SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
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| x | ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934. |
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TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934. |
New Jersey | 52-1273725 | |
(State or Other Jurisdiction of Incorporation or Organization) | (IRS Employer Identification Number) |
(Title of Class)
Title of each class | Name of each exchange on which registered | |
| Common Stock, no par value | NASDAQ |
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Large Accelerated Filer | Accelerated Filerx | Non-Accelerated¨ | Small Reporting Company |
February 28, 2014
Common Stock, no par value: 16,290,70016,369,012 shares
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| PART I | |||||
Item 1. | Business | 3 | ||||
| Item 1A. | Risk Factors | 18 | ||||
| Item 1B. | Unresolved Staff Comments | 25 | ||||
Item 2.
| Properties | 25 | ||||
Item 3. | Legal Proceedings | 26 | ||||
Item 3A. | Executive Officers of the Registrant | 27 | ||||
Item 4.
| Mine Safety Disclosures | 28 | ||||
PART II | ||||||
Item 5. | Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities | 29 | ||||
Item 6. | Selected Financial Data | 30 | ||||
Item 7. | Management’s Discussion and Analysis of Financial Condition and Results of Operations | 33 | ||||
Item 7A. | Quantitative and Qualitative Disclosures About Market Risk | 65 | ||||
Item 8. | Financial Statements and Supplementary Data: | F-1 | ||||
| F-2 | ||||||
| Center Bancorp, Inc. and Subsidiaries: | ||||||
| Consolidated Statements of Condition | F-4 | |||||
| Consolidated Statements of Income | F-5 | |||||
| Consolidated Statements of Comprehensive Income | F-6 | |||||
| Consolidated Statements of Changes in Stockholders’ Equity | F-7 | |||||
| Consolidated Statements of Cash Flows | F-8 | |||||
| Notes to Consolidated Financial Statements | F-9 | |||||
Item 9. | Changes in and Disagreements With Accountants on Accounting and Financial Disclosure | 66 | ||||
Item 9A. | Controls and Procedures | 66 | ||||
Item 9B. | Other Information | 69 | ||||
PART III | ||||||
Item 10. | Directors, Executive Officers and Corporate Governance | 70 | ||||
Item 11. | Executive Compensation | 70 | ||||
Item 12. | Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters | 70 | ||||
Item 13. | Certain Relationships and Related Transactions, and Director Independence | 70 | ||||
| Item 14. | Principal Accounting Fees and Services | 70 | ||||
PART IV | ||||||
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Item 15. | Exhibits, | 71 | ||||
| Signatures | ||||||
| 74 | ||||||
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The
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During 2001 and 2003, the Corporation formed statutory business trusts, which exist for the exclusive purpose of (i) issuing trust securities representing undivided beneficial interests in the assets of a trust; (ii) investing the gross proceedsowns some of the trust securities in junior subordinated deferrable interest debentures (subordinated debentures) of the Corporation; and (iii) engaging in only those activities necessaryreal estate loans. All subsidiaries mentioned above are directly or incidental thereto. These subordinated debentures and the related income effects are not eliminated in the consolidated financial statements as the statutory business trusts are not consolidated in accordance with Financial Accounting Standards Board (“FASB”) FASB ASC 810-10 (previously FASB interpretation No. 46(R), “Consolidation of Variable Interest Entities.” Distributions on the subordinated debenturesindirectly wholly owned by the subsidiary trusts have been classified as interest expense in the Consolidated Statements of Income.
The Corporation, issued $10.3 million of subordinated debentures in 2001 and $5.2 million of subordinated debentures in 2003. On December 18, 2006,except that the Corporation redeemed $10.3 millionowns less than 100 percent of subordinated debentures and dissolved Center Bancorp, Inc. Statutory Trust I. At December 31, 2010, the $5.2 millionpreferred stock of these securities still outstanding were includedthe REIT subsidiary. A REIT must have 100 or more shareholders to quality as a componentREIT. The REIT has issued less than 20 percent of Tierits outstanding non-voting preferred stock to individuals, primarily bank personnel and directors.
During 2002,2012, the Bank established two investment subsidiariesassumed all of the deposits and certain other liabilities and acquired certain assets of Saddle River Valley Bank, a New Jersey State-chartered bank, pursuant to hold portionsthe terms of its securities portfolio. At December 2007, under a planPurchase and Assumption Agreement, dated as of liquidation adopted byFebruary 1, 2012, among the Bank, oneSaddle River Valley Bank and Saddle River Valley Bancorp. This purchase and assumption was in keeping with the Bank’s strategy to expand its base of operations into Northern New Jersey.
The Bank, through its subsidiary, Center Financial Group LLC, provides financial services, including brokerage services, insurance and annuities, mutual funds and financial planning. In the fourth quarter of 2007, the Corporation formed a title insurance partnership, Center Title LLC, with Progressive Title Company in Parsippany, New Jersey to provide title services in connection with the closing of real estate transactions. In January 2008, the Corporation formed a title insurance partnership, Union Title LLC, with Elite Title Abstract of West Caldwell, New Jersey to provide title services in connection with the closing of real estate loan transactions. Our partnerships with both title companies were liquidated during December, 2009.
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Bank liquidated this business.
On November 9, 2007, the FRB approved the Parent Corporation’s application to become a Financial Holding Company. A Financial Holding Company may perform the following activities: insurance underwriting, securities dealing and underwriting, financial and investment advisory services, merchant banking and issuing or selling security interests in bank-eligible assets. Financial Holding Companies may also engage in any other activity that the FRB determines to be financial in nature or incidental to financial activities after consultation with the Secretary of the Treasury. A Financial Holding Company may also engage in any non-financial activity that the FRB determines is complementary to a financial activity and does not pose a substantial risk to the safety or soundness of depository institutions or the financial system. As of December 31, 2009 the Parent Corporation officially rescinded its status as a financial services holding company as a result of the discontinuation of its title insurance activities.
ratios and Community Reinvestment Act ratings and anti-money laundering policies are generally prerequisites to obtaining federal regulatory approval to make acquisitions. The policy of the FRB provides that a bank holding company is expected to act as a source of financial strength to its subsidiary bank and to commit resources to support the subsidiary bank in circumstances in which it might not do so absent that policy.
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| • | Minimum Capital Requirements. The Dodd-Frank Act requires new capital rules and the application of the same leverage and risk-based capital requirements that apply to insured depository institutions to most bank holding companies. In addition to making bank holding companies subject to the same capital requirements as their bank subsidiaries, these provisions (often referred to as the Collins Amendment to the Dodd-Frank Act) were also intended to eliminate or significantly reduce the use of hybrid capital instruments, especially trust preferred securities, as regulatory capital. The Dodd-Frank Act also requires banking regulators to seek to make capital standards countercyclical, so that the required levels of capital increase in times of economic expansion and decrease in times of economic contraction. See “New Capital Rules” for a description of new capital requirements adopted by U.S. federal banking regulators in 2013 and the treatment of trust preferred securities under such rules. |
| • | Basel III.On July 9, 2013, the Office of the Comptroller of the Currency approved a final rule revising regulatory capital rules applicable to national banks, implementing Basel III. This rule redefines Tier 1 capital as two components (Common Equity Tier 1 and Additional Tier 1), creates a new capital ratio (Common Equity Tier 1 Risk-based Capital Ratio) and implements a capital conservation buffer. It also revises the prompt corrective action thresholds and makes changes to risk weighs for certain assets and off-balance-sheet exposures. Banks are required to transition into the new rule beginning on January 1, 2015, although, based on the Corporation’s capital levels and balance sheet composition at September 30, 2013, the Corporation does not believe implementation of the new rule will have a material impact on the Corporation’s capital needs; however, due to the complexity of the rules, the Corporation will continue to evaluate the impact of these changes to our regulatory capital of Center Bancorp and Union Center National Bank. This statement regarding the impact of the new regulations constitutes a forward-looking statement under the Private Securities Litigation Reform Act of 1995. Actual results could differ materially from this statement as a result of various factors, including modifications to the new regulations that may be adopted prior to the effective dates of the new regulations. | |
| • | The Consumer Financial Protection Bureau (“Bureau”). The Dodd-Frank Act created the Bureau within the Federal Reserve. The Bureau is tasked with establishing and implementing rules and regulations under certain federal consumer protection laws with respect to the conduct of providers of certain consumer financial products and services. The Bureau has rulemaking authority over many of the statutes governing products and services offered to bank consumers. In addition, the Dodd-Frank Act permits states to adopt consumer protection laws and regulations that are more stringent than those regulations promulgated by the Bureau and state attorneys general are permitted to enforce consumer protection rules adopted by the Bureau against state-chartered institutions. The Consumer Financial Protection Bureau has examination and enforcement authority over all banks and savings institutions with more than $10 billion in assets. Institutions with $10 billion or less in assets, such as the Bank, will continue to be examined for compliance with the consumer laws by their primary bank regulators. |
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| • | Deposit Insurance. The Dodd-Frank Act makes permanent the $250,000 deposit insurance limit for insured deposits. Amendments to the Federal Deposit Insurance Act also revise the assessment base against which an insured depository institution’s deposit insurance premiums paid to the Deposit Insurance Fund (“DIF”) will be calculated. Under the amendments, the assessment base will no longer be the institution’s deposit base, but rather its average consolidated total assets less its average tangible equity during the assessment period. Additionally, the Dodd-Frank Act makes changes to the minimum designated reserve ratio of the DIF, increasing the minimum from 1.15 percent to 1.35 percent of the estimated amount of total insured deposits and eliminating the requirement that the FDIC pay dividends to depository institutions when the reserve ratio exceeds certain thresholds. In December 2010, the FDIC increased the designated reserve ratio to 2.0 percent. |
| • | Shareholder Votes . The Dodd-Frank Act requires publicly traded companies like Center Bancorp to give shareholders a non-binding vote on executive compensation and so-called “golden parachute” payments in certain circumstances. The Dodd-Frank Act also authorizes the SEC to promulgate rules that would allow shareholders to nominate their own candidates using a company’s proxy materials. |
| • | Transactions with Affiliates. The Dodd-Frank Act enhances the requirements for certain transactions with affiliates under Section 23A and 23B of the Federal Reserve Act, including an expansion of the definition of “covered transactions” and increasing the amount of time for which collateral requirements regarding covered transactions must be maintained. These requirements became effective during 2011. |
| • | Transactions with Insiders. Insider transaction limitations are expanded through the strengthening of loan restrictions to insiders and the expansion of the types of transactions subject to the various limits, including derivative transactions, repurchase agreements, reverse repurchase agreements and securities lending or borrowing transactions. Restrictions are also placed on certain asset sales to and from an insider to an institution, including requirements that such sales be on market terms and, in certain circumstances, approved by the institution’s board of directors. These requirements became effective during 2011. |
| • | Enhanced Lending Limits. The Dodd-Frank Act strengthened the previous limits on a depository institution’s credit exposure to one borrower which limited a depository institution’s ability to extend credit to one person (or group of related persons) in an amount exceeding certain thresholds. The Dodd-Frank Act expanded the scope of these restrictions to include credit exposure arising from derivative transactions, repurchase agreements, and securities lending and borrowing transactions. |
| • | Compensation Practices. The Dodd-Frank Act provides that the appropriate federal regulators must establish standards prohibiting as an unsafe and unsound practice any compensation plan of a bank holding company or other “covered financial institution” that provides an insider or other employee with “excessive compensation” or compensation that gives rise to excessive risk or could lead to a material financial loss to such firm. In June 2010, prior to the Dodd-Frank Act, the bank regulatory agencies promulgated theInteragency Guidance on Sound Incentive Compensation Policies , which set forth three key principles concerning incentive compensation arrangements: |
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The Federal Reserve Board has issued Regulation W, which codifies prior regulations under Sections 23A and 23B of the Federal Reserve Act and interpretative guidance with respect to affiliate transactions. Regulation W incorporates the exemption from the affiliate transaction rules but expands the exemption to cover the purchase of any type of loan or extension of credit from an affiliate. Affiliates of a bank include, among other entities, the bank’s holding company and companies that are under common control with the bank. The Parent Corporation is considered to be an affiliate of the Bank. In general, subject to certain specified exemptions, a bank or its subsidiaries are limited in their ability to engage in “covered transactions” with affiliates:
In addition,
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required to maintain a leverage ratio of 3% plus an additional cushion of at least 100 to 200 basis points. The Parent Corporation’s leverage ratio was 9.909.69 percent at December 31, 2010.
2013.
The OCC has established higher minimum capital ratios for the Bank effective as of December 31, 2009: Tier 1 Risk-Based Capital of 10.0 percent, Total Risk-Based Capital of 12.0 percent and Tier 1 Leverage Capital of 8.0 percent. At December 31, 2010, the Bank’s capital ratios were all above the minimum levels required.
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Basel II also would set capital requirements for operational risk and refine the existing capital requirements for market risk exposures. The Corporation is not required to comply with the advanced approaches of Basel II.
For banks inFederal Reserve Board, the United States, amongFDIC and the most significantComptroller of the Currency adopted final rules (the “New Rules”), which implement certain provisions of Basel III concerningand the Dodd-Frank Act. The New Rules replace the general risk-based capital arerules of the following:
| · | Common Equity Tier 1 Capital Ratio of 4.5% (this is a new concept and requirement, and is referred to as the “CET1”); |
| · | Tier 1 Capital Ratio (CET1 capital plus “Additional Tier 1 capital”) of 6.0%; and |
| · | Total Capital Ratio (Tier 1 capital plus Tier 2 capital) of 8.0%. |
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| · | CET1 of 7%; |
| · | Tier 1 Capital Ratio of 8.5%; and |
| · | Total Capital Ratio of 10.5%. |
The Basel III provisions on liquidity include complex criteria establishing the LCR and NSFR. Although Basel III is described as a “final text,” it is subject to the resolution of certain issues and to further guidance and modification, as well as to adoption by United States banking regulators, including decisions as to whether and to what extent it will apply to United States banks that are not large, internationally active banks.
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Under current regulations,up to at least the FDIC utilizes a risk-based assessment system that imposesstandard maximum deposit insurance premiums based upon a risk matrix that takes into account a bank’s capital levelamount of $250,000 per depositor at each separately chartered FDIC-insured depository institution, and supervisory rating, known as a “CAMEL rating.” The assessment rate(ii) funds deposited in IOLTAs will no longer be insured under Section 343 of the Dodd-Frank Act, but because IOLTAs are fiduciary accounts, they generally qualify for an individual institution is determined according to a formula basedpass-through coverage on a weighted average of the institution’s individual CAMELS component ratings plus six financial ratios. Well-capitalized institutions (generally those with CAMELS composite ratings of 1 or 2) are grouped in Risk Category I and their initial assessment base rate for deposit insurance is set at an annual rate of between 12 and 16 basis points. The initial base assessment rate for institutions in Risk Categories II, III, and IV is set at annual rates of 22, 31 and 50 basis points, respectively. These base rates are then adjusted to a final assessment rate based on an institution’s brokered deposits, secured liabilities and unsecured debt. In 2010 the Bank recognized a total of $1.8 million in FDIC expense of the $5.7 million assessments prepaid in 2009.
On May 22, 2009, the Board of Directors of the FDIC adopted a final rule imposing a special assessment on the entire banking industry. The special assessment was calculated as five basis points times each insured depository institution’s assets minus Tier 1 capital, as reported in the report of condition as of June 30, 2009 and would not exceed ten times the institution’s assessment base for the second quarter of 2009 risk-based assessment. This special assessment, which totaled $1.2 million, was remitted by the Bank on September 30, 2009.
per-client basis.
three basis points. Any prepaid assessment in excess of the amounts that are subsequently determined to be actually due to the FDIC by June 30, 2013, willwere required to be returned to the institution at that time.
In November 2010, As of December 31, 2013 the Bank recognized a total of $5.4 million in FDIC expense of the $5.7 million assessments prepaid on December 30, 2009, and received a refund of $334,000 in May of 2013.
The Company paid $1.1 million in total FDIC assessments in 2013, as compared to $1.2 million in 2012.
| · | allows bank holding companies meeting management, capital, and Community Reinvestment Act standards to engage in a substantially broader range of non-banking activities than previously was permissible, including insurance underwriting and making merchant banking investments in commercial and financial companies; if a bank holding company elects to become a financial holding company, it files a certification, effective in 30 days, and thereafter may engage in certain financial activities without further approvals; |
| · | allows insurers and other financial services companies to acquire banks; |
| · | removes various restrictions that previously applied to bank holding company ownership of securities firms and mutual fund advisory companies; and |
| · | establishes the overall regulatory structure applicable to bank holding companies that also engage in insurance and securities operations. |
The Modernization Act also modified other financial laws, including laws related to financial privacy and community reinvestment.
The Gramm-Leach-Bliley Financial Modernization Act of 1999 became effective in early 2000. The Modernization Act:
The Modernization Act also modified other financial laws, including laws related to financial privacy and community reinvestment.
Under the Community Reinvestment Act (“CRA”), as implemented by OCC regulations, a national bank has a continuing and affirmative obligation consistent with its safe and sound operation to help meet the credit needs of its entire community, including low and moderate income neighborhoods. The CRA does not establish specific lending requirements or programs for financial institutions nor does it limit an institution’s discretion to develop the types of products and services that it believes are best suited to its particular community, consistent with the CRA. The CRA requires the OCC, in connection with its examination of a national bank, to assess the bank’s record of meeting the credit needs of its community and to take such record into account in its evaluation of certain applications by such bank.
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In response to the events of September 11, 2001, the
| · | All financial institutions must establish anti-money laundering programs that include, at a minimum: (i) internal policies, procedures, and controls; (ii) specific designation of an anti-money laundering compliance officer; (iii) ongoing employee training programs; and (iv) an independent audit function to test the anti-money laundering program. |
| · | The Secretary of the Department of Treasury, in conjunction with other bank regulators, is authorized to issue regulations that provide for minimum standards with respect to customer identification at the time new accounts are opened. |
| · | Financial institutions that establish, maintain, administer, or manage private banking accounts or correspondent accounts in the United States for non-United States persons or their representatives (including foreign individuals visiting the United States) are required to establish appropriate, specific and, where necessary, enhanced due diligence policies, procedures, and controls designed to detect and report money laundering. |
| · | Financial institutions are prohibited from establishing, maintaining, administering or managing correspondent accounts for foreign shell banks (foreign banks that do not have a physical presence in any country), and will be subject to certain record keeping obligations with respect to correspondent accounts of foreign banks. |
| · | Bank regulators are directed to consider a holding company’s effectiveness in combating money laundering when ruling on Federal Reserve Act and Bank Merger Act applications. |
The United States Treasury Department has issued a number of implementing regulations which address various requirements of the USA PATRIOT Act and are applicable to financial institutions such as the Bank. These regulations impose obligations on financial institutions to maintain appropriate policies, procedures and controls to detect, prevent and report money laundering and terrorist financing and to verify the identity of their customers.
The SOA generally applies to all companies, both U.S. and non-U.S., that file or are required to file periodic reports with the Securities and Exchange Commission (the “SEC”) under the Securities Exchange Act of 1934 (the “Exchange Act”).
The SOA includes specific disclosure requirements and corporate governance rules, requires the SEC and securities exchanges to adopt extensive additional disclosure, corporate governance and other related rules and mandates further studies of certain issues by the SEC. The SOA addresses, among other matters:
In response to recent unprecedented market turmoil, EESA was enacted on October 3, 2008. EESA authorizes the U.S. Treasury Departmentpreferred stock (the “treasury”“TARP Preferred Stock”) to provide upthe United States Treasury pursuant to $700 billion in funding for the financial services industry. Pursuant to the EESA, the Treasury was initially authorized to use $350 billion for theCongress’ Troubled Asset Relief Program (“TARP”). Of this amount,
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| Relative Increase in QSBL to Baseline | Dividend Rate (for each of the 2nd – 10th Dividend Periods) | ||
| 0% or less | 5 | % | |
| More than 0%, but less than 2.5% | 5 | % | |
| 2.5% or more, but less than 5% | 4 | % | |
| 5% or more, but less than 7.5% | 3 | % | |
| 7.5% or more, but less than 10% | 2 | % | |
| 10% or more | 1 | % |
| 0% or less | 7 | % | |
| More than 0%, but less than 2.5% | 5 | % | |
| 2.5% or more, but less than 5% | 4 | % | |
| 5% or more, but less than 7.5% | 3 | % | |
| 7.5% or more, but less than 10% | 2 | % | |
| 10% or more | 1 | % |
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Participants in the TARP Capital Purchase Program were required to accept several compensation-related limitations associated with this Program. In January 2009, five executive officers of the Corporation agreed in writing to accept the compensation standards in existence at that time under the Capital Purchase Program and thereby cap or eliminate some of their contractual or legal rights. The provisions agreed to were as follows:
During the CPP Covered Period, the Corporation is not permitted to take federal income tax deductions for compensation paid to the senior executive officers in excess of $500,000 per year, subject to certain exceptions.
On February 17, 2009, the American Recovery and Reinvestment Act of 2009 (the “Stimulus Act”) was enacted. The Stimulus Act contains several provisions designed to establish executive compensation and governance standards for financial institutions (such as the Corporation) that received or will receive financial assistance under TARP. In certain instances, the Stimulus Act modified the compensation-related limitations contained in the TARP Capital Purchase Program; in addition, the Stimulus Act created additional compensation-related limitations and directed the Treasury to establish standards for executive compensation applicable to participants in TARP. In their January 2009 agreements, the Corporation’s executives did not waive their rights with respect to the provisions implemented by the Stimulus Act; other employees now covered by these provisions were not asked and did not agree to waive their rights. The compensation-related limitations applicable to the Corporation which have been added or modified by the Stimulus Act are as follows, which provisions are expected to be included in standards established by the Treasury:
The Dodd-Frank Act, which was signed into law on July 21, 2010, will have a broad impact on the financial services industry, including significant regulatory and compliance changes. Many of the requirements called for in the Dodd-Frank Act will be implemented over time and most will be subject to implementing regulations over the course of several years.
Among other things, the Dodd-Frank Act:
While it is difficult to predict at this time what specific impact the Dodd-Frank Act and the yet to be written implementing rules and regulations will have on the Corporation, management expects that at a minimum the Corporation’s operating and compliance costs will increase, and our interest expense could increase.
From time to time proposals are made in the U.S. Congress and before various bank regulatory authorities, which would alter the policies of and place restrictions on different types of banking operations. It is impossible to predict the impact, if any, of potential legislative trends on the business of the Parent Corporation and the Bank.
of the Bank’s net profits for that year combined with the retained profits for the two preceding years. The Bank’s current MOU provides that the Bank cannot declare a dividend without the prior approval of the OCC.
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the SBLF Preferred Stock, or repurchase shares of any such stock, only if after payment of such dividends or repurchase of such shares, the Parent Corporation’s Tier 1 Capital would be at least equal to the so-called Tier 1 Dividend Threshold, excluding any subsequent net charge-offs and any redemption of the SBLF Preferred Stock.
Certain lending authorities are granted to loan officers based upon each officer’s position and experience. However, large dollar loans and lending lines are reported to and are subject to the approval of the Bank’s loan committees and/or board of directors. Either the Chairman of the Board or President chairs the loan committees.
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| Loan Category | Loan-to-Value Limit | |||
| Raw Land | 65 | % | ||
| Land Development | 75 | % | ||
| Commercial, Multifamily and Other Non-residential construction | 80 | % | ||
| Construction: One to Four Family Residential | 85 | % | ||
| Improved Property (excluding One to Four Family Residential) | 85 | % | ||
| Owner-Occupied One to Four Family and Home Equity* | 90 | % | ||
| * | For a permanent mortgage or home equity loan on owner occupied one to four family residential property with |
The risk elements identified by the Corporation include non-performing loans, loans past due ninety days or more as to interest or principal payments but not placed on a non-accrual status, potential problem loans, other real estate owned, net, and other non-performing interest-earning assets.
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As described under “Item 1 — Business — Regulation of Bank Subsidiary,” the Bank is subject to a MOU with the OCC, pursuantstringent capital requirements which could require us to which it has agreedseek capital at times when capital may be expensive or unavailable to take various actions to improve the Bank’s capital position and profitability. The OCC has also established higher minimum capital ratios for the Bank than the regulatory minimums. While management is committed to addressing and resolving the issues raised by the OCC and has initiated corrective actions to comply with various requirements of the MOU, no assurances can be given that the OCC will find the Bank’s compliance plan satisfactory, or that the Bank will not be subject to further supervisory action by the OCC. us.
| · | we potentially face increased regulation of our industry and compliance with such regulation may increase our costs and limit our ability to pursue business opportunities; |
| · | customer demand for loans secured by real estate could be reduced due to weaker economic conditions, an increase in unemployment, a decrease in real estate values or an increase in interest rates; |
| · | the process we use to estimate losses inherent in our credit exposure requires difficult, subjective and complex judgments, including forecasts of economic conditions and how these economic conditions might impair the ability of our borrowers to repay their loans; |
| · | the level of uncertainty concerning economic conditions may adversely affect the accuracy of our estimates which may, in turn, impact the reliability of the process; |
| · | the value of the portfolio of investment securities that we hold may be adversely affected; and |
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| · | inflation; |
| · | recession; |
| · | a rise in unemployment; |
| · | tightening money supply; and |
| · | domestic and international disorder and instability in domestic and foreign financial markets, among other things. |
Changes in the interest rate environment may reduce profits. We expect that we will continue to realize income from the differential or “spread” between the interest we earn on loans, securities and other interest-earning assets, and the interest we pay on deposits, borrowings and other interest-bearing liabilities. Net interest spreads are affected by the difference between the maturities and repricing characteristics of interest-earning assets and interest-bearing liabilities. Changes in levels of market interest rates could materially and adversely affect our net interest spread, asset quality, levels of prepayments and cash flows as well as the market value of our securities portfolio and overall profitability.
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regional and community banks to reduce their exposure to the risks of other banks. In addition, many of the larger correspondent lenders have reduced or even eliminated federal funds lines for their correspondent customers. Furthermore, regional and community banks generally have less access to the capital markets than do the national and super-regional banks because of their smaller size and limited analyst coverage. Any decline in available funding could adversely impact our ability to originate loans, invest in securities, meet our expenses, or fulfill obligations such as repaying our borrowings or meeting deposit withdrawal demands, any of which could have a material adverse impact on our liquidity, business, results of operations and financial condition.
As a result of our participation in the U.S. Treasury’s Capital Purchase Program, our ability to declare or pay dividends on any of our capital stock is subject to restrictions. Specifically, we are unable to declare dividend payments on common, junior preferred orpari passu preferred shares if we are in arrears in the payment of dividends on the Preferred Shares. Further, until the third anniversary of the investment or when all of the Preferred Shares have been redeemed or transferred, we are not permitted to increase the cash dividends on our common stock without the U.S. Treasury’s approval. Additionally, our ability to repurchase our shares of outstanding common stock is restricted. The U.S. Treasury’s consent generally is required for us to make any stock repurchase until the third anniversary of the investment by the U.S. Treasury unless all of the Preferred Shares have been redeemed or transferred. Further, common, junior preferred orpari passu preferred shares may not be repurchased if we are in arrears in the payment of dividends on the Preferred Shares. These restrictions, as well as the dilutive effect of the warrants that we issued to the U.S. Treasury as part of the Capital Purchase Program, may have a negative effect on the market price of our common stock.
Pursuant to the terms by which we participated in the U.S. Treasury’s Capital Purchase Agreement and the terms of the American Recovery and Reinvestment Act of 2009, we and several of our senior employees are subject to substantial limitations on executive compensation and are subject to corporate governance standards imposed pursuant to that Act. Such requirements may adversely affect our ability to attract and retain senior officers and employees who are critical to the operation of our business.
The documents that we executed with the U.S. Treasury when it purchased our Preferred Shares allow it to unilaterally change the terms of the Preferred Shares or impose additional requirements on the Corporation if there is a change in law. These changes or additional requirements could restrict our ability to conduct business, could subject us to additional cost and expense or could change the terms of the Preferred Shares to the detriment of our common shareholders. While it may be possible for us to redeem the Preferred Shares in
the event that the U.S. Treasury imposes any changes or additional requirements that we believe are detrimental, there can be no assurances that our federal regulator will approve such redemption or that we will have the ability to implement such redemption, especially in light of regulatory requirements imposed upon financial institutions seeking to redeem TARP securities.
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| · | loan delinquencies may increase; |
Further deterioration
| · | problem assets and foreclosures may increase; |
| · | demand for our products and services may decline; and |
| · | collateral for loans made by Union Center National Bank may decline in value, in turn reducing Union Center National Bank’s clients’ borrowing power, among other things. |
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| · | potential exposure to unknown or contingent liabilities of banks and businesses we acquire; |
| · | exposure to potential asset quality issues of the acquired bank or related business; |
| · | difficulty and expense of integrating the operations and personnel of banks and businesses we acquire; and |
| · | the possible loss of key employees and customers of the banks and businesses we acquire |
| 23 | ||
On July 21, 2010, President Obama signed the Dodd-Frank Act into law.
While it is difficult to predict at this time what specific impact the Dodd-Frank Act newly written implementing rules and regulations and yet to be written implementing rules and regulations will have on us, we expect that at a minimum our operating and compliance costs will increase, and our interest expense could increase.
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The following table sets forth certain information regarding the Bank’s leased locations.
Branch Location | Term | |
356 Chestnut Street, Union, New Jersey | Term expires in 2028 | |
Career Center Branch located in Union High School, Union, New Jersey | Term expires | |
300 Main Street, Madison, New Jersey | Term expires May 31, 2016 and is subject to renewal at the Bank’s option | |
2933 Vauxhall Road, Vauxhall, New Jersey | Term | |
545 Morris Avenue, Summit, New Jersey | Term expires | |
| Ely Place, Boonton, New Jersey | Term expires August 29, 2021, and is subject to renewal at the Bank’s option | |
71 E. Allendale Road, Saddle River, New Jersey | Term expires May 31, 2032 unless sooner terminated or extended by the Bank | |
| Route 202 and Allerman Road Oakland, New Jersey | Term expires April 30, 2028 and is subject to renewal at the Bank’s option | |
12 E. Palisade Avenue, Englewood, New Jersey | Term expires July 31, 2022 and is subject to renewal at the Bank’s option | |
344 Nassau Street, Princeton, New Jersey | Term expires May 31, 2016 and is subject to renewal at the Bank’s option | |
171 East Saddle River Road Saddle River, New Jersey | Term expired December 31, 2013, month to month |
| 25 | ||
data center until 2010. During the second quarter of 2010, the Corporation entered into a lease of its former operations facility under a direct financing lease. The lease has a 15 year term with no renewal options. According to the terms of the lease, the lessee has an obligation to purchase the property underlying the lease in either year seven, (7), ten (10) or fifteen (15) at predetermined prices for those years as provided in the lease. The structure of the minimum lease payments and the purchase prices as provided in the lease provide an inducement to the lessee to purchase the property in year seven (7).
In December 2009, the Corporation took steps to terminate a participation agreement with another New Jersey bank at December 31, 2009. Under the terms of the agreement, the participation ended on December 31, 2009, and, in the Corporation’s view, the lead bank is required to repurchase the remaining balance. The lead bank questioned our enforcement of the participation agreement. Therefore, the Corporation filed suit in Superior Court of New Jersey Chancery Division in Morris County, New Jersey, for the return of the outstanding principal.
Union Center has instituted a suit against Highlands State Bank (“Highlands”) in the Superior Court of New Jersey (Docket No. MRS-C-189-09). This litigation relates to a participating interest in a construction loan originated by Highlands. This loan was closed, and the participating interest (85%) was acquired, in 2007. Various causes of action are pleaded in this litigation by both parties, including claims for recovery of damages. The primary claim prosecuted by Union Center seeks a judicial determination that the Participation Agreement executed with Highlands was properly terminated in accordance with its terms on December 31, 2009 and that Highlands is obligated to return the unpaid balance of the loan funds advanced by Union Center during its participation in the loan. The primary claim presented by Highlands is that Union Center’s participation in the loan must continue until it is ultimately retired, which will probably result in a substantial loss that it is claimed must be shared by Union Center. This litigation is in its early stages. The initial pleadings have been filed and the discovery phase will now begin. As of December 31, 2010 no significant progress has been made regarding a decision resulting from the discovery or depositions taken during 2010.
There are no other significant pending legal proceedings involving the Corporation other than those arising out of routine operations. operations, and those arising in connection with the Merger.
| 26 | ||
Name and Age | Officer Since | | ||
Business Experience | ||||
| Anthony C. Weagley Age – | 1996 the Parent Corporation 1985 the Bank | President and Chief Executive Officer of the Parent Corporation | ||
| Mark S. Cardone Age – | 2001 the Parent Corporation 2001 the Bank | Vice President of the Parent Corporation and Senior Vice President & Branch Administrator of the Bank (2001 – Present) | ||
| Joseph D. Gangemi Age – | 2008 the Parent Corporation 2004 the Bank | Vice President and Assistant Portfolio Manager of the Parent Corporation and the Bank (December 31, 2010 – Present) | ||
| John Bailey Age – 59 | 2013 the Bank |
| | | ||
James W. Sorge Age – 61 | ||||
| 2010 the Parent Corporation 2010 the Bank | Vice President and Compliance Officer of the Parent Corporation and Senior Vice President and Compliance Officer of the Bank (March 2010 – Present); Vice President and Director, PNC Global Investment Servicing (May 2008 – March 2010); Vice President, BSA/AML/OFAC Officer, Yardville National Bank (June 2005 – April 2008) |
| 27 | ||
Name and Age | Officer Since | Business Experience | ||
| George J. Theiller Age – | 2009 the Parent Corporation 2005 the Bank | Vice President and Senior Auditor of the Parent Corporation and Senior Vice President and Senior Auditor of the Bank (December 2009 – Present); Vice President and Senior Auditor of the Bank (April 2005 – December 2009) | ||
| Francis R. Patryn Age – | 2006 the Parent Corporation 2006 the Bank | Vice President and Chief Financial Officer of the Parent Corporation and Senior Vice President, Chief Financial Officer of the Bank (May 31, 2013 – Present); Vice President, Chief Financial Officer and Comptroller of the Parent Corporation and Vice President and Chief Financial Officer and Comptroller of the Bank (November 2010 – March 28, 2011); Vice President and Comptroller of the Bank (October 2006 – March 28, 2011 and March 28, 2011 to May 31, 2013) | ||
| Arthur M. Wein Age – 63 | 2009 the Parent Corporation 2009 the Bank | Vice President and Chief Operating Officer of the Parent Corporation and Senior Vice President and Chief Operating Officer of the Bank (October 2009 – Present); Vice President and Business Development Officer of the Summit Region of the Bank (April 2009 – October 2009); President and Chief Executive Officer of UTZ Technologies, Inc. (manufacturer of thick film hybrid screens) (December 2003 – March 2009) |
| 28 | ||
was $18.76.
| | | | | | | ||||||||||||||||||||||||||
| Common Stock Price | ||||||||||||||||||||||||||||||||
| 2010 | 2009 | Common Dividends Declared | ||||||||||||||||||||||||||||||
| High Bid | Low Bid | High Bid | Low Bid | 2010 | 2009 | |||||||||||||||||||||||||||
| Fourth Quarter | $ | 8.11 | $ | 7.30 | $ | 9.20 | $ | 7.36 | $ | 0.03 | $ | 0.03 | ||||||||||||||||||||
| Third Quarter | 7.67 | 7.05 | 10.16 | 7.53 | 0.03 | 0.03 | ||||||||||||||||||||||||||
| Second Quarter | 9.07 | 6.94 | 9.15 | 6.88 | 0.03 | 0.03 | ||||||||||||||||||||||||||
| First Quarter | 9.09 | 8.31 | 8.50 | 6.43 | 0.03 | 0.09 | ||||||||||||||||||||||||||
| Total | $ | 0.12 | $ | 0.18 | ||||||||||||||||||||||||||||
| Common Stock Price | |||||||||||||||||||
| 2013 | 2012 | Common Dividends Declared | |||||||||||||||||
| High | Low | High | Low | 2013 | 2012 | ||||||||||||||
| Fourth Quarter | $ | 19.67 | $ | 13.96 | $ | 11.93 | $ | 10.89 | $ | 0.075 | $ | 0.055 | |||||||
| Third Quarter | 15.24 | 12.95 | 11.99 | 10.82 | 0.075 | 0.055 | |||||||||||||
| Second Quarter | 13.23 | 11.50 | 11.25 | 9.75 | 0.075 | 0.055 | |||||||||||||
| First Quarter | 12.82 | 11.62 | 10.45 | 9.50 | 0.055 | 0.030 | |||||||||||||
| Total | $ | 0.280 | $ | 0.195 | |||||||||||||||
As noted elsewhere herein, on January 9, 2009, as part of the U.S. Department of the Treasury’s Troubled Asset Relief Program (“TARP”), the Parent Corporation entered into an agreement with the U.S. Treasury (the “Stock Purchase Agreement”) pursuant to which (i) the Parent Corporation issued and sold, and the U.S. Treasury purchased, 10,000 shares (the “Preferred Shares”) of the Company’s Fixed Rate Cumulative Perpetual Preferred Stock, Series A, having a liquidation preference of $1,000 per share for an aggregate purchase price of $10 million in cash, and (ii) the Parent Corporation issued to the U.S. Treasury a ten-year warrant (the “Warrant”) to purchase up to 173,410 shares of the Parent Corporation’s common stock at an exercise price of $8.65 per share. As a result of the successful completion of the Rights Offering in October 2009, the number of shares underlying the warrant held by the U.S. Treasury was reduced to 86,705 sharesduring 2013 or 50 percent of the original 173,410 shares. Until the third anniversary of the issuance of the Preferred Shares, the consent of the U.S. Treasury will be required for any increase in the dividends on the Parent Corporation’s common stock or for any stock repurchases unless the Preferred Shares have been redeemed in their entirety or the U.S. Treasury has transferred the Preferred Shares to third parties. See “Dividends” below for additional restrictions on the payment of dividends.
preferred stock ifIn addition, capital guidelines and other regulatory requirements may further limit the Parent Corporation issues additional series of preferred stock) ifCorporation’s and the Parent Corporation is in arrears in the payment of dividendsBank’s ability to pay dividends. See “Item 1 – Business – Supervision and Regulation –New Capital Rules.”
Set forth belowfollowing page is a line graph presentation comparing the cumulative stockholder return on the Parent Corporation’s common stock, on a dividend reinvested basis, against the cumulative total returns of the Standard & Poor’s Composite and the SNL Mid-Atlantic Bank Index for the period from January 1, 20062009 through December 31, 2010.
| 29 | ||
| | | | | | | ||||||||||||||||||
| Fiscal Year Ending | ||||||||||||||||||||||||
| Company/Index/Market | 12/31/2005 | 12/31/2006 | 12/31/2007 | 12/31/2008 | 12/31/2009 | 12/31/2010 | ||||||||||||||||||
| Center Bancorp, Inc. | 100.00 | 148.38 | 111.68 | 85.74 | 96.47 | 89.46 | ||||||||||||||||||
| S&P Composite | 100.00 | 115.33 | 121.64 | 76.97 | 103.96 | 122.30 | ||||||||||||||||||
| SNL Mid-Atlantic Bank Index | 100.00 | 120.02 | 90.76 | 50.00 | 52.63 | 61.40 | ||||||||||||||||||
| Fiscal Year Ending | |||||||||||||||||||
| Company/Index/Market | 12/31/2008 | 12/31/2009 | 12/31/2010 | 12/31/2011 | 12/31/2012 | 12/31/2013 | |||||||||||||
| Center Bancorp, Inc. | 100.00 | 112.51 | 104.33 | 126.63 | 154.44 | 251.89 | |||||||||||||
| S&P Composite | 100.00 | 135.05 | 158.89 | 145.05 | 158.88 | 168.03 | |||||||||||||
| SNL Mid-Atlantic Bank Index | 100.00 | 105.27 | 122.81 | 92.26 | 123.59 | 166.59 | |||||||||||||
| 30 | ||
| | | | | | |||||||||||||||
| | | | | | |||||||||||||||
| Years Ended December 31, | ||||||||||||||||||||
| 2010 | 2009 | 2008 | 2007 | 2006 | ||||||||||||||||
| (Dollars in Thousands, Except per Share Data) | ||||||||||||||||||||
| Summary of Income | ||||||||||||||||||||
| Interest income | $ | 48,714 | $ | 51,110 | $ | 49,894 | $ | 52,129 | $ | 53,325 | ||||||||||
| Interest expense | 14,785 | 22,645 | 24,095 | 30,630 | 28,974 | |||||||||||||||
| Net interest income | 33,929 | 28,465 | 25,799 | 21,499 | 24,351 | |||||||||||||||
| Provision for loan losses | 5,076 | 4,597 | 1,561 | 350 | 57 | |||||||||||||||
| Net interest income after provision for loan losses | 28,853 | 23,868 | 24,238 | 21,149 | 24,294 | |||||||||||||||
| Other income | 2,472 | 3,906 | 2,644 | 4,372 | 633 | |||||||||||||||
| Other expense | 24,099 | 23,057 | 19,473 | 24,598 | 24,358 | |||||||||||||||
| Income before income tax expense | 7,226 | 4,717 | 7,409 | 923 | 569 | |||||||||||||||
| Income tax expense (benefit) | 222 | 946 | 1,567 | (2,933 | ) | (3,329 | ) | |||||||||||||
| Net income | $ | 7,004 | $ | 3,771 | $ | 5,842 | $ | 3,856 | $ | 3,898 | ||||||||||
| Net income available to common stockholders | $ | 6,423 | $ | 3,204 | $ | 5,842 | $ | 3,856 | $ | 3,898 | ||||||||||
| Statement of Financial Condition Data | ||||||||||||||||||||
| Investments | $ | 378,080 | $ | 298,124 | $ | 242,714 | $ | 314,194 | $ | 381,733 | ||||||||||
| Total loans | 708,444 | 719,606 | 676,203 | 551,669 | 550,414 | |||||||||||||||
| Goodwill and other intangibles | 16,959 | 17,028 | 17,110 | 17,204 | 17,312 | |||||||||||||||
| Total assets | 1,207,385 | 1,195,488 | 1,023,293 | 1,017,645 | 1,051,384 | |||||||||||||||
| Deposits | 860,332 | 813,705 | 659,537 | 699,070 | 726,771 | |||||||||||||||
| Borrowings | 212,855 | 269,253 | 268,440 | 218,109 | 206,434 | |||||||||||||||
| Stockholders’ equity | 120,957 | 101,749 | 81,713 | 85,278 | 97,613 | |||||||||||||||
| Dividends | ||||||||||||||||||||
| Cash dividends | $ | 1,852 | $ | 2,434 | $ | 4,675 | $ | 4,885 | $ | 4,808 | ||||||||||
| Dividend payout ratio | 28.83 | % | 75.97 | % | 80.02 | % | 126.69 | % | 123.35 | % | ||||||||||
| Cash Dividends Per Share(1) | ||||||||||||||||||||
| Cash dividends | $ | 0.12 | $ | 0.18 | $ | 0.36 | $ | 0.36 | $ | 0.34 | ||||||||||
| Earnings Per Share(1) | ||||||||||||||||||||
| Basic | $ | 0.43 | $ | 0.24 | $ | 0.45 | $ | 0.28 | $ | 0.28 | ||||||||||
| Diluted | $ | 0.43 | $ | 0.24 | $ | 0.45 | $ | 0.28 | $ | 0.28 | ||||||||||
| Weighted Average Common Shares Outstanding(1) | ||||||||||||||||||||
| Basic | 15,025,870 | 13,382,614 | 13,048,518 | 13,780,504 | 13,959,684 | |||||||||||||||
| Diluted | 15,027,159 | 13,385,416 | 13,061,410 | 13,840,756 | 14,040,338 | |||||||||||||||
| Operating Ratios | ||||||||||||||||||||
| Return on average assets | 0.59 | % | 0.31 | % | 0.58 | % | 0.38 | % | 0.37 | % | ||||||||||
| Average stockholders’ equity to average assets | 9.38 | % | 7.66 | % | 8.28 | % | 9.33 | % | 9.21 | % | ||||||||||
| Return on average stockholders’ equity | 6.30 | % | 4.02 | % | 7.03 | % | 4.09 | % | 4.04 | % | ||||||||||
| Return on average tangible stockholders’ equity(2) | 7.44 | % | 4.91 | % | 8.86 | % | 5.00 | % | 4.93 | % | ||||||||||
| Book Value | ||||||||||||||||||||
| Book value per common share(1) | $ | 6.83 | $ | 6.32 | $ | 6.29 | $ | 6.48 | $ | 7.02 | ||||||||||
| Tangible book value per common share(1)(2) | $ | 5.79 | $ | 5.15 | $ | 4.97 | $ | 5.17 | $ | 5.77 | ||||||||||
| Non-Financial Information | ||||||||||||||||||||
| Common stockholders of record | 592 | 605 | 640 | 679 | 717 | |||||||||||||||
| Full-time equivalent staff | 159 | 160 | 160 | 172 | 214 | |||||||||||||||
| Years Ended December 31, | ||||||||||||||||||||
| 2013 | 2012 | 2011 | 2010 | 2009 | ||||||||||||||||
| (Dollars in Thousands, Except per Share Data) | ||||||||||||||||||||
| Summary of Income | ||||||||||||||||||||
| Interest income | $ | 57,268 | $ | 55,272 | $ | 51,927 | $ | 48,714 | $ | 51,110 | ||||||||||
| Interest expense | 11,082 | 11,776 | 12,177 | 14,785 | 22,645 | |||||||||||||||
| Net interest income | 46,186 | 43,496 | 39,750 | 33,929 | 28,465 | |||||||||||||||
| Provision for loan losses | 350 | 325 | 2,448 | 5,076 | 4,597 | |||||||||||||||
| Net interest income after provision for loan losses | 45,836 | 43,171 | 37,302 | 28,853 | 23,868 | |||||||||||||||
| Other income | 6,851 | 7,210 | 7,478 | 2,472 | 3,906 | |||||||||||||||
| Other expense | 25,278 | 25,197 | 23,443 | 24,099 | 23,057 | |||||||||||||||
| Income before income tax expense | 27,409 | 25,184 | 21,337 | 7,226 | 4,717 | |||||||||||||||
| Income tax expense | 7,484 | 7,677 | 7,411 | 222 | 946 | |||||||||||||||
| Net income | $ | 19,925 | $ | 17,507 | $ | 13,926 | $ | 7,004 | $ | 3,771 | ||||||||||
| Net income available to common stockholders | $ | 19,784 | $ | 17,226 | $ | 13,106 | $ | 6,423 | $ | 3,204 | ||||||||||
| Statement of Financial Condition Data | ||||||||||||||||||||
| Investments available for sale | $ | 323,070 | $ | 496,815 | $ | 414,507 | $ | 378,080 | $ | 298,124 | ||||||||||
| Investments held to maturity | 215,286 | 58,064 | 72,233 | — | — | |||||||||||||||
| Loans held for sale | — | 1,491 | 1,018 | 333 | — | |||||||||||||||
| Total loans | 960,943 | 889,672 | 754,992 | 708,111 | 719,606 | |||||||||||||||
| Allowance for loan losses | 10,333 | 10,237 | 9,602 | 8,867 | 8,711 | |||||||||||||||
| Goodwill and other intangible assets | 16,828 | 16,858 | 16,902 | 16,959 | 17,028 | |||||||||||||||
| Total assets | 1,673,082 | 1,629,765 | 1,432,738 | 1,207,385 | 1,195,488 | |||||||||||||||
| Deposits | 1,342,005 | 1,306,922 | 1,121,415 | 860,332 | 813,705 | |||||||||||||||
| Borrowings | 146,000 | 146,000 | 161,000 | 212,855 | 269,253 | |||||||||||||||
| Stockholders’ equity | 168,584 | 160,691 | 135,916 | 120,957 | 101,749 | |||||||||||||||
| Dividends | ||||||||||||||||||||
| Cash dividends on Common Stock | $ | 4,254 | $ | 2,778 | $ | 1,955 | $ | 1,800 | $ | 2,434 | ||||||||||
| Dividend payout ratio | 21.50 | % | 16.13 | % | 14.92 | % | 28.02 | % | 75.97 | % | ||||||||||
| Cash Dividends Per Share | ||||||||||||||||||||
| Cash dividends | $ | 0.280 | $ | 0.195 | $ | 0.12 | $ | 0.12 | $ | 0.18 | ||||||||||
| Earnings Per Share | ||||||||||||||||||||
| Basic | $ | 1.21 | $ | 1.05 | $ | 0.80 | $ | 0.43 | $ | 0.24 | ||||||||||
| Diluted | $ | 1.21 | $ | 1.05 | $ | 0.80 | $ | 0.43 | $ | 0.24 | ||||||||||
| Weighted Average Common Shares Outstanding | ||||||||||||||||||||
| Basic | 16,349,204 | 16,340,197 | 16,295,761 | 15,025,870 | 13,382,614 | |||||||||||||||
| Diluted | 16,385,692 | 16,351,046 | 16,314,899 | 15,027,159 | 13,385,416 | |||||||||||||||
| Operating Ratios | ||||||||||||||||||||
| Return on average assets | 1.22 | % | 1.14 | % | 1.05 | % | 0.59 | % | 0.31 | % | ||||||||||
| Average stockholders’ equity to average assets | 10.10 | % | 9.73 | % | 9.83 | % | 9.38 | % | 7.66 | % | ||||||||||
| Return on average stockholders’ equity | 12.08 | % | 11.69 | % | 10.73 | % | 6.30 | % | 4.02 | % | ||||||||||
Return on average tangible stockholders’ equity(1) | 13.45 | % | 13.18 | % | 12.33 | % | 7.44 | % | 4.91 | % | ||||||||||
| Book Value | ||||||||||||||||||||
| Book value per common share | $ | 9.61 | $ | 9.14 | $ | 7.63 | $ | 6.83 | $ | 6.32 | ||||||||||
Tangible book value per common share(1) | $ | 8.58 | $ | 8.11 | $ | 6.60 | $ | 5.79 | $ | 5.15 | ||||||||||
| Non-Financial Information | ||||||||||||||||||||
| Common stockholders of record | 514 | 551 | 563 | 592 | 605 | |||||||||||||||
| Full-time equivalent staff | 166 | 178 | 163 | 159 | 160 | |||||||||||||||
| 31 | ||
| Tangible book value per common share, which is a non-GAAP financial measure, is computed by dividing stockholders’ equity less preferred stock, goodwill and other intangible assets by common shares outstanding. The following table provides certain related reconciliations between Generally Accepted Accounting Principles (“GAAP”)measures (stockholders’ equity and book value per common share) and the related non-GAAP financial measures (tangible stockholders’ equity and tangible book value per common share): |
| | | | | | |||||||||||||||
| 2010 | 2009 | 2008 | 2007 | 2006 | ||||||||||||||||
| (Dollars in Thousands, Except per Share Data) | ||||||||||||||||||||
| Common shares outstanding | 16,289,832 | 14,572,029 | 12,991,312 | 13,155,784 | 13,910,450 | |||||||||||||||
| Stockholders’ equity | $ | 120,957 | $ | 101,749 | $ | 81,713 | $ | 85,278 | $ | 97,613 | ||||||||||
| Less: Preferred Stock | 9,700 | 9,619 | — | �� | — | — | ||||||||||||||
| Less: Goodwill and other intangible assets | 16,959 | 17,028 | 17,110 | 17,204 | 17,312 | |||||||||||||||
| Tangible Stockholders’ Equity | $ | 94,298 | $ | 75,102 | $ | 64,603 | $ | 68,074 | $ | 80,301 | ||||||||||
| Book value per common share | $ | 6.83 | $ | 6.32 | $ | 6.29 | $ | 6.48 | $ | 7.02 | ||||||||||
| Less: Goodwill and other intangible assets | 1.04 | 1.17 | 1.32 | 1.31 | 1.25 | |||||||||||||||
| Tangible Book Value per Common Share | $ | 5.79 | $ | 5.15 | $ | 4.97 | $ | 5.17 | $ | 5.77 | ||||||||||
All per common share amounts reflect all prior stock splits and dividends.
| 2013 | 2012 | 2011 | 2010 | 2009 | ||||||||||||
| (Dollars in Thousands, Except per Share Data) | ||||||||||||||||
| Common shares outstanding | 16,369,012 | 16,347,915 | 16,332,327 | 16,289,832 | 14,572,029 | |||||||||||
| Stockholders’ equity | $ | 168,584 | $ | 160,691 | $ | 135,916 | $ | 120,957 | $ | 101,749 | ||||||
| Less: Preferred Stock | 11,250 | 11,250 | 11,250 | 9,700 | 9,619 | |||||||||||
| Less: Goodwill and other intangible assets | 16,828 | 16,858 | 16,902 | 16,959 | 17,028 | |||||||||||
| Tangible Common Stockholders’ Equity | $ | 140,506 | $ | 132,583 | $ | 107,764 | $ | 94,298 | $ | 75,102 | ||||||
| Book value per common share | $ | 9.61 | $ | 9.14 | $ | 7.63 | $ | 6.83 | $ | 6.32 | ||||||
| Less: Goodwill and other intangible assets | 1.03 | 1.03 | 1.03 | 1.04 | 1.17 | |||||||||||
| Tangible Book Value per Common Share | $ | 8.58 | $ | 8.11 | $ | 6.60 | $ | 5.79 | $ | 5.15 | ||||||
| | | | | | |||||||||||||||
| 2010 | 2009 | 2008 | 2007 | 2006 | ||||||||||||||||
| (Dollars in Thousands) | ||||||||||||||||||||
| Net income | $ | 7,004 | $ | 3,771 | $ | 5,842 | $ | 3,856 | $ | 3,898 | ||||||||||
| Average stockholders’ equity | $ | 111,136 | $ | 93,850 | $ | 83,123 | $ | 94,345 | $ | 96,505 | ||||||||||
| Less: Average goodwill and other intangible assets | 16,993 | 17,069 | 17,158 | 17,259 | 17,378 | |||||||||||||||
| Average Tangible Stockholders’ Equity | $ | 94,143 | $ | 76,781 | $ | 65,965 | $ | 77,086 | $ | 79,127 | ||||||||||
| Return on average stockholders’ equity | 6.30 | % | 4.02 | % | 7.03 | % | 4.09 | % | 4.04 | % | ||||||||||
| Add: Average goodwill and other intangible assets | 1.14 | .89 | 1.83 | 0.91 | 0.89 | |||||||||||||||
| Return on Average Tangible Stockholders’ Equity | 7.44 | % | 4.91 | % | 8.86 | % | 5.00 | % | 4.93 | % | ||||||||||
| 2013 | 2012 | 2011 | 2010 | 2009 | ||||||||||||||||
| (Dollars in Thousands) | ||||||||||||||||||||
| Net income | $ | 19,925 | $ | 17,507 | $ | 13,926 | $ | 7,004 | $ | 3,771 | ||||||||||
| Average stockholders’ equity | $ | 165,025 | $ | 149,714 | $ | 129,838 | $ | 111,136 | $ | 93,850 | ||||||||||
| Less: Average goodwill and other intangible assets | 16,842 | 16,879 | 16,930 | 16,993 | 17,069 | |||||||||||||||
| Average Tangible Stockholders’ Equity | $ | 148,183 | $ | 132,835 | $ | 112,908 | $ | 94,143 | $ | 76,781 | ||||||||||
| Return on average stockholders’ equity | 12.08 | % | 11.69 | % | 10.73 | % | 6.30 | % | 4.02 | % | ||||||||||
| Add: Average goodwill and other intangible assets | 1.37 | 1.49 | 1.61 | 1.14 | 0.89 | |||||||||||||||
| Return on Average Tangible Stockholders’ Equity | 13.45 | % | 13.18 | % | 12.33 | % | 7.44 | % | 4.91 | % | ||||||||||
| 32 | ||
| 33 | ||
The Corporation has adopted the provisions of FASB ASC 350-10-05, (previously SFAS No. 142, “Goodwill and Other Intangible Assets”), which requires that goodwill be reported separate from other intangible assets in the Consolidated Statements of Condition and not be amortized but tested for impairment annually or more frequently if impairment indicators arise for impairment. No impairment charge was deemed necessary for the years ended December 31, 20102013, 2012 and 2009.
| 34 | ||
2013.
favorable asset quality profile. Earnings for 2010 were positively impacted by growth in net interest income, and spread expansion through bothprimarily from an increase in the average balance sheet improvements andof earning assets of $108.8 million, which was partially offset by a decline of 13 basis points in yield. The decline in yield on earning assets was somewhat offset by a decline of 8 basis points from a lower cost of funds as compared to 2009 and reductions in other real estate owned, marketing expenses and occupancy expenses. These improvements were somewhat offset by higher loan loss provisions as well as higher salaries and employee benefits, FDIC insurance, professional and consulting fees and computer expenses. Other expense for2012.
The Corporation previously announced a strategic outsourcing agreement with Fiserv to provide core account processing services, which is consistent with the Corporation’s other strategic initiatives to streamline operations, reduce operating overhead and allow the Corporation to focus on core competencies of customer service and product development. This coupled with previously initiated cost reduction plans are intended to improve operating efficiencies, business and technical operations. The core processing transition was consummated duringNet interest margins reflected improvement in the fourth quarter of 2009. Additionally,2012, as prior action on reducing the consolidationcost of the Corporation’s branch office on 392 Springfield Avenue in Summit, New Jerseyfunds coupled with offsetting compression primarily as result of a continued high liquidity pool carried during the first quarter of 2009 into its new office on 545 Morris Avenue in Summit, New Jersey resulted in improved efficiencyperiods took root and increased customer service.
For the twelve months ended December 31, 2010, total salaries and benefits increased by $850,000 or 8.6 percentstarted to $10.8 million primarily attributable to additions to official staff and merit increases for existing staff of approximately $720,000 and increased medical insurance expense of $130,000.
The decreased tax rate resulted in part from the measurement and reassessment of the technical merits which led the Corporation to conclude that its position of the recognition of $2.6 million on a previously unrecognized tax benefit was sustainable. This in turn resulted in recognition of tax benefits previously unrecognized due to changes in the Corporation’s business entity structure during 2007 and into 2008 offset by a higher proportion of taxable income versus tax-exempt income in 2010 versus 2009. The decreased tax rate benefit was offset, in part, due to the surrender of Bank Owned Life Insurance Policies resulting in a $633,000 income tax expense in 2010.
abate further compression..
| 35 | ||
our Englewood office, we are working to solidify and expand the service relationship with our new customers. We remain excited by the potential to create incremental shareholder value from our strategic growth. We believe that this type of sequential earnings performance demonstrates the Corporation’s commitment to achieving meaningful growth in earnings performance, an essential component of providing consistent and favorable long-term returns to our shareholders. However, while we continue to see an improvement in balance sheet strength and core earnings performance, we still remain cautious about the credit stability of the broader markets.
climate and continues to maintain a conservative credit culture. At December 31, 2013, the Corporation had $202.3 million in overall undisbursed loan commitments, which includes largely unused commercial lines of credit, home equity lines of credit and available usage from active construction facilities. Included in the overall undisbursed commitments are the Corporation's "Approved, Accepted but Unfunded" pipeline, which includes approximately $35.7 million in commercial and commercial real estate loans and $2.3 million in residential mortgages expected to fund over the next 90 days.
$11.3 million or 0.940.31 percent at December 31, 2009.2012. The increasedecrease in non-performing assets from December 31, 20092012 was primarily attributable toachieved notwithstanding the addition of three largeseveral new residential loans (totaling approximately $0.3 million) and commercial loans (totaling approximately $1.7 million) into non-performing status. This was more than offset by decreases from pay-downs and an increase in troubled debt restructurings.
pay offs of $2.9 million, total charge-offs of $272,000, and the return to performing status of $0.4 million, while $220,000 was moved within the non-performing asset category from non-accrual to OREO.
Deposit growth was strong in 2010, reflective of customers’ desire for safety and liquidity and flight to quality in light of the financial crisis. At December 31, 2010, total deposits for the Corporation were $860.3 million. Non-interest-bearing core deposits, a low cost source of funding, continue to be a key funding source. At December 31, 2010, this source of funding amounted to $144.2from $10.2 million or 13.4 percent of total funding sources and 16.8 percent of total deposits.
Certificates of deposit $100,000 and greater decreased to 13.9 percent of total deposits at December 31, 2010 from 17.82012.
2013, decreased by $11.4 million or 10.3 percent from December 31, 2012.
| 36 | ||
2012, as an increase in retained earnings was offset only in part by the increased asset base in 2013.
The Corporation announced an increase in its common stock buyback program on September 28, 2007 and June 26, 2008, under which the Parent Corporation was authorized to purchase up to 2,039,731 shares of Center Bancorp’s outstanding common stock. As ofearnings.
1,386,863 shares under the program at an average cost of $11.44 per share. As repurchases are now restricted pursuant to the Parent Corporation’s participation in TARP there were no repurchases during 2010. See Item 5 of this Annual Report on Form 10K.
The following sections discuss the Corporation’s Results of Operations, Asset and Liability Management, Liquidity and Capital Resources.
2011.
| 37 | ||
| | | | | | | | | | |||||||||||||||||||||||||||
| | | | | | | | | | |||||||||||||||||||||||||||
| 2010 | 2009 | 2008 | ||||||||||||||||||||||||||||||||||
| Amount | Increase (Decrease) from Prior Year | Percent Change | Amount | Increase (Decrease) from Prior Year | Percent Change | Amount | Increase (Decrease) from Prior Year | Percent Change | ||||||||||||||||||||||||||||
| (Dollars in Thousands) | ||||||||||||||||||||||||||||||||||||
| Interest income: | ||||||||||||||||||||||||||||||||||||
| Investments | $ | 11,059 | $ | (3,279 | ) | (22.9 | ) | $ | 14,338 | $ | (67 | ) | (0.47 | ) | $ | 14,405 | $ | (4,850 | ) | (25.19 | ) | |||||||||||||||
| Loans, including fees | 37,200 | 449 | 1.22 | 36,751 | 641 | 1.78 | 36,110 | 2,583 | 7.70 | |||||||||||||||||||||||||||
| Federal funds sold and securities purchased under agreements to resell | 0 | 0 | 0.00 | 0 | (113 | ) | (100.00 | ) | 113 | (491 | ) | (81.29 | ) | |||||||||||||||||||||||
| Restricted investment in bank stocks | 568 | 37 | 6.97 | 531 | (63 | ) | (10.61 | ) | 594 | 45 | 8.20 | |||||||||||||||||||||||||
| Total interest income | 48,827 | (2,793 | ) | (5.41 | ) | 51,620 | 398 | 0.78 | 51,222 | (2,713 | ) | (5.03 | ) | |||||||||||||||||||||||
| Interest expense: | ||||||||||||||||||||||||||||||||||||
| Deposits | 6,006 | (6,302 | ) | (51.20 | ) | 12,308 | (979 | ) | (7.37 | ) | 13,287 | (7,548 | ) | (36.23 | ) | |||||||||||||||||||||
| Borrowings | 8,779 | (1,558 | ) | (15.07 | ) | 10,337 | (471 | ) | (4.36 | ) | 10,808 | 1,013 | 10.34 | |||||||||||||||||||||||
| Total interest expense | 14,785 | (7,860 | ) | (34.71 | ) | 22,645 | (1,450 | ) | (6.02 | ) | 24,095 | (6,535 | ) | (21.34 | ) | |||||||||||||||||||||
| Net interest income on a fully tax-equivalent basis | 34,042 | 5,067 | 17.49 | 28,975 | 1,848 | 6.81 | 27,127 | 3,822 | 16.40 | |||||||||||||||||||||||||||
| Tax-equivalent adjustment | (113 | ) | 397 | (77.84 | ) | (510 | ) | 818 | (61.60 | ) | (1,328 | ) | 478 | (26.47 | ) | |||||||||||||||||||||
| Net interest income | $ | 33,929 | $ | 5,464 | 19.20 | $ | 28,465 | $ | 2,666 | 10.33 | $ | 25,799 | $ | 4,300 | 20.00 | |||||||||||||||||||||
| 2013 | 2012 | 2011 | ||||||||||||||||||||||||||
| Amount | Increase (Decrease) from Prior Year | Percent Change | Amount | Increase (Decrease) from Prior Year | Percent Change | Amount | Increase (Decrease) from Prior Year | Percent Change | ||||||||||||||||||||
| (Dollars in Thousands) | ||||||||||||||||||||||||||||
| Interest income: | ||||||||||||||||||||||||||||
| Investment available-for-sale | $ | 13,833 | $ | (1,234) | (8.19) | $ | 15,067 | $ | 1,018 | 7.25 | $ | 14,049 | $ | 2,990 | 27.04 | |||||||||||||
| Investment held-to-maturity | 5,275 | 2,562 | 94.43 | 2,713 | 743 | 37.72 | 1,970 | 1,970 | 100.00 | |||||||||||||||||||
| Loans, including fees | 40,281 | 1,360 | 3.49 | 38,921 | 2,601 | 7.16 | 36,320 | (880) | (2.37) | |||||||||||||||||||
| Other interest-bearing deposits | 2 | (6) | (75.00) | 8 | 8 | — | — | — | — | |||||||||||||||||||
| Restricted investment in bank stocks | 407 | (45) | (9.96) | 452 | (12) | (2.59) | 464 | (104) | (18.31) | |||||||||||||||||||
| Total interest income | 59,798 | 2,637 | 4.61 | 57,161 | 4,358 | 8.25 | 52,803 | 3,976 | 8.14 | |||||||||||||||||||
| Interest expense: | ||||||||||||||||||||||||||||
| Deposits | 5,219 | (189) | (3.49) | 5,408 | (112) | (2.03) | 5,520 | (486) | (8.09) | |||||||||||||||||||
| Borrowings | 5,863 | (505) | (7.93) | 6,368 | (289) | (4.34) | 6,657 | (2,122) | (24.17) | |||||||||||||||||||
| Total interest expense | 11,082 | (694) | (5.89) | 11,776 | (401) | (3.29) | 12,177 | (2,608) | (17.64) | |||||||||||||||||||
| Net interest income on a tax-equivalent basis | 48,716 | 3,331 | 7.34 | 45,385 | 4,759 | 11.71 | 40,626 | 6,584 | 19.34 | |||||||||||||||||||
| Tax-equivalent adjustment | (2,530) | (641) | 33.93 | (1,889) | (1,013) | (115.64) | (876) | (763) | 675.22 | |||||||||||||||||||
| Net interest income | $ | 46,186 | $ | 2,690 | 6.18 | $ | 43,496 | $ | 3,746 | 9.42 | $ | 39,750 | $ | 5,821 | 17.16 | |||||||||||||
Historically, the most significant component of the Corporation’s earnings has been net interest income, which is the difference between the interest earned on the portfolio of earning assets (principally loans and investments) and the interest paid for deposits and borrowings, which support these assets. There were several factors that affected net interest income during 2010,2013, including the volume, pricing, mix and maturity of interest-earning assets and interest-bearing liabilities and interest rate fluctuations.
| 38 | ||
margin.
interest bearing deposits of $36.4 million partially offset by decreases in borrowings of $10.5 million.
Increased average investment volume in 2012 was funded primarily by the increased deposit growth. Average interest-bearing liabilities increased by $168.3 million, due primarily to an increase in interest bearing deposits of $201.7 million partially offset by decreases in borrowings of $33.4 million.
| 39 | ||
| | | | | | | ||||||||||||||||||
| 2010/2009 Increase (Decrease) Due to Change in: | 2009/2008 Increase (Decrease) Due to Change in: | |||||||||||||||||||||||
| Average Volume | Average Rate | Net Change | Average Volume | Average Rate | Net Change | |||||||||||||||||||
| (Dollars in Thousands) | ||||||||||||||||||||||||
| Interest-earning assets: | ||||||||||||||||||||||||
| Investment securities: | ||||||||||||||||||||||||
| Taxable | $ | 700 | $ | (2,813 | ) | $ | (2,113 | ) | $ | 3,553 | $ | (1,355 | ) | $ | 2,198 | |||||||||
| Non-Taxable | (1,122 | ) | (44 | ) | (1,166 | ) | (2,463 | ) | 86 | (2,377 | ) | |||||||||||||
| Loans, net of unearned discount | 1,002 | (553 | ) | 449 | 3,864 | (3,223 | ) | 641 | ||||||||||||||||
| Federal funds sold and securities purchased under agreements to resell | (0 | ) | (0 | ) | (0 | ) | (56 | ) | (57 | ) | (113 | ) | ||||||||||||
| Restricted investment in bank stocks | (12 | ) | 49 | 37 | 25 | 24 | 49 | |||||||||||||||||
| Total interest-earning assets | 568 | (3,361 | ) | (2,793 | ) | 4,923 | (4,525 | ) | 398 | |||||||||||||||
| Interest-bearing liabilities: | ||||||||||||||||||||||||
| Money market deposits | 54 | (749 | ) | (695 | ) | (545 | ) | (1,298 | ) | (1,843 | ) | |||||||||||||
| Savings deposits | 286 | (1,110 | ) | (824 | ) | 1,017 | 483 | 1,500 | ||||||||||||||||
| Time deposits | (1,905 | ) | (2,262 | ) | (4,167 | ) | 3,648 | (3,050 | ) | 598 | ||||||||||||||
| Other interest-bearing deposits | 309 | (925 | ) | (616 | ) | 204 | (1,438 | ) | (1,234 | ) | ||||||||||||||
| Borrowings and subordinated debentures | (709 | ) | (849 | ) | (1,558 | ) | (463 | ) | (8 | ) | (471 | ) | ||||||||||||
| Total interest-bearing liabilities | (1,965 | ) | (5,895 | ) | (7,860 | ) | 3,861 | (5,311 | ) | (1,450 | ) | |||||||||||||
| Change in net interest income | $ | 2,533 | $ | 2,534 | $ | 5,067 | $ | 1,062 | $ | 786 | $ | 1,848 | ||||||||||||
| 2013/2012 Increase (Decrease) Due to Change in: | 2012/2011 Increase (Decrease) Due to Change in: | ||||||||||||||||||
| Average Volume | Average Rate | Net Change | Average Volume | Average Rate | Net Change | ||||||||||||||
| (Dollars in Thousands) | |||||||||||||||||||
| Interest-earning assets: | |||||||||||||||||||
| Investment securities: | |||||||||||||||||||
| Available for sale | |||||||||||||||||||
| Taxable | $ | (742) | $ | 287 | $ | (455) | $ | 1,294 | $ | (2,368) | $ | (1,074) | |||||||
| Non-Taxable | (839) | 60 | (779) | 1,770 | 322 | 2,092 | |||||||||||||
| Held to maturity | |||||||||||||||||||
| Taxable | 143 | 233 | 376 | 335 | (320) | 15 | |||||||||||||
| Non-Taxable | 2,662 | (476) | 2,186 | 702 | 26 | 728 | |||||||||||||
| Loans, net of unearned discount | 4,320 | (2,960) | 1,360 | 5,296 | (2,695) | 2,601 | |||||||||||||
| Other interest-bearing deposits | (6) | — | (6) | 8 | — | 8 | |||||||||||||
| Restricted investment in bank stocks | (7) | (38) | (45) | (3) | (9) | (12) | |||||||||||||
| Total interest-earning assets | 5,531 | (2,894) | 2,637 | 9,402 | (5,044) | 4,358 | |||||||||||||
| Interest-bearing liabilities: | |||||||||||||||||||
| Money market deposits | 173 | 11 | 184 | 767 | (220) | 547 | |||||||||||||
| Savings deposits | (18) | (66) | (84) | 54 | (292) | (238) | |||||||||||||
| Time deposits | (160) | (159) | (319) | (347) | (26) | (373) | |||||||||||||
| Other interest-bearing deposits | 76 | (46) | 30 | 277 | (325) | (48) | |||||||||||||
| Borrowings and subordinated debentures | (409) | (96) | (505) | (1,236) | 947 | (289) | |||||||||||||
| Total interest-bearing liabilities | (338) | (356) | (694) | (485) | 84 | (401) | |||||||||||||
| Change in net interest income | $ | 5,869 | $ | (2,538) | $ | 3,331 | $ | 9,887 | $ | (5,128) | $ | 4,759 | |||||||
The increase in the volume of loans in 2010 primarily reflected increases in commercial and commercial real estate loans. 2013.
| 40 | ||
interest-earning assets created a $4.5 million reduction to interest income as compared with a contribution of $4.9 million attributable to volume increases, principally loans.
The Federal Open Market Committee (“FOMC”) kept the Federal Funds target rate at zero to 0.25 percent throughout 2010.2013. This action by the FOMC allowed the Corporation to reduce liability costs throughout 2010.
2013.
as the flight to quality continued as depositors sought the safety of FDIC insurance.
2013.
2012.
2011.
2012.
| 41 | ||
| | | | | | | | | | |||||||||||||||||||||||||||||||
| | | | | | | | | | |||||||||||||||||||||||||||||||
| Years Ended December 31, | ||||||||||||||||||||||||||||||||||||||||
| 2010 | 2009 | 2008 | ||||||||||||||||||||||||||||||||||||||
| (Tax-Equivalent Basis) | Average Balance | Income/ Expense | Yield/ Rate | Average Balance | Income/ Expense | Yield/ Rate | Average Balance | Income/ Expense | Yield/ Rate | |||||||||||||||||||||||||||||||
| (Dollars in Thousands) | ||||||||||||||||||||||||||||||||||||||||
| ASSETS | ||||||||||||||||||||||||||||||||||||||||
| Interest-earning assets: | ||||||||||||||||||||||||||||||||||||||||
| Investment securities:(1) | ||||||||||||||||||||||||||||||||||||||||
| Taxable | $ | 305,927 | $ | 10,726 | 3.51 | % | $ | 289,414 | $ | 12,839 | 4.44 | % | $ | 211,185 | $ | 10,529 | 4.99 | % | ||||||||||||||||||||||
| Non-taxable | 5,880 | 333 | 5.66 | % | 25,677 | 1,499 | 5.84 | % | 67,890 | 3,876 | 5.71 | % | ||||||||||||||||||||||||||||
| Loans, net of unearned income:(2) | 708,425 | 37,200 | 5.25 | % | 692,562 | 36,751 | 5.31 | % | 622,533 | 36,110 | 5.80 | % | ||||||||||||||||||||||||||||
| Federal funds sold and securities purchased under agreements to resell | — | — | — | — | — | — | % | 4,047 | 113 | 2.79 | % | |||||||||||||||||||||||||||||
| Restricted investment in bank stocks | 10,293 | 568 | 5.52 | % | 10,526 | 531 | 5.04 | % | 10,104 | 594 | 5.88 | % | ||||||||||||||||||||||||||||
| Total interest-earning assets | 1,030,525 | 48,827 | 4.74 | % | 1,018,179 | 51,620 | 5.07 | % | 915,759 | 51,222 | 5.59 | % | ||||||||||||||||||||||||||||
| Non-interest-earning assets: | ||||||||||||||||||||||||||||||||||||||||
| Cash and due from banks | 81,681 | 128,156 | 16,063 | |||||||||||||||||||||||||||||||||||||
| Bank owned life insurance | 27,045 | 24,941 | 22,627 | |||||||||||||||||||||||||||||||||||||
| Intangible assets | 16,993 | 17,069 | 17,158 | |||||||||||||||||||||||||||||||||||||
| Other assets | 36,817 | 42,980 | 37,602 | |||||||||||||||||||||||||||||||||||||
| Allowance for loan losses | (8,579 | ) | (6,916 | ) | (5,681 | ) | ||||||||||||||||||||||||||||||||||
| Total non-interest earning assets | 153,957 | 206,230 | 87,769 | |||||||||||||||||||||||||||||||||||||
| Total assets | $ | 1,184,482 | $ | 1,224,409 | $ | 1,003,528 | ||||||||||||||||||||||||||||||||||
| LIABILITIES & STOCKHOLDERS’ EQUITY | ||||||||||||||||||||||||||||||||||||||||
| Interest-bearing liabilities: | ||||||||||||||||||||||||||||||||||||||||
| Money market deposits | $ | 127,614 | $ | 940 | 0.74 | % | $ | 123,427 | $ | 1,635 | 1.32 | % | $ | 150,373 | $ | 3,478 | 2.31 | % | ||||||||||||||||||||||
| Savings deposits | 168,591 | 1,226 | 0.73 | % | 145,536 | 2,050 | 1.41 | % | 63,192 | 550 | 0.87 | % | ||||||||||||||||||||||||||||
| Time deposits | 210,565 | 2,683 | 1.27 | % | 319,639 | 6,850 | 2.14 | % | 178,761 | 6,252 | 3.50 | % | ||||||||||||||||||||||||||||
| Other interest-bearing deposits | 169,479 | 1,157 | 0.68 | % | 140,890 | 1,773 | 1.26 | % | 131,452 | 3,007 | 2.29 | % | ||||||||||||||||||||||||||||
| Short-term and long-term borrowings | 239,777 | 8,568 | 3.57 | % | 258,607 | 10,146 | 3.92 | % | 270,390 | 10,501 | 3.88 | % | ||||||||||||||||||||||||||||
| Subordinated debentures | 5,155 | 211 | 4.09 | % | 5,155 | 191 | 3.71 | % | 5,155 | 307 | 5.96 | % | ||||||||||||||||||||||||||||
| Total interest-bearing liabilities | 921,181 | 14,785 | 1.61 | % | 993,254 | 22,645 | 2.28 | % | 799,323 | 24,095 | 3.01 | % | ||||||||||||||||||||||||||||
| Non-interest-bearing liabilities: | ||||||||||||||||||||||||||||||||||||||||
| Demand deposits | 142,364 | 124,966 | 114,400 | |||||||||||||||||||||||||||||||||||||
| Other non-interest-bearing deposits | 0 | 333 | 368 | |||||||||||||||||||||||||||||||||||||
| Other liabilities | 9,801 | 12,003 | 6,314 | |||||||||||||||||||||||||||||||||||||
| Total non-interest-bearing liabilities | 152,165 | 137,302 | 121,082 | |||||||||||||||||||||||||||||||||||||
| Stockholders’ equity | 111,136 | 93,853 | 83,123 | |||||||||||||||||||||||||||||||||||||
| Total liabilities and stockholders’ equity | $ | 1,184,482 | $ | 1,224,409 | $ | 1,003,528 | ||||||||||||||||||||||||||||||||||
| Net interest income (tax-equivalent basis) | 34,042 | 28,975 | 27,127 | |||||||||||||||||||||||||||||||||||||
| Net interest spread | 3.13 | % | 2.79 | % | 2.58 | % | ||||||||||||||||||||||||||||||||||
| Net interest income as percent of earning assets (margin) | 3.30 | % | 2.85 | % | 2.96 | % | ||||||||||||||||||||||||||||||||||
| Tax-equivalent adjustment(3) | (113 | ) | (510 | ) | (1,328 | ) | ||||||||||||||||||||||||||||||||||
| Net interest income | $ | 33,929 | $ | 28,465 | $ | 25,799 | ||||||||||||||||||||||||||||||||||
| Years Ended December 31, | ||||||||||||||||||||||||||||||
| 2013 | 2012 | 2011 | ||||||||||||||||||||||||||||
| (Tax-Equivalent Basis) | Average Balance | Income/ Expense | Yield/ Rate | Average Balance | Income/ Expense | Yield/ Rate | Average Balance | Income/ Expense | Yield/ Rate | |||||||||||||||||||||
| (Dollars in Thousands) | ||||||||||||||||||||||||||||||
| ASSETS | ||||||||||||||||||||||||||||||
| Interest-earning assets: | ||||||||||||||||||||||||||||||
| Investment securities: (1) | ||||||||||||||||||||||||||||||
| Available for sale | ||||||||||||||||||||||||||||||
| Taxable | $ | 374,361 | $ | 11,027 | 2.95 | % | $ | 399,739 | $ | 11,482 | 2.87 | % | $ | 359,939 | $ | 12,556 | 3.49 | % | ||||||||||||
| Non-taxable | 59,320 | 2,806 | 4.73 | % | 77,069 | 3,585 | 4.65 | % | 28,067 | 1,493 | 5.32 | % | ||||||||||||||||||
| Held to maturity | ||||||||||||||||||||||||||||||
| Taxable | 38,598 | 1,278 | 3.31 | % | 33,707 | 902 | 2.68 | % | 23,041 | 887 | 3.85 | % | ||||||||||||||||||
| Non-taxable | 87,175 | 3,997 | 4.59 | % | 30,824 | 1,811 | 5.88 | % | 18,869 | 1,083 | 5.74 | % | ||||||||||||||||||
| Loans, net of unearned income: (2) | 908,784 | 40,281 | 4.43 | % | 815,501 | 38,921 | 4.77 | % | 712,895 | 36,320 | 5.09 | % | ||||||||||||||||||
| Other interest-bearing deposits | 351 | 2 | 0.57 | % | 2,766 | 8 | 0.29 | % | — | — | — | % | ||||||||||||||||||
| Restricted investment in bank stocks | 8,983 | 407 | 4.53 | % | 9,120 | 452 | 4.96 | % | 9,185 | 464 | 5.05 | % | ||||||||||||||||||
| Total interest-earning assets | 1,477,572 | 59,798 | 4.05 | % | 1,368,726 | 57,161 | 4.18 | % | 1,151,996 | 52,803 | 4.58 | % | ||||||||||||||||||
| Non-interest-earning assets: | ||||||||||||||||||||||||||||||
| Cash and due from banks | 82,447 | 100,469 | 99,607 | |||||||||||||||||||||||||||
| Bank owned life insurance | 35,217 | 30,668 | 28,405 | |||||||||||||||||||||||||||
| Intangible assets | 16,842 | 16,879 | 16,930 | |||||||||||||||||||||||||||
| Other assets | 31,427 | 31,703 | 33,984 | |||||||||||||||||||||||||||
| Allowance for loan losses | (10,235) | (9,972) | (9,660) | |||||||||||||||||||||||||||
| Total non-interest earning assets | 155,698 | 169,747 | 169,266 | |||||||||||||||||||||||||||
| Total assets | $ | 1,633,270 | $ | 1,538,473 | $ | 1,321,262 | ||||||||||||||||||||||||
| LIABILITIES & STOCKHOLDERS’ EQUITY | ||||||||||||||||||||||||||||||
| Interest-bearing liabilities: | ||||||||||||||||||||||||||||||
| Money market deposits | $ | 411,209 | $ | 1,827 | 0.44 | % | $ | 372,140 | $ | 1,643 | 0.44 | % | $ | 204,664 | $ | 1,096 | 0.54 | % | ||||||||||||
| Savings deposits | 185,793 | 613 | 0.33 | % | 190,744 | 697 | 0.37 | % | 179,759 | 935 | 0.52 | % | ||||||||||||||||||
| Time deposits | 172,444 | 1,582 | 0.92 | % | 189,060 | 1,901 | 1.01 | % | 223,560 | 2,274 | 1.02 | % | ||||||||||||||||||
| Other interest-bearing deposits | 298,530 | 1,197 | 0.40 | % | 279,631 | 1,167 | 0.42 | % | 221,839 | 1,215 | 0.55 | % | ||||||||||||||||||
| Short-term and long-term borrowings | 146,425 | 5,705 | 3.90 | % | 156,905 | 6,200 | 3.95 | % | 190,343 | 6,497 | 3.41 | % | ||||||||||||||||||
| Subordinated debentures | 5,155 | 158 | 3.06 | % | 5,155 | 168 | 3.26 | % | 5,155 | 160 | 3.10 | % | ||||||||||||||||||
| Total interest-bearing liabilities | 1,219,556 | 11,082 | 0.91 | % | 1,193,635 | 11,776 | 0.99 | % | 1,025,320 | 12,177 | 1.19 | % | ||||||||||||||||||
| Non-interest-bearing liabilities: | ||||||||||||||||||||||||||||||
| Demand deposits | 233,835 | 182,642 | 159,059 | |||||||||||||||||||||||||||
| Other liabilities | 14,854 | 12,482 | 7,045 | |||||||||||||||||||||||||||
| Total non-interest-bearing liabilities | 248,689 | 195,124 | 166,104 | |||||||||||||||||||||||||||
| Stockholders’ equity | 165,025 | 149,714 | 129,838 | |||||||||||||||||||||||||||
| Total liabilities and stockholders’ equity | $ | 1,633,270 | $ | 1,538,473 | $ | 1,321,262 | ||||||||||||||||||||||||
| Net interest income (tax-equivalent basis) | 48,716 | 45,385 | 40,626 | |||||||||||||||||||||||||||
| Net interest spread | 3.14 | % | 3.19 | % | 3.39 | % | ||||||||||||||||||||||||
| Net interest income as percent of earning assets (margin) | 3.30 | % | 3.32 | % | 3.53 | % | ||||||||||||||||||||||||
| Tax-equivalent adjustment (3) | (2,530) | (1,889) | (876) | |||||||||||||||||||||||||||
| Net interest income | $ | 46,186 | $ | 43,496 | $ | 39,750 | ||||||||||||||||||||||||
| (1) | Average balances for available-for-sale securities are based on amortized cost. |
| (2) | Average balances for loans include loans on non-accrual status. |
| (3) | The tax-equivalent adjustment was computed based on a statutory Federal income tax rate of 35 percent for 2013 and 2012 and 34 |
| 42 | ||
In the past, the Corporation’s investment portfolio also consisted of overnight investments that were made in the Reserve Primary Fund (the “Fund”), a money market fund registered with the Securities and Exchange Commission as an investment company under the Investment Company Act of 1940. On September 22, 2008, the Fund announced that redemptions of shares of the Fund were suspended pursuant to an SEC order so that an orderly liquidation could be effected for the protection of the Fund’s investors. Through December 31, 2010, the Corporation received six distributions from the Fund, totaling approximately 99 percent of its outstanding balance.
During the twelve month periodyear ended December 31, 2010,2013, volume related factors decreasedincreased investment revenue by $422,000,$1.2 million, while rate related factors decreasedincreased investment revenue by $2.8 million.$104,000. The tax-equivalent yield on investments decreasedincreased by 10014 basis points to 3.553.42 percent from a yield of 4.553.28 percent during the year ended December 31, 2009.2012. The reductionsincrease in the investment portfolio primarilyresulted from the large buildup of liquidity, which caused the Corporation to prudently expand the size of its investment portfolio in the tax-exempt sector, were made during the first three quarters of 2010an effort to reduce exposure to these particular sectors of the portfolio while continuing to providedeploy excess cash flow for loan funding and forecasted liability outflows.into earning assets. The yield on the portfolio declinedincreased compared to 20092012 due primarily to saleshigher rates earned on taxable securities.
Improvement in yield has been limited by reinvesting opportunities. During the first quarter of 2009, the Corporation recorded a $140,000 other-than-temporary impairment charge on its Lehman Brothers bond holding. Through June 30, 2009, other-than-temporary impairment charges taken on this bond amounted to $1,440,000. As part of the Corporation’s tax strategies, management elected to sell the Lehman bond holding during the third quarter of 2009.
maturity.
was sold effective December 31, 2010 which represents 41.9 percent of the par amount of $3.1 million. The new cost basis for this security has been written down to $778,000.
One of the Pooled TRUPS incurred its third interruption of cash flow payments in 2009. Management reviewed the cash flow analysis and credit support to determine if it was probable that all principal and interest would be repaid, and recorded a $1.1 million other-than-temporary impairment charge for the three months ended December 31, 2009 and $2.5 million for the twelve months ended December 31, 2009, which represented 78.7 percent of the par amount of $3.1 million. At December 31, 20092013 at the new cost basis for this security has been written down to $665,000. The other Pooled TRUP incurred its first interruption of cash flow payments in the fourth quarter of 2009. Management determined that an other-than-temporary impairment existed on this security as well and recorded a $1.0 million charge during the fourth quarter of 2009, which represented 32.3 percent of the par amount of $3.0 million. At December 31, 2009 the new cost basis for this security has been written down to $2.0 million.
basis.
| 43 | ||
During 2009, the Corporation recorded $113,000 of$318,000 in principal losses and $484,000 other-than-temporary impairment charges relating to one equity holdingcharge on this bond in bank stocks. Due to the deterioration in that bank’s financial condition and that near term prospects in market value recovery appear remote, management determined that the expectation to recover its cost is not temporary. As such, this equity was written down to fair market value at the time of evaluation, which was December 31, 2009.
2012.
| 44 | ||
| | | | | | | | | | |||||||||||||||||||||||||||
| | | | | | | | | | |||||||||||||||||||||||||||
| US Treas & Agency Securities | Federal Agency Obligations | Mortgage Backed Securities | Obligations in U.S. States & Political Subdivisions | Trust Preferred | Corp Bonds & Notes | Collateralized Mortgage Obligations | Equity Securities | Total | ||||||||||||||||||||||||||||
| Due in 1 year or less | ||||||||||||||||||||||||||||||||||||
| Amortized Cost | $ | — | $ | — | $ | — | $ | — | $ | — | $ | 1,503 | $ | — | $ | — | $ | 1,503 | ||||||||||||||||||
| Market Value | $ | — | $ | — | $ | — | $ | — | $ | — | $ | 1,500 | $ | — | $ | — | $ | 1,500 | ||||||||||||||||||
| Weighted Average Yield | — | % | — | % | — | % | — | % | — | % | 1.35 | % | — | % | — | % | 1.35 | % | ||||||||||||||||||
| Due after one year through five years | ||||||||||||||||||||||||||||||||||||
| Amortized Cost | $ | — | $ | 55 | $ | — | $ | — | $ | — | $ | 19,130 | $ | — | $ | — | $ | 19,185 | ||||||||||||||||||
| Market Value | $ | — | $ | 55 | $ | — | $ | — | $ | — | $ | 18,755 | $ | — | $ | — | $ | 18,810 | ||||||||||||||||||
| Weighted Average Yield | — | % | 0.91 | % | — | % | — | % | — | % | 2.50 | % | — | % | — | % | 2.50 | % | ||||||||||||||||||
| Due after five years through ten years | ||||||||||||||||||||||||||||||||||||
| Amortized Cost | $ | 7,123 | $ | 57 | $ | 5,165 | $ | 18,002 | $ | — | $ | 37,930 | $ | — | $ | — | $ | 68,277 | ||||||||||||||||||
| Market Value | $ | 6,995 | $ | 57 | $ | 5,044 | $ | 17,577 | $ | — | $ | 36,829 | $ | — | $ | — | $ | 66,502 | ||||||||||||||||||
| Weighted Average Yield | 3.23 | % | 1.85 | % | 3.41 | % | 5.67 | % | — | % | 4.21 | % | — | % | — | % | 4.43 | % | ||||||||||||||||||
| Due after ten years | ||||||||||||||||||||||||||||||||||||
| Amortized Cost | $ | — | $ | 67,939 | $ | 174,872 | $ | 20,310 | $ | 21,222 | $ | 4,484 | $ | 3,941 | $ | 5,135 | $ | 297,903 | ||||||||||||||||||
| Market Value | $ | — | $ | 68,369 | $ | 172,689 | $ | 19,648 | $ | 18,731 | $ | 4,350 | $ | 2,728 | $ | 4,753 | $ | 291,268 | ||||||||||||||||||
| Weighted Average Yield | — | % | 2.57 | % | 2.37 | % | 5.39 | % | 6.85 | % | 6.00 | % | 3.21 | % | 0.02 | % | 2.97 | % | ||||||||||||||||||
| Total | ||||||||||||||||||||||||||||||||||||
| Amortized Cost | $ | 7,123 | $ | 68,051 | $ | 180,037 | $ | 38,312 | $ | 21,222 | $ | 63,047 | $ | 3,941 | $ | 5,135 | $ | 386,868 | ||||||||||||||||||
| Market Value | $ | 6,995 | $ | 68,481 | $ | 177,733 | $ | 37,225 | $ | 18,731 | $ | 61,434 | $ | 2,728 | $ | 4,753 | $ | 378,080 | ||||||||||||||||||
| Weighted Average Yield | 3.23 | % | 2.57 | % | 2.40 | % | 5.52 | % | 6.85 | % | 3.75 | % | 3.21 | % | 0.02 | % | 3.19 | % | ||||||||||||||||||
| Due in 1 year or less | Due after 1 year through 5 years | Due after 5 years through 10 years | Due after 10 years | Total | ||||||||||||||||||||||||||||||
| Amortized Cost | Weighted Average Yield | Amortized Cost | Weighted Average Yield | Amortized Cost | Weighted Average Yield | Amortized Cost | Weighted Average Yield | Amortized Cost | Weighted Average Yield | Market Value | ||||||||||||||||||||||||
| (Dollars in thousands) | ||||||||||||||||||||||||||||||||||
| Investment Securities Available-for-Sale | ||||||||||||||||||||||||||||||||||
| U.S. Treasury and Agency Securities | $ | — | — | % | $ | — | — | % | $ | 14,344 | 2.25 | % | $ | — | — | % | $ | 14,344 | 2.25 | % | $ | 13,519 | ||||||||||||
| Federal Agency Obligations | — | — | 2,828 | 1.75 | 835 | 1.72 | 16,904 | 2.22 | 20,567 | 2.14 | 19,941 | |||||||||||||||||||||||
| Residential Mortgage Pass-through Securities | — | — | 223 | 2.11 | 5,021 | 2.33 | 43,068 | 2.62 | 48,312 | 2.59 | 48,874 | |||||||||||||||||||||||
| Commercial Mortgage Pass-through Securities | — | — | 4,064 | 2.11 | — | — | 3,081 | 2.63 | 7,145 | 2.33 | 6,991 | |||||||||||||||||||||||
| Obligations of U.S. States and Political Subdivisions | — | — | — | — | 5,758 | 3.10 | 25,046 | 3.58 | 30,804 | 3.49 | 31,460 | |||||||||||||||||||||||
| Trust Preferred | — | — | — | — | 4,500 | 5.37 | 15,263 | 5.89 | 19,763 | 5.77 | 19,403 | |||||||||||||||||||||||
| Corporate Bonds and Notes | 9,588 | 1.95 | 54,027 | 2.68 | 90,567 | 4.40 | — | — | 154,182 | 3.64 | 158,630 | |||||||||||||||||||||||
| Asset-backed Securities | — | — | 5,148 | 0.93 | 7,234 | 1.07 | 3,351 | 1.73 | 15,733 | 1.16 | 15,979 | |||||||||||||||||||||||
| Certificates of deposit | 150 | 1.38 | 1,203 | 1.81 | 527 | 2.25 | 370 | 2.52 | 2,250 | 2.00 | 2,262 | |||||||||||||||||||||||
| Equity Securities | — | — | — | — | — | — | 376 | — | 376 | — | 287 | |||||||||||||||||||||||
| Other Securities | — | — | 2,500 | — | — | — | 3,171 | — | 5,671 | — | 5,724 | |||||||||||||||||||||||
| Total | $ | 9,738 | 1.94 | % | $ | 69,993 | 2.37 | % | $ | 128,786 | 3.84 | % | $ | 110,630 | 3.12 | % | $ | 319,147 | 3.21 | % | $ | 323,070 | ||||||||||||
| Investment Securities Held-to-Maturity | ||||||||||||||||||||||||||||||||||
| U.S. Treasury and Agency Securities | $ | — | — | % | $ | — | — | % | $ | 28,056 | 2.51 | % | $ | — | — | % | $ | 28,056 | 2.51 | % | $ | 27,037 | ||||||||||||
| Federal Agency Obligations | — | — | — | — | — | — | 15,249 | 2.85 | 15,249 | 2.85 | 14,883 | |||||||||||||||||||||||
| Residential Mortgage Pass-through Securities | — | — | — | — | — | — | 2,246 | 2.76 | 2,246 | 2.76 | 2,182 | |||||||||||||||||||||||
| Commercial Mortgage Pass-through Securities | — | — | 2,960 | 2.23 | 1,457 | 2.28 | — | — | 4,417 | 2.25 | 4,396 | |||||||||||||||||||||||
| Obligations of U.S. States and Political Subdivisions | 2,061 | 0.85 | 2,480 | 4.13 | 9,803 | 2.51 | 113,074 | 3.11 | 127,418 | 3.05 | 125,033 | |||||||||||||||||||||||
| Corporate Bonds and Notes | — | — | 10,067 | 2.83 | 27,833 | 3.80 | — | — | 37,900 | 3.54 | 37,427 | |||||||||||||||||||||||
| Total | $ | 2,061 | 0.85 | % | $ | 15,507 | 2.92 | % | $ | 67,149 | 3.04 | % | $ | 130,569 | 3.07 | % | $ | 215,286 | 3.03 | % | $ | 210,958 | ||||||||||||
| Total Investment Securities | $ | 11,799 | 1.75 | % | $ | 85,500 | 2.47 | % | $ | 195,935 | 3.57 | % | $ | 241,199 | 3.09 | % | $ | 534,433 | 3.14 | % | $ | 534,028 | ||||||||||||
| 45 | ||
2013.
| | | | |||||||||
| 2010 | 2009 | 2008 | ||||||||||
| (Dollars in Thousands) | ||||||||||||
| Securities Available-for-Sale: | ||||||||||||
| U.S. Treasury & Agency Securities | $ | 6,995 | $ | 2,089 | $ | 100 | ||||||
| Federal Agency Obligations | 68,481 | 128,365 | 7,239 | |||||||||
| Mortgage-backed securities | 177,733 | 86,220 | 75,558 | |||||||||
| Obligations of U.S. States and political subdivisions | 37,225 | 19,281 | 52,094 | |||||||||
| Trust Preferred Securities | 18,731 | 26,715 | 31,771 | |||||||||
| Corporate bonds & notes | 61,434 | 22,655 | 17,955 | |||||||||
| Collateralized mortgage obligations | 2,728 | 7,266 | 41,407 | |||||||||
| Equity securities | 4,753 | 5,533 | 16,590 | |||||||||
| Total Investment Securities Available-for-Sale | $ | 378,080 | $ | 298,124 | $ | 242,714 | ||||||
2013 2012 2011 (Dollars in Thousands) Investment Securities Available-for-Sale: U.S. treasury & agency securities $ 13,519 $ 11,909 $ — Federal agency obligations 19,941 20,535 24,969 Residential mortgage pass-through securities 48,874 53,784 115,364 Commercial mortgage pass-through securities 6,991 9,969 — Obligations of U.S. States and political subdivisions 31,460 107,714 69,173 Trust preferred securities 19,403 21,249 16,187 Corporate bonds and notes 158,630 237,405 173,117 Collateralized mortgage obligations — 2,120 1,899 Asset-backed securities 15,979 19,742 7,653 Certificates of deposit 2,262 2,865 — Equity securities 287 325 262 Other securities 5,724 9,198 5,883 Total $ 323,070 $ 496,815 $ 414,507 Investment Securities Held-to-Maturity: U.S. treasury & agency securities $ 28,056 $ — $ — Federal agency obligations 15,249 4,178 28,262 Residential mortgage pass-through securities 2,246 — — Commercial mortgage-backed securities 4,417 5,501 6,276 Obligations of U.S. States and political subdivisions 127,418 48,385 37,695 Corporate bonds and notes 37,900 — — Total $ 215,286 $ 58,064 $ 72,233 Total investment securities $ 538,356 $ 554,879 $ 486,740
therefore expects to move cautiously in the growth process into 2014.
| 46 | ||
| | | | | | |||||||||||||||
| December 31, | ||||||||||||||||||||
| 2010 | 2009 | 2008 | 2007 | 2006 | ||||||||||||||||
| (Dollars in Thousands) | ||||||||||||||||||||
| Real estate – residential mortgage | $ | 165,154 | $ | 191,199 | $ | 240,885 | $ | 266,251 | $ | 269,486 | ||||||||||
| Real estate – commercial mortgage | 421,745 | 410,056 | 358,394 | 219,356 | 206,044 | |||||||||||||||
| Commercial and industrial | 121,034 | 117,912 | 75,415 | 65,493 | 74,179 | |||||||||||||||
| Installment | 511 | 439 | 1,509 | 569 | 705 | |||||||||||||||
| Total loans | 708,444 | 719,606 | 676,203 | 551,669 | 550,414 | |||||||||||||||
| Less: | ||||||||||||||||||||
| Allowance for loan losses | 8,867 | 8,711 | 6,254 | 5,163 | 4,960 | |||||||||||||||
| Net loans | $ | 699,577 | $ | 710,895 | $ | 669,949 | $ | 546,506 | $ | 545,454 | ||||||||||
Included in the loan balances above are net deferred loan costs of $272,000, $391,000 and $572,000 at December 31, 2010, 2009 and 2008, respectively.
| December 31, | ||||||||||||||||
| 2013 | 2012 | 2011 | 2010 | 2009 | ||||||||||||
| (Dollars in Thousands) | ||||||||||||||||
| Commercial and industrial | $ | 229,688 | $ | 181,682 | $ | 146,711 | $ | 121,043 | $ | 117,841 | ||||||
| Commercial real estate | 536,539 | 497,392 | 408,164 | 371,983 | 358,987 | |||||||||||
| Construction | 42,722 | 40,277 | 39,388 | 49,467 | 51,139 | |||||||||||
| Residential mortgage | 150,571 | 169,094 | 159,753 | 164,847 | 190,803 | |||||||||||
| Installment | 1,084 | 1,104 | 959 | 513 | 445 | |||||||||||
| Subtotal | 960,604 | 889,549 | 754,975 | 707,853 | 719,215 | |||||||||||
| Net deferred loan costs | 339 | 123 | 17 | 258 | 391 | |||||||||||
| Total loans | 960,943 | 889,672 | 754,992 | 708,111 | 719,606 | |||||||||||
| Less: allowance for loan losses | 10,333 | 10,237 | 9,602 | 8,867 | 8,711 | |||||||||||
| Net loans | $ | 950,610 | $ | 879,435 | $ | 745,390 | $ | 699,244 | $ | 710,895 | ||||||
The increase in commercial loans in 20102013 was a result of the expansion of the Corporation’s customer base, aggressive business development and marketing programs coupled with its positive market trends for the Corporation. While growthimage in certain sectors of the Banks’ market, such as consumer real estate products, was severely stressed during most of 2008, theits market. The Corporation experienced an increased growth in its commercial lending sales efforts during 20092012 and 20102013 as it continued to benefit from the Corporation’s primary core customer base.
Average commercial loans, which include commercial real estate and construction, increased to $532.4$763.1 million atfor the year ended December 31, 20102013 compared to $476.1$661.7 million atfor the year ended December 31, 20092012 or by approximately $56.3$101.4 million or 11.815.3 percent in 20102013 compared with 2009. The Corporation seeks to create growth in the commercial lending sector by offering competitive products and pricing and by capitalizing on new relationships in its market area. Over the last several years, the expansion of the Bank’s marketplace has aided in this growth. Products are offered to meet the financial requirements of the Corporation’s clients. It is an objective of the Corporation’s credit policies to diversify the commercial loan portfolio to limit concentrations in any single industry.
2012.
| 47 | ||
At December 31, 2010,2013, the Corporation had total loan commitments outstanding of $179.9$202.3 million, of which approximately 61.598.9 percent were for commercial loans, commercial real estate loans and construction loans.
| | | | | ||||||||||||
| At December 31, 2010, Maturing | ||||||||||||||||
| In One Year or Less | After One Year through Five Years | After Five Years | Total | |||||||||||||
| (Dollars in Thousands) | ||||||||||||||||
| Construction loans | $ | 41,952 | $ | 500 | $ | 7,292 | $ | 49,744 | ||||||||
| Commercial real estate loans | 59,125 | 184,915 | 127,961 | 372,001 | ||||||||||||
| Residential real estate loans | 38,854 | 29,984 | 96,316 | 165,154 | ||||||||||||
| Commercial and industrial | 74,534 | 40,739 | 5,761 | 121,034 | ||||||||||||
| All other loans | 366 | 100 | 45 | 511 | ||||||||||||
| Total | $ | 214,831 | $ | 256,238 | $ | 237,375 | $ | 708,444 | ||||||||
| Loans with: | ||||||||||||||||
| Fixed rates | $ | 78,468 | $ | 102,669 | $ | 213,374 | $ | 394,511 | ||||||||
| Variable rates | 136,363 | 153,569 | 24,001 | 313,933 | ||||||||||||
| Total | $ | 214,831 | $ | 256,238 | $ | 237,375 | $ | 708,444 | ||||||||
| At December 31, 2013, Maturing | |||||||||||||
| In One Year or Less | After One Year through Five Years | After Five Years | Total | ||||||||||
| (Dollars in Thousands) | |||||||||||||
| Commercial and industrial | $ | 121,628 | $ | 52,219 | $ | 55,841 | $ | 229,688 | |||||
| Commercial real estate | 22,910 | 108,786 | 404,843 | 536,539 | |||||||||
| Construction | 31,994 | 10,728 | — | 42,722 | |||||||||
| Residential mortgage | 911 | 9,594 | 140,066 | 150,571 | |||||||||
| Installment | 745 | 225 | 114 | 1,084 | |||||||||
| Total | $ | 178,188 | $ | 181,552 | $ | 600,864 | $ | 960,604 | |||||
| Loans with: | |||||||||||||
| Fixed rates | $ | 36,203 | $ | 119,477 | $ | 133,678 | $ | 289,358 | |||||
| Variable rates | 141,985 | 62,075 | 467,186 | 671,246 | |||||||||
| Total | $ | 178,188 | $ | 181,552 | $ | 600,864 | $ | 960,604 | |||||
| 48 | ||
climate as well as operating, regulatory and other conditions beyond the Corporation’s control. The allowance for loan losses as a percentage of total loans amounted to 1.251.08 percent, 1.211.15 percent and 0.921.27 percent at December 31, 2010, 20092013, 2012 and 2008,2011, respectively.
| 49 | ||
| | | | | | |||||||||||||||
| Years Ended December 31, | ||||||||||||||||||||
| 2010 | 2009 | 2008 | 2007 | 2006 | ||||||||||||||||
| (Dollars in Thousands) | ||||||||||||||||||||
| Average loans outstanding | $ | 708,425 | $ | 692,562 | $ | 622,533 | $ | 541,297 | $ | 522,352 | ||||||||||
| Total loans at end of period | $ | 708,444 | $ | 719,606 | $ | 676,203 | $ | 551,669 | $ | 550,414 | ||||||||||
| Analysis of the Allowance for Loan Losses | ||||||||||||||||||||
| Balance at the beginning of year | $ | 8,711 | $ | 6,254 | $ | 5,163 | $ | 4,960 | $ | 4,937 | ||||||||||
| Charge-offs: | ||||||||||||||||||||
| Commercial | 3,348 | 2,122 | 444 | 45 | — | |||||||||||||||
| Residential | 1,552 | 4 | 20 | 80 | 50 | |||||||||||||||
| Installment loans | 40 | 26 | 35 | 31 | 29 | |||||||||||||||
| Total charge-offs | 4,940 | 2,152 | 499 | 156 | 79 | |||||||||||||||
| Recoveries: | ||||||||||||||||||||
| Commercial | 13 | 2 | 10 | 2 | 19 | |||||||||||||||
| Residential | 1 | 4 | 13 | — | — | |||||||||||||||
| Installment loans | 6 | 6 | 6 | 7 | 26 | |||||||||||||||
| Total recoveries | 20 | 12 | 29 | 9 | 45 | |||||||||||||||
| Net charge-offs (recoveries) | 4,920 | 2,140 | 470 | 147 | 34 | |||||||||||||||
| Provision for loan losses | 5,076 | 4,597 | 1,561 | 350 | 57 | |||||||||||||||
| Balance at end of year | $ | 8,867 | $ | 8,711 | $ | 6,254 | $ | 5,163 | $ | 4,960 | ||||||||||
| Ratio of net charge-offs during the year to average loans outstanding during the year | 0.69 | % | 0.31 | % | 0.08 | % | 0.03 | % | 0.01 | % | ||||||||||
| Allowance for loan losses as a percentage of total loans at end of year | 1.25 | % | 1.21 | % | 0.92 | % | 0.94 | % | 0.90 | % | ||||||||||
| Years Ended December 31, | ||||||||||||||||||||
| 2013 | 2012 | 2011 | 2010 | 2009 | ||||||||||||||||
| (Dollars in Thousands) | ||||||||||||||||||||
| Average loans outstanding | $ | 960,943 | $ | 815,501 | $ | 712,895 | $ | 708,425 | $ | 692,562 | ||||||||||
| Total loans at end of period | $ | 908,784 | $ | 889,672 | $ | 754,992 | $ | 708,111 | $ | 719,606 | ||||||||||
| Analysis of the Allowance for Loan Losses | ||||||||||||||||||||
| Balance at the beginning of year | $ | 10,237 | $ | 9,602 | $ | 8,867 | $ | 8,711 | $ | 6,254 | ||||||||||
| Charge-offs: | ||||||||||||||||||||
| Commercial and Construction | 132 | 57 | 1,985 | 3,348 | 2,122 | |||||||||||||||
| Residential | 175 | 454 | 23 | 1,552 | 4 | |||||||||||||||
| Installment loans | 22 | 16 | 20 | 40 | 26 | |||||||||||||||
| Total charge-offs | 329 | 527 | 2,028 | 4,940 | 2,152 | |||||||||||||||
| Recoveries: | ||||||||||||||||||||
| Commercial and Construction | 69 | 620 | 255 | 13 | 2 | |||||||||||||||
| Residential | 0 | 210 | 53 | 1 | 4 | |||||||||||||||
| Installment loans | 6 | 7 | 7 | 6 | 6 | |||||||||||||||
| Total recoveries | 75 | 837 | 315 | 20 | 12 | |||||||||||||||
| Net charge-offs (recoveries) | 254 | (310) | 1,713 | 4,920 | 2,140 | |||||||||||||||
| Provision for loan losses | 350 | 325 | 2,448 | 5,076 | 4,597 | |||||||||||||||
| Balance at end of year | $ | 10,333 | $ | 10,237 | $ | 9,602 | $ | 8,867 | $ | 8,711 | ||||||||||
| Ratio of net charge-offs (recoveries)during the year to average loans outstanding during the year | 0.03 | % | (0.04) | % | 0.24 | % | 0.69 | % | 0.31 | % | ||||||||||
| Allowance for loan losses as a percentage of total loans at end of year | 1.08 | % | 1.15 | % | 1.27 | % | 1.25 | % | 1.21 | % | ||||||||||
Implicit in the lending function is the fact that loan losses will be experienced and that the risk of loss will vary with the type of loan being made, the creditworthiness of the borrower and prevailing economic conditions. The allowance for loan losses has been allocated in the table below according to the estimated amount deemed to be reasonably necessary to provide for the possibility of losses being incurred within the following categories of loans at December 31, for each of the past five years.
| | | | | | | | | ||||||||||||||||||||||||
| Commercial | Real Estate Residential Mortgage | Installment | Unallocated | |||||||||||||||||||||||||||||
| Amount of Allowance | Loans to Total Loans % | Amount of Allowance | Loans to Total Loans % | Amount of Allowance | Loans to Total Loans % | Amount of Allowance | Total | |||||||||||||||||||||||||
| (Dollars in Thousands) | ||||||||||||||||||||||||||||||||
| 2010 | $ | 7,538 | 76.6 | $ | 1,038 | 23.3 | $ | 52 | 0.1 | $ | 239 | $ | 8,867 | |||||||||||||||||||
| 2009 | 7,314 | 73.3 | 1,242 | 26.6 | 56 | 0.1 | 99 | 8,711 | ||||||||||||||||||||||||
| 2008 | 5,473 | 64.2 | 651 | 35.6 | 60 | 0.2 | 70 | 6,254 | ||||||||||||||||||||||||
| 2007 | 4,167 | 51.6 | 727 | 48.3 | 49 | 0.1 | 220 | 5,163 | ||||||||||||||||||||||||
| 2006 | $ | 3,972 | 50.9 | $ | 707 | 49.0 | $ | 45 | 0.1 | $ | 236 | $ | 4,960 | |||||||||||||||||||
| Commercial | Real Estate Residential Mortgage | Installment | Unallocated | ||||||||||||||||||||||
| Amount of Allowance | Loans to Total Loans % | Amount of Allowance | Loans to Total Loans % | Amount of Allowance | Loans to Total Loans % | Amount of Allowance | Total | ||||||||||||||||||
| (Dollars in Thousands) | |||||||||||||||||||||||||
| 2013 | $ | 7,806 | 84.2 | $ | 990 | 15.7 | $ | 146 | 0.1 | $ | 1,391 | $ | 10,333 | ||||||||||||
| 2012 | 7,944 | 80.9 | 1,528 | 19.0 | 114 | 0.1 | 651 | 10,237 | |||||||||||||||||
| 2011 | 8,206 | 78.7 | 1,263 | 21.2 | 51 | 0.1 | 82 | 9,602 | |||||||||||||||||
| 2010 | 7,538 | 76.6 | 1,038 | 23.3 | 52 | 0.1 | 239 | 8,867 | |||||||||||||||||
| 2009 | 7,314 | 73.4 | 1,242 | 26.5 | 56 | 0.1 | 99 | 8,711 | |||||||||||||||||
| 50 | ||
The following table sets forth, as of the dates indicated, the amount of the Corporation’s non-accrual loans, accruing loans past due 90 days or more, and other real estate owned (“OREO”) and troubled debt restructurings.
| | | | | | |||||||||||||||
| At December 31, | ||||||||||||||||||||
| 2010 | 2009 | 2008 | 2007 | 2006 | ||||||||||||||||
| (Dollars in Thousands) | ||||||||||||||||||||
| Non-accrual loans | $ | 11,174 | $ | 11,245 | $ | 541 | $ | 3,907 | $ | 475 | ||||||||||
| Accruing loans past due 90 days or more | 714 | 39 | 139 | — | 225 | |||||||||||||||
| Total non-performing loans | 11,888 | 11,284 | 680 | 3,907 | 700 | |||||||||||||||
| OREO | — | — | 3,949 | 501 | — | |||||||||||||||
| Total non-performing assets | $ | 11,888 | $ | 11,284 | $ | 4,629 | $ | 4,408 | $ | 700 | ||||||||||
| Troubled debt restructuring | 7,035 | 966 | 93 | — | — | |||||||||||||||
Total non-accrual loans remained relatively even
| At December 31, | ||||||||||||||||
| 2013 | 2012 | 2011 | 2010 | 2009 | ||||||||||||
| (Dollars in Thousands) | ||||||||||||||||
| Non-accrual loans | $ | 3,137 | $ | 3,616 | $ | 6,871 | $ | 11,174 | $ | 11,245 | ||||||
| Accruing loans past due 90 days or more | — | 55 | 1,029 | 714 | 39 | |||||||||||
| Total non-performing loans | 3,137 | 3,671 | 7,900 | 11,888 | 11,284 | |||||||||||
| OREO | 220 | 1,300 | 591 | — | — | |||||||||||
| Total non-performing assets | $ | 3,357 | $ | 4,971 | $ | 8,491 | $ | 11,888 | $ | 11,284 | ||||||
| Troubled debt restructuring — performing | $ | 5,746 | $ | 6,813 | $ | 7,459 | $ | 7,035 | $ | 966 | ||||||
| 51 | ||
2012. The increase in non-accrual loans atdecrease from December 31, 2009 as compared with one year prior2011 was primarily attributable toachieved notwithstanding the addition of three largeseveral new residential loans (totaling approximately $1.2 million) and commercial credits. In Marchloans (totaling approximately $1.0 million) into non-performing status. This was more than offset by decreases from pay-downs of 2009, one commercial$1.7 million, total charge-offs of $175,000 of existing loans, the transfer of $1.3 million to other real estate construction project of industrial warehouses was downgradedowned and the transfer to non-accrual status. The loan was a participation loan with another New Jersey bank. In December of 2009, the Corporation took steps to terminate this participation agreement, as the participation ended on December 31, 2009. The Corporation filed suit for the return of the outstanding principal and reclassified this $5.1 million outstanding loan intoperforming troubled debt restructured from non-accrual status on the Corporation’s balance sheet.
of $3.9 million.
| | | | | | |||||||||||||||
| December 31, | ||||||||||||||||||||
| 2010 | 2009 | 2008 | 2007 | 2006 | ||||||||||||||||
| (Dollars in Thousands) | ||||||||||||||||||||
| Commercial | $ | — | $ | — | $ | — | $ | — | $ | 225 | ||||||||||
| Residential | 714 | 39 | 139 | — | — | |||||||||||||||
| Installment | — | — | — | — | — | |||||||||||||||
| Total accruing loans 90 days or more past due | $ | 714 | $ | 39 | $ | 139 | $ | — | $ | 225 | ||||||||||
The balance at December 31, 2010 and 2009 comprise one, different for each year, 1 – 4 family residential loan. At December 31, 2010 the loan in question was well secured and in the process of collection either through bringing the loan current as payments had been received during the month of December 2010 or through the sale of the property.
| December 31, | ||||||||||||||||
| 2013 | 2012 | 2011 | 2010 | 2009 | ||||||||||||
| (Dollars in Thousands) | ||||||||||||||||
| Commercial | $ | — | $ | — | $ | 1,029 | $ | — | $ | — | ||||||
| Residential | — | 55 | — | 714 | 39 | |||||||||||
| Installment | — | — | — | — | — | |||||||||||
| Total accruing loans 90 days or more past due | $ | — | $ | 55 | $ | 1,029 | $ | 714 | $ | 39 | ||||||
All Decrease
terms.
be downgraded or upgraded as circumstances warrant. During the first quarter of 2010,2013, the Corporation reevaluated severalinternally risk rated as assets especially mentioned or substandard a total of $1,041,000 new commercial loans, which resultedand $281,000 in the downgrade of two lending relationships totaling $4.8 million intonew residential loans. This was partially offset by upgrades to an internal pass risk rating categories associated with “potential problem loans” that had not previously been characterized as such by the Corporation. Further, $725,000 was placedof $6,408,000 in commercial loans and $1,327,000 of residential loans. Payoffs of commercial and residential loans totaled $5,438,000. Charge-offs and transfers to other real estate owned accounted for $498,000. A final mitigant came from continued principal reductions on non-accrual status. The Corporation’s construction portfolio experienced a decline inother potential problem loans from December 31, 2008 to December 31, 2009 asloans. With the additionexception of one new relationship of $3.6 million was offset by the removal of another relationship amounting to $4.7 million. The Corporation’s commercial portfolio experienced an increase in potential problemnon-accrual loans, at December 31, 2009 with the addition of six lending relationships while shedding two for a net increase of $10.9 million in this segment. This increase was mitigated somewhat by principal payments made on many of these accounts. All potential problem loans were performing loans as of December 31, 2010.2013. The Corporation has no foreign loans.
In general, it is At December 31, 2013, the policy of management to consider the charge-off of loans at the point that they become past due in excess of 90 days, with the exception of loans that are secured by cash, marketable securities or real estate loans, which are well secured and in the process of collection.
Corporation had no doubtful loans.
| 52 | ||
| | | | | | | ||||||||||||||||||
| Years Ended December 31, | ||||||||||||||||||||||||
| 2010 | 2009 | % Change | 2009 | 2008 | % Change | |||||||||||||||||||
| (Dollars in Thousands) | ||||||||||||||||||||||||
| Service charges, commissions and fees | $ | 1,975 | $ | 1,835 | 7.63 | % | $ | 1,835 | $ | 2,015 | (8.93 | )% | ||||||||||||
| Annuity & insurance commissions | 123 | 126 | (2.38 | ) | 126 | 112 | 12.50 | |||||||||||||||||
| Bank-owned life insurance | 1,226 | 1,156 | 6.06 | 1,156 | 1,203 | (3.91 | ) | |||||||||||||||||
| Net securities gains (losses) | (1,339 | ) | 491 | (372.71 | ) | 491 | (1,106 | ) | 144.39 | |||||||||||||||
| Other | 487 | 298 | 63.42 | 298 | 420 | (29.05 | ) | |||||||||||||||||
| Total other income | $ | 2,472 | $ | 3,906 | (36.71 | )% | $ | 3,906 | $ | 2,644 | 47.73 | % | ||||||||||||
| Years Ended December 31, | ||||||||||||||||||||
| 2013 | 2012 | % Change | 2012 | 2011 | % Change | |||||||||||||||
| (Dollars in Thousands) | ||||||||||||||||||||
| Service charges, commissions and fees | $ | 1,873 | $ | 1,775 | 5.52 | % | $ | 1,775 | $ | 1,896 | (6.38) | % | ||||||||
| Annuity & insurance commissions | 489 | 204 | 139.71 | 204 | 110 | 85.45 | ||||||||||||||
| Bank-owned life insurance | 1,364 | 1,018 | 33.99 | 1,018 | 1,038 | (1.93) | ||||||||||||||
| Net securities gains | 1,711 | 2,012 | (14.96) | 2,012 | 3,634 | (44.63) | ||||||||||||||
| Loan related fees | 839 | 510 | 64.51 | 510 | 432 | 18.06 | ||||||||||||||
| Net gains on sales of loans held for sale | 294 | 484 | (39.26) | 484 | 251 | 92.83 | ||||||||||||||
| Bargain gain on acquisition | — | 899 | (100.00) | 899 | — | 100.00 | ||||||||||||||
| Other | 281 | 308 | (8.77) | 308 | 117 | 163.25 | ||||||||||||||
| Total other income | $ | 6,851 | $ | 7,210 | (4.98) | % | $ | 7,210 | $ | 7,478 | (3.58) | % | ||||||||
$644.1 $122.2 million compared to approximately $665.8$130.1 million in 2009.2012. The gross realized gains on securities sold amounted to approximately $4.9$2.5 million in 20102013 compared to $5.9$2.9 million in 2009,2012, while the gross realized losses amounted to approximately $635,000$88,000 in 20102013 compared to $1.2 million$893,000 in 2009.
2012. The sales of securities were made in the normal course of business and the proceeds were primarily reinvested into the investment portfolio.
| 53 | ||
| | | | | | | ||||||||||||||||||
| Year Ended December 31, | ||||||||||||||||||||||||
| 2010 | 2009 | % Change | 2009 | 2008 | % Change | |||||||||||||||||||
| (Dollars in Thousands) | ||||||||||||||||||||||||
| Salaries and employee benefits | $ | 10,765 | $ | 9,915 | 8.57 | % | $ | 9,915 | $ | 8,505 | 16.58 | % | ||||||||||||
| Occupancy, net | 2,088 | 2,536 | (17.67 | ) | 2,536 | 3,279 | (22.66 | ) | ||||||||||||||||
| Premises and equipment | 1,093 | 1,263 | (13.46 | ) | 1,263 | 1,436 | (12.05 | ) | ||||||||||||||||
| FDIC insurance | 2,126 | 2,055 | 3.45 | 2,055 | 217 | 847.00 | ||||||||||||||||||
| Professional and consulting | 1,121 | 811 | 38.22 | 811 | 703 | 15.36 | ||||||||||||||||||
| Stationery and printing | 316 | 339 | (6.78 | ) | 339 | 397 | (14.61 | ) | ||||||||||||||||
| Marketing and advertising | 268 | 366 | (26.78 | ) | 366 | 637 | (42.54 | ) | ||||||||||||||||
| Computer expense | 1,366 | 964 | 41.70 | 964 | 834 | 15.59 | ||||||||||||||||||
| OREO expense, net | 284 | 1,438 | (80.25 | ) | 1,438 | 31 | 4538.71 | |||||||||||||||||
| Loss on fixed assets, net | 427 | — | 100.00 | — | 51 | (100.00 | ) | |||||||||||||||||
| Repurchase agreement termination fee | 594 | — | 100.00 | — | — | — | ||||||||||||||||||
| Other | 3,651 | 3,370 | 8.34 | 3,370 | 3,383 | (.38 | ) | |||||||||||||||||
| Total other expense | $ | 24,099 | $ | 23,057 | 4.52 | % | $ | 23,057 | $ | 19,473 | 18.40 | % | ||||||||||||
| Year Ended December 31, | ||||||||||||||||||||||||
| 2013 | 2012 | % Change | 2012 | 2011 | % Change | |||||||||||||||||||
| (Dollars in Thousands) | ||||||||||||||||||||||||
| Salaries and employee benefits | $ | 13,465 | $ | 12,571 | 7.11 | % | $ | 12,571 | $ | 11,527 | 9.06 | % | ||||||||||||
| Occupancy and equipment | 3,518 | 2,987 | 17.78 | 2,987 | 2,947 | 1.36 | ||||||||||||||||||
| FDIC insurance | 1,098 | 1,154 | (4.85) | 1,154 | 1,712 | (32.59) | ||||||||||||||||||
| Professional and consulting | 1,111 | 1,077 | 3.16 | 1,077 | 1,156 | (6.83) | ||||||||||||||||||
| Stationery and printing | 333 | 349 | (4.58) | 349 | 368 | (5.16) | ||||||||||||||||||
| Marketing and advertising | 304 | 186 | 63.44 | 186 | 131 | 41.98 | ||||||||||||||||||
| Computer expense | 1,422 | 1,419 | 0.21 | 1,419 | 1,312 | 8.16 | ||||||||||||||||||
| OREO expense, net | 137 | 150 | (8.67) | 150 | 398 | (62.31) | ||||||||||||||||||
| Repurchase agreement prepayment and termination fee | — | 1,012 | (100.00) | 1,012 | — | 100.00 | ||||||||||||||||||
| Acquisition cost | — | 482 | (100.00) | 482 | — | 100.00 | ||||||||||||||||||
| Other | 3,890 | 3,810 | 2.10 | 3,810 | 3,892 | (2.11) | ||||||||||||||||||
| Total other expense | $ | 25,278 | $ | 25,197 | 0.32 | % | $ | 25,197 | $ | 23,443 | 7.48 | % | ||||||||||||
increased in 2009 from 2008 across several expense categories, with the largest increase occurring in salaries and benefit expense, FDIC insurance and OREO expense.
Prudent management of operating expenses has been and will continue to be a key objective of management in an effort to improve earnings performance. The Corporation’s ratio of other expenses to average assets increaseddecreased to 2.031.55 percent in 20102013 compared to 1.881.64 percent in 20092012 and 1.941.77 percent in 2008.
2011.
$170,000.
In 2009, the Corporation announced a strategic outsourcing agreement with Fiserv to provide core account processing services, which is consistent with the Corporation’s other strategic initiatives to streamline operations, reduce operating overhead and allow the Corporation to focus on core competencies of customer service and product development. The core processing transition was consummated during the fourth quarter of 2009. In 2008, the Corporation announced a series of strategic outsourcing agreements to aid in the realization of its goal to reduce operating overhead and shrink the infrastructure of the Corporation. The cost reduction plans resulted in the reduction of workforce by 12 staff positions, which in turn resulted in a one-time pre-tax charge of $145,000 in the second quarter of 2008 for severance and termination benefits.
| 54 | ||
facility.
For the year ended December 31, 2012, FDIC insurance expense decreased $558,000 compared to 2011.
Stationery and printing expenses for 20102013 decreased $23,000$16,000 or 6.784.5 percent, compared to 2009,2012, due primarily to better cost containment measures relating to stationery andreduction of checkbook printing materials.costs. The decrease in such expenses of $58,000$19,000 or 14.65.16 percent in 20092012 from 2008 reflected improved cost containment in the purchasing2011 was due primarily to costs related to marketing of supplies.
new bank products.
the opening of the new Englewood branch office.
systems.
properties.
| 55 | ||
On June 12, 2009, the FASB issued SFAS No. 166, “Accounting for Transfers of Financial Assets” (“FAS 166”), which was incorporated into ASC 860 “Transfers and Servicing”, and SFAS No.167, “Amendments to FASB Interpretation No. 46 (Revised), which was incorporated into ASC 810 “Consolidation” (“FAS 167”), which change the way entities account for securitizations and special-purpose entities.
FAS 166 is a revision to FASB ASC 860-10 (previously SFAS No. 140, “Accounting for Transfers and Servicing of Financial Assets and Extinguishments of Liabilities”) and will require more information about transfers of financial assets, including securitization transactions, and where companies have continuing exposure to the risks related to transferred financial assets. FAS 166 also eliminates the concept of a “qualifying special-purpose entity”, changes the requirements for derecognizing financial assets and requires additional disclosures.
FAS 167 changes 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.
Both FAS 166 and FAS 167 became effective as of the beginning of each reporting entity’s first annual reporting period that begins after November 15, 2009, for interim periods within that first annual reporting period and for interim and annual reporting periods thereafter. Earlier application is prohibited. The recognition and measurement provisions of FAS 166 shall be applied to transfers that occur on or after the effective date. The Corporation adopted both FAS 166 and FAS 167 on January 1, 2010, as required. The Corporation is currently assessing the impact this adoption may have on the Corporation’s consolidated financial statements.
In January 2010,2013, the FASB issued ASU No. 2010-06, 2013-01,“ImprovingBalance Sheet (Topic 210): Disclosures About Fair Value Measurementsabout Offsetting Assets and Liabilities,”,” which added disclosure requirementsamended disclosures by requiring improved information about transfers intofinancial instruments and out of Levels 1, 2, and 3, clarified existing fair value disclosure requirements about the appropriate level of disaggregation, and clarifiedderivative instruments that a description of the valuation technique (e.g., market approach, income approach, or cost approach) and inputs used to measure fair value was required for recurring, nonrecurring, and Level 2 and 3 fair value measurements. These provisions of the ASU were effective for the Corporation’s reporting period ending March 31, 2010. The ASU also requires that Level 3 activity about purchases, sales, issuances, and settlements be presented on a gross basis rather than as a net number as currently permitted. This provision of the ASU is effective for the Corporation’s reporting period ending March 31, 2011. As this provision amends only the disclosure requirements related to Level 3 activity, the adoption will have no impactare either offset on the Corporation’s statementsbalance sheet or subject to an enforceable master netting arrangement or similar agreement, irrespective of income and condition.
In December 2010,whether they are offset on the FASB issued ASU No. 2010-28, “When to Perform Step 2 of the Goodwill Impairment Test forbalance sheet. Reporting Units with Zero or Negative Carrying Amounts.” Under GAAP, the evaluation of goodwill impairment is a two-step test. In Step 1, an entity must assess whether the carrying amount of a reporting unit exceeds its fair value. If it does, an entity must perform Step 2 of the goodwill impairment test to determine whether goodwill has been impaired and to calculate the amount of that impairment. The provisions of this ASU modify Step 1 of the goodwill impairment test for reporting units with zero or negative carrying amounts. For those reporting units, an entity isentities are required to perform Step 2provide both net and gross information for these assets and liabilities in order to enhance comparability between those entities that prepare their financial statements on the basis of international financial reporting standards ("IFRS"). Companies were required to apply the goodwill impairment test if it is more likely than not that a goodwill impairment exists.amendments for fiscal years beginning on or after January 1, 2013, and interim periods within those years. The provisions of this ASU are effective for the Corporation’s reporting period ending March 31, 2011. As of December 31, 2010, the Corporation had no reporting units with zero or negative carrying amounts or reporting units where there was a reasonable possibility of failing Step 1 of the goodwill impairment test. As a result, the adoption of this ASU isaccounting standard did not expected to have a material impact on the Corporation’s statementsCorporation's results of income and condition.
operations, financial position, or liquidity.
ASU 20100-20,Receivables (Topic 310): Disclosures about the Credit Quality of Financing Receivables and the Allowance for Credit Losses, will help investors assess the credit risk of a company’s receivables portfolio and the adequacy of its allowance for credit losses held against the portfolios by expanding credit risk disclosures.
This ASU requires more information about the credit quality of financing receivables in the disclosures to financial statements, such as aging information and credit quality indicators. Both new and existing disclosures must be disaggregated by portfolio segment or class. The disaggregation of information is based on how a company develops its allowance for credit losses and how it manages its credit exposure.
The amendments in this Update apply to all public and nonpublic entities with financing receivables. Financing receivables include loans and trade accounts receivable. However, short-term trade accounts receivable, receivables measured at fair value or lower of cost or fair value, and debt securities are exempt from these disclosure amendments.
The effective date of ASU 2010-20 differs for public and nonpublic companies. For public companies, the amendments that require disclosures as of the end of a reporting period are effective for periodsending on or after December 15, 2010. The amendments that require disclosures about activity that occurs during a reporting period are effective for periodsbeginning on or after December 15, 2010. For nonpublic companies, the amendments are effective for annual reporting periods ending on or after December 15, 2011.
In April 2009, the FASB issued three amendments to the fair value measurement, disclosure and other-than-temporary impairment standards:
FASB ASC 820-10-05 (previously SFAS No. 157, “Fair Value Measurements”) defines fair value as the price that would be received to sell the asset or transfer the liability in an orderly transaction (that is, not a forced liquidation or distressed sale) between market participants at the measurement date under current market conditions. FASB ASC 820-10-05 provides additional guidance on identifying circumstances when a transaction may not be considered orderly.
FASB ASC 820-10-65 provides a list of factors that a reporting entity should evaluate to determine whether there has been a significant decrease in the volume and level of activity for the asset or liability in relation to normal market activity for the asset or liability. When the reporting entity concludes there has been a significant decrease in the volume and level of activity for the asset or liability, further analysis of the information from that market is needed and significant adjustments to the related prices may be necessary to estimate fair value in accordance with FASB ASC 820-10-05.
FASB ASC 820-10-65 clarifies that when there has been a significant decrease in the volume and level of activity for the asset or liability, some transactions may not be orderly. In those situations, the entity must evaluate the weight of evidence to determine whether the transaction is orderly. It also provides a list of circumstances that may indicate that a transaction is not orderly. A transaction price that is not associated with an orderly transaction is given little, if any, weight when estimating fair value.
FASB ASC 320-10-65 amends other-than-temporary impairment guidance for debt securities and expands disclosure requirements for other-than-temporarily impaired debt and equity securities. FASB ASC 320-10-65 requires companies to record other-than-temporary impairment charges, through earnings, if they have the intent to sell, or will more likely than not be required to sell, an impaired debt security before a recovery of its amortized cost basis. In addition, FASB ASC 320-10-65 requires companies to record other-than-temporary
impairment charges through earnings for the amount of credit losses, regardless of the intent or requirement to sell. Credit loss is measured as the difference between the present value of an impaired debt security’s cash flows and its amortized cost basis. Non-credit related write-downs to fair value must be recorded as decreases to accumulated other comprehensive income as long as a company has no intent or requirement to sell an impaired security before a recovery of amortized cost basis. Finally, FASB ASC 320-10-65 requires companies to record all previously recorded non-credit related other-than-temporary impairment charges for debt securities as cumulative effect adjustments to retained earnings as of the beginning of the period of adoption.
FASB ASC 825-10-65 (previously SFAS 107-1 and APB 28-1) requires disclosures about fair value of financial instruments for interim reporting periods of publicly traded companies as well as in annual financial statements. FASB ASC 825-10-65 also requires those disclosures in summarized financial information at interim reporting periods.
All three FASB ASC’s discussed herein include substantial additional disclosure requirements. The effective date for these new ASC’s is the same: interim and annual reporting periods ended after June 15, 2009. The Corporation adopted these ASC’s at June 30, 2009 and there was not a material impact on its consolidated financial statements.
On May 28, 2009, the FASB issued FASB ASC 855-10-05 (previously SFAS No. 165, “Subsequent Events”). Under FASB ASC 855-10-05, companies are required to evaluate events and transactions that occur after the balance sheet date but before the date the financial statements are issued, or available to be issued in the case of non-public entities. FASB ASC 855-10-05 requires entities to recognize in the financial statements, the effect of all events or transactions that provide additional evidencesignificant amounts reclassified from each component of conditions that existed ataccumulated other comprehensive income based on its source and the balance sheet date, includingincome statement line item affected by the estimates inherent in the financial preparation process. Entities shall not recognize the impact of events or transactions that provide evidence about conditions that did not exist at the balance sheet date but arose after that date. FASB ASC 855-10-05 also requires entities to disclose the date through which subsequent events have been evaluated. ASC 855-10-05 was subsequently amended in February of 2010 by ASU 2010-09 “Amendment to Certain recognition and Disclosure Requirements.” FASB ASC 855-10-05 was effective for interim and annual reporting periods ending after June 15, 2009.reclassification. The Corporation adopted the provisions of FASB ASC 855-10-05 forASU No. 2013-02 effective January 1, 2013. As the quarter ended June 30, 2009. TheCorporation provided these required disclosures in the notes to the Consolidated Financial Statements, the adoption of this accounting standardASU No. 2013-02 had no material impact on the Corporation’sCorporation's consolidated financial statements.
On June 12, 2009, the FASB issued SFAS No. 166, “Accounting for Transfersstatements of Financial Assets” (“FAS 166”),income and SFAS No. 167, “Amendments to FASB Interpretation No. 46(R)” (“FAS 167”), which change the way entities account for securitizations and special-purpose entities.
FAS 166 is a revision to FASB ASC 860-10-05 (previously SFAS 140, “Accounting for Transfers and Servicing of Financial Assets and Extinguishments of Liabilities”) and will require more information about transfers of financial assets, including securitization transactions, and where companies have continuing exposure to the risks related to transferred financial assets. FAS 166 also eliminates the concept of a “qualifying special-purpose entity”, changes the requirements for derecognizing financial assets and requires additional disclosures.
FAS 167 changes 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.
Both FAS 166 and FAS 167 will be effective as of the beginning of each reporting entity’s first annual reporting period that begins after November 15, 2009, for interim periods within that first annual reporting period and for interim and annual reporting periods thereafter. Earlier application is prohibited. The recognition and measurement provisions of FAS 166 shall be applied to transfers that occur on or after the effective date. The Corporation adopted both FAS 166 and FAS 167 on January 1, 2010, as required. The Corporation is currently assessing the impact this adoption may have on the Corporation’s consolidated financial statements.
In November 2008, the SEC released a proposed roadmap regarding the potential use by U.S. issuers of financial statements prepared in accordance with International Financial Reporting Standards (“IFRS”). IFRS is a comprehensive series of accounting standards published by the International Accounting Standards Board. Under the proposed roadmap, the Company may be required to prepare financial statements in accordance with IFRS as early as 2014. The SEC will make a determination in 2011 regarding the mandatory adoption of IFRS. The Company is currently assessing the impact that this potential change would have on its consolidated financial statements, and it will continue to monitor the development of the potential implementation of IFRS.
| 56 | ||
| 57 | ||
| | | | | | | | | | |||||||||||||||||||||||||||
| | | | | | | | | | |||||||||||||||||||||||||||
| Expected Maturity/Principal Repayment December 31, | ||||||||||||||||||||||||||||||||||||
| Average Interest Rate | Year End 2011 | Year End 2012 | Year End 2013 | Year End 2014 | Year End 2015 | 2016 and Thereafter | Total Balance | Estimated Fair Value | ||||||||||||||||||||||||||||
| (Dollars in Thousands) | ||||||||||||||||||||||||||||||||||||
| Interest-Earning Assets: | ||||||||||||||||||||||||||||||||||||
| Loans, net | 5.41 | % | $ | 288,072 | $ | 95,302 | $ | 118,410 | $ | 70,086 | $ | 41,415 | $ | 86,292 | $ | 699,577 | $ | 706,309 | ||||||||||||||||||
| Investments | 3.07 | % | 87,524 | 53,533 | 24,911 | 28,450 | 28,846 | 154,816 | 378,080 | 378,080 | ||||||||||||||||||||||||||
| Total interest-earning assets | $ | 375,596 | $ | 148,835 | $ | 143,321 | $ | 98,536 | $ | 70,261 | $ | 241,108 | $ | 1,077,657 | $ | 1,084,389 | ||||||||||||||||||||
| Interest-Bearing Liabilities: | ||||||||||||||||||||||||||||||||||||
| Time certificates of deposit of $100,000 or greater | 0.87 | % | $ | 107,115 | $ | 9,783 | $ | 2,753 | $ | — | $ | — | $ | — | $ | 119,651 | $ | 120,021 | ||||||||||||||||||
| Time certificates of deposit of less than $100,000 | 1.46 | % | 45,737 | 12,246 | 3,554 | 150 | 265 | 10 | 61,962 | 62,358 | ||||||||||||||||||||||||||
| Other interest-bearing deposits | 0.56 | % | 99,536 | 99,536 | 103,513 | 48,142 | 89,412 | 94,370 | 534,509 | 534,593 | ||||||||||||||||||||||||||
| Subordinated debentures | 3.14 | % | 5,155 | — | — | — | — | — | 5,155 | 5,157 | ||||||||||||||||||||||||||
| Securities sold under agreements to repurchase and Fed Funds Purchased | 2.75 | % | 41,855 | — | — | — | 10,000 | 31,000 | 82,855 | 87,602 | ||||||||||||||||||||||||||
| Term borrowings | 3.61 | % | 10,000 | — | 5,000 | — | — | 115,000 | 130,000 | 133,823 | ||||||||||||||||||||||||||
| Total interest-bearing liabilities | $ | 309,398 | $ | 121,565 | $ | 114,820 | $ | 48,292 | $ | 99,677 | $ | 240,380 | $ | 934,132 | $ | 943,554 | ||||||||||||||||||||
| Cumulative interest-earning assets | $ | 375,596 | $ | 524,431 | $ | 667,752 | $ | 766,288 | $ | 836,549 | $ | 1,077,657 | $ | 1,077,657 | ||||||||||||||||||||||
| Cumulative interest-bearing liabilities | 309,398 | 430,963 | 545,783 | 594,075 | 693,752 | 934,132 | 934,132 | |||||||||||||||||||||||||||||
| Rate sensitivity gap | 66,198 | 27,270 | 28,501 | 50,244 | (29,416 | ) | 728 | 143,525 | ||||||||||||||||||||||||||||
| Cumulative rate sensitivity gap | 66,198 | 93,468 | 121,969 | 172,213 | 142,797 | 143,525 | 143,525 | |||||||||||||||||||||||||||||
| Cumulative gap ratio | 1.21 | % | 1.22 | % | 1.22 | % | 1.29 | % | 1.21 | % | 1.15 | % | 1.15 | % | ||||||||||||||||||||||
| Expected Maturity/Principal Repayment December 31, | ||||||||||||||||||||||||||||||||||||
| Average Interest Rate | Year End 2014 | Year End 2015 | Year End 2016 | Year End 2017 | Year End 2018 | 2019 and Thereafter | Total Balance | Estimated Fair Value | ||||||||||||||||||||||||||||
| (Dollars in Thousands) | ||||||||||||||||||||||||||||||||||||
| Interest-Earning Assets: | ||||||||||||||||||||||||||||||||||||
| Loans, net | 4.42 | % | $ | 343,557 | $ | 110,140 | $ | 85,347 | $ | 87,235 | $ | 124,630 | $ | 199,701 | $ | 950,610 | $ | 948,606 | ||||||||||||||||||
| Investments | 2.99 | % | 69,678 | 32,086 | 53,108 | 29,752 | 27,951 | 325,781 | 538,356 | 534,028 | ||||||||||||||||||||||||||
| Total interest-earning assets | $ | 413,235 | $ | 142,226 | $ | 138,455 | $ | 116,987 | $ | 152,581 | $ | 525,482 | $ | 1,488,966 | $ | 1,482,634 | ||||||||||||||||||||
| Interest-Bearing Liabilities: | ||||||||||||||||||||||||||||||||||||
| Time certificates of deposit of $100,000 or greater | 0.88 | % | $ | 62,473 | $ | 16,434 | $ | 16,817 | $ | 3,720 | $ | — | $ | — | $ | 99,444 | $ | 100,194 | ||||||||||||||||||
| Time certificates of deposit of less than $100,000 | 1.36 | % | 39,633 | 9,238 | 2,948 | 656 | 34 | — | 52,509 | 52,905 | ||||||||||||||||||||||||||
| Other interest-bearing deposits | 0.41 | % | 207,650 | 206,551 | 155,746 | 106,746 | 79,313 | 434,046 | 1,190,052 | 1,190,052 | ||||||||||||||||||||||||||
| Subordinated debentures | 3.06 | % | 5,155 | — | — | — | — | — | 5,155 | 5,143 | ||||||||||||||||||||||||||
| Securities sold under agreements torepurchase and Fed Funds Purchased | 5.90 | % | — | — | — | 15,000 | 16,000 | — | 31,000 | 33,430 | ||||||||||||||||||||||||||
| Term borrowings | 3.26 | % | — | — | — | 35,000 | 40,000 | 40,000 | 115,000 | 124,010 | ||||||||||||||||||||||||||
| Total interest-bearing liabilities | $ | 314,911 | $ | 232,223 | $ | 175,511 | $ | 161,122 | $ | 135,347 | $ | 474,046 | $ | 1,493,160 | $ | 1,505,734 | ||||||||||||||||||||
| Cumulative interest-earning assets | $ | 413,235 | $ | 555,461 | $ | 693,916 | $ | 810,903 | $ | 963,484 | $ | 1,488,966 | $ | 1,434,314 | ||||||||||||||||||||||
| Cumulative interest-bearing liabilities | 314,911 | 547,134 | 722,645 | 883,767 | 1,019,114 | 1,493,160 | 1,243,006 | |||||||||||||||||||||||||||||
| Rate sensitivity gap | 98,324 | (89,997) | (37,056) | (44,135) | 17,234 | 51,436 | 191,308 | |||||||||||||||||||||||||||||
| Cumulative rate sensitivity gap | 98,324 | 8,327 | (28,729) | (72,864) | (55,630) | (4,194) | (4,194) | |||||||||||||||||||||||||||||
| Cumulative gap ratio | 1.31 | % | 1.02 | % | 0.96 | % | 0.92 | % | 0.95 | % | 1.00 | % | 1.00 | % | ||||||||||||||||||||||
On September 30, 2009, the FDIC proposed a rule that required insured institutions to prepay their estimated quarterly assessments through December 31, 2012 to strengthen the cash position of the Deposit Insurance Fund. The cash prepayment was made on December 30, 2009 and amounted to approximately $5.7 million, which included the 2009 fourth quarter assessment. The prepayment did not have a significant impact on the Corporation’s future cash position or operations.
| 59 | ||
2012. See Note 9 of the Notes to the Consolidated Financial Statements for more information.
2012.
| | | | | | |||||||||||||||
| December 31, | Net Change Volume 2010 vs. 2009 | |||||||||||||||||||
| 2010 | 2009 | |||||||||||||||||||
| Amount | Percentage | Amount | Percentage | |||||||||||||||||
| (Dollars in Thousands) | ||||||||||||||||||||
| Demand Deposits | $ | 144,210 | 30.4 | % | $ | 130,518 | 34.4 | % | $ | 13,692 | ||||||||||
| Interest-Bearing Demand | 186,509 | 39.2 | 156,738 | 41.3 | 29,771 | |||||||||||||||
| Regular Savings | 112,305 | 23.6 | 58,240 | 15.4 | 54,065 | |||||||||||||||
| Money Market Deposits under $100 | 32,105 | 6.8 | 33,795 | 8.9 | (1,690 | ) | ||||||||||||||
| Total core deposits | $ | 475,129 | 100.0 | % | $ | 379,291 | 100.0 | % | $ | 95,838 | ||||||||||
| Total deposits | $ | 860,332 | $ | 813,705 | $ | 46,627 | ||||||||||||||
| Core deposits to total deposits | 55.23 | % | 46.61 | % | ||||||||||||||||
| December 31, | Net Change Volume 2013 vs. 2012 | |||||||||||||||||||
| 2013 | 2012 | |||||||||||||||||||
| Amount | Percentage | Amount | Percentage | |||||||||||||||||
| (Dollars in Thousands) | ||||||||||||||||||||
| Demand Deposits | $ | 227,370 | 30.3 | % | $ | 215,071 | 30.7 | % | $ | 12,299 | ||||||||||
| Interest-Bearing Demand | 266,613 | 35.5 | 217,922 | 31.2 | 48,691 | |||||||||||||||
| Regular Savings | 102,721 | 13.7 | 110,896 | 15.8 | (8,175) | |||||||||||||||
| Money Market Deposits under $100 | 153,502 | 20.5 | 156,009 | 22.3 | (2,507) | |||||||||||||||
| Total core deposits | $ | 750,206 | 100.0 | % | $ | 699,898 | 100.0 | % | $ | 50,308 | ||||||||||
| Total deposits | $ | 1,342,005 | $ | 1,306,922 | $ | 35,083 | ||||||||||||||
| Core deposits to total deposits | 55.90 | % | 53.55 | % | ||||||||||||||||
| 60 | ||
that were previously classified as short term borrowings were discontinued and were moved to interest bearing checking accounts.
| | | | |||||||||
| December 31, | ||||||||||||
| 2010 | 2009 | 2008 | ||||||||||
| (Dollars in Thousands) | ||||||||||||
| Short-term securities sold under repurchase agreements, including Federal Funds purchased: | ||||||||||||
| Average interest rate: | ||||||||||||
| At year end | 0.27 | % | 0.97 | % | 1.98 | % | ||||||
| For the year | 0.50 | % | 1.38 | % | 2.39 | % | ||||||
| Average amount outstanding during the year | $ | 42,608 | $ | 35,392 | $ | 43,973 | ||||||
| Maximum amount outstanding at any month end | $ | 54,855 | $ | 58,515 | $ | 52,992 | ||||||
| Amount outstanding at year end | $ | 41,855 | $ | 46,109 | $ | 30,143 | ||||||
| December 31, | ||||||||||||
| 2013 | 2012 | 2011 | ||||||||||
| (Dollars in Thousands) | ||||||||||||
| Short-term securities sold under repurchase agreements,including Federal Funds purchased: | ||||||||||||
| Average interest rate: | ||||||||||||
| At year end | — | % | — | % | — | % | ||||||
| For the year | 0.32 | % | 0.48 | % | 0.27 | % | ||||||
| Average amount outstanding during the year | $ | 425 | $ | 181 | $ | 29,288 | ||||||
| Maximum amount outstanding at any month end | $ | - | $ | 10,050 | $ | 71,732 | ||||||
| Amount outstanding at year end | $ | — | $ | — | $ | — | ||||||
During 2009, cash and cash equivalents (which increased overall by $74.1$23.4 million) were provided on a net basis by operating activities and financing activities, and used on a net basis by investing activities. With respect to the cash flows from financing activities, a $172.3 million increase in cash resulted from a substantial net increaseincreases in deposits as well as fromwere partially offset by the proceeds of our TARP participation and rights offering.
Corporation’s dividend payments.
| 61 | ||
| | | | | | |||||||||||||||
| Total | Less Than 1 Year | 1 – 3 Years | 4 – 5 Years | After 5 Years | ||||||||||||
| (Dollars in Thousands) | ||||||||||||||||
| Contractual Obligations | ||||||||||||||||
| Operating lease obligations | $ | 11,543 | $ | 920 | $ | 1,735 | $ | 1,599 | $ | 7,289 | ||||||
| Total contracted cost obligations | $ | 11,543 | $ | 920 | $ | 1,735 | $ | 1,599 | $ | 7,289 | ||||||
| Other Long-term Liabilities/Long-term Debt | ||||||||||||||||
| Time Deposits | $ | 151,953 | $ | 102,106 | $ | 45,437 | $ | 4,410 | $ | — | ||||||
| Federal Home Loan Bank advances and repurchase agreements | 146,000 | — | 50,000 | 56,000 | 40,000 | |||||||||||
| Subordinated debentures | 5,155 | — | — | — | 5,155 | |||||||||||
| Total Other Long-term Liabilities/Long-term Debt | $ | 303,108 | $ | 102,106 | $ | 95,437 | $ | 60,410 | $ | 45,155 | ||||||
| Other Commercial Commitments – Off Balance Sheet | ||||||||||||||||
| Commitments under commercial loans and lines of credit | $ | 109,661 | $ | 109,661 | $ | — | $ | — | $ | — | ||||||
| Home equity and other revolving lines of credit | 41,836 | 41,836 | — | — | — | |||||||||||
| Outstanding commercial mortgage loan commitments | 48,129 | 39,568 | 8,561 | — | — | |||||||||||
| Standby letters of credit | 9,655 | 9,655 | — | — | — | |||||||||||
| Performance letters of credit | 21,844 | 21,844 | — | — | — | |||||||||||
| Outstanding residential mortgage loan commitments | 1,858 | 1,858 | — | — | — | |||||||||||
| Overdraft protection lines | 5,273 | 5,273 | — | — | — | |||||||||||
| Total off balance sheet arrangements and contractual obligations | $ | 238,256 | $ | 229,695 | $ | 8,561 | $ | — | $ | — | ||||||
| Total contractual obligations and other commitments | $ | 552,907 | $ | 332,721 | $ | 105,733 | $ | 62,009 | $ | 52,444 | ||||||
2011.
| 62 | ||
On January 12, 2009, the Corporation issued $10 million in nonvoting senior preferred stock to the U.S. Department of Treasury under the Capital Purchase Program. As part of the transaction, the Corporation also issued warrants to the U.S. Treasury to purchase 173,410 shares of common stock of the Corporation at an exercise price of $8.65 per share. As previously announced, the Corporation’s voluntary participation in the Capital Purchase Program amounted to approximately 50 percent of what the Corporation had qualified for under the U.S. Treasury program. The funding was used to support the balance sheet. As a result of the successful completion of the Rights Offering in October 2009, the number of shares underlying the warrant held by the U.S. Treasury was reduced to 86,705 shares or 50 percent of the original 173,410 shares.
In July 2009, the Corporation announced that its Board of Directors had authorized a rights offering of up to approximately $11 million of common stock to its existing stockholders. In October, the Corporation successfully raised total gross proceeds of approximately $11 million in its rights offering and a private placement with its standby purchaser.
Book value per share at year-end 20102013 was $6.83$9.61 compared to $6.32$9.14 at year-end 2009.2012. Tangible book value at year-end 20102013 was $5.79$8.58 compared to $5.15$8.11 at year end 2009;2012; see Item 6 for a reconciliation of this non-GAAP financial measure to book value.
| 63 | ||
Net interest income, the primary source of earnings, is impacted favorably or unfavorably by changes in interest rates. Although the impact of interest rate fluctuations is mitigated by ALCO strategies, significant changes in interest rates can have a material adverse impact on profitability.
| 64 | ||
| 65 | ||
| | Page | ||
| F-2 | ||||
| Consolidated Statements of Condition | F-4 | |||
| Consolidated Statements of Income | F-5 | |||
| Consolidated Statements of Comprehensive Income | F-6 | |||
| Consolidated Statements of Changes in Stockholders’ Equity | F-7 | |||
| Consolidated Statements of Cash Flows | F-8 | |||
| Notes to Consolidated Financial Statements | F-9 | |||
| F-1 | ||
audit.
/s/ ParenteBeard LLCParenteBeard LLCReading, PennsylvaniaMarch 16, 2011
| F-2 | ||
| F-3 | ||
| | | ||||||||
| December 31, | ||||||||||
| 2010 | 2009 | |||||||||
| (In Thousands, Except Share Data) | ||||||||||
| ASSETS | ||||||||||
| Cash and due from banks | $ | 37,497 | $ | 89,168 | ||||||
| Investment securities available-for-sale | 378,080 | 298,124 | ||||||||
| Loans | 708,444 | 719,606 | ||||||||
| Less: Allowance for loan losses | 8,867 | 8,711 | ||||||||
| Net loans | 699,577 | 710,895 | ||||||||
| Restricted investment in bank stocks, at cost | 9,596 | 10,672 | ||||||||
| Premises and equipment, net | 12,937 | 17,860 | ||||||||
| Accrued interest receivable | 4,134 | 4,033 | ||||||||
| Bank owned life insurance | 27,905 | 26,304 | ||||||||
| Goodwill and other intangible assets | 16,959 | 17,028 | ||||||||
| Prepaid FDIC assessment | 3,582 | 5,374 | ||||||||
| Other assets | 17,118 | 16,030 | ||||||||
| Total assets | $ | 1,207,385 | $ | 1,195,488 | ||||||
| LIABILITIES AND STOCKHOLDERS’ EQUITY | ||||||||||
| Deposits: | ||||||||||
| Non-interest-bearing | $ | 144,210 | $ | 130,518 | ||||||
| Interest-bearing: | ||||||||||
| Time deposits $100,000 and over | 119,651 | 144,802 | ||||||||
| Interest-bearing transaction, savings and time deposits less than $100,000 | 596,471 | 538,385 | ||||||||
| Total deposits | 860,332 | 813,705 | ||||||||
| Short-term borrowings | 41,855 | 46,109 | ||||||||
| Long-term borrowings | 171,000 | 223,144 | ||||||||
| Subordinated debentures | 5,155 | 5,155 | ||||||||
| Accounts payable and accrued liabilities | 8,086 | 5,626 | ||||||||
| Total liabilities | 1,086,428 | 1,093,739 | ||||||||
| Stockholders’ Equity | ||||||||||
| Preferred Stock, $1,000 liquidation value per share: | ||||||||||
| Authorized 5,000,000 shares; issued 10,000 shares in 2010 and 2009 | 9,700 | 9,619 | ||||||||
| Common stock, no par value: | ||||||||||
| Authorized 25,000,000 shares; issued 18,477,412 shares in 2010 and 16,762,412 in 2009; outstanding 16,289,832 shares in 2010 and 14,572,029 in 2009 | 110,056 | 97,908 | ||||||||
| Additional paid-in capital | 4,941 | 5,650 | ||||||||
| Retained earnings | 21,633 | 17,068 | ||||||||
| Treasury stock, at cost (2,187,580 shares in 2010 and 2,190,383 in 2009) | (17,698 | ) | (17,720 | ) | ||||||
| Accumulated other comprehensive loss | (7,675 | ) | (10,776 | ) | ||||||
| Total stockholders’ equity | 120,957 | 101,749 | ||||||||
| Total liabilities and stockholders’ equity | $ | 1,207,385 | $ | 1,195,488 | ||||||
| December 31, | |||||||
| 2013 | 2012 | ||||||
| (In Thousands, Except Share and Per Share Data) | |||||||
| ASSETS | |||||||
| Cash and due from banks | $ | 82,692 | $ | 104,134 | |||
| Interest bearing deposits with banks | — | 2,004 | |||||
| Total cash and cash equivalents | 82,692 | 106,138 | |||||
| Securities available-for-sale | 323,070 | 496,815 | |||||
| Securities held-to-maturity (fair value of $210,958 and $62,431) | 215,286 | 58,064 | |||||
| Loans held for sale | — | 1,491 | |||||
| Loans | 960,943 | 889,672 | |||||
| Less: Allowance for loan losses | 10,333 | 10,237 | |||||
| Net loans | 950,610 | 879,435 | |||||
| Restricted investment in bank stocks, at cost | 8,986 | 8,964 | |||||
| Premises and equipment, net | 13,681 | 13,563 | |||||
| Accrued interest receivable | 6,802 | 6,849 | |||||
| Bank owned life insurance | 35,734 | 34,961 | |||||
| Goodwill and other intangible assets | 16,828 | 16,858 | |||||
| Prepaid FDIC assessment | — | 811 | |||||
| Other real estate owned | 220 | 1,300 | |||||
| Due from brokers for investment securities | 8,759 | — | |||||
| Other assets | 10,414 | 4,516 | |||||
| Total assets | $ | 1,673,082 | $ | 1,629,765 | |||
| LIABILITIES AND STOCKHOLDERS’ EQUITY | |||||||
| Deposits: | |||||||
| Non-interest-bearing | $ | 227,370 | $ | 215,071 | |||
| Interest-bearing: | |||||||
| Time deposits $100 and over | 99,444 | 110,835 | |||||
| Interest-bearing transaction, savings and time deposits less than $100 | 1,015,191 | 981,016 | |||||
| Total deposits | 1,342,005 | 1,306,922 | |||||
| Long-term borrowings | 146,000 | 146,000 | |||||
| Subordinated debentures | 5,155 | 5,155 | |||||
| Accounts payable and accrued liabilities | 11,338 | 10,997 | |||||
| Total liabilities | 1,504,498 | 1,469,074 | |||||
| Stockholders’ Equity | |||||||
| Preferred Stock, $1,000 liquidation value per share: | |||||||
| Authorized 5,000,000 shares; issued and outstanding 11,250 shares of Series B preferred stock at December 31, 2013 and 2012 total liquidation value of $11,250,000 | 11,250 | 11,250 | |||||
| Common stock, no par value: | |||||||
| Authorized 25,000,000 shares; issued 18,477,412 shares at December 31, 2013 and 2012; outstanding 16,369,012 shares at December 31, 2013 and 16,347,915 at December 31, 2012 | 110,056 | 110,056 | |||||
| Additional paid-in capital | 4,986 | 4,801 | |||||
| Retained earnings | 61,914 | 46,753 | |||||
| Treasury stock, at cost (2,108,400 shares at December 31, 2013 and 2,129,497 at December 31, 2012) | (17,078) | (17,232) | |||||
| Accumulated other comprehensive income (loss) | (2,544) | 5,063 | |||||
| Total stockholders’ equity | 168,584 | 160,691 | |||||
| Total liabilities and stockholders’ equity | $ | 1,673,082 | $ | 1,629,765 | |||
| F-4 | ||
| | | | |||||||||||
| Years Ended December 31, | ||||||||||||||
| 2010 | 2009 | 2008 | ||||||||||||
| (Dollars in Thousands, Except per Share Data) | ||||||||||||||
| Interest income: | ||||||||||||||
| Interest and fees on loans | $ | 37,200 | $ | 36,751 | $ | 36,110 | ||||||||
| Interest and dividends on investment securities: | ||||||||||||||
| Taxable interest income | 10,588 | 12,727 | 10,353 | |||||||||||
| Non-taxable interest income | 220 | 989 | 2,547 | |||||||||||
| Dividends | 706 | 643 | 771 | |||||||||||
| Interest on federal funds sold and securities purchased under agreements to resell | — | — | 113 | |||||||||||
| Total interest income | 48,714 | 51,110 | 49,894 | |||||||||||
| Interest expense: | ||||||||||||||
| Interest on certificates of deposit $100,000 & over | 1,301 | 3,551 | 2,411 | |||||||||||
| Interest on other deposits | 4,705 | 8,757 | 10,876 | |||||||||||
| Interest on short-term borrowings | 211 | 449 | 1,295 | |||||||||||
| Interest on long-term borrowings | 8,568 | 9,888 | 9,513 | |||||||||||
| Total interest expense | 14,785 | 22,645 | 24,095 | |||||||||||
| Net interest income | 33,929 | 28,465 | 25,799 | |||||||||||
| Provision for loan losses | 5,076 | 4,597 | 1,561 | |||||||||||
| Net interest income, after provision for loan losses | 28,853 | 23,868 | 24,238 | |||||||||||
| Other income: | ||||||||||||||
| Service charges, commissions and fees | 1,975 | 1,835 | 2,015 | |||||||||||
| Annuity and insurance | 123 | 126 | 112 | |||||||||||
| Bank-owned life insurance | 1,226 | 1,156 | 1,203 | |||||||||||
| Other | 487 | 298 | 420 | |||||||||||
| Total other-than-temporary impairment losses | (8,953 | ) | (9,066 | ) | (1,761 | ) | ||||||||
| Less: Portion of loss recognized in other comprehensive income (before taxes) | 3,377 | 4,828 | — | |||||||||||
| Net other-than-temporary impairment losses | (5,576 | ) | (4,238 | ) | (1,761 | ) | ||||||||
| Net gains on sale on investment securities | 4,237 | 4,729 | 655 | |||||||||||
| Net investment securities gains (losses) | (1,339 | ) | 491 | (1,106 | ) | |||||||||
| Total other income | 2,472 | 3,906 | 2,644 | |||||||||||
| Other expense: | ||||||||||||||
| Salaries and employee benefits | 10,765 | 9,915 | 8,505 | |||||||||||
| Occupancy, net | 2,088 | 2,536 | 3,279 | |||||||||||
| Premises and equipment | 1,093 | 1,263 | 1,436 | |||||||||||
| FDIC Insurance | 2,126 | 2,055 | 217 | |||||||||||
| Professional and consulting | 1,121 | 811 | 703 | |||||||||||
| Stationery and printing | 316 | 339 | 397 | |||||||||||
| Marketing and advertising | 268 | 366 | 637 | |||||||||||
| Computer expense | 1,366 | 964 | 834 | |||||||||||
| OREO expense, net | 284 | 1,438 | 31 | |||||||||||
| Loss on fixed assets, net | 427 | — | 51 | |||||||||||
| Repurchase agreement termination fee | 594 | — | — | |||||||||||
| Other | 3,651 | 3,370 | 3,383 | |||||||||||
| Total other expense | 24,099 | 23,057 | 19,473 | |||||||||||
| Income before income tax expense | 7,226 | 4,717 | 7,409 | |||||||||||
| Income tax expense | 222 | 946 | 1,567 | |||||||||||
| Net income | 7,004 | 3,771 | 5,842 | |||||||||||
| Preferred stock dividends and accretion | 581 | 567 | — | |||||||||||
| Net income available to common stockholders | $ | 6,423 | $ | 3,204 | $ | 5,842 | ||||||||
| Earnings per common share: | ||||||||||||||
| Basic | $ | 0.43 | $ | 0.24 | $ | 0.45 | ||||||||
| Diluted | $ | 0.43 | $ | 0.24 | $ | 0.45 | ||||||||
| Weighted average common shares outstanding: | ||||||||||||||
| Basic | 15,025,870 | 13,382,614 | 13,048,518 | |||||||||||
| Diluted | 15,027,159 | 13,385,416 | 13,061,410 | |||||||||||
| Years Ended December 31, | ||||||||||
| 2013 | 2012 | 2011 | ||||||||
| (Dollars in Thousands, Except per Share Data) | ||||||||||
| Interest income: | ||||||||||
| Interest and fees on loans | $ | 40,132 | $ | 38,921 | $ | 36,320 | ||||
| Interest and dividends on investment securities: | ||||||||||
| Taxable interest income | 12,189 | 12,269 | 13,278 | |||||||
| Non-taxable interest income | 4,422 | 3,507 | 1,700 | |||||||
| Dividends | 523 | 567 | 629 | |||||||
| Interest on federal funds sold and other short-term investment | 2 | 8 | — | |||||||
| Total interest income | 57,268 | 55,272 | 51,927 | |||||||
| Interest expense: | ||||||||||
| Interest on certificates of deposit $100 & over | 866 | 839 | 1,215 | |||||||
| Interest on other deposits | 4,353 | 4,569 | 4,305 | |||||||
| Interest on short-term borrowings | — | — | 79 | |||||||
| Interest on long-term borrowings | 5,863 | 6,368 | 6,578 | |||||||
| Total interest expense | 11,082 | 11,776 | 12,177 | |||||||
| Net interest income | 46,186 | 43,496 | 39,750 | |||||||
| Provision for loan losses | 350 | 325 | 2,448 | |||||||
| Net interest income, after provision for loan losses | 45,836 | 43,171 | 37,302 | |||||||
| Other income: | ||||||||||
| Service charges, commissions and fees | 1,873 | 1,775 | 1,896 | |||||||
| Annuity and insurance | 489 | 204 | 110 | |||||||
| Bank-owned life insurance | 1,364 | 1,018 | 1,038 | |||||||
| Loan related fees | 839 | 510 | 432 | |||||||
| Net gains on sale of loans held for sale | 294 | 484 | 251 | |||||||
| Bargain gain on acquisition | — | 899 | — | |||||||
| Other | 281 | 308 | 117 | |||||||
| Total other-than-temporary impairment losses | (652) | (870) | (342) | |||||||
| Net gains on sale on investment securities | 2,363 | 2,882 | 3,976 | |||||||
| Net investment securities gains | 1,711 | 2,012 | 3,634 | |||||||
| Total other income | 6,851 | 7,210 | 7,478 | |||||||
| Other expense: | ||||||||||
| Salaries and employee benefits | 13,465 | 12,571 | 11,527 | |||||||
| Occupancy and equipment | 3,518 | 2,987 | 2,947 | |||||||
| FDIC Insurance | 1,098 | 1,154 | 1,712 | |||||||
| Professional and consulting | 1,111 | 1,077 | 1,156 | |||||||
| Stationery and printing | 333 | 349 | 368 | |||||||
| Marketing and advertising | 304 | 186 | 131 | |||||||
| Computer expense | 1,422 | 1,419 | 1,312 | |||||||
| Other real estate owned expense, net | 137 | 150 | 398 | |||||||
| Repurchase agreement prepayment and termination fee | — | 1,012 | — | |||||||
| Acquisition cost | — | 482 | — | |||||||
| Other | 3,890 | 3,810 | 3,892 | |||||||
| Total other expense | 25,278 | 25,197 | 23,443 | |||||||
| Income before income tax expense | 27,409 | 25,184 | 21,337 | |||||||
| Income tax expense | 7,484 | 7,677 | 7,411 | |||||||
| Net income | 19,925 | 17,507 | 13,926 | |||||||
| Preferred stock dividends and accretion | 141 | 281 | 820 | |||||||
| Net income available to common stockholders | $ | 19,784 | $ | 17,226 | $ | 13,106 | ||||
| Earnings per common share: | ||||||||||
| Basic | $ | 1.21 | $ | 1.05 | $ | 0.80 | ||||
| Diluted | $ | 1.21 | $ | 1.05 | $ | 0.80 | ||||
| Weighted average common shares outstanding: | ||||||||||
| Basic | 16,349,204 | 16,340,197 | 16,295,761 | |||||||
| Diluted | 16,385,692 | 16,351,046 | 16,314,899 | |||||||
| F-5 | ||
| | | | | | | | |||||||||||||||||||||||
| Years Ended December 31, 2010, 2009 and 2008 | ||||||||||||||||||||||||||||||
| Preferred Stock | Common Stock | Additional Paid In Capital | Retained Earnings | Treasury Stock | Accumulated Other Comprehensive Income (Loss) | Total Stockholders’ Equity | ||||||||||||||||||||||||
| (In Thousands, Except Share and per Share Data) | ||||||||||||||||||||||||||||||
| Balance, December 31, 2007 | $ | — | $ | 86,908 | $ | 5,133 | $ | 15,161 | $ | (16,100 | ) | $ | (5,824 | ) | $ | 85,278 | ||||||||||||||
| Comprehensive income: | ||||||||||||||||||||||||||||||
| Net income | 5,842 | 5,842 | ||||||||||||||||||||||||||||
| Other comprehensive loss, net of taxes | (3,088 | ) | (3,088 | ) | ||||||||||||||||||||||||||
| Total comprehensive income | 2,754 | |||||||||||||||||||||||||||||
| Cash dividends declared on common stock of ($0.36 per share) | (4,675 | ) | (4,675 | ) | ||||||||||||||||||||||||||
| Issuance cost of common stock | (19 | ) | (19 | ) | ||||||||||||||||||||||||||
| Restricted stock award (3,028 shares) | 25 | 25 | ||||||||||||||||||||||||||||
| Exercise of stock options (25,583 shares) | 21 | 203 | 224 | |||||||||||||||||||||||||||
| Stock-based compensation expense | 128 | 128 | ||||||||||||||||||||||||||||
| Taxes related to stock-based compensation | (78 | ) | (78 | ) | ||||||||||||||||||||||||||
| Treasury stock purchased (193,083 shares) | (1,924 | ) | (1,924 | ) | ||||||||||||||||||||||||||
| Balance, December 31, 2008 | $ | — | $ | 86,908 | $ | 5,204 | $ | 16,309 | $ | (17,796 | ) | $ | (8,912 | ) | $ | 81,713 | ||||||||||||||
| Comprehensive income: | ||||||||||||||||||||||||||||||
| Net income | 3,771 | 3,771 | ||||||||||||||||||||||||||||
| Other comprehensive loss, net of taxes | (1,864 | ) | (1,864 | ) | ||||||||||||||||||||||||||
| Total comprehensive income | 1,907 | |||||||||||||||||||||||||||||
| Issuance of preferred stock (10,000 shares) and warrants (86,705 shares) | 9,539 | 461 | 10,000 | |||||||||||||||||||||||||||
| Accretion of discount on preferred stock | 80 | (80 | ) | — | ||||||||||||||||||||||||||
| Dividends on preferred stock | (487 | ) | (487 | ) | ||||||||||||||||||||||||||
| Proceeds from rights offering (1,571,428 shares) | 11,000 | 11,000 | ||||||||||||||||||||||||||||
| Cash dividends declared on common stock ($0.18 per share) | (2,434 | ) | (2,434 | ) | ||||||||||||||||||||||||||
| Issuance cost of common stock | (11 | ) | (11 | ) | ||||||||||||||||||||||||||
| Exercise of stock options (9,289 shares) | (19 | ) | 76 | 57 | ||||||||||||||||||||||||||
| Stock-based compensation expense | 77 | 77 | ||||||||||||||||||||||||||||
| Taxes related to stock-based compensation | (73 | ) | (73 | ) | ||||||||||||||||||||||||||
| Balance, December 31, 2009 | $ | 9,619 | $ | 97,908 | $ | 5,650 | $ | 17,068 | $ | (17,720 | ) | $ | (10,776 | ) | $ | 101,749 | ||||||||||||||
| Comprehensive income: | ||||||||||||||||||||||||||||||
| Net income | 7,004 | 7,004 | ||||||||||||||||||||||||||||
| Other comprehensive gains, net of taxes | 3,101 | 3,101 | ||||||||||||||||||||||||||||
| Total comprehensive income | 10,105 | |||||||||||||||||||||||||||||
| Accretion of discount on preferred stock | 81 | (81 | ) | — | ||||||||||||||||||||||||||
| Dividends on preferred stock | (500 | ) | (500 | ) | ||||||||||||||||||||||||||
| Proceeds from stock offerings (1,715,000 shares) | 12,148 | (770 | ) | 11,378 | ||||||||||||||||||||||||||
| Cash dividends declared on common stock ($0.12 per share) | (1,852 | ) | (1,852 | ) | ||||||||||||||||||||||||||
| Issuance cost of common stock | (6 | ) | (6 | ) | ||||||||||||||||||||||||||
| Stock awarded | 3 | 22 | 25 | |||||||||||||||||||||||||||
| Stock-based compensation expense | 51 | 51 | ||||||||||||||||||||||||||||
| Option related tax trueup | 7 | 7 | ||||||||||||||||||||||||||||
| Balance, December 31, 2010 | $ | 9,700 | $ | 110,056 | $ | 4,941 | $ | 21,633 | $ | (17,698 | ) | $ | (7,675 | ) | $ | 120,957 | ||||||||||||||
| Years Ended December 31, | ||||||||||
| 2013 | 2012 | 2011 | ||||||||
| (Dollars in Thousands) | ||||||||||
| Net income | $ | 19,925 | $ | 17,507 | $ | 13,926 | ||||
| Other comprehensive income, net of tax: | ||||||||||
| Unrealized gains and losses on securities available-for-sale: | ||||||||||
| Reclassification adjustments for OTTI losses included in income | 652 | 870 | 342 | |||||||
| Tax effect | (178) | (265) | (119) | |||||||
| Net of tax amount | 474 | 605 | 223 | |||||||
| Unrealized (losses) gains on available for sale securities | (8,741) | 19,819 | 8,990 | |||||||
| Tax effect | 3,578 | (7,444) | (3,486) | |||||||
| Net of tax amount | (5,163) | 12,375 | 5,504 | |||||||
| Reclassification adjustment for realized gains arising during this period | (2,363) | (2,882) | (3,976) | |||||||
| Tax effect | 645 | 879 | 1,380 | |||||||
| Net of tax amount | (1,718) | (2,003) | (2,596) | |||||||
| Unrealized holding (losses) gains on securities transferred from available-for-sale to held-to-maturity securities | (2,612) | — | 291 | |||||||
| Tax effect | 1,064 | — | (110) | |||||||
| Net of tax amount | (1,548) | — | 181 | |||||||
| Amortization of unrealized holding gains on securities transferred from available-for-sale to held-to-maturity securities | (58) | (2) | (46) | |||||||
| Tax effect | 19 | 1 | 28 | |||||||
| Net of tax amount | (39) | (1) | (18) | |||||||
| Pension plan: | ||||||||||
| Actuarial gains (losses) | 654 | (790) | (1,649) | |||||||
| Tax effect | (267) | 323 | 584 | |||||||
| Net of tax amount | 387 | (467) | (1,065) | |||||||
| Total other comprehensive (loss) income | (7,607) | 10,509 | 2,229 | |||||||
| Total comprehensive income | $ | 12,318 | $ | 28,016 | $ | 16,155 | ||||
| F-6 | ||
| | | | |||||||||||
| Years Ended December 31, | ||||||||||||||
| 2010 | 2009 | 2008 | ||||||||||||
| (Dollars in Thousands) | ||||||||||||||
| Cash flows from operating activities: | ||||||||||||||
| Net income | $ | 7,004 | $ | 3,771 | $ | 5,842 | ||||||||
| Adjustments to Reconcile Net Income to Net Cash Provided by (Used In) Operating Activities: | ||||||||||||||
| Depreciation and amortization | 1,165 | 1,451 | 1,832 | |||||||||||
| Provision for loan losses | 5,076 | 4,597 | 1,561 | |||||||||||
| Provision for deferred taxes | 51 | 819 | 1,221 | |||||||||||
| Stock-based compensation expense | 51 | 77 | 128 | |||||||||||
| Net other-than-temporary impairment losses | 5,576 | 4,238 | 1,761 | |||||||||||
| Net gains on available-for-sale securities | (4,237 | ) | (4,729 | ) | (655 | ) | ||||||||
| Net gain on sale of loans held for sale | (140 | ) | (5 | ) | (13 | ) | ||||||||
| Loans originated for resale | (8,347 | ) | (3,453 | ) | (1,708 | ) | ||||||||
| Proceeds of loans held for sale | 8,154 | 3,458 | 1,721 | |||||||||||
| Net loss on premises and equipment | 427 | — | 51 | |||||||||||
| Net loss on OREO | 207 | 905 | 26 | |||||||||||
| Life insurance death benefit | — | (136 | ) | (230 | ) | |||||||||
| Increase in cash surrender value of bank owned life insurance | (1,226 | ) | (1,020 | ) | (973 | ) | ||||||||
| Net amortization of securities | 2,979 | 793 | 90 | |||||||||||
| (Increase) decrease in accrued interest receivable | (101 | ) | 121 | 381 | ||||||||||
| Decrease in prepaid FDIC insurance assessment | 1,792 | — | — | |||||||||||
| (Increase) decrease in other assets | 1,642 | (1,732 | ) | (7,332 | ) | |||||||||
| Increase (decrease) in other liabilities | (2,426 | ) | (480 | ) | (4,432 | ) | ||||||||
| Net cash (used in) provided by operating activities | 17,647 | 8,675 | (729 | ) | ||||||||||
| Cash flows from investing activities: | ||||||||||||||
| Proceeds from maturities of investment securities available-for-sale | 67,960 | 58,206 | 52,702 | |||||||||||
| Net redemption (purchases) of restricted investment in bank stock | 1,076 | (442 | ) | (1,763 | ) | |||||||||
| Proceeds from sales of investment securities available-for-sale | 644,075 | 665,828 | 330,808 | |||||||||||
| Purchase of securities available-for-sale | (791,156 | ) | (785,044 | ) | (315,899 | ) | ||||||||
| Net decrease (increase) in loans | 8,357 | (45,543 | ) | (125,004 | ) | |||||||||
| Purchases of premises and equipment | (300 | ) | (742 | ) | (2,882 | ) | ||||||||
| Purchase of bank-owned life insurance | (6,000 | ) | (2,475 | ) | — | |||||||||
| Redemption of bank-owned life insurance | 5,610 | — | — | |||||||||||
| Proceeds from life insurance death benefits | 15 | 266 | 526 | |||||||||||
| Capital expenditure addition to OREO | — | (476 | ) | — | ||||||||||
| Proceeds from sale of premises and equipment | 1 | 1 | 24 | |||||||||||
| Proceeds from sale of branch facility | — | — | 2,414 | |||||||||||
| Increase in principal portion of lease | (9 | ) | — | — | ||||||||||
| Proceeds from sale of OREO | 1,720 | 3,520 | 452 | |||||||||||
| Net cash used in investing activities | (68,651 | ) | (106,901 | ) | (58,622 | ) | ||||||||
| Years Ended December 31, 2013, 2012 and 2011 | ||||||||||||||||||||||
| Preferred Stock | Common Stock | Additional Paid In Capital | Retained Earnings | Treasury Stock | Accumulated Other Comprehensive Income (Loss) | Total Stockholders’ Equity | ||||||||||||||||
| (In Thousands, Except Share and per Share Data) | ||||||||||||||||||||||
| Balance, January 1, 2011 | $ | 9,700 | $ | 110,056 | $ | 4,941 | $ | 21,633 | $ | (17,698) | $ | (7,675) | $ | 120,957 | ||||||||
| Net income | 13,926 | 13,926 | ||||||||||||||||||||
| Other comprehensive income | 2,229 | 2,229 | ||||||||||||||||||||
| Accretion of discount on preferred stock | 300 | (300) | — | |||||||||||||||||||
| Dividends on preferred stock | (520) | (520) | ||||||||||||||||||||
| Redemption of series A preferred stock | (10,000) | (10,000) | ||||||||||||||||||||
| Proceeds from issuance of series B preferred stock | 11,250 | 11,250 | ||||||||||||||||||||
| Warrant repurchased | (245) | (245) | ||||||||||||||||||||
| Cash dividends declared on common stock ($0.12 per share) | (1,955) | (1,955) | ||||||||||||||||||||
| Issuance cost of common stock | (5) | (5) | ||||||||||||||||||||
| Issuance cost of series B preferred stock | (84) | (84) | ||||||||||||||||||||
| Exercise of stock options (42,495 shares) | (16) | 344 | 328 | |||||||||||||||||||
| Stock-based compensation expense | 35 | 35 | ||||||||||||||||||||
| Balance, December 31, 2011 | 11,250 | 110,056 | 4,715 | 32,695 | (17,354) | (5,446) | 135,916 | |||||||||||||||
| Net income | 17,507 | 17,507 | ||||||||||||||||||||
| Other comprehensive income | 10,509 | 10,509 | ||||||||||||||||||||
| Dividends on series B preferred stock | (253) | (253) | ||||||||||||||||||||
| Cash dividends declared on common stock ($0.195 per share) | (3,188) | (3,188) | ||||||||||||||||||||
| Issuance cost of common stock | (8) | (8) | ||||||||||||||||||||
| Exercise of stock options (15,588 shares) | 19 | 122 | 141 | |||||||||||||||||||
| Stock-based compensation expense | 39 | 39 | ||||||||||||||||||||
| Option related tax trueup | 28 | 28 | ||||||||||||||||||||
| Balance, December 31, 2012 | 11,250 | 110,056 | 4,801 | 46,753 | (17,232) | 5,063 | 160,691 | |||||||||||||||
| Net income | 19,925 | 19,925 | ||||||||||||||||||||
| Other comprehensive loss | (7,607) | (7,607) | ||||||||||||||||||||
| Dividends on series B preferred stock | (169) | (169) | ||||||||||||||||||||
| Cash dividends declared on common stock ($0.260 per share) | (4,581) | (4,581) | ||||||||||||||||||||
| Dividend on restricted stock declared | (1) | (1) | ||||||||||||||||||||
| Issuance cost of common stock | (13) | (13) | ||||||||||||||||||||
| Issuance of restricted stock award (18,829 shares) | 91 | 152 | 243 | |||||||||||||||||||
| Exercise of stock options (2,268 shares) | 19 | 2 | 21 | |||||||||||||||||||
| Stock-based compensation expense | 59 | 59 | ||||||||||||||||||||
| Option related tax trueup | 16 | 16 | ||||||||||||||||||||
| Balance, December 31, 2013 | $ | 11,250 | $ | 110,056 | $ | 4,986 | $ | 61,914 | $ | (17,078) | $ | (2,544) | $ | 168,584 | ||||||||
| F-7 | ||
| | | | |||||||||||
| Years Ended December 31, | ||||||||||||||
| 2010 | 2009 | 2008 | ||||||||||||
| (Dollars in Thousands) | ||||||||||||||
| Cash flows from financing activities: | ||||||||||||||
| Net increase (decrease) in deposits | 46,627 | 154,168 | (39,533 | ) | ||||||||||
| Net increase (decrease) in short-term borrowings | (4,254 | ) | 966 | (4,521 | ) | |||||||||
| Proceeds from long-term borrowings | — | — | 55,000 | |||||||||||
| Payments on long-term borrowings | (52,144 | ) | (153 | ) | (148 | ) | ||||||||
| Cash dividends on common stock | (1,800 | ) | (3,166 | ) | (4,675 | ) | ||||||||
| Cash dividends on preferred stock | (500 | ) | (425 | ) | — | |||||||||
| Issuance cost of common stock | (6 | ) | (11 | ) | (19 | ) | ||||||||
| Proceeds from issuance of preferred stock and warrants | — | 10,000 | — | |||||||||||
| Proceeds from issuance of shares from stock offering or rights offering | 12,148 | 11,000 | — | |||||||||||
| Issuance cost from issue of common stock | (770 | ) | — | — | ||||||||||
| Tax (expense) benefit from stock based compensation | 7 | (73 | ) | (78 | ) | |||||||||
| Issuance cost of restricted stock award | 25 | — | 25 | |||||||||||
| Proceeds from exercise of stock options | — | 57 | 224 | |||||||||||
| Purchase of treasury stock | — | — | (1,924 | ) | ||||||||||
| Net cash provided by (used in) financing activities | (667 | ) | 172,363 | 4,351 | ||||||||||
| Net (decrease) increase in cash and cash equivalents | (51,671 | ) | 74,137 | (55,000 | ) | |||||||||
| Cash and cash equivalents at beginning of year | 89,168 | 15,031 | 70,031 | |||||||||||
| Cash and cash equivalents at end of year | $ | 37,497 | $ | 89,168 | $ | 15,031 | ||||||||
| Supplemental disclosures of cash flow information: | ||||||||||||||
| Noncash activities: | ||||||||||||||
| Trade date accounting settlement for investments | $ | 8 | $ | 1,979 | $ | 3,514 | ||||||||
| Transfer of loans to real estate owned | 1,927 | — | 3,949 | |||||||||||
| Net investment in direct financing lease | 3,700 | — | — | |||||||||||
| Cash paid during year for: | ||||||||||||||
| Interest paid on deposits and borrowings | $ | 15,569 | $ | 23,021 | $ | 23,615 | ||||||||
| Income taxes | 2,479 | 344 | 2,370 | |||||||||||
| Years Ended December 31, | ||||||||||
| 2013 | 2012 | 2011 | ||||||||
| (Dollars in Thousands) | ||||||||||
| Cash flows from operating activities: | ||||||||||
| Net income | $ | 19,925 | $ | 17,507 | $ | 13,926 | ||||
| Adjustments to Reconcile Net Income to Net Cash Provided by Operating Activities: | ||||||||||
| Depreciation and amortization | 886 | 914 | 983 | |||||||
| Provision for loan losses | 350 | 325 | 2,448 | |||||||
| Provision for deferred taxes | 1,739 | 1,912 | 3,406 | |||||||
| Stock-based compensation expense | 59 | 39 | 35 | |||||||
| Net other-than-temporary impairment losses | 652 | 870 | 342 | |||||||
| Net gains on sales of available-for-sale securities | (2,363) | (2,882) | (3,976) | |||||||
| Net gains on sales of loans held for sale | (294) | (484) | (251) | |||||||
| Net loans originated for sale | (14,816) | (22,013) | (14,357) | |||||||
| Proceeds from sales of loans held for sale | 16,601 | 22,024 | 13,923 | |||||||
| Net gains on disposition of premises and equipment | (2) | — | — | |||||||
| Net loss on sales of other real estate owned | 75 | 9 | 5 | |||||||
| Life insurance death benefit | (291) | — | — | |||||||
| Increase in cash surrender value of bank owned life insurance | (1,073) | (1,018) | (1,038) | |||||||
| Net amortization of securities | 3,316 | 4,589 | 4,012 | |||||||
| Increase in accrued interest receivable | (233) | (241) | (2,085) | |||||||
| Decrease in prepaid FDIC insurance assessment | 811 | 1,073 | 1,698 | |||||||
| Increase in other assets | (397) | (2,538) | (402) | |||||||
| (Decrease) increase in other liabilities | (1,792) | 980 | (585) | |||||||
| Net cash provided by operating activities | 23,153 | 21,066 | 18,084 | |||||||
| Cash flows from investing activities: | ||||||||||
| Investment securities available-for-sale: | ||||||||||
| Purchases | (155,464) | (207,880) | (400,644) | |||||||
| Sales | 122,165 | 130,059 | 254,821 | |||||||
| Maturities, calls and principal repayment | 46,378 | 48,406 | 48,029 | |||||||
| Investment securities held-to-maturity: | ||||||||||
| Purchases | (23,531) | (16,606) | (13,118) | |||||||
| Maturities and principal repayment | 3,830 | 30,258 | 7,475 | |||||||
| Net (purchase) redemption of restricted investment in bank stock | (22) | 319 | 363 | |||||||
| Net increase in loans | (71,761) | (83,478) | (49,223) | |||||||
| Purchases of premises and equipment | (973) | (842) | (316) | |||||||
| Purchase of bank-owned life insurance | — | (5,000) | — | |||||||
| Proceeds from life insurance death benefits | 592 | — | — | |||||||
| Proceeds from sale of premises and equipment | 2 | — | — | |||||||
| Proceeds from sale of other real estate owned | 1,230 | 500 | 33 | |||||||
| Cash and cash equivalent acquired in acquisition | — | 6,195 | — | |||||||
| Cash consideration paid in acquisition | — | (10,251) | — | |||||||
| Net cash used in investing activities | (77,554) | (108,320) | (152,580) | |||||||
| Cash flows from financing activities: | ||||||||||
| Net increase in deposits | 35,083 | 100,271 | 261,083 | |||||||
| Net decrease in short-term borrowings | — | — | (41,855) | |||||||
| Payments on long-term borrowings | — | (15,000) | (10,000) | |||||||
| Cash dividends on common stock | (4,254) | (2,778) | (1,955) | |||||||
| Cash dividends on preferred stock | (141) | (363) | (417) | |||||||
| Proceeds from issuance of Series B preferred stock | — | — | 11,250 | |||||||
| Redemption of Series A preferred stock | — | — | (10,000) | |||||||
| Warrant repurchased | — | — | (245) | |||||||
| Issuance cost of common stock | (13) | (8) | (5) | |||||||
| Issuance cost of Series B preferred stock | — | — | (84) | |||||||
| Tax expense from stock based compensation | 16 | 28 | — | |||||||
| Issuance of restricted stock award | 243 | — | — | |||||||
| Proceeds from exercise of stock options | 21 | 141 | 328 | |||||||
| Net cash provided by financing activities | 30,955 | 82,291 | 208,100 | |||||||
| Net (decrease) increase in cash and cash equivalents | (23,446) | (4,963) | 73,604 | |||||||
| Cash and cash equivalents at beginning of year | 106,138 | 111,101 | 37,497 | |||||||
| Cash and cash equivalents at end of year | $ | 82,692 | $ | 106,138 | $ | 111,101 | ||||
| Supplemental disclosures of cash flow information: | ||||||||||
| Noncash activities: | ||||||||||
| Trade date accounting settlement for investments | $ | 8,759 | $ | — | $ | — | ||||
| Transfer of loans to other real estate owned | 236 | 1,300 | 629 | |||||||
| Transfer from investment securities available-for-sale to investment securities held-to-maturity | 138,300 | — | 66,833 | |||||||
| Cash paid during year for: | ||||||||||
| Interest paid on deposits and borrowings | $ | 10,993 | $ | 11,894 | $ | 12,226 | ||||
| Income taxes | 4,727 | 6,280 | 4,484 | |||||||
| Business combinations: | ||||||||||
| Non-cash assets acquired: | ||||||||||
| Investment securities available-for-sale | $ | — | $ | 37,143 | $ | — | ||||
| Loans | — | 52,192 | — | |||||||
| Premises and equipment, net | — | 1,262 | — | |||||||
| Accrued interest receivable | — | 389 | — | |||||||
| Total non-cash assets acquired | $ | — | $ | 90,986 | $ | — | ||||
| Liabilities assumed: | ||||||||||
| Deposits | $ | — | $ | 85,236 | $ | — | ||||
| Other liabilities | — | 795 | — | |||||||
| Total liabilities assumed | $ | — | $ | 86,031 | $ | — | ||||
| Net non-cash assets acquired | $ | — | $ | 4,056 | $ | — | ||||
| Bargain gain on acquisition | $ | — | $ | 899 | $ | — | ||||
| Net cash and cash equivalents acquired | $ | — | $ | 6,195 | $ | — | ||||
| Cash consideration paid in acquisition | $ | — | $ | 10,251 | $ | — | ||||
| F-8 | ||
Cash Equivalents
| F-9 | ||
In instances when a determination is made that an other-than-temporary impairment exists but the investor does not intend to sell the debt security and it is not more likely than not that it will be required to sell the debt security prior to its anticipated recovery, FASB ASC 320-10-65 changeschanged the presentation and amount of the other-than-temporary impairment recognized in the income statement.statement of income. The other-than-temporary impairment is separated into (a) the amount of the total other-than-temporary impairment related to a decrease in cash flows expected to be collected from the debt security (the credit loss) and (b) the amount of the total other-than-temporary impairment related to all other factors. The amount of the total other-than-temporary impairment related to the credit loss is recognized through earnings. The amount of the total other-than-temporary impairment related to all other factors is recognized through other comprehensive income. Impairment charges on certain investment securities of approximately $5.6$0.7 million, $4.2$0.9 million and $1.8$0.3 million were recognized in earnings during the years ended December 31, 2010, 20092013, 2012 and 2008,2011, respectively.
In July 2010, the Financial Accounting Standards Board (the “FASB”) issued Accounting Standards Update (“ASU”) No. 2010-20,“Disclosures about the Credit Quality of Financing Receivables and the Allowance for Credit Losses,” which requires that the Corporation provide a greater level of disaggregated information about the credit quality of the Corporation’s loans and leases and the allowance for loan and lease losses (the “Allowance”). This ASU also requires the Corporation to disclose on a prospective basis, additional information related to credit quality indicators, non-accrual loans and leases, and past due information. The Corporation adopted the provisions of this ASU in preparing the Consolidated Financial Statements as of and for the year ended December 31, 2010. As this ASU amends only the disclosure
| F-10 | ||
requirements for loans and leases and the Allowance, the adoption had no impact on the Corporation’s statements of income and condition. See Note 5 of the Notes to the Consolidated Financial Statements for the required disclosures.
installment).
to principal unless collectability of the principal amount is reasonably assured, in which case interest income may be accrued or recognized on a cash basis.
| F-11 | ||
| F-12 | ||
Land is carried at cost and bank premises and equipment at cost less accumulated depreciation based on estimated useful lives of assets, computed principally on a straight-line basis. Expenditures for maintenance and repairs are charged to operations as incurred; major renewals and betterments are capitalized. Gains and losses on sales or other dispositions are recorded as a component of other income or other expenses. In September 2007, the Corporation reclassified its Florham Park office building from premises to held for sale, which was included in other assets, and entered into a contract to sell that property. On February 29, 2008, the Corporation completed the sale of the property for $2.4 million, which approximated the carrying value.
During the second quarter of 2010, the Corporation entered into a lease of its former operations facility under a direct financing lease. The lease has a 15 year term with no renewal options. According to the terms of the lease, the lessee has an obligation to purchase the property underlying the lease in either year seven (7), ten (10) or fifteen (15) at predetermined prices for those years as provided in the lease. The structure of the minimum lease payments and the purchase prices as provided in the lease provide an inducement to the lessee to purchase the property in year seven (7).
During the fourth quarter of 2010, the Corporation sold one residential property in Morris County, New Jersey, and one residential property in Union County, New Jersey which were carried as OREO. At December 31, 2010 and 2009, the Corporation had no OREO.
| F-13 | ||
The Corporation accounts for its defined benefit pension plan in accordance with FASB ASC 715-30. FASB ASC 715-30 requires that the funded status of defined benefit postretirement plans be recognized on the Corporation’s statement of condition and changes in the funded status be reflected in other comprehensive income. FASB ASC 715-30 also requires companies to measure the funded status of the plan as of the date of its fiscal year-end, effective for fiscal years ended after December 15, 2008. Early adoption was encouraged. The Corporation had early adopted this statement and the adoption did not have a material effect on the Corporation’s consolidated financial statements.
| F-14 | ||
| | | | |||||||||
| Years Ended December 31, | ||||||||||||
| 2010 | 2009 | 2008 | ||||||||||
| (In Thousands, Except per Share Amounts) | ||||||||||||
| Net income | $ | 7,004 | $ | 3,771 | $ | 5,842 | ||||||
| Preferred stock dividends and accretion | 581 | 567 | — | |||||||||
| Net income available to common stockholders | $ | 6,423 | $ | 3,204 | $ | 5,842 | ||||||
| Average number of common shares outstanding | 15,026 | 13,382 | 13,049 | |||||||||
| Effect of dilutive options | 1 | 3 | 12 | |||||||||
| Average number of common shares outstanding used to calculate diluted earnings per common share | 15,027 | 13,385 | 13,061 | |||||||||
| Earnings per common share: | ||||||||||||
| Basic | $ | 0.43 | $ | 0.24 | $ | 0.45 | ||||||
| Diluted | $ | 0.43 | $ | 0.24 | $ | 0.45 | ||||||
| Years Ended December 31, | ||||||||||
| 2013 | 2012 | 2011 | ||||||||
| (In Thousands, Except per Share Amounts) | ||||||||||
| Net income | $ | 19,925 | $ | 17,507 | $ | 13,926 | ||||
| Preferred stock dividends and accretion | 141 | 281 | 820 | |||||||
| Net income available to common stockholders | $ | 19,784 | $ | 17,226 | $ | 13,106 | ||||
| Average number of common shares outstanding | 16,349 | 16,340 | 16,296 | |||||||
| Effect of dilutive options | 37 | 11 | 19 | |||||||
| Average number of common shares outstanding used to calculate diluted earnings per common share | 16,386 | 16,351 | 16,315 | |||||||
| Anti-dilutive common shares outstanding | 14 | 42 | 79 | |||||||
| Earnings per common share: | ||||||||||
| Basic | $ | 1.21 | $ | 1.05 | $ | 0.80 | ||||
| Diluted | $ | 1.21 | $ | 1.05 | $ | 0.80 | ||||
| ⋅ | Macroeconomic conditions. |
| ⋅ | Industry and market conditions. |
| ⋅ | Overall financial performance. |
| F-15 | ||
The Corporation recognizes deferred tax assets and liabilities for the expected future tax consequences of events that have been included in the financial statements or tax returns. Under this method, deferred tax assets and liabilities are determined based on the difference between financial statement and tax bases of assets and liabilities, using enacted tax rates expected to be applied to taxable income in the years in which the differences are expected to be settled. Income tax-related interest and penalties are classified as a component of income tax expense.
On June 12, 2009, the FASB issued SFAS No. 166, “Accounting for Transfers of Financial Assets” (“FAS 166”), which was incorporated into ASC 860 “Transfers and Servicing”, and SFAS No.167, “Amendments to FASB Interpretation No. 46 (Revised), which was incorporated into ASC 810 “Consolidation” (“FAS 167”), which change the way entities account for securitizations and special-purpose entities.
FAS 166 is a revision to FASB ASC 860-10 (previously SFAS No. 140, “Accounting for Transfers and Servicing of Financial Assets and Extinguishments of Liabilities”) and will require more information about transfers of financial assets, including securitization transactions, and where companies have continuing exposure to the risks related to transferred financial assets. FAS 166 also eliminates the concept of a “qualifying special-purpose entity”, changes the requirements for derecognizing financial assets and requires additional disclosures.
FAS 167 changes 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.
Both FAS 166 and FAS 167 became effective as of the beginning of each reporting entity’s first annual reporting period that begins after November 15, 2009, for interim periods within that first annual reporting period and for interim and annual reporting periods thereafter. Earlier application is prohibited. The recognition and measurement provisions of FAS 166 shall be applied to transfers that occur on or after the effective date. The Corporation adopted both FAS 166 and FAS 167 on January 1, 2010, as required. The adoption had no impact on the Corporation’s statements of income and financial condition.
the ASU is effective for the Corporation’s reporting period ending March 31, 2011. As this provision amends only the disclosure requirements related to Level 3 activity, the adoption will have no impactare either offset on the Corporation’s statementsbalance sheet or subject to an enforceable master netting arrangement or similar agreement, irrespective of income and condition.
In December 2010,whether they are offset on the FASB issued ASU No. 2010-28, “When to Perform Step 2 of the Goodwill Impairment Test forbalance sheet. Reporting Units with Zero or Negative Carrying Amounts.” Under GAAP, the evaluation of goodwill impairment is a two-step test. In Step 1, an entity must assess whether the carrying amount of a reporting unit exceeds its fair value. If it does, an entity must perform Step 2 of the goodwill impairment test to determine whether goodwill has been impaired and to calculate the amount of that impairment. The provisions of this ASU modify Step 1 of the goodwill impairment test for reporting units with zero or negative carrying amounts. For those reporting units, an entity isentities are required to perform Step 2provide both net and gross information for these assets and liabilities in order to enhance comparability between those entities that prepare their financial statements on the basis of international financial reporting standards ("IFRS"). Companies were required to apply the goodwill impairment test if it is more likely than not that a goodwill impairment exists.amendments for fiscal years beginning on or after January 1, 2013, and interim periods within those years. The provisions of this ASU are effective for the Corporation’s reporting period ending March 31, 2011. As of December 31, 2010, the Corporation had no reporting units with zero or negative carrying amounts or reporting units where there was a reasonable possibility of failing Step 1 of the goodwill impairment test. As a result, the adoption of this ASU isaccounting standard did not expected to have a material impact on the Corporation’sCorporation's results of operations, financial position, or liquidity.
In January 2011, the
ASU 20100-20,Receivables (Topic 310): Disclosures about the Credit Quality of Financing Receivables and the Allowance for Credit Losses, will help investors assess the credit risk of a company’s receivables portfolio and the adequacy of its allowance for credit losses held against the portfolios by expanding credit risk disclosures.
This ASU requires more information about the credit quality of financing receivables in the disclosures to financial statements, such as aging information and credit quality indicators. Both new and existing disclosures must be disaggregated by portfolio segment or class. The disaggregation of information is based on how a company develops its allowance for credit losses and how it manages its credit exposure.
The amendments in this Update apply to all public and nonpublic entities with financing receivables. Financing receivables include loans and trade accounts receivable. However, short-term trade accounts receivable, receivables measured at fair value or lower of cost or fair value, and debt securities are exempt from these disclosure amendments.
The effective date of ASU 2010-20 differs for public and nonpublic companies. For public companies, the amendments that require disclosures as of the end of a reporting period are effective for periodsending on or after December 15, 2010. The amendments that require disclosures about activity that occurs during a reporting period are effective for periodsbeginning on or after December 15, 2010. For nonpublic companies, the amendments are effective for annual reporting periods ending on or after December 15, 2011. The Corporation adopted the ASU as required. The adoption had no impact on the Corporation’s statements of income and financial condition.
| F-16 | ||
| August 1, 2012 | ||||
| (Dollars in thousands) | ||||
| Assets acquired: | ||||
| Cash and cash equivalents | $ | 6,195 | ||
| Investment securities available-for-sale | 37,143 | |||
| Loans | 52,192 | |||
| Premises and equipment, net | 1,262 | |||
| Accrued interest receivable | 389 | |||
| Total assets acquired | $ | 97,181 | ||
| Liabilities assumed: | ||||
| Deposits: | $ | 85,236 | ||
| Other liabilities | 795 | |||
| Total liabilities assumed | $ | 86,031 | ||
| Net assets acquired | $ | 11,150 | ||
| Cash consideration paid in acquisition | $ | 10,251 | ||
| Bargain gain on acquisition | $ | 899 | ||
| F-17 | ||
| (Dollars in thousands) | ||||
| Net interest income | $ | 1,352 | ||
| Non-interest income | 15 | |||
| Non-interest expense and income taxes | (763) | |||
| Net income | $ | 604 |
| (Dollars in thousands) | ||||
| Contractually required principal and interest at acquisition | $ | 2,101 | ||
| Contractual cash flows not expected to be collected (nonaccretable difference) | (982) | |||
| Expected cash flows at acquisition | 1,119 | |||
| Interest component of expected cash flows (accretable discount) | (161) | |||
| Fair value of acquired loans accounted for under FASB ASC 310-30 | $ | 958 |
| December 31, | |||||||
| 2013 | 2012 | ||||||
| (in thousands) | |||||||
| Accretable discount balance, beginning of period | $ | 130 | $ | — | |||
| Additions resulting from acquisition | — | 161 | |||||
| Accretion to interest income | (130) | (31) | |||||
| Accretable discount, end of period | $ | — | $ | 130 | |||
| (Dollars in thousands) | ||||
| Contractually required principal and interest at acquisition | $ | 50,917 | ||
| Contractual cash flows not expected to be collected (credit mark) | (807) | |||
| Expected cash flows at acquisition | 50,110 | |||
| Interest rate premium mark | 1,313 | |||
| Fair value of acquired loans not accounted for under FASB ASC 310-30 | $ | 51,423 |
| F-18 | ||
| | | | | ||||||||||||
| Amortized Cost | Gross Unrealized Gains | Gross Unrealized Losses | Fair Value | |||||||||||||
| December 31, 2010 | ||||||||||||||||
| (Dollars in Thousands) | ||||||||||||||||
| Securities Available-for-Sale: | ||||||||||||||||
| U.S. Treasury and agency securities | $ | 7,123 | $ | — | $ | (128 | ) | $ | 6,995 | |||||||
| Federal agency obligations | 68,051 | 1,071 | (641 | ) | 68,481 | |||||||||||
| Mortgage-backed securities | 180,037 | 115 | (2,419 | ) | 177,733 | |||||||||||
| Obligations of U.S. states and political subdivisions | 38,312 | 1 | (1,088 | ) | 37,225 | |||||||||||
| Trust preferred securities | 21,222 | 26 | (2,517 | ) | 18,731 | |||||||||||
| Corporate bonds and notes | 63,047 | — | (1,613 | ) | 61,434 | |||||||||||
| Collateralized mortgage obligations | 3,941 | — | (1,213 | ) | 2,728 | |||||||||||
| Equity securities | 5,135 | — | (382 | ) | 4,753 | |||||||||||
| Total | $ | 386,868 | $ | 1,213 | $ | (10,001 | ) | $ | 378,080 | |||||||
| | | | | Amortized Cost | Gross Unrealized Gains | Gross Unrealized Losses | Fair Value | |||||||||||||||||||||
| Amortized Cost | Gross Unrealized Gains | Gross Unrealized Losses | Fair Value | December 31, 2013 | |||||||||||||||||||||||||
| December 31, 2009 | (Dollars in Thousands) | ||||||||||||||||||||||||||||
| (Dollars in Thousands) | |||||||||||||||||||||||||||||
| Securities Available-for-Sale: | |||||||||||||||||||||||||||||
| Investment Securities Available-for-Sale: | |||||||||||||||||||||||||||||
| U.S. Treasury and agency securities | $ | 2,089 | $ | — | $ | — | $ | 2,089 | $ | 14,344 | $ | — | $ | (825) | $ | 13,519 | |||||||||||||
| Federal agency obligations | 129,672 | 538 | (1,845 | ) | 128,365 | 20,567 | 29 | (655) | 19,941 | ||||||||||||||||||||
| Mortgage backed securities | 86,968 | 54 | (802 | ) | 86,220 | ||||||||||||||||||||||||
| Residential mortgage pass-through securities | 48,312 | 791 | (229) | 48,874 | |||||||||||||||||||||||||
| Commercial mortgage pass-through securities | 7,145 | 3 | (157) | 6,991 | |||||||||||||||||||||||||
| Obligations of U.S. states and political subdivisions | 19,688 | 77 | (484 | ) | 19,281 | 30,804 | 711 | (55) | 31,460 | ||||||||||||||||||||
| Trust preferred securities | 34,404 | 113 | (7,802 | ) | 26,715 | 19,763 | 150 | (510) | 19,403 | ||||||||||||||||||||
| Corporate bonds and notes | 23,680 | 76 | (1,101 | ) | 22,655 | 154,182 | 4,930 | (482) | 158,630 | ||||||||||||||||||||
| Collateralized mortgage obligations | 9,637 | — | (2,371 | ) | 7,266 | ||||||||||||||||||||||||
| Asset-backed securities | 15,733 | 246 | — | 15,979 | |||||||||||||||||||||||||
| Certificates of deposit | 2,250 | 32 | (20) | 2,262 | |||||||||||||||||||||||||
| Equity securities | 5,936 | 42 | (445 | ) | 5,533 | 376 | — | (89) | 287 | ||||||||||||||||||||
| Other securities | 5,671 | 68 | (15) | 5,724 | |||||||||||||||||||||||||
| Total | $ | 312,074 | $ | 900 | $ | (14,850 | ) | $ | 298,124 | $ | 319,147 | $ | 6,960 | $ | (3,037) | $ | 323,070 | ||||||||||||
| Investment Securities Held-to-Maturity: | |||||||||||||||||||||||||||||
| U.S. Treasury and agency securities | $ | 28,056 | $ | — | $ | (1,019) | $ | 27,037 | |||||||||||||||||||||
| Federal agency obligations | 15,249 | 23 | (389) | 14,883 | |||||||||||||||||||||||||
| Residential mortgage-backed securities | 2,246 | — | (64) | 2,182 | |||||||||||||||||||||||||
| Commercial mortgage-backed securities | 4,417 | 41 | (62) | 4,396 | |||||||||||||||||||||||||
| Obligations of U.S. states and political subdivisions | 127,418 | 1,303 | (3,688) | 125,033 | |||||||||||||||||||||||||
| Corporate bonds and notes | 37,900 | 149 | (622) | 37,427 | |||||||||||||||||||||||||
| Total | $ | 215,286 | $ | 1,516 | $ | (5,844) | $ | 210,958 | |||||||||||||||||||||
| Total investment securities | $ | 534,433 | $ | 8,476 | $ | (8,881) | $ | 534,028 | |||||||||||||||||||||
All of the Corporation’s investment securities are classified as available-for-sale at December 31, 2010 and 2009.
| Amortized Cost | Gross Unrealized Gains | Gross Unrealized Losses | Fair Value | ||||||||||
| December 31, 2012 | |||||||||||||
| (Dollars in Thousands) | |||||||||||||
| Investment Securities Available-for-Sale: | |||||||||||||
| U.S. Treasury and agency securities | $ | 11,870 | $ | 62 | $ | (23) | $ | 11,909 | |||||
| Federal agency obligations | 20,207 | 333 | (5) | 20,535 | |||||||||
| Residential mortgage pass-through securities | 52,400 | 1,385 | (1) | 53,784 | |||||||||
| Commercial mortgage pass-through securities | 9,725 | 244 | — | 9,969 | |||||||||
| Obligations of U.S. states and political subdivisions | 103,193 | 4,653 | (132) | 107,714 | |||||||||
| Trust preferred securities | 22,279 | 144 | (1,174) | 21,249 | |||||||||
| Corporate bonds and notes | 228,681 | 9,095 | (371) | 237,405 | |||||||||
| Collateralized mortgage obligations | 2,120 | — | — | 2,120 | |||||||||
| Asset-backed securities | 19,431 | 311 | — | 19,742 | |||||||||
| Certificates of deposit | 2,854 | 21 | (10) | 2,865 | |||||||||
| Equity securities | 535 | — | (210) | 325 | |||||||||
| Other securities | 9,145 | 68 | (15) | 9,198 | |||||||||
| Total | $ | 482,440 | $ | 16,316 | $ | (1,941) | $ | 496,815 | |||||
| Investment Securities Held-to-Maturity: | |||||||||||||
| Federal agency obligations | $ | 4,178 | $ | 79 | $ | — | $ | 4,257 | |||||
| Commercial mortgage-backed securities | 5,501 | 154 | (5) | 5,650 | |||||||||
| Obligations of U.S. states and political subdivisions | 48,385 | 4,139 | — | 52,524 | |||||||||
| Total | $ | 58,064 | $ | 4,372 | $ | (5) | $ | 62,431 | |||||
| Total investment securities | $ | 540,504 | $ | 20,688 | $ | (1,946) | $ | 559,246 | |||||
| F-19 | ||
| | | ||||||
| Available-for-Sale | ||||||||
| Amortized Cost | Fair Value | |||||||
| (Dollars in Thousands) | ||||||||
| Due in one year or less | $ | 1,503 | $ | 1,500 | ||||
| Due after one year through five years | 19,185 | 18,810 | ||||||
| Due after five years through ten years | 68,277 | 66,502 | ||||||
| Due after ten years | 112,731 | 108,782 | ||||||
| Mortgage-backed securities without stated maturities | 180,037 | 177,733 | ||||||
| Equity securities | 5,135 | 4,753 | ||||||
| Total investment securities | $ | 386,868 | $ | 378,080 | ||||
During 2010, securities sold
| December 31, 2013 | |||||||
| Amortized Cost | Fair Value | ||||||
| (Dollars in Thousands) | |||||||
| Investment Securities Available-for-Sale: | |||||||
| Due in one year or less | $ | 9,738 | $ | 9,780 | |||
| Due after one year through five years | 63,206 | 64,802 | |||||
| Due after five years through ten years | 123,765 | 126,024 | |||||
| Due after ten years | 60,934 | 60,588 | |||||
| Residential mortgage pass-through securities | 48,312 | 48,874 | |||||
| Commercial mortgage pass-through securities | 7,145 | 6,991 | |||||
| Equity securities | 376 | 287 | |||||
| Other securities | 5,671 | 5,724 | |||||
| Total | $ | 319,147 | $ | 323,070 | |||
| Investment Securities Held-to-Maturity: | |||||||
| Due in one year or less | $ | 2,061 | $ | 2,065 | |||
| Due after one year through five years | 12,547 | 12,699 | |||||
| Due after five years through ten years | 65,692 | 64,027 | |||||
| Due after ten years | 128,323 | 125,589 | |||||
| Residential mortgage-backed securities | 2,246 | 2,182 | |||||
| Commercial mortgage-backed securities | 4,417 | 4,396 | |||||
| Total | $ | 215,286 | $ | 210,958 | |||
| Total investment securities | $ | 534,433 | $ | 534,028 | |||
| Years Ended December 31, | ||||||||||
| (Dollars in Thousands) | 2013 | 2012 | 2011 | |||||||
| Gross gains on sales of investment securities | $ | 2,451 | $ | 2,905 | $ | 4,045 | ||||
| Gross losses on sales of investment securities | 88 | 23 | 69 | |||||||
| Net gains on sales of investment securities | $ | 2,363 | $ | 2,882 | $ | 3,976 | ||||
| F-20 | ||
| | | | |||||||||
| Years Ended December 31, | ||||||||||||
| 2010 | 2009 | 2008 | ||||||||||
| (Dollars in Thousands) | ||||||||||||
| Equity securities | $ | — | $ | 113 | $ | 461 | ||||||
| Debt securities | 5,576 | 4,125 | 1,300 | |||||||||
| Total other-than-temporary impairment charges | $ | 5,576 | $ | 4,238 | $ | 1,761 | ||||||
| Years Ended December 31, | |||||||||
| 2013 | 2012 | 2011 | |||||||
| (Dollars in Thousands) | |||||||||
| One variable rate private label CMO | $ | — | $ | 484 | $ | 18 | |||
| Pooled trust preferred securities | 628 | 68 | — | ||||||
| Principal losses on a variable rate CMO | 24 | 318 | 324 | ||||||
| Total other-than-temporary impairment charges | $ | 652 | $ | 870 | $ | 342 | |||
a decline in fair value is other than temporary, the OTTI is separated into the amount representing the credit loss and the amount related to all other factors. The amount of the OTTI related to the credit loss is determined based on the present value of cash flows expected to be collected and is recognized in earnings. The amount of the total OTTI related to other factors is recognized in other comprehensive income, net of applicable taxes. The previous amortized cost basis less the OTTI recognized in earnings becomes the new amortized cost basis of the investment.
| F-21 | ||
| | | | | | | | | | |||||||||||||||||||||||||||
| | | | | | | | | | |||||||||||||||||||||||||||
| Deal Name | Single Issuer or Pooled | Class/ Tranche | Amortized Cost | Fair Value | Gross Unrealized Gain (Loss) | Lowest Credit Rating Assigned | Number of Banks Currently Performing | Deferrals and Defaults as % of Original Collateral | Expected Deferral/Defaults as % of Remaining Performing Collateral | |||||||||||||||||||||||||||
| (Dollars in Thousands) | ||||||||||||||||||||||||||||||||||||
| Countrywide Capital IV | Single | — | $ | 1,769 | $ | 1,688 | $ | (81 | ) | BB+ | 1 | None | None | |||||||||||||||||||||||
| Countrywide Capital V | Single | — | 2,747 | 2,691 | (56 | ) | BB+ | 1 | None | None | ||||||||||||||||||||||||||
| Countrywide Capital V | Single | — | 250 | 244 | (6 | ) | BB+ | 1 | None | None | ||||||||||||||||||||||||||
| NPB Capital Trust II | Single | — | 873 | 875 | 2 | NR | 1 | None | None | |||||||||||||||||||||||||||
| Citigroup Cap IX | Single | — | 991 | 892 | (99 | ) | BB+ | 1 | None | None | ||||||||||||||||||||||||||
| Citigroup Cap IX | Single | — | 1,903 | 1,721 | (182 | ) | BB+ | 1 | None | None | ||||||||||||||||||||||||||
| Citigroup Cap XI | Single | — | 245 | 242 | (3 | ) | BB+ | 1 | None | None | ||||||||||||||||||||||||||
| BAC Capital Trust X | Single | — | 2,500 | 2,205 | (295 | ) | NR | 1 | None | None | ||||||||||||||||||||||||||
| Nationsbank Cap Trust III | Single | — | 1,569 | 1,116 | (453 | ) | BB+ | 1 | None | None | ||||||||||||||||||||||||||
| Morgan Stanley Cap Trust IV | Single | — | 2,500 | 2,260 | (240 | ) | BB+ | 1 | None | None | ||||||||||||||||||||||||||
| Morgan Stanley Cap Trust IV | Single | — | 1,741 | 1,581 | (160 | ) | BB+ | 1 | None | None | ||||||||||||||||||||||||||
| Saturns – GS 2004-06 | Single | — | 242 | 229 | (13 | ) | BBB- | 1 | None | None | ||||||||||||||||||||||||||
| Saturns – GS 2004-06 | Single | — | 312 | 296 | (16 | ) | BBB- | 1 | None | None | ||||||||||||||||||||||||||
| Saturns – GS 2004-04 | Single | — | 778 | 731 | (47 | ) | BBB- | 1 | None | None | ||||||||||||||||||||||||||
| Saturns – GS 2004-04 | Single | — | 22 | 20 | (2 | ) | BBB- | 1 | None | None | ||||||||||||||||||||||||||
| USB Capital VII | Single | — | 1,213 | 1,230 | 17 | BBB+ | 1 | None | None | |||||||||||||||||||||||||||
| USB Capital VII | Single | — | 561 | 568 | 7 | BBB+ | 1 | None | None | |||||||||||||||||||||||||||
| ALESCO Preferred Funding VI | Pooled | C2 | 227 | 19 | (208 | ) | Ca | 44 of 67 | 36.4 | % | 41.3 | % | ||||||||||||||||||||||||
| ALESCO Preferred Funding VII | Pooled | C1 | 779 | 123 | (656 | ) | Ca | 61 of 79 | 26.8 | % | 42.6 | % | ||||||||||||||||||||||||
| Deal Name | Single Issuer or Pooled | Class/ Tranche | Amortized Cost | Fair Value | Gross Unrealized Gain (Loss) | Lowest Credit Rating Assigned | Number of Banks Currently Performing | Deferrals and Defaults as % of Original Collateral | Expected Deferral/Defaults as % of Remaining Performing Collateral | ||||||||||||||
| (Dollars in Thousands) | |||||||||||||||||||||||
| Countrywide Capital IV | Single | — | $ | 1,771 | $ | 1,772 | $ | 1 | BB+ | 1 | None | None | |||||||||||
| Countrywide Capital V | Single | — | 2,747 | 2,784 | 37 | BB+ | 1 | None | None | ||||||||||||||
| Countrywide Capital V | Single | — | 250 | 253 | 3 | BB+ | 1 | None | None | ||||||||||||||
| Citigroup Cap IX | Single | — | 992 | 999 | 7 | BB+ | 1 | None | None | ||||||||||||||
| Citigroup Cap IX | Single | — | 1,906 | 1,927 | 21 | BB+ | 1 | None | None | ||||||||||||||
| Citigroup Cap XI | Single | — | 246 | 248 | 2 | BB+ | 1 | None | None | ||||||||||||||
| Nationsbank Cap Trust III | Single | — | 1,574 | 1,275 | (299) | BB+ | 1 | None | None | ||||||||||||||
| Morgan Stanley Cap Trust IV | Single | — | 2,500 | 2,372 | (128) | BB+ | 1 | None | None | ||||||||||||||
| Morgan Stanley Cap Trust IV | Single | — | 1,742 | 1,659 | (83) | BB+ | 1 | None | None | ||||||||||||||
| Saturns — GS 2004-04 | Single | — | 536 | 536 | — | BB+ | 1 | None | None | ||||||||||||||
| Goldman Sachs | Single | — | 999 | 1,011 | 12 | BB+ | 1 | None | None | ||||||||||||||
| Stifel Financial | Single | — | 4,500 | 4,567 | 67 | BBB- | 1 | None | None | ||||||||||||||
| Total | $ | 19,763 | $ | 19,403 | $ | (360) | |||||||||||||||||
total OTTI loss. The model considers the structure and term and the financial condition of the underlying issuers. Specifically, the model details interest rates, principal balances of note classes and underlying issuers and the allocation of the payments to the note classes according to a priority of payments specified in the offering circular and indenture. The current estimate of expected cash flows is based on the most recent trustee reports and other relevant market information including announcements of interest payment deferrals or defaults of underlying trust preferred securities. Assumptions used in the model include defaultsdefault rates, default rate timing profile and recovery rates. We assumeThe Corporation assumes no prepayments as thesethe Pooled TRUPS wereTRUP was issued at comparatively tight spreads and as such, there is little incentive, if any, to prepay.
One of
| F-22 | ||
| | | ||||||
| Years Ended December 31, | ||||||||
| 2010 | 2009 | |||||||
| (Dollars in Thousands) | ||||||||
| Balance of credit-related OTTI at January 1, | $ | 3,621 | $ | — | ||||
| Addition: | ||||||||
| Credit losses for which other-than-temporary impairment was not previously recognized | 5,576 | 3,761 | ||||||
| Reduction: | ||||||||
| Credit losses for securities sold during the period | (3,000 | ) | (140 | ) | ||||
| Balance of credit-related OTTI at December 31, | $ | 6,197 | $ | 3,621 | ||||
| Years Ended December 31, | ||||||||||
| 2013 | 2012 | 2011 | ||||||||
| (Dollars in Thousands) | ||||||||||
| Balance of credit-related OTTI at January 1, | $ | 4,450 | $ | 6,539 | $ | 6,197 | ||||
| Addition: | ||||||||||
| Credit losses for which other-than-temporary impairment was not previously recognized | 652 | 870 | 342 | |||||||
| Reduction: | ||||||||||
| Credit losses for securities sold during the period | (5,102) | (2,959) | — | |||||||
| Balance of credit-related OTTI at December 31, | $ | — | $ | 4,450 | $ | 6,539 | ||||
| F-23 | ||
At December 31, 2010, excess subordination as a percentage of remaining performing collateral for the ALESCO Preferred Funding VI and VII investments were -36.6 percent and -21.1 percent, respectively. Excess subordination is the amount of performing collateral above the amount of outstanding collateral underlying each class of the security. The Excess Subordination as a Percent of Remaining Performing Collateral reflects the difference between the performing collateral and the collateral underlying each security divided by the performing collateral. A negative number results when the paying collateral is less than the collateral underlying each class of the security. A low or negative number decreases the likelihood of full repayment of principal and interest accordingly to original contractual terms.
During 2010, the Corporation did not record other-than-temporary impairment charges relating to equity holdings in bank stocks.
The Corporation’s investment portfolio also consists of overnight investments that were made into the Reserve Primary Fund (the “Fund”), a money market fund registered with the Securities and Exchange Commission as an investment company under the Investment Company Act of 1940. On September 22, 2008, the Fund announced that redemptions of shares of the Fund were suspended pursuant to an SEC order so that an orderly liquidation could be effected for the protection of the Fund’s investors. Through December 31, 2009, the Corporation has received five distributions from the Fund, totaling approximately 92 percent of its outstanding balance, leaving a remaining outstanding balance in the Fund of $2.943 million. On January 29, 2010, as part of the court order liquidation of the Fund, the Corporation received a sixth distribution or $2.446 million, bringing total distributions to date to approximately 99 percent. During the fourth quarter of 2009, the Corporation recorded a $364,000, or approximately 1 percent, other-than-temporary impairment charge to earnings relating to this court order liquidation of the Fund. The Corporation’s outstanding carrying balance in the Fund as of January 31, 2010 totaled $133,000. The Corporation’s outstanding carrying balance in the Fund as of December 31, 2010 was zero and recording to earnings approximately $30,000 as partial recovery of the OTTI charge. Future liquidation distributions received by the Corporation, if any, will be recorded to earnings.
During 2010, securities sold from the Corporation’s available-for-sale portfolio amounted to approximately $644.1 million. The gross realized gains on securities sold amounted to approximately $4,872,000, while the gross realized losses amounted to approximately $635,000 in 2010. During 2010, the Corporation recorded a $3.0 million other-than-temporary impairment charge on its trust preferred securities, $1.8 million on two pooled trust preferred securities, $360,000 in a variable rate private label CMO and $398,000 on principal losses on a variable rate private label CMO. During 2009, securities sold from the Corporation’s available-for-sale portfolio amounted to approximately $665.8 million. The gross realized gains on securities sold amounted to approximately $5,897,000, while the gross realized losses amounted to approximately $1,168,000 in 2009. During 2009, the Corporation recorded a $140,000 other-than-temporary impairment charge on its Lehman Brothers corporate bond, $3,433,000 on two pooled trust preferred securities, $188,000 on a variable rate private label CMO, $364,000 on charge to earnings relating to the court ordered liquidation of the Reserve Primary Fund, and $113,000 of write-downs relating to a single equity holding in bank stocks.
During the third quarter of 2008, the Corporation recognized a $1.2 million other-than-temporary impairment charge on a Lehman Brothers corporate bond, sold in 2009, as a result of Lehman Brothers’ September bankruptcy filing. The Corporation deemed it prudent to mark the security down to what the Corporation believes it would receive from the bankruptcy proceedings as opposed to an attempted sale into an illiquid market. During the fourth quarter, the Corporation took an additional impairment charge of $100,000 on the same bond. The Corporation filed its claims under the Bankruptcy and received notification that Lehman will be afforded a longer time for liquidation than originally announced in order to maximize value returns on the sold assets. Management will continue to monitor the liquidation process, re-test values during that period and adjust carrying value if necessary.
During 2008, the Corporation recorded $461,000 of other-than-temporary impairment charges relating to three equity holdings in bank stocks. These equities were written down to fair value.
For all other securities, the Corporation does not believe that the unrealized losses, which were comprised of 115170 and 49 investment securities as of December 31, 2010,2013 and December 31, 2012, respectively, represent an other-than-temporary impairment. The gross unrealized losses associated with U.S. Treasury and Agency securities and Federal agency obligations, mortgage-backed securities, corporate bonds, asset-backed securities and tax-exempt securities are not considered to be other than temporary because their unrealized losses are related to changes in interest rates and do not affect the expected cash flows of the underlying collateral or issuer.
Obligations of U.S. states and political subdivisions are comprised of intermediate to long-term municipal bonds. A review of the coupon rates and maturity dates validates the unrealized losses due to the changes in interest rates. These bonds were purchased at lower ends of the interest rate cycle and were a part of the Corporation’s overall strategy to use tax-free instruments and to barbell the maturity distribution of bonds. The bonds are conservative in nature and the value decline is related to the changes in interest rates that occurred since the time of purchase and subsequent changes in spreads affecting the market prices. All of the issues carry an A or better underlying credit support and were evaluated on the basis on their underlying fundamentals; included but not limited to annual financial reports, geographic location, population and debt ratios. In certain cases options for calls reduce the effective duration and in turn the future market value fluctuations. All issues are performing and are expected to continue to perform in accordance with their respective contractual terms and conditions. There have not been disruptions of any payments, associated with any of these municipal securities.
| F-24 | ||
| | | | | | | ||||||||||||||||||
| December 31, 2010 | ||||||||||||||||||||||||
| Total | Less Than 12 Months | 12 Months or Longer | ||||||||||||||||||||||
| Fair Value | Unrealized Losses | Fair Value | Unrealized Losses | Fair Value | Unrealized Losses | |||||||||||||||||||
| (Dollars in Thousands) | ||||||||||||||||||||||||
| Available-for-Sale: | ||||||||||||||||||||||||
| U.S. Treasury and agency securities | $ | 6,995 | $ | (128 | ) | $ | 6,995 | $ | (128 | ) | $ | — | $ | — | ||||||||||
| Federal agency obligations | 35,799 | (641 | ) | 32,113 | (622 | ) | 3,686 | (19 | ) | |||||||||||||||
| Mortgage-backed securities | 166,820 | (2,419 | ) | 166,820 | (2,419 | ) | — | — | ||||||||||||||||
| Obligations of U.S. states and political subdivisions | 19,699 | (1,088 | ) | 19,699 | (1,088 | ) | — | — | ||||||||||||||||
| Trust preferred securities | 16,058 | (2,517 | ) | — | — | 16,058 | (2,517 | ) | ||||||||||||||||
| Corporate bonds and notes | 61,434 | (1,613 | ) | 52,985 | (1,175 | ) | 8,449 | (438 | ) | |||||||||||||||
| Collateralized mortgage obligations | 2,728 | (1,213 | ) | — | — | 2,728 | (1,213 | ) | ||||||||||||||||
| Equity securities | 4,653 | (382 | ) | 3,427 | (73 | ) | 1,226 | (309 | ) | |||||||||||||||
| Total Temporarily Impaired Securities | $ | 314,186 | $ | (10,001 | ) | $ | 282,039 | $ | (5,505 | ) | $ | 32,147 | $ | (4,496 | ) | |||||||||
| | | | | | | ||||||||||||||||||
| December 31, 2009 | ||||||||||||||||||||||||
| Total | Less than 12 Months | 12 Months or Longer | ||||||||||||||||||||||
| Fair Value | Unrealized Losses | Fair Value | Unrealized Losses | Fair Value | Unrealized Losses | |||||||||||||||||||
| (Dollars in Thousands) | ||||||||||||||||||||||||
| Available-for-Sale: | ||||||||||||||||||||||||
| U.S. Treasury and agency securities | — | — | — | — | — | — | ||||||||||||||||||
| Federal agency obligations | $ | 72,801 | $ | (1,845 | ) | $ | 72,699 | $ | (1,844 | ) | $ | 102 | $ | (1 | ) | |||||||||
| Mortgage backed securities | 47,703 | (802 | ) | 47,703 | (802 | ) | — | — | ||||||||||||||||
| Obligations of U.S. states and political subdivisions | 7,181 | (484 | ) | 6,297 | (458 | ) | 884 | (26 | ) | |||||||||||||||
| Trust preferred securities | 25,253 | (7,802 | ) | 3,717 | (1,234 | ) | 21,536 | (6,568 | ) | |||||||||||||||
| Corporate bonds & notes | 19,803 | (1,101 | ) | 11,864 | (55 | ) | (7,939 | ) | (1,046 | ) | ||||||||||||||
| Collateralized mortgage obligations | 3,012 | (2,371 | ) | — | — | 3,012 | (2,371 | ) | ||||||||||||||||
| Equity securities | 1,317 | (445 | ) | — | — | 1,317 | (445 | ) | ||||||||||||||||
| Total temporarily impaired securities | $ | 177,070 | $ | (14,850 | ) | $ | 142,280 | $ | (4,393 | ) | $ | 34,790 | $ | (10,457 | ) | |||||||||
| December 31, 2013 | |||||||||||||||||||
| Total | Less than 12 Months | 12 Months or Longer | |||||||||||||||||
| Fair Value | Unrealized Losses | Fair Value | Unrealized Losses | Fair Value | Unrealized Losses | ||||||||||||||
| (Dollars in Thousands) | |||||||||||||||||||
| Investment Securities Available-for-Sale: | |||||||||||||||||||
| U.S. Treasury and agency securities | $ | 13,519 | $ | (825) | $ | 13,519 | $ | (825) | $ | — | $ | — | |||||||
| Federal agency obligation | 17,200 | (655) | 17,200 | (655) | — | — | |||||||||||||
| Residential mortgage pass-through securities | 18,293 | (229) | 18,293 | (229) | — | — | |||||||||||||
| Commercial mortgage pass-through securities | 2,924 | (157) | 2,924 | (157) | — | — | |||||||||||||
| Obligations of U.S. states and political subdivisions | 4,199 | (55) | 4,199 | (55) | — | — | |||||||||||||
| Trust preferred securities | 5,306 | (510) | 4,031 | (211) | 1,275 | (299) | |||||||||||||
| Corporate bonds and notes | 32,498 | (482) | 30,533 | (448) | 1,965 | (34) | |||||||||||||
| Certificates of deposit | 552 | (20) | 552 | (20) | — | — | |||||||||||||
| Equity securities | 287 | (89) | — | — | 287 | (89) | |||||||||||||
| Other securities | 985 | (15) | — | — | 985 | (15) | |||||||||||||
| Total | 95,763 | (3,037) | 91,251 | (2,600) | 4,512 | (437) | |||||||||||||
| Investment Securities Held-to-Maturity: | |||||||||||||||||||
| U.S. Treasury and agency securities | 27,037 | (1,019) | 27,037 | (1,019) | — | — | |||||||||||||
| Federal agency obligation | 13,492 | (389) | 13,197 | (388) | 295 | (1) | |||||||||||||
| Residential mortgage pass-through securities | 2,182 | (64) | 2,182 | (64) | — | — | |||||||||||||
| Commercial mortgage-backed securities | 1,395 | (62) | 1,395 | (62) | — | — | |||||||||||||
| Obligations of U.S. states and political subdivisions | 66,034 | (3,688) | 57,072 | (2,957) | 8,962 | (731) | |||||||||||||
| Corporate bonds and notes | 27,210 | (622) | 27,210 | (622) | — | — | |||||||||||||
| Total | 137,350 | (5,844) | 128,093 | (5,112) | 9,257 | (732) | |||||||||||||
| Total Temporarily Impaired Securities | $ | 233,113 | $ | (8,881) | $ | 219,344 | $ | (7,712) | $ | 13,769 | $ | (1,169) | |||||||
| F-25 | ||
| December 31, 2012 | |||||||||||||||||||
| Total | Less than 12 Months | 12 Months or Longer | |||||||||||||||||
| Fair Value | Unrealized Losses | Fair Value | Unrealized Losses | Fair Value | Unrealized Losses | ||||||||||||||
| (Dollars in Thousands) | |||||||||||||||||||
| Investment Securities Available-for-Sale: | |||||||||||||||||||
| U.S. Treasury and agency securities | $ | 4,460 | $ | (23) | $ | 4,460 | $ | (23) | $ | — | $ | — | |||||||
| Federal agency obligation | 877 | (5) | 877 | (5) | — | — | |||||||||||||
| Residential mortgage pass-through securities | 1,669 | (1) | 1,669 | (1) | — | — | |||||||||||||
| Obligations of U.S. states and political subdivisions | 18,360 | (132) | 18,360 | (132) | — | — | |||||||||||||
| Trust preferred securities | 11,740 | (1,174) | 10,494 | (18) | 1,246 | (1,156) | |||||||||||||
| Corporate bonds and notes | 26,440 | (371) | 18,244 | (134) | 8,196 | (237) | |||||||||||||
| Certificates of deposit | 388 | (10) | 388 | (10) | — | — | |||||||||||||
| Equity securities | 325 | (210) | — | — | 325 | (210) | |||||||||||||
| Other securities | 985 | (15) | — | — | 985 | (15) | |||||||||||||
| Total | 65,244 | (1,941) | 54,492 | (323) | 10,752 | (1,618) | |||||||||||||
| Investment Securities Held-to-Maturity: | |||||||||||||||||||
| Commercial mortgage-backed securities | 932 | (5) | 932 | (5) | — | — | |||||||||||||
| Total | 932 | (5) | 932 | (5) | — | — | |||||||||||||
| Total Temporarily Impaired Securities | $ | 66,176 | $ | (1,946) | $ | 55,424 | $ | (328) | $ | 10,752 | $ | (1,618) | |||||||
| | | ||||||
| 2010 | 2009 | |||||||
| (Dollars in Thousands) | ||||||||
| Commercial and industrial | $ | 121,034 | $ | 117,912 | ||||
| Commercial real estate | 372,001 | 358,957 | ||||||
| Construction | 49,744 | 51,099 | ||||||
| Residential mortgage | 165,154 | 191,199 | ||||||
| Installment | 511 | 439 | ||||||
| Total loans | $ | 708,444 | $ | 719,606 | ||||
Included in
| 2013 | 2012 | ||||||
| (Dollars in Thousands) | |||||||
| Commercial and industrial | $ | 229,688 | $ | 181,682 | |||
| Commercial real estate | 536,539 | 497,392 | |||||
| Construction | 42,722 | 40,277 | |||||
| Residential mortgage | 150,571 | 169,094 | |||||
| Installment | 1,084 | 1,104 | |||||
| Subtotal | 960,604 | 889,549 | |||||
| Net deferred loan costs | 339 | 123 | |||||
| Total loans | $ | 960,943 | $ | 889,672 | |||
| F-26 | ||
Allowance for Loan Losses – (continued)
$10,225,000. During the year ended December 31, 2012, the Corporation made new loans to officers and directors in the amount of $13,952,000; payments by such persons during 2012 aggregated $5,254,000. On March 30, 2012, the Corporation appointed Frederick S. Fish to the Board of Directors. Mr. Fish had a prior lending relationship with the Bank, the total loan to Mr. Fish of approximately $9,910,000 is included in the amount of new loan to officers and directors.
During the second quarter of 2010, the Corporation entered into a lease of its former operations facility under a direct financing lease. The lease has a 15 year term with no renewal options. According to the terms of the lease, the lessee has an obligation to purchase the property underlying the lease in either year seven (7), ten (10) or fifteen (15) at predetermined prices for those years as provided in the lease. The structure of the minimum lease payments and the purchase prices as provided in the lease provide an inducement to the lessee to purchase the property in year seven (7).
| | |||
| (Dollars in thousands) | ||||
| For years ending December 31, | ||||
| 2011 | $ | 156 | ||
| 2012 | 171 | |||
| 2013 | 216 | |||
| 2014 | 216 | |||
| 2015 | 261 | |||
| Thereafter | 2,689 | |||
| Total minimum future lease receipts | $ | 3,709 | ||
| For years ending December 31, | (Dollars in Thousands) | |||
| 2014 | $ | 216 | ||
| 2015 | 228 | |||
| 2016 | 265 | |||
| 2017 | 265 | |||
| 2018 | 265 | |||
| Thereafter | 2,511 | |||
| Total minimum future lease receipts | $ | 3,750 | ||
| 2013 | 2012 | ||||||
| (Dollars in Thousands) | |||||||
| Commercial and industrial | $ | 753 | $ | 214 | |||
| Commercial real estate | 744 | 354 | |||||
| Construction | — | 319 | |||||
| Residential mortgage | 1,640 | 2,729 | |||||
| Total loans receivable on non-accrual status | $ | 3,137 | $ | 3,616 | |||
| F-27 | ||
The following table presents information about loan receivables on non accrual status at December 31, 2010:
| | |||
| December 31, 2010 | ||||
| (Dollars in Thousands) | ||||
| Commercial and Industrial | $ | 456 | ||
| Commercial Real Estate | 3,563 | |||
| Construction | 5,865 | |||
| Residential Mortgage | 1,290 | |||
| Total loans receivable on non accrual status | $ | 11,174 | ||
| | | | | | |||||||||||||||
| December 31, 2010 | ||||||||||||||||||||
| (Dollars in Thousands) | ||||||||||||||||||||
| Pass | Special Mention | Substandard | Doubtful | Total | ||||||||||||||||
| Commercial and industrial | $ | 116,741 | $ | 1,929 | $ | 2,364 | $ | — | $ | 121,034 | ||||||||||
| Commercial real estate | 345,096 | 15,383 | 11,522 | — | 372,001 | |||||||||||||||
| Construction | 43,879 | — | 3,588 | 2,277 | 49,744 | |||||||||||||||
| Residential mortgage | 161,558 | — | 3,596 | — | 165,154 | |||||||||||||||
| Installment | 511 | — | — | — | 511 | |||||||||||||||
| Total loans | $ | 667,785 | $ | 17,312 | $ | 21,070 | $ | 2,277 | $ | 708,444 | ||||||||||
| December 31, 2013 | ||||||||||||||||
| (Dollars in Thousands) | ||||||||||||||||
| Pass | Special Mention | Substandard | Doubtful | Total | ||||||||||||
| Commercial and industrial | $ | 226,013 | $ | 1,719 | $ | 1,284 | $ | 672 | $ | 229,688 | ||||||
| Commercial real estate | 509,679 | 14,544 | 12,316 | — | 536,539 | |||||||||||
| Construction | 41,492 | — | 1,230 | — | 42,722 | |||||||||||
| Residential mortgage | 147,379 | 978 | 2,214 | — | 150,571 | |||||||||||
| Installment | 964 | — | 120 | — | 1,084 | |||||||||||
| Total loans | $ | 925,527 | $ | 17,241 | $ | 17,164 | $ | 672 | $ | 960,604 | ||||||
| December 31, 2012 | ||||||||||||||||
| (Dollars in Thousands) | ||||||||||||||||
| Pass | Special Mention | Substandard | Doubtful | Total | ||||||||||||
| Commercial and industrial | $ | 176,818 | $ | 3,281 | $ | 1,583 | $ | — | $ | 181,682 | ||||||
| Commercial real estate | 462,266 | 18,945 | 16,181 | — | 497,392 | |||||||||||
| Construction | 38,303 | 810 | 1,164 | — | 40,277 | |||||||||||
| Residential mortgage | 163,769 | 993 | 4,332 | — | 169,094 | |||||||||||
| Installment | 967 | — | 137 | — | 1,104 | |||||||||||
| Total loans | $ | 842,123 | $ | 24,029 | $ | 23,397 | $ | — | $ | 889,549 | ||||||
| F-28 | ||
| December 31, 2013 | ||||||||||||||||
| (Dollars in Thousands) | ||||||||||||||||
| No Related Allowance Recorded | Recorded Investment | Unpaid Principal Balance | Related Allowance | Average Recorded Investment | Interest Income Recognized | |||||||||||
| Commercial and industrial | $ | 449 | $ | 449 | $ | — | $ | 494 | $ | 25 | ||||||
| Commercial real estate | 10,482 | 10,783 | — | 10,658 | 496 | |||||||||||
| Residential mortgage | 1,858 | 2,000 | — | 1,892 | 94 | |||||||||||
| Installment | 120 | 120 | — | 128 | 6 | |||||||||||
| Total | $ | 12,909 | $ | 13,352 | $ | — | $ | 13,172 | $ | 621 | ||||||
| With An Allowance Recorded | Recorded Investment | Unpaid Principal Balance | Related Allowance | Average Recorded Investment | Interest Income Recognized | |||||||||||
| Commercial and industrial | $ | 672 | $ | 672 | $ | 300 | $ | 687 | $ | 43 | ||||||
| Commercial real estate | 4,344 | 4,344 | 115 | 4,359 | 200 | |||||||||||
| Total | $ | 5,016 | $ | 5,016 | $ | 415 | $ | 5,046 | $ | 243 | ||||||
| Total | ||||||||||||||||
| Commercial and industrial | $ | 1,121 | $ | 1,121 | $ | 300 | $ | 1,181 | $ | 68 | ||||||
| Commercial real estate | 14,826 | 15,127 | 115 | 15,017 | 696 | |||||||||||
| Residential mortgage | 1,858 | 2,000 | — | 1,892 | 94 | |||||||||||
| Installment | 120 | 120 | — | 128 | 6 | |||||||||||
| Total (including related allowance) | $ | 17,925 | $ | 18,368 | $ | 415 | $ | 18,218 | $ | 864 | ||||||
| December 31, 2012 | ||||||||||||||||
| (Dollars in Thousands) | ||||||||||||||||
| No Related Allowance Recorded | Recorded Investment | Unpaid Principal Balance | Related Allowance | Average Recorded Investment | Interest Income Recognized | |||||||||||
| Commercial and industrial | $ | 731 | $ | 731 | $ | — | $ | 834 | $ | 46 | ||||||
| Commercial real estate | 5,886 | 6,187 | — | 6,182 | 349 | |||||||||||
| Construction | 3,600 | 3,600 | — | 3,600 | 92 | |||||||||||
| Residential mortgage | 422 | 422 | — | 439 | 22 | |||||||||||
| Total | $ | 10,639 | $ | 10,940 | $ | — | $ | 11,055 | $ | 509 | ||||||
| With An Allowance Recorded | Recorded Investment | Unpaid Principal Balance | Related Allowance | Average Recorded Investment | Interest Income Recognized | |||||||||||
| Commercial real estate | $ | 4,180 | $ | 4,180 | $ | 493 | $ | 4,179 | $ | 138 | ||||||
| Residential mortgage | 1,255 | 1,255 | 152 | 1,289 | 40 | |||||||||||
| Total | $ | 5,435 | $ | 5,435 | $ | 645 | $ | 5,468 | $ | 178 | ||||||
| Total | ||||||||||||||||
| Commercial and industrial | $ | 731 | $ | 731 | $ | — | $ | 834 | $ | 46 | ||||||
| Commercial real estate | 10,066 | 10,367 | 493 | 10,361 | 487 | |||||||||||
| Construction | 3,600 | 3,600 | — | 3,600 | 92 | |||||||||||
| Residential mortgage | 1,677 | 1,677 | 152 | 1,728 | 62 | |||||||||||
| Total (including related allowance) | $ | 16,074 | $ | 16,375 | $ | 645 | $ | 16,523 | $ | 687 | ||||||
| F-29 | ||
| | | | | | |||||||||||||||
| December 31, 2010 | ||||||||||||||||||||
| (Dollars in Thousands) | ||||||||||||||||||||
| No Related Allowance Recorded | Recorded Investment | Unpaid Principal Balance | Related Allowance | Average Recorded Investment | Interest Income Recognized | |||||||||||||||
| Commercial and industrial | $ | 1,364 | $ | 1,908 | $ | — | $ | 1,933 | $ | 87 | ||||||||||
| Commercial real estate | 3,984 | 4,625 | — | 4,274 | 78 | |||||||||||||||
| Construction | 5,865 | 8,642 | — | 6,855 | 112 | |||||||||||||||
| Residential mortgage | 1,462 | 1,765 | — | 1,711 | 27 | |||||||||||||||
| Total | $ | 12,675 | $ | 16,940 | $ | — | $ | 14,773 | $ | 304 | ||||||||||
| | | | | | |||||||||||||||
| With An Allowance Recorded | Recorded Investment | Unpaid Principal Balance | Related Allowance | Average Recorded Investment | Interest Income Recognized | |||||||||||||||
| Commercial real estate | $ | 4,180 | $ | 4,180 | $ | 618 | $ | 4,181 | $ | 204 | ||||||||||
| Residential mortgage | 1,354 | 1,354 | 21 | 1,356 | 76 | |||||||||||||||
| Total | $ | 5,534 | $ | 5,534 | $ | 639 | $ | 5,537 | $ | 280 | ||||||||||
| | | | | | |||||||||||||||
| Total | ||||||||||||||||||||
| Commercial and industrial | $ | 1,364 | $ | 1,908 | $ | — | $ | 1,933 | $ | 87 | ||||||||||
| Commercial real estate | 8,164 | 8,805 | 618 | 8,455 | 282 | |||||||||||||||
| Construction | 5,865 | 8,642 | — | 6,855 | 112 | |||||||||||||||
| Residential mortgage | 2,816 | 3,119 | 21 | 3,067 | 103 | |||||||||||||||
| Total (including related allowance) | $ | 18,209 | $ | 22,474 | $ | 639 | $ | 20,310 | $ | 584 | ||||||||||
The Corporation defines an impaired loan as a loan and the Allowance for which it is probable, based on information available at the determination date, that the Corporation will not collect all amounts due under the contractual terms of the loan. At December 31, 2010 impaired loans were primarily collateral dependent, and totaled $18.2 million. Specific allowance for loan loss of $639,000 was assigned to impaired loans of $5.5 million. Loans in the amount of $12.7 million had no specific allowance allocation.
Loan Losses – (continued)
| F-30 | ||
| | | | | | | | |||||||||||||||||||||
| December 31, 2010 | ||||||||||||||||||||||||||||
| (Dollars in Thousands) | ||||||||||||||||||||||||||||
| 30 – 59 Days Past Due | 60 – 89 Days Past Due | Greater Than 90 Days | Total Past Due | Current | Total Loans Receivable | Loans Receivable > 90 Days And Accruing | ||||||||||||||||||||||
| Commercial and Industrial | $ | 1,509 | $ | 476 | $ | 456 | $ | 2,441 | $ | 118,593 | $ | 121,034 | $ | — | ||||||||||||||
| Commercial Real Estate | 4,290 | 2,229 | 3,563 | 10,082 | 361,919 | 372,001 | — | |||||||||||||||||||||
| Construction | 170 | 449 | 5,865 | 6,484 | 43,260 | 49,744 | — | |||||||||||||||||||||
| Residential Mortgage | 1,814 | 309 | 2,004 | 4,127 | 161,027 | 165,154 | 714 | |||||||||||||||||||||
| Installment | 9 | — | — | 9 | 502 | 511 | — | |||||||||||||||||||||
| Total | $ | 7,792 | $ | 3,463 | $ | 11,888 | $ | 23,143 | $ | 685,301 | $ | 708,444 | $ | 714 | ||||||||||||||
| December 31, 2013 | ||||||||||||||||||||||
| (Dollars in Thousands) | ||||||||||||||||||||||
| 30 – 59 Days Past Due | 60 – 89 Days Past Due | Greater Than 90 Days | Total Past Due | Current | Total Loans Receivable | Loans Receivable > 90 Days And Accruing | ||||||||||||||||
| Commercial and Industrial | $ | 18 | $ | — | $ | 753 | $ | 771 | $ | 228,917 | $ | 229,688 | $ | — | ||||||||
| Commercial Real Estate | 221 | — | 744 | 965 | 535,574 | 536,539 | — | |||||||||||||||
| Construction | — | — | — | — | 42,722 | 42,722 | — | |||||||||||||||
| Residential Mortgage | 990 | 258 | 1,640 | 2,888 | 147,683 | 150,571 | — | |||||||||||||||
| Installment | 5 | — | — | 5 | 1,079 | 1,084 | — | |||||||||||||||
| Total | $ | 1,234 | $ | 258 | $ | 3,137 | $ | 4,629 | $ | 955,975 | $ | 960,604 | $ | — | ||||||||
| December 31, 2012 | ||||||||||||||||||||||
| (Dollars in Thousands) | ||||||||||||||||||||||
| 30 – 59 Days Past Due | 60 – 89 Days Past Due | Greater Than 90 Days | Total Past Due | Current | Total Loans Receivable | Loans Receivable > 90 Days And Accruing | ||||||||||||||||
| Commercial and Industrial | $ | 590 | $ | — | 216 | 806 | $ | 180,876 | $ | 181,682 | $ | — | ||||||||||
| Commercial Real Estate | 1,012 | 703 | 354 | 2,069 | 495,323 | 497,392 | — | |||||||||||||||
| Construction | — | — | 319 | 319 | 39,958 | 40,277 | — | |||||||||||||||
| Residential Mortgage | 2,017 | 628 | 2,784 | 5,429 | 163,665 | 169,094 | 55 | |||||||||||||||
| Installment | 23 | — | — | 23 | 1,081 | 1,104 | — | |||||||||||||||
| Total | $ | 3,642 | $ | 1,331 | $ | 3,673 | $ | 8,646 | $ | 880,903 | $ | 889,549 | $ | 55 | ||||||||
| F-31 | ||
| | | | | | | | |||||||||||||||||||||
| December 31, 2010 | ||||||||||||||||||||||||||||
| (Dollars in Thousands) | ||||||||||||||||||||||||||||
| C & I | Comm R/E | Construction | Res Mtge | Installment | Unallocated | Total | ||||||||||||||||||||||
| Allowance for loan and lease losses: | ||||||||||||||||||||||||||||
| Individually evaluated for impairment | $ | — | $ | 618 | $ | — | $ | 21 | $ | — | $ | — | $ | 639 | ||||||||||||||
| Collectively evaluated for impairment | 1,272 | 5,097 | 551 | 1,017 | 52 | 239 | 8,228 | |||||||||||||||||||||
| Total | $ | 1,272 | $ | 5,715 | $ | 551 | $ | 1,038 | $ | 52 | $ | 239 | $ | 8,867 | ||||||||||||||
| Loans Receivable | ||||||||||||||||||||||||||||
| Individually evaluated for impairment | $ | 2,748 | $ | 11,960 | $ | 5,865 | $ | 1,354 | $ | — | $ | — | $ | 21,927 | ||||||||||||||
| Collectively evaluated for impairment | 118,286 | 360,041 | 43,879 | 163,800 | 511 | — | 686,517 | |||||||||||||||||||||
| Total | $ | 121,034 | $ | 372,001 | $ | 49,744 | $ | 165,154 | $ | 511 | $ | — | $ | 708,444 | ||||||||||||||
| December 31, 2013 (Dollars in Thousands) | ||||||||||||||||||||||
| C & I | Comm R/E | Construction | Res Mtge | Installment | Unallocated | Total | ||||||||||||||||
| Allowance for loan and lease losses: | ||||||||||||||||||||||
| Individually evaluated for impairment | $ | 300 | $ | 115 | $ | — | $ | — | $ | — | $ | — | $ | 415 | ||||||||
| Collectively evaluated for impairment | 1,398 | 5,631 | 362 | 990 | 146 | 1,391 | 9,918 | |||||||||||||||
| Total | $ | 1,698 | $ | 5,746 | $ | 362 | $ | 990 | $ | 146 | $ | 1,391 | $ | 10,333 | ||||||||
| Loans Receivable | ||||||||||||||||||||||
| Individually evaluated for impairment | $ | 1,121 | $ | 14,826 | $ | — | $ | 1,858 | $ | 120 | $ | — | $ | 17,925 | ||||||||
| Collectively evaluated for impairment | 226,450 | 505,361 | 41,493 | 135,031 | 839 | — | 909,174 | |||||||||||||||
| Loans acquired with discounts related to credit quality | 2,117 | 16,352 | 1,229 | 13,682 | 125 | — | 33,505 | |||||||||||||||
| Total | $ | 229,688 | $ | 536,539 | $ | 42,722 | $ | 150,571 | $ | 1,084 | $ | — | $ | 960,604 | ||||||||
| December 31, 2012 (Dollars in Thousands) | ||||||||||||||||||||||
| C & I | Comm R/E | Construction | Res Mtge | Installment | Unallocated | Total | ||||||||||||||||
| Allowance for loan and lease losses: | ||||||||||||||||||||||
| Individually evaluated for impairment | $ | — | $ | 493 | $ | — | $ | 152 | $ | — | $ | — | $ | 645 | ||||||||
| Collectively evaluated for impairment | 2,419 | 4,719 | 313 | 1,376 | 114 | 651 | 9,592 | |||||||||||||||
| Total | $ | 2,419 | $ | 5,212 | $ | 313 | $ | 1,528 | $ | 114 | $ | 651 | $ | 10,237 | ||||||||
| Loans Receivable | ||||||||||||||||||||||
| Individually evaluated for impairment | $ | 731 | $ | 10,066 | $ | 3,600 | $ | 1,677 | $ | — | $ | — | $ | 16,074 | ||||||||
| Collectively evaluated for impairment | 176,913 | 466,411 | 34,572 | 146,508 | 973 | — | 825,377 | |||||||||||||||
| Loans acquired with discounts related to credit quality | 4,038 | 20,915 | 2,105 | 20,909 | 131 | — | 48,098 | |||||||||||||||
| Total | $ | 181,682 | $ | 497,392 | $ | 40,277 | $ | 169,094 | $ | 1,104 | $ | — | $ | 889,549 | ||||||||
| F-32 | ||
| | | | |||||||||
| 2010 | 2009 | 2008 | ||||||||||
| (Dollars in Thousands) | ||||||||||||
| Balance at the beginning of year | $ | 8,711 | $ | 6,254 | $ | 5,163 | ||||||
| Provision for loan losses | 5,076 | 4,597 | 1,561 | |||||||||
| Loans charged-off | (4,940 | ) | (2,152 | ) | (499 | ) | ||||||
| Recoveries on loans previously charged-off | 20 | 12 | 29 | |||||||||
| Balance at the end of year | $ | 8,867 | $ | 8,711 | $ | 6,254 | ||||||
| Year Ended December 31, 2013 | ||||||||||||||||||||||
| (Dollars in thousands) | ||||||||||||||||||||||
| C & I | Comm R/E | Construction | Res Mtg | Installment | Unallocated | Total | ||||||||||||||||
| Balance at January 1, | $ | 2,424 | $ | 5,323 | $ | 313 | $ | 1,532 | $ | 113 | $ | 532 | $ | 10,237 | ||||||||
| Loans charged-off | (6) | (126) | — | (175) | (22) | — | (329) | |||||||||||||||
| Recoveries | 41 | 28 | — | — | 6 | — | 75 | |||||||||||||||
| Provision for loan losses | (761) | 521 | 49 | (367) | 49 | 859 | 350 | |||||||||||||||
| Balance at December 31, | $ | 1,698 | $ | 5,746 | $ | 362 | $ | 990 | $ | 146 | $ | 1,391 | $ | 10,333 | ||||||||
| Year Ended December 31, 2012 | ||||||||||||||||||||||
| (Dollars in thousands) | ||||||||||||||||||||||
| C & I | Comm R/E | Construction | Res Mtg | Installment | Unallocated | Total | ||||||||||||||||
| Balance at January 1, | $ | 1,527 | $ | 5,972 | $ | 707 | $ | 1,263 | $ | 51 | $ | 82 | $ | 9,602 | ||||||||
| Loans charged-off | — | (57) | — | (454) | (16) | — | (527) | |||||||||||||||
| Recoveries | — | 80 | 540 | 210 | 7 | — | 837 | |||||||||||||||
| Provision for loan losses | 892 | (783) | (934) | 509 | 72 | 569 | 325 | |||||||||||||||
| Balance at December 31, | $ | 2,419 | $ | 5,212 | $ | 313 | $ | 1,528 | $ | 114 | $ | 651 | $ | 10,237 | ||||||||
| For the Year Ended December 31, | ||||||||||
| 2013 | 2012 | 2011 | ||||||||
| (Dollars in Thousands) | ||||||||||
| Balance at the beginning of year | $ | 10,237 | $ | 9,602 | $ | 8,867 | ||||
| Provision for loan losses | 350 | 325 | 2,448 | |||||||
| Loans charged-off | (329) | (527) | (2,028) | |||||||
| Recoveries on loans previously charged-off | 75 | 837 | 315 | |||||||
| Balance at the end of year | $ | 10,333 | $ | 10,237 | $ | 9,602 | ||||
At December 31, 2010,2013, there were no commitments to lend additional funds to borrowers whose loans were non-accrual or contractually past due in excess of 90 days and still accruing interest.
interest, or whose terms have been modified in troubled debt restructurings.
| F-33 | ||
| Year Ended December 31, 2013 | ||||||||||
| Number of Loans | Pre-restructuring Outstanding Recorded Investment | Post-restructuring Outstanding Recorded Investment | ||||||||
| (Dollars in Thousands) | ||||||||||
| Troubled debt restructurings: | ||||||||||
| Commercial Real Estate | — | $ | — | $ | — | |||||
| Residential Mortgage | — | — | — | |||||||
| Installment | — | — | — | |||||||
| Total | — | $ | — | $ | — | |||||
| Year Ended December 31, 2012 | ||||||||||
| Number of Loans | Pre-restructuring Outstanding Recorded Investment | Post-restructuring Outstanding Recorded Investment | ||||||||
| (Dollars in Thousands) | ||||||||||
| Troubled debt restructurings: | ||||||||||
| Commercial Real Estate | 1 | $ | 225 | $ | 225 | |||||
| Residential Mortgage | 1 | 714 | 675 | |||||||
| Installment | 1 | 1,354 | 1,354 | |||||||
| Total | 3 | $ | 2,293 | $ | 2,254 | |||||
| F-34 | ||
| | | | |||||||||
| Estimated Useful Life (Years) | 2010 | 2009 | ||||||||||
| (Dollars in Thousands) | ||||||||||||
| Land | $ | 2,403 | $ | 3,447 | ||||||||
| Buildings | 5 – 40 | 12,656 | 16,200 | |||||||||
| Furniture, fixtures and equipment | 2 – 20 | 15,929 | 16,222 | |||||||||
| Leasehold improvements | 5 – 30 | 1,839 | 1,839 | |||||||||
| Subtotal | 32,827 | 37,708 | ||||||||||
| Less: accumulated depreciation and amortization | 19,890 | 19,848 | ||||||||||
| Total premises and equipment, net | $ | 12,937 | $ | 17,860 | ||||||||
| Estimated | |||||||||
| Useful Life | |||||||||
| (Years) | 2013 | 2012 | |||||||
| (Dollars in Thousands) | |||||||||
| Land | — | $ | 2,403 | $ | 2,403 | ||||
| Buildings | 5 – 40 | 13,675 | 13,434 | ||||||
| Furniture, fixtures and equipment | 2 – 20 | 17,604 | 17,226 | ||||||
| Leasehold improvements | 5 – 30 | 3,184 | 2,900 | ||||||
| Subtotal | 36,866 | 35,963 | |||||||
| Less: accumulated depreciation and amortization | 23,185 | 22,400 | |||||||
| Total premises and equipment, net | $ | 13,681 | $ | 13,563 | |||||
and Other, and the FASB issued ASU No. 2011-08, “Testing Goodwill for Impairment,” allowing an initial qualitative assessment of goodwill commonly known as step zero impairment testing. In general, the step zero test allows an entity to first assess qualitative factors to determine whether it is more likely than not (i.e., more than 50%) that the fair value of a reporting unit is less than its carrying value. If a step zero impairment test results in the conclusion that it is more likely than not that the fair value of the reporting unit exceeds its carrying value, then no further testing is required.
2012.
| | | | |||||||||
| Gross Carrying Amount | Accumulated Amortization | Net Carrying Amount | ||||||||||
| (Dollars in Thousands) | ||||||||||||
| As of December 31, 2010: | ||||||||||||
| Core deposits | $ | 703 | $ | (548 | ) | $ | 155 | |||||
| Total intangible assets | 703 | (548 | ) | 155 | ||||||||
| As of December 31, 2009: | ||||||||||||
| Core deposits | $ | 703 | $ | (479 | ) | $ | 224 | |||||
| Total intangible assets | 703 | (479 | ) | 224 | ||||||||
| Gross Carrying Amount | Accumulated Amortization | Net Carrying Amount | ||||||||
| (Dollars in Thousands) | ||||||||||
| As of December 31, 2013: | ||||||||||
| Core deposits | $ | 703 | $ | (679) | $ | 24 | ||||
| Total intangible assets | 703 | (679) | 24 | |||||||
| As of December 31, 2012: | ||||||||||
| Core deposits | $ | 703 | $ | (649) | $ | 54 | ||||
| Total intangible assets | 703 | (649) | 54 | |||||||
| F-35 | ||
| (dollars in thousands) | Amount | |||
| 2014 | $ | 102,106 | ||
| 2015 | 25,672 | |||
| 2016 | 19,765 | |||
| 2017 | 4,376 | |||
| 2018 | 34 | |||
| Thereafter | — | |||
| Total | $ | 151,953 | ||
| | |||
| Amount | ||||
| (Dollars in Thousands) | ||||
| Due in one year or less | $ | 107,115 | ||
| Due in 2012 | 9,783 | |||
| Due in 2013 | 2,753 | |||
| Due in 2014 | — | |||
| Total certificates of deposit $100,000 or more | $ | 119,651 | ||
| (dollars in thousands) | Amount | |||
| Three Months or Less | $ | 15,301 | ||
| Over Three Months through Six Months | 28,401 | |||
| Over Six Months through Twelve Months | 18,771 | |||
| Over Twelve Months | 36,971 | |||
| Total | $ | 99,444 | ||
Short-term borrowings at December 31, 2010 and 2009 consisted of the following:
| | | ||||||
| 2010 | 2009 | |||||||
| (Dollars in Thousands) | ||||||||
| Securities sold under agreements to repurchase | $ | 28,855 | $ | 46,109 | ||||
| Federal funds purchased and FHLB short-term advances | 13,000 | — | ||||||
| Total short-term borrowings | $ | 41,855 | $ | 46,109 | ||||
The weighted average interest rates for short-term borrowings at December 31, 2010 and 2009 were 0.27 percent and 0.97 percent, respectively.
Long-term borrowings at December 31, 20102013 and 20092012 consisted of the following:
| | | ||||||
| 2010 | 2009 | |||||||
| (Dollars in Thousands) | ||||||||
| FHLB long-term advances | $ | 130,000 | $ | 170,144 | ||||
| Securities sold under agreements to repurchase | 41,000 | 53,000 | ||||||
| Total long-term borrowings | $ | 171,000 | $ | 223,144 | ||||
| 2013 | 2012 | ||||||
| (Dollars in Thousands) | |||||||
| FHLB long-term advances | $ | 115,000 | $ | 115,000 | |||
| Securities sold under agreements to repurchase | 31,000 | 31,000 | |||||
| Total long-term borrowings | $ | 146,000 | $ | 146,000 | |||
| F-36 | ||
2012, respectively. The maximum borrowing capacity with the Federal Home Loan Bank is limited to25 percent of the Corporation’s total assets.
| | | ||||||
| (Dollars in Thousands) | 2010 | 2009 | ||||||
| 2010 | $ | — | $ | 40,144 | ||||
| 2011 | 10,000 | 10,000 | ||||||
| 2013 | 5,000 | 5,000 | ||||||
| 2016 | 20,000 | 20,000 | ||||||
| 2017 | 55,000 | 55,000 | ||||||
| 2018 | 40,000 | 40,000 | ||||||
| Total | $ | 130,000 | 170,144 | |||||
| 2013 | 2012 | ||||||
| (Dollars in Thousands) | |||||||
| 2016 | $ | — | $ | 20,000 | |||
| 2017 | 35,000 | 55,000 | |||||
| 2018 | 40,000 | 40,000 | |||||
| 2020 | 40,000 | — | |||||
| Total | $ | 115,000 | $ | 115,000 | |||
| | | ||||||
| (Dollars in Thousands) | 2010 | 2009 | ||||||
| 2011 | $ | — | $ | 12,000 | ||||
| 2015 | 10,000 | 10,000 | ||||||
| 2017 | 15,000 | 15,000 | ||||||
| 2018 | 16,000 | 16,000 | ||||||
| Total | $ | 41,000 | $ | 53,000 | ||||
| 2013 | 2012 | ||||||
| (Dollars in Thousands) | |||||||
| 2017 | $ | 15,000 | $ | 15,000 | |||
| 2018 | 16,000 | 16,000 | |||||
| Total | $ | 31,000 | $ | 31,000 | |||
| F-37 | ||
| | | | | | |||||
| Issuance Date | Securities Issued | Liquidation Value | Coupon Rate | Maturity | Redeemable by Issuer Beginning | |||||||
| 12/19/2003 | $ | 5,000,000 | $1,000 per Capital Security | Floating 3-month LIBOR + 285 Basis Points | 01/23/2034 | 01/23/2009 | ||||||
| | | | |||||||||
| 2010 | 2009 | 2008 | ||||||||||
| (Dollars in Thousands) | ||||||||||||
| Current: | ||||||||||||
| Federal | $ | (27 | ) | $ | (19 | ) | $ | 104 | ||||
| State | 198 | 146 | 242 | |||||||||
| Subtotal | 171 | 127 | 346 | |||||||||
| Deferred: | ||||||||||||
| Federal | (191 | ) | 824 | 1,184 | ||||||||
| State | 242 | (5 | ) | 37 | ||||||||
| Subtotal | 51 | 819 | 1,221 | |||||||||
| Income tax expense | $ | 222 | $ | 946 | $ | 1,567 | ||||||
| 2013 | 2012 | 2011 | ||||||||
| (Dollars in Thousands) | ||||||||||
| Current: | ||||||||||
| Federal | $ | 5,658 | $ | 5,506 | $ | 3,818 | ||||
| State | 87 | 259 | 187 | |||||||
| Subtotal | 5,745 | 5,765 | 4,005 | |||||||
| Deferred: | ||||||||||
| Federal | 1,906 | 1,085 | 2,157 | |||||||
| State | (167) | 827 | 1,249 | |||||||
| Subtotal | 1,739 | 1,912 | 3,406 | |||||||
| Income tax expense | $ | 7,484 | $ | 7,677 | $ | 7,411 | ||||
| | | | |||||||||
| 2010 | 2009 | 2008 | ||||||||||
| (Dollars in Thousands) | ||||||||||||
| Income before income tax expense | $ | 7,226 | $ | 4,717 | $ | 7,409 | ||||||
| Federal statutory rate | 34 | % | 34 | % | 34 | % | ||||||
| Computed “expected” Federal income tax expense | 2,457 | 1,604 | 2,519 | |||||||||
| State tax, net of Federal tax benefit | 291 | 93 | 184 | |||||||||
| Bank owned life insurance | (417 | ) | (393 | ) | (409 | ) | ||||||
| Tax-exempt interest and dividends | (75 | ) | (334 | ) | (798 | ) | ||||||
| Tax on Bank Owned Life Insurance policy surrender gain | 539 | — | — | |||||||||
| Reversal of unrealized tax benefit & interest | (2,551 | ) | — | — | ||||||||
| Other, net | (22 | ) | (24 | ) | 71 | |||||||
| Income tax expense | $ | 222 | $ | 946 | $ | 1,567 | ||||||
| 2013 | 2012 | 2011 | ||||||||||
| (Dollars in Thousands) | ||||||||||||
| Income before income tax expense | $ | 27,409 | $ | 25,184 | $ | 21,337 | ||||||
| Federal statutory rate | 35 | % | 35 | % | 35 | % | ||||||
| Computed “expected” Federal income tax expense | 9,593 | 8,814 | 7,468 | |||||||||
| State tax, net of Federal tax benefit | (53) | 706 | 933 | |||||||||
| Bank owned life insurance | (477) | (356) | (363) | |||||||||
| Tax-exempt interest and dividends | (1,645) | (1,228) | (595) | |||||||||
| Bargain gain on Saddle River Valley Bank acquisition | — | (314) | — | |||||||||
| Other, net | 66 | 55 | (32) | |||||||||
| Income tax | $ | 7,484 | $ | 7,677 | $ | 7,411 | ||||||
| F-38 | ||
The decreased tax rate resulted in part from the measurement and reassessment of the technical merits which led the Corporation to conclude that its position of the recognition of $2.6 million on a previously unrecognized tax benefit was sustainable. This in turn resulted in recognition of tax benefits previously unrecognized due to changes in the Corporation’s business entity structure during 2007 and into 2008 offset by a higher proportion of taxable income versus tax-exempt income in 2010 versus 2009. The decreased tax rate benefit was offset, in part, due to the surrender of Bank Owned Life Insurance Policies resulting in a $633,000 in income tax expense in 2010.
| | | ||||||
| 2010 | 2009 | |||||||
| (Dollars in Thousands) | ||||||||
| Deferred tax assets: | ||||||||
| Impaired assets | $ | 2,621 | $ | 1,661 | ||||
| Allowance for loan losses | 3,358 | 3,296 | ||||||
| Employee benefit plans | 59 | 54 | ||||||
| Unrealized loss on securities available-for-sale and tax benefits related to FASB ASC 715-10 | 5,028 | 7,088 | ||||||
| Other | 656 | 507 | ||||||
| Federal NOL and AMT Credits | 3,874 | 4,777 | ||||||
| NJ NOL and AMA credits | 1,471 | 1,866 | ||||||
| Total deferred tax assets | $ | 17,067 | $ | 19,249 | ||||
| Deferred tax liabilities: | ||||||||
| Depreciation | $ | 298 | $ | 243 | ||||
| Market discount accretion | 29 | 61 | ||||||
| Deferred loan costs, net of fees | 435 | 502 | ||||||
| Purchase accounting | 62 | 89 | ||||||
| Total deferred tax liabilities | 824 | 895 | ||||||
| Net deferred tax asset | $ | 16,243 | $ | 18,354 | ||||
| 2013 | 2012 | ||||||
| (Dollars in Thousands) | |||||||
| Deferred tax assets: | |||||||
| Impaired assets | $ | 1,221 | $ | 1,967 | |||
| Allowance for loan losses | 4,118 | 4,040 | |||||
| Employee benefit plans | — | 64 | |||||
| Pension actuarial losses | 2,206 | 2,473 | |||||
| Other | 466 | 454 | |||||
| NJ NOL | 399 | — | |||||
| NJ AMA credits | 137 | 131 | |||||
| Total deferred tax assets | $ | 8,547 | $ | 9,129 | |||
| Deferred tax liabilities: | |||||||
| Employee benefit plans | $ | 1,281 | $ | — | |||
| Depreciation | 416 | 294 | |||||
| Market discount accretion | 200 | 148 | |||||
| Deferred loan costs, net of fees | 385 | 330 | |||||
| Purchase accounting | 522 | 608 | |||||
| Unrealized gains on securities available-for-sale | 547 | 5,675 | |||||
| Total deferred tax liabilities | 3,351 | 7,055 | |||||
| Net deferred tax asset | $ | 5,196 | $ | 2,074 | |||
2033
.| F-39 | ||
| | | ||||||
| 2010 | 2009 | |||||||
| (Dollars in Thousands) | ||||||||
| Commitments under commercial loans and lines of credit | $ | 77,786 | $ | 70,076 | ||||
| Home equity and other revolving lines of credit | 50,131 | 54,572 | ||||||
| Outstanding commercial mortgage loan commitments | 32,554 | 33,659 | ||||||
| Standby letters of credit | 2,225 | 1,676 | ||||||
| Performance letters of credit | 12,019 | 11,466 | ||||||
| Outstanding residential mortgage loan commitments | 250 | 4,153 | ||||||
| Overdraft protection lines | 4,898 | 5,058 | ||||||
| Other consumer | — | 11 | ||||||
| Total | $ | 179,863 | $ | 180,671 | ||||
Other expenses include
| 2013 | 2012 | ||||||
| (Dollars in Thousands) | |||||||
| Commitments under commercial loans and lines of credit | $ | 109,661 | $ | 129,797 | |||
| Home equity and other revolving lines of credit | 41,836 | 46,795 | |||||
| Outstanding commercial mortgage loan commitments | 48,129 | 30,955 | |||||
| Standby letters of credit | 9,655 | 1,700 | |||||
| Performance letters of credit | 21,844 | 27,743 | |||||
| Outstanding residential mortgage loan commitments | 1,858 | 2,207 | |||||
| Overdraft protection lines | 5,273 | 5,666 | |||||
| Total | $ | 238,256 | $ | 244,863 | |||
$7,289,000.
| F-40 | ||
At December 31, 2010,2013, management believes that the Bank and the Parent Corporation met all capital adequacy requirements to which they are subject.
The following is a summary of the Bank’s and the Parent Corporation’s actual capital amounts and ratios as of December 31, 20102013 and 2009,2012, compared to the FRB and FDIC minimum capital adequacy requirements and the FRB and FDIC requirements for classification as a well-capitalized institution.
| | | | | | | ||||||||||||||||||
| Union Center National Bank | Minimum Capital Adequacy | For Classification Under Corrective Action Plan as Well Capitalized | ||||||||||||||||||||||
| Amount | Ratio | Amount | Ratio | Amount | Ratio | |||||||||||||||||||
| (Dollars in Thousands) | ||||||||||||||||||||||||
| December 31, 2010 Leverage (Tier 1) capital | $ | 112,601 | 9.56 | % | $ | 48,088 | 4.00 | % | $ | 59,262 | 5.00 | % | ||||||||||||
| Risk-Based Capital: | ||||||||||||||||||||||||
| Tier 1 | $ | 112,601 | 12.83 | % | $ | 35,116 | 4.00 | % | $ | 52,674 | 6.00 | % | ||||||||||||
| Total | 121,468 | 13.84 | % | 70,232 | 8.00 | % | 87,790 | 10.00 | % | |||||||||||||||
| December 31, 2009 Leverage (Tier 1) capital | $ | 96,314 | 7.56 | % | $ | 52,133 | 4.00 | % | $ | 64,315 | 5.00 | % | ||||||||||||
| Risk-Based Capital: | ||||||||||||||||||||||||
| Tier 1 | $ | 96,314 | 11.17 | % | $ | 34,485 | 4.00 | % | $ | 51,727 | 6.00 | % | ||||||||||||
| Total | 105,036 | 12.18 | % | 68,970 | 8.00 | % | 86,212 | 10.00 | % | |||||||||||||||
| | | | | | | ||||||||||||||||||
| Parent Corporation | Minimum Capital Adequacy | For Classification as Well Capitalized | ||||||||||||||||||||||
| Amount | Ratio | Amount | Ratio | Amount | Ratio | |||||||||||||||||||
| (Dollars in Thousands) | ||||||||||||||||||||||||
| December 31, 2010 Leverage (Tier 1) capital | $ | 116,600 | 9.90 | % | $ | 48,098 | 4.00 | % | $ | 59,275 | 5.00 | % | ||||||||||||
| Risk-Based Capital: | ||||||||||||||||||||||||
| Tier 1 | $ | 116,600 | 13.28 | % | $ | 35,124 | 4.00 | % | $ | 52,686 | 6.00 | % | ||||||||||||
| Total | 125,467 | 14.29 | % | 70,248 | 8.00 | % | N/A | N/A | ||||||||||||||||
| December 31, 2009 Leverage (Tier 1) capital | $ | 98,536 | 7.73 | % | $ | 52,143 | 4.00 | % | $ | 64,327 | 5.00 | % | ||||||||||||
| Risk-Based Capital: | ||||||||||||||||||||||||
| Tier 1 | $ | 98,536 | 11.43 | % | $ | 34,498 | 4.00 | % | $ | 51,747 | 6.00 | % | ||||||||||||
| Total | 107,247 | 12.44 | % | 68,996 | 8.00 | % | N/A | N/A | ||||||||||||||||
| F-41 | ||
| Union Center National Bank | Minimum Capital Adequacy | For Classification Under Corrective Action Plan as Well Capitalized | |||||||||||||||||
| Amount | Ratio | Amount | Ratio | Amount | Ratio | ||||||||||||||
| (Dollars in Thousands) | |||||||||||||||||||
| December 31, 2013 Leverage (Tier 1) capital | $ | 159,431 | 9.69 | % | $ | 65,813 | 4.00 | % | $ | 82,266 | 5.00 | % | |||||||
| Risk-Based Capital: | |||||||||||||||||||
| Tier 1 | $ | 159,431 | 12.10 | % | $ | 52,704 | 4.00 | % | $ | 79,057 | 6.00 | % | |||||||
| Total | 169,974 | 12.91 | % | 105,329 | 8.00 | % | 131,661 | 10.00 | % | ||||||||||
| December 31, 2012 Leverage (Tier 1) capital | $ | 143,294 | 8.99 | % | $ | 63,757 | 4.00 | % | $ | 79,696 | 5.00 | % | |||||||
| Risk-Based Capital: | |||||||||||||||||||
| Tier 1 | $ | 143,294 | 11.35 | % | $ | 50,500 | 4.00 | % | $ | 75,750 | 6.00 | % | |||||||
| Total | 153,776 | 12.18 | % | 101,002 | 8.00 | % | 126,253 | 10.00 | % | ||||||||||
| Parent Corporation | Minimum Capital Adequacy | For Classification as Well Capitalized | |||||||||||||||||
| Amount | Ratio | Amount | Ratio | Amount | Ratio | ||||||||||||||
| (Dollars in Thousands) | |||||||||||||||||||
| December 31, 2013 Leverage (Tier 1) capital | $ | 159,316 | 9.69 | % | $ | 65,765 | 4.00 | % | $ | N/A | N/A | % | |||||||
| Risk-Based Capital: | |||||||||||||||||||
| Tier 1 | $ | 159,316 | 12.10 | % | $ | 52,666 | 4.00 | % | $ | N/A | N/A | % | |||||||
| Total | 169,894 | 12.90 | % | 105,361 | 8.00 | % | N/A | N/A | |||||||||||
| December 31, 2012 Leverage (Tier 1) capital | $ | 143,824 | 9.02 | % | $ | 63,780 | 4.00 | % | $ | N/A | N/A | % | |||||||
| Risk-Based Capital: | |||||||||||||||||||
| Tier 1 | $ | 143,824 | 11.39 | % | $ | 50,509 | 4.00 | % | $ | N/A | N/A | % | |||||||
| Total | 154,271 | 12.22 | % | 100,996 | 8.00 | % | N/A | N/A | |||||||||||
On March 1, 2005, the Federal Reserve adopted a final rule that allows the continued inclusion of outstanding and prospective issuances of trust preferred securities in the Tier I Capital of bank holding companies, subject to stricter quantitative limits and qualitative standards. The new quantitative limits became effective after a five-year transition period ending March 31, 2009. Under the final rules, trust preferred securities and other restricted core capital elements are limited to 25% of all core capital elements. Amounts of restricted core capital elements in excess of these limits may be included in Tier II Capital. Based on a review of the final rule, the Corporation believes that its trust preferred issues qualify as Tier I Capital. However, in the event that the trust preferred issues do not qualify as Tier I Capital, the Corporation would remain well-capitalized.
The Dodd-Frank Act includes certain provisions, often referred to as the “Collins Amendment,” concerning the capital requirements of the United States banking regulators. These provisions are intended to subject bank holding companies to the same capital requirements as their bank subsidiaries and to eliminate or
| F-42 | ||
significantly reduce the use of hybrid capital instruments, especially trust preferred securities, as regulatory capital. Under the Collins Amendment, trust preferred securities issued by a company, such as Union Center National Bank, with total consolidated assets of less than $15 billion before May 19, 2010 and treated as regulatory capital are grandfathered, but any such securities issued later are not eligible as regulatory capital. The banking regulators must develop regulations setting minimum risk-based and leverage capital requirements for holding companies and banks on a consolidated basis that are no less stringent than the generally applicable requirements in effect for depository institutions under the prompt corrective action regulations. The banking regulators also must seek to make capital standards countercyclical so that the required levels of capital increase in times of economic expansion and decrease in times of economic contraction. The Dodd-Frank Act requires these new capital regulations to be adopted by the Federal Reserve in final form 18 months after the date of enactment of the Dodd-Frank Act (July 21, 2010).
Disclosure of comprehensive income for the years ended December 31, 2010, 2009 and 2008 is presented in the Consolidated Statements of Changes in Stockholders’ Equity. The table below provides a reconciliation of the components of
| Affected Line Item in the | |||||||||||
| Details about Accumulated Other | Amounts Reclassified from Accumulated | Statement Where Net Income is | |||||||||
| Comprehensive Income Components | Other Comprehensive Income | Presented | |||||||||
| Twelve Months Ended | |||||||||||
| December 31, | |||||||||||
| (Dollars in thousands) | 2013 | 2012 | 2011 | ||||||||
| OTTI losses | $ | (652) | $ | (870) | $ | (342) | Net investment securities gains | ||||
| 178 | 265 | 119 | Tax benefit | ||||||||
| (474) | (605) | (223) | Net of tax | ||||||||
| Sale of investment securities available-for-sale | 2,363 | 2,882 | 3,976 | Net investment securities gains | |||||||
| (645) | (879) | (1,380) | Tax expense | ||||||||
| 1,718 | 2,003 | 2,596 | Net of tax | ||||||||
| Amortization of unrealized holding gains on securities transferred from available-for-sale to held-to-maturity | 58 | 2 | 46 | Interest income | |||||||
| (19) | (1) | (28) | Tax expense | ||||||||
| 39 | 1 | 18 | Net of tax | ||||||||
| Pension plan actuarial (gains) losses | (654) | 790 | 1,649 | Before tax | |||||||
| 267 | (323) | (584) | Tax benefit (expense) | ||||||||
| (387) | 467 | 1,065 | Net of tax | ||||||||
| Total reclassification | $ | 896 | $ | 1,866 | $ | 3,456 | Net of tax | ||||
The components of other comprehensive income (loss), net of taxes, were as follows for the following fiscal years ended December 31:
| | | | |||||||||
| Years Ended December 31, | ||||||||||||
| 2010 | 2009 | 2008 | ||||||||||
| (Dollars in Thousands) | ||||||||||||
| Reclassification adjustments of OTTI losses included in income | $ | (5,576 | ) | $ | (4,238 | ) | $ | — | ||||
| Unrealized gains (losses) on available for sale securities | 6,500 | (3,809 | ) | (3,328 | ) | |||||||
| Reclassification adjustment for net gain/(loss) arising during this period | 4,237 | 4,729 | 655 | |||||||||
| Net unrealized gains (losses) | 5,161 | (3,318 | ) | (2,673 | ) | |||||||
| Tax effect | (2,060 | ) | 1,354 | 1,584 | ||||||||
| Net of tax amount | 3,101 | (1,964 | ) | (1,089 | ) | |||||||
| Change in minimum pension liability | — | 25 | — | |||||||||
| Tax effect | — | (10 | ) | — | ||||||||
| Net of tax amount | — | 15 | — | |||||||||
| Net actuarial gains (losses) | — | 142 | (3,332 | ) | ||||||||
| Tax effect | — | (57 | ) | 1,333 | ||||||||
| Net of tax amount | — | 85 | (1,999 | ) | ||||||||
| Other comprehensive income (loss), net of tax | $ | 3,101 | $ | (1,864 | ) | $ | (3,088 | ) | ||||
| 2013 | 2012 | ||||||
| (Dollars in Thousands) | |||||||
| Investment securities available for sale, net of tax | $ | 2,374 | $ | 8,781 | |||
| Unamortized component of securities transferred from available-for-sale to held-to-maturity, net of tax | (1,425) | 162 | |||||
| Defined benefit pension and post-retirement plans, net of tax | (3,493) | (3,880) | |||||
| Total | $ | (2,544) | $ | 5,063 | |||
| F-43 | ||
Accumulated other comprehensive loss at December 31, 2010 and 2009 consisted of the following:
| | | ||||||
| 2010 | 2009 | |||||||
| (Dollars in Thousands) | ||||||||
| Investment securities available for sale, net of tax | $ | (5,327 | ) | $ | (8,428 | ) | ||
| Defined benefit pension and post-retirement plans, net of tax | (2,348 | ) | (2,348 | ) | ||||
| Total | $ | (7,675 | ) | $ | (10,776 | ) | ||
In addition, the Corporation has a non-qualified retirement plan that is designed to supplement the pension plan for key employees. The plan is known as the Union Center National Bank Benefit Equalization Plan, or “BEP”. The BEP is a nonqualified, unfunded supplemental retirement plan, which is designed to replace the benefits that cannot be provided under the terms of the Pension Plan solely due to certain compensation and benefit limits placed on tax-qualified pension plans under the Internal Revenue Code. Benefits under the BEP Plan were paid out in 2009.
In 1999, the Corporation adopted a Directors’ Retirement Plan, which was designed to provide retirement benefits for members of the Board of Directors. There was no recorded expense associated with the plan in 2010, 2009 and 2008. During the third quarter of 2008, the Corporation recognized a $272,000 benefit relating to a lump-sum payment and termination of the Directors Retirement Plan. This benefit represented the difference between the actuarial present value of the lump-sum payments and the accrued liability previously recorded on the Corporation’s balance sheet.
The following table sets forth changes in projected benefit obligation, changes in fair value of plan assets, funded status, and amounts recognized in the consolidated statements of condition for the Corporation’s pension plans at December 31, 20102013 and 2009.
| | | ||||||
| 2010 | 2009 | |||||||
| (Dollars in Thousands) | ||||||||
| Change in Benefit Obligation: | ||||||||
| Projected benefit obligation at beginning of year | $ | 10,660 | $ | 9,923 | ||||
| Service cost | — | — | ||||||
| Interest cost | 601 | 606 | ||||||
| Actuarial loss | 393 | 617 | ||||||
| Benefits paid | (622 | ) | (486 | ) | ||||
| Projected benefit obligation at end of year | $ | 11,032 | $ | 10,660 | ||||
| Change in Plan Assets: | ||||||||
| Fair value of plan assets at beginning year | $ | 6,652 | $ | 5,734 | ||||
| Actual return on plan assets | 663 | 930 | ||||||
| Employer contributions | 300 | 474 | ||||||
| Benefits paid | (622 | ) | (486 | ) | ||||
| Fair value of plan assets at end of year | $ | 6,993 | $ | 6,652 | ||||
| Funded status | $ | (4,039 | ) | $ | (4,008 | ) | ||
| 2013 | 2012 | ||||||
| (Dollars in Thousands) | |||||||
| Change in Benefit Obligation: | |||||||
| Projected benefit obligation at beginning of year | $ | 13,533 | $ | 12,345 | |||
| Interest cost | 529 | 555 | |||||
| Actuarial loss | 255 | 1,389 | |||||
| Benefits paid | (748) | (756) | |||||
| Projected benefit obligation at end of year | $ | 13,569 | $ | 13,533 | |||
| Change in Plan Assets: | |||||||
| Fair value of plan assets at beginning year | $ | 7,034 | $ | 6,762 | |||
| Actual return on plan assets | 1,040 | 681 | |||||
| Employer contributions | 3,700 | 347 | |||||
| Benefits paid | (748) | (756) | |||||
| Fair value of plan assets at end of year | $ | 11,026 | $ | 7,034 | |||
| Funded status | $ | (2,543) | $ | (6,499) | |||
| F-44 | ||
| | | | |||||||||
| 2010 | 2009 | 2008 | ||||||||||
| (Dollars in Thousands) | ||||||||||||
| Service cost | $ | — | $ | — | $ | — | ||||||
| Interest cost | 601 | 606 | 701 | |||||||||
| Expected return on plan assets | (413 | ) | (288 | ) | (658 | ) | ||||||
| Net amortization and deferral | 130 | — | — | |||||||||
| Net periodic pension expense | $ | 318 | $ | 318 | $ | 43 | ||||||
| 2013 | 2012 | 2011 | ||||||||
| (Dollars in Thousands) | ||||||||||
| Interest cost | $ | 529 | $ | 555 | $ | 589 | ||||
| Expected return on plan assets | (488) | (377) | (381) | |||||||
| Net amortization | 375 | 294 | 179 | |||||||
| Net periodic pension expense | $ | 416 | $ | 472 | $ | 387 | ||||
| | | | |||||||||
| 2010 | 2009 | 2008 | ||||||||||
| Discount rate | 5.25 | % | 5.75 | % | 6.25 | % | ||||||
| Rate of compensation increase | N/A | N/A | N/A | |||||||||
| Expected long-term rate of return on plan assets | 6.25 | % | 5.00 | % | 7.50 | % | ||||||
2013 2012 2011 Discount rate 4.84 % 4.03 % 4.64 % Rate of compensation increase N/A N/A N/A Expected long-term rate of return on plan assets 5.50 % 5.50 % 5.50 %
| | | | |||||||||
| 2010 | 2009 | 2008 | ||||||||||
| (Dollars in Thousands) | ||||||||||||
| Information for Plans With a Benefit Obligation in Excess of Plan Assets | ||||||||||||
| Projected benefit obligation | $ | 11,032 | $ | 10,660 | $ | 9,923 | ||||||
| Accumulated benefit obligation | 11,032 | 10,660 | 9,923 | |||||||||
| Fair value of plan assets | 6,993 | 6,652 | 5,734 | |||||||||
| Assumptions | ||||||||||||
| Weighted average assumptions used to determine benefit obligation at December 31 | ||||||||||||
| Discount rate | 5.25 | % | 5.75 | % | 6.25 | % | ||||||
| Rate of compensation increase | N/A | N/A | N/A | |||||||||
| Weighted average assumptions used to determine net periodic benefit cost for years ended December 31 | ||||||||||||
| Discount rate | 5.75 | % | 6.25 | % | 6.25 | % | ||||||
| Expected long-term return on plan assets | 6.25 | % | 5.00 | % | 7.50 | % | ||||||
| Rate of compensation increase | N/A | N/A | N/A | |||||||||
| 2013 | 2012 | 2011 | |||||||
| (Dollars in Thousands) | |||||||||
| Weighted average assumptions used to determine net periodic benefit cost for years ended December 31 | |||||||||
| Discount rate | 4.03 | % | 4.64 | % | 5.25 | % | |||
| Expected long-term return on plan assets | 5.50 | % | 5.50 | % | 5.50 | % | |||
| Rate of compensation increase | N/A | N/A | N/A | ||||||
| | | | |||||||||
| Asset Category | 2010 | 2009 | 2008 | |||||||||
| Equity securities | 44 | % | 44 | % | 48 | % | ||||||
| Debt and/or fixed income securities | 37 | % | 46 | % | 34 | % | ||||||
| Alternative investments, including commodities, foreign currency and real estate | — | % | 5 | % | 9 | % | ||||||
| Cash and other alternative investments, including hedge funds, equity structured notes | 19 | % | 5 | % | 9 | % | ||||||
| Total | 100 | % | 100 | % | 100 | % | ||||||
| Asset Category | 2013 | 2012 | 2011 | |||||||||
| Equity securities (domestic and international) | 53 | % | 60 | % | 47 | % | ||||||
| Debt and/or fixed income securities | 39 | % | 39 | % | 41 | % | ||||||
| Alternative investments, including commodities, foreign currency and real estate | — | % | 1 | % | 4 | % | ||||||
| Cash and other alternative investments, including hedge funds, equity structured notes | 8 | % | — | % | 8 | % | ||||||
| Total | 100 | % | 100 | % | 100 | % | ||||||
| F-45 | ||
| | | |||||||
| Range | Target | ||||||||
| Equity securities | % | 45 | % | ||||||
| Debt and/or fixed income securities | % | 40 | % | ||||||
| International equity | % | 15 | % | ||||||
| Short term | N/A | N/A | |||||||
| Other | |||||||||
| | | | | ||||||||||||
| Fair Value Measurements at Reporting Date Using | ||||||||||||||||
| December 31, 2010 | Quoted Prices in Active Markets for Identical Assets (Level 1) | Significant Other Observable Inputs (Level 2) | Significant Unobservable Inputs (Level 3) | |||||||||||||
| (Dollars in Thousands) | ||||||||||||||||
| Cash | $ | 1,379 | $ | 1,379 | $ | — | $ | — | ||||||||
| Equity Securities: | ||||||||||||||||
| U.S. companies | 1,522 | 1,522 | — | — | ||||||||||||
| International companies | 1,534 | 1,534 | — | — | ||||||||||||
| U.S. Treasury securities | 2,378 | 2,378 | — | — | ||||||||||||
| Corporate bonds | 180 | 180 | — | — | ||||||||||||
| Total | $ | 6,993 | $ | 6,993 | $ | — | $ | — | ||||||||
The fair value of the Corporation’s pension plan assets at December 31, 2009, by asset category, are as follows:
| | | | | ||||||||||||
| Fair Value Measurements at Reporting Date Using | ||||||||||||||||
| December 31, 2009 | Quoted Prices in Active Markets for Identical Assets (Level 1) | Significant Other Observable Inputs (Level 2) | Significant Unobservable Inputs (Level 3) | |||||||||||||
| (in thousands) | ||||||||||||||||
| Cash | $ | 1,020 | $ | 1,020 | $ | — | $ | — | ||||||||
| Equity securities: | ||||||||||||||||
| U.S. companies | 1,327 | 1,327 | — | — | ||||||||||||
| International companies | 1,163 | 1,163 | — | — | ||||||||||||
| U.S. Treasury securities | 2,301 | 2,301 | — | — | ||||||||||||
| Corporate bonds | 340 | 340 | — | — | ||||||||||||
| Commodities | 170 | 170 | — | — | ||||||||||||
| Hedge funds | 331 | — | — | 331 | ||||||||||||
| Total | $ | 6,652 | $ | 6,321 | $ | — | $ | 331 | ||||||||
| December 31, 2013 | Fair Value Measurements at Reporting Date Using | ||||||||||||
| Quoted Prices in Active Markets for Identical Assets (Level 1) | Significant Other Observable Inputs (Level 2) | Significant Unobservable Inputs (Level 3) | |||||||||||
| (Dollars in Thousands) | |||||||||||||
| Cash | $ | 865 | $ | 865 | $ | — | $ | — | |||||
| Equity securities: | |||||||||||||
| U.S. companies | 4,310 | 4,310 | — | — | |||||||||
| International companies | 1,495 | 1,495 | — | — | |||||||||
| Debt and/or fixed income securities | 4,356 | 4,356 | — | — | |||||||||
| Total | $ | 11,026 | $ | 11,026 | $ | — | $ | — | |||||
| December 31, 2012 | Fair Value Measurements at Reporting Date Using | ||||||||||||
| Quoted Prices in Active Markets for Identical Assets (Level 1) | Significant Other Observable Inputs (Level 2) | Significant Unobservable Inputs (Level 3) | |||||||||||
| (Dollars in Thousands) | |||||||||||||
| Cash | $ | 42 | $ | 42 | $ | — | $ | — | |||||
| Equity securities: | |||||||||||||
| U.S. companies | 3,154 | 3,154 | — | — | |||||||||
| International companies | 1,051 | 1,051 | — | — | |||||||||
| Debt and/or fixed income securities | 2,787 | 2,787 | — | — | |||||||||
| Total | $ | 7,034 | $ | 7,034 | $ | — | $ | — | |||||
| F-46 | ||
The following table presents the changes in pension plan asset with significant unobservable inputs (Level 3) for the year ended December 31:
| | | ||||||
| 2010 | 2009 | |||||||
| (in thousands) | ||||||||
| Beginning balance, January 1, | $ | 331 | $ | 663 | ||||
| Actual return on plan assets: | ||||||||
| Relating to assets still held at the reporting date | — | 88 | ||||||
| Relating to assets sold during the period | 8 | — | ||||||
| Purchases, sales and settlements | (339 | ) | — | |||||
| Transfers out of Level 3 | — | (420 | ) | |||||
| Ending balance, December 31, | $ | 0 | $ | 331 | ||||
2014.
The relief was available for any two Plan Years 2008 through 2011.
| F-47 | ||
Options covering 38,203, 38,203granted on August 27 and 38,203March 1, 2013, while27,784 and27,784 shares were granted on March 1, 2010, March 1, 20092012 and March 1, 2008,2011, respectively. The fair value of share-based payment awards was estimated using the Black-Scholes option pricing model with the following assumptions and weighted average fair values:
| | | | |||||||||
| 2010 | 2009 | 2008 | ||||||||||
| Weighted average fair value of grants | $ | 2.16 | $ | 1.48 | $ | 3.10 | ||||||
| Risk-free interest rate | 2.29 | % | 1.90 | % | 3.03 | % | ||||||
| Dividend yield | 1.41 | % | 4.69 | % | 2.43 | % | ||||||
| Expected volatility | 28.60 | % | 33.00 | % | 30.20 | % | ||||||
| Expected life in months | 62 | 69 | 88 | |||||||||
| 2013 | 2012 | 2011 | ||||||||||
| Weighted average fair value of grants | $ | 2.50 – 5.87 | $ | 2.03 | $ | 1.89 | ||||||
| Risk-free interest rate | 1.86 – 2.29 | % | 2.03 | % | 2.19 | % | ||||||
| Dividend yield | 1.76 – 2.11 | % | 1.24 | % | 1.32 | % | ||||||
| Expected volatility | 23.21 – 33.74 | % | 22.04 | % | 22.25 | % | ||||||
| Expected life in months | 69 – 90 | 68 | 65 | |||||||||
| F-48 | ||
| | | | | ||||||||||||
| Shares | Weighted- Average Exercise Price | Weighted- Average Remaining Contractual Term (In Years) | Aggregate Intrinsic Value | |||||||||||||
| Outstanding at December 31, 2009 | 192,002 | $ | 10.04 | |||||||||||||
| Granted | 38,203 | 8.53 | ||||||||||||||
| Exercised | 0 | 0.00 | ||||||||||||||
| Forfeited/cancelled/expired | (31,259 | ) | 10.02 | |||||||||||||
| Outstanding at December 31, 2010 | 198,946 | $ | 9.75 | 4.82 | $ | 29,638 | ||||||||||
| Exercisable at December 31, 2010 | 139,898 | $ | 10.05 | 3.31 | $ | 20,885 | ||||||||||
| Shares | Weighted- Average Exercise Price | Weighted- Average Remaining Contractual Term (In Years) | Aggregate Intrinsic Value | ||||||||||
| Outstanding at December 31, 2012 | 183,574 | $ | 10.04 | ||||||||||
| Granted | 41,639 | 12.95 | |||||||||||
| Exercised | (2,268) | 9.14 | |||||||||||
| Forfeited/cancelled/expired | (34,565) | 10.81 | |||||||||||
| Outstanding at December 31, 2013 | 188,380 | $ | 10.55 | 5.99 | $ | 1,546,129 | |||||||
| Exercisable at December 31, 2013 | 113,751 | $ | 10.14 | 4.40 | $ | 980,102 | |||||||
| | | ||||||
| Stock Option Plan | Shares | Exercise Price Range per Share | ||||||
| Outstanding, December 31, 2007 (188,273 shares exercisable) | 264,255 | $6.07 to $15.73 | ||||||
| Granted during 2008 | 38,203 | $11.15 | ||||||
| Exercised during 2008 | (25,583 | ) | $6.07 to $10.66 | |||||
| Expired or canceled during 2008 | (91,711 | ) | $6.07 to $15.73 | |||||
| Outstanding, December 31, 2008 (125,468 shares exercisable) | 185,164 | $6.07 to $15.73 | ||||||
| Granted during 2009 | 38,203 | $7.67 | ||||||
| Exercised during 2009 | (9,289 | ) | $6.07 | |||||
| Expired or canceled during 2009 | (22,076 | ) | $6.07 to $15.73 | |||||
| Outstanding, December 31, 2009 (124,271 shares exercisable) | 192,002 | $7.67 to $15.73 | ||||||
| Granted during 2010 | 38,203 | $8.53 | ||||||
| Exercised during 2010 | 0 | $0.00 | ||||||
| Expired or canceled during 2010 | (31,259 | ) | $7.67 to $15.73 | |||||
| Outstanding, December 31, 2010 (138,898) shares exercisable) | 198,946 | $7.67 to $15.73 | ||||||
| Stock Option Plan | Shares | Exercise Price Range per Share | |||||
| Outstanding, December 31, 2010 (138,898 shares exercisable) | 198,946 | $7.67 to $15.73 | |||||
| Granted during 2011 | 27,784 | $ | 9.11 | ||||
| Exercised during 2011 | (42,495) | $ | 7.71 | ||||
| Expired or canceled during 2011 | (12,857) | $ | 10.50 to $15.73 | ||||
| Outstanding, December 31, 2011 (105,388 shares exercisable) | 171,378 | $7.67 to $15.73 | |||||
| Granted during 2012 | 27,784 | $ | 9.64 | ||||
| Exercised during 2012 | (15,588) | $7.67 to $10.50 | |||||
| Expired or canceled during 2012 | — | $ | 0.00 | ||||
| Outstanding, December 31, 2012 (117,111 shares exercisable) | 183,574 | $7.67 to $15.73 | |||||
| Granted during 2013 | 41,639 | $ | 12.52 to $14.24 | ||||
| Exercised during 2013 | (2,268) | $7.67 to $10.66 | |||||
| Expired or canceled or forfeited during 2013 | (34,565) | $ | 7.67 to $15.73 | ||||
| Outstanding, December 31, 2013 (113,751 shares exercisable) | 188,380 | $7.67 to $15.73 | |||||
| F-49 | ||
In September 2006, the FASB issued FASB ASC 820-10-05 (previously SFAS No. 157, “Fair Value Measurements”).
In December 2007, the FASB issued FASB ASC 820-10-15 (previously FASB Statement Position 157-2, “Effective Date of FASB Statement No. 157”). FASB ASC 820-10-15 delays the effective date of FASB ASC 820-10-05 for all non-financial assets and liabilities, except those that are recognized or disclosed at fair value on a recurring basis (at least annually) to fiscal years beginning after November 15, 2008 and interim periods within those fiscal years. As such, the Corporation adopted the provisions of FASB ASC 820-10-05 relating to non-financial assets and liabilities in 2009. In October 2008, the FASB issued FASB ASC 820-10-35 (previously FASB Staff Position 157-3, “Determining the Fair Value of a Financial Asset When the Market for that Asset is Not Active”), to clarify the application of the provisions of FASB ASC 820-10-05 in an inactive market and how an entity would determine fair value in an inactive market. FASB ASC 820-10-35 was applied to the Corporation’s December 31, 2008 consolidated financial statements.
Level 1: Unadjusted quoted prices in active markets that are accessible at the measurement date for identical, unrestricted assets or liabilities. |
Level 2: Quoted prices for similar assets and liabilities in active markets, and inputs that are observable for the asset or liability, either directly or indirectly, for substantially the full term of the financial instrument. |
Level 3: Prices or valuation techniques that require inputs that are both significant to the fair value measurement and unobservable (for example, supported with little or no market activity). |
| F-50 | ||
| (a) | Quoted prices in active markets for similar TRUPS with insignificant adjustments for differences between the TRUPS that the Corporation holds and similar TRUPS. |
| (b) | Quoted prices in markets that are not active that represent current transactions for the same or similar TRUPS that do not require significant adjustment based on unobservable inputs. |
| F-51 | ||
| F-52 | ||
The fair value of deposits with no stated maturity, such as non-interest-bearing demand deposits, savings and interest-bearing checking accounts, and money market and checking accounts, is equal to the amount payable on demand as of December 31, 20102013 and 2009.2012. The fair value of certificates of deposit is based on the discounted value of contractual cash flows. The discount rate is estimated using the rates currently offered for deposits of similar remaining maturities.
| | | | | ||||||||||||||
| Fair Value Measurements at Reporting Date Using | ||||||||||||||||||
| December 31, 2010 | Quoted Prices in Active Markets for Identical Assets (Level 1) | Significant Other Observable Inputs (Level 2) | Significant Unobservable Inputs (Level 3) | |||||||||||||||
| (Dollars in Thousands) | ||||||||||||||||||
| Financial Instruments Measured at Fair Value on a Recurring Basis: | ||||||||||||||||||
| U.S. Treasury & agency securities | $ | 6,995 | $ | 6,995 | $ | — | $ | — | ||||||||||
| Federal agency obligations | 68,481 | — | 68,481 | — | ||||||||||||||
| Mortgage backed securities | 177,733 | — | 177,733 | |||||||||||||||
| Obligations of U.S. states and political subdivision | 37,225 | 16,936 | 20,289 | — | ||||||||||||||
| Trust preferred securities | 18,731 | — | 18,589 | 142 | ||||||||||||||
| Corporate bonds & notes | 61,434 | — | 61,434 | — | ||||||||||||||
| Collateralized mortgage obligations | 2,728 | — | — | 2,728 | ||||||||||||||
| Equity securities | 4,753 | 4,753 | — | — | ||||||||||||||
| Securities available-for-sale | $ | 378,080 | $ | 28,684 | $ | 346,526 | $ | 2,870 | ||||||||||
| | | | | ||||||||||||||
| Fair Value Measurements at Reporting Date Using | ||||||||||||||||||
| December 31, 2009 | Quoted Prices in Active Markets for Identical Assets (Level 1) | Significant Other Observable Inputs (Level 2) | Significant Unobservable Inputs (Level 3) | |||||||||||||||
| (Dollars in Thousands) | ||||||||||||||||||
| Financial Instruments Measured at Fair Value on a Recurring Basis: | ||||||||||||||||||
| U.S. Treasury & agency securities | $ | 2,089 | $ | 2,089 | $ | — | $ | — | ||||||||||
| Federal agency obligations | 128,365 | 26,288 | 102,077 | — | ||||||||||||||
| Mortgage backed securities | 86,220 | 29,182 | 57,038 | |||||||||||||||
| Obligations of U.S. states and political subdivision | 19,281 | — | 19,281 | — | ||||||||||||||
| Trust preferred securities | 26,715 | — | 24,366 | 2,349 | ||||||||||||||
| Corporate bonds and notes | 22,655 | 2,994 | 19,661 | — | ||||||||||||||
| Collateralized mortgages obligations | 7,266 | 4,254 | 3,012 | — | ||||||||||||||
| Equity securities | 5,533 | 5,533 | — | — | ||||||||||||||
| Securities available-for-sale | $ | 298,124 | $ | 70,340 | $ | 225,435 | $ | 2,349 | ||||||||||
| F-53 | ||
| December 31, 2013 | Fair Value Measurements at Reporting Date Using | ||||||||||||
| Quoted Prices in Active Markets for Identical Assets (Level 1) | Significant Other Observable Inputs (Level 2) | Significant Unobservable Inputs (Level 3) | |||||||||||
| (Dollars in Thousands) | |||||||||||||
| Financial Instruments Measured at Fair Value on a Recurring Basis: | |||||||||||||
| U.S. treasury and agency securities | $ | 13,519 | $ | 13,519 | $ | — | $ | — | |||||
| Federal agency obligations | 19,941 | — | 19,941 | — | |||||||||
| Residential mortgage pass-through securities | 48,874 | — | 48,874 | — | |||||||||
| Commercial mortgage pass- through securities | 6,991 | — | 6,991 | — | |||||||||
| Obligations of U.S. states and political subdivision | 31,460 | — | 31,460 | — | |||||||||
| Trust preferred securities | 19,403 | — | 19,403 | — | |||||||||
| Corporate bonds and notes | 158,630 | — | 158,630 | — | |||||||||
| Asset-backed securities | 15,979 | — | 15,979 | — | |||||||||
| Certificates of deposit | 2,262 | — | 2,262 | — | |||||||||
| Equity securities | 287 | 287 | — | — | |||||||||
| Other securities | 5,724 | 5,724 | — | — | |||||||||
| Securities available-for-sale | $ | 323,070 | $ | 19,530 | $ | 303,540 | $ | — | |||||
| December 31, 2012 | Fair Value Measurements at Reporting Date Using | ||||||||||||
| Quoted Prices in Active Markets for Identical Assets (Level 1) | Significant Other Observable Inputs (Level 2) | Significant Unobservable Inputs (Level 3) | |||||||||||
| (Dollars in Thousands) | |||||||||||||
| Financial Instruments Measured at Fair Value on a Recurring Basis: | |||||||||||||
| U.S. treasury and agency securities | $ | 11,909 | $ | 11,909 | $ | — | $ | — | |||||
| Federal agency obligations | 20,535 | — | 20,535 | — | |||||||||
| Residential mortgage pass- through securities | 53,784 | — | 53,784 | — | |||||||||
| Commercial mortgage pass- through securities | 9,969 | — | 9,969 | — | |||||||||
| Obligations of U.S. states and political subdivision | 107,714 | 469 | 107,245 | — | |||||||||
| Trust preferred securities | 21,249 | — | 21,213 | 36 | |||||||||
| Corporate bonds and notes | 237,405 | — | 237,405 | — | |||||||||
| Collateralized mortgage obligations | 2,120 | — | 2,120 | — | |||||||||
| Asset-backed securities | 19,742 | — | 19,742 | — | |||||||||
| Certificates of deposit | 2,865 | — | 2,865 | — | |||||||||
| Equity securities | 325 | 325 | — | — | |||||||||
| Other securities | 9,198 | 9,198 | — | — | |||||||||
| Securities available-for-sale | $ | 496,815 | $ | 21,901 | $ | 474,878 | $ | 36 | |||||
| F-54 | ||
| | |||
| 2010 | ||||
| (Dollars in Thousands) | ||||
| Beginning balance, January 1, | $ | 2,349 | ||
| Transfers into Level 3 | 8,197 | |||
| Transfers out of Level 3 | (5,174 | ) | ||
| Principal interest deferrals | 118 | |||
| Principal paydown | (1,083 | ) | ||
| Total net losses included in net income | (3,000 | ) | ||
| Total net unrealized gains | 1,463 | |||
| Ending balance, December 31, | $ | 2,870 | ||
| | ||||||||||
| 2009 | 2013 | 2012 | |||||||||
| (Dollars in Thousands) | (Dollars in Thousands) | ||||||||||
| Beginning balance, January 1, | $ | 23,554 | $ | 36 | $ | 2,115 | |||||
| Transfers out of Level 3 | (19,855 | ) | (260) | (2,120) | |||||||
| Principal interest deferrals | 139 | 58 | 116 | ||||||||
| Principal paydown | — | (272) | |||||||||
| Total net losses included in net income | (4,403 | ) | (628) | (68) | |||||||
| Total net unrealized gains | 2,914 | 794 | 265 | ||||||||
| Ending balance, December 31, | $ | 2,349 | $ | — | $ | 36 | |||||
| | | | | ||||||||||||||
| Fair Value Measurements at Reporting Date Using | ||||||||||||||||||
| December 31, 2010 | Quoted Prices in Active Markets for Identical Assets (Level 1) | Significant Other Observable Inputs (Level 2) | Significant Unobservable Inputs (Level 3) | |||||||||||||||
| (Dollars in Thousands) | ||||||||||||||||||
| Assets Measured at Fair Value on a Non-Recurring Basis: | ||||||||||||||||||
| Impaired loans | $ | 4,895 | $ | — | $ | — | $ | 4,895 | ||||||||||
At December 31, 2010 and 2009, impaired loans totaled $5,534,000 and $6,756,000, respectively. The amount of related valuation allowances was $639,000
Impaired Loans | Valuation Techniques | Range of Unobservable Inputs | ||
| Residential | Appraisals of collateral value | Adjustment for age of comparable sales, generally a decline of 0-25% | ||
| Commercial | Discounted cash flow model | Discount rate from 0% to 6% | ||
| Commercial real estate | Appraisals of collateral value | Market capitalization rates between 8% to 12%. Market rental rates for similar properties | ||
| Construction | Appraisals of collateral value | Adjustment for age comparable sales. Generally a decline of 5% to no change | ||
Other Real Estate Owned | ||||
| Residential | Appraisals of collateral value | Adjustment for age of comparable sales, generally a decline of 0-25% and estimated selling costs of 6-8% | ||
| Commercial | Appraisals of collateral value | Adjustment for age of comparable sales, generally a decline of 15% to no change and estimated selling costs of 6-8% |
2012 were as follows:
| December 31, 2013 | Fair Value Measurements at Reporting Date Using | ||||||||||||
| Quoted Prices in Active Markets for Identical Assets (Level 1) | Significant Other Observable Inputs (Level 2) | Significant Unobservable Inputs (Level 3) | |||||||||||
| (Dollars in Thousands) | |||||||||||||
| Assets Measured at Fair Value on a Non-Recurring Basis: | |||||||||||||
| Impaired loans | $ | 4,601 | $ | — | $ | — | $ | 4,601 | |||||
| Other real estate owned | 220 | — | — | 220 | |||||||||
| December 31, 2012 | Fair Value Measurements at Reporting Date Using | ||||||||||||
| Quoted Prices in Active Markets for Identical Assets (Level 1) | Significant Other Observable Inputs (Level 2) | Significant Unobservable Inputs (Level 3) | |||||||||||
| (Dollars in Thousands) | |||||||||||||
| Assets Measured at Fair Value on a Non-Recurring Basis: | |||||||||||||
| Impaired loans | $ | 4,790 | $ | — | $ | — | $ | 4,790 | |||||
| Other real estate owned | 1,300 | — | — | 1,300 | |||||||||
| F-55 | ||
Loans.
The value of an impaired loan is measured based upon the present value of expected future cash flows discounted at the loan’s effective interest rate, or the fair value of the collateral if the loan is collateral dependent. Smaller balance homogeneous loans that are collectively evaluated for impairment, such as residential mortgage loans and installment loans, are specifically excluded from the impaired loan portfolio.The Corporation’s impaired loans are primarily collateral dependent. Impaired loans are individually assessed to determine that each loan’s carrying value is not in excess of the fair value of the related collateral or the present value of the expected future cash flows.
Owned.
Certain assets such asEstimated
| F-56 | ||
| Fair Value Measurements | ||||||||||||||||
| Carrying Amount | Fair Value | Quoted Prices in Active Markets for Identical Assets (Level 1) | Significant Other Observable Inputs (Level 2) | Significant Unobservable Inputs (Level 3) | ||||||||||||
| (in thousands) | ||||||||||||||||
| December 31, 2013 | ||||||||||||||||
| Financial assets | ||||||||||||||||
| Cash and due from banks | $ | 82,692 | $ | 82,692 | $ | 82,692 | $ | — | $ | — | ||||||
| Investment securities available-for-sale | 323,070 | 323,070 | 19,530 | 303,540 | — | |||||||||||
| Investment securities held-to-maturity | 215,286 | 210,958 | 27,037 | 164,940 | 18,981 | |||||||||||
| Restricted investment in bank stocks | 8,986 | 8,986 | — | 8,986 | — | |||||||||||
| Net loans | 950,610 | 948,606 | — | — | 948,606 | |||||||||||
| Accrued interest receivable | 6,802 | 6,802 | — | 4,136 | 2,666 | |||||||||||
| Financial liabilities | ||||||||||||||||
| Non interest-bearing deposits | 227,370 | 227,370 | — | 227,370 | — | |||||||||||
| Interest-bearing deposits | 1,114,635 | 1,115,781 | — | 1,115,781 | — | |||||||||||
| Long-term borrowings | 146,000 | 157,440 | — | 157,440 | — | |||||||||||
| Subordinated debentures | 5,155 | 5,143 | — | 5,143 | — | |||||||||||
| Accrued interest payable | 963 | 963 | — | 963 | — | |||||||||||
| December 31, 2012 | ||||||||||||||||
| Financial assets | ||||||||||||||||
| Cash and due from banks | $ | 104,134 | $ | 104,134 | $ | 104,134 | $ | — | $ | — | ||||||
| Interest bearing deposits with banks | 2,004 | 2,004 | 2,004 | — | — | |||||||||||
| Investment securities available-for-sale | 496,815 | 496,815 | 21,901 | 474,878 | 36 | |||||||||||
| Investment securities held-to-maturity | 58,064 | 62,431 | — | 53,247 | 9,184 | |||||||||||
| Restricted investment in bank stocks | 8,964 | 8,964 | — | 8,964 | — | |||||||||||
| Loans held for sale | 1,491 | 1,491 | 1,491 | — | — | |||||||||||
| Net loans | 879,435 | 897,030 | — | — | 897,030 | |||||||||||
| Accrued interest receivable | 6,849 | 6,849 | — | 4,465 | 2,384 | |||||||||||
| Financial liabilities | ||||||||||||||||
| Non interest-bearing deposits | 215,071 | 215,071 | — | 215,071 | — | |||||||||||
| Interest-bearing deposits | 1,091,851 | 1,092,822 | — | 1,092,822 | — | |||||||||||
| Long-term borrowings | 146,000 | 162,992 | — | 162,992 | — | |||||||||||
| Subordinated debentures | 5,155 | 5,046 | — | 5,046 | — | |||||||||||
| Accrued interest payable | 874 | 874 | — | 874 | — | |||||||||||
| F-57 | ||
| | | | | ||||||||||||||
| December 31, | ||||||||||||||||||
| 2010 | 2009 | |||||||||||||||||
| Carrying Amount | Fair Value | Carrying Amount | Fair Value | |||||||||||||||
| (Dollars in Thousands) | ||||||||||||||||||
| FINANCIAL ASSETS: | ||||||||||||||||||
| Cash and cash equivalents | $ | 37,497 | $ | 37,497 | $ | 89,168 | $ | 89,168 | ||||||||||
| Investment securities available-for-sale | 378,080 | 378,080 | 298,124 | 298,124 | ||||||||||||||
| Net loans | 699,577 | 706,309 | 710,895 | 717,191 | ||||||||||||||
| Restricted investment in bank stocks | 9,596 | 9,596 | 10,672 | 10,672 | ||||||||||||||
| Accrued interest receivable | 4,134 | 4,134 | 4,033 | 4,033 | ||||||||||||||
| FINANCIAL LIABILITIES: | ||||||||||||||||||
| Non-interest-bearing deposits | 144,210 | 144,210 | 130,518 | 130,518 | ||||||||||||||
| Interest-bearing deposits | 716,122 | 716,887 | 683,187 | 683,974 | ||||||||||||||
| Federal funds purchased, securities sold under agreement to repurchase and FHLB advances | 212,855 | 221,425 | 269,253 | 279,219 | ||||||||||||||
| Subordinated debentures | 5,155 | 5,157 | 5,155 | 5,155 | ||||||||||||||
| Accrued interest payable | $ | 1,041 | $ | 1,041 | $ | 1,825 | $ | 1,825 | ||||||||||
Fair value estimates are based on existing balance sheet financial instruments, without attempting to estimate the value of anticipated future business and the value of assets and liabilities that are not considered financial instruments. For example, there are certain significant assets and liabilities that are not considered financial assets or liabilities, such as the brokerage network, deferred taxes, premises and equipment, and goodwill. In addition, the tax ramifications related to the realization of the unrealized gains and losses can have a significant effect on fair value estimates and have not been considered in the estimates.
| F-58 | ||
| | | ||||||||
| At December 31, | ||||||||||
| 2010 | 2009 | |||||||||
| (Dollars in Thousands) | ||||||||||
| ASSETS | ||||||||||
| Cash and cash equivalents | $ | 4,299 | $ | 2,683 | ||||||
| Investment in subsidiaries | 122,129 | 104,144 | ||||||||
| Securities available for sale | 432 | 501 | ||||||||
| Other assets | 22 | 248 | ||||||||
| Total assets | $ | 126,882 | $ | 107,576 | ||||||
| LIABILITIES AND STOCKHOLDERS’ EQUITY | ||||||||||
| Other liabilities | $ | 460 | $ | 280 | ||||||
| Securities sold under repurchase agreement | 310 | 392 | ||||||||
| Subordinated debentures | 5,155 | 5,155 | ||||||||
| Stockholders’ equity | 120,957 | 101,749 | ||||||||
| Total liabilities and stockholders’ equity | $ | 126,882 | $ | 107,576 | ||||||
| At December 31, | |||||||
| 2013 | 2012 | ||||||
| (Dollars in Thousands) | |||||||
| ASSETS | |||||||
| Cash and cash equivalents | $ | 285 | $ | 629 | |||
| Investment in subsidiaries | 173,658 | 165,351 | |||||
| Securities available for sale | 442 | 543 | |||||
| Other assets | 271 | 41 | |||||
| Total assets | $ | 174,656 | $ | 166,564 | |||
| LIABILITIES AND STOCKHOLDERS’ EQUITY | |||||||
| Other liabilities | $ | 917 | $ | 718 | |||
| Subordinated debentures | 5,155 | 5,155 | |||||
| Stockholders’ equity | 168,584 | 160,691 | |||||
| Total liabilities and stockholders’ equity | $ | 174,656 | $ | 166,564 | |||
| For Years Ended December 31, | ||||||||||
| 2013 | 2012 | 2011 | ||||||||
| (Dollars in Thousands) | ||||||||||
| Income: | ||||||||||
| Dividend income from subsidiaries | $ | 4,393 | $ | 2,079 | $ | 785 | ||||
| Other income | 6 | 15 | 7 | |||||||
| Net gains on available for sale securities | 22 | 26 | — | |||||||
| Management fees | 353 | 409 | 294 | |||||||
| Total Income | 4,774 | 2,529 | 1,086 | |||||||
| Expenses | (765) | (731) | (615) | |||||||
| Income before equity in undistributed earnings of subsidiaries | 4,009 | 1,798 | 471 | |||||||
| Equity in undistributed earnings of subsidiaries | 15,916 | 15,709 | 13,455 | |||||||
| Net Income | $ | 19,925 | $ | 17,507 | $ | 13,926 | ||||
| F-59 | ||
| | | | |||||||||||
| For Years Ended December 31, | ||||||||||||||
| 2010 | 2009 | 2008 | ||||||||||||
| (Dollars in Thousands) | ||||||||||||||
| Income: | ||||||||||||||
| Dividend income from subsidiaries | $ | 500 | $ | 2,474 | $ | 4,675 | ||||||||
| Other income | 8 | 3 | 37 | |||||||||||
| Net (losses) on available for sale securities | (97 | ) | (325 | ) | (413 | ) | ||||||||
| Management fees | 290 | 298 | 275 | |||||||||||
| Total Income | 701 | 2,450 | 4,574 | |||||||||||
| Expenses | (635 | ) | (604 | ) | (623 | ) | ||||||||
| Income before equity in undistributed earnings of subsidiaries | 66 | 1,846 | 3,951 | |||||||||||
| Equity in undistributed earnings of subsidiaries | 6,938 | 1,925 | 1,891 | |||||||||||
| Net Income | $ | 7,004 | $ | 3,771 | $ | 5,842 | ||||||||
| Consolidated Subsidiaries | Parent | Consolidated Total | ||||||||
| (Dollars in Thousands) | ||||||||||
| For the year ended 2013: | ||||||||||
| Net income | $ | 19,925 | $ | — | $ | 19,925 | ||||
| Other comprehensive (loss) income, net of tax: | ||||||||||
| Net unrealized loss on investment securities | (8,073) | 79 | (7,994) | |||||||
| Actuarial gain | 387 | — | 387 | |||||||
| Total other comprehensive (loss) income | (7,686) | 79 | (7,607) | |||||||
| Total comprehensive income | $ | 12,239 | $ | 79 | $ | 12,318 | ||||
| For the year ended 2012: | ||||||||||
| Net income | $ | 17,507 | $ | — | $ | 17,507 | ||||
| Other comprehensive income, net of tax: | ||||||||||
| Net unrealized gain on investment securities | 10,935 | 41 | 10,976 | |||||||
| Actuarial loss | (467) | — | (467) | |||||||
| Total other comprehensive income | 10,468 | 41 | 10,509 | |||||||
| Total comprehensive income | $ | 27,975 | $ | 41 | $ | 28,016 | ||||
| For the year ended 2011: | ||||||||||
| Net income | $ | 13,926 | $ | — | $ | 13,926 | ||||
| Other comprehensive income, net of tax: | ||||||||||
| Net unrealized gain (loss) on investment securities | 3,301 | (7) | 3,294 | |||||||
| Actuarial loss | (1,065) | — | (1,065) | |||||||
| Total other comprehensive income (loss) | 2,236 | (7) | 2,229 | |||||||
| Total comprehensive income | $ | 16,162 | $ | (7) | $ | 16,155 | ||||
| For Years Ended December 31 | ||||||||||
| 2013 | 2012 | 2011 | ||||||||
| (Dollars in Thousands) | ||||||||||
| Cash flows from operating activities: | ||||||||||
| Net income | $ | 19,925 | $ | 17,507 | $ | 13,926 | ||||
| Adjustments to reconcile net income to net cash provided by operating activities: | ||||||||||
| Net gains on available for sale securities | (22) | (26) | — | |||||||
| Equity in undistributed earnings of subsidiary | (15,916) | (15,709) | (13,455) | |||||||
| Change in deferred tax asset | — | — | 3 | |||||||
| (Increase) decrease in other assets | (167) | 563 | (298) | |||||||
| (Decrease) increase in other liabilities | (276) | (772) | 220 | |||||||
| Stock based compensation | 59 | 39 | 35 | |||||||
| Net cash provided by operating activities | 3,603 | 1,602 | 431 | |||||||
| Cash flows from investing activities: | ||||||||||
| Proceeds from sales of available-for-sale securities | 181 | 375 | — | |||||||
| Purchase of available-for-sale securities | — | (410) | — | |||||||
| Investments in subsidiaries | — | — | (1,250) | |||||||
| Net cash provided by (used in) investing activities | 181 | (35) | (1,250) | |||||||
| Cash flows from financing activities: | ||||||||||
| Net decrease in borrowings | — | — | (310) | |||||||
| Cash dividends on common stock | (4,254) | (2,778) | (1,955) | |||||||
| Cash dividends on preferred stock | (141) | (363) | (417) | |||||||
| Proceeds from issuance of Series B preferred stock | — | — | 11,250 | |||||||
| Redemption of Series A preferred stock | — | — | (10,000) | |||||||
| Warrant repurchased | — | — | (245) | |||||||
| Issuance of restricted stock award | 243 | — | — | |||||||
| Issuance cost of common stock | (13) | (8) | (5) | |||||||
| Issuance cost of Series B preferred stock | — | — | (84) | |||||||
| Proceeds from exercise of stock options | 21 | 141 | 328 | |||||||
| Tax expense from stock based compensation | 16 | 28 | — | |||||||
| Net cash used in financing activities | (4,128) | (2,980) | (1,438) | |||||||
| Decrease in cash and cash equivalents | (344) | (1,413) | (2,257) | |||||||
| Cash and cash equivalents at beginning of year | 629 | 2,042 | 4,299 | |||||||
| Cash and cash equivalents at the end of year | $ | 285 | $ | 629 | $ | 2,042 | ||||
| F-60 | ||
| | | | |||||||||||||
| For Years Ended December 31 | ||||||||||||||||
| 2010 | 2009 | 2008 | ||||||||||||||
| (Dollars in Thousands) | ||||||||||||||||
| Cash flows from operating activities: | ||||||||||||||||
| Net income | $ | 7,004 | $ | 3,771 | $ | 5,842 | ||||||||||
| Adjustments to reconcile net income to net cash provided by operating activities: | ||||||||||||||||
| Net losses on available for sale securities | 97 | 325 | 413 | |||||||||||||
| Equity in undistributed (earnings) of subsidiary | (6,938 | ) | (1,925 | ) | (1,891 | ) | ||||||||||
| Change in deferred tax asset | 224 | (111 | ) | (1,542 | ) | |||||||||||
| (Increase) decrease in other assets | (44 | ) | 1,838 | 41 | ||||||||||||
| Increase (decrease) in other liabilities | 70 | (844 | ) | 1,610 | ||||||||||||
| Stock based compensation | 51 | 77 | 128 | |||||||||||||
| Net cash provided by operating activities | 464 | 3,131 | 4,601 | |||||||||||||
| Cash flows from investing activities: | ||||||||||||||||
| Purchases of available-for-sale securities | — | — | (579 | ) | ||||||||||||
| Maturity of available-for-sale securities | 130 | 659 | 938 | |||||||||||||
| (Investments in subsidiaries) and return of capital from subsidiaries | (8,000 | ) | (19,000 | ) | 3,500 | |||||||||||
| Net cash (used in) provided by investing activities | (7,870 | ) | (18,341 | ) | 3,859 | |||||||||||
| Cash flows from financing activities: | ||||||||||||||||
| Net (decrease) in borrowings | (82 | ) | (411 | ) | (1,197 | ) | ||||||||||
| Cash dividends paid on common stock | (1,800 | ) | (3,166 | ) | (4,675 | ) | ||||||||||
| Proceeds from exercise of stock options | — | 57 | 224 | |||||||||||||
| Proceeds from restricted stock | 25 | — | 25 | |||||||||||||
| Proceeds from issuance of preferred stock and warrants | — | 10,000 | — | |||||||||||||
| Cash dividends paid on preferred stock | (500 | ) | (425 | ) | — | |||||||||||
| Proceeds from issuance of shares from stock offerings | 12,148 | 11,000 | — | |||||||||||||
| Issuance cost of common stock from common stock offering | (770 | ) | — | — | ||||||||||||
| Purchase of treasury stock | — | — | (1,924 | ) | ||||||||||||
| Issuance cost of common stock | (6 | ) | (11 | ) | (19 | ) | ||||||||||
| Tax (expense) from stock based compensation | 7 | (73 | ) | (78 | ) | |||||||||||
| Net cash provided by (used in) financing activities | 9,022 | 16,971 | (7,644 | ) | ||||||||||||
| Increase in cash and cash equivalents | 1,616 | 1,761 | 816 | |||||||||||||
| Cash and cash equivalents at beginning of year | 2,683 | 922 | 106 | |||||||||||||
| Cash and cash equivalents at the end of year | $ | 4,299 | $ | 2,683 | $ | 922 | ||||||||||
| | | | | ||||||||||||||
| 2010 | ||||||||||||||||||
| 4th Quarter | 3rd Quarter | 2nd Quarter | 1st Quarter | |||||||||||||||
| (Dollars in Thousands, Except per Share Data) | ||||||||||||||||||
| Total interest income | $ | 11,519 | $ | 12,035 | $ | 12,488 | $ | 12,672 | ||||||||||
| Total interest expense | 3,138 | 3,653 | 3,831 | 4,163 | ||||||||||||||
| Net interest income | 8,381 | 8,382 | 8,657 | 8,509 | ||||||||||||||
| Provision for loan losses | 2,048 | 1,307 | 781 | 940 | ||||||||||||||
| Total other income, net of securities gains | 989 | 1,102 | 825 | 895 | ||||||||||||||
| Net securities gains (losses) | 315 | 1,033 | 657 | (3,344 | ) | |||||||||||||
| Other expense | 5,997 | 5,442 | 6,268 | 6,392 | ||||||||||||||
| Income (loss) before income taxes | 1,640 | 3,768 | 3,090 | (1,272 | ) | |||||||||||||
| Provision (Benefit) from income taxes | (930 | ) | 1,629 | 1,076 | (1,553 | ) | ||||||||||||
| Net income | $ | 2,570 | $ | 2,139 | $ | 2,014 | $ | 281 | ||||||||||
| Net income available to common stockholders | $ | 2,426 | $ | 1,993 | $ | 1,868 | $ | 136 | ||||||||||
| Earnings per share: | ||||||||||||||||||
| Basic | $ | 0.15 | $ | 0.14 | $ | 0.13 | $ | 0.01 | ||||||||||
| Diluted | $ | 0.15 | $ | 0.14 | $ | 0.13 | $ | 0.01 | ||||||||||
| Weighted average common shares outstanding: | ||||||||||||||||||
| Basic | 16,289,832 | 14,649,397 | 14,574,832 | 14,574,832 | ||||||||||||||
| Diluted | 16,290,071 | 14,649,397 | 14,576,223 | 14,579,871 | ||||||||||||||
| | | | | |||||||||||||||||||||||||||
| 2009 | 2013 | ||||||||||||||||||||||||||||||
| 4th Quarter | 3rd Quarter | 2nd Quarter | 1st Quarter | 4th Quarter | 3rd Quarter | 2nd Quarter | 1st Quarter | ||||||||||||||||||||||||
| (Dollars in Thousands, Except per Share Data) | (Dollars in Thousands, Except per Share Data) | ||||||||||||||||||||||||||||||
| Total interest income | $ | 12,971 | $ | 13,491 | $ | 12,706 | $ | 11,942 | $ | 14,644 | $ | 14,541 | $ | 13,979 | $ | 14,104 | |||||||||||||||
| Total interest expense | 4,953 | 6,050 | 6,079 | 5,563 | 2,778 | 2,819 | 2,751 | 2,734 | |||||||||||||||||||||||
| Net interest income | 8,018 | 7,441 | 6,627 | 6,379 | 11,866 | 11,722 | 11,228 | 11,370 | |||||||||||||||||||||||
| Provision for loan losses | 2,740 | 280 | 156 | 1,421 | 350 | — | — | — | |||||||||||||||||||||||
| Total other income, net of securities gains | 968 | 822 | 841 | 784 | 1,307 | 1,200 | 1,107 | 1,526 | |||||||||||||||||||||||
| Net securities gains (losses) | (1,308 | ) | (511 | ) | 1,710 | 600 | |||||||||||||||||||||||||
| Net securities gains | 449 | 343 | 600 | 319 | |||||||||||||||||||||||||||
| Other expense | 5,238 | 5,186 | 7,314 | 5,319 | 6,459 | 6,205 | 6,076 | 6,538 | |||||||||||||||||||||||
| Income before income taxes | (300 | ) | 2,286 | 1,708 | 1,023 | 6,813 | 7,060 | 6,859 | 6,677 | ||||||||||||||||||||||
| Provision (Benefit)for income taxes | (536 | ) | 751 | 507 | 224 | ||||||||||||||||||||||||||
| Provision from income taxes | 1,829 | 1,966 | 1,936 | 1,753 | |||||||||||||||||||||||||||
| Net income | $ | 236 | $ | 1,535 | $ | 1,201 | $ | 799 | $ | 4,984 | $ | 5,094 | $ | 4,923 | $ | 4,924 | |||||||||||||||
| Net income available to common stockholders | $ | 94 | $ | 1,387 | $ | 1,053 | $ | 670 | $ | 4,955 | $ | 5,066 | $ | 4,895 | $ | 4,868 | |||||||||||||||
| Earnings per share: | |||||||||||||||||||||||||||||||
| Basic | $ | 0.01 | $ | 0.11 | $ | 0.08 | $ | 0.05 | $ | 0.30 | $ | 0.31 | $ | 0.30 | $ | 0.30 | |||||||||||||||
| Diluted | $ | 0.01 | $ | 0.11 | $ | 0.08 | $ | 0.05 | $ | 0.30 | $ | 0.31 | $ | 0.30 | $ | 0.30 | |||||||||||||||
| Weighted average common shares outstanding: | |||||||||||||||||||||||||||||||
| Basic | 14,531,387 | 13,000,601 | 12,994,429 | 12,991,312 | 16,350,183 | 16,349,480 | 16,348,915 | 16,348,215 | |||||||||||||||||||||||
| Diluted | 14,534,255 | 13,005,101 | 12,996,544 | 12,993,185 | 16,396,931 | 16,385,155 | 16,375,774 | 16,373,588 | |||||||||||||||||||||||
| 2012 | |||||||||||||
| 4th Quarter | 3rd Quarter | 2nd Quarter | 1st Quarter | ||||||||||
| (Dollars in Thousands, Except per Share Data) | |||||||||||||
| Total interest income | $ | 14,263 | $ | 14,118 | $ | 13,496 | $ | 13,395 | |||||
| Total interest expense | 2,841 | 2,935 | 2,950 | 3,050 | |||||||||
| Net interest income | 11,422 | 11,183 | 10,546 | 10,345 | |||||||||
| Provision for loan losses | 100 | 225 | (107) | 107 | |||||||||
| Total other income, net of securities gains | 1,217 | 1,872 | 1,091 | 1,018 | |||||||||
| Net securities (losses) gains | (201) | 763 | 513 | 937 | |||||||||
| Other expense | 6,193 | 7,507 | 5,690 | 5,807 | |||||||||
| Income before income taxes | 6,145 | 6,086 | 6,567 | 6,386 | |||||||||
| Provision from income taxes | 1,676 | 1,632 | 2,214 | 2,155 | |||||||||
| Net income | $ | 4,469 | $ | 4,454 | $ | 4,353 | $ | 4,231 | |||||
| Net income available to common stockholders | $ | 4,441 | $ | 4,426 | $ | 4,269 | $ | 4,090 | |||||
| Earnings per share: | |||||||||||||
| Basic | $ | 0.27 | $ | 0.27 | $ | 0.26 | $ | 0.25 | |||||
| Diluted | $ | 0.27 | $ | 0.27 | $ | 0.26 | $ | 0.25 | |||||
| Weighted average common shares outstanding: | |||||||||||||
| Basic | 16,347,564 | 16,347,088 | 16,333,653 | 16,332,327 | |||||||||
| Diluted | 16,363,698 | 16,362,635 | 16,341,767 | 16,338,162 | |||||||||
| F-61 | ||
| 66 | ||
| 67 | ||
ParenteBeard LLC,
the Corporation’s internal control over financial reporting as of December 31, 2010.2013. The report, which expresses an unqualified opinion on the effectiveness of the Corporation’s internal control over financial reporting as of December 31, 2010,2013, is included in this item under the heading “Report of Independent Registered Public Accounting Firm.”
| 68 | ||
COSO criteria.
/s/ ParenteBeard LLC
ParenteBeard LLCReading, PennsylvaniaMarch 16, 2011
| 69 | ||
None.
| 70 | ||
| | | | |||||||||
| Plan Category | Number of Securities to Be Issued Upon Exercise of Outstanding Options, Warrants and Rights (a) | Weighted-Average Exercise Price of Outstanding Options, Warrants and Rights (b) | Number of Securities Remaining Available for Future Issuance Under Equity Compensation Plans (Excluding Securities Reflected in Column (a)) (c) | |||||||||
| Equity Compensation Plans Approved by Shareholders | 198,946 | $ | 7.67 – $15.73 | 843,127 | ||||||||
| Equity Compensation Plans Not Approved by Shareholders | — | — | — | |||||||||
| Total | 198,946 | $ | 7.67 – $15.73 | 843,127 | ||||||||
| Plan Category | Number of Securities to Be Issued Upon Exercise of Outstanding Options, Warrants and Rights (a) | Weighted-Average Exercise Price of Outstanding Options, Warrants and Rights (b) | Number of Securities Remaining Available for Future Issuance Under Equity Compensation Plans (Excluding Securities Reflected in Column (a)) (c) | |||||||
| Equity Compensation Plans Approved by Shareholders | 188,380 | $ | 10.55 | 769,608 | ||||||
| Equity Compensation Plans Not Approved by Shareholders | — | — | — | |||||||
| Total | 188,380 | $ | 10.55 | 769,608 | ||||||
| 71 | ||
| (a) | (1) Financial Statements and Schedules: |
Report of Independent Registered Public Accounting Firm
Consolidated Statements of Condition
Consolidated Statements of Income
Consolidated Statements of Changes in Stockholders’ Equity
Consolidated Statements of Cash Flows
Notes to Consolidated Financial Statements
| Reports of Independent Registered Public Accounting Firms | F-2 | |
| Consolidated Statements of Condition | F-4 | |
| Consolidated Statements of Income | F-5 | |
| Consolidated Statements of Comprehensive Income | F-6 | |
| Consolidated Statements of Changes in Stockholders’ Equity | F-7 | |
| Consolidated Statements of Cash Flows | F-8 | |
| Notes to Consolidated Financial Statements | F-9 |
| (b) | Exhibits (numbered in accordance with Item 601 of Regulation S-K) filed herewith or incorporated by reference as part of this annual report. |
Exhibit No. | Description | |
| Bank Purchase and Assumption Agreement, dated February 1, 2012, by and among the Registrant, Saddle River Valley Bancorp and Saddle River Valley Bank is incorporated by reference to Exhibit 2.1 to the Registrant’s Current Report on Form 8-K dated February 2, 2012. | ||
| 3.1 | The Registrant’s Restated Certificate of Incorporation | |
| 3.2 | The Registrant’s Amended and Restated By-Laws | |
| 10.1 | ||
| The Registrant’s 1993 Employee Stock Option Plan is incorporated by reference to Exhibit 10.3 to the Registrant’s Annual Report on Form 10-K for the year ended December 31, 1993. | ||
| The Registrant’s 1993 Outside Director Stock Option Plan is incorporated by reference to Exhibit 10.4 to the Registrant’s Annual Report on Form 10-K for the year ended December 31, 1993. | ||
| The Registrant’s Annual Incentive Plan is incorporated by reference to Exhibit 10.6 to the Registrant’s Annual Report on Form 10-K for the year ended December 31, 2006. | ||
| 10.7 | Non-Competition Agreement, dated as of December 2, 2010, between the Registrant, and Anthony C. Weagley is incorporated by reference to Exhibit 10.1 to the Registrant’s Current Report on Form 8-K dated December 6, 2010. | |
| 10.8 | Non-Competition Agreement, dated as of December 2, 2010, between the Registrant, and James W. Sorge is incorporated by reference to Exhibit 10.2 to the Registrant’s Current Report on Form 8-K dated December 6, 2010. | |
| Center Bancorp, Inc. 2009 Equity Incentive Plan is incorporated by reference to Exhibit 10.1 to the Registrant’s Current Report on Form 8-K dated June 1, 2009. | ||
| Center Bancorp, Inc. 1999 Stock Incentive Plan is incorporated by reference to Exhibit 10.11 to the Registrant’s Annual Report on Form 10-K for the year ended December 31, 1999. |
| 72 | |
Exhibit No. | | |
Description | ||
| 10.11 | Registrant’s Placement Agreement dated December 12, 2003 with Sandler O’Neill & Partners, L.P. to issue and sell $5 million aggregate liquidation amount of floating rate | |
| 10.12 | Indenture dated as of December 19, 2003, between the Registrant and Wilmington Trust Company relating to $5.0 million aggregate principal amount of floating rate debentures is incorporated by reference to Exhibit 10.16 of the Registrant’s Annual Report on Form 10-K for the year ended December 31, 2003. | |
| 10.13 | Amended and restated Declaration of Trust of Center Bancorp Statutory Trust II, dated as of December 19, 2003 is incorporated by reference to Exhibit 10.17 of the Registrant’s Annual Report on Form 10-K for the year ended December 31, 2003. | |
| 10.14 | Guarantee Agreement between Registrant and Wilmington Trust Company dated as of December 19, 2003 is incorporated by reference to Exhibit 10.18 of the Registrant’s Annual Report on Form 10-K for the year ended December 31, 2003. | |
| 10.15 | ||
| Registration Rights Agreement, dated September 29, 2004, relating to securities issued in a September 2004 private placement of securities, is incorporated by reference to Exhibit 10.2 to the Registrant’s Current Report on Form 8-K dated October 1, 2004. | ||
| The Registrant’s Amended and Restated 2003 Non-Employee Director Stock Option Plan, as amended and restated, is incorporated by reference to Exhibit 10.1 to the Registrant’s Current Report on Form 8-K dated March 5, 2008. | ||
| Amended and restated Employment Agreement among the Registrant, its bank subsidiary and Mark S. Cardone, effective as of January 1, 2007, is incorporated by reference to Exhibit 10.4 to the Registrant’s Current Report on Form 10-K filed with the SEC on February 26, 2007. See also Exhibit 10.22. | ||
| Registration Rights Agreement, dated June 30, 2005, relating to securities issued in a June 2005 private placement of securities is incorporated by reference to Exhibit 10.2 to the Registrant’s Current Report on Form 8-K dated June 30, 2005. | ||
| Open Market Share Purchase Incentive Plan is incorporated by reference to exhibit 10.1 to the Registrant’s Current Report on Form 8-K dated January 26, 2006. | ||
| Amendment to Employment Agreement among the Registrant, its bank subsidiary and Mark Cardone, dated December 3, 2007, is incorporated by reference to Exhibit 10.2 to the Registrant’s Current Report on Form 10-K dated December 20, 2007. | ||
| 10.23 | Repurchase Agreement, dated September 15, 2011, between the Registrant and the United States Department of the Treasury, with respect to the repurchase of Preferred Stock issued pursuant to TARP is incorporated by reference to Exhibit 10.2 to the Registrant’s Current Report on Form 8-K dated September 21, 2011. | |
| 10.24 | Warrant Letter Agreement, dated December 7, 2011, providing for the repurchase of the warrants issued pursuant to TARP is incorporated by reference to Exhibit 10.1 to the Registrant’s Current Report on Form 8-K dated December 12, 2011. |
| 73 | ||
Exhibit No. | Description | |
| 10.25* | Employment Agreement, dated as of April 12, 2013, between Union Center National Bank and Mark S. Cardone is incorporated by reference to Exhibit 10.1 to the Registrant’s Current Report on Form 8-K filed with the SEC on April 15, 2013. | |
| 10.26* | Employment Agreement, dated as of April 12, 2013, between Union Center National Bank and Arthur M. Wein is incorporated by reference to Exhibit 10.2 to the Registrant’s Current Report on Form 8-K filed with the SEC on April 15, 2013. | |
| 10.27* | Employment Agreement, dated as of April 12, 2013, between Union Center National Bank and James W. Sorge is incorporated by reference to Exhibit 10.3 to the Registrant’s Current Report on Form 8-K filed with the SEC on April 15, 2013. | |
| 10.28* | Employment Agreement, dated as of April 12, 2013, between Union Center National Bank and Joseph D. Gangemi is incorporated by reference to Exhibit 10.4 to the Registrant’s Current Report on Form 8-K filed with the SEC on April 15, 2013. | |
| 10.29* | Amendment to Employment Agreement, dated February 18, 2014, between Union Center National Bank and Mark S. Cardone is incorporated by reference to Exhibit 10.1 to the Registrant’s Current Report on Form 8-K filed with the SEC on February 24, 2014. | |
| 10.30* | Amendment to Employment Agreement, dated February 18, 2014, between Union Center National Bank and Arthur M. Wein is incorporated by reference to Exhibit 10.2 to the Registrant’s Current Report on Form 8-K filed with the SEC on February 24, 2014. | |
| 10.31* | Amendment to Employment Agreement, dated February 18, 2014, between Union Center National Bank and Joseph D. Gangemi is incorporated by reference to Exhibit 10.3 to the Registrant’s Current Report on Form 8-K filed with the SEC on February 24, 2014. | |
| 10.32* | Consulting Agreement, dated as of January 20, 2014, between Center Bancorp, Inc. and Lawrence B. Seidman is incorporated by reference to Exhibit 10.5 to the Registrant’s Current Report on Form 8-K filed with the SEC on January 21, 2014. | |
| 10.33 | Registration Rights Agreement, dated as of January 20, 2014, among Center Bancorp, Inc., Lawrence B. Seidman and the other shareholders named therein is incorporated by reference to Exhibit 10.6 to the Registrant’s Current Report on Form 8-K filed with the SEC on January 21, 2014. | |
| 10.34* | Agreement, dated January 20, 2014, among Anthony C. Weagley, Center Bancorp, Inc. and Union Center National Bank, is incorporated by reference to Exhibit 10.7 to the Registrant’s Current Report on Form 8-K filed with the SEC on January 21, 2014. | |
| 10.35* | Amendment to 2003 Amended and Restated Non-Employee Director Stock Option Plan is incorporated by reference to Exhibit 10.8 to the Registrant’s Current Report on Form 8-K filed with the SEC on January 21, 2014. |
| 74 | ||
Exhibit No. | Description | |
| 11.1 | Statement regarding computation of per share earnings is omitted because the computation can be clearly determined from the material incorporated by reference in this Report. | |
| 12.1 | Statement of Ratios of Earnings to Fixed Charges. | |
| 14.1 | Code of Ethics is incorporated by reference to Exhibit 14.1 of the Registrant’s Annual Report on Form 10-K for the year ended December 31, 2003. | |
| 21.1 | Subsidiaries of the Registrant. | |
| 23.1 | Consent of | |
| 23.2 | Consent of ParenteBeard, LLC. | |
| 24.1 | Power of attorney | |
| 31.1 | Personal certification of the chief executive officer pursuant to section 302 of the Sarbanes-Oxley Act of 2002. |
| | |
| 31.2 | Personal certification of the chief financial officer pursuant to section 302 of the Sarbanes-Oxley Act of 2002. | |
| Personal certification of the chief executive officer pursuant to section 906 of the Sarbanes-Oxley Act of 2002. | ||
| Personal certification of the chief financial officer pursuant to section 906 of the Sarbanes-Oxley Act of 2002. | ||
| 99.3 | Code of Conduct is incorporated by reference to Exhibit 99.1 to the Registrant’s Annual Report on Form 10-K for the year ended December 31, 2003. | |
101 .INS*** | XBRL instance document | |
101 .SCH*** | XBRL Taxonomy Extension Schema Document | |
101 .CAL*** | XBRL Taxonomy Extension Calculation Linkbase Document | |
101 .DEF*** | XBRL Taxonomy Extension Definition Linkbase Document | |
101 .LAB*** | XBRL Taxonomy Extension Label Linkbase Document | |
101 .PRE *** | XBRL Taxonomy Extension Presentation Linkbase Document |
| (c) | Financial Statement Schedules |
| * | Management contract on compensatory plan or arrangement. |
| ** | Furnished herewith. |
| *** | XBRL (Extensible Business Reporting Language) information is furnished and not filed or a part of a registration statement or prospectus for purposes of Sections 11 or 12 of the Securities Act of 1933, as amended, is deemed not filed for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, and otherwise is not subject to liability under these sections. |
| 75 | ||
| | ||
CENTER BANCORP, INC. | |||
| March | By: | By: | |
/s/ Anthony C. Weagley | |||
| Anthony C. Weagley | |||
| President and Chief Executive Officer | |||
| | ||
| /s/ Alexander A. Bol*Alexander A. Bol | Chairman of the Board | ||
| Alexander A. Bol | |||
| /s/ James J. Kennedy | Director | ||
| Frederick S. Fish | |||
| /s/ Howard Kent*Howard Kent | Director | ||
| Howard Kent | |||
| /s/ Phyllis Klein | Director | ||
| Nicholas Minoia | |||
| /s/ Nicholas Minoia | Director | ||
| |||
| /s/ Lawrence B. Seidman* | Director | ||
| Lawrence B. Seidman | |||
| Alan H. Straus | |||
| /s/ William A. Thompson* | Director | ||
| William A. Thompson | |||
| /s/ Raymond Vanaria*Raymond Vanaria | Director | ||
| Raymond Vanaria | |||
| /s/ | President and Chief Executive Officer | ||
| Anthony C. Weagley | |||
| /s/ Francis R. | Vice President, Treasurer and Chief Financial Officer | ||
| Francis R. Patryn | |||
*By: | |||
| /s/ Anthony C. Weagley | |||
| Anthony C. Weagley | |||
| Attorney-in-fact | |||
75