ORRSTOWN FINANCIAL SERVICES, INC.
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(Exact name of registrant as specified in its charter)
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Pennsylvania
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001-34292
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23-2530374
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(State or other jurisdiction
of incorporation)
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(SEC File Number)
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(IRS Employer
Identification No.)
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77 East King Street, P.O. Box 250, Shippensburg, Pennsylvania
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17257
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(Address of principal executive offices)
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(Zip Code)
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Registrant’s telephone number, including area code:
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(717) 532-6114
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Not Applicable
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(Former name or former address, if changed since last report)
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Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2. below):
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o
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Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
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o
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Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
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o
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Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
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o
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Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c)).
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SIGNATURES
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Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this Report to be signed on its behalf by the undersigned hereunto duly authorized.
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ORRSTOWN FINANCIAL SERVICES, INC.
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Date: January 23, 2013
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By:
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/s/ David P. Boyle
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David P. Boyle
Executive Vice President and Chief Financial Officer
(Duly Authorized Representative)
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·
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Net income for the three months ended December 31, 2012 totaled $1.03 million, marking a return to profitability in the fourth quarter.
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·
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Nonaccrual loans of $17.9 million at December 31, 2012 were substantially reduced from the prior quarter’s total of $57.8 million, resulting in a significantly lower provision for loan losses of $1.0 million for the quarter ended December 31, 2012, compared to $5.1 million for the quarter ended September 30, 2012.
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·
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Nonaccrual loans of $17.9 million represent a 78.6% reduction from December 31, 2011’s total of $83.7 million.
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(Dollars in thousands, except per share data)
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December 31, 2012
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December 31, 2011
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||||||
For the Quarter Ended:
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||||||||
Net income (loss)
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$ | 1,030 | $ | (29,481 | ) | |||
Diluted earnings (loss) per share
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$ | 0.13 | $ | (3.66 | ) | |||
Return on average assets
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0.33 | % | (7.89 | %) | ||||
Return on average equity
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4.69 | % | (75.94 | %) | ||||
Net interest income
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$ | 8,471 | $ | 11,584 | ||||
Net interest margin
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3.00 | % | 3.45 | % | ||||
December 31, 2012
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December 31, 2011
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|||||||
For the Year Ended:
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||||||||
Net income (loss)
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$ | (38,454 | ) | $ | (31,964 | ) | ||
Diluted earnings (loss) per share
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$ | (4.77 | ) | $ | (3.98 | ) | ||
Dividends per share
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$ | 0.00 | $ | 0.69 | ||||
Return on average assets
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(2.84 | %) | (2.11 | %) | ||||
Return on average equity
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(35.22 | %) | (20.33 | %) | ||||
Net interest income
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$ | 37,888 | $ | 49,607 | ||||
Net interest margin
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3.12 | % | 3.66 | % | ||||
Balance Sheet Highlights:
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December 31, 2012
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December 31, 2011
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||||||
Assets
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$ | 1,232,668 | $ | 1,444,097 | ||||
Loans, gross
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711,601 | 967,993 | ||||||
Allowance for loan losses
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23,166 | 43,715 | ||||||
Deposits
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1,085,039 | 1,216,902 | ||||||
Shareholders' equity
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87,694 | 128,197 |
Three Months Ended
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Twelve Months Ended
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|||||||||||||||
December 31,
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December 31,
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December 31,
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December 31,
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|||||||||||||
(Dollars in thousands)
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2012
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2011
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2012
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2011
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||||||||||||
Net interest income
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$ | 8,471 | $ | 11,584 | $ | 37,888 | $ | 49,607 | ||||||||
Effect of tax exempt income
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483 | 681 | 2,265 | 2,805 | ||||||||||||
Net interest income, tax equivalent basis
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$ | 8,954 | $ | 12,265 | $ | 40,153 | $ | 52,412 |
CONDENSED CONSOLIDATED BALANCE SHEETS
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|||||||
(Unaudited)
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(Audited)*
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||||||
December 31,
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December 31,
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||||||
(Dollars in thousands)
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2012
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2011
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|||||
Assets
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|||||||
Cash and cash equivalents
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$ | 150,688 | $ | 106,669 | |||
Short-term investments | 0 | 3,000 | |||||
Securities available for sale
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301,970 | 310,365 |
Loans held for sale
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7,862 | 2,553 | |||||
Loans
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703,739 | 965,440 | |||||
Less: Allowance for loan losses
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(23,166 | ) | (43,715 | ) | |||
Net Loans
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688,435 | 924,278 | |||||
Premises and equipment, net
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26,782 | 27,183 | |||||
Other assets
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64,793 | 72,602 | |||||
Total assets
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$ | 1,232,668 | $ | 1,444,097 | |||
Liabilities
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|||||||
Deposits:
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|||||||
Non-interest bearing
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$ | 121,090 | $ | 111,930 | |||
Interest bearing
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963,949 | 1,104,972 | |||||
Total deposits
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1,085,039 | 1,216,902 | |||||
Borrowings
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47,120 | 88,811 | |||||
Accrued interest and other liabilities
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12,815 | 10,187 | |||||
Total liabilities
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1,144,974 | 1,315,900 | |||||
Shareholders' Equity
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|||||||
Common stock
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421 | 419 | |||||
Additional paid - in capital
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122,724 | 122,514 | |||||
Retained earnings (accumulated deficit)
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(37,259 | ) | 1,195 | ||||
Accumulated other comprehensive income
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1,828 | 4,089 | |||||
Treasury stock
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(20 | ) | (20 | ) | |||
Total shareholders' equity
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87,694 | 128,197 | |||||
Total liabilities and shareholders' equity
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$ | 1,232,668 | $ | 1,444,097 | |||
*The consolidated balance sheet at December 31, 2011 has been derived from audited financial statements at that date.
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ORRSTOWN FINANCIAL SERVICES, INC. AND ITS WHOLLY-OWNED SUBSIDIARY
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||||||||||||||||
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)
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||||||||||||||||
Three Months Ended
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Twelve Months Ended
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|||||||||||||||
December 31,
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December 31,
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December 31,
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December 31,
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|||||||||||||
(Dollars in thousands, Except per Share Data)
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2012
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2011
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2012
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2011
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||||||||||||
Interest and dividend income
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||||||||||||||||
Interest and fees on loans
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$ | 8,930 | $ | 11,693 | $ | 39,647 | $ | 48,917 | ||||||||
Interest and dividends on investment securities
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1,057 | 2,315 | 5,789 | 11,444 | ||||||||||||
Total interest and dividend income
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9,987 | 14,008 | 45,436 | 60,361 | ||||||||||||
Interest expense
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||||||||||||||||
Interest on deposits
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1,353 | 2,162 | 6,712 | 9,368 | ||||||||||||
Interest on borrowings
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163 | 262 | 836 | 1,386 | ||||||||||||
Total interest expense
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1,516 | 2,424 | 7,548 | 10,754 | ||||||||||||
Net interest income
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8,471 | 11,584 | 37,888 | 49,607 | ||||||||||||
Provision for loan losses
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1,000 | 26,250 | 48,300 | 58,575 | ||||||||||||
Net interest income after provision for loan losses
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7,471 | (14,666 | ) | (10,412 | ) | (8,968 | ) | |||||||||
Noninterest income
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||||||||||||||||
Service charges on deposit accounts
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1,601 | 1,608 | 6,227 | 6,411 | ||||||||||||
Trust department and brokerage income
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1,557 | 1,438 | 6,053 | 5,789 | ||||||||||||
Mortgage banking activities
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1,250 | 748 | 3,393 | 3,007 | ||||||||||||
Merchant processing revenues
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0 | 0 | 149 | 1,850 | ||||||||||||
Other income
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756 | 560 | 2,616 | 3,339 | ||||||||||||
Investment securities gains
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0 | 3,025 | 4,824 | 6,224 | ||||||||||||
Total noninterest income
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5,164 | 7,379 | 23,262 | 26,620 | ||||||||||||
Noninterest expenses
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||||||||||||||||
Salaries and employee benefits
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5,356 | 3,808 | 19,864 | 17,506 | ||||||||||||
Occupancy, furniture and equipment
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1,211 | 1,132 | 4,888 | 4,692 | ||||||||||||
Data processing
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140 | 125 | 574 | 1,161 | ||||||||||||
Advertising and bank promotions
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296 | 416 | 1,411 | 1,246 | ||||||||||||
FDIC insurance
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708 | 415 | 2,727 | 2,417 | ||||||||||||
Professional services
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795 | 1,537 | 3,076 | 3,531 | ||||||||||||
Collection and problem loan
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407 | 477 | 2,297 | 1,167 | ||||||||||||
Real estate owned expenses
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128 | 368 | 834 | 681 | ||||||||||||
Goodwill impairment and Intangible asset amortization
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52 | 19,500 | 209 | 19,657 | ||||||||||||
Other operating expenses
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1,507 | 2,708 | 7,469 | 8,421 | ||||||||||||
Total noninterest expenses
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10,600 | 30,486 | 43,349 | 60,479 | ||||||||||||
Income (loss) before income tax (benefit)
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2,035 | (37,773 | ) | (30,499 | ) | (42,827 | ) | |||||||||
Income tax expense (benefit)
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1,005 | (8,292 | ) | 7,955 | (10,863 | ) | ||||||||||
Net income (loss)
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$ | 1,030 | $ | (29,481 | ) | $ | (38,454 | ) | $ | (31,964 | ) | |||||
Per share information:
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||||||||||||||||
Basic earnings (loss) per share
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$ | 0.13 | $ | (3.66 | ) | $ | (4.77 | ) | $ | (3.98 | ) | |||||
Diluted earnings (loss) per share
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0.13 | (3.66 | ) | (4.77 | ) | (3.98 | ) | |||||||||
Dividends per share
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0.00 | 0.00 | 0.00 | 0.69 | ||||||||||||
Average shares and common stock equivalents outstanding
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8,079,520 | 8,053,955 | 8,066,148 | 8,026,726 |
ANALYSIS OF NET INTEREST INCOME
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||||||||||||||||||||||||
Average Balances and Interest Rates, Taxable Equivalent Basis
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||||||||||||||||||||||||
Three Months Ended
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||||||||||||||||||||||||
December 31, 2012
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December 31, 2011
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|||||||||||||||||||||||
Tax
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Tax
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Tax
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Tax
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|||||||||||||||||||||
Average
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Equivalent
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Equivalent
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Average
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Equivalent
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Equivalent
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|||||||||||||||||||
(Dollars in thousands)
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Balance
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Interest
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Rate
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Balance
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Interest
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Rate
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||||||||||||||||||
Assets
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||||||||||||||||||||||||
Federal funds sold
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||||||||||||||||||||||||
& interest bearing
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||||||||||||||||||||||||
bank balances
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$ | 111,600 | $ | 73 | 0.26 | % | $ | 73,868 | $ | 51 | 0.27 | % | ||||||||||||
Securities
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295,362 | 1,139 | 1.53 | 345,996 | 2,629 | 3.04 | ||||||||||||||||||
Loans
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779,197 | 9,258 | 4.73 | 982,920 | 12,009 | 4.79 | ||||||||||||||||||
Total interest-earning
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||||||||||||||||||||||||
assets
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1,186,159 | 10,470 | 3.51 | 1,402,784 | 14,689 | 4.13 | ||||||||||||||||||
Other assets
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60,701 | 71,188 | ||||||||||||||||||||||
Total
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$ | 1,246,860 | $ | 1,473,972 | ||||||||||||||||||||
Liabilities and Shareholders' Equity
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||||||||||||||||||||||||
Interest bearing
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||||||||||||||||||||||||
demand deposits
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$ | 496,030 | $ | 228 | 0.18 | $ | 555,206 | $ | 430 | 0.29 | ||||||||||||||
Savings deposits
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74,012 | 31 | 0.17 | 71,877 | 30 | 0.17 | ||||||||||||||||||
Time deposits
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409,348 | 1,094 | 1.06 | 516,116 | 1,702 | 1.31 | ||||||||||||||||||
Short term borrowings
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11,289 | 7 | 0.25 | 27,111 | 28 | 0.44 | ||||||||||||||||||
Long term debt
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37,671 | 156 | 1.65 | 35,948 | 234 | 2.58 | ||||||||||||||||||
Total interest bearing
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||||||||||||||||||||||||
liabilities
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1,028,350 | 1,516 | 0.59 | 1,206,258 | 2,424 | 0.79 | ||||||||||||||||||
Non-interest bearing
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||||||||||||||||||||||||
demand deposits
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119,122 | 111,658 | ||||||||||||||||||||||
Other
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12,099 | 9,903 | ||||||||||||||||||||||
Total Liabilities
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1,159,571 | 1,327,819 | ||||||||||||||||||||||
Shareholders' Equity
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87,289 | 146,153 | ||||||||||||||||||||||
Total
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$ | 1,246,860 | 0.51 | % | $ | 1,473,972 | 0.68 | % | ||||||||||||||||
Net interest income (FTE)/
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||||||||||||||||||||||||
net interest spread
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8,954 | 2.92 | % | 12,265 | 3.34 | % | ||||||||||||||||||
Net interest margin
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3.00 | % | 3.45 | % | ||||||||||||||||||||
Tax-equivalent adjustment
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(483 | ) | (681 | ) | ||||||||||||||||||||
Net interest income
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$ | 8,471 | $ | 11,584 | ||||||||||||||||||||
NOTES: Yields and interest income on tax-exempt assets have been computed on a fully taxable equivalent basis assuming a 35% tax rate.
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||||||||||||||||||||||||
For yield calculation purposes, nonaccruing loans are included in the average loan balance.
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ANALYSIS OF NET INTEREST INCOME
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|||||||||||||||||||||||||
Average Balances and Interest Rates, Taxable Equivalent Basis
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|||||||||||||||||||||||||
Twelve Months Ended
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|||||||||||||||||||||||||
December 31, 2012
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December 31, 2011
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||||||||||||||||||||||||
Tax
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Tax
|
Tax
|
Tax
|
||||||||||||||||||||||
Average
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Equivalent
|
Equivalent
|
Average
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Equivalent
|
Equivalent
|
||||||||||||||||||||
(Dollars in thousands)
|
Balance
|
Interest
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Rate
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Balance
|
Interest
|
Rate
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|||||||||||||||||||
Assets
|
|||||||||||||||||||||||||
Federal funds sold
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|||||||||||||||||||||||||
& interest bearing
|
|||||||||||||||||||||||||
bank balances
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$ | 109,298 | $ | 287 | 0.26 | % | $ | 42,690 | $ | 138 | 0.32 | % |
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||||||||||||
Securities
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315,581 | 6,420 | 2.03 | 396,473 | 12,906 | 3.26 | |||||||||||||||||||
Loans
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859,985 | 40,994 | 4.77 | 993,828 | 50,122 | 5.04 | |||||||||||||||||||
Total interest-earning
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|||||||||||||||||||||||||
assets
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1,284,864 | 47,701 | 3.71 | 1,432,991 | 63,166 | 4.41 | |||||||||||||||||||
Other assets
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67,363 | 84,777 | |||||||||||||||||||||||
Total
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$ | 1,352,227 | $ | 1,517,768 | |||||||||||||||||||||
Liabilities and Shareholders' Equity
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|||||||||||||||||||||||||
Interest bearing
|
|||||||||||||||||||||||||
demand deposits
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$ | 511,800 | $ | 1,236 | 0.24 | % | $ | 486,793 | $ | 1,710 | 0.35 | % |
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||||||||||||
Savings deposits
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74,180 | 124 | 0.17 | 71,059 | 140 | 0.20 | |||||||||||||||||||
Time deposits
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455,507 | 5,352 | 1.17 | 574,079 | 7,518 | 1.31 | |||||||||||||||||||
Short term borrowings
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30,581 | 120 | 0.39 | 63,271 | 314 | 0.50 | |||||||||||||||||||
Long term debt
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43,576 | 716 | 1.64 | 42,308 | 1,072 | 2.53 | |||||||||||||||||||
Total interest bearing
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|||||||||||||||||||||||||
liabilities
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1,115,644 | 7,548 | 0.68 | 1,237,510 | 10,754 | 0.87 | |||||||||||||||||||
Non-interest bearing
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|||||||||||||||||||||||||
demand deposits
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116,930 | 113,157 | |||||||||||||||||||||||
Other
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10,469 | 9,901 | |||||||||||||||||||||||
Total Liabilities
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1,243,043 | 1,360,568 | |||||||||||||||||||||||
Shareholders' Equity
|
109,184 | 157,200 | |||||||||||||||||||||||
Total
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$ | 1,352,227 | 0.59 | % | $ | 1,517,768 | 0.75 | % |
|
||||||||||||||||
Net interest income (FTE)/
|
|||||||||||||||||||||||||
net interest spread
|
40,153 | 3.03 | % | 52,412 | 3.54 | % |
|
||||||||||||||||||
Net interest margin
|
3.12 | % | 3.66 | % |
|
||||||||||||||||||||
Tax-equivalent adjustment
|
(2,265 | ) | (2,805 | ) | |||||||||||||||||||||
Net interest income
|
$ | 37,888 | $ | 49,607 | |||||||||||||||||||||
NOTES: Yields and interest income on tax-exempt assets have been computed on a fully taxable equivalent basis assuming a 35% tax rate.
|
|||||||||||||||||||||||||
For yield calculation purposes, nonaccruing loans are included in the average loan balance.
|
Nonperforming Assets / Risk Elements
|
||||||||||||
December 31,
|
September 30,
|
December 31,
|
||||||||||
(Dollars in Thousands)
|
2012
|
2012
|
2011
|
|||||||||
Nonaccrual loans (cash basis)
|
$ | 17,943 | $ | 57,780 | $ | 83,697 | ||||||
Other real estate (OREO)
|
1,876 | 2,575 | 2,165 | |||||||||
Total nonperforming assets
|
19,819 | 60,355 | 85,862 | |||||||||
Restructured loans still accruing
|
3,092 | 3,113 | 27,917 | |||||||||
Loans past due 90 days or more and still accruing
|
0 | 923 | 0 | |||||||||
Total risk assets
|
$ | 22,911 | $ | 64,391 | $ | 113,779 | ||||||
Loans 30-89 days past due
|
$ | 3,578 | $ | 5,435 | $ | 6,723 | ||||||
Asset quality ratios:
|
||||||||||||
Total nonaccrual loans to loans
|
2.55 | % | 7.19 | % | 8.67 | % | ||||||
Total nonperforming assets to assets
|
1.61 | % | 4.75 | % | 5.95 | % | ||||||
Total nonperforming assets to total loans and OREO
|
2.81 | % | 7.49 | % | 8.87 | % | ||||||
Total risk assets to total loans and OREO
|
3.25 | % | 7.99 | % | 11.76 | % | ||||||
Total risk assets to total assets
|
1.86 | % | 5.07 | % | 7.88 | % | ||||||
Allowance for loan losses to total loans
|
3.29 | % | 4.57 | % | 4.53 | % | ||||||
Allowance for loan losses to nonaccrual loans
|
129.11 | % | 63.52 | % | 52.23 | % | ||||||
Allowance for loan losses to nonaccrual and
|
||||||||||||
restructured loans still accruing
|
110.13 | % | 60.27 | % | 39.17 | % |
Roll Forward of Allowance for Loan Losses
|
||||||||||||||||
Three Months Ended
|
Twelve Months Ended
|
|||||||||||||||
December 31,
|
December 31,
|
December 31,
|
December 31,
|
|||||||||||||
(Dollars in Thousands)
|
2012
|
2011
|
2012
|
2011
|
||||||||||||
Balance at beginning of period
|
$ | 36,700 | $ | 25,677 | $ | 43,715 | $ | 16,020 | ||||||||
Provision for loan losses
|
1,000 | 26,250 | 48,300 | 58,575 | ||||||||||||
Recoveries
|
2,602 | 23 | 5,410 | 52 | ||||||||||||
Loans charged-off
|
(17,136 | ) | (8,235 | ) | (74,259 | ) | (30,932 | ) | ||||||||
Balance at end of period
|
$ | 23,166 | $ | 43,715 | $ | 23,166 | $ | 43,715 |
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