Liquidity and Capital Resources

3 Months Ended

Mar. 31, 2014

Liquidity and Capital Resources [Abstract]

3. Liquidity and Capital Resources

Liquidity describes our ability to meet the financial obligations that arise in the ordinary course of business. Liquidity is primarily needed to meet the borrowing and deposit withdrawal requirements of our customers and to fund current and planned expenditures. Our primary sources of funds are deposits, scheduled amortization and prepayments of loan principal and mortgage-backed securities, maturities and calls of securities and funds provided by our operations. In addition, we may borrow from the Federal Home Loan Bank of Cincinnati. At March 31, 2014 and December 31, 2013, we had $17.8 million and $19.3 million, respectively, in outstanding borrowings from the Federal Home Loan Bank of Cincinnati and had the capacity to increase such borrowings at those dates by approximately $117.9 million and $132.6 million, respectively.

Loan repayments and maturing securities are a relatively predictable source of funds. However, deposit flows, calls of securities and prepayments of loans and mortgage-backed securities are strongly influenced by interest rates, general and local economic conditions and competition in the marketplace. These factors reduce the predictability of these sources of funds.

Our primary investing activities are the origination of one- to four-family real estate loans, commercial real estate, construction and consumer loans, and the purchase of securities. For the three months ended March 31, 2014, loan originations totaled $15.2 million, compared to $28.8 million for the three months ended March 31, 2013.

Total deposits decreased $2.7 million during the three months ended March 31, 2014, total deposits decreased $4.3 million during the three months ended March 31, 2013, respectively. Deposit flows are affected by the level of interest rates, the interest rates and products offered by competitors and other factors.

The following table sets forth information regarding the Corporation’s obligations and commitments to make future payments under contracts as of March 31, 2014.


			Payments due by period
	Less		More than		More than		More
	than			1-3		4-5	than
	1 year		years		years		5 years		Total
	(In thousands)

Contractual obligations:
Advances from the Federal Home Loan Bank	$	870	$	12,175	$	2,244	$	2,512	$	17,801
Certificates of deposit		121,859		84,366		21,942		-		228,167
Lease obligations		77		111		118		189		495

Amount of loan commitments and expiration per period:
Commitments to originate one- to four-family loans		1,096		-		-		-		1,096
Home equity lines of credit		21,406		-		-		-		21,406
Commercial lines of credit		999		-		-		-		999
Undisbursed loans in process		3,188		-		-		-		3,188

Total contractual obligations	$	149,495	$	96,652	$	24,304	$	2,701	$	273,152

We are committed to maintaining a strong liquidity position and we monitor our liquidity position on a daily basis. We anticipate that we will have sufficient funds to meet our current funding commitments. Based on our deposit retention experience and current pricing strategy, we anticipate that a significant portion of maturing time deposits will be retained.

At March 31, 2014 and 2013, we exceeded all of the applicable regulatory capital requirements. Our core (Tier 1) capital was $77.8 million and $77.4 million, or 13.6% and 12.8% of total assets at March 31, 2014 and 2013, respectively. In order to be classified as “well-capitalized” under federal banking regulations, we were required to have core capital of at least $35.0 million, or 6.0% of assets as of March 31, 2014. To be classified as a well-capitalized bank, we must also have a ratio of total risk-based capital to risk-weighted assets of at least 10.0%. At March 31, 2014 and 2013, we had a total risk-based capital ratio of 25.7% and 25.3%, respectively.

- Definition

The entire disclosure for reporting when there is a substantial doubt about an entity's ability to continue as a going concern for a reasonable period of time (generally a year from the balance sheet date). Disclose: (a) pertinent conditions and events giving rise to the assessment of substantial doubt about the entity's ability to continue as a going concern for a reasonable period of time, (b) the possible effects of such conditions and events, (c) management's evaluation of the significance of those conditions and events and any mitigating factors, (d) possible discontinuance of operations, (e) management's plans (including relevant prospective financial information), and (f) information about the recoverability or classification of recorded asset amounts or the amounts or classification of liabilities. If management's plans alleviate the substantial doubt about the entity's ability to continue as a going concern, disclosure of the principal conditions and events that initially raised the substantial doubt about the entity's ability to continue as a going concern would be expected to be considered. Disclose whether operations for the current or prior years generated sufficient cash to cover current obligations, whether waivers were obtained from creditors relating to the company's default under the provisions of debt agreements and possible effects of such conditions and events, such as: whether there is a possible need to obtain additional financing (debt or equity) or to liquidate certain holdings to offset future cash flow deficiencies. Disclose appropriate parent company information when parent is dependent upon remittances from subsidiaries to satisfy its obligations and capital resources.

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