PINX:CFOK Community First Bancorp Quarterly Report 10-Q Filing - 3/31/2012

Effective Date 3/31/2012

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Table of Contents

 

 

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C.  20549

 

FORM 10-Q

 

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF

THE SECURITIES EXCHANGE ACT OF 1934

 

For Quarterly Period Ended March 31, 2012

 

Commission File No. 000-29640

 

COMMUNITY FIRST BANCORPORATION

(Exact name of registrant as specified in its charter)

 

South Carolina

 

58-2322486

(State or other jurisdiction of

 

(IRS Employer Identification No.)

incorporation or organization)

 

 

 

449 HIGHWAY 123 BYPASS

SENECA, SOUTH CAROLINA  29678

(Address of principal executive offices, zip code)

 

(864) 886-0206

(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 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 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.   (Check one):

 

Large accelerated filer o

 

Accelerated filer o

 

 

 

Non-accelerated filer o

 

Smaller reporting company x

(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

 

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date:  Common Stock, no par or stated value,4,152,294 Shares Outstanding on May 18, 2012.

 

 

 




Table of Contents

 

PART I — FINANCIAL INFORMATION

 

Item 1. — Financial Statements

 

COMMUNITY FIRST BANCORPORATION

Consolidated Balance Sheets

 

 

 

(Unaudited)

 

 

 

 

 

March 31,

 

December 31,

 

 

 

2012

 

2011

 

 

 

(Dollars in thousands)

 

Assets

 

 

 

 

 

Cash and due from banks

 

$

1,747

 

$

3,355

 

Interest bearing deposits due from banks

 

143,585

 

121,555

 

Cash and cash equivalents

 

145,332

 

124,910

 

Debt securities available-for-sale

 

103,388

 

124,094

 

Equity securities available-for-sale

 

3

 

317

 

Securities held-to-maturity (fair value $4,340 for 2012 and $4,752 for 2011)

 

4,004

 

4,396

 

Federal Home Loan Bank stock, at cost

 

1,143

 

1,143

 

Loans

 

216,278

 

224,656

 

Allowance for loan losses

 

(4,861

)

(4,359

)

Loans - net

 

211,417

 

220,297

 

Premises and equipment - net

 

8,938

 

8,929

 

Accrued interest receivable

 

1,513

 

1,879

 

Bank-owned life insurance

 

10,104

 

10,016

 

Foreclosed assets

 

18,548

 

18,306

 

Other assets

 

2,916

 

2,826

 

 

 

 

 

 

 

Total assets

 

$

507,306

 

$

517,113

 

 

 

 

 

 

 

Liabilities

 

 

 

 

 

Deposits

 

 

 

 

 

Noninterest bearing

 

$

65,662

 

$

68,465

 

Interest bearing

 

390,634

 

395,377

 

Total deposits

 

456,296

 

463,842

 

Accrued interest payable

 

1,056

 

1,154

 

Long-term debt

 

6,500

 

6,500

 

Other liabilities

 

2,598

 

2,552

 

Total liabilities

 

466,450

 

474,048

 

 

 

 

 

 

 

Shareholders’ equity

 

 

 

 

 

Preferred stock - Series A - non-voting 5% cumulative - $1,000 per share liquidation preference; 5,000 shares authorized; issued and outstanding - 3,150 shares

 

3,126

 

3,126

 

Preferred stock - no par value; 9,995,000 shares authorized; None issued and outstanding

 

 

 

Common stock - no par value; 10,000,000 shares authorized; issued and outstanding - 4,152,294 for 2012 and 4,152,334 for 2011

 

40,669

 

40,669

 

Additional paid-in capital

 

748

 

748

 

Retained earnings (Accumulated deficit)

 

(3,733

)

(3,014

)

Accumulated other comprehensive income

 

46

 

1,536

 

Total shareholders’ equity

 

40,856

 

43,065

 

 

 

 

 

 

 

Total liabilities and shareholders’ equity

 

$

507,306

 

$

517,113

 

 

See accompanying notes to unaudited consolidated financial statements.

 

3



Table of Contents

 

COMMUNITY FIRST BANCORPORATION

Consolidated Statements of Income (Loss)

 

 

 

(Unaudited)

 

 

 

Three Months Ended

 

 

 

March 31,

 

 

 

2012

 

2011

 

 

 

(Dollars in thousands,
except per share)

 

Interest income

 

 

 

 

 

Loans, including fees

 

$

3,369

 

$

3,623

 

Interest bearing deposits due from banks

 

68

 

28

 

Securities

 

 

 

 

 

Taxable

 

752

 

1,124

 

Tax-exempt

 

176

 

177

 

Other investments

 

4

 

2

 

Total interest income

 

4,369

 

4,954

 

Interest expense

 

 

 

 

 

Time deposits $100M and over

 

399

 

562

 

Other deposits

 

615

 

870

 

Long-term debt

 

64

 

64

 

Total interest expense

 

1,078

 

1,496

 

Net interest income

 

3,291

 

3,458

 

Provision for loan losses

 

935

 

1,250

 

Net interest income after provision

 

2,356

 

2,208

 

Other income

 

 

 

 

 

Service charges on deposit accounts

 

253

 

260

 

Debit card transaction fees

 

181

 

183

 

Credit life insurance commissions

 

 

1

 

Net gains on sales of securities available-for-sale

 

1,528

 

 

Net gains (losses) on sales of foreclosed assets

 

12

 

(29

)

Increase in value of bank-owned life insurance

 

88

 

89

 

Other income

 

50

 

55

 

Total other income

 

2,112

 

559

 

Other expenses

 

 

 

 

 

Salaries and employee benefits

 

1,192

 

1,220

 

Net occupancy expense

 

160

 

139

 

Furniture and equipment expense

 

91

 

79

 

Amortization of computer software

 

175

 

97

 

Expenses of foreclosed assets

 

1,812

 

201

 

FDIC insurance expense

 

249

 

232

 

Debit card transaction expenses

 

39

 

116

 

Other expense

 

596

 

474

 

Total other expenses

 

4,314

 

2,558

 

Income before income taxes

 

154

 

209

 

Income tax expense

 

834

 

34

 

Net income (loss)

 

(680

)

175

 

Deductions for amounts not available to common shareholders:

 

 

 

 

 

Dividends declared or accumulated on preferred stock

 

(39

)

(39

)

Net income (loss) available to common shareholders

 

$

(719

)

$

136

 

 

 

 

 

 

 

Per common share*

 

 

 

 

 

Net income (loss)

 

$

(0.17

)

$

0.03

 

Net income (loss), assuming dilution

 

(0.17

)

0.03

 

 


* Per share information has been retroactively adjusted to reflect a 5% stock dividend effective December 16, 2011.

 

See accompanying notes to unaudited consolidated financial statements.

 

4



Table of Contents

 

COMMUNITY FIRST BANCORPORATION

Consolidated Statements of Comprehensive Income (Loss)

 

 

 

(Unaudited)

 

 

 

Three Months Ended

 

 

 

March 31,

 

 

 

2012

 

2011

 

 

 

(Dollars in thousands)

 

 

 

 

 

 

 

Net income (loss)

 

$

(680

)

$

175

 

Other comprehensive income (loss)

 

 

 

 

 

Unrealized losses on available-for-sale securities arising during the period

 

(796

)

(242

)

Related income tax benefit

 

286

 

87

 

Less: Reclassification adjustments for net gains included in net income

 

(1,528

)

 

Related income tax benefit

 

548

 

 

Other comprehensive loss

 

(1,490

)

(155

)

Comprehensive income (loss)

 

$

(2,170

)

$

20

 

 

See accompanying notes to unaudited consolidated financial statements.

 

5



Table of Contents

 

COMMUNITY FIRST BANCORPORATION

Consolidated Statements of Changes in Shareholders’ Equity

 

(Unaudited)

 

 

 

 

 

 

 

 

 

 

 

Retained

 

Accumulated

 

 

 

 

 

Shares of

 

 

 

 

 

Additional

 

Earnings

 

Other

 

 

 

 

 

Common

 

Preferred

 

Common

 

Paid-in

 

(Accumulated

 

Comprehensive

 

 

 

 

 

Stock

 

Stock

 

Stock

 

Capital

 

Deficit)

 

Income (Loss)

 

Total

 

 

 

(Dollars in thousands)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Balance, January 1, 2011

 

3,972,976

 

$

3,126

 

$

39,931

 

$

748

 

$

1,396

 

$

111

 

$

45,312

 

Net income

 

 

 

 

 

175

 

 

175

 

Other comprehensive income (loss)

 

 

 

 

 

 

(155

)

(155

)

Dividends declared on preferred stock

 

 

 

 

 

(39

)

 

(39

)

Balance, March 31, 2011

 

3,972,976

 

$

3,126

 

$

39,931

 

$

748

 

$

1,532

 

$

(44

)

$

45,293

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Balance, January 1, 2012

 

4,152,334

 

$

3,126

 

$

40,669

 

$

748

 

$

(3,014

)

$

1,536

 

$

43,065

 

Net income (loss)

 

 

 

 

 

(680

)

 

(680

)

Other comprehensive income (loss)

 

 

 

 

 

 

(1,490

)

(1,490

)

Adjustment of fractional shares issued in conjunction with 2011 stock dividend

 

(40

)

 

 

 

 

 

 

Dividends declared on preferred stock

 

 

 

 

 

(39

)

 

(39

)

Balance, March 31, 2012

 

4,152,294

 

$

3,126

 

$

40,669

 

$

748

 

$

(3,733

)

$

46

 

$

40,856

 

 

See accompanying notes to unaudited consolidated financial statements.

 

6



Table of Contents

 

COMMUNITY FIRST BANCORPORATION

Consolidated Statements of Cash Flows

 

 

 

(Unaudited)

 

 

 

Three Months Ended

 

 

 

March 31,

 

 

 

2012

 

2011

 

 

 

(Dollars in thousands)

 

Operating activities

 

 

 

 

 

Net income (loss)

 

$

(680

)

$

175

 

Adjustments to reconcile net income (loss) to net cash provided by operating activities

 

 

 

 

 

Provision for loan losses

 

935

 

1,250

 

Depreciation

 

88

 

93

 

Deferred income taxes

 

314

 

(201

)

Amortization of net loan fees and costs

 

(7

)

17

 

Securities accretion and premium amortization

 

259

 

268

 

Net gains realized on sales of securities available-for-sale

 

(1,528

)

 

Writedowns of foreclosed assets

 

1,531

 

45

 

Loss (gain) on sale of foreclosed assets

 

(12

)

29

 

Increase in cash surrender value of bank-owned life insurance

 

(88

)

(89

)

Decrease in interest receivable

 

366

 

98

 

Decrease in interest payable

 

(98

)

(526

)

Decrease in prepaid expenses and other assets

 

419

 

459

 

Increase in other accrued expenses

 

46

 

243

 

Net cash provided by operating activities

 

1,545

 

1,861

 

 

 

 

 

 

 

Investing activities

 

 

 

 

 

Purchases of available-for-sale securities

 

(46,529

)

(23,965

)

Maturities, calls and paydowns of securities available-for-sale

 

24,159

 

21,871

 

Maturities, calls and paydowns of securities held-to-maturity

 

392

 

643

 

Proceeds of sales of securities available-for-sale

 

42,335

 

 

Net decrease in loans made to customers

 

5,278

 

7,502

 

Purchases of premises and equipment

 

(97

)

(5

)

Additional investment in foreclosed assets, net

 

(20

)

 

Proceeds of sale of foreclosed assets

 

944

 

324

 

Net cash provided by investing activities

 

26,462

 

6,370

 

 

 

 

 

 

 

Financing activities

 

 

 

 

 

Net (decrease) increase in demand deposits, interest bearing transaction accounts and savings accounts

 

(7,180

)

6,516

 

Net decrease in certificates of deposit and other time deposits

 

(366

)

(17,802

)

Decrease in short-term borrowings

 

 

(5,000

)

Cash dividends paid on preferred stock

 

(39

)

(39

)

Net cash used by financing activities

 

(7,585

)

(16,325

)

Increase (decrease) in cash and cash equivalents

 

20,422

 

(8,094

)

Cash and cash equivalents, beginning

 

124,910

 

40,882

 

Cash and cash equivalents, ending

 

$

145,332

 

$

32,788

 

 

See accompanying notes to unaudited consolidated financial statements.

 

7



Table of Contents

 

COMMUNITY FIRST BANCORPORATION

Consolidated Statements of Cash Flows - continued

 

 

 

(Unaudited)

 

 

 

Three Months Ended

 

 

 

March 31,

 

 

 

2012

 

2011

 

 

 

(Dollars in thousands)

 

Supplemental Disclosure of Cash Flow Information

 

 

 

 

 

Cash paid during the period for

 

 

 

 

 

Interest

 

$

1,176

 

$

2,022

 

Income taxes

 

 

 

Net transfers from loans and other asets to foreclosed assets

 

2,796

 

508

 

Noncash investing and financing activities:

 

 

 

 

 

Other comprehensive loss

 

(1,490

)

(155

)

 

8



Table of Contents

 

COMMUNITY FIRST BANCORPORATION

 

Notes to Unaudited Consolidated Financial Statements

(Dollar amounts in thousands, except per share)

 

Accounting Policies — A summary of significant accounting policies is included in Community First Bancorporation’s (the “Company,” “our,” “we,” “us,” and similar references) Annual Report on Form 10-K for the year ended December 31, 2011 filed with the Securities and Exchange Commission.

 

Management Opinion — In the opinion of management, the accompanying unaudited consolidated financial statements of Community First Bancorporation reflect all adjustments necessary for a fair presentation of the results of the periods presented.  Such adjustments were of a normal, recurring nature.

 

Investment Securities — The following table presents information about amortized cost, unrealized gains, unrealized losses, and estimated fair values of securities:

 

 

 

March 31, 2012

 

December 31, 2011

 

 

 

 

 

Gross

 

Gross

 

 

 

 

 

Gross

 

Gross

 

 

 

 

 

 

 

Unrealized

 

Unrealized

 

Estimated

 

 

 

Unrealized

 

Unrealized

 

Estimated

 

 

 

Amortized

 

Holding

 

Holding

 

Fair

 

Amortized

 

Holding

 

Holding

 

Fair

 

 

 

Cost

 

Gains

 

Losses

 

Value

 

Cost

 

Gains

 

Losses

 

Value

 

 

 

(Dollars in thousands)

 

Available-for-sale

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Debt securities

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Mortgage-backed securities issued by US Government agencies

 

$

653

 

$

9

 

$

 

$

662

 

$

1,555

 

$

65

 

$

 

$

1,620

 

Government sponsored enterprises (GSEs)

 

66,895

 

84

 

423

 

66,556

 

75,004

 

436

 

55

 

75,385

 

Mortgage-backed securities issued by GSEs

 

30,165

 

378

 

61

 

30,482

 

26,951

 

1,118

 

4

 

28,065

 

State, county and municipal

 

5,603

 

97

 

12

 

5,688

 

18,180

 

853

 

9

 

19,024

 

Total debt securities

 

103,316

 

568

 

496

 

103,388

 

121,690

 

2,472

 

68

 

124,094

 

Equity securities

 

2

 

1

 

 

3

 

324

 

 

7

 

317

 

Total

 

$

103,318

 

$

569

 

$

496

 

$

103,391

 

$

122,014

 

$

2,472

 

$

75

 

$

124,411

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Held-to-maturity

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Mortgage-backed securities issued by US Government agencies

 

$

 

$

 

$

 

$

 

$

 

$

 

$

 

$

 

Government sponsored enterprises

 

 

 

 

 

 

 

 

 

Mortgage-backed securities issued by GSEs

 

4,004

 

336

 

 

4,340

 

4,396

 

356

 

 

4,752

 

State, county and municipal

 

 

 

 

 

 

 

 

 

Total

 

$

4,004

 

$

336

 

$

 

$

4,340

 

$

4,396

 

$

356

 

$

 

$

4,752

 

 

9



Table of Contents

 

The amortized cost and estimated fair value of debt securities by contractual maturity are shown below:

 

 

 

March 31, 2012

 

 

 

Amortized

 

Estimated

 

 

 

Cost

 

Fair Value

 

 

 

(Dollars in thousands)

 

Non-mortgage backed securities issued by GSEs and by state, county and municipal issuers

 

 

 

 

 

Due within one year

 

$

150

 

$

150

 

Due after one through five years

 

433

 

435

 

Due after five through ten years

 

48,585

 

48,433

 

Due after ten years

 

23,330

 

23,226

 

 

 

72,498

 

72,244

 

Mortgage-backed securities issued by:

 

 

 

 

 

US Government agencies

 

34,169

 

34,822

 

GSEs

 

653

 

662

 

Total

 

$

107,320

 

$

107,728

 

 

The estimated fair values and gross unrealized losses of all of the Company’s investment securities whose fair values were less than amortized cost as of March 31, 2012 and December 31, 2011 and which had not been determined to be other-than-temporarily impaired are presented below.  The Company evaluates all available-for-sale securities and all held-to-maturity securities for impairment as of each balance sheet date.  The securities have been segregated in the table by investment category and the length of time that individual securities have been in a continuous unrealized loss position.

 

10



Table of Contents

 

 

 

March 31, 2012

 

 

 

Continuously in Unrealized Loss Position for a Period of

 

 

 

Less than 12 Months

 

12 Months or more

 

Total

 

 

 

Estimated
Fair Value

 

Unrealized
Loss

 

Estimated
Fair Value

 

Unrealized
Loss

 

Estimated
Fair Value

 

Unrealized
Loss

 

 

 

(Dollars in thousands)

 

Available-for-sale

 

 

 

 

 

 

 

 

 

 

 

 

 

Government-sponsored enterprises (GSEs)

 

$

40,208

 

$

423

 

$

 

$

 

$

40,208

 

$

423

 

Mortgage-backed securities issued by GSEs

 

14,357

 

61

 

 

 

14,357

 

61

 

State, county and municipal securities

 

1,055

 

12

 

 

 

1,055

 

12

 

Equity securities

 

 

 

 

 

 

 

Total

 

$

55,620

 

$

496

 

$

 

$

 

$

55,620

 

$

496

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Held-to-maturity

 

 

 

 

 

 

 

 

 

 

 

 

 

GSEs

 

$

 

$

 

$

 

$

 

$

 

$

 

Total

 

$

 

$

 

$

 

$

 

$

 

$

 

 

 

 

December 31, 2011

 

 

 

Continuously in Unrealized Loss Position for a Period of

 

 

 

Less than 12 Months

 

12 Months or more

 

Total

 

 

 

Estimated
Fair Value

 

Unrealized
Loss

 

Estimated
Fair Value

 

Unrealized
Loss

 

Estimated
Fair Value

 

Unrealized
Loss

 

 

 

(Dollars in thousands)

 

Available-for-sale

 

 

 

 

 

 

 

 

 

 

 

 

 

Government-sponsored enterprises (GSEs)

 

$

12,623

 

$

55

 

$

 

$

 

$

12,623

 

$

55

 

Mortgage-backed securities issued by GSEs

 

1,946

 

4

 

 

 

1,946

 

4

 

State, county and municipal securities

 

 

 

501

 

9

 

501

 

9

 

Equity securities

 

315

 

7

 

 

 

315

 

7

 

Total

 

$

14,884

 

$

66

 

$

501

 

$

9

 

$

15,385

 

$

75

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Held-to-maturity

 

 

 

 

 

 

 

 

 

 

 

 

 

GSEs

 

$

 

$

 

$

 

$

 

$

 

$

 

Total

 

$

 

$

 

$

 

$

 

$

 

$

 

 

As of March 31, 2012, 39 securities had been continuously in an unrealized loss position for less than 12 months and no securities had been continuously in an unrealized loss position for 12 months or more.  We do not consider these investments to be other-than-temporarily impaired because the unrealized losses involve primarily issuances of government-sponsored enterprises and state, county and municipal government issuers.  We also believe that the impairments resulted from current credit market conditions.  There have been no defaults or failures by any of the issuers to remit periodic interest payments as required, nor are we aware that any such issuer has given notice that it expects it will be unable to make any such future payment according to the terms of its bond agreement.  Although we classify a majority of our investment securities as available-for-sale, management has not determined that any specific securities will be disposed of prior to maturity and believes that we have both the ability and the intent to hold those investments until a recovery of fair value, including until maturity.  Furthermore, we do not believe that we will be required to sell any such securities prior to recovery of the unrealized losses.  Substantially all of the state, county and municipal securities were rated at least “investment grade” by either S&P or Moody’s, or both, as of March 31, 2012.

 

Our subsidiary bank is a member of the Federal Home Loan Bank of Atlanta (“FHLB”) and, accordingly, is required to own restricted stock in that institution in amounts that may vary from time to time.  These securities are identified in a separate category in the Consolidated Balance Sheets.  Because of the restrictions imposed, the stock may not be sold to other parties, but is redeemable by the FHLB at the same price as that at which it was acquired by the Company’s

 

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subsidiary.  We evaluate this security for impairment based on the probability of ultimate recovery of the acquisition cost.  No impairment has been recognized based on this evaluation.

 

During the first three months of 2012, we sold sixty-seven available-for-sale debt securities and two available-for-sale equity securities for proceeds of $42,335 and realized gains of $1,528.  In addition, seventeen securities were called for proceeds of $20,100 and paydowns of mortgage-backed securities totaled $4,451.  We purchased twenty-seven debt securities for cash expenditures of $46,529.  There were there no transfers of available-for-sale securities to other categories.

 

Loans — Loans consisted of the following:

 

 

 

March 31,

 

December 31,

 

 

 

2012

 

2011

 

 

 

(Dollars in thousands)

 

Commercial, financial and industrial

 

$

18,362

 

$

18,123

 

Real estate- construction

 

10,097

 

11,706

 

Real estate - mortgage

 

169,201

 

174,351

 

Consumer installment

 

18,618

 

20,476

 

Total

 

216,278

 

224,656

 

Allowance for loan losses

 

(4,861

)

(4,359

)

Loans - net

 

$

211,417

 

$

220,297

 

 

The following table provides information about the payment status of loans:

 

 

 

30-59 Days
Past Due

 

60-89 Days
Past Due

 

90 Days or
More Past Due

 

Total Past
Due

 

Current

 

Total Loans

 

 

 

(Dollars in thousands)

 

As of March 31, 2012

 

 

 

 

 

 

 

 

 

 

 

 

 

Commercial, financial and industrial

 

$

135

 

$

386

 

$

220

 

$

741

 

$

17,621

 

$

18,362

 

Real estate- construction

 

 

 

1,709

 

1,709

 

8,388

 

10,097

 

Real estate - mortgage

 

3,005

 

1,008

 

5,888

 

9,901

 

159,300

 

169,201

 

Consumer installment

 

435

 

108

 

176

 

719

 

17,899

 

18,618

 

Total

 

$

3,575

 

$

1,502

 

$

7,993

 

$

13,070

 

$

203,208

 

$

216,278

 

 

 

 

30-59 Days
Past Due

 

60-89 Days
Past Due

 

90 Days or
More Past Due

 

Total Past
Due

 

Current

 

Total Loans

 

 

 

(Dollars in thousands)

 

As of December 31, 2011

 

 

 

 

 

 

 

 

 

 

 

 

 

Commercial, financial and industrial

 

$

223

 

$

117

 

$

265

 

$

605

 

$

17,518

 

$

18,123

 

Real estate- construction

 

 

230

 

2,594

 

2,824

 

8,882

 

11,706

 

Real estate - mortgage

 

1,490

 

1,175

 

7,387

 

10,052

 

164,299

 

174,351

 

Consumer installment

 

458

 

119

 

109

 

686

 

19,790

 

20,476

 

Total

 

$

2,171

 

$

1,641

 

$

10,355

 

$

14,167

 

$

210,489

 

$

224,656

 

 

Nonaccrual loans totaled $7,993 and $10,342 as of March 31, 2012 and December 31, 2011, respectively.  Troubled debt restructurings, not including such loans that are included in nonaccrual loans, totaled $8,075 as of March 31, 2012 and

 

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$6,205 as of December 31, 2011.  As of March 31, 2012 and December 31, 2011, we had loans past due 90 days or more and still accruing interest totaling $0 and $13, respectively.

 

Loans that we grade Management Attention and Special Mention are not believed to represent more than a minimal likelihood of loss.  Those grades indicate that a change in the borrowers’ circumstances, or some other event, has occurred such that an elevated level of monitoring is warranted.  Such loans are generally evaluated collectively for purposes of estimating the allowance for loan losses.  Loans graded Substandard are believed to present a moderate likelihood of loss due the presence of well-defined weakness in the borrowers’ financial condition such as a change in their demonstrated repayment history, the effects of lower collateral values combined with other financial difficulties the borrowers may be experiencing, or deterioration of other indicators of the borrowers’ ability to service the loan as agreed.  Loans graded Doubtful are believed to present a high likelihood of loss due to severe deterioration of a borrowers’ financial condition, severe past due status and/or substantial deterioration of collateral value, or other factors.  Loans graded Substandard and Doubtful are evaluated individually for impairment.  Management updates the loans in its internal risk grading system no less often than monthly.  The following table provides information about how we grade loans internally.

 

 

 

Internally Assigned Risk Grade

 

 

 

 

 

Management
Attention

 

Special Mention

 

Substandard

 

Doubtful

 

Total

 

 

 

(Dollars in thousands)

 

As of March 31, 2012

 

 

 

 

 

 

 

 

 

 

 

Commercial, financial and industrial

 

$

1,381

 

$

2,423

 

$

988

 

$

 

$

4,792

 

Real estate- construction

 

1,553

 

1,542

 

4,271

 

 

7,366

 

Real estate - mortgage

 

12,421

 

16,673

 

18,779

 

 

47,873

 

Consumer installment

 

1,034

 

662

 

839

 

 

2,535

 

 

 

$

16,389

 

$

21,300

 

$

24,877

 

$

 

$

62,566

 

 

 

 

Internally Assigned Risk Grade

 

 

 

 

 

Management
Attention

 

Special Mention

 

Substandard

 

Doubtful

 

Total

 

 

 

(Dollars in thousands)

 

As of December 31, 2011

 

 

 

 

 

 

 

 

 

 

 

Commercial, financial and industrial

 

$

1,182

 

$

2,023

 

$

981

 

$

 

$

4,186

 

Real estate- construction

 

1,541

 

1,457

 

5,822

 

 

8,820

 

Real estate - mortgage

 

10,699

 

12,586

 

21,425

 

 

44,710

 

Consumer installment

 

1,335

 

860

 

697

 

 

2,892

 

 

 

$

14,757

 

$

16,926

 

$

28,925

 

$

 

$

60,608

 

 

Impaired loans generally are nonaccrual loans, loans that are 90 days or more delinquent as to principal or interest payments, and other loans where, based on current information and events, it is probable that we will be unable to collect principal and interest payments according to the contractual terms of the loan agreements, including loans whose terms have been modified in a troubled debt restructuring.  A loan is not considered to be impaired, however, if any periods of delay or shortfalls of amounts expected to be collected are insignificant or if we expect that we will be able to collect all amounts due including interest accrued at the contractual interest rate during the period of delay.

 

Following is a summary of our impaired loans, by class:

 

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Table of Contents

 

 

 

Recorded
Investment

 

Unpaid
Principal
Balance

 

Related
Allowance

 

Year-to-Date
Average
Recorded
Investment

 

Year-to-Date
Interest Income
Recognized

 

 

 

(Dollars in thousands)

 

As of March 31, 2012

 

 

 

 

 

 

 

 

 

 

 

With no related allowance recorded:

 

 

 

 

 

 

 

 

 

 

 

Commercial, financial and industrial

 

$

927

 

$

1,100

 

$

 

$

927

 

$

 

Real estate- construction

 

1,725

 

2,070

 

 

1,725

 

 

Real estate - mortgage

 

11,400

 

11,591

 

 

11,400

 

1

 

Consumer installment

 

65

 

86

 

 

65

 

 

 

 

 

 

 

 

 

 

 

 

 

 

With an allowance recorded:

 

 

 

 

 

 

 

 

 

 

 

Commercial, financial and industrial

 

$

335

 

$

335

 

$

210

 

$

335

 

$

 

Real estate- construction

 

633

 

797

 

64

 

633

 

 

Real estate - mortgage

 

3,987

 

5,752

 

490

 

3,987

 

 

Consumer installment

 

242

 

242

 

127

 

242

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total:

 

 

 

 

 

 

 

 

 

 

 

Commercial, financial and industrial

 

$

1,262

 

$

1,435

 

$

210

 

$

1,262

 

$

 

Real estate - construction and mortgage

 

17,745

 

20,210

 

554

 

17,745

 

1

 

Consumer installment

 

307

 

328

 

127

 

307

 

 

Total

 

$

19,314

 

$

21,973

 

$

891

 

$

19,314

 

$

1

 

 

 

 

Recorded
Investment

 

Unpaid
Principal
Balance

 

Related
Allowance

 

Year-to-Date
Average
Recorded
Investment

 

Year-to-Date
Interest Income
Recognized

 

 

 

(Dollars in thousands)

 

As of December 31, 2011

 

 

 

 

 

 

 

 

 

 

 

With no related allowance recorded:

 

 

 

 

 

 

 

 

 

 

 

Commercial, financial and industrial

 

$

178

 

$

330

 

$

 

$

361

 

$

15

 

Real estate- construction

 

2,664

 

3,443

 

 

6,216

 

42

 

Real estate - mortgage

 

9,654

 

12,073

 

 

10,909

 

275

 

Consumer installment

 

40

 

56

 

 

144

 

6

 

 

 

 

 

 

 

 

 

 

 

 

 

With an allowance recorded:

 

 

 

 

 

 

 

 

 

 

 

Commercial, financial and industrial

 

$

271

 

$

271

 

$

120

 

$

714

 

$

18

 

Real estate- construction

 

764

 

764

 

134

 

1,174

 

55

 

Real estate - mortgage

 

1,310

 

1,755

 

270

 

1,833

 

64

 

Consumer installment

 

298

 

298

 

149

 

342

 

20

 

 

 

 

 

 

 

 

 

 

 

 

 

Total:

 

 

 

 

 

 

 

 

 

 

 

Commercial, financial and industrial

 

$

449

 

$

601

 

$

120

 

$

1,075

 

$

33

 

Real estate - construction and mortgage

 

14,392

 

18,035

 

404

 

20,132

 

436

 

Consumer installment

 

338

 

354

 

149

 

486

 

26

 

Total

 

$

15,179

 

$

18,990

 

$

673

 

$

21,693

 

$

495

 

 

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Table of Contents

 

The following table provides information about how we evaluated loans for impairment, the amount of the allowance for loan losses estimated for loans subjected to each type of evaluation, and the related total amounts, by portfolio segment as of each date indicated:

 

 

 

Secured by

 

 

 

 

 

 

 

Real Estate

 

Other

 

Total

 

 

 

(Dollars in thousands)

 

As of March 31, 2012

 

 

 

 

 

 

 

Allowance for credit losses

 

 

 

 

 

 

 

Ending balance

 

$

2,721

 

$

2,140

 

$

4,861

 

Ending balance - individually evaluated for impairment

 

$

554

 

$

337

 

$

891

 

Ending balance - collectively evaluated for impairment

 

$

2,167

 

$

1,803

 

$

3,970

 

 

 

 

 

 

 

 

 

Loans

 

 

 

 

 

 

 

Ending balance

 

$

179,298

 

$

36,980

 

$

216,278

 

Ending balance - individually evaluated for impairment

 

$

17,299

 

$

1,527

 

$

18,826

 

Ending balance - collectively evaluated for impairment

 

$

161,999

 

$

35,453

 

$

197,452

 

 

 

 

Secured by

 

 

 

 

 

 

 

Real Estate

 

Other

 

Total

 

 

 

(Dollars in thousands)

 

As of December 31, 2011

 

 

 

 

 

 

 

Allowance for credit losses

 

 

 

 

 

 

 

Ending balance

 

$

2,437

 

$

1,922

 

$

4,359

 

Ending balance - individually evaluated for impairment

 

$

404

 

$

269

 

$

673

 

Ending balance - collectively evaluated for impairment

 

$

2,033

 

$

1,653

 

$

3,686

 

 

 

 

 

 

 

 

 

Loans

 

 

 

 

 

 

 

Ending balance

 

$

186,057

 

$

38,599

 

$

224,656

 

Ending balance - individually evaluated for impairment

 

$

14,392

 

$

787

 

$

15,179

 

Ending balance - collectively evaluated for impairment

 

$

171,665

 

$

37,812

 

$

209,477

 

Ending balance - Loans acquired with deteriorated credit quality

 

$

1,402

 

$

58

 

$

1,460

 

 

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Table of Contents

 

The following table presents information about loans that were modified in troubled debt restructurings during the first three months of 2012:

 

 

 

As of March 31, 2012

 

 

 

Modifications

 

Troubled Debt Restructurings

 

Number of
Contracts

 

Pre-
Modification
Outstanding
Recorded
Investment

 

Post-
Modification
Outstanding
Recorded
Investment

 

Real estate - mortgage

 

1

 

$

116

 

$

116

 

Consumer installment

 

2

 

16

 

14

 

 

The following table presents information about loans that were modified in troubled debt restructuring during the twelve months ending March 31, 2012 and subsequently defaulted:

 

 

 

As of March 31, 2012

 

Troubled Debt Restructurings that
Subsequently Defaulted

 

Number of
Contracts

 

Recorded
Investment

 

Real estate - mortgage

 

1

 

$

230

 

 

During the three months ended March 31, 2012, we continued to experience higher than normal (pre-recession) amounts of net charge-offs, and relatively high levels of past due and nonaccrual loans.  These and other measures of credit quality, as well as continuing weakness in real estate prices, relatively low levels of activity in the real estate market and the continuing high unemployment in our market areas, indicate that our loan customers and collateral values remain under stress.  Accordingly, we have recorded higher than normal provision and allowance for loan losses to recognize those conditions.   We have not changed our accounting policy or the methodology used to estimate the allowance for loan losses since December 31, 2011.  The following table provides information about activity in the allowance for loan losses by portfolio segment for the three months ended March 31, 2012:

 

 

 

Secured by

 

 

 

 

 

 

 

 

 

Real Estate

 

Other

 

Unallocated

 

Total

 

 

 

(Dollars in thousands)

 

 

 

For the three months ended March 31, 2012

 

 

 

 

 

 

 

 

 

Allowance for credit losses

 

 

 

 

 

 

 

 

 

Balance, January 1, 2012

 

$

2,437

 

$

880

 

$

1,042

 

$

4,359

 

Provision charged to expense

 

441

 

342

 

152

 

$

935

 

Recoveries

 

26

 

10

 

 

$

36

 

Charge-offs

 

(296

)

(173

)

 

(469

)

Balance at March 31, 2012

 

$

2,608

 

$

1,059

 

$

1,194

 

$

4,861

 

 

Earnings (Loss) Per Common Share — Basic earnings (loss) per common share is computed by dividing net income (loss) applicable to common shares by the weighted average number of common shares outstanding.  Diluted earnings (loss) per common share is computed by dividing applicable net income (loss) by the weighted average number of common shares outstanding and any dilutive potential common shares and dilutive stock options.  It is assumed that all dilutive stock options are exercised at the beginning of each period and that the proceeds are used to purchase shares of the Company’s common stock at the average market price during the period.  Per share information for 2011 has been retroactively adjusted to give effect to a 5% stock dividend effective December 16, 2011.  Net income (loss) per common share and net income (loss) per common share, assuming dilution, were computed as follows:

 

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Table of Contents

 

 

 

Three Months Ended

 

 

 

March 31,

 

 

 

2012

 

2011

 

 

 

(Dollars in thousands,

 

 

 

except per share amounts)