Attached files
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EX-32 - EXHIBIT 32 - St. Joseph Bancorp, Inc. | t68688_ex32.htm |
EX-31.2 - EXHIBIT 31.2 - St. Joseph Bancorp, Inc. | t68688_ex31-2.htm |
EX-31.1 - EXHIBIT 31.1 - St. Joseph Bancorp, Inc. | t68688_ex31-1.htm |
UNITED
STATES
SECURITIES
AND EXCHANGE COMMISSION
Washington,
D.C. 20549
FORM
10-Q
[X]
|
Quarterly
Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of
1934
|
For the Quarterly Period Ended June 30,
2010
or
[ ]
|
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: 000-53573
St. Joseph Bancorp,
Inc.
(Exact
name of registrant as specified in its charter)
Maryland
|
26-3616144
|
|
(State
or other jurisdiction of
|
(I.R.S.
Employer
|
|
incorporation
or organization)
|
Identification
Number)
|
|
1901 Frederick Avenue, St. Joseph,
Missouri
|
64501
|
|
(Address
of Principal Executive Offices)
|
Zip
Code
|
(816)
233-5148
(Registrant’s
telephone number, including area code)
None
|
(Former
Name, Former Address and Former Fiscal Year,
|
If
Changed Since Last Report)
|
Indicate
by check mark whether the Registrant (1) has filed all reports required to be
filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the
preceding 12 months (or for such shorter period that the Registrant was required
to file such reports) and (2) has been subject to such filing requirements for
the past 90 days. YES [X] NO [ ]
Indicate
by check mark whether the registrant has submitted electronically and posted on
its corporate Web
site, if
any, every Interactive Data File required to be submitted and posted pursuant to
Rule 405 of Regulation S-T during the preceding 12 months (or for such shorted
period that the registrant was required to submit and post such
files).
YES
[ ] NO [ ]
Indicate by check mark whether the
registrant is a large accelerated filer, an accelerated filer, a non-accelerated
filer, or a smaller reporting company. See the definitions of “large
accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule
12b-2 of the Exchange Act. (Check one):
Large accelerated
filer [ ] Accelerated
filer [ ] Non-accelerated
filer [ ] Smaller
reporting company [X]
Indicate by check mark whether the Registrant is
a shell company (as defined in Rule 12b-2 of the Act). YES
[ ] NO [X]
As of August 1, 2010, there were issued
and outstanding 376,918 shares of the Registrant’s Common Stock.
St.
Joseph Bancorp, Inc.
Quarterly
Report on Form 10-Q
For
The Three and Six Months Ended
June
30, 2010
Table
of Contents
PART
I - FINANCIAL INFORMATION
|
|
Item 1. Condensed Consolidated Financial
Statements
|
|
Condensed
Consolidated Balance Sheets at June 30, 2010 (Unaudited)
|
|
and December 31, 2009
|
3
|
Condensed
Consolidated Statements of Operations - For the Three and Six
Months
|
|
Ended June 30, 2010 and 2009 (Unaudited)
|
4
|
Condensed Consolidated
Statements of Stockholders’ Equity - For the Six Months
|
|
Ended June 30, 2010 and 2009 (Unaudited)
|
5
|
Condensed
Consolidated Statements of Cash Flows - For the Six Months
|
|
Ended June 30, 2010 and 2009 (Unaudited)
|
6
|
Notes
to Condensed Consolidated Financial Statements (Unaudited)
|
7
|
|
|
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations
|
14
|
Item 3. Quantitative and Qualitative Disclosures About
Market Risk
|
19
|
Item 4T. Controls and Procedures
|
19
|
PART
II - OTHER INFORMATION
|
|
Items
1 through 6
|
20
|
Signatures
|
21
|
2
St.
Joseph Bancorp, Inc. and Subsidiaries
|
||
Condensed
Consolidated Balance Sheets
|
||
June
30, 2010 and December 31, 2009
|
Assets
|
||||||||
June 30, 2010
|
December 31, 2009
|
|||||||
|
(unaudited)
|
|||||||
Cash
and due from banks
|
$ | 1,653,172 | $ | 1,311,198 | ||||
Interest-earning
deposits in other institutions
|
4,703,702 | 4,196,227 | ||||||
Available-for-sale
securities
|
3,314,958 | 4,260,289 | ||||||
Loans,
net of allowance for loan losses of $99,000
|
||||||||
at June 30, 2010 and $63,500 December 31, 2009
|
14,315,681 | 12,827,709 | ||||||
Premises
and equipment, net
|
1,000,620 | 421,452 | ||||||
Federal
Home Loan Bank Stock, at cost
|
26,700 | 26,200 | ||||||
Interest
receivable
|
95,637 | 82,325 | ||||||
Prepaid
income taxes
|
2,877 | 2,877 | ||||||
Other
|
66,567 | 112,631 | ||||||
Total assets
|
$ | 25,179,914 | $ | 23,240,908 | ||||
Liabilities
and Stockholders' Equity
|
||||||||
Liabilities
|
||||||||
Deposits:
|
||||||||
Savings, NOW and money market
|
$ | 5,617,744 | $ | 4,055,699 | ||||
Time
|
11,681,669 | 11,222,929 | ||||||
Total deposits
|
17,299,413 | 15,278,628 | ||||||
Advances from borrowers for taxes and insurance
|
78,713 | 23,799 | ||||||
Interest payable
|
775 | 1,274 | ||||||
Deferred income taxes
|
14,732 | 16,405 | ||||||
Other liabilities
|
86,864 | 42,607 | ||||||
Total liabilities
|
17,480,497 | 15,362,713 | ||||||
Temporary
Equity
|
||||||||
ESOP shares subject to mandatory redemption
|
15,824 | 10,050 | ||||||
Stockholders'
Equity
|
||||||||
Common stock, $.01 par value, 4,000,000 shares
|
||||||||
authorized, 376,918 shares issued and outstanding
|
3,739 | 3,739 | ||||||
Preferred stock, $.01 par value, 1,000,000 shares
authorized,
|
||||||||
none issued or outstanding
|
- | - | ||||||
Additional paid-in capital
|
2,660,273 | 2,660,021 | ||||||
Retained earnings
|
4,923,633 | 5,131,632 | ||||||
Accumulated other comprehensive income:
|
||||||||
Unrealized gain on available-for-sale securities, net
|
||||||||
of income taxes
|
95,948 | 72,753 | ||||||
Total stockholders' equity
|
7,683,593 | 7,868,145 | ||||||
Total liabilities and stockholders' equity
|
$ | 25,179,914 | $ | 23,240,908 | ||||
See
accompanying notes to condensed consolidated financial
statements.
|
3
St.
Joseph Bancorp, Inc. and Subsidiaries
|
||||
Condensed
Consolidated Statements of Operations
Three
and Six Months Ended June 30, 2010 and 2009
(unaudited)
|
Three Months Ended June 30,
|
Six Months Ended June 30,
|
|||||||||||||||
2010
|
2009
|
2010
|
2009
|
|||||||||||||
Interest
Income
|
||||||||||||||||
Interest and fees on loans
|
$ | 204,925 | $ | 167,397 | $ | 395,281 | $ | 328,882 | ||||||||
Available-for-sale securities
|
37,674 | 61,111 | 76,081 | 120,023 | ||||||||||||
Interest-earning deposits
|
25,085 | 26,560 | 50,628 | 56,505 | ||||||||||||
Federal Home Loan Bank dividends
|
129 | 55 | 261 | 111 | ||||||||||||
Total interest income
|
267,813 | 255,123 | 522,251 | 505,521 | ||||||||||||
Interest
Expense
|
||||||||||||||||
Deposits
|
93,916 | 108,738 | 186,749 | 214,758 | ||||||||||||
Net
Interest Income
|
173,897 | 146,385 | 335,502 | 290,763 | ||||||||||||
Provision
for loan losses
|
35,500 | 9,000 | 35,500 | 17,000 | ||||||||||||
Net
Interest Income After Provision for Loan Losses
|
138,397 | 137,385 | 300,002 | 273,763 | ||||||||||||
Non-interest
Income
|
||||||||||||||||
Other
|
2,382 | 1,158 | 4,136 | 3,339 | ||||||||||||
Non-interest
Expense
|
||||||||||||||||
Salaries and employee benefits
|
139,908 | 102,644 | 253,491 | 207,554 | ||||||||||||
Net occupancy expense
|
27,061 | 20,037 | 46,130 | 42,479 | ||||||||||||
Depreciation
|
2,890 | 2,386 | 5,487 | 4,866 | ||||||||||||
Legal expense
|
16,283 | 18,370 | 27,632 | 19,270 | ||||||||||||
Audit fees and exams
|
42,523 | 48,883 | 93,274 | 109,639 | ||||||||||||
Franchise and special taxes
|
7,266 | 5,885 | 12,820 | 11,354 | ||||||||||||
Marketing expense
|
11,746 | 11,082 | 20,387 | 19,683 | ||||||||||||
Other
|
35,631 | 34,059 | 59,982 | 49,146 | ||||||||||||
Total non-interest expense
|
283,308 | 243,346 | 519,203 | 463,991 | ||||||||||||
Loss
Before Income Taxes
|
(142,529 | ) | (104,803 | ) | (215,065 | ) | (186,889 | ) | ||||||||
Credit
for Income Taxes
|
(6,844 | ) | (4,359 | ) | (7,820 | ) | (20,734 | ) | ||||||||
Net
Loss
|
$ | (135,685 | ) | $ | (100,444 | ) | $ | (207,245 | ) | $ | (166,155 | ) | ||||
Basic
loss per share
|
$ | (0.39 | ) | $ | (0.29 | ) | $ | (0.60 | ) | $ | (0.48 | ) | ||||
Basic
weighted average shares outstanding
|
348,147 | 346,765 | 348,021 | 346,765 |
4
St.
Joseph Bancorp, Inc. and Subsidiaries
|
Condensed
Consolidated Statements of Stockholders' Equity
|
Six
Months Ended June 30, 2010 and 2009
|
(unaudited)
|
Accumulated
|
|||||||||||||||||||||||
Additional
|
Other
|
Total
|
|||||||||||||||||||||
Comprehensive
|
Paid-in
|
Retained |
Comprehensive
|
Stockholders'
|
|||||||||||||||||||
Income
|
Common Stock
|
Capital
|
Earnings
|
Income
|
Equity
|
||||||||||||||||||
Balance,
January 1, 2009
|
$ | - | $ | - | $ | 5,428,846 | $ | 76,563 | $ | 5,505,409 | |||||||||||||
Net loss
|
(166,155 | ) | - | - | (166,155 | ) | - | (166,155 | ) | ||||||||||||||
Change in unrealized appreciation of available-
|
|||||||||||||||||||||||
for-sale securities, net of income taxes
|
|||||||||||||||||||||||
of $2,457
|
5,608 | - | - | - | 5,608 | 5,608 | |||||||||||||||||
Total comprehensive loss
|
$ | (160,547 | ) | ||||||||||||||||||||
Net proceeds from issuance of 376,918 shares
|
|||||||||||||||||||||||
of common stock
|
3,769 | 2,961,521 | - | - | 2,965,290 | ||||||||||||||||||
Acquisition of unearned ESOP shares
|
(30 | ) | (301,500 | ) | - | - | (301,530 | ) | |||||||||||||||
Balance,
June 30, 2009
|
$ | 3,739 | $ | 2,660,021 | $ | 5,262,691 | $ | 82,171 | $ | 8,008,622 | |||||||||||||
Balance,
January 1, 2010
|
$ | 3,739 | $ | 2,660,021 | $ | 5,131,632 | $ | 72,753 | $ | 7,868,145 | |||||||||||||
Net loss
|
(207,245 | ) | - | - | (207,245 | ) | - | (207,245 | ) | ||||||||||||||
Change in unrealized appreciation of available-
|
|||||||||||||||||||||||
for-sale securities, net of income taxes
|
|||||||||||||||||||||||
of $6,147 | 23,195 | - | - | - | 23,195 | 23,195 | |||||||||||||||||
Total comprehensive loss
|
$ | (184,050 | ) | ||||||||||||||||||||
Change in redemption value of ESOP shares
|
|||||||||||||||||||||||
subject to mandatory redemption
|
- | - | (754 | ) | - | (754 | ) | ||||||||||||||||
ESOP shares committed for release
|
- | 252 | - | - | 252 | ||||||||||||||||||
Balance,
June 30, 2010
|
$ | 3,739 | $ | 2,660,273 | $ | 4,923,633 | $ | 95,948 | $ | 7,683,593 | |||||||||||||
See
accompanying notes to condensed consolidated financial
statements.
|
5
St.
Joseph Bancorp, Inc. and Subsidiaries
|
Condensed
Consolidated Statements of Cash Flows
|
Six
Months Ended June 30, 2010 and 2009
|
(unaudited)
|
June 30, 2010
|
June 30, 2009
|
|||||||
Operating
Activities
|
||||||||
Net loss
|
$ | (207,245 | ) | (166,155 | ) | |||
Adjustments to reconcile net loss to net cash
|
||||||||
used in operating activities:
|
||||||||
Depreciation and amortization
|
12,122 | 11,279 | ||||||
Amortization and accretion of securities
|
4,930 | 2,459 | ||||||
Provision for loan losses
|
35,500 | 17,000 | ||||||
Gain on disposal of premises and equipment
|
- | (300 | ) | |||||
Deferred income taxes
|
(7,820 | ) | 8,827 | |||||
Compensation cost on allocated ESOP shares
|
5,272 | - | ||||||
Changes in:
|
||||||||
Interest receivable
|
(13,312 | ) | (40,881 | ) | ||||
Prepaid income taxes
|
- | (29,561 | ) | |||||
Other assets
|
46,064 | 39,208 | ||||||
Other liabilities and interest payable
|
43,758 | 10,403 | ||||||
Net cash used in operating activities
|
(80,731 | ) | (147,721 | ) | ||||
Investing
Activities
|
||||||||
Net increase in loans
|
(1,523,108 | ) | (1,596,192 | ) | ||||
Purchases of securities
|
(517,435 | ) | (1,519,579 | ) | ||||
Net proceeds (purchases) of interest-earning deposits
|
(507,475 | ) | 41,112 | |||||
Proceeds from maturities and calls of securities
|
1,015,000 | - | ||||||
Purchases of Federal Home Loan Bank stock
|
(500 | ) | (4,000 | ) | ||||
Principal reductions of mortgage backed securities
|
472,178 | 553,338 | ||||||
Proceeds from disposal of property and equipment
|
- | 300 | ||||||
Purchases of property and equipment
|
(591,654 | ) | (39,433 | ) | ||||
Net cash used in investing activities
|
(1,652,994 | ) | (2,564,454 | ) | ||||
Financing
Activities
|
||||||||
Net increase in savings, NOW
|
||||||||
and money market accounts
|
1,562,045 | 220,860 | ||||||
Net
increase in time deposits
|
458,740 | 1,029,658 | ||||||
Net increase in prepaid conversion costs
|
- | (300,781 | ) | |||||
Proceeds from issuance of common stock
|
- | 1,331,546 | ||||||
Net increase in advances from borrowers
|
||||||||
for taxes and insurance
|
54,914 | 55,759 | ||||||
Net cash provided by financing activities
|
2,075,699 | 2,337,042 | ||||||
|
||||||||
Increase
(decrease) in Cash and Cash Equivalents
|
341,974 | (375,133 | ) | |||||
Cash
and Cash Equivalents, Beginning of Period
|
1,311,198 | 594,352 | ||||||
Cash
and Cash Equivalents, End of Period
|
$ | 1,653,172 | $ | 219,219 | ||||
Supplemental
Cash Flows Information
|
||||||||
Interest paid
|
$ | 187,248 | $ | 216,220 | ||||
Income taxes paid
|
$ | - | $ | - | ||||
Non
cash transactions:
|
||||||||
In
2009, conversion costs totaling $803,890 were netted against proceeds from
the issuance of common stock. Subscription proceeds deposits of
$2,136,104 were also applied to proceeds from common stock
issued.
|
||||||||
In
2009, the Company issued the Employee Stock Ownership Plan (the ESOP) in
common stock by providing direct financing of $301,530 to the
ESOP.
|
||||||||
See
accompanying notes to condensed consolidated financial
statements.
|
6
ST.
JOSEPH BANCORP, INC. AND SUBSIDIARIES
NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
June
30, 2010
(Unaudited)
NOTE
1 – BASIS OF PRESENTATION
The
accompanying unaudited condensed consolidated financial statements reflect all
adjustments that are, in the opinion of the Company’s management, necessary to
fairly present the financial position, results of operations and cash flows for
the Company. These adjustments consist only of normal recurring
adjustments. The condensed consolidated balance sheet of the Company,
as of December 31, 2009, has been derived from the audited consolidated balance
sheet of the Company as of that date. Certain information and
footnote disclosures, normally included in financial statements prepared in
accordance with generally accepted accounting principles, have been condensed or
omitted. The Company’s Annual Report to shareholders for the year
ended December 31, 2009, contains consolidated financial statements and related
footnote disclosures which should be read in conjunction with the accompanying
consolidated financial statements. The results of operations for the
period ended June 30, 2010 are not necessarily indicative of the operating
results for the full year.
On July
9, 2008, Midwest Federal Savings and Loan Association (the Association) approved
a plan (the Plan) to convert from a federally-chartered mutual savings
association to a federally-chartered stock savings association, subject to
approval by its members. The Plan, which included a formation of a
holding company, St. Joseph Bancorp, Inc., (the Company) to own all of the
outstanding stock of the Association, was approved by the Office of Thrift
Supervision (OTS) and included the filing of a registration statement with the
Securities and Exchange Commission, which was declared effective on November 12,
2008.
The Plan
called for the common stock of the holding company to be offered to various
parties in a subscription offering at a price based on an independent appraisal
of the Association, which was determined to be $10 per share. Shares that were
not purchased in the subscription offering were offered in a community
offering. The Association may not declare or pay a cash dividend if
the effect thereof would cause its net worth to be reduced below either the
amount required for the regulatory capital requirements imposed by the
OTS.
The
conversion has been accounted for in accordance with generally accepted
accounting principles. Accordingly, the condensed consolidated
balance sheets as of June 30, 2010 and December 31, 2009, and the condensed
consolidated statements of operations and cash flows for the six months ended
June 30, 2010 and 2009, are presented as results of the Company and its
subsidiaries.
The
condensed consolidated financial statements include the accounts of St. Joseph
Bancorp, as well as its wholly owned subsidiaries, Midwest Federal Savings and
Loan Association, and MFS Financial Services, Inc., an insurance agency, which
is currently inactive. All significant intercompany balances and
transactions have been eliminated in consolidation. The condensed
consolidated financial statements have been prepared without
audit. In the opinion of management, all adjustments (including
normal recurring adjustments) necessary to present fairly the Company’s
consolidated financial position, results of operations and changes in cash flows
have been made.
The
Company operates in a highly regulated environment and is subject to extensive
regulation, supervision and examination. Applicable laws and
regulations may change, and there is no assurance that such changes will not
adversely affect the Company’s business. Such regulation and
supervision govern the activities in which an institution may engage and are
intended primarily for the protection of the Association, its depositors and the
FDIC. Regulatory authorities have extensive discretion in connection
with their supervisory and enforcement activities, including but not limited to
the imposition of restrictions on the operation of an institution, the
classification of assets by the institution and the adequacy of an institution’s
allowance for loan losses. Any change in such regulation and
oversight, whether in the form of restrictions on activities, regulatory policy,
regulations, or legislation, including but not limited to changes in the
regulations governing banks, could have a material impact on the Company’s
operations. In particular, the Dodd-Frank Wall Street Reform and
Consumer Protection Act was recently signed into law by the
President. The effect of this new law on the banking industry and on
the Company is uncertain at the present time given that many of the changes will
be implemented through regulatory rules that have yet to be proposed or
adopted.
7
ST.
JOSEPH BANCORP, INC. AND SUBSIDIARIES
NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
June
30, 2010
(Unaudited)
NOTE
2 – FORMATION OF HOLDING COMPANY AND CONVERSION
On
January 30, 2009, the Company became the holding company for the Association
upon the Association’s conversion from a federally chartered mutual savings
association to a federally chartered capital stock savings
association. The conversion was accomplished through the sale and
issuance by the Company of 376,918 shares of common stock at $10 a
share. Proceeds from the sale of common stock, net of expenses
incurred of $803,890, were $2,965,290. This does not include $301,530
related to shares held by the Association’s Employee Stock Ownership Plan
(ESOP).
NOTE
3 – EMPLOYEE STOCK OWNERSHIP PLAN
In
connection with the conversion to an entity owned by stockholders, the
Association established an ESOP for the exclusive benefit of eligible employees
(all salaried employees who have completed at least 1,000 hours of service in a
twelve-month period and have attained the age of 21). The ESOP
borrowed funds from the Company in an amount sufficient to purchase 30,153
shares (approximately 8% of the common stock issued in the stock
offering). The loan is secured by the shares purchased and will be
repaid by the ESOP with funds from contributions made by the Association and
dividends received by the ESOP. Contributions will be applied to
repay interest on the loan first, then the remainder will be applied to
principal. The loan is expected to be repaid over a period of up to
30 years. Shares purchased with the loan proceeds are held in a
suspense account for allocation among participants as the loan is
repaid. Contributions to the ESOP and shares released from the
suspense account are allocated among participants in proportion to their
compensation, relative to total compensation of all active
participants. Participants will vest in their accrued benefits under
the employee stock ownership plan at the rate of 20 percent per
year. Vesting is accelerated upon retirement, death or disability of
the participant, or a change in control of the
Association. Forfeitures will be reallocated to remaining plan
participants. Benefits may be payable upon retirement, death,
disability, separation from service, or termination of the ESOP.
The debt
of the ESOP is eliminated in consolidation. Contributions to the ESOP
shall be sufficient to pay principal and interest currently due under the loan
agreement. As shares are committed to be released from collateral,
the Company reports compensation expense equal to the average market price of
the shares for the respective period, and the shares become outstanding for
earnings per share computations. Dividends on unallocated ESOP shares
are recorded as a reduction of debt and accrued interest. ESOP
compensation expense was $5,272 and $-0- for the six months ended June 30, 2010
and 2009, respectively.
A summary
of ESOP shares at June 30, 2010 is as follows:
Released
shares
|
1,005 | |||
Shares
committed for release
|
502 | |||
Unreleased
shares
|
28,646 | |||
Total
|
30,153 | |||
Fair
value of unreleased shares
|
$ | 300,783 |
The
Company is obligated, at the option of each beneficiary, to repurchase shares of
the ESOP at its current fair market value, upon the beneficiary’s termination or
after retirement (“put right”). The put right feature makes the stock
mandatorily redeemable. Since the redemption feature is not within
the sole control of the Company, this obligation has been classified outside of
permanent equity, and included within the caption temporary equity on the
balance sheet. The Company accounts for this obligation based on the
maximum cash obligation, which is based on the fair value of the underlying
equity securities. At June 30, 2010, the fair value as estimated by
an independent third party of the 1,507 shares released and committed for
release, held by the ESOP, is $15,824.
8
ST.
JOSEPH BANCORP, INC. AND SUBSIDIARIES
NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
June
30, 2010
(Unaudited)
NOTE
4 – CURRENT ACCOUNTING DEVELOPMENTS
On
December 23, 2009, the FASB issued guidance which modifies certain aspects
contained in the Transfers and
Servicing topic of FASB ASC 860. This standard enhances
information reported to users of financial statements by providing greater
transparency about transfers of financial assets, including securitization
transactions, and where companies have continuing exposure to the risks related
to transferred financial assets. This standard was effective for the
Company as of January 1, 2010 with adoption applied prospectively for transfers
that occur on or after that date. The adoption of this standard did not have a
material impact on its financial position or results of operations.
In
January 2010, the FASB issued guidance which modifies certain aspects contained
in the Fair Value Measurements
and Disclosure topic of FAS ASC 820. This standard enhances
information reported to users of the financial statements by providing
additional and enhanced disclosures about the fair value
measurements. This standard was effective for the Company as of
January 1, 2010, except for the disclosures about purchases, sales, issuances
and settlements in the roll forward of activity in Level 3 fair value
measurements, which will be effective on January 1, 2011. The
adoption of this standard did not have a material impact on the Company’s
financial position or results of operations.
In July
2010, the FASB issued Accounting Standards Update 2010-20, Disclosure about the Credit Quality
of Financing Receivables and the Allowance for Credit
Losses. This new guidance will increase disclosures made about
the credit quality of loans and the allowance for credit losses. The
disclosures will provide additional information about the nature of credit risk
inherent in the Company’s loans, how credit risk is analyzed and assessed, and
the reasons for the change in the allowance for loan losses. The
requirements will be effective for the Company’s year ending December 31,
2010. Upon adoption, management does not anticipate that this
standard will have a material impact on the Company’s consolidated financial
statements.
NOTE
5 – EARNINGS (LOSS) PER SHARE
Earnings
(loss) per share amount is based on the weighted average number of shares
outstanding for the period and the net income (loss) applicable to common
stockholders. There were no outstanding shares of common stock until
the conversion on January 30, 2009. ESOP shares are excluded from
shares outstanding until they have been committed to be released.
The
following table presents a reconciliation of basic earnings per share to diluted
earnings per share for the periods indicated.
Three
Months
Ended
|
Three
Months
Ended
|
Six
Months
Ended
|
Six
Months
Ended
|
|||||||||||||
6/30/10
|
6/30/09
|
6/30/10
|
6/30/09
|
|||||||||||||
Net
loss
|
$ | (135,685 | ) | $ | (100,444 | ) | $ | (207,245 | ) | $ | (166,155 | ) | ||||
Change
in redemption value of ESOP
|
||||||||||||||||
shares
subject to mandatory redemption
|
(126 | ) | - | (754 | ) | - | ||||||||||
Net
loss
|
$ | (135,811 | ) | $ | (100,444 | ) | $ | (207,999 | ) | $ | (166,155 | ) | ||||
Average
common shares outstanding
|
348,147 | 346,765 | 348,021 | 346,765 | ||||||||||||
Average
common share stock options
|
||||||||||||||||
outstanding
|
- | - | - | - | ||||||||||||
Average
diluted common shares
|
348,147 | 346,765 | 348,021 | 346,765 | ||||||||||||
Loss
per share:
|
||||||||||||||||
Basic
|
$ | (0.39 | ) | $ | (0.29 | ) | $ | (0.60 | ) | $ | (0.48 | ) | ||||
Diluted
|
(0.39 | ) | (0.29 | ) | (0.60 | ) | (0.48 | ) |
9
ST.
JOSEPH BANCORP, INC. AND SUBSIDIARIES
NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
June
30, 2010
(Unaudited)
NOTE
6 – AVAILABLE-FOR-SALE SECURITIES
The
amortized cost of available-for-sale securities and their estimated fair values
are summarized below:
Amortized
Cost
|
Gross
Unrealized
Gains
|
Gross
Unrealized
Losses
|
Estimated
Fair
Value
|
|||||||||||||
June
30, 2010:
|
||||||||||||||||
U.S.
Government agencies
|
$ | 1,527,707 | $ | 41,091 | $ | - | $ | 1,568,798 | ||||||||
Municipal
securities
|
80,000 | 501 | - | 80,501 | ||||||||||||
Mortgage-backed
securities
|
1,585,896 | 79,763 | - | 1,665,659 | ||||||||||||
$ | 3,193,603 | $ | 121,355 | $ | - | $ | 3,314,958 | |||||||||
Amortized Cost
|
Gross
Unrealized
Gains
|
Gross
Unrealized
Losses
|
Estimated
Fair
Value
|
|||||||||||||
December
31, 2009:
|
||||||||||||||||
U.S.
Government agencies
|
$ | 2,014,241 | $ | 21,482 | $ | - | $ | 2,035,723 | ||||||||
Municipal
securities
|
95,000 | 1,850 | - | 96,850 | ||||||||||||
Mortgage-backed
securities
|
2,059,037 | 68,679 | - | 2,127,716 | ||||||||||||
$ | 4,168,278 | $ | 92,011 | $ | - | $ | 4,260,289 |
All
mortgage-backed securities at June 30, 2010 and December 31, 2009 relate to
residential mortgages, and were issued by government-sponsored
enterprises.
Interest
receivable for investments totaled $44,786 and $42,718 at June 30, 2010 and
December 31, 2009, respectively.
The
amortized cost and fair value of available-for-sale securities at June 30, 2010,
by contractual maturity, are shown below. Expected maturities will
differ from contractual maturities because issuers may have the right to call or
prepay obligations with or without call or prepayment penalties.
Amortized
Cost
|
Fair
Value
|
|||||||
Within one year
|
$ | 80,000 | $ | 80,501 | ||||
One to five years
|
1,527,707 | 1,568,798 | ||||||
Mortgage-backed securities
|
1,585,896 | 1,665,659 | ||||||
Totals
|
$ | 3,193,603 | $ | 3,314,958 |
Certain
investments in debt securities may be reported in the condensed consolidated
financial statements at an amount less than their historical
cost. There were no unrealized losses at June 30, 2010 or December
31, 2009.
10
ST.
JOSEPH BANCORP, INC. AND SUBSIDIARIES
NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
June
30, 2010
(Unaudited)
NOTE
7 – FAIR VALUE OF FINANCIAL INSTRUMENTS
Fair
value is the price that would be received to sell an asset or paid to transfer a
liability in an orderly transaction between market participants at the
measurement date. It also establishes a fair value hierarchy which
requires an entity to maximize the use of observable inputs and minimize the use
of unobservable inputs when measuring fair value. There are three
levels of inputs that may be used to measure fair value:
|
Level
1:
|
Inputs
to the valuation methodology are quoted prices, unadjusted, for identical
assets or liabilities in active markets. A quoted price in an
active market provides the most reliable evidence of fair value and shall
be used to measure fair value whenever
available.
|
|
Level
2:
|
Inputs
to the valuation methodology include quoted prices for similar assets or
liabilities in active markets; inputs to the valuation methodology include
quoted prices for identical or similar assets or liabilities in markets
that are not active; or inputs to the valuation methodology that are
derived principally from or can be corroborated by observable market data
by correlation or other means.
|
|
Level
3
|
Inputs
to the valuation methodology are unobservable and significant to the fair
value measurements. Level 3 assets and liabilities include
financial instruments whose value is determined using discounted cash flow
methodologies, as well as instruments for which the determination of fair
value requires significant management judgment or
estimation.
|
The
following tables present the balances of assets measured at fair value on a
recurring basis by level at June 30, 2010 and December 31, 2009:
Quoted Prices in
|
Significant
|
|||||||||||||||
Active
Markets
|
Other
|
Significant
|
||||||||||||||
For Identical
|
Observable
|
Unobservable
|
||||||||||||||
Description
|
Total
|
Assets (Level 1)
|
Inputs (Level 2)
|
Inputs (Level 3)
|
||||||||||||
June 30, 2010
|
||||||||||||||||
U.S.
Government agencies
|
$ | 1,568,798 | $ | - | $ | 1,568,798 | $ | - | ||||||||
Municipal
securities
|
80,501 | - | 80,501 | - | ||||||||||||
Mortgage-backed
securities
|
1,665,659 | - | 1,665,659 | - | ||||||||||||
Total
|
$ | 3,314,958 | $ | - | $ | 3,314,958 | $ | - |
December 31, 2009
|
||||||||||||||||
U.S.
Government agencies
|
$ | 2,035,723 | $ | - | $ | 2,035,723 | $ | - | ||||||||
Municipal
securities
|
96,850 | - | 96,850 | - | ||||||||||||
Mortgage-backed
securities
|
2,127,716 | - | 2,127,716 | - | ||||||||||||
Total
|
$ | 4,260,289 | $ | - | $ | 4,260,289 | $ | - |
11
ST.
JOSEPH BANCORP, INC. AND SUBSIDIARIES
NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
June
30, 2010
(Unaudited)
NOTE 7 – FAIR VALUE OF FINANCIAL
INSTRUMENTS (CONTINUED)
Securities
available-for-sale are recorded at fair value on a recurring
basis. Fair value measurement is based upon quoted prices, if
available. If quoted prices are not available, fair values are
measured using independent pricing models or other model-based valuation
techniques such as the present value of future cash flows, adjusted for the
securities credit rating, prepaying assumptions and other factors such as credit
loss assumptions. Level 2 securities include U.S. government agency
securities, mortgage-backed securities (including pools and collateralized
mortgage obligations), municipal bonds, and corporate-debt
securities. There were no transfers between level one and two
classifications. The Company’s policy is to recognize transfers in
and transfers out as of the actual date of the event or change in circumstances
that caused the transfer.
The
Company had no significant assets measured at fair value on a non-recurring
basis at June 30, 2010 or December 31, 2009.
The
following methods were used to estimate the fair value of all other financial
instruments recognized in the accompanying balance sheets at amounts other than
fair value:
Cash
and Due From Banks, Interest-earning Deposits and Federal Home Loan Bank
Stock
The
carrying amount approximates fair value.
Loans
and Interest Receivable
The fair
value of loans is estimated by discounting the future cash flows using the
current rates at which similar loans would be made to borrowers with similar
credit ratings and for the same remaining maturities. Loans with
similar characteristics were aggregated for purposes of the
calculations. The carrying amount of accrued interest approximates
its fair value.
Deposits
and Interest Payable
Deposits
include savings accounts, NOW accounts and certain money market
deposits. The carrying amount approximates fair value. The
fair value of fixed-maturity time deposits is estimated using a discounted cash
flow calculation that applies the rates currently offered for deposits of
similar remaining maturities. The carrying amount of interest payable
approximates its fair value.
Advances
From Borrowers for Taxes and Insurance
The
carrying amount approximates fair value.
12
ST.
JOSEPH BANCORP, INC. AND SUBSIDIARIES
NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
June
30, 2010
(Unaudited)
NOTE 7 – FAIR VALUE OF FINANCIAL
INSTRUMENTS (CONTINUED)
The
following table presents estimated fair values of the Company’s financial
instruments at June 30, 2010 and December 31, 2009 and includes financial
instruments that are not accounted for at fair value:
June 30, 2010
|
December 31, 2009
|
|||||||||||||||
Carrying
Amount
|
Fair Value
|
Carrying
Amount
|
Fair
Value
|
|||||||||||||
Financial
assets
|
||||||||||||||||
Cash and due from
banks
|
$ | 1,653,172 | $ | 1,653,172 | $ | 1,311,198 | $ | 1,311,198 | ||||||||
Interest-earning deposits
|
4,703,702 | 4,703,702 | 4,196,227 | 4,196,227 | ||||||||||||
Loans, net of
allowance for loan losses
|
14,315,681 | 14,567,196 | 12,827,709 | 12,952,930 | ||||||||||||
Federal Home
Loan Bank Stock
|
26,700 | 26,700 | 26,200 | 26,200 | ||||||||||||
Interest
receivable
|
95,637 | 95,637 | 82,325 | 82,325 |
Financial
liabilities
|
||||||||||||||||
Deposits
|
17,299,413 | 17,585,420 | 15,278,628 | 15,482,658 | ||||||||||||
Advances from
borrowers for taxes and insurance
|
78,713 | 78,713 | 23,799 | 23,799 | ||||||||||||
Interest
payable
|
775 | 775 | 1,274 | 1,274 |
NOTE
8 – SUBSEQUENT EVENTS
On July
1, 2010, the Association opened an additional branch office located in St.
Joseph, Missouri. The purchase price of the property was
$538,000. The Association did not acquire deposits or loans as part
of this transaction.
13
Item
2.
|
Management’s
Discussion and Analysis of Financial Condition and Results of
Operations
|
Forward-Looking
Statements
This report contains forward-looking
statements within the meaning of the Private Securities Litigation Reform Act of
1995, including statements about anticipated operating and financial
performance, such as loan originations, operating efficiencies, loan sales,
charge-offs and loan loss provision, growth opportunities, interest rates and
deposit growth. Words such as “may,” “could,” “should,” “would,” “will,” ”will
likely result,” ”believe,” ”expect,” ”plan,” ”will continue,” ”is anticipated,”
”estimate,” ”intend,” ”project,” and similar expressions are intended to
identify these forward-looking statements. We wish to caution readers
not to place undue reliance on any such forward-looking statements, each of
which speaks only as of the date made. Such statements are subject to certain
risks and uncertainties that could cause actual results to differ materially
from historical earnings than those presently anticipated or
projected.
Critical
Accounting Policies
In reviewing and understanding
financial information for the Company, you are encouraged to read and understand
the significant accounting policies used in preparing our consolidated financial
statements. The accounting and financial reporting policies of the
Company conform to accounting principles generally accepted in the United States
of America and to general practices within the banking
industry. Accordingly, the financial statements require certain
estimates, judgments, and assumptions, which are believed to be reasonable,
based upon the information available. These estimates and assumptions
affect the reported amounts of assets and liabilities at the date of the
financial statements and the reported amounts of income and expenses during the
periods presented. The following accounting policy comprises those
that management believes are the most critical to aid in fully understanding and
evaluating our reported financial results. This policy requires
numerous estimates or economic assumptions that may prove inaccurate or may be
subject to variations, which may significantly affect our reported results and
financial condition for the period or in future periods.
The Company’s critical accounting
policy involving the more significant judgments and assumptions used in the
preparation of the condensed consolidated financial statements as of June 30,
2010 has remained unchanged from December 31, 2009. This policy
relates to the allowance for loan losses. This critical accounting
policy is incorporated by reference under Item 8 “Financial Statements and
Supplementary Data” in the Annual Report on Form 10-K for the year ended
December 31, 2009.
Comparison
of Financial Condition at June 30, 2010 and December 31, 2009
Total assets increased $1.9 million, or
8.3%, to $25.2 million at June 30, 2010 from $23.2 million at December 31,
2009. The increase was primarily the result of an increase in
loans.
Net loans receivable increased by $1.5
million, or 11.6%, to $14.3 million at June 30, 2010 from $12.8 million at
December 31, 2009. One- to four-family residential real estate loans increased
$942,000, or 8.1%, to $12.5 million at June 30, 2010 from $11.6 million at
December 31, 2009. Real estate construction loans increased $88,000, or 43.9%,
to $287,000 at June 30, 2010 from $200,000 at December 31, 2009. Home
equity lines of credit increased $51,000, or 111.7% to $96,000 at June 30, 2010
from $46,000 at December 31, 2009. Commercial loans increased to
$500,000 at June 30, 2010 from $-0- at December 31, 2009. Other types
of loans decreased a net amount of $57,000 from December 31, 2009 to June 30,
2010. The net increase during this period reflected a continued
emphasis in growing our loan portfolio in our market area.
Our allowance for loan losses totaled
$99,000 at June 30, 2010 and $63,500 at December 31, 2009. At June
30, 2010, our allowance for loan losses totaled 0.69% of total
loans. Management will continue to monitor the allowance for loan
losses as economic conditions and our performance dictate. Although
we maintain our allowance for loan losses at a level which we consider to be
adequate to provide for potential losses, there can be no assurance that future
losses will not exceed estimated amounts or that additional provisions for loan
losses will not be required in future periods.
14
Available-for-sale securities decreased
$945,000, or 22.2%, to $3.3 million at June 30, 2010 from $4.3 million at
December 31, 2009. The decrease was the result of purchases in the
amount of $517,000 and an increase of $29,000 in fair value offset by $5,000 in
amortization, $750,000 in called securities, $250,000 in maturities and $472,000
in principal reductions on mortgage back securities.
Premises and equipment increased
$579,000, or 137.4%, to $1 million at June 30, 2010 from $421,000 at December
31, 2009. This increase was a result of the purchase of an additional
branch office located in St. Joseph, Missouri.
Deposits increased $2.0 million, or
13.2%, to $17.3 million at June 30, 2010 from $15.3 million at December 31,
2009. This increase was due to savings deposits increasing $1.5
million, or 38.5%, to $5.6 million at June 30, 2010 from $4.1 million at
December 31, 2009. Time deposits increased $459,000, or 4.1%, to
$11.7 million at June 30, 2010 from $11.2 million at December 31,
2009. The increase in deposits resulted primarily from a more
aggressive marketing campaign, competitive short-term savings rates offered
during the period, and from calls to existing and potential clients requesting
their business.
Total stockholders’ equity decreased
$185,000 to $7.7 million at June 30, 2010 from $7.9 million at December 31,
2009. This decrease was primarily due to a net loss in the amount of
$207,000 for the six months ended June 30, 2010 offset by a net change in
unrealized appreciation of available-for-sale securities of
$23,000.
Comparison
of Operating Results for the Six Months Ended June 30, 2010 and June 30,
2009
General.
Net loss increased $41,000 to $(207,000) for the six months ended June 30, 2010
from $(166,000) for the six months ended June 30, 2009. The primary
reasons for the increase were a $55,000 increase in non-interest expense, the
credit for income taxes decreasing $13,000, and a $19,000 increase in provision
for loan losses offset by interest income increasing $17,000, interest expense
decreasing $28,000, and non-interest income increasing $1,000.
Interest
Income. Interest income increased $17,000, or 3.3%, to $522,000 for the
six months ended June 30, 2010 from $506,000 for the six months ended June 30,
2009. The increase in interest income resulted from a $66,000
increase in interest income and fees on loans offset by a $44,000 decrease in
interest income on available-for-sale securities and a $5,000 decrease in
interest income on interest-earning deposits.
Interest income and fees on loans
increased $66,000, or 20.2%, to $395,000 for the six months ended June 30, 2010
from $329,000 for the six months ended June 30, 2009. The average
balance of loans increased $2.6 million, or 24.8%, to $13.3 million for the six
months ended June 30, 2010 from $10.7 million for the six months ended June 30,
2009. In addition, the average yield decreased to 5.81% for the six
months ended June 30, 2010 from 6.02% for the six months ended June 30,
2009. The increase in the average balance of loans resulted primarily
from increases in one- to four-family residential loans and increases in
commercial loans.
Interest income on available-for-sale
securities decreased $44,000, or 36.6% to $76,000 for the six months ended June
30, 2010 from $120,000 for the six months ended June 30, 2009. The
average balance of investment securities decreased $1.5 million, or 26.8%, to
$4.1 million for the six months ended June 30, 2010 from $5.6 million for the
six months ended June 30, 2009. In addition, the average yield on the
available-for-sale securities portfolio decreased to 3.73% for the six months
ended June 30, 2010 from 4.30% for the six months ended June 30,
2009.
Interest income on interest-earning
deposits decreased $5,000, or 10.4%, to $51,000 for the six months ended June
30, 2010 from $56,000 for the six months ended June 30, 2009. The
average balance of interest-earning deposits increased $369,000, or 6.8%, to
$5.8 million for the six months ended June 30, 2010 from $5.5 million for the
six months ended June 30, 2009. In addition, the average yield on
interest-earning deposits decreased to 1.75% for the six months ended June 30,
2010 from 2.09% for the six months ended June 30, 2009.
15
Interest
Expense. Interest expense decreased $28,000, or 13.0%, to $187,000 for
the six months ended June 30, 2010 from $215,000 for the six months ended June
30, 2009. The decrease in interest expense on interest-bearing
deposits was due to a decrease in rates. The average rate paid on
interest-bearing deposits decreased 78 basis points to 2.30% for the six months
ended June 30, 2010 from 3.08% for the six months ended June 30,
2009. We experienced increases in the average balances of savings
accounts and the NOW account categories and a small decrease in certificates of
deposit. There was a $1.6 million, or 11.0%, increase in the average
balance of interest-bearing deposits to $16.2 million for the six months ended
June 30, 2010 from $14.6 million for the six months ended June 30,
2009. The increase in deposits resulted primarily from a more
aggressive marketing campaign, competitive short-term savings rates offered
during the period, and from calls to existing and potential clients requesting
their business.
Provision for
Loan Losses. The provision for loan losses is evaluated on a
regular basis by our management and is based upon management’s periodic review
of the collectability of the loans in light of historical experience, the nature
and volume of the loan portfolio, adverse situations that may affect the
borrower’s ability to repay, estimated value of any underlying collateral and
prevailing economic conditions. The provision for loan losses was
$36,000 for the six months ended June 30, 2010 and $17,000 for the six months
ended June 30, 2009. There were no non-performing loans, loans
delinquent 60 days or more, charge-offs or recoveries during the six months
ended June 30, 2010 or 2009.
Recent weakness in economic conditions
have had a severe impact on nationwide housing and financial markets, and the
financial services industry in general. Continuation of these trends
could adversely affect the local housing, construction and banking industries,
and weaken the local economy. If borrowers are negatively affected by
future adverse economic conditions, our non-performing assets may
increase. The allowance for loan losses as a percentage of total
loans was 0.69% and 0.49% at June 30, 2010 and December 31, 2009,
respectively. We used the same methodology in calculating the
provision for loan losses during each of the six months ended June 30, 2010 and
June 30, 2009. The provision for loan losses increased primarily due
to the Association engaging in a new line of commercial lending including one
unsecured commercial loan of $500,000.
Non-interest
Income. Non-interest income was $4,000 for the six months
ended June 30, 2010 as compared to $3,000 for the six months ended June 30,
2009.
Non-interest
Expense. Non-interest expense increased $55,000 or 11.9% to
$519,000 for the six months ended June 30, 2010 from $464,000 for the six months
ended June 30, 2009. Compensation and benefits expense increased
$46,000 to $253,000 for the six months ended June 30, 2010 from $208,000 for the
six months ended June 30, 2009 due to increased staffing and ESOP
expense. Audit fees and exams expense decreased $16,000 to $93,000
for the six months ended June 30, 2010 from $110,000 for the six months ended
June 30, 2009. Net occupancy expense increased $4,000 to $46,000 for
the six months ended June 30, 2010 from $42,000 for the six months ended June
30, 2009 due to increased expenses resulting from the purchase of an additional
branch office. Legal expense increased $8,000 to $28,000 for the six
months ended June 30, 2010 from $19,000 for the six months ended June 30, 2009
primarily due to fees related to being a public company. Franchise
and special taxes increased $2,000 to $13,000 for the six months ended June 30,
2010 from $11,000 for the six months ended June 30, 2009 due to increased
staffing. Other expense increased $11,000 to $60,000 for the six months ended
June 30, 2010 from $49,000 for the six months ended June 30, 2009 primarily due
to increased FDIC assessments and increased miscellaneous operating
expenses.
Income Tax
Expense (Benefit). The credit for income taxes decreased by
$13,000 to $(8,000) for the six months ended June 30, 2010 from $(21,000) for
the six months ended June 30, 2009.
Comparison
of Operating Results for the Three Months Ended June 30, 2010 and June 30,
2009
General. Net
loss increased $35,000 to $(136,000) for the three months ended June 30, 2010
from $(100,000) for the three months ended June 30, 2009. The primary
reasons for the increase were a $40,000 increase in non-interest expense and a
$27,000 increase in provision for loan losses partially offset by interest
income increasing $13,000 and a decrease in interest expense by $15,000 and the
credit for income taxes increasing $2,000.
16
Interest
Income. Interest income increased $13,000, or 5.0%, to
$268,000 for the three months ended June 30, 2010 from $255,000 for the three
months ended June 30, 2009. The increase in interest income resulted
from a $38,000 increase in interest income and fees on loans offset by a $23,000
decrease in interest income on available-for-sale securities and a $2,000
decrease in interest income on interest-earning deposits.
Interest income and fees on loans
increased $38,000, or 22.4%, to $205,000 for the three months ended June 30,
2010 from $167,000 for the three months ended June 30, 2009. The
average balance of loans increased $2.5 million, or 22.7%, to $13.7 million for
the three months ended June 30, 2010 from $11.1 million for the three months
ended June 30, 2009. The average yield was 5.82% for the three months
ended June 30, 2010 and June 30, 2009. The increase in the average
balance of loans resulted primarily from increases in one- to four-family
residential loans and increases in commercial loans.
Interest income on available-for-sale
securities decreased $23,000, or 38.4%, to $38,000 for the three months ended
June 30, 2010 from $61,000 for the three months ended June 30,
2009. The average balance of investment securities decreased $1.9
million, or 32.0%, to $4.1 million for the three months ended June 30, 2010 from
$6.0 million for the three months ended June 30, 2009. In addition,
the average yield on the available-for-sale securities portfolio decreased to
3.70% for the three months ended June 30, 2010 from 4.24% for the three months
ended June 30, 2009.
Interest income on interest-earning
deposits decreased $2,000, or 5.9%, to $25,000 for the three months ended June
30, 2010 from $27,000 for the three months ended June 30, 2009. The
average balance of interest-earning deposits increased $469,000, or 8.8%, to
$5.8 million for the three months ended June 30, 2010 from 5.3 million for the
three months ended June 30, 2009. In addition, the average yield on
interest-earning deposits decreased to 1.73% for the three months ended June 30,
2010 from 2.03% for the three months ended June 30, 2009.
Interest
Expense. Interest expense decreased $15,000, or 13.6%, to
$94,000 for the three months ended June 30, 2010 from $109,000 for the three
months ended June 30, 2009. The average rate paid on interest-bearing
deposits decreased 65 basis points to 2.25% for the three months ended June 30,
2010 from 2.90% for the three months ended June 30, 2009. We
experienced increases in the average balances of savings accounts and NOW
accounts and a small decrease in certificates of deposit. There was a
$1.5 million, or 10.2%, increase in the average balance of interest-bearing
deposits to $16.7 million for the three months ended June 30, 2010 from $15.2
million for the three months ended June 30, 2009. The increase in
deposits resulted primarily from a more aggressive marketing campaign,
competitive short-term savings rates offered during the period, and from calls
to existing and potential clients requesting their business.
Provision for
Loan Losses. The provision for loan losses was $36,000 for the
three months ended June 30, 2010 and $9,000 for the three months ended June 30,
2009. The provision for loan losses increased primarily due to the
Association engaging in a new line of commercial lending including one unsecured
commercial loan of $500,000. There were no non-performing loans,
loans delinquent 60 days or more, charge-offs or recoveries during the three
months ended June 30, 2010 or 2009.
The allowance for loan losses as
a percentage of total loans was 0.69% and 0.33% at June 30, 2010 and June 30,
2009, respectively. We used the same methodology in calculating the
provision for loan losses during each of the three months ended June 30, 2010
and June 30, 2009.
Non-interest
Expense. Non-interest expense increased $40,000, or 16.4%, to
$283,000 for the three months ended June 30, 2010 from $243,000 for the three
months ended June 30, 2009. Compensation and benefits expense
increased $37,000 to $140,000 for the three months ended June 30, 2010 from
$103,000 for the three months ended June 30, 2009 due to increased staffing and
ESOP expense. Audit fees and expenses decreased $6,000 to $43,000 for
the three months ended June 30, 2010 from $49,000 for the three months ended
June 30, 2009. Net occupancy expense increased $7,000 to $27,000 for
the three months ended June 30, 2010 from $20,000 for the three months ended
June 30, 2009 due to increased expenses resulting from the purchase of an
additional branch office.
17
Income Tax
Expense (Benefit). The provision (credit) for income taxes
increased by $3,000 to $(7,000) for the three months ended June 30, 2010 from
$(4,000) for the three months ended June 30, 2009.
Liquidity
and Capital Resources
Liquidity is the ability to meet
current and future financial obligations of a short-term nature. Our
primary sources of funds consist of deposit inflows, loan repayments and
maturities of securities. In addition, we have the ability to borrow
funds from the Federal Home Loan Bank of Des Moines. While maturities
and scheduled amortization of loans and securities are predictable sources of
funds, deposit flows and mortgage prepayments are greatly influenced by general
interest rates, economic conditions and competition.
Our Board of Directors is responsible
for establishing and monitoring our liquidity targets and strategies in order to
ensure that sufficient liquidity exists for meeting the borrowing needs and
deposit withdrawals of our customers, as well as unanticipated
contingencies. We believe that we have enough sources of liquidity to
satisfy our short- and long-term liquidity needs as of June 30,
2010.
We regularly monitor and adjust our
investments in liquid assets based upon our assessment of: (1) expected loan
demand; (2) expected deposit flows; (3) yields available on interest-earning
deposits and securities; and (4) the objectives of our asset/liability
management program. Excess liquid assets are invested generally in
interest-earning deposits and short- and intermediate-term
securities.
Our most liquid assets are cash and
cash equivalents and interest-earning deposits in other
institutions. The levels of these assets are dependent on our
operating, financing, lending and investing activities during any given
period. At June 30, 2010, cash and cash equivalents totaled $1.7
million and interest-earning deposits in other institutions totaled $4.7
million. Securities classified as available-for-sale, which provide
additional sources of liquidity, totaled $3.3 million at June 30,
2010. On June 30, 2010, we had no outstanding borrowings from the
Federal Home Loan Bank of Des Moines. We have the ability to borrow
from the Federal Home Loan Bank of Des Moines, although we have not currently
established any credit lines.
At June 30, 2010 and December 31, 2009,
we had no loan commitments outstanding. In addition, at June 30, 2010
we had unused lines-of-credit to borrowers totaling $409,000. At
December 31, 2009, we had unused lines-of-credit to borrowers totaling
$153,000. Certificates of deposit due within one year of June 30,
2010 totaled $3.5 million, or 20.2% of total deposits. If these
deposits do not remain with us, we will be required to seek other sources of
funds, including other deposits and Federal Home Loan Bank
advances. Depending on market conditions, we may be required to pay
higher rates on such deposits or borrowings than we currently pay on the
certificates of deposit due on or before June 30, 2011. We believe,
however, based on past experience, that a significant portion of such deposits
will remain with us. We have the ability to attract and retain
deposits by adjusting the interest rates offered.
Our primary investing activities are
originating loans, and purchasing interest-earning deposits and
securities. During the six months ended June 30, 2010 and 2009, we
originated $2.5 million and $2.6 million, respectively, of
loans. During the six months ended June 30, 2010 and 2009, we had net
proceeds (purchases) of interest-earning deposits totaling $(507,000) and
$41,000, respectively. During those periods, we had net decreases in
securities of $945,000 and net increases in securities of $971,000,
respectively.
Financing activities consist primarily
of activity in deposit accounts. We experienced a net increase in
total deposits of $2.0 million for the six months ended June 30, 2010, and a net
decrease in total deposits of $886,000 for the six months ended June 30,
2009. The 2010 increase in deposits resulted primarily from a more
aggressive marketing campaign, competitive short-term savings rates offered
during the period, and from calls to existing and potential clients requesting
their business. The 2009 decrease was due to subscription proceeds
held by the Association at December 31, 2008, that were applied to proceeds from
common stock issued on January 30, 2009.
18
The Company is subject to various
regulatory capital requirements, including a risk-based capital
measure. The risk-based capital guidelines include both a definition
of capital and a framework for calculating risk-weighted assets by assigning
balance sheet assets and off-balance sheet items to broad risk
categories. At June 30, 2010 and December 31, 2009, the Company and
the Association exceeded all regulatory capital requirements. The
Company and the Association are considered “well capitalized” under regulatory
guidelines.
The net proceeds from the stock
offering significantly increased our liquidity and capital
resources. Over time, the initial level of liquidity will likely be
reduced as net proceeds from the stock offering are used for general corporate
purposes, including the funding of loans.
Item
3.
|
Quantitative
and Qualitative Disclosures About Market Risk
|
There
have been no material changes in the quantitative and qualitative
information about market risk from the information provided in the
Company’s Annual Report on Form 10-K for the fiscal year ended December
31, 2009.
|
|
Item
4T.
|
Controls
and Procedures
|
(a)
|
Evaluation
of disclosure controls and procedures.
|
Under
the supervision and with the participation of our management, including
our Principal Executive Officer and Principal Financial Officer, we
evaluated the effectiveness of the design and operation of our disclosure
controls and procedures (as defined in Rule 13a-15(e) and 15d-15(e) under
the Exchange Act) as of the end of the period covered by this quarterly
report. Based upon that evaluation, the Principal Executive Officer and
Principal Financial Officer concluded that, as of the end of the period
covered by this quarterly report, our disclosure controls and procedures
were effective to ensure that information required to be disclosed in the
reports that the Company files or submits under the Exchange Act is
recorded, processed, summarized and reported within the time periods
specified in the Securities and Exchange Commission’s rules and
forms.
|
|
(b)
|
Changes
in internal control over financial reporting.
|
There
were no changes made in our internal control over financial reporting
during the period covered by this report that have materially affected, or
are reasonably likely to materially affect, our internal control over
financial reporting.
|
19
PART
II – OTHER INFORMATION
|
|
Item
1.
|
Legal
Proceedings
|
St.
Joseph Bancorp, Inc. and Midwest Federal Savings and Loan Association are
subject to various legal actions arising in the normal course of
business. At June 30, 2010, we were not involved in any legal
proceedings, the outcome of which we believe to be material to our
financial condition or results of operations.
|
|
Item
1A.
|
Risk
Factors
|
Not
applicable to a smaller reporting company.
|
|
Item
2.
|
Unregistered
Sales of Equity Securities and Use of Proceeds
|
None
|
|
Item
3.
|
Defaults
Upon Senior Securities
|
None
|
|
Item
4.
|
[Reserved]
|
Item
5.
|
Other
Information
|
None
|
|
Item
6.
|
Exhibits
|
Exhibit
31.1
|
Certification
of Chief Executive Officer Pursuant to Section 302 of Sarbanes-Oxley Act
of 2002
|
Exhibit
31.2
|
Certification
of Chief Financial Officer Pursuant to Section 302 of Sarbanes-Oxley Act
of 2002
|
Exhibit
32
|
Certification
of Chief Executive Officer and Chief Financial Officer Pursuant to 18
U.S.C. Section 1350, as Adopted Pursuant to Section 906 of Sarbanes-Oxley
Act of 2002
|
20
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.
ST. JOSEPH BANCORP, INC. | |||
Registrant | |||
Date: August
16, 2010
|
|
By: /s/ Ralph E. Schank | |
President and Chief Executive Officer | |||
(Principal Executive and Financial Officer) | |||
21