XNAS:FXCB Fox Chase Bancorp Inc Quarterly Report 10-Q Filing - 6/30/2012

Effective Date 6/30/2012

XNAS:FXCB Fair Value Estimate
Premium
XNAS:FXCB Consider Buying
Premium
XNAS:FXCB Consider Selling
Premium
XNAS:FXCB Fair Value Uncertainty
Premium
XNAS:FXCB Economic Moat
Premium
XNAS:FXCB Stewardship
Premium
 

Table of Contents

 

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, DC 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, 2012

 

OR

 

o                          TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

 

For the transition period from              to             

 

Commission file number: 000-54025

 


 

Fox Chase Bancorp, Inc.

(Exact name of registrant as specified in its charter)

 


 

Maryland

 

35-2379633

(State or other jurisdiction of
incorporation or organization)

 

(I.R.S. Employer
Identification No.)

 

 

 

4390 Davisville Road, Hatboro, Pennsylvania

 

19040

(Address of principal executive offices)

 

(Zip Code)

 

(215) 682-7400

(Registrant’s telephone number, including area code)

N/A

(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 (Section 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).  Yes x No o

 

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 definition of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.  (Check one):

 

Large Accelerated Filer [  ]

 

Accelerated Filer [X ]

Non-Accelerated Filer [ ]

 

Smaller Reporting Company [  ]

(Do not check if a smaller reporting company)

 

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

Yes  o    No  x

 

As of August 1, 2012, there were 12,613,952 shares of the registrant’s common stock outstanding.

 

 



Table of Contents

 

 

FOX CHASE BANCORP, INC.

 

 

Table of Contents

 

 

 

 

Page
No.

 

 

 

 

Part I. Financial Information

 

 

 

 

 

 

Item 1.

Financial Statements

 

3

 

 

 

 

 

Consolidated Statements of Condition at June 30, 2012 (unaudited) and December 31, 2011

 

3

 

 

 

 

 

Consolidated Statements of Operations for the Three and Six Months Ended June 30, 2012 and 2011 (unaudited)

 

4

 

 

 

 

 

Consolidated Statements of Changes in Equity for the Six Months Ended June 30, 2012 and 2011 (unaudited)

 

5

 

 

 

 

 

Consolidated Statements of Cash Flows for the Six Months Ended June 30, 2012 and 2011 (unaudited)

 

6

 

 

 

 

 

Consolidated Statements of Comprehensive Income for the Three and Six Months Ended June 30, 2012 and 2011 (unaudited)

 

7

 

 

 

 

 

Notes to the Unaudited Consolidated Financial Statements

 

8

 

 

 

 

Item 2.

Management’s Discussion and Analysis of Financial Condition and Results of Operations

 

32

 

 

 

 

Item 3.

Quantitative and Qualitative Disclosures About Market Risk

 

45

 

 

 

 

Item 4.

Controls and Procedures

 

45

 

 

 

 

Part II. Other Information

 

 

 

 

 

 

Item 1.

Legal Proceedings

 

45

 

 

 

 

Item 1A.

Risk Factors

 

45

 

 

 

 

Item 2.

Unregistered Sales of Equity Securities and Use of Proceeds

 

46

 

 

 

 

Item 3.

Defaults Upon Senior Securities

 

46

 

 

 

 

Item 4.

Mine Safety Disclosures

 

46

 

 

 

 

Item 5.

Other Information

 

46

 

 

 

 

Item 6.

Exhibits

 

46

 

 

 

 

Signatures

 

 

 

2



Table of Contents

 

PART I. FINANCIAL INFORMATION

 

Item 1. Financial Statements

 

FOX CHASE BANCORP, INC.

Consolidated Statements of Condition

(In Thousands, Except Share Data)

 

 

 

June 30,

 

December 31,

 

 

 

 

 

 

 

 

 

2012

 

2011

 

 

 

(Unaudited)

 

 

 

ASSETS

 

 

 

 

 

Cash and due from banks

 

  $

810  

 

  $

734

 

Interest-earning demand deposits in other banks

 

13,998  

 

6,852

 

Total cash and cash equivalents

 

14,808  

 

7,586

 

Investment securities available-for-sale

 

8,460  

 

23,106

 

Mortgage related securities available-for-sale

 

242,929  

 

225,664

 

Mortgage related securities held-to-maturity (fair value of $36,179 at June 30, 2012 and $41,758 at December 31, 2011)

 

35,075  

 

41,074

 

Loans, net of allowance for loan losses of $11,225 at June 30, 2012 and $12,075 at December 31, 2011

 

656,785  

 

670,572

 

Federal Home Loan Bank stock, at cost

 

7,287  

 

8,074

 

Bank-owned life insurance

 

13,843  

 

13,606

 

Premises and equipment, net

 

10,506  

 

10,431

 

Assets acquired through foreclosure

 

8,165  

 

2,423

 

Real estate held for investment

 

1,620  

 

1,620

 

Accrued interest receivable

 

3,299  

 

4,578

 

Mortgage servicing rights, net

 

244  

 

316

 

Deferred tax asset, net

 

1,897  

 

1,682

 

Other assets

 

7,041  

 

5,131

 

Total Assets

 

  $

1,011,959  

 

  $

1,015,863

 

 

 

 

 

 

 

LIABILITIES AND STOCKHOLDERS’ EQUITY

 

 

 

 

 

LIABILITIES

 

 

 

 

 

Deposits

 

  $

729,503  

 

  $

676,594

 

Short-term borrowings

 

15,000  

 

8,500

 

Federal Home Loan Bank advances

 

50,000  

 

88,278

 

Other borrowed funds

 

30,000  

 

50,000

 

Advances from borrowers for taxes and insurance

 

2,151  

 

1,736

 

Accrued interest payable

 

287  

 

418

 

Accrued expenses and other liabilities

 

2,371  

 

2,145

 

Total Liabilities

 

829,312  

 

827,671

 

STOCKHOLDERS’ EQUITY

 

 

 

 

 

Preferred stock ($.01 par value; 1,000,000 shares authorized, none issued and outstanding at June 30, 2012 and December 31, 2011)

 

-     

 

-    

 

Common stock ($.01 par value; 60,000,000 shares authorized, 12,594,823 shares issued and outstanding at June 30, 2012 and 13,037,310 shares issued and outstanding at December 31, 2011)

 

146  

 

146

 

Additional paid-in capital

 

135,668  

 

134,871

 

Treasury stock, at cost (1,986,200 shares at June 30, 2012 and 1,524,900 shares at December 31, 2011)

 

(25,756) 

 

(19,822)

 

Common stock acquired by benefit plans

 

(11,083) 

 

(11,541)

 

Retained earnings

 

78,717  

 

77,971

 

Accumulated other comprehensive income, net

 

4,955  

 

6,567

 

Total Stockholders’ Equity

 

182,647  

 

188,192

 

 

 

 

 

 

 

Total Liabilities and Stockholders’ Equity

 

  $

1,011,959  

 

  $

1,015,863

 

 

 

 

 

See accompanying notes to the unaudited consolidated financial statements.

 

3



Table of Contents

 

FOX CHASE BANCORP, INC.

Consolidated Statements of Operations

(Unaudited)

(In Thousands, Except Per Share Data)

 

 

 

Three Months Ended

 

Six Months Ended

 

 

 

June 30,

 

June 30,

 

 

 

2012

 

2011

 

2012

 

2011

 

 

 

 

 

 

 

 

 

 

 

 

 

INTEREST INCOME

 

 

 

 

 

 

 

 

 

 

 

Interest and fees on loans

 

  $

8,362

 

  $

8,726

 

 

  $

17,210

 

  $

17,558

 

 

Interest on mortgage related securities

 

1,955

 

2,665

 

 

3,934

 

5,226

 

 

Interest on investment securities available-for-sale

 

 

 

 

 

 

 

 

 

 

 

Taxable

 

78

 

124

 

 

171

 

264

 

 

Nontaxable

 

14

 

67

 

 

33

 

137

 

 

Other interest income

 

2

 

25

 

 

5

 

53

 

 

Total Interest Income

 

10,411

 

11,607

 

 

21,353

 

23,238

 

 

INTEREST EXPENSE

 

 

 

 

 

 

 

 

 

 

 

Deposits

 

1,637

 

2,242

 

 

3,408

 

4,670

 

 

Short-term borrowings

 

5

 

-    

 

 

10

 

-    

 

 

Federal Home Loan Bank advances

 

688

 

1,153

 

 

1,442

 

2,307

 

 

Other borrowed funds

 

410

 

432

 

 

842

 

859

 

 

Total Interest Expense

 

2,740

 

3,827

 

 

5,702

 

7,836

 

 

Net Interest Income

 

7,671

 

7,780

 

 

15,651

 

15,402

 

 

Provision for loan losses

 

1,291

 

900

 

 

2,566

 

1,875

 

 

Net Interest Income after Provision for Loan Losses

 

6,380

 

6,880

 

 

13,085

 

13,527

 

 

NONINTEREST INCOME

 

 

 

 

 

 

 

 

 

 

 

Service charges and other fee income

 

385

 

452

 

 

774

 

779

 

 

Net gain on sale of assets acquired through foreclosure

 

98

 

20

 

 

127

 

20

 

 

Income on bank-owned life insurance

 

118

 

116

 

 

237

 

230

 

 

Other

 

139

 

63

 

 

296

 

89

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total other-than-temporary impairment loss

 

-       

 

(398

)

 

-       

 

(398

)

 

Less: Portion of loss recognized in other comprehensive income (before taxes)

 

-       

 

197

 

 

-       

 

197

 

 

Net other-than-temporary impairment loss

 

-       

 

(201

)

 

-       

 

(201

)

 

Net gains on sale of investment securities

 

2,340

 

-    

 

 

2,340

 

-    

 

 

Net investment securities gains (losses)

 

2,340

 

(201

)

 

2,340

 

(201

)

 

 

 

 

 

 

 

 

 

 

 

 

 

Total Noninterest Income

 

3,080

 

450

 

 

3,774

 

917

 

 

NONINTEREST EXPENSE

 

 

 

 

 

 

 

 

 

 

 

Salaries, benefits and other compensation

 

3,353

 

3,214

 

 

6,692

 

6,381

 

 

Occupancy expense

 

420

 

434

 

 

879

 

931

 

 

Furniture and equipment expense

 

138

 

104

 

 

290

 

207

 

 

Data processing costs

 

472

 

418

 

 

918

 

838

 

 

Professional fees

 

489

 

484

 

 

958

 

835

 

 

Marketing expense

 

106

 

85

 

 

152

 

145

 

 

FDIC premiums

 

201

 

229

 

 

382

 

512

 

 

Assets acquired through foreclosure expense

 

38

 

125

 

 

153

 

144

 

 

Loss on extinguishment of debt

 

3,018

 

-    

 

 

3,018

 

-    

 

 

Other

 

464

 

387

 

 

897

 

785

 

 

Total Noninterest Expense

 

8,699

 

5,480

 

 

14,339

 

10,778

 

 

Income Before Income Taxes

 

761

 

1,850

 

 

2,520

 

3,666

 

 

Income tax provision

 

222

 

593

 

 

794

 

1,163

 

 

Net Income

 

  $

539

 

  $

1,257

 

 

  $

1,726

 

  $

2,503

 

 

Earnings per share:

 

 

 

 

 

 

 

 

 

 

 

Basic

 

  $

0.05

 

  $

0.09

 

 

  $

0.15

 

  $

0.18

 

 

Diluted

 

  $

0.05

 

  $

0.09

 

 

  $

0.15

 

  $

0.18

 

 

 

 

See accompanying notes to the unaudited consolidated financial statements.

 

4



Table of Contents

 

FOX CHASE BANCORP, INC.

Consolidated Statements of Changes in Equity

Six Months Ended June 30, 2012 and 2011

(In Thousands, Unaudited)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Common

 

 

 

 

 

Accumulated

 

 

 

 

 

 

 

 

 

Additional

 

 

 

 

 

Stock

 

 

 

 

 

Other

 

 

 

 

 

 

Common

 

 

Paid in

 

 

Treasury

 

 

Acquired by

 

 

Retained

 

 

Comprehensive

 

 

Total

 

 

 

Stock

 

 

Capital

 

 

Stock

 

 

Benefit Plans

 

 

Earnings

 

 

Income, net

 

 

Equity

 

BALANCE - DECEMBER 31, 2010

 

  $

145

 

 

  $  133,997

 

 

  $

-   

 

 

  $

(9,283

)

 

  $

74,307

 

 

  $

6,538

 

 

  $  205,704

 

Stock based compensation expense

 

-    

 

 

481

 

 

-   

 

 

-   

 

 

-   

 

 

-   

 

 

481

 

Unallocated ESOP shares committed to employees

 

-    

 

 

112

 

 

-   

 

 

312

 

 

-   

 

 

-   

 

 

424

 

Issuance of stock for vested equity awards

 

-    

 

 

(67

)

 

-   

 

 

84

 

 

(17

)

 

-   

 

 

-   

 

Common stock issued for exercise of vested stock options

 

1

 

 

123

 

 

-   

 

 

-   

 

 

-   

 

 

-   

 

 

124

 

Dividends paid ($0.04 per share)

 

-    

 

 

-    

 

 

-   

 

 

-   

 

 

(581

)

 

-   

 

 

(581

)

Net income

 

-    

 

 

-    

 

 

-   

 

 

-   

 

 

2,503

 

 

-   

 

 

2,503

 

Other comprehensive income

 

-    

 

 

-    

 

 

-   

 

 

-   

 

 

-   

 

 

1,199

 

 

1,199

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

BALANCE - JUNE 30, 2011

 

  $

146

 

 

  $  134,646

 

 

  $

-   

 

 

  $

(8,887

)

 

  $

76,212

 

 

  $

7,737

 

 

  $  209,854

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Common

 

 

 

Accumulated

 

 

 

 

 

 

Additional

 

 

 

Stock

 

 

 

Other

 

 

 

 

Common

 

Paid in

 

Treasury

 

Acquired by

 

Retained

 

Comprehensive

 

Total

 

 

Stock

 

Capital

 

Stock

 

Benefit Plans

 

Earnings

 

Income, net

 

Equity

BALANCE - DECEMBER 31, 2011

 

  $

146

 

 

  $  134,871

 

 

 $ (19,822

)

 

  $

(11,541

)

 

  $

77,971

 

 

  $

6,567

 

 

  $  188,192

 

Purchase of treasury stock, net

 

-   

 

 

-   

 

 

(5,934

)

 

-   

 

 

-   

 

 

-   

 

 

(5,934

)

Stock based compensation expense

 

-   

 

 

590

 

 

-   

 

 

-   

 

 

-   

 

 

-   

 

 

590

 

Unallocated ESOP shares committed to employees

 

-   

 

 

109

 

 

-   

 

 

312

 

 

-   

 

 

-   

 

 

421

 

Issuance of stock for vested equity awards

 

-   

 

 

(134

)

 

-   

 

 

146

 

 

(12

)

 

-   

 

 

-   

 

Common stock issued for exercise of vested stock options

 

-   

 

 

203

 

 

-   

 

 

-   

 

 

-   

 

 

-   

 

 

203

 

Tax benefit from exercise of stock options and vesting of restricted stock

 

-   

 

 

29

 

 

-   

 

 

-   

 

 

-   

 

 

-   

 

 

29

 

Dividends paid ($0.08 per share)

 

-   

 

 

-   

 

 

-   

 

 

-   

 

 

(968

)

 

-   

 

 

(968

)

Net income

 

-   

 

 

-   

 

 

-   

 

 

-   

 

 

1,726

 

 

-   

 

 

1,726

 

Other comprehensive income

 

-   

 

 

-   

 

 

-   

 

 

-   

 

 

-   

 

 

(1,612

)

 

(1,612

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

BALANCE - JUNE 30, 2012

 

  $

146

 

 

  $  135,668

 

 

 $ (25,756

)

 

  $

(11,083

)

 

  $

78,717

 

 

  $

4,955

 

 

  $  182,647

 

 

See accompanying notes to the unaudited consolidated financial statements.

 

5



Table of Contents

 

FOX CHASE BANCORP, INC.

Consolidated Statements of Cash Flows

(In Thousands)

 

 

 

 

 

 

 

 

 

 

 

Six Months Ended June 30,

 

 

 

 

2012

 

 

2011

 

 

 

 

(Unaudited)

 

Cash Flows From Operating Activities

 

 

 

 

 

 

 

Net income

 

 

  $

1,726

 

 

  $

2,503

 

Adjustments to reconcile net income to net cash provided by operating activities:

 

 

 

 

 

 

 

Provision for loan losses

 

 

2,566

 

 

1,875

 

Valuation adjustment for other real estate owned

 

 

45

 

 

100

 

Depreciation

 

 

430

 

 

329

 

Net amortization of securities premiums and discounts

 

 

1,424

 

 

1,680

 

Provision for deferred income taxes

 

 

685

 

 

235

 

Stock compensation from benefit plans

 

 

1,011

 

 

905

 

Net gain on sale of assets acquired through foreclosure

 

 

(127

)

 

(20

)

Net gains on sales of investment securities

 

 

(2,340

)

 

-

 

Net other-than-temporary impairment loss

 

 

-

 

 

201

 

Additions to assets acquired through foreclosure

 

 

(35

)

 

-

 

Income on bank-owned life insurance

 

 

(237

)

 

(230

)

Decrease in mortgage servicing rights, net

 

 

72

 

 

45

 

(Decrease) increase in accrued interest receivable and other assets

 

 

(565

)

 

924

 

Decrease (increase) in accrued interest payable, accrued expenses and other liabilities

 

 

125

 

 

(1,189

)

Net Cash Provided by Operating Activities

 

 

4,780

 

 

7,358

 

 

 

 

 

 

 

 

 

Cash Flows from Investing Activities

 

 

 

 

 

 

 

Investment securities - available-for-sale:

 

 

 

 

 

 

 

Proceeds from sales

 

 

6,157

 

 

-

 

Proceeds from maturities, calls and principal repayments

 

 

8,516

 

 

6,700

 

Mortgage related securities – available-for-sale:

 

 

 

 

 

 

 

Purchases

 

 

(122,835

)

 

(33,065

)

Proceeds from sales

 

 

69,067

 

 

-

 

Proceeds from maturities, calls and principal repayments

 

 

35,041

 

 

38,783

 

Mortgage related securities – held-to-maturity:

 

 

 

 

 

 

 

Proceeds from maturities, calls and principal repayments

 

 

5,714

 

 

3,100

 

Net decrease in loans

 

 

16,280

 

 

17,753

 

Purchases of loans and loan participations

 

 

(11,753

)

 

(18,117

)

Net decrease in Federal Home Loan Bank stock

 

 

787

 

 

966

 

Purchases of premises and equipment

 

 

(505

)

 

(260

)

Proceeds from sales and payments on assets acquired through foreclosure

 

 

1,126

 

 

1,137

 

Net Cash Provided by Investing Activities

 

 

7,595

 

 

16,997

 

 

 

 

 

 

 

 

 

Cash Flows from Financing Activities

 

 

 

 

 

 

 

Net increase (decrease) in deposits

 

 

52,909

 

 

(8,478

)

Decrease in advances from borrowers for taxes and insurance

 

 

415

 

 

343

 

Principal payments on other borrowed funds

 

 

(20,000

)

 

-

 

Principal payments on Federal Home Loan Bank advances

 

 

(38,278

)

 

(2,241

)

Net increase in short-term borrowings

 

 

6,500

 

 

-

 

Common stock issued for exercise of stock options

 

 

203

 

 

124

 

Purchase of treasury stock

 

 

(5,934

)

 

-

 

Cash dividends paid

 

 

(968

)

 

(581

)

Net Cash Used in Financing Activities

 

 

(5,153

)

 

(10,833

)

Net Increase in Cash and Cash Equivalents

 

 

7,222

 

 

13,522

 

Cash and Cash Equivalents – Beginning

 

 

7,586

 

 

38,314

 

Cash and Cash Equivalents – Ending

 

 

  $

14,808

 

 

  $

51,836

 

Supplemental Disclosure of Cash Flow Information

 

 

 

 

 

 

 

Interest paid

 

 

  $

5,883

 

 

  $

7,839

 

Income taxes paid

 

 

  $

1,440

 

 

  $

1,100

 

Transfers of loans to assets acquired through foreclosure

 

 

  $

6,751

 

 

  $

1,045

 

Net charge-offs

 

 

  $

3,416

 

 

  $

1,882

 

 

See accompanying notes to the unaudited consolidated financial statements.

 

6



Table of Contents

 

FOX CHASE BANCORP, INC.

Consolidated Statements of Comprehensive Income

(Unaudited, in Thousands)

 

 

 

 

Three Months Ended

 

Six Months Ended

 

 

 

June 30,

 

June 30,

 

 

 

2012

 

2011

 

2012

 

2011

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net income

 

$

539

 

$

1,257

 

$

1,726

 

$

2,503

 

 

 

 

 

 

 

 

 

 

 

Other comprehensive (loss) income:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Unrealized holding gains (losses) arising during period, net of tax (benefit) expense of ($6) and $884 for the three months ended June 30, 2012 and 2011, respectively and $70 and $(744) for the six months ended June 30, 2012 and 2011, respectively

 

33

 

1,606

 

(102)

 

1,329

 

 

 

 

 

 

 

 

 

 

 

Non-credit related unrealized loss on other-than temporary impaired securities, net of tax (benefit) of ($67) for the three and six months ended June 30, 2011

 

-

 

(130)

 

-

 

(130)

 

 

 

 

 

 

 

 

 

 

 

Reclassification adjustments for net investment securities gains included in net income, net of tax expense of $864 for the three and six months ended June 30, 2012

 

(1,563)

 

-

 

(1,563)

 

-

 

 

 

 

 

 

 

 

 

 

 

Reclassification adjustment for loss included in net income for other-than temporary impaired investment sold, net of tax (benefit) of ($34) for the three and six months ended June 30, 2012

 

53

 

-

 

53

 

-

 

 

 

 

 

 

 

 

 

 

 

Other comprehensive (loss) income

 

(1,477)

 

1,476

 

(1,612)

 

1,199

 

 

 

 

 

 

 

 

 

 

 

Comprehensive (loss) income

 

$

(938)

 

$

2,733

 

$

114

 

$

3,702

 

 

 

See accompanying notes to the unaudited consolidated financial statements.

 

7



Table of Contents

 

FOX CHASE BANCORP, INC

Notes to the Unaudited Consolidated Financial Statements

 

 

NOTE 1 - PRINCIPLES OF CONSOLIDATION AND PRESENTATION

 

 

Fox Chase Bancorp, Inc. (the “Bancorp”) is a Maryland corporation that was incorporated in March 2010 to be the successor corporation to old Fox Chase Bancorp, Inc. (“Old Fox Chase Bancorp”), the federal corporation and the former stock holding company for Fox Chase Bank (the “Bank”), upon completion of the mutual-to-stock conversion of Fox Chase MHC, the former mutual holding company for Fox Chase Bank.

 

The Bancorp’s primary business is holding the common stock of the Bank and making two loans to the ESOP. The Bancorp is authorized to pursue other business activities permissible by laws and regulations for savings and loan holding companies.

 

The Bancorp and the Bank (collectively referred to as the “Company”) provide a wide variety of financial products and services to individuals and businesses through the Bank’s eleven branches in Philadelphia, Richboro, Willow Grove, Warminster, Lahaska, Hatboro, Media and West Chester, Pennsylvania, and Ocean City, Marmora and Egg Harbor Township, New Jersey.  The operations of the Company are managed as a single business segment.  The Company competes with other financial institutions and other companies that provide financial services.  The Bank also owns approximately 45% of Philadelphia Mortgage Advisors (“PMA”), a mortgage banker located in Blue Bell, Pennsylvania and Ocean City, New Jersey.

 

The Company is subject to regulations of certain federal banking agencies.  These regulations can and do change significantly from period to period.  The Company also undergoes periodic examinations by regulatory agencies which may subject them to further changes with respect to asset valuations, amounts of required loan loss allowances and operating restrictions resulting from the regulators’ judgments based on information available to them at the time of their examinations.  Pursuant to the provisions of the Dodd-Frank Wall Street Reform and Consumer Protection Act (the “Dodd-Frank Act”), effective July 21, 2011, the regulation and supervision of federal savings institutions, such as the Bank, was transferred from the Office of Thrift Supervision to the Office of the Comptroller of the Currency, the agency that regulates national banks.  As a result, the Office of the Comptroller of the Currency has assumed primary responsibility for examining the Bank and implementing and enforcing many of the laws and regulations applicable to federal savings associations.  In addition, pursuant to the provisions of the Dodd-Frank Act, effective July 21, 2011, savings and loan holding companies, such as the Bancorp, are regulated by the Board of Governors of the Federal Reserve System.

 

The consolidated financial statements include the accounts of the Bancorp and the Bank. The Bank’s operations include the accounts of its wholly owned subsidiaries, Fox Chase Financial, Inc., Fox Chase Service Corporation, 104 S. Oakland Ave., LLC and Davisville Associates, LLC.  Fox Chase Financial Inc. is a Delaware-chartered investment holding company and its sole purpose is to manage and hold investment securities.  Fox Chase Service Corporation is a Pennsylvania chartered company and its purposes are to facilitate the Bank’s investment in PMA and, for regulatory purposes, to hold commercial loans.  At June 30, 2012, Fox Chase Service Corporation held $20.0 million in commercial loans.  104 S. Oakland Ave., LLC is a New Jersey-chartered limited liability company formed to secure, manage and hold foreclosed real estate.  Davisville Associates, LLC is a Pennsylvania-chartered limited liability company formed to secure, manage and hold foreclosed real estate.  All material inter-company transactions and balances have been eliminated in consolidation. Prior period amounts are reclassified, when necessary, to conform with the current year’s presentation.

 

During 2012 and 2011, the Bank engaged in certain business activities with PMA.  These activities included providing a warehouse line of credit to PMA, as well as acquiring residential mortgage and home equity loans from PMA. The Bank recorded interest income from PMA on the warehouse line of $175,000 and $85,000 for the six months ended June 30, 2012 and 2011, respectively, as well as loan satisfaction fees, which are recorded in service charges and other fee income, from PMA of $28,000  and $25,000 for the six months ended June 30, 2012 and 2011.  In addition, the Bank acquired total loans from PMA of $11.6 million and $4.4 million for the six months ended June 30, 2012 and 2011, respectively, which includes the cost of the loans.   During September 2010, the Bank provided PMA a term loan in the amount of $1.2 million, which was secured by a residential property owned by PMA.  The loan was paid off during the second quarter of 2011.  The Bank recorded interest income on the term loan of $25,000 for the six months ended June 30, 2011.

 

8



Table of Contents

 

NOTE 1 - PRINCIPLES OF CONSOLIDATION AND PRESENTATION (CONTINUED)

 

The Company follows accounting principles and reporting practices that are in compliance with U.S. generally accepted accounting principles (“GAAP”). The preparation of the financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclose contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period.  Actual results could differ from those estimates.  Material estimates that are particularly susceptible to significant change in the near term relate to the determination of the allowance for loan losses, the valuation and realizability of deferred tax assets and the evaluation of other-than-temporary impairment and valuation of investment securities.

 

These interim financial statements do not contain all necessary disclosures required by GAAP for complete financial statements and therefore should be read in conjunction with the audited financial statements and the notes thereto included in Fox Chase Bancorp, Inc.’s Annual Report on Form 10-K/A, as filed with the Securities and Exchange Commission on March 20, 2012.   These financial statements include all normal and recurring adjustments which management believes were necessary in order to conform to GAAP.  The results for the six months ended June 30, 2012 are not necessarily indicative of the results that may be expected for the year ending December 31, 2012 or any other period.

 

During the quarter ended June 30, 2012, the Company acquired three life insurance policies from debtors in exchange for full satisfaction of debt. As a result, the Company has changed the caption on the consolidated statement of condition from other real estate owned to assets acquired through foreclosure.  Below is the significant accounting policy for assets acquired through foreclosure.

 

Assets Acquired through Foreclosure

 

Assets acquired through foreclosure consists of other real estate owned and financial assets acquired from debtors.  These assets are obtained through foreclosure, by a deed-in-lieu of foreclosure, in-substance foreclosure or in exchange for satisfaction of debt.

 

Other real estate owned is carried at the lower of cost or fair value, less estimated selling costs. Costs related to the development or improvement of an acquired property are capitalized. Holding costs and declines in carrying value after acquisition are recorded as assets acquired through foreclosure expense in the consolidated statements of operations.  As of June 30, 2012, the Company held $6.4 million of other real estate owned.

 

Financial assets acquired from debtors are carried at fair value under the fair value option in accordance with FASB ASC 825 “Financial Instruments”.  Changes in fair value after acquisition are recorded as assets acquired through foreclosure expense in the consolidated statements of operations.  As of June 30, 2012, the Company held $1.8 million of financial assets acquired from debtors, consisting of three life insurance policies.

 

Per Share Information

 

Basic earnings per share excludes dilution and is computed by dividing income available to common stockholders by the weighted-average common shares outstanding during the period.  Diluted earnings per share takes into account the potential dilution that could occur if securities or other contracts to issue common stock were exercised and converted into common stock.  Unallocated shares in the ESOP and shares purchased to fund the Bancorp’s Equity Incentive Plans are not included in either basic or diluted earnings per share.

 

9



Table of Contents

 

NOTE 1 - PRINCIPLES OF CONSOLIDATION AND PRESENTATION (CONTINUED)

 

The following table presents the reconciliation of the numerators and denominators of the basic and diluted earnings per share computations.

 

 

 

Three Months Ended

 

Six Months Ended

 

 

 

June 30,

 

June 30,

 

 

 

2012

 

2011

 

2012

 

2011

 

 

 

(Unaudited)

 

 

 

 

 

 

 

 

 

 

 

Net income

 

$

539,000

 

$

1,257,000

 

$

1,726,000

 

$

2,503,000

 

 

 

 

 

 

 

 

 

 

 

Weighted-average common shares outstanding (1)

 

12,671,404

 

14,552,714

 

12,775,182

 

14,550,154

 

Average common stock acquired by stock benefit plans:

 

 

 

 

 

 

 

 

 

ESOP shares unallocated

 

(659,744)

 

(724,466)

 

(667,877)

 

(732,676)

 

Shares purchased by trust

 

(387,540)

 

(165,984)

 

(390,947)

 

(167,888)

 

Weighted-average common shares used to calculate basic earnings per share

 

11,624,120

 

13,662,264

 

11,716,358

 

13,649,590

 

Dilutive effect of:

 

 

 

 

 

 

 

 

 

Restricted stock awards

 

41,827

 

40,319

 

37,668

 

36,250

 

Stock option awards

 

84,676

 

68,351

 

72,824

 

39,296

 

Weighted-average common shares used to calculate diluted earnings per share

 

11,750,623

 

13,770,934

 

11,826,850

 

13,725,136

 

 

 

 

 

 

 

 

 

 

 

Earnings per share-basic

 

$

0.05

 

$

0.09

 

$

0.15

 

$

0.18

 

Earnings per share-diluted

 

$

0.05

 

$

0.09

 

$

0.15

 

$

0.18

 

 

 

 

 

 

 

 

 

 

 

Outstanding common stock equivalents having no dilutive effect

 

947,639

 

717,350

 

963,650

 

750,475

 

 

(1)

Excludes treasury stock for 2012. No treasury shares were held by the Company during the three or six month periods ended June 30, 2011.

 

10



Table of Contents

 

NOTE 2 – INVESTMENT AND MORTGAGE RELATED SECURITIES

 

The amortized cost and fair value of securities available-for-sale and held-to-maturity as of June 30, 2012 and December 31, 2011 are summarized as follows:

 

 

 

June 30, 2012 (Unaudited)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Gross

 

Gross

 

 

 

 

 

 

 

Amortized

 

Unrealized

 

Unrealized

 

OTTI

 

Fair

 

 

 

Cost

 

Gains

 

Losses

 

in AOCI

 

Value

 

 

 

(In Thousands)

 

Available-for-Sale Securities:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Obligations of U.S. government agencies

 

$

300

 

$

15

 

$

-

 

$

-

 

$

315

 

State and political subdivisions

 

349

 

1

 

-

 

-

 

350

 

Corporate securities

 

7,977

 

22

 

(204)

 

-

 

7,795

 

 

 

8,626

 

38

 

(204)

 

-

 

8,460

 

 

 

 

 

 

 

 

 

 

 

 

 

Private label commercial mortgage related securities

 

6,595

 

83

 

-

 

-

 

6,678

 

Agency residential mortgage related securities

 

228,453

 

7,803

 

(5)

 

-

 

236,251

 

Total mortgage related securities

 

235,048

 

7,886

 

(5)

 

-

 

242,929

 

Total available-for-sale securities

 

$

243,674

 

$

7,924

 

$

(209)

 

$

-

 

$

251,389

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Held-to-Maturity Securities:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Agency residential mortgage related securities

 

$

35,075

 

$

1,104

 

$

-

 

$

-

 

$

36,179

 

Total mortgage related securities

 

35,075

 

1,104

 

-

 

-

 

36,179

 

Total held-to-maturity securities

 

$

35,075

 

$

1,104

 

$

-

 

$

-

 

$

36,179

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

December 31, 2011

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Gross

 

Gross

 

 

 

 

 

 

 

Amortized

 

Unrealized

 

Unrealized

 

OTTI

 

Fair

 

 

 

Cost

 

Gains

 

Losses

 

in AOCI

 

Value

 

 

 

(In Thousands)

 

Available-for-Sale Securities:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Obligations of U.S. government agencies

 

$

6,424

 

$

90

 

$

-

 

$

-

 

$

6,514

 

State and political subdivisions

 

1,865

 

8

 

-

 

-

 

1,873

 

Corporate securities

 

15,007

 

16

 

(304)

 

-

 

14,719

 

 

 

23,296

 

114

 

(304)

 

-

 

23,106

 

 

 

 

 

 

 

 

 

 

 

 

 

Private label residential mortgage related security

 

164

 

4

 

-

 

(46)

 

122

 

Private label commercial mortgage related securities

 

8,799

 

107

 

-

 

-

 

8,906

 

Agency residential mortgage related securities

 

206,285

 

10,357

 

(6)

 

-

 

216,636

 

Total mortgage related securities

 

215,248

 

10,468

 

(6)

 

(46)

 

225,664

 

Total available-for-sale securities

 

$

238,544

 

$

10,582

 

$

(310)

 

$

(46)

 

$

248,770

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Held-to-Maturity Securities:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Agency residential mortgage related securities

 

$

41,074

 

$

684

 

$

-

 

$

-

 

$

41,758

 

Total mortgage related securities

 

41,074

 

684

 

-

 

-

 

41,758

 

Total held-to-maturity securities

 

$

41,074

 

$

684

 

$

-

 

$

-

 

$

41,758

 

 

11



Table of Contents

 

NOTE 2 - INVESTMENT AND MORTGAGE RELATED SECURITIES (CONTINUED)

 

The following tables show gross unrealized losses and fair value of securities, aggregated by security category and length of time that individual securities have been in a continuous unrealized loss position, at June 30, 2012 and December 31, 2011:

 

 

 

June 30, 2012 (Unaudited)

 

 

 

Less than 12 Months

 

12 Months or More

 

Total

 

 

 

Fair

 

Unrealized

 

Fair

 

Unrealized

 

Fair

 

Unrealized

 

 

 

Value

 

Losses

 

Value

 

Losses

 

Value

 

Losses

 

 

 

(In Thousands)

 

Available-for-Sale Securities:

 

 

 

 

 

 

 

 

 

 

 

 

 

Obligations of U.S. government agencies

 

  $

-

 

  $

-

 

  $

-

 

  $

-

 

  $

-

 

  $

-

 

State and political subdivisions

 

-

 

-

 

-

 

-

 

-

 

-

 

Corporate securities

 

1,902

 

(27)

 

2,823

 

(177)

 

4,725

 

(204)

 

 

 

1,902

 

(27)

 

2,823

 

(177)

 

4,725

 

(204)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Private label commercial mortgage related securities

 

-

 

-

 

-

 

-

 

-

 

-

 

Agency residential mortgage related securities

 

21,032

 

(5)

 

-

 

-

 

21,032

 

(5)

 

Total mortgage related securities

 

21,032

 

(5)

 

-

 

-

 

21,032

 

(5)

 

Total available-for-sale securities

 

  $

22,934

 

  $

(32)

 

  $

2,823

 

  $

(177)

 

  $

25,757

 

  $

(209)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Held-to-Maturity Securities:

 

 

 

 

 

 

 

 

 

 

 

 

 

Agency residential mortgage related securities

 

-

 

-

 

-

 

-

 

-

 

-

 

Total mortgage related securities

 

-

 

-

 

-

 

-

 

-

 

-

 

Total held-to-maturity securities

 

  $

-

 

  $

-

 

  $

-

 

  $

-

 

  $

-

 

  $

-

 

Total Temporarily Impaired Securities

 

  $

22,934

 

  $

(32)

 

  $

2,823

 

  $

(177)

 

  $

25,757

 

  $

(209)

 

 

 

 

December 31, 2011

 

 

 

Less than 12 Months

 

12 Months or More

 

Total

 

 

 

 

 

 

 

 

 

Unrealized

 

 

 

 

 

 

 

 

 

 

 

 

 

Losses

 

 

 

 

 

 

 

 

 

 

 

 

 

Plus

 

 

 

 

 

 

 

Fair

 

Unrealized

 

Fair

 

OTTI

 

Fair

 

Unrealized

 

 

Value

 

Losses

 

Value

 

in AOCI

 

Value

 

Losses

 

 

(In Thousands)

 

Available-for-Sale Securities:

 

 

 

 

 

 

 

 

 

 

 

 

 

Obligations of U.S. government agencies

 

  $

-

 

  $

-

 

  $

-

 

  $

-

 

  $

-

 

  $

-

 

State and political subdivisions

 

-

 

-

 

-

 

-

 

-

 

-

 

Corporate securities

 

4,799

 

(182)

 

2,878

 

(122)

 

7,677

 

(304)

 

 

 

4,799

 

(182)

 

2,878

 

(122)

 

7,677

 

(304)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Private label residential mortgage related security

 

-

 

-

 

122

 

(42)

 

122

 

(42)

 

Private label commercial mortgage related securities

 

-

 

-

 

-

 

-

 

-

 

-

 

Agency residential mortgage related securities

 

1,538

 

(6)

 

-

 

-

 

1,538

 

(6)

 

Total mortgage related securities

 

1,538

 

(6)

 

122

 

(42)

 

1,660

 

(48)

 

Total available-for-sale securities

 

  $

6,337

 

  $

(188)

 

  $

3,000

 

  $

(164)

 

  $

9,337

 

  $

(352)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Held-to-Maturity Securities: