UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
(Mark One)
X | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF |
THE SECURITIES EXCHANGE ACT OF 1934 | |
| |
| For the quarterly period ended June 30, 2012 |
|
|
| OR |
|
|
___ | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF |
THE SECURITIES EXCHANGE ACT OF 1934 |
For the transition period from _____ to _____
Commission File Number: 001-35595
GEORGETOWN BANCORP, INC.
(Exact name of registrant as specified in its charter)
Maryland |
|
| 80-0817763 | |
(State or other jurisdiction of |
|
| (I.R.S. Employer | |
incorporation or organization) |
|
| Identification No.) | |
|
|
|
| |
2 East Main Street, Georgetown, MA |
|
| 01833 | |
(Address of principal executive office) |
|
| (Zip Code) | |
(978) 352-8600
(Registrant’s telephone number, including area code)
None
(Former name, former address and former fiscal year, if changed since last report)
Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Sections 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. (1) Yes X No (2) Yes No X
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes X No
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer”, “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.
Large accelerated filer |
| Accelerated filer |
|
|
Non-accelerated filer |
| Smaller reporting company X |
|
|
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes_ No X
Indicate the number of shares outstanding of the registrant’s common stock, as of the latest practicable date: Common Stock, $0.01 par value, 1,940,298 shares outstanding as of August 8, 2012.
Form 10-Q
GEORGETOWN BANCORP, INC.
GEORGETOWN BANCORP, INC.
CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION
-------------------------------------------------------------------------------------------
ASSETS
|
| At |
| At | ||
|
| June 30, |
| December 31, | ||
|
| 2012 |
| 2011 | ||
|
| (Unaudited) |
|
| ||
|
| (In thousands) | ||||
|
|
|
|
| ||
Cash and due from banks |
| $ | 2,232 |
| $ | 9,598 |
Short-term investments |
| 38,042 |
| 9,485 | ||
Total cash and cash equivalents |
| 40,274 |
| 19,083 | ||
|
|
|
|
| ||
Securities available for sale, at fair value |
| 7,176 |
| 4,174 | ||
Securities held to maturity, at amortized cost |
| 1,945 |
| 2,322 | ||
Federal Home Loan Bank stock, at cost |
| 2,861 |
| 3,111 | ||
Loans held for sale |
| 1,435 |
| 769 | ||
Loans, net of allowance for loan losses of $1,553,000 at June 30, 2012 and $1,824,000 at December 31, 2011 |
| 151,328 |
| 161,120 | ||
Premises and equipment, net |
| 3,862 |
| 3,882 | ||
Accrued interest receivable |
| 626 |
| 627 | ||
Bank-owned life insurance |
| 2,745 |
| 2,696 | ||
Other real estate owned |
| 283 |
| 30 | ||
Prepaid FDIC insurance |
| 290 |
| 362 | ||
Other assets |
| 1,755 |
| 1,199 | ||
|
|
|
|
| ||
Total assets |
| $ | 214,580 |
| $ | 199,375 |
|
|
|
|
| ||
LIABILITIES AND STOCKHOLDERS’ EQUITY |
|
|
|
| ||
|
|
|
|
| ||
Deposits |
| $ | 166,594 |
| $ | 151,085 |
Securities sold under agreements to repurchase |
| - |
| 573 | ||
Long-term Federal Home Loan Bank advances |
| 25,100 |
| 25,121 | ||
Mortgagors’ escrow accounts |
| 706 |
| 730 | ||
Accrued expenses and other liabilities |
| 1,469 |
| 1,537 | ||
Total liabilities |
| 193,869 |
| 179,046 | ||
|
|
|
|
| ||
Commitments and contingencies |
|
|
|
| ||
|
|
|
|
| ||
Stockholders’ equity: |
|
|
|
| ||
Preferred stock, $0.10 par value per share: 1,000,000 shares authorized; none outstanding |
| - |
| - | ||
Common stock, $0.10 par value per share: 10,000,000 shares authorized; 2,777,250 shares issued |
| 278 |
| 278 | ||
Additional paid-in capital |
| 11,514 |
| 11,496 | ||
Retained earnings |
| 10,298 |
| 10,010 | ||
Accumulated other comprehensive income |
| 152 |
| 134 | ||
Unearned compensation - ESOP (24,501 and 28,597 shares unallocated at June 30, 2012 and December 31, 2011, respectively) |
| (245) |
| (286) | ||
Unearned compensation - Restricted stock (42,050 and 36,552 shares non-vested at June 30, 2012 and December 31, 2011, respectively) |
| (225) |
| (167) | ||
Treasury stock, at cost (124,959 and 133,347 shares at June 30, 2012 and December 31, 2011, respectively) |
| (1,061) |
| (1,136) | ||
Total stockholders’ equity |
| 20,711 |
| 20,329 | ||
|
|
|
|
| ||
Total liabilities and stockholders’ equity |
| $ | 214,580 |
| $ | 199,375 |
See accompanying notes to consolidated financial statements.
GEORGETOWN BANCORP, INC.
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
---------------------------------------------------------
(unaudited)
|
| Three Months Ended |
| Six Months Ended |
| ||||||||
|
| June 30, |
| June 30, |
| ||||||||
|
| 2012 |
| 2011 |
| 2012 |
| 2011 |
| ||||
|
| (In thousands, except share and per share data) |
| ||||||||||
|
|
|
|
|
|
|
|
|
| ||||
Interest and dividend income: |
|
|
|
|
|
|
|
|
| ||||
Loans, including fees |
| $ | 2,161 |
| $ | 2,685 |
| $ | 4,412 |
| $ | 5,383 |
|
Securities |
| 82 |
| 92 |
| 146 |
| 191 |
| ||||
Short-term investments |
| 13 |
| - |
| 19 |
| - |
| ||||
Total interest and dividend income |
| 2,256 |
| 2,777 |
| 4,577 |
| 5,574 |
| ||||
|
|
|
|
|
|
|
|
|
| ||||
Interest expense: |
|
|
|
|
|
|
|
|
| ||||
Deposits |
| 230 |
| 413 |
| 513 |
| 830 |
| ||||
Short-term Federal Home Loan Bank advances |
| - |
| 2 |
| - |
| 7 |
| ||||
Long-term Federal Home Loan Bank advances |
| 217 |
| 231 |
| 435 |
| 478 |
| ||||
Securities sold under agreements to repurchase |
| - |
| - |
| 1 |
| 1 |
| ||||
Total interest expense |
| 447 |
| 646 |
| 949 |
| 1,316 |
| ||||
|
|
|
|
|
|
|
|
|
| ||||
Net interest income |
| 1,809 |
| 2,131 |
| 3,628 |
| 4,258 |
| ||||
Provision for loan losses |
| 31 |
| 681 |
| 95 |
| 745 |
| ||||
Net interest income, after provision for loan losses |
| 1,778 |
| 1,450 |
| 3,533 |
| 3,513 |
| ||||
|
|
|
|
|
|
|
|
|
| ||||
Non-interest income: |
|
|
|
|
|
|
|
|
| ||||
Customer service fees |
| 136 |
| 131 |
| 267 |
| 265 |
| ||||
Mortgage banking income, net |
| 162 |
| 43 |
| 288 |
| 110 |
| ||||
Income from bank-owned life insurance |
| 25 |
| 25 |
| 49 |
| 49 |
| ||||
Other |
| 6 |
| (1) |
| 8 |
| - |
| ||||
Total non-interest income |
| 329 |
| 198 |
| 612 |
| 424 |
| ||||
|
|
|
|
|
|
|
|
|
| ||||
Non-interest expenses: |
|
|
|
|
|
|
|
|
| ||||
Salaries and employee benefits |
| 1,066 |
| 954 |
| 2,089 |
| 1,959 |
| ||||
Occupancy and equipment expenses |
| 217 |
| 182 |
| 431 |
| 385 |
| ||||
Data processing expenses |
| 124 |
| 108 |
| 245 |
| 217 |
| ||||
Professional fees |
| 113 |
| 104 |
| 214 |
| 209 |
| ||||
Advertising expenses |
| 88 |
| 71 |
| 175 |
| 158 |
| ||||
FDIC insurance |
| 38 |
| 54 |
| 77 |
| 101 |
| ||||
Other general and administrative expenses |
| 259 |
| 234 |
| 479 |
| 437 |
| ||||
Total non-interest expenses |
| 1,905 |
| 1,707 |
| 3,710 |
| 3,466 |
| ||||
|
|
|
|
|
|
|
|
|
| ||||
Income (loss) before income taxes |
| 202 |
| (59) |
| 435 |
| 471 |
| ||||
|
|
|
|
|
|
|
|
|
| ||||
Income tax provision (benefit) |
| 67 |
| (39) |
| 147 |
| 159 |
| ||||
|
|
|
|
|
|
|
|
|
| ||||
Net income (loss) |
| $ | 135 |
| $ | (20) |
| $ | 288 |
| $ | 312 |
|
|
|
|
|
|
|
|
|
|
| ||||
Weighted-average number of common shares outstanding: |
|
|
|
|
|
|
|
|
| ||||
Basic |
| 2,668,498 |
| 2,646,420 |
| 2,663,281 |
| 2,641,606 |
| ||||
Diluted |
| 2,671,871 |
| 2,646,420 |
| 2,664,739 |
| 2,641,803 |
| ||||
|
|
|
|
|
|
|
|
|
| ||||
Earnings per share: |
|
|
|
|
|
|
|
|
| ||||
Basic |
| $ | 0.05 |
| $ | (0.01) |
| $ | 0.11 |
| $ | 0.12 |
|
Diluted |
| $ | 0.05 |
| $ | (0.01) |
| $ | 0.11 |
| $ | 0.12 |
|
|
|
|
|
|
|
|
|
|
| ||||
Comprehensive income: |
|
|
|
|
|
|
|
|
| ||||
|
|
|
|
|
|
|
|
|
| ||||
Net income (loss) |
| $ | 135 |
| $ | (20) |
| $ | 288 |
| $ | 312 |
|
|
|
|
|
|
|
|
|
|
| ||||
Other comprehensive income (loss), net of tax: |
|
|
|
|
|
|
|
|
| ||||
Unrealized gain (loss) on securities available for sale |
| 28 |
| 7 |
| 18 |
| (17) |
| ||||
|
|
|
|
|
|
|
|
|
| ||||
Comprehensive income (loss) |
| $ | 163 |
| $ | (13) |
| $ | 306 |
| $ | 295 |
|
See accompanying notes to consolidated financial statements.
GEORGETOWN BANCORP, INC.
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY
-----------------------------------------------------------------------------------------------------------------
(unaudited)
|
|
|
|
|
|
|
| Accumulated |
|
|
|
|
|
|
|
| ||||||||
|
|
|
| Additional |
|
|
| Other |
| Unearned |
| Unearned |
|
|
|
| ||||||||
|
| Common |
| Paid-in |
| Retained |
| Comprehensive |
| Compensation- |
| Compensation- |
| Treasury |
|
| ||||||||
|
| Stock |
| Capital |
| Earnings |
| Income (Loss) |
| ESOP |
| Restricted Stock |
| Stock |
| Total | ||||||||
|
| (In thousands) | ||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||
Balance at December 31, 2010 |
| $ | 278 |
| $ | 11,424 |
| $ | 8,999 |
| $ | 120 |
| $ | (368) |
| $ | (100) |
| $ | (1,184) |
| $ | 19,169 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||
Comprehensive income: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||
Net income |
| - |
| - |
| 312 |
| - |
| - |
| - |
| - |
| 312 | ||||||||
Net unrealized loss on securities available for sale, net of related tax effects of $11,000 |
| - |
| - |
| - |
| (17) |
| - |
| - |
| - |
| (17) | ||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||
Common stock held by ESOP allocated or committed to be allocated (4,096 shares) |
| - |
| (13) |
| - |
| - |
| 41 |
| - |
| - |
| 28 | ||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||
Restricted stock granted in connection with equity incentive plan (25,998 shares) |
| - |
| 169 |
| - |
| - |
| - |
| (169) |
| - |
| - | ||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||
Forfeiture of restricted stock (7,650 shares) |
| - |
| (46) |
| - |
| - |
| - |
| 46 |
| - |
| - | ||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||
Reissuance of treasury stock (5,796 shares) |
| - |
| (50) |
| - |
| - |
| - |
| - |
| 50 |
| - | ||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||
Purchase of treasury stock (280 shares) |
| - |
| - |
| - |
| - |
| - |
| - |
| (2) |
| (2) | ||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||
Share based compensation - options |
| - |
| 11 |
| - |
| - |
| - |
| - |
| - |
| 11 | ||||||||
Share based compensation - restricted stock |
| - |
| - |
| - |
| - |
| - |
| 25 |
| - |
| 25 | ||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||
Balance at June 30, 2011 |
| $ | 278 |
| $ | 11,495 |
| $ | 9,311 |
| $ | 103 |
| $ | (327) |
| $ | (198) |
| $ | (1,136) |
| $ | 19,526 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||
Balance at December 31, 2011 |
| $ | 278 |
| $ | 11,496 |
| $ | 10,010 |
| $ | 134 |
| $ | (286) |
| $ | (167) |
| $ | (1,136) |
| $ | 20,329 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||
Comprehensive income: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||
Net income |
| - |
| - |
| 288 |
| - |
| - |
| - |
| - |
| 288 | ||||||||
Net unrealized gain on securities available for sale, net of related tax effects of $10,000 |
| - |
| - |
| - |
| 18 |
| - |
| - |
| - |
| 18 | ||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||
Common stock held by ESOP allocated or committed to be allocated (4,096 shares) |
| - |
| (12) |
| - |
| - |
| 41 |
| - |
| - |
| 29 | ||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||
Restricted stock granted in connection with equity incentive plan (17,506 shares) |
| - |
| 109 |
| - |
| - |
| - |
| (109) |
| - |
| - | ||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||
Forfeiture of restricted stock (2,250 shares) |
| - |
| (13) |
| - |
| - |
| - |
| 13 |
| - |
| - | ||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||
Reissuance of treasury stock (9,758 shares) |
| - |
| (83) |
| - |
| - |
| - |
| - |
| 83 |
| - | ||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||
Purchase of treasury stock (1,370 shares) |
| - |
| - |
| - |
| - |
| - |
| - |
| (8) |
| (8) | ||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||
Share based compensation - options |
| - |
| 17 |
| - |
| - |
| - |
| - |
| - |
| 17 | ||||||||
Share based compensation - restricted stock |
| - |
| - |
| - |
| - |
| - |
| 38 |
| - |
| 38 | ||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||
Balance at June 30, 2012 |
| $ | 278 |
| $ | 11,514 |
| $ | 10,298 |
| $ | 152 |
| $ | (245) |
| $ | (225) |
| $ | (1,061) |
| $ | 20,711 |
See accompanying notes to consolidated financial statements.
GEORGETOWN BANCORP, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
--------------------------------------------------------------------
(unaudited)
|
| Six Months Ended | ||||
|
| June 30, | ||||
|
| 2012 |
| 2011 | ||
|
| (In thousands) | ||||
Cash flows from operating activities: |
|
|
|
| ||
Net income |
| $ | 288 |
| $ | 312 |
Adjustments to reconcile net income to net cash (used) provided by operating activities: |
|
|
|
| ||
Provision for loan losses |
| 95 |
| 745 | ||
Amortization (accretion) of securities, net |
| 2 |
| (4) | ||
Net change in loan fees and costs |
| (88) |
| (26) | ||
Depreciation and amortization expense |
| 138 |
| 129 | ||
Decrease in accrued interest receivable |
| 1 |
| 66 | ||
Income from bank-owned life insurance |
| (49) |
| (49) | ||
Stock-based compensation expense |
| 84 |
| 64 | ||
Gain on sale of loans |
| (375) |
| (120) | ||
Loans originated for sale |
| (18,288) |
| (4,732) | ||
Proceeds from sale of loans |
| 17,997 |
| 5,300 | ||
Decrease in prepaid FDIC insurance |
| 72 |
| 93 | ||
Net change in other assets and liabilities |
| (634) |
| (549) | ||
Net cash (used) provided by operating activities |
| (757) |
| 1,229 | ||
|
|
|
|
| ||
Cash flows from investing activities: |
|
|
|
| ||
Activity in securities available for sale: |
|
|
|
| ||
Maturities, prepayments and calls |
| 1,174 |
| 1,755 | ||
Purchases |
| (4,152) |
| (983) | ||
Maturities, prepayments and calls of securities held to maturity |
| 379 |
| 475 | ||
Redemption of Federal Home Loan Bank stock |
| 250 |
| - | ||
Loan originations, net |
| 9,218 |
| 4,959 | ||
Principal balance of portfolio loans sold |
| 314 |
| - | ||
Purchase of premises and equipment |
| (118) |
| (79) | ||
Net cash provided by investing activities |
| 7,065 |
| 6,127 | ||
(continued)
See accompanying notes to consolidated financial statements.
GEORGETOWN BANCORP, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
--------------------------------------------------------------------
(unaudited)
(concluded)
|
| Six Months Ended | ||||
|
| June 30, | ||||
|
| 2012 |
| 2011 | ||
|
| (In thousands) | ||||
Cash flows from financing activities: |
|
|
|
| ||
Net change in deposits |
| 15,509 |
| (263) | ||
Net change in securities sold under agreements to repurchase |
| (573) |
| (69) | ||
Net change in Federal Home Loan Bank advances with maturities of three months or less |
| - |
| (500) | ||
Proceeds of Federal Home Loan Bank advances with maturities greater than three months |
| 8,500 |
| - | ||
Repayments of Federal Home Loan Bank advances with maturities greater than three months |
| (8,521) |
| (3,030) | ||
Net change in mortgagors’ escrow accounts |
| (24) |
| (10) | ||
Purchase of vested restricted shares to treasury stock |
| (8) |
| (2) | ||
Net cash provided (used) by financing activities |
| 14,883 |
| (3,874) | ||
|
|
|
|
| ||
Net change in cash and cash equivalents |
| 21,191 |
| 3,482 | ||
|
|
|
|
| ||
Cash and cash equivalents at beginning of period |
| 19,083 |
| 3,298 | ||
|
|
|
|
| ||
Cash and cash equivalents at end of period |
| $ | 40,274 |
| $ | 6,780 |
|
|
|
|
| ||
Supplementary information: |
|
|
|
| ||
Interest paid on deposit accounts |
| $ | 515 |
| $ | 829 |
Interest paid on borrowings |
| 463 |
| 498 | ||
Income taxes paid |
| 219 |
| 507 | ||
Loans transferred to other real estate owned |
| 253 |
| - |
See accompanying notes to consolidated financial statements.
GEORGETOWN BANCORP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(1) Basis of Presentation
The accompanying unaudited financial statements of Georgetown Bancorp, Inc., a federal corporation, (the “Company”) were prepared in accordance with the instructions for Form 10-Q and with Regulation S-X and do not include information or footnotes necessary for a complete presentation of financial condition, results of operations, and cash flows in conformity with generally accepted accounting principles. However, in the opinion of management, all adjustments (consisting of normal recurring adjustments) necessary for a fair presentation of the financial statements have been included. The results of operations for the three- and six-month periods ended June 30, 2012 are not necessarily indicative of the results that may be expected for future periods, including the entire fiscal year. These financial statements should be read in conjunction with the financial statements and notes thereto included in the December 31, 2011 Consolidated Financial Statements presented in the Company’s Annual Report on Form 10-K filed with the Securities and Exchange Commission on March 30, 2012. The consolidated financial statements include the accounts of Georgetown Savings Bank (the “Bank”) and its wholly owned subsidiary, Georgetown Securities Corporation, which engages in the buying, selling and holding of securities. All significant inter-company balances and transactions have been eliminated in consolidation. These consolidated financial statements consider events that occurred through the date the consolidated financial statements were issued.
(2) Earnings Per Common Share
The Company has adopted the Earnings Per Share (“EPS”) guidance included in Accounting Standards Codification (“ASC”) 260-10. As presented below, basic earnings per share is computed by dividing net income available to common stockholders by the weighted average number of common shares outstanding for the period. Diluted earnings per share reflect the potential dilution that would occur if securities or other contracts to issue common stock were exercised or converted into common stock or resulted in the issuance of common stock that then shared in the earnings of the entity. For purposes of computing diluted EPS, the treasury stock method is used.
Treasury shares and unallocated ESOP shares are not deemed outstanding for earnings per share calculations.
Earnings per common share have been computed based on the following:
|
| Three Months Ended |
| Six Months Ended | ||||||||
|
| June 30, |
| June 30, | ||||||||
|
| 2012 |
| 2011 |
| 2012 |
| 2011 | ||||
|
|
|
|
|
|
|
|
| ||||
Net income (loss) available to common stockholders |
| $ | 135,000 |
| $ | (20,000) |
| $ | 288,000 |
| $ | 312,000 |
|
|
|
|
|
|
|
|
| ||||
Basic common shares: |
|
|
|
|
|
|
|
| ||||
Weighted average shares outstanding |
| 2,652,291 |
| 2,643,903 |
| 2,649,848 |
| 2,642,279 | ||||
Less: Weighted average unallocated ESOP shares |
| (25,843) |
| (34,035) |
| (26,868) |
| (35,059) | ||||
Add: Weighted average unvested restricted stock shares with non-forfeitable dividend rights |
| 42,050 |
| 36,552 |
| 40,301 |
| 34,386 | ||||
Basic weighted average common shares outstanding |
| 2,668,498 |
| 2,646,420 |
| 2,663,281 |
| 2,641,606 | ||||
|
|
|
|
|
|
|
|
| ||||
Dilutive potential common shares |
| 3,373 |
| - |
| 1,458 |
| 197 | ||||
|
|
|
|
|
|
|
|
| ||||
Diluted weighted average common shares outstanding |
| 2,671,871 |
| 2,646,420 |
| 2,664,739 |
| 2,641,803 | ||||
|
|
|
|
|
|
|
|
| ||||
Basic earnings (loss) per share |
| $ | 0.05 |
| $ | (0.01) |
| $ | 0.11 |
| $ | 0.12 |
|
|
|
|
|
|
|
|
| ||||
Diluted earnings (loss) per share |
| $ | 0.05 |
| $ | (0.01) |
| $ | 0.11 |
| $ | 0.12 |
Options to purchase 56,492 shares, representing all outstanding options, were included in the computation of diluted earnings per share for the three and six month periods ended June 30, 2012. Options to purchase 42,348 shares were not included in the computation of diluted earnings per share for the three months ended June 30, 2011 because to do so would have been antidilutive. Of the 42,348 options to purchase shares, 21,748 were not included in the computation of diluted earnings per share for the six months ended June 30, 2011, because to do so would have been antidilutive.
(3) Corporate Structure
In conjunction with its reorganization into the mutual holding company structure, on January 5, 2005, the Bank (i) converted to a stock savings bank as the successor to the Bank in its mutual form; (ii) organized the Company as a federally-chartered corporation that owns 100% of the common stock of the Bank (in stock form); and (iii) organized Georgetown Bancorp, MHC as a federally-chartered mutual holding company that owned 56.7% of the Common Stock of the Company as of June 30, 2012. On November 28, 2011, the Boards of Directors of the Company, Georgetown Bancorp, MHC and the Bank each unanimously adopted a Plan of Conversion or Reorganization of the Mutual Holding Company pursuant to which Georgetown Bancorp, MHC undertook a “second-step” conversion and now ceases to exist. The Bank reorganized from a two-tier mutual holding company structure to a fully public stock holding company structure effective July 11, 2012, and, as a result, is now the wholly-owned subsidiary of Georgetown Bancorp, Inc., a Maryland corporation (“New Georgetown”). Because the conversion occurred after June 30, 2012, the information included in this quarterly report is that of the Company.
(4) Recent Accounting Pronouncements
In April 2011, the Financial Accounting Standards Board (“the FASB”) issued Accounting Standards Update (“ASU”) 2011-03, “Reconsideration of Effective Control for Repurchase Agreements.” The objective of this ASU is to improve the accounting for repurchase agreements and other agreements that both entitle and obligate a transferor to repurchase or redeem financial assets before their maturity. This ASU prescribes when an entity may or may not recognize a sale upon the transfer of financial assets subject to repurchase agreements. The guidance in this ASU is effective for the first interim or annual period beginning on or after December 15, 2011. Early adoption is not permitted. The Company’s adoption of this guidance did not have a material impact on its financial position or results of operation.
In May 2011, the FASB issued ASU 2011-04, “Amendments to Achieve Common Fair Value Measurement and Disclosure Requirements in U.S. GAAP and International Financial Reporting Standards.” The amendments in this ASU explain how to measure fair value. They do not require additional fair value measurements and are not intended to establish valuation standards or affect valuation practices outside of financial reporting. The amendments in this ASU are to be applied prospectively. For public entities, the amendments are effective during interim and annual periods beginning after December 15, 2011. The Company’s adoption of this guidance did not have a material impact on its financial position or results of operation.
In June 2011, the FASB issued ASU 2011-05, “Presentation of Comprehensive Income.” The objective of this ASU is to improve the comparability, consistency, and transparency of financial reporting and to increase the prominence of items reported in other comprehensive income. Under this ASU, an entity has the option to present the total of comprehensive income, the components of net income, and the components of other comprehensive income either in a single continuous statement of comprehensive income or in two separate but consecutive statements. An entity is required to present each component of net income along with total net income, each component of other comprehensive income along with a total for other comprehensive income, and a total amount for comprehensive income. An entity is required to present on the face of the financial statements reclassification adjustments for items that are reclassified from other comprehensive income to net income in the statement(s) where the components of net income and the components of other comprehensive income are presented. The amendments in this ASU should be applied retrospectively. For public entities, the amendments are effective for fiscal years, and interim periods within those years, beginning after December 15, 2011. The Company’s adoption of this guidance did not have a material impact on its financial position or results of operation.
In December 2011, the FASB issued ASU 2011-11, “Disclosures about Offsetting Assets and Liabilities.” This ASU is to enhance current disclosures. Entities are required to disclose both gross information and net information about both instruments and transactions eligible for offset in the statement of financial position and instruments and transactions subject to an agreement similar to a master netting arrangement. The amendments in this ASU are effective for annual periods beginning on or after January 1, 2013, and interim periods within those annual periods. An entity should provide the disclosures required by those amendments retrospectively for all comparative periods presented. The Company does not anticipate that the adoption of this guidance will have a material impact on its financial position or results of operation.
In December 2011, the FASB issued ASU 2011-12, “Comprehensive Income (Topic 220): Deferral of the Effective Date for Amendments to the Presentation of Reclassifications of Items Out of Accumulated Other Comprehensive Income in Accounting Standards Update No. 2011-05.” The amendments in this update defer those changes in ASU 2011-05 that relate to the presentation of reclassifications out of accumulated other comprehensive income on the components of net income and other comprehensive income for all periods presented. All other requirements in ASU 2011-05 are not affected by this update. The amendments are effective during interim and annual periods beginning after December 15, 2011. The Company’s adoption of this guidance did not have a material impact on its financial position or results of operation.
(5) Securities
A summary of securities is as follows:
|
|
|
| Gross |
| Gross |
|
| ||||
|
| Amortized |
| Unrealized |
| Unrealized |
| Fair | ||||
|
| Cost |
| Gains |
| Losses |
| Value | ||||
|
| (In thousands) | ||||||||||
|
|
|
|
|
|
|
|
| ||||
At June 30, 2012 |
|
|
|
|
|
|
|
| ||||
|
|
|
|
|
|
|
|
| ||||
Securities available for sale |
|
|
|
|
|
|
|
| ||||
|
|
|
|
|
|
|
|
| ||||
Residential mortgage-backed securities |
| $ | 6,940 |
| $ | 236 |
| $ | - |
| $ | 7,176 |
|
|
|
|
|
|
|
|
| ||||
Securities held to maturity |
|
|
|
|
|
|
|
| ||||
|
|
|
|
|
|
|
|
| ||||
Residential mortgage-backed securities |
| $ | 1,945 |
| $ | 164 |
| $ | - |
| $ | 2,109 |
|
|
|
| Gross |
| Gross |
|
| ||||
|
| Amortized |
| Unrealized |
| Unrealized |
| Fair | ||||
|
| Cost |
| Gains |
| Losses |
| Value | ||||
|
| (In thousands) | ||||||||||
|
|
|
|
|
|
|
|
| ||||
At December 31, 2011 |
|
|
|
|
|
|
|
| ||||
|
|
|
|
|
|
|
|
| ||||
Securities available for sale |
|
|
|
|
|
|
|
| ||||
|
|
|
|
|
|
|
|
| ||||
Government-sponsored enterprise obligations |
| $ | 502 |
| $ | 1 |
| $ | - |
| $ | 503 |
Residential mortgage-backed securities |
| 3,464 |
| 207 |
| - |
| 3,671 | ||||
|
|
|
|
|
|
|
|
| ||||
Total securities available for sale |
| $ | 3,966 |
| $ | 208 |
| $ | - |
| $ | 4,174 |
|
|
|
|
|
|
|
|
| ||||
Securities held to maturity |
|
|
|
|
|
|
|
| ||||
|
|
|
|
|
|
|
|
| ||||
Residential mortgage-backed securities |
| $ | 2,322 |
| $ | 184 |
| $ | - |
| $ | 2,506 |
All residential mortgage-backed securities have been issued by government-sponsored enterprises.
The amortized cost and estimated fair value of debt securities by contractual maturity at June 30, 2012 are as follows. Expected maturities will differ from contractual maturities because issuers may have the right to call or prepay obligations with or without call or prepayment penalties.
|
| Available for Sale |
| Held to Maturity |
| ||||||||
|
| Amortized |
| Fair |
| Amortized |
| Fair |
| ||||
|
| Cost |
| Value |
| Cost |
| Value |
| ||||
|
| (In thousands) |
| ||||||||||
|
|
|
|
|
|
|
|
|
| ||||
Residential mortgage-backed securities |
| $ | 6,940 |
| $ | 7,176 |
| $ | 1,945 |
| $ | 2,109 |
|
There were no sales of securities for the six months ended June 30, 2012 and 2011.
There were no securities with gross unrealized losses at June 30, 2012 and December 31, 2011.
(6) Loans and Servicing
Loans
A summary of loans is as follows:
|
| At |
| At | ||||||||
|
| June 30, |
| December 31, | ||||||||
|
| 2012 |
| 2011 | ||||||||
|
| Amount |
| Percent |
| Amount |
| Percent | ||||
|
| (Dollars in thousands) |
| |||||||||
|
|
|
|
|
|
|
|
|
| |||
Residential loans: |
|
|
|
|
|
|
|
|
|
| ||
One-to-four family |
| $ | 65,727 |
| 43.06 | % |
| $ | 62,613 |
| 38.46 | % |
Home equity loans and lines of credit |
| 16,302 |
| 10.68 |
|
| 17,118 |
| 10.51 |
| ||
Total residential mortgage loans |
| 82,029 |
| 53.74 |
|
| 79,731 |
| 48.97 |
| ||
|
|
|
|
|
|
|
|
|
|
| ||
Commercial loans: |
|
|
|
|
|
|
|
|
|
| ||
One-to-four family investment property |
| 10,431 |
| 6.83 |
|
| 10,816 |
| 6.64 |
| ||
Multi-family real estate |
| 9,556 |
| 6.26 |
|
| 13,037 |
| 8.01 |
| ||
Commercial real estate |
| 27,343 |
| 17.91 |
|
| 25,399 |
| 15.60 |
| ||
Commercial business |
| 7,138 |
| 4.68 |
|
| 10,137 |
| 6.23 |
| ||
Total commercial loans |
| 54,468 |
| 35.68 |
|
| 59,389 |
| 36.48 |
| ||
|
|
|
|
|
|
|
|
|
|
| ||
Construction loans: |
|
|
|
|
|
|
|
|
|
| ||
One-to-four family |
| 7,011 |
| 4.59 |
|
| 11,941 |
| 7.33 |
| ||
Multi-family |
| 8,530 |
| 5.59 |
|
| 10,656 |
| 6.55 |
| ||
Non-residential |
| 138 |
| 0.09 |
|
| 629 |
| 0.39 |
| ||
Total construction loans |
| 15,679 |
| 10.27 |
|
| 23,226 |
| 14.27 |
| ||
|
|
|
|
|
|
|
|
|
|
| ||
Consumer |
| 470 |
| 0.31 |
|
| 451 |
| 0.28 |
| ||
|
|
|
|
|
|
|
|
|
|
| ||
Total loans |
| 152,646 |
| 100.00 | % |
| 162,797 |
| 100.00 | % | ||
|
|
|
|
|
|
|
|
|
|
| ||
Other items: |
|
|
|
|
|
|
|
|
|
| ||
Net deferred loan costs |
| 235 |
|
|
|
| 147 |
|
|
| ||
Allowance for loan losses |
| (1,553) |
|
|
|
| (1,824) |
|
|
| ||
|
|
|
|
|
|
|
|
|
|
| ||
Total loans, net |
| $ | 151,328 |
|
|
|
| $ | 161,120 |
|
|
|
An analysis of the allowance for loan losses at June 30, 2012 and December 31, 2011 is below. For additional information please refer to Item 2, Management’s Discussion and Analysis of Financial Condition and Results of Operations.
|
| Residential |
| Commercial |
| Construction |
|
|
|
|
| |||||||||||||||||||||||
|
| One-to-four |
| Home equity |
| One-to-four |
| Multi-family |
| Commercial |
| Commercial |
| One-to-four |
| Multi-family |
| Non- |
| Consumer |
| Total |
| |||||||||||
|
| (In thousands) |
| |||||||||||||||||||||||||||||||
At June 30, 2012 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||
Allowance for loan losses |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||
Beginning Balance |
| $ | 346 |
| $ | 341 |
| $ | 59 |
| $ | 98 |
| $ | 400 |
| $ | 234 |
| $ | 228 |
| $ | 98 |
| $ | 11 |
| $ | 9 |
| $ | 1,824 |
|
Charge-offs |
| (144) |
| (33) |
| - |
| - |
| - |
| (2) |
| (191) |
| - |
| - |
| (1) |
| (371) |
| |||||||||||
Recoveries |
| 5 |
| - |
| - |
| - |
| - |
| - |
| - |
| - |
| - |
| - |
| 5 |
| |||||||||||
Provision |
| 104 |
| (8) |
| (2) |
| (26) |
| 26 |
| (92) |
| 119 |
| (20) |
| (7) |
| 1 |
| 95 |
| |||||||||||
Ending Balance |
| $ | 311 |
| $ | 300 |
| $ | 57 |
| $ | 72 |
| $ | 426 |
| $ | 140 |
| $ | 156 |
| $ | 78 |
| $ | 4 |
| $ | 9 |
| $ | 1,553 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||
Ending balance: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||
individually evaluated for impairment |
| $ | 109 |
| $ | 13 |
| $ | - |
| $ | - |
| $ | - |
| $ | 20 |
| $ | - |
| $ | - |
| $ | - |
| $ | - |
| $ | 142 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||
Ending balance: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||
collectively evaluated for impairment |
| $ | 202 |
| $ | 287 |
| $ | 57 |
| $ | 72 |
| $ | 426 |
| $ | 120 |
| $ | 156 |
| $ | 78 |
| $ | 4 |
| $ | 9 |
| $ | 1,411 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||
Loans |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||
Ending Balance |
| $ | 65,727 |
| $ | 16,302 |
| $ | 10,431 |
| $ | 9,556 |
| $ | 27,343 |
| $ | 7,138 |
| $ | 7,011 |
| $ | 8,530 |
| $ | 138 |
| $ | 470 |
| $ | 152,646 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||
Ending balance: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||
individually evaluated for impairment |
| $ | 1,016 |
| $ | 44 |
| $ | - |
| $ | - |
| $ | 310 |
| $ | 20 |
| $ | 767 |
| $ | - |
| $ | - |
| $ | - |
| $ | 2,157 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||
Ending balance: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||
collectively evaluated for impairment |
| $ | 64,711 |
| $ | 16,258 |
| $ | 10,431 |
| $ | 9,556 |
| $ | 27,033 |
| $ | 7,118 |
| $ | 6,244 |
| $ | 8,530 |
| $ | 138 |
| $ | 470 |
| $ | 150,489 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||
At December 31, 2011 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||
Allowance for loan losses |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||
Beginning Balance |
| $ | 233 |
| $ | 320 |
| $ | 60 |
| $ | 106 |
| $ | 431 |
| $ | 304 |
| $ | 93 |
| $ | 83 |
| $ | 6 |
| $ | 15 |
| $ | 1,651 |
|
Charge-offs |
| - |
| (741) |
| - |
| - |
| (10) |
| (3) |
| - |
| - |
| - |
| (34) |
| (788) |
| |||||||||||
Recoveries |
| 9 |
| - |
| - |
| - |
| - |
| 1 |
| - |
| - |
| - |
| 2 |
| 12 |
| |||||||||||
Provision |
| 104 |
| 762 |
| (1) |
| (8) |
| (21) |
| (68) |
| 135 |
| 15 |
| 5 |
| 26 |
| 949 |
| |||||||||||
Ending Balance |
| $ | 346 |
| $ | 341 |
| $ | 59 |
| $ | 98 |
| $ | 400 |
| $ | 234 |
| $ | 228 |
| $ | 98 |
| $ | 11 |
| $ | 9 |
| $ | 1,824 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||
Ending balance: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||
individually evaluated for impairment |
| $ | 185 |
| $ | 13 |
| $ | - |
| $ | - |
| $ | - |
| $ | - |
| $ | 121 |
| $ | - |
| $ | - |
| $ | - |
| $ | 319 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||
Ending balance: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||
collectively evaluated for impairment |
| $ | 161 |
| $ | 328 |
| $ | 59 |
| $ | 98 |
| $ | 400 |
| $ | 234 |
| $ | 107 |
| $ | 98 |
| $ | 11 |
| $ | 9 |
| $ | 1,505 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||
Loans |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||
Ending Balance |
| $ | 62,613 |
| $ | 17,118 |
| $ | 10,816 |
| $ | 13,037 |
| $ | 25,399 |
| $ | 10,137 |
| $ | 11,941 |
| $ | 10,656 |
| $ | 629 |
| $ | 451 |
| $ | 162,797 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||
Ending balance: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||
individually evaluated for impairment |
| $ | 898 |
| $ | 13 |
| $ | - |
| $ | - |
| $ | 314 |
| $ | - |
| $ | 1,168 |
| $ | 1,269 |
| $ | - |
| $ | - |
| $ | 3,662 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||
Ending balance: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||
collectively evaluated for impairment |
| $ | 61,715 |
| $ | 17,105 |
| $ | 10,816 |
| $ | 13,037 |
| $ | 25,085 |
| $ | 10,137 |
| $ | 10,773 |
| $ | 9,387 |
| $ | 629 |
| $ | 451 |
| $ | 159,135 |
|
The following is a summary of past-due and non-accrual loans at June 30, 2012 and December 31, 2011. For additional information please refer to Item 2, Management’s Discussion and Analysis of Financial Condition and Results of Operations.
|
| Loans delinquent for: |
|
|
|
|
|
|
| 90 days |
|
| |||||||||||||
|
|
|
|
|
| 90 days |
| Total |
| Total |
| Total |
| or more |
| Non-accrual | |||||||||
|
| 30 - 59 Days |
| 60 - 89 Days |
| or more |
| Past Due |
| Current |
| Loans |
| and accruing |
| Loans | |||||||||
|
| (In thousands) | |||||||||||||||||||||||
At June 30, 2012: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||
Residential loans: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||
One-to-four family |
| $ | 315 |
| $ | - |
| $ | 552 |
| $ | 867 |
| $ | 64,860 |
| $ | 65,727 |
| $ | - |
| $ | 1,016 |
|
Home equity loans and lines of credit |
| 13 |
| - |
| - |
| 13 |
| 16,289 |
| 16,302 |
| - |
| 44 |
| ||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||
Commercial loans: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||
One-to-four family investment property |
| - |
| - |
| - |
| - |
| 10,431 |
| 10,431 |
| - |
| - |
| ||||||||
Multi-family real estate |
| - |
| - |
| - |
| - |
| 9,556 |
| 9,556 |
| - |
| - |
| ||||||||
Commercial real estate |
| 2,120 |
| - |
| - |
| 2,120 |
| 25,223 |
| 27,343 |
| - |
| - |
| ||||||||
Commercial business |
| 20 |
| - |
| - |
| 20 |
| 7,118 |
| 7,138 |
| - |
| 20 |
| ||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||
Construction loans: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||
One-to-four family |
| - |
| - |
| 767 |
| 767 |
| 6,244 |
| 7,011 |
| - |
| 767 |
| ||||||||
Multi-family |
| - |
| - |
| - |
| - |
| 8,530 |
| 8,530 |
| - |
| - |
| ||||||||
Non-residential |
| - |
| - |
| - |
| - |
| 138 |
| 138 |
| - |
| - |
| ||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||
Consumer |
| 5 |
| - |
| - |
| 5 |
| 465 |
| 470 |
| - |
| - |
| ||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||
Total |
| $ | 2,473 |
| $ | - |
| $ | 1,319 |
| $ | 3,792 |
| $ | 148,854 |
| $ | 152,646 |
| $ | - |
| $ | 1,847 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||
At December 31, 2011: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||
Residential loans: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||
One-to-four family |
| $ | 431 |
| $ | 175 |
| $ | 391 |
| $ | 997 |
| $ | 61,616 |
| $ | 62,613 |
| $ | - |
| $ | 683 |
|
Home equity loans and lines of credit |
| - |
| - |
| - |
| - |
| 17,118 |
| 17,118 |
| - |
| 13 |
| ||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||
Commercial loans: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||
One-to-four family investment property |
| - |
| - |
| - |
| - |
| 10,816 |
| 10,816 |
| - |
| - |
| ||||||||
Multi-family real estate |
| - |
| - |
| - |
| - |
| 13,037 |
| 13,037 |
| - |
| - |
| ||||||||
Commercial real estate |
| 314 |
| - |
| - |
| 314 |
| 25,085 |
| 25,399 |
| - |
| - |
| ||||||||
Commercial business |
| - |
| - |
| - |
| - |
| 10,137 |
| 10,137 |
| - |
| - |
| ||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||
Construction loans: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||
One-to-four family |
| - |
| 100 |
| 1,168 |
| 1,268 |
| 10,673 |
| 11,941 |
| - |
| 1,168 |
| ||||||||
Multi-family |
| - |
| - |
| - |
| - |
| 10,656 |
| 10,656 |
| - |
| 1,269 |
| ||||||||
Non-residential |
| - |
| - |
| - |
| - |
| 629 |
| 629 |
| - |
| - |
| ||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||
Consumer |
| 4 |
| - |
| - |
| 4 |
| 447 |
| 451 |
| - |
| - |
| ||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||
Total |
| $ | 749 |
| $ | 275 |
| $ | 1,559 |
| $ | 2,583 |
| $ | 160,214 |
| $ | 162,797 |
| $ | - |
| $ | 3,133 |
|
The following is an analysis of impaired loans at June 30, 2012 and December 31, 2011.
|
|
|
| Unpaid |
|
|
| Average |
| Interest | |||||
|
| Recorded |
| Principal |
| Related |
| Recorded |
| Income | |||||
|
| Investment |
| Balance |
| Allowance |
| Investment |
| Recognized | |||||
|
| (In thousands) | |||||||||||||
|
|
|
|
|
|
|
|
|
|
| |||||
At June 30, 2012 |
|
|
|
|
|
|
|
|
|
| |||||
|
|
|
|
|
|
|
|
|
|
| |||||
Impaired loans without a valuation allowance |
|
|
|
|
|
|
|
|
|
| |||||
|
|
|
|
|
|
|
|
|
|
| |||||
Residential loans: |
|
|
|
|
|
|
|
|
|
| |||||
One-to-four family |
| $ | 352 |
| $ | 352 |
| $ | - |
| $ | 202 |
| $ | - |
Home equity loans and lines of credit |
| 31 |
| 31 |
| - |
| 4 |
| - | |||||
Commercial loans: |
|
|
|
|
|
|
|
|
|
| |||||
One-to-four family investment property |
| - |
| - |
| - |
| - |
| - | |||||
Multi-family real estate |
| - |
| - |
| - |
| - |
| - | |||||
Commercial real estate |
| 310 |
| 310 |
| - |
| 312 |
| 9 | |||||
Commercial business |
| - |
| - |
| - |
| - |
| - | |||||
|
|
|
|
|
|
|
|
|
|
| |||||
Construction loans: |
|
|
|
|
|
|
|
|
|
| |||||
One-to-four family |
| 767 |
| 767 |
| - |
| 938 |
| - | |||||
Multi-family |
| - |
| - |
| - |
| 638 |
| 23 | |||||
Non-residential |
| - |
| - |
| - |
| - |
| - | |||||
|
|
|
|
|
|
|
|
|
|
| |||||
Consumer |
| - |
| - |
| - |
| - |
| - | |||||
|
|
|
|
|
|
|
|
|
|
| |||||
Total impaired with no related allowance |
| $ | 1,460 |
| $ | 1,460 |
| $ | - |
| $ | 2,094 |
| $ | 32 |
|
|
|
|
|
|
|
|
|
|
| |||||
Impaired loans with a valuation allowance |
|
|
|
|
|
|
|
|
|
| |||||
|
|
|
|
|
|
|
|
|
|
| |||||
Residential loans: |
|
|
|
|
|
|
|
|
|
| |||||
One-to-four family |
| $ | 664 |
| $ | 664 |
| $ | 109 |
| $ | 797 |
| $ | 7 |
Home equity loans and lines of credit |
| 13 |
| 13 |
| 13 |
| 13 |
| - | |||||
|
|
|
|
|
|
|
|
|
|
| |||||
Commercial loans: |
|
|
|
|
|
|
|
|
|
| |||||
One-to-four family investment property |
| - |
| - |
| - |
| - |
| - | |||||
Multi-family real estate |
| - |
| - |
| - |
| - |
| - | |||||
Commercial real estate |
| - |
| - |
| - |
| - |
| - | |||||
Commercial business |
| 20 |
| 20 |
| 20 |
| 6 |
| - | |||||
|
|
|
|
|
|
|
|
|
|
| |||||
Construction loans: |
|
|
|
|
|
|
|
|
|
| |||||
One-to-four family |
| - |
| - |
| - |
| - |
| - | |||||
Multi-family |
| - |
| - |
| - |
| - |
| - | |||||
Non-residential |
| - |
| - |
| - |
| - |
| - | |||||
Consumer |
| - |
| - |
| - |
| - |
| - | |||||
|
|
|
|
|
|
|
|
|
|
| |||||
Total with an allowance recorded |
| $ | 697 |
| $ | 697 |
| $ | 142 |
| $ | 816 |
| $ | 7 |
|
|
|
|
|
|
|
|
|
|
| |||||
At December 31, 2011 |
|
|
|
|
|
|
|
|
|
| |||||
|
|
|
|
|
|
|
|
|
|
| |||||
Impaired loans without a valuation allowance |
|
|
|
|
|
|
|
|
|
| |||||
|
|
|
|
|
|
|
|
|
|
| |||||
Residential loans: |
|
|
|
|
|
|
|
|
|
| |||||
One-to-four family |
| $ | - |
| $ | - |
| $ | - |
| $ | 16 |
| $ | - |
Home equity loans and lines of credit |
| - |
| - |
| - |
| - |
| - | |||||
|
|
|
|
|
|
|
|
|
|
| |||||
Commercial loans: |
|
|
|
|
|
|
|
|
|
| |||||
One-to-four family investment property |
| - |
| - |
| - |
| - |
| - | |||||
Multi-family real estate |
| - |
| - |
| - |
| - |
| - | |||||
Commercial real estate |
| 314 |
| 314 |
| - |
| 145 |
| 10 | |||||
Commercial business |
| - |
| - |
| - |
| 63 |
| 42 | |||||
|
|
|
|
|
|
|
|
|
|
| |||||
Construction loans: |
|
|
|
|
|
|
|
|
|
| |||||
One-to-four family |
| 732 |
| 732 |
| - |
| 225 |
| - | |||||
Multi-family |
| 1,269 |
| 1,269 |
| - |
| 448 |
| 62 | |||||
Non-residential |
| - |
| - |
| - |
| - |
| - | |||||
|
|
|
|
|
|
|
|
|
|
| |||||
Consumer |
| - |
| - |
| - |
| - |
| - | |||||
|
|
|
|
|
|
|
|
|
|
| |||||
Total impaired with no related allowance |
| $ | 2,315 |
| $ | 2,315 |
| $ | - |
| $ | 897 |
| $ | 114 |
|
|
|
|
|
|
|
|
|
|
| |||||
Impaired loans with a valuation allowance |
|
|
|
|
|
|
|
|
|
| |||||
|
|
|
|
|
|
|
|
|
|
| |||||
Residential loans: |
|
|
|
|
|
|
|
|
|
| |||||
One-to-four family |
| $ | 898 |
| $ | 898 |
| $ | 185 |
| $ | 297 |
| $ | 7 |
Home equity loans and lines of credit |
| 13 |
| 13 |
| 13 |
| 182 |
| 1 | |||||
|
|
|
|
|
|
|
|
|
|
| |||||
Commercial loans: |
|
|
|
|
|
|
|
|
|
| |||||
One-to-four family investment property |
| - |
| - |
| - |
| - |
| - | |||||
Multi-family real estate |
| - |
| - |
| - |
| - |
| - | |||||
Commercial real estate |
| - |
| - |
| - |
| - |
| - | |||||
Commercial business |
| - |
| - |
| - |
| - |
| - | |||||
|
|
|
|
|
|
|
|
|
|
| |||||
Construction loans: |
|
|
|
|
|
|
|
|
|
| |||||
One-to-four family |
| 436 |
| 436 |
| 121 |
| 226 |
| 19 | |||||
Multi-family |
| - |
| - |
| - |
| - |
| - | |||||
Non-residential |
| - |
| - |
| - |
| - |
| - | |||||
|
|
|
|
|
|
|
|
|
|
| |||||
Consumer |
| - |
| - |
| - |
| - |
| - | |||||
|
|
|
|
|
|
|
|
|
|
| |||||
Total with an allowance recorded |
| $ | 1,347 |
| $ | 1,347 |
| $ | 319 |
| $ | 705 |
| $ | 27 |
The following is a summary of loans modified and considered troubled debt restructurings during the six months ended June 30, 2012:
|
|
|
| Pre-Modification |
| Post-Modification | ||
|
| Number of |
| Outstanding Recorded |
| Outstanding Recorded | ||
|
| Contracts |
| Investment |
| Investment | ||
|
|
|
| (In thousands) |
|
| ||
|
|
|
|
|
|
| ||
Residential loans: |
|
|
|
|
|
| ||
One-to-four family |
| - |
| $ | - |
| $ | - |
Home equity loans and lines of credit |
| - |
| - |
| - | ||
Commercial loans: |
|
|
|
|
|
| ||
One-to-four family investment property |
| - |
| - |
| - | ||
Multi-family real estate |
| - |
| - |
| - | ||
Commercial real estate |
| - |
| - |
| - | ||
Commercial business |
| - |
| - |
| - | ||
|
|
|
|
|
|
| ||
Construction loans: |
|
|
|
|
|
| ||
One-to-four family |
| 1 |
| 732 |
| 767 | ||
Multi-family |
| - |
| - |
| - | ||
Non-residential |
| - |
| - |
| - | ||
|
|
|
|
|
|
| ||
Consumer |
| - |
| - |
| - | ||
|
|
|
|
|
|
| ||
Total troubled debt restructurings |
| 1 |
| $ | 732 |
| $ | 767 |
The one loan modification made during the six months ended June 30, 2012 did not result in a material impact to the allowance for loan loss account. The modified terms included an extension of the maturity date as well as $35,000 in additional funds in order to complete the project and allow time for the sale of the property. There are no commitments to lend additional funds to those borrowers whose loans were modified in a troubled debt restructuring as of June 30, 2012.
The following is a summary of troubled debt restructurings in default of the modified terms as of June 30, 2012:
|
| Number of |
| Recorded |
|
| |
|
| Contracts |
| Investment |
|
| |
|
| (In thousands) |
|
| |||
|
|
|
|
|
|
| |
Residential loans: |
|
|
|
|
|
| |
One-to-four family |
| - |
| $ | - |
|
|
Home equity loans and lines of credit |
| - |
| - |
|
| |
Commercial loans: |
|
|
|
|
|
| |
One-to-four family investment property |
| - |
| - |
|
| |
Multi-family real estate |
| - |
| - |
|
| |
Commercial real estate |
| - |
| - |
|
| |
Commercial business |
| - |
| - |
|
| |
|
|
|
|
|
|
| |
Construction loans: |
|
|
|
|
|
| |
One-to-four family |
| 1 |
| 767 |
|
| |
Multi-family |
| - |
| - |
|
| |
Non-residential |
| - |
| - |
|
| |
|
|
|
|
|
|
| |
Consumer |
| - |
| - |
|
| |
|
|
|
|
|
|
| |
Total impaired with no related allowance |
| 1 |
| $ | 767 |
|
|
The following table represents the Company’s loans by risk rating at June 30, 2012 and December 31, 2011. For additional information please refer to Item 2, Management’s Discussion and Analysis of Financial Condition and Results of Operations.
|
| Residential |
| Commercial |
| Construction |
|
|
|
| |||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||||||||
|
| One-to-four family |
| Home equity loans and lines of credit |
| One-to-four family investment property |
| Multi-family real estate |
| Commercial real estate |
| Commercial business |
| One-to-four family |
| Multi-family |
| Non- residential |
| Consumer |
| Total | |||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||
|
| (In thousands) | |||||||||||||||||||||||||||||||
At June 30, 2012: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||
Classification: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||
Not formally rated |
| $ | 64,711 |
| $ | 16,258 |
| $ | - |
| $ | - |
| $ | - |
| $ | - |
| $ | - |
| $ | - |
| $ | - |
| $ | 470 |
| $ | 81,439 |
Pass |
| - |
| - |
| 10,134 |
| 9,556 |
| 23,627 |
| 6,739 |
| 6,144 |
| 8,530 |
| 138 |
| - |
| 64,868 | |||||||||||
Special mention |
| - |
| - |
| 297 |
| - |
| - |
| 279 |
| 100 |
| - |
| - |
| - |
| 676 | |||||||||||
Substandard |
| 1,016 |
| 44 |
| - |
| - |
| 3,716 |
| 100 |
| 767 |
| - |
| - |
| - |
| 5,643 | |||||||||||
Doubtful |
| - |
| - |
| - |
| - |
| - |
| 20 |
| - |
| - |
| - |
| - |
| 20 | |||||||||||
Loss |
| - |
| - |
| - |
| - |
| - |
| - |
| - |
| - |
| - |
| - |
| - | |||||||||||
Total loans |
| $ | 65,727 |
| $ | 16,302 |
| $ | 10,431 |
| $ | 9,556 |
| $ | 27,343 |
| $ | 7,138 |
| $ | 7,011 |
| $ | 8,530 |
| $ | 138 |
| $ | 470 |
| $ | 152,646 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||
At December 31, 2011: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||
Classification: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||
Not formally rated |
| $ | 61,715 |
| $ | 17,105 |
| $ | - |
| $ | - |
| $ | - |
| $ | - |
| $ | - |
| $ | - |
| $ | - |
| $ | 451 |
| $ | 79,271 |
Pass |
| - |
| - |
| 10,816 |
| 13,037 |
| 21,643 |
| 9,208 |
| 10,773 |
| 9,387 |
| 139 |
| - |
| 75,003 | |||||||||||
Special mention |
| - |
| - |
| - |
| - |
| 458 |
| 289 |
| - |
| - |
| - |
| - |
| 747 | |||||||||||
Substandard |
| 898 |
| 13 |
| - |
| - |
| 3,298 |
| 640 |
| 1,168 |
| 1,269 |
| 490 |
| - |
| 7,776 | |||||||||||
Doubtful |
| - |
| - |
| - |
| - |
| - |
| - |
| - |
| - |
| - |
| - |
| - | |||||||||||
Loss |
| - |
| - |
| - |
| - |
| - |
| - |
| - |
| - |
| - |
| - |
| - | |||||||||||
Total loans |
| $ | 62,613 |
| $ | 17,118 |
| $ | 10,816 |
| $ | 13,037 |
| $ | 25,399 |
| $ | 10,137 |
| $ | 11,941 |
| $ | 10,656 |
| $ | 629 |
| $ | 451 |
| $ | 162,797 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Credit Quality Information
The Company utilizes a nine grade internal loan rating system for commercial real estate, construction and residential mortgages and commercial business loans as follows:
Loans rated 1 - 5: Loans in these categories are considered “pass” rated loans with low to average risk.
Loans rated 6: Loans in this category are considered “special mention.” These loans have risk profiles that are starting to show signs of potential weakness and are being closely monitored by management.
Loans rated 7: Loans in this category are considered “substandard.” These loans have a well defined weakness that jeopardizes the liquidation of the debt and is inadequately protected by the current sound worth and paying capacity of the borrower or pledged collateral. There is a distinct possibility that the Company will sustain some loss if the deficiencies are not corrected.
Loans rated 8: Loans in this category are considered “doubtful.” Loans classified as doubtful have all the weaknesses inherent in those classified substandard with the added characteristic that the weaknesses make collection or liquidation in full, on the basis of currently existing facts, highly questionable and improbable.
Loans rated 9: Loans in this category are considered a “loss”. The loan has been determined to be uncollectible and the chance of loss is inevitable. Loans in this category will be charged-off.
On an annual basis, or more often if needed, the Company formally reviews the ratings on all commercial real estate, construction and commercial business loans.
Loans serviced for others and mortgage servicing rights
Mortgage loans serviced for others are not included in the accompanying consolidated balance sheets. The unpaid principal balances of mortgage loans serviced for others were $68,365,000 and $57,948,000 at June 30, 2012 and December 31, 2011, respectively.
The risks inherent in the mortgage servicing assets relate primarily to changes in prepayments that result from shifts in mortgage interest rates. The fair value of servicing rights was $477,000 at June 30, 2012 and was determined using the moving average 10-year, U.S. Treasury rate plus 5.0%, adjusted to reflect the current credit spreads and conditions in the market as a discount rate. Prepayment assumptions, which are impacted by loan rates and terms, are calculated using a moving average of prepayment data published by the Securities Industry and Financial Markets Association, an independent third party proprietary analysis of prepayment rates embedded in liquid mortgage securities markets and modeled against the serviced loan portfolio by the independent third party valuation specialist.
The following summarizes mortgage servicing rights capitalized and amortized, along with the aggregate activity-related valuation allowances:
|
| Six Months Ended |
| ||||
|
| June 30, |
| ||||
|
| 2012 |
| 2011 |
| ||
|
| (In thousands) |
| ||||
|
|
|
|
|
| ||
Mortgage servicing rights: |
|
|
|
|
| ||
Balance at beginning of period |
| $ | 475 |
| $ | 424 |
|
Additions |
| 162 |
| 54 |
| ||
Disposals |
| - |
| - |
| ||
Amortization |
| (97) |
| (51) |
| ||
Balance at end of period |
| 540 |
| 427 |
| ||
|
|
|
|
|
| ||
Valuation allowances: |
|
|
|
|
| ||
Balance at beginning of period |
| 17 |
| 4 |
| ||
Additions |
| 60 |
| 12 |
| ||
Recoveries |
| - |
| - |
| ||
Write-downs |
| - |
| - |
| ||
Balance at end of period |
| 77 |
| 16 |
| ||
|
|
|
|
|
| ||
Mortgage servicing assets, net |
| $ | 463 |
| $ | 411 |
|
|
|
|
|
|
| ||
Fair value of mortgage servicing assets |
| $ | 477 |
| $ | 455 |
|
(7) Secured Borrowings and Collateral
Federal Home Loan Bank advances
At June 30, 2012, all Federal Home Loan Bank (“FHLB”) of Boston advances were secured by a blanket security agreement on qualified collateral, principally first mortgage loans on owner-occupied residential property in the amount of $56.2 million, and mortgage-backed securities with a fair value of $9.3 million.
(8) Fair Value Measurements
The Company groups its financial assets and financial liabilities measured at fair value in three levels, based on the markets in which the assets and liabilities are traded and the reliability of the assumptions used to determine fair value as follows:
Level l - Valuation is based on quoted prices in active markets for identical assets or liabilities. Level l assets and liabilities generally include debt and equity securities that are traded in an active exchange market. At June 30, 2012, the Company had no assets or liabilities valued using Level 1 measurements.
Level 2 - Valuation is based on observable inputs other than Level l prices, such as quoted prices for similar assets or liabilities; quoted prices in markets that are not active; or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities.
Level 3 - Valuation is based on unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities. Level 3 assets and liabilities include financial instruments whose value is determined using pricing models, discounted cash flow methodologies, or similar techniques, as well as instruments for which the determination of fair value requires significant management judgment or estimation.
All of the Company’s securities that are measured at fair value are included in Level 2 and are based on pricing models from independent, third party pricing services that consider standard input factors such as observable market data, benchmark yields, interest rate volatilities, broker/dealer quotes, credit spreads and new issue data. There are no liabilities measured at fair value. All of the Company’s impaired loans and other real estate owned that are measured at fair value are included in Level 3 and are based on the appraised value of the underlying collateral considering discounting factors, if deemed appropriate, and adjusted for selling costs. These appraised values may be discounted based on management’s historical knowledge, expertise or changes in market conditions from time of valuation. The Company did not have any significant transfers of assets or liabilities to or from Levels 1 and 2 of the fair value hierarchy during the six-month period ended June 30, 2012.
Assets and liabilities measured at fair value on a recurring basis at June 30, 2012 and December 31, 2011 are summarized below.
|
|
|
|
|
|
|
| Assets |
| ||||
|
| Level 1 |
| Level 2 |
| Level 3 |
| at Fair Value |
| ||||
|
| (In thousands) |
| ||||||||||
At June 30, 2012 |
|
|
|
|
|
|
|
|
| ||||
|
|
|
|
|
|
|
|
|
| ||||
Assets |
|
|
|
|
|
|
|
|
| ||||
|
|
|
|
|
|
|
|
|
| ||||
Securities available for sale |
|
|
|
|
|
|
|
|
| ||||
|
|
|
|
|
|
|
|
|
| ||||
Residential mortgage-backed securities |
| $ | - |
| $ | 7,176 |
| $ | - |
| $ | 7,176 |
|
|
|
|
|
|
|
|
|
|
| ||||
At December 31, 2011 |
|
|
|
|
|
|
|
|
| ||||
|
|
|
|
|
|
|
|
|
| ||||
Assets |
|
|
|
|
|
|
|
|
| ||||
|
|
|
|
|
|
|
|
|
| ||||
Securities available for sale |
|
|
|
|
|
|
|
|
| ||||
|
|
|
|
|
|
|
|
|
| ||||
Government-sponsored enterprise obligations |
| $ | - |
| $ | 503 |
| $ | - |
| $ | 503 |
|
Residential mortgage-backed securities |
| - |
| 3,671 |
| - |
| 3,671 |
| ||||
Total securities available for sale |
| $ | - |
| $ | 4,174 |
| $ | - |
| $ | 4,174 |
|
The Company may also be required, from time to time, to measure certain other financial assets on a nonrecurring basis in accordance with generally accepted accounting principles. These adjustments to fair value usually result from application of lower-of-cost-or-market accounting or write-downs of individual assets. Assets measured at fair value on a non-recurring basis at June 30, 2012 and December 31, 2011 are summarized below. The fair value adjustments relate to the amount of write down recorded as of June 30, 2012 and December 31, 2011.
|
|
|
|
|
|
|
| Assets |
| Adjustments |
| |||||
|
| Level 1 |
| Level 2 |
| Level 3 |
| at Fair Value |
| to Fair Value |
| |||||
|
|
|
| (In thousands) |
|
|
|
|
|
|
| |||||
At June 30, 2012 |
|
|
|
|
|
|
|
|
|
|
| |||||
|
|
|
|
|
|
|
|
|
|
|
| |||||
Impaired loans |
| $ | - |
| $ | - |
| $ | 555 |
| $ | 555 |
| $ | (142) |
|
Other real estate owned |
| - |
| - |
| 283 |
| 283 |
| (14) |
| |||||
|
| $ | - |
| $ | - |
| $ | 838 |
| $ | 838 |
| $ | (156) |
|
|
|
|
|
|
|
|
|
|
|
|
| |||||
|
|
|
|
|
|
|
|
|
|
|
| |||||
|
|
|
|
|
|
|
| Assets |
| Adjustments |
| |||||
|
| Level 1 |
| Level 2 |
| Level 3 |
| at Fair Value |
| to Fair Value |
| |||||
|
|
|
| (In thousands) |
|
|
|
|
|
|
| |||||
At December 31, 2011 |
|
|
|
|
|
|
|
|
|
|
| |||||
|
|
|
|
|
|
|
|
|
|
|
| |||||
Impaired loans |
| $ | - |
| $ | - |
| $ | 1,028 |
| $ | 1,028 |
| $ | (319) |
|
Other real estate owned |
| - |
| - |
| 30 |
| 30 |
| (14) |
| |||||
|
| $ | - |
| $ | - |
| $ | 1,058 |
| $ | 1,058 |
| $ | (333) |
|
The following methods and assumptions were used by the Company in estimating fair value disclosures for financial instruments:
Cash and cash equivalents: The carrying amounts of cash and short-term investments approximate fair values.
Securities: Fair values for the Company’s debt securities are based on pricing models that consider standard input factors such as observable market data, benchmark yields, interest rate volatilities, broker/dealer quotes, credit spreads and new issue data.
Federal Home Loan Bank stock: Fair value is based on redemption provisions of the FHLB of Boston. The FHLB stock has no quoted market value.
Loans held for sale: Fair value is based on committed secondary market prices.
Loans: For variable-rate loans that reprice frequently and with no significant change in credit risk, fair values are based on carrying values. Fair values for other loans are estimated using discounted cash flow analyses, using market interest rates currently being offered for loans with similar terms to borrowers of similar credit quality. Fair values for impaired loans are estimated using discounted cash flow analyses or underlying collateral values, where applicable.
Capitalized mortgage servicing rights: Fair value is based on a quarterly, independent third-party valuation model that calculates the present value of estimated future net servicing income. The model utilizes a variety of assumptions, the most significant of which are loan prepayment assumptions and the discount rate used to discount future cash flows. Prepayment assumptions, which are impacted by loan rates and terms, are calculated using a moving average of prepayment data published by the Securities Industry and Financial Markets Association, third party proprietary analysis of prepayment rates embedded in liquid mortgage securities markets and modeled against the serviced loan portfolio by the independent third party valuation specialist. The discount rate is the moving average 10-year, U.S. Treasury rate plus 5.0% and adjusted to reflect the current credit spreads and conditions in the market. Other assumptions include delinquency rates, foreclosure rates, servicing cost inflation, and annual unit loan cost. All assumptions are adjusted periodically to reflect current circumstances and all are obtained from independent market sources.
Deposits: The fair values for non-certificate accounts are, by definition, equal to the amount payable on demand at the reporting date which is the carrying amount. Fair values for certificates of deposit are estimated using a discounted cash flow calculation that applies market interest rates currently being offered on certificates to a schedule of aggregated expected monthly maturities on time deposits.
Securities sold under agreements to repurchase: The fair value estimate of securities sold under agreements to repurchase approximates carrying value as they mature daily and bear market interest rates.
Short-term FHLB advances: The fair value of short-term FHLB advances approximate carrying value, as they generally mature within 90 days.
Long-term FHLB advances: The fair value for long-term FHLB advances is estimated using discounted cash flow analyses based on current market borrowing rates for similar types of borrowing arrangements.
Accrued interest: The carrying amounts of accrued interest approximate fair value.
Off-balance-sheet instruments: Fair values for off-balance-sheet, credit-related financial instruments are based on fees currently charged to enter into similar agreements, taking into account the remaining terms of the agreements and the counterparties’ credit standing. At June 30, 2012 and December 31, 2011, the fair value of commitments outstanding is not significant since fees charged are not material.
The estimated fair values and related carrying amounts of the Company’s financial instruments at June 30, 2012 and December 31, 2011 are as follows:
|
| June 30, 2012 |
| |||||||||||||
|
| Carrying |
|
|
|
|
|
|
|
|
| |||||
|
| Amount |
| Fair Value |
| |||||||||||
|
|
|
| Level 1 |
| Level 2 |
| Level 3 |
| Total |
| |||||
|
|
|
|
|
| (In thousands) |
|
|
|
|
| |||||
Financial assets: |
|
|
|
|
|
|
|
|
|
|
| |||||
Cash and cash equivalents |
| $ | 40,274 |
| $ | 40,274 |
| $ | - |
| $ | - |
| $ | 40,274 |
|
Securities available for sale |
| 7,176 |
| - |
| 7,176 |
| - |
| 7,176 |
| |||||
Securities held to maturity |
| 1,945 |
| - |
| 2,109 |
| - |
| 2,109 |
| |||||
FHLB stock |
| 2,861 |
| 2,861 |
| - |
| - |
| 2,861 |
| |||||
Loans held for sale |
| 1,435 |
| 1,449 |
| - |
| - |
| 1,449 |
| |||||
Loans, net |
| 151,328 |
| - |
| - |
| 157,723 |
| 157,723 |
| |||||
Accrued interest receivable |
| 626 |
| 626 |
| - |
| - |
| 626 |
| |||||
Capitalized mortgage servicing rights |
| 463 |
| - |
| 477 |
| - |
| 477 |
| |||||
|
|
|
|
|
|
|
|
|
|
|
| |||||
Financial liabilities: |
|
|
|
|
|
|
|
|
|
|
| |||||
Deposits |
| $ | 166,594 |
| $ | - |
| $ | 167,041 |
| $ | - |
| $ | 167,041 |
|
Long-term FHLB advances |
| 25,100 |
| - |
| 25,591 |
| - |
| 25,591 |
| |||||
Mortgagers’ escrow accounts |
| 706 |
| 706 |
| - |
| - |
| 706 |
| |||||
Accrued interest payable |
| 49 |
| 49 |
| - |
| - |
| 49 |
| |||||
|
|
|
|
|
|
|
|
|
|
|
| |||||
|
|
|
|
|
|
|
|
|
|
|
| |||||
|
| December 31, 2011 |
| |||||||||||||
|
| Carrying |
|
|
|
|
|
|
|
|
| |||||
|
| Amount |
| Fair Value |
| |||||||||||
|
|
|
| Level 1 |
| Level 2 |
| Level 3 |
| Total |
| |||||
|
|
|
|
|
| (In thousands) |
|
|
|
|
| |||||
Financial assets: |
|
|
|
|
|
|
|
|
|
|
| |||||
Cash and cash equivalents |
| $ | 19,083 |
| $ | 19,083 |
| $ | - |
| $ | - |
| $ | 19,083 |
|
Securities available for sale |
| 4,174 |
| - |
| 4,174 |
| - |
| 4,174 |
| |||||
Securities held to maturity |
| 2,322 |
| - |
| 2,506 |
| - |
| 2,506 |
| |||||
FHLB stock |
| 3,111 |
| 3,111 |
| - |
| - |
| 3,111 |
| |||||
Loans held for sale |
| 769 |
| 780 |
| - |
| - |
| 780 |
| |||||
Loans, net |
| 161,120 |
| - |
| - |
| 165,806 |
| 165,806 |
| |||||
Accrued interest receivable |
| 627 |
| 627 |
| - |
| - |
| 627 |
| |||||
Capitalized mortgage servicing rights |
| 458 |
| - |
| 493 |
| - |
| 493 |
| |||||
|
|
|
|
|
|
|
|
|
|
|
| |||||
Financial liabilities: |
|
|
|
|
|
|
|
|
|
|
| |||||
Deposits |
| $ | 151,085 |
| $ | - |
| $ | 151,277 |
| $ | - |
| $ | 151,277 |
|
Securities sold under agreements to repurchase |
| 573 |
| 573 |
| - |
| - |
| 573 |
| |||||
Long-term FHLB advances |
| 25,121 |
| - |
| 25,660 |
| - |
| 25,660 |
| |||||
Mortgagers’ escrow accounts |
| 730 |
| 730 |
| - |
| - |
| 730 |
| |||||
Accrued interest payable |
| 79 |
| 79 |
| - |
| - |
| 79 |
|
(9) Equity Incentive Plan
At June 30, 2012, the Company had one equity incentive plan, which was described more fully in Note 13 of the consolidated financial statements and notes thereto for the year ended December 31, 2011.
The following table presents the activity for the plan for the six months ended June 30, 2012:
|
| Stock Options |
| ||||
|
| Number of |
| Weighted |
| ||
|
|
|
|
|
| ||
Outstanding at beginning of year |
| 41,498 |
| $ | 6.80 |
| |
Granted |
| 17,494 |
| $ | 6.90 |
| |
Forfeited |
| (2,500) |
| $ | 6.80 |
| |
|
|
|
|
|
| ||
Outstanding at end of period |
| 56,492 |
| $ | 6.83 |
| |
|
|
|
|
|
| ||
Exercisable at end of period |
| 14,454 |
|
|
| ||
|
|
|
|
|
| ||
Weighted average fair value of options granted during the period |
| $ | 2.87 |
|
|
| |
Options Outstanding |
| Options Exercisable |
| ||||||||
Number |
| Weighted-Average |
| Weighted |
| Number |
| Weighted |
| ||
Outstanding |
| Remaining |
| Average |
| Exercisable |
| Average |
| ||
as of 06/30/2012 |
| Contractual Life |
| Exercise Price |
| as of 06/30/2012 |
| Exercise Price |
| ||
|
|
|
|
|
|
|
|
|
| ||
18,500 |
| 7.65 Years |
| $ | 6.72 |
| 9,392 |
| $ | 6.72 |
|
20,498 |
| 8.65 Years |
| $ | 6.88 |
| 5,062 |
| $ | 6.88 |
|
17,494 |
| 9.65 Years |
| $ | 6.90 |
| - |
| - |
| |
56,492 |
| 8.63 Years |
| $ | 6.83 |
| 14,454 |
| $ | 6.78 |
|
|
| Non-vested | |||
|
| Restricted Stock | |||
|
| Number of |
| Weighted | |
|
|
|
|
| |
Outstanding at beginning of year |
| 36,552 |
| $ | 5.97 |
Granted |
| 17,506 |
| $ | 6.25 |
Forfeited |
| (2,250) |
| $ | 5.92 |
Vested |
| (9,758) |
| $ | 5.87 |
|
|
|
|
| |
Outstanding at end of period |
| 42,050 |
| $ | 6.11 |
As of June 30, 2012, unrecognized share-based compensation expense related to non-vested options amounted to $100,000 and the unrecognized share-based compensation expense related to non-vested restricted stock amounted to $225,000. Both amounts are expected to be recognized over a weighted average period of 3.4 years.
For the six months ended June 30, 2012, the Company recognized compensation expense for stock options of $17,000 with a related tax benefit of $3,000. For the six months ended June 30, 2012, the Company recognized compensation expense for restricted stock awards of $38,000, with a related tax benefit of $15,000.
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations
This document may contain certain forward-looking statements, such as statements of the New Georgetown or the Bank’s plans, objectives, expectations, estimates and intentions. Forward-looking statements may be identified by the use of words such as “expects”, “subject”, and “believe”, “will”, “intends”, “will be” or “would”. These statements are subject to change based on various important factors (some of which are beyond New Georgetown’s or the Bank’s control) and actual results may differ materially. Accordingly, readers should not place undue reliance on any forward-looking statements, which reflect management’s analysis of factors only as of the date of which they are given. These factors include general economic conditions, trends in interest rates, the ability of our borrowers to repay their loans, the ability of New Georgetown or the Bank to effectively manage its growth, and results of regulatory examinations, among other factors. The foregoing list of important factors is not exclusive. Readers should carefully review the risk factors described in other documents New Georgetown files from time to time with the Securities and Exchange Commission, including Current Reports on Form 8-K.
Except as required by applicable law and regulation, New Georgetown does not undertake – and specifically disclaims any obligation – to publicly release the result of any revisions that may be made to any forward-looking statements to reflect events or circumstances after the date of such statements or to reflect the occurrence of anticipated or unanticipated events.
Overview
The Company’s results of operations depend primarily on net interest and dividend income, which is the difference between the interest and dividend income earned on its interest-earning assets, such as loans and securities, and the interest expense on its interest-bearing liabilities, such as deposits and borrowings. The Company also generates non-interest income, primarily from fees and service charges. Gains on sales of loans are additional sources of non-interest income. The Company’s non-interest expense primarily consists of employee compensation and benefits, occupancy and equipment expense, advertising, data processing, professional fees and other operating expenses.
Operating results for the six months ended June 30, 2012 reflected a decline of $630,000, or 14.8%; in net interest income year over year, as cash from loan payoffs flowed into short-term investments. The average balance of short-term investments for the six months ended June 30, 2012 was $22.3 million, compared to $625,000 for the same period in 2011. The provision for loan losses declined $650,000 for the six months ended June 30, 2012 compared to the same period in 2011, primarily due to the charged off of one, residential home equity loan in June 2011. Mortgage banking income increased $178,000, or 161.8% primarily due to the volume of residential loan sales. The Company continues to focus on generating commercial loan and core deposit growth, which we believe will build long-term shareholder value.
Critical Accounting Policies
Critical accounting policies are those that involve significant judgments and assumptions by management and that have, or could have, a material impact on our income or the carrying value of our assets. Our critical accounting policies are those related to our allowance for loan losses and the valuation of our deferred tax assets.
Allowance for Loan Losses. The allowance for loan losses is established as losses are estimated to have occurred through a provision for loan losses charged to earnings. Loan losses are charged against the allowance when management believes the uncollectability of a loan balance is confirmed. Subsequent recoveries, if any, are credited to the allowance.
The allowance for loan losses is evaluated on a monthly basis by management and is based upon management’s monthly review of the collectability of the loans in light of known and inherent risks in the nature and volume of the loan portfolio, adverse situations that may affect the borrower’s ability to repay, estimated value of any underlying collateral and prevailing economic conditions. Additionally, as part of the evaluation of the level of the allowance for loan losses, on a quarterly basis management analyzes several qualitative loan portfolio risk factors including, but not limited to, charge-off history, changes in management or underwriting policies, current economic conditions, delinquency statistics, geographic and industry concentrations, the adequacy of the underlying collateral, the financial strength of the borrower and results of internal and external loan reviews. This evaluation is inherently subjective as it requires estimates that are susceptible to significant revision as more information becomes available.
The allowance for loan losses consists of specific, general and unallocated components. The specific component relates to loans that are classified as impaired. For such loans that are classified as impaired, an allowance for loan losses is established when the discounted cash flows or the fair value of the existing collateral (less cost to sell) of the impaired loan is lower than the carrying value of that loan. The general component covers non-impaired loans and is based on historical loss experience adjusted for qualitative factors. An unallocated component may be maintained to cover uncertainties that could affect management’s estimate of probable losses.
A loan is considered impaired when, based on current information and events, it is probable that the Bank will be unable to collect the scheduled payments of principal or interest when due according to the contractual terms of the loan agreement. Factors considered by management in determining impairment include payment status, collateral value, and the probability of collecting scheduled principal and interest payments when due. Loans that experience insignificant payment delays and payment shortfalls generally are not classified as impaired.
We periodically may agree to modify the contractual terms of loans. When a loan is modified and a concession is made to a borrower experiencing financial difficulty, the modification is considered a troubled debt restructuring. All troubled debt restructurings are initially classified as impaired.
Adjustable-rate mortgage loans decrease the risk associated with changes in market interest rates by periodically repricing, but involve other risks because, as interest rates increase, the underlying payments by the borrower increase, thus increasing the potential for default by the borrower. At the same time, the marketability of the underlying collateral may be adversely affected by higher interest rates. Upward adjustment of the contractual interest rate is also limited by the maximum periodic and lifetime interest rate adjustments permitted by our loan documents and, therefore, the effectiveness of adjustable-rate mortgage loans may be limited during periods of rapidly rising interest rates.
Loans secured by commercial real estate, multi-family and one- to four-family investment properties, generally involve larger principal amounts and a greater degree of risk than one- to four-family residential mortgage loans. Because payments on loans secured by commercial real estate, including multi-family and one- to four-family investment properties, are often dependent on successful operation or management of the properties, repayment of such loans may be affected by adverse conditions in the real estate market or the economy.
Unlike residential mortgage loans, which generally are made on the basis of the borrower’s ability to make repayment from his or her employment or other income, and which are secured by real property whose value tends to be more easily ascertainable, commercial business loans generally are made on the basis of the borrower’s ability to repay the loan from the cash flow of the borrower’s business. As a result, the availability of funds for the repayment of commercial business loans may depend substantially on the success of the business itself. Further, any collateral securing the loans may depreciate over time, may be difficult to appraise and may fluctuate in value.
Construction and development financing is generally considered to involve a higher degree of credit risk than long-term financing on improved, owner-occupied real estate. Risk of loss on a construction loan depends largely upon the accuracy of the initial estimate of the value of the property at completion of construction compared to the estimated cost (including interest) of construction and other assumptions. If the estimate of construction cost proves to be inaccurate, we may be required to advance funds beyond the amount originally committed in order to protect the value of the property. Additionally, if the estimate of value proves to be inaccurate, we may be confronted with a project, when completed, having a value that is insufficient to assure full repayment.
Income Taxes. Deferred income tax assets and liabilities are determined using the liability (or balance sheet) method. Under this method, the net deferred tax asset or liability is determined based on the tax effects of the temporary differences between the book and tax bases of the various balance sheet assets and liabilities and gives current recognition to changes in tax rates and laws. A valuation allowance is established against deferred tax assets when, based upon the available evidence including historical and projected taxable income, it is more likely than not that some or all of the deferred tax assets will not be realized.
Comparison of Financial Condition at June 30, 2012 and December 31, 2011
Total assets increased $15.2 million, or 7.6%, to $214.6 million at June 30, 2012 from $199.4 million at December 31, 2011. The increase resulted from increases in cash and cash equivalents and securities, partially offset by a decrease in loans.
Cash and cash equivalents increased $21.2 million, or 111.0%, to $40.3 million at June 30, 2012 from $19.1 million at December 31, 2011. The increase in cash and cash equivalents resulted primarily from proceeds held as escrow of $9.8 million from New Georgetown’s stock offering and loan repayments and prepayments during the six months ended June 30, 2012, as well as an increase in NOW accounts.
Loans (excluding loans held for sale) decreased $9.8 million, or 6.1%, to $151.3 million at June 30, 2012 from $161.1 million at December 31, 2011, due primarily to decreases in construction, commercial real estate and commercial loans, partially offset by increases in residential loans. Construction loans decreased $7.5 million, or 32.5%, to $15.7 million at June 30, 2012 from $23.2 million at December 31, 2011, as residential housing units continued to be sold. The significant majority of our construction loans remain collateralized by residential real estate (99.1% at June 30, 2012 and 97.3% at December 31, 2011). Total commercial loans decreased $4.9 million, or 8.3%, to $54.5 million at June 30, 2012 from $59.4 million at December 31, 2011. Although we continue to emphasize the origination of commercial loans, despite the current competitive market, we have determined to maintain our historical underwriting standards instead of relaxing these standards and we have not reduced loan rates below levels at which we could not operate profitably.
Our total securities portfolio increased $2.6 million, or 40.4%, to $9.1 million at June 30, 2012 from $6.5 million at December 31, 2011. We used excess cash for securities purchases during the six months ended June 30, 2012.
Deposits increased $15.5 million, or 10.3%, to $166.6 million at June 30, 2012 from $151.1 million at December 31, 2011. Included in this growth were the escrow funds of $9.8 million from New Georgetown’s stock offering, which was completed July 11, 2012. Our continued focus on generating lower-cost “core” deposits (which we define as non-certificate of deposit accounts, excluding net proceeds from the Company’s stock offering) resulted in such core deposits increasing $3.4 million, or 3.3%, to $109.1 million at June 30, 2012 from $105.6 million at December 31, 2011, with such deposits representing 71.4% of our deposit portfolio at June 30, 2012 and 69.9% of our deposit portfolio at December 31, 2011.
Total borrowings were $25.1 million at June 30, 2012 compared to $25.7 million at December 31, 2011.
Stockholders’ equity increased $382,000 to $20.7 million at June 30, 2012 from $20.3 million at December 31, 2011. The increase resulted primarily from net income of $288,000 for the six months ended June 30, 2012.
Loan Portfolio Composition. The following table sets forth the composition of our loan portfolio by type of loan as of the dates indicated.
|
| At |
| At |
| ||||||||
|
| June 30, |
| December 31, |
| ||||||||
|
| 2012 |
| 2011 |
| ||||||||
|
| Amount |
| Percent |
| Amount |
| Percent |
| ||||
|
| (Dollars in thousands) |
| ||||||||||
|
|
|
|
|
|
|
|
|
|
| |||
Residential loans: |
|
|
|
|
|
|
|
|
|
| |||
One-to-four family |
| $ | 65,727 |
| 43.06 | % |
| $ | 62,613 |
| 38.46 | % |
|
Home equity loans and lines of credit |
| 16,302 |
| 10.68 |
|
| 17,118 |
| 10.51 |
|
| ||
Total residential mortgage loans |
| 82,029 |
| 53.74 |
|
| 79,731 |
| 48.97 |
|
| ||
|
|
|
|
|
|
|
|
|
|
|
| ||
Commercial loans: |
|
|
|
|
|
|
|
|
|
|
| ||
One-to-four family investment property |
| 10,431 |
| 6.83 |
|
| 10,816 |
| 6.64 |
|
| ||
Multi-family real estate |
| 9,556 |
| 6.26 |
|
| 13,037 |
| 8.01 |
|
| ||
Commercial real estate |
| 27,343 |
| 17.91 |
|
| 25,399 |
| 15.60 |
|
| ||
Commercial business |
| 7,138 |
| 4.68 |
|
| 10,137 |
| 6.23 |
|
| ||
Total commercial loans |
| 54,468 |
| 35.68 |
|
| 59,389 |
| 36.48 |
|
| ||
|
|
|
|
|
|
|
|
|
|
|
| ||
Construction loans: |
|
|
|
|
|
|
|
|
|
|
| ||
One-to-four family |
| 7,011 |
| 4.59 |
|
| 11,941 |
| 7.33 |
|
| ||
Multi-family |
| 8,530 |
| 5.59 |
|
| 10,656 |
| 6.55 |
|
| ||
Non-residential |
| 138 |
| 0.09 |
|
| 629 |
| 0.39 |
|
| ||
Total construction loans |
| 15,679 |
| 10.27 |
|
| 23,226 |
| 14.27 |
|
| ||
|
|
|
|
|
|
|
|
|
|
|
| ||
Consumer |
| 470 |
| 0.31 |
|
| 451 |
| 0.28 |
|
| ||
|
|
|
|
|
|
|
|
|
|
|
| ||
Total loans |
| 152,646 |
| 100.00 | % |
| 162,797 |
| 100.00 | % |
| ||
|
|
|
|
|
|
|
|
|
|
|
| ||
Other items: |
|
|
|
|
|
|
|
|
|
| |||
Net deferred loan costs |
| 235 |
|
|
| 147 |
|
|
| ||||
Allowance for loan losses |
| (1,553) |
|
|
| (1,824) |
|
|
| ||||
|
|
|
|
|
|
|
|
|
| ||||
Total loans, net |
| $ | 151,328 |
|
|
| $ | 161,120 |
|
|
|
Asset Quality. The table below sets forth the amounts and categories of our non-performing assets at the dates indicated. Delinquent loans that are 90 days or more past due are generally considered non-performing assets.
|
| At June 30, |
| At December 31, |
| ||
|
| 2012 |
| 2011 |
| ||
|
| (Dollars in thousands) |
| ||||
|
|
|
|
|
| ||
Non-accrual loans: |
|
|
|
|
| ||
Residential mortgage loans |
| $ | 1,060 |
| $ | 696 |
|
Commercial loans |
| 20 |
| - |
| ||
Construction loans |
| - |
| 2,437 |
| ||
Consumer |
| - |
| - |
| ||
|
|
|
|
|
| ||
Total non-accrual loans |
| 1,080 |
| 3,133 |
| ||
|
|
|
|
|
| ||
Non-performing restructured loans |
| 767 |
| - |
| ||
|
|
|
|
|
| ||
Total non-performing loans |
| 1,847 |
| 3,133 |
| ||
|
|
|
|
|
| ||
Real estate owned |
| 283 |
| 30 |
| ||
|
|
|
|
|
| ||
Total non-performing assets |
| $ | 2,130 |
| $ | 3,163 |
|
|
|
|
|
|
| ||
Ratios: |
|
|
|
|
| ||
Non-performing loans to total loans |
| 1.21% |
| 1.92% |
| ||
Non-performing assets to total assets |
| 0.99% |
| 1.59% |
|
Total delinquent loans increased $1.2 million, from $2.6 million at December 31, 2011 to $3.8 million at June 30, 2012, primarily due to one commercial real estate loan totaling $2.1 million in the 30 to 59 day category. On July 2, 2012 that loan was brought current.
Non-performing assets decreased $1.0 million to $2.1 million at June 30, 2012 compared to $3.2 million at December 31, 2011. The decrease in non-performing assets was primarily in construction loans, as units were sold and loans were brought current. Total non-performing assets represented 0.99% of total assets at June 30, 2012 and 1.59% of total assets at December 31, 2011.
Loans classified as substandard decreased $2.1 million to $5.6 million at June 30, 2012 from $7.8 at December 31, 2011. The decrease was primarily in construction loans reflecting the sale of units and the payoff of loans refinanced with another financial institution. All of these credits continue to be managed aggressively. One residential loan totaling $175,000 classified as substandard was paid off in July 2012 without a loss to the Bank.
The allowance for loan losses was $1.6 million at June 30, 2012. Loan charge-offs were $371,000 and loan recoveries were $5,000 for the six months ended June 30, 2012, as compared to loan charge-offs of $744,000 and loan recoveries of $8,000 for the same period in 2011. The allowance represented 1.02% of total loans at June 30, 2012 and 1.12% of total loans at December 31, 2011. At these levels, the allowance for loan losses as a percentage of non-performing loans was 84.08% at June 30, 2012 and 58.22% at December 31, 2011.
Comparison of Operating Results for the Three Months Ended June 30, 2012 and 2011
General. Net income increased $155,000, or 775.0%, to $135,000 for the three months ended June 30, 2012, compared to a net loss of $20,000 for the three months ended June 30, 2011. The increase was due primarily to a decrease in the provision for loan losses and an increase in non-interest income, partially offset by a decrease in net interest income and an increase in non-interest expense.
Interest and Dividend Income. Interest and dividend income decreased $521,000, or 18.8%, to $2.3 million for the three months ended June 30, 2012 from $2.8 million for the three months ended June 30, 2011. We experienced decreases in interest and dividend income from both loans and securities. Interest income on loans decreased $524,000, or 19.5%, to $2.2 million for the three months ended June 30, 2012 from $2.7 million for the three months ended June 30, 2011, due to a $19.8 million, or 11.1%, decrease in the average balance of loans as well as a 57 basis point decrease in yield to 5.46% for the three months ended June 30, 2012 from 6.03% for the three months ended June 30, 2011. We continued to experienced decreases in loans through June 30, 2012, and the new loans we have been originating have been at lower interest rates due to continued low market interest rates.
Interest and dividend income on investment securities decreased $10,000, or 10.9%, to $82,000 for the three months ended June 30, 2012 from $92,000 for the three months ended June 30, 2011, due to a 45 basis point decrease in yield to 2.59% for the three months ended June 30, 2012, partially offset by a $551,000, or 4.6% increase in the average balance of investment securities for the three months ended June 30, 2012.
Interest income on short-term investments increased $13,000 for the three months ended June 30, 2012, as there was no interest income on short-term investments for the three months ended June 30, 2011. The income increase reflected an increase in overnight funds.
Interest Expense. Interest expense decreased $199,000, or 30.8%, to $447,000 for the three months ended June 30, 2012 from $646,000 for the three months ended June 30, 2011. We experienced decreases in interest expense on both deposits and borrowings (primarily long-term Federal Home Loan Bank advances). Interest expense on deposits decreased $183,000, or 44.3%, to $230,000 for the three months ended June 30, 2012 from $413,000 for the three months ended June 30, 2011, due to a decrease in rates we paid on interest-bearing deposits, partially offset by an increase in the average balance of deposits. The average rate we paid on interest-bearing deposits decreased to 0.66% for the three months ended June 30, 2012 compared to 1.24% for the three months ended June 30, 2011. We have been able to increase our lower cost “core” deposits, as described above, while also reducing rates in the current low interest rate environment. The average balance of interest-bearing deposits increased $6.6 million, or 5.0%, to $139.3 million for the three months ended June 30, 2012 from $132.7 million for the three months ended June 30, 2011.
Interest expense on Federal Home Loan Bank advances decreased $16,000, or 7.2%%, to $217,000 for the three months ended June 30, 2012 from $233,000 for the three months ended June 30, 2011. The decrease was primarily due to a decrease in the average balance, which decreased $5.7 million, or 18.4%, to $25.1 million for the three months ended June 30, 2012 from $30.8 million for the three months ended June 30, 2011, partially offset by a 43 basis point increase in the average rate we paid on FHLB advances to 3.46% for the three months ended June 30, 2012 compared to 3.03% for the three months ended June 30, 2011. The increase in the average rate paid reflected the maturing of lower rate advances. We have been able to reduce our reliance on borrowings, as we have had excess cash to fund our operations.
Net Interest Income. Net interest income decreased $322,000, or 15.1%, to $1.8 million for the three months ended June 30, 2012 compared to $2.1 million for the three months ended June 30, 2011. Our net interest margin decreased 72 basis points, to 3.74% for the three months ended June 30, 2012 compared to 4.46% for the three months ended June 30, 2011, as the yield we earned on interest-earning assets decreased 116 basis points to 4.66% for the three months ended June 30, 2012 compared to 5.82% for the three months ended June 30, 2011, while the rate we paid on interest-bearing liabilities decreased 49 basis points to 1.09% for the three months ended June 30, 2012 compared to 1.58% for the three months ended June 30, 2011. Our net interest margin may continue to compress in the future due to current competitive pricing in our market area.
Provision for Loan Losses. We establish provisions for loan losses, which are charged to operations, at a level necessary to absorb known and inherent losses that are both probable and reasonably estimable at the date of the financial statements. In evaluating the level of the allowance for loan losses quarterly, management analyzes several qualitative loan portfolio risk factors including but not limited to, charge-off history over a relevant period, changes in management or underwriting policies, current economic conditions, delinquency statistics, geographic and industry concentrations, the adequacy of the underlying collateral, the financial strength of the borrower and results of internal and external loan reviews. This evaluation is inherently subjective, as it requires estimates that are susceptible to significant revision as more information becomes available. After an evaluation of these factors, we recorded a $31,000 provision for loan losses for the three months ended June 30, 2012 compared to $681,000 for the three months ended June 30, 2011. The provision from the three months ended June 30, 2011 was primarily due to one residential home equity loan that was charged off. The provisions recorded resulted in an allowance for loan losses of $1.6 million, or 1.02% of total loans and 84.08% of non-performing loans at June 30, 2012 compared to an allowance for loan losses of $1.8 million, or 1.12% of total loans and 58.22% of non-performing loans at December 31, 2011. We experienced $178,000 of charge-offs during the quarter ended June 30, 2012. In addition, non-performing loans decreased to $1.8 million at June 30, 2012 from $3.1 million at December 31, 2011.
Non-interest Income. Non-interest income increased $131,000, or 66.2%, to $329,000 for the three months ended June 30, 2012 from $198,000 for the three months ended June 30, 2011. Mortgage banking income increased $119,000, or 276.7%, to $162,000 for the three months ended June 30, 2012 from $43,000 for the three months ended June 30, 2011. We sold $9.5 million of loans during the three months ended June 30, 2012 compared to $2.5 million of such sales for the three months ended June 30, 2011.
Non-interest Expense. Non-interest expense increased $198,000, or 11.6%, to $1.9 million for the three months ended June 30, 2012 and from $1.7 million for the three months ended June 30, 2011. Salaries and benefits expense increased $112,000, or 11.7%, primarily due to the costs associated with additional staff and the replacement of existing staff at higher salaries. Occupancy expense increased $35,000, or 19.2% primarily due to the replacement of on-staff facilities personnel with a more efficient out-sourced solution. Other general and administrative expenses increased $25,000, or 10.7%, for the three months ended June 30, 2012 and included $10,000 in expenses associated with using the trade name Georgetown Bank as part of a marketing campaign.
Income Tax Expense. The income before income taxes of $202,000 resulted in income tax expense of $67,000 for the three months ended June 30, 2012, compared to the loss before income taxes of $59,000 resulting in an income tax benefit of $39,000 for the three months ended June 30, 2011. The effective income tax rate was 33.1% for the three months ended June 30, 2012 compared to 66.0% for the three months ended June 30, 2011.
Average Balance Sheet. The following table sets forth certain information regarding the Company’s average balance sheet for the periods indicated, including the average yields on its interest-earning assets and the average costs of its interest-bearing liabilities. Average yields are calculated by dividing the interest income produced by the average balance of interest-bearing assets. Average costs are calculated by dividing the interest expense produced by the average balance of interest-bearing liabilities. The average balances for the period are derived from average balances that are calculated daily. The average yields and costs include fees that are considered adjustments to such average yields and costs.
|
| At June 30, |
| Three Months Ended June 30, |
| |||||||||||||||||
|
| 2012 |
| 2012 |
| 2011 |
| |||||||||||||||
|
|
|
| Weighted |
| Average |
|
|
|
|
| Average |
|
|
|
|
| |||||
|
| Outstanding |
| Average |
| Outstanding |
|
|
| Yield/ |
| Outstanding |
|
|
| Yield/ |
| |||||
|
| Balance |
| Rate |
| Balance |
| Interest |
| Rate (5) |
| Balance |
| Interest |
| Rate (5) |
| |||||
|
|
|
|
|
| (Dollars in thousands) |
| |||||||||||||||
Interest-earning assets: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||
Loans |
| $ | 154,316 |
| 5.35% |
| $ | 158,280 |
| $ | 2,161 |
| 5.46% |
| $ | 178,045 |
| $ | 2,685 |
| 6.03% |
|
Investment securities (1) |
| 11,982 |
| 2.90% |
| 12,658 |
| 82 |
| 2.59% |
| 12,107 |
| 92 |
| 3.04% |
| |||||
Short-term investments |
| 38,042 |
| 0.24% |
| 22,772 |
| 13 |
| 0.23% |
| 819 |
| - |
| 0.00% |
| |||||
Total interest-earning assets |
| 204,340 |
| 4.26% |
| 193,710 |
| 2,256 |
| 4.66% |
| 190,971 |
| 2,777 |
| 5.82% |
| |||||
Non-interest-earning assets |
| 10,240 |
|
|
| 9,423 |
| - |
|
|
| 10,986 |
| - |
|
|
| |||||
Total assets |
| $ | 214,580 |
|
|
| $ | 203,133 |
| 2,256 |
|
|
| $ | 201,957 |
| 2,777 |
|
|
| ||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||
Interest-bearing liabilities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||
Savings deposits |
| $ | 22,305 |
| 0.05% |
| $ | 13,324 |
| 3 |
| 0.09% |
| $ | 11,627 |
| 6 |
| 0.21% |
| ||
NOW accounts |
| 22,943 |
| 0.26% |
| 20,684 |
| 14 |
| 0.27% |
| 14,489 |
| 16 |
| 0.44% |
| |||||
Money market accounts |
| 56,483 |
| 0.30% |
| 58,924 |
| 52 |
| 0.35% |
| 55,878 |
| 129 |
| 0.92% |
| |||||
Certificates of deposit |
| 47,666 |
| 1.37% |
| 46,411 |
| 161 |
| 1.39% |
| 50,706 |
| 262 |
| 2.07% |
| |||||
Total interest-bearing deposits |
| 149,397 |
| 0.60% |
| 139,343 |
| 230 |
| 0.66% |
| 132,700 |
| 413 |
| 1.24% |
| |||||
FHLB advances |
| 25,100 |
| 2.95% |
| 25,100 |
| 217 |
| 3.46% |
| 30,763 |
| 233 |
| 3.03% |
| |||||
Repurchase agreements |
| - |
| 0.50% |
| 271 |
| - |
| 0.00% |
| 382 |
| - |
| 0.00% |
| |||||
Total interest-bearing liabilities |
| 174,497 |
| 0.94% |
| 164,714 |
| 447 |
| 1.09% |
| 163,845 |
| 646 |
| 1.58% |
| |||||
Non-interest-bearing liabilities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||
Demand deposits |
| 17,197 |
|
|
| 15,514 |
|
|
|
|
| 16,766 |
|
|
|
|
| |||||
Other non-interest-bearing liabilities |
| 2,175 |
|
|
| 2,473 |
|
|
|
|
| 1,746 |
|
|
|
|
| |||||
Total liabilities |
| 193,869 |
|
|
| 182,701 |
|
|
|
|
| 182,357 |
|
|
|
|
| |||||
Stockholders’ equity |
| 20,711 |
|
|
| 20,432 |
|
|
|
|
| 19,600 |
|
|
|
|
| |||||
Total liabilities and equity |
| $ | 214,580 |
|
|
| $ | 203,133 |
|
|
|
|
| $ | 201,957 |
|
|
|
|
| ||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||
Net interest income |
|
|
|
|
|
|
| $ | 1,809 |
|
|
|
|
| $ | 2,131 |
|
|
| |||
Net interest rate spread (2) |
|
|
| 3.32% |
|
|
|
|
| 3.57% |
|
|
|
|
| 4.24% |
| |||||
Net interest-earning assets (3) |
| $ | 29,843 |
|
|
| $ | 28,996 |
|
|
|
|
| $ | 27,126 |
|
|
|
|
| ||
Net interest margin (4) |
|
|
|
|
|
|
|
|
| 3.74% |
|
|
|
|
| 4.46% |
| |||||
Average of interest-earning assets to interest-bearing liabilities |
|
|
|
|
|
|
|
|
| 117.60% |
|
|
|
|
| 116.56% |
|
(1) Consists entirely of taxable investment securities.
(2) Net interest rate spread represents the difference between the yield on average interest-earning assets and the cost of average interest-bearing liabilities.
(3) Net interest-earning assets represents total interest-earning assets less total interest-bearing liabilities.
(4) Net interest margin represents net interest income divided by average total interest-earning assets.
(5) Annualized.
Rate/Volume Analysis. The following table presents the effects of changing rates and volumes on our net interest income for the periods indicated. The rate column shows the effects attributable to changes in rate (changes in rate multiplied by prior volume). The volume column shows the effects attributable to changes in volume (changes in volume multiplied by prior rate). The net column represents the sum of the prior columns. For purposes of this table, changes attributable to both rate and volume, which cannot be segregated, have been allocated proportionately, based on the changes due to rate and the changes due to volume.
|
| For the Three Months Ended June 30, 2012 |
| |||||||||
|
| Compared to the Three Months Ended |
| |||||||||
|
| June 30, 2011 |
| |||||||||
|
| Increase (Decrease) Due to |
|
|
| |||||||
|
| Volume |
| Rate |
| Net |
| |||||
|
| (In thousands) |
| |||||||||
|
|
|
|
|
|
|
| |||||
Interest-earning assets: |
|
|
|
|
|
|
|
|
| |||
Loans |
| $ | (298 | ) |
| $ | (226 | ) |
| $ | (524 | ) |
Investment securities |
| 4 |
|
| (14 | ) |
| (10 | ) | |||
Short-term investments |
| - |
|
| 13 |
|
| 13 |
| |||
|
|
|
|
|
|
|
|
|
| |||
Total interest-earning assets |
| (294 | ) |
| (227 | ) |
| (521 | ) | |||
|
|
|
|
|
|
|
|
|
| |||
Interest-bearing liabilities: |
|
|
|
|
|
|
|
|
| |||
Savings deposits |
| 1 |
|
| (4 | ) |
| (3 | ) | |||
NOW accounts |
| 7 |
|
| (9 | ) |
| (2 | ) | |||
Money market accounts |
| 7 |
|
| (84 | ) |
| (77 | ) | |||
Certificates of deposit |
| (22 | ) |
| (79 | ) |
| (101 | ) | |||
|
|
|
|
|
|
|
|
|
| |||
Total interest-bearing deposits |
| (7 | ) |
| (176 | ) |
| (183 | ) | |||
|
|
|
|
|
|
|
|
|
| |||
FHLB advances |
| (43 | ) |
| 27 |
|
| (16 | ) | |||
|
|
|
|
|
|
|
|
|
| |||
Total interest-bearing liabilities |
| (50 | ) |
| (149 | ) |
| (199 | ) | |||
|
|
|
|
|
|
|
|
|
| |||
Change in net interest income |
| $ | (244 | ) |
| $ | (78 | ) |
| $ | (322 | ) |
Comparison of Operating Results for the Six Months Ended June 30, 2012 and 2011
General. Net income decreased $24,000, or 7.7%, to $288,000 for the six months ended June 30, 2012, compared to $312,000 for the six months ended June 30, 2011. The decrease was due primarily to a decrease in net interest income and an increase in non-interest expense, partially offset by a decrease in the provision for loan losses and an increase in non-interest income.
Interest and Dividend Income. Interest and dividend income decreased $997,000, or 17.9%, to $4.6 million for the six months ended June 30, 2012 from $5.6 million for the six months ended June 30, 2011. We experienced decreases in interest and dividend income from both loans and securities. Interest income on loans decreased $971,000, or 18.0%, to $4.4 million for the six months ended June 30, 2012 from $5.4 million for the six months ended June 30, 2011, due to a $21.1 million, or 11.7%, decrease in the average balance of loans as well as a 43 basis point decrease in yield to 5.54% for the six months ended June 30, 2012 from 5.97% for the six months ended June 30, 2011. We continued to experienced decreases in loans through June 30, 2012, and the new loans we have been originating have been at lower interest rates due to continued low market interest rates.
Interest and dividend income on investment securities decreased $45,000, or 23.6%, to $146,000 for the six months ended June 30, 2012 from $191,000 for the six months ended June 30, 2011, due to a 46 basis point decrease in yield to 2.60% for the six months ended June 30, 2012 and by a $1.3 million, or 10.2% increase in the average balance of investment securities for the six months ended June 30, 2012.
Interest income on short-term investments increased $19,000 for the six months ended June 30, 2012, as there was no interest income on short-term investments for the six months ended June 30, 2011. The income increase reflected an increase in overnight funds.
Interest Expense. Interest expense decreased $367,000, or 27.9%, to $949,000 for the six months ended June 30, 2012 from $1.3 million for the six months ended June 30, 2011. We experienced decreases in interest expense on both deposits and borrowings (primarily long-term Federal Home Loan Bank advances). Interest expense on deposits decreased $317,000, or 38.2%, to $513,000 for the six months ended June 30, 2012 from $830,000 for the six months ended June 30, 2011, due to a decrease in rates we paid on interest-bearing deposits, partially offset by an increase in the average balance of deposits. The average rate we paid on interest-bearing deposits decreased to 0.74% for the six months ended June 30, 2012 compared to 1.24% for the six months ended June 30, 2011. We have been able to increase our lower cost “core” deposits, as described above, while also reducing rates in the current low interest rate environment. The average balance of interest-bearing deposits increased $4.3 million, or 3.2%, to $138.0 million for the six months ended June 30, 2012 from $133.7 million for the six months ended June 30, 2011.
Interest expense on Federal Home Loan Bank advances decreased $50,000, or 10.3%%, to $435,000 for the six months ended June 30, 2012 from $485,000 for the six months ended June 30, 2011. The decrease was primarily due to a decrease in the average balance, which decreased $7.4 million, or 22.8%, to $25.1 million for the six months ended June 30, 2012 from $32.5 million for the six months ended June 30, 2011, partially offset by a 49 basis point increase in the average rate we paid on FHLB advances to 3.47% for the six months ended June 30, 2012 compared to 2.98% for the six months ended June 30, 2011. The increase in the average rate paid reflected the maturing of lower rate advances. We have been able to reduce our reliance on borrowings, as we have had excess cash to fund our operations.
Net Interest Income. Net interest income decreased $630,000, or 14.8%, to $3.6 million for the six months ended June 30, 2012 compared to $4.3 million for the six months ended June 30, 2011. Our net interest margin decreased 64 basis points, to 3.76% for the six months ended June 30, 2012 compared to 4.40% for the six months ended June 30, 2011, as the yield we earned on interest-earning assets decreased 101 basis points to 4.75% for the six months ended June 30, 2012 compared to 5.76% for the six months ended June 30, 2011, while the rate we paid on interest-bearing liabilities decreased 42 basis points to 1.16% for the six months ended June 30, 2012 compared to 1.58% for the six months ended June 30, 2011. Our net interest margin may continue to compress in the future due to current competitive pricing in our market area.
Provision for Loan Losses. We establish provisions for loan losses, which are charged to operations, at a level necessary to absorb known and inherent losses that are both probable and reasonably estimable at the date of the financial statements. In evaluating the level of the allowance for loan losses quarterly, management analyzes several qualitative loan portfolio risk factors including but not limited to, charge-off history over a relevant period, changes in management or underwriting policies, current economic conditions, delinquency statistics, geographic and industry concentrations, the adequacy of the underlying collateral, the financial strength of the borrower and results of internal and external loan reviews. This evaluation is inherently subjective, as it requires estimates that are susceptible to significant revision as more information becomes available. After an evaluation of these factors, we recorded a $95,000 provision for loan losses for the six months ended June 30, 2012 compared to $745,000 for the six months ended June 30, 2011. The provision from the six months ended June 30, 2011 was primarily due to one residential home equity loan that was charged off. The provisions recorded resulted in an allowance for loan losses of $1.6 million, or 1.02% of total loans and 84.08% of non-performing loans at June 30, 2012 compared to an allowance for loan losses of $1.8 million, or 1.12% of total loans and 58.22% of non-performing loans at December 31, 2011. We experienced $371,000 of charge-offs during the six months ended June 30, 2012. In addition, non-performing loans decreased to $1.8 million at June 30, 2012 from $3.1 million at December 31, 2011.
Non-interest Income. Non-interest income increased $188,000, or 44.3%, to $612,000 for the six months ended June 30, 2012 from $424,000 for the six months ended June 30, 2011. Mortgage banking income increased $178,000, or 161.8%, to $288,000 for the six months
ended June 30, 2012 from $49,000 for the six months ended June 30, 2011. We sold $17.9 million of loans during the six months ended June 30, 2012 compared to $5.2 million of such sales for the six months ended June 30, 2011.
Non-interest Expense. Non-interest expense increased $244,000, or 7.0%, to $3.7 million for the six months ended June 30, 2012 and from $3.5 million for the six months ended June 30, 2011. Salaries and benefits expense increased $130,000, or 6.6%, primarily due to the costs associated with additional staff and the replacement of existing staff at higher salaries. Occupancy expense increased $46,000, or 11.9% primarily due to the replacement of on-staff facilities personnel with a more efficient out-sourced solution. Data processing expense increased $28,000, or 12.9% primarily due to the implementation of new services. Other general and administrative expenses increased $42,000, or 9.6%, for the six months ended June 30, 2012 and included $10,000 in expenses associated with using the trade name Georgetown Bank as part of a marketing campaign.
Income Taxes. The income before income taxes of $435,000 for the six months ended June 30, 2011 resulted in an income tax provision of $147,000 for the six months ended June 30, 2011, as compared to income before income taxes of $471,000 and a related income tax provision of $159,000 for the six months ended June 30, 2010. The effective tax rates for the six months ended June 30, 2012 and 2011 were 33.7% and 33.8%, respectively.
Average Balance Sheet. The following table sets forth certain information regarding the Company’s average balance sheet for the periods indicated, including the average yields on its interest-earning assets and the average costs of its interest-bearing liabilities. Average yields are calculated by dividing the interest income produced by the average balance of interest-bearing assets. Average costs are calculated by dividing the interest expense produced by the average balance of interest-bearing liabilities. The average balances for the period are derived from average balances that are calculated daily. The average yields and costs include fees that are considered adjustments to such average yields and costs.
|
| At June 30, |
| Six Months Ended June 30, |
| |||||||||||||||||
|
| 2012 |
| 2012 |
| 2011 |
| |||||||||||||||
|
|
|
| Weighted |
| Average |
|
|
|
|
| Average |
|
|
|
|
| |||||
|
| Outstanding |
| Average |
| Outstanding |
|
|
| Yield/ |
| Outstanding |
|
|
| Yield/ |
| |||||
|
| Balance |
| Rate |
| Balance |
| Interest |
| Rate |
| Balance |
| Interest |
| Rate |
| |||||
|
|
|
|
|
| (Dollars in thousands) |
| |||||||||||||||
Interest-earning assets: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||
Loans |
| $ | 154,316 |
| 5.35% |
| $ | 159,277 |
| $ | 4,412 |
| 5.54% |
| $ | 180,411 |
| $ | 5,383 |
| 5.97% |
|
Investment securities (1) |
| 11,982 |
| 2.90% |
| 11,220 |
| 146 |
| 2.60% |
| 12,495 |
| 191 |
| 3.06% |
| |||||
Short-term investments |
| 38,042 |
| 0.24% |
| 22,285 |
| 19 |
| 0.17% |
| 625 |
| - |
| 0.00% |
| |||||
Total interest-earning assets |
| 204,340 |
| 4.26% |
| 192,782 |
| 4,577 |
| 4.75% |
| 193,531 |
| 5,574 |
| 5.76% |
| |||||
Non-interest-earning assets |
| 10,240 |
|
|
| 9,152 |
| - |
|
|
| 10,361 |
| - |
|
|
| |||||
Total assets |
| $ | 214,580 |
|
|
| $ | 201,934 |
| 4,577 |
|
|
| $ | 203,892 |
| 5,574 |
|
|
| ||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||
Interest-bearing liabilities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||
Savings deposits |
| $ | 22,305 |
| 0.05% |
| $ | 12,439 |
| 9 |
| 0.14% |
| $ | 11,892 |
| 12 |
| 0.20% |
| ||
NOW accounts |
| 22,943 |
| 0.26% |
| 19,372 |
| 32 |
| 0.33% |
| 14,507 |
| 32 |
| 0.44% |
| |||||
Money market accounts |
| 56,483 |
| 0.30% |
| 60,100 |
| 150 |
| 0.50% |
| 56,641 |
| 258 |
| 0.91% |
| |||||
Certificates of deposit |
| 47,666 |
| 1.37% |
| 46,110 |
| 322 |
| 1.40% |
| 50,673 |
| 528 |
| 2.08% |
| |||||
Total interest-bearing deposits |
| 149,397 |
| 0.60% |
| 138,021 |
| 513 |
| 0.74% |
| 133,713 |
| 830 |
| 1.24% |
| |||||
FHLB advances |
| 25,100 |
| 2.95% |
| 25,105 |
| 435 |
| 3.47% |
| 32,516 |
| 485 |
| 2.98% |
| |||||
Repurchase agreements |
| - |
| 0.50% |
| 376 |
| 1 |
| 0.53% |
| 363 |
| 1 |
| 0.55% |
| |||||
Total interest-bearing liabilities |
| 174,497 |
| 0.94% |
| 163,502 |
| 949 |
| 1.16% |
| 166,592 |
| 1,316 |
| 1.58% |
| |||||
Non-interest-bearing liabilities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||
Demand deposits |
| 17,197 |
|
|
| 15,672 |
|
|
|
|
| 16,034 |
|
|
|
|
| |||||
Other non-interest-bearing liabilities |
| 2,175 |
|
|
| 2,352 |
|
|
|
|
| 1,768 |
|
|
|
|
| |||||
Total liabilities |
| 193,869 |
|
|
| 181,526 |
|
|
|
|
| 184,394 |
|
|
|
|
| |||||
Stockholders’ equity |
| 20,711 |
|
|
| 20,408 |
|
|
|
|
| 19,498 |
|
|
|
|
| |||||
Total liabilities and equity |
| $ | 214,580 |
|
|
| $ | 201,934 |
|
|
|
|
| $ | 203,892 |
|
|
|
|
| ||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||
Net interest income |
|
|
|
|
|
|
| $ | 3,628 |
|
|
|
|
| $ | 4,258 |
|
|
| |||
Net interest rate spread (2) |
|
|
| 3.32% |
|
|
|
|
| 3.59% |
|
|
|
|
| 4.18% |
| |||||
Net interest-earning assets (3) |
| $ | 29,843 |
|
|
| $ | 29,280 |
|
|
|
|
| $ | 26,939 |
|
|
|
|
| ||
Net interest margin (4) |
|
|
|
|
|
|
|
|
| 3.76% |
|
|
|
|
| 4.40% |
| |||||
Average of interest-earning assets to interest-bearing liabilities |
|
|
|
|
|
|
|
|
| 117.91% |
|
|
|
|
| 116.17% |
|
(1) Consists entirely of taxable investment securities.
(2) Net interest rate spread represents the difference between the yield on average interest-earning assets and the cost of average interest-bearing liabilities.
(3) Net interest-earning assets represents total interest-earning assets less total interest-bearing liabilities.
(4) Net interest margin represents net interest income divided by average total interest-earning assets.
Rate/Volume Analysis. The following table presents the effects of changing rates and volumes on our net interest income for the periods indicated. The rate column shows the effects attributable to changes in rate (changes in rate multiplied by prior volume). The volume column shows the effects attributable to changes in volume (changes in volume multiplied by prior rate). The net column represents the sum of the prior columns. For purposes of this table, changes attributable to both rate and volume, which cannot be segregated, have been allocated proportionately, based on the changes due to rate and the changes due to volume.
|
| For the Six Months Ended June 30, 2012 |
| ||||||||||
|
| Compared to the Six Months Ended |
| ||||||||||
|
| June 30, 2011 |
| ||||||||||
|
| Increase (Decrease) Due to |
|
|
|
| |||||||
|
| Volume |
|
| Rate |
|
| Net |
|
| |||
|
| (In thousands) |
| ||||||||||
Interest-earning assets: |
|
|
|
|
|
|
|
|
|
| |||
Loans |
| $ | (631 | ) |
| $ | (340 | ) |
| $ | (971 | ) |
|
Investment securities |
| (19 | ) |
| (26 | ) |
| (45 | ) |
| |||
Short-term investments |
| - |
|
| 19 |
|
| 19 |
|
| |||
|
|
|
|
|
|
|
|
|
|
| |||
Total interest-earning assets |
| (650 | ) |
| (347 | ) |
| (997 | ) |
| |||
|
|
|
|
|
|
|
|
|
|
| |||
Interest-bearing liabilities: |
|
|
|
|
|
|
|
|
|
| |||
Savings deposits |
| 1 |
|
| (4 | ) |
| (3 | ) |
| |||
NOW accounts |
| 11 |
|
| (11 | ) |
| - |
|
| |||
Money market accounts |
| 16 |
|
| (124 | ) |
| (108 | ) |
| |||
Certificates of deposit |
| (48 | ) |
| (158 | ) |
| (206 | ) |
| |||
|
|
|
|
|
|
|
|
|
|
| |||
Total interest-bearing deposits |
| (20 | ) |
| (297 | ) |
| (317 | ) |
| |||
|
|
|
|
|
|
|
|
|
|
| |||
FHLB advances |
| (111 | ) |
| 61 |
|
| (50 | ) |
| |||
|
|
|
|
|
|
|
|
|
|
| |||
Total interest-bearing liabilities |
| (131 | ) |
| (236 | ) |
| (367 | ) |
| |||
|
|
|
|
|
|
|
|
|
|
| |||
Change in net interest income |
| $ | (519 | ) |
| $ | (111 | ) |
| $ | (630 | ) |
|
Liquidity Management. Liquidity is the ability to meet current and future financial obligations of a short-term nature. Our primary sources of funds consist of deposit inflows, loan repayments and maturities and sales of securities. While maturities and scheduled amortization of loans and securities are predictable sources of funds, deposit flows and mortgage prepayments are greatly influenced by general interest rates, economic conditions and competition. The Company recently began to sell loans to the secondary market and expects to continue to utilize this strategy in future periods.
We regularly adjust our investments in liquid assets based upon our assessment of (i) expected loan demand, (ii) expected deposit flows, (iii) yields available on interest-earning deposits and securities, and (iv) the objectives of our asset/liability management program. Excess liquid assets are invested generally in interest-earning deposits and short- and intermediate-term securities.
Our most liquid assets are cash and cash equivalents. The levels of these assets are dependent on our operating, financing, lending and investing activities during any given period. At June 30, 2012, cash and cash equivalents totaled $40.3 million. Securities classified as available-for-sale, which provide additional sources of liquidity, totaled $7.2 million at June 30, 2012. Our policies also allow for access to the wholesale funds market for up to 50.0% of total assets, or $107.3 million. At June 30, 2012, we had $25.1 million in FHLB advances outstanding and $696,000 in brokered certificates of deposit, allowing the Company access to an additional $81.5 million in wholesale funds based on policy guidelines.
At June 30, 2012, we had $20.6 million in loan commitments outstanding. In addition to commitments to originate loans, we had $16.1 million in unadvanced funds to borrowers.
Related to our secondary market activities, we had $9.3 million of forward loan sale commitments at June 30, 2012. These forward loan sale commitments were used to offset the interest rate risk associated with mortgage loans, which have had their interest rate locked by our customers.
Certificates of deposit due within one year of June 30, 2012 totaled $26.2 million, or 15.7% of total deposits. If these deposits do not remain with us, we will be required to seek other sources of funds, including other certificates of deposit or other wholesale funding options. Depending on market conditions, we may be required to pay higher rates on such deposits or other borrowings than we currently pay on the certificates of deposit due on or before June 30, 2013. We believe, however, based on past experience that a significant portion of our certificates of deposit will remain with us. We have the ability to attract and retain deposits by adjusting the interest rates offered.
We have no material commitments or demands that are likely to affect our liquidity other than set forth below. In the event loan demand were to increase at a pace greater than expected, or any unforeseen demand or commitment were to occur, we would access our borrowing capacity with the FHLB and other wholesale market sources.
Our primary investing activities are the origination of loans and the purchase of securities. During the six months ended June 30, 2012, we originated $43.1 million of loans. We also sold $17.9 million in residential mortgage loans for the six months ended June 30, 2012.
Financing activities consist primarily of activity in deposit accounts, FHLB borrowings and advances and the sale of residential mortgages. We experienced a net increase in total deposits of $15.5 million for the six months ended June 30, 2012, which included $9.8 million of proceeds held as escrow from New Georgetown’s stock offering. Deposit flows are affected by the overall level of interest rates, the interest rates and products offered by us and our local competitors and other factors. We generally manage the pricing of our deposits to be competitive.
FHLB borrowings and advances reflected a net decrease of $21,000 during the six months ended June 30, 2012. FHLB borrowings and advances have primarily been used to fund loan demand.
Capital Management. The Bank is subject to various regulatory capital requirements including a risk-based capital measure. The risk-based capital guidelines include both a definition of capital and a framework for calculating risk-weighted assets by assigning balance sheet assets and off-balance sheet items to broad risk categories. At June 30, 2012, the Bank exceeded all of its regulatory capital requirements and is considered “well capitalized” under regulatory guidelines.
The net proceeds from the stock offering will significantly increase our liquidity and capital resources. Over time, the initial level of liquidity will be reduced as net proceeds from the stock offering are used for general corporate purposes, including the funding of loans. Our financial condition and results of operations will be enhanced by the net proceeds from the stock offering, resulting in increased net interest-earning assets and net interest income. However, due to the increase in equity resulting from the net proceeds raised in the stock offering, our return on equity will be adversely affected following the stock offering.
On June 6, 2012, the OCC and the other federal bank regulatory agencies issued a series of proposed rules to revise their risk-based and leverage capital requirements and their method for calculating risk-weighted assets to make them consistent with the agreements that were reached by the Basel Committee on Banking Supervision in “Basel III: A Global Regulatory Framework for More Resilient Banks and Banking Systems” (“Basel III”). The proposed rules would apply to all depository institutions, top-tier bank holding companies with total consolidated assets of $500 million or more, and top-tier savings and loan holding companies (“banking organizations”). Among other things, the proposed rules establish a new common equity tier 1 minimum capital requirement and a higher minimum tier 1 capital requirement, and assign higher risk weightings (150%) to exposures that are more than 90 days past due or are on nonaccrual status and certain commercial real estate facilities that finance the acquisition, development or construction of real property. The proposed rules also limit a banking organization’s capital distributions and certain discretionary bonus payments if the banking organization does not hold a “capital conservation buffer” consisting of a specified amount of common equity tier 1 capital in addition to the amount necessary to meet its minimum risk-based capital requirements. The final rules will become effective on January 1, 2013, and the changes set forth in the final rules will be phased in from January 1, 2013 through January 1, 2019.
Off-Balance Sheet Arrangements. For the six months ended June 30, 2012, we engaged in no off-balance sheet transactions reasonably likely to have a material effect on our financial condition, results of operations or cash flows.
Item 3. Quantitative and Qualitative Disclosure About Market Risk
Not applicable to smaller reporting companies.
Item 4. Controls and Procedures
Under the supervision and with the participation of our management, including our Chief Executive Officer and Chief Financial Officer, we evaluated the effectiveness of the design and operation of our disclosure controls and procedures (as defined in Rule 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934) as of the end of the period covered by this report. Based upon that evaluation, the Chief Executive Officer and Chief Financial Officer concluded that, as of the end of the period covered by this report, our disclosure controls and procedures were effective to ensure (1) that information required to be disclosed in the reports that the Company files or submits under the Securities Exchange Act of 1934, is recorded, processed, summarized and reported, within the time periods specified in the SEC’s rules and
forms; and (2) that information required to be disclosed by the Company in the reports that it files or submits under the Act is accumulated and communicated to the Company’s management, including its principal executive and principal financial officers, or persons performing similar functions, as appropriate to allow timely decisions regarding required disclosure. There has been no change in the Company’s internal control over financial reporting during the Company’s most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, the Company’s internal control over financial reporting.
Neither the Company nor the Bank is engaged in pending legal proceedings material to the Company’s consolidated financial condition or results of operations.
Other than as set forth in this Quarterly Report on Form 10-Q, there have been no material changes to the Risk Factors set forth in New Georgetown’s prospectus dated May 14, 2012, as filed with the SEC on May 31, 2012.
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
a) Not applicable
b) Not applicable
c) The Company did not repurchase any shares during the quarter ended June 30, 2012.
Item 3. Defaults Upon Senior Securities
None
Item 4. Mine Safety Disclosures
Not applicable
a) Not applicable
b) There were no material changes to the procedures by which security holders may recommend nominees to the Company’s board of directors during the period covered by this Form 10-Q.
31.1 Certification of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act
31.2 Certification of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act
32.0 Certification of Chief Executive Officer and Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act
101 The following financial statements from Georgetown Bancorp Inc.’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2012, filed on August 14, 2012, formatted in XBRL: (i) Condensed Consolidated Balance Sheets, (ii) Consolidated Statements of Comprehensive Income, (iii) Consolidated Statements of Equity, (iv) Condensed Consolidated Statements of Cash Flows, (v) the Notes to Condensed Consolidated Financial Statements.
Table Of Contents
101.INS | Interactive datafile | XBRL Instance Document |
101.SCH | Interactive datafile | XBRL Taxonomy Extension Schema Document |
101.CAL | Interactive datafile | XBRL Taxonomy Extension Calculation Linkbase Document |
101.DEF | Interactive datafile | XBRL Taxonomy Extension Definition Linkbase Document |
101.LAB | Interactive datafile | XBRL Taxonomy Extension Label Linkbase |
101.PRE | Interactive datafile | XBRL Taxonomy Extension Presentation Linkbase Document |
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
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| GEORGETOWN BANCORP, INC. |
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| (Registrant) |
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Date: August 14, 2012 |
| /s/ Robert E. Balletto |
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| Robert E. Balletto |
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| President and Chief Executive Officer |
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| (Principal Executive Officer) |
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Date: August 14, 2012 |
| /s/ Joseph W. Kennedy |
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| Joseph W. Kennedy |
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| Senior Vice President, Chief Financial Officer and Treasurer | |
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| (Principal Accounting and Financial Officer) |