Attached files
file | filename |
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EXCEL - IDEA: XBRL DOCUMENT - First Clover Leaf Financial Corp. | Financial_Report.xls |
EX-31.2 - EX-31.2 - First Clover Leaf Financial Corp. | a14-14130_1ex31d2.htm |
EX-32 - EX-32 - First Clover Leaf Financial Corp. | a14-14130_1ex32.htm |
EX-31.1 - EX-31.1 - First Clover Leaf Financial Corp. | a14-14130_1ex31d1.htm |
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
(Mark One)
x QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
for the quarterly period ended June 30, 2014
OR
o TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
for the transition period from to
Commission file number 000-50820
FIRST CLOVER LEAF FINANCIAL CORP.
(Exact name of registrant as specified in its charter)
Maryland |
|
20-4797391 |
(State or other jurisdiction of |
|
(I.R.S. Employer Identification No.) |
incorporation or organization) |
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6814 Goshen Road, Edwardsville, IL |
|
62025 |
(Address of principal executive offices) |
|
(Zip Code) |
Registrants telephone number, including area code (618) 656-6122
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Sections 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes x. No o.
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate 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 x. No o.
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of large accelerated filer, accelerated filer and smaller reporting company in Rule 12b-2 of the Exchange Act. (Check one):
Large accelerated filer o |
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Accelerated filer o |
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Non-accelerated filer o (do not check if smaller reporting company) |
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Smaller reporting company x |
Indicate by check mark whether the Registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes o. No x.
Indicate the number of shares outstanding of each of the issuers classes of common stock, as of the latest practicable date.
Class |
|
Outstanding August 1, 2014 |
Common Stock, par value $.10 per share |
|
7,007,283 |
FIRST CLOVER LEAF FINANCIAL CORP.
FORM 10-Q
FOR THE QUARTER ENDED JUNE 30, 2014
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PAGE NO. | |||
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PART I - Financial Information |
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Item 1. Financial Statements (Unaudited) |
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3 | |||||
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4 | |||||
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5 | |||||
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5 | |||||
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7 | |||||
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Managements Discussion and Analysis of Financial Condition and Results of Operations |
36 | ||||
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48 | |||||
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50 | |||||
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51 | |||||
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51 | |||||
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Item 2. Unregistered Sales of Equity Securities and Use of Proceeds |
51 | ||||
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51 | |||||
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51 | |||||
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51 | |||||
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51 | |||||
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52 | ||||
FIRST CLOVER LEAF FINANCIAL CORP.
|
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June 30, |
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December 31, |
| ||
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2014 |
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2013 |
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(Unaudited) |
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| ||
ASSETS |
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|
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|
| ||
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|
|
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|
| ||
Cash and due from banks |
|
$ |
17,353,056 |
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$ |
14,363,461 |
|
Interest-earning deposits |
|
9,143,268 |
|
8,681,426 |
| ||
Federal funds sold |
|
61,731,068 |
|
61,648,938 |
| ||
Total cash and cash equivalents |
|
88,227,392 |
|
84,693,825 |
| ||
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|
|
|
|
| ||
Interest-earning time deposits |
|
1,770,852 |
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1,766,493 |
| ||
Securities available for sale |
|
116,632,977 |
|
117,776,982 |
| ||
Federal Home Loan Bank stock |
|
2,887,763 |
|
2,887,763 |
| ||
Loans, net of allowance for loan losses of $5,567,909 and $5,590,668 at June 30, 2014 and December 31, 2013, respectively |
|
382,529,539 |
|
372,568,962 |
| ||
Loans held for sale |
|
260,935 |
|
|
| ||
Property and equipment, net |
|
10,444,511 |
|
9,873,198 |
| ||
Goodwill |
|
11,385,323 |
|
11,385,323 |
| ||
Bank-owned life insurance |
|
14,641,923 |
|
8,497,895 |
| ||
Core deposit intangible |
|
225,010 |
|
271,000 |
| ||
Foreclosed assets |
|
4,289,225 |
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5,577,481 |
| ||
Mortgage servicing rights |
|
927,597 |
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918,247 |
| ||
Accrued interest receivable |
|
1,536,523 |
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1,551,258 |
| ||
Other assets |
|
3,620,076 |
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4,276,015 |
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Total assets |
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$ |
639,379,646 |
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$ |
622,044,442 |
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LIABILITIES AND STOCKHOLDERS EQUITY |
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Liabilities: |
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Deposits: |
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Noninterest-bearing |
|
$ |
57,436,700 |
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$ |
55,263,604 |
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Interest-bearing |
|
471,136,428 |
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447,276,088 |
| ||
Total deposits |
|
528,573,128 |
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502,539,692 |
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Federal Home Loan Bank advances |
|
13,983,875 |
|
13,980,005 |
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Securities sold under agreements to repurchase |
|
14,984,621 |
|
26,766,169 |
| ||
Subordinated debentures |
|
4,000,000 |
|
4,000,000 |
| ||
Accrued interest payable |
|
186,345 |
|
199,764 |
| ||
Other liabilities |
|
2,255,430 |
|
1,463,182 |
| ||
Total liabilities |
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563,983,399 |
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548,948,812 |
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Stockholders Equity |
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Preferred stock, $.10 par value, 10,000,000 shares authorized, no shares issued |
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Common stock, $.10 par value, 20,000,000 shares authorized, 7,007,283 shares issued and outstanding at June 30, 2014 and December 31, 2013 |
|
700,728 |
|
700,728 |
| ||
Additional paid-in capital |
|
55,818,936 |
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55,818,936 |
| ||
Retained earnings |
|
18,914,542 |
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18,268,454 |
| ||
Accumulated other comprehensive loss |
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(37,959 |
) |
(1,692,488 |
) | ||
Total stockholders equity |
|
75,396,247 |
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73,095,630 |
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Total liabilities and stockholders equity |
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$ |
639,379,646 |
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$ |
622,044,442 |
|
See Notes to Consolidated Financial Statements.
FIRST CLOVER LEAF FINANCIAL CORP.
CONSOLIDATED STATEMENTS OF INCOME
(UNAUDITED)
|
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Three Months Ended |
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Six Months Ended |
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|
|
June 30, |
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June 30, |
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|
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2014 |
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2013 |
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2014 |
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2013 |
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Interest and dividend income: |
|
|
|
|
|
|
|
|
| ||||
Interest and fees on loans |
|
$ |
4,102,934 |
|
$ |
4,403,689 |
|
$ |
8,135,545 |
|
$ |
9,059,584 |
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Securities: |
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|
|
|
|
|
|
|
| ||||
Taxable interest income |
|
320,073 |
|
248,830 |
|
645,497 |
|
478,240 |
| ||||
Nontaxable interest income |
|
274,101 |
|
237,506 |
|
546,089 |
|
464,535 |
| ||||
Interest-earning deposits, federal funds sold, and other |
|
61,815 |
|
35,964 |
|
112,878 |
|
71,203 |
| ||||
Total interest and dividend income |
|
4,758,923 |
|
4,925,989 |
|
9,440,009 |
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10,073,562 |
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Interest expense: |
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|
|
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|
|
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Deposits |
|
527,261 |
|
715,463 |
|
1,071,778 |
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1,510,548 |
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Federal Home Loan Bank advances |
|
74,811 |
|
122,451 |
|
149,492 |
|
243,931 |
| ||||
Securities sold under agreements to repurchase |
|
912 |
|
3,271 |
|
3,677 |
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8,860 |
| ||||
Subordinated debentures |
|
21,446 |
|
21,939 |
|
43,222 |
|
43,407 |
| ||||
Total interest expense |
|
624,430 |
|
863,124 |
|
1,268,169 |
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1,806,746 |
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Net interest income |
|
4,134,493 |
|
4,062,865 |
|
8,171,840 |
|
8,266,816 |
| ||||
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Provision for loan losses |
|
|
|
225,000 |
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|
450,000 |
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|
|
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Net interest income after provision for loan losses |
|
4,134,493 |
|
3,837,865 |
|
8,171,840 |
|
7,816,816 |
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|
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Non-interest income: |
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|
|
|
|
|
|
|
| ||||
Service fees on deposit accounts |
|
117,024 |
|
94,567 |
|
205,729 |
|
177,462 |
| ||||
Other service charges and fees |
|
103,861 |
|
95,101 |
|
194,221 |
|
183,536 |
| ||||
Loan servicing fees |
|
68,868 |
|
61,371 |
|
140,509 |
|
142,542 |
| ||||
Gain on sale of securities |
|
|
|
3,487 |
|
|
|
359,138 |
| ||||
Gain on sale of loans |
|
186,645 |
|
167,638 |
|
212,700 |
|
432,810 |
| ||||
Loss on sale of assets, net |
|
(75,039 |
) |
|
|
(75,039 |
) |
|
| ||||
Gain (loss) on sale of foreclosed assets |
|
(163,155 |
) |
30,217 |
|
(197,199 |
) |
35,767 |
| ||||
Other |
|
133,681 |
|
165,042 |
|
268,541 |
|
237,809 |
| ||||
|
|
371,885 |
|
617,423 |
|
749,462 |
|
1,569,064 |
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|
|
|
|
|
|
|
|
|
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Non-interest expense: |
|
|
|
|
|
|
|
|
| ||||
Compensation and employee benefits |
|
1,779,872 |
|
1,561,447 |
|
3,591,032 |
|
3,106,011 |
| ||||
Occupancy expense |
|
424,185 |
|
337,541 |
|
827,711 |
|
659,345 |
| ||||
Data processing services |
|
195,467 |
|
190,240 |
|
380,840 |
|
372,888 |
| ||||
Director fees |
|
42,800 |
|
41,983 |
|
85,650 |
|
79,333 |
| ||||
Professional fees |
|
176,917 |
|
112,703 |
|
300,030 |
|
211,682 |
| ||||
FDIC insurance premiums |
|
120,000 |
|
129,000 |
|
237,102 |
|
246,000 |
| ||||
Foreclosed asset related expenses |
|
182,968 |
|
194,267 |
|
257,417 |
|
425,239 |
| ||||
Amortization of core deposit intangible |
|
14,505 |
|
66,001 |
|
45,990 |
|
131,998 |
| ||||
Amortization of mortgage servicing rights |
|
20,388 |
|
38,294 |
|
38,390 |
|
85,092 |
| ||||
Other |
|
652,457 |
|
537,758 |
|
1,206,889 |
|
1,018,571 |
| ||||
|
|
3,609,559 |
|
3,209,234 |
|
6,971,051 |
|
6,336,159 |
| ||||
|
|
|
|
|
|
|
|
|
| ||||
Income before income taxes |
|
896,819 |
|
1,246,054 |
|
1,950,251 |
|
3,049,721 |
| ||||
|
|
|
|
|
|
|
|
|
| ||||
Income tax expense |
|
187,010 |
|
379,680 |
|
463,289 |
|
988,285 |
| ||||
|
|
|
|
|
|
|
|
|
| ||||
Net income |
|
$ |
709,809 |
|
$ |
866,374 |
|
$ |
1,486,962 |
|
$ |
2,061,436 |
|
|
|
|
|
|
|
|
|
|
| ||||
Basic and diluted earnings per share |
|
$ |
0.10 |
|
$ |
0.12 |
|
$ |
0.21 |
|
$ |
0.28 |
|
Dividends per share |
|
$ |
0.06 |
|
$ |
0.06 |
|
$ |
0.12 |
|
$ |
0.12 |
|
See notes to consolidated financial statements.
FIRST CLOVER LEAF FINANCIAL CORP.
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(UNAUDITED)
|
|
Three Months Ended |
|
Six Months Ended |
| ||||||||
|
|
June 30, |
|
June 30, |
| ||||||||
|
|
2014 |
|
2013 |
|
2014 |
|
2013 |
| ||||
|
|
|
|
|
|
|
|
|
| ||||
Net income |
|
$ |
709,809 |
|
$ |
866,374 |
|
$ |
1,486,962 |
|
$ |
2,061,436 |
|
Other comprehensive income: |
|
|
|
|
|
|
|
|
| ||||
Unrealized gains (losses) on securities available for sale arising during the period |
|
1,235,308 |
|
(2,535,375 |
) |
2,626,239 |
|
(3,191,912 |
) | ||||
Reclassification adjustment for realized gains included in income |
|
|
|
(3,487 |
) |
|
|
(359,138 |
) | ||||
Tax effect |
|
(457,064 |
) |
939,379 |
|
(971,710 |
) |
1,313,889 |
| ||||
Net of tax |
|
778,244 |
|
(1,599,483 |
) |
1,654,529 |
|
(2,237,161 |
) | ||||
Comprehensive income (loss) |
|
$ |
1,488,053 |
|
$ |
(733,109 |
) |
$ |
3,141,491 |
|
$ |
(175,725 |
) |
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
|
|
Six Months Ended |
| ||||
|
|
June 30, |
| ||||
|
|
2014 |
|
2013 |
| ||
Cash flows from operating activities |
|
|
|
|
| ||
Net income |
|
$ |
1,486,962 |
|
$ |
2,061,436 |
|
Adjustments to reconcile net income to net cash provided by operating activities: |
|
|
|
|
| ||
Amortization (accretion) of: |
|
|
|
|
| ||
Deferred loan origination costs, net |
|
(9,572 |
) |
(60,471 |
) | ||
Premiums and discounts on securities |
|
498,661 |
|
489,161 |
| ||
Core deposit intangible |
|
45,990 |
|
131,998 |
| ||
Mortgage servicing rights |
|
38,390 |
|
85,092 |
| ||
Fair value adjustments |
|
(46,357 |
) |
(29,715 |
) | ||
Provision for loan losses |
|
|
|
450,000 |
| ||
Depreciation |
|
286,469 |
|
277,910 |
| ||
Gain on sale of securities |
|
|
|
(359,138 |
) | ||
Gain on sale of loans |
|
(212,700 |
) |
(432,810 |
) | ||
Loss on sale of property and equipment |
|
75,039 |
|
|
| ||
Loss (gain) on sale of foreclosed assets |
|
197,199 |
|
(35,767 |
) | ||
Write-down on foreclosed assets |
|
39,723 |
|
273,407 |
| ||
Earnings on bank-owned life insurance |
|
(144,028 |
) |
(112,798 |
) | ||
Increase in mortgage servicing rights |
|
(47,740 |
) |
(141,848 |
) | ||
Proceeds from sales of loans held for sale |
|
6,221,959 |
|
18,168,949 |
| ||
Originations of loans held for sale |
|
(6,270,194 |
) |
(16,549,739 |
) | ||
Change in assets and liabilities: |
|
|
|
|
| ||
Accrued interest receivable and other assets |
|
(301,036 |
) |
(850,801 |
) | ||
Accrued interest payable |
|
(13,419 |
) |
(42,869 |
) | ||
Other liabilities |
|
792,248 |
|
1,001,611 |
| ||
Net cash provided by operating activities |
|
2,637,594 |
|
4,323,608 |
| ||
(Continued)
See notes to consolidated financial statements.
FIRST CLOVER LEAF FINANCIAL CORP.
CONSOLIDATED STATEMENTS OF CASH FLOWS (CONTINUED)
(UNAUDITED)
|
|
Six Months Ended |
| ||||
|
|
June 30, |
| ||||
|
|
2014 |
|
2013 |
| ||
Cash flows from investing activities |
|
|
|
|
| ||
Purchase of interest-earning time deposits |
|
(4,359 |
) |
(10,664 |
) | ||
Available for sale securities: |
|
|
|
|
| ||
Purchases |
|
(17,864,498 |
) |
(42,373,421 |
) | ||
Proceeds from calls, maturities, and principal repayments |
|
21,170,941 |
|
15,323,155 |
| ||
Proceeds from sales |
|
|
|
9,025,930 |
| ||
Decrease (increase) in loans |
|
(9,643,279 |
) |
27,067,337 |
| ||
Purchase of property and equipment |
|
(1,183,161 |
) |
(147,206 |
) | ||
Proceeds from the sale of property and equipment |
|
242,304 |
|
|
| ||
Proceeds from the sale of foreclosed assets |
|
767,011 |
|
475,690 |
| ||
Purchase of bank-owned life insurance |
|
(6,000,000 |
) |
(3,000,000 |
) | ||
Net cash provided by (used in) investing activities |
|
(12,515,041 |
) |
6,360,821 |
| ||
|
|
|
|
|
| ||
Cash flows from financing activities |
|
|
|
|
| ||
Net increase in deposit accounts |
|
$ |
26,033,436 |
|
$ |
7,497,170 |
|
Net decrease in securities sold under agreements to repurchase |
|
(11,781,548 |
) |
(7,225,782 |
) | ||
Repurchase of common stock |
|
|
|
(1,863,278 |
) | ||
Cash dividends paid |
|
(840,874 |
) |
(885,802 |
) | ||
Net cash provided by (used in) financing activities |
|
13,411,014 |
|
(2,477,692 |
) | ||
|
|
|
|
|
| ||
Net increase in cash and cash equivalents |
|
3,533,567 |
|
8,206,737 |
| ||
|
|
|
|
|
| ||
Cash and cash equivalents: |
|
|
|
|
| ||
Beginning |
|
84,693,825 |
|
71,414,598 |
| ||
|
|
|
|
|
| ||
Ending |
|
$ |
88,227,392 |
|
$ |
79,621,335 |
|
|
|
|
|
|
| ||
Supplemental schedule of noncash investing and financing activities |
|
|
|
|
| ||
Assets acquired in settlement of loans |
|
$ |
98,907 |
|
$ |
944,204 |
|
Loans made to finance sales of foreclosed assets |
|
383,230 |
|
|
| ||
|
|
|
|
|
| ||
Supplemental disclosures of cash flow information |
|
|
|
|
| ||
Cash paid during the period for: |
|
|
|
|
| ||
Interest |
|
$ |
1,277,718 |
|
$ |
1,842,115 |
|
Income taxes, net of refunds |
|
675,000 |
|
1,255,000 |
|
See notes to consolidated financial statements.
FIRST CLOVER LEAF FINANCIAL CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 2014 AND DECEMBER 31, 2013
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The information contained in the accompanying consolidated financial statements is unaudited. In the opinion of management, the consolidated financial statements contain all adjustments necessary for a fair statement of the results of operations for the interim periods. All such adjustments are of a normal recurring nature. Any differences appearing between the numbers presented in the financial statements and managements discussion and analysis are due to rounding. The results of operations for the interim periods are not necessarily indicative of the results which may be expected for the entire year or for any other period. These consolidated financial statements should be read in conjunction with the consolidated financial statements of First Clover Leaf Financial Corp. (the Company or First Clover Leaf) for the year ended December 31, 2013 contained in the 2013 Annual Report to Stockholders that is filed as Exhibit 13 to the Companys Annual Report on Form 10-K. Accordingly, footnote disclosures which would substantially duplicate the disclosures in the audited consolidated financial statements have been omitted.
The preparation of financial statements in conformity with U.S. generally accepted accounting principles requires management to make estimates and assumptions which affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities as of the date of the financial statements, as well as the reported amounts of income and expenses during the reported periods. Actual results could differ from those estimates.
The Company is a Maryland corporation that was incorporated in March 2006 as the successor corporation to First Federal Financial Services, Inc., in connection with the July 2006 second-step conversion of First Federal Financial Services, MHC and the simultaneous acquisition of Clover Leaf Financial Corp. and its wholly owned savings bank subsidiary, Clover Leaf Bank. The accompanying interim consolidated financial statements include the accounts of the Company, its wholly owned subsidiary, First Clover Leaf Bank (the Bank) and the Banks wholly owned inactive subsidiary, Clover Leaf Financial Services, Inc. On July 25, 2014, the inactive subsidiary was dissolved. First Clover Leafs common stock is traded on the NASDAQ Capital Market under the symbol FCLF.
Recent Accounting Pronouncements: The following accounting standards were recently issued relating to the financial services industry:
In May 2014, the Financial Accounting Standard Board (the FASB) issued an update creating FASB Topic 606, Revenue from Contracts with Customers. The guidance in this update affects any entity that either enters into contracts with customers to transfer goods or services or enters into contracts for the transfer of nonfinancial assets unless those contracts are within the scope of other standards (for example, insurance contracts or lease contracts). The core principle of the guidance is that an entity should recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. The guidance provides steps to follow to achieve the core principle. An entity should disclose sufficient information to enable users of financial statements to understand the nature, amount, timing and uncertainty of revenue and cash flows arising from contracts with customers. Qualitative and quantitative information is required about contracts with customers, significant judgments and changes in judgments, and assets recognized from the costs to obtain or fulfill a contract. The amendments in this update become effective for annual periods and interim periods within those annual periods beginning after December 15, 2016. We are currently evaluating the impact of adopting the new guidance on the consolidated financial statements.
In January 2014, the FASB amended existing guidance clarifying that if an in substance repossession or foreclosure occurs, a creditor is considered to have received physical possession of residential real estate property collateralizing a consumer mortgage loan upon either (1) the creditor obtaining legal title to the residential real estate property upon completion of a foreclosure or (2) the borrower conveying all interest in the residential real estate property to the creditor to satisfy that loan through completion of a deed in lieu of foreclosure or through a similar legal agreement. Additionally, the amendments require interim and annual disclosure of both (1) the amount of foreclosed residential real estate property held by the creditor and (2)
FIRST CLOVER LEAF FINANCIAL CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 2014 AND DECEMBER 31, 2013
the recorded investment in consumer mortgage loans collateralized by residential real estate property that are in the process of foreclosure according to local requirements of the applicable jurisdiction. The amendments in this update are effective for public business entities for annual periods, and interim periods within those annual periods, beginning after December 15, 2014. The Company does not expect this amendment to have a material impact on the consolidated financial statements.
In July 2013, the FASB amended existing guidance related to the presentation of an unrecognized tax benefit when a net operating loss carryforward, a similar tax loss or a tax credit carryforward exists. These amendments provide that an unrecognized tax benefit, or a portion thereof, be presented in the financial statements as a reduction to a deferred tax asset for a net operating loss carryforward, a similar tax loss, or a tax credit carryforward, except to the extent that a net operating loss carryforward, a similar tax loss, or a tax credit carryforward is not available at the reporting date to settle any additional income taxes that would result from disallowance of a tax position. Or, if the tax law does not require the entity to use, and the entity does not intend to use, the deferred tax asset for such purpose, then the unrecognized tax benefit should be presented as a liability. These amendments are effective for interim and annual reporting periods beginning after December 15, 2013. The effect of adopting this standard did not have a material effect on the Companys operating results or financial condition.
Reclassifications: Certain reclassifications have been made to conform to the current year presentation. These reclassifications had no impact on the Companys net income or total stockholders equity.
NOTE 2 SECURITIES AVAILABLE FOR SALE
The amortized cost and fair values of securities with gross unrealized gains and losses as of the dates indicated are summarized as follows:
|
|
June 30, 2014 |
| ||||||||||
|
|
|
|
Gross |
|
Gross |
|
|
| ||||
|
|
Amortized |
|
Unrealized |
|
Unrealized |
|
Fair |
| ||||
|
|
Cost |
|
Gains |
|
(Losses) |
|
Value |
| ||||
U.S. government agency obligations |
|
$ |
35,359,461 |
|
$ |
44,320 |
|
$ |
(560,547 |
) |
$ |
34,843,234 |
|
State and municipal securities |
|
42,870,250 |
|
930,096 |
|
(508,319 |
) |
43,292,027 |
| ||||
Other securities(1) |
|
248,501 |
|
|
|
|
|
248,501 |
| ||||
Mortgage-backed: residential |
|
38,215,018 |
|
357,033 |
|
(322,836 |
) |
38,249,215 |
| ||||
|
|
|
|
|
|
|
|
|
| ||||
|
|
$ |
116,693,230 |
|
$ |
1,331,449 |
|
$ |
(1,391,702 |
) |
$ |
116,632,977 |
|
|
|
December 31, 2013 |
| ||||||||||
U.S. government agency obligations |
|
$ |
41,982,901 |
|
$ |
34,010 |
|
$ |
(1,101,316 |
) |
$ |
40,915,595 |
|
U.S. treasury securities |
|
5,000,000 |
|
|
|
|
|
5,000,000 |
| ||||
State and municipal securities |
|
39,827,427 |
|
439,363 |
|
(1,521,921 |
) |
38,744,869 |
| ||||
Other securities(1) |
|
248,501 |
|
|
|
|
|
248,501 |
| ||||
Mortgage-backed: residential |
|
33,404,645 |
|
234,517 |
|
(771,145 |
) |
32,868,017 |
| ||||
|
|
|
|
|
|
|
|
|
| ||||
|
|
$ |
120,463,474 |
|
$ |
707,890 |
|
$ |
(3,394,382 |
) |
$ |
117,776,982 |
|
(1) Includes a Certificate of Deposit in the amount of $245,000
FIRST CLOVER LEAF FINANCIAL CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 2014 AND DECEMBER 31, 2013
NOTE 2 SECURITIES AVAILABLE FOR SALE (Continued)
Unrealized losses and fair value, aggregated by investment category and length of time that individual securities have been in a continuous unrealized loss position as of June 30, 2014 and December 31, 2013, are summarized as follows:
|
|
June 30, 2014 |
| ||||||||||||||||
|
|
Less than 12 Months |
|
12 Months or More |
|
Total |
| ||||||||||||
|
|
Fair |
|
Unrealized |
|
Fair |
|
Unrealized |
|
Fair |
|
Unrealized |
| ||||||
|
|
Value |
|
Losses |
|
Value |
|
Losses |
|
Value |
|
Losses |
| ||||||
U.S. government agency obligations |
|
$ |
3,492,324 |
|
$ |
(13,689 |
) |
$ |
15,493,982 |
|
$ |
(546,858 |
) |
$ |
18,986,306 |
|
$ |
(560,547 |
) |
State and municipal securities |
|
4,471,009 |
|
(47,058 |
) |
12,756,110 |
|
(461,261 |
) |
17,227,119 |
|
(508,319 |
) | ||||||
Mortgage-backed: residential |
|
3,071,054 |
|
(32,473 |
) |
18,823,722 |
|
(290,363 |
) |
21,894,776 |
|
(322,836 |
) | ||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
|
|
$ |
11,034,387 |
|
$ |
(93,220 |
) |
$ |
47,073,814 |
|
$ |
(1,298,482 |
) |
$ |
58,108,201 |
|
$ |
(1,391,702 |
) |
|
|
December 31, 2013 |
| ||||||||||||||||
|
|
Less than 12 Months |
|
12 Months or More |
|
Total |
| ||||||||||||
|
|
Fair |
|
Unrealized |
|
Fair |
|
Unrealized |
|
Fair |
|
Unrealized |
| ||||||
|
|
Value |
|
Losses |
|
Value |
|
Losses |
|
Value |
|
Losses |
| ||||||
U.S. government agency obligations |
|
$ |
32,313,881 |
|
$ |
(962,837 |
) |
$ |
1,364,739 |
|
$ |
(138,479 |
) |
$ |
33,678,620 |
|
$ |
(1,101,316 |
) |
State and municipal securities |
|
20,013,766 |
|
(1,112,126 |
) |
3,322,850 |
|
(409,795 |
) |
23,336,616 |
|
(1,521,921 |
) | ||||||
Mortgage-backed: residential |
|
16,485,580 |
|
(531,722 |
) |
5,443,669 |
|
(239,423 |
) |
21,929,249 |
|
(771,145 |
) | ||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
|
|
$ |
68,813,227 |
|
$ |
(2,606,685 |
) |
$ |
10,131,258 |
|
$ |
(787,697 |
) |
$ |
78,944,485 |
|
$ |
(3,394,382 |
) |
Management evaluates the investment portfolio on at least a quarterly basis to determine if investments have suffered an other-than-temporary decline in value. In addition, management monitors market trends, investment grades, bond defaults and other circumstances to identify trends and circumstances that might impact the carrying value of equity securities.
At June 30, 2014, the Company had 72 securities in an unrealized loss position which included: 12 agency securities, 39 state and municipal securities, and 21 mortgage-backed securities. This is a decrease from 97 securities at December 31, 2013. The unrealized losses resulted from changes in market interest rates and liquidity, as opposed to changes in the probability of contractual cash flows. The Company does not intend to sell the securities, and it is not more-likely-than-not that the Company will be required to sell the securities prior to recovery of the amortized cost. Full collection of the amounts due according to the contractual terms of the securities is expected; therefore, the Company does not consider these investments to be other-than-temporarily impaired at June 30, 2014.
FIRST CLOVER LEAF FINANCIAL CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 2014 AND DECEMBER 31, 2013
NOTE 2 SECURITIES AVAILABLE FOR SALE (Continued)
The amortized cost and fair value at June 30, 2014, by contractual maturity, are shown below. Maturities may differ from contractual maturities in mortgage-backed securities because the mortgages underlying the securities may be called or repaid without any penalties. Additionally, an item in our other securities category has no stated maturity. Therefore, stated maturities are not disclosed for these items.
|
|
Amortized |
|
Fair |
| ||
|
|
Cost |
|
Value |
| ||
Due in one year or less |
|
$ |
12,690,776 |
|
$ |
12,716,410 |
|
Due after one year through five years |
|
14,993,035 |
|
14,994,116 |
| ||
Due after five years through ten years |
|
33,458,583 |
|
33,250,016 |
| ||
Due after ten years |
|
17,332,317 |
|
17,419,719 |
| ||
Other securities - non-maturing |
|
3,501 |
|
3,501 |
| ||
Mortgage-backed: residential |
|
38,215,018 |
|
38,249,215 |
| ||
|
|
|
|
|
| ||
|
|
$ |
116,693,230 |
|
$ |
116,632,977 |
|
Securities with a carrying amount of approximately $72,539,000 and $88,180,000 were pledged to secure deposits as required or permitted by law at June 30, 2014 and December 31, 2013, respectively.
At June 30, 2014, there were no holdings of securities of any one issuer, other than the U.S. Government and its agencies, in an amount greater than 10% of stockholders equity. There were no sales of securities during the three and six months ended June 30, 2014. The Company received proceeds of $3,303,453 from the sale of securities during the three months ended June 30, 2013, resulting in gross realized gains of $17,838 and gross realized losses of $14,351. The Company received proceeds of $9,025,930 from the sale of securities during the six months ending June 30, 2013 resulting in gross realized gains of $373,489 and gross realized losses of $14,351.
FIRST CLOVER LEAF FINANCIAL CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 2014 AND DECEMBER 31, 2013
NOTE 3 - LOANS
The components of loans are as follows:
|
|
At June 30, |
|
At December 31, |
| ||||||
|
|
2014 |
|
2013 |
| ||||||
|
|
Amount |
|
Percent |
|
Amount |
|
Percent |
| ||
Real estate loans: |
|
|
|
|
|
|
|
|
| ||
One-to-four family |
|
$ |
118,061,294 |
|
29.9 |
% |
$ |
118,884,453 |
|
31.4 |
% |
Multi-family |
|
38,109,056 |
|
9.7 |
|
40,262,269 |
|
10.6 |
| ||
Commercial |
|
122,250,575 |
|
30.8 |
|
120,839,112 |
|
31.8 |
| ||
Construction and land |
|
28,432,750 |
|
7.2 |
|
13,961,068 |
|
3.7 |
| ||
|
|
306,853,675 |
|
77.6 |
|
293,946,902 |
|
77.5 |
| ||
|
|
|
|
|
|
|
|
|
| ||
Commercial business |
|
74,467,619 |
|
18.9 |
|
71,940,431 |
|
19.0 |
| ||
|
|
|
|
|
|
|
|
|
| ||
Consumer: |
|
|
|
|
|
|
|
|
| ||
Home equity |
|
12,091,430 |
|
3.1 |
|
11,712,701 |
|
3.1 |
| ||
Automobile and other |
|
1,407,877 |
|
0.4 |
|
1,525,594 |
|
0.4 |
| ||
|
|
13,499,307 |
|
3.5 |
|
13,238,295 |
|
3.5 |
| ||
|
|
|
|
|
|
|
|
|
| ||
Total gross loans |
|
394,820,601 |
|
100.0 |
% |
379,125,628 |
|
100.0 |
% | ||
Undisbursed portion of construction loans |
|
(6,880,023 |
) |
|
|
(1,112,957 |
) |
|
| ||
Deferred loan origination costs, net |
|
156,870 |
|
|
|
146,959 |
|
|
| ||
Allowance for loan losses |
|
(5,567,909 |
) |
|
|
(5,590,668 |
) |
|
| ||
|
|
|
|
|
|
|
|
|
| ||
Loans, net |
|
$ |
382,529,539 |
|
|
|
$ |
372,568,962 |
|
|
|
The Company has certain lending policies and procedures in place that are designed to maximize loan income within an acceptable level of risk. Management reviews and presents these policies to the board of directors at least annually. A reporting system supplements the review process by providing management with reports related to loan production, loan quality, loan delinquencies and non-performing and potential problem loans.
Additional information regarding our accounting policies for the individual loan categories is contained in our 2013 Annual Report to Stockholders that is filed as Exhibit 13 to the Companys Annual Report on Form 10-K.
On occasion, the Company originates loans secured by single-family dwellings with loan to value ratios exceeding 90%. As of June 30, 2014 and December 31, 2013, these loans represented 1.06% and 1.07%, respectively, of our combined one-to-four family and home equity portfolios. The Company does not consider the level of such loans to be a significant concentration of credit as of June 30, 2014 or December 31, 2013.
The recorded investment in loans does not include accrued interest and loan origination fees due to immateriality. The recorded investment in construction and land includes undisbursed commitments of approximately $6,880,000 and $1,113,000 at June 30, 2014 and December 31, 2013, respectively. The allowance for loan losses does not include a component for undisbursed loan commitments; rather this amount is included in other liabilities.
FIRST CLOVER LEAF FINANCIAL CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 2014 AND DECEMBER 31, 2013
NOTE 3 - LOANS (Continued)
The following tables present our past-due loans, segregated by class, as of June 30, 2014 and December 31, 2013:
June 30, 2014
|
|
Loans |
|
Loans |
|
Loans |
|
Total |
|
Current |
|
Total |
|
Accruing Loans |
| |||||||
Real estate loans: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||
One-to-four family |
|
$ |
203,943 |
|
$ |
310,728 |
|
$ |
763,519 |
|
$ |
1,278,190 |
|
$ |
116,783,104 |
|
$ |
118,061,294 |
|
$ |
|
|
Multi-family |
|
|
|
|
|
|
|
|
|
38,109,056 |
|
38,109,056 |
|
|
| |||||||
Commercial |
|
26,809 |
|
680,788 |
|
14,392 |
|
721,989 |
|
121,528,586 |
|
122,250,575 |
|
|
| |||||||
Construction and land |
|
|
|
|
|
|
|
|
|
28,432,750 |
|
28,432,750 |
|
|
| |||||||
|
|
230,752 |
|
991,516 |
|
777,911 |
|
2,000,179 |
|
304,853,496 |
|
306,853,675 |
|
|
| |||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||
Commercial business |
|
12,283 |
|
|
|
|
|
12,283 |
|
74,455,336 |
|
74,467,619 |
|
|
| |||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||
Consumer: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||
Home equity |
|
73,192 |
|
|
|
44,251 |
|
117,443 |
|
11,973,987 |
|
12,091,430 |
|
|
| |||||||
Automobile and other |
|
|
|
|
|
|
|
|
|
1,407,877 |
|
1,407,877 |
|
|
| |||||||
|
|
73,192 |
|
|
|
44,251 |
|
117,443 |
|
13,381,864 |
|
13,499,307 |
|
|
| |||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||
Total |
|
$ |
316,227 |
|
$ |
991,516 |
|
$ |
822,162 |
|
$ |
2,129,905 |
|
$ |
392,690,696 |
|
$ |
394,820,601 |
|
$ |
|
|
December 31, 2013
|
|
Loans |
|
Loans |
|
Loans |
|
Total |
|
Current |
|
Total |
|
Accruing Loans |
| |||||||
Real estate loans: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||
One-to-four family |
|
$ |
631,656 |
|
$ |
116,090 |
|
$ |
673,677 |
|
$ |
1,421,423 |
|
$ |
117,463,030 |
|
$ |
118,884,453 |
|
$ |
|
|
Multi-family |
|
|
|
|
|
|
|
|
|
40,262,269 |
|
40,262,269 |
|
|
| |||||||
Commercial |
|
15,162 |
|
|
|
30,016 |
|
45,178 |
|
120,793,934 |
|
120,839,112 |
|
|
| |||||||
Construction and land |
|
|
|
|
|
|
|
|
|
13,961,068 |
|
13,961,068 |
|
|
| |||||||
|
|
646,818 |
|
116,090 |
|
703,693 |
|
1,466,601 |
|
292,480,301 |
|
293,946,902 |
|
|
| |||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||
Commercial business |
|
4,719 |
|
|
|
|
|
4,719 |
|
71,935,712 |
|
71,940,431 |
|
|
| |||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||
Consumer: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||
Home equity |
|
40,473 |
|
|
|
30,047 |
|
70,520 |
|
11,642,181 |
|
11,712,701 |
|
|
| |||||||
Automobile and other |
|
|
|
|
|
|
|
|
|
1,525,594 |
|
1,525,594 |
|
|
| |||||||
|
|
40,473 |
|
|
|
30,047 |
|
70,520 |
|
13,167,775 |
|
13,238,295 |
|
|
| |||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||
Total |
|
$ |
692,010 |
|
$ |
116,090 |
|
$ |
733,740 |
|
$ |
1,541,840 |
|
$ |
377,583,788 |
|
$ |
379,125,628 |
|
$ |
|
|
FIRST CLOVER LEAF FINANCIAL CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 2014 AND DECEMBER 31, 2013
NOTE 3 - LOANS (Continued)
All loans are reviewed on a regular basis and are placed on non-accrual status when, in the opinion of management, there is reasonable probability of loss of principal or collection of additional interest is deemed insufficient to warrant further accrual. Generally, we place all loans 90 days or more past due on non-accrual status. However, exceptions may occur when a loan is in process of renewal, but it has not yet been completed. In addition, we may place any loan on non-accrual status if any part of it is classified as loss or if any part has been charged-off. When a loan is placed on non-accrual status, total interest accrued and unpaid to date is reversed. Subsequent payments are applied to the outstanding principal balance.
Non-accrual loans, segregated by class, are as follows:
|
|
June 30, |
|
December 31, |
| ||
|
|
2014 |
|
2013 |
| ||
Real estate loans: |
|
|
|
|
| ||
One-to-four family |
|
$ |
1,112,581 |
|
$ |
1,671,324 |
|
Multi-family |
|
1,841,334 |
|
2,100,064 |
| ||
Commercial |
|
1,902,261 |
|
1,388,887 |
| ||
Construction and land |
|
640,134 |
|
1,141,057 |
| ||
|
|
5,496,310 |
|
6,301,332 |
| ||
|
|
|
|
|
| ||
Commercial business |
|
680,000 |
|
|
| ||
|
|
|
|
|
| ||
Consumer: |
|
|
|
|
| ||
Home equity |
|
155,943 |
|
144,800 |
| ||
|
|
|
|
|
| ||
Total non-accrual loans |
|
$ |
6,332,253 |
|
$ |
6,446,132 |
|
FIRST CLOVER LEAF FINANCIAL CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 2014 AND DECEMBER 31, 2013
NOTE 3 - LOANS (Continued)
The following tables present the activity in the allowance for loan losses for the three and six months ended June 30, 2014 and 2013. Allocation of a portion of the allowance to one category of loans does not preclude its availability to absorb losses in other categories.
Three months ended June 30, 2014
|
|
Beginning |
|
Charge-offs |
|
Recoveries |
|
Provision |
|
Ending Balance |
| |||||
Real estate loans: |
|
|
|
|
|
|
|
|
|
|
| |||||
One-to-four family |
|
$ |
1,346,963 |
|
$ |
(129,484 |
) |
$ |
602 |
|
$ |
7,771 |
|
$ |
1,225,852 |
|
Multi-family |
|
494,900 |
|
|
|
|
|
(56,469 |
) |
438,431 |
| |||||
Commercial |
|
1,892,631 |
|
|
|
|
|
(182,816 |
) |
1,709,815 |
| |||||
Construction and land |
|
641,774 |
|
|
|
|
|
369,542 |
|
1,011,316 |
| |||||
|
|
4,376,268 |
|
(129,484 |
) |
602 |
|
138,028 |
|
4,385,414 |
| |||||
|
|
|
|
|
|
|
|
|
|
|
| |||||
Commercial business |
|
1,157,656 |
|
|
|
5,302 |
|
(165,269 |
) |
997,689 |
| |||||
|
|
|
|
|
|
|
|
|
|
|
| |||||
Consumer |
|
|
|
|
|
|
|
|
|
|
| |||||
Home equity |
|
165,266 |
|
(22,660 |
) |
1,017 |
|
28,414 |
|
172,037 |
| |||||
Automobile and other |
|
13,942 |
|
|
|
|
|
(1,173 |
) |
12,769 |
| |||||
|
|
179,208 |
|
(22,660 |
) |
1,017 |
|
27,241 |
|
184,806 |
| |||||
|
|
|
|
|
|
|
|
|
|
|
| |||||
Total |
|
$ |
5,713,132 |
|
$ |
(152,144 |
) |
$ |
6,921 |
|
$ |
|
|
$ |
5,567,909 |
|
Three months ended June 30, 2013
|
|
Beginning |
|
Charge-offs |
|
Recoveries |
|
Provision |
|
Ending Balance |
| |||||
Real estate loans: |
|
|
|
|
|
|
|
|
|
|
| |||||
One-to-four family |
|
$ |
721,179 |
|
$ |
(2,773 |
) |
$ |
500 |
|
$ |
292,480 |
|
$ |
1,011,386 |
|
Multi-family |
|
743,617 |
|
(482,478 |
) |
|
|
298,859 |
|
559,998 |
| |||||
Commercial |
|
1,528,571 |
|
(134,105 |
) |
272 |
|
(321,074 |
) |
1,073,664 |
| |||||
Construction and land |
|
1,407,276 |
|
|
|
56,560 |
|
48,258 |
|
1,512,094 |
| |||||
|
|
4,400,643 |
|
(619,356 |
) |
57,332 |
|
318,523 |
|
4,157,142 |
| |||||
|
|
|
|
|
|
|
|
|
|
|
| |||||
Commercial business |
|
1,277,300 |
|
|
|
3,117 |
|
(84,795 |
) |
1,195,622 |
| |||||
|
|
|
|
|
|
|
|
|
|
|
| |||||
Consumer |
|
|
|
|
|
|
|
|
|
|
| |||||
Home equity |
|
146,285 |
|
(13,009 |
) |
|
|
(12,500 |
) |
120,776 |
| |||||
Automobile and other |
|
8,960 |
|
(7,574 |
) |
|
|
3,772 |
|
5,158 |
| |||||
|
|
155,245 |
|
(20,583 |
) |
|
|
(8,728 |
) |
125,934 |
| |||||
|
|
|
|
|
|
|
|
|
|
|
| |||||
Total |
|
$ |
5,833,188 |
|
$ |
(639,939 |
) |
$ |
60,449 |
|
$ |
225,000 |
|
$ |
5,478,698 |
|
FIRST CLOVER LEAF FINANCIAL CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 2014 AND DECEMBER 31, 2013
NOTE 3 - LOANS (Continued)
Six months ended June 30, 2014
|
|
Beginning |
|
Charge-offs |
|
Recoveries |
|
Provision |
|
Ending Balance |
| |||||
Real estate loans: |
|
|
|
|
|
|
|
|
|
|
| |||||
One-to-four family |
|
$ |
1,424,663 |
|
$ |
(219,163 |
) |
$ |
1,017 |
|
$ |
19,335 |
|
$ |
1,225,852 |
|
Multi-family |
|
661,358 |
|
|
|
|
|
(222,927 |
) |
438,431 |
| |||||
Commercial |
|
1,454,455 |
|
(1,876 |
) |
|
|
257,236 |
|
1,709,815 |
| |||||
Construction and land |
|
668,085 |
|
|
|
230,000 |
|
113,231 |
|
1,011,316 |
| |||||
|
|
4,208,561 |
|
(221,039 |
) |
231,017 |
|
166,875 |
|
4,385,414 |
| |||||
|
|
|
|
|
|
|
|
|
|
|
| |||||
Commercial business |
|
1,219,080 |
|
|
|
8,716 |
|
(230,107 |
) |
997,689 |
| |||||
|
|
|
|
|
|
|
|
|
|
|
| |||||
Consumer: |
|
|
|
|
|
|
|
|
|
|
| |||||
Home equity |
|
116,478 |
|
(43,519 |
) |
1,916 |
|
97,162 |
|
172,037 |
| |||||
Automobile and other |
|
46,549 |
|
|
|
150 |
|
(33,930 |
) |
12,769 |
| |||||
|
|
163,027 |
|
(43,519 |
) |
2,066 |
|
63,232 |
|
184,806 |
| |||||
|
|
|
|
|
|
|
|
|
|
|
| |||||
Total |
|
$ |
5,590,668 |
|
$ |
(264,558 |
) |
$ |
241,799 |
|
$ |
|
|
$ |
5,567,909 |
|
Six months ended June 30, 2013
|
|
Beginning |
|
Charge-offs |
|
Recoveries |
|
Provision |
|
Ending Balance |
| |||||
Real estate loans: |
|
|
|
|
|
|
|
|
|
|
| |||||
One-to-four family |
|
$ |
847,285 |
|
$ |
(303,235 |
) |
$ |
16,618 |
|
$ |
450,718 |
|
$ |
1,011,386 |
|
Multi-family |
|
958,303 |
|
(482,478 |
) |
|
|
84,173 |
|
559,998 |
| |||||
Commercial |
|
1,268,081 |
|
(167,251 |
) |
590 |
|
(27,756 |
) |
1,073,664 |
| |||||
Construction and land |
|
1,413,002 |
|
|
|
157,268 |
|
(58,176 |
) |
1,512,094 |
| |||||
|
|
4,486,671 |
|
(952,964 |
) |
174,476 |
|
448,959 |
|
4,157,142 |
| |||||
|
|
|
|
|
|
|
|
|
|
|
| |||||
Commercial business |
|
1,296,114 |
|
(124,786 |
) |
7,970 |
|
16,324 |
|
1,195,622 |
| |||||
|
|
|
|
|
|
|
|
|
|
|
| |||||
Consumer: |
|
|
|
|
|
|
|
|
|
|
| |||||
Home equity |
|
151,625 |
|
(13,009 |
) |
|
|
(17,840 |
) |
120,776 |
| |||||
Automobile and other |
|
10,175 |
|
(7,574 |
) |
|
|
2,557 |
|
5,158 |
| |||||
|
|
161,800 |
|
(20,583 |
) |
|
|
(15,283 |
) |
125,934 |
| |||||
|
|
|
|
|
|
|
|
|
|
|
| |||||
Total |
|
$ |
5,944,585 |
|
$ |
(1,098,333 |
) |
$ |
182,446 |
|
$ |
450,000 |
|
$ |
5,478,698 |
|
FIRST CLOVER LEAF FINANCIAL CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 2014 AND DECEMBER 31, 2013
NOTE 3 - LOANS (Continued)
The following tables separate the allocation of the allowance for loan losses and the loan balances between loans evaluated both individually and collectively as of June 30, 2014 and December 31, 2013:
June 30, 2014
|
|
Period-end allowance allocated to loans: |
|
Loans evaluated for impairment: |
| ||||||||||||||
|
|
Individually |
|
Collectively |
|
|
|
|
|
|
|
|
| ||||||
|
|
evaluated for |
|
evaluated for |
|
Ending |
|
|
| ||||||||||
|
|
impairment |
|
impairment |
|
Balance |
|
Individually |
|
Collectively |
|
Ending Balance |
| ||||||
Real estate loans: |
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
One-to-four family |
|
$ |
71,031 |
|
$ |
1,154,821 |
|
$ |
1,225,852 |
|
$ |
1,160,906 |
|
$ |
116,900,388 |
|
$ |
118,061,294 |
|
Multi-family |
|
|
|
438,431 |
|
438,431 |
|
1,841,334 |
|
36,267,722 |
|
38,109,056 |
| ||||||
Commercial |
|
205,363 |
|
1,504,452 |
|
1,709,815 |
|
2,150,867 |
|
120,099,708 |
|
122,250,575 |
| ||||||
Construction and land |
|
|
|
1,011,316 |
|
1,011,316 |
|
640,134 |
|
27,792,616 |
|
28,432,750 |
| ||||||
|
|
276,394 |
|
4,109,020 |
|
4,385,414 |
|
5,793,241 |
|
301,060,434 |
|
306,853,675 |
| ||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
Commercial business |
|
123,875 |
|
873,814 |
|
997,689 |
|
803,875 |
|
73,663,744 |
|
74,467,619 |
| ||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
Consumer: |
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
Home equity |
|
|
|
172,037 |
|
172,037 |
|
173,458 |
|
11,917,972 |
|
12,091,430 |
| ||||||
Automobile and other |
|
|
|
12,769 |
|
12,769 |
|
|
|
1,407,877 |
|
1,407,877 |
| ||||||
|
|
|
|
184,806 |
|
184,806 |
|
173,458 |
|
13,325,849 |
|
13,499,307 |
| ||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
Total |
|
$ |
400,269 |
|
$ |
5,167,640 |
|
$ |
5,567,909 |
|
$ |
6,770,574 |
|
$ |
388,050,027 |
|
$ |
394,820,601 |
|
December 31, 2013
|
|
Period-end allowance allocated to loans: |
|
Loans evaluated for impairment: |
| ||||||||||||||
|
|
Individually |
|
Collectively |
|
Ending |
|
Individually |
|
Collectively |
|
Ending Balance |
| ||||||
Real estate loans: |
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
One-to-four family |
|
$ |
160,881 |
|
$ |
1,263,782 |
|
$ |
1,424,663 |
|
$ |
1,720,101 |
|
$ |
117,164,352 |
|
$ |
118,884,453 |
|
Multi-family |
|
|
|
661,358 |
|
661,358 |
|
2,100,064 |
|
38,162,205 |
|
40,262,269 |
| ||||||
Commercial |
|
195,103 |
|
1,259,352 |
|
1,454,455 |
|
1,978,525 |
|
118,860,587 |
|
120,839,112 |
| ||||||
Construction and land |
|
10,315 |
|
657,770 |
|
668,085 |
|
1,141,057 |
|
12,820,011 |
|
13,961,068 |
| ||||||
|
|
366,299 |
|
3,842,262 |
|
4,208,561 |
|
6,939,747 |
|
287,007,155 |
|
293,946,902 |
| ||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
Commercial business |
|
131,774 |
|
1,087,306 |
|
1,219,080 |
|
131,774 |
|
71,808,657 |
|
71,940,431 |
| ||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
Consumer: |
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
Home equity |
|
8,602 |
|
107,876 |
|
116,478 |
|
162,449 |
|
11,550,252 |
|
11,712,701 |
| ||||||
Automobile and other |
|
|
|
46,549 |
|
46,549 |
|
|
|
1,525,594 |
|
1,525,594 |
| ||||||
|
|
8,602 |
|
154,425 |
|
163,027 |
|
162,449 |
|
13,075,846 |
|
13,238,295 |
| ||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
Total |
|
$ |
506,675 |
|
$ |
5,083,993 |
|
$ |
5,590,668 |
|
$ |
7,233,970 |
|
$ |
371,891,658 |
|
$ |
379,125,628 |
|
FIRST CLOVER LEAF FINANCIAL CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 2014 AND DECEMBER 31, 2013
NOTE 3 - LOANS (Continued)
Credit Quality Indicators: As part of the on-going monitoring of the credit quality of the Companys loan portfolio, management categorizes loans into risk categories based on relevant information about the ability of borrowers to service their debt and comply with various terms of their loan agreements. The Company considers current financial information, historical payment experience, credit documentation, public information and current economic trends. Generally, all sizeable credits receive a financial review no less than annually to monitor and adjust, if necessary, the credits risk profile. Credits classified as watch generally receive a review more frequently than annually. The risk category of homogeneous loans, such as consumer loans and smaller balance loans, is evaluated when the loan becomes delinquent. For special mention, substandard, and doubtful credit classifications, the frequency of review is increased to no less than quarterly in order to determine potential impact on credit loss estimates.
The Company categorizes loans into the following risk categories based on relevant information about the ability of borrowers to service their debt:
Pass - A pass asset is well protected by the current worth and paying capacity of the obligor (or guarantors, if any) or by the fair value, less cost to acquire and sell, of any underlying collateral in a timely manner. Pass assets also include certain assets considered watch, which are still protected by the worth and paying capacity of the borrower but deserve closer attention and a higher level of credit monitoring.
Special Mention - A special mention asset has potential weaknesses that deserve managements close attention. The asset may also be subject to a weak or speculative market or to economic conditions, which may, in the future adversely affect the obligor. If left uncorrected, these potential weaknesses may result in deterioration of the repayment prospects for the asset or in the Banks credit position at some future date. Special mention assets are not adversely classified and do not expose the Bank to sufficient risk to warrant adverse classification.
Substandard - A substandard asset is an asset with a well-defined weakness that jeopardizes repayment, in whole or in part, of the debt. These credits are inadequately protected by the current sound worth and paying capacity of the obligor or of the collateral pledged. These assets are characterized by the distinct possibility that the institution will sustain some loss of principal and/or interest if the deficiencies are not corrected. It is not necessary for a loan to have an identifiable loss potential in order to receive this rating.
Doubtful - An asset that has all the weaknesses inherent in the substandard classification, with the added characteristic that the weaknesses make collection or liquidation in full, on the basis of currently known facts, conditions and values, highly questionable and improbable. The possibility of loss is extremely likely, but it is not identified at this point due to pending factors.
Loss - An asset, or portion thereof, classified as loss is considered uncollectible and of such little value that its continuance on the Companys books as an asset is not warranted. This classification does not necessarily mean that an asset has no recovery or salvage value; but rather, there is much doubt about whether, how much, or when the recovery would occur. As such, it is not practical or desirable to defer the write-off. Therefore, there is no balance to report for credits categorized as loss.
FIRST CLOVER LEAF FINANCIAL CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 2014 AND DECEMBER 31, 2013
NOTE 3 - LOANS (Continued)
The following tables present our credit quality indicators, segregated by class, as of June 30, 2014 and December 31, 2013:
June 30, 2014
|
|
Pass |
|
Special Mention |
|
Substandard |
|
Doubtful |
|
Total |
| |||||
Real estate loans: |
|
|
|
|
|
|
|
|
|
|
| |||||
One-to-four family |
|
$ |
116,129,137 |
|
$ |
310,794 |
|
$ |
1,233,320 |
|
$ |
388,043 |
|
$ |
118,061,294 |
|
Multi-family |
|
33,531,849 |
|
2,735,873 |
|
1,841,334 |
|
|
|
38,109,056 |
| |||||
Commercial |
|
111,870,965 |
|
5,879,146 |
|
4,500,464 |
|
|
|
122,250,575 |
| |||||
Construction and land |
|
27,514,778 |
|
217,129 |
|
700,843 |
|
|
|
28,432,750 |
| |||||
|
|
289,046,729 |
|
9,142,942 |
|
8,275,961 |
|
388,043 |
|
306,853,675 |
| |||||
|
|
|
|
|
|
|
|
|
|
|
| |||||
Commercial business |
|
71,752,342 |
|
1,911,402 |
|
803,875 |
|
|
|
74,467,619 |
| |||||
|
|
|
|
|
|
|
|
|
|
|
| |||||
Consumer: |
|
|
|
|
|
|
|
|
|
|
| |||||
Home equity |
|
11,904,880 |
|
30,607 |
|
152,166 |
|
3,777 |
|
12,091,430 |
| |||||
Automobile and other |
|
1,407,877 |
|
|
|
|
|
|
|
1,407,877 |
| |||||
|
|
13,312,757 |
|
30,607 |
|
152,166 |
|
3,777 |
|
13,499,307 |
| |||||
|
|
|
|
|
|
|
|
|
|
|
| |||||
Total |
|
$ |
374,111,828 |
|
$ |
11,084,951 |
|
$ |
9,232,002 |
|
$ |
391,820 |
|
$ |
394,820,601 |
|
December 31, 2013
|
|
Pass |
|
Special Mention |
|
Substandard |
|
Doubtful |
|
Total |
| |||||
Real estate loans: |
|
|
|
|
|
|
|
|
|
|
| |||||
One-to-four family |
|
$ |
115,491,532 |
|
$ |
1,672,820 |
|
$ |
1,367,925 |
|
$ |
352,176 |
|
$ |
118,884,453 |
|
Multi-family |
|
35,412,469 |
|
2,749,736 |
|
2,100,064 |
|
|
|
40,262,269 |
| |||||
Commercial |
|
110,571,786 |
|
5,902,447 |
|
4,334,863 |
|
30,016 |
|
120,839,112 |
| |||||
Construction and land |
|
12,696,737 |
|
|
|
1,264,331 |
|
|
|
13,961,068 |
| |||||
|
|
274,172,524 |
|
10,325,003 |
|
9,067,183 |
|
382,192 |
|
293,946,902 |
| |||||
|
|
|
|
|
|
|
|
|
|
|
| |||||
Commercial business |
|
71,074,289 |
|
534,368 |
|
331,774 |
|
|
|
71,940,431 |
| |||||
|
|
|
|
|
|
|
|
|
|
|
| |||||
Consumer: |
|
|
|
|
|
|
|
|
|
|
| |||||
Home equity |
|
11,518,523 |
|
31,730 |
|
132,401 |
|
30,047 |
|
11,712,701 |
| |||||
Automobile and other |
|
1,525,594 |
|
|
|
|
|
|
|
1,525,594 |
| |||||
|
|
13,044,117 |
|
31,730 |
|
132,401 |
|
30,047 |
|
13,238,295 |
| |||||
|
|
|
|
|
|
|
|
|
|
|
| |||||
Total |
|
$ |
358,290,930 |
|
$ |
10,891,101 |
|
$ |
9,531,358 |
|
$ |
412,239 |
|
$ |
379,125,628 |
|
FIRST CLOVER LEAF FINANCIAL CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 2014 AND DECEMBER 31, 2013
NOTE 3 - LOANS (Continued)
The following tables provide details of impaired loans, segregated by class, as of and for the periods indicated. The unpaid contractual balance represents the recorded balance prior to any partial charge-offs. The recorded investment represents customer balances net of any partial charge-offs recognized on the loans.
|
|
As of June 30, 2014 |
|
As of December 31, 2013 |
| ||||||||||||||
|
|
Unpaid |
|
Recorded |
|
Allowance for |
|
Unpaid |
|
Recorded |
|
Allowance for |
| ||||||
With no related allowance recorded: |
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
Real estate loans: |
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
One-to-four family |
|
$ |
627,235 |
|
$ |
516,868 |
|
$ |
|
|
$ |
1,082,196 |
|
$ |
899,959 |
|
$ |
|
|
Multi-family |
|
2,475,732 |
|
1,841,334 |
|
|
|
2,734,462 |
|
2,100,064 |
|
|
| ||||||
Commercial |
|
1,038,981 |
|
1,038,981 |
|
|
|
808,008 |
|
808,008 |
|
|
| ||||||
Construction and land |
|
2,413,368 |
|
640,134 |
|
|
|
1,986,485 |
|
213,251 |
|
|
| ||||||
|
|
6,555,316 |
|
4,037,317 |
|
|
|
6,611,151 |
|
4,021,282 |
|
|
| ||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
Commercial business |
|
680,000 |
|
680,000 |
|
|
|
|
|
|
|
|
| ||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
Consumer: |
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
Home equity |
|
199,728 |
|
173,458 |
|
|
|
132,402 |
|
132,402 |
|
|
| ||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
Subtotal |
|
$ |
7,435,044 |
|
$ |
4,890,775 |
|
$ |
|
|
$ |
6,743,553 |
|
$ |
4,153,684 |
|
$ |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
With an allowance recorded: |
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
Real estate loans: |
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
One-to-four family |
|
$ |
868,550 |
|
$ |
644,038 |
|
$ |
71,031 |
|
$ |
864,017 |
|
$ |
820,142 |
|
$ |
160,881 |
|
Multi-family |
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
Commercial |
|
1,304,121 |
|
1,111,886 |
|
205,363 |
|
1,360,876 |
|
1,170,517 |
|
195,103 |
| ||||||
Construction and land |
|
|
|
|
|
|
|
927,806 |
|
927,806 |
|
10,315 |
| ||||||
|
|
2,172,671 |
|
1,755,924 |
|
276,394 |
|
3,152,699 |
|
2,918,465 |
|
366,299 |
| ||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
Commercial business |
|
123,875 |
|
123,875 |
|
123,875 |
|
131,774 |
|
131,774 |
|
131,774 |
| ||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
Consumer: |
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
Home equity |
|
|
|
|
|
|
|
30,047 |
|
30,047 |
|
8,602 |
| ||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
Subtotal |
|
2,296,546 |
|
1,879,799 |
|
400,269 |
|
3,314,520 |
|
3,080,286 |
|
506,675 |
| ||||||
Total |
|
$ |
9,731,590 |
|
$ |
6,770,574 |
|
$ |
400,269 |
|
$ |
10,058,073 |
|
$ |
7,233,970 |
|
$ |
506,675 |
|
FIRST CLOVER LEAF FINANCIAL CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 2014 AND DECEMBER 31, 2013
NOTE 3 - LOANS (Continued)
|
|
For the three months ended June 30, 2014 |
|
For the three months ended June 30, 2013 |
| ||||||||||||||
|
|
Average |
|
Interest Income |
|
Cash Basis |
|
Average Investment |
|
Interest Income |
|
Cash Basis Recognized |
| ||||||
With no related allowance recorded: |
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
Real estate loans: |
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
One-to-four family |
|
$ |
784,205 |
|
$ |
483 |
|
$ |
|
|
$ |
1,208,214 |
|
$ |
|
|
$ |
|
|
Multi-family |
|
1,027,015 |
|
|
|
|
|
231,822 |
|
|
|
|
| ||||||
Commercial |
|
933,819 |
|
3,455 |
|
|
|
2,902,229 |
|
|
|
|
| ||||||
Construction and land |
|
865,655 |
|
|
|
|
|
1,686,959 |
|
|
|
|
| ||||||
|
|
3,610,694 |
|
3,938 |
|
|
|
6,029,224 |
|
|
|
|
| ||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
Commercial business |
|
340,000 |
|
|
|
|
|
|
|
|
|
|
| ||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
Consumer: |
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
Home equity |
|
157,501 |
|
313 |
|
|
|
135,984 |
|
|
|
|
| ||||||
Automobile and other |
|
|
|
|
|
|
|
2,274 |
|
|
|
|
| ||||||
|
|
157,501 |
|
313 |
|
|
|
138,258 |
|
|
|
|
| ||||||
Subtotal |
|
$ |
4,108,195 |
|
$ |
4,251 |
|
$ |
|
|
$ |
6,167,482 |
|
$ |
|
|
$ |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
With an allowance recorded: |
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
Real estate loans: |
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
One-to-four family |
|
$ |
581,242 |
|
$ |
|
|
$ |
|
|
$ |
870,751 |
|
$ |
|
|
$ |
|
|
Multi-family |
|
828,887 |
|
|
|
|
|
2,465,999 |
|
|
|
|
| ||||||
Commercial |
|
1,223,184 |
|
|
|
|
|
359,151 |
|
|
|
|
| ||||||
Construction and land |
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
|
|
2,633,313 |
|
|
|
|
|
3,695,901 |
|
|
|
|
| ||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
Commercial business |
|
125,873 |
|
2,290 |
|
|
|
347,693 |
|
230 |
|
|
| ||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
Consumer: |
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
Home equity |
|
|
|
|
|
|
|
35,611 |
|
|
|
|
| ||||||
Automobile and other |
|
|
|
|
|
|
|
1,892 |
|
|
|
|
| ||||||
|
|
|
|
|
|
|
|
37,503 |
|
|
|
|
| ||||||
Subtotal |
|
2,759,186 |
|
2,290 |
|
|
|
4,081,097 |
|
230 |
|
|
| ||||||
Total |
|
$ |
6,867,381 |
|
$ |
6,541 |
|
$ |
|
|
$ |
10,248,579 |
|
$ |
230 |
|
$ |
|
|
FIRST CLOVER LEAF FINANCIAL CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 2014 AND DECEMBER 31, 2013
NOTE 3 - LOANS (Continued)
|
|
For the six months ended June 30, 2014 |
|
For the six months ended June 30, 2013 |
| ||||||||||||||
|
|
Average |
|
Interest Income |
|
Cash Basis |
|
Average |
|
Interest Income |
|
Cash Basis |
| ||||||
With no related allowance recorded: |
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
Real estate loans: |
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
One-to-four family |
|
$ |
822,790 |
|
$ |
963 |
|
$ |
|
|
$ |
970,208 |
|
$ |
|
|
$ |
|
|
Multi-family |
|
1,384,698 |
|
|
|
|
|
226,535 |
|
|
|
|
| ||||||
Commercial |
|
891,882 |
|
7,709 |
|
|
|
2,835,650 |
|
|
|
|
| ||||||
Construction and land |
|
648,187 |
|
|
|
|
|
1,943,446 |
|
|
|
|
| ||||||
|
|
3,747,557 |
|
8,672 |
|
|
|
5,975,839 |
|
|
|
|
| ||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
Commercial business |
|
226,667 |
|
|
|
|
|
854 |
|
|
|
|
| ||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
Consumer: |
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
Home equity |
|
149,134 |
|
574 |
|
|
|
143,127 |
|
|
|
|
| ||||||
Automobile and other |
|
|
|
|
|
|
|
1,516 |
|
|
|
|
| ||||||
|
|
149,134 |
|
574 |
|
|
|
144,643 |
|
|
|
|
| ||||||
Subtotal |
|
$ |
4,123,358 |
|
$ |
9,246 |
|
$ |
|
|
$ |
6,121,336 |
|
$ |
|
|
$ |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
With an allowance recorded: |
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
Real estate loans: |
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
One-to-four family |
|
$ |
660,875 |
|
$ |
|
|
$ |
|
|
$ |
1,102,541 |
|
$ |
|
|
$ |
|
|
Multi-family |
|
552,591 |
|
|
|
|
|
2,573,935 |
|
|
|
|
| ||||||
Commercial |
|
1,205,628 |
|
3,186 |
|
|
|
417,901 |
|
|
|
|
| ||||||
Construction and land |
|
309,269 |
|
|
|
|
|
|
|
|
|
|
| ||||||
|
|
2,728,363 |
|
3,186 |
|
|
|
4,094,377 |
|
|
|
|
| ||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
Commercial business |
|
127,840 |
|
4,725 |
|
|
|
317,761 |
|
230 |
|
|
| ||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
Consumer: |
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
Home equity |
|
10,016 |
|
|
|
|
|
33,114 |
|
|
|
|
| ||||||
Automobile and other |
|
|
|
|
|
|
|
4,506 |
|
|
|
|
| ||||||
|
|
10,016 |
|
|
|
|
|
37,620 |
|
|
|
|
| ||||||
Subtotal |
|
2,866,219 |
|
7,911 |
|
|
|
$ |
4,449,758 |
|
$ |
230 |
|
$ |
|
| |||
Total |
|
$ |
6,989,577 |
|
$ |
17,157 |
|
$ |
|
|
$ |
10,571,094 |
|
$ |
230 |
|
$ |
|
|
FIRST CLOVER LEAF FINANCIAL CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 2014 AND DECEMBER 31, 2013
NOTE 3 - LOANS (Continued)
Troubled Debt Restructurings:
During the three and six months ending June 30, 2014, there were no loans modified as troubled debt restructurings.
The Company had allocated $342,453 of specific reserves on $5,025,071 of loans to customers whose loan terms have been modified in troubled debt restructurings as of June 30, 2014. The Company had $354,822 of allocations of specific reserves on $6,215,918 of loans to customers whose loan terms were modified in troubled debt restructurings as of December 31, 2013. The Company had no commitments to lend additional amounts as of June 30, 2014 or December 31, 2013 to customers with outstanding loans that are classified as troubled debt restructurings.
The following tables present loans, by class, modified as troubled debt restructurings that occurred during the three and six months ended June 30, 2013:
Three months ended June 30, 2013
|
|
Number of |
|
Pre-Modification |
|
Post-Modification |
| ||
Real estate loans: |
|
|
|
|
|
|
| ||
One-to-four family |
|
4 |
|
$ |
85,912 |
|
$ |
88,012 |
|
|
|
|
|
|
|
|
| ||
Commercial business |
|
1 |
|
138,002 |
|
138,002 |
| ||
|
|
|
|
|
|
|
| ||
Total |
|
5 |
|
$ |
223,914 |
|
$ |
226,014 |
|
Six months ended June 30, 2013
|
|
Number of |
|
Pre-Modification |
|
Post-Modification |
| ||
Real estate loans: |
|
|
|
|
|
|
| ||
One-to-four family |
|
4 |
|
$ |
85,912 |
|
$ |
88,012 |
|
|
|
|
|
|
|
|
| ||
Commercial business |
|
1 |
|
138,002 |
|
138,002 |
| ||
|
|
|
|
|
|
|
| ||
Total |
|
5 |
|
$ |
223,914 |
|
$ |
226,014 |
|
FIRST CLOVER LEAF FINANCIAL CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 2014 AND DECEMBER 31, 2013
NOTE 3 - LOANS (Continued)
The following table presents the troubled debt restructurings for which there was a payment default within twelve months following the modification during the three and six months ended June 30, 2014 and 2013.
|
|
Three and six months |
| |||
|
|
Number of |
|
Recorded Investment |
| |
Real estate loans: |
|
|
|
|
| |
One-to-four family |
|
4 |
|
$ |
87,028 |
|
|
|
|
|
|
| |
Total |
|
4 |
|
$ |
87,028 |
|
|
|
Three and six months |
| |||
|
|
Number of |
|
Recorded Investment |
| |
Real estate loans: |
|
|
|
|
| |
One-to-four family |
|
1 |
|
$ |
54,024 |
|
|
|
|
|
|
| |
Total |
|
1 |
|
$ |
54,024 |
|
The troubled debt restructurings that subsequently defaulted, described above, resulted in a net increase in the allowance for loan losses of $2,647 and resulted in charge-offs of $6,011 during the six months ended June 30, 2014.
A loan is considered to be in payment default once it is 60 days contractually past due under the modified terms.
NOTE 4 - GOODWILL
In accordance with ASC Topic 350, Intangibles - Goodwill and Other, goodwill and intangible assets with indefinite useful lives are no longer amortized; rather they are assessed, at least annually, for impairment. The Company tests goodwill for impairment on an annual basis as of September 30, or more often if events or circumstances indicate there may be impairment. During 2013, at our annual impairment assessment date of September 30, our analysis indicated that no impairment existed.
FIRST CLOVER LEAF FINANCIAL CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 2014 AND DECEMBER 31, 2013
NOTE 5 EARNINGS PER SHARE
Basic and diluted earnings per share represents net income available to common stockholders divided by the weighted average number of common shares outstanding.
|
|
Three Months Ended |
|
Six Months Ended |
| ||||||||
|
|
June 30, |
|
June 30, |
| ||||||||
|
|
2014 |
|
2013 |
|
2014 |
|
2013 |
| ||||
|
|
|
|
|
|
|
|
|
| ||||
Net income |
|
$ |
709,809 |
|
$ |
866,374 |
|
$ |
1,486,962 |
|
$ |
2,061,436 |
|
Basic potential common shares: |
|
|
|
|
|
|
|
|
| ||||
Basic weighted average shares outstanding |
|
7,007,283 |
|
7,299,696 |
|
7,007,283 |
|
7,373,567 |
| ||||
|
|
|
|
|
|
|
|
|
| ||||
Dilutive potential common shares |
|
|
|
|
|
|
|
|
| ||||
|
|
|
|
|
|
|
|
|
| ||||
Diluted weighted average shares outstanding |
|
7,007,283 |
|
7,299,696 |
|
7,007,283 |
|
7,373,567 |
| ||||
|
|
|
|
|
|
|
|
|
| ||||
Basic and diluted earnings per share |
|
$ |
0.10 |
|
$ |
0.12 |
|
$ |
0.21 |
|
$ |
0.28 |
|
NOTE 6 - FAIR VALUE MEASUREMENTS
The Company determines the fair market values of its financial instruments based on the fair value hierarchy established in ASC Topic 820, Fair Value Measurements and Disclosures, which requires an entity to maximize the use of observable inputs and minimizes the use of unobservable inputs when measuring fair value. The guidance also describes three levels of inputs that may be used to measure fair value.
· Level 1 - Unadjusted quoted prices in active markets for identical assets or liabilities that the Company has the ability to access at the measurement date.
· Level 2 - Inputs other than quoted prices included with Level 1 that are observable for the asset or liability either directly or indirectly. These might include quoted prices for similar assets or liabilities in active markets, quoted prices for identical or similar assets or liabilities in markets that are not active, inputs other than quoted prices that are observable for the asset or liability (such as interest rates, volatilities, prepayment speeds, credit risks, etc.) or inputs that are derived from or corroborated by market data by correlation or other means.
· Level 3 - Unobservable inputs for determining the fair value of assets or liabilities that reflect an entitys own assumptions about the assumptions that market participants would use in pricing the assets or liabilities.
FIRST CLOVER LEAF FINANCIAL CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 2014 AND DECEMBER 31, 2013
NOTE 6 - FAIR VALUE MEASUREMENTS (Continued)
Securities: The fair value of available-for-sale securities are determined by various valuation methodologies. Where quoted market prices are available in an active market, securities are classified within Level 1. The Company has no securities classified within Level 1. If quoted market prices are not available, then fair values are estimated by using pricing models or quoted prices of securities with similar characteristics. For these investments, the pricing applications apply available information as applicable through processes such as benchmark curves, benchmarking of like securities, sector groupings and matrix pricing to prepare evaluations. They also use model processes, such as the Option Adjusted Spread model to assess interest rate impact and develop prepayment scenarios. In the case of municipal securities, information on the Bloomberg terminal such as credit ratings, credit support, and call features are used to set the matrix values for the issues, which will be used to determine the yields from which the market values are calculated each month. Because they are not price quote valuations, the pricing methods are considered Level 2 inputs. At this time all of the Companys securities fall within the Level 2 hierarchy for pricing. In certain cases where Level 1 or Level 2 inputs are not available, securities are classified within Level 3 of the hierarchy. The Company currently has no securities classified within Level 3. During the six months ended June 30, 2014, there were no transfers between Level 1 and Level 2. The valuation methodology was consistent for the six months ended June 30, 2014 and the year ended December 31, 2013.
Foreclosed Assets: Assets acquired through or instead of loan foreclosure are initially recorded at fair value less costs to sell when acquired, establishing a new cost basis. These assets are subsequently accounted for at lower of cost or fair value less estimated costs to sell. Fair value is commonly based on recent real estate appraisals which are updated no less frequently than annually. These appraisals may utilize a single valuation approach or a combination of approaches including comparable sales and the income approach. Adjustments are routinely made in the appraisal process by the independent appraisers to adjust for differences between the comparable sales and income data available. Such adjustments are usually significant and typically result in a Level 3 classification of the inputs for determining fair value. Foreclosed assets are evaluated on a quarterly basis for additional impairment and adjusted accordingly.
Impaired Loans: The fair value of impaired loans with specific allocations of the allowance for loan losses is generally based on recent real estate appraisals. These appraisals may utilize a single valuation approach or a combination of approaches including comparable sales and the income approach. Adjustments are routinely made in the appraisal process by the independent appraisers to adjust for differences between the comparable sales and income data available. Such adjustments are usually significant and typically result in a Level 3 classification of the inputs for determining fair value. Non-real estate collateral may be valued using an appraisal, net book value per the borrowers financial statements, or aging reports, adjusted or discounted based on managements historical knowledge, changes in market conditions from the time of the valuation, and managements expertise and knowledge of the client and clients business, resulting in a Level 3 fair value classification. Impaired loans are evaluated on a quarterly basis for additional impairment and adjusted accordingly.
Appraisals for both foreclosed assets and collateral-dependent impaired loans are performed by certified general appraisers (for commercial properties) or certified residential appraisers (for residential properties) whose qualifications and licenses have been reviewed and verified by the Company. Once received, a member of the loan department reviews the assumptions and approaches utilized in the appraisal as well as the overall resulting fair value in comparison with independent data sources such as recent market data or industry-wide statistics. On an annual basis, the Company compares the actual selling price of collateral that has been sold to the most recent appraised value to determine what additional adjustment should be made to the appraisal value to arrive at fair value.
FIRST CLOVER LEAF FINANCIAL CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 2014 AND DECEMBER 31, 2013
NOTE 6 - FAIR VALUE MEASUREMENTS (Continued)
Assets measured at fair value on a recurring basis segregated by fair value hierarchy level during the periods ended June 30, 2014 and December 31, 2013 are summarized below:
|
|
Fair Value Measurements at June 30, 2014 Using: |
| ||||||||||
|
|
Quoted Prices |
|
Significant Other |
|
Significant |
|
|
| ||||
Assets: |
|
(Level 1) |
|
(Level 2) |
|
(Level 3) |
|
Total |
| ||||
Securities: |
|
|
|
|
|
|
|
|
| ||||
U.S. government agency obligations |
|
$ |
|
|
$ |
34,843,234 |
|
$ |
|
|
$ |
34,843,234 |
|
State and municipal securities |
|
|
|
43,292,027 |
|
|
|
43,292,027 |
| ||||
Other securities |
|
|
|
248,501 |
|
|
|
248,501 |
| ||||
Mortgage-backed: residential |
|
|
|
38,249,215 |
|
|
|
38,249,215 |
| ||||
Total securities available for sale |
|
$ |
|
|
$ |
116,632,977 |
|
$ |
|
|
$ |
116,632,977 |
|
|
|
Fair Value Measurements at December 31, 2013 Using: |
| ||||||||||
|
|
Quoted Prices |
|
Significant Other |
|
Significant |
|
|
| ||||
Assets: |
|
(Level 1) |
|
(Level 2) |
|
(Level 3) |
|
Total |
| ||||
Securities: |
|
|
|
|
|
|
|
|
| ||||
U.S. government agency obligations |
|
$ |
|
|
$ |
40,915,595 |
|
$ |
|
|
$ |
40,915,595 |
|
U.S. treasury securities |
|
|
|
5,000,000 |
|
|
|
5,000,000 |
| ||||
State and municipal securities |
|
|
|
38,744,869 |
|
|
|
38,744,869 |
| ||||
Other securities |
|
|
|
248,501 |
|
|
|
248,501 |
| ||||
Mortgage-backed: residential |
|
|
|
32,868,017 |
|
|
|
32,868,017 |
| ||||
Total securities available for sale |
|
$ |
|
|
$ |
117,776,982 |
|
$ |
|
|
$ |
117,776,982 |
|
FIRST CLOVER LEAF FINANCIAL CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 2014 AND DECEMBER 31, 2013
NOTE 6 - FAIR VALUE MEASUREMENTS (Continued)
Assets measured at fair value on a nonrecurring basis by fair value hierarchy level during the periods ended June 30, 2014 and December 31, 2013 are summarized below:
|
|
Fair Value Measurements at June 30, 2014 Using: |
| ||||||||||
|
|
Quoted Prices |
|
Significant Other |
|
Significant |
|
|
| ||||
Assets: |
|
(Level 1) |
|
(Level 2) |
|
(Level 3) |
|
Total |
| ||||
|
|
|
|
|
|
|
|
|
| ||||
Foreclosed assets: |
|
|
|
|
|
|
|
|
| ||||
Real estate: |
|
|
|
|
|
|
|
|
| ||||
Construction and land |
|
$ |
|
|
$ |
|
|
$ |
301,560 |
|
$ |
301,560 |
|
|
|
|
|
|
|
|
|
|
| ||||
Total foreclosed assets |
|
$ |
|
|
$ |
|
|
$ |
301,560 |
|
$ |
301,560 |
|
|
|
|
|
|
|
|
|
|
| ||||
Impaired loans: |
|
|
|
|
|
|
|
|
| ||||
Real estate loans: |
|
|
|
|
|
|
|
|
| ||||
One-to-four family |
|
$ |
|
|
$ |
|
|
$ |
573,007 |
|
$ |
573,007 |
|
Commercial |
|
|
|
|
|
906,523 |
|
906,523 |
| ||||
|
|
|
|
|
|
|
|
|
| ||||
Total impaired loans |
|
$ |
|
|
$ |
|
|
$ |
1,479,530 |
|
$ |
1,479,530 |
|
FIRST CLOVER LEAF FINANCIAL CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 2014 AND DECEMBER 31, 2013
NOTE 6 - FAIR VALUE MEASUREMENTS (Continued)
|
|
Fair Value Measurements at December 31, 2013 Using: |
| ||||||||||
|
|
Quoted Prices |
|
Significant Other |
|
Significant |
|
|
| ||||
Assets: |
|
(Level 1) |
|
(Level 2) |
|
(Level 3) |
|
Total |
| ||||
|
|
|
|
|
|
|
|
|
| ||||
Foreclosed assets: |
|
|
|
|
|
|
|
|
| ||||
Real estate: |
|
|
|
|
|
|
|
|
| ||||
One-to-four family |
|
$ |
|
|
$ |
|
|
$ |
103,500 |
|
$ |
103,500 |
|
Multi-family |
|
|
|
|
|
118,100 |
|
118,100 |
| ||||
Commercial |
|
|
|
|
|
692,230 |
|
692,230 |
| ||||
Construction and land |
|
|
|
|
|
1,901,758 |
|
1,901,758 |
| ||||
|
|
|
|
|
|
|
|
|
| ||||
Total foreclosed assets |
|
$ |
|
|
$ |
|
|
$ |
2,815,588 |
|
$ |
2,815,588 |
|
|
|
|
|
|
|
|
|
|
| ||||
Impaired loans: |
|
|
|
|
|
|
|
|
| ||||
Real estate loans: |
|
|
|
|
|
|
|
|
| ||||
One-to-four family |
|
$ |
|
|
$ |
|
|
$ |
659,261 |
|
$ |
659,261 |
|
Commercial |
|
|
|
|
|
975,414 |
|
975,414 |
| ||||
Construction and land |
|
|
|
|
|
917,491 |
|
917,491 |
| ||||
|
|
|
|
|
|
2,552,166 |
|
2,552,166 |
| ||||
|
|
|
|
|
|
|
|
|
| ||||
Consumer: |
|
|
|
|
|
|
|
|
| ||||
Home Equity |
|
|
|
|
|
21,445 |
|
21,445 |
| ||||
|
|
|
|
|
|
21,445 |
|
21,445 |
| ||||
|
|
|
|
|
|
|
|
|
| ||||
Total impaired loans |
|
$ |
|
|
$ |
|
|
$ |
2,573,611 |
|
$ |
2,573,611 |
|
|
|
|
|
|
|
|
|
|
| ||||
Mortgage Servicing Rights |
|
$ |
|
|
$ |
918,247 |
|
$ |
|
|
$ |
918,247 |
|
Foreclosed assets are collateral dependent and are recorded at the lesser of the recorded investment in the receivable or the appraised value less costs to sell and may be revalued on a nonrecurring basis. Foreclosed assets measured at fair value less costs to sell on a nonrecurring basis at June 30, 2014, had a net carrying amount of $301,560, which was made up of the outstanding balance of $607,283, net of cumulative write-downs of $305,723 which included $39,723 that occurred during the six months ended June 30, 2014. At December 31, 2013, foreclosed assets had a carrying amount of $2,815,588, which was made up of the outstanding balance of $4,123,275, net of write-downs of $1,307,687.
Impaired loans that are measured for impairment using the fair value of the collateral for collateral dependent loans, had a principal balance of $1,879,799, with a valuation allowance of $400,269 at June 30, 2014, resulting in a net decrease in provision for loan losses of $6,972 for the six months ended June 30, 2014. At December 31, 2013, impaired loans had a principal balance of $3,080,286 with a valuation allowance of $506,675.
FIRST CLOVER LEAF FINANCIAL CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 2014 AND DECEMBER 31, 2013
NOTE 6 - FAIR VALUE MEASUREMENTS (Continued)
The following table presents quantitative information about Level 3 fair value measurements for financial instruments measured at fair value on a non-recurring basis at June 30, 2014:
|
|
Fair Value |
|
Valuation |
|
Unobservable Inputs |
|
Range |
|
Weighted |
| |
|
|
|
|
|
|
|
|
|
|
|
| |
Foreclosed assets: |
|
|
|
|
|
|
|
|
|
|
| |
Real estate: |
|
|
|
|
|
|
|
|
|
|
| |
Construction and land |
|
$ |
301,560 |
|
Sales Comparison |
|
Adjustment for difference between comparable sales |
|
4% to 34% |
|
16.2 |
% |
|
|
|
|
|
|
|
|
|
|
|
| |
Impaired loans: |
|
|
|
|
|
|
|
|
|
|
| |
Real estate loans: |
|
|
|
|
|
|
|
|
|
|
| |
One-to-four family |
|
$ |
573,007 |
|
Sales Comparison |
|
Adjustment for difference between comparable sales |
|
-16% to 16% |
|
1.0 |
% |
Commercial |
|
906,523 |
|
Income Approach |
|
Investment Capitalization Rates |
|
1% to 24% |
|
11.3 |
% |
The following table presents quantitative information about Level 3 fair value measurements for financial instruments measured at fair value on a non-recurring basis at December 31, 2013:
|
|
Fair Value |
|
Valuation |
|
Unobservable Inputs |
|
Range |
|
Weighted |
| |
|
|
|
|
|
|
|
|
|
|
|
| |
Foreclosed assets: |
|
|
|
|
|
|
|
|
|
|
| |
Real estate: |
|
|
|
|
|
|
|
|
|
|
| |
One-to-four family |
|
$ |
103,500 |
|
Sales Comparison |
|
Adjustment for difference between comparable sales |
|
-2% to 20% |
|
8.3 |
% |
Multi-family |
|
118,100 |
|
Sales Comparison |
|
Adjustment for difference between comparable sales |
|
2% to 26% |
|
15.5 |
% | |
Commercial |
|
692,230 |
|
Sales Comparison |
|
Adjustment for difference between comparable sales |
|
-2% to 0% |
|
-1.9 |
% | |
Construction and land |
|
1,901,758 |
|
Sales Comparison |
|
Adjustment for difference between comparable sales |
|
-21% to 36% |
|
5.5 |
% | |
|
|
|
|
|
|
|
|
|
|
|
| |
Impaired loans: |
|
|
|
|
|
|
|
|
|
|
| |
Real estate loans: |
|
|
|
|
|
|
|
|
|
|
| |
One-to-four family |
|
$ |
659,261 |
|
Sales Comparison |
|
Adjustment for difference between comparable sales |
|
-11% to 27% |
|
2.9 |
% |
Commercial |
|
975,414 |
|
Sales Comparison |
|
Adjustment for difference between comparable sales |
|
-28% to 16% |
|
-9.2 |
% | |
Construction and land |
|
917,491 |
|
Sales Comparison |
|
Adjustment for difference between comparable sales |
|
-14% to 36% |
|
19.1 |
% | |
Consumer: |
|
|
|
|
|
|
|
|
|
|
| |
Home Equity |
|
21,445 |
|
Sales Comparison |
|
Adjustment for difference between comparable sales |
|
-9% to -3% |
|
-5.6 |
% |
FIRST CLOVER LEAF FINANCIAL CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 2014 AND DECEMBER 31, 2013
NOTE 7 - FAIR VALUE OF FINANCIAL INSTRUMENTS
FASB ASC Topic 825, Financial Instruments, requires disclosure of fair value information about financial instruments, whether or not recognized in the balance sheet. Fair value is determined under the framework established by ASC Topic 820, Fair Value Measurement and Disclosures. ASC Topic 825 excludes certain financial instruments and all non-financial instruments from its disclosure requirements. Accordingly, the aggregate fair value amounts presented may not necessarily represent the underlying fair value of the Company.
The following methods and assumptions were used by the Company in estimating fair value disclosures for financial instruments:
Cash and Cash Equivalents: The carrying amounts of cash and cash equivalents approximate fair values given the short-term nature and active market for U.S. currency and are classified as Level 1.
Interest-Earning Time Deposits: Due to the short-term nature of these deposits, the carrying amounts of these deposits approximate fair values. However, since it is unusual to observe a quoted price in an active market during the outstanding term, these deposits are classified as Level 2.
Federal Home Loan Bank Stock: The Company is required to maintain these equity securities as a member of the Federal Home Loan Bank of Chicago (FHLB) and in amounts as required by this institution. These equity securities are restricted in that they can only be sold back to the respective institution or another member institution at par. Therefore, they are less liquid than other tradable securities and their fair value is not readily available.
Loans: Fair values are estimated for portfolios of loans with similar financial characteristics. Loans are segmented by type such as real estate, commercial business, and consumer loans. Each loan segment is further segregated into fixed and adjustable rate interest terms and by performing and non-performing classifications. The fair value of fixed rate loans is estimated by either observable market prices or by discounting future cash flows using discount rates that reflect the Companys current pricing for loans with similar characteristics, such as loan type, pricing and remaining maturity resulting in a Level 3 classification. Impaired loans that have no specific reserve are classified as Level 3. Impaired loans that have been written down to the fair value of the corresponding collateral, less estimated costs to sell, are not included in this table as those amounts were presented previously. The fair value computed is not necessarily an exit price.
Loans Held for Sale: The fair value of loans held for sale is estimated based upon binding contracts and quotes from third party investors resulting in a Level 2 classification.
Accrued Interest Receivable: The carrying amount of accrued interest receivable approximates its fair value. Accrued interest receivable related to interest-earning time deposits and securities is classified as Level 2. Accrued interest receivable related to loans is classified as Level 3.
Deposits: The fair values disclosed for demand deposits are, by definition, equal to the amount payable on demand at the reporting date (i.e., their carrying amounts) and are classified as Level 1. The carrying amounts for interest-bearing money market and savings accounts approximate their fair values at the reporting date and are classified as Level 1. Fair values for fixed-rate certificates of deposit are estimated using a discounted cash flow calculation that applies interest rates currently being offered on certificates to a schedule of aggregated expected monthly maturities on time deposits resulting in a Level 2 classification.
Federal Home Loan Bank Advances: The fair value of FHLB advances, which are at a fixed rate, are estimated using discounted cash flow analyses based on current rates for similar advances resulting in a Level 2 classification.
FIRST CLOVER LEAF FINANCIAL CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 2014 AND DECEMBER 31, 2013
NOTE 7 - FAIR VALUE OF FINANCIAL INSTRUMENTS (Continued)
Securities Sold Under Agreements to Repurchase: The carrying amounts of securities sold under agreements to repurchase approximate fair value resulting in a Level 2 classification.
Subordinated Debentures: This debenture is a floating rate instrument which re-prices quarterly. The fair value of variable rate trust preferred debentures approximate carrying value resulting in a Level 2 classification.
Accrued Interest Payable: The carrying amount of accrued interest payable approximates its fair value. Accrued interest payable related to interest-bearing money market and savings accounts is classified as Level 1. All other accrued interest payable is classified as Level 2.
The following information presents estimated fair values of the Companys financial instruments as of June 30, 2014 and December 31, 2013 that have not been previously presented and the methods and assumptions used to estimate those fair values.
|
|
|
|
Fair Value Measurements at June 30, 2014 Using: |
| |||||||||||
|
|
Carrying |
|
Quoted Prices in |
|
Significant Other |
|
Significant |
|
Fair |
| |||||
|
|
Amount |
|
(Level 1) |
|
(Level 2) |
|
(Level 3) |
|
Value |
| |||||
Financial assets: |
|
|
|
|
|
|
|
|
|
|
| |||||
Cash and cash equivalents |
|
$ |
88,227,392 |
|
$ |
88,227,392 |
|
$ |
|
|
$ |
|
|
$ |
88,227,392 |
|
Interest-earning time deposits |
|
1,770,852 |
|
|
|
1,770,852 |
|
|
|
1,770,852 |
| |||||
Federal Home Loan Bank stock |
|
2,887,763 |
|
|
|
|
|
|
|
N/A |
| |||||
Loans, net (excluding impaired loans at fair value) |
|
381,050,009 |
|
|
|
|
|
381,258,185 |
|
381,258,185 |
| |||||
Loans held for sale |
|
260,935 |
|
|
|
260,935 |
|
|
|
260,935 |
| |||||
Accrued interest receivable |
|
1,536,523 |
|
|
|
537,635 |
|
998,888 |
|
1,536,523 |
| |||||
|
|
|
|
|
|
|
|
|
|
|
| |||||
Financial liabilities: |
|
|
|
|
|
|
|
|
|
|
| |||||
Non-interest bearing deposits |
|
57,436,700 |
|
57,436,700 |
|
|
|
|
|
57,436,700 |
| |||||
Interest-bearing deposits |
|
471,136,428 |
|
342,174,142 |
|
129,633,048 |
|
|
|
471,807,190 |
| |||||
Federal Home Loan Bank advances |
|
13,983,875 |
|
|
|
14,075,634 |
|
|
|
14,075,634 |
| |||||
Securities sold under agreement to repurchase |
|
14,984,621 |
|
|
|
14,984,621 |
|
|
|
14,984,621 |
| |||||
Subordinated debentures |
|
4,000,000 |
|
|
|
4,000,000 |
|
|
|
4,000,000 |
| |||||
Accrued interest payable |
|
186,345 |
|
11,987 |
|
174,358 |
|
|
|
186,345 |
| |||||
FIRST CLOVER LEAF FINANCIAL CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 2014 AND DECEMBER 31, 2013
NOTE 7 - FAIR VALUE OF FINANCIAL INSTRUMENTS (Continued)
|
|
|
|
Fair Value Measurements at December 31, 2013 Using: |
| |||||||||||
|
|
Carrying |
|
Quoted Prices in |
|
Significant Other |
|
Significant |
|
Fair |
| |||||
|
|
Amount |
|
(Level 1) |
|
(Level 2) |
|
(Level 3) |
|
Value |
| |||||
Financial assets: |
|
|
|
|
|
|
|
|
|
|
| |||||
Cash and cash equivalents |
|
$ |
84,693,825 |
|
$ |
84,693,825 |
|
$ |
|
|
$ |
|
|
$ |
84,693,825 |
|
Interest-earning time deposits |
|
1,766,493 |
|
|
|
1,766,493 |
|
|
|
1,766,493 |
| |||||
Federal Home Loan Bank stock |
|
2,887,763 |
|
|
|
|
|
|
|
N/A |
| |||||
Loans, net (excluding impaired loans at fair value) |
|
369,995,351 |
|
|
|
|
|
369,987,191 |
|
369,987,191 |
| |||||
Accrued interest receivable |
|
1,551,258 |
|
|
|
546,692 |
|
1,004,566 |
|
1,551,258 |
| |||||
|
|
|
|
|
|
|
|
|
|
|
| |||||
Financial liabilities: |
|
|
|
|
|
|
|
|
|
|
| |||||
Non-interest bearing deposits |
|
55,263,604 |
|
55,263,604 |
|
|
|
|
|
55,263,604 |
| |||||
Interest-bearing deposits |
|
447,276,088 |
|
319,716,842 |
|
128,515,854 |
|
|
|
448,232,696 |
| |||||
Federal Home Loan Bank advances |
|
13,980,005 |
|
|
|
14,114,389 |
|
|
|
14,114,389 |
| |||||
Securities sold under agreement to repurchase |
|
26,766,169 |
|
|
|
26,766,169 |
|
|
|
26,766,169 |
| |||||
Subordinated debentures |
|
4,000,000 |
|
|
|
4,000,000 |
|
|
|
4,000,000 |
| |||||
Accrued interest payable |
|
199,764 |
|
15,233 |
|
184,531 |
|
|
|
199,764 |
| |||||
In addition, other assets and liabilities of the Company that are not defined as financial instruments are not included in the above disclosures, such as property and equipment. Also, non-financial instruments typically not recognized in financial statements nevertheless may have value but are not included in the above disclosures. These include, among other items, the estimated earnings power of core deposit accounts, our trained work force, customer goodwill and similar items.
FIRST CLOVER LEAF FINANCIAL CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 2014 AND DECEMBER 31, 2013
NOTE 8 ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS)
The following tables summarize the changes within each classification of accumulated other comprehensive loss, net of tax, for the three and six months ended June 30, 2014. There was no reclassification out of accumulated other comprehensive income for these periods.
Changes in Accumulated Other Comprehensive Income (Loss) by Component
For the Three Months Ended June 30, 2014(1)
|
|
Unrealized Gains |
|
Total |
| ||
Accumulated Other Comprehensive Loss at April 1, 2014 |
|
$ |
(816,203 |
) |
$ |
(816,203 |
) |
|
|
|
|
|
| ||
Other comprehensive income before reclassifications |
|
778,244 |
|
778,244 |
| ||
Amount reclassified from accumulated other comprehensive loss |
|
|
|
|
| ||
Net current-period other comprehensive income |
|
778,244 |
|
778,244 |
| ||
|
|
|
|
|
| ||
Accumulated Other Comprehensive Loss at June 30, 2014 |
|
$ |
(37,959 |
) |
$ |
(37,959 |
) |
(1) All amounts are net of tax.
Changes in Accumulated Other Comprehensive Income (Loss) by Component For the Six Months Ended June 30, 2014(1) | |||||||
|
|
|
|
|
| ||
|
|
Unrealized Gains |
|
Total |
| ||
Accumulated Other Comprehensive Loss at January 1, 2014 |
|
$ |
(1,692,488 |
) |
$ |
(1,692,488 |
) |
|
|
|
|
|
| ||
Other comprehensive income before reclassifications |
|
1,654,529 |
|
1,654,529 |
| ||
Amount reclassified from accumulated other comprehensive loss |
|
|
|
|
| ||
Net current-period other comprehensive income |
|
1,654,529 |
|
1,654,529 |
| ||
|
|
|
|
|
| ||
Accumulated Other Comprehensive Loss at June 30, 2014 |
|
$ |
(37,959 |
) |
$ |
(37,959 |
) |
(1) All amounts are net of tax.
FIRST CLOVER LEAF FINANCIAL CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 2014 AND DECEMBER 31, 2013
NOTE 8 - ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS) (Continued)
The following tables summarize the changes within each classification of accumulated other comprehensive income, net of tax, for the three and six months ended June 30, 2013, and summarize the significant amounts reclassified out of each component of accumulated other comprehensive income:
Changes in Accumulated Other Comprehensive Income (Loss) by Component
For the Three Months Ended June 30, 2013(1)
|
|
Unrealized Gains |
|
Total |
| ||
Accumulated Other Comprehensive Income at April 1, 2013 |
|
$ |
558,433 |
|
$ |
558,433 |
|
|
|
|
|
|
| ||
Other comprehensive loss before reclassifications |
|
(1,597,286 |
) |
(1,597,286 |
) | ||
Amount reclassified from accumulated other comprehensive income(2) |
|
(2,197 |
) |
(2,197 |
) | ||
Net current-period other comprehensive loss |
|
(1,599,483 |
) |
(1,599,483 |
) | ||
|
|
|
|
|
| ||
Accumulated Other Comprehensive Loss at June 30, 2013 |
|
$ |
(1,041,050 |
) |
$ |
(1,041,050 |
) |
(1) All amounts are net of tax.
(2) See table below for details about reclassifications.
Reclassifications out of Accumulated Other Comprehensive Income For the Three Months Ended June 30, 2013 | ||||||
|
|
|
|
|
| |
Details about Accumulated Other |
|
Amount Reclassified from |
|
Affected Line Item in the |
| |
Unrealized gains and losses on available-for-sale securities |
|
|
|
|
| |
|
|
$ |
3,487 |
|
Gain on sale of securities |
|
|
|
(1,290 |
) |
Tax expense |
| |
Total reclassifications for the period |
|
$ |
2,197 |
|
Net of tax |
|
FIRST CLOVER LEAF FINANCIAL CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 2014 AND DECEMBER 31, 2013
NOTE 8 - ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS) (Continued)
Changes in Accumulated Other Comprehensive Income (Loss) by Component
For the Six Months Ended June 30, 2013(1)
|
|
Unrealized Gains |
|
Total |
| ||
Accumulated Other Comprehensive Income at January 1, 2013 |
|
$ |
1,196,111 |
|
$ |
1,196,111 |
|
|
|
|
|
|
| ||
Other comprehensive loss before reclassifications |
|
(2,010,904 |
) |
(2,010,904 |
) | ||
Amount reclassified from accumulated other comprehensive income(2) |
|
(226,257 |
) |
(226,257 |
) | ||
Net current-period other comprehensive loss |
|
(2,237,161 |
) |
(2,237,161 |
) | ||
|
|
|
|
|
| ||
Accumulated Other Comprehensive Loss at June 30, 2013 |
|
$ |
(1,041,050 |
) |
$ |
(1,041,050 |
) |
(1) All amounts are net of tax.
(2) See table below for details about reclassifications.
Reclassifications out of Accumulated Other Comprehensive Income For the Six Months Ended June 30, 2013 | ||||||
|
|
|
|
|
| |
Details about Accumulated Other |
|
Amount Reclassified from |
|
Affected Line Item in the |
| |
Unrealized gains and losses on available-for-sale securities |
|
|
|
|
| |
|
|
$ |
359,138 |
|
Gain on sale of securities |
|
|
|
(132,881 |
) |
Tax expense |
| |
Total reclassifications for the period |
|
$ |
226,257 |
|
Net of tax |
|
NOTE 9 SUBSEQUENT EVENTS
On July 28, 2014, the Board of Directors of the Company declared a cash dividend on the Companys common stock of $0.06 per share for the quarter ended June 30, 2014. The dividend will be payable to stockholders of record as of August 22, 2014 and is expected to be paid on August 29, 2014.
Item 2. Managements Discussion and Analysis of Financial Condition and Results of Operations
Forward-Looking Statements
When used in this Form 10-Q, the words or phrases will likely result, are expected to, will continue, is anticipated, estimate, project or similar expressions are intended to identify forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Such statements are subject to certain risks and uncertainties including, but not limited to changes in general economic conditions, either nationally or in our market areas, that are worse than expected; competition among depository and other financial institutions; inflation and changes in the interest rate environment that reduce our margins or reduce the fair value of financial instruments; adverse changes in the securities markets; changes in laws or government regulations or policies affecting financial institutions, including changes in regulatory fees, capital requirements and allowance for loan losses requirements; our ability to enter new markets successfully and capitalize on growth opportunities; our ability to successfully integrate acquired entities, if any; changes in consumer spending, borrowing and savings habits; changes in accounting policies and practices, as may be adopted by the bank regulatory agencies, the Financial Accounting Standards Board, the Securities and Exchange Commission and the Public Company Accounting Oversight Board; changes resulting from shutdowns of the federal government; changes in our organization, compensation and benefit plans; changes in our financial condition or results of operations that reduce capital available to pay dividends; and changes in the financial condition or future prospects of issuers of securities that we own, that could cause actual results to differ materially from historical earnings and those presently anticipated or projected. The Company wishes to caution you not to place undue reliance on any such forward-looking statements, which only speak as of the date made. The Company wishes to advise you that the factors listed above could affect the Companys financial performance and could cause the Companys actual results for future periods to differ materially from any opinions or statements expressed with respect to future periods in any current statements.
The Company does not undertake, and specifically disclaims any obligation, to publicly release the result of any revisions which may be made to any forward-looking statements to reflect events or circumstances after the date of such statements or to reflect the occurrence of anticipated or unanticipated events.
Critical Accounting Policies
First Clover Leaf considers the allowance for loan losses and goodwill and other intangible assets to be its critical accounting estimates, due to the higher degree of judgment and complexity than its other significant accounting estimates.
Allowance for Loan Losses. The allowance for loan losses is a valuation account that reflects our evaluation of the probable incurred credit losses in our loan portfolio. We maintain the allowance through provisions for loan losses that we charge to income. We charge losses on loans against the allowance for loan losses when we believe the collection of loan principal is unlikely. Subsequent recoveries, if any, are credited to the allowance.
Our evaluation of risk in maintaining the allowance for loan losses includes the review of all loans on which the collectibility of principal may not be reasonably assured. We consider the following factors as part of this evaluation: our historical loan loss experience, the nature and volume of the loan portfolio, adverse situations that may affect the borrowers ability to repay, estimated value of any underlying collateral, and prevailing economic conditions. For each allowance portfolio class, we apply loss factors to calculate the required allowance based upon actual historical loss rates over a time period that we have determined represents the current credit cycle. The Company extended the look back period used to establish the loss history for the general reserve component of the allowance for loan losses in the first quarter of 2014 in an effort to continue to factor in the higher loss experience that resulted from the credit crisis. Management evaluates the total balance of the allowance for loan losses based on several factors that are not loan specific but are reflective of the probable incurred losses in the loan portfolio, including managements periodic review of loan collectibility in light of historical experience, loan portfolio composition, prevailing economic conditions such as housing trends, inflation rates and unemployment rates, and geographic concentrations of loans within the Banks immediate market area.
There may be other factors that may warrant our consideration in maintaining an allowance at a level sufficient to provide for probable incurred losses. This evaluation is inherently subjective as it requires estimates that are susceptible to significant revision as more information becomes available or as future events change.
In addition, the Office of the Comptroller of the Currency (OCC), as an integral part of its examination process, periodically reviews our loan portfolio and the related allowance for loan losses. The OCC may require us to increase the allowance for loan losses based on its judgments of information available to it at the time of its examination, thereby adversely affecting our results of operations. There can be no assurance that the OCC will not require further increases to the allowance.
Goodwill. Goodwill arising from business combinations represents the value attributable to unidentifiable intangible elements in the business acquired. Goodwill recorded by First Clover Leaf in connection with its acquisitions relates to the inherent value in the businesses acquired, and this value is dependent upon First Clover Leafs ability to provide quality, cost effective services in a competitive market place. The continued value of recorded goodwill is impacted by the value of our stock and continued profitability of the organization. In the event that the stock price experiences significant declines or the operations of the Company lack profitability, an impairment of goodwill may need to be recognized. Any impairment recognized would adversely impact earnings in the period in which it is recognized.
The goodwill impairment analysis allows the assessment of qualitative factors to determine if it is more-likely-than-not that the fair value of a reporting unit is less than the carrying value. If it is determined that we should proceed with impairment testing, we then estimate the fair value of our single reporting unit as of the measurement date utilizing two approaches including the comparable transactions approach, and the control premium approach which utilizes the Companys stock price. We then compare the estimated fair value of the reporting unit to the current carrying value of the reporting unit to determine if goodwill impairment had occurred as of the measurement date. During 2013, at our annual impairment assessment date of September 30, our analysis indicated that no impairment existed. Future events, such as adverse changes to First Clover Leafs business or changes in the economic market, could cause management to conclude that impairment indicators exist and require management to re-evaluate goodwill. Should such re-evaluation determine goodwill is impaired; the resulting impairment loss recognized could have a material, adverse impact on First Clover Leafs financial condition and results of operations. In accordance with current accounting guidance, management has determined that the Company has only one reporting unit for purposes of evaluating goodwill.
Overview
First Clover Leaf had net income of $710,000 for the three months ended June 30, 2014 compared to net income of $866,000 for the same period in 2013. The decrease was primarily due to losses on sales of a non-branch building and furnishings and foreclosed assets, and higher compensation and employee benefits expense, partially offset by reductions in interest expense, provision for loan losses, and income tax expense. Basic and diluted earnings per share were $0.10 for the three-month period ended June 30, 2014 and $0.12 for the comparable period in 2013.
First Clover Leaf had net income of $1.5 million for the six months ended June 30, 2014 compared to net income of $2.1 million for the same period in 2013. The decrease was primarily due to the same factors described above for the three months ended June 30, 2014 plus decreases in gain on sales of securities. Basic and diluted earnings per share were $0.21 for the six-month period ended June 30, 2014 and $0.28 for the comparable period in 2013.
Financial Condition
Total Assets. Total assets increased to $639.4 million at June 30, 2014 from $622.0 million at December 31, 2013. The increase was primarily due to higher balances of cash and cash equivalents, loans and bank-owned life insurance, partially offset by a decrease in foreclosed assets.
Total cash and cash equivalents increased $3.5 million to $88.2 million at June 30, 2014 from $84.7 million at December 31, 2013. The increase was primarily due to increased deposits predominately from a non-customer special purpose account that we expect to be disbursed in the coming months, partially offset by increased loan funding and the purchase of additional bank-owned life insurance.
Net loans increased $9.9 million to $382.5 million at June 30, 2014 from $372.6 million at December 31, 2013. This was primarily due to loan originations exceeding loan repayments. We experienced increased activity in construction and land loans due to the funding of several large projects during the six months ended June 30, 2014. Loans held for sale at June 30, 2014 totaled $261,000. There were no loans held for sale at December 31, 2013.
Total Liabilities. Total liabilities increased to $564.0 million at June 30, 2014 from $548.9 million at December 31, 2013. Deposits increased $26.1 million to $528.6 million at June 30, 2014 from $502.5 million at December 31, 2013. Non-interest bearing deposits increased $2.1 million to $57.4 million at June 30, 2014 from $55.3 million at December 31, 2013 due to normal fluctuations in business deposit accounts. Interest bearing deposits increased $23.8 million to $471.1 million at June 30, 2014 from $447.3 million at December 31, 2013. This increase was primarily due to deposits predominately from a non-customer special purpose account that we expect to be disbursed in the coming months. Securities sold under agreements to repurchase decreased $11.8 million to $15.0 million at June 30, 2014 from $26.8 million at December 31, 2013. This decrease was due primarily to normal fluctuations in these business accounts.
Stockholders Equity. Stockholders equity increased to $75.4 million at June 30, 2014 from $73.1 million at December 31, 2013, primarily due to net income of $1.5 million and a reduction in accumulated other comprehensive loss of $1.7 million, partially offset by the payment of cash dividends of $841,000 during the six months ended June 30, 2014.
Asset Quality
The Company has experienced a decline in non-performing assets as of June 30, 2014 compared to December 31, 2013. The decrease was primarily due to the sale of foreclosed assets of $1.3 million. The following tables set forth information with respect to the Companys non-performing and impaired loans and other non-performing assets at the dates indicated:
|
|
June 30, |
|
December 31, |
| |||
|
|
2014 |
|
2013 |
| |||
|
|
|
|
|
| |||
Loans 90 days or more past due and still accruing |
|
$ |
|
|
$ |
|
| |
Non-accrual loans(1) |
|
5,652,253 |
|
6,446,132 |
| |||
Other impaired loans |
|
438,321 |
|
787,838 |
| |||
Total non-performing loans |
|
6,090,574 |
|
7,233,970 |
| |||
Foreclosed assets |
|
4,289,225 |
|
5,577,481 |
| |||
Total non-performing assets |
|
$ |
10,379,799 |
|
$ |
12,811,451 |
| |
(1) The entire balance is also classified as impaired as of June 30, 2014 and December 31, 2013.
|
|
June 30, |
|
December 31, |
|
|
|
2014 |
|
2013 |
|
|
|
|
|
|
|
Non-performing assets to total assets |
|
1.62 |
% |
2.06 |
% |
Non-performing loans to total loans |
|
1.59 |
|
1.94 |
|
Allowance for loan losses to non-performing loans |
|
91.42 |
|
77.28 |
|
Allowance for loan losses to total loans |
|
1.46 |
|
1.50 |
|
Non-Performing and Impaired Loans and Other Non-Performing Assets. At June 30, 2014, our total non-performing and impaired loans and other non-performing assets were $10.4 million compared to $12.8 million at December 31, 2013. At June 30, 2014, the Companys non-accrual loans decreased $700,000 to $5.7 million from $6.4 million at December 31, 2013.
At June 30, 2014, the Bank had one relationship classified as non-accrual with a balance in excess of $1.0 million, and one relationship classified as non-accrual with a balance slightly below $1.0 million. The largest non-accrual relationship is a $1.6 million credit to a real estate investor. This credit was placed on non-accrual status in 2012. The investor has been experiencing cash flow difficulties due to higher vacancy rates and the need for property repairs. Since being placed on nonaccrual, $800,000 in pay-downs from the sale of collateral has been received on this relationship, and a charge-off of $483,000 was recorded, all of which was previously reserved. A property manager is overseeing the daily operations, and all non-rented properties have been listed for sale. The borrower has signed a forbearance agreement with the Company to aid in selling some of the properties to further reduce the debt. We believe the collateral on this loan is sufficient to cover the majority of the outstanding balance and that sufficient allowances have been set aside for the remaining outstanding balance. The second credit is a $937,000 credit to a real estate investor. This relationship was also placed on non-accrual status in 2012. The collateral for this credit is primarily a mobile-home park along with several small commercial buildings. The mobile-home park has experienced high vacancies and cash flow is limited. The Bank has restructured this loan into a two-note structure with the requirement that all rents from the mobile-home park are deposited directly into an account at the Bank. There are two commercial buildings that are currently listed for sale making up the remainder of the collateral. We are seeing improvement in the borrowers cash flow as the number of vacancies at the mobile-home park has decreased significantly. Sufficient reserves have been established to cover the collateral shortfall.
In addition to the non-accrual loans discussed above, we may have loans that are still accruing interest that we categorize as impaired due to observed credit deterioration. This allows us to individually evaluate them for our allowance for loan losses. At June 30, 2014, there were three credits in this classification with a total balance of $438,000. The largest loan in this classification at June 30, 2014 was a $249,000 commercial real estate loan secured by a commercial building. The Bank has not been able to obtain updated financial statements from the borrower and therefore cannot perform an adequate review of cash flow to support the debt. In comparison, there were four loans that met this classification at December 31, 2013 with a total balance of $788,000.
The following table presents a summary of our past due loans as of June 30, 2014 and December 31, 2013:
|
|
June 30, |
|
December 31, |
| ||
|
|
2014 |
|
2013 |
| ||
|
|
|
|
|
| ||
Loans 30-59 Days Past Due |
|
$ |
316,227 |
|
$ |
692,010 |
|
Loans 60-89 Days Past Due |
|
991,516 |
|
116,090 |
| ||
Loans 90 or more Days Past Due |
|
822,162 |
|
733,740 |
| ||
Total Past Due Loans |
|
$ |
2,129,905 |
|
$ |
1,541,840 |
|
Past due balances increased approximately $600,000 from $1.5 million at December 31, 2013 to $2.1 million at June 30, 2014. The category experiencing the largest increase was the 60-89 days past due category, increasing approximately $876,000 from year-end December 31, 2013. The increase in the 60-89 past due was primarily a result of two commercial real estate loans. The loans are in non-accrual status and the Bank is currently working on a forbearance agreement with the borrower.
The following table presents a summary of our credit quality indicators as of June 30, 2014 and December 31, 2013:
|
|
June 30, |
|
December 31, |
| ||
|
|
2014 |
|
2013 |
| ||
|
|
|
|
|
| ||
Pass |
|
$ |
374,111,828 |
|
$ |
358,290,930 |
|
Special Mention |
|
11,084,951 |
|
10,891,101 |
| ||
Substandard |
|
9,232,002 |
|
9,531,358 |
| ||
Doubtful |
|
391,820 |
|
412,239 |
| ||
Total Loans |
|
$ |
394,820,601 |
|
$ |
379,125,628 |
|
In addition to the decline in non-performing and impaired loans at June 30, 2014 compared to balances at December 31, 2013, there was also a decline in loans classified as substandard and doubtful. However, loans classified as special mention increased slightly from $10.9 million at December 31, 2013 to $11.1 million at June 30, 2014. The primary reason for the increase in this category was the downgrade of one relationship with four individual loans that reported a significant operating loss that resulted in insufficient debt service coverage. The loan category impacted by this relationship is commercial real estate. We are continuing to monitor this relationship and expect this to be a temporary downgrade.
At June 30, 2014, the Bank had 9 properties classified as foreclosed assets valued at $4.3 million, which is a decrease of $1.3 million from December 31, 2013. The collateral on these properties consists of farmland, two residential lot developments, a commercial development, and five single-family residences. All of these properties were transferred into foreclosed assets at cost or the propertys fair value, less estimated costs of disposal, at the date of foreclosure. Initial valuation adjustments, if any, are charged against the allowance for loan losses. The properties are evaluated on a nonrecurring basis to verify that the recorded amount is supported by its current fair value.
Results of Operations
General. First Clover Leaf had net income of $710,000 for the three months ended June 30, 2014 compared to net income of $866,000 for the same period in 2013. The decrease was primarily due to losses on sale of assets and sale of foreclosed assets, and higher compensation and employee benefits expense, partially offset by reductions in interest expense, provision for loan losses, and income tax expense. Basic and diluted earnings per share were $0.10 for the three-month period ended June 30, 2014 and $0.12 for the comparable period in 2013.
First Clover Leaf had net income of $1.5 million for the six months ended June 30, 2014 compared to net income of $2.1 million for the same period in 2013. The decrease was primarily due to the same factors described above for the three months ended June 30, 2014 plus decreases in gain on sales of securities. Basic and diluted earnings per share were $0.21 for the six-month period ended June 30, 2014 and $0.28 for the comparable period in 2013.
Our net interest rate spread decreased to 2.77% from 2.92% and our net interest margin decreased to 2.84% from 3.05% for the six months ended June 30, 2014 compared to the same period in 2013. The decrease in the interest rate spread was attributable to the yield on interest-earning assets declining faster than the cost of funds. As with most financial institutions, yield on earning assets and cost of funds are largely dependent on the interest rate environment. While the decline in industry interest rates has slowed, competitive and market forces continue to pressure the yield on our earning assets. Our ability to lower rates paid on deposits is limited due to the already low deposit rates and the competitive environment in which we operate. In addition, a significant number of our interest-bearing deposits are time deposits, which are fixed-rate contracts until maturity that do not allow for immediate re-pricing as rates fluctuate.
Net interest income. Net interest income remained relatively unchanged at $4.1 million for the three months ended June 30, 2014 and 2013. Net interest income decreased to $8.2 million for the six months ended June 30, 2014 from $8.3 million for the same period in 2013, primarily due to lower yields on, and a lower balance of, net interest-earning assets. Net average interest-earning assets, which represent our average total interest-earning assets less our average total interest-bearing liabilities, were $81.6 million for the six months ended June 30, 2014, compared to $85.1 million for the same period in 2013. The ratio of interest-earning assets to interest-bearing liabilities decreased to 116.39% for the six months ended June 30, 2014 from 118.43% for the same period in 2013. The net interest rate spread decreased to 2.77% for the six months ended June 30, 2014, compared to 2.92% for the comparable period in 2013. The average rate earned on interest-earning assets decreased by 43 basis points for the six months ended June 30, 2014 to 3.28% from 3.71% for the same period in 2013, while the average rate paid on interest-bearing liabilities decreased by 28 basis points during these periods to 0.51% from 0.79%.
The following tables set forth the average balance sheets, average yields and cost of funds, and certain other information for the periods indicated. No tax-equivalent yield adjustments were made, as the effect thereof was not material. All average balances are daily average balances. Non-accrual loans were included in the computation of average balances, but have been reflected in the table as loans carrying a zero yield. The yields set forth below include the effect of deferred loan fees, discounts and premiums that are amortized or accreted to interest income or expense. Yields and rates have been annualized.
|
|
Three Months Ended June 30, |
|
Three Months Ended June 30, |
| ||||||||||||
|
|
2014 |
|
2013 |
| ||||||||||||
|
|
Average |
|
Interest (4) |
|
Yield/ |
|
Average |
|
Interest (4) |
|
Yield/ |
| ||||
|
|
(Dollars in thousands) |
| ||||||||||||||
Interest-earning assets: |
|
|
|
|
|
|
|
|
|
|
|
|
| ||||
Loans, gross |
|
$ |
376,235 |
|
$ |
4,103 |
|
4.37 |
% |
$ |
381,170 |
|
$ |
4,404 |
|
4.63 |
% |
Securities |
|
114,240 |
|
594 |
|
2.09 |
% |
106,361 |
|
486 |
|
1.83 |
% | ||||
Interest-earning balances from depository institutions |
|
90,181 |
|
62 |
|
0.28 |
% |
59,399 |
|
36 |
|
0.24 |
% | ||||
Total interest-earning assets |
|
580,656 |
|
4,759 |
|
3.29 |
% |
546,930 |
|
4,926 |
|
3.61 |
% | ||||
Non-interest-earning assets |
|
52,326 |
|
|
|
|
|
52,303 |
|
|
|
|
| ||||
Total assets |
|
$ |
632,982 |
|
|
|
|
|
$ |
599,233 |
|
|
|
|
| ||
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||
Interest-bearing liabilities: |
|
|
|
|
|
|
|
|
|
|
|
|
| ||||
Interest-bearing transaction |
|
$ |
305,695 |
|
$ |
167 |
|
0.22 |
% |
$ |
239,776 |
|
$ |
269 |
|
0.45 |
% |
Savings deposits |
|
28,682 |
|
13 |
|
0.18 |
% |
27,416 |
|
22 |
|
0.32 |
% | ||||
Time deposits |
|
128,659 |
|
347 |
|
1.08 |
% |
140,720 |
|
425 |
|
1.21 |
% | ||||
Securities sold under agreements to repurchase |
|
14,754 |
|
1 |
|
0.03 |
% |
28,526 |
|
3 |
|
0.04 |
% | ||||
Federal Home Loan Bank advances |
|
13,983 |
|
75 |
|
2.12 |
% |
21,972 |
|
122 |
|
2.23 |
% | ||||
Subordinated debentures |
|
4,000 |
|
21 |
|
2.11 |
% |
4,000 |
|
22 |
|
2.21 |
% | ||||
Total interest-bearing liabilities |
|
495,773 |
|
624 |
|
0.50 |
% |
462,410 |
|
863 |
|
0.75 |
% | ||||
Non-interest-bearing liabilities |
|
62,302 |
|
|
|
|
|
59,026 |
|
|
|
|
| ||||
Total liabilities |
|
558,075 |
|
|
|
|
|
521,436 |
|
|
|
|
| ||||
Stockholders equity |
|
74,908 |
|
|
|
|
|
77,477 |
|
|
|
|
| ||||
Total liabilities and stockholders equity |
|
$ |
632,983 |
|
|
|
|
|
$ |
598,913 |
|
|
|
|
| ||
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||
Net interest income |
|
|
|
$ |
4,135 |
|
|
|
|
|
$ |
4,063 |
|
|
| ||
Net interest rate spread (1) |
|
|
|
|
|
2.78 |
% |
|
|
|
|
2.86 |
% | ||||
Net interest-earning assets (2) |
|
$ |
84,883 |
|
|
|
|
|
$ |
84,520 |
|
|
|
|
| ||
Net interest margin (3) |
|
|
|
|
|
2.86 |
% |
|
|
|
|
2.98 |
% | ||||
Ratio of interest-earning assets to interest-bearing liabilities |
|
|
|
|
|
117.12 |
% |
|
|
|
|
118.28 |
% |
(1) Net interest rate spread represents the difference between the yield on average interest-earning assets and the cost of average interest-bearing liabilities.
(2) Net interest-earning assets represent total interest-earning assets less total interest-bearing liabilities.
(3) Net interest margin represents net interest income divided by average total interest-earning assets.
(4) Interest on loans includes loan fees collected in the amount of $45,264 and $32,617 for the three months ended June 30, 2014 and 2013, respectively.
|
|
Six Months Ended June 30, |
|
Six Months Ended June 30, |
| ||||||||||||
|
|
2014 |
|
2013 |
| ||||||||||||
|
|
Average |
|
Interest (4) |
|
Yield/ |
|
Average |
|
Interest (4) |
|
Yield/ |
| ||||
|
|
(Dollars in thousands) |
| ||||||||||||||
Interest-earning assets: |
|
|
|
|
|
|
|
|
|
|
|
|
| ||||
Loans, gross |
|
$ |
374,619 |
|
$ |
8,136 |
|
4.38 |
% |
$ |
388,377 |
|
$ |
9,060 |
|
4.70 |
% |
Securities |
|
115,131 |
|
1,191 |
|
2.09 |
% |
100,296 |
|
943 |
|
1.90 |
% | ||||
Interest-earning balances from depository institutions |
|
89,855 |
|
113 |
|
0.25 |
% |
58,373 |
|
71 |
|
0.25 |
% | ||||
Total interest-earning assets |
|
579,605 |
|
9,440 |
|
3.28 |
% |
547,046 |
|
10,074 |
|
3.71 |
% | ||||
Non-interest-earning assets |
|
52,606 |
|
|
|
|
|
51,469 |
|
|
|
|
| ||||
Total assets |
|
$ |
632,211 |
|
|
|
|
|
$ |
598,515 |
|
|
|
|
| ||
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||
Interest-bearing liabilities: |
|
|
|
|
|
|
|
|
|
|
|
|
| ||||
Interest-bearing transaction |
|
$ |
305,356 |
|
$ |
347 |
|
0.23 |
% |
$ |
236,290 |
|
$ |
565 |
|
0.48 |
% |
Savings deposits |
|
28,281 |
|
25 |
|
0.18 |
% |
26,763 |
|
46 |
|
0.35 |
% | ||||
Time deposits |
|
127,048 |
|
700 |
|
1.11 |
% |
143,846 |
|
900 |
|
1.26 |
% | ||||
Securities sold under agreements to repurchase |
|
19,307 |
|
4 |
|
0.04 |
% |
29,038 |
|
9 |
|
0.06 |
% | ||||
Federal Home Loan Bank advances |
|
13,982 |
|
149 |
|
2.15 |
% |
21,970 |
|
244 |
|
2.24 |
% | ||||
Subordinated debentures |
|
4,000 |
|
43 |
|
2.17 |
% |
4,000 |
|
43 |
|
2.17 |
% | ||||
Total interest-bearing liabilities |
|
497,974 |
|
1,268 |
|
0.51 |
% |
461,907 |
|
1,807 |
|
0.79 |
% | ||||
Non-interest-bearing liabilities |
|
59,802 |
|
|
|
|
|
58,590 |
|
|
|
|
| ||||
Total liabilities |
|
557,776 |
|
|
|
|
|
520,497 |
|
|
|
|
| ||||
Stockholders equity |
|
74,435 |
|
|
|
|
|
78,018 |
|
|
|
|
| ||||
Total liabilities and stockholders equity |
|
$ |
632,211 |
|
|
|
|
|
$ |
598,515 |
|
|
|
|
| ||
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||
Net interest income |
|
|
|
$ |
8,172 |
|
|
|
|
|
$ |
8,267 |
|
|
| ||
Net interest rate spread (1) |
|
|
|
|
|
2.77 |
% |
|
|
|
|
2.92 |
% | ||||
Net interest-earning assets (2) |
|
$ |
81,631 |
|
|
|
|
|
$ |
85,139 |
|
|
|
|
| ||
Net interest margin (3) |
|
|
|
|
|
2.84 |
% |
|
|
|
|
3.05 |
% | ||||
Ratio of interest-earning assets to interest-bearing liabilities |
|
|
|
|
|
116.39 |
% |
|
|
|
|
118.43 |
% |
(1) Net interest rate spread represents the difference between the yield on average interest-earning assets and the cost of average interest-bearing liabilities.
(2) Net interest-earning assets represent total interest-earning assets less total interest-bearing liabilities.
(3) Net interest margin represents net interest income divided by average total interest-earning assets.
(4) Interest on loans includes loan fees collected in the amount of $57,927 and $75,072 for the six months ended June 30, 2014 and 2013, respectively.
Interest and fee income. Interest and fee income on loans decreased to $4.1 million for the three months ended June 30, 2014 from $4.4 million for the comparable period in 2013, and decreased to $8.1 million for the six months ended June 30, 2014 from $9.1 million for the comparable period in 2013, primarily as a result of a lower average yield in addition a lower average balance in the 2014 periods. The average loan balance was $374.6 million and $388.4 million for the six months ended June 30, 2014 and 2013, respectively. The average yield on loans decreased to 4.38% for the six months ended June 30, 2014 from 4.70% for the comparable period in 2013. The decline in yield was primarily due to new loan originations having lower rates than the loans maturing or being paid off.
Interest income on securities increased to $594,000 for the three months ended June 30, 2014 compared to $486,000 for the same period in 2013. Interest income on securities increased to $1.2 million for the six months ended June 30, 2014 compared to $943,000 for the same period in 2013. These increases were due primarily to a higher average balance in addition to a higher average yield for both periods. The average balance of securities was $115.1 million and $100.3 million for the six months ended June 30, 2014 and 2013, respectively. The average yield on securities increased to 2.09% for the six months ended June 30, 2014 from 1.90% for the comparable period in 2013.
Interest on other interest-earning deposits increased to $62,000 for the three months ended June 30, 2014 from $36,000 for the comparable period in 2013. Interest on other interest-earning deposits increased to $113,000 for the six months ended June 30, 2014 from $71,000 for the comparable period in 2013. These increases were due primarily to a higher average balance for both periods. The average balance of other interest-earning deposits increased to $89.9 million for the six months ended June 30, 2014 from $58.4 million for the same period in 2013. The average yield on other interest-earning deposits remained constant at 0.25% for the six months ended June 30, 2014 and 2013.
Interest expense. Interest expense on deposits decreased to $528,000 for the three months ended June 30, 2014 from $716,000 for the comparable period in 2013. The decrease was due primarily to a decline in rate and lower average balances in time deposits, partially offset by a higher average balance in interest-bearing transaction accounts. Interest expense on deposits decreased to $1.1 million for the six months ended June 30, 2014 from $1.5 million for the comparable period in 2013. The decrease was due primarily to a decline in rate and lower average balances in time deposits, partially offset by a higher average balance in interest-bearing transaction accounts. The average balance of interest-bearing deposits, comprised of interest-bearing transaction, savings deposits, and time deposits, was $460.7 million and $406.9 million for the six months ended June 30, 2014 and 2013, respectively. The rate for time deposits decreased to 1.11% for the six months ended June 30, 2014 from 1.26% for the comparable period in 2013. The rate for interest-bearing transaction accounts for the six months ended June 30, 2014 decreased to 0.23% from 0.48% for the six months ended June 30, 2013. The rate for savings deposits decreased to 0.18% for the six months ended June 30, 2014 from 0.35% for the same period in 2013.
Interest expense on FHLB advances decreased to $75,000 for the three months ended June 30, 2014 from $122,000 for the same period in 2013, due primarily to a lower average balance and a decrease in rate. Interest expense on FHLB advances decreased to $149,000 for the six months ended June 30, 2014 from $244,000 for the same period in 2013 for the same reasons. The average balance of FHLB advances was $14.0 million and $22.0 million for the six months ended June 30, 2014 and 2013, respectively. The average rate on FHLB advances decreased to 2.15% for the six months ended June 30, 2014 compared to 2.24% for the comparable period in 2013.
Provision for loan losses. There was no additional provision for loan losses in the three- and six-month periods ended June 30, 2014 compared to $225,000 and $450,000 for the three- and six-month periods ended June 30, 2013, respectively. The decrease was primarily due to improvements in credit quality trends and a decrease in non-performing loans.
The commercial real estate category had an increase in provision expense for the period ended March 31, 2014 based on a change in historical loss factors at March 31, 2014 compared to December 31, 2013. The Company is expanding its historical loss look back period to five years, as this more accurately reflects the risk of our current portfolio. Conversely, the provision expense for the period end June 30, 2014 declined due to the continuing improvements in the overall credit quality of the commercial real estate portfolio, the improvement in the historical charge-off history, as well as the improvement in property values that serve as collateral.
There was a significant change in the reserve allocation for construction and land loans over the six months ended June 30, 2014. For the three-month period ended March 31, 2014, a $230,000 recovery was received resulting in a provision credit in this category. For the three-month period ending June 30, 2014, the volume of construction and land loans outstanding increased $7.5 million excluding the undisbursed portion resulting in a significant increase in the provision allocation for this category.
Provision for loan losses is based upon managements consideration of current economic conditions, the Companys loan portfolio composition and historical loss experience, and current market valuations on collateral, as well as managements estimate of probable losses in the portfolio and the level of non-performing and impaired loans. As of June 30, 2014, our non-performing and impaired loans and the
related specific reserves each decreased from June 30, 2013. Our ratio of non-performing loans to total loans decreased to 1.59% at June 30, 2014 from 2.65% at June 30, 2013. Charge-offs for the six months ended June 30, 2014 decreased to $265,000 from $1.1 million for the six months ended June 30, 2013. Therefore, we did not incur any provision expense for the six months ended June 30, 2014.
Management also reviews individual loans for which full collectibility may not be reasonably assured and considers, among other matters, the estimated fair value of the underlying collateral. This evaluation is ongoing and results in variations in the Companys provision for loan losses. There may be other factors that may warrant our consideration in maintaining an allowance at a level sufficient to provide for probable losses. The Company is subject to periodic examination by the OCC, which may require the Company to record increases in the allowance based on its evaluation of available information. There can be no assurance that the OCC will not require further increases to the allowance.
Non-interest income. Non-interest income decreased to $372,000 for the three months ended June 30, 2014 from $617,000 for the comparable period in 2013, primarily due to loss on sale of assets and loss on sale of foreclosed assets. Non-interest income decreased to $749,000 for the six months ended June 30, 2014 from $1.6 million for the comparable period in 2013, primarily due to decreases in gain on sale of securities and gain on sale of loans in addition to losses on the sale of assets and on the sale of foreclosed assets. During the six months ended June 30, 2014, there was no gain on sale of securities compared to a gain on sale of securities of $359,000 for the same period in 2013. Gain on sale of loans totaled $213,000 for the six months ended June 30, 2014 compared to $433,000 for the comparable period in 2013, due to weak demand and reduced refinancing activity of home mortgages. We experienced a loss of $75,000 on the sale of a building during the six months ended June 30, 2014 compared to no such loss in the same period in 2013. We also experienced a net loss on the sale of foreclosed assets of $197,000 during the six months ended June 30, 2014 compared to a gain of $36,000 during the comparable period in 2013.
Non-interest expense. Non-interest expense increased to $3.6 million for the three months ended June 30, 2014 from $3.2 million for the same period in 2013. The increase was due primarily to an increase in compensation and employee benefits, and in occupancy expense. Non-interest expense increased to $7.0 million for the six months ended June 30, 2014 from $6.3 million for the same period in 2013. The increase was due primarily to an increase in compensation and employee benefits, and in occupancy expense, partially offset by a reduction in foreclosed asset related expenses.
Compensation and employee benefits increased to $1.8 million for the three months ended June 30, 2014 from $1.6 million for the same period in 2013. Compensation and employee benefits increased to $3.6 million for the six months ended June 30, 2014 from $3.1 million for the same period in 2013. The increases were primarily due to normal merit increases and increased staffing levels.
Occupancy expense increased to $424,000 for the three months ended June 30, 2014 compared to $338,000 for the comparable period in 2013. Occupancy expense increased to $828,000 for the six months ended June 30, 2014 compared to $659,000 for the comparable period in 2013. The increases were primarily due to incurring higher snow removal expenses, additional software expenses for new products, new rent expense for the loan production office opened in January 2014, relocation expenses, and property repairs compared to the six months ended June 30, 2013.
Foreclosed asset related expenses decreased to $183,000 for the three months ended June 30, 2014 compared to $194,000 for the comparable period in 2013. Foreclosed asset related expenses decreased to $257,000 for the six months ended June 30, 2014 compared to $425,000 for the comparable period in 2013. The decrease was due to the Company incurring less property value write-downs on foreclosed properties during the six months ended June 30, 2014.
Income taxes. Income tax expense decreased to $187,000 for the three months ended June 30, 2014 from $380,000 for the same period in 2013. Income tax expense decreased to $463,000 for the six months ended June 30, 2014 from $988,000 for the same period in 2013. The decrease was primarily due to a lower level of pre-tax income and an increased level of tax exempt income for the 2014 periods.
Liquidity and Capital Resources
We maintain liquid assets at levels considered adequate to meet liquidity needs. We adjust our liquidity levels to fund deposit outflows, repay our borrowings and fund loan commitments. We also adjust liquidity as appropriate to meet asset and liability management objectives.
Our primary sources of liquidity are deposits, amortization and prepayment of loans, maturities of investment securities and other short-term investments, and earnings and funds provided from operations. While scheduled principal repayments on loans are a relatively predictable source of funds, deposit flows and loan prepayments are greatly influenced by market interest rates, economic conditions, and rates offered by our competition. We set the interest rates on our deposits to maintain a desired level of total deposits. In addition, we invest excess funds in short-term interest-earning assets, which provide liquidity to meet lending requirements.
A portion of our liquidity consists of cash and cash equivalents, which are a product of our operating, investing and financing activities. At June 30, 2014 and December 31, 2013, $88.2 million and $84.7 million, respectively, were invested in cash and cash equivalents. The primary sources of cash are principal repayments on loans, proceeds from the calls and maturities of investment securities, increases in deposit and securities sold under agreements to repurchase accounts, and advances from the FHLB.
Cash flows are derived from operating activities, investing activities and financing activities as reported in the Consolidated Statements of Cash Flows included with the Consolidated Financial Statements under Item 1 of Part I of this 10-Q.
Our primary investing activities are the origination of loans and the purchase of investment securities. Loan originations exceeded principal collections on loans by $9.7 million for the six months ended June 30, 2014 compared to principal collections exceeding loan originations by $27.1 million for the six months ended June 30, 2013. Cash received from calls, maturities, and principal repayments of available-for-sale investment securities totaled $21.2 million and $15.3 million for the six months ended June 30, 2014 and 2013, respectively. We purchased $17.9 million and $42.4 million of available-for-sale investment securities during the six months ended June 30, 2014 and 2013, respectively. During the six months ended June 30, 2014, we did not sell any available-for-sale investment securities. However, during the six months ended June 30, 2013, we received proceeds of $9.0 million from the sale of available-for-sale investment securities. Purchases of property and equipment totaled $1.2 million and $147,000 for the six months ended June 30, 2014 and 2013, respectively. During the six months ended June 30, 2014, we purchased $6.0 million of bank-owned life insurance compared to $3.0 million during the same period in 2013.
Deposit flows are generally affected by market interest rates, products offered by local competitors, and other factors. Net deposits increased by $26.0 million and $7.5 million for the six months ended June 30, 2014 and 2013, respectively.
Liquidity management is both a daily and long-term function of business management. If we require funds beyond our ability to generate them internally, borrowing agreements exist with the FHLB, which provides an additional source of funds. At June 30, 2014 and December 31, 2013, we had $14.0 million of advances from the FHLB. At June 30, 2014, we had additional available credit of approximately $63.2 million. Additionally, we may sell investment securities under agreements to repurchase (commonly referred to as repurchase agreements) if we require additional liquidity. At June 30, 2014 our repurchase agreements totaled $15.0 million, down from $26.8 million at December 31, 2013.
The Bank is required to maintain certain minimum capital requirements under OCC regulations. Failure by a savings institution to meet minimum capital requirements can result in certain mandatory and possible discretionary actions by regulators, which, if undertaken, could have a direct material effect on the Banks financial statements. Under the capital adequacy guidelines and regulatory framework for prompt corrective action, the Bank must meet specific capital guidelines that involve quantitative measures of the Banks assets, liabilities, and certain off-balance sheet items as calculated under regulatory accounting practices. As of June 30, 2014, under regulatory standards, the Bank had capital levels in excess of the minimums necessary to be considered well capitalized, which is the highest regulatory designation.
The Banks actual capital amounts and ratios are presented in the following table.
As of June 30, 2014
|
|
|
|
|
|
|
|
|
|
To be Well Capitalized |
| |||||
|
|
|
|
|
|
For Capital |
|
Under Prompt Corrective |
| |||||||
|
|
Actual |
|
Adequacy Purposes |
|
Action Provisions |
| |||||||||
|
|
Amount |
|
Ratio |
|
Amount |
|
Ratio |
|
Amount |
|
Ratio |
| |||
Tier I Capital to Adjusted Total Assets |
|
$ |
66,497,000 |
|
10.60 |
% |
$ |
25,102,000 |
|
4.00 |
% |
$ |
31,378,000 |
|
5.00 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||
Tier I Capital to Risk Weighted Assets |
|
66,497,000 |
|
15.87 |
% |
15,757,000 |
|
4.00 |
% |
25,136,000 |
|
6.00 |
% | |||
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||
Total Capital to Risk Weighted Assets |
|
70,350,000 |
|
16.79 |
% |
33,514,000 |
|
8.00 |
% |
41,893,000 |
|
10.00 |
% | |||
The Companys actual capital amounts and ratios are presented in the following table:
As of June 30, 2014 | ||||||
|
|
|
| |||
|
|
Actual |
| |||
|
|
Amount |
|
Ratio |
| |
|
|
|
|
|
| |
Tier I Capital to Adjusted Total Assets |
|
$ |
63,731,000 |
|
9.79 |
% |
|
|
|
|
|
| |
Tier I Capital to Risk Weighted Assets |
|
63,731,000 |
|
15.20 |
% | |
|
|
|
|
|
| |
Total Capital to Risk Weighted Assets |
|
71,584,000 |
|
17.07 |
% | |
In July 2013, the U.S. federal banking authorities approved the implementation of the Basel III regulatory capital reforms and issued rules effecting certain changes required by the Dodd-Frank Act (the Basel III Rules). The Basel III Rules are applicable to all U.S. banks that are subject to minimum capital requirements, as well as to bank and savings and loan holding companies other than small bank holding companies (generally bank holding companies with consolidated assets of less than $500 million). The Basel III Rules not only increase most of the required minimum regulatory capital ratios, but they introduce a new common equity Tier 1 capital ratio and the concept of a capital conservation buffer. The Basel III Rules also expand the definition of capital as in effect currently by establishing criteria that instruments must meet to be considered additional Tier 1 capital (Tier 1 capital in addition to common equity) and Tier 2 capital. A number of instruments that now generally qualify as Tier 1 capital will not qualify, or their qualifications will change when the Basel III rules are fully implemented. The Basel III Rules also permit banking organizations with less than $15.0 billion in assets to retain, through a one-time election, the existing treatment for accumulated other comprehensive income, which currently does not affect regulatory capital. The Basel III Rules have maintained the general structure of the current prompt corrective action framework, while incorporating the increased requirements. The prompt corrective action guidelines were also revised to add the common equity Tier 1 capital ratio. In order to be a well-capitalized depository institution under the new regime, a bank and holding company must maintain a common equity Tier 1 capital ratio of 6.5% or more; a Tier 1 capital ratio of 8% or more; a total capital ratio of 10% or more; and a leverage ratio of 5% or more. Generally, financial institutions become subject to the new Basel III Rules on January 1, 2015, with phase-in periods for many of the changes. Management is continuing to assess the effect the Basel III Rules may have on the Companys and the Banks capital positions and will monitor developments in this area. At present, management believes that its current capital structure and the execution of its existing capital plan will be sufficient to meet and exceed the revised regulatory capital ratios as required by the new Basel III Rules.
Off-Balance Sheet Arrangements
In the ordinary course of business, the Company is a party to credit-related financial instruments with off-balance sheet risk to meet the financing needs of our customers. These financial instruments
include commitments to extend credit. The Company follows the same credit policies in making commitments as it does for on-balance sheet instruments.
Commitments to extend credit are agreements to lend to a customer as long as there is no violation of any condition established in the contract. Commitments generally have fixed expiration dates or other termination clauses and may require payment of a fee. The commitments for equity lines of credit may expire without being drawn upon. Therefore, the total commitment amounts do not necessarily represent future cash requirements. The amount of collateral obtained, if it is deemed necessary by the Company, is based on managements credit evaluation of the customer.
Unfunded commitments under construction lines of credit for residential and multi-family properties are commitments for possible future extensions of credit to existing customers. These lines of credit are uncollateralized and usually do not contain a specified maturity date and may not be drawn upon to the total extent to which the Company is committed.
Standby letters of credit are conditional commitments issued by the Company to guarantee the performance of a customer to a third party.
A summary of the notional or contractual amounts of financial instruments, with off-balance-sheet risk at June 30, 2014 follows:
|
|
|
|
|
|
|
|
Range of Rates |
| |||
|
|
Variable Rate |
|
Fixed Rate |
|
Total |
|
on Fixed Rate |
| |||
|
|
Commitments |
|
Commitments |
|
Commitments |
|
Commitments |
| |||
|
|
|
|
|
|
|
|
|
| |||
Commitments to extend credit |
|
$ |
19,870,206 |
|
$ |
53,432,503 |
|
$ |
73,302,709 |
|
1.85% - 18.00% |
|
Standby letters of credit |
|
2,317,772 |
|
256,640 |
|
2,574,412 |
|
3.50% - 5.75% |
| |||
Loans sold to the FHLB under the Mortgage Partnership Finance (MPF) program are sold with recourse. The Bank has an agreement to sell residential loans of up to $131.0 million to the FHLB, of which approximately $72.2 million had been sold as of June 30, 2014. As a part of the agreement, the Bank had a maximum credit enhancement of $1.2 million at June 30, 2014. The Company intends to continue originating and selling mortgage loans while retaining the servicing of the loans. In addition to the FHLB of Chicago MPF program, the Company currently has a relationship to sell loans to Fannie Mae. These loans are also sold with recourse. The Company has a recourse liability reserve established. Since the Company has no loss experience at this time, we utilized the current Fannie Mae loss history rates in the calculation of our reserve.
Item 3. Quantitative and Qualitative Disclosures about Market Risk
The majority of First Clover Leafs assets and liabilities are monetary in nature. Consequently, the most significant form of market risk is interest rate risk. First Clover Leafs assets, consisting primarily of loans, have longer maturities than its liabilities, consisting primarily of deposits. As a result, the principal part of First Clover Leafs business strategy is to manage interest rate risk and reduce the exposure of our net interest income to changes in market interest rates. Accordingly, the Banks board of directors has established an Asset/Liability Management Committee which is responsible for evaluating the interest rate risk inherent in assets and liabilities, for determining the level of risk that is appropriate given First Clover Leafs business strategy, operating environment, capital, liquidity and performance objectives, and for managing this risk consistent with the guidelines approved by the board of directors. Senior management monitors the level of interest rate risk on a regular basis, and the Asset/Liability Management Committee meets at least quarterly to review the asset/liability policies and interest rate risk position.
During the relatively low interest rate environment that has existed in recent years, we have implemented the following strategies to manage interest rate risk: (i) maintaining a high equity-to-assets
ratio; and (ii) offering a variety of adjustable rate loan products, including adjustable rate one-to-four family, multi-family and non-residential mortgage loans, short-term consumer loans, and a variety of adjustable-rate commercial loans. By maintaining a high equity-to-assets ratio and by investing in adjustable-rate and short-term assets, we are better positioned to react to increases in market interest rates. However, maintaining high equity balances reduces the return-on-equity ratio, and investments in shorter-term assets generally bear lower yields than longer-term investments.
First Clover Leaf utilized an independent third party to analyze interest rate risk sensitivity as of March 31, 2014. The model uses a discounted cash flow analysis and an option-based pricing approach to measure the interest rate sensitivity of net portfolio value (NPV). The model estimates the economic value of each type of asset, liability and off-balance-sheet contract under the assumption of instantaneous rate increases of up to 400 basis points or decreases of 100 points in 100 basis point increments. An increase in interest rates from 3% to 4% would mean, for example, a 100 basis point increase in the Change in Interest column.
The tables below set forth, as March 31, 2014 and December 31, 2013, the estimated changes in the NPV that would result from the designated instantaneous changes in the U.S. Treasury yield curve. Computations of prospective effects of hypothetical interest rate changes are based on numerous assumptions including relative levels of market interest rates, loan prepayments and deposit decay, and should not be relied upon as indicative of actual results.
March 31, 2014
|
|
NPV |
|
Net Portfolio Value as a Percentage of |
| |||||||||
|
|
Estimated |
|
Estimated Increase |
|
|
|
|
| |||||
Change in Interest |
|
NPV |
|
Amount |
|
Percent |
|
NPV Ratio |
|
Change |
| |||
+400 |
bp |
|
$ |
63,461 |
|
$ |
(17,386 |
) |
(22 |
)% |
11.09 |
% |
(164 |
)bp |
+300 |
bp |
|
70,893 |
|
(9,954 |
) |
(12 |
) |
12.07 |
|
(66 |
)bp | ||
+200 |
bp |
|
76,127 |
|
(4,720 |
) |
(6 |
) |
12.61 |
|
(12 |
)bp | ||
+100 |
bp |
|
80,241 |
|
(606 |
) |
(1 |
) |
12.95 |
|
22 |
bp | ||
0 |
bp |
|
80,847 |
|
|
|
|
|
12.73 |
|
0 |
bp | ||
-100 |
bp |
|
85,396 |
|
4,549 |
|
6 |
|
13.21 |
|
48 |
bp | ||
December 31, 2013
|
|
NPV |
|
Net Portfolio Value as a Percentage of |
| ||||||||||
|
|
Estimated |
|
Estimated Increase |
|
|
|
|
| ||||||
Change in Interest |
|
NPV |
|
Amount |
|
Percent |
|
NPV Ratio |
|
Change |
| ||||
+400 |
|
bp |
|
$ |
59,863 |
|
$ |
(19,708 |
) |
(25 |
)% |
10.68 |
% |
(208 |
)bp |
+300 |
|
bp |
|
67,556 |
|
(12,015 |
) |
(15 |
) |
11.73 |
|
(103 |
)bp | ||
+200 |
|
bp |
|
73,434 |
|
(6,137 |
) |
(8 |
) |
12.39 |
|
(37 |
)bp | ||
+100 |
|
bp |
|
78,174 |
|
(1,397 |
) |
(2 |
) |
12.84 |
|
8 |
bp | ||
|
|
bp |
|
79,571 |
|
|
|
|
|
12.76 |
|
|
bp | ||
-100 |
|
bp |
|
84,224 |
|
4,653 |
|
6 |
|
13.25 |
|
49 |
bp | ||
The 2014 table above indicates that at March 31, 2014 in the event of a 100 basis point decrease in interest rates, we would experience a 6% increase in the net portfolio value. In the event of a 400 basis point increase in interest rates, we would experience a 22% decrease in the net portfolio value. Management does not believe that the Companys primary market risk exposures at June 30, 2014, and how those exposures were managed during the three months ended June 30, 2014, have changed materially when compared to the immediately preceding quarter ended March 31, 2014. However, the Companys primary market risk exposure has not yet been quantified at June 30, 2014 as it is not yet available, and the complexity of the model makes it difficult to accurately predict results.
Certain shortcomings are inherent in the methodology used in the above interest rate risk measurement. Modeling changes in net portfolio value require making certain assumptions that may or may not reflect the manner in which actual yields and costs respond to changes in market interest rates. In this regard, the net portfolio value table presented assumes that the composition of the interest-sensitive assets and liabilities existing at the beginning of a period remains constant over the period being measured and assumes that a particular change in interest rates is reflected uniformly across the yield curve regardless of the duration or re-pricing of specific assets and liabilities. Accordingly, although the net portfolio value table provides an indication of the interest rate risk exposure at a particular point in time, such measurements are not intended to and do not provide a precise forecast of the effect of changes in market interest rates on its net interest income and will differ from actual results.
Item 4. Controls and Procedures
As of the end of the period covered by this report, the Company carried out an evaluation, under the supervision and with the participation of the Companys principal executive officer and principal financial officer, of the effectiveness of the design and operation of the Companys disclosure controls and procedures. Based on this evaluation, the Companys principal executive officer and principal financial officer concluded that the Companys disclosure controls and procedures were effective as of the end of the period covered by this report.
In addition, there have been no changes in the Companys internal control over financial reporting during the most recent fiscal quarter that have materially affected, or are reasonably likely to materially affect, the Companys internal control over financial reporting.
There are no material legal proceedings to which the Company or any of its subsidiaries is a party or of which any of their properties is subject other than ordinary routine litigation incidental to their respective businesses.
Not required.
Item 2 Unregistered Sales of Equity Securities and Use of Proceeds.
(a) None.
(b) Not applicable.
(c) None.
Item 3 - Defaults upon Senior Securities.
Not applicable.
Item 4 Mine Safety Disclosures.
Not applicable.
None.
(a) Exhibits.
31.1: |
Certification of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. |
31.2: |
Certification of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. |
32: |
Certification pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. |
101: |
The following financial statements as of and for the quarter ended June 30, 2014, formatted in XBRL: (i) Consolidated Balance Sheets, (ii) Consolidated Statements of Net Income, (iii) Consolidated Statements of Comprehensive Income, (iv) Consolidated Statements of Cash Flows, and (v) the Notes to Consolidated Financial Statements. |
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.
|
FIRST CLOVER LEAF FINANCIAL CORP. | ||||
|
(Registrant) | ||||
|
| ||||
DATE: |
August 14, 2014 |
|
|
BY: |
/s/ P. David Kuhl |
|
|
|
| ||
|
|
|
P. David Kuhl, | ||
|
|
|
President and Chief Executive Officer | ||
|
| ||||
|
| ||||
|
BY: |
/s/ Darlene F. McDonald | |||
|
|
| |||
|
|
Darlene F. McDonald, | |||
|
|
Executive Vice-President and Chief Financial Officer | |||