Attached files
file | filename |
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EX-31.1 - 1st United Bancorp, Inc. | i00185_ex31-1.htm |
EX-31.2 - 1st United Bancorp, Inc. | i00185_ex31-2.htm |
EX-32.1 - 1st United Bancorp, Inc. | i00185_ex32-1.htm |
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UNITED STATES |
SECURITIES AND EXCHANGE COMMISSION |
Washington, DC 20549 |
FORM 10-Q
(Mark One)
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x |
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934. |
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For the quarterly period ended March 31, 2011 |
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OR |
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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
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1ST UNITED BANCORP, INC. |
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(Exact Name of Registrant as specified in its charter) |
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FLORIDA |
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65-0925265 |
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(State or Other Jurisdiction of Incorporation or Organization) |
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(I.R.S. Employer Identification No.) |
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One North Federal Highway, Boca Raton |
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33432 |
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(Address of Principal Executive Offices) |
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(Zip Code) |
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(561) 362-3400 |
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(Registrants Telephone Number, Including Area Code) |
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N/A |
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(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 issuers classes of common stock, as of the latest practicable date.
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Class |
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Outstanding at April 15, 2011 |
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Common stock, $.01 par value |
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30,557,603 |
1ST UNITED BANCORP, INC.
MARCH 31, 2011
INDEX
INTRODUCTORY NOTE
Caution Concerning Forward-Looking Statements
The SEC encourages companies to disclose forward-looking information so that investors can better understand a companys 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., Managements 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 Managements Discussion and Analysis of Financial Condition and Results of Operations, in Part II, Item 7, as well as:
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legislative or regulatory changes, including the Dodd-Frank Act; |
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the strength of the United States economy in general and the strength of the local economies in which we conduct operations; |
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the accuracy of our financial statement estimates and assumptions, including the estimate for our loan loss provision; |
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the frequency and magnitude of foreclosure of our loans; |
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our customers willingness to make timely payments on their loans; |
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restrictions on our operations, including the inability to pay dividends without our regulators consent; |
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our ability to comply with the terms of the loss sharing agreements with the FDIC; |
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our ability to integrate the business and operations of companies and banks that we have acquired, and those we may acquire in the future; |
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the effects of the health and soundness of other financial institutions, including the FDICs need to increase Deposit Insurance Fund assessments; |
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the failure to achieve expected gains, revenue growth, and/or expense savings from future acquisitions; |
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our ability to declare and pay dividends; |
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changes in the securities and real estate markets; |
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changes in monetary and fiscal policies of the U.S. Government; |
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inflation, interest rate, market and monetary fluctuations; |
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the effects of our lack of a diversified loan portfolio, including the risks of geographic and industry concentrations; |
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our need and our ability to incur additional debt or equity financing; |
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the effects of harsh weather conditions, including hurricanes, and man-made disasters; |
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our ability to comply with the extensive laws and regulations to which we are subject; |
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the willingness of clients to accept third-party products and services rather than our products and services and vice versa; |
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increased competition and its effect on pricing; |
1
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technological changes; |
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negative publicity and the impact on our reputation; |
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the effects of security breaches and computer viruses that may affect our computer systems; |
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changes in consumer spending and saving habits; |
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growth and profitability of our noninterest income; |
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changes in accounting principles, policies, practices or guidelines; |
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the limited trading activity of our common stock; |
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the concentration of ownership of our common stock; |
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anti-takeover provisions under federal and state law as well as our Articles of Incorporation and our Bylaws; |
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other risks described from time to time in our filings with the Securities and Exchange Commission; and |
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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.
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ITEM 1. |
1ST UNITED BANCORP, INC.
CONSOLIDATED BALANCE SHEETS
(Dollar amounts in thousands, except per share data)
(unaudited)
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March 31, |
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December 31, |
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ASSETS |
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Cash and due from financial institutions |
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$ |
153,870 |
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$ |
118,952 |
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Federal funds sold |
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401 |
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800 |
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Cash and cash equivalents |
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154,271 |
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119,752 |
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Time deposits in other financial institutions |
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75 |
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75 |
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Securities available for sale |
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111,233 |
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102,289 |
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Loans held for sale |
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4,800 |
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Loans, net of allowance of $14,032 and $13,050 at March 31, 2011 and year end 2010 |
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800,930 |
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847,689 |
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Nonmarketable equity securities |
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18,291 |
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18,543 |
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Premises and equipment, net |
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9,808 |
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9,823 |
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Other real estate owned |
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8,495 |
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9,085 |
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Company-owned life insurance |
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4,764 |
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4,727 |
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FDIC loss share receivable |
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84,818 |
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86,712 |
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Goodwill |
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45,008 |
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45,008 |
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Core deposit intangible |
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3,160 |
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3,289 |
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Accrued interest receivable and other assets |
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19,610 |
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15,960 |
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$ |
1,260,463 |
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$ |
1,267,752 |
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LIABILITIES AND SHAREHOLDERS EQUITY |
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Deposits |
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Non-interest bearing |
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$ |
301,302 |
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$ |
281,285 |
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Interest bearing |
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724,787 |
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783,402 |
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Total deposits |
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1,026,089 |
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1,064,687 |
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Federal funds purchased and repurchase agreements |
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12,327 |
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12,886 |
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Federal Home Loan Bank advances |
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5,000 |
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5,000 |
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Other borrowings |
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4,625 |
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4,750 |
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Accrued interest payable and other liabilities |
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7,153 |
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6,379 |
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Total liabilities |
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1,055,194 |
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1,093,702 |
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Commitments and contingencies |
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Shareholders equity |
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Preferred stock no par, 5,000,000 shares authorized; no shares issued or outstanding |
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Common stock $0.01 par value; 60,000,000 shares authorized; 29,807,603 and 24,793,089 issued and outstanding at March 31, 2011 and December 31, 2010, respectively |
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298 |
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248 |
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Additional paid-in capital |
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212,416 |
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181,697 |
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Accumulated deficit |
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(8,072 |
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(8,427 |
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Accumulated other comprehensive income |
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627 |
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532 |
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Total shareholders equity |
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205,269 |
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174,050 |
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$ |
1,260,463 |
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$ |
1,267,752 |
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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)
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Three months ended |
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2011 |
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2010 |
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Interest and dividend income: |
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Loans, including fees |
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$ |
13,717 |
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$ |
10,542 |
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Securities |
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787 |
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834 |
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Federal funds sold and other |
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177 |
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133 |
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Total interest income |
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14,681 |
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11,509 |
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Interest expense: |
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Deposits |
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1,631 |
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1,912 |
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Federal funds purchased and repurchase agreements |
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6 |
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7 |
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Federal Home Loan Bank advances |
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55 |
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58 |
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Other borrowings |
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32 |
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77 |
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Total interest expense |
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1,724 |
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2,054 |
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Net interest income |
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12,957 |
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9,455 |
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Provision for loan losses |
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1,900 |
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1,250 |
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Net interest income after provision for loan losses |
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11,057 |
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8,205 |
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Non-interest income: |
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Service charges and fees on deposit accounts |
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1,074 |
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789 |
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Net loss on sale of other real estate owned |
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(224 |
) |
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Net gains (losses) on sales of securities |
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(10 |
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Net gain on sales of residential loans |
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11 |
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5 |
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Increase in cash surrender value of company-owned life insurance |
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36 |
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42 |
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Adjustment to FDIC indemnification asset |
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(244 |
) |
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Other |
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76 |
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75 |
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Total non-interest income |
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729 |
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901 |
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Non-interest expense: |
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Salaries and employee benefits |
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5,242 |
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4,080 |
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Occupancy and equipment |
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2,052 |
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1,696 |
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Data processing |
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891 |
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588 |
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Telephone |
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231 |
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183 |
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Stationery and supplies |
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88 |
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71 |
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Amortization of intangibles |
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129 |
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114 |
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Professional fees |
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513 |
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383 |
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Advertising |
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33 |
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35 |
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Reorganization expense |
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450 |
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360 |
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FDIC assessment |
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410 |
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339 |
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Other |
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1,152 |
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694 |
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Total non-interest expense |
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11,191 |
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8,543 |
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Income before taxes |
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595 |
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563 |
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Income tax expense |
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240 |
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217 |
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Net income |
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$ |
355 |
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$ |
346 |
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Basic earnings per share |
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$ |
0.01 |
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$ |
0.01 |
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Diluted earnings per share |
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$ |
0.01 |
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$ |
0.01 |
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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)
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Shares of |
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Common |
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Additional |
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Accumulated |
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Accumulated |
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Total |
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Balance at January 1, 2010 |
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Comprehensive income: |
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24,781,660 |
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$ |
248 |
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$ |
180,888 |
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(10,587 |
) |
$ |
45 |
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$ |
170,594 |
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Net income (loss) |
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346 |
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346 |
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Change in net unrealized gain (loss) on securities available for sale |
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237 |
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237 |
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Total comprehensive income (loss) |
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583 |
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Stock-based compensation expense |
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200 |
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200 |
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Registration cost on issuance of common stock |
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(21 |
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(21 |
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Balance, March 31, 2010 |
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24,781,660 |
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$ |
248 |
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$ |
181,067 |
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$ |
(10,241 |
) |
$ |
282 |
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$ |
171,356 |
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Balance at January 1, 2011 |
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24,793,089 |
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$ |
248 |
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$ |
181,697 |
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(8,427 |
) |
$ |
532 |
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$ |
174,050 |
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Comprehensive income: |
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Net income |
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355 |
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355 |
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Change in net unrealized gain on securities available for sale |
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95 |
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95 |
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Total comprehensive income |
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450 |
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Stock-based compensation expense |
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311 |
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311 |
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Restricted stock grants |
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14,514 |
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Issuance of common stock, net of cost of $2,042 |
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5,000,000 |
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50 |
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30,408 |
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30,458 |
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Balance, March 31, 2011 |
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29,807,603 |
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$ |
298 |
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$ |
212,416 |
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$ |
(8,072 |
) |
$ |
627 |
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$ |
205,269 |
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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)
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2011 |
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2010 |
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Cash flows from operating activities |
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Net income |
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$ |
355 |
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$ |
346 |
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Adjustments to reconcile net income to net cash from (used for) operating activities Provision for loan losses |
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1,900 |
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1,250 |
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Depreciation and amortization |
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601 |
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482 |
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Net accretion of purchase accounting adjustments |
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2,942 |
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|
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.
Bancorps 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 Companys 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 Companys 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 FDICs 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 borrowers 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 managements 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 loans 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 |
|
Gross |
|
Gross |
|
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 |
|
Fair |
|
||
|
|
|
|
|
|
||
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 |
|
Unrealized |
|
Fair |
|
Unrealized |
|
Fair |
|
Unrealized |
|
||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
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 Companys amortized cost basis. Based on the Companys 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 |
|
Loans Not |
|
Total |
|
Loans |
|
Loans Not |
|
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 |
|
Commercial |
|
Construction |
|
Consumer |
|
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 |
|
Commercial |
|
Construction |
|
Consumer |
|
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 |
|
Commercial |
|
Construction |
|
Consumer |
|
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 |
|
|||||||||||
|
|
|
|
|
|
|||||||||||
(Dollars in thousands) |
|
Unpaid |
|
Recorded |
|
Allowance for |
|
Unpaid |
|
Recorded |
|
|||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||
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 |
|
|||||||||||
|
|
|
|
|
|
|||||||||||
(Dollars in thousands) |
|
Unpaid |
|
Recorded |
|
Allowance for |
|
Unpaid |
|
Recorded |
|
|||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||
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, |
|
December 31, |
|||
|
|
|
|
||||
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 managements 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 |
|
Accruing 30 - 59 |
|
Accruing 60-89 |
|
Non-Accrual and |
|
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 |
|
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 managements close attention. If left uncorrected, these potential weaknesses may result in deterioration of the repayment prospects for the loan or of the institutions 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 |
|
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 |
|
December 31, |
|
||||||||
|
|
|
|
|
|
||||||||
|
|
Carrying |
|
Fair |
|
Carrying |
|
Fair |
|
||||
|
|
|
|
|
|
|
|
|
|
||||
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 entitys 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, |
|
Quoted prices |
|
Significant |
|
Significant |
|
||||
|
|
|
|
|
|
|
|
|
|
||||
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, |
|
Quoted prices in |
|
Significant |
|
Significant |
|
||||
|
|
|
|
|
|
|
|
|
|
||||
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, |
|
Quoted prices |
|
Significant |
|
Significant |
|
||||
|
|
|
|
|
|
|
|
|
|
||||
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, |
|
Quoted prices in |
|
Significant |
|
Significant |
|
||||
|
|
|
|
|
|
|
|
|
|
||||
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 creditors 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.
|
|
MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS |
The following is managements 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. Managements 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 TBOMs 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 FDICs 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 Republics carrying value and $64.2 million in cash and investments. All of Republics 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 FDICs 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
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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. |
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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. |
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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. |
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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. |
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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:
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March 31, 2011 |
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March 31, 2010 |
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(Dollars in thousands) |
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Average |
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Interest |
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Average |
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Average |
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Interest |
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Average |
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Assets |
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Interest-earning assets |
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Loans |
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$ |
840,573 |
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$ |
13,717 |
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6.62 |
% |
$ |
677,729 |
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$ |
10,542 |
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6.31 |
% |
Investment securities |
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99,191 |
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890 |
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3.59 |
% |
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87,067 |
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834 |
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3.83 |
% |
Federal funds sold and securities purchased under resale agreements |
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132,875 |
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74 |
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0.73 |
% |
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141,109 |
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133 |
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0.38 |
% |
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Total interest-earning assets |
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1,072,639 |
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14,681 |
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5.61 |
% |
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905,905 |
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11,509 |
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5.15 |
% |
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Non interest-earning assets |
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189,229 |
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131,560 |
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Allowance for loan losses |
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(13,390 |
) |
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(13,374 |
) |
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Total assets |
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$ |
1,248,478 |
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$ |
1,024,091 |
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Liabilities and Shareholders Equity |
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Interest-bearing liabilities |
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NOW accounts |
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$ |
122,676 |
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58 |
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0.19 |
% |
$ |
106,091 |
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$ |
50 |
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0.19 |
% |
Money market accounts |
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251,133 |
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536 |
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0.90 |
% |
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152,663 |
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379 |
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1.01 |
% |
Savings accounts |
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40,457 |
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55 |
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0.55 |
% |
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35,970 |
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69 |
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0.77 |
% |
Certificates of deposit |
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325,735 |
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982 |
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1.23 |
% |
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313,338 |
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1,414 |
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1.83 |
% |
Fed Funds Purchased and Repos |
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14,282 |
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6 |
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0.17 |
% |
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16,956 |
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7 |
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0.17 |
% |
Other borrowings |
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9,726 |
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87 |
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0.92 |
% |
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10,037 |
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135 |
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5.45 |
% |
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Total interest-bearing liabilities |
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764,009 |
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1,724 |
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0.93 |
% |
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635,055 |
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2,054 |
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1.31 |
% |
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Non interest-bearing liabilities |
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Demand deposit accounts |
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300,199 |
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209,512 |
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Other liabilities |
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6,553 |
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7,022 |
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Total non interest-bearing liabilities |
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306,752 |
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216,534 |
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Shareholders equity |
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177,717 |
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172,502 |
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Total liabilities and shareholders equity |
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$ |
1,248,478 |
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$ |
1,024,091 |
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Net interest spread |
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$ |
12,957 |
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4.64 |
% |
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$ |
9,455 |
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3.84 |
% |
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Net interest on average earning assets - Margin |
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4.90 |
% |
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4.23 |
% |
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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
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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 $1.4 million during the quarter ended March 31, 2010, which added approximately 60 basis points to the March 31, 2010 margin. In addition, average loans as a percent of earning assets increased to 78% for the period ended March 31, 2011 compared to 75% for the period ended March 31, 2010. Also, our cost of funds was approximately 38 basis points lower for the quarter ended March 31, 2011, as compared to 2010, primarily as a result of lower rates in the renewal of time deposits.
Rate Volume Analysis
The following table sets forth certain information regarding changes in our interest income and interest expense for the three months ended March 31, 2011 as compared to the three months ended March 31, 2010. For each category of interest-earning assets and interest-bearing liabilities, information is provided on changes attributable to changes in interest rate and changes in the volume. Changes in both volume and rate have been allocated based on the proportionate absolute changes in each category.
Changes in interest earnings for the three-month periods ended March 31, 2011 and 2010:
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(Dollars in thousands) |
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March 31, 2011 and 2010 |
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Change in |
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Variance |
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Variance |
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Assets |
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Interest-earning assets |
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Loans |
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$ |
3,175 |
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$ |
2,636 |
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$ |
539 |
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Investment securities |
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56 |
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|
111 |
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(55 |
) |
Federal funds sold and securities purchased under resale agreements |
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(59 |
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(7 |
) |
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(52 |
) |
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Total interest-earning assets |
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$ |
3,172 |
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$ |
2,740 |
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$ |
432 |
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Liabilities |
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Interest-bearing liabilities |
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NOW accounts |
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8 |
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8 |
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Money market accounts |
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157 |
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|
216 |
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|
(59 |
) |
Savings accounts |
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(14 |
) |
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8 |
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(22 |
) |
Certificates of deposit |
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(432 |
) |
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54 |
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(486 |
) |
Fed Funds Purchased and Repos |
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(1 |
) |
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(1 |
) |
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Other borrowings |
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(48 |
) |
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(4 |
) |
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(44 |
) |
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Total interest-bearing liabilities |
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(330 |
) |
|
281 |
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|
(611 |
) |
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Net interest spread |
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$ |
3,502 |
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$ |
2,459 |
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$ |
1,043 |
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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.
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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 $11,191,000 for the current quarter.
The following summarizes the changes in non-interest expense accounts for the three months ended March 31, 2011 compared to the three months ended March 31, 2010:
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Three months ended |
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(Dollars in thousands) |
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March 31, |
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March 31, |
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Difference |
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Salaries and employee benefits |
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$ |
5,242 |
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$ |
4,080 |
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$ |
1,162 |
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Occupancy and equipment |
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|
2,052 |
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|
1,696 |
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|
356 |
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Data processing |
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|
891 |
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|
588 |
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|
303 |
|
Telephone |
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|
231 |
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|
183 |
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|
48 |
|
Stationery and supplies |
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|
88 |
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|
71 |
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17 |
|
Amortization of Intangibles |
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|
129 |
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|
114 |
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|
15 |
|
Professional fees |
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|
513 |
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|
383 |
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|
130 |
|
Advertising |
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|
33 |
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|
35 |
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|
(2 |
) |
Reorganization expenses |
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|
450 |
|
|
360 |
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|
90 |
|
FDIC assessment |
|
|
410 |
|
|
339 |
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|
71 |
|
Other |
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|
1,152 |
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|
694 |
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|
458 |
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Total non-interest expense |
|
$ |
11,191 |
|
$ |
8,543 |
|
$ |
2,648 |
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|
|
|
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 borrowers 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 borrowers 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 |
|
Total |
|
Percent of |
|
Percent of |
|
||||
|
|
|
|
|
|
|
|
|
|
||||
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 |
|
Total |
|
Percent of |
|
Percent of |
|
||||
|
|
|
|
|
|
|
|
|
|
||||
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 |
|
Balance |
|
% of |
|
||||
|
|
|
|
|
|
|
|
|
|
||||
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 managements 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 |
|
Assets |
|
Total |
|
Assets Not |
|
Assets |
|
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 |
|
Accruing 30 - 59 |
|
Accruing 60-89 |
|
Non-Accrual and |
|
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 |
|
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 sellers 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 loans 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 loans 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 |
|
|||||||||||
|
|
|
|
|
|
|||||||||||
(Dollars in thousands) |
|
Unpaid |
|
Recorded |
|
Allowance for |
|
Unpaid |
|
Recorded |
|
|||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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 |
|
|||||||||||
|
|
|
|
|
|
|||||||||||
(Dollars in thousands) |
|
Unpaid |
|
Recorded |
|
Allowance for |
|
Unpaid |
|
Recorded |
|
|||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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 managements 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 loans 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 |
|
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 |
|
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 borrowers 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 |
|
Commercial |
|
Construction |
|
Consumer |
|
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 |
|
Commercial |
|
Construction |
|
Consumer |
|
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 |
|
Commercial |
|
Construction |
|
Consumer |
|
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, |
|
December 31, |
|
||||||||||||||
|
|
|
|
|
|
||||||||||||||
|
|
Assets Not |
|
Assets Subject to |
|
Total |
|
Assets Not |
|
Assets Subject |
|
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 Bancorps and 1st United Banks regulatory Capital Ratios for the respective periods:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Actual |
|
Minimum for |
|
Minimum for |
|
||||||||||||
|
|
|
|
|
|
|
|
||||||||||||
(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 managements 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 borrowers 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 borrowers 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 loans effective interest rate, the loans 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.
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CONTROLS AND PROCEDURES |
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(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 Commissions 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.
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(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.
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OTHER INFORMATION |
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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.
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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.
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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.
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EXHIBITS |
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(a) |
The following exhibits are included herein: |
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Exhibit No. |
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Name |
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31.1 |
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Certification Pursuant to Rule 13a-14(a) under the Securities Exchange Act of 1934, as amended. |
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31.2 |
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Certification Pursuant to Rule 13a-14(a) under the Securities Exchange Act of 1934, as amended. |
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32 |
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Certification Pursuant to 18 U.S.C. Section 1350 |
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99.1 |
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Press release to announce earnings, dated April 26, 2011. |
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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.
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1ST UNITED BANCORP, INC. |
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(Registrant) |
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Date: |
April 26, 2011 |
By: /s/ John Marino |
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JOHN MARINO |
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PRESIDENT AND CHIEF FINANCIAL OFFICER |
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(Mr. Marino is the principal financial officer and has been duly authorized to sign on behalf of the Registrant) |
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EXHIBIT INDEX
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EXHIBIT |
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DESCRIPTION |
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31.1 |
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Certification Pursuant to Rule 13a-14(a) under the Securities Exchange Act of 1934, as amended. |
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31.2 |
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Certification Pursuant to Rule 13a-14(a) under the Securities Exchange Act of 1934, as amended. |
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32 |
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Certification Pursuant to 18 U.S.C. Section 1350 |
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99.1 |
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Press release to announce earnings, dated April 26, 2011 |
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