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Table of Contents

 

 

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, DC 20549

 

FORM 10-Q

 

(MARK ONE)

 

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

 

For the Quarterly Period Ended March 31, 2011

 

OR

 

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

 

For the transition period from                    to                   

 

Commission File Number:  000-50407

 

FREDERICK COUNTY BANCORP, INC.

(Exact name of registrant as specified in its charter)

 

Maryland

 

20-0049496

(State of other jurisdiction of

 

(I.R.S. Employer

incorporation or organization)

 

Identification No.)

 

9 North Market Street

Frederick, Maryland 21701

(Address of registrant’s principal executive offices)

 

301.620.1400

(Registrant’s telephone number, including area code)

 

N/A

(Former name, former address and former fiscal year, if changed since last report)

 

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

 

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§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).  o  Yes  o  No

 

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer or a smaller reporting company.  See definition of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.

 

Large accelerated filer o

 

Accelerated filer o

 

 

 

Non-accelerated filer o

 

Smaller reporting company x

 

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

 

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practical date.  There were 1,476,754 shares of Common Stock outstanding as of April 30, 2011.

 

 

 



Table of Contents

 

FREDERICK COUNTY BANCORP, INC. AND SUBSIDIARY

TABLE OF CONTENTS

 

PART I

FINANCIAL INFORMATION

 

 

Item 1.

Financial Statements (Unaudited)

 

 

 

Consolidated Balance Sheets, March 31, 2011 and December 31, 2010

 

 

 

Consolidated Statements of Income, Three Months Ended March 31, 2011 and 2010

 

 

 

Consolidated Statements of Changes in Shareholders’ Equity, Three Months Ended March 31, 2011 and 2010

 

 

 

Consolidated Statements of Cash Flows, Three Months Ended March 31, 2011 and 2010

 

 

 

Notes to Unaudited Consolidated Financial Statements

 

 

Item 2.

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

 

 

Item 3.

Quantitative and Qualitative Disclosures about Market Risk

 

 

Item 4.

Controls and Procedures

 

 

PART II

OTHER INFORMATION

 

 

Item 1.

Legal Proceedings

 

 

Item 1A.

Risk Factors

 

 

Item 2.

Unregistered Sales of Equity Securities and Use of Proceeds

 

 

Item 3.

Defaults upon Senior Securities

 

 

Item 4.

Removed and Reserved

 

 

Item 5.

Other Information

 

 

Item 6.

Exhibits

 

 

 

Signatures

 

2



Table of Contents

 

Frederick County Bancorp, Inc. and Subsidiaries

Consolidated Balance Sheets

 

 

 

March 31,

 

December 31,

 

(dollars in thousands)

 

2011

 

2010

 

 

 

(unaudited)

 

 

 

ASSETS 

 

 

 

 

 

Cash and due from banks

 

$

1,464

 

$

1,469

 

Federal funds sold

 

1,304

 

1,128

 

Interest-bearing deposits in other banks

 

36,269

 

39,468

 

Cash and cash equivalents

 

39,037

 

42,065

 

Investment securities available-for-sale at fair value

 

36,875

 

30,178

 

Restricted stock

 

1,521

 

1,521

 

Loans

 

207,766

 

209,387

 

Less: Allowance for loan losses

 

(3,842

)

(3,718

)

Net loans

 

203,924

 

205,669

 

Bank premises and equipment

 

5,816

 

4,968

 

Other assets

 

4,537

 

4,642

 

Total assets

 

$

291,710

 

$

289,043

 

 

 

 

 

 

 

LIABILITIES AND SHAREHOLDERS’ EQUITY

 

 

 

 

 

 

 

 

 

 

 

Liabilities

 

 

 

 

 

Deposits:

 

 

 

 

 

Noninterest-bearing deposits

 

$

42,549

 

$

41,244

 

Interest-bearing deposits

 

208,223

 

207,380

 

Total deposits

 

250,772

 

248,624

 

Short-term borrowings

 

300

 

300

 

Long-term borrowings

 

10,000

 

10,000

 

Junior subordinated debentures

 

6,186

 

6,186

 

Accrued interest and other liabilities

 

769

 

738

 

Total liabilities

 

268,027

 

265,848

 

 

 

 

 

 

 

Shareholders’ Equity

 

 

 

 

 

Common stock, per share par value $0.01; 10,000,000 shares authorized; 1,476,754 and 1,469,364 shares issued and outstanding

 

15

 

15

 

Additional paid-in capital

 

15,188

 

15,069

 

Retained earnings

 

8,478

 

8,142

 

Accumulated other comprehensive income (loss)

 

2

 

(31

)

Total shareholders’ equity

 

23,683

 

23,195

 

Total liabilities and shareholders’ equity

 

$

291,710

 

$

289,043

 

 

The accompanying notes are an integral part of these unaudited consolidated financial statements.

 

3



Table of Contents

 

Frederick County Bancorp, Inc. and Subsidiaries

Consolidated Statements of Income (Unaudited)

 

 

 

Three Months Ended

 

(dollars in thousands, except per share amounts)

 

March 31,
2011

 

March 31,
2010

 

Interest income:

 

 

 

 

 

Interest and fees on loans

 

$

3,128

 

$

3,289

 

Interest and dividends on investment securities:

 

 

 

 

 

Interest — taxable

 

160

 

115

 

Interest — tax exempt

 

86

 

80

 

Dividends

 

12

 

12

 

Other interest income

 

22

 

8

 

Total interest income

 

3,408

 

3,504

 

Interest expense:

 

 

 

 

 

Interest on deposits

 

623

 

746

 

Interest on short-term borrowings

 

4

 

5

 

Interest on long-term borrowings

 

79

 

114

 

Interest on junior subordinated debentures

 

101

 

101

 

Total interest expense

 

807

 

966

 

Net interest income

 

2,601

 

2,538

 

Provision for loan losses

 

115

 

400

 

Net interest income after provision for loan losses

 

2,486

 

2,138

 

Noninterest income:

 

 

 

 

 

Securities gains

 

3

 

 

Service fees

 

79

 

91

 

Other operating income

 

48

 

46

 

Total noninterest income

 

130

 

137

 

Noninterest expense:

 

 

 

 

 

Salaries and employee benefits

 

1,222

 

1,060

 

Occupancy and equipment expenses

 

341

 

324

 

Other operating expenses

 

542

 

451

 

Total noninterest expense

 

2,105

 

1,835

 

Income before provision for income taxes

 

511

 

440

 

Provision for income taxes

 

175

 

132

 

Net income

 

$

336

 

$

308

 

Basic earnings per share

 

$

0.23

 

$

0.21

 

Diluted earnings per share

 

$

0.22

 

$

0.21

 

Basic weighted average number of shares outstanding

 

1,473,508

 

1,461,802

 

Diluted weighted average number of shares outstanding

 

1,499,219

 

1,468,896

 

 

The accompanying notes are an integral part of these unaudited consolidated financial statements.

 

4



Table of Contents

 

Frederick County Bancorp, Inc. and Subsidiaries

Consolidated Statement of Changes in Shareholders’ Equity (Unaudited)

 

Three Months Ended March 31,
(dollars in thousands)

 

Shares
Outstanding

 

Common
Stock

 

Additional
Paid-in

Capital

 

Retained
Earnings

 

Accumulated
Other
Comprehensive
Income
 (Loss)

 

Total
Shareholders’
Equity

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Balance, January 1, 2010

 

1461,802

 

$

15

 

$

14,702

 

$

6,987

 

$

46

 

$

21,750

 

Comprehensive income:

 

 

 

 

 

 

 

 

 

 

 

 

 

Net income

 

 

 

 

 

 

 

308

 

 

 

308

 

Changes in net unrealized gains (losses) on securities available for sale, net of income taxes of $10

 

 

 

 

 

 

 

 

 

16

 

16

 

Total Comprehensive income

 

 

 

 

 

 

 

 

 

 

 

324

 

Compensation expense from stock option transactions

 

 

 

 

 

2

 

 

 

 

 

2

 

Balance, March 31, 2010

 

1,461,802

 

$

15

 

$

14,704

 

$

7,295

 

$

62

 

$

22,076

 

Balance, January 1, 2011

 

1,469,364

 

$

15

 

$

15,069

 

$

8,142

 

$

(31

)

$

23,195

 

Comprehensive income:

 

 

 

 

 

 

 

 

 

 

 

 

 

Net income

 

 

 

 

 

 

 

336

 

 

 

336

 

Changes in net unrealized gains (losses) on securities available for sale, net of income taxes of $23

 

 

 

 

 

 

 

 

 

35

 

35

 

Reclassification adjustment for (gains) losses realized, net of income tax benefits of $1

 

 

 

 

 

 

 

 

 

(2

)

(2

)

Total Comprehensive income

 

 

 

 

 

 

 

 

 

 

 

369

 

Shares repurchased

 

(7,850

)

 

 

(105

)

 

 

 

 

(105

)

Shares issued under stock option transactions

 

15,240

 

 

 

153

 

 

 

 

 

153

 

Compensation expense from stock option transactions

 

 

 

 

 

47

 

 

 

 

 

47

 

Excess tax benefit from equity-based awards

 

 

 

 

 

24

 

 

 

 

 

24

 

Balance, March 31, 2011

 

1,476,754

 

$

15

 

$

15,188

 

$

8,478

 

$

2

 

$

23,683

 

 

5



Table of Contents

 

Frederick County Bancorp, Inc. and Subsidiaries

Consolidated Statements of Cash Flows (Unaudited)

 

 

 

Three Months Ended March 31,

 

(dollars in thousands)

 

2011

 

2010

 

Cash flows from operating activities:

 

 

 

 

 

Net income

 

$

336

 

$

308

 

Adjustments to reconcile net income to net cash provided by operating activities:

 

 

 

 

 

Depreciation and amortization

 

73

 

77

 

Deferred income taxes (benefits)

 

(76

)

82

 

Provision for loan losses

 

115

 

400

 

Securities gains

 

(3

)

 

Net premium amortization on investment securities

 

81

 

60

 

Stock option compensation expense

 

47

 

 

Excess tax benefit from equity-based awards

 

(24

)

 

Decrease in accrued interest and other assets

 

186

 

19

 

Increase (decrease) in accrued interest and other liabilities

 

30

 

(150

)

Net cash provided by operating activities

 

765

 

796

 

Cash flows from investing activities:

 

 

 

 

 

Purchases of investment securities available for sale

 

(9,037

)

(6,139

)

Proceeds from sales of investment securities available for sale

 

1,274

 

 

Proceeds from maturities, prepayments and calls investment securities available for sale

 

1,042

 

2,130

 

Net decrease (increase) in loans

 

1,629

 

(143

)

Purchases of bank premises and equipment

 

(921

)

(74

)

Net cash used in investing activities

 

(6,013

)

(4,226

)

Cash flows from financing activities:

 

 

 

 

 

Net increase in NOW, money market accounts, savings accounts and noninterest-bearing deposits

 

3,857

 

6,968

 

Net (decrease) increase in time deposits

 

(1,709

)

15,851

 

Proceeds from issuance of common stock

 

153

 

 

Repurchase of common stock

 

(105

)

 

Excess tax benefit from equity-based awards

 

24

 

 

Net cash provided by financing activities

 

2,220

 

22,819

 

Net (decrease) increase in cash and cash equivalents

 

(3,028

)

19,389

 

Cash and cash equivalents — beginning of period

 

42,065

 

12,114

 

Cash and cash equivalents — end of period

 

$

39,037

 

$

31,503

 

Supplemental cash flow disclosures:

 

 

 

 

 

Interest paid

 

$

809

 

$

971

 

Income taxes paid

 

$

92

 

$

121

 

 

The accompanying notes are an integral part of these unaudited consolidated financial statements.

 

6



Table of Contents

 

FREDERICK COUNTY BANCORP, INC.

 

Notes to Unaudited Consolidated Financial Statements

 

Note 1.  General:

 

Frederick County Bancorp, Inc. (the “Bancorp”), the parent company for its wholly-owned subsidiary Frederick County Bank (the “Bank” and together with Bancorp, the “Company”), was organized in September 2003. The Bank was incorporated under the laws of the state of Maryland in August 2000 and commenced banking operations in October 2001.  The Bank provides its customers with various banking services.  The Bank offers various loan and deposit products to its customers.  The Bank’s customers include individuals and commercial enterprises within its principal market area consisting of Frederick County, Maryland.  Additionally, the Bank maintains correspondent banking relationships and transacts daily federal funds sales on an unsecured basis with regional correspondent banks.  Note 4 discusses the types of securities the Bank purchases.  Note 5 discusses the types of lending in which the Bank engages.  The Bank does not have any significant concentrations to any one industry or customer.  Bancorp also has a subsidiary trust, established to issue trust preferred securities, and two subsidiaries established to hold foreclosed properties.  The two subsidiaries established to hold foreclosed properties are known as FCB Holdings, Inc. (a direct subsidiary of Bancorp) and FCB Hagerstown, LLC (an indirect subsidiary of Bancorp).  See Note 7 for additional disclosures related to the subsidiary trust.

 

The accompanying unaudited consolidated financial statements of the Company have been prepared in accordance with accounting principles generally accepted in the United States of America for interim financial information, the instructions for Form 10-Q, Regulation S-X, and general practices within the banking industry.  Accordingly, they do not include all of the information and disclosures required by generally accepted accounting principles for complete financial statements.  These statements should be read in conjunction with the consolidated financial statements and accompanying footnotes included in the Company’s 2009 Annual Report on Form 10-K.  In the opinion of management, all adjustments, consisting of normal recurring adjustments, considered necessary for a fair presentation have been included.  The results shown in this interim report are not necessarily indicative of results to be expected for any other period or for the full year ending December 31, 2011.

 

The preparation of financial statements requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period.  These estimates and assumptions are based on information available as of the date of the consolidated financial statements and could differ from actual results.

 

Recent Accounting Pronouncements

 

The FASB issued new guidance under ASU 2010-06, Fair Value Measurements and Disclosures (Topic 820), also known as, to improve disclosures about fair value measurements.  The guidance requires entities to disclose separately the amounts of significant transfers in and out of Level 1 and Level 2 fair value measurements and describe the reasons for the same.  It also requires Level 3 reconciliation to be presented on a gross basis disclosing purchases, sales, issuances and settlements separately.  The guidance is effective for interim and annual financial periods beginning after December 15, 2009 except for gross basis presentation for Level 3 reconciliation, which is effective for interim and annual periods beginning after December 15, 2010.  The disclosure requirements effective for interim and annual financial periods beginning after December 15, 2009 have been adopted for the interim period ended March 31, 2010, while the disclosure requirements effective for gross basis presentation for Level 3 reconciliation beginning after December 15, 2010 have been adopted for the interim period ended March 31, 2011.

 

The FASB issued new guidance under ASU 2010-20, Receivables - Disclosures about the Credit Quality of Financing Receivables and the Allowance for Credit Losses (Topic 310).  The guidance requires entities to provide disclosures designed to facilitate financial statement users’ evaluation of (i) the nature of credit risk inherent in the entity’s portfolio of financing receivables, (ii) how that risk is analyzed and assessed in arriving at the allowance for credit losses and (iii) the changes and reasons for those changes in the allowance for credit losses.  Disclosures must be disaggregated by portfolio segment, the level at which an entity develops and documents a systematic method for determining its allowance for credit losses, and class of financing receivable, which is generally a disaggregation of portfolio segment.  The required disclosures include, among other things, a roll forward of the allowance for credit losses as well as information about modified, impaired, non-accrual and past due loans and credit quality indicators.  ASU 2010-20 became effective for the Company’s financial statements as of December 31, 2010, as it relates to disclosures required as of the end of a reporting period.  The Company adopted the guidance for disclosures that relate to activity during a reporting period on January 1, 2011 and it did not have a material impact on the Company’s consolidated financial condition or results of operations.

 

The FASB issued new guidance under ASU 2010-28, Intangibles — Goodwill and Other (Topic 350) — When to Perform Step 2 of the Goodwill Impairment Test for Reporting Units with Zero or Negative Carrying Amounts.  This guidance modifies Step 1 of the goodwill impairment test for reporting units with zero or negative carrying amounts.  For those reporting units, an entity is required to perform Step 2 of the goodwill impairment test if it is more likely than not that a goodwill impairment exists.  In determining whether

 

7



Table of Contents

 

it is more likely than not that a goodwill impairment exists, an entity should consider whether there are any adverse qualitative factors indicating that an impairment may exist such as if an event occurs or circumstances change that would more likely than not reduce the fair value of a reporting unit below its carrying amount.  ASU 2010-28 became effective for the Company on January 1, 2011 and did not have a significant impact on the Company’s financial statements.

 

The FASB issued new guidance under ASU 2011-02, Receivables (Topic 310) — A Creditor’s Determination of Whether a Restructuring Is a Troubled Debt Restructuring.  This guidance clarifies which loan modifications constitute troubled debt restructurings and is intended to assist creditors in determining whether a modification of the terms of a receivable meets the criteria to be considered a troubled debt restructuring, both for purposes of recording an impairment loss and for disclosure of troubled debt restructurings.  In evaluating whether a restructuring constitutes a troubled debt restructuring, a creditor must separately conclude, under this guidance, that both of the following exist: (a) the restructuring constitutes a concession; and (b) the debtor is experiencing financial difficulties,  ASU 2011-02 will be effective for the Company on July 1, 2011, and applies retrospectively to restructurings occurring on or after January 1, 2011.  Adoption of ASU 2011-02 is not expected to have a significant impact of the Company’s financial statement.

 

Note 2. Earnings Per Share:

 

Earnings per share (“EPS”) are disclosed as basic and diluted.  Basic EPS is generally computed by dividing net income by the weighted-average number of common shares outstanding for the period, whereas diluted EPS essentially reflects the potential dilution in basic EPS that could occur if other contracts to issue common stock were exercised.

 

 

 

Three Months Ended
March 31,

 

(dollars in thousands, except per share amounts)

 

2011

 

2010

 

Net income

 

$

336

 

$

308

 

Basic earnings per share

 

$

0.23

 

$

0.21

 

Diluted earnings per share

 

$

0.22

 

$

0.21

 

Basic weighted average number of shares outstanding

 

1,473,508

 

1,461,802

 

Effect of dilutive securities — stock options

 

25,710

 

7,094

 

Diluted weighted average number of shares outstanding

 

1,499,218

 

1,468,896

 

Anti-dilutive securities outstanding

 

 

 

 

Note 3.  Employee Stock Option Plan:

 

The Company maintains an Employee Stock Option Plan that provides for grants of incentive and non-incentive stock options.  This plan has been presented to and approved by the Company’s shareholders.  There were 118,700 stock options granted in April 2010 and no stock options granted in the three months ended March 31, 2011.  The Company recognizes the cost of employee services received in exchange for an award of equity investment based on the grant-date fair value of the award.  That cost is recognized over the vesting period of the award.  Stock-based compensation expense related to stock options for the three months ended March 31, 2011 and 2010 was $47 thousand and $2 thousand, respectively.  As of March 31, 2011, there was $83 thousand of total unrecognized compensation cost related to non-vested stock options that will be expensed over the period April 1, 2011 through April 30, 2012.

 

The weighted-average fair value of options granted in the year ended December 31, 2010 was $2.97, respectively, and was estimated at the date of grant using the Black-Scholes Option Pricing Model with the following weighted average assumptions.

 

 

 

December 31,

 

 

 

2010

 

Risk free interest rate of return

 

3.80

%

Expected option life (months)

 

60

 

Expected volatility

 

25

%

Expected dividends

 

%

 

The risk-free interest rate is based on the U.S. Treasury yield curve in effect at the time of the grant.  The expected lives are based on the “simplified” method allowed by ASC Topic 718 Compensation, whereby the expected term is equal to the midpoint between the vesting date and the end of the contractual term of the award.  The expected volatility is based on the Company’s estimated level of volatility.  The dividend yield assumption is based on the Company’s expectation of dividend payouts.

 

8



Table of Contents

 

The following is a summary of stock option transactions during the three months ended March 31, 2011.

 

 

 

Options Issued
and Outstanding

 

Weighted-Average
Exercise Price

 

Balance at January 1, 2011

 

235,430

 

$

10.69

 

Exercised

 

15,240

 

10.05

 

Balance at March 31, 2011

 

220,190

 

$

10.73

 

Exercisable at March 31, 2011

 

136,180

 

$

10.13

 

 

Note 4.  Investment Portfolio:

 

The following tables set forth certain information regarding the Company’s investment portfolio at March 31, 2011 and December 31, 2010:

 

Available-for-sale portfolio

 

March 31, 2011
(dollars in thousands)

 

Amortized
Cost

 

Gross
Unrealized
Gains

 

Gross
Unrealized
Losses

 

Estimated
Fair
Value

 

Average
Yield

 

State and political subdivisions:

 

 

 

 

 

 

 

 

 

 

 

Due after five years through ten years

 

$

4,299

 

$

25

 

$

35

 

$

4,289

 

4.82

%

Due after ten years

 

9,672

 

73

 

71

 

9,674

 

5.63

%

 

 

13,971

 

98

 

106

 

13,963

 

 

 

Mortgage-backed debt securities

 

22,601

 

137

 

126

 

22,612

 

3.06

%

Equity securities

 

300

 

 

 

300

 

%

 

 

$

36,872

 

$

235

 

$

232

 

$

36,875

 

3.92

%

 

December 31, 2010
(dollars in thousands)

 

Amortized
Cost

 

Gross
Unrealized
Gains

 

Gross
Unrealized
Losses

 

Estimated
Fair
Value

 

Average
Yield

 

State and political subdivisions:

 

 

 

 

 

 

 

 

 

 

 

Due after five years through ten years

 

$

2,094

 

$

12

 

$

21

 

$

2,085

 

5.36

%

Due after ten years

 

7,005

 

50

 

123

 

6,932

 

5.74

%

 

 

9,099

 

62

 

144

 

9,017

 

 

 

Mortgage-backed debt securities

 

20,830

 

158

 

127

 

20,861

 

2.71

%

Equity securities

 

300

 

 

 

300

 

%

 

 

$

30,229

 

$

220

 

$

271

 

$

30,178

 

3.57

%

 

 

 

Continuous unrealized
losses existing for less than
12 months

 

Continuous unrealized
losses existing for 12
months and greater

 

Total

 

March 31, 2011
(dollars in thousands)

 

Estimated
Fair

Value

 

Unrealized
Losses

 

Estimated
Fair

Value

 

Unrealized
Losses

 

Estimated
Fair

Value

 

Unrealized
Losses

 

State and political subdivisions

 

$

4,435

 

$

106

 

$

 

$

 

$

4,435

 

$

106

 

Mortgage-backed debt securities

 

9,778

 

126

 

 

 

9,778

 

126

 

Total temporarily impaired securities

 

$

14,213

 

$

232

 

$

 

$

 

$

14,213

 

$

232

 

 

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Table of Contents

 

 

 

Continuous unrealized
losses existing for less than
12 months

 

Continuous unrealized
losses existing for 12
months and greater

 

Total

 

December 31, 2010
(dollars in thousands)

 

Estimated
Fair

Value

 

Unrealized
Losses

 

Estimated
Fair

Value

 

Unrealized
Losses

 

Estimated
Fair

Value

 

Unrealized
Losses

 

State and political subdivisions

 

$

4,253

 

$

144

 

 

$

 

$

4,253

 

$

144

 

Mortgage-backed debt securities

 

9,398

 

127

 

 

 

9,398

 

127

 

Total temporarily impaired securities

 

$

13,651

 

$

271

 

$

 

$

 

$

13,651

 

$

271

 

 

Management systematically evaluates investment securities for other-than-temporary declines in fair value on a quarterly basis.  This analysis requires management to consider various factors, which include: (1) duration and magnitude of the decline in value; (2) the financial condition of the issuer or issuers; and (3) the structure of the security. An impairment loss is recognized in earnings only when: (1) we intend to sell the debt security; (2) it is more likely than not that we will be required to sell the security before recovery of its amortized cost basis; or (3) we do not expect to recover the entire amortized cost basis of the security.  In situations where we intend to sell or when it is more likely than not that we will be required to sell the security, the entire impairment loss must be recognized in earnings.  In all other situations, only the portion of the impairment loss representing the credit loss must be recognized in earnings, with the remaining portion being recognized in shareholders’ equity as a component of other comprehensive income, net of deferred taxes.  Credit loss is determined by calculating the present value of future cash flows of the security compared to the amortized cost of the security.  Realized gains or losses on the sale of investment and mortgage-backed securities are reported in earnings and determined using the amortized cost of the specific security sold.

 

Restricted Stock

 

The following table shows the amounts of restricted stock as of March 31, 2011 and December 31, 2010:

 

 

 

March 31,

 

December 31,

 

(dollars in thousands)

 

2011

 

2010

 

Federal Home Loan Bank of Atlanta

 

$

907

 

$

907

 

Federal Reserve Bank

 

574

 

574

 

Atlantic Central Bankers Bank

 

40

 

40

 

 

 

$

1,521

 

$

1,521

 

 

Note 5.  Loans and Allowance for Loan Losses:

 

Loans consist of the following:

 

 

 

March 31,

 

% of

 

December 31,

 

% of

 

(dollars in thousands)

 

2011

 

Loans

 

2010

 

Loans

 

 

 

 

 

 

 

 

 

 

 

Construction and land development

 

$

13,892

 

7

%

$

15,742

 

8

%

Real estate:

 

 

 

 

 

 

 

 

 

Commercial real estate mortgage

 

130,988

 

63

%

128,998

 

62

%

Residential real estate mortgage

 

35,598

 

17

%

37,143

 

17

%

Total construction and real estate mortgage

 

166,586

 

80

%

166,141

 

79

%

Commercial and industrial

 

25,708

 

12

%

25,778

 

12

%

Consumer

 

1,580

 

1

%

1,726

 

1

%

 

 

207,766

 

100

%

209,387

 

100

%

Less allowance for loan losses

 

(3,842

)

 

 

(3,718

)

 

 

Net loans

 

$

203,924

 

 

 

$

205,669

 

 

 

 

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Table of Contents

 

Allowance for loan losses and recorded investment in loans for the three months ended March 31, 2011 is summarized as follows:

 

(dollars in thousands)

 

Construction
and Land
Development

 

Commercial
Real Estate
Mortgage

 

Residential
Real Estate
Mortgage

 

Commercial
and
Industrial

 

Consumer

 

Total

 

Allowance for loan losses:

 

 

 

 

 

 

 

 

 

 

 

 

 

Beginning balance

 

$

273

 

$

2,546

 

$

432

 

$

455

 

$

12

 

$

3,718

 

Charge-offs

 

(1

)

 

 

 

 

 

 

 

 

(1

)

Recoveries

 

 

 

 

 

 

 

10

 

 

 

10

 

Provisions

 

(63

)

243

 

(76

)

14

 

(3

)

115

 

Ending balance

 

$

209

 

$

2,789

 

$

356

 

$

479

 

$

9

 

$

3,842

 

Ending balance: individually evaluated for impairment

 

$

155

 

$

1,213

 

$

11

 

$

206

 

$

 

$

1,585

 

Ending balance: collectively evaluated for impairment

 

$

54

 

$

1,576

 

$

345

 

$

273

 

$

9

 

$

2,257

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Loans:

 

 

 

 

 

 

 

 

 

 

 

 

 

Ending balance

 

$

13,892

 

$

130,988

 

$

35,598

 

$

25,708

 

$

1,580

 

$

207,766

 

Ending balance: individually evaluated for impairment

 

$

2,198

 

$

12,454

 

$

1,566

 

$

4,171

 

$

20

 

$

20,409

 

Ending balance: collectively evaluated for impairment

 

$

11,694

 

$

118,534

 

$

34,032

 

$

21,537

 

$

1,560

 

$

187,357

 

 

Credit quality indicators as of March 31, 2011 are as follows:

 

Internally assigned grade:

 

Pass — loans in this category have strong asset quality and liquidity along with a multi-year track record of profitability.

 

Special mention — loans in this category are currently protected but are potentially weak. The credit risk may be relatively minor, yet constitute an increased risk in light of the circumstances surrounding a specific loan.

 

Substandard — loans in this category show signs of continuing negative financial trends and unprofitability and therefore, is inadequately protected by the current sound worth and paying capacity of the obligor or of the collateral pledged, if any.

 

Commercial credit exposure - Credit risk profile by internally assigned grade

 

(dollars in thousands)

 

Construction
and Land
Development

 

Commercial
Real Estate
Mortgage

 

Commercial
and Industrial

 

Total

 

Pass

 

$

8,235

 

$

103,814

 

$

15,451

 

$

127,500

 

Special mention

 

3,716

 

14,894

 

7,162

 

25,772

 

Substandard

 

1,941

 

12,280

 

3,095

 

17,316

 

Total

 

$

13,892

 

$

130,988

 

$

25,708

 

$

170,588

 

 

Consumer credit exposure - Credit risk profile by internally assigned grade

 

(dollars in thousands)

 

Residential
 Real Estate
Mortgage

 

Consumer

 

Total

 

Pass

 

$

30,240

 

$

1,489

 

$

31,729

 

Special mention

 

3,788

 

91

 

3,879

 

Substandard

 

1,570

 

 

1,570

 

Total

 

$

35,598

 

$

1,580

 

$

37,178

 

 

Information on impaired loans for the three months ended March 31, 2011 is as follows:

 

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Table of Contents

 

(dollars in thousands)

 

Recorded
Investment

 

Unpaid
Principal
Balance

 

Related
Allowance

 

Average
Recorded
Investment

 

Interest
Income
Recognized

 

 

 

 

 

 

 

 

 

 

 

 

 

With no allowance recorded:

 

 

 

 

 

 

 

 

 

 

 

Construction and land development

 

$

1,833

 

$

1,833

 

$

 

$

1,936

 

$

41

 

Commercial real estate mortgage

 

7,451

 

7,451

 

 

7,913

 

86

 

Residential real estate mortgage

 

1,049

 

1,049

 

 

707

 

 

Commercial and industrial

 

3,757

 

3,757

 

 

3,968

 

40

 

Consumer

 

20

 

20

 

 

10

 

 

Total with no allowance

 

$

14,110

 

$

14,110

 

$

 

$

14,534

 

$

167

 

With an allowance recorded:

 

 

 

 

 

 

 

 

 

 

 

Construction and land development

 

$

365

 

$

365

 

$

155

 

$

365

 

$

5

 

Commercial real estate mortgage

 

5,003

 

5,003

 

1,213

 

4,870

 

77

 

Residential real estate mortgage

 

517

 

517

 

11

 

517

 

8

 

Commercial and industrial

 

414

 

414

 

206

 

414

 

6

 

Total with an allowance

 

$

6,299

 

$

6,299

 

$

1,585

 

$

6,166

 

$

96

 

Grand total:

 

 

 

 

 

 

 

 

 

 

 

Construction and land development

 

$

2,198

 

$

2,198

 

$

155

 

$

2,301

 

$

46

 

Commercial real estate mortgage

 

12,454

 

12,454

 

1,213

 

12,783

 

163

 

Residential real estate mortgage

 

1,566

 

1,566

 

11

 

1,224

 

8

 

Commercial and industrial

 

4,171

 

4,171

 

206

 

4,382

 

46

 

Consumer

 

20

 

20

 

 

10

 

 

Grand total

 

$

20,409

 

$

20,409

 

$

1,585

 

$

20,700

 

$

263

 

 

At March 31, 2011 and December 31, 2010, nonaccrual loans are $2.45 million and $2.20 million, respectively.

 

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Table of Contents

 

An age analysis of past due loans as of March 31, 2011 is as follows:

 

(dollars in thousands)

 

30-59
Days
Past
Due

 

60-89 Days
Past Due

 

Greater
than
90 Days

 

Total
Past Due

 

Current

 

Total

 

Greater than
90 Days and
Still
Accruing

 

Construction and land development

 

$

232

 

$

 

$

108

 

$

340

 

$

13,552

 

$

13,892

 

$

 

Commercial real estate mortgage

 

1,919

 

2,179

 

2,167

 

6,265

 

124,723

 

130,988

 

 

Residential real estate mortgage

 

305

 

 

 

305

 

35,293

 

35,598

 

 

Commercial and industrial

 

34

 

 

178

 

212

 

25,496

 

25,708

 

 

Consumer

 

22

 

 

 

22

 

1,558

 

1,580

 

 

Total

 

$

2,512

 

$

2,179

 

$

2,453

 

$

7,144

 

$

200,622

 

$

207,766

 

$

 

 

The Company’s charge-off policy states after all collection efforts have been exhausted and the loan is deemed to be a loss, it will be charged to the Company’s established allowance for loan losses.  Consumer loans subject to the Uniform Retail Credit Classification are charged-off as follows: (a) closed end loans are charged-off no later than 120 days after becoming delinquent; (b) consumer loans to borrowers who subsequently declare bankruptcy, where the Company is an unsecured creditor, are charged-off within 60 days of receipt of the notification from the bankruptcy court; (c) fraudulent loans are charged-off within 90 days of discovery; and (d) death of a borrower will cause a charge-off to be incurred at such time an actual loss is determined.  All other types of loans are generally evaluated for loss potential at the 90th day past due threshold; and any loss is recognized no later than the 120th day past due threshold; each loss is evaluated on its specific facts regarding the appropriate timing to recognize the loss.

 

The Company does not normally engage in partial charge-offs and has not incurred any in the three months ended March 31, 2011.

 

Note 6.   Deposits

 

The following table provides a summary of the Company’s deposit base at the dates indicated.

 

 

 

March 31,

 

December 31,

 

(dollars in thousands)

 

2011

 

2010

 

Noninterest-bearing demand deposits

 

$

42,549

 

$

41,244

 

Interest-bearing demand deposits:

 

 

 

 

 

NOW accounts

 

15,186

 

15,049

 

Money market accounts

 

73,464

 

71,317

 

Savings accounts

 

5,087

 

4,820

 

Certificates of deposit:

 

 

 

 

 

$100,000 or more

 

47,548

 

47,566

 

Less than $100,000

 

66,938

 

68,628

 

Total deposits

 

$

250,772

 

$

248,624

 

 

Note 7. Trust preferred securities/junior subordinated debentures and other long-term borrowings:

 

In December 2006, Bancorp completed the private placement of an aggregate of $6.00 million of trust preferred securities through FCBI Statutory Trust I (the “Trust”), a newly formed trust subsidiary organized under Connecticut law, of which Bancorp owns all of the common securities of $186 thousand. The principal asset of the Trust is a similar amount of Bancorp’s junior subordinated debentures. The junior subordinated debentures bear interest at a fixed rate of 6.5375% until December 15, 2011, at which time the interest rate becomes a variable rate, adjusted quarterly, equal to 163 basis points over three-month LIBOR. The junior subordinated debentures mature on December 15, 2036, and may be redeemed at par, at Bancorp’s option, on any interest payment date commencing December 15, 2011. The securities are redeemable prior to December 15, 2011, at a premium ranging up to 103.525% of the principal amount thereof, upon the occurrence of certain regulatory or legal events. The obligations of Bancorp with respect to the Trust’s preferred securities constitute a full and unconditional guarantee by Bancorp of Trust’s obligations with respect to the trust preferred securities to the extent set forth in the related guarantee. Subject to certain exceptions and limitations, Bancorp may elect from time to time to defer interest payments on the junior subordinated debentures, resulting in a deferral of distribution payments on the related trust preferred securities.   If the Company defers interest payments on the junior subordinated debentures, or otherwise is in default of the obligations, the Company would be prohibited from making dividend payments to its shareholders.

 

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Table of Contents

 

The trust preferred securities may be included in Tier 1 capital for regulatory capital adequacy purposes up to 25% of Tier 1 capital, net of goodwill after its inclusion. The portion of the trust preferred securities not qualifying as Tier 1 capital may be included as part of total qualifying capital in Tier 2 capital, subject to limitation.

 

At March 31, 2011 and December 31, 2010, the Company had a total of $10.00 million in borrowings under its credit facility from the Federal Home Loan Bank of Atlanta (“FHLB”).  This amount consists of two (2) $5.00 million borrowings with fixed interest rates of 3.29% and 3.05%, with a maturity of November 19, 2015.  Outstanding advances are secured by collateral consisting of a blanket lien on qualifying loans in the Bank’s residential mortgage loan portfolio and certain commercial real estate loans.

 

Note 8.  Noninterest Expense:

 

Noninterest expense consists of the following:

 

 

 

Three Months Ended
March 31,

 

(dollars in thousands)

 

2011

 

2010

 

 

 

 

 

 

 

Salaries

 

$

1,018

 

$

881

 

Deferred Personnel Costs

 

(26

)

(14

)

Payroll Taxes

 

88

 

78

 

Employee Insurance

 

79

 

55

 

Other Employee Benefits

 

63

 

77

 

Depreciation

 

73

 

104

 

Rent

 

115

 

104

 

Utilities

 

27

 

27

 

Repairs and Maintenance

 

60

 

57

 

ATM Expense

 

22

 

24

 

Other Occupancy and Equipment Expenses

 

44

 

35

 

Postage and Supplies

 

20

 

15

 

Data Processing

 

99

 

98

 

Advertising and Promotion

 

70

 

70

 

FDIC insurance

 

94

 

81

 

Legal

 

20

 

10

 

Insurance

 

21

 

14

 

Consulting

 

10

 

5

 

Courier

 

4

 

4

 

Audit Fees

 

48

 

48

 

Other

 

156

 

106

 

 

 

$

2,105

 

$

1,835

 

 

Note 9.  401(k) Profit Sharing Plan:

 

The Company has a Section 401(k) profit sharing plan covering employees meeting certain eligibility requirements as to minimum age and years of service.  Employees may make voluntary contributions to the Plan through payroll deductions on a pre-tax basis.  The Company has the discretion to make matching contributions of 100% of the employee’s contributions up to 4% of the employee’s salary.  A participant’s account under the Plan, together with investment earnings thereon, is normally distributable, following retirement, death, disability or other termination of employment, in a single lump-sum payment.

 

The Company made matching contributions of $48 thousand and $42 thousand for the three months ended March 31, 2011 and 2010, respectively.

 

Note 10.  Shareholders’ Equity:

 

Capital:

 

The Company and the Bank are subject to various regulatory capital requirements administered by the federal banking agencies.  Failure to meet minimum capital requirements can initiate certain mandatory - and possibly additional discretionary - actions by regulators that, if undertaken, could have a direct material effect on the Company’s consolidated financial statements.  Under capital adequacy guidelines and the regulatory framework for prompt corrective action, the Company, once it exceeds $500 million in assets, and the Bank must meet specific capital guidelines that involve quantitative measures of the Company’s and the Bank’s assets,

 

14



Table of Contents

 

liabilities, and certain off-balance-sheet items as calculated under regulatory accounting practices.  The Company’s and the Bank’s capital amounts and classification are also subject to qualitative judgments by the regulators about components, risk weightings, and other factors.

 

Quantitative measures established by regulation to ensure capital adequacy require the Company and the Bank to maintain minimum amounts and ratios (set forth in the following table) of total and Tier 1 capital (as defined in the regulations) to risk-weighted assets (as defined), and Tier 1 capital (as defined) to average assets (as defined).  Management believes that the Company and the Bank met all capital adequacy requirements to which they are subject as of March 31, 2011.

 

As of March 31, 2011, the most recent notification from the regulatory agency categorized the Bank as well capitalized under the regulatory framework for prompt corrective action.  To be categorized as well capitalized the Bank must maintain minimum total risk-based, Tier 1 risk-based, and Tier 1 leverage ratios as set forth in the table.  There are no conditions or events since that notification which management believes have changed the Bank’s category.

 

The Company’s and the Bank’s actual capital amounts and ratios at March 31, 2011 and December 31, 2010 are presented in the following tables.

 

March 31, 2011

 

Actual

 

For Capital
Adequacy Purposes

 

Minimum To Be Well
Capitalized Under
Prompt Corrective
Action Provisions

 

(dollars in thousands)

 

Amount

 

Ratio

 

Amount

 

Ratio

 

Amount

 

Ratio

 

Tier 1 Capital

 

 

 

 

 

 

 

 

 

 

 

 

 

To Risk-Weighted Assets

 

 

 

 

 

 

 

 

 

 

 

 

 

Company

 

$

29,681

 

12.99

%

$

9,136

 

4.00

%

N/A

 

N/A

 

Bank

 

$

28,831

 

12.68

%

$

9,097

 

4.00

%

$

13,646

 

6.00

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total Capital

 

 

 

 

 

 

 

 

 

 

 

 

 

To Risk-Weighted Assets

 

 

 

 

 

 

 

 

 

 

 

 

 

Company

 

$

32,548

 

14.25

%

$

18,273

 

8.00

%

N/A

 

N/A

 

Bank

 

$

31,686

 

13.93

%

$

18,195

 

8.00

%

$

22,743

 

10.00

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Tier 1 Capital

 

 

 

 

 

 

 

 

 

 

 

 

 

To Average Assets

 

 

 

 

 

 

 

 

 

 

 

 

 

Company

 

$

29,681

 

10.37

%

$

11,445

 

4.00

%

N/A

 

N/A

 

Bank

 

$

28,831

 

10.11

%

$

11,406

 

4.00

%

$

14,258

 

5.00

%

 

 

 

 

 

 

 

 

 

 

 

Minimum To Be Well

 

 

 

 

 

 

 

 

 

 

 

Capitalized Under

 

 

 

 

 

 

 

For Capital

 

Prompt Corrective

 

December 31, 2010

 

Actual

 

Adequacy Purposes

 

Action Provisions

 

(dollars in thousands)

 

Amount

 

Ratio

 

Amount

 

Ratio

 

Amount

 

Ratio

 

Tier 1 Capital

 

 

 

 

 

 

 

 

 

 

 

 

 

To Risk-Weighted Assets

 

 

 

 

 

 

 

 

 

 

 

 

 

Company

 

$

29,226

 

12.86

%

$

9,094

 

4.00

%

N/A

 

N/A

 

Bank

 

$

28,430

 

12.56

%

$

9,055

 

4.00

%

$

13,582

 

6.00

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total Capital

 

 

 

 

 

 

 

 

 

 

 

 

 

To Risk-Weighted Assets

 

 

 

 

 

 

 

 

 

 

 

 

 

Company

 

$

32,079

 

14.11

%

$

18,188

 

8.00

%

N/A

 

N/A

 

Bank

 

$

31,271

 

13.81

%

$

18,110

 

8.00

%

$

22,637

 

10.00

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Tier 1 Capital

 

 

 

 

 

 

 

 

 

 

 

 

 

To Average Assets

 

 

 

 

 

 

 

 

 

 

 

 

 

Company

 

$

29,226

 

10.03

%

$

11,652

 

4.00

%

N/A

 

N/A

 

Bank

 

$

28,430

 

9.78

%

$

11,625

 

4.00

%

$

14,531

 

5.00

%

 

On June 26, 2007, the Company authorized the repurchase of up to 146,000 shares of its common stock, for an aggregate expenditure of not more than $4.5 million, through September 30, 2012, or earlier termination of the program by the Board of Directors.

 

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Table of Contents

 

Repurchases, if any, by the Company pursuant to this authorization are expected to enable the Company to repurchase its shares at an attractive price, and to provide a source of liquidity for the Company’s shares.  As of March 31, 2011, there have been 12,968 shares repurchased by the Company at an average price of $12.88.

 

Note 11.  Fair Value Measurements

 

The Company follows the guidance issued by the FASB under ASC Topic 825 Financial Instruments regarding fair value measurements and disclosures topic.  This guidance permits entities to measure many financial instruments and certain other items at fair value.  The objective is to improve financial reporting by providing entities with the opportunity to mitigate volatility in reported earnings caused by measuring related assets and liabilities differently without having to apply complex hedge accounting provisions.  The election to use the fair value option is available when an entity first recognizes a financial asset or financial liability or upon entering into a Company commitment.  Subsequent changes must be recorded in earnings.  The Company has yet to apply the fair value option to any assets or liabilities.  This guidance clarifies that fair value is an exit price, representing the amount that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants.  Under this guidance, fair value measurements are not adjusted for transaction costs.  This guidance establishes a fair value hierarchy that prioritizes the inputs to valuation techniques used to measure fair value.  The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (Level 1 measurements) and the lowest priority to unobservable inputs (Level 3 measurements).  The three levels of the fair value hierarchy under this guidance are described below.

 

Level 1

 

Valuations for assets and liabilities traded in active exchange markets.  Valuations are obtained from readily available pricing sources for market transactions involving identical assets or liabilities.

 

 

 

Level 2

 

Valuations for assets and liabilities traded in less active dealer or broker markets.  Valuations are obtained from third party pricing services for identical or comparable assets or liabilities which use observable inputs other than Level 1 prices, such as quoted prices for similar assets or liabilities; quoted prices in active markets that are not active; or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities.

 

 

 

Level 3

 

Unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities.

 

A financial instrument’s level within the fair value hierarchy is based on the lowest level of input that is significant to the fair value measurement.

 

The types of instruments valued based on quoted market prices in active markets include most U.S. government and agency securities, liquid mortgage products, active listed equities and most money market securities.  Such instruments are generally classified within Level 1 or Level 2 of the fair value hierarchy.  As required by fair value measurement and disclosures guidance, the Company does not adjust the quoted price for such instruments.

 

The types of instruments valued based on quoted prices in markets that are not active, broker or dealer quotations, or alternative pricing sources with reasonable levels of price transparency include most investment-grade and high-yield corporate bonds, less liquid mortgage products, less liquid equities, state, municipal and provincial obligations.  Such instruments are generally classified within Level 2 of the fair value hierarchy.

 

Level 3 is for positions that are not traded in active markets or are subject to transfer restrictions, valuations are adjusted to reflect illiquidity and/or non-transferability, and such adjustments are generally based on available market evidence.  In the absence of such evidence, management’s best estimate is used.

 

Impaired loans are evaluated and valued at the time the loan is identified as impaired, at the lower of cost or market value.  Market value is measured based on the value of the collateral securing these loans and is classified at a Level 3 in the fair value hierarchy.  Collateral may be real estate and/or business assets including equipment, inventory and/or accounts receivable.  The value of real estate collateral is determined based on appraisal by qualified licensed appraisers hired by the Company.  The value of business equipment, inventory and accounts receivable collateral is based on the net book value on the business’ financial statements and, if necessary, discounted based on management’s review and analysis.  Appraised and reported values may be discounted based on management’s historical knowledge, changes in market conditions from the time of valuation, and/or management’s expertise and knowledge of the client and client’s business.  Impaired loans are reviewed and evaluated on at least a quarterly basis for additional impairment and adjusted accordingly, based on the same factors identified above.

 

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Table of Contents

 

The following tables set forth the Company’s financial assets and liabilities that were accounted for or disclosed at fair value on a recurring basis as of March 31, 2011 and December 31, 2010.

 

 

 

 

 

 

 

Significant

 

 

 

 

 

Carrying

 

 

 

Other

 

Significant

 

 

 

Value

 

Quoted

 

Observable

 

Unobservable

 

March 31, 2011

 

(Fair

 

Prices

 

Inputs

 

Inputs

 

(dollars in thousands)

 

Value)

 

(Level 1)

 

(Level 2)

 

(Level 3)

 

 

 

 

 

 

 

 

 

 

 

Securities available for sale:

 

 

 

 

 

 

 

 

 

Mortgage-backed debt

 

$

22,612

 

$

 

$

22,612

 

$

 

State and political subdivisions

 

13,963

 

 

13,963

 

 

Equity securities

 

300

 

 

300

 

 

Total

 

$

36,875

 

$

 

$

36,875

 

$

 

 

 

 

 

 

 

 

Significant

 

 

 

 

 

Carrying

 

 

 

Other

 

Significant

 

 

 

Value

 

Quoted

 

Observable

 

Unobservable

 

December 31, 2010

 

(Fair

 

Prices

 

Inputs

 

Inputs

 

(dollars in thousands)

 

Value)

 

(Level 1)

 

(Level 2)

 

(Level 3)

 

 

 

 

 

 

 

 

 

 

 

Securities available for sale:

 

 

 

 

 

 

 

 

 

Mortgage-backed debt

 

$

20,861

 

$

 

$

20,861

 

$

 

State and political subdivisions

 

9,017

 

 

9,017

 

 

Equity securities

 

300

 

 

300

 

 

Total

 

$

30,178

 

$

 

$

30,178

 

$

 

 

The following tables set forth the Company’s financial assets and liabilities that were accounted for or disclosed at fair value on a nonrecurring basis as of March 31, 2011 and December 31, 2010.

 

March 31, 2011
(dollars in thousands)

 

Carrying
Value
(Fair
Value)

 

Quoted
Prices
(Level 1)

 

Significant
Other
Observable
Inputs
(Level 2)

 

Significant
Unobservable
Inputs
(Level 3)

 

 

 

 

 

 

 

 

 

 

 

Foreclosed properties

 

$

726

 

$

 

$

 

$

726

 

Impaired loans

 

$

18,824

 

$

 

$

 

$

18,824

 

 

 

 

 

 

 

 

Significant

 

 

 

 

 

Carrying

 

 

 

Other

 

Significant

 

 

 

Value

 

Quoted

 

Observable

 

Unobservable

 

December 31, 2010

 

(Fair

 

Prices

 

Inputs

 

Inputs

 

(dollars in thousands)

 

Value)

 

(Level 1)

 

(Level 2)

 

(Level 3)

 

 

 

 

 

 

 

 

 

 

 

Foreclosed properties

 

$

726

 

$

 

$

 

$

726

 

Impaired loans

 

$

19,744

 

$

 

$

 

$

19,744

 

 

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Table of Contents

 

The following tables provide a reconciliation of all assets measured at fair value on a nonrecurring basis using significant unobservable inputs (Level 3) for the three months ended March 31, 2011 and 2010.

 

(dollars in thousands)

 

Foreclosed
Properties

 

Impaired
Loans

 

Balance at December 31, 2010

 

$

726

 

$

19,744

 

Total net gains (losses) for the period included in:

 

 

 

 

 

Gain on sale of foreclosed properties

 

 

 

Other comprehensive gain (loss)

 

 

 

Purchases

 

 

 

Sales

 

 

 

Transfers in

 

 

268

 

Transfers out

 

 

(1,188

)

Balance at March 31, 2011

 

$

726

 

$

18,824

 

 

(dollars in thousands)

 

Foreclosed
Properties

 

Impaired
Loans

 

Balance at December 31, 2009

 

$

495

 

$

12,950

 

Total net gains (losses) for the period included in:

 

 

 

 

 

Gain on sale of foreclosed properties