10-Q 1 a13-9794_110q.htm 10-Q

Table of Contents

 

 

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

 

FORM 10-Q

 

(Mark One)

 

x      QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934.

 

For the quarterly period ended March 31, 2013.

 

o         TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934.

 

For the transition period from            to            

 

Commission file number:  0-21815

 

FIRST MARINER BANCORP

(Exact name of registrant as specified in its charter)

 

Maryland

 

52-1834860

(State of Incorporation)

 

(I.R.S. Employer Identification Number)

 

1501 South Clinton Street, Baltimore,
MD

 

21224

 

410-342-2600

(Address of principal executive offices)

 

(Zip Code)

 

(Telephone Number)

 

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 during the preceding 12 months (or for such shorter period that the registrant was required to file such report, and (2) has been subject to such filing requirements for the past 90 days. Yes  x  No  o

 

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  o (Not Applicable)

 

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 definitions of “large accelerated filer,” “accelerated filer,” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):

 

Large accelerated filer o

 

Accelerated filer o

 

 

 

Non-accelerated filer o

 

Smaller reporting company x

 

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

 

The number of shares of common stock outstanding as of May 10, 2013 is 19,699,603 shares.

 

 

 



Table of Contents

 

FIRST MARINER BANCORP AND SUBSIDIARY

TABLE OF CONTENTS

 

PART I - FINANCIAL INFORMATION

5

 

 

 

Item 1 -

Financial Statements

5

 

 

 

 

Consolidated Statements of Financial Condition as of March 31, 2013 (unaudited) and December 31, 2012

5

 

 

 

 

Consolidated Statements of Operations (unaudited) for the three months ended March 31, 2013 and 2012

6

 

 

 

 

Consolidated Statements of Comprehensive (Loss) Income (unaudited) for the three months ended March 31, 2013 and 2012

7

 

 

 

 

Consolidated Statements of Changes in Stockholders’ (Deficit) Equity (unaudited) for the three months ended March 31, 2013 and 2012

8

 

 

 

 

Consolidated Statements of Cash Flows (unaudited) for the three months ended March 31, 2013 and 2012

9

 

 

 

 

Notes to Consolidated Financial Statements (unaudited)

10

 

 

 

Item 2 –

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

31

 

 

 

Item 3 -

Quantitative and Qualitative Disclosures About Market Risk

55

 

 

 

Item 4 -

Controls and Procedures

56

 

 

 

 

 

 

PART II - OTHER INFORMATION

57

 

 

 

Item 1 –

Legal Proceedings

57

Item 1A–

Risk Factors

57

Item 2 -

Unregistered Sales of Equity Securities and Use of Proceeds

57

Item 3 -

Defaults Upon Senior Securities

57

Item 4 -

Mine Safety Disclosures

57

Item 5 -

Other Information

57

Item 6 -

Exhibits

57

 

 

 

Signatures

58

 

 

Exhibit Index

59

 

2



Table of Contents

 

CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS

 

Some of our statements contained in, or incorporated by reference into, this Quarterly Report on Form 10-Q are “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. We intend such forward-looking statements to be covered by the safe harbor provisions for forward-looking statements contained in the Private Securities Litigation Reform Act of 1995 and are including this statement for purposes of invoking these safe harbor provisions. Forward-looking statements are not guarantees of performance or results. When we use words like “may,” “plan,” “contemplate,” “anticipate,” “believe,” “intend,” “continue,” “expect,” “project,” “predict,” “estimate,” “target,” “could,” “is likely,” “should,” “would,” “will,” and similar expressions, you should consider them as identifying forward-looking statements, although we may use other phrasing. These forward-looking statements involve risks and uncertainties and are based on our beliefs and assumptions and on the information available to us at the time that these disclosures were prepared. These forward-looking statements involve risks and uncertainties and may not be realized due to a variety of factors, including, but not limited to, the following:

 

·                  our ability to successfully implement our liquidity contingency plan and meet our liquidity needs;

 

·                  a reduction in the value of certain assets held by us;

 

·                  a reduction in the value of the collateral for loans made by us, especially real estate, which, in turn would likely reduce our customers’ borrowing power and the value of assets and collateral associated with our existing loans;

 

·                  increased loan delinquencies and/or an escalation in problem assets and foreclosures;

 

·                  the failure of assumptions underlying the establishment of our allowance for loan losses that may prove to be materially incorrect or may not be borne out by subsequent events;

 

·                  our ability to continue to operate as a going concern;

 

·                  our ability to realize the benefits from our cost saving initiatives;

 

·                  our ability to meet our interest payment obligations on our junior subordinated deferrable interest debentures upon expiration of the deferral period in 2013;

 

·                  our ability to raise sufficient capital to comply with the requirements of our regulators and for continued support of operations;

 

·                  the imposition of additional enforcement actions by bank regulatory authorities upon First Mariner Bank or First Mariner Bancorp;

 

·                  our ability to successfully implement our plan to reduce First Mariner Bank’s risk exposure to problem assets;

 

·                  our ability to retain key employees;

 

·                  our ability to effectively manage market risk, credit risk, and operational risk;

 

·                  unanticipated regulatory or judicial proceedings;

 

·                  the success and timing of our business strategies and our ability to effectively carry out our business and capital plans;

 

·                   the effect of any mergers, acquisitions, or other transactions to which we or our subsidiary may from time to time be a party;

 

·                  the risks of changes in interest rates on the level and composition of deposits, loan demand, and the values of loan collateral, securities, and interest-sensitive assets and liabilities;

 

·                  the effect of changes in accounting policies and practices, as may be adopted from time-to-time by bank regulatory agencies, the Securities and Exchange Commission, the Financial Accounting Standards Board, or other accounting standards setters;

 

·                  adverse changes in the securities’ markets;

 

3



Table of Contents

 

·                  the effects of competition from other commercial banks, thrifts, mortgage-banking firms, consumer finance companies, credit unions, securities brokerage firms, insurance companies, money market and other mutual funds, and other financial institutions operating in our market area and elsewhere, including institutions operating regionally, nationally, and internationally, together with competitors offering banking products and services by mail, telephone, and the Internet;

 

·                  costs and potential disruption or interruption of operations due to cyber-security incidents;

 

·                  a decline in demand for our products and services;

 

·                  an inability to attract and retain deposits;

 

·                   the timely development of competitive new products and services and the acceptance of these products and services by new and existing customers;

 

·                  changes in consumer spending and savings habits;

 

·                   the strength of the United States economy in general, the strength of the local economies in which we conduct operations, and the unfavorable effects of future economic conditions, including inflation, recession, or decreases in real estate values;

 

·                   geopolitical conditions, including acts or threats of terrorism, actions taken by the United States or other governments in response to acts or threats of terrorism and/or military conflicts, which could impact business and economic conditions in the United States and abroad;

 

·                  the effects of, and changes in, trade, monetary, and fiscal policies and laws, including interest rate policies of the Federal Reserve Board, inflation, interest rate, market, and monetary fluctuations;

 

·                  our ability to continue to realize income through our mortgage-banking operations; and

 

·                  the risks described in this Quarterly Report on Form 10-Q and our Annual Report on Form 10-K as of and for the year ended December 31, 2012.

 

All written or oral forward-looking statements attributable to us are expressly qualified in their entirety by this Cautionary Note. Our actual results may differ significantly from those we discuss in these forward-looking statements. For other factors, risks, and uncertainties that could cause our actual results to differ materially from estimates and projections contained in these forward-looking statements, please read the “Risk Factors” in Item 1A of Part I of our Annual Report on Form 10-K as of and for the year ended December 31, 2012. Any forward-looking statement speaks only as of the date which such statement was made, and, except as required by law, we expressly disclaim any obligation or undertaking to disseminate any updates or revisions to any forward-looking statement to reflect events or circumstances after the date on which such statement is made or to reflect the occurrence of unanticipated events.

 

4



Table of Contents

 

PART I — FINANCIAL INFORMATION

 

Item 1 — Financial Statements

 

First Mariner Bancorp and Subsidiary

Consolidated Statements of Financial Condition

(dollars in thousands, except per share data)

 

 

 

March 31,

 

December 31,

 

 

 

2013

 

2012

 

 

 

(unaudited)

 

 

 

ASSETS

 

 

 

 

 

Cash and due from banks

 

$

273,745

 

$

169,225

 

Federal funds sold and interest-bearing deposits

 

28,964

 

16,556

 

Securities available for sale (“AFS”), at fair value

 

56,372

 

57,676

 

Loans held for sale (“LHFS”), at fair value

 

237,379

 

404,289

 

Loans receivable

 

597,529

 

610,396

 

Allowance for loan losses

 

(11,225

)

(11,434

)

Loans, net

 

586,304

 

598,962

 

Real estate acquired through foreclosure

 

10,654

 

18,058

 

Restricted stock investments

 

3,517

 

7,099

 

Premises and equipment, net

 

37,174

 

37,651

 

Accrued interest receivable

 

3,392

 

4,387

 

Bank-owned life insurance (“BOLI”)

 

38,859

 

38,601

 

Prepaid expenses and other assets

 

25,280

 

25,025

 

 

 

 

 

 

 

Total assets

 

$

1,301,640

 

$

1,377,529

 

 

 

 

 

 

 

LIABILITIES AND STOCKHOLDERS’ DEFICIT

 

 

 

 

 

Liabilities:

 

 

 

 

 

Deposits:

 

 

 

 

 

Noninterest-bearing

 

$

108,347

 

$

109,966

 

Interest-bearing

 

1,083,936

 

1,076,864

 

Total deposits

 

1,192,283

 

1,186,830

 

Short-term borrowings

 

1,585

 

53,466

 

Long-term borrowings

 

48,462

 

73,515

 

Junior subordinated deferrable interest debentures

 

52,068

 

52,068

 

Accrued expenses and other liabilities (of which, $223 and $248 are at fair value, respectively)

 

18,364

 

20,022

 

Total liabilities

 

1,312,762

 

1,385,901

 

 

 

 

 

 

 

Stockholders’ deficit:

 

 

 

 

 

Common stock, $.05 par value; 75,000,000 shares authorized; 18,860,482 shares issued and outstanding at both March 31, 2013 and December 31, 2012

 

939

 

939

 

Additional paid-in capital

 

79,892

 

79,872

 

Retained deficit

 

(89,607

)

(87,337

)

Accumulated other comprehensive loss

 

(2,346

)

(1,846

)

Total stockholders’ deficit

 

(11,122

)

(8,372

)

 

 

 

 

 

 

Total liabilities and stockholders’ deficit

 

$

1,301,640

 

$

1,377,529

 

 

See accompanying notes to consolidated financial statements

 

5



Table of Contents

 

First Mariner Bancorp and Subsidiary

Consolidated Statements of Operations

(dollars in thousands except per share data)

 

 

 

Three Months Ended

 

 

 

March 31,

 

 

 

2013

 

2012

 

 

 

(unaudited)

 

Interest income:

 

 

 

 

 

Loans

 

$

10,793

 

$

11,283

 

Securities and other earning assets

 

340

 

336

 

Total interest income

 

11,133

 

11,619

 

Interest expense:

 

 

 

 

 

Deposits

 

2,953

 

3,088

 

Short-term borrowings

 

15

 

33

 

Long-term borrowings

 

1,020

 

932

 

Total interest expense

 

3,988

 

4,053

 

Net interest income

 

7,145

 

7,566

 

Provision for loan losses

 

1,300

 

1,000

 

Net interest income after provision for loan losses

 

5,845

 

6,566

 

Noninterest income:

 

 

 

 

 

Total other-than-temporary impairment (“OTTI”) charges

 

 

38

 

Less: Portion included in other comprehensive income (pre-tax)

 

 

(498

)

Net OTTI charges on AFS securities

 

 

(460

)

Mortgage-banking revenue

 

9,789

 

8,950

 

ATM fees

 

516

 

718

 

Service fees on deposits

 

626

 

680

 

Gain on sale of AFS securities

 

31

 

 

Loss on sales and disposals of premises and equipment and other assets

 

 

(93

)

Commissions on sales of nondeposit investment products

 

45

 

62

 

Income from BOLI

 

259

 

293

 

Other

 

341

 

229

 

Total noninterest income

 

11,607

 

10,379

 

Noninterest expense:

 

 

 

 

 

Salaries and employee benefits

 

6,880

 

5,779

 

Occupancy

 

2,290

 

2,222

 

Furniture, fixtures, and equipment

 

389

 

362

 

Professional services

 

807

 

373

 

Advertising

 

442

 

188

 

Data processing

 

203

 

432

 

ATM servicing expenses

 

105

 

226

 

Write-downs, losses, and costs of real estate acquired through foreclosure

 

2,685

 

1,274

 

Federal Deposit Insurance Corporation (“FDIC”) insurance premiums

 

1,210

 

1,048

 

Service and maintenance

 

716

 

591

 

Corporate Insurance

 

794

 

473

 

Consulting fees

 

412

 

608

 

Postage

 

1,051

 

259

 

Other

 

1,738

 

1,495

 

Total noninterest expense

 

19,722

 

15,330

 

Net income before income taxes

 

(2,270

)

1,615

 

Income tax benefit

 

 

(205

)

Net (loss) income

 

$

(2,270

)

$

1,820

 

 

 

 

 

 

 

Net (loss) income per common share - basic and diluted

 

$

(0.12

)

$

0.10

 

 

See accompanying notes to consolidated financial statements.

 

6



Table of Contents

 

First Mariner Bancorp and Subsidiary

Consolidated Statements of Comprehensive (Loss) Income

(dollars in thousands)

 

 

 

Three Months Ended

 

 

 

March 31,

 

 

 

2013

 

2012

 

 

 

(unaudited)

 

Net (loss) income

 

$

(2,270

)

$

1,820

 

Other comprehensive (loss) income items:

 

 

 

 

 

Unrealized holding (losses) gains on securities arising during the period (net of tax (benefit) expense of $(326) and $304, respectively)

 

(482

)

449

 

Reclassification adjustment for net (gains) losses on securities (net of tax (expense) benefit of $(13) and $186, respectively) included in net (loss) income

 

(18

)

274

 

Total other comprehensive (loss) income

 

(500

)

723

 

Total comprehensive (loss) income

 

$

(2,770

)

$

2,543

 

 

See accompanying notes to consolidated financial statements.

 

7



Table of Contents

 

First Mariner Bancorp and Subsidiary

Consolidated Statements of Changes in Stockholders’ (Deficit) Equity

(dollars in thousands except per share data)

 

 

 

Three Months Ended March 31, 2013 (unaudited)

 

 

 

Number of

 

 

 

 

 

 

 

Accumulated

 

 

 

 

 

Shares of

 

 

 

Additional

 

 

 

Other

 

Total

 

 

 

Common

 

Common

 

Paid-in

 

Retained

 

Comprehensive

 

Stockholders’

 

 

 

Stock

 

Stock

 

Capital

 

Deficit

 

Loss

 

Deficit

 

Balance at December 31, 2012

 

18,860,482

 

$

939

 

$

79,872

 

$

(87,337

)

$

(1,846

)

$

(8,372

)

Net loss

 

 

 

 

(2,270

)

 

(2,270

)

Costs of common stock issued, net

 

 

 

(5

)

 

 

(5

)

Change in fair value of warrants

 

 

 

25

 

 

 

25

 

Changes in unrealized losses on securities, net of taxes

 

 

 

 

 

(500

)

(500

)

Balance at March 31, 2013

 

18,860,482

 

$

939

 

$

79,892

 

$

(89,607

)

$

(2,346

)

$

(11,122

)

 

 

 

Three Months Ended March 31, 2012 (unaudited)

 

 

 

Number of

 

 

 

 

 

 

 

Accumulated

 

 

 

 

 

Shares of

 

 

 

Additional

 

 

 

Other

 

Total

 

 

 

Common

 

Common

 

Paid-in

 

Retained

 

Comprehensive

 

Stockholders’

 

 

 

Stock

 

Stock

 

Capital

 

Deficit

 

Loss

 

Deficit

 

Balance at December 31, 2011

 

18,860,482

 

$

939

 

$

80,125

 

$

(103,454

)

$

(3,022

)

$

(25,412

)

Net income

 

 

 

 

1,820

 

 

1,820

 

Costs of common stock issued, net

 

 

 

(5

)

 

 

(5

)

Change in fair value of warrants

 

 

 

(101

)

 

 

(101

)

Changes in unrealized losses on securities, net of taxes

 

 

 

 

 

723

 

723

 

Balance at March 31, 2012

 

18,860,482

 

$

939

 

$

80,019

 

$

(101,634

)

$

(2,299

)

$

(22,975

)

 

See accompanying notes to consolidated financial statements.

 

8



Table of Contents

 

First Mariner Bancorp and Subsidiary

Consolidated Statements of Cash Flows

(dollars in thousands)

 

 

 

Three Months Ended March 31,

 

 

 

2013

 

2012

 

 

 

(unaudited)

 

Cash flows from operating activities:

 

 

 

 

 

Net (loss) income

 

$

(2,270

)

$

1,820

 

Adjustments to reconcile net (loss) income to net cash from operating activities:

 

 

 

 

 

Depreciation and amortization

 

669

 

728

 

(Accretion) amortization of unearned loan fees and costs, net

 

(52

)

133

 

Amortization of discounts on mortgage-backed securities, net

 

15

 

1

 

Origination fees and gains on sale of mortgage loans

 

(9,492

)

(8,255

)

Net OTTI charges on AFS securities

 

 

460

 

Gain on sale of AFS securities

 

(31

)

 

Loss on disposition and sale of premises and equipment and other assets

 

 

93

 

Decrease in accrued interest receivable

 

995

 

164

 

Provision for loan losses

 

1,300

 

1,000

 

Write-downs and losses on sale of real estate acquired through foreclosure

 

1,870

 

756

 

Increase in cash surrender value of BOLI

 

(259

)

(293

)

Originations of mortgage LHFS

 

(716,926

)

(460,375

)

Proceeds from sales of mortgage LHFS

 

892,495

 

463,044

 

Net decrease in accrued expenses and other liabilities

 

(1,630

)

(548

)

Net decrease (increase) in prepaids and other assets

 

84

 

(1,459

)

Net cash provided by (used in) operating activities

 

166,768

 

(2,731

)

Cash flows from investing activities:

 

 

 

 

 

Loan principal repayments, net

 

6,409

 

17,401

 

Sales of loans

 

5,537

 

 

Repurchase of loans previously sold

 

(722

)

 

Sale of restricted stock investments

 

3,582

 

 

Purchases of premises and equipment

 

(194

)

(180

)

Activity in AFS securities:

 

 

 

 

 

Maturities/calls/repayments

 

3,821

 

3,587

 

Sales

 

2,338

 

 

Purchases

 

(5,678

)

(2,994

)

Proceeds from sales of real estate acquired through foreclosure

 

6,554

 

1,503

 

Net cash provided investing activities

 

21,647

 

19,317

 

Cash flows from financing activities:

 

 

 

 

 

Net increase (decrease) in deposits

 

5,452

 

(1,519

)

Net decrease in other borrowed funds

 

(76,934

)

(298

)

Net costs of stock issuance

 

(5

)

(5

)

Net cash used in financing activities

 

(71,487

)

(1,822

)

Increase in cash and cash equivalents

 

116,928

 

14,764

 

Cash and cash equivalents at beginning of period

 

185,781

 

148,789

 

Cash and cash equivalents at end of period

 

$

302,709

 

$

163,553

 

Supplemental information:

 

 

 

 

 

Interest paid on deposits and borrowed funds

 

$

3,549

 

$

3,655

 

Real estate acquired in satisfaction of loans

 

$

1,020

 

$

2,555

 

Transfers of LHFS to loan portfolio

 

$

834

 

$

116

 

 

See accompanying notes to consolidated financial statements

 

9



Table of Contents

 

First Mariner Bancorp and Subsidiary

Notes to Consolidated Financial Statements

(Information as of and for the three months

ended March 31, 2013 and 2012 is unaudited)

 

(1)                                 Summary of Significant Accounting Policies

 

Basis of Presentation

 

The accompanying consolidated financial statements for First Mariner Bancorp have been prepared in accordance with the instructions for Form 10-Q and, therefore, do not include all information and notes necessary for a full presentation of financial condition, results of operations, and cash flows in conformity with accounting principles generally accepted in the United States of America (“U.S.”) (“GAAP”).  The consolidated financial statements should be read in conjunction with the audited financial statements included in First Mariner Bancorp’s Annual Report on Form 10-K as of and for the year ended December 31, 2012.  When used in these notes, the terms “the Company,”  “we,”  “us,” and “our” refer to First Mariner Bancorp and, unless the context requires otherwise, its consolidated subsidiary.

 

The consolidated financial statements include the accounts of First Mariner and its wholly owned subsidiary, 1st Mariner Bank (the “Bank”). All significant intercompany accounts and transactions have been eliminated in consolidation. Events occurring after the date of the financial statements were considered in the preparation of the financial statements.  Certain reclassifications have been made to amounts previously reported to conform to classifications made in 2013.

 

The consolidated financial statements as of March 31, 2013 and for the three months ended March 31, 2013 and 2012 are unaudited but include all adjustments, consisting only of normal recurring adjustments, which we consider necessary for a fair presentation of financial position and results of operations for those periods. The results of operations for the three months ended March 31, 2013 are not necessarily indicative of the results that will be achieved for the entire year or any future interim period.

 

The preparation of the financial statements in conformity with GAAP requires management to make estimates and judgments that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities as of the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. Material estimates that are particularly susceptible to significant change in the near term relate to the determination of the allowance for loan losses (the “allowance”), loan repurchases and related valuations, real estate acquired through foreclosure, impairment of AFS securities, valuations of financial instruments, and deferred income taxes. In connection with these determinations, management evaluates historical trends and ratios and, where appropriate, obtains independent appraisals for significant properties and prepares fair value analyses. Actual results could differ significantly from those estimates.

 

(2)                                 Going Concern Consideration

 

Due to the conditions and events discussed later in Note 5, there is substantial doubt regarding our ability to continue as a going concern.  Management is taking various steps designed to improve the Company’s and the Bank’s capital position.  The Bank has developed a written alternative capital plan designed to improve the Bank’s capital ratios.  Such plan is dependent upon a capital infusion to meet the capital requirements of the various regulatory agreements (see Note 5 for more information on the agreements).  The Company continues to work with its advisors in an attempt to improve capital ratios.

 

The consolidated financial statements presented above and the accompanying Notes have been prepared on a going concern basis, which contemplates the realization of assets and the discharge of liabilities in the normal course of business for the foreseeable future, and does not include any adjustment to reflect the possible future effects on the recoverability and classification of assets, or the amounts and classification of liabilities that may result from the outcome of any extraordinary regulatory action, which would affect our ability to continue as a going concern.

 

(3)                             Securities

 

The composition of our securities portfolio (all AFS) is as follows:

 

10



Table of Contents

 

 

 

March 31, 2013

 

 

 

Amortized

 

Unrealized

 

Unrealized

 

Estimated

 

 

 

Cost

 

Gains

 

Losses

 

Fair Value

 

 

 

(dollars in thousands)

 

Mortgage-backed securities

 

$

6,728

 

$

129

 

$

88

 

$

6,769

 

Trust preferred securities

 

6,136

 

 

2,064

 

4,072

 

U.S. government agency notes

 

39,060

 

88

 

10

 

39,138

 

U.S. Treasury securities

 

4,773

 

2

 

 

4,775

 

Equity securities - banks

 

1,288

 

20

 

472

 

836

 

Equity securities - mutual funds

 

750

 

32

 

 

782

 

 

 

$

58,735

 

$

271

 

$

2,634

 

$

56,372

 

 

 

 

December 31, 2012

 

 

 

Amortized

 

Unrealized

 

Unrealized

 

Estimated

 

 

 

Cost

 

Gains

 

Losses

 

Fair Value

 

 

 

(dollars in thousands)

 

Mortgage-backed securities

 

$

7,040

 

$

169

 

$

75

 

$

7,134

 

Trust preferred securities

 

11,246

 

79

 

2,144

 

9,181

 

U.S. government agency notes

 

33,435

 

107

 

5

 

33,537

 

U.S. Treasury securities

 

5,779

 

2

 

 

5,781

 

Equity securities - banks

 

1,288

 

16

 

48

 

1,256

 

Equity securities - mutual funds

 

750

 

37

 

 

787

 

 

 

$

59,538

 

$

410

 

$

2,272

 

$

57,676

 

 

Contractual maturities of debt securities at March 31, 2013 are shown below.  Actual maturities may differ from contractual maturities because borrowers have the right to call or prepay obligations with or without call or prepayment penalties.

 

 

 

Amortized

 

Estimated

 

 

 

Cost

 

Fair Value

 

 

 

(dollars in thousands)

 

Due in one year or less

 

$

15,998

 

$

16,055

 

Due after one year through five years

 

27,835

 

27,859

 

Due after ten years

 

6,136

 

4,071

 

Mortgage-backed securities

 

6,728

 

6,769

 

 

 

$

56,697

 

$

54,754

 

 

The following tables show the level of our gross unrealized losses and the fair value of the associated securities by type and maturity for AFS securities:

 

11



Table of Contents

 

 

 

March 31, 2013

 

 

 

Less than 12 months

 

12 months or more

 

Total

 

 

 

Estimated

 

Unrealized

 

Estimated

 

Unrealized

 

Estimated

 

Unrealized

 

 

 

Fair Value

 

Losses

 

Fair Value

 

Losses

 

Fair Value

 

Losses

 

 

 

(dollars in thousands)

 

Mortgage-backed securities

 

$

3,506

 

$

88

 

$

 

$

 

$

3,506

 

$

88

 

Trust preferred securities

 

 

 

4,071

 

2,064

 

4,071

 

2,064

 

U.S. government agency notes

 

12,729

 

10

 

 

 

12,729

 

10

 

Equity securities - banks

 

610

 

472

 

 

 

610

 

472

 

 

 

$

16,845

 

$

570

 

$

4,071

 

$

2,064

 

$

20,916

 

$

2,634

 

 

 

 

December 31, 2012

 

 

 

Less than 12 months

 

12 months or more

 

Total

 

 

 

Estimated

 

Unrealized

 

Estimated

 

Unrealized

 

Estimated

 

Unrealized

 

 

 

Fair Value

 

Losses

 

Fair Value

 

Losses

 

Fair Value

 

Losses

 

 

 

(dollars in thousands)

 

Mortgage-backed securities

 

$

3,552

 

$

75

 

$

 

$

 

$

3,552

 

$

75

 

Trust preferred securities

 

 

 

5,027

 

2,144

 

5,027

 

2,144

 

U.S. government agency notes

 

9,139

 

5

 

 

 

9,139

 

5

 

Equity securities - banks

 

1,035

 

47

 

123

 

1

 

1,158

 

48

 

 

 

$

13,726

 

$

127

 

$

5,150

 

$

2,145

 

$

18,876

 

$

2,272

 

 

The trust preferred securities that we hold in our securities portfolio are issued by other banks, bank holding companies, and insurance companies.  Certain of these securities have experienced declines in value since acquisition. These declines have occurred due to changes in the market which has limited the demand for these securities and reduced their liquidity.  We consider the decline in value for four pooled trust preferred securities to be other than temporary and recorded the credit-related portion of the impairment as net OTTI of $460,000 during the three months ended March 31, 2012.  No additional OTTI charges were required during 2013.  See additional information on the pooled trust preferred securities in Note 8.

 

The following shows the activity in OTTI related to credit losses for the three months ended March 31:

 

 

 

2013

 

2012

 

 

 

(dollars in thousands)

 

Balance at beginning of period

 

$

9,190

 

$

8,730

 

Additional OTTI taken for credit losses

 

 

460

 

Balance at end of period

 

$

9,190

 

$

9,190

 

 

All of the remaining securities that are impaired are so due to declines in fair values resulting from changes in interest rates or increased credit/liquidity spreads since the time they were purchased.  We have the intent to hold these debt securities to maturity, and, for debt and equity securities in a loss position, for the foreseeable future and do not intend, nor do we believe it is more likely than not, that we will be required to sell the securities before anticipated recovery. We expect these securities will be repaid in full, with no losses realized. As such, management considers the impairments to be temporary.

 

At March 31, 2013, we held securities with an aggregate carrying value (fair value) of $50.5 million that we have pledged as collateral for certain mortgage-banking and hedging activities, borrowings, government deposits, and customer deposits.

 

(4)                             Loans Receivable and Allowance for Loan Losses

 

Loans receivable are summarized as follows:

 

12



Table of Contents

 

 

 

March 31,

 

December 31,

 

 

 

2013

 

2012

 

 

 

(dollars in thousands)

 

Commercial

 

$

46,472

 

$

47,838

 

Commercial mortgage

 

257,319

 

263,763

 

Commercial construction

 

47,646

 

49,931

 

Consumer construction

 

18,443

 

18,668

 

Residential mortgage

 

110,872

 

111,376

 

Consumer

 

115,621

 

117,581

 

Total loans

 

596,373

 

609,157

 

Unearned loan fees, net

 

1,156

 

1,239

 

 

 

$

597,529

 

$

610,396

 

 

Included in consumer loan totals in the above table are overdrawn commercial and retail checking accounts totaling $216,000 as of March 31, 2013 and $919,000 as of December 31, 2012.

 

Transferred Loans

 

In accordance with the Financial Accounting Standards Board (“FASB”) guidance on mortgage-banking activities, any loan which is originally originated for sale into the secondary market and which we subsequently elect to transfer into the Company’s loan portfolio is valued at fair value at the time of the transfer with any decline in value recorded as a charge against earnings.

 

Information on the activity in transferred loans and related accretable yield is as follows for the three months ended March 31:

 

 

 

Loan Balance

 

Accretable Yield

 

Total

 

 

 

2013

 

2012

 

2013

 

2012

 

2013

 

2012

 

 

 

(dollars in thousands)

 

Beginning balance

 

$

17,501

 

$

14,008

 

$

220

 

$

266

 

$

17,281

 

$

13,742

 

Loans transferred

 

834

 

116

 

 

 

834

 

116

 

Charge-offs

 

 

(72

)

 

(8

)

 

(64

)

Payments/accretion

 

 

(1,935

)

(12

)

(211

)

12

 

(1,724

)

Ending balance

 

$

18,335

 

$

12,117

 

$

208

 

$

47

 

$

18,127

 

$

12,070

 

 

At March 31, 2013, we had pledged loans with a carrying value of $101.0 million as collateral for Federal Home Loan Bank (“FHLB”) advances.

 

Credit Quality

 

Management has an established methodology to determine the adequacy of the allowance for loan losses that assesses the risks and losses inherent in the loan portfolio.  For purposes of determining the allowance for loan losses, we have segmented our loan portfolio by product type.  Our portfolio loan segments are commercial, commercial mortgage, commercial construction, consumer construction, residential mortgage, and consumer.  We have looked at all segments to determine if subcategorization into classes is warranted based upon our credit review methodology.  We have divided consumer loans into two classes, (1) home equity and second mortgage loans and (2) other consumer loans.

 

To establish the allocated portion of the allowance for loan losses, loans are pooled by portfolio class and an historical loss percentage is applied to each class.  The historical loss percentage is based upon a rolling 24-month history, which gives us the most relevant charge-off data.  The result of that calculation for each loan class is then applied to the current loan portfolio balances to determine the required allocated portion of the allowance for loan loss level per loan class.  We then apply additional loss multipliers to the different classes of loans to reflect various environmental factors.  This amount is considered our unallocated reserve.  These factors capture any changes in economic trends, portfolio composition, real estate trends, as well as other factors and are meant to supplement the required allocated reserves.  For individually evaluated loans (impaired loans), we do additional analyses to determine the impairment amount.  In general, this impairment is included as part of the allocated allowance for loan losses for troubled debt restructures (“TDR” or “TDRs”) and is charged off for all other impaired loans.  These loss estimates are performed under multiple economic scenarios to establish a range of potential outcomes for each criterion.  Management applies judgment to develop its own view of loss probability within that range, using external and internal parameters with the objective of establishing an allowance for loss inherent within these portfolios as of the reporting date.

 

13



Table of Contents

 

The following tables presents by portfolio segment, the changes in the allowance for loan losses, and the recorded investment in loans:

 

As of and for the three months ended March 31, 2013:

 

 

 

 

 

Commercial

 

Commercial

 

Consumer

 

Residential

 

 

 

 

 

 

 

 

 

Commercial

 

Mortgage

 

Construction

 

Construction

 

Mortgage

 

Consumer

 

Unallocated

 

Total

 

 

 

(dollars in thousands)

 

Beginning Balance

 

$

2,070

 

$

1,254

 

$

414

 

$

20

 

$

1,774

 

$

2,040

 

$

3,862

 

$

11,434

 

Charge-offs

 

(129

)

(1,087

)

(88

)

 

(295

)

(157

)

 

(1,756

)

Recoveries

 

2

 

11

 

 

 

114

 

120

 

 

247

 

Net charge-offs

 

(127

)

(1,076

)

(88

)

 

(181

)

(37

)

 

(1,509

)

Provision for (reversal of) loan losses

 

210

 

1,499

 

111

 

(9

)

289

 

(126

)

(674

)

1,300

 

Ending Balance

 

$

2,153

 

$

1,677

 

$

437

 

$

11

 

$

1,882

 

$

1,877

 

$

3,188

 

$

11,225

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Ending balance - individually evaluated for impairment

 

$

121

 

$

36

 

$

 

$

 

$

146

 

$

 

$

 

$

303

 

Ending balance - collectively evaluated for impairment

 

2,032

 

1,641

 

437

 

11

 

1,736

 

1,877

 

3,188

 

10,922

 

 

 

$

2,153

 

$

1,677

 

$

437

 

$

11

 

$

1,882

 

$

1,877

 

$

3,188

 

$

11,225

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Ending loan balance - individually evaluated for impairment

 

$

9,472

 

$

28,934

 

$

11,069

 

$

822

 

$

18,003

 

$

922

 

 

 

$

69,222

 

Ending loan balance - collectively evaluated for impairment

 

37,064

 

228,349

 

36,544

 

17,788

 

92,808

 

115,754

 

 

 

528,307

 

 

 

$

46,536

 

$

257,283

 

$

47,613

 

$

18,610

 

$

110,811

 

$

116,676

 

 

 

$

597,529

 

 

14



Table of Contents

 

As of and for the three months ended March 31, 2012:

 

 

 

 

 

Commercial

 

Commercial

 

Consumer

 

Residential

 

 

 

 

 

 

 

 

 

Commercial

 

Mortgage

 

Construction

 

Construction

 

Mortgage

 

Consumer

 

Unallocated

 

Total

 

 

 

(dollars in thousands)

 

Beginning Balance

 

$

2,768

 

$

2,011

 

$

1,809

 

$

156

 

$

2,711

 

$

2,632

 

$

1,714

 

$

13,801

 

Charge-offs

 

(187

)

(226

)

(147

)

(7

)

(514

)

(392

)

 

(1,473

)

Recoveries

 

 

 

52

 

 

36

 

105

 

 

193

 

Net charge-offs

 

(187

)

(226

)

(95

)

(7

)

(478

)

(287

)

 

(1,280

)

Provision for (reversal of) loan losses

 

197

 

86

 

143

 

21

 

417

 

173

 

(37

)

1,000

 

Ending Balance

 

$

2,778

 

$

1,871

 

$

1,857

 

$

170

 

$

2,650

 

$

2,518

 

$

1,677

 

$

13,521

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Ending balance - individually evaluated for impairment

 

$

4

 

$

44

 

$

 

$

 

$

191

 

$

 

$

 

$

239

 

Ending balance - collectively evaluated for impairment

 

2,774

 

1,827

 

1,857

 

170

 

2,459

 

2,518

 

1,677

 

13,282

 

 

 

$

2,778

 

$

1,871

 

$

1,857

 

$

170

 

$

2,650

 

$

2,518

 

$

1,677

 

$

13,521

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Ending loan balance - individually evaluated for impairment

 

$

4,750

 

$

28,993

 

$

12,498

 

$

573

 

$

18,542

 

$

1,015

 

 

 

$

66,371

 

Ending loan balance - collectively evaluated for impairment

 

47,851

 

281,146

 

41,400

 

16,573

 

100,432

 

126,725

 

 

 

614,127

 

 

 

$

52,601

 

$

310,139

 

$

53,898

 

$

17,146

 

$

118,974

 

$

127,740

 

 

 

$

680,498

 

 

We use creditworthiness categories to grade commercial loans.  Our internal grading system is based on experiences with similarly graded loans.  Category ratings are reviewed each quarter.  Our internal risk ratings are as follows:

 

Superior Credit Quality (“RR1”) — This category includes credits that are secured by up to 95% advance against cash balances, municipal or corporate bonds carrying an A rating or better (subject to maturity), U.S. Government securities (subject to maturity), and fully marketable securities of companies with an A or better debt rating.  In addition, the borrower must have a reasonable financial condition evidenced by complete financial statements.

 

High Credit Quality (“RR2”) — This category includes credits that are secured by up to 70% advance against municipal or corporate bonds carrying an A rating or better, U.S. Government securities, and marketable securities of companies with an A or better debt rating.  For individual credits, the credit must be secured by any of the aforementioned items or first deed of trust on residential owner-occupied property with a loan-to-value (“LTV”) ratio of 80% or less and adequate cash flow to service the debt.  Permanent real estate loans on fully-leased properties with A-rated tenants and a 70% or less LTV ratio with income coverage of 1.25 times or higher may qualify for this rating, with confirmation of tenants’ financial condition.  No commercial construction loans may carry this rating at inception.  At March 31, 2013 and December 31, 2012, none of our loans carried this risk rating.

 

Above Average Credit Quality (“RR3”) — This category includes business loans to publicly traded companies with a B rating or better, commercial construction loans with a contingent-free take-out or substantial pre-leasing (75% or more of leasable space) with an  LTV ratio of 70% or less, residential construction loans with pre-sold units and an LTV ratio of 70% or less as long as sales are on a noncontingent basis and the overall project is progressing on schedule as originally determined, loans to individuals with liquid assets and strong net worth and the additional ability to service the debt from sources unrelated to the purpose of the credit extension, and monitored credits to borrowers of sound financial condition with approved advance rates providing adequate margin so that collateral can be easily liquidated within 90 days or less.

 

15



Table of Contents

 

Average/Satisfactory Credit Quality (“RR4”) — In general, this category includes small-to-medium sized companies with satisfactory financial condition, cash flow, profitability, and balance sheet and income statement ratios, term loans and revolving credits with annual clean-up requirements, the majority of retail commercial credits, loans to partnerships or small businesses, most wholesale sales finance lines, wholesale distributors whose capital position and profitability are at Risk Management Association averages, and loans to individuals with acceptable financial condition and sufficient net cash flow to service the debt as long as the source of repayment is identifiable and sufficient to liquidate the debt within an acceptable period of time and a secondary source of repayment is evident.

 

Acceptable With Care  (“RR5”) — This category includes secured loans to small- or medium-sized companies which have suffered a financial setback where a convincing plan for correction demonstrates the deficiency is temporary in nature, loans with debt service coverage ratios below or LTV ratios above policy guidelines, most construction and development loans, permanent loans underwritten based on pro forma rents as opposed to historical or actual rents, real estate loans where the project is moderately off the original projections as to cost estimates or absorption, and loans where the interest reserve is no longer adequate but the customer or guarantor has a proven ability to carry the interest expense out of pocket for an extended time period without undue financial strain. These credits require additional attention by the account officer and/or loan administration.

 

Watch Credits (“RR6”) — This category includes loans to borrowers who have experienced a temporary setback or deterioration in financial condition that should correct itself during the next twelve months, companies whose financial condition has been marginally acceptable for a period of time and prospects for significant improvement are limited, loans to individuals with marginal financial condition, and most credits for start-up operations.  Also included in this category are real estate loans where the project is moderately off original projections, interest reserve may be depleted, with the borrower or guarantor having a questionable or unproved ability to pay interest out of pocket.  Such loans may have modest cost overruns that will cause a shortage in the budget, raising question as to how the project will be completed.  These loans may have a good collateral position, additional collateral, or strong guarantors to mitigate the risk. These credits are considered marginally acceptable, and greater than usual attention is warranted by the account officer and/or loan operations.

 

Special Mention (“RR7”) — special mention credits are characterized as adequately covered by collateral (if any) and/or the paying capacity of the borrower, but are subject to one or more deteriorating trends.  These credits constitute an undue and unwarranted credit risk, but not to the point of justifying a classification of substandard.  These credits have potential weaknesses which, if not examined and corrected, may weaken the asset or inadequately protect the Bank’s credit position at some future date.  This category should not be used to list assets that bear risks usually associated with the particular type of financing.  Assets with this rating may have the potential for significant weakness.  Loans where weaknesses are evident and significant must be considered for more serious criticism. Examples of credits carried in special mention may include the following:

 

·      loans which are fully covered by collateral and cash flow, but where margins are inadequate;

 

·                  loans to borrowers with a strong capital base, who are experiencing modest losses;

 

·                  loans to borrowers with very strong cash flows, but experiencing modest losses;

 

·                  credits that are subject to manageable, but excessive, leverage;

 

·                  credits with material collateral documentation exceptions, but which appear to be strong credits;

 

·                  credits to customers who have not provided the Bank with current or satisfactory financial data (unless the credit is secured by liquid marketable collateral or guaranteed by financially sound parties);

 

·                  credits that the account officer may be unable to supervise properly because of a lack of expertise or lack of control over the collateral and/or its condition;

 

·                  loans with deficient documentation or other deviations from prudent lending practices; and

 

·                  loans with strong guarantors and/or secondary sources of cash flow are the support for repayment.

 

Substandard (“RR8”) — Substandard loans are inadequately protected by the current sound worth and paying capacity of the obligor or the collateral pledged, if any.  Loans so classified have a well-defined weakness or weaknesses, which jeopardize the orderly liquidation of the debt.  They are characterized by the distinct possibility that the Bank will sustain some loss if the deficiencies are not corrected. The borrower’s financial condition indicates an inability to repay, even if restructured. 

 

16



Table of Contents

 

Prospects for improvement in the borrower’s financial condition are poor.  Primary repayment source appears to be shifting from cash flow to liquidation of collateral. Examples of substandard credits may include the following:

 

·                  credits adequately covered by collateral value, where repayment is dependent upon the sale of nonliquid collateral, nontrading assets, or from guarantors;

 

·                  loans secured by collateral greater than the amount of the credit, but where cash flow is inadequate to amortize the debt over a reasonable period of time;

 

·                  credits with negative financial trends coupled with material collateral documentation deficiencies or where there is a high potential for loss of principal;

 

·                  unsecured loans to borrowers whose financial condition does not warrant unsecured advances;

 

·                  credits where the borrower is in bankruptcy or the work out effort is proceeding toward legal remedies including foreclosure; and

 

·                  all nonaccrual loans.

 

Doubtful (“RR9”) — Doubtful classifications have all the weaknesses inherent in those classified substandard with the added characteristic that the weaknesses make collection or liquidation in full on the basis of currently known facts, conditions, and values highly questionable and improbable.  A doubtful classification may be appropriate in cases where significant risk exposures are perceived, but loss cannot be determined because of specific, reasonable, and pending factors which may strengthen and work to the advantage of the credit in the near term.  Account officers attempt to identify any principal loss in the credit, where possible, thereby limiting the excessive use of the doubtful classification.  The classification is a deferral of the estimated loss until its more exact status may be determined.  Pending factors include proposed mergers, acquisition or liquidation procedures, new capital injection, perfecting liens on additional collateral, and refinancing plans.  At March 31, 2013 and December 31, 2012, none of our loans carried this risk rating.

 

Loss (“RR10”) — Losses must be taken as soon as they are realized.  In some instances and on a temporary basis, a portion of a loan may receive this rating (split rating) when the actual loss cannot be currently identified.  In these instances, additional facts or information is necessary to determine the final amount to be charged against the loan loss reserve. When applied for these purposes, this risk rating may be used for a period not to exceed nine months.  Subsequent to the identification of this split rating, the remaining balance will be risk rated substandard.  This category includes advances in excess of calculated current fair value which are considered uncollectible and do not warrant continuance as bankable assets.  This classification does not mean that the loan has absolutely no recovery or salvage value, but rather it is not practical or desirable to defer writing off this basically worthless asset even though partial recovery may occur in the future.  Credits to distressed borrowers lacking an identifiable and realistic source of repayment are generally charged off.  Loans where repayment is dependent upon events that are not predictable in terms of result or timing (such as protracted litigation) are generally charged off.  At March 31, 2013 and December 31, 2012, none of our loans carried this risk rating.

 

The following table shows the credit quality breakdown of our commercial loan portfolio by class as of March 31, 2013 and December 31, 2012:

 

 

 

Commercial

 

Commercial Mortgage

 

Commercial Construction

 

Consumer Construction

 

Total

 

 

 

2013

 

2012

 

2013

 

2012

 

2013

 

2012

 

2013

 

2012

 

2013

 

2012

 

 

 

(dollars in thousands)

 

RR8

 

$

2,609

 

$

2,678

 

$

21,804

 

$

26,262

 

$

10,101

 

$

10,708

 

$

 

$

 

$

34,514

 

$

39,648

 

RR7

 

7,921

 

7,268

 

20,529

 

17,174

 

10,469

 

10,355

 

 

 

38,919

 

34,797

 

RR6

 

9,053

 

9,966

 

48,379

 

48,754

 

13,920

 

15,151

 

 

 

71,352

 

73,871

 

RR5

 

15,780

 

16,008

 

95,890

 

101,312

 

12,412

 

12,781

 

 

 

124,082

 

130,101

 

RR4

 

11,165

 

11,971

 

67,550

 

67,044

 

711

 

907

 

18,610

 

18,837

 

98,036

 

98,759

 

RR3

 

 

 

3,131

 

3,168

 

 

 

 

 

3,131

 

3,168

 

RR1

 

8

 

16

 

 

 

 

 

 

 

8

 

16

 

 

 

$

46,536

 

$

47,907

 

$

257,283

 

$

263,714

 

$

47,613

 

$

49,902

 

$

18,610

 

$

18,837

 

$

370,042

 

$

380,360

 

 

We do not individually grade residential mortgage or consumer loans.  Such loans are classified as performing or nonperforming.  Loan performance is reviewed each quarter.  The following table shows performing and nonperforming (nonaccrual) residential mortgage and consumer loans by class as of March 31, 2013 and December 31, 2012:

 

17



Table of Contents

 

 

 

Residential Mortgage

 

Home Equity & 2nd Mortgage

 

Other Consumer

 

Total

 

 

 

2013

 

2012

 

2013

 

2012

 

2013

 

2012

 

2013

 

2012

 

 

 

(dollars in thousands)

 

Nonaccrual loans

 

$

8,383

 

$

8,826

 

$

910

 

$

961

 

$

12

 

$

12

 

$

9,305

 

$

9,799

 

Performing loans

 

102,428

 

102,519

 

97,999

 

100,844

 

17,755

 

16,874

 

218,182

 

220,237

 

 

 

$

110,811

 

$

111,345

 

$

98,909

 

$

101,805

 

$

17,767

 

$

16,886

 

$

227,487

 

$

230,036

 

 

The following tables show the aging of our loans receivable by class.  Also included are loans that are 90 days or more past due as to interest and principal and still accruing because they are well-secured and in the process of collection.

 

March 31, 2013:

 

 

 

 

 

 

 

90 Days

 

 

 

 

 

 

 

90 Days

 

 

 

30-59 Days

 

60-89 Days

 

or More

 

Total

 

 

 

Total

 

or More

 

 

 

Past Due

 

Past Due

 

Past Due

 

Past Due

 

Current

 

Loans

 

and Accruing

 

 

 

(dollars in thousands)

 

Commercial

 

$

 

$

 

$

1,776

 

$

1,776

 

$

44,760

 

$

46,536

 

$

 

Commercial mortgage

 

8,206

 

88

 

15,522

 

23,816

 

233,467

 

257,283

 

 

Commercial construction

 

2,032

 

 

4,045

 

6,077

 

41,536

 

47,613

 

 

Consumer construction

 

1,536

 

 

822

 

2,358

 

16,252

 

18,610

 

 

Residential mortgage

 

11,961

 

 

8,725

 

20,686

 

90,125

 

110,811

 

342

 

Home equity and 2nd mortgage

 

2,871

 

150

 

1,121

 

4,142

 

94,767

 

98,909

 

211

 

Other consumer

 

203

 

17

 

13

 

233

 

17,534

 

17,767

 

1

 

 

 

$

26,809

 

$

255

 

$

32,024

 

$

59,088

 

$

538,441

 

$

597,529

 

$

554

 

 

December 31, 2012:

 

 

 

 

 

 

 

90 Days

 

 

 

 

 

 

 

90 Days

 

 

 

30-59 Days

 

60-89 Days

 

or More

 

Total

 

 

 

Total

 

or More

 

 

 

Past Due

 

Past Due

 

Past Due

 

Past Due

 

Current

 

Loans

 

and Accruing

 

 

 

(dollars in thousands)

 

Commercial

 

$

221

 

$

 

$

2,110

 

$

2,331

 

$

45,576

 

$

47,907

 

$

 

Commercial mortgage

 

8,233

 

1,698

 

21,269

 

31,200

 

232,514

 

263,714

 

 

Commercial construction

 

2,127

 

 

4,637

 

6,764

 

43,138

 

49,902

 

 

Consumer construction

 

1,075

 

331

 

645

 

2,051

 

16,786

 

18,837

 

 

Residential mortgage

 

6,847

 

7,650

 

9,048

 

23,545

 

87,800

 

111,345

 

222

 

Home equity and 2nd mortgage

 

1,287

 

416

 

961

 

2,664

 

99,141

 

101,805

 

 

Other consumer

 

13

 

7

 

12

 

32

 

16,854

 

16,886

 

 

 

 

$

19,803

 

$

10,102

 

$

38,682

 

$

68,587

 

$

541,809

 

$

610,396

 

$

222

 

 

Impaired loans include nonaccrual loans and TDRs.  The following tables show the breakout of impaired loans by class:

 

18



Table of Contents

 

 

 

 

 

 

 

 

 

Three Months Ended March 31,

 

 

 

March 31, 2013

 

2013

 

2012

 

 

 

 

 

Unpaid

 

 

 

Average

 

Interest

 

 

 

Average

 

Interest

 

 

 

 

 

Recorded

 

Principal

 

Related

 

Recorded

 

Income

 

Charge-

 

Recorded

 

Income

 

Charge-

 

 

 

Investment

 

Balance

 

Allowance

 

Investment

 

Recognized

 

Offs

 

Investment

 

Recognized

 

Offs

 

 

 

(dollars in thousands)

 

With no related allowance:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Commercial

 

$

2,190

 

$

2,190

 

$

 

$

2,362

 

$

11

 

$

129

 

$

4,697

 

$

43

 

$

187

 

Commercial mortgage

 

$

26,860

 

$

26,860

 

$

 

$

29,710

 

$

176

 

$

1,087

 

$

22,774

 

$

249

 

$

226

 

Commercial construction

 

$

11,069

 

$

11,069

 

$

 

$

11,380

 

$

119

 

$

88

 

$

11,782

 

$

90

 

$

147

 

Consumer construction

 

$

822

 

$

822

 

$

 

$

733

 

$

2

 

$

 

$

646

 

$

5

 

$

7

 

Residential mortgage

 

$

11,606