10-Q 1 a14-9461_110q.htm 10-Q

Table of Contents

 

 

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 March 31, 2014

______________________

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 11,627,231 shares of common stock outstanding as of May 8, 2014.

 

 



Table of Contents

 

 

BRIDGE BANCORP, INC.

 

PART I -

FINANCIAL INFORMATION

 

 

 

 

Item 1.

Financial Statements

3

 

 

 

 

Consolidated Balance Sheets as of March 31, 2014 and December 31, 2013

3

 

 

 

 

Consolidated Statements of Income for the Three Months Ended March 31, 2014 and 2013

4

 

 

 

 

Consolidated Statements of Comprehensive Income for the Three Months Ended March 31, 2014 and 2013

5

 

 

 

 

Consolidated Statements of Stockholders’ Equity for the Three Months Ended March 31, 2014 and 2013

6

 

 

 

 

Consolidated Statements of Cash Flows for the Three Months Ended March 31, 2014 and 2013

7

 

 

 

 

Condensed Notes to Consolidated Financial Statements

8

 

 

 

Item 2.

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

34

 

 

 

Item 3.

Quantitative and Qualitative Disclosures About Market Risk

47

 

 

 

Item 4.

Controls and Procedures

48

 

 

 

PART II -

OTHER INFORMATION

48

 

 

 

Item 1.

Legal Proceedings

48

 

 

 

Item 1A.

Risk Factors

48

 

 

 

Item 2.

Unregistered Sales of Equity Securities and Use of Proceeds

48

 

 

 

Item 3.

Defaults Upon Senior Securities

48

 

 

 

Item 4.

Mine Safety Disclosures

48

 

 

 

Item 5.

Other Information

48

 

 

 

Item 6.

Exhibits

49

 

 

 

Signatures

 

50

 

 



Table of Contents

 

 

Item 1. Financial Statements

BRIDGE BANCORP, INC. AND SUBSIDIARIES

Consolidated Balance Sheets (unaudited)

(In thousands, except share and per share amounts)

 

 

 

March 31,

 

December 31,

 

 

 

2014

 

2013

 

ASSETS

 

 

 

 

 

Cash and due from banks

 

$

36,407

 

$

39,997

 

Interest earning deposits with banks

 

7,764

 

5,576

 

Total cash and cash equivalents

 

44,171

 

45,573

 

 

 

 

 

 

 

Securities available for sale, at fair value

 

626,732

 

575,179

 

Securities held to maturity (fair value of $213,844 and $197,339, respectively)

 

216,043

 

201,328

 

Total securities

 

842,775

 

776,507

 

 

 

 

 

 

 

Securities, restricted

 

10,489

 

7,034

 

 

 

 

 

 

 

Loans held for investments

 

1,135,730

 

1,013,263

 

Allowance for loan losses

 

(16,369

)

(16,001

)

Loans, net

 

1,119,361

 

997,262

 

 

 

 

 

 

 

Premises and equipment, net

 

30,198

 

27,983

 

Accrued interest receivable

 

6,407

 

5,648

 

Goodwill

 

10,696

 

2,034

 

Core deposit intangible

 

2,063

 

190

 

Bank owned life insurance

 

10,104

 

10,035

 

Prepaid pension

 

8,605

 

8,586

 

Other real estate owned

 

 

2,242

 

Other assets

 

28,059

 

13,652

 

Total Assets

 

$

2,112,928

 

$

1,896,746

 

 

 

 

 

 

 

LIABILITIES AND STOCKHOLDERS’ EQUITY

 

 

 

 

 

Demand deposits

 

$

519,962

 

$

582,938

 

Savings, NOW and money market deposits

 

987,484

 

855,246

 

Certificates of deposit of $100,000 or more

 

101,337

 

64,445

 

Other time deposits

 

66,103

 

36,450

 

Total deposits

 

1,674,886

 

1,539,079

 

 

 

 

 

 

 

Federal Funds Purchased

 

66,000

 

64,000

 

Federal Home Loan Bank advances

 

152,217

 

98,000

 

Repurchase agreements

 

11,562

 

11,370

 

Junior subordinated debentures

 

16,002

 

16,002

 

Other liabilities and accrued expenses

 

25,406

 

8,835

 

Total Liabilities

 

1,946,073

 

1,737,286

 

 

 

 

 

 

 

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; 11,623,737 and 11,317,367 shares issued, respectively; 11,622,080 and 11,307,607 shares outstanding, respectively

 

116

 

113

 

Surplus

 

117,461

 

111,377

 

Retained earnings

 

59,240

 

61,441

 

Less: Treasury Stock at cost, 1,657 and 9,760 shares, respectively

 

(42

)

(235

)

 

 

176,775

 

172,696

 

Accumulated other comprehensive loss, net of income tax

 

(9,920

)

(13,236

)

Total Stockholders’ Equity

 

166,855

 

159,460

 

Total Liabilities and Stockholders’ Equity

 

$

2,112,928

 

$

1,896,746

 

 

See accompanying condensed notes to the Unaudited Consolidated Financial Statements

 

3



Table of Contents

 

 

BRIDGE BANCORP, INC. AND SUBSIDIARIES

Consolidated Statements of  Income (unaudited)

(In thousands, except per share amounts)

 

 

 

For the

 

 

 

Three Months Ended

 

 

 

March 31,

 

 

 

2014

 

2013

 

Interest income:

 

 

 

 

 

Loans (including fee income)

 

$

13,314

 

$

10,668

 

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

 

2,291

 

1,443

 

U.S. GSE securities

 

807

 

791

 

State and municipal obligations

 

701

 

680

 

Corporate Bonds

 

154

 

101

 

Deposits with banks

 

8

 

5

 

Other interest and dividend income

 

83

 

43

 

Total interest income

 

17,358

 

13,731

 

 

 

 

 

 

 

Interest expense:

 

 

 

 

 

Savings, NOW and money market deposits

 

837

 

884

 

Certificates of deposit of $100,000 or more

 

175

 

329

 

Other time deposits

 

95

 

85

 

Federal funds purchased and repurchase agreements

 

129

 

124

 

Federal Home Loan Bank advances

 

245

 

40

 

Junior subordinated debentures

 

341

 

341

 

Total interest expense

 

1,822

 

1,803

 

 

 

 

 

 

 

Net interest income

 

15,536

 

11,928

 

Provision for loan losses

 

700

 

550

 

Net interest income after provision for loan losses

 

14,836

 

11,378

 

 

 

 

 

 

 

Non interest income:

 

 

 

 

 

Service charges on deposit accounts

 

799

 

801

 

Fees for other customer services

 

566

 

653

 

Net securities (losses) gains

 

(1,112

)

338

 

Title fee income

 

322

 

286

 

Other operating income

 

227

 

26

 

Total non-interest income

 

802

 

2,104

 

 

 

 

 

 

 

Non-interest expense:

 

 

 

 

 

Salaries and employee benefits

 

6,206

 

5,394

 

Occupancy and equipment

 

1,615

 

1,191

 

Technology and communications

 

717

 

542

 

Marketing and advertising

 

421

 

348

 

Professional services

 

356

 

309

 

FDIC assessments

 

288

 

216

 

Acquisition costs and branch restructuring

 

4,434

 

 

Amortization of core deposit intangible

 

58

 

16

 

Other operating expenses

 

918

 

892

 

Total non-interest expense

 

15,013

 

8,908

 

 

 

 

 

 

 

Income before income taxes

 

625

 

4,574

 

Income tax expense

 

219

 

1,461

 

Net income

 

$

406

 

$

3,113

 

Basic earnings per share

 

$

0.04

 

$

0.35

 

Diluted earnings per share

 

$

0.04

 

$

0.35

 

 

See accompanying condensed notes to the Unaudited Consolidated Financial Statements

 

4



Table of Contents

 

 

BRIDGE BANCORP, INC. AND SUBSIDIARIES

Consolidated Statements of Comprehensive Income (unaudited)

(In thousands)

 

 

 

For the

 

 

 

Three Months Ended

 

 

 

March 31,

 

 

 

2014

 

2013

 

Net Income

 

$

406

 

$

3,113

 

Other comprehensive income (loss):

 

 

 

 

 

Change in unrealized net gains (losses) on securities available for sale, net of reclassification and deferred income taxes

 

3,411

 

(607

)

Adjustment to pension liability, net of deferred income taxes

 

(4

)

39

 

Unrealized (losses) gains on cash flow hedge, net of deferred income taxes

 

(91

)

17

 

Total other comprehensive income (loss)

 

3,316

 

(551

)

Comprehensive income

 

$

3,722

 

$

2,562

 

 

See accompanying condensed notes to the Unaudited Consolidated Financial Statements.

 

5



Table of Contents

 

 

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
Loss

 

Total

 

Balance at January 1, 2014

 

$

113

 

$

111,377

 

$

61,441

 

$

(235

)

$

(13,236

)

$

159,460

 

Net income

 

 

 

 

 

406

 

 

 

 

 

406

 

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

 

 

 

151

 

 

 

 

 

 

 

151

 

Shares issued in the acquisition of FNBNY Bancorp, net of offering costs (240,598 shares)

 

2

 

5,946

 

 

 

 

 

 

 

5,948

 

Stock awards granted and distributed

 

1

 

(332

)

 

 

331

 

 

 

 

Vesting of stock awards

 

 

 

 

 

 

 

(147

)

 

 

(147

)

Exercise of stock options

 

 

 

(2

)

 

 

9

 

 

 

7

 

Tax effect of stock plans

 

 

 

30

 

 

 

 

 

 

 

30

 

Share based compensation expense

 

 

 

291

 

 

 

 

 

 

 

291

 

Cash dividend declared, $0.23 per share

 

 

 

 

 

(2,607

)

 

 

 

 

(2,607

)

Other comprehensive income, net of deferred income taxes

 

 

 

 

 

 

 

 

 

3,316

 

3,316

 

Balance at March 31, 2014

 

$

116

 

$

117,461

 

$

59,240

 

$

(42

)

$

(9,920

)

$

166,855

 

 

 

 

Common
Stock

 

Surplus

 

Retained
Earnings

 

Treasury
Stock

 

Accumulated
Other
Comprehensive
Loss

 

Total

 

Balance at January 1, 2013

 

$

89

 

$

64,208

 

$

55,102

 

$

(309

)

$

(418

)

$

118,672

 

Net income

 

 

 

 

 

3,113

 

 

 

 

 

3,113

 

Stock awards granted and distributed

 

1

 

(411

)

 

 

410

 

 

 

 

Vesting of stock awards

 

 

 

 

 

 

 

(149

)

 

 

(149

)

Tax effect of stock plans

 

 

 

(9

)

 

 

 

 

 

 

(9

)

Share based compensation expense

 

 

 

338

 

 

 

 

 

 

 

338

 

Other comprehensive loss, net of deferred income taxes

 

 

 

 

 

 

 

 

 

(551

)

(551

)

Balance at March 31, 2013

 

$

90

 

$

64,126

 

$

58,215

 

$

(48

)

$

(969

)

$

121,414

 

 

See accompanying condensed notes to the Unaudited Consolidated Financial Statements.

 

6



Table of Contents

 

 

BRIDGE BANCORP, INC. AND SUBSIDIARIES

Consolidated Statements of Cash Flows (unaudited)

(In thousands)

 

 

 

For the

 

 

 

Three Months Ended

 

 

 

March 31,

 

 

 

2014

 

2013

 

Cash flows from operating activities:

 

 

 

 

 

Net Income

 

$

406

 

$

3,113

 

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

 

 

 

 

 

Provision for loan losses

 

700

 

550

 

Depreciation and amortization

 

581

 

417

 

Net amortization on securities

 

885

 

1,512

 

Increase in cash surrender value of bank owned life insurance

 

(69

)

 

Amortization of core deposit intangible

 

58

 

16

 

Share based compensation expense

 

291

 

338

 

Net securities losses (gains)

 

1,112

 

(338

)

Increase in accrued interest receivable

 

(759

)

(131

)

Increase in other assets

 

(3,929

)

(1,268

)

Increase (decrease) in accrued expenses and other liabilities

 

1,686

 

(202

)

Net cash provided by operating activities

 

962

 

4,007

 

 

 

 

 

 

 

Cash flows from investing activities:

 

 

 

 

 

Purchases of securities available for sale

 

(148,637

)

(26,033

)

Purchases of securities, restricted

 

(80,235

)

(59

)

Purchases of securities held to maturity

 

(17,962

)

 

Proceeds from sales of securities available for sale

 

198,763

 

46,553

 

Redemption of securities, restricted

 

79,380

 

 

Maturities, calls and principal payments of securities available for sale

 

15,712

 

51,395

 

Maturities, calls and principal payments of securities held to maturity

 

3,011

 

13,932

 

Net increase in loans

 

(35,409

)

(63,715

)

Proceeds from sales of other real estate owned, net

 

2,242

 

 

Purchase of premises and equipment

 

(1,008

)

(1,570

)

Net cash acquired in business combination

 

2,926

 

 

Net cash provided by investing activities

 

18,783

 

20,503

 

 

 

 

 

 

 

Cash flows from financing activities:

 

 

 

 

 

Net decrease in deposits

 

(34,066

)

(35,121

)

Net increase (decrease) in federal funds purchased

 

2,000

 

(15,500

)

Net increase in FHLB advances

 

14,935

 

 

Repayment of acquired unsecured debt

 

(1,450

)

 

Net increase in repurchase agreements

 

192

 

431

 

Net proceeds from issuance of common stock

 

151

 

 

Net proceeds from exercise of stock options

 

7

 

 

Repurchase of surrendered stock from vesting of restricted stock awards

 

(147

)

(149

)

Excess tax benefit (expense) from share based compensation

 

30

 

(9

)

Cash dividends paid

 

(2,607

)

 

Other, net

 

(192

)

 

Net cash used in financing activities

 

(21,147

)

(50,348

)

 

 

 

 

 

 

Net decrease in cash and cash equivalents

 

(1,402

)

(25,838

)

Cash and cash equivalents at beginning of period

 

45,573

 

51,249

 

Cash and cash equivalents at end of period

 

$

44,171

 

$

25,411

 

 

 

 

 

 

 

Supplemental Information-Cash Flows:

 

 

 

 

 

Cash paid for:

 

 

 

 

 

Interest

 

$

1,712

 

$

1,792

 

Income tax

 

$

883

 

$

190

 

 

 

 

 

 

 

Noncash investing and financing activities:

 

 

 

 

 

Securities which settled in the subsequent period

 

$

12,905

 

$

 

 

 

 

 

 

 

Acquisition of noncash assets and liabilities:

 

 

 

 

 

Fair value of assets acquired

 

$

206,981

 

$

 

Fair value of liabilities assumed

 

$

212,430

 

$

 

 

See accompanying condensed notes to the Unaudited Consolidated Financial Statements.

 

7



Table of Contents

 

 

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”), a financial title insurance subsidiary, Bridge Abstract LLC (“Bridge Abstract”), and an investment services subsidiary, Bridge Financial Services LLC that was formed on March 26, 2014. 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 three months ended March 31, 2014 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, 2013.

 

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 non-forfeitable 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 months ended March 31, 2014 and 2013 is as follows:

 

 

 

Three months ended,

 

 

 

March 31,

 

(In thousands, except per share data)

 

2014

 

2013

 

Net Income

 

$

406

 

$

3,113

 

Less: Dividends paid on and earnings allocated to participating securities

 

 

(80

)

Income attributable to common stock

 

$

406

 

$

3,033

 

 

 

 

 

 

 

Weighted average common shares outstanding, including participating securities

 

11,513

 

8,978

 

Less: weighted average participating securities

 

(263

)

(231

)

Weighted average common shares outstanding

 

11,250

 

8,747

 

Basic earnings per common share

 

$

0.04

 

$

0.35

 

 

 

 

 

 

 

Income attributable to common stock

 

$

406

 

$

3,033

 

 

 

 

 

 

 

Weighted average common shares outstanding

 

11,250

 

8,747

 

Weighted average common equivalent shares outstanding

 

1

 

 

Weighted average common and equivalent shares outstanding

 

11,251

 

8,747

 

Diluted earnings per common share

 

$

0.04

 

$

0.35

 

 

8



Table of Contents

 

 

There were 5,131 and 49,362 options outstanding at March 31, 2014 and March 31, 2013, 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 March 31, 2014, 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 which supersedes the Bridge Bancorp, Inc. Equity Incentive Plan that was approved in 2006 (the “2006 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 and no compensation expense was attributable to stock options for the three months ended March 31, 2014 and March 31, 2013 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.  The intrinsic value of options exercised during the first quarter of 2014 and 2013 was $1,000 and $0, respectively. The intrinsic value of options outstanding and exercisable at March 31, 2014 and March 31, 2013 was $55,000 and $0, respectively.

 

A summary of the status of the Company’s stock options as of and for the three months ended March 31, 2014 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, January 1, 2014

 

45,395

 

$

25.54

 

 

 

 

 

Granted

 

 

 

 

 

 

 

Exercised

 

(1,274

)

$

24.00

 

 

 

 

 

Forfeited

 

(1,230

)

$

25.25

 

 

 

 

 

Expired

 

(561

)

$

24.00

 

 

 

 

 

Outstanding, March 31, 2014

 

42,330

 

$

25.61

 

2.47 years

 

$

55

 

Vested and Exercisable, March 31, 2014

 

42,330

 

$

25.61

 

2.47 years

 

$

55

 

 

 

 

Number of

 

Exercise

 

Range of Exercise Prices

 

Options

 

Price

 

 

 

37,199

 

$

25.25

 

 

 

3,000

 

$

26.55

 

 

 

2,131

 

$

30.60

 

 

 

42,330

 

 

 

 

During the three months ended March 31, 2014 restricted stock awards of 73,323 shares were granted. Of the 73,323 shares granted, 53,425 shares vest over seven years with a third vesting after years five, six and seven, 17,898 shares vest over five years with a third vesting after years three, four and five and the remaining 2,000 shares vest ratably over approximately two years. During the three months ended March 31, 2013 restricted stock awards of 72,940 shares were granted. Of the 72,940 shares granted, 51,175 shares vest over seven years with a third vesting after years five, six and seven, 12,652 shares vest over five years with a third vesting after years three, four and five and the remaining 9,113 shares vest ratably over approximately five years. Compensation expense attributable to restricted stock awards was $251,000 and $299,000 for the three months ended March 31, 2014 and 2013, respectively.

 

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Table of Contents

 

 

A summary of the status of the Company’s unvested restricted stock as of and for the three months ended March 31, 2014 is as follows:

 

 

 

 

 

Weighted

 

 

 

 

 

Average Grant-Date

 

 

 

Shares

 

Fair Value

 

Unvested, January 1, 2014

 

197,599

 

$

21.18

 

Granted

 

73,323

 

$

25.44

 

Vested

 

(23,529

)

$

21.58

 

Forfeited

 

 

 

Unvested, March 31, 2014

 

247,393

 

$

22.41

 

 

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 $40,000 and $39,000 for the three months ended March 31, 2014 and 2013, 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 March 31, 2014 and December 31, 2013 and the corresponding amounts of unrealized gains and losses therein:

 

 

 

March 31, 2014

 

 

 

 

 

Gross

 

Gross

 

Estimated

 

 

 

Amortized

 

Unrealized

 

Unrealized

 

Fair

 

(In thousands)

 

Cost

 

Gains

 

Losses

 

Value

 

Available for sale:

 

 

 

 

 

 

 

 

 

U.S. GSE securities

 

$

133,504

 

$

52

 

$

(6,776

)

$

126,780

 

State and municipal obligations

 

66,401

 

515

 

(540

)

66,376

 

U.S. GSE residential mortgage-backed securities

 

57,820

 

44

 

(443

)

57,421

 

U.S. GSE residential collateralized mortgage obligations

 

271,898

 

239

 

(5,434

)

266,703

 

U.S. GSE commercial mortgage-backed securities

 

3,061

 

 

(169

)

2,892

 

U.S. GSE commercial collateralized mortgage obligations

 

32,760

 

166

 

(81

)

32,845

 

Non Agency commercial mortgage-backed securities

 

817

 

 

(24

)

793

 

Other Asset backed securities

 

57,715

 

45

 

(1,843

)

55,917

 

Corporate Bonds

 

16,989

 

53

 

(37

)

17,005

 

Total available for sale

 

640,965

 

1,114

 

(15,347

)

626,732

 

 

 

 

 

 

 

 

 

 

 

Held to maturity:

 

 

 

 

 

 

 

 

 

U.S. GSE securities

 

11,261

 

 

(141

)

11,120

 

State and municipal obligations

 

66,790

 

1,057

 

(22

)

67,825

 

U.S. GSE residential mortgage-backed securities

 

7,599

 

 

(237

)

7,362

 

U.S. GSE residential collateralized mortgage obligations

 

65,831

 

510

 

(2,922

)

63,419

 

U.S. GSE commercial mortgage-backed securities

 

10,082

 

 

(208

)

9,874

 

U.S. GSE commercial collateralized mortgage obligations

 

31,580

 

291

 

(637

)

31,234

 

Corporate Bonds

 

22,900

 

136

 

(26

)

23,010

 

Total held to maturity

 

216,043

 

1,994

 

(4,193

)

213,844

 

Total securities

 

$

857,008

 

$

3,108

 

$

(19,540

)

$

840,576

 

 

10



Table of Contents

 

 

 

 

December 31, 2013

 

 

 

 

 

Gross

 

Gross

 

Estimated

 

 

 

Amortized

 

Unrealized

 

Unrealized

 

Fair

 

(In thousands)

 

Cost

 

Gains

 

Losses

 

Value

 

Available for sale:

 

 

 

 

 

 

 

 

 

U.S. GSE securities

 

$

164,278

 

$

15

 

$

(11,536

)

$

152,757

 

State and municipal obligations

 

62,141

 

602

 

(1,087

)

61,656

 

U.S. GSE residential mortgage-backed securities

 

14,609

 

36

 

(210

)

14,435

 

U.S. GSE residential collateralized mortgage obligations

 

285,595

 

559

 

(6,963

)

279,191

 

U.S. GSE commercial mortgage-backed securities

 

3,076

 

 

(242

)

2,834

 

U.S. GSE commercial collateralized mortgage obligations

 

26,740

 

194

 

(24

)

26,910

 

Non Agency commercial mortgage-backed securities

 

3,658

 

 

(80

)

3,578

 

Other Asset backed securities

 

34,970

 

42

 

(1,194

)

33,818

 

Total available for sale

 

595,067

 

1,448

 

(21,336

)

575,179

 

 

 

 

 

 

 

 

 

 

 

Held to maturity:

 

 

 

 

 

 

 

 

 

U.S. GSE securities

 

11,254

 

 

(375

)

10,879

 

State and municipal obligations

 

67,232

 

863

 

(179

)

67,916

 

U.S. GSE residential mortgage-backed securities

 

8,001

 

 

(312

)

7,689

 

U.S. GSE residential collateralized mortgage obligations

 

68,197

 

537

 

(3,655

)

65,079

 

U.S. GSE commercial mortgage-backed securities

 

10,132

 

 

(356

)

9,776

 

U.S. GSE commercial collateralized mortgage obligations

 

13,627

 

 

(706

)

12,921

 

Corporate Bonds

 

22,885

 

203

 

(9

)

23,079

 

Total held to maturity

 

201,328

 

1,603

 

(5,592

)

197,339

 

Total securities

 

$

796,395

 

$

3,051

 

$

(26,928

)

$

772,518

 

 

The following table summarizes the amortized cost, fair value and maturities of the available for sale and held to maturity investment securities portfolio at March 31, 2014. 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.

 

 

 

March 31, 2014

 

 

 

Amortized

 

Fair

 

(In thousands)

 

Cost

 

Value

 

Maturity

 

 

 

 

 

Available for sale:

 

 

 

 

 

Within one year

 

$

14,922

 

$

15,013

 

One to five years

 

36,688

 

36,947

 

Five to ten years

 

151,739

 

146,035

 

Beyond ten years

 

437,616

 

428,737

 

Total

 

$

640,965

 

$

626,732

 

 

 

 

 

 

 

Held to maturity:

 

 

 

 

 

Within one year

 

$

27,107

 

$

27,163

 

One to five years

 

42,301

 

42,397

 

Five to ten years

 

34,537

 

34,873

 

Beyond ten years

 

112,098

 

109,411

 

Total

 

$

216,043

 

$

213,844

 

 

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Table of Contents

 

 

Securities with unrealized losses at March 31, 2014 and December 31, 2013, 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

 

March 31, 2014

 

 

 

Unrealized

 

 

 

Unrealized

 

(In thousands)

 

Fair Value

 

losses

 

Fair Value

 

losses

 

Available for sale:

 

 

 

 

 

 

 

 

 

U.S. GSE securities

 

$

94,284

 

$

4,516

 

$

29,326

 

$

2,260

 

State and municipal obligations

 

21,355

 

521

 

982

 

19

 

U.S. GSE residential mortgage-backed securities

 

46,371

 

443

 

 

 

U.S. GSE residential collateralized mortgage obligations

 

185,751

 

4,281

 

29,695

 

1,153

 

U.S. GSE commercial mortgage-backed securities

 

2,892

 

169

 

 

 

U.S. GSE commercial collateralized mortgage obligations

 

18,793

 

81

 

 

 

Non Agency commercial mortgage-backed securities

 

793

 

24

 

 

 

Other Asset backed securities

 

51,190

 

1,843

 

 

 

Corporate Bonds

 

4,084

 

37

 

 

 

Total available for sale

 

425,513

 

11,915

 

60,003

 

3,432

 

 

 

 

 

 

 

 

 

 

 

Held to maturity:

 

 

 

 

 

 

 

 

 

U.S. GSE securities

 

11,121

 

141

 

 

 

State and municipal obligations

 

10,403

 

21

 

205

 

1

 

U.S. GSE residential mortgage-backed securities

 

7,362

 

237

 

 

 

U.S. GSE residential collateralized mortgage obligations

 

27,190

 

1,721

 

17,779

 

1,201

 

U.S. GSE commercial mortgage-backed securities

 

9,874

 

208

 

 

 

U.S. GSE commercial collateralized mortgage obligations

 

20,787

 

637

 

 

 

Corporate Bonds

 

8,976

 

24

 

998

 

2

 

Total held to maturity

 

$

95,713

 

$

2,989

 

$

18,982

 

$

1,204

 

 

 

 

Less than 12 months

 

Greater than 12 months

 

December 31, 2013

 

 

 

Unrealized

 

 

 

Unrealized

 

(In thousands)

 

Fair Value

 

losses

 

Fair Value

 

losses

 

Available for sale:

 

 

 

 

 

 

 

 

 

U.S. GSE securities

 

$

128,468

 

$

8,915

 

$

23,966

 

$

2,621

 

State and municipal obligations

 

23,765

 

1,046

 

966

 

41

 

U.S. GSE residential mortgage-backed securities

 

10,410

 

210

 

 

 

U.S. GSE residential collateralized mortgage obligations

 

218,415

 

6,476

 

12,757

 

487

 

U.S. GSE commercial mortgage-backed securities

 

2,834

 

242

 

 

 

U.S. GSE commercial collateralized mortgage obligations

 

4,912

 

24

 

 

 

Non Agency commercial mortgage-backed securities

 

3,578

 

80

 

 

 

Other Asset backed securities

 

21,144

 

1,103

 

2,906

 

91

 

Total available for sale

 

413,526

 

18,096

 

40,595

 

3,240

 

 

 

 

 

 

 

 

 

 

 

Held to maturity:

 

 

 

 

 

 

 

 

 

U.S. GSE securities

 

10,879

 

375

 

 

 

State and municipal obligations

 

24,079

 

178

 

385

 

1

 

U.S. GSE residential mortgage-backed securities

 

7,689

 

312

 

 

 

U.S. GSE residential collateralized mortgage obligations

 

29,570

 

2,169

 

17,752

 

1,486

 

U.S. GSE commercial mortgage-backed securities

 

9,776

 

356

 

 

 

U.S. GSE commercial collateralized mortgage obligations

 

12,921

 

706

 

 

 

Corporate Bonds

 

1,993

 

7

 

999

 

2

 

Total held to maturity

 

$

96,907

 

$

4,103

 

$

19,136

 

$

1,489

 

 

12



Table of Contents

 

 

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 March 31, 2014, the majority of unrealized losses on both the available for sale and held to maturity securities are related to the Company’s U.S. GSE securities and U.S. GSE residential collateralized mortgage obligations.  The decrease in fair value of the U.S. GSE securities and U.S. GSE residential collateralized mortgage obligations is attributable to changes in interest rates and not credit quality.  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 March 31, 2014.

 

Proceeds from sales of securities available for sale were $198.8 million and $46.6 million for the three months ended March 31, 2014 and 2013, respectively. Net losses of $1.1 million and net gains of $0.3 million were realized on these sales during the three months ended March 31, 2014 and 2013, respectively. Proceeds from calls of securities were $0.3 million and $31.7 million for the three months ended March 31, 2014 and 2013, respectively.

 

Securities having a fair value of approximately $408.5 million and $397.5 million at March 31, 2014 and December 31, 2013, 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 three months ended March 31, 2014 or the year ended December 31, 2013.

 

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 $10.5 million and $7.0 million in FHLB, ACBB and FRB stock at March 31, 2014 and December 31, 2013.  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.

 

13



Table of Contents

 

 

Assets and liabilities measured on a recurring basis:

 

 

 

 

 

Fair Value Measurements at

 

 

 

 

 

March 31, 2014 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

 

$

126,780

 

 

 

$

126,780

 

 

 

State and municipal obligations

 

66,376

 

 

 

66,376

 

 

 

U.S. GSE residential mortgage-backed securities

 

57,421

 

 

 

57,421

 

 

 

U.S. GSE residential collateralized mortgage obligations

 

266,703

 

 

 

266,703

 

 

 

U.S. GSE commercial mortgage-backed securities

 

2,892

 

 

 

2,892

 

 

 

U.S. GSE commercial collateralized mortgage obligations

 

32,845

 

 

 

32,845

 

 

 

Non Agency commercial mortgage-backed securities

 

793

 

 

 

793

 

 

 

Other Asset backed securities

 

55,917

 

 

 

55,917

 

 

 

Corporate Bonds

 

17,005

 

 

 

17,005

 

 

 

Total available for sale

 

$

626,732

 

 

 

$

626,732

 

 

 

 

 

 

 

 

 

 

 

 

 

Financial Liabilities:

 

 

 

 

 

 

 

 

 

Derivatives

 

$

(314

)

 

 

$

(314

)

 

 

 

 

 

 

 

Fair Value Measurements at

 

 

 

 

 

December 31, 2013 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

 

$

152,757

 

 

 

$

152,757

 

 

 

State and municipal obligations

 

61,656

 

 

 

61,656

 

 

 

U.S. GSE residential mortgage-backed securities

 

14,435

 

 

 

14,435

 

 

 

U.S. GSE residential collateralized mortgage obligations

 

279,191

 

 

 

279,191

 

 

 

U.S. GSE commercial mortgage-backed securities

 

2,834

 

 

 

2,834

 

 

 

U.S. GSE commercial collateralized mortgage obligations

 

26,910

 

 

 

26,910

 

 

 

Non Agency commercial mortgage-backed securities

 

3,578

 

 

 

3,578

 

 

 

Other Asset backed securities

 

33,818

 

 

 

33,818

 

 

 

Total available for sale

 

$

575,179

 

 

 

$

575,179

 

 

 

 

 

 

 

 

 

 

 

 

 

Financial Liabilities:

 

 

 

 

 

 

 

 

 

Derivatives

 

$

(164

)

 

 

$

(164

)

 

 

 

14



Table of Contents

 

 

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

 

 

 

 

 

Fair Value Measurements at

 

 

 

 

 

March 31, 2014 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

 

$

846

 

 

 

 

 

$

846

 

 

 

 

 

 

Fair Value Measurements at

 

 

 

 

 

December 31, 2013 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

 

$

1,329

 

 

 

 

 

$

1,329

 

Other real estate owned

 

2,242

 

 

 

 

 

2,242

 

 

Impaired loans with allocated allowance for loan losses at March 31, 2014, had a carrying amount of $0.8 million, which is made up of the outstanding balance of $1.1 million, net of a valuation allowance of $0.3 million. No additional provision for loan losses was necessary for the three months ended March 31, 2014. Impaired loans with allocated allowance for loan losses at December 31, 2013, had a carrying amount of $1.3 million, which is made up of the outstanding balance of $1.5 million, net of a valuation allowance of $0.2 million. This resulted in an additional provision for loan losses of $0.2 million at December 31, 2013.

 

Other real estate owned at March 31, 2014 and December 31, 2013 had a carrying amount of $0 and $2.2 million, respectively, and no valuation allowance recorded.  Accordingly, there was no additional provision for loan losses included in the amount reported on the Consolidated Statements of Income.

 

The Company used the following method and assumptions 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.

 

Securities Available for Sale and Held to Maturity: 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).

 

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

 

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).

 

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 to ASC 820-10.

 

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Impaired Loans: For impaired loans, the Company evaluates the fair value of the loan in accordance with current accounting guidance.  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. The fair value of other real estate owned is also evaluated in accordance with current accounting guidance and 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. All appraisals undergo a second review process to insure that the methodology employed and the values derived are accurate. 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 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. Management also considers the appraisal values for commercial properties associated with current loan origination activity.  Collectively, this information is reviewed to help assess current trends in commercial property values. For each collateral dependent impaired loan, management considers information that relates to the type of commercial property to determine if such properties may have appreciated or depreciated in value since the date of the most recent appraisal. Adjustments to fair value are made only when the analysis indicates a probable decline in collateral values.

 

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.

 

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 March 31, 2014 and December 31, 2013.

 

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.

 

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The estimated fair values and recorded carrying amounts of the Bank’s financial instruments at March 31, 2014 and December 31, 2013 are as follows:

 

 

 

 

 

Fair Value Measurements at

 

 

 

 

 

 

 

March 31, 2014 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

 

$

36,407

 

$

36,407

 

$

 

$

 

$

36,407

 

Interest bearing deposits with banks

 

7,764

 

 

7,764

 

 

7,764

 

Securities available for sale

 

626,732

 

 

626,732

 

 

626,732

 

Securities restricted

 

10,489

 

n/a

 

n/a

 

n/a

 

n/a

 

Securities held to maturity

 

216,043

 

 

213,844

 

 

213,844

 

Loans, net

 

1,119,361

 

 

 

1,125,030

 

1,125,030

 

Accrued interest receivable