x
|
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
|
¨
|
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
|
Louisiana
|
72 –1020809
|
|
(State of other jurisdiction of incorporation or organization)
|
(I.R.S. Employer Identification No.)
|
Large accelerated filer ¨ | Accelerated filer x | Non-accelerated filer ¨ | Small reporting company ¨ |
Part I – Financial Information
|
2
|
||
Item 1.
|
2
|
||
Consolidated Balance Sheets |
2
|
||
Consolidated Statements of Earnings (unaudited) |
3
|
||
Consolidated Statement of Shareholders’ Equity (unaudited) |
4
|
||
Consolidated Statements of Cash Flows (unaudited) |
5
|
||
Notes to Interim Consolidated Financial Statements |
6
|
||
Item 2.
|
24
|
||
Forward-Looking Statements |
24
|
||
Critical Accounting Policies |
24
|
||
Recent Developments |
25
|
||
Results of Operations |
25
|
||
Analysis of Balance Sheet |
31
|
||
Bank Liquidity |
33
|
||
Item 3.
|
36
|
||
Item 4.
|
36
|
||
Part II – Other Information
|
37
|
||
Item 1.
|
37
|
||
Item 1A.
|
37
|
||
Item 2.
|
37
|
||
Item 3.
|
37
|
||
Item 4.
|
37
|
||
Item 5.
|
37
|
||
Item 6.
|
37
|
MidSouth Bancorp, Inc. and Subsidiaries
|
||||||||
(dollars in thousands, except share data)
|
September 30, 2011
(unaudited)
|
December 31, 2010*
(audited)
|
|||||||
Assets
|
||||||||
Cash and due from banks, including required reserves of $5,803 and $3,487, respectively
|
$ | 22,100 | $ | 20,758 | ||||
Interest-bearing deposits in banks
|
73,575 | 69,452 | ||||||
Federal funds sold
|
2,127 | 1,697 | ||||||
Time deposits held in banks
|
- | 5,164 | ||||||
Securities available-for-sale, at fair value (cost of $313,054 at September 30, 2011 and $257,472 at December 31, 2010)
|
325,736 | 263,809 | ||||||
Securities held-to-maturity (fair value of $44,114 at September 30, 2011 and $1,608 at December 31, 2010)
|
43,736 | 1,588 | ||||||
Other investments
|
5,057 | 5,062 | ||||||
Loans
|
673,426 | 580,812 | ||||||
Allowance for loan losses
|
(7,329 | ) | (8,813 | ) | ||||
Loans, net
|
666,097 | 571,999 | ||||||
Bank premises and equipment, net
|
40,752 | 36,592 | ||||||
Accrued interest receivable
|
5,270 | 4,628 | ||||||
Goodwill
|
16,997 | 9,271 | ||||||
Intangibles
|
2,710 | 115 | ||||||
Cash surrender value of life insurance
|
4,813 | 4,698 | ||||||
Other real estate
|
7,278 | 1,206 | ||||||
Other assets
|
5,703 | 6,300 | ||||||
Total assets
|
$ | 1,221,951 | $ | 1,002,339 | ||||
Liabilities and Shareholders’ Equity
|
||||||||
Liabilities:
|
||||||||
Deposits:
|
||||||||
Non-interest-bearing
|
$ | 222,937 | $ | 199,460 | ||||
Interest bearing
|
766,073 | 601,312 | ||||||
Total deposits
|
989,010 | 800,772 | ||||||
Securities sold under agreements to repurchase
|
55,078 | 43,826 | ||||||
Junior subordinated debentures
|
15,465 | 15,465 | ||||||
Other liabilities
|
9,031 | 5,623 | ||||||
Total liabilities
|
1,068,584 | 865,686 | ||||||
Commitments and contingencies
|
- | - | ||||||
Shareholders’ equity:
|
||||||||
Series A Preferred stock, no par value; 5,000,000 shares authorized, no shares issued and outstanding at September 30, 2011 and 20,000 shares issued and outstanding at December 31, 2010
|
- | 19,408 | ||||||
Series B Preferred stock, no par value; 5,000,000 shares authorized, 32,000 shares issued and outstanding at September 30, 2011 and no shares issued and outstanding at December 31, 2010
|
32,000 | - | ||||||
Common stock, $0.10 par value; 30,000,000 shares authorized, 9,880,743 issued and 9,730,266 outstanding at September 30, 2011 and December 31, 2010
|
988 | 988 | ||||||
Additional paid-in capital
|
89,991 | 89,893 | ||||||
Unearned ESOP shares
|
(17 | ) | (104 | ) | ||||
Accumulated other comprehensive income
|
8,370 | 4,182 | ||||||
Treasury stock – 150,477 shares at September 30, 2011 and December 31, 2010, at cost
|
(3,286 | ) | (3,286 | ) | ||||
Retained earnings
|
25,321 | 25,572 | ||||||
Total shareholders’ equity
|
153,367 | 136,653 | ||||||
Total liabilities and shareholders’ equity
|
$ | 1,221,951 | $ | 1,002,339 |
MidSouth Bancorp, Inc. and Subsidiaries
|
||||||||||||||||
(in thousands, except per share data)
|
Three Months Ended September 30,
|
Nine Months Ended September 30,
|
|||||||||||||||
2011
|
2010
|
2011
|
2010
|
|||||||||||||
Interest income:
|
||||||||||||||||
Loans, including fees
|
$ | 10,803 | $ | 10,104 | $ | 30,015 | $ | 29,832 | ||||||||
Securities and other investments:
|
||||||||||||||||
Taxable
|
1,407 | 925 | 3,538 | 2,816 | ||||||||||||
Nontaxable
|
816 | 986 | 2,597 | 3,009 | ||||||||||||
Federal funds sold
|
2 | 3 | 7 | 4 | ||||||||||||
Time and interest bearing deposits in other banks
|
49 | 59 | 170 | 214 | ||||||||||||
Other investments
|
43 | 43 | 116 | 113 | ||||||||||||
Total interest income
|
13,120 | 12,120 | 36,443 | 35,988 | ||||||||||||
Interest expense:
|
||||||||||||||||
Deposits
|
1,013 | 1,325 | 2,985 | 4,316 | ||||||||||||
Securities sold under agreements to repurchase
|
207 | 249 | 602 | 713 | ||||||||||||
Federal funds purchased
|
- | - | - | 2 | ||||||||||||
Other borrowed money
|
- | - | - | 3 | ||||||||||||
Junior subordinated debentures
|
242 | 247 | 726 | 731 | ||||||||||||
Total interest expense
|
1,462 | 1,821 | 4,313 | 5,765 | ||||||||||||
Net interest income
|
11,658 | 10,299 | 32,130 | 30,223 | ||||||||||||
Provision for loan losses
|
650 | 1,500 | 3,150 | 4,150 | ||||||||||||
Net interest income after provision for loan losses
|
11,008 | 8,799 | 28,980 | 26,073 | ||||||||||||
Non-interest income:
|
||||||||||||||||
Service charges on deposits
|
1,781 | 2,427 | 5,066 | 7,485 | ||||||||||||
Gain on securities, net
|
- | - | 99 | - | ||||||||||||
ATM and debit card income
|
964 | 859 | 2,797 | 2,489 | ||||||||||||
Other charges and fees
|
653 | 450 | 1,679 | 1,427 | ||||||||||||
Total non-interest income
|
3,398 | 3,736 | 9,641 | 11,401 | ||||||||||||
Non-interest expenses:
|
||||||||||||||||
Salaries and employee benefits
|
5,778 | 5,118 | 15,980 | 15,306 | ||||||||||||
Occupancy expense
|
2,474 | 2,177 | 6,718 | 6,709 | ||||||||||||
FDIC insurance
|
188 | 334 | 711 | 986 | ||||||||||||
Other
|
4,735 | 3,488 | 11,726 | 10,019 | ||||||||||||
Total non-interest expenses
|
13,175 | 11,117 | 35,135 | 33,020 | ||||||||||||
Income before income taxes
|
1,231 | 1,418 | 3,486 | 4,454 | ||||||||||||
Income tax expense
|
131 | 179 | 292 | 530 | ||||||||||||
Net earnings
|
1,100 | 1,239 | 3,194 | 3,924 | ||||||||||||
Dividends on preferred stock and accretion of warrants
|
804 | 300 | 1,402 | 898 | ||||||||||||
Net earnings available to common shareholders
|
$ | 296 | $ | 939 | $ | 1,792 | $ | 3,026 | ||||||||
Earnings per share:
|
||||||||||||||||
Basic
|
$ | 0.03 | $ | 0.09 | $ | 0.18 | $ | 0.31 | ||||||||
Diluted
|
$ | 0.03 | $ | 0.09 | $ | 0.18 | $ | 0.31 |
MidSouth Bancorp, Inc. and Subsidiaries
|
|
For the Nine Months Ended September 30, 2011
(in thousands, except share and per share data)
|
Preferred
Stock Series A
|
Preferred
Stock Series B
|
Common
Stock
|
Additional Paid-in
|
Unearned ESOP
|
Accumulated Other Comprehensive
|
Treasury
|
Retained
|
|||||||||||||||||||||||||||||
Shares
|
Amt
|
Shares
|
Amt
|
Shares
|
Amt
|
Capital
|
Shares
|
Income
|
Stock
|
Earnings
|
Total
|
|||||||||||||||||||||||||
Balance- December 31, 2010
|
20,000 | $ | 19,408 | - | $ | - | 9,880,743 | $ | 988 | $ | 89,893 | $ | (104 | ) | $ | 4,182 | $ | (3,286 | ) | $ | 25,572 | $ | 136,653 | |||||||||||||
Net earnings
|
- | - | - | - | - | - | - | - | - | - | 3,194 | 3,194 | ||||||||||||||||||||||||
Unrealized holding gains on securities available-for-sale arising during the period, net of income tax expense of $2,191
|
- | - | - | - | - | - | - | - | 4,253 | - | - | 4,253 | ||||||||||||||||||||||||
Reclassification adjustment for gain on securities available-for-sale, net of income tax expense of $34
|
- | - | - | - | - | - | - | - | (65 | ) | - | - | (65 | ) | ||||||||||||||||||||||
Comprehensive income
|
7,382 | |||||||||||||||||||||||||||||||||||
Dividends on Series A Preferred Stock and accretion of common stock warrants
|
- | 592 | - | - | - | - | - | - | - | - | (1,242 | ) | (650 | ) | ||||||||||||||||||||||
Repayment of Series A Preferred Stock
|
(20,000 | ) | (20,000 | ) | - | - | - | - | - | - | (20,000 | ) | ||||||||||||||||||||||||
Issuance of Series B Preferred Stock
|
32,000 | 32,000 | - | - | - | - | - | - | 32,000 | |||||||||||||||||||||||||||
Dividends on Series B Preferred Stock
|
- | - | - | - | - | - | - | - | - | - | (160 | ) | (160 | ) | ||||||||||||||||||||||
Dividends on common stock, $0.21 per share
|
- | - | - | - | - | - | - | - | - | - | (2,043 | ) | (2,043 | ) | ||||||||||||||||||||||
ESOP compensation expense
|
- | - | - | - | - | - | 32 | 87 | - | - | - | 119 | ||||||||||||||||||||||||
Stock option and restricted stock compensation expense
|
- | - | - | - | - | - | 66 | - | - | - | - | 66 | ||||||||||||||||||||||||
Balance- September 30, 2011
|
- | $ | - | 32,000 | $ | 32,000 | 9,880,743 | $ | 988 | $ | 89,991 | $ | (17 | ) | $ | 8,370 | $ | (3,286 | ) | $ | 25,321 | $ | 153,367 |
MidSouth Bancorp, Inc. and Subsidiaries
|
||
(in thousands)
|
For the Nine Months Ended September 30,
|
||||||||
2011
|
2010
|
|||||||
Cash flows from operating activities:
|
||||||||
Net earnings
|
$ | 3,194 | $ | 3,924 | ||||
Adjustments to reconcile net earnings to net cash provided by operating activities:
|
||||||||
Depreciation and amortization
|
2,504 | 2,623 | ||||||
Provision for loan losses
|
3,150 | 4,150 | ||||||
Provision for deferred tax expense
|
(189 | ) | (838 | ) | ||||
Amortization of premiums on securities, net
|
679 | 909 | ||||||
Amortization of other investments
|
10 | - | ||||||
Stock compensation expense
|
14 | 5 | ||||||
Restricted stock expense
|
52 | 23 | ||||||
Net gain on sale of investment securities
|
(99 | ) | - | |||||
Net loss on sale of other real estate
|
66 | 146 | ||||||
Net loss on sale of premises and equipment
|
15 | 62 | ||||||
Change in accrued interest receivable
|
(447 | ) | (181 | ) | ||||
Change in accrued interest payable
|
(275 | ) | (300 | ) | ||||
Change in other assets & other liabilities, net
|
2,050 | 2,322 | ||||||
Write down of other real estate owned
|
434 | 241 | ||||||
Net cash provided by operating activities
|
11,158 | 13,086 | ||||||
Cash flows from investing activities net of effect of purchase acquisition in 2011:
|
||||||||
Net decrease in time deposits in other banks
|
5,164 | 21,062 | ||||||
Proceeds from maturities and calls of securities available-for-sale
|
58,990 | 26,278 | ||||||
Proceeds from maturities and calls of securities held-to-maturity
|
900 | 1,456 | ||||||
Proceeds from sale of securities available-for-sale
|
3,895 | - | ||||||
Purchases of securities available-for-sale
|
(118,517 | ) | (26,107 | ) | ||||
Purchases of securities held-to-maturity
|
(43,403 | ) | - | |||||
Purchases of other investments
|
(5 | ) | (173 | ) | ||||
Net change in loans
|
(46,652 | ) | (18,067 | ) | ||||
Purchases of premises and equipment
|
(2,947 | ) | (689 | ) | ||||
Proceeds from sale of premises and equipment
|
6 | 3 | ||||||
Net cash associated with Jefferson Bank acquisition
|
93,800 | - | ||||||
Proceeds from sale of other real estate
|
613 | 766 | ||||||
Purchase of other real estate
|
- | (450 | ) | |||||
Net cash (used in) provided by investing activities
|
(48,156 | ) | 4,079 | |||||
Cash flows from financing activities net of effect of purchase acquisition in 2011:
|
||||||||
Change in deposits
|
22,465 | 6,320 | ||||||
Change in securities sold under agreements to repurchase
|
11,252 | 6,032 | ||||||
Change in federal funds purchased
|
- | (1,700 | ) | |||||
Issuance of Series B preferred stock
|
32,000 | - | ||||||
Redemption of Series A preferred stock
|
(20,000 | ) | - | |||||
Issuance of common stock and treasury stock, net of offering expenses
|
- | 4,769 | ||||||
Payment of dividends on preferred stock
|
(778 | ) | (750 | ) | ||||
Payment of dividends on common stock
|
(2,046 | ) | (1,825 | ) | ||||
Proceeds from exercise of stock options
|
- | 17 | ||||||
Net cash provided by financing activities
|
42,893 | 12,863 | ||||||
Net increase in cash and cash equivalents
|
5,895 | 30,028 | ||||||
Cash and cash equivalents, beginning of period
|
91,907 | 23,351 | ||||||
Cash and cash equivalents, end of period
|
$ | 97,802 | $ | 53,379 | ||||
Supplemental information- Noncash items
|
||||||||
Accretion of warrants
|
$ | 592 | $ | 148 | ||||
Transfer of loans to other real estate
|
7,185 | 1,183 | ||||||
Net change in loan to ESOP
|
(87 | ) | (84 | ) |
MidSouth Bancorp, Inc. and Subsidiaries
|
Notes to Interim Consolidated Financial Statements
|
September 30, 2011
|
(Unaudited)
|
Assets
|
As Recorded
By Jefferson |
Fair Value
Adjustments |
Fair
Value |
|||||||||
Cash
|
$ | 93,800 | $ | - | $ | 93,800 | ||||||
Investment securities
|
175 | - | 175 | |||||||||
Loans receivable
|
59,818 | (2,124 | ) | 57,694 | ||||||||
Fixed assets
|
2,240 | 1,392 | 3,632 | |||||||||
Core deposit intangible
|
- | 2,702 | 2,702 | |||||||||
Other assets
|
327 | - | 327 | |||||||||
Total assets acquired
|
$ | 156,360 | $ | 1,970 | $ | 158,330 | ||||||
Liabilities
|
||||||||||||
Deposits
|
$ | 164,368 | $ | 1,405 | $ | 165,773 | ||||||
Other liabilities
|
283 | - | 283 | |||||||||
Total liabilities assumed
|
164,651 | 1,405 | 166,056 | |||||||||
Excess of liabilities assumed over assets acquired
|
$ | 8,291 | ||||||||||
Aggregate fair value adjustments
|
$ | 565 | ||||||||||
Goodwill
|
$ | 7,726 |
Balance, December 31, 2010
|
$ | 9,271 | ||
Addition: Jefferson Bank
|
7,726 | |||
Balance, September 30, 2011
|
$ | 16,997 |
Residential
|
$ | 6,327 | ||
Residential construction
|
2,190 | |||
Commercial and industrial
|
10,957 | |||
Commercial real estate
|
27,300 | |||
Land
|
9,950 | |||
Agriculture
|
312 | |||
Home equity lines of credit
|
183 | |||
Installment
|
475 | |||
$ | 57,694 |
September 30, 2011
|
||||||||||||||||
Amortized
Cost
|
Gross
Unrealized
Gains
|
Gross
Unrealized
Losses
|
Fair Value
|
|||||||||||||
Available-for-sale:
|
||||||||||||||||
U.S. Government sponsored enterprises
|
$ | 81,133 | $ | 843 | $ | - | $ | 81,976 | ||||||||
Obligations of state and political subdivisions
|
91,987 | 5,984 | - | 97,971 | ||||||||||||
GSE mortgage-backed securities
|
75,063 | 4,456 | - | 79,519 | ||||||||||||
Collateralized mortgage obligations: residential
|
39,209 | 711 | 5 | 39,915 | ||||||||||||
Collateralized mortgage obligations: commercial
|
25,662 | 693 | - | 26,355 | ||||||||||||
$ | 313,054 | $ | 12,687 | $ | 5 | $ | 325,736 |
December 31, 2010
|
||||||||||||||||
Amortized
Cost
|
Gross
Unrealized
Gains
|
Gross
Unrealized
Losses
|
Fair Value
|
|||||||||||||
Available-for-sale:
|
||||||||||||||||
U.S. Government sponsored enterprises
|
$ | 116,560 | $ | 1,138 | $ | - | $ | 117,698 | ||||||||
Obligations of state and political subdivisions
|
105,376 | 3,593 | 117 | 108,852 | ||||||||||||
GSE mortgage-backed securities
|
10,642 | 830 | - | 11,472 | ||||||||||||
Collateralized mortgage obligations: residential
|
21,849 | 882 | 43 | 22,688 | ||||||||||||
Collateralized mortgage obligations: commercial
|
3,045 | 54 | - | 3,099 | ||||||||||||
$ | 257,472 | $ | 6,497 | $ | 160 | $ | 263,809 |
September 30, 2011
|
||||||||||||||||
Amortized
Cost
|
Gross
Unrealized
Gains
|
Gross
Unrealized
Losses
|
Fair Value
|
|||||||||||||
Held-to-maturity:
|
||||||||||||||||
Obligations of state and political subdivisions
|
$ | 340 | $ | 3 | $ | - | $ | 343 | ||||||||
GSE mortgage-backed securities
|
35,821 | 375 | - | 36,196 | ||||||||||||
Collateralized mortgage obligations: commercial
|
7,575 | - | - | 7,575 | ||||||||||||
$ | 43,736 | $ | 378 | $ | - | $ | 44,114 |
December 31, 2010
|
||||||||||||||||
Amortized
Cost
|
Gross
Unrealized
Gains
|
Gross
Unrealized
Losses
|
Fair Value
|
|||||||||||||
Held-to-maturity:
|
||||||||||||||||
Obligations of state and political subdivisions
|
$ | 1,588 | $ | 20 | $ | - | $ | 1,608 |
Amortized
Cost
|
Fair
Value
|
|||||||
Available-for-sale:
|
||||||||
Due in one year or less
|
$ | 56,427 | $ | 56,892 | ||||
Due after one year through five years
|
73,917 | 76,940 | ||||||
Due after five years through ten years
|
36,150 | 39,132 | ||||||
Due after ten years
|
6,626 | 6,983 | ||||||
Mortgage-backed securities and collateralized mortgage obligations:
|
||||||||
Residential
|
114,272 | 119,434 | ||||||
Commercial
|
25,662 | 26,355 | ||||||
$ | 313,054 | $ | 325,736 |
Amortized
Cost
|
Fair
Value
|
|||||||
Held-to-maturity:
|
||||||||
Due in one year or less
|
$ | 140 | $ | 142 | ||||
Due after one year through five years
|
200 | 201 | ||||||
Mortgage-backed securities and collateralized mortgage obligations:
|
||||||||
Residential
|
35,821 | 36,196 | ||||||
Commercial
|
7,575 | 7,575 | ||||||
$ | 43,736 | $ | 44,114 |
September 30, 2011
|
||||||||||||||||||||||||
Securities with losses
under 12 months
|
Securities with losses
over 12 months
|
Total
|
||||||||||||||||||||||
Available-for-sale:
|
Fair Value
|
Gross
Unrealized
Loss
|
Fair Value
|
Gross
Unrealized
Loss
|
Fair Value
|
Gross
Unrealized
Loss
|
||||||||||||||||||
Collateralized mortgage obligations: residential
|
$ | - | $ | - | $ | 148 | $ | 5 | $ | 148 | $ | 5 | ||||||||||||
$ | - | $ | - | $ | 148 | $ | 5 | $ | 148 | $ | 5 |
December 31, 2010
|
||||||||||||||||||||||||
Securities with losses
under 12 months
|
Securities with losses
over 12 months
|
Total
|
||||||||||||||||||||||
Available-for-sale:
|
Fair Value
|
Gross
Unrealized
Loss
|
Fair Value
|
Gross
Unrealized
Loss
|
Fair Value
|
Gross
Unrealized
Loss
|
||||||||||||||||||
Obligations of state and political subdivisions
|
$ | 6,919 | $ | 117 | $ | - | $ | - | $ | 6,919 | $ | 117 | ||||||||||||
Collateralized mortgage obligations: residential
|
4,689 | 36 | 227 | 7 | 4,916 | 43 | ||||||||||||||||||
$ | 11,608 | $ | 153 | $ | 227 | $ | 7 | $ | 11,835 | $ | 160 |
September 30, 2011
|
December 31, 2010
|
|||||||
FRB-Atlanta
|
$ | 1,628 | $ | 1,624 | ||||
FHLB-Dallas
|
586 | 584 | ||||||
Other bank stocks
|
713 | 713 | ||||||
CRA investment
|
2,130 | 2,141 | ||||||
$ | 5,057 | $ | 5,062 |
Three Months Ended
September 30,
|
Nine Months Ended
September 30,
|
|||||||||||||||
2011
|
2010
|
2011
|
2010
|
|||||||||||||
Balance, beginning of period
|
$ | 7,313 | $ | 8,471 | $ | 8,813 | $ | 7,995 | ||||||||
Provision for loan losses
|
650 | 1,500 | 3,150 | 4,150 | ||||||||||||
Recoveries
|
48 | 58 | 256 | 209 | ||||||||||||
Loans charged-off
|
(682 | ) | (1,583 | ) | (4,890 | ) | (3,908 | ) | ||||||||
Balance, end of period
|
$ | 7,329 | $ | 8,446 | $ | 7,329 | $ | 8,446 |
Modifications by Class of Loans
(in thousands)
|
||||||||||||
Number of Contracts
|
Pre-Modification Outstanding
Recorded Investment
|
Post-Modification Outstanding Recorded Investment
|
||||||||||
Troubled debt restructuring as of September 30, 2011:
|
||||||||||||
Commercial, financial, and agricultural
|
4 | $ | 449 | $ | 449 | |||||||
Consumer - other
|
1 | 12 | 12 | |||||||||
$ | 461 | $ | 461 | |||||||||
Number of Contracts
|
Pre-Modification Outstanding Recorded Investment
|
Post-Modification Outstanding Recorded Investment
|
||||||||||
Troubled debt restructuring as of December 31, 2010:
|
||||||||||||
Commercial, financial, and agricultural
|
1 | $ | 194 | $ | 194 | |||||||
Commercial real estate - other
|
1 | 446 | 446 | |||||||||
Consumer - other
|
1 | 13 | 13 | |||||||||
$ | 653 | $ | 653 |
Allowance for Loan Losses and Recorded Investment in Loans
|
||||||||||||||||||||||||||||||||
For the Nine Months Ended September 30, 2011 (in thousands)
|
||||||||||||||||||||||||||||||||
Real Estate
|
||||||||||||||||||||||||||||||||
Coml, Fin,
and Agric
|
Construction
|
Commercial
|
Residential
|
Consumer
|
Finance Leases Coml
|
Other
|
Total
|
|||||||||||||||||||||||||
Allowance for loan losses:
|
||||||||||||||||||||||||||||||||
Beginning balance
|
$ | 1,664 | $ | 2,963 | $ | 2,565 | $ | 862 | $ | 730 | $ | 29 | $ | - | $ | 8,813 | ||||||||||||||||
Charge-offs
|
(625 | ) | (2,377 | ) | (1,219 | ) | (214 | ) | (436 | ) | (19 | ) | - | (4,890 | ) | |||||||||||||||||
Recoveries
|
128 | 13 | 1 | 4 | 110 | - | - | 256 | ||||||||||||||||||||||||
Provision
|
870 | 1,029 | 636 | 222 | 385 | 8 | - | 3,150 | ||||||||||||||||||||||||
Ending balance
|
$ | 2,037 | $ | 1,628 | $ | 1,983 | $ | 874 | $ | 789 | $ | 18 | $ | - | $ | 7,329 | ||||||||||||||||
Ending balance: individually evaluated for impairment
|
$ | 369 | $ | 66 | $ | 41 | $ | 26 | $ | 103 | $ | - | $ | - | $ | 605 | ||||||||||||||||
Loans:
|
||||||||||||||||||||||||||||||||
Ending balance
|
$ | 212,233 | $ | 60,055 | $ | 262,983 | $ | 78,188 | $ | 54,779 | $ | 4,472 | 716 | $ | 673,426 | |||||||||||||||||
Ending balance: individually evaluated for impairment
|
$ | 4,744 | $ | 3,741 | $ | 2,072 | $ | 1,420 | $ | 254 | $ | - | $ | - | $ | 12,231 |
Allowance for Loan Losses and Recorded Investment in Loans
|
||||||||||||||||||||||||||||||||
For the Year Ended December 31, 2010 (in thousands)
|
||||||||||||||||||||||||||||||||
Real Estate
|
||||||||||||||||||||||||||||||||
Coml, Fin, and Agric
|
Construction
|
Commercial
|
Residential
|
Consumer
|
Finance Leases Coml
|
Other
|
Total
|
|||||||||||||||||||||||||
Allowance for loan losses:
|
||||||||||||||||||||||||||||||||
Beginning balance
|
$ | 2,105 | $ | 2,240 | $ | 1,683 | $ | 631 | $ | 1,315 | $ | 21 | $ | - | $ | 7,995 | ||||||||||||||||
Charge-offs
|
(1,333 | ) | (1,478 | ) | (130 | ) | (146 | ) | (1,368 | ) | (1 | ) | - | (4,456 | ) | |||||||||||||||||
Recoveries
|
50 | 1 | 1 | 60 | 141 | 1 | - | 254 | ||||||||||||||||||||||||
Provision
|
842 | 2,200 | 1,011 | 317 | 642 | 8 | - | 5,020 | ||||||||||||||||||||||||
Ending balance
|
$ | 1,664 | $ | 2,963 | $ | 2,565 | $ | 862 | $ | 730 | $ | 29 | $ | - | $ | 8,813 | ||||||||||||||||
Ending balance: individually evaluated for impairment
|
$ | 27 | $ | 2,024 | $ | 827 | $ | 84 | $ | 91 | $ | - | $ | - | $ | 3,053 | ||||||||||||||||
Loans:
|
||||||||||||||||||||||||||||||||
Ending balance
|
$ | 177,598 | $ | 54,164 | $ | 208,764 | $ | 72,460 | $ | 62,272 | $ | 4,748 | $ | 806 | $ | 580,812 | ||||||||||||||||
Ending balance: individually evaluated for impairment
|
$ | 3,549 | $ | 10,813 | $ | 8,780 | $ | 1,761 | $ | 275 | $ | - | $ | - | $ | 25,178 |
Credit Quality Indicators by Class of Loans
|
||||||||||||||||||||
As of September 30, 2011 (in thousands)
|
||||||||||||||||||||
Commercial Credit Exposure
|
||||||||||||||||||||
Credit Risk Profile by Creditworthiness Category
|
||||||||||||||||||||
Commercial, Financial, and Agricultural
|
Commercial
Real Estate Construction
|
Commercial
Real Estate -Other
|
Commercial
Total
|
% of Total
Commercial
|
||||||||||||||||
Pass
|
$ | 202,560 | $ | 44,751 | $ | 248,757 | $ | 496,068 | 93.77 | % | ||||||||||
Special mention
|
1,994 | 3,458 | 6,119 | 11,571 | 2.19 | % | ||||||||||||||
Substandard
|
7,679 | 5,590 | 8,107 | 21,376 | 4.04 | % | ||||||||||||||
$ | 212,233 | $ | 53,799 | $ | 262,983 | $ | 529,015 | 100.00 | % | |||||||||||
Residential Credit Exposure
|
||||||||||||||||||||
Credit Risk Profile by Creditworthiness Category
|
||||||||||||||||||||
Residential - Construction
|
Residential - Prime
|
Residential - Subprime
|
Residential
Total
|
% of Total Residential
|
||||||||||||||||
Pass
|
$ | 6,156 | $ | 73,213 | $ | - | $ | 79,369 | 93.99 | % | ||||||||||
Special mention
|
- | 2,237 | - | 2,237 | 2.65 | % | ||||||||||||||
Substandard
|
100 | 2,738 | - | 2,838 | 3.36 | % | ||||||||||||||
$ | 6,256 | $ | 78,188 | $ | - | $ | 84,444 | 100.00 | % |
Consumer and Commercial Credit Exposure
|
||||||||||||||||||||||||
Credit Risk Profile Based on Payment Activity
|
||||||||||||||||||||||||
Consumer - Credit
Card
|
Consumer -
Other
|
Finance
Leases Commercial
|
Other
Loans
|
Consumer
Total
|
% of Total Consumer
|
|||||||||||||||||||
Performing
|
$ | 4,882 | $ | 49,631 | $ | 4,472 | $ | 716 | $ | 59,701 | 99.56 | % | ||||||||||||
Nonperforming
|
10 | 256 | - | - | 266 | .44 | % | |||||||||||||||||
$ | 4,892 | $ | 49,887 | $ | 4,472 | $ | 716 | $ | 59,967 | 100.00 | % |
Credit Quality Indicators by Class of Loans
|
||||||||||||||||||||
As of December 31, 2010 (in thousands)
|
||||||||||||||||||||
Commercial Credit Exposure
|
||||||||||||||||||||
Credit Risk Profile by Creditworthiness Category
|
||||||||||||||||||||
Commercial, Financial, and Agricultural
|
Commercial
Real Estate Construction
|
Commercial
Real Estate -Other
|
Commercial
Total
|
% of Total
Commercial
|
||||||||||||||||
Pass
|
$ | 165,581 | $ | 32,061 | $ | 191,089 | $ | 388,731 | 89.50 | % | ||||||||||
Special Mention
|
3,661 | 3,851 | 3,726 | 11,238 | 2.59 | % | ||||||||||||||
Substandard
|
8,356 | 12,077 | 13,949 | 34,382 | 7.91 | % | ||||||||||||||
$ | 177,598 | $ | 47,989 | $ | 208,764 | $ | 434,351 | 100.00 | % | |||||||||||
Residential Credit Exposure
|
||||||||||||||||||||
Credit Risk Profile by Creditworthiness Category
|
||||||||||||||||||||
Residential - Construction
|
Residential - Prime
|
Residential - Subprime
|
Residential
Total
|
% of Total Residential
|
||||||||||||||||
Pass
|
$ | 5,959 | $ | 66,867 | $ | - | $ | 72,826 | 92.61 | % | ||||||||||
Special mention
|
- | 2,501 | - | 2,501 | 3.18 | % | ||||||||||||||
Substandard
|
216 | 3,092 | - | 3,308 | 4.21 | % | ||||||||||||||
$ | 6,175 | $ | 72,460 | $ | - | $ | 78,635 | 100.00 | % |
Consumer and Commercial Credit Exposure
|
||||||||||||||||||||||||
Credit Risk Profile Based on Payment Activity
|
||||||||||||||||||||||||
Consumer - Credit
Card
|
Consumer -
Other
|
Finance
Leases Commercial
|
Other
Loans
|
Consumer
Total
|
% of Total Consumer
|
|||||||||||||||||||
Performing
|
$ | 5,318 | $ | 56,905 | $ | 4,748 | $ | 806 | $ | 67,777 | 99.93 | % | ||||||||||||
Nonperforming
|
- | 49 | - | - | 49 | 0.07 | % | |||||||||||||||||
$ | 5,318 | $ | 56,954 | $ | 4,748 | $ | 806 | $ | 67,826 | 100.00 | % |
Age Analysis of Past Due Loans by Class of Loans
(in thousands)
|
||||||||||||||||||||||||||||
30-59
Days
Past Due
(1)
|
60-89
Days Past
Due (1)
|
Greater
than 90
Days Past
Due (1)
|
Total
Past Due
|
Current
|
Total
Loans
|
Recorded Investment > 90 days and Accruing
|
||||||||||||||||||||||
As of September 30, 2011
|
||||||||||||||||||||||||||||
Commercial, financial, and agricultural
|
$ | 419 | $ | 115 | $ | 3,091 | $ | 3,625 | $ | 208,608 | $ | 212,233 | $ | 47 | ||||||||||||||
Commercial real estate – construction
|
431 | 129 | 419 | 979 | 59,076 | 60,055 | - | |||||||||||||||||||||
Commercial real estate - other
|
1,113 | 265 | 1,143 | 2,521 | 260,462 | 262,983 | - | |||||||||||||||||||||
Consumer - credit card
|
60 | 17 | 10 | 87 | 4,805 | 4,892 | 10 | |||||||||||||||||||||
Consumer - other
|
393 | 126 | 236 | 755 | 49,132 | 49,887 | 14 | |||||||||||||||||||||
Residential - construction
|
- | - | - | - | - | - | - | |||||||||||||||||||||
Residential - prime
|
741 | 122 | 478 | 1,341 | 76,847 | 78,188 | 16 | |||||||||||||||||||||
Residential - subprime
|
- | - | - | - | - | - | - | |||||||||||||||||||||
Other loans
|
84 | - | - | 84 | 632 | 716 | - | |||||||||||||||||||||
Finance leases commercial
|
- | - | - | - | 4,472 | 4,472 | - | |||||||||||||||||||||
$ | 3,241 | $ | 774 | $ | 5,377 | $ | 9,392 | $ | 664,034 | $ | 673,426 | $ | 87 | |||||||||||||||
30-59
Days
Past Due (1)
|
60-89
Days Past
Due (1)
|
Greater
than 90
Days Past
Due (1)
|
Total
Past Due
|
Current
|
Total
Loans
|
Recorded Investment >
90 days and Accruing
|
||||||||||||||||||||||
As of December 31, 2010
|
||||||||||||||||||||||||||||
Commercial, financial, and agricultural
|
$ | 1,298 | $ | 114 | $ | 2,405 | $ | 3,817 | $ | 173,781 | $ | 177,598 | $ | 17 | ||||||||||||||
Commercial real estate - construction
|
3,334 | - | 3,324 | 6,658 | 41,331 | 47,989 | - | |||||||||||||||||||||
Commercial real estate - other
|
642 | 6,579 | 1,234 | 8,455 | 200,309 | 208,764 | - | |||||||||||||||||||||
Consumer - credit card
|
50 | 23 | - | 73 | 5,245 | 5,318 | - | |||||||||||||||||||||
Consumer - other
|
407 | 79 | 280 | 766 | 56,188 | 56,954 | 49 | |||||||||||||||||||||
Residential - construction
|
- | - | - | - | 6,175 | 6,175 | - | |||||||||||||||||||||
Residential - prime
|
1,023 | 22 | 1,155 | 2,200 | 70,260 | 72,460 | - | |||||||||||||||||||||
Residential - subprime
|
- | - | - | - | - | - | - | |||||||||||||||||||||
Other loans
|
102 | 3 | - | 105 | 701 | 806 | - | |||||||||||||||||||||
Finance leases commercial
|
- | - | - | - | 4,748 | 4,748 | - | |||||||||||||||||||||
$ | 6,856 | $ | 6,820 | $ | 8,398 | $ | 22,074 | $ | 558,738 | $ | 580,812 | $ | 66 |
(1)
|
Past due amounts may include loans on nonaccrual status.
|
Impaired Loans
(in thousands)
|
||||||||||||||||||||
Recorded Investment
|
Unpaid
Principal
Balance
|
Related Allowance
|
Average Recorded Investment
|
Interest
Income Recognized
|
||||||||||||||||
As of September 30, 2011
|
||||||||||||||||||||
With no related allowance recorded:
|
||||||||||||||||||||
Commercial, financial, and agricultural
|
$ | 2,924 | $ | 3,042 | $ | - | $ | 2,187 | $ | 68 | ||||||||||
Commercial real estate – construction
|
3,419 | 3,419 | - | 4,131 | 155 | |||||||||||||||
Commercial real estate – other
|
1,744 | 1,744 | - | 1,894 | 38 | |||||||||||||||
Consumer – other
|
28 | 39 | - | 39 | - | |||||||||||||||
Residential – prime
|
1,113 | 1,113 | - | 1,244 | 32 | |||||||||||||||
Finance leases
|
- | - | - | 9 | - | |||||||||||||||
Other
|
- | - | - | 8 | - | |||||||||||||||
Subtotal:
|
$ | 9,228 | $ | 9,357 | $ | - | $ | 9,512 | $ | 293 | ||||||||||
With an allowance recorded:
|
||||||||||||||||||||
Commercial
|
1,820 | 1,820 | 370 | 1,706 | 49 | |||||||||||||||
Commercial real estate – construction
|
322 | 322 | 66 | 1,500 | 9 | |||||||||||||||
Commercial real estate – other
|
328 | 328 | 41 | 254 | - | |||||||||||||||
Consumer – other
|
225 | 229 | 102 | 211 | 6 | |||||||||||||||
Residential – prime
|
308 | 308 | 26 | 274 | - | |||||||||||||||
Subtotal:
|
$ | 3,003 | $ | 3,007 | $ | 605 | $ | 3,945 | $ | 64 | ||||||||||
Totals:
|
||||||||||||||||||||
Commercial
|
10,557 | 10,675 | 477 | 11,689 | 319 | |||||||||||||||
Consumer
|
253 | 268 | 102 | 250 | 6 | |||||||||||||||
Residential
|
1,421 | 1,421 | 26 | 1,518 | 32 | |||||||||||||||
Grand total:
|
$ | 12,231 | $ | 12,364 | $ | 605 | $ | 13,457 | $ | 357 | ||||||||||
Recorded Investment
|
Unpaid Principal Balance
|
Related Allowance
|
Average Recorded Investment
|
Interest Income Recognized
|
||||||||||||||||
As of December 31, 2010
|
||||||||||||||||||||
With no related allowance recorded:
|
||||||||||||||||||||
Commercial, financial, and agricultural
|
$ | 3,291 | $ | 3,538 | $ | - | $ | 4,036 | $ | 85 | ||||||||||
Commercial real estate – construction
|
5,918 | 9,175 | - | 5,584 | 179 | |||||||||||||||
Commercial real estate – other
|
2,407 | 2,487 | - | 1,941 | 114 | |||||||||||||||
Consumer – other
|
90 | 90 | - | 80 | 8 | |||||||||||||||
Residential – prime
|
1,549 | 1,549 | - | 1,166 | 77 | |||||||||||||||
Subtotal:
|
$ | 13,255 | $ | 16,839 | $ | - | $ | 12,807 | $ | 463 | ||||||||||
With an allowance recorded:
|
||||||||||||||||||||
Commercial
|
258 | 258 | 27 | 1,671 | 6 | |||||||||||||||
Commercial real estate – construction
|
4,895 | 4,895 | 2,024 | 4,098 | 140 | |||||||||||||||
Commercial real estate – other
|
6,373 | 6,373 | 827 | 6,632 | 2 | |||||||||||||||
Consumer – other
|
185 | 185 | 91 | 262 | 3 | |||||||||||||||
Residential – prime
|
212 | 212 | 84 | 320 | 12 | |||||||||||||||
Subtotal:
|
$ | 11,923 | $ | 11,923 | $ | 3,053 | $ | 12,983 | $ | 163 | ||||||||||
Totals:
|
||||||||||||||||||||
Commercial
|
23,142 | 26,726 | 2,878 | 23,962 | 526 | |||||||||||||||
Consumer
|
275 | 275 | 91 | 342 | 11 | |||||||||||||||
Residential
|
1,761 | 1,761 | 84 | 1,486 | 89 | |||||||||||||||
Grand total:
|
$ | 25,178 | $ | 28,762 | $ | 3,053 | $ | 25,790 | $ | 626 |
Loans on Nonaccrual Status
(in thousands)
|
||||||||
September 30, 2011
|
December 31, 2010
|
|||||||
Commercial, financial, and agricultural
|
$ | 4,295 | $ | 2,589 | ||||
Commercial real estate - construction
|
988 | 8,220 | ||||||
Commercial real estate - other
|
1,566 | 7,378 | ||||||
Consumer - credit card
|
- | - | ||||||
Consumer - other
|
242 | 261 | ||||||
Residential - construction
|
- | - | ||||||
Residential - prime
|
848 | 1,155 | ||||||
Residential - subprime
|
- | - | ||||||
Other loans
|
- | - | ||||||
Finance leases commercial
|
- | - | ||||||
$ | 7,939 | $ | 19,603 |
Three Months Ended
September 30,
|
Nine Months Ended
September 30,
|
|||||||||||||||
2011
|
2010
|
2011
|
2010
|
|||||||||||||
Net earnings available to common shareholders
|
$ | 296 | $ | 939 | $ | 1,792 | $ | 3,026 | ||||||||
Weighted average number of common shares outstanding used in computation of basic earnings per common share
|
9,726 | 9,709 | 9,723 | 9,697 | ||||||||||||
Effect of dilutive securities:
|
||||||||||||||||
Stock options
|
11 | 16 | 13 | 18 | ||||||||||||
Restricted stock
|
3 | - | 4 | - | ||||||||||||
Weighted average number of common shares outstanding plus effect of dilutive securities – used in computation of diluted earnings per share
|
9,740 | 9,725 | 9,740 | 9,715 |
Assets / Liabilities Measured
at Fair Value
|
Fair Value Measurements
at September 30, 2011 using:
|
|||||||||||||||
Description
|
at September 30, 2011
|
Level 1
|
Level 2
|
Level 3
|
||||||||||||
Available-for-sale securities:
|
||||||||||||||||
U.S. Government sponsored enterprises
|
$ | 81,976 | $ | - | $ | 81,976 | $ | - | ||||||||
Obligations of state and political subdivisions
|
97,971 | - | 97,971 | - | ||||||||||||
GSE mortgage-backed securities
|
79,519 | - | 79,519 | - | ||||||||||||
Collateralized mortgage obligations: residential
|
39,915 | - | 39,915 | - | ||||||||||||
Collateralized mortgage obligations: commercial
|
26,355 | - | 26,355 | - | ||||||||||||
$ | 325,736 | $ | - | $ | 325,736 | $ | - |
Assets / Liabilities Measured
at Fair Value
|
Fair Value Measurements
at December 31, 2010 using:
|
|||||||||||||||
Description
|
at December 31, 2010
|
Level 1
|
Level 2
|
Level 3
|
||||||||||||
Available-for-sale securities:
|
||||||||||||||||
U.S. Government sponsored enterprises
|
$ | 117,698 | $ | - | $ | 117,698 | $ | - | ||||||||
Obligations of state and political subdivisions
|
108,852 | - | 108,852 | - | ||||||||||||
GSE mortgage-backed securities
|
11,472 | - | 11,472 | - | ||||||||||||
Collateralized mortgage obligations: residential
|
22,688 | - | 22,688 | - | ||||||||||||
Collateralized mortgage obligations: commercial
|
3,099 | - | 3,099 | - | ||||||||||||
$ |
263,809
|
$ | 263,809 | $ |
Assets / Liabilities Measured
at Fair Value
|
Fair Value Measurements
at September 30, 2011 using:
|
|||||||||||||||
Description
|
at September 30, 2011
|
Level 1
|
Level 2
|
Level 3
|
||||||||||||
Impaired loans
|
$ | 2,970 | $ | - | $ | 2,970 | $ | - | ||||||||
Other real estate
|
$ | 7,278 | $ | - | $ | 7,278 | $ | - |
Assets / Liabilities Measured
at Fair Value
|
Fair Value Measurements
at December 31, 2010 using:
|
|||||||||||||||
Description
|
at December 31, 2010
|
Level 1
|
Level 2
|
Level 3
|
||||||||||||
Impaired loans
|
$ | 12,841 | $ | - | $ | 12,841 | $ | - | ||||||||
Other real estate
|
$ | 1,206 | $ | - | $ | 1,206 | $ | - |
September 30, 2011
|
December 31, 2010
|
|||||||||||||||
Carrying
Amount
|
Fair
Value
|
Carrying
Amount
|
Fair
Value
|
|||||||||||||
Financial assets:
|
||||||||||||||||
Cash and cash equivalents
|
$ | 97,802 | $ | 97,802 | $ | 91,907 | $ | 91,907 | ||||||||
Time deposits held in banks
|
- | - | 5,164 | 5,206 | ||||||||||||
Securities available-for-sale
|
325,736 | 325,736 | 263,809 | 263,809 | ||||||||||||
Securities held-to-maturity
|
43,736 | 44,114 | 1,588 | 1,608 | ||||||||||||
Other investments
|
5,057 | 5,057 | 5,062 | 5,062 | ||||||||||||
Loans, net
|
666,097 | 675,497 | 571,999 | 580,033 | ||||||||||||
Cash surrender value of life insurance policies
|
4,813 | 4,813 | 4,698 | 4,698 | ||||||||||||
Financial liabilities:
|
||||||||||||||||
Non-interest-bearing deposits
|
222,937 | 222,937 | 199,460 | 199,460 | ||||||||||||
Interest-bearing deposits
|
766,073 | 768,973 | 601,312 | 602,188 | ||||||||||||
Securities sold under agreements to repurchase
|
55,078 | 55,078 | 43,826 | 43,826 | ||||||||||||
Junior subordinated debentures
|
15,465 | 17,342 | 15,465 | 16,031 |
Item 2.
|
Management’s Discussion and Analysis of Financial Condition and Results of Operation.
|
Table 1
|
||||||||||||||||||||||||
Consolidated Average Balances, Interest and Rates
(in thousands)
|
||||||||||||||||||||||||
Three Months Ended September 30,
|
||||||||||||||||||||||||
2011
|
2010
|
|||||||||||||||||||||||
Average
Volume
|
Interest
|
Average
Yield/Rate
|
Average
Volume
|
Interest
|
Average
Yield/Rate
|
|||||||||||||||||||
Assets
|
||||||||||||||||||||||||
Investment securities1
|
||||||||||||||||||||||||
Taxable
|
$ | 223,933 | $ | 1,407 | 2.51 | % | $ | 161,183 | $ | 925 | 2.30 | % | ||||||||||||
Tax exempt2
|
90,677 | 1,150 | 5.07 | % | 108,555 | 1,392 | 5.13 | % | ||||||||||||||||
Total investment securities
|
314,610 | 2,557 | 3.25 | % | 269,738 | 2,317 | 3.44 | % | ||||||||||||||||
Federal funds sold
|
4,647 | 2 | 0.17 | % | 4,594 | 3 | 0.26 | % | ||||||||||||||||
Time and interest bearing deposits in other banks
|
74,438 | 49 | 0.26 | % | 33,704 | 58 | 0.68 | % | ||||||||||||||||
Other investments
|
5,058 | 43 | 3.40 | % | 5,066 | 44 | 3.47 | % | ||||||||||||||||
Loans
|
||||||||||||||||||||||||
Commercial and real estate
|
567,274 | 9,177 | 6.42 | % | 495,940 | 8,150 | 6.52 | % | ||||||||||||||||
Installment
|
75,327 | 1,626 | 8.56 | % | 91,656 | 1,954 | 8.46 | % | ||||||||||||||||
Total loans3
|
642,601 | 10,803 | 6.67 | % | 587,596 | 10,104 | 6.82 | % | ||||||||||||||||
Total earning assets
|
1,041,354 | 13,454 | 5.13 | % | 900,698 | 12,526 | 5.52 | % | ||||||||||||||||
Allowance for loan losses
|
(7,051 | ) | (8,249 | ) | ||||||||||||||||||||
Nonearning assets
|
114,213 | 93,333 | ||||||||||||||||||||||
Total assets
|
$ | 1,148,516 | $ | 985,782 | ||||||||||||||||||||
Liabilities and shareholders’ equity
|
||||||||||||||||||||||||
NOW, money market, and savings
|
$ | 505,013 | $ | 530 | 0.42 | % | $ | 465,420 | $ | 872 | 0.74 | % | ||||||||||||
Time deposits
|
198,101 | 483 | 0.97 | % | 120,838 | 453 | 1.49 | % | ||||||||||||||||
Total interest bearing deposits
|
703,114 | 1,013 | 0.57 | % | 586,258 | 1,325 | 0.90 | % | ||||||||||||||||
Securities sold under repurchase agreements
|
49,819 | 207 | 1.65 | % | 51,920 | 249 | 1.90 | % | ||||||||||||||||
Junior subordinated debentures
|
15,465 | 242 | 6.12 | % | 15,465 | 247 | 6.25 | % | ||||||||||||||||
Total interest bearing liabilities
|
768,398 | 1,462 | 0.75 | % | 653,643 | 1,821 | 1.11 | % | ||||||||||||||||
Demand deposits
|
224,437 | 187,755 | ||||||||||||||||||||||
Other liabilities
|
10,924 | 6,997 | ||||||||||||||||||||||
Shareholders’ equity
|
144,757 | 137,387 | ||||||||||||||||||||||
Total liabilities and shareholders’ equity
|
$ | 1,148,516 | $ | 985,782 | ||||||||||||||||||||
Net interest income and net interest spread
|
$ | 11,992 | 4.38 | % | $ | 10,705 | 4.41 | % | ||||||||||||||||
Net yield on interest earning assets
|
4.57 | % | 4.72 | % |
Table 2
|
||||||||||||||||||||||||
Consolidated Average Balances, Interest and Rates
(in thousands)
|
||||||||||||||||||||||||
Nine Months Ended September 30,
|
||||||||||||||||||||||||
2011
|
2010
|
|||||||||||||||||||||||
Average
Volume
|
Interest
|
Average
Yield/Rate
|
Average
Volume
|
Interest
|
Average
Yield/Rate
|
|||||||||||||||||||
Assets
|
||||||||||||||||||||||||
Investment securities1
|
||||||||||||||||||||||||
Taxable
|
$ | 200,559 | 3,538 | 2.35 | % | $ | 152,383 | $ | 2,816 | 2.46 | % | |||||||||||||
Tax exempt2
|
95,546 | 3,664 | 5.11 | % | 109,938 | 4,247 | 5.15 | % | ||||||||||||||||
Total investment securities
|
296,105 | 7,202 | 3.24 | % | 262,321 | 7,063 | 3.59 | % | ||||||||||||||||
Federal funds sold
|
4,758 | 7 | 0.19 | % | 2,351 | 4 | 0.22 | % | ||||||||||||||||
Time and interest bearing deposits in other banks
|
68,217 | 170 | 0.33 | % | 36,811 | 214 | 0.78 | % | ||||||||||||||||
Other investments
|
5,059 | 116 | 3.06 | % | 4,989 | 113 | 3.02 | % | ||||||||||||||||
Loans
|
||||||||||||||||||||||||
Commercial and real estate
|
520,736 | 25,102 | 6.44 | % | 486,231 | 23,868 | 6.56 | % | ||||||||||||||||
Installment
|
77,630 | 4,913 | 8.46 | % | 96,673 | 5,964 | 8.25 | % | ||||||||||||||||
Total loans3
|
598,366 | 30,015 | 6.71 | % | 582,904 | 29,832 | 6.84 | % | ||||||||||||||||
Total earning assets
|
972,505 | 37,510 | 5.16 | % | 889,376 | 37,226 | 5.60 | % | ||||||||||||||||
Allowance for loan losses
|
(7,301 | ) | (7,952 | ) | ||||||||||||||||||||
Nonearning assets
|
100,033 | 92,896 | ||||||||||||||||||||||
Total assets
|
$ | 1,065,237 | $ | 974,320 | ||||||||||||||||||||
Liabilities and shareholders’ equity
|
||||||||||||||||||||||||
NOW, money market, and savings
|
$ | 497,725 | $ | 1,794 | 0.48 | % | $ | 466,372 | $ | 2,834 | 0.81 | % | ||||||||||||
Time deposits
|
141,985 | 1,191 | 1.12 | % | 123,264 | 1,482 | 1.61 | % | ||||||||||||||||
Total interest bearing deposits
|
639,710 | 2,985 | 0.62 | % | 589,636 | 4,316 | 0.98 | % | ||||||||||||||||
Securities sold under repurchase agreements
|
47,230 | 602 | 1.70 | % | 47,433 | 713 | 2.01 | % | ||||||||||||||||
Federal funds purchased
|
- | - | 325 | 2 | 0.81 | % | ||||||||||||||||||
Other borrowings
|
- | - | 912 | 3 | 0.44 | % | ||||||||||||||||||
Junior subordinated debentures
|
15,465 | 726 | 6.19 | % | 15,465 | 731 | 6.23 | % | ||||||||||||||||
Total interest bearing liabilities
|
702,405 | 4,313 | 0.82 | % | 653,771 | 5,765 | 1.18 | % | ||||||||||||||||
Demand deposits
|
214,819 | 178,492 | ||||||||||||||||||||||
Other liabilities
|
8,069 | 6,247 | ||||||||||||||||||||||
Shareholders’ equity
|
139,944 | 135,810 | ||||||||||||||||||||||
Total liabilities and shareholders’ equity
|
$ | 1,065,237 | $ | 974,320 | ||||||||||||||||||||
Net interest income and net interest spread
|
$ | 33,197 | 4.34 | % | $ | 31,461 | 4.42 | % | ||||||||||||||||
Net yield on interest earning assets
|
4.56 | % | 4.73 | % |
Table 3
Changes in Taxable-Equivalent Net Interest Income
(in thousands)
|
||||||||||||
Three Months Ended
September 30, 2011 compared to September 30, 2010
|
||||||||||||
Total
Increase
|
Change
Attributable To
|
|||||||||||
(Decrease)
|
Volume
|
Rates
|
||||||||||
Taxable-equivalent earned on:
|
||||||||||||
Investment securities
|
||||||||||||
Taxable
|
482 | 387 | 95 | |||||||||
Tax exempt
|
(242 | ) | (227 | ) | (15 | ) | ||||||
Federal funds sold
|
(1 | ) | - | (1 | ) | |||||||
Time and interest bearing deposits in other banks
|
(9 | ) | 42 | (51 | ) | |||||||
Other investments
|
(1 | ) | - | (1 | ) | |||||||
Loans, including fees
|
699 | 929 | (230 | ) | ||||||||
Total
|
928 | 1,131 | (203 | ) | ||||||||
Interest paid on:
|
||||||||||||
Interest bearing deposits
|
(312 | ) | 230 | (542 | ) | |||||||
Securities sold under repurchase agreements
|
(42 | ) | (10 | ) | (32 | ) | ||||||
Junior subordinated debentures
|
(5 | ) | - | (5 | ) | |||||||
Total
|
(359 | ) | 220 | (579 | ) | |||||||
Taxable-equivalent net interest income
|
$ | 1,287 | $ | 911 | $ | 376 |
Table 4
Changes in Taxable-Equivalent Net Interest Income
(in thousands)
|
||||||||||||
Nine Months Ended
September 30, 2011 compared to September 30, 2010
|
||||||||||||
Total
Increase
|
Change
Attributable To
|
|||||||||||
(Decrease)
|
Volume
|
Rates
|
||||||||||
Taxable-equivalent earned on:
|
||||||||||||
Investment securities
|
||||||||||||
Taxable
|
722 | 855 | (133 | ) | ||||||||
Tax exempt
|
(583 | ) | (552 | ) | (31 | ) | ||||||
Federal funds sold
|
3 | 4 | (1 | ) | ||||||||
Time and interest bearing deposits in other banks
|
(44 | ) | 121 | (165 | ) | |||||||
Other investments
|
3 | 2 | 1 | |||||||||
Loans, including fees
|
183 | 782 | (599 | ) | ||||||||
Total
|
284 | 1,212 | (928 | ) | ||||||||
Interest paid on:
|
||||||||||||
Interest bearing deposits
|
(1,331 | ) | 342 | (1,673 | ) | |||||||
Securities sold under repurchase agreements
|
(111 | ) | (3 | ) | (108 | ) | ||||||
Federal funds purchased
|
(2 | ) | (2 | ) | - | |||||||
Other borrowings
|
(3 | ) | (3 | ) | - | |||||||
Junior subordinated debentures
|
(5 | ) | - | (5 | ) | |||||||
Total
|
(1,452 | ) | 334 | (1,786 | ) | |||||||
Taxable-equivalent net interest income
|
$ | 1,736 | $ | 878 | $ | 858 |
Table 5
Composition of Loans
(in thousands)
|
||||||||
September 30, 2011
|
December 31, 2010
|
|||||||
Commercial, financial, and agricultural
|
$ | 212,233 | $ | 177,598 | ||||
Lease financing receivable
|
4,472 | 4,748 | ||||||
Real estate – commercial
|
262,983 | 208,764 | ||||||
Real estate – residential
|
78,188 | 72,460 | ||||||
Real estate – construction
|
60,055 | 54,164 | ||||||
Installment loans to individuals
|
54,779 | 62,272 | ||||||
Other
|
716 | 806 | ||||||
Total loans
|
$ | 673,426 | $ | 580,812 |
Table 6
Nonperforming Assets and Loans Past Due 90 Days or More and Still Accruing
(in thousands)
|
||||||||||||
September 30,
2011
|
December 31,
2010
|
September 30,
2010
|
||||||||||
Nonaccrual loans
|
$ | 7,939 | $ | 19,603 | $ | 23,569 | ||||||
Loans past due 90 days and over and still accruing
|
87 | 66 | 624 | |||||||||
Total nonperforming loans
|
8,026 | 19,669 | 24,193 | |||||||||
Other real estate
|
7,278 | 1,206 | 1,401 | |||||||||
Other foreclosed assets
|
9 | 36 | 55 | |||||||||
Total nonperforming assets
|
$ | 15,313 | $ | 20,911 | $ | 25,649 | ||||||
Troubled debt restructurings
|
$ | 461 | $ | 653 | $ | 661 | ||||||
Nonperforming assets to total assets
|
1.25 | % | 2.09 | % | 2.58 | % | ||||||
Nonperforming assets to total loans + ORE + other foreclosed assets
|
2.25 | % | 3.59 | % | 4.28 | % | ||||||
ALL to nonperforming loans
|
91.32 | % | 44.81 | % | 34.91 | % | ||||||
ALL to total loans
|
1.09 | % | 1.52 | % | 1.41 | % | ||||||
YTD charge-offs
|
$ | 4,890 | $ | 4,456 | $ | 3,908 | ||||||
YTD recoveries
|
(256 | ) | (254 | ) | (209 | ) | ||||||
YTD net charge-offs
|
$ | 4,634 | $ | 4,202 | $ | 3,699 | ||||||
Annualized net charge-offs to total loans
|
.92 | % | 0.72 | % | 0.83 | % |
Exhibit Number
|
Document Description
|
|
Certification pursuant to Exchange Act Rules 13(a) – 14(a) *
|
||
Certification pursuant to Exchange Act Rules 13(a) – 14(a) *
|
||
Certification pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 **
|
||
Certification pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 **
|
||
101
|
The following financial information from the Registrant’s Quarterly Report on Form 10-Q for the quarterly period ended September 30, 2011, formatted in Extensible Business Reporting Language (“XBRL”): (i) Consolidated Statements of Operations, (ii) Consolidated Balance Sheets, (iii) Consolidated Statements of Cash Flows and (iv) Notes to Consolidated Financial Statements.***
|
MidSouth Bancorp, Inc.
(Registrant)
|
|
Date: November 9, 2011
|
|
/s/ C. R. Cloutier
|
|
C. R. Cloutier, President /CEO
|
|
(Principal Executive Officer)
|
|
/s/ James R. McLemore
|
|
James R. McLemore, CFO
|
|
(Principal Financial Officer)
|
|
/s/ Teri S. Stelly
|
|
Teri S. Stelly, Controller
(Principal Accounting Officer)
|
|
a)
|
designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this quarterly report is being prepared;
|
|
b)
|
designed such internal control over financial reporting, or cause such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
|
|
c)
|
evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this quarterly report based on such evaluations; and
|
|
d)
|
disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
|
|
a)
|
all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and
|
|
b)
|
any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.
|
/s/ C. R. Cloutier
|
|
Chief Executive Officer
|
|
a)
|
designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this quarterly report is being prepared;
|
|
b)
|
designed such internal control over financial reporting, or cause such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
|
|
c)
|
evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this quarterly report (the "Evaluation Date"); and
|
|
d)
|
disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
|
|
a)
|
all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial data; and
|
|
b)
|
any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.
|
/s/ James R. McLemore
|
|
Chief Financial Officer
|
M0Y[&$HN>YC:OY]:^_P#_`(-YOVEA\*?VMKWX(:W?F/3/B'IA@MU=SM74+<-+ M"?3+)YJ>Y85=-VD>SD.*^K9@D]I:?/I^)^XM%%%=)^AA1110`445Y]^U;\=M M'_9F_9T\8?'/6I(PGAW1)KBVCD.!-,O$V MH>+O$-Z]S?ZI>RW=[<2'+22R.79B>Y))JA7(W=W/RS%8B6*Q$JK^T[_Y!111 M2,`KU7]BK]F+Q+^V!^TKX8^!/AQ'5-4O@^JW:KD6EE'\\\I^B`X]20.]>6V\ M$]U<1VMK"TDLKA(XT7+.Q.``.Y)K]XO^"*__``3AF_8Y^$,OQ8^*>D1I\0/& M-LC7$3I\^DV/#):\]'8X>3W"K_"[2L@_&OYB[V[GO[R:_N9"\L M\K22,QR2S')/YFL:KV1\EQ177+3HKS?Z+]2*BBBL3Y`*W/AGX_\`$'PI^(FA M_$SPI>M`U:"_L9E_ADBD#K^HK#HH&FXM-;G]3/P,^+/A[X[_!WPS\8_"L MBM8>)-&@OX%5L^69$!:,GU5MRGW4UU=?G-_P;G_M-_\`"POV<]<_9OU[4=^H M>!M1^T:7&[ $A575?CU_$****9 MU!7Y?_\`!R5^TN_A_P"'?A#]EC0-1"SZ] %Q#BO88!P6\]/EU_R^9X)1117.?`!4 MME97FI7D6G:=:R3W$\@C@@A0L\CDX"J!R23VKH/A+\'OB;\=O'=C\-/A)X,O MM=UO491';6-C"6//5F/1%`R2QP``2>E?MC_P2_\`^",'@+]D2&V^+_QZAT_Q M/\0W"26:>7YEIH1QG$6>))L]92/E(^3^\:C%R>AZ.7Y;B,PJ6@K16[Z+_-^1 MYG_P1X_X(T_\*Q;3OVIOVL_#*/XA*I<>%/"5Y&&&F9`9+JX7_GO_`'8R/W?4 M_-@+^G5%%=$8J*LC]!P>#H8&BJ=):?BWW844451U!117C_[7'[2VL?!+P3J. MB_"7PDWBOXA3:#=W^B^&X'`$4,*,SWERW2*!,8&<&5\1IECPF[$5*D:<'*6Q M\$_\''7[8.FPZ%H'[&/A#5-]Y-<1ZUXM$3_ZJ-01;0-CNQ+2%3V$9[U^2-;O MQ-^(WC;XN?$#5_B7\1];GU'7-:OI+K4KRY8EGE9B3]`.@'8#%85 ?M8:;XHM+[ MXB>-?AOJVD12!KO3M,\8:C9S3K_=$S:3*$^NPUA44I/1'Q^=83,,=C%R0?+' M1/\`-_UV/SB@@GNIEMK6!Y9'.$CC0LS'V`Y-?;O[$O\`P0N_:A_:8GL?&'Q; MM)/A[X/F(D>YU6`_VA=1]?W-L<$9XP[[1@Y&<8/Z+?LV?L!^(_V4'COOA!^Q M1\$X]27&_7-8^*6JWUZ#Q\RR2Z(=AX'W`@KW#_A)_P!O7_HA_P`(?_#J:I_\ MHZ(T^X\%P_2@U+$MOR2=OF[7_(D_9-_8D_9U_8M\%CPA\#?`T5I)*H_M'6KO M$M_?-QS+,1DCC.Q<*.P'->M5Y%_PE'[>G_1#_A#_`.'4U3_Y1T?\)1^WI_T0 M_P"$/_AU-4_^4=:JR5D?3TW1I04(1LET2?\`D>NT5Y#_`,)/^WK_`-$/^$/_ M`(=35/\`Y1T0O^WKK7F)=6WPC\-@OB-H;G5-9*KQR=T=D">OMP/7AW+]JNB? MW?YGKU9/C'QWX*^'FD'7O'?BS3M'LP WE'S6/@7PW::6J^PFG^TS`>X=3[BM[P/^S+\&?`FL+XIM?" MS:KKHVEO$/B.\EU*_+`8W":Y9VC)_P!C:/:C4.:K+:-O7_@7_0R9OBK\3_B^ MHT[X#>%YM)TN9?WGCGQ5ITD4:J0?FM+*3;+<-T(:01QC@Y?[M=+\,?@IX-^% M^GWHL1 *WN%'J6$D)Q_TS->;?\0UW[<__`$5;X3?^#W4__E=7L7[!'_!%3]NW M]C7]JKPK\>Y/B9\,;G3],NFAURSL=
Document And Entity Information (USD $) | 9 Months Ended | ||
---|---|---|---|
Sep. 30, 2011 | Nov. 04, 2011 | Jun. 30, 2010 | |
Entity Registrant Name | MIDSOUTH BANCORP INC | ||
Entity Central Index Key | 0000745981 | ||
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 | Accelerated Filer | ||
Entity Public Float | $ 84,624,211 | ||
Entity Common Stock, Shares Outstanding | 9,730,506 | ||
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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Credit Quality of Loans and Allowance for Loan Losses | 9 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Credit Quality of Loans and Allowance for Loan Losses [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Credit Quality of Loans and Allowance for Loan Losses | 5. Credit Quality of Loans and Allowance for Loan Losses A summary of the activity in the allowance for loan losses is as follows (in thousands):
The Company's loans individually evaluated for impairment were approximately $12.2 million at September 30, 2011 and $25.2 million at December 31, 2010. Specific reserves totaling $605,000 were established for $3.0 million of impaired loans reported at September 30, 2011. At December 31, 2010, specific reserves totaling $3.1 million were established for $11.9 million of impaired loans. Interest recognized on impaired loans totaled $357,000 at September 30, 2011. Loans classified as TDRs totaled $461,000 and $653,000 at September 30, 2011 and December 31, 2010, respectively. Four commercial loans were classified as TDRs due to a reduction in monthly payments granted to the borrowers and one small consumer loan was classified as a TDR due to a credit exception granted to the borrower. As of September 30, 2011, there have been no commitments to lend additional funds to debtors owing receivables whose terms have been modified in TDRs. To provide greater transparency on non-performing assets, additional disclosures required by ASU 2010-20 have been included below. Allowance for loan losses is reported by portfolio segment and further detail of credit quality indicators are provided by class of loans.
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Basis of Presentation | 9 Months Ended |
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Sep. 30, 2011 | |
Basis of Presentation [Abstract] | |
Basis of Presentation | 1. Basis of Presentation The accompanying unaudited consolidated financial statements and notes thereto contain all adjustments, consisting only of normal recurring adjustments, necessary to present fairly, in accordance with accounting principles generally accepted in the United States of America, the financial position of MidSouth Bancorp, Inc. (the “Company”) and its subsidiaries as of September 30, 2011 and the results of their operations and their cash flows for the periods presented. The interim financial information should be read in conjunction with the annual consolidated financial statements and the notes thereto included in the Company's 2010 Annual Report on Form 10-K. The results of operations for the nine month period ended September 30, 2011 are not necessarily indicative of the results to be expected for the entire year. Use of Estimates – The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenues and expenses during the reported period. Actual results could differ from those estimates. Summary of Significant Accounting Policies - The accounting and reporting policies of the Company conform with accounting principles generally accepted in the United States of America and general practices within the banking industry. There have been no material changes or developments in the application of accounting principles or in our evaluation of the accounting estimates and the underlying assumptions or methodologies that we believe to be Critical Accounting Policies and Estimates as disclosed in our 2010 Annual Report on Form 10-K. Recently Adopted Accounting Pronouncements - In December 2010, the FASB issued Accounting Standards Update No. 2010-29, Disclosure of Supplementary Pro Forma Information for Business Combinations (“ASU No. 2010-29”). ASU No. 2010-29 specifies that if a public entity presents comparative financial statements, the entity should disclose revenue and earnings of the combined entity as though the business combination that occurred during the current year had occurred as of the beginning of the comparable prior annual reporting period only. ASU No. 2010-29 is effective prospectively for business combinations for which the acquisition date is on or after the beginning of the first annual reporting period beginning on or after December 15, 2010. The required ASU No. 2010-29 disclosures were not required in conjunction with the Bank's purchase of five former Jefferson Bank branches from the First Bank & Trust Company of Lubbock, Texas in Note 2 – Acquisition Activity due to the immateriality of assets acquired and liabilities assumed to the Company's consolidated balance sheet. In April 2011, the FASB issued ASU No. 2011-02, A Creditor's Determination of Whether a Restructuring Is a Troubled Debt Restructuring, which amends guidance for evaluating whether the restructuring of a receivable by a creditor is a troubled debt restructuring (“TDR”). The ASU responds to concerns that creditors are inconsistently applying existing guidance for identifying TDRs. The main provision of this Update requires a creditor to separately conclude whether the restructuring constitutes a concession and whether the debtor is experiencing financial difficulties, in order to determine if a restructuring constitutes a TDR. Guidance is also provided to assist the creditor in evaluating these two criteria. Furthermore, the amendments clarify that a creditor is precluded from using the effective interest rate test, as described in the debtors guidance on restructuring payables, when evaluating whether a restructuring constitutes a TDR. The Company adopted ASU No. 2011-02 for the interim period beginning July 1, 2011. Adoption of ASU No. 2011-02 did not have a material impact on the Company's results of operations, financial position or disclosures. In September 2011, the FASB issued ASU 2011-08, Intangibles- Goodwill and Other (Topic 350): Testing Goodwill for Impairment. The amendments in this Update gives an entity the option to first assess qualitative factors to determine whether the existence of events or circumstances leads to a determination that it is more likely than not that the fair value of a reporting unit is less than its carrying amount. If, after assessing the totality of events or circumstances, an entity determines it is not more likely than not that the fair value of a reporting unit is less than its carrying amount, then performing the two-step impairment test is unnecessary. However, if an entity concludes otherwise, then it is required to perform the first step of the two-step impairment test by calculating the fair value of the reporting unit and comparing the fair value with the carrying amount of the reporting unit, as described in ASC 350-20-35-4. If the carrying amount of a reporting unit exceeds its fair value, then the entity is required to perform the second step of the goodwill impairment test to measure the amount of the impairment loss, if any, as described in ASC 350-20-35-9. Under the amendments in this Update, an entity has the option to bypass the qualitative assessment for any reporting unit in any period and proceed directly to performing the first step of the two-step goodwill impairment test. An entity may resume performing the qualitative assessment in any subsequent period. 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, including for annual and interim goodwill impairment tests performed as of a date before September 15, 2011, if an entity's financial statements for the most recent annual or interim period have not yet been issued. The Company has elected to adopt ASU 2011-08 effective for the year ended December 31, 2011. Recently Issued Accounting Pronouncements -In April 2011, the FASB issued ASU No. 2011-03, Transfers and Servicing (Topic 860): Reconsideration of Effective Control for Repurchase Agreements. The amendments in this Update remove 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. Other criteria applicable to the assessment of effective control are not changed by the amendments in this Update. The guidance in this Update is effective for the first interim or annual period beginning on or after December 15, 2011. The guidance should be applied prospectively to transactions or modifications of existing transactions that occur on or after the effective date. Early adoption is not permitted. ASU No. 2011-03 is not expected to have a material impact on the Company's results of operations, financial position or disclosures. In May 2011, the FASB issued ASU 2011-04, Fair Value Measurement (Topic 820): Amendments to Achieve Common Fair Value Measurement and Disclosure Requirements in U.S. GAAP and IFRSs. The amendments in this Update result in common fair value measurement and disclosure requirements in U.S. GAAP and IFRSs. Consequently, the amendments change the wording used to describe many of the requirements in U.S. GAAP for measuring fair value and for disclosing information about fair value measurements. For many of the requirements, the Board does not intend for the amendments in this Update to result in a change in the application of the requirements in Topic 820. The Update also reflects the FASB's consideration of the different characteristics of public and non-public entities and the needs of users of their financial statements. Non-public entities will be exempt from a number of the new disclosure requirements. The amendments in this Update are to be applied prospectively. For public entities, the amendments are effective during interim and annual periods beginning after December 15, 2011. Early application by public entities is not permitted. In June 2011, the FASB issued ASU 2011-05, Comprehensive Income (Topic 220): Presentation of Comprehensive Income. The amendments in this Update allows an entity the option to present the total of comprehensive income, the components of net income, and the components of other comprehensive income either in a single continuous statement of comprehensive income or in two separate but consecutive statements. In both choices, an entity is required to present each component of net income along with total net income, each component of other comprehensive income along with a total for other comprehensive income, and a total amount for comprehensive income. This Update eliminates the option to present the components of other comprehensive income as part of the statement of changes in shareholders' equity. The amendments in this Update do not change the items that must be reported in other comprehensive income or when an item of other comprehensive income must be reclassified to net income. The amendments in this Update should be applied retrospectively. For public entities, the amendments are effective for fiscal years, and interim periods within those years, beginning after December 15, 2011. Early adoption is permitted, because compliance with the amendments is already permitted. The amendments do not require any transition disclosures. Reclassifications-Certain reclassifications have been made to the prior years' financial statements in order to conform to the classifications adopted for reporting in 2011. The reclassifications had no impact on shareholders' equity or net income. |
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Earnings Per Common Share [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Earnings Per Common Share | 7. Earnings Per Common Share Following is a summary of the information used in the computation of earnings per common share (in thousands):
Options to acquire 18,331 and 23,335 shares of common stock were not included in computing diluted earnings per share for the quarter and nine months ended September 30, 2011 and 2010, respectively, because the effect of these shares was anti-dilutive. For the quarter and nine months ended September 30, 2010, 21,366 shares of restricted stock were not included in computed diluted earnings because the effect of these shares was anti-dilutive. As a result of the completion of a qualified equity offering in December 2009, warrants issued to the U. S. Department of the Treasury (the “Treasury”) to purchase 208,768 shares of our common stock were reduced to 104,384 shares. The remaining 104,384 shares subject to the warrants were anti-dilutive and not included in the computation of diluted earnings per share for the quarter and nine months ended September 30, 2011. |
Declaration of Dividends | 9 Months Ended |
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Sep. 30, 2011 | |
Declaration of Dividends [Abstract] | |
Declaration of Dividends | 8. Declaration of Dividends A first quarter dividend of $0.07 per share for holders of common stock of record on March 17, 2011 was declared on January 25, 2011 and was paid on April 1, 2011. On April 26, 2011, the Company declared a second quarter dividend of $0.07 per share for holders of common stock of record on June 16, 2011, and was paid on July 1, 2011. A third quarter dividend was declared on July 27, 2011 in the amount of $0.07 per share for holders of common stock of record on September 16, 2011 and paid on October 1, 2011. On October 25, 2011, the Company declared a fourth quarter dividend of $0.07 per share for holders of common stock of record December 15, 2011 to be paid on January 3, 2012. |
Stockholders' Equity | 9 Months Ended |
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Sep. 30, 2011 | |
Stockholders Equity [Abstract] | |
Stockholders Equity | 6. Stockholders' Equity In August 2011, the Company repaid $20.0 million in Series A Preferred Stock issued to the Treasury under the Capital Purchase Plan (“CPP”) with funds from the U.S. Treasury's Small Business Lending Fund (“SBLF”) authorized by Congress under the Small Business Jobs Act of 2010. Repayment of the 20,000 shares of Series A Preferred Stock under the CPP resulted in accelerated accretion of discount on the preferred stock of approximately $444,000 in the third quarter of 2011. As a result of the repurchase of the Series A Preferred Stock, all of the TARP limitations affecting the Company were removed. In connection with the SBLF, the Company issued $32.0 million in Series B Preferred Stock to the Treasury. The dividend rate on the Series B Preferred Stock will be between 1% and 5% based on the level of qualified small business loans through the end of the ninth dividend period ending September 30, 2013. Beginning with the tenth dividend period and under certain conditions, the dividend rate could be as high as 9%. |
Consolidated Statement of Shareholders' Equity (unaudited) (Parenthetical) (USD $) In Thousands, except Per Share data | 9 Months Ended |
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Sep. 30, 2011 | |
Consolidated Statement of Shareholders' Equity (unaudited) (Parenthetical) [Abstract] | |
Unrealized holding gains on securities available-for-sale arising during the period, net of income tax expense | $ 2,191 |
Reclassification adjustment for gain on securities available-for-sale, net of income tax expense | $ 34 |
Dividends on common stock (in dollars per share) | $ 0.21 |
Acquisition Activity | 9 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Acquisition Activity [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Acquisition Activity | 2. Acquisition Activity On July 29, 2011, the Company's subsidiary, MidSouth Bank, N.A. (“the Bank”), consummated the purchase of all five former Jefferson Bank locations in the Dallas-Fort Worth, Texas area. The Bank acquired the branch network from First Bank and Trust Company, which purchased Jefferson Bank's assets in connection with the bankruptcy of Jefferson Bank's parent company. The Bank acquired at fair value approximately $57.7 million in performing loans and assumed approximately $165.8 million in Jefferson Bank deposits for a purchase price of approximately $10.6 million. The Jefferson Bank transaction was accounted for using the acquisition method of accounting and accordingly, assets acquired, liabilities assumed and consideration exchanged were recorded at their estimated fair values on the acquisition date. Fair values are preliminary and subject to refinement for up to one year after the closing date of the acquisition as additional information relative to fair values become available. Assets acquired totaled $166.1 million, including $57.7 million in loans, $93.8 million in cash, $0.2 million of investment securities, $3.6 million of fixed assets and $10.4 million of intangibles. Liabilities assumed were $166.1 million, including $165.8 million of deposits. Preliminary goodwill of $7.7 million is calculated as the purchase premium after adjusting for the fair value of net assets acquired and represents the value expected from the synergies created from combining the businesses as well as the economies of scale expected from combining the operations of the acquired branches with those of the Bank. The following table provides the assets purchased and the liabilities assumed and the adjustments to fair value (in thousands):
The discount on loans receivable will be accreted to interest income over the 3 year estimated average life of the loans using the level yield method. The core deposit intangible asset is being amortized over a 10 year life on an accelerated basis. The deposit premium will be amortized over the 2.4 year average life of the related deposits as a reduction of interest expense. The following table provides a reconciliation of goodwill:
The operating results of the Company for the period ended September 30, 2011 include the operating results of the acquired assets and assumed liabilities for the 63 days subsequent to the acquisition date of July 29, 2011. The operations of the former Jefferson Bank branches provided $359,000 in revenue, net of interest expense, and resulted in a $137,000 net loss before taxes after operating costs of $497,000 for the period from the acquisition date. The net loss is exclusive of interest income earned on net cash received from the acquisition and is included in the consolidated financial statements. Jefferson Bank's results of operations prior to the acquisition are not included in the Company's consolidated statement of income. Acquisition related charges of $876,000 for the quarter and $998,000 for the nine month period ended September 30, 2011 are recorded in the consolidated statements of earnings and include incremental costs to execute the transaction and to integrate the operations of the Company and the former Jefferson Bank branches. Such expenses were primarily for professional services, data processing costs and other fees associated with the conversion of systems and integration of operations; costs related to branch and office consolidations, costs related to termination of existing contractual arrangements for various services, marketing and promotion expenses, retention and severance and incentive compensation costs, travel costs, and printing, supplies and other costs. In many cases, determining the fair value of the acquired assets and assumed liabilities required that the Company estimate cash flows expected to result from those assets and liabilities and to discount those cash flows at appropriate rates of interest. The most significant of those determinations related to the fair valuation of acquired loans. For such loans, the excess of cash flows expected at acquisition over the estimated fair value is recognized as interest income over the remaining lives of the loans. Management determined that the acquired loans were performing and that there was no evidence of credit quality deterioration. Therefore, these loans are accounted for under ASC 310-20 and accordingly, contractual cash flows equal the expected cash flows. The loans are categorized into different loan pools per loan types. The Company determined expected cash flows on the acquired loans based on the best available information at the date of acquisition. In accordance with GAAP, there was no carry-over of Jefferson Bank's previously established allowance for loan losses. Loans at the acquisition date of July 29, 2011 are presented in the following table (in thousands).
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Investment Securities | 9 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Investment Securities [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Investments Securities | 3. Investment Securities At September 30, 2011, the investment portfolio included approximately $33.9 million of GNMA collateralized mortgage obligations (“CMOs”) backed by commercial mortgages, compared with approximately $3.1 million at December 31, 2010. As a result of the increase in this type of investment, the CMO category has been subdivided into residential and commercial as of September 30, 2011 and December 31, 2010. With the exception of three private-label CMOs with a combined balance remaining of $148,000 at September 30, 2011, all of the Company's CMOs are government-sponsored enterprise (“GSE”) securities. The portfolio of securities consisted of the following (in thousands):
The amortized cost and fair value of debt securities at September 30, 2011 by contractual maturity are shown in the following table (in thousands) with the exception of mortgage-backed securities and collateralized mortgage obligations. Expected maturities may differ from contractual maturities for mortgage-backed securities and collateralized mortgage obligations because borrowers may have the right to call or prepay obligations with or without call or prepayment penalties.
Details concerning investment securities with unrealized losses are as follows (in thousands):
Management evaluates each quarter whether unrealized losses on securities represent impairment that is other than temporary. For debt securities, the Company considers its intent to sell the securities or if it is more likely than not the Company will be required to sell the securities. If such impairment is identified, based upon the intent to sell or the more likely than not threshold, the carrying amount of the security is reduced to fair value with a charge to earnings. Upon the result of the aforementioned review, management then reviews for potential other than temporary impairment based upon other qualitative factors. In making this evaluation, management considers changes in market rates relative to those available when the security was acquired, changes in market expectations about the timing of cash flows from securities that can be prepaid, performance of the debt security, and changes in the market's perception of the issuer's financial health and the security's credit quality. If determined that a debt security has incurred other than temporary impairment, then the amount of the credit related impairment is determined. If a credit loss is evident, the amount of the credit loss is charged to earnings and the non-credit related impairment is recognized through other comprehensive income. The unrealized losses on debt securities at September 30, 2011 resulted from changing market interest rates over the yields available at the time the underlying securities were purchased. Two of the 22 collateralized mortgage obligations contained unrealized losses at September 30, 2011. Management identified no impairment related to credit quality. At September 30, 2011, management had the intent and ability to hold impaired securities and no impairment was evaluated as other than temporary. As a result, no other than temporary impairment losses were recognized during the three months ended September 30, 2011. During the nine months ended September 30, 2011, the Company sold five securities classified as available-for-sale and one security classified as held-to-maturity. Of the available-for-sale securities, four securities were sold with gains totaling $94,000 and one security was sold at a loss of $4,000 for a net gain of $90,000. The securities were sold as a result of an external review performed on the municipal securities portfolio. The decision to sell the one held to maturity security, which was sold at a gain of $9,000, was based on the inability to obtain current financial information on the municipality. The sale was consistent with action taken on other securities with a similar deficiency, as identified in the external review. The Company did not sell any investment securities during the nine month period ending September 30, 2010. Securities with an aggregate carrying value of approximately $148.0 million and $150.6 million at September 30, 2011 and December 31, 2010, respectively, were pledged to secure public funds on deposit and for other purposes required or permitted by law. |
Other Investments | 9 Months Ended | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Other Investments Note [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Other Investments | 4. Other Investments The Company is required to own stock in the Federal Reserve Bank of Atlanta (“FRB-Atlanta”) and as a member of the Federal Home Loan Bank system, owns stock in the Federal Home Loan Bank of Dallas (“FHLB-Dallas”). The Company accounts for FRB-Atlanta and FHLB-Dallas stock as other investments along with stock ownership in two correspondent banks and a Community Reinvestment Act (“CRA”) investment in a Senior Housing Crime Prevention program in Louisiana. The CRA investment consisted of three government-sponsored agency mortgage-backed securities purchased by the Company and held by the Senior Housing Crime Prevention program. The majority of the interest earned on the securities provides income to the program. For impairment analysis, the Company reviews financial statements and regulatory capital ratios for each of the banks in which the Company owns stock to verify financial stability and regulatory compliance with capital requirements. As of September 30, 2011 and December 31, 2010, based upon quarterly reviews, management determined that there was no impairment in the bank stocks held as other investments. The aggregate carrying amount of other investments consisted of the following (in thousands):
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Fair Value Measurement | 9 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Fair Value Measurement [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Fair Value Measurement | 9. Fair Value Measurement The Company groups assets and liabilities at fair value 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. These levels are: Level 1 –Valuation is based upon quoted prices for identical instruments traded in active markets. Level 2 –Level 2 – Valuation is based upon quoted prices for similar instruments in active markets, quoted prices for identical or similar instruments in markets that are not active, and model-based valuation techniques for which all significant assumptions are observable in the market. Level 3 –Level 3 – Valuation is generated from model-based techniques that use at least one significant assumption not observable in the market. These unobservable assumptions reflect estimates of assumptions that market participants would use in pricing the asset or liability. Valuation techniques include use of option pricing models, discounted cash flow models and similar techniques Following is a description of valuation methodologies used for assets and liabilities which are either recorded or disclosed at fair value. Cash and Cash Equivalents-The carrying value of cash and cash equivalents is a reasonable estimate of fair value. Time Deposits Held in Banks-Fair values for fixed-rate time deposits are estimated using a discounted cash flow analysis that applies interest rates currently being offered on time deposits of similar terms of maturity. Securities Available-for-Sale-Securities available-for-sale are recorded at fair value on a recurring basis. Fair value measurement is based upon quoted prices, if available. If quoted prices are not available, fair values are measured using independent pricing models or other model-based valuation techniques such as the present value of future cash flows, adjusted for the security's credit rating, prepayment assumptions and other factors such as credit loss assumptions. Level 1 securities include those traded on an active exchange, such as the New York Stock Exchange and U.S. Treasury securities that are traded by dealers or brokers in active over-the-counter market funds. Securities are classified as Level 2 within the valuation hierarchy when the Company obtains fair value measurements from an independent pricing service. The fair value measurements consider observable data that may include dealer quotes, market spreads, cash flows, the U.S. Treasury yield curve, live trading levels, trade execution data, market consensus prepayment speeds, credit information, and the bond's terms and conditions, among other things. Level 2 inputs are used to value U.S. Agency securities, mortgage-backed securities, municipal securities, single issue trust preferred securities, certain pooled trust preferred securities, and certain equity securities that are not actively traded. Other Investments-The carrying value of other investments is a reasonable estimate of fair value. Loans-For disclosure purposes, the fair value of fixed rate 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. For variable rate loans, the carrying amount is a reasonable estimate of fair value. The Company does not record loans at fair value on a recurring basis. No adjustment to fair value is taken related to illiquidity discounts. However, from time to time, a loan is considered impaired and an allowance for loan losses is established. Loans for which it is probable that payment of interest and principal will not be made in accordance with the contractual terms of the loan agreement are considered impaired. Once a loan is identified as individually impaired, management uses one of three methods to measure impairment, which, include collateral value, market value of similar debt, and discounted cash flows. Those impaired loans not requiring an allowance represent loans for which the fair value of the expected repayments or collateral exceed the recorded investments in such loans. Impaired loans where an allowance is established based on the fair value of collateral or where the loan balance has been charged down to fair value require classification in the fair value hierarchy. When the fair value of the collateral is based on an observable market price or a current appraised value, the Company records the impaired loan as nonrecurring Level 2. When an appraised value is not available or management determines the fair value of the collateral is further impaired below the appraised value and adjusts the appraisal value by taking an additional discount for market conditions and there is no observable market price, the Company records the impaired loan as nonrecurring Level 3. For non-performing loans, collateral valuations currently in file are reviewed for acceptability in terms of timeliness and applicability. Although each determination is made based on the facts and circumstances of each credit, generally valuations are no longer considered acceptable when there has been physical deterioration of the property from when it was last appraised, or there has been a significant change in the underlying assumptions of the appraisal. If the valuation is deemed to be unacceptable, a new appraisal is ordered. New appraisals are typically received within 4-6 weeks. While awaiting new appraisals, the valuation in the file is utilized, net of discounts. Discounts are derived from available relevant market data, selling costs, taxes, and insurance. Any perceived collateral deficiency utilizing the discounted value is specifically reserved (as required by ASC Topic 310) until the new appraisal is received or charged off. Thus, provisions or charge-offs are recognized in the period the credit is identified as non-performing. The following sources are utilized to set appropriate discounts: market real estate agents, current local sales data, bank history for devaluation of similar property, Sheriff's valuations and buy/sell contracts. If a real estate agent is used to market and sell the property, values are discounted 10% for selling costs. Additional discounts may be applied if research from the above sources indicates a discount is appropriate given devaluation of similar property from the time of the initial valuation. Other Real Estate-Other real estate properties are adjusted to fair value upon transfer of the loans to other real estate, and annually thereafter to insure other real estate assets are carried at the lower of carrying value or fair value. Exceptions to obtaining initial appraisals are properties where a buy/sell agreement exists for the loan value or greater, or where we have received a Sheriff's valuation for properties liquidated through a Sheriff sale. Fair value is based upon independent market prices, appraised values of the collateral or management's estimation of the value of the collateral. When the fair value of the collateral is based on an observable market price or a current appraised value, the Company records the other real estate as nonrecurring Level 2. When an appraised value is not available or management determines the fair value of the collateral is further impaired below the appraised value and adjusts the appraisal value by taking an additional discount for market conditions and there is no observable market prices, the Company records the other real estate asset as nonrecurring Level 3. Cash Surrender Value of Life Insurance Policies-Fair value for life insurance cash surrender value is based on cash surrender values indicated by the insurance companies. Deposits-The fair value of demand deposits, savings accounts, NOW accounts, and money market deposits is the amount payable on demand at the reporting date. The fair value of fixed maturity certificates of deposit is estimated by discounting the future cash flows using the rates currently offered for deposits of similar remaining maturities. The estimated fair value does not include customer related intangibles. Securities Sold Under Agreements to Repurchase-The fair value approximates the carrying value of securities sold under agreements to repurchase due to their short-term nature. Junior Subordinated Debentures-For junior subordinated debentures that bear interest on a floating basis, the carrying amount approximates fair value. For junior subordinated debentures that bear interest on a fixed rate basis, the fair value is estimated using a discounted cash flow analysis that applies interest rates currently being offered on similar types of borrowings. Commitments to Extend Credit, Standby Letters of Credit and Credit Card Guarantees-Because commitments to extend credit and standby letters of credit are generally short-term and made using variable rates, the carrying value and estimated fair value associated with these instruments are immaterial. Assets Recorded at Fair Value Below is a table that presents information about certain assets and liabilities measured at fair value on a recurring basis (in thousands):
Certain assets and liabilities are measured at fair value on a nonrecurring basis and are included in the table below (in thousands). Impaired loans are level 2 assets measured using appraisals from external parties of the collateral less any prior liens. Other real estate properties are also level 2 assets measured using appraisals from external parties.
Limitations Fair value estimates are made at a specific point in time, based on relevant market information and information about the financial instrument. These estimates do not reflect any premium or discount that could result from offering for sale at one time the Company's entire holdings of a particular financial instrument. Because no market exists for a significant portion of the Company's financial instruments, fair value estimates are based on many judgments. These estimates are subjective in nature and involve uncertainties and matters of significant judgment and therefore cannot be determined with precision. Changes in assumptions could significantly affect the estimates. Fair value estimates are based on existing on and off-balance sheet financial instruments without attempting to estimate the value of anticipated future business and the value of assets and liabilities that are not considered financial instruments. Significant assets and liabilities that are not considered financial instruments include deferred income taxes and premises and equipment. In addition, the tax ramifications related to the realization of the unrealized gains and losses can have a significant effect on fair value estimates and have not been considered in the estimates. The estimated fair values of the Company's financial instruments are as follows at September 30, 2011 and December 31, 2010 (in thousands):
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