x
|
QUARTERLY
REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
1934
|
¨
|
TRANSITION
REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
1934
|
Maryland
|
32-0135202
|
(State
or other jurisdiction of
|
(I.R.S.
Employer
|
incorporation
or organization)
|
Identification
No.)
|
Large
accelerated filer
|
¨
|
Accelerated
filer ¨
|
Non-accelerated
filer
|
¨
|
Smaller
reporting company x
|
(Do
not check if a smaller reporting
company)
|
Common
Stock, Par Value $0.01
|
Outstanding
at November 15, 2010
|
(Title
of Class)
|
2,884,249
shares
|
PAGE
|
|
PART
I – FINANCIAL INFORMATION
|
|
ITEM
1 - UNAUDITED FINANCIAL STATEMENTS
|
|
Consolidated
Balance Sheet at September 30, 2010 and December 31, 2009
|
3
|
Consolidated
Statements of Income for the Three and Nine Months
|
|
Ended
September 30, 2010 and September 30, 2009
|
4
|
Consolidated
Statement of Changes in Stockholders’ Equity
|
|
for
the Nine Months Ended September 30, 2010
|
5
|
Consolidated
Statements of Cash Flows for the Nine Months Ended
|
|
September
30, 2010 and September 30, 2009
|
6
|
Notes
to Unaudited Consolidated Financial Statements
|
7
|
ITEM
2 - MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
|
17
|
ITEM
3 – QUANTITATIVE AND QUALITIATIVE DISCLOSURES ABOUT MARKET
RISK
|
24
|
ITEM
4 - CONTROLS AND PROCEDURES
|
24
|
Part
II - OTHER INFORMATION
|
|
ITEM
1 - LEGAL PROCEEDINGS
|
25
|
ITEM
1A - RISK FACTORS
|
25
|
ITEM
2 - UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF
PROCEEDS
|
25
|
ITEM
3 - DEFAULTS UPON SENIOR SECURITIES
|
25
|
ITEM
4 – (REMOVED AND RESERVED
|
25
|
ITEM
5 - OTHER INFORMATION
|
25
|
ITEM
6 - EXHIBITS
|
25
|
Section
302 Certifications
|
|
Section
906 Certifications
|
September 30, 2010
|
December 31, 2009
|
|||||||
(Unaudited)
|
||||||||
ASSETS
|
||||||||
Cash
and cash equivalents:
|
||||||||
Cash
on hand and due from banks
|
$ | 4,935,335 | $ | 2,583,131 | ||||
Overnight
deposits with FHLB
|
24,354 | 515,927 | ||||||
Total
cash and cash equivalents
|
4,959,689 | 3,099,058 | ||||||
Securities
AFS
|
34,750,106 | 33,712,724 | ||||||
Securities
HTM
|
2,570,000 | 3,928,167 | ||||||
Loans
held for sale
|
832,347 | 51,970 | ||||||
Loans
receivable, net of allowance for loan losses of $3,046,058
and
|
||||||||
$3,660,344
as of September 30, 2010 and December 31, 2009,
respectively
|
161,684,007 | 171,219,105 | ||||||
Foreclosed
real estate and other repossessed assets
|
3,591,575 | 3,579,895 | ||||||
Federal
Home Loan Bank stock, at cost
|
4,196,900 | 4,196,900 | ||||||
Premises
and equipment
|
6,165,192 | 6,563,683 | ||||||
Accrued
interest receivable
|
1,213,131 | 1,230,287 | ||||||
Intangible
assets
|
700,419 | 919,757 | ||||||
Prepaid
FDIC premiums
|
1,051,147 | 1,314,850 | ||||||
Deferred
tax asset
|
492,899 | 559,235 | ||||||
Other
assets
|
3,461,915 | 3,130,063 | ||||||
Total
assets
|
$ | 225,669,327 | $ | 233,505,694 | ||||
LIABILITIES
AND STOCKHOLDERS' EQUITY
|
||||||||
Liabilities:
|
||||||||
Deposits
|
$ | 156,550,836 | $ | 158,099,809 | ||||
Advances
from borrowers for taxes and insurance
|
207,227 | 105,419 | ||||||
Federal
Home Loan Bank advances
|
37,000,000 | 44,400,000 | ||||||
Note
payable
|
- | 630,927 | ||||||
REPO
sweep accounts
|
6,386,899 | 5,407,791 | ||||||
Accrued
expenses and other liabilities
|
1,666,751 | 1,809,266 | ||||||
Total
liabilities
|
201,811,713 | 210,453,212 | ||||||
Stockholders'
equity:
|
||||||||
Common
stock ($0.01 par value 20,000,000 shares authorized
|
||||||||
3,191,999
shares issued)
|
31,920 | 31,920 | ||||||
Additional
paid-in capital
|
23,796,238 | 23,722,767 | ||||||
Retained
earnings
|
2,593,552 | 2,000,264 | ||||||
Treasury
stock at cost (307,750 shares
|
(2,963,918 | ) | (2,963,918 | ) | ||||
Unearned
compensation
|
(69,094 | ) | (161,678 | ) | ||||
Accumulated
other comprehensive income
|
468,916 | 423,127 | ||||||
Total
stockholders' equity
|
23,857,614 | 23,052,482 | ||||||
Total
liabilities and stockholders' equity
|
$ | 225,669,327 | $ | 233,505,694 |
For the Three Months
|
For the Nine Months
|
|||||||||||||||
Ended September 30,
|
Ended September 30,
|
|||||||||||||||
2010
|
2009
|
2010
|
2009
|
|||||||||||||
(Unaudited)
|
(Unaudited)
|
|||||||||||||||
Interest
income:
|
||||||||||||||||
Interest
and fees on loans
|
$ | 2,590,033 | $ | 2,762,789 | $ | 7,683,432 | $ | 8,570,404 | ||||||||
Interest
and dividends on investments
|
||||||||||||||||
Taxable
|
107,002 | 154,682 | 346,409 | 413,204 | ||||||||||||
Tax-exempt
|
40,739 | 57,038 | 152,005 | 171,584 | ||||||||||||
Interest
on mortgage-backed securities
|
168,757 | 136,177 | 490,603 | 430,928 | ||||||||||||
Total
interest income
|
2,906,531 | 3,110,686 | 8,672,449 | 9,586,120 | ||||||||||||
Interest
expense:
|
||||||||||||||||
Interest
on deposits
|
560,106 | 795,356 | 1,799,663 | 2,736,532 | ||||||||||||
Interest
on borrowings
|
291,228 | 422,715 | 908,467 | 1,279,247 | ||||||||||||
Total
interest expense
|
851,334 | 1,218,071 | 2,708,130 | 4,015,779 | ||||||||||||
Net
interest income
|
2,055,197 | 1,892,615 | 5,964,319 | 5,570,341 | ||||||||||||
Provision
for loan losses
|
352,711 | 2,976,642 | 958,639 | 3,492,711 | ||||||||||||
Net
interest income (expense) after provision for loan losses
|
1,702,486 | (1,084,027 | ) | 5,005,680 | 2,077,630 | |||||||||||
Non
Interest income:
|
||||||||||||||||
Service
charges and other fees
|
206,024 | 217,159 | 609,538 | 661,488 | ||||||||||||
Mortgage
banking activities
|
447,319 | 244,550 | 1,010,634 | 1,167,626 | ||||||||||||
Gain
on sale of available-for-sale investments
|
- | - | 496,817 | 1,227 | ||||||||||||
Net
gain (loss) on sale of premises and equipment,
|
||||||||||||||||
real
estate owned and other repossessed assets
|
(1,146 | ) | (2,128 | ) | 52,720 | 25,350 | ||||||||||
Insurance
& brokerage commissions
|
- | 15,157 | - | 129,798 | ||||||||||||
Other
|
65,267 | 16,637 | 391,603 | 67,997 | ||||||||||||
Total
non interest income
|
717,464 | 491,375 | 2,561,312 | 2,053,486 | ||||||||||||
Non
interest expenses:
|
||||||||||||||||
Compensation
and employee benefits
|
1,203,327 | 1,095,509 | 3,568,567 | 3,414,767 | ||||||||||||
FDIC
Insurance premiums
|
88,820 | 106,199 | 277,368 | 376,807 | ||||||||||||
Advertising
|
42,320 | 31,784 | 98,312 | 93,655 | ||||||||||||
Occupancy
|
277,658 | 294,567 | 878,471 | 897,054 | ||||||||||||
Amortization
of intangible assets
|
73,113 | 73,113 | 219,338 | 199,983 | ||||||||||||
Service
bureau charges
|
71,230 | 76,533 | 236,926 | 255,043 | ||||||||||||
Professional
services
|
79,008 | 93,588 | 331,210 | 359,711 | ||||||||||||
Other
|
512,725 | 305,341 | 1,363,511 | 962,826 | ||||||||||||
Total
non interest expenses
|
2,348,201 | 2,076,634 | 6,973,703 | 6,559,846 | ||||||||||||
Income
(loss) from continuing operations before income tax
benefit
|
71,749 | (2,669,286 | ) | 593,289 | (2,428,731 | ) | ||||||||||
Income
tax expense from continuing operations
|
- | 1,148,845 | - | 1,200,585 | ||||||||||||
Net
income (loss) from continuing operations
|
71,749 | (3,818,130 | ) | 593,289 | (3,629,316 | ) | ||||||||||
Loss
from discontinued operations, net of income tax benefit
|
||||||||||||||||
of
$43,209
|
- | - | - | (83,875 | ) | |||||||||||
Gain
on sale of discontinued operations, net of income tax
expense
|
||||||||||||||||
of
$19,585
|
- | - | - | 38,017 | ||||||||||||
Loss
from discontinued operations
|
- | - | - | (45,858 | ) | |||||||||||
Net
Income (loss)
|
$ | 71,749 | $ | (3,818,130 | ) | $ | 593,289 | $ | (3,675,174 | ) | ||||||
Per
share data:
|
||||||||||||||||
Income
(loss) per share from continuing operations
|
||||||||||||||||
Basic
|
$ | 0.02 | $ | (1.32 | ) | $ | 0.21 | $ | (1.26 | ) | ||||||
Diluted
|
$ | 0.02 | $ | (1.32 | ) | $ | 0.21 | $ | (1.26 | ) | ||||||
Loss
per share from discontinued operations
|
||||||||||||||||
Basic
|
$ | - | $ | - | $ | - | $ | (0.02 | ) | |||||||
Diluted
|
$ | - | $ | - | $ | - | $ | (0.02 | ) | |||||||
Net
income (loss) per share
|
||||||||||||||||
Basic
|
$ | 0.02 | $ | (1.32 | ) | $ | 0.21 | $ | (1.27 | ) | ||||||
Diluted
|
$ | 0.02 | $ | (1.32 | ) | $ | 0.21 | $ | (1.27 | ) | ||||||
Dividends
per common share
|
$ | - | $ | - | $ | - | $ | - |
Accumulated
|
||||||||||||||||||||||||||||
Additional
|
Other
|
|||||||||||||||||||||||||||
Common
|
Treasury
|
Paid-in
|
Unearned
|
Retained
|
Comprehensive
|
|||||||||||||||||||||||
Stock
|
Stock
|
Capital
|
Compensation
|
Earnings
|
Income
|
Total
|
||||||||||||||||||||||
Balance
at December 31, 2009
|
$ | 31,920 | $ | (2,963,918 | ) | $ | 23,722,767 | $ | (161,678 | ) | $ | 2,000,263 | $ | 423,127 | $ | 23,052,481 | ||||||||||||
Stock-based
compensation
|
- | - | 73,471 | 92,584 | - | - | 166,055 | |||||||||||||||||||||
Net
income for the period
|
- | - | - | - | 593,289 | - | 593,289 | |||||||||||||||||||||
Change
in unrealized gain:
|
||||||||||||||||||||||||||||
on
available-for-sale securities
|
||||||||||||||||||||||||||||
(net
of tax of $23,588)
|
- | - | - | - | - | 45,789 | 45,789 | |||||||||||||||||||||
Total
comprehensive income
|
- | - | - | - | - | - | 639,078 | |||||||||||||||||||||
Balance
at September 30, 2010
|
$ | 31,920 | $ | (2,963,918 | ) | $ | 23,796,238 | $ | (69,094 | ) | $ | 2,593,552 | $ | 468,916 | $ | 23,857,614 |
For
Nine Months Ended
|
||||||||
September
30,
|
||||||||
2010
|
2009
|
|||||||
(Unaudited)
|
||||||||
Cash
Flows from Operating Activities:
|
||||||||
Net
income (loss)
|
$ | 593,289 | $ | (3,675,174 | ) | |||
Adjustments
to reconcile net income (loss) to net cash from operating
activities:
|
||||||||
Depreciation and amortization
|
608,538 | 624,223 | ||||||
Provision for loan loss
|
958,639 | 3,492,711 | ||||||
Amortization and accretion on securities
|
93,265 | 50,224 | ||||||
Gain on sale of investment securities
|
(496,817 | ) | (1,227 | ) | ||||
ESOP contribution
|
- | 13,122 | ||||||
Stock-based compensation
|
166,055 | 158,409 | ||||||
Gain on sale of loans held for sale
|
(436,243 | ) | (492,288 | ) | ||||
Originations of loans held for sale
|
(30,128,868 | ) | (42,604,156 | ) | ||||
Proceeds from sale of loans held for sale
|
29,784,734 | 43,153,444 | ||||||
Gain on sale of fixed assets
|
(9,423 | ) | (47,974 | ) | ||||
Net
change in
|
||||||||
Accrued interest receivable
|
17,156 | 100,578 | ||||||
Other assets
|
(125,559 | ) | (814,186 | ) | ||||
Prepaid FDIC insurance premiums
|
263,703 | - | ||||||
Deferred income tax benefit
|
66,336 | 1,117,022 | ||||||
Accrued expenses and other liabilities
|
(384,078 | ) | 773,590 | |||||
Net
cash provided by operating activities
|
970,727 | 1,848,318 | ||||||
Cash
Flows from Investing Activities:
|
||||||||
Net decrease in loans
|
8,576,460 | 6,694,579 | ||||||
Proceeds from maturity and sale of securities
|
22,347,073 | 10,072,221 | ||||||
Proceeds from sale of property and equipment
|
30,874 | 1,501,066 | ||||||
Net change in discontinued operations
|
- | 1,533,942 | ||||||
Purchase of securities
|
(21,553,359 | ) | (17,226,243 | ) | ||||
Purchase of premises and equipment
|
(12,160 | ) | (118,810 | ) | ||||
Net
cash provided by investing activities
|
9,388,888 | 2,456,755 | ||||||
Cash
Flows from Financing Activities:
|
||||||||
Net decrease in deposits
|
(1,548,973 | ) | (9,420,589 | ) | ||||
Net increase (decrease) in Repo Sweep accounts
|
979,108 | (2,574,972 | ) | |||||
Net increase in advances from borrowers
|
101,808 | 84,490 | ||||||
Additions to advances from Federal Home Loan Bank and notes payable
.
|
12,925,000 | 55,560,000 | ||||||
Repayments of Federal Home Loan Bank advances and notes
payable
|
(20,955,927 | ) | (49,147,724 | ) | ||||
Net
cash used for financing activities
|
(8,498,984 | ) | (5,498,795 | ) | ||||
Net
increase (decrease) in cash and cash equivalents
|
1,860,631 | (1,193,722 | ) | |||||
Cash
and cash equivalents at beginning of period
|
3,099,058 | 3,470,311 | ||||||
Cash
and cash equivalents at end of period
|
$ | 4,959,689 | $ | 2,276,589 | ||||
Supplemental
disclosure of cash flow information:
|
||||||||
Cash
paid during the period for income taxes
|
$ | - | $ | - | ||||
Cash
paid during the period for interest
|
$ | 2,796,474 | $ | 4,197,740 |
September 30, 2010
|
||||||||||||||||
Amortized
Cost
|
Gross
Unrealized
Gains
|
Gross
Unrealized
Losses
|
Market
Value
|
|||||||||||||
(in thousands)
|
||||||||||||||||
Securities
Available for Sale
|
||||||||||||||||
U.S.
Government and agency obligations
|
$ | 7,524 | $ | 109 | $ | - | 7,633 | |||||||||
Municipal
obligations
|
4,893 | 271 | - | 5,164 | ||||||||||||
Corporate
bonds & other obligations
|
1,000 | 14 | - | 1,014 | ||||||||||||
Mortgage-backed
securities
|
20,621 | 318 | 1 | 20,938 | ||||||||||||
Equity
investments
|
2 | - | 1 | 1 | ||||||||||||
Total
|
$ | 34,040 | $ | 712 | $ | 2 | $ | 34,750 | ||||||||
Securities
Held to Maturity
|
||||||||||||||||
Municipal
notes
|
$ | 2,570 | $ | 191 | $ | - | $ | 2,761 | ||||||||
December
31, 2009
|
||||||||||||||||
Amortized
Cost
|
Gross
Unrealized
Gains
|
Gross
Unrealized
Losses
|
Market
Value
|
|||||||||||||
(in
thousands)
|
||||||||||||||||
Securities
Available for Sale
|
||||||||||||||||
U.S.
Government and agency obligations
|
$ | 8,220 | $ | 37 | $ | - | 8,257 | |||||||||
Municipal
obligations
|
7,870 | 183 | - | 8,053 | ||||||||||||
Corporate
bonds & other obligations
|
1,000 | 2 | - | 1,002 | ||||||||||||
Mortgage-backed
securities
|
15,979 | 419 | 1 | 16,397 | ||||||||||||
Equity
investments
|
3 | 1 | - | 4 | ||||||||||||
Total
|
$ | 33,072 | $ | 642 | $ | 1 | $ | 33,713 | ||||||||
Securities
Held to Maturity
|
||||||||||||||||
Municipal
notes
|
$ | 3,928 | $ | 159 | $ | 3 | $ | 4,084 |
September 30, 2010
|
||||||||
Amortized
Cost
|
Market
Value
|
|||||||
(in thousands)
|
||||||||
Available
For Sale:
|
||||||||
Due
in one year or less
|
$ | 3,294 | $ | 3,347 | ||||
Due
after one year through five years
|
7,795 | 7,942 | ||||||
Due
in five year through ten years
|
1,847 | 1,951 | ||||||
Due
after ten years
|
481 | 571 | ||||||
Subtotal
|
13,417 | 13,811 | ||||||
Equity
securities
|
2 | 1 | ||||||
Mortgage-backed
securities
|
20,621 | 20,938 | ||||||
Total
|
$ | 34,040 | $ | 34,750 | ||||
Held
To Maturity:
|
||||||||
Due
in one year or less
|
$ | 85 | $ | 86 | ||||
Due
after one year through five years
|
365 | 390 | ||||||
Due
in five year through ten years
|
630 | 683 | ||||||
Due
after ten years
|
1,490 | 1,602 | ||||||
Total
|
$ | 2,570 | $ | 2,761 |
|
·
|
Reduce
its overall credit risk in the investment
portfolio.
|
|
·
|
Improve
its risk-based capital position as bonds sold were 20% risk-weighted while
the replacement bonds are 0%
risk-weighted.
|
|
·
|
Because
of the timing of the restructuring, the Company was able to capture some
previously unrealized gains.
|
|
·
|
The
Company did forego a higher yield (approximately 10 basis points), but was
able to minimize the yield loss by buying longer-term GNMAs, which was
possible because of the minimal level of interest-rate risk inherent in
the Company’s balance sheet.
|
September 30, 2010
|
||||||||||||||||
Gross
Unrealized
Losses
|
Gross
Unrealized
Losses
|
|||||||||||||||
Fair
Value
|
<12
months
|
Fair
Value
|
> 12
months
|
|||||||||||||
(in thousands)
|
||||||||||||||||
Available
For Sale:
|
||||||||||||||||
U.S.
Government and agency obligations
|
$ | - | $ | - | $ | - | $ | - | ||||||||
Corporate
bonds and other obligations
|
- | - | - | - | ||||||||||||
Municipal
obligations
|
- | - | - | - | ||||||||||||
Mortgage-backed
securities
|
1,994 | 1 | - | - | ||||||||||||
Equity
securities
|
- | - | 2 | 1 | ||||||||||||
Total
|
$ | 1,994 | $ | 1 | $ | 4 | $ | 1 | ||||||||
December
31, 2009
|
||||||||||||||||
Gross
Unrealized
Losses
|
Gross
Unrealized
Losses
|
|||||||||||||||
Fair
Value
|
<12
months
|
Fair
Value
|
>
12
months
|
|||||||||||||
(in
thousands)
|
||||||||||||||||
Available
For Sale:
|
||||||||||||||||
U.S.
Government and agency obligations
|
$ | - | $ | - | $ | - | $ | - | ||||||||
Corporate
bonds and other obligations
|
- | - | - | - | ||||||||||||
Municipal
obligations
|
- | - | 13 | 1 | ||||||||||||
Mortgage-backed
securities
|
- | - | - | - | ||||||||||||
Equity
securities
|
- | - | - | - | ||||||||||||
Total
|
$ | - | $ | - | $ | 13 | $ | 1 | ||||||||
Held
to Maturity:
|
||||||||||||||||
Municipal
notes
|
$ | - | $ | - | $ | 27 | $ | 3 |
At September 30,
|
At December 31,
|
|||||||
2010
|
2009
|
|||||||
(in thousands)
|
||||||||
Real
estate loans:
|
||||||||
Residential
mortgage
|
$ | 74,261 | $ | 81,620 | ||||
Commercial
loans:
|
||||||||
Secured
by real estate
|
62,527 | 62,376 | ||||||
Other
|
8,574 | 9,873 | ||||||
Total
commercial loans
|
71,101 | 72,249 | ||||||
Consumer
loans:
|
||||||||
Secured
by real estate
|
17,425 | 18,732 | ||||||
Other
|
2,182 | 2,553 | ||||||
Total
consumer loans
|
19,607 | 21,285 | ||||||
Total
gross loans
|
$ | 164,969 | $ | 175,154 | ||||
Less:
|
||||||||
Net
deferred loan fees
|
(239 | ) | (275 | ) | ||||
Allowance
for loan losses
|
(3,046 | ) | (3,660 | ) | ||||
Total
loans, net
|
$ | 161,684 | $ | 171,219 |
Weighted-Average
|
|||||||||||
Weighted-
|
Remaining
|
||||||||||
Average
|
Contractual Term
|
Aggregate
|
|||||||||
Options
|
Shares
|
Exercise Price
|
(Years)
|
Intrinsic Value
|
|||||||
Outstanding
at January 1, 2010
|
188,132 | $ | 9.47 | ||||||||
Granted
|
0 | N/A | |||||||||
Exercised
|
0 | N/A | |||||||||
Forfeited
or expired
|
(2,000 | ) | $ | 9.54 | |||||||
Oustanding
at September 30, 2010
|
186,132 | $ | 9.47 |
5.82
|
$0
|
||||||
Options
Exercisable at September 30, 2010
|
148,774 | $ | 9.46 |
4.38
|
$0
|
Weighted-Average
|
||||||||
Grant-Date
|
||||||||
Nonvested Shares
|
Shares
|
Fair Value
|
||||||
Nonvested
at January 1, 2010
|
73,476 | $ | 2.11 | |||||
Granted
|
0 | N/A | ||||||
Vested
|
(34,118 | ) | $ | 2.11 | ||||
Forfeited
|
(2,000 | ) | $ | 2.10 | ||||
Nonvested
at September 30, 2010
|
37,358 | $ | 2.10 |
For the Nine Months Ended
|
||||||||||||||||
September 30, 2009
|
||||||||||||||||
(in Thousands)
|
||||||||||||||||
Bank
|
ICA
|
Eliminations
|
Total
|
|||||||||||||
Interest
Income
|
$ | 9,586 | $ | 4 | $ | (4 | ) | $ | 9,586 | |||||||
Interest
Expense
|
4,016 | 4 | (4 | ) | 4,016 | |||||||||||
Net Interest Income -
Before provision for loan losses
|
5,570 | - | - | 5,570 | ||||||||||||
Provision
for Loan Losses
|
3,493 | - | - | 3,493 | ||||||||||||
Net Interest Income -
After provision for loan losses
|
2,078 | - | - | 2,078 | ||||||||||||
Other
Income
|
2,073 | 191 | - | 2,264 | ||||||||||||
Operating
Expenses
|
6,548 | 292 | - | 6,840 | ||||||||||||
Loss - Before
federal income tax benefit
|
(2,397 | ) | (101 | ) | - | (2,498 | ) | |||||||||
Federal
Income Tax expense (benefit)
|
1,212 | (34 | ) | - | 1,178 | |||||||||||
Net
loss
|
$ | (3,609 | ) | $ | (67 | ) | $ | - | $ | (3,676 | ) | |||||
Depreciation
and amortization
|
$ | 577 | $ | 47 | $ | - | $ | 624 | ||||||||
Assets
|
$ | 239,411 | $ | - | $ | - | $ | 239,411 | ||||||||
Expenditures
related to long-lived assets:
|
||||||||||||||||
Goodwill
|
$ | - | $ | - | $ | - | $ | - | ||||||||
Intangible
assets
|
- | - | - | - | ||||||||||||
Property
and equipment
|
119 | - | - | 119 | ||||||||||||
Total
|
$ | 119 | $ | - | $ | - | $ | 119 |
Assets and Liabilities Measured at Fair Value on a Recurring Basis at September 30, 2010
|
||||||||||||||||
(in Thousands)
|
||||||||||||||||
Quoted Prices in
Active Markets
for Identical
Assets (Level 1)
|
Significant
Other
Observable
Inputs
(Level 2)
|
Significant
Unobservable
Inputs
(Level 3)
|
Balance at
September 30,
2010
|
|||||||||||||
Assets
|
||||||||||||||||
Investment
securities- available-for-sale:
|
||||||||||||||||
US
Government & agency obligations
|
$ | - | $ | 7,633 | $ | - | $ | 7,633 | ||||||||
Municipal
obligations
|
- | 5,164 | - | 5,164 | ||||||||||||
Corporate
bonds & other obligations
|
- | 1,014 | - | 1,014 | ||||||||||||
Mortgage-backed
securities
|
- | 20,938 | - | 20,938 | ||||||||||||
Equity
investments
|
- | 1 | - | 1 | ||||||||||||
Total
investment securities - available-for-sale
|
$ | - | $ | 34,750 | $ | - | $ | 34,750 | ||||||||
Liabilities
|
||||||||||||||||
None
|
Assets and Liabilities Measured at Fair Value on a Recurring Basis at September 30, 2009
|
||||||||||||||||
(in Thousands)
|
||||||||||||||||
Quoted Prices in
Active Markets
for Identical
Assets (Level 1)
|
Significant
Other
Observable
Inputs
(Level 2)
|
Significant
Unobservable
Inputs
(Level 3)
|
Balance at
September 30,
2009
|
|||||||||||||
Assets
|
||||||||||||||||
Investment
securities- available-for-sale:
|
||||||||||||||||
US
Government & agency obligations
|
$ | - | $ | 8,257 | $ | - | $ | 8,257 | ||||||||
Municipal
obligations
|
- | 8,053 | - | 8,053 | ||||||||||||
Corporate
bonds & other obligations
|
- | 1,002 | - | 1,002 | ||||||||||||
Mortgage-backed
securities
|
- | 16,397 | - | 16,397 | ||||||||||||
Equity
investments
|
- | 4 | - | 4 | ||||||||||||
Total
investment securities - available-for-sale
|
$ | - | $ | 33,713 | $ | - | $ | 33,713 | ||||||||
Liabilities
|
||||||||||||||||
None
|
Assets Measured at Fair Value on a Nonrecurring Basis at September 30, 2010
|
||||||||||||||||||||||||
(in Thousands)
|
||||||||||||||||||||||||
Balance at
September 30,
2010
|
Quoted Prices
in Active
Markets for
Identical
Assets
(Level 1)
|
Significant
Other
Observable
Inputs
(Level 2)
|
Significant
Unobservable
Inputs
(Level 3)
|
Change in fair
value for the
three-month
period ended
September 30,
2010
|
Change in fair
value for the
nine-month
period ended
September 30,
2010
|
|||||||||||||||||||
Impaired
loans accounted for under FASB ASC 310-10
|
$ | 3,138 | $ | - | $ | - | $ | 3,138 | $ | 267 | $ | 868 | ||||||||||||
Other
real estate owned -residential mortgages
|
$ | 615 | $ | - | $ | - | $ | 615 | $ | 16 | $ | 55 | ||||||||||||
Other
real estate owned - commercial
|
$ | 2,977 | $ | - | $ | - | $ | 2,977 | $ | - | $ | 260 | ||||||||||||
Total
change in fair value
|
$ | 283 | $ | 1,183 |
Assets Measured at Fair Value on a Nonrecurring Basis at September 30, 2009
|
||||||||||||||||||||||||
(in Thousands)
|
||||||||||||||||||||||||
Balance at
September 30,
2009
|
Quoted Prices
in Active
Markets for
Identical
Assets (Level
1)
|
Significant
Other
Observable
Inputs (Level
2)
|
Significant
Unobservable
Inputs (Level
3)
|
Change in fair
value for the
three-month
period ended
September 30,
2009
|
Change in fair
value for the
nine-month
period ended
September 30,
2009
|
|||||||||||||||||||
Impaired
loans accounted for under FASB ASC 310-10
|
$ | 7,155 | $ | - | $ | - | $ | 4,948 | $ | 482 | $ | 508 | ||||||||||||
Other
real estate owned -residential mortgages
|
$ | 512 | $ | - | $ | - | $ | 512 | $ | 22 | $ | 59 | ||||||||||||
Other
real estate owned - commercial
|
$ | 3,022 | $ | - | $ | - | $ | 3,022 | $ | 592 | $ | 622 | ||||||||||||
Total
change in fair value
|
$ | 1,096 | $ | 1,189 |
September 30, 2010
|
December 31, 2009
|
|||||||||||||||
(In Thousands)
|
||||||||||||||||
Carrying
Amounts
|
Estimated
Fair Value
|
Carrying
Amounts
|
Estimated
Fair Value
|
|||||||||||||
Financial
assets:
|
||||||||||||||||
Cash
and cash equivalents
|
$ | 4,960 | $ | 4,960 | $ | 3,099 | $ | 3,099 | ||||||||
Securities
available for sale
|
34,750 | 34,750 | 33,713 | 33,713 | ||||||||||||
Securities
held to maturity
|
2,570 | 2,761 | 3,928 | 4,084 | ||||||||||||
Loans
and loans held for sale - Net
|
162,516 | 164,031 | 171,271 | 171,544 | ||||||||||||
Federal
Home Loan Bank stock
|
4,197 | 4,197 | 4,197 | 4,197 | ||||||||||||
Accrued
interest receivable
|
1,213 | 1,213 | 1,230 | 1,230 | ||||||||||||
Financial
liabilities:
|
||||||||||||||||
Customer
deposits
|
156,551 | 157,779 | 158,100 | 159,081 | ||||||||||||
Federal
Home Loan Bank advances
|
37,000 | 37,831 | 44,400 | 45,552 | ||||||||||||
Note
payable
|
- | - | 631 | 634 | ||||||||||||
REPO
sweep accounts
|
6,387 | 6,387 | 5,408 | 5,408 | ||||||||||||
Accrued
interest payable
|
233 | 233 | 322 | 322 |
Quarter ended September 30, 2010
|
||||||||||||
Compared to
|
||||||||||||
Quarter ended September 30, 2009
|
||||||||||||
Increase (Decrease) Due to:
|
||||||||||||
Volume
|
Rate
|
Total
|
||||||||||
(In thousands)
|
||||||||||||
Interest-earning
assets:
|
||||||||||||
Loans
receivable
|
$ | (303 | ) | $ | 130 | $ | (173 | ) | ||||
Investment
securities
|
- | 8 | $ | 8 | ||||||||
Other
investments
|
14 | (53 | ) | $ | (39 | ) | ||||||
Total interest-earning assets
|
(289 | ) | 85 | (204 | ) | |||||||
Interest-bearing
liabilities:
|
- | |||||||||||
Savings
Deposits
|
1 | (3 | ) | (2 | ) | |||||||
Money
Market/NOW accounts
|
(14 | ) | 13 | (1 | ) | |||||||
Certificates
of Deposit
|
(82 | ) | (150 | ) | (232 | ) | ||||||
Deposits
|
(95 | ) | (140 | ) | (235 | ) | ||||||
Borrowed
funds
|
(39 | ) | (93 | ) | (132 | ) | ||||||
Total interest-bearing liabilities
|
(134 | ) | (233 | ) | (367 | ) | ||||||
Change
in net interest income
|
$ | (155 | ) | $ | 318 | $ | 163 |
|
·
|
During
the quarter ended September 30, 2009, two large commercial relationships
were placed on non-accrual status, resulting in additional provision
totaling almost $1.5 million during that
quarter.
|
|
·
|
During
the quarter ended September 30, 2010, we established approximately
$500,000 in specific reserves on two out-of-state commercial participation
loans due to new information
received.
|
|
·
|
Despite
the $500,000 in specific reserves, our provision for loan losses was only
$353,000 because our history of commercial charge-offs resulted in a
higher estimated loss factor being applied to our entire portfolio of
commercial loans for the quarter ended September 30, 2009 as compared to
the quarter ended September 30, 2010 when a declining commercial
charge-off history resulted in a decrease in the estimated loss factor
applied to the portfolio of commercial
loans.
|
Delinquent
|
||||||||||||
Portfolio
|
Loans
|
Non-Accrual
|
||||||||||
Balance
|
Over 90 Days
|
Loans
|
||||||||||
(Dollars in thousands)
|
||||||||||||
At September 30, 2010
|
||||||||||||
Real
estate loans:
|
||||||||||||
Construction
|
$ | 4,067 | $ | - | $ | 1,859 | ||||||
One - to four - family
|
73,481 | 320 | 2,537 | |||||||||
Commercial Mortgages
|
59,240 | - | 1,223 | |||||||||
Home equity lines of credit/ Junior liens
|
17,425 | - | 243 | |||||||||
Commercial
loans
|
8,574 | - | 56 | |||||||||
Consumer
loans
|
2,182 | 6 | 6 | |||||||||
Total gross loans
|
164,969 | 326 | 5,924 | |||||||||
Less:
|
||||||||||||
Net deferred loan fees
|
(239 | ) | (2 | ) | (4 | ) | ||||||
Allowance for loan losses
|
(3,046 | ) | - | (573 | ) | |||||||
Total loans, net
|
$ | 161,684 | $ | 324 | $ | 5,347 | ||||||
At December 31, 2009
|
||||||||||||
Real
estate loans:
|
||||||||||||
Construction
|
$ | 9,019 | $ | - | $ | 3,546 | ||||||
One - to four - family
|
81,193 | 89 | 2,944 | |||||||||
Commercial Mortgages
|
53,784 | 2,697 | 2,204 | |||||||||
Home equity lines of credit/Junior liens
|
18,732 | 21 | 157 | |||||||||
Commercial
loans
|
9,873 | - | 96 | |||||||||
Consumer
loans
|
2,553 | 32 | - | |||||||||
Total gross loans
|
175,154 | 2,839 | 8,947 | |||||||||
Less:
|
||||||||||||
Net deferred loan fees
|
(275 | ) | (1 | ) | (11 | ) | ||||||
Allowance for loan losses
|
(3,660 | ) | (80 | ) | (954 | ) | ||||||
Total loans, net
|
$ | 171,219 | $ | 2,758 | $ | 7,982 |
Nine Months ended September 30, 2010
|
||||||||||||
Compared to
|
||||||||||||
Nine Months ended September 30, 2009
|
||||||||||||
Increase (Decrease) Due to:
|
||||||||||||
Volume
|
Rate
|
Total
|
||||||||||
(In
thousands)
|
||||||||||||
Interest-earning
assets:
|
||||||||||||
Loans
receivable
|
$ | (975 | ) | $ | 88 | $ | (887 | ) | ||||
Investment
securities
|
72 | (50 | ) | 22 | ||||||||
Other
investments
|
26 | (75 | ) | (49 | ) | |||||||
Total interest-earning assets
|
(877 | ) | (37 | ) | (914 | ) | ||||||
Interest-bearing
liabilities:
|
- | |||||||||||
Savings
Deposits
|
1 | (10 | ) | (9 | ) | |||||||
Money
Market/NOW accounts
|
45 | (96 | ) | (51 | ) | |||||||
Certificates
of Deposit
|
(319 | ) | (558 | ) | (877 | ) | ||||||
Deposits
|
(273 | ) | (664 | ) | (937 | ) | ||||||
Borrowed
funds
|
(50 | ) | (321 | ) | (371 | ) | ||||||
Total interest-bearing liabilities
|
(323 | ) | (985 | ) | (1,308 | ) | ||||||
Change
in net interest income
|
$ | (554 | ) | $ | 948 | $ | 394 |
September 30,
|
December 31,
|
|||||||
2010
|
2009
|
|||||||
(Dollars in thousands)
|
||||||||
Total
non-accrual loans
|
$ | 5,924 | $ | 8,947 | ||||
Accrual
loans delinquent 90 days or more:
|
||||||||
One- to four-family residential
|
320 | 89 | ||||||
Other real estate loans
|
- | 2,696 | ||||||
Construction
|
- | - | ||||||
Purchased Out-of-State
|
- | - | ||||||
Commerical
|
- | - | ||||||
Consumer & other
|
6 | 54 | ||||||
Total accrual loans delinquent 90 days or
more
|
$ | 326 | $ | 2,839 | ||||
Total
nonperforming loans (1)
|
6,250 | 11,786 | ||||||
Total
real estate owned-residential mortgages (2)
|
612 | 584 | ||||||
Total
real estate owned-Commercial (2)
|
2,976 | 2,985 | ||||||
Total
real estate owned-Consumer & other repossessed assets
(2)
|
3 | 11 | ||||||
Total
nonperforming assets
|
$ | 9,841 | $ | 15,366 | ||||
Total
nonperforming loans to loans receivable
|
3.79 | % | 6.73 | % | ||||
Total
nonperforming assets to total assets
|
4.36 | % | 6.58 | % |
(1)
|
All
of the Bank's loans delinquent more than 90 days are classified as
nonperforming.
|
(2)
|
Represents
the net book value of property acquired by the Bank through foreclosure or
deed in lieu of foreclosure. Upon acquisition, this property is recorded
at the lower of its fair market value or the principal balance of the
related loan.
|
|
·
|
An
enhanced quarterly watch credit review process to proactively manage
higher risk loans;
|
|
·
|
The
addition of a Chief Credit Officer to oversee loan underwriting and
collection processes;
|
|
·
|
The
creation of a Senior Loan Committee to review all commercial loans above
individual lender authority;
|
|
·
|
Annual
third-party commercial loan review function which provides overall
portfolio and individual loan
feedback;
|
|
·
|
Quarterly
review of Criticized Asset Reports for each credit over
$50,000;
|
|
·
|
Developed
quarterly targets for reducing levels of non-performing assets including
an action plan for each non-performing asset;
and
|
|
·
|
Expanded
our Collection Department to enhance our call program for delinquent
loans.
|
Regulatory
|
Minimum to be
|
|||||||||||||||||||||||
Actual
|
Minimum
|
Well Capitalized
|
||||||||||||||||||||||
Amount
|
Ratio
|
Amount
|
Ratio
|
Amount
|
Ratio
|
|||||||||||||||||||
Dollars in Thousands
|
||||||||||||||||||||||||
Tier
1 (Core) capital ( to
|
||||||||||||||||||||||||
adjusted
assets)
|
$ | 21,171 | 9.48 | % | $ | 8,935 | 4.00 | % | $ | 11,169 | 5.00 | % | ||||||||||||
Total
risk-based capital ( to risk-
|
||||||||||||||||||||||||
weighted
assets)
|
$ | 23,098 | 15.00 | % | $ | 12,319 | 8.00 | % | $ | 15,399 | 10.00 | % | ||||||||||||
Tier
1 risk-based capital ( to
|
||||||||||||||||||||||||
risk
weighted assets)
|
$ | 21,171 | 13.75 | % | $ | 6,160 | 4.00 | % | $ | 9,239 | 6.00 | % | ||||||||||||
Tangible
Capital ( to
|
||||||||||||||||||||||||
tangible
assets)
|
$ | 21,171 | 9.48 | % | $ | 3,351 | 1.50 | % | $ | 4,468 | 2.00 | % |
|
(a)
|
Not
applicable
|
|
(b)
|
Not
applicable
|
|
(a)
|
Not
applicable
|
|
(b)
|
There
was no material change to the procedures by which security holders may
recommend nominees to the Company’s Board of Directors during the period
covered by the Form 10-Q.
|
FIRST
FEDERAL OF NORTHERN MICHIGAN BANCORP,
INC.
|
By:
|
/s/Michael W. Mahler
|
|
Michael
W. Mahler
|
||
Chief
Executive Officer
|
||
Date: November
15, 2010
|
||
By:
|
/s/Amy E. Essex
|
|
Amy
E. Essex, Chief Financial Officer
|
||
(Principal
Financial and Accounting Officer)
|
||
Date:
November 15, 2010
|