x
|
QUARTERLY REPORT PURSUANT TO 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
|
¨
|
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES AND EXCHANGE ACT
|
Ohio
|
34-1405357
|
|
(State or other jurisdiction of
|
(IRS Employer Identification No.)
|
|
incorporation or organization)
|
201 South Fourth Street, Martins Ferry, Ohio 43935-0010
|
(Address of principal executive offices)
|
(740) 633-0445
|
(Registrant’s telephone number, including area code)
|
N/A
|
(Former name, former address and former fiscal year, if changed since last report)
|
PART I - FINANCIAL INFORMATION
|
|
Item 1 Condensed Consolidated Balance Sheets
|
3
|
Condensed Consolidated Statements of Income
|
4
|
Condensed Consolidated Statements of Comprehensive Income
|
5
|
Condensed Consolidated Statements of Cash Flows
|
6
|
Notes to Condensed Consolidated Financial Statements
|
8
|
Item 2 Management’s Discussion and Analysis of Financial Condition and Results of Operations
|
30
|
Item 3 Quantitative and Qualitative Disclosures About Market Risk
|
38
|
Item 4 Controls and Procedures
|
38
|
PART II - OTHER INFORMATION
|
|
Item 1 Legal Proceedings
|
39
|
Item 1A Risk Factors
|
39
|
Item 2 Unregistered Sales of Equity Securities and Use of Proceeds
|
39
|
Item 3 Defaults Upon Senior Securities
|
40
|
Item 4 Other Information
|
40
|
Item 5 Exhibits
|
40
|
SIGNATURES
|
41
|
June 30,
|
December 31,
|
|||||||
|
2011
|
2010
|
||||||
(Unaudited)
|
||||||||
Assets
|
||||||||
Cash and due from banks
|
$ | 5,081 | $ | 5,006 | ||||
Interest-bearing demand deposits
|
7,859 | 5,929 | ||||||
Cash and cash equivalents
|
12,940 | 10,935 | ||||||
Certificates of deposit in other financial institutions
|
–– | 2,564 | ||||||
Available-for-sale securities
|
94,462 | 96,155 | ||||||
Held-to-maturity securities
|
4,550 | 6,331 | ||||||
Loans, net of allowance for loan losses of $2,783 and $2,740 at June 30, 2011 and December 31, 2010, respectively
|
274,553 | 276,037 | ||||||
Premises and equipment
|
10,072 | 9,278 | ||||||
Federal Home Loan Bank stock
|
4,810 | 4,810 | ||||||
Foreclosed assets held for sale, net
|
2,175 | 1,912 | ||||||
Intangible assets
|
483 | 543 | ||||||
Accrued interest receivable
|
1,484 | 1,441 | ||||||
Deferred income taxes
|
635 | 801 | ||||||
Bank-owned life insurance
|
10,682 | 10,401 | ||||||
Other assets
|
2,206 | 2,227 | ||||||
Total assets
|
$ | 419,052 | $ | 423,435 | ||||
Liabilities and Stockholders’ Equity
|
||||||||
Liabilities
|
||||||||
Deposits
|
||||||||
Demand
|
$ | 132,866 | $ | 131,600 | ||||
Savings
|
55,307 | 52,463 | ||||||
Time
|
137,130 | 141,383 | ||||||
Total deposits
|
325,303 | 325,446 | ||||||
Short-term borrowings
|
12,320 | 11,843 | ||||||
Federal Home Loan Bank advances
|
38,208 | 43,450 | ||||||
Subordinated debentures
|
4,000 | 4,000 | ||||||
Interest payable and other liabilities
|
2,867 | 3,115 | ||||||
Total liabilities
|
382,698 | 387,854 | ||||||
Stockholders’ Equity
|
||||||||
Preferred stock, no par value, authorized 2,000,000 shares; no shares issued
|
–– | –– | ||||||
Common stock, $1 par value; authorized 10,000,000 shares; issued 5,370,304 shares
|
5,370 | 5,370 | ||||||
Additional paid-in capital
|
18,687 | 20,133 | ||||||
Retained earnings
|
16,798 | 15,308 | ||||||
Stock held by deferred compensation plan; 2011 – 185,636 shares, 2010 – 176,392 shares
|
(1,755 | ) | (1,657 | ) | ||||
Unearned ESOP compensation
|
(2,183 | ) | (2,311 | ) | ||||
Accumulated other comprehensive loss
|
(387 | ) | (707 | ) | ||||
Treasury stock, at cost
|
||||||||
2011 – 14,467 shares, 2010 – 45,717 shares
|
(176 | ) | (555 | ) | ||||
Total stockholders’ equity
|
36,354 | 35,581 | ||||||
Total liabilities and stockholders’ equity
|
$ | 419,052 | $ | 423,435 |
Three months ended
|
Six months ended
|
|||||||||||||||
June 30,
|
June 30,
|
|||||||||||||||
2011
|
2010
|
2011
|
2010
|
|||||||||||||
Interest and dividend income
|
||||||||||||||||
Loans, including fees
|
$ | 4,461 | $ | 4,354 | $ | 8,779 | $ | 8,529 | ||||||||
Taxable securities
|
408 | 652 | 757 | 1,461 | ||||||||||||
Non-taxable securities
|
282 | 391 | 584 | 800 | ||||||||||||
Federal funds sold
|
5 | 23 | 11 | 34 | ||||||||||||
Dividends on Federal Home Loan Bank stock and other
|
56 | 93 | 119 | 219 | ||||||||||||
Total interest and dividend income
|
5,212 | 5,513 | 10,250 | 11,043 | ||||||||||||
Interest expense
|
||||||||||||||||
Deposits
|
||||||||||||||||
Demand
|
32 | 47 | 65 | 96 | ||||||||||||
Savings
|
17 | 24 | 34 | 50 | ||||||||||||
Time
|
718 | 1,109 | 1,445 | 2,306 | ||||||||||||
Borrowings
|
453 | 535 | 932 | 1,067 | ||||||||||||
Total interest expense
|
1,220 | 1,715 | 2,476 | 3,519 | ||||||||||||
Net interest income
|
3,992 | 3,798 | 7,774 | 7,524 | ||||||||||||
Provision for loan losses
|
494 | 370 | 1,142 | 730 | ||||||||||||
Net interest income after provision for loan losses
|
3,498 | 3,428 | 6,632 | 6,794 | ||||||||||||
Noninterest income
|
||||||||||||||||
Service charges on deposit accounts
|
579 | 625 | 1,023 | 1,158 | ||||||||||||
Realized gains on sales of securities
|
–– | –– | 370 | –– | ||||||||||||
Realized gains on sales of loans
|
13 | 31 | 43 | 44 | ||||||||||||
Realized (losses) gains on sales of foreclosed assets
|
(5 | ) | 2 | (5 | ) | (1 | ) | |||||||||
BOLI benefit in excess of surrender value
|
100 | –– | 100 | –– | ||||||||||||
Other income
|
208 | 201 | 428 | 434 | ||||||||||||
Total noninterest income
|
895 | 859 | 1,959 | 1,635 | ||||||||||||
Noninterest expense
|
||||||||||||||||
Salaries and employee benefits
|
1,718 | 1,833 | 3,471 | 3,588 | ||||||||||||
Net occupancy and equipment expense
|
434 | 422 | 884 | 847 | ||||||||||||
Provision for impairment on foreclosed real estate
|
49 | –– | 49 | –– | ||||||||||||
Professional services
|
242 | 206 | 428 | 394 | ||||||||||||
Insurance
|
65 | 26 | 127 | 128 | ||||||||||||
Deposit insurance premiums
|
120 | 145 | 207 | 240 | ||||||||||||
Franchise and other taxes
|
126 | 127 | 244 | 258 | ||||||||||||
Advertising
|
61 | 54 | 123 | 147 | ||||||||||||
Stationery and office supplies
|
55 | 80 | 100 | 139 | ||||||||||||
Amortization of intangible asset
|
29 | 28 | 59 | 54 | ||||||||||||
Other expenses
|
574 | 550 | 1,075 | 1,047 | ||||||||||||
Total noninterest expense
|
3,473 | 3,471 | 6,767 | 6,842 | ||||||||||||
Income before federal income taxes
|
920 | 816 | 1,824 | 1,587 | ||||||||||||
Federal income taxes
|
168 | 115 | 334 | 203 | ||||||||||||
Net income
|
$ | 752 | $ | 701 | $ | 1,490 | $ | 1,384 | ||||||||
EARNINGS PER COMMON SHARE
|
||||||||||||||||
Basic
|
$ | 0.15 | $ | 0.14 | $ | 0.30 | $ | 0.28 | ||||||||
Diluted
|
$ | 0.15 | $ | 0.14 | $ | 0.30 | $ | 0.28 | ||||||||
DIVIDENDS PER COMMON SHARE
|
$ | 0.14 | $ | 0.14 | $ | 0.28 | $ | 0.28 |
Three months ended
|
Six months ended
|
|||||||||||||||
June 30,
|
June 30,
|
|||||||||||||||
2011
|
2010
|
2011
|
2010
|
|||||||||||||
Net income
|
$ | 752 | $ | 701 | $ | 1,490 | $ | 1,384 | ||||||||
Other comprehensive income, net of tax:
|
||||||||||||||||
Unrealized holding gains on securities during the
|
||||||||||||||||
period, net of taxes of $194, $26,
|
||||||||||||||||
$291 and $373 for each respective period
|
377 | 51 | 564 | 725 | ||||||||||||
Reclassification adjustment for realized gains included in income, net of taxes of $126 for the six months ended June 30, 2011
|
–– | –– | (244 | ) | –– | |||||||||||
Comprehensive income
|
$ | 1,129 | $ | 752 | $ | 1,810 | $ | 2,109 | ||||||||
Accumulated comprehensive income (loss)
|
$ | (387 | ) | $ | 218 | $ | (387 | ) | $ | 218 |
2011
|
2010
|
|||||||
Operating Activities
|
||||||||
Net income
|
$ | 1,490 | $ | 1,384 | ||||
Items not requiring (providing) cash
|
||||||||
Amortization of premiums and discounts on securities, net
|
(48 | ) | 64 | |||||
Depreciation and amortization
|
484 | 399 | ||||||
Amortization of intangible asset
|
59 | 54 | ||||||
Expense related to share based compensation plans
|
90 | 107 | ||||||
Expense related to ESOP
|
100 | 104 | ||||||
Provision for loan losses
|
1,142 | 730 | ||||||
Provision for losses on foreclosed real estate
|
49 | –– | ||||||
Increase in value of bank-owned life insurance
|
(281 | ) | (199 | ) | ||||
BOLI benefit in excess of surrender value
|
(100 | ) | –– | |||||
Gain on sale of securities
|
(370 | ) | –– | |||||
Gain on sale of loans
|
(43 | ) | (44 | ) | ||||
Proceeds from sale of loans
|
2,732 | 2,954 | ||||||
Loans originated for sale
|
(2,689 | ) | (2,910 | ) | ||||
Loss on sale of foreclosed assets
|
5 | 1 | ||||||
Amortization of mortgage servicing rights
|
13 | 14 | ||||||
Net change in accrued interest receivable and other assets
|
24 | (62 | ) | |||||
Net change in accrued expenses and other liabilities
|
(246 | ) | (262 | ) | ||||
Net cash provided by operating activities
|
2,411 | 2,334 | ||||||
Investing Activities
|
||||||||
Securities available for sale:
|
||||||||
Maturities, prepayments and calls
|
33,233 | 46,362 | ||||||
Purchases
|
(39,540 | ) | (41,197 | ) | ||||
Securities held to maturity:
|
||||||||
Maturities, prepayments and calls
|
1,495 | 3,424 | ||||||
Proceeds from sale of held-to-maturity securities
|
302 | –– | ||||||
Proceeds from sale of available for sale securities
|
8,886 | –– | ||||||
Net change in loans
|
54 | (11,601 | ) | |||||
Net change in certificates of deposit in other financial institutions
|
2,564 | 12,500 | ||||||
Purchases of premises and equipment
|
(1,278 | ) | (154 | ) | ||||
Proceeds from sale of foreclosed assets
|
13 | 195 | ||||||
Net cash provided by investing activities
|
5,729 | 9,529 |
2011
|
2010
|
|||||||
Financing Activities
|
||||||||
Net change in deposits
|
$ | (143 | ) | $ | (581 | ) | ||
Net change in short-term borrowings
|
477 | 936 | ||||||
Net change in long-term borrowings
|
(5,242 | ) | (377 | ) | ||||
Shares purchased for deferred compensation plan
|
27 | 60 | ||||||
Proceeds from purchase of shares by Dividend Reinvestment Plan
|
237 | 231 | ||||||
Cash dividends paid on common stock
|
(1,491 | ) | (1,475 | ) | ||||
Net cash used in financing activities
|
(6,135 | ) | (1,206 | ) | ||||
Increase in Cash and Cash Equivalents
|
2,005 | 10,657 | ||||||
Cash and Cash Equivalents, Beginning of Period
|
10,935 | 31,271 | ||||||
Cash and Cash Equivalents, End of Period
|
$ | 12,940 | $ | 41,928 | ||||
Supplemental Cash Flows Information
|
||||||||
Interest paid on deposits and borrowings
|
$ | 2,555 | $ | 3,575 | ||||
Federal income taxes paid
|
$ | 535 | $ | 305 | ||||
Supplemental Disclosure of Non-Cash Investing and Financing Activities
|
||||||||
Transfers from loans to foreclosed assets held for sale
|
$ | 374 | $ | 165 | ||||
Unrealized gains on securities designated as available for sale, net of related tax effects
|
$ | 320 | $ | 725 | ||||
Trade date securities purchases
|
$ | –– | $ | 6,000 |
Note 1:
|
Summary of Significant Accounting Policies
|
Three months ended
June 30,
|
Six months ended
June 30,
|
|||||||||||||||
2011
|
2010
|
2011
|
2010
|
|||||||||||||
Basic
|
||||||||||||||||
Net income (In thousands)
|
$ | 752 | $ | 701 | $ | 1,490 | $ | 1,384 | ||||||||
Dividends on non-vested restricted stock (In thousands)
|
(24 | ) | (25 | ) | (48 | ) | (50 | ) | ||||||||
Net earnings allocated to stockholders (In thousands)
|
$ | 728 | $ | 676 | $ | 1,442 | $ | 1,334 | ||||||||
Weighted average common shares outstanding
|
4,759,315 | 4,677,145 | 4,752,357 | 4,671,572 | ||||||||||||
Basic earnings per common share
|
$ | 0.15 | $ | 0.14 | $ | 0.30 | $ | 0.28 | ||||||||
Diluted
|
||||||||||||||||
Net income allocated to stockholders (In thousands)
|
$ | 728 | $ | 676 | $ | 1,442 | $ | 1,334 | ||||||||
Weighted average common shares outstanding for basic earnings per common share
|
4,759,315 | 4,677,145 | 4,752,357 | 4,671,572 | ||||||||||||
Add: Dilutive effects of assumed exercise of stock options and restricted stock
|
29,999 | 17,847 | 29,999 | 17,847 | ||||||||||||
Average shares and dilutive potential common shares
|
4,789,314 | 4,694,992 | 4,782,356 | 4,689,419 | ||||||||||||
Diluted earnings per common share
|
$ | 0.15 | $ | 0.14 | $ | 0.30 | $ | 0.28 |
Note 2:
|
Securities
|
Amortized
Cost
|
Gross
Unrealized
Gains
|
Gross
Unrealized
Losses
|
Approximate
Fair Value
|
|||||||||||||
(In thousands)
|
||||||||||||||||
Available-for-sale Securities:
|
||||||||||||||||
June 30, 2011
|
||||||||||||||||
U.S. government agencies
|
$ | 71,494 | $ | 171 | $ | (19 | ) | $ | 71,646 | |||||||
State and political subdivisions
|
22,350 | 470 | (20 | ) | 22,800 | |||||||||||
Equity securities
|
4 | 12 | –– | 16 | ||||||||||||
$ | 93,848 | $ | 653 | $ | (39 | ) | $ | 94,462 | ||||||||
Available-for-sale Securities:
|
||||||||||||||||
December 31, 2010:
|
||||||||||||||||
U.S. government agencies
|
$ | 61,908 | $ | 53 | $ | (728 | ) | $ | 61,233 | |||||||
State and political subdivisions
|
25,008 | 315 | (28 | ) | 25,295 | |||||||||||
Government sponsored entities mortgage-backed securities
|
9,105 | 509 | –– | 9,614 | ||||||||||||
Equity securities
|
4 | 9 | –– | 13 | ||||||||||||
$ | 96,025 | $ | 886 | $ | (756 | ) | $ | 96,155 |
Amortized
Cost
|
Gross
Unrealized
Gains
|
Gross
Unrealized
Losses
|
Approximate
Fair Value
|
|||||||||||||
(In thousands)
|
||||||||||||||||
Held-to-maturity Securities:
|
||||||||||||||||
June 30, 2011:
|
||||||||||||||||
State and political subdivisions
|
$ | 4,550 | $ | 177 | $ | –– | $ | 4,727 | ||||||||
December 31, 2010:
|
||||||||||||||||
State and political subdivisions
|
$ | 6,331 | $ | 179 | $ | –– | $ | 6,510 |
Available-for-sale
|
Held-to-maturity
|
|||||||||||||||
Amortized
Cost
|
Fair
Value
|
Amortized
Cost
|
Fair
Value
|
|||||||||||||
(In thousands)
|
||||||||||||||||
Within one year
|
$ | –– | $ | –– | $ | 110 | $ | 112 | ||||||||
One to five years
|
9,776 | 9,862 | 2,089 | 2,179 | ||||||||||||
Five to ten years
|
38,121 | 38,437 | 2,351 | 2,436 | ||||||||||||
After ten years
|
45,947 | 46,147 | –– | –– | ||||||||||||
93,844 | 94,446 | 4,550 | 4,727 | |||||||||||||
Equity securities
|
4 | 16 | –– | –– | ||||||||||||
Totals
|
$ | 93,848 | $ | 94,462 | $ | 4,550 | $ | 4,727 |
Six months ended
March 31,
|
||||||||
2011
|
2010
|
|||||||
(In thousands)
|
||||||||
Proceeds from sale
|
$ | 9,188 | $ | –– | ||||
Gross gains
|
370 | –– | ||||||
Gross losses
|
–– | –– |
June 30, 2011
|
||||||||||||||||||||||||
Less than 12 Months
|
12 Months or More
|
Total
|
||||||||||||||||||||||
Description of
Securities
|
Fair Value
|
Unrealized
Losses
|
Fair Value
|
Unrealized
Losses
|
Fair Value
|
Unrealized
Losses
|
||||||||||||||||||
(In thousands)
|
||||||||||||||||||||||||
U.S. Government agencies
|
$ | 11,414 | $ | (19 | ) | $ | –– | $ | –– | $ | 11,414 | $ | (19 | ) | ||||||||||
State and political subdivisions
|
320 | (20 | ) | –– | –– | 320 | (20 | ) | ||||||||||||||||
Total temporarily impaired securities
|
$ | 11,734 | $ | (39 | ) | $ | –– | $ | –– | $ | 11,734 | $ | (39 | ) |
December 31, 2010
|
||||||||||||||||||||||||
Less than 12 Months
|
12 Months or More
|
Total
|
||||||||||||||||||||||
Description of
Securities
|
Fair Value
|
Unrealized
Losses
|
Fair Value
|
Unrealized
Losses
|
Fair Value
|
Unrealized
Losses
|
||||||||||||||||||
(In thousands)
|
||||||||||||||||||||||||
U.S. Government agencies
|
$ | 33,215 | $ | (728 | ) | $ | –– | $ | –– | $ | 33,215 | $ | (728 | ) | ||||||||||
State and political subdivisions
|
2,484 | (28 | ) | –– | –– | 2,484 | (28 | ) | ||||||||||||||||
Total temporarily impaired securities
|
$ | 35,699 | $ | (756 | ) | $ | –– | $ | –– | $ | 35,699 | $ | (756 | ) |
Note 3:
|
Loans and Allowance for Loan Losses
|
June 30,
|
December 31,
|
|||||||
2011
|
2010
|
|||||||
(In thousands)
|
||||||||
Commercial loans
|
$ | 33,901 | $ | 32,153 | ||||
Commercial real estate
|
138,729 | 136,369 | ||||||
Residential real estate
|
61,401 | 63,378 | ||||||
Installment loans
|
43,305 | 46,877 | ||||||
Total gross loans
|
277,336 | 278,777 | ||||||
Less allowance for loan losses
|
(2,783 | ) | (2,740 | ) | ||||
Total loans
|
$ | 274,553 | $ | 276,037 |
Three months ended
June 30,
|
Six months ended
June 30,
|
|||||||||||||||
2011
|
2010
|
2011
|
2010
|
|||||||||||||
(In thousands)
|
||||||||||||||||
Beginning balance
|
$ | 2,521 | $ | 2,527 | $ | 2,740 | $ | 2,390 | ||||||||
Provision for loan losses
|
494 | 370 | 1,142 | 730 | ||||||||||||
Loans charged-off
|
(315 | ) | (268 | ) | (1,282 | ) | (579 | ) | ||||||||
Recoveries of previous charge-offs
|
83 | 100 | 183 | 188 | ||||||||||||
Ending balance
|
$ | 2,783 | $ | 2,729 | $ | 2,783 | $ | 2,729 |
Commercial
|
Commercial
Real Estate
|
Installment
|
Residential
|
Unallocated
|
Total
|
|||||||||||||||||||
(In thousands)
|
||||||||||||||||||||||||
Allowance for loan losses:
|
||||||||||||||||||||||||
Balance, April 1, 2011
|
$ | 370 | $ | 1,738 | $ | 227 | $ | 60 | $ | 126 | $ | 2,521 | ||||||||||||
Provision charged to expense
|
(160 | ) | 333 | 4 | 90 | 227 | 494 | |||||||||||||||||
Losses charged off
|
(55 | ) | (106 | ) | (80 | ) | (74 | ) | –– | (315 | ) | |||||||||||||
Recoveries
|
4 | 2 | 76 | 1 | –– | 83 | ||||||||||||||||||
Balance, June 30, 2011
|
$ | 159 | $ | 1,967 | $ | 227 | $ | 77 | $ | 353 | $ | 2,783 | ||||||||||||
Balance, January 1, 2011
|
$ | 561 | $ | 1,566 | $ | 229 | $ | 140 | $ | 244 | $ | 2,740 | ||||||||||||
Provision charged to expense
|
36 | 812 | 135 | 50 | 109 | 1,142 | ||||||||||||||||||
Losses charged off
|
(443 | ) | (427 | ) | (297 | ) | (115 | ) | –– | (1,282 | ) | |||||||||||||
Recoveries
|
5 | 16 | 160 | 2 | –– | 183 | ||||||||||||||||||
Balance, June 30, 2011
|
$ | 159 | $ | 1,967 | $ | 227 | $ | 77 | $ | 353 | $ | 2,783 | ||||||||||||
Ending balance: individually evaluated for impairment
|
$ | 74 | $ | 1,619 | $ | –– | $ | 17 | $ | –– | $ | 1,710 | ||||||||||||
Ending balance: collectively evaluated for impairment
|
$ | 85 | $ | 348 | $ | 227 | $ | 60 | $ | 353 | $ | 1,073 | ||||||||||||
Loans:
|
||||||||||||||||||||||||
Ending balance: individually evaluated for impairment
|
$ | 394 | $ | 4,744 | $ | –– | $ | 150 | $ | –– | $ | 5,288 | ||||||||||||
Ending balance: collectively evaluated for impairment
|
$ | 33,507 | $ | 133,985 | $ | 43,305 | $ | 61,251 | $ | –– | $ | 272,048 |
Commercial
|
Commercial
Real Estate
|
Installment
|
Residential
|
Unallocated
|
Total
|
|||||||||||||||||||
(In thousands)
|
||||||||||||||||||||||||
Allowance for loan losses:
|
||||||||||||||||||||||||
Balance, beginning of year
|
$ | 890 | $ | 999 | $ | 251 | $ | 100 | $ | 150 | $ | 2,390 | ||||||||||||
Provision charged to expense
|
(110 | ) | 1,339 | 296 | 197 | 94 | 1,816 | |||||||||||||||||
Losses charged off
|
(256 | ) | (775 | ) | (579 | ) | (160 | ) | –– | (1,770 | ) | |||||||||||||
Recoveries
|
37 | 3 | 261 | 3 | –– | 304 | ||||||||||||||||||
Balance, end of year
|
$ | 561 | $ | 1,566 | $ | 229 | $ | 140 | $ | 244 | $ | 2,740 | ||||||||||||
Ending balance: individually evaluated for impairment
|
$ | 486 | $ | 1,226 | $ | –– | $ | 60 | $ | –– | $ | 1,772 | ||||||||||||
Ending balance: collectively evaluated for impairment
|
$ | 75 | $ | 340 | $ | 229 | $ | 80 | $ | 244 | $ | 968 | ||||||||||||
Loans:
|
||||||||||||||||||||||||
Ending balance: individually evaluated for impairment
|
$ | 1,184 | $ | 5,852 | $ | –– | $ | 238 | $ | –– | $ | 7,274 | ||||||||||||
Ending balance: collectively evaluated for impairment
|
$ | 30,969 | $ | 130,517 | $ | 46,877 | $ | 63,140 | $ | –– | $ | 271,503 |
June 30, 2011
|
||||||||||||||||
Loan Class
|
Commercial
|
Commercial
Real Estate
|
Residential
|
Installment
|
||||||||||||
(In thousands)
|
||||||||||||||||
Pass Grade
|
$ | 30,478 | $ | 125,564 | $ | 41,501 | $ | 61,240 | ||||||||
Special Mention
|
302 | 2,308 | 618 | 6 | ||||||||||||
Substandard
|
2,236 | 7,806 | 432 | 16 | ||||||||||||
Doubtful
|
885 | 3,051 | 754 | 139 | ||||||||||||
$ | 33,901 | $ | 138,729 | $ | 43,305 | $ | 61,401 |
December 31, 2010
|
||||||||||||||||
Loan Class
|
Commercial
|
Commercial
Real Estate
|
Residential
|
Installment
|
||||||||||||
(In thousands)
|
||||||||||||||||
Pass Grade
|
$ | 28,416 | $ | 122,795 | $ | 62,517 | $ | 46,877 | ||||||||
Special Mention
|
134 | 1,141 | 623 | –– | ||||||||||||
Substandard
|
3,603 | 12,198 | 238 | –– | ||||||||||||
Doubtful
|
–– | 235 | –– | –– | ||||||||||||
$ | 32,153 | $ | 136,369 | $ | 63,378 | $ | 46,877 |
30-59 Days
Past Due
and
Accruing
|
60-89 Days
Past Due
and
Accruing
|
Greater
Than 90
Days and
Accruing
|
Non
Accrual
|
Total Past
Due and
Non Accrual
|
Current
|
Total Loans
Receivable
|
||||||||||||||||||||||
(In thousands)
|
||||||||||||||||||||||||||||
Commercial
|
$ | 31 | $ | –– | $ | –– | $ | 516 | $ | 547 | $ | 33,354 | $ | 33,901 | ||||||||||||||
Commercial real estate
|
210 | –– | –– | 2,308 | 2,518 | 136,211 | 138,729 | |||||||||||||||||||||
Installment
|
349 | 72 | –– | 103 | 524 | 42,781 | 43,305 | |||||||||||||||||||||
Residential
|
863 | 31 | –– | 1,290 | 2,184 | 59,217 | 61,401 | |||||||||||||||||||||
Total
|
$ | 1,453 | $ | 103 | $ | –– | $ | 4,217 | $ | 5,773 | $ | 271,563 | $ | 277,336 |
30-59 Days
Past Due
and
Accruing
|
60-89 Days
Past Due
and
Accruing
|
Greater
Than 90
Days and
Accruing
|
Non
Accrual
|
Total Past
Due and
Non Accrual
|
Current
|
Total Loans
Receivable
|
||||||||||||||||||||||
(In thousands)
|
||||||||||||||||||||||||||||
Commercial
|
$ | 265 | $ | 201 | $ | 25 | $ | 300 | $ | 791 | $ | 31,362 | $ | 32,153 | ||||||||||||||
Commercial real estate
|
567 | 525 | –– | 3,163 | 4,255 | 132,114 | 136,369 | |||||||||||||||||||||
Installment
|
421 | 159 | –– | 240 | 820 | 46,057 | 46,877 | |||||||||||||||||||||
Residential
|
529 | 279 | –– | 823 | 1,631 | 61,747 | 63,378 | |||||||||||||||||||||
Total
|
$ | 1,782 | $ | 1,164 | $ | 25 | $ | 4,526 | $ | 7,497 | $ | 271,280 | $ | 278,777 |
For the three months ended
June 30, 2011
|
For the six months ended
June 30, 2011
|
|||||||||||||||||||||||||||
Recorded
Balance
|
Unpaid
Principal
Balance
|
Specific
Allowance
|
Average
Investment in
Impaired Loans
|
Interest
Income
Recognized
|
Average
Investment in
Impaired Loans
|
Interest
Income
Recognized
|
||||||||||||||||||||||
(In thousands)
|
||||||||||||||||||||||||||||
Loans without a specific valuation allowance:
|
||||||||||||||||||||||||||||
Commercial
|
$ | 264 | $ | 264 | $ | –– | $ | 564 | $ | 2 | $ | 392 | $ | 1 | ||||||||||||||
Commercial real estate
|
1,176 | 1,176 | –– | 1,174 | 25 | 1,210 | 11 | |||||||||||||||||||||
Residential
|
14 | 14 | –– | 42 | –– | 40 | –– | |||||||||||||||||||||
Installment
|
–– | –– | –– | –– | –– | –– | –– | |||||||||||||||||||||
1,454 | 1,454 | –– | 1,780 | 27 | 1,642 | 12 | ||||||||||||||||||||||
Loans with a specific valuation allowance:
|
||||||||||||||||||||||||||||
Commercial
|
130 | 130 | 74 | 320 | 6 | 385 | 3 | |||||||||||||||||||||
Commercial real estate
|
3,568 | 3,568 | 1,619 | 4,128 | 56 | 4,353 | 28 | |||||||||||||||||||||
Residential
|
136 | 136 | 17 | 142 | –– | 129 | –– | |||||||||||||||||||||
3,834 | 3,834 | 1,710 | 4,590 | 62 | 4,867 | 31 | ||||||||||||||||||||||
Total:
|
||||||||||||||||||||||||||||
Commercial
|
$ | 394 | $ | 394 | $ | 74 | $ | 884 | $ | 8 | $ | 777 | $ | 4 | ||||||||||||||
Commercial real estate
|
$ | 4,744 | $ | 4,744 | $ | 1,619 | $ | 5,302 | $ | 81 | $ | 5,563 | $ | 39 | ||||||||||||||
Residential
|
$ | 150 | $ | 150 | $ | 17 | $ | 184 | $ | –– | $ | 169 | $ | –– | ||||||||||||||
Installment
|
$ | –– | $ | –– | $ | –– | $ | –– | $ | –– | $ | –– | $ | –– |
Recorded
Balance
|
Unpaid
Principal
Balance
|
Specific
Allowance
|
Average
Investment in
Impaired
Loans
|
Interest
Income
Recognized
|
||||||||||||||||
(In thousands)
|
||||||||||||||||||||
Loans without a specific valuation allowance:
|
||||||||||||||||||||
Commercial
|
$ | 518 | $ | 518 | $ | –– | $ | 510 | $ | 22 | ||||||||||
Commercial real estate
|
1,186 | 1,186 | –– | 1,172 | 45 | |||||||||||||||
Residential
|
77 | 77 | –– | 69 | 4 | |||||||||||||||
1,781 | 1,781 | –– | 1,751 | 71 | ||||||||||||||||
Loans with a specific valuation allowance:
|
||||||||||||||||||||
Commercial
|
666 | 666 | 486 | 648 | 38 | |||||||||||||||
Commercial real estate
|
4,666 | 4,666 | 1,226 | 4,688 | 80 | |||||||||||||||
Residential
|
161 | 161 | 60 | 148 | 3 | |||||||||||||||
5,493 | 5,493 | 1,772 | 5,484 | 121 | ||||||||||||||||
Total:
|
||||||||||||||||||||
Commercial
|
$ | 1,184 | $ | 1,184 | $ | 486 | $ | 1,158 | $ | 60 | ||||||||||
Commercial real estate
|
$ | 5,852 | $ | 5,852 | $ | 1,226 | $ | 5,860 | $ | 125 | ||||||||||
Residential
|
$ | 238 | $ | 238 | $ | 60 | $ | 217 | $ | 7 |
Note 4:
|
Benefit Plans
|
Three months ended
June 30,
|
Six months ended
June 30,
|
|||||||||||||||
2011
|
2010
|
2011
|
2010
|
|||||||||||||
(In thousands)
|
||||||||||||||||
Service cost
|
$ | 76 | $ | 67 | $ | 152 | $ | 134 | ||||||||
Interest cost
|
43 | 45 | 86 | 90 | ||||||||||||
Expected return on assets
|
(60 | ) | (58 | ) | (120 | ) | (116 | ) | ||||||||
Amortization of prior service cost and net loss
|
20 | 21 | 40 | 42 | ||||||||||||
Pension expense
|
$ | 79 | $ | 75 | $ | 158 | $ | 150 |
Note 5:
|
Off-balance-sheet Activities
|
June 30,
|
December 31,
|
|||||||
2011
|
2010
|
|||||||
(In thousands)
|
||||||||
Commitments to extend credit
|
$ | 13,950 | $ | 12,858 | ||||
Commitment to originate loans
|
10,165 | 9,200 | ||||||
Overdraft program and ready reserve lines
|
26,901 | 29,189 | ||||||
Standby letters of credit
|
962 | 897 |
Note 6:
|
Fair Value Measurements
|
|
Level 1
|
Quoted prices in active markets for identical assets or liabilities
|
|
Level 2
|
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
|
|
Level 3
|
Unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities
|
Fair Value Measurements Using
|
||||||||||||||||
Fair Value
|
Quoted Prices
in Active
Markets for
Identical
Assets
(Level 1)
|
Significant
Other
Observable
Inputs
(Level 2)
|
Significant
Unobservable
Inputs
(Level 3)
|
|||||||||||||
(In thousands)
|
||||||||||||||||
June 30, 2011
|
||||||||||||||||
U.S. government agencies
|
$ | 71,646 | $ | –– | $ | 71,646 | $ | –– | ||||||||
State and political subdivisions
|
22,800 | –– | 22,800 | –– | ||||||||||||
Equity securities
|
16 | 16 | –– | –– | ||||||||||||
December 31, 2010
|
||||||||||||||||
U.S. government agencies
|
$ | 61,233 | $ | –– | $ | 61,233 | $ | –– | ||||||||
State and political subdivisions
|
25,295 | –– | 25,295 | –– | ||||||||||||
Government sponsored entities mortgage-backed securities
|
9,614 | –– | 9,614 | –– | ||||||||||||
Equity securities
|
13 | 13 | –– | –– |
Fair Value Measurements Using
|
||||||||||||||||
Fair Value
|
Quoted Prices
in Active
Markets for
Identical
Assets
(Level 1)
|
Significant
Other
Observable
Inputs
(Level 2)
|
Significant
Unobservable
Inputs
(Level 3)
|
|||||||||||||
(In thousands)
|
||||||||||||||||
June 30, 2011
|
||||||||||||||||
Impaired loans
|
$ | 1,768 | $ | –– | $ | –– | $ | 1,768 | ||||||||
Foreclosed assets held for sale
|
372 | –– | –– | 372 | ||||||||||||
December 31, 2010
|
||||||||||||||||
Impaired loans
|
$ | 3,595 | $ | –– | $ | –– | $ | 3,595 | ||||||||
Mortgage servicing rights
|
215 | –– | –– | 215 | ||||||||||||
Foreclosed assets held for sale
|
238 | –– | –– | 238 |
June 30, 2011
|
December 31, 2010
|
|||||||||||||||
Carrying
Amount
|
Fair
Value
|
Carrying
Amount
|
Fair
Value
|
|||||||||||||
(In thousands)
|
||||||||||||||||
Financial assets
|
||||||||||||||||
Cash and cash equivalents
|
$ | 12,940 | $ | 12,940 | $ | 10,935 | $ | 10,935 | ||||||||
Certificates of deposit in other financial institutions
|
–– | –– | 2,564 | 2,564 | ||||||||||||
Available-for-sale securities
|
94,462 | 94,462 | 96,155 | 96,155 | ||||||||||||
Held-to-maturity securities
|
4,550 | 4,727 | 6,331 | 6,510 | ||||||||||||
Loans, net of allowance for loan losses
|
274,553 | 274,797 | 276,037 | 276,699 | ||||||||||||
Federal Home Loan Bank stock
|
4,810 | 4,810 | 4,810 | 4,810 | ||||||||||||
Accrued interest receivable
|
1,484 | 1,484 | 1,441 | 1,441 | ||||||||||||
Financial liabilities
|
||||||||||||||||
Deposits
|
325,303 | 309,626 | 325,446 | 308,387 | ||||||||||||
Short-term borrowings
|
12,320 | 12,579 | 11,843 | 11,829 | ||||||||||||
Federal Home Loan Bank advances
|
38,208 | 35,237 | 43,450 | 45,316 | ||||||||||||
Subordinated debentures
|
4,000 | 3,412 | 4,000 | 3,412 | ||||||||||||
Interest payable
|
257 | 257 | 337 | 337 |
ITEM 2
|
Management’s Discussion and Analysis of Financial
|
Total
|
Tier 1
|
Tier 1
|
||||||||||
Capital To
|
Capital To
|
Capital To
|
||||||||||
Risk-Weighted
|
Risk-Weighted
|
Average
|
||||||||||
Assets
|
Assets
|
Assets
|
||||||||||
Well capitalized
|
10.00 | % | 6.00 | % | 5.00 | % | ||||||
Adequately capitalized
|
8.00 | % | 4.00 | % | 4.00 | % | ||||||
Undercapitalized
|
6.00 | % | 3.00 | % | 3.00 | % |
June 30,
|
||||
2011
|
||||
(Dollars in thousands)
|
||||
Tier 1 capital
|
$ | 39,446 | ||
Total risk-based capital
|
42,233 | |||
Risk-weighted assets
|
297,710 | |||
Average total assets
|
430,399 | |||
Total risk-based capital ratio
|
14.19 | % | ||
Tier 1 risk-based capital ratio
|
13.25 | % | ||
Tier 1 capital to average assets
|
9.16 | % |
ITEM 3
|
Quantitative and Qualitative Disclosures About Market Risk
|
ITEM 4.
|
Controls and Procedures
|
ITEM 1.
|
Legal Proceedings
|
ITEM 1A.
|
Risk Factors
|
ITEM 2.
|
Unregistered Sales of Equity Securities and Use of Proceeds
|
Period
|
(a)
Total Number of
Shares (or Units)
Purchased
|
(b)
Average Price Paid
Per Share (or Unit)
|
(c)
Total Number of
Shares (or Units)
Purchased as Part
Of Publicly
Announced Plans
Or Programs
|
(d)
Maximum Number or
Approximate Dollar
Value) of Shares (or
Units) that May Yet Be
Purchased Under the
Plans or Programs
|
||||||||||||
Month #1
|
||||||||||||||||
4/1/2011 to
|
–– | –– | –– | –– | ||||||||||||
4/30/2011
|
||||||||||||||||
Month #2
|
||||||||||||||||
5/1/2011 to
|
–– | –– | –– | –– | ||||||||||||
5/31/2011
|
||||||||||||||||
Month #3
|
||||||||||||||||
6/1/2011 to
|
–– | –– | –– | –– | ||||||||||||
6/30/2011
|
ITEM 3.
|
Defaults Upon Senior Securities
|
ITEM 4.
|
Other Information
|
ITEM 5.
|
Exhibits
|
EX-3.1
|
Amended Articles of Incorporation of United Bancorp, Inc. (1)
|
|
EX-3.2
|
Amended Code of Regulations of United Bancorp, Inc. (2)
|
|
EX-4.0
|
Instruments Defining the Rights of Security Holders (See Exhibits 3.1 and 3.2)
|
|
EX 31.1
|
Rule 13a-14(a) Certification – CEO
|
|
EX 31.2
|
Rule 13a-14(a) Certification – CFO
|
|
EX 32.1
|
Section 1350 Certification – CEO
|
|
EX 32.2
|
|
Section 1350 Certification – CFO
|
|
(1)
|
Incorporated by reference to Appendix B to the registrant’s Definitive Proxy Statement filed with the Securities and Exchange Commission on March 14, 2001.
|
|
(2)
|
Incorporated by reference to Appendix C to the registrant’s Definitive Proxy Statement filed with the Securities and Exchange Commission on March 14, 2001.
|
/s/United Bancorp, Inc.
|
|||||
Date:
|
August 12, 2011
|
By:
|
/s/James W. Everson
|
||
James W. Everson
|
|||||
Chairman, President and Chief Executive Officer
|
|||||
Date:
|
August 12, 2011
|
By:
|
/s/Randall M. Greenwood
|
||
Randall M. Greenwood
|
|||||
Senior Vice President, Chief Financial Officer and Treasurer
|
Exhibit No. |
Description
|
||
3.1
|
Amended Articles of Incorporation of United Bancorp, Inc. incorporated by reference to Appendix B to the registrant’s Definitive Proxy Statement filed with the Securities and Exchange Commission on March 14, 2001.
|
||
3.2
|
Amended Code of Regulations of United Bancorp, Inc. incorporated by reference to Appendix C to the registrant’s Definitive Proxy Statement filed with the Securities and Exchange Commission on March 14, 2001.
|
||
4.0
|
Instruments Defining the Rights of Security Holders (See Exhibits 3.1 and 3.2)
|
||
31.1
|
Rule 13a-14(a) Certification – Principal Executive Officer
|
||
31.2
|
Rule 13a-14(a) Certification – Principal Financial Officer
|
||
32.1
|
Certification pursuant to 18 U.S.C. Section 1350, as enacted pursuant to Section 906 of The Sarbanes-Oxley act of 2002.
|
||
32.2
|
|
Certification pursuant to 18 U.S.C. Section 1350, as enacted pursuant to Section 906 of The Sarbanes-Oxley Act of 2002.
|
1.
|
I have reviewed this Form 10-Q of United Bancorp, Inc.;
|
2.
|
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
|
3.
|
Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
|
4.
|
The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal 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 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):
|
Date: August 12, 2011
|
/s/James W. Everson
|
|
James W. Everson, Chairman, President and CEO
|
Date: August 12, 2011
|
/s/Randall M. Greenwood
|
Randall M. Greenwood, CFO
|
/s/James W. Everson
|
|
James W. Everson,
|
|
Chairman, President and Chief Executive Officer
|
|
August 12, 2011
|
/s/Randall M. Greenwood
|
|
Randall M. Greenwood,
|
|
Chief Financial Officer
|
|
August 12, 2011
|
Condensed Consolidated Balance Sheets (Parenthetical) (USD $)
In Thousands, except Share data |
Jun. 30, 2011
|
Dec. 31, 2010
|
---|---|---|
Loans, allowance for loan losses | $ 2,783 | $ 2,740 |
Preferred stock, no par value | $ 0 | $ 0 |
Preferred stock, authorized | 2,000,000 | 2,000,000 |
Preferred stock, shares issued | 0 | 0 |
Common stock, par value | $ 1 | $ 1 |
Common stock, authorized | 10,000,000 | 10,000,000 |
Common stock, issued | 5,370,304 | 5,370,304 |
Stock held by deferred compensation plan, shares | 185,636 | 176,392 |
Treasury stock, shares | 14,467 | 45,717 |
Document and Entity Information
|
6 Months Ended | |
---|---|---|
Jun. 30, 2011
|
Aug. 05, 2011
|
|
Document Information [Line Items] | Â | Â |
Document Type | 10-Q | Â |
Amendment Flag | false | Â |
Document Period End Date | Jun. 30, 2011 | |
Document Fiscal Year Focus | 2011 | Â |
Document Fiscal Period Focus | Q2 | Â |
Trading Symbol | UBCP | Â |
Entity Registrant Name | UNITED BANCORP INC /OH/ | Â |
Entity Central Index Key | 0000731653 | Â |
Current Fiscal Year End Date | --12-31 | Â |
Entity Filer Category | Smaller Reporting Company | Â |
Entity Common Stock, Shares Outstanding | Â | 5,355,837 |
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Off-balance-sheet Activities
|
6 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Jun. 30, 2011
|
|||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Off-balance-sheet Activities |
Some
financial instruments, such as loan commitments, credit lines,
letters of credit and overdraft protection, are issued to meet
customer financing needs. These are agreements to provide
credit or to support the credit of others, as long as conditions
established in the contracts are met, and usually have expiration
dates. Commitments may expire without being used.
Off-balance-sheet risk to credit loss exists up to the face amount
of these instruments, although material losses are not
anticipated. The same credit policies are used to make such
commitments as are used for loans, including obtaining collateral
at exercise of the commitment.
A
summary of the notional or contractual amounts of financial
instruments with off-balance-sheet risk at the indicated dates is
as follows:
|
Summary of Significant Accounting Policies
|
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Jun. 30, 2011
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Summary of Significant Accounting Policies |
These
interim financial statements are prepared without audit and reflect
all adjustments which, in the opinion of management, are necessary
to present fairly the financial position of United Bancorp, Inc.
(“Company”) at June 30, 2011, and its results of
operations and cash flows for the interim periods presented.
All such adjustments are normal and recurring in nature. The
accompanying condensed consolidated financial statements have been
prepared in accordance with the instructions for Form 10-Q and,
therefore, do not purport to contain all the necessary financial
disclosures required by accounting principles generally accepted in
the United States of America that might otherwise be necessary in
the circumstances and should be read in conjunction with the
Company’s consolidated financial statements and related notes
for the year ended December 31, 2010 included in its Annual Report
on Form 10-K. Reference is made to the accounting policies of
the Company described in the Notes to the Consolidated Financial
Statements contained in its Annual Report on Form 10-K. The
results of operations for the three and six months ended June 30,
2011, are not necessarily indicative of the results to be expected
for the full year. The condensed consolidated balance sheet
of the Company as of December 31, 2010 has been derived from the
audited consolidated balance sheet of the Company as of that
date.
Principles of Consolidation
The
consolidated financial statements include the accounts of United
Bancorp, Inc. (“United” or “the Company”)
and its wholly-owned subsidiary, The Citizens Savings Bank of
Martins Ferry, Ohio (“the Bank” or
“Citizens”). The Company operates in two divisions, The
Community Bank, a division of The Citizens Savings Bank and The
Citizens Bank, a division of The Citizens Savings Bank. All
intercompany transactions and balances have been eliminated in
consolidation.
Nature of Operations
The
Company’s revenues, operating income, and assets are almost
exclusively derived from banking. Accordingly, all of the
Company’s banking operations are considered by management to
be aggregated in one reportable operating segment. Customers
are mainly located in Athens, Belmont, Carroll, Fairfield,
Harrison, Hocking, Jefferson, and Tuscarawas Counties and the
surrounding localities in northeastern, east-central and
southeastern Ohio, and include a wide range of individuals,
businesses and other organizations. The Citizens Bank
division conducts its business through its main office in Martins
Ferry, Ohio and twelve branches in Bridgeport, Colerain, Dellroy,
Dillonvale, Dover, Jewett, New Philadelphia, St. Clairsville East,
St. Clairsville West, Sherrodsville, Strasburg, and Tiltonsville,
Ohio. The Community Bank division conducts its business
through its main office in Lancaster, Ohio and seven offices in
Amesville, Glouster, Lancaster, and Nelsonville, Ohio. The
Company’s primary deposit products are checking, savings, and
term certificate accounts, and its primary lending products are
residential mortgage, commercial, and installment loans.
Substantially all loans are secured by specific items of collateral
including business assets, consumer assets and real estate and are
not considered “sub prime” type loans. The
targeted lending areas of our Bank operations encompass four
separate metropolitan areas, minimizing the risk to changes in
economic conditions in the communities housing the Company’s
20 branch locations.
The
Company’s primary deposit products are checking, savings and
term certificate accounts and its primary lending products are
residential mortgage, commercial and installment loans.
Substantially all loans are secured by specific items of collateral
including business assets, consumer assets and real estate.
Commercial loans are expected to be repaid from cash flow from
operations of businesses. Real estate loans are secured by
both residential and commercial real estate. Net interest
income is affected by the relative amount of interest-earning
assets and interest-bearing liabilities and the interest received
or paid on these balances. The level of interest rates paid
or received by the Company can be significantly influenced by a
number of environmental factors, such as governmental monetary and
fiscal policies, that are outside of management’s
control.
Use of Estimates
To
prepare financial statements in conformity with accounting
principles generally accepted in the United States of America,
management makes estimates and assumptions based on available
information. These estimates and assumptions affect the
amounts reported in the financial statements and the disclosures
provided and future results could differ. The allowance for
loan losses and fair values of financial instruments are
particularly subject to change.
Loans
Loans
that management has the intent and ability to hold for the
foreseeable future or until maturity or payoff are reported at
their outstanding principal balances adjusted for any charge-offs,
the allowance for loan losses and any unamortized deferred fees or
costs on originated loans.
For
loans amortized at cost, interest income is accrued on the unpaid
principal balance. Loan origination fees, net of certain
direct origination costs, as well as premiums and discounts, are
deferred and amortized as a level yield adjustment over the
respective term of the loan.
The
accrual of interest on mortgage and commercial loans is
discontinued at the time the loan is 90 days past due unless the
credit is well-secured and in process of collection. Past due
status is based on contractual terms of the loan. In all
cases, loans are placed on nonaccrual or charged off at an earlier
date if collection of principal or interest is considered
doubtful.
All
interest accrued but not collected for loans that are placed on
nonaccrual or charged off is reversed against interest
income. The interest on these loans is accounted for on the
cash-basis or cost-recovery method, until qualifying for return to
accrual. Loans are returned to accrual status when all the
principal and interest amounts contractually due are brought
current and future payments are reasonably assured.
Allowance for Loan Losses
The
allowance for loan losses is established as losses are estimated to
have occurred through a provision for loan losses charged to
income. Loan losses are charged against the allowance when
management believes the uncollectibility of a loan balance is
confirmed. Subsequent recoveries, if any, are credited to the
allowance.
The
allowance for loan losses is evaluated on a monthly basis by
management and the Citizens Board of Directors and is based upon
management’s periodic review of the collectibility of the
loans in light of historical experience, the nature and volume of
the loan portfolio, adverse situations that may affect the
borrower’s ability to repay, estimated value of any
underlying collateral and prevailing economic conditions.
This evaluation is inherently subjective as it requires estimates
that are susceptible to significant revision as more information
becomes available.
The
allowance consists of allocated and general components. The
allocated component relates to loans that are classified as
impaired. For those loans that are classified as impaired, an
allowance is established when the discounted cash flows (or
collateral value or observable market price) of the impaired loan
is lower than the carrying value of that loan. The general
component covers nonclassified loans and is based on historical
charge-off experience and expected loss given default derived from
the Company’s internal risk rating process. Other
adjustments may be made to the allowance for pools of loans after
an assessment of internal or external influences on credit quality
that are not fully reflected in the historical loss or risking
rating data.
A
loan is considered impaired when, based on current information and
events, it is probable that the Company will be unable to collect
the scheduled payments of principal or interest when due according
to the contractual terms of the loan agreement. Factors
considered by management in determining impairment include payment
status, collateral value and the probability of collecting
scheduled principal and interest payments when due. Loans
that experience insignificant payment delays and payment shortfalls
generally are not classified as impaired. Management
determines the significance of payment delays and payment
shortfalls on a case-by-case basis, taking into consideration all
of the circumstances surrounding the loan and the borrower,
including the length of the delay, the reasons for the delay, the
borrower’s prior payment record and the amount of the
shortfall in relation to the principal and interest owed.
Impairment is measured on a loan-by-loan basis for commercial and
construction loans by either the present value of expected future
cash flows discounted at the loan’s effective interest rate,
the loan’s obtainable market price or the fair value of the
collateral if the loan is collateral dependent.
Groups
of loans with similar risk characteristics are collectively
evaluated for impairment based on the group’s historical loss
experience adjusted for changes in trends, conditions and other
relevant factors that affect repayment of the loans.
Accordingly, the Company does not separately identify individual
consumer and residential loans for impairment measurements, unless
such loans are the subject of a restructuring agreement due to
financial difficulties of the borrower.
Earnings Per Share
Basic
earnings per common share is computed based upon the
weighted-average number of common shares outstanding during the
period, less shares in the ESOP which are unallocated and not
committed to be released and non-vested restricted stock. At
June 30, 2011 and 2010, the ESOP held 224,537 and 248,176
unallocated shares, respectively, which were not included in
weighted-average common shares outstanding. In addition at
June 30, 2011 and 2010, the Company has 170,000 and 180,000 shares,
respectively, of non vested restricted stock, which were not
included in weighted-average common shares outstanding. Diluted
earnings per common share include the dilutive effect of additional
potential common shares issuable under the Company’s stock
compensation plans.
Options
to purchase 53,714 shares of common stock at a weighted-average
exercise price of $10.34 per share were outstanding at both June
30, 2011 and 2010, but were not included in the computation of
diluted earnings per share because the options’ exercise
price was greater than the average market price of the common
shares.
Income Taxes
The
Company is subject to income taxes in the U.S. federal
jurisdiction, as well as various state jurisdictions. Tax
regulations within each jurisdiction are subject to the
interpretation of the related tax laws and regulations and require
significant judgment to apply. With few exceptions, the
Company is no longer subject to U.S. federal, state and local
income tax examinations by tax authorities for the years before
2008.
Recent Accounting Pronouncements
FASB
Accounting Standards Update (ASU) 2010-20, Receivables: Disclosures
about the Credit Quality of Financing Receivables and the Allowance
for Credit Losses (Topic 310), issued on July 21, 2010,
concerns improved disclosures regarding the credit quality in a
financial institution’s loan portfolio. The guidance
requires additional disaggregation of the credit portfolio by
portfolio segment and class of receivable, a revised roll forward
of the allowance for credit losses, presentation of the credit
portfolio by credit quality indicators, an aging schedule of past
due receivables, disclosure of troubled debt restructurings and
purchases and sales of receivables by portfolio segment. The
period-end disclosures were effective for periods ending on or
after December 15, 2010 (December 31, 2010 for the Company).
The activity disclosures are effective for periods beginning on or
after December 15, 2010 (January 1, 2011 for the Company).
The Company adopted FASB ASU 2010-20 as required, without a
material effect on the Company’s financial condition or
results of operations.
FASB
ASU 2011-02, Receivables (Topic 310), A
Creditor’s Determination of Whether a Restructuring Is a
Troubled Debt Restructuring, issued in April 2011, amends
Subtopic 310-40 to clarify existing guidance related to a
creditor’s evaluation of whether a restructuring of debt is
considered a troubled debt restructuring. The amendments add
additional clarity in determining whether a creditor has granted a
concession and whether a debtor is experiencing financial
difficulties. The updated guidance and related disclosure
requirements are effective for financial statements issued for the
first interim or annual period beginning on or after June 15,
2011, and should be applied retroactively to the beginning of the
annual period of adoption. Early adoption is permitted. Management
is currently evaluating the impact of the guidance on the
Company’s condensed consolidated financial
statements.
FASB
ASU 2011-03, Transfers and Servicing
(Topic 860), Reconsideration of Effective Control for Repurchase
Agreements, issued in April 2011, improves the accounting
for repurchase agreements and other agreements that both entitle
and obligate a transferor to repurchase or redeem financial assets
before their maturity. The updated guidance is effective for the
first interim or annual period beginning on or after December 15,
2011 and should be applied prospectively. Management is currently
evaluating the impact of the guidance on the Company’s
condensed consolidated financial statements.
FASB
ASU 2011-04, Fair
Value Measurement (Topic 820), Amendments to Achieve Common Fair
Value Measurement and Disclosure Requirements, issued
in May 2011,
provides guidance in common fair value measurement and disclosure
requirements. The amendment changes the wording used to
describe many of the requirements for measuring fair value and for
disclosing information about fair value measurements. The
amendments are effective during interim and annual periods
beginning after December 15, 2011. Management is currently
evaluating the impact of the guidance on the Company’s
condensed consolidated financial statements
FASB ASU 2011-05, Comprehensive
Income (Topic 220), Presentation of Comprehensive
Income,
issued in June 2011, is designed to improve the comparability,
consistency, and transparency of financial reporting and to
increase the prominence of items reported in comprehensive income.
The amendments are effective during interim and annual periods
beginning after December 15, 2011. Management does not expect
adoption of this standard to have a material impact on the
Company’s condensed consolidated financial
statements.
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Fair Value Measurements
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Jun. 30, 2011
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Fair Value Measurements |
The
Company defines fair value as the price that would be received to
sell an asset or paid to transfer a liability in an orderly
transaction between market participants at the measurement
date. The Company also utilizes a fair value hierarchy which
requires an entity to maximize the use of observable inputs and
minimize the use of unobservable inputs when measuring fair
value. The standard describes three levels of inputs that may
be used to measure fair value:
Following
is a description of the valuation methodologies used for assets
measured at fair value on a recurring basis and recognized in the
accompanying consolidated balance sheets, as well as the general
classification of such instruments pursuant to the valuation
hierarchy.
Available-for-sale Securities
Where
quoted market prices are available in an active market, securities
are classified within Level 1 of the valuation
hierarchy. The Company’s equity securities are
classified within Level 1 of the hierarchy. If quoted market
prices are not available, the Company generally relies on prices
obtained from independent pricing services or brokers.
Securities measured with this valuation technique are generally
classified as Level 2 of the hierarchy, and their fair values are
estimated by using pricing models, quoted prices of securities with
similar characteristics or discounted cash flows using significant
inputs observable in the market. Examples of Level 2
securities include U.S. government agency bonds, mortgage-backed
securities and state and political subdivision bonds. In certain
cases where Level 1 or Level 2 inputs are not available, securities
are classified within Level 3 of the hierarchy. The Company
has no securities classified as Level 3 of the
hierarchy.
The
following table presents the fair value measurements of assets
recognized in the accompanying consolidated balance sheets measured
at fair value on a recurring basis and the level within the fair
value hierarchy in which the fair value measurements fall at June
30, 2011 and December 31, 2010:
Following
is a description of the valuation methodologies used for assets
measured at fair value on a nonrecurring basis and recognized in
the accompanying consolidated balance sheets, as well as the
general classification of such instruments pursuant to the
valuation hierarchy.
Impaired Loans (Collateral Dependent)
Collateral
dependent impaired loans consisted primarily of loans secured by
nonresidential real estate. Management has determined fair
value measurements on impaired loans primarily through evaluations
of appraisals performed. Due to the nature of the valuation
inputs, impaired loans are classified within Level 3 of the
hierarchy.
Mortgage Servicing Rights
Mortgage
servicing rights, which are included in other assets, do not trade
in an active, open market with readily observable prices.
Accordingly, fair value is estimated using discounted cash flow
models. Due to the nature of the valuation inputs, mortgage
servicing rights are classified within Level 3 of the
hierarchy.
Foreclosed Assets Held for Sale
Assets
acquired through, or in lieu of, loan foreclosure are held for sale
and are initially recorded at fair value (based on current
appraised value) at the date of foreclosure less costs to sell,
establishing a new cost basis. Subsequent to foreclosure,
valuations are periodically performed by management and the assets
are carried at the lower of carrying amount or fair value less cost
to sell. Management has determined fair value measurements on
other real estate owned primarily through evaluations of appraisals
performed, and current and past offers for the other real estate
under evaluation. Due to the nature of the valuation inputs,
foreclosed assets held for sale are classified within Level 3 of
the hierarchy listed below.
The
following table presents the fair value measurements of assets
recognized in the accompanying consolidated balance sheets measured
at fair value on a nonrecurring basis and the level within the fair
value hierarchy in which the fair value measurements fall at June
30, 2011 and December 31, 2010.
The
following table presents estimated fair values of the
Company’s financial instruments. The fair values of
certain of these instruments were calculated by discounting
expected cash flows, which involves significant judgments by
management and uncertainties. Fair value is the estimated
amount at which financial assets or liabilities could be exchanged
in a current transaction between willing parties, other than in a
forced or liquidation sale. Because no market exists for
certain of these financial instruments and because management does
not intend to sell these financial instruments, the Company does
not know whether the fair values shown below represent values at
which the respective financial instruments could be sold
individually or in the aggregate.
The
following methods and assumptions were used to estimate the fair
value of each class of financial instruments.
Cash and Cash Equivalents, Accrued Interest Receivable and Federal
Home Loan Bank Stock
The
carrying amounts approximate fair value.
Certificates of Deposit in other Financial
Institutions
The
fair value of certificates of deposit in other financial
institutions is estimated by discounting the future cash flows
using the current rates at which similar certificates could be
acquired from financial institutions with similar credit ratings
and for the same remaining maturities. Certificates with
similar characteristics were aggregated for purposes of the
calculations.
Held-to-maturity Securities
Fair
values equal quoted market prices, if available. If quoted
market prices are not available, fair value is estimated based on
quoted market prices of similar securities.
Loans
The
fair value of loans is estimated by discounting the future cash
flows using the current rates at which similar loans would be made
to borrowers with similar credit ratings and for the same remaining
maturities. Loans with similar characteristics were
aggregated for purposes of the calculations.
Deposits
Deposits
include demand deposits, savings accounts, NOW accounts and certain
money market deposits. The carrying amount approximates fair
value. The fair value of fixed-maturity time deposits is
estimated using a discounted cash flow calculation that applies the
rates currently offered for deposits of similar remaining
maturities.
Interest Payable
The
carrying amount approximates fair value.
Short-term Borrowings, Federal Home Loan Bank Advances and
Subordinated Debentures
Rates
currently available to the Company for debt with similar terms and
remaining maturities are used to estimate the fair value of
existing debt.
Commitments to Originate Loans, Letters of Credit and Lines of
Credit
The
fair value of commitments to originate loans is estimated using the
fees currently charged to enter into similar agreements, taking
into account the remaining terms of the agreements and the present
creditworthiness of the counterparties. For fixed-rate loan
commitments, fair value also considers the difference between
current levels of interest rates and the committed rates. The
fair values of letters of credit and lines of credit are based on
fees currently charged for similar agreements or on the estimated
cost to terminate or otherwise settle the obligations with the
counterparties at the reporting date. Fair values of
commitments were not material at June 30, 2011 and
December 31, 2010.
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Condensed Consolidated Statements of Comprehensive Income (Parenthetical) (USD $)
In Thousands |
3 Months Ended | 6 Months Ended | ||
---|---|---|---|---|
Jun. 30, 2011
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Jun. 30, 2010
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Jun. 30, 2011
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Jun. 30, 2010
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Unrealized holding gains on securities during the period, taxes | $ 194 | $ 26 | $ 291 | $ 373 |
Reclassification adjustment for realized gains included in income, taxes | Â | Â | $ 126 | Â |
Securities
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Jun. 30, 2011
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Securities |
The
amortized cost and approximate fair values, together with gross
unrealized gains and losses of securities are as
follows:
The
amortized cost and fair value of available-for-sale securities and
held-to-maturity securities at June 30, 2011, by contractual
maturity, are shown below. Expected maturities will differ
from contractual maturities because issuers may have the right to
call or prepay obligations with or without call or prepayment
penalties.
The
carrying value of securities pledged as collateral, to secure
public deposits and for other purposes, was $51.7 million and $66.4
million at June 30, 2011 and December 31, 2010,
respectively.
Gains
and losses on the sale of securities are recorded on the trade date
and are determined using the specific identification method.
Information with respect to sales of securities and resulting gross
realized gains and losses was as follows:
During
the six months ended June 30, 2011 the Company sold one security
with an amortized cost of $295,000 resulting in a realized gain of
approximately $7,000 and is included in the table above under gross
gains. This security was classified on the books as
“held to maturity” and was sold due to a credit quality
down grade of the municipality issuer.
Certain
investments in debt securities are reported in the financial
statements at an amount less than their historical cost. The
total fair value of these investments at June 30, 2011 and December
31, 2010, was $11.7
million and $35.7 million, which represented approximately 12% and
35%, respectively, of the Company’s available-for-sale and
held-to-maturity investment portfolio.
Based
on evaluation of available evidence, including recent changes in
market interest rates, credit rating information and information
obtained from regulatory filings, management believes the declines
in fair value for these securities are temporary.
Should
the impairment of any of these securities become
other-than-temporary, the cost basis of the investment will be
reduced and the resulting loss recognized in net income in the
period the other-than-temporary impairment is
identified.
The
following tables show the Company’s investments’ gross
unrealized losses and fair value, aggregated by investment category
and length of time that individual securities have been in a
continuous unrealized loss position at June 30, 2011 and December
31, 2010:
The
unrealized losses on the Company’s investments in U.S.
Government agency and municipal securities were caused primarily by
interest rate changes. The contractual terms of those
investments do not permit the issuer to settle the securities at a
price less than the amortized cost bases of the investments.
Because the Company does not intend to sell the investments and it
is not more likely than not the Company will be required to sell
the investments before recovery of their amortized cost bases,
which may be maturity, the Company does not consider those
investments to be other-than-temporarily impaired at June 30, 2011
and December 31, 2010.
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