10-Q 1 a12-20066_110q.htm 10-Q

 

 

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 


 

FORM 10-Q

 


 

x

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE

 

 

SECURITIES EXCHANGE ACT OF 1934

 

 

For the quarterly period ended September 30, 2012

 


 

Commission file number 001-34096

 


 

BRIDGE BANCORP, INC.

(Exact name of registrant as specified in its charter)

 

NEW YORK

11-2934195

(State or other jurisdiction of incorporation or organization)

(IRS Employer Identification Number)

 

 

2200 MONTAUK HIGHWAY, BRIDGEHAMPTON, NEW YORK

11932

(Address of principal executive offices)

(Zip Code)

 

Registrant’s telephone number, including area code: (631) 537-1000

 

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.

Yes [X] No [  ]

 

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).

Yes [X] No [ ]

 

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company.  See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.  (Check one):

 

Large accelerated filer [  ]

 

Accelerated filer [X]

 

 

 

Non-accelerated filer [  ] (Do not check if a smaller reporting company)

 

Smaller reporting company [  ]

 

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes [  ] No [X]

 

There were 8,805,428 shares of common stock outstanding as of November 2, 2012.

 

 



 

 

BRIDGE BANCORP, INC.

 

PART I -

FINANCIAL INFORMATION

 

 

 

 

Item 1.

Financial Statements

3

 

 

 

 

Consolidated Balance Sheets as of September 30, 2012 and December 31, 2011

3

 

 

 

 

Consolidated Statements of Income for the Three and Nine Months Ended September 30, 2012 and 2011

4

 

 

 

 

Consolidated Statements of Comprehensive Income for the Three and Nine Months Ended September 30, 2012 and 2011

5

 

 

 

 

Consolidated Statements of Stockholders’ Equity for the Nine Months Ended September 30, 2012 and 2011

6

 

 

 

 

Consolidated Statements of Cash Flows for the Nine Months Ended September 30, 2012 and 2011

7

 

 

 

 

Condensed Notes to Consolidated Financial Statements

8

 

 

 

Item 2.

Management’s Discussion and Analysis of Financial Condition and Results of Operations

32

 

 

 

Item 3.

Quantitative and Qualitative Disclosures About Market Risk

50

 

 

 

Item 4.

Controls and Procedures

51

 

 

 

PART II -

OTHER INFORMATION

51

 

 

 

Item 1.

Legal Proceedings

51

 

 

 

Item 1A.

Risk Factors

51

 

 

 

Item 2.

Unregistered Sales of Equity Securities and Use of Proceeds

52

 

 

 

Item 3.

Defaults Upon Senior Securities

52

 

 

 

Item 4.

Mine Safety Disclosures

52

 

 

 

Item 5.

Other Information

52

 

 

 

Item 6.

Exhibits

52

 

 

 

Signatures

 

53

 

 



 

 

Item 1. Financial Statements

BRIDGE BANCORP, INC. AND SUBSIDIARIES

Consolidated Balance Sheets (unaudited)

(In thousands, except share and per share amounts)

 

 

 

September 30,

 

December 31,

 

 

 

2012

 

2011

 

ASSETS

 

 

 

 

 

Cash and due from banks

 

$

20,593

 

$

25,921

 

Interest earning deposits with banks

 

7,264

 

53,625

 

Total cash and cash equivalents

 

27,857

 

79,546

 

 

 

 

 

 

 

Securities available for sale, at fair value

 

560,790

 

441,439

 

Securities held to maturity (fair value of $216,083 and $170,952, respectively)

 

212,879

 

169,153

 

Total securities

 

773,669

 

610,592

 

 

 

 

 

 

 

Securities, restricted

 

2,978

 

1,660

 

 

 

 

 

 

 

Loans held for sale

 

 

2,300

 

 

 

 

 

 

 

Loans held for investments

 

732,471

 

612,143

 

Allowance for loan losses

 

(14,044

)

(10,837

)

Loans, net

 

718,427

 

601,306

 

 

 

 

 

 

 

Premises and equipment, net

 

25,320

 

24,171

 

Accrued interest receivable

 

5,412

 

4,940

 

Goodwill

 

2,034

 

2,034

 

Core deposit intangible

 

265

 

316

 

Other real estate owned

 

250

 

 

Other assets

 

9,896

 

10,593

 

Total Assets

 

$

1,566,108

 

$

1,337,458

 

 

 

 

 

 

 

LIABILITIES AND STOCKHOLDERS’ EQUITY

 

 

 

 

 

Demand deposits

 

$

412,736

 

$

321,496

 

Savings, NOW and money market deposits

 

737,219

 

683,863

 

Certificates of deposit of $100,000 or more

 

125,563

 

140,578

 

Other time deposits

 

39,329

 

42,248

 

Total deposits

 

1,314,847

 

1,188,185

 

 

 

 

 

 

 

Federal funds purchased and Federal Home Loan Bank overnight borrowings

 

62,000

 

 

Federal Home Loan Bank term advances

 

15,000

 

 

Repurchase agreements

 

13,093

 

16,897

 

Junior subordinated debentures

 

16,002

 

16,002

 

Accrued interest payable

 

212

 

319

 

Due to securities broker

 

17,874

 

 

Other liabilities and accrued expenses

 

10,764

 

9,068

 

Total Liabilities

 

1,449,792

 

1,230,471

 

 

 

 

 

 

 

Commitments and Contingencies

 

 

 

 

 

 

 

 

 

Stockholders’ equity:

 

 

 

 

 

Preferred stock, par value $.01 per share (2,000,000 shares authorized; none issued)

 

 

 

Common stock, par value $.01 per share:

 

 

 

 

 

Authorized: 20,000,000 shares; 8,721,132 and 8,374,917 shares issued, respectively; 8,709,994 and 8,345,399 shares outstanding, respectively

 

87

 

84

 

Surplus

 

59,969

 

52,962

 

Retained earnings

 

55,732

 

52,228

 

Less: Treasury Stock at cost, 11,138 and 29,518 shares, respectively

 

(229

)

(715

)

 

 

115,559

 

104,559

 

Accumulated other comprehensive income (loss):

 

 

 

 

 

Net unrealized gain on securities, net of deferred income taxes of ($2,669) and ($3,774), respectively

 

4,055

 

5,734

 

Pension liability, net of deferred income taxes of $2,119 and $2,205, respectively

 

(3,176

)

(3,306

)

Net unrealized loss on cash flow hedge, net of deferred income taxes of $81 and $0, respectively

 

(122

)

 

Total Stockholders’ Equity

 

116,316

 

106,987

 

Total Liabilities and Stockholders’ Equity

 

$

1,566,108

 

$

1,337,458

 

 

See accompanying condensed notes to the Unaudited Consolidated Financial Statements.

 

3



 

 

BRIDGE BANCORP, INC. AND SUBSIDIARIES

Consolidated Statements of  Income (unaudited)

(In thousands, except per share amounts)

 

 

 

For the

 

For the

 

 

 

Three Months Ended

 

Nine Months Ended

 

 

 

September 30,

 

September 30,

 

 

 

2012

 

2011

 

2012

 

2011

 

Interest income:

 

 

 

 

 

 

 

 

 

Loans (including fee income)

 

$

10,467

 

$

9,555

 

$

29,753

 

$

26,074

 

Mortgage-backed securities, CMOs and other asset-backed securities

 

1,710

 

2,281

 

5,793

 

6,982

 

State and municipal obligations

 

747

 

697

 

2,361

 

2,124

 

U.S. GSE securities

 

579

 

712

 

2,164

 

1,526

 

Corporate Bonds

 

153

 

177

 

473

 

550

 

Deposits with banks

 

28

 

32

 

70

 

91

 

Other interest and dividend income

 

23

 

17

 

68

 

53

 

Total interest income

 

13,707

 

13,471

 

40,682

 

37,400

 

 

 

 

 

 

 

 

 

 

 

Interest expense:

 

 

 

 

 

 

 

 

 

Savings, NOW and money market deposits

 

952

 

986

 

2,829

 

2,977

 

Certificates of deposit of $100,000 or more

 

360

 

354

 

1,113

 

841

 

Other time deposits

 

101

 

132

 

324

 

385

 

Federal funds purchased and repurchase agreements

 

97

 

136

 

323

 

405

 

Federal home loan bank advances

 

38

 

 

46

 

 

Junior subordinated debentures

 

341

 

341

 

1,024

 

1,025

 

Total interest expense

 

1,889

 

1,949

 

5,659

 

5,633

 

 

 

 

 

 

 

 

 

 

 

Net interest income

 

11,818

 

11,522

 

35,023

 

31,767

 

Provision for loan losses

 

600

 

1,450

 

3,925

 

3,050

 

Net interest income after provision for loan losses

 

11,218

 

10,072

 

31,098

 

28,717

 

 

 

 

 

 

 

 

 

 

 

Non interest income:

 

 

 

 

 

 

 

 

 

Service charges on deposit accounts

 

827

 

776

 

2,492

 

2,342

 

Fees for other customer services

 

854

 

761

 

2,179

 

1,816

 

Title fee income

 

344

 

200

 

1,037

 

667

 

Net securities gains

 

186

 

 

2,179

 

135

 

Other operating income

 

24

 

29

 

101

 

85

 

Total non interest income

 

2,235

 

1,766

 

7,988

 

5,045

 

 

 

 

 

 

 

 

 

 

 

Non interest expense:

 

 

 

 

 

 

 

 

 

Salaries and employee benefits

 

5,211

 

4,815

 

15,584

 

13,389

 

Net occupancy expense

 

828

 

798

 

2,423

 

2,303

 

Furniture and fixture expense

 

293

 

304

 

855

 

918

 

FDIC assessments

 

190

 

134

 

542

 

635

 

Acquisition costs

 

 

109

 

 

728

 

Amortization of core deposit intangible

 

16

 

16

 

51

 

24

 

Cost of extinguishment of debt

 

 

 

158

 

 

Other operating expenses

 

1,941

 

1,648

 

5,654

 

5,019

 

Total non interest expense

 

8,479

 

7,824

 

25,267

 

23,016

 

 

 

 

 

 

 

 

 

 

 

Income before income taxes

 

4,974

 

4,014

 

13,819

 

10,746

 

Income tax expense

 

1,614

 

1,241

 

4,457

 

3,337

 

Net income

 

$

3,360

 

$

2,773

 

$

9,362

 

$

7,409

 

Basic earnings per share

 

$

0.39

 

$

0.41

 

$

1.09

 

$

1.12

 

Diluted earnings per share

 

$

0.39

 

$

0.41

 

$

1.09

 

$

1.12

 

 

See accompanying condensed notes to the Unaudited Consolidated Financial Statements.

 

4



 

 

BRIDGE BANCORP, INC. AND SUBSIDIARIES

Consolidated Statements of Comprehensive Income (unaudited)

(In thousands)

 

 

 

For the

 

For the

 

 

 

Three Months Ended

 

Nine Months Ended

 

 

 

September 30,

 

September 30,

 

 

 

2012

 

2011

 

2012

 

2011

 

Net Income

 

$

3,360

 

$

2,773

 

$

9,362

 

$

7,409

 

Other comprehensive income (loss):

 

 

 

 

 

 

 

 

 

Change in unrealized net gains on securities available for sale, net of reclassification and deferred income tax effects

 

(91

)

1,631

 

(1,679

)

2,658

 

Adjustment to pension liability, net of deferred income taxes

 

43

 

20

 

130

 

62

 

Unrealized loss on cash flow hedge, net of deferred income taxes

 

(102

)

 

(122

)

 

Total other comprehensive income (loss)

 

(150

)

1,651

 

(1,671

)

2,720

 

Comprehensive income

 

$

3,210

 

$

4,424

 

$

7,691

 

$

10,129

 

 

See accompanying condensed notes to the Unaudited Consolidated Financial Statements.

 

5


 


 

 

BRIDGE BANCORP, INC. AND SUBSIDIARIES

Consolidated Statements of Stockholders’ Equity (unaudited)

(In thousands, except per share amounts)

 

 

 

Common
Stock

 

Surplus

 

Retained
Earnings

 

Treasury
Stock

 

Accumulated
Other
Comprehensive
Income

 

Total

 

Balance at January 1, 2012

 

$

84

 

$

52,962

 

$

52,228

 

$

(715

)

$

2,428

 

$

106,987

 

Net income

 

 

 

 

 

9,362

 

 

 

 

 

9,362

 

Shares issued under the dividend reinvestment plan (“DRP”)

 

3

 

6,561

 

 

 

 

 

 

 

6,564

 

Stock awards granted and distributed

 

 

 

(580

)

 

 

580

 

 

 

 

Stock awards forfeited

 

 

 

6

 

 

 

(6

)

 

 

 

Vesting of stock awards

 

 

 

 

 

 

 

(88

)

 

 

(88

)

Tax effect of stock plans

 

 

 

(10

)

 

 

 

 

 

 

(10

)

Share based compensation expense

 

 

 

1,030

 

 

 

 

 

 

 

1,030

 

Cash dividend declared, $0.69 per share

 

 

 

 

 

(5,858

)

 

 

 

 

(5,858

)

Other comprehensive income, net of deferred income taxes

 

 

 

 

 

 

 

 

 

(1,671

)

(1,671

)

Balance at September 30, 2012

 

$

87

 

$

59,969

 

$

55,732

 

$

(229

)

$

757

 

$

116,316

 

 

 

 

Common
Stock

 

Surplus

 

Retained
Earnings

 

Treasury
Stock

 

Accumulated
Other
Comprehensive
Income

 

Total

 

Balance at January 1, 2011

 

$

64

 

$

19,751

 

$

46,463

 

$

(2,325

)

$

1,767

 

$

65,720

 

Net income

 

 

 

 

 

7,409

 

 

 

 

 

7,409

 

Shares issued under the dividend reinvestment plan (“DRP”)

 

2

 

2,971

 

 

 

 

 

 

 

2,973

 

Shares issued in the acquisition of Hampton State Bank (273,479 shares)

 

3

 

5,847

 

 

 

 

 

 

 

5,850

 

Stock awards granted and distributed

 

 

 

(387

)

 

 

387

 

 

 

 

Stock awards forfeited

 

 

 

39

 

 

 

(39

)

 

 

 

Vesting of stock awards

 

 

 

 

 

 

 

(61

)

 

 

(61

)

Tax effect of stock plans

 

 

 

(1

)

 

 

 

 

 

 

(1

)

Share based compensation expense

 

 

 

774

 

 

 

 

 

 

 

774

 

Cash dividend declared, $0.46 per share

 

 

 

 

 

(3,029

)

 

 

 

 

(3,029

)

Other comprehensive income, net of deferred income taxes

 

 

 

 

 

 

 

 

 

2,720

 

2,720

 

Balance at September 30, 2011

 

$

69

 

$

28,994

 

$

50,843

 

$

(2,038

)

$

4,487

 

$

82,355

 

 

See accompanying condensed notes to the Unaudited Consolidated Financial Statements.

 

6



 

 

BRIDGE BANCORP, INC. AND SUBSIDIARIES

Consolidated Statements of Cash Flows (unaudited)

(In thousands)

 

 

 

For the

 

 

 

Nine Months Ended

 

 

 

September 30,

 

 

 

2012

 

2011

 

Cash flows from operating activities:

 

 

 

 

 

Net Income

 

$

9,362

 

$

7,409

 

Adjustments to reconcile net income to net cash provided by operating activities:

 

 

 

 

 

Provision for loan losses

 

3,925

 

3,050

 

Depreciation and amortization

 

1,313

 

1,370

 

Net amortization on securities

 

3,696

 

1,574

 

Amortization of core deposit intangible

 

51

 

24

 

Share based compensation expense

 

1,030

 

774

 

Net securities gains

 

(2,179

)

(135

)

Increase in accrued interest receivable

 

(472

)

(221

)

Decrease in other assets

 

244

 

1,083

 

Increase in accrued expenses and other liabilities

 

2,905

 

1,467

 

Net cash provided by operating activities

 

19,875

 

16,395

 

 

 

 

 

 

 

Cash flows from investing activities:

 

 

 

 

 

Purchases of securities available for sale

 

(388,698

)

(200,906

)

Purchases of securities, restricted

 

(16,325

)

(140

)

Purchases of securities held to maturity

 

(116,347

)

(69,315

)

Proceeds from sales of securities available for sale

 

67,077

 

14,084

 

Redemption of securities, restricted

 

15,007

 

225

 

Maturities, calls and principal payments of securities available for sale

 

211,802

 

150,726

 

Maturities, calls and principal payments of securities held to maturity

 

76,662

 

46,653

 

Net increase in loans

 

(119,321

)

(57,015

)

Proceeds from loan sale

 

575

 

 

Purchase of premises and equipment

 

(2,462

)

(1,625

)

Net cash acquired in business combination

 

 

2,309

 

Net cash used in investing activities

 

(272,030

)

(115,004

)

 

 

 

 

 

 

Cash flows from financing activities:

 

 

 

 

 

Net increase in deposits

 

126,662

 

181,602

 

Net increase (decrease) in federal funds purchased and FHLB overnight borrowings

 

62,000

 

(7,000

)

Net increase (decrease) in FHLB term advances

 

15,000

 

(5,016

)

Net (decrease) increase in repurchase agreements

 

(3,804

)

225

 

Net proceeds from issuance of common stock

 

6,564

 

2,973

 

Repurchase of surrendered stock from exercise of stock options and vesting of restricted stock awards

 

(88

)

(61

)

Excess tax expense from share based compensation

 

(10

)

(1

)

Cash dividends paid

 

(5,858

)

(4,496

)

Net cash provided by financing activities

 

200,466

 

168,226

 

 

 

 

 

 

 

Net (decrease) increase in cash and cash equivalents

 

(51,689

)

69,617

 

Cash and cash equivalents at beginning of period

 

79,546

 

22,918

 

Cash and cash equivalents at end of period

 

$

27,857

 

$

92,535

 

 

 

 

 

 

 

Supplemental Information-Cash Flows:

 

 

 

 

 

Cash paid for:

 

 

 

 

 

Interest

 

$

5,766

 

$

5,652

 

Income tax

 

$

2,985

 

$

2,644

 

 

 

 

 

 

 

Noncash investing and financing activities:

 

 

 

 

 

Securities which settled in the subsequent period

 

$

17,874

 

$

1,429

 

Financing of sale of loans held for sale

 

$

1,725

 

$

 

 

 

 

 

 

 

Acquisition of noncash assets and liabilities:

 

 

 

 

 

Fair value of assets acquired

 

$

 

$

66,566

 

Fair value of liabilities assumed

 

$

 

$

65,059

 

 

See accompanying condensed notes to the Unaudited Consolidated Financial Statements.

 

7



 

 

BRIDGE BANCORP, INC. AND SUBSIDIARIES

CONDENSED NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

(unaudited)

1. BASIS OF PRESENTATION

 

Bridge Bancorp, Inc. (the “Company”) is a bank holding company incorporated under the laws of the State of New York. The Company’s business currently consists of the operations of its wholly-owned subsidiary, The Bridgehampton National Bank (the “Bank”). The Bank’s operations include its real estate investment trust subsidiary, Bridgehampton Community, Inc. (“BCI”), and a financial title insurance subsidiary, Bridge Abstract LLC (“Bridge Abstract”). In addition to the Bank, the Company has another subsidiary Bridge Statutory Capital Trust II which was formed in 2009. In accordance with current accounting guidance, the trust is not consolidated in the Company’s financial statements.

 

The accompanying Unaudited Consolidated Financial Statements, which include the accounts of the Company and its wholly-owned subsidiary, the Bank, have been prepared in accordance with U.S. generally accepted accounting principles (“GAAP”) for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X. The Unaudited Consolidated Financial Statements included herein reflect all normal recurring adjustments that are, in the opinion of management, necessary for a fair presentation of the results for the interim periods presented. In preparing the interim financial statements, management has made estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenue and expense during the reported periods. Such estimates are subject to change in the future as additional information becomes available or previously existing circumstances are modified. Actual future results could differ significantly from those estimates. The annualized results of operations for the nine months ended September 30, 2012 are not necessarily indicative of the results of operations that may be expected for the entire fiscal year. Certain information and note disclosures normally included in the financial statements prepared in accordance with GAAP have been condensed or omitted pursuant to the rules and regulations of the Securities and Exchange Commission (the “SEC”). Certain reclassifications have been made to prior year amounts, and the related discussion and analysis, to conform to the current year presentation. These reclassifications did not have an impact on net income or total stockholders’ equity. The Unaudited Consolidated Financial Statements should be read in conjunction with the Audited Consolidated Financial Statements and notes thereto included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2011.

 

2. EARNINGS PER SHARE

 

Financial Accounting Standards Board Accounting Standards Codification (“FASB ASC”) No. 260-10-45 addresses whether instruments granted in share-based payment transactions are participating securities prior to vesting and, therefore, need to be included in the earnings allocation in computing earnings per share (“EPS”).  The restricted stock awards and restricted stock units granted by the Company contain nonforfeitable rights to dividends and therefore are considered participating securities.  The two-class method for calculating basic EPS excludes dividends paid to participating securities and any undistributed earnings attributable to participating securities.

 

The computation of EPS for the three and nine months ended September 30, 2012 and 2011 is as follows:

 

 

 

Three months ended,

 

Nine months ended,

 

 

 

September 30,

 

September 30,

 

(In thousands, except per share data)

 

2012

 

2011

 

2012

 

2011

 

Net Income

 

$

3,360

 

$

2,773

 

$

9,362

 

$

7,409

 

Less: Dividends paid on and earnings allocated to participating securities

 

(88

)

(79

)

(244

)

(217

)

Income attributable to common stock

 

$

3,272

 

$

2,694

 

$

9,118

 

$

7,192

 

 

 

 

 

 

 

 

 

 

 

Weighted average common shares outstanding, including participating securities

 

8,695

 

6,789

 

8,573

 

6,590

 

Less: weighted average participating securities

 

(226

)

(194

)

(225

)

(192

)

Weighted average common shares outstanding

 

8,469

 

6,595

 

8,348

 

6,398

 

Basic earnings per common share

 

$

0.39

 

$

0.41

 

$

1.09

 

$

1.12

 

 

 

 

 

 

 

 

 

 

 

Income attributable to common stock

 

$

3,272

 

$

2,694

 

$

9,118

 

$

7,192

 

 

 

 

 

 

 

 

 

 

 

Weighted average common shares outstanding

 

8,469

 

6,595

 

8,348

 

6,398

 

Weighted average common equivalent shares outstanding

 

1

 

1

 

1

 

1

 

Weighted average common and equivalent shares outstanding

 

8,470

 

6,596

 

8,349

 

6,399

 

Diluted earnings per common share

 

$

0.39

 

$

0.41

 

$

1.09

 

$

1.12

 

 

8



 

 

There were 49,737 and 52,123 options outstanding at September 30, 2012 and September 30, 2011, respectively, that were not included in the computation of diluted earnings per share because the options’ exercise prices were greater than the average market price of common stock and were, therefore, antidilutive. The $16.0 million in convertible trust preferred securities outstanding at September 30, 2012, were not included in the computation of diluted earnings per share because the assumed conversion of the trust preferred securities was antidilutive.

 

3. STOCK BASED COMPENSATION PLANS

 

The Compensation Committee of the Board of Directors determines stock options and restricted stock awarded under the Bridge Bancorp, Inc. Equity Incentive Plan (“Plan”) and the Company accounts for this Plan under the FASB ASC No. 718 and 505. On May 4, 2012, the stockholders of the Company approved the Company’s 2012 Stock-Based Incentive Plan. The plan provides for the grant of stock-based and other incentive awards to officers, employees and directors of the Company.

 

No new grants of stock options were awarded during the nine months ended September 30, 2012 and September 30, 2011.  There was no compensation expense attributable to stock options for the nine months ended September 30, 2012 and September 30, 2011, because all stock options were vested.

 

The intrinsic value for stock options is calculated based on the exercise price of the underlying awards and the market price of our common stock as of the reporting date.  No stock options were exercised during the first nine months of 2012 and 2011. The intrinsic value of options outstanding and exercisable at September 30, 2012 and September 30, 2011 was $16,000 and $6,000, respectively.

 

A summary of the status of the Company’s stock options as of and for the nine months ended September 30, 2012 is as follows:

 

 

 

 

 

 

 

Weighted

 

 

 

 

 

 

 

Weighted

 

Average

 

 

 

 

 

Number

 

Average

 

Remaining

 

Aggregate

 

 

 

of

 

Exercise

 

Contractual

 

Intrinsic

 

(Dollars in thousands, except per share amounts)

 

Options

 

Price

 

Life

 

Value

 

Outstanding, December 31, 2011

 

54,223

 

$

25.05

 

 

 

 

 

Granted

 

 

 

 

 

 

 

Exercised

 

 

 

 

 

 

 

Forfeited

 

(2,386

)

$

25.27

 

 

 

 

 

Expired

 

 

 

 

 

 

 

Outstanding, September 30, 2012

 

51,837

 

$

25.04

 

3.58 years   

 

$

16

 

Vested and Exercisable, September 30, 2012

 

51,837

 

$

25.04

 

3.58 years   

 

$

16

 

 

 

 

Number of

 

 

Exercise

 

 

 

 

 

 

Range of Exercise Prices

 

Options

 

 

Price

 

 

 

 

 

 

 

 

2,100

 

$

15.47

 

 

 

 

 

 

 

 

4,872

 

$

24.00

 

 

 

 

 

 

 

 

39,659

 

$

25.25

 

 

 

 

 

 

 

 

3,000

 

$

26.55

 

 

 

 

 

 

 

 

2,206

 

$

30.60

 

 

 

 

 

 

 

 

51,837

 

 

 

 

 

 

 

 

 

 

During the nine months ended September 30, 2012 and 2011, respectively, restricted stock awards of 21,993 and 13,688 shares were granted. These awards vest over approximately five years with a third vesting after years three, four and five. Compensation expense attributable to restricted stock awards was $292,000 and $912,000 for the three and nine months ended September 30, 2012, respectively, and $228,000 and $675,000 for the three and nine months ended September 30, 2011, respectively.

 

9



 

 

A summary of the status of the Company’s unvested restricted stock as of and for the nine months ended September 30, 2012 is as follows:

 

 

 

 

 

Weighted

 

 

 

 

 

Average Grant-Date

 

 

 

Shares

 

Fair Value

 

Unvested, December 31, 2011

 

211,371

 

$

21.56

 

Granted

 

21,993

 

$

19.82

 

Vested

 

(30,100

)

$

21.44

 

Forfeited

 

(230

)

$

22.06

 

Unvested, September 30, 2012

 

203,034

 

$

21.39

 

 

In April 2009, the Company adopted a Directors Deferred Compensation Plan. Under the Plan, independent directors may elect to defer all or a portion of their annual retainer fee in the form of restricted stock units. In addition, Directors receive a non-election retainer in the form of restricted stock units.  These restricted stock units vest ratably over one year and have dividend rights but no voting rights. In connection with this Plan, the Company recorded expenses of approximately $39,000 and $118,000 for the three and nine months ended September 30, 2012, respectively, and $34,000 and $99,000 for the three and nine months ended September 30, 2011, respectively.

 

4. SECURITIES

 

The following table summarizes the amortized cost and fair value of the available for sale and held to maturity investment securities portfolio at September 30, 2012 and December 31, 2011 and the corresponding amounts of unrealized gains and losses therein:

 

 

 

September 30, 2012

 

 

 

 

 

Gross

 

Gross

 

Estimated

 

 

 

Amortized

 

Unrealized

 

Unrealized

 

Fair

 

(In thousands)

 

Cost

 

Gains

 

Losses

 

Value

 

Available for sale:

 

 

 

 

 

 

 

 

 

U.S. GSE securities

 

$

150,215

 

$

1,249

 

$

(53

)

$

151,411

 

State and municipal obligations

 

69,250

 

1,390

 

(27

)

70,613

 

U.S. GSE residential mortgage-backed securities

 

24,107

 

1,733

 

 

25,840

 

U.S. GSE residential collateralized mortgage obligations

 

275,668

 

2,847

 

(626

)

277,889

 

U.S. GSE commercial collateralized mortgage obligations (1)

 

9,132

 

307

 

 

9,439

 

Non Agency commercial mortgage-backed securities

 

4,960

 

48

 

 

 

5,008

 

Other Asset backed securities

 

20,734

 

14

 

(158

)

20,590

 

Total available for sale

 

554,066

 

7,588

 

(864

)

560,790

 

 

 

 

 

 

 

 

 

 

 

Held to maturity:

 

 

 

 

 

 

 

 

 

U.S. GSE securities

 

4,992

 

47

 

 

5,039

 

State and municipal obligations

 

98,685

 

2,433

 

(39

)

101,079

 

U.S. GSE residential mortgage-backed securities

 

9,899

 

47

 

 

9,946

 

U.S. GSE residential collateralized mortgage obligations

 

61,152

 

848

 

(278

)

61,722

 

U.S. GSE commercial mortgage-backed securities

 

10,371

 

369

 

 

10,740

 

U.S. GSE commercial collateralized mortgage obligations

 

4,975

 

220

 

 

5,195

 

Corporate Bonds

 

22,805

 

137

 

(580

)

22,362

 

Total held to maturity

 

212,879

 

4,101

 

(897

)

216,083

 

Total securities

 

$

766,945

 

$

11,689

 

$

(1,761

)

$

776,873

 

 

10


 


 

 

 

 

December 31, 2011

 

 

 

 

 

Gross

 

Gross

 

Estimated

 

 

 

Amortized

 

Unrealized

 

Unrealized

 

Fair

 

(In thousands)

 

Cost

 

Gains

 

Losses

 

Value

 

Available for sale:

 

 

 

 

 

 

 

 

 

U.S. GSE securities

 

$

130,708

 

$

968

 

$

(2

)

$

131,674

 

State and municipal obligations

 

52,861

 

1,366

 

(8

)

54,219

 

U.S. GSE residential mortgage-backed securities

 

67,317

 

3,667

 

 

70,984

 

U.S. GSE residential collateralized mortgage obligations

 

175,878

 

3,493

 

(46

)

179,325

 

U.S. GSE commercial collateralized mortgage obligations (1)

 

5,167

 

70

 

 

5,237

 

Total available for sale

 

431,931

 

9,564

 

(56

)

441,439

 

 

 

 

 

 

 

 

 

 

 

Held to maturity:

 

 

 

 

 

 

 

 

 

State and municipal obligations

 

104,314

 

2,048

 

(5

)

106,357

 

U.S. GSE residential collateralized mortgage obligations

 

42,081

 

1,104

 

(21

)

43,164

 

Corporate Bonds

 

22,758

 

3

 

(1,330

)

21,431

 

Total held to maturity

 

169,153

 

3,155

 

(1,356

)

170,952

 

Total securities

 

$

601,084

 

$

12,719

 

$

(1,412

)

$

612,391

 

 

(1)        U.S. GSE commercial collateralized mortgage obligations represent securities with multi-family mortgage loans as the collateral.

 

The following table summarizes the amortized cost, fair value and maturities of the available for sale and held to maturity investment securities portfolio at September 30, 2012. Expected maturities will differ from contractual maturities because borrowers may have the right to call or prepay obligations with or without call or prepayment penalties.

 

 

 

September 30, 2012

 

 

 

Amortized

 

Fair

 

(In thousands)

 

Cost

 

Value

 

Maturity

 

 

 

 

 

Available for sale:

 

 

 

 

 

Within one year

 

$

21,185

 

$

21,261

 

One to five years

 

55,332

 

56,991

 

Five to ten years

 

137,666

 

139,072

 

Beyond ten years

 

339,883

 

343,466

 

Total

 

$

554,066

 

$

560,790

 

 

 

 

 

 

 

Held to maturity:

 

 

 

 

 

Within one year

 

$

46,758

 

$

46,798

 

One to five years

 

51,368

 

51,408

 

Five to ten years

 

22,556

 

23,526

 

Beyond ten years

 

92,197

 

94,351

 

Total

 

$

212,879

 

$

216,083

 

 

11



 

 

Securities with unrealized losses at September 30, 2012 and December 31, 2011, aggregated by category and length of time that individual securities have been in a continuous unrealized loss position, are as follows:

 

 

 

Less than 12 months

 

Greater than 12 months

 

September 30, 2012

 

 

 

Unrealized

 

 

 

Unrealized

 

(In thousands)

 

Fair Value

 

losses

 

Fair Value

 

losses

 

Available for sale:

 

 

 

 

 

 

 

 

 

U.S. GSE securities

 

$

27,928

 

$

53

 

$

 

$

 

State and municipal obligations

 

9,601

 

27

 

 

 

U.S. GSE residential collateralized mortgage obligations

 

81,896

 

626

 

 

 

Other Asset backed securities

 

7,831

 

158

 

 

 

 

 

Total available for sale

 

127,256

 

864

 

 

 

 

 

 

 

 

 

 

 

 

 

Held to maturity:

 

 

 

 

 

 

 

 

 

State and municipal obligations

 

22,136

 

39

 

 

 

U.S. GSE residential collateralized mortgage obligations

 

26,402

 

278

 

 

 

Corporate Bonds

 

 

 

17,419

 

580

 

Total held to maturity

 

$

48,538

 

$

317

 

$

17,419

 

$

580

 

 

 

 

Less than 12 months

 

Greater than 12 months

 

December 31, 2011

 

 

 

Unrealized

 

 

 

Unrealized

 

(In thousands)

 

Fair Value

 

losses

 

Fair Value

 

losses

 

Available for sale:

 

 

 

 

 

 

 

 

 

U.S. GSE securities

 

$

7,196

 

$

2

 

$

 

$

 

State and municipal obligations

 

4,283

 

8

 

 

 

U.S. GSE residential collateralized mortgage obligations

 

7,672

 

46

 

 

 

Total available for sale

 

$

19,151

 

$

56

 

$

 

$

 

 

 

 

 

 

 

 

 

 

 

Held to maturity:

 

 

 

 

 

 

 

 

 

State and municipal obligations

 

7,011

 

5

 

 

 

U.S. GSE residential collateralized mortgage obligations

 

4,810

 

21

 

 

 

Corporate Bonds

 

4,664

 

336

 

12,006

 

994

 

Total held to maturity

 

$

16,485

 

$

362

 

$

12,006

 

$

994

 

 

Other-Than-Temporary-Impairment

 

Management evaluates securities for other-than-temporary impairment (“OTTI”) at least on a quarterly basis, and more frequently when economic or market conditions warrant. The investment securities portfolio is evaluated for OTTI by segregating the portfolio into two general segments and applying the appropriate OTTI model. Investment securities classified as available for sale or held-to-maturity are generally evaluated for OTTI under FASB ASC 320, Accounting for Certain Investments in Debt and Equity Securities. In determining OTTI under the FASB ASC 320 model, management considers many factors, including: (1) the length of time and the extent to which the fair value has been less than cost, (2) the financial condition and near-term prospects of the issuer, (3) whether the market decline was affected by macroeconomic conditions, and (4) whether the Company has the intent to sell the debt security or more likely than not will be required to sell the debt security before its anticipated recovery. If either of the criteria regarding intent or requirement to sell is met, the entire difference between amortized cost and fair value is recognized as impairment through earnings. For debt securities that do not meet the aforementioned criteria, the amount of impairment is split into two components as follows: (1) OTTI related to credit loss, which must be recognized in the income statement and (2) OTTI related to other factors, which is recognized in other comprehensive income. The credit loss is defined as the difference between the present value of the cash flows expected to be collected and the amortized cost basis. The assessment of whether an other-than-temporary decline exists involves a high degree of subjectivity and judgment and is based on the information available to management at a point in time.

 

At September 30, 2012, the majority of unrealized losses on available for sale securities are related to the Company’s U.S. GSE residential collateralized mortgage obligations and the majority of unrealized losses on held to maturity securities are related to corporate bonds.  The decrease in fair value of the U.S. GSE residential collateralized mortgage obligations and the corporate bond portfolio is attributable to changes in interest rates and not credit quality.  Each issuer of corporate bonds has maintained their well capitalized status and continues to be reviewed periodically.  The Company does not have the intent to sell these securities and it is more likely than not that it will not be required to sell the securities before their anticipated recovery. Therefore, the Company does not consider these securities to be other-than-temporarily impaired at September 30, 2012.

 

12



 

 

Proceeds from sales of securities available for sale were $3.3 million for the three months ended September 30, 2012.  There were no proceeds from sales of securities available for sale for the three months ended September 30, 2011. Proceeds from sales of securities available for sale were $67.1 million and $14.1 million for the nine months ended September 30, 2012 and 2011, respectively. Gross gains of $0.2 million were realized on these sales during the three months ended September 30, 2012.  There were no gross gains realized on sales during the three months ended September 30, 2011. Gross gains of $2.2 million and $0.1 million were realized on these sales during the nine months ended September 30, 2012 and 2011, respectively. Proceeds from calls of securities were $44.5 million and $86.9 million for the three months ended September 30, 2012 and 2011, respectively. Proceeds from calls of securities were $153.0 million and $114.1 million for the nine months ended September 30, 2012 and 2011, respectively.

 

Securities having a fair value of approximately $299.4 million and $287.8 million at September 30, 2012 and December 31, 2011, respectively, were pledged to secure public deposits and Federal Home Loan Bank and Federal Reserve Bank overnight borrowings. The Bank did not hold any trading securities during the nine months ended September 30, 2012 or the year ended December 31, 2011.

 

The Bank is a member of the Federal Home Loan Bank (“FHLB”) of New York. Members are required to own a particular amount of stock based on the level of borrowings and other factors, and may invest in additional amounts.  The Bank is a member of the Atlantic Central Banker’s Bank (“ACBB”) and is required to own ACBB stock. The Bank is also a member of the Federal Reserve Bank (“FRB”) system and required to own FRB stock.  FHLB, ACBB and FRB stock is carried at cost and periodically evaluated for impairment based on ultimate recovery of par value.  Both cash and stock dividends are reported as income.  The Bank owned approximately $3.0 million in FHLB, ACBB and FRB stock at September 30, 2012 and approximately $1.7 million at December 31, 2011.  These amounts were reported as restricted securities in the consolidated balance sheets.

 

5. ESTIMATED FAIR VALUE OF FINANCIAL INSTRUMENTS

 

FASB ASC No. 820-10 defines fair value as the exchange price that would be received for an asset or paid to transfer a liability (exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. FASB ASC 820-10 also establishes a fair value hierarchy which requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. The standard describes three levels of inputs that may be used to measure fair values:

 

Level 1: Quoted prices (unadjusted) for identical assets or liabilities in active markets that the entity has the ability to access as of the measurement date.

 

Level 2: Significant other observable inputs other than Level 1 prices such as quoted prices for similar assets or liabilities; quoted prices in markets that are not active; or other inputs that are observable or can be corroborated by observable market data.

 

Level 3: Significant unobservable inputs that reflect a reporting entity’s own assumptions about the assumptions that market participants would use in pricing an asset or liability.

 

Investment Securities: The estimated fair values are based on independent dealer quotations on nationally recognized securities exchanges, if available (Level 1). For securities where quoted prices are not available, fair value is based on matrix pricing, which is a mathematical technique widely used in the industry to value debt securities without relying exclusively on quoted prices for the specific securities but rather by relying on the securities’ relationship to other benchmark quoted securities (Level 2).

 

Derivatives: Represents an interest rate swap and the estimated fair values are based on valuation models using observable market data as of measurement date (Level 2).

 

Impaired Loans:  At the time a loan is considered impaired, it is valued at the lower of cost or fair value.  For loans that are collateral dependent, the fair value of the collateral is used to determine the fair value of the loan. The fair value of the collateral is determined based upon recent appraised values. These appraisals may utilize a single valuation approach or a combination of approaches including comparable sales and the income approach. Adjustments are routinely made in the appraisal process by the independent appraisers to adjust for differences between the comparable sales and income data available. Adjustments may relate to location, square footage, condition, amenities, market rate of leases as well as timing of comparable sales. Such adjustments are generally capped at 15% of appraised value and typically result in a Level 3 classification of the inputs for determining fair value. The fair value of the loan is compared to the carrying value to determine if any write-down or specific reserve is required. Impaired loans are evaluated on a quarterly basis for additional impairment and adjusted accordingly.

 

Appraisals for collateral-dependent impaired loans are performed by certified general appraisers (for commercial properties) or certified residential appraisers (for residential properties) whose qualifications and licenses have been reviewed and verified by the Company.  Once received, the Credit Administration department reviews the assumptions and approaches utilized in the appraisal as

 

13



 

 

well as the overall resulting fair value in comparison with independent data sources such as recent market data or industry-wide statistics.  On a quarterly basis, the Company compares the actual selling price of collateral that has been sold to the most recent appraised value to determine what additional adjustment should be made to the appraisal value to arrive at fair value.  The most recent analysis performed indicated that a discount of 1-3% should be applied to residential properties with appraisals performed within 12 months and an appreciation of 3-17% should be applied to commercial properties with appraisals performed within 12 months.

 

Loans Held For Sale:  Loans held for sale are carried at the lower of cost or fair values.  The fair value of loans held for sale is determined using quoted prices for similar assets, adjusted for specific attributes of that loan or other observable market data, such as outstanding commitments from third party investors (Level 3).

 

Assets and liabilities measured on a recurring basis:

 

 

 

 

 

Fair Value Measurements at

 

 

 

 

 

September 30, 2012 Using:

 

 

 

 

 

 

 

Significant

 

 

 

 

 

 

 

Quoted Prices In

 

Other

 

Significant

 

 

 

 

 

Active Markets for

 

Observable

 

Unobservable

 

 

 

Carrying

 

Identical Assets

 

Inputs

 

Inputs

 

(In thousands)

 

Value

 

(Level 1)

 

(Level 2)

 

(Level 3)

 

Financial Assets:

 

 

 

 

 

 

 

 

 

Available for sale securities:

 

 

 

 

 

 

 

 

 

U.S. GSE securities

 

$

151,411

 

 

 

$

151,411

 

 

 

State and municipal obligations

 

70,613

 

 

 

70,613

 

 

 

U.S. GSE residential mortgage-backed securities

 

25,840

 

 

 

25,840

 

 

 

U.S. GSE residential collateralized mortgage obligations

 

277,889

 

 

 

277,889

 

 

 

U.S. GSE commercial collateralized mortgage obligations (1)

 

9,439

 

 

 

9,439

 

 

 

Non Agency commercial mortgage-backed securities

 

5,008

 

 

 

5,008

 

 

 

Other Asset backed securities

 

20,590

 

 

 

20,590

 

 

 

Total available for sale

 

$

560,790

 

 

 

$

560,790

 

 

 

 

 

 

 

 

 

 

 

 

 

Derivatives

 

$

(203

)

 

 

$

(203

)

 

 

 

 

 

 

 

Fair Value Measurements at

 

 

 

 

 

December 31, 2011 Using:

 

 

 

 

 

 

 

Significant

 

 

 

 

 

 

 

Quoted Prices In

 

Other

 

Significant

 

 

 

 

 

Active Markets for

 

Observable

 

Unobservable

 

 

 

Carrying

 

Identical Assets

 

Inputs

 

Inputs

 

(In thousands)

 

Value

 

(Level 1)

 

(Level 2)

 

(Level 3)

 

Financial Assets:

 

 

 

 

 

 

 

 

 

Available for sale securities:

 

 

 

 

 

 

 

 

 

U.S. GSE securities

 

$

131,674

 

 

 

$

131,674

 

 

 

State and municipal obligations

 

54,219

 

 

 

54,219

 

 

 

U.S. GSE residential mortgage-backed securities

 

70,984

 

 

 

70,984

 

 

 

U.S. GSE residential collateralized mortgage obligations

 

179,325

 

 

 

179,325

 

 

 

U.S. GSE commercial collateralized mortgage obligations (1)

 

5,237

 

 

 

5,237

 

 

 

Total available for sale

 

$

441,439

 

 

 

$

441,439

 

 

 

 

(1)        U.S. GSE commercial collateralized mortgage obligations represent securities with multi-family mortgage loans as the collateral.

 

14



 

 

Assets measured at fair value on a non-recurring basis are summarized below:

 

 

 

 

 

Fair Value Measurements at

 

 

 

 

 

September 30, 2012 Using:

 

 

 

 

 

 

 

Significant

 

 

 

 

 

 

 

Quoted Prices In

 

Other

 

Significant

 

 

 

 

 

Active Markets for

 

Observable

 

Unobservable

 

 

 

Carrying

 

Identical Assets

 

Inputs

 

Inputs

 

(In thousands)

 

Value

 

(Level 1)

 

(Level 2)

 

(Level 3)

 

Impaired loans

 

$

299

 

 

 

 

 

$

299

 

 

 

 

 

 

Fair Value Measurements at

 

 

 

 

 

December 31, 2011 Using:

 

 

 

 

 

 

 

Significant

 

 

 

 

 

 

 

Quoted Prices In

 

Other

 

Significant

 

 

 

 

 

Active Markets for

 

Observable

 

Unobservable

 

 

 

Carrying

 

Identical Assets

 

Inputs

 

Inputs

 

(In thousands)

 

Value

 

(Level 1)

 

(Level 2)

 

(Level 3)

 

Impaired loans

 

$

1,868

 

 

 

 

 

$

1,868

 

Loans held for sale

 

2,300

 

 

 

 

 

2,300

 

 

Impaired loans with allocated allowance for loan losses at September 30, 2012, had a carrying amount of $0.3 million, which is made up of the outstanding balance of $0.8 million, net of a valuation allowance of $0.5 million. This resulted in an additional provision for loan losses of $0.3 million that is included in the amount reported on the income statement. Impaired loans with allocated allowance for loan losses at December 31, 2011, had a carrying amount of $1.9 million, which is made up of the outstanding balance of $2.1 million, net of a valuation allowance of $0.2 million. This resulted in an additional provision for loan losses of $0.2 million that is included in the amount reported on the income statement.

 

Loans held for sale at December 31, 2011 had a carrying amount and outstanding balance of $2.3 million. There was no valuation allowance at December 31, 2011. Charge-offs of $0.9 million were incurred on loans transferred to loans held for sale at December 31, 2011. These loans were subsequently sold in January 2012 with no gain or loss incurred.

 

The Company used the following method and assumptions, not previously presented, in estimating the fair value of its financial instruments:

 

Cash and Due from Banks and Federal Funds Sold: Carrying amounts approximate fair value, since these instruments are either payable on demand or have short-term maturities. Cash on hand and non-interest due from bank accounts are Level 1 and interest bearing Cash Due from Banks and Federal Funds Sold are Level 2.

 

Restricted Securities: It is not practicable to determine the fair value of FHLB, ACBB and FRB stock due to restrictions placed on its transferability.

 

Loans: The estimated fair values of real estate mortgage loans and other loans receivable are based on discounted cash flow calculations that use available market benchmarks when establishing discount factors for the types of loans resulting in a Level 3 classification. Exceptions may be made for adjustable rate loans (with resets of one year or less), which would be discounted straight to their rate index plus or minus an appropriate spread. All nonaccrual loans are carried at their current fair value. The methods utilized to estimate the fair value of loans do not necessarily represent an exit price and therefore, while permissible for presentation purposed under ASC 825-10, do not conform with ASC 820-10.

 

Deposits: The estimated fair value of certificates of deposits are based on discounted cash flow calculations that use a replacement cost of funds approach to establishing discount rates for certificates of deposits maturities resulting in a Level 2 classification. Stated value is fair value for all other deposits resulting in a Level 1 classification.

 

Borrowed Funds: The estimated fair value of borrowed funds are based on discounted cash flow calculations that use a replacement cost of funds approach to establishing discount rates for funding maturities resulting in a Level 2 classification.

 

15


 


 

 

Junior Subordinated Debentures: The estimated fair value is based on estimates using market data for similarly risk weighted items and takes into consideration the convertible features of the debentures into common stock of the Company which is an unobservable input resulting in a Level 3 classification.

 

Accrued Interest Receivable and Payable: For these short-term instruments, the carrying amount is a reasonable estimate of the fair value resulting in a Level 1 or 2 classification.

 

Off-Balance-Sheet Liabilities: The fair value of off-balance-sheet commitments to extend credit is estimated using fees currently charged to enter into similar agreements. The fair value is immaterial as of September 30, 2012 and December 31, 2011.

 

Fair value estimates are made at specific points in time and are based on existing on-and off-balance sheet financial instruments. Such estimates are generally subjective in nature and dependent upon a number of significant assumptions associated with each financial instrument or group of financial instruments, including estimates of discount rates, risks associated with specific financial instruments, estimates of future cash flows, and relevant available market information. Changes in assumptions could significantly affect the estimates. In addition, fair value estimates do not reflect the value of anticipated future business, premiums or discounts that could result from offering for sale at one time the Company’s entire holdings of a particular financial instrument, or the tax consequences of realizing gains or losses on the sale of financial instruments.

 

The estimated fair values and recorded carrying amounts of the Bank’s financial instruments at September 30, 2012 and December 31, 2011 are as follows:

 

 

 

 

 

Fair Value Measurements at

 

 

 

 

 

 

 

September 30, 2012 Using:

 

 

 

 

 

 

 

 

 

Significant

 

 

 

 

 

 

 

 

 

Quoted Prices In

 

Other

 

Significant

 

 

 

 

 

 

 

Active Markets for

 

Observable

 

Unobservable

 

 

 

 

 

Carrying

 

Identical Assets

 

Inputs

 

Inputs

 

 

 

(In thousands)

 

Amount

 

(Level 1)

 

(Level 2)

 

(Level 3)

 

Total

 

Financial assets:

 

 

 

 

 

 

 

 

 

 

 

Cash and due from banks

 

$

20,593

 

$

20,593

 

$

 

$

 

$

20,593

 

Interest bearing deposits with banks

 

7,264

 

 

7,264

 

 

7,264

 

Securities available for sale

 

560,790

 

 

560,790

 

 

560,790

 

Securities restricted

 

2,978

 

n/a

 

n/a

 

n/a

 

n/a

 

Securities held to maturity

 

212,879

 

 

216,083

 

 

216,083

 

Loans, net

 

718,427

 

 

 

749,227

 

749,227

 

Accrued interest receivable

 

5,412

 

 

2,952

 

2,460

 

5,412

 

 

 

 

 

 

 

 

 

 

 

 

 

Financial liabilities:

 

 

 

 

 

 

 

 

 

 

 

Certificates of deposit

 

164,892

 

 

 

166,551

 

 

166,551

 

Demand and other deposits

 

1,149,955

 

1,149,955

 

 

 

1,149,955

 

Federal funds purchased and

 

 

 

 

 

 

 

 

 

 

Federal Home Loan Bank overnight borrowings

 

62,000

 

62,000

 

 

 

62,000

 

Federal Home Loan Bank term advances

 

15,000

 

 

15,199

 

 

15,199

 

Repurchase agreements

 

13,093

 

 

13,845

 

 

13,845

 

Junior Subordinated Debentures

 

16,002

 

 

 

17,364

 

17,364

 

Accrued interest payable

 

212

 

22

 

190

 

 

212

 

 

16



 

 

 

 

At December 31, 2011

 

 

 

Carrying

 

Fair

 

(In thousands)

 

Amount

 

Value

 

Financial assets:

 

 

 

 

 

Cash and due from banks

 

$

25,921

 

$

25,921