For the fiscal year ended
|
December 31, 2012
|
For the transition period from
|
to
|
Commission file number
|
000-13222
|
CITIZENS FINANCIAL SERVICES, INC.
|
||||||
(Exact name of registrant as specified in its charter)
|
||||||
Pennsylvania
|
23-2265045
|
|||||
State or other jurisdiction of
incorporation or organization
|
(I.R.S. Employer
Identification No.)
|
|||||
15 South Main Street, Mansfield, Pennsylvania
|
16933
|
|||||
(Address of principal executive offices)
|
(Zip Code)
|
|||||
Registrant’s telephone number, including area code
|
(570) 662-2121
|
|||||
Securities registered pursuant to Section 12(b) of the Act:
|
None
|
|||||
Securities registered pursuant to Section 12(g) of the Act:
|
||||||
Common Stock, par value $1.00 per share
|
||||||
(Title of class)
|
Citizens Financial Services, Inc.
Form 10-K
INDEX
|
|
Page
|
|
PART I
|
|
ITEM 1 – BUSINESS
|
1 – 8
|
ITEM 1A – RISK FACTORS
|
8 – 13
|
ITEM 1B – UNRESOLVED STAFF COMMENTS
|
13
|
ITEM 2 – PROPERTIES
|
13
|
ITEM 3 – LEGAL PROCEEDINGS
|
13
|
ITEM 4 – MINE SAFETY DISCLOSURES
|
14
|
PART II
|
|
ITEM 5 – MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES
|
15 – 16
|
ITEM 6 – SELECTED FINANCIAL DATA
|
17
|
ITEM 7 – MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
|
18 – 46
|
ITEM 7A – QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
|
46
|
ITEM 8 – FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
|
47 – 89
|
ITEM 9 – CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE
|
90
|
ITEM 9A – CONTROLS AND PROCEDURES
|
90
|
ITEM 9B– OTHER INFORMATION
|
90
|
PART III
|
|
ITEM 10 – DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE
|
91
|
ITEM 11 – EXECUTIVE COMPENSATION
|
91
|
ITEM 12 – SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS
|
91 – 92
|
ITEM 13 – CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE
|
92
|
ITEM 14 – PRINCIPAL ACCOUNTANT FEES AND SERVICES
|
92
|
PART IV
|
|
ITEM 15 – EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
|
93 – 94
|
SIGNATURES
|
95
|
Dividends
|
Dividends
|
|||||
2012
|
declared
|
2011
|
declared
|
|||
|
High
|
Low
|
per share
|
High
|
Low
|
per share
|
First quarter
|
$ 36.39
|
$ 33.42
|
$ 0.295
|
$ 45.00
|
$ 35.00
|
$ 0.260
|
Second quarter
|
41.09
|
35.64
|
0.300
|
38.01
|
36.50
|
0.265
|
Third quarter
|
46.00
|
39.31
|
0.300
|
40.00
|
33.00
|
0.265
|
Fourth quarter
|
46.01
|
41.75
|
0.685
|
36.65
|
32.75
|
0.370
|
Period
|
Total Number of
Shares (or units
Purchased)
|
Average Price Paid
per Share (or Unit)
|
Total Number of Shares (or
Units) Purchased as Part of
Publicly Announced Plans of
Programs
|
Maximum Number (or
Approximate Dollar Value) of
Shares (or Units) that May Yet Be
Purchased Under the Plans or
Programs (1)
|
10/1/12 to 10/31/12
|
-
|
-
|
-
|
135,685
|
11/1/12 to 11/30/12
|
16,111
|
$43.92
|
16,111
|
119,574
|
12/1/12 to 12/31/12
|
-
|
-
|
-
|
119,574
|
Total
|
16,111
|
$43.92
|
16,111
|
119,574
|
(1)
|
On January 17, 2012, the Company announced that the Board of Directors authorized the Company to repurchase up to 140,000 shares. The repurchases will be conducted through open-market purchases or privately negotiated transactions and will be made from time to time depending on market conditions and other factors. No time limit was placed on the duration of the share repurchase program. Any repurchased shares will be held as treasury stock and will be available for general corporate purposes.
|
Period Ending
|
|||||||
Index
|
12/31/06
|
12/31/07
|
12/31/08
|
12/31/09
|
12/31/10
|
12/31/11
|
12/31/12
|
Citizens Financial Services, Inc.
|
100.00
|
93.40
|
96.45
|
134.90
|
203.38
|
197.59
|
258.60
|
S&P 500
|
100.00
|
105.49
|
66.46
|
84.05
|
96.71
|
98.76
|
114.56
|
SNL Bank NASDAQ
|
100.00
|
78.51
|
57.02
|
46.25
|
54.57
|
48.42
|
57.71
|
SNL Mid-Atlantic Bank
|
100.00
|
75.62
|
41.66
|
43.85
|
51.16
|
38.43
|
51.49
|
SNL Bank $500M-$1B
|
100.00
|
80.13
|
51.35
|
48.90
|
53.38
|
46.96
|
60.21
|
(in thousands, except share data)
|
2012
|
2011
|
2010
|
2009
|
2008
|
Interest income
|
$ 38,085
|
$ 38,293
|
$ 39,000
|
$ 38,615
|
$ 37,238
|
Interest expense
|
7,659
|
9,683
|
11,340
|
13,231
|
14,058
|
Net interest income
|
30,426
|
28,610
|
27,660
|
25,384
|
23,180
|
Provision for loan losses
|
420
|
675
|
1,255
|
925
|
330
|
Net interest income after provision
|
|||||
for loan losses
|
30,006
|
27,935
|
26,405
|
24,459
|
22,850
|
Non-interest income
|
7,233
|
6,582
|
6,197
|
5,959
|
5,325
|
Investment securities gains (losses), net
|
604
|
334
|
99
|
139
|
(4,089)
|
Non-interest expenses
|
19,297
|
18,409
|
18,043
|
18,010
|
15,957
|
Income before provision for income taxes
|
18,546
|
16,442
|
14,658
|
12,547
|
8,129
|
Provision for income taxes
|
4,331
|
3,610
|
3,156
|
2,683
|
1,224
|
Net income
|
$ 14,215
|
$ 12,832
|
$ 11,502
|
$ 9,864
|
$ 6,905
|
Per share data:
|
|||||
Net income – Basic (1)
|
$ 4.88
|
$ 4.36
|
$ 3.90
|
$ 3.33
|
$ 2.33
|
Net income - Diluted (1)
|
4.88
|
4.36
|
3.90
|
3.33
|
2.33
|
Cash dividends declared (1)
|
1.58
|
1.15
|
1.07
|
1.00
|
0.95
|
Stock dividend
|
1%
|
1%
|
1%
|
1%
|
1%
|
Book value (1) (2)
|
29.27
|
26.11
|
22.93
|
20.12
|
17.82
|
End of Period Balances:
|
|||||
Total assets
|
$ 882,427
|
$ 878,567
|
$ 812,526
|
$ 729,477
|
$ 668,612
|
Total investments
|
310,252
|
318,823
|
251,303
|
198,582
|
174,139
|
Loans
|
502,463
|
487,509
|
473,517
|
456,384
|
432,814
|
Allowance for loan losses
|
6,784
|
6,487
|
5,915
|
4,888
|
4,378
|
Total deposits
|
737,096
|
733,993
|
680,711
|
605,559
|
546,680
|
Total borrowings
|
46,126
|
53,882
|
55,996
|
54,115
|
61,204
|
Stockholders' equity
|
89,475
|
81,468
|
68,690
|
61,527
|
52,770
|
Key Ratios
|
|||||
Return on assets (net income to average total assets)
|
1.62%
|
1.52%
|
1.50%
|
1.42%
|
1.13%
|
Return on equity (net income to average total equity)
|
17.48%
|
17.86%
|
18.13%
|
17.65%
|
13.51%
|
Equity to asset ratio (average equity to average total assets,
|
|||||
excluding other comprehensive income)
|
9.26%
|
8.49%
|
8.25%
|
8.02%
|
8.33%
|
Net interest margin
|
3.99%
|
3.94%
|
4.19%
|
4.23%
|
4.36%
|
Efficiency
|
46.10%
|
46.23%
|
47.96%
|
51.91%
|
50.91%
|
Dividend payout ratio (dividends declared divided by net income)
|
32.37%
|
26.30%
|
27.50%
|
29.92%
|
40.77%
|
Tier 1 leverage
|
9.70%
|
8.83%
|
8.32%
|
8.15%
|
7.91%
|
Tier 1 risk-based capital
|
16.21%
|
14.94%
|
13.72%
|
12.69%
|
12.02%
|
Total risk-based capital
|
17.50%
|
16.23%
|
14.97%
|
13.77%
|
13.06%
|
Nonperforming assets/total loans
|
1.83%
|
2.11%
|
2.80%
|
1.55%
|
0.73%
|
Nonperforming loans/total loans
|
1.71%
|
1.94%
|
2.65%
|
1.48%
|
0.60%
|
Allowance for loan losses/total loans
|
1.35%
|
1.33%
|
1.25%
|
1.07%
|
1.01%
|
Net charge-offs/average loans
|
0.02%
|
0.02%
|
0.05%
|
0.09%
|
0.04%
|
(1) Amounts were retroactively adjusted to reflect stock dividends.
|
|||||
(2) Calculation excludes accumulated other comprehensive income.
|
|
·
|
Interest rates could change more rapidly or more significantly than we expect.
|
|
·
|
The economy could change significantly in an unexpected way, which would cause the demand for new loans and the ability of borrowers to repay outstanding loans to change in ways that our models do not anticipate.
|
|
·
|
The stock and bond markets could suffer a significant disruption, which may have a negative effect on our financial condition and that of our borrowers, and on our ability to raise money by issuing new securities.
|
|
·
|
It could take us longer than we anticipate implementing strategic initiatives designed to increase revenues or manage expenses, or we may be unable to implement those initiatives at all.
|
|
·
|
Acquisitions and dispositions of assets could affect us in ways that management has not anticipated.
|
|
·
|
We may become subject to new legal obligations or the resolution of litigation may have a negative effect on our financial condition.
|
|
·
|
We may become subject to new and unanticipated accounting, tax, or regulatory practices or requirements.
|
|
·
|
We could experience greater loan delinquencies than anticipated, adversely affecting our earnings and financial condition. We could also experience greater losses than expected due to the ever increasing volume of information theft and fraudulent scams impacting our customers and the banking industry.
|
|
·
|
We could lose the services of some or all of our key personnel, which would negatively impact our business because of their business development skills, financial expertise, lending experience, technical expertise and market area knowledge.
|
|
·
|
Exploration and drilling of the natural gas reserves in the Marcellus Shale in our market area may be affected by federal, state and local laws and regulations such as restrictions on production, permitting, changes in taxes and environmental protection, which could negatively impact our customers and, as a result, negatively impact our loan and deposit volume and loan quality.
|
|
·
|
Similarly, customers dependent on the exploration and drilling of the natural gas reserves may be dependent on the market price of natural gas. As a result, decreases in the market price of natural gas could also negatively impact our customers.
|
(market values - in thousands)
|
2012
|
2011
|
INVESTMENTS:
|
||
Bonds
|
$ 18,848
|
$ 20,688
|
Stock
|
23,811
|
21,500
|
Savings and Money Market Funds
|
15,521
|
18,411
|
Mutual Funds
|
46,106
|
32,780
|
Mortgages
|
558
|
723
|
Real Estate
|
670
|
570
|
Miscellaneous
|
40
|
-
|
Cash
|
-
|
-
|
TOTAL
|
$ 105,554
|
$ 94,672
|
ACCOUNTS:
|
||
Trusts
|
27,313
|
27,485
|
Guardianships
|
982
|
648
|
Employee Benefits
|
37,588
|
33,022
|
Investment Management
|
39,647
|
30,623
|
Custodial
|
24
|
2,894
|
TOTAL
|
$ 105,554
|
$ 94,672
|
Analysis of Average Balances and Interest Rates (1)
|
|||||||||
2012
|
2011
|
2010
|
|||||||
Average
|
Average
|
Average
|
Average
|
Average
|
Average
|
||||
Balance
(1)
|
Interest
|
Rate
|
Balance
(1)
|
Interest
|
Rate
|
Balance
(1)
|
Interest
|
Rate
|
|
(dollars in thousands)
|
$
|
$
|
%
|
$
|
$
|
%
|
$
|
$
|
%
|
ASSETS
|
|||||||||
Short-term investments:
|
|||||||||
Interest-bearing deposits at banks
|
14,439
|
21
|
0.15
|
30,508
|
81
|
0.27
|
31,495
|
90
|
0.29
|
Total short-term investments
|
14,439
|
21
|
0.15
|
30,508
|
81
|
0.27
|
31,495
|
90
|
0.29
|
Investment securities:
|
|||||||||
Taxable
|
226,424
|
4,592
|
2.03
|
198,908
|
4,630
|
2.33
|
147,242
|
4,923
|
3.34
|
Tax-exempt (3)
|
94,221
|
5,608
|
5.95
|
90,794
|
5,555
|
6.12
|
69,928
|
4,463
|
6.38
|
Total investment securities
|
320,645
|
10,200
|
3.18
|
289,702
|
10,185
|
3.52
|
217,170
|
9,386
|
4.32
|
Loans:
|
|||||||||
Residential mortgage loans
|
183,408
|
11,746
|
6.40
|
181,394
|
12,396
|
6.83
|
192,294
|
13,666
|
7.11
|
Construction loans
|
10,746
|
605
|
5.63
|
7,043
|
437
|
6.20
|
9,548
|
588
|
6.16
|
Commercial & agricultural loans
|
235,073
|
14,699
|
6.25
|
223,586
|
14,297
|
6.39
|
208,596
|
13,903
|
6.67
|
Loans to state & political subdivisions
|
57,247
|
2,680
|
4.68
|
52,113
|
2,709
|
5.20
|
46,719
|
2,750
|
5.89
|
Other loans
|
10,348
|
871
|
8.42
|
10,836
|
921
|
8.49
|
11,463
|
994
|
8.67
|
Loans, net of discount (2)(3)(4)
|
496,822
|
30,601
|
6.16
|
474,972
|
30,760
|
6.48
|
468,620
|
31,901
|
6.81
|
Total interest-earning assets
|
831,906
|
40,822
|
4.91
|
795,182
|
41,026
|
5.16
|
717,285
|
41,377
|
5.77
|
Cash and due from banks
|
3,736
|
9,996
|
9,537
|
||||||
Bank premises and equipment
|
11,560
|
12,121
|
12,659
|
||||||
Other assets
|
30,782
|
28,816
|
29,311
|
||||||
Total non-interest earning assets
|
46,078
|
50,933
|
51,507
|
||||||
Total assets
|
877,984
|
846,115
|
768,792
|
||||||
LIABILITIES AND STOCKHOLDERS' EQUITY
|
|||||||||
Interest-bearing liabilities:
|
|||||||||
NOW accounts
|
200,486
|
791
|
0.39
|
190,810
|
919
|
0.48
|
155,157
|
1,020
|
0.66
|
Savings accounts
|
84,558
|
165
|
0.20
|
71,205
|
195
|
0.27
|
55,241
|
166
|
0.30
|
Money market accounts
|
73,102
|
316
|
0.43
|
57,742
|
299
|
0.52
|
46,878
|
259
|
0.55
|
Certificates of deposit
|
290,710
|
4,841
|
1.67
|
312,284
|
6,531
|
2.09
|
320,504
|
8,115
|
2.53
|
Total interest-bearing deposits
|
648,856
|
6,113
|
0.94
|
632,041
|
7,944
|
1.26
|
577,780
|
9,560
|
1.65
|
Other borrowed funds
|
52,484
|
1,546
|
2.95
|
55,483
|
1,739
|
3.13
|
54,071
|
1,780
|
3.29
|
Total interest-bearing liabilities
|
701,340
|
7,659
|
1.09
|
687,524
|
9,683
|
1.41
|
631,851
|
11,340
|
1.79
|
Demand deposits
|
85,890
|
79,086
|
65,654
|
||||||
Other liabilities
|
9,430
|
7,637
|
7,841
|
||||||
Total non-interest-bearing liabilities
|
95,320
|
86,723
|
73,495
|
||||||
Stockholders' equity
|
81,324
|
71,868
|
63,446
|
||||||
Total liabilities & stockholders' equity
|
877,984
|
846,115
|
768,792
|
||||||
Net interest income
|
33,163
|
31,343
|
30,037
|
||||||
Net interest spread (5)
|
3.82%
|
3.75%
|
3.98%
|
||||||
Net interest income as a percentage
|
|||||||||
of average interest-earning assets
|
3.99%
|
3.94%
|
4.19%
|
||||||
Ratio of interest-earning assets
|
|||||||||
to interest-bearing liabilities
|
119%
|
116%
|
114%
|
||||||
(1) Averages are based on daily averages.
|
|||||||||
(2) Includes loan origination and commitment fees.
|
|||||||||
(3) Tax exempt interest revenue is shown on a tax equivalent basis for proper comparison using
|
|||||||||
a statutory federal income tax rate of 34%.
|
|||||||||
(4) Income on non-accrual loans is accounted for on a cash basis, and the loan balances are included in interest-earning assets.
|
|||||||||
(5) Interest rate spread represents the difference between the average rate earned on interest-earning assets
|
|||||||||
and the average rate paid on interest-bearing liabilities.
|
2012
|
2011
|
2010
|
|
Interest and dividend income from investment
|
|||
securities and short-term investments (non-tax adjusted)
|
$ 8,315
|
$ 8,377
|
$ 7,958
|
Tax equivalent adjustment
|
1,906
|
1,889
|
1,518
|
Interest and dividend income from investment
|
|||
securities and short-term investments (non-tax adjusted)
|
$ 10,221
|
$ 10,266
|
$ 9,476
|
2012
|
2011
|
2010
|
|
Interest and fees on loans (non-tax adjusted)
|
$ 29,770
|
$ 29,916
|
$ 31,042
|
Tax equivalent adjustment
|
831
|
844
|
859
|
Interest and fees on loans (tax equivalent basis)
|
$ 30,601
|
$ 30,760
|
$ 31,901
|
2012
|
2011
|
2010
|
|
Total interest income
|
$ 38,085
|
$ 38,293
|
$ 39,000
|
Total interest expense
|
7,659
|
9,683
|
11,340
|
Net interest income
|
30,426
|
28,610
|
27,660
|
Total tax equivalent adjustment
|
2,737
|
2,733
|
2,377
|
Net interest income (tax equivalent basis)
|
$ 33,163
|
$ 31,343
|
$ 30,037
|
2012 vs. 2011 (1)
|
2011 vs. 2010 (1)
|
|||||
Change in
|
Change
|
Total
|
Change in
|
Change
|
Total
|
|
Volume
|
in Rate
|
Change
|
Volume
|
in Rate
|
Change
|
|
Interest Income:
|
||||||
Short-term investments:
|
||||||
Interest-bearing deposits at banks
|
$ (32)
|
$ (28)
|
$ (60)
|
$ (3)
|
$ (6)
|
$ (9)
|
Investment securities:
|
||||||
Taxable
|
598
|
(636)
|
(38)
|
1,446
|
(1,739)
|
(293)
|
Tax-exempt
|
189
|
(136)
|
53
|
1,268
|
(176)
|
1,092
|
Total investment securities
|
787
|
(772)
|
15
|
2,714
|
(1,915)
|
799
|
Total investment income
|
755
|
(800)
|
(45)
|
2,711
|
(1,921)
|
790
|
Loans:
|
||||||
Residential mortgage loans
|
140
|
(790)
|
(650)
|
(757)
|
(513)
|
(1,270)
|
Construction loans
|
204
|
(36)
|
168
|
(155)
|
4
|
(151)
|
Commercial & agricultural loans
|
706
|
(304)
|
402
|
906
|
(512)
|
394
|
Loans to state & political subdivisions
|
253
|
(282)
|
(29)
|
300
|
(341)
|
(41)
|
Other loans
|
(42)
|
(8)
|
(50)
|
(54)
|
(19)
|
(73)
|
Total loans, net of discount
|
1,261
|
(1,420)
|
(159)
|
240
|
(1,381)
|
(1,141)
|
Total Interest Income
|
2,016
|
(2,220)
|
(204)
|
2,951
|
(3,302)
|
(351)
|
Interest Expense:
|
||||||
Interest-bearing deposits:
|
||||||
NOW accounts
|
49
|
(177)
|
(128)
|
205
|
(306)
|
(101)
|
Savings accounts
|
55
|
(85)
|
(30)
|
42
|
(13)
|
29
|
Money Market accounts
|
45
|
(28)
|
17
|
55
|
(15)
|
40
|
Certificates of deposit
|
(428)
|
(1,262)
|
(1,690)
|
(203)
|
(1,381)
|
(1,584)
|
Total interest-bearing deposits
|
(279)
|
(1,552)
|
(1,831)
|
99
|
(1,715)
|
(1,616)
|
Other borrowed funds
|
(91)
|
(102)
|
(193)
|
48
|
(89)
|
(41)
|
Total interest expense
|
(370)
|
(1,654)
|
(2,024)
|
147
|
(1,804)
|
(1,657)
|
Net interest income
|
$ 2,386
|
$ (566)
|
$ 1,820
|
$ 2,804
|
$ (1,498)
|
$ 1,306
|
2012
|
2011
|
2010
|
|
Service charges
|
$ 4,475
|
$ 4,380
|
$ 3,997
|
Trust
|
644
|
665
|
542
|
Brokerage and insurance
|
392
|
352
|
439
|
Investment securities gains, net
|
604
|
334
|
99
|
Gains on loans sold
|
759
|
208
|
341
|
Earnings on bank owned life insurance
|
507
|
498
|
504
|
Other
|
456
|
479
|
374
|
Total
|
$ 7,837
|
$ 6,916
|
$ 6,296
|
2012/2011
|
2011/2010
|
|||
Change
|
Change
|
|||
Amount
|
%
|
Amount
|
%
|
|
Service charges
|
$ 95
|
2.2
|
$ 383
|
9.6
|
Trust
|
(21)
|
(3.2)
|
123
|
22.7
|
Brokerage and insurance
|
40
|
11.4
|
(87)
|
(19.8)
|
Investment securities gains, net
|
270
|
80.8
|
235
|
237.4
|
Gains on loans sold
|
551
|
264.9
|
(133)
|
(39.0)
|
Earnings on bank owned life insurance
|
9
|
1.8
|
(6)
|
(1.2)
|
Other
|
(23)
|
(4.8)
|
105
|
28.1
|
Total
|
$ 921
|
13.3
|
$ 620
|
9.8
|
2012
|
2011
|
2010
|
|
Salaries and employee benefits
|
$ 11,018
|
$ 9,996
|
$ 9,850
|
Occupancy
|
1,265
|
1,331
|
1,219
|
Furniture and equipment
|
411
|
449
|
454
|
Professional fees
|
891
|
744
|
681
|
FDIC insurance
|
468
|
592
|
950
|
ORE expenses
|
164
|
396
|
310
|
Pennsylvania shares tax
|
602
|
541
|
540
|
Other
|
4,478
|
4,360
|
4,039
|
Total
|
$ 19,297
|
$ 18,409
|
$ 18,043
|
2012/2011
|
2011/2010
|
|||
Change
|
Change
|
|||
Amount
|
%
|
Amount
|
%
|
|
Salaries and employee benefits
|
$ 1,022
|
10.2
|
$ 146
|
1.5
|
Occupancy
|
(66)
|
(5.0)
|
112
|
9.2
|
Furniture and equipment
|
(38)
|
(8.5)
|
(5)
|
(1.1)
|
Professional fees
|
147
|
19.8
|
63
|
9.3
|
FDIC insurance
|
(124)
|
(20.9)
|
(358)
|
(37.7)
|
ORE expenses
|
(232)
|
(58.6)
|
86
|
27.7
|
Pennsylvania shares tax
|
61
|
11.3
|
1
|
0.2
|
Other
|
118
|
2.7
|
321
|
7.9
|
Total
|
$ 888
|
4.8
|
$ 366
|
2.0
|
2012
|
%
|
2011
|
%
|
2010
|
|||
Balance
|
Increase
|
Change
|
Balance
|
Increase
|
Change
|
Balance
|
|
Total assets
|
$ 882.4
|
$ 3.8
|
0.4
|
$ 878.6
|
$ 66.1
|
8.1
|
$ 812.5
|
Total investments
|
310.3
|
(8.5)
|
(2.7)
|
318.8
|
67.5
|
26.9
|
251.3
|
Total loans, net
|
495.7
|
14.7
|
3.1
|
481.0
|
13.4
|
2.9
|
467.6
|
Total deposits
|
737.1
|
3.1
|
0.4
|
734.0
|
53.3
|
7.8
|
680.7
|
Total stockholders' equity
|
89.5
|
8.0
|
9.8
|
81.5
|
12.8
|
18.6
|
68.7
|
2012
|
% of
|
2011
|
% of
|
2010
|
% of
|
2009
|
% of
|
2008
|
% of
|
|
Amount
|
Total
|
Amount
|
Total
|
Amount
|
Total
|
Amount
|
Total
|
Amount
|
Total
|
|
Available-for-sale:
|
||||||||||
U. S. Agency securities
|
$ 127,234
|
41.0
|
$ 168,600
|
52.9
|
$ 118,484
|
47.1
|
$ 65,223
|
32.8
|
$ 28,942
|
16.6
|
U.S. Treasuries
|
4,947
|
1.6
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
Obligations of state & political
|
||||||||||
subdivisions
|
100,875
|
32.5
|
101,547
|
31.9
|
76,922
|
30.6
|
59,574
|
30.0
|
44,132
|
25.3
|
Corporate obligations
|
22,109
|
7.1
|
8,460
|
2.7
|
8,681
|
3.5
|
3,166
|
1.6
|
5,296
|
3.0
|
Mortgage-backed securities
|
53,673
|
17.3
|
38,974
|
12.2
|
46,015
|
18.3
|
70,194
|
35.3
|
95,407
|
54.8
|
Equity securities
|
1,414
|
0.5
|
1,242
|
0.3
|
1,201
|
0.5
|
425
|
0.3
|
362
|
0.3
|
Total
|
$ 310,252
|
100.0
|
$ 318,823
|
100.0
|
$ 251,303
|
100.0
|
$ 198,582
|
100.0
|
$ 174,139
|
100.0
|
After One Year
|
After Five Years
|
|||||||||
|
One Year or Less
|
to Five years
|
to Ten Years
|
After Ten Years
|
Total
|
|||||
Amortized
|
Yield
|
Amortized
|
Yield
|
Amortized
|
Yield
|
Amortized
|
Yield
|
Amortized
|
Yield
|
|
Cost
|
%
|
Cost
|
%
|
Cost
|
%
|
Cost
|
%
|
Cost
|
%
|
|
Available-for-sale securities:
|
||||||||||
U.S. agency securities
|
$ 52,676
|
1.7
|
$ 72,449
|
1.7
|
$ -
|
-
|
$ -
|
-
|
$ 125,125
|
1.7
|
U.S. treasuries
|
-
|
-
|
-
|
-
|
4,922
|
1.2
|
-
|
-
|
4,922
|
1.2
|
Obligations of state & political
|
|
|
|
|
|
|||||
subdivisions
|
14,013
|
5.6
|
58,650
|
5.5
|
22,625
|
6.0
|
-
|
-
|
95,288
|
5.7
|
Corporate obligations
|
4,080
|
1.5
|
10,419
|
2.8
|
7,200
|
1.8
|
-
|
-
|
21,699
|
2.2
|
Mortgage-backed securities
|
11,242
|
2.5
|
40,830
|
2.5
|
-
|
-
|
-
|
-
|
52,072
|
2.5
|
Total available-for-sale
|
$ 82,011
|
2.5
|
$ 182,348
|
3.1
|
$ 34,747
|
4.3
|
$ -
|
-
|
$ 299,106
|
3.1
|
2012
|
2011
|
2010
|
2009
|
2008
|
||||||
Amount
|
%
|
Amount
|
%
|
Amount
|
%
|
Amount
|
%
|
Amount
|
%
|
|
Real estate:
|
||||||||||
Residential
|
$ 178,080
|
35.4
|
$ 184,034
|
37.7
|
$ 185,012
|
39.1
|
$194,989
|
42.7
|
$199,118
|
46.0
|
Commercial
|
176,710
|
35.2
|
165,826
|
34.0
|
152,499
|
32.2
|
133,953
|
29.4
|
107,740
|
24.9
|
Agricultural
|
18,015
|
3.6
|
19,224
|
3.9
|
19,078
|
4.0
|
19,485
|
4.2
|
17,066
|
3.9
|
Construction
|
12,011
|
2.4
|
8,481
|
1.7
|
9,766
|
2.1
|
5,619
|
1.2
|
11,118
|
2.6
|
Consumer
|
10,559
|
2.1
|
10,746
|
2.2
|
11,285
|
2.4
|
11,895
|
2.6
|
11,651
|
2.7
|
Other commercial and agricultural loans
|
47,880
|
9.5
|
44,299
|
9.1
|
47,156
|
10.0
|
44,101
|
9.7
|
37,968
|
8.8
|
State & political subdivision loans
|
59,208
|
11.8
|
54,899
|
11.4
|
48,721
|
10.2
|
46,342
|
10.2
|
48,153
|
11.1
|
Total loans
|
502,463
|
100.0
|
487,509
|
100.0
|
473,517
|
100.0
|
456,384
|
100.0
|
432,814
|
100.0
|
Less allowance for loan losses
|
6,784
|
6,487
|
5,915
|
4,888
|
4,378
|
|||||
Net loans
|
$ 495,679
|
$ 481,022
|
$ 467,602
|
$451,496
|
$428,436
|
2012/2011
|
2011/2010
|
|||
Change
|
Change
|
|||
Amount
|
%
|
Amount
|
%
|
|
Real estate:
|
||||
Residential
|
$ (5,954)
|
(3.2)
|
$ (978)
|
(0.5)
|
Commercial
|
10,884
|
6.6
|
13,327
|
8.7
|
Agricultural
|
(1,209)
|
(6.3)
|
146
|
0.8
|
Construction
|
3,530
|
41.6
|
(1,285)
|
(13.2)
|
Consumer
|
(187)
|
(1.7)
|
(539)
|
(4.8)
|
Other commercial and agricultural loans
|
3,581
|
8.1
|
(2,857)
|
(6.1)
|
State & political subdivision loans
|
4,309
|
7.8
|
6,178
|
12.7
|
Total loans
|
$ 14,954
|
3.1
|
$ 13,992
|
3.0
|
Commercial, municipal,
|
Real estate
|
||
agricultural
|
construction
|
Total
|
|
Maturity of loans:
|
|||
One year or less
|
$ 10,219
|
$ -
|
$ 10,219
|
Over one year through five years
|
40,114
|
-
|
40,114
|
Over five years
|
251,480
|
12,011
|
263,491
|
Total
|
$ 301,813
|
$ 12,011
|
$ 313,824
|
Sensitivity of loans to changes in interest
|
|||
rates - loans due after December 31, 2013:
|
|||
Predetermined interest rate
|
$ 51,831
|
$ 726
|
$ 52,557
|
Floating or adjustable interest rate
|
239,763
|
11,285
|
251,048
|
Total
|
$ 291,594
|
$ 12,011
|
$ 303,605
|
December 31,
|
|||||
2012
|
2011
|
2010
|
2009
|
2008
|
|
Balance at beginning of period
|
$ 6,487
|
$ 5,915
|
$ 4,888
|
$ 4,378
|
$ 4,197
|
Charge-offs:
|
|||||
Real estate:
|
|||||
Residential
|
95
|
101
|
147
|
76
|
31
|
Commercial
|
2
|
29
|
53
|
236
|
36
|
Agricultural
|
-
|
-
|
-
|
1
|
20
|
Consumer
|
54
|
71
|
35
|
80
|
44
|
Other commercial and agricultural loans
|
21
|
6
|
173
|
153
|
115
|
Total loans charged-off
|
172
|
207
|
408
|
546
|
246
|
Recoveries:
|
|||||
Real estate:
|
|||||
Residential
|
-
|
-
|
4
|
1
|
6
|
Commercial
|
9
|
15
|
11
|
1
|
-
|
Agricultural
|
-
|
-
|
-
|
-
|
20
|
Consumer
|
33
|
57
|
45
|
52
|
19
|
Other commercial and agricultural loans
|
7
|
32
|
120
|
77
|
52
|
Total loans recovered
|
49
|
104
|
180
|
131
|
97
|
Net loans charged-off
|
123
|
103
|
228
|
415
|
149
|
Provision charged to expense
|
420
|
675
|
1,255
|
925
|
330
|
Balance at end of year
|
$ 6,784
|
$ 6,487
|
$ 5,915
|
$ 4,888
|
$ 4,378
|
Loans outstanding at end of period
|
$ 502,463
|
$ 487,509
|
$ 473,517
|
$ 456,384
|
$ 432,814
|
Average loans outstanding, net
|
$ 496,822
|
$ 474,972
|
$ 468,620
|
$ 442,921
|
$ 423,382
|
Non-performing assets:
|
|||||
Non-accruing loans
|
$ 8,067
|
$ 9,165
|
$ 11,853
|
$ 5,871
|
$ 2,202
|
Accrual loans - 90 days or more past due
|
506
|
275
|
692
|
884
|
383
|
Total non-performing loans
|
$ 8,573
|
$ 9,440
|
$ 12,545
|
$ 6,755
|
$ 2,585
|
Foreclosed assets held for sale
|
616
|
860
|
693
|
302
|
591
|
Total non-performing assets
|
$ 9,189
|
$ 10,300
|
$ 13,238
|
$ 7,057
|
$ 3,176
|
Troubled debt restructurings (TDR)
|
|||||
Non-accruing TDRs
|
$ 4,834
|
$ 5,490
|
$ 130
|
$ -
|
$ -
|
Accrual TDRs
|
193
|
123
|
-
|
-
|
-
|
Total troubled debt restructurings
|
$ 5,027
|
$ 5,613
|
$ 130
|
$ -
|
$ -
|
Net charge-offs to average loans
|
0.02%
|
0.02%
|
0.05%
|
0.09%
|
0.04%
|
Allowance to total loans
|
1.35%
|
1.33%
|
1.25%
|
1.07%
|
1.01%
|
Allowance to total non-performing loans
|
79.13%
|
68.72%
|
47.15%
|
72.36%
|
169.36%
|
Non-performing loans as a percent of loans
|
|||||
net of unearned income
|
1.71%
|
1.94%
|
2.65%
|
1.48%
|
0.60%
|
Non-performing assets as a percent of loans
|
|||||
net of unearned income
|
1.83%
|
2.11%
|
2.80%
|
1.55%
|
0.73%
|
·
|
Level of and trends in delinquencies, impaired/classified loans
|
|
Change in volume and severity of past due loans
|
|
Volume of non-accrual loans
|
|
Volume and severity of classified, adversely or graded loans
|
·
|
Level of and trends in charge-offs and recoveries
|
·
|
Trends in volume, terms and nature of the loan portfolio
|
·
|
Effects of any changes in risk selection and underwriting standards and any other changes in lending and recovery policies, procedures and practices
|
·
|
Changes in the quality of the Bank’s loan review system
|
·
|
Experience, ability and depth of lending management and other relevant staff
|
·
|
National, state, regional and local economic trends and business conditions
|
|
General economic conditions
|
|
Unemployment rates
|
|
Inflation / CPI
|
|
Changes in values of underlying collateral for collateral-dependent loans
|
·
|
Industry conditions including the effects of external factors such as competition, legal, and regulatory requirements on the level of estimated credit losses.
|
·
|
Existence and effect of any credit concentrations, and changes in the level of such concentrations
|
2012
|
2011
|
2010
|
2009
|
2008
|
||||||
Amount
|
%
|
Amount
|
%
|
Amount
|
%
|
Amount
|
%
|
Amount
|
%
|
|
Real estate loans:
|
||||||||||
Residential
|
$ 875
|
35.4
|
$ 805
|
37.7
|
$ 969
|
39.1
|
$ 801
|
42.7
|
$ 694
|
46.0
|
Commercial, agricultural
|
4,437
|
38.8
|
4,132
|
37.9
|
3,380
|
36.2
|
2,864
|
33.6
|
2,303
|
28.8
|
Construction
|
38
|
2.4
|
15
|
1.7
|
22
|
2.1
|
20
|
1.2
|
5
|
2.6
|
Consumer
|
119
|
2.1
|
111
|
2.2
|
108
|
2.4
|
131
|
2.6
|
449
|
2.7
|
Other commercial and agricultural loans
|
728
|
9.5
|
674
|
9.1
|
983
|
10.0
|
918
|
9.7
|
807
|
8.8
|
State & political subdivision loans
|
271
|
11.8
|
235
|
11.4
|
137
|
10.1
|
93
|
10.1
|
19
|
11.1
|
Unallocated
|
316
|
N/A
|
515
|
N/A
|
316
|
N/A
|
61
|
N/A
|
101
|
N/A
|
Total allowance for loan losses
|
$ 6,784
|
100.0
|
$ 6,487
|
100.0
|
$ 5,915
|
100.0
|
$ 4,888
|
100.0
|
$ 4,378
|
100.0
|
December 31, 2012
|
December 31, 2011
|
||||||||
Non-Performing Loans
|
Non-Performing Loans
|
||||||||
30 - 90 Days
|
90 Days Past
|
Non-
|
Total Non-
|
30 - 90 Days
|
90 Days Past
|
Non-
|
Total Non-
|
||
Past Due
|
Due Accruing
|
accrual
|
Performing
|
Past Due
|
Past Due
|
accrual
|
Performing
|
||
Real estate:
|
|||||||||
Residential
|
$ 1,108
|
$ 332
|
$ 663
|
$ 995
|
$ 859
|
$ 99
|
$ 554
|
$ 653
|
|
Commercial
|
597
|
152
|
7,042
|
7,194
|
731
|
176
|
8,094
|
8,270
|
|
Agricultural
|
54
|
-
|
-
|
-
|
143
|
-
|
-
|
-
|
|
Construction
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
|
Consumer
|
87
|
4
|
-
|
4
|
93
|
-
|
-
|
-
|
|
Other commercial loans
|
932
|
18
|
362
|
380
|
8
|
-
|
517
|
517
|
|
Total nonperforming loans
|
$ 2,778
|
$ 506
|
$ 8,067
|
$ 8,573
|
$ 1,834
|
$ 275
|
$ 9,165
|
$ 9,440
|
Change in Non-Performing Loans
|
||
2012 / 2011
|
||
Amount
|
%
|
|
Real estate:
|
||
Residential
|
$ 342
|
52.4
|
Commercial
|
(1,076)
|
(13.0)
|
Agricultural
|
-
|
-
|
Construction
|
-
|
-
|
Consumer
|
4
|
N/A
|
Other commercial loans
|
(137)
|
(26.5)
|
Total nonperforming loans
|
$ (867)
|
(9.2)
|
Non-Performing Loans
|
|||||
2012
|
2011
|
2010
|
2009
|
2008
|
|
Real estate:
|
|||||
Residential
|
$ 995
|
$ 653
|
$ 711
|
$ 885
|
$ 956
|
Commercial
|
7,194
|
8,270
|
8,161
|
2,498
|
1,567
|
Agricultural
|
-
|
-
|
2,241
|
2,094
|
-
|
Construction
|
-
|
-
|
-
|
749
|
-
|
Consumer
|
4
|
-
|
18
|
11
|
2
|
Commercial and other loans
|
380
|
517
|
1,414
|
429
|
60
|
State & political subdivision loans
|
-
|
-
|
-
|
89
|
-
|
Total nonperforming loans
|
$ 8,573
|
$ 9,440
|
$ 12,545
|
$ 6,755
|
$ 2,585
|
·
|
A commercial customer with a total loan relationship of $4.6 million secured by 165 residential properties is considered non-accrual as of December 31, 2012. In the first quarter of 2011, the Company and Borrower entered into a forbearance agreement to restructure the debt. As a result of all loan payments being made on the loans through December 31, 2012, there is no specific reserve allocation as of December 31, 2012 and the loan continues to pay in accordance with the restructured agreement.
|
·
|
A commercial customer with a relationship of approximately $946,000 is considered non-accrual as of December 31, 2012. This relationship includes a balance of $669,000 that is subject to USDA guarantees. The current economic conditions related to the timber industry have significantly impacted the cash flows from the customer’s activities. Management reviewed the collateral and guarantees and determined that a specific reserve allocation of $113,000 was required as of December 31, 2012 based on the appraised value of collateral.
|
·
|
A commercial customer with a relationship of approximately $968,000 is considered non-accrual as of December 31, 2012. The current economic conditions have significantly impacted the cash flows from the customer’s activities. Management reviewed the collateral and determined that a specific reserve allocation of $231,000 was required as of December 31, 2012 based on the appraised value of collateral.
|
·
|
While non-performing loans are still higher than the Company’s historical levels, 54.0% of this balance is associated with one customer still experiencing financial difficulties, whose debt was restructured in 2011 and whose balances at December 31, 2012 were current. Additionally, in 2012, we experienced a decrease in our non-performing assets of $867,000 or 9.2% since December 31, 2011.
|
·
|
Net and gross charge-offs continue to be low in relation to the size of the Bank’s loan portfolio and compared to our peer group. Net charge-offs for both 2012 and 2011 were 0.02% of the total loan portfolio.
|
·
|
We have not experienced the significant decrease in the collateral values of local residential, commercial or agricultural real estate loan portfolios as seen in other parts of the country. Additionally, real estate market values in our market area did not realize the significant, and sometimes speculative, increases as seen in other parts of the country. Finally, our market area is predominately centered in the Marcellus Shale natural gas exploration and drilling area. These natural gas exploration and drilling activities have significantly impacted the overall interest in real estate in our market area due to the related lease and royalty revenues associated with it. The natural gas activities have had a positive impact on the value of local real estate.
|
2012
|
2011
|
2010
|
||||
Amount
|
%
|
Amount
|
%
|
Amount
|
%
|
|
Non-interest-bearing deposits
|
$ 89,494
|
12.1
|
$ 85,605
|
11.6
|
$ 75,589
|
11.1
|
NOW accounts
|
201,804
|
27.4
|
200,897
|
27.4
|
176,625
|
25.9
|
Savings deposits
|
87,836
|
11.9
|
79,659
|
10.8
|
61,682
|
9.1
|
Money market deposit accounts
|
83,423
|
11.3
|
67,223
|
9.2
|
50,201
|
7.4
|
Certificates of deposit
|
274,539
|
37.3
|
300,609
|
41.0
|
316,614
|
46.5
|
Total
|
$ 737,096
|
100.0
|
$ 733,993
|
100.0
|
$ 680,711
|
100.0
|
2012/2011
|
2011/2010
|
|||
Change
|
Change
|
|||
Amount
|
%
|
Amount
|
%
|
|
Non-interest-bearing deposits
|
$ 3,889
|
4.5
|
$ 10,016
|
13.3
|
NOW accounts
|
907
|
0.5
|
24,272
|
13.7
|
Savings deposits
|
8,177
|
10.3
|
17,977
|
29.1
|
Money market deposit accounts
|
16,200
|
24.1
|
17,022
|
33.9
|
Certificates of deposit
|
(26,070)
|
(8.7)
|
(16,005)
|
(5.1)
|
Total
|
$ 3,103
|
0.4
|
$ 53,282
|
7.8
|
2012
|
2011
|
2010
|
|
3 months or less
|
$ 15,348
|
$ 17,135
|
$ 11,189
|
Over 3 months through 6 months
|
10,216
|
14,300
|
9,857
|
Over 6 months through 12 months
|
28,953
|
36,726
|
45,822
|
Over 12 months
|
58,962
|
51,966
|
61,828
|
Total
|
$ 113,479
|
$ 120,127
|
$ 128,696
|
As a percent of total
|
|||
certificates of deposit
|
41.33%
|
39.96%
|
40.65%
|
2012
|
2011
|
2010
|
||||
Amount
|
%
|
Amount
|
%
|
Amount
|
%
|
|
Individuals
|
$ 464,764
|
63.1
|
$ 484,523
|
66.0
|
$ 468,747
|
68.9
|
Businesses and other organizations
|
142,659
|
19.3
|
138,338
|
18.9
|
105,958
|
15.5
|
United States government
|
-
|
-
|
2
|
-
|
1,239
|
0.2
|
State & political subdivisions
|
129,673
|
17.6
|
111,130
|
15.1
|
104,767
|
15.4
|
Total
|
$ 737,096
|
100.0
|
$ 733,993
|
100.0
|
$ 680,711
|
100.0
|
|
Repairs to parking lots at various facilities totaling $125,000
|
|
New signs as a result of the Bank’s charter conversion totaling $48,000
|
|
New ATM’s and upgraded software to meet the Americans with Disabilities Act requirements totaling $117,000
|
|
Purchase of real estate for $542,000, which may be used for future expansion.
|
|
Computer and software purchases totaling $65,000
|
|
Leasehold improvements and furniture and fixtures for the Rome branch totaling $27,000.
|
One year
|
One to
|
Three to
|
Over Five
|
||
Contractual Obligations
|
or Less
|
Three Years
|
Five Years
|
Years
|
Total
|
Deposits without a stated maturity
|
$ 462,557
|
$ -
|
$ -
|
$ -
|
$ 462,557
|
Time deposits
|
126,355
|
107,946
|
38,838
|
1,400
|
274,539
|
Long-term borrowings - FHLB
|
20,800
|
4,200
|
2,000
|
3,000
|
30,000
|
Note Payable
|
7,500
|
-
|
-
|
-
|
7,500
|
Repurchase agreements
|
7,436
|
-
|
1,190
|
-
|
8,626
|
Operating leases
|
127
|
131
|
78
|
306
|
642
|
Total
|
$ 624,775
|
$ 112,277
|
$ 42,106
|
$ 4,706
|
$ 783,222
|
Maturity or Re-pricing of Company Assets and Liabilities as of December 31, 2012
|
|||||||
Within
|
Four to
|
One to
|
Two to
|
Three to
|
Over
|
||
Three
|
Twelve
|
Two
|
Three
|
Five
|
Five
|
||
|
Months
|
Months
|
Years
|
Years
|
Years
|
Years
|
Total
|
Interest-earning assets:
|
|||||||
Interest-bearing deposits at banks
|
$ 14,026
|
$ -
|
$ -
|
$ -
|
$ -
|
$ -
|
$ 14,026
|
Investment securities
|
36,466
|
56,658
|
58,174
|
32,901
|
76,115
|
39,704
|
300,018
|
Residential mortgage loans
|
18,195
|
16,951
|
20,434
|
21,765
|
45,522
|
55,213
|
178,080
|
Construction loans
|
62
|
556
|
368
|
1,727
|
7,343
|
1,955
|
12,011
|
Commercial and farm loans
|
73,552
|
34,916
|
34,936
|
40,721
|
41,088
|
17,392
|
242,605
|
Loans to state & political subdivisions
|
2,919
|
5,801
|
22,266
|
412
|
4,937
|
22,873
|
59,208
|
Other loans
|
2,467
|
2,398
|
2,012
|
1,282
|
1,204
|
1,196
|
10,559
|
Total interest-earning assets
|
$ 147,687
|
$ 117,280
|
$ 138,190
|
$ 98,808
|
$ 176,209
|
$ 138,333
|
$ 816,507
|
Interest-bearing liabilities:
|
|||||||
NOW accounts
|
$ 115,017
|
$ -
|
$ -
|
$ -
|
$ -
|
$ 86,787
|
$ 201,804
|
Savings accounts
|
-
|
-
|
-
|
-
|
-
|
87,836
|
87,836
|
Money Market accounts
|
72,068
|
-
|
-
|
-
|
-
|
11,355
|
83,423
|
Certificates of deposit
|
37,187
|
89,168
|
62,274
|
45,672
|
38,838
|
1,400
|
274,539
|
Short-term borrowing
|
6,936
|
-
|
-
|
-
|
-
|
-
|
6,936
|
Long-term borrowing
|
7,500
|
21,300
|
4,200
|
656
|
2,534
|
3,000
|
39,190
|
Total interest-bearing liabilities
|
$ 238,708
|
$ 110,468
|
$ 66,474
|
$ 46,328
|
$ 41,372
|
$ 190,378
|
$ 693,728
|
Excess interest-earning
|
|||||||
assets (liabilities)
|
$ (91,021)
|
$ 6,812
|
$ 71,716
|
$ 52,480
|
$ 134,837
|
$ (52,045)
|
|
Cumulative interest-earning assets
|
$ 147,687
|
$ 264,967
|
$ 403,157
|
$ 501,965
|
$ 678,174
|
$ 816,507
|
|
Cumulative interest-bearing liabilities
|
238,708
|
349,176
|
415,650
|
461,978
|
503,350
|
693,728
|
|
Cumulative gap
|
$ (91,021)
|
$ (84,209)
|
$ (12,493)
|
$ 39,987
|
$ 174,824
|
$ 122,779
|
|
Cumulative interest rate
|
|||||||
sensitivity ratio (1)
|
0.62
|
0.76
|
0.97
|
1.09
|
1.35
|
1.18
|
|
(1) Cumulative interest-earning assets divided by interest-bearing liabilities.
|
Change In
|
% Change In
|
||||
Prospective One-Year
|
Prospective
|
Prospective
|
|||
Changes in Rates
|
Net Interest Income
|
Net Interest Income
|
Net Interest Income
|
||
-100 Shock
|
$ 28,046
|
$ (378)
|
(1.33)
|
||
Base
|
28,424
|
||||
+100 Shock
|
28,185
|
(239)
|
(0.84)
|
||
+200 Shock
|
27,625
|
(799)
|
(2.81)
|
||
+300 Shock
|
27,046
|
(1,378)
|
(4.85)
|
||
+400 Shock
|
26,574
|
(1,850)
|
(6.51)
|
Citizens Financial Services, Inc.
|
|||
Consolidated Balance Sheet
|
|||
December 31,
|
|||
(in thousands, except share data)
|
2012
|
2011
|
|
ASSETS:
|
|||
Cash and cash equivalents:
|
|||
Noninterest-bearing
|
$ 12,307
|
$ 9,960
|
|
Interest-bearing
|
14,026
|
20,472
|
|
Total cash and cash equivalents
|
26,333
|
30,432
|
|
Available-for-sale securities
|
310,252
|
318,823
|
|
Loans held for sale
|
1,458
|
-
|
|
Loans (net of allowance for loan losses:
|
|||
2012, $6,784; 2011, $6,487)
|
495,679
|
481,022
|
|
Premises and equipment
|
11,521
|
11,702
|
|
Accrued interest receivable
|
3,816
|
3,621
|
|
Goodwill
|
10,256
|
10,256
|
|
Bank owned life insurance
|
14,177
|
13,669
|
|
Other assets
|
8,935
|
9,042
|
|
TOTAL ASSETS
|
$ 882,427
|
$ 878,567
|
|
LIABILITIES:
|
|||
Deposits:
|
|||
Noninterest-bearing
|
$ 89,494
|
$ 85,605
|
|
Interest-bearing
|
647,602
|
648,388
|
|
Total deposits
|
737,096
|
733,993
|
|
Borrowed funds
|
46,126
|
53,882
|
|
Accrued interest payable
|
1,143
|
1,512
|
|
Other liabilities
|
8,587
|
7,712
|
|
TOTAL LIABILITIES
|
792,952
|
797,099
|
|
STOCKHOLDERS' EQUITY:
|
|||
Preferred Stock $1.00 par value; authorized 3,000,000 shares
|
|||
2012 and 2011; none issued in 2012 or 2011
|
-
|
-
|
|
Common Stock
|
|||
$1.00 par value; authorized 15,000,000 shares 2012 and 2011;
|
|||
issued 3,161,324 and 3,132,866 shares in 2012 and 2011,
|
|||
respectively
|
3,161
|
3,133
|
|
Additional paid-in capital
|
16,468
|
15,313
|
|
Retained earnings
|
71,813
|
63,337
|
|
Accumulated other comprehensive income
|
4,631
|
4,949
|
|
Treasury stock, at cost:
|
|||
262,921 and 230,203 shares for 2012 and 2011, respectively
|
(6,598)
|
(5,264)
|
|
TOTAL STOCKHOLDERS' EQUITY
|
89,475
|
81,468
|
|
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY
|
$ 882,427
|
$ 878,567
|
|
See accompanying notes to consolidated financial statements.
|
Citizens Financial Services, Inc.
|
||||
Consolidated Statement of Income
|
||||
Year Ended December 31,
|
||||
(in thousands, except per share data)
|
2012
|
2011
|
2010
|
|
INTEREST AND DIVIDEND INCOME:
|
||||
Interest and fees on loans
|
$ 29,770
|
$ 29,916
|
$ 31,042
|
|
Interest-bearing deposits with banks
|
21
|
81
|
90
|
|
Investment securities:
|
||||
Taxable
|
4,521
|
4,575
|
4,876
|
|
Nontaxable
|
3,702
|
3,666
|
2,945
|
|
Dividends
|
71
|
55
|
47
|
|
TOTAL INTEREST AND DIVIDEND INCOME
|
38,085
|
38,293
|
39,000
|
|
INTEREST EXPENSE:
|
||||
Deposits
|
6,113
|
7,944
|
9,560
|
|
Borrowed funds
|
1,546
|
1,739
|
1,780
|
|
TOTAL INTEREST EXPENSE
|
7,659
|
9,683
|
11,340
|
|
NET INTEREST INCOME
|
30,426
|
28,610
|
27,660
|
|
Provision for loan losses
|
420
|
675
|
1,255
|
|
NET INTEREST INCOME AFTER PROVISION FOR
|
||||
LOAN LOSSES
|
30,006
|
27,935
|
26,405
|
|
NON-INTEREST INCOME:
|
||||
Service charges
|
4,475
|
4,380
|
3,997
|
|
Trust
|
644
|
665
|
542
|
|
Brokerage and insurance
|
392
|
352
|
439
|
|
Investment securities gains, net
|
604
|
334
|
99
|
|
Gains on loans sold
|
759
|
208
|
341
|
|
Earnings on bank owned life insurance
|
507
|
498
|
504
|
|
Other
|
456
|
479
|
374
|
|
TOTAL NON-INTEREST INCOME
|
7,837
|
6,916
|
6,296
|
|
NON-INTEREST EXPENSES:
|
||||
Salaries and employee benefits
|
11,018
|
9,996
|
9,850
|
|
Occupancy
|
1,265
|
1,331
|
1,219
|
|
Furniture and equipment
|
411
|
449
|
454
|
|
Professional fees
|
891
|
744
|
681
|
|
Federal depository insurance
|
468
|
592
|
950
|
|
Pennsylvania shares tax
|
602
|
541
|
540
|
|
Other
|
4,642
|
4,756
|
4,349
|
|
TOTAL NON-INTEREST EXPENSES
|
19,297
|
18,409
|
18,043
|
|
Income before provision for income taxes
|
18,546
|
16,442
|
14,658
|
|
Provision for income taxes
|
4,331
|
3,610
|
3,156
|
|
NET INCOME
|
$ 14,215
|
$ 12,832
|
$ 11,502
|
|
PER COMMON SHARE DATA:
|
||||
NET INCOME – BASIC
|
$ 4.88
|
$ 4.36
|
$ 3.90
|
|
NET INCOME - DILUTED
|
$ 4.88
|
$ 4.36
|
$ 3.90
|
|
CASH DIVIDENDS PER SHARE
|
$ 1.58
|
$ 1.15
|
$ 1.07
|
|
See accompanying notes to consolidated financial statements.
|
Citizens Financial Services, Inc.
|
|||
Consolidated Statement of Comprehensive Income
|
|||
Year Ended December 31,
|
|||
(in thousands)
|
2012
|
2011
|
2010
|
Net Income
|
$ 14,215
|
$ 12,832
|
$ 11,502
|
Other Comprehensive income (loss):
|
|||
Securities available for sale
|
|||
Change in net unrealized gain/loss during the period
|
821
|
7,114
|
(1,617)
|
Income tax (benefit)
|
278
|
2,419
|
(550)
|
543
|
4,695
|
(1,067)
|
|
Reclassification adjustment for realized gains
|
|||
included in income
|
(604)
|
(334)
|
(99)
|
Income tax benefit
|
(205)
|
(114)
|
(34)
|
(399)
|
(220)
|
(65)
|
|
Unrealized loss (gain) on interest rate swap
|
148
|
61
|
(243)
|
Income tax (benefit)
|
50
|
21
|
(83)
|
|
98
|
40
|
(160)
|
Change in unrecognized pension costs
|
(848)
|
(939)
|
464
|
Income tax (benefit)
|
(288)
|
(319)
|
159
|
(560)
|
(620)
|
305
|
|
Net other comprehensive income (loss)
|
(318)
|
3,895
|
(987)
|
Comprehensive income
|
$ 13,897
|
$ 16,727
|
$ 10,515
|
See accompanying notes to consolidated financial statements.
|
Citizens Financial Services, Inc.
|
|||||||
Consolidated Statement of Changes in Stockholders' Equity
|
|||||||
Accumulated
|
|||||||
Additional
|
Other
|
||||||
Common Stock
|
Paid-in
|
Retained
|
Comprehensive
|
Treasury
|
|||
(in thousands, except share data)
|
Shares
|
Amount
|
Capital
|
Earnings
|
Income (Loss)
|
Stock
|
Total
|
Balance, December 31, 2009
|
3,076,253
|
$ 3,076
|
$ 13,457
|
$ 47,353
|
$ 2,041
|
$ (4,400)
|
$ 61,527
|
Net income
|
11,502
|
11,502
|
|||||
Net other comprehensive loss
|
(987)
|
(987)
|
|||||
Total comprehensive income
|
10,515
|
||||||
Stock dividend
|
28,181
|
28
|
733
|
(761)
|
-
|
||
Purchase of treasury stock (13,863 shares)
|
(386)
|
(386)
|
|||||
Restricted stock awards
|
(128)
|
119
|
(9)
|
||||
Restricted stock vesting
|
154
|
-
|
154
|
||||
Forfeited restricted stock
|
10
|
(10)
|
-
|
||||
Stock awards
|
9
|
42
|
51
|
||||
Cash dividends, $1.07 per share
|
(3,162)
|
(3,162)
|
|||||
Balance, December 31, 2010
|
3,104,434
|
3,104
|
14,235
|
54,932
|
1,054
|
(4,635)
|
68,690
|
Net income
|
12,832
|
12,832
|
|||||
Net other comprehensive income
|
3,895
|
3,895
|
|||||
Total comprehensive income
|
16,727
|
||||||
Stock dividend
|
28,432
|
29
|
1,023
|
(1,052)
|
-
|
||
Purchase of treasury stock (24,247 shares)
|
(851)
|
(851)
|
|||||
Restricted stock awards
|
(159)
|
(159)
|
|||||
Restricted stock vesting
|
209
|
209
|
|||||
Cash dividend reinvestment paid from treasury stock
|
5
|
(227)
|
222
|
-
|
|||
Cash dividends, $1.15 per share
|
(3,148)
|
(3,148)
|
|||||
Balance, December 31, 2011
|
3,132,866
|
3,133
|
15,313
|
63,337
|
4,949
|
(5,264)
|
81,468
|
Net income
|
14,215
|
14,215
|
|||||
Net other comprehensive loss
|
(318)
|
(318)
|
|||||
Total comprehensive income
|
13,897
|
||||||
Stock dividend
|
28,458
|
28
|
1,110
|
(1,138)
|
-
|
||
Purchase of treasury stock (33,042 shares)
|
(1,348)
|
(1,348)
|
|||||
Restricted stock awards
|
(156)
|
14
|
(142)
|
||||
Restricted stock vesting
|
201
|
201
|
|||||
Cash dividends, $1.58 per share
|
(4,601)
|
(4,601)
|
|||||
Balance, December 31, 2012
|
3,161,324
|
$ 3,161
|
$ 16,468
|
$ 71,813
|
$ 4,631
|
$ (6,598)
|
$ 89,475
|
See accompanying notes to consolidated financial statements.
|
Consolidated Statement of Cash Flows
|
|||
Year Ended December 31,
|
|||
(in thousands)
|
2012
|
2011
|
2010
|
Cash Flows from Operating Activities:
|
|||
Net income
|
$ 14,215
|
$ 12,832
|
$ 11,502
|
Adjustments to reconcile net income to net
|
|||
cash provided by operating activities:
|
|||
Provision for loan losses
|
420
|
675
|
1,255
|
Depreciation and amortization
|
420
|
469
|
457
|
Amortization and accretion on investment securities
|
2,364
|
1,932
|
829
|
Deferred income taxes
|
(58)
|
98
|
(270)
|
Investment securities gains, net
|
(604)
|
(334)
|
(99)
|
Earnings on bank owned life insurance
|
(507)
|
(498)
|
(504)
|
Stock awards
|
201
|
209
|
205
|
Originations of loans held for sale
|
(37,398)
|
(9,583)
|
(16,243)
|
Proceeds from sales of loans held for sale
|
36,699
|
9,791
|
16,584
|
Realized gains on loans sold
|
(759)
|
(208)
|
(341)
|
Increase in accrued interest receivable
|
(195)
|
(166)
|
(314)
|
Decrease in prepaid federal depository insurance
|
415
|
531
|
860
|
Decrease in accrued interest payable
|
(369)
|
(267)
|
(258)
|
Other, net
|
(33)
|
83
|
(847)
|
Net cash provided by operating activities
|
14,811
|
15,564
|
12,816
|
Cash Flows from Investing Activities:
|
|||
Available-for-sale securities:
|
|||
Proceeds from sales of available-for-sale securities
|
20,619
|
10,264
|
8,871
|
Proceeds from maturity and principal repayments of securities
|
117,375
|
89,645
|
54,069
|
Purchase of securities
|
(130,966)
|
(162,247)
|
(118,105)
|
Proceeds from redemption of regulatory stock
|
1,141
|
472
|
184
|
Purchase of regulatory stock
|
(1,405)
|
-
|
-
|
Net increase in loans
|
(15,230)
|
(14,551)
|
(18,415)
|
Purchase of premises, equipment and software
|
(438)
|
(140)
|
(1,292)
|
Proceeds from sale of premises and equipment
|
-
|
590
|
-
|
Proceeds from sale of foreclosed assets held for sale
|
738
|
372
|
942
|
Property purchased for future expansion
|
-
|
(542)
|
-
|
Net cash used in investing activities
|
(8,166)
|
(76,137)
|
(73,746)
|
Cash Flows from Financing Activities:
|
|||
Net increase in deposits
|
3,103
|
53,282
|
75,152
|
Proceeds from long-term borrowings
|
-
|
3,018
|
3,702
|
Repayments of long-term borrowings
|
(5,590)
|
(7,000)
|
(3,858)
|
Net increase (decrease) in short-term borrowed funds
|
(2,166)
|
1,868
|
2,037
|
Purchase of treasury stock
|
(1,348)
|
(851)
|
(386)
|
Purchase of restricted stock
|
(142)
|
(159)
|
(9)
|
Dividends paid
|
(4,601)
|
(3,148)
|
(3,162)
|
Net cash (used) provided by financing activities
|
(10,744)
|
47,010
|
73,476
|
Net (decrease) increase in cash and cash equivalents
|
(4,099)
|
(13,563)
|
12,546
|
Cash and Cash Equivalents at Beginning of Year
|
30,432
|
43,995
|
31,449
|
Cash and Cash Equivalents at End of Year
|
$ 26,333
|
$ 30,432
|
$ 43,995
|
Supplemental Disclosures of Cash Flow Information:
|
|||
Interest paid
|
$ 8,028
|
$ 9,950
|
$ 11,598
|
Income taxes paid
|
$ 4,345
|
$ 3,215
|
$ 3,585
|
Non-cash activities:
|
|||
Real estate acquired in settlement of loans
|
$ 374
|
$ 684
|
$ 1,205
|
Real estate transferred to other assets
|
$ -
|
$ -
|
$ 307
|
See accompanying notes to consolidated financial statements.
|
·
|
Level of and trends in delinquencies, impaired/classified loans
|
|
Change in volume and severity of past due loans
|
|
Volume of non-accrual loans
|
|
Volume and severity of classified, adversely or graded loans
|
·
|
Level of and trends in charge-offs and recoveries
|
·
|
Trends in volume, terms and nature of the loan portfolio
|
·
|
Effects of any changes in risk selection and underwriting standards and any other changes in lending and recovery policies, procedures and practices
|
·
|
Changes in the quality of the Bank’s loan review system
|
·
|
Experience, ability and depth of lending management and other relevant staff
|
·
|
National, state, regional and local economic trends and business conditions
|
|
General economic conditions
|
|
Unemployment rates
|
|
Inflation / CPI
|
|
Changes in values of underlying collateral for collateral-dependent loans
|
·
|
Industry conditions including the effects of external factors such as competition, legal, and regulatory requirements on the level of estimated credit losses.
|
·
|
Existence and effect of any credit concentrations, and changes in the level of such concentrations
|
2012
|
2011
|
2010
|
|
|
|||
Net income applicable to common stock
|
$14,215,000
|
$12,832,000
|
$11,502,000
|
Basic earnings per share computation:
|
|||
Weighted average common shares outstanding
|
2,911,885
|
2,943,028
|
2,952,041
|
Earnings per share - basic
|
$4.88
|
$4.36
|
$3.90
|
Diluted earnings per share computation:
|
|||
Weighted average common shares outstanding for basic earnings per share
|
2,911,885
|
2,943,028
|
2,952,041
|
Add: Dilutive effects of restricted stock
|
1,642
|
-
|
-
|
Weighted average common shares outstanding for dilutive earnings per share
|
2,913,527
|
2,943,028
|
2,952,041
|
Earnings per share - dilutive
|
$4.88
|
$4.36
|
$3.90
|
Gross
|
Gross
|
|||
Amortized
|
Unrealized
|
Unrealized
|
Fair
|
|
2012
|
Cost
|
Gains
|
Losses
|
Value
|
Available-for-sale securities:
|
||||
U.S. Agency securities
|
$ 125,125
|
$ 2,150
|
$ (41)
|
$ 127,234
|
U.S. Treasuries
|
4,922
|
25
|
-
|
4,947
|
Obligations of state and
|
||||
political subdivisions
|
95,288
|
5,721
|
(134)
|
100,875
|
Corporate obligations
|
21,699
|
452
|
(42)
|
22,109
|
Mortgage-backed securities in
|
||||
government sponsored entities
|
52,072
|
1,728
|
(127)
|
53,673
|
Equity securities in financial institutions
|
912
|
502
|
-
|
1,414
|
Total available-for-sale securities
|
$ 300,018
|
$ 10,578
|
$ (344)
|
$ 310,252
|
2011
|
||||
Available-for-sale securities:
|
||||
U.S. Agency securities
|
$ 166,534
|
$ 2,087
|
$ (21)
|
$ 168,600
|
Obligations of state and
|
||||
political subdivisions
|
96,556
|
4,996
|
(5)
|
101,547
|
Corporate obligations
|
8,263
|
197
|
-
|
8,460
|
Mortgage-backed securities in
|
||||
government sponsored entities
|
36,630
|
2,356
|
(12)
|
38,974
|
Equity securities in financial institutions
|
823
|
420
|
(1)
|
1,242
|
Total available-for-sale securities
|
$ 308,806
|
$ 10,056
|
$ (39)
|
$ 318,823
|
Less than Twelve Months
|
Twelve Months or Greater
|
Total
|
||||||
Gross
|
Gross
|
Gross
|
||||||
Fair
|
Unrealized
|
Fair
|
Unrealized
|
Fair
|
Unrealized
|
|||
2012
|
Value
|
Losses
|
Value
|
Losses
|
Value
|
Losses
|
||
U.S. Agency securities
|
$ 6,016
|
$ (41)
|
$ -
|
$ -
|
$ 6,016
|
$ (41)
|
||
Obligations of states and
|
||||||||
political subdivisions
|
7,981
|
(134)
|
-
|
-
|
7,981
|
(134)
|
||
Corporate obligations
|
10,972
|
(42)
|
-
|
-
|
10,972
|
(42)
|
||
Mortgage-backed securities in
|
||||||||
government sponsored entities
|
8,651
|
(127)
|
-
|
-
|
8,651
|
(127)
|
||
Total securities
|
$ 33,620
|
$ (344)
|
$ -
|
$ -
|
$ 33,620
|
$ (344)
|
||
2011
|
||||||||
U.S. Agency securities
|
$ 10,018
|
$ (21)
|
$ -
|
$ -
|
$ 10,018
|
$ (21)
|
||
Obligations of states and
|
||||||||
political subdivisions
|
1,057
|
(3)
|
771
|
(2)
|
1,828
|
(5)
|
||
Mortgage-backed securities in
|
||||||||
government sponsored entities
|
3,164
|
(12)
|
-
|
-
|
3,164
|
(12)
|
||
Equity securities in financial institutions
|
39
|
(1)
|
-
|
-
|
39
|
(1)
|
||
Total securities
|
$ 14,278
|
$ (37)
|
$ 771
|
$ (2)
|
$ 15,049
|
$ (39)
|
2012
|
2011
|
2010
|
|
Gross gains
|
$ 604
|
$ 461
|
$ 99
|
Gross losses
|
-
|
127
|
-
|
Net gains
|
$ 604
|
$ 334
|
$ 99
|
Amortized
|
||
Cost
|
Fair Value
|
|
Available-for-sale securities:
|
||
Due in one year or less
|
$ 19,148
|
$ 19,317
|
Due after one year through five years
|
71,727
|
73,597
|
Due after five years through ten years
|
63,510
|
64,811
|
Due after ten years
|
144,721
|
151,113
|
Total
|
$ 299,106
|
$ 308,838
|
2012
|
Total Loans
|
Individually evaluated for impairment
|
Collectively evaluated for impairment
|
|
Real estate loans:
|
||||
Residential
|
$ 178,080
|
$ 424
|
$ 177,656
|
|
Commercial and agricultural
|
194,725
|
9,093
|
185,632
|
|
Construction
|
12,011
|
-
|
12,011
|
|
Consumer
|
10,559
|
-
|
10,559
|
|
Other commercial and agricultural loans
|
47,880
|
901
|
46,979
|
|
State and political subdivision loans
|
59,208
|
-
|
59,208
|
|
Total
|
502,463
|
$ 10,418
|
$ 492,045
|
|
Allowance for loan losses
|
6,784
|
|||
Net loans
|
$ 495,679
|
|||
2011
|
||||
Real estate loans:
|
||||
Residential
|
$ 184,034
|
$ 94
|
$ 183,940
|
|
Commercial and agricultural
|
185,050
|
8,270
|
176,780
|
|
Construction
|
8,481
|
-
|
8,481
|
|
Consumer
|
10,746
|
-
|
10,746
|
|
Other commercial and agricultural loans
|
44,299
|
517
|
43,782
|
|
State and political subdivision loans
|
54,899
|
-
|
54,899
|
|
Total
|
487,509
|
$ 8,881
|
$ 478,628
|
|
Allowance for loan losses
|
6,487
|
|||
Net loans
|
$ 481,022
|
Recorded
|
Recorded
|
||||
Unpaid
|
Investment
|
Investment
|
Total
|
||
Principal
|
With No
|
With
|
Recorded
|
Related
|
|
Balance
|
Allowance
|
Allowance
|
Investment
|
Allowance
|
|
2012
|
|||||
Real estate loans:
|
|||||
Mortgages
|
$ 309
|
$ 150
|
$ 136
|
$ 286
|
$ 8
|
Home Equity
|
138
|
-
|
138
|
138
|
14
|
Commercial
|
10,669
|
6,476
|
2,617
|
9,093
|
559
|
Agricultural
|
-
|
-
|
-
|
-
|
-
|
Construction
|
-
|
-
|
-
|
-
|
-
|
Consumer
|
-
|
-
|
-
|
-
|
-
|
Other commercial loans
|
950
|
592
|
309
|
901
|
1
|
Other agricultural loans
|
-
|
-
|
-
|
-
|
-
|
State and political
|
|||||
subdivision loans
|
-
|
-
|
-
|
-
|
-
|
Total
|
$ 12,066
|
$ 7,218
|
$ 3,200
|
$ 10,418
|
$ 582
|
2011
|
|||||
Real estate loans:
|
|||||
Mortgages
|
$ -
|
$ -
|
$ -
|
$ -
|
$ -
|
Home Equity
|
94
|
36
|
58
|
94
|
13
|
Commercial
|
9,394
|
5,663
|
2,607
|
8,270
|
433
|
Agricultural
|
-
|
-
|
-
|
-
|
-
|
Construction
|
-
|
-
|
-
|
-
|
-
|
Consumer
|
-
|
-
|
-
|
-
|
-
|
Other commercial loans
|
574
|
30
|
487
|
517
|
48
|
Other agricultural loans
|
-
|
-
|
-
|
-
|
-
|
State and political
|
|||||
subdivision loans
|
-
|
-
|
-
|
-
|
-
|
Total
|
$ 10,062
|
$ 5,729
|
$ 3,152
|
$ 8,881
|
$ 494
|
2012
|
2011
|
2010
|
|
Average investment in impaired loans
|
$ 8,625
|
$ 9,653
|
$ 9,356
|
Interest income recognized on impaired loans
|
123
|
123
|
143
|
Interest income recognized on a cash basis on impaired loans
|
123
|
123
|
143
|
·
|
Pass (Grades 1-5) – These loans are to customers with credit quality ranging from an acceptable to very high quality and are protected by the current net worth and paying capacity of the obligor or by the value of the underlying collateral.
|
·
|
Special Mention (Grade 6) – This loan grade is in accordance with regulatory guidance and includes loans where a potential weakness or risk exists, which could cause a more serious problem if not corrected.
|
·
|
Substandard (Grade 7) – This loan grade is in accordance with regulatory guidance and includes loans that have a well-defined weakness based on objective evidence and be characterized by the distinct possibility that the Bank will sustain some loss if the deficiencies are not corrected.
|
·
|
Doubtful (Grade 8) – This loan grade is in accordance with regulatory guidance and includes loans that have all the weaknesses inherent in a substandard asset. In addition, these weaknesses make collection or liquidation in full highly questionable and improbable, based on existing circumstances.
|
·
|
Loss (Grade 9) – This loan grade is in accordance with regulatory guidance and includes loans that are considered uncollectible, or of such value that continuance as an asset is not warranted.
|
2012
|
Pass
|
Special Mention
|
Substandard
|
Doubtful
|
Loss
|
Ending Balance
|
Real estate loans:
|
||||||
Commercial
|
$ 149,892
|
$ 7,616
|
$ 19,127
|
$ 75
|
$ -
|
$ 176,710
|
Agricultural
|
13,690
|
2,386
|
1,939
|
-
|
-
|
18,015
|
Construction
|
12,011
|
-
|
-
|
-
|
-
|
12,011
|
Other commercial loans
|
39,239
|
826
|
1,555
|
-
|
-
|
41,620
|
Other agricultural loans
|
4,833
|
589
|
838
|
-
|
-
|
6,260
|
State and political
|
||||||
subdivision loans
|
58,120
|
-
|
1,088
|
-
|
-
|
59,208
|
Total
|
$ 277,785
|
$ 11,417
|
$ 24,547
|
$ 75
|
$ -
|
$ 313,824
|
2011
|
Pass
|
Special Mention
|
Substandard
|
Doubtful
|
Loss
|
Ending Balance
|
Real estate loans:
|
||||||
Commercial
|
$ 138,409
|
$ 10,372
|
$ 17,045
|
$ -
|
$ -
|
$ 165,826
|
Agricultural
|
14,628
|
2,412
|
2,184
|
-
|
-
|
19,224
|
Construction
|
8,481
|
-
|
-
|
-
|
-
|
8,481
|
Other commercial loans
|
34,606
|
2,203
|
921
|
17
|
-
|
37,747
|
Other agricultural loans
|
4,509
|
809
|
1,234
|
-
|
-
|
6,552
|
State and political
|
||||||
subdivision loans
|
53,733
|
-
|
1,166
|
-
|
-
|
54,899
|
Total
|
$ 254,366
|
$ 15,796
|
$ 22,550
|
$ 17
|
$ -
|
$ 292,729
|
2012
|
Performing
|
Non-performing
|
Total
|
Real estate loans:
|
|||
Mortgages
|
$ 105,822
|
$ 726
|
$ 106,548
|
Home Equity
|
71,263
|
269
|
71,532
|
Consumer
|
10,555
|
4
|
10,559
|
Total
|
$ 187,640
|
$ 999
|
$ 188,639
|
2011
|
Performing
|
Non-performing
|
Total
|
Real estate loans:
|
|||
Mortgages
|
$ 102,238
|
$ 473
|
$ 102,711
|
Home Equity
|
81,143
|
180
|
81,323
|
Consumer
|
10,746
|
-
|
10,746
|
Total
|
$ 194,127
|
$ 653
|
$ 194,780
|
30-59 Days
|
60-89 Days
|
90 Days
|
Total Past
|
Total Financing
|
90 Days and
|
|||
2012
|
Past Due
|
Past Due
|
Or Greater
|
Due
|
Current
|
Receivables
|
Accruing
|
|
Real estate loans:
|
||||||||
Mortgages
|
$ 636
|
$ 294
|
$ 493
|
$ 1,423
|
$ 105,125
|
$ 106,548
|
$ 244
|
|
Home Equity
|
267
|
17
|
222
|
506
|
71,026
|
71,532
|
88
|
|
Commercial
|
602
|
-
|
2,149
|
2,751
|
173,959
|
176,710
|
152
|
|
Agricultural
|
54
|
-
|
-
|
54
|
17,961
|
18,015
|
-
|
|
Construction
|
-
|
-
|
-
|
-
|
12,011
|
12,011
|
-
|
|
Consumer
|
45
|
43
|
4
|
92
|
10,467
|
10,559
|
4
|
|
Other commercial loans
|
962
|
-
|
317
|
1,279
|
40,341
|
41,620
|
18
|
|
Other agricultural loans
|
-
|
-
|
-
|
-
|
6,260
|
6,260
|
-
|
|
State and political
|
||||||||
subdivision loans
|
-
|
-
|
-
|
-
|
59,208
|
59,208
|
-
|
|
Total
|
$ 2,566
|
$ 354
|
$ 3,185
|
$ 6,105
|
$ 496,358
|
$ 502,463
|
$ 506
|
|
Loans considered non-accrual
|
$ 73
|
$ 69
|
$ 2,679
|
$ 2,821
|
$ 5,246
|
$ 8,067
|
||
Loans still accruing
|
2,493
|
285
|
506
|
3,284
|
491,112
|
494,396
|
||
Total
|
$ 2,566
|
$ 354
|
$ 3,185
|
$ 6,105
|
$ 496,358
|
$ 502,463
|
30-59 Days
|
60-89 Days
|
90 Days
|
Total Past
|
Total Financing
|
90 Days and
|
|||
2011
|
Past Due
|
Past Due
|
Or Greater
|
Due
|
Current
|
Receivables
|
Accruing
|
|
Real estate loans:
|
||||||||
Mortgages
|
$ 428
|
$ 91
|
$ 398
|
$ 917
|
$ 101,794
|
$ 102,711
|
$ 60
|
|
Home Equity
|
339
|
-
|
180
|
519
|
80,804
|
81,323
|
39
|
|
Commercial
|
319
|
412
|
2,794
|
3,525
|
162,301
|
165,826
|
176
|
|
Agricultural
|
143
|
-
|
-
|
143
|
19,081
|
19,224
|
-
|
|
Construction
|
-
|
-
|
-
|
-
|
8,481
|
8,481
|
-
|
|
Consumer
|
86
|
7
|
-
|
93
|
10,653
|
10,746
|
-
|
|
Other commercial loans
|
9
|
-
|
503
|
512
|
37,235
|
37,747
|
-
|
|
Other agricultural loans
|
-
|
-
|
-
|
-
|
6,552
|
6,552
|
-
|
|
State and political
|
||||||||
subdivision loans
|
-
|
-
|
-
|
-
|
54,899
|
54,899
|
-
|
|
Total
|
$ 1,324
|
$ 510
|
$ 3,875
|
$ 5,709
|
$ 481,800
|
$ 487,509
|
$ 275
|
|
Loans considered non-accrual
|
$ -
|
$ -
|
$ 3,600
|
$ 3,600
|
$ 5,565
|
$ 9,165
|
||
Loans still accruing
|
1,324
|
510
|
275
|
2,109
|
476,235
|
478,344
|
||
Total
|
$ 1,324
|
$ 510
|
$ 3,875
|
$ 5,709
|
$ 481,800
|
$ 487,509
|
2012
|
2011
|
|||
Real estate loans:
|
||||
Mortgages
|
$ 482
|
$ 413
|
||
Home Equity
|
181
|
141
|
||
Commercial
|
7,042
|
8,094
|
||
Agricultural
|
-
|
-
|
||
Construction
|
-
|
-
|
||
Consumer
|
-
|
-
|
||
Other commercial loans
|
362
|
517
|
||
Other agricultural loans
|
-
|
-
|
||
State and political subdivision
|
-
|
-
|
||
$ 8,067
|
$ 9,165
|
2012
|
Number of contracts
|
Pre-modification Outstanding Recorded Investment
|
Post-Modification Outstanding Recorded Investment
|
|||
Interest Modification
|
Term Modification
|
Interest Modification
|
Term Modification
|
Interest Modification
|
Term Modification
|
|
Real estate loans:
|
||||||
Residential mortgage
|
1
|
1
|
$ 48
|
$ 71
|
$ 48
|
$ 71
|
Commercial
|
-
|
3
|
-
|
160
|
-
|
160
|
Other commercial loans
|
-
|
1
|
-
|
25
|
-
|
25
|
Total
|
1
|
5
|
$ 48
|
$ 256
|
$ 48
|
$ 256
|
2011
|
Interest Modification
|
Term Modification
|
Interest Modification
|
Term Modification
|
Interest Modification
|
Term Modification
|
Real estate loans:
|
||||||
Residential
|
2
|
-
|
$ 76
|
$ -
|
$ 76
|
$ -
|
Commercial
|
5
|
1
|
5,912
|
47
|
5,912
|
47
|
Other commercial loans
|
1
|
-
|
15
|
-
|
15
|
-
|
Total
|
8
|
1
|
$ 6,003
|
$ 47
|
$ 6,003
|
$ 47
|
2012
|
2011
|
|||
Number of
contracts
|
Recorded
investment
|
Number of
contracts
|
Recorded
investment
|
|
Real estate loans:
|
||||
Commercial
|
1
|
$ 50
|
3
|
$ 150
|
Total recidivism
|
1
|
$ 50
|
3
|
$ 150
|
Balance at
December
31, 2011
|
Charge-offs
|
Recoveries
|
Provision
|
Balance at
December
31, 2011
|
Individually
evaluated for impairment
|
Collectively
evaluated for impairment
|
|
Real estate loans:
|
|||||||
Residential
|
$ 805
|
$ (95)
|
$ -
|
$ 165
|
$ 875
|
$ 22
|
$ 853
|
Commercial and agricultural
|
4,132
|
(2)
|
9
|
298
|
4,437
|
559
|
3,878
|
Construction
|
15
|
-
|
-
|
23
|
38
|
-
|
38
|
Consumer
|
111
|
(54)
|
33
|
29
|
119
|
-
|
119
|
Other commercial and agricultural loans
|
674
|
(21)
|
7
|
68
|
728
|
1
|
727
|
State and political
|
-
|
||||||
subdivision loans
|
235
|
-
|
-
|
36
|
271
|
-
|
271
|
Unallocated
|
515
|
-
|
-
|
(199)
|
316
|
-
|
316
|
Total
|
$ 6,487
|
$ (172)
|
$ 49
|
$ 420
|
$ 6,784
|
$ 582
|
$ 6,202
|
Balance at
December
31, 2010
|
Charge-offs
|
Recoveries
|
Provision
|
Balance at
December
31, 2011
|
Individually
evaluated for
impairment
|
Collectively
evaluated for impairment
|
|
Real estate loans:
|
|||||||
Residential
|
$ 969
|
$ (101)
|
$ -
|
$ (63)
|
$ 805
|
$ 13
|
$ 792
|
Commercial and agricultural
|
3,380
|
(29)
|
15
|
766
|
4,132
|
433
|
3,699
|
Construction
|
22
|
-
|
-
|
(7)
|
15
|
-
|
15
|
Consumer
|
108
|
(71)
|
57
|
17
|
111
|
-
|
111
|
Other commercial and agricultural loans
|
983
|
(6)
|
32
|
(335)
|
674
|
48
|
626
|
State and political
|
-
|
||||||
subdivision loans
|
137
|
-
|
-
|
98
|
235
|
-
|
235
|
Unallocated
|
316
|
-
|
-
|
199
|
515
|
-
|
515
|
Total
|
$ 5,915
|
$ (207)
|
$ 104
|
$ 675
|
$ 6,487
|
$ 494
|
$ 5,993
|
Balance at
December
31, 2009
|
Charge-offs
|
Recoveries
|
Provision
|
Balance at
December
31, 2010
|
Individually
evaluated for
impairment
|
Collectively
evaluated for impairment
|
|
Real estate loans:
|
|||||||
Residential
|
$ 801
|
$ (76)
|
$ 4
|
$ 240
|
$ 969
|
$ 21
|
$ 948
|
Commercial and agricultural
|
2,864
|
(124)
|
21
|
619
|
3,380
|
167
|
3,213
|
Construction
|
20
|
-
|
-
|
2
|
22
|
-
|
22
|
Consumer
|
131
|
(88)
|
79
|
(14)
|
108
|
-
|
108
|
Other commercial and agricultural loans
|
918
|
(120)
|
76
|
109
|
983
|
-
|
983
|
State and political subdivision loans
|
93
|
-
|
-
|
44
|
137
|
-
|
137
|
Unallocated
|
61
|
-
|
-
|
255
|
316
|
-
|
316
|
Total
|
$ 4,888
|
$ (408)
|
$ 180
|
$ 1,255
|
$ 5,915
|
$ 188
|
$ 5,727
|
·
|
The qualitative factors for changes in levels of and trends in delinquencies and impaired/classified loans were increased for residential real estate loans and other commercial loans due to increases in the amount of loans past due.
|
·
|
The qualitative factor for changes in the quality of the loan review system was increased for all portfolio types due to personnel changes.
|
·
|
The qualitative factor for changes in values of underlying collateral was decreased for residential and commercial real estate loans as flooding experienced in our primary market area of north central Pennsylvania at the end of 2011 was not as severe as estimated for the year ended December 31, 2011.
|
·
|
The qualitative factor for changes in unemployment rates was increased for all loan types due to rising unemployment rates in the Bank’s primary market during 2012.
|
·
|
The qualitative factor for the existence and effect of any credit concentrations and changes in the level of such concentrations was increased for commercial real estate loans and other commercial loans due to the increased size of these loans in regards to the Company’s loan portfolio.
|
·
|
Separate factors were created for special mention, substandard and doubtful loans for each qualitative factor reviewed to more accurately reflect the risks inherent in the Bank’s loan portfolio.
|
·
|
The qualitative factors for changes in levels of and trends in delinquencies, impaired/classified loans were decreased for all loans portfolio types due to the decreases in nonaccrual loans and total past due loans.
|
·
|
The qualitative factors for changes in the trends of charge-offs and recoveries were decreased for residential, consumer loans, commercial and agricultural loans due to reduced net charge-offs in 2011.
|
·
|
The qualitative factors for changes in portfolio volumes were reduced for agricultural loans due to the decreased size of the portfolio in relation to the total portfolio.
|
·
|
The qualitative factor for changes in values of underlying collateral was increased for residential and commercial real estate loans due to flooding that occurred in our primary market area of north central Pennsylvania. The Company is continuing to monitor the impact, if any, this will have on the loan portfolio.
|
·
|
The qualitative factor for the existence and effect of any credit concentrations and changes in the level of such concentrations was increased for municipal loans and commercial loans due to the increased size of these loans in regards to the Company’s loan portfolio, while this factor was reduced for agricultural loans.
|
2012
|
2011
|
|
Land
|
$ 3,278
|
$ 3,278
|
Buildings
|
12,448
|
12,313
|
Furniture, fixtures and equipment
|
6,374
|
6,517
|
Construction in process
|
64
|
6
|
22,164
|
22,114
|
|
Less: accumulated depreciation
|
10,643
|
10,412
|
Premises and equipment, net
|
$ 11,521
|
$ 11,702
|
2012
|
2011
|
|
Beginning carrying amount
|
$ 3,619
|
$ 3,619
|
Add: amount related to acquisition
|
-
|
-
|
Gross carrying amount
|
$ 3,619
|
$ 3,619
|
Less: accumulated amortization
|
3,619
|
3,604
|
Net carrying amount
|
$ -
|
$ 15
|
2012
|
2011
|
|
Non-interest-bearing deposits
|
$ 89,494
|
$ 85,605
|
NOW accounts
|
201,804
|
200,897
|
Savings deposits
|
87,836
|
79,659
|
Money market deposit accounts
|
83,423
|
67,223
|
Certificates of deposit
|
274,539
|
300,609
|
Total
|
$ 737,096
|
$ 733,993
|
2013
|
$ 126,355
|
|
2014
|
62,274
|
|
2015
|
45,528
|
|
2016
|
19,372
|
|
2017
|
19,610
|
|
Thereafter
|
1,400
|
|
Total certificates of deposit
|
$ 274,539
|
Securities
|
|||||||
Sold Under
|
|
Total
|
|||||
Agreements to
|
FHLB
|
Federal Funds
|
FRB
|
Notes
|
Term
|
Borrowed
|
|
Repurchase(a)
|
Advances(b)
|
Line (c)
|
BIC Line (d)
|
Payable(e,f)
|
Loans(g)
|
Funds
|
|
2012
|
|||||||
Balance at December 31
|
$ 8,626
|
$ -
|
$ -
|
$ -
|
$ 7,500
|
$ 30,000
|
$ 46,126
|
Highest balance at any month-end
|
11,382
|
19,338
|
-
|
-
|
7,500
|
35,000
|
73,220
|
Average balance
|
9,765
|
3,135
|
-
|
1
|
7,500
|
32,077
|
52,478
|
Weighted average interest rate:
|
|||||||
Paid during the year
|
0.84%
|
0.25%
|
0.51%
|
0.75%
|
5.87%
|
3.14%
|
2.95%
|
As of year-end
|
0.87%
|
0.00%
|
0.00%
|
0.00%
|
5.87%
|
3.06%
|
3.10%
|
2011
|
|||||||
Balance at December 31
|
$ 11,382
|
$ -
|
$ -
|
$ -
|
$ 7,500
|
$ 35,000
|
$ 53,882
|
Highest balance at any month-end
|
11,382
|
-
|
-
|
-
|
7,500
|
39,000
|
57,882
|
Average balance
|
10,484
|
3
|
-
|
-
|
7,500
|
37,496
|
55,483
|
Weighted average interest rate:
|
|||||||
Paid during the year
|
0.82%
|
0.68%
|
1.53%
|
0.00%
|
5.87%
|
3.22%
|
3.13%
|
As of year-end
|
0.79%
|
0.00%
|
0.00%
|
0.00%
|
5.87%
|
3.13%
|
3.01%
|
December 31,
|
December 31,
|
||
Interest Rate
|
Maturity
|
2012
|
2011
|
Fixed:
|
|||
3.57%
|
May 7, 2012
|
$ -
|
$ 2,000
|
3.36%
|
May 9, 2012
|
-
|
2,000
|
3.89%
|
September 5, 2012
|
-
|
1,000
|
2.72%
|
March 31, 2013
|
1,150
|
1,150
|
2.58%
|
April 28, 2013
|
2,000
|
2,000
|
2.37%
|
May 5, 2013
|
2,000
|
2,000
|
3.75%
|
May 6, 2013
|
2,000
|
2,000
|
3.55%
|
May 9, 2013
|
2,000
|
2,000
|
2.26%
|
May 15, 2013
|
1,650
|
1,650
|
3.42%
|
December 2, 2013
|
5,000
|
5,000
|
3.52%
|
December 5, 2013
|
5,000
|
5,000
|
2.31%
|
January 27,2014
|
1,000
|
1,000
|
2.80%
|
April 17, 2014
|
3,200
|
3,200
|
2.29%
|
October 2, 2017
|
2,000
|
2,000
|
2.72%
|
July 12, 2018
|
1,000
|
1,000
|
3.52%
|
July 12, 2021
|
2,000
|
2,000
|
Total term loans
|
$ 30,000
|
$ 35,000
|
2013
|
$ 35,736
|
|
2014
|
4,200
|
|
2015
|
656
|
|
2016
|
534
|
|
2017
|
2,000
|
|
Thereafter
|
3,000
|
|
Total borrowed funds
|
$ 46,126
|
2012
|
2011
|
||||
Change in benefit obligation
|
|||||
Benefit obligation at beginning of year
|
$
|
8,387
|
$
|
7,637
|
|
Service cost
|
330
|
328
|
|||
Interest cost
|
344
|
402
|
|||
Actuarial gain
|
1,207
|
425
|
|||
Benefits paid
|
(251)
|
(405)
|
|||
Benefit obligation at end of year
|
10,017
|
8,387
|
|||
Change in plan assets
|
|||||
Fair value of plan assets at beginning of year
|
7,472
|
7,337
|
|||
Actual return on plan assets
|
790
|
35
|
|||
Employer contribution
|
750
|
505
|
|||
Benefits paid
|
(251)
|
(405)
|
|||
Fair value of plan assets at end of year
|
8,761
|
7,472
|
|||
Funded status
|
$
|
(1,256)
|
$
|
(915)
|
Amounts recognized in accumulated other
|
|||||
comprehensive loss consists of:
|
|||||
Net loss
|
$
|
3,375
|
$
|
2,570
|
|
Prior service cost
|
(357)
|
(400)
|
|||
Total
|
$
|
3,018
|
$
|
2,170
|
2012
|
|||
Projected benefit obligation
|
$
|
10,017
|
|
Accumulated benefit obligation
|
10,017
|
||
Fair value of plan assets
|
8,761
|
2012
|
2011
|
2010
|
|||||
Service cost
|
$
|
330
|
$
|
328
|
$
|
303
|
|
Interest cost
|
344
|
402
|
399
|
||||
Expected return on plan assets
|
(565)
|
(595)
|
(523)
|
||||
Net amortization and deferral
|
135
|
46
|
44
|
||||
Net periodic benefit cost
|
$
|
244
|
$
|
181
|
$
|
223
|
2012
|
2011
|
||||
Discount rate
|
3.30%
|
4.00%
|
|||
Rate of compensation increase
|
3.00%
|
3.00%
|
2012
|
2011
|
2010
|
|||||
Discount rate
|
4.00%
|
5.25%
|
5.75%
|
||||
Expected long-term return on plan assets
|
7.50%
|
8.00%
|
8.00%
|
||||
Rate of compensation increase
|
3.00%
|
3.00%
|
3.25%
|
2012
|
Level 1
|
Level II
|
Level III
|
Total
|
Allocation
|
|||||
Assets
|
||||||||||
Cash and cash equivalents
|
$ 525
|
$ -
|
$ -
|
$ 525
|
6.0%
|
|||||
Equity Securities
|
||||||||||
U.S. Companies
|
3,121
|
-
|
-
|
3,121
|
35.6%
|
|||||
Mutual Funds and ETF's (a)
|
3,058
|
-
|
-
|
3,058
|
34.9%
|
|||||
Corporate Bonds
|
-
|
1,149
|
-
|
1,149
|
13.1%
|
|||||
U.S. Agency Securities
|
-
|
908
|
-
|
908
|
10.4%
|
|||||
Total
|
$ 6,704
|
$ 2,057
|
$ -
|
$ 8,761
|
100.0%
|
|||||
2011
|
Level 1
|
Level II
|
Level III
|
Total
|
Allocation
|
|||||
Assets
|
||||||||||
Cash and cash equivalents
|
$ 208
|
$ -
|
$ -
|
$ 208
|
2.8%
|
|||||
Equity Securities
|
||||||||||
U.S. Companies
|
2,958
|
-
|
-
|
2,958
|
39.6%
|
|||||
Mutual Funds and ETF's (a)
|
1,797
|
-
|
-
|
1,797
|
24.0%
|
|||||
Corporate Bonds
|
-
|
1,273
|
-
|
1,273
|
17.0%
|
|||||
U.S. Agency Securities
|
-
|
1,086
|
-
|
1,086
|
14.5%
|
|||||
Certificate of deposit
|
150
|
-
|
-
|
150
|
2.1%
|
|||||
Total
|
$ 5,113
|
$ 2,359
|
$ -
|
$ 7,472
|
100.0%
|
(a)
|
This category comprises mutual funds investing in domestic large-cap, mid-caps, small caps, international large cap, emerging markets and commodities.
|
2013
|
$ 326
|
|
2014
|
636
|
|
2015
|
306
|
|
2016
|
570
|
|
2017
|
516
|
|
2018 - 2022
|
4,037
|
2012
|
2011
|
|||
Weighted
|
Weighted
|
|||
Average
|
Average
|
|||
Shares
|
Market Price
|
Shares
|
Market Price
|
|
Outstanding, beginning of year
|
9,921
|
$ 29.37
|
11,241
|
$ 22.79
|
Granted
|
4,132
|
37.68
|
4,268
|
37.16
|
Vested
|
(5,407)
|
25.92
|
(5,588)
|
22.08
|
Outstanding, end of year
|
8,646
|
$ 35.51
|
9,921
|
$ 29.37
|
Year Ended December 31,
|
|||
2012
|
2011
|
2010
|
|
Currently payable
|
$ 4,389
|
$ 3,512
|
$ 3,426
|
Deferred tax liability (asset)
|
(58)
|
98
|
(270)
|
Provision for income taxes
|
$ 4,331
|
$ 3,610
|
$ 3,156
|
2012
|
2011
|
|
Deferred tax assets:
|
||
Allowance for loan losses
|
$ 2,307
|
$ 2,206
|
Deferred compensation
|
544
|
563
|
Allowance for losses on available-for-sale securities
|
784
|
789
|
Pension and other retirement obligation
|
733
|
586
|
Unrealized loss on interest rate swap
|
68
|
118
|
Interest on non-accrual loans
|
720
|
572
|
Incentive plan accruals
|
323
|
84
|
Other
|
214
|
140
|
Total
|
$ 5,693
|
$ 5,058
|
Deferred tax liabilities:
|
||
Premises and equipment
|
$ (358)
|
$ (343)
|
Investment securities accretion
|
(302)
|
(354)
|
Loan fees and costs
|
(110)
|
(80)
|
Goodwill and core deposit intangibles
|
(2,126)
|
(1,828)
|
Low income housing tax credits
|
(20)
|
(36)
|
Mortgage servicing rights
|
(167)
|
(103)
|
Unrealized gains on available-for-sale securities
|
(3,480)
|
(3,406)
|
Total
|
(6,563)
|
(6,150)
|
Deferred tax liability, net
|
$ (870)
|
$ (1,092)
|
Year Ended December 31,
|
|||
2012
|
2011
|
2010
|
|
Provision at statutory rates on
|
|||
pre-tax income
|
$ 6,306
|
$ 5,590
|
$ 4,977
|
Effect of tax-exempt income
|
(1,853)
|
(1,844)
|
(1,607)
|
Low income housing tax credits
|
(57)
|
(96)
|
(164)
|
Bank owned life insurance
|
(172)
|
(169)
|
(171)
|
Nondeductible interest
|
87
|
107
|
113
|
Other items
|
20
|
22
|
8
|
Provision for income taxes
|
$ 4,331
|
$ 3,610
|
$ 3,156
|
Statutory tax rates
|
34%
|
34%
|
34%
|
Effective tax rates
|
23.4%
|
22.0%
|
21.5%
|
2012
|
2011
|
|
Net unrealized gain on securities available for sale
|
$ 10,234
|
$ 10,017
|
Tax effect
|
3,480
|
3,406
|
Net -of-tax amount
|
6,754
|
6,611
|
Unrealized loss on interest rate swap
|
(200)
|
(348)
|
Tax effect
|
(68)
|
(118)
|
Net -of-tax amount
|
(132)
|
(230)
|
Unrecognized pension costs
|
(3,017)
|
(2,170)
|
Tax effect
|
(1,026)
|
(738)
|
Net -of-tax amount
|
(1,991)
|
(1,432)
|
Total accumulated other comprehensive income
|
$ 4,631
|
$ 4,949
|
2012
|
2011
|
|
Balance, beginning of year
|
$ 4,056
|
$ 3,080
|
New loans
|
2,420
|
2,270
|
Repayments
|
(2,127)
|
(1,294)
|
Balance, end of year
|
$ 4,349
|
$ 4,056
|
2012
|
2011
|
||||
Total capital (to risk-weighted assets)
|
Amount
|
Ratio
|
Amount
|
Ratio
|
|
Company
|
$ 90,889
|
17.50%
|
$ 82,050
|
16.23%
|
|
For capital adequacy purposes
|
41,546
|
8.00%
|
40,432
|
8.00%
|
|
To be well capitalized
|
51,932
|
10.00%
|
50,540
|
10.00%
|
|
Tier I capital (to risk-weighted assets)
|
|||||
Company
|
$ 84,166
|
16.21%
|
$ 75,541
|
14.95%
|
|
For capital adequacy purposes
|
20,773
|
4.00%
|
20,216
|
4.00%
|
|
To be well capitalized
|
31,159
|
6.00%
|
30,324
|
6.00%
|
|
Tier I capital (to average assets)
|
|||||
Company
|
$ 84,166
|
9.70%
|
$ 75,541
|
8.83%
|
|
For capital adequacy purposes
|
34,692
|
4.00%
|
34,223
|
4.00%
|
|
To be well capitalized
|
43,366
|
5.00%
|
42,779
|
5.00%
|
2012
|
2011
|
||||
Total capital (to risk-weighted assets)
|
Amount
|
Ratio
|
Amount
|
Ratio
|
|
Bank
|
$ 87,215
|
16.84%
|
$ 77,051
|
15.29%
|
|
For capital adequacy purposes
|
41,425
|
8.00%
|
40,326
|
8.00%
|
|
To be well capitalized
|
51,781
|
10.00%
|
50,408
|
10.00%
|
|
Tier I capital (to risk-weighted assets)
|
|||||
Bank
|
$ 80,702
|
15.59%
|
$ 70,729
|
14.03%
|
|
For capital adequacy purposes
|
20,713
|
4.00%
|
20,163
|
4.00%
|
|
To be well capitalized
|
31,069
|
6.00%
|
30,245
|
6.00%
|
|
Tier I capital (to average assets)
|
|||||
Bank
|
$ 80,702
|
9.32%
|
$ 70,729
|
8.28%
|
|
For capital adequacy purposes
|
34,634
|
4.00%
|
34,166
|
4.00%
|
|
To be well capitalized
|
43,293
|
5.00%
|
42,708
|
5.00%
|
2012
|
2011
|
|
Commitments to extend credit
|
$82,645
|
$89,012
|
Standby letters of credit
|
5,208
|
3,832
|
2013
|
$ 127
|
2014
|
71
|
2015
|
60
|
2016
|
39
|
2017
|
39
|
Thereafter
|
306
|
Total
|
$ 642
|
Level I:
|
Quoted prices are available in active markets for identical assets or liabilities as of the reported date.
|
Level II:
|
Pricing inputs are other than quoted prices in active markets, which are either directly or indirectly observable as of the reported date. The nature of these assets and liabilities include items for which quoted prices are available but traded less frequently, and items that are fair valued using other financial instruments, the parameters of which can be directly observed.
|
Level III:
|
Assets and liabilities that have little to no pricing observability as of the reported date. These items do not have two-way markets and are measured using management’s best estimate of fair value, where the inputs into the determination of fair value require significant management judgment or estimation.
|
2012
|
Level 1
|
Level II
|
Level III
|
Total
|
|||||
Fair value measurements on a recurring basis:
|
|||||||||
Securities available for sale:
|
|||||||||
U.S. agency securities
|
$ -
|
$ 127,234
|
$ -
|
$ 127,234
|
|||||
U.S. treasuries
|
-
|
4,947
|
-
|
4,947
|
|||||
Obligations of state and
|
|||||||||
political subdivisions
|
-
|
100,875
|
-
|
100,875
|
|||||
Corporate obligations
|
-
|
22,109
|
-
|
22,109
|
|||||
Mortgage-backed securities in
|
|||||||||
government sponsored entities
|
-
|
53,673
|
-
|
53,673
|
|||||
Equity securities in financial institutions
|
1,414
|
-
|
-
|
1,414
|
|||||
Trust Preferred Interest Rate Swap
|
-
|
(200)
|
-
|
(200)
|
2011
|
Level 1
|
Level II
|
Level III
|
Total
|
|||||
Fair value measurements on a recurring basis:
|
|||||||||
Securities available for sale:
|
|||||||||
U.S. Agency securities
|
$ -
|
$ 168,600
|
$ -
|
$ 168,600
|
|||||
Obligations of state and
|
|||||||||
political subdivisions
|
-
|
101,547
|
-
|
101,547
|
|||||
Corporate obligations
|
-
|
8,460
|
-
|
8,460
|
|||||
Mortgage-backed securities in
|
|||||||||
government sponsored entities
|
-
|
38,974
|
-
|
38,974
|
|||||
Equity securities in financial institutions
|
1,242
|
-
|
-
|
1,242
|
|||||
Trust Preferred Interest Rate Swap
|
-
|
(348)
|
-
|
(348)
|
·
|
Impaired Loans - Loans for which it is probable that payment of interest and principal will not be made in accordance with the contractual terms of the loan agreement are considered impaired. Once a loan is identified as individually impaired, management measures impairment using one of several methods, including collateral value, liquidation value and discounted cash flows. Those impaired loans not requiring an allowance represent loans for which the fair value of the expected repayments or collateral exceed the recorded investments in such loans. Collateral values are estimated using Level 2 inputs based on observable market data or Level 3 inputs based on customized discounting criteria. For a majority of impaired real estate related loans, the Company obtains a current external appraisal. Other valuation techniques are used as well, including internal valuations, comparable property analysis and contractual sales information.
|
·
|
Other Real Estate owned – Other real estate owned, which is obtained through the Bank’s foreclosure process is valued utilizing the appraised collateral value. Collateral values are estimated using Level 2 inputs based on observable market data or Level 3 inputs based on customized discounting criteria. At the time, the foreclosure is completed, the Company obtains a current external appraisal.
|
December 31, 2012
|
|||||||||
Level 1
|
Level II
|
Level III
|
Total
|
||||||
Impaired Loans
|
$ -
|
$ -
|
$ 9,836
|
$ 9,836
|
|||||
Other real estate owned
|
-
|
-
|
616
|
616
|
|||||
December 31, 2011
|
|||||||||
Level 1
|
Level II
|
Level III
|
Total
|
||||||
Impaired Loans
|
$ -
|
$ -
|
$ 8,387
|
$ 8,387
|
|||||
Other real estate owned
|
-
|
-
|
860
|
860
|
Fair Value at December 31, 2012
|
Valuation Technique(s)
|
Unobservable input
|
Range
|
||
Impaired Loans
|
$ 4,882
|
Discounted Cash Flows
|
Probability of Default
|
0%
|
|
Change in interest rates
|
0-7%
|
||||
4,954
|
Appraised Collateral Values
|
Discount for time since appraisal
|
0-20%
|
||
Selling costs
|
0%-10%
|
||||
Holding period
|
0 - 18 months
|
||||
Other real estate owned
|
616
|
Appraised Collateral Values
|
Discount for time since appraisal
|
0-20%
|
|
Selling costs
|
6%-10%
|
||||
Holding period
|
0 - 18 months
|
Carrying
|
||||||
December 31, 2012
|
Amount
|
Fair Value
|
Level I
|
Level II
|
Level III
|
Total
|
Financial assets:
|
||||||
Cash and due from banks
|
$ 26,333
|
$ 26,333
|
$ 26,333
|
$ -
|
$ -
|
$ 26,333
|
Available-for-sale securities
|
310,252
|
310,252
|
1,414
|
308,838
|
-
|
310,252
|
Loans held for sale
|
1,458
|
1,458
|
1,458
|
1,458
|
||
Net loans
|
495,679
|
522,502
|
-
|
-
|
522,502
|
522,502
|
Bank owned life insurance
|
14,177
|
14,177
|
14,177
|
-
|
-
|
14,177
|
Regulatory stock
|
3,565
|
3,565
|
3,565
|
-
|
-
|
3,565
|
Accrued interest receivable
|
3,816
|
3,816
|
3,816
|
-
|
-
|
3,816
|
Financial liabilities:
|
||||||
Deposits
|
$ 737,096
|
$ 742,422
|
$ 462,557
|
$ -
|
$ 279,865
|
$ 742,422
|
Borrowed funds
|
46,126
|
43,403
|
-
|
43,403
|
-
|
43,403
|
Trust preferred interest rate swap
|
200
|
200
|
-
|
200
|
-
|
200
|
Accrued interest payable
|
1,143
|
1,143
|
1,143
|
-
|
-
|
1,143
|
Carrying
|
||
December 31, 2011
|
Amount
|
Fair Value
|
Financial assets:
|
||
Cash and cash equivalents
|
$ 30,432
|
$ 30,432
|
Available-for-sale securities
|
318,823
|
318,823
|
Net loans
|
481,022
|
527,724
|
Bank owned life insurance
|
13,669
|
13,669
|
Regulatory stock
|
3,301
|
3,301
|
Accrued interest receivable
|
3,621
|
3,621
|
Financial liabilities:
|
||
Deposits
|
$ 733,993
|
$ 740,839
|
Borrowed funds
|
53,882
|
51,437
|
Trust preferred interest rate swap
|
348
|
348
|
Accrued interest payable
|
1,512
|
1,512
|
CITIZENS FINANCIAL SERVICES, INC.
|
||
CONDENSED BALANCE SHEET
|
||
December 31,
|
||
(in thousands)
|
2012
|
2011
|
Assets:
|
||
Cash
|
$ 2,366
|
$ 3,609
|
Available-for-sale securities
|
1,286
|
1,154
|
Investment in subsidiary:
|
||
First Citizens Community Bank
|
93,363
|
84,136
|
Other assets
|
520
|
510
|
Total assets
|
$ 97,535
|
$ 89,409
|
Liabilities:
|
||
Other liabilities
|
$ 560
|
$ 441
|
Borrowed funds
|
7,500
|
7,500
|
Total liabilities
|
8,060
|
7,941
|
Stockholders' equity
|
89,475
|
81,468
|
Total liabilities and stockholders' equity
|
$ 97,535
|
$ 89,409
|
CITIZENS FINANCIAL SERVICES, INC.
|
|||
CONDENSED STATEMENT OF INCOME
|
|||
Year Ended December 31,
|
|||
(in thousands)
|
2012
|
2011
|
2010
|
Dividends from:
|
|||
Bank subsidiary
|
$ 5,045
|
$ 3,823
|
$ 3,608
|
Available-for-sale securities
|
51
|
42
|
34
|
Total dividends
|
5,096
|
3,865
|
3,642
|
Realized securities gains (losses)
|
58
|
(38)
|
-
|
Expenses
|
611
|
488
|
423
|
Income before equity in undistributed
|
|||
earnings of subsidiary
|
4,543
|
3,339
|
3,219
|
Equity in undistributed
|
|||
earnings - First Citizens Community Bank
|
9,672
|
9,493
|
8,283
|
Net income
|
$ 14,215
|
$ 12,832
|
$ 11,502
|
Comprehensive income
|
$ 13,897
|
$ 16,727
|
$ 10,515
|
CITIZENS FINANCIAL SERVICES, INC.
|
|||
STATEMENT OF CASH FLOWS
|
|||
Year Ended December 31,
|
|||
(in thousands)
|
2012
|
2011
|
2010
|
Cash flows from operating activities:
|
|||
Net income
|
$ 14,215
|
$ 12,832
|
$ 11,502
|
Adjustments to reconcile net income to net
|
|||
cash provided by operating activities:
|
|||
Equity in undistributed earnings of subsidiaries
|
(9,672)
|
(9,493)
|
(8,283)
|
Investment securities (gains) losses, net
|
(58)
|
38
|
-
|
Other, net
|
394
|
125
|
199
|
Net cash provided by operating activities
|
4,879
|
3,502
|
3,418
|
Cash flows from investing activities:
|
|||
Purchases of available-for-sale securities
|
(141)
|
(147)
|
(542)
|
Proceeds from the sale of available-for-sale securities
|
110
|
184
|
-
|
Net cash provided by (used in) investing activities
|
(31)
|
37
|
(542)
|
Cash flows from financing activities:
|
|||
Cash dividends paid
|
(4,601)
|
(3,148)
|
(3,162)
|
Purchase of treasury stock
|
(1,348)
|
(851)
|
(386)
|
Purchase of restricted stock
|
(142)
|
(159)
|
(9)
|
Net cash used in financing activities
|
(6,091)
|
(4,158)
|
(3,557)
|
Net decrease in cash
|
(1,243)
|
(619)
|
(681)
|
Cash at beginning of year
|
3,609
|
4,228
|
4,909
|
Cash at end of year
|
$ 2,366
|
$ 3,609
|
$ 4,228
|
(in thousands, except share data)
|
Three Months Ended,
|
|||
2012
|
Mar 31
|
Jun 30
|
Sep 30
|
Dec 31
|
Interest income
|
$ 9,637
|
$ 9,613
|
$ 9,474
|
$ 9,361
|
Interest expense
|
2,079
|
1,948
|
1,859
|
1,773
|
Net interest income
|
7,558
|
7,665
|
7,615
|
7,588
|
Provision for loan losses
|
105
|
105
|
105
|
105
|
Non-interest income
|
1,735
|
1,716
|
1,679
|
2,103
|
Investment securities gains, net
|
108
|
213
|
240
|
43
|
Non-interest expenses
|
4,855
|
4,565
|
4,932
|
4,945
|
Income before provision for income taxes
|
4,441
|
4,924
|
4,497
|
4,684
|
Provision for income taxes
|
992
|
1,171
|
1,033
|
1,135
|
Net income
|
$ 3,449
|
$ 3,753
|
$ 3,464
|
$ 3,549
|
Earnings Per Share Basic
|
$ 1.18
|
$ 1.29
|
$ 1.19
|
$ 1.22
|
Earnings Per Share Diluted
|
$ 1.18
|
$ 1.29
|
$ 1.19
|
$ 1.22
|
Three Months Ended,
|
||||
2011
|
Mar 31
|
Jun 30
|
Sep 30
|
Dec 31
|
Interest income
|
$ 9,469
|
$ 9,565
|
$ 9,613
|
$ 9,646
|
Interest expense
|
2,533
|
2,489
|
2,406
|
2,255
|
Net interest income
|
6,936
|
7,076
|
7,207
|
7,391
|
Provision for loan losses
|
225
|
150
|
150
|
150
|
Non-interest income
|
1,462
|
1,653
|
1,711
|
1,756
|
Investment securities gains (losses), net
|
120
|
114
|
117
|
(17)
|
Non-interest expenses
|
4,743
|
4,679
|
4,498
|
4,489
|
Income before provision for income taxes
|
3,550
|
4,014
|
4,387
|
4,491
|
Provision for income taxes
|
720
|
867
|
1,009
|
1,014
|
Net income
|
$ 2,830
|
$ 3,147
|
$ 3,378
|
$ 3,477
|
Earnings Per Share Basic
|
$ 0.96
|
$ 1.07
|
$ 1.15
|
$ 1.18
|
Earnings Per Share Diluted
|
$ 0.96
|
$ 1.07
|
$ 1.15
|
$ 1.18
|
Date: March 7, 2013
|
By:
|
/s/ Randall E. Black | |
Randall E. Black | |||
Chief Executive Officer and President
(Principal Executive Officer)
|
|||
Date: March 7, 2013
|
By:
|
/s/ Mickey L. Jones | |
Mickey L. Jones | |||
Treasurer
(Principal Financial & Accounting Officer)
|
|||
(a)
|
Disclosure Controls and Procedures
|
(b)
|
Internal Control Over Financial Reporting
|
|
Management’s annual report on internal control over financial reporting and the attestation report of the independent registered public accounting firm are incorporated herein by reference to Item 8 - the Company’s audited Consolidated Financial Statements in this Annual Report on Form 10-K
|
|
(c)
|
Changes to Internal Control Over Financial Reporting
|
(a)
|
Security Ownership of Certain Beneficial Owners Information required by this item is incorporated herein by reference to the section captioned “Stock Ownership” in the Company’s 2013 Proxy Statement.
|
(b)
|
Security Ownership of Management Information required by this item is incorporated herein by reference to the section captioned “Stock Ownership” in the Company’s 2013 Proxy Statement.
|
(c)
|
Changes in Control
|
(d)
|
Equity Compensation Plan Information
|
|
The following table sets forth information as of December 31, 2012 about Company common stock that may be issued under the Company’s 2006 Restricted Stock Plan. The plan was approved by the Company’s stockholders.
|
Plan Category
|
Number of
securities to be
issued upon the
exercise of
outstanding
options, warrants
and rights
|
Weighted-average
exercise price of
outstanding
options, warrants
and rights
|
Number of securities
remaining available
for future issuance
under equity
compensation plans
(excluding securities
reflected in the first
column)
|
|||
Equity compensation plans approved by security holders
|
n/a
|
n/a
|
70,783
|
|||
Equity compensation plans not approved by security holders
|
n/a
|
n/a
|
n/a
|
|||
Total
|
n/a
|
n/a
|
70,783
|
3.1
|
Articles of Incorporation of Citizens Financial Services, Inc., as amended(1)
|
|
3.2
|
Bylaws of Citizens Financial Services, Inc.(2)
|
|
4
|
Instrument defining the rights of security holders (3)
|
|
10.1
|
*Amended and Restated Executive Employment Agreement between Citizens Financial Services, Inc., First Citizens Community Bank and Randall E. Black(4)
|
|
10.2
|
*Citizens Financial Services, Inc. Directors’ Deferred Compensation Plan(5)
|
|
10.3
|
*Citizens Financial Services, Inc. Directors’ Life Insurance Program(6)
|
|
10.4
|
*Citizens Financial Services, Inc. 2006 Restricted Stock Plan(7)
|
|
10.5
|
*Form of Award Agreement for Citizens Financial Services, Inc. 2006 Restricted Stock Plan(8)
|
|
10.6
|
*Supplemental Executive Retirement Plan
|
|
10.7
|
*Change in Control Agreement, between First Citizens Community Bank, Citizens Financial Services, Inc. (as guarantor) and Terry B. Osborne (9)
|
|
10.8
|
*Change in Control Agreement, between First Citizens Community Bank, Citizens Financial Services, Inc. (as guarantor) and Mickey L. Jones (10)
|
|
10.9
|
*First Citizens Community Bank 2012 Annual Incentive Plan (11)
|
|
21
|
List of Subsidiaries
|
|
23
|
Consent of S.R. Snodgrass, A.C., Certified Public Accountants
|
|
31.1
|
Rule 13a-14(a)/15d-14(a) Certification of Chief Executive Officer
|
|
31.2
|
Rule 13a-14(a)/15d-14(a) Certification of Chief Financial Officer
|
|
32.1
|
Section 1350 Certification of Chief Executive Officer
|
32.2
|
Section 1350 Certification of Chief Financial Officer
|
|
101**
|
The following materials from the Company’s Annual Report on Form 10-K for the year ended December 31, 2012, formatted in XBRL (Extensible Business Reporting Language): (i) The Consolidated Balance Sheet, (ii) the Consolidated Statement of Income, (iii) the Consolidated Statement of Comprehensive Income, (iv) the Consolidated Statement of Changes in Stockholders’ Equity, (v) the Consolidated Statement of Cash Flows and (vi) related notes.
|
Citizens Financial Services, Inc.
(Registrant)
|
|||
Date: March 7, 2013
|
By:
|
/s/ Randall E. Black | |
Randall E. Black | |||
Chief Executive Officer and President | |||
|
Signature and Capacity | Date |
/s/ Randall E. Black
Randall E. Black, Chief Executive Officer, President and Director
(Principal Executive Officer)
|
March 7, 2013 |
/s/ R. Lowell Coolidge
R. Lowell Coolidge, Director
|
March 7, 2013 |
/s/ Rudolph J. van der Hiel
Rudolph J. van der Hiel, Director
|
March 7, 2013 |
/s/ Robert W. Chappell
Robert W. Chappell, Director
|
March 7, 2013 |
/s/ Mark L. Dalton
Mark L. Dalton, Director
|
March 7, 2013 |
/s/ R. Joseph Landy
R. Joseph Landy, Director
|
March 7, 2013 |
/s/ Roger C. Graham, Jr.
Roger C. Graham, Director
|
March 7, 2013 |
/s/ E. Gene Kosa
E. Gene Kosa, Director
|
March 7, 2013 |
/s/ Rinaldo A. DePaola
Rinaldo A. DePaola, Director
|
March 7, 2013 |
/s/ Thomas E. Freeman
Thomas E. Freeman, Director
|
March 7, 2013 |
/s/ Mickey L. Jones
Mickey L. Jones, Treasurer and Chief Financial Officer
(Principal Financial & Accounting Officer)
|
March 7, 2013 |
“Termination for Cause” and “Cause” shall mean (i) the willful failure by an Executive to substantially perform his duties hereunder (other than a failure resulting from the Executive’s incapacity because of physical or mental illness, after notice from the Bank and a failure to cure such violation within thirty (30) days of said notice; (ii) the willful engaging by an Executive in misconduct injurious to the Bank; (iii) the dishonesty or gross negligence of the Executive in the performance of his duties; (iv) the breach of the Executive’s fiduciary duty involving personal profit; (v) the material violation of any law, rule or regulation governing banks or bank officers or any final cease and desist order issued by a bank regulatory authority; (vi) conduct on the part of Executive which brings public discredit to the Bank; (vii) unlawful discrimination by the Executive, including harassment against Bank’s employees, customers, business associates, contractors, or visitors; (viii) theft or abuse by the Executive of the Bank’s property or the property of the Bank’s customers, employees, contractors, vendors, or business associates; (ix) failure of the Executive to follow the good faith lawful instructions of the Board of Directors of the Bank with respect to its operations, after notice from the Bank and a failure to cure such violation within thirty (30) days of said notice; (x) the direction or recommendation of a state or federal bank regulatory authority to remove the Executive’s position with the Bank as identified herein; (xi) any final removal or prohibition order to which the Executive is subject, by a federal banking agency pursuant to Sections 8(e) and 8(g) of the Federal Deposit Insurance Act; (xii) the Executive’s conviction of or plea of guilty or nolo contendere to a felony, crime of falsehood or a crime involving moral turpitude, or the actual incarceration of Executive; (xiii) any act of fraud, misappropriation or personal dishonesty; (xv) any act insubordination; (xiv) misrepresentation of a material fact, or omission of information necessary to make the information supplied not materially misleading, in an application or other information provided by the Executive to the Bank or any representative of the Bank in connection with the Executive’s employment with the Bank; (xvi) the existence of any material conflict between the interests of Bank and the Executive that is not disclosed in writing by the Executive to the Bank and approved in writing by the Board of Directors of Bank; or (xvii) the Executive takes action that is clearly contrary to the best interest of the Bank.
|
Vesting Schedule
|
||
Years of Vesting Service
|
Percent Vested
|
|
Less than 1
|
0%
|
|
1 but less than 2
|
33 1/3%
|
|
2 but less than 3
|
66 2/3%
|
|
3 or more
|
100%
|
|
|
|
Date: March 7, 2013 | By: | /s/ Randall E. Black |
|
||
By: Randall E. Black
Chief Executive Officer and President
(Principal Executive Officer)
|
|
|
|
Date: March 7, 2013 | By: | /s/ Mickey L. Jones |
|
||
By: Mickey L. Jones
Chief Financial Officer
(Principal Accounting Officer)
|
1.
|
The Report fully complies with the requirements of section 13(a) or 15 (d) of the Securities Exchange Act of 1934; and
|
2.
|
To my knowledge, the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company as of the dates and for the periods expressed in the Report.
|
|
|
|
Date: March 7, 2013 | By: | /s/ Randall E. Black |
|
||
By: Randall E. Black
Chief Executive Officer and President
(Principal Executive Officer)
|
1. |
The Report fully complies with the requirements of section 13(a) or 15 (d) of the Securities Exchange Act of 1934; and
|
2. |
To my knowledge, the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company as of the dates and for the periods expressed in the Report.
|
|
|
|
Date: March 7, 2013 | By: | /s/ Mickey L. Jones |
|
||
By: Mickey L. Jones
Chief Financial Officer
(Principal Financial Officer and
Principal Accounting Officer)
|
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OTHER COMPREHENSIVE INCOME (Tables)
|
12 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Dec. 31, 2012
|
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Other Comprehensive Income [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Components of Accumulated Other Comprehensive Income, Net of Tax | The components of accumulated other comprehensive income, net of tax, as of December 31, were as follows (in thousands):
|
RESTRICTIONS ON CASH AND DUE FROM BANKS (Details) (USD $)
|
Dec. 31, 2012
|
Dec. 31, 2011
|
---|---|---|
RESTRICTIONS ON CASH AND DUE FROM BANKS [Abstract] | ||
Cash reserves at the Federal Reserve Bank | $ 1,468,000 | $ 1,415,000 |
Cash FDIC insured amount, Maximum | $ 250,000 |
PREMISES & EQUIPMENT (Details) (USD $)
|
12 Months Ended | ||
---|---|---|---|
Dec. 31, 2012
|
Dec. 31, 2011
|
Dec. 31, 2010
|
|
Premises and Equipment [Line Items] | |||
Premises and equipment, gross | $ 22,164,000 | $ 22,114,000 | |
Less: accumulated depreciation | 10,643,000 | 10,412,000 | |
Premises and equipment, net | 11,521,000 | 11,702,000 | |
Depreciation expense | 606,000 | 649,000 | 669,000 |
Land [Member]
|
|||
Premises and Equipment [Line Items] | |||
Premises and equipment, gross | 3,278,000 | 3,278,000 | |
Buildings [Member]
|
|||
Premises and Equipment [Line Items] | |||
Premises and equipment, gross | 12,448,000 | 12,313,000 | |
Furniture, Fixtures and Equipment [Member]
|
|||
Premises and Equipment [Line Items] | |||
Premises and equipment, gross | 6,374,000 | 6,517,000 | |
Construction in Process [Member]
|
|||
Premises and Equipment [Line Items] | |||
Premises and equipment, gross | $ 64,000 | $ 6,000 |
CONSOLIDATED CONDENSED QUARTERLY DATA (UNAUDITED) (Tables)
|
12 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Dec. 31, 2012
|
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CONSOLIDATED CONDENSED QUARTERLY DATA (UNAUDITED) [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Consolidated condensed quarterly data |
|
PREMISES & EQUIPMENT (Tables)
|
12 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Dec. 31, 2012
|
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PREMISES & EQUIPMENT [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Summary of Premises and Equipment | Premises and equipment at December 31, 2012 and 2011 are summarized as follows (in thousands):
|
CORE DEPOSIT INTANGIBLE ASSETS (Details) (Core Deposits [Member], USD $)
|
12 Months Ended | ||
---|---|---|---|
Dec. 31, 2012
|
Dec. 31, 2011
|
Dec. 31, 2010
|
|
Core Deposits [Member]
|
|||
Core deposit intangible assets [Roll Forward] | |||
Beginning carrying amount | $ 3,619,000 | ||
Add: amount related to acquisition | 0 | 0 | |
Gross carrying amount | 3,619,000 | 3,619,000 | |
Less: accumulated amortization | 3,619,000 | 3,604,000 | |
Net carrying amount at end of period | 0 | 15,000 | |
Amortization expense | $ 15,000 | $ 17,000 | $ 17,000 |
OPERATING LEASES
|
12 Months Ended | |||||||||||||||||||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Dec. 31, 2012
|
||||||||||||||||||||||||||||||||||||
OPERATING LEASES [Abstract] | ||||||||||||||||||||||||||||||||||||
OPERATING LEASES | 17. OPERATING LEASES The following schedule shows future minimum rental payments under operating leases with noncancellable terms in excess of one year as of December 31, 2012 (in thousands):
The Company's operating lease obligations represent short and long-term lease and rental payments for facilities. Total rental expense for all operating leases for the years ended December 31, 2012, 2011 and 2010 were $152,000, $159,000 and $139,000, respectively. |
COMMITMENTS AND CONTINGENT LIABILITIES (Tables)
|
12 Months Ended | |||||||||||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Dec. 31, 2012
|
||||||||||||||||||||||||||||
COMMITMENTS AND CONTINGENT LIABILITIES [Abstract] | ||||||||||||||||||||||||||||
Financial instruments whose contract amounts represent credit risk | Financial instruments, whose contract amounts represent credit risk at December 31, 2012 and 2011, are as follows (in thousands):
|
EMPLOYEE BENEFIT PLANS (Tables)
|
12 Months Ended | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Dec. 31, 2012
|
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EMPLOYEE BENEFIT PLANS [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Obligation and net funded status | The following table sets forth the obligation and funded status as of December 31 (in thousands):
Amounts not yet recognized as a component of net periodic pension cost (in thousands)
|
|||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Accumulated benefit obligations in excess of plan assets | The accumulated benefit obligation for the defined benefit pension plan was $10,017,000 and $8,387,000 at December 31, 2012 and 2011, respectively. Information where the accumulated benefit obligation is in excess of plan assets at December 31, 2012 is as follows (in thousands):
|
|||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Components of net periodic benefit costs | The components of net periodic benefit costs for the periods ending December 31 are as follows (in thousands):
|
|||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Weighted-average assumptions used to determine benefit obligations and net periodic benefit cost | The weighted-average assumptions used to determine benefit obligations at December 31:
The weighted-average assumptions used to determine net periodic benefit cost for the year ended December 31:
|
|||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Fair value of plan assets | The long-term rate of return on plan assets gives consideration to returns currently being earned on plan assets as well as future rates expected to be earned. The investment objective is to maximize total return consistent with the interests of the participants and beneficiaries, and prudent investment management. The allocation of the pension plan assets is determined on the basis of sound economic principles and is continually reviewed in light of changes in market conditions. Asset allocation favors equity securities, with a target allocation of 50-70%. The target allocation for debt securities is 30-50%. At December 31, 2012, the pension plan had a sufficient cash and money market position in order to re-allocate the equity portfolio for diversification purposes and reduce risk in the total portfolio. The following table sets forth by level, within the fair value hierarchy as defined in footnote 17, the Plan's assets at fair value as of December 31, 2012 and 2011 (in thousands):
|
|||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Expected future benefit payments | The Bank expects to contribute $500,000 to its pension plan in 2013. Expected future benefit payments that the Bank estimates from its pension plan are as follows (in thousands):
|
|||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of vesting, awarding and forfeiting of restricted shares | The following table details the vesting, awarding and forfeiting of restricted shares during 2012 and 2011:
|
LOANS AND RELATED ALLOWANCE FOR LOAN LOSSES CREDIT QUALITY INDICATOR (Details) (USD $)
|
12 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Dec. 31, 2012
|
Dec. 31, 2011
|
Dec. 31, 2012
Minimum [Member]
|
Dec. 31, 2012
Real Estate Loans [Member]
Mortgages [Member]
|
Dec. 31, 2011
Real Estate Loans [Member]
Mortgages [Member]
|
Dec. 31, 2012
Real Estate Loans [Member]
Home Equity [Member]
|
Dec. 31, 2011
Real Estate Loans [Member]
Home Equity [Member]
|
Dec. 31, 2012
Consumer [Member]
|
Dec. 31, 2011
Consumer [Member]
|
Dec. 31, 2012
Pass [Member]
|
Dec. 31, 2011
Pass [Member]
|
Dec. 31, 2012
Pass [Member]
Real Estate Loans [Member]
Commercial [Member]
|
Dec. 31, 2011
Pass [Member]
Real Estate Loans [Member]
Commercial [Member]
|
Dec. 31, 2012
Pass [Member]
Real Estate Loans [Member]
Agricultural [Member]
|
Dec. 31, 2011
Pass [Member]
Real Estate Loans [Member]
Agricultural [Member]
|
Dec. 31, 2012
Pass [Member]
Real Estate Loans [Member]
Construction [Member]
|
Dec. 31, 2011
Pass [Member]
Real Estate Loans [Member]
Construction [Member]
|
Dec. 31, 2012
Pass [Member]
Other Commercial Loans [Member]
|
Dec. 31, 2011
Pass [Member]
Other Commercial Loans [Member]
|
Dec. 31, 2012
Pass [Member]
Other Agricultural Loans [Member]
|
Dec. 31, 2011
Pass [Member]
Other Agricultural Loans [Member]
|
Dec. 31, 2012
Pass [Member]
State and Political Subdivision Loans [Member]
|
Dec. 31, 2011
Pass [Member]
State and Political Subdivision Loans [Member]
|
Dec. 31, 2012
Special Mention [Member]
|
Dec. 31, 2011
Special Mention [Member]
|
Dec. 31, 2012
Special Mention [Member]
Real Estate Loans [Member]
Commercial [Member]
|
Dec. 31, 2011
Special Mention [Member]
Real Estate Loans [Member]
Commercial [Member]
|
Dec. 31, 2012
Special Mention [Member]
Real Estate Loans [Member]
Agricultural [Member]
|
Dec. 31, 2011
Special Mention [Member]
Real Estate Loans [Member]
Agricultural [Member]
|
Dec. 31, 2012
Special Mention [Member]
Real Estate Loans [Member]
Construction [Member]
|
Dec. 31, 2011
Special Mention [Member]
Real Estate Loans [Member]
Construction [Member]
|
Dec. 31, 2012
Special Mention [Member]
Other Commercial Loans [Member]
|
Dec. 31, 2011
Special Mention [Member]
Other Commercial Loans [Member]
|
Dec. 31, 2012
Special Mention [Member]
Other Agricultural Loans [Member]
|
Dec. 31, 2011
Special Mention [Member]
Other Agricultural Loans [Member]
|
Dec. 31, 2012
Special Mention [Member]
State and Political Subdivision Loans [Member]
|
Dec. 31, 2011
Special Mention [Member]
State and Political Subdivision Loans [Member]
|
Dec. 31, 2012
Substandard [Member]
|
Dec. 31, 2011
Substandard [Member]
|
Dec. 31, 2012
Substandard [Member]
Real Estate Loans [Member]
Commercial [Member]
|
Dec. 31, 2011
Substandard [Member]
Real Estate Loans [Member]
Commercial [Member]
|
Dec. 31, 2012
Substandard [Member]
Real Estate Loans [Member]
Agricultural [Member]
|
Dec. 31, 2011
Substandard [Member]
Real Estate Loans [Member]
Agricultural [Member]
|
Dec. 31, 2012
Substandard [Member]
Real Estate Loans [Member]
Construction [Member]
|
Dec. 31, 2011
Substandard [Member]
Real Estate Loans [Member]
Construction [Member]
|
Dec. 31, 2012
Substandard [Member]
Other Commercial Loans [Member]
|
Dec. 31, 2011
Substandard [Member]
Other Commercial Loans [Member]
|
Dec. 31, 2012
Substandard [Member]
Other Agricultural Loans [Member]
|
Dec. 31, 2011
Substandard [Member]
Other Agricultural Loans [Member]
|
Dec. 31, 2012
Substandard [Member]
State and Political Subdivision Loans [Member]
|
Dec. 31, 2011
Substandard [Member]
State and Political Subdivision Loans [Member]
|
Dec. 31, 2012
Doubtful [Member]
|
Dec. 31, 2011
Doubtful [Member]
|
Dec. 31, 2012
Doubtful [Member]
Real Estate Loans [Member]
Commercial [Member]
|
Dec. 31, 2011
Doubtful [Member]
Real Estate Loans [Member]
Commercial [Member]
|
Dec. 31, 2012
Doubtful [Member]
Real Estate Loans [Member]
Agricultural [Member]
|
Dec. 31, 2011
Doubtful [Member]
Real Estate Loans [Member]
Agricultural [Member]
|
Dec. 31, 2012
Doubtful [Member]
Real Estate Loans [Member]
Construction [Member]
|
Dec. 31, 2011
Doubtful [Member]
Real Estate Loans [Member]
Construction [Member]
|
Dec. 31, 2012
Doubtful [Member]
Other Commercial Loans [Member]
|
Dec. 31, 2011
Doubtful [Member]
Other Commercial Loans [Member]
|
Dec. 31, 2012
Doubtful [Member]
Other Agricultural Loans [Member]
|
Dec. 31, 2011
Doubtful [Member]
Other Agricultural Loans [Member]
|
Dec. 31, 2012
Doubtful [Member]
State and Political Subdivision Loans [Member]
|
Dec. 31, 2011
Doubtful [Member]
State and Political Subdivision Loans [Member]
|
Dec. 31, 2012
Loss [Member]
|
Dec. 31, 2011
Loss [Member]
|
Dec. 31, 2012
Loss [Member]
Real Estate Loans [Member]
Commercial [Member]
|
Dec. 31, 2011
Loss [Member]
Real Estate Loans [Member]
Commercial [Member]
|
Dec. 31, 2012
Loss [Member]
Real Estate Loans [Member]
Agricultural [Member]
|
Dec. 31, 2011
Loss [Member]
Real Estate Loans [Member]
Agricultural [Member]
|
Dec. 31, 2012
Loss [Member]
Real Estate Loans [Member]
Construction [Member]
|
Dec. 31, 2011
Loss [Member]
Real Estate Loans [Member]
Construction [Member]
|
Dec. 31, 2012
Loss [Member]
Other Commercial Loans [Member]
|
Dec. 31, 2011
Loss [Member]
Other Commercial Loans [Member]
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Dec. 31, 2012
Loss [Member]
Other Agricultural Loans [Member]
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Dec. 31, 2011
Loss [Member]
Other Agricultural Loans [Member]
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Dec. 31, 2012
Loss [Member]
State and Political Subdivision Loans [Member]
|
Dec. 31, 2011
Loss [Member]
State and Political Subdivision Loans [Member]
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Dec. 31, 2012
Internally Assigned Grade [Member]
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Dec. 31, 2011
Internally Assigned Grade [Member]
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Dec. 31, 2012
Internally Assigned Grade [Member]
Real Estate Loans [Member]
Commercial [Member]
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Dec. 31, 2011
Internally Assigned Grade [Member]
Real Estate Loans [Member]
Commercial [Member]
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Dec. 31, 2012
Internally Assigned Grade [Member]
Real Estate Loans [Member]
Agricultural [Member]
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Dec. 31, 2011
Internally Assigned Grade [Member]
Real Estate Loans [Member]
Agricultural [Member]
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Dec. 31, 2012
Internally Assigned Grade [Member]
Real Estate Loans [Member]
Construction [Member]
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Dec. 31, 2011
Internally Assigned Grade [Member]
Real Estate Loans [Member]
Construction [Member]
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Dec. 31, 2012
Internally Assigned Grade [Member]
Other Commercial Loans [Member]
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Dec. 31, 2011
Internally Assigned Grade [Member]
Other Commercial Loans [Member]
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Dec. 31, 2012
Internally Assigned Grade [Member]
Other Agricultural Loans [Member]
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Dec. 31, 2011
Internally Assigned Grade [Member]
Other Agricultural Loans [Member]
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Dec. 31, 2012
Internally Assigned Grade [Member]
State and Political Subdivision Loans [Member]
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Dec. 31, 2011
Internally Assigned Grade [Member]
State and Political Subdivision Loans [Member]
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Dec. 31, 2012
Performing [Member]
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Dec. 31, 2011
Performing [Member]
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Dec. 31, 2012
Performing [Member]
Real Estate Loans [Member]
Mortgages [Member]
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Dec. 31, 2011
Performing [Member]
Real Estate Loans [Member]
Mortgages [Member]
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Dec. 31, 2012
Performing [Member]
Real Estate Loans [Member]
Home Equity [Member]
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Dec. 31, 2011
Performing [Member]
Real Estate Loans [Member]
Home Equity [Member]
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Dec. 31, 2012
Performing [Member]
Consumer [Member]
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Dec. 31, 2011
Performing [Member]
Consumer [Member]
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Dec. 31, 2012
Nonperforming [Member]
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Dec. 31, 2011
Nonperforming [Member]
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Dec. 31, 2012
Nonperforming [Member]
Real Estate Loans [Member]
Mortgages [Member]
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Dec. 31, 2011
Nonperforming [Member]
Real Estate Loans [Member]
Mortgages [Member]
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Dec. 31, 2012
Nonperforming [Member]
Real Estate Loans [Member]
Home Equity [Member]
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Dec. 31, 2011
Nonperforming [Member]
Real Estate Loans [Member]
Home Equity [Member]
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Dec. 31, 2012
Nonperforming [Member]
Consumer [Member]
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Dec. 31, 2011
Nonperforming [Member]
Consumer [Member]
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Financing Receivable, Recorded Investment [Line Items] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Percentage of dollar volume of commercial loan portfolio to be reviewed, minimum (in hundredths) | 60.00% | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Amount over which all relationships to be reviewed, minimum | $ 500,000 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Amount which is 90 days past due to be reviewed for all aggregate loan relationships, minimum | 100,000 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Financing Receivable by credit exposure [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Total | $ 188,639,000 | $ 194,780,000 | $ 106,548,000 | $ 102,711,000 | $ 71,532,000 | $ 81,323,000 | $ 10,559,000 | $ 10,746,000 | $ 277,785,000 | $ 254,366,000 | $ 149,892,000 | $ 138,409,000 | $ 13,690,000 | $ 14,628,000 | $ 12,011,000 | $ 8,481,000 | $ 39,239,000 | $ 34,606,000 | $ 4,833,000 | $ 4,509,000 | $ 58,120,000 | $ 53,733,000 | $ 11,417,000 | $ 15,796,000 | $ 7,616,000 | $ 10,372,000 | $ 2,386,000 | $ 2,412,000 | $ 0 | $ 0 | $ 826,000 | $ 2,203,000 | $ 589,000 | $ 809,000 | $ 0 | $ 0 | $ 24,547,000 | $ 22,550,000 | $ 19,127,000 | $ 17,045,000 | $ 1,939,000 | $ 2,184,000 | $ 0 | $ 0 | $ 1,555,000 | $ 921,000 | $ 838,000 | $ 1,234,000 | $ 1,088,000 | $ 1,166,000 | $ 75,000 | $ 17,000 | $ 75,000 | $ 0 | $ 0 | $ 0 | $ 0 | $ 0 | $ 0 | $ 17,000 | $ 0 | $ 0 | $ 0 | $ 0 | $ 0 | $ 0 | $ 0 | $ 0 | $ 0 | $ 0 | $ 0 | $ 0 | $ 0 | $ 0 | $ 0 | $ 0 | $ 0 | $ 0 | $ 313,824,000 | $ 292,729,000 | $ 176,710,000 | $ 165,826,000 | $ 18,015,000 | $ 19,224,000 | $ 12,011,000 | $ 8,481,000 | $ 41,620,000 | $ 37,747,000 | $ 6,260,000 | $ 6,552,000 | $ 59,208,000 | $ 54,899,000 | $ 187,640,000 | $ 194,127,000 | $ 105,822,000 | $ 102,238,000 | $ 71,263,000 | $ 81,143,000 | $ 10,555,000 | $ 10,746,000 | $ 999,000 | $ 653,000 | $ 726,000 | $ 473,000 | $ 269,000 | $ 180,000 | $ 4,000 | $ 0 |
OPERATING LEASES (Details) (USD $)
|
12 Months Ended | ||
---|---|---|---|
Dec. 31, 2012
|
Dec. 31, 2011
|
Dec. 31, 2010
|
|
Future minimum rental payments under operating leases [Abstract] | |||
2013 | $ 127,000 | ||
2014 | 71,000 | ||
2015 | 60,000 | ||
2016 | 39,000 | ||
2017 | 39,000 | ||
Thereafter | 306,000 | ||
Total | 642,000 | ||
Total rental expense | $ 152,000 | $ 159,000 | $ 139,000 |
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Details) (USD $)
|
3 Months Ended | 12 Months Ended | |||||||||
---|---|---|---|---|---|---|---|---|---|---|---|
Dec. 31, 2012
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Sep. 30, 2012
|
Jun. 30, 2012
|
Mar. 31, 2012
|
Dec. 31, 2011
|
Sep. 30, 2011
|
Jun. 30, 2011
|
Mar. 31, 2011
|
Dec. 31, 2012
|
Dec. 31, 2011
|
Dec. 31, 2010
|
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Business and Organization [Abstract] | |||||||||||
Number of full service banking offices | 17 | ||||||||||
Operating Segments [Abstract] | |||||||||||
Number of operating segments | 1 | ||||||||||
Cash and Cash Equivalents [Abstract] | |||||||||||
Interest-earning deposits maturity, Maximum for inclusion as cash equivalents | 90 days | ||||||||||
Investment Securities [Abstract] | |||||||||||
Number of classifications of investment securities | 3 | 3 | |||||||||
Held-to-maturity securities | $ 0 | $ 0 | $ 0 | $ 0 | |||||||
Trading securities | 0 | 0 | 0 | 0 | |||||||
Number of years significantly below cost to recognize an impairment | 1 year | ||||||||||
Allowance for Loan Losses [Abstract] | |||||||||||
Size of family properties, minimum | 1 | ||||||||||
Size of family properties, maximum | 4 | ||||||||||
Number of days past for loan to be considered impaired, Maximum | 90 days | ||||||||||
Goodwill [Abstract] | |||||||||||
Goodwill impairment loss | 0 | 0 | 0 | ||||||||
Derivative Financial Instruments [Abstract] | |||||||||||
Net gain or loss recognized in earnings | 0 | 0 | 0 | ||||||||
Computation of earnings per share [Abstract] | |||||||||||
Net income applicable to common stock | $ 3,549,000 | $ 3,464,000 | $ 3,753,000 | $ 3,449,000 | $ 3,477,000 | $ 3,378,000 | $ 3,147,000 | $ 2,830,000 | $ 14,215,000 | $ 12,832,000 | $ 11,502,000 |
Basic earnings per share computation: [Abstract] | |||||||||||
Weighted average common shares outstanding (in shares) | 2,911,885 | 2,943,028 | 2,952,041 | ||||||||
Earnings per share - basic (in dollars per share) | $ 1.22 | $ 1.19 | $ 1.29 | $ 1.18 | $ 1.18 | $ 1.15 | $ 1.07 | $ 0.96 | $ 4.88 | $ 4.36 | $ 3.90 |
Diluted earnings per share computation: [Abstract] | |||||||||||
Weighted average common shares outstanding for basic earnings per share (in shares) | 2,911,885 | 2,943,028 | 2,952,041 | ||||||||
Add: Dilutive effects of restricted stock (in shares) | 1,642 | 0 | 0 | ||||||||
Weighted average common shares outstanding for dilutive earnings per share (in shares) | 2,913,527 | 2,943,028 | 2,952,041 | ||||||||
Earnings per share - dilutive (in dollars per share) | $ 1.22 | $ 1.19 | $ 1.29 | $ 1.18 | $ 1.18 | $ 1.15 | $ 1.07 | $ 0.96 | $ 4.88 | $ 4.36 | $ 3.90 |
Restricted Stock [Member]
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Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items] | |||||||||||
Antidilutive restricted stock excluded from net income per share calculations (in shares) | 2,621 | 9,921 | 11,241 | ||||||||
Minimum [Member]
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Allowance for Loan Losses [Abstract] | |||||||||||
Number of days past for loan to be considered impaired, Maximum | 90 days | ||||||||||
Minimum [Member] | Core Deposits [Member]
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Finite-Lived Intangible Assets [Line Items] | |||||||||||
Useful Life | 3 years | ||||||||||
Maximum [Member] | Core Deposits [Member]
|
|||||||||||
Finite-Lived Intangible Assets [Line Items] | |||||||||||
Useful Life | 5 years 6 months | ||||||||||
Furniture, Fixtures and Equipment [Member] | Minimum [Member]
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Premises and Equipment [Line Items] | |||||||||||
Useful life | 3 years | ||||||||||
Furniture, Fixtures and Equipment [Member] | Maximum [Member]
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Premises and Equipment [Line Items] | |||||||||||
Useful life | 15 years | ||||||||||
Building Premises [Member] | Minimum [Member]
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Premises and Equipment [Line Items] | |||||||||||
Useful life | 5 years | ||||||||||
Building Premises [Member] | Maximum [Member]
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Premises and Equipment [Line Items] | |||||||||||
Useful life | 40 years | ||||||||||
Open End Loans [Member]
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Loans to be Charged Off [Line Items] | |||||||||||
Number of days past due before charge-off | 180 days | ||||||||||
Closed End Loans [Member]
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Loans to be Charged Off [Line Items] | |||||||||||
Number of days past due before charge-off | 120 days | ||||||||||
All Other Loans [Member]
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Loans to be Charged Off [Line Items] | |||||||||||
Number of days past due before charge-off | 90 days |
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
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12 Months Ended | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Dec. 31, 2012
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SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES | 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Business and Organization Citizens Financial Services, Inc. (individually and collectively, the "Company"), is headquartered in Mansfield, Pennsylvania, and provides a full range of banking and related services through its wholly owned subsidiary, First Citizens Community Bank (the "Bank"), and its wholly owned subsidiary, First Citizens Insurance Agency, Inc. During 2012, the Bank converted form a national bank to a Pennsylvania-state chartered bank and trust company, which resulted in a name change from First Citizens National Bank. As of December 31, 2012, the Bank operates seventeen full-service banking branches in Potter, Tioga and Bradford counties, Pennsylvania and Allegany County, New York and loan production offices in Clinton and Luzerne Counties in Pennsylvania. The Bank also provides trust services, including the administration of trusts and estates, retirement plans, and other employee benefit plans, along with a brokerage division that provides a comprehensive menu of investment services. The Bank serves individual and corporate customers and is subject to competition from other financial institutions and intermediaries with respect to these services. The Company and Bank are supervised by the Board of Governors of the Federal Reserve System, while the Bank is subject to additional regulation and supervision by the Pennsylvania Department of Banking. A summary of significant accounting and reporting policies applied in the presentation of the accompanying financial statements follows: Basis of Presentation The financial statements are consolidated to include the accounts of the Company and its subsidiary, First Citizens Community Bank, and its subsidiary, First Citizens Insurance Agency, Inc. These statements have been prepared in accordance with U.S. generally accepted accounting principles. All significant inter-company accounts and transactions have been eliminated in the consolidated financial statements. In preparing the financial statements, management makes estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenues and expenses for the period. Actual results could differ significantly from those estimates. Material estimates that are particularly susceptible to significant change relate to determination of the allowance for loan losses and deferred tax assets and liabilities. Operating Segments An operating segment is defined as a component of an enterprise that engages in business activities that generates revenue and incurs expense, and the operating results of which are reviewed by the chief operating decision maker in the determination of resource allocation and performance. While the Company's chief decision makers monitor the revenue streams of the various Company's products and services, operations are managed and financial performance is evaluated on a Company-wide basis. Consistent with our internal reporting, the Company's business activities are reported as one segment, which is community banking. Cash and Cash Equivalents Cash equivalents include cash on hand, deposits in banks and interest-earning deposits. Interest-earning deposits with original maturities of 90 or less are considered cash equivalents. Net cash flows are reported for loan, deposits and short term borrowing transactions. Investment Securities Investment securities at the time of purchase are classified as one of the three following types: Held-to-Maturity Securities - Includes securities that the Company has the positive intent and ability to hold to maturity. These securities are reported at amortized cost. The Company had no held-to-maturity securities as of December 31, 2012 and 2011. Trading Securities - Includes debt and equity securities bought and held principally for the purpose of selling them in the near term. Such securities are reported at fair value with unrealized holding gains and losses included in earnings. The Company had no trading securities as of December 31, 2012 and 2011. Available-for-Sale Securities - Includes debt and equity securities not classified as held-to-maturity or trading securities that will be held for indefinite periods of time. These securities may be sold in response to changes in market interest or prepayment rates, needs for liquidity and changes in the availability of and yield of alternative investments. Such securities are reported at fair value, with unrealized holding gains and losses excluded from earnings and reported as a separate component of stockholders' equity, net of estimated income tax effect. The amortized cost of investment in debt securities is adjusted for amortization of premiums and accretion of discounts, computed by a method that results in a level yield. Gains and losses on the sale of investment securities are computed on the basis of specific identification of the adjusted cost of each security. Securities are periodically reviewed for other-than-temporary impairment. For debt securities, management considers whether the present value of future cash flows expected to be collected are less than the security's amortized cost basis (the difference defined as the credit loss), the magnitude and duration of the decline, the reasons underlying the decline and the Company's intent to sell the security or whether it is more likely than not that the Company would be required to sell the security before its anticipated recovery in market value, to determine whether the loss in value is other than temporary. Once a decline in value is determined to be other than temporary, if the Company does not intend to sell the security, and it is more-likely-than-not that it will not be required to sell the security, before recovery of the security's amortized cost basis, the charge to earnings is limited to the amount of credit loss. Any remaining difference between fair value and amortized cost (the difference defined as the non-credit portion) is recognized in other comprehensive income, net of applicable taxes. Otherwise, the entire difference between fair value and amortized cost is charged to earnings. For equity securities where the fair value has been significantly below cost for one year, the Company's policy is to recognize an impairment loss unless sufficient evidence is available that the decline is not other than temporary and a recovery period can be predicted. A decline in value that is considered to be other-than-temporary is recorded as a loss within non-interest income in the consolidated statement of income. Common stock of the Federal Reserve Bank, Federal Home Loan Bank and correspondent banks represent ownership in institutions which are wholly owned by other financial institutions. These equity securities are accounted for at cost and are classified as other assets. The fair value of investments, except certain state and municipal securities, is based on bid prices published in financial newspapers or bid quotations received from securities dealers. The fair value of certain state and municipal securities is not readily available through market sources other than dealer quotations, so fair value is based on quoted market prices of similar instruments, adjusted for differences between the quoted instruments and the instruments being valued. Loans Interest on all loans is recognized on the accrual basis based upon the principal amount outstanding. The accrual of interest income on loans is discontinued when, in the opinion of management, doubt exists as to the ability to collect such interest. Payments received on non-accrual loans are applied to the outstanding principal balance or recorded as interest income, depending upon our assessment of our ultimate ability to collect principal and interest. Loans are returned to the accrual status when factors indicating doubtful collectability cease to exist. The Company recognizes nonrefundable loan origination fees and certain direct loan origination costs over the life of the related loan as an adjustment of loan yield using the interest method. Allowance For Loan Losses The allowance for loan losses represents the amount which management estimates is adequate to provide for probable losses inherent in its loan portfolio. The allowance method is used in providing for loan losses. Accordingly, all loan losses are charged to the allowance and all recoveries are credited to it. The allowance for loan losses is established through a provision for loan losses which is charged to operations. The provision is based upon management's periodic evaluation of individual loans, the overall risk characteristics of the various portfolio segments, past experience with losses, the impact of economic conditions on borrowers, and other relevant factors. The estimates used in determining the adequacy of the allowance for loan losses are particularly susceptible to significant change in the near term. Impaired loans are commercial, municipal, agricultural, commercial real estate loans and certain residential mortgages cross collateralized with commercial relationships for which it is probable that the Company will not be able to collect all amounts due according to the contractual terms of the loan agreement. The Company individually evaluates such loans for impairment and does not aggregate loans by major risk classifications. The definition of "impaired loans" is not the same as the definition of "non-accrual loans," although the two categories overlap. The Company may choose to place a loan on non-accrual status due to payment delinquency or uncertain collectability, while not classifying the loan as impaired if the loan is not a commercial, agricultural, municipal or commercial real estate loan. Factors considered by management in determining impairment include payment status and collateral value. The amount of impairment for these types of impaired loans is determined by the difference between the present value of the expected cash flows related to the loan, using the original interest rate, and its recorded value; or, as a practical expedient in the case of a collateral dependent loan, the difference between the fair value of the collateral and the recorded amount of the loans. Mortgage loans on one to four family properties and all consumer loans are large groups of smaller balance homogeneous loans and are measured for impairment collectively. Loans that experience insignificant payment delays, which is defined as 90 days or less, generally are not classified as impaired. Management determines the significance of payment delays on a case-by-case basis, taking into consideration all of the circumstances surrounding the loan and the borrower, including the length of the delay, the borrower's prior payment record, and the amount of shortfall in relation to the principal and interest owed. The Company allocates the allowance based on the factors described below, which conform to the Company's loan classification policy. In reviewing risk within the Bank's loan portfolio, management has determined there to be several different risk categories within the loan portfolio. The allowance for loan losses consists of amounts applicable to: (i) residential real estate loans; (ii) commercial and agricultural real estate loans; (iii) construction; (iv) consumer loans; (v) commercial and other loans and (vi) state and political subdivision loans. Factors considered in this process include general loan terms, collateral, and availability of historical data to support the analysis. Historical loss percentages for each risk category are calculated and used as the basis for calculating allowance allocations. Certain qualitative factors are evaluated to determine additional inherent risks in the loan portfolio, which are not necessarily reflected in the historical loss percentages. These factors are then added to the historical allocation percentage to get the adjusted factor to be applied to non classified loans. The following qualitative factors are analyzed:
The company also maintains an unallocated allowance to account for any factors or conditions that may cause a potential loss but are not specifically addressed in the process described above. The Company analyzes its loan portfolio each quarter to determine the appropriateness of its allowance for loan losses. Loan Charge-off Policies Consumer loans are generally fully or partially charged down to the fair value of collateral securing the asset when the loan is 180 days past due for open-end loans or 120 days past due for closed-end loans unless the loan is well secured and in the process of collection. All other loans are generally charged down to the net realizable value when the loan is 90 days past due. Troubled Debt Restructurings In situations where, for economic or legal reasons related to a borrower's financial difficulties, management may grant a concession for other than an insignificant period of time to the borrower that would not otherwise be considered, the related loan is classified as a Troubled Debt Restructuring (TDR). Management strives to identify borrowers in financial difficulty early and work with them to modify more affordable terms before their loan reaches nonaccrual status. These modified terms may include rate reductions, principal forgiveness, payment forbearance and other actions intended to minimize the economic loss and to avoid foreclosure or repossession of the collateral. In cases where borrowers are granted new terms that provide for a reduction of either interest or principal, management measures any impairment on the restructuring as noted above for impaired loans. In addition to the allowance for the pooled portfolios, management has developed a separate allowance for loans that are identified as impaired through a TDR. These loans are excluded from pooled loss forecasts and a separate reserve is provided under the accounting guidance for loan impairment. Foreclosed Assets Held For Sale Foreclosed assets acquired in settlement of loans are carried at fair value less estimated costs to sell. Prior to foreclosure, the value of the underlying loan is written down to fair market value of the real estate or other assets to be acquired by a charge to the allowance for loan losses, if necessary. Any subsequent write-downs are charged against operating expenses. Operating expenses of such properties, net of related income and losses on disposition, are included in other expenses and gains and losses are included in other non-interest income or other non-interest expense. Premises and Equipment Premises and equipment are stated at cost, less accumulated depreciation. Depreciation expense is computed on straight line and accelerated methods over the estimated useful lives of the assets, which range from 3 to 15 years for furniture, fixtures and equipment and 5 to 40 years for building premises. Repair and maintenance expenditures which extend the useful life of an asset are capitalized and other repair expenditures are expensed as incurred. When premises or equipment are retired or sold, the remaining cost and accumulated depreciation are removed from the accounts and any gain or loss is credited to income or charged to expense, respectively. Intangible Assets Intangible assets include core deposit intangibles, which are a measure of the value of consumer demand and savings deposits acquired in business combinations accounted for as purchases. The core deposit intangibles are being amortized from 3 to 5 ½ year life on a straight-line basis depending on the acquisition and are included in other assets. The recoverability of the carrying value of intangible assets is evaluated on an ongoing basis, and permanent declines in value, if any, are charged to expense. Goodwill The Company utilizes a two-step process for testing the impairment of goodwill on at least an annual basis. This approach could cause more volatility in the Company's reported net income because impairment losses, if any, could occur irregularly and in varying amounts. The Company performs an annual impairment analysis of goodwill. Based on the fair value of the reporting unit, no impairment of goodwill was recognized in 2012 or 2011. Bank Owned Life Insurance The Company has purchased life insurance policies on certain officers, and is the sole beneficiary on those policies. Bank owned life insurance is recorded at its cash surrender value, or the amount that can be realized. Increases in the cash surrender value are recognized as other non-interest income. Income Taxes The Company and the Bank file a consolidated federal income tax return. Deferred tax assets and liabilities are computed based on the difference between the financial statement basis and income tax basis of assets and liabilities using the enacted marginal tax rates. Deferred income tax expenses or benefits are based on the changes in the net deferred tax asset or liability from period to period. Employee Benefit Plans The Company has a noncontributory defined benefit pension plan covering employees hired before January 1, 2007. It is the Company's policy to fund pension costs on a current basis to the extent deductible under existing tax regulations. Such contributions are intended to provide not only for benefits attributed to service to date, but also for those expected to be earned in the future. The Company has a defined contribution, 401(k) plan covering eligible employees. The employee may also contribute to the plan on a voluntary basis, up to a maximum percentage allowable not to exceed the limits of Code Sections 401(k). Under the plan, the Company also makes contributions on behalf of eligible employees, which vest immediately. The Company also has a profit-sharing plan for employees which provide tax-deferred salary savings to plan participants. The Company has a deferred compensation plan for directors who have elected to defer all or portions of their fees until their retirement or termination from service. The Company has a restricted stock plan which covers eligible employees and non-employee corporate directors. Under the plan, awards are granted based upon performance related requirements and are subject to certain vesting criteria. Compensation cost related to restricted stock is recognized based on the market price of the stock at the grant date over the vesting period. The Company maintains a non-qualified supplemental executive retirement plan ("SERP") for certain executives to compensate those executive participants in the Company's noncontributory defined benefit pension plan whose benefits are limited by compensation limitations under current tax law. The SERP is considered an unfunded plan for tax and ERISA purposes and all obligations arising under the SERP are payable from the general assets of the Company. Expenses under the SERP are recognized as earned over the expected years of service. Mortgage Servicing Rights (MSR's) The Company originates certain loans for the express purpose of selling such loans in the secondary market. The Company maintains all servicing rights for these loans. The loans held for sale are carried at lower of cost or market. Originated MSR's are recorded by allocating total costs incurred between the loan and servicing rights based on their relative fair values. MSR's are amortized in proportion to the estimated servicing income over the estimated life of the servicing portfolio and measured for impairment. Derivative Financial Instruments The Company entered into an interest rate swap derivative to convert floating-rate debt to fixed-rate debt. The Company's interest rate swap agreement involves an agreement to pay a fixed rate and receive a floating rate, at specified intervals, calculated on an agreed-upon notional amount. The Company's objective in entering into this interest rate financial instrument is to mitigate its exposure to significant unplanned fluctuations in earnings caused by volatility in interest rates. As of December 31, 2012 and 2011, the derivative instrument entered into was designated as a hedge of underlying exposures. The Company does not use this instrument for trading or speculative purposes. Derivative instruments used by the Company involve, to varying degrees, elements of credit risk, in the event a counter party should default, and market risk, as the instruments are subject to interest rate fluctuations. Credit risk is managed through the use of counterparty diversification and monitoring of counterparty financial condition. All derivatives are recognized on the balance sheet at their fair value. To date, the derivative entered into by the Company qualifies for and is designated as a cash flow hedge. Changes in the fair value of a derivative that is highly effective, and that is designated and qualifies as a cash flow hedge to the extent that the hedge is effective, are recorded in other comprehensive income (loss) until earnings are affected by the variability of cash flows of the hedged transaction (e.g. until periodic settlements of a variable asset or liability are recorded in earnings). Any hedge ineffectiveness (which represents the amount by which the changes in the fair value of the derivative exceed the variability in the cash flows of the forecasted transaction) is recorded in current-period earnings. There was no net gain or loss recognized in earnings related to our derivative instruments during the years ended December 31, 2012, 2011 and 2010. Comprehensive Income The Company is required to present comprehensive income in a full set of general purpose financial statements for all periods presented. Other comprehensive income is comprised of unrealized holding gains (losses) on the available-for-sale securities portfolio, unrecognized pension costs, and unrealized gain (loss) on interest rate swap. Recent Accounting Pronouncements In July, 2012, the FASB issued ASU 2012-02, Intangibles – Goodwill and Other (Topic 350) – Testing Indefinite-Lived Intangible Assets for Impairment. ASU 2012-02 give entities the option to first assess qualitative factors to determine whether the existence of events or circumstances leads to a determination that it is more likely than not that an indefinite-lived intangible asset is impaired. If, after assessing the totality of events or circumstances, an entity determines it is more likely than not that an indefinite-lived intangible asset is impaired, then the entity must perform the quantitative impairment test. If, under the quantitative impairment test, the carrying amount of the intangible asset exceeds its fair value, an entity should recognize an impairment loss in the amount of that excess. Permitting an entity to assess qualitative factors when testing indefinite-lived intangible assets for impairment results in guidance that is similar to the goodwill impairment testing guidance in ASU 2011-08. ASU 2012-02 is effective for annual and interim impairment tests performed for fiscal years beginning after September 15, 2012 (early adoption permitted). This ASU is not expected to have a significant impact on the Company's financial statements. In October, 2012, the FASB issued ASU 2012-06, Business Combinations (Topic 805) - Subsequent Accounting for an Indemnification Asset Recognized at the Acquisition Date as a Result of a Government-Assisted Acquisition of a Financial Institution. ASU 2012-06 requires that when a reporting entity recognizes an indemnification asset (in accordance with Subtopic 805-20) as a result of a government assisted acquisition of a financial institution and subsequently a change in the cash flows expected to be collected on the indemnification asset occurs (as a result of a change in cash flows expected to be collected on the assets subject to indemnification), the reporting entity should subsequently account for the change in the measurement of the indemnification asset on the same basis as the change in the assets subject to indemnification. Any amortization of changes in value should be limited to the contractual term of the indemnification agreement (that is, the lesser of the term of the indemnification agreement and the remaining life of the indemnified assets). ASU 2012-06 is effective for fiscal years, and interim periods within those years, beginning on or after December 15, 2012. Early adoption is permitted. The amendments should be applied prospectively to any new indemnification assets acquired after the date of adoption and to indemnification assets existing as of the date of adoption arising from a government-assisted acquisition of a financial institution. This ASU is not expected to have a significant impact on the Company's financial statements. In February 2013, the FASB issued ASU 2013-02, Comprehensive Income (Topic 220): Reporting of Amounts Reclassified Out of Accumulated Other Comprehensive Income. The amendments in this Update require an entity to report the effect of significant reclassifications out of accumulated other comprehensive income on the respective line items in net income if the amount being reclassified is required under U.S. generally accepted accounting principles (GAAP) to be reclassified in its entirety to net income. For other amounts that are not required under U.S. GAAP to be reclassified in their entirety to net income in the same reporting period, an entity is required to cross-reference other disclosures required under U.S. GAAP that provide additional detail about those amounts. For public entities, the amendments are effective prospectively for reporting periods beginning after December 15, 2012. For nonpublic entities, the amendments are effective prospectively for reporting periods beginning after December 15, 2013. Early adoption is permitted. The Company is currently evaluating the impact that these disclosures will have on its financial statements. In January 2013, the FASB issued ASU 2013-01, Balance Sheet (Topic 210): Clarifying the Scope of Disclosures about Offsetting Assets and Liabilities. The amendments clarify that the scope of Update 2011-11 applies to derivatives accounted for in accordance with Topic 815, Derivatives and Hedging, including bifurcated embedded derivatives, repurchase agreements and reverse repurchase agreements, and securities borrowing and securities lending transactions that are either offset in accordance with Section 210-20-45 or Section 815-10-45 or subject to an enforceable master netting arrangement or similar agreement. An entity is required to apply the amendments for fiscal years beginning on or after January 1, 2013, and interim periods within those annual periods. An entity should provide the required disclosures retrospectively for all comparative periods presented. The effective date is the same as the effective date of Update 2011-11. The Company is currently evaluating the impact that these disclosures will have on its financial statements. Treasury Stock The purchase of the Company's common stock is recorded at cost. At the date of subsequent reissue, the treasury stock account is reduced by the cost of such stock on a last-in-first-out basis. Cash Flows The Company utilizes the net reporting of cash receipts and cash payments for deposit, short-term borrowing and lending activities. The Company considers amounts due from banks and interest-bearing deposits in banks as cash equivalents. Trust Assets and Income Assets held by the Company in a fiduciary or agency capacity for its customers are not included in the consolidated financial statements since such items are not assets of the Company. In accordance with industry practice, fees are recorded on the cash basis and approximate the fees which would have been recognized on the accrual basis. Earnings Per Share The following table sets forth the computation of earnings per share. Earnings per share calculations give retroactive effect to stock dividends declared by the Company.
For 2012, 2011 and 2010, 2,621, 9,921 and 11,241 shares, respectively, related to the restricted stock program were excluded from the diluted earnings per share calculations since they were anti-dilutive. Reclassification Certain of the prior year amounts have been reclassified to conform to the current year presentation. Such reclassifications had no effect on net income or stockholders' equity. |
INCOME TAXES (Details) (USD $)
|
12 Months Ended | ||
---|---|---|---|
Dec. 31, 2012
|
Dec. 31, 2011
|
Dec. 31, 2010
|
|
Provision for income taxes [Abstract] | |||
Currently payable | $ 4,389,000 | $ 3,512,000 | $ 3,426,000 |
Deferred tax liability (asset) | (58,000) | 98,000 | (270,000) |
Provision for income taxes | 4,331,000 | 3,610,000 | 3,156,000 |
Deferred tax assets [Abstract] | |||
Allowance for loan losses | 2,307,000 | 2,206,000 | |
Deferred compensation | 544,000 | 563,000 | |
Allowance for losses on available-for-sale securities | 784,000 | 789,000 | |
Pensions and other retirement obligation | 733,000 | 586,000 | |
Unrealized loss on interest rate swap | 68,000 | 118,000 | |
Interest on non-accrual loans | 720,000 | 572,000 | |
Incentive plan accruals | 323,000 | 84,000 | |
Other | 214,000 | 140,000 | |
Total | 5,693,000 | 5,058,000 | |
Deferred tax liabilities [Abstract] | |||
Premises and equipment | (358,000) | (343,000) | |
Investment securities accretion | (302,000) | (354,000) | |
Loan fees and costs | (110,000) | (80,000) | |
Goodwill and core deposit intangibles | (2,126,000) | (1,828,000) | |
Low income housing tax credits | (20,000) | (36,000) | |
Mortgage servicing rights | (167,000) | (103,000) | |
Unrealized gains on available-for-sale securities | (3,480,000) | (3,406,000) | |
Total | (6,563,000) | (6,150,000) | |
Deferred tax liability, net | (870,000) | (1,092,000) | |
Valuation allowance | 0 | 0 | |
Total provision for income taxes reconciliation [Abstract] | |||
Provision at statutory rates on pre-tax income | 6,306,000 | 5,590,000 | 4,977,000 |
Effect of tax-exempt income | (1,853,000) | (1,844,000) | (1,607,000) |
Low income housing tax credits | (57,000) | (96,000) | (164,000) |
Bank owned life insurance | (172,000) | (169,000) | (171,000) |
Nondeductible interest | 87,000 | 107,000 | 113,000 |
Other items | 20,000 | 22,000 | 8,000 |
Provision for income taxes | 4,331,000 | 3,610,000 | 3,156,000 |
Statutory tax rates (in hundredths) | 34.00% | 34.00% | 34.00% |
Effective tax rates (in hundredths) | 23.40% | 22.00% | 21.50% |
Minimum percentages of tax position liable to be realized upon ultimate settlement (in hundredths) | 50.00% | ||
Income Tax Uncertainties [Abstract] | |||
Liability for uncertain tax positions | 0 | 0 | |
Unrecognized tax benefits | $ 0 | $ 0 |