UNITED
STATES
SECURITIES
AND EXCHANGE COMMISSION
WASHINGTON,
D.C. 20549
FORM
10-Q
|
x
|
QUARTERLY REPORT PURSUANT TO
SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
1934
|
For
the Quarterly Period Ended June 30, 2009
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: 0-13358
|
CAPITAL
CITY BANK GROUP, INC.
|
|
(Exact
name of registrant as specified in its
charter)
|
|
Florida
|
59-2273542
|
|
|
(State
or other jurisdiction of incorporation or organization)
|
(I.R.S.
Employer Identification No.)
|
|
217
North Monroe Street, Tallahassee, Florida
|
32301
|
|
|
(Address
of principal executive office)
|
(Zip
Code)
|
|
(850)
402-7000
|
|
(Registrant's
telephone number, including area
code)
|
Indicate
by check mark whether the registrant (1) has filed all reports required to be
filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the
preceding 12 months (or for such shorter period that the registrant was required
to file such reports), and (2) has been subject to such filing requirements for
the past 90 days. Yes x No o
Indicate
by check mark whether the registrant has submitted electronically and posted on
its corporate Web site, if any, every Interactive Data File required to be
submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this
chapter) during the preceding 12 months (or for such shorter period that the
registrant was required to submit and post such
files). Yes o No o
Indicate
by check mark whether the registrant is a large accelerated filer, an
accelerated filer, a non-accelerated filer, or a smaller reporting
company. See definitions of "large accelerated filer”, “accelerated
filer", and “smaller reporting company” in Rule 12b-2 of the Exchange
Act.
|
Large
accelerated filer o
|
Accelerated
filer x
|
Non-accelerated
filer o
|
Smaller
reporting company o
|
|
(Do
not check if smaller reporting company)
|
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
At July
31, 2009,17,024,508 shares of the Registrant's Common Stock, $.01 par value,
were outstanding.
CAPITAL
CITY BANK GROUP, INC.
QUARTERLY
REPORT ON FORM 10-Q
FOR
THE PERIOD ENDED JUNE 30, 2009
TABLE
OF CONTENTS
|
PART
I – Financial Information
|
Page
|
||
|
Item
1.
|
|||
|
Consolidated
Statements of Financial Condition – June 30, 2009 and December 31,
2008
|
4
|
||
|
Consolidated
Statements of Income – Three and Six Months Ended June 30, 2009 and
2008
|
5
|
||
|
Consolidated
Statement of Changes in Shareowners’ Equity – Six Months Ended June 30,
2009
|
6
|
||
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Consolidated
Statements of Cash Flow – Six Months Ended June 30, 2009 and
2008
|
7
|
||
|
Notes
to Consolidated Financial Statements
|
8
|
||
|
Item
2.
|
16
|
||
|
Item
3.
|
29
|
||
|
Item
4.
|
29
|
||
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PART
II – Other Information
|
|||
|
Item
1.
|
29
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||
|
Item
1A.
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29
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||
|
Item
2.
|
29
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||
|
Item
3.
|
29
|
||
|
Item
4.
|
29
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||
|
Item
5.
|
29
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||
|
Item
6.
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30
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||
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31
|
|||
| Exhibit Index |
32
|
||
-2-
INTRODUCTORY
NOTE
Caution
Concerning Forward-Looking Statements
This
Quarterly Report on Form 10-Q contains "forward-looking statements" within the
meaning of the Private Securities Litigation Reform Act of
1995. These forward-looking statements include, among others,
statements about our beliefs, plans, objectives, goals, expectations, estimates
and intentions that are subject to significant risks and uncertainties and are
subject to change based on various factors, many of which are beyond our
control. The words "may," "could," "should," "would," "believe,"
"anticipate," "estimate," "expect," "intend," "plan," "target," "goal," and
similar expressions are intended to identify forward-looking
statements.
All
forward-looking statements, by their nature, are subject to risks and
uncertainties. Our actual future results may differ materially from
those set forth in our forward-looking statements.
Our
ability to achieve our financial objectives could be adversely affected by the
factors discussed in detail in Part I, Item 2., “Management’s Discussion and
Analysis of Financial Condition and Results of Operations” and Part II, Item 1A.
“Risk Factors” in this Quarterly Report on Form 10-Q, the following sections of
our Annual Report on Form 10-K for the year ended December 31, 2008 (the “2008
Form 10-K”): (a) “Introductory Note” in Part I, Item 1. “Business”; (b) “Risk
Factors” in Part I, Item 1A., as updated in our subsequent quarterly reports
filed on Form 10-Q, and (c) “Introduction” in “Management’s Discussion and
Analysis of Financial Condition and Results of Operations,” in Part II, Item 7.
as well as:
|
§
|
the
frequency and magnitude of foreclosure of our
loans;
|
|
§
|
the
adequacy of collateral underlying collateralized loans and our ability to
resell the collateral if we foreclose on the
loans;
|
|
§
|
the
effects of our lack of a diversified loan portfolio, including the risks
of geographic and industry
concentrations;
|
|
§
|
the
accuracy of our financial statement estimates and assumptions, including
the estimate for our loan loss
provision;
|
|
§
|
the
extent to which our nonperforming loans increase or decrease as a
percentage of our total loan
portfolio;
|
|
§
|
our
ability to integrate the business and operations of companies and banks
that we have acquired, and those we may acquire in the
future;
|
|
§
|
our
need and our ability to incur additional debt or equity
financing;
|
|
§
|
the
strength of the United States economy in general and the strength of the
local economies in which we conduct
operations;
|
|
§
|
the
effects of harsh weather conditions, including
hurricanes;
|
|
§
|
inflation,
interest rate, market and monetary
fluctuations;
|
|
§
|
effect
of changes in the stock market and other capital
markets;
|
|
§
|
legislative
or regulatory changes;
|
|
§
|
our
ability to comply with the extensive laws and regulations to which we are
subject;
|
|
§
|
the
willingness of clients to accept third-party products and services rather
than our products and services and vice
versa;
|
|
§
|
changes
in the securities and real estate
markets;
|
|
§
|
increased
competition and its effect on
pricing;
|
|
§
|
technological
changes;
|
|
§
|
changes
in monetary and fiscal policies of the U.S.
Government;
|
|
§
|
the
effects of security breaches and computer viruses that may affect our
computer systems;
|
|
§
|
changes
in consumer spending and saving
habits;
|
|
§
|
growth
and profitability of our noninterest
income;
|
|
§
|
changes
in accounting principles, policies, practices or
guidelines;
|
|
§
|
the
limited trading activity of our common
stock;
|
|
§
|
the
concentration of ownership of our common
stock;
|
|
§
|
anti-takeover
provisions under federal and state law as well as our Articles of
Incorporation and our Bylaws;
|
|
§
|
other
risks described from time to time in our filings with the Securities and
Exchange Commission; and
|
|
§
|
our
ability to manage the risks involved in the
foregoing.
|
However,
other factors besides those referenced also could adversely affect our results,
and you should not consider any such list of factors to be a complete set of all
potential risks or uncertainties. Any forward-looking statements made
by us or on our behalf speak only as of the date they are made. We do
not undertake to update any forward-looking statement, except as required by
applicable law.
-3-
-4-
-5-
-6-
-7-
CAPITAL
CITY BANK GROUP, INC.
|
NOTE 1
- SIGNIFICANT
ACCOUNTING POLICIES
|
Basis
of Presentation
Capital
City Bank Group, Inc. (“CCBG” or the “Company”) provides a full range of banking
and banking-related services to individual and corporate clients through its
subsidiary, Capital City Bank, with banking offices located in Florida, Georgia,
and Alabama. The Company is subject to competition from other
financial institutions, is subject to regulation by certain government agencies
and undergoes periodic examinations by those regulatory
authorities.
The
unaudited consolidated financial statements included herein have been prepared
by the Company pursuant to the rules and regulations of the Securities and
Exchange Commission, including Regulation S-X. Certain information
and footnote disclosures normally included in financial statements prepared in
accordance with accounting principles generally accepted in the United States of
America have been condensed or omitted pursuant to such rules and
regulations. Prior period financial statements have been reformatted
and amounts reclassified, as necessary, to conform with the current
presentation. The Company and its subsidiary follow accounting
principles generally accepted in the United States (“GAAP”) and reporting
practices applicable to the banking industry. The principles that
materially affect its financial position, results of operations and cash flows
are set forth in the Notes to Consolidated Financial Statements which are
included in the 2008 Form 10-K.
In the
opinion of management, the consolidated financial statements contain all
adjustments, which are those of a recurring nature, and disclosures necessary to
present fairly the financial position of the Company as of June 30, 2009 and
December 31, 2008, the results of operations for the three and six months ended
June 30, 2009 and 2008, and cash flows for the six months ended June 30, 2009
and 2008. The Company has evaluated subsequent events for potential
recognition and/or disclosure through August 10, 2009, the date the consolidated
financial statements included in this Quarterly Report on Form 10-Q were
issued.
|
NOTE
2 - INVESTMENT SECURITIES
|
The
amortized cost and related market value of investment securities
available-for-sale were as follows:
|
June
30, 2009
|
||||||||||||||||
|
(Dollars
in Thousands)
|
Amortized
Cost
|
Unrealized
Gains
|
Unrealized
Losses
|
Market
Value
|
||||||||||||
|
U.S.
Treasury
|
$
|
27,899
|
$
|
297
|
$
|
-
|
$
|
28,196
|
||||||||
|
U.S.
Government Agencies
|
5,597
|
61
|
-
|
5,658
|
||||||||||||
|
States
and Political Subdivisions
|
105,925
|
1,420
|
68
|
107,277
|
||||||||||||
|
Residential
Mortgage-Backed Securities
|
39,493
|
677
|
18
|
40,152
|
||||||||||||
|
Other
Securities(1)
|
12,719
|
-
|
-
|
12,719
|
||||||||||||
|
Total
Investment Securities
|
$
|
191,633
|
$
|
2,455
|
$
|
86
|
$
|
194,002
|
||||||||
|
December
31, 2008
|
||||||||||||||||
|
(Dollars
in Thousands)
|
Amortized
Cost
|
Unrealized
Gains
|
Unrealized
Losses
|
Market
Value
|
||||||||||||
|
U.S.
Treasury
|
$
|
29,094
|
$
|
577
|
$
|
-
|
$
|
29,671
|
||||||||
|
U.S.
Government Agencies
|
7,091
|
180
|
-
|
7,271
|
||||||||||||
|
States
and Political Subdivisions
|
100,370
|
1,224
|
32
|
101,562
|
||||||||||||
|
Residential
Mortgage-Backed Securities
|
39,860
|
332
|
116
|
40,076
|
||||||||||||
|
Other
Securities(1)
|
12,882
|
107
|
-
|
12,989
|
||||||||||||
|
Total
Investment Securities
|
$
|
189,297
|
$
|
2,420
|
$
|
148
|
$
|
191,569
|
||||||||
|
(1)
|
Includes Federal Home Loan
Bank and Federal Reserve Bank stock recorded at cost of $6.9 million and
$4.8 million, respectively, at June 30, 2009, and $7.0 million and $4.8
million, respectively, at December 31, 2008. Also, balance includes a bank
preferred
stock issue
recorded at $1.0 million and $1.1 million at June 30, 2009 and December
31, 2008,
respectively.
|
The
Company’s subsidiary, Capital City Bank, as a member of the Federal Home Loan
Bank (“FHLB”) of Atlanta, is required to own capital stock in the FHLB of
Atlanta based generally upon the balances of residential and commercial real
estate loans, and FHLB advances. FHLB stock of $6.9 million which is
included in other securities is pledged to secure FHLB advances. No
ready market exists for this stock, and it has no quoted market
value. However, redemption of this stock has historically been at par
value.
Maturity Distribution. As of
June 30, 2009, the Company's investment securities had the following maturity
distribution based on contractual maturities:
|
(Dollars
in Thousands)
|
Amortized
Cost
|
Market
Value
|
||||||
|
Due
in one year or less
|
$
|
80,324
|
$
|
81,143
|
||||
|
Due
after one through five years
|
96,207
|
97,682
|
||||||
|
Due
after five through ten years
|
1,833
|
1,847
|
||||||
|
Due
over ten years
|
1,550
|
1,611
|
||||||
|
No
Maturity
|
11,719
|
11,719
|
||||||
|
Total
Investment Securities
|
$
|
191,633
|
$
|
194,002
|
||||
Expected
maturities may differ from contractual maturities because borrowers may have the
right to call or prepay obligations with or without call or prepayment
penalties.
NOTE
3 - LOANS
The
composition of the Company's loan portfolio was as follows:
|
(Dollars
in Thousands)
|
June
30, 2009
|
December
31, 2008
|
||||||
|
Commercial,
Financial and Agricultural
|
$
|
201,589
|
$
|
206,230
|
||||
|
Real
Estate-Construction
|
153,507
|
141,973
|
||||||
|
Real
Estate-Commercial
|
686,420
|
656,959
|
||||||
|
Real
Estate-Residential(1)
|
448,216
|
481,034
|
||||||
|
Real
Estate-Home Equity
|
235,473
|
218,500
|
||||||
|
Real
Estate-Loans Held-for-Sale
|
7,369
|
3,204
|
||||||
|
Consumer
|
244,489
|
249,897
|
||||||
|
Loans,
Net of Unearned Interest
|
$
|
1,977,063
|
$
|
1,957,797
|
||||
|
(1)
|
Includes
loans in process with outstanding balances of $8.4 million and $13.9
million for June 30, 2009 and December 31, 2008,
respectively.
|
Net
deferred fees included in loans at June 30, 2009 and December 31, 2008 were $2.0
million and $1.9 million, respectively.
-8-
NOTE
4 - ALLOWANCE FOR LOAN LOSSES
An
analysis of the changes in the allowance for loan losses for the six month
periods ended June 30 was as follows:
|
(Dollars
in Thousands)
|
2009
|
2008
|
||||||
|
Balance,
Beginning of Period
|
$
|
37,004
|
$
|
18,066
|
||||
|
Provision
for Loan Losses
|
16,836
|
9,574
|
||||||
|
Recoveries
on Loans Previously Charged-Off
|
1,604
|
1,287
|
||||||
|
Loans
Charged-Off
|
(13,662
|
)
|
(6,409
|
)
|
||||
|
Balance,
End of Period
|
$
|
41,782
|
$
|
22,518
|
||||
Impaired
Loans. Loans are considered impaired when, based on current
information and events, it is probable the Company will be unable to collect all
amounts due in accordance with the original contractual terms of the loan
agreement, including scheduled principal and interest
payments. Selected information pertaining to impaired loans is
depicted in the table below:
|
June
30, 2009
|
December
31, 2008
|
|||||||||||||||
|
(Dollars
in Thousands)
|
Balance
|
Valuation
Allowance
|
Balance
|
Valuation
Allowance
|
||||||||||||
|
Impaired
Loans:
|
||||||||||||||||
|
With
Related Valuation Allowance
|
$
|
99,646
|
$
|
18,483
|
$
|
68,705
|
$
|
15,901
|
||||||||
|
Without
Related Valuation Allowance
|
26,656
|
-
|
37,723
|
-
|
||||||||||||
|
NOTE
5 - INTANGIBLE ASSETS
|
The
Company had net intangible assets of $90.9 million and $92.9 million at June 30,
2009 and December 31, 2008, respectively. Intangible assets were as
follows:
|
June
30, 2009
|
December
31, 2008
|
|||||||||||||||
|
(Dollars
in Thousands)
|
Gross
Amount
|
Accumulated
Amortization
|
Gross
Amount
|
Accumulated
Amortization
|
||||||||||||
|
Core
Deposit Intangibles
|
$
|
47,176
|
$
|
42,017
|
$
|
47,176
|
$
|
40,092
|
||||||||
|
Goodwill
|
84,811
|
-
|
84,811
|
-
|
||||||||||||
|
Customer
Relationship Intangible
|
1,867
|
975
|
1,867
|
879
|
||||||||||||
|
Total
Intangible Assets
|
$
|
133,854
|
$
|
42,992
|
$
|
133,854
|
$
|
40,971
|
||||||||
Net
Core Deposit Intangibles: As of June 30, 2009 and December 31,
2008, the Company had net core deposit intangibles of $5.1 million and $7.1
million, respectively. Amortization expense for the first six months
of 2009 and 2008 was approximately $2.0 million and $2.9 million,
respectively. Estimated annual amortization expense for 2009 is $3.8
million.
Goodwill: As of June 30, 2009 and December 31, 2008, the Company had goodwill, net of accumulated amortization, of $84.8 million. Goodwill is the Company's only intangible asset that is no longer subject to amortization under the provisions of Statement of Financial Accounting Standards (“SFAS”) No. 142, “Goodwill and Other Intangible Assets.”
Other: As
of June 30, 2009 and December 31, 2008, the Company had a customer relationship
intangible asset, net of accumulated amortization, of $0.9 million and $1.0
million, respectively. This intangible asset was recorded as a result
of the March 2004 acquisition of trust customer relationships from Synovus Trust
Company. Amortization expense for the first six months of 2009 and
2008 was approximately $96,000. Estimated annual amortization expense
is approximately $191,000 based on use of a 10-year useful
life.
NOTE
6 - DEPOSITS
The
composition of the Company's interest bearing deposits at June 30, 2009 and
December 31, 2008 was as follows:
|
(Dollars
in Thousands)
|
June
30, 2009
|
December
31, 2008
|
||||||
|
NOW
Accounts
|
$
|
733,526
|
$
|
758,976
|
||||
|
Money
Market Accounts
|
300,683
|
324,646
|
||||||
|
Savings
Deposits
|
123,257
|
115,261
|
||||||
|
Other
Time Deposits
|
424,339
|
373,595
|
||||||
|
Total
Interest Bearing Deposits
|
$
|
1,581,805
|
$
|
1,572,478
|
||||
|
NOTE
7 - STOCK-BASED COMPENSATION
|
The
Company recognizes the cost of stock-based associate stock compensation in
accordance with SFAS No. 123R, "Share-Based Payment” (Revised) under the
fair value method.
As of
June 30, 2009, the Company had three stock-based compensation plans, consisting
of the 2008 Associate Stock Incentive Plan ("ASIP"), the 2005 Associate Stock
Purchase Plan ("ASPP"), and the 2005 Director Stock Purchase Plan
("DSPP"). Total compensation expense associated
with these plans for the six months ended June 30, 2009 and 2008 was $81,000 and
$208,000, respectively. In the first quarter of 2008, under the
provisions of an incentive plan substantially similar to the ASIP, the Company
reversed approximately $577,000 in related stock compensation expense in
conjunction with the termination of the Company’s 2011 strategic
initiative.
ASIP. The
Company's ASIP allows the Company's Board of Directors to award key associates
various forms of equity-based incentive compensation. Under the ASIP,
all participants in this plan are eligible to earn an equity award, in the form
of restricted stock. The award for 2009 is tied to an internally
established earnings goal. The grant-date fair value of the shares
eligible to be awarded in 2009 is approximately $718,000. In
addition, each plan participant is eligible to receive from the Company a tax
supplement bonus equal to 31% of the stock award value at the time of
issuance. A total of 53,795 shares are eligible for
issuance. There has been no expense recognized for the first six
months of 2009 as results fell short of the earnings performance
goal.
A total
of 875,000 shares of common stock have been reserved for issuance under the
ASIP. To date, the Company has issued a total of 67,022 shares of
common stock under the ASIP.
Executive Stock Option
Agreement. Prior to 2007, the Company maintained a
stock option arrangement for a key executive officer (William G. Smith, Jr. -
Chairman, President and CEO, CCBG). The status of the options granted
under this arrangement is detailed in the table provided below. In
2007, the Company replaced its practice of entering into a stock option
arrangement by establishing a Performance Share Unit Plan under the provisions
of the ASIP that allows the executive to earn shares based on the compound
annual growth rate in diluted earnings per share over a three-year
period. The details of this program for the executive are outlined in
a Form 8-K filing dated January 31, 2007. No expense related to this
plan was recognized for the first six months of 2009 and 2008 as results fell
short of the earnings performance goal.
-9-
A summary
of the status of the Company’s option shares as of June 30, 2009 is presented
below:
|
Options
|
Shares
|
Weighted-Average
Exercise Price
|
Weighted-Average
Remaining Term
|
Aggregate
Intrinsic Value
|
||||||||||||
|
Outstanding
at January 1, 2009
|
60,384 | $ | 32.79 | 5.9 | $ | - | ||||||||||
|
Granted
|
- | - | - | - | ||||||||||||
|
Exercised
|
- | - | - | - | ||||||||||||
|
Forfeited
or expired
|
- | - | - | - | ||||||||||||
|
Outstanding
at June 30, 2009
|
60,384 | $ | 32.79 | 5.4 | $ | - | ||||||||||
|
Exercisable
at June 30, 2009
|
60,384 | $ | 32.79 | 5.4 | $ | - | ||||||||||
Compensation
expense associated with the aforementioned option shares was fully recognized as
of December 31, 2007.
DSPP. The
Company's DSPP allows the directors to purchase the Company's common stock at a
price equal to 90% of the closing price on the date of
purchase. Stock purchases under the DSPP are limited to the amount of
the director’s annual cash compensation. The DSPP has 93,750 shares
reserved for issuance. A total of 50,736 shares have been issued
since the inception of the DSPP. For the first six months 2009, the
Company recognized approximately $14,000 in expense related to this
plan. For the first six months of 2008, the Company recognized
approximately $21,000 in expense related to the DSPP.
ASPP. Under the
Company's ASPP, substantially all associates may purchase the Company's common
stock through payroll deductions at a price equal to 90% of the lower of the
fair market value at the beginning or end of each six-month offering
period. Stock purchases under the ASPP are limited to 10% of an
associate's eligible compensation, up to a maximum of $25,000 (fair market value
on each enrollment date) in any plan year. Shares are issued at the
beginning of the quarter following each six-month offering
period. The ASPP has 593,750 shares of common stock reserved for
issuance. A total of 96,757 shares have been issued since inception
of the ASPP. For the first six months of 2009, the Company recognized
approximately $67,000 in expense related to the ASPP plan compared to $58,000 in
expense for the same period in 2008.
NOTE
8 - EMPLOYEE BENEFIT PLANS
The
Company has a defined benefit pension plan covering substantially all full-time
and eligible part-time associates and a Supplemental Executive Retirement Plan
(“SERP”) covering its executive officers.
The
components of the net periodic benefit costs for the Company's qualified benefit
pension plan were as follows:
|
Three
Months Ended June 30,
|
Six
Months Ended June 30,
|
|||||||||||||||
|
(Dollars
in Thousands)
|
2009
|
2008
|
2009
|
2008
|
||||||||||||
|
Discount
Rate
|
6.00
|
%
|
6.25
|
%
|
6.00
|
%
|
6.25
|
%
|
||||||||
|
Long-Term
Rate of Return on Assets
|
8.00
|
%
|
8.00
|
%
|
8.00
|
%
|
8.00
|
%
|
||||||||
|
Service
Cost
|
$
|
1,525
|
$
|
1,279
|
$
|
3,050
|
$
|
2,558
|
||||||||
|
Interest
Cost
|
1,200
|
1,063
|
2,400
|
2,126
|
||||||||||||
|
Expected
Return on Plan Assets
|
(1,275
|
)
|
(1,253
|
)
|
(2,550
|
)
|
(2,506
|
)
|
||||||||
|
Prior
Service Cost Amortization
|
125
|
75
|
250
|
151
|
||||||||||||
|
Net
Loss Amortization
|
750
|
280
|
1,500
|
561
|
||||||||||||
|
Net
Periodic Benefit Cost
|
$
|
2,325
|
$
|
1,444
|
$
|
4,650
|
$
|
2,890
|
||||||||
The
components of the net periodic benefit costs for the Company's SERP were as
follows:
|
Three
Months Ended June 30,
|
Six
Months Ended June 30,
|
|||||||||||||||
|
(Dollars
in Thousands)
|
2009
|
2008
|
2009
|
2008
|
||||||||||||
|
Discount
Rate
|
6.00
|
%
|
6.25
|
%
|
6.00
|
%
|
6.25
|
%
|
||||||||
|
Service
Cost
|
$
|
5
|
$
|
22
|
$
|
10
|
$
|
44
|
||||||||
|
Interest
Cost
|
74
|
56
|
148
|
111
|
||||||||||||
|
Prior
Service Cost Amortization
|
45
|
2
|
90
|
4
|
||||||||||||
|
Net
Loss Amortization
|
(5)
|
1
|
(11)
|
3
|
||||||||||||
|
Net
Periodic Benefit Cost
|
$
|
119
|
$
|
81
|
$
|
237
|
$
|
162
|
||||||||
|
NOTE
9 - COMMITMENTS AND
CONTINGENCIES
|
Lending
Commitments. The Company is a party to financial instruments
with off-balance sheet risks in the normal course of business to meet the
financing needs of its clients. These financial instruments consist
of commitments to extend credit and standby letters of credit.
The
Company’s maximum exposure to credit loss under standby letters of credit and
commitments to extend credit is represented by the contractual amount of those
instruments. The Company uses the same credit policies in
establishing commitments and issuing letters of credit as it does for on-balance
sheet instruments. As of June 30, 2009, the amounts associated with
the Company’s off-balance sheet obligations were as follows:
|
(Dollars
in Millions)
|
Amount
|
|||
|
Commitments
to Extend Credit(1)
|
$
|
393
|
||
|
Standby
Letters of Credit
|
$
|
17
|
||
|
(1)
|
Commitments include unfunded
loans, revolving lines of credit, and other unused
commitments.
|
Commitments
to extend credit are agreements to lend to a client so 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. Since many of the commitments are expected
to expire without being drawn upon, the total commitment amounts do not
necessarily represent future cash requirements.
Contingencies. The
Company is a party to lawsuits and claims arising out of the normal course of
business. In management's opinion, there are no known pending claims
or litigation, the outcome of which would, individually or in the aggregate,
have a material effect on the consolidated results of operations, financial
position, or cash flows of the Company.
Indemnification
Obligation. The Company is a member of the Visa U.S.A.
network. Visa U.S.A believes that its member banks are required to
indemnify Visa U.S.A. for potential future settlement of certain litigation (the
“Covered Litigation”). The Company recorded a charge in its fourth
quarter 2007 financial statements of approximately $1.9 million, or $0.07 per
diluted common share, to recognize its proportionate contingent liability
related to the costs of the judgments and settlements from the Covered
Litigation.
-10-
The
Company reversed a portion of the Covered Litigation accrual in the amount of
approximately $1.1 million to account for the establishment of a litigation
escrow account by Visa Inc., the parent company of Visa U.S.A., in conjunction
with Visa’s initial public offering during the first quarter of
2008. This escrow account was established to pay the costs of the
judgments and settlements from the Covered Litigation. Approximately
$0.8 million remains accrued for the contingent liability related to remaining
Covered Litigation.
In
October 2008 and July 2009, Visa Inc. funded additional amounts of $1.1 billion
and $700 million into the litigation escrow account to fund the settlement of
the Discover Financial Services litigation and additional pending litigation,
which in effect reduced the exchange ratio for the Company’s Class B shares of
Visa Inc. While the Company could be required to separately fund its
proportionate share of any Covered Litigation losses, it is expected that this
litigation escrow account will be used to pay all or a substantial amount of the
losses.
NOTE
10 - COMPREHENSIVE INCOME
SFAS No.
130, "Reporting Comprehensive Income," requires that certain transactions and
other economic events that bypass the income statement be displayed as other
comprehensive income. Comprehensive income totaled $1.4 million for
the six months ended June 30, 2009 and $12.0 million for the comparable period
in 2008. The Company’s comprehensive income consists of net income
and changes in unrealized gains and losses on securities available-for-sale (net
of income taxes) and changes in the pension liability (net of
taxes). The after-tax increase in net unrealized gains on securities
totaled approximately $24,000 for the six months ended June 30,
2009. The after-tax decrease in the net unrealized gains on
securities totaled approximately $79,000 for the six months ended June 30,
2008. Reclassification adjustments consist only of realized gains and
losses on sales of investment securities and were not material for the same
comparable periods. There was no change in the company’s pension
liability for the period ended June 30, 2009 as this liability is adjusted on an
annual basis at December 31st.
NOTE
11 – FAIR VALUE MEASUREMENTS
The
Company adopted the provisions of SFAS No. 157, "Fair Value
Measurements," for financial assets and financial liabilities effective January
1, 2008. Subsequently, on January 1, 2009, the Company adopted SFAS
No. 157-2 "Effective Date of FASB Statement No. 157" for non-financial
assets and non-financial liabilities. SFAS No. 157 defines fair
value, establishes a framework for measuring fair value in generally accepted
accounting principles and expands disclosures about fair value
measurements.
SFAS 157
defines fair value as the price that would be received to sell an asset or paid
to transfer a liability in an orderly transaction between market participants. A
fair value measurement assumes that the transaction to sell the asset or
transfer the liability occurs in the principal market for the asset or liability
or, in the absence of a principal market, the most advantageous market for the
asset or liability. The price in the principal (or most advantageous)
market used to measure the fair value of the asset or liability shall not be
adjusted for transaction costs. An orderly transaction is a
transaction that assumes exposure to the market for a period prior to the
measurement date to allow for marketing activities that are usual and customary
for transactions involving such assets and liabilities; it is not a forced
transaction. Market participants are buyers and sellers in the
principal market that are (i) independent, (ii) knowledgeable,
(iii) able to transact, and (iv) willing to transact.
SFAS 157
requires the use of valuation techniques that are consistent with the market
approach, the income approach and/or the cost approach. The market
approach uses prices and other relevant information generated by market
transactions involving identical or comparable assets and
liabilities. The income approach uses valuation techniques to convert
future amounts, such as cash flows or earnings, to a single present amount on a
discounted basis. The cost approach is based on the amount that
currently would be required to replace the service capacity of an asset
(replacement cost). Valuation techniques should be consistently
applied. Inputs to valuation techniques refer to the assumptions that
market participants would use in pricing the asset or
liability. Inputs may be observable, meaning those that reflect the
assumptions market participants would use in pricing the asset or liability
developed based on market data obtained from independent sources, or
unobservable, meaning those that reflect the reporting entity's own assumptions
about the assumptions market participants would use in pricing the asset or
liability developed based on the best information available in the
circumstances. In that regard, SFAS 157 establishes a fair value
hierarchy for valuation inputs that gives the highest priority to quoted prices
in active markets for identical assets or liabilities and the lowest priority to
unobservable inputs. The fair value hierarchy is as
follows:
Level 1 Inputs -
Unadjusted quoted prices in active markets for identical assets or
liabilities that the reporting entity has the ability to access at the
measurement date.
Level 2 Inputs - Inputs
other than quoted prices included in 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 principally from or corroborated by market data by
correlation or other means.
Level 3 Inputs -
Unobservable inputs for determining the fair values of assets or
liabilities that reflect an entity's own assumptions about the assumptions that
market participants would use in pricing the assets or liabilities.
A
description of the valuation methodologies used for instruments measured at fair
value, as well as the general classification of such instruments pursuant to the
valuation hierarchy, is set forth below. These valuation methodologies were
applied to all of the Company’s financial assets and financial liabilities
carried at fair value effective January 1, 2008.
In
general, fair value is based upon quoted market prices, where
available. If such quoted market prices are not available, fair value
is based upon models that primarily use, as inputs, observable market-based
parameters. Valuation adjustments may be made to ensure that
financial instruments are recorded at fair value. These adjustments
may include amounts to reflect counterparty credit quality, the Company’s
creditworthiness, among other things, as well as unobservable
parameters. Any such valuation adjustments are applied consistently
over time. The Company’s valuation methodologies may produce a fair
value calculation that may not be indicative of net realizable value or
reflective of future fair values. While management believes the Company’s
valuation methodologies are appropriate and consistent with other market
participants, the use of different methodologies or assumptions to determine the
fair value of certain financial instruments could result in a different estimate
of fair value at the reporting date.
Securities Available for
Sale. Securities
classified as available for sale are reported at fair value on a recurring basis
utilizing Level 1, 2, or 3 inputs. For these securities, the
Company obtains fair value measurements from an independent pricing service or a
model that uses, as inputs, observable market based parameters. The
fair value measurements consider observable data that may include quoted prices
in active markets, or other inputs, including dealer quotes, market spreads,
cash flows, the U.S. Treasury yield curve, live trading levels, trade execution
data, market consensus prepayment speeds, and credit information and the bond's
terms and conditions.
The
following table summarizes financial assets and financial liabilities measured
at fair value on a recurring basis as of June 30, 2009, segregated by the level
of the valuation inputs within the fair value hierarchy utilized to measure fair
value:
|
(Dollars
in Thousands)
|
Level
1 Inputs
|
Level
2 Inputs
|
Level
3 Inputs(1)
|
Total
Fair
Value
|
||||||||||||
|
Securities
Available for Sale
|
$ | 33,670 | $ | 147,613 | $ | 1,000 | $ | 182,283 | ||||||||
|
(1)
|
Reflects
one bank preferred stock issue of $1.0 million whose fair value has been
determined based on an internal valuation
model.
|
The
change in the fair value of Level 3 securities from December 31, 2008 to June
30, 2009 primarily relates to the change in the unrealized gain for one
security and was not material to the Company’s financial
statements.
-11-
Certain
financial and non-financial assets measured at fair value on a nonrecurring
basis are detailed below; that is, the instruments are not measured at fair
value on an ongoing basis but are subject to fair value adjustments in certain
circumstances (for example, when there is evidence of
impairment). Financial and non-financial liabilities measured at fair
value on a nonrecurring basis were not significant at June 30,
2009.
Impaired Loans. On
a non-recurring basis, certain impaired loans are reported at the fair value of
the underlying collateral if repayment is expected solely from the liquidation
of collateral. Collateral values are estimated using Level 3 inputs
based on customized discounting criteria. Impaired loans had a
carrying value of $126.3 million, with a valuation allowance of $18.5 million,
resulting in an additional provision for loan losses of $2.6 million for the six
month period ended June 30, 2009.
Loans Held for Sale. Loans held
for sale were $7.4 million as of June 30, 2009. These loans are
carried at the lower of cost or fair value and are adjusted to fair value on a
nonrecurring basis. Fair value is based on observable markets rates
for comparable loan products which is considered a Level 2 fair value
measurement.
Other Real Estate
Owned. During the first six months of 2009, certain foreclosed
assets, upon initial recognition, were measured and reported at fair value
through a charge-off to the allowance for possible loan losses based on the fair
value of the foreclosed asset. The fair value of the foreclosed
asset, upon initial recognition, is estimated using Level 2 inputs based on
observable market data. Foreclosed assets measured at fair value upon
initial recognition totaled $19.2 million during the six months ended June 30,
2009. In connection with the measurement and initial recognition of
the foregoing foreclosed assets, the Company recognized gross charge-offs to the
allowance for loan losses totaling $5.7 million. In addition, the
Company recognized subsequent losses totaling $1.6 million for foreclosed assets
that were re-valued during the six months ended June 30, 2009. The
carrying value of foreclosed assets was $19.7 million at June 30,
2009.
Effective
January 1, 2008, the Company adopted the provisions of SFAS No. 159,
"The Fair Value Option for Financial Assets and Financial Liabilities -
Including an Amendment of FASB Statement No. 115." SFAS 159 permits
the Company to choose to measure eligible items at fair value at specified
election dates. Changes in fair value on items for which the fair
value measurement option has been elected are reported in earnings at each
subsequent reporting date. The fair value option (i) is applied
instrument by instrument, with certain exceptions, thus the Company may record
identical financial assets and liabilities at fair value or by another
measurement basis permitted under generally accepted accounting principals,
(ii) is irrevocable (unless a new election date
occurs), and (iii) is applied only to entire instruments and not to
portions of instruments. Adoption of SFAS 159 on January 1,
2008 did not have a significant impact on the Company’s financial statements
because the Company did not elect fair value measurement under SFAS
159.
SFAS 107,
“Disclosures about Fair Value of Financial Instruments,” as amended, requires
disclosure of the fair value of financial assets and financial liabilities,
including those financial assets and financial liabilities that are not measured
and reported at fair value on a recurring basis or non-recurring
basis. A detailed description of the valuation methodologies used in
estimating the fair value of financial instruments is set forth in the 2008 Form
10-K.
The
Company’s financial instruments that have estimated fair values are presented
below:
|
June
30, 2009
|
December
31, 2008
|
|||||||||||||||
|
(Dollars
in Thousands)
|
Carrying
Value
|
Estimated
Fair
Value
|
Carrying
Value
|
Estimated
Fair
Value
|
||||||||||||
|
Financial
Assets:
|
||||||||||||||||
|
Cash
|
$
|
92,394
|
$
|
92,394
|
$
|
88,143
|
$
|
88,143
|
||||||||
|
Short-Term Investments
|
2,016
|
2,016
|
6,806
|
6,806
|
||||||||||||
|
Investment
Securities
|
194,002
|
194,002
|
191,569
|
191,569
|
||||||||||||
|
Loans,
Net of Allowance for Loan Losses
|
1,935,281
|
1,931,278
|
1,920,793
|
1,915,887
|
||||||||||||
|
Total
Financial Assets
|
$
|
2,223,693
|
$
|
2,219,690
|
$
|
2,207,311
|
$
|
2,202,405
|
||||||||
|
Financial
Liabilities:
|
||||||||||||||||
|
Deposits
|
$
|
2,005,930
|
$
|
1,945,804
|
$
|
1,992,174
|
$
|
1,960,361
|
||||||||
|
Short-Term
Borrowings
|
73,989
|
73,239
|
62,044
|
61,799
|
||||||||||||
|
Subordinated
Notes Payable
|
62,887
|
60,984
|
62,887
|
63,637
|
||||||||||||
|
Long-Term
Borrowings
|
52,354
|
55,939
|
51,470
|
57,457
|
||||||||||||
|
Total
Financial Liabilities
|
$
|
2,195,160
|
$
|
2,135,966
|
$
|
2,168,575
|
$
|
2,143,254
|
||||||||
All
non-financial instruments are excluded from the above table. The
disclosures also do not include certain intangible assets such as client
relationships, deposit base intangibles and goodwill. Accordingly,
the aggregate fair value amounts presented do not represent the underlying value
of the Company.
-12-
NOTE
12 – NEW ACCOUNTING STANDARDS
Statement
of Financial Accounting Standards
SFAS No. 141, “Business
Combinations (Revised 2007).” SFAS 141R replaces
SFAS 141, “Business Combinations,” and applies to all transactions and
other events in which one entity obtains control over one or more other
businesses. SFAS 141R requires an acquirer, upon initially
obtaining control of another entity, to recognize the assets, liabilities and
any non-controlling interest in the acquiree at fair value as of the acquisition
date. Contingent consideration is required to be recognized and
measured at fair value on the date of acquisition rather than at a later date
when the amount of that consideration may be determinable beyond a reasonable
doubt. This fair value approach replaces the cost-allocation process
required under SFAS 141 whereby the cost of an acquisition was allocated to
the individual assets acquired and liabilities assumed based on their estimated
fair value. SFAS 141R requires acquirers to expense
acquisition-related costs as incurred rather than allocating such costs to the
assets acquired and liabilities assumed, as was previously the case under
SFAS 141. Under SFAS 141R, the requirements of
SFAS 146, “Accounting for Costs Associated with Exit or Disposal
Activities,” would have to be met in order to accrue for a restructuring plan in
purchase accounting. Pre-acquisition contingencies are to be
recognized at fair value, unless it is a non-contractual contingency that is not
likely to materialize, in which case, nothing should be recognized in purchase
accounting and, instead, that contingency would be subject to the probable and
estimable recognition criteria of SFAS 5, “Accounting for
Contingencies.” SFAS 141R is applicable to the Company’s
accounting for business combinations closing on or after January 1,
2009.
SFAS No. 160, “Noncontrolling
Interest in Consolidated Financial Statements, an amendment of ARB Statement
No. 51.” SFAS 160 amends Accounting Research
Bulletin (“ARB”) No. 51, “Consolidated Financial Statements,” to establish
accounting and reporting standards for the non-controlling interest in a
subsidiary and for the deconsolidation of a subsidiary. SFAS 160
clarifies that a non-controlling interest in a subsidiary, which is sometimes
referred to as minority interest, is an ownership interest in the consolidated
entity that should be reported as a component of equity in the consolidated
financial statements. Among other requirements, SFAS 160
requires consolidated net income to be reported at amounts that include the
amounts attributable to both the parent and the non-controlling
interest. It also requires disclosure, on the face of the
consolidated income statement, of the amounts of consolidated net income
attributable to the parent and to the non-controlling
interest. SFAS 160 became effective for the Company on
January 1, 2009 and did not have an impact on the Company’s financial
statements.
SFAS No. 161, “Disclosures
About Derivative Instruments and Hedging Activities, an Amendment of FASB
Statement No. 133.” SFAS 161 amends SFAS 133, “Accounting for
Derivative Instruments and Hedging Activities,” to amend and expand the
disclosure requirements of SFAS 133 to provide greater transparency about
(i) how and why an entity uses derivative instruments, (ii) how
derivative instruments and related hedge items are accounted for under
SFAS 133 and its related interpretations, and (iii) how derivative
instruments and related hedged items affect an entity’s financial position,
results of operations and cash flows. To meet those objectives,
SFAS 161 requires qualitative disclosures about objectives and strategies
for using derivatives, quantitative disclosures about fair value amounts of
gains and losses on derivative instruments and disclosures about
credit-risk-related contingent features in derivative
agreements. SFAS 161 became effective for the Company on
January 1, 2009 and did not have an impact on the Company’s financial
statements.
SFAS No. 165, “Subsequent
Events.” SFAS 165 establishes general standards of accounting
for and disclosure of events that occur after the balance sheet date but before
financial statements are issued or available to be issued. SFAS 165
defines (i) the period after the balance sheet date during which a reporting
entity’s management should evaluate events or transactions that may have
occurred for potential recognition or disclosure in the financial statements
(ii) the circumstances under which an entity should recognize events or
transactions occurring after the balance sheet date in its financial statements,
and (iii) the disclosure an entity should make about events or transactions that
occurred after the balance sheet date. SFAS 165 became effective for
the Company’s financial statement for periods ending after June 15,
2009. SFAS 165 did not have a significant impact on the Company’s
financial statements.
SFAS No. 166, “Accounting for
Transfers of Financial Assets, an Amendment of FASB Statement No.
140.” SFAS 166 amends SFAS 140, “Accounting for Transfers and
Servicing of Financial Assets and Extinguishments of Liabilities,” to enhance
reporting about transfers of financial assets, including securitizations, and
where companies have continuing exposure to the risks related to transferred
financial assets. SFAS 166 eliminates the concept of a “qualifying
special-purpose entity” and changes the requirements for derecognizing financial
assets. SFAS 166 also requires additional disclosures about all
continuing involvements with transferred financial assets including information
about gains and losses resulting from transfers during the
period. SFAS 166 will be effective January 1, 2010 and is not
expected to have a significant impact on the Company’s financial
statements.
SFAS No. 167, Amendments to FASB
Interpretation No. 46(R).” SFAS 167 amends FIN 46 (Revised
December 2003), “Consolidation of Variable Interest
Entities.” to change how a company determines when an entity that is
insufficiently capitalized or is not controlled through voting (or similar
rights) should be consolidated. The determination of whether a
company is required to consolidate an entity is based on, among other things, an
entity’s purpose and design and a company’s ability to direct the activities of
the entity that most significantly impact the entity’s economic
performance. SFAS 167 requires additional disclosures about the
reporting entity’s involvement with variable-interest entities and any
significant changes in risk exposure due to that involvement as well as its
affect on the entity’s financial statements. SFAS 167 will be
effective January 1, 2010 and is not expected to have a significant impact on
the Company’s financial statements.
SFAS No. 168, “The FASB Accounting
Standards Codification and the Hierarchy of Generally Accepted Accounting
Principles, a Replacement of FASB Statement 162.” SFAS 168
replaces SFAS 162, “The Hierarchy of Generally Accepted Accounting
Principles” and establishes the FASB Accounting Standards
Codification (the “Codification”) as the source of authoritative accounting
principles recognized by the FASB to be applied by non-governmental entities in
the preparation of financial statements in conformity with generally accepted
accounting principles. Rules and interpretive releases of the SEC
under authority of federal securities laws are also sources of authoritative
guidance for SEC registrants. All guidance contained in the
Codification carries an equal level of authority. All
non-grandfathered, non-SEC accounting literature not included in the
Codification is superseded and deemed non-authoritative. SFAS 168
will be effective for the Company’s financial statements for the periods ending
after September 15, 2009.
Financial
Accounting Standards Board Staff Positions and Interpretations
FSP No. EITF 03-6-1,
“Determining Whether Instruments Granted in Share-Based Payment Transactions Are
Participating Securities.” FSP EITF 03-6-1 provides
that unvested share-based payment awards that contain nonforfeitable rights to
dividends or dividend equivalents (whether paid or unpaid) are participating
securities and shall be included in the computation of earnings per share
pursuant to the two-class method. FSP EITF 03-6-1 became
effective on January 1, 2009 and did not have a significant impact on the
Company’s financial statements.
FSP No. 132(R)-1 “Employers’
Disclosures about Postretirement Benefit Plan
Assets.” FSP 132(R)-1 provides guidance related to an
employer’s disclosures about plan assets of defined benefit pension or other
post-retirement benefit plans. Under FSP 132(R)-1, disclosures
should provide users of financial statements with an understanding of how
investment allocation decisions are made, the factors that are pertinent to an
understanding of investment policies and strategies, the major categories of
plan assets, the inputs and valuation techniques used to measure the fair value
of plan assets, the effect of fair value measurements using significant
unobservable inputs on changes in plan assets for the period and significant
concentrations of risk within plan assets. The disclosures required
by FSP 132(R)-1 will be included in the Company’s financial statements
beginning with the financial statements for the year-ended December 31,
2009.
FSP SFAS 157-4, “Determining
Fair Value When the Volume and Level of Activity for the Asset or Liability Have
Significantly Decreased and Identifying Transactions That Are Not
Orderly.” FSP SFAS 157-4 affirms that the objective
of fair value when the market for an asset is not active is the price that would
be received to sell the asset in an orderly transaction, and clarifies and
includes additional factors for determining whether there has been a significant
decrease in market activity for an asset when the market for that asset is not
active. FSP SFAS 157-4 requires an entity to base its
conclusion about whether a transaction was not orderly on the weight of the
evidence. FSP SFAS 157-4 also amended SFAS 157, “Fair
Value Measurements,” to expand certain disclosure requirements. The
Company adopted the provisions of FSP 157-4 during the second quarter of
2009 and it did not significantly impact the Company’s financial
statements.
FSP SFAS 115-2 and
SFAS 124-2, “Recognition and Presentation of Other-Than-Temporary
Impairments.” FSP SFAS 115-2 and SFAS 124-2
(i) changes existing guidance for determining whether an impairment is
other than temporary to debt securities and (ii) replaces the existing
requirement that the entity’s management assert it has both the intent and
ability to hold an impaired security until recovery with a requirement that
management assert: (a) it does not have the intent to sell the security;
and (b) it is more likely than not it will not have to sell the security
before recovery of its cost basis. Under FSP SFAS 115-2 and
SFAS 124-2, declines in the fair value of held-to-maturity and
available-for-sale securities below their cost that are deemed to be other than
temporary are reflected in earnings as realized losses to the extent the
impairment is related to credit losses. The amount of the impairment
related to other factors is recognized in other comprehensive
income. The Company adopted the provisions of
FSP SFAS 115-2 and SFAS 124-2 during the second
quarter of 2009 and it did not significantly impact the Company’s financial
statements.
-13-
FSP SFAS 107-1 and APB 28-1,
“Interim Disclosures about Fair Value of Financial
Instruments.” FSP SFAS 107-1 and APB 28-1 amends
SFAS 107, “Disclosures about Fair Value of Financial Instruments,” to
require an entity to provide disclosures about fair value of financial
instruments in interim financial information and amends Accounting Principles
Board (“APB”) Opinion No. 28, “Interim Financial Reporting,” to
require those disclosures in summarized financial information at interim
reporting periods. Under FSP SFAS 107-1 and APB 28-1, a publicly
traded company shall include disclosures about the fair value of its financial
instruments whenever it issues summarized financial information for interim
reporting periods. In addition, entities must disclose, in the body or in the
accompanying notes of its summarized financial information for interim reporting
periods and in its financial statements for annual reporting periods, the fair
value of all financial instruments for which it is practicable to estimate that
value, whether recognized or not recognized in the statement of financial
position, as required by SFAS 107. The new interim disclosures
required by FSP SFAS 107-1 and APB 28-1 are included in the Company’s
interim financial statements for the second quarter of 2009.
FSP SFAS 141R-1,
“Accounting for Assets Acquired and Liabilities Assumed in a Business
Combination That Arise from
Contingencies.” FSP SFAS 141R-1 amends the guidance
in SFAS 141R to require that assets acquired and liabilities assumed in a
business combination that arise from contingencies be recognized at fair value
if fair value can be reasonably estimated. If fair value of such an
asset or liability cannot be reasonably estimated, the asset or liability would
generally be recognized in accordance with SFAS 5, “Accounting for
Contingencies,” and FASB Interpretation (“FIN”) No. 14, “Reasonable
Estimation of the Amount of a Loss.” FSP SFAS 141R-1 removes
subsequent accounting guidance for assets and liabilities arising from
contingencies from SFAS 141R and requires entities to develop a systematic
and rational basis for subsequently measuring and accounting for assets and
liabilities arising from contingencies. FSP SFAS 141R-1 eliminates
the requirement to disclose an estimate of the range of outcomes of recognized
contingencies at the acquisition date. For unrecognized
contingencies, entities are required to include only the disclosures required by
SFAS 5. FSP SFAS 141R-1 also requires that contingent
consideration arrangements of an acquiree assumed by the acquirer in a business
combination be treated as contingent consideration of the acquirer and should be
initially and subsequently measured at fair value in accordance with
SFAS 141R. FSP SFAS 141R-1 is effective for assets or
liabilities arising from contingencies the Company acquires in business
combinations occurring after January 1, 2009.
-14-
QUARTERLY
FINANCIAL DATA (UNAUDITED)
|
2009
|
2008
|
2007
|
||||||||||||||||||||||||||||||
|
(Dollars
in Thousands, Except Per Share Data)
|
Second
|
First
|
Fourth
|
Third(1)
|
Second
|
First
|
Fourth
|
Third
|
||||||||||||||||||||||||
|
Summary
of Operations:
|
||||||||||||||||||||||||||||||||
|
Interest
Income
|
$ | 31,180 | $ | 31,053 | $ | 33,229 | $ | 34,654 | $ | 36,260 | $ | 38,723 | $ | 40,786 | $ | 41,299 | ||||||||||||||||
|
Interest
Expense
|
4,085 | 4,058 | 5,482 | 7,469 | 8,785 | 12,264 | 13,241 | 13,389 | ||||||||||||||||||||||||
|
Net
Interest Income
|
27,095 | 26,995 | 27,747 | 27,185 | 27,475 | 26,459 | 27,545 | 27,910 | ||||||||||||||||||||||||
|
Provision
for Loan Losses
|
8,426 | 8,410 | 12,497 | 10,425 | 5,432 | 4,142 | 1,699 | 1,552 | ||||||||||||||||||||||||
|
Net
Interest Income After
Provision
for Loan Losses
|
18,669 | 18,585 | 15,250 | 16,760 | 22,043 | 22,317 | 25,846 | 26,358 | ||||||||||||||||||||||||
|
Noninterest
Income
|
14,634 | 14,042 | 13,311 | 20,212 | 15,718 | 17,799 | 15,823 | 14,431 | ||||||||||||||||||||||||
|
Noninterest
Expense
|
32,930 | 32,257 | 31,002 | 29,916 | 30,756 | 29,798 | 31,614 | 29,919 | ||||||||||||||||||||||||
|
Income
Before Provision for Income Taxes
|
373 | 370 | (2,441 | ) | 7,056 | 7,005 | 10,318 | 10,055 | 10,870 | |||||||||||||||||||||||
|
Provision
for Income Taxes
|
(401 | ) | (280 | ) | (738 | ) | 2,218 | 2,195 | 3,038 | 2,391 | 3,699 | |||||||||||||||||||||
|
Net
Income
|
$ | 774 | $ | 650 | $ | (1,703 | ) | $ | 4,838 | $ | 4,810 | $ | 7,280 | $ | 7,664 | $ | 7,171 | |||||||||||||||
|
Net
Interest Income (FTE)
|
$ | 27,679 | $ | 27,578 | $ | 28,387 | $ | 27,802 | $ | 28,081 | $ | 27,078 | $ | 28,196 | $ | 28,517 | ||||||||||||||||
|
Per
Common Share:
|
||||||||||||||||||||||||||||||||
|
Net
Income Basic
|
$ | 0.04 | $ | 0.04 | $ | (0.10 | ) | $ | 0.29 | $ | 0.28 | $ | 0.42 | $ | 0.44 | $ | 0.41 | |||||||||||||||
|
Net
Income Diluted
|
0.04 | 0.04 | (0.10 | ) | 0.29 | 0.28 | 0.42 | 0.44 | 0.41 | |||||||||||||||||||||||
|
Dividends
Declared
|
0.190 | 0.190 | 0.190 | 0.185 | 0.185 | 0.185 | < | |||||||||||||||||||||||||