SECURITIES AND EXCHANGE COMMISSION
TO
California | 6022 | 01-0775317 | ||||||||
(State or other jurisdiction of incorporation or organization) | (Primary Standard Industrial Classification Code) | (I.R.S. Employer Identification No.) |
Nevada City, California 95959
(530) 478-6000
(Address, including zip code and telephone number,
including area code, of registrant’s principal and executive offices)
Citizens Bancorp
President and Chief Executive Officer
208 Providence Mine Road Suite 122
Nevada City, California 95959
(530) 478-6000
(Name, address, including zip code, and telephone number,
including area code, of agent for service)
John F. Stuart, Esq.
Stuart | Moore
641 Higuera Street
Suite 302
San Luis Obispo, CA 93401
(805) 545-8590
(805) 545-8599 — facsimile
As soon as practicable after the effective date of this Registration Statement.
![](https://capedge.com/proxy/S-1A/0001145443-11-000041/d27324-citizenslogo.jpg)
[*] Units
Each Unit Consisting of One (1) Share of Common Stock
And A Variable Number of Warrants Depending on the Number of Units
Purchased by A Particular Investor as Fully Described Herein
$[*] Per Unit
Page | ||||||
---|---|---|---|---|---|---|
Summary | 1 | |||||
Selected Consolidated Financial Information | 12 | |||||
Risk Factors | 14 | |||||
Cautionary Note Regarding Forward-Looking Statements | 24 | |||||
Use of Proceeds | 25 | |||||
Trading History and Dividend Policy | 25 | |||||
Capitalization | 27 | |||||
Dilution | 28 | |||||
Management’s Discussion and Analysis of Financial Condition and Results of Operations | 29 | |||||
Business | 67 | |||||
Supervision and Regulation | 78 | |||||
Management | 86 | |||||
Principal Shareholders | 96 | |||||
Description of Capital Stock | 98 | |||||
The Offering | 102 | |||||
Consent | 103 | |||||
Certain Legal Matters | 103 | |||||
Available Information | 103 | |||||
Where You Can Find More Information | 103 | |||||
Index to Financial Statements | 104 |
• | assumes an offering price of $[*] per unit; and |
• | does not give effect to the use of proceeds of the Offering. |
members have businesses located in Nevada County. Our committed employees strive to make a real difference in the community and currently volunteer in 81 local organizations, sit on 31 boards of directors and contribute to 66 organizations.
• | a major economic recession in our market area, California and the nation which resulted in decreasing real estate values and significant unemployment; |
• | a concentration in land and construction loans; |
• | a circumvention of certain policies and procedures within the loan administration function, see “Risk Factors — Risks Related to Our Business and Market”; and |
• | the need for a valuation reserve on our deferred tax assets. |
its lines of credit with the Federal Home Loan Bank and Federal Reserve Bank, respectively. In order to preserve capital in August 2009, we began deferring TARP dividend payments and in July 2010, we began deferring interest payments on trust preferred securities. Our ability to raise additional liquidity through deposit campaigns and interest deposits is subject to pricing limitations.
• | Gary D. Gall joined the organization as our President and Chief Executive Officer and Director in July 2009. Prior to that, between August 2008 and August 2009, he was Chairman of the Board for Sierra Vista Bank, Folsom, CA and between 1993 and 2006, was President and Chief Executive Officer for Western Sierra Bancorp, Cameron Park, CA. Prior to that, he was President and Chief Executive Officer of Delta National Bank in Manteca for six years. Mr. Gall’s 36 year banking career has been devoted to community banking and the long sustaining value it brings to local businesses, individuals and the community. During his tenure at Western Sierra, he led a dedicated team that grew assets from $50 million with four branches to over $1.2 billion and 31 branches within a multi-bank holding company environment. Under his leadership, the bank successfully negotiated and completed the merger/acquisition of six other community banks between 1999 and 2005. Western Sierra, who joined NASDAQ in 1999, was also recognized nationally for performing in the top 5% of community banks in 2004. |
• | Susann C. Trevena has served as our Executive Vice President and Chief Financial Officer since 2002. Ms. Trevena’s 41 year career includes positions most recently as Vice President for Boston Private Bank & Trust company and preceding that, as Senior Vice President and Chief Financial Officer for Bank of Los Altos. |
• | Michael A. Behn has served as our Senior Vice President/Chief Information Officer since 2004. In addition, in 2009 he was named an Executive Vice President, Chief Information Officer and the Bank’s Senior Credit Administrator. Mr. Behn’s 30 year career includes positions with Bank of America, United California Bank/First Interstate Bank of California, Manufacturers Bank and City National Bank. |
• | Phillip J. Campbell joined the organization as our Executive Vice President/General Counsel and Chief Risk Officer in August 2009. Mr. Campbell’s 30 year career has focused on financial institutions. His career includes his former role between 2002 and 2009 as Chief Counsel for the Wachovia Small Business Capital subsidiaries of Wachovia Corporation and Wachovia Bank, N.A., and Assistant General Counsel with Wachovia Corporation and Wells Fargo & Co. He also was a partner at the law firm of Weintraub, Genshlea & Chediak. |
• | completing a comprehensive review of the loan portfolio; |
• | reorganizing the credit administration and underwriting functions, including internal control enhancement; |
• | hiring a number of new senior officers; |
• | increasing equity capital by almost $1.7 million through the private placement of Company common stock; |
• | planning a reduction in assets of approximately $30 million in 2010 in order to reduce balance sheet risk and support regulatory capital ratios; |
• | assigning Mr. Campbell as Chief Risk Officer and Mr. Behn as Senior Credit Administrator; |
• | maintaining a net interest margin within the 90th percentile of all insured commercial banks with assets between $300 million and $1.0 billion; |
• | changing the funding mix by reducing brokered deposits and focusing on building core deposits; |
• | becoming more efficient by centralizing operations and reducing non-interest expense; and |
• | initiating an SBA department to diversify the loan portfolio, reduce risk and generate fee income |
• | increase the Bank’s capital through a combination of new equity capital and its earnings; |
• | minimize future losses from the $29.4 million in non-performing loans we had at December 31, 2010 or from other assets; and/or |
• | reduce assets from the amount at year end 2010. |
• | Maintain acceptable Executive Management and provide Executive Management with written authority to implement the provisions of the Consent Order and obtain written approval from the regulators to appoint new individuals to the Bank’s Board or to Executive Management. |
• | Within 150 days of the effective date of the Order and thereafter, achieve and maintain tangible shareholder’s equity to total tangible assets, and Tier 1 capital to total assets, equal to or greater than 9% (the “Capital Requirement”). |
• | Develop, adopt and implement a Capital Plan setting forth specific actions that the Bank will take to satisfy the Capital Requirement; |
• | Within 30 days from the effective date of the Order, eliminate from the books, all assets classified “Loss” in the Report of Examination dated May 18, 2009 (“Report”) by charge-off or collection. |
• | Within 90 days from the effective date of the Order, reduce assets classified as “Doubtful” and “Substandard” in the Report to not more than 75% of capital and reserves. |
• | Within 180 days from the effective date of the Order, reduce assets classified as “Doubtful” and “Substandard” in the Report to not more than 50% of capital and reserves. |
• | Within 270 days from the effective date of the Order, reduce assets classified as “Doubtful” and “Substandard” in the Report to not more than 25% of capital and reserves. |
• | Within 60 days from the effective date of the Order, develop a written asset disposition plan for each classified asset greater than $500,000; plans shall be reviewed and approved by the Board. |
• | During the life of the Order, maintain an adequate allowance. In addition, revise methodology for determining the adequacy of the allowance in accordance with the Report. Board shall review the adequacy of the allowance at least quarterly and results of the review shall be reflected in the meeting minutes. |
• | Within 60 days from the effective date of the Order, revise, adopt and implement improved written lending policies that address deficiencies identified in the Report. |
• | Within 60 days from the effective date of the Order, develop and implement appropriate policies and procedures re: appraisals and evaluations. |
• | Within 60 days from the effective date of the Order, revise and implement policies and procedures for monitoring and reporting asset concentrations. |
• | Effective February 11, 2010, do not extend any credit to any borrower who has loans, in whole or in part, that have been charged off or are classified “Loss” and remain uncollected. |
• | Within 60 days from the effective date of the Order, formulate and implement a written plan and comprehensive budget for all categories of income and expense and submit to DFI & FDIC for review and opportunity to comment. |
• | During the life of the order, do not establish any new branches or other office without prior written consent of the DFI & FDIC. |
• | Within 90 days of the effective date of the Order, adopt and implement a written Contingency Liquidity Policy. |
• | During the life of the Order, no distributions to shareholders may be made without prior written approval of DFI and FDIC. |
• | During the life of the Order, the Bank is to comply with the provisions of the FDIC Rules & Regulations regarding brokered deposits. |
• | Within 60 days from the effective date of the Order, correct all violations of consumer laws in the Compliance Report dated May 4, 2009, and adopt and implement policies, procedures & controls to prevent their recurrence. |
• | Within 60 days from the effective date of the Order, increase oversight of the Compliance function, dedicate additional resources as needed, and provide monthly reports to senior executive officers and the Board. |
• | Within 60 days from the effective date of the Order, evaluate and enhance the compliance training program. |
• | Within 60 days from the effective date of the Order, adopt and implement internal controls to ensure consistency between system specs and loan documents with particular focus on improving compliance monitoring of flood insurance requirements. |
• | Within 60 days from the effective date of the Order, improve compliance audit procedures to address scope and frequency of such audits. |
• | Within 30 days after the end of the first quarter following the effective date of the Order, and within 30 days after the end of each quarter thereafter, provide written progress reports to DFI & FDIC. |
• | During the life of the Consent Order, notify DFI & FDIC in advance of making any public announcement regarding the financial condition of the Bank, Executive Management or the Board. |
• | During the life of the Consent Order and in the future, comply with all laws and regulations. |
• | During the life of the Order, do not amend or rescind any approved plans, policies, procedures or programs without prior written approval of the DFI and FDIC. |
• | The Board of Directors of the Company shall take appropriate steps to ensure that the Bank complies with the Order entered into with the FDIC and the DFI.; |
• | The Company shall not declare or pay any dividends nor make any distribution of interest, principal, or other sums on subordinated debentures or trust preferred securities without the prior written approval of the Federal Reserve Board; |
• | The Company and its nonbank subsidiaries, if any, shall not, directly or indirectly incur, increase or guarantee any debt, nor shall the Company directly or indirectly, purchase or redeem any shares of its stock without the prior approval of the Federal Reserve Board; |
• | The Company shall comply with certain notice provisions under the applicable federal rules and regulations to notify the Federal Reserve Board in appointing any new director or senior executive officer, or changing the responsibilities of any senior executive officer so that the officer would assume a different senior executive officer position; |
• | The Company shall comply with restrictions on indemnification and severance payments pursuant to the applicable federal laws and regulations; |
• | Within 30 days after the end of each calendar quarter following the date of the Federal Reserve Agreement, the Board of Directors shall submit to the Federal Reserve Board written progress reports detailing the form |
and manner of all actions taken to secure compliance with the provisions of the Agreement and the result thereof, applicable financial data of the Company, and changes in shareholders’ equity. |
• | No capital distributions or payment of management fees. |
• | Submission of a capital restoration plan (“CRP”) that is acceptable to the FDIC. |
• | Close monitoring by the FDIC of the Bank’s condition and compliance with the approved CRP as well as limitations and/or restrictions set forth in this paragraph. |
• | Restricting growth of the Bank average total assets during any calendar quarter to not more than its average total assets during the preceding calendar quarter unless the FDIC has accepted the CRP and the increase is consistent with the CRP and the Bank’s ratio of tangible equity to assets increases at a rate during the calendar quarter sufficient to enable the Bank to reach an acceptable capital level within a reasonable time. |
• | The FDIC’s prior approval must be obtained for the acquisition of any company or branch, the establishment of any branch, or the engagement in new line of business. |
to meet this goal, the Company is continuing its efforts to raise the capital needed to reach the Consent Order’s Capital Requirements. To meet the Capital Requirements, the Company and/or Bank must:
• | increase the Company’s and Bank’s capital through a combination of new equity capital and the Bank’s earnings; and |
• | minimize future losses from the $29.4 million in non-performing loans and $10.3 million in other real estate assets the Bank had at December 31, 2010. |
• | a strong net interest margin of 4.54% for the nine months ended September 30, 2010 driven by our low cost of funds; |
• | approximately $9.3 million in deferred tax assets to shelter future income from taxes, subject to certain limitations; |
• | the opening of our SBA department to generate small business government guaranteed loans which can be retained for earnings or, when eligible, sold in the secondary market for a premium with the possibility of service fee income; and |
• | an increase in operating efficiencies and cost reduction measures which should favorably impact non-interest expense. |
• | Maintain our emphasis on business banking |
• | Increase market share |
• | Use technology to expand customer base |
banking, bill pay and cash management, remote deposit capture, ATMs and an internet website. We believe the availability of both traditional banking services and electronic banking services enhance our ability to attract a broader range of customers.
• | Maintain and recruit highly competent personnel |
Balance, October 1, 2010 | $ | 14,486 | ||||
Provision charged to operations | 2,200 | |||||
Net losses charged to allowance | (1,598 | ) | ||||
Balance, December 31, 2010 | $ | 15,088 |
CITIZENS BANCORP AND SUBSIDIARIES | CITIZENS BANK | ||||||||||||||||||||||
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Minimum Regulatory Requirement | Actual Capital Ratio | Minimum Regulatory Requirement | Minimum Regulatory Requirement for “Well Capitalized” Institution | Actual Capital Ratio | |||||||||||||||||||
Leverage Ratio | 4.0 | % | 1.5 | % | 4.0 | %(1) | 5.0 | % | 5.5 | % | |||||||||||||
Tier 1 Risk-Based Ratio | 4.0 | % | 1.9 | % | 4.0 | % | 6.0 | % | 6.9 | % | |||||||||||||
Total Risk-Based Ratio | 8.0 | % | 1.5 | % | 8.0 | % | 10.0 | % | 8.2 | % |
(1) | The Order entered into by the Bank in February 2010, requires the Bank to maintain a Tier 1 capital to average assets (Leverage) ratio equal to or greater than 9% by July 2010. The Bank was unable to meet the deadline to increase the leverage ratio to 9%. |
Securities Offered | [*] units, with each unit consisting of one (1) share of common stock and a variable number of 2011 Warrants, as described below. If all [*] units are sold, the gross proceeds would be $[*] million assuming no 2011 Warrants are exercised, and $[*] million assuming [*] 2011 Warrants are issued, and all such 2011 Warrants are exercised. | |||||
Price per Unit | $[*] | |||||
Minimum Investment | $[*] |
Description of the 2011 Warrants | The exercise price of each 2011 Warrant is $5.00. The 2011 Warrants are transferable separately from our common stock, and will be exercisable for a period of 3 or 7 years as set forth below. | |||||
Number and Specific Terms of Warrants | The number of 2011 Warrants per unit received by a particular investor, and the specific terms of those 2011 Warrants will be determined based on the following: |
INVESTMENT ($[*] / Unit) | | TOTAL WARRANTS PER UNIT PURCHASED | | EXERCISE PRICE | | TERM | ||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
$1,000,000 and above | 1.00 | $5.00 | 3 Years — 50% 7 Years — 50% | |||||||||||
$500,000 to $999,999 | 0.75 | $5.00 | 3 Years — 50% 7 Years — 50% | |||||||||||
$250,000 to $499,999 | 0.50 | $5.00 | 3 Years — 50% 7 Years — 50% | |||||||||||
$100,000 to $249,999 | 0.25 | $5.00 | 3 Years — 50% 7 Years — 50% | |||||||||||
$[*] to $99,999 | 0.00 | Not applicable | Not applicable |
Termination date | , 2011, subject to extension | |||||
Escrow | Subscription funds will be held in a separate escrow account by Pacific Coast Bankers Bank and will only be released to the Company on the termination date if new equity capital and earnings combined would result in the Bank being in substantial compliance with the Capital Requirement of the Order. If the gross proceeds are less than necessary to satisfy this requirement, subscription funds will be returned to subscribers as soon as possible after the termination date without interest. | |||||
Use of proceeds | We intend to use all of the proceeds from the sale of the common stock to contribute to the Bank as additional capital in order to support its regulatory capital ratios. See “Consent Order and Written Agreement.” | |||||
Common Stock Outstanding | As of the date of this Prospectus, we have 2,335,090 shares of common stock outstanding. If all units are sold, we will have [*]shares outstanding, excluding the shares issuable upon exercise of the 2011 Warrants and any outstanding stock options. The number of shares of our common stock that will be outstanding after this Offering includes the 2,335,090 shares outstanding as of September 30, 2010, but excludes 660,230 shares of common stock reserved for issuance under our stock option plans of which 65,623 shares were subject to outstanding options at September 30, 2010. |
(Dollars in thousands, except per share data) | At or For the Nine Months Ended September 30, | At or For the Year Ended December 31, | |||||||||||||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
2010 | 2009 | 2009 | 2008 | 2007 | 2006 | 2005 | |||||||||||||||||||||||||
Unaudited | |||||||||||||||||||||||||||||||
Operations Data: | |||||||||||||||||||||||||||||||
Net interest income | $ | 10,626 | $ | 10,942 | $ | 15,122 | $ | 15,100 | $ | 14,294 | $ | 13,582 | $ | 11,297 | |||||||||||||||||
Provision for credit losses | 7,900 | 3,900 | 11,115 | 23,900 | 945 | 560 | 845 | ||||||||||||||||||||||||
Non-interest income | 1,720 | 1,716 | 5,112 | 2,140 | 2,206 | 1,668 | 1,295 | ||||||||||||||||||||||||
Non-interest expense | 8,895 | 11,099 | 15,691 | 11,653 | 11,242 | 9,632 | 7,629 | ||||||||||||||||||||||||
(Loss) income before income tax | (4,449 | ) | (2,341 | ) | (6,572 | ) | (18,313 | ) | 4,313 | 5,058 | 4,117 | ||||||||||||||||||||
Income tax (benefit) | — | (946 | ) | 6,568 | (7,662 | ) | 1,728 | 2,024 | 1,647 | ||||||||||||||||||||||
Net (loss) income | (4,449 | ) | (1,395 | ) | (13,140 | ) | (10,651 | ) | 2,585 | 3,034 | 2,470 | ||||||||||||||||||||
Dividends/discount accretion on preferred stock | (78 | ) | (302 | ) | (328 | ) | — | — | — | — | |||||||||||||||||||||
Net (loss) income applicable to common shareholders | ($4,527 | ) | ($1,697 | ) | ($13,468 | ) | ($10,651 | ) | $ | 2,585 | $ | 3,034 | $ | 2,470 | |||||||||||||||||
Share Data (retroactively adjusted for 5% stock dividends paid in June 2008, 2007 and 2006): | |||||||||||||||||||||||||||||||
(Loss) earnings per share — basic | ($1.95 | ) | ($0.89 | ) | ($7.01 | ) | ($5.56 | ) | $ | 1.35 | $ | 1.60 | $ | 1.34 | |||||||||||||||||
(Loss) earnings per share — diluted | ($1.95 | ) | ($0.89 | ) | ($7.01 | ) | ($5.56 | ) | $ | 1.32 | $ | 1.57 | $ | 1.30 | |||||||||||||||||
Book value per common share | $ | (2.32 | ) | $ | 4.83 | $ | (0.42 | ) | $ | 5.70 | $ | 11.28 | $ | 9.87 | $ | 8.19 | |||||||||||||||
Balance Sheet Data: | |||||||||||||||||||||||||||||||
Assets | $ | 357,493 | $ | 387,298 | $ | 371,058 | $ | 363,274 | $ | 328,433 | $ | 280,393 | $ | 226,995 | |||||||||||||||||
Loans | 281,375 | 302,529 | 304,739 | 312,374 | 305,135 | 259,381 | 206,659 | ||||||||||||||||||||||||
Allowance for credit losses | (14,486 | ) | (14,466 | ) | (14,387 | ) | (12,406 | ) | (3,919 | ) | (3,374 | ) | (2,825 | ) | |||||||||||||||||
Loans, net | 266,889 | 288,063 | 290,352 | 299,968 | 301,216 | 256,007 | 203,834 | ||||||||||||||||||||||||
Deposits | 283,030 | 318,739 | 302,631 | 299,758 | 274,255 | 243,237 | 189,626 | ||||||||||||||||||||||||
Junior subordinated debentures | 15,465 | 15,465 | 15,465 | 15,465 | 15,465 | 15,465 | 9,279 | ||||||||||||||||||||||||
Preferred stock | 10,551 | 10,446 | 10,473 | 10,369 | — | — | — | ||||||||||||||||||||||||
Common stock & (accumulated deficit) retained earnings | (5,413 | ) | 9,245 | (968 | ) | 10,927 | 21,572 | 18,864 | 15,376 | ||||||||||||||||||||||
Total shareholders’ equity | 5,138 | 19,692 | 9,505 | 21,296 | 21,572 | 18,864 | 15,376 |
(Dollars in thousands, except per share data) | At or For the Nine Months Ended September 30, | At or For the Year Ended December 31, | |||||||||||||||||||||||||||||
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2010 | 2009 | 2009 | 2008 | 2007 | 2006 | 2005 | |||||||||||||||||||||||||
Unaudited | |||||||||||||||||||||||||||||||
Financial Ratios: | |||||||||||||||||||||||||||||||
Return on average equity | (81.37 | %) | (11.44 | %) | (72.71 | %) | (50.82 | %) | 12.77 | % | 17.67 | % | 16.51 | % | |||||||||||||||||
Return on average assets | (1.76 | %) | (0.60 | %) | (3.58 | %) | (3.04 | %) | 0.86 | % | 1.18 | % | 1.11 | % | |||||||||||||||||
Efficiency ratio | 72.05 | % | 87.68 | % | 77.55 | % | 67.60 | % | 68.14 | % | 63.16 | % | 60.59 | % | |||||||||||||||||
Net interest margin | 4.54 | % | 4.35 | % | 4.51 | % | 4.61 | % | 5.05 | % | 5.62 | % | 5.07 | % | |||||||||||||||||
Loans to deposits | 99.42 | % | 94.91 | % | 100.70 | % | 104.21 | % | 111.26 | % | 106.64 | % | 108.98 | % | |||||||||||||||||
Net charge-offs to average loans | 3.56 | % | 0.79 | % | 2.94 | % | 4.87 | % | 0.14 | % | 0.01 | % | 0.00 | % | |||||||||||||||||
Non-performing loans to total loans | 12.59 | % | 11.70 | % | 8.95 | % | 8.92 | % | 3.10 | % | 0.00 | % | 0.00 | % | |||||||||||||||||
Allowance for credit losses to non-performing loans | 40.88 | % | 40.87 | % | 52.74 | % | 44.55 | % | 41.74 | % | N/A | N/A | |||||||||||||||||||
Allowance for credit losses to total loans | 5.15 | % | 4.78 | % | 4.72 | % | 3.97 | % | 1.28 | % | 1.30 | % | 1.37 | % | |||||||||||||||||
Average equity to average assets | 1.50 | % | 5.07 | % | 4.92 | % | 5.98 | % | 6.70 | % | 6.65 | % | 6.71 | % | |||||||||||||||||
Consolidated Capital Ratios: | |||||||||||||||||||||||||||||||
Leverage capital ratio | 2.0 | % | 4.5 | % | 3.3 | % | 5.5 | % | 8.9 | % | 9.0 | % | 9.4 | % | |||||||||||||||||
Total risk-based capital ratio | 8.5 | % | 10.2 | % | 9.2 | % | 10.2 | % | 12.0 | % | 12.6 | % | 11.5 | % | |||||||||||||||||
Tier 1 risk-based capital ratio | 2.4 | % | 5.4 | % | 4.1 | % | 5.9 | % | 8.5 | % | 8.4 | % | 8.6 | % | |||||||||||||||||
Bank-only Capital Ratios: | |||||||||||||||||||||||||||||||
Leverage capital ratio | 5.7 | % | 6.1 | % | 6.1 | % | 7.8 | % | 11.1 | % | 11.6 | % | 10.8 | % | |||||||||||||||||
Total risk-based capital ratio | 8.3 | % | 8.9 | % | 8.9 | % | 9.7 | % | 11.7 | % | 12.1 | % | 11.2 | % | |||||||||||||||||
Tier 1 risk-based capital ratio | 7.0 | % | 7.6 | % | 7.7 | % | 8.4 | % | 10.5 | % | 10.9 | % | 9.9 | % |
common stock. We also do not expect a market to develop for the 2011 Warrants, which may impact your ability to sell any 2011 Warrants that you receive in the Offering.
(“TLGP”). The actual impact that any of the recent, or future, legislative and regulatory initiatives will have on the financial markets and the overall economy cannot be accurately predicted. Any failure of these initiatives to help stabilize or improve the financial markets and the economy, and a continuation or worsening of current financial market and economic conditions could materially and adversely affect our business, financial condition, results of operations, access to credit or the trading price of our common stock.
• | Loan delinquencies may increase, which may cause us to increase loan loss provisions, and also result in a reduction in net interest income and our earnings as well as weaken our balance sheet; |
• | Problem assets and foreclosures may increase, which could result in higher operating expenses, and increases in our loan loss provisions; |
• | Demand for our products and services may decline including specifically, the demand for loans, which would cause our revenues, which include net interest income and noninterest income, to decline; and |
• | Collateral for loans may decline in value, reducing a customer’s borrowing power, and reducing the value of assets and collateral associated with our loans. |
• | As a result of the ongoing deterioration in economic conditions, since December 31, 2009, the Bank has seen both an increase in the number of borrowers experiencing difficulties and a decrease in the appraisal values of the underlying collateral. |
million and $23.9 million, respectively, which was the primary cause of our losses of $13.1 million and $10.7 million, respectively, for those periods. Our allowance as of the years ended December 31, 2009 and 2008 was $14.4 million and $12.4 million, respectively. For the nine months ended September 30, 2010, the provision was $7.9 million and as of September 30, 2010, our allowance was $14.5 million. Additionally for the three months ended December 31, 2010, the provision was $2.2 million and the balance in our allowance increased to $15.1 million. Our allowance for credit losses may not be adequate to cover actual loan losses, and future provisions for credit losses could materially and adversely affect our business, financial condition, results of operations and cash flows. The allowance for credit losses reflects our estimate of the probable losses in our loan portfolio at the relevant balance sheet date. Our allowance for credit losses is based on prior experience, as well as an evaluation of the known risks in the current portfolio, composition and growth of the loan portfolio and economic factors. The determination of an appropriate level of the allowance for credit losses is an inherently difficult process and is based on numerous assumptions. The amount of future losses is susceptible to changes in economic, operating and other conditions, including changes in interest rates, that may be beyond our control and these losses may exceed current estimates.
have more than one loan outstanding. Consequently, an adverse development with respect to one loan or one credit relationship can expose us to a significantly greater risk of loss compared to an adverse development with respect to a one- to four-family residential mortgage loan.
• | Inability to control non-interest expense, including, but not limited to, rising employee, regulatory compliance, and legal costs and other professional fees; |
• | Inability to increase non-interest income; |
• | Inability to expand our market share in our existing markets; and |
• | Inability to effectively manage and mitigate credit risk. |
• | Information Systems |
• | Technological Advances |
• | Severe Weather, Natural Disasters, Acts of War or Terrorism and Other External Events |
defaults by, or even rumors or questions about, one or more financial services institutions, or the financial services industry generally, have led to market-wide liquidity problems, losses of depositor, creditor and counterparty confidence and could lead to losses or defaults by us or by other institutions. We could experience increases in deposits and assets as a direct or indirect result of other banks’ difficulties or failure, which would increase the capital we need to support such growth or we could experience severe and unexpected decreases in deposits which could adversely impact our liquidity, heighten regulatory concern or endanger our continuing existence.
advertising campaigns. Additionally, banks and other financial institutions with larger capitalization and financial intermediaries not subject to bank regulatory restrictions may have larger lending limits which would allow them to serve the credit needs of larger customers. Areas of competition include interest rates for loans and deposits, efforts to obtain loan and deposit customers and a range in quality of products and services provided, including new technology-driven products and services. We also face competition from out-of-market financial intermediaries that have opened loan production offices or that solicit deposits in our market areas. If we are unable to attract and retain banking customers, we may be unable to achieve appropriate loan growth and level of deposits and our business, financial condition, results of operations and cash flows.
Subsequently, an external auditor was engaged to review and test the controls in lending operations. In addition, both internal and independent reviews of the Company’s loan portfolio were conducted and it was determined that an additional provision for loan losses of $16 million, including loan charge-offs of approximately $10.8 million, should be reflected as part of the December 31, 2008 consolidated financial statements. The after tax effect of these adjustments was to increase the previously reported net loss for the year ended December 31, 2008 by approximately $9.6 million.
• | changes in general economic conditions, either nationally or locally in the Nevada County area or other areas in which we conduct or will conduct our business; |
• | the persistence of the ongoing economic crisis; |
• | inflation, interest rate, market and monetary fluctuations; |
• | real estate values and competition; |
• | changes in consumer spending habits and savings habits; |
• | increases in competitive pressures among financial institutions and businesses offering similar products and services; |
• | higher defaults on our loan portfolio than we expect; |
• | changes in management’s estimate of the adequacy of the allowance for credit losses; |
• | lower net income from operations; |
• | loss of more business or customers than we expect, or operating costs higher than we expect; |
• | ability to successfully grow our business in our market area; |
• | legislative or regulatory changes or changes in accounting principles, policies or guidelines; |
• | technological changes; and |
• | regulatory or judicial proceedings. |
the effect of a 5% stock dividend distributed on June 19, 2008. Prices do not include retail mark-ups, markdowns or commissions.
Quarter Ended | Closing Prices | ||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|
Low | High | ||||||||||
2008 | |||||||||||
March 31 | $ | 12.14 | $ | 17.24 | |||||||
June 30 | $ | 12.67 | $ | 18.10 | |||||||
September 30 | $ | 11.35 | $ | 16.25 | |||||||
December 31 | $ | 7.10 | $ | 15.75 | |||||||
2009 | |||||||||||
March 31 | $ | 5.75 | $ | 9.50 | |||||||
June 30 | $ | 4.05 | $ | 9.50 | |||||||
September 30 | $ | 4.00 | $ | 7.00 | |||||||
December 31 | $ | 3.50 | $ | 5.75 | |||||||
2010 | |||||||||||
March 31 | $ | 3.50 | $ | 5.25 | |||||||
June 30 | $ | 2.75 | $ | 4.00 | |||||||
September 30 | $ | 0.57 | $ | 5.99 | |||||||
December 31 | $ | 1.62 | $ | 2.95 |
Plan category | Number of securities to be issued upon exercise of outstanding options, warrants and rights | Weighted-average exercise price of outstanding options, warrants and rights | Number of securities remaining available for future issuance under equity compensation plans (excluding securities reflected in column (a)) | |||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Equity compensation plans approved by security holders | 67,082 | $13.43 | 594,607 | |||||||||||
Equity compensation plans not approved by security holders | — | — | — | |||||||||||
Total | 67,082 | $13.43 | 594,607 |
As of September 30, 2010 | |||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|
(Unaudited) | Actual | Pro Forma | |||||||||
(Dollars in thousands, except share and per share amounts) | |||||||||||
Indebtedness: | |||||||||||
Borrowings | $ | 48,567 | $ | 48,567 | |||||||
Junior subordinated debentures | 15,465 | 15,465 | |||||||||
Shareholders’ Equity: | |||||||||||
Serial preferred stock — 2,500,000 shares authorized | |||||||||||
Series A preferred stock; 10,400 shares outstanding | 10,031 | 10,031 | |||||||||
Series B preferred stock; 520 shares outstanding | 520 | 520 | |||||||||
Common stock — no par value; 20,000,000 shares authorized, 2,335,090 shares outstanding, actual; [*] shares outstanding, pro forma | 16,040 | [*] | |||||||||
Accumulated deficit | (21,448 | ) | (21,448 | ) | |||||||
Accumulated other comprehensive loss, net of taxes | (5 | ) | (5 | ) | |||||||
Total shareholders’ equity | 5,138 | [*] | |||||||||
Total capitalization | $ | 69,170 | $ | [*] | |||||||
Citizens Bancorp Capital Ratios: | |||||||||||
Leverage capital ratio | 2.0 | % | [*]% | ||||||||
Tier 1 risk-based capital ratio | 2.4 | % | [*]% | ||||||||
Total risk-based capital ratio | 8.5 | % | [*]% | ||||||||
Citizens Bank of Northern California Capital Ratios: | |||||||||||
Leverage capital ratio | 5.7 | % | [*]% | ||||||||
Tier 1 risk-based capital ratio | 7.0 | % | [*]% | ||||||||
Total risk-based capital ratio | 8.3 | % | [*]% | ||||||||
Book value per common share | $ | (2.32 | ) | $ | [*] |
Offering price per share | $ | [*] | ||||
Book value per common share as of September 30, 2010, actual | ($2.32 | ) | ||||
Increase in tangible book value per share attributable to new investors | $ | [*] | ||||
As adjusted tangible book value per share after this offering | $ | [*] | ||||
Dilution per share to new investors | $ | [*] |
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Year Ended December 31, | |||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
2009 | 2008 | 2007 | |||||||||||||
(Dollars in thousands, except share and per share data) | |||||||||||||||
Net interest income | $ | 15,122 | $ | 15,100 | $ | 14,294 | |||||||||
Provision for credit losses | 11,115 | 23,900 | 945 | ||||||||||||
Net interest income (loss) after provision for credit losses | 4,007 | (8,800 | ) | 13,349 | |||||||||||
Non-interest income | 5,112 | 2,140 | 2,206 | ||||||||||||
Non-interest expense | 15,691 | 11,653 | 11,242 | ||||||||||||
Provision for (benefit from) income taxes | 6,568 | (7,662 | ) | 1,728 | |||||||||||
Net (loss) income | (13,140 | ) | (10,651 | ) | 2,585 | ||||||||||
Dividends and discount accretion on preferred stock | (328 | ) | — | — | |||||||||||
Net (loss) income applicable to common shareholders | $ | (13,468 | ) | $ | (10,651 | ) | $ | 2,585 | |||||||
Average assets | $ | 376,524 | $ | 350,545 | $ | 301,885 | |||||||||
Average shareholders’ equity | $ | 18,523 | $ | 20,960 | $ | 20,233 |
Year Ended December 31, | |||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
2009 | 2008 | 2007 | |||||||||||||
(Dollars in thousands, except share and per share data) | |||||||||||||||
Share Information: | |||||||||||||||
Weighted average shares outstanding — basic | 1,920,300 | 1,915,117 | 1,911,897 | ||||||||||||
Weighted average shares outstanding — diluted | 1,920,300 | 1,915,117 | 1,956,595 | ||||||||||||
Profitability Measures: | |||||||||||||||
(Loss) earnings per share — basic | $ | (7.01 | ) | $ | (5.56 | ) | $ | 1.35 | |||||||
(Loss) earnings per share — diluted | $ | (7.01 | ) | $ | (5.56 | ) | $ | 1.32 | |||||||
Return on average assets | (3.58 | )% | (3.04 | )% | 0.86 | % | |||||||||
Return on average shareholders’ equity | (72.71 | )% | (50.82 | )% | 12.77 | % | |||||||||
Efficiency Ratio | 77.55 | % | 67.60 | % | 68.14 | % |
For the Three Months Ended September 30, | For the Nine Months Ended September 30, | ||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
(Unaudited) | 2010 | 2009 | 2010 | 2009 | |||||||||||||||
(Dollars in thousands, except share and per share data) | |||||||||||||||||||
Net interest income | $ | 3,415 | $ | 3,673 | $ | 10,626 | $ | 10,942 | |||||||||||
Provision for credit losses | 400 | 400 | 7,900 | 3,900 | |||||||||||||||
Net interest income after provision for credit losses | 3,015 | 3,273 | 2,726 | 7,042 | |||||||||||||||
Non-interest income | 628 | 594 | 1,720 | 1,716 | |||||||||||||||
Non-interest expense | 3,602 | 3,214 | 8,895 | 11,099 | |||||||||||||||
Provision for (benefit from) income taxes | — | 264 | — | (946 | ) | ||||||||||||||
Net income (loss) | 41 | 389 | (4,449 | ) | (1,395 | ) | |||||||||||||
Dividends and discount accretion on preferred stock | (26 | ) | (26 | ) | (78 | ) | (302 | ) | |||||||||||
Net income (loss) applicable to common shareholders | $ | 15 | $ | 363 | $ | (4,527 | ) | $ | (1,697 | ) | |||||||||
Average assets | $ | 341,801 | $ | 384,400 | $ | 342,920 | $ | 375,745 | |||||||||||
Average shareholders’ equity | $ | 5,128 | $ | 19,491 | $ | 7,438 | $ | 19,831 | |||||||||||
Share Information: | |||||||||||||||||||
Weighted average shares outstanding — basic | 2,335,090 | 1,915,981 | 2,324,193 | 1,915,981 | |||||||||||||||
Weighted average shares outstanding — diluted | 2,335,090 | 1,915,981 | 2,324,193 | 1,915,981 | |||||||||||||||
Profitability Measures: | |||||||||||||||||||
Earnings (loss) per share — basic | $ | 0.01 | $ | 0.19 | $ | (1.95 | ) | $ | (0.89 | ) | |||||||||
Earnings (loss) per share — diluted | $ | 0.01 | $ | 0.19 | $ | (1.95 | ) | $ | (0.89 | ) | |||||||||
Return on average assets | 0.02 | % | 0.38 | % | (1.76 | )% | (0.60 | )% | |||||||||||
Return on average shareholders’ equity | 1.13 | % | 7.40 | % | (81.37 | )% | (11.44 | )% | |||||||||||
Efficiency ratio | 89.10 | % | 75.32 | % | 72.05 | % | 87.68 | % |
• | We must recapitalize the Company to overcome the losses sustained in 2010, 2009 and 2008. In December 2009, we started that process by raising nearly $1.6 million in capital from a private placement stock sale in order to strengthen the Bank’s balance sheet and capital position. A majority of the funds were raised from directors, officers and other charter members of the Board. In addition, in April 2010, as a continuation of the private placement, we received an additional $100 thousand. |
• | We must bring ourselves into compliance with the Order as quickly as possible in order to reduce the actual costs involved in achieving compliance and refocus management’s attention on traditional banking activities. |
• | In June 2010, the regulators completed a full examination of the Bank. The regulators also refused to grant the Bank’s request for an extension of the July deadline to achieve the Capital Requirement of the Order. |
• | Our results can be significantly influenced by changes in the credit quality of our borrowers. Nonaccrual loans totaled $27.1 million or 10.3% of total loans at December 31, 2010. The provision for credit losses was $11.1 million in 2009, a significant decrease over the $23.9 million in 2008. The provision for credit losses was $7.9 million for the nine months ended September 30, 2010 and we added an additional $2.2 million for the three months ended December 31, 2010. As the economy and real estate values stabilize, management anticipates that |
loan loss provisions in 2011 will be less than the 2010, 2009 and 2008 levels. However, with the current economic conditions in the United States and California, and an increasing number of borrowers who are impacted by the recession, substantial uncertainty regarding the timing and extent of economic recovery remains. As such, increases in the level of provisioning for credit losses may be necessary. |
• | Our earnings are sensitive to changes in market interest rates. Our balance sheet is slightly asset sensitive and as a result, our net interest margin tends to increase in a rising interest rate environment and decline in a falling interest rate environment. Throughout 2009, interest rates have been at historically low levels, which compressed our net interest margin. As the Federal Reserve begins to increase interest rates, our net interest margin will begin to rise as well. Management does not anticipate a significant impact until interest rates increase by 2%, when it is expected that variable rate loans will begin to rise above their current floors. |
• | In February 2010, the Bank relocated its Central Operations Department to its downtown Grass Valley location, making room for the Bank to lay the early groundwork for establishing a Small Business Administration (“SBA”) Lending Division at their Nevada City Loan Operations Center. These moves are part of several strategies the Bank has put into motion to position the Bank for the future. These strategies will enable the Bank to provide continued excellent service, enhance its menu of financial products offered, increase efficiency and improve financial performance. The Bank’s move to broaden its SBA lending and seek “Preferred Lender” status is part of a long-term strategy in providing loans to small business, both real estate and non-real estate related, under a government guaranteed program. |
Year Ended December 31, | |||||||||||||||||||||||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
2009 | 2008 | 2007 | |||||||||||||||||||||||||||||||||||||
Average Balance | Interest Income or Expense | Average Yield or Cost | Average Balance | Interest Income or Expense | Average Yield or Cost | Average Balance | Interest Income or Expense | Average Yield or Cost | |||||||||||||||||||||||||||||||
(Dollars in thousands) | |||||||||||||||||||||||||||||||||||||||
ASSETS | |||||||||||||||||||||||||||||||||||||||
Interest earning assets: | |||||||||||||||||||||||||||||||||||||||
Total loans (1) (2) (3) | $ | 310,253 | $ | 19,215 | 6.19 | % | $ | 316,500 | $ | 21,801 | 6.89 | % | $ | 279,221 | $ | 22,428 | 8.03 | % | |||||||||||||||||||||
Investment securities available-for-sale (1) | 1,670 | 40 | 2.40 | % | 1,205 | 40 | 3.32 | % | 1,446 | 55 | 3.80 | % | |||||||||||||||||||||||||||
Federal funds sold | 8,409 | 8 | 0.10 | % | 9,440 | 125 | 1.32 | % | 1,981 | 66 | 3.33 | % | |||||||||||||||||||||||||||
Interest bearing deposits with other banks | 15,021 | 27 | 0.18 | % | 323 | 5 | 1.55 | % | 172 | 8 | 3.33 | % | |||||||||||||||||||||||||||
Total interest earning assets | 335,353 | 19,290 | 5.75 | % | 327,468 | 21,971 | 6.71 | % | 282,820 | 22,557 | 7.98 | % | |||||||||||||||||||||||||||
Non-interest earning assets: | |||||||||||||||||||||||||||||||||||||||
Cash and due from banks | 26,305 | 7,182 | 8,891 | ||||||||||||||||||||||||||||||||||||
Allowance for credit losses | (13,988 | ) | (4,678 | ) | (3,586 | ) | |||||||||||||||||||||||||||||||||
Other assets | 28,854 | 20,573 | 13,760 | ||||||||||||||||||||||||||||||||||||
Total assets | $ | 376,524 | $ | 350,545 | $ | 301,885 | |||||||||||||||||||||||||||||||||
LIABILITIES AND SHAREHOLDERS’ EQUITY | |||||||||||||||||||||||||||||||||||||||
Interest bearing liabilities: | |||||||||||||||||||||||||||||||||||||||
Deposits: | |||||||||||||||||||||||||||||||||||||||
Interest bearing demand | $ | 39,073 | 9 | 0.02 | % | $ | 34,547 | 10 | 0.03 | % | $ | 28,314 | 105 | 0.37 | % | ||||||||||||||||||||||||
Money market | 59,143 | 719 | 1.22 | % | 60,586 | 1,418 | 2.34 | % | 54,624 | 1,658 | 3.04 | % | |||||||||||||||||||||||||||
Savings | 16,953 | 67 | 0.40 | % | 13,634 | 72 | 0.53 | % | 11,910 | 112 | 0.94 | % | |||||||||||||||||||||||||||
Time certificates of deposit | 120,464 | 2,431 | 2.02 | % | 112,194 | 3,950 | 3.52 | % | 96,695 | 4,815 | 4.98 | % | |||||||||||||||||||||||||||
Total interest bearing deposits | 235,633 | 3,226 | 1.37 | % | 220,961 | 5,450 | 2.47 | % | 191,543 | 6,690 | 3.49 | % | |||||||||||||||||||||||||||
Borrowings | 30,875 | 473 | 1.53 | % | 22,638 | 493 | 2.18 | % | 5,613 | 398 | 7.09 | % | |||||||||||||||||||||||||||
Junior subordinated debentures | 15,465 | 469 | 3.03 | % | 15,465 | 928 | 6.00 | % | 15,465 | 1,175 | 7.60 | % | |||||||||||||||||||||||||||
Total interest bearing liabilities | 281,973 | 4,168 | 1.48 | % | 259,064 | 6,871 | 2.65 | % | 212,621 | 8,263 | 3.89 | % | |||||||||||||||||||||||||||
Non-interest bearing liabilities: | |||||||||||||||||||||||||||||||||||||||
Demand deposits | 72,397 | 66,933 | 65,860 | ||||||||||||||||||||||||||||||||||||
Other liabilities | 3,631 | 3,588 | 3,171 | ||||||||||||||||||||||||||||||||||||
Total liabilities | 358,001 | 329,585 | 281,652 | ||||||||||||||||||||||||||||||||||||
Shareholders’ equity | 18,523 | 20,960 | 20,233 | ||||||||||||||||||||||||||||||||||||
Total liabilities and shareholders’ equity | $ | 376,524 | $ | 350,545 | $ | 301,885 | |||||||||||||||||||||||||||||||||
Net interest income | $ | 15,122 | $ | 15,100 | $ | 14,294 | |||||||||||||||||||||||||||||||||
Net interest margin (4) | 4.51 | % | 4.61 | % | 5.05 | % |
(1) | Yields on loans and tax exempt securities have not been adjusted to a tax-equivalent basis because the impact is not considered significant. |
(2) | Average nonaccrual loan balances of $26.7 million for 2009, $10.5 million for 2008 and $2.9 million for 2007 are included in average loan balances for computational purposes. |
(3) | Loan origination fees and costs are included in interest income as adjustments of the loan yields over the life of the loan using the interest method. Loan interest income includes net loan costs of $112 thousand for 2009 and net loan fees of, $152 thousand and $257 thousand for 2008 and 2007, respectively. |
(4) | Net interest margin is computed by dividing net interest income by total average earning assets. |
Year Ended December 31, 2009 Compared to Year Ended December 31, 2008 | |||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Volume | Rate (1) | Net Change | |||||||||||||
(Dollars in thousands) | |||||||||||||||
Interest income: | |||||||||||||||
Loans | $ | (430 | ) | $ | (2,156 | ) | $ | (2,586 | ) | ||||||
Investment securities available-for- sale | 15 | (15 | ) | — | |||||||||||
Federal funds sold | (14 | ) | (103 | ) | (117 | ) | |||||||||
Interest bearing deposits with other banks | 228 | (206 | ) | 22 | |||||||||||
Total interest income | (201 | ) | (2,480 | ) | (2,681 | ) | |||||||||
Interest expense: | |||||||||||||||
Interest bearing demand | 1 | (2 | ) | (1 | ) | ||||||||||
Money market | (34 | ) | (665 | ) | (699 | ) | |||||||||
Savings | 18 | (23 | ) | (5 | ) | ||||||||||
Time certificates of deposit | 291 | (1,810 | ) | (1,519 | ) | ||||||||||
Borrowings | 179 | (199 | ) | (20 | ) | ||||||||||
Junior subordinated debentures | — | (459 | ) | (459 | ) | ||||||||||
Total interest expense | 455 | (3,158 | ) | (2,703 | ) | ||||||||||
Net interest income | $ | (656 | ) | $ | 678 | $ | 22 |
Year Ended December 31, 2008 Compared to Year Ended December 31, 2007 | |||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Volume | Rate (1) | Net Change | |||||||||||||
(Dollars in thousands) | |||||||||||||||
Interest income: | |||||||||||||||
Loans | $ | 2,994 | $ | (3,621 | ) | $ | (627 | ) | |||||||
Investment securities available-for- sale | (9 | ) | (6 | ) | (15 | ) | |||||||||
Federal funds sold | 249 | (190 | ) | 59 | |||||||||||
Interest bearing deposits with other banks | 7 | (10 | ) | (3 | ) | ||||||||||
Total interest income | 3,241 | (3,827 | ) | (586 | ) | ||||||||||
Interest expense: | |||||||||||||||
Interest bearing demand | 23 | (118 | ) | (95 | ) | ||||||||||
Money market | 181 | (421 | ) | (240 | ) | ||||||||||
Savings | 16 | (56 | ) | (40 | ) | ||||||||||
Time certificates of deposit | 772 | (1,637 | ) | (865 | ) | ||||||||||
Borrowings | 1,207 | (1,112 | ) | 95 | |||||||||||
Junior subordinated debentures | — | (247 | ) | (247 | ) | ||||||||||
Total interest expense | 2,199 | (3,591 | ) | (1,392 | ) | ||||||||||
Net interest income | $ | 1,042 | $ | (236 | ) | $ | 806 |
(1) | Factors contributing to both changes in rate and volume have been attributed to changes in rates. |
(Unaudited) | Three Months Ended September 30, 2010 | Three Months Ended September 30, 2009 | |||||||||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Average Balance | Interest Income or Expense | Average Yield or Cost | Average Balance | Interest Income or Expense | Average Yield or Cost | ||||||||||||||||||||||
(Dollars in thousands) | |||||||||||||||||||||||||||
ASSETS | |||||||||||||||||||||||||||
Interest-earning assets: | |||||||||||||||||||||||||||
Loans (1) (2) (3) | $ | 285,329 | $ | 3,896 | 5.42 | % | $ | 308,602 | $ | 4,628 | 5.95 | % | |||||||||||||||
Investment securities | 7,372 | 55 | 2.96 | % | 1,566 | 7 | 1.77 | % | |||||||||||||||||||
Federal funds sold | — | — | 0.00 | % | 162 | — | 0.00 | % | |||||||||||||||||||
Interest-bearing deposits with other banks | 19,753 | 47 | 0.94 | % | 32,040 | 12 | 0.00 | % | |||||||||||||||||||
Total interest-earning assets | 312,454 | 3,998 | 5.08 | % | 342,370 | 4,647 | 5.38 | % | |||||||||||||||||||
Non-earning assets: | |||||||||||||||||||||||||||
Cash and due from banks | 25,514 | 26,296 | |||||||||||||||||||||||||
Allowance for credit losses | (15,204 | ) | (14,373 | ) | |||||||||||||||||||||||
Other assets | 19,037 | 30,107 | |||||||||||||||||||||||||
Total assets | $ | 341,801 | $ | 384,400 | |||||||||||||||||||||||
LIABILITIES AND SHAREHOLDERS’ EQUITY | |||||||||||||||||||||||||||
Interest-bearing liabilities: | |||||||||||||||||||||||||||
Interest-bearing demand | $ | 43,816 | 2 | 0.02 | % | $ | 40,229 | 2 | 0.02 | % | |||||||||||||||||
Money market | 59,087 | 111 | 0.75 | % | 58,651 | 174 | 1.18 | % | |||||||||||||||||||
Savings | 17,944 | 9 | 0.20 | % | 17,219 | 17 | 0.39 | % | |||||||||||||||||||
Time certificates of deposit | 78,067 | 235 | 1.19 | % | 121,405 | 554 | 1.81 | % | |||||||||||||||||||
Total interest-bearing deposits | 198,914 | 357 | 0.71 | % | 237,504 | 747 | 1.25 | % | |||||||||||||||||||
Borrowings | 39,283 | 120 | 1.21 | % | 32,000 | 120 | 1.49 | % | |||||||||||||||||||
Trust preferred securities | 15,465 | 106 | 2.72 | % | 15,465 | 107 | 2.74 | % | |||||||||||||||||||
Total interest-bearing liabilities | 253,662 | 583 | 0.91 | % | 284,969 | 974 | 1.36 | % | |||||||||||||||||||
Noninterest-bearing liabilities: | |||||||||||||||||||||||||||
Demand deposits | 79,333 | 76,384 | |||||||||||||||||||||||||
Other liabilities | 3,678 | 3,556 | |||||||||||||||||||||||||
Total liabilities | 336,673 | 364,909 | |||||||||||||||||||||||||
Shareholders’ equity | 5,128 | 19,491 | |||||||||||||||||||||||||
Total liabilities and shareholders’ equity | $ | 341,801 | $ | 384,400 | |||||||||||||||||||||||
Net interest income | $ | 3,415 | $ | 3,673 | |||||||||||||||||||||||
Net interest margin (4) | 4.34 | % | 4.26 | % |
(1) | Yields on loans and tax exempt securities have not been adjusted to a tax-equivalent basis because the impact is not considered significant. |
(2) | Average nonaccrual loan balances of $30.4 million for 2010 and $25.1 million for 2009 are included in average loan balances for computational purposes. |
(3) | Loan origination fees and costs are included in interest income as adjustments of the loan yields over the life of the loan using the interest method. Loan interest income includes net loan costs of $30 thousand for 2010 and $44 thousand for 2009, respectively. |
(4) | Net interest margin is computed by dividing net interest income by total average earning assets. |
(Unaudited) | Nine Months Ended September 30, 2010 | Nine Months Ended September 30, 2009 | |||||||||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Average Balance | Interest Income or Expense | Average Yield or Cost | Average Balance | Interest Income or Expense | Average Yield or Cost | ||||||||||||||||||||||
(Dollars in thousands) | |||||||||||||||||||||||||||
ASSETS | �� | ||||||||||||||||||||||||||
Interest-earning assets: | |||||||||||||||||||||||||||
Loans (1) (2) (3) | $ | 292,988 | $ | 12,298 | 5.61 | % | $ | 312,460 | $ | 14,201 | 6.08 | % | |||||||||||||||
Investment securities | 4,148 | 91 | 2.93 | % | 1,705 | 33 | 2.59 | % | |||||||||||||||||||
Federal funds sold | — | — | 0.00 | % | 8,979 | 8 | 0.12 | % | |||||||||||||||||||
Interest-bearing deposits with other banks | 15,569 | 68 | 0.58 | % | 10,977 | 12 | 0.15 | % | |||||||||||||||||||
Total interest-earning assets | 312,705 | 12,457 | 5.33 | % | 334,121 | 14,254 | 5.70 | % | |||||||||||||||||||
Non-earning assets: | |||||||||||||||||||||||||||
Cash and due from banks | 26,858 | 24,764 | |||||||||||||||||||||||||
Allowance for credit losses | (14,640 | ) | (13,842 | ) | |||||||||||||||||||||||
Other assets | 17,997 | 30,702 | |||||||||||||||||||||||||
Total assets | $ | 342,920 | $ | 375,745 | |||||||||||||||||||||||
LIABILITIES AND SHAREHOLDERS’ EQUITY | |||||||||||||||||||||||||||
Interest-bearing liabilities: | |||||||||||||||||||||||||||
Interest-bearing demand | $ | 43,296 | 5 | 0.02 | % | $ | 38,064 | 7 | 0.02 | % | |||||||||||||||||
Money market | 60,630 | 318 | 0.70 | % | 58,353 | 567 | 1.30 | % | |||||||||||||||||||
Savings | 18,325 | 30 | 0.22 | % | 16,658 | 51 | 0.41 | % | |||||||||||||||||||
Time certificates of deposit | 84,214 | 835 | 1.33 | % | 123,784 | 1,980 | 2.14 | % | |||||||||||||||||||
Total interest-bearing deposits | 206,465 | 1,188 | 0.77 | % | 236,859 | 2,605 | 1.47 | % | |||||||||||||||||||
Borrowing | 33,428 | 347 | 1.39 | % | 29,500 | 335 | 1.52 | % | |||||||||||||||||||
Trust preferred securities | 15,465 | 296 | 2.56 | % | 15,465 | 372 | 3.22 | % | |||||||||||||||||||
Total interest-bearing liabilities | 255,358 | 1,831 | 0.96 | % | 281,824 | 3,312 | 1.57 | % | |||||||||||||||||||
Noninterest-bearing liabilities: | |||||||||||||||||||||||||||
Demand deposits | 76,830 | 70,392 | |||||||||||||||||||||||||
Other liabilities | 3,294 | 3,698 | |||||||||||||||||||||||||
Total liabilities | 335,482 | 355,914 | |||||||||||||||||||||||||
Shareholders’ equity | 7,438 | 19,831 | |||||||||||||||||||||||||
Total liabilities and shareholders’ equity | $ | 342,920 | $ | 375,745 | |||||||||||||||||||||||
Net interest income | $ | 10,626 | $ | 10,942 | |||||||||||||||||||||||
Net interest margin (4) | 4.54 | % | 4.38 | % |
(1) | Yields on loans and tax exempt securities have not been adjusted to a tax-equivalent basis because the impact is not considered significant. |
(2) | Average nonaccrual loan balances of $29.2 million for 2010 and $25.3 million for 2009 are included in average loan balances for computational purposes. |
(3) | Loan origination fees and costs are included in interest income as adjustments of the loan yields over the life of the loan using the interest method. Loan interest income includes net loan costs of $75 thousand for 2010 and $78 thousand for 2009, respectively. |
(4) | Net interest margin is computed by dividing net interest income by total average earning assets. |
Three Months Ended September 30, 2010 Compared to the Three Months Ended September 30, 2009 | |||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Volume | Rate (1) | Net Change | |||||||||||||
(Dollars in thousands) | |||||||||||||||
Interest income: | |||||||||||||||
Loans | $ | (349 | ) | $ | (383 | ) | $ | (732 | ) | ||||||
Investment securities | 26 | 22 | 48 | ||||||||||||
Federal funds sold | — | — | — | ||||||||||||
Interest-bearing deposits with other banks | (5 | ) | 40 | 35 | |||||||||||
Total interest income | (328 | ) | (321 | ) | (649 | ) | |||||||||
Interest expense: | |||||||||||||||
Interest-bearing demand | — | — | — | ||||||||||||
Money market | 1 | (64 | ) | (63 | ) | ||||||||||
Savings | 1 | (9 | ) | (8 | ) | ||||||||||
Time certificates of deposit | (198 | ) | (121 | ) | (319 | ) | |||||||||
Borrowings | 27 | (27 | ) | — | |||||||||||
Junior subordinated debentures | — | (1 | ) | (1 | ) | ||||||||||
Total interest expense | (169 | ) | (222 | ) | (391 | ) | |||||||||
Net interest income | $ | (159 | ) | $ | (99 | ) | $ | (258 | ) |
(1) | Factors contributing to both changes in rate and volume have been attributed to changes in rates. |
Nine Months Ended September 30, 2010 Compared to the Nine Months Ended September 30, 2009 | |||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Volume | Rate (1) | Net Change | |||||||||||||
(Dollars in thousands) | |||||||||||||||
Interest income: | |||||||||||||||
Loans | $ | (885 | ) | $ | (1,018 | ) | $ | (1,903 | ) | ||||||
Investment securities | 47 | 11 | 58 | ||||||||||||
Federal funds sold | (8 | ) | — | (8 | ) | ||||||||||
Interest-bearing deposits with other banks | 5 | 51 | 56 | ||||||||||||
Total interest income | (841 | ) | (956 | ) | (1,797 | ) | |||||||||
Interest expense: | |||||||||||||||
Interest-bearing demand | 1 | (3 | ) | (2 | ) | ||||||||||
Money market | 22 | (271 | ) | (249 | ) | ||||||||||
Savings | 5 | (26 | ) | (21 | ) | ||||||||||
Time certificates of deposit | (633 | ) | (512 | ) | (1,145 | ) | |||||||||
Borrowings | 45 | (33 | ) | 12 | |||||||||||
Junior subordinated debentures | — | (76 | ) | (76 | ) | ||||||||||
Total interest expense | (560 | ) | (921 | ) | (1,481 | ) | |||||||||
Net interest income | $ | (281 | ) | $ | (35 | ) | $ | (316 | ) |
(1) | Factors contributing to both changes in rate and volume have been attributed to changes in rates. |
to $316.5 million for the year ended December 31, 2008, from $279.2 million for 2007, and yielded 6.89% for the year ended December 31, 2008, compared to 8.03% for 2007. The yield on average loans in 2008 was negatively impacted by an increase in nonaccrual loans and the impact of variable rate loans that re-priced during a period of declining short-term interest rates. The yield on investment securities decreased to 3.32% for the year ended December 31, 2008, from 3.80% for 2007.
primarily the result of a decrease in deposit rates paid on all liabilities as a result of a lower interest rate environment and a decrease in the average balances of time certificates of deposits.
declined $39.6 million due to the maturity of time deposits that were not replaced. Of the $39.6 million decrease, $26.2 million related to brokered deposits that matured and were not replaced. The overall cost of deposits decreased to 0.56% for the nine months ended September 30, 2010, from 1.13% for same period of 2009. This overall cost differs from the cost of total interest-bearing deposits of 0.77% and 1.47% for the nine months ended September 30, 2010 and 2009, respectively due to the substantial percentage of our funding sources which are noninterest-bearing demand deposits, which were 27.1% of average total deposits for the nine months ended September 30, 2010, compared to 22.9% for same period of 2009. At September 30, 2010 noninterest-bearing deposits as a percent of total deposits were 29.6%, an increase over the 25.2% at December 31, 2009.
Year Ended December 31, | |||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
2009 | 2008 | 2007 | |||||||||||||
(Dollars in thousands) | |||||||||||||||
Service charges | $ | 1,360 | $ | 1,251 | $ | 1,031 | |||||||||
Broker fee income | 689 | 491 | 798 | ||||||||||||
Gain on sale of loans | 2,818 | 71 | — | ||||||||||||
Increase in cash surrender value of life insurance | 209 | 207 | 220 | ||||||||||||
Other | 36 | 120 | 157 | ||||||||||||
Total non-interest income | $ | 5,112 | $ | 2,140 | $ | 2,206 | |||||||||
Total non-interest income to average total assets | 1.36 | % | 0.61 | % | 0.73 | % |
(Unaudited) | For the Three Months Ended September 30, | For the Nine Months Ended September 30, | |||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
2010 | 2009 | 2010 | 2009 | ||||||||||||||||
(Dollars in thousands) | |||||||||||||||||||
Service charges | $ | 364 | $ | 341 | $ | 1,076 | $ | 1,013 | |||||||||||
Broker fee income | 83 | 189 | 245 | 515 | |||||||||||||||
Cash surrender value of life insurance | 52 | 52 | 253 | 157 | |||||||||||||||
Gain on sale of securities | 120 | — | 120 | — | |||||||||||||||
Other | 9 | 12 | 26 | 31 | |||||||||||||||
Total non-interest income | $ | 628 | $ | 594 | $ | 1,720 | $ | 1,716 | |||||||||||
Total non-interest income to average total assets, annualized | 0.73 | % | 0.61 | % | 0.67 | % | 0.61 | % |
million. We recorded a gain of $2.8 million on the transaction. There were no such transactions in 2008. Broker fee income increased 40.3%, or $198 thousand, as a result of an increase in the number of mortgage loan transactions completed in 2009 compared to 2008. Service charges increased 8.7%, or $109 thousand, as a result of an increase in deposit accounts.
Year Ended December 31, | |||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
2009 | 2008 | 2007 | |||||||||||||
(Dollars in thousands) | |||||||||||||||
Salaries and employee benefits | $ | 4,925 | $ | 5,271 | $ | 6,051 | |||||||||
Occupancy and equipment | 1,771 | 1,863 | 1,793 | ||||||||||||
Loss on sale/writedown of other real estate owned | 3,441 | 116 | — | ||||||||||||
Regulatory fees | 1,162 | 280 | 192 | ||||||||||||
Outsourced data processing | 1,032 | 969 | 851 | ||||||||||||
Legal and accounting | 596 | 284 | 214 | ||||||||||||
Other real estate owned expenses | 368 | 444 | — | ||||||||||||
Miscellaneous loan expenses | 323 | 221 | 96 | ||||||||||||
Director compensation and retirement | 267 | 357 | 294 | ||||||||||||
Consulting fees | 264 | 86 | 49 | ||||||||||||
Postage and courier | 245 | 242 | 180 | ||||||||||||
Telephone | 238 | 241 | 216 | ||||||||||||
Advertising and marketing | 223 | 296 | 330 |
Year Ended December 31, | |||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
2009 | 2008 | 2007 | |||||||||||||
(Dollars in thousands) | |||||||||||||||
Stationery and supplies | $ | 193 | $ | 217 | $ | 269 | |||||||||
Correspondent banking fees | 32 | 131 | 124 | ||||||||||||
Other operating expenses | 611 | 635 | 583 | ||||||||||||
Total non-interest expense | $ | 15,691 | $ | 11,653 | $ | 11,242 | |||||||||
Total non-interest expense to average total assets | 4.17 | % | 3.32 | % | 3.71 | % |
(Unaudited) | For the Three Months Ended September 30, | For the Nine Months Ended September 30, | |||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
2010 | 2009 | 2010 | 2009 | ||||||||||||||||
(Dollars in thousands) | (Dollars in thousands) | ||||||||||||||||||
Salaries and employee benefits | $ | 1,448 | $ | 1,203 | $ | 4,064 | $ | 3,534 | |||||||||||
Occupancy and equipment | 407 | 453 | 1,255 | 1,329 | |||||||||||||||
Loss on sale/writedown of other real estate owned | 646 | 46 | 1,004 | 1,947 | |||||||||||||||
Regulatory fees | 267 | 399 | 781 | 879 | |||||||||||||||
Outsourced data processing | 252 | 252 | 792 | 769 | |||||||||||||||
Other real estate owned expenses | 100 | 37 | 196 | 259 | |||||||||||||||
Legal and accounting | 92 | 246 | 356 | 527 | |||||||||||||||
Miscellaneous loan expenses | 84 | 43 | 207 | 202 | |||||||||||||||
Postage and courier | 65 | 63 | 196 | 182 | |||||||||||||||
Telephone | 46 | 58 | 201 | 173 | |||||||||||||||
Stationery and supplies | 37 | 58 | 134 | 147 | |||||||||||||||
Advertising and marketing | 30 | 56 | 97 | 188 | |||||||||||||||
Consulting fees | 15 | 53 | 65 | 207 | |||||||||||||||
Director compensation and retirement | 3 | 56 | (895 | ) | 199 | ||||||||||||||
Other operating expenses | 110 | 191 | 442 | 557 | |||||||||||||||
Total non-interest expense | $ | 3,602 | $ | 3,214 | $ | 8,895 | $ | 11,099 | |||||||||||
Total non-interest expense to average total assets, annualized | 4.18 | % | 3.32 | % | 3.47 | % | 3.95 | % |
The directors received no consideration for the cancellation of benefits. There was no such reversal in the nine months ended September 30, 2009.
Year Ended December 31, | |||||||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
2009 | 2008 | 2007 | 2006 | 2005 | |||||||||||||||||||
(Dollars in thousands) | |||||||||||||||||||||||
Commercial | $ | 43,461 | $ | 50,782 | $ | 55,395 | $ | 38,865 | $ | 27,442 | |||||||||||||
Real estate — residential secured by 1st deeds | 13,340 | 13,428 | 11,581 | 11,181 | 8,545 | ||||||||||||||||||
Real estate — residential secured by 2nd deeds | 51,102 | 26,695 | 22,997 | 19,056 | 16,009 | ||||||||||||||||||
Real estate — land | 5,091 | 7,556 | 10,215 | 8,506 | 10,179 | ||||||||||||||||||
Real estate — nonresidential | 145,719 | 145,878 | 126,148 | 102,814 | 84,969 | ||||||||||||||||||
Real estate — construction | 40,794 | 62,319 | 71,940 | 73,798 | 54,952 | ||||||||||||||||||
Consumer | 5,238 | 5,815 | 7,124 | 5,553 | 5,007 | ||||||||||||||||||
304,745 | 312,473 | 305,400 | 259,773 | 207,103 | |||||||||||||||||||
Deferred loan origination fees, net | (6 | ) | (99 | ) | (265 | ) | (392 | ) | (443 | ) | |||||||||||||
Allowance for credit losses | (14,387 | ) | (12,406 | ) | (3,919 | ) | (3,374 | ) | (2,826 | ) | |||||||||||||
Total net loans | $ | 290,352 | $ | 299,968 | $ | 301,216 | $ | 256,007 | $ | 203,834 |
Maturity | |||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
One Year or Less | One through Five Years | Over Five Years | Total | ||||||||||||||||
(Dollars in thousands) | |||||||||||||||||||
Total Loans | $ | 66,465 | $ | 39,104 | $ | 199,176 | $ | 304,745 |
review. In 2009, the Bank recorded additional loan loss provisions of $11.1 million to cover potential losses in the portfolio. In 2009, the Bank recorded $9.1 million of charge-offs, net of recoveries, or 2.94% of average loans. At December 31, 2009, the Bank had non-performing assets of $31.9 million, or 8.6% of total assets. Non-performing assets includes nonaccrual loans, accruing loans that are past due 90 days or more and OREO.
As of September 30, 2010 | As of December 31, 2009 | ||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Amount | % of Loans | Amount | % of Loans | ||||||||||||||||
(Dollars in thousands) | |||||||||||||||||||
Commercial | $ | 35,583 | 12.7 | % | $ | 43,461 | 14.3 | % | |||||||||||
Real estate — residential secured by 1st deeds | 12,849 | 4.6 | % | 13,340 | 4.4 | % | |||||||||||||
Real estate — residential secured by 2nd deeds | 47,889 | 17.0 | % | 51,102 | 16.7 | % | |||||||||||||
Real estate — land | 3,854 | 1.4 | % | 5,091 | 1.7 | % | |||||||||||||
Real estate — nonresidential | 146,922 | 52.2 | % | 145,719 | 47.8 | % | |||||||||||||
Real estate — construction | 29,566 | 10.5 | % | 40,794 | 13.4 | % | |||||||||||||
Consumer | 4,624 | 1.6 | % | 5,238 | 1.7 | % | |||||||||||||
Total gross loans | 281,287 | 100.0 | % | 304,745 | 100.0 | % | |||||||||||||
Deferred loan origination costs (fees), net | 89 | (6 | ) | ||||||||||||||||
Allowance for credit losses | (14,486 | ) | (14,387 | ) | |||||||||||||||
Total net loans | $ | 266,890 | $ | 290,352 |
provision for credit losses was recognized. In the third quarter of 2010, net charge offs declined to $1.8 million and a $400 thousand provision for credit losses was recorded. The majority of charge-offs occurring in the second quarter of 2010 ($3.1 million) were concentrated in five loans. In the second quarter of 2010, updated appraisals were received and management determined that the recorded amount in excess of the appraised value of these five collateral dependent loans was considered uncollectible. At March 31, 2010, these five loans had specific reserves totaling $2.2 million based on the estimated fair value of the collateral at that date. The increase in the provision during the second quarter of 2010 is largely attributable to specific reserves of $2.3 million on eight newly identified impaired loans totaling $9.5 million and lower valuations ($1.8 million) in collateral securing four loans that had been identified as impaired at March 31, 2010. The majority of the charge-offs occurring in the third quarter of 2010 ($775 thousand) were concentrated in two loans. In the third quarter of 2010, management determined that the recorded amount in excess of the appraised value of these two collateral dependent loans was considered uncollectible. At June 30, 2010, these two loans had specific reserves totaling $512 thousand based on the estimated fair value of the collateral at that date.
As of September 30, 2010 | As of December 31, 2009 | As of December 31, 2008 | |||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
(Dollars in thousands) | |||||||||||||||
Commercial | $ | 1,294 | $ | 178 | $ | 149 | |||||||||
Real estate — residential 1st deed of trust | 432 | 544 | 270 | ||||||||||||
Real estate — residential 2nd deed of trust | 1,210 | 1,388 | 521 | ||||||||||||
Real estate — land | 539 | 479 | — | ||||||||||||
Real estate — nonresidential | 23,809 | 10,315 | — | ||||||||||||
Real estate — construction | 8,924 | 9,593 | 1,386 | ||||||||||||
Consumer | 117 | 67 | — | ||||||||||||
Total troubled debt restructures | $ | 36,325 | $ | 22,564 | $ | 2,326 |
December 31, 2008, all $2.3 million in restructured loans were considered impaired, of which, $714 thousand had a specific valuation allowance totaling $186 thousand. As of December 31, 2008, there was 1 restructured loan totaling $270 thousand that was not performing in accordance with its modified terms. During the year ended December 31, 2008, no charge-offs were recorded relating to restructured loans.
As of September 30, 2010 | As of December 31, 2009 | As of December 31, 2008 | |||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
(Dollars in thousands) | |||||||||||||||
Reduction in contractual rate of interest | $ | 10,839 | $ | 7,898 | $ | 645 | |||||||||
Deferral of payments | 1,727 | 2,186 | — | ||||||||||||
Extension of maturity date | 4 | 5 | — | ||||||||||||
Reduction in contractual rate of interest & deferral of payments | 8,879 | 6,446 | — | ||||||||||||
Reduction in contractual rate of interest & extension of maturity date | 14,680 | 5,826 | 1,386 | ||||||||||||
Reduction in contractual rate of interest, deferral of payments and extension of maturity date | 196 | 203 | 295 | ||||||||||||
Total restructured loans | $ | 36,325 | $ | 22,564 | $ | 2,326 |
As of December 31, | |||||||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
2009 | 2008 | 2007 | 2006 | 2005 | |||||||||||||||||||
(Dollars in thousands) | |||||||||||||||||||||||
Nonaccrual loans: | |||||||||||||||||||||||
Commercial | $ | 733 | $ | 1,176 | $ | 124 | $ | — | $ | — | |||||||||||||
Real estate — residential 1st deed of trust | 793 | 557 | — | — | — | ||||||||||||||||||
Real estate — residential 2nd deed of trust | 1,278 | 684 | 120 | — | — | ||||||||||||||||||
Real estate — land | 612 | 2,358 | — | — | — | ||||||||||||||||||
Real estate — nonresidential | 6,068 | 3,443 | 283 | — | — | ||||||||||||||||||
Real estate — construction | 15,336 | 19,633 | 8,947 | — | — | ||||||||||||||||||
Consumer | 62 | — | — | — | — | ||||||||||||||||||
Total nonaccrual loans | 24,882 | 27,851 | 9,474 | — | — | ||||||||||||||||||
Accruing loans past due 90 days or more: | |||||||||||||||||||||||
Commercial | 396 | — | — | — | — | ||||||||||||||||||
Real estate — construction | 2,000 | — | — | — | — | ||||||||||||||||||
Total accruing loans past due 90 day or more | 2,396 | — | — | — | — | ||||||||||||||||||
Total non-performing loans (NPLs) | 27,278 | 27,851 | 9,474 | — | — | ||||||||||||||||||
OREO | 4,650 | 6,195 | — | — | — | ||||||||||||||||||
Total non-performing assets (NPAs) | 31,928 | 34,046 | 9,474 | — | — | ||||||||||||||||||
Restructured loans, not included above: | |||||||||||||||||||||||
Commercial | 178 | — | — | — | — | ||||||||||||||||||
Real estate — residential 1st deed of trust | 276 | — | — | — | — | ||||||||||||||||||
Real estate — residential 2nd deed of trust | 663 | 521 | — | — | — | ||||||||||||||||||
Real estate — land | 276 | — | — | — | — | ||||||||||||||||||
Real estate — nonresidential | 7,847 | — | — | — | — | ||||||||||||||||||
Real estate — construction | 4,080 | — | — | — | — | ||||||||||||||||||
Consumer | 5 | — | — | — | — | ||||||||||||||||||
Total restructured loans, not included above | 13,325 | 521 | — | — | — | ||||||||||||||||||
Total non-performing assets and restructured loans (NPARs) | $ | 45,253 | $ | 34,567 | $ | 9,474 | $ | — | $ | — | |||||||||||||
Selected ratios: | |||||||||||||||||||||||
NPLs to total loans | 8.95 | % | 8.92 | % | 3.10 | % | 0.00 | % | 0.00 | % | |||||||||||||
NPAs to total assets | 8.60 | % | 9.37 | % | 2.88 | % | 0.00 | % | 0.00 | % | |||||||||||||
NPARs to total assets | 12.20 | % | 9.52 | % | 2.88 | % | 0.00 | % | 0.00 | % |
�� | As of September 30, 2010 | As of December 31, 2009 | |||||||||
---|---|---|---|---|---|---|---|---|---|---|---|
(Dollars in thousands) | |||||||||||
Nonaccrual loans: | |||||||||||
Commercial | $ | 1,931 | $ | 733 | |||||||
Real estate — residential 1st deed of trust | 533 | 793 | |||||||||
Real estate — residential 2nd deed of trust | 2,694 | 1,278 | |||||||||
Real estate — land | 343 | 612 | |||||||||
Real estate — nonresidential | 8,765 | 6,068 | |||||||||
Real estate — construction | 18,915 | 15,336 | |||||||||
Consumer | 95 | 62 | |||||||||
Total nonaccrual loans | 33,276 | 24,882 | |||||||||
Accruing loans past due 90 day or more: | |||||||||||
Commercial | 159 | 396 | |||||||||
Real estate — construction | 2,000 | 2,000 | |||||||||
Accruing loans past due 90 day or more | 2,159 | 2,396 | |||||||||
Total non-performing loans (NPLs) | 35,435 | 27,278 | |||||||||
OREO | 6,727 | 4,650 | |||||||||
Total non-performing assets (NPAs) | 42,162 | 31,928 | |||||||||
Restructured loans, not included above: | |||||||||||
Commercial | 1,118 | 178 | |||||||||
Real estate — residential 1st deed of trust | — | 276 | |||||||||
Real estate — residential 2nd deed of trust | 781 | 663 | |||||||||
Real estate — land | 196 | 276 | |||||||||
Real estate — nonresidential | 17,847 | 7,847 | |||||||||
Real estate — construction | — | 4,080 | |||||||||
Consumer | 70 | 5 | |||||||||
Total restructured loans, not included above | 20,012 | 13,325 | |||||||||
Total non-performing assets and restructured loans (NPARs) | $ | 62,174 | $ | 45,253 | |||||||
Selected ratios: | |||||||||||
NPLs to total loans | 12.72 | % | 8.73 | % | |||||||
NPAs to total assets | 11.79 | % | 8.60 | % | |||||||
NPARs to total assets | 17.39 | % | 12.20 | % |
million accruing restructured loans which had sustained payment performance for a reasonable time prior to the restructuring but, based on global cash flows, were not expected to maintain that performance under the original terms of the agreement. However, global cash flows indicated the borrower’s ability to maintain payment performance under the restructured terms.
As of September 30, 2010 | As of December 31, 2009 | As of December 31, 2008 | |||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
(Dollars in thousands) | |||||||||||||||
Commercial | $ | 4,679 | $ | 5,818 | $ | 1,176 | |||||||||
Real estate — residential 1st deed of trust | 959 | 1,056 | 561 | ||||||||||||
Real estate — residential 2nd deed of trust | 3,801 | 1,518 | 1,401 | ||||||||||||
Real estate — land | 1,083 | 613 | 868 | ||||||||||||
Real estate — nonresidential | 33,863 | 20,523 | 10,405 | ||||||||||||
Real estate — construction | 22,146 | 28,958 | 21,723 | ||||||||||||
Consumer | 209 | 249 | — | ||||||||||||
Total impaired loans | $ | 66,740 | $ | 58,735 | $ | 36,134 | |||||||||
Method used to measure impairment | |||||||||||||||
Discounted cash flows | $ | 26,083 | $ | 14,929 | $ | 394 | |||||||||
Collateral value | 40,657 | 43,806 | 35,740 | ||||||||||||
Total impaired loans | $ | 66,740 | $ | 58,735 | $ | 36,134 |
• | specific allocation for problem graded loans (“impaired loans”), |
• | general or formula allocation, and |
• | discretionary allocation based on loan portfolio segmentation. |
As of and for the Year Ended December 31, | |||||||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
2009 | 2008 | 2007 | 2006 | 2005 | |||||||||||||||||||
(Dollars in thousands) | |||||||||||||||||||||||
Beginning balance | $ | 12,406 | $ | 3,919 | $ | 3,374 | $ | 2,826 | $ | 1,988 | |||||||||||||
Loans charged off during period: | |||||||||||||||||||||||
Commercial | 806 | 6,718 | 30 | 10 | 8 | ||||||||||||||||||
Real estate — residential 2nds | 253 | 368 | 41 | — | — | ||||||||||||||||||
Real estate — land | 963 | 769 | — | — | — | ||||||||||||||||||
Real estate — nonresidential | 171 | 360 | 38 | — | — | ||||||||||||||||||
Real estate — construction | 6,693 | 6,284 | 289 | — | — | ||||||||||||||||||
Consumer | 596 | 1,010 | 2 | 2 | — | ||||||||||||||||||
Total | 9,482 | 15,509 | 400 | 12 | 8 | ||||||||||||||||||
Recoveries: | |||||||||||||||||||||||
Commercial | 57 | 27 | — | — | 1 | ||||||||||||||||||
Real estate — nonresidential | 157 | — | — | — | — | ||||||||||||||||||
Real estate — construction | 23 | — | — | — | — | ||||||||||||||||||
Consumer | 111 | 69 | — | — | — | ||||||||||||||||||
Total | 348 | 96 | — | — | 1 | ||||||||||||||||||
Net loans charged off | (9,134 | ) | (15,413 | ) | (400 | ) | (12 | ) | (7 | ) | |||||||||||||
Provision for credit losses | 11,115 | 23,900 | 945 | 560 | 845 | ||||||||||||||||||
Ending balance | $ | 14,387 | $ | 12,406 | $ | 3,919 | $ | 3,374 | $ | 2,826 | |||||||||||||
Total loans, net of fees and costs | $ | 304,739 | $ | 312,374 | $ | 305,135 | $ | 259,381 | $ | 206,659 | |||||||||||||
Average loans | $ | 310,253 | $ | 316,500 | $ | 279,221 | $ | 236,034 | $ | 197,536 | |||||||||||||
Non-performing loans | $ | 27,278 | $ | 27,851 | $ | 9,474 | $ | — | $ | — | |||||||||||||
Selected ratios: | |||||||||||||||||||||||
Net charge-offs to average loans | 2.94 | % | 4.87 | % | 0.14 | % | 0.01 | % | 0.00 | % | |||||||||||||
Provision for credit losses to average loans | 3.58 | % | 7.55 | % | 0.34 | % | 0.24 | % | 0.43 | % | |||||||||||||
Allowance for credit losses to total loans | 4.72 | % | 3.97 | % | 1.28 | % | 1.30 | % | 1.37 | % | |||||||||||||
Allowance for credit losses to non-performing loans | 52.74 | % | 44.55 | % | 41.37 | % | N/A | N/A |
entire loan portfolio. In 2009, management increased the unallocated amount of the allowance due to the significant decline in the value of real estate collateral during the year and the potential for increased risk in the portfolio relating to the economic and regulatory environment.
As of December 31, | |||||||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
2009 | 2008 | 2007 | 2006 | 2005 | |||||||||||||||||||
(Dollars in thousands) | |||||||||||||||||||||||
Commercial | $ | 3,825 | $ | 3,908 | $ | 508 | $ | 617 | $ | 862 | |||||||||||||
Real estate — residential 1sts | 367 | 244 | 98 | 76 | 43 | ||||||||||||||||||
Real estate — residential 2nds | 1,250 | 610 | 197 | 128 | 81 | ||||||||||||||||||
Real estate — land | 375 | 1,236 | 141 | 90 | 101 | ||||||||||||||||||
Real estate — nonresidential | 3,449 | 1,832 | 1,066 | 958 | 852 | ||||||||||||||||||
Real estate — construction | 4,205 | 3,934 | 1,598 | 1,207 | 650 | ||||||||||||||||||
Consumer | 527 | 483 | 62 | 180 | 125 | ||||||||||||||||||
Unallocated | 389 | 159 | 249 | 118 | 112 | ||||||||||||||||||
Total | $ | 14,387 | $ | 12,406 | $ | 3,919 | $ | 3,374 | $ | 2,826 |
As of December 31, | |||||||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
2009 | 2008 | 2007 | 2006 | 2005 | |||||||||||||||||||
Commercial | 14.3 | % | 16.3 | % | 18.2 | % | 15.0 | % | 13.3 | % | |||||||||||||
Real estate — residential 1sts | 4.4 | % | 4.3 | % | 3.8 | % | 4.3 | % | 4.1 | % | |||||||||||||
Real estate — residential 2nds | 16.7 | % | 8.5 | % | 7.5 | % | 7.2 | % | 7.7 | % | |||||||||||||
Real estate — land | 1.7 | % | 2.4 | % | 3.3 | % | 3.3 | % | 7.9 | % | |||||||||||||
Real estate — nonresidential | 47.8 | % | 46.6 | % | 41.3 | % | 39.6 | % | 41.0 | % | |||||||||||||
Real estate — construction | 13.4 | % | 20.0 | % | 23.6 | % | 28.5 | % | 26.6 | % | |||||||||||||
Consumer | 1.7 | % | 1.9 | % | 2.3 | % | 2.1 | % | 2.4 | % | |||||||||||||
Total | 100.0 | % | 100.0 | % | 100.0 | % | 100.0 | % | 100.0 | % |
September 30, 2010. However, during the three months ended December 31, 2010, certain credits experienced deterioration of credit quality and an additional provision totaling $2.2 million was recorded. No prediction of the ultimate level of loans charged off in future years can be made with any certainty.
Commercial | Real Estate — Residential 1sts | Real Estate — Residential 2nds | Real Estate — Land | Non- residential Real Estate | Construction | Consumer | Unallocated | Total | |||||||||||||||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
(Dollars in thousands) | |||||||||||||||||||||||||||||||||||||||
Beginning balance | $ | 3,826 | $ | 367 | $ | 1,250 | $ | 375 | $ | 3,449 | $ | 4,205 | $ | 526 | $ | 389 | $ | 14,387 | |||||||||||||||||||||
Charge-offs | (2,558 | ) | (101 | ) | (472 | ) | (156 | ) | (727 | ) | (3,850 | ) | (75 | ) | — | (7,939 | ) | ||||||||||||||||||||||
Recoveries | 102 | — | 34 | — | 2 | — | — | — | 138 | ||||||||||||||||||||||||||||||
Provision | 2,155 | 143 | 2,491 | 281 | 1,705 | 1,309 | (56 | ) | (128 | ) | 7,900 | ||||||||||||||||||||||||||||
Ending Balance | $ | 3,525 | $ | 409 | $ | 3,303 | $ | 500 | $ | 4,429 | $ | 1,664 | $ | 395 | $ | 261 | $ | 14,486 | |||||||||||||||||||||
Ending balance: loans individually evaluated for impairment | $ | 4,679 | $ | 959 | $ | 3,801 | $ | 1,083 | $ | 33,863 | $ | 22,146 | $ | 209 | $ | 66,740 | |||||||||||||||||||||||
Loans with a specific reserve | $ | 3,404 | $ | 576 | $ | 2,963 | $ | 740 | $ | 20,525 | $ | 10,426 | $ | 103 | $ | 38,738 | |||||||||||||||||||||||
Specific reserve | $ | 1,554 | $ | 115 | $ | 937 | $ | 261 | $ | 2,069 | $ | 947 | $ | 60 | $ | 5,943 |
As of and for the Three Months Ended September 30, | As of and for the Nine Months Ended September 30, | ||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
2010 | 2009 | 2010 | 2009 | ||||||||||||||||
(dollars in thousands) | |||||||||||||||||||
Beginning balance | $ | 15,922 | $ | 14,281 | $ | 14,387 | $ | 12,406 | |||||||||||
Loans charged off during period: | |||||||||||||||||||
Commercial | 410 | 86 | 2,558 | 183 | |||||||||||||||
Real estate — residential 1sts | 42 | — | 101 | — | |||||||||||||||
Real estate — residential 2nds | 61 | 127 | 472 | 127 | |||||||||||||||
Real estate — land | 21 | — | 156 | — | |||||||||||||||
Real estate — nonresidential | 727 | — | 727 | 171 | |||||||||||||||
Real estate — construction | 555 | 1 | 3,850 | 949 | |||||||||||||||
Consumer | 44 | 6 | 75 | 596 | |||||||||||||||
Total | 1,860 | 220 | 7,939 | 2,026 |
As of and for the Three Months Ended September 30, | As of and for the Nine Months Ended September 30, | ||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
2010 | 2009 | 2010 | 2009 | ||||||||||||||||
(dollars in thousands) | |||||||||||||||||||
Recoveries: | |||||||||||||||||||
Commercial | $ | 22 | $ | — | $ | 102 | $ | 47 | |||||||||||
Real estate — residential 2nds | — | — | 34 | — | |||||||||||||||
Real estate — nonresidential | 2 | — | 2 | — | |||||||||||||||
Real estate — construction | — | — | — | 23 | |||||||||||||||
Consumer | — | — | — | 111 | |||||||||||||||
Total | 24 | — | 138 | 181 | |||||||||||||||
Net loans charged off | (1,836 | ) | (220 | ) | (7,801 | ) | (1,845 | ) | |||||||||||
Provision for credit losses | 400 | 400 | 7,900 | 3,900 | |||||||||||||||
Ending balance | $ | 14,486 | $ | 14,461 | $ | 14,486 | $ | 14,461 | |||||||||||
Total loans, net of fees and costs | $ | 281,375 | $ | 302,529 | $ | 281,375 | $ | 302,529 | |||||||||||
Average loans | $ | 285,329 | $ | 308,602 | $ | 292,988 | $ | 312,460 | |||||||||||
Non-performing loans | $ | 35,435 | $ | 35,397 | $ | 35,435 | $ | 35,397 | |||||||||||
Selected ratios: | |||||||||||||||||||
Net charge-offs to average loans, annualized | 2.55 | % | 0.28 | % | 3.56 | % | 0.79 | % | |||||||||||
Provision for credit losses to average loans, annualized | 0.56 | % | 0.51 | % | 3.61 | % | 1.67 | % | |||||||||||
Allowance for credit losses to total loans | 5.15 | % | 4.78 | % | 5.15 | % | 4.78 | % | |||||||||||
Allowance for credit losses to non-performing loans | 40.88 | % | 40.85 | % | 40.88 | % | 40.85 | % |
For the three months ended September 30, 2010 | For the nine months ended September 30, 2010 | ||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|
(dollars in thousands) | |||||||||||
Beginning balance | $ | 5,472 | $ | 4,650 | |||||||
Additions | 2,104 | 3,390 | |||||||||
Dispositions | (203 | ) | (308 | ) | |||||||
Write-downs | (646 | ) | (1,005 | ) | |||||||
Balance, September 30, 2010 | $ | 6,727 | $ | 6,727 |
Year Ended December 31, | |||||||||||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
2009 | 2008 | 2007 | |||||||||||||||||||||||||
Average Balance | Average Rate | Average Balance | Average Rate | Average Balance | Average Rate | ||||||||||||||||||||||
(dollars in thousands) | |||||||||||||||||||||||||||
Interest-bearing demand | $ | 39,073 | 0.02 | % | $ | 34,547 | 0.03 | % | $ | 28,314 | 0.37 | % | |||||||||||||||
Money market | 59,143 | 1.22 | 60,586 | 2.34 | 54,624 | 3.04 | |||||||||||||||||||||
Savings | 16,953 | 0.40 | 13,634 | 0.53 | 11,910 | 0.94 | |||||||||||||||||||||
Time certificates of deposit | 120,464 | 2.02 | 112,194 | 3.52 | 96,695 | 4.98 | |||||||||||||||||||||
Non-interest bearing deposits | 72,397 | — | 66,933 | — | 65,860 | — | |||||||||||||||||||||
Total | $ | 308,030 | 1.05 | % | $ | 287,894 | 1.89 | % | $ | 257,403 | 2.60 | % |
December 31, 2009 | ||||||
---|---|---|---|---|---|---|
(dollars in thousands) | ||||||
Due in three months or less | $ | 18,049 | ||||
Due in over three months through six months | 21,692 | |||||
Due in over six months through twelve months | 3,568 | |||||
Due in over twelve months | 737 | |||||
Total | $ | 44,046 |
As of December 31, | |||||||||||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
2009 | 2008 | 2007 | |||||||||||||||||||||||||
Amount | Rate | Amount | Rate | Amount | Rate | ||||||||||||||||||||||
(Dollars in thousands) | |||||||||||||||||||||||||||
Short-term: | |||||||||||||||||||||||||||
FHLB advances | $ | 25,000 | 1.05 | % | $ | 8,000 | 1.07 | % | $ | 13,500 | 4.46 | % | |||||||||||||||
Long-term: | |||||||||||||||||||||||||||
FHLB advances | $ | 15,000 | 1.89 | % | $ | 15,000 | 2.30 | % | — | 0.00 | % |
As of September 30, 2010 | |||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|
Amount | Rate | ||||||||||
(Dollars in thousands) | |||||||||||
Short-term: | |||||||||||
FHLB advances | $ | 38,567 | 0.95 | % | |||||||
Long-term: | |||||||||||
FHLB advances | $ | 10,000 | 1.26 | % |
CITIZENS BANCORP AND SUBSIDIARIES | CITIZENS BANK | ||||||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Minimum Regulatory Requirement | Actual Capital Ratio | Minimum Regulatory Requirement | Minimum Regulatory Requirement for “Well Capitalized” Institution | Actual Capital Ratio | |||||||||||||||||||
Leverage Ratio | 4.0 | % | 3.3 | % | 4.0 | %(1) | 5.0 | % | 6.1 | % | |||||||||||||
Tier 1 Risk-Based Ratio | 4.0 | % | 4.1 | % | 4.0 | % | 6.0 | % | 7.7 | % | |||||||||||||
Total Risk-Based Ratio | 8.0 | % | 9.2 | % | 8.0 | % | 10.0 | % | 8.9 | % |
CITIZENS BANCORP AND SUBSIDIARIES | CITIZENS BANK | ||||||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Minimum Regulatory Requirement | Actual Capital Ratio | Minimum Regulatory Requirement | Minimum Regulatory Requirement for “Well Capitalized” Institution | Actual Capital Ratio | |||||||||||||||||||
Leverage Ratio | 4.0 | % | 2.0 | % | 4.0 | %(1) | 5.0 | % | 5.7 | % | |||||||||||||
Tier 1 Risk-Based Ratio | 4.0 | % | 2.4 | % | 4.0 | % | 6.0 | % | 7.0 | % | |||||||||||||
Total Risk-Based Ratio | 8.0 | % | 8.5 | % | 8.0 | % | 10.0 | % | 8.3 | % |
• | a major economic recession in our market area, California and the nation which resulted in decreasing real estate values and significant unemployment; |
• | a concentration in land and construction loans; |
• | a circumvention of certain policies and procedures within the loan administration function, see “Risk Factors — Risks Related to Our Business and Market”; and |
• | the need for a valuation reserve on our deferred tax assets. |
• | completing a comprehensive review of the loan portfolio; |
• | reorganizing the credit administration and underwriting functions, including internal control enhancement; |
• | hiring a number of new senior officers; |
• | increasing equity capital by almost $1.7 million through the private placement of Company stock; |
• | planning a reduction in assets of approximately $30 million in 2010 in order to support regulatory capital ratios; |
• | assigning Mr. Campbell as Chief Risk Officer and Mr. Behn as Senior Credit Administrator; |
• | maintaining a net interest margin within the 90th percentile of all insured commercial banks with assets between $300 million and $1.0 billion; |
• | changing our funding mix by reducing brokered deposits and focusing on building core deposits; |
• | becoming more efficient by centralizing operations and reducing non-interest expense; |
• | initiating an SBA department to diversify the loan portfolio, reduce risk and generate fee income; and |
the capital needed to reach the capital ratios required in the Order. See “Consent Order and Written Agreement.” To achieve such a ratio, we must:
• | increase the Bank’s capital through a combination of new equity capital and its earnings; |
• | continue to reduce assets from the amount at year end 2009; and |
• | minimize future losses from non-performing loans or from other assets. |
• | Maintain acceptable Executive Management and provide Executive Management with written authority to implement the provisions of the Consent Order and obtain written approval from the regulators to appoint new individuals to the Bank’s Board or to Executive Management. |
• | Status: Following the May 2009 DFI examination, the Bank received regulatory approval and retained the services of a new President/Chief Executive Officer, Gary D. Gall; Senior Credit Administrator, Michael A. Behn; and added the position of General Counsel/Chief Risk Officer, Phillip J. Campbell, to the Executive Management team. On March 18, 2010, the Bank’s Board adopted a resolution providing appropriate written authority to each member of Executive Management to implement the provisions of the Order. |
• | Within 150 days of the effective date of the Order and thereafter, achieve and maintain tangible shareholder’s equity to total tangible assets, and Tier 1 capital to total assets, equal to or greater than 9% (the “Capital Requirement”). |
• | Status: On September 17, 2009, the Company began to implement a strategy to augment capital. In December of 2009 a private placement of common stock was conducted by the Company and raised $1.6 million, of which $1.4 million was down-streamed to the Bank on December 28, 2009. To further augment the Bank’s capital, certain deferred compensation arrangements with Directors and one of the executive officers were surrendered, adding $1.3 million to the Bank’s retained earnings effective June 30, 2010. |
• | Develop, adopt and implement a Capital Plan setting forth specific actions that the Bank will take to satisfy the Capital Requirement; |
• | Status: Prior to entering into the Consent Order, the Board adopted a Capital Policy in September 2009. Subsequently, the Board adopted a modification to the Capital Policy, integrating the 2009-2010 capital enhancement strategies to include a private placement and this Offering. |
• | Within 30 days from the effective date of the Order, eliminate from the books, all assets classified “Loss” in the Report of Examination dated May 18, 2009 (“Report”) by charge-off or collection. |
• | Status: Prior to entering into the Order, all loans classified as “Loss” in the Report were charged-off. |
• | Within 90 days from effective date of the Order, reduce assets classified as “Doubtful” and “Substandard” in the Report to not more than 75% of capital and reserves. |
• | Status: Assets classified in the May 2009 examination as Substandard or Doubtful had been reduced by approximately 54% as of May 12, 2010. The ratio of those assets to capital and reserves was approximately 58% on that date. |
• | Within 180 days from effective date of the Order, reduce assets classified as “Doubtful” and “Substandard” in the Report to not more than 50% of capital and reserves. |
• | Status: Assets classified in the May 2009 examination as Substandard or Doubtful had been reduced by approximately $34 million, or 72% as of November 12, 2010 to approximately $13 million. The ratio of those assets to capital and reserves was approximately 38% on that date. The Bank is diligently working to reduce the level of classifications to the level required by the Order through the completion of scheduled foreclosure actions and successful loan modifications. |
• | Within 270 days from the effective date of the Order, reduce assets classified as “Doubtful” and ”Substandard” in the Report to not more than 25% of capital and reserves. |
• | Status: The Bank is diligently working to reduce the level of classifications to the level required by the Order through the completion of scheduled foreclosure actions and successful loan modifications. |
• | Within 60 days from the effective date of the Order, develop a written asset disposition plan for each classified asset greater than $500,000; plans shall be reviewed and approved by the Board. |
• | Status: The Bank completed written asset disposition plans as required by the Order. The Bank’s Board completed its review and approval of the plans during its April 2010 regular Board meeting. |
• | During the life of the Order, maintain an adequate allowance. In addition, revise methodology for determining the adequacy of the allowance in accordance with the Report. Board shall review the adequacy of the allowance at least quarterly and results of the review shall be reflected in the meeting minutes. |
• | Status: The Bank continues to maintain an adequate allowance for credit losses. As of September 30, 2010, the Bank’s ratio of allowance for credit losses to total loans stood at 5.15%. Prior to entering into the Order, the allowance methodology was revised as recommended in the Report. In addition, the Bank engaged an independent consultant to review the adequacy of the reserve for the purchased HELOC portfolio, and utilized the results of that review to enhance the reserve for that portfolio effective June 30, 2010. The Board reviews the adequacy of the allowance for credit losses quarterly as required by the Order and this review is documented in meeting minutes. |
• | Within 60 days from the effective date of the Order, revise, adopt and implement improved written lending policies that address deficiencies identified in the Report. |
• | Status: Prior to entering into Order, the written lending policies were revised to address the deficiencies and incorporate recommendations contained in the Report. |
• | Within 60 days from the effective date of the Order, develop and implement appropriate policies and procedures re: appraisals and evaluations. |
• | Status: Prior to entering into the Order, the Bank revised its written lending policies and implemented new procedures concerning appraisals and evaluations. |
• | Within 60 days from the effective date of the Order, revise and implement policies and procedures for monitoring and reporting asset concentrations. |
• | Status: Prior to entering into the Order, the Bank revised its written lending policies and procedures concerning the reporting and monitoring of asset concentrations. |
• | Effective February 11, 2010, do not extend any credit to any borrower who has loans, in whole or in part, that have been charged off or are classified “Loss” and remain uncollected. |
• | Status: Since the effective date of the Order, the Bank has not extended credit to any borrower who has loans, in whole or in part, that have been charged off or are classified “Loss” and remain uncollected. |
• | Within 60 days from the effective date of the Order, formulate and implement a written plan and comprehensive budget for all categories of income and expense and submit to the DFI & FDIC for review and opportunity to comment. |
• | Status: On February 18, 2010, the Bank’s 2010 budget was approved by the Board. On March 2, 2010, the budget was mailed to the DFI & FDIC for review and comment. No comments from the DFI or FDIC have been received by the Bank. |
• | During the life of the order, do not establish any new branches or other office without prior written consent of the DFI & FDIC. |
• | Status: The Bank has not established any new branches or offices. |
• | Within 90 days of the effective date of the Order, adopt and implement a written Contingency Liquidity Policy. |
• | Status: On November 19, 2009, the Asset/Liability Management and Interest Rate Risk Policy, which includes a Contingency Funding Plan addendum, was approved by the Board. This policy was further revised and approved again by the Board on April 22, 2010. |
• | During the life of the Order, no distributions to shareholders may be made without prior written approval of DFI and FDIC. |
• | Status: No distributions have been made to the Bank’s shareholder (the Company). |
• | During the life of the Order, the Bank is to comply with the provisions of the FDIC Rules & Regulations regarding brokered deposits. |
• | Status: The Bank is in compliance with the FDIC Rules & Regulations provisions regarding brokered deposits. Since September 30, 2008, brokered and reciprocal deposits have been reduced from a high of $64 million, or 17.5% of total assets. There were no brokered nor reciprocal deposits outstanding at September 30, 2010. |
• | Within 60 days from the effective date of the Order, correct all violations of consumer laws in the Compliance Report dated May 4, 2009, and adopt and implement policies, procedures & controls to prevent their recurrence. |
• | Status: All of the apparent violations of consumer laws as noted in the Compliance Report have been corrected. Examination recommendations have been noted and implemented. Policies, procedures and controls were adopted and implemented to prevent the reoccurrence. The corrections and changes were accomplished by several methods including: computer software changes, revising |
procedures, and additional employee training. The compliance review process has been enhanced to monitor and supervise these areas of concern |
• | Within 60 days from the effective date of the Order, increase oversight of the Compliance function, dedicate additional resources as needed, and provide monthly reports to senior executive officers and the Board. |
• | Status: Following the date of the Compliance Examination, the Board hired a General Counsel/ Chief Risk Officer/Compliance Officer experienced in bank compliance issues to oversee the Bank’s compliance function and replace the former Compliance Officer. Additionally, to assist the General Counsel, an Assistant Compliance Officer has been retained to assist with day-to-day compliance issues and to oversee the Bank’s compliance training program. Our comprehensive employee compliance training program has been enhanced and is being closely monitored. The Board and senior management are committed to providing additional resources to the compliance function as needed. Monthly compliance reports are now being provided to the Board and senior executive officers. |
• | Within 60 days from the effective date of the Order, evaluate and enhance the compliance training program. |
• | Status: The Bank’s training program has been reviewed and specific courses have been assigned according to individual job functions. In addition to on-line computer training, reinforcement is provided during department/staff/committee meetings by department managers, the Assistant Compliance Officer, or General Counsel/Chief Risk Officer. To develop an in-depth knowledge of compliance issues the Assistant Compliance Officer and General Counsel/Chief Risk Officer attend web seminars and conferences. Finally, a Bank Compliance Committee comprised of the department managers, the Assistant Compliance Officer, and the General Counsel/Chief Risk Officer has been reconvened and meets on a quarterly basis to share Bank Compliance developments and discuss compliance training and/or issues. General Counsel/Chief Risk Officer and Assistant Compliance Officer provide the Board’s Audit Committee with monthly updates on progress with compliance initiatives and new compliance projects. Thorough record keeping for all employees who attend training meetings and/or seminars, as well as assigned on-line training, is compiled and documented by the Assistant Compliance Officer. |
• | Within 60 days from the effective date of the Order, adopt and implement internal controls to ensure consistency between system specs and loan documents with particular focus on improving compliance monitoring of flood insurance requirements. |
• | Status: The Bank’s loan file maintenance and review procedures have been enhanced to include an affirmative certification from the Loan Underwriter attesting that real property collateral lies outside the flood zone or has proper flood insurance. |
• | Within 60 days from the effective date of the Order, improve compliance audit procedures to address scope and frequency of such audits. |
• | Status: The Bank has enhanced its internal monitoring of compliance issues. Additionally, the Board has increased the audit frequency of its loan and deposit compliance areas so that audits in these areas are performed on an annual basis. The Audit Committee increased the review period in the scope of engagement with its auditors to include testing of transactions since the prior audit. |
• | Within 30 days after the end of the first quarter following the effective date of the Order, and within 30 days after the end of each quarter thereafter, provide written progress reports to DFI & FDIC. |
• | Status: The Bank has filed the required progress reports with the DFI and FDIC. |
• | During the life of the Consent Order, notify DFI & FDIC in advance of making any public announcement regarding the financial condition of the Bank, Executive Management or the Board. |
• | Status: Since the February 11, 2010 effective date of the Consent Order, the DFI and FDIC have been provided in advance, with any and all applicable public announcements. |
• | During the life of the Consent Order and in the future, comply with all laws and regulations. |
• | Status: The Bank continues to endeavor to comply with all laws and regulations. |
• | During the life of the Order, do not amend or rescind any approved plans, policies, procedures or programs without prior written approval of the DFI and FDIC. |
• | Status: The Bank has complied with this provision. |
• | The Board of Directors of the Company shall take appropriate steps to ensure that the Bank complies with the Order entered into with the FDIC and the DFI.; |
• | Status: The Company has provided the Federal Reserve Board with copies of the DFI/FDIC Order quarterly progress reports. |
• | Status: The Company has not declared or paid any dividends or other distributions without obtaining the prior written approval of the Federal Reserve Board. The Company received the Federal Reserve Board’s prior written approval to make the April 7, 2010 trust preferred securities payment on the condition that the Company received new capital sufficient to make such payment. Such capital was raised and no further payments have been made on the trust preferred securities. |
• | The Company and its nonbank subsidiaries, if any, shall not, directly or indirectly incur, increase or guarantee any debt, nor shall the Company directly or indirectly, purchase or redeem any shares of its stock without the prior approval of the Federal Reserve Board; |
• | Status: The Company has not directly or indirectly incurred, increased or guaranteed any debt, nor has the Company directly or indirectly, purchased or redeemed any shares of its stock. |
• | The Company shall comply with certain notice provisions under the applicable federal rules and regulations to notify the Federal Reserve Board in appointing any new director or senior executive officer, or changing the responsibilities of any senior executive officer so that the officer would assume a different senior executive officer position; |
• | Status: The Company submitted two Interagency Notice of Change in Director packages for new directors, Reynold C. Johnson III and Kenneth J. Meyers and received a letter dated May 28, 2010 from FRB interposing no objection to the appointments. Mr. Johnson was appointed effective June 2, 2010, and Mr. Meyers was appointed effective June 4, 2010. |
• | The Company shall comply with restrictions on indemnification and severance payments pursuant to the applicable federal laws and regulations; |
• | Status: The Company has not made any indemnification payments and all severance payments have been in accordance with applicable federal laws and regulations. |
• | Within 30 days after the end of each calendar quarter following the date of the Federal Reserve Agreement, the Board of Directors shall submit to the Federal Reserve Board written progress reports detailing the |
form and manner of all actions taken to secure compliance with the provisions of the Agreement and the result thereof, applicable financial data of the Company, and changes in shareholders’ equity. |
• | Status: The Company provided the Federal Reserve Board with such quarterly written progress reports. |
• | No capital distributions or payment of management fees. |
• | Submission of a CRP that is acceptable to the FDIC. |
• | Close monitoring by the FDIC of the Bank’s condition and compliance with the approved CRP as well as limitations and/or restrictions set forth in this paragraph. |
• | Restricting growth of the Bank average total assets during any calendar quarter to not more than its average total assets during the preceding calendar quarter unless the FDIC has accepted the CRP and the increase is consistent with the CRP and the Bank’s ratio of tangible equity to assets increases at a rate during the calendar quarter sufficient to enable the Bank to reach an acceptable capital level within a reasonable time. |
• | The FDIC’s prior approval must be obtained for the acquisition of any company or branch, the establishment of any branch, or the engagement in new line of business. |
• | a strong net interest margin of 4.54% for the nine months ended September 30, 2010 driven by our low cost of funds; |
• | approximately $9.3 million in deferred tax assets to shelter future income from taxes, subject to certain limitations; |
• | the opening of our SBA department to generate small business government guaranteed loans which can be retained for earnings or sold in the secondary market for a premium with the possibility of service fee income; and |
• | an increase in operating efficiencies and cost reduction measures which should favorably impact non-interest expense. |
• | Maintain our emphasis on business banking |
• | Increase market share |
• | Use technology to expand our customer base |
• | Maintain and recruit highly competent personnel |
Our executive officers and directors are active members in the communities comprising our service area and they personally call on their business contacts and acquaintances to become our customers. In 2009, for the 11th year in a row, the quality of our service was voted “Best in Nevada County” by the readers of the Union Newspaper.
• | The Nevada City Branch is located at 305 Railroad Avenue, Suite 1, Nevada City, California, and is approximately 2,950 square feet, with a lease term that began October 1, 1994, and will expire on October 30, 2017, at a rate of $1.34 per square foot. There are two five-year options to extend the term of this lease remaining. |
• | The Grass Valley Branch is located at 305 Neal Street, Grass Valley, California, and is approximately 5,540 square feet, with a lease term that began August 1, 2002, and will expire July 31, 2012, at a current rate of $1.14 per square foot that escalates annually by the increase in the CPI. We have 2 five-year options to extend the term of this lease remaining. |
• | The Penn Valley Branch is located at 11362 Pleasant Valley Road, Penn Valley, California, and is approximately 1,368 square feet, with a lease term that began December 1, 1997, and terminates September 30, 2014, at a rate of $1.08 per square foot. There are no options to extend the term of this lease remaining. |
• | The Olympia Park Branch is located at 709 Sutton Way, Grass Valley, California, and is approximately 5,374 square feet, with a lease term that began April 21, 2000, and terminates November 27, 2010, at a current rate of $1.23. There are no options to extend the term of this lease. |
• | The Lake of the Pines Branch is located at 10037 Combie Road, Auburn, California, and is approximately 2,162 square feet, with a lease term that began April 30, 2004, and terminates April 29, 2014, at a current rate of $2.61 per square foot that escalates annually by the increase in the CPI to a maximum of 5%. We have 2 five-year options to extend the term of this lease. |
• | The Truckee Branch is located at 12047 Donner Pass Road, Truckee, California and is approximately 3,000 square feet, with a lease term that began February 1, 2006, and terminates April 30, 2011, at a rate of $2.75 per square foot. We have 2 five-year options to extend the term of this lease. |
• | The Auburn Branch is located at 905 Lincoln Way, Auburn, California and is approximately 3,816 square feet, with a lease term that began May 1, 2006, and terminates April 30, 2011, at a current rate of $2.53 per square foot that escalates by 4% annually. We have 2 five-year options to extend the term of this lease. |
• | Our Operations Center is located at 208 Providence Mine Road, Suites 219 and 122, Nevada City, California, and is approximately 7,568 square feet, with a lease term that began September 1, 2005, and terminates August 31, 2010, at a current rate of $1.39 per square foot which escalates annually by the increase in the CPI to a maximum of 5%. We have 3 options to extend the term of this lease, each for 3 years. |
• | reserves against deposits; |
• | interest rates payable on deposits; |
• | loans and investments; |
• | mergers and acquisitions; |
• | borrowings; |
• | dividends; |
• | locations of branch offices; and |
• | level of capital. |
• | to enjoin “unsafe or unsound” practices; |
• | to require affirmative action to correct any conditions resulting from any violation or practice; |
• | to issue an administrative order that can be judicially enforced, to direct an increase in capital; |
• | to restrict the growth of the bank; |
• | to assess civil monetary penalties; |
• | to remove officers and directors; and |
• | to ultimately terminate the bank’s deposit insurance, which for a California chartered bank would result in a revocation of the bank’s charter. See “Consent Order and Written Agreement.” |
• | the imposition of a conservator or receiver; |
• | the issuance of a cease-and-desist order that can be judicially enforced; |
• | the termination of insurance of deposits (in the case of a depository institution); |
• | the imposition of civil money penalties; |
• | the issuance of directives to increase capital; |
• | the issuance of formal and informal agreements; |
• | the issuance of removal and prohibition orders against institution-affiliated parties; and |
• | the enforcement of such actions through injunctions or restraining orders based upon a judicial determination that the agency would be harmed if such equitable relief was not granted. |
brokered deposits, limits the aggregate extensions of credit by a depository institution to an executive officer, director, principal shareholder or related interest, and reduces deposit insurance coverage for deposits offered by undercapitalized institutions for deposits by certain employee benefits accounts. The federal banking agencies have the flexibility to pursue appropriate or effective courses of action given the specific circumstances and severity of an institution’s noncompliance with one or more standards, including requiring an institution to submit an acceptable compliance plan.
a distribution to its shareholders in an amount not exceeding the greater of (x) its retained earnings; (y) its net income for its last fiscal year; or (z) its net income for its current fiscal year. In the event that the Commissioner determines that the shareholders’ equity of a bank is inadequate or that the making of a distribution by the Bank would be unsafe or unsound, he may order the Bank to refrain from making a proposed distribution. The FDIC may also restrict the payment of dividends if such payment would be deemed unsafe or unsound or if after the payment of such dividends, the Bank would be included in one of the “undercapitalized” categories for capital adequacy purposes pursuant to federal law.
• | initial notices to customers about their privacy policies, describing the conditions under which they may disclose non-public information to nonaffiliated third parties and affiliates; |
• | annual notices of their privacy policies to current customers; and |
• | a reasonable method for customers to “opt out” of disclosures to nonaffiliated third parties. |
disclosure, corporate governance and other related rules and mandates further studies of certain issues. The SOA represents significant federal involvement in matters traditionally left to state regulatory systems, such as the regulation of the accounting profession, and to state corporate law, such as the relationship between a Board of Directors and management and between a Board of Directors and its committees.
under the TARP, without regard to whether the TARP recipient has replaced such funds from any source, and without regard to any waiting period. Any TARP recipient that repays its TARP assistance pursuant to this provision would no longer be subject to the executive compensation provisions under ARRA.
Name | Age | Director Since | Position(s) Held | |||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Kenneth E. Baker | 68 | 1995 | Director, Chairman of the Board | |||||||||||
John T. Casey | 72 | 1995 | Director | |||||||||||
Charles V. Litton, Jr. | 64 | 1995 | Director | |||||||||||
Janie L. Marini | 62 | 1995 | Director | |||||||||||
Wyn G. Spiller | 60 | 2006 | Director | |||||||||||
Gary N. Tintle | 59 | 1995 | Director | |||||||||||
Gary D. Gall | 59 | 2009 | Director, President, Chief Executive Officer | |||||||||||
Reynold C. Johnson, III | 60 | 2010 | Director | |||||||||||
Kenneth J. Meyers | 44 | 2010 | Director | |||||||||||
Susann C. Trevena | 65 | Executive Vice President, Chief Financial Officer | ||||||||||||
Michael A. Behn | 53 | Executive Vice President, Chief Information Officer & Senior Credit Administrator | ||||||||||||
Phillip J. Campbell | 51 | Executive Vice President, General Counsel/Chief Risk Officer |
Name | Principal Occupation and Business Experience | |||||
---|---|---|---|---|---|---|
Kenneth E. Baker | Chairman of the Board of Directors of the Company since 2003 and Chairman of the Board of Directors of the Bank since 1995. A fourth generation resident of Nevada County, Mr. Baker retired from Nevada City Engineering, Inc., a full service civil engineering, land surveying and land planning firm, on August 31, 2004, after serving 29 years as President. He remains President of Hooper & Weaver Mortuary, Inc. since 1992, a local provider of death care services for Western Nevada County, and President of Hooper & Weaver Preneed Insurance Services, Inc. since 1994. | |||||
John T. Casey | Director of the Company since 2003 and Director of the Bank since 1995. Mr. Casey was President/CEO of Sierra Mountain Mills, a lumber manufacturing facility, from 1960-1984. From 1985 until his retirement in 2003, Mr. Casey was President/CEO of Caseywood Corporation. The company sells high-end quality building materials to contractors and owner builders in Nevada, Placer, Sierra, and Yuba counties. | |||||
Gary D. Gall | Director of the Company and the Bank since July 2009. Prior to that, between August 2008 and August 2009, he was Chairman of the Board for Sierra Vista Bank, Folsom, CA and between 1993 and 2006, was President and Chief Executive Officer for Western Sierra Bancorp, Cameron Park, CA. Prior to that, he was President and Chief Executive Officer of Delta National Bank in Manteca for six years. |
Name | Principal Occupation and Business Experience | |||||
---|---|---|---|---|---|---|
Reynold C. Johnson III | Director of the Company and of the Bank since June 2010. Mr. Johnson is Chairman of the Board of Pacific Land Enterprises and has a strong background of success in real estate development and banking. His 25+ year career in development spans five states and includes projects related to office and industrial parks, sports complexes and ranch and residential properties. Mr. Johnson’s active career in commercial banking includes co-founding of and board membership in Bank of Walnut Creek, which after 25 years, prior to being sold to First Republic in 2007, grew to approximately $600 million. At that bank, he served on the Investment and Audit Committees and was Chairman of the Compensation Committee and was a member of the Loan Committee. A former member of the Sutter Club in Sacramento, CA, he is an active leader in the western Nevada County communities. | |||||
Charles V. Litton, Jr. | Director of the Company since 2003 and Director of the Bank since 1995. Mr. Litton has been the President of Litton Engineering Laboratories, which designs and manufactures lathes and accessories used in the scientific glass apparatus, fiber optic, semiconductor, high intensity lamp and artistic glass industries, since 1972. He also served as President or Vice President of English Mountain Ranch since 1972, a family-owned real estate holding company. | |||||
Janie L. Marini | Director of the Company since 2003 and Director of the Bank since 1995. A tax accountant, Ms. Marini has practiced since 1978 and is the owner of her own firm, Marini Accounting & Tax Company. She is a member of the National Society of Public Accountants since 1985, as well as the National Association of Enrolled Agents, and the California Society of Enrolled Agents. | |||||
Kenneth J. Meyers | Director of the Company and of the Bank since June 2010. Mr. Meyers has 20 years experience in the investment industry with a deep history in serving Nevada County investors. Mr. Meyers is a Managing Director for investment firm R.W. Baird & Co. He holds a BS Degree in Finance from California State University, Chico, and also holds NASD Series 3, 7, 8, 63, and 65 licenses. He is a member of the University of Sacramento Steering Committee, a past member of Wachovia Securities and Payne Webber Advisory Councils, and a past member of CSU, Chico’s Business School Steering Committee. | |||||
Wyn G. Spiller | Director of the Company and Director of the Bank since January 2006, Ms. Spiller is a 30-year resident of Nevada County. Ms. Spiller holds a B.A. Degree in Psychology from Louisiana State University. Her diverse career spans 4 years in teaching, 10 years in retail ownership and 18 years with N.C.W.G. Inc. dba Nevada City Winery, currently serving as Chairman/CEO. Ms. Spiller is a former director and past President of the Nevada County Economic Resource Council. | |||||
Gary N. Tintle | Director of the Company since 2003 and Director of the Bank since 1995. Mr. Tintle has been President of Tintle, Inc., a Nevada County construction company, operating since 1988 and specializing in residential and commercial construction and remodeling projects. |
Name | Principal Occupation and Business Experience | |||||
---|---|---|---|---|---|---|
Susann C. Trevena | Executive Vice President and Chief Financial Officer of the Company since 2003 and the Bank since 2002. Prior to joining the Bank, Ms. Trevena was Vice President for Boston Private Bank & Trust Company and preceding that, Senior Vice President and Chief Financial Officer for Bank of Los Altos. | |||||
Michael A. Behn | Senior Vice President and Chief Information Officer of the Company and the Bank since 2004, and Executive Vice President and Chief Information Officer and Senior Credit Administrator since 2009. Prior to that he was Executive Manager of Getronics LLC in Los Angeles for four years and Vice President of City National Bank in Los Angeles for sixteen years. | |||||
Phillip J. Campbell | Executive Vice President and General Counsel and Chief Risk Officer of the Company and the Bank since August, 2009. Prior to that, between 2002 and 2009, he was Senior Vice President and Assistant General Counsel for Wells Fargo & Co. /Wachovia Corporation SBA lending subsidiaries and Western and Central Regional Counsel for Business Banking. He was also a partner at the law firm of Weintraub, Genshlea & Chediak in Sacramento. |
such responsibilities to the Executive Committee for the purpose of ARRA compliance until the Board establishes a standing Compensation Committee that is composed entirely of independent directors.
Name | Fees earned or paid in cash | Stock awards | Option awards | Non-equity incentive plan compensation | Nonqualified deferred compensation earnings | All other compensation | Total | |||||||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Kenneth Baker | $ | — | $ | — | $ | — | $ | — | $ | 38,642 | $ | 6,340 | $ | 44,982 | ||||||||||||||||
John Casey | 26,997 | — | — | — | — | 4,913 | 31,910 | |||||||||||||||||||||||
Charles Litton | 24,880 | — | — | — | — | 2,183 | 27,063 | |||||||||||||||||||||||
Janie Marini | — | — | — | — | 26,997 | 2,529 | 29,526 | |||||||||||||||||||||||
Wyn Spiller | 16,410 | — | — | — | — | 1,071 | 17,481 | |||||||||||||||||||||||
Gary Tintle | — | — | — | — | 19,586 | 1,367 | 20,953 |
to the termination of the agreements did not receive and are not entitled to future compensation with respect to the termination of the agreements.
Annual Compensation | Long-Term Compensation | |||||||||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Name and Principal Position | Year | Salary | Bonus(1) | Other Annual Compensation(2) | Awards of Securities Underlying Options | All Other Compensation | ||||||||||||||||||||
Gary D. Gall(3) President and Chief Executive Officer | 2009 | $ | 106,090 | — | $ | 2,000 | — | $ | 18,269 | (4) | ||||||||||||||||
Susann C. Trevena | 2009 | $ | 160,417 | — | $ | 4,800 | — | $ | 136,454 | (5) | ||||||||||||||||
Executive Vice President and | 2008 | $ | 150,000 | $ | 41,940 | $ | 4,800 | — | $ | 120,204 | (5) | |||||||||||||||
Chief Financial Officer | 2007 | $ | 150,000 | $ | 41,101 | $ | 4,800 | — | $ | 118,537 | (5) | |||||||||||||||
Michael A. Behn(6) | 2009 | $ | 134,620 | — | $ | 4,800 | — | $ | 7,969 | (7) | ||||||||||||||||
Executive Vice President and | 2008 | $ | 124,620 | $ | 12,500 | $ | 4,800 | — | $ | 7,244 | (7) | |||||||||||||||
Chief Information Officer and | 2007 | $ | 124,068 | $ | 12,500 | $ | 4,800 | — | $ | 11,576 | (7) | |||||||||||||||
Senior Credit Administrator | ||||||||||||||||||||||||||
Judith Hess(8) | 2009 | $ | 155,081 | — | $ | 4,800 | — | — | ||||||||||||||||||
Former President and | 2008 | $ | 180,000 | $ | 50,238 | $ | 4,800 | — | $ | 3,905 | (8) | |||||||||||||||
Chief Executive Officer | 2007 | $ | 156,000 | $ | 49,321 | $ | 4,800 | — | $ | 4,501 | (8) |
(1) | Other than the bonus accrued for 2007 that was paid in 2008, no bonus was accrued or paid for 2008 or 2009 |
(2) | Represents automobile allowances. |
(3) | Appointed President/Chief Executive Officer July 2009. |
(4) | Represents fees paid while serving in a consulting capacity prior to becoming President & Chief Executive Officer. |
(5) | Represents amounts accrued in 2009 pursuant to a salary continuation agreement between Citizens Bank and Ms. Trevena and $4,444 contribution to the profit-sharing plan accrued in 2006 and paid in 2007, and $3,400 contribution to the profit-sharing plan accrued in 2007 and paid in 2008. No profit-sharing contribution was accrued in 2008 or 2009. |
(6) | Appointed Executive Vice President October 2009. Mr. Behn was not in an executive role prior to that. |
(7) | Represents amounts accrued pursuant to a salary continuation agreement between Citizens Bank and Mr. Behn and $2,819 contribution to the profit-sharing plan accrued in 2006 and paid in 2007, and $2,454 contribution to the profit-sharing plan accrued in 2007 and paid in 2008. No profit-sharing contribution was accrued in 2008 or 2009. |
(8) | Ms. Hess’ position as President and Chief Executive Officer was terminated July 31, 2009. She was re-hired as Senior Vice President/Chief Banking Officer. The 2009 salary includes all amounts paid to her in both positions. Other Compensation represents $4,501 contribution to the profit-sharing plan accrued in 2006 and paid in 2007, and $3,905 accrued in 2007 and paid in 2008. |
Number of Securities Underlying Unexercised Options Held at December 31, 2009(1) | |||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|
Name | Exercisable | Unexercisable | |||||||||
Susann C. Trevena | 24,086 | 0 | |||||||||
Michael A. Behn | 3,647 | 0 |
(1) | Based on the closing price of Citizens Bancorp common stock on December 31, 2009, of $4.00 as reported by QuoteMedia.com, there were no in-the-money options at December 31, 2009 and there were no options exercised in 2009. |
Option awards | |||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Name | Number of securities underlying unexercised options exercisable | Option exercise price | Option expiration date | ||||||||||||
Gary D. Gall | — | N/A | N/A | ||||||||||||
Susann C. Trevena | 5,731 | $ | 14.3972 | 1/30/2012 | |||||||||||
9,116 | $ | 11.5178 | 2/20/2013 | ||||||||||||
9,239 | $ | 15.7136 | 12/16/2014 | ||||||||||||
Michael A. Behn | 3,647 | $ | 12.7519 | 2/19/2014 | |||||||||||
Judith Hess | — | N/A | N/A |
options issued to Judith Hess, which have now been forfeited, no stock options or shares have been granted or issued to other employees and directors under the 2006 Stock Plan. As of December 31, 2009, there were no options granted or exercisable under the 2006 Stock Plan.
• | each person known to us to beneficially own more than 5% of the outstanding shares of our common stock, |
• | each of our directors, |
• | each of the persons listed in the Summary Compensation Table, and |
• | all executive officers and directors as a group. |
Beneficial Ownership of Common Stock Before Offering | |||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|
Name and address of Beneficial Owner(1) | Shares Beneficially Owned(2) | Percent of Shares | |||||||||
Directors and Named Executive Officers | |||||||||||
Kenneth E. Baker(3) Chairman of the Board | 158,654 | 6.62 | % | ||||||||
John T. Casey(4) Director | 61,652 | 2.56 | % | ||||||||
Gary D. Gall Director and President/Chief Executive Officer | 70,000 | 2.92 | % | ||||||||
Charles V. Litton, Jr.(5) Director | 48,856 | 2.03 | % | ||||||||
Janie L. Marini(6) Director | 83,481 | 3.47 | % | ||||||||
Wyn G. Spiller(7) Director | 14,719 | 0.61 | % | ||||||||
Gary N. Tintle(8) Director | 76,537 | 3.18 | % | ||||||||
Michael A. Behn(9) EVP / Chief Information Officer & Senior Credit Administrator | 6,147 | 0.26 | % | ||||||||
Phillip J. Campbell EVP / General Counsel & Chief Risk Officer | 6,250 | 0.26 | % | ||||||||
Susann C. Trevena(10) EVP / Chief Financial Officer | 28,511 | 1.18 | % | ||||||||
Judith Hess(11) Former Director and President/Chief Executive Officer | 8,952 | 0.37 | % | ||||||||
Timothy R. Peterson(12) Former Executive Vice President & Chief Credit Officer | 11,010 | 0.46 | % | ||||||||
Reynold C. Johnson, III(13) Director | 57,724 | 2.41 | % | ||||||||
Kenneth J. Meyers(13) Director | 5,000 | 0.21 | % | ||||||||
All Directors and Executive Officers as a Group (14 people) | 637,493 | 26.54 | % |
(1) | The address of each of the beneficial owners is c/o Citizens Bancorp, 208 Providence Mine Rd. #122, Nevada City, CA 95959. |
(2) | Includes shares issuable upon the exercise of stock options exercisable within 60 days of the Record Date. Shares of Citizens Bancorp Common Stock issuable upon exercise of stock options are deemed outstanding for computing the percentage of the person holding such securities, but are not deemed outstanding for computing the percentage of any other person. |
(3) | Includes 113,248 shares held jointly by Mr. Baker and his spouse as trustees of the Baker Family Trust, 4,687 shares held in an IRA for Mr. Baker’s spouse, 38,220 shares held in an IRA for Mr. Baker, and 2,499 shares held for the benefit of Mr. Baker’s seven minor grandchildren. |
(4) | Includes 53,752 shares held jointly by Mr. Casey and his spouse as trustees of the Casey Family Revocable Living Trust, and 7,900 shares issuable upon the exercise of stock options. |
(5) | Includes 8,750 shares held jointly by Mr. Litton and his spouse as trustees of the Charles V. Litton & Janeille Litton Trust, 11,544 shares held jointly by Mr. Litton and his spouse, and 7,293 shares issuable upon exercise of stock options. |
(6) | Includes 76,249 shares held jointly by Ms. Marini and her spouse, and 7,232 shares issuable upon exercise of stock options. |
(7) | Includes 3,642 held jointly by Ms. Spiller and her spouse as trustees of the Lindsay C. Spiller Trust, the Katherine S. Spiller Trust, and the Ross B. Spiller Trust, and 7,128 shares held in an IRA for Wyn Spiller. |
(8) | Includes 47,207 shares held by the Gary N. and Patricia A. Tintle Trust, 579 shares held by the custodian for Susan Tintle, 12,258 shares held by the Patricia A. Tintle IRA, 3,917 shares held by the Gary N. Tintle IRA, 1,974 shares held by the Tintle, Inc. 401(k) Profit Sharing Trust, and 10,602 shares issuable upon exercise of stock options. |
(9) | Includes 3,647 shares issuable upon exercise of stock options. |
(10) | Includes 24,086 shares issuable upon exercise of stock options. |
(11) | Ms. Hess terminated her position as President/Chief Executive Officer on July 31, 2009. |
(12) | Mr. Peterson terminated his position as Executive Vice President/Chief Credit Officer on June 17, 2009. |
(13) | Mr. Johnson and Mr. Meyers were appointed to the Board of Directors in June 2010. |
• | are entitled to one vote for each share on all matters submitted to a vote of shareholders (such as the election of directors, approval and any amendments to our option plan, certain amendments to our Articles of Incorporation and Bylaws, and certain mergers, sale of assets and other consolidation transactions); |
• | may cumulate their votes in the election of our directors (that is, to give any candidate or any number of candidates standing for election, a number of votes equal to the number of directors to be elected multiplied by the number of shares which such shareholder owns), provided that such candidate or candidates’ names have been placed in nomination prior to voting and a shareholder has given notice at the meeting, prior to the vote on the election of directors, of the shareholder’s intention to cumulate his or her votes. If any one shareholder has given such notice, all shareholders may cumulate their votes for nominated candidates. The candidates who receive the highest number of votes will be elected as directors; |
• | are entitled to receive such cash dividends, if any, as may be declared by our Board of Directors out of legally available funds, subject to the preference in dividend rights of the Series A and Series B Preferred Stock and other series of preferred stock subsequently issued or other obligations, including the interest payments on our trust preferred securities; |
• | will be entitled to all assets that are legally available for distribution upon our liquidation, dissolution or winding up, after payment of all debts and liabilities, including funds of depositors, and after payment of the liquidation preferences of the Series A and Series B Preferred Stock and other series of preferred stock then outstanding; |
• | have no preemptive, subscription, redemption, sinking fund or conversion rights and are not subject to further calls or assessments; |
• | are subject to the rights of the Series A and Series B Preferred Stock and any series of preferred stock issued and outstanding as well as any series of preferred stock we may issue in the future; and |
• | are provided annual reports including audited financial statements. |
INVESTMENT [*] / Unit) | WARRANTS (per Unit Purchased) | EXERCISE PRICE | TERM | |||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
$1,000,000 and above | 1.00 | $5.00 | 3 Years — 50% 7 Years — 50% | |||||||||||
$500,000 to $999,999 | 0.75 | $5.00 | 3 Years — 50% 7 Years — 50% | |||||||||||
$250,000 to $499,999 | 0.50 | $5.00 | 3 Years — 50% 7 Years — 50% | |||||||||||
$100,000 to $249,999 | 0.25 | $5.00 | 3 Years — 50% 7 Years — 50% | |||||||||||
$[*] to $99,999 | 0.00 | Not applicable | Not applicable |
cash, certified check or any combination thereof equal to the total exercise price. The Warrant Agent will then return to the holder a certificate evidencing the number of shares of common stock issued upon exercise. If less than all the shares covered by the 2011 Warrant certificate surrendered are being purchased, a new certificate representing the unexercised portion of the 2011 Warrants, will be issued.
Gary D. Gall | Susann C. Trevena | |||||
President / Chief Executive Officer | Executive Vice President / Chief Financial Officer | |||||
Citizens Bancorp | Citizens Bancorp | |||||
(530) 478-6000 | (530) 478-6000 |
Page | ||||||
---|---|---|---|---|---|---|
Citizens Bancorp | ||||||
AUDITED | ||||||
Report of Independent Registered Public Accounting Firm | F-1 | |||||
Consolidated Balance Sheet as of December 31, 2009 and 2008 | F-2 | |||||
Consolidated Statement of Operations for the Years Ended December 31, 2009, 2008 and 2007 | F-3 | |||||
Consolidated Statement of Changes in Shareholders’ Equity for the Years Ended December 31, 2009, 2008 and 2007 | F-4 | |||||
Consolidated Statement of Cash Flows for the Years Ended December 31, 2009, 2008 and 2007 | F-7 | |||||
Notes to Consolidated Financial Statements | F-9 | |||||
UNAUDITED | ||||||
Condensed Consolidated Balance Sheet as of September 30, 2010 and December 31, 2009 | F-42 | |||||
Condensed Consolidated Statement of Operations for the Three and Nine Months Ended September 30, 2010 and 2009 | F-43 | |||||
Condensed Consolidated Statement of Changes in Shareholders’ Equity for the Nine Months Ended September 30, 2009 and 2010 | F-44 | |||||
Condensed Consolidated Statement of Cash Flows for the Nine Months Ended September 30, 2010 and 2009 | F-46 | |||||
Notes to Condensed Consolidated Financial Statements Unaudited | F-47 |
![](https://capedge.com/proxy/S-1A/0001145443-11-000041/d27324letterhead.jpg)
Board of Directors
Citizens Bancorp and Subsidiary
![](https://capedge.com/proxy/S-1A/0001145443-11-000041/perrysmith.jpg)
2009 | 2008 | |||||||||
---|---|---|---|---|---|---|---|---|---|---|
ASSETS | ||||||||||
Cash and due from banks | $ | 6,413,965 | $ | 7,049,509 | ||||||
Interest-bearing deposits due from banks | 55,420,753 | 419,101 | ||||||||
Federal funds sold | 25,260,000 | |||||||||
Cash and cash equivalents | 61,834,718 | 32,728,610 | ||||||||
Time deposits in other banks | 100,000 | 100,000 | ||||||||
Available-for-sale investment securities (Note 4) | 1,561,658 | 1,161,000 | ||||||||
Loans, less allowance for credit losses of $14,387,379 in 2009 and $12,406,146 in 2008 (Notes 5, 9, 12 and 15) | 290,351,610 | 299,967,581 | ||||||||
Premises and equipment, net (Note 7) | 1,547,127 | 2,073,006 | ||||||||
Cash surrender value of bank-owned life insurance (Note 14) | 6,115,775 | 5,907,107 | ||||||||
Other real estate owned | 4,649,762 | 6,194,799 | ||||||||
Accrued interest receivable and other assets (Note 11) | 4,897,222 | 15,141,432 | ||||||||
Total assets | $ | 371,057,872 | $ | 363,273,535 | ||||||
LIABILITIES AND SHAREHOLDERS’ EQUITY | ||||||||||
Deposits: | ||||||||||
Noninterest-bearing | $ | 76,123,629 | $ | 65,218,160 | ||||||
Interest-bearing (Note 8) | 226,507,652 | 234,540,248 | ||||||||
Total deposits | 302,631,281 | 299,758,408 | ||||||||
Short-term borrowings (Note 9) | 25,000,000 | 8,000,000 | ||||||||
Long-term debt (Note 9) | 15,000,000 | 15,000,000 | ||||||||
Junior subordinated debentures (Note 10) | 15,465,000 | 15,465,000 | ||||||||
Accrued interest payable and other liabilities (Note 14) | 3,456,759 | 3,754,179 | ||||||||
Total liabilities | 361,553,040 | 341,977,587 | ||||||||
Commitments and contingencies (Note 12) | ||||||||||
Shareholders’ equity (Note 13): | ||||||||||
Serial preferred stock — 2,500,000 shares authorized | ||||||||||
Series A preferred stock; 10,400 shares outstanding in 2009 and 2008 | 9,952,881 | 9,848,881 | ||||||||
Series B preferred stock; 520 shares outstanding in 2009 and 2008 | 520,000 | 520,000 | ||||||||
Common stock — no par value; 5,000,000 shares authorized; outstanding 2,310,090 shares in 2009 and 1,915,981 in 2008 | 15,945,833 | 14,373,787 | ||||||||
Accumulated deficit | (16,921,714 | ) | (3,454,196 | ) | ||||||
Accumulated other comprehensive income, net of taxes (Notes 4 and 17) | 7,832 | 7,476 | ||||||||
Total shareholders’ equity | 9,504,832 | 21,295,948 | ||||||||
Total liabilities and shareholders’ equity | $ | 371,057,872 | $ | 363,273,535 |
part of these consolidated financial statements.
2009 | 2008 | 2007 | ||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Interest income: | ||||||||||||||
Interest and fees on loans | $ | 19,214,678 | $ | 21,801,460 | $ | 22,427,955 | ||||||||
Interest on investment securities: | ||||||||||||||
Taxable | 39,310 | 39,768 | 55,226 | |||||||||||
Tax exempt | 265 | |||||||||||||
Interest on Federal funds sold | 8,429 | 124,770 | 66,286 | |||||||||||
Interest on deposits in banks | 27,320 | 4,752 | 8,105 | |||||||||||
Total interest income | 19,290,002 | 21,970,750 | 22,557,572 | |||||||||||
Interest expense: | ||||||||||||||
Interest expense on deposits (Note 8) | 3,226,616 | 5,449,328 | 6,689,819 | |||||||||||
Interest on borrowings (Note 9) | 472,929 | 492,917 | 398,150 | |||||||||||
Interest on junior subordinated debentures (Note 10) | 468,939 | 928,259 | 1,175,452 | |||||||||||
Total interest expense | 4,168,484 | 6,870,504 | 8,263,421 | |||||||||||
Net interest income before provision for credit losses | 15,121,518 | 15,100,246 | 14,294,151 | |||||||||||
Provision for credit losses (Note 5) | 11,115,000 | 23,900,000 | 945,000 | |||||||||||
Net interest (loss) income after provision for credit losses | 4,006,518 | (8,799,754 | ) | 13,349,151 | ||||||||||
Non-interest income: | ||||||||||||||
Service charges | 1,359,539 | 1,251,361 | 1,030,798 | |||||||||||
Broker fee income | 688,944 | 491,465 | 798,086 | |||||||||||
Gain on transfer of financial assets (Note 6) | 2,817,928 | |||||||||||||
Other income | 245,489 | 397,515 | 377,162 | |||||||||||
Total non-interest income | 5,111,900 | 2,140,341 | 2,206,046 | |||||||||||
Non-interest expenses: | ||||||||||||||
Salaries and employee benefits (Notes 5 and 14) | 4,924,802 | 5,270,900 | 6,051,453 | |||||||||||
Occupancy and equipment (Notes 7, 12 and 15) | 1,770,501 | 1,862,829 | 1,792,674 | |||||||||||
Loss on sale/writedown of other real estate owned | 3,440,961 | 116,393 | ||||||||||||
Other expenses (Note 16) | 5,554,101 | 4,403,860 | 3,398,538 | |||||||||||
Total non-interest expenses | 15,690,365 | 11,653,982 | 11,242,665 | |||||||||||
(Loss) income before income taxes | (6,571,947 | ) | (18,313,395 | ) | 4,312,532 | |||||||||
Provision for (benefit from) income taxes (Note 11) | 6,568,000 | (7,662,000 | ) | 1,728,000 | ||||||||||
Net (loss) income | (13,139,947 | ) | (10,651,395 | ) | 2,584,532 | |||||||||
Dividends and discount accretion on preferred stock (Note 13) | (327,571 | ) | ||||||||||||
Net (loss) income applicable to common shareholders | $ | (13,467,518 | ) | $ | (10,651,395 | ) | $ | 2,584,532 | ||||||
Basic (loss) earnings per share (Note 13) | $ | (7.01 | ) | $ | (5.56 | ) | $ | 1.35 | ||||||
Diluted (loss) earnings per share (Note 13) | $ | (7.01 | ) | $ | (5.56 | ) | $ | 1.32 |
part of these consolidated financial statements.
Preferred Stock | Common Stock | |||||||||||||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Shares | Amount | Shares | Amount | Retained Earnings (Accumulated Deficit) | Accumulated Other Comprehensive Income (Loss), Net of Taxes | Total Shareholders’ Equity | ||||||||||||||||||||||||
Balance, January 1, 2007 | — | $ | — | 1,733,182 | $ | 10,699,977 | $ | 8,179,241 | $ | (15,000 | ) | $ | 18,864,218 | |||||||||||||||||
Comprehensive income (Note 17): | ||||||||||||||||||||||||||||||
Net income | 2,584,532 | 2,584,532 | ||||||||||||||||||||||||||||
Other comprehensive income, net of tax: | ||||||||||||||||||||||||||||||
Net change in unrealized losses on available-for-sale investment securities | 12,591 | 12,591 | ||||||||||||||||||||||||||||
Total comprehensive income | 2,597,123 | |||||||||||||||||||||||||||||
Stock dividend (Note 13) | 86,484 | 2,139,614 | (2,139,614 | ) | ||||||||||||||||||||||||||
Cash paid for fractional shares | (5,424 | ) | (5,424 | ) | ||||||||||||||||||||||||||
Stock-based compensation expense (Note 13) | 92,220 | 92,220 | ||||||||||||||||||||||||||||
Retirement of common stock in connection with the exercise of stock options | (382 | ) | (9,206 | ) | (9,206 | ) | ||||||||||||||||||||||||
Stock options exercised and related tax benefit (Note 13) | 2,822 | 33,299 | 33,299 | |||||||||||||||||||||||||||
Balance, December 31, 2007 | — | — | 1,822,106 | $ | 12,955,904 | $ | 8,618,735 | $ | (2,409 | ) | $ | 21,572,230 |
part of these consolidated financial statements.
(Continued)
Preferred Stock | Common Stock | |||||||||||||||||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Shares | Amount | Shares | Amount | Retained Earnings (Accumulated Deficit) | Accumulated Other Comprehensive Income (Loss), Net of Taxes | Total Shareholders’ Equity | ||||||||||||||||||||||||||||
Balance, December 31, 2007 | — | $ | — | 1,822,106 | $ | 12,955,904 | $ | 8,618,735 | $ | (2,409 | ) | $ | 21,572,230 | |||||||||||||||||||||
Cumulative effect of change in accounting principle, adoption of EITF 06-4 (Note 14) | (98,397 | ) | (98,397 | ) | ||||||||||||||||||||||||||||||
Comprehensive loss (Note 17): | ||||||||||||||||||||||||||||||||||
Net loss | (10,651,395 | ) | (10,651,395 | ) | ||||||||||||||||||||||||||||||
Other comprehensive income, net of tax: | ||||||||||||||||||||||||||||||||||
Net change in unrealized losses on Available-for-sale investment securities | 9,885 | 9,885 | ||||||||||||||||||||||||||||||||
Total comprehensive loss | (10,641,510 | ) | ||||||||||||||||||||||||||||||||
Stock dividend (Note 13) | 90,982 | 1,319,239 | (1,319,239 | ) | ||||||||||||||||||||||||||||||
Cash paid for fractional shares | (3,900 | ) | (3,900 | ) | ||||||||||||||||||||||||||||||
Issuance of Series A preferred stock, net of issuance costs (Note 13) | 10,400 | 9,848,881 | 9,848,881 | |||||||||||||||||||||||||||||||
Issuance of Series B preferred stock upon exercise of preferred stock warrants (Note 13) | 520 | 520,000 | 520,000 | |||||||||||||||||||||||||||||||
Stock-based compensation expense (Note 13) | 77,900 | 77,900 | ||||||||||||||||||||||||||||||||
Stock options exercised and related tax benefit (Note 13) | 2,893 | 20,744 | 20,744 | |||||||||||||||||||||||||||||||
Balance, December 31, 2008 | 10,920 | $ | 10,368,881 | 1,915,981 | $ | 14,373,787 | $ | (3,454,196 | ) | $ | 7,476 | $ | 21,295,948 |
part of these consolidated financial statements.
(Continued)
Preferred Stock | Common Stock | |||||||||||||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Shares | Amount | Shares | Amount | Retained Earnings (Accumulated Deficit) | Accumulated Other Comprehensive Income (Loss), Net of Taxes | Total Shareholders’ Equity | ||||||||||||||||||||||||
Balance, December 31, 2008 | 10,920 | $ | 10,368,881 | 1,915,981 | $ | 14,373,787 | $ | (3,454,196 | ) | $ | 7,476 | $ | 21,295,948 | |||||||||||||||||
Comprehensive loss (Note 17): | ||||||||||||||||||||||||||||||
Net loss | (13,139,947 | ) | (13,139,947 | ) | ||||||||||||||||||||||||||
Other comprehensive income, net of tax: | ||||||||||||||||||||||||||||||
Net change in unrealized gains on Available-for-sale investment securities (Note 4) | 356 | 356 | ||||||||||||||||||||||||||||
Total comprehensive loss | �� | (13,139,591 | ) | |||||||||||||||||||||||||||
Issuance of common stock (Note 13) | 394,109 | 1,559,034 | 1,559,034 | |||||||||||||||||||||||||||
Dividends declared and paid on preferred stock (Note 13) | (223,571 | ) | (223,571 | ) | ||||||||||||||||||||||||||
Amortization of preferred stock discount (Note 13) | 104,000 | (104,000 | ) | |||||||||||||||||||||||||||
Stock-based compensation expense (Note 13) | 13,012 | 13,012 | ||||||||||||||||||||||||||||
Balance, December 31, 2009 | 10,920 | $ | 10,472,881 | 2,310,090 | $ | 15,945,833 | $ | (16,921,714 | ) | $ | 7,832 | $ | 9,504,832 |
part of these consolidated financial statements.
2009 | 2008 | 2007 | ||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Cash flows from operating activities: | ||||||||||||||
Net (loss) income | $ | (13,139,947 | ) | $ | (10,651,395 | ) | $ | 2,584,532 | ||||||
Adjustments to reconcile net (loss) income to net cash provided by operating activities: | ||||||||||||||
Stock-based compensation expense | 13,012 | 77,900 | 92,220 | |||||||||||
Provision for credit losses | 11,115,000 | 23,900,000 | 945,000 | |||||||||||
Valuation allowance on other real estate owned (OREO) | 3,377,807 | 35,851 | ||||||||||||
Depreciation and amortization | 617,416 | 671,526 | 667,669 | |||||||||||
Accretion on investment securities | 18,840 | 162 | ||||||||||||
Gain on sale of loans | (70,845 | ) | ||||||||||||
Gain on transfer of financial assets | (2,817,928 | ) | ||||||||||||
Loss on sale of OREO | 63,154 | 80,542 | ||||||||||||
Decrease in deferred loan origination fees, net | (93,022 | ) | (166,145 | ) | (127,091 | ) | ||||||||
Benefit (provision for) deferred income taxes | 6,579,000 | (4,559,000 | ) | (488,000 | ) | |||||||||
Increase in cash surrender value of bank-owned life insurance | (208,668 | ) | (207,348 | ) | (220,206 | ) | ||||||||
Decrease (increase) in accrued interest receivable and other assets | 4,202,759 | (4,372,554 | ) | (211,853 | ) | |||||||||
(Decrease) increase in accrued interest payable and other liabilities | (297,420 | ) | 14,382 | 815,085 | ||||||||||
Net cash provided by operating activities | 9,430,003 | 4,753,076 | 4,057,356 | |||||||||||
Cash flows from investing activities: | ||||||||||||||
Purchase of available-for-sale investment securities | (1,568,903 | ) | (1,148,500 | ) | (300,118 | ) | ||||||||
Proceeds from matured or called available- for-sale investment securities | 1,150,000 | 1,300,000 | ||||||||||||
Proceeds from sale of loans | 2,422,000 | 5,720,171 | ||||||||||||
Purchase of loan portfolio | (20,145,000 | ) | ||||||||||||
Proceeds from sale of OREO | 4,172,875 | 2,018,618 | ||||||||||||
Investment in OREO | (385,218 | ) | (1,047,891 | ) | ||||||||||
Net purchase of FHLB stock | (563,900 | ) | (196,500 | ) | (209,700 | ) | ||||||||
Net decrease (increase) in loans | 13,451,340 | (35,416,636 | ) | (46,026,500 | ) | |||||||||
Purchase of premises and equipment | (91,537 | ) | (167,645 | ) | (595,355 | ) | ||||||||
Purchase of bank-owned life insurance | (75,000 | ) | ||||||||||||
Principal payments received on tax credit instrument | 26,112 | 26,112 | 103,483 | |||||||||||
Net cash used in investing activities | (1,532,231 | ) | (28,912,271 | ) | (47,103,190 | ) |
part of these consolidated financial statements.
(Continued)
2009 | 2008 | 2007 | ||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Cash flows from financing activities: | ||||||||||||||
Net increase (decrease) in demand, interest-bearing demand and savings deposits | $ | 33,560,674 | $ | (4,618,554 | ) | $ | 20,784,801 | |||||||
Net (decrease) increase in time deposits | (30,687,801 | ) | 30,122,311 | 10,232,858 | ||||||||||
Proceeds from issuance of preferred stock, net | 10,368,881 | |||||||||||||
Dividends paid on preferred stock | (223,571 | ) | ||||||||||||
Net change in short-term borrowings | 17,000,000 | (5,500,000 | ) | 13,500,000 | ||||||||||
Net change in long-term debt | 15,000,000 | |||||||||||||
Cash paid for fractional shares | (3,900 | ) | (5,424 | ) | ||||||||||
Proceeds from exercise of stock options | 20,744 | 24,093 | ||||||||||||
Proceeds from issuance of common stock | 1,559,034 | |||||||||||||
Net cash provided by financing activities | 21,208,336 | 45,389,482 | 44,536,328 | |||||||||||
Increase in cash and cash equivalents | 29,106,108 | 21,230,287 | 1,490,494 | |||||||||||
Cash and cash equivalents at beginning of year | 32,728,610 | 11,498,323 | 10,007,829 | |||||||||||
Cash and cash equivalents at end of year | $ | 61,834,718 | $ | 32,728,610 | $ | 11,498,323 | ||||||||
Supplemental disclosure of cash flow information: | ||||||||||||||
Cash paid (received) during the year for: | ||||||||||||||
Interest expense | $ | 4,476,647 | $ | 6,916,034 | $ | 8,230,499 | ||||||||
Income taxes | $ | (4,564,702 | ) | $ | 1,335,000 | $ | 2,325,000 | |||||||
Non-cash investing activities: | �� | |||||||||||||
Net change in unrealized gains (losses) on available-for-sale investment securities | $ | 595 | $ | 16,662 | $ | 20,882 | ||||||||
Real estate acquired through foreclosure | $ | 5,683,581 | $ | 7,281,919 | ||||||||||
Amortization of preferred stock discount | $ | 104,000 |
part of these consolidated financial statements.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. | THE BUSINESS OF CITIZENS BANCORP |
2. | SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES |
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
• | Available-for-sale securities, reported at fair value, with unrealized gains and losses excluded from earnings and reported, net of taxes, as accumulated other comprehensive income (loss) within shareholders’ equity. |
• | Held-to-maturity securities, which management has the positive intent and ability to hold, reported at amortized cost, adjusted for the accretion of discounts and amortization of premiums. |
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
2007 | ||||||
---|---|---|---|---|---|---|
Dividend yield (not applicable) | ||||||
Expected volatility | 15.00% | |||||
Risk-free interest rate | 4.75% | |||||
Expected option life | 7.5 years | |||||
Weighted average fair value of options granted during the year | $7.20 |
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
3. | FAIR VALUE MEASUREMENTS |
December 31, 2009 | December 31, 2008 | ||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Carrying Amount | Fair Value | Carrying Amount | Fair Value | ||||||||||||||||
Financial assets: | |||||||||||||||||||
Cash and due from banks | $ | 6,413,965 | $ | 6,413,965 | $ | 7,049,509 | $ | 7,049,509 | |||||||||||
Interest-bearing deposits due from banks | 55,420,753 | 55,420,753 | 419,101 | 419,101 | |||||||||||||||
Federal funds sold | 25,260,000 | 25,260,000 | |||||||||||||||||
Time deposits in other banks | 100,000 | 100,000 | 100,000 | 100,000 | |||||||||||||||
Available-for-sale investment securities | 1,561,658 | 1,561,658 | 1,161,000 | 1,161,000 | |||||||||||||||
Loans, net | 290,351,610 | 275,454,564 | 299,967,581 | 285,784,374 | |||||||||||||||
Cash surrender value of bank-owned life insurance | 6,115,775 | 6,115,775 | 5,907,107 | 5,907,107 | |||||||||||||||
FHLB stock | 1,880,000 | 1,880,000 | 1,316,100 | 1,316,100 | |||||||||||||||
Tax credit instrument | 26,111 | 26,111 | 52,223 | 52,223 | |||||||||||||||
Accrued interest receivable | 1,953,281 | 1,953,281 | 1,522,519 | 1,522,519 | |||||||||||||||
Financial liabilities: | |||||||||||||||||||
Deposits | $ | 302,631,281 | $ | 302,144,383 | $ | 299,758,408 | $ | 299,217,721 | |||||||||||
Short-term borrowings | 25,000,000 | 25,000,000 | 8,000,000 | 8,000,000 | |||||||||||||||
Long-term debt | 15,000,000 | 15,024,824 | 15,000,000 | 15,108,147 | |||||||||||||||
Junior subordinated debentures | 15,465,000 | 5,780,673 | 15,465,000 | 2,090,215 | |||||||||||||||
Accrued interest payable | 232,988 | 232,988 | 501,045 | 501,045 |
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
Description | Fair Value | Level 1 | Level 2 | Level 3 | ||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Available-for-sale investment securities: | ||||||||||||||||||
December 31, 2009 | $ | 1,561,658 | $ | — | $ | 1,561,658 | $ | — | ||||||||||
December 31, 2008 | $ | 1,161,000 | $ | — | $ | 1,161,000 | $ | — |
Description | Fair Value December 31, 2009 | Level 1 | Level 2 | Level 3 | Total Gains (Losses) | |||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Impaired loans | $ | 33,561,000 | $ | $ | $ | 33,561,000 | $ | (9,599,000 | ) | |||||||||||||
Other real estate | 4,649,762 | 4,649,762 | (1,634,600 | ) | ||||||||||||||||||
Total assets measured at fair value on a non-recurring basis | $ | 38,210,762 | $ | — | $ | — | $ | 38,210,762 | $ | (11,233,600 | ) |
Description | Fair Value December 31, 2008 | Level 1 | Level 2 | Level 3 | Total Gains (Losses) | |||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Impaired loans | $ | 20,153,000 | $ | $ | $ | 20,153,000 | $ | (9,625,000 | ) | |||||||||||||
Other real estate | 6,194,799 | 6,194,799 | (35,851 | ) | ||||||||||||||||||
Total assets measured at fair value on a non-recurring basis | $ | 26,347,799 | $ | — | $ | — | $ | 26,347,799 | $ | (9,660,851 | ) |
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
4. | AVAILABLE-FOR-SALE INVESTMENT SECURITIES |
2009 | |||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Amortized Cost | Gross Unrealized Gains | Gross Unrealized Losses | Estimated Fair Value | ||||||||||||||||
Debt securities: | |||||||||||||||||||
U.S. Government agencies | $ | 1,548,518 | $ | 13,140 | $ | — | $ | 1,561,658 |
2008 | |||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Amortized Cost | Gross Unrealized Gains | Gross Unrealized Losses | Estimated Fair Value | ||||||||||||||||
Debt securities: | |||||||||||||||||||
U.S. Government agencies | $ | 1,148,456 | $ | 12,544 | $ | — | $ | 1,161,000 |
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
5. | LOANS AND THE ALLOWANCE FOR LOAN LOSSES |
December 31, | |||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|
2009 | 2008 | ||||||||||
Commercial | $ | 43,461,030 | $ | 50,781,651 | |||||||
Real estate — residential | 69,533,034 | 47,678,612 | |||||||||
Real estate — nonresidential | 145,718,979 | 145,877,630 | |||||||||
Real estate — construction | 40,793,632 | 62,319,507 | |||||||||
Consumer | 5,238,080 | 5,815,115 | |||||||||
304,744,755 | 312,472,515 | ||||||||||
Deferred loan origination fees, net | (5,766 | ) | (98,788 | ) | |||||||
Allowance for credit losses | (14,387,379 | ) | (12,406,146 | ) | |||||||
$ | 290,351,610 | $ | 299,967,581 |
Year Ended December 31, | |||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
2009 | 2008 | 2007 | |||||||||||||
Balance, beginning of year | $ | 12,406,146 | $ | 3,918,602 | $ | 3,373,692 | |||||||||
Provision charged to operations | 11,115,000 | 23,900,000 | 945,000 | ||||||||||||
Losses charged to allowance | (9,482,330 | ) | (15,508,807 | ) | (400,090 | ) | |||||||||
Recoveries of loans previously charged-off | 348,563 | 96,351 | |||||||||||||
Balance, end of year | $ | 14,387,379 | $ | 12,406,146 | $ | 3,918,602 |
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
6. | TRANSFER OF FINANCIAL ASSETS |
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
to estimate the fair value of the loans using assumptions for the weighted average rate, weighted average maturity and prepayment speed. The discount rates were based on the following assumptions: 1) Alternative Cost of Funds — Estimated weighted alternative cost of funds to fund the portfolio using Federal Home Loan Bank borrowings and time deposits; 2) Credit and Liquidity Premiums — The credit and liquidity premiums for the portfolio were calculated based on the default probabilities and expected losses of the underlying loans and market for portfolios of performing mortgage loans; and 3) Capital Charge — A capital charge was calculated based on a return on capital required for the market participant’s investment to meet incremental regulatory capital requirements. Based on the aforementioned analysis, the Company utilized an estimated discount rate of 6.84%. The Company estimated a constant prepayment rate of 20.0% based on information published in third party periodicals and a weighted average maturity of 83 months based on the weighted average date of the end of the interest only term for the portfolio. These cash flows were discounted to the present value at a rate that reflected both the return requirements and the risk inherent in the specific investment. The Company also applied incremental illiquidity discounts to the performing loans based on similarly rated corporate bonds. The incremental discounts are for additional illiquidity associated with disposition of the performing loans in the market environment in effect when the portfolio was purchased. In addition, the Company estimated the fair value of the default reserve fund based on the present value of the estimated potential losses during the 36 months that the seller agreed to repurchase past due loans. Based on these assumptions, the non-recurring fair value of the portfolio was determined to be 93.38% of par or $24,896,000 as of October 2009.
7. | PREMISES AND EQUIPMENT |
December 31, | |||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|
2009 | 2008 | ||||||||||
Furniture and equipment | $ | 3,372,877 | $ | 3,348,183 | |||||||
Leasehold improvements | 1,893,864 | 1,881,937 | |||||||||
5,266,741 | 5,230,120 | ||||||||||
Less accumulated depreciation and amortization | (3,719,614 | ) | (3,157,114 | ) | |||||||
$ | 1,547,127 | $ | 2,073,006 |
8. | INTEREST-BEARING DEPOSITS |
December 31, | |||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|
2009 | 2008 | ||||||||||
Savings | $ | 18,287,085 | $ | 14,301,394 | |||||||
Money market | 65,373,400 | 55,350,706 | |||||||||
NOW accounts | 43,801,948 | 35,155,128 | |||||||||
Time, $100,000 or more | 44,045,087 | 35,497,732 | |||||||||
Other time | 55,000,132 | 94,235,288 | |||||||||
$ | 226,507,652 | $ | 234,540,248 |
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
Year Ending December 31, | ||||||
---|---|---|---|---|---|---|
2010 | $ | 91,252,932 | ||||
2011 | 6,621,066 | |||||
2012 | 325,908 | |||||
2013 | 845,313 | |||||
$ | 99,045,219 |
2009 | 2008 | 2007 | ||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Savings | $ | 66,501 | $ | 71,921 | $ | 111,526 | ||||||||
Money market | 640,032 | 1,328,646 | 1,658,289 | |||||||||||
NOW accounts | 88,416 | 99,994 | 104,584 | |||||||||||
Time, $100,000 or more | 869,538 | 1,297,071 | 2,172,450 | |||||||||||
Other time | 1,562,129 | 2,651,696 | 2,642,970 | |||||||||||
$ | 3,226,616 | $ | 5,449,328 | $ | 6,689,819 |
9. | BORROWING ARRANGEMENTS |
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
December 31, 2009 | December 31, 2008 | |||||||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Amount | Rate | Maturity Date | Amount | Rate | Maturity Date | |||||||||||||||||||
$3,000,000 | 0.94% | January 2010 | $ | 3,000,000 | 1.83 | % | January 2009 | |||||||||||||||||
5,000,000 | 2.41% | February 2010 | 3,000,000 | 0.54 | % | June 2009 | ||||||||||||||||||
3,000,000 | 0.63% | March 2010 | 2,000,000 | 0.72 | % | September 2009 | ||||||||||||||||||
3,000,000 | 0.64% | March 2010 | ||||||||||||||||||||||
3,000,000 | 0.79% | June 2010 | $ | 8,000,000 | ||||||||||||||||||||
3,000,000 | 0.81% | June 2010 | ||||||||||||||||||||||
5,000,000 | 0.56% | October 2010 | ||||||||||||||||||||||
$25,000,000 |
December 31, 2009 | December 31, 2008 | |||||||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Amount | Rate | Maturity Date | Amount | Rate | Maturity Date | |||||||||||||||||||
$5,000,000 | 2.42% | January 2011 | 5,000,000 | 2.41 | % | February 2010 | ||||||||||||||||||
5,000,000 | 2.06% | March 2011 | 5,000,000 | 2.42 | % | January 2011 | ||||||||||||||||||
5,000,000 | 1.20% | October 2011 | 5,000,000 | 2.06 | % | March 2011 | ||||||||||||||||||
$15,000,000 | $ | 15,000,000 |
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
10. | JUNIOR SUBORDINATED DEBENTURES |
Subordinated debentures due to Citizens Bancorp Trust I with interest payable quarterly, based on 3-month LIBOR plus 3.30%, repricing quarterly (3.58% at December 31, 2009), redeemable beginning July 7, 2008, and due July 7, 2033. | $ | 3,093,000 | ||||
Subordinated debentures due to Citizens Bancorp Trust II with interest payable quarterly, based on 3-month LIBOR plus 2.70%, repricing quarterly (2.98% at December 31, 2008), redeemable beginning July 7, 2009, and due July 7, 2034. | 3,093,000 | |||||
Subordinated debentures due to Citizens Bancorp Trust III with interest payable quarterly, based on 3-month LIBOR plus 1.50%, repricing quarterly (1.78% at December 31, 2008), redeemable beginning October 7, 2010 and due October 7, 2035. | 3,093,000 | |||||
Subordinated debentures due to Citizens Bancorp Trust IV with interest payable quarterly, based on 3-month LIBOR plus 1.65%, repricing quarterly (1.93% at December 31, 2008), beginning July 7, 2011 and due July 7, 2036. | 6,186,000 | |||||
$ | 15,465,000 |
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
11. | INCOME TAXES |
Federal | State | Total | ||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
2009 | ||||||||||||||
Current | $ | (25,000 | ) | $ | 14,000 | $ | (11,000 | ) | ||||||
Deferred | (2,003,000 | ) | (712,000 | ) | (2,715,000 | ) | ||||||||
Valuation allowance | 6,068,000 | 3,226,000 | 9,294,000 | |||||||||||
Provision for income taxes | $ | 4,040,000 | $ | 2,528,000 | $ | 6,568,000 | ||||||||
2008 | ||||||||||||||
Current | $ | (3,105,000 | ) | $ | 2,000 | $ | (3,103,000 | ) | ||||||
Deferred | (2,553,000 | ) | (2,006,000 | ) | (4,559,000 | ) | ||||||||
Benefit from income taxes | $ | (5,658,000 | ) | $ | (2,004,000 | ) | $ | (7,662,000 | ) | |||||
2007 | ||||||||||||||
Current | $ | 1,616,000 | $ | 600,000 | $ | 2,216,000 | ||||||||
Deferred | (343,000 | ) | (145,000 | ) | (488,000 | ) | ||||||||
Provision for income taxes | $ | 1,273,000 | $ | 455,000 | $ | 1,728,000 |
December 31, | |||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|
2009 | 2008 | ||||||||||
Deferred tax assets: | |||||||||||
Allowance for credit losses | $ | 4,256,000 | $ | 3,717,000 | |||||||
Net operating loss carryforward | 3,997,000 | 2,925,000 | |||||||||
Future benefit of State income tax deduction | 1,000 | 1,000 | |||||||||
Deferred compensation | 903,000 | 1,050,000 | |||||||||
Bank premises and equipment | 169,000 | 34,000 | |||||||||
Non-accrual loan interest | 606,000 | 11,000 | |||||||||
Minimum tax credit | 205,000 | 205,000 | |||||||||
Other real estate owned | 850,000 | 200,000 | |||||||||
Other | 142,000 | ||||||||||
Total deferred tax assets before valuation allowance | 11,129,000 | 8,143,000 | |||||||||
Valuation allowance | (9,294,000 | ) | |||||||||
Total deferred tax assets | 1,835,000 | 8,143,000 | |||||||||
Deferred tax liabilities: | |||||||||||
Future liability of State taxes | (1,096,000 | ) | (855,000 | ) | |||||||
Deferred loan costs | (572,000 | ) | (642,000 | ) | |||||||
Other | (162,000 | ) | (62,000 | ) | |||||||
Unrealized gain on available-for-sale Investment securities | (5,000 | ) | (5,000 | ) | |||||||
Total deferred tax liabilities | (1,835,000 | ) | (1,564,000 | ) | |||||||
Net deferred tax assets | $ | — | $ | 6,579,000 |
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
Year Ended December 31, | |||||||||||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
2009 | 2008 | 2007 | |||||||||||||||||||||||||
Amount | Rate % | Amount | Rate % | Amount | Rate % | ||||||||||||||||||||||
Federal income tax expense, at statutory rate | $ | (2,234,462 | ) | (34.0 | ) | $ | (6,226,554 | ) | (34.0 | ) | $ | 1,466,261 | 34.0 | ||||||||||||||
State franchise tax, net of Federal tax effect | (460,349 | ) | (7.0 | ) | (1,322,904 | ) | (7.2 | ) | 308,536 | 7.2 | |||||||||||||||||
Net increase in cash surrender value of bank-owned life insurance | (70,947 | ) | (1.1 | ) | (70,498 | ) | (0.3 | ) | (90,624 | ) | (2.1 | ) | |||||||||||||||
Tax credit from investment in Q-ZAB financial instrument | (10,846 | ) | (0.2 | ) | (10,846 | ) | (0.1 | ) | (4,998 | ) | (0.1 | ) | |||||||||||||||
Valuation allowance | 9,294,000 | 141.4 | |||||||||||||||||||||||||
Other | 50,604 | 0.8 | (31,198 | ) | (0.2 | ) | 48,825 | 1.0 | |||||||||||||||||||
Income tax provision (benefit) and effective tax rate | $ | 6,568,000 | 99.9 | $ | (7,662,000 | ) | (41.8 | ) | $ | 1,728,000 | 40.0 |
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
12. | COMMITMENTS AND CONTINGENCIES |
Year Ending December 31, | ||||||
---|---|---|---|---|---|---|
2010 | $ | 582,372 | ||||
2011 | 279,294 | |||||
2012 | 174,607 | |||||
2013 | 130,493 | |||||
2014 | 81,917 | |||||
Thereafter | 131,928 | |||||
$ | 1,380,611 |
December 31, | |||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|
2009 | 2008 | ||||||||||
Commitments to extend credit | $ | 60,829,000 | $ | 89,410,000 | |||||||
Standby letters of credit | $ | 1,109,000 | $ | 1,415,000 | |||||||
Guarantees of credit cards issued by other banks | $ | 1,330,000 | $ | 1,216,000 |
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
13. | SHAREHOLDERS’ EQUITY |
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
For the Year Ended | Net (Loss) Income Available to Common Shareholders | Weighted Average Number of Shares Outstanding | Per Share Amount | |||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
December 31, 2009 | ||||||||||||||
Basic loss per share | $ | (13,467,518 | ) | 1,920,300 | $ | (7.01 | ) | |||||||
December 31, 2008 | ||||||||||||||
Basic loss per share | $ | (10,651,395 | ) | 1,915,117 | $ | (5.56 | ) | |||||||
December 31, 2007 | ||||||||||||||
Basic earnings per share | $ | 2,584,532 | 1,911,897 | $ | 1.35 | |||||||||
Effect of dilutive stock options | 44,698 | |||||||||||||
Diluted earnings per share | $ | 2,584,532 | 1,956,595 | $ | 1.32 |
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
2009 | 2008 | 2007 | |||||||||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Shares | Weighted Average Exercise Price | Shares | Weighted Average Exercise Price | Shares | Weighted Average Exercise Price | ||||||||||||||||||||||
Options outstanding, beginning of year | 123,062 | $ | 14.30 | 130,598 | $ | 13.93 | 132,732 | $ | 13.73 | ||||||||||||||||||
Options granted | 3,307 | $ | 21.59 | ||||||||||||||||||||||||
Options exercised | (3,039 | ) | $ | 6.83 | (2,963 | ) | $ | 11.24 | |||||||||||||||||||
Options canceled | (55,980 | ) | $ | 15.34 | (4,497 | ) | $ | 9.71 | (2,478 | ) | $ | 15.71 | |||||||||||||||
Options outstanding, end of year | 67,082 | $ | 13.43 | 123,062 | $ | 14.30 | 130,598 | $ | 13.93 | ||||||||||||||||||
Options exercisable, end of year | 67,082 | $ | 13.43 | 118,432 | $ | 14.01 | 114,939 | $ | 13.43 |
Range of Exercise Prices | Number of Options Outstanding December 31, 2009 | Weighted Average Remaining Contractual Life | Number of Options Exercisable December 31, 2009 | |||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
$11.19 to $11.49 | 20,873 | 0.8 years | 20,873 | |||||||||||
$11.50 to $14.99 | 20,925 | 2.9 years | 20,925 | |||||||||||
$15.00 to $15.72 | 25,284 | 5.0 years | 25,284 | |||||||||||
67,082 | 67,082 |
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
December 31, | |||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
2009 | 2008 | ||||||||||||||||||
Amount | Ratio | Amount | Ratio | ||||||||||||||||
Leverage Ratio | |||||||||||||||||||
Citizens Bancorp and Subsidiary | $ | 12,669,000 | 3.3 | % | $ | 19,611,000 | 5.5 | % | |||||||||||
Minimum regulatory requirement | $ | 15.525,000 | 4.0 | % | $ | 14,159,000 | 4.0 | % | |||||||||||
Citizens Bank of Northern California | $ | 23,610,000 | 6.1 | % | $ | 28,121,000 | 7.8 | % | |||||||||||
Minimum requirement for “Well-Capitalized” institution under prompt corrective action provisions | $ | 19,390,000 | 5.0 | % | $ | 18,032,000 | 5.0 | % | |||||||||||
Minimum regulatory requirement | $ | 15,512,000 | 4.0 | % | $ | 14,425,000 | 4.0 | % | |||||||||||
Tier 1 Risk-Based Capital Ratio | |||||||||||||||||||
Citizens Bancorp and Subsidiary | $ | 12,669,000 | 4.1 | % | $ | 19,611,000 | 5.9 | % | |||||||||||
Minimum regulatory requirement | $ | 12,362,000 | 4.0 | % | $ | 13,361,000 | 4.0 | % | |||||||||||
Citizens Bank of Northern California | $ | 23,610,000 | 7.7 | % | $ | 28,121,000 | 8.4 | % | |||||||||||
Minimum requirement for “Well-Capitalized” institution under prompt corrective action provisions | $ | 18,523,000 | 6.0 | % | $ | 20,002,000 | 6.0 | % | |||||||||||
Minimum regulatory requirement | $ | 12,349,000 | 4.0 | % | $ | 13,335,000 | 4.0 | % | |||||||||||
Total Risk-Based Capital Ratio | |||||||||||||||||||
Citizens Bancorp and Subsidiary | $ | 28,492,000 | 9.2 | % | $ | 33,990,000 | 10.2 | % | |||||||||||
Minimum regulatory requirement | $ | 24,723,000 | 8.0 | % | $ | 26,722,000 | 8.0 | % | |||||||||||
Citizens Bank of Northern California | $ | 27,601,000 | 8.9 | % | $ | 32,392,000 | 9.7 | % | |||||||||||
Minimum requirement for “Well-Capitalized” institution under prompt corrective action provisions | $ | 30,872,000 | 10.0 | % | $ | 33,336,000 | 10.0 | % | |||||||||||
Minimum regulatory requirement | $ | 24,698,000 | 8.0 | % | $ | 26,669,000 | 8.0 | % |
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
14. | BENEFIT PLANS AND AGREEMENTS |
15. | RELATED PARTY TRANSACTIONS |
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
Balance, January 1, 2009 | $ | 11,217,000 | ||||
Disbursements | 723,000 | |||||
Amounts repaid | (512,000 | ) | ||||
Balance, December 31, 2009 | $ | 11,428,000 | ||||
Undisbursed commitments to related parties, December 31, 2009 | $ | 420,000 |
16. | OTHER EXPENSES |
Year Ended December 31, | |||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
2009 | 2008 | 2007 | |||||||||||||
Regulatory assessments | $ | 1,162,270 | $ | 279,815 | $ | 191,868 | |||||||||
Outsourced data processing | 1,031,785 | 968,693 | 850,516 | ||||||||||||
Legal and accounting | 596,227 | 283,496 | 213,586 | ||||||||||||
Other real estate owned expenses | 368,332 | 444,323 | |||||||||||||
Miscellaneous loan expenses | 322,856 | 221,109 | 96,112 | ||||||||||||
Director compensation and retirement | 267,131 | 357,456 | 294,456 | ||||||||||||
Consulting fees | 264,369 | 86,152 | 49,196 | ||||||||||||
Postage and courier | 244,752 | 242,379 | 180,296 | ||||||||||||
Telephone | 238,119 | 241,281 | 215,823 | ||||||||||||
Advertising and marketing | 223,045 | 296,090 | 330,090 | ||||||||||||
Stationery and supplies | 192,533 | 216,784 | 269,079 | ||||||||||||
Other operating expenses | 642,682 | 766,282 | 707,516 | ||||||||||||
$ | 5,554,101 | $ | 4,403,860 | $ | 3,398,538 |
17. | COMPREHENSIVE INCOME (LOSS) |
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
Before Tax | Tax (Expense) Benefit | After Tax | ||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
For the Year Ended December 31, 2009 | ||||||||||||||
Other comprehensive income: | ||||||||||||||
Unrealized holding gains | $ | 595 | $ | (239 | ) | $ | 356 | |||||||
For the Year Ended December 31, 2008 | ||||||||||||||
Other comprehensive income: | ||||||||||||||
Unrealized holding gains | $ | 16,662 | $ | (6,777 | ) | $ | 9,885 | |||||||
For the Year Ended December 31, 2007 | ||||||||||||||
Other comprehensive income: | ||||||||||||||
Unrealized holding gains | $ | 20,882 | $ | (8,291 | ) | $ | 12,591 |
18. | PARENT ONLY CONDENSED FINANCIAL STATEMENTS |
December 31, 2009 and 2008
2009 | 2008 | |||||||||
---|---|---|---|---|---|---|---|---|---|---|
ASSETS | ||||||||||
Cash and cash equivalents | $ | 983,985 | $ | 1,524,830 | ||||||
Investment in bank subsidiary | 23,617,530 | 34,705,728 | ||||||||
Other assets | 467,922 | 897,622 | ||||||||
Total assets | $ | 25,069,437 | $ | 37,128,180 | ||||||
LIABILITIES AND SHAREHOLDERS’ EQUITY | ||||||||||
Other liabilities | $ | 99,605 | $ | 367,232 | ||||||
Junior subordinated debentures | 15,465,000 | 15,465,000 | ||||||||
Total liabilities | 15,564,605 | 15,832,232 | ||||||||
Shareholders’ equity: | ||||||||||
Preferred stock — Series A | 9,952,881 | 9,848,881 | ||||||||
Preferred stock — Series B | 520,000 | 520,000 | ||||||||
Common stock | 15,945,833 | 14,373,787 | ||||||||
Accumulated deficit | (16,921,714 | ) | (3,454,196 | ) | ||||||
Accumulated other comprehensive income, net of taxes | 7,832 | 7,476 | ||||||||
Total shareholders’ equity | 9,504,832 | 21,295,948 | ||||||||
Total liabilities and shareholders’ equity | $ | 25,069,437 | $ | 37,128,180 |
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
For the Years Ended December 31, 2009, 2008 and 2007
2009 | 2008 | 2007 | ||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Income: | ||||||||||||||
Earnings from investment in Citizens Bancorp Trust I, Trust II, Trust III and Trust IV | $ | 14,080 | $ | 26,393 | $ | 37,521 | ||||||||
Interest on money market account | 13,107 | 4,201 | 10,372 | |||||||||||
Total income | 27,187 | 30,594 | 47,893 | |||||||||||
Expenses: | ||||||||||||||
Interest on junior subordinated debentures | 468,939 | 928,259 | 1,175,452 | |||||||||||
Other expenses | 196,630 | 134,389 | 131,851 | |||||||||||
Total expenses | 665,569 | 1,062,648 | 1,307,303 | |||||||||||
Loss before equity in undistributed (loss) income of subsidiary | (638,382 | ) | (1,032,054 | ) | (1,259,410 | ) | ||||||||
Equity in undistributed (loss) income of subsidiary | (12,501,565 | ) | (10,043,341 | ) | 3,321,317 | |||||||||
(Loss) income before income taxes | (13,139,947 | ) | (11,075,395 | ) | 2,061,907 | |||||||||
Benefit from income taxes | (424,000 | ) | (522,625 | ) | ||||||||||
Net (loss) income | (13,139,947 | ) | (10,651,395 | ) | 2,584,532 | |||||||||
Dividends and discount accretion on preferred stock | (327,571 | ) | ||||||||||||
Net (loss) income applicable to common shareholders | $ | (13,467,518 | ) | $ | (10,651,395 | ) | $ | 2,584,532 |
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
19. | PARENT ONLY CONDENSED FINANCIAL STATEMENTS (Continued) |
For the Years Ended December 31, 2009, 2008 and 2007
2009 | 2008 | 2007 | ||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Cash flows from operating activities: | ||||||||||||||
Net (loss) income | $ | (13,139,947 | ) | $ | (10,651,395 | ) | $ | 2,584,532 | ||||||
Adjustments to reconcile net (loss) income to net cash used in operating activities: | ||||||||||||||
Net loss (income) of subsidiary | 12,501,565 | 10,043,341 | (3,321,317 | ) | ||||||||||
Stock-based compensation expense | 13,012 | 77,900 | 92,220 | |||||||||||
Decrease (increase) in other assets | 416,688 | 39,874 | (70,225 | ) | ||||||||||
(Decrease) increase in other liabilities | (267,626 | ) | 105,154 | (11,768 | ) | |||||||||
Net cash used in operating activities | (476,308 | ) | (385,126 | ) | (726,558 | ) | ||||||||
Cash flows used in investing activities: | ||||||||||||||
Investment in Bank subsidiary | (1,400,000 | ) | (9,000,000 | ) | ||||||||||
Cash flows from financing activities: | ||||||||||||||
Proceeds from the issuance of preferred stock | 10,368,881 | |||||||||||||
Dividends paid on preferred stock | (223,571 | ) | ||||||||||||
Cash paid for fractional shares | (3,900 | ) | (5,424 | ) | ||||||||||
Proceeds from issuance of common stock | 1,559,034 | |||||||||||||
Proceeds from the exercise of stock options | 20,744 | 24,093 | ||||||||||||
Net cash provided by financing activities | 1,335,463 | 10,385,725 | 18,669 | |||||||||||
(Decrease) increase in cash and cash equivalents | (540,845 | ) | 1,000,599 | (707,889 | ) | |||||||||
Cash and cash equivalents at beginning of year | 1,524,830 | 524,231 | 1,232,120 | |||||||||||
Cash and cash equivalents at end of year | $ | 983,985 | $ | 1,524,830 | $ | 524,231 | ||||||||
Supplemental disclosure of cash flow information: | ||||||||||||||
Cash paid during the year for interest expense | $ | 636,457 | $ | 929,014 | $ | 1,188,700 | ||||||||
Non-cash investing activities: | ||||||||||||||
Net change in unrealized gains on available-for-sale investment securities | $ | 595 | $ | 16,662 | $ | 20,882 |
CONDENSED CONSOLIDATED BALANCE SHEET (Unaudited)
September 30, 2010 | December 31, 2009 | |||||||||
---|---|---|---|---|---|---|---|---|---|---|
ASSETS | ||||||||||
Cash and due from banks | $ | 5,770,254 | $ | 6,413,965 | ||||||
Interest-bearing deposits due from banks | 37,117,784 | 55,420,753 | ||||||||
Cash and cash equivalents | 42,888,038 | 61,834,718 | ||||||||
Time deposits in other banks | 17,278,000 | 100,000 | ||||||||
Available-for-sale investment securities | 10,543,007 | 1,561,658 | ||||||||
Loans held for sale | 2,815,140 | — | ||||||||
Portfolio loans, less allowance for credit losses of $14,485,613 at September 30, 2010 and $14,387,379 at December 31, 2009 | 264,074,447 | 290,351,610 | ||||||||
Premises and equipment, net | 1,235,199 | 1,547,127 | ||||||||
Cash surrender value of bank-owned life insurance | 6,173,938 | 6,115,775 | ||||||||
Other real estate owned | 6,726,516 | 4,649,762 | ||||||||
Accrued interest receivable and other assets | 5,758,317 | 4,897,222 | ||||||||
Total assets | $ | 357,492,602 | $ | 371,057,872 | ||||||
LIABILITIES AND SHAREHOLDERS’ EQUITY | ||||||||||
Deposits: | ||||||||||
Noninterest-bearing | $ | 83,822,035 | $ | 76,123,629 | ||||||
Interest-bearing | 199,207,484 | 226,507,652 | ||||||||
Total deposits | 283,029,519 | 302,631,281 | ||||||||
Short-term borrowings | 38,566,500 | 25,000,000 | ||||||||
Long-term debt | 10,000,000 | 15,000,000 | ||||||||
Junior subordinated debentures | 15,465,000 | 15,465,000 | ||||||||
Accrued interest payable and other liabilities | 5,294,004 | 3,456,759 | ||||||||
Total liabilities | 352,355,023 | 361,553,040 | ||||||||
Commitments and contingencies | ||||||||||
Shareholders’ equity: | ||||||||||
Serial preferred stock — 2,500,000 shares authorized | ||||||||||
Series A preferred stock; 10,400 shares outstanding at September 30, 2010 and December 31, 2009 | 10,030,881 | 9,952,881 | ||||||||
Series B preferred stock; 520 shares outstanding at September 30, 2010 and December 31, 2009 | 520,000 | 520,000 | ||||||||
Common stock — no par value; 20,000,000 shares authorized; 2,335,090 shares outstanding at September 30, 2010 and 2,310,090 shares outstanding at December 31, 2009 | 16,040,020 | 15,945,833 | ||||||||
Accumulated deficit | (21,448,634 | ) | (16,921,714 | ) | ||||||
Accumulated other comprehensive (loss) income, net of taxes | (4,688 | ) | 7,832 | |||||||
Total shareholders’ equity | 5,137,579 | 9,504,832 | ||||||||
Total liabilities and shareholders’ equity | $ | 357,492,602 | $ | 371,057,872 |
unaudited condensed consolidated financial statements.
CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS (Unaudited)
Three Months Ended | Nine Months Ended | ||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
September 30, 2010 | September 30, 2009 | September 30, 2010 | September 30, 2009 | ||||||||||||||||
Interest income: | |||||||||||||||||||
Interest and fees on loans | $ | 3,895,384 | $ | 4,627,668 | $ | 12,297,524 | $ | 14,201,171 | |||||||||||
Interest on investment securities: | |||||||||||||||||||
Taxable | 55,301 | 7,034 | 91,294 | 32,302 | |||||||||||||||
Tax exempt | — | 265 | — | 265 | |||||||||||||||
Interest on Federal funds sold | — | 179 | — | 8,429 | |||||||||||||||
Interest on deposits in banks | 47,170 | 11,782 | 68,267 | 11,912 | |||||||||||||||
Total interest income | 3,997,855 | 4,646,928 | 12,457,085 | 14,254,079 | |||||||||||||||
Interest expense: | |||||||||||||||||||
Interest expense on deposits | 356,258 | 746,575 | 1,188,122 | 2,605,480 | |||||||||||||||
Interest on borrowings | 120,079 | 119,843 | 347,568 | 335,347 | |||||||||||||||
Interest on junior subordinated debentures | 106,243 | 107,099 | 295,717 | 371,705 | |||||||||||||||
Total interest expense | 582,580 | 973,517 | 1,831,407 | 3,312,532 | |||||||||||||||
Net interest income before provision for credit losses | 3,415,275 | 3,673,411 | 10,625,678 | 10,941,547 | |||||||||||||||
Provision for credit losses | 400,000 | 400,000 | 7,900,000 | 3,900,000 | |||||||||||||||
Net interest income after provision for credit losses | 3,015,275 | 3,273,411 | 2,725,678 | 7,041,547 | |||||||||||||||
Non-interest income: | |||||||||||||||||||
Service charges | 363,508 | 340,947 | 1,076,486 | 1,013,137 | |||||||||||||||
Broker fee income | 83,465 | 188,894 | 244,907 | 514,627 | |||||||||||||||
Gain on sale of securities | 120,004 | — | 120,004 | — | |||||||||||||||
Other income | 60,898 | 64,315 | 278,818 | 188,463 | |||||||||||||||
Total non-interest income | 627,875 | 594,156 | 1,720,215 | 1,716,227 | |||||||||||||||
Non-interest expenses: | |||||||||||||||||||
Salaries and employee benefits | 1,447,704 | 1,203,155 | 4,064,214 | 3,533,919 | |||||||||||||||
Occupancy and equipment | 406,850 | 453,618 | 1,254,745 | 1,328,809 | |||||||||||||||
Loss on sale/writedown of other real estate owned | 645,557 | 45,703 | 1,003,797 | 1,946,969 | |||||||||||||||
Other expenses | 1,102,440 | 1,511,814 | 2,572,057 | 4,289,132 | |||||||||||||||
Total non-interest expenses | 3,602,551 | 3,214,290 | 8,894,813 | 11,098,829 | |||||||||||||||
Income (loss) before income taxes | 40,599 | 653,277 | (4,448,920 | ) | (2,341,055 | ) | |||||||||||||
Provision for (benefit from) income taxes | — | 263,917 | — | (945,763 | ) | ||||||||||||||
Net income (loss) | 40,599 | 389,360 | (4,448,920 | ) | (1,395,292 | ) | |||||||||||||
Dividends and discount accretion on preferred stock | (26,000 | ) | (26,000 | ) | (78,000 | ) | (301,571 | ) | |||||||||||
Net income (loss) applicable to common shareholders | $ | 14,599 | $ | 363,360 | $ | (4,526,920 | ) | $ | (1,696,863 | ) | |||||||||
Basic earnings (loss) per share | $ | 0.01 | $ | 0.19 | $ | (1.95 | ) | $ | (0.89 | ) | |||||||||
Diluted earnings (loss) per share | $ | 0.01 | $ | 0.19 | $ | (1.95 | ) | $ | (0.89 | ) |
unaudited condensed consolidated financial statements.
Nine Months Ended September 30, 2009 | |||||||||||||||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Preferred Stock | Common Stock | ||||||||||||||||||||||||||||||
Shares | Amount | Shares | Amount | Accumulated Deficit | Accumulated Other Comprehensive Income, Net of Taxes | Total Shareholders’ Equity | |||||||||||||||||||||||||
Balance, January 1, 2009 | 10,920 | $ | 10,368,881 | 1,915,981 | $ | 14,373,787 | $ | (3,454,196 | ) | $ | 7,476 | $ | 21,295,948 | ||||||||||||||||||
Net loss | (1,395,292 | ) | (1,395,292 | ) | |||||||||||||||||||||||||||
Other comprehensive income, net of tax: | |||||||||||||||||||||||||||||||
Net change in unrealized gains on available-for-sale investment securities | 429 | 429 | |||||||||||||||||||||||||||||
Total comprehensive loss | (1,394,863 | ) | |||||||||||||||||||||||||||||
Dividends declared and paid on preferred stock | (223,571 | ) | (223,571 | ) | |||||||||||||||||||||||||||
Amortization of preferred stock discount | 78,000 | (78,000 | ) | — | |||||||||||||||||||||||||||
Stock-based compensation expense | 14,024 | 14,024 | |||||||||||||||||||||||||||||
Balance, September 30, 2009 | 10,920 | $ | 10,446,881 | 1,915,981 | $ | 14,387,811 | $ | (5,151,059 | ) | $ | 7,905 | $ | 19,691,538 |
unaudited condensed consolidated financial statements.
(Unaudited) (Continued)
Nine Months Ended September 30, 2010 | |||||||||||||||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Preferred Stock | Common Stock | ||||||||||||||||||||||||||||||
Shares | Amount | Shares | Amount | Accumulated Deficit | Accumulated Other Comprehensive Income, Net of Taxes | Total Shareholders’ Equity | |||||||||||||||||||||||||
Balance, January 1, 2010 | 10,920 | $ | 10,472,881 | 2,310,090 | $ | 15,945,833 | $ | (16,921,714 | ) | $ | 7,832 | $ | 9,504,832 | ||||||||||||||||||
Net loss | (4,448,920 | ) | (4,448,920 | ) | |||||||||||||||||||||||||||
Other comprehensive loss, net of tax: | |||||||||||||||||||||||||||||||
Net change in unrealized gains on available-for-sale investment securities | (12,520 | ) | (12,520 | ) | |||||||||||||||||||||||||||
Total comprehensive loss | (4,461,440 | ) | |||||||||||||||||||||||||||||
Issuance of common stock, net of issuance costs | 25,000 | 94,187 | 94,187 | ||||||||||||||||||||||||||||
Amortization of preferred stock discount | 78,000 | (78,000 | ) | — | |||||||||||||||||||||||||||
Balance, September 30, 2010 | 10,920 | $ | 10,550,881 | 2,335,090 | $ | 16,040,020 | $ | (21,448,634 | ) | $ | (4,688 | ) | $ | 5,137,579 |
unaudited condensed consolidated financial statements.
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS (Unaudited)
Nine Months Ended | |||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|
September 30, 2010 | September 30, 2009 | ||||||||||
Cash flows from operating activities: | |||||||||||
Net loss | $ | (4,448,920 | ) | $ | (1,395,292 | ) | |||||
Adjustments to reconcile net loss to net cash provided by operating activities: | |||||||||||
Stock-based compensation expense | — | 14,024 | |||||||||
Provision for credit losses | 7,900,000 | 3,900,000 | |||||||||
Valuation allowance on other real estate owned (OREO) | 1,042,550 | 1,719,707 | |||||||||
(Gain) loss on sale of OREO | (38,158 | ) | 227,261 | ||||||||
Proceeds from secured borrowings | 3,110,167 | — | |||||||||
Loans originated for sale | (1,237,500 | ) | |||||||||
Depreciation and amortization | 386,972 | 475,529 | |||||||||
Accretion on investment securities | 22,739 | 12,379 | |||||||||
Gain on sale of available-for-sale (AFS) investment securities | (120,004 | ) | — | ||||||||
Increase in deferred loan origination fees, net | 94,119 | 128,321 | |||||||||
Increase in cash surrender value of bank-owned life insurance | (58,163 | ) | (156,501 | ) | |||||||
Increase in accrued interest receivable and other assets | (3,997,373 | ) | (243,091 | ) | |||||||
Increase (decrease) in accrued interest payable and other liabilities | 1,845,731 | (351,677 | ) | ||||||||
Net cash provided by operating activities | 4,502,160 | 4,330,660 | |||||||||
Cash flows from investing activities: | |||||||||||
Net increase in time deposits in other banks | (17,178,000 | ) | — | ||||||||
Purchase of AFS investment securities | (13,517,049 | ) | (1,568,903 | ) | |||||||
Proceeds from sale of AFS investment securities | 4,011,796 | — | |||||||||
Proceeds from matured or called AFS investment securities | 500,000 | 1,150,000 | |||||||||
Principal payments received on MBS securities | 100,163 | — | |||||||||
Proceeds from sale of OREO | 308,604 | 3,438,294 | |||||||||
Investment in OREO | — | (385,218 | ) | ||||||||
Net decrease in loans | 13,315,654 | 2,580,504 | |||||||||
Purchase of premises and equipment | (75,044 | ) | (74,679 | ) | |||||||
Principal payments received on tax credit instrument | 26,111 | 26,112 | |||||||||
Net cash (used in) provided by investing activities | (12,507,765 | ) | 5,166,110 | ||||||||
Cash flows from financing activities: | |||||||||||
Net increase in demand, interest-bearing demand and savings deposits | 1,142,761 | 26,931,264 | |||||||||
Net decrease in time deposits | (20,744,523 | ) | (7,764,820 | ) | |||||||
Dividends paid on preferred stock | — | (223,571 | ) | ||||||||
Net change in short-term borrowings | 13,566,500 | 12,000,000 | |||||||||
Net change in long-term debt | (5,000,000 | ) | (5,000,000 | ) | |||||||
Proceeds from issuance of common stock | 94,187 | — | |||||||||
Net cash (used in) provided by financing activities | (10,941,075 | ) | 25,942,873 | ||||||||
(Decrease) increase in cash and cash equivalents | (18,946,680 | ) | 35,439,643 | ||||||||
Cash and cash equivalents at beginning of period | 61,834,718 | 32,728,610 | |||||||||
Cash and cash equivalents at end of period | $ | 42,888,038 | $ | 68,168,253 | |||||||
Non-cash investing activities: | |||||||||||
Real estate acquired through foreclosure | $ | 3,389,750 | $ | 5,292,704 | |||||||
Amortization of preferred stock discount | $ | 78,000 | $ | 78,000 | |||||||
Loans reclassified to held for sale | $ | 1,577,640 | $ | — |
unaudited condensed consolidated financial statements.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)
1. | BASIS OF PRESENTATION |
2. | REGULATORY MATTERS |
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) (Continued)
enforcement action and could have a material adverse effect on their business, financial condition and results of operations.
CITIZENS BANCORP AND SUBSIDIARIES | CITIZENS BANK | ||||||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Minimum Regulatory Requirement | Actual Capital Ratio | Minimum Regulatory Requirement | Minimum Regulatory Requirement for “Well Capitalized” Institution | Actual Capital Ratio | |||||||||||||||||||
Leverage Ratio | 4.0 | % | 2.0 | % | 4.0 | %(1) | 5.0 | % | 5.7 | % | |||||||||||||
Tier 1 Risk-Based Ratio | 4.0 | % | 2.4 | % | 4.0 | % | 6.0 | % | 7.0 | % | |||||||||||||
Total Risk-Based Ratio | 8.0 | % | 8.5 | % | 8.0 | % | 10.0 | % | 8.3 | % |
(1) | The Order entered into by the Bank in February 2010, requires the Bank to maintain a Tier 1 capital to average assets (Leverage) ratio equal to or greater than 9% by July 2010. The Bank was unable to meet the deadline to increase the leverage ratio to 9%. |
3. | FAIR VALUE MEASUREMENTS |
September 30, 2010 | December 31, 2009 | ||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Carrying Amount | Fair Value | Carrying Amount | Fair Value | ||||||||||||||||
Financial assets: | |||||||||||||||||||
Cash and due from banks | $ | 5,770,254 | $ | 5,770,254 | $ | 6,413,965 | $ | 6,413,965 | |||||||||||
Interest-bearing deposits due from banks | 37,117,784 | 37,117,784 | 55,420,753 | 55,420,753 | |||||||||||||||
Time deposits in other banks | 17,278,000 | 17,490,850 | 100,000 | 100,000 | |||||||||||||||
Available-for-sale investment securities | 10,543,007 | 10,543,007 | 1,561,658 | 1,561,658 | |||||||||||||||
Portfolio loans, net | 264,074,447 | 249,234,778 | 290,351,610 | 275,454,564 | |||||||||||||||
Loans held for sale | 2,815,140 | 3,110,167 | — | — | |||||||||||||||
Cash surrender value of bank-owned life insurance | 6,173,938 | 6,173,938 | 6,115,775 | 6,115,775 | |||||||||||||||
FHLB stock | 2,282,700 | 2,282,700 | 1,880,000 | 1,880,000 | |||||||||||||||
Tax credit instrument | — | — | 26,111 | 26,111 | |||||||||||||||
Accrued interest receivable | 1,922,573 | 1,922,573 | 1,953,281 | 1,953,281 |
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) (Continued)
September 30, 2010 | December 31, 2009 | ||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Carrying Amount | Fair Value | Carrying Amount | Fair Value | ||||||||||||||||
Financial liabilities: | |||||||||||||||||||
Deposits | $ | 283,029,519 | $ | 282,152,889 | $ | 302,631,281 | $ | 302,144,383 | |||||||||||
Short-term borrowings | 38,566,500 | 38,566,500 | 25,000,000 | 25,000,000 | |||||||||||||||
Long-term debt | 10,000,000 | 10,103,624 | 15,000,000 | 15,024,824 | |||||||||||||||
Junior subordinated debentures | 15,465,000 | 7,129,549 | 15,465,000 | 5,780,673 | |||||||||||||||
Accrued interest payable | 243,880 | 243,880 | 232,988 | 232,988 |
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) (Continued)
Description | Fair Value | Level 1 | Level 2 | Level 3 | ||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Available-for-sale investment securities: | ||||||||||||||||||
September 30, 2010 | $ | 10,543,007 | $ | — | $ | 10,543,007 | $ | — | ||||||||||
December 31, 2009 | $ | 1,561,658 | $ | — | $ | 1,561,658 | $ | — |
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) (Continued)
Description | Fair Value September 30, 2010 | Level 1 | Level 2 | Level 3 | Total Gains (Losses) | |||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Impaired loans | $ | 39,652,000 | $ | — | $ | — | $ | 39,652,000 | $ | (5,713,000 | ) | |||||||||||
Other real estate | 6,726,516 | — | — | 6,726,516 | (3,145,000 | ) | ||||||||||||||||
Total assets measured at fair value on a non-recurring basis | $ | 46,378,516 | $ | — | $ | — | $ | 46,378,516 | $ | (8,858,000 | ) |
Description | Fair Value December 31, 2009 | Level 1 | Level 2 | Level 3 | Total Gains (Losses) | |||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Impaired loans | $ | 33,561,000 | $ | — | $ | — | $ | 33,561,000 | $ | (9,599,000 | ) | |||||||||||
Other real estate | 4,649,762 | — | — | 4,649,762 | (1,634,600 | ) | ||||||||||||||||
Total assets measured at fair value on a non-recurring basis | $ | 38,210,762 | $ | — | $ | — | $ | 38,210,762 | $ | (11,233,600 | ) |
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) (Continued)
4. | AVAILABLE-FOR-SALE INVESTMENT SECURITIES |
September 30, 2010 | |||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Amortized Cost | Gross Unrealized Gains | Gross Unrealized Losses | Estimated Fair Value | ||||||||||||||||
Debt securities: | |||||||||||||||||||
U.S. Government agencies | $ | 1,029,657 | $ | 15,661 | $ | — | $ | 1,045,318 | |||||||||||
U.S. Government agencies collateralized by mortgage obligations | 7,621,216 | 4,365 | 13,243 | 7,612,338 | |||||||||||||||
Corporate debt obligations | 1,900,000 | — | 14,649 | 1,885,351 | |||||||||||||||
$ | 10,550,873 | $ | 20,026 | $ | 27,892 | $ | 10,543,007 |
December 31, 2009 | |||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Amortized Cost | Gross Unrealized Gains | Gross Unrealized Losses | Estimated Fair Value | ||||||||||||||||
Debt securities: | |||||||||||||||||||
U.S. Government agencies | $ | 1,548,518 | $ | 13,140 | $ | — | $ | 1,561,658 |
5. | LOANS AND THE ALLOWANCE FOR CREDIT LOSSES |
As of September 30, 2010 | As of December 31, 2009 | |||||||||
---|---|---|---|---|---|---|---|---|---|---|
Commercial | $ | 35,483,307 | $ | 43,461,030 | ||||||
Real estate — residential 1st deed of trust | 12,849,222 | 13,340,000 | ||||||||
Real estate — residential 2nd deed of trust | 47,889,073 | 51,102,323 | ||||||||
Real estate — land | 3,853,694 | 5,090,711 | ||||||||
Real estate — nonresidential | 144,206,385 | 145,718,979 | ||||||||
Real estate — construction | 29,566,409 | 40,793,632 | ||||||||
Consumer | 4,623,617 | 5,238,080 | ||||||||
278,471,707 | 304,744,755 | |||||||||
Deferred loan origination fees, net | 88,353 | (5,766 | ) | |||||||
Allowance for credit losses | (14,485,613 | ) | (14,387,379 | ) | ||||||
Total net loans | $ | 264,074,447 | $ | 290,351,610 |
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) (Continued)
Three Months Ended | Nine Months Ended | ||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
September 30, 2010 | September 30, 2009 | September 30, 2010 | September 30, 2009 | ||||||||||||||||
Balance, beginning of period | $ | 15,922,492 | $ | 14,281,150 | $ | 14,387,379 | $ | 12,406,146 | |||||||||||
Provision charged to operations | 400,000 | 400,000 | 7,900,000 | 3,900,000 | |||||||||||||||
Losses charged to allowance | (1,859,836 | ) | (219,214 | ) | (7,939,111 | ) | (2,025,567 | ) | |||||||||||
Recoveries of loans previously charged-off | 22,957 | 3,881 | 137,345 | 185,238 | |||||||||||||||
Balance, end of period | $ | 14,485,613 | $ | 14,465,817 | $ | 14,485,613 | $ | 14,465,817 |
6. | LOANS HELD FOR SALE |
7. | BORROWING ARRANGEMENTS |
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) (Continued)
September 30, 2010 | December 31, 2009 | |||||||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Amount | Rate | Maturity Date | Amount | Rate | Maturity Date | |||||||||||||||||||
$5,000,000 | 0.56% | October 2010 | $ | 3,000,000 | 0.94 | % | January 2010 | |||||||||||||||||
3,000,000 | 0.34% | December 2010 | 5,000,000 | 2.41 | % | February 2010 | ||||||||||||||||||
5,000,000 | 2.42% | January 2011 | 3,000,000 | 0.63 | % | March 2010 | ||||||||||||||||||
5,000,000 | 2.06% | March 2011 | 3,000,000 | 0.64 | % | March 2010 | ||||||||||||||||||
5,000,000 | 0.59% | April 2011 | 3,000,000 | 0.79 | % | June 2010 | ||||||||||||||||||
15,566,500 | 0.49% | July 2011 | 3,000,000 | 0.81 | % | June 2010 | ||||||||||||||||||
5,000,000 | 0.56 | % | October 2010 | |||||||||||||||||||||
$38,566,500 | $ | 25,000,000 |
September 30, 2010 | December 31, 2009 | |||||||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Amount | Rate | Maturity Date | Amount | Rate | Maturity Date | |||||||||||||||||||
$5,000,000 | 1.20% | October 2011 | $ | 5,000,000 | 2.42 | % | January 2011 | |||||||||||||||||
5,000,000 | 1.32% | April 2012 | 5,000,000 | 2.06 | % | March 2011 | ||||||||||||||||||
5,000,000 | 1.20 | % | October 2011 | |||||||||||||||||||||
$10,000,000 | $ | 15,000,000 |
8. | INCOME TAXES |
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) (Continued)
as a benefit only if it is “more likely than not” that the tax position would be sustained in a tax examination, with a tax examination being presumed to occur. The amount recognized is the largest amount of tax benefit that is greater than 50% likely of being realized upon settlement with the applicable taxing authority. The portion of the benefits associated with tax positions taken that exceeds the amount measured as described above is reflected as a liability for unrecognized tax benefits in the accompanying balance sheet along with any associated interest and penalties that would be payable to the taxing authorities upon examination.
9. | COMMITMENTS AND CONTINGENCIES |
September 30, 2010 | December 31, 2009 | |||||||||
---|---|---|---|---|---|---|---|---|---|---|
Commitments to extend credit | $ | 46,231,000 | $ | 60,829,000 | ||||||
Standby letters of credit | $ | 1,050,000 | $ | 1,109,000 | ||||||
Guarantees of credit cards issued by other banks | $ | 943,000 | $ | 1,330,000 |
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) (Continued)
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) (Continued)
10. | EARNINGS (LOSS) PER SHARE |
Net Loss Available to Common Shareholders | Weighted Average Number of Shares Outstanding | Per Share Amount | ||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
For the Three Months Ended September 30, 2010 | ||||||||||||||
Basic income per share | $ | 14,599 | 2,335,090 | $ | 0.01 | |||||||||
For the Three Months Ended September 30, 2009 | ||||||||||||||
Basic income per share | $ | 363,360 | 1,915,981 | $ | 0.19 | |||||||||
For the Nine Months Ended September 30, 2010 | ||||||||||||||
Basic loss per share | $ | (4,526,920 | ) | 2,324,193 | $ | (1.95 | ) | |||||||
For the Nine Months Ended September 30, 2009 | ||||||||||||||
Basic loss per share | $ | (1,696,863 | ) | 1,915,981 | $ | (0.89 | ) |
11. | STOCK OPTIONS |
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) (Continued)
less than $0.01 per share. Compensation expense is recognized over the vesting period on a straight line accounting basis.
Shares | Weighted Average Exercise Price | |||||||||
---|---|---|---|---|---|---|---|---|---|---|
Options outstanding, December 31, 2009 | 67,082 | $ | 13.43 | |||||||
Options granted | — | $ | — | |||||||
Options exercised | — | $ | — | |||||||
Options canceled | (1,459 | ) | $ | 15.71 | ||||||
Options outstanding, September 30, 2010 | 65,623 | $ | 13.38 | |||||||
Options exercisable, September 30, 2010 | 65,623 | $ | 13.38 |
12. | COMPREHENSIVE INCOME (LOSS) |
Before Tax | Tax Benefit (Expense) | After Tax | ||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
For the Three Months Ended September 30, 2010 | ||||||||||||||
Other comprehensive loss: | ||||||||||||||
Unrealized holding losses | $ | (35,850 | ) | $ | 14,484 | $ | (21,366 | ) | ||||||
For the Three Months Ended September 30, 2009 | ||||||||||||||
Other comprehensive loss: | ||||||||||||||
Unrealized holding gains | $ | 10,577 | $ | (4,273 | ) | $ | 6,304 | |||||||
For the Nine Months Ended September 30, 2010 | ||||||||||||||
Other comprehensive income: | ||||||||||||||
Unrealized holding losses | $ | (21,006 | ) | $ | 8,486 | $ | (12,520 | ) | ||||||
For the Nine Months Ended September 30, 2009 | ||||||||||||||
Other comprehensive loss: | ||||||||||||||
Unrealized holding gains | $ | 719 | $ | (290 | ) | $ | 429 |
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) (Continued)
13. | DEFERRED COMPENSATION AGREEMENTS |
14. | IMPACT OF NEW FINANCIAL ACCOUNTING STANDARDS |
Improving Disclosures about Fair Value Measurements (“ASU 10-06”). ASU 10-06 revises two disclosure requirements concerning fair value measurements and clarifies two others. It requires separate presentation of significant transfers into and out of Levels 1 and 2 of the fair value hierarchy and disclosure of the reasons for such transfers. It will also require the presentation of purchases, sales, issuances and settlements within
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) (Continued)
Level 3 on a gross basis rather than a net basis. The amendments also clarify that disclosures should be disaggregated by class of asset or liability and that disclosures about inputs and valuation techniques should be provided for both recurring and non-recurring fair value measurements. The Company’s disclosures about fair value measurements are presented in Note 3: Fair Value Measurements. These new disclosure requirements were adopted by the Company during the current period, with the exception of the requirement concerning gross presentation of Level 3 activity, which is effective for fiscal years beginning after December 15, 2010. With respect to the portions of this ASU that were adopted during the current period, the adoption of this standard did not have a material impacted on the Company’s consolidated financial position, results of operations, cash flows, or disclosures. Management does not believe that the adoption of the remaining portion of this ASU will have a material impact on the Company’s consolidated financial position, results of operations, cash flows, or disclosures.
Amendments to Certain Recognition and Disclosure Requirements. The amendments in the ASU remove the requirement for a Securities and Exchange Commission (“SEC”) filer to disclose a date through which subsequent events have been evaluated in both issued and revised financial statements. Revised financial statements include financial statements revised as a result of either correction of an error or retrospective application of U.S. generally accepted accounting principals (“U.S. GAAP”). The FASB also clarified that if the financial statements have been revised, then an entity that is not an SEC filer should disclose both the date that the financial statements were issued or available to be issued and the date the revised financial statements were issued or available to be issued. The FASB believes these amendments remove potential conflicts with the SEC’s literature. All of the amendments in the ASU were effective upon issuance, except for the use of the issued date for conduit debt obligors, which is effective for interim or annual periods ending after June 15, 2010.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) (Continued)
pronouncement will have a material impact on the Company’s financial condition, results of operations or cash flows.
15. | SUBSEQUENT EVENTS |
Balance, October 1, 2010 | $ | 14,486,000 | ||||
Provision charged to operations | 2,200,000 | |||||
Net losses charged to allowance | (1,598,000 | ) | ||||
Balance, December 31, 2010 | $ | 15,088,000 |
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) (Continued)
CITIZENS BANCORP AND SUBSIDIARIES | CITIZENS BANK | ||||||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Minimum Regulatory Requirement | Actual Capital Ratio | Minimum Regulatory Requirement | Minimum Regulatory Requirement for “Well Capitalized” Institution | Actual Capital Ratio | |||||||||||||||||||
Leverage Ratio | 4.0 | % | 1.5 | % | 4.0 | %(1) | 5.0 | % | 5.5 | % | |||||||||||||
Tier 1 Risk-Based Ratio | 4.0 | % | 1.9 | % | 4.0 | % | 6.0 | % | 6.9 | % | |||||||||||||
Total Risk-Based Ratio | 8.0 | % | 1.5 | % | 8.0 | % | 10.0 | % | 8.2 | % |
(1) | The Order entered into by the Bank in February 2010, requires the Bank to maintain a Tier 1 capital to average assets (Leverage) ratio equal to or greater than 9% by July 2010. The Bank was unable to meet the deadline to increase the leverage ratio to 9%. |
INFORMATION REQUIRED IN PROSPECTUS
SEC registration fee | $ | 3,803 | ||||
Legal fees and expenses | $ | 60,000 | ||||
Accounting fees and expenses | $ | 80,000 | ||||
Printing costs | $ | 15,000 | ||||
Mailing and other miscellaneous expenses | $ | 5,000 | ||||
Total | $ | 163,803 |
anniversary the Series A and the Series B Preferred Stock are redeemed in whole or the Treasury has transferred all of the Series A and Series B Preferred Stock to third parties.
(a) | Exhibits |
Exhibit No. | Exhibit | |||||
---|---|---|---|---|---|---|
(3.1) | Articles of Incorporation as amended. * | |||||
(3.2) | The Company Bylaws as amended. * | |||||
(3.3) | Certificate of Determination for the Series A Preferred Stock. * | |||||
(3.4) | Certificate of Determination for the Series B Preferred Stock. * | |||||
(4.1) | Specimen form of the Company stock certificate. * | |||||
(4.2) | Form of Certificate for the Series A Preferred Stock. * | |||||
(4.3) | Form of Certificate for the Series B Preferred Stock. * | |||||
(4.4) | Form of Warrant (Affixed to the Form of Warrant Agreement). * | |||||
(5.1) | Opinion of Stuart ¦ Moore regarding validity of the common stock being registered. | |||||
(10.1) | Letter Agreement, dated December 23, 2008, between the Company and the United States Department of Treasury, with respect to the issuance of the Preferred Stock and the Warrant. * | |||||
(10.2) | Warrant Agreement. * | |||||
(10.3) | Citizens Bancorp 2006 Stock Option Plan Adopted by the Board of Directors on March 14, 2006. * | |||||
(10.4) | Adopted, Amended and Restated Citizens Bank of Nevada County 1995 Stock Option Plan. * | |||||
(10.5) | Citizens Bank of Northern California Profit Sharing 401(k) Plan. * | |||||
(10.6) | Employment Agreement Between Chief Executive Officer, Gary D. Gall and Bank, dated July 9, 2009. * | |||||
(10.7) | Employment Agreement Between Chief Financial Officer, Susann Trevena and Bank, dated January 30, 2002. * | |||||
(10.8) | Offer Letter Between Senior Credit Administrator, Michael A. Behn and Bank, dated July 17, 2009. * | |||||
(10.9) | Offer Letter Between General Counsel and Chief Risk Officer, Phillip J. Campbell and Bank, dated August 10, 2009. * | |||||
(10.10) | Salary Continuation Agreement between Susann C. Trevena and Bank dated July 1, 2006. * | |||||
(10.11) | Citizens Bank of Nevada County Employee Stock Purchase Plan dated December 20, 2001. * | |||||
(10.12) | Consent Order entered into between the Bank and the Federal Deposit Insurance Corporation and the California Department of Financial Institutions, dated February 11, 2010. * | |||||
(10.13) | Agreement between the Company and the Federal Reserve Board, dated February 22, 2010. * | |||||
(21.1) | Subsidiaries of the Company. * | |||||
(23.1) | Consent of Perry-Smith, LLP. | |||||
(24.1) | Power of Attorney. * |
* | previously filed |
(1) | For purposes of determining any liability under the Securities Act of 1933, the information omitted from the form of prospectus as filed as part of this registration statement in reliance upon Rule 430A and contained in a form of prospectus filed by the registrant pursuant to Rule 424(b)(1) or (4) or 497(h) under the Securities Act of 1933 shall be deemed to be part of this registration statement as of the time it was declared effective. |
(2) | For the purpose of determining any liability under the Securities Act of 1933, each post-effective amendment that contains a form of prospectus shall be deemed to be a new registration statement relating to the securities offered therein, and the offering of such securities at that time shall be deemed to be the initialbona fide offering thereof. |
By: | /s/ Gary D. Gall Gary D. Gall President and Chief Executive Officer |
Signature | Capacity | |||||
---|---|---|---|---|---|---|
/s/ Kenneth E. Baker * KENNETH E. BAKER | Chairman of the Board | |||||
/s/ Gary D. Gall * GARY D. GALL | Director, President and CEO | |||||
/s/ Susann Trevena * SUSANN TREVENA | Chief Financial Officer (principal accounting officer) | |||||
/s/ John T. Casey * JOHN T. CASEY | Director | |||||
/s/ Charles V. Litton, Jr. * CHARLES V. LITTON, JR. | Director | |||||
/s/ Janie L. Marini * JANIE L. MARINI | Director | |||||
/s/ Wyn Spiller * WYN SPILLER | Director | |||||
/s/ Gary N. Tintle * GARY N. TINTLE | Director | |||||
/s/ Reynold C. Johnson, III * REYNOLD C. JOHNSON, III | Director | |||||
/s/ Kenneth J. Meyers * KENNETH J. MEYERS | Director | |||||
* By Gary D. Gall, Attorney in Fact |
Exhibit No. | Exhibit | |||||
---|---|---|---|---|---|---|
(3.1) | Articles of Incorporation as amended. * | |||||
(3.2) | The Company Bylaws as amended. * | |||||
(3.3) | Certificate of Determination for the Series A Preferred Stock. * | |||||
(3.4) | Certificate of Determination for the Series B Preferred Stock. * | |||||
(4.1) | Specimen form of the Company stock certificate. * | |||||
(4.2) | Form of Certificate for the Series A Preferred Stock. * | |||||
(4.3) | Form of Certificate for the Series B Preferred Stock. * | |||||
(4.4) | Form of Warrant (Affixed to the Form of Warrant Agreement). * | |||||
(5.1) | Opinion of Stuart ¦ Moore regarding validity of the common stock being registered. | |||||
(10.1) | Letter Agreement, dated December 23, 2008, between the Company and the United States Department of Treasury, with respect to the issuance of the Preferred Stock and the Warrant. * | |||||
(10.2) | Warrant Agreement. * | |||||
(10.3) | Citizens Bancorp 2006 Stock Option Plan Adopted by the Board of Directors on March 14, 2006. * | |||||
(10.4) | Adopted, Amended and Restated Citizens Bank of Nevada County 1995 Stock Option Plan. * | |||||
(10.5) | Citizens Bank of Northern California Profit Sharing 401(k) Plan. * | |||||
(10.6) | Employment Agreement Between Chief Executive Officer, Gary D. Gall and Bank, dated July 9, 2009. * | |||||
(10.7) | Employment Agreement Between Chief Financial Officer, Susann Trevena and Bank, dated January 30, 2002. * | |||||
(10.8) | Offer Letter Between Senior Credit Administrator, Michael A. Behn and Bank, dated July 17, 2009. * | |||||
(10.9) | Offer Letter Between General Counsel and Chief Risk Officer, Phillip J. Campbell and Bank, dated August 10, 2009. * | |||||
(10.10) | Salary Continuation Agreement between Susann C. Trevena and Bank dated July 1, 2006. * | |||||
(10.11) | Citizens Bank of Nevada County Employee Stock Purchase Plan dated December 20, 2001. * | |||||
(10.12) | Consent Order entered into between the Bank and the Federal Deposit Insurance Corporation and the California Department of Financial Institutions, dated February 11, 2010. * | |||||
(10.13) | Agreement between the Company and the Federal Reserve Board, dated February 22, 2010. * | |||||
(21.1) | Subsidiaries of the Company. * | |||||
(23.1) | Consent of Perry-Smith, LLP. | |||||
(24.1) | Power of Attorney. * |
* | previously filed |