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EX-32.1 - 1st United Bancorp, Inc.i00185_ex32-1.htm


 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, DC 20549

FORM 10-Q

(Mark One)

 

 

x

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

 

 

For the quarterly period ended March 31, 2011

 

OR

 

o

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

For the transition period from ____________________________________ to ____________________________________

Commission file number 001-34462

 

1ST UNITED BANCORP, INC.


(Exact Name of Registrant as specified in its charter)


 

 

 

FLORIDA

 

65-0925265


(State or Other Jurisdiction of Incorporation or Organization)

 

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


 

 

 

One North Federal Highway, Boca Raton

 

33432


(Address of Principal Executive Offices)

 

(Zip Code)


 

(561) 362-3400


(Registrant’s Telephone Number, Including Area Code)

 

N/A


(Former Name, Former Address and Former Fiscal Year, if Changed Since Last Report.)

          Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes x No o

          Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§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 whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer,” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):

Large accelerated filer o          Accelerated filer x          Non-accelerated filer o          Smaller reporting company o

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).
Yes o No x

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date.

 

 

 

Class

 

Outstanding at April 15, 2011


 


Common stock, $.01 par value

 

30,557,603




1ST UNITED BANCORP, INC.
MARCH 31, 2011
INDEX

 

 

 

 

 

 

 

PAGE NO.

 

 

 


 

 

 

 

PART I.

FINANCIAL INFORMATION

 

 

 

 

 

 

Item 1.

Consolidated Financial Statements (Unaudited)

 

 

 

 

 

 

 

Consolidated Balance Sheets (Unaudited) March 31, 2011 and December 31, 2010

 

3

 

 

 

 

 

Consolidated Statement of Operations (Unaudited) for the Three Months Ended March 31, 2011 and 2010

 

4

 

 

 

 

 

Consolidated Statements of Changes in Shareholders’ Equity (Unaudited) for the Three Months ended March 31, 2011 and 2010

 

5

 

 

 

 

 

Consolidated Statements of Cash Flows (Unaudited) for the Three Months Ended March 31, 2011 and 2010

 

6

 

 

 

 

 

Notes To Unaudited Consolidated Financial Statements

 

7

 

 

 

 

Item 2.

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

 

20

 

 

 

 

Item 4.

Controls and Procedures

 

41

 

 

 

 

PART II.

OTHER INFORMATION

 

 

 

 

 

 

Item 1.

Legal Proceedings

 

41

 

 

 

 

Item 1A.

Risk Factors

 

41

 

 

 

 

Item 5.

Other Information

 

41

 

 

 

 

Item 6.

Exhibits

 

41

 

 

 

 

SIGNATURES

 

42



INTRODUCTORY NOTE
Caution Concerning Forward-Looking Statements

The SEC encourages companies to disclose forward-looking information so that investors can better understand a company’s future prospects and make informed investment decisions. This Quarterly Report on Form 10-Q contains “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. These forward-looking statements include, among others, statements about our beliefs, plans, objectives, goals, expectations, estimates and intentions that are subject to significant risks and uncertainties and are subject to change based on various factors, many of which are beyond our control. The words “may,” “could,” “should,” “would,” “believe,” “anticipate,” “estimate,” “expect,” “intend,” “plan,” “target,” “goal,” and similar expressions are intended to identify forward-looking statements.

All forward-looking statements, by their nature, are subject to risks and uncertainties. Our actual future results may differ materially from those set forth in the forward-looking statements. Our ability to achieve our financial objectives could be adversely affected by the factors discussed in detail in Part I, Item 2., “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and Part II, Item 1A., “Risk Factors” in this Quarterly Report on Form 10-Q, the following sections of our Annual Report on Form 10-K for the year ended December 31, 2010 (the “Annual Report”): (a) “Introductory Note” in Part I, Item 1. “Business;” (b) “Risk Factors” in Part I, Item 1A. as updated in our subsequent quarterly reports on Form 10-Q; and (c) “Introduction” in Management’s Discussion and Analysis of Financial Condition and Results of Operations,” in Part II, Item 7, as well as:

 

 

 

 

legislative or regulatory changes, including the Dodd-Frank Act;

 

 

 

 

the strength of the United States economy in general and the strength of the local economies in which we conduct operations;

 

 

 

 

the accuracy of our financial statement estimates and assumptions, including the estimate for our loan loss provision;

 

 

 

 

the frequency and magnitude of foreclosure of our loans;

 

 

 

 

our customers’ willingness to make timely payments on their loans;

 

 

 

 

restrictions on our operations, including the inability to pay dividends without our regulators’ consent;

 

 

 

 

our ability to comply with the terms of the loss sharing agreements with the FDIC;

 

 

 

 

our ability to integrate the business and operations of companies and banks that we have acquired, and those we may acquire in the future;

 

 

 

 

the effects of the health and soundness of other financial institutions, including the FDIC’s need to increase Deposit Insurance Fund assessments;

 

 

 

 

the failure to achieve expected gains, revenue growth, and/or expense savings from future acquisitions;

 

 

 

 

our ability to declare and pay dividends;

 

 

 

 

changes in the securities and real estate markets;

 

 

 

 

changes in monetary and fiscal policies of the U.S. Government;

 

 

 

 

inflation, interest rate, market and monetary fluctuations;

 

 

 

 

the effects of our lack of a diversified loan portfolio, including the risks of geographic and industry concentrations;

 

 

 

 

our need and our ability to incur additional debt or equity financing;

 

 

 

 

the effects of harsh weather conditions, including hurricanes, and man-made disasters;

 

 

 

 

our ability to comply with the extensive laws and regulations to which we are subject;

 

 

 

 

the willingness of clients to accept third-party products and services rather than our products and services and vice versa;

 

 

 

 

increased competition and its effect on pricing;

1


 

 

 

 

technological changes;

 

 

 

 

negative publicity and the impact on our reputation;

 

 

 

 

the effects of security breaches and computer viruses that may affect our computer systems;

 

 

 

 

changes in consumer spending and saving habits;

 

 

 

 

growth and profitability of our noninterest income;

 

 

 

 

changes in accounting principles, policies, practices or guidelines;

 

 

 

 

the limited trading activity of our common stock;

 

 

 

 

the concentration of ownership of our common stock;

 

 

 

 

anti-takeover provisions under federal and state law as well as our Articles of Incorporation and our Bylaws;

 

 

 

 

other risks described from time to time in our filings with the Securities and Exchange Commission; and

 

 

 

 

our ability to manage the risks involved in the foregoing.

However, other factors besides those listed above could adversely affect our results, and you should not consider any such list of factors to be a complete set of all potential risks or uncertainties. These forward-looking statements are not guarantees of future performance, but reflect the present expectations of future events by our management and are subject to a number of factors and uncertainties that could cause actual results to differ materially from those described in the forward-looking statements. Any forward-looking statements made by us speak only as of the date they are made. We do not undertake to update any forward-looking statement, except as required by applicable law.

2


 

 

ITEM 1.

FINANCIAL STATEMENTS

1ST UNITED BANCORP, INC.
CONSOLIDATED BALANCE SHEETS
(Dollar amounts in thousands, except per share data)
(unaudited)

 

 

 

 

 

 

 

 







 

 

March 31,
2011
(unaudited)

 

December 31,
2010

 

 

 


 


 

 

ASSETS

 

 

 

 

 

 

 

Cash and due from financial institutions

 

$

153,870

 

$

118,952

 

Federal funds sold

 

 

401

 

 

800

 

 

 



 



 

Cash and cash equivalents

 

 

154,271

 

 

119,752

 

Time deposits in other financial institutions

 

 

75

 

 

75

 

Securities available for sale

 

 

111,233

 

 

102,289

 

Loans held for sale

 

 

 

 

4,800

 

Loans, net of allowance of $14,032 and $13,050 at March 31, 2011 and year end 2010

 

 

800,930

 

 

847,689

 

Nonmarketable equity securities

 

 

18,291

 

 

18,543

 

Premises and equipment, net

 

 

9,808

 

 

9,823

 

Other real estate owned

 

 

8,495

 

 

9,085

 

Company-owned life insurance

 

 

4,764

 

 

4,727

 

FDIC loss share receivable

 

 

84,818

 

 

86,712

 

Goodwill

 

 

45,008

 

 

45,008

 

Core deposit intangible

 

 

3,160

 

 

3,289

 

Accrued interest receivable and other assets

 

 

19,610

 

 

15,960

 

 

 



 



 

 

 

$

1,260,463

 

$

1,267,752

 

 

 



 



 

 

 

 

 

 

 

 

 

LIABILITIES AND SHAREHOLDERS’ EQUITY

 

 

 

 

 

 

 

Deposits

 

 

 

 

 

 

 

Non-interest bearing

 

$

301,302

 

$

281,285

 

Interest bearing

 

 

724,787

 

 

783,402

 

 

 



 



 

Total deposits

 

 

1,026,089

 

 

1,064,687

 

Federal funds purchased and repurchase agreements

 

 

12,327

 

 

12,886

 

Federal Home Loan Bank advances

 

 

5,000

 

 

5,000

 

Other borrowings

 

 

4,625

 

 

4,750

 

Accrued interest payable and other liabilities

 

 

7,153

 

 

6,379

 

 

 



 



 

Total liabilities

 

 

1,055,194

 

 

1,093,702

 

 

 

 

 

 

 

 

 

Commitments and contingencies

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Shareholders’ equity

 

 

 

 

 

 

 

Preferred stock – no par, 5,000,000 shares authorized; no shares issued or outstanding

 

 

 

 

 

Common stock – $0.01 par value; 60,000,000 shares authorized; 29,807,603 and 24,793,089 issued and outstanding at March 31, 2011 and December 31, 2010, respectively

 

 

298

 

 

248

 

Additional paid-in capital

 

 

212,416

 

 

181,697

 

Accumulated deficit

 

 

(8,072

)

 

(8,427

)

Accumulated other comprehensive income

 

 

627

 

 

532

 

 

 



 



 

Total shareholders’ equity

 

 

205,269

 

 

174,050

 

 

 



 



 

 

 

$

1,260,463

 

$

1,267,752

 

 

 



 



 


 


See accompanying notes to the consolidated financial statements.

3


1ST UNITED BANCORP, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)
(Dollars in thousands, except per share data)
(unaudited)

 

 

 

 

 

 

 

 





 

 

Three months ended
March 31,

 

 

 

2011

 

2010

 

 

 


 


 

Interest and dividend income:

 

 

 

 

 

 

 

Loans, including fees

 

$

13,717

 

$

10,542

 

Securities

 

 

787

 

 

834

 

Federal funds sold and other

 

 

177

 

 

133

 

 

 



 



 

Total interest income

 

 

14,681

 

 

11,509

 

 

 

 

 

 

 

 

 

Interest expense:

 

 

 

 

 

 

 

Deposits

 

 

1,631

 

 

1,912

 

Federal funds purchased and repurchase agreements

 

 

6

 

 

7

 

Federal Home Loan Bank advances

 

 

55

 

 

58

 

Other borrowings

 

 

32

 

 

77

 

 

 



 



 

Total interest expense

 

 

1,724

 

 

2,054

 

 

 



 



 

 

 

 

 

 

 

 

 

Net interest income

 

 

12,957

 

 

9,455

 

Provision for loan losses

 

 

1,900

 

 

1,250

 

 

 



 



 

Net interest income after provision for loan losses

 

 

11,057

 

 

8,205

 

 

 

 

 

 

 

 

 

Non-interest income:

 

 

 

 

 

 

 

Service charges and fees on deposit accounts

 

 

1,074

 

 

789

 

Net loss on sale of other real estate owned

 

 

(224

)

 

 

Net gains (losses) on sales of securities

 

 

 

 

(10

)

Net gain on sales of residential loans

 

 

11

 

 

5

 

Increase in cash surrender value of company-owned life insurance

 

 

36

 

 

42

 

Adjustment to FDIC indemnification asset

 

 

(244

)

 

 

Other

 

 

76

 

 

75

 

 

 



 



 

Total non-interest income

 

 

729

 

 

901

 

 

 

 

 

 

 

 

 

Non-interest expense:

 

 

 

 

 

 

 

Salaries and employee benefits

 

 

5,242

 

 

4,080

 

Occupancy and equipment

 

 

2,052

 

 

1,696

 

Data processing

 

 

891

 

 

588

 

Telephone

 

 

231

 

 

183

 

Stationery and supplies

 

 

88

 

 

71

 

Amortization of intangibles

 

 

129

 

 

114

 

Professional fees

 

 

513

 

 

383

 

Advertising

 

 

33

 

 

35

 

Reorganization expense

 

 

450

 

 

360

 

FDIC assessment

 

 

410

 

 

339

 

Other

 

 

1,152

 

 

694

 

 

 



 



 

Total non-interest expense

 

 

11,191

 

 

8,543

 

 

 

 

 

 

 

 

 

Income before taxes

 

 

595

 

 

563

 

Income tax expense

 

 

240

 

 

217

 

 

 



 



 

Net income

 

$

355

 

$

346

 

 

 



 



 

Basic earnings per share

 

$

0.01

 

$

0.01

 

Diluted earnings per share

 

$

0.01

 

$

0.01

 

See accompanying notes to the consolidated financial statements.

4


1ST UNITED BANCORP, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS’ EQUITY
(Dollars in thousands except share data)
(unaudited)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Shares of
Common Stock

 

Common
Stock

 

Additional
Paid-In
Capital

 

Accumulated
Deficit

 

Accumulated
Other
Comprehensive
Income (loss)

 

Total
Shareholders’
Equity

 

 

 


 


 


 


 


 


 

 

Balance at January 1, 2010

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Comprehensive income:

 

 

24,781,660

 

$

248

 

$

180,888

 

 

(10,587

)

$

45

 

$

170,594

 

Net income (loss)

 

 

 

 

 

 

 

 

 

 

 

346

 

 

 

 

 

346

 

Change in net unrealized gain (loss) on securities available for sale

 

 

 

 

 

 

 

 

 

 

 

 

 

 

237

 

 

237

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 



 

Total comprehensive income (loss)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

583

 

Stock-based compensation expense

 

 

 

 

 

 

 

 

200

 

 

 

 

 

 

 

 

200

 

Registration cost on issuance of common stock

 

 

 

 

 

 

 

 

(21

)

 

 

 

 

 

 

 

(21

)

 

 












 



 



 

Balance, March 31, 2010

 

 

24,781,660

 

$

248

 

$

181,067

 

$

(10,241

)

$

282

 

$

171,356

 

 

 












 



 



 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Balance at January 1, 2011

 

 

24,793,089

 

$

248

 

$

181,697

 

 

(8,427

)

$

532

 

$

174,050

 

Comprehensive income:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net income

 

 

 

 

 

 

 

 

 

 

 

355

 

 

 

 

 

355

 

Change in net unrealized gain on securities available for sale

 

 

 

 

 

 

 

 

 

 

 

 

 

 

95

 

 

95

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 



 

Total comprehensive income

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

450

 

Stock-based compensation expense

 

 

 

 

 

 

 

 

311

 

 

 

 

 

 

 

 

311

 

Restricted stock grants

 

 

14,514

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Issuance of common stock, net of cost of $2,042

 

 

5,000,000

 

 

50

 

 

30,408

 

 

 

 

 

 

 

 

30,458

 

 

 



















Balance, March 31, 2011

 

 

29,807,603

 

$

298

 

$

212,416

 

$

(8,072

)

$

627

 

$

205,269

 

 

 



















See accompanying notes to the consolidated financial statements.

5


1ST UNITED BANCORP, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
Three months ended March 31, 2011 and 2010

(Dollars in thousands)
(unaudited)

 

 

 

 

 

 

 

 

 

 

2011

 

2010

 

 

 


 


 

Cash flows from operating activities

 

 

 

 

 

 

 

Net income

 

$

355

 

$

346

 

Adjustments to reconcile net income to net cash from (used for) operating activities Provision for loan losses

 

 

1,900

 

 

1,250

 

Depreciation and amortization

 

 

601

 

 

482

 

Net accretion of purchase accounting adjustments

 

 

2,942

 

 

 

Net amortization of securities

 

 

(269

)

 

181

 

Increase in cash surrender value of company-owned life insurance

 

 

(37

)

 

(42

)

Stock-based compensation expense

 

 

311

 

 

200

 

Net (gain) loss on sale of securities

 

 

 

 

10

 

Net loss on foreclosed assets

 

 

224

 

 

69

 

Net loss on premises and equipment

 

 

11

 

 

4

 

Net (gain) loss on sale of loans held for sale

 

 

(11

)

 

(5

)

Loans originated for sale

 

 

(812

)

 

(319

)

Proceeds from sale of loans held for sale

 

 

5,623

 

 

324

 

Net change in:

 

 

 

 

 

 

 

Deferred income tax

 

 

(298

)

 

(519

)

Deferred loan fees

 

 

225

 

 

1,276

 

Other assets

 

 

(3,525

)

 

(3,305

)

Accrued expenses and other liabilities

 

 

774

 

 

(670

)

 

 



 



 

Net cash from (used for) operating activities

 

 

8,014

 

 

(718

)

 

 



 



 

 

 

 

 

 

 

 

 

Cash flows from investing activities

 

 

 

 

 

 

 

Proceeds from sales and calls of securities

 

 

1,000

 

 

5,167

 

Proceeds from security maturities and prepayments

 

 

6,423

 

 

4,372

 

Purchases of securities

 

 

(15,946

)

 

(14,158

)

Loan originations and payments, net

 

 

42,192

 

 

(13,086

)

Purchase of nonmarketable equity securities

 

 

252

 

 

(608

)

Proceeds from sale of other real estate owned

 

 

1,952

 

 

280

 

Additions to premises and equipment, net

 

 

(352

)

 

(276

)

 

 



 



 

Net cash used for investing activities

 

 

35,521

 

 

(18,309

)

 

 

 

 

 

 

 

 

Cash flows from financing activities

 

 

 

 

 

 

 

Net change in deposits

 

 

(38,790

)

 

39,791

 

Net change in federal funds purchased and repurchase agreements

 

 

(559

)

 

(9,779

)

Net change in other borrowings

 

 

(125

)

 

(55

)

Issuance of common stock net of expense

 

 

30,458

 

 

(21

)

 

 



 



 

Net cash from financing activities

 

 

(9,016

)

 

29,936

 

 

 



 



 

 

 

 

 

 

 

 

 

Net change in cash and cash equivalents

 

 

34,519

 

 

10,909

 

Beginning cash and cash equivalents

 

 

119,752

 

 

135,241

 

 

 



 



 

 

 

 

 

 

 

 

 

Ending cash and cash equivalents

 

$

154,271

 

$

146,150

 

 

 



 



 

 

 

 

 

 

 

 

 

Supplemental cash flow information:

 

 

 

 

 

 

 

Interest paid

 

$

1,759

 

$

2,120

 

Income taxes paid

 

 

 

 

 

Transfer of loans to foreclosed assets

 

 

1,586

 

 

 

See accompanying notes to the consolidated financial statements.

6


1ST UNITED BANCORP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in thousands, except per share data)
(unaudited)

NOTE 1 – BASIS OF PRESENTATION

Nature of Operations and Principles of Consolidation: The consolidated financial statements include 1st United Bancorp, Inc. (“Bancorp”) and its wholly-owned subsidiaries, 1st United Bank (“1st United”) and Equitable Equity Lending (“EEL”), together referred to as “the Company.” Intercompany transactions and balances are eliminated in consolidation.

Bancorp’s primary business is the ownership and operation of 1st United. 1st United is a state chartered commercial bank that provides financial services through its four offices in Palm Beach County, four offices in Broward County, four offices in Miami-Dade County and one each in the cities of Vero Beach, Sebastian and Barefoot Bay, Florida. Its primary deposit products are checking, savings, and term certificate accounts, and its primary lending products are commercial and residential mortgages, commercial, and installment loans. Substantially all loans are secured by specific items of collateral including commercial and residential real estate, business assets and consumer assets. Commercial loans are expected to be repaid from cash flow from operations of businesses. Other financial instruments, which potentially represent concentrations of credit risk, include deposit accounts in other financial institutions and federal funds sold.

EEL is a commercial finance subsidiary that from time to time will hold foreclosed assets or non-performing loans transferred from 1st United for disposal and resolution. At March 31, 2011 and December 31, 2010, EEL held $2.9 million in performing loans and $2.2 million in non-performing loans.

The accompanying consolidated financial statements have been prepared in accordance with the instructions to Form 10-Q and, therefore, do not include all information and notes necessary for a complete presentation of financial position, results of operations and cash flow activity required in accordance with accounting principles generally accepted in the United States. In the opinion of management of the Company, all adjustments (consisting only of normal recurring adjustments) necessary for a fair statement of results for the interim periods have been made. These financial statements and notes should be read in conjunction with the consolidated financial statements and notes included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2010.

In preparing the consolidated financial statements, management is required to make estimates and assumptions that affect the reported asset and liability balances and revenue and expense amounts and the disclosure of contingent assets and liabilities. Actual results could differ significantly from those estimates. The December 31, 2010 balance sheet was derived from the Company’s December 31, 2010 audited financial statements.

Earnings Per Common Share: Basic earnings per common share is net income available to common shareholders divided by the weighted average number of common shares outstanding during the period. Diluted earnings per share includes the dilutive effect of additional potential common shares issuable under stock options and stock warrants.

The weighted average common shares outstanding for the period ended March 31, 2011 was 25,307,603 and 25,367,508 for computing basic earnings per share and for computing diluted earnings per share, respectively. The weighted average shares outstanding for the period ended March 31, 2010 was 24,781,660 and 24,919,865 for computing basic earnings per share and for computing diluted earnings per share, respectively. Shares of common stock related to stock options of 2,094,478 for March 31, 2011, and 1,025,035 for March 31, 2010, were not considered in computing diluted earnings (loss) per share for 2011 and 2010 because consideration of those instruments would be antidilutive.

FDIC Loss Share Receivable. The FDIC Loss Share Receivable represents the estimated amounts due from the FDIC related to the loss share agreements which were booked as of the acquisition dates of Republic Federal Bank, N.A. (“Republic”) and The Bank of Miami, N.A. (“TBOM”). The estimate represents the discounted value of the FDIC’s reimbursed portion of estimated losses we expect to realize on loans and other real estate (“Covered Assets”) acquired as a result of the TBOM and Republic acquisitions. As losses are realized on Covered Assets, the portion that the FDIC pays the Company in cash for principal and up to 90 days of interest reduces the FDIC Loss Share Receivable.

The FDIC Loss Share Receivable is reviewed quarterly and adjusted for any changes in expected cash flows based on recent performance and expectations for future performance of the Covered Assets. Any increases in cash flows of the Covered Assets will be accreted into income over the life of the Covered Asset but will reduce immediately the FDIC Loss Share Receivable. Any decreases in the cash flow of the Covered Assets under those expected will result in the impairment to the Covered Asset and an increase in the FDIC Loss Share Receivable to be reflected immediately. Adjustments to the FDIC Loss Share Receivable are recorded to non-interest income.

7


Allowance for Loan Losses. In originating loans, we recognize that credit losses will be experienced and the risk of loss will vary with, among other things: general economic conditions; the type of loan being made; the creditworthiness of the borrower over the term of the loan; and, in the case of a collateralized loan, the quality of the collateral for such a loan. The allowance for loan losses represents our estimate of the allowance necessary to provide for probable incurred losses in the loan portfolio. In making this determination, we analyze the ultimate collectability of the loans in our portfolio, feedback provided by internal loan staff, the independent loan review function and information provided by examinations performed by regulatory agencies.

The allowance for loan losses is evaluated at the portfolio segment level using the same methodology for each segment. The historical net losses for a rolling two year period is the basis for the general reserve for each segment which is adjusted for each of the same qualitative factors (i.e., nature and volume of portfolio, economic and business conditions, classification, past due and non accrual trends) evaluated by each individual segment. Impaired loans and related specific reserves for each of the segments are also evaluated using the same methodology for each segment. The qualitative factors totaled approximately 30 basis points of the allowance for loan losses at March 31, 2011.

A loan is considered impaired when, based on current information and events, it is probable that the Company will be unable to collect the scheduled payments of principal or interest when due according to the contractual terms of the loan agreement. Loans, for which the terms have been modified, and for which the borrower is experiencing financial difficulties, are considered troubled debt restructurings and classified as impaired.

Factors considered by management in determining impairment include payment status, collateral value, and the probability of collecting scheduled principal and interest payments when due. Loans that experience insignificant payment delays (loan payments made within 90 days of the due date) and payment shortfalls (which are tracked as past due amounts) generally are not classified as impaired. Management determines the significance of payment delays and payment shortfalls on a case-by-case basis, taking into consideration all of the circumstances surrounding the loan and the borrower, including the length of the delay, the reasons for the delay, the borrower’s prior payment record, and the amount of the shortfall in relation to the principal and interest owed.

Charge-offs of loans are made by portfolio segment at the time that the collection of the full principal, in management’s judgment, is doubtful. This methodology for determining charge-offs is consistently applied to each segment.

On a quarterly basis, management reviews the adequacy of the allowance for loan losses. Commercial credits are graded by risk management and the loan review function validates the assigned credit risk grades. In the event that a loan is downgraded, it is included in the allowance analysis at the lower grade. To establish the appropriate level of the allowance, we review and classify a sample of loans (including all impaired and nonperforming loans) as to potential loss exposure.

Our analysis of the allowance for loan losses consists of three components: (i) specific credit allocation established for expected losses resulting from analysis developed through specific credit allocations on individual loans for which the recorded investment in the loan exceeds the fair value; (ii) general portfolio allocation based on historical loan loss experience for each loan category; and (iii) qualitative reserves based on general economic conditions as well as specific economic factors in the markets in which we operate.

The specific credit allocation component of the allowance for loan losses is based on a regular analysis of loans where the internal credit rating is at or below the substandard classification and the loan is determined to be impaired as determined by management. The amount of impairment, if any, is determined based on either the present value of expected future cash flows discounted at the loan’s effective interest rate, the market price of the loan, or, if the loan is collateral dependent, the fair value of the underlying collateral less cost of sale. The Company may classify a loan as substandard, however, it may not be classified as impaired. A loan may be classified as substandard by management if, for example, the primary source of repayment is insufficient, the financial condition of the borrower and/or guarantors has deteriorated or there are chronic delinquencies.

8


NOTE 2 – SECURITIES

The amortized cost and fair value of available for sale securities and the related gross unrealized gains and losses recognized in accumulated other comprehensive income were as follows.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Amortized
Cost

 

Gross
Unrealized
Gains

 

Gross
Unrealized
Losses

 

Fair Value

 

 

 


 


 


 


 

March 31, 2011

 

 

 

 

 

 

 

 

 

 

 

 

 

U.S. Government and federal agency

 

$

2,995

 

$

54

 

$

 

$

3,049

 

Residential Mortgage-backed

 

 

107,233

 

 

1,329

 

 

(378

)

 

108,184

 

 

 



 



 



 



 

 

 

$

110,228

 

$

1,383

 

$

(378

)

$

111,233

 

 

 



 



 



 



 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

December 31, 2010

 

 

 

 

 

 

 

 

 

 

 

 

 

U.S. Government and federal agency

 

$

3,995

 

$

43

 

$

 

$

4,038

 

Residential Mortgage-backed

 

 

97,441

 

 

1,134

 

 

(324

)

 

98,251

 

 

 



 



 



 



 

 

 

$

101,436

 

$

1,177

 

$

(324

)

$

102,289

 

 

 



 



 



 



 

At March 31, 2011 and year end 2010, there were no holdings of securities of any one issuer, other than the U.S. Government and its agencies, in an amount greater than 10% of shareholders’ equity.

The amortized cost and fair value of debt securities at March 31, 2011 by contractual maturity were as shown in the table below. Securities not due at a single maturity date, primarily mortgage-backed securities, are shown separately.

 

 

 

 

 

 

 

 

 

 

Amortized
Cost

 

Fair
Value

 

 

 


 


 

Due in one year or less

 

$

 

$

 

Due from one to five years

 

 

 

 

 

Due from five to ten years

 

 

2,995

 

 

3,049

 

Due after ten years

 

 

 

 

 

Residential Mortgage-backed

 

 

107,233

 

 

108,184

 

 

 



 



 

 

 

$

110,228

 

$

111,233

 

 

 



 



 

Securities as of March 31, 2011 and December 31, 2010 with a carrying amount of $21,680 and $31,497, respectively, were pledged to secure public deposits and repurchase agreements.

Proceeds from sales of available for sale securities were $0 and $5,167 for the three months ended March 31, 2011 and 2010, respectively. Gross gains of $0 and $15 and gross losses of $0 and $25 were realized on these sales during 2011 and 2010, respectively.

Gross unrealized losses at March 31, 2011 and December 31, 2010, aggregated by investment category and length of time that individual securities have been in a continuous unrealized loss position, were as follows.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Less than 12 Months

 

12 Months or More

 

Total

 

 

 


 


 


 

 

 

Fair
Value

 

Unrealized
Loss

 

Fair
Value

 

Unrealized
Loss

 

Fair
Value

 

Unrealized
Loss

 

 

 


 


 


 


 


 


 

March 31, 2011

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

U.S. Government and federal agency

 

$

 

$

 

$

 

$

 

$

 

$

 

Residential Mortgage-backed

 

 

35,861

 

 

(378

)

 

 

 

 

 

35,361

 

 

(378

)

 

 



 



 



 



 



 



 

 

 

$

35,861

 

$

(378

)

$

 

$

 

$

35,361

 

$

(378

)

 

 



 



 



 



 



 



 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

December 31, 2010

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

U.S. Government and federal agency

 

$

 

$

 

$

 

$

 

$

 

$

 

Residential Mortgage-backed

 

 

23,557

 

 

(324

)

 

 

 

 

 

23,557

 

 

(324

)

 

 



 



 



 



 



 



 

 

 

$

23,557

 

$

(324

)

$

 

$

 

$

23,557

 

$

(324

)

 

 



 



 



 



 



 



 

9


NOTE 2 – SECURITIES (Continued)

In determining other than temporary impairment (“OTTI”) for debt securities, management considers many factors, including: (1) the length of time and the extent to which the fair value has been less than cost, (2) the financial condition and near-term prospects of the issuer, (3) whether the market decline was affected by macroeconomic conditions, and (4) whether the Company has the intent to sell the debt security or more likely than not will be required to sell the debt security before its anticipated recovery. The assessment of whether OTTI exists involves a high degree of subjectivity and judgment and is based on the information available to management at a point in time.

At March 31, 2011 and December 31, 2010, securities with unrealized losses had depreciated 1.10% and 1.40%, respectively, from the Company’s amortized cost basis. Based on the Company’s assessment, these differences at March 31, 2011 and December 31, 2010 were deemed to be temporary.

NOTE 3 - LOANS

Loans at March 31, 2011 and December 31, 2010 were as follows:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

March 31, 2011

 

December 31, 2010

 

 

 


 


 

 

 

Loans
Subject to
Loss Share
Agreements

 

Loans Not
Subject to
Loss Share
Agreements

 

Total

 

Loans
Subject to
Loss Share
Agreements

 

Loans Not
Subject to
Loss Share
Agreements

 

Total

 

 

 


 


 


 


 


 


 

Commercial and industrial

 

$

28,195

 

$

92,804

 

$

120,999

 

$

34,749

 

$

94,924

 

$

129,673

 

Real estate:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Residential

 

 

115,838

 

 

105,268

 

 

221,106

 

 

117,296

 

 

110,204

 

 

227,500

 

Commercial

 

 

177,989

 

 

249,310

 

 

427,299

 

 

192,106

 

 

264,509

 

 

456,615

 

Construction and development

 

 

6,758

 

 

27,082

 

 

33,840

 

 

6,687

 

 

26,757

 

 

33,444

 

Consumer and other

 

 

1,163

 

 

10,473

 

 

11,636

 

 

4,651

 

 

8,994

 

 

13,645

 

 

 



 



 



 



 



 



 

 

 

$

329,943

 

$

484,937

 

$

814,880

 

$

355,489

 

$

505,388

 

$

860,877

 

 

 



 



 



 



 



 



 

Add (deduct):

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Unearned income and net deferred loan (fees) costs

 

 

 

 

 

 

 

 

82

 

 

 

 

 

 

 

 

(138

)

Allowance for loan losses

 

 

 

 

 

 

 

 

(14,032

)

 

 

 

 

 

 

 

(13,050

)

 

 

 

 

 

 

 

 



 

 

 

 

 

 

 



 

 

 

 

 

 

 

 

 

$

800,930

 

 

 

 

 

 

 

$

847,689

 

 

 

 

 

 

 

 

 



 

 

 

 

 

 

 



 

Activity in the allowance for loan losses for the three months ended March 31, 2011 was as follows:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(Dollars in thousands)

 

Commercial

 

Residential
Real Estate

 

Commercial
Real Estate

 

Construction
and Land
Development

 

Consumer
and Other

 

Total

 

 

 


 


 


 


 


 


 

Beginning balance, January 1, 2011

 

$

3,832

 

$

3,026

 

$

4,145

 

$

1,895

 

$

152

 

$

13,050

 

Provisions for loan losses

 

 

(270

)

 

1,202

 

 

589

 

 

359

 

 

20

 

 

1,900

 

Loans charged off

 

 

(200

)

 

(140

)

 

(539

)

 

 

 

(133

)

 

(1,012

)

Recoveries

 

 

50

 

 

 

 

11

 

 

33

 

 

 

 

94

 

 

 



 



 



 



 



 



 

Ending Balance

 

$

3,412

 

$

4,088

 

$

4,206

 

$

2,287

 

$

39

 

$

14,032

 

 

 



 



 



 



 



 



 

10


NOTE 3 - LOANS (continued)

Activity in the allowance for loan losses for the three months ended March 31, 2010 was as follows:

 

 

 

 

 

 

 

Beginning balance, January 1, 2011

 

$

13,282

 

 

Provision for loan losses

 

 

1,250

 

 

Loans charged-off

 

 

(1,020

)

 

Recoveries

 

 

 

 

 

 



 

 

Ending balance

 

$

13,512

 

 

 

 



 

               Allowance for Loan Losses Allocation

As of March 31, 2011 (dollars in thousands):

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Commercial

 

Residential
Real Estate

 

Commercial
Real Estate

 

Construction
and Land
Development

 

Consumer
and Other

 

Total

 

 

 


 


 


 


 


 


 

Specific Reserves:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Impaired loans

 

$

757

 

$

1,867

 

$

2,126

 

$

824

 

$

 

$

5,574

 

Purchase credit impaired loans

 

 

 

 

 

 

320

 

 

 

 

 

 

320

 

 

 



 



 



 



 



 



 

Total specific reserves

 

 

757

 

 

1,867

 

 

2,446

 

 

824

 

 

 

 

5,894

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

General reserves

 

 

2,655

 

 

2,221

 

 

1,760

 

 

1,463

 

 

39

 

 

8,138

 

 

 



 



 



 



 



 



 

Total

 

$

3,412

 

$

4,088

 

$

4,206

 

$

2,287

 

$

39

 

$

14,032

 

 

 



 



 



 



 



 



 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Loans individually evaluated for impairment

 

$

989

 

$

14,310

 

$

24,318

 

$

6,801

 

$

 

$

46,418

 

Purchase credit impaired loans

 

 

1,395

 

 

26,047

 

 

57,562

 

 

4,925

 

 

 

 

89,929

 

Loans collectively evaluated for impairment

 

 

118,615

 

 

180,749

 

 

345,419

 

 

22,114

 

 

11,636

 

 

678,533

 

 

 



 



 



 



 



 



 

 

 

$

120,999

 

$

221,106

 

$

427,299

 

$

33,840

 

$

11,636

 

$

814,880

 

 

 



 



 



 



 



 



 

As of December 31, 2010 (dollars in thousands):

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Commercial

 

Residential
Real Estate

 

Commercial
Real Estate

 

Construction
and Land
Development

 

Consumer
and Other

 

Total

 

 

 


 


 


 


 


 


 

Specific Reserves:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Impaired loans

 

$

260

 

$

1,781

 

$

1,497

 

$

822

 

$

108

 

$

4,468

 

Purchase credit impaired loans

 

 

 

 

89

 

 

215

 

 

 

 

 

 

304

 

 

 



 



 



 



 



 



 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total specific reserves

 

 

260

 

 

1,870

 

 

1,712

 

 

822

 

 

108

 

 

4,772

 

General reserves

 

 

3,572

 

 

1,156

 

 

2,433

 

 

1,073

 

 

44

 

 

8,278

 

 

 



 



 



 



 



 



 

Total

 

$

3,832

 

$

3,026

 

$

4,145

 

$

1,895

 

$

152

 

$

13,050

 

 

 



 



 



 



 



 



 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Loans individually evaluated for impairment

 

$

434

 

$

10,612

 

$

15,720

 

$

6,510

 

$

289

 

$

33,565

 

Purchase credit impaired loans

 

 

2,856

 

 

24,977

 

 

50,122

 

 

3,880

 

 

1,129

 

 

82,964

 

Loans collectively evaluated for impairment

 

 

126,383

 

 

191,911

 

 

390,773

 

 

23,054

 

 

12,227

 

 

744,348

 

 

 



 



 



 



 



 



 

 

 

$

129,673

 

$

227,500

 

$

456,615

 

$

33,444

 

$

13,645

 

$

860,877

 

 

 



 



 



 



 



 



 

11


NOTE 3 - LOANS (continued)

The following tables present loans individually evaluated for impairment by class of loan as of March 31, 2011 and December 31, 2010.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

March 31, 2011

 

Impaired Loans – With Allowance

 

Impaired Loans – With no
Allowance

 

 

 


 


 

(Dollars in thousands)

 

Unpaid
Principal

 

Recorded
Investment

 

Allowance for
Loan Losses
Allocated

 

Unpaid
Principal

 

Recorded
Investment

 













Residential:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

First mortgages

 

$

7,233

 

$

7,233

 

$

1,220

 

$

5,429

 

$

5,429

 

HELOCs and equity

 

 

1,642

 

 

1,510

 

 

647

 

 

138

 

 

138

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Commercial:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Secured – non-real estate

 

 

891

 

 

891

 

 

757

 

 

49

 

 

49

 

Secured – real estate

 

 

 

 

 

 

 

 

49

 

 

49

 

Unsecured

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Commercial Real Estate:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Owner occupied

 

 

8,973

 

 

8,973

 

 

1,284

 

 

1,241

 

 

1,241

 

Non-owner occupied

 

 

7,303

 

 

6,303

 

 

1,162

 

 

7,801

 

 

7,801

 

Multi-family

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Construction and Land Development:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Construction

 

 

 

 

 

 

 

 

 

 

 

Improved land

 

 

6,938

 

 

5,354

 

 

824

 

 

319

 

 

319

 

Unimproved land

 

 

 

 

 

 

 

 

1,557

 

 

1,128

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Consumer and other

 

 

 

 

 

 

 

 

 

 

 

 

 



 



 



 



 



 

Total March 31, 2011

 

$

32,980

 

$

30,264

 

$

5,894

 

$

16,583

 

$

16,154

 

 

 



 



 



 



 



 


 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

December 31, 2010

 

Impaired Loans – With Allowance

 

Impaired Loans – With
no Allowance

 

 

 


 


 

(Dollars in thousands)

 

Unpaid
Principal

 

Recorded
Investment

 

Allowance for
Loan Losses
Allocated

 

Unpaid
Principal

 

Recorded
Investment

 













Residential:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

First mortgages

 

$

7,021

 

$

7,021

 

$

1,219

 

$

1,939

 

$

1,939

 

HELOCs and equity

 

 

1,513

 

 

1,513

 

 

650

 

 

139

 

 

139

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Commercial:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Secured – non-real estate

 

 

311

 

 

311

 

 

210

 

 

73

 

 

73

 

Secured – real estate

 

 

50

 

 

50

 

 

50

 

 

 

 

 

Unsecured

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Commercial Real Estate:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Owner occupied

 

 

6,124

 

 

6,124

 

 

1,027

 

 

1,455

 

 

1,455

 

Non-owner occupied

 

 

6,512

 

 

6,512

 

 

685

 

 

1,629

 

 

1,629

 

Multi-family

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Construction and Land Development:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Construction

 

 

 

 

 

 

 

 

 

 

 

Improved land

 

 

6,965

 

 

5,382

 

 

823

 

 

 

 

 

Unimproved land

 

 

 

 

 

 

 

 

1,557

 

 

1,128

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Consumer and other

 

 

289

 

 

289

 

 

108

 

 

 

 

 

 

 



 



 



 



 



 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total December 31, 2010

 

$

28,785

 

$

27,202

 

$

4,772

 

$

6,792

 

$

6,363

 

 

 



 



 



 



 



 

12


NOTE 3 - LOANS (continued)

Average of impaired loans and related interest income for three months ended March 31, 2011 were as follows (dollars in thousands):

 

 

 

 

 

 

 

 

 

 

 

 

 

 

                         

Residential:

 

 

 

 

 

 

 

 

 

 

 

 

 

    First
Mortgages
  HELOCs
and Equity
        Total
Residential
 

 

 



 



 

 

 

 



 

Average of impaired loans

 

$

9,275

 

$

1,666

 

 

 

 

$

10,941

 

Interest income recognized during impairment

 

 

159

 

 

 

 

 

 

 

159

 

Cash-basis interest income recognized

 

 

107

 

 

 

 

 

 

 

107

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Commercial:

 

 

 

 

 

 

 

 

 

 

 

 

 

    Secured Non-
Real Estate
  Secured
Real Estate
  Unsecured   Total
Commercial
 

 

 



 



 



 



 

Average of impaired loans

 

 

1,051

 

 

49

 

 

 

 

1,100

 

Interest income recognized during impairment

 

 

1

 

 

2

 

 

 

 

 

3

 

Cash-basis interest income recognized

 

 

2

 

 

 

 

 

 

2

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Commercial Real Estate:

 

 

 

 

 

 

 

 

 

 

 

 

 

    Owner
Occupied
  Non-Owner
Occupied
  Multi Family   Total Commercial
Real Estate
 

 

 



 



 



 



 

Average of impaired loans

 

 

10,199

 

 

9,294

 

 

 

 

19,493

 

Interest income recognized during impairment

 

 

332

 

 

264

 

 

 

 

596

 

Cash-basis interest income recognized

 

 

134

 

 

91

 

 

 

 

225

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Construction and Land Development:

 

 

 

 

 

 

 

 

 

 

 

 

 

    Construction   Improved
Land
  Unimproved
Land
  Total Construction
and Land Development
 

 

 



 



 



 



 

Average of impaired loans

 

 

 

 

5,450

 

 

1,128

 

 

6,578

 

Interest income recognized during impairment

 

 

 

 

105

 

 

 

 

105

 

Cash-basis interest income recognized

 

 

 

 

46

 

 

 

 

46

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

          Total Consumer
and Other
 

 

 

 

 

 

 

 

 

 

 

 



 

Consumer and other:

 

 

 

 

 

 

 

 

 

 

 

 

 

Average of impaired loans

 

 

 

 

 

 

 

 

 

 

 

 

Interest income recognized during impairment

 

 

 

 

 

 

 

 

 

 

 

 

Cash-basis interest income recognized

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 



 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total:

 

 

 

 

 

 

 

 

 

 

 

 

 

Average of impaired loans

 

 

 

 

 

 

 

 

 

 

$

38,112

 

Interest income recognized during impairment

 

 

 

 

 

 

 

 

 

 

 

863

 

Cash-basis interest income recognized

 

 

 

 

 

 

 

 

 

 

 

380

 

Average impaired loans and related interest income for the quarter ended March 31, 2010 are as follows:

 

 

 

 

 

 

 

2010

 

 

 


 

Average of impaired loans during the year

 

$

18,968

 

Interest income recognized during impairment

 

 

60

 

Cash-basis interest income recognized

 

 

55

 

Modifications of terms for our loans and their inclusion as troubled debt restructurings are based on individual facts and circumstances. Loan modifications that are included as troubled debt restructurings may involve reduction of the interest rate, extension of the term of the loan and/or forgiveness of principal, regardless of the period of the modification. Generally, we will allow interest rate reductions for a period of less than two years after which the loan reverts back to its original interest rate. Each of the loans included as troubled debt restructurings at March 31, 2011 had interest rate modifications from 6 months to 2 years before reverting back to the original interest rate. All of the loans were modified due to financial stress of the borrower. The following is a summary of troubled debt restructurings as of March 31, 2011 and December 31, 2010, all of which were performing in accordance with the restructured terms.

 

 

 

 

 

 

 

 

(Dollars in thousands)

 

March 31,
2011

 

December 31,
2010

 

 

 


 


 

Residential

 

$

2,640

 

$

2,649

 

Commercial Real Estate

 

 

16,300

 

 

6,996

 

Construction and Land

 

 

4,736

 

 

4,750

 

Commercial and Industrial

 

 

275

 

 

277

 

 

 



 



 

Total

 

$

23,951

 

$

14,672

 

 

 



 



 

13


NOTE 3 - LOANS (continued)

The Company currently does not have any loans that were troubled debt restructurings that are included in non-accrual status at March 31, 2011. Loans retain their accrual status at the time of their modification. As a result, if a loan is on non-accrual at the time it is modified, it stays as non-accrual, and if a loan is on accrual at the time of the modification, it generally stays on accrual. A minimum of six payments of both principal and interest are required before we will put a loan back on accrual that was previously on non-accrual. The average yield on the loans classified as troubled debt restructurings was 4.8% as of March 31, 2011. Troubled debt restructuring loans are considered impaired.

At March 31, 2011, there were no loans that did not perform in accordance with the restructured terms.

During the quarter ended March 31, 2011, the Company had no loans in which we lowered the interest rate prior to maturity to competitively retain the loan.

Generally, interest on loans accrues and is credited to income based upon the principal balance outstanding. It is management’s policy to discontinue the accrual of interest income and classify a loan as non-accrual when principal or interest is past due 90 days or more unless, in the determination of management, the principal and interest on the loan are well collateralized and in the process of collection. Consumer installment loans are generally charged-off after 90 days of delinquency unless adequately collateralized and in the process of collection. Loans are not returned to accrual status until principal and interest payments are brought current and future payments appear reasonably certain. Interest accrued and unpaid at the time a loan is placed on non-accrual status is charged against interest income.

During the quarters ended March 31, 2011 and 2010, interest income not recognized on non-accrual loans (but would have been recognized if these loans were current) was approximately $185 and $64, respectively.

The following tables summarize past due and non accrual loans for the quarter ending March 21, 2011 and year ending December 31, 2010:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

As of March 31, 2011
(Dollars in thousands)

 

Accruing 30 - 59

 

Accruing 60-89

 

Non-Accrual and
90 days and over past due
and accruing

 

Total

 

 

 


 


 


 


 

 

 

Number

 

Amount

 

Number

 

Amount

 

Number

 

Amount

 

Number

 

Amount

 

 

 


 


 


 


 


 


 


 


 

Residential:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

First mortgages

 

 

11

 

$

1,511

 

 

 

$

 

 

65

 

$

10,036

 

 

76

 

$

11,547

 

HELOCs and equity

 

 

1

 

 

28

 

 

 

 

 

 

4

 

 

1,635

 

 

5

 

 

1,663

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Commercial:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Secured – non-real estate

 

 

10

 

 

1,128

 

 

 

 

 

 

7

 

 

1,652

 

 

17

 

 

2,780

 

Secured – real estate

 

 

 

 

 

 

2

 

 

770

 

 

1

 

 

49

 

 

3

 

 

819

 

Unsecured

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Commercial Real Estate:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Owner occupied

 

 

2

 

 

384

 

 

 

 

 

 

14

 

 

2,529

 

 

16

 

 

2,913

 

Non-owner occupied

 

 

2

 

 

907

 

 

3

 

 

1,648

 

 

4

 

 

5,557

 

 

9

 

 

8,112

 

Multi-family

 

 

 

 

 

 

 

 

 

 

2

 

 

1,271

 

 

2

 

 

1,271

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Construction and Land

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Development:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Construction

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Improved land

 

 

1

 

 

398

 

 

 

 

 

 

4

 

 

937

 

 

5

 

 

1,335

 

Unimproved land

 

 

1

 

 

2,516

 

 

 

 

 

 

1

 

 

1,128

 

 

2

 

 

3,644

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Consumer and other

 

 

1

 

 

59

 

 

 

 

 

 

 

 

 

 

1

 

 

59

 

 

 



 



 



 



 



 



 



 



 

Total March 31, 2011

 

 

29

 

$

6,931

 

 

5

 

$

2,418

 

 

102

 

$

24,794

 

 

136

 

$

34,143

 

 

 



 



 



 



 



 



 



 



 

Included in the table above as of March 31, 2011 are loans in the accruing 30-59 category with a carrying value of $3.0 million, loans in the accruing 60-89 category with a carrying value of $0, and loans in the non-accrual and 90 day and over category with a carrying value of $6.5 million, which are subject to the Loss Share Agreements.

14


NOTE 3 - LOANS (continued)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(Dollars in thousands)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Accruing 30 - 59

 

Accruing 60-89

 

Non-Accrual and
90 days and over past due
and accruing

 

Total

 

 

 


 


 


 


 

 

 

Number

 

Amount

 

Number

 

Amount

 

Number

 

Amount

 

Number

 

Amount

 

 

 


 


 


 


 


 


 


 


 

As of December 31, 2010

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Residential:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

First mortgages

 

 

11

 

$

2,280

 

 

1

 

$

116

 

 

7

 

$

6,325

 

 

19

 

$

8,721

 

HELOCs and equity

 

 

1

 

 

136

 

 

 

 

 

 

4

 

 

1,638

 

 

5

 

 

1,774

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Commercial:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Secured – non-real estate

 

 

6

 

 

1,095

 

 

2

 

 

185

 

 

5

 

 

264

 

 

13

 

 

1,544

 

Secured – real estate

 

 

 

 

 

 

 

 

 

 

1

 

 

50

 

 

1

 

 

50

 

Unsecured

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Commercial Real Estate:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Owner occupied

 

 

2

 

 

4,692

 

 

 

 

 

 

7

 

 

4,800

 

 

9

 

 

9,492

 

Non-owner occupied

 

 

4

 

 

1,029

 

 

3

 

 

2,635

 

 

3

 

 

3,764

 

 

10

 

 

7,428

 

Multi-family

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Construction and Land

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Development:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Construction

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Improved land

 

 

 

 

 

 

 

 

 

 

 

2

 

 

631

 

 

2

 

 

631

 

Unimproved land

 

 

 

 

 

 

 

 

 

 

 

1

 

 

1,128

 

 

1

 

 

1,128

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Consumer and other

 

 

 

 

 

 

 

 

 

 

 

1

 

 

289

 

 

1

 

 

289

 

 

 



 



 



 



 



 



 



 



 

Total December 31, 2010

 

 

24

 

$

9,232

 

 

6

 

$

2,936

 

 

31

 

$

18,889

 

 

61

 

$

31,057

 

 

 



 



 



 



 



 



 



 



 

Included in the table above as of December 31, 2010 in the accruing 30-59 category are loans with a carrying value of $3.2 million, accruing 60 - 89 category are loans with a carrying value of $475, and in the non-accrual and 90 day and over category are loans with a carrying value of $519, which are subject to the Loss Share Agreements.

Credit Quality Indicators:

The Company categorizes loans into risk categories based on relevant information about the ability of borrowers to service their debt such as: current financial information, historical payment experience, credit documentation, public information, and current economic trends, among other factors. The Company analyzes loans individually by classifying the loans as to credit risk. Loans classified as substandard or special mention are reviewed quarterly by the Company for further deterioration or improvement to determine if appropriately classified and impairment, if any. All other loans greater than $1 million, Commercial and Personal lines of credit greater than $100, and unsecured loans greater than $100 are specifically reviewed at least annually to determine the appropriate loan grading. In addition, during the renewal process of any loan, as well if a loan becomes past due, the Company will evaluate the loan grade.

Loans excluded from the scope of the annual review process above are generally classified as pass credits until: (a) they become past due; (b) management becomes aware of a deterioration in the credit worthiness of the borrower; or (c) the customer contacts the Company for a modification. In these circumstances, the loan is specifically evaluated for potential classification as to special mention, substandard or even charged off. The Company uses the following definitions for risk ratings:

 

 

 

Special Mention. Loans classified as special mention have a potential weakness that deserves management’s close attention. If left uncorrected, these potential weaknesses may result in deterioration of the repayment prospects for the loan or of the institution’s credit position at some future date.

 

 

 

Substandard. Loans classified as substandard are inadequately protected by the current net worth and payment capacity of the obligor or of the collateral pledged, if any. Loans so classified have a well-defined weakness or weaknesses that jeopardize the liquidation of the debt. They are characterized by the distinct possibility that the institution will sustain some loss if the deficiencies are not corrected.

15


NOTE 3 - LOANS (continued)

 

 

 

Doubtful. Loans classified as doubtful have all the weaknesses inherent in those classified as substandard, with the added characteristic that the weaknesses make collection or liquidation in full, on the basis of currently existing facts, conditions, and values, highly questionable and improbable.


 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(Dollars in thousands)

 

Total

 

Pass Credits

 

Special Mention

 

Substandard

 

Doubtful

 

 

 


 


 


 


 


 

 

 

 

 

 

 

 

 

 

 

 

 

March 31, 2011

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Residential:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

First mortgages

 

$

166,085

 

$

139,672

 

$

13,623

 

$

12,790

 

$

 

HELOCs and equity

 

 

55,021

 

 

46,594

 

 

942

 

 

7,485

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Commercial:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Secured – non-real estate

 

 

108,816

 

 

102,371

 

 

3,339

 

 

3,106

 

 

 

Secured – real estate

 

 

35,850

 

 

34,316

 

 

477

 

 

1,057

 

 

 

Unsecured

 

 

12,183

 

 

12,183

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Commercial Real Estate:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Owner occupied

 

 

151,356

 

 

131,698

 

 

8,158

 

 

11,500

 

 

 

Non-owner occupied

 

 

209,584

 

 

185,006

 

 

9,627

 

 

14,951

 

 

 

Multi-family

 

 

30,509

 

 

30,509

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Construction and Land Development:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Construction

 

 

579

 

 

579

 

 

 

 

 

 

 

Improved land

 

 

20,808

 

 

13,893

 

 

1,242

 

 

5,673

 

 

 

Unimproved land

 

 

12,453

 

 

8,810

 

 

 

 

3,643

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Consumer and other

 

 

11,636

 

 

11,609

 

 

 

 

27

 

 

 

 

 



 



 



 



 



 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total March 31, 2011

 

$

814,880

 

$

717,240

 

$

37,408

 

$

60,232

 

$

 

 

 



 



 



 



 



 


 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(Dollars in thousands)

 

Total

 

Pass Credits

 

Special
Mention

 

Substandard

 

Doubtful

 

 

 


 


 


 


 


 

 

 

 

 

 

 

 

 

 

 

 

 

December 31, 2010

 

 

 

 

 

 

 

 

 

 

 

Residential:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

First mortgages

 

$

172,598

 

$

157,169

 

$

6,332

 

$

9,097

 

$

 

HELOCs and equity

 

 

54,902

 

 

50,803

 

 

1,764

 

 

2,335

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Commercial:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Secured – non-real estate

 

 

106,801

 

 

103,374

 

 

757

 

 

2,670

 

 

 

Secured – real estate

 

 

37,012

 

 

36,962

 

 

 

 

50

 

 

 

Unsecured

 

 

22,872

 

 

22,420

 

 

 

 

452

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Commercial Real Estate:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Owner occupied

 

 

157,653

 

 

138,048

 

 

6,636

 

 

12,969

 

 

 

Non-owner occupied

 

 

224,033

 

 

201,021

 

 

5,955

 

 

17,057

 

 

 

Multi-family

 

 

37,916

 

 

37,916

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Construction and Land Development:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Construction

 

 

 

 

 

 

 

 

 

 

 

Improved land

 

 

21,758

 

 

15,292

 

 

1,084

 

 

5,382

 

 

 

Unimproved land

 

 

11,687

 

 

8,044

 

 

 

 

3,643

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Consumer and other

 

 

13,645

 

 

13,317

 

 

39

 

 

289

 

 

 

 

 



 



 



 



 



 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total December 31, 2010

 

$

860,877

 

$

784,366

 

$

22,567

 

$

53,944

 

$

 

 

 



 



 



 



 



 

16


NOTE 3 - LOANS (continued)

As part of the acquisition of The Bank of Miami, N.A. in 2010 and Republic Federal Bank, N.A. in 2009 from the Federal Deposit Insurance Corporation and of Equitable Financial Group, Inc. and Citrus Bank, N.A. in 2008, the Company acquired certain loans for which there was, at acquisition, evidence of deterioration of credit quality since origination and it was probable, at acquisition, that all contractually required payments would not be collected. The carrying amount of these loans at March 31, 2011 was approximately $89.9 million, net of a discount of $54.7 million. During the quarter ended March 31, 2011, approximately $1.8 million was accreted into income on these loans and at March 31, 2011 the remaining accretable difference is $20.1 million. In addition, $87.4 million of the $89.9 million is covered by the Loss Share Agreements.

At March 31, 2011, $2.5 million of these loans were included in nonperforming loans, and considered impaired. Further, the Company has recorded an increase in allowance for loan losses of $100 during the three months ended March 31, 2011 and $0 during the three months ended March 31, 2010 for these loans.

NOTE 4 – COMMON STOCK OFFERING

During the quarter ended March 31, 2011, Bancorp issued 5,000,000 (the “Offering”) shares of common stock at $6.50 per share. The total proceeds of the Offering were $30,458 (net of offering costs of $2,042). On April 12, 2011 the underwriter exercised their full over-allotment option and 750,000 additional shares were issued at $6.50 for total additional proceeds of approximately $4,531 (net of offering costs of $344).

NOTE 5 – FAIR VALUES OF FINANCIAL INSTRUMENTS

Carrying amount and estimated fair values of financial instruments were as follows at March 31, 2011 and year end 2010.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

March 31
2011

 

December 31,
2010

 

 

 


 


 

 

 

Carrying
Amount

 

Fair
Value

 

Carrying
Amount

 

Fair
Value

 

 

 


 


 


 


 

Financial assets

 

 

 

 

 

 

 

 

 

 

 

 

 

Cash and cash equivalents

 

$

154,271

 

$

154,271

 

$

119,752

 

$

119,752

 

Time deposits in other financial institutions

 

 

75

 

 

75

 

 

75

 

 

75

 

Securities available for sale

 

 

111,233

 

 

111,233

 

 

102,289

 

 

102,289

 

Loans, net, including loans held for sale

 

 

800,930

 

 

799,539

 

 

852,489

 

 

851,105

 

Nonmarketable equity securities

 

 

18,291

 

 

N/A

 

 

18,543

 

 

N/A

 

Bank owned life insurance

 

 

4,764

 

 

4,764

 

 

4,727

 

 

4,727

 

FDIC loss share receivable

 

 

84,818

 

 

84,818

 

 

86,712

 

 

86,712

 

Accrued interest receivable

 

 

3,568

 

 

3,568

 

 

2,484

 

 

2,484

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Financial liabilities

 

 

 

 

 

 

 

 

 

 

 

 

 

Deposits

 

 

(1,026,089

)

 

(1,025,152

)

 

(1,064,687

)

 

(1,064,878

)

Federal funds purchased and repurchase agreements

 

 

(12,327

)

 

(12,392

)

 

(12,886

)

 

(12,881

)

Federal Home Loan Bank advances

 

 

(5,000

)

 

(5,000

)

 

(5,000

)

 

(5,000

)

Other borrowings

 

 

(4,625

)

 

(4,625

)

 

(4,750

)

 

(4,752

)

Accrued interest payable

 

 

(608

)

 

(608

)

 

(782

)

 

(782

)

The methods and assumptions used to estimate fair value are described as follows:

Carrying amount is the estimated fair value for cash and cash equivalents, time deposits in other financial institutions, accrued interest receivable and payable, demand deposits, federal funds purchased and repurchase agreements, and deposits that reprice frequently and fully. Fair value of loans is based on discounted 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, adjusted for the allowance for loan losses. For deposits with infrequent repricing or repricing limits, fair value is based on discounted cash flows using current market rates applied to the estimated life. Fair value of debt is based on current rates for similar financing. It was not practicable to determine the fair value of nonmarketable equity securities due to restrictions placed on their transferability. The fair value of off-balance-sheet items is not considered material (or is based on the current fees or cost that would be charged to enter into or terminate such arrangements).

17


NOTE 5 – FAIR VALUES OF FINANCIAL INSTRUMENTS (continued)

Fair Value Option and Fair Value Measurements

ASC 820-10-65 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. The standard describes three levels of inputs that may be used to measure fair value:

 

 

 

 

 

Level 1: Quoted prices (unadjusted) for identical assets or liabilities in active markets that the entity has the ability to access as of the measurement date.

 

 

 

 

 

Level 2: Significant other observable inputs other than Level 1 prices such as quoted prices for similar assets or liabilities; quoted prices in markets that are not active; or other inputs that are observable or can be corroborated by observable market data.

 

 

 

 

 

Level 3: Significant unobservable inputs that reflect a reporting entity’s own assumptions about the assumptions that market participants would use in pricing an asset or liability.

The fair values of securities available for sale are determined by obtaining quoted prices on nationally recognized securities exchanges (Level 1 inputs) or matrix pricing, which is a mathematical technique widely used in the industry to value debt securities without relying exclusively on quoted prices for the specific securities but rather by relying on the securities’ relationship to other benchmark quoted securities (Level 2 inputs).

The fair value of impaired loans with specific allocations of the allowance for loan losses is generally based on recent real estate appraisals. These appraisals may utilize a single valuation approach or a combination of approaches including comparable sales and the income approach. Adjustments are routinely made in the appraisal process by the appraisers to adjust for differences between the comparable sales and income data available. Such adjustments are typically significant and result in a Level 3 classification of the inputs for determining fair value.

Assets and liabilities measured at fair value on a recurring basis are summarized below.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Fair value measurements at March 31, 2011 using

 

 

 


 

 

 

March 31,
2011

 

Quoted prices
in active markets
for identical assets
(Level 1)

 

Significant
other
observable
inputs
(Level 2)

 

Significant
unobservable
inputs
(Level 3)

 

 

 


 


 


 


 

Assets:

 

 

 

 

 

 

 

 

 

 

 

 

 

U.S. Government and federal agency

 

$

3,049

 

$

 

$

3,049

 

$

 

Mortgage-backed: residential

 

 

108,184

 

 

 

 

108,184

 

 

 

 

 



 



 



 



 

 

 

$

111,233

 

$

 

$

111,233

 

$

 

 

 



 



 



 



 

18


NOTE 5 – FAIR VALUES OF FINANCIAL INSTRUMENTS (continued)

Assets and liabilities measured at fair value on a non-recurring basis are summarized below.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Fair value measurements at March 31, 2011 using

 

 

 


 

 

 

March 31,
2011

 

Quoted prices in
active markets
for identical assets
(Level 1)

 

Significant
other
observable
Inputs
(Level 2)

 

Significant
unobservable
inputs
(Level 3)

 

 

 


 


 


 


 

Assets:

 

 

 

 

 

 

 

 

 

 

 

 

 

Impaired loans

 

 

 

 

 

 

 

 

 

 

 

 

 

Residential

 

$

16,177

 

$

 

$

 

$

16,177

 

Commercial

 

 

1,746

 

 

 

 

 

 

1,746

 

Commercial real estate

 

 

26,664

 

 

 

 

 

 

26,664

 

Construction and land development

 

 

7,625

 

 

 

 

 

 

7,625

 

Consumer and other

 

 

 

 

 

 

 

 

 

 

 



 



 



 



 

 

 

$

52,212

 

$

 

$

 

$

52,212

 

 

 



 



 



 



 

Other real estate:

 

 

 

 

 

 

 

 

 

 

 

 

 

Commercial

 

$

6,337

 

$

 

$

 

$

6,337

 

Residential

 

 

2,158

 

 

 

 

 

 

2,158

 

 

 



 



 



 



 

 

 

$

8,495

 

$

 

$

 

$

8,495

 

 

 



 



 



 



 

Impaired loans, which are measured for impairment using the fair value of the collateral for collateral dependent loans, had a carrying amount of $58,006, with a valuation allowance of $5,794 resulting in an additional provision for loan losses of $797 for the period.

Other real estate owned, which are measured for impairment using the fair value of the collateral, had a carrying amount of $8,495, with no valuation allowance for the period.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Fair value measurements at December 31, 2010 using

 

 

 


 

 

 

December 31,
2010

 

Quoted prices
in active markets
for identical assets
(Level 1)

 

Significant
other
observable
inputs
(Level 2)

 

Significant
unobservable
inputs
(Level 3)

 

 

 


 


 


 


 

Available for Sale Securities:

 

 

 

 

 

 

 

 

 

 

 

 

 

U.S. Government and federal agency

 

$

4,038

 

$

 

$

4,038

 

$

 

Mortgage-backed: residential

 

 

98,251

 

 

 

 

98,251

 

 

 

 

 



 



 



 



 

 

 

$

102,289

 

$

 

$

102,289

 

$

 

 

 



 



 



 



 

19


NOTE 5 – FAIR VALUES OF FINANCIAL INSTRUMENTS (Continued)

Assets and liabilities measured at fair value on a non-recurring basis are summarized below.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Fair value measurements at December 31, 2010 using

 

 

 


 

 

 

December 31,
2010

 

Quoted prices in
active markets
for identical assets
(Level 1)

 

Significant
other
observable
Inputs
(Level 2)

 

Significant
unobservable
inputs
(Level 3)

 

 

 


 


 


 


 

Assets:

 

 

 

 

 

 

 

 

 

 

 

 

 

Impaired loans

 

 

 

 

 

 

 

 

 

 

 

 

 

Residential

 

$

6,665

 

$

 

$

 

$

6,665

 

Commercial

 

 

101

 

 

 

 

 

 

101

 

Commercial real estate

 

 

10,924

 

 

 

 

 

 

10,924

 

Construction and land development

 

 

4,559

 

 

 

 

 

 

4,559

 

Consumer and other

 

 

181

 

 

 

 

 

 

181

 

 

 



 



 



 



 

 

 

$

22,430

 

$

 

$

 

$

22,430

 

 

 



 



 



 



 

Other real estate:

 

 

 

 

 

 

 

 

 

 

 

 

 

Commercial

 

$

7,608

 

$

 

 

 

 

7,608

 

Residential

 

 

1,477

 

 

 

 

 

 

1,477

 

 

 



 



 



 



 

 

 

$

9,085

 

$

 

$

 

$

9,085

 

 

 



 



 



 



 

At December 31, 2010, impaired loans, which are measured for impairment using the fair value of the collateral for collateral dependent loans, had a carrying amount of $27,202, with a valuation allowance of $4,772 resulting in an additional provision for loan losses of $3,212 for the period.

Other real estate owned, which are measured for impairment using the fair value of the collateral, had a carrying amount of $9,085 with no valuation allowance for the period.

There have been no transfers between levels for 2011 and 2010.

NOTE 6 – ADOPTION OF NEW ACCOUNTING STANDARDS

In April 2011, the FASB amended existing guidance for assisting a creditor in determining whether a restructuring is a troubled debt restructuring. The amendments clarify the guidance for a creditor’s evaluation of whether it has granted a concession and whether a debtor is experiencing financial difficulties. This guidance is effective for interim and annual reporting periods beginning after June 15, 2011, and should be applied retrospectively to the beginning of the annual period of adoption. For purposes of measuring impairment on newly identified troubled debt restructurings, the amendments should be applied prospectively for the first interim or annual period beginning on or after June 15, 2011. The Company has not determined the impact, if any, upon the adoption of the standard.

 

 

ITEM 2.

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The following is management’s discussion and analysis of certain significant factors that have affected our financial condition and operating results during the periods included in the accompanying consolidated financial statements, and should be read in conjunction with such financial statements. Management’s discussion and analysis is divided into subsections entitled “Business Overview,” “Operating Results,” “Financial Condition,” “Capital Resources,” “Cash Flows and Liquidity,” “Off Balance Sheet Arrangements,” and “Critical Accounting Policies.” Our financial condition and operating results principally reflect those of its wholly-owned subsidiaries, 1st United Bank (“1st United”) and Equitable Equity Lending (“EEL”). The consolidated entity is referred to as the “Company,” “Bancorp,” “we,” “us,” or “our.”

The following discussion should be read in conjunction with the condensed consolidated financial statements and notes thereto included in this Quarterly Report on Form 10-Q.

20


CAUTION CONCERNING FORWARD-LOOKING STATEMENTS

This Quarterly Report on Form 10-Q, including this MD&A section, contains “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. These forward-looking statements include, among others, statements about our beliefs, plans, objectives, goals, expectations, estimates and intentions that are subject to significant risks and uncertainties and are subject to change based on various factors, many of which are beyond our control. The words “may,” “could,” “should,” “would,” “believe,” “anticipate,” “estimate,” “expect,” “intend,” “plan,” “target,” “goal,” and similar expressions are intended to identify forward-looking statements.

All forward-looking statements, by their nature, are subject to risks and uncertainties. Our actual future results may differ materially from those set forth in our forward-looking statements. Please see the Introductory Note and Item 1A. Risk Factors of our Annual Report on Form 10-K, as updated from time to time, and in our other filings made from time to time with the SEC after the date of this report.

However, other factors besides those listed above, or in our Quarterly Report or in our Annual Report, also could adversely affect our results, and you should not consider any such list of factors to be a complete set of all potential risks or uncertainties. Any forward-looking statements made by us or on our behalf speak only as of the date they are made. We do not undertake to update any forward-looking statement, except as required by applicable law.

BUSINESS OVERVIEW

We are a financial holding company headquartered in Boca Raton, Florida.

On December 17, 2010, 1st United, our banking subsidiary, entered into a purchase and assumption agreement (the “Bank of Miami Agreement”) with the FDIC, as receiver for The Bank of Miami, National Association (“TBOM”), Miami, Florida. According to the terms of the Bank of Miami Agreement, 1st United assumed all deposits (except certain brokered deposits) and borrowings, and acquired certain assets of TBOM. Assets acquired included $275.8 million in loans, and $12.8 million in other real estate owned based on TBOM’s carrying value and approximately $75 million in cash and investments. TBOM operated three banking centers in Miami-Dade County, Florida, and had 101 employees.

All of the TBOM loans acquired are covered by two loss share agreements (the “TBOM Loss Share Agreements”) between the FDIC and 1st United, which affords 1st United significant loss protection. Under the TBOM Loss Share Agreements, the FDIC will cover 80% of covered loan and other real estate losses for loans and other real estate owned acquired. The TBOM Loss Share Agreements also cover third party collection costs and 90 days of accrued interest on covered loans. The term for loss sharing and loss recoveries on residential real estate loans is ten years, while the term for loss sharing and loss recoveries on non-residential real estate loans is five years with respect to losses and eight years with respect to loss recoveries. The reimbursable losses from the FDIC are based on the book value of the relevant loan as determined by the FDIC at the date of the transaction. New loans made after that date are not covered by the TBOM Loss Share Agreements.

1st United received a $38 million net discount on the TBOM assets acquired. The acquisition was accounted for under the acquisition method of accounting in accordance with FASB ASC 805, “Business Combinations.” The purchased assets and assumed liabilities were recorded at their respective acquisition date fair values, and identifiable intangible assets were recorded at fair value. Fair values are preliminary and subject to refinement for up to one year after the closing date of the acquisition as new information relative to closing date fair values becomes available. We recorded an estimated receivable from the FDIC in the amount of $48.7 million as of December 17, 2010, which represents the fair value of the FDIC’s portion of the losses that are expected to be incurred and reimbursed to us. The TBOM Loss Share Agreements are subject to certain servicing procedures as specified in the agreements.

1st United did not acquire the real property, furniture or equipment of TBOM as part of the Bank of Miami Agreement. 1st United also had until March 18, 2011, to request the FDIC to repudiate all leases entered into by the former TBOM or the leases will be assumed. Two of the former TBOM banking facilities are leased and one is owned. Two of the locations are approximately one mile from existing 1st United facilities and one location has less than $3 million in deposits. Management determined that none of the TBOM branches would be retained, and requested the FDIC to repudiate the leases effective May 31, 2011, and anticipates the deposits to be serviced from existing 1st United banking centers.

On December 11, 2009, we announced that 1st United, our banking subsidiary, had entered into a purchase and assumption agreement (the “Republic Agreement”) with the FDIC, as receiver for Republic Federal Bank, National Association (“Republic”), Miami, Florida. According to the terms of the Republic Agreement, 1st United assumed all deposits (except certain brokered deposits) and borrowings, and acquired certain assets of Republic. Assets acquired included $238 million in loans based on Republic’s carrying value and $64.2 million in cash and investments. All of Republic’s repossessed or foreclosed real estate and substantially all non-performing loans were retained by the FDIC. Republic operated four banking

21


centers in Miami-Dade County, Florida, and had approximately 100 employees. We assumed approximately $349.6 million in deposits in this transaction.

All of the Republic loans acquired are covered by two loss share agreements (the “Republic Loss Share Agreements”) between the FDIC and 1st United, which affords 1st United significant loss protection. Under the Republic Loss Share Agreements, the FDIC will cover 80% of covered loan and foreclosed real estate losses up to $36 million and 95% of losses in excess of that amount. The Republic Loss Share Agreements also cover third party collection costs and 90 days of accrued interest on covered loans. The term for loss sharing and loss recoveries on residential real estate loans is ten years, while the term for loss sharing and loss recoveries on non-residential real estate loans is five years with respect to losses and eight years with respect to loss recoveries. The reimbursable losses from the FDIC are based on the book value of the relevant loan as determined by the FDIC at the date of the transaction. New loans made after that date are not covered by the Republic Loss Share Agreements.

1st United received a $34.2 million net discount on the Republic assets acquired. The acquisition was accounted for under the purchase method of accounting in accordance with FASB ASC 805, “Business Combinations.” The purchased assets and assumed liabilities were recorded at their respective acquisition date fair values, and identifiable intangible assets were recorded at fair value. We recorded an estimated receivable from the FDIC in the amount of $32.9 million as of December 11, 2009, which represents the fair value of the FDIC’s portion of the losses that are expected to be incurred and reimbursed to us. The Republic Loss Share Agreements are subject to certain servicing procedures as specified in the agreements.

1st United had until March 11, 2010, to request the FDIC to repudiate all leases entered into by the former Republic or the leases will have been assumed. Each of the four banking centers was leased. We assumed (in one case on a negotiated basis) three banking center leases and asked the FDIC to repudiate all other leases including the lease for the Aventura banking facility which was closed on April 23, 2010. This banking center was within two miles of our North Miami Beach banking facility and we determined closing this banking center would have minimal impact on our customers.

As a result of the acquisitions of Republic and TBOM, we had 18 banking centers (includes the three locations to be closed in May 2011) during the first quarter of 2011 vs. 16 banking centers for the first quarter of 2010 (includes one location closed in April 2010). The TBOM Loss Share Agreements and Republic Loss Share Agreements are collectively referred to as the “Loss Share Agreements”.

We follow a business plan that emphasizes the delivery of banking services to businesses and individuals in our geographic market who desire a high level of personalized service. The business plan includes business banking, professional market services, real estate lending and private banking, as well as full community banking products and services. The business plan also provides for an emphasis on our Small Business Administration lending program, as well as on small business lending. We focus on the building of a balanced loan and deposit portfolio, with emphasis on low cost liabilities and variable rate loans.

As is the case with banking institutions generally, our operations are materially and significantly influenced by general economic conditions and by related monetary and fiscal policies of financial institution regulatory agencies, including the Federal Reserve Bank and the FDIC. Deposit flows and costs of funds are influenced by interest rates on competing investments and general market rates of interest. Lending activities are affected by the demand for financing of real estate and other types of loans, which in turn is affected by the interest rates at which such financing may be offered and other factors affecting local demand and availability of funds. We face strong competition in the attraction of deposits (our primary source of lendable funds) and in the origination of loans.

Financial Overview

 

 

 

 

Net income for the quarter ended March 31, 2011 was $355,000 compared to net income of $346,000 for the quarter ended March 31, 2010.

 

 

 

 

Net interest margin increased to 4.90% for the quarter ended March 31, 2011, compared to 4.23% for the quarter ended March 31, 2010.

 

 

 

 

During the three months ended March 31, 2011, we incurred approximately $1.6 million (approximately $535,000 per month) in personnel related and facilities costs that related to the integration of TBOM which will be eliminated by May 31, 2011.

22


 

 

 

 

Non-performing assets at March 31, 2011 represented 2.64% of total assets compared to 2.21% at December 31, 2010. Non-performing assets not covered by the Loss Share Agreement represented 1.49% of total assets at March 31, 2011 compared to 1.64% at December 31, 2010.

 

 

 

 

The changes in operating results for the period ended March 31, 2011 when compared to the period ended March 31, 2010 were substantially a result of the TBOM acquisition.

OPERATING RESULTS

For the three month period ended March 31, 2011, we reported net income of $355,000 compared to net income of $346,000 for the three month period ended March 31, 2010. We have summarized the material variances between periods below.

Net Interest Income

Net interest income, which constitutes our principal source of income, represents the excess of interest income on interest-earning assets over interest expense on interest-bearing liabilities. Our principal interest-earning assets are federal funds sold, investment securities and loans. Our interest-bearing liabilities primarily consist of time deposits, interest-bearing checking accounts (“NOW accounts”), savings deposits and money market accounts. We invest the funds attracted by these interest-bearing liabilities in interest-earning assets. Accordingly, our net interest income depends upon the volume of average interest-earning assets and average interest-bearing liabilities and the interest rates earned or paid on them.

The following table reflects the components of net interest income, setting forth for the periods presented, (1) average assets, liabilities and shareholders’ equity, (2) interest income earned on interest-earning assets and interest paid on interest-bearing liabilities, (3) average yields earned on interest-earning assets and average rates paid on interest-bearing liabilities, (4) our net interest spread (i.e., the average yield on interest-earning assets less the average rate on interest-bearing liabilities) and (5) our net interest margin (i.e., the net yield on interest-earning assets).

Net interest earnings for the three-month periods ended March 31, 2011 and 2010 are reflected in the following table:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

March 31, 2011

 

March 31, 2010

 

 

 


 


 

(Dollars in thousands)

 

Average
Balance

 

Interest
Income/
Expense

 

Average
Rates
Earned/
Paid

 

Average
Balance

 

Interest
Income/
Expense

 

Average
Rates
Earned/
Paid

 

 

 


 


 


 


 


 


 

Assets

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Interest-earning assets

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Loans

 

$

840,573

 

$

13,717

 

 

6.62

%

$

677,729

 

$

10,542

 

 

6.31

%

Investment securities

 

 

99,191

 

 

890

 

 

3.59

%

 

87,067

 

 

834

 

 

3.83

%

Federal funds sold and securities purchased under resale agreements

 

 

132,875

 

 

74

 

 

0.73

%

 

141,109

 

 

133

 

 

0.38

%

 

 



 



 



 



 



 



 

Total interest-earning assets

 

 

1,072,639

 

 

14,681

 

 

5.61

%

 

905,905

 

 

11,509

 

 

5.15

%

 

 



 



 



 



 



 



 

Non interest-earning assets

 

 

189,229

 

 

 

 

 

 

 

 

131,560

 

 

 

 

 

 

 

Allowance for loan losses

 

 

(13,390

)

 

 

 

 

 

 

 

(13,374

)

 

 

 

 

 

 

 

 



 

 

 

 

 

 

 



 

 

 

 

 

 

 

Total assets

 

$

1,248,478

 

 

 

 

 

 

 

$

1,024,091

 

 

 

 

 

 

 

 

 



 

 

 

 

 

 

 



 

 

 

 

 

 

 

Liabilities and Shareholders’ Equity

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Interest-bearing liabilities

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

NOW accounts

 

$

122,676

 

 

58

 

 

0.19

%

$

106,091

 

$

50

 

 

0.19

%

Money market accounts

 

 

251,133

 

 

536

 

 

0.90

%

 

152,663

 

 

379

 

 

1.01

%

Savings accounts

 

 

40,457

 

 

55

 

 

0.55

%

 

35,970

 

 

69

 

 

0.77

%

Certificates of deposit

 

 

325,735

 

 

982

 

 

1.23

%

 

313,338

 

 

1,414

 

 

1.83

%

Fed Funds Purchased and Repos

 

 

14,282

 

 

6

 

 

0.17

%

 

16,956

 

 

7

 

 

0.17

%

Other borrowings

 

 

9,726

 

 

87

 

 

0.92

%

 

10,037

 

 

135

 

 

5.45

%

 

 



 



 



 



 



 



 

Total interest-bearing liabilities

 

 

764,009

 

 

1,724

 

 

0.93

%

 

635,055

 

 

2,054

 

 

1.31

%

 

 



 



 



 



 



 



 

Non interest-bearing liabilities

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Demand deposit accounts

 

 

300,199

 

 

 

 

 

 

 

 

209,512

 

 

 

 

 

 

 

Other liabilities

 

 

6,553

 

 

 

 

 

 

 

 

7,022

 

 

 

 

 

 

 

 

 



 

 

 

 

 

 

 



 

 

 

 

 

 

 

Total non interest-bearing liabilities

 

 

306,752

 

 

 

 

 

 

 

 

216,534

 

 

 

 

 

 

 

Shareholders’ equity

 

 

177,717

 

 

 

 

 

 

 

 

172,502

 

 

 

 

 

 

 

 

 



 

 

 

 

 

 

 



 

 

 

 

 

 

 

Total liabilities and shareholders’ equity

 

$

1,248,478

 

 

 

 

 

 

 

$

1,024,091

 

 

 

 

 

 

 

 

 



 

 

 

 

 

 

 



 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net interest spread

 

 

 

 

$

12,957

 

 

4.64

%

 

 

 

$

9,455

 

 

3.84

%

 

 

 

 

 



 

 

 

 

 

 

 



 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net interest on average earning assets - Margin

 

 

 

 

 

 

 

 

4.90

%

 

 

 

 

 

 

 

4.23

%

 

 

 

 

 

 

 

 



 

 

 

 

 

 

 



 

Our net interest income for the 1st quarter of 2011 was positively impacted by the increase in average earning assets of $166.7 million as compared to 2010 due primarily as a result of the loans and investments acquired in the TBOM transaction. Total loans increased by $123.2 million, or 17.8%, from $691.7 million at March 31, 2010 to $815 million at March 31, 2011. At

23


March 31, 2011, loans represented 63.5% of total assets and 78.5% of total deposits and customer repurchase agreements versus 65% of total assets and 79% of total deposits and customer repurchase agreements at March 31, 2010. Earnings for the current quarter were positively impacted by the accretion of discount of approximately $2.5 million related to loans acquired in the TBOM and Republic transactions. Included in this $2.5 million of accretion of discount was approximately $500,000 related to the disposition of assets acquired in the Republic transaction above the discounted purchase price of the asset (included in other income was an expense of approximately $400,000 related to a reduction of the FDIC receivable for the same assets).

Net interest income was $13.0 million for the three months ended March 31, 2011, as compared to $9.5 million for the three months ended March 31, 2010, an increase of $3.5 million or 37.0%. The increase resulted primarily from an increase in average earning assets of $166.7 million or 18.4% primarily due to the TBOM acquisition. In addition, the net interest margin (i.e., net interest income divided by average earning assets) increased 67 basis points from 4.23% during the three months ended March 31, 2010 to 4.90% during the three months ended March 31, 2011, mainly the result of an increase in the accretion of a loan discount of $2.5 million during the quarter on acquired loans which added approximately 95 basis points to the March 31, 2011 net interest margin. This compares to accretion of loan discount of $1.4 million during the quarter ended March 31, 2010, which added approximately 60 basis points to the March 31, 2010 margin. In addition, average loans as a percent of earning assets increased to 78% for the period ended March 31, 2011 compared to 75% for the period ended March 31, 2010. Also, our cost of funds was approximately 38 basis points lower for the quarter ended March 31, 2011, as compared to 2010, primarily as a result of lower rates in the renewal of time deposits.

Rate Volume Analysis

The following table sets forth certain information regarding changes in our interest income and interest expense for the three months ended March 31, 2011 as compared to the three months ended March 31, 2010. For each category of interest-earning assets and interest-bearing liabilities, information is provided on changes attributable to changes in interest rate and changes in the volume. Changes in both volume and rate have been allocated based on the proportionate absolute changes in each category.

Changes in interest earnings for the three-month periods ended March 31, 2011 and 2010:

 

 

 

 

 

 

 

 

 

 

 

(Dollars in thousands)

 

March 31, 2011 and 2010

 

 

 


 

 

 

Change in
Interest
Income/
Expense

 

Variance
Due to
Volume
Changes

 

Variance
Due to
Rate
Changes

 

 

 


 


 


 

Assets

 

 

 

 

 

 

 

 

 

 

Interest-earning assets

 

 

 

 

 

 

 

 

 

 

Loans

 

$

3,175

 

$

2,636

 

$

539

 

Investment securities

 

 

56

 

 

111

 

 

(55

)

Federal funds sold and securities purchased under resale agreements

 

 

(59

)

 

(7

)

 

(52

)

 

 



 



 



 

Total interest-earning assets

 

$

3,172

 

$

2,740

 

$

432

 

 

 

 

 

 

 

 

 

 

 

 

Liabilities

 

 

 

 

 

 

 

 

 

 

Interest-bearing liabilities

 

 

 

 

 

 

 

 

 

 

NOW accounts

 

 

8

 

 

8

 

 

 

 

Money market accounts

 

 

157

 

 

216

 

 

(59

)

Savings accounts

 

 

(14

)

 

8

 

 

(22

)

Certificates of deposit

 

 

(432

)

 

54

 

 

(486

)

Fed Funds Purchased and Repos

 

 

(1

)

 

(1

)

 

 

 

Other borrowings

 

 

(48

)

 

(4

)

 

(44

)

 

 



 



 



 

Total interest-bearing liabilities

 

 

(330

)

 

281

 

 

(611

)

 

 



 



 



 

 

 

 

 

 

 

 

 

 

 

 

Net interest spread

 

$

3,502

 

$

2,459

 

$

1,043

 

 

 



 



 



 

Non-interest Income, Non-interest Expense, Provision for Loan Losses, and Income Taxes

Non-interest income includes service charges on deposit accounts, gains or losses on sales of securities, and all other items of income, other than interest, resulting from our business activities. Non-interest income decreased by $172,000, or 19.0%, to $729,000 for the quarter ended March 31, 2011 when compared to the first quarter of 2010. The decrease was principally due to losses of $224,000 on the sale of OREO and an adjustment to indemnification asset receivable from the FDIC of $244,000, which was partially offset by higher service charge income on deposits.

24


Service charges increased from the three-month period ended March 31, 2010 by approximately $285,000 to $1,074,000 for the three month period ended March 31, 2011 primarily as a result of an increase in average deposits during 2011 of $131.9 million due to the TBOM acquisition.

The adjustment to FDIC indemnification asset during the quarter ended March 31, 2011 represented an approximate $400,000 expense due to the disposition of assets acquired in the Republic transaction at amounts above the discounted carrying value of the asset resulting in a lower actual loss on the asset than originally estimated. This expense was offset by the accretion of income of approximately $166,000 on the indemnification asset during the quarter.

During the quarter ended March 31, 2011, we had no activity on the sale of securities as compared to a loss of $10,000 for the quarter ended March 31, 2010.

During the quarter ended March 31, 2011, the Bank sold two OREO properties with a carrying value of $1.32 million and recorded a net loss of $224,000.

Non-interest expense is comprised of salaries, employee benefits, occupancy and equipment expense and other operating expenses incurred in supporting our various business activities. Non-interest expense increased by $2.6 million, or 31%, from $8,543,000 for the first quarter of 2010 to $11,191,000 for the current quarter.

The following summarizes the changes in non-interest expense accounts for the three months ended March 31, 2011 compared to the three months ended March 31, 2010:

 

 

 

 

 

 

 

 

 

 

 

 

 

Three months ended

 

 

 

 

 

 


 

 

 

 

(Dollars in thousands)

 

March 31,
2011

 

March 31,
2010

 

Difference

 

 

 


 


 


 

Salaries and employee benefits

 

$

5,242

 

$

4,080

 

$

1,162

 

Occupancy and equipment

 

 

2,052

 

 

1,696

 

 

356

 

Data processing

 

 

891

 

 

588

 

 

303

 

Telephone

 

 

231

 

 

183

 

 

48

 

Stationery and supplies

 

 

88

 

 

71

 

 

17

 

Amortization of Intangibles

 

 

129

 

 

114

 

 

15

 

Professional fees

 

 

513

 

 

383

 

 

130

 

Advertising

 

 

33

 

 

35

 

 

(2

)

Reorganization expenses

 

 

450

 

 

360

 

 

90

 

FDIC assessment

 

 

410

 

 

339

 

 

71

 

Other

 

 

1,152

 

 

694

 

 

458

 

 

 



 



 



 

Total non-interest expense

 

$

11,191

 

$

8,543

 

$

2,648

 

 

 



 



 



 

Salary and employee benefits increased by approximately $1,162,000 to $5,242,000 for the period ended March 31, 2011 as compared to the period ended March 31, 2010 of $4,080,000 primarily as a result of the acquisition of the TBOM operation, including three banking centers at the end of 2010. Included in this amount is approximately $700,000 (approximately $235,000 monthly) of personnel related costs that are expected to be eliminated by May 31, 2011 due to the integration of TBOM. Full time equivalents at the end of March 31, 2011 were 285 compared to 220 at March 31, 2010. Approximately 42 positions will be eliminated as part of the integration of TBOM.

Occupancy and Equipment increased by approximately $356,000 to $2,052,000 for the period ended March 31, 2011 as compared to the period ended March 31, 2010 of $1,696,000 primarily as a result of the acquisition of the TBOM operation, including three banking centers at the end of 2010. Approximately $400,000 (approximately $135,000 per month) of this increase will be eliminated effective July 1, 2011 as a result of the integration of the TBOM operation.

Data processing expenses increased by $303,000 primarily as a result of the TBOM acquisition to $891,000 for the quarter ended March 31, 2011. Approximately $120,000 ($40,000 per month) of the increase related to the TBOM acquisition is expected to be eliminated by May 31, 2011.

The reorganization expense of $450,000 in 2011 represents the accrual during the quarter of stay bonuses for employees whose positions have been eliminated by May 31, 2011 from the TBOM acquisition as compared to the $360,000 of similar expenses in 2010 related to the Republic acquisition. Approximately $300,000 will be recorded in the second quarter after which the stay bonus will be paid and no further accrual will be recorded.

25


Professional fees increased by $130,000 to $513,000 for the quarter ended March 31, 2011 primarily a result of carrying and resolution of costs related to the increase in non-performing assets during this period as compared to 2010.

The other increases in other expenses were primarily due to the TBOM acquisition.

We recorded a $1.9 million loan loss provision for the three months ended March 31, 2011, compared to $1.3 million for the three months ended March 31, 2010. The $1.9 million provision for the three months ended March 31, 2011 was primarily a result of the continuing deterioration of values of underlying collateral on classified assets.

We recorded an income tax expense of $240,000 for the three months ended March 31, 2011, compared to a $217,000 tax expense for the three months ended March 31, 2010.

FINANCIAL CONDITION

At March 31, 2011, our total assets were $1.26 billion and our net loans were $800.9 million or 63.5% of total assets. At December 31, 2010, our total assets were $1.27 billion and our net loans were $847.7 million or 67.0% of total assets. Net loans decreased by approximately $46.8 million to $800.9 million at March 31, 2011 due primarily to a number of significant pay-offs during the quarter and resolutions on acquired loans partially offset by new loan production.

At March 31, 2011, the allowance for loan losses was $14 million or 1.72% of total loans. At December 31, 2010, the allowance for loan losses was $13.1 million or 1.52% of total loans.

At March 31, 2011, our total deposits were $1.026 billion, a decrease of $38.6 million (3.6%) over December 31, 2010 of $1.064 billion. Non-interest bearing deposits represented 29% of total deposits at March 31, 2011 compared to 26% at December 31, 2010. The decrease in total deposits was primarily a result of approximately $60 million in wholesale time deposits acquired in the TBOM acquisition being liquidated during the quarter as anticipated, which were partially offset by an increase in transactional accounts for the same period.

Loan Quality

Management seeks to maintain a high quality loan portfolio through sound underwriting and lending practices. The banking industry and its regulators view elements of loan concentrations as a concern that can give rise to deterioration in loan quality if not managed effectively.

Loan concentrations are defined as amounts loaned to a number of borrowers engaged in similar activities, and/or located in the same region, sufficient to cause them to be similarly impacted by economic or other conditions. We, on a routine basis, monitor these concentrations in order to consider adjustments in our lending practices to reflect economic conditions, loan-to-deposit ratios, and industry trends. As of March 31, 2011 and December 31, 2010, there were no concentration of loans within any portfolio category to any group of borrowers engaged in similar activities or in a similar business (other than noted below) that exceeded 10% of total loans, except that as of such dates loans collateralized with mortgages on real estate represented 75.0% and 77.0%, respectively, of the total loan portfolio and were to a broad base of borrowers in varying activities, businesses, and locations.

At 1st United, we consider our focus to be in business banking. Through our business banking activities, we provide commercial purpose real estate secured loans as referenced above and also provide commercial, and residential real estate loans. Business banking also provides loan facilities ranging from commercial purpose non-real estate secured loans, to lines of credit, Export/Import Bank loans and SBA loans.

Commercial and industrial loans, unlike residential mortgage loans (which generally are made on the basis of the borrower’s ability to repay from employment and other income and which are collateralized by real property with values tending to be more readily ascertainable), are non-real estate secured commercial loans typically underwritten on the basis of the borrower’s ability to make repayment from the cash flow of its business and generally are collateralized by a variety of business assets, such as accounts receivable, equipment and inventory. As a result, the availability of funds for the repayment of commercial and industrial loans may be substantially dependent on the success of the business itself, which is subject to adverse conditions in the economy. Commercial and industrial loans are generally repaid from operational earnings, the collection of rent, or conversion of assets. Commercial and industrial loans can also entail certain additional risks when they involve larger loan balances to single borrowers or a related group of borrowers, resulting in a more concentrated loan portfolio. Further, the collateral underlying the loans may depreciate over time, cannot be appraised with as much precision as residential real estate, and may fluctuate in value based on the success of the business.

The following charts illustrate the number of loans in our loan portfolio as of March 31, 2011 and December 31, 2010.

26


Loan Portfolio as of March 31, 2011

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(dollars in thousands)

 

Total
Loans

 

Total

 

Percent of
Loan Portfolio

 

Percent of
Total Assets

 

 

 


 


 


 


 

Loan Types

 

 

 

 

 

 

 

 

 

 

 

 

 

Residential:

 

 

 

 

 

 

 

 

 

 

 

 

 

First mortgages

 

 

553

 

$

166,085

 

 

20.38

%

 

13.18

%

HELOCs and equity

 

 

273

 

 

55,021

 

 

6.75

%

 

4.37

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Commercial:

 

 

 

 

 

 

 

 

 

 

 

 

 

Secured – non-real estate

 

 

488

 

 

108,816

 

 

13.35

%

 

8.63

%

Secured – real estate

 

 

54

 

 

35,850

 

 

4.40

%

 

2.84

%

Unsecured

 

 

46

 

 

12,183

 

 

1.50

%

 

0.97

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Commercial Real Estate:

 

 

 

 

 

 

 

 

 

 

 

 

 

Owner occupied

 

 

185

 

 

151,356

 

 

18.57

%

 

12.01

%

Non-owner occupied

 

 

194

 

 

209,584

 

 

25.72

%

 

16.63

%

Multi-family

 

 

63

 

 

30,509

 

 

3.74

%

 

2.42

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Construction and Land Development:

 

 

 

 

 

 

 

 

 

 

 

 

 

Construction

 

 

1

 

 

579

 

 

0.07

%

 

0.05

%

Improved land

 

 

30

 

 

20,808

 

 

2.55

%

 

1.65

%

Unimproved land

 

 

14

 

 

12,453

 

 

1.53

%

 

0.99

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Consumer and other

 

 

195

 

 

11,636

 

 

1.44

%

 

0.92

%

 

 



 



 



 



 

Total March 31, 2011

 

 

2,096

 

$

814,880

 

 

100.00

%

 

64.66

%

 

 



 



 



 



 

Loan Portfolio as of December 31, 2010

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(Dollars in thousands)

 

Total
Loans

 

Total

 

Percent of
Loan Portfolio

 

Percent of
Total Assets

 

 

 


 


 


 


 

Loan Types

 

 

 

 

 

 

 

 

 

 

 

 

 

Residential:

 

 

 

 

 

 

 

 

 

 

 

 

 

First mortgages

 

 

575

 

$

172,598

 

 

20.04

%

 

13.61

%

HELOCs and equity

 

 

284

 

 

54,902

 

 

6.38

%

 

4.33

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Commercial:

 

 

 

 

 

 

 

 

 

 

 

 

 

Secured – non-real estate

 

 

478

 

 

106,802

 

 

12.41

%

 

8.43

%

Secured – real estate

 

 

54

 

 

37,012

 

 

4.30

%

 

2.92

%

Unsecured

 

 

99

 

 

22,872

 

 

2.66

%

 

1.80

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Commercial Real Estate:

 

 

 

 

 

 

 

 

 

 

 

 

 

Owner occupied

 

 

181

 

 

157,653

 

 

18.31

%

 

12.44

%

Non-owner occupied

 

 

204

 

 

224,033

 

 

26.02

%

 

17.67

%

Multi-family

 

 

62

 

 

37,916

 

 

4.40

%

 

2.99

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Construction and Land Development:

 

 

 

 

 

 

 

 

 

 

 

 

 

Construction

 

 

 

 

 

 

0.00

%

 

0.00

%

Improved land

 

 

36

 

 

21,757

 

 

2.53

%

 

1.72

%

Unimproved land

 

 

9

 

 

11,687

 

 

1.36

%

 

0.92

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Consumer and other

 

 

200

 

 

13,645

 

 

1.59

%

 

1.08

%

 

 



 



 



 



 

Total December 31, 2010

 

 

2,182

 

$

860,877

 

 

100.00

%

 

67.91

%

 

 



 



 



 



 

27


The following chart illustrates the composition of our construction and land development loan portfolio as of March 31, 2011 and year-end 2010.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

March 31, 2011

 

December 31, 2010

 

 

 


 


 

(Dollars in thousands)

 

Balance

 

% of
Total Loans

 

Balance

 

% of
Total Loans

 

 

 


 


 


 


 

Construction

 

 

 

 

 

 

 

 

 

 

 

 

 

Residential

 

$

579

 

 

0.07

%

$

 

 

0.00

%

Residential Spec

 

 

 

 

%

 

 

 

0.00

%

Commercial

 

 

 

 

%

 

 

 

0.00

%

Commercial Spec

 

 

 

 

%

 

 

 

0.00

%

Land Development

 

 

 

 

 

 

 

 

 

 

 

 

 

Residential

 

 

2,117

 

 

0.26

%

 

2,384

 

 

0.30

%

Residential Spec

 

 

11,358

 

 

1.39

%

 

12,997

 

 

1.50

%

Commercial

 

 

9,942

 

 

1.22

%

 

7,151

 

 

0.80

%

Commercial Spec

 

 

9,844

 

 

1.21

%

 

10,912

 

 

1.30

%

 

 












 

Total

 

$

33,840

 

 

4.15

%

$

33,444

 

 

3.90

%

 

 












 

Generally, interest on loans accrues and is credited to income based upon the principal balance outstanding. It is management’s policy to discontinue the accrual of interest income and classify a loan as non-accrual when principal or interest is past due 90 days or more unless, in the determination of management, the principal and interest on the loan are well collateralized and in the process of collection. Consumer installment loans are generally charged-off after 90 days of delinquency unless adequately collateralized and in the process of collection. Loans are not returned to accrual status until principal and interest payments are brought current and future payments appear reasonably certain. Interest accrued and unpaid at the time a loan is placed on non-accrual status is charged against interest income.

We have identified certain assets as non-performing and troubled debt restructuring assets. These assets include non-accruing loans, foreclosed real estate, loans that are contractually past due 90 days or more as to principal or interest payments and still accruing, and troubled debt restructurings. All troubled debt restructurings, non-accruing loans and loans accruing 90 days or more are considered impaired. These assets present more than the normal risk that we will be unable to eventually collect or realize their full carrying value.

Modifications of terms for our loans and their inclusion as troubled debt restructurings are based on individual facts and circumstances. Loan modifications that are included as troubled debt restructurings may involve reduction of the interest rate, extension of the term of the loan and/or forgiveness of principal, regardless of the period of the modification. Generally, we will allow interest rate reductions for a period of less than two years after which the loan reverts back to its original interest rate. Each of the loans included as troubled debt restructurings at March 31, 2011 had interest rate modifications from 6 months to 2 years before reverting back to the original interest rate. All of the loans were modified due to financial stress of the borrower. The following is a summary of troubled debt restructurings as of March 31, 2011, all of which were performing in accordance with the restructured terms.

 

 

 

 

 

(Dollars in thousands)

 

Loan Amount

 

 

 


 

Residential

 

$

2,640

 

Commercial Real Estate

 

 

16,300

 

Construction and Land

 

 

4,736

 

Commercial and Industrial

 

 

275

 

 

 



 

Total

 

$

23,951

 

 

 



 

At December 31, 2010 troubled debt restructurings totaled $14.7 million. The approximate $9.0 million increase at March 31, 2011 was primarily due to two commercial real estate loans restructured during the quarter. The average yield on these two loans as restructured is 5.12%.

We currently do not have any loans that were troubled debt restructurings that are included in non-accrual status at March 31, 2011. Loans retain their accrual status at the time of their modification. As a result, if a loan is on non-accrual at the time it is modified, it stays as non-accrual, and if a loan is on accrual at the time of the modification, it generally stays on accrual. A minimum of six payments of both principal and interest are required before we will put a loan back on accrual that was previously on non-accrual. The average yield on the loans classified as troubled debt restructurings was 4.8% as of March 31, 2011. Troubled debt restructuring loans are considered impaired.

28


At March 31, 2011, there were no loans that did not perform in accordance with the restructured terms.

During the quarter ended March 31, 2011, we had no loans on which we lowered the interest rate prior to maturity to competitively retain the loan. During the year ended December 31, 2010, we had approximately $2.6 million in commercial real estate and $650,000 in residential loans which we lowered the interest rate prior to maturity to competitively retain the loan. Due to the borrowers’ significant deposit balances and overall quality of the loans, these loans were not included in troubled debt restructurings. In addition, each of these borrowers was not considered to be in financial distress and the modified terms matched current market terms for borrowers with similar risk characteristics. We had no other loans where we extended the maturity or forgave principal that were not already included in troubled debt restructurings or otherwise impaired.

During the quarters ended March 31, 2011 and 2010, interest income not recognized on non-accrual loans (but would have been recognized if these loans were current) was approximately $185,000, and $64,400, respectively.

Our non-performing and troubled debt restructuring assets at March 31, 2011 and December 31, 2010 were as follows:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

March 31, 2011

 

December 31, 2010

 

 

 


 


 

(Dollars in thousands)

 

Assets Not
Subject to
Loss Share
Agreements

 

Assets
Subject to
Loss Share
Agreements

 

Total

 

Assets Not
Subject to
Loss Share
Agreements

 

Assets
Subject to
Loss Share
Agreements

 

Total

 














 

Non-Accrual Loans

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Residential

 

$

6,058

 

$

3,978

 

$

10,036

 

$

6,062

 

$

263

 

$

6,325

 

Home Equity Lines

 

 

1,635

 

 

 

 

1,635

 

 

1,638

 

 

 

 

1,638

 

Commercial Real Estate

 

 

5,893

 

 

2,472

 

 

8,365

 

 

8,381

 

 

183

 

 

8,564

 

Construction and Land Development

 

 

1,745

 

 

319

 

 

2,064

 

 

1,759

 

 

 

 

1,759

 

Commercial and Industrial

 

 

944

 

 

49

 

 

993

 

 

241

 

 

73

 

 

314

 

Other

 

 

 

 

 

 

 

 

289

 

 

 

 

289

 

 

 



 



 



 



 



 



 

Total

 

$

16,275

 

$

6,818

 

$

23,093

 

$

18,370

 

$

519

 

$

18,889

 

 

 



 



 



 



 



 



 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Accruing => 90 days past due

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Residential

 

$

 

$

 

$

 

$

 

$

 

$

 

Home Equity Lines

 

 

 

 

 

 

 

 

 

 

 

 

 

Commercial Real Estate

 

 

1,701

 

 

 

 

1,701

 

 

 

 

 

 

 

Construction and Land Development

 

 

 

 

 

 

 

 

 

 

 

 

 

Commercial and Industrial

 

 

 

 

 

 

 

 

 

 

 

 

 

Other

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 



 



 



 



 



 



 

Total

 

$

1,701

 

$

 

$

1,701

 

$

 

$

 

$

 

 

 



 



 



 



 



 



 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total non-accruing loans

 

$

16,275

 

$

6,818

 

$

23,093

 

$

18,370

 

$

519

 

$

18,889

 

Accruing => 90 days past due

 

 

1,701

 

 

 

 

1,701

 

 

 

 

 

 

 

Foreclosed real estate

 

 

841

 

 

7,654

 

 

8,495

 

 

2,449

 

 

6,636

 

 

9,085

 

 

 



 



 



 



 



 



 

Total non-performing assets

 

 

18,817

 

 

14,472

 

 

33,289

 

 

20,819

 

 

7,155

 

 

27,974

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Trouble debt restructured loans

 

 

23,676

 

 

 

 

23,676

 

 

14,672

 

 

 

 

14,672

 

 

 



 



 



 



 



 



 

Total non-performing assets and restructured loans

 

$

42,493

 

$

14,472

 

$

56,965

 

$

35,491

 

$

7,155

 

$

42,646

 

 

 



 



 



 



 



 



 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Ratios

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total non-accruing and accruing =>90 days past due to total loans

 

 

2.21

%

 

.83

%

 

3.04

%

 

2.13

%

 

.06

%

 

2.19

%

Total non-performing assets to total assets

 

 

1.49

%

 

1.15

%

 

2.64

%

 

1.65

%

 

.56

%

 

2.21

%

Total non-performing assets and troubled debt restructured loans to total assets

 

 

3.37

%

 

1.15

%

 

4.52

%

 

2.80

%

 

.56

%

 

3.36

%

29


Since December 31, 2010, for non-performing assets not subject to Loss Share Agreements, we had approximately $508,000 in non-accrual loans which were charged off, $3.3 million were paid off and approximately $2.0 million was added to non-accrual during the quarter.

Significant loans included in non-accrual loans not covered by Loss Share Agreements at March 31, 2011 include: $2.7 million loan, net of a $406,000 specific reserve secured by a single family home in Palm Beach County (appraised September 2010, for $3 million); $2.0 million loan, net of a $220,000 specific reserve, secured by new commercial office/warehouse property in Broward County, Florida (appraised December 2010 for $2.3 million); $1.3 million loan, net of a $390,000 specific reserve secured by commercial rental property in Broward County (appraised April 2011 for $1.6 million); $1.6 million loan secured by a single family home in Broward County (appraised March 2010, for $4.2 million); $1.0 million loan, net of a $500,000 specific reserve secured by commercial real estate in Palm Beach County (appraised December 2010, for $1.23 million); $1.1 million participation loan secured by land in Orlando, Florida (appraised September 2010, for $1.3 million for pro rata portion); $810,000 loan, net of a $90,000 specific reserve, secured by a home in Broward County (appraised September, 2010 for $900,000). The remaining non-accrual loans are each under $750,000. We have specific reserves (including those noted above) included in the allowance for loan losses of $3.8 million for probable incurred loan losses to non-accrual loans that are not covered by Loss Share Agreements. We continue to aggressively work to resolve each of these loans.

The following summarizes our past due loans for the quarter ending March 31, 2011 and year ending December 31, 2010:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

As of March 31, 2011
(Dollars in thousands)

 

Accruing 30 - 59

 

Accruing 60-89

 

Non-Accrual and
90 days and over past due
and accruing

 

Total

 

 

 


 


 


 


 

 

 

Number

 

Amount

 

Number

 

Amount

 

Number

 

Amount

 

Number

 

Amount

 

 

 


 


 


 


 


 


 


 


 

Residential:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

First mortgages

 

 

11

 

$

1,511

 

 

 

$

 

 

65

 

$

10,036

 

 

76

 

$

11,547

 

HELOCs and equity

 

 

1

 

 

28

 

 

 

 

 

 

4

 

 

1,635

 

 

5

 

 

1,663

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Commercial:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Secured – non-real estate

 

 

10

 

 

1,128

 

 

 

 

 

 

7

 

 

1,652

 

 

17

 

 

2,780

 

Secured – real estate

 

 

 

 

 

 

2

 

 

770

 

 

1

 

 

49

 

 

3

 

 

819

 

Unsecured

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Commercial Real Estate:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Owner occupied

 

 

2

 

 

384

 

 

 

 

 

 

14

 

 

2,529

 

 

16

 

 

2,913

 

Non-owner occupied

 

 

2

 

 

907

 

 

3

 

 

1,648

 

 

4

 

 

5,557

 

 

9

 

 

8,112

 

Multi-family

 

 

 

 

 

 

 

 

 

 

2

 

 

1,271

 

 

2

 

 

1,271

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Construction and Land Development:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Construction

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Improved land

 

 

1

 

 

398

 

 

 

 

 

 

4

 

 

937

 

 

5

 

 

1,335

 

Unimproved land

 

 

1

 

 

2,516

 

 

 

 

 

 

1

 

 

1,128

 

 

2

 

 

3,644

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Consumer and other

 

 

1

 

 

59

 

 

 

 

 

 

 

 

 

 

1

 

 

59

 

 

 



 



 



 



 



 



 



 



 

Total March 31, 2011

 

 

29

 

$

6,931

 

 

5

 

$

2,418

 

 

102

 

$

24,794

 

 

136

 

$

34,143

 

 

 



 



 



 



 



 



 



 



 

Included in the table above as of March 31, 2011 are loans in the accruing 30-59 category with a carrying value of $3.0 million, loans in the accruing 60-89 category with a carrying value of $0, and loans in the non-accrual and 90 day and over category with a carrying value of $6.5 million, which are subject to the Loss Share Agreements.

30


 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(Dollars in thousands)

 

Accruing 30 - 59

 

Accruing 60-89

 

Non-Accrual and
90 days and over past due
and accruing

 

Total

 

 

 


 


 


 


 

 

 

Number

 

Amount

 

Number

 

Amount

 

Number

 

Amount

 

Number

 

Amount

 

 

 


 


 


 


 


 


 


 


 

As of December 31, 2010

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Residential:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

First mortgages

 

 

11

 

$

2,280

 

 

1

 

$

116

 

 

7

 

$

6,325

 

 

19

 

$

8,721

 

HELOCs and equity

 

 

1

 

 

136

 

 

 

 

 

 

4

 

 

1,638

 

 

5

 

 

1,774

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Commercial:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Secured – non-real estate

 

 

6

 

 

1,095

 

 

2

 

 

185

 

 

5

 

 

264

 

 

13

 

 

1,544

 

Secured – real estate

 

 

 

 

 

 

 

 

 

 

1

 

 

50

 

 

1

 

 

50

 

Unsecured

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Commercial Real Estate:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Owner occupied

 

 

2

 

 

4,692

 

 

 

 

 

 

7

 

 

4,800

 

 

9

 

 

9,492

 

Non-owner occupied

 

 

4

 

 

1,029

 

 

3

 

 

2,635

 

 

3

 

 

3,764

 

 

10

 

 

7,428

 

Multi-family

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Construction and Land Development:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Construction

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Improved land

 

 

 

 

 

 

 

 

 

 

 

2

 

 

631

 

 

2

 

 

631

 

Unimproved land

 

 

 

 

 

 

 

 

 

 

 

1

 

 

1,128

 

 

1

 

 

1,128

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Consumer and other

 

 

 

 

 

 

 

 

 

 

 

1

 

 

289

 

 

1

 

 

289

 

 

 



 



 



 



 



 



 



 



 

Total December 31, 2010

 

 

24

 

$

9,232

 

 

6

 

$

2,936

 

 

31

 

$

18,889

 

 

61

 

$

31,057

 

 

 



 



 



 



 



 



 



 



 

Included in the table above as of December 31, 2010 in the accruing 30-59 category are loans with a carrying value of $3.2 million, accruing 60 - 89 category are loans with a carrying value of $475,000, and in the non-accrual and 90 day and over category are loans with a carrying value of $519,000, which are subject to the Loss Share Agreements.

Certain Acquired Loans: As part of business acquisitions, the Company acquires certain loans that have shown evidence of credit deterioration since origination. These acquired loans are recorded at the allocated fair value, such that there is no carryover of the seller’s allowance for loan losses. Such acquired loans are accounted for individually. The Company estimates the amount and timing of expected cash flows for each purchased loan, and the expected cash flows in excess of the allocated fair value is recorded as interest income over the remaining life of the loan (accretable yield). The excess of the loan’s contractual principal and interest over expected cash flows is not recorded (non-accretable difference). Over the life of the loan, expected cash flows continue to be estimated. If the present value of expected cash flows is less than the carrying amount, a loss is recorded through the allowance for loan losses. If the present value of expected cash flows is greater than the carrying amount, it is recognized as part of future interest income.

We evaluated each of the acquired loans under ASC 310-30 to determine whether (1) there was evidence of credit deterioration since origination, and (2) it was probable that we would not collect all of the contractually required payment receivable. We determined the best indicator of such evidence was an individual loan’s payment status and/or whether a loan was determined to be classified by us based on our review of each individual loan. Therefore, generally each individual loan that should have been or was on nonaccrual at the acquisition date, loans contractually past due 60 days or more, and each individual loan that was classified by us were included subject to ASC 310-30. These loans were recorded at the discounted expected cash flows of the individual loan.

Loans which were evaluated under ASC 310-30, and where the timing and amount of cash flows can be reasonably estimated, were accounted for in accordance with ASC 310-30-35. The Company applies the interest method for these loans under this subtopic and the loans are excluded from non-accrual. If at acquisition we identified loans that we could not reasonably estimate cash flows or if subsequent to acquisition such cash flows could not be estimated, such loans would be included in non-accrual.

31


Impaired Loans

The following tables present loans individually evaluated for impairment by class of loan as of March 31, 2011 and December 31, 2010.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

March 31, 2011

 

Impaired Loans – With Allowance

 

Impaired Loans – With no
Allowance

 

 

 


 


 

(Dollars in thousands)

 

Unpaid
Principal

 

Recorded
Investment

 

Allowance for
Loan Losses
Allocated

 

Unpaid
Principal

 

Recorded
Investment

 


















Residential:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

First mortgages

 

$

7,233

 

$

7,233

 

$

1,220

 

$

5,429

 

$

5,429

 

HELOCs and equity

 

 

1,642

 

 

1,510

 

 

647

 

 

138

 

 

138

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Commercial:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Secured – non-real estate

 

 

891

 

 

891

 

 

757

 

 

49

 

 

49

 

Secured – real estate

 

 

 

 

 

 

 

 

49

 

 

49

 

Unsecured

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Commercial Real Estate:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Owner occupied

 

 

8,973

 

 

8,973

 

 

1,284

 

 

1,241

 

 

1,241

 

Non-owner occupied

 

 

7,303

 

 

6,303

 

 

1,162

 

 

7,801

 

 

7,801

 

Multi-family

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Construction and Land Development:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Construction

 

 

 

 

 

 

 

 

 

 

 

Improved land

 

 

6,938

 

 

5,354

 

 

824

 

 

319

 

 

319

 

Unimproved land

 

 

 

 

 

 

 

 

1,557

 

 

1,128

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Consumer and other

 

 

 

 

 

 

 

 

 

 

 

 

 



 



 



 



 



 

Total March 31, 2011

 

$

32,980

 

$

30,264

 

$

5,894

 

$

16,583

 

$

16,154

 

 

 



 



 



 



 



 


 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

December 31, 2010

 

Impaired Loans – With Allowance

 

Impaired Loans – With
no Allowance

 

 

 


 


 

(Dollars in thousands)

 

Unpaid
Principal

 

Recorded
Investment

 

Allowance for
Loan Losses
Allocated

 

Unpaid
Principal

 

Recorded
Investment

 


















Residential:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

First mortgages

 

$

7,021

 

$

7,021

 

$

1,219

 

$

1,939

 

$

1,939

 

HELOCs and equity

 

 

1,513

 

 

1,513

 

 

650

 

 

139

 

 

139

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Commercial:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Secured – non-real estate

 

 

311

 

 

311

 

 

210

 

 

73

 

 

73

 

Secured – real estate

 

 

50

 

 

50

 

 

50

 

 

 

 

 

Unsecured

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Commercial Real Estate:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Owner occupied

 

 

6,124

 

 

6,124

 

 

1,027

 

 

1,455

 

 

1,455

 

Non-owner occupied

 

 

6,512

 

 

6,512

 

 

685

 

 

1,629

 

 

1,629

 

Multi-family

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Construction and Land Development:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Construction

 

 

 

 

 

 

 

 

 

 

 

Improved land

 

 

6,965

 

 

5,382

 

 

823

 

 

 

 

 

Unimproved land

 

 

 

 

 

 

 

 

1,557

 

 

1,128

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Consumer and other

 

 

289

 

 

289

 

 

108

 

 

 

 

 

 

 



 



 



 



 



 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total December 31, 2010

 

$

28,785

 

$

27,202

 

$

4,772

 

$

6,792

 

$

6,363

 

 

 



 



 



 



 



 

32


Average of impaired loans and related interest income for three months ended March 31, 2011 were as follows (dollars in thousands):

 

 

 

 

 

Residential:

 

 

 

 

Average of impaired loans

 

$

10,941

 

Interest income recognized during impairment

 

 

159

 

Cash-basis interest income recognized

 

 

107

 

 

 

 

 

 

Commercial:

 

 

 

 

Average of impaired loans

 

 

1,100

 

Interest income recognized during impairment

 

 

3

 

Cash-basis interest income recognized

 

 

2

 

 

 

 

 

 

Commercial Real Estate:

 

 

 

 

Average of impaired loans

 

 

19,493

 

Interest income recognized during impairment

 

 

596

 

Cash-basis interest income recognized

 

 

225

 

 

 

 

 

 

Construction and Land Development:

 

 

 

 

Average of impaired loans

 

 

6,578

 

Interest income recognized during impairment

 

 

105

 

Cash-basis interest income recognized

 

 

46

 

 

 

 

 

 

Consumer and other:

 

 

 

 

Average of impaired loans

 

 

 

Interest income recognized during impairment

 

 

 

Cash-basis interest income recognized

 

 

 

 

 

 

 

 

Total:

 

 

 

 

Average of impaired loans

 

 

38,112

 

Interest income recognized during impairment

 

 

863

 

Cash-basis interest income recognized

 

 

380

 

Allowance for Loan Losses

At March 31, 2011, the allowance for loan losses was $14 million or 1.72% of total loans. At December 31, 2010, the allowance for loan losses was $13.1 million or 1.52% of total loans. In originating loans, we recognize that credit losses will be experienced and the risk of loss will vary with, among other things: general economic conditions; the type of loan being made; the creditworthiness of the borrower over the term of the loan; and, in the case of a collateralized loan, the quality of the collateral for such a loan. The allowance for loan losses represents our estimate of the allowance necessary to provide for probable incurred losses in the loan portfolio. In making this determination, we analyze the ultimate collectability of the loans in our portfolio, feedback provided by internal loan staff, the independent loan review function and information provided by examinations performed by regulatory agencies.

The allowance for loan losses is evaluated at the portfolio segment level using the same methodology for each segment. The historical net losses for a rolling two year period is the basis for the general reserve for each segment which is adjusted for each of the same qualitative factors (i.e., nature and volume of portfolio, economic and business conditions, classification, past due and non accrual trends) evaluated by each individual segment. Impaired loans and related specific reserves for each of the segments are also evaluated using the same methodology for each segment.

Charge-offs of loans are made by portfolio segment at the time that the collection of the full principal, in management’s judgment, is doubtful. This methodology for determining charge-offs is consistently applied to each segment.

On a quarterly basis, management reviews the adequacy of the allowance for loan losses. Commercial credits are graded by risk management and the loan review function validates the assigned credit risk grades. In the event that a loan is downgraded, it is included in the allowance analysis at the lower grade. To establish the appropriate level of the allowance, we review and classify a sample of loans (including all impaired and nonperforming loans) as to potential loss exposure.

Our analysis of the allowance for loan losses consists of three components: (i) specific credit allocation established for expected losses resulting from analysis developed through specific credit allocations on individual loans for which the recorded investment in the loan exceeds the fair value; (ii) general portfolio allocation based on historical loan loss

33


experience for each loan category; and (iii) qualitative reserves based on general economic conditions as well as specific economic factors in the markets in which we operate.

The specific credit allocation component of the allowance for loan losses is based on a regular analysis of loans where the internal credit rating is at or below the substandard classification and the loan is determined to be impaired as determined by management. The amount of impairment, if any, is determined based on either the present value of expected future cash flows discounted at the loan’s effective interest rate, the market price of the loan, or, if the loan is collateral dependent, the fair value of the underlying collateral less cost of sale. A loan may also be classified as substandard and not be classified as impaired by management. A loan may be classified as substandard by management if, for example, the primary source of repayment is insufficient, the financial condition of the borrower and/or guarantors has deteriorated or there are chronic delinquencies.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(Dollars in thousands)

 

Total

 

Pass Credits

 

Special
Mention

 

Substandard

 

Doubtful

 

 

 


 


 


 


 


 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

March 31, 2011

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Residential:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

First mortgages

 

$

166,085

 

$

139,672

 

$

13,623

 

$

12,790

 

$

 

HELOCs and equity

 

 

55,021

 

 

46,594

 

 

942

 

 

7,485

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Commercial:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Secured – non-real estate

 

 

108,816

 

 

102,371

 

 

3,339

 

 

3,106

 

 

 

Secured – real estate

 

 

35,850

 

 

34,316

 

 

477

 

 

1,057

 

 

 

Unsecured

 

 

12,183

 

 

12,183

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Commercial Real Estate:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Owner occupied

 

 

151,356

 

 

131,698

 

 

8,158

 

 

11,500

 

 

 

Non-owner occupied

 

 

209,584

 

 

185,006

 

 

9,627

 

 

14,951

 

 

 

Multi-family

 

 

30,509

 

 

30,509

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Construction and Land Development:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Construction

 

 

579

 

 

579

 

 

 

 

 

 

 

Improved land

 

 

20,808

 

 

13,893

 

 

1,242

 

 

5,673

 

 

 

Unimproved land

 

 

12,453

 

 

8,810

 

 

 

 

3,643

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Consumer and other

 

 

11,636

 

 

11,609

 

 

 

 

27

 

 

 

 

 



 



 



 



 



 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total March 31, 2011

 

$

814,880

 

$

717,240

 

$

37,408

 

$

60,232

 

$

 

 

 



 



 



 



 



 

34


 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(Dollars in thousands)

 

Total

 

Pass Credits

 

Special
Mention

 

Substandard

 

Doubtful

 

 

 


 


 


 


 


 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

December 31, 2010

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Residential:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

First mortgages

 

$

172,598

 

$

157,169

 

$

6,332

 

$

9,097

 

$

 

HELOCs and equity

 

 

54,902

 

 

50,803

 

 

1,764

 

 

2,335

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Commercial:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Secured – non-real estate

 

 

106,801

 

 

103,374

 

 

757

 

 

2,670

 

 

 

Secured – real estate

 

 

37,012

 

 

36,962

 

 

 

 

50

 

 

 

Unsecured

 

 

22,872

 

 

22,420

 

 

 

 

452

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Commercial Real Estate:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Owner occupied

 

 

157,653

 

 

138,048

 

 

6,636

 

 

12,969

 

 

 

Non-owner occupied

 

 

224,033

 

 

201,021

 

 

5,955

 

 

17,057

 

 

 

Multi-family

 

 

37,916

 

 

37,916

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Construction and Land Development:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Construction

 

 

 

 

 

 

 

 

 

 

 

Improved land

 

 

21,758

 

 

15,292

 

 

1,084

 

 

5,382

 

 

 

Unimproved land

 

 

11,687

 

 

8,044

 

 

 

 

3,643

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Consumer and other

 

 

13,645

 

 

13,317

 

 

39

 

 

289

 

 

 

 

 



 



 



 



 



 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total December 31, 2010

 

$

860,877

 

$

784,366

 

$

22,567

 

$

53,944

 

$

 

 

 



 



 



 



 



 

All non-accrual loans and substantially all troubled debt restructurings are included in substandard loans.

The total of substandard loans, which include all non-accrual loans, totaled $60.2 million at March 31, 2011 (of which $6.9 million is subject to the Loss Share Agreements) and $53.9 million at December 31, 2010 (of which $609,000 is subject to the Loss Share Agreements). The increase since December 31, 2010 is primarily due to the addition of $4.5 million in non-accrual loans acquired from TBOM which are covered by the Loss Share Agreements. In addition, at March 31, 2011, we identified approximately $46.8 million (or 5.7% of total loans) in loans we have classified as impaired which are included in our substandard classification. This compares to $33.6 million or 3.9% of total loans at December 31, 2010. The increase was primarily due to an increase in troubled debt restructurings during the period of approximately $9.0 million and the addition of approximately $6.3 million in non-accrual loans covered by the Loss Share Agreements during the quarter. At March 31, 2011 and December 31, 2010, the specific credit allocation included in the allowance for loan losses for loans impaired was approximately $5.9 million and $4.8 million, respectively. All loans classified as substandard that are collateralized by real estate are re-appraised at a minimum on an annual basis. The specific credit allocation for loans impaired is adjusted based on the new appraisals.

We also have loans classified as Special Mention. We classify loans as Special Mention if there are declining trends in the borrower’s business, questions regarding condition or value of the collateral, or other weaknesses. At March 31, 2011, we had $37.4 million (4.6% of outstanding loans), which includes $3.2 million in loans subject to Loss Share Agreements, which compares to $22.6 million (2.6% of outstanding loans), none of which were subject to Loss Share Agreements, at December 31, 2010. If there is further deterioration on these loans, they may be classified substandard in the future, and depending on the fair value of the loan a specific credit allocation may be needed resulting in increased provisions for loan losses.

We determine the general portfolio allocation component of the allowance for loan losses statistically using a loss analysis that examines historical loan loss experience adjusted for current environmental factors. We perform the loss analysis quarterly and update loss factors regularly based on actual experience. The general portfolio allocation element of the allowance for loan losses also includes consideration of the amounts necessary for concentrations and changes in portfolio mix and volume.

We base the allowance for loan losses on estimates and ultimate realized losses may vary from current estimates. We review these estimates quarterly, and as adjustments, either positive or negative, become necessary, we make a corresponding

35


increase or decrease in the provision for loan losses. The methodology used to determine the adequacy of the allowance for loan losses is consistent with prior years and there were no reallocations.

Management remains watchful of credit quality issues. Should the economic climate deteriorate from current levels, borrowers may experience difficulty repaying loans and the level of non-performing loans, charge-offs and delinquencies could rise and require further increases in loan loss provisions.

Activity in the allowance for loan losses for the three months ended March 31, 2011 was as follows:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(Dollars in thousands)

 

Commercial

 

Residential
Real Estate

 

Commercial
Real Estate

 

Construction
and Land
Development

 

Consumer
and Other

 

Total

 

 

 


 


 


 


 


 


 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Beginning balance, January 1, 2011

 

$

3,832

 

$

3,026

 

$

4,145

 

$

1,895

 

$

152

 

$

13,050

 

Provisions for loan losses

 

 

(270

)

 

1,202

 

 

589

 

 

359

 

 

20

 

 

1,900

 

Loans charged off

 

 

(200

)

 

(140

)

 

(539

)

 

 

 

(133

)

 

(1,012

)

Recoveries

 

 

50

 

 

 

 

11

 

 

33

 

 

 

 

94

 

 

 



 



 



 



 



 



 

Ending Balance

 

$

3,412

 

$

4,088

 

$

4,206

 

$

2,287

 

$

39

 

$

14,032

 

 

 



 



 



 



 



 



 

Activity in the allowance for loan losses for the three months ended March 31, 2010 was as follows (dollars in thousands):

 

 

 

 

 

Beginning balance, January 1, 2010

 

$

13,282

 

Provision for loan losses

 

 

1,250

 

Loans charged-off

 

 

(1,020

)

Recoveries

 

 

 

 

 



 

 

 

 

 

 

Ending balance

 

$

13,512

 

 

 



 

          Allowance for Loan Losses Allocation

As of March 31, 2011 (dollars in thousands):

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Commercial

 

Residential
Real Estate

 

Commercial
Real Estate

 

Construction
and Land
Development

 

Consumer
and Other

 

Total

 

 

 


 


 


 


 


 


 

Specific Reserves:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Impaired loans

 

$

757

 

$

1,867

 

$

2,126

 

$

824

 

$

 

$

5,574

 

Purchase credit impaired loans

 

 

 

 

 

 

320

 

 

 

 

 

 

320

 

 

 



 



 



 



 



 



 

Total specific reserves

 

 

757

 

 

1,867

 

 

2,446

 

 

824

 

 

 

 

5,894

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

General reserves

 

 

2,655

 

 

2,221

 

 

1,760

 

 

1,463

 

 

39

 

 

8,138

 

 

 



 



 



 



 



 



 

Total

 

$

3,412

 

$

4,088

 

$

4,206

 

$

2,287

 

$

39

 

$

14,032

 

 

 



 



 



 



 



 



 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Loans individually evaluated for impairment

 

$

989

 

$

14,310

 

$

24,318

 

$

6,801

 

$

 

$

46,418

 

Purchase credit impaired loans

 

 

1,395

 

 

26,047

 

 

57,562

 

 

4,925

 

 

 

 

89,929

 

Loans collectively evaluated for impairment

 

 

118,615

 

 

180,749

 

 

345,419

 

 

22,114

 

 

11,636

 

 

678,533

 

 

 



 



 



 



 



 



 

 

 

$

120,999

 

$

221,106

 

$

427,299

 

$

33,840

 

$

11,636

 

$

814,880

 

 

 



 



 



 



 



 



 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Allowance as percent of loans per category as of March 31, 2011

 

 

2.82

%

 

1.85

%

 

0.98

%

 

6.76

%

 

0.33

%

 

1.72

%

 

 



 



 



 



 



 



 

36


As of December 31, 2010 (dollars in thousands):

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Commercial

 

Residential
Real Estate

 

Commercial
Real Estate

 

Construction
and Land
Development

 

Consumer
and Other

 

Total

 

 

 


 


 


 


 


 


 

Specific Reserves:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Impaired loans

 

$

260

 

$

1,781

 

$

1,497

 

$

822

 

$

108

 

$

4,468

 

Purchase credit impaired loans

 

 

 

 

89

 

 

215

 

 

 

 

 

 

304

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total specific reserves

 

 

260

 

 

1,870

 

 

1,712

 

 

822

 

 

108

 

 

4,772

 

General reserves

 

 

3,572

 

 

1,156

 

 

2,433

 

 

1,073

 

 

44

 

 

8,278

 

 

 



 



 



 



 



 



 

Total

 

$

3,832

 

$

3,026

 

$

4,145

 

$

1,895

 

$

152

 

$

13,050

 

 

 



 



 



 



 



 



 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Loans individually evaluated for impairment

 

$

434

 

$

10,612

 

$

15,720

 

$

6,510

 

$

289

 

$

33,565

 

Purchase credit impaired loans

 

 

2,856

 

 

24,977

 

 

50,122

 

 

3,880

 

 

1,129

 

 

82,964

 

Loans collectively evaluated for impairment

 

 

126,383

 

 

191,911

 

 

390,773

 

 

23,054

 

 

12,227

 

 

744,348

 

 

 



 



 



 



 



 



 

 

 

$

129,673

 

$

227,500

 

$

456,615

 

$

33,444

 

$

13,645

 

$

860,877

 

 

 



 



 



 



 



 



 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Allowance as percent of loans per category as of December 31, 2010

 

 

2.96

%

 

1.33

%

 

0.91

%

 

5.67

%

 

1.11

%

 

1.52

%

 

 



 



 



 



 



 



 

Other Real Estate Owned

Real estate acquired by us as a result of foreclosure or by deed in lieu of foreclosure is classified as other real estate owned (“OREO”). OREO properties are recorded at the lower of cost or fair value less estimated selling costs, and the estimated loss, if any, is charged to the allowance for credit losses at the time it is transferred to OREO. Further write-downs in OREO are recorded at the time management believes additional deterioration in value has occurred and are charged to non-interest expense. At March 31, 2011, we had $8.5 million of OREO property, of which $7.7 million were a result of the TBOM acquisition and are covered under the TBOM Loss Share Agreement. At December 31, 2010, we had $9.1 million of OREO property, of which $6.6 million were a result of the TBOM acquisition and are covered under the TBOM Loss Share Agreements.

The following is a summary of other real estate owned as of March 31, 2011 and December 31, 2010:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

March 31,
2011

 

December 31,
2010

 

 

 


 


 

 

 

Assets Not
Subject
to Loss Share
Agreements

 

Assets Subject to
Loss Share
Agreements

 

Total

 

Assets Not
Subject
to Loss Share
Agreements

 

Assets Subject
to Loss Share
Agreements

 

Total

 

 

 


 


 


 


 


 


 

Commercial Real Estate

 

$

841

 

$

5,496

 

$

6,337

 

$

2,147

 

$

5,461

 

$

7,608

 

Residential

 

 

 

 

2,158

 

 

2,158

 

 

302

 

 

1,175

 

 

1,477

 

 

 



 



 



 



 



 



 

Total

 

$

841

 

$

7,654

 

$

8,495

 

$

2,449

 

$

6,636

 

$

9,085

 

 

 



 



 



 



 



 



 

Investment Securities

We manage our consolidated securities portfolio, which represented 9.2% of our average earning asset base for the quarter ended March 31, 2011, as compared to 9.8% at year ended December 31, 2010, to minimize interest rate risk, maintain sufficient liquidity, and maximize return. The portfolio includes callable agency bonds, US Treasury Securities, mortgage-backed securities, and collateralized mortgage obligations. Corporate obligations consist of investment grade obligations of public corporations. Our financial planning anticipates income streams generated by the securities portfolio based on normal maturity, pay downs and reinvestment.

37


Deposits

Total deposits decreased by $38.6 million from December 31, 2010 to total deposits of $1.026 billion at March 31, 2011, due primarily to liquidation of approximately $60.0 million of wholesale deposits acquired in the TBOM acquisition which was partially offset by growth in transaction accounts during the quarter. Broker deposits at March 31, 2011 were $300,000, or less than 0.03% of deposits. At March 31, 2011, non-interest bearing deposits represented approximately 29.0% of deposits compared to 26.0% at December 31, 2010.

CAPITAL RESOURCES

We are subject to regulatory capital requirements administered by federal banking agencies. Capital adequacy guidelines and prompt corrective action regulations involve quantitative measures of assets, liabilities, and certain off-balance-sheet items calculated under regulatory accounting practices. Capital amounts and classifications are also subject to qualitative judgments by regulators. Failure to meet capital requirements can initiate regulatory action.

The Federal banking regulatory authorities have adopted certain “prompt corrective action” rules with respect to depository institutions. The rules establish five capital tiers: “well capitalized,” “adequately capitalized,” “undercapitalized,” “significantly undercapitalized,” and “critically undercapitalized.” The various federal banking regulatory agencies have adopted regulations to implement the capital rules by, among other things, defining the relevant capital measures for the five capital categories. An institution is deemed to be “well capitalized” if it has a total risk-based capital ratio of 10% or greater, a Tier 1 risk-based capital ratio of 6% or greater, and a Tier 1 leverage ratio of 5% or greater and is not subject to a regulatory order, agreement, or directive to meet and maintain a specific capital level. At March 31, 2011, 1st United Bank met the capital ratios of a “well capitalized” financial institution with a total risk-based capital ratio of 20.89%, a Tier 1 risk-based capital ratio of 18.80%, and a Tier 1 leverage ratio of 8.83%. Depository institutions which fall below the “adequately capitalized” category generally are prohibited from making any capital distribution, are subject to growth limitations, and are required to submit a capital restoration plan. There are a number of requirements and restrictions that may be imposed on institutions treated as “significantly undercapitalized” and, if the institution is “critically undercapitalized,” the banking regulatory agencies have the right to appoint a receiver or conservator.

The following represents 1st United Bancorp’s and 1st United Bank’s regulatory Capital Ratios for the respective periods:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Actual

 

Minimum for
Capital Adequacy

 

Minimum for
Well Capitalized

 

 

 


 


 


 

(Dollars in thousands)

 

Amount

 

%

 

Amount

 

%

 

Amount

 

%

 

 

 


 


 


 


 


 


 

As of March 31, 2011

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total Capital to risk-weighted assets

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Consolidated

 

$

168,247

 

 

29.78

%

$

45,195

 

 

8.00

%

$

56,494

 

 

10.00

%

1st United

 

 

117,062

 

 

20.89

%

 

44,828

 

 

8.00

%

 

56,035

 

 

10.00

%

Tier I capital to risk-weighted assets

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Consolidated

 

 

156,474

 

 

27.70

%

 

22,598

 

 

4.00

%

 

33,897

 

 

6.00

%

1st United

 

 

105,352

 

 

18.80

%

 

22,414

 

 

4.00

%

 

33,621

 

 

6.00

%

Tier I capital to total average assets

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Consolidated

 

 

156,474

 

 

13.05

%

 

47,950

 

 

4.00

%

 

59,937

 

 

5.00

%

1st United

 

 

105,352

 

 

8.83

%

 

47,745

 

 

4.00

%

 

59,681

 

 

5.00

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

As of December 31, 2010

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total Capital to risk-weighted assets

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Consolidated

 

$

137,282

 

 

23.71

%

$

45,765

 

 

8.00

%

$

57,206

 

 

10.00

%

1st United

 

 

116,571

 

 

20.26

%

 

45,415

 

 

8.00

%

 

56,769

 

 

10.00

%

Tier I capital to risk-weighted assets

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Consolidated

 

 

125,221

 

 

21.62

%

 

22,883

 

 

4.00

%

 

34,324

 

 

6.00

%

1st United

 

 

104,564

 

 

18.18

%

 

22,707

 

 

4.00

%

 

34,061

 

 

6.00

%

Tier I capital to total average assets

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Consolidated

 

 

125,221

 

 

11.78

%

 

42,526

 

 

4.00

%

 

53,157

 

 

5.00

%

1st United

 

 

104,564

 

 

9.90

%

 

42,237

 

 

4.00

%

 

52,769

 

 

5.00

%

During the quarter ended March 31, 2011, Bancorp issued 5,000,000 (the “Offering”) shares of common stock at $6.50 per share. The total proceeds of the Offering were $30,458 (net of offering costs of $2,042). On April 12, 2011 the underwriter

38


exercised their full over-allotment option and 750,000 additional shares were issued at $6.50 for total additional proceeds of approximately $4,531 (net of offering costs of $344).

CASH FLOWS AND LIQUIDITY

Our primary sources of cash are deposit growth, maturities and amortization of loans and investment securities, operations, and borrowing. We use cash from these and other sources to first fund loan growth. Any remaining cash is used primarily to purchase a combination of short, intermediate, and longer-term investment securities.

We manage our liquidity position with the objective of maintaining sufficient funds to respond to the needs of depositors and borrowers and to take advantage of earnings enhancement opportunities. In addition to the normal inflow of funds from core-deposit growth together with repayments and maturities of loans and investments, we use other short-term funding sources such as brokered time deposits, securities sold under agreements to repurchase, overnight federal funds purchased from correspondent banks and the acceptance of short-term deposits from public entities, and Federal Home Loan Bank advances.

We monitor, stress test and manage our liquidity position on several bases, which vary depending upon the time period. As the time period is stress test expanded, other data is factored in, including estimated loan funding requirements, estimated loan payoffs, investment portfolio maturities or calls, and anticipated depository buildups or runoffs.

We classify all of our securities as available-for-sale to maintain significant liquidity. Our liquidity position is further enhanced by structuring our loan portfolio interest payments as monthly, complemented by retail credit and residential mortgage loans in our loan portfolio, resulting in a steady stream of loan repayments. In managing our investment portfolio, we provide for staggered maturities so that cash flows are provided as such investments mature.

Our securities portfolio, federal funds sold, and cash and due from bank deposit balances serve as primary sources of liquidity for 1st United. At March 31, 2011, we had approximately $154.3 million in cash and cash equivalents and securities not pledged of $89.2 million.

At March 31, 2011, we had no short-term borrowings and long-term borrowings of $5.0 million from the FHLB. At March 31, 2011, we had commitments to originate loans totaling $75.0 million. Scheduled maturities of certificates of deposit during the twelve months following March 31, 2011 totaled $251.7 million, and maturing loans total approximately $227.1 million.

Management believes that we have adequate resources to fund all of our commitments, that substantially all of our existing commitments will be funded in the subsequent twelve months and, if so desired, that we can adjust the rates on certificates of deposit and other deposit accounts to retain deposits in a changing interest rate environment. At March 31, 2011, we had short-term lines available from correspondent banks totaling $46.0 million. FRB discount window availability of $42.3 million, and borrowing capacity from the FHLB of $37.7 million based on collateral pledged, for a total credit available of $126.0 million. In addition, being “well capitalized,” the Bank can access wholesale deposits for approximately $296.8 million based on current policy limits.

OFF-BALANCE SHEET ARRANGEMENTS

We do not currently engage in the use of derivative instruments to hedge interest rate risks. However, we are a party to financial instruments with off-balance sheet risks in the normal course of business to meet the financing needs of our clients.

At March 31, 2011, we had $75.0 million in commitments to originate loans and $4.51 million in standby letters of credit. Commitments to extend credit are agreements to lend to a customer so long as there is no violation of any condition established in the contract. Commitments generally have termination clauses and may require payment of a fee. Since many of the commitments are expected to expire without being drawn upon, the total commitment amounts do not necessarily represent future cash requirements. Standby letters of credit are conditional commitments issued by us to guarantee the performance of a client to a third party. We use the same credit policies in establishing commitments and issuing letters of credit as we do for on-balance sheet instruments.

If commitments arising from these financial instruments continue to require funding at historical levels, management does not anticipate that such funding will adversely impact our ability to meet on-going obligations. In the event these commitments require funding in excess of historical levels, management believes current liquidity, available lines of credit from the FHLB, investment security maturities and our revolving credit facility provide a sufficient source of funds to meet these commitments.

39


CRITICAL ACCOUNTING POLICIES

Allowance for Loan Losses

The allowance for loan losses is established as losses are estimated to have occurred through a provision for loan losses charged to earnings. Loan losses are charged against the allowance when management believes the uncollectibility of a loan balance is confirmed. Subsequent recoveries, if any, are credited to the allowance.

The allowance for loan losses is evaluated on a regular basis by management and is based upon management’s periodic review of the collectibility 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. This evaluation is inherently subjective as it requires estimates that are susceptible to significant revision as more information becomes available.

The allowance consists of specific and general components. The specific component relates to loans that are classified as either loss, doubtful, substandard or special mention. For such loans that are also classified as impaired, an allowance is established when the discounted cash flows (or collateral value or observable market price) of the impaired loan is lower than the carrying value of that loan. The general component covers nonclassified loans and is based on historical industry loss experience adjusted for qualitative factors.

A loan is considered impaired when, based on current information and events, it is probable that we will be unable to collect the scheduled payments of principal or interest when due according to the contractual terms of the loan agreement. Factors considered by management in determining impairment include payment status, collateral value, and the probability of collecting scheduled principal and interest payments when due. Loans that experience insignificant payment delays and payment shortfalls generally are not classified as impaired. Management determines the significance of payment delays (loan payments made within 90 days of the due date) and payment shortfalls (which are tracked as past due amounts) on a case-by-case basis, taking into consideration all of the circumstances surrounding the loan and the borrower, including the length of the delay, the reasons for the delay, the borrower’s prior payment record, and the amount of the shortfall in relation to the principal and interest owed. Management considers loan payments made within 90 days of the due date to be “insignificant payment delays.” Payment shortfalls are traced as past due amounts. Impairment is measured on a loan by loan basis for commercial and commercial real estate loans by either the present value of expected future cash flows discounted at the loan’s effective interest rate, the loan’s obtainable market price, or the fair value of the collateral if the loan is collateral dependent.

Large groups of smaller balance homogeneous loans are collectively evaluated for impairment. Accordingly, we do not separately identify individual consumer and residential loans for impairment disclosures.

Goodwill and Intangible Assets

Goodwill represents the excess of cost over fair value of assets of business acquired. Goodwill and intangible assets acquired in a purchase business combination and determined to have an indefinite useful life are not amortized, but instead tested for impairment at least annually. Intangible assets with estimable useful lives are amortized over their respective estimated useful lives to their estimated residual values. We acquired First Western Bank, on April 7, 2004, Equitable on February 29, 2008, Citrus on August 15, 2008, Republic on December 11, 2009, and TBOM on December 17, 2010. Consequently, we were required to record the assets acquired, including identified intangible assets, and liabilities assumed at their fair value, which involves estimates based on third party valuations, such as appraisals, internal valuations based on discounted cash flow analyses or other valuation techniques. The determination of the useful lives of intangible assets is subjective, as is the appropriate amortization period for such intangible assets. In addition, purchase acquisitions typically result in recording goodwill, which is subject to ongoing periodic impairment tests based on the fair value of the reporting unit compared to its carrying amount, including goodwill. As of December 31, 2010, the required annual impairment test of goodwill was performed and no impairment existed as of the valuation date. If for any future period we determine that there has been impairment in the carrying value of our goodwill balances, we will record a charge to our earnings, which could have a material adverse effect on our net income, but not to our risk based capital ratios.

Income Taxes

Deferred income tax assets and liabilities are recorded to reflect the tax consequences on future years of temporary differences between revenues and expenses reported for financial statements and those reported for income tax purposes. Deferred tax assets and liabilities are measured using the enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be realized or settled. Valuation allowances are provided against assets which are not likely to be realized.

40


 

 

ITEM 4.

CONTROLS AND PROCEDURES


 

 

(a)

Evaluation of Disclosure Controls and Procedures

Our Chief Executive Officer, Rudy E. Schupp, and Chief Financial Officer, John Marino, have evaluated our disclosure controls and procedures, as defined in Rule 13a-15(e) under the Securities Exchange Act of 1934, as amended (the “Exchange Act”), as of the end of the period covered by this report. Based upon that evaluation, our Chief Executive Officer and Chief Financial Officer each have concluded that our disclosure controls and procedures are effective in ensuring that information required to be disclosed by us in the reports that we file or submit 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. Such controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed is accumulated and communicated to our management, including our principal executive and principal financial officers, to allow timely decisions regarding disclosure.

 

 

(b)

Changes in Internal Control Over Financial Reporting

Our management, including our Chief Executive Officer and Chief Financial Officer, has reviewed our internal control over financial reporting, as defined in Rule 13a-15 (f) under the Exchange Act. There were no changes in internal control over financial reporting that occurred during the fiscal quarter covered by this report that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

 

 

PART II.

OTHER INFORMATION

 

 

ITEM 1.

LEGAL PROCEEDINGS

From time-to-time we may be involved in litigation that arises in the normal course of business. As of the date of this Form 10-Q, we are not a party to any litigation that management believes could reasonably be expected to have a material adverse effect on our financial position or results of operations for an annual period.

 

 

ITEM 1A.

RISK FACTORS

In addition to the other information set forth in this Quarterly Report, you should carefully consider the factors discussed in Part I, Item 1A. “Risk Factors” in our Annual Report, as updated in our subsequent quarterly reports. The risks described in our Annual Report are not the only risks facing us. Additional risks and uncertainties not currently known to us or that we currently deem to be immaterial also may materially adversely affect our business, financial condition and/or operating results.

 

 

ITEM 5.

OTHER INFORMATION

On April 26, 2011, we announced via press release our financial results for the three-month period ended March 31, 2011. A copy of our press release is included herein as Exhibit 99.1 and incorporated herein by reference.

The information furnished under Part II, Item 5 of this Quarterly Report, including Exhibit 99.1, shall not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, nor shall it be deemed incorporated by reference in any filing under the Securities Act of 1933, except as shall be expressly set forth by specific reference in such filing.

 

 

ITEM 6.

EXHIBITS


 

 

(a)

The following exhibits are included herein:


 

 

 

 

 

 

 

Exhibit No.

 

 

Name

 

 


 

 


 

31.1

 

 

Certification Pursuant to Rule 13a-14(a) under the Securities Exchange Act of 1934, as amended.

 

 

 

 

 

31.2

 

 

Certification Pursuant to Rule 13a-14(a) under the Securities Exchange Act of 1934, as amended.

 

 

 

 

 

32

 

 

Certification Pursuant to 18 U.S.C. Section 1350

 

 

 

 

 

99.1

 

 

Press release to announce earnings, dated April 26, 2011.

41


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.

 

 

 

 

 

 

1ST UNITED BANCORP, INC.

 

 

(Registrant)

 

 

 

Date:

April 26, 2011

By: /s/ John Marino

 

 

 


 

 

 

JOHN MARINO

 

 

PRESIDENT AND CHIEF FINANCIAL OFFICER

 

 

(Mr. Marino is the principal financial officer and has been duly authorized to sign on behalf of the Registrant)

42


EXHIBIT INDEX

 

 

 

EXHIBIT

 

DESCRIPTION

 


 


 

31.1

 

Certification Pursuant to Rule 13a-14(a) under the Securities Exchange Act of 1934, as amended.

 

 

 

31.2

 

Certification Pursuant to Rule 13a-14(a) under the Securities Exchange Act of 1934, as amended.

 

 

 

32

 

Certification Pursuant to 18 U.S.C. Section 1350

 

 

 

99.1

 

Press release to announce earnings, dated April 26, 2011

43