MARYLAND | 52-1726127 |
(State or other jurisdiction | (I.R.S. Employer Identification Number) |
of incorporation or organization) | |
1919 A West Street, Annapolis, Maryland | 21401 |
(Address of principal executive offices) | (Zip Code) |
Section | Page No. | |
PART I | 1 | |
Item 1. | Business | 1 |
Item 2. | Properties | 30 |
Item 3. | Legal Proceedings | 30 |
Item 4. | Submission of Matters to a Vote of Security Holders | 30 |
PART II | 30 | |
Item 5. | Market for Registrant’s Common Equity and Related Stockholder Matters | 30 |
Item 6. | Selected Financial Data | 31 |
Item 7. | Management’s Discussion and Analysis of Financial Condition | |
and Results of Operations | 35 | |
Item 7.A. | Quantitative and Qualitative Disclosures About Market Risk | 42 |
Item 8. | Financial Statements and Supplementary Data | 43 |
Item 9. | Changes in and Disagreements with Accountants on | |
Accounting and Financial Disclosures | 43 | |
Item 9A. | Controls and Procedures | 44 |
PART III | 44 | |
Item 10. | Directors and Executive Officers of the Registrant | 44 |
Item 11. | Executive Compensation | 45 |
Item 12. | Security Ownership of Certain Beneficial Owners and Management | 45 |
Item 13. | Certain Relationships and Related Transactions | 45 |
45 | ||
Item 14. | Principal Accountant Fees and Services | 45 |
PART IV | 45 | |
Item 15. | Exhibits, Financial Statements, Schedules and Reports on Form 8-K | 46 |
Signatures | 46 | |
At the period ended: | December 31, | |||||||||||||||
2003 | 2002 | 2001 | 2000 | 1999 | ||||||||||||
(dollars in thousands, except per share information) | ||||||||||||||||
Balance Sheet Data: | ||||||||||||||||
Total assets | $ | 540,471 | $ | 458,415 | $ | 366,890 | $ | 293,230 | $ | 233,724 | ||||||
Total loans, net | 506,026 | 418,825 | 342,641 | 274,652 | 214,066 | |||||||||||
Total nonperforming assets | 469 | 1,982 | 2,413 | 1,490 | 1,597 | |||||||||||
Deposits | 419,726 | 377,925 | 286,918 | 229,312 | 186,204 | |||||||||||
Short-term borrowings | 6,000 | - | 17,000 | 18,000 | 2,000 | |||||||||||
Notes payable | 59,000 | 34,000 | 25,000 | 16,000 | 22,000 | |||||||||||
Total liabilities | 487,501 | 415,233 | 332,059 | 268,009 | 211,743 | |||||||||||
Minority Interest – Preferred Securities of Subsidiary | 4,000 | 4,000 | 4,000 | 3,892 | 3,892 | |||||||||||
Stockholders' equity | 48,970 | 39,181 | 30,831 | 21,329 | 18,089 | |||||||||||
Book value per share | 11.77 | 9.46 | 7.60 | 6.58 | 5.59 |
For the period ended: | December 31, | |||||||||||||||
2003 | 2002 | 2001 | 2000 | 1999 | ||||||||||||
Operations Data: | ||||||||||||||||
Net interest income | $ | 24,746 | $ | 19,603 | $ | 13,395 | $ | 10,884 | $ | 9,524 | ||||||
Net interest income after provision for loan losses | 23,846 | 18,933 | 12,687 | 10,293 | 9,020 | |||||||||||
Noninterest income | 4,674 | 4,133 | 2,570 | 1,439 | 1,586 | |||||||||||
Noninterest expense | 9,616 | 8,447 | 6,588 | 5,348 | 5,477 | |||||||||||
Net income | 11,329 | 8,948 | 5,256 | 3,945 | 3,127 | |||||||||||
Basic earnings per share * | 2.68 | 2.13 | 1.38 | 1.15 | 0.90 | |||||||||||
Diluted earnings per share * | 2.67 | 2.13 | 1.37 | 1.12 | 0.84 | |||||||||||
Common Stock Cash dividends declared per share* | 0.34 | 0.24 | 0.19 | 0.17 | 0.15 | |||||||||||
Common Stock dividends declared per share to | ||||||||||||||||
diluted earnings per share * | 12.73 | % | 11.27 | % | 13.87 | % | 15.18 | % | 17.86 | % | ||||||
Weighted number of shares outstanding basic * | 4,146,566 | 4,092,188 | 3,647,451 | 3,237,888 | 3,230,940 | |||||||||||
Weighted number of shares outstanding diluted * | 4,157,302 | 4,103,223 | 3,683,346 | 3,330,915 | 3,450,831 | |||||||||||
Performance Ratios: | ||||||||||||||||
Return on average assets | 2.23 | % | 2.14 | % | 1.55 | % | 1.47 | % | 1.38 | % | ||||||
Return on average equity | 25.22 | % | 25.58 | % | 20.22 | % | 20.04 | % | 18.31 | % | ||||||
Interest rate spread | 4.77 | % | 4.59 | % | 3.65 | % | 3.75 | % | 3.94 | % | ||||||
Net interest margin | 4.99 | % | 4.86 | % | 4.05 | % | 4.17 | % | 4.34 | % | ||||||
Noninterest expense to average assets | 1.76 | % | 2.02 | % | 1.95 | % | 2.00 | % | 2.43 | % | ||||||
Efficiency ratio | 30.33 | % | 35.59 | % | 41.27 | % | 43.40 | % | 49.30 | % | ||||||
* Retroactively adjusted to reflect three-for-one stock split declared February 19, 2002 and effective for shares outstanding | ||||||||||||||||
as of March 1, 2002. |
1 | ||
2 | ||
3 | ||
2003 | 2002 | 2001 | 2000 | 1999 | ||||||||||
Amount | Percent | Amount | Percent | Amount | Percent | Amount | Percent | Amount | Percent | |||||
Real Estate Loans | (dollars in thousands) |
Residential, one to four family units | $220,165 | 36.20% | $180,397 | 36.58% | $151,250 | 36.90% | $137,498 | 41.95% | $ 101,640 | 39.89% | ||||
Residential, multifamily | 866 | 0.14% | 1,318 | 0.27% | 1,065 | 0.26% | 1,026 | 0.31% | 991 | 0.39% | ||||
Commercial and industrial real estate | 112,382 | 18.48% | 95,298 | 19.33% | 71,557 | 17.46% | 54,024 | 16.48% | 49,231 | 19.32% | ||||
Construction and land acquisition and | ||||||||||||||
development loans | 240,757 | 39.58% | 191,197 | 38.77% | 163,849 | 39.98% | 117,325 | 35.80% | 90,324 | 35.45% | ||||
Land | 25,820 | 4.25% | 20,109 | 4.08% | 16,895 | 4.12% | 11,390 | 3.48% | 7,018 | 2.76% | ||||
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Total real estate loans | 599,990 | 98.65% | 488,319 | 99.03% | 404,616 | 98.72% | 321,263 | 98.02% | 249,204 | 97.81% | ||||
Other loans: | ||||||||||||||
Business, commercial | 7,088 | 1.16% | 3,894 | 0.79% | 3.970 | 0.97% | 5,592 | 1.71% | 170 | 0.07% | ||||
Consumer | 1,144 | 0.19% | 870 | 0.18% | 1,257 | 0.31% | 885 | 0.27% | 5,406 | 2.12% | ||||
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Total other loans | 8,232 | 1.35% | 4,764 | 0.97% | 5,227 | 1.28% | 6,477 | 1.98% | 5,576 | 2.19% | ||||
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Total gross loans | 608,222 | 100.00% | 493,083 | 100.00% | 409,843 | 100.00% | 327,740 | 100.00% | 254,780 | 100.00% | ||||
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Unearned fees, premiums & discounts, net | (3,343) | (2,674) | (2,164) | (2,149) | (1,852) | |||||||||
Loans in process | (94,020) | (67,593) | (61,685) | (48,211) | (36,715) | |||||||||
Allowance for loan loss | (4,833) | (3,991) | (3,353) | (2,728) | (2,147) | |||||||||
Total Loans net | $506,026 | $418,825 | $342,641 | $274,652 | $214,066 | |||||||||
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4 | ||
For the year ended December 31, | |||||||||
2003 | 2002 | 2001 | |||||||
(dollars in thousands) | |||||||||
Available for Sale: | |||||||||
Beginning balance | $ | 17,481 | $ | 7,499 | $ | 4,169 | |||
Originations | 119,660 | 110,565 | 63,565 | ||||||
Repurchases | - | - | 41 | ||||||
Repayments | (95 | ) | (48 | ) | - | ||||
Deferred fees | - | - | 26 | ||||||
Net sales | (133,871 | ) | (100,535 | ) | (60,302 | ) | |||
Transfers (to) from available for sale | - | - | - | ||||||
Ending Balance | $ | 3,175 | $ | 17,481 | $ | 7,499 | |||
Held for investment | |||||||||
Beginning balance | $ | 475,602 | $ | 402,345 | $ | 323,571 | |||
Originations and purchases | 201,242 | 233,222 | 293,195 | ||||||
Repurchases | - | - | - | ||||||
Repayments/payoffs | (71,797 | ) | (159,965 | ) | (214,295 | ) | |||
Sales | - | - | - | ||||||
Transfers (to) from repossessed assets | - | - | (127 | ) | |||||
Ending balance | $ | 605,047 | $ | 475,602 | $ | 402,344 | |||
5 | ||
Coupon range | Percentage ofPortfolio | |||
Less than 6.00% | 30.97 | % | ||
6.01 - 7.00% | 41.81 | % | ||
7.01 - 8.00% | 17.34 | % | ||
8.01 - 9.00% | 4.80 | % | ||
9.01 - 10.00% | 3.73 | % | ||
Over 10.01% | 1.35 | % | ||
100.00 | % | |||
6 | ||
7 | ||
Due | Due after | ||||||||||||
within | 1 through | Due after | |||||||||||
one year | 5 years | 5 years | Total | ||||||||||
(dollars in thousands) | |||||||||||||
One to four family residential | $ | 13,578 | $ | 71,027 | $ | 135,560 | $ | 220,165 | |||||
Multifamily | - | 283 | 583 | 866 | |||||||||
Commercial and industrial real estate | 16,350 | 35,344 | 60,688 | 112,382 | |||||||||
Construction and land acquisition | |||||||||||||
and development loans | 201,490 | 39,267 | - | 240,757 | |||||||||
Land | 7,117 | 18,374 | 329 | 25,820 | |||||||||
Commercial, non-real estate | 3,124 | 1,303 | 2,661 | 7,088 | |||||||||
Consumer | 282 | 364 | 498 | 1,144 | |||||||||
Total | $ | 241,941 | $ | 165,962 | $ | 200,319 | $ | 608,222 | |||||
8 | ||
Fixed | Floating | Total | ||||||||
(dollars in thousands) | ||||||||||
One to four family residential | $ | 155,288 | $ | 51,299 | $ | 206,587 | ||||
Multifamily | 475 | 391 | 866 | |||||||
Commercial and industrial real estate | 63,445 | 32,587 | 96,032 | |||||||
Construction and land acquisition | ||||||||||
and development loans | 21,961 | 17,306 | 39,267 | |||||||
Land | 18,703 | - | 18,703 | |||||||
Commercial, non-real estate | 1,658 | 2,306 | 3,964 | |||||||
Consumer | 862 | - | 862 | |||||||
Total | $ | 262,392 | $ | 103,889 | $ | 366,281 | ||||
9 | ||
10 | ||
At December 31, | ||||||||||||||||
2003 | 2002 | 2001 | 2000 | 1999 | ||||||||||||
(dollars in thousands) | ||||||||||||||||
Loans accounted for on a non-accrual basis: | ||||||||||||||||
Mortgage loans: | ||||||||||||||||
One-to-four family real estate | $ | 378 | $ | 1,366 | $ | 1,801 | $ | 872 | $ | 909 | ||||||
Home equity lines of credit | 50 | - | - | - | 16 | |||||||||||
Commercial | - | 253 | 300 | 292 | ||||||||||||
Land | 24 | 139 | - | - | - | |||||||||||
Non-mortgage loans: | ||||||||||||||||
Consumer | 17 | - | - | 14 | - | |||||||||||
Commercial loans | - | - | - | - | - | |||||||||||
Total non-accrual loans | 469 | 1,758 | 2,101 | 1,178 | 925 | |||||||||||
Accruing loans which are contractually past due 90 days or more: | ||||||||||||||||
Mortgage loans: | ||||||||||||||||
Permanent loans secured by one-to-four family real estate | - | - | - | - | - | |||||||||||
Commercial | - | - | - | - | - | |||||||||||
Non-mortgage loans | ||||||||||||||||
Consumer | - | - | - | - | - | |||||||||||
Total accruing loans greater than 90 days past due | - | - | - | - | - | |||||||||||
Total non-performing loans | $ | 469 | $ | 1,758 | $ | 2,101 | $ | 1,178 | $ | 925 | ||||||
Foreclosed real-estate | $ | - | $ | 224 | $ | 312 | $ | 312 | $ | 672 | ||||||
Total nonperforming assets | $ | 469 | $ | 1,982 | $ | 2,413 | $ | 1,490 | $ | 1,597 | ||||||
Total non-accrual and accrual loans to net loans | 0.09 | % | 0.42 | % | 0.61 | % | 0.43 | % | 0.43 | % | ||||||
Allowance for loan losses to total non-performing loans, | ||||||||||||||||
including loans contractually past due 90 days or more | 1030.49 | % | 227.02 | % | 159.59 | % | 231.58 | % | 232.11 | % | ||||||
Total non-accrual and accruing loans greater than | ||||||||||||||||
90 days past due to total assets | 0.09 | % | 0.38 | % | 0.57 | % | 0.40 | % | 0.40 | % | ||||||
Total non-performing assets to total assets | 0.09 | % | 0.43 | % | 0.66 | % | 0.51 | % | 0.68 | % | ||||||
11 | ||
12 | ||
2003 | 2002 | 2001 | 2000 | 1999 | |||||||||||||||||||||
| | | | ||||||||||||||||||||||
AllowanceAmount | Percentage of Loans in each Category toTotal Loans | AllowanceAmount | Percentage of Loans in each Category toTotal Loans | AllowanceAmount | Percentage of Loans in each Category toTotal Loans | AllowanceAmount | Percentage of Loans in each Category toTotal Loans | AllowanceAmount | Percentage of Loans in each Category toTotal Loans | ||||||||||||||||
(dollars in thousands) | |||||||||||||||||||||||||
Residential, one to four family | $ | 1,938 | 36.20 | % | $ | 1,542 | 36.58 | % | $ | 1,081 | 36.90 | % | $ | 995 | 41.95 | % | $ | 776 | 39.89 | % | |||||
Multifamily | 21 | 0.14 | % | 21 | 0.27 | % | 24 | 0.26 | % | 18 | 0.31 | % | 10 | 0.39 | % | ||||||||||
Commercial and industrial real estate | 1,154 | 18.48 | % | 881 | 19.33 | % | 850 | 17.46 | % | 658 | 16.48 | % | 567 | 19.32 | % | ||||||||||
Construction and land acquisition and | |||||||||||||||||||||||||
development loans | 1,173 | 39.58 | % | 1,202 | 38.77 | % | 917 | 39.98 | % | 662 | 35.80 | % | 428 | 35.45 | % | ||||||||||
Land | 476 | 4.25 | % | 300 | 4.08 | % | 413 | 4.12 | % | 308 | 3.48 | % | 292 | 2.76 | % | ||||||||||
Business, commercial | 59 | 1.16 | % | 33 | 0.79 | % | 52 | .97 | % | 75 | 1.71 | % | 4 | 0.07 | % | ||||||||||
Other | 12 | 0.19 | % | 12 | 0.18 | % | 16 | .31 | % | 12 | 0.27 | % | 70 | 2.12 | % | ||||||||||
Total | $ | 4,833 | 100.00 | % | $ | 3,991 | 100.00 | % | $ | 3,353 | 100.00 | % | $ | 2,728 | 100.00 | % | $ | 2,147 | 100.00 | % | |||||
13 | ||
At or for the Year Ended | ||||||||||||||||
December 31, | ||||||||||||||||
2003 | 2002 | 2001 | 2000 | 1999 | ||||||||||||
(dollars in thousands) | ||||||||||||||||
Average loans outstanding, net | $ | 466,512 | $ | 384,537 | $ | 313,798 | $ | 246,631 | $ | 203,237 | ||||||
Total gross loans outstanding at end of period | $ | 608,222 | $ | 493,083 | $ | 409,844 | $ | 327,740 | $ | 254,780 | ||||||
Allowance balance at beginning of period | $ | 3,991 | $ | 3,353 | $ | 2,728 | $ | 2,147 | $ | 1,984 | ||||||
Provision for loan losses | 900 | 670 | 709 | 591 | 504 | |||||||||||
Actual charge-offs | ||||||||||||||||
1-4 family residential real estate | 25 | - | 74 | 30 | 89 | |||||||||||
Other | 33 | 32 | 10 | - | 263 | |||||||||||
Total charge-offs | 58 | 32 | 84 | 30 | 352 | |||||||||||
Recoveries | ||||||||||||||||
Total recoveries | - | - | - | 20 | 11 | |||||||||||
Net chargeoffs | 58 | 32 | 84 | 10 | 341 | |||||||||||
Allowance balance at end of period | $ | 4,833 | $ | 3,991 | $ | 3,353 | $ | 2,728 | $ | 2,147 | ||||||
Net chargeoffs as a percent of average loans | 0.01 | % | 0.01 | % | 0.03 | % | 0.00 | % | 0.17 | % | ||||||
Allowance for loan losses to total gross loans at end of period | 0.79 | % | 0.81 | % | 0.82 | % | 0.83 | % | 0.84 | % | ||||||
14 | ||
at December 31, | |||||||||
2003 | 2002 | 2001 | |||||||
(dollars in thousands) | |||||||||
Investment Securities Held to Maturity | |||||||||
U.S. Treasury Notes | $ | - | $ | - | $ | 2,001 | |||
FHLB Notes | 6,000 | 4,000 | 5,000 | ||||||
Total Investment Securities Held to Maturity | 6,000 | 4,000 | 7,001 | ||||||
Interest-bearing deposits in other banks | $ | 458 | $ | 4,191 | $ | 1,059 | |||
Federal funds sold | 3,914 | 10,713 | 3,949 | ||||||
Mortgage-backed securities held to maturity | 6,721 | 5,661 | 212 | ||||||
FHLB stock | 3,250 | 1,900 | 2,500 | ||||||
14,343 | 22,465 | 7,720 | |||||||
$ | 20,343 | $ | 26,465 | $ | 14,721 | ||||
15 | ||
More than One to | More than Five to | ||||||||||||||
One Year or Less | Five Years | Ten Years | More than Ten Years | Total Investment Securities | |||||||||||
Carrying | Average | Carrying | Average | Carrying | Average | Carrying | Average | Carrying | Average | Market | |||||
Value | Yield | Value | Yield | Value | Yield | Value | Yield | Value | Yield | Value | |||||
(dollars in thousands) | |||||||||||||||
Investment Securities Held to Maturity | |||||||||||||||
FHLB Notes | - | $ 4,000 | 2.58% | $ 2,000 | 5.05% | - | $ 6,000 | 3.40% | $5,922 | ||||||
Interest-bearing deposits in other banks | $ 458 | 0.85% | - | - | - | 458 | 0.85% | 458 | |||||||
Federal funds sold | 3,914 | 0.88% | - | - | - | 3,914 | 0.88% | 3,914 | |||||||
Mortgage-backed securities held to maturity | - | 2,918 | 4.37% | - | $ 3,803 | 5.53% | 6,721 | 5.02% | 6,694 | ||||||
FHLB stock | - | - | - | 3,250 | 3.50% | 3,250 | 3.50% | 3,250 | |||||||
Total | $ 4,372 | 0.87 % | $ 6,918 | 2.58% | $ 2,000 | 5.05% | $ 7,053 | 4.59% | $ 20,343 | 3.41% | $20,238 | ||||
16 | ||
2003 | 2002 | |||||||||||||
Amount | Percent | Amount | Percent | |||||||||||
Category | ||||||||||||||
NOW accounts | $ | 21,219,969 | 5.06 | % | $ | 15,980,589 | 4.23 | % | ||||||
Money market accounts | 152,412,884 | 36.31 | 132,767,052 | 35.13 | ||||||||||
Passbooks | 19,190,968 | 4.57 | 18,189,610 | 4.81 | ||||||||||
Certificates | 226,832,739 | 54.04 | 210,913,461 | 55.81 | ||||||||||
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419,656,560 | 99.98 | 377,850,712 | 99.98 | |||||||||||
Accrued interest | 69,625 | .02 | 74,329 | .02 | ||||||||||
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Total savings | $ | 419,726,185 | 100.00 | % | $ | 377,925,041 | 100.00 | % | ||||||
2003 | |||||||
Amount | Percent | ||||||
One year or less | $ | 125,650,800 | 55.39 | % | |||
More than 1 year to 2 years | 30,261,890 | 13.34 | |||||
More than 2 years to 3 years | 39,724,600 | 17.51 | |||||
More than 3 years to 4 years | 19,889,201 | 8.77 | |||||
More than 4 years to 5 years | 11,306,248 | 4.99 | |||||
More than 5 years | - | .00 | |||||
$ | 226,832,739 | 100.00 | % | ||||
17 | ||
Jumbo Certificate | ||||
of Deposits | ||||
Time Remaining Until Maturity | (dollars inthousands | ) | ||
Less than three months | $ | 10,046 | ||
3 months to 6 months | 7,852 | |||
6 months to 12 months | 8,739 | |||
Greater than 12 months | 31,242 | |||
Total | $ | 57,879 | ||
Year ended December 31, | ||||||||||
2003 | 2002 | 2001 | ||||||||
(dollars in thousands) | ||||||||||
Short term borrowings and notes payable | ||||||||||
Average balance outstanding during the period | $ | 1,500 | $ | 4,917 | $ | 21,917 | ||||
Maximum amount outstanding at any month-end during | ||||||||||
the period | 8,000 | 14,000 | 27,000 | |||||||
Weighted Average interest rate during the period | 0.62 | % | 3.16 | % | 5.38 | % | ||||
Total short term borrowings at period end | 6,000 | - | 17,000 | |||||||
Weighted average interest rate at period end | 1.15 | % | 0.00 | % | 4.40 | % |
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18 | ||
19 | ||
20 | ||
- the creation of a five-member oversight board appointed by the SEC that will set standards for accountants and have investigative and disciplinary powers;
- the prohibition of accounting firms from providing various types of consulting services to public clients and requiring accounting firms to rotate partners among public client assignments every five years;
- increased penalties for financial crimes;
- expanded disclosure of corporate operations and internal controls and required executive certification of financial presentations;
- increased requirements for board audit committees and their members;
- enhanced controls on, and reporting of, insider trading; and
- statutory separations between investment bankers and analysts.
21 | ||
- due diligence requirements for financial institutions that administer, maintain, or manage private banks accounts or correspondent accounts for non-US persons
- standards for verifying customer identification at account opening
- rules to promote cooperation among financial institutions, regulators, and law enforcement entities in identifying parties that may be involved in terrorism or money laundering
- reports by nonfinancial trades and businesses filed with the Treasury Department's Financial Crimes Enforcement Network for transactions exceeding $10,000, and
- filing of suspicious activities reports securities by brokers and dealers if they believe a customer may be violating U.S. laws and regulations.
22 | ||
- initial notices to customers about their privacy policies, describing the conditions under which they may disclose nonpublic personal information to nonaffiliated third parties and affiliates;
- annual notices of their privacy policies to current customers; and
- a reasonable method for customers to “opt out” of disclosures to nonaffiliated third parties.
- interprets previously issued interagency customer information security guidelines that require financial institutions to implement information security programs designed to protect their customers’ information; and
- describes the components of a response program and sets a standard for providing notice to customers affected by unauthorized access to or use of customer information that could result in substantial harm or inconvenience to those customers, thereby reducing the risk of losses due to fraud or identity theft.
23 | ||
24 | ||
Actual | For Capital Adequacy Purposes | To Be Well Capitalized Under Prompt Corrective Action Provisions | |||||||||||||||||
Amount | % | Amount |
| % |
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| Amount |
| % | ||||||||||
December 31, 2003 | |||||||||||||||||||
Tangible (1) | $ | 49,568,918 | 9.2 | % | $ | 8,095,323 | 1.50 | % | N/A | N/A | |||||||||
Tier I capital (2) | 49,568,918 | 12.0 | % | N/A | N/A | $ | 24,692,400 | 6.00 | % | ||||||||||
Core (1) | 49,568,918 | 9.2 | % | 21,587,529 | 4.00 | % | 26,984,411 | 5.00 | % | ||||||||||
Risk-weighted (2) | 54,313,918 | 13.2 | % | 32,923,200 | 8.00 | % | 41,154,000 | 10.00 | % | ||||||||||
December 31, 2002 | |||||||||||||||||||
Tangible (1) | $ | 39,898,384 | 8.8 | % | $ | 6,837,788 | 1.50 | % | N/A | N/A | |||||||||
Tier I capital (2) | 39,898,384 | 12.1 | % | N/A | N/A | $ | 19,768,800 | 6.00 | % | ||||||||||
Core (1) | 39,898,384 | 8.8 | % | 18,234,100 | 4.00 | % | 22,792,625 | 5.00 | % | ||||||||||
Risk-weighted (2) | 43,781,865 | 13.3 | % | 26,358,400 | 8.00 | % | 32,948,000 | 10.00 | % |
- making unaffordable loans based on the assets of the borrower rather than on the borrower's ability to repay an obligation ("asset-based lending")
- inducing a borrower to refinance a loan repeatedly in order to charge high points and fees each time the loan is refinanced ("loan flipping")
- engaging in fraud or deception to conceal the true nature of the loan obligation from an unsuspecting or unsophisticated borrower.
- interest rates for first lien mortgage loans in excess of 8 percentage points above comparable Treasury securities,
- subordinate-lien loans of 10 percentage points above Treasury securities. and
- fees such as optional insurance and similar debt protection costs paid in connection with the credit transaction, when combined with points and fees if deemed excessive.
25 | ||
- “well capitalized;”
- “adequately capitalized;”
- “undercapitalized;”
- “significantly undercapitalized;” and
- “critically undercapitalized.”
26 | ||
- the purchase price of each single-family dwelling in the development does not exceed $500,000;
- the savings association is in compliance with its fully phased-in capital requirements;
- the loans comply with applicable loan-to-value requirements; and
- the aggregate amount of loans made under this authority does not exceed 150% of unimpaired capital and surplus.
- to an amount equal to 10% of the association's capital and surplus, in the case of covered transactions with any one affiliate; and
- to an amount equal to 20% of the association's capital and surplus, in the case of covered transactions with all affiliates.
- a loan or extension of credit to an affiliate;
- a purchase of investment securities issued by an affiliate;
- a purchase of assets from an affiliate, with some exceptions;
- the acceptance of securities issued by an affiliate as collateral for a loan or extension of credit to any party; or
- the issuance of a guarantee, acceptance or letter of credit on behalf of an affiliate.
- a savings association may not make a loan or extension of credit to an affiliate unless the affiliate is engaged only in activities permissible for bank holding companies;
- a savings association may not purchase or invest in securities of an affiliate other than shares of a subsidiary;
- a savings association and its subsidiaries may not purchase a low-quality asset from an affiliate;
- covered transactions and other specified transactions between a savings association or its subsidiaries and an affiliate must be on terms and conditions that are consistent with safe and sound banking practices; and
- with some exceptions, each loan or extension of credit by a savings association to an affiliate must be secured by collateral with a market value ranging from 100% to 130%, depending on the type of collateral, of the amount of the loan or extension of credit.
27 | ||
- a financial subsidiary,
- a subsidiary controlled by one or more affiliates,
- an ESOP, or
- a subsidiary determined by the OTS or the Federal Reserve to be an affiliate.
- it is not eligible for expedited treatment of its other applications under OTS regulations;
- the total amount of all of capital distributions, including the proposed capital distribution, for the applicable calendar year exceeds its net income for that year to date plus retained net income for the preceding two years;
- it would not be at least adequately capitalized, under the prompt corrective action regulations of the OTS following the distribution; or
- the association's proposed capital distribution would violate a prohibition contained in any applicable statute, regulation, or agreement between the savings association and the OTS, or the FDIC, or violate a condition imposed on the savings association in an OTS-approved application or notice.
- would not be well capitalized under the prompt corrective action regulations of the OTS following the distribution;
- the proposed capital distribution would reduce the amount of or retire any part of the savings association's common or preferred stock or retire any part of debt instruments like notes or debentures included in capital, other than regular payments required under a debt instrument approved by the OTS; or
- the savings association is a subsidiary of a savings and loan holding company.
28 | ||
- 1% of its aggregate outstanding principal amount of its residential mortgage loans, home purchase contracts and similar obligations at the beginning of each calendar year; or
- 5% of its FHLB advances or borrowings.
- Expanded Membership – (i) expands the uses for, and types of, collateral for advances; (ii) eliminates bias toward QTL lenders; and (iii) removes capital limits on advances using real estate related collateral (e.g., commercial real estate and home equity loans).
- New Capital Structure – each FHLB is allowed to establish two classes of stock: Class A is redeemable within six months of notice; and Class B is redeemable within five years notice. Class B is valued at 1.5 times the value of Class A stock. Each FHLB will be required to maintain minimum capital equal to 5% of equity. As of July 17, 2002, each FHLB, including our FHLB of Atlanta, received Federal Housing Finance Board approval of its capital plan. These plans must be implemented by July 1, 2004.
- Voluntary Membership – federally chartered savings associations, such as the Bank, are no longer required to be members of the system.
- REFCorp Payments – changes the amount paid by the system on debt incurred in connection with the thrift crisis in the late 1980s from a fixed amount to 20% of net earnings after deducting certain expenses.
29 | ||
2003 | 2002 | ||||||
Stock Price Range | Stock Price Range | ||||||
Quarter | Low | High | Per Share Dividend | Quarter | Low | High | Per Share Dividend |
1st | $ 15.82 | $ 22.00 | $.08 | 1st | $ 8.67 | $ 11 | $.06 |
2nd | 20.08 | 25.10 | .08 | 2nd | 9.75 | 17 | .06 |
3rd | 21.60 | 32.00 | .09 | 3rd | 14.64 | 16.97 | .06 |
4th | 29.85 | 34.20 | .09 | 4th | 14.75 | 16.15 | .06 |
30 | ||
Summary Financial and Other Data | |||||||||||||||
at December 31, | |||||||||||||||
2003 | 2002 | 2001 | 2000 | 1999 | |||||||||||
(dollars in thousands, except per share information) | |||||||||||||||
Balance Sheet Data | |||||||||||||||
Total assets | $ | 540,471 | $ | 458,415 | $ | 366,890 | $ | 293,230 | $ | 233,724 | |||||
Cash and cash equivalents | 8,426 | 18,660 | 6,038 | 1,007 | 2,430 | ||||||||||
Total loans, net | 506,026 | 418,825 | 342,641 | 274,652 | 214,066 | ||||||||||
Securities available for sale | - | - | - | 858 | 812 | ||||||||||
Mortgage backed securities and securities | |||||||||||||||
held to maturity | 12,721 | 9,661 | 7,213 | 9,779 | 10,326 | ||||||||||
Nonperforming loans | 469 | 1,758 | 2,101 | 1,178 | 925 | ||||||||||
Real estate acquired through foreclosure | - | 224 | 312 | 312 | 672 | ||||||||||
Total nonperforming assets | 469 | 1,982 | 2,413 | 1,490 | 1,597 | ||||||||||
Deposits | 419,726 | 377,925 | 286,918 | 229,312 | 186,204 | ||||||||||
Short-term borrowings | 6,000 | - | 17,000 | 18,000 | 2,000 | ||||||||||
Notes payable | 59,000 | 34,000 | 25,000 | 16,000 | 22,000 | ||||||||||
Total liabilities | 487,501 | 415,233 | 332,059 | 268,009 | 211,743 | ||||||||||
Minority Interest – Preferred Securities of Subsidiary | 4,000 | 4,000 | 4,000 | 3,892 | 3,892 | ||||||||||
Stockholders’ equity | 48,970 | 39,181 | 30,831 | 21,329 | 18,089 | ||||||||||
Common shares outstanding * | 4,159,092 | 4,142,592 | 4,057,092 | 3,239,316 | 3,234,492 | ||||||||||
Book value per common shares * | 11.77 | 9.46 | 7.60 | 6.58 | 5.59 | ||||||||||
Other Data: | |||||||||||||||
Number of: | |||||||||||||||
Full service retail banking facilities | 2 | 2 | 2 | 2 | 2 | ||||||||||
Full-time equivalent employees | 81 | 69 | 67 | 66 | 63 | ||||||||||
* Retroactively adjusted to reflect three-for-one stock split declared February 19, 2002. |
31 | ||
Summary of Operations | |||||||||||||||
For the Year Ended December 31, | |||||||||||||||
2003 | 2002 | 2001 | 2000 | 1999 | |||||||||||
(dollars in thousands, except per share data) | |||||||||||||||
Interest and dividend income | $ | 37,087 | $ | 33,402 | $ | 29,489 | $ | 24,271 | $ | 20,047 | |||||
Interest expense | 12,341 | 13,799 | 16,094 | 13,387 | 10,523 | ||||||||||
Net interest income | 24,746 | 19,603 | 13,395 | 10,884 | 9,524 | ||||||||||
Provision for loan losses | 900 | 670 | 708 | 591 | 504 | ||||||||||
Net interest income after provision for loan losses | 23,846 | 18,933 | 12,687 | 10,293 | 9,020 | ||||||||||
Noninterest income | 4,674 | 4,133 | 2,570 | 1,439 | 1,586 | ||||||||||
Noninterest expense | 9,616 | 8,447 | 6,588 | 5,348 | 5,477 | ||||||||||
Earnings before income tax provision | 18,904 | 14,619 | 8,669 | 6,384 | 5,129 | ||||||||||
Provision for income taxes | 7,575 | 5,671 | 3,413 | 2,439 | 2,002 | ||||||||||
Net income | $ | 11,329 | $ | 8,948 | $ | 5,256 | $ | 3,945 | $ | 3,127 | |||||
Per Share Data: | |||||||||||||||
Basic earnings per share * | $ | 2.68 | $ | 2.13 | $ | 1.38 | $ | 1.15 | $ | 0.90 | |||||
Diluted earnings per share * | $ | 2.67 | $ | 2.13 | $ | 1.37 | $ | 1.12 | $ | 0.84 | |||||
Weighted number of shares outstanding basic * | 4,146,566 | 4,092,188 | 3,647,451 | 3,237,888 | 3,230,940 | ||||||||||
Weighted number of shares outstanding diluted * | 4,157,302 | 4,103,223 | 3,683,346 | 3,330,915 | 3,450,831 | ||||||||||
* Retroactively adjusted to reflect three-for-one stock split declared February 19, 2002. |
32 | ||
Key Operating Ratios | |||||||||||||||
For the Year Ended December 31, | |||||||||||||||
2003 | 2002 | 2001 | 2000 | 1999 | |||||||||||
(dollars in thousands) | |||||||||||||||
Performance Ratios: | |||||||||||||||
Return on average assets | 2.23 | % | 2.14 | % | 1.55 | % | 1.47 | % | 1.38 | % | |||||
Return on average equity | 25.22 | % | 25.58 | % | 20.22 | % | 20.04 | % | 18.31 | % | |||||
Net interest margin | 4.99 | % | 4.86 | % | 4.05 | % | 4.17 | % | 4.34 | % | |||||
Interest rate spread | 4.77 | % | 4.59 | % | 3.65 | % | 3.75 | % | 3.94 | % | |||||
Noninterest expense to average assets | 1.76 | % | 2.02 | % | 1.95 | % | 2.00 | % | 2.43 | % | |||||
Efficiency ratio | 30.33 | % | 35.59 | % | 41.27 | % | 43.40 | % | 49.30 | % | |||||
Asset Quality Ratios: | |||||||||||||||
Equity to Assets | 9.06 | % | 8.55 | % | 8.40 | % | 7.27 | % | 7.74 | % | |||||
Nonperforming assets to total assets | |||||||||||||||
at end of period | 0.09 | % | 0.43 | % | 0.66 | % | 0.51 | % | 0.68 | % | |||||
Nonperforming loans to total gross | |||||||||||||||
loans at end of period | 0.08 | % | 0.36 | % | 0.51 | % | 0.36 | % | 0.36 | % | |||||
Allowance for loan losses to total | |||||||||||||||
gross loans at end of period | 0.79 | % | 0.81 | % | 0.82 | % | 0.83 | % | 0.84 | % | |||||
Allowance for loan losses to | |||||||||||||||
nonperforming loans at end of period | 1030.49 | % | 227.02 | % | 159.59 | % | 231.58 | % | 232.11 | % | |||||
Mortgage Origination and Servicing Data: | |||||||||||||||
Mortgage loans originated or purchased | $ | 320,902 | $ | 343,787 | $ | 342,915 | $ | 213,614 | $ | 180,782 | |||||
Mortgage loans sold | 133,871 | 100,535 | 60,302 | 36,869 | 37,706 | ||||||||||
Mortgage loans serviced for others | 24,016 | 23,935 | 17,376 | 21,648 | 23,186 | ||||||||||
Capitalized value of mortgage | |||||||||||||||
servicing rights | 13 | 19 | 26 | 33 | 39 |
33 | ||
Years Ended December 31, | |||||||||||
2003 | 2002 | 2001 | |||||||||
Average | Average | Average | |||||||||
Volume | Interest | Yield/Cost | Volume | Interest | Yield/Cost | Volume | Interest | Yield/Cost | |||
(dollars in thousands) | |||||||||||
ASSETS | |||||||||||
Loans (1) | $ 466,512 | $ 36,403 | 7.80% | $ 384,537 | $ 32,723 | 8.51% | $ 313,798 | $ 28,617 | 9.12% | ||
Investments (2) | 6,167 | 243 | 3.94% | 7,339 | 362 | 4.93% | 7,671 | 450 | 5.86% | ||
Mortgage-backed securities | 6,586 | 210 | 3.18% | 1,346 | 54 | 4.00% | 255 | 18 | 7.09% | ||
Other interest-earning assets (3) | 16,749 | 231 | 1.38% | 10,123 | 263 | 2.60% | 8,773 | 404 | 4.60% | ||
Total interest-earning assets | 496,014 | 37,087 | 7.48% | 403,345 | 33,402 | 8.28% | 330,497 | 29,489 | 8.92% | ||
Non-interest earning assets | 11,894 | 13,979 | 7,800 | ||||||||
Total Assets | $ 507,908 | $ 417,324 | $ 338,297 | ||||||||
LIABILITIES AND STOCKHOLDERS' EQUITY | |||||||||||
Savings and checking deposits | $ 187,979 | $ 2,997 | 1.59% | $ 138,961 | $ 3,485 | 2.51% | $ 69,846 | $ 2,422 | 3.47% | ||
Certificates of deposits | 222,819 | 7.964 | 3.57% | 198,613 | 8,815 | 4.44% | 190,391 | 11,170 | 5.87% | ||
Borrowings | 43,833 | 1,380 | 3.15% | 36,500 | 1,499 | 4.11% | 45,250 | 2,502 | 5.53% | ||
Total interest-bearing liabilities | 454,631 | 12,341 | 2.71% | 374,074 | 13,799 | 3.69% | 305,487 | 16,094 | 5.27% | ||
Non-interest bearing liabilities | 4,360 | 4,271 | 2,866 | ||||||||
Minority Interest – Preferred Securities of Subsidiary | 4,000 | 4,000 | 3.946 | ||||||||
Stockholders' equity | 44,917 | 34,979 | 25,998 | ||||||||
Total liabilities and stockholders' equity | $ 507,908 | $ 417,324 | $ 338,297 | ||||||||
Net interest income and Interest rate spread | $ 24,746 | 4.77% | $ 19,603 | 4.59% | $ 13,395 | 3.65% | |||||
Net interest margin | 4.99% | 4.86% | 4.05% | ||||||||
Average interest-earning assets to | |||||||||||
average interest-bearing liabilities | 109.10% | 107.82% | 108.19% | ||||||||
(1) Non-accrual loans are included in the average balances and in the computation of yields. | |||||||||||
(2) The Company does not have any tax exempt securities. | |||||||||||
(3) Other interest earning assets includes interest bearing deposits in other banks, federal funds, and FHLB stock investments. |
34 | ||
Year ended December 31, 2003 vs.Year ended December 31, 2002 | Year ended December 31, 2002 vs.Year ended December 31, 2001 | |||||||||||||||||
Total | Changes Due to | Total | Changes Due to | |||||||||||||||
Change | Volume (1) | Rate (1) | Change | Volume (1) | Rate (1) | |||||||||||||
(dollars in thousands) | ||||||||||||||||||
Interest-earning assets | ||||||||||||||||||
Loans | $ | 3,680 | $ | 6,631 | $ | (2,951 | ) | $ | 4,106 | $ | 6,128 | $ | (2,022 | ) | ||||
Investments | (119 | ) | (53 | ) | (66 | ) | (88 | ) | (18 | ) | (70 | ) | ||||||
Mortgage-backed securities | 156 | 170 | (14 | ) | 36 | 46 | (10 | ) | ||||||||||
Other interest-earning assets | (32 | ) | 121 | (153 | ) | (141 | ) | 55 | (196 | ) | ||||||||
Total interest income | $ | 3,685 | $ | 6,869 | $ | (3,184 | ) | $ | 3,913 | $ | 6,211 | $ | (2,298 | ) | ||||
Interest-bearing liabilities | ||||||||||||||||||
Savings and checking deposits | $ | (488 | ) | $ | 1,010 | $ | (1,498 | ) | $ | 1,063 | $ | 1,867 | $ | (804 | ) | |||
Certificates of deposits | (851 | ) | 1,000 | (1,851 | ) | (2,355 | ) | 463 | (2,818 | ) | ||||||||
Borrowings | (119 | ) | 340 | (459 | ) | (1,003 | ) | (434 | ) | (569 | ) | |||||||
Total interest expense | $ | (1,458 | ) | $ | 2,350 | $ | (3,808 | ) | $ | (2,295 | ) | $ | 1,896 | $ | (4,191 | ) | ||
Net change in interest income | $ | 5,143 | $ | 4,519 | $ | 624 | $ | 6,208 | $ | 4,315 | $ | 1,893 | ||||||
(1) Changes in interest income/expense not arising from volume or rate variances are allocated proportionately to rate and volume. |
35 | ||
36 | ||
Contractual Obligations | Payments due by period (dollars in thousands) | ||||||||||||||
Total | Less than 1 year | 1-3 years | 3-5 years | More than 5 years | |||||||||||
Long term debt | $ | 59,000 | $ | 5,000 | $ | 12,000 | $ | 15,000 | $ | 27,000 | |||||
Operating lease obligations | 30 | 28 | 2 | - | - | ||||||||||
Certificates of Deposit | 226,833 | 125,651 | 69,987 | 31,195 | - | ||||||||||
Other long term liabilities reflected | |||||||||||||||
on the Company’s balance sheet | |||||||||||||||
under GAAP | - | - | - | - | - | ||||||||||
Total | $ | 285,863 | $ | 130,679 | $ | 81,989 | $ | 46,195 | $ | 27,000 | |||||
37 | ||
38 | ||
39 | ||
40 | ||
41 | ||
42 | ||
Net Portfolio Value | NPV as % of PV of Assets | ||||
Change In Rates | $ Amount | $ Change | % Change | NPV Ratio | Change |
(dollars are in thousands) | |||||
+300 bp | 63,590 | -13,527 | -18% | 11.64% | -188 bp |
+200 bp | 69,494 | - 7,623 | -10% | 12.51% | -100 bp |
+100 bp | 74,216 | - 2,901 | - 4% | 13.17% | -35 bp |
0 bp | 77,116 | 13.52% | |||
-100 bp | 79,959 | 2,842 | + 4% | 13.85% | +34 bp |
-200 bp | --- | 0 | 0% | 0.00% | 0 bp |
-300 bp | --- | 0 | 0% | 0.00% | 0 bp |
12/31/2003 | 09/30/2003 | 12/31/2002 | |
RISK MEASURES: FOR GIVE RATE SHOCK | |||
Pre-Shock NPV Ratio: NPV as % of PV of Assets | 13.52% | 12.73% | 12.68% |
Post-Shock NPV Ratio | 12.51% | 11.38% | 12.33% |
Sensitivity Measure: Decline in NPV Ratio | 100 bp | 134 bp | 36 bp |
TB 13a Level of Risk | Minimal | Minimal | Minimal |
43 | ||
44 | �� | |
45 | ||
46 | ||