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SECURITIES AND EXCHANGE COMMISSION
Exchange Act of 1934 (Amendment No. )
o | Preliminary Proxy Statement | |
o | Confidential, for Use of the Commission Only (as permitted by Rule 14a-6(e)(2)) | |
þ | Definitive Proxy Statement | |
o | Definitive Additional Materials | |
o | Soliciting Material Pursuant to §240.14a-12 |
þ | No fee required. | |
o | Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11. |
(1) | Title of each class of securities to which transaction applies: | ||
(2) | Aggregate number of securities to which transaction applies: | ||
(3) | Per unit price or other underlying value of transaction computed pursuant to Exchange Act Rule 0-11 (set forth the amount on which the filing fee is calculated and state how it was determined): | ||
(4) | Proposed maximum aggregate value of transaction: | ||
(5) | Total fee paid: | ||
o | Fee paid previously with preliminary materials. | |
o | Check box if any part of the fee is offset as provided by Exchange Act Rule 0-11(a)(2) and identify the filing for which the offsetting fee was paid previously. Identify the previous filing by registration statement number, or the Form or Schedule and the date of its filing. |
(1) | Amount Previously Paid: | ||
(2 ) Form, Schedule or Registration Statement No.: | |||
(3) | Filing Party: | ||
(4) | Date Filed: | ||
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• | purchase for $217,019,000 in cash, 119,900,000 shares of Common Stock, at a purchase price of $1.81 per share; and | ||
• | permit the Company to distribute to each Company shareholder as of a certain date fixed prior to the closing of the transactions contemplated by the Investment Agreement (the “Closing”), immediately prior to Closing, one contingent value right (“CVR”) per share that would entitle the holder to receive up to $0.75 in cash per CVR at the end of a five-year period based on the credit performance of GreenBank’s existing loan portfolio. |
(1) | the original issuance and certain subsequent issuances of shares of the Company’s Common Stock to NAFH under the terms of the Investment Agreement; | ||
(2) | an amendment to the Company’s Amended and Restated Charter (the “Charter”) to increase the number of authorized shares of the Company’s Common Stock from twenty million (20,000,000) to three hundred million (300,000,000); | ||
(3) | an amendment to the Company’s Charter to decrease the par value of the Company’s Common Stock from $2.00 per share to $0.01 per share; | ||
(4) | an amendment to the Company’s Charter to expressly exempt NAFH and its affiliates and associates from the provisions of Section 9 of the Company’s Charter; |
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(5) | an amendment to the Company’s Charter to remove Section 8(j) of the Charter so that the Tennessee Control Share Acquisition Act will not apply to the Company and its shareholders; | ||
(6) | the merger of GreenBank with and into a subsidiary of NAFH; | ||
(7) | on an advisory and non-binding basis, the compensation to be received by the Company’s named executive officers in connection with the issuance of the shares of Common Stock to NAFH under the terms of the Investment Agreement; and | ||
(8) | the grant to the proxy holder of discretionary authority to vote to adjourn the Special Meeting, if necessary, in order to solicit additional proxies in the event there are not sufficient affirmative votes present at the Special Meeting to approve the proposals that may be considered and voted on, at the Special Meeting. |
Chairman of the Board and
Chief Executive Officer
your shares, please call our proxy solicitor:
Shareholder may call toll-free at 1 (888) 750-5834
Banks and Brokers may call collect at 1 (212) 750-5833
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To Be Held on September 7, 2011
(1) | to approve the original issuance and certain subsequent issuances of shares of the Company’s Common Stock to North American Financial Holdings, Inc. under the terms of the Investment Agreement, dated May 5, 2011, among Green Bankshares, Inc., GreenBank and North American Financial Holdings, Inc. (the “Investment Agreement”); | ||
(2) | to vote on an amendment to the Company’s Amended and Restated Charter (the “Charter”) to increase the number of authorized shares of the Company’s Common Stock from twenty million (20,000,000) to three hundred million (300,000,000); | ||
(3) | to vote on an amendment to the Company’s Charter to decrease the par value of the Company’s Common Stock from $2.00 per share to $0.01 per share; | ||
(4) | to vote on an amendment to the Company’s Charter to expressly exempt North American Financial Holdings, Inc. and its affiliates and associates from the provisions of Section 9 of the Company’s Charter; | ||
(5) | to vote on an amendment to the Company’s Charter to remove Section 8(j) of the Charter so that the Tennessee Control Share Acquisition Act will not apply to the Company and its shareholders; | ||
(6) | to approve the merger of GreenBank with and into a subsidiary of North American Financial Holdings, Inc.; | ||
(7) | to approve, on an advisory and non-binding basis, the compensation to be received by the Company’s named executive officers in connection with the issuance of the shares of the Company’s Common Stock to North American Financial Holdings, Inc. under the terms of the Investment Agreement; and | ||
(8) | to grant the proxy holder discretionary authority to vote to adjourn the Special Meeting, if necessary, in order to solicit additional proxies in the event there are not sufficient affirmative votes present at the Special Meeting to approve the proposals that may be considered and voted on, at the Special Meeting. |
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July 27, 2011
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Special Meeting of Shareholders to be Held on September 7, 2011
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100 North Main Street
P.O. Box 1120
Greeneville, Tennessee 37743
(423) 639-5111
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• | the absence of any law, order, injunction or decree by a governmental body prohibiting (or any lawsuit or formal proceeding by a governmental body seeking to prohibit) the Initial Investment or NAFH’s owning or voting the shares it intends to purchase in the Initial Investment; | ||
• | receipt of all required regulatory approvals; | ||
• | the approval of Proposals 1, 2, 3, 5 and 6 described in this Proxy Statement; | ||
• | the accuracy of the other party’s representations and warranties (subject to the materiality standard described in the Investment Agreement) and the performance by the other party in all material respects of its obligations under the Investment Agreement; and | ||
• | the entry by NAFH and the United States Department of the Treasury (“Treasury”) into a binding agreement, on terms previously disclosed to the Company by NAFH, regarding the NAFH’s repurchase of $72.3 million of shares of the Company’s Fixed Rate Cumulative Perpetual Preferred Stock, Series A and warrant to purchase shares of Common Stock issued to the Treasury in connection with the Company’s participation in the Capital Purchase Program (the “CPP”) of the Treasury’s Troubled Asset Relief Program (the “TARP”) (the “Repurchase”). |
• | either (i) Proposal 4 described in this Proxy Statement is approved by the Company’s shareholders or (ii) the Bank Merger (as defined in Proposal 4) shall have received all required board and governmental approvals and is reasonably capable of being consummated within three business days following the Closing; | ||
• | the absence, since December 31, 2010, of any “material adverse effect” (as defined in the Investment Agreement) on the Company or its subsidiaries; | ||
• | the appointment of individuals designated by NAFH to the board of directors of the Company and GreenBank such that the NAFH designees constitute a majority of the board of directors of the Company and GreenBank; | ||
• | the resignation of certain directors of the Company and GreenBank; | ||
• | the waiver of rights to receive certain change in control and other payments from certain senior officers; | ||
• | the absence of any requirement imposed by any required regulatory approvals that materially reduces the economic benefit of the transactions contemplated by the Investment Agreement for NAFH (a “Burdensome Condition”), as determined by NAFH in its good faith judgment; |
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• | certain limitations on reductions in deposit levels and the amount of charge-offs at GreenBank between the date of the Investment Agreement and Closing; | ||
• | the declaration of the CVR distribution; and | ||
• | other terms and conditions typical of similar transactions and described in the Investment Agreement. |
• | completion of the Initial Investment; | ||
• | termination of the Investment Agreement in accordance with its terms, before certain third party acquisitions or acquisition proposals, except a termination of the Investment Agreement by NAFH based on a breach by the Company of a representation, warranty, covenant or other agreement contained in the Investment Agreement (unless the breach is non-volitional) or a termination based on the Company breaching its obligations under the non-solicitation/exclusivity provisions of the Investment Agreement or based on the Board of Directors having withdrawn its recommendation that the Company’s shareholders approve the transactions or recommended a competing transaction; or |
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• | the passage of 18 months, subject to certain limited extensions described in the Option Agreement, after termination of the Investment Agreement, if the termination follows the occurrence of certain third party acquisitions or acquisition proposals or is a termination of the Investment Agreement by NAFH based on a breach by the Company of a representation, warranty, covenant or other agreement contained in the Investment Agreement (unless the breach is non-volitional) or a termination based on the Company breaching its obligations under the non-solicitation/exclusivity provisions of the Investment Agreement or based on the Board of Directors having withdrawn its recommendation that the Company’s shareholders approve the transactions or recommended a competing transaction. |
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• | approve the original issuance and certain subsequent issuances of shares of Common Stock to NAFH under the terms of the Investment Agreement; | ||
• | vote on an amendment to the Company’s Charter to increase the number of authorized shares of Common Stock from twenty million (20,000,000) to three hundred million (300,000,000); | ||
• | vote on an amendment to the Charter to decrease the par value of the Common Stock from $2.00 per share to $0.01 per share; | ||
• | vote on an amendment to the Charter to expressly exempt NAFH and its affiliates and associates from the provisions of Section 9 of the Charter; | ||
• | vote on an amendment to the Charter to remove Section 8(j) of the Charter so that the Tennessee Control Share Acquisition Act will not apply to the Company and its shareholders; | ||
• | approve the merger of GreenBank with and into a subsidiary of NAFH; | ||
• | approve, on an advisory and non-binding basis, the compensation to be received by the Company’s named executive officers in connection with the issuance of the shares of Common Stock to NAFH under the terms of the Investment Agreement; and | ||
• | grant the proxy holder discretionary authority to vote to adjourn the Special Meeting, if necessary, in order to solicit additional proxies in the event there are not sufficient affirmative votes present at the Special Meeting to approve the proposals that may be considered and voted on, at the Special Meeting. |
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• | submitting a written revocation prior to the meeting to Michael J. Fowler, Corporate Secretary, Green Bankshares, Inc., 100 North Main Street, Greeneville, Tennessee 37743-4992; | ||
• | submitting another proxy by mail, Internet or telephone on a later date than the original proxy; or | ||
• | attending the Special Meeting and voting in person. |
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INVESTMENT AGREEMENT
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Projected | ||||
as of and for the fiscal year | ||||
ending December 31, | ||||
2011 | ||||
(dollars in thousands) | ||||
Balance Sheet Data: | ||||
Investments and cash | $ | 510,865 | ||
Loans | 1,590,818 | |||
Loan loss reserve | (61,662 | ) | ||
Other real estate owned | 74,246 | |||
Deposits | 1,875,876 | |||
Borrowings | 163,944 | |||
Capital | 205,848 | |||
Income Statement Data: | ||||
Net interest income | 75,637 | |||
Loan loss provision | (41,860 | ) | ||
Non-interest income | 30,414 | |||
Non-interest expense | (89,556 | ) | ||
Loss before income taxes | (25,365 | ) | ||
Net loss — GreenBank | (25,365 | ) | ||
Green Bankshares expenses | (7,100 | ) | ||
Consolidated net loss | (32,465 | ) | ||
Other Financial Data: | ||||
Net charge -offs | $ | 45,100 | ||
Capital Ratios: | ||||
Tier 1 leverage ratio | 8.20 | % | ||
Total risk-based capital ratio | 12.88 | % | ||
Tangible common equity as a percentage of tangible assets | 1.66 | % |
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• | That would result in a monopoly or that would further a combination or conspiracy to monopolize banking in the United States; or | ||
• | That could substantially lessen competition in any in any banking market, that would tend to create a monopoly in any banking market, or that would be in restraint of trade, unless the Federal Reserve finds that the public interest in meeting the convenience and needs of the communities served outweighs the anti-competitive effects of the proposed transaction. |
• | its belief that the recapitalization transaction with NAFH was more favorable to the Company’s shareholders than any other alternative reasonably available to the Company. The Board of Directors considered possible alternatives to the recapitalization transaction with NAFH, including continuing to operate the Company on a stand-alone basis, entering into the merger transaction with NAFH, or pursuing a recapitalization transaction with PE Firm A, and the risks and uncertain returns associated with each of these alternatives, each of which the Board of Directors determined not to pursue when compared to the recapitalization transaction, which the Company’s Board of Directors believed offered the possibility of the highest value to the Company’s shareholders because of the Board of Directors’ belief that (1) based on the trading prices of certain comparable recapitalization transactions, the Company’s stock price would trade higher than the value of the merger consideration being offered by NAFH and (2) unlike in the NAFH merger transaction in which the Company’s shareholders would receive primarily cash in exchange for their shares of Company Common Stock, the Company’s shareholders would remain shareholders of the Company and as a |
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result they would have the opportunity to participate in the Company’s future earnings or growth, which the Company’s Board of Directors believed would be improved over a stand-alone basis on account of the significant capital investment by NAFH; | |||
• | the Board of Directors’ belief that if the Company’s stock price traded higher than the per share price offered in the merger transaction the Company’s shareholders could immediately sell their shares of Common Stock at a price higher than the price they would receive in the merger transaction without having to wait for the transaction to close before doing so; | ||
• | the results of the extensive review of strategic alternatives conducted by the Company, with the assistance of its financial and legal advisors over a period of nine months, which involved the Company’s management engaging in discussions with approximately twenty parties to determine their potential interest in a business combination or recapitalization transaction with the Company; | ||
• | the conclusion of the Company’s Board of Directors that the termination fees, expense reimbursements and payments potentially owning to NAFH under the Investment Agreement and the Option (and the circumstances when each such fee or payment is payable) were reasonable in light of the potential benefits to the Company and its shareholders of the recapitalization transaction with NAFH and the extensive sale process conducted by the Company; | ||
• | the significant amount of cash on hand at NAFH, and the absence of a financing condition to NAFH’s obligation to consummate the Investment, together with NAFH’s obligation under the Investment Agreement to pay the Company a reverse termination fee in an amount equal to $8,000,000 if the Investment Agreement is terminated because NAFH breaches a covenant of the Investment Agreement (and fails to cure such breach in the time allowed in the Investment Agreement) that causes the failure of a closing condition to be satisfied; and | ||
• | the conclusion by the Company’s Board of Directors that consummation of the recapitalization transaction with NAFH, including the Bank Merger, would aid the Company and GreenBank in dealing with the formal regulatory enforcement action being pursued by the FDIC and the TDFI, which the Board of Directors believed would negatively impact the Company’s and GreenBank’s operations on a stand-alone basis. |
• | the amount of dilution that the Company’s existing shareholders would incur as a result of consummation of the transactions contemplated by the Investment Agreement; | ||
• | the fact that the per share purchase price being paid by NAFH was less than the trading price for the Company’s Common Stock and the book value per share of Common Stock; | ||
• | the risk that the NAFH recapitalization transaction might not be completed, including the risk that the banking regulators or the Company’s shareholders might not approve the transaction; | ||
• | the actual and potential interests of the Company’s executive officers and directors in the recapitalization transaction that may be different than or in addition to those of the Company’s shareholders generally (see “ — Interests of the Company’s Directors and Executive Officers in the Proposal”); | ||
• | the restrictions in the Investment Agreement on the Company’s ability to solicit or engage in discussions or negotiations with a third party regarding other proposals and the restrictions on the ability of the Company’s Board of Directors to withdraw its recommendation that the Company’s shareholders vote in favor of the proposals included in this Proxy Statement; |
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• | the requirements in the Investment Agreement and the Option that the Company pay NAFH termination fees and expense reimbursement payments of up to $16,750,000 in certain circumstances (see “Overview — Termination Fees Payable by the Company” ); and | ||
• | the possibility of employee and customer disruption associated with the recapitalization transaction. |
AUTHORIZED SHARES OF COMMON STOCK
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Upon Effectiveness of | ||||||||
As of June 30, 2011 | Amendment | |||||||
Shares of Common Stock Authorized | 20,000,000 | 300,000,000 | ||||||
Shares of Common Stock Outstanding | 13,239,090 | 13,239,090 | ||||||
Shares of Common Stock Reserved for Issuance* | 1,050,937 | 1,050,937 | ||||||
Shares of Common Stock Available for Future Issuance | 5,709,973 | 285,709,973 | ||||||
Shares of Common Stock to be Issued in Connection with Investment Agreement | 119,900,000 | 119,900,000 | ||||||
* | The number of shares of Common Stock reserved for issuance includes 979,874 shares of Common Stock subject to outstanding options at June 30, 2011 and 72,278 shares of Common Stock subject to the Treasury Warrant. |
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OF COMMON STOCK
FINANCIAL HOLDINGS, INC. AND ITS AFFILIATES AND ASSOCIATES FROM THE PROVISIONS
OF SECTION 9
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THAT THE TENNESSEE CONTROL SHARE ACQUISITION ACT WILL NOT APPLY TO THE
COMPANY AND ITS SHAREHOLDERS
OF NORTH AMERICAN FINANCIAL HOLDINGS, INC.
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• | On July 16, 2010, NAFH commenced banking operations when it purchased approximately $1.2 billion of assets and assumed approximately $960 million of deposits of three failed banks from the FDIC: First National Bank of the South of Spartanburg, South Carolina, Metro Bank of Dade County of Miami, Florida and Turnberry Bank of Aventura, Florida (collectively, the “Failed Banks”). The transactions included 13 branches located in South Carolina and 10 branches located in Florida. NAFH purchased assets of approximately $1.4 billion and assumed deposits of approximately $1.2 billion from the Failed Banks. In connection with the acquisition, NAFH entered into loss-sharing arrangements with the FDIC covering approximately $796 million of loans and real estate owned of the Failed Banks that NAFH acquired. | ||
• | On September 30, 2010, NAFH invested approximately $175 million in TIB Financial, a bank holding company headquartered in Naples, Florida with approximately $1.7 billion in assets and 28 branches in southwest Florida at the acquisition date, and acquired approximately 94% of that company’s common stock after giving effect to a subsequent rights offering to legacy TIB Financial Corp. shareholders. On April 27, 2011, NAFH combined TIB Financial Corp.’s banking subsidiary, TIB Bank, with NAFH Bank in an all stock transaction. | ||
• | On January 28, 2011, NAFH invested approximately $181 million in Capital Bank Corporation, a bank holding company headquartered in Raleigh, North Carolina with approximately $1.7 billion in assets and 32 branches in central and western North Carolina at the acquisition date, and acquired approximately 83% of that company’s common stock after giving effect to a subsequent rights offering to legacy Capital Bank Corporation shareholders. |
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• | The Bank Merger is expected to create significant operating efficiencies by consolidating the loan operations, deposit operations, ALCO and risk management, budgeting, marketing, financial reporting and compliance functions of the two banks; | ||
• | The Bank Merger will result in a bank with increased size and scale; |
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• | The Bank Merger will expand NAFH Bank’s and GreenBank’s overall geographic coverage; | ||
• | The Bank Merger is expected to be a tax free transaction; and | ||
• | The Bank Merger is expected to mitigate the regulatory burden of operating two stand alone banks regulated by two different federal regulators. |
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Company | NAFH | Company | NAFH | |||||||||||||
Per Share | Per Share | Per Share | Per Share | |||||||||||||
Data | Data | Data | Data | |||||||||||||
(As Reported) | (As Reported) | (Pro Forma) | (Pro Forma) | |||||||||||||
Three months ended March 31, 2011 | ||||||||||||||||
Net income (loss) per share, basic | $ | (0.88 | ) | $ | 0.01 | $ | 0.04 | $ | 0.11 | |||||||
Net income (loss) per share, diluted | (0.88 | ) | 0.01 | 0.04 | 0.11 | |||||||||||
Dividends | — | — | — | — | ||||||||||||
Common book value per share | $ | 4.88 | $ | 19.56 | $ | 1.90 | $ | 19.53 | ||||||||
Year ended December 31, 2010 | ||||||||||||||||
Net income (loss) per share, basic | (6.54 | ) | 0.32 | 0.13 | 0.72 | |||||||||||
Net income (loss) per share, diluted | (6.54 | ) | 0.32 | 0.13 | 0.72 | |||||||||||
Dividends | — | — | — | — | ||||||||||||
Common book value per share | 5.75 | 19.49 | 1.98 | 19.45 |
• | That would result in a monopoly or that would further a combination or conspiracy to monopolize banking in the United States; or | ||
• | That could substantially lessen competition in any banking market, that would tend to create a monopoly in any banking market, or that would be in restraint of trade, unless the Office of the Comptroller of the |
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Currency finds that the public interest in meeting the convenience and needs of the communities served outweighs the anti-competitive effects of the proposed transaction. |
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• | The closing price per share at the time of consummation of the Investment is $2.58, which is equal to average closing market price of the Company’s common stock over the first five business days following the first public announcement of the Investment (or May 5, 2011); | ||
• | The Investment closed on July 26, 2011, the last practicable date prior to the filing of this Proxy Statement; | ||
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• | The named executive officers of the Company were terminated without cause immediately following a change in control on July 26, 2011, which is the last practicable date prior to the filing of this Proxy Statement; and | ||
• | Mr. Vaught waived his right to receive any change in control payments based on or otherwise related to the Investment. |
Cash | Equity | Pension/ | ||||||||||||||
Name | ($) | ($)(1) | NQDC ($) | Total ($) | ||||||||||||
Stephen M. Rownd | — | 109,745 | — | 109,745 | ||||||||||||
Michael J. Fowler | — | 79,632 | — | 79,632 | ||||||||||||
Kenneth R. Vaught | (2 | ) | 2,655 | (3 | ) | 2,655 | ||||||||||
James E. Adams(4) | — | — | — | — | ||||||||||||
Steve L. Droke(5) | — | — | — | — | ||||||||||||
William C. Adams, Jr. | 321,266 | 1,604 | — | 322,870 | ||||||||||||
R. Stan Puckett (4) | — | — | — | — |
(1) | Pursuant to EESA, the accelerated vesting of equity awards upon a change in control is prohibited. However, it is anticipated that following consummation of the Repurchase the unvested equity awards of the NEOs will be accelerated. None of the stock options held by the NEOs have exercise prices that are less than $2.58. Accordingly, no value is ascribed to these stock options and the value reported is related solely to unvested shares of restricted stock. | |
(2) | If the Company fails to obtain waivers with respect to payments based on or otherwise related to the Investment from Mr. Vaught and NAFH waives such condition to the Closing, Mr. Vaught may be entitled to additional payments in the amount of approximately $798,000. | |
(3) | Under the Non-Competition Agreement and in connection with his termination (without regard for any change in control enhancement), Mr. Vaught would be entitled to receive payments of $84,924 per year for a period of ten years. Mr. Vaught would not be entitled to receive payments until he reaches age 50. | |
(4) | Messrs. J. Adams and Puckett retired on May 16, 2011 and March 31, 2010, respectively, and neither is entitled to any payments solely as a result of consummation of the Investment. | |
(5) | Mr. Droke resigned effective June 17, 2011 and is not entitled to any payments solely as a result of consummation of the Investment. |
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Name and Address of | Amount and Nature of | Percent of Common | ||||||
Beneficial Owner | Beneficial Ownership (a) | Stock Outstanding | ||||||
Scott M. Niswonger | 827,711 | (b) | 6.25 | % | ||||
P.O. Box 938 Greeneville, TN 37744 | ||||||||
Columbia Wagner Assets Management, L.P. | 1,183,912 | (c) | 8.94 | % | ||||
227 West Monroe Street, Suite 3000 Chicago, IL 60606 | ||||||||
Phil M. Bachman | 893,280 | (d) | 6.75 | % | ||||
Martha Bachman 100 N. Main Street, P.O. Box 1120 Greeneville, Tennessee 37743 | ||||||||
Dimensional Fund Advisors LP | 780,663 | (e) | 5.90 | % | ||||
6300 Bee Cave Road, Building One Austin, TX 78746 |
(a) | For purposes of this table, an individual or entity is considered to “beneficially own” any share of Common Stock which he, she or it directly or indirectly, through any contract, arrangement, understanding, relationship, or otherwise, has or shares: (1) voting power, which includes the power to vote, or to direct the voting of, such security; and/or (2) investment power, which includes the power to dispose, or to direct the disposition of, such security. In addition, an individual or entity is deemed to be the beneficial owner of any share of Common Stock of which he, she or it has the right to acquire voting or investment power within 60 days of the Record Date. | |
(b) | Based upon information set forth in a Schedule 13D/A, filed with the SEC on October 22, 2010 by Mr. Niswonger, who has sole voting and dispositive power with respect to 827,711 shares. | |
(c) | Based solely on the information contained in a Schedule 13G filed by Columbia Wagner Asset Management, L.P. with the SEC on February 10, 2011, as of December 31, 2010. | |
(d) | Martha Bachman is a director and the wife of retired director Phil Bachman. Includes 201,417 shares of common stock held directly or indirectly by Martha Bachman, 673,697 shares owned by Phil Bachman individually and 18,166 shares owned by Mr. and Mrs. Bachman jointly. | |
(e) | Based solely on the information contained in a Schedule 13G filed by Dimensional Fund Advisors, L.P. with the SEC on February 11, 2011, as of December 31, 2010. |
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Number of Shares Beneficially Owned | ||||||||||||||||
Common | ||||||||||||||||
Shares | Shares | Percent of | ||||||||||||||
Beneficially | Acquirable in | Common Stock | ||||||||||||||
Name and Position | Owned(a)(b) | 60 Days (c) | Total | Outstanding | ||||||||||||
Stephen M. Rownd, Chairman of the Board and Chief Executive Officer | 47,114 | — | 47,114 | * | ||||||||||||
Martha Bachman, Director | 893,280 | (d)(e) | — | 893,280 | 6.75 | % | ||||||||||
Bruce Campbell, Director | 10,189 | — | 10,189 | * | ||||||||||||
W.T. Daniels, Director | 14,215 | — | 14,215 | * | ||||||||||||
Robert K. Leonard, Director | 94,153 | (f)(e) | — | 94,153 | * | |||||||||||
Samuel Lynch, Director | 3,850 | — | 3,850 | * | ||||||||||||
Bill Mooningham, Director | 2,396 | — | 2,396 | * | ||||||||||||
John Tolsma, Director | 11,985 | — | 11,985 | * | ||||||||||||
Charles H. Whitfield, Jr., Director | 14,817 | — | 14,817 | * | ||||||||||||
Kenneth R. Vaught, Director, President and Chief Operating Officer | 38,834 | 26,800 | 65,634 | * | ||||||||||||
William C. Adams, Senior Vice President and Chief Information Officer | 25,870 | (e) | 16,391 | 42,261 | * | |||||||||||
Steve L. Droke, Former Senior Vice President and Chief Credit Officer | 18,802 | 7,219 | 26,021 | * | ||||||||||||
R. Stan Puckett, Retired Chairman of the Board and Chief Executive Officer | 45,772 | 44,640 | (g) | 90,412 | * | |||||||||||
James E. Adams, Retired Executive Vice President, Former Chief Financial Officer and Secretary | 25,823 | 4,200 | 30,023 | * | ||||||||||||
Michael J. Fowler, Senior Vice President and Chief Financial Officer | 30,865 | — | 30,865 | * | ||||||||||||
All directors and executive officers as a group (16 persons)(h) | 1,299,825 | 119,737 | 1,419,562 | 10.63 | % |
* | Less than 1% of the outstanding Common Stock. | |
(a) | For the definition of “beneficially owned,” see Note (a) to the preceding table. | |
(b) | Includes shares owned directly by directors and executive officers of the Company as well as shares held by their spouses and children, trust of which certain directors are trustees and corporations in which certain directors own a controlling interest. | |
(c) | Represents options to purchase Common Stock which are exercisable within 60 days of the Record Date. | |
(d) | Martha Bachman is a director and the wife of retired director Phil Bachman. Includes 201,417 shares of common stock held directly or indirectly by Martha Bachman, 673,697 shares owned by Phil Bachman individually and 18,166 shares owned by Mr. and Mrs. Bachman jointly. | |
(e) | As of July 6, 2011, the following individuals have pledged the following amounts of their common shares beneficially owned to secure lines of credits or other indebtedness: Martha Bachman and retired director Phil Bachman — 312,899 shares; Robert Leonard — 15,000 shares held in a limited liability partnership; and William C. Adams — 5,000 shares. | |
(f) | Includes 41,197 shares of common stock in a limited partnership of which Mr. Leonard is a limited partner. Mr. Leonard disclaims beneficial ownership of 32,216 of these shares. Also includes 504 shares of common stock in a limited liability company in which Mr. Leonard has an interest. Mr. Leonard disclaims beneficial ownership of 363 of these shares. | |
(g) | Includes options to acquire 36,000 shares of Common Stock currently exercisable (or exercisable within 60 days of the Record Date) by Mr. Puckett at an exercise price equal to 150% of the book value of the Common Stock at the date of grant (a weighted average price of |
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approximately $16.27 per share) and options to acquire 19,800 shares of Common Stock currently exercisable (or exercisable within 60 days of the Record Date) by Mr. Puckett at an exercise price equal to the fair market value at the date of grant (a weighted average price of approximately $29.03 per share). | ||
(h) | Includes shares held by Mr. Puckett, who served as the Company’s Chairman and Chief Executive Officer until March 31, 2010, shares held by Mr. J. Adams, who served as the Company’s Executive Vice President, Chief Financial Officer and Secretary until May 16, 2011 and shares held by Mr. Droke, who served as the Company’s Senior Vice President and Chief Credit Officer until June 17, 2011. |
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Secretary
July 27, 2011
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ARTICLE I PURCHASE; CLOSING | ||
1.1 Purchase | A-1 | |
1.2 Closing | A-1 | |
ARTICLE II REPRESENTATIONS AND WARRANTIES | ||
2.1 Disclosure | A-6 | |
2.2 Representations and Warranties of the Company and the Bank | A-7 | |
2.3 Representations and Warranties of Purchaser | A-25 | |
ARTICLE III COVENANTS | ||
3.1 Filings; Other Actions | A-28 | |
3.2 Access, Information and Confidentiality | A-29 | |
3.3 Conduct of the Business | A-30 | |
3.4 Acquisition Proposals | A-34 | |
3.5 Repurchase | A-36 | |
3.6 D&O Indemnification | A-37 | |
3.7 Notice of Developments | A-37 | |
ARTICLE IV ADDITIONAL AGREEMENTS | ||
4.1 Governance Matters | A-37 | |
4.2 Legend | A-38 | |
4.3 Exchange Listing | A-38 | |
4.4 Registration Rights | A-38 | |
4.5 Employees | A-38 | |
4.6 Reservation for Issuance | A-38 | |
4.7 Additional Investment | A-38 | |
ARTICLE V TERMINATION | ||
5.1 Termination | A-39 | |
5.2 Effects of Termination | A-40 | |
5.3 Fees | A-40 | |
ARTICLE VI MISCELLANEOUS | ||
6.1 No Survival | A-41 | |
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6.2 Expenses | A-41 | |
6.3 Amendment; Waiver | A-42 | |
6.4 Counterparts and Facsimile | A-42 | |
6.5 Governing Law | A-42 | |
6.6 Notices | A-42 | |
6.7 Entire Agreement, Assignment | A-43 | |
6.8 Interpretation; Other Definitions | A-43 | |
6.9 Captions | A-44 | |
6.10 Severability | A-44 | |
6.11 No Third Party Beneficiaries | A-44 | |
6.12 Time of Essence | A-44 | |
6.13 Certain Adjustments | A-44 | |
6.14 Public Announcements | A-44 | |
6.15 Specific Performance; Limitation on Damages | A-45 | |
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Term | Location of Definition | |
409A Plan | 2.2(s)(8) | |
Acquisition Agreement | 3.4(b) | |
Acquisition Proposal | 3.4(c) | |
Adverse Recommendation Change | 3.4(b) | |
Affiliate | 6.8(a) | |
Agency | 2.2(w)(5)(D) | |
Agreement | Preamble | |
Authorizations | 2.2(a)(1) | |
Bank | Preamble | |
Bank Charter | 2.2(a)(2) | |
beneficial owner | 6.8(g) | |
beneficially own | 6.8(g) | |
Benefit Plan | 2.2(s)(1) | |
Burdensome Condition | 1.2(c)(2)(F) | |
business day | 6.8(e) | |
Capitalization Date | 2.2(b) | |
CERCLA | 2.2(v) | |
Charge-Offs | 1.2(c)(2)(L) | |
Charter | 2.2(a)(1) | |
Closing | 1.2(a) | |
Closing Date | 1.2(a) | |
Closing Expense Reimbursement | 6.2 | |
Code | 2.2(j) | |
Common Stock | Recitals | |
Company | Preamble | |
Company 10-K | 2.1(c)(2)(A) | |
Company Insurance Policies | 2.2(x) | |
Company Preferred Stock | 2.2(b) | |
Company Recommendation | 3.1(b) | |
Company Reports | 2.2(h)(1) | |
Company Representatives | 3.2(a) | |
Company Significant Agreement | 2.2(m)(i) | |
Company’s knowledge | 2.1(d) | |
Confidentiality Agreement | 3.2(b) | |
control | 6.8(a) | |
controlled by | 6.8(a) | |
CVRs | Recitals | |
Disclosure Schedule | 2.1(a) | |
EESA | 2.2(s)(10) | |
ERISA | 2.2(s)(1) | |
ERISA Affiliate | 2.2(s)(1) | |
Exchange Act | 2.2(h)(1) | |
Existing D&O Policies | 1.2(c)(2)(H)(i) | |
Expense Reimbursement | 5.3(c) | |
FDIC | 2.2(a)(2) | |
Federal Reserve | 1.2(c)(1)(B) | |
GAAP | 2.2(g) | |
Governmental Entity | 1.2(c)(1)(A) | |
herein | 6.8(d) | |
hereof | 6.8(d) | |
hereunder | 6.8(d) | |
include | 6.8(c) | |
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Term | Location of Definition | |
included | 6.8(c) | |
includes | 6.8(c) | |
including | 6.8(c) | |
knowledge of the Company | 2.1(d) | |
Laws | 2.1(b) | |
Liens | 1.2(b)(1) | |
Loan Portfolio Committee | 4.1(c) | |
Loans | 2.2(w)(1) | |
Loan Tape | 2.2(w)(9) | |
Material Adverse Effect | 2.1(b) | |
NASDAQ | 1.2(c)(2)(I) | |
Nominees | 4.1(b) | |
Notice of Recommendation Change | 3.4(b) | |
or | 6.8(b) | |
Option | Recitals | |
Organizational Common Stock | 2.2(b) | |
Permits | 2.2(q) | |
Permitted Liens | 2.2(i) | |
Per Share Purchase Price | 1.2(b)(2) | |
person | 6.8(f) | |
Pool | 2.2(w)(8) | |
Previously Disclosed | 2.1(c) | |
Proprietary Rights | 2.2(y) | |
Purchased Shares | 1.1 | |
Purchaser | Preamble | |
Purchaser Designees | 1.2(c)(2)(G) | |
Registration Rights Agreement | 4.4 | |
Regulatory Agreement | 2.2(u) | |
Resigning Directors | 1.2(c)(2)(G) | |
Representatives | 3.4(a) | |
Repurchase | Recitals | |
Required Approvals | 2.2(f) | |
Sarbanes-Oxley Act | 2.2(h)(2) | |
SEC | 2.1(c)(2)(A) | |
Securities Act | 2.2(h)(1) | |
Series A Preferred | Recitals | |
Shareholder Meeting | 3.1(b) | |
Shareholder Proposal | 3.1(b) | |
SRO | 2.2(h)(1) | |
Subsidiaries | 2.2(a)(1) | |
Subsidiary | 2.2(a)(1) | |
Superior Proposal | 3.4(c) | |
Tax Return | 2.2(j) | |
Taxes | 2.2(j) | |
Tennessee DFI | 1.2(c)(1)(B) | |
Termination Fee | 5.3(c) | |
Treasury | Recitals | |
Treasury Warrants | Recitals | |
Trust Preferred Securities | 2.2(d)(2) | |
under common control with | 6.8(a) | |
VA | 2.2(w)(5) | |
Voting Debt | 2.2(b) | |
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Schedule A | List of Subsidiaries | |
Exhibit A | Terms of Contingent Value Rights | |
Exhibit B | Terms of Repurchase | |
Exhibit C | Form of Registration Rights Agreement |
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A-4
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A-5
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A-6
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A-7
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A-8
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A-9
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A-10
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A-11
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A-12
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A-13
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A-14
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A-15
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A-19
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A-25
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A-27
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COVENANTS
A-28
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A-29
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A-30
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A-31
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A-32
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A-33
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A-34
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A-35
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A-36
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A-37
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A-38
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(a) | If to Purchaser: | ||
North American Financial Holdings, Inc. 4725 Piedmont Row Drive Charlotte, North Carolina 28210 Attention: Christopher G. Marshall Telephone: (704) 554-5901 Fax: (704) 964-2442 | |||
with a copy to (which copy alone shall not constitute notice): | |||
Wachtell, Lipton, Rosen & Katz 51 West 52nd Street New York, New York 10019 Attention: David E. Shapiro Telephone: (212) 403-1000 Fax: (212) 403-2000 |
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(b) | If to the Company or the Bank: | ||
Green Bankshares, Inc. 100 North Main Street Greeneville, Tennessee 37743 Attention: Stephen M. Rownd Telephone: (423) 278-3323 Fax: (866) 550-2336 | |||
with a copy to (which copy alone shall not constitute notice): | |||
Bass, Berry & Sims PLC 150 Third Avenue South, Suite 2800 Nashville, Tennessee 37201 Attention: D. Scott Holley Telephone: (615) 742-7721 Fax: (615) 742-2813 |
A-43
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A-44
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A-45
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GREEN BANKSHARES, INC. | ||||
By: | /s/ Stephen M. Rownd | |||
Name: | Stephen M. Rownd | |||
Title: | Chairman and CEO | |||
GREENBANK | ||||
By: | /s/ Stephen M. Rownd | |||
Name: | Stephen M. Rownd | |||
Title: | Chairman and CEO | |||
A-46
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NORTH AMERICAN FINANCIAL HOLDINGS, INC. | ||||
By: | /s/ Christopher G. Marshall | |||
Name: | Christopher G. Marshall | |||
Title: | EVP, CFO | |||
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State or Other Jurisdiction of | ||
Name of Subsidiary | Incorporation/Organization | |
Company Subsidiaries | ||
Greene County Capital Trust I | Delaware | |
Greene County Capital Trust II | Delaware | |
GreenBank Capital Trust I | Delaware | |
Civitas Statutory Trust I | Delaware | |
Cumberland Capital Statutory Trust II | Connecticut | |
Bank Subsidiaries | ||
Superior Financial Services, Inc. | Tennessee | |
GCB Acceptance Corporation | Tennessee | |
Fairway Title Company | Tennessee | |
GB Holdings, LLC | Tennessee |
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Term Sheet for Contingent Value Rights
Recipients | Immediately prior to the Closing, existing shareholders of the Company as of a predetermined record date mutually agreeable to the Purchaser and the Company will be issued one right (a “CVR”) for each share of Common Stock owned by such shareholder. Each CVR would entitle the holder to a cash payment based on the amount of Credit Losses (as defined below) prior to the Maturity Date up to a maximum of $0.75 per CVR in the aggregate. | |
Maturity Date | 5 years from the Closing Date | |
Settlement Obligation at Maturity | If the amount of Credit Losses is less than the Stipulated Amount, the Issuer will pay to holders of the CVRs, within 60 days of the Maturity Date, an amount equal to: | |
(A) If the difference between the Stipulated Amount and the amount of Credit Losses expressed on a per CVR basis (such difference, the “Loss Shortfall”) is less than or equal to $0.50, then 100% of the Loss Shortfall; and | ||
(B) If the Loss Shortfall is greater than $0.50, then $0.50 plus 50% of the excess of the Loss Shortfall over $0.50 with a maximum of $0.75 per CVR. | ||
If the amount of Credit Losses equals or exceeds the Stipulated Amount (as defined below), the CVRs will expire and the Company shall not be required to make any payment with respect to them. | ||
Credit Losses | “Credit Losses” means the Charge-Offs for any loans existing as of the date hereof for the period commencing on the date hereof and ending on the Maturity Date less any recoveries in respect of such Charge-Offs. | |
Stipulated Amount | $178,000,000. | |
Determinations | All determinations with respect to Credit Losses calculations for purposes of the CVRs and amounts payable in respect of the CVRs shall be made by the Loan Portfolio Committee of the Company’s Board of Directors in its sole discretion. | |
Early Redemption | The Company may redeem the CVRs at any time at a price of $0.75 per CVR. | |
Voting rights | Any modifications of the terms of the CVRs that are adverse to the holders will require the consent of the holders of a majority of the CVRs. Otherwise, no voting rights attach to the CVRs. | |
Dividend rights | None. | |
Merger, Acquisition or Change in Control | In the event that the Company experiences a Change in Control, all rights under the CVRs shall be redeemed upon closing at $0.75 per CVR. |
Exhibit A-1
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Change in Control | A “Change in Control” shall mean any transaction resulting in the holders of the equity interests of the Parent immediately prior to such transaction owning, directly or indirectly, less than 50% of the equity interests of the Parent immediately following such transaction. For purposes of the preceding sentence, the “Parent” shall mean the ultimate holder that directly or indirectly owns or controls, by share ownership, contract or otherwise, a majority of the equity interests of the Company. | |
Transferability; Attachment; Death | The rights of a holder of a CVR may not be assigned or transferred except by will or the laws of descent or distribution. The CVR shall not be subject, in whole or in part, to attachment, execution, or levy of any kind, and any attempt to sell, pledge, assign, hypothecate, transfer or otherwise dispose of the CVR shall be void. If a holder of a CVR should die, the designee, legal representative, or legatee, the successor trustee of such holder’s inter vivos trust or the person who acquired the right to the CVR by reason of the death of such holder (individually, a “Successor”) shall succeed to such holder’s rights with respect to the CVR. |
Exhibit A-2
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TO THE CHARTER
OF
GREEN BANKSHARES, INC.
GREEN BANKSHARES, INC. | ||||
By: | ||||
Name: | Stephen M. Rownd | |||
Title: | Chief Executive Officer |
B-1
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TO THE CHARTER
OF
GREEN BANKSHARES, INC.
GREEN BANKSHARES, INC. | ||||
By: | ||||
Name: | Stephen M. Rownd | |||
Title: | Chief Executive Officer |
C-1
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TO THE CHARTER
OF
GREEN BANKSHARES, INC.
GREEN BANKSHARES, INC. | ||||
By: | ||||
Name: | Stephen M. Rownd | |||
Title: | Chief Executive Officer |
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GREENBANK
WITH AND INTO
NAFH NATIONAL BANK
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ATTEST: | NAFH NATIONAL BANK | |
Name: | Name: | |
Title: | Title: | |
ATTEST: | GREENBANK | |
Name: | Name: | |
Title: | Title: |
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2010 | 2009 | 2008 | 2007 | 2006 | ||||||||||||||||
Commercial real estate | $ | 1,080,805 | $ | 1,306,398 | $ | 1,430,225 | $ | 1,549,457 | $ | 921,190 | ||||||||||
Residential real estate | 378,783 | 392,365 | 397,922 | 398,779 | 281,629 | |||||||||||||||
Commercial | 222,927 | 274,346 | 315,099 | 320,264 | 258,998 | |||||||||||||||
Consumer | 75,498 | 83,382 | 89,733 | 97,635 | 87,111 | |||||||||||||||
Other | 1,913 | 2,117 | 4,656 | 3,871 | 2,203 | |||||||||||||||
Unearned interest | (14,548 | ) | (14,801 | ) | (14,245 | ) | (13,630 | ) | (11,502 | ) | ||||||||||
Loans, net of unearned interest | $ | 1,745,378 | $ | 2,043,807 | $ | 2,223,390 | $ | 2,356,376 | $ | 1,539,629 | ||||||||||
Allowance for loan losses | $ | (66,830 | ) | $ | (50,161 | ) | $ | (48,811 | ) | $ | (34,111 | ) | $ | (22,302 | ) | |||||
2010 | 2009 | 2008 | 2007 | 2006 | ||||||||||||||||
Speculative 1-4 family residential real estate | ||||||||||||||||||||
Acquisition and development | $ | 131,669 | $ | 185,087 | $ | 242,343 | $ | 285,592 | $ | 159,760 | ||||||||||
Lot warehouse | 42,796 | 66,104 | 79,555 | 104,201 | 64,429 | |||||||||||||||
Commercial 1-4 family residential | 31,511 | 70,434 | 160,786 | 279,680 | 134,390 | |||||||||||||||
Sub-total | 205,976 | 321,625 | 482,684 | 669,473 | 358,579 | |||||||||||||||
Construction | ||||||||||||||||||||
Commercial vacant land | 77,081 | 101,679 | 103,160 | 69,298 | 37,461 | |||||||||||||||
Commercial construction — non-owner occupied | 63,881 | 164,887 | 144,344 | 157,374 | 80,032 | |||||||||||||||
Commercial construction — owner occupied | 5,407 | 28,213 | 55,305 | 58,814 | 37,515 |
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2010 | 2009 | 2008 | 2007 | 2006 | ||||||||||||||||
Consumer residential construction | 14,161 | 19,073 | 27,632 | 38,231 | 25,279 | |||||||||||||||
Sub-total | 160,530 | 313,852 | 330,441 | 323,717 | 180,287 | |||||||||||||||
Total speculative and construction | $ | 366,506 | $ | 635,477 | $ | 813,125 | $ | 993,190 | $ | 538,866 | ||||||||||
Due in One | Due After One Year | Due After | ||||||||||||||
Year or Less | Through Five Years | Five Years | Total | |||||||||||||
Commercial real estate | $ | 437,374 | $ | 613,259 | $ | 30,172 | $ | 1,080,805 | ||||||||
Residential real estate(1) | 42,826 | 93,735 | 235,732 | 372,293 | ||||||||||||
Commercial | 148,500 | 68,752 | 5,675 | 222,927 | ||||||||||||
Consumer(1) | 19,110 | 45,815 | 2,515 | 67,440 | ||||||||||||
Other | 1,629 | 236 | 48 | 1,913 | ||||||||||||
Total | $ | 649,439 | $ | 821,797 | $ | 274,142 | $ | 1,745,378 | ||||||||
(1) | Net of unearned interest |
Fixed Rate | Variable Rate | Total | ||||||||||
Commercial real estate | $ | 432,141 | $ | 211,290 | $ | 643,431 | ||||||
Residential real estate | 111,198 | 218,269 | 329,467 | |||||||||
Commercial | 46,740 | 27,687 | 74,427 | |||||||||
Consumer | 47,696 | 634 | 48,330 | |||||||||
Other | 236 | 48 | 284 | |||||||||
Total | $ | 638,011 | $ | 457,928 | $ | 1,095,939 | ||||||
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At December 31, | ||||||||||||||||||||
2010 | 2009 | 2008 | 2007 | 2006 | ||||||||||||||||
Loans accounted for on a non-accrual basis | $ | 143,707 | $ | 75,411 | $ | 30,926 | $ | 32,060 | $ | 3,479 | ||||||||||
Accruing loans which are contractually past due 90 days or more as to interest or principal payments | 2,112 | 147 | 509 | 18 | 28 | |||||||||||||||
Total non-performing loans | 145,819 | 75,558 | 31,435 | 32,078 | 3,507 | |||||||||||||||
Real estate owned: | ||||||||||||||||||||
Foreclosures | 59,965 | 56,952 | 44,964 | 4,401 | 1,445 | |||||||||||||||
Other real estate held and repossessed assets | 130 | 216 | 407 | 458 | 243 | |||||||||||||||
Total non-performing assets | $ | 205,914 | $ | 132,726 | $ | 76,806 | $ | 36,937 | $ | 5,195 | ||||||||||
Restructured loans not included above | $ | 39,940 | $ | 11,632 | $ | — | $ | — | $ | — | ||||||||||
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Year Ended December 31, | ||||||||||||||||||||
2010 | 2009 | 2008 | 2007 | 2006 | ||||||||||||||||
Balance at beginning of year | $ | 50,161 | $ | 48,811 | $ | 34,111 | $ | 22,302 | $ | 19,739 | ||||||||||
Reserve acquired in acquisition | — | — | — | 9,022 | — | |||||||||||||||
Subtotal | 50,161 | 48,811 | 34,111 | 31,324 | 19,739 | |||||||||||||||
Charge-offs: | ||||||||||||||||||||
Commercial real estate | (48,617 | ) | (40,893 | ) | (28,759 | ) | (7,516 | ) | (494 | ) | ||||||||||
Commercial | (3,210 | ) | (6,941 | ) | (6,177 | ) | (2,065 | ) | (879 | ) | ||||||||||
Subtotal | (51,827 | ) | (47,834 | ) | (34,936 | ) | (9,581 | ) | (1,373 | ) | ||||||||||
Residential real estate | (3,102 | ) | (3,176 | ) | (2,275 | ) | (840 | ) | (947 | ) | ||||||||||
Consumer | (2,889 | ) | (3,880 | ) | (4,058 | ) | (3,050 | ) | (2,009 | ) | ||||||||||
Other | — | — | — | — | (28 | ) | ||||||||||||||
Total charge-offs | (57,818 | ) | (54,890 | ) | (41,269 | ) | (13,471 | ) | (4,357 | ) | ||||||||||
Recoveries: | ||||||||||||||||||||
Commercial real estate | 1,301 | 3,066 | 1,691 | 289 | 17 | |||||||||||||||
Commercial | 909 | 1,669 | 221 | 227 | 171 | |||||||||||||||
Subtotal | 2,210 | 4,735 | 1,912 | 516 | 188 | |||||||||||||||
Residential real estate | 287 | 402 | 138 | 213 | 284 | |||||||||||||||
Consumer | 882 | 853 | 1,106 | 1,038 | 936 | |||||||||||||||
Other | 1 | 4 | 3 | 8 | 5 | |||||||||||||||
Total recoveries | 3,380 | 5,994 | 3,159 | 1,775 | 1,413 | |||||||||||||||
Net charge-offs | (54,438 | ) | (48,896 | ) | (38,110 | ) | (11,696 | ) | (2,944 | ) | ||||||||||
Provision for loan losses | 71,107 | 50,246 | 52,810 | 14,483 | 5,507 | |||||||||||||||
Balance at end of year | $ | 66,830 | $ | 50,161 | $ | 48,811 | $ | 34,111 | $ | 22,302 | ||||||||||
Ratio of net charge-offs to average loans outstanding, net of unearned discount, during the period | 2.84 | % | 2.25 | % | 1.63 | % | .57 | % | .20 | % | ||||||||||
Ratio of allowance for loan losses to non-performing loans | 45.83 | % | 66.39 | % | 155.28 | % | 106.34 | % | 635.93 | % | ||||||||||
Ratio of allowance for loan losses to total loans, net of unearned income | 3.83 | % | 2.45 | % | 2.20 | % | 1.45 | % | 1.45 | % | ||||||||||
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At December 31, | ||||||||||||||||||||||||||||||||||||||||
2010 | 2009 | 2008 | 2007 | 2006 | ||||||||||||||||||||||||||||||||||||
Percent | Percent of | Percent of | Percent | Percent | ||||||||||||||||||||||||||||||||||||
of loans | loans in | loans in | of loans | of loans | ||||||||||||||||||||||||||||||||||||
in each | each | each | in each | in each | ||||||||||||||||||||||||||||||||||||
category | category | category | category | category | ||||||||||||||||||||||||||||||||||||
Balance at end of period | to total | to total | to total | to total | to total | |||||||||||||||||||||||||||||||||||
applicable to: | Amount | loans | Amount | loans | Amount | loans | Amount | loans | Amount | loans | ||||||||||||||||||||||||||||||
Commercial real estate | $ | 54,203 | 61.93 | % | $ | 36,527 | 63.93 | % | $ | 35,714 | 64.33 | % | $ | 20,489 | 65.38 | % | $ | 10,619 | 59.38 | % | ||||||||||||||||||||
Residential real estate | 4,431 | 21.33 | % | 4,350 | 18.88 | % | 3,669 | 17.63 | % | 2,395 | 16.83 | % | 1,639 | 18.16 | % | |||||||||||||||||||||||||
Commercial | 5,080 | 12.78 | % | 5,840 | 13.42 | % | 6,479 | 14.17 | % | 7,575 | 13.51 | % | 6,645 | 16.70 | % | |||||||||||||||||||||||||
Consumer | 3,108 | 3.86 | % | 3,437 | 3.67 | % | 2,927 | 3.66 | % | 3,635 | 4.12 | % | 3,384 | 5.62 | % | |||||||||||||||||||||||||
Other | 8 | 0.11 | % | 7 | 0.10 | % | 22 | 0.21 | % | 17 | 0.16 | % | 15 | 0.14 | % | |||||||||||||||||||||||||
Totals | $ | 66,830 | 100.00 | % | $ | 50,161 | 100.00 | % | $ | 48,811 | 100.00 | % | $ | 34,111 | 100.00 | % | $ | 22,302 | 100.00 | % | ||||||||||||||||||||
At December 31, | ||||||||||||
2010 | 2009 | 2008 | ||||||||||
Securities Held to Maturity: | ||||||||||||
State and political subdivisions | $ | 215 | $ | 251 | $ | 404 | ||||||
Other securities | 250 | 375 | 253 | |||||||||
Total | $ | 465 | $ | 626 | $ | 657 | ||||||
Securities Available for Sale: | ||||||||||||
U.S. government agencies | $ | 83,299 | $ | 52,048 | $ | 98,806 | ||||||
State and political subdivisions | 31,501 | 32,192 | 31,804 | |||||||||
Collateralized mortgage obligations | 67,575 | 44,677 | 68,373 | |||||||||
Mortgage-backed securities | 17,964 | 16,892 | 2,086 | |||||||||
Trust preferred securities | 1,663 | 1,915 | 2,493 | |||||||||
Total | $ | 202,002 | $ | 147,724 | $ | 203,562 | ||||||
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Due After One | ||||||||||||||||||||
Due in One | Year through | Due After Five Years | Due | |||||||||||||||||
Year or Less | Five Years | through 10 Years | After 10 Years | Total | ||||||||||||||||
Securities Held to Maturity: | ||||||||||||||||||||
State and political subdivisions | $ | 215 | $ | — | $ | — | $ | — | $ | 215 | ||||||||||
Other securities | 250 | — | — | — | 250 | |||||||||||||||
Securities Available for Sale: | ||||||||||||||||||||
U.S. government agencies | — | — | 39,004 | 45,102 | 84,106 | |||||||||||||||
State and political subdivisions | 1,005 | 4,067 | 21,986 | 4,133 | 31,191 | |||||||||||||||
Collateralized mortgage obligations | — | 651 | 1,584 | 63,809 | 66,044 | |||||||||||||||
Mortgage-backed securities | — | 5,989 | 4,012 | 7,167 | 17,168 | |||||||||||||||
Trust preferred securities | — | — | — | 1,850 | 1,850 | |||||||||||||||
Subtotal | $ | 1,470 | $ | 10,707 | $ | 66,586 | $ | 122,061 | $ | 200,824 | ||||||||||
Market value adjustment on available for sale securities | 3 | 535 | 554 | 553 | 1,645 | |||||||||||||||
Total | $ | 1,473 | $ | 11,242 | $ | 67,140 | $ | 122,614 | $ | 202,469 | ||||||||||
Weighted average yield (a) | 7.08 | % | 4.83 | % | 3.94 | % | 3.44 | % | 3.75 | % | ||||||||||
(a) | Weighted average yields on tax-exempt obligations have been computed on a fully taxable-equivalent basis using a tax rate of 35%. |
Year Ended December 31, | ||||||||||||||||||||||||
2010 | 2009 | 2008 | ||||||||||||||||||||||
Average | Average | Average | Average | Average | Average | |||||||||||||||||||
Balance | Rate Paid | Balance | Rate Paid | Balance | Rate Paid | |||||||||||||||||||
Types of deposits (all in domestic offices): | ||||||||||||||||||||||||
Noninterest bearing demand deposits | $ | 166,814 | — | $ | 162,765 | — | $ | 187,058 | — | |||||||||||||||
Interest-bearing demand deposits | 881,978 | 1.01 | % | 700,586 | 1.30 | % | 577,024 | 1.57 | % | |||||||||||||||
Savings deposits | 98,900 | 1.02 | % | 83,549 | 1.13 | % | 68,612 | .77 | % | |||||||||||||||
Time deposits | 841,458 | 2.20 | % | 1,166,640 | 3.06 | % | 1,317,362 | 3.68 | % | |||||||||||||||
Total deposits | $ | 1,989,150 | $ | 2,113,540 | $ | 2,150,056 | ||||||||||||||||||
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Maturity Period | Certificates of Deposits | |||
Three months or less | $ | 41,190 | ||
Over three through six months | 43,741 | |||
Over six through twelve months | 112,097 | |||
Over twelve months | 112,673 | |||
Total | $ | 309,701 | ||
County | Deposit Share | |||
Greene, TN | 28.72 | % | ||
Hawkins, TN | 19.36 | % | ||
Lawrence, TN | 17.53 | % | ||
Smith, TN | 10.58 | % | ||
Sumner, TN | 10.12 | % | ||
Hamblen, TN | 8.78 | % | ||
Blount, TN | 8.15 | % | ||
Cocke, TN | 8.15 | % | ||
Macon, TN | 7.10 | % | ||
Madison, NC | 6.66 | % | ||
Montgomery, TN | 6.36 | % | ||
Loudon, TN | 6.00 | % | ||
Washington, TN | 5.91 | % | ||
McMinn, TN | 5.63 | % | ||
Bristol, VA1 | 4.39 | % | ||
Sullivan, TN | 2.82 | % | ||
Williamson, TN | 2.80 | % | ||
Rutherford, TN | 2.62 | % | ||
Monroe, TN | 1.49 | % | ||
Knox, TN | 0.82 | % | ||
Davidson, TN | 0.79 | % |
1 | Bristol, VA is deemed a city. |
F-11
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• | Changing the assessment base for federal deposit insurance from the amount of insured deposits to consolidated assets less tangible capital, eliminating the ceiling and increasing the size of the floor of the DIF, and offsetting the impact of the increase in the minimum floor on institutions with less than $10 billion in assets; | ||
• | Making permanent the $250,000 limit for federal deposit insurance, increasing the cash limit of Securities Investor Protection Corporation protection to $250,000 and providing unlimited federal deposit insurance until December 31, 2012 for non-interest bearing demand transaction accounts at all insured depository institutions; | ||
• | Repealing the federal prohibition on payment of interest on demand deposits, thereby permitting depositing institutions to pay interest on business transaction and other accounts; | ||
• | Centralizing responsibility for consumer financial protection by creating a new agency, the Consumer Financial Protection Bureau, responsible for implementing federal consumer protection laws, although banks below $10 billion in assets will continue to be examined and supervised for compliance with these laws by their federal banking regulator; | ||
• | Restricting the preemption of state law by federal law and disallowing national bank subsidiaries from availing themselves of such preemption; | ||
• | Imposing new requirements for mortgage lending, including new minimum underwriting standards, prohibitions on certain yield-spread compensation to mortgage originators, special consumer protections for mortgage loans that do not meet certain provision qualifications, prohibitions and limitations on certain mortgage terms and various new mandated disclosures to mortgage borrowers; | ||
• | Applying the same leverage and risk based capital requirements that apply to insured depository institutions to holding companies, although the Company’s currently outstanding subordinated debentures (but not new issuances) will continue to qualify as Tier 1 capital, subject to existing limitations on the amount that may so qualify; |
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• | Permitting national and state banks to establish de novo interstate branches at any location where a bank based in that state could establish a branch, and requiring that bank holding companies and banks be well capitalized and well managed in order to acquire banks located outside their home state; | ||
• | Imposing new limits on affiliated transactions and causing derivative transactions to be subject to lending limits; and | ||
• | Implementing corporate governance revisions, including with regard to executive compensation and proxy access to shareholders, that apply to all public companies not just financial institutions. |
• | The bank holding company has registered securities under Section 12 of the Securities Exchange Act of 1934; or | ||
• | No other person owns a greater percentage of that class of voting securities immediately after the transaction. |
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F-14
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F-15
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• | Ensure that the incentive compensation programs for its senior executive officers do not encourage unnecessary and excessive risks that threaten the value of the Company; |
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• | Implement a required clawback of any bonus or incentive compensation paid to the Company’s senior executive officers and the next twenty most highly compensated employees based on materially inaccurate financial statements or any other materially inaccurate performance metric; | ||
• | Not make any bonus, incentive or retention payment to any of the Company’s five most highly compensated employees, except as permitted under the IFR; | ||
• | Not make any “golden parachute payment” (as defined in the IFR) to any of the Company’s senior executive officers or next five most highly compensated employees; and | ||
• | Agree not to deduct for tax purposes executive compensation in excess of $500,000 in any one fiscal year for each of the Company’s senior executive officers. |
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High/Low Sales Price | Closing | Dividends Paid | ||||||||||
During Quarter | Price | Per Share | ||||||||||
2010: | ||||||||||||
First quarter | $ | 9.48 / 3.52 | $ | 8.16 | $ | — | ||||||
Second quarter | 15.04 / 7.96 | 12.77 | — | |||||||||
Third quarter | 13.11 / 6.58 | 6.79 | — | |||||||||
Fourth quarter | 7.73 / 2.39 | 3.20 | — | |||||||||
$ | — | |||||||||||
2009: | ||||||||||||
First quarter | $ | 14.71 / 4.51 | $ | 8.80 | $ | 0.13 | ||||||
Second quarter | 9.73 / 4.14 | 4.48 | — | |||||||||
Third quarter | 6.83 / 3.25 | 5.00 | — | |||||||||
Fourth quarter | 5.48 / 3.51 | 3.55 | — | |||||||||
$ | 0.13 | |||||||||||
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2010 | 2009 | 2008 | 2007(1) | 2006 | ||||||||||||||||
(in thousands, except per share data, ratios and percentages) | ||||||||||||||||||||
Total interest income | $ | 120,864 | $ | 138,456 | $ | 170,516 | $ | 176,626 | $ | 117,357 | ||||||||||
Total interest expense | 37,271 | 57,931 | 75,491 | 81,973 | 45,400 | |||||||||||||||
Net interest income | 83,593 | 80,525 | 95,025 | 94,653 | 71,957 | |||||||||||||||
Provision for loan losses | (71,107 | ) | (50,246 | ) | (52,810 | ) | (14,483 | ) | (5,507 | ) | ||||||||||
Net interest income after provision for loan losses | 12,486 | 30,279 | 42,215 | 80,170 | 66,450 | |||||||||||||||
Noninterest income | 32,544 | 31,578 | 33,614 | 27,602 | 20,710 | |||||||||||||||
Noninterest expense | (110,815 | ) | (229,587 | ) | (85,837 | ) | (69,252 | ) | (52,708 | ) | ||||||||||
Income (loss) before income taxes | (65,785 | ) | (167,730 | ) | (10,008 | ) | 38,520 | 34,452 | ||||||||||||
Income tax (expense) benefit | (14,910 | ) | 17,036 | 4,648 | (14,146 | ) | (13,190 | ) | ||||||||||||
Net income (loss) | (80,695 | ) | (150,694 | ) | (5,360 | ) | 24,374 | 21,262 | ||||||||||||
Preferred stock dividend and accretion of discount on warrants | (5,001 | ) | (4,982 | ) | (92 | ) | — | — | ||||||||||||
Net income (loss) available to common shareholders | $ | (85,696 | ) | $ | (155,676 | ) | $ | (5,452 | ) | $ | 24,374 | $ | 21,262 | |||||||
Per Share Data: | ||||||||||||||||||||
Net income (loss) available to common shareholders, basic | $ | (6.54 | ) | $ | (11.91 | ) | $ | (0.42 | ) | $ | 2.07 | $ | 2.17 | |||||||
Net income (loss) available to common shareholders, assuming dilution | $ | (6.54 | ) | $ | (11.91 | ) | $ | (0.42 | ) | $ | 2.07 | $ | 2.14 | |||||||
Net income (loss) available to common shareholders, assuming dilution adjusted for goodwill impairment charge(7) | $ | (6.54 | ) | $ | (1.40 | ) | $ | (0.42 | ) | $ | 2.07 | $ | 2.14 | |||||||
Dividends declared | $ | 0.00 | $ | 0.13 | $ | 0.52 | $ | 0.68 | $ | 0.64 | ||||||||||
Common book value(2)(7) | $ | 5.75 | $ | 12.15 | $ | 24.09 | $ | 24.94 | $ | 18.80 | ||||||||||
Tangible common book value(3)(7) | $ | 5.23 | $ | 11.44 | $ | 12.23 | $ | 12.73 | $ | 14.87 | ||||||||||
Financial Condition Data: | ||||||||||||||||||||
Assets | $ | 2,406,040 | $ | 2,619,139 | $ | 2,944,671 | $ | 2,947,741 | $ | 1,772,654 | ||||||||||
Loans, net of unearned interest | $ | 1,745,378 | $ | 2,043,807 | $ | 2,223,390 | $ | 2,356,376 | $ | 1,539,629 | ||||||||||
Cash and investments | $ | 504,559 | $ | 378,785 | $ | 410,344 | $ | 314,615 | $ | 91,997 | ||||||||||
Federal funds sold | $ | 4,856 | $ | 3,793 | $ | 5,263 | $ | — | $ | 25,983 | ||||||||||
Deposits | $ | 1,976,854 | $ | 2,084,096 | $ | 2,184,147 | $ | 1,986,793 | $ | 1,332,505 | ||||||||||
FHLB advances and notes payable | $ | 158,653 | $ | 171,999 | $ | 229,349 | $ | 318,690 | $ | 177,571 | ||||||||||
Subordinated debentures | $ | 88,662 | $ | 88,662 | $ | 88,662 | $ | 88,662 | $ | 13,403 | ||||||||||
Federal funds purchased and repurchase agreements | $ | 19,413 | $ | 24,449 | $ | 35,302 | $ | 194,525 | $ | 42,165 | ||||||||||
Shareholders’ equity | $ | 143,897 | $ | 226,769 | $ | 381,231 | $ | 322,477 | $ | 184,471 | ||||||||||
Common shareholders’ equity(2)(7) | $ | 75,776 | $ | 160,034 | $ | 315,885 | $ | 322,477 | $ | 184,471 | ||||||||||
Tangible common shareholders’ equity(3)(7) | $ | 69,025 | $ | 150,699 | $ | 160,411 | $ | 164,650 | $ | 145,931 | ||||||||||
Tangible shareholders’ equity(4)(7) | $ | 137,146 | $ | 217,434 | $ | 225,757 | $ | 164,650 | $ | 145,931 | ||||||||||
Selected Ratios: | ||||||||||||||||||||
Interest rate spread | 3.79 | % | 3.19 | % | 3.48 | % | 3.83 | % | 4.32 | % | ||||||||||
Net interest margin(6) | 3.86 | % | 3.34 | % | 3.70 | % | 4.25 | % | 4.77 | % | ||||||||||
Total tangible equity to tangible assets(4)(5)(7) | 5.72 | % | 8.33 | % | 8.09 | % | 5.90 | % | 8.42 | % | ||||||||||
Tangible common equity to tangible assets(3)(5)(7) | 2.88 | % | 5.77 | % | 5.75 | % | 5.90 | % | 8.42 | % | ||||||||||
Return on average assets | (3.41 | )% | (5.59 | )% | (0.18 | )% | 0.98 | % | 1.28 | % | ||||||||||
Return on average equity | (38.56 | )% | (50.44 | )% | (1.64 | )% | 8.96 | % | 11.91 | % | ||||||||||
Return on average common equity(2)(7) | (55.35 | )% | (64.25 | )% | (1.65 | )% | 8.96 | % | 11.91 | % | ||||||||||
Return on average common tangible equity(3)(7) | (58.32 | )% | (96.77 | )% | (3.14 | )% | 15.41 | % | 15.25 | % | ||||||||||
Average equity to average assets | 8.85 | % | 11.09 | % | 11.24 | % | 10.91 | % | 10.78 | % | ||||||||||
Dividend payout ratio | N/M | N/M | N/M | 32.85 | % | 29.49 | % | |||||||||||||
Ratio of nonperforming assets to total assets assets | 8.56 | % | 5.07 | % | 2.61 | % | 1.25 | % | 0.29 | % | ||||||||||
Ratio of allowance for loan losses to nonperforming loans | 45.83 | % | 66.39 | % | 155.28 | % | 106.34 | % | 635.93 | % | ||||||||||
Ratio of allowance for loan losses to total loans, net of unearned income loans | 3.83 | % | 2.45 | % | 2.20 | % | 1.45 | % | 1.45 | % |
1 | Information for the 2007 fiscal year includes the operations of CVBG, with which the Company merged on May 18, 2007. |
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2 | Common shareholders’ equity is shareholders’ equity less preferred stock. | |
3 | Tangible common shareholders’ equity is shareholders’ equity less goodwill, other intangible assets and preferred stock. | |
4 | Tangible shareholders’ equity is shareholders’ equity less goodwill and other intangible assets. | |
5 | Tangible assets is total assets less goodwill and other intangible assets. | |
6 | Net interest margin is the net yield on interest earning assets and is the difference between the Fully Taxable Equivalent yield earned on interest-earning assets less the effective cost of supporting liabilities. | |
7 | Please refer to the “GAAP Reconciliation and Management Explanation of Non-GAAP Financial Measures” section following “Selected Financial Data” for more information, including a reconciliation of this non-GAAP financial measure. |
• | “Net income (loss) per share available to common shareholders assuming dilution adjusted for goodwill impairment charge” is defined as net income (loss) per share available to common shareholders reduced by goodwill impairment charge, net of tax. | |
• | “Common shareholders’ equity” is shareholders’ equity less preferred stock. | |
• | “Tangible assets” are total assets less goodwill and other intangible assets. | |
• | “Tangible shareholders’ equity” is shareholders’ equity less goodwill and other intangible assets. | |
• | “Tangible common book value per share” is defined as total equity reduced by recorded goodwill, other intangible assets and preferred stock divided by total common shares outstanding. This measure discloses changes from period-to-period in book value per share exclusive of changes in intangible assets and preferred stock. Goodwill, an intangible asset that is recorded in a purchase business combination, has the effect of increasing total book value while not increasing the tangible assets of a company. Companies utilizing purchase accounting in a business combination, as required by GAAP, must record goodwill related to such transactions. | |
• | “Tangible common shareholders’ equity” is shareholders’ equity less goodwill, other intangible assets and preferred stock. | |
• | “Return on average common equity” is defined as net income (loss) available to common shareholders’ for the period divided by average equity reduced by average preferred stock. | |
• | “Return on average common tangible equity” is defined as net income (loss) available to common shareholders’ for the period divided by average equity reduced by average goodwill, other intangible assets and preferred stock. |
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At and for the Fiscal Years Ended December 31, | ||||||||||||||||||||
2010 | 2009 | 2008 | 2007 | 2006 | ||||||||||||||||
Total shareholders’ equity | $ | 143,897 | $ | 226,769 | $ | 381,231 | $ | 322,477 | $ | 184,471 | ||||||||||
Less: Preferred stock | (68,121 | ) | (66,735 | ) | (65,346 | ) | — | — | ||||||||||||
Common shareholders’ equity | $ | 75,776 | $ | 160,034 | $ | 315,855 | $ | 322,477 | $ | 184,471 | ||||||||||
Total shareholders’ equity | $ | 143,897 | $ | 226,769 | $ | 381,231 | $ | 322,477 | $ | 184,471 | ||||||||||
Less: | ||||||||||||||||||||
Goodwill | — | — | (143,389 | ) | (143,140 | ) | (31,327 | ) | ||||||||||||
Core Deposit and other intangibles | (6,751 | ) | (9,335 | ) | (12,085 | ) | (14,687 | ) | (7,213 | ) | ||||||||||
Preferred stock | (68,121 | ) | (66,735 | ) | (65,346 | ) | — | — | ||||||||||||
Tangible common shareholders’ equity | $ | 69,025 | $ | 150,699 | $ | 160,411 | $ | 1 64,650 | $ | 145,931 | ||||||||||
Total shareholders’ equity | $ | 143,897 | $ | 226,769 | $ | 381,231 | $ | 322,477 | $ | 184,471 | ||||||||||
Less: | ||||||||||||||||||||
Goodwill | — | — | (143,389 | ) | (143,140 | ) | (31,327 | ) | ||||||||||||
Core Deposit and other intangibles | (6,751 | ) | (9,335 | ) | (12,085 | ) | (14,687 | ) | (7,213 | ) | ||||||||||
Tangible shareholders’ equity | $ | 137,146 | $ | 217,434 | $ | 225,757 | $ | 164,650 | $ | 145,931 | ||||||||||
Total assets | $ | 2,406,040 | $ | 2,619,139 | $ | 2,944,671 | $ | 2,947,741 | $ | 1,772,654 | ||||||||||
Less: | ||||||||||||||||||||
Goodwill | — | — | (143,389 | ) | (143,140 | ) | (31,327 | ) | ||||||||||||
Core Deposit and other intangibles | (6,751 | ) | (9,335 | ) | (12,085 | ) | (14,687 | ) | (7,213 | ) | ||||||||||
Tangible assets | $ | 2,399,289 | $ | 2,609,804 | $ | 2,789,197 | $ | 2,789,914 | $ | 1,734,114 | ||||||||||
Common book value per share | $ | 5.75 | $ | 12.15 | $ | 24.09 | $ | 24.94 | $ | 18.80 | ||||||||||
Effect of intangible assets | $ | (0.52 | ) | $ | (0.71 | ) | $ | (11.86 | ) | $ | (12.21 | ) | $ | (3.93 | ) | |||||
Tangible common book value per share | $ | 5.23 | $ | 11.44 | $ | 12.23 | $ | 12.73 | $ | 14.87 | ||||||||||
Return on average common equity | (55.35 | )% | (64.25 | )% | (1.65 | )% | 8.96 | % | 11.91 | % | ||||||||||
Effect of intangible assets | (2.97 | )% | (32.52 | )% | (1.49 | )% | 6.45 | % | 3.34 | % | ||||||||||
Return on average common tangible equity | (58.32 | )% | (96.77 | )% | (3.14 | )% | 15.41 | % | 15.25 | % |
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For the Fiscal Years Ended December 31, | ||||||||||||||||||||
2010 | 2009 | 2008 | 2007 | 2006 | ||||||||||||||||
Total non-interest expense | $ | 110,815 | $ | 229,587 | $ | 85,837 | $ | 69,252 | $ | 52,708 | ||||||||||
Goodwill impairment charge | — | (143,389 | ) | — | — | — | ||||||||||||||
Operating expenses | $ | 110,815 | $ | 86,198 | $ | 85,837 | $ | 69,252 | $ | 52,708 | ||||||||||
Net income (loss) available to common shareholders | $ | (85,696 | ) | $ | (155,676 | ) | $ | (5,452 | ) | $ | 24,374 | $ | 21,262 | |||||||
Goodwill impairment charge, net of tax of $5,975 | — | 137,414 | — | — | — | |||||||||||||||
Net operating income (loss) available to common shareholders | $ | (85,696 | ) | $ | (18,262 | ) | $ | (5,452 | ) | $ | 24,374 | $ | 21,262 | |||||||
Per Diluted Share: | ||||||||||||||||||||
Net income (loss) available to common shareholders | $ | (6.54 | ) | $ | (11.91 | ) | $ | (0.42 | ) | $ | 2.07 | $ | 2.14 | |||||||
Goodwill impairment charge, net of tax of $5,975 | — | 10.51 | — | — | — | |||||||||||||||
Net operating income (loss) | $ | (6.54 | ) | $ | (1.40 | ) | $ | (0.42 | ) | $ | 2.07 | $ | 2.14 | |||||||
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2010 | 2009 | 2008 | ||||||||||||||||||||||||||||||||||
Average | Average | Average | Average | Average | Average | |||||||||||||||||||||||||||||||
Balance | Interest | Rate | Balance | Interest | Rate | Balance | Interest | Rate | ||||||||||||||||||||||||||||
Interest-earning assets: | ||||||||||||||||||||||||||||||||||||
Loans(1)(4) | ||||||||||||||||||||||||||||||||||||
Real estate loans | $ | 1,517,937 | $ | 86,904 | 5.73 | % | $ | 1,719,026 | $ | 99,796 | 5.81 | % | $ | 1,890,209 | $ | 121,168 | 6.41 | % | ||||||||||||||||||
Commercial loans | 250,126 | 14,358 | 5.74 | % | 295,913 | 16,284 | 5.50 | % | 319,131 | 20,020 | 6.27 | % | ||||||||||||||||||||||||
Consumer and other loans-net(2) | 65,802 | 8,963 | 13.62 | % | 81,242 | 9,660 | 11.89 | % | 89,565 | 10,516 | 11.74 | % | ||||||||||||||||||||||||
Fees on loans | — | 3,563 | — | 3,532 | — | 3,979 | ||||||||||||||||||||||||||||||
Total loans (including fees) | $ | 1,833,865 | $ | 113,788 | 6.20 | % | $ | 2,096,181 | $ | 129,272 | 6.17 | % | $ | 2,298,905 | $ | 155,683 | 6.77 | % | ||||||||||||||||||
Investment securities(3) | ||||||||||||||||||||||||||||||||||||
Taxable | $ | 137,148 | $ | 4,937 | 3.60 | % | $ | 144,881 | $ | 7,035 | 4.86 | % | $ | 227,710 | $ | 12,770 | 5.61 | % | ||||||||||||||||||
Tax-exempt(4) | 30,799 | 1,909 | 6.20 | % | 31,660 | 1,938 | 6.12 | % | 32,743 | 1,995 | 6.09 | % | ||||||||||||||||||||||||
FHLB and other stock | 12,734 | 530 | 4.16 | % | 12,836 | 573 | 4.46 | % | 12,890 | 647 | 5.02 | % | ||||||||||||||||||||||||
Total investment securities | $ | 180,681 | $ | 7,376 | 4.08 | % | $ | 189,377 | $ | 9,546 | 5.04 | % | $ | 273,343 | $ | 15,412 | 5.64 | % | ||||||||||||||||||
Other short-term investments | 170,952 | 435 | 0.25 | % | 147,918 | 376 | 0.25 | % | 17,941 | 175 | 0.98 | % | ||||||||||||||||||||||||
Total interest- earning assets | $ | 2,185,498 | $ | 121,599 | 5.56 | % | $ | 2,433,476 | $ | 139,194 | 5.72 | % | $ | 2,590,189 | $ | 171,270 | 6.61 | % | ||||||||||||||||||
Noninterest-earning assets: | ||||||||||||||||||||||||||||||||||||
Cash and due from banks | $ | 42,743 | $ | 45,870 | $ | 51,181 | ||||||||||||||||||||||||||||||
Premises and equipment | 80,556 | 83,478 | 83,411 | |||||||||||||||||||||||||||||||||
Other, less allowance for loan losses | 202,649 | 219,831 | 231,499 | |||||||||||||||||||||||||||||||||
Total noninterest- earning assets | $ | 325,948 | $ | 349,179 | $ | 366,091 | ||||||||||||||||||||||||||||||
Total assets | $ | 2,511,446 | $ | 2,782,655 | $ | 2,956,280 | ||||||||||||||||||||||||||||||
1 | Average loan balances exclude nonaccrual loans. | |
2 | Installment loans are stated net of unearned income. | |
3 | The average balance of and the related yield associated with securities available for sale is based on the cost of such securities. | |
4 | Fully Taxable Equivalent (“FTE”) at the rate of 35%. The FTE basis adjusts for the tax benefits of income on certain tax-exempt loans and investments using the federal statutory rate of 35% for each period presented. The Company believes this measure to be the preferred industry measurement of net interest income and provides relevant comparison between taxable and non-taxable amounts. |
F-30
Table of Contents
2010 | 2009 | 2008 | ||||||||||||||||||||||||||||||||||
Average | Average | Average | Average | Average | Average | |||||||||||||||||||||||||||||||
Balance | Interest | Rate | Balance | Interest | Rate | Balance | Interest | Rate | ||||||||||||||||||||||||||||
Interest-bearing liabilities: | ||||||||||||||||||||||||||||||||||||
Deposits Savings, interest checking, and money market accounts | $ | 980,878 | $ | 9,924 | 1.01 | % | $ | 784,135 | $ | 10,078 | 1.29 | % | $ | 645,636 | $ | 9,588 | 1.49 | % | ||||||||||||||||||
Time deposits | 841,458 | 18,510 | 2.20 | % | 1,166,640 | 35,690 | 3.06 | % | 1,317,362 | 48,502 | 3.68 | % | ||||||||||||||||||||||||
Total deposits | $ | 1,822,336 | $ | 28,434 | 1.56 | % | $ | 1,950,775 | $ | 45,768 | 2.35 | % | $ | 1,962,998 | $ | 58,090 | 2.96 | % | ||||||||||||||||||
Securities sold under repurchase agreements and short-term borrowings | 22,338 | 22 | 0.10 | % | 28,049 | 29 | 0.10 | % | 106,309 | 2,111 | 1.99 | % | ||||||||||||||||||||||||
Subordinated debentures | 88,662 | 1,980 | 2.23 | % | 88,662 | 2,577 | 2.91 | % | 88,662 | 4,555 | 5.14 | % | ||||||||||||||||||||||||
FHLB advances and notes payable | 171,229 | 6,835 | 3.99 | % | 221,282 | 9,557 | 4.32 | % | 254,154 | 10,735 | 4.22 | % | ||||||||||||||||||||||||
Total interest-bearing liabilities | $ | 2,104,565 | $ | 37,271 | 1.77 | % | $ | 2,288,768 | $ | 57,931 | 2.53 | % | $ | 2,412,123 | $ | 75,491 | 3.13 | % | ||||||||||||||||||
Noninterest bearing liabilities: | ||||||||||||||||||||||||||||||||||||
Demand deposits | $ | 166,814 | $ | 162,765 | $ | 187,058 | ||||||||||||||||||||||||||||||
Other liabilities | 17,854 | 22,477 | 24,832 | |||||||||||||||||||||||||||||||||
Total non-interest- bearing liabilities | $ | 184,668 | $ | 185,242 | $ | 211,890 | ||||||||||||||||||||||||||||||
Shareholders’ equity | 222,213 | 308,645 | 332,267 | |||||||||||||||||||||||||||||||||
Total liabilities and shareholders’ equity | $ | 2,511,446 | $ | 2,782,655 | $ | 2,956,280 | ||||||||||||||||||||||||||||||
Net interest income | $ | 84,328 | $ | 81,263 | $ | 95,799 | ||||||||||||||||||||||||||||||
Margin analysis: | ||||||||||||||||||||||||||||||||||||
Interest rate spread | 3.79 | % | 3.19 | % | 3.48 | % | ||||||||||||||||||||||||||||||
Net yield on interest- earning assets (net interest margin) | 3.86 | % | 3.34 | % | 3.70 | % | ||||||||||||||||||||||||||||||
F-31
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2010 vs. 2009 | 2009 vs. 2008 | |||||||||||||||||||||||||||||||
Rate/ | Total | Rate/ | Total | |||||||||||||||||||||||||||||
Volume | Rate | Volume | Change | Volume | Rate | Volume | Change | |||||||||||||||||||||||||
Interest income: | ||||||||||||||||||||||||||||||||
Loans, net of unearned income | $ | (16,177 | ) | $ | 792 | $ | (99 | ) | $ | (15,484 | ) | $ | (13,729 | ) | $ | (13,909 | ) | $ | 1,227 | $ | (26,411 | ) | ||||||||||
Investment securities: | ||||||||||||||||||||||||||||||||
Taxable | (376 | ) | (1,826 | ) | 104 | (2,098 | ) | (4,645 | ) | (1,713 | ) | 623 | (5,735 | ) | ||||||||||||||||||
Tax-exempt | (53 | ) | 25 | 1 | (27 | ) | (66 | ) | 9 | — | (57 | ) | ||||||||||||||||||||
FHLB and other stock, at cost | (5 | ) | (38 | ) | — | (43 | ) | 13 | (88 | ) | 1 | (74 | ) | |||||||||||||||||||
Other short-term investments | 59 | — | — | 59 | 1,272 | (127 | ) | (944 | ) | 201 | ||||||||||||||||||||||
Total interest income | (16,552 | ) | (1,047 | ) | 6 | (17,593 | ) | (17,155 | ) | (15,828 | ) | 907 | (32,076 | ) | ||||||||||||||||||
Interest Expense: | ||||||||||||||||||||||||||||||||
Savings, interest checking, and money market accounts | 2,529 | (2,145 | ) | (539 | ) | (155 | ) | 2,128 | (1,347 | ) | (291 | ) | 490 | |||||||||||||||||||
Time deposits | (9,948 | ) | (10,027 | ) | 2,795 | (17,180 | ) | (5,549 | ) | (8,201 | ) | 938 | (12,812 | ) | ||||||||||||||||||
Short-term borrowings | (6 | ) | (1 | ) | — | (7 | ) | (1,671 | ) | (1,379 | ) | 968 | (2,082 | ) | ||||||||||||||||||
Subordinated debentures | — | (597 | ) | — | (597 | ) | — | (1,978 | ) | — | (1,978 | ) | ||||||||||||||||||||
Notes payable | (2,162 | ) | (724 | ) | 164 | (2,722 | ) | (1,389 | ) | 242 | (31 | ) | (1,178 | ) | ||||||||||||||||||
Total interest expense | (9,587 | ) | (13,494 | ) | 2,420 | (20,661 | ) | (6,481 | ) | (12,663 | ) | 1,584 | (17,560 | ) | ||||||||||||||||||
Net interest income | $ | (6,965 | ) | $ | 12,447 | $ | (2,414 | ) | $ | 3,068 | $ | (10,674 | ) | $ | (3,165 | ) | $ | (677 | ) | $ | (14,516 | ) | ||||||||||
F-32
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F-33
Table of Contents
F-34
Table of Contents
F-35
Table of Contents
F-36
Table of Contents
• | On December 28, 2005, CVBG issued $13,403 of subordinated debentures, as part of a privately placed pool of trust preferred securities. The securities, due in 2036, bear interest at a floating rate of 1.54% above the three-month LIBOR rate, reset quarterly, and are callable five years from the date of issuance without penalty. | ||
• | On July 31, 2001, CVBG issued $4,124 of subordinated debentures, as part of a privately placed pool of trust preferred securities. The securities, due in 2031, bear interest at a floating rate of 3.58% above the three-month LIBOR rate, reset quarterly, and are currently callable without penalty. |
F-37
Table of Contents
Minimum Amounts | ||||||||||||||||||||||||
to be Well | ||||||||||||||||||||||||
Minimum Required | Capitalized Under | |||||||||||||||||||||||
for Capital | Prompt Corrective | |||||||||||||||||||||||
Actual | Adequacy Purposes | Action Provisions | ||||||||||||||||||||||
Actual | Ratio (%) | Actual | Ratio (%) | Actual | Ratio (%) | |||||||||||||||||||
2010 | ||||||||||||||||||||||||
Total Capital (to Risk Weighted Assets) | ||||||||||||||||||||||||
Consolidated | $ | 239.7 | 13.2 | $ | 145.2 | 8.0 | $ | 181.6 | 10.0 | |||||||||||||||
Bank | 239.6 | 13.2 | 145.0 | 8.0 | 181.3 | 10.0 | ||||||||||||||||||
Tier 1 Capital (to Risk Weighted Assets) | ||||||||||||||||||||||||
Consolidated | $ | 216.5 | 11.9 | $ | 72.6 | 4.0 | $ | 108.9 | 6.0 | |||||||||||||||
Bank | 216.4 | 11.9 | 72.5 | 4.0 | 108.8 | 6.0 | ||||||||||||||||||
Tier 1 Capital (to Average Assets) | ||||||||||||||||||||||||
Consolidated | $ | 216.5 | 8.9 | $ | 97.6 | 4.0 | $ | 122.0 | 5.0 | |||||||||||||||
Bank | 216.4 | 8.9 | 97.5 | 4.0 | 121.8 | 5.0 | ||||||||||||||||||
2009 | ||||||||||||||||||||||||
Total Capital (to Risk Weighted Assets) | ||||||||||||||||||||||||
Consolidated | $ | 318.5 | 14.9 | $ | 171.0 | 8.0 | $ | 213.8 | 10.0 | |||||||||||||||
Bank | 317.4 | 14.9 | 170.7 | 8.0 | 213.4 | 10.0 |
F-38
Table of Contents
Minimum Amounts | ||||||||||||||||||||||||
to be Well | ||||||||||||||||||||||||
Minimum Required | Capitalized Under | |||||||||||||||||||||||
for Capital | Prompt Corrective | |||||||||||||||||||||||
Actual | Adequacy Purposes | Action Provisions | ||||||||||||||||||||||
Actual | Ratio (%) | Actual | Ratio (%) | Actual | Ratio (%) | |||||||||||||||||||
Tier 1 Capital (to Risk Weighted Assets) | ||||||||||||||||||||||||
Consolidated | $ | 291.5 | 13.6 | $ | 85.5 | 4.0 | $ | 128.3 | 6.0 | |||||||||||||||
Bank | 290.4 | 13.6 | 85.4 | 4.0 | 128.0 | 6.0 | ||||||||||||||||||
Tier 1 Capital (to Average Assets) | ||||||||||||||||||||||||
Consolidated | $ | 291.5 | 10.7 | $ | 108.6 | 4.0 | $ | 135.8 | 5.0 | |||||||||||||||
Bank | 290.4 | 10.7 | 108.6 | 4.0 | 135.7 | 5.0 |
Less than 1 | More than 5 | |||||||||||||||||||
Year | 1-3 Years | 3-5 Years | Years | Total | ||||||||||||||||
Commitments to make loans — fixed | $ | 3,827 | $ | — | $ | — | $ | — | $ | 3,827 | ||||||||||
Commitments to make loans — variable | 2,464 | — | — | — | 2,464 | |||||||||||||||
Unused lines of credit | 101,145 | 14,460 | 13,457 | 72,911 | 201,973 | |||||||||||||||
Letters of credit | 17,632 | 8,042 | — | — | 25,674 | |||||||||||||||
Total | $ | 125,068 | $ | 22,502 | $ | 13,457 | $ | 72,911 | $ | 233,938 | ||||||||||
F-39
Table of Contents
Less than 1 | More than 5 | |||||||||||||||||||
Year | 1-3 Years | 3-5 Years | Years | Total | ||||||||||||||||
Certificate of deposits | $ | 531,829 | $ | 192,743 | $ | 55,068 | $ | 3,446 | $ | 783,086 | ||||||||||
Repurchase agreements | 19,413 | — | — | — | 19,413 | |||||||||||||||
FHLB advances and notes payable | 15,288 | 65,566 | 30,605 | 47,194 | 158,653 | |||||||||||||||
Subordinated debentures | — | — | — | 88,662 | 88,662 | |||||||||||||||
Operating lease obligations | 1,243 | 2,294 | 1,226 | 734 | 5,497 | |||||||||||||||
Deferred compensation | 1,543 | — | 256 | 475 | 2,274 | |||||||||||||||
Purchase obligations | 1,611 | — | — | — | 1,611 | |||||||||||||||
Total | $ | 570,927 | $ | 260,603 | $ | 87,155 | $ | 140,511 | $ | 1,059,196 | ||||||||||
F-40
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F-41
Table of Contents
GREEN BANKSHARES, INC.
F-42
Table of Contents
March 15, 2011
F-43
Table of Contents
GREEN BANKSHARES, INC.
March 15, 2011
F-44
Table of Contents
CONSOLIDATED BALANCE SHEETS
December 31, 2010 and 2009
(Amounts in thousands, except share and per share data)
2010 | 2009 | |||||||
ASSETS | ||||||||
Cash and due from banks | $ | 289,358 | $ | 206,701 | ||||
Federal funds sold | 4,856 | 3,793 | ||||||
Cash and cash equivalents | 294,214 | 210,494 | ||||||
Interest earning deposits in other banks | — | 11,000 | ||||||
Securities available for sale | 202,002 | 147,724 | ||||||
Securities held to maturity (with a market value of $467 and $638) | 465 | 626 | ||||||
Loans held for sale | 1,299 | 1,533 | ||||||
Loans, net of unearned interest | 1,745,378 | 2,043,807 | ||||||
Allowance for loan losses | (66,830 | ) | (50,161 | ) | ||||
Other real estate owned and repossessed assets | 60,095 | 57,168 | ||||||
Premises and equipment, net | 78,794 | 81,818 | ||||||
FHLB and other stock, at cost | 12,734 | 12,734 | ||||||
Cash surrender value of life insurance | 31,479 | 30,277 | ||||||
Core deposit and other intangibles | 6,751 | 9,335 | ||||||
Deferred tax asset (net of valuation allowance of $43,455 and $0) | 2,177 | 13,600 | ||||||
Other assets | 37,482 | 49,184 | ||||||
Total assets | $ | 2,406,040 | $ | 2,619,139 | ||||
LIABILITIES AND SHAREHOLDERS’ EQUITY | ||||||||
Liabilities | ||||||||
Non interest-bearing deposits | $ | 152,752 | $ | 177,602 | ||||
Interest-bearing deposits | 1,822,703 | 1,899,910 | ||||||
Brokered deposits | 1,399 | 6,584 | ||||||
Total deposits | 1,976,854 | 2,084,096 | ||||||
Repurchase agreements | 19,413 | 24,449 | ||||||
FHLB advances and notes payable | 158,653 | 171,999 | ||||||
Subordinated debentures | 88,662 | 88,662 | ||||||
Accrued interest payable and other liabilities | 18,561 | 23,164 | ||||||
Total liabilities | $ | 2,262,143 | $ | 2,392,370 | ||||
Shareholders’ equity | ||||||||
Preferred stock: no par, 1,000,000 shares authorized, 72,278 shares outstanding | $ | 68,121 | $ | 66,735 | ||||
Common stock: $2 par, 20,000,000 shares authorized, 13,188,896 and 13,171,474 shares outstanding | 26,378 | 26,343 | ||||||
Common stock warrants | 6,934 | 6,934 | ||||||
Additional paid-in capital | 188,901 | 188,310 | ||||||
Retained earnings (deficit) | (147,436 | ) | (61,742 | ) | ||||
Accumulated other comprehensive income (loss) | 999 | 189 | ||||||
Total shareholders’ equity | 143,897 | 226,769 | ||||||
Total liabilities and shareholders’ equity | $ | 2,406,040 | $ | 2,619,139 | ||||
F-45
Table of Contents
CONSOLIDATED STATEMENTS OF INCOME
Years ended December 31, 2010, 2009 and 2008
(Amounts in thousands, except share and per share data)
2010 | 2009 | 2008 | ||||||||||
Interest income | ||||||||||||
Interest and fees on loans | $ | 113,721 | $ | 129,212 | $ | 155,627 | ||||||
Taxable securities | 4,938 | 7,035 | 12,770 | |||||||||
Nontaxable securities | 1,241 | 1,260 | 1,297 | |||||||||
FHLB and other stock | 530 | 573 | 647 | |||||||||
Federal funds sold and other | 434 | 376 | 175 | |||||||||
Total interest income | 120,864 | 138,456 | 170,516 | |||||||||
Interest expense | ||||||||||||
Deposits | 28,434 | 45,768 | 58,090 | |||||||||
Federal funds purchased and repurchase agreements | 22 | 29 | 2,111 | |||||||||
FHLB advances and notes payable | 6,835 | 9,557 | 10,735 | |||||||||
Subordinated debentures | 1,980 | 2,577 | 4,555 | |||||||||
Total interest expense | 37,271 | 57,931 | 75,491 | |||||||||
Net interest income | 83,593 | 80,525 | 95,025 | |||||||||
Provision for loan losses | 71,107 | 50,246 | 52,810 | |||||||||
Net interest income after provision for loan losses | 12,486 | 30,279 | 42,215 | |||||||||
Non-interest income | ||||||||||||
Service charges on deposit accounts | 24,179 | 23,738 | 23,176 | |||||||||
Other charges and fees | 1,791 | 1,999 | 2,192 | |||||||||
Trust and investment services income | 2,842 | 1,977 | 1,878 | |||||||||
Mortgage banking income | 703 | 383 | 804 | |||||||||
Other income | 3,122 | 3,042 | 2,903 | |||||||||
Securities gains (losses), net | ||||||||||||
Realized gains | — | 1,415 | 2,661 | |||||||||
Other-than-temporary impairment | (553 | ) | (1,678 | ) | — | |||||||
Less non-credit portion recognized in other comprehensive income | 460 | 702 | — | |||||||||
Total securities gains (loss), net | (93 | ) | 439 | 2,661 | ||||||||
Total non-interest income | 32,544 | 31,578 | 33,614 | |||||||||
Non-interest expense | ||||||||||||
Employee compensation | 31,990 | 30,611 | 33,615 | |||||||||
Employee benefits | 3,378 | 3,835 | 4,788 | |||||||||
Occupancy expense | 6,908 | 6,956 | 6,900 | |||||||||
Equipment expense | 2,846 | 3,092 | 3,555 | |||||||||
Computer hardware/software expense | 3,523 | 2,816 | 2,752 | |||||||||
Professional services | 2,777 | 2,108 | 2,069 | |||||||||
Advertising | 2,388 | 1,894 | 3,538 | |||||||||
OREO maintenance expense | 2,324 | 1,222 | 825 | |||||||||
Collection and repossession expense | 3,228 | 3,131 | 1,109 | |||||||||
Loss on OREO and repossessed assets | 29,895 | 8,156 | 7,028 | |||||||||
FDIC insurance | 4,155 | 4,960 | 1,631 | |||||||||
Core deposit and other intangibles amortization | 2,584 | 2,750 | 2,602 | |||||||||
Goodwill impairment | — | 143,389 | — | |||||||||
Other expenses | 14,819 | 14,667 | 15,425 | |||||||||
Total non-interest expense | 110,815 | 229,587 | 85,837 | |||||||||
Income (loss) before income taxes | (65,785 | ) | (167,730 | ) | (10,008 | ) | ||||||
Provision (benefit) for income taxes | 14,910 | (17,036 | ) | (4,648 | ) | |||||||
Net income (loss) | (80,695 | ) | (150,694 | ) | (5,360 | ) | ||||||
Preferred stock dividends and accretion of discount | 5,001 | 4,982 | 92 | |||||||||
Net income (loss) available to common shareholders | $ | (85,696 | ) | $ | (155,676 | ) | $ | (5,452 | ) | |||
Earnings (loss) per common share: | ||||||||||||
Basic | $ | (6.54 | ) | $ | (11.91 | ) | $ | (0.42 | ) | |||
Diluted | (6.54 | ) | (11.91 | ) | (0.42 | ) |
F-46
Table of Contents
CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS’ EQUITY
Years ended December 31, 2010, 2009 and 2008
(Amounts in thousands, except share and per share data)
Warrants | Accumulated | |||||||||||||||||||||||||||||||
For | Additional | Retained | Other | Total | ||||||||||||||||||||||||||||
Preferred | Common Stock | Common | Paid-in | Earnings | Comprehensive | Shareholders’ | ||||||||||||||||||||||||||
Stock | Shares | Amount | Stock | Capital | (Deficit) | Income (Loss) | Equity | |||||||||||||||||||||||||
Balance, January 1, 2008 | — | 12,931,015 | 25,862 | — | 185,170 | 109,938 | 1,507 | 322,477 | ||||||||||||||||||||||||
Preferred stock transactions: | ||||||||||||||||||||||||||||||||
Issuance of 72,278 shares of preferred stock | 72,278 | — | — | — | — | — | — | 72,278 | ||||||||||||||||||||||||
Discount associated with 635,504 common stock warrants issued with preferred stock | (6,934 | ) | — | — | 6,934 | — | — | — | — | |||||||||||||||||||||||
Accretion of preferred stock discount | 2 | — | — | — | — | (2 | ) | — | — | |||||||||||||||||||||||
Preferred stock dividends accrued | — | — | — | — | — | (90 | ) | — | (90 | ) | ||||||||||||||||||||||
Common stock transactions: | ||||||||||||||||||||||||||||||||
Exercise of shares under stock option plan | — | 9,759 | 19 | — | 201 | — | — | 220 | ||||||||||||||||||||||||
Common stock exchanged for exercised stock options | — | (7,991 | ) | (16 | ) | — | (93 | ) | — | — | (109 | ) | ||||||||||||||||||||
Issuance of restricted common shares | 60,907 | 122 | (122 | ) | — | — | — | |||||||||||||||||||||||||
Stock dividend | — | 118,997 | 238 | — | 1,822 | (2,060) - | — | — | ||||||||||||||||||||||||
Compensation expense: | ||||||||||||||||||||||||||||||||
Stock options | — | — | — | — | 456 | — | 456 | |||||||||||||||||||||||||
Restricted stock | — | — | — | — | 303 | — | 303 | |||||||||||||||||||||||||
Stock option tax benefit | — | — | — | — | 5 | — | — | 5 | ||||||||||||||||||||||||
Dividends paid ($.52 per share) | — | — | — | — | — | (6,779 | ) | — | (6,779 | ) | ||||||||||||||||||||||
Comprehensive loss: | ||||||||||||||||||||||||||||||||
Net loss | — | — | — | — | — | (5,360 | ) | — | (5,360 | ) | ||||||||||||||||||||||
Change in unrealized losses, net of reclassification and taxes | — | — | — | — | — | — | (2,170 | ) | (2,170 | ) | ||||||||||||||||||||||
Total comprehensive loss | (7,530 | ) | ||||||||||||||||||||||||||||||
Balance, December 31, 2008 | 65,346 | 13,112,687 | 26,225 | 6,934 | 187,742 | 95,647 | (663 | ) | 381,231 | |||||||||||||||||||||||
Preferred stock transactions: | ||||||||||||||||||||||||||||||||
Accretion of preferred stock discount | 1,389 | — | — | — | — | (1,389 | ) | — | — | |||||||||||||||||||||||
Preferred stock dividends | — | — | — | — | — | (3,593 | ) | — | (3,593 | ) | ||||||||||||||||||||||
Common stock transactions: | ||||||||||||||||||||||||||||||||
Issuance of restricted common shares | — | 58,787 | 118 | — | (118 | ) | — | — | — | |||||||||||||||||||||||
Compensation expense: | ||||||||||||||||||||||||||||||||
Stock options | — | — | — | — | 387 | — | — | 387 | ||||||||||||||||||||||||
Restricted stock | — | — | — | — | 299 | — | — | 299 | ||||||||||||||||||||||||
Dividends paid ($.13 per share) | — | — | — | — | — | (1,713 | ) | — | (1,713 | ) | ||||||||||||||||||||||
Comprehensive loss: | ||||||||||||||||||||||||||||||||
Net loss | — | — | — | — | — | (150,694 | ) | — | (150,694 | ) | ||||||||||||||||||||||
Change in unrealized gains, net of reclassification and taxes | — | — | — | — | — | — | 852 | 852 | ||||||||||||||||||||||||
Total comprehensive loss | (149,842 | ) | ||||||||||||||||||||||||||||||
Balance, December 31, 2009 | $ | 66,735 | 13,171,474 | $ | 26,343 | $ | 6,934 | $ | 188,310 | $ | (61,742 | ) | $ | 189 | $ | 226,769 | ||||||||||||||||
Preferred stock transactions: | ||||||||||||||||||||||||||||||||
Accretion of preferred stock discount | 1,386 | — | — | — | — | (1,386 | ) | — | — | |||||||||||||||||||||||
Preferred stock dividends | — | — | — | — | — | (3,613 | ) | — | (3,613 | ) | ||||||||||||||||||||||
Common stock transactions: | ||||||||||||||||||||||||||||||||
Issuance of restricted common shares | — | 17,422 | 35 | — | (35 | ) | — | — | — | |||||||||||||||||||||||
Compensation expense: | ||||||||||||||||||||||||||||||||
Stock options | — | — | — | — | 295 | — | — | 295 | ||||||||||||||||||||||||
Restricted stock | — | — | — | — | 331 | — | — | 331 | ||||||||||||||||||||||||
Comprehensive loss: | ||||||||||||||||||||||||||||||||
Net loss | — | — | — | — | — | (80,695 | ) | — | (80,695 | ) | ||||||||||||||||||||||
Change in unrealized gains, net of reclassification and taxes | — | — | — | — | — | — | 810 | 810 | ||||||||||||||||||||||||
Total comprehensive loss | (79,885 | ) | ||||||||||||||||||||||||||||||
Balance, December 31, 2010 | $ | 68,121 | 13,188,896 | $ | 26,378 | $ | 6,934 | $ | 188,901 | $ | (147,436 | ) | $ | 999 | $ | 143,897 | ||||||||||||||||
F-47
Table of Contents
CONSOLIDATED STATEMENTS OF CASH FLOWS
Years ended December 31, 2010, 2009 and 2008
(Amounts in thousands)
2010 | 2009 | 2008 | ||||||||||
Cash flows from operating activities | ||||||||||||
Net loss | $ | (80,695 | ) | $ | (150,694 | ) | $ | (5,360 | ) | |||
Adjustments to reconcile net income (loss) to net cash provided by operating activities | ||||||||||||
Provision for loan losses | 71,107 | 50,246 | 52,810 | |||||||||
Impairment of goodwill | — | 143,389 | — | |||||||||
Depreciation and amortization | 7,152 | 7,117 | 7,030 | |||||||||
Security amortization and accretion, net | 538 | 73 | (983 | ) | ||||||||
Write down of investments and other securities for impairment | 93 | 1,272 | 174 | |||||||||
(Gain) loss on sale of securities | — | (1,415 | ) | (2,661 | ) | |||||||
FHLB stock dividends | — | — | (464 | ) | ||||||||
Net gain on sale of mortgage loans | (653 | ) | (264 | ) | (573 | ) | ||||||
Originations of mortgage loans held for sale | (46,994 | ) | (43,879 | ) | (49,501 | ) | ||||||
Proceeds from sales of mortgage loans | 47,881 | 43,050 | 51,962 | |||||||||
Increase in cash surrender value of life insurance | (1,202 | ) | (1,125 | ) | (1,073 | ) | ||||||
Gain from settlement of life insurance | — | (305 | ) | — | ||||||||
Net (gains) losses from sales of fixed assets | (1 | ) | (85 | ) | 665 | |||||||
Stock-based compensation expense | 626 | 686 | 759 | |||||||||
Net loss on OREO and repossessed assets | 29,895 | 8,156 | 7,028 | |||||||||
Deferred tax (benefit) | 26,739 | (1,654 | ) | (4,374 | ) | |||||||
Net changes: | ||||||||||||
Other assets | (4,139 | ) | (21,375 | ) | 78 | |||||||
Accrued interest payable and other liabilities | (5,505 | ) | (3,177 | ) | (10,875 | ) | ||||||
Net cash provided by operating activities | 44,842 | 30,016 | 44,642 | |||||||||
Cash flows from investing activities | ||||||||||||
Net change in interest-earning deposits with banks | 11,000 | (11,000 | ) | — | ||||||||
Purchase of securities available for sale | (171,820 | ) | (92,100 | ) | (180,626 | ) | ||||||
Proceeds from sale of securities available for sale | — | 36,266 | 123,701 | |||||||||
Proceeds from maturities of securities available for sale | 118,246 | 113,440 | 88,711 | |||||||||
Proceeds from maturities of securities held to maturity | 160 | 30 | 645 | |||||||||
Purchase of FHLB stock | — | — | (417 | ) | ||||||||
Net change in loans | 195,847 | 99,111 | 27,754 | |||||||||
Proceeds from settlement of life insurance | — | 691 | — | |||||||||
Proceeds from sale of other real estate | 16,136 | 11,930 | 20,654 | |||||||||
Improvements to other real estate | (813 | ) | (307 | ) | (1,071 | ) | ||||||
Proceeds from sale of fixed assets | 8 | 800 | 58 | |||||||||
Premises and equipment expenditures | (1,551 | ) | (3,542 | ) | (5,814 | ) | ||||||
Net cash provided by investing activities | 167,213 | 155,319 | 73,595 | |||||||||
Cash flows from financing activities | ||||||||||||
Net change in core deposits | (102,057 | ) | 270,162 | 48,589 | ||||||||
Net change in brokered deposits | (5,185 | ) | (370,213 | ) | 148,765 | |||||||
Net change in federal funds purchased and repurchase agreements | (5,036 | ) | (10,853 | ) | (159,223 | ) | ||||||
Tax benefit resulting from stock options | — | — | 5 | |||||||||
Proceeds from FHLB advances and notes payable | — | — | 20,916 | |||||||||
Repayment of FHLB advances and notes payable | (13,346 | ) | (57,350 | ) | (110,258 | ) | ||||||
Preferred stock dividends paid | (2,711 | ) | (3,232 | ) | — | |||||||
Common stock dividends paid | — | (1,713 | ) | (6,779 | ) | |||||||
Proceeds from issuance of preferred stock and common stock warrants | — | — | 72,278 | |||||||||
Proceeds from issuance of common stock | — | — | 111 | |||||||||
Net cash provided by (used in) financing activities | (128,335 | ) | (173,199 | ) | 14,404 | |||||||
Net change in cash and cash equivalents | 83,720 | 12,136 | 132,641 | |||||||||
Cash and cash equivalents, beginning of year | 210,494 | 198,358 | 65,717 | |||||||||
Cash and cash equivalents, end of year | $ | 294,214 | $ | 210,494 | $ | 198,358 | ||||||
Supplemental disclosures — cash and noncash | ||||||||||||
Interest paid | $ | 41,875 | $ | 62,198 | $ | 77,761 | ||||||
Income taxes paid net of refunds | (148 | ) | 1,675 | 5,674 | ||||||||
Loans converted to other real estate | 54,613 | 75,545 | 37,991 | |||||||||
Unrealized gain (loss) on available for sale securities, net of tax | 810 | 852 | (2,170 | ) |
F-48
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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Amounts in thousands, except share and per share data)
December 31, 2010, 2009 and 2008
F-49
Table of Contents
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Amounts in thousands, except share and per share data)
December 31, 2010, 2009 and 2008
F-50
Table of Contents
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Amounts in thousands, except share and per share data)
December 31, 2010, 2009 and 2008
F-51
Table of Contents
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Amounts in thousands, except share and per share data)
December 31, 2010, 2009 and 2008
F-52
Table of Contents
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Amounts in thousands, except share and per share data)
December 31, 2010, 2009 and 2008
F-53
Table of Contents
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Amounts in thousands, except share and per share data)
December 31, 2010, 2009 and 2008
Gross | Gross | |||||||||||||||
Amortized | Unrealized | Unrealized | Fair | |||||||||||||
Cost | Gains | Losses | Value | |||||||||||||
Available for Sale | ||||||||||||||||
2010 | ||||||||||||||||
U.S. government agencies | $ | 84,106 | $ | 115 | $ | (922 | ) | $ | 83,299 | |||||||
States and political subdivisions | 31,192 | 705 | (396 | ) | 31,501 | |||||||||||
Collateralized mortgage obligations | 66,043 | 1,901 | (369 | ) | 67,575 | |||||||||||
Mortgage-backed securities | 17,168 | 815 | (19 | ) | 17,964 | |||||||||||
Trust preferred securities | 1,850 | — | (187 | ) | 1,663 | |||||||||||
$ | 200,359 | $ | 3,536 | $ | (1,893 | ) | $ | 202,002 | ||||||||
2009 | ||||||||||||||||
U.S. government agencies | $ | 52,937 | $ | 99 | $ | (988 | ) | $ | 52,048 | |||||||
States and political subdivisions | 31,764 | 877 | (449 | ) | 32,192 | |||||||||||
Collateralized mortgage obligations | 44,018 | 1,281 | (622 | ) | 44,677 | |||||||||||
Mortgage-backed securities | 16,607 | 291 | (6 | ) | 16,892 | |||||||||||
Trust preferred securities | 2,088 | — | (173 | ) | 1,915 | |||||||||||
$ | 147,414 | $ | 2,548 | $ | (2,238 | ) | $ | 147,724 | ||||||||
Held to Maturity | ||||||||||||||||
2010 | ||||||||||||||||
States and political subdivisions | $ | 215 | $ | 1 | $ | — | $ | 216 | ||||||||
Other securities | 250 | 1 | — | 251 | ||||||||||||
$ | 465 | $ | 2 | $ | — | $ | 467 | |||||||||
2009 | ||||||||||||||||
States and political subdivisions | $ | 251 | $ | 4 | $ | — | $ | 255 | ||||||||
Other securities | 375 | 8 | — | 383 | ||||||||||||
$ | 626 | $ | 12 | $ | — | $ | 638 | |||||||||
F-54
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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Amounts in thousands, except share and per share data)
December 31, 2010, 2009 and 2008
Available for Sale | Held to Maturity | |||||||||||
Fair | Carrying | Fair | ||||||||||
Value | Amount | Value | ||||||||||
Due in one year or less | $ | 979 | $ | 465 | $ | 467 | ||||||
Due after one year through five years | 4,226 | — | — | |||||||||
Due after five years through ten years | 61,208 | — | — | |||||||||
Due after ten years | 50,050 | — | — | |||||||||
Collateralized mortgage obligations | 67,575 | — | — | |||||||||
Mortgage-backed securities | 17,964 | — | — | |||||||||
Total maturities | $ | 202,002 | $ | 465 | $ | 467 | ||||||
Less than 12 months | 12 months or more | Total | ||||||||||||||||||||||
Fair | Unrealized | Fair | Unrealized | Fair | Unrealized | |||||||||||||||||||
Value | Loss | Value | Loss | Value | Loss | |||||||||||||||||||
2010 | ||||||||||||||||||||||||
U. S. government agencies | $ | 65,178 | $ | (922 | ) | $ | — | $ | — | $ | 65,178 | $ | (922 | ) | ||||||||||
States and political subdivisions | 2,488 | (114 | ) | 1,659 | (282 | ) | 4,147 | (396 | ) | |||||||||||||||
Collateralized mortgage obligations | 14,666 | (266 | ) | 2,699 | (104 | ) | 17,365 | (370 | ) | |||||||||||||||
Mortgage-backed securities | 2,821 | (17 | ) | 8 | (2 | ) | 2,829 | (19 | ) | |||||||||||||||
Trust preferred securities | — | — | 1,663 | (186 | ) | 1,663 | (186 | ) | ||||||||||||||||
Total temporarily impaired | $ | 85,153 | $ | (1,319 | ) | $ | 6,029 | $ | (574 | ) | $ | 91,182 | $ | (1,893 | ) | |||||||||
2009 | ||||||||||||||||||||||||
U. S. government agencies | $ | 40,959 | $ | (988 | ) | $ | — | $ | — | $ | 40,959 | $ | (988 | ) | ||||||||||
States and political subdivisions | 2,463 | (24 | ) | 3,075 | (425 | ) | 5,538 | (449 | ) | |||||||||||||||
Collateralized mortgage obligations | 4,997 | (32 | ) | 3,222 | (590 | ) | 8,219 | (622 | ) | |||||||||||||||
Mortgage-backed securities | 2,028 | (5 | ) | 11 | (1 | ) | 2,039 | (6 | ) | |||||||||||||||
Trust preferred securities | 1,783 | (122 | ) | 132 | (51 | ) | 1,915 | (173 | ) | |||||||||||||||
Total temporarily impaired | $ | 52,230 | $ | (1,171 | ) | $ | 6,440 | $ | (1,067 | ) | $ | 58,670 | $ | (2,238 | ) | |||||||||
F-55
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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Amounts in thousands, except share and per share data)
December 31, 2010, 2009 and 2008
F-56
Table of Contents
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Amounts in thousands, except share and per share data)
December 31, 2010, 2009 and 2008
Present | ||||||||||||||||||||||||
Current | Value | |||||||||||||||||||||||
Credit | Book | Fair | Unrealized | Discounted | ||||||||||||||||||||
Description | Cusip# | Rating | Value | Value | Loss | Cash Flow | ||||||||||||||||||
Collateralized mortgage obligations | ||||||||||||||||||||||||
Wells Fargo — 2007 - 4 A21 | 94985RAW2 | Caa2 | $ | 2,802 | $ | 2,699 | (103 | ) | $ | 2,887 | ||||||||||||||
Trust preferred securities | ||||||||||||||||||||||||
West Tennessee Bancshares, Inc. | 956192AA6 | N/A | 675 | 638 | (37 | ) | 675 |
December 31, 2010 | December 31, 2009 | |||||||
Beginning balance of credit losses at January 1, 2010 and 2009 | $ | 976 | $ | — | ||||
Other-than-temporary impairment credit losses | 93 | 976 | ||||||
Ending balance of cumulative credit losses recognized in earnings | $ | 1,069 | $ | 976 | ||||
2010 | 2009 | 2008 | ||||||||||
Commercial real estate | $ | 1,080,805 | $ | 1,306,398 | $ | 1,430,225 | ||||||
Residential real estate | 378,783 | 392,365 | 397,922 | |||||||||
Commercial | 222,927 | 274,346 | 315,099 | |||||||||
Consumer | 75,498 | 83,382 | 89,733 | |||||||||
Other | 1,913 | 2,117 | 4,656 | |||||||||
Unearned interest | (14,548 | ) | (14,801 | ) | (14,245 | ) | ||||||
Loans, net of unearned interest | $ | 1,745,378 | $ | 2,043,807 | $ | 2,223,390 | ||||||
Allowance for loan losses | $ | (66,830 | ) | $ | (50,161 | ) | $ | (48,811 | ) | |||
F-57
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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Amounts in thousands, except share and per share data)
December 31, 2010, 2009 and 2008
2010 | 2009 | 2008 | ||||||||||
Beginning balance | $ | 50,161 | $ | 48,811 | $ | 34,111 | ||||||
Add (deduct): | ||||||||||||
Provision for loan losses | 71,107 | 50,246 | 52,810 | |||||||||
Loans charged off | (57,818 | ) | (54,890 | ) | (41,269 | ) | ||||||
Recoveries of loans charged off | 3,380 | 5,994 | 3,159 | |||||||||
Balance, end of year | $ | 66,830 | $ | 50,161 | $ | 48,811 | ||||||
Commercial | Residential | |||||||||||||||||||||||
Real Estate | Real Estate | Commercial | Consumer | Other | Total | |||||||||||||||||||
2010 | ||||||||||||||||||||||||
Allowance for loan losses: | ||||||||||||||||||||||||
Beginning balance | $ | 36,527 | $ | 4,350 | $ | 5,840 | $ | 3,437 | $ | 7 | $ | 50,161 | ||||||||||||
Add (deduct): | ||||||||||||||||||||||||
Charge-offs | (48,617 | ) | (3,102 | ) | (3,210 | ) | (2,889 | ) | — | (57,818 | ) | |||||||||||||
Recoveries | 1,301 | 287 | 909 | 882 | 1 | 3,380 | ||||||||||||||||||
Provision | 64,992 | 2,896 | 1,541 | 1,678 | — | 71,107 | ||||||||||||||||||
Ending balance | $ | 54,203 | $ | 4,431 | $ | 5,080 | $ | 3,108 | $ | 8 | $ | 66,830 | ||||||||||||
Allowance for loan losses: | ||||||||||||||||||||||||
Allocation for loans individually evaluated for impairment | $ | 22,939 | $ | 1,027 | $ | 722 | $ | 146 | $ | — | $ | 24,834 | ||||||||||||
Allocation for loans collectively evaluated for impairment | 31,264 | 3,404 | 4,358 | 2,962 | 8 | 41,996 | ||||||||||||||||||
Ending Balance | $ | 54,203 | $ | 4,431 | $ | 5,080 | $ | 3,108 | $ | 8 | $ | 66,830 | ||||||||||||
Loans: | ||||||||||||||||||||||||
Ending balance: | ||||||||||||||||||||||||
individually evaluated for impairment | 170,175 | 8,697 | 6,149 | 970 | — | 185,991 | ||||||||||||||||||
Ending balance: | ||||||||||||||||||||||||
collectively evaluated for impairment | 910,630 | 363,506 | 216,778 | 66,470 | 1,913 | 1,559,387 | ||||||||||||||||||
2010 | 2009 | 2008 | ||||||||||
Loans with no allowance allocated | $ | 81,981 | $ | 89,292 | $ | 29,602 | ||||||
Loans with allowance allocated | $ | 104,010 | $ | 25,946 | $ | 17,613 | ||||||
Amount of allowance allocated | 24,834 | 5,737 | 2,651 | |||||||||
Average impaired loan balance during the year | 212,167 | 125,280 | 48,347 | |||||||||
Interest income not recognized during impairment | 1,105 | 558 | 619 |
F-58
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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Amounts in thousands, except share and per share data)
December 31, 2010, 2009 and 2008
Unpaid | Average | Interest | ||||||||||||||||||
Recorded | Principal | Related | Recorded | Income | ||||||||||||||||
Investment | Balance | Allowance | Investment | Recognized | ||||||||||||||||
Commercial Real Estate: | ||||||||||||||||||||
Speculative 1-4 Family | $ | 72,138 | $ | 98,141 | $ | 11,830 | $ | 85,487 | $ | 2,292 | ||||||||||
Construction | 56,758 | 69,355 | 8,366 | 63,710 | 2,565 | |||||||||||||||
Owner Occupied | 13,590 | 14,513 | 851 | 14,119 | 644 | |||||||||||||||
Non-owner Occupied | 25,824 | 27,561 | 1,823 | 28,786 | 1,375 | |||||||||||||||
Other | 1,865 | 2,090 | 69 | 2,278 | 66 | |||||||||||||||
Residential Real Estate: | ||||||||||||||||||||
HELOC | 2,807 | 2,894 | 346 | 2,603 | 88 | |||||||||||||||
Mortgage-Prime | 4,539 | 4,722 | 590 | 4,661 | 209 | |||||||||||||||
Mortgage-Subprime | 370 | 370 | 57 | 370 | — | |||||||||||||||
Other | 981 | 1,285 | 34 | 2,419 | 47 | |||||||||||||||
Commercial | 6,149 | 7,510 | 722 | 6,729 | 171 | |||||||||||||||
Consumer: | ||||||||||||||||||||
Prime | 217 | 228 | 32 | 252 | 13 | |||||||||||||||
Subprime | 228 | 228 | 35 | 228 | — | |||||||||||||||
Auto-Subprime | 525 | 525 | 79 | 525 | — | |||||||||||||||
Other | — | — | — | — | — | |||||||||||||||
Total | $ | 185,991 | $ | 229,422 | $ | 24,834 | $ | 212,167 | $ | 7,470 | ||||||||||
F-59
Table of Contents
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Amounts in thousands, except share and per share data)
December 31, 2010, 2009 and 2008
F-60
Table of Contents
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Amounts in thousands, except share and per share data)
December 31, 2010, 2009 and 2008
Speculative 1-4 | Owner | Non-Owner | ||||||||||||||||||
Family | Construction | Occupied | Occupied | Other | ||||||||||||||||
Commercial Real Estate Credit Exposure | ||||||||||||||||||||
Prime | $ | — | $ | — | $ | — | $ | — | $ | — | ||||||||||
Desirable | — | 1,573 | 968 | 177 | — | |||||||||||||||
Satisfactory tier I | 2,836 | 978 | 38,623 | 56,221 | 4,246 | |||||||||||||||
Satisfactory tier II | 14,010 | 34,239 | 102,383 | 130,850 | 17,999 | |||||||||||||||
Acceptable with care | 69,902 | 47,093 | 62,198 | 159,216 | 45,597 | |||||||||||||||
Management Watch | 27,383 | 15,259 | 5,298 | 26,415 | 2,965 | |||||||||||||||
Substandard | 91,845 | 61,388 | 16,289 | 38,037 | 6,817 | |||||||||||||||
Loss | — | — | — | — | — | |||||||||||||||
Total | 205,976 | 160,530 | 225,759 | 410,916 | 77,624 | |||||||||||||||
Commercial | ||||
Commercial Credit Exposure | ||||
Prime | $ | 1,236 | ||
Desirable | 7,951 | |||
Satisfactory tier I | 33,859 | |||
Satisfactory tier II | 91,505 | |||
Acceptable with care | 72,286 | |||
Management Watch | 8,511 | |||
Substandard | 7,579 | |||
Loss | — | |||
Total | 222,927 | |||
Mortgage – | ||||||||||||||||
HELOC | Mortgage | Subprime | Other | |||||||||||||
Consumer Real Estate Credit Exposure | ||||||||||||||||
Pass | $ | 188,086 | $ | 131,845 | $ | 11,692 | $ | 29,833 | ||||||||
Management Watch | 1,017 | 317 | — | — | ||||||||||||
Substandard | 2,807 | 5,117 | 50 | 1,529 | ||||||||||||
Total | 191,910 | 137,279 | 11,742 | 31,362 | ||||||||||||
F-61
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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Amounts in thousands, except share and per share data)
December 31, 2010, 2009 and 2008
Consumer – | Consumer Auto | |||||||||||
Consumer – Prime | Subprime | – Subprime | ||||||||||
Consumer Credit Exposure | ||||||||||||
Pass | $ | 35,029 | $ | 13,093 | $ | 18,588 | ||||||
Management Watch | — | — | — | |||||||||
Substandard | 217 | 39 | 474 | |||||||||
Total | 35,246 | 13,132 | 19,062 | |||||||||
60-89 | ||||||||||||||||||||||||||||
30-59 | Days | Greater | Recorded | |||||||||||||||||||||||||
Days | Past | Than | Total | Total | Investment > 90 | |||||||||||||||||||||||
Past Due | Due | 90 Days | Past Due | Current | Loans | Days and Accruing | ||||||||||||||||||||||
Commercial real estate: | ||||||||||||||||||||||||||||
Speculative 1-4 Family | $ | 22,267 | $ | 1,777 | $ | 30,802 | $ | 54,846 | $ | 151,130 | $ | 205,976 | $ | 1,758 | ||||||||||||||
Construction | 14,541 | — | 26,915 | 41,456 | 119,074 | 160,530 | — | |||||||||||||||||||||
Owner Occupied | 8,114 | 1,633 | 4,137 | 13,884 | 211,875 | 225,759 | — | |||||||||||||||||||||
Non-owner Occupied | 4,014 | 5,961 | 8,814 | 18,789 | 392,127 | 410,916 | 170 | |||||||||||||||||||||
Other | 116 | 865 | 1,491 | 2,472 | 75,152 | 77,624 | 18 | |||||||||||||||||||||
Residential real estate: | ||||||||||||||||||||||||||||
HELOC | 747 | 358 | 644 | 1,749 | 190,161 | 191,910 | — | |||||||||||||||||||||
Mortgage-Prime | 1,359 | 915 | 1,779 | 4,053 | 133,226 | 137,279 | 8 | |||||||||||||||||||||
Mortgage-Subprime | 100 | 51 | 98 | 249 | 11,493 | 11,742 | — | |||||||||||||||||||||
Other | 403 | 176 | 566 | 1,145 | 30,217 | 31,362 | 19 | |||||||||||||||||||||
Commercial | 2,422 | 593 | 3,922 | 6,937 | 215,990 | 222,927 | 92 |
F-62
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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Amounts in thousands, except share and per share data)
December 31, 2010, 2009 and 2008
60-89 | ||||||||||||||||||||||||||||
30-59 | Days | Greater | Recorded | |||||||||||||||||||||||||
Days | Past | Than | Total | Total | Investment > 90 | |||||||||||||||||||||||
Past Due | Due | 90 Days | Past Due | Current | Loans | Days and Accruing | ||||||||||||||||||||||
Consumer: | ||||||||||||||||||||||||||||
Prime | 315 | 86 | 108 | 509 | 34,737 | 35,246 | 29 | |||||||||||||||||||||
Subprime | 155 | 64 | 6 | 225 | 12,907 | 13,132 | — | |||||||||||||||||||||
Auto-Subprime | 476 | 166 | 101 | 743 | 18,319 | 19,062 | 18 | |||||||||||||||||||||
Other | 73 | — | — | 73 | 1,840 | 1,913 | — | |||||||||||||||||||||
Total | 55,102 | 12,645 | 79,383 | 147,130 | 1,598,248 | 1,745,378 | 2,112 | |||||||||||||||||||||
F-63
Table of Contents
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Amounts in thousands, except share and per share data)
December 31, 2010, 2009 and 2008
Commercial real estate: | ||||
Speculative 1-4 Family | $ | 63,298 | ||
Construction | 41,789 | |||
Owner Occupied | 5,511 | |||
Non-owner Occupied | 18,772 | |||
Other | 1,865 | |||
Residential real estate: | ||||
HELOC | 1,668 | |||
Mortgage-Prime | 3,350 | |||
Mortgage-Subprime | 254 | |||
Other | 957 | |||
Commercial | 5,813 | |||
Consumer: | ||||
Prime | 130 | |||
Subprime | 107 | |||
Auto-Subprime | 193 | |||
Other | — | |||
Total | 143,707 | |||
2010 | 2009 | |||||||
Loans past due 90 days still on accrual | $ | 2,112 | $ | 147 | ||||
Nonaccrual loans | 143,707 | 75,411 | ||||||
Total | $ | 145,819 | $ | 75,558 | ||||
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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Amounts in thousands, except share and per share data)
December 31, 2010, 2009 and 2008
F-65
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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Amounts in thousands, except share and per share data)
December 31, 2010, 2009 and 2008
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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Amounts in thousands, except share and per share data)
December 31, 2010, 2009 and 2008
Total | ||||||||||||||||||||
Fair Value | Carrying | Assets/Liabilities | ||||||||||||||||||
Measurement Using | Amount in | Measured | ||||||||||||||||||
Description | Level 1 | Level 2 | Level 3 | Balance Sheet | at Fair Value | |||||||||||||||
2010 | ||||||||||||||||||||
Securities available for sale | ||||||||||||||||||||
U.S. government agencies | $ | — | $ | 83,299 | $ | — | $ | 83,299 | $ | 83,299 | ||||||||||
States and political subdivisions | — | 31,501 | — | 31,501 | 31,501 | |||||||||||||||
Collateralized mortgage obligations | — | 67,575 | — | 67,575 | 67,575 | |||||||||||||||
Mortgage-backed securities | — | 17,964 | — | 17,964 | 17,964 | |||||||||||||||
Trust preferred securities | — | 1,025 | 638 | 1,663 | 1,663 | |||||||||||||||
2009 | ||||||||||||||||||||
Securities available for sale | ||||||||||||||||||||
U.S. government agencies | $ | — | $ | 52,048 | $ | — | $ | 52,048 | $ | 52,048 | ||||||||||
States and political subdivisions | — | 32,192 | — | 32,192 | 32,192 | |||||||||||||||
Collateralized mortgage obligations | — | 44,677 | — | 44,677 | 44,677 | |||||||||||||||
Mortgage-backed securities | — | 16,892 | — | 16,892 | 16,892 | |||||||||||||||
Trust preferred securities | — | 1,277 | 638 | 1,915 | 1,915 |
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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Amounts in thousands, except share and per share data)
December 31, 2010, 2009 and 2008
2010 | 2009 | |||||||
Beginning balance | $ | 638 | $ | — | ||||
Total gains or (loss) (realized/unrealized) | ||||||||
Included in earnings | (75 | ) | (778 | ) | ||||
Included in other comprehensive income | 75 | (112 | ) | |||||
Paydowns and maturities | — | — | ||||||
Transfers into Level 3 | — | 1,528 | ||||||
Ending balance | $ | 638 | $ | 638 | ||||
Total Carrying | Assets/Liabilities | |||||||||||||||||||
Fair Value Measurement Using | Amount in | Measured at Fair | ||||||||||||||||||
Description | Level 1 | Level 2 | Level 3 | Balance Sheet | Value | |||||||||||||||
2010 | ||||||||||||||||||||
Other real estate | $ | — | $ | — | $ | 38,086 | $ | 38,086 | $ | 38,086 | ||||||||||
Impaired loans | — | — | 129,088 | 129,088 | 129,088 | |||||||||||||||
Total assets at fair value | $ | — | $ | — | $ | 167,174 | $ | 167,174 | $ | 167,174 | ||||||||||
2009 | ||||||||||||||||||||
Other real estate | $ | — | $ | — | $ | 23,508 | $ | 23,508 | $ | 23,508 | ||||||||||
Impaired loans | — | — | 57,914 | 57,914 | 57,914 | |||||||||||||||
Total assets at fair value | $ | — | $ | — | $ | 81,422 | $ | 81,422 | $ | 81,422 | ||||||||||
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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Amounts in thousands, except share and per share data)
December 31, 2010, 2009 and 2008
2010 | 2009 | |||||||||||||||
Carrying | Fair | Carrying | Fair | |||||||||||||
Value | Value | Value | Value | |||||||||||||
Financial assets: | ||||||||||||||||
Cash and cash equivalents | $ | 294,214 | $ | 294,214 | $ | 221,494 | $ | 221,494 | ||||||||
Securities available for sale | 202,002 | 202,002 | 147,724 | 147,724 | ||||||||||||
Securities held to maturity | 465 | 467 | 626 | 638 | ||||||||||||
Loans held for sale | 1,299 | 1,317 | 1,533 | 1,552 | ||||||||||||
Loans, net | 1,678,548 | 1,664,126 | 1,993,646 | 1,950,684 | ||||||||||||
FHLB and other stock | 12,734 | 12,734 | 12,734 | 12,734 | ||||||||||||
Cash surrender value of life insurance | 31,479 | 31,479 | 30,277 | 30,277 | ||||||||||||
Accrued interest receivable | 7,845 | 7,845 | 9,130 | 9,130 | ||||||||||||
Financial liabilities: | ||||||||||||||||
Deposit accounts | $ | 1,976,854 | $ | 1,987,105 | $ | 2,084,096 | $ | 2,095,611 | ||||||||
Federal funds purchased and repurchase agreements | 19,413 | 19,413 | 24,449 | 24,449 | ||||||||||||
FHLB Advances and notes payable | 158,653 | 166,762 | 171,999 | 176,602 | ||||||||||||
Subordinated debentures | 88,662 | 64,817 | 88,662 | 70,527 | ||||||||||||
Accrued interest payable | 2,140 | 2,140 | 2,561 | 2,561 |
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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Amounts in thousands, except share and per share data)
December 31, 2010, 2009 and 2008
2010 | 2009 | |||||||
Land | $ | 18,372 | $ | 18,372 | ||||
Premises | 62,474 | 61,809 | ||||||
Leasehold improvements | 3,092 | 3,061 | ||||||
Furniture, fixtures and equipment | 28,057 | 25,222 | ||||||
Automobiles | 103 | 112 | ||||||
Construction in progress | 138 | 2,162 | ||||||
112,236 | 110,738 | |||||||
Accumulated depreciation | (33,442 | ) | (28,920 | ) | ||||
$ | 78,794 | $ | 81,818 | |||||
2011 | $ | 1,243 | ||
2012 | 1,251 | |||
2013 | 1,043 | |||
2014 | 793 | |||
2015 | 433 | |||
Thereafter | 734 | |||
Total | $ | 5,497 | ||
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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Amounts in thousands, except share and per share data)
December 31, 2010, 2009 and 2008
2010 | 2009 | |||||||
Beginning of year | $ | — | $ | 143,389 | ||||
Impairment | — | (143,389 | ) | |||||
End of year | $ | — | $ | — | ||||
Core deposit intangibles | 2010 | 2009 | ||||||
Gross carrying amount | $ | 19,796 | $ | 19,796 | ||||
Accumulated amortization, beginning of year | (10,803 | ) | (8,304 | ) | ||||
Amortization | (2,495 | ) | (2,499 | ) | ||||
Accumulated amortization, end of year | (13,298 | ) | (10,803 | ) | ||||
End of year | $ | 6,498 | $ | 8,993 | ||||
Other intangibles | 2010 | 2009 | ||||||
Gross carrying amount | $ | 745 | $ | 745 | ||||
Accumulated amortization, beginning of year | (403 | ) | (152 | ) | ||||
Amortization | (89 | ) | (251 | ) | ||||
Accumulated amortization, end of year | (492 | ) | (403 | ) | ||||
End of year | $ | 253 | $ | 342 | ||||
2011 | $ | 2,531 | ||
2012 | 2,401 | |||
2013 | 1,701 | |||
2014 | 118 | |||
2015 | — | |||
Total | $ | 6,751 | ||
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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Amounts in thousands, except share and per share data)
December 31, 2010, 2009 and 2008
2010 | 2009 | |||||||
Noninterest-bearing demand deposits | $ | 152,752 | $ | 177,602 | ||||
Interest-bearing demand deposits | 939,091 | 837,268 | ||||||
Savings deposits | 101,925 | 86,166 | ||||||
Brokered deposits | 1,399 | 6,584 | ||||||
Time deposits | 781,687 | 976,476 | ||||||
Total deposits | $ | 1,976,854 | $ | 2,084,096 | ||||
2011 | $ | 531,829 | ||
2012 | 139,812 | |||
2013 | 52,931 | |||
2014 | 14,822 | |||
2015 | 40,246 | |||
Thereafter | 3,446 |
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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Amounts in thousands, except share and per share data)
December 31, 2010, 2009 and 2008
2010 | 2009 | 2008 | ||||||||||
Average balance during the year | $ | 22,342 | $ | 28,008 | $ | 74,881 | ||||||
Average interest rate during the year | 0.10 | % | 0.10 | % | 1.57 | % | ||||||
Maximum month-end balance during the year | $ | 26,161 | $ | 35,935 | $ | 98,925 | ||||||
Weighted average interest rate at year-end | 0.10 | % | 0.10 | % | 0.10 | % |
2010 | 2009 | |||||||
Short-term borrowings | ||||||||
Fixed rate FHLB advance, 4.44% | ||||||||
Matures December 2011 | $ | 15,000 | $ | — | ||||
Variable rate FHLB advances at 5.00% to 5.31% | ||||||||
Matured December 2010 | — | 12,000 | ||||||
Total short-term borrowings | 15,000 | 12,000 | ||||||
Long-term borrowings | ||||||||
Fixed rate FHLB advances, from 1.50% to 3.36%, | ||||||||
Various maturities through June 2023 | 51,327 | 50,766 | ||||||
Fixed rate FHLB advances from 4.18% to 6.35%, | ||||||||
Various maturities through 2020 | 92,326 | 109,233 | ||||||
Total long term borrowings | 143,653 | 159,999 | ||||||
Total borrowings | $ | 158,653 | $ | 171,999 | ||||
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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Amounts in thousands, except share and per share data)
December 31, 2010, 2009 and 2008
Total | ||||
2011 | $ | 15,288 | ||
2012 | 65,278 | |||
2013 | 288 | |||
2014 | 10,296 | |||
2015 | 20,309 | |||
Thereafter | 47,194 | |||
$ | 158,653 | |||
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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Amounts in thousands, except share and per share data)
December 31, 2010, 2009 and 2008
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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Amounts in thousands, except share and per share data)
December 31, 2010, 2009 and 2008
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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Amounts in thousands, except share and per share data)
December 31, 2010, 2009 and 2008
2010 | 2009 | 2008 | ||||||||||
Current — federal | $ | (10,054 | ) | $ | (12,906 | ) | $ | (221 | ) | |||
Current — state | (1,775 | ) | (2,476 | ) | (53 | ) | ||||||
Deferred — federal | (13,870 | ) | (1,397 | ) | (3,649 | ) | ||||||
Deferred — state | (2,846 | ) | (257 | ) | (725 | ) | ||||||
Deferred tax asset — valuation allowance | 43,455 | — | — | |||||||||
$ | 14,910 | $ | (17,036 | ) | $ | (4,648 | ) | |||||
2010 | 2009 | |||||||||||||||
Assets | Liabilities | Assets | Liabilities | |||||||||||||
Allowance for loan losses | $ | 26,214 | $ | — | $ | 19,675 | $ | — | ||||||||
Deferred compensation | 2,129 | — | 1,973 | — | ||||||||||||
REO basis | 12,175 | — | — | — | ||||||||||||
Purchase accounting adjustments | — | (1,424 | ) | 672 | — | |||||||||||
Depreciation | — | (1,998 | ) | — | (2,129 | ) | ||||||||||
FHLB dividends | — | (1,658 | ) | — | (1,658 | ) | ||||||||||
Core deposit intangible | 2,189 | — | — | (4,860 | ) | |||||||||||
Unrealized (gain) loss on securities | — | (645 | ) | — | (122 | ) | ||||||||||
NOL carry forward | 10,192 | — | — | (122 | ) | |||||||||||
Other | (1,542 | ) | 49 | — | ||||||||||||
Deferred tax asset — valuation allowance | (43,455 | ) | — | — | ||||||||||||
Total deferred income taxes | $ | 52,899 | $ | (50,722 | ) | $ | 22,369 | $ | (8,769 | ) | ||||||
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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Amounts in thousands, except share and per share data)
December 31, 2010, 2009 and 2008
2010 | 2009 | 2008 | ||||||||||
Statutory federal tax rate | (35.0 | %) | (35.0 | %) | (35.0 | %) | ||||||
State income tax, net of federal benefit | (4.6 | ) | (1.1 | ) | (5.2 | ) | ||||||
Tax exempt income | (2.0 | ) | (0.5 | ) | (8.0 | ) | ||||||
Goodwill impairment | — | 26.4 | — | |||||||||
Deferred tax asset — valuation allowance | 66.1 | — | — | |||||||||
Other | (1.8 | ) | (0.5 | ) | — | |||||||
(22.7 | %) | (10.2 | %) | (46.4 | %) | |||||||
2010 | 2009 | |||||||
Commitments to make loans — fixed | $ | 3,827 | $ | 1,202 | ||||
Commitments to make loans — variable | 2,464 | 4,718 | ||||||
Unused lines of credit | 201,973 | 239,374 | ||||||
Letters of credit | 25,674 | 30,107 |
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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Amounts in thousands, except share and per share data)
December 31, 2010, 2009 and 2008
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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Amounts in thousands, except share and per share data)
December 31, 2010, 2009 and 2008
Minimum Amounts | ||||||||||||||||||||||||
to be Well | ||||||||||||||||||||||||
Minimum Required | Capitalized Under | |||||||||||||||||||||||
for Capital | Prompt Corrective | |||||||||||||||||||||||
Actual | Adequacy Purposes | Action Provisions | ||||||||||||||||||||||
Actual | Ratio (%) | Actual | Ratio (%) | Actual | Ratio (%) | |||||||||||||||||||
2010 | ||||||||||||||||||||||||
Total Capital (to Risk Weighted Assets) | ||||||||||||||||||||||||
Consolidated | $ | 239.7 | 13.2 | $ | 145.2 | 8.0 | $ | 181.6 | 10.0 | |||||||||||||||
Bank | 239.6 | 13.2 | 145.0 | 8.0 | 181.3 | 10.0 | ||||||||||||||||||
Tier 1 Capital (to Risk Weighted Assets) | ||||||||||||||||||||||||
Consolidated | $ | 216.5 | 11.9 | $ | 72.6 | 4.0 | $ | 108.9 | 6.0 | |||||||||||||||
Bank | 216.4 | 11.9 | 72.5 | 4.0 | 108.8 | 6.0 | ||||||||||||||||||
Tier 1 Capital (to Average Assets) | ||||||||||||||||||||||||
Consolidated | $ | 216.5 | 8.9 | $ | 97.6 | 4.0 | $ | 122.0 | 5.0 | |||||||||||||||
Bank | 216.4 | 8.9 | 97.5 | 4.0 | 121.8 | 5.0 | ||||||||||||||||||
2009 | ||||||||||||||||||||||||
Total Capital (to Risk Weighted Assets) | ||||||||||||||||||||||||
Consolidated | $ | 318.5 | 14.9 | $ | 171.0 | 8.0 | $ | 213.8 | 10.0 | |||||||||||||||
Bank | 317.4 | 14.9 | 170.7 | 8.0 | 213.4 | 10.0 | ||||||||||||||||||
Tier 1 Capital (to Risk Weighted Assets) | ||||||||||||||||||||||||
Consolidated | $ | 291.5 | 13.6 | $ | 85.5 | 4.0 | $ | 128.3 | 6.0 | |||||||||||||||
Bank | 290.4 | 13.6 | 85.4 | 4.0 | 128.0 | 6.0 | ||||||||||||||||||
Tier 1 Capital (to Average Assets) | ||||||||||||||||||||||||
Consolidated | $ | 291.5 | 10.7 | $ | 108.6 | 4.0 | $ | 135.8 | 5.0 | |||||||||||||||
Bank | 290.4 | 10.7 | 108.6 | 4.0 | 135.7 | 5.0 |
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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Amounts in thousands, except share and per share data)
December 31, 2010, 2009 and 2008
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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Amounts in thousands, except share and per share data)
December 31, 2010, 2009 and 2008
Weighted | ||||||||||||||||
Weighted | Average | |||||||||||||||
Average | Remaining | Aggregate | ||||||||||||||
Stock | Exercise | Contractual | Intrinsic | |||||||||||||
Options | Price | Term | Value | |||||||||||||
Outstanding at January 1, 2008 | 452,077 | $ | 25.72 | |||||||||||||
Exercised | (9,759 | ) | 12.63 | |||||||||||||
Forfeited | (1,565 | ) | 30.65 | |||||||||||||
Expired | (16,310 | ) | 23.00 | |||||||||||||
Outstanding at December 31, 2008 | 424,443 | $ | 26.10 | |||||||||||||
Forfeited | (1,374 | ) | 32.05 | |||||||||||||
Expired | (34,875 | ) | 25.58 | |||||||||||||
Outstanding at December 31, 2009 | 388,194 | $ | 26.14 | |||||||||||||
Exercised | — | — | ||||||||||||||
Forfeited | (6,484 | ) | 33.12 | |||||||||||||
Expired | — | — | ||||||||||||||
Outstanding at December 31, 2010 | 381,710 | $ | 25.96 | 3.6 years | $ | — | ||||||||||
Options exercisable at December 31, 2010 | 344,029 | $ | 25.17 | 3.4 years | $ | — | ||||||||||
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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Amounts in thousands, except share and per share data)
December 31, 2010, 2009 and 2008
Outstanding | Exercisable | |||||||||||||||||||||||
Weighted | Weighted | Weighted | Weighted | |||||||||||||||||||||
Average | Average | Average | Average | |||||||||||||||||||||
Range of | Number | Remaining | Exercise | Number | Remaining | Exercise | ||||||||||||||||||
Exercise Prices | Outstanding | Contractual Life | Price | Outstanding | Contractual Life | Price | ||||||||||||||||||
$12.41 - $15.00 | 24,142 | 1.8 | $ | 12.95 | 24,142 | 1.8 | $ | 12.95 | ||||||||||||||||
$15.01 - $20.00 | 77,698 | 1.8 | $ | 17.63 | 77,698 | 1.8 | $ | 17.63 | ||||||||||||||||
$20.01 - $25.00 | 50,635 | 3.1 | $ | 23.36 | 50,635 | 3.1 | $ | 23.36 | ||||||||||||||||
$25.01 - $30.00 | 135,476 | 4.7 | $ | 28.00 | 122,137 | 4.6 | $ | 27.91 | ||||||||||||||||
$30.01 - $36.32 | 93,759 | 4.4 | $ | 34.80 | 69,417 | 3.8 | $ | 34.37 | ||||||||||||||||
Total | 381,710 | 344,029 | ||||||||||||||||||||||
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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Amounts in thousands, except share and per share data)
December 31, 2010, 2009 and 2008
Weighted | ||||||||
Average | ||||||||
Price Per | ||||||||
Shares | Share | |||||||
Balance at January 1, 2008 | — | $ | — | |||||
Granted: | ||||||||
Non-employee Directors | 7,852 | 16.56 | ||||||
Executive officers & management | 62,015 | 19.20 | ||||||
Cancelled: | ||||||||
Non-employee Directors | — | — | ||||||
Executive officers & management | (8,960 | ) | 19.44 | |||||
Balance at December 31, 2008 | 60,907 | 18.83 | ||||||
Granted: | ||||||||
Non-employee Directors | 7,060 | 7.08 | ||||||
Non-executive officers & management | 56,934 | 7.08 | ||||||
Vested: | ||||||||
Non-employee Directors | (7,852 | ) | 16.56 | |||||
Executive officers, non-executive officers & management | (10,584 | ) | 19.16 | |||||
Cancelled: | ||||||||
Non-employee Directors | — | — | ||||||
Non-executive officers & management | (5,207 | ) | 14.98 | |||||
Balance at December 31, 2009 | 101,258 | $ | 11.74 | |||||
Granted: | ||||||||
Non-employee Directors | 6,548 | 6.11 | ||||||
Executive officers | 18,382 | 8.16 | ||||||
Vested: | ||||||||
Non-employee Directors | (7,060 | ) | 7.08 | |||||
Executive officers, non-executive officers & management | (20,335 | ) | 12.77 | |||||
Cancelled: | ||||||||
Executive officers | (1,543 | ) | 16.56 | |||||
Non-executive officers & management | (5,968 | ) | 11.82 | |||||
Balance at December 31, 2010 | 91,282 | $ | 10.67 | |||||
Weighted-average fair value of nonvested stock awards granted during the year ended December 31, | ||||||||
2010 | $ | 7.62 | ||||||
2009 | $ | 7.08 | ||||||
2008 | $ | 18.90 | ||||||
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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Amounts in thousands, except share and per share data)
December 31, 2010, 2009 and 2008
Weighted | ||||||||
Average | ||||||||
Price Per | ||||||||
SAR’s | Share | |||||||
Balance at January 1, 2008 | 19,000 | 34.63 | ||||||
Granted: | ||||||||
Non-employee Directors | 7,852 | 16.56 | ||||||
Executive officers & management | 62,015 | 19.20 | ||||||
Cancelled/Expired: | ||||||||
Non-employee Directors | — | — | ||||||
Executive officers & management | (8,960 | ) | 19.44 | |||||
Balance at December 31, 2008 | 79,907 | $ | 22.58 | |||||
Granted: | ||||||||
Non-employee Directors | 7,060 | 7.08 | ||||||
Non-executive officers & management | 56,934 | 7.08 | ||||||
Cancelled/Expired: | ||||||||
Non-employee Directors | (7,852 | ) | 16.56 | |||||
Non-executive officers & management | (15,817 | ) | 17.78 | |||||
Balance at December 31, 2009 | 120,232 | $ | 15.36 | |||||
Granted: | ||||||||
Non-employee Directors | 6,548 | 6.11 | ||||||
Non-executive officers & management | — | — | ||||||
Cancelled/Expired: | ||||||||
Non-employee Directors | (7,060 | ) | 7.08 | |||||
Non-executive officers & management | (27,777 | ) | 12.75 | |||||
Balance at December 31, 2010 | 91,943 | $ | 16.12 | |||||
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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Amounts in thousands, except share and per share data)
December 31, 2010, 2009 and 2008
Weighted-average fair value of cash-settled SAR’s granted during the year ended December 31, | ||||||||
2010 | $ | 6.11 | ||||||
2009 | $ | 7.08 | ||||||
2008 | $ | 18.93 | ||||||
2010 | 2009 | 2008 | ||||||||||
Risk-free interest rate | 0.307 | % | 0.67% – 1.89 | % | 3.81% – 3.85 | % | ||||||
Volatility | 57.06 | % | 40.18 | % | 29.46% – 32.81 | % | ||||||
Expected life | 1 year | 1 – 5 years | 1 – 5 years | |||||||||
Dividend yield | 0.00 | % | 7.34 | % | 3.54 | % |
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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Amounts in thousands, except share and per share data)
December 31, 2010, 2009 and 2008
2010 | 2009 | 2008 | ||||||||||
Basic Earnings (Loss) Per Share | ||||||||||||
Net income (loss) | $ | (80,695 | ) | $ | (150,694 | ) | $ | (5,360 | ) | |||
Less: preferred stock dividends and accretion of discount on warrants | 5,001 | 4,982 | 92 | |||||||||
Net income (loss) available to common shareholders | $ | (85,696 | ) | $ | (155,676 | ) | $ | (5,452 | ) | |||
Weighted average common shares outstanding | 13,093,847 | 13,068,407 | 12,932,576 | |||||||||
Basic earnings (loss) per share | $ | (6.54 | ) | $ | (11.91 | ) | $ | (0.42 | ) | |||
Diluted Earnings (Loss) Per Share | ||||||||||||
Net income (loss) | $ | (80,695 | ) | $ | (150,694 | ) | $ | (5,360 | ) | |||
Less: preferred stock dividends and accretion of discount on warrants | 5,001 | 4,982 | 92 | |||||||||
Net income (loss) available to common shareholders | $ | (85,696 | ) | $ | (155,676 | ) | $ | (5,452 | ) | |||
Weighted average common shares outstanding | 13,093,847 | 13,068,407 | 12,932,576 | |||||||||
Add: Dilutive effects of assumed conversions of restricted stock and exercises of stock options and warrants | — | — | 58,214 | |||||||||
Weighted average common and dilutive potential common shares outstanding(1) (2) | 13,093,847 | 13,068,407 | 12,990,790 | |||||||||
Diluted earnings (loss) per common share(1) (2) | $ | (6.54 | ) | $ | (11.91 | ) | $ | (0.42 | ) | |||
1 | Diluted weighted average shares outstanding for 2010 and 2009 excludes 92,979 and 96,971 shares of unvested restricted stock because they are anti-dilutive and is equal to weighted average common shares outstanding. | |
2 | Stock options and warrants of 1,017,645, 1,058,992 and 387,121 were excluded from the 2010, 2009 and 2008 diluted earnings per share because their impact was anti-dilutive. |
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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Amounts in thousands, except share and per share data)
December 31, 2010, 2009 and 2008
Years ended December 31, 2010 and 2009
2010 | 2009 | |||||||
Assets | ||||||||
Cash and due from financial institutions | $ | 1,707 | $ | 3,081 | ||||
Investment in subsidiary | 228,590 | 308,831 | ||||||
Other | 4,795 | 4,692 | ||||||
Total assets | $ | 235,092 | $ | 316,604 | ||||
LIABILITIES | ||||||||
Subordinated debentures | $ | 88,662 | $ | 88,662 | ||||
Other liabilities | 2,533 | 1,173 | ||||||
Total liabilities | 91,195 | 89,835 | ||||||
Shareholders’ equity | 143,897 | 226,769 | ||||||
Total liabilities and shareholders’ equity | $ | 235,092 | $ | 316,604 | ||||
Years ended December 31, 2010, 2009, and 2008
2010 | 2009 | 2008 | ||||||||||
Dividends from subsidiary | $ | 2,500 | $ | 3,000 | $ | 13,600 | ||||||
Other income | 96 | 180 | 241 | |||||||||
Interest expense | (1,980 | ) | (2,577 | ) | (4,555 | ) | ||||||
Other expense | (2,002 | ) | (1,718 | ) | (2,022 | ) | ||||||
Income (loss) before income taxes | (1,386 | ) | (1,115 | ) | 7,264 | |||||||
Income tax benefit | (743 | ) | (1,488 | ) | (2,330 | ) | ||||||
Equity in undistributed net income (loss) of subsidiary | (80,052 | ) | (151,067 | ) | (14,954 | ) | ||||||
Net income (loss) | (80,695 | ) | (150,694 | ) | (5,360 | ) | ||||||
Preferred stock dividends and accretion of discount on warrants | 5,001 | 4,982 | 92 | |||||||||
Net income (loss) available to common shareholders | $ | (85,696 | ) | $ | (155,676 | ) | $ | (5,452 | ) | |||
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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Amounts in thousands, except share and per share data)
December 31, 2010, 2009 and 2008
Years ended December 31, 2010, 2009, and 2008
2010 | 2009 | 2008 | ||||||||||
Operating activities | ||||||||||||
Net income (loss) | $ | (80,695 | ) | $ | (150,694 | ) | $ | (5,360 | ) | |||
Adjustments to reconcile net income to net cash provided (used) by operating activities: | ||||||||||||
Undistributed (net income) loss of subsidiaries | 80,052 | 151,067 | 14,954 | |||||||||
Stock compensation expense | 626 | 686 | 759 | |||||||||
Change in other assets | 104 | 1,868 | (1,413 | ) | ||||||||
Change in liabilities | 1,250 | (412 | ) | (14 | ) | |||||||
Net cash provided (used) by operating activities | 1,337 | 2,515 | 8,926 | |||||||||
Investing activities | ||||||||||||
Capital investment in bank subsidiary | — | — | (77,278 | ) | ||||||||
Net cash used in investing activities | — | — | (77,278 | ) | ||||||||
Financing activities | ||||||||||||
Preferred stock dividends paid | (2,711 | ) | (3,232 | ) | — | |||||||
Common stock dividends paid | — | (1,713 | ) | (6,779 | ) | |||||||
Proceeds from issuance of preferred stock | — | — | 72,278 | |||||||||
Proceeds from issuance of common stock | — | — | 111 | |||||||||
Tax benefit resulting from stock options | — | — | 5 | |||||||||
Net cash provided (used in) financing activities | (2,711 | ) | (4,945 | ) | 65,615 | |||||||
Net change in cash and cash equivalents | (1,374 | ) | (2,430 | ) | (2,737 | ) | ||||||
Cash and cash equivalents, beginning of year | 3,081 | 5,511 | 8,248 | |||||||||
Cash and cash equivalents, end of year | $ | 1,707 | $ | 3,081 | $ | 5,511 | ||||||
2010 | 2009 | 2008 | ||||||||||
Unrealized holding gains and (losses) on securities available for sale, net of tax of $523, $1,105 and ($357), respectively | $ | 810 | $ | 1,712 | $ | (553 | ) | |||||
Reclassification adjustment for losses (gains) realized in net income, net of tax of $0, ($555) and ($1,044), respectively | — | (860 | ) | (1,617 | ) | |||||||
Other comprehensive income (loss) | $ | 810 | $ | 852 | $ | (2,170 | ) | |||||
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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Amounts in thousands, except share and per share data)
December 31, 2010, 2009 and 2008
Other | Holding | Total | ||||||||||||||||||
2010 | Banking | Segments | Company | Eliminations | Segments | |||||||||||||||
Net interest income | $ | 77,246 | $ | 8,327 | $ | (1,980 | ) | $ | — | $ | 83,593 | |||||||||
Provision for loan losses | 69,568 | 1,539 | — | — | 71,107 | |||||||||||||||
Noninterest income | 31,467 | 1,899 | 96 | (918 | ) | 32,544 | ||||||||||||||
Noninterest expense | 105,088 | 4,643 | 2,002 | (918 | ) | 110,815 | ||||||||||||||
Income tax expense (benefit) | 14,068 | 1,585 | (743 | ) | — | 14,910 | ||||||||||||||
Segment profit (loss) | $ | (80,011 | ) | $ | 2,459 | $ | (3,143 | ) | �� | $ | — | $ | (80,695 | ) | ||||||
Segment assets | $ | 2,356,543 | $ | 42,995 | $ | 6,502 | $ | — | $ | 2,406,040 | ||||||||||
Other | Holding | Total | ||||||||||||||||||
2009 | Banking | Segments | Company | Eliminations | Segments | |||||||||||||||
Net interest income | $ | 74,628 | $ | 8,474 | $ | (2,577 | ) | $ | — | $ | 80,525 | |||||||||
Provision for loan losses | 47,483 | 2,763 | — | — | 50,246 | |||||||||||||||
Noninterest income | 30,258 | 2,127 | 180 | (987 | ) | 31,578 | ||||||||||||||
Noninterest expense | 223,989 | 4,868 | 1,717 | (987 | ) | 229,587 | ||||||||||||||
Income tax expense (benefit) | (16,712 | ) | 1,164 | (1,488 | ) | — | (17,036 | ) | ||||||||||||
Segment profit (loss) | $ | (149,874 | ) | $ | 1,806 | $ | (2,626 | ) | $ | — | $ | (150,694 | ) | |||||||
Segment assets | $ | 2,568,926 | $ | 42,251 | $ | 7,962 | $ | — | $ | 2,619,139 | ||||||||||
Other | Holding | Total | ||||||||||||||||||
2008 | Banking | Segments | Company | Eliminations | Segments | |||||||||||||||
Net interest income | $ | 91,900 | $ | 7,680 | $ | (4,555 | ) | $ | — | $ | 95,025 | |||||||||
Provision for loan losses | 50,074 | 2,736 | — | — | 52,810 | |||||||||||||||
Noninterest income | 32,012 | 2,231 | 241 | (870 | ) | 33,614 | ||||||||||||||
Noninterest expense | 79,548 | 5,137 | 2,022 | (870 | ) | 85,837 | ||||||||||||||
Income tax expense (benefit) | (3,118 | ) | 800 | (2,330 | ) | — | (4,648 | ) | ||||||||||||
Segment profit (loss) | $ | (2,592 | ) | $ | 1,238 | $ | (4,006 | ) | $ | — | $ | (5,360 | ) | |||||||
Segment assets | $ | 2,895,163 | $ | 39,846 | $ | 9,662 | $ | — | $ | 2,944,671 | ||||||||||
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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Amounts in thousands, except share and per share data)
December 31, 2010, 2009 and 2008
As of and for the period ended December 31, 2010 | Bank | Other | Total | |||||||||
Nonperforming loans as percentage of total loans, net of unearned income | 8.40 | % | 1.30 | % | 8.35 | % | ||||||
Nonperforming assets as a percentage of total assets | 8.52 | % | 1.34 | % | 8.56 | % | ||||||
Allowance for loan losses as a percentage of total loans, net of unearned income | 3.68 | % | 7.33 | % | 3.83 | % | ||||||
Allowance for loan losses as a percentage of nonperforming loans | 43.80 | % | 562.24 | % | 45.83 | % | ||||||
Net charge-offs to average total loans, net of unearned income | 2.76 | % | 4.20 | % | 2.84 | % |
As of and for the period ended December 31, 2009 | Bank | Other | Total | |||||||||
Nonperforming loans as percentage of total loans, net of unearned income | 3.69 | % | 1.50 | % | 3.70 | % | ||||||
Nonperforming assets as a percentage of total assets | 5.04 | % | 2.02 | % | 5.07 | % | ||||||
Allowance for loan losses as a percentage of total loans, net of unearned income | 2.30 | % | 8.05 | % | 2.45 | % | ||||||
Allowance for loan losses as a percentage of nonperforming loans | 62.29 | % | 538.31 | % | 66.39 | % | ||||||
Net charge-offs to average total loans, net of unearned income | 2.15 | % | 5.88 | % | 2.25 | % |
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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Amounts in thousands, except share and per share data)
December 31, 2010, 2009 and 2008
For the three months ended | ||||||||||||||||
Summary of Operations | 3/31/10 | 6/30/10 | 9/30/10 | 12/31/10 | ||||||||||||
Net interest income | $ | 21,659 | $ | 21,473 | $ | 20,747 | $ | 19,714 | ||||||||
Provision for loan losses | 3,889 | 4,749 | 36,823 | 25,646 | ||||||||||||
Noninterest income | 7,686 | 8,771 | 9,029 | 7,058 | ||||||||||||
Noninterest expense | 20,546 | 21,274 | 27,009 | 41,986 | ||||||||||||
Income tax expense (benefit) | 1,714 | 1,410 | 1,098 | 10,688 | ||||||||||||
Net income (loss) | $ | 3,196 | $ | 2,811 | $ | (35,154 | ) | $ | (51,548 | ) | ||||||
Net income (loss) available to common shareholders | $ | 1,946 | $ | 1,561 | $ | (36,405 | ) | $ | (52,798 | ) | ||||||
Comprehensive income | $ | 4,166 | $ | 3,705 | $ | (34,583 | ) | $ | (53,173 | ) | ||||||
Basic earnings (loss) per common share | $ | 0.15 | $ | 0.12 | $ | (2.78 | ) | $ | (4.03 | ) | ||||||
Diluted earnings (loss) per common share | $ | 0.15 | $ | 0.12 | $ | (2.78 | ) | $ | (4.03 | ) | ||||||
Dividends per common share | $ | 0.00 | $ | 0.00 | $ | 0.00 | $ | 0.00 | ||||||||
Average common shares outstanding | 13,082,347 | 13,097,611 | 13,097,611 | 13,097,611 | ||||||||||||
Average common shares outstanding — diluted | 13,172,727 | 13,192,648 | 13,097,611 | 13,097,611 |
For the three months ended | ||||||||||||||||
Summary of Operations | 3/31/09 | 6/30/09 | 9/30/09 | 12/31/09 | ||||||||||||
Net interest income | $ | 19,429 | $ | 20,180 | $ | 20,338 | $ | 20,578 | ||||||||
Provision for loan losses | 985 | 24,384 | 18,475 | 6,402 | ||||||||||||
Noninterest income | 6,943 | 7,541 | 9,189 | 8,134 | ||||||||||||
Noninterest expense | 17,831 | 169,143 | 22,365 | 20,477 | ||||||||||||
Income tax expense (benefit) | 2,776 | (15,656 | ) | (4,815 | ) | 659 | ||||||||||
Net income (loss) | $ | 4,780 | $ | (150,150 | ) | $ | (6,498 | ) | $ | 1,174 | ||||||
Net income (loss) available to common shareholders | $ | 3,548 | $ | (151,400 | ) | $ | (7,748 | ) | $ | (76 | ) | |||||
Comprehensive income | $ | 5,668 | $ | (150,557 | ) | $ | (5,073 | ) | $ | 120 | ||||||
Basic earnings (loss) per common share | $ | 0.27 | $ | (11.58 | ) | $ | (0.59 | ) | $ | (0.01 | ) | |||||
Diluted earnings (loss) per share | $ | 0.27 | $ | (11.58 | ) | $ | (0.59 | ) | $ | (0.01 | ) | |||||
Dividends per common share | $ | 0.13 | $ | 0.00 | $ | 0.00 | $ | 0.00 | ||||||||
Average common shares outstanding | 13,062,881 | 13,070,216 | 13,070,216 | 13,070,216 | ||||||||||||
Average common shares outstanding — diluted | 13,141,840 | 13,070,216 | 13,070,216 | 13,070,216 |
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CONDENSED CONSOLIDATED BALANCE SHEETS
March 31, 2011 and December 31, 2010
(Amounts in thousands, except share and per share data)
(Unaudited) | ||||||||
March 31, | December 31, | |||||||
2011 | 2010* | |||||||
ASSETS | ||||||||
Cash and due from banks | $ | 323,485 | $ | 289,358 | ||||
Federal funds sold | 7,931 | 4,856 | ||||||
Cash and cash equivalents | 331,416 | 294,214 | ||||||
Interest earning deposits in other banks | — | — | ||||||
Securities available for sale | 226,732 | 202,002 | ||||||
Securities held to maturity (with a market value of $115 and $467) | 115 | 465 | ||||||
Loans held for sale | 960 | 1,299 | ||||||
Loans, net of unearned interest | 1,680,249 | 1,745,378 | ||||||
Allowance for loan losses | (65,109 | ) | (66,830 | ) | ||||
Other real estate owned and repossessed assets | 60,033 | 60,095 | ||||||
Premises and equipment, net | 77,814 | 78,794 | ||||||
FHLB and other stock, at cost | 12,734 | 12,734 | ||||||
Cash surrender value of life insurance | 31,758 | 31,479 | ||||||
Core deposit and other intangibles | 6,125 | 6,751 | ||||||
Deferred tax asset ( net of valuation allowance of $47,563 and $43,455) | 6,339 | 2,177 | ||||||
Other assets | 23,528 | 37,482 | ||||||
Total assets | $ | 2,392,694 | $ | 2,406,040 | ||||
LIABILITIES AND SHAREHOLDERS’ EQUITY | ||||||||
Liabilities | ||||||||
Non-interest bearing deposits | $ | 165,927 | $ | 152,752 | ||||
Interest bearing deposits | 1,808,309 | 1,822,703 | ||||||
Brokered deposits | 1,399 | 1,399 | ||||||
Total deposits | 1,975,635 | 1,976,854 | ||||||
Repurchase agreements | 18,712 | 19,413 | ||||||
FHLB advances and notes payable | 158,588 | 158,653 | ||||||
Subordinated debentures | 88,662 | 88,662 | ||||||
Accrued interest payable and other liabilities | 18,267 | 18,561 | ||||||
Total liabilities | $ | 2,259,864 | $ | 2,262,143 | ||||
Shareholders’ equity | ||||||||
Preferred stock: no par, 1,000,000 shares authorized, 72,278 shares outstanding | $ | 68,468 | $ | 68,121 | ||||
Common stock: $2 par, 20,000,000 shares authorized, 13,182,797 and 13,188,896 shares outstanding | 26,366 | 26,378 | ||||||
Common stock warrants | 6,934 | 6,934 | ||||||
Additional paid-in capital | 189,022 | 188,901 | ||||||
Accumulated Deficit | (158,997 | ) | (147,436 | ) | ||||
Accumulated other comprehensive income | 1,037 | 999 | ||||||
Total shareholders’ equity | 132,830 | 143,897 | ||||||
Total liabilities and shareholders’ equity | $ | 2,392,694 | $ | 2,406,040 | ||||
* | Derived from the audited consolidated balance sheet, as filed in the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2010. |
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CONDENSED CONSOLIDATED STATEMENTS OF INCOME
Three Months Ended March 31, 2011 and 2010
(Amounts in thousands, except share and per share data)
Three Months Ended | ||||||||
March 31, | ||||||||
2011 | 2010 | |||||||
(Unaudited) | ||||||||
Interest income | ||||||||
Interest and fees on loans | $ | 24,600 | $ | 30,060 | ||||
Taxable securities | 1,401 | 1,288 | ||||||
Nontaxable securities | 305 | 312 | ||||||
FHLB and other stock | 138 | 138 | ||||||
Federal funds sold and other | 181 | 94 | ||||||
Total interest income | 26,625 | 31,892 | ||||||
Interest expense | ||||||||
Deposits | 5,330 | 8,061 | ||||||
Federal funds purchased and repurchase agreements | 4 | 6 | ||||||
FHLB advances and notes payable | 1,543 | 1,694 | ||||||
Subordinated debentures | 481 | 472 | ||||||
Total interest expense | 7,358 | 10,233 | ||||||
Net interest income | 19,267 | 21,659 | ||||||
Provision for loan losses | 13,897 | 3,889 | ||||||
Net interest income after provision for loan losses | 5,370 | 17,770 | ||||||
Non-interest income | ||||||||
Service charges on deposit accounts | 5,830 | 5,940 | ||||||
Other charges and fees | 430 | 356 | ||||||
Trust and investment services income | 515 | 582 | ||||||
Mortgage banking income | 87 | 118 | ||||||
Other income | 765 | 690 | ||||||
Total non-interest income | 7,627 | 7,686 | ||||||
Non-interest expense | ||||||||
Employee compensation | 8,131 | 7,665 | ||||||
Employee benefits | 977 | 977 | ||||||
Occupancy expense | 1,794 | 1,699 | ||||||
Equipment expense | 877 | 708 | ||||||
Computer hardware/software expense | 919 | 824 | ||||||
Professional services | 788 | 607 | ||||||
Advertising | 719 | 598 | ||||||
OREO maintenance expense | 1,155 | 445 | ||||||
Collection and repossession expense | 547 | 1,287 | ||||||
Loss on OREO and repossessed assets | 2,101 | 509 | ||||||
FDIC Insurance | 1,086 | 851 | ||||||
Core deposit and other intangibles amortization | 626 | 651 | ||||||
Other expenses | 3,307 | 3,725 | ||||||
Total non-interest expenses | 23,027 | 20,546 | ||||||
Income (loss) before income taxes | (10,030 | ) | 4,910 | |||||
Provision for income/(loss) taxes | 281 | 1,714 | ||||||
Net income/(loss) | $ | (10,311 | ) | $ | 3,196 | |||
Preferred stock dividends and accretion of discount | 1,250 | 1,250 | ||||||
Net income/(loss) available to common shareholders | $ | (11,561 | ) | $ | 1,946 | |||
Per share of common stock: | ||||||||
Basic earnings | $ | (0.88 | ) | $ | 0.15 | |||
Diluted earnings | (0.88 | ) | 0.15 | |||||
Dividends | — | — | ||||||
Weighted average shares outstanding: | ||||||||
Basic | 13,108,598 | 13,082,347 | ||||||
Diluted | 13,108,598 | 13,172,727 | ||||||
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CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN SHAREHOLDERS’ EQUITY
For the Three Months Ended March 31, 2011
(Unaudited)
(Amounts in thousands, except share and per share data)
Warrants | Accumulated | |||||||||||||||||||||||||||||||
For | Additional | Other | Total | |||||||||||||||||||||||||||||
Preferred | Common Stock | Common | Paid-in | Accumulated | Comprehensive | Shareholders’ | ||||||||||||||||||||||||||
Stock | Shares | Amount | Stock | Capital | (Deficit) | Income | Equity | |||||||||||||||||||||||||
Balance, December 31, 2010 | $ | 68,121 | 13,188,896 | $ | 26,378 | $ | 6,934 | $ | 188,901 | $ | (147,436 | ) | $ | 999 | $ | 143,897 | ||||||||||||||||
Preferred stock transactions: | ||||||||||||||||||||||||||||||||
Accretion of preferred stock discount | 347 | — | — | — | — | (347 | ) | — | — | |||||||||||||||||||||||
Preferred stock dividends accrued | — | — | — | — | — | (903 | ) | — | (903 | ) | ||||||||||||||||||||||
Common stock transactions: | ||||||||||||||||||||||||||||||||
Forfeiture of restricted common shares | — | (6,099 | ) | (12 | ) | — | (52 | ) | — | — | (64 | ) | ||||||||||||||||||||
Compensation expense: | ||||||||||||||||||||||||||||||||
Stock options | — | — | — | — | 50 | — | — | 50 | ||||||||||||||||||||||||
Restricted stock | — | — | — | — | 123 | — | — | 123 | ||||||||||||||||||||||||
Comprehensive income/(loss): | ||||||||||||||||||||||||||||||||
Net (loss) | — | — | — | — | — | (10,311 | ) | — | (10,311 | ) | ||||||||||||||||||||||
Change in unrealized gains, net of reclassification and taxes | — | — | — | — | — | — | 38 | 38 | ||||||||||||||||||||||||
Total comprehensive income/(loss) | (10,273 | ) | ||||||||||||||||||||||||||||||
Balance, March 31, 2011 | $ | 68,468 | 13,182,797 | $ | 26,366 | $ | 6,934 | $ | 189,022 | $ | (158,997 | ) | $ | 1,037 | $ | 132,830 | ||||||||||||||||
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CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
For the Three Months Ended March 31, 2011 and 2010
(Amounts in thousands, except share and per share data)
March 31, | March 31, | |||||||
2011 | 2010 | |||||||
(Unaudited) | ||||||||
Cash flows from operating activities | ||||||||
Net income (loss) | $ | (10,311 | ) | $ | 3,196 | |||
Adjustments to reconcile net income / (loss) to net cash provided by operating activities | ||||||||
Provision for loan losses | 13,897 | 3,889 | ||||||
Depreciation and amortization | 1,736 | 1,828 | ||||||
Security amortization and accretion, net | 129 | 59 | ||||||
Net gain on sale of mortgage loans | (78 | ) | (110 | ) | ||||
Originations of mortgage loans held for sale | (7,421 | ) | (8,741 | ) | ||||
Proceeds from sales of mortgage loans | 7,838 | 9,794 | ||||||
Increase in cash surrender value of life insurance | (279 | ) | (265 | ) | ||||
Net losses from sales of fixed assets | 203 | 3 | ||||||
Stock-based compensation expense | 109 | 156 | ||||||
Net loss on other real estate and repossessed assets | 2,099 | 509 | ||||||
Deferred tax benefit | — | (303 | ) | |||||
Net changes: | ||||||||
Other assets | 9,769 | 4,970 | ||||||
Accrued interest payable and other liabilities | (1,196 | ) | (5,895 | ) | ||||
Net cash provided by operating activities | 16,495 | 9,090 | ||||||
Cash flows from investing activities | ||||||||
Purchase of securities available for sale | (35,782 | ) | (51,525 | ) | ||||
Proceeds from maturities of securities available for sale | 10,985 | 27,072 | ||||||
Proceeds from maturities of securities held to maturity | 350 | 10 | ||||||
Net change in loans | 43,266 | 28,763 | ||||||
Proceeds from sale of other real estate | 4,322 | 2,368 | ||||||
Improvements to other real estate | (113 | ) | (332 | ) | ||||
Proceeds from sale of fixed assets | 7 | — | ||||||
Premises and equipment expenditures | (342 | ) | (566 | ) | ||||
Net cash provided by investing activities | 22,693 | 5,790 | ||||||
Cash flows from financing activities | ||||||||
Net change in core deposits | (1,219 | ) | (41,046 | ) | ||||
Net change in brokered deposits | — | (5,185 | ) | |||||
Net change in repurchase agreements | (702 | ) | (619 | ) | ||||
Repayments of FHLB advances and notes payable | (65 | ) | (80 | ) | ||||
Preferred stock dividends paid | — | (903 | ) | |||||
Common stock dividends paid | — | — | ||||||
Net cash (used) in financing activities | (1,986 | ) | (47,833 | ) | ||||
Net change in cash and cash equivalents | 37,202 | (32,953 | ) | |||||
Cash and cash equivalents, beginning of period | 294,214 | 210,494 | ||||||
Cash and cash equivalents, end of period | $ | 331,416 | $ | 177,541 | ||||
Supplemental disclosures — cash and noncash | ||||||||
Interest paid | $ | 7,044 | $ | 10,523 | ||||
Loans converted to other real estate | 6,616 | 18,540 | ||||||
Unrealized gain on available for sale securities, net of tax | 38 | 970 | ||||||
Loans Originated to finance / sell other real estate | 1,020 | 1,417 |
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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
March 31, 2011
Unaudited
(Amounts in thousands, except share and per share data)
Gross | Gross | |||||||||||||||
Amortized | Unrealized | Unrealized | Fair | |||||||||||||
Cost | Gains | Losses | Value | |||||||||||||
Available for Sale | ||||||||||||||||
March 31, 2011 | ||||||||||||||||
U.S. government agencies | $ | 93,966 | $ | 138 | $ | (1,031 | ) | $ | 93,073 | |||||||
States and political subdivisions | 30,225 | 845 | (271 | ) | 30,799 | |||||||||||
Collateralized mortgage obligations | 78,300 | 1,861 | (395 | ) | 79,766 | |||||||||||
Mortgage-backed securities | 20,685 | 749 | (30 | ) | 21,404 | |||||||||||
Trust preferred securities | 1,850 | — | (160 | ) | 1,690 | |||||||||||
$ | 225,026 | $ | 3,593 | $ | (1,887 | ) | $ | 226,732 | ||||||||
December 31, 2010 | ||||||||||||||||
U.S. government agencies | $ | 84,106 | $ | 115 | $ | (922 | ) | $ | 83,299 | |||||||
States and political subdivisions | 31,192 | 705 | (396 | ) | 31,501 | |||||||||||
Collateralized mortgage obligations | 66,043 | 1,901 | (369 | ) | 67,575 | |||||||||||
Mortgage-backed securities | 17,168 | 815 | (19 | ) | 17,964 | |||||||||||
Trust preferred securities | 1,850 | — | (187 | ) | 1,663 | |||||||||||
$ | 200,359 | $ | 3,536 | $ | (1,893 | ) | $ | 202,002 | ||||||||
Held to Maturity | ||||||||||||||||
March 31, 2011 | ||||||||||||||||
States and political subdivisions | $ | 115 | $ | — | $ | — | $ | 115 | ||||||||
$ | 115 | $ | — | $ | — | $ | 115 | |||||||||
December 31, 2010 | ||||||||||||||||
States and political subdivisions | $ | 215 | $ | 1 | $ | — | $ | 216 | ||||||||
Other securities | 250 | 1 | — | 251 | ||||||||||||
$ | 465 | $ | 2 | $ | — | $ | 467 | |||||||||
F-97
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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
March 31, 2011
Unaudited
(Amounts in thousands, except share and per share data)
Available for Sale | Held to Maturity | |||||||||||
Fair | Carrying | Fair | ||||||||||
Value | Amount | Value | ||||||||||
Due in one year or less | $ | 989 | $ | 115 | $ | 115 | ||||||
Due after one year through five years | 4,723 | — | — | |||||||||
Due after five years through ten years | 64,980 | — | — | |||||||||
Due after ten years | 54,870 | — | — | |||||||||
Collateralized mortgage obligations | 79,766 | — | — | |||||||||
Mortgage-backed securities | 21,404 | — | — | |||||||||
Total maturities | $ | 226,732 | $ | 115 | $ | 115 | ||||||
Less than 12 months | 12 months or more | Total | ||||||||||||||||||||||
Fair | Unrealized | Fair | Unrealized | Fair | Unrealized | |||||||||||||||||||
Value | Loss | Value | Loss | Value | Loss | |||||||||||||||||||
March 31, 2011 | ||||||||||||||||||||||||
U. S. government agencies | $ | 66,950 | $ | (1,031 | ) | $ | — | $ | — | $ | 66,950 | $ | (1,031 | ) | ||||||||||
States and political subdivisions | 3,798 | (58 | ) | 1,749 | (213 | ) | 5,547 | (271 | ) | |||||||||||||||
Collateralized mortgage obligations | 19,893 | (383 | ) | 2,790 | (12 | ) | 22,683 | (395 | ) | |||||||||||||||
Mortgage-backed securities | 2,986 | (27 | ) | 6 | (3 | ) | 2,992 | (30 | ) | |||||||||||||||
Trust preferred securities | — | — | 1,690 | (160 | ) | 1,690 | (160 | ) | ||||||||||||||||
Total temporarily impaired | $ | 93,627 | $ | (1,499 | ) | $ | 6,235 | $ | (388 | ) | $ | 99,862 | $ | (1,887 | ) | |||||||||
December 31, 2010 | ||||||||||||||||||||||||
U. S. government agencies | $ | 65,178 | $ | (922 | ) | $ | — | $ | — | $ | 65,178 | $ | (922 | ) | ||||||||||
States and political subdivisions | 2,488 | (114 | ) | 1,659 | (282 | ) | 4,147 | (396 | ) | |||||||||||||||
Collateralized mortgage obligations | 14,666 | (266 | ) | 2,699 | (104 | ) | 17,365 | (370 | ) | |||||||||||||||
Mortgage-backed securities | 2,821 | (17 | ) | 8 | (2 | ) | 2,829 | (19 | ) | |||||||||||||||
Trust preferred securities | — | — | 1,663 | (186 | ) | 1,663 | (186 | ) | ||||||||||||||||
Total temporarily impaired | $ | 85,153 | $ | (1,319 | ) | $ | 6,029 | $ | (574 | ) | $ | 91,182 | $ | (1,893 | ) | |||||||||
F-98
Table of Contents
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
March 31, 2011
Unaudited
(Amounts in thousands, except share and per share data)
F-99
Table of Contents
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
March 31, 2011
Unaudited
(Amounts in thousands, except share and per share data)
Current | ||||||||||||||||
Credit | Book | Fair | Unrealized | |||||||||||||
Description | Cusip# | Rating | Value | Value | Loss | |||||||||||
Collateralized mortgage obligations | ||||||||||||||||
Wells Fargo — 2007 - 4 A21 | 94985RAW2 | Caa2 | $ | 2,802 | $ | 2,790 | $ | (12 | ) | |||||||
Trust preferred securities | ||||||||||||||||
West Tennessee Bancshares, Inc. | 956192AA6 | N/A | 675 | 638 | (37 | ) |
First Quarter | First Quarter | |||||||
2011 | 2010 | |||||||
Beginning balance of credit losses at January 1, 2011 and 2010 | $ | 1,069 | $ | 976 | ||||
Other-than-temporary impairment credit losses | — | — | ||||||
Ending balance of cumulative credit losses recognized in earnings | $ | 1,069 | $ | 976 | ||||
F-100
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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
March 31, 2011
Unaudited
(Amounts in thousands, except share and per share data)
March 31, | December 31, | |||||||
2011 | 2010 | |||||||
Commercial real estate | $ | 1,028,903 | $ | 1,080,805 | ||||
Residential real estate | 379,616 | 378,783 | ||||||
Commercial | 208,496 | 222,927 | ||||||
Consumer | 75,379 | 75,498 | ||||||
Other | 3,139 | 1,913 | ||||||
Unearned income | (15,284 | ) | (14,548 | ) | ||||
Loans, net of unearned income | $ | 1,680,249 | $ | 1,745,378 | ||||
Allowance for loan losses | $ | (65,109 | ) | $ | (66,830 | ) | ||
March 31, | March 31, | |||||||
2011 | 2010 | |||||||
Beginning balance | $ | 66,830 | $ | 50,161 | ||||
Add (deduct): | ||||||||
Provision for loan losses | 13,897 | 3,889 | ||||||
Loans charged off | (16,404 | ) | (4,733 | ) | ||||
Recoveries of loans charged off | 786 | 850 | ||||||
Balance, end of period | $ | 65,109 | $ | 50,167 | ||||
F-101
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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
March 31, 2011
Unaudited
(Amounts in thousands, except share and per share data)
Commercial Real | Residential Real | |||||||||||||||||||||||
Estate | Estate | Commercial | Consumer | Other | Total | |||||||||||||||||||
2011 | ||||||||||||||||||||||||
Allowance for loan losses: | ||||||||||||||||||||||||
Beginning balance | $ | 54,203 | $ | 4,431 | $ | 5,080 | $ | 3,108 | $ | 8 | $ | 66,830 | ||||||||||||
Add (deduct): | ||||||||||||||||||||||||
Charge-offs | (14,919 | ) | (312 | ) | (728 | ) | (445 | ) | — | (16,404 | ) | |||||||||||||
Recoveries | 196 | 29 | 378 | 183 | — | 786 | ||||||||||||||||||
Provision | 13,886 | 234 | 915 | (1,138 | ) | — | 13,897 | |||||||||||||||||
Ending balance | $ | 53,366 | $ | 4,382 | $ | 5,645 | $ | 1,708 | $ | 8 | $ | 65,109 | ||||||||||||
As of December 31, 2010 | ||||||||||||||||||||||||
Allowance for loan losses | ||||||||||||||||||||||||
Allocation for loans individually evaluated for impairment | $ | 22,939 | $ | 1,027 | $ | 722 | $ | 146 | $ | — | $ | 24,834 | ||||||||||||
Allocation for loans collectively evaluated for impairment | 31,264 | 3,404 | 4,358 | 2,962 | 8 | 41,996 | ||||||||||||||||||
Ending Balance | $ | 54,203 | $ | 4,431 | $ | 5,080 | $ | 3,108 | $ | 8 | $ | 66,830 | ||||||||||||
As of March 31, 2011 | ||||||||||||||||||||||||
Allowance for loan losses: | ||||||||||||||||||||||||
Allocation for loans individually evaluated for impairment | $ | 19,662 | $ | 1,120 | $ | 1,732 | $ | 154 | $ | — | $ | 22,668 | ||||||||||||
Allocation for loans collectively evaluated for impairment | 33,704 | 3,262 | 3,913 | 1,554 | 8 | 42,441 | ||||||||||||||||||
Ending Balance | $ | 53,366 | $ | 4,382 | $ | 5,645 | $ | 1,708 | $ | 8 | $ | 65,109 | ||||||||||||
As of December 31, 2010 Loans: | ||||||||||||||||||||||||
Ending balance: individually evaluated for impairment | $ | 170,175 | $ | 8,697 | $ | 6,149 | $ | 970 | $ | — | $ | 185,991 | ||||||||||||
Ending balance: collectively evaluated for impairment | $ | 910,630 | $ | 363,506 | $ | 216,778 | $ | 66,470 | $ | 1,913 | $ | 1,559,387 | ||||||||||||
As of March 31, 2011 Loans: | ||||||||||||||||||||||||
Ending balance: individually evaluated for impairment | $ | 181,082 | $ | 9,657 | $ | 7,512 | $ | 1,286 | $ | — | $ | 199,537 | ||||||||||||
Ending balance: collectively evaluated for impairment | $ | 847,821 | $ | 363,266 | $ | 200,984 | $ | 66,458 | $ | 3,139 | $ | 1,481,668 | ||||||||||||
F-102
Table of Contents
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
March 31, 2011
Unaudited
(Amounts in thousands, except share and per share data)
March 31, | December 31, | |||||||
2011 | 2010 | |||||||
Loans with no allowance allocated | $ | 95,432 | $ | 81,981 | ||||
Loans with allowance allocated | $ | 104,105 | $ | 104,010 | ||||
Amount of allowance allocated | 22,668 | 24,834 | ||||||
Average impaired loan balance during the year | 207,166 | 212,167 | ||||||
Interest income not recognized during impairment | 500 | 1,105 |
Unpaid | Average | Interest | ||||||||||||||||||
Recorded | Principal | Related | Recorded | Income | ||||||||||||||||
Investment | Balance | Allowance | Investment | Recognized | ||||||||||||||||
Commercial Real Estate: | ||||||||||||||||||||
Speculative 1-4 Family | $ | 75,482 | $ | 111,392 | $ | 11,085 | $ | 79,742 | $ | 231 | ||||||||||
Construction | 46,456 | 65,525 | 4,379 | 49,747 | 71 | |||||||||||||||
Owner Occupied | 14,782 | 15,365 | 543 | 15,143 | 18 | |||||||||||||||
Non-owner Occupied | 43,663 | 46,035 | 3,655 | 44,177 | 182 | |||||||||||||||
Other | 699 | 738 | — | 706 | — | |||||||||||||||
Residential Real Estate: | ||||||||||||||||||||
HELOC | 3,199 | 3,295 | — | 3,206 | 15 | |||||||||||||||
Mortgage-Prime | 6,260 | 6,801 | 1,069 | 6,373 | 41 | |||||||||||||||
Mortgage-Subprime | 650 | 649 | 51 | 650 | — | |||||||||||||||
Other | 102 | 122 | — | 103 | — | |||||||||||||||
Commercial | 7,512 | 8,702 | 1,732 | 7,825 | 17 | |||||||||||||||
Other | — | — | — | — | — | |||||||||||||||
Consumer: | ||||||||||||||||||||
Prime | 222 | 234 | — | 235 | 3 | |||||||||||||||
Subprime | 86 | 86 | 90 | 86 | — | |||||||||||||||
Auto-Subprime | 424 | 424 | 64 | 424 | — | |||||||||||||||
Other | — | — | — | — | — | |||||||||||||||
Total | $ | 199,537 | 259,368 | 22,668 | 208,417 | 578 | ||||||||||||||
F-103
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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
March 31, 2011
Unaudited
(Amounts in thousands, except share and per share data)
Unpaid | Average | Interest | ||||||||||||||||||
Recorded | Principal | Related | Recorded | Income | ||||||||||||||||
Investment | Balance | Allowance | Investment | Recognized | ||||||||||||||||
Commercial Real Estate: | ||||||||||||||||||||
Speculative 1-4 Family | $ | 72,138 | $ | 98,141 | $ | 11,830 | $ | 85,487 | $ | 2,292 | ||||||||||
Construction | 56,758 | 69,355 | 8,366 | 63,710 | 2,565 | |||||||||||||||
Owner Occupied | 13,590 | 14,513 | 851 | 14,119 | 644 | |||||||||||||||
Non-owner Occupied | 25,824 | 27,561 | 1,823 | 28,786 | 1,375 | |||||||||||||||
Other | 1,865 | 2,090 | 69 | 2,278 | 66 | |||||||||||||||
Residential Real Estate: | ||||||||||||||||||||
HELOC | 2,807 | 2,894 | 346 | 2,603 | 88 | |||||||||||||||
Mortgage-Prime | 4,539 | 4,722 | 590 | 4,661 | 209 | |||||||||||||||
Mortgage-Subprime | 370 | 370 | 57 | 370 | — | |||||||||||||||
Other | 981 | 1,285 | 34 | 2,419 | 47 | |||||||||||||||
Commercial | 6,149 | 7,510 | 722 | 6,729 | 171 | |||||||||||||||
Consumer: | ||||||||||||||||||||
Prime | 217 | 228 | 32 | 252 | 13 | |||||||||||||||
Subprime | 228 | 228 | 35 | 228 | — | |||||||||||||||
Auto-Subprime | 525 | 525 | 79 | 525 | — | |||||||||||||||
Other | — | — | — | — | — | |||||||||||||||
Total | 185,991 | 229,422 | 24,834 | 212,167 | 7,470 | |||||||||||||||
F-104
Table of Contents
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
March 31, 2011
Unaudited
(Amounts in thousands, except share and per share data)
F-105
Table of Contents
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
March 31, 2011
Unaudited
(Amounts in thousands, except share and per share data)
Speculative 1-4 | Owner | Non-Owner | ||||||||||||||||||
Family | Construction | Occupied | Occupied | Other | ||||||||||||||||
Commercial Real Estate Credit Exposure | ||||||||||||||||||||
Prime | $ | — | $ | — | $ | — | $ | — | $ | — | ||||||||||
Desirable | 1,585 | 971 | 173 | |||||||||||||||||
Satisfactory tier I | 2,773 | 899 | 29,677 | 35,754 | 919 | |||||||||||||||
Satisfactory tier II | 13,816 | 18,949 | 111,367 | 155,082 | 6,664 | |||||||||||||||
Acceptable with care | 60,611 | 43,092 | 58,729 | 185,416 | 6,850 | |||||||||||||||
Management Watch | 25,855 | 15,592 | 8,985 | 34,028 | 2,036 | |||||||||||||||
Substandard | 78,764 | 55,190 | 19,051 | �� | 52,929 | 3,146 | ||||||||||||||
Loss | — | — | — | — | — | |||||||||||||||
Total | 181,819 | 135,307 | 228,780 | 463,382 | 19,615 | |||||||||||||||
Speculative 1-4 | Owner | Non-Owner | ||||||||||||||||||
Family | Construction | Occupied | Occupied | Other | ||||||||||||||||
Commercial Real Estate Credit Exposure | ||||||||||||||||||||
Prime | $ | — | $ | — | $ | — | $ | — | $ | — | ||||||||||
Desirable | — | 1,573 | 968 | 177 | — | |||||||||||||||
Satisfactory tier I | 2,836 | 978 | 38,623 | 56,221 | 4,246 | |||||||||||||||
Satisfactory tier II | 14,010 | 34,239 | 102,383 | 130,850 | 17,999 | |||||||||||||||
Acceptable with care | 69,902 | 47,093 | 62,198 | 159,216 | 45,597 | |||||||||||||||
Management Watch | 27,383 | 15,259 | 5,298 | 26,415 | 2,965 | |||||||||||||||
Substandard | 91,845 | 61,388 | 16,289 | 38,037 | 6,817 | |||||||||||||||
Loss | — | — | — | — | — | |||||||||||||||
Total | 205,976 | 160,530 | 225,759 | 410,916 | 77,624 | |||||||||||||||
F-106
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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
March 31, 2011
Unaudited
(Amounts in thousands, except share and per share data)
March 31, | December 31, | |||||||
2011 | 2010 | |||||||
Commercial | Commercial | |||||||
Commercial Credit Exposure | ||||||||
Prime | $ | 1,418 | $ | 1,236 | ||||
Desirable | 6,098 | 7,951 | ||||||
Satisfactory tier I | 31,276 | 33,859 | ||||||
Satisfactory tier II | 85,849 | 91,505 | ||||||
Acceptable with care | 63,295 | 72,286 | ||||||
Management Watch | 8,826 | 8,511 | ||||||
Substandard | 11,734 | 7,579 | ||||||
Loss | — | — | ||||||
Total | 208,496 | 222,927 | ||||||
Mortgage – | ||||||||||||||||
HELOC | Mortgage | Subprime | Other | |||||||||||||
Consumer Real Estate Credit Exposure | ||||||||||||||||
Pass | $ | 192,083 | $ | 151,975 | $ | 11,668 | $ | 3,932 | ||||||||
Management Watch | 1,017 | 2,042 | — | |||||||||||||
Substandard | 3,695 | 6,359 | 50 | 102 | ||||||||||||
Total | 196,795 | 160,376 | 11,718 | 4,034 | ||||||||||||
Mortgage – | ||||||||||||||||
HELOC | Mortgage | Subprime | Other | |||||||||||||
Consumer Real Estate Credit Exposure | ||||||||||||||||
Pass | $ | 188,086 | $ | 131,845 | $ | 11,692 | $ | 29,833 | ||||||||
Management Watch | 1,017 | 317 | — | — | ||||||||||||
Substandard | 2,807 | 5,117 | 50 | 1,529 | ||||||||||||
Total | 191,910 | 137,279 | 11,742 | 31,362 | ||||||||||||
F-107
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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
March 31, 2011
Unaudited
(Amounts in thousands, except share and per share data)
Consumer – | Consumer Auto | |||||||||||
As of March 31, 2011 | Consumer – Prime | Subprime | – Subprime | |||||||||
Consumer Credit Exposure | ||||||||||||
Pass | $ | 33,964 | $ | 12,963 | $ | 19,468 | ||||||
Management Watch | — | — | ||||||||||
Substandard | 221 | 76 | 96 | |||||||||
Total | 34,185 | 13,039 | 19,564 | |||||||||
Consumer – | Consumer Auto | |||||||||||
As of December 31, 2010 | Consumer – Prime | Subprime | – Subprime | |||||||||
Consumer Credit Exposure | ||||||||||||
Pass | $ | 35,029 | $ | 13,093 | $ | 18,588 | ||||||
Management Watch | — | — | — | |||||||||
Substandard | 217 | 39 | 474 | |||||||||
Total | 35,246 | 13,132 | 19,062 | |||||||||
F-108
Table of Contents
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
March 31, 2011
Unaudited
(Amounts in thousands, except share and per share data)
Recorded | ||||||||||||||||||||||||||||
Investment | ||||||||||||||||||||||||||||
Greater | > 90 Days | |||||||||||||||||||||||||||
30-59 Days | 60-89 Days | Than 90 | Total Past | and | ||||||||||||||||||||||||
Past Due | Past Due | Days | Due | Current | Total Loans | Accruing | ||||||||||||||||||||||
Commercial real estate: | ||||||||||||||||||||||||||||
Speculative 1-4 | $ | 9,179 | $ | 3,222 | $ | 41,377 | $ | 53,778 | $ | 128,041 | $ | 181,819 | $ | 5,518 | ||||||||||||||
Family | ||||||||||||||||||||||||||||
Construction | 248 | 18,622 | 18,870 | 116,437 | 135,307 | — | ||||||||||||||||||||||
Owner | 4,499 | 126 | 11,610 | 16,235 | 212,545 | 228,780 | — | |||||||||||||||||||||
Occupied | ||||||||||||||||||||||||||||
Non-owner | 6,170 | 3,848 | 17,675 | 27,693 | 435,689 | 463,382 | — | |||||||||||||||||||||
Occupied | ||||||||||||||||||||||||||||
Other | 835 | 619 | 192 | 1,646 | 17,969 | 19,615 | — | |||||||||||||||||||||
Residential real estate: | ||||||||||||||||||||||||||||
HELOC | 1,077 | 155 | 1,024 | 2,256 | 194,539 | 196,795 | — | |||||||||||||||||||||
Mortgage-Prime | 6,196 | 1,381 | 2,711 | 10,288 | 150,088 | 160,376 | — | |||||||||||||||||||||
Mortgage-Subprime | 51 | 6 | 72 | 129 | 11,589 | 11,718 | — | |||||||||||||||||||||
Other | 85 | 3 | 81 | 169 | 3,865 | 4,034 | — | |||||||||||||||||||||
Commercial | 608 | 267 | 5,795 | 6,670 | 201,826 | 208,496 | 72 | |||||||||||||||||||||
Consumer: | ||||||||||||||||||||||||||||
Prime | 201 | 58 | 51 | 310 | 33,875 | 34,185 | 2 | |||||||||||||||||||||
Subprime | 140 | 104 | 53 | 297 | 12,742 | 13,039 | — | |||||||||||||||||||||
Auto-Subprime | 565 | 110 | 125 | 800 | 18,764 | 19,564 | — | |||||||||||||||||||||
Other | — | — | — | — | 3,139 | 3,139 | — | |||||||||||||||||||||
Total | 29,606 | 10,147 | 99,388 | 139,141 | 1,541,108 | 1,680,249 | 5,592 | |||||||||||||||||||||
F-109
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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
March 31, 2011
(Amounts in thousands, except share and per share data)
Recorded | ||||||||||||||||||||||||||||
Investment | ||||||||||||||||||||||||||||
Greater | > 90 Days | |||||||||||||||||||||||||||
30-59 Days | 60-89 Days | Than 90 | Total Past | and | ||||||||||||||||||||||||
Past Due | Past Due | Days | Due | Current | Total Loans | Accruing | ||||||||||||||||||||||
Commercial real estate: | ||||||||||||||||||||||||||||
Speculative 1-4 | $ | 22,267 | $ | 1,777 | $ | 30,802 | $ | 54,846 | $ | 151,130 | $ | 205,976 | $ | 1,758 | ||||||||||||||
Family | ||||||||||||||||||||||||||||
Construction | 14,541 | — | 26,915 | 41,456 | 119,074 | 160,530 | — | |||||||||||||||||||||
Owner | 8,114 | 1,633 | 4,137 | 13,884 | 211,875 | 225,759 | — | |||||||||||||||||||||
Occupied | ||||||||||||||||||||||||||||
Non-owner | 4,014 | 5,961 | 8,814 | 18,789 | 392,127 | 410,916 | 170 | |||||||||||||||||||||
Occupied | ||||||||||||||||||||||||||||
Other | 116 | 865 | 1,491 | 2,472 | 75,152 | 77,624 | 18 | |||||||||||||||||||||
Residential real estate: | ||||||||||||||||||||||||||||
HELOC | 747 | 358 | 644 | 1,749 | 190,161 | 191,910 | — | |||||||||||||||||||||
Mortgage-Prime | 1,359 | 915 | 1,779 | 4,053 | 133,226 | 137,279 | 8 | |||||||||||||||||||||
Mortgage-Subprime | 100 | 51 | 98 | 249 | 11,493 | 11,742 | — | |||||||||||||||||||||
Other | 403 | 176 | 566 | 1,145 | 30,217 | 31,362 | 19 | |||||||||||||||||||||
Commercial | 2,422 | 593 | 3,922 | 6,937 | 215,990 | 222,927 | 92 | |||||||||||||||||||||
Consumer: | ||||||||||||||||||||||||||||
Prime | 315 | 86 | 108 | 509 | 34,737 | 35,246 | 29 | |||||||||||||||||||||
Subprime | 155 | 64 | 6 | 225 | 12,907 | 13,132 | — | |||||||||||||||||||||
Auto-Subprime | 476 | 166 | 101 | 743 | 18,319 | 19,062 | 18 | |||||||||||||||||||||
Other | 73 | — | — | 73 | 1,840 | 1,913 | — | |||||||||||||||||||||
Total | 55,102 | 12,645 | 79,383 | 147,130 | 1,598,248 | 1,745,378 | 2,112 | |||||||||||||||||||||
F-110
Table of Contents
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
March 31, 2011
Unaudited
(Amounts in thousands, except share and per share data)
March 31, | December | |||||||
2011 | 31, 2010 | |||||||
Commercial real estate: | ||||||||
Speculative 1-4 Family | $ | 60,024 | $ | 63,298 | ||||
Construction | 38,629 | 41,789 | ||||||
Owner Occupied | 14,458 | 5,511 | ||||||
Non-owner Occupied | 30,720 | 18,772 | ||||||
Other | 192 | 1,865 | ||||||
Residential real estate: | ||||||||
HELOC | 2,025 | 1,668 | ||||||
Mortgage-Prime | 4,758 | 3,350 | ||||||
Mortgage-Subprime | 351 | 254 | ||||||
Other | 102 | 957 | ||||||
Commercial | 7,034 | 5,813 | ||||||
Consumer: | ||||||||
Prime | 143 | 130 | ||||||
Subprime | 163 | 107 | ||||||
Auto-Subprime | 217 | 193 | ||||||
Other | — | — | ||||||
Total | 158,816 | 143,707 | ||||||
March 31, | December 31, | |||||||
2011 | 2010 | |||||||
Loans past due 90 days still on accrual | $ | 5,592 | $ | 2,112 | ||||
Nonaccrual loans | 158,816 | 143,707 | ||||||
Total | $ | 164,408 | $ | 145,819 | ||||
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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
March 31, 2011
Unaudited
(Amounts in thousands, except share and per share data)
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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
March 31, 2011
Unaudited
(Amounts in thousands, except share and per share data)
Three Months Ended | ||||||||
March 31, | ||||||||
2011 | 2010 | |||||||
Basic Earnings Per Share | ||||||||
Net income (loss) | $ | (10,311 | ) | $ | 3,196 | |||
Less: preferred stock dividends and accretion of discount on warrants | 1,250 | 1,250 | ||||||
Net income (loss) available to common shareholders | $ | (11,561 | ) | $ | 1,946 | |||
Weighted average common shares outstanding | 13,108,598 | 13,082,347 | ||||||
Basic earnings (loss) per share available to common shareholders | $ | (0.88 | ) | $ | 0.15 | |||
Diluted Earnings Per Share | ||||||||
Net income (loss) | $ | (10,311 | ) | $ | 3,196 | |||
Less: preferred stock dividends and accretion of discount on warrants | 1,250 | 1,250 | ||||||
Net income (loss) available to common shareholders | $ | (11,561 | ) | $ | 1,946 | |||
Weighted average common shares outstanding | 13,108,598 | 13,082,347 | ||||||
Add: Dilutive effects of assumed conversions of restricted stock and exercises of stock options and warrants | — | 90,380 | ||||||
Weighted average common and dilutive potential common shares outstanding | 13,108,598 | 13,172,727 | ||||||
Diluted earnings (loss) per share available to common shareholders | $ | (0.88 | ) | $ | 0.15 | |||
NOTE: | Dividends of $3,255 on preferred stock have been accrued as the Company intends to pay. |
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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
March 31, 2011
Unaudited
(Amounts in thousands, except share and per share data)
Other | Holding | |||||||||||||||||||
Three months ended March 31, 2011 | Bank | Segments | Company | Eliminations | Totals | |||||||||||||||
Net interest income (expense) | $ | 17,611 | $ | 2,148 | $ | (492 | ) | $ | — | $ | 19,267 | |||||||||
Provision for loan losses | 13,627 | 270 | — | — | 13,897 | |||||||||||||||
Noninterest income | 7,379 | 476 | 14 | (242 | ) | 7,627 | ||||||||||||||
Noninterest expense | 22,115 | 1,243 | (89 | ) | (242 | ) | 23,027 | |||||||||||||
Income tax expense (benefit) | (46 | ) | 436 | (109 | ) | — | 281 | |||||||||||||
Segment profit (loss) | (10,706 | ) | $ | 675 | $ | (280 | ) | $ | — | $ | (10,311 | ) | ||||||||
Segment assets at March 31, 2011 | $ | 2,342,891 | $ | 43,322 | $ | 6,481 | $ | — | $ | 2,392,694 | ||||||||||
Other | Holding | |||||||||||||||||||
Three months ended March 31, 2010 | Bank | Segments | Company | Eliminations | Totals | |||||||||||||||
Net interest income (expense) | $ | 20,068 | $ | 2,063 | $ | (472 | ) | $ | — | $ | 21,659 | |||||||||
Provision for loan losses | 3,356 | 533 | — | — | 3,889 | |||||||||||||||
Noninterest income | 7,528 | 371 | 14 | (227 | ) | 7,686 | ||||||||||||||
Noninterest expense | 19,469 | 1,115 | 189 | (227 | ) | 20,546 | ||||||||||||||
Income tax expense (benefit) | 1,628 | 309 | (223 | ) | — | 1,714 | ||||||||||||||
Segment profit (loss) | 3,143 | $ | 477 | $ | (424 | ) | $ | — | $ | 3,196 | ||||||||||
Segment assets at March 31, 2010 | $ | 2,520,503 | $ | 41,663 | $ | 7,566 | $ | — | $ | 2,569,732 | ||||||||||
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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
March 31, 2011
Unaudited
(Amounts in thousands, except share and per share data)
As of and for the period ended March 31, 2011 | Bank | Other | Total | |||||||||
Nonperforming loans as percentage of total loans, net of unearned income | 9.84 | % | 1.65 | % | 9.78 | % | ||||||
Nonperforming assets as a percentage of total assets | 9.34 | % | 2.07 | % | 9.38 | % | ||||||
Allowance for loan losses as a percentage of total loans, net of unearned income | 3.72 | % | 7.25 | % | 3.87 | % | ||||||
Allowance for loan losses as a percentage of nonperforming loans | 37.81 | % | 439.21 | % | 39.60 | % | ||||||
YTD net charge-offs to average total loans, net of unearned income | 0.90 | % | 0.61 | % | 0.91 | % |
As of and for the period ended March 31, 2010 | Bank | Other | Total | |||||||||
Nonperforming loans as percentage of total loans, net of unearned income | 3.19 | % | 1.23 | % | 3.19 | % | ||||||
Nonperforming assets as a percentage of total assets | 5.25 | % | 1.37 | % | 5.27 | % | ||||||
Allowance for loan losses as a percentage of total loans, net of unearned income | 2.36 | % | 8.13 | % | 2.52 | % | ||||||
Allowance for loan losses as a percentage of nonperforming loans | 73.98 | % | 661.74 | % | 78.85 | % | ||||||
YTD net charge-offs to average total loans, net of unearned income | 0.17 | % | 1.25 | % | 0.19 | % |
As of and for the year ended December 31, 2010 | Bank | Other | Total | |||||||||
Nonperforming loans as percentage of total loans, net of unearned income | 8.40 | % | 1.30 | % | 8.35 | % | ||||||
Nonperforming assets as a percentage of total assets | 8.52 | % | 1.34 | % | 8.56 | % | ||||||
Allowance for loan losses as a percentage of total loans, net of unearned income | 3.68 | % | 7.33 | % | 3.83 | % | ||||||
Allowance for loan losses as a percentage of nonperforming loans | 43.80 | % | 562.24 | % | 45.83 | % | ||||||
Net charge-offs to average total loans, net of unearned income | 2.76 | % | 4.20 | % | 2.84 | % |
Net charge-offs | Bank | Other | Total | |||||||||
For the three month period ended March 31, 2011 | $ | 15,347 | $ | 270 | $ | 15,617 | ||||||
For the three month period ended March 31, 2010 | $ | 3,345 | $ | 537 | $ | 3,882 | ||||||
For the year ended December 31, 2010 | $ | 52,615 | $ | 1,823 | $ | 54,438 |
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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
March 31, 2011
Unaudited
(Amounts in thousands, except share and per share data)
F-116
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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
March 31, 2011
Unaudited
(Amounts in thousands, except share and per share data)
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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
March 31, 2011
Unaudited
(Amounts in thousands, except share and per share data)
Total Carrying | Assets/Liabilities | |||||||||||||||||||
Fair Value Measurement Using | Amount in | Measured at Fair | ||||||||||||||||||
Description | Level 1 | Level 2 | Level 3 | Balance Sheet | Value | |||||||||||||||
March 31, 2011 | �� | |||||||||||||||||||
Securities available for sale | ||||||||||||||||||||
U.S. government agencies | $ | — | $ | 93,073 | $ | — | $ | 93,073 | $ | 93,073 | ||||||||||
States and political subdivisions | — | 30,799 | — | 30,799 | 30,799 | |||||||||||||||
Collateralized mortgage obligations | — | 79,766 | — | 79,766 | 79,766 | |||||||||||||||
Mortgage-backed securities | — | 21,404 | — | 21,404 | 21,404 | |||||||||||||||
Trust preferred securities | — | 1,052 | 638 | 1,690 | 1,690 | |||||||||||||||
December 31, 2010 | ||||||||||||||||||||
Securities available for sale | ||||||||||||||||||||
U.S. government agencies | $ | — | $ | 83,299 | $ | — | $ | 83,299 | $ | 83,299 | ||||||||||
States and political subdivisions | — | 31,501 | — | 31,501 | 31,501 | |||||||||||||||
Collateralized mortgage obligations | — | 67,575 | — | 67,575 | 67,575 | |||||||||||||||
Mortgage-backed securities | — | 17,964 | — | 17,964 | 17,964 | |||||||||||||||
Trust preferred securities | — | 1,025 | 638 | 1,663 | 1,663 |
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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
March 31, 2011
Unaudited
(Amounts in thousands, except share and per share data)
March 31, | March 31, | |||||||
2011 | 2010 | |||||||
Beginning balance, January 1 | $ | 638 | $ | 638 | ||||
Total gains or (loss) (realized/unrealized) | ||||||||
Included in earnings | — | — | ||||||
Included in other comprehensive income | — | — | ||||||
Paydowns and maturities | — | — | ||||||
Transfers into Level 3 | — | — | ||||||
Ending balance, March 31 | $ | 638 | $ | 638 | ||||
Total Carrying | Assets/Liabilities | |||||||||||||||||||
Fair Value Measurement Using | Amount in | Measured at Fair | ||||||||||||||||||
Description | Level 1 | Level 2 | Level 3 | Balance Sheet | Value | |||||||||||||||
March 31, 2011 | ||||||||||||||||||||
Other real estate | $ | — | $ | — | $ | 6,008 | $ | 6,008 | $ | 6,008 | ||||||||||
Impaired loans | — | — | 125,361 | 125,361 | 125,361 | |||||||||||||||
Total assets at fair value | $ | — | $ | — | $ | 131,369 | $ | 131,369 | $ | 131,369 | ||||||||||
December 31, 2010 | ||||||||||||||||||||
Other real estate | $ | — | $ | — | $ | 38,806 | $ | 38,806 | $ | 38,806 | ||||||||||
Impaired loans | — | — | 129,088 | 129,088 | 129,088 | |||||||||||||||
Total assets at fair value | $ | — | $ | — | $ | 167,174 | $ | 167,174 | $ | 167,174 | ||||||||||
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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
March 31, 2011
Unaudited
(Amounts in thousands, except share and per share data)
March 31, | December 31, | |||||||||||||||
2011 | 2010 | |||||||||||||||
Carrying | Fair | Carrying | Fair | |||||||||||||
Value | Value | Value | Value | |||||||||||||
Financial assets: | ||||||||||||||||
Cash and cash equivalents | $ | 331,416 | $ | 331,416 | $ | 294,214 | $ | 294,214 | ||||||||
Securities available for sale | 226,732 | 226,732 | 202,002 | 202,002 | ||||||||||||
Securities held to maturity | 115 | 115 | 465 | 467 | ||||||||||||
Loans held for sale | 960 | 970 | 1,299 | 1,317 | ||||||||||||
Loans, net | 1,615,140 | 1,600,794 | 1,678,548 | 1,664,126 | ||||||||||||
FHLB and other stock | 12,734 | 12,734 | 12,734 | 12,734 | ||||||||||||
Cash surrender value of life insurance | 31,758 | 31,758 | 31,479 | 31,479 | ||||||||||||
Accrued interest receivable | 7,332 | 7,332 | 7,845 | 7,845 | ||||||||||||
Financial liabilities: | ||||||||||||||||
Deposit accounts | $ | 1,975,635 | $ | 1,988,676 | $ | 1,976,854 | $ | 1,987,105 | ||||||||
Federal funds purchased and repurchase agreements | 18,712 | 18,712 | 19,413 | 19,413 | ||||||||||||
FHLB advances and notes payable | 158,588 | 166,703 | 158,653 | 166,762 | ||||||||||||
Subordinated debentures | 88,662 | 62,985 | 88,662 | 64,817 | ||||||||||||
Accrued interest payable | 2,454 | 2,454 | 2,140 | 2,140 |
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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
March 31, 2011
Unaudited
(Amounts in thousands, except share and per share data)
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Three Months Ended | ||||||||||||||||||||||||
March 31, | ||||||||||||||||||||||||
2011 | 2010 | |||||||||||||||||||||||
Average | Average | Average | Average | |||||||||||||||||||||
Balance | Interest | Rate | Balance | Interest | Rate | |||||||||||||||||||
Interest-earning assets: | ||||||||||||||||||||||||
Loans(1) (2) | $ | 1,567,761 | $ | 24,614 | 6.37 | % | $ | 1,954,136 | $ | 30,080 | 6.24 | % | ||||||||||||
Investment securities(2) | 227,762 | 2,007 | 3.57 | % | 169,020 | 1,906 | 4.57 | % | ||||||||||||||||
Other short-term investments | 294,905 | 181 | 0.25 | % | 148,394 | 94 | 0.26 | % | ||||||||||||||||
Total interest-earning assets | $ | 2,090,428 | $ | 26,802 | 5.20 | % | $ | 2,271,550 | $ | 32,080 | 5.73 | % | ||||||||||||
Non-interest earning assets | 340,868 | 306,586 | ||||||||||||||||||||||
Total assets | $ | 2,431,296 | $ | 2,578,136 | ||||||||||||||||||||
Interest-bearing liabilities: | ||||||||||||||||||||||||
Deposits: | ||||||||||||||||||||||||
Interest checking, savings and money market | $ | 1,079,824 | $ | 1,811 | 0.68 | % | $ | 941,888 | $ | 2,398 | 1.03 | % | ||||||||||||
Time deposits | 763,967 | 3,519 | 1.87 | % | 940,388 | 5,663 | 2.44 | % | ||||||||||||||||
Total interest-bearing deposits | $ | 1,843,791 | $ | 5,330 | 1.17 | % | $ | 1,882,276 | $ | 8,061 | 1.74 | % | ||||||||||||
Securities sold under repurchase agreements and short-term borrowings | 16,994 | 4 | 0.10 | % | 23,615 | 6 | 0.10 | % | ||||||||||||||||
Notes payable | 158,628 | 1,543 | 3.94 | % | 171,946 | 1,694 | 4.00 | % | ||||||||||||||||
Subordinated debentures | 88,662 | 481 | 2.20 | % | 88,662 | 472 | 2.16 | % | ||||||||||||||||
Total interest-bearing liabilities | $ | 2,108,075 | $ | 7,358 | 1.42 | % | $ | 2,166,499 | $ | 10,233 | 1.92 | % | ||||||||||||
�� | ||||||||||||||||||||||||
Non-interest bearing liabilities: | ||||||||||||||||||||||||
Demand deposits | 161,702 | 163,173 | ||||||||||||||||||||||
Other liabilities | 17,731 | 18,098 | ||||||||||||||||||||||
Total non-interest bearing liabilities | 179,433 | 181,271 | ||||||||||||||||||||||
Total liabilities | 2,287,508 | 2,347,770 | ||||||||||||||||||||||
Shareholders’ equity | 143,788 | 230,366 | ||||||||||||||||||||||
Total liabilities and shareholders’ equity | $ | 2,431,296 | $ | 2,578,136 | ||||||||||||||||||||
Net interest income | $ | 19,444 | $ | 21,847 | ||||||||||||||||||||
Interest rate spread | 3.77 | % | 3.81 | % | ||||||||||||||||||||
Net yield on interest-earning assets | 3.77 | % | 3.90 | % | ||||||||||||||||||||
1 | Average loan balances excluded nonaccrual loans for the periods presented. | |
2 | Fully Taxable Equivalent (“FTE”) at the rate of 35%. The FTE basis adjusts for the tax benefits of income on certain tax-exempt loans and investments using the federal statutory rate of 35% for each period presented. The Company believes this measure to be the preferred industry measurement of net interest income and provides relevant comparison between taxable and non-taxable amounts. |
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Required | Required | |||||||||||||||
Minimum | to be | |||||||||||||||
Ratio | Well Capitalized | Bank | Company | |||||||||||||
Tier 1 risk-based | 4.00 | % | 6.00 | % | 11.83 | % | 9.36 | % | ||||||||
capital | ||||||||||||||||
Total risk-based capital | 8.00 | % | 10.00 | % | 13.11 | % | 13.03 | % | ||||||||
Leverage Ratio | 4.00 | % | 5.00 | % | 8.55 | % | 6.78 | % |
Less than 1_ | More than 5_ | |||||||||||||||||||
Year | 1-3 Years | 3-5 Years | Years | Total | ||||||||||||||||
Commitments to make loans — fixed | $ | 272 | $ | 862 | $ | 744 | $ | 152 | $ | 2,030 | ||||||||||
Commitments to make loans — variable | 606 | 225 | — | 698 | 1,529 | |||||||||||||||
Unused lines of credit | 126,883 | 22,888 | 14,379 | 72,492 | 236,642 | |||||||||||||||
Letters of credit | 17,532 | 7,762 | — | — | 25,294 | |||||||||||||||
Total | $ | 145,293 | $ | 31,737 | $ | 15,123 | $ | 73,342 | $ | 265,495 | ||||||||||
Less than 1_ | More than 5_ | |||||||||||||||||||
Year | 1-3 Years | 3-5 Years | Years | Total | ||||||||||||||||
Certificates of deposits | $ | 527,774 | $ | 142,656 | $ | 56,445 | $ | 3,448 | $ | 730,323 | ||||||||||
FHLB advances and notes payable | 15,291 | 75,570 | 20,611 | 47,115 | 158,587 | |||||||||||||||
Subordinated debentures | — | — | — | 88,662 | 88,662 | |||||||||||||||
Operating lease obligations | 1,292 | 2,284 | 1,093 | 648 | 5,317 | |||||||||||||||
Deferred compensation | 1,515 | — | 264 | 2,131 | 3,910 | |||||||||||||||
Purchase obligations | — | — | — | — | — | |||||||||||||||
Total | $ | 545,872 | $ | 220,510 | $ | 78,413 | $ | 142,004 | $ | 986,799 | ||||||||||
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F-132
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Unaudited Consolidated Financial Statements for the Three Months Ended
March 31, 2010 and 2011
G-1
Table of Contents
CONSOLIDATED BALANCE SHEETS
(Unaudited) | ||||||||
(Dollars and shares in thousands, except per share data) | March 31, 2011 | December 31, 2010 | ||||||
Assets | ||||||||
Cash and due from banks | $ | 719,804 | $ | 886,925 | ||||
Trading securities | 602 | — | ||||||
Investment Securities held to maturity | 250 | 250 | ||||||
Investment securities available for sale | 764,550 | 479,466 | ||||||
Loans held for sale | 1,424 | — | ||||||
Loans, net of deferred loan costs and fees | 2,939,768 | 1,742,747 | ||||||
Less: Allowance for loan losses | 2,287 | 753 | ||||||
Loans, net | 2,937,481 | 1,741,994 | ||||||
�� | ||||||||
Other real estate owned | 84,533 | 70,817 | ||||||
Indemnification asset | 77,597 | 91,467 | ||||||
Receivable from FDIC | 45,095 | 46,585 | ||||||
Premises and equipment, net | 71,165 | 44,078 | ||||||
Goodwill | 67,610 | 36,616 | ||||||
Intangible assets, net | 19,340 | 15,154 | ||||||
Deferred income tax asset | 68,929 | 16,789 | ||||||
Accrued interest receivable and other assets | 92,758 | 66,850 | ||||||
Total Assets | $ | 4,951,138 | $ | 3,496,991 | ||||
Liabilities and Shareholders’ Equity | ||||||||
Liabilities | ||||||||
Deposits: | ||||||||
Noninterest-bearing demand | $ | 463,206 | $ | 295,713 | ||||
Interest-bearing | 3,075,516 | 1,964,384 | ||||||
Total deposits | 3,538,722 | 2,260,097 | ||||||
Federal Home Loan Bank (FHLB) advances | 280,151 | 243,067 | ||||||
Short-term borrowings | 50,650 | 61,969 | ||||||
Long-term borrowings | 97,358 | 22,887 | ||||||
Accrued interest payable and other liabilities | 43,953 | 27,735 | ||||||
Total liabilities | 4,010,834 | 2,615,755 | ||||||
Shareholders’ equity | ||||||||
Preferred stock $0.01 par value: 50,000 shares authorized, 0 shares issued | — | — | ||||||
Common stock—Class A $0.01 par value: 200,000 shares authorized, 20,889 and 21,384 shares issued and outstanding, respectively | 209 | 214 | ||||||
Common stock—Class B $0.01 par value: 200,000 shares authorized, 25,261 and 23,736 shares issued and outstanding, respectively | 252 | 237 | ||||||
Additional paid in capital | 878,485 | 865,673 | ||||||
Retained earnings | 12,338 | 11,938 | ||||||
Accumulated other comprehensive loss | (97 | ) | (2,759 | ) | ||||
Noncontrolling interest | 49,117 | 5,933 | ||||||
Total shareholders’ equity | 940,304 | 881,236 | ||||||
Total Liabilities and Shareholders’ Equity | $ | 4,951,138 | $ | 3,496,991 | ||||
G-2
Table of Contents
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
(Dollars and shares in thousands, except per share amounts)
Three Months Ended | Three Months Ended | |||||||
March 31, 2011 | March 31, 2010 | |||||||
Interest and dividend income | ||||||||
Loans, including fees | $ | 35,551 | $ | — | ||||
Investment securities: | ||||||||
Taxable interest income | 3,693 | — | ||||||
Tax-exempt interest income | 207 | — | ||||||
Dividends | 13 | — | ||||||
Interest-bearing deposits in other banks | 710 | 725 | ||||||
Federal Home Loan Bank stock | 131 | — | ||||||
Total interest and dividend income | 40,305 | 725 | ||||||
Interest expense | ||||||||
Deposits | 5,926 | — | ||||||
Federal Home Loan Bank advances | 623 | — | ||||||
Short-term borrowings | 35 | — | ||||||
Long-term borrowings | 882 | — | ||||||
Total interest expense | 7,466 | — | ||||||
Net interest income | 32,839 | 725 | ||||||
Provision for loan losses | 1,545 | — | ||||||
Net interest income after provision for loan losses | 31,294 | 725 | ||||||
Non-interest income | ||||||||
Service charges on deposit accounts | 1,919 | — | ||||||
Fees on mortgage loans originated and sold | 531 | — | ||||||
Investment advisory and trust fees | 387 | — | ||||||
Other income | 1,721 | — | ||||||
Investment securities losses, net | (57 | ) | — | |||||
Total non-interest income | 4,501 | — | ||||||
Non-interest expense | ||||||||
Salaries and employee benefits | 15,093 | 851 | ||||||
Net occupancy and equipment expense | 5,338 | 15 | ||||||
Foreclosed asset related expense | 1,178 | ��� | ||||||
Conversion expenses | 3,737 | — | ||||||
Organizational expenses | — | 2,100 | ||||||
Other expense | 9,694 | 148 | ||||||
Total non-interest expense | 35,040 | 3,114 | ||||||
Income (loss) before income taxes | 755 | (2,389 | ) | |||||
Income tax expense (benefit) | 405 | (1,008 | ) | |||||
Net income (loss) before attribution of noncontrolling interests | 350 | (1,381 | ) | |||||
Net loss attributable to noncontrolling interests | 50 | — | ||||||
Net income (loss) attributable to North American Financial Holdings, Inc. | $ | 400 | $ | (1,381 | ) | |||
Basic and diluted earnings (loss) per share | $ | 0.01 | $ | (0.04 | ) | |||
G-3
Table of Contents
Consolidated Statements of Changes in Shareholders’ Equity
(Unaudited)
(Dollars and shares in thousands, except per share data)
Shares | Shares | Accumulated | ||||||||||||||||||||||||||||||||||
Common | Common | Additional | Other | Total | ||||||||||||||||||||||||||||||||
Stock | Class A | Stock | Class B | Paid in | Retained | Comprehensive | Noncontrolling | Shareholders’ | ||||||||||||||||||||||||||||
Class A | Stock | Class B | Stock | Capital | Earnings | Loss | Interest | Equity | ||||||||||||||||||||||||||||
Balance, January 1, 2011 | 21,384 | $ | 214 | 23,736 | $ | 237 | $ | 865,673 | $ | 11,938 | $ | (2,759 | ) | $ | 5,933 | $ | 881,236 | |||||||||||||||||||
Comprehensive income: | ||||||||||||||||||||||||||||||||||||
Net income | 400 | (50 | ) | 350 | ||||||||||||||||||||||||||||||||
Other comprehensive income, net of tax | ||||||||||||||||||||||||||||||||||||
Net market valuation adjustment on securities available for sale | 2,611 | 269 | 2,880 | |||||||||||||||||||||||||||||||||
Less: reclassification adjustment for gains included in net income | (7 | ) | — | (7 | ) | |||||||||||||||||||||||||||||||
Other comprehensive income, net of tax expense of $1,761 | 2,604 | 269 | 2,873 | |||||||||||||||||||||||||||||||||
Comprehensive income | 3,223 | |||||||||||||||||||||||||||||||||||
Conversion of shares | (1,525 | ) | (15 | ) | 1,525 | 15 | — | |||||||||||||||||||||||||||||
Restricted stock grants | 1,030 | 10 | (10 | ) | — | |||||||||||||||||||||||||||||||
Stock based compensation | 408 | 408 | ||||||||||||||||||||||||||||||||||
Origination of noncontrolling interest | 43,785 | 43,785 | ||||||||||||||||||||||||||||||||||
Rights offerings of subsidiaries | 12,414 | 58 | (820 | ) | 11,652 | |||||||||||||||||||||||||||||||
Balance, March 31, 2011 | 20,889 | $ | 209 | 25,261 | $ | 252 | $ | 878,485 | $ | 12,338 | $ | (97 | ) | $ | 49,117 | $ | 940,304 | |||||||||||||||||||
Shares | Shares | Accumulated | ||||||||||||||||||||||||||||||||||
Common | Common | Additional | Other | Total | ||||||||||||||||||||||||||||||||
Stock | Class A | Stock | Class B | Paid in | Accumulated | Comprehensive | Noncontrolling | Shareholders’ | ||||||||||||||||||||||||||||
Class A | Stock | Class B | Stock | Capital | deficit | Loss | Interest | Equity | ||||||||||||||||||||||||||||
Balance, January 1, 2010 | 19,181 | $ | 192 | 8,726 | $ | 87 | $ | 526,133 | $ | (92 | ) | $ | — | $ | — | 526,320 | ||||||||||||||||||||
Net loss | (1,381 | ) | (1,381 | ) | ||||||||||||||||||||||||||||||||
Issuance of common stock | 3,114 | 31 | 1,073 | 11 | 79,158 | 79,200 | ||||||||||||||||||||||||||||||
Balance, March 31, 2010 | 22,295 | $ | 223 | 9,799 | $ | 98 | $ | 605,291 | $ | (1,473 | ) | $ | — | $ | — | $ | 604,139 | |||||||||||||||||||
G-4
Table of Contents
CONSOLIDATED STATEMENTS OF CASH FLOWS
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS
(Unaudited)
(Dollars in thousands)
Three Months Ended | Three Months Ended | |||||||
March 31, 2011 | March 31, 2010 | |||||||
Cash flows from operating activities: | ||||||||
Net income (loss) | $ | 350 | $ | (1,381 | ) | |||
Adjustments to reconcile net income (loss) to net cash (used in) provided by operating activities: | ||||||||
Accretion of acquired loans | (29,916 | ) | — | |||||
Depreciation and amortization | 197 | — | ||||||
Provision for loan losses | 1,545 | — | ||||||
Deferred income tax expense (income) | (734 | ) | (887 | ) | ||||
Investment securities net realized gains | (57 | ) | — | |||||
Net amortization of investment premium/discount | 1,983 | — | ||||||
Stock-based compensation | 545 | — | ||||||
Gain on sales of OREO | (105 | ) | — | |||||
OREO valuation adjustments | 131 | — | ||||||
Other | (127 | ) | — | |||||
Mortgage loans originated for sale | (10,790 | ) | — | |||||
Proceeds from sales of mortgage loans originated for sale | 18,739 | — | ||||||
Fees on mortgage loans sold | (353 | ) | — | |||||
Change in accrued interest receivable and other assets | 16,373 | 50 | ||||||
Change in accrued interest payable and other liabilities | 5,603 | 101 | ||||||
Net cash provided by (used in) operating activities | 3,384 | (2,117 | ) | |||||
Cash flows from investing activities: | ||||||||
Purchases of investment securities available for sale | (105,870 | ) | — | |||||
Sales of investment securities available for sale | 6,635 | — | ||||||
Repayments of principal and maturities of investment securities available for sale | 33,811 | — | ||||||
Cash acquired through acquisition of Capital Bank Corp. | 27,955 | — | ||||||
Principal repayments on loans, net of loans originated or acquired | (44,632 | ) | — | |||||
Purchases of premises and equipment | (1,161 | ) | — | |||||
Proceeds from sales of loans | — | — | ||||||
Proceeds from sale of OREO | 14,358 | — | ||||||
Net cash used in investing activities | (68,904 | ) | — | |||||
Cash flows from financing activities: | ||||||||
Issuance of common stock | — | 79,200 | ||||||
Net increase in demand, money market and savings accounts | 111,337 | — | ||||||
Net decrease in time deposits | (184,178 | ) | — | |||||
Net decrease in federal funds purchased and securities sold under agreements to repurchase | (11,320 | ) | — | |||||
Net decrease short term FHLB advances | (10,000 | ) | — | |||||
Repayment of long term FHLB advances | (19,030 | ) | — | |||||
Net proceeds from common stock rights offering | 11,590 | — | ||||||
Net cash (used in) provided by financing activities | (101,601 | ) | 79,200 | |||||
Net decrease in cash and cash equivalents | (167,121 | ) | 77,083 | |||||
Cash and cash equivalents at beginning of period | 886,925 | 526,711 | ||||||
Cash and cash equivalents at end of period | $ | 719,804 | $ | 603,794 | ||||
Supplemental disclosures of cash paid: | ||||||||
Interest | $ | 9,103 | $ | — | ||||
Income taxes | 5,200 | — | ||||||
Supplemental information: | ||||||||
Transfer of loans to OREO | 12,842 | — |
G-5
Table of Contents
Notes to Consolidated Financial Statements
March 31, 2011 and 2010
(dollars in thousands)
• | Commercial mortgage—owner occupied, office building, hotel or motel, guest houses, retail, multi-family, farmland, and other; | ||
• | Residential mortgage—primary residence, second residence and investment; | ||
• | Construction and vacant land; | ||
• | Commercial and agricultural | ||
• | Indirect auto—prime and sub-prime; | ||
• | Home equity; and | ||
• | Other consumer |
G-6
Table of Contents
• | Commercial and agricultural—industry specific economic trends and individual borrower financial condition | ||
• | Construction and vacant land, farmland and commercial mortgage loans—type of property (i.e., residential, commercial, industrial) and geographic concentrations and risks and individual borrower financial condition | ||
• | Residential mortgage, indirect auto and consumer—historical charge-offs and current trends in borrower’s credit, property collateral, and loan characteristics |
G-7
Table of Contents
Three Months | Three Months | |||||||
Ended March 31, | Ended March 31, | |||||||
2011 | 2010 | |||||||
Weighted average number of common shares outstanding: | ||||||||
Basic | 45,120 | 31,117 | ||||||
Dilutive effect of options outstanding | — | — | ||||||
Dilutive effect of restricted shares | 130 | — | ||||||
Diluted | 45,250 | 31,117 | ||||||
G-8
Table of Contents
Three Months | Three Months | |||||||
Ended March 31, | Ended March 31, | |||||||
2011 | 2011 | |||||||
Anti-dilutive stock options | 397 | — | ||||||
Anti-dilutive restricted shares | — | — |
G-9
Table of Contents
As of January 28, 2011 | ||||
(Dollars in thousands) | (Unaudited) | |||
Fair value of assets acquired: | ||||
Cash and cash equivalents | $ | 208,255 | ||
Investment securities | 225,336 | |||
Mortgage loans held for sale | 2,569 | |||
Loans | 1,135,164 | |||
Goodwill | 30,994 | |||
Other intangible assets | 5,004 | |||
Deferred tax assets | 55,391 | |||
Other assets | 66,663 | |||
Total assets acquired | 1,729,376 | |||
Fair value of liabilities assumed: | ||||
Deposits | 1,351,467 | |||
Borrowings | 123,837 | |||
Subordinated debt | 19,392 | |||
Other liabilities | 10,595 | |||
Total liabilities assumed | 1,505,291 | |||
Net assets acquired | 224,085 | |||
Less: non-controlling interest at fair value | (43,785 | ) | ||
180,300 | ||||
Underwriting and legal costs | 750 | |||
Purchase price | $ | 181,050 | ||
G-10
Table of Contents
Pro Forma (Unaudited) | ||||||||
Three-Months Ended March 31, | ||||||||
2011 | 2010 | |||||||
Net interest income | $ | 36,798 | $ | 13,275 | ||||
Non-interest income | $ | 5,333 | $ | 2,531 | ||||
Net income (loss) | $ | 996 | $ | (6,715 | ) |
March 31, 2011 | ||||||||||||||||
Amortized | Unrealized | Unrealized | Estimated Fair | |||||||||||||
Held to Maturity | Cost | Gains | Losses | Value | ||||||||||||
Foreign government | $ | 250 | $ | — | $ | — | $ | 250 | ||||||||
$ | 250 | $ | — | $ | — | $ | 250 | |||||||||
March 31, 2011 | ||||||||||||||||
Amortized | Unrealized | Unrealized | Estimated | |||||||||||||
Available for Sale | Cost | Gains | Losses | Fair Value | ||||||||||||
U.S. Government agencies and corporations | $ | 62,564 | $ | 26 | $ | 385 | $ | 62,205 | ||||||||
States and political subdivisions—tax exempt | 26,234 | 966 | 116 | 27,084 | ||||||||||||
States and political subdivisions—taxable | 7,229 | 6 | 104 | 7,131 | ||||||||||||
Marketable equity securities | 1,833 | 37 | 9 | 1,861 | ||||||||||||
Mortgage-backed securities—residential | 662,494 | 2,545 | 2,955 | 662,084 | ||||||||||||
Corporate bonds | 3,220 | 174 | — | 3,394 | ||||||||||||
Collateralized debt obligation | 803 | — | 12 | 791 | ||||||||||||
$ | 764,377 | $ | 3,754 | $ | 3,581 | $ | 764,550 | |||||||||
December 31, 2010 | ||||||||||||||||
Amortized | Unrealized | Unrealized | Estimated | |||||||||||||
Held to Maturity | Cost | Gains | Losses | Fair Value | ||||||||||||
Foreign government | $ | 250 | $ | — | $ | — | $ | 250 | ||||||||
$ | 250 | $ | — | $ | — | $ | 250 | |||||||||
December 31, 2010 | ||||||||||||||||
Amortized | Unrealized | Unrealized | Estimated | |||||||||||||
Available for Sale | Cost | Gains | Losses | Fair Value | ||||||||||||
U.S. Government agencies and corporations | $ | 49,497 | $ | 18 | $ | 382 | $ | 49,133 | ||||||||
States and political subdivisions—tax exempt | 5,918 | 2 | 128 | 5,792 | ||||||||||||
States and political subdivisions—taxable | 9,540 | 41 | 227 | 9,354 | ||||||||||||
Marketable equity securities | 102 | — | 28 | 74 | ||||||||||||
Mortgage-backed securities—residential | 415,961 | 948 | 4,696 | 412,213 | ||||||||||||
Corporate bonds | 2,104 | 1 | — | 2,105 | ||||||||||||
Collateralized debt obligation | 807 | — | 12 | 795 | ||||||||||||
$ | 483,929 | $ | 1,010 | $ | 5,473 | $ | 479,466 | |||||||||
G-11
Table of Contents
March 31, 2011 | ||||
Due in one year or less | $ | 2,285 | ||
Due after one year through five years | 35,920 | |||
Due after five years through ten years | 27,427 | |||
Due after ten years | 34,973 | |||
Marketable equity securities | 1,861 | |||
Mortgage-backed securities—residential | 662,084 | |||
$ | 764,550 | |||
Less than 12 Months | 12 Months or Longer | Total | ||||||||||||||||||||||
Estimated | Unrealized | Estimated | Unrealized | Estimated | Unrealized | |||||||||||||||||||
March 31, 2011 | Fair Value | Losses | Fair Value | Losses | Fair Value | Losses | ||||||||||||||||||
U.S. Government agencies and corporations | $ | 15,868 | $ | 385 | — | — | $ | 15,868 | $ | 385 | ||||||||||||||
States and political subdivisions—tax exempt | 4,723 | 116 | — | 4,723 | 116 | |||||||||||||||||||
States and political subdivisions—taxable | 5,744 | 104 | — | — | 5,744 | 104 | ||||||||||||||||||
Marketable equity securities | 1,722 | 9 | — | — | 1,722 | 9 | ||||||||||||||||||
Mortgage-backed securities—residential | 246,999 | 2,955 | — | — | 246,999 | 2,955 | ||||||||||||||||||
Collateralized debt obligation | 791 | 12 | — | — | 791 | 12 | ||||||||||||||||||
Total temporarily impaired | $ | 275,847 | $ | 3,581 | $ | — | $ | — | $ | 275,847 | $ | 3,581 | ||||||||||||
Less than 12 Months | 12 Months or Longer | Total | ||||||||||||||||||||||
Estimated | Unrealized | Estimated | Unrealized | Estimated | Unrealized | |||||||||||||||||||
December 31, 2010 | Fair Value | Losses | Fair Value | Losses | Fair Value | Losses | ||||||||||||||||||
U.S. Government agencies and corporations | $ | 20,725 | $ | 382 | — | — | $ | 20,725 | $ | 382 | ||||||||||||||
States and political subdivisions—tax exempt | 5,191 | 128 | — | 5,191 | 128 | |||||||||||||||||||
States and political subdivisions—taxable | 8,198 | 227 | — | — | 8,198 | 227 | ||||||||||||||||||
Marketable equity securities | 74 | 28 | — | — | 74 | 28 | ||||||||||||||||||
Mortgage-backed securities—residential | 255,676 | 4,696 | — | — | 255,676 | 4,696 | ||||||||||||||||||
Corporate bonds | — | — | — | — | — | — | ||||||||||||||||||
Collateralized debt obligation | 795 | 12 | — | — | 795 | 12 | ||||||||||||||||||
Total temporarily impaired | $ | 290,659 | $ | 5,473 | $ | — | $ | — | $ | 290,659 | $ | 5,473 | ||||||||||||
G-12
Table of Contents
March 31, 2011 | December 31, 2010 | |||||||
Real estate mortgage loans: | ||||||||
Commercial | $ | 1,512,703 | $ | 1,042,211 | ||||
Residential | 497,712 | 318,977 | ||||||
Construction and vacant land | 404,755 | 130,019 | ||||||
Commercial and agricultural loans | 279,232 | 103,524 | ||||||
Indirect auto loans | 40,653 | 28,038 | ||||||
Home equity loans | 183,590 | 104,955 | ||||||
Other consumer loans | 19,479 | 14,807 | ||||||
Total loans | 2,938,124 | 1,742,531 | ||||||
Net deferred loan costs | 1,644 | 216 | ||||||
Loans, net of deferred loan costs | $ | 2,939,768 | $ | 1,742,747 | ||||
• | Whether the loan was performing according to contractual terms at the time of acquisition; | ||
• | The loan type based on regulatory reporting guidelines, namely whether the loan was a mortgage, consumer, or commercial loan; and | ||
• | The nature of collateral. |
Contractually required payments | $ | 1,318,702 | ||
Nonaccretable difference | (98,777 | ) | ||
Cash flows expected to be collected at acquisition | 1,219,925 | |||
Accretable yield | (163,892 | ) | ||
Fair value of acquired loans at acquisition | $ | 1,056,033 | ||
G-13
Table of Contents
Three Months Ended | ||||
March 31, 2011 | ||||
Balance, beginning of period | $ | 292,805 | ||
New loans purchased | 163,892 | |||
Accretion of income | (29,916 | ) | ||
Reclassifications from nonaccretable difference | — | |||
Disposals | — | |||
Balance, end of period | $ | 426,781 | ||
• | the estimate of the remaining life of PCI loans which may change the amount of future interest income, and possibly principal, expected to be collected; | ||
• | the estimate of the amount of contractually required principal and interest payments over the estimated life that will not be collected (the nonaccretable difference); and | ||
• | indices for PCI loans with variable rates of interest. |
G-14
Table of Contents
The following is a summary of the major categories of non-covered loans outstanding as of March 31, 2011 and December 31, 2010: |
Total | ||||||||||||
Non PCI | Noncovered | |||||||||||
March 31, 2011 | PCI Loans | Loans | Loans | |||||||||
Real estate mortgage loans | ||||||||||||
Commercial | $ | 1,047,649 | $ | 79,747 | $ | 1,127,396 | ||||||
Residential | 372,240 | 39,973 | 412,213 | |||||||||
Construction and vacant land | 305,904 | 13,540 | 319,444 | |||||||||
Commercial and agricultural loans | 194,997 | 53,817 | 248,814 | |||||||||
Indirect auto loans | 18,325 | 22,328 | 40,653 | |||||||||
Home equity loans | 25,347 | 87,936 | 113,283 | |||||||||
Other consumer loans | 7,924 | 11,555 | 19,479 | |||||||||
Total loans | 1,972,386 | 308,896 | 2,281,282 | |||||||||
Net deferred loan costs | — | 1,644 | 1,644 | |||||||||
Loans, net of deferred loan costs | $ | 1,972,386 | $ | 310,540 | $ | 2,282,926 | ||||||
Total | ||||||||||||
Non PCI | Noncovered | |||||||||||
December 31, 2010 | PCI Loans | Loans | Loans | |||||||||
Real estate mortgage loans | ||||||||||||
Commercial | $ | 599,820 | $ | 18,043 | $ | 617,863 | ||||||
Residential | 213,982 | 15,918 | 229,900 | |||||||||
Farmland | 12,083 | — | 12,083 | |||||||||
Construction and vacant land | 38,956 | 1,864 | 40,820 | |||||||||
Commercial and agricultural loans | 55,741 | 15,633 | 71,374 | |||||||||
Indirect auto loans | 21,743 | 6,295 | 28,038 | |||||||||
Home equity loans | 4,353 | 27,010 | 31,363 | |||||||||
Other consumer loans | 8,805 | 6,001 | 14,806 | |||||||||
Total loans | 955,483 | 90,764 | 1,046,247 | |||||||||
Net deferred loan costs | — | 216 | 216 | |||||||||
Loans, net of deferred loan costs | $ | 955,483 | $ | 90,980 | $ | 1,046,463 | ||||||
Non PCI | Total Covered | |||||||||||
March 31, 2011 | PCI Loans | Loans | Loans | |||||||||
Real estate mortgage loans | ||||||||||||
Commercial | $ | 385,307 | $ | — | $ | 385,307 | ||||||
Residential | 85,499 | — | 85,499 | |||||||||
Construction and vacant land | 85,311 | — | 85,311 | |||||||||
Commercial and agricultural loans | 28,136 | 2,282 | 30,418 | |||||||||
Home equity loans | — | 70,307 | 70,307 | |||||||||
Total loans | $ | 584,253 | $ | 72,589 | $ | 656,842 | ||||||
Non PCI | Total Covered | |||||||||||
December 31, 2010 | PCI Loans | Loans | Loans | |||||||||
Real estate mortgage loans | ||||||||||||
Commercial | $ | 412,266 | $ | — | $ | 412,266 | ||||||
Residential | 89,077 | — | 89,077 | |||||||||
Construction and vacant land | 89,199 | — | 89,199 | |||||||||
Commercial and agricultural loans | 29,592 | 2,558 | 32,150 | |||||||||
Home equity loans | — | 73,592 | 73,592 | |||||||||
Total loans | $ | 620,134 | $ | 76,150 | $ | 696,284 | ||||||
G-15
Table of Contents
Greater than 90 Days | ||||||||||||||||||||||||||||
Past Due and Still | ||||||||||||||||||||||||||||
30-89 Days Past Due | Accruing/Accreting | Nonaccrual | ||||||||||||||||||||||||||
Non-purchased credit impaired | Non- | Non- | Non- | |||||||||||||||||||||||||
loans | Covered | Covered | Covered | Covered | Covered | Covered | Total | |||||||||||||||||||||
Commercial real estate: | ||||||||||||||||||||||||||||
Land, lot and construction | $ | — | $ | — | $ | — | $ | — | $ | — | $ | — | $ | — | ||||||||||||||
Real estate—non-owner occupied | — | — | — | — | — | — | — | |||||||||||||||||||||
Real estate—owner occupied | — | — | — | — | — | — | — | |||||||||||||||||||||
Consumer real estate: | ||||||||||||||||||||||||||||
Residential mortgage | — | — | — | — | — | — | — | |||||||||||||||||||||
Home equity lines | 1,300 | 516 | 2,505 | — | — | — | 4,321 | |||||||||||||||||||||
Commercial and industrial | 20 | — | 90 | — | — | — | 110 | |||||||||||||||||||||
Prime indirect auto loans | — | — | — | — | — | — | — | |||||||||||||||||||||
Sub-prime indirect auto loans | — | — | — | — | — | — | — | |||||||||||||||||||||
Other consumer loans | — | 65 | — | — | — | — | 65 | |||||||||||||||||||||
Total loans | $ | 1,320 | $ | 581 | $ | 2,595 | $ | — | $ | — | $ | — | $ | 4,496 | ||||||||||||||
Greater than 90 Days | ||||||||||||||||||||||||||||
Past Due and Still | ||||||||||||||||||||||||||||
30-89 Days Past Due | Accruing/Accreting | Nonaccrual | ||||||||||||||||||||||||||
Non- | Non- | Non- | ||||||||||||||||||||||||||
Purchased credit impaired loans | Covered | Covered | Covered | Covered | Covered | Covered | Total | |||||||||||||||||||||
Commercial real estate: | ||||||||||||||||||||||||||||
Land, lot and construction | $ | 455 | $ | 14,822 | $ | 54,920 | $ | 61,243 | $ | — | $ | — | $ | 131,440 | ||||||||||||||
Real estate—non-owner occupied | 4,256 | 16,057 | 26,832 | 17,638 | — | — | 64,783 | |||||||||||||||||||||
Real estate—owner occupied | 5,681 | 8,439 | 9,526 | 31,730 | — | — | 55,376 | |||||||||||||||||||||
Consumer real estate: | ||||||||||||||||||||||||||||
Residential mortgage | 4,380 | 6,760 | 30,536 | 16,939 | — | — | 58,615 | |||||||||||||||||||||
Home equity lines | 1,244 | 529 | 1,267 | 1,239 | — | — | 4,279 | |||||||||||||||||||||
Commercial and industrial | 702 | 7,224 | 3,586 | 3,565 | — | — | 15,077 | |||||||||||||||||||||
Prime indirect auto loans | — | 118 | — | 60 | — | — | 178 | |||||||||||||||||||||
Sub-prime indirect auto loans | — | 260 | — | 56 | — | — | 316 | |||||||||||||||||||||
Other consumer loans | — | 178 | — | 236 | — | — | 414 | |||||||||||||||||||||
Total loans | $ | 16,718 | $ | 54,387 | $ | 126,667 | $ | 132,706 | $ | — | $ | — | $ | 330,478 | ||||||||||||||
• | Pass—These loans range from superior quality with minimal credit risk to loans requiring heightened management attention but that are still an acceptable risk and continue to perform as contracted. | ||
• | Special Mention—Loans classified as special mention have a potential weakness that deserves management’s close attention. If left uncorrected, these potential weaknesses may result in deterioration of the repayment prospects for the loan or of the institution’s credit position at some future date. | ||
• | Substandard—Loans classified as substandard are inadequately protected by the current net worth and paying capacity of the obligor or of the collateral pledged, if any. Loans so classified have a well-defined weakness or weaknesses that jeopardize the liquidation of the debt. They are characterized by the distinct possibility that the institution will sustain some loss if the deficiencies are not corrected. |
G-16
Table of Contents
• | Doubtful—Loans classified as doubtful have all the weaknesses inherent in those classified as substandard, with the added characteristic that the weaknesses make collection or liquidation in full, on the basis of currently existing facts, conditions, and values, highly questionable and improbable. |
Special | ||||||||||||||||||||
Pass | Mention | Substandard | Doubtful | Total | ||||||||||||||||
Commercial real estate: | ||||||||||||||||||||
Land, lot and construction | $ | 13,483 | $ | 74 | $ | 45 | $ | — | $ | 13,602 | ||||||||||
Real estate- non-owner occupied | 32,225 | — | — | — | 32,225 | |||||||||||||||
Real estate—owner occupied | 41,647 | — | 2,115 | — | 43,762 | |||||||||||||||
Consumer real estate: | ||||||||||||||||||||
Residential mortgage | 45,439 | — | — | — | 45,439 | |||||||||||||||
Home equity lines | 152,047 | 1,589 | 4,593 | — | 158,229 | |||||||||||||||
Commercial and industrial | 52,633 | 17 | 382 | — | 53,032 | |||||||||||||||
Prime indirect auto loans | 22,281 | — | — | — | 22,281 | |||||||||||||||
Sub-prime indirect auto loans | 47 | — | — | — | 47 | |||||||||||||||
Other consumer loans | 12,343 | 20 | 505 | — | 12,868 | |||||||||||||||
Total loans | $ | 372,145 | $ | 1,700 | $ | 7,640 | $ | — | $ | 381,485 | ||||||||||
Balance, December 31, 2010 | $ | 91,467 | ||
Increase due to acquisitions | — | |||
Accretion | 318 | |||
Reimbursable losses claimed | (14,188 | ) | ||
Balance, March 31, 2011 | $ | 77,597 | ||
Three Months | Three Months | |||||||
Ended March 31, 2011 | Ended March 31, 2010 | |||||||
Balance, beginning of period | $ | 753 | $ | — | ||||
Provision for loan losses charged to expense | 1,545 | — | ||||||
Loans charged off | (11 | ) | — | |||||
Recoveries of loans previously charged off | — | — | ||||||
Balance, end of period | $ | 2,287 | $ | — | ||||
G-17
Table of Contents
December 31, | ||||||||||||||||
2010 | Provision | Net Charge-offs | March 31, 2011 | |||||||||||||
Real estate mortgage loans: | ||||||||||||||||
Commercial | $ | 149 | $ | 610 | $ | — | $ | 759 | ||||||||
Residential | 215 | 236 | — | 451 | ||||||||||||
Construction and vacant land | 25 | 190 | — | 215 | ||||||||||||
Commercial and agricultural loans | 133 | 417 | — | 550 | ||||||||||||
Indirect auto loans | 184 | 44 | (11 | ) | 217 | |||||||||||
Home equity loans | 33 | 37 | — | 70 | ||||||||||||
Other consumer loans | 14 | 11 | — | 25 | ||||||||||||
Total loans | $ | 753 | $ | 1,545 | $ | (11 | ) | $ | 2,287 | |||||||
Allowance for Loan Losses | Loans | |||||||||||||||||||||||
Individually | Collectively | Individually | ||||||||||||||||||||||
Evaluated | Evaluated | Purchased | Evaluated | Collectively | Purchased | |||||||||||||||||||
for | for | Credit- | for | Evaluated for | Credit- | |||||||||||||||||||
March 31, 2011 | Impairment | Impairment | Impaired | Impairment | Impairment(1) | Impaired | ||||||||||||||||||
Real estate mortgage loans: | ||||||||||||||||||||||||
Commercial | $ | — | $ | 759 | $ | — | $ | — | $ | 79,747 | $ | 1,432,956 | ||||||||||||
Residential | — | 451 | — | — | 39,973 | 457,739 | ||||||||||||||||||
Construction and vacant land | — | 215 | — | — | 13,540 | 391,215 | ||||||||||||||||||
Commercial and agricultural | — | 550 | — | — | 56,099 | 223,133 | ||||||||||||||||||
Indirect auto loans | — | 217 | — | — | 22,328 | 18,325 | ||||||||||||||||||
Home equity loans | — | 70 | — | — | 158,243 | 25,347 | ||||||||||||||||||
Other consumer loans | — | 25 | — | — | 11,555 | 7,924 | ||||||||||||||||||
Total loans | $ | — | $ | 2,287 | $ | — | $ | — | $ | 381,485 | $ | 2,556,639 | ||||||||||||
G-18
Table of Contents
Well | Adequately | |||||||||||||||
Capitalized | Capitalized | March 31, 2011 | December 31, | |||||||||||||
Requirement | Requirement | Actual | 2010 Actual | |||||||||||||
Tier 1 Capital (to Average Assets) | ||||||||||||||||
Consolidated | N/A | ³ 4.0 | % | 19.2 | % | 24.3 | % | |||||||||
TIBB | N/A | ³ 4.0 | % | 9.0 | % | 8.2 | % | |||||||||
Capital Bank Corp. | N/A | ³ 4.0 | % | 10.0 | % | N/A | ||||||||||
TIB Bank | ³ 5.0 | % | ³ 4.0 | % | 8.4 | % | 8.1 | % | ||||||||
NAFH NB Bank | ³ 5.0 | % | ³ 4.0 | % | 12.7 | % | 12.1 | % | ||||||||
Capital Bank | ³ 5.0 | % | ³ 4.0 | % | 8.8 | % | N/A | |||||||||
Tier 1 Capital (to Risk Weighted Assets) | ||||||||||||||||
Consolidated | N/A | ³ 4.0 | % | 30.8 | % | 41.8 | % | |||||||||
TIBB | N/A | ³ 4.0 | % | 14.2 | % | 13.4 | % | |||||||||
Capital Bank Corp. | N/A | ³ 4.0 | % | 13.2 | % | N/A | ||||||||||
TIB Bank | ³ 6.0 | % | ³ 4.0 | % | 13.2 | % | 13.1 | % | ||||||||
NAFH NB Bank | ³ 6.0 | % | ³ 4.0 | % | 45.8 | % | 17.1 | % | ||||||||
Capital Bank | ³ 6.0 | % | ³ 4.0 | % | 11.6 | % | N/A | |||||||||
Total Capital (to Risk Weighted Assets) | ||||||||||||||||
Consolidated | N/A | ³ 8.0 | % | 31.1 | % | 41.9 | % | |||||||||
TIBB | N/A | ³ 8.0 | % | 14.3 | % | 13.4 | % | |||||||||
Capital Bank Corp. | N/A | ³ 8.0 | % | 13.6 | % | N/A | ||||||||||
TIB Bank | ³ 10.0 | % | ³ 8.0 | % | 13.3 | % | 13.1 | % | ||||||||
NAFH NB Bank | ³ 10.0 | % | ³ 8.0 | % | 46.2 | % | 17.1 | % | ||||||||
Capital Bank | ³ 10.0 | % | ³ 8.0 | % | 12.0 | % | N/A |
G-19
Table of Contents
G-20
Table of Contents
Fair Value Measurements at March 31, 2011 | ||||||||||||||||
Using | ||||||||||||||||
Quoted Prices | ||||||||||||||||
in Active | Significant | Significant | ||||||||||||||
Markets for | Other | Unobservable | ||||||||||||||
Identical Assets | Observable | Inputs | ||||||||||||||
March 31, 2011 | (Level 1) | Inputs (Level 2) | (Level 3) | |||||||||||||
Assets: | ||||||||||||||||
Trading securities | $ | 602 | $ | 602 | $ | — | $ | — | ||||||||
Available for sale securities | ||||||||||||||||
U.S. Government agencies and corporations | $ | 62,205 | $ | — | $ | 62,205 | $ | — | ||||||||
States and political subdivisions—tax exempt | 27,084 | — | 27,084 | — | ||||||||||||
States and political subdivisions—taxable | 7,131 | 7,131 | ||||||||||||||
Marketable equity securities | 1,861 | 1,861 | — | — | ||||||||||||
Mortgage-backed securities—residential | 662,084 | — | 662,084 | — | ||||||||||||
Corporate bonds | 3,394 | — | 2,287 | 1,107 | ||||||||||||
Collateralized debt obligations | 791 | — | — | 791 | ||||||||||||
Available for sale securities | $ | 764,550 | $ | 1,861 | $ | 760,791 | $ | 1,898 | ||||||||
Fair Value Measurements at December 31, 2010 | ||||||||||||||||
Using | ||||||||||||||||
Quoted Prices | ||||||||||||||||
in Active | Significant | Significant | ||||||||||||||
Markets for | Other | Unobservable | ||||||||||||||
Identical Assets | Observable | Inputs | ||||||||||||||
December 31, 2010 | (Level 1) | Inputs (Level 2) | (Level 3) | |||||||||||||
Assets: | ||||||||||||||||
U.S. Government agencies and corporations | $ | 49,133 | $ | — | $ | 49,133 | $ | — | ||||||||
States and political subdivisions—tax exempt | 5,792 | — | 5,792 | — | ||||||||||||
States and political subdivisions—taxable | 9,354 | — | 9,354 | — | ||||||||||||
Marketable equity securities | 74 | — | 74 | — | ||||||||||||
Mortgage-backed securities—residential | 412,213 | — | 412,213 | — | ||||||||||||
Corporate bonds | 2,105 | — | 2,105 | — | ||||||||||||
Collateralized debt obligations | 795 | — | — | 795 | ||||||||||||
Available for sale securities | $ | 479,466 | $ | — | $ | 478,671 | $ | 795 | ||||||||
Fair Value Measurements Using Significant | ||||||||
Unobservable Inputs (Level 3) | ||||||||
Three Months Ended March 31, 2011 | ||||||||
Collateralized Debt | ||||||||
Corporate Bonds | Obligations | |||||||
Beginning balance, January 1, | $ | — | $ | 795 | ||||
Acquired through acquisition of Capital Bank Corporation | 1,107 | — | ||||||
Included in earnings—other than temporary impairment | — | — | ||||||
Included in other comprehensive income | — | (4 | ) | |||||
Transfer in to Level 3 | — | — | ||||||
Ending balance March 31, | $ | 1,107 | $ | 791 | ||||
G-21
Table of Contents
Fair Value Measurements at March 31, 2011 Using | ||||||||||||
Quoted Prices | Significant | |||||||||||
in Active | Other | Significant | ||||||||||
Markets for | Observable | Unobservable | ||||||||||
Identical Assets | Inputs | Inputs | ||||||||||
(Level 1) | (Level 2) | (Level 3) | ||||||||||
Assets: | ||||||||||||
Other real estate owned | $ | — | $ | — | $ | 77,636 | ||||||
Other repossessed assets | — | 108 | — | |||||||||
Fair Value Measurements at December 31, 2010 Using | ||||||||||||
Quoted Prices | Significant | |||||||||||
in Active | Other | Significant | ||||||||||
Markets for | Observable | Unobservable | ||||||||||
Identical Assets | Inputs | Inputs | ||||||||||
(Level 1) | (Level 2) | (Level 3) | ||||||||||
Assets: | ||||||||||||
Other real estate owned | $ | — | $ | — | $ | 70,817 | ||||||
Other repossessed assets | — | 137 | — |
March 31, 2011 | December 31, 2010 | |||||||||||||||
Carrying | Estimated | Carrying | Estimated | |||||||||||||
Value | Fair Value | Value | Fair Value | |||||||||||||
Financial assets: | ||||||||||||||||
Cash and cash equivalents | $ | 719,804 | $ | 719,804 | $ | 886,925 | $ | 886,925 | ||||||||
Investment securities | 765,402 | 765,402 | 479,716 | 479,716 | ||||||||||||
Loans, net | 2,938,905 | 2,947,097 | 1,741,994 | 1,781,181 | ||||||||||||
FDIC indemnification asset | 77,597 | 77,597 | 91,467 | 91,467 | ||||||||||||
Federal reserve, federal home loan bank and independent bankers’ bank stock | 30,735 | 30,735 | 23,465 | 23,465 | ||||||||||||
Accrued interest receivable | 14,107 | 14,107 | 8,286 | 8,286 | ||||||||||||
Financial liabilities: | ||||||||||||||||
Non-contractual deposits | $ | 1,507,529 | $ | 1,507,529 | $ | 906,742 | $ | 906,742 | ||||||||
Contractual deposits | 2,031,193 | 2,034,276 | 1,353,510 | 1,355,099 | ||||||||||||
Federal Home Loan Bank Advances | 280,151 | 279,278 | 243,067 | 242,522 | ||||||||||||
Short-term borrowings | 50,650 | 50,649 | 61,969 | 61,969 | ||||||||||||
Long term borrowings | 55,899 | 55,899 | — | — | ||||||||||||
Subordinated debentures | 41,459 | 41,704 | 22,887 | 25,267 | ||||||||||||
Accrued interest payable | 9,055 | 9,055 | 9,334 | 9,334 |
G-22
Table of Contents
Three Months | ||||||||
Three Months Ended | Ended March 31, | |||||||
March 31, 2011 | 2010 | |||||||
Balance, beginning of period | $ | 70,817 | $ | — | ||||
Increase due to acquisitions | 15,118 | — | ||||||
Real estate acquired | 13,713 | — | ||||||
Property sold | (15,115 | ) | — | |||||
Balance, end of period | $ | 84,533 | $ | — | ||||
Three Months Ended | ||||
March 31, 2011 | ||||
Stock options | $ | 376 | ||
Restricted stock | 169 | |||
Total stock-based compensation expense | $ | 545 | ||
Salaries and employee benefits | $ | 470 | ||
Other expense | 75 | |||
Total stock-based compensation expense | $ | 545 | ||
G-23
Table of Contents
Three Months Ended | ||||
March 31, 2011 | ||||
Dividend yield | 0.00 | % | ||
Risk-free interest rate | 2.55 | % | ||
Expected option life | 5 years | |||
Volatility | 33 | % | ||
Weighted average grant-date fair value of options granted | $ | 4.61 |
• | The dividend yield assumption is consistent with management expectations of dividend distributions based upon the Company’s business plan. An increase in dividend yield will decrease stock compensation expense. | ||
• | The risk-free interest rate was developed using the U.S. Treasury yield curve for periods equal to the expected life of the options on the grant date. An increase in the risk-free interest rate will increase stock compensation expense. | ||
• | The expected option life for the current period grants was estimated using the vesting period, the term of the option and estimates of future exercise behavior patterns. An increase in the option life will increase stock compensation expense. | ||
• | The volatility was estimated using a peer group assessment for periods approximating the expected option life. Appropriate weight is attributed to financial theory, according to which the volatility of an institution’s equity should be related to the volatility of its assets and the entity’s financial leverage. An increase in the volatility will increase stock compensation expense. |
Weighted | ||||||||
Average | ||||||||
Exercise Price | ||||||||
Shares | Per Share | |||||||
Balance, January 1, 2011 | — | $ | — | |||||
Granted | 2,236 | 20.00 | ||||||
Exercised | — | — | ||||||
Expired or forfeited | — | — | ||||||
Balance, March 31, 2011 | 2,236 | $ | 20.00 |
G-24
Table of Contents
Outstanding Options | Options Exercisable | |||||||||||
Weighted | Weighted | |||||||||||
Average | Average | Weighted | ||||||||||
Remaining | Exercise | Average | ||||||||||
Contractual | Price Per | Exercise | ||||||||||
Exercise Prices | Number | Life | Share | Number | Price | |||||||
$ | 20.00 | 2,236 | 8.73 years | $ | 20.00 | — | N/A | |||||
Three Months Ended | ||||
March 31, 2011 | ||||
Starting share price (based upon most recent trade) | $17.00 | |||
Risk-free interest rate | Forward Treasury Curve | |||
Market risk premium | 0.00 | % | ||
Volatility (annual/monthly) | 33% / 9.4 | % | ||
Annual forfeiture estimate | 5.00 | % | ||
Weighted average grant-date fair value of restricted stock awards granted | $10.56 |
• | An increase in the risk-free interest rate will increase stock compensation expense. | ||
• | The volatility was estimated using a peer group assessment for periods approximating the expected option life. Appropriate weight is attributed to financial theory, according to which the volatility of an institution’s equity should be related to the volatility of its assets and the entity’s financial leverage. An increase in the volatility will increase stock compensation expense. | ||
• | An increase in the annual forfeiture estimate will decrease stock compensation expense. |
Weighted | ||||||||
Average | ||||||||
Grant-Date | ||||||||
Fair Value Per | ||||||||
Shares | Share | |||||||
Balance, January 1, 2011 | — | $ | — | |||||
Granted | 1,030 | 10.56 | ||||||
Vested | — | — | ||||||
Expired or forfeited | — | — | ||||||
Balance, March 31, 2011 | 1,030 | $ | 10.56 |
G-25
Table of Contents
G-26
Table of Contents
Consolidated Financial Statements as of and for the Year Ended
December 31, 2010 and as of December 31, 2009 and for the Period from November 30, 2009
to December 31, 2009
G-27
Table of Contents
North American Financial Holdings, Inc.
June 23, 2011
Ft. Lauderdale, Florida
G-28
Table of Contents
Consolidated Balance Sheets
December 31, 2010 and 2009
(dollars and shares in thousands, except per share data) | 2010 | 2009 | ||||||
Assets | ||||||||
Cash and due from banks | $ | 886,925 | $ | 526,711 | ||||
Investment securities held to maturity (estimated fair value $250) | 250 | — | ||||||
Investment securities available for sale (amortized cost $483,929) | 479,466 | — | ||||||
Loans, net of deferred loan costs and fees | 1,742,747 | — | ||||||
Less: Allowance for loan losses | 753 | — | ||||||
Loans, net | 1,741,994 | — | ||||||
Other real estate owned | 70,817 | — | ||||||
Receivable from FDIC | 46,585 | — | ||||||
Indemnification asset | 91,467 | — | ||||||
Premises and equipment, net | 44,078 | — | ||||||
Goodwill | 36,616 | — | ||||||
Intangible assets, net | 15,154 | — | ||||||
Deferred income tax asset | 16,789 | 50 | ||||||
Accrued interest receivable and other assets | 66,850 | — | ||||||
Total assets | $ | 3,496,991 | $ | 526,761 | ||||
Liabilities and Shareholders’ Equity | ||||||||
Liabilities | ||||||||
Deposits | ||||||||
Noninterest-bearing demand | $ | 295,713 | $ | — | ||||
Interest-bearing | 1,964,384 | — | ||||||
Total deposits | 2,260,097 | — | ||||||
Federal Home Loan Bank (FHLB) advances | 243,067 | — | ||||||
Short-term borrowings | 61,969 | — | ||||||
Long-term borrowings | 22,887 | — | ||||||
Accrued interest payable and other liabilities | 27,735 | 441 | ||||||
Total liabilities | 2,615,755 | 441 | ||||||
Shareholders’ Equity | ||||||||
Preferred stock $0.01 par value: 50,000 shares authorized, 0 shares issued | — | — | ||||||
Common stock-Class A $0.01 par value: 200,000 shares authorized, 21,384 and 19,181 shares issued and outstanding | 214 | 192 | ||||||
Common stock-Class B $0.01 par value: 200,000 shares authorized, 23,736 and 8,726 shares issued and outstanding | 237 | 87 | ||||||
Additional paid in capital | 865,673 | 526,133 | ||||||
Retained earnings (accumulated deficit) | 11,938 | (92 | ) | |||||
Accumulated other comprehensive loss | (2,759 | ) | — | |||||
Noncontrolling interest | 5,933 | — | ||||||
Total shareholders’ equity | 881,236 | 526,320 | ||||||
Total Liabilities and Shareholders’ Equity | $ | 3,496,991 | $ | 526,761 | ||||
G-29
Table of Contents
Consolidated Statements of Income
Year Ended December 31, 2010 and Period From November 30, 2009 (Inception) to
December 31, 2009
(dollars in thousands) | 2010 | 2009 | ||||||
Interest and dividend income | ||||||||
Loans, including fees | $ | 36,429 | $ | — | ||||
Investment securities | 2,713 | — | ||||||
Interest-bearing deposits in other banks | 3,462 | 72 | ||||||
Federal Home Loan Bank stock | 141 | — | ||||||
Total interest and dividend income | 42,745 | 72 | ||||||
Interest expense | ||||||||
Deposits | 4,656 | — | ||||||
Long-term debt-subordinated debentures | 458 | — | ||||||
Federal Home Loan Bank advances | 931 | — | ||||||
Borrowings | 189 | — | ||||||
Total interest expense | 6,234 | — | ||||||
Net interest income | 36,511 | 72 | ||||||
Provision for loan losses | 753 | — | ||||||
Net interest income after provision for loan losses | 35,758 | 72 | ||||||
Noninterest income | ||||||||
Service charges on deposit accounts | 1,992 | — | ||||||
Fees on mortgage loans originated and sold | 449 | — | ||||||
Investment advisory and trust fees | 354 | — | ||||||
Gain on acquisition of banks | 15,175 | — | ||||||
Other income | 1,645 | — | ||||||
Total noninterest income | 19,615 | — | ||||||
Noninterest expense | ||||||||
Salaries and employee benefits | 17,229 | 40 | ||||||
Net occupancy and equipment expense | 4,629 | — | ||||||
Professional fees | 11,721 | — | ||||||
Other expense | 10,798 | 174 | ||||||
Total noninterest expense | 44,377 | 214 | ||||||
Income (loss) before income taxes | 10,996 | (142 | ) | |||||
Income tax benefit | 1,041 | 50 | ||||||
Net income before attribution of noncontrolling interests | 12,037 | (92 | ) | |||||
Net income attributable to noncontrolling interests | 7 | — | ||||||
Net income attributable to North American Financial Holdings, Inc. | $ | 12,030 | $ | (92 | ) | |||
Basic and diluted income (loss) per share | $ | 0.31 | $ | (0.01 | ) | |||
G-30
Table of Contents
Statements of Changes in Shareholders’ Equity
Year Ended December 31, 2010 and Period From November 30, 2009 (Inception) to December 31, 2009
Shares | Shares | Retained | Accumulated | |||||||||||||||||||||||||||||||||
Common | Common | Additional | Earnings | Other | ||||||||||||||||||||||||||||||||
Stock | Class A | Stock | Class B | Paid in | (Accumulated | Comprehensive | Noncontrolling | Total | ||||||||||||||||||||||||||||
(dollars and shares in thousands) | Class A | Stock | Class B | Stock | Capital | Deficit) | Loss | Interest | Equity | |||||||||||||||||||||||||||
Balance, November 30, 2009 (Inception) | — | $ | — | — | $ | — | $ | — | $ | — | $ | — | $ | — | $ | — | ||||||||||||||||||||
Issuance of common stock | 19,181 | 192 | 8,726 | 87 | 526,133 | 526,412 | ||||||||||||||||||||||||||||||
Net loss | (92 | ) | (92 | ) | ||||||||||||||||||||||||||||||||
Balance, December 31, 2009 | 19,181 | 192 | 8,726 | 87 | 526,133 | (92 | ) | — | — | 526,320 | ||||||||||||||||||||||||||
Comprehensive income | ||||||||||||||||||||||||||||||||||||
Net income | 12,030 | 7 | 12,037 | |||||||||||||||||||||||||||||||||
Other comprehensive loss | ||||||||||||||||||||||||||||||||||||
Net market valuation adjustment on securities available for sale, net of $1,327 tax benefit | ||||||||||||||||||||||||||||||||||||
Other comprehensive loss | (2,759 | ) | (29 | ) | (2,788 | ) | ||||||||||||||||||||||||||||||
Comprehensive income | 9,249 | |||||||||||||||||||||||||||||||||||
Issuance of common stock | 2,203 | 22 | 15,010 | 150 | 339,540 | — | 339,712 | |||||||||||||||||||||||||||||
Origination of noncontrolling interest | 5,955 | 5,955 | ||||||||||||||||||||||||||||||||||
Balance, December 31, 2010 | 21,384 | $ | 214 | 23,736 | $ | 237 | $ | 865,673 | $ | 11,938 | $ | (2,759 | ) | $ | 5,933 | $ | 881,236 | |||||||||||||||||||
G-31
Table of Contents
Consolidated Statements of Cash Flow
Year Ended December 31, 2010 and Period From November 30, 2009 (Inception) to
December 31, 2009
(dollars in thousands) | 2010 | 2009 | ||||||
Cash flows from operating activities | ||||||||
Net income (loss) | $ | 12,037 | $ | (92 | ) | |||
Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities | ||||||||
Accretion of acquired loans | (30,480 | ) | — | |||||
Depreciation and amortization | (980 | ) | — | |||||
Provision for loan losses | 752 | — | ||||||
Deferred income tax benefit (loss) | (159 | ) | — | |||||
Net amortization of investment premium/discount | 1,931 | — | ||||||
Net deferred loan costs | (216 | ) | — | |||||
Gain on acquisition of banks | (15,175 | ) | — | |||||
Mortgage loans originated for sale | (22,194 | ) | — | |||||
Proceeds from sales of mortgage loans held for sale, net of fees | 18,493 | — | ||||||
Change in accrued interest receivable and other asset | 1,336 | (50 | ) | |||||
Change in accrued interest payable and other liabilities | (7,090 | ) | 441 | |||||
Net cash (used in) provided by operating activities | (41,745 | ) | 299 | |||||
Cash flows from investing activities | ||||||||
Purchases of investment securities available for sale | (211,775 | ) | — | |||||
Sales of investment securities available for sale | 22,204 | — | ||||||
Repayments of principal and maturities of investment securities available for sale | 87,173 | — | ||||||
Cash received on TIB Financial Corp. acquisition | 54,665 | — | ||||||
Cash paid on FNB acquisition, net of cash acquired | (29,751 | ) | — | |||||
Cash received on Metro bank acquisition, net of cash paid | 75,076 | — | ||||||
Cash received on Turnberry acquisition | 57,279 | — | ||||||
Net purchase of FHLB and Federal Reserve stock | (2,849 | ) | — | |||||
Principal repayments on loans, net of loans originated or acquired | 54,338 | — | ||||||
Purchases of premises and equipment | (1,277 | ) | — | |||||
Proceeds from sales of OREO | 12,253 | — | ||||||
Net cash provided by investing activities | 117,336 | — | ||||||
Cash flows from financing activities | ||||||||
Net increase in demand, money market and savings accounts | 31,062 | — | ||||||
Net decrease in time deposits | (58,427 | ) | — | |||||
Net decrease in brokered time deposits | (314 | ) | — | |||||
Net increase in federal funds purchased and securities sold under agreements to repurchase | 4,430 | — | ||||||
Net decrease in long term repurchase agreements | (10,000 | ) | — | |||||
Net repayment of long term FHLB advances | (21,840 | ) | — | |||||
Net proceeds from issuance of common shares | 339,712 | 526,412 | ||||||
Net cash provided by financing activities | 284,623 | 526,412 | ||||||
Net increase in cash and cash equivalents | 360,214 | 526,711 | ||||||
Cash and cash equivalents | ||||||||
Beginning of period | 526,711 | — | ||||||
End of period | $ | 886,925 | $ | 526,711 | ||||
Supplemental disclosures of cash paid | ||||||||
Interest paid | $ | 7,387 | $ | — | ||||
Income taxes paid | $ | 500 | $ | — | ||||
Supplemental disclosures of noncash transactions | ||||||||
Other real estate acquired from borrowers | $ | 20,009 | $ | — |
G-32
Table of Contents
Notes to Consolidated Financial Statements
(dollars and shares in thousands)
1. | Summary of Significant Accounting Policies |
Principles of Consolidation and Nature of Operations |
North American Financial Holdings, Inc. (“NAFH” or the “Company”) is a bank holding company incorporated in Delaware and headquartered in Florida whose business is conducted primarily through our subsidiaries, NAFH National Bank (“NAFH NB”) and TIB Financial Corp. (“TIBB”; parent company of TIB Bank and Naples Capital Advisors, Inc.) (collectively referred to as the Company’s subsidiary banks or the “Banks”). All significant inter-company accounts and transactions have been eliminated in consolidation. As of December 31, 2010, NAFH had a total of fifty full service banking offices located in southern Florida and throughout South Carolina. |
On July 16, 2010, NAFH NB acquired the operations and certain assets and liabilities from the Federal Deposit Insurance Corporation (“FDIC”) as receiver of three failed banks: the former Metrobank of Dade County, the former Turnberry Bank and the former First National Bank of the South. On September 30, 2010, NAFH acquired a controlling interest in TIB Financial Corp. See Note 2—Acquisitions for information about the Company’s acquired operations. On January 28, 2011, the Company acquired a controlling interest in Capital Bank Corporation, see Note 20. The Company’s subsidiary banks offer a wide range of commercial and retail banking and financial services to businesses and individuals. Account services include checking, interest-bearing checking, money market, certificates of deposit and individual retirement accounts. The Banks offers all types of commercial loans, including: owner-operated commercial real estate; acquisition, development and construction; income-producing properties; working capital; inventory and receivable facilities; and equipment loans. Consumer loan products include residential real estate, installment loans, home equity, home equity lines and auto and boat loans. |
The accounting and reporting policies conform to accounting principles generally accepted in the United States of America. The following is a summary of the more significant of these policies. | ||
Operating Segments |
While the chief decision-makers monitor the revenue streams of the various products and services, operations are managed and financial performance is evaluated on a Company wide basis. As operating results for all segments are similar, all of the financial service operations are considered by management to be aggregated in one reportable operating segment. | ||
Use of Estimates and Assumptions |
To prepare financial statements in conformity with accounting principles generally accepted in the United States of America, management makes estimates and assumptions based on available information. These estimates and assumptions affect the amounts reported in the financial statements and the disclosures provided, and actual results could differ. Material estimates that are particularly susceptible to significant change include the determination of the allowance for loan losses, determination of fair value, determination of impairment of financial instruments, goodwill and intangible assets and the determination of deferred income tax assets and liabilities. Changes in assumptions or in market conditions could significantly affect the fair value estimates. Due to the acquisitions discussed in more detail in Note 2-Acquisitions, the measurement of assets acquired and liabilities assumed at their estimated fair values represent material estimates which are subject to change during the measurement period. | ||
Cash and Cash Equivalents |
For purposes of the consolidated statement of cash flows, cash and cash equivalents include cash on hand and items with an original maturity of three months or less, including amounts due from banks, federal funds sold, and interest-bearing deposits at the Federal Home Loan Bank of Atlanta and the Federal Reserve Bank of Atlanta. Net cash flows are reported for customer loan and deposit transactions and short term borrowings. | ||
Investment Securities and Other than Temporary Impairment |
Investment securities which may be sold prior to maturity are classified as available for sale and are carried at fair value, with unrealized holding gains and losses reported in other comprehensive income. Other securities such as Federal Home Loan Bank stock are carried at cost and are included in other assets on the balance sheets. Investment securities where the Company has both the intent and ability to hold to maturity are classified as held to maturity and reported at amortized cost. |
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Interest income includes amortization of purchase premium or discount. Premiums and discounts on securities are amortized using the level-yield method without anticipating prepayments, except for mortgage backed securities where prepayments are anticipated. Gains and losses on sales are realized on the trade date and determined using the specific identification method based on the amortized cost of the security sold. |
Management regularly reviews each investment security for impairment based on criteria that include the extent to which cost exceeds fair value, the duration of that market decline, the financial health of and specific prospects for the issuer(s) and our ability and intention with regard to holding the security. |
Management evaluates securities for other-than-temporary impairment (“OTTI”) at least on a quarterly basis, and more frequently when economic or market conditions warrant such an evaluation. |
In determining OTTI under accounting guidance, management considers many factors, including but not limited to: (1) the length of time and the extent to which the fair value has been less than cost, (2) the financial condition and near-term prospects of the issuer, (3) whether the market decline was affected by macroeconomic conditions, and (4) whether the entity has the intent to sell the debt security or more likely than not will be required to sell the debt security before its anticipated recovery. The assessment of whether an other-than-temporary decline exists involves a high degree of subjectivity and judgment and is based on the information available to management at a point in time. |
When OTTI occurs, the amount of the impairment recognized in earnings depends on whether management intends to sell the security or it is more likely than not that we will be required to sell the security before recovery of its amortized cost basis, less any current-period credit loss. If management intends to sell or it is more likely than not that the Company will be required to sell the security before recovery of its amortized cost basis, less any current-period credit loss, the impairment is required to be recognized in earnings equal to the entire difference between the investment’s amortized cost basis and its fair value at the balance sheet date. If management does not intend to sell the security and it is not more likely than not that the Company will be required to sell the security before recovery of its amortized cost basis less any current-period loss, the impairment is separated into the amount representing the credit loss and the amount related to all other factors. The amount of impairment related to the credit loss is determined based on the present value of cash flows expected to be collected and is recognized in earnings. The amount of the impairment related to other factors is recognized in other comprehensive income, net of applicable taxes. The previous amortized cost basis less the OTTI recognized in earnings becomes the new amortized cost basis of the investment. |
Future declines in the fair value of securities may result in impairment charges which may be material to the financial condition and results of operations of the Company. | ||
Originated Loans |
Loans that management has the intent and ability to hold are reported at the principal balance outstanding, net of deferred loan fees and costs, and an allowance for loan losses. Interest income is reported on the interest method and includes amortization of net deferred loan fees and costs over the loan term. If the collectibility of interest appears doubtful, the accrual of interest is discontinued and all unpaid interest is reversed. Loans are returned to accrual status when all the principal and interest amounts contractually due are brought current and future payments are reasonably assured. | ||
�� | Nonaccrual Loans |
The majority of loans are placed on nonaccrual status when it is probable that principal or interest is not fully collectible, or generally when principal or interest becomes 90 days past due, whichever occurs first. Certain loans past due 90 days or more may remain on accrual status if management determines that it does not have concern over the collectability of principal and interest. Generally, when loans are placed on nonaccrual status, accrued interest receivable is reversed against interest income in the current period. Interest payments received thereafter are generally applied as a reduction to the remaining principal balance as long as concern exists as to the ultimate collection of the principal. Loans are generally removed from nonaccrual status when they become current as to both principal and interest and concern no longer exists as to the collectability of principal and interest. NAFH’s policies related to when loans are placed on nonaccrual status conform to guidelines prescribed by bank regulatory authorities. | ||
Accounting for Acquired Loans |
The Company accounts for its acquisitions using the acquisition method of accounting. All identifiable assets acquired, including loans, are recorded at fair value. No allowance for loan losses related to the acquired loans is recorded on the acquisition date as the fair value of the loans acquired incorporates assumptions regarding credit risk. Loans acquired are recorded at fair value, exclusive of the shared-loss agreements with the FDIC. The fair value estimates associated with the loans include estimates related to expected prepayments and the amount and timing of undiscounted expected principal, interest and other cash flows. |
Loans acquired in a transfer, including business combinations, where there is evidence of credit deterioration since origination and it is probable at the date of acquisition that the Company will not collect all contractually required principal and interest |
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payments, are accounted for under accounting guidance for purchased credit-impaired (“PCI”) loans. NAFH has generally aggregated the purchased loans into pools of loans with common risk characteristics. Over the life of the acquired loans, the Company continues to estimate cash flows expected to be collected on individual loans or on pools of loans sharing common risk characteristics. The Company evaluates at each balance sheet date whether the estimated cash flows and corresponding present value of its loans, determined using the effective interest rates, has decreased and if so, recognizes a provision for loan loss in its consolidated statement of income. For any increases in cash flows expected to be collected, the Company adjusts the amount of accretable yield recognized on a prospective basis over the loan’s or pool’s remaining life. For further discussion of the Company’s acquisitions and loan accounting, see Notes 2 and 5 to the consolidated financial statements. | ||
FDIC Indemnification Asset |
Because the FDIC will reimburse the Company for certain amounts related to certain acquired loans and other real estate owned should the Company experience a loss, an indemnification asset is also recorded at fair value at the acquisition date. The indemnification asset is recognized at the same time as the indemnified loans, and measured on the same basis, subject to collectability or contractual limitations. The indemnification asset on the acquisition date reflect the reimbursements expected to be received from the FDIC, using an appropriate discount rate, which reflects counterparty credit risk and other uncertainties. |
Subsequent to initial recognition, the indemnification asset continues to be measured on the same basis as the related indemnified loans and the loss share receivable is impacted by changes in estimated cash flows associated with these loans. Deterioration in the credit quality on expected cash flows of the loans (immediately recorded as an adjustment to the allowance for loan losses) would immediately increase the loss share receivable, with the offset recorded through the consolidated statement of income. Increases in the credit quality or cash flows of loans (reflected as an adjustment to yield and accreted into income over the remaining life of the loans) decrease the basis of the indemnification asset, with such decrease being amortized into income over 1) the life of the loan or 2) the life of the shared loss agreements, whichever is shorter. Loss assumptions used in the basis of the indemnified loans are consistent with the loss assumptions used to measure the indemnification asset. Fair value accounting incorporates into the fair value of the indemnification asset an element of the time value of money, which is accreted back into income over the life of the shared loss agreements. |
Upon the determination of an incurred loss the indemnification asset will be reduced by the amount owed by the FDIC. A corresponding claim receivable is recorded until cash is received from the FDIC. | ||
Loans Held for Sale |
Certain residential fixed rate mortgage loans originated by the Company are sold servicing released to third parties immediately. Certain of these sales are subject to temporary recourse provisions. The recourse provisions may require the repurchase of the outstanding balance of loans which default within a limited period of time subsequent to the sale of the loan. The recourse periods vary by investor and extend up to seven months subsequent to the sale of the loan. All origination fees are recognized as income at the time of the sale. Mortgage loans originated and intended for sale in the secondary market are carried at the lower of aggregate cost or market, as determined by outstanding commitments from investors. Net unrealized losses, if any, are recorded as a valuation allowance and charged to earnings. As of December 31, 2010, the Company had mortgage loans originated for sale of $10,492 classified within the caption “Other assets” in the consolidated balance sheet. The Company and its acquired operations have not historically experienced significant losses resulting from the recourse provisions described above. Accordingly, management believes that no such provision or allowance is necessary as of December 31, 2010. | ||
Allowance for Loan Losses |
The allowance for loan losses is a valuation allowance for probable incurred credit losses, which is increased by the provision for loan losses and decreased by charge-offs less recoveries. Loan losses are charged against the allowance when management believes the uncollectibility of a loan balance is confirmed. Subsequent recoveries, if any, are credited to the allowance. Management estimates the allowance balance required based on factors including past loan loss experience, the nature and volume of the portfolio, information about specific borrower situations and estimated collateral values, economic conditions, and other factors. Allocations of the allowance may be made for specific loans, but the entire allowance is available for any loan that, in management’s judgment, should be charged off. |
The allowance consists of specific and general components. The specific component relates to loans that are individually internally classified as impaired. The general component covers nonimpaired loans and is based on subjective factors and historical loss experience adjusted for current factors. |
A loan is considered impaired when it is probable that not all principal and interest amounts will be collected according to the loan contract or when the loan contract terms have been modified resulting in a concession of terms and where the borrower is experiencing financial difficulty. Generally, individual commercial, commercial real estate and residential loans exceeding $500 are individually evaluated for impairment. If a loan is considered to be impaired, a portion of the allowance is allocated so that the loan is reported net, at the present value of estimated future cash flows using the loan’s existing rate or at the lesser of the recorded investment in the loan or the fair value of collateral if repayment is expected solely from the collateral. Generally, large groups of smaller balance homogeneous loans, such as consumer, indirect, and residential real estate loans (other than those |
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evaluated individually), are collectively evaluated for impairment, and accordingly, they are not separately identified for impairment disclosures. | ||
Premises and Equipment |
Land is carried at cost. Premises and equipment are reported at cost less accumulated depreciation. For financial reporting purposes, premises and equipment are depreciated using the straight-line method over their estimated useful lives. Expenditures for maintenance and repairs are charged to operations as incurred, while major renewals and betterments are capitalized. For Federal income tax reporting purposes, depreciation is computed using primarily accelerated methods. | ||
Operating Leases |
Rent expense for the Company’s operating leases is recorded on a straight-line basis over the initial lease term and those renewal periods that are reasonably assured. It is common for lease agreements to contain various provisions for items such as step rent or other escalation clauses and lease concessions, which may offer a period of no rent payment. These types of items are considered by the Company and are recorded into expense on a straight line basis over the minimum lease terms. Certain leases require the Company to pay property taxes, insurance and routine maintenance. | ||
Foreclosed Assets |
Assets acquired through, or in lieu of, loan foreclosure or repossession are generally held for sale and are initially recorded at the lesser of their recorded investment or fair value less cost to sell when acquired, establishing a new cost basis. If fair value subsequently declines, a valuation allowance is recorded through expense so that the asset is reported at the lower of cost or fair value less cost to sell. Costs incurred after acquisition are generally expensed. | ||
Goodwill |
Goodwill represents the future economic benefits arising from other assets acquired that are not individually identified and separately recognized. Goodwill and intangible assets acquired in a purchase business combination and determined to have an indefinite useful life are not amortized, but tested for impairment annually or more frequently when events or circumstances indicate impairment may have occurred. |
Goodwill impairment exists when a reporting unit’s carrying value of goodwill exceeds its fair value, which is determined through a two-step impairment test. Step 1 includes the determination of the carrying value of a reporting unit, including the existing goodwill and intangible assets, and estimating the fair value of the reporting unit. If the carrying amount of a reporting unit exceeds its fair value, we are required to perform a second step to the impairment test. Step 2 of the goodwill impairment test is performed to measure the impairment loss. Step 2 requires that the implied fair value of the reporting unit goodwill be compared to the carrying amount of that goodwill. If the carrying amount of the reporting unit goodwill exceeds the implied fair value of that goodwill, an impairment loss is required to be recognized in an amount equal to that excess. | ||
Long-lived Assets and Other Intangible Assets |
Long-lived assets, including premises and equipment, core deposit base premiums arising from acquisitions and other intangible assets, are reviewed for impairment when events indicate their carrying amount may not be recoverable from future undiscounted cash flows. If impaired, the assets are written down to fair value. |
Intangible assets with definite useful lives are amortized over their estimated useful lives to their estimated residual values. The only intangible asset with an indefinite life on the Company’s balance sheet is goodwill. Other intangible assets include core deposit base premiums arising from acquisitions and are initially measured at fair value. Amortization expense associated with intangible assets is recognized in other expense on the income statement using the straight-line method over estimated lives of four to ten years, which is consistent with the use of the assets. | ||
Loan Commitments and Related Financial Instruments |
Financial instruments include off-balance sheet credit instruments, such as commitments to make loans and letters of credit, issued to meet customer financing needs. The face amount for these items represents the exposure to loss, before considering customer collateral or ability to repay. Such financial instruments are recorded when they are funded. | ||
Company Owned Life Insurance |
The Company’s owns life insurance polices on certain current and former directors and employees of its subsidiaries. These policies are recorded at the amount that can be realized under the insurance contract at the balance sheet date, which is the cash surrender value adjusted for other charges or other amounts due that are probable at settlement, if applicable. |
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Income Taxes |
Income tax expense (or benefit) is the total of the current year income tax due or refundable and the change in deferred tax assets and liabilities. 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 basis of the various balance sheet assets and liabilities and gives current recognition to changes in tax rates and laws. |
A valuation allowance related to deferred tax assets is required when it is considered more likely than not that all or part of the benefit related to such assets will not be realized. As of December 31, 2010, management considered the need for a valuation allowance and, based upon its assessment of the relative weight of the positive and negative evidence available at the time of the analysis, concluded that a valuation allowance was not necessary. |
A tax position is recognized as a benefit only if it is “more likely than not” that the tax position would be sustained in a tax examination, with a tax examination being presumed to occur. The amount recognized is the largest amount of tax benefit that is greater than 50% likely of being realized on examination. For tax positions not meeting the “more likely than not” test, no tax benefit is recorded. The Company recognizes interest and/or penalties related to income tax matters in income tax expense. | ||
Earnings (Loss) Per Common Share |
Basic earnings (loss) per share is net income (loss) allocated to common shareholders divided by the weighted average number of common shares and vested restricted shares outstanding during the period. Diluted earnings per share includes the dilutive effect of additional potential common shares issuable under stock options, warrants and restricted shares computed using the treasury stock method. |
Since there were no dilutive stock options, restricted stock awards or warrants outstanding during the periods reported, earnings (loss) per share has been computed based on 38,206 and 8,244 basic and diluted shares for the year ended December 31, 2010 and the period ended December 31, 2009, respectively. | ||
Comprehensive Income |
Comprehensive income consists of net income and other comprehensive income. Other comprehensive income includes unrealized gains and losses on securities available for sale which are also recognized as separate components of equity. |
Securities Purchased Under Agreements to Resell and Securities Sold Under Agreements to Repurchase |
Securities purchased under agreements to resell and securities sold under agreements to repurchase are accounted for as collateralized lending and borrowing transactions, respectively, and are recorded at the amounts at which the securities were acquired or sold plus accrued interest. The fair value of collateral either received from or provided to a third party is regularly monitored, and additional collateral is obtained, provided or requested to be returned as appropriate. | ||
Loss Contingencies |
Loss contingencies, including claims and legal actions arising in the ordinary course of business, are recorded as liabilities when the likelihood of loss is probable and an amount or range of loss can be reasonably estimated. Management does not believe there are currently any such matters that will have a material effect on the financial statements. | ||
Fair Value of Financial Instruments |
Fair values of financial instruments are estimated using relevant market information and other assumptions, as more fully disclosed in Note 15. Fair value estimates include uncertainties and matters of significant judgment regarding interest rates, credit risk, prepayments, and other factors, especially in the absence of broad markets for particular items. Changes in assumptions or in market conditions could significantly affect these estimates. | ||
2. | Business Combinations and Acquisitions |
FDIC-Assisted Purchase and Assumption of Assets and Liabilities of First National Bank of the South, Metro Bank of Dade County and Turnberry Bank |
NAFH NB entered into three purchase and assumption agreements with loss share arrangements with the FDIC as receiver during 2010. As part of these agreements, the FDIC also granted NAFH NB an option to purchase at appraised value the premises, furniture, fixtures, and equipment of the acquired institutions and assume the leases associated with these offices. |
On July 16, 2010 (the “Transaction Date”), NAFH NB acquired certain assets, assumed all of the deposits, and assumed certain other liabilities of First National Bank of the South (“FNB”), Metro Bank of Dade County (“Metro”) and Turnberry Bank (“Turnberry”) from the FDIC in whole-bank acquisitions. |
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Each acquisition was accounted for separately under the purchase method of accounting. Both the purchased assets and liabilities assumed were recorded at their respective acquisition date fair values. Identifiable intangible assets, including goodwill, core deposit intangible assets, customer relationships, tradenames and mortgage servicing rights, were recorded at fair value. Because the fair value of assets acquired and intangible assets created as a result of the acquisitions exceeded the fair value of liabilities assumed on the Metro Bank and Turnberry acquistions, the Company recorded gains resulting from the acquisitions in its consolidated statements of income for the year ended December 31, 2010. These gains totaled $15,175. As the fair value of consideration paid in the FNB acquisition exceeded the estimated fair value of net assets acquired, goodwill of $6,616 was recorded. |
Certain loans and other real estate owned acquired in these acquisitions are covered by loss share agreements between NAFH NB and the FDIC which afford NAFH NB significant protection against future losses. Under the agreements, the FDIC will cover 80% of losses on the disposition of loans and other real estate owned up to certain thresholds presented in the following table. The term for loss sharing on single-family residential real estate loans is ten years, while the term for loss sharing on nonresidential loans is five years and NAFH NB reimbursement to the FDIC for a total of eight years for recoveries. The reimbursable losses from the FDIC are based on the book value of the relevant loans as determined by the FDIC at the date of the transaction. New loans made after that date are not covered by the provisions of the loss share agreements. As part of the acquisition, NAFH NB has recorded an indemnification asset that represents the estimated fair value of the FDIC’s portion of the losses that are expected to be incurred and reimbursed. The indemnification asset related to incurred losses at December 31, 2010 was $46,585 of which $45,678 was collected through April 18, 2011. The following table also presents the value of the indemnification asset at the acquisition date. |
Value of | ||||||||||||
Loss | 80% of Loss | Indemnification | ||||||||||
Threshold | Threshold | Asset | ||||||||||
FNB | $ | 123,000 | $ | 98,400 | $ | 71,386 | ||||||
Metro | 81,000 | 64,800 | 44,191 | |||||||||
Turnberry | 28,000 | 22,400 | 21,739 | |||||||||
$ | 232,000 | $ | 185,600 | $ | 137,316 | |||||||
NAFH NB has agreed to make a true-up payment, also known as clawback liability, to the FDIC on the date that is 45 days following the last day of the final shared loss month, or upon the final disposition of all covered assets under the loss sharing agreements in the event losses thereunder fail to reach expected levels, not to exceed ten years from the Transaction Date. The estimated fair value of the true-up payment as of the acquisition date was $979. |
The acquired assets and liabilities are presented in the following table at fair value at the acquisition date. |
FNB | Metro | Turnberry | Total | |||||||||||||
Assets | ||||||||||||||||
Cash | $ | 64,728 | $ | 79,267 | $ | 40,353 | $ | 184,348 | ||||||||
Investment securities | 40,564 | 30,333 | 3,495 | 74,392 | ||||||||||||
Loans | 389,603 | 226,826 | 152,125 | 768,554 | ||||||||||||
Other real estate owned | 20,832 | 7,547 | 5,439 | 33,818 | ||||||||||||
Core deposit and other intangible assets | 2,214 | 1,400 | 600 | 4,214 | ||||||||||||
Goodwill | 6,616 | — | — | 6,616 | ||||||||||||
Indemnification asset | 71,386 | 44,191 | 21,739 | 137,316 | ||||||||||||
Other assets | 6,315 | 3,921 | 4,392 | 14,628 | ||||||||||||
Total assets | 602,258 | 393,485 | 228,143 | 1,223,886 | ||||||||||||
Liabilities | ||||||||||||||||
Interest-bearing deposits | 409,614 | 263,110 | 161,209 | 833,933 | ||||||||||||
Noninterest-bearing deposits | 38,718 | 73,271 | 14,192 | 126,181 | ||||||||||||
Borrowings | 57,579 | 31,981 | 59,024 | 148,584 | ||||||||||||
Other liabilities | 1,868 | 10,312 | 6,089 | 18,269 | ||||||||||||
Total liabilities | 507,779 | 378,674 | 240,514 | 1,126,967 | ||||||||||||
Net assets acquired | 94,479 | 14,811 | (12,371 | ) | 96,919 | |||||||||||
Consideration paid (received) | 94,479 | 4,191 | (16,926 | ) | 81,744 | |||||||||||
Gains on acquisitions of banks | $ | — | $ | 10,620 | $ | 4,555 | $ | 15,175 | ||||||||
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The above estimated fair values of assets acquired and liabilities assumed are based on the information that was available as of the Transaction Date and the Company believes that information provides a reasonable basis for estimating the fair values. However, the Company may obtain additional information and evidence during the measurement period that may impact the estimated fair value amounts. The Company expects to finalize the valuation and complete the purchase price allocation as soon as practicable. |
As these acquisitions are FDIC-assisted purchases and assumptions of assets and liabilities of failed institutions, the presentation of pro forma information of the acquired institutions is impracticable. | ||
NAFH Inc. Investment in TIBB |
On September 30, 2010, the Company acquired a controlling interest in TIBB for aggregate consideration of $175,000. The consideration was comprised of approximately $162,840 in cash and approximately $12,160 in the form of the contribution to TIBB of all 37,000 shares of preferred stock issued by TIBB to the United States Department of the Treasury under the TARP Capital Purchase Program and the related warrant to purchase shares of TIBB’s Common Stock which the Company purchased directly from the Treasury. |
Immediately following the acquisition, the Company controlled 98.7% of the voting securities of TIBB. The following table summarizes the acquisition: |
Fair value of assets acquired | ||||
Cash and cash equivalents | $ | 229,665 | ||
Securities available for sale | 309,320 | |||
Loans | 1,017,842 | |||
Goodwill and intangible assets, net | 41,769 | |||
Other real estate owned | 29,531 | |||
Bank officer life insurance—cash surrender value | 10,842 | |||
Premises and equipment | 43,632 | |||
Other assets | 54,582 | |||
Total assets acquired | 1,737,183 | |||
Fair value of liabilities assumed | ||||
Deposits | 1,327,663 | |||
Long-term debt and other borrowings | 208,783 | |||
Other liabilities | 22,239 | |||
Total liabilities assumed | 1,558,685 | |||
Net assets | 178,498 | |||
Less: Noncontrolling interest at fair value | 5,955 | |||
172,543 | ||||
Underwriting, due diligence and legal costs | 2,457 | |||
Purchase consideration | $ | 175,000 | ||
The above estimated fair values of assets acquired and liabilities assumed are based on the information that was available as of the acquisition date and the Company believe that information provides a reasonable basis for estimating the fair values. However, the Company may obtain additional information and evidence during the measurement period that may impact the estimated fair value amounts. The Company expects to finalize the valuation and complete the purchase price allocation as soon as practicable. |
There were no indemnification assets identified in this business combination, nor were there any contingent consideration assets or liabilities to be recognized. |
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The following table reflects the pro forma total net interest income, non interest income and net loss for 2010 presented as though the acquisition of TIB Financial Corp. had taken place at the beginning of the period. The pro forma results are not necessarily indicative of the results of operations that would have occurred had the acquisition actually taken place on the first day of the respective periods, nor of future results of operations. As the inception of the Company’s operations was November 30, 2009, pro forma information for the period from inception to December 31, 2009 was deemed not material for presentation. |
Pro Forma | ||||
(Unaudited) | ||||
Year Ended | ||||
December 31, 2010 | ||||
Net interest income | $ | 69,393 | ||
Non-interest income | $ | 28,941 | ||
Net loss | $ | (40,775 | ) |
3. | Cash and Due From Banks |
The Banks are required to maintain reserve balances in cash or on deposit with the Federal Reserve Bank to meet regulatory reserve and clearing requirements. The reserve requirement at December 31, 2010 for NAFH NB was $500. The regulatory reserve and clearing balance requirements for TIB Bank was $2,393 at December 31, 2010. |
4. | Investment Securities |
As of December 31, 2010, the Company’s security portfolio consisted of 106 securities positions, 77 of which were in an unrealized loss position. The majority of unrealized losses are related to the Company’s collateralized debt obligation, corporate bonds and mortgage-backed and other securities, as discussed below. |
The amortized cost, estimated fair value, and the related gross unrealized gains and losses recognized in accumulated other comprehensive income of investment securities at December 31, 2010 are presented below: |
Amortized | Unrealized | Unrealized | Estimated | |||||||||||||
Held to Maturity | Cost | Gains | Losses | Fair Value | ||||||||||||
Foreign government | $ | 250 | $ | — | $ | — | $ | 250 | ||||||||
$ | 250 | $ | — | $ | — | $ | 250 | |||||||||
Amortized | Unrealized | Unrealized | Estimated | |||||||||||||
Available for Sale | Cost | Gains | Losses | Fair Value | ||||||||||||
U.S. Government agencies and corporations | $ | 49,497 | $ | 18 | $ | 382 | $ | 49,133 | ||||||||
States and political subdivisions—tax exempt | 5,918 | 2 | 128 | 5,792 | ||||||||||||
States and political subdivisions—taxable | 9,540 | 41 | 227 | 9,354 | ||||||||||||
Mortgage-backed securities—residential | 415,961 | 948 | 4,696 | 412,213 | ||||||||||||
Marketable equity securities | 102 | — | 28 | 74 | ||||||||||||
Corporate bonds | 2,104 | 1 | — | 2,105 | ||||||||||||
Collateralized debt obligations | 807 | — | 12 | 795 | ||||||||||||
$ | 483,929 | $ | 1,010 | $ | 5,473 | $ | 479,466 | |||||||||
Securities with unrealized losses not recognized in income, and the period of time they have been in an unrealized loss position as of December 31, 2010, are as follows: |
Less than 12 Months | 12 Months or Longer | Total | ||||||||||||||||||||||
Estimated | Unrealized | Estimated | Unrealized | Estimated | Unrealized | |||||||||||||||||||
Available for Sale | Fair Value | Losses | Fair Value | Losses | Fair Value | Losses | ||||||||||||||||||
U.S. Government agencies and corporations | $ | 20,725 | $ | 382 | $ | — | $ | — | $ | 20,725 | $ | 382 | ||||||||||||
States and political subdivisions—tax exempt | 5,191 | 128 | — | — | 5,191 | 128 | ||||||||||||||||||
States and political subdivisions—taxable | 8,198 | 227 | — | — | 8,198 | 227 | ||||||||||||||||||
Mortgage-backed securities—Residential | 255,676 | 4,696 | — | — | 255,676 | 4,696 | ||||||||||||||||||
Marketable equity securities | 74 | 28 | — | — | 74 | 28 | ||||||||||||||||||
Corporate bonds | — | — | — | — | — | — | ||||||||||||||||||
Collateralized debt obligations | 795 | 12 | — | — | 795 | 12 | ||||||||||||||||||
$ | 290,659 | $ | 5,473 | $ | — | $ | — | $ | 290,659 | $ | 5,473 | |||||||||||||
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The mortgage-backed securities in an unrealized loss position at December 31, 2010, were issued by U.S. government-sponsored entities and agencies, primarily Fannie Mae and Freddie Mac, institutions which the government has affirmed its commitment to support. Because the decline in fair value is attributable to changes in interest rates and illiquidity, and not credit quality, and because the Company does not have the intent to sell these mortgage-backed securities and it is more likely than not that it will not be required to sell the securities before their anticipated recovery, the Company does not consider these securities to be other-than-temporarily impaired at December 31, 2010. |
The estimated fair value of investment securities available for sale at December 31, 2010, by contractual maturity, are shown as follows. Expected maturities may differ from contractual maturities because borrowers may have the right to call or repay obligations without call or prepayment penalties. Securities not due at a single maturity date, primarily mortgage-backed securities, are shown separately. |
Held to | Available | |||||||||||||||
Maturity | Yield | for Sale | Yield | |||||||||||||
Due in one year or less | $ | 250 | 5.10 | % | $ | 2,290 | 1.08 | % | ||||||||
Due after one year through five years | — | 18,409 | 0.74 | % | ||||||||||||
Due after five years through ten years | — | 26,104 | 1.41 | % | ||||||||||||
Due after ten years | — | 20,376 | 3.83 | % | ||||||||||||
Marketable equity securities | — | 74 | N/A | |||||||||||||
Mortgage-backed securities | — | 412,213 | 2.46 | % | ||||||||||||
$ | 250 | $ | 479,466 | |||||||||||||
At December 31, 2010, securities with a fair value of approximately $44,784 are subject to call during 2011. |
Sales of available for sale securities were as follows: |
Year Ended | ||||
December 31, | ||||
2010 | ||||
Proceeds | $ | 22,204 | ||
Gross gains | — | |||
Gross losses | — |
Proceeds from the maturities, principal repayments, and calls of investment securities available for sale during 2010 were $87,173. |
Investment securities having carrying values of approximately $145,338 at December 31, 2010 were pledged to secure public funds on deposit, securities sold under agreements to repurchase, and for other purposes as required by law. |
5. | Loans |
Major classifications of loans are as follows: |
Real estate mortgage loans | ||||
Commercial | $ | 1,020,921 | ||
Residential | 318,977 | |||
Farmland | 21,290 | |||
Construction and vacant land | 130,019 | |||
Commercial and agricultural loans | 103,524 | |||
Indirect auto loans | 28,038 | |||
Home equity loans | 104,955 | |||
Other consumer loans | 14,807 | |||
Total loans | 1,742,531 | |||
Net deferred loan costs | 216 | |||
Loans, net of deferred loan costs | $ | 1,742,747 | ||
Covered loans represent loans acquired from the FDIC subject to the loss sharing agreements. Covered loans are further broken out into (i) loans acquired with evidence of credit impairment, which we call purchased credit impaired, and (ii) non PCI loans. Loans originated by the Company and loans acquired through the purchase of TIBB are excluded from the loss sharing agreements and are classified as “not covered”. Additionally, certain consumer loans acquired through the acquisition of failed banks from the FDIC are specifically excluded from the loss sharing agreements. |
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Loans acquired are recorded at fair value in accordance with the fair value, exclusive of the shared-loss agreements with the FDIC. The fair value estimates associated with the loans include estimates related to expected prepayments and the amount and timing of undiscounted expected principal, interest and other cash flows. At the time of acquisition, the Company accounted for the impaired purchased loans by segregating each portfolio into loan pools with similar risk characteristics, which included: |
• | Whether the loan was performing according to contractual terms at the time of acquisition; | ||
• | The loan type based on regulatory reporting guidelines, namely whether the loan was a mortgage, consumer, or commercial loan; and | ||
• | The nature of collateral. |
From these pools, the Company used certain loan information, including outstanding principal balance, estimated expected losses, weighted average maturity, weighted average term to re-price (if a variable rate loan), weighted average margin, and weighted average interest rate to estimate the expected cash flow for each loan pool. Over the life of the acquired loans, the Company continues to estimate cash flows expected to be collected on each loan pool. The Company evaluates, at each balance sheet date, whether the present value of the cash flows from the loan pools, determined using the effective interest rates, has decreased and if so, recognizes a provision for loan loss in its consolidated statement of income. For any increases in cash flows expected to be collected, the Company adjusts the amount of accretable yield recognized on a prospective basis over the loan’s or pool’s remaining life. |
Purchased credit-impaired loans for which it was probable at acquisition that all contractually required payments would not be collected are as follows: |
NAFH NB | TIBB | Total | ||||||||||
Cash flows expected to be collected at acquisition | $ | 737,605 | $ | 1,250,636 | $ | 1,988,241 | ||||||
Accretable yield | (46,570 | ) | (276,715 | ) | (323,285 | ) | ||||||
Fair value of acquired loans at acquisition | $ | 691,035 | $ | 973,921 | $ | 1,664,956 | ||||||
Accretable yield, or income expected to be collected, related to purchased credit-impaired loans is as follows: |
Balance, December 31, 2009 | $ | — | ||
New loans purchased | 323,285 | |||
Accretion of income | (30,480 | ) | ||
Reclassifications from nonaccretable difference | — | |||
Disposals | — | |||
Balance, December 31, 2010 | $ | 292,805 | ||
The contractually required payments represent the total undiscounted amount of all uncollected contractual principal and contractual interest payments both past due and scheduled for the future, adjusted for the timing of estimated prepayments and any full or partial charge-offs prior to acquisition by NAFH. Nonaccretable difference represents contractually required payments in excess of the amount of estimated cash flows expected to be collected. The accretable yield represents the excess of estimated cash flows expected to be collected over the initial fair value of the PCI loans, which is their fair value at the time of acquisition by NAFH. The accretable yield is accreted into interest income over the estimated life of the PCI loans using the level yield method. The accretable yield will change due to changes in: |
• | The estimate of the remaining life of PCI loans which may change the amount of future interest income, and possibly principal, expected to be collected; | ||
• | The estimate of the amount of contractually required principal and interest payments over the estimated life that will not be collected (the nonaccretable difference); and | ||
• | Indices for PCI loans with variable rates of interest. |
PCI loans accounted for using the cost recovery method amounted to $124,650 as of December 31, 2010. Each of these loans is on nonaccrual status. PCI loans that have an accretable difference are not included in disclosures of nonperforming balances even though the borrower may be contractually past due. |
For PCI loans, the impact of loan modifications is included in the evaluation of expected cash flows for subsequent decreases or increases of cash flows. For variable rate PCI loans, expected future cash flows will be recalculated as the rates adjust over the lives of the loans. At acquisition, the expected future cash flows were based on the variable rates that were in effect at that time. |
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Because of the loss protection provided by the FDIC, the risks of NAFH NB’s loans and foreclosed real estate are significantly different from those assets not covered under the loss share agreement. Accordingly, the Company presents loans subject to the loss share agreements as “covered loans” in the information below and loans that are not subject to the loss share agreement as “noncovered loans.” |
Noncovered Loans |
The following is a summary of the major categories of noncovered loans outstanding as of December 31, 2010: |
Total Noncovered | ||||||||||||
PCI Loans | Non PCI Loans | Loans | ||||||||||
Real estate mortgage loans | ||||||||||||
Commercial | $ | 599,820 | $ | 18,043 | $ | 617,863 | ||||||
Residential | 213,982 | 15,918 | 229,900 | |||||||||
Farmland | 12,083 | — | 12,083 | |||||||||
Construction and vacant land | 38,956 | 1,864 | 40,820 | |||||||||
Commercial and agricultural loans | 55,741 | 15,633 | 71,374 | |||||||||
Indirect auto loans | 21,743 | 6,295 | 28,038 | |||||||||
Home equity loans | 4,353 | 27,010 | 31,363 | |||||||||
Other consumer loans | 8,805 | 6,001 | 14,806 | |||||||||
Total loans | 955,483 | 90,764 | 1,046,247 | |||||||||
Net deferred loan costs | — | 216 | 216 | |||||||||
Loans, net of deferred loan costs | $ | 955,483 | $ | 90,980 | $ | 1,046,463 | ||||||
The Bank had no troubled debt restructurings (“TDR”) or nonaccrual loans in its noncovered loan portfolio at December 31, 2010. |
Covered Loans |
The following is a summary of the major categories of covered loans outstanding as of December 31, 2010: |
Total Covered | ||||||||||||
PCI Loans | Non PCI Loans | Loans | ||||||||||
Real estate mortgage loans | ||||||||||||
Commercial | $ | 403,059 | $ | — | $ | 403,059 | ||||||
Residential | 89,077 | — | 89,077 | |||||||||
Farmland | 9,207 | — | 9,207 | |||||||||
Construction and vacant land | 89,199 | — | 89,199 | |||||||||
Commercial and agricultural loans | 29,592 | 2,558 | 32,150 | |||||||||
Home equity loans | — | 73,592 | 73,592 | |||||||||
Total loans | $ | 620,134 | $ | 76,150 | $ | 696,284 | ||||||
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Greater than 90 Days | ||||||||||||||||||||||||||||
Past Due and Still | ||||||||||||||||||||||||||||
30-89 Days Past Due | Accruing/Accreting | Nonaccrual | ||||||||||||||||||||||||||
Non-purchased credit impaired loans | Covered | Non-Covered | Covered | Non-Covered | Covered | Non-Covered | Total | |||||||||||||||||||||
Commercial real estate: | ||||||||||||||||||||||||||||
Land, lot and construction | $ | — | $ | — | $ | — | $ | — | $ | — | $ | — | $ | — | ||||||||||||||
Real estate- non-owner occupied | — | — | — | — | — | — | — | |||||||||||||||||||||
Real estate—owner occupied | — | — | — | — | — | — | — | |||||||||||||||||||||
Consumer real estate: | ||||||||||||||||||||||||||||
Residential mortgage | — | — | — | — | — | — | — | |||||||||||||||||||||
Home equity lines | 1,237 | 405 | 2,868 | 636 | — | — | 5,146 | |||||||||||||||||||||
Commercial and industrial | 135 | 266 | — | — | — | — | 401 | |||||||||||||||||||||
Prime indirect auto loans | — | — | — | — | — | — | — | |||||||||||||||||||||
Sub-prime indirect auto loans | — | — | — | — | — | — | — | |||||||||||||||||||||
Other consumer loans | — | 15 | — | — | — | — | 15 | |||||||||||||||||||||
Total loans | $ | 1,372 | $ | 686 | $ | 2,868 | $ | 636 | $ | — | $ | — | $ | 5,562 | ||||||||||||||
Greater than 90 Days | ||||||||||||||||||||||||||||
Past Due and Still | ||||||||||||||||||||||||||||
30-89 Days Past Due | Accruing/Accreting | Nonaccrual | ||||||||||||||||||||||||||
Purchased credit impaired loans | Covered | Non-Covered | Covered | Non-Covered | Covered | Non-Covered | Total | |||||||||||||||||||||
Commercial real estate: | ||||||||||||||||||||||||||||
Land, lot and construction | $ | 5,978 | $ | 1,776 | $ | 51,075 | $ | 8,217 | $ | — | $ | — | $ | 67,046 | ||||||||||||||
Real estate—non-owner occupied | 7,601 | 9,221 | 33,615 | 12,020 | — | — | 62,457 | |||||||||||||||||||||
Real estate—owner occupied | 9,905 | 2,237 | 12,696 | 22,616 | — | — | 47,454 | |||||||||||||||||||||
Consumer real estate: | ||||||||||||||||||||||||||||
Residential mortgage | 5,704 | 1,713 | 33,416 | 12,263 | — | — | 53,096 | |||||||||||||||||||||
Home equity lines | 1,039 | — | 1,675 | 8 | — | — | 2,722 | |||||||||||||||||||||
Commercial and industrial | 1,168 | 1,175 | 1,916 | 400 | — | — | 4,659 | |||||||||||||||||||||
Prime indirect auto loans | — | 191 | — | 49 | — | — | 240 | |||||||||||||||||||||
Sub-prime indirect auto loans | — | 534 | — | 83 | — | — | 617 | |||||||||||||||||||||
Other consumer loans | — | 367 | — | 265 | — | — | 632 | |||||||||||||||||||||
Total loans | $ | 31,395 | $ | 17,214 | $ | 134,393 | $ | 55,921 | $ | — | $ | — | $ | 238,923 | ||||||||||||||
• | Pass—These loans range from superior quality with minimal credit risk to loans requiring heightened management attention but that are still an acceptable risk and continue to perform as contracted. | ||
• | Special Mention—Loans classified as special mention have a potential weakness that deserves management’s close attention. If left uncorrected, these potential weaknesses may result in deterioration of the repayment prospects for the loan or of the institution’s credit position at some future date. | ||
• | Substandard—Loans classified as substandard are inadequately protected by the current net worth and paying capacity of the obligor or of the collateral pledged, if any. Loans so classified have a well-defined weakness or weaknesses that |
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jeopardize the liquidation of the debt. They are characterized by the distinct possibility that the institution will sustain some loss if the deficiencies are not corrected. | |||
• | Doubtful—Loans classified as doubtful have all the weaknesses inherent in those classified as substandard, with the added characteristic that the weaknesses make collection or liquidation in full, on the basis of currently existing facts, conditions, and values, highly questionable and improbable. |
Special | ||||||||||||||||||||
Pass | Mention | Substandard | Doubtful | Total | ||||||||||||||||
Real estate mortgage loans: | ||||||||||||||||||||
Commercial | $ | 18,043 | $ | — | $ | — | $ | — | $ | 18,043 | ||||||||||
Residential | 15,918 | — | — | — | 15,918 | |||||||||||||||
Construction and vacant land | 1,535 | 162 | 167 | — | 1,864 | |||||||||||||||
Commercial and agricultural | 15,547 | 127 | 2,517 | — | 18,191 | |||||||||||||||
Indirect auto loans | 6,295 | — | — | — | 6,295 | |||||||||||||||
Home equity loans | 76,058 | 9,818 | 9,784 | 4,942 | 100,602 | |||||||||||||||
Other consumer loans | 5,914 | — | 87 | — | 6,001 | |||||||||||||||
Total loans | $ | 139,310 | $ | 10,107 | $ | 12,555 | $ | 4,942 | $ | 166,914 |
6. | FDIC Indemnification Asset |
The following is a summary of the year to date activity in the FDIC indemnification asset. |
Balance, December 31, 2009 | $ | — | ||
Increase due to acquisitions | 137,316 | |||
Accretion | 736 | |||
Reimbursable losses claimed | (46,585 | ) | ||
Balance, December 31, 2010 | $ | 91,467 | ||
7. | Allowance for Loan Losses |
Activity in the allowance for loan losses is as follows: |
Balance, December 31, 2009 | $ | — | ||
Provision for loan losses charged to expense | 753 | |||
Loans charged off | — | |||
Recoveries of loans previously charged off | — | |||
Balance, December 31, 2010 | $ | 753 | ||
Allowance for Loan Losses | Loans | |||||||||||||||||||||||
Individually | Collectively | Individually | ||||||||||||||||||||||
Evaluated | Evaluated | Purchased | Evaluated | Collectively | Purchased | |||||||||||||||||||
for | for | Credit- | for | Evaluated for | Credit- | |||||||||||||||||||
Impairment | Impairment | Impaired | Impairment | Impairment(1) | Impaired | |||||||||||||||||||
Real estate mortgage loans: | ||||||||||||||||||||||||
Commercial | $ | — | $ | 149 | $ | — | $ | — | $ | 18,043 | $ | 1,024,169 | ||||||||||||
Residential | — | 215 | — | — | 15,918 | 303,059 | ||||||||||||||||||
Construction and vacant land | — | 25 | — | — | 1,864 | 128,155 | ||||||||||||||||||
Commercial and agricultural | — | 133 | — | — | 18,191 | 85,333 | ||||||||||||||||||
Indirect auto loans | — | 184 | — | — | 6,295 | 21,744 | ||||||||||||||||||
Home equity loans | — | 33 | — | — | 100,602 | 4,353 | ||||||||||||||||||
Other consumer loans | — | 14 | — | — | 6,001 | 8,804 | ||||||||||||||||||
Total loans | $ | — | $ | 753 | $ | — | $ | — | $ | 166,914 | $ | 1,575,617 | ||||||||||||
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(1) | Loans collectively evaluated for impairment include $97,987 of acquired home equity loans, $5,827 of commercial and agricultural loans and $4,935 of other consumer loans which are presented net of unamortized purchase discounts of $(25,025), (279), and (46), respectively. |
8. | Premises and Equipment |
A summary of the cost and accumulated depreciation of premises and equipment follows: |
Balance as of | ||||||||
December 31, | Estimated | |||||||
2010 | Useful Life | |||||||
Land | $ | 13,891 | ||||||
Buildings and leasehold improvements | 25,133 | 3 to 40 years | ||||||
Furniture, fixtures and equipment | 5,595 | 1 to 40 years | ||||||
Construction in progress | 259 | |||||||
44,878 | ||||||||
Less: Accumulated depreciation | (800 | ) | ||||||
Premises and equipment, net | $ | 44,078 | ||||||
The Company is obligated under operating leases for office and banking premises which expire in periods varying from one to twenty-two years. Future minimum lease payments, before considering renewal options that generally are present, are as follows at December 31, 2010: |
Years Ending December 31, | ||||
2011 | $ | 3,062 | ||
2012 | 1,996 | |||
2013 | 1,689 | |||
2014 | 1,655 | |||
2015 | 1,244 | |||
Thereafter | 15,145 | |||
$ | 24,791 | |||
Rental expense for the year ended December 31, 2010 was $1,351. |
9. | Goodwill and Intangible Assets |
The ending balance of goodwill as of December 31, 2010 is $36,616 of which $30,000 and $6,616 is related to the Company’s 2010 acquisitions of TIBB and FNB, respectively. |
The Company applied “acquisition accounting” for all of its acquisitions during 2010. Acquisition accounting requires that the assets purchased, the liabilities assumed, and non-controlling interests all be reported in the acquirer’s financial statements at their fair value, with any excess of purchase consideration over the net assets being reported at fair value being recorded as goodwill. |
Changes in intangible assets during the year ended December 31, 2010 consist of the following: |
Gross | ||||||||||||
Carrying | Accumulated | Net Book | ||||||||||
Amount | Amortization | Value | ||||||||||
Balance, December 31, 2009 | $ | — | $ | — | $ | — | ||||||
Core deposit intangible due to acquisition of NAFH NB | 4,100 | 454 | 3,646 | |||||||||
Mortgage servicing right due to acquisition of NAFH NB | 114 | 12 | 102 | |||||||||
Core deposit intangible due to acquisition of TIBB | 7,500 | 188 | 7,312 | |||||||||
Customer relationship intangible due to acquisition of TIBB | 3,500 | 87 | 3,413 | |||||||||
Trade names due to acquisition of TIBB | 770 | 89 | 681 | |||||||||
Balance, December 31, 2010 | $ | 15,984 | $ | 830 | $ | 15,154 | ||||||
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All of the identified intangible assets are amortized as noninterest expense over their estimated lives. |
Estimated amortization expense for each of the next five years is as follows: |
Years ending December 31, | ||||
2011 | $ | 2,509 | ||
2012 | 2,420 | |||
2013 | 2,154 | |||
2014 | 1,686 | |||
2015 | 1,100 | |||
$ | 9,869 | |||
10. | Other Real Estate Owned |
The activity within Other Real Estate Owned for the year ended December 31, 2010 was as follows: |
Balance, December 31, 2009 | $ | — | ||
OREO acquired through acquisitions | 63,349 | |||
Real estate acquired from borrowers | 19,721 | |||
Property sold | (12,253 | ) | ||
Balance, December 31, 2010 | $ | 70,817 | ||
11. | Time Deposits |
Time deposits of $100 or more were $703,567 at December 31, 2010. |
At December 31, 2010, the scheduled maturities of time deposits are as follows: |
Years Ending December 31, | ||||
2011 | $ | 1,004,708 | ||
2012 | 248,638 | |||
2013 | 70,882 | |||
2014 | 5,234 | |||
2015 | 24,048 | |||
$ | 1,353,510 | |||
12. | Short-Term Borrowings and Federal Home Loan Bank Advances |
Short-term borrowings include federal funds purchased, securities sold under agreements to repurchase, advances from the Federal Home Loan Bank, and a Treasury, tax and loan note option. |
As of December 31, 2010, TIB Bank had an unsecured overnight federal funds purchased line with a maximum accommodation of $30,000 from a correspondent bank. Additionally, TIB Bank has agreements with various financial institutions under which securities can be sold under agreements to repurchase. The Banks also have securities sold under agreements to repurchase with commercial account holders whereby the Banks sweep the customer’s accounts on a daily basis and pay interest on these amounts. These agreements are collateralized by investment securities chosen by the Banks. |
TIB Bank accepts Treasury, tax and loan deposits from certain commercial depositors and remits these deposits to the appropriate government authorities. TIB Bank can hold up to $1,700 of these deposits more than a day under a note option agreement with its regional Federal Reserve Bank and pays interest on those funds held. TIB Bank pledges certain investment securities against this account. |
As of December 31, 2010, TIB Bank’s collateral availability under its agreement with the Federal Reserve Bank of Atlanta (“FRB”) provided for up to approximately $39,653 of borrowing availability from the FRB discount window. |
NAFH NB assumed an agreement with another financial institution in which securities had been sold which would be repurchased at a future date. The interest rates on these repurchase agreements are fixed for the remaining term of the agreement. The outstanding fair value amount at December 31, 2010 was $10,015, matured in January 2011, and had a fixed interest rate of 5.16%. As of December 31, 2010, $11,203 of securities of the United States Government or its agencies were pledged to collateralize these borrowings. |
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The Banks have securities sold under agreements to repurchase with customers whereby the Banks sweep the customers’ accounts on a daily basis and pay interest on these amounts. These agreements are collateralized by investment securities of the United States Government or its agencies which are chosen by the Banks. |
The Banks invest in Federal Home Loan Bank stock for the purpose of establishing credit lines with the Federal Home Loan Bank. The credit availability to the Banks is based on a percentage of each Bank’s total assets as reported on the most recent quarterly financial information submitted to the regulators subject to the pledging of sufficient collateral. At December 31, 2010, in addition to $25,150 in letters of credit used in lieu of pledging securities to the State of Florida, TIB Bank had $125,000 in advances outstanding with a carrying value of $131,116. NAFH Bank had FHLB advances outstanding with a face value of $105,833 and a carrying value of $111,951. The advances for both Banks consist of the following: |
Contractual | |||||||||||||
Contractual | Rate at | ||||||||||||
Carrying | Outstanding | Repricing | December 31, | ||||||||||
Amount | Amount | Maturity Date | Frequency | 2010 | |||||||||
NAFH Bank | |||||||||||||
$ | 5,001 | $ | 5,000 | February 2011 | Fixed | 0.51 | % | ||||||
3,011 | 3,000 | March 2011 | Fixed | 2.12 | % | ||||||||
3,013 | 3,000 | May 2011 | Fixed | 1.65 | % | ||||||||
5,102 | 5,000 | June 2011(a) | Fixed | 4.95 | % | ||||||||
5,106 | 5,000 | June 2011(a) | Fixed | 5.04 | % | ||||||||
5,058 | 5,000 | July 2011(a) | Fixed | 2.81 | % | ||||||||
1,547 | 1,250 | September 2011 | Fixed | 2.99 | % | ||||||||
1,077 | 1,250 | September 2011 | Fixed | 3.58 | % | ||||||||
465 | 357 | October 2011 | Fixed | 3.91 | % | ||||||||
5,203 | 5,000 | January 2012(a) | Fixed | 4.56 | % | ||||||||
571 | 476 | April 2012 | Fixed | 4.70 | % | ||||||||
5,265 | 5,000 | May 2012(a) | Fixed | 4.59 | % | ||||||||
7,695 | 7,500 | March 2013 | Fixed | 2.29 | % | ||||||||
4,308 | 4,000 | March 2013 | Fixed | 4.58 | % | ||||||||
5,155 | 5,000 | June 2013(a) | Fixed | 2.27 | % | ||||||||
5,528 | 5,000 | May 2014(a) | Fixed | 4.60 | % | ||||||||
5,552 | 5,000 | June 2014(a) | Fixed | 4.66 | % | ||||||||
5,215 | 5,000 | February 2015 | Fixed | 2.83 | % | ||||||||
5,391 | 5,000 | June 2015 | Fixed | 3.71 | % | ||||||||
5,426 | 5,000 | July 2015(a) | Fixed | 3.57 | % | ||||||||
5,734 | 5,000 | June 2017(a) | Fixed | 4.58 | % | ||||||||
5,523 | 5,000 | November 2017(b) | Fixed | 3.93 | % | ||||||||
5,613 | 5,000 | July 2018(a) | Fixed | 3.94 | % | ||||||||
5,198 | 5,000 | July 2018(a) | Fixed | 2.14 | % | ||||||||
5,194 | 5,000 | July 2018(a) | Fixed | 2.12 | % | ||||||||
TIB Bank | |||||||||||||
53,502 | 50,000 | April 2013(a) | Fixed | 3.80 | % | ||||||||
51,790 | 50,000 | December 2011(a) | Fixed | 4.18 | % | ||||||||
10,586 | 10,000 | September 2012(a) | Fixed | 4.05 | % | ||||||||
10,009 | 10,000 | March 2011 | Fixed | 0.61 | % | ||||||||
5,229 | 5,000 | March 2012(a) | Fixed | 4.29 | % | ||||||||
$ | 243,067 | $ | 230,833 | ||||||||||
(a) | These advances have quarterly conversion dates. If the FHLB chooses to convert the advance, the Bank has the option of prepaying the entire balance without penalty. Otherwise, the advance will convert to an adjustable rate, repricing on a quarterly basis. If the FHLB does not convert the advance, it will remain at the contracted fixed rate until the maturity date. | |
(b) | This advance has a one-time conversion option in November 2012. |
The Banks’ collateral with the FHLB consists of a blanket floating lien pledge of the Banks’ respective residential 1-4 family mortgage and commercial real estate secured loans. The amount of eligible collateral at December 31, 2010 was $187,722 and $121,840 for TIB Bank and NAFH Bank, respectively. |
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13. | Long Term Borrowings | |
Subordinated Debentures |
Through its acquisition of TIBB, the Company acquired three separate pooled offerings of trust preferred securities. The Company is not considered the primary beneficiary of the trusts (variable interest entities), therefore the trusts are not consolidated in the Company’s consolidated financial statements, but rather the subordinated debentures are presented as a liability. |
TIBB formed three wholly-owned statutory trust subsidiaries for the purpose of issuing the trust preferred securities. The Trusts used the proceeds from the issuance of trust preferred securities to acquire junior subordinated deferrable interest debentures of TIBB. The trust preferred securities essentially mirror the debt securities, carrying a cumulative preferred dividend equal to the interest rate on the debt securities. The debt securities and the trust preferred securities each have 30-year lives. The trust preferred securities and the debt securities are callable by TIBB or the Trust, at their respective option after a period of time outlined below, and at varying premiums and sooner in specific events, subject to prior approval by the Federal Reserve Board (“FRB”), if then required. Pursuant to a request from the FRB, the Company’s subsidiary TIBB, prior to its acquisition by the Company, elected to defer interest payments on these trust preferred securities beginning with the payments due in October 2009. As of December 31, 2010, the Company remained in an elective deferral period. Deferral of the trust preferred securities is allowed for up to 60 months without being considered an event of default. |
Face | Carrying | Interest | Maturity | |||||||||||
Date of Offering | Amount | Amount | Rate | Call Date | Date | |||||||||
September 7, 2000 | $ | 8,000 | $ | 8,865 | 10.6% Fixed | September 7, 2010 | September 7, 2030 | |||||||
July 31, 2001 | 5,000 | 3,674 | 3.87% (3 Month LIBOR plus 358 basis points) | July 31, 2006 | July 31, 2031 | |||||||||
June 23, 2006 | 20,000 | 10,348 | 1.84% (3 Month LIBOR plus 155 basis points) | June 23, 2011 | June 23, 2036 |
At December 31, 2010, the maturities of long-term borrowings were as follows: |
Fixed Rate | Floating Rate | Total | ||||||||||
Due in 2011 | $ | — | $ | — | $ | — | ||||||
Due in 2012 | — | — | — | |||||||||
Due in 2013 | — | — | — | |||||||||
Due in 2014 | — | — | — | |||||||||
Thereafter | 8,865 | 14,022 | 22,887 | |||||||||
Total long-term debt | $ | 8,865 | $ | 14,022 | $ | 22,887 | ||||||
14. | Income Taxes |
2010 | 2009 | |||||||
Current income tax provision | ||||||||
Federal | $ | 4,491 | $ | — | ||||
State | 550 | — | ||||||
5,041 | — | |||||||
Deferred tax benefit | ||||||||
Federal | (4,949 | ) | (41 | ) | ||||
State | (1,133 | ) | (9 | ) | ||||
(6,082 | ) | (50 | ) | |||||
$ | (1,041 | ) | $ | (50 | ) | |||
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2010 | 2009 | |||||||
Pretax income from continuing operations | $ | 10,996 | $ | (142 | ) | |||
Income taxes computed at Federal statutory tax rate Effect of: | 3,849 | 50 | ||||||
Purchase Accounting Gain | (5,371 | ) | — | |||||
TCA Legal Costs | 860 | — | ||||||
Tax-exempt income, net | (77 | ) | — | |||||
State income taxes, net | (423 | ) | — | |||||
Other, net | 121 | — | ||||||
Total income tax expense (benefit) | $ | (1,041 | ) | $ | 50 | |||
The details of the net deferred tax asset as of December 31, 2010 and 2009 are as follows: |
2010 | 2009 | |||||||
Clawback Reserve Liability | $ | 394 | $ | — | ||||
Goodwill | 7,910 | — | ||||||
OREO Write Down Allowance | 7,850 | — | ||||||
FHLB Borrowings | 2,397 | — | ||||||
CD Premium | 1,207 | — | ||||||
Allowance for loan losses | 290 | — | ||||||
Purchase accounting adjustment | 30,428 | — | ||||||
Net operating loss and AMT carryforward | 5,319 | 50 | ||||||
Recognized impairment of other real estate owned | — | — | ||||||
Acquisition related intangibles | 2,372 | — | ||||||
Net unrealized losses on securities available for sale | 1,716 | — | ||||||
Other | — | — | ||||||
Total gross deferred tax assets | $ | 59,883 | $ | 50 | ||||
FDIC Indemnification Assets | $ | (35,284 | ) | $ | — | |||
Deferred loan costs | (83 | ) | — | |||||
Acquisition related intangibles | (1,957 | ) | — | |||||
Other | (5,770 | ) | — | |||||
Total gross deferred tax liabilities | $ | (43,094 | ) | $ | — | |||
Net temporary differences | 16,789 | — | ||||||
Valuation allowance | — | — | ||||||
Net deferred tax asset | $ | 16,789 | $ | 50 | ||||
A valuation allowance related to deferred tax assets is required when it is considered more likely than not that all or part of the benefit related to such assets will not be realized. In assessing the need for a valuation allowance, management considered various factors including projections of future operating results as well as the significant cumulative losses incurred by the operations acquired from the FDIC in recent years. These factors represent the most significant positive and negative evidence that management considered in concluding that no valuation allowance was necessary at December 31, 2010. |
At December 31, 2010, the Company had Federal and state net operating loss carryforwards of $13,737, which expire in 2030 if unused. These net operating loss carryforwards resulted from the acquisition of TIBB and are subject to an annual limitation estimated to be $723. |
The Company and its subsidiaries are subject to U.S. federal income tax, as well as income tax of the states of Florida, South Carolina and North Carolina. |
At December 31, 2010, the Company had no amounts recorded for uncertain tax positions. The Company does not expect the total amount of unrecognized tax benefits to significantly increase in the next twelve months. |
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15. | Employee Benefit Plans |
TIBB maintains an Employee Stock Ownership Plan with 401(k) provisions that covers all employees who are qualified as to age and length of service. Three types of contributions can be made to the Plan by the Company and participants: basic voluntary contributions which are discretionary contributions made by all participants; a matching contribution, whereby the Company will match 50 percent of salary reduction contributions up to 5 percent of compensation; and an additional discretionary contribution which may be made by the Company and allocated to the accounts of participants on the basis of total relative compensation. The Company contributed $83 during 2010 to the plan. |
TIB Bank entered into salary continuation agreements with several of its executive officers. The plans are nonqualified deferred compensation arrangements that were designed to provide supplemental retirement income benefits to participants. In 2010, following the investment by NAFH Inc. and the TARP repayment, the salary continuation agreements were terminated and the executives each received a lump sum distribution of their respective accrued benefit earned under their agreement. The Bank has purchased single premium life insurance policies on several of these individuals. In 2010, following the acquisition by the Company, the salary continuation agreements were terminated and the executives each received a lump sum distribution of their respective accrued benefit earned under their agreement resulting in a total payout of $1,305. Cash value income (net of related insurance premium expense) totaled $66 for 2010. |
In 2001, TIB Bank established a nonqualified retirement benefit plan for eligible Bank directors. Under the plan, the Bank pays each participant, or their beneficiary, the amount of directors fees deferred and interest in 120 equal monthly installments, beginning the month following the director’s normal retirement date. In 2011 the director deferred agreements were terminated and the directors participating in the plan each received a lump sum distribution of their respective deferral account balances. The Company expensed $9 in 2010 for the accrual of the retirement benefits. The Company owns single premium split dollar life insurance policies on these individuals. Cash value income (net of related insurance premium expense) totaled $38 during 2010. In 2011 the director deferred agreements were terminated and the directors participating in the plan each received a lump sum distribution of their respective deferral account balances resulting in a total payout of $431 by the Company. |
16. | Shareholders’ Equity and Minimum Regulatory Capital Requirements |
The Company (on a consolidated basis) and the Banks are subject to various regulatory capital requirements administered by federal and state banking agencies. Failure to meet minimum capital requirements results in certain discretionary and required actions by regulators that could have an effect on the Company’s operations. The regulations require the Company and the Banks to meet specific capital adequacy guidelines that involve quantitative measures of assets, liabilities, and certain off-balance-sheet items as calculated under regulatory accounting practices. The Company’s capital amounts and classifications are also subject to qualitative judgments by the regulators about components, risk weightings and other factors. |
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Capital Adequacy and Ratios |
To be considered well capitalized and adequately capitalized (as defined) under the regulatory framework for prompt corrective action, the Banks must maintain minimum Tier 1 leverage, Tier 1 risk-based, and total risk-based ratios. At December 31, 2010 the Banks maintained capital ratios exceeding the requirements to be considered well capitalized. These minimum amounts and ratios along with the actual amounts and ratios for the Company, TIBB and the Banks at December 31, 2010 are presented in the following table. |
Well Capitalized | Adequately Capitalized | |||||||||||||||||||||||
Requirement | Requirement | Actual | ||||||||||||||||||||||
Amount | Ratio | Amount | Ratio | Amount | Ratio | |||||||||||||||||||
Tier 1 Capital (to Average Assets) | ||||||||||||||||||||||||
Consolidated | N/A | N/A | ³ $137,767 | ³ 4.0 | % | $ | 838,475 | 24.3 | % | |||||||||||||||
TIBB | N/A | N/A | ³ 67,763 | ³ 4.0 | % | 139,596 | 8.2 | % | ||||||||||||||||
TIB Bank | ³ $84,285 | ³ 5.0 | % | ³ 67,428 | ³ 4.0 | % | 136,764 | 8.1 | % | |||||||||||||||
NAFH NB | ³ 60,119 | ³ 5.0 | % | ³ 48,095 | ³ 4.0 | % | 145,632 | 12.1 | % | |||||||||||||||
Tier 1 Capital (to Risk Weighted Assets) | ||||||||||||||||||||||||
Consolidated | N/A | N/A | $ | 80,201 | ³ 4.0 | % | $ | 838,475 | 41.8 | % | ||||||||||||||
TIBB | N/A | N/A | 41,750 | ³ 4.0 | % | 139,596 | 13.4 | % | ||||||||||||||||
TIB Bank | ³ $62,616 | ³ 6.0 | % | 41,744 | ³ 4.0 | % | 136,764 | 13.1 | % | |||||||||||||||
NAFH NB | ³ 51,167 | ³ 6.0 | % | 34,112 | ³ 4.0 | % | 145,632 | 17.1 | % | |||||||||||||||
Total Capital (to Risk Weighted Assets) | ||||||||||||||||||||||||
Consolidated | N/A | N/A | ³ $160,402 | ³ 8.0 | % | $ | 839,280 | 41.9 | % | |||||||||||||||
TIBB | N/A | N/A | 83,501 | ³ 8.0 | % | 140,027 | 13.4 | % | ||||||||||||||||
TIB Bank | ³ $104,360 | ³ 10.0 | % | ³ 83,488 | ³ 8.0 | % | 137,195 | 13.1 | % | |||||||||||||||
NAFH NB | ³ 85,279 | ³ 10.0 | % | ³ 68,223 | ³ 8.0 | % | 146,006 | 17.1 | % |
Management believes, as of December 31, 2010, that the Company, TIBB and the Banks meet all capital requirements to which they are subject. |
Under state banking law, regulatory approval will be required if the total of all dividends declared in any calendar year by a bank exceeds the bank’s net profits to date for that year combined with its retained net profits for the preceding two years. Declaration of any dividends by TIB Bank in 2010 would have required regulatory approval. During 2010, no dividends were declared by the Banks. |
17. | Stock-Based Compensation |
As of December 31, 2010, the Company has one compensation plan under which shares of its common stock are issuable in the form of stock options, stock appreciation rights, restricted stock restricted stock units, stock awards and stock bonus awards. This is its 2010 Equity Incentive Plan (the “2010 Plan”). The 2010 Plan was effective December 22, 2009 and expires on December 22, 2019, the tenth anniversary of the effective date. The maximum number of shares of common stock of the Company that may be optioned or awarded through the 2019 expiration of the plan is 5,750 shares of which up to 70% may be granted pursuant to stock options and up to 30% may be granted pursuant to restricted stock and restricted stock units. If any awards granted under the Plan are forfeited or any option terminates, expires or lapses without being exercised, or any award is settled for cash, the shares of stock shall again be available for awards under the Plan. As of December 31, 2010 no awards had been granted. |
As of December 31, 2010, TIBB has one compensation plan under which shares of its common stock are issuable in the form of stock options, restricted shares, stock appreciation rights, performance shares or performance units. This is its 2004 Equity Incentive Plan (the “2004 Plan”), which was approved by TIBB’s shareholders at the May 25, 2004 annual meeting. Previously, TIBB had granted stock options under the 1994 Incentive Stock Option and Nonstatutory Stock Option Plan (the “1994 Plan”) as amended and restated as of August 31, 1996. Under the 2004 Plan, the Board of Directors of the Company may grant nonqualified stock-based awards to any director, and incentive or nonqualified stock-based awards to any officer, key executive, administrative, or other employee including an employee who is a director of the Company. At the May 25, 2010 annual meeting, the shareholders approved an amendment to the 2004 Plan increasing the maximum number of shares of common stock of the Company that may be optioned or awarded through the 2014 expiration of the plan to 250 shares, no more than 200 of which may be issued pursuant to awards granted in the form of restricted shares. Such shares may be treasury, or |
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authorized but unissued, shares of common stock of the Company. If options or awards granted under the Plan expire or terminate for any reason without having been exercised in full or released from restriction, the corresponding shares shall again be available for option or award for the purposes of the Plan as long as no dividends have been paid to the holder in accordance with the provisions of the grant agreement. At December 31, 2010 there were 7 exercisable options outstanding under the Plan with a weighted average remaining contractual life of 4.91 years, weighted average exercise price of $688.80 and exercise price range from $158.42 to $1,489.52. Shares available for grant as of December 31, 2010 were 243. |
18. | Loan Commitments and Other Related Activities |
Some financial instruments, such as loan commitments, credit lines, letters of credit, and overdraft protection, are issued to meet customer financing needs. These are agreements to provide credit or to support the credit of others, as long as conditions established in the contract are met, and usually have expiration dates. Commitments may expire without being used. Off-balance-sheet risk of credit loss exists up to the face amount of these instruments, although material losses are not anticipated. The same credit policies are used to make such commitments as are used for loans, including obtaining collateral at exercise of the commitment. |
The contractual amount of financial instruments with off-balance-sheet risk was as follows at December 31, 2010: |
Fixed Rate | Variable Rate | |||||||
Commitments to make loans | $ | 42,236 | $ | 16,627 | ||||
Unfunded commitments under lines of credit | 21,179 | 99,850 |
Commitments to make loans are generally made for periods of 30 days. As of December 31, 2010, the fixed rate loan commitments have interest rates ranging from 2.94% to 11.00% and maturities ranging from 1 year to 30 years. |
As of December 31, 2010 the Banks were subject to letters of credit totaling $2,080. |
19. | Fair Values of Financial Instruments |
Accounting guidance establishes a fair value hierarchy which requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. The guidance describes three levels of inputs that may be used to measure fair value: |
Level 1 | Quoted prices (unadjusted) for identical assets or liabilities in active markets that the entity has the ability to access as of the measurement date. |
Level 2 | Significant other observable inputs other than Level 1 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. |
Level 3 | Significant unobservable inputs that reflect a reporting entity’s own assumptions about the assumptions that market participants would use in pricing an asset or liability. |
The fair values of securities available for sale can be determined by 1) obtaining quoted prices on nationally recognized securities exchanges when available (Level 1 inputs), 2) matrix pricing, which is a mathematical technique widely used in the industry to value debt securities without relying exclusively on quoted prices for the specific securities but rather by relying on the securities’ relationship to other benchmark quoted securities (Level 2 inputs) and 3) custom discounted cash flow or other internal modeling (Level 3 inputs). |
Valuation of Impaired Loans and Other Real Estate Owned |
The fair value of collateral dependent impaired loans with specific allocations of the allowance for loan losses and other real estate owned is generally based on recent real estate appraisals. These appraisals may utilize a single valuation approach or a combination of approaches including comparable sales and the income approach. Adjustments are routinely made in the appraisal process by the appraisers to adjust for differences between the comparable sales and income data available. Such adjustments are typically significant and result in a Level 3 classification of the inputs for determining fair value. |
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Assets and Liabilities Measured on a Recurring Basis |
Assets and liabilities measured at fair value on a recurring basis are summarized below: |
Fair Value Measurements Using | ||||||||||||||||
Quoted Prices in | ||||||||||||||||
Active Markets | Significant | Significant | ||||||||||||||
for Identical | Other Observable | Unobservable | ||||||||||||||
Assets | Inputs | Inputs | ||||||||||||||
(Level 1) | (Level 2) | (Level 3) | ||||||||||||||
Assets | ||||||||||||||||
U.S. Government agencies and corporations | $ | 49,133 | $ | — | $ | 49,133 | $ | — | ||||||||
States and political subdivisions—tax exempt | 5,792 | — | 5,792 | — | ||||||||||||
States and political subdivisions—taxable | 9,354 | — | 9,354 | — | ||||||||||||
Mortgage-backed securities—residential | 412,213 | — | 412,213 | — | ||||||||||||
Marketable equity securities | 74 | — | 74 | — | ||||||||||||
Corporate bonds | 2,105 | — | 2,105 | — | ||||||||||||
Collateralized debt obligations | 795 | — | — | 795 | ||||||||||||
Available for sale securities | $ | 479,466 | $ | — | $ | 478,671 | $ | 795 | ||||||||
Assets and Liabilities Measured on a Nonrecurring Basis |
Assets and liabilities measured at fair value on a nonrecurring basis are summarized below: |
Fair Value Measurements Using | ||||||||||||
Quoted Prices in | ||||||||||||
Active Markets | Significant | Significant | ||||||||||
for Identical | Other Observable | Unobservable | ||||||||||
Assets | Inputs | Inputs | ||||||||||
(Level 1) | (Level 2) | (Level 3) | ||||||||||
Assets | ||||||||||||
Other real estate owned | $ | — | $ | — | $ | 70,817 | ||||||
Other repossessed assets | — | 137 | — |
Other real estate owned which is measured at the lesser of fair value less costs to sell or the Company’s recorded investment in the foreclosed loan had a carrying amount of $70,817 as of December 31, 2010. Other repossessed assets are primarily comprised of repossessed vehicles and equipment and are measured at fair value as of the date of repossession. |
Carrying amount and estimated fair values of financial instruments were as follows: |
2010 | 2009 | |||||||||||||||
Carrying | Estimated | Carrying | Estimated | |||||||||||||
Value | Fair Value | Value | Fair Value | |||||||||||||
Financial Assets | ||||||||||||||||
Cash and cash equivalents | $ | 886,925 | $ | 886,925 | $ | 526,711 | $ | 526,711 | ||||||||
Investment securities available for sale | 479,466 | 479,466 | — | — | ||||||||||||
Investment securities held to maturity | 250 | 250 | — | — | ||||||||||||
Loans, net | 1,741,994 | 1,781,181 | — | — | ||||||||||||
FDIC indemnification asset | 91,467 | 91,467 | — | — | ||||||||||||
Federal reserve, federal home loan bank and independent bankers’ bank stock | 23,465 | 23,465 | — | — | ||||||||||||
Accrued interest receivable | 8,286 | 8,286 | — | — | ||||||||||||
Financial Liabilities | ||||||||||||||||
Noncontractual deposits | $ | 906,742 | $ | 906,742 | $ | — | $ | — | ||||||||
Contractual deposits | 1,353,510 | 1,355,099 | — | — | ||||||||||||
Federal home loan bank advances | 243,067 | 242,522 | — | — | ||||||||||||
Short-term borrowings | 61,969 | 61,969 | — | — | ||||||||||||
Subordinated debentures | 22,887 | 25,267 | — | — | ||||||||||||
Accrued interest payable | 9,334 | 9,334 | — | — |
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The methods and assumptions used to estimate fair value are described as follows: |
Carrying amount is the estimated fair value for cash and cash equivalents, accrued interest receivable and payable, noncontractual demand deposits and certain short-term borrowings. As it is not practicable to determine the fair value of Federal Reserve, Federal Home Loan Bank stock and other bankers’ bank stock due to restrictions placed on its transferability, the estimated fair value is equal to their carrying amount. Security fair values are based on market prices or dealer quotes, and if no such information is available, on the rate and term of the security and information about the issuer including estimates of discounted cash flows when necessary. For fixed rate loans or contractual deposits and for variable rate loans or deposits with infrequent repricing or repricing limits, fair value is based on discounted cash flows using current market rates applied to the estimated life, adjusted for the allowance for loan losses. Fair values for impaired loans are estimated using discounted cash flow analysis or underlying collateral values. Fair value of long-term debt is based on current rates for similar financing. The fair value of off-balance sheet items that includes commitments to extend credit to fund commercial, consumer, real estate construction and real estate-mortgage loans and to fund standby letters of credit is considered nominal. |
20. | Condensed Financial Information of North American Financial Holdings, Inc. |
Year Ended December 31, 2010 and Period From November 30, 2009 (Inception) to December 31, 2009
(Parent Only)
2010 | 2009 | |||||||
Assets | ||||||||
Cash and due from banks | $ | 546,995 | $ | 526,711 | ||||
Investment in bank subsidiary | 155,515 | — | ||||||
Investment in bank holding company subsidiary | 170,817 | — | ||||||
Accrued interest receivable and other assets | 3,749 | 50 | ||||||
Total assets | $ | 877,076 | $ | 526,761 | ||||
Liabilities and Shareholders’ Equity | ||||||||
Accrued interest payable and other liabilities | 1,773 | 441 | ||||||
Shareholders’ equity | 875,303 | 526,320 | ||||||
Total Liabilities and Shareholders’ Equity | $ | 877,076 | $ | 526,761 | ||||
Year Ended December 31, 2010 and Period From November 30, 2009 (Inception) to December 31, 2009
(Parent Only)
2010 | 2009 | |||||||
Operating income | ||||||||
Interest-bearing deposits in other banks | $ | 3,175 | $ | 72 | ||||
Total operating income | 3,175 | 72 | ||||||
Operating expense | ||||||||
Salaries | 3,635 | 40 | ||||||
Other expense | 10,757 | 174 | ||||||
Total operating expense | 14,392 | 214 | ||||||
Income (loss) before income tax benefit and equity in undistributed earnings of subsidiaries | (11,217 | ) | (142 | ) | ||||
Income tax benefit | 3,699 | 50 | ||||||
Loss before equity in undistributed earnings of subsidiaries | (7,518 | ) | (92 | ) | ||||
Equity in income of subsidiaries | 19,548 | — | ||||||
Net income | $ | 12,030 | $ | (92 | ) | |||
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Year Ended December 31, 2010 and Period From November 30, 2009 (Inception) to December 31, 2009
(Parent Only)
2010 | 2009 | |||||||
Cash flows from operating activities | ||||||||
Net income (loss) | $ | 12,030 | $ | (92 | ) | |||
Equity in income of subsidiaries | (19,548 | ) | — | |||||
Increase (decrease) in net income tax obligation | (3,699 | ) | (50 | ) | ||||
Change in accrued interest receivable and other assets | 1,332 | — | ||||||
Change in accrued interest payable and other liabilities | (1 | ) | 441 | |||||
Net cash (used in) provided by operating activities | (9,886 | ) | 299 | |||||
Cash flows from investing activities | ||||||||
Investment in bank subsidiary | (137,000 | ) | — | |||||
Investment in bank holding company subsidiary | (172,543 | ) | — | |||||
Net cash used by investing activities | (309,543 | ) | — | |||||
Cash flows from financing activities | ||||||||
Net proceeds from issuance of common shares | 339,713 | 526,412 | ||||||
Net cash provided by financing activities | 339,713 | 526,412 | ||||||
Net increase in cash and cash equivalents | 20,284 | 526,711 | ||||||
Cash and cash equivalents | ||||||||
Beginning of period | 526,711 | — | ||||||
End of period | $ | 546,995 | $ | 526,711 | ||||
21. | Supplemental Financial Data |
Components of other expense in excess of 1 percent of total interest and non-interest income are as follows: |
2010 | 2009 | |||||||
Conversion expenses | $ | 1,991 | — | |||||
FDIC & state assessments | 2,097 | — | ||||||
Computer services | 2,098 | — | ||||||
Amortization of intangibles | 818 | — | ||||||
Insurance non-building | 640 | — | ||||||
Foreclosed asset related expense | 701 | — | ||||||
Travel | 382 | 35 | ||||||
Organizational Expense | — | 91 |
22. | Quarterly Financial Data (Unaudited) |
The following is a summary of unaudited quarterly results for 2010 and 2009: |
2010 | 2009 | |||||||||||||||||||
Fourth | Third | Second | First | Fourth | ||||||||||||||||
Condensed income statements: | ||||||||||||||||||||
Interest income | $ | 29,773 | $ | 11,416 | $ | 831 | $ | 725 | $ | 72 | ||||||||||
Net interest income | 24,747 | 10,208 | 831 | 725 | 72 | |||||||||||||||
Provision for loan losses | 753 | — | — | — | — | |||||||||||||||
Purchase accounting gain | — | 15,175 | — | — | — | |||||||||||||||
Net Income (loss) | (167 | ) | 14,607 | (1,022 | ) | (1,381 | ) | (92 | ) | |||||||||||
Net income (loss) allocated to common shareholders | (174 | ) | 14,607 | (1,022 | ) | (1,381 | ) | (92 | ) | |||||||||||
Basic and diluted earnings (loss) per common share | $ | — | $ | 0.33 | $ | (0.03 | ) | $ | (0.04 | ) | $ | (0.01 | ) |
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23. | Subsequent Events |
The Company’s investment in TIBB was subsequently reduced to approximately 94% as a result of a shareholder rights offering which closed on January 18, 2011. |
The Company closed on an investment in Capital Bank Corp. on January 28, 2011 to purchase 71,000,000 shares of common stock for $181,050,000 in cash. Subsequent to the investment, the Company owned approximately 85% of Capital Bank Corp. The Company’s investment in Capital Bank Corp. was subsequently reduced to approximately 83% as a result of a shareholder rights offering which closed on March 11, 2011. |
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EASY WAYS TO VOTE
OF SHAREHOLDERS
September 7, 2011
Table of Contents
common stock for the upcoming Special Meeting of Shareholders.
1. | Vote by Telephone —Call toll-free from the U.S. or Canada at1 (866)-287-0485, on a touch-tone telephone. Please follow the simple instructions provided. |
2. | Vote by Internet —Please accesshttps://www.proxyvotenow.com/grnb, and follow the simple instructions provided. Please note you must type an “s” after http. |
CONTROL NUMBER: | |||||
Your telephone or Internet vote authorizes the named proxies to vote your shares in the same manner
as if you had executed a proxy card.
3. | Vote by Mail —If you do not have access to a touch-tone telephone or to the Internet, please sign, date and return the proxy card in the envelope provided, or mail to: Green Bankshares, Inc. c/o Innisfree M&A Incorporated, FDR Station, P.O. Box 5154, New York, NY 10150-5154. |
1. | Approval of the original issuance and certain subsequent issuances of shares of the Company’s Common Stock under the terms of the Investment Agreement, dated May 5, 2011, among Green Bankshares, Inc., GreenBank and North American Financial Holdings, Inc. |
2. | Approval of the amendment to the Company’s Charter to increase the number of authorized shares of the Company’s Common Stock from twenty million (20,000,000) to three hundred million (300,000,000). |
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3. | Approval of the amendment to the Company’s Charter to decrease the par value of the Company’s Common Stock from $2.00 per share to $0.01 per share. |
4. | Approval of the amendment to the Company’s Charter to exempt North American Financial Holdings, Inc. and its affiliates and associates from Section 9 of the Charter. |
5. | Approval of the amendment to the Company’s Charter to remove Section 8(j) of the Charter so that the Tennessee Control Share Acquisition Act will not apply to the Company and its shareholders. |
6. | Approval of the merger of GreenBank with and into a subsidiary of North American Financial Holdings, Inc. |
7. | Approval, on an advisory and non-binding basis, of the compensation to be received by the Company’s named executive officers in connection with the issuance of shares of Common Stock to North American Financial Holdings, Inc. under the terms of the Investment Agreement. |
8. | Approval of grant of discretionary authority to vote to adjourn the Special Meeting, if necessary, in order to solicit additional proxies in the event that there are not sufficient affirmative votes present at the Special Meeting to approve the proposals that may be considered and acted upon at the Special Meeting. |
Date: | |||
Signature: | |||
Signature: | |||
Title(s): | |||
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