Table of Contents
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, 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: 001-33126
CITIZENS FIRST CORPORATION
(Exact name of registrant as specified in its charter)
|
Kentucky |
|
61-0912615 |
|
(State or other jurisdiction of
incorporation or organization) |
|
(I.R.S. Employer
Identification No.) |
|
|
|
|
|
1065 Ashley Street, Bowling Green, Kentucky |
|
42103 |
|
(Address of principal executive offices) |
|
(Zip Code) |
(270) 393-0700
(Registrant’s telephone number, including area code)
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 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). 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 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 a 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 class of common stock, as of the latest practicable date.
1,968,777 shares of Common Stock, no par value, were outstanding at July 26, 2012.
Table of Contents
Part 1. Financial Information
Item 1. Financial Statements
Citizens First Corporation
Consolidated Balance Sheets
|
|
|
(In Thousands, Except Share Data) |
|
|
|
|
June 30,
2012 |
|
December 31,
2011 |
|
|
|
|
Unaudited |
|
|
|
|
Assets |
|
|
|
|
|
|
Cash and due from financial institutions |
|
$ |
9,478 |
|
$ |
12,439 |
|
|
Federal funds sold |
|
12,540 |
|
18,110 |
|
|
Cash and cash equivalents |
|
22,018 |
|
30,549 |
|
|
Available-for-sale securities |
|
47,915 |
|
50,718 |
|
|
Loans held for sale |
|
99 |
|
180 |
|
|
Loans, net of allowance for loan losses of $5,899 and $5,865 at June 30, 2012 and December 31, 2011, respectively |
|
294,129 |
|
288,487 |
|
|
Premises and equipment, net |
|
11,704 |
|
11,849 |
|
|
Bank owned life insurance (BOLI) |
|
7,456 |
|
7,324 |
|
|
Federal Home Loan Bank (FHLB) stock, at cost |
|
2,025 |
|
2,025 |
|
|
Accrued interest receivable |
|
1,761 |
|
1,858 |
|
|
Deferred income taxes |
|
2,968 |
|
2,973 |
|
|
Goodwill |
|
4,097 |
|
4,097 |
|
|
Core deposit intangible |
|
1,170 |
|
1,346 |
|
|
Other real estate owned |
|
214 |
|
637 |
|
|
Other assets |
|
1,336 |
|
1,751 |
|
|
Total Assets |
|
$ |
396,892 |
|
$ |
403,794 |
|
|
Liabilities |
|
|
|
|
|
|
Deposits |
|
|
|
|
|
|
Noninterest bearing |
|
41,797 |
|
38,352 |
|
|
Savings, NOW and money market |
|
107,996 |
|
116,968 |
|
|
Time |
|
171,055 |
|
177,411 |
|
|
Total deposits |
|
320,848 |
|
332,731 |
|
|
FHLB advances |
|
29,000 |
|
25,000 |
|
|
Subordinated debentures |
|
5,000 |
|
5,000 |
|
|
Accrued interest payable |
|
247 |
|
275 |
|
|
Other liabilities |
|
1,623 |
|
1,916 |
|
|
Total Liabilities |
|
$ |
356,718 |
|
$ |
364,922 |
|
|
Stockholders’ Equity |
|
|
|
|
|
|
6.5% cumulative preferred stock; no par value, authorized 250 shares, aggregate liquidation preference of $7,998; issued and outstanding 250 shares at June 30, 2012 and December 31, 2011, respectively |
|
$ |
7,659 |
|
$ |
7,659 |
|
|
5.0% Series A cumulative preferred stock; no par value, authorized 250 shares, aggregate liquidation preference of $6,567; issued and outstanding 187 shares at June 30, 2012 and December 31, 2011 respectively |
|
6,495 |
|
6,471 |
|
|
Common stock, no par value, authorized 5,000,000 shares; issued and outstanding 1,968,777 shares at June 30, 2012 and December 31, 2011, respectively |
|
27,072 |
|
27,072 |
|
|
Retained Earnings (deficit) |
|
(1,619 |
) |
(2,706 |
) |
|
Accumulated other comprehensive income |
|
567 |
|
376 |
|
|
Total stockholders’ equity |
|
$ |
40,174 |
|
$ |
38,872 |
|
|
Total liabilities and stockholders’ equity |
|
$ |
396,892 |
|
$ |
403,794 |
|
See Notes to Unaudited Consolidated Financial Statements
3
Table of Contents
Citizens First Corporation
Unaudited Consolidated Statements of Operations
|
|
|
Three months ended
(In Thousands, Except Per Share Data) |
|
|
|
|
June 30, 2012 |
|
June 30, 2011 |
|
|
Interest and dividend income |
|
|
|
|
|
|
Loans |
|
$ |
4,219 |
|
$ |
3,943 |
|
|
Taxable securities |
|
152 |
|
157 |
|
|
Non-taxable securities |
|
162 |
|
183 |
|
|
Federal funds sold and other |
|
33 |
|
35 |
|
|
Total interest and dividend income |
|
4,566 |
|
4,318 |
|
|
Interest expense |
|
|
|
|
|
|
Deposits |
|
758 |
|
984 |
|
|
FHLB advances |
|
105 |
|
77 |
|
|
Subordinated debentures |
|
28 |
|
25 |
|
|
Short-term borrowings |
|
0 |
|
2 |
|
|
Total interest expense |
|
891 |
|
1,088 |
|
|
Net interest income |
|
3,675 |
|
3,230 |
|
|
Provision for loan losses |
|
450 |
|
300 |
|
|
Net interest income after provision for loan losses |
|
3,225 |
|
2,930 |
|
|
Non-interest income |
|
|
|
|
|
|
Service charges on deposit accounts |
|
340 |
|
334 |
|
|
Other service charges and fees |
|
143 |
|
113 |
|
|
Gain on sale of mortgage loans |
|
64 |
|
56 |
|
|
Non-deposit brokerage fees |
|
57 |
|
60 |
|
|
Lease income |
|
68 |
|
68 |
|
|
BOLI income |
|
66 |
|
68 |
|
|
Gain on sale of securities available-for-sale |
|
55 |
|
61 |
|
|
Total non-interest income |
|
793 |
|
760 |
|
|
Non-interest expenses |
|
|
|
|
|
|
Salaries and employee benefits |
|
1,414 |
|
1,201 |
|
|
Net occupancy expense |
|
479 |
|
463 |
|
|
Advertising and public relations |
|
93 |
|
102 |
|
|
Professional fees |
|
149 |
|
171 |
|
|
Data processing services |
|
221 |
|
172 |
|
|
Franchise shares and deposit tax |
|
141 |
|
114 |
|
|
FDIC Insurance |
|
73 |
|
112 |
|
|
Core deposit intangible amortization |
|
88 |
|
65 |
|
|
Postage and office supplies |
|
59 |
|
44 |
|
|
Telephone and other communication |
|
44 |
|
36 |
|
|
Other real estate owned expenses |
|
105 |
|
87 |
|
|
Other |
|
179 |
|
154 |
|
|
Total non-interest expenses |
|
3,045 |
|
2,721 |
|
|
Income before income taxes |
|
973 |
|
969 |
|
|
Provision for income taxes |
|
247 |
|
241 |
|
|
Net income |
|
$ |
726 |
|
$ |
728 |
|
|
Dividends and accretion on preferred stock |
|
223 |
|
223 |
|
|
Net income available for common stockholders |
|
$ |
503 |
|
$ |
505 |
|
|
Basic earnings per common share |
|
$ |
0.25 |
|
$ |
0.26 |
|
|
Diluted earnings per common share |
|
$ |
0.24 |
|
$ |
0.25 |
|
|
Comprehensive income, net of tax |
|
|
|
|
|
|
Net Income |
|
726 |
|
728 |
|
|
Other comprehensive income |
|
|
|
|
|
|
Reclassification adjustment for losses (gains) included in net income, net |
|
(36 |
) |
(40 |
) |
|
Change in unrealized gain (loss) on available for sale securities, net |
|
203 |
|
477 |
|
|
Comprehensive income |
|
$ |
893 |
|
$ |
1,165 |
|
See Notes to Unaudited Consolidated Financial Statements
4
Table of Contents
Citizens First Corporation
Unaudited Consolidated Statements of Operations
|
|
|
Six months ended
(In Thousands, Except Per Share Data) |
|
|
|
|
June 30, 2012 |
|
June 30, 2011 |
|
|
Interest and dividend income |
|
|
|
|
|
|
Loans |
|
$ |
8,479 |
|
$ |
7,898 |
|
|
Taxable securities |
|
314 |
|
310 |
|
|
Non-taxable securities |
|
325 |
|
361 |
|
|
Federal funds sold and other |
|
66 |
|
68 |
|
|
Total interest and dividend income |
|
9,184 |
|
8,637 |
|
|
Interest expense |
|
|
|
|
|
|
Deposits |
|
1,561 |
|
1,982 |
|
|
FHLB advances |
|
200 |
|
154 |
|
|
Subordinated debentures |
|
55 |
|
49 |
|
|
Short-term borrowings |
|
0 |
|
3 |
|
|
Total interest expense |
|
1,816 |
|
2,188 |
|
|
Net interest income |
|
7,368 |
|
6,449 |
|
|
Provision for loan losses |
|
820 |
|
525 |
|
|
Net interest income after provision for loan losses |
|
6,548 |
|
5,924 |
|
|
Non-interest income |
|
|
|
|
|
|
Service charges on deposit accounts |
|
659 |
|
655 |
|
|
Other service charges and fees |
|
262 |
|
233 |
|
|
Gain on sale of mortgage loans |
|
154 |
|
125 |
|
|
Non-deposit brokerage fees |
|
91 |
|
88 |
|
|
Lease income |
|
136 |
|
125 |
|
|
BOLI income |
|
132 |
|
135 |
|
|
Gain on sale of securities available-for-sale |
|
55 |
|
61 |
|
|
Total non-interest income |
|
1,489 |
|
1,422 |
|
|
Non-interest expenses |
|
|
|
|
|
|
Salaries and employee benefits |
|
2,823 |
|
2,507 |
|
|
Net occupancy expense |
|
938 |
|
938 |
|
|
Advertising and public relations |
|
168 |
|
168 |
|
|
Professional fees |
|
292 |
|
285 |
|
|
Data processing services |
|
450 |
|
348 |
|
|
Franchise shares and deposit tax |
|
266 |
|
228 |
|
|
FDIC Insurance |
|
145 |
|
215 |
|
|
Core deposit intangible amortization |
|
176 |
|
131 |
|
|
Postage and office supplies |
|
109 |
|
77 |
|
|
Telephone and other communication |
|
86 |
|
79 |
|
|
Other real estate owned expenses |
|
150 |
|
137 |
|
|
Other |
|
369 |
|
312 |
|
|
Total non-interest expenses |
|
5,972 |
|
5,425 |
|
|
Income before income taxes |
|
2,065 |
|
1,921 |
|
|
Provision for income taxes |
|
531 |
|
477 |
|
|
Net income |
|
$ |
1,534 |
|
$ |
1,444 |
|
|
Dividends and accretion on preferred stock |
|
447 |
|
508 |
|
|
Net income available for common stockholders |
|
$ |
1,087 |
|
$ |
936 |
|
|
Basic earnings per common share |
|
$ |
0.55 |
|
$ |
0.47 |
|
|
Diluted earnings per common share |
|
$ |
0.53 |
|
$ |
0.46 |
|
|
Comprehensive income, net of tax |
|
|
|
|
|
|
Net Income |
|
1,534 |
|
1,444 |
|
|
Other comprehensive income |
|
|
|
|
|
|
Reclassification adjustment for losses (gains) included in net income, net |
|
(36 |
) |
(40 |
) |
|
Change in unrealized gain (loss) on available for sale securities, net |
|
227 |
|
794 |
|
|
Comprehensive income |
|
$ |
1,725 |
|
$ |
2,198 |
|
See Notes to Unaudited Consolidated Financial Statements
5
Table of Contents
Citizens First Corporation
Unaudited Consolidated Statements of Changes in Stockholders’ Equity
In thousands, except share data
|
|
|
Preferred
Stock |
|
Common
Stock |
|
Retained
Earnings
(Deficit) |
|
Accumulated
Other
Comprehensive
Income (Loss) |
|
Total |
|
|
Balance, January 1, 2011 |
|
$ |
16,245 |
|
$ |
27,072 |
|
$ |
(4,357 |
) |
$ |
(651 |
) |
$ |
38,309 |
|
|
Net income |
|
|
|
|
|
1,444 |
|
|
|
1,444 |
|
|
Repayment of 63 shares Series A preferred stock |
|
(2,212 |
) |
|
|
|
|
|
|
(2,212 |
) |
|
Accretion on Series A preferred stock |
|
73 |
|
|
|
(73 |
) |
|
|
— |
|
|
Change in other comprehensive income, net |
|
|
|
|
|
|
|
754 |
|
754 |
|
|
Dividend declared and paid on preferred stock |
|
|
|
|
|
(435 |
) |
|
|
(435 |
) |
|
Balance, June 30, 2011 |
|
$ |
14,106 |
|
$ |
27,072 |
|
$ |
(3,421 |
) |
$ |
103 |
|
$ |
37,860 |
|
|
|
|
Preferred
Stock |
|
Common
Stock |
|
Retained
Earnings
(Deficit) |
|
Accumulated
Other
Comprehensive
Income |
|
Total |
|
|
Balance, January 1, 2012 |
|
$ |
14,130 |
|
$ |
27,072 |
|
$ |
(2,706 |
) |
$ |
376 |
|
$ |
38,872 |
|
|
Net income |
|
|
|
|
|
1,534 |
|
|
|
1,534 |
|
|
Accretion on Series A preferred stock |
|
24 |
|
|
|
(24 |
) |
|
|
— |
|
|
Change in other comprehensive income, net |
|
|
|
|
|
|
|
191 |
|
191 |
|
|
Dividend declared and paid on preferred stock |
|
|
|
|
|
(423 |
) |
|
|
(423 |
) |
|
Balance, June 30, 2012 |
|
$ |
14,154 |
|
$ |
27,072 |
|
$ |
(1,619 |
) |
$ |
567 |
|
$ |
40,174 |
|
See Notes to Unaudited Consolidated Financial Statements
6
Table of Contents
Citizens First Corporation
Unaudited Consolidated Statements of Cash Flows
|
|
|
(In Thousands) |
|
|
|
|
June 30, 2012 |
|
June 30, 2011 |
|
|
Operating Activities |
|
|
|
|
|
|
Net income |
|
$ |
1,534 |
|
$ |
1,444 |
|
|
Items not requiring (providing) cash: |
|
|
|
|
|
|
Depreciation and amortization |
|
320 |
|
370 |
|
|
Provision for loan losses |
|
820 |
|
525 |
|
|
Amortization of premiums and discounts on securities |
|
131 |
|
101 |
|
|
Amortization of core deposit intangible |
|
176 |
|
131 |
|
|
Deferred income taxes |
|
(93 |
) |
(177 |
) |
|
Bank-owned life insurance |
|
(132 |
) |
(135 |
) |
|
Proceeds from sale of mortgage loans held for sale |
|
8,086 |
|
4,299 |
|
|
Origination of mortgage loans held for sale |
|
(7,851 |
) |
(4,117 |
) |
|
Gains on sales of available-for- sale securities |
|
(55 |
) |
(61 |
) |
|
Gains on sales of loans |
|
(154 |
) |
(125 |
) |
|
Losses on sale of other real estate owned |
|
116 |
|
91 |
|
|
Gain on sale premises and equipment |
|
(8 |
) |
(9 |
) |
|
Changes in: |
|
|
|
|
|
|
Interest receivable |
|
97 |
|
24 |
|
|
Other assets |
|
415 |
|
569 |
|
|
Interest payable and other liabilities |
|
(321 |
) |
(21 |
) |
|
Net cash provided by operating activities |
|
$ |
3,081 |
|
2,909 |
|
|
Investing Activities |
|
|
|
|
|
|
Loan originations and payments, net |
|
(6,550 |
) |
(2,079 |
) |
|
Purchase of premises and equipment |
|
(174 |
) |
(89 |
) |
|
Proceeds from maturities of available-for-sale securities |
|
9,749 |
|
6,583 |
|
|
Proceeds from sales of available-for-sale securities |
|
962 |
|
1,100 |
|
|
Proceeds from sales of other real estate owned |
|
395 |
|
778 |
|
|
Purchase of available-for-sale securities |
|
(7,696 |
) |
(9,855 |
) |
|
Proceeds from sales of premises and equipment |
|
8 |
|
11 |
|
|
Net cash (used in) investing activities |
|
(3,306 |
) |
(3,551 |
) |
|
Financing Activities |
|
|
|
|
|
|
Net change in demand deposits, money market, NOW and savings accounts |
|
(5,527 |
) |
7,941 |
|
|
Net change in time deposits |
|
(6,356 |
) |
(3,387 |
) |
|
Partial Repayment of TARP preferred stock |
|
— |
|
(2,212 |
) |
|
Proceeds from FHLB advances |
|
9,000 |
|
— |
|
|
Repayment of FHLB advances |
|
(5,000 |
) |
— |
|
|
Net change in fed funds purchased and repurchase agreements |
|
— |
|
245 |
|
|
Dividends paid on preferred stock |
|
(423 |
) |
(435 |
) |
|
Net cash provided by (used in) financing activities |
|
(8,306 |
) |
2,152 |
|
|
Increase in Cash and Cash Equivalents |
|
(8,531 |
) |
1,510 |
|
|
Cash and Cash Equivalents, Beginning of Year |
|
30,549 |
|
14,811 |
|
|
Cash and Cash Equivalents, End of Quarter |
|
$ |
22,018 |
|
$ |
16,321 |
|
|
|
|
|
|
|
|
|
Supplemental Cash Flows Information |
|
|
|
|
|
|
Interest paid |
|
$ |
1,844 |
|
$ |
2,213 |
|
|
Income taxes paid |
|
$ |
475 |
|
$ |
270 |
|
|
Loans transferred to other real estate owned |
|
$ |
88 |
|
$ |
402 |
|
See Notes to Unaudited Consolidated Financial Statements
7
Table of Contents
Citizens First Corporation
Notes to Unaudited Consolidated Financial Statements
Note 1 — Nature of Operations and Summary of Significant Accounting Policies
The accounting and reporting policies of Citizens First Corporation (the “Company”) and its subsidiary, Citizens First Bank, Inc. (the “Bank”), conform to U.S. generally accepted accounting principles and general practices within the banking industry. The consolidated financial statements include the accounts of the Company and the Bank. All significant intercompany transactions and accounts have been eliminated in consolidation.
Certain information and note disclosures normally included in the Company’s annual financial statements prepared in accordance with U.S. generally accepted accounting principles have been condensed or omitted. These consolidated financial statements should be read in conjunction with the consolidated financial statements and notes thereto included in the Company’s 2011 Annual Report on Form 10-K filed with the Securities and Exchange Commission.
The preparation of financial statements in conformity with U.S. generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities as of the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Estimates used in the preparation of the financial statements are based on various factors including the current interest rate environment and the general strength of the local economy. Changes in the overall interest rate environment can significantly affect the Company’s net interest income and the value of its recorded assets and liabilities. Actual results could differ from those estimates used in the preparation of the financial statements.
In the opinion of management, all adjustments considered necessary for a fair presentation have been reflected in the accompanying unaudited financial statements. Those adjustments consist only of normal recurring adjustments. Results of interim periods are not necessarily indicative of results to be expected for the full year. The consolidated balance sheet of the Company as of December 31, 2011 has been derived from the audited consolidated balance sheet of the Company as of that date.
Note 2 - Reclassifications
Certain reclassifications have been made to the consolidated financial statements of prior periods to conform to the current period presentation. These reclassifications do not affect net income or total shareholders’ equity as previously reported.
8
Table of Contents
Note 3 - Available-For-Sale Securities
The following table summarizes the amortized cost and fair value of the available-for sale securities portfolio at June 30, 2012 and December 31, 2011 and the corresponding amounts of gross unrealized gains and losses recognized in accumulated other comprehensive income (loss):
|
|
|
(Dollars in Thousands) |
|
|
|
|
Amortized
Cost |
|
Gross
Unrealized
Gains |
|
Gross
Unrealized
Losses |
|
Fair
Value |
|
|
June 30, 2012 |
|
|
|
|
|
|
|
|
|
|
U. S. government agencies and government sponsored entities |
|
$ |
7,536 |
|
$ |
16 |
|
$ |
(4 |
) |
$ |
7,548 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
State and municipal |
|
17,850 |
|
1,270 |
|
(1 |
) |
19,119 |
|
|
Agency mortgage-backed securities: residential |
|
19,804 |
|
394 |
|
— |
|
20,198 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Trust preferred security |
|
1,866 |
|
— |
|
(816 |
) |
1,050 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Total investment securities |
|
$ |
47,056 |
|
$ |
1,680 |
|
$ |
(821 |
) |
$ |
47,915 |
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2011 |
|
|
|
|
|
|
|
|
|
|
U. S. government agencies and government sponsored entities |
|
$ |
11,555 |
|
$ |
27 |
|
$ |
(13 |
) |
$ |
11,569 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
State and municipal |
|
18,390 |
|
1,126 |
|
(2 |
) |
19,514 |
|
|
Agency mortgage-backed securities: residential |
|
18,337 |
|
305 |
|
(7 |
) |
18,635 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Trust preferred security |
|
1,865 |
|
— |
|
(865 |
) |
1,000 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total investment securities |
|
$ |
50,147 |
|
$ |
1,458 |
|
$ |
(887 |
) |
$ |
50,718 |
|
The amortized cost and fair value of investment securities at June 30, 2012 by contractual maturity were as follows. Securities not due at a single maturity date, primarily mortgage-backed securities, are shown separately.
|
|
|
June 30, 2012
(Dollars in Thousands) |
|
|
|
|
Available-For-Sale |
|
|
|
|
Amortized Cost |
|
Fair Value |
|
|
Due in one year or less |
|
250 |
|
258 |
|
|
Due from one to five years |
|
5,935 |
|
6,120 |
|
|
Due from five to ten years |
|
11,729 |
|
12,319 |
|
|
Due after ten years |
|
9,338 |
|
9,020 |
|
|
Agency mortgage-backed: residential |
|
19,804 |
|
20,198 |
|
|
|
|
|
|
|
|
|
Total |
|
$ |
47,056 |
|
$ |
47,915 |
|
|
|
|
|
|
|
|
|
9
Table of Contents
The following table summarizes the investment securities with unrealized losses at June 30, 2012 and December 31, 2011, aggregated by investment category and length of time that individual securities have been in continuous unrealized loss position:
|
|
|
(Dollars in Thousands) |
|
|
|
|
Less than 12 Months |
|
12 Months or More |
|
Total |
|
|
Description of
Securities |
|
Fair Value |
|
Unrealized
Losses |
|
Fair Value |
|
Unrealized
Losses |
|
Fair Value |
|
Unrealized
Losses |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
June 30, 2012: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
U.S. government agencies and government sponsored entities |
|
$ |
1,009 |
|
$ |
(4 |
) |
$ |
— |
|
$ |
— |
|
$ |
1,009 |
|
$ |
(4 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
State and municipal |
|
317 |
|
(1 |
) |
— |
|
— |
|
317 |
|
(1 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Trust preferred security |
|
— |
|
— |
|
1,050 |
|
(816 |
) |
1,050 |
|
(816 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total temporarily impaired |
|
$ |
1,326 |
|
$ |
(5 |
) |
$ |
1,050 |
|
$ |
(816 |
) |
$ |
2,376 |
|
$ |
(821 |
) |
|
|
|
(Dollars in Thousands) |
|
|
|
|
Less than 12 Months |
|
12 Months or More |
|
Total |
|
|
Description of
Securities |
|
Fair Value |
|
Unrealized
Losses |
|
Fair Value |
|
Unrealized
Losses |
|
Fair Value |
|
Unrealized
Losses |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2011: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
U.S. government agencies and government sponsored entities |
|
$ |
4,505 |
|
$ |
(13 |
) |
$ |
— |
|
$ |
— |
|
$ |
4,505 |
|
$ |
(13 |
) |
|
Agency mortgage backed securities - residential |
|
2,569 |
|
(7 |
) |
— |
|
— |
|
2,569 |
|
(7 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
State and municipal |
|
304 |
|
(2 |
) |
— |
|
— |
|
304 |
|
(2 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Trust preferred security |
|
— |
|
— |
|
1,000 |
|
(865 |
) |
1,000 |
|
(865 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total temporarily impaired |
|
$ |
7,378 |
|
$ |
(22 |
) |
$ |
1,000 |
|
$ |
(865 |
) |
$ |
8,378 |
|
$ |
(887 |
) |
Other-Than-Temporary-Impairment
Management evaluates securities for other-than-temporary impairment (“OTTI”) at least on a quarterly basis, and more frequently when economic or market conditions warrant such an evaluation. Investment securities classified as available-for-sale are generally evaluated for OTTI under ASC Topic 320, “Investments - Debt and Equity Securities.”
In determining OTTI under the ASC Topic 320 model, management considers many factors, including: (1) the length of time and the extent to which the fair value has been less than cost, (2) the financial condition and near-term prospects of the issuer, (3) whether the market decline was affected by macroeconomic conditions, and (4) whether the entity has the intent to sell the debt security or more likely than not will be required to sell the debt security before its anticipated recovery. The assessment of whether an other-than-temporary decline exists involves a high degree of subjectivity and judgment and is based on the information available to management at a point in time.
10
Table of Contents
As of June 30, 2012, our securities portfolio consisted of $47.9 million fair value of securities, $2.4 million, or 3 securities, of which were in an unrealized loss position.
All rated securities are investment grade. For those that are not rated, the financial condition has been evaluated and no adverse conditions were identified related to repayment. Declines in fair value are a function of rate differences in the market and market illiquidity. The Company does not intend or is not expected to be required to sell these securities before recovery of their amortized cost basis.
The Company’s unrealized losses relate primarily to its investment in a single trust preferred security. The security is a single-issuer trust preferred that is not rated. While market conditions have allowed some increase in the fair market value of the trust preferred security at June 30, 2012, a full recovery has not yet occurred. No impairment charge is being taken as no loss of principal or interest is anticipated. All principal and interest payments are being received as scheduled. On a quarterly basis, we evaluate the creditworthiness of the issuer, a bank holding company with operations in the state of Kentucky. Based on the issuer’s continued profitability and well-capitalized position, we do not deem that there is credit loss. The decline in fair value is primarily attributable to illiquidity affecting these markets and not the expected cash flows of the individual securities. We have evaluated the financial condition and near term prospects of the issuer and expect to fully recover our cost basis. This security continues to pay interest as agreed and future payments are expected to be made as agreed. This security is not considered to be other-than-temporarily impaired.
Note 4 - Loans and Allowance for Loan Losses
Categories of loans include:
|
|
|
(Dollars in Thousands) |
|
|
|
|
June 30,
2012 |
|
December 31,
2011 |
|
|
|
|
|
|
|
|
|
Commercial |
|
$ |
51,707 |
|
$ |
58,853 |
|
|
Commercial real estate: |
|
|
|
|
|
|
Construction |
|
11,589 |
|
13,720 |
|
|
Other |
|
147,850 |
|
130,300 |
|
|
Residential real estate |
|
81,693 |
|
83,486 |
|
|
Consumer: |
|
|
|
|
|
|
Auto |
|
3,615 |
|
3,998 |
|
|
Other |
|
3,574 |
|
3,995 |
|
|
Total loans |
|
300,028 |
|
294,352 |
|
|
Less allowance for loan losses |
|
(5,899 |
) |
(5,865 |
) |
|
|
|
|
|
|
|
|
Net loans |
|
$ |
294,129 |
|
$ |
288,487 |
|
The following table sets forth an analysis of our allowance for loan losses for the three months ending June 30, 2012 and 2011.
11
Table of Contents
|
|
|
(Dollars In Thousands) |
|
|
|
|
Commercial |
|
Commercial
Real Estate |
|
Residential
Real Estate |
|
Consumer |
|
Unallocated |
|
Total |
|
|
June 30, 2012 Allowance for loan losses: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Beginning balance |
|
$ |
1,915 |
|
$ |
2,628 |
|
$ |
981 |
|
$ |
78 |
|
$ |
326 |
|
$ |
5,928 |
|
|
Provision for loan losses |
|
340 |
|
194 |
|
19 |
|
(9 |
) |
(94 |
) |
450 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loans charged-off |
|
(200 |
) |
(85 |
) |
(209 |
) |
(1 |
) |
— |
|
(495 |
) |
|
Recoveries |
|
— |
|
— |
|
14 |
|
2 |
|
— |
|
16 |
|
|
Total ending allowance balance |
|
$ |
2,055 |
|
$ |
2,737 |
|
$ |
805 |
|
$ |
70 |
|
$ |
232 |
|
$ |
5,899 |
|
|
|
|
(Dollars In Thousands) |
|
|
|
|
Commercial |
|
Commercial
Real Estate |
|
Residential
Real Estate |
|
Consumer |
|
Unallocated |
|
Total |
|
|
June 30, 2011 Allowance for loan losses: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Beginning balance |
|
$ |
2,204 |
|
$ |
1,657 |
|
$ |
659 |
|
$ |
190 |
|
$ |
294 |
|
$ |
5,004 |
|
|
Provision for loan losses |
|
(3 |
) |
49 |
|
256 |
|
(34 |
) |
32 |
|
300 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loans charged-off |
|
— |
|
— |
|
(89 |
) |
(11 |
) |
— |
|
(100 |
) |
|
Recoveries |
|
8 |
|
— |
|
— |
|
3 |
|
— |
|
11 |
|
|
Total ending allowance balance |
|
$ |
2,209 |
|
$ |
1,706 |
|
$ |
826 |
|
$ |
148 |
|
$ |
326 |
|
$ |
5,215 |
|
The following table sets forth an analysis of our allowance for loan losses for the six months ending June 30, 2012 and 2011.
|
|
|
(Dollars In Thousands) |
|
|
|
|
Commercial |
|
Commercial
Real Estate |
|
Residential
Real Estate |
|
Consumer |
|
Unallocated |
|
Total |
|
|
June 30, 2012 Allowance for loan losses: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Beginning balance |
|
$ |
2,667 |
|
$ |
1,986 |
|
$ |
858 |
|
$ |
81 |
|
$ |
273 |
|
$ |
5,865 |
|
|
Provision for loan losses |
|
(312 |
) |
836 |
|
339 |
|
(3 |
) |
(40 |
) |
820 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loans charged-off |
|
(300 |
) |
(85 |
) |
(408 |
) |
(13 |
) |
— |
|
(806 |
) |
|
Recoveries |
|
— |
|
— |
|
15 |
|
5 |
|
— |
|
20 |
|
|
Total ending allowance balance |
|
$ |
2,055 |
|
$ |
2,737 |
|
$ |
804 |
|
$ |
70 |
|
$ |
233 |
|
$ |
5,899 |
|
|
|
|
(Dollars In Thousands) |
|
|
|
|
Commercial |
|
Commercial
Real Estate |
|
Residential
Real Estate |
|
Consumer |
|
Unallocated |
|
Total |
|
|
June 30, 2011 Allowance for loan losses: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Beginning balance |
|
$ |
3,212 |
|
$ |
902 |
|
$ |
604 |
|
$ |
200 |
|
$ |
83 |
|
$ |
5,001 |
|
|
Provision for loan losses |
|
(828 |
) |
804 |
|
337 |
|
(32 |
) |
244 |
|
525 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loans charged-off |
|
(187 |
) |
— |
|
(121 |
) |
(27 |
) |
— |
|
(335 |
) |
|
Recoveries |
|
12 |
|
— |
|
6 |
|
6 |
|
— |
|
24 |
|
|
Total ending allowance balance |
|
$ |
2,209 |
|
$ |
1,706 |
|
$ |
826 |
|
$ |
147 |
|
$ |
327 |
|
$ |
5,215 |
|
12
Table of Contents
The following tables present the balance in the allowance for loan losses and the recorded investment in loans by portfolio segment and based on the impairment method as of June 30, 2012 and December 31, 2011. As of June 30, 2012 and December 31, 2011, accrued interest receivable of $1.7 million and $1.6 million, respectively, and net deferred loan fees of $144 thousand and $96 thousand, respectively, are not considered significant and therefore not included in the recorded investment in loans presented in the following tables.
|
|
|
(Dollars In Thousands) |
|
|
June 30, 2012 |
|
Commercial |
|
Commercial
Real Estate |
|
Residential
Real Estate |
|
Consumer |
|
Unallocated |
|
Total |
|
|
Allowance for loan losses: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Ending allowance balance attributable to loans: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Individually evaluated for impairment |
|
$ |
1,465 |
|
$ |
2,060 |
|
$ |
94 |
|
$ |
16 |
|
$ |
— |
|
$ |
3,635 |
|
|
Collectively evaluated |
|
590 |
|
677 |
|
710 |
|
54 |
|
233 |
|
2,264 |
|
|
Total ending allowance balance |
|
$ |
2,055 |
|
$ |
2,737 |
|
$ |
804 |
|
$ |
70 |
|
$ |
233 |
|
$ |
5,899 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loans: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Individually evaluated for impairment |
|
$ |
4,167 |
|
$ |
7,322 |
|
$ |
682 |
|
$ |
22 |
|
$ |
— |
|
$ |
12,193 |
|
|
Collectively evaluated |
|
47,540 |
|
152,117 |
|
81,011 |
|
7,167 |
|
— |
|
287,835 |
|
|
Total ending loans balance |
|
$ |
51,707 |
|
$ |
159,439 |
|
$ |
81,693 |
|
$ |
7,189 |
|
$ |
— |
|
$ |
300,028 |
|
|
|
|
(Dollars In Thousands) |
|
|
December 31, 2011 |
|
Commercial |
|
Commercial
Real Estate |
|
Residential
Real Estate |
|
Consumer |
|
Unallocated |
|
Total |
|
|
Allowance for loan losses: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Ending allowance balance attributable to loans: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Individually evaluated for impairment |
|
$ |
1,738 |
|
$ |
973 |
|
$ |
310 |
|
$ |
6 |
|
$ |
— |
|
$ |
3,027 |
|
|
Collectively evaluated |
|
929 |
|
1,013 |
|
548 |
|
75 |
|
273 |
|
2,838 |
|
|
Total ending allowance balance |
|
$ |
2,667 |
|
$ |
1,986 |
|
$ |
858 |
|
$ |
81 |
|
$ |
273 |
|
$ |
5,865 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loans: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Individually evaluated for impairment |
|
$ |
4,186 |
|
$ |
3,624 |
|
$ |
971 |
|
$ |
6 |
|
$ |
— |
|
$ |
8,787 |
|
|
Collectively evaluated |
|
54,667 |
|
140,396 |
|
82,515 |
|
7,987 |
|
— |
|
285,565 |
|
|
Total ending loans balance |
|
$ |
58,853 |
|
$ |
144,020 |
|
$ |
83,486 |
|
$ |
7,993 |
|
$ |
— |
|
$ |
294,352 |
|
The following table presents information related to impaired loans by class of loans as of June 30, 2012 and for the year ended December 31, 2011. In this table presentation the unpaid principal balance of the loans has been reduced by net charge-offs and is equivalent to the recorded investment.
13
Table of Contents
|
|
|
(Dollars in Thousands)
June 30, 2012 |
|
(Dollars in Thousands)
December 31, 2011 |
|
|
|
|
Unpaid
Principal
Balance |
|
Allowance
for Loan
Losses
Allocated |
|
Unpaid
Principal
Balance |
|
Allowance
for Loan
Losses
Allocated |
|
|
|
|
|
|
|
|
|
|
|
|
|
Commercial |
|
$ |
2,349 |
|
$ |
— |
|
$ |
2,020 |
|
$ |
— |
|
|
Commercial real estate: |
|
|
|
|
|
|
|
|
|
|
Construction |
|
— |
|
— |
|
— |
|
— |
|
|
Other |
|
632 |
|
— |
|
999 |
|
— |
|
|
Residential real estate |
|
399 |
|
— |
|
374 |
|
— |
|
|
Consumer: |
|
|
|
|
|
|
|
|
|
|
Auto |
|
4 |
|
— |
|
— |
|
— |
|
|
Other |
|
2 |
|
— |
|
— |
|
— |
|
|
Subtotal |
|
3,386 |
|
— |
|
3,393 |
|
— |
|
|
|
|
|
|
|
|
|
|
|
|
|
With an allowance recorded: |
|
|
|
|
|
|
|
|
|
|
Commercial |
|
1,818 |
|
1,465 |
|
2,166 |
|
1,738 |
|
|
Commercial real estate: |
|
|
|
|
|
|
|
|
|
|
Construction |
|
— |
|
— |
|
— |
|
— |
|
|
Other |
|
6,690 |
|
2,060 |
|
2,625 |
|
973 |
|
|
Residential real estate |
|
283 |
|
94 |
|
597 |
|
310 |
|
|
Consumer: |
|
|
|
|
|
|
|
|
|
|
Auto |
|
16 |
|
16 |
|
5 |
|
5 |
|
|
Other |
|
0 |
|
0 |
|
1 |
|
1 |
|
|
Subtotal |
|
8,807 |
|
3,635 |
|
5,394 |
|
3,027 |
|
|
Total |
|
$ |
12,193 |
|
$ |
3,635 |
|
$ |
8,787 |
|
$ |
3,027 |
|
Information on impaired loans for the three months ending June 30, 2012 and 2011 is as follows:
|
|
|
(Dollars in Thousands)
June 30, 2012 |
|
(Dollars in Thousands)
June 30, 2011 |
|
|
|
|
Average
Recorded
Investment |
|
Interest
Income
Recognized |
|
Cash Basis
Interest
Recognized |
|
Average
Recorded
Investment |
|
Interest
Income
Recognized |
|
Cash Basis
Interest
Recognized |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commercial |
|
$ |
4,148 |
|
28 |
|
6 |
|
$ |
2,956 |
|
37 |
|
38 |
|
|
Commercial real estate: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Construction |
|
— |
|
— |
|
— |
|
— |
|
— |
|
— |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other |
|
7,418 |
|
121 |
|
94 |
|
3,629 |
|
35 |
|
27 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Residential real estate |
|
729 |
|
9 |
|
1 |
|
953 |
|
7 |
|
— |
|
|
Consumer: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Auto |
|
17 |
|
— |
|
— |
|
6 |
|
|
|
— |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other |
|
2 |
|
— |
|
— |
|
— |
|
— |
|
— |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total |
|
$ |
12,314 |
|
$ |
158 |
|
$ |
101 |
|
$ |
7,544 |
|
$ |
79 |
|
$ |
65 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Information on impaired loans for the six months ending June 30, 2012 and 2011 is as follows:
14
Table of Contents
|
|
|
(Dollars in Thousands)
June 30, 2012 |
|
(Dollars in Thousands)
June 30, 2011 |
|
|
|
|
Average
Recorded
Investment |
|
Interest
Income
Recognized |
|
Cash Basis
Interest
Recognized |
|
Average
Recorded
Investment |
|
Interest
Income
Recognized |
|
Cash Basis
Interest
Recognized |
|
|
|
|
|