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Table of Contents
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
Quarterly Report Pursuant to Section 13 or 15(d)
of the Securities Exchange Act of 1934
of the Securities Exchange Act of 1934
For the quarterly period ended:
June 30, 2011
Commission File Number: 000-11448
NewBridge Bancorp
(Exact name of Registrant as specified in its Charter)
North Carolina (State of Incorporation) |
56-1348147 (I.R.S. Employer Identification No.) |
|
1501 Highwoods Boulevard, Suite 400 Greensboro, North Carolina (Address of principal executive offices) |
27410 (Zip Code) |
(336) 369-0900
(Registrants telephone number, including area code)
(Registrants telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by
Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for
such shorter period that the registrant was required to file such reports), and (2) has been
subject to such filing requirements for the past 90 days. Yes þ No o
Indicate by check mark whether the Registrant has submitted electronically and posted on its
corporate Website, if any, every Interactive Data File required to be submitted and posted pursuant
to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the
Registrant was required to submit and post such files). Yes þ 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 definition 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 o | Non-accelerated filer o (Do not check if a smaller reporting company) |
Smaller reporting company þ |
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the
Exchange Act) Yes o No þ
At August 9, 2011, 15,655,868 shares of the registrants common stock were outstanding.
NEWBRIDGE BANCORP
FORM 10-Q
TABLE OF CONTENTS
TABLE OF CONTENTS
2
Table of Contents
PART I
FINANCIAL INFORMATION
FINANCIAL INFORMATION
Item 1. Financial Statements.
NewBridge Bancorp and Subsidiary
Consolidated Balance Sheets
(Dollars in thousands, except per share data)
Consolidated Balance Sheets
(Dollars in thousands, except per share data)
June 30 | ||||||||
2011 | December 31 | |||||||
(Unaudited) | 2010 | |||||||
Assets |
||||||||
Cash and due from banks |
$ | 26,890 | $ | 23,479 | ||||
Interest-bearing bank balances |
53,917 | 5,596 | ||||||
Loans held for sale |
2,754 | 76,994 | ||||||
Investment
securities |
292,898 | 325,129 | ||||||
Loans |
1,244,288 | 1,260,585 | ||||||
Less allowance for credit losses |
(28,040 | ) | (28,752 | ) | ||||
Net loans |
1,216,248 | 1,231,833 | ||||||
Premises and equipment |
36,670 | 38,442 | ||||||
Real estate acquired in settlement of loans |
25,729 | 26,718 | ||||||
Bank-owned life insurance |
31,053 | 30,317 | ||||||
Deferred tax assets |
27,353 | 27,089 | ||||||
Other assets |
22,317 | 21,564 | ||||||
Total assets |
$ | 1,735,829 | $ | 1,807,161 | ||||
Liabilities |
||||||||
Deposits: |
||||||||
Non-interest bearing |
$ | 161,703 | $ | 161,734 | ||||
Savings, NOW and money market accounts |
829,491 | 795,696 | ||||||
Time deposits |
435,895 | 495,565 | ||||||
Total deposits |
1,427,089 | 1,452,995 | ||||||
Borrowings from the Federal Home Loan Bank |
80,200 | 112,700 | ||||||
Other borrowings |
46,774 | 61,774 | ||||||
Accrued expenses and other liabilities |
17,795 | 16,504 | ||||||
Total liabilities |
1,571,858 | 1,643,973 | ||||||
Shareholders Equity |
||||||||
Preferred stock, par value $.01 per share: |
||||||||
Authorized 10,000,000 shares; issued and outstanding
(liquidation preference $1,000 per share) 52,372 |
51,639 | 51,490 | ||||||
Common stock, par value $5 per share: |
||||||||
Authorized 50,000,000 shares; issued and outstanding 15,655,868 |
78,279 | 78,279 | ||||||
Paid-in capital |
87,115 | 87,048 | ||||||
Directors deferred compensation plan |
(575 | ) | (618 | ) | ||||
Retained deficit |
(51,323 | ) | (52,016 | ) | ||||
Accumulated other comprehensive (loss) |
(1,164 | ) | (995 | ) | ||||
Total shareholders equity |
163,971 | 163,188 | ||||||
Total liabilities and shareholders equity |
$ | 1,735,829 | $ | 1,807,161 | ||||
See notes to consolidated financial statements
3
Table of Contents
NewBridge Bancorp and Subsidiary
Consolidated Statements of Income
(Unaudited; dollars in thousands, except per share data)
Consolidated Statements of Income
(Unaudited; dollars in thousands, except per share data)
Three Months Ended | Six Months Ended | |||||||||||||||
June 30 | June 30 | |||||||||||||||
2011 | 2010 | 2011 | 2010 | |||||||||||||
Interest Income |
||||||||||||||||
Interest and fees on loans |
$ | 16,694 | $ | 18,951 | $ | 33,930 | $ | 38,381 | ||||||||
Interest on investment securities: |
||||||||||||||||
Taxable |
2,974 | 2,954 | 6,448 | 5,634 | ||||||||||||
Tax exempt |
191 | 1,054 | 382 | 2,173 | ||||||||||||
Interest-bearing bank balances and Federal funds sold |
20 | 13 | 24 | 34 | ||||||||||||
Total interest income |
19,879 | 22,972 | 40,784 | 46,222 | ||||||||||||
Interest Expense |
||||||||||||||||
Deposits |
2,574 | 3,984 | 5,262 | 8,286 | ||||||||||||
Borrowings from the Federal Home Loan Bank |
284 | 1,017 | 631 | 2,118 | ||||||||||||
Other borrowings |
492 | 595 | 984 | 1,205 | ||||||||||||
Total interest expense |
3,350 | 5,596 | 6,877 | 11,609 | ||||||||||||
Net interest income |
16,529 | 17,376 | 33,907 | 34,613 | ||||||||||||
Provision for credit losses |
3,020 | 4,928 | 9,093 | 8,651 | ||||||||||||
Net interest income after provision for credit losses |
13,509 | 12,448 | 24,814 | 25,962 | ||||||||||||
Noninterest Income |
||||||||||||||||
Retail banking |
2,554 | 3,102 | 5,054 | 6,001 | ||||||||||||
Mortgage banking services |
268 | 442 | 693 | 712 | ||||||||||||
Wealth management services |
626 | 498 | 1,171 | 1,022 | ||||||||||||
Gain on sale of investment securities |
| | 1,961 | | ||||||||||||
Writedowns and loss on sale of real estate acquired
in settlement of loans |
(1,585 | ) | (717 | ) | (3,071 | ) | (2,158 | ) | ||||||||
Other |
538 | 583 | 1,127 | 845 | ||||||||||||
Total noninterest income |
2,401 | 3,908 | 6,935 | 6,422 | ||||||||||||
Noninterest Expense |
||||||||||||||||
Personnel |
7,352 | 7,510 | 14,641 | 15,324 | ||||||||||||
Occupancy |
1,017 | 1,040 | 2,060 | 2,174 | ||||||||||||
Furniture and equipment |
924 | 1,170 | 1,888 | 2,352 | ||||||||||||
Technology and data processing |
960 | 1,120 | 1,877 | 2,274 | ||||||||||||
FDIC insurance |
632 | 900 | 1,427 | 1,800 | ||||||||||||
Other |
3,694 | 3,728 | 7,080 | 7,097 | ||||||||||||
Total noninterest expense |
14,579 | 15,468 | 28,973 | 31,021 | ||||||||||||
Income before income taxes |
1,331 | 888 | 2,776 | 1,363 | ||||||||||||
Income taxes |
190 | 34 | 624 | 136 | ||||||||||||
Net Income |
1,141 | 854 | 2,152 | 1,227 | ||||||||||||
Dividends and accretion on preferred stock |
(730 | ) | (730 | ) | (1,459 | ) | (1,460 | ) | ||||||||
Net Income (Loss) available to common shareholders |
$ | 411 | $ | 124 | $ | 693 | $ | (233 | ) | |||||||
Earnings (loss) per share: |
||||||||||||||||
Basic |
$ | 0.03 | $ | 0.01 | $ | 0.04 | $ | (0.01 | ) | |||||||
Diluted |
$ | 0.02 | $ | 0.01 | $ | 0.04 | $ | (0.01 | ) | |||||||
Weighted average shares outstanding: |
||||||||||||||||
Basic |
15,655,868 | 15,655,868 | 15,655,868 | 15,655,868 | ||||||||||||
Diluted |
16,521,391 | 16,441,749 | 16,602,032 | 15,655,868 |
See notes to consolidated financial statements
4
Table of Contents
NewBridge Bancorp and Subsidiary
Consolidated Statements of Changes in Shareholders Equity and Comprehensive Income
Consolidated Statements of Changes in Shareholders Equity and Comprehensive Income
Six months ended June 30, 2011 and 2010
(Unaudited; Dollars in thousands)
(Unaudited; Dollars in thousands)
Directors | Accumulated | |||||||||||||||||||||||||||||||
Deferred | Retained | Other | Total | |||||||||||||||||||||||||||||
Preferred | Common Stock | Paid-in | Compensation | Earnings | Comprehensive | Shareholders | ||||||||||||||||||||||||||
Stock | Shares | Amount | Capital | Plan | (Deficit) | Income (Loss) | Equity | |||||||||||||||||||||||||
Balances at December 31, 2009 |
$ | 51,190 | 15,655,868 | $ | 78,279 | $ | 86,969 | $ | (634 | ) | $ | (52,477 | ) | $ | 1,277 | $ | 164,604 | |||||||||||||||
Net Income |
1,227 | 1,227 | ||||||||||||||||||||||||||||||
Change in unrealized gain on securities
available for sale, net of deferred
income taxes |
2,103 | 2,103 | ||||||||||||||||||||||||||||||
Total comprehensive income |
3,330 | |||||||||||||||||||||||||||||||
Dividends and accretion on preferred stock |
150 | (1,460 | ) | (1,310 | ) | |||||||||||||||||||||||||||
Stock-based compensation expense |
40 | 40 | ||||||||||||||||||||||||||||||
Common stock distributed |
15 | 15 | ||||||||||||||||||||||||||||||
Balances at June 30, 2010 |
$ | 51,340 | 15,655,868 | $ | 78,279 | $ | 87,009 | $ | (619 | ) | $ | (52,710 | ) | $ | 3,380 | $ | 166,679 | |||||||||||||||
Balances at December 31, 2010 |
$ | 51,490 | 15,655,868 | $ | 78,279 | $ | 87,048 | $ | (618 | ) | $ | (52,016 | ) | $ | (995 | ) | $ | 163,188 | ||||||||||||||
Net Income |
2,152 | 2,152 | ||||||||||||||||||||||||||||||
Change in unrealized gain on securities
available for sale, net of deferred
income taxes |
(169 | ) | (169 | ) | ||||||||||||||||||||||||||||
Total comprehensive income |
1,983 | |||||||||||||||||||||||||||||||
Dividends and accretion on preferred stock |
149 | (1,459 | ) | (1,310 | ) | |||||||||||||||||||||||||||
Stock-based compensation expense |
67 | 67 | ||||||||||||||||||||||||||||||
Common stock distributed |
43 | 43 | ||||||||||||||||||||||||||||||
Balances at June 30, 2011 |
$ | 51,639 | 15,655,868 | $ | 78,279 | $ | 87,115 | $ | (575 | ) | $ | (51,323 | ) | $ | (1,164 | ) | $ | 163,971 | ||||||||||||||
See notes to consolidated financial statements
5
Table of Contents
NewBridge Bancorp and Subsidiary
Consolidated Statements of Cash Flows
(Unaudited; dollars in thousands)
Consolidated Statements of Cash Flows
(Unaudited; dollars in thousands)
Six Months Ended | ||||||||
June 30 | ||||||||
2011 | 2010 | |||||||
Cash Flow from operating activities |
||||||||
Net Income |
$ | 2,152 | $ | 1,227 | ||||
Adjustments to reconcile net income to net cash provided
by operating activities: |
||||||||
Depreciation and amortization |
3,110 | 3,251 | ||||||
(Increase) decrease in deferred income taxes |
(264 | ) | 1,486 | |||||
Decrease in income taxes receivable |
| 2,692 | ||||||
Decrease in income earned but not received |
554 | 244 | ||||||
Decrease in interest accrued but not paid |
(236 | ) | (409 | ) | ||||
Net decrease in other assets |
3,542 | 987 | ||||||
Net increase (decrease) in other liabilities |
1,526 | (245 | ) | |||||
Provision for credit losses |
9,093 | 8,651 | ||||||
Gain on sale of loans held for sale |
(693 | ) | (712 | ) | ||||
Originations of loans held for sale |
(39,615 | ) | (85,532 | ) | ||||
Proceeds from sales of loans held for sale |
114,549 | 81,919 | ||||||
(Gain) Loss on sale of premises, equipment and real estate
acquired in settlement of loans |
(239 | ) | 955 | |||||
Stock based compensation |
67 | 40 | ||||||
Net cash provided by operating activities |
93,546 | 14,554 | ||||||
Cash Flow from investing activities |
||||||||
Purchases of securities available for sale |
(27,426 | ) | (45,007 | ) | ||||
Purchases of securities held to maturity |
| (39,160 | ) | |||||
Proceeds from sales/maturities of securities available for sale |
58,566 | 62,169 | ||||||
Gain on sales of securities available for sale |
(1,961 | ) | | |||||
Net (increase) decrease in loans made to customers |
(626 | ) | 27,040 | |||||
Proceeds from sale of premises, equipment and real estate acquired
in settlement of loans |
6,245 | 10,084 | ||||||
Expenditures for improvements to real estate acquired
in settlement of loans, net of income received |
52 | 46 | ||||||
Purchases of premises and equipment |
(1,991 | ) | (2,440 | ) | ||||
Net cash provided by investing activities |
32,859 | 12,732 | ||||||
Cash Flow from financing activities |
||||||||
Net increase in demand deposits, NOW, money
market and savings accounts |
33,764 | 119,114 | ||||||
Net decrease in time deposits |
(59,670 | ) | (67,077 | ) | ||||
Net decrease in other borrowings |
(15,000 | ) | (27,642 | ) | ||||
Net decrease in borrowings from Federal
Home Loan Bank |
(32,500 | ) | (41,500 | ) | ||||
Dividends paid |
(1,310 | ) | (1,309 | ) | ||||
Common stock distributed (acquired) |
43 | 15 | ||||||
Net cash provided by (used for) financing activities |
(74,673 | ) | (18,399 | ) | ||||
Increase in cash and cash equivalents |
51,732 | 8,887 | ||||||
Cash and cash equivalents at the beginning of the period |
29,075 | 44,840 | ||||||
Cash and cash equivalents at the end of the period |
$ | 80,807 | $ | 53,727 | ||||
See notes to consolidated financial statements
6
Table of Contents
NewBridge Bancorp and Subsidiary
Consolidated Statements of Cash Flows (continued)
(Unaudited; dollars in thousands)
Consolidated Statements of Cash Flows (continued)
(Unaudited; dollars in thousands)
Six Months Ended | ||||||||
June 30 | ||||||||
2011 | 2010 | |||||||
Supplemental disclosures of cash flow information |
||||||||
Cash paid during the periods for: |
||||||||
Interest |
$ | 7,113 | $ | 13,116 | ||||
Income Taxes |
| | ||||||
Supplemental disclosures of noncash transactions |
||||||||
Transfer of loans to real estate acquired
in settlement of loans |
$ | 6,225 | $ | 9,724 | ||||
Accretion on U.S. Treasury preferred stock |
149 | 150 | ||||||
Unrealized gains/(losses) on securities available for sale: |
||||||||
Change in securities available for sale |
1,555 | (2,420 | ) | |||||
Change in deferred income taxes |
(1,386 | ) | 317 | |||||
Change in shareholders equity |
(169 | ) | 2,103 |
See notes to consolidated financial statements
7
Table of Contents
NewBridge Bancorp and Subsidiary
Notes to Consolidated Financial Statements
(Unaudited)
Notes to Consolidated Financial Statements
(Unaudited)
Note 1 Basis of Presentation
The accompanying interim unaudited consolidated financial statements have been prepared in
accordance with accounting principles generally accepted in the United States (GAAP) for interim
financial information and in accordance with the instructions to Form 10-Q and Rule 10-01 of
Regulation S-X. They do not include all of the information and footnotes required by GAAP for
complete financial statements. In the opinion of management, all adjustments (consisting of normal
recurring accruals) and provisions for credit losses considered necessary for a fair presentation
have been included. Operating results for the three-month period ended June 30, 2011 are not
necessarily indicative of the results that may be expected for the year ending December 31, 2011.
NewBridge Bancorp (Bancorp or the Company) is a bank holding company incorporated under the
laws of North Carolina (NC) and registered under the Bank Holding Company Act of 1956, as amended
(the BHCA). Bancorps principal asset is stock of its banking subsidiary, NewBridge Bank (the
Bank). Accordingly, throughout this Quarterly Report on Form 10-Q, there are frequent references
to the Bank.
Through its branch network, the Bank provides a wide range of banking products to individuals,
small to medium-sized businesses and other organizations in its market areas, including interest
bearing and non-interest bearing checking accounts, certificates of deposit, individual retirement
accounts, overdraft protection, personal and corporate trust services, safe deposit boxes, online
banking, corporate cash management, brokerage, financial planning and asset management, mortgage
loans and secured and unsecured loans.
As of June 30, 2011, the Bank operated four active non-bank subsidiaries: Peoples Finance Company
of Lexington, Inc. (Peoples Finance), LSB Properties, Inc. (LSB Properties), Henry Properties,
LLC (Henry Properties) and Prince George Court Holdings, Inc. (Prince George). Peoples Finance,
a NC licensed finance company, with approximately $0.4 million of loans outstanding as of June 30,
2011, is no longer actively soliciting loans. LSB Properties, Henry Properties and Prince George
together own the real estate acquired in settlement of loans of the Bank.
The organization and business of the Company, accounting policies followed by the Company and other
relevant information are contained in the notes to the consolidated financial statements in
Bancorps Annual Report on Form 10-K for the fiscal year ended December 31, 2010, filed with the
Securities and Exchange Commission (the SEC) on March 24, 2011 (SEC File No. 000-11448) (the
Annual Report). This Quarterly Report should be read in conjunction with the Annual Report.
Recent accounting pronouncements
In July 2010, the Financial Accounting Standards Board (FASB) issued ASU No. 2010-20, Receivables
(ASC 310) Disclosure about the Credit Quality of Financing Receivables and the Allowance for
Credit Losses. This ASU requires new disclosures and clarifies existing disclosure requirements
about the nature of credit risk inherent in an entitys loan portfolio; how that risk is analyzed
and assessed in arriving at the allowance for loan losses; and the changes and reasons for those
changes in the allowance for credit losses. The FASBs objective is to improve these disclosures
and, thus, increase the transparency in financial reporting, as well as clarify the requirements
for existing disclosures. ASU 2010-20 became effective for interim and annual reporting periods
ending on or after December 15, 2010. The disclosures about activity during a reporting period are effective for interim and annual
reporting periods beginning on or after December 15, 2010. In January 2011, the FASB delayed the
effective date of the portion of ASU 2010-20 related to troubled debt restructurings to June 2011.
The Company adopted the required portions of ASU-
8
Table of Contents
2010-20 as of December 31, 2010, which only
impacted disclosures. The adoption of the remainder of this pronouncement did not have a material
impact on the Companys financial condition or results of operations.
In April 2011, the FASB issued Update ASU No. 2011-02 Receivables (ASC 310) A Creditors
Determination of Whether a Restructuring Is a Troubled Debt Restructuring. The amendments clarify
guidance on whether a restructuring constitutes a troubled debt restructuring. The creditor must
separately conclude that both of the following exist 1) the restructuring constitutes a concession,
and 2) the debtor is experiencing financial difficulties. The amendments are effective for the
first interim or annual period beginning on or after June 15, 2011, and should be applied
retrospectively to the beginning of the annual period of adoption. For purposes of measuring
impairment of those receivables, an entity should apply the amendments prospectively for the first
interim or annual period beginning on or after June 15, 2011. The adoption of this pronouncement
did not have a material impact on the Companys financial condition or results of operations.
Reclassification
Certain items for 2010 have been reclassified to conform to the 2011 presentation. Such
reclassifications had no effect on net income, total assets or shareholders equity as previously
reported.
Note 2 Net Income (Loss) Per Share
Basic and diluted net income (loss) per share are computed based on the weighted average number of
shares outstanding during each period. Diluted net income per share reflects the potential dilution
that could occur if stock options or warrants were exercised, or restricted stock vested, resulting
in the issuance of common stock sharing in the net income of the Company. A summary of basic and
diluted weighted average number of shares used in the computation of net income (loss) per share
follows (in thousands, except per share data):
Three Months Ended | Six Months Ended | |||||||||||||||
June 30 | June 30 | |||||||||||||||
2011 | 2010 | 2011 | 2010 | |||||||||||||
Weighted average number of common shares used in
computing basic net income per share |
15,655,868 | 15,655,868 | 15,655,868 | 15,655,868 | ||||||||||||
Effect of dilutive stock options, warrants and
restricted stock grants |
865,523 | 785,881 | 946,164 | | ||||||||||||
Diluted weighted average common shares outstanding |
16,521,391 | 16,441,749 | 16,602,032 | 15,655,868 | ||||||||||||
9
Table of Contents
Note 3 Investment Securities
Investment securities consist of the following (in thousands):
June 30, 2011 | ||||||||||||||||
Amortized | Unrealized | Unrealized | Market | |||||||||||||
Cost | Gains | Losses | Value | |||||||||||||
U.S. government agency securities |
$ | 92,279 | $ | 136 | $ | (1,224 | ) | $ | 91,191 | |||||||
Mortgage backed securities |
36,146 | 2,837 | | 38,983 | ||||||||||||
State and municipal obligations |
17,388 | 71 | (932 | ) | 16,527 | |||||||||||
Corporate bonds |
100,882 | 1,821 | (523 | ) | 102,180 | |||||||||||
Collateralized mortgage obligations |
27,744 | 1,134 | (40 | ) | 28,838 | |||||||||||
Federal Home Loan Bank stock |
9,115 | | | 9,115 | ||||||||||||
Other equity securities |
5,775 | 289 | | 6,064 | ||||||||||||
Total |
$ | 289,329 | $ | 6,288 | $ | (2,719 | ) | $ | 292,898 | |||||||
December 31, 2010 | ||||||||||||||||
Amortized | Unrealized | Unrealized | Market | |||||||||||||
Cost | Gains | Losses | Value | |||||||||||||
U.S. government agency securities |
$ | 109,274 | $ | 267 | $ | (2,017 | ) | $ | 107,524 | |||||||
Mortgage backed securities |
55,989 | 4,320 | | 60,309 | ||||||||||||
State and municipal obligations |
17,380 | 13 | (1,982 | ) | 15,411 | |||||||||||
Corporate bonds |
82,816 | 2,309 | (612 | ) | 84,513 | |||||||||||
Collateralized mortgage obligations |
39,679 | 823 | (90 | ) | 40,412 | |||||||||||
Federal Home Loan Bank stock |
10,399 | | | 10,399 | ||||||||||||
Other equity securities |
5,775 | 786 | | 6,561 | ||||||||||||
Total |
$ | 321,312 | $ | 8,518 | $ | (4,701 | ) | $ | 325,129 | |||||||
All
securities were classified as available for sale as of each date
presented.
The following is a schedule of securities in a loss position as of June 30, 2011 (in thousands):
Less than 1 year | 1 Year or More | Total | ||||||||||||||||||||||
Market | Unrealized | Market | Unrealized | Market | Unrealized | |||||||||||||||||||
Value | Loss | Value | Loss | Value | Loss | |||||||||||||||||||
U.S. government agency securities |
$ | 74,066 | $ | (1,224 | ) | $ | | $ | | $ | 74,066 | $ | (1,224 | ) | ||||||||||
State and municipal obligations |
7,630 | (309 | ) | 5,498 | (623 | ) | 13,128 | (932 | ) | |||||||||||||||
Corporate bonds |
28,084 | (523 | ) | | | 28,084 | (523 | ) | ||||||||||||||||
Collateralized mortgage obligations |
1,337 | (10 | ) | 2,486 | (30 | ) | 3,823 | (40 | ) | |||||||||||||||
Total securities |
$ | 111,117 | $ | (2,066 | ) | $ | 7,984 | $ | (653 | ) | $ | 119,101 | $ | (2,719 | ) | |||||||||
Investment securities with an amortized cost of $77,408,000 and $98,111,000, as of June 30,
2011, and December 31, 2010, respectively, were pledged to secure public deposits and for other
purposes. The Bank has obtained $50,000,000 in letters of credit, which are used in lieu of
securities to pledge against public deposits.
During the first quarter of 2011, the Company sold $31,510,000 of investments for a gain of
$1,961,000. The Company elected to sell shorter-duration, odd-lot mortgage backed securities and
corporate bonds that
10
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had significant gain positions. No investment securities were sold during the
six months ended June 30, 2010.
Note 4 Loans and Allowance for Credit Losses
Loans are summarized as follows (in thousands):
June 30 | December 31 | |||||||
2011 | 2010 | |||||||
Secured by owner-occupied nonfarm nonresidential
properties |
239,746 | 222,889 | ||||||
Secured by other nonfarm nonresidential
properties |
164,778 | 159,086 | ||||||
Other commercial and industrial |
134,792 | 134,011 | ||||||
Total Commercial |
539,316 | 515,986 | ||||||
Construction loans 1 to 4 family
residential |
11,584 | 16,736 | ||||||
Other construction and land development |
118,289 | 122,382 | ||||||
Total Real estate construction |
129,873 | 139,118 | ||||||
Closed-end loans secured by 1 to 4 family
residential properties |
296,232 | 304,640 | ||||||
Lines of credit secured by 1 to 4 family
residential properties |
215,417 | 219,557 | ||||||
Loans secured by 5 or more family
residential properties |
19,376 | 20,207 | ||||||
Total Real estate mortgage |
531,025 | 544,404 | ||||||
Credit cards |
7,507 | 7,749 | ||||||
Other revolving credit plans |
9,273 | 9,042 | ||||||
Other consumer loans |
22,602 | 36,224 | ||||||
Total Consumer |
39,382 | 53,015 | ||||||
Loans to other depository institutions |
| 3,800 | ||||||
All other loans |
4,692 | 4,262 | ||||||
Total Other |
4,692 | 8,062 | ||||||
Total loans |
1,244,288 | 1,260,585 | ||||||
Loans held for sale |
2,754 | 76,994 | ||||||
Total loans and loans held for sale |
1,247,042 | 1,337,579 |
11
Table of Contents
Nonperforming assets are summarized as follows (in thousands):
June 30 | December 31 | |||||||
2011 | 2010 | |||||||
Commercial nonaccrual loans, not restructured |
$ | 17,839 | $ | 23,453 | ||||
Commercial nonaccrual loans, restructured |
11,042 | 11,190 | ||||||
Non-commercial nonaccrual loans |
10,383 | 8,537 | ||||||
Total nonaccrual loans |
39,264 | 43,180 | ||||||
Troubled debt restructured, accruing |
8,351 | 7,378 | ||||||
Accruing loans which are contractually past due 90 days
or more |
65 | 27 | ||||||
Total nonperforming loans |
47,680 | 50,585 | ||||||
Real estate acquired in settlement of loans |
25,729 | 26,718 | ||||||
Total nonperforming assets |
$ | 73,409 | $ | 77,303 | ||||
Nonperforming loans to loans outstanding at end of period |
3.83 | % | 4.01 | % | ||||
Nonperforming assets to total assets at end of period |
4.23 | % | 4.28 | % | ||||
Allowance for credit losses to non-performing loans |
58.81 | % | 56.84 | % |
The aging of loans is summarized in the following table (in thousands):
30-89 days | 90 + days | Nonaccrual | Total past due | Total loans | ||||||||||||||||||||
Past due | Past due | Loans | + nonaccrual | Current | Receivable | |||||||||||||||||||
June 30, 2011 |
||||||||||||||||||||||||
Secured by owner-occupied nonfarm nonresidential
property |
$ | 4,377 | $ | | $ | 5,751 | $ | 10,128 | $ | 229,618 | $ | 239,746 | ||||||||||||
Secured by other nonfarm nonresidential property |
1,187 | | 1,658 | 2,845 | 161,933 | 164,778 | ||||||||||||||||||
Other commercial and industrial |
215 | | 847 | 1,062 | 133,730 | 134,792 | ||||||||||||||||||
Total Commercial |
5,779 | | 8,256 | 14,035 | 525,281 | 539,316 | ||||||||||||||||||
Construction loans 1 to 4 family residential |
250 | | 1,276 | 1,526 | 10,058 | 11,584 | ||||||||||||||||||
Other construction and land development |
1,876 | | 13,665 | 15,541 | 102,728 | 118,289 | ||||||||||||||||||
Total Real estate construction |
2,126 | | 14,941 | 17,067 | 118,007 | 129,873 | ||||||||||||||||||
Closed-end loans secured by 1 to 4 family residential
property |
5,794 | | 13,854 | 19,648 | 276,584 | 296,232 | ||||||||||||||||||
Lines of credit secured by 1 to 4 family residential
property |
1,672 | | 1,440 | 3,112 | 212,305 | 215,417 | ||||||||||||||||||
Loans secured by 5 or more family residential property |
6,417 | | 394 | 6,811 | 12,565 | 19,376 | ||||||||||||||||||
Total Real estate mortgage |
13,883 | | 15,688 | 29,571 | 501,454 | 531,025 | ||||||||||||||||||
Credit cards |
83 | 58 | | 141 | 7,366 | 7,507 | ||||||||||||||||||
Other revolving credit plans |
208 | | 24 | 232 | 9,041 | 9,273 | ||||||||||||||||||
Other consumer loans |
343 | 7 | 355 | 705 | 21,897 | 22,602 | ||||||||||||||||||
Total Consumer |
634 | 65 | 379 | 1,078 | 38,304 | 39,382 | ||||||||||||||||||
Loans to other depository institutions |
| | | | | | ||||||||||||||||||
All other loans |
| | | | 4,692 | 4,692 | ||||||||||||||||||
Total Other |
| | | | 4,692 | 4,692 | ||||||||||||||||||
Total loans |
22,422 | 65 | 39,264 | 61,751 | 1,182,537 | 1,244,288 | ||||||||||||||||||
Loans held for sale |
| | | | 2,754 | 2,754 | ||||||||||||||||||
Total loans and loans held for sale |
$ | 22,422 | $ | 65 | $ | 39,264 | $ | 61,751 | $ | 1,185,291 | $ | 1,247,042 | ||||||||||||
12
Table of Contents
30-89 days | 90 + days | Nonaccrual | Total past due | Total loans | ||||||||||||||||||||
Past due | Past due | Loans | + nonaccrual | Current | Receivable | |||||||||||||||||||
December 31, 2010 |
||||||||||||||||||||||||
Secured by owner-occupied nonfarm nonresidential
property |
$ | 2,619 | $ | | $ | 5,953 | $ | 8,572 | $ | 214,317 | $ | 222,889 | ||||||||||||
Secured by other nonfarm nonresidential property |
1,767 | | 1,076 | 2,843 | 156,243 | 159,086 | ||||||||||||||||||
Other commercial and industrial |
2,641 | | 1,875 | 4,516 | 129,495 | 134,011 | ||||||||||||||||||
Total Commercial |
7,027 | | 8,904 | 15,931 | 500,055 | 515,986 | ||||||||||||||||||
Construction loans 1 to 4 family residential |
1,166 | | 2,666 | 3,832 | 12,904 | 16,736 | ||||||||||||||||||
Other construction and land development |
3,354 | | 13,925 | 17,279 | 105,103 | 122,382 | ||||||||||||||||||
Total Real estate construction |
4,520 | | 16,591 | 21,111 | 118,007 | 139,118 | ||||||||||||||||||
Closed-end loans secured by 1 to 4 family residential
property |
10,444 | | 10,830 | 21,274 | 283,366 | 304,640 | ||||||||||||||||||
Lines of credit secured by 1 to 4 family residential
property |
4,549 | | 1,611 | 6,160 | 213,397 | 219,557 | ||||||||||||||||||
Loans secured by 5 or more family residential property |
147 | | 1,004 | 1,151 | 19,056 | 20,207 | ||||||||||||||||||
Total Real estate mortgage |
15,140 | | 13,445 | 28,585 | 515,189 | 544,404 | ||||||||||||||||||
Credit cards |
122 | 27 | | 149 | 7,600 | 7,749 | ||||||||||||||||||
Other revolving credit plans |
226 | | 11 | 237 | 8,805 | 9,042 | ||||||||||||||||||
Other consumer loans |
847 | | 429 | 1,276 | 34,948 | 36,224 | ||||||||||||||||||
Total Consumer |
1,195 | 27 | 440 | 1,662 | 51,353 | 53,015 | ||||||||||||||||||
Loans to other depository institutions |
| | 3,800 | 3,800 | | 3,800 | ||||||||||||||||||
All other loans |
| | | | 4,262 | 4,262 | ||||||||||||||||||
Total Other |
| | 3,800 | 3,800 | 4,262 | 8,062 | ||||||||||||||||||
Total loans |
27,882 | 27 | 43,180 | 71,089 | 1,189,496 | 1,260,585 | ||||||||||||||||||
Loans held for sale |
359 | | | 359 | 76,635 | 76,994 | ||||||||||||||||||
Total loans and loans held for sale |
$ | 28,241 | $ | 27 | $ | 43,180 | $ | 71,448 | $ | 1,266,131 | $ | 1,337,579 | ||||||||||||
Impaired loans and related information are summarized in the following tables (in thousands):
Impaired Loans | ||||||||||||
Recorded | Unpaid principal | Specific | ||||||||||
Balance | Balance | Allowance | ||||||||||
June 30, 2011 |
||||||||||||
Loans without a specific valuation allowance |
||||||||||||
Commercial |
$ | 4,204 | $ | 4,399 | $ | | ||||||
Real estate construction |
9,237 | 13,546 | | |||||||||
Real estate mortgage |
9,204 | 9,758 | | |||||||||
Consumer |
117 | 117 | | |||||||||
Total |
22,762 | 27,820 | | |||||||||
Loans with a specific valuation allowance |
||||||||||||
Commercial |
2,961 | 3,447 | 1,304 | |||||||||
Real estate construction |
3,840 | 4,140 | 456 | |||||||||
Real estate mortgage |
7,920 | 8,474 | 1,008 | |||||||||
Consumer |
| | | |||||||||
Total |
14,721 | 16,061 | 2,768 | |||||||||
Total impaired loans |
||||||||||||
Commercial |
7,165 | 7,846 | 1,304 | |||||||||
Real estate construction |
13,077 | 17,686 | 456 | |||||||||
Real estate mortgage |
17,124 | 18,232 | 1,008 | |||||||||
Consumer |
117 | 117 | | |||||||||
Total |
$ | 37,483 | $ | 43,881 | $ | 2,768 |
13
Table of Contents
Impaired Loans | ||||||||||||
Recorded | Unpaid principal | Specific | ||||||||||
Balance | Balance | Allowance | ||||||||||
December 31, 2010 |
||||||||||||
Loans without a specific valuation allowance |
||||||||||||
Commercial |
$ | 4,651 | $ | 5,437 | $ | | ||||||
Real estate construction |
12,489 | 17,165 | | |||||||||
Real estate mortgage |
6,633 | 7,676 | | |||||||||
Consumer |
112 | 112 | | |||||||||
Other |
3,800 | 10,000 | | |||||||||
Total |
27,685 | 40,390 | | |||||||||
Loans with a specific valuation allowance |
||||||||||||
Commercial |
1,375 | 1,482 | 578 | |||||||||
Real estate construction |
1,606 | 2,577 | 251 | |||||||||
Real estate mortgage |
7,290 | 7,290 | 976 | |||||||||
Consumer |
347 | 347 | 122 | |||||||||
Other |
| | | |||||||||
Total |
10,618 | 11,696 | 1,927 | |||||||||
Total impaired loans |
||||||||||||
Commercial |
6,026 | 6,919 | 578 | |||||||||
Real estate construction |
14,095 | 19,742 | 251 | |||||||||
Real estate mortgage |
13,923 | 14,966 | 976 | |||||||||
Consumer |
459 | 459 | 122 | |||||||||
Other |
3,800 | 10,000 | | |||||||||
Total |
$ | 38,303 | $ | 52,086 | $ | 1,927 |
June 30 | December 31 | |||||||
2011 | 2010 | |||||||
Loans identified as impaired |
$ | 37,483 | $ | 38,303 | ||||
Other nonperforming loans |
10,197 | 12,282 | ||||||
Total nonperforming loans |
47,680 | 50,585 | ||||||
Other potential problem loans |
97,141 | 110,924 | ||||||
Total impaired and potential problem loans |
$ | 144,821 | $ | 161,509 | ||||
The Banks policy for impaired loan accounting subjects all loans to impairment recognition
except for large groups of smaller balance homogeneous loans such as credit card, residential
mortgage and consumer loans. The Bank generally considers loans 90 days or more past due and all
nonaccrual loans to be impaired.
The following table summarizes, by internally assigned risk grade, the risk grade for loans for
which the bank has assigned a risk grade (in thousands).
June 30 | December 31 | |||||||||||||||||||||||||||||||||||||||
2011 | 2010 | |||||||||||||||||||||||||||||||||||||||
Special | Sub- | Special | Sub- | |||||||||||||||||||||||||||||||||||||
Pass | Mention | standard | Doubtful | Total | Pass | Mention | standard | Doubtful | Total | |||||||||||||||||||||||||||||||
Commercial |
$ | 428,361 | $ | 52,771 | $ | 85,355 | $ | 207 | $ | 566,694 | $ | 423,474 | $ | 48,651 | $ | 75,682 | $ | 1,121 | $ | 548,928 | ||||||||||||||||||||
Real estate
construction |
56,885 | 16,583 | 30,538 | 722 | 104,728 | 66,766 | 13,673 | 47,319 | 630 | 128,388 | ||||||||||||||||||||||||||||||
Real estate mortgage |
62,169 | 6,529 | 16,219 | 66 | 84,983 | 92,610 | 7,898 | 20,288 | 798 | 121,594 | ||||||||||||||||||||||||||||||
Consumer |
| | | | | 2 | | | | 2 | ||||||||||||||||||||||||||||||
Other |
4,007 | | | | 4,007 | 3,448 | | 3,903 | | 7,351 | ||||||||||||||||||||||||||||||
Total |
$ | 551,422 | $ | 75,883 | $ | 132,112 | $ | 995 | $ | 760,412 | $ | 586,300 | $ | 70,222 | $ | 147,192 | $ | 2,549 | $ | 806,263 | ||||||||||||||||||||
14
Table of Contents
An analysis of the changes in the allowance for credit losses follows (in thousands):
Six Months Ended | ||||||||
June 30 | ||||||||
2011 | 2010 | |||||||
Balance, beginning of period |
$ | 28,752 | $ | 35,843 | ||||
Loans charged off: |
||||||||
Commercial |
2,459 | 4,964 | ||||||
Real estate construction |
2,248 | 1,329 | ||||||
Real estate mortgage |
4,005 | 4,273 | ||||||
Consumer |
710 | 1,584 | ||||||
Other |
1,300 | | ||||||
Total chargeoffs |
10,722 | 12,150 | ||||||
Recoveries of loans previously charged off: |
||||||||
Commercial |
198 | 227 | ||||||
Real estate construction |
184 | 47 | ||||||
Real estate mortgage |
295 | 135 | ||||||
Consumer |
221 | 328 | ||||||
Other |
19 | | ||||||
Total recoveries |
917 | 737 | ||||||
Net loans charged off |
9,805 | 11,413 | ||||||
Provision for loan losses |
9,093 | 8,651 | ||||||
Balance, end of period |
$ | 28,040 | $ | 33,081 | ||||
Loans totaling $2,754,000 and $76,994,000, as of June 30, 2011 and December 31, 2010,
respectively, were held for sale, and stated at the lower of cost or market on an individual basis.
Loans totaling $519,718,000 and $569,896,000, as of June 30, 2011 and December 31, 2010,
respectively, were pledged to secure lines of the credit with the Federal Home Loan Bank and
Federal Reserve Bank.
Note 5 Stock Compensation Plans
The Company recorded $67,000, or less than $0.01 per diluted share and $40,000, or less than $0.01
per diluted share, of total stock-based compensation expense for the six-month periods ended June
30, 2011 and June 30, 2010, respectively. The stock-based compensation expense is calculated on a
ratable basis over the vesting periods of the related stock options or restricted stock grants and
is reported under personnel expense. This expense had no impact on the Companys reported cash
flows. As of June 30, 2011, there was $453,000 of total unrecognized stock-based compensation
expense. This expense will be fully recognized by December 31, 2014.
For purposes of determining estimated fair value of the stock options and restricted stock grants,
the Company has computed the estimated fair values of all stock-based compensation using the
Black-Scholes option pricing model and, for stock options and restricted stock grants granted prior
to December 31, 2010, has applied the assumptions set forth in the Annual Report.
On February 9, 2011, the Companys Board of Directors awarded a total of 83,551 restricted stock
units to certain executive officers. The fair value of these restricted stock units is $5.15, which
was the closing price of the Companys common stock on that date. The restricted stock units vest
over a period of four years, and are subject to the Company repaying certain portions of the funds
it received under the U.S. Department of the Treasury (the U.S. Treasury) Capital Purchase
Program. The stock-based compensation expense for these awards was immaterial for the second
quarter and first six months of 2011. There were no stock options granted in 2011.
15
Table of Contents
Note 6 Fair Value of Financial Instruments
The table below presents the assets measured at fair value on a recurring basis categorized by the
level of inputs used in the valuation of each asset (in thousands):
Quoted prices | ||||||||||||
in active markets | Significant other | Significant | ||||||||||
for identical | observable inputs | unobservable inputs | ||||||||||
assets (Level 1) | (Level 2) | (Level 3) | ||||||||||
Available for sale securities at June 30, 2011 |
$ | | $ | 265,793 | $ | 9,115 | ||||||
Available for sale securities at December 31, 2010 |
| 314,730 | 10,399 |
The table below presents the assets measured at fair value on a non-recurring basis
categorized by the level of inputs used in the valuation of each asset (in thousands):
Quoted prices | ||||||||||||
in active markets | Significant other | Significant | ||||||||||
for identical | observable inputs | unobservable inputs | ||||||||||
assets (Level 1) | (Level 2) | (Level 3) | ||||||||||
Loans held for sale at June 30, 2011 |
$ | | $ | 2,754 | $ | | ||||||
Loans held for sale at December 31, 2010 |
| 76,994 | | |||||||||
Real estate
acquired in settlement of loans at June 30, 2011 |
| | 25,729 | |||||||||
Real estate
acquired in settlement of loans at December 31, 2010 |
| | 26,718 | |||||||||
Core deposit intangible at June 30, 2011 |
| | 4,163 | |||||||||
Core deposit intangible at December 31, 2010 |
| | 4,526 | |||||||||
Impaired loans, net of allowance at June 30, 2011 |
| | 33,598 | |||||||||
Impaired loans, net of allowance at December 31, 2010 |
| | 36,368 |
Note 7 U.S. Treasury Capital Purchase Program
Pursuant to the U.S. Treasury Capital Purchase Program, on December 12, 2008, the Company issued
and sold to the U.S. Treasury (i) 52,372 shares of Bancorps Fixed Rate Cumulative Perpetual
Preferred Stock, Series A (the Series A Preferred Stock) and (ii) a warrant (the Warrant) to
purchase 2,567,255 shares of the Companys common stock at an exercise price of $3.06 per share,
for an aggregate purchase price of $52,372,000 in cash. The Warrant may be exercised by U.S.
Treasury at any time before it expires on December 12, 2018. The fair value of the Warrant of
$1,497,000 was estimated on the date of the grant using the Black-Scholes option-pricing model. The
Series A Preferred Stock pays cumulative dividends of five percent for the first five years and
nine percent thereafter, unless the Company redeems the shares.
Note 8 Sale of Harrisonburg, Virginia Operations
On May 20, 2011, the bank sold it Harrisonburg, Virginia operations. This transaction included the
sale of approximately $73.0 million of loans and $48.8 million of deposits, as well as a bank
branch and a parcel of land. The bank retained approximately $30.5 million of loans in its Virginia
Region. The bank had provided for an estimated loss of $322,000 in the fourth quarter of 2010, and
recorded a gain of approximately $100,000 in the second quarter of 2011 when the sale closed.
16
Table of Contents
Item 2. Managements Discussion and Analysis of Financial Condition and Results of Operations.
The discussion presented herein is intended to provide an overview of the changes in financial
condition and results of operations during the time periods required by Item 303 of Regulation S-K
for NewBridge Bancorp (Bancorp or the Company) and its wholly-owned subsidiary NewBridge Bank
(the Bank).
The consolidated financial statements also include the accounts and results of operations of the
Banks wholly-owned subsidiaries. This discussion and analysis is intended to complement the
unaudited financial statements, notes and supplemental financial data in this Quarterly Report on
Form 10-Q, and should be read in conjunction therewith.
This Quarterly Report on Form 10-Q contains forward-looking statements within the meaning of the
Private Securities Litigation Reform Act of 1995. These statements represent expectations and
beliefs of Bancorp including but not limited to Bancorps operations, performance, financial
condition, growth or strategies. These forward-looking statements are identified by words such as
expects, anticipates, should, estimates, believes and variations of these words and other
similar statements. For this purpose, any statements contained in this Quarterly Report on Form
10-Q that are not statements of historical fact may be deemed to be forward-looking statements.
Readers should not place undue reliance on forward-looking statements as a number of important
factors could cause actual results to differ materially from those in the forward-looking
statements. These forward-looking statements involve estimates, assumptions, risks and
uncertainties that could cause actual results to differ materially from current projections
depending on a variety of important factors, including without limitation: (1) recently enacted
legislation, or legislation enacted in the future, or any proposed federal programs may subject
Bancorp to increased regulation and may adversely affect Bancorp; (2) the strength of the United
States economy generally, and the strength of the local economies in which Bancorp conducts
operations, may be different than expected, resulting in, among other things, a continued
deterioration in credit quality, including the resultant effect on Bancorps loan portfolio and
allowance for credit losses; (3) the effects of, and changes in, trade, monetary and fiscal
policies and laws, including interest rate policies of the Board of Governors of the Federal
Reserve System (the Federal Reserve); (4) inflation, deflation, interest rate, market and
monetary fluctuations; (5) adverse conditions in the stock market, the public debt market and other
capital markets (including changes in interest rate and market liquidity conditions) and the impact
of such conditions on Bancorps capital markets and capital management activities; (6) the timely
development of competitive new products and services by Bancorp and the acceptance of these
products and services by new and existing customers; (7) the willingness of customers to accept
third party products marketed by Bancorp; (8) the willingness of customers to substitute
competitors products and services for Bancorps products and services and vice versa; (9) the
impact of changes in financial services laws and regulations (including laws concerning taxes,
banking and securities); (10) technological changes; (11) changes in consumer spending and saving
habits; (12) the effect of corporate restructurings, acquisitions and/or dispositions, and the
failure to achieve the expected revenue growth and/or expense savings from such corporate
restructurings, acquisitions and/or dispositions; (13) the current stresses in the financial and
real estate markets, including possible continued deterioration in property values; (14)
unanticipated regulatory or judicial proceedings; (15) the impact of changes in accounting policies
by the Securities and Exchange Commission (the SEC); (16) adverse changes in financial
performance and/or condition of Bancorps borrowers which could impact repayment of such borrowers
outstanding loans; and (17) Bancorps success at managing the risks involved in the foregoing.
Bancorp cautions that the foregoing list of important factors is not exhaustive. See also those
risk factors identified in the section headed Risk Factors, beginning on page 14 of Bancorps
Annual Report on Form 10-K for the fiscal year ended December
31, 2010, filed with the Securities
and Exchange Commission (the SEC) on March 24, 2011 (the Annual Report). Bancorp undertakes no
obligation to update any forward-looking statement, whether written or oral, which may be made from
time to time by or on behalf of Bancorp.
17
Table of Contents
Introduction
Bancorp is a bank holding company incorporated under the laws of North Carolina (NC) and
registered under the Bank Holding Company Act of 1956, as amended (the BHCA). Bancorps
principal asset is the stock of its banking subsidiary, the Bank.
The Companys results of operations are dependent primarily on the results of operations of the
Bank and thus are dependent to a significant extent on net interest income, which is the difference
between the income earned on the Banks loan and investment portfolios and cost of funds,
consisting of interest paid on deposits and borrowings. Results of operations are also affected by
the Companys provision for credit losses, mortgage loan sales activities, service charges and
other fee income, and noninterest expense. The Companys noninterest expense principally consists
of compensation and employee benefits, office occupancy and equipment expense, data processing,
professional fees, and advertising and business promotion expenses. The Companys results of
operations are also significantly affected by general economic and competitive conditions,
particularly changes in interest rates, government policies and actions of regulatory authorities.
Commercial banking in North Carolina is extremely competitive, due in large part to intrastate and
interstate branching laws. Many of the Companys competitors are significantly larger and have
greater resources. The Company continues to encounter significant competition from a number of
sources, including bank holding companies, financial holding companies, commercial banks, thrift
institutions, credit unions and other financial institutions and financial intermediaries. The
Company competes in its market areas with some of the largest banking organizations in the
Southeast and nationally, almost all of which have numerous branches in NC. The Companys
competition is not limited to financial institutions based in NC. The enactment of federal
legislation authorizing nationwide interstate banking has greatly increased the size and financial
resources of some of the Companys competitors. Many of its competitors have substantially higher
lending limits due to their greater total capitalization, and some perform functions for their
customers that the Company generally does not offer. The Company primarily relies on providing
quality products and services at a competitive price within its market areas. As a result of
interstate banking legislation, the Companys market is also open to further future penetration by
banks located in other states.
The following discussion and analysis is presented on a consolidated basis and focuses on the major
components of the Companys operations and significant changes in its results of operations for the
periods presented. For further information, refer to the Consolidated Financial Statements and
notes thereto included in the Annual Report.
Application of Critical Accounting Policies
The accounting and reporting policies of the Company and its subsidiary comply with accounting
principles generally accepted in the United States and conform to standards within the banking
industry. The preparation of the financial information contained in this Quarterly Report on Form
10-Q requires the Companys management to make estimates and judgments that affect the reported
amounts of assets, liabilities, revenues and expenses, and related disclosure of contingent assets
and liabilities. The Companys management evaluates these estimates on an ongoing basis. A summary
of the allowance for credit losses, one of the most complex and subjective accounting policies of
the Company, is discussed under the heading Asset Quality and Allowance for Credit losses.
18
Table of Contents
Three Months Ended June 30, 2011 Compared to Three Months Ended June 30, 2010
Net Interest Income
The primary source of earnings for the Bank is net interest income, which represents the dollar
amount by which interest generated from earning assets exceeds the cost of funds. Earning assets
consist primarily of loans and investment securities. Cost of funds is the interest paid on
interest-bearing deposits and borrowed funds.
Net interest income for the second quarter of 2011, on a taxable equivalent basis, was $16.6
million, a decrease of $1.2 million or 6.9%, from $17.9 million for the second quarter of 2011.
Average earning assets in the second quarter of 2011 decreased $198.5 million, or 11.0%, to $1.61
billion, compared to $1.81 billion in the second quarter of 2010. Average loans decreased $126.6
million as a result of soft loan demand and the sale of approximately $73.0 million in loans in
connection with the sale of the Banks Harrisonburg, Virginia operations. Average interest-bearing
liabilities for the second quarter of 2011 decreased $178.3 million, or 11.2%, to $1.42 billion,
compared to $1.59 billion for the second quarter of 2010. The impact on net interest income caused
by the decrease in earning assets was partially offset by an increase in taxable-equivalent net
interest margin, which increased to 4.14% for the second quarter of 2011, compared to 3.96% for the
second quarter of 2010, an increase of 18 basis points.
The increase in net interest margin was due to the Companys continued shift in focus away from
higher cost time deposits and towards checking accounts and other core deposit relationships. The
average yield on earning assets during the second quarter of 2011 was 22 basis points lower than
the average yield on earning assets during the comparable period in 2010, while the average rate on
interest-bearing liabilities decreased by 46 basis points during the same time period, which
resulted in an increase in the interest rate spread in the second quarter of 2011 of 24 basis
points compared to the second quarter of 2010. The following table provides an analysis of average
volumes, yields and rates and net interest income on a tax-equivalent basis for the three months
ended June 30, 2011 and 2010.
19
Table of Contents
(Fully taxable equivalent basis1, in thousands)
Three Months Ended | Three Months Ended | |||||||||||||||||||||||
June 30, 2011 | June 30, 2010 | |||||||||||||||||||||||
Interest | Annualized | Interest | Annualized | |||||||||||||||||||||
Average | Income/ | Average | Average | Income/ | Average | |||||||||||||||||||
Balance | Expense | Yield/Rate | Balance | Expense | Yield/Rate | |||||||||||||||||||
Earning assets: |
||||||||||||||||||||||||
Loans receivable2 |
$ | 1,298,832 | $ | 16,694 | 5.16 | % | $ | 1,425,417 | $ | 18,951 | 5.33 | % | ||||||||||||
Taxable securities |
251,964 | 2,953 | 4.70 | 243,771 | 2,947 | 4.85 | ||||||||||||||||||
Tax exempt securities |
16,225 | 282 | 6.96 | 101,712 | 1,536 | 6.06 | ||||||||||||||||||
FHLB stock |
9,664 | 21 | 0.86 | 11,640 | 7 | 0.26 | ||||||||||||||||||
Interest-bearing bank balances |
32,514 | 20 | 0.25 | 25,251 | 13 | 0.21 | ||||||||||||||||||
Federal funds sold |
| | | | | | ||||||||||||||||||
Total earning assets |
1,609,229 | 19,970 | 4.98 | 1,807,791 | 23,454 | 5.20 | ||||||||||||||||||
Non-earning assets: |
||||||||||||||||||||||||
Cash and due from banks |
35,781 | 27,820 | ||||||||||||||||||||||
Premises and equipment |
37,706 | 40,635 | ||||||||||||||||||||||
Other assets |
107,386 | 104,518 | ||||||||||||||||||||||
Allowance for credit losses |
(29,988 | ) | (35,492 | ) | ||||||||||||||||||||
Total assets |
$ | 1,760,112 | $ | 19,970 | $ | 1,945,272 | $ | 23,454 | ||||||||||||||||
Interest-bearing liabilities: |
||||||||||||||||||||||||
Savings deposits |
$ | 41,598 | $ | 10 | 0.10 | % | $ | 40,934 | $ | 10 | 0.10 | % | ||||||||||||
NOW deposits |
439,153 | 710 | 0.65 | 363,390 | 866 | 0.96 | ||||||||||||||||||
Money market deposits |
358,642 | 703 | 0.79 | 346,760 | 767 | 0.89 | ||||||||||||||||||
Time deposits |
429,205 | 1,151 | 1.08 | 630,581 | 2,341 | 1.49 | ||||||||||||||||||
Other borrowings |
61,279 | 492 | 3.22 | 72,476 | 596 | 3.30 | ||||||||||||||||||
Borrowings from Federal
Home Loan Bank |
86,299 | 284 | 1.32 | 140,431 | 1,017 | 2.90 | ||||||||||||||||||
Total interest-bearing liabilities |
1,416,176 | 3,350 | 0.95 | 1,594,472 | 5,597 | 1.41 | ||||||||||||||||||
Other liabilities and shareholders
equity: |
||||||||||||||||||||||||
Demand deposits |
165,070 | 166,588 | ||||||||||||||||||||||
Other liabilities |
15,920 | 19,126 | ||||||||||||||||||||||
Shareholders equity |
162,946 | 164,986 | ||||||||||||||||||||||
Total liabilities and shareholders
equity |
$ | 1,760,112 | 3,350 | $ | 1,945,272 | 5,597 | ||||||||||||||||||
Net interest income and net
interest margin3 |
$ | 16,620 | 4.14 | % | $ | 17,857 | 3.96 | % | ||||||||||||||||
Interest rate spread4 |
4.03 | % | 3.79 | % | ||||||||||||||||||||
1 | Income related to securities exempt from federal income taxes is stated on a fully
taxable-equivalent basis, assuming a federal income tax rate of 35%, and is then reduced by
the non-deductible portion of interest expense. The adjustments made to convert to a fully
taxable equivalent basis were $91 for 2011 and $482 for 2010. |
|
2 | The average loans receivable balances include non-accruing loans. Amortization of
loan fees, net of deferred costs, of $150 and $139 for the three months ended June 30, 2011
and 2010, respectively, are included in interest income. |
|
3 | Net interest margin is computed by dividing net interest income by average earning assets. | |
4 | Earning assets yield minus interest-bearing liability rate. |
20
Table of Contents
Noninterest Income and Expense
In the second quarter of 2011, noninterest income decreased to $2.4 million, from $3.9 million
during the same period in 2010. Retail banking income decreased 17.7% to $2.6 million in the second
quarter of 2011 from $3.1 million in the second quarter of 2010, due primarily to ongoing
regulatory changes in the industry and changes in consumer behavior. Mortgage revenue decreased to
$268,000 in the second quarter of 2011, compared to $442,000 in the second quarter of 2010.
Writedowns and loss on sale of OREO increased from ($717,000) in the second quarter of 2010 to
($1.6) million in the second quarter of 2011. Wealth management income increased $128,000 to
$626,000 for the three months ending June 30, 2011 compared to the same period a year ago.
In the second quarter of 2011, noninterest expense decreased to $14.6 million from $15.5 million in
the second quarter of 2010. Personnel expense, technology and data processing expense, occupancy
costs and furniture and equipment expenses all decreased as a result of the Companys continued
focus on a disciplined cost management culture.
The following table presents the details of Other Noninterest Expense.
Other Noninterest Expense (in thousands)
Three Months Ended | ||||||||||||
June 30, | Percentage | |||||||||||
2011 | 2010 | Variance | ||||||||||
Other operating expenses: |
||||||||||||
Advertising |
$ | 376 | $ | 408 | (7.8 | )% | ||||||
Bankcard expense |
125 | 106 | 17.9 | |||||||||
Legal and professional fees |
742 | 901 | (17.6 | ) | ||||||||
Postage |
146 | 228 | (36.0 | ) | ||||||||
Amortization of core deposit intangible |
182 | 182 | 0.0 | |||||||||
OREO expense |
393 | 376 | 4.5 | |||||||||
Telephone |
175 | 171 | 2.3 | |||||||||
Travel, dues and subscriptions |
242 | 250 | (3.2 | ) | ||||||||
Stationery, printing and supplies |
104 | 197 | (47.2 | ) | ||||||||
Other expense |
1,209 | 909 | 33.0 | |||||||||
$ | 3,694 | $ | 3,728 | (0.9 | ) | |||||||
21
Table of Contents
Six Months Ended June 30, 2011 Compared to Six Months Ended June 30, 2010
Net Interest Income
Net interest income for the first six months of 2011, on a taxable equivalent basis, was $34.1
million, a decrease of $1.5 million or 4.3%, from $35.6 million for the first six months of 2010.
Average earning assets in the first six months of 2011 decreased $178.2 million, or 9.8%, to $1.63
billion, compared to $1.81 billion in the first six months of 2010. Average loans decreased $122.2
million as a result of soft loan demand and the sale of approximately $73.0 million in loans in
connection with the sale of the Banks Harrisonburg, Virginia operations. Average interest-bearing
liabilities for the first six months of 2011 decreased $161.2 million, or 10.1%, to $1.46 billion,
compared to $1.61 billion for the first six months of 2010. The impact on net interest income
caused by the decrease in earning assets was partially offset by an increase in taxable-equivalent
net interest margin, which increased to 4.21% for the first six months of 2011, compared to 3.96%
for the first six months of 2010, an increase of 25 basis points.
The increase in net interest margin was due to the Companys continued shift in focus away from
higher cost time deposits and towards checking accounts and other core deposit relationships. The
average yield on earning assets during the first six months of 2011 was 20 basis points
lower than the average yield on earning assets during the comparable period in 2010, while the
average rate on interest-bearing liabilities decreased by 50 basis points during the same time
period, which resulted in an increase in the interest rate spread in the first six months
of 2011 of 30 basis points compared to the first six months of 2010. The following table
provides an analysis of average volumes, yields and rates and net interest income on a
tax-equivalent basis for the six months ended June 30, 2011 and 2010.
22
Table of Contents
(Fully taxable equivalent basis1, in thousands)
Six Months Ended | Six Months Ended | |||||||||||||||||||||||
June 30, 2011 | June 30, 2010 | |||||||||||||||||||||||
Interest | Annualized | Interest | Annualized | |||||||||||||||||||||
Average | Income/ | Average | Average | Income/ | Average | |||||||||||||||||||
Balance | Expense | Yield/Rate | Balance | Expense | Yield/Rate | |||||||||||||||||||
Earning assets: |
||||||||||||||||||||||||
Loans receivable2 |
$ | 1,316,817 | $ | 33,930 | 5.20 | % | $ | 1,438,986 | $ | 38,381 | 5.38 | % | ||||||||||||
Taxable securities |
270,038 | 6,406 | 4.78 | 234,182 | 5,619 | 4.84 | ||||||||||||||||||
Tax exempt securities |
15,970 | 564 | 7.13 | 102,991 | 3,165 | 6.20 | ||||||||||||||||||
FHLB stock |
10,029 | 42 | 0.84 | 11,633 | 15 | 0.26 | ||||||||||||||||||
Interest-bearing bank balances |
20,115 | 24 | 0.24 | 23,361 | 33 | 0.29 | ||||||||||||||||||
Federal funds sold |
| | | | | | ||||||||||||||||||
Total earning assets |
1,632,969 | 40,966 | 5.06 | 1,811,153 | 47,213 | 5.26 | ||||||||||||||||||
Non-earning assets: |
||||||||||||||||||||||||
Cash and due from banks |
31,911 | 27,405 | ||||||||||||||||||||||
Premises and equipment |
38,175 | 40,623 | ||||||||||||||||||||||
Other assets |
107,306 | 106,647 | ||||||||||||||||||||||
Allowance for credit losses |
(29,941 | ) | (36,095 | ) | ||||||||||||||||||||
Total assets |
$ | 1,780,420 | $ | 40,967 | $ | 1,949,733 | $ | 47,213 | ||||||||||||||||
Interest-bearing liabilities: |
||||||||||||||||||||||||
Savings deposits |
$ | 40,898 | $ | 20 | 0.10 | % | $ | 40,685 | $ | 20 | 0.10 | % | ||||||||||||
NOW deposits |
439,756 | 1,461 | 0.67 | 326,959 | 1,454 | 0.90 | ||||||||||||||||||
Money market deposits |
338,314 | 1,255 | 0.75 | 350,606 | 1,574 | 0.91 | ||||||||||||||||||
Time deposits |
450,727 | 2,525 | 1.13 | 656,007 | 5,237 | 1.61 | ||||||||||||||||||
Other borrowings |
61,763 | 984 | 3.21 | 81,362 | 1,205 | 2.99 | ||||||||||||||||||
Borrowings from Federal
Home Loan Bank |
105,361 | 631 | 1.21 | 147,084 | 2,118 | 2.90 | ||||||||||||||||||
Total interest-bearing liabilities |
1,436,819 | 6,877 | 0.97 | 1,602,702 | 11,609 | 1.46 | ||||||||||||||||||
Other liabilities and shareholders
equity: |
||||||||||||||||||||||||
Demand deposits |
164,355 | 162,968 | ||||||||||||||||||||||
Other liabilities |
16,327 | 19,396 | ||||||||||||||||||||||
Shareholders equity |
162,919 | 164,481 | ||||||||||||||||||||||
Total liabilities and shareholders
equity |
$ | 1,780,420 | 6,877 | $ | 1,949,546 | 11,609 | ||||||||||||||||||
Net interest income and net
interest margin3 |
$ | 34,090 | 4.21 | % | $ | 35,604 | 3.96 | % | ||||||||||||||||
Interest rate spread4 |
4.09 | % | 3.80 | % | ||||||||||||||||||||
1 | Income related to securities exempt from federal income taxes is stated on a fully taxable-equivalent basis, assuming a federal income tax rate of 35%, and is then reduced by the non-deductible portion of interest expense. The adjustments made to convert to a fully taxable equivalent basis were $182 for 2011 and $991 for 2010. | |
2 | The average loans receivable balances include non-accruing loans. Amortization of loan fees, net of deferred costs, of $359 and $422 for the six months ended June 30, 2011 and 2010, respectively, are included in interest income. | |
3 | Net interest margin is computed by dividing net interest income by average earning assets. | |
4 | Earning assets yield minus interest-bearing liability rate. |
23
Table of Contents
Noninterest Income and Expense
In the first six months of 2011, noninterest income increased to $6.9 million, from $6.4 million
during the same period in 2010. The Company recognized gains on the sale of investment securities
of $2.0 million during the first six months of 2011. The Company elected to sell shorter-duration,
odd-lot mortgage backed securities and corporate bonds that had significant gain positions. No
investment securities were sold during the six months ended June 30, 2010. Retail banking income
decreased 15.8% to $5.1 million in the first six months of 2011 from $6.0 million in the first six
months of 2010, due primarily to ongoing regulatory changes in the industry and changes in consumer
behavior. Writedowns and loss on sale of OREO increased from ($2.2) million in the first six months
of 2010 to ($3.1) million in the first six months of 2011. Wealth management income increased
$149,000 to $1.2 million for the six months ending June 30, 2011 compared to the same period a year
ago.
In the first six months of 2011, noninterest expense decreased to $29.0 million from $31.0 million
in the first six months of 2010. Personnel expense decreased to $14.6 million in the first six
months of 2011 from $15.3 million in the first six months of 2010, primarily as a result of
headcount reductions from branches closed in 2010. In addition, the Company recorded decreases in
technology and data processing expense, occupancy costs, and furniture and equipment expenses as a
result of the Companys continued focus on a disciplined cost management culture.
The following table presents the details of Other Noninterest Expense.
Other Noninterest Expense (in thousands)
Six Months Ended | ||||||||||||
June 30, | Percentage | |||||||||||
2011 | 2010 | Variance | ||||||||||
Other operating expenses: |
||||||||||||
Advertising |
$ | 814 | $ | 797 | 2.1 | % | ||||||
Bankcard expense |
232 | 258 | (10.1 | ) | ||||||||
Legal and professional fees |
1,368 | 1,625 | (15.8 | ) | ||||||||
Postage |
360 | 439 | (18.0 | ) | ||||||||
Amortization of core deposit
intangible |
363 | 363 | 0.0 | |||||||||
OREO expense |
762 | 600 | 27.0 | |||||||||
Telephone |
325 | 361 | (10.0 | ) | ||||||||
Travel, dues and subscriptions |
457 | 451 | 1.3 | |||||||||
Stationery, printing and supplies |
251 | 356 | (29.5 | ) | ||||||||
Other expense |
2,148 | 1,847 | 16.3 | |||||||||
$ | 7,080 | $ | 7,097 | (0.2 | ) | |||||||
Asset Quality and Allowance for Credit losses
The Companys allowance for credit losses is analyzed monthly by management. This analysis
includes a methodology that segments the loan portfolio into homogeneous loan classifications and
considers the current status of the portfolio, historical charge-off experience, current levels of
delinquent, impaired and non-performing loans and their underlying collateral values, as well as
economic and other risk factors. It is also subject to regulatory examinations and determinations
as to adequacy, which may take into account such factors as the methodology employed and other
analytical measures in comparison to a group of peer banks. Management believes the allowance for
credit losses is sufficient to absorb known risk in the portfolio. The Company, like many
financial institutions, has recently and will likely continue to face a challenging credit
environment in the coming months as a result of the overall economic slowdown in the region and the
nation. The majority of the Banks loan portfolio is comprised of loans secured by real
24
Table of Contents
estate,
and is therefore subject to risk as a result of the weakening real estate market. No assurances
can be
given that future economic conditions will not adversely affect borrowers and result in increases
in credit losses and non-performing asset levels.
The allowance for credit losses, which is utilized to absorb actual losses in the loan portfolio,
is maintained at a level consistent with managements best estimate of probable credit losses
incurred as of the balance sheet date. Major loan portfolio subgroups include: risk graded
commercial loans, mortgage loans, home equity loans, retail loans and retail credit lines.
Management also analyzes the loan portfolio on an ongoing basis to evaluate current risk levels,
and risk grades are adjusted accordingly. While management uses the best information available to
make evaluations, future adjustments may be needed if economic or other conditions differ
substantially from the assumptions used.
At June 30, 2011, the allowance for credit losses was $28.0 million or 2.25% of total loans
outstanding compared to $28.8 million or 2.15% of loans outstanding at December 31, 2010, and $33.1
million or 2.33% of loans outstanding at June 30, 2010. At June 30, 2011, the allowance for credit
losses was 58.81% of nonperforming loans compared to 56.84% at December 31, 2010 and 55.64% at June
30, 2010. Based on analysis of the current loan portfolio and levels of current problem loans and
potential problem loans, management believes the allowance for credit losses to be adequate.
Additional information regarding the allowance for credit losses is presented in the table headed
Asset Quality Analysis, on the following page.
Nonperforming loans totaled $47.7 million at June 30, 2011, compared to $50.6 million at December
31, 2010 and $59.5 million at June 30, 2010. The decrease from the 2010 year end and from the prior
year is primarily driven by decreases in non-accrual loans. Real estate acquired in settlement of
loans (OREO) was $25.7 million at June 30, 2011, $26.7 million at December 31, 2010, and $26.0
million at June 30, 2010. Approximately $6.2 million was transferred from loans into OREO and
approximately $4.1 million of such assets were disposed of during the first six months of 2011. A
net loss of $3.1 million has been recorded on disposition and writedowns of OREO in the current
year, compared to a net loss of $2.2 million in the first six months of 2010. The Company recorded
$782,000 of expenses on OREO during the first six months of 2011, compared to $919,000 million in
the first six months of 2010. Nonperforming assets (comprised of nonaccrual loans, restructured
loans and OREO) totaled $73.4 million, or 4.23% of total assets, at March 31, 2011, compared to
$77.3 million, or 4.28% of total assets, at December 31, 2010 and $85.4 million, or 4.42% of total
assets, a year ago. Total impaired and potential problem loans declined $15.0 million, or 9.3%,
primarily due to a reduction in other potential problem loans.
The provision for credit losses charged to operations for the six months ended June 30, 2011
totaled $9.1 million, compared to $8.7 million for the six months ended June 30, 2010. Net
charge-offs for the six months ended June 30, 2011 were $9.8 million, or 1.50% of average loans
held for investment on an annualized basis, compared to net charge-offs of $11.4 million, or 1.60%
of average loans held for investment on an annualized basis, for the six months ended June 30,
2010. Charge-offs and provision expense for the six months ended June 30, 2011 include $1.3 million
related to a subordinated debt loan to a financial institution.
25
Table of Contents
Six Months Ended | Year Ended | Six Months Ended | ||||||||||
Asset Quality Analysis | June 30 | December 31 | June 30 | |||||||||
(Dollars in thousands) | 2011 | 2010 | 2010 | |||||||||
Allowance for credit losses: |
||||||||||||
Balance, beginning of period |
$ | 28,752 | $ | 35,843 | $ | 35,843 | ||||||
Loans charged off |
||||||||||||
Commercial |
2,459 | 9,052 | 4,964 | |||||||||
Real estate construction |
2,248 | 5,379 | 1,329 | |||||||||
Real estate mortgage |
4,005 | 7,260 | 4,273 | |||||||||
Consumer |
710 | 2,829 | 1,584 | |||||||||
Other |
1,300 | 6,200 | | |||||||||
Total chargeoffs |
10,722 | 30,720 | 12,150 | |||||||||
Recoveries of loans previously charged off: |
||||||||||||
Commercial |
1,398 | 1,370 | 227 | |||||||||
Real estate construction |
184 | 80 | 47 | |||||||||
Real estate mortgage |
295 | 270 | 135 | |||||||||
Consumer |
221 | 647 | 328 | |||||||||
Other |
19 | 10 | | |||||||||
Total recoveries |
917 | 2,377 | 737 | |||||||||
Net loans charged off |
9,805 | 28,343 | 11,413 | |||||||||
Provision for loan losses |
9,093 | 21,252 | 8,651 | |||||||||
Balance, end of period |
$ | 28,040 | $ | 28,752 | $ | 33,081 | ||||||
Nonperforming Assets: |
||||||||||||
Commercial nonaccrual loans, not
restructured |
$ | 18,147 | $ | 23,453 | $ | 38,326 | ||||||
Commercial nonaccrual loans, restructured |
11,042 | 11,190 | 8,915 | |||||||||
Non-commercial nonaccrual loans |
10,075 | 8,537 | 6,184 | |||||||||
Total nonaccrual loans |
39,264 | 43,180 | 53,425 | |||||||||
Troubled debt restructured, accruing |
8,351 | 7,378 | 5,379 | |||||||||
Loans 90 days or more past due and
still accruing |
65 | 27 | 649 | |||||||||
Total non-performing loans |
47,680 | 50,585 | 59,453 | |||||||||
Real estate acquired in settlement of loans |
25,729 | 26,718 | 25,966 | |||||||||
Total nonperforming assets |
$ | 73,409 | $ | 77,303 | $ | 85,419 | ||||||
Loans identified as impaired |
$ | 37,483 | $ | 38,303 | $ | 38,677 | ||||||
Other nonperforming loans |
10,197 | 12,282 | 20,776 | |||||||||
Total nonperforming loans |
47,680 | 50,585 | 59,453 | |||||||||
Other potential problem loans |
97,141 | 110,924 | 100,912 | |||||||||
Total impaired and potential problem loans |
$ | 144,821 | $ | 161,509 | $ | 160,365 | ||||||
Asset Quality Ratios: |
||||||||||||
Nonperforming loans to total loans outstanding
at end of period |
3.83 | % | 3.78 | % | 4.19 | % | ||||||
Nonperforming assets to total assets
at end of period |
4.23 | 4.28 | 4.42 | |||||||||
Allowance for credit losses as a percentage
of total loans outstanding at end of period |
2.25 | 2.15 | 2.33 | |||||||||
Allowance for credit losses to nonperforming loans |
58.81 | 56.84 | 55.64 | |||||||||
Net charge-offs as a percentage of
average loans outstanding during the period |
1.50 | * | 2.01 | 1.60 | * |
* | Denotes annualized |
26
Table of Contents
Income Taxes
The Company recorded income tax expense of $624,000 for the first six months of 2011, compared to
income tax expense of $136,000 for the first six months of 2010. The Companys effective tax rate
was 22.5% for the six-month period ended June 30, 2011, compared to 10.0% for the first six months
of 2010. The change in the effective rate is primarily as a result of the reduction in tax exempt
income from 2010 to 2011.
Interest Rate Risk Management
Interest rate risk management is a part of the Banks overall asset/liability management process.
The primary oversight of asset/liability management rests with the Banks Asset and Liability
Committee, which is comprised of the Banks Chief Executive Officer (CEO), Chief Financial
Officer (CFO), and other senior executives. The Committee meets on a monthly basis to review the
asset/liability management activities of the Bank and monitor compliance with established policies.
Activities of the Asset and Liability Committee are reported to the Audit and Risk Management
Committee of the Companys Board of Directors.
A primary objective of interest rate risk management is to ensure the stability and quality of the
Companys primary earnings component, net interest income. This process involves monitoring the
Companys balance sheet in order to determine the potential impact that changes in the interest
rate environment may have on net interest income. Rate sensitive assets and liabilities have
interest rates that are subject to change within a specific time period, due to either maturity or
to contractual agreements which allow the instruments to reprice prior to maturity. Interest rate
sensitivity management seeks to ensure that both assets and liabilities react to changes in
interest rates within a similar time period, thereby minimizing the risk to net interest income.
The Bank utilizes a computer based interest rate risk simulation model prepared by an independent
consultant. This comprehensive model includes rate sensitivity gap analysis, net interest income
analysis, and present value of equity analysis, under various rate scenarios. The Bank uses this
model to monitor interest rate risk on a quarterly basis and to detect trends that may affect the
overall net interest income of the Bank. This simulation incorporates the dynamics of balance sheet
and interest rate changes and calculates the related effect on net interest income. The Banks
asset/liability policy provides guidance for levels of interest rate risk and potential
remediations, if necessary, to mitigate excessive levels of risk. The modeling results indicate the
Bank is subject to an acceptable level of interest rate risk. The Bank is not subject to other
types of market risk, such as foreign currency exchange rate risk, commodity or equity price risk.
Liquidity Management
Liquidity management refers to the policies and practices that ensure the Bank has the ability to
meet day-to-day cash flow requirements based primarily on activity in loan and deposit accounts of
the Banks customers. Deposit withdrawals, loan funding and general corporate activity create the
primary needs for liquidity for the Bank. Liquidity is derived from sources such as deposit
growth; maturity, calls or sales of investment securities; principal and interest payments on
loans; access to borrowed funds or lines of credit; and profits.
During the first six months of 2011, the Company had net cash provided by operating activities of
$93.5 million, compared to $14.6 million of net cash provided by operating activities in the first
six months of 2010. The increase was primarily the result of the Companys sale of $73.0 million of
loans in connection with the sale of its Harrisonburg, Virginia operations.
Net cash provided by investing activities for the first six months of 2011 was $32.9 million,
compared to net cash provided by for investing activities in the first six months of 2010 of $12.7
million. This change is primarily attributable to proceeds from the sale of securities exceeding
purchases of securities by $31.1
27
Table of Contents
million during the six months of 2011. During the first six months
of 2010, purchases of securities exceeded proceeds from sales of securities by $22.0 million. This
was partially offset by a decrease of $27.0 million in loans to customers during the first six
months of 2010.
During the six months ended June 30, 2011, financing activities used $74.7 million, compared to net
cash used by financing activities of $18.4 million during the same period of 2010. The change was
primarily the result of the Company decreasing its total deposits by $25.9 million during the first
six months of 2011, while total deposits increased by $52.0 million during the same period in 2011.
The Company sold approximately $48.8 million of deposits in connection with the sale of its
Harrisonburg, Virginia operations.
Cash and cash equivalents totaled $80.8 million at June 30, 2011, compared to $29.1 million at
December 31, 2010 and $53.7 million at June 30, 2010.
The Bank has borrowing capacity of approximately $275.9 million with the FHLB, of which
approximately $145.7 million was available at June 30, 2011. These borrowings are collateralized
by FHLB stock, investment securities, qualifying 1 to 4 family residential mortgage loans, and
qualifying commercial real estate loans. The Bank provides various reports to the FHLB on a
regular basis to maintain the availability of the credit line. Each borrowing request to the FHLB
is initiated through an advance application that is subject to approval by the FHLB before funds
are advanced under the line of credit. The Bank also has $24.9 million of borrowing capacity
through the Federal Reserve Bank System, of which none was used as of June 30, 2011. The line with
the Federal Reserve Bank of Richmond is collateralized using investment securities and qualified
loans.
Capital Resources and Shareholders Equity
Pursuant to the U.S. Department of the Treasury (the U.S. Treasury) Capital Purchase Program (the
CPP), on December 12, 2008, Bancorp issued and sold to the U.S. Treasury (i) 52,372 shares of
Bancorps Fixed Rate Cumulative Perpetual Preferred Stock, Series A (the Series A Preferred
Stock) and (ii) a warrant (the Warrant) to purchase 2,567,255 shares of Bancorps common stock,
par value $5.00 per share, for an aggregate purchase price of $52,372,000 in cash. The Securities
Purchase Agreement, dated December 12, 2008, pursuant to which the securities issued to the U.S.
Treasury under the CPP were sold, restricts Bancorp, without the prior approval of the U.S.
Treasury, from increasing dividends payable on its common stock from the last quarterly cash
dividend per share ($0.05) declared on the common stock prior to October 14, 2008, limits Bancorps
ability to repurchase shares of its common stock (with certain exceptions, including the repurchase
of its common stock to offset share dilution from equity-based compensation awards), grants the
holders of the Series A Preferred Stock, the Warrant and the common stock of Bancorp to be issued
under the Warrant, certain registration rights, and subjects Bancorp to certain of the executive
compensation limitations included in the EESA, the ARRA and related regulations. Additionally, the
Companys Board of Directors has resolved not to declare or pay any dividend, common or preferred,
or make any payments on trust preferred securities without the prior approval of the Federal
Reserve Bank.
Bancorp did not repurchase any of its equity securities during 2010 or the first two quarters of
2011.
Banks and bank holding companies, as regulated institutions, must meet required levels of capital.
The Commissioner of Banks in North Carolina, the Federal Reserve and the FDIC, which are the
primary banking regulatory agencies for the Bank and the Company, have adopted minimum capital
regulations or guidelines that categorize components and the level of risk associated with various
types of assets. Financial institutions are required to maintain a level of capital commensurate
with the risk profile assigned to their assets in accordance with the guidelines.
28
Table of Contents
As shown in the accompanying table, the Company and the Bank have capital levels exceeding the
minimum levels for well capitalized banks and bank holding companies as of June 30, 2011.
Regulatory Capital | ||||||||||||||||
Well | Adequately | |||||||||||||||
Capitalized | Capitalized | Company | Bank | |||||||||||||
Total Capital |
10.0 | % | 8.0 | % | 14.72 | % | 14.38 | % | ||||||||
Tier 1 Capital |
6.0 | 4.0 | 13.45 | 13.11 | ||||||||||||
Leverage Capital |
5.0 | 4.0 | 10.20 | 9.94 |
The Company holds $4.4 million of the $52.4 million received from the U.S. Treasury under the
CPP, which may be invested in the Bank to increase the Banks total risk based capital ratio from
the present level of 14.38%.
Item 3. Quantitative and Qualitative Disclosures about Market Risk
Market risk is the possible chance of loss from unfavorable changes in market prices and rates.
These changes may result in a reduction of future period net interest income or other comprehensive
income.
The Company considers interest rate risk to be its most significant market risk, which could
potentially have the greatest impact on operating earnings. The primary oversight of
asset/liability management rests with the Banks Asset and Liability Committee. The Committee
meets on a monthly basis to review the asset/liability management activities of the Bank and
monitor compliance with established policies. Activities of the Asset and Liability Committee are
reported to the Audit and Risk Management Committee of the Companys Board of Directors.
The Company has not experienced any material changes in interest rate risk since the end of the
fiscal year ended December 31, 2010.
Item 4. Controls and Procedures
Evaluation of disclosure controls and procedures
The Companys management, including its CEO, CFO and Chief Accounting Officer (CAO) evaluated the
effectiveness of the Companys disclosure controls and procedures (as defined in Rule 13a-15(e)
under the Securities Exchange Act of 1934) as of June 30, 2011. Based upon that evaluation, the
Companys CEO, CFO and CAO each concluded that as of June 30, 2011, the end of the period covered
by this Quarterly Report on Form 10-Q, the Company maintained effective disclosure controls and
procedures.
Changes in internal control over financial reporting
There have been no changes to the Companys internal controls over financial reporting that
occurred during the quarter ended June 30, 2011 that have materially affected, or are reasonably
likely to materially affect, the Companys internal controls over financial reporting.
29
Table of Contents
PART II. OTHER INFORMATION
Item 1. Legal Proceedings
Not applicable.
Item 1A. Risk Factors
There have been no material changes to the Companys Risk Factors as previously disclosed in
Bancorps Annual Report on Form 10-K for the fiscal year ended December 31, 2010.
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
There were no sales of equity securities during the first two quarters of 2011 which were
not registered under the Securities Act of 1933, as amended. The Company did not repurchase
any of its equity securities during the first two quarters of 2011.
Item 3. Defaults Upon Senior Securities
Not applicable.
Item 4. Removed and Reserved
Item 5. Other Information
Not applicable
30
Table of Contents
Item 6. Exhibits
Exhibit | ||
No. | Description | |
3.1
|
Articles of Incorporation, and amendments thereto, incorporated by reference
to Exhibit 4.1 of the Registration Statement on Form S-8, filed with the SEC
on May 16, 2001 (SEC File No. 333-61046). |
|
3.2
|
Articles of Merger of FNB with and into LSB, including amendments to the
Articles of Incorporation, as amended, incorporated by reference to Exhibit
3.4 of the Quarterly Report on Form 10-Q for the quarter ended September 30,
2007, filed with the SEC on November 9, 2007 (SEC File No. 000-11448). |
|
3.3
|
Amended and Restated Bylaws adopted by the Board of Directors on August 17,
2004 and amended on July 23, 2008 (with identified Bylaw approved by the
shareholders) incorporated by reference to Exhibit 3.3 of the Quarterly Report
on Form 10-Q for the quarter ended March 31, 2009, filed with the SEC on May
8, 2009 (SEC File No. 000-11448). |
|
4.1
|
Specimen certificate of common stock, $5.00 par value, incorporated by
reference to Exhibit 4.1 of the Quarterly Report on Form 10-Q for the quarter
ended September 30, 2007, filed with the SEC on November 9, 2007 (SEC File No.
000-11448). |
|
4.2
|
Amended and Restated Trust Agreement, regarding Trust Preferred Securities,
dated August 23, 2005, incorporated herein by reference to Exhibit 4.02 of the
Quarterly Report on Form 10-Q for the quarter ended September 30, 2005, filed
with the SEC (SEC File No. 000-13086). |
|
4.3
|
Guarantee Agreement, regarding Trust Preferred Securities, dated August 23,
2005, incorporated herein by reference to Exhibit 4.03 of the Quarterly Report
on Form 10-Q for the quarter ended September 30, 2005, filed with the SEC (SEC
File No. 000-13086). |
|
4.4
|
Indenture, regarding Trust Preferred Securities, dated August 23, 2005,
incorporated herein by reference to Exhibit 4.04 of the Quarterly Report on
Form 10-Q for the quarter ended September 30, 2005, filed with the SEC (SEC
File No. 000-13086). |
|
4.5
|
Articles of Amendment, filed with the North Carolina Department of the
Secretary of State on December 12, 2008, incorporated herein by reference to
Exhibit 4.1 of the Current Report on Form 8-K filed with the SEC on December
12, 2008 (SEC File No. 000-11448). |
|
4.6
|
Form of Certificate for the Fixed Rate Cumulative Perpetual Preferred Stock,
Series A, incorporated herein by reference to Exhibit 4.2 of the Current
Report on Form 8-K filed with the SEC on December 12, 2008 (SEC File No.
000-11448). |
|
4.7
|
Warrant for Purchase of Shares of Common Stock issued by Bancorp to the United
States Department of the Treasury on December 12, 2008, incorporated herein by
reference to Exhibit 4.3 of the Current Report on Form 8-K filed with the SEC
on December 12, 2008 (SEC File No. 000-11448). |
|
10.1
|
Benefit Equivalency Plan of FNB Southeast, effective January 1, 1994
incorporated herein by reference to Exhibit 10 of the Quarterly Report on Form
10-QSB for the fiscal quarter ended June 30, 1995, filed with the SEC (SEC
File No. 000-13086). |
|
10.2
|
1994 Director Stock Option Plan, incorporated herein by reference to Exhibit 4
of the Registration Statement on Form S-8 filed with the SEC on July 15, 1994
(SEC File No. 33-81664). |
31
Table of Contents
Exhibit | ||
No. | Description | |
10.3
|
1996 Omnibus Stock Incentive Plan, incorporated herein by reference to Exhibit
10.2 of the Annual Report on Form 10-K for the year ended December 31, 1995
filed with the SEC on March 28, 1996 (SEC File No. 000-11448). |
|
10.4
|
Omnibus Equity Compensation Plan, incorporated herein by reference to Exhibit
10(B) of the Annual Report on Form 10-KSB40 for the fiscal year ended December
31, 1996, filed with the SEC on March 31, 1997 (SEC File No. 000-13086). |
|
10.5
|
Amendment to Benefit Equivalency Plan of FNB Southeast, effective January 1,
1998., incorporated herein by reference to Exhibit 10.16 of the Annual Report
on Form 10-K for the fiscal year ended December 31, 1998, filed with the SEC
on March 25, 1999 (SEC File No. 000-13086) |
|
10.6
|
Amendment Number 1 to 1996 Omnibus Stock Incentive Plan, incorporated herein
by reference to Exhibit 4.5 of the Registration Statement on Form S-8, filed
with the SEC on May 16, 2001 (SEC File No. 333-61046). |
|
10.7
|
Long Term Stock Incentive Plan for certain senior management employees of FNB
Southeast incorporated herein by reference to Exhibit 10.10 of the Annual
Report on Form 10-K for the fiscal year ended December 31, 2002, filed with
the SEC on March 27, 2003 (SEC File No. 000-13086). |
|
10.8
|
Form of Employment Continuity Agreement effective as of January 1, 2004
between LSB and Robert E. Lineback, Jr. and Philip G. Gibson with a Schedule
setting forth the material details in which such documents differ from the
document a copy of which is filed, incorporated herein by reference to Exhibit
10.10 of the Annual Report on Form 10-K for the year ended December 31, 2003
filed with the SEC on March 15, 2004 (SEC File No. 000-11448). |
|
10.9
|
Form of Stock Option Award Agreement for a Director adopted under LSB
Comprehensive Equity Compensation Plan for Directors and Employees,
incorporated herein by reference to Exhibit 10.1 of the Current Report on Form
8-K filed with the SEC on December 23, 2004 (SEC File No. 000-11448). |
|
10.10
|
Form of Incentive Stock Option Award Agreement for an Employee adopted under
LSB Comprehensive Equity Compensation Plan for Directors and Employees,
incorporated herein by reference to Exhibit 10.2 of the Current Report on Form
8-K filed with the SEC on December 23, 2004 (SEC File No. 000-11448). |
|
10.11
|
Form of Amendment to the applicable Grant Agreements under the 1996 Omnibus
Stock Incentive Plan, incorporated herein by reference to Exhibit 10.2 of the
Current Report on Form 8-K filed with the SEC on April 15, 2005 (SEC File No.
000-11448). |
|
10.12
|
Form of Amendment to the Incentive Stock Option Award Agreement for an
Employee adopted under LSB Comprehensive Equity Compensation Plan for
Directors and Employees, incorporated herein by reference to Exhibit 10.3 of
the Current Report on Form 8-K filed with the SEC on April 15, 2005 (SEC File
No. 000-11448). |
|
10.13
|
Restated Form of Director Fee Deferral Agreement adopted under LSB
Comprehensive Equity Compensation Plan for Directors and Employees,
incorporated herein by reference to Exhibit 99.1 of the Current Report on Form
8-K filed with the SEC on December 23, 2005 (SEC File No. 000-11448). |
|
10.14
|
Form of Stock Appreciation Rights Award Agreement adopted under LSB
Comprehensive Equity Compensation Plan for Directors and Employees,
incorporated herein by reference to Exhibit 99.2 of the Current Report on Form
8-K filed with the SEC on December 23, 2005 (SEC File No. 000-11448). |
|
10.15
|
FNB Amended and Restated Directors Retirement Policy, incorporated herein by
reference to Exhibit 99.1 of the Current Report on Form 8-K, filed with the
SEC on August 3, 2007 (SEC File No. 000-11448). |
32
Table of Contents
Exhibit | ||
No. | Description | |
10.16
|
Amendment to the FNB Directors and Senior Management Deferred Compensation
Plan Trust Agreement among Regions Bank d/b/a/ Regions Morgan Keegan Trust,
FNB Southeast and FNB, dated July 31, 2007, incorporated herein by reference
to Exhibit 99.2 of the Current Report on Form 8-K, filed with the SEC on
August 3, 2007 (SEC File No. 000-11448). |
|
10.17
|
Employment and Change of Control Agreement with William W. Budd, Jr.
incorporated herein by reference to Exhibit 99.1 of the Current Report on Form
8-K, filed with the SEC on March 11, 2010 (SEC File No. 000-11448). |
|
10.18
|
Employment and Change of Control Agreement with Jerry W. Beasley, incorporated
herein by reference to Exhibit 99.3 of the Current Report on Form 8-K, filed
with the SEC on March 14, 2008 (SEC File No. 000-11448). |
|
10.19
|
Employment and Change of Control Agreement with Robin S. Hager, incorporated
herein by reference to Exhibit 99.1 of the Current Report on Form 8-K, filed
with the SEC on August 3, 2010 (SEC File No. 000-11448). |
|
10.20
|
Employment and Change of Control Agreement with Paul McCombie, incorporated
herein by reference to Exhibit 99.5 of the Current Report on Form 8-K, filed
with the SEC on March 14, 2008 (SEC File No. 000-11448). |
|
10.21
|
Directors and Senior Management Deferred Compensation Plan Trust Agreement
between FNB Southeast and Morgan Trust Company, incorporated herein by
reference to Exhibit 99.7 of the Current Report on Form 8-K, filed with the
SEC on March 14, 2008 (SEC File No. 000-11448). |
|
10.22
|
Bancorp Non-Qualified Deferred Compensation Plan for Directors and Senior
Management, incorporated herein by reference to Exhibit 99.9 of the Current
Report on Form 8-K, filed with the SEC on March 14, 2008 (SEC File No.
000-11448). |
|
10.23
|
First Amendment to the Bancorp Non-Qualified Deferred Compensation Plan for
Directors and Senior Management, incorporated herein by reference to Exhibit
99.10 of the Current Report on Form 8-K, filed with the SEC on March 14, 2008
(SEC File No. 000-11448). |
|
10.24
|
Bancorp Amended and Restated Long Term Stock Incentive Plan, formerly the FNB
Long Term Stock Incentive Plan (the 2006 Omnibus Plan), incorporated herein
by reference to Exhibit 10.27 of the Quarterly Report on Form 10-Q filed with
the SEC on May 9, 2008 (SEC File No. 000-11448). |
|
10.25
|
Amended and Restated Comprehensive Equity Compensation Plan for Directors and
Employees, incorporated herein by reference to Exhibit 10.44 of the Quarterly
Report on Form 10-Q, filed with the SEC on August 11, 2008 (SEC File No.
000-11448). |
|
10.26
|
Form of Restricted Stock Award Agreement adopted under the Amended and
Restated Comprehensive Equity Compensation Plan for Directors and Employees,
incorporated herein by reference to Exhibit 10.45 of the Quarterly Report on
Form 10-Q, filed with the SEC on August 11, 2008 (SEC File No. 000-11448). |
|
10.27
|
Employment and Change of Control Agreement with David P. Barksdale,
incorporated herein by reference to Exhibit 99.1 of the Current Report on Form
8-K, filed with the SEC on October 17, 2008 (SEC File No. 000-11448). |
|
10.28
|
Letter Agreement, dated December 12, 2008, between Bancorp and the United
States Department of the Treasury, with respect to the issuance and sale of
the Fixed Rate Cumulative Perpetual Preferred Stock, Series A and the Warrant,
incorporated herein by reference to Exhibit 10.1 of the Current Report on Form
8-K filed with the SEC on December 12, 2008 (SEC File No. 000-11448). |
33
Table of Contents
Exhibit | ||
No. | Description | |
10.29
|
Form of Employment Agreement Amendment, dated December 12, 2008 among Bancorp,
the Bank and the senior executive officers of Bancorp, incorporated herein by
reference to Exhibit 10.2 of the Current Report on Form 8-K filed with the SEC
on December 12, 2008 (SEC File No. 000-11448). |
|
10.30
|
Bancorp Management Incentive Plan, dated February 18, 2008, incorporated
herein by reference to Exhibit 99.1 of the Current Report on Form 8-K, filed
with the SEC on March 6, 2009 (SEC File No. 000-11448). |
|
10.31
|
Employment and Change of Control Agreement with Ramsey K. Hamadi, incorporated
herein by reference to Exhibit 99.1 of the Current Report on Form 8-K, filed
with the SEC on March 30, 2009 (SEC File No. 000-11448). |
|
10.32
|
Promissory Note by Ramsey K. Hamadi in favor of the Bank incorporated herein
by reference to Exhibit 99.1 of the Current Report on Form 8-K, filed with the
SEC on April 21, 2009 (SEC File No. 000-11448). |
|
10.33
|
Excessive and Luxury Expenditure Policy of Bancorp and the Bank, incorporated
herein by reference to Exhibit 99.1 of the Current Report on Form 8-K filed
with the SEC on September 9, 2009 (SEC File No. 000-11448). |
|
10.34
|
Employment and Change of Control Agreement among Bancorp, the Bank and
Pressley A. Ridgill, executed September 9, 2009, and effective January 1,
2010, incorporated herein by reference to Exhibit 99.1 of the Current Report
on Form 8-K filed with the SEC on September 11, 2009 (SEC File No. 000-11448). |
|
10.35
|
Form of Amendment to Employment and Change of Control Agreement, dated
September 16, 2009, among Bancorp, the Bank and the senior executive officers
of Bancorp, incorporated herein by reference to Exhibit 99.1 of the Current
Report on Form 8-K filed with the SEC on September 16, 2009 (SEC File No.
000-11448). |
|
31.01
|
Certification Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. |
|
31.02
|
Certification Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. |
|
32.01
|
Certifications Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. |
|
101 |
The following
materials from the Companys 10-Q Report for the quarterly
period ended June 30, 2011, formatted in XBRL: (i) the Condensed
Consolidated Balance Sheets, (ii) the Condensed Consolidated Statements of Income,
(iii) the Condensed Consolidated Statements of Changes in
Shareholders Equity, (iv) the Condensed Consolidated Statements
of Cash Flows, and (v) the Notes to the Condensed Consolidated
Financial Statements, tagged as blocks of text.* |
|
* Furnished, not filed
34
Table of Contents
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused
this report to be signed on its behalf by the undersigned thereunto duly authorized.
Date: August 12, 2011 | NEWBRIDGE BANCORP (Registrant) |
|||
By: | /s/ Ramsey K. Hamadi | |||
Name: | Ramsey K. Hamadi | |||
Title: | Executive Vice President and Chief Financial Officer (Authorized Officer) |
35
Table of Contents
EXHIBIT INDEX
Exhibit | ||
No. | Description | |
31.01
|
Certification Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. |
|
31.02
|
Certification Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. |
|
32.01
|
Certification Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. |
|
101 |
The following
materials from the Companys 10-Q Report for the quarterly
period ended June 30, 2011, formatted in XBRL: (i) the Condensed
Consolidated Balance Sheets, (ii) the Condensed Consolidated Statements of Income,
(iii) the Condensed Consolidated Statements of Changes in
Shareholders Equity, (iv) the Condensed Consolidated Statements
of Cash Flows, and (v) the Notes to the Condensed Consolidated
Financial Statements, tagged as blocks of text.* |
|
* Furnished, not filed
36