Attached files
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EX-32.2 - EX-32.2 - CENTRA FINANCIAL HOLDINGS INC | l38024exv32w2.htm |
EX-31.1 - EX-31.1 - CENTRA FINANCIAL HOLDINGS INC | l38024exv31w1.htm |
EX-32.1 - EX-32.1 - CENTRA FINANCIAL HOLDINGS INC | l38024exv32w1.htm |
EX-31.2 - EX-31.2 - CENTRA FINANCIAL HOLDINGS INC | l38024exv31w2.htm |
Table of Contents
United States
Securities and Exchange Commission
Securities and Exchange Commission
Washington, D.C. 20549
FORM 10-Q
þ | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the quarterly period ended September 30, 2009
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 000-49699
Centra Financial Holdings, Inc.
(Exact name of registrant as specified in its charter)
West Virginia (State or other jurisdiction of incorporation or organization) |
55-0770610 (I.R.S. Employer Identification No) |
990 Elmer Prince Drive
P. O. Box 656
Morgantown, West Virginia 26507-0656
(Address of principal executive offices, zip code)
P. O. Box 656
Morgantown, West Virginia 26507-0656
(Address of principal executive offices, zip code)
304-598-2000
(Registrants telephone number, including area code)
(Registrants telephone number, including area code)
Not Applicable
(Former name, address, and fiscal year, if changed since last report)
(Former name, address, and 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 þ 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 o No o
Indicate by check mark if the registrant is a large accelerated filer, an accelerated filer,
or a non-accelerated filer. See definition of accelerated filer and large accelerated filer in
Rule 12b-2 of the Exchange Act.
Check one:
Large accelerated filer o | Accelerated filer þ | Non-accelerated filer o (Do not check if a smaller reporting company) | Smaller reporting company o |
Indicate by check mark if the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act.
Yes o No þ
Indicate the number of shares outstanding of each of the issuers classes of common equity, as
of the latest practicable date:
As of October 31, 2009, the number of shares outstanding of the registrants only class of
common stock was 7,039,882.
Centra Financial Holdings, Inc.
Table of Contents
Table of Contents
Part I. Financial Information
Item 1. Financial Statements
Centra Financial Holdings, Inc. and Subsidiaries
Consolidated Balance Sheets
Consolidated Balance Sheets
September 30 | December 31 | |||||||
2009 | 2008 | |||||||
(Dollars in Thousands, Except Per Share Data) | (Unaudited) | (Note B) | ||||||
Assets |
||||||||
Cash and due from banks |
$ | 6,457 | $ | 18,646 | ||||
Interest-bearing deposits in other banks |
5,235 | 1,650 | ||||||
Federal funds sold |
47,220 | | ||||||
Total cash and cash equivalents |
58,912 | 20,296 | ||||||
Available-for-sale securities, at fair value (amortized cost of
$126,346 at September 30, 2009 and $117,740 at December 31,
2008) |
129,267 | 119,550 | ||||||
Other investment securities, at cost |
2,922 | 1,993 | ||||||
Loans, net of unearned income |
1,030,869 | 1,025,212 | ||||||
Allowance for loan losses |
(16,482 | ) | (16,367 | ) | ||||
Net loans |
1,014,387 | 1,008,845 | ||||||
Premises and equipment, net |
22,803 | 21,446 | ||||||
Loans held for sale |
2,724 | 1,961 | ||||||
Goodwill and other intangible assets |
15,742 | 16,297 | ||||||
Other assets |
27,251 | 23,169 | ||||||
Total assets |
$ | 1,274,008 | $ | 1,213,557 | ||||
Liabilities |
||||||||
Deposits |
||||||||
Non-interest bearing |
$ | 151,260 | $ | 132,229 | ||||
Interest bearing |
952,748 | 880,164 | ||||||
Total deposits |
1,104,008 | 1,012,393 | ||||||
Short-term borrowings |
34,230 | 75,285 | ||||||
Long-term debt |
20,000 | 20,000 | ||||||
Other liabilities |
12,539 | 10,637 | ||||||
Total liabilities |
1,170,777 | 1,118,315 | ||||||
Stockholders equity |
||||||||
Preferred stock, $1 par value, 1,000,000 authorized, none issued |
| | ||||||
Common stock, $1 par value, 50,000,000 authorized, 6,994,921
and 6,804,084 issued and outstanding on September 30, 2009 and
December 31, 2008, respectively |
6,995 | 6,804 | ||||||
Additional paid-in capital |
95,901 | 93,887 | ||||||
Retained earnings (deficit) |
(1,418 | ) | (6,535 | ) | ||||
Accumulated other comprehensive gain |
1,753 | 1,086 | ||||||
Total stockholders equity |
103,231 | 95,242 | ||||||
Total liabilities and stockholders equity |
$ | 1,274,008 | $ | 1,213,557 | ||||
Notes to consolidated financial statements are an integral part of these statements.
1
Table of Contents
Centra Financial Holdings, Inc. and Subsidiaries
Consolidated Statements of Income
Consolidated Statements of Income
Nine Months Ended | Three Months Ended | |||||||||||||||
September 30 | September 30 | |||||||||||||||
(Unaudited) (Dollars in Thousands Except Per Share Data) | 2009 | 2008 | 2009 | 2008 | ||||||||||||
Interest income |
||||||||||||||||
Loans, including fees |
$ | 45,652 | $ | 47,692 | $ | 15,223 | $ | 16,069 | ||||||||
Loans held for sale |
126 | 135 | 27 | 41 | ||||||||||||
Securities available-for-sale |
3,066 | 4,102 | 977 | 1,215 | ||||||||||||
Interest bearing bank balances |
1 | 22 | | 3 | ||||||||||||
Federal funds sold |
10 | 313 | 6 | 49 | ||||||||||||
Total interest income |
48,855 | 52,264 | 16,233 | 17,377 | ||||||||||||
Interest expense |
||||||||||||||||
Deposits |
16,103 | 21,377 | 5,082 | 6,835 | ||||||||||||
Short-term borrowings |
242 | 704 | 58 | 317 | ||||||||||||
Long-term debt |
459 | 802 | 130 | 243 | ||||||||||||
Total interest expense |
16,804 | 22,883 | 5,270 | 7,395 | ||||||||||||
Net interest income |
32,051 | 29,381 | 10,963 | 9,982 | ||||||||||||
Provision for credit losses |
2,506 | 1,971 | 1,186 | 813 | ||||||||||||
Net interest income after provision for credit losses |
29,545 | 27,410 | 9,777 | 9,169 | ||||||||||||
Other income |
||||||||||||||||
Service charges on deposit accounts |
2,712 | 2,071 | 952 | 877 | ||||||||||||
Other service charges and fees |
1,858 | 1,818 | 644 | 614 | ||||||||||||
Secondary market income |
1,067 | 995 | 281 | 276 | ||||||||||||
Security (losses) gains |
(336 | ) | 212 | | 17 | |||||||||||
Other |
540 | 687 | 153 | 236 | ||||||||||||
Total other income |
5,841 | 5,783 | 2,030 | 2,020 | ||||||||||||
Other expense |
||||||||||||||||
Salary and employee benefits |
11,501 | 12,430 | 4,019 | 4,020 | ||||||||||||
Occupancy expense |
2,025 | 1,901 | 745 | 631 | ||||||||||||
Equipment expense |
1,741 | 1,596 | 578 | 560 | ||||||||||||
Advertising |
1,122 | 1,014 | 431 | 344 | ||||||||||||
Professional fees |
669 | 902 | 188 | 381 | ||||||||||||
Data processing |
1,880 | 1,620 | 617 | 587 | ||||||||||||
Other outside services |
761 | 667 | 246 | 251 | ||||||||||||
Regulatory assessment |
1,526 | 536 | 389 | 188 | ||||||||||||
Other |
3,370 | 3,826 | 1,217 | 1,253 | ||||||||||||
Total other expense |
24,595 | 24,492 | 8,430 | 8,215 | ||||||||||||
Net income before income tax |
10,791 | 8,701 | 3,377 | 2,974 | ||||||||||||
Income tax expense |
3,709 | 2,917 | 1,223 | 945 | ||||||||||||
Net income |
7,082 | 5,784 | 2,154 | 2,029 | ||||||||||||
Dividends and accretion on preferred stock (TARP) |
923 | | | | ||||||||||||
Net income available to common shareholders |
$ | 6,159 | $ | 5,784 | $ | 2,154 | $ | 2,029 | ||||||||
Basic earnings per share |
$ | 0.89 | $ | 0.88 | $ | 0.31 | $ | 0.31 | ||||||||
Diluted earnings per share |
$ | 0.85 | $ | 0.81 | $ | 0.29 | $ | 0.28 | ||||||||
Basic weighted-average shares outstanding |
6,912,570 | 6,578,798 | 6,970,533 | 6,587,614 | ||||||||||||
Diluted weighted-average shares outstanding |
7,284,451 | 7,127,680 | 7,327,725 | 7,120,929 | ||||||||||||
Cash dividends declared per share |
$ | 0.15 | $ | 0.15 | $ | 0.05 | $ | 0.05 |
Notes to consolidated financial statements are an integral part of these statements.
2
Table of Contents
Centra Financial Holdings, Inc. and Subsidiaries
Consolidated Statements of Stockholders Equity
For the Nine Months Ended September 30, 2009 and 2008
Consolidated Statements of Stockholders Equity
For the Nine Months Ended September 30, 2009 and 2008
Accumulated | ||||||||||||||||||||||||
Additional | Retained | Other | ||||||||||||||||||||||
Preferred | Common | Paid-in | Earnings | Comprehensive | ||||||||||||||||||||
(Unaudited) (Dollars in Thousands) | Stock | Stock | Capital | (Deficit) | Income | Total | ||||||||||||||||||
Balance, January 1, 2008 |
$ | | $ | 5,971 | $ | 81,580 | $ | (547 | ) | $ | 916 | $ | 87,920 | |||||||||||
Issuance of common stock |
| 18 | 99 | | | 117 | ||||||||||||||||||
Stock Based Compensation |
| | 168 | | | 168 | ||||||||||||||||||
Adoption of Accounting for Deferred Compensation and
Postretirement Benefit Aspects of Endorsement
Split-Dollar Life Insurance Arrangements |
| | | (171 | ) | | (171 | ) | ||||||||||||||||
Cash dividend declared on common stock, $0.15 per
share |
| | | (898 | ) | | (898 | ) | ||||||||||||||||
Comprehensive income: |
||||||||||||||||||||||||
Net income |
| | | 5,784 | | 5,784 | ||||||||||||||||||
Other comprehensive income: |
||||||||||||||||||||||||
Change in net unrealized gain (loss) on
available-for-sale securities, net of income tax
benefit of $(128) |
| | | | (192 | ) | (192 | ) | ||||||||||||||||
Reclassification adjustment for
gains on
securities included in net income, net of taxes
of $85 |
| | | | 127 | 127 | ||||||||||||||||||
Net unrealized gain on available-for-sale
securities, net of income tax of $(43) |
| | | | | (65 | ) | |||||||||||||||||
Total comprehensive income |
5,719 | |||||||||||||||||||||||
Balance, September 30, 2008 |
$ | | $ | 5,989 | $ | 81,847 | $ | 4,168 | $ | 851 | $ | 92,855 | ||||||||||||
Balance, January 1, 2009 |
$ | | $ | 6,804 | $ | 93,887 | $ | (6,535 | ) | $ | 1,086 | $ | 95,242 | |||||||||||
Issuance of Series A Preferred Stock |
15 | | 14,235 | | | 14,250 | ||||||||||||||||||
Issuance of Series B Preferred Stock |
1 | | 749 | | | 750 | ||||||||||||||||||
Accretion of discount on Series A Preferred Stock |
| | 43 | (43 | ) | | | |||||||||||||||||
Redemption of Series A Preferred Stock |
(15 | ) | | (14,278 | ) | (707 | ) | | (15,000 | ) | ||||||||||||||
Redemption of Series B Preferred Stock |
(1 | ) | | (749 | ) | | | (750 | ) | |||||||||||||||
Exercise of 126,217 stock options |
| 126 | 859 | | | 985 | ||||||||||||||||||
Stock Based Compensation |
| | 218 | | | 218 | ||||||||||||||||||
Cash dividend declared on common stock, $0.15 per share |
| | | (1,042 | ) | | (1,042 | ) | ||||||||||||||||
Cash dividends on Series A and B Preferred Stock |
| | | (173 | ) | | (173 | ) | ||||||||||||||||
Sale of shares issued through dividend reinvestment plan |
| 65 | 937 | | | 1,002 | ||||||||||||||||||
Comprehensive income: |
||||||||||||||||||||||||
Net income |
| | | 7,082 | | 7,082 | ||||||||||||||||||
Other comprehensive income: |
||||||||||||||||||||||||
Change in unrealized gain on available-for-sale
securities, net of income taxes of $265 |
| | | | 465 | 465 | ||||||||||||||||||
Reclassification adjustment for net losses
included in net income, net of income tax of $135 |
| | | | 202 | 202 | ||||||||||||||||||
Net unrealized gain on available-for-sale
securities, net of income tax of $130 |
| | | | 667 | |||||||||||||||||||
Total comprehensive income |
| | | | | 7,749 | ||||||||||||||||||
Balance, September 30, 2009 |
$ | | $ | 6,995 | $ | 95,901 | $ | (1,418 | ) | $ | 1,753 | $ | 103,231 | |||||||||||
Notes to consolidated financial statements are an integral part of these statements.
3
Table of Contents
Centra Financial Holdings, Inc. and Subsidiaries
Consolidated Statements of Cash Flows
Consolidated Statements of Cash Flows
Nine Months Ended | ||||||||
September 30 | ||||||||
(Unaudited) (Dollars in Thousands) | 2009 | 2008 | ||||||
Operating activities |
||||||||
Net income |
$ | 7,082 | $ | 5,784 | ||||
Adjustments to reconcile net income to net cash provided by operating
activities: |
||||||||
Accretion of discounts on securities |
(194 | ) | (534 | ) | ||||
Amortization of premiums on securities |
815 | 397 | ||||||
Loss on impairment/ (gain) on calls of investment securities |
336 | (212 | ) | |||||
Amortization of purchase accounting adjustments |
598 | 1,047 | ||||||
Provision for credit losses |
2,506 | 1,971 | ||||||
Deferred income tax (benefit) expense |
(484 | ) | 1,514 | |||||
Loss on disposal of fixed assets |
50 | | ||||||
Depreciation |
1,563 | 1,371 | ||||||
Loans originated for sale |
(74,756 | ) | (65,289 | ) | ||||
Proceeds of loans sold |
75,058 | 65,132 | ||||||
Gain on sale of loans |
(1,065 | ) | (995 | ) | ||||
Stock based compensation expense |
218 | 168 | ||||||
Increase in cash surrender value of life insurance |
(340 | ) | (236 | ) | ||||
Increase in other liabilities |
1,902 | 2,055 | ||||||
Increase in other assets |
(2,157 | ) | (3,177 | ) | ||||
Net cash provided by operating activities |
11,132 | 8,996 | ||||||
Investing activities |
||||||||
Purchases of life insurance |
(1,380 | ) | (5,509 | ) | ||||
Purchases of premises and equipment |
(2,974 | ) | (3,883 | ) | ||||
Purchases of available-for-sale securities |
(53,209 | ) | (52,995 | ) | ||||
Proceeds from maturities, calls and prepayments of
available-for-sale securities |
42,717 | 56,078 | ||||||
Net increase in loans made to customers |
(8,087 | ) | (136,068 | ) | ||||
Net cash used in investing activities |
(22,933 | ) | (142,377 | ) | ||||
Financing activities |
||||||||
Net increase in deposits |
91,615 | 93,691 | ||||||
Net (decrease) increase in securities sold under agreement to repurchase |
(41,055 | ) | 17,625 | |||||
Cash received from exercise of stock options |
985 | 117 | ||||||
Cash received from dividend reinvestment plan |
736 | | ||||||
Cash payment in lieu of fractional shares |
(8 | ) | | |||||
Cash dividends paid on common stock |
(933 | ) | (600 | ) | ||||
Net proceeds from issuance of Series A and B Preferred Stock |
15,000 | | ||||||
Repayment of Series A and B Preferred Stock |
(15,750 | ) | | |||||
Cash dividends paid on preferred stock |
(173 | ) | | |||||
Net cash provided by financing activities |
50,417 | 110,833 | ||||||
Increase (decrease) in cash and cash equivalents |
38,616 | (22,548 | ) | |||||
Cash and cash equivalents beginning of period |
20,296 | 43,396 | ||||||
Cash and cash equivalents end of period |
$ | 58,912 | $ | 20,848 | ||||
Notes to consolidated financial statements are an integral part of these statements.
4
Table of Contents
Centra Financial Holdings, Inc.
Notes to Consolidated Financial Statements
Notes to Consolidated Financial Statements
Note A Organization
Centra Bank, Inc. (Centra Bank or the Company) is a full service commercial bank that was chartered
on September 27, 1999, under the laws of the State of West Virginia and commenced operations on
February 14, 2000. Centra Financial Holdings, Inc. (Centra) was formed on October 25, 1999, for the
purpose of becoming a one-bank holding company to own all of the outstanding stock of Centra Bank.
Management has evaluated all significant events and transactions that occurred after September 30,
2009, but prior to November 9, 2009, the date these financial statements were issued, for potential
recognition or disclosure in these financial statements.
Note B Basis of Presentation
Centras consolidated financial statements have been prepared in accordance with Centras
accounting and reporting policies, which are in conformity with U. S. generally accepted accounting
principles for interim financial information and with instructions to Form 10-Q and Rule 10-01 of
Regulation S-X. Such policies require management to make estimates and develop assumptions that
affect the amounts reported in the consolidated financial statements and related footnotes. Actual
results could differ from managements estimates. Also, they do not include all the information
and footnotes required by U. S. generally accepted accounting principles for annual year-end
financial statements. In the opinion of management, all material adjustments considered necessary
for a fair presentation, have been included and are of a normal, recurring nature. The balance
sheet as of December 31, 2008, has been derived from the audited financial statements at that date,
but does not include all of the information and footnotes required by U. S. generally accepted
accounting principles. Operating results for the three and nine months ended September 30, 2009,
are not necessarily indicative of the results that may be expected for the year ending December 31,
2009. These interim financial statements should be read in conjunction with the financial
statements and notes thereto included in Centras December 31, 2008, Form 10-K filed with the
Securities and Exchange Commission.
Note C Net Income Per Common Share
Centra determines basic earnings per share by dividing net income available to common shareholders
by the weighted average number of common shares outstanding during the period. Diluted earnings per
share is determined by dividing net income available to common shareholders by the weighted average
number of common shares outstanding increased by the number of shares that would be issued assuming
the exercise of stock options. At September 30, 2009 and 2008, stock options outstanding were
1,352,611 and 1,471,272 shares at an average price of $10.77 and $9.18, respectively. For the
three months ended September 30, 2009 and 2008, the dilutive effect of stock options was 357,192
and 533,315 shares, respectively. For the nine months ended September 30, 2009 and 2008, the
dilutive effect of stock options was 371,881 and 548,882 shares, respectively.
Note D Fair Value Measurements
Fair Value Measurements (ASC Topic 820), was issued by the FASB on January 1, 2008, and clarifies
that fair value of certain assets and liabilities is an exit price, representing the amount that
would be received to sell an asset or paid to transfer a liability in an orderly transaction
between market participants. Effective January 1, 2009, Centra implemented, Fair Value
Measurements, for our nonfinancial assets and liabilities that are re-measured at fair value on a
non-recurring basis. In October, 2008, the FASB issued Determining the Fair Value of a Financial
Asset When the Market for that Asset Is Not Active, which clarifies the treatment for assets in a
market that is not active and provides an example to illustrate key consideration in determining
the fair value of a financial asset.
Fair Value Measurements specifies a hierarchy of valuation techniques based on whether the inputs
to those valuation techniques are observable or unobservable. Observable inputs reflect market
data obtained from independent sources, while unobservable inputs reflect Centras market
assumptions. The three levels of the fair value hierarchy under Fair Value Measurements based on
these two types of inputs are as follows:
| Level 1 Valuation is based on quoted prices in active markets for identical assets and liabilities. |
5
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| Level 2 Valuation is based on observable inputs other than quoted prices in active markets for similar assets and liabilities, quoted prices for identical or similar assets and liabilities in nonactive markets, and model-based valuation techniques for which all significant assumptions are observable in the market. | ||
| Level 3 Valuation is based on model-based techniques that use one or more significant inputs or assumptions that are unobservable in the market. |
When determining the fair value measurements for assets and liabilities, Centra looks to active and
observable markets to price identical assets or liabilities whenever possible and classifies such
items in Level 1. When identical assets and liabilities are not traded in active markets, Centra
looks to market observable data for similar assets and liabilities and classifies such items as
Level 2. Nevertheless, when certain assets and liabilities are not actively traded in observable
markets and Centra must use alternative valuation techniques using unobservable inputs to determine
a fair value and classifies such items as Level 3. The level within the fair value hierarchy is
based on the lowest level of input that is significant in the fair value measurement.
The following table presents the balances of financial assets and liabilities measured at fair
value on a recurring basis as of September 30, 2009:
Fair Value Measurements at September 30, 2009 | ||||||||||||||||
Using: | ||||||||||||||||
Quoted Prices | ||||||||||||||||
in Active | Significant | |||||||||||||||
Markets for | Other | Significant | ||||||||||||||
Identical | Observable | Unobservable | ||||||||||||||
(Unaudited) (Dollars in Thousands) | Balance as of | Assets | Inputs | Inputs | ||||||||||||
Description | September 30, 2009 | (Level 1) | (Level 2) | (Level 3) | ||||||||||||
Assets |
||||||||||||||||
Available-for-sale securities: |
||||||||||||||||
Debt securities: |
||||||||||||||||
U.S. Government sponsored
agencies |
$ | 91,326 | $ | 91,326 | $ | | ||||||||||
State and municipal |
34,418 | 34,418 | | |||||||||||||
Corporate |
3,100 | 3,100 | | |||||||||||||
Equity securities: |
||||||||||||||||
Financial institution stock |
423 | $ | 423 | | | |||||||||||
Total |
$ | 129,267 | $ | 423 | $ | 128,844 | $ | | ||||||||
Available for sale securities are recorded at fair value on a recurring basis. Fair value
measurement is based upon quoted market prices, when available (Level 1). If quoted market prices
are not available, fair values are measured utilizing independent valuation techniques of identical
or similar securities. Third party vendors compile prices from various sources and may apply such
techniques as matrix pricing to determine the value of identical or similar securities (Level 2).
Any securities available for sale not valued based upon the methods above are considered Level 3.
Certain financial assets are measured at fair value on a nonrecurring basis in accordance with
GAAP. Adjustments to the fair value of these assets usually result from the application of
lower-of-cost-or-market accounting or write-downs of individual assets.
Loans held for sale: Loans held for sale are carried at the lower of cost or market value. These
loans currently consist of one-to-four family residential loans originated for sale in the
secondary market. Fair value is based on the price secondary markets are currently offering for
similar loans which is not materially different than cost due
6
Table of Contents
to the short duration between origination and sale (Level 2). As such, Centra records any fair
value adjustments on a nonrecurring basis. Gains and losses on the sale of loans are recorded
within secondary market income on the Consolidated Statements of Income. For the three and nine
months ended September 30, 2009 and 2008, no fair value adjustment was recognized in earnings
related to loans held for sale.
Allowance for Credit Losses: Loans are designated as impaired when, in the judgment of management
based on current information and events, it is probable that all amounts due according to the
contractual terms of the loan agreement will not be collected. For such loans, impairment is
measured based on the present value of expected future cash flows to be received from the borrower,
or alternatively, the observable market price of the loan or the fair value of the collateral if
the loan is collateral dependent. Impairment is typically measured based on the fair value of the
collateral securing the loans. Collateral may be in the form of real estate or business assets
including equipment, inventory, and accounts receivable. The vast majority of the collateral is
real estate. The value of real estate collateral is determined utilizing an income or market
valuation approach based on an appraisal conducted by an independent, licensed appraiser outside of
the Company (Level 2). The value of business equipment is based upon an outside appraisal if deemed
significant, or the net book value on the applicable business financial statements if not
considered significant. Likewise, values for inventory and accounts receivables collateral are
based on financial statement balances or aging reports (Level 3). Any fair value adjustments from
the underlying collateral on impaired loans are recorded in the period incurred as provision for
credit losses expense on the Consolidated Statements of Income. For the three and nine months
ended September 30, 2009 and 2008, no such fair value adjustment was recognized in earnings that
related to the allowance for loan losses allocated to impaired loans.
Other real estate owned: Other real estate owned (OREO) is measured at fair value less cost to sell
at the date of foreclosure, establishing a new cost basis. Subsequent to foreclosure, valuations
are periodically performed by management and the assets are carried at the lower of carrying amount
or fair value less cost to sell. Income and expenses from operations and changes in valuation
allowance are included in other expense from OREO. For the three and nine months ended September
30, 2009 and 2008, no fair value adjustment was recognized in earnings related to OREO.
Goodwill and Core Deposit Intangible: Goodwill is carried at cost basis and is reviewed annually or
more frequently if necessary for impairment. Core Deposit Intangible is recorded at cost and
amortized monthly and reviewed annually for impairment or earlier if indicators of impairment
exist. If impairment exists, the measurement of loss is based on the fair value of the reporting
unit (goodwill) and the core deposit intangible. For the three and nine months ended September 30,
2009 and 2008, no fair value adjustment was recognized in earnings related to goodwill and core
deposit intangible.
Financial Instruments: The following methods and assumptions were used by Centra in estimating its
fair value disclosures for financial instruments:
Cash and Cash Equivalents: The carrying amounts reported in the balance sheet approximate
their fair values.
Investment Securities: Fair values for investment securities are based on quoted market
prices, where available. If quoted market prices are not available, fair values are estimated using
quoted market prices of comparable securities.
Loans: The fair value of performing variable rate loans that reprice frequently and
performing demand loans, with no significant change in credit risk, is based on carrying value. The
fair value of certain mortgage loans is based on quoted market prices of similar loans sold
adjusted for differences in loan characteristics. The fair value of other performing loans (e.g.,
commercial real estate, commercial, and consumer loans) is estimated using discounted cash flow
analyses and interest rates currently being offered for loans with similar terms to borrowers of
similar credit quality.
Loans Held for Sale: The estimated fair value of loans held for sale is based upon the
market price of similar loans which is not materially different than cost due to the short time
duration between origination and sale.
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Deposits: The carrying amounts of demand deposits, savings accounts, and certain money
market deposits approximate their fair values. The fair value of fixed maturity certificates of
deposit is estimated using a discounted cash flow calculation that applies current rates offered
for deposits of similar remaining maturities.
Short-Term Borrowings: The carrying amounts of short-term borrowings approximate their fair
values.
Long-Term Debt: The carrying amounts of long-term debt approximate their fair value because
the debt is a variable rate instrument repricing quarterly.
Off-Balance Sheet Financial Instruments: The fair value of loan commitments is estimated
using the fees currently charged to enter into similar agreements taking into account the remaining
terms of the agreements and the counter parties credit standing. The estimated fair value of
these commitments approximates their carrying value.
The estimated fair value of Centras financial instruments are as follows:
Financial Instruments | ||||||||
Estimated | ||||||||
(Dollars in Thousands) | Carrying | Fair | ||||||
At September 30, 2009: | Amount | Value | ||||||
Financial assets: |
||||||||
Cash and cash equivalents |
$ | 58,912 | $ | 58,912 | ||||
Investment securities |
129,267 | 129,267 | ||||||
Loans |
1,030,869 | 1,039,218 | ||||||
Loans Held for Sale |
2,724 | 2,724 | ||||||
Financial liabilities: |
||||||||
Deposits |
1,104,008 | 1,123,030 | ||||||
Short-term borrowings |
34,230 | 34,230 | ||||||
Long-term debt |
20,000 | 20,000 |
Note E Investment Securities
Management determines the appropriate classification of investment securities at the time of
purchase. Available-for-sale securities are those securities that would be available to be sold in
the future in response to Centras liquidity needs, changes in market interest rates, and
asset-liability management strategies, among others. Available-for-sale securities are reported at
fair value, with unrealized holding gains and losses reported in a separate component of other
comprehensive income. The cost of securities sold is based on the specific-identification method.
Securities Classified as Available-for-Sale | ||||||||||||||||
Gross | Gross | Estimated | ||||||||||||||
Amortized | Unrealized | Unrealized | Fair | |||||||||||||
(Dollars in Thousands) | Cost | Gains | Losses | Value | ||||||||||||
At September 30, 2009: |
||||||||||||||||
Debt securities: |
||||||||||||||||
U.S. Government sponsored agencies |
$ | 89,691 | $ | 1,645 | $ | (10 | ) | $ | 91,326 | |||||||
State and municipal |
33,096 | 1,340 | (18 | ) | 34,418 | |||||||||||
Corporate |
3,031 | 69 | | 3,100 | ||||||||||||
Equity securities: |
||||||||||||||||
Financial institution stock |
528 | | (105 | ) | 423 | |||||||||||
Total available-for-sale securities |
$ | 126,346 | $ | 3,054 | $ | (133 | ) | $ | 129,267 | |||||||
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Securities Classified as Available-for-Sale | ||||||||||||||||
Gross | Gross | Estimated | ||||||||||||||
Amortized | Unrealized | Unrealized | Fair | |||||||||||||
(Dollars in Thousands) | Cost | Gains | Losses | Value | ||||||||||||
At December 31, 2008: |
||||||||||||||||
Debt securities: |
||||||||||||||||
U.S. Government sponsored agencies |
$ | 79,961 | $ | 1,942 | $ | | $ | 81,903 | ||||||||
State and municipal |
33,558 | 416 | (252 | ) | 33,722 | |||||||||||
Corporate |
3,306 | 21 | (45 | ) | 3,282 | |||||||||||
Equity securities: |
||||||||||||||||
Financial institution stock |
915 | | (272 | ) | 643 | |||||||||||
Total available-for-sale securities |
$ | 117,740 | $ | 2,379 | $ | (569 | ) | $ | 119,550 | |||||||
At September 30, 2009 and December 31, 2008, investment securities having a carrying value of
$108,130,000 and $112,070,000, respectively, were pledged to secure public deposits and repurchase
agreements in accordance with federal and state requirements.
Provided below is a summary of securities available-for-sale which were in an unrealized loss
position at September 30, 2009 and December 31, 2008. Centra held seven and thirty-nine securities,
respectively, that were in an unrealized loss position at September 30, 2009 and December 31, 2008.
Centra has the intent to hold these securities and it is more likely than not that Centra will not
be required to sell the securities before the anticipated recovery in fair value or by the time
these securities mature. Further, Centra believes the deterioration in fair value is attributable
to changes in market interest rates and not credit quality of the issuer.
Less Than 12 Months | 12 Months or More | Total | ||||||||||||||||||||||
Fair | Unrealized | Fair | Unrealized | Fair | Unrealized | |||||||||||||||||||
(Dollars in Thousands) | Value | Losses | Value | Losses | Value | Losses | ||||||||||||||||||
At September 30, 2009: |
||||||||||||||||||||||||
Debt securities: |
||||||||||||||||||||||||
U.S. Government sponsored
agencies |
$ | 5,062 | $ | (10 | ) | $ | | $ | | $ | 5,062 | $ | (10 | ) | ||||||||||
State and municipal |
942 | (18 | ) | | | 942 | (18 | ) | ||||||||||||||||
Corporate |
| | | | | | ||||||||||||||||||
Equity securities: |
||||||||||||||||||||||||
Financial institution stock |
423 | (105 | ) | | | 423 | (105 | ) | ||||||||||||||||
Total |
$ | 6,427 | $ | (133 | ) | $ | | $ | | $ | 6,427 | $ | (133 | ) | ||||||||||
Less Than 12 Months | 12 Months or More | Total | ||||||||||||||||||||||
Fair | Unrealized | Fair | Unrealized | Fair | Unrealized | |||||||||||||||||||
(Dollars in Thousands) | Value | Losses | Value | Losses | Value | Losses | ||||||||||||||||||
At December 31, 2008: |
||||||||||||||||||||||||
Debt securities: |
||||||||||||||||||||||||
U.S. Government sponsored
agencies |
$ | | $ | | $ | | $ | | $ | | $ | | ||||||||||||
State and municipal |
12,355 | (252 | ) | | | 12,355 | (252 | ) | ||||||||||||||||
Corporate |
1,733 | (45 | ) | | | 1,733 | (45 | ) | ||||||||||||||||
Equity securities: |
||||||||||||||||||||||||
Financial institution stock |
| | 643 | (272 | ) | 643 | (272 | ) | ||||||||||||||||
Total |
$ | 14,088 | $ | (297 | ) | $ | 643 | $ | (272 | ) | $ | 14,731 | $ | (569 | ) | |||||||||
Management evaluates securities for other-than-temporary impairment at least on a quarterly basis,
and more frequently when economic or market concerns warrant such evaluation. Consideration is
given to (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, and (3) the intent of Centra to sell
the security or whether its more likely than not that Centra would be required to sell the
security before its anticipated recovery in fair value. During the first quarter of
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2009, Centra determined that one equity security that had been in an unrealized loss position for
more than twelve months was other-than-temporarily impaired. Centra recognized the loss and
adjusted the investments cost basis by $387 thousand during the first quarter 2009, which is
included in Security (losses) gains on the Consolidated Statement of Income. No further
other-than-temporary impairment was recognized during the second or third quarters 2009.
The estimated maturities presented in the tables below may differ from the contractual maturities
because borrowers may have the right to call or prepay obligations without call or prepayment
penalties. The portfolio contains no single issue (excluding U.S. government and U.S. agency
securities) that exceeds 10% of stockholders equity.
The fair value of the available-for-sale securities portfolio as of September 30, 2009 and December
31, 2008 by contractual maturity, are shown below:
Fair Value Due: | ||||||||||||||||||||
After 1 year | After 5 years | |||||||||||||||||||
(Dollars in Thousands) | Within 1 year | through 5 years | through 10 years | Over 10 years | Total | |||||||||||||||
At September 30, 2009: |
||||||||||||||||||||
Debt securities: |
||||||||||||||||||||
U.S. Government sponsored
agencies |
$ | 26,723 | 64,603 | $ | | $ | | $ | 91,326 | |||||||||||
State and municipal |
656 | 26,474 | 7,288 | | 34,418 | |||||||||||||||
Corporate |
2,287 | 813 | | | 3,100 | |||||||||||||||
Equity securities: |
||||||||||||||||||||
Financial institution stock |
| | | 423 | 423 | |||||||||||||||
Total |
$ | 29,666 | $ | 91,890 | $ | 7,288 | $ | 423 | $ | 129,267 | ||||||||||
Fair Value Due: | ||||||||||||||||||||
After 1 year | After 5 years | |||||||||||||||||||
(Dollars in Thousands) | Within 1 year | through 5 years | through 10 years | Over 10 years | Total | |||||||||||||||
At December 31, 2008: |
||||||||||||||||||||
Debt securities: |
||||||||||||||||||||
U.S. Government sponsored
agencies |
$ | 29,068 | $ | 52,835 | $ | | $ | | $ | 81,903 | ||||||||||
State and municipal |
581 | 18,696 | 14,445 | | 33,722 | |||||||||||||||
Corporate |
1,703 | 1,579 | | | 3,282 | |||||||||||||||
Equity securities: |
||||||||||||||||||||
Financial institution stock |
643 | 643 | ||||||||||||||||||
Total |
$ | 31,352 | $ | 73,110 | $ | 14,445 | $ | 643 | $ | 119,550 | ||||||||||
As of September 30, 2009 and December 31, 2008, other investments at cost were equal to $2.9
million and $2.0 million, respectively, and consisted of Federal Home Loan Bank stock.
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Note F Preferred Stock
On January 16, 2009, Centra entered into a Letter Agreement (the Purchase Agreement) with the
United States Department of the Treasury (the Treasury) under the Troubled Asset Relief Program
Capital Purchase Program (TARP CPP), pursuant to which Centra issued and sold (i) 15,000 shares
of Preferred Stock as Fixed Rate Cumulative Perpetual Preferred Stock, Series A (the Series A
Preferred Stock) and (ii) a warrant (the Warrant) to purchase 751 shares of Centras Fixed Rate
Cumulative Perpetual Preferred Stock Series B, par value $1.00 per share and liquidation value
$1,000 per share (the Series B Preferred Stock), for an aggregate purchase price of $15,000,000
in cash (the transaction being referred to as the Investment). In accordance with the Purchase
Agreement, the warrants were immediately exercised by the Treasury into the Series B Preferred
Stock. Centra calculated the fair value of the Series A and B Preferred Stock and determined that
a discount of approximately $750,000 existed at the time of purchase. The net proceeds were
allocated between the Series A and B Preferred Stock based on their relative fair values.
Centra received approval from its primary bank regulators and the Treasury to the return of the
Investment, and accordingly, on March 31, 2009, Centra returned to the Treasury a total of
$15,095,833, which includes the original investment amount of $15,000,000 for the Series A
Preferred Stock plus accrued but unpaid dividends of $95,833. Centra received in return, and
cancelled, the share certificate for the Series A Preferred Stock. The difference between the
amount paid to the Treasury and the carrying value of the Series A Preferred Stock was deducted
from earnings available to common shareholders.
On April 15, 2009, Centra completed the redemption of the Series B Preferred Stock with the U.S.
Department of Treasury. As instructed by the Treasury, Centra returned a total of $761,250, which
included accrued but unpaid dividends of $11,250 and an additional premium of $750,000. Centra
received in return the cancelled Series B Preferred Stock. The differences between the amount paid
to the Treasury and the carrying value of the Series B Preferred Stock were deducted from earnings
available to common shareholders.
Note G Recent Accounting Pronouncements
On June 29, 2009, the FASB issued an accounting pronouncement establishing the FASB Accounting
Standards Codification (the ASC) as the source of authoritative accounting principles recognized
by the FASB to be applied by nongovernmental entities. This pronouncement was effective for
financial statements issued for interim and annual periods ending after September 15, 2009, for
most entities. On the effective date, all non-SEC accounting and reporting standards will be
superseded. Centra adopted this new accounting pronouncement for the quarterly period ended
September 30, 2009, as required, and adoption did not have a material impact on Centra financial
statements taken as a whole.
On June 12, 2009, the FASB issued two related accounting pronouncements changing the accounting
principles and disclosures requirements related to securitizations and special-purpose entities.
Specifically, these pronouncements eliminate the concept of a qualifying special-purpose entity,
change the requirements for derecognizing financial assets and change how a company determines when
an entity that is insufficiently capitalized or is not controlled through voting (or similar
rights) should be consolidated. These pronouncements also expand existing disclosure requirements
to include more information about transfers of financial assets, including securitization
transactions, and where companies have continuing exposure to the risks related to transferred
financial assets. These pronouncements will be effective as of the beginning of each reporting
entitys first annual reporting period that begins after November 15, 2009, for interim periods
within that first annual reporting period and for interim and annual reporting periods thereafter.
Earlier application is prohibited. The recognition and measurement provisions regarding transfers
of financial assets shall be applied to transfers that occur on or after the effective date.
Centra will adopt these new pronouncements on January 1, 2010, as required. Management has not yet
determined the impact adoption may have on Centra consolidated financial statements.
On May 28, 2009, the FASB issued an accounting pronouncement establishing general standards of
accounting for and disclosure of subsequent events, which are events occurring after the balance
sheet date but before the date the financial statements are issued or available to be issued. In
particular, the pronouncement requires entities to recognize in the financial statements the effect
of all subsequent events that provide additional evidence of conditions that existed at the balance
sheet date, including the estimates inherent in the financial preparation
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process. Entities may not recognize the impact of subsequent events that provide evidence about conditions
that did not exist at the balance sheet date but arose after that date. This pronouncement also
requires entities to disclose the date through which subsequent events have been evaluated. This
pronouncement was effective for interim and annual reporting periods ending after June 15, 2009.
Centra adopted the provisions of this pronouncement for the quarter ended June 30, 2009, as
required, and adoption did not have a material impact on Centra financial statements taken as a
whole.
On April 9, 2009, the FASB issued three related accounting pronouncements intended to provide
additional application guidance and enhance disclosures regarding fair value measurements and
impairments of securities. In particular, these pronouncements: (1) provide guidelines for making
fair value measurements more consistent with the existing accounting principles when the volume and
level of activity for the asset or liability have decreased significantly; (2) enhance consistency
in financial reporting by increasing the frequency of fair value disclosures and (3) modify
existing general standards of accounting for and disclosure of other-than-temporary impairment
(OTTI) losses for impaired debt securities.
The fair value measurement guidance of these pronouncements reaffirms the need for entities to use
judgment in determining if a formerly active market has become inactive and in determining fair
values when markets have become inactive. The changes to fair value disclosures relate to
financial instruments that are not currently reflected on the balance sheet at fair value. Prior
to these pronouncements, fair value disclosures for these instruments were required for annual
statements only. These disclosures now are required to be included in interim financial
statements. The general standards of accounting for OTTI losses were changed to require the
recognition of an OTTI loss in earnings only when an entity (1) intends to sell the debt security;
(2) more likely than not will be required to sell the security before recovery of its amortized
cost basis or (3) does not expect to recover the entire amortized cost basis of the security. In
situations when an entity intends to sell or more likely than not will be required to sell the
security, the entire OTTI loss must be recognized in earnings. In all other situations, only the
portion of the OTTI losses representing the credit loss must be recognized in earnings, with the
remaining portion being recognized in other comprehensive income, net of deferred taxes.
All three pronouncements were effective for interim and annual periods ending after June 15, 2009.
Entities were permitted to early adopt the provisions of these pronouncements for interim and
annual periods ending after March 15, 2009, but had to adopt all three concurrently. Centra
adopted these provisions of these pronouncements for the quarterly period ending June 30, 2009, as
required. The adoption of these pronouncements did not have any material impact on Centras
financial statements taken as a whole.
Item 2. Managements Discussion and Analysis of Financial Condition and Results of Operations
The Private Securities Litigation Reform Act of 1995 indicates that the disclosure of
forward-looking information is desirable for investors and encourages such disclosure by providing
a safe harbor for forward-looking statements that involve risk and uncertainty. All statements
other than statements of historical fact included in this Form 10-Q including statements in
Managements Discussion and Analysis of Financial Condition and Results of Operations are, or may
be deemed to be, forward-looking statements within the meaning of Section 27A of the Securities Act
of 1933 and Section 21E of the Securities and Exchange Act of 1934. When considering
forward-looking statements, you should keep in mind cautionary statements in this document and
other SEC filings including the Risk Factors section of item 1A of our 2008 Annual Report on Form
10-K. In order to comply with the terms of the safe harbor, the corporation notes that a variety of
factors, (e.g., changes in the national and local economies, changes in the interest rate
environment, competition, changes in governmental regulation, etc.) could cause Centras actual
results and experience to differ materially from the anticipated results or other expectations
expressed in those forward-looking statements.
The following data should be read in conjunction with the unaudited consolidated financial
statements and the managements discussion and analysis that follows.
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At September 30, 2009 and 2008, or for the nine and three months ended September 30, 2009 and 2008:
Nine Months Ended | Three Months Ended | |||||||||||||||
September 30 | September 30 | |||||||||||||||
2009 | 2008 | 2009 | 2008 | |||||||||||||
Net income to: |
||||||||||||||||
Average assets
|
0.77 | % | 0.67 | % | 0.69 | % | 0.68 | % | ||||||||
Average stockholders equity
|
9.14 | 8.54 | 8.38 | 8.81 | ||||||||||||
Net interest margin
|
3.83 | 3.74 | 3.83 | 3.65 | ||||||||||||
Average stockholders equity to average assets
|
8.41 | 7.87 | 8.19 | 7.68 | ||||||||||||
Total loans to total deposits (end of period)
|
93.38 | 97.48 | 93.38 | 97.48 | ||||||||||||
Allowance for loan losses to total loans (end of period)
|
1.60 | 1.50 | 1.60 | 1.50 | ||||||||||||
Allowance for credit losses to total loans (end of period)
|
1.75 | 1.66 | 1.75 | 1.66 | ||||||||||||
Efficiency ratio*
|
62.18 | 69.29 | 63.39 | 67.77 | ||||||||||||
Capital ratios: |
||||||||||||||||
Tier 1 capital ratio
|
10.71 | 9.95 | 10.71 | 9.95 | ||||||||||||
Risk-based capital ratio
|
11.97 | 11.21 | 11.97 | 11.21 | ||||||||||||
Leverage ratio
|
8.59 | 8.11 | 8.59 | 8.11 | ||||||||||||
Cash dividends as a percentage of net income
|
14.69 | 15.52 | 16.22 | 14.79 | ||||||||||||
Per share data: |
||||||||||||||||
Book value per share (end of period)
|
$ | 14.76 | $ | 15.50 | $ | 14.76 | $ | 15.50 | ||||||||
Market value per share (end of period)**
|
17.00 | 16.59 | 17.00 | $ | 16.59 | |||||||||||
Basic earnings per share
|
0.89 | 0.88 | 0.31 | 0.31 | ||||||||||||
Diluted earnings per share
|
0.85 | 0.81 | 0.29 | 0.28 | ||||||||||||
Cash dividends per share
|
0.15 | 0.15 | 0.05 | 0.05 |
* | The efficiency ratio is defined as noninterest expense less amortization of intangibles divided by net interest income plus noninterest income exclusive of security gains and losses. | |
** | Market value per share is based on stock price valuation performed by Danielson and Associates and Centras knowledge of certain arms-length transactions in the stock as Centras common stock is not traded on any market. There may be other transactions involving either higher or lower prices of which Centra is unaware. |
Introduction
The following discussion and analysis of the consolidated financial statements of Centra is
presented to provide insight into managements assessment of the financial results. Centras
wholly-owned banking subsidiary, Centra Bank, is the primary financial entity in this discussion.
Unless otherwise noted, this discussion will be in reference to the bank.
Centra Bank was chartered by the State of West Virginia and is subject to regulation, supervision,
and examination by the Federal Deposit Insurance Corporation and the West Virginia Division of
Banking. The bank is not a member of the Federal Reserve System. The bank is a member of the
Federal Home Loan Bank of Pittsburgh.
The bank provides a full array of financial products and services to its customers, including
traditional banking products such as deposit accounts, lending products, debit cards, automated
teller machines, and safe deposit rental facilities.
This discussion and analysis should be read in conjunction with the prior year-end audited
financial statements and footnotes thereto included in the Companys filing on Form 10-K and the
ratios, statistics, and discussions contained elsewhere in this Form 10-Q.
Application of Critical Accounting Policies
Centras consolidated financial statements are prepared in accordance with U.S. generally accepted
accounting principles and follow general practices within the banking industry. Application of
these principles requires
13
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management to make estimates, assumptions, and judgments that affect the amounts reported in the
financial statements; accordingly, as this information changes, the financial statements could
reflect different estimates, assumptions, and judgments. Application of certain accounting policies
inherently requires a greater reliance on the use of estimates, assumptions and judgments and as
such, the probability of actual results being materially different from reported estimates is
increased. Estimates, assumptions, and judgments are necessary when assets and liabilities are
required to be recorded at fair value, when a decline in the value of an asset not carried on the
financial statements at fair value warrants an impairment write-down or valuation reserve to be
established, or when an asset or liability needs to be recorded contingent upon a future event.
Carrying assets and liabilities at fair value inherently results in more financial statement
volatility. The fair values and the information used to record valuation adjustments for certain
assets and liabilities are based either on quoted market prices or are provided by other
third-party sources, when available. When third-party information is not available, valuation
adjustments are estimated in good faith by management primarily through the use of internal
forecasting techniques.
The most significant accounting policies followed by the bank are presented in Note 1 to the
audited consolidated financial statements included in Centras 2008 Annual Report on Form 10-K.
These policies, along with the disclosures presented in the other financial statement notes and in
managements discussion and analysis of operations, provide information on how significant assets
and liabilities are valued in the financial statements and how those values are determined. Based
on the valuation techniques used and the sensitivity of financial statements amounts to the
methods, assumptions, and estimates underlying those amounts, management has identified the
determination of the allowance for loan losses to be the accounting area that requires the most
subjective or complex judgments, and as such could be most subject to revision as new information
becomes available.
Centra maintains an allowance for loan losses to absorb probable losses based on a quarterly
analysis of the loan portfolio and estimation of the losses that have been incurred within the loan
portfolio. This formal analysis determines an appropriate level and allocation of the allowance for
loan losses among loan types and resulting provision for loan losses by considering factors
affecting losses, including specific losses, levels and trends in impaired and nonperforming loans,
historical loan loss experience, current national and local economic conditions, volume, growth and
composition of the portfolio, regulatory guidance, and other relevant factors. Determining the
amount of the allowance for loan losses requires significant judgment and the use of material
estimates by management, which is inherently subjective. The loan portfolio also represents the
largest asset in the consolidated balance sheet. Note 1 to the consolidated financial statements
describes the methodology used to determine the allowance for loan losses and a discussion of the
factors driving changes in the amount of the allowance for loan losses is included in the Allowance
for Credit Losses section of Managements Discussion and Analysis in this quarterly report on Form
10-Q.
Centra considers accounting for income taxes to also be a critical accounting policy. Deferred
income taxes are recorded based on temporary differences between the tax basis of an asset or
liability and its reported amount in the financial statements at the anticipated statutory tax rate
that will be in effect when the differences are expected to be recovered or settled. Further
discussion of income taxes, including a reconciliation of the effective tax rate to the statutory
rate, is included in Note 9 to the consolidated financial statements contained in the 2008 Form
10-K.
In Centras 2008 Annual Report on Form 10-K, investment securities and income recognition are also
mentioned as critical accounting policies.
Any material effect on the financial statements related to these critical accounting areas is also
discussed in this financial review.
Results of Operations
Overview of the Statement of Income
For the quarter ended September 30, 2009, Centra earned $2.2 million compared to $2.0 million
in the third quarter of 2008. These earnings equated to a return on average assets of 0.69% and
0.68%, respectively, and a return on average equity of 8.38% and 8.81%, respectively. Core growth
improved
both net interest income and other income while increases in expenses were controlled resulting in
an overall net income increase of 6.16%.
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For the nine months ended September 30, 2009, Centra earned $7.1 million compared to $5.8
million for the first nine months of 2008. These earnings equated to a return on average assets of
0.77% and 0.67% for the nine months ended September 30, 2009 and 2008, respectively. Return on
average equity was 9.14% and 8.54% for September 30, 2009 and 2008, respectively. Net income
increased by $1.3 million or 22.44% for the nine month period ended September 30, 2009.
Interest Income and Expense
Net interest income is the amount by which interest income on earning assets exceeds interest
expense on interest-bearing liabilities. Interest-earning assets include loans and investment
securities while interest-bearing liabilities include interest-bearing deposits and short and
long-term borrowed funds. Net interest income is the primary source of revenue for the bank. Net
interest income is impacted by changes in market interest rates, as well as changes in the mix and
volume of interest-earning assets and interest-bearing liabilities.
Net interest income increased to $11.0 million in the third quarter of 2009 from $10.0 million in
the third quarter of 2008. Net interest income increased to $32.1 million in the first nine months
of 2009 from $29.4 million in the first nine months of 2008. These similar increases were due to
growth in interest earning assets coupled with an increase in net interest margin in the third
quarter and first nine months of 2009 from 2008.
Centras average interest-earning assets and liabilities increased during the third quarter and
first nine months of 2009 compared to the same time periods in 2008. The most significant areas of
change were net loans, which increased to an average balance of $1.0 billion for the quarter ended
September 30, 2009 from $977.8 million for the quarter ended September 30, 2008 and
interest-bearing liabilities which grew to an average of $991.2 million from $960.4 for the
respective periods. Net loans increased to an average balance of $1.0 billion for the nine months
ended September 30, 2009 from $929.2 million for the nine months ended September 30, 2008 and
interest-bearing liabilities which grew to an average of $980.8 million from $922.4 million for the
respective periods. These trends reflect the continued growth of Centra in all of our operating
markets.
Net interest margin is presented on a tax-equivalent basis to provide a comparison among all types
of interest earning assets. The tax-equivalent basis adjusts for the tax-favored status of income
from certain loans and investments. Although this is a non-GAAP measure, Centras management
believes this measure is more widely used within the financial services industry and provides
better comparability of net interest income arising from taxable and tax-exempt sources. Centra
uses this measure to monitor net interest income performance and to manage its balance sheet
composition.
Net interest margin is calculated by dividing net interest income by average interest-earning
assets. This ratio serves as a performance measurement of the net interest revenue stream generated
by the banks balance sheet. The net interest margin for the quarters ended September 30, 2009 and
2008 were 3.83% and 3.65%, respectively. Centra has experienced an increase in the margin despite
significant interest rate drops over the past twelve months. Centra experienced a 65 basis points
decline in the yield on interest earning assets which was substantially offset by a 95 basis points
decrease in the cost of on interest bearing liabilities.
The net interest margin for the nine months ended September 30, 2009 and 2008 were 3.83% and 3.74%,
respectively. Similar to the quarter, Centra has experienced an increase in the margin for the
first nine months of the year. Year to date, Centra experienced a 80 basis point decline in the
yield on interest earning assets which was substantially offset by a 102 basis points decrease in
the cost of interest bearing liabilities.
15
Table of Contents
The following tables reconcile the difference between net interest income and tax-equivalent net
interest income for the three months ended September 30, 2009 and September 30, 2008 and the nine
months ended September 30, 2009 and September 30, 2008.
Three Months Ended | ||||||||
September 30 | ||||||||
(Unaudited)(Dollars in Thousands) |
2009 | 2008 | ||||||
Net interest income, GAAP basis
|
$ | 10,963 | $ | 9,982 | ||||
Tax-equivalent adjustment
|
224 | 239 | ||||||
Tax-equivalent net interest income
|
$ | 11,187 | $ | 10,221 | ||||
Nine Months Ended | ||||||||
September 30 | ||||||||
(Unaudited)(Dollars in Thousands) |
2009 | 2008 | ||||||
Net interest income, GAAP basis
|
$ | 32,051 | $ | 29,381 | ||||
Tax-equivalent adjustment
|
691 | 692 | ||||||
Tax-equivalent net interest income
|
$ | 32,742 | $ | 30,073 | ||||
Management continuously monitors the effects of net interest margin on the performance of the bank.
Loan growth, fluctuations in prime lending rates and mix of the balance sheet will continue to
impact net interest margin in future periods. As competition for deposits and quality loans
continues, management anticipates continued pressure on the net interest margin given the current
interest rate environment.
16
Table of Contents
Average Balances and Interest Rates
(Unaudited)(Dollars in Thousands)
(Unaudited)(Dollars in Thousands)
Three Months Ended | Three Months Ended | |||||||||||||||||||||||
September 30, 2009 | September 30, 2008 | |||||||||||||||||||||||
Interest | Interest | |||||||||||||||||||||||
Average | Income/ | Yield/ | Average | Income/ | Yield/ | |||||||||||||||||||
Balance | Expense | Cost | Balance | Expense | Cost | |||||||||||||||||||
Assets |
||||||||||||||||||||||||
Interest-bearing deposits in banks |
$ | 5,230 | $ | | 0.00 | % | $ | 1,025 | $ | 3 | 1.06 | % | ||||||||||||
Federal funds sold |
14,516 | 6 | 0.16 | 11,641 | 49 | 1.67 | ||||||||||||||||||
Loans held for sale |
2,107 | 27 | 5.10 | 2,538 | 40 | 6.32 | ||||||||||||||||||
Securities (1)(4): |
||||||||||||||||||||||||
Taxable |
89,773 | 700 | 3.09 | 87,403 | 912 | 4.15 | ||||||||||||||||||
Tax exempt |
33,068 | 434 | 5.20 | 34,910 | 462 | 5.27 | ||||||||||||||||||
Loans (2)(3)(4): |
||||||||||||||||||||||||
Commercial |
751,593 | 10,729 | 5.66 | 701,370 | 11,451 | 6.50 | ||||||||||||||||||
Tax exempt |
8,763 | 176 | 7.96 | 12,212 | 224 | 7.28 | ||||||||||||||||||
Consumer |
80,375 | 1,485 | 7.33 | 88,749 | 1,569 | 7.04 | ||||||||||||||||||
Real estate |
191,795 | 2,900 | 6.00 | 190,357 | 2,906 | 6.07 | ||||||||||||||||||
Allowance for loan losses |
(17,095 | ) | | | (14,910 | ) | | | ||||||||||||||||
Net loans |
1,015,431 | 15,290 | 5.97 | 977,778 | 16,150 | 6.57 | ||||||||||||||||||
Total earning assets |
1,160,125 | 16,457 | 5.63 | 1,115,295 | 17,616 | 6.28 | ||||||||||||||||||
Cash and due from banks |
17,380 | 17,192 | ||||||||||||||||||||||
Other assets |
67,832 | 60,179 | ||||||||||||||||||||||
Total assets |
$ | 1,245,337 | $ | 1,192,666 | ||||||||||||||||||||
Liabilities |
||||||||||||||||||||||||
Deposits: |
||||||||||||||||||||||||
Non-interest bearing demand |
$ | 140,073 | | $ | 130,616 | | ||||||||||||||||||
NOW |
184,891 | 401 | 0.86 | 167,401 | 836 | 1.99 | ||||||||||||||||||
Money market checking |
173,393 | 571 | 1.31 | 130,679 | 611 | 1.86 | ||||||||||||||||||
Savings |
41,886 | 37 | 0.35 | 36,845 | 43 | 0.47 | ||||||||||||||||||
IRAs |
46,978 | 370 | 3.13 | 45,652 | 456 | 3.98 | ||||||||||||||||||
CDs |
484,457 | 3,704 | 3.03 | 493,011 | 4,889 | 3.94 | ||||||||||||||||||
Short-term borrowings |
39,547 | 58 | 0.58 | 66,766 | 317 | 1.89 | ||||||||||||||||||
Long-term borrowings |
20,000 | 129 | 2.56 | 20,000 | 243 | 4.83 | ||||||||||||||||||
Total interest bearing liabilities |
991,152 | 5,270 | 2.11 | 960,354 | 7,395 | 3.06 | ||||||||||||||||||
Other liabilities |
12,156 | 10,056 | ||||||||||||||||||||||
Total liabilities |
1,143,381 | 1,101,026 | ||||||||||||||||||||||
Stockholders equity |
||||||||||||||||||||||||
Preferred stock |
| | ||||||||||||||||||||||
Common stock |
6,970 | 5,989 | ||||||||||||||||||||||
Paid-in capital |
96,573 | 82,779 | ||||||||||||||||||||||
Accumulated (deficit) earnings |
(3,167 | ) | 2,282 | |||||||||||||||||||||
Unrealized gains |
1,580 | 590 | ||||||||||||||||||||||
Total stockholders equity |
101,956 | 91,640 | ||||||||||||||||||||||
Total liabilities and stockholders equity |
$ | 1,245,337 | $ | 1,192,666 | ||||||||||||||||||||
Net interest spread |
3.52 | 3.22 | ||||||||||||||||||||||
Impact of non-interest-bearing funds on margin |
0.31 | 0.43 | ||||||||||||||||||||||
Net interest income-margin |
$ | 11,187 | 3.83 | % | $ | 10,221 | 3.65 | % | ||||||||||||||||
(1) | Average balances of investment securities based on carrying value. | |
(2) | Loan fees included in interest income were $191 in 2009 and $315 in 2008. | |
(3) | Non-accrual loans are included in the daily average loan amounts outstanding. | |
(4) | Income is computed on a fully tax-equivalent basis assuming a tax rate of approximately 40%. |
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Table of Contents
Average Balances and Interest Rates
(Unaudited)(Dollars in Thousands)
(Unaudited)(Dollars in Thousands)
Nine Months Ended | Nine Months Ended | |||||||||||||||||||||||
September 30, 2009 | September 30, 2008 | |||||||||||||||||||||||
Interest | Interest | |||||||||||||||||||||||
Average | Income/ | Yield/ | Average | Income/ | Yield/ | |||||||||||||||||||
Balance | Expense | Cost | Balance | Expense | Cost | |||||||||||||||||||
Assets |
||||||||||||||||||||||||
Interest-bearing deposits in banks |
$ | 2,831 | $ | 1 | 0.06 | % | $ | 1,142 | $ | 22 | 2.52 | % | ||||||||||||
Federal funds sold |
2,356 | 10 | 0.59 | 16,339 | 313 | 2.56 | ||||||||||||||||||
Loans held for sale |
3,863 | 126 | 4.36 | 3,372 | 135 | 5.34 | ||||||||||||||||||
Securities (1)(4): |
||||||||||||||||||||||||
Taxable |
89,078 | 2,234 | 3.35 | 88,851 | 3,210 | 7.23 | ||||||||||||||||||
Tax exempt |
33,061 | 1,299 | 5.25 | 34,013 | 1,355 | 7.97 | ||||||||||||||||||
Loans (2)(3)(4): |
||||||||||||||||||||||||
Commercial |
741,332 | 31,851 | 5.74 | 657,653 | 33,413 | 6.79 | ||||||||||||||||||
Tax exempt |
11,032 | 603 | 7.31 | 11,286 | 637 | 7.54 | ||||||||||||||||||
Consumer |
83,691 | 4,588 | 7.33 | 87,595 | 4,880 | 7.44 | ||||||||||||||||||
Real estate |
193,208 | 8,834 | 6.11 | 187,025 | 8,991 | 6.42 | ||||||||||||||||||
Allowance for loan losses |
(16,829 | ) | | | (14,408 | ) | | | ||||||||||||||||
Net loans |
1,012,434 | 45,876 | 6.06 | 929,151 | 47,921 | 6.89 | ||||||||||||||||||
Total earning assets |
1,143,623 | 49,546 | 5.79 | 1,072,868 | 52,956 | 6.59 | ||||||||||||||||||
Cash and due from banks |
22,396 | 16,600 | ||||||||||||||||||||||
Other assets |
65,778 | 60,658 | ||||||||||||||||||||||
Total assets |
$ | 1,231,797 | $ | 1,150,126 | ||||||||||||||||||||
Liabilities |
||||||||||||||||||||||||
Deposits: |
||||||||||||||||||||||||
Non-interest bearing demand |
$ | 135,558 | | $ | 123,163 | | | |||||||||||||||||
NOW |
167,677 | 1,083 | 0.86 | 163,783 | 2,844 | 2.32 | ||||||||||||||||||
Money market checking |
161,820 | 1,611 | 1.33 | 122,272 | 1,809 | 1.98 | ||||||||||||||||||
Savings |
40,403 | 106 | 0.35 | 36,385 | 148 | 0.55 | ||||||||||||||||||
IRAs |
46,164 | 1,161 | 3.36 | 45,936 | 1,431 | 4.16 | ||||||||||||||||||
CDs |
494,526 | 12,142 | 3.28 | 486,568 | 15,145 | 4.16 | ||||||||||||||||||
Short-term borrowings |
50,240 | 242 | 0.64 | 47,407 | 704 | 1.98 | ||||||||||||||||||
Long-term borrowings |
20,000 | 459 | 3.07 | 20,000 | 802 | 5.36 | ||||||||||||||||||
Total interest bearing liabilities |
980,830 | 16,804 | 2.29 | 922,351 | 22,883 | 3.31 | ||||||||||||||||||
Other liabilities |
11,801 | 14,113 | ||||||||||||||||||||||
Total liabilities |
1,128,189 | 1,059,627 | ||||||||||||||||||||||
Stockholders equity |
||||||||||||||||||||||||
Preferred stock |
937 | | ||||||||||||||||||||||
Common stock |
6,912 | 5,981 | ||||||||||||||||||||||
Paid-in capital |
99,059 | 82,360 | ||||||||||||||||||||||
Accumulated (deficit) earnings |
(4,834 | ) | 1,161 | |||||||||||||||||||||
Unrealized gains |
1,534 | 997 | ||||||||||||||||||||||
Total stockholders equity |
103,608 | 90,499 | ||||||||||||||||||||||
Total liabilities and stockholders equity |
$ | 1,231,797 | $ | 1,150,126 | ||||||||||||||||||||
Net interest spread |
3.50 | 3.28 | ||||||||||||||||||||||
Impact of non-interest bearing funds on
margin |
0.33 | 0.46 | ||||||||||||||||||||||
Net interest income-margin |
$ | 32,742 | 3.83 | % | $ | 30,073 | 3.74 | % | ||||||||||||||||
(1) | Average balances of investment securities based on carrying value. | |
(2) | Loan fees included in interest income were $626 in 2009 and $930 in 2008. | |
(3) | Non-accrual loans are included in the daily average loan amounts outstanding. | |
(4) | Income is computed on a fully tax-equivalent basis assuming a tax rate of approximately 40%. |
18
Table of Contents
Allowance and Provision for Credit Losses
Management continually monitors the loan portfolio through its regional committees and the Senior
Loan Committee to determine the adequacy of the allowance for loan losses. This formal analysis
determines the appropriate level of the allowance for loan losses and allocation of the allowance
among loan types and specific credits. The portion of the allowance allocated among the various
loan types represents managements estimate of probable losses based upon historical loss factors.
In addition, Centra considers factors such as changes in lending policies, changes in the trend and
volume of past due and adversely classified or graded loans, changes in local and national economic
conditions, and effects of changes in loan concentrations. Specific loss estimates are derived for
individual credits, where applicable, and are based upon specific qualitative criteria, including
the size of the loan and loan grades below a predetermined level.
Centra maintains an allowance for loan losses and an allowance for lending-related commitments.
For financial reporting purposes, Centra reports its provision for credit losses as the sum of the
provision for loan losses and the provision for losses on lending-related commitments. The
allowance for loan losses was $16.5 million, $16.4 million, and $15.2 million as of September 30,
2009, December 31, 2008, and September 30, 2008, respectively, which represents an allowance to
total loans of 1.60%, 1.60% and 1.50% for the respective period ends. The allowance for loan losses
as of September 30, 2009 increased slightly by $0.1 million since December 31, 2008, which is due
to marginal loan growth of $5.7 million and managements assessment of the adequacy of the reserve.
The increase in the allowance for loan losses at September 30, 2009 compared to September 30,
2008 was primarily due to the loan growth of $18.9 million, significant deterioration of general
economic conditions and the increase in delinquent and non-performing assets from the previous
year.
Non-performing assets consist of non-accrual loans, other impaired loans that are not 90 days or
more past due and still accruing interest, and other real estate owned. As of September 30, 2009,
total non-performing assets reached $15.1 million compared to $7.5 million as of September 30,
2008. The increase is a result of further deteriorating economic conditions in our operation
markets as well as a rise in impaired loans and other real estate owned.
Total non-performing loans were $13.1 million as of September 30, 2009 compared to $7.2 million as
of September 30, 2008. Total non-accrual loans have increased by $1.3 million since September 30,
2008 to $8.5 million as of September 30, 2009. Non-accrual loans continue to be concentrated in
commercial and real estate loans. Non-accrual commercial loans have increased by $1.1 million to
$5.7 million as of September 30, 2009. Non-accrual real estate loans were $2.3 million as of
September 30, 2009 compared to $2.2 million as of September 30, 2008. As a result of these
increases, Centras allowance as a percent of non-performing loans has dropped to 125% at September
30, 2009 from 210% at September 30, 2008.
As of September 30, 2009, total impaired loans were $10.4 million, which include commercial
non-accrual loans and one loan for $4.6 million that was deemed impaired due to managements
expectation that the borrower would not be able to satisfy the contractual obligation due to a
decline in the collateral value. Of the total impaired loans, $7.5 million required specific
reserves due to shortfalls in collateral value. Centra reserved $2.6 million for impaired loans as
of September 30, 2009. As of September 30, 2009, other real estate owned was $2.0 million compared
to $303 thousand as of September 30, 2008.
Accruing loans past due 30 days or more have increased by $2.5 million since September 30, 2008 to
$4.8 million as of September 30, 2009. As of September 30, 2009, only 0.47% of Centras total loan
portfolio was past due 30 days or more. Commercial loans past due 30 days or more make up 47.76%
or $2.3 million of the total loan delinquencies. Consumer loans past due 30 days or more make up
33.40% or $1.6 million of the total loan delinquencies. Real estate loans past due 30 days or more
make up 18.84% or $905 thousand of the total loan delinquencies.
In determining the allowance for loan losses, Centra segregates the loan portfolio by loan type:
commercial, consumer and real estate loans. Of the $16.5 million allowance for loan losses recorded
on September 30, 2009, $10.5 million is allocated to commercial loans, $2.2 million is allocated to
consumer loans, and $3.8 million is allocated to real estate loans. A specific reserve of $2.6
million is allocated to impaired loans, which is included in the commercial loan reserve
allocation. Of the $2.6 specific reserve, $1.9 million is allocated to the other impaired loan
mentioned above. Of the $16.4 million recorded on December 31, 2008, $9.3 million is allocated to
commercial loans, $2.8 million is allocated to consumer loans, and $4.3 million is allocated to
real estate loans. No specific reserve was allocated to impaired loans as of December 31, 2008.
Of the $15.2 million recorded on September 30, 2008, $8.7 million is allocated to commercial loans,
$2.6 million is allocated to consumer loans, and $3.9 million is allocated to real estate loans.
No specific reserve was allocated to impaired loans as of September 30, 2008.
The increase in the allowance for commercial loan losses at September 30, 2009 from the previous
periods is most notably due to the inherent risk within the portfolio. As noted above, Centra
identified five loans totaling $7.5 million that were considered impaired and resulted in an
additional allowance of $2.6 million. Additionally, the historical loss factor has increased from
19
Table of Contents
prior periods as Centra has experienced a higher level of losses during the later part of 2008 and
during the first nine months of 2009 compared to prior years. For the nine months ended September
30, 2009, total charge-offs reached $2.6 million compared to only $0.4 million from the previous
year. Centras charge off levels continue to hold below peer levels.
Centras net charge-offs as a percent of average loans were 0.30% during through the first nine
months of 2009 while according to the FDICs Second Quarter 2009 Quarterly Banking Profile, banks
$1-10 billion in asset size experienced net charge-offs as a percent of average loans of 2.17%.
The allowance for consumer loan losses has decreased at September 30, 2009 from the prior periods
proportionately to the decline in the outstanding loan balances, which were $77.7 million as of
September 30, 2009, $87.4 million as of December 31, 2008 and $89.5 million as of September 30,
2008. The allowance for real estate loan losses has also decreased proportionately at September
30, 2009 from the prior periods due to the decline in the outstanding loan balances, which were
$191.6 million as of September 30, 2009 and $194.8 million as of December 31, 2008 and $193.2
million as of September 30, 2008.
Management records the provision for loan losses as a result of its analysis of the adequacy of the
allowance for loan losses and the overall management of inherent credit risk. The provision for
loan losses for the quarters ended September 30, 2009 and 2008 was $1.2 million and $0.8 million,
respectively. The provision for loan losses for the first nine months of September 30, 2009 and
2008 was $2.5 million and $2.0 million, respectively.
Activity in the allowance for loan losses follows:
Nine Months Ended | ||||||||
September 30 | ||||||||
(Dollars in Thousands) | 2009 | 2008 | ||||||
Allowance for loan losses |
||||||||
Balance, beginning of period |
$ | 16,367 | $ | 13,536 | ||||
Loan charge-offs |
(2,646 | ) | (353 | ) | ||||
Loan recoveries |
309 | 144 | ||||||
Net (charge-offs) |
(2,337 | ) | (209 | ) | ||||
Provision for loan losses |
2,452 | 1,902 | ||||||
Balance, end of period |
$ | 16,482 | $ | 15,229 | ||||
Total non-performing assets and accruing loans past due 90 days are summarized as follows:
September 30 | December 31 | September 30 | ||||||||||
(Dollars in Thousands) | 2009 | 2008 | 2008 | |||||||||
Non-accrual loans: |
||||||||||||
Commercial |
$ | 5,730 | $ | 3,774 | $ | 4,641 | ||||||
Real Estate |
2,292 | 2,468 | 2,194 | |||||||||
Consumer |
478 | 519 | 402 | |||||||||
Total non-accrual loans |
8,500 | 6,761 | 7,237 | |||||||||
Other impaired loans |
4,634 | | | |||||||||
Total non-performing loans |
13,134 | 6,761 | 7,237 | |||||||||
Other real estate, net |
1,970 | 160 | 303 | |||||||||
Total non-performing assets |
$ | 15,104 | $ | 6,921 | 7,540 | |||||||
20
Table of Contents
September 30 | December 31 | September 30 | ||||||||||
(Dollars in Thousands) | 2009 | 2008 | 2008 | |||||||||
Accruing loans past due 30 days or more |
$ | 4,803 | $ | 6,301 | $ | 2,271 | ||||||
Non-performing loans as a % of total loans |
1.27 | % | 0.67 | % | 0.72 | % | ||||||
Allowance for loan losses as a % of non-performing loans |
125 | % | 242 | % | 210 | % | ||||||
Allowance for loan losses as a % of total loans |
1.60 | % | 1.60 | % | 1.50 | % | ||||||
Allowance for credit losses as a % of total loans |
1.75 | % | 1.74 | % | 1.60 | % |
Loans are placed on nonaccrual automatically when they become 90-days delinquent. Collection and
foreclosure procedures have been initiated on these loans and minimal losses are anticipated.
Centra records an Allowance for Credit Losses related to unused off balance sheet commitments
within the other liabilities portion of the balance sheet. Activity in this allowance account is as
follows:
September 30 | ||||||||
(Dollars in Thousands) | 2009 | 2008 | ||||||
Balance, beginning of period |
$ | 1,477 | 1,507 | |||||
Provision for loss |
54 | 69 | ||||||
Balance, end of period |
$ | 1,531 | 1,576 | |||||
Noninterest Income
Fees related to real estate loans sold in the secondary market, service charges on deposit
accounts, and electronic banking revenue generate the core of the banks non-interest income.
Noninterest income totaled $2.0 million in the third quarter of 2009 and 2008. Noninterest income
totaled $5.8 million in the first nine months of 2009 and 2008. Overall noninterest income
remained consistent despite other-than-temporary losses of $387 thousand recognized during the
first quarter 2009 on an equity security held within the investment portfolio. Excluding this
charge, noninterest income would have reached $6.2 million, which is an increase of $445 thousand
or 7.69% for the first nine months of 2009 compared to the first nine months of 2008. This
increase is attributable to a rise in secondary market income and service charges on deposit
accounts.
Service charges on deposit accounts increased to $953 thousand in the third quarter of 2009 from
$877 thousand in the third quarter of 2008. Similarly, service charges on deposit accounts
increased to $2.7 million in the first nine months of 2009 from $2.1 million in the first nine
months of 2008. This growth was the direct result of the corresponding increase in
deposit accounts and fee changes.
Other service charges and fees increased to $644 thousand in the third quarter of 2009 from $614
thousand in the third quarter of 2008. Other service charges and fees were $1.9 million in the
first nine months of 2009 and compared to $1.8 million in the first nine months of 2008.
Centra originates long-term, fixed-rate and adjustable-rate mortgage loans and sells them in the
secondary market, servicing released. Centras mortgage banking income includes the recognition of
fees received from the borrower and the investor upon the sale of the loan. Centra recognized $281
thousand from such fees in the third quarter of 2009 compared to $276 thousand in the third quarter
of 2008. Centra recognized $1.1 million from such fees in the first nine months of 2009
compared to $1.0 million in the first nine months of 2008.
Noninterest Expense
For the third quarter of 2009, noninterest expense totaled $8.4 million compared to $8.2 million in
the third quarter of 2008. Centras efficiency ratio was 63.39% for the third quarter of 2009
compared to 67.77% for the third quarter of 2008. This ratio measures the efficiency of
noninterest expenses less amortization of intangibles incurred in relationship to net interest
income plus noninterest income exclusive of security gains and losses.
For the first nine months of 2009, noninterest expense totaled $24.6 million compared to $24.5 in
the first nine months of 2008. Centras efficiency ratio was 62.18% for the first nine months of
2009 compared to 69.29% for the first nine months of 2008. The 5 basis point FDIC special
assessment fee incurred during the second quarter incurred during the first quarter significantly
affected the ratio in 2009 as it would have been 60.72% for the nine months ended September 30,
2009 absent this item.
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Table of Contents
Salaries and benefits totaled $4.0 million for the quarter ended September 30, 2009 and 2008.
Salaries and benefits totaled $11.5 million for the nine months ended September 30, 2009 compared
to $12.4 million for the nine months ended September 30, 2008. Centra had 232 full-time equivalent
personnel as of September 30, 2009, compared to 248 full-time equivalent personnel as of September
30, 2008. The reduction in staffing levels represents Centras efforts to focus on operational
efficiency and optimal staffing levels while continuing to provide an exceptional level of customer
service. Management will continue to strive to find new ways of increasing efficiencies and
leveraging its resources, while effectively optimizing customer service.
For the quarters ended September 30, 2009 and 2008, occupancy expense totaled $745 thousand and
$631 thousand, respectively. For the nine months ended September 30, 2009 and 2008, occupancy
expense totaled $2.0 million and $1.9 million respectively. During the third quarter, Centra
opened its fifteenth full service branch. This branch was opened in the Washington County Maryland
market.
Equipment expense totaled $578 thousand in the third quarter of 2009 compared to $560 thousand for
the third quarter of 2008. Included in equipment expense is depreciation of furniture, fixtures,
and equipment of $374 thousand for the quarter ended September 30, 2009, and $356 thousand for the
quarter ended September 30, 2008. Equipment expense totaled $1.7 million in the first nine months
of 2009 compared to $1.6 million for the first nine months of 2008. Included in equipment expense
is depreciation of furniture, fixtures and equipment of $1.1 million for the nine months ended
September 30, 2009 and $1.0 million for the nine months ended September 30, 2008. Equipment
depreciation reflects Centras commitment to technology including investments that improve service
delivery channels to our customers and operational efficiency.
Advertising costs totaled $431 thousand in the third quarter of 2009 compared to $344 thousand in
the third quarter of 2008. Advertising costs totaled $1.1 million in the first nine months of 2009
compared to $1.0 million in the first nine months of 2008. The bank believes the current marketing
approach will continue to result in market awareness of the Centra name and customer service
philosophy.
Professional fees include legal, accounting and consulting fees paid related to bank operations.
Professional fees totaled $188 thousand in the third quarter of 2009 compared to $381 thousand in
the third quarter of 2008. Professional fees totaled $669 thousand in the first nine months of 2009
compared to $902 thousand in the first nine months of 2008. Professional fees decreased from prior
year due to consulting services utilized in 2008, but not incurred in 2009.
Data processing costs totaled $617 thousand in the third quarter of 2009 compared to $587 thousand
in the third quarter of 2008. Data processing costs totaled $1.9 million in the first nine months
of 2009 compared to $1.6 million in the first nine months of 2008. Data processing costs have
increased in correlation to the number of deposit and loan accounts and the continued branch
expansion.
Other outside services totaled $246 thousand in the third quarter of 2009 compared to $251 thousand
in the third quarter of 2008. Other outside services totaled $761 thousand in the first nine
months of 2009 compared to $667 thousand in the first nine months of 2008. This increase is due to
increases in correspondent bank fees, ATM network fees, and courier services.
Regulatory assessment expense totaled $389 thousand in the third quarter of 2009 compared to $188
thousand in the third quarter 2008. Regulatory assessment expense totaled $1.5 million in the
first nine months of 2009 compared to $536 thousand in the first nine months 2008. The FDIC
applied a special assessment to all member banks as of June 30, 2009 in order to recapitalize the
regulatory insurance funds. This fee was in addition to the normal regulatory assessment required
by the FDIC. Centra accrued $567 thousand during the second quarter 2009 related to the special
assessment, and the fee was paid during the third quarter 2009. The FDIC has indicated the
possibility of imposing additional special assessments on all insured institutions similar to the
one levied in the third quarter of 2009. The FDIC has also proposed to have all insured
institution prepay assessments through 2012. As proposed, prepaid assessments would be collected
on December 31, 2009. Such special assessments, if imposed, could materially increase the total
FDIC insurance expense recognized for 2009 and impair cash flow at the end of the year.
Other operating expense totaled $1.2 million in the third quarter of 2009 compared to $1.3 million
in the third quarter of 2008. Other operating expense totaled $3.4 million in the first nine
months of 2009 compared to $3.8 million in the first nine months of 2008. The decrease was
primarily the result of a decline in other loan related expenses and other operating expenses from
the prior year.
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Income Tax Expense
The effective tax rate for the third quarter of 2009 and 2008 was 36.2% and 31.8%, respectively.
The effective tax rate for the first nine months of 2009 was 34.4% compared to 33.5% for the first
nine months of 2008.
Centra incurred income tax expense of $1.2 million in the third quarter of 2009 compared to $945
thousand for the third quarter of 2008. Centra incurred income tax of $3.7 million in the first
nine months of 2009 compared to $2.9 million for the first nine months of 2008. Centras income
tax expense has increased over the prior year due to an increase in net income before tax.
Return on Average Assets and Average Equity
Returns on average assets (ROA) and average equity (ROE) were 0.69% and 8.38% for the third quarter
of 2009 compared to 0.68% and 8.81% for the third quarter of 2008. ROA and ROE were 0.77% and
9.14% for the first nine months of 2009 compared to 0.67% and 8.54% for the first nine months of
2008. These measures have increased compared to the prior period reflecting the increased
profitability of Centra.
The bank is considered well capitalized under regulatory and industry standards of risk-based
capital.
Financial Condition
Overview of the Statement of Condition
Total assets at September 30, 2009, were $1.3 billion or an increase of $60.5 million since
December 31, 2008. Each major category of assets has increased from the prior period. Asset
growth has occurred primarily due to increases in federal funds sold, securities, and loans and was
funded largely by increases in non-interest bearing and interest bearing deposits. Centras
liquidity position has also improved as a result of deposit growth.
Deposits totaled $1.1 billion at September 30, 2009, or an increase of $91.6 million since December
31, 2008. Short-term borrowings totaled $34.2 million at September 30, 2009, and have decreased
$41.1 million since December 31, 2008 due to deposit growth.
Stockholders equity was $103.2 million at September 30, 2009, or an increase of approximately $8.0
million from December 31, 2008, due primarily to Centras net income recognized for the first nine
months of 2009 as well as the result of equity received from the exercise of certain stock options
and stock purchased through the dividend reinvestment plan.
Cash and Cash Equivalents
Cash and cash equivalents totaled $58.9 million as of September 30, 2009, compared to $20.3 million
as of December 31, 2008, or an increase of $38.6 million. Federal funds sold were $47.2 million as
of September 30, 2009. Centra was in a borrowing position at the end of 2008, but the need for
borrowing was eliminated with deposit growth.
Total cash and cash equivalents fluctuate on a daily basis due to transactions in process and other
liquidity and performance demands. Management believes the liquidity needs of Centra are satisfied
by the current balance of cash and cash equivalents, readily available access to traditional and
non-traditional funding sources, and the portions of the investment and loan portfolios that mature
within one year. These sources of funds should enable Centra to meet cash obligations as they come
due.
Investment Securities
Available-for-sale investment securities totaled $129.3 million as of September 30, 2009, and
$119.6 million as of December 31, 2008. This is an increase of $9.7 million from year-end and
reflects Centras ongoing efforts to invest conservatively to position the portfolio to help fund
future loan demand. . Additionally, the proceeds from the maturities and calls of numerous
securities were reinvested into the government-sponsored agency and state and municipal bond
portfolios.
Government-sponsored agency securities comprise the majority of the portfolio. Centra also holds
state and municipal securities, corporate issued debt securities, and corporate stock. Centra does
not hold any single issue or pooled trust preferred securities, mortgage backed securities,
perpetual preferred equity securities or any securities collateralized by sub-prime loans.
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Most of the banks investment securities are classified as available-for-sale. Management believes
the available-for-sale classification provides flexibility for the bank in terms of growing the
bank as well as interest rate risk management. At September 30, 2009, the amortized cost of the
banks investment securities totaled $126.3 million, resulting in unrealized
appreciation in the investment portfolio of $2.9 million and a corresponding increase in the banks
equity of $1.8 million, net of deferred income taxes.
As of September 30, 2009, Centra evaluated all investment securities with material unrealized
losses for impairment. During the first quarter 2009, Centra recognized other-than-temporary
impairment losses of $387 thousand on an equity security, which had been in an unrealized loss
position for more than twelve months. No additional impairment loss was recorded during the second
or third quarters 2009.
Other investments totaled $2.9 million as of September 30, 2009 compared to $2.0 million as of
December 31, 2008. Other investments include Federal Home Loan Bank stock.
Management monitors the earnings performance and liquidity of the investment portfolio on a regular
basis through Asset/Liability Committee meetings. The group also monitors net interest income, sets
pricing guidelines, and manages interest rate risk for the bank. Through active balance sheet
management and analysis of the investment securities portfolio, the bank maintains sufficient
liquidity to satisfy depositor requirements and the various credit needs of its customers.
Management believes the risk characteristics inherent in the investment portfolio are acceptable
based on these parameters.
Loans
The banks lending is primarily focused in the north central and eastern panhandle regions of West
Virginia, Southwestern Pennsylvania and Hagerstown, Maryland. Areas of focus consist primarily of
commercial lending, retail lending, which includes single-family residential mortgages, and
consumer lending.
The following table details total loans outstanding as of:
September 30 | December 31 | |||||||
(Dollars in Thousands) | 2009 | 2008 | ||||||
Commercial |
$ | 146,758 | $ | 141,584 | ||||
Real estate, commercial |
614,809 | 601,468 | ||||||
Real estate, residential mortgage |
191,631 | 194,805 | ||||||
Consumer |
77,671 | 87,355 | ||||||
Total loans |
$ | 1,030,869 | $ | 1,025,212 | ||||
Commercial real estate loans constitute the largest component of the lending portfolio. This is the
result of a concerted effort to attract quality commercial loans while maintaining appropriate
underwriting standards. As a result the current economic environment where consumers are saving
more and spending less, management expects commercial loan demand to slow down during the remainder
of 2009.
Loan Concentration
With the significant commercial loan balances, the bank has concentrations of its loan portfolio in
the building, developing, and general contracting industry, coal mining, clothing retail, leasing
of real estate, and the hotel/motel areas. These concentrations, while within the same industry
segment, are not concentrated with a single borrower or market. This dissemination of borrowers
somewhat mitigates the concentrations previously noted. Management continually monitors these
concentrations.
Funding Sources
Centra considers a number of alternatives, including but not limited to deposits, brokered
deposits, short-term borrowings, and long-term borrowings when evaluating funding sources.
Traditional deposits continue to be the most significant source of funds for the bank, reaching
$1.1 billion at September 30, 2009.
Non-interest bearing deposits remain a core funding source for Centra. At September 30, 2009,
non-interest bearing deposits totaled $151.3 million compared to $132.2 million at December 31,
2008. Management intends to continue to focus on
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maintaining its base of low-cost funding sources,
through product offerings that benefit customers who increase their relationship with Centra by
using multiple products and services.
Interest bearing deposits totaled $952.7 million at September 30, 2009, compared to $880.2 million
at December 31, 2008. Average interest bearing liabilities totaled $991.2 million during the third
quarter of 2009 compared to $960.4 million for the third quarter of 2008. Average interest bearing
liabilities totaled $980.8 million during the first nine months of 2009 compared to $922.4 million
for the first nine months of 2008. Average non-interest bearing demand deposits totaled $140.1
million for the third quarter of 2009 compared to $130.6 million for the third quarter of 2008.
Average non-interest bearing demand deposits totaled $135.6 million for the first nine months of
2009 compared to $123.2 million for the first nine months of 2008. Management will continue to
emphasize deposit growth in 2009 by offering outstanding customer service and competitively priced
products. Management will also concentrate on balancing deposit growth with adequate net interest
margin to meet Centras strategic profitability goals.
Along with traditional deposits, Centra has access to both short-term and long-term borrowings to
fund its operations and investments. Centras short-term borrowings consist of corporate deposits
held in overnight repurchase agreements and federal funds purchased. At September 30, 2009,
short-term borrowings totaled $34.2 million compared to $75.3 million at December 31, 2008.
Centra formed two statutory business trusts for the purpose of issuing trust preferred capital
securities with the proceeds invested in junior subordinated debt securities of Centra. In
September 2006 and September 2004, Centra completed the private placement of two $10,000,000
Floating Rate, Trust Preferred Securities through its Centra Financial Statutory Trust II and
Centra Financial Statutory Trust I subsidiaries. The 2006 and 2004 securities are at an interest
cost of 2.29% and 1.65%, respectively, over the three-month LIBOR rate, reset quarterly. Interest
payments are due quarterly.
Capital/Stockholders Equity
In July 2009, the Board of Directors of Centra Financial Holdings, Inc., parent company of Centra
Bank, Inc., declared the payment of the companys seventh cash dividend on Centra common stock.
Payable on October 1, 2009, $0.05 per share has been distributed to shareholders of record on
September 18, 2009.
Centras retained earnings/deficit is the result of stock dividends issued in prior years.
Retained earnings/deficit is reduced by the effect of the total dividend as common stock and
additional paid-in capital are increased proportionately. Thus, total equity does not change when
stock dividends are issued.
At September 30, 2009, accumulated other comprehensive income totaled $1.8 million compared to $1.1
million at December 31, 2008. Because all the investment securities in Centras portfolio are
classified as available-for-sale, both the investment and equity sections of Centras balance sheet
are more sensitive to the changing market values of investments.
The primary source of funds for dividends to be paid by Centra Financial Holdings, Inc. is
dividends received from its subsidiary bank, Centra Bank. Dividends paid by the subsidiary bank are
subject to restrictions by banking regulations. The most restrictive provision requires regulatory
approval if dividends declared in any year exceed that years retained net profits, as defined,
plus the retained net profits, as defined, of the two preceding years. At September 30, 2009,
Centra Bank has $23.6 million available for dividends.
Centra has also complied with the standards of capital adequacy mandated by the banking industry.
Bank regulators have established risk-based capital requirements designed to measure capital
adequacy. Risk-based capital ratios reflect the relative risks of various assets banks hold in
their portfolios. A weight category of 0% (lowest risk assets), 20%, 50%, or 100% (highest risk
assets) is assigned to each asset on the balance sheet. Detailed information concerning Centras
risk-based capital ratios can be found in Note 12 of the Notes to the Consolidated Financial
Statements of Centras 2008 Form 10-K. At September 30, 2009, Centra and its banking subsidiarys
risk-based capital ratios exceeded the minimum standards for a well capitalized financial
institution.
Centra and its banking subsidiary are subject to various regulatory capital requirements
administered by the federal banking agencies. Under the capital adequacy guidelines and the
regulatory framework for prompt corrective action, Centra must meet specific capital guidelines
that involve quantitative measures of their assets, liabilities and certain off-balance sheet items
as calculated under regulatory accounting practices. Centra and its banking subsidiarys capital
amounts and classification are also subject to qualitative judgments by the regulators about
components, risk weightings and other factors.
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Commitments
In the normal course of business, Centra is party to financial instruments with off-balance sheet
risk necessary to meet the financing needs of customers and to manage its own exposure to
fluctuations in interest rates. These financial instruments include commitments to extend credit.
The instruments involve, to varying degrees, elements of credit and interest rate risk in
excess of the amount recognized in the balance sheets. The contract or notional amounts of these
instruments express the extent of involvement Centra has in these financial instruments.
Loan commitments are made to accommodate the financial needs of Centras customers. Standby letters
of credit commit Centra to make payments on behalf of customers when certain specified future
events occur. Centra had standby letters of credit of $33.1 million and $31.1 million at September
30, 2009 and December 31, 2008, respectively. Centras exposure to credit loss in the event of
nonperformance by the counter-party to the financial instrument for loan commitments and standby
letters of credit is represented by the contractual amount of those instruments. Centra uses the
same underwriting standards in making commitments and conditional obligations as it does for
on-balance sheet instruments. The amount of collateral obtained is based on managements credit
evaluation of the customer. Collateral held varies, but may include accounts receivable, inventory,
property, plant and equipment, and income-producing commercial properties. The total amount of loan
commitments outstanding at September 30, 2009 and December 31, 2008, was $134.4 million and $145.5
million, respectively. The total amount of unfunded commitments under lines of credit outstanding
at September 30, 2009 and December 31, 2008, was $47.6 million and $46.8 million, respectively. At
September 30, 2009 and December 31, 2008, Centra has recorded $1.5 million for probable losses
related to these commitments and has classified that accrual in other liabilities in the
Consolidated Balance Sheets.
Centra originates long-term, fixed rate and adjustable rate mortgage loans and sells them on the
secondary market, servicing released. At September 30, 2009 and 2008, Centra had $9.9 million and
$2.3 million, respectively, of commitments to borrowers to originate loans to be sold on the
secondary market. The fair value of the derivatives related to these commitments is not material to
the financial statements.
Market Risk Management
The most significant market risk resulting from Centra Banks normal course of business, extending
loans and accepting deposits, is interest rate risk. Interest rate risk is the potential for
economic loss due to future interest rate changes that can impact both the earnings stream as well
as market values of financial assets and liabilities. Centras management has charged the
Asset/Liability Committee (ALCO) with the overall management of Centra and its subsidiary banks
balance sheet related to the management of interest rate risk. The ALCO strives to keep Centra Bank
focused on the future, anticipating and exploring alternatives, rather than simply reacting to
change after the fact.
To this end, the ALCO has established an interest risk management policy that sets the minimum
requirements and guidelines for monitoring and controlling the level and amount of interest rate
risk. The objective of the interest rate risk policy is to encourage management to adhere to sound
fundamentals of banking while allowing sufficient flexibility to exercise the creativity and
innovations necessary to meet the challenges of changing markets. The ultimate goal of these
policies is to optimize net interest income within the constraints of prudent capital adequacy,
liquidity, and safety.
The ALCO relies on different methods of assessing interest rate risk including simulating net
interest income, monitoring the sensitivity of the net present market value of equity or economic
value of equity, and monitoring the difference or gap between maturing or rate-sensitive assets and
liabilities over various time periods. The ALCO places emphasis on simulation modeling as the most
beneficial measurement of interest rate risk due to its dynamic measure. By employing a simulation
process that measures the impact of potential changes in interest rates and balance sheet
structures and by establishing limits on changes in net income and net market value, the ALCO is
better able to evaluate the possible risks associated with alternative strategies.
The simulation process starts with a base case simulation that represents projections of current
balance sheet growth trends. Base case simulation results are prepared under a flat interest rate
forecast and at least two alternative interest rate forecasts, one rising and one declining,
assuming parallel yield curve shifts. Comparisons showing the earnings variance from the flat rate
forecast illustrate the risks associated with the current balance sheet strategy. When necessary,
additional balance sheet strategies are developed and simulations prepared. These additional
simulations are run with the same interest rate forecasts used with the base case simulation and/or
using non-parallel yield curve shifts. The additional strategies are used to measure yield curve
risk, prepayment risk, basis risk, and index lag risk inherent in the balance sheet. Comparisons
showing the earnings and equity value variance from the base case provide the ALCO with information
concerning the risks associated with implementing the alternative strategies. The results from
model simulations are reviewed for indications of whether current
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interest rate risk strategies are
accomplishing their goal and, if not, suggest alternative strategies that could. The policy calls
for periodic review by the ALCO of assumptions used in the modeling.
ALCO believes that it is beneficial to monitor interest rate risk for both the short and long-term.
Therefore, to effectively evaluate results from model simulations, limits on changes in net
interest income and the value of the balance sheet will be established. ALCO has determined that
the earnings at risk of the bank shall not change more than 7.5% from base case for
each 1% shift in interest rates. Centra is in compliance with this policy as of September 30,
2009, in all rate change scenarios shown below.
The following table is provided to show the earnings at risk and value at risk positions of Centra
as of September 30, 2009.
(Dollars in Thousands)
Immediate | Estimated Increase | |||||||
Interest Rate Change | (Decrease) in Net | |||||||
(in Basis Points) | Interest Income | |||||||
300 |
$ | (1,600 | ) | (3.60 | %) | |||
200 |
(1,588 | ) | (3.58 | %) | ||||
100 |
(759 | ) | (1.71 | %) | ||||
-100 |
780 | 1.76 | % |
Effects of Inflation on Financial Statements
Substantially all of the banks assets relate to banking and are monetary in nature. Therefore they
are not impacted by inflation to the same degree as companies in capital-intensive industries in a
replacement cost environment. During a period of rising prices, a net monetary asset position
results in loss in purchasing power and conversely a net monetary liability position results in an
increase in purchasing power. In the banking industry, typically monetary assets exceed monetary
liabilities. The current monetary policy targeting low levels of inflation has resulted in
relatively stable price levels. Therefore, inflation has had little impact on Centras net assets.
Future Outlook
The banks results of operations through the first nine months and third quarter of 2009 shows that
Centra has been able to respond to unprecedented economic times. Centras net income for the
quarter continues to be strong despite the current economic environment.
On September 24, 2009, area business leaders and officials gathered to help us celebrate our newly
constructed North Pointe Drive office in Hagerstown, Maryland, the third office in that area and
our first newly constructed facility. Just three weeks after this grand opening, we announced plans
for a new headquarters building for Hagerstown to be constructed at the corner of Dual Highway and
Mount Aetna Road, arguably one of the most dynamic locations in the Washington County Market. These
openings demonstrate our continued ability to move forward, drawing on the deep experience of our
board and leadership team that is seasoned and ready to elevate market share in the greater
Hagerstown area.
The continued emphasis in future periods will be to focus on asset quality and profitable growth
while balancing the effects of competition on pricing of our interest bearing assets and
liabilities.
Item 3. Quantitative and Qualitative Disclosure of Market Risk
The information called for by this item is provided under the caption Market Risk Management
under Item 2. Managements Discussion and Analysis of Financial Condition and Results of
Operations.
Item 4. Controls and Procedures
As of the end of the period covered by this Quarterly Report on Form 10-Q, the company, under the
supervision and with the participation of management, including the chief executive officer and
chief financial officer, carried out an evaluation of the effectiveness of the design and operation
of our disclosure controls and procedures pursuant to Exchange Act Rules 13a-14. Based upon that
evaluation, the chief executive officer and chief financial officer concluded that our disclosure
controls and procedures are effective in timely alerting them to material information relating to
the company which is required to be
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included in our periodic SEC filings. There has been no change
in the companys internal control over financial reporting during the quarter ended September 30,
2009, that has materially affected, or is reasonably likely to materially affect the companys
internal control over financial reporting.
Part II. Other Information
In accordance with the instructions to Part II, the other specified items in this part have been
omitted because they are not applicable or the information has been previously reported.
Item 1. Legal Proceedings
None.
Item 1A. Risk Factors
Centra had no material changes from the risk factors identified in the December 31, 2008, filing on
Form 10-K.
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
Centra does not currently have a stock repurchase program.
Item 3. Defaults Upon Senior Securities
None
Item 4. Submission of Matters to a Vote of Security Holders
None
Item 5. Other Information
None.
Item 6. Exhibits
(a) The following exhibits are filed herewith.
Exhibit 31.1
|
Certificate of principal executive officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 | |
Exhibit 31.2
|
Certificate of principal financial officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 | |
Exhibit 32.1
|
Certificate of principal executive officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 | |
Exhibit 32.2
|
Certificate of principal financial officer pursuant to Section 906 of the Sarbanes-Oxley Act of Act of 2002 |
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused
this report to be signed on its behalf by the undersigned thereunto duly authorized.
November 5, 2009 | CENTRA FINANCIAL HOLDINGS, INC. |
|||
By: | /s/ Douglas J. Leech | |||
Douglas J. Leech | ||||
President and Chief Executive Officer | ||||
By: | /s/ Kevin D. Lemley | |||
Kevin D. Lemley | ||||
Chief Financial Officer | ||||
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