. Under capital adequacy guidelines and the regulatory framework for prompt corrective action, the Bank must meet specific capital guidelines that involve quantitative measures of the Bank's assets, liabilities and certain off-balance sheet items, as calculated under regulatory accounting practices. The Bank's capital amounts and classification are also subject to qualitative judgments by the regulators about components, risk weightings and other factors. Quantitative measures established by regulation to ensure capital adequacy require the Bank to maintain minimum amounts and ratios (set forth in the table below) of total and Tier I capital (as defined in the regulations) to risk-weighted assets (as defined) and of Tier I capital (as defined) to total assets (as defined). As of September 30, 2011 and December 31, 2010, the Bank met the conditions to be classified as “well capitalized” under the regulatory framework for prompt corrective action. There are no conditions or events since then that management believes have changed the Bank's regulatory category. As a savings and loan holding company regulated by the Federal Reserve Board (the “FRB”), the Company is not currently subject to any separate regulatory capital requirements. The Dodd-Frank Act, however, requires the FRB to promulgate consolidated capital requirements for depository institution holding companies that are no less stringent, both quantitatively in terms of components of capital, than those applicable to institutions themselves. There is a five-year transition period before the capital requirements will apply to savings and loan holding companies. The following is a summary of the Bank's regulatory capital amounts and ratios as of September 30, 2011 and December 31, 2010.
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FAIR VALUE OF ASSETS AND LIABILITIES | 9 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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FAIR VALUE OF ASSETS AND LIABILITIES [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
FAIR VALUE OF ASSETS AND LIABILITIES | NOTE 8. FAIR VALUE OF ASSETS AND LIABILITIES Fair Value Hierarchy The Company groups its assets and liabilities in three levels based on the markets in which the assets and liabilities are traded and the reliability of the assumptions used to determine fair value.
Determination of Fair Value The Company uses fair value measurements to record fair value adjustments to certain assets and liabilities and to determine fair value disclosures. The fair value of a financial instrument is 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. Fair value is best determined based upon quoted market prices. However, in many instances, there are no quoted market prices for the Company's various financial instruments. In cases where quoted market prices are not available, fair values are based on estimates using present value or other valuation techniques. Those techniques are significantly affected by the assumptions used, including the discount rate and estimates of future cash flows. Accordingly, the fair value estimates may not be realized in an immediate settlement of the instrument. The following methods and assumptions were used by the Company in estimating fair value disclosures of its financial instruments:
Assets and Liabilities Measured at Fair Value on a Recurring Basis The following table presents assets and liabilities measured at fair value on a recurring basis as of September 30, 2011 and December 31, 2010. The Company had no significant transfers into or out of Levels 1, 2 or 3 during the nine months ended September 30, 2011.
The following table shows a reconciliation of the beginning and ending balances for Level 3 assets (liabilities):
Assets Measured at Fair Value on a Nonrecurring Basis The Company may also be required, from time to time, to measure certain other financial assets on a nonrecurring basis in accordance with generally accepted accounting principles. These adjustments to fair value usually result from the application of lower-of-cost-or-market accounting or write-downs of individual assets. The following table summarizes the fair value hierarchy used to determine each adjustment and the carrying value of the related individual assets as of September 30, 2011 and 2010. There were no liabilities measured at fair value on a nonrecurring basis at September 30, 2011 or 2010.
The Company measures the impairment of loans that are collateral dependent based on the fair value of the collateral (Level 3). The fair value of collateral used by the Company represents the amount expected to be received from the sale of the property, net of selling costs, as determined by an independent, licensed or certified appraiser using observable market data. This data includes information such as selling price of similar properties, expected future cash flows or earnings of the subject property based on current market expectations, and relevant legal, physical and economic factors. Losses applicable to write-downs of impaired loans are based on the appraised market value of the underlying collateral, assuming foreclosure of these loans is imminent. The amount of other real estate owned represents the carrying value of the collateral based on the appraised value of the underlying collateral less selling costs. The loss on foreclosed assets represents adjustments in the valuation recorded during the time period indicated and not for losses incurred on sales. Summary of Fair Values of Financial Instruments The estimated fair values, and related carrying or notional amounts, of the Company's financial instruments are presented in the following table. Certain financial instruments and all nonfinancial instruments are exempt from disclosure requirements. Accordingly, the aggregate fair value amounts presented do not represent the underlying value of the Company. Management uses its best judgment in estimating the fair value of the Company's financial instruments; however, there are inherent weaknesses in any estimation technique. Therefore, for substantially all financial instruments, the fair value estimates presented herein are not necessarily indicative of the amounts the Company could have realized in a sales transaction at September 30, 2011 and December 31, 2010. The estimated fair value amounts at September 30, 2011 and December 31, 2010 have been measured as of each respective date, and the estimated fair value amounts at December 31, 2010 have not been re-evaluated or updated for purposes of the consolidated financial statements subsequent to that date. As such, the estimated fair values of these financial instruments subsequent to the respective reporting dates may be different than the amounts reported at each period-end. The information presented should not be interpreted as an estimate of the fair value of the entire Company since a fair value calculation is only required for a limited portion of the Company's assets. Due to the wide range of valuation techniques and the degree of subjectivity used in making the estimate, comparisons between the Company's disclosures and those of other banks may not be meaningful. As of September 30, 2011 and December 31, 2010, the recorded carrying amounts and estimated fair values of the Company's financial instruments are as follows:
Off-Balance Sheet Instruments The Company assumes interest rate risk, which represents the risk that general interest rate levels will change, as a result of its normal operations. As a result, the fair values of the Company's financial instruments will change when interest rate levels change and that change may be either favorable or unfavorable to the Company. Management attempts to match maturities of assets and liabilities to the extent believed necessary to minimize interest rate risk. However, borrowers with fixed-rate obligations are less likely to prepay in a rising rate environment and more likely to prepay in a falling rate environment. Conversely, depositors who are receiving fixed rates are more likely to withdraw funds before maturity in a rising rate environment and less likely to do so in a falling rate environment. Management monitors rates and maturities of assets and liabilities and attempts to minimize interest rate risk by adjusting terms of new loans and deposits and by investing in securities with terms that mitigate the Company's overall interest rate risk. |
ACCUMULATED OTHER COMPREHENSIVE LOSS | 9 Months Ended | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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ACCUMULATED OTHER COMPREHENSIVE LOSS [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
ACCUMULATED OTHER COMPREHENSIVE LOSS | NOTE 6. ACCUMULATED OTHER COMPREHENSIVE LOSS Accounting principles generally require that recognized revenue, expenses, gains and losses be included in net income. Although certain changes in assets and liabilities are reported as a separate component of shareholders' equity on the balance sheet, such items, along with net income are components of comprehensive income. Components of other comprehensive income for the nine months ended September 30, 2011 are as follows:
The components of accumulated other comprehensive loss included in shareholders' equity are as follows:
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CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY (Unaudited) (Parenthetical) (USD $) | 9 Months Ended |
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Sep. 30, 2011 | |
CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY (Unaudited) (Parenthetical) [Abstract] | |
Cash dividends declared per share | $ 0.09 |
Shares purchased for ESOP pursuant to reorganization | 392,670 |
Allocation of ESOP shares | 36,477 |
Treasury stock purchased | 547 |
NET INCOME PER SHARE | 9 Months Ended | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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NET INCOME PER SHARE [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
NET INCOME PER SHARE | NOTE 2. NET INCOME PER SHARE Basic net income per share is calculated by dividing the net income available to common shareholders by the weighted average number of common shares outstanding during the period. Unvested restricted shares are considered outstanding in the computation of basic net income per share since the shares participate in dividends and the rights to the dividends are non-forfeitable. Diluted net income per share is computed in a manner similar to basic net income per share except that the weighted average number of common shares outstanding is increased to include the incremental common shares (as computed using the treasury stock method) that would have been outstanding if all potentially dilutive common stock equivalents were issued during the period. The Company's common stock equivalents relate solely to stock options. Treasury shares and unallocated common shares held by the Bank's ESOP are not deemed outstanding for net income per share calculations. Anti-dilutive shares are common stock equivalents with weighted average exercise prices in excess of the weighted average market value for the periods presented, and are not considered in diluted earnings per share calculations. The Company had anti-dilutive common shares outstanding of 436,434 and 395,512 for the three and nine months ended September 30, 2011, respectively, and 383,264 and 397,890 for the three and nine months ended September 30, 2010, respectively. The computation of net income per share is as follows:
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SECURITIES | 9 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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SECURITIES [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
SECURITIES | NOTE 3. SECURITIES Trading securities: During the third quarter of 2010, the Company elected to record two collateralized debt obligations at fair value and reclassified them to trading securities from available for sale in accordance with applicable guidance. Cumulative unrealized losses at the date of election totaling $652,000 were reclassified from accumulated other comprehensive loss to retained earnings as a cumulative effect adjustment resulting from a change in accounting principle. These securities were sold during the quarter ended June 30, 2011. At December 31, 2010, these securities had an aggregate carrying value and fair value of $248,000. For the nine months ended September 30, 2011, the net gain in fair value on trading securities was $182,000, respectively, and is included in net gain in fair value on trading securities and derivatives on the statements of income. The Company does not purchase securities with the intent of selling them in the near term, thus there are no other securities in the trading portfolio. Available for sale securities: The amortized cost, gross unrealized gains and losses and approximate fair values of available for sale securities at September 30, 2011 and December 31, 2010 are as follows:
The amortized cost and fair value of debt securities by contractual maturities at September 30, 2011 are presented below. Actual maturities of mortgage-backed securities may differ from contractual maturities because the mortgages underlying the securities may be called or repaid without any penalties. Because mortgage-backed securities are not due at a single maturity date, they are not included in the maturity categories in the following maturity summary.
The following is a summary of realized gains and losses on the sale of securities for the three and nine months ended September 30, 2011 and 2010:
Proceeds from the sale of available for sale securities were $3.8 million and $36.4 million for the three and nine months ended September 30, 2011, respectively, and $6.3 million and $40.1 million for the three and nine months ended September 30, 2010, respectively. The following tables present information pertaining to securities with gross unrealized losses at September 30, 2011 and December 31, 2010, aggregated by investment category and length of time the individual securities have been in a continuous unrealized loss position.
At September 30, 2011, twenty-eight debt securities with gross unrealized losses had aggregate depreciation of 7.37% of the Company's amortized cost basis. The majority of the unrealized losses related to the Company's collateralized debt obligations and non-agency mortgage-backed securities as discussed below. The Company did not recognize net impairment losses on securities for the three and nine months ended September 30, 2011. For the three and nine months ended September 30, 2010, the Company recognized net impairment losses of $160,000 and $492,000, respectively, on investments deemed other-than-temporarily impaired. The following summarizes, by security type, the basis for management's determination during the preparation of the financial statements of whether the applicable investments within the Company's securities portfolio were other-than-temporarily impaired at September 30, 2011. Debt Securities: U.S. Government and Agency Obligations and Government-Sponsored Enterprises. The unrealized losses on the Company's U.S. Government and agency obligations and government-sponsored enterprises related primarily to a widening of the rate spread to comparable treasury securities. The contractual terms of these investments do not permit the issuer to settle the securities at a price less than the amortized cost basis of the investments. Because the decline in market value is attributable to changes in interest rates and not credit quality and because the Company does not intend to sell these securities and it is not more likely than not that the Company will be required to sell the securities before their anticipated recovery, which may be maturity, the Company does not consider these securities to be other-than-temporarily impaired at September 30, 2011. Mortgage-backed Securities - Agency - Residential. The unrealized losses on the Company's agency–residential mortgage-backed securities were caused by increases in the rate spread to comparable treasury securities. The Company does not expect these securities to settle at a price less than the amortized cost basis of the investments. Because the Company does not intend to sell the investments and it is not more likely than not that the Company will be required to sell the investments before the recovery of their amortized cost basis, which may be at maturity, the Company does not consider these investments to be other-than-temporarily impaired at September 30, 2011. Mortgage-backed Securities - Non-agency - Residential. Despite significant improvement in the market, these securities continue to trade well below historic levels, particularly those backed by jumbo or hybrid loan collateral. In particular, five non-agency mortgage-backed securities displayed market pricing significantly below book value or were rated below investment grade at September 30, 2011. At September 30, 2011, management evaluated credit rating details for the tranche owned, as well as credit information on subordinate tranches, potential future credit losses and loss analyses. Additionally, management reviewed reports prepared by an independent third party for certain non-agency mortgage-backed securities. The Company previously recorded OTTI losses on one of the non-agency mortgage-backed securities totaling $1.1 million related to credit. The Company did not record any further impairment losses at September 30, 2011 because the Company does not intend to sell the investments and it is not more likely than not that the Company will be required to sell the investments before recovery of their amortized cost basis, which may be at maturity. See the table of non-agency mortgage-backed securities rated below investment grade as of September 30, 2011 for more details. Mortgage-backed Securities - Non-agency - HELOC. The unrealized loss on the Company's non-agency - HELOC mortgage-backed security is related to one security whose market has been illiquid. This security is collateralized by home equity lines of credit secured by first and second liens and insured by Financial Security Assurance. At September 30, 2011, management evaluated credit rating details, collateral support and loss analyses. All of the unrealized losses on this security relate to factors other than credit. Because the Company does not intend to sell this security and it is not more likely than not that the Company will be required to sell this security before the recovery of its amortized cost basis, which may be at maturity, the Company did not record an impairment loss at September 30, 2011. Collateralized Debt Obligations. The unrealized losses on the Company's collateralized debt obligations related to investments in pooled trust preferred securities (“PTPS”). The PTPS market continues to experience significant declines in market value as a result of market saturation. Transactions for PTPS have been limited and have occurred primarily as a result of distressed or forced liquidation sales. The securities were widely held by hedge funds and European banks and used to offset interest rate exposure tied to LIBOR. As the positions have unwound, an excess supply of these securities have saturated the market. Management evaluated current credit ratings, credit support and stress testing for future defaults related to the Company's PTPS. Management also reviewed analytics provided by the trustee and independent OTTI reviews and associated cash flow analyses performed by an independent third party. The unrealized losses on the Company's PTPS investments were caused by a lack of liquidity, credit downgrades and decreasing credit support. The increased number of bank and insurance company failures has decreased the level of credit support for these investments. A number of lower tranche income issues have foregone payments or have received payment in kind through increased principal allocations. However, the number of deferring securities has been decreasing and a number of reinstatements have occurred recently. At September 30, 2011, based on the existing credit profile, management does not believe that these investments will suffer from any further credit-related losses. Because the Company does not intend to sell the investments and it is not more likely than not that the Company will be required to sell the investments before recovery of their amortized cost basis, which may be at maturity, the Company did not record additional impairment losses at September 30, 2011. See the table of collateralized debt obligations rated below investment grade as of September 30, 2011 for more details. Equity Securities: The Company's investments in marketable equity securities consist of common stock of companies in the financial services sector and various other industries. Management evaluated the near-term prospects of the issuers and the Company's ability and intent to hold the investments for a reasonable period of time sufficient for an anticipated recovery of fair value. Although certain issuers have shown declines in earnings as a result of the weakened economy, no credit issues have been identified that cause management to believe that the declines in market value are other-than-temporary at September 30, 2011. For debt securities with OTTI losses, the Company estimated the portion of loss attributable to credit using a discounted cash flow model in accordance with applicable guidance. Significant inputs for the non-agency mortgage-backed securities included the estimated cash flows of the underlying collateral based on key assumptions, such as default rate, loss severity and prepayment rate. Assumptions used can vary widely from loan to loan, and are influenced by such factors as loan interest rate, geographical location of the borrower, borrower characteristics and collateral type. Significant inputs for the collateralized debt obligations included estimated cash flows and prospective deferrals, defaults and recoveries based on the underlying seniority status and subordination structure of the pooled trust preferred debt tranche at the time of measurement. Prospective deferral, default and recovery estimates affecting projected cash flows were based on an analysis of the underlying financial condition of the individual issuers, with consideration of the account's capital adequacy, credit quality, lending concentrations and other factors. All cash flow estimates were based on the securities' tranche structure and contractual rate and maturity terms. The Company utilized the services of an independent third-party valuation firm to obtain information about the structure in order to determine how the underlying collateral cash flows will be distributed to each security issued from the structure. The present value of the expected cash flows was compared to the Company's holdings to determine the credit-related impairment loss, if any. To the extent that continued changes in interest rates, credit movements and other factors that influence fair value of investments occur, the Company may be required to record additional impairment charges for OTTI in future periods. The following table presents in more detail the Company's non-agency mortgage-backed security holdings that are rated below investment grade as of September 30, 2011 (dollars in thousands).
The following table details the Company's collateralized debt obligations that are rated below investment grade as of September 30, 2011 (dollars in thousands).
The following table presents a roll-forward of the balance of credit losses on the Company's debt securities for which a portion of OTTI was recognized in other comprehensive income for the three and nine months ended September 30, 2011.
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