UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
|
x |
Quarterly report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 |
for the quarterly period ended June 30, 2011
|
o |
Transition report pursuant to Section 13 or 15(d) of the Exchange Act |
for the transition period from to
Commission File No. 000-28344
FIRST COMMUNITY CORPORATION
(Exact name of registrant as specified in its charter)
|
South Carolina |
|
57-1010751 |
|
(State of Incorporation) |
|
(I.R.S. Employer Identification) |
5455 Sunset Boulevard, Lexington, South Carolina 29072
(Address of Principal Executive Offices)
(803) 951-2265
(Registrant’s Telephone Number, Including Area Code)
(Former Name, Former Address and Former Fiscal Year, if Changed Since Last Report)
Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15 (d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes x No o
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). x Yes o No
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer,” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.
|
Large accelerated filer o |
|
Accelerated filer o |
|
|
|
|
|
Non-accelerated filer o |
|
Smaller reporting company x |
Indicate by check mark whether the registrant is shell company (as defined in Rule 12b-2 of the Exchange Act). Yes o No x
Indicate the number of shares outstanding of each of the issuer’s classes of common equity, as of the latest practicable date: On August 5, 2011, 3,277,454 shares of the issuer’s common stock, par value $1.00 per share, were issued and outstanding.
|
Consolidated Statements of Changes in Shareholders’ Equity and Comprehensive Income |
|
Item 2. Managements Discussion and Analysis of Financial Condition and Results of Operations |
|
Item 3. Quantitative and Qualitative Disclosures About Market Risk |
|
|
|
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds |
|
|
|
EX-31.1 RULE 13A-14(A) CERTIFICATION OF PRINCIPAL EXECUTIVE OFFICER |
|
EX-31.2 RULE 13A-14(A) CERTIFICATION OF PRINCIPAL FINANCIAL OFFICER |
|
EX-32 SECTION 1350 CERTIFICATIONS |
FIRST COMMUNITY CORPORATION
|
|
|
June 30, |
|
|
| ||
|
|
|
2011 |
|
December 31, |
| ||
|
(Dollars in thousands, except par value) |
|
(Unaudited) |
|
2010 |
| ||
|
ASSETS |
|
|
|
|
| ||
|
Cash and due from banks |
|
$ |
8,152 |
|
$ |
7,114 |
|
|
Interest-bearing bank balances |
|
13,201 |
|
19,102 |
| ||
|
Federal funds sold and securities purchased under agreements to resell |
|
266 |
|
245 |
| ||
|
Investment securities - available for sale |
|
204,485 |
|
189,309 |
| ||
|
Other investments, at cost |
|
6,257 |
|
6,841 |
| ||
|
Loans held for sale |
|
625 |
|
— |
| ||
|
Loans |
|
325,671 |
|
329,954 |
| ||
|
Less allowance for loan losses |
|
4,716 |
|
4,911 |
| ||
|
Net loans |
|
320,955 |
|
325,043 |
| ||
|
Property, furniture and equipment - net |
|
17,710 |
|
18,026 |
| ||
|
Bank owned life insurance |
|
10,893 |
|
10,773 |
| ||
|
Other real estate owned |
|
8,970 |
|
6,904 |
| ||
|
Intangible assets |
|
571 |
|
881 |
| ||
|
Other assets |
|
13,094 |
|
14,785 |
| ||
|
Total assets |
|
$ |
605,179 |
|
$ |
599,023 |
|
|
LIABILITIES |
|
|
|
|
| ||
|
Deposits: |
|
|
|
|
| ||
|
Non-interest bearing demand |
|
$ |
82,476 |
|
$ |
72,625 |
|
|
NOW and money market accounts |
|
134,627 |
|
123,604 |
| ||
|
Savings |
|
32,518 |
|
29,886 |
| ||
|
Time deposits less than $100,000 |
|
135,751 |
|
143,946 |
| ||
|
Time deposits $100,000 and over |
|
85,545 |
|
85,283 |
| ||
|
Total deposits |
|
470,917 |
|
455,344 |
| ||
|
Securities sold under agreements to repurchase |
|
15,551 |
|
12,686 |
| ||
|
Federal Home Loan Bank advances |
|
54,228 |
|
68,094 |
| ||
|
Junior subordinated debt |
|
15,464 |
|
15,464 |
| ||
|
Other borrowed money |
|
100 |
|
120 |
| ||
|
Other liabilities |
|
4,993 |
|
5,518 |
| ||
|
Total liabilities |
|
561,253 |
|
557,226 |
| ||
|
SHAREHOLDERS’ EQUITY |
|
|
|
|
| ||
|
Preferred stock, par value $1.00 per share, 10,000,000 shares authorized; 11,350 issued and outstanding |
|
11,086 |
|
11,035 |
| ||
|
Common stock, par value $1.00 per share; 10,000,000 shares authorized; issued and outstanding 3,277,454 at June 30, 2011 3,270,135 at December 31, 2010 |
|
3,277 |
|
3,270 |
| ||
|
Common stock warrants issued |
|
509 |
|
509 |
| ||
|
Additional paid in capital |
|
48,997 |
|
48,956 |
| ||
|
Accumulated deficit |
|
(19,033 |
) |
(19,732 |
) | ||
|
Accumulated other comprehensive income |
|
(910 |
) |
(2,241 |
) | ||
|
Total shareholders’ equity |
|
43,926 |
|
41,797 |
| ||
|
Total liabilities and shareholders’ equity |
|
$ |
605,179 |
|
$ |
599,023 |
|
See Notes to Consolidated Financial Statements
FIRST COMMUNITY CORPORATION
CONSOLIDATED STATEMENTS OF INCOME
|
|
|
Six |
|
Six |
| ||
|
|
|
Months Ended |
|
Months Ended |
| ||
|
|
|
June 30, |
|
June 30, |
| ||
|
|
|
2011 |
|
2010 |
| ||
|
(Dollars in thousands, except per share data) |
|
(Unaudited) |
|
(Unaudited) |
| ||
|
Interest income: |
|
|
|
|
| ||
|
Loans, including fees |
|
$ |
9,629 |
|
$ |
10,025 |
|
|
Taxable securities |
|
3,203 |
|
3,877 |
| ||
|
Non taxable securities |
|
33 |
|
77 |
| ||
|
Federal funds sold and securities purchased under resale agreements |
|
21 |
|
26 |
| ||
|
Other |
|
20 |
|
19 |
| ||
|
Total interest income |
|
12,906 |
|
14,024 |
| ||
|
Interest expense: |
|
|
|
|
| ||
|
Deposits |
|
2,443 |
|
3,305 |
| ||
|
Federal funds sold and securities sold under agreement to repurchase |
|
18 |
|
36 |
| ||
|
Other borrowed money |
|
1,372 |
|
1,511 |
| ||
|
Total interest expense |
|
3,833 |
|
4,852 |
| ||
|
Net interest income |
|
9,073 |
|
9,172 |
| ||
|
Provision for loan losses |
|
750 |
|
1,130 |
| ||
|
Net interest income after provision for loan losses |
|
8,323 |
|
8,042 |
| ||
|
Non-interest income: |
|
|
|
|
| ||
|
Deposit service charges |
|
936 |
|
963 |
| ||
|
Mortgage origination fees |
|
454 |
|
349 |
| ||
|
Investment advisory fees and non-deposit commissions |
|
313 |
|
334 |
| ||
|
Gain on sale of securities |
|
141 |
|
106 |
| ||
|
Gain (loss) on sale of other assets |
|
(91 |
) |
28 |
| ||
|
Fair value (loss) adjustments |
|
(125 |
) |
(443 |
) | ||
|
Other-than-temporary-impairment write-down on securities |
|
(4 |
) |
(359 |
) | ||
|
Other |
|
974 |
|
861 |
| ||
|
Total non-interest income |
|
2,598 |
|
1,839 |
| ||
|
Non-interest expense: |
|
|
|
|
| ||
|
Salaries and employee benefits |
|
4,509 |
|
4,305 |
| ||
|
Occupancy |
|
617 |
|
606 |
| ||
|
Equipment |
|
571 |
|
583 |
| ||
|
Marketing and public relations |
|
297 |
|
196 |
| ||
|
FDIC assessments |
|
505 |
|
413 |
| ||
|
Other real estate expense |
|
504 |
|
293 |
| ||
|
Amortization of intangibles |
|
310 |
|
310 |
| ||
|
Other |
|
1,790 |
|
1,773 |
| ||
|
Total non-interest expense |
|
9,103 |
|
8,479 |
| ||
|
Net income before tax |
|
1,818 |
|
1,402 |
| ||
|
Income taxes |
|
522 |
|
338 |
| ||
|
Net income |
|
$ |
1,296 |
|
$ |
1,064 |
|
|
Preferred stock dividends, including discount accretion |
|
335 |
|
332 |
| ||
|
Net income available to common shareholders |
|
$ |
961 |
|
$ |
732 |
|
|
Basic earnings per common share |
|
$ |
0.29 |
|
$ |
0.23 |
|
|
Diluted earnings per common share |
|
$ |
0.29 |
|
$ |
0.23 |
|
See Notes to Consolidated Financial Statements
FIRST COMMUNITY CORPORATION
CONSOLIDATED STATEMENTS OF INCOME
|
|
|
Three |
|
Three |
| ||
|
|
|
Months Ended |
|
Months Ended |
| ||
|
|
|
June 30, |
|
June 30, |
| ||
|
|
|
2011 |
|
2010 |
| ||
|
(Dollars in thousands, except per share data) |
|
(Unaudited) |
|
(Unaudited) |
| ||
|
|
|
|
|
|
| ||
|
Interest income: |
|
|
|
|
| ||
|
Loans, including fees |
|
$ |
4,821 |
|
$ |
4,975 |
|
|
Taxable securities |
|
1,611 |
|
1,861 |
| ||
|
Non taxable securities |
|
14 |
|
6 |
| ||
|
Federal funds sold and securities purchased under resale agreements |
|
10 |
|
17 |
| ||
|
Other |
|
10 |
|
10 |
| ||
|
Total interest income |
|
6,466 |
|
6,869 |
| ||
|
Interest expense: |
|
|
|
|
| ||
|
Deposits |
|
1,185 |
|
1,634 |
| ||
|
Federal funds sold and securities sold under agreement to repurchase |
|
10 |
|
15 |
| ||
|
Other borrowed money |
|
652 |
|
755 |
| ||
|
Total interest expense |
|
1,847 |
|
2,404 |
| ||
|
Net interest income |
|
4,619 |
|
4,465 |
| ||
|
Provision for loan losses |
|
390 |
|
580 |
| ||
|
Net interest income after provision for loan losses |
|
4,229 |
|
3,885 |
| ||
|
Non-interest income: |
|
|
|
|
| ||
|
Deposit service charges |
|
478 |
|
478 |
| ||
|
Mortgage origination fees |
|
263 |
|
225 |
| ||
|
Investment advisory fees and non-deposit commissions |
|
138 |
|
160 |
| ||
|
Gain (loss) on sale of securities |
|
7 |
|
104 |
| ||
|
Gain (loss) on sale of other assets |
|
(44 |
) |
31 |
| ||
|
Fair value (loss) adjustments |
|
(129 |
) |
(247 |
) | ||
|
Other-than-temporary-impairment write-down on securities |
|
— |
|
(216 |
) | ||
|
Other |
|
505 |
|
445 |
| ||
|
Total non-interest income |
|
1,218 |
|
980 |
| ||
|
Non-interest expense: |
|
|
|
|
| ||
|
Salaries and employee benefits |
|
2,196 |
|
2,178 |
| ||
|
Occupancy |
|
308 |
|
292 |
| ||
|
Equipment |
|
290 |
|
295 |
| ||
|
Marketing and public relations |
|
126 |
|
105 |
| ||
|
FDIC assessment |
|
250 |
|
209 |
| ||
|
Other real estate expense |
|
158 |
|
103 |
| ||
|
Amortization of intangibles |
|
155 |
|
155 |
| ||
|
Other |
|
944 |
|
919 |
| ||
|
Total non-interest expense |
|
4,427 |
|
4,256 |
| ||
|
Net income before tax |
|
1,020 |
|
609 |
| ||
|
Income taxes |
|
294 |
|
134 |
| ||
|
Net income |
|
$ |
726 |
|
$ |
475 |
|
|
Preferred stock dividends, including discount accretion |
|
168 |
|
166 |
| ||
|
Net income available to common shareholders |
|
$ |
558 |
|
$ |
309 |
|
|
Basic earnings per common share |
|
$ |
0.17 |
|
$ |
0.10 |
|
|
Diluted earnings per common share |
|
$ |
0.17 |
|
$ |
0.10 |
|
See Notes to Consolidated Financial Statements
FIRST COMMUNITY CORPORATION
Consolidated Statement of Changes in Shareholder’s Equity and Comprehensive Income (Loss)
Six Months ended June 30, 2011 and June 30, 2010
(Unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accumulated |
|
|
| ||||||||
|
|
|
|
|
|
|
|
|
Common |
|
Additional |
|
Nonvested |
|
|
|
Other |
|
|
| ||||||||
|
|
|
Preferred |
|
Shares |
|
Common |
|
Stock |
|
Paid-in |
|
Restricted |
|
Accumulated |
|
Comprehensive |
|
|
| ||||||||
|
(Dollars and shares in thousands) |
|
Stock |
|
Issued |
|
Stock |
|
Warrants |
|
Capital |
|
Stock |
|
Deficit |
|
Income (Loss) |
|
Total |
| ||||||||
|
Balance, December 31, 2009 |
|
$ |
10,939 |
|
3,252 |
|
$ |
3,252 |
|
$ |
509 |
|
$ |
48,873 |
|
$ |
(79 |
) |
$ |
(20,401 |
) |
$ |
(1,653 |
) |
$ |
41,440 |
|
|
Comprehensive Income: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||
|
Net income |
|
|
|
|
|
|
|
|
|
|
|
|
|
1,064 |
|
|
|
1,064 |
| ||||||||
|
Other comprehensive income: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||
|
Unrealized gain during period on available-for-sale securities net of tax of $381 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
707 |
|
|
| ||||||||
|
Less: reclassification adjustment for gain included in net income, net of tax $37 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(69 |
) |
|
| ||||||||
|
Reclassification adjustment for Other-than-temporary-impairment included in net income, net of tax $126 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
233 |
|
|
| ||||||||
|
Other comprehensive income: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
871 |
|
871 |
| ||||||||
|
Comprehensive income : |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,935 |
| ||||||||
|
Amortization of compensation on restricted stock |
|
|
|
|
|
|
|
|
|
|
|
52 |
|
|
|
|
|
52 |
| ||||||||
|
Dividends: Common ($0.08 per share) |
|
|
|
|
|
|
|
|
|
|
|
|
|
(260 |
) |
|
|
(260 |
) | ||||||||
|
Preferred |
|
48 |
|
|
|
|
|
|
|
|
|
|
|
(332 |
) |
|
|
(284 |
) | ||||||||
|
Dividend reinvestment plan |
|
|
|
10 |
|
10 |
|
|
|
50 |
|
|
|
|
|
|
|
60 |
| ||||||||
|
Balance, June 30, 2010 |
|
$ |
10,987 |
|
3,262 |
|
$ |
3,262 |
|
$ |
509 |
|
$ |
48,923 |
|
$ |
(27 |
) |
$ |
(19,929 |
) |
$ |
(782 |
) |
$ |
42,943 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||
|
Balance, December 31, 2010 |
|
$ |
11,035 |
|
3,270 |
|
$ |
3,270 |
|
$ |
509 |
|
$ |
48,956 |
|
$ |
— |
|
$ |
(19,732 |
) |
$ |
(2,241 |
) |
$ |
41,797 |
|
|
Comprehensive Income: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||
|
Net income |
|
|
|
|
|
|
|
|
|
|
|
|
|
1,296 |
|
|
|
1,296 |
| ||||||||
|
Other comprehensive income: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||
|
Unrealized gain arising during period on available-for sale security net of tax expense of $771 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,420 |
|
|
| ||||||||
|
Reclassification adjustment for gain included in net income, net of tax of $49 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(92 |
) |
|
| ||||||||
|
Reclassification adjustment for Other-than-temporary impairment on securities net of tax benefit of $1 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
3 |
|
|
| ||||||||
|
Other comprehensive income |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,331 |
|
1,331 |
| ||||||||
|
Comprehensive income |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2,627 |
| ||||||||
|
Dividends: Common ($0.08 per share) |
|
|
|
|
|
|
|
|
|
|
|
|
|
(262 |
) |
|
|
(262 |
) | ||||||||
|
Preferred |
|
51 |
|
|
|
|
|
|
|
|
|
|
|
(335 |
) |
|
|
(284 |
) | ||||||||
|
Dividend reinvestment plan |
|
|
|
7 |
|
7 |
|
|
|
41 |
|
|
|
|
|
|
|
48 |
| ||||||||
|
Balance, June 30, 2011 |
|
$ |
11,086 |
|
3,277 |
|
$ |
3,277 |
|
$ |
509 |
|
$ |
48,997 |
|
$ |
— |
|
$ |
(19,033 |
) |
$ |
(910 |
) |
$ |
43,926 |
|
See Notes to Consolidated Financial Statements
FIRST COMMUNITY CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
|
|
|
Six months ended June 30, |
| ||||
|
(Dollars in thousands) |
|
2011 |
|
2010 |
| ||
|
Cash flows from operating activities: |
|
|
|
|
| ||
|
Net income |
|
$ |
1,296 |
|
$ |
1,064 |
|
|
Adjustments to reconcile net income to net cash provided in operating activities: |
|
|
|
|
| ||
|
Depreciation |
|
425 |
|
454 |
| ||
|
Premium amortization (discount accretion) |
|
874 |
|
583 |
| ||
|
Provision for loan losses |
|
750 |
|
1,130 |
| ||
|
Writedowns of other real estate owned |
|
202 |
|
99 |
| ||
|
(Gain) loss on sale of other real estate owned |
|
91 |
|
(28 |
) | ||
|
Amortization of intangibles |
|
310 |
|
310 |
| ||
|
(Gain) on sale of securities |
|
(141 |
) |
(106 |
) | ||
|
Other-than-temporary-impairment on securities |
|
4 |
|
359 |
| ||
|
Net decrease in fair value option instruments and derivatives |
|
125 |
|
443 |
| ||
|
(Increase) decrease in other assets |
|
612 |
|
(536 |
) | ||
|
Increase (decrease) in other liabilities |
|
(525 |
) |
202 |
| ||
|
Net cash provided in operating activities |
|
4,023 |
|
3,974 |
| ||
|
Cash flows from investing activities: |
|
|
|
|
| ||
|
Purchase of investment securities available-for-sale |
|
(67,467 |
) |
(68,089 |
) | ||
|
Maturity of investment securities available-for-sale |
|
17,425 |
|
21,271 |
| ||
|
Proceeds from sale of securities available-for-sale |
|
36,817 |
|
51,933 |
| ||
|
Maturity of investment securities held-to-maturity |
|
— |
|
4,895 |
| ||
|
Decrease (increase) in loans |
|
(941 |
) |
3,247 |
| ||
|
Proceeds from sale of other real estate owned |
|
1,408 |
|
1,150 |
| ||
|
Purchase of property and equipment |
|
(119 |
) |
(95 |
) | ||
|
Proceeds from sale of land |
|
9 |
|
— |
| ||
|
Net cash provided (used) in investing activities |
|
(12,868 |
) |
14,312 |
| ||
|
Cash flows from financing activities: |
|
|
|
|
| ||
|
Increase in deposit accounts |
|
15,573 |
|
9,877 |
| ||
|
Increase (decrease) in securities sold under agreements to repurchase |
|
2,865 |
|
(5,865 |
) | ||
|
(Decrease) in other borrowings |
|
(20 |
) |
(131 |
) | ||
|
Repayment of advances from FHLB |
|
(13,866 |
) |
(4,366 |
) | ||
|
Dividends paid: Common Stock |
|
(262 |
) |
(260 |
) | ||
|
Preferred Stock |
|
(335 |
) |
(332 |
) | ||
|
Dividend reinvestment plan |
|
48 |
|
60 |
| ||
|
Net cash provided (used) from financing activities |
|
4,003 |
|
(1,017 |
) | ||
|
Net increase (decrease) in cash and cash equivalents |
|
(4,842 |
) |
17,269 |
| ||
|
Cash and cash equivalents at beginning of period |
|
26,461 |
|
20,844 |
| ||
|
Cash and cash equivalents at end of period |
|
$ |
21,619 |
|
$ |
38,113 |
|
|
Supplemental disclosure: |
|
|
|
|
| ||
|
Cash paid during the period for: |
|
|
|
|
| ||
|
Interest |
|
$ |
4,165 |
|
$ |
4,700 |
|
|
Income taxes |
|
$ |
— |
|
$ |
— |
|
|
Non-cash investing and financing activities: |
|
|
|
|
| ||
|
Unrealized gain on securities |
|
$ |
1,331 |
|
$ |
871 |
|
|
Transfer of loans to foreclosed property |
|
$ |
3,655 |
|
$ |
2,799 |
|
|
Transfer of HTM securities with OTTI to AFS securities |
|
$ |
— |
|
$ |
4,164 |
|
See Notes to Consolidated Financial Statements
Notes to Consolidated Financial Statements
Note 1 - Basis of Presentation
In the opinion of management, the accompanying unaudited consolidated balance sheets, and the consolidated statements of income, changes in shareholders’ equity and comprehensive income (loss), and the consolidated statements of cash flows of First Community Corporation (“the Company”), present fairly in all material respects the Company’s financial position at June 30, 2011 and December 31, 2010, the Company’s results of operations and cash flows for the three months ended June 30, 2011 and 2010. The results of operations for the three months ended June 30, 2011 are not necessarily indicative of the results that may be expected for the year ending December 31, 2011.
In the opinion of management, all adjustments necessary to fairly present the consolidated financial position and consolidated results of operations have been made. All such adjustments are of a normal, recurring nature. All significant intercompany accounts and transactions have been eliminated in consolidation. The consolidated financial statements and notes thereto are presented in accordance with the instructions for Form 10-Q. The information included in the Company’s 2010 Annual Report on Form 10-K should be referred to in connection with these unaudited interim financial statements.
Note 2 — Earnings Per Common Share
The following reconciles the numerator and denominator of the basic and diluted earnings per common share computation:
|
|
|
Six months |
|
Three months |
| ||||||||
|
|
|
Ended June 30, |
|
ended June 30, |
| ||||||||
|
(In thousands, except price per share) |
|
2011 |
|
2010 |
|
2011 |
|
2010 |
| ||||
|
Numerator (Net income available to common shareholders) |
|
$ |
961 |
|
$ |
732 |
|
$ |
558 |
|
$ |
309 |
|
|
Denominator |
|
|
|
|
|
|
|
|
| ||||
|
Weighted average common shares outstanding for: |
|
|
|
|
|
|
|
|
| ||||
|
Basic earnings per share |
|
3,274 |
|
3,241 |
|
3,276 |
|
3,244 |
| ||||
|
Dilutive securities: |
|
|
|
|
|
|
|
|
| ||||
|
Stock options – Treasury stock method |
|
— |
|
— |
|
— |
|
— |
| ||||
|
Diluted earnings per share |
|
3,274 |
|
3,241 |
|
3,276 |
|
3,244 |
| ||||
|
The average market price used in calculating assumed number of shares |
|
$ |
6.59 |
|
$ |
6.26 |
|
$ |
6.86 |
|
$ |
6.32 |
|
At June 30, 2011, there were 77,450 outstanding options at an average exercise price of $19.07 and warrants for 196,000 shares at $8.69. None of the options or warrants has an exercise price below the average market price of $6.59 and $6.86 for the six and three-month periods ended June 30, 2011, respectively, and therefore are not deemed to be dilutive. At June 30, 2010 there were 190,256 outstanding options at an average exercise price of $13.28 and warrants for 196,000 shares at $8.69. None of the options or warrants has an exercise price below the average market price of $6.26 and $6.32 for the six and three-month period ended June 30, 2010, respectively, and therefore are not deemed to be dilutive.
Note 3 —Assets and Liabilities Measured at Fair Value
In connection with the adoption of the Fair Value Option, the Company adopted the requirements of the FASB ASC Fair Value Measurement Topic which defines fair value, establishes a framework for measuring fair value, and expands disclosures about fair value measurements. Fair value is defined as the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. The Fair Value Measurement Topic also establishes a fair value hierarchy which requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. The standard describes three levels of inputs that may be used to measure fair value:
Note 3 —Assets and Liabilities Measured at Fair Value - continued
|
Level l |
Quoted prices in active markets for identical assets or liabilities. |
|
|
|
|
Level 2 |
Observable inputs other than Level 1 prices such as quoted prices for similar assets or liabilities; quoted prices in markets that are not active; or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities. |
|
|
|
|
Level 3 |
Unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities. Level 3 assets and liabilities include financial instruments whose value is determined using pricing models, discounted cash flow methodologies, or similar techniques, as well as instruments for which the determination of fair value requires significant management judgment or estimation. |
Following is a description of valuation methodologies used for assets and liabilities recorded at fair value on a recurring basis:
Investment Securities Available for Sale: Measurement is on a recurring basis based upon quoted market prices, if available. If quoted market 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 prepayment assumptions, projected credit losses, and liquidity. Level 1 securities include those traded on an active exchange or by dealers or brokers in active over-the-counter markets. Level 2 securities include mortgage-backed securities (“MBSs”) issued both issued by government sponsored enterprises and private label MBSs. Generally these fair values are priced from established pricing models. Level 3 securities include corporate debt obligations and asset—backed securities that are less liquid or for which there is an inactive market.
Loans: Loans that are considered impaired are recorded at fair value on a non-recurring basis. Once a loan is considered impaired, measurement is based upon FASB ASC 310-10-35 “Loan Impairment”. The fair value is estimated using one of several methods, including collateral liquidation value, market value of similar debt and discounted cash flows. Those impaired loans not requiring a specific charge against the allowance represent loans for which the fair value of the expected repayments or collateral meet or exceed the recorded investment in the loan. At June 30, 2011, substantially all of the total impaired loans were evaluated based on the fair value of the underlying collateral. When the Company records the fair value based upon a current appraisal, the fair value measurement is considered a Level 2 measurement. When a current appraisal is not available or there is estimated further impairment, the measurement is considered a Level 3 measurement.
Other Real Estate Owned (“OREO”): OREO is carried at the lower of carrying value or fair value on a non-recurring basis. Fair value is based upon independent appraisals or management’s estimation of the collateral and is considered a Level 2 measurement. When a current appraisal is not available or there is estimated further impairment, the measurement is considered a Level 3 measurement.
Derivative Financial Instruments: Interest rate swaps and interest rate caps are carried at fair value and measured on a recurring basis. The measurement is based on valuation techniques including discounted cash flows analysis for each derivative. The analysis reflects the contractual remaining term of derivative, interest rates, volatility and expected cash payments. The measurement of the interest rate swap and cap are considered to be a Level 3 measurement.
Note 3 —Assets and Liabilities Measured at Fair Value - continued
The following tables reflect the changes in fair values for the six and three-month periods ended June 30, 2011 and 2010 and where these changes are included in the income statement:
(Dollars in thousands)
|
|
|
Six months ended |
|
Three months ended |
| ||||||||
|
|
|
2011 |
|
2010 |
|
2011 |
|
2010 |
| ||||
|
Description |
|
Non-interest |
|
Non-interest |
|
Non-interest |
|
Non-interest |
| ||||
|
Interest rate cap/swap |
|
$ |
(125 |
) |
$ |
(443 |
) |
$ |
(129 |
) |
$ |
(247 |
) |
|
Total |
|
$ |
(125 |
) |
$ |
(443 |
) |
$ |
(129 |
) |
$ |
(247 |
) |
The following table summarizes quantitative disclosures about the fair value for each category of assets carried at fair value as of June 30, 2011 and December 31, 2010 that are measured on a recurring basis. There were no liabilities carried at fair value as of June 30, 2011 or December 31, 2010 that are measured on a recurring basis.
(Dollars in thousands)
|
Description |
|
June 30, |
|
Quoted Prices |
|
Significant |
|
Significant |
| ||||
|
Available for sale securities |
|
|
|
|
|
|
|
|
| ||||
|
Government sponsored enterprises |
|
$ |
7,032 |
|
$ |
— |
|
$ |
7,032 |
|
$ |
— |
|
|
Mortgage-backed securities |
|
134,615 |
|
— |
|
134,615 |
|
— |
| ||||
|
Small Business Administration securities |
|
36,841 |
|
— |
|
36,841 |
|
— |
| ||||
|
State and local government |
|
22,478 |
|
— |
|
21,899 |
|
579 |
| ||||
|
Corporate and other securities |
|
3,519 |
|
946 |
|
2,474 |
|
99 |
| ||||
|
|
|
204,485 |
|
946 |
|
202,862 |
|
678 |
| ||||
|
|
|
|
|
|
|
|
|
|
| ||||
|
Interest rate cap/swap |
|
(733 |
) |
— |
|
— |
|
(733 |
) | ||||
|
Total |
|
$ |
203,752 |
|
$ |
946 |
|
$ |
202,861 |
|
$ |
(55 |
) |
(Dollars in thousands)
|
Description |
|
December |
|
Quoted Prices |
|
Significant |
|
Significant |
| ||||
|
Available for sale securities |
|
|
|
|
|
|
|
|
| ||||
|
Government sponsored enterprises |
|
$ |
13,738 |
|
$ |
— |
|
$ |
13,738 |
|
$ |
— |
|
|
Mortgage-backed securities |
|
121,257 |
|
— |
|
121,257 |
|
— |
| ||||
|
Small Business Administration securities |
|
31,496 |
|
— |
|
31,496 |
|
— |
| ||||
|
State and local government |
|
19,055 |
|
— |
|
18,430 |
|
625 |
| ||||
|
Corporate and other securities |
|
3,763 |
|
1,118 |
|
2,463 |
|
182 |
| ||||
|
|
|
189,309 |
|
1,118 |
|
187,384 |
|
807 |
| ||||
|
|
|
|
|
|
|
|
|
|
| ||||
|
Interest rate cap/swap |
|
(778 |
) |
— |
|
— |
|
(778 |
) | ||||
|
Total |
|
$ |
188,531 |
|
$ |
1,118 |
|
$ |
187,384 |
|
$ |
29 |
|
Note 3 —Assets and Liabilities Measured at Fair Value — continued
The following tables reconcile the changes in Level 3 financial instruments for the six and three months ended June 30, 2011, that are measured on a recurring basis.
|
(Dollars in thousands) |
|
State and local |
|
Corporate and other |
|
Interest rate |
| |||
|
Beginning Balance December 31, 2010 |
|
$ |
625 |
|
$ |
182 |
|
$ |
(778 |
) |
|
Total gains or losses (realized/unrealized) |
|
|
|
|
|
|
| |||
|
|
|
|
|
|
|
|
| |||
|
Included in earnings |
|
— |
|
(4 |
) |
(125 |
) | |||
|
|
|
|
|
|
|
|
| |||
|
Included in other comprehensive income |
|
— |
|
(79 |
) |
— |
| |||
|
|
|
|
|
|
|
|
| |||
|
Purchases, issuances, and settlements |
|
(46 |
) |
— |
|
170 |
| |||
|
|
|
|
|
|
|
|
| |||
|
Transfers in and/or out of Level 3 |
|
— |
|
— |
|
— |
| |||
|
Ending Balance June 30, 2011 |
|
$ |
579 |
|
$ |
99 |
|
$ |
(733 |
) |
|
(Dollars in thousands) |
|
State and local |
|
Corporate and other |
|
Interest rate |
| |||
|
Beginning Balance March 31, 2011 |
|
$ |
625 |
|
$ |
111 |
|
$ |
(690 |
) |
|
Total gains or losses (realized/unrealized) |
|
|
|
|
|
|
| |||
|
|
|
|
|
|
|
|
| |||
|
Included in earnings |
|
— |
|
— |
|
(121 |
) | |||
|
|
|
|
|
|
|
|
| |||
|
Included in other comprehensive income |
|
— |
|
(12 |
) |
— |
| |||
|
|
|
|
|
|
|
|
| |||
|
Purchases, issuances, and settlements |
|
(46 |
) |
— |
|
78 |
| |||
|
|
|
|
|
|
|
|
| |||
|
Transfers in and/or out of Level 3 |
|
— |
|
— |
|
— |
| |||
|
Ending Balance June 30, 2011 |
|
$ |
579 |
|
$ |
99 |
|
$ |
(733 |
) |
Note 3 —Assets and Liabilities Measured at Fair Value — continued
The following tables summarize quantitative disclosures about the fair value for each category of assets carried at fair value as of June 30, 2011 and December 31, 2010 that are measured on a non-recurring basis.
(Dollars in thousands)
|
Description |
|
June 30, |
|
Quoted Prices |
|
Significant |
|
Significant |
| ||||
|
Impaired loans: |
|
|
|
|
|
|
|
|
| ||||
|
Commercial & Industrial |
|
$ |
91 |
|
$ |
— |
|
$ |
91 |
|
$ |
— |
|
|
Real estate: |
|
|
|
|
|
|
|
|
| ||||
|
Mortgage-residential |
|
388 |
|
— |
|
388 |
|
— |
| ||||
|
Mortgage-commercial |
|
5,799 |
|
— |
|
5,799 |
|
— |
| ||||
|
Consumer: |
|
|
|
|
|
|
|
|
| ||||
|
Home equity |
|
23 |
|
— |
|
23 |
|
— |
| ||||
|
Other |
|
9 |
|
— |
|
9 |
|
— |
| ||||
|
Total impaired |
|
6,310 |
|
— |
|
6,310 |
|
— |
| ||||
|
Other real estate owned: |
|
|
|
|
|
|
|
|
| ||||
|
Construction |
|
2,194 |
|
— |
|
2,194 |
|
— |
| ||||
|
Mortgage-residential |
|
1,725 |
|
— |
|
1,725 |
|
— |
| ||||
|
Mortgage-commercial |
|
5,051 |
|
— |
|
5,051 |
|
— |
| ||||
|
Total other real estate owned |
|
8,970 |
|
— |
|
8,970 |
|
— |
| ||||
|
Total |
|
$ |
15,280 |
|
$ |
— |
|
$ |
15,280 |
|
$ |
— |
|
(Dollars in thousands)
|
Description |
|
December 31, |
|
Quoted Prices |
|
Significant |
|
Significant |
| ||||
|
Impaired loans: |
|
|
|
|
|
|
|
|
| ||||
|
Commercial & Industrial |
|
$ |
96 |
|
$ |
— |
|
$ |
96 |
|
$ |
— |
|
|
Real estate: |
|
|
|
|
|
|
|
|
| ||||
|
Mortgage-residential |
|
1,527 |
|
— |
|
1,527 |
|
— |
| ||||
|
Mortgage-commercial |
|
7,914 |
|
— |
|
7,914 |
|
— |
| ||||
|
Consumer: |
|
|
|
|
|
|
|
|
| ||||
|
Home equity |
|
38 |
|
— |
|
38 |
|
— |
| ||||
|
Other |
|
12 |
|
— |
|
12 |
|
— |
| ||||
|
Total impaired |
|
9,587 |
|
— |
|
9,587 |
|
— |
| ||||
|
Other real estate owned: |
|
|
|
— |
|
|
|
— |
| ||||
|
Construction |
|
2,331 |
|
— |
|
2,331 |
|
— |
| ||||
|
Mortgage-residential |
|
1,267 |
|
— |
|
1,267 |
|
— |
| ||||
|
Mortgage-commercial |
|
3,306 |
|
— |
|
3,306 |
|
— |
| ||||
|
Total other real estate owned |
|
6,904 |
|
— |
|
6,904 |
|
— |
| ||||
|
Total |
|
$ |
16,491 |
|
$ |
— |
|
$ |
16,491 |
|
$ |
— |
|
Note 4—INVESTMENT SECURITIES
The amortized cost and estimated fair values of investment securities are summarized below:
AVAILABLE-FOR-SALE:
|
(Dollars in thousands) |
|
Amortized |
|
Gross |
|
Gross |
|
Fair Value |
| ||||
|
June 30, 2011: |
|
|
|
|
|
|
|
|
| ||||
|
Government sponsored enterprises |
|
$ |
7,036 |
|
$ |
8 |
|
$ |
12 |
|
$ |
7,032 |
|
|
Mortgage-backed securities |
|
136,140 |
|
1,304 |
|
2,829 |
|
134,615 |
| ||||
|
Small Business Administration pools |
|
36,481 |
|
409 |
|
49 |
|
36,841 |
| ||||
|
State and local government |
|
21,957 |
|
639 |
|
118 |
|
22,478 |
| ||||
|
Corporate and other securities |
|
4,305 |
|
74 |
|
860 |
|
3,519 |
| ||||
|
|
|
$ |
205,919 |
|
$ |
2,434 |
|
$ |
3,868 |
|
$ |
204,485 |
|
|
December 31, 2010: |
|
|
|
|
|
|
|
|
| ||||
|
Government sponsored enterprises |
|
$ |
13,793 |
|
$ |
44 |
|
$ |
99 |
|
$ |
13,738 |
|
|
Mortgage-backed securities |
|
124,113 |
|
1,558 |
|
4,414 |
|
121,257 |
| ||||
|
Small Business Administration pools |
|
31,451 |
|
135 |
|
90 |
|
31,496 |
| ||||
|
State and local government |
|
19,128 |
|
217 |
|
290 |
|
19,055 |
| ||||
|
Corporate and other securities |
|
4,311 |
|
244 |
|
792 |
|
3,763 |
| ||||
|
|
|
$ |
192,796 |
|
$ |
2,198 |
|
$ |
5,685 |
|
$ |
189,309 |
|
Note 4—Investment Securities - continued
During the six months ended June 30, 2011 and June 30, 2010, the Company received proceeds of $36.8 million and $51.9 million, respectively from the sale of investment securities available-for-sale. Gross realized gains amounted to $1.7 million and gross realized losses amounted to $1.5 million for the six months ended June 30, 2011. For the six months ended June 30, 2010, gross realized gains amounted to $1.8 million and gross realized losses amounted to $1.7 million. As prescribed by FASB ASC 320-10-35 for the quarter ended June 30, 2010, the Company recognized the credit component of an OTTI of its debt securities in earnings and the non-credit component in other comprehensive income for those securities in which the Company does not intend to sell the security and it is more likely than not the Company will not be required to sell the securities prior to recovery.
At June 30, 2011, corporate and other securities available-for-sale included the following at fair value: corporate bonds at $2.4 million, mutual funds at $895.8 thousand and Federal Home Loan Mortgage Corporation (the “FHLMC” or “Freddie Mac”) preferred stock of $49.8 thousand. At December 31 2010, corporate and other securities available-for-sale included the following at fair value: corporate bonds at $2.6 million, mutual funds at $883.1 thousand and FHLMC preferred stock of $234.6 thousand.
Note 4—Investment Securities — continued
During the six and three months ended June 30, 2011 and 2010, the Company recorded OTTI losses on available-for-sale securities as follows:
|
|
|
Six months ended |
|
Three months ended |
| ||||||||
|
(Dollars in thousands) |
|
Available- |
|
Total |
|
Available- |
|
Total |
| ||||
|
Total OTTI charge realized and unrealized |
|
$ |
71 |
|
$ |
71 |
|
$ |
— |
|
$ |
— |
|
|
OTTI recognized in other comprehensive income (non-credit component) |
|
67 |
|
67 |
|
— |
|
— |
| ||||
|
Net impairment losses recognized in earnings (credit component) |
|
$ |
4 |
|
$ |
4 |
|
$ |
— |
|
$ |
— |
|
|
|
|
Six months ended |
|
Three months ended |
| ||||||||
|
(Dollars in thousands) |
|
Available- |
|
Total |
|
Available- |
|
Total |
| ||||
|
Total OTTI charge realized and unrealized |
|
$ |
1,059 |
|
$ |
1,059 |
|
$ |
916 |
|
$ |
916 |
|
|
OTTI recognized in other comprehensive income (non-credit component) |
|
700 |
|
700 |
|
700 |
|
700 |
| ||||
|
Net impairment losses recognized in earnings (credit component) |
|
$ |
359 |
|
$ |
359 |
|
$ |
216 |
|
$ |
216 |
|
During 2011 and 2010, OTTIs occurred for which only a portion is attributed to credit loss and recognized in earnings. The remainder was reported in other comprehensive income. The following is an analysis of amounts relating to credit losses on debt securities recognized in earnings during the six months ended June 30, 2011 and 2010.
|
|
|
2011 |
|
2010 |
| |||||
|
|
|
Available for |
|
Available for |
|
Held to |
| |||
|
(Dollars in thousands) |
|
Sale |
|
Sale |
|
Maturity |
| |||
|
|
|
|
|
|
|
|
| |||
|
Balance at beginning of period |
|
$ |
2,143 |
|
$ |
165 |
|
$ |
326 |
|
|
|
|
|
|
|
|
|
| |||
|
Other-than-temporary-impairment not previously recognized |
|
— |
|
115 |
|
98 |
| |||
|
|
|
|
|
|
|
|
| |||
|
Additional increase for which an other-than-temporary impairment was previously recognized related to credit losses |
|
4 |
|
118 |
|
28 |
| |||
|
|
|
|
|
|
|
|
| |||
|
Other-than-temporary-impairment previously recognized on securities sold |
|
(196 |
) |
— |
|
— |
| |||
|
|
|
|
|
|
|
|
| |||
|
Realized losses during the period |
|
(91 |
) |
(89 |
) |
— |
| |||
|
Transfer to available-for-sale |
|
— |
|
452 |
|
(452 |
) | |||
|
Balance related to credit losses on debt securities at end of period |
|
$ |
1,860 |
|
$ |
761 |
|
$ |
— |
|
Note 4—Investment Securities — continued
For the six months ended June 30, 2011, there was one trust preferred security with an OTTI in which only the amount of loss related to credit was recognized in earnings. There was no OTTI recognized in earnings for the three months ended June 30, 2011. The Company uses a third party to obtain information about the structure in order to determine how the underlying cash flows will be distributed to each security. For the trust preferred security, cash flows are evaluated assuming no prepayments with continued defaults of 150 basis-points annually and no subsequent recoveries of previous or ongoing defaults.
In evaluating the non-agency MBSs, relevant assumptions such as prepayment rate, default rate and loss severity on a loan level basis are used in determining the expected recovery of the contractual cash flows. The assumptions are that all loans greater than 60 days delinquent will be resolved across a two-year period at loss severities based on location and category. The weighted average loss severity for the loans greater than 60 days delinquent is 57.3%. The balance of the underlying portfolio cash flows are evaluated using ongoing assumptions for loss severities, prepayment rates and default rates. The ongoing assumptions for average prepayment rate, default rate and severity used in the valuations were approximately 5.5%, 3.0%, and 48.6%, respectively. The underlying collateral on substantially all of these securities is fixed rate residential first mortgages located throughout the United States. The underlying collateral includes various percentages of owner-occupied, as well as, investment related single-family, 2-4 family and condominium residential properties. The securities were purchased at various discounts to par value. Based on the assumptions used in valuing the securities, the Company believes the existing discount and remaining subordinated collateral provide coverage against future credit losses on the downgraded securities for which no OTTI has been recognized.
Note 4—Investment Securities - continued
The following table shows gross unrealized losses and fair values, aggregated by investment category and length of time that individual securities have been in a continuous loss position at June 30, 2011 and December 31, 2010.
|
|
|
Less than 12 months |
|
12 months or more |
|
Total |
| ||||||||||||
|
June 30, 2011 |
|
Fair Value |
|
Unrealized |
|
Fair Value |
|
Unrealized |
|
Fair Value |
|
Unrealized |
| ||||||
|
Available-for-sale securities: |
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
|
US Treasury and Government sponsored enterprises |
|
$ |
1,487 |
|
$ |
12 |
|
$ |
— |
|
$ |
— |
|
$ |
1,487 |
|
$ |
12 |
|
|
Small Business Administration Pools |
|
7,524 |
|
49 |
|
— |
|
— |
|
7,524 |
|
49 |
| ||||||
|
Government Sponsored Enterprise mortgage-backed securities |
|
36,720 |
|
334 |
|
450 |
|
1 |
|
37,170 |
|
335 |
| ||||||
|
Non-agency mortgage-backed securities |
|
901 |
|
60 |
|
14,171 |
|
2,434 |
|
15,072 |
|
2,494 |
| ||||||
|
Corporate bonds and other |
|
49 |
|
1 |
|
1,514 |
|
859 |
|
1,563 |
|
860 |
| ||||||
|
State and local government |
|
5,871 |
|
118 |
|
— |
|
— |
|
5,871 |
|
118 |
| ||||||
|
Total |
|
$ |
52,552 |
|
$ |
574 |
|
$ |
16,135 |
|
$ |
3,295 |
|
$ |
68,687 |
|
$ |
3,868 |
|
December 31, 2010
|
|
|
Less than 12 months |
|
12 months or more |
|
Total |
| ||||||||||||
|
(Dollars in thousands) |
|
Fair Value |
|
Unrealized |
|
Fair Value |
|
Unrealized |
|
Fair Value |
|
Unrealized |
| ||||||
|
Available-for-sale securities: |
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
|
US Treasury and Government sponsored enterprises |
|
$ |
5,652 |
|
$ |
99 |
|
$ |
— |
|
$ |
— |
|
$ |
5,652 |
|
$ |
99 |
|
|
Government Sponsored Enterprise mortgage-backed securities |
|
32,416 |
|
402 |
|
780 |
|
1 |
|
33,196 |
|
403 |
| ||||||
|
Small Business Administration pools |
|
5,355 |
|
90 |
|
— |
|
— |
|
5,355 |
|
90 |
| ||||||
|
Non-agency mortgage-backed securities |
|
1,081 |
|
29 |
|
36,065 |
|
3,982 |
|
37,146 |
|
4,011 |
| ||||||
|
Corporate bonds and other |
|
59 |
|
1 |
|
1,585 |
|
791 |
|
1,644 |
|
792 |
| ||||||
|
State and local government |
|
8,909 |
|
290 |
|
— |
|
— |
|
8,909 |
|
290 |
| ||||||
|
Total |
|
$ |
53,472 |
|
$ |
911 |
|
$ |
38,430 |
|
$ |
4,774 |
|
$ |
91,902 |
|
$ |
5,685 |
|
Government Sponsored Enterprise, Mortgage-Backed Securities: Beginning in 2008 and continuing through 2010 and into 2011, the bond markets and many institutional holders of bonds have come under a great deal of stress partially as a result of increasing delinquencies in the sub-prime mortgage lending market. At June 30, 2011, the Company’s wholly-owned subsidiary, First Community Bank, N.A. (the “Bank”), owns MBSs including collateralized mortgage obligations (CMOs) with a book value of $117.7 million and approximate fair value of $118.7 million issued by government sponsored entities (GSEs). Current economic conditions have impacted MBSs issued by GSEs such as the FHLMC and the Federal National Mortgage Association (the “FNMA” or “Fannie Mae”). These entities have experienced increasing delinquencies in the underlying loans that make up the MBSs and CMOs. As of June 30, 2011 and December 31, 2010, all of the MBSs issued by GSEs are classified as “Available for Sale”. Unrealized losses on these investments are not considered to be “other than temporary” and we have the intent and ability to hold these until they mature or recover the current book value. The contractual cash flows of the investments are guaranteed by the GSE. Accordingly, it is expected that the securities would not be settled at a price less than the amortized cost of the Company’s investment. Because the Company has the ability and intent to hold these investments until a recovery of fair value, which may be maturity, the Company does not consider the investments to be OTTI at June 30, 2011.
Non-agency mortgage —backed securities: The Company also holds private label mortgage-backed securities (PLMBSs), including CMOs, at June 30, 2011 with an amortized cost of $18.4 million and approximate fair value of $15.9 million. Although these are not classified as sub-prime obligations or considered the “high risk” tranches, the majority of “structured” investments within all credit markets have been impacted by volatility and credit concerns and economic stresses beginning in 2008 and continuing through 2010 and into 2011. The result has been that the market for these investments has become less liquid and the spread as compared to alternative investments has
Note 4—Investment Securities — continued
widened dramatically. During the second quarter of 2008, the Company implemented a leverage strategy whereby we acquired approximately $63.2 million in certain non-agency MBSs and CMOs. All of the mortgage assets acquired in this transaction were classified as prime or ALT-A securities and represented the senior or super-senior tranches of the securities. The assets acquired as part of this strategy were classified as held-to-maturity in the investment portfolio. Due to the significant spreads on these securities, they were all purchased at discounts. A detailed analysis of each of the CMO pools included in this leverage transaction, as well as privately held CMOs held previously in the available-for-sale portfolio, have been analyzed by reviewing underlying loan delinquencies, collateral value and resulting credit support. These securities have continued to experience increasing delinquencies in the underlying loans that make up the MBSs and CMOs. Management monitors each of these pools on a quarterly basis to identify any deterioration in the credit quality, collateral values and credit support underlying the investments.
During the three and six months ended June 30, 2011, no OTTI charges were recorded in earnings for the PLMBS portfolio. During the quarter ended June 30, 2010, the Company identified eight PLMBS with a fair value of $6.9 million that it considered OTTI. As prescribed by FASB ASC 320-10-65, the Company has recognized impairment charges in earnings for the amounts related to credit losses and amounts related to non-credit losses have been recognized in other comprehensive income. The credit losses were estimated by projecting the expected cash flows estimating prepayment speeds, increasing defaults and collateral loss severities. The credit loss portion of the impairment charge represents the difference between the present value of the expected cash flows and the amortized cost basis of the securities.
The following table summarizes as of June 30, 2011 the number of CUSIPs, par value, carrying value and fair value of the non-agency mortgage-backed/CMOs securities by credit rating. The credit rating reflects the lowest credit rating by any major rating agency. All non-agency mortgage-backed /CMO securities are in the super-senior or senior tranche.
(Dollars in thousands)
|
Credit |
|
Number |
|
Par |
|
Amortized |
|
Fair |
| |||
|
AAA |
|
9 |
|
$ |
2,930 |
|
$ |
2,931 |
|
$ |
2,830 |
|
|
Aa2 |
|
1 |
|
95 |
|
95 |
|
98 |
| |||
|
AA- |
|
1 |
|
390 |
|
389 |
|
389 |
| |||
|
Aa3 |
|
1 |
|
500 |
|
500 |
|
441 |
| |||
|
Below Investment Grade |
|
11 |
|
16,722 |
|
14,506 |
|
12,190 |
| |||
|
Total |
|
23 |
|
$ |
20,637 |
|
$ |
18,421 |
|
$ |
15,948 |
|
During the six months ended June 30, 2011, the Company sold 14 non-agency MBSs with a total book value of approximately $29.8 million. Ten of these securities in the total amount of $21.3 million were rated below investment grade by the rating agencies with the other four being rated above investment grade. Four of these securities with a book value of approximately $3.8 million, with $3.6 million below investment grade, were sold in the second quarter of 2011, and seven securities with a book value of approximately $26.0 million, with $17.7 million rated below investment grade, were sold in the first quarter of 2011. The sales of these non-agency MBSs during the six months ended June 30, 2011 have served to significantly reduce the level of securities on the Company’s balance sheet that are rated below investment grade.
Note 4—Investment Securities — continued
Corporate Bonds: The Company’s unrealized loss on investments in corporate bonds relates to bonds with three different issuers. The economic conditions throughout 2009 and 2010 and into 2011 have had a significant impact on all corporate debt obligations. As a result, the spreads on all of the securities have widened dramatically and the liquidity of many of these investments has been negatively impacted. One of these bonds is rated Aa2 by Moody (investment grade) and the other two bonds have been downgraded below investment grade. One downgraded investment, a preferred term security with a book value of $875 thousand and fair value of $99 thousand, is rated C by Fitch and Ca by Moody. During 2011 and 2010, the Company recorded $4.0 thousand and $1.1 million in OTTI charges on this preferred term security, respectively. The second bond is rated Ba1 by Moody and BBB- by Fitch with a carrying value of $998 thousand and a fair value of $939 thousand and matures in July 2014. All of the corporate bonds held by the Company are reviewed on a quarterly basis to identify downgrades by rating agencies as well as deterioration of the underlying collateral or the issuer’s ability to service the debt obligation. Other than the preferred term security, the Company does not consider these investments to be OTTI at June 30, 2011.
Small Business Administration Pools: These pools are guaranteed pass-thru with the full faith and credit of the United States government. Because the Company has the ability and intent to hold these investments until a recovery of fair value, which may be maturity, the Company does not consider the investments to be OTTI at June 30, 2011.
State and Local Governments and Other: The unrealized losses on these investments are attributable to increases in interest rates, rather than credit quality. Because the Company has the ability and intent to hold these investments until a recovery of fair value, which may be maturity, the Company does not consider the investments to be OTTI at June 30, 2011.
The amortized cost and fair value of investment securities at June 30, 2011 by contractual maturity are as follows. Expected maturities differ from contractual maturities because borrowers may have the right to call or prepay the obligations with or without prepayment penalties. MBSs are based on average life at estimated prepayment speeds.
|
|
|
Available-for-sale |
| ||||
|
(Dollars in thousands) |
|
Amortized |
|
Fair |
| ||
|
Due in one year or less |
|
$ |
8,695 |
|
$ |
8,264 |
|
|
Due after one year through five years |
|
88,051 |
|
88,033 |
| ||
|
Due after five years through ten years |
|
82,741 |
|
81,343 |
| ||
|
Due after ten years |
|
26,432 |
|
26,845 |
| ||
|
|
|
$ |
205,919 |
|
$ |
204,485 |
|
Note 5—Loans
Loans summarized by category as of June 30, 2011 and December 31, 2010 are as follows:
|
|
|
June 30, |
|
December 31, |
| ||
|
(Dollars in thousands) |
|
2011 |
|
2010 |
| ||
|
Commercial, financial and agricultural |
|
$ |
21,394 |
|
$ |
20,555 |
|
|
Real estate: |
|
|
|
|
| ||
|
Construction |
|
8,080 |
|
10,540 |
| ||
|
Mortgage-residential |
|
41,872 |
|
46,684 |
| ||
|
Mortgage-commercial |
|
220,078 |
|
218,298 |
| ||
|
Consumer: |
|
|
|
|
| ||
|
Home equity |
|
28,242 |
|
27,747 |
| ||
|
Other |
|
6,005 |
|
6,130 |
| ||
|
Total |
|
$ |
325,671 |
|
$ |
329,954 |
|
At June 30, 2011, there were $625 thousand of residential mortgage loans held for sale at fair value. These loans are originated with firm purchase commitments from various investors at the time the loans are closed. Generally, funds are received and the loans transferred to the investors within three to seven business days.
Activity in the allowance for loan losses for the six months and three months ended June 30, 2011 and 2010 was as follows:
|
|
|
Six months ended |
| ||||
|
|
|
June 30, |
|
June 30, |
| ||
|
(Dollars in thousands) |
|
2011 |
|
2010 |
| ||
|
Balance at the beginning of period |
|
$ |
4,911 |
|
$ |
4,854 |
|
|
Provision for loan losses |
|
750 |
|
1,130 |
| ||
|
Charged off loans |
|
(980 |
) |
(1,199 |
) | ||
|
Recoveries |
|
35 |
|
53 |
| ||
|
Balance at end of period |
|
$ |
4,716 |
|
$ |
4,838 |
|
|
|
|
Three months ended |
| ||||
|
|
|
June 30, |
|
June 30, |
| ||
|
(Dollars in thousands) |
|
2011 |
|
2010 |
| ||
|
Balance at the beginning of period |
|
$ |
4,655 |
|
$ |
4,868 |
|
|
Provision for loan losses |
|
390 |
|
580 |
| ||
|
Charged off loans |
|
(342 |
) |
(631 |
) | ||
|
Recoveries |
|
13 |
|
21 |
| ||
|
Balance at end of period |
|
$ |
4,716 |
|
$ |
4,838 |
|
Note 5—Loans-continued
The detailed activity in the allowance for loan losses and the recorded investment in loans receivable as of and for the three months ended June 30, 2011 and the year ended December 31, 2010 is as follows:
|
|
|
|
|
|
|
Real estate |
|
Real estate |
|
|
|
|
|
|
|
|
| ||||||||
|
(Dollars in thousands) |
|
|
|
Real estate |
|
Mortgage |
|
Mortgage |
|
Consumer |
|
Consumer |
|
|
|
|
| ||||||||
|
2011 |
|
Commercial |
|
Construction |
|
Residential |
|
Commercial |
|
Home equity |
|
Other |
|
Unallocated |
|
Total |
| ||||||||
|
Allowance for loan losses: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||
|
Beginning balance December 31, 2010 |
|
$ |
681 |
|
$ |
905 |
|
$ |
465 |
|
$ |
1,404 |
|
$ |
325 |
|
$ |
88 |
|
$ |
1,043 |
|
$ |
4,911 |
|
|
Charge-offs |
|
154 |
|
— |
|
142 |
|
519 |
|
132 |
|
33 |
|
— |
|
980 |
| ||||||||
|
Recoveries |
|
14 |
|
— |
|
2 |
|
— |
|
3 |
|
16 |
|
— |
|
35 |
| ||||||||
|
Provisions |
|
(179 |
) |
(526 |
) |
189 |
|
812 |
|
229 |
|
(20 |
) |
245 |
|
750 |
| ||||||||
|
Ending balance June 30, 2011 |
|
$ |
362 |
|
$ |
379 |
|
$ |
514 |
|
$ |
1,697 |
|
$ |
425 |
|
$ |
51 |
|
$ |
1,288 |
|
$ |
4,716 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||
|
Ending balances: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||
|
Individually evaluated for impairment |
|
$ |
— |
|
$ |
— |
|
$ |
— |
|
$ |
— |
|
$ |
— |
|
$ |
— |
|
$ |
— |
|
$ |
— |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||
|
Collectively evaluated for impairment |
|
362 |
|
379 |
|
514 |
|
1,697 |
|
425 |
|
51 |
|
1,288 |
|
4,716 |
| ||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||
|
Loans receivable: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||
|
Ending balance-total |
|
$ |
21,394 |
|
$ |
8,080 |
|
$ |
41,872 |
|
$ |
220,078 |
|
$ |
28,242 |
|
$ |
6,005 |
|
— |
|
$ |
325,671 |
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||
|
Ending balances: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||
|
Individually evaluated for impairment |
|
91 |
|
— |
|
388 |
|
5,799 |
|
23 |
|
9 |
|
— |
|
6,310 |
| ||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||
|
Collectively evaluated for impairment |
|
$ |
21,303 |
|
$ |
8,080 |
|
$ |
41,484 |
|
$ |
214,279 |
|
$ |
28,219 |
|
$ |
5,996 |
|
$ |
— |
|
$ |
319,361 |
|
Note 5—Loans-continued
|
|
|
|
|
|
|
Real estate |
|
Real estate |
|
|
|
|
|
|
|
|
| ||||||||
|
(Dollars in thousands) |
|
|
|
Real estate |
|
Mortgage |
|
Mortgage |
|
Consumer |
|
Consumer |
|
|
|
|
| ||||||||
|
2010 |
|
Commercial |
|
Construction |
|
Residential |
|
Commercial |
|
Home equity |
|
Other |
|
Unallocated |
|
Total |
| ||||||||
|
Allowance for loan losses: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||
|
Beginning balance December 31, 2009 |
|
$ |
634 |
|
$ |
1331 |
|
$ |
138 |
|
$ |
1,522 |
|
$ |
105 |
|
$ |
127 |
|
$ |
997 |
|
$ |
4,854 |
|
|
Charge-offs |
|
125 |
|
— |
|
512 |
|
984 |
|
186 |
|
141 |
|
— |
|
1,948 |
| ||||||||
|
Recoveries |
|
31 |
|
— |
|
7 |
|
38 |
|
9 |
|
42 |
|
— |
|
127 |
| ||||||||
|
Provisions |
|
141 |
|
(426 |
) |
832 |
|
828 |
|
397 |
|
60 |
|
46 |
|
1,878 |
| ||||||||
|
Ending balance December 31, 2010 |
|
$ |
681 |
|
$ |
905 |
|
$ |
465 |
|
$ |
1,404 |
|
$ |
325 |
|
$ |
88 |
|
$ |
1043 |
|
$ |
4,911 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||
|
Ending balances: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||
|
Individually evaluated for impairment |
|
$ |
— |
|
$ |
— |
|
$ |
— |
|
$ |
96 |
|
$ |
— |
|
$ |
— |
|
$ |
— |
|
$ |
96 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||
|
Collectively evaluated for impairment |
|
681 |
|
905 |
|
465 |
|
1,308 |
|
325 |
|
88 |
|
1,043 |
|
4,815 |
| ||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||
|
Loans receivable: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||
|
Ending balance-total |
|
$ |
20,555 |
|
$ |
10,540 |
|
$ |
46,684 |
|
$ |
218,298 |
|
$ |
27,747 |
|
$ |
6,130 |
|
$ |
— |
|
$ |
329,954 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||
|
Ending balances: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||
|
Individually evaluated for impairment |
|
96 |
|
— |
|
1,527 |
|
7,914 |
|
38 |
|
12 |
|
— |
|
9,587 |
| ||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||
|
Collectively evaluated for impairment |
|
$ |
20,459 |
|
$ |
10,540 |
|
$ |
45,157 |
|
$ |
210,384 |
|
$ |
27,709 |
|
$ |
6,118 |
|
$ |
— |
|
$ |
320,367 |
|
Loans outstanding to bank directors, executive officers and their related business interests amounted to $6.1 million and $8.4 million at June 30, 2011 and June 30, 2010, respectively. Repayments on these loans during the six months ended June 30, 2011 were $568 thousand and loans made amounted to $808 thousand. Repayments on these loans during the six months ended June 30, 2010 were $1.5 million and loans made amounted to $4.2 million. Related party loans are made on substantially the same terms, including interest rates and collateral, as those prevailing at the time for comparable transactions with unrelated persons and generally do not involve more than the normal risk of collectability.
Note 5—Loans-continued
The following table presents at June 30, 2011 and December 31, 2010 loans individually evaluated and considered impaired under FAS ASC 310 “Accounting by Creditors for Impairment of a Loan.” Impairment includes performing troubled debt restructurings.
|
|
|
June 30, |
|
December 31, |
| ||
|
(Dollars in thousands) |
|
2011 |
|
2010 |
| ||
|
Total loans considered impaired |
|
$ |
6,310 |
|
$ |
9,587 |
|
|
Loans considered impaired for which there is a related allowance for loan loss: |
|
|
|
|
| ||
|
Outstanding loan balance |
|
— |
|
378 |
| ||
|
Related allowance |
|
— |
|
96 |
| ||
|
Loans considered impaired and previously written down to fair value |
|
6,310 |
|
9,209 |
| ||
|
Average impaired loans |
|
6,656 |
|
10,576 |
| ||
The following tables are by loan category and present at June 30, 2011 and December 31, 2010 loans individually evaluated and considered impaired under FAS ASC 310 “Accounting by Creditors for Impairment of a Loan.” Impairment includes performing troubled debt restructurings.
|
|
|
|
|
Unpaid |
|
|
|
Average |
|
Interest |
| |||||
|
(Dollars in thousands) |
|
Recorded |
|
Principal |
|
Related |
|
Recorded |
|
Income |
| |||||
|
June 30, 2011 |
|
Investment |
|
Balance |
|
Allowance |
|
Investment |
|
Recognized |
| |||||
|
With no allowance recorded: |
|
|
|
|
|
|
|
|
|
|
| |||||
|
Commercial |
|
$ |
91 |
|
$ |
91 |
|
$ |
— |
|
$ |
94 |
|
$ |
1 |
|
|
Real estate: |
|
|
|
|
|
|
|
|
|
|
| |||||
|
Construction |
|
— |
|
— |
|
— |
|
— |
|
— |
| |||||
|
Mortgage-residential |
|
388 |
|
403 |
|
— |
|
406 |
|
1 |
| |||||
|
Mortgage-commercial |
|
5,799 |
|
6,003 |
|
— |
|
6,122 |
|
128 |
| |||||
|
Consumer: |
|
|
|
|
|
|
|
|
|
|
| |||||
|
Home Equity |
|
23 |
|
23 |
|
— |
|
23 |
|
— |
| |||||
|
Other |
|
9 |
|
9 |
|
— |
|
11 |
|
— |
| |||||
|
|
|
|
|
|
|
|
|
|
|
|
| |||||
|
With an allowance recorded: |
|
|
|
|
|
|
|
|
|
|
| |||||
|
Commercial |
|
— |
|
— |
|
— |
|
— |
|
— |
| |||||
|
Real estate: |
|
|
|
|
|
|
|
|
|
|
| |||||
|
Construction |
|
— |
|
— |
|
— |
|
— |
|
— |
| |||||
|
Mortgage-residential |
|
— |
|
— |
|
— |
|
— |
|
— |
| |||||
|
Mortgage-commercial |
|
— |
|
— |
|
— |
|
— |
|
— |
| |||||
|
Consumer: |
|
|
|
|
|
|
|
|
|
|
| |||||
|
Home Equity |
|
— |
|
— |
|
— |
|
— |
|
— |
| |||||
|
Other |
|
— |
|
— |
|
— |
|
— |
|
— |
| |||||
|
|
|
|
|
|
|
|
|
|
|
|
| |||||
|
Total: |
|
|
|
|
|
|
|
|
|
|
| |||||
|
Commercial |
|
$ |
91 |
|
$ |
91 |
|
$ |
— |
|
$ |
94 |
|
$ |
1 |
|
|
Real estate: |
|
|
|
|
|
|
|
|
|
|
| |||||
|
Construction |
|
— |
|
— |
|
— |
|
— |
|
— |
| |||||
|
Mortgage-residential |
|
388 |
|
403 |
|
— |
|
406 |
|
1 |
| |||||
|
Mortgage-commercial |
|
5,799 |
|
6,003 |
|
— |
|
6,122 |
|
128 |
| |||||
|
Consumer: |
|
|
|
|
|
|
|
|
|
|
| |||||
|
Home Equity |
|
23 |
|
23 |
|
— |
|
23 |
|
— |
| |||||
|
Other |
|
9 |
|
9 |
|
— |
|
11 |
|
— |
| |||||
|
|
|
$ |
6,310 |
|
$ |
6,529 |
|
$ |
— |
|
$ |
6,656 |
|
$ |
130 |
|
The Company determined that all specific reserves for impaired loans were confirmed losses and were charged-off against outstanding loan balances during the six months ended June 30, 2011.
Note 5—Loans-continued
|
|
|
|
|
Unpaid |
|
|
|
Average |
|
Interest |
| |||||
|
(Dollars in thousands) |
|
Recorded |
|
Principal |
|
Related |
|
Recorded |
|
Income |
| |||||
|
December 31, 2010 |
|
Investment |
|
Balance |
|
Allowance |
|
Investment |
|
Recognized |
| |||||
|
With no allowance recorded: |
|
|
|
|
|
|
|
|
|
|
| |||||
|
Commercial |
|
$ |
96 |
|
$ |
96 |
|
$ |
— |
|
$ |
108 |
|
$ |
4 |
|
|
Real estate: |
|
|
|
|
|
|
|
|
|
|
| |||||
|
Construction |
|
— |
|
— |
|
— |
|
— |
|
— |
| |||||
|
Mortgage-residential |
|
1,527 |
|
1,835 |
|
— |
|
1,853 |
|
20 |
| |||||
|
Mortgage-commercial |
|
7,536 |
|
8,077 |
|
— |
|
8,180 |
|
272 |
| |||||
|
Consumer: |
|
|
|
|
|
|
|
|
|
|
| |||||
|
Home Equity |
|
38 |
|
38 |
|
— |
|
40 |
|
— |
| |||||
|
Other |
|
12 |
|
12 |
|
— |
|
14 |
|
— |
| |||||
|
|
|
|
|
|
|
|
|
|
|
|
| |||||
|
With an allowance recorded: |
|
|
|
|
|
|
|
|
|
|
| |||||
|
Commercial |
|
— |
|
— |
|
— |
|
— |
|
— |
| |||||
|
Real estate: |
|
|
|
|
|
|
|
|
|
|
| |||||
|
Construction |
|
— |
|
— |
|
— |
|
— |
|
— |
| |||||
|
Mortgage-residential |
|
— |
|
— |
|
— |
|
— |
|
— |
| |||||
|
Mortgage-commercial |
|
378 |
|
378 |
|
96 |
|
381 |
|
27 |
| |||||
|
Consumer: |
|
|
|
|
|
|
|
|
|
|
| |||||
|
Home Equity |
|
— |
|
— |
|
— |
|
— |
|
— |
| |||||
|
Other |
|
— |
|
— |
|
— |
|
— |
|
— |
| |||||
|
|
|
|
|
|
|
|
|
|
|
|
| |||||
|
Total: |
|
|
|
|
|
|
|
|
|
|
| |||||
|
Commercial |
|
96 |
|
96 |
|
— |
|
108 |
|
4 |
| |||||
|
Real estate: |
|
|
|
|
|
|
|
|
|
|
| |||||
|
Construction |
|
— |
|
— |
|
— |
|
— |
|
— |
| |||||
|
Mortgage-residential |
|
1,527 |
|
1,835 |
|
— |
|
1,853 |
|
20 |
| |||||
|
Mortgage-commercial |
|
7,914 |
|
8,455 |
|
96 |
|
8,561 |
|
299 |
| |||||
|
Consumer: |
|
|
|
|
|
|
|
|
|
|
| |||||
|
Home Equity |
|
38 |
|
38 |
|
— |
|
40 |
|
— |
| |||||
|
Other |
|
12 |
|
12 |
|
— |
|
14 |
|
— |
| |||||
|
|
|
$ |
9,587 |
|
$ |
10,436 |
|
$ |
96 |
|
$ |
10,576 |
|
$ |
323 |
|
The Company categorizes loans into risk categories based on relevant information about the ability of borrowers to service their debt, including: current financial information, historical payment experience, credit documentation, public information, and current economic trends, among other factors. The Company analyzes loans individually by classifying the loans as to credit risk. This analysis is performed on a monthly basis. The Company uses the following definitions for risk ratings:
Special Mention. Loans classified as special mention have a potential weakness that deserves management’s close attention. If left uncorrected, these potential weaknesses may result in deterioration of the repayment prospects for the loan or of the institution’s credit position at some future date. Special mention assets are not adversely classified and do not expose an institution to sufficient risk to warrant adverse classification.
Substandard. Loans classified as substandard are inadequately protected by the current net worth and paying capacity of the obligor or of the collateral pledged, if any. Loans so classified have a well-defined weakness or weaknesses that jeopardize the liquidation of the debt. They are characterized by the distinct possibility that the institution will sustain some loss if the deficiencies are not corrected.
Doubtful. Loans classified as doubtful have all the weaknesses inherent in those classified as substandard, with the added characteristic that the weaknesses make collection or liquidation in full, on the basis of currently existing facts, conditions, and values, highly questionable and improbable.
Note 5—Loans-continued
Loans not meeting the criteria above that are analyzed individually as part of the above described process are considered to be pass rated loans. As of June 30, 2011 and December 31, 2010, and based on the most recent analysis performed, the risk category of loans by class of loans is shown in the table below. As of June 30, 2011 and December 31, 2010, no loans were classified as doubtful.
|
(Dollars in thousands) |
|
|
|
Special |
|
|
|
|
|
|
| |||||
|
June 30, 2011 |
|
Pass |
|
Mention |
|
Substandard |
|
Doubtful |
|
Total |
| |||||
|
Commercial, financial & agricultural |
|
$ |
20,208 |
|
$ |
661 |
|
$ |
525 |
|
$ |
— |
|
$ |
21,394 |
|
|
Real estate: |
|
|
|
|
|
|
|
|
|
|
| |||||
|
Construction |
|
3,174 |
|
— |
|
4,906 |
|
— |
|
8,080 |
| |||||
|
Mortgage — residential |
|
40,962 |
|
130 |
|
780 |
|
— |
|
41,872 |
| |||||
|
Mortgage — commercial |
|
199,448 |
|
9,933 |
|
10,697 |
|
— |
|
220,078 |
| |||||
|
Consumer: |
|
|
|
|
|
|
|
|
|
|
| |||||
|
Home Equity |
|
27,819 |
|
— |
|
423 |
|
— |
|
28,242 |
| |||||
|
Other |
|
5,940 |
|
54 |
|
11 |
|
— |
|
6,005 |
| |||||
|
Total |
|
$ |
297,551 |
|
$ |
10,778 |
|
$ |
17,342 |
|
$ |
— |
|
$ |
325,671 |
|
|
(Dollars in thousands) |
|
|
|
Special |
|
|
|
|
|
|
| |||||
|
December 31, 2010 |
|
Pass |
|
Mention |
|
Substandard |
|
Doubtful |
|
Total |
| |||||
|
Commercial, financial & agricultural |
|
$ |
19,722 |
|
$ |
232 |
|
$ |
602 |
|
$ |
— |
|
$ |
20,556 |
|
|
Real estate: |
|
|
|
|
|
|
|
|
|
|
| |||||
|
Construction |
|
5,111 |
|
— |
|
5,429 |
|
— |
|
10,540 |
| |||||
|
Mortgage — residential |
|
44,815 |
|
— |
|
1,869 |
|
— |
|
46,684 |
| |||||
|
Mortgage — commercial |
|
196,153 |
|
8,270 |
|
13,874 |
|
— |
|
218,297 |
| |||||
|
Consumer: |
|
|
|
|
|
|
|
|
|
|
| |||||
|
Home Equity |
|
27,501 |
|
100 |
|
146 |
|
— |
|
27,747 |
| |||||
|
Other |
|
6,124 |
|
6 |
|
— |
|
— |
|
6,130 |
| |||||
|
Total |
|
$ |
299,426 |
|
$ |
8,608 |
|
$ |
21,920 |
|
$ |
— |
|
$ |
329,954 |
|
At June 30, 2011 and December 31, 2010, non-accrual loans totaled $3.3 million and $5.9 million, respectively.
Troubled debt restructurings included in impaired loans at June 30, 2011 and December 31, 2010 amounted to $4.3 million and $4.4 million, respectively. Troubled debt restructurings in nonaccrual status at June 30, 2011 and December 31, 2010 amounted to $1.3 million and $696 thousand, respectively.
There were no loans greater than ninety days delinquent and still accruing interest at June 30, 2011. Loans greater than ninety days delinquent and still accruing interest at December 31, 2010 amounted to $373 thousand.
Note 5—Loans-continued
The following tables are by loan category and present loans past due and on non-accrual status as of June 30, 2011 and December 31, 2010:
|
(Dollars in thousands) |
|
30-59 |
|
60-89 |
|
Greater |
|
Nonaccrual |
|
Total |
|
Current |
|
Total |
| |||||||
|
Commercial |
|
$ |
75 |
|
$ |
102 |
|
$ |
— |
|
$ |
55 |
|
$ |
232 |
|
$ |
21,162 |
|
$ |
21,394 |
|
|
Real estate: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||
|
Construction |
|
— |
|
— |
|
— |
|
— |
|
— |
|
8,080 |
|
8,080 |
| |||||||
|
Mortgage-residential |
|
562 |
|
263 |
|
— |
|
388 |
|
1,213 |
|
40,659 |
|
41,872 |
| |||||||
|
Mortgage-commercial |
|
444 |
|
401 |
|
— |
|
2,839 |
|
3,684 |
|
216,394 |
|
220,078 |
| |||||||
|
Consumer: |
|
|
|
|
|
|
|
|
|
|||||||||||||