UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For Quarterly Period Ended June 30, 2009 Commission File No.
000-29640
COMMUNITY FIRST BANCORPORATION
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(Exact name of registrant as specified in its charter)
South Carolina 58-2322486
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(State or other jurisdiction of (IRS Employer Identification No.)
incorporation or organization)
449 HIGHWAY 123 BYPASS
SENECA, SOUTH CAROLINA 29678
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(Address of principal executive offices, zip code)
(864) 886-0206
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(Registrant's telephone number, including area code)
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 during the preceding 12 months (or for such shorter period that the
registrant was required to submit and post such files).
Yes [ ] No [ ] (Not yet applicable to Registrant)
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 [ ]
Non-accelerated filer [ ] Smaller reporting company [X]
(Do not check if a 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 ]
Indicate the number of shares outstanding of each of the issuer's
classes of common stock, as of the latest practicable date: Common Stock, no par
or stated value, 3,609,811 Shares Outstanding on August 6, 2009
COMMUNITY FIRST BANCORPORATION
FORM 10-Q
Index
Page
----
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
Consolidated Balance Sheets ..................................................................... 3
Consolidated Statements of Income ............................................................... 4
Consolidated Statements of Changes in Shareholders' Equity ...................................... 5
Consolidated Statements of Cash Flows ........................................................... 6
Notes to Unaudited Consolidated Financial Statements ............................................ 7
Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations ........... 16
Item 3. Quantitative and Qualitative Disclosures About Market Risk ...................................... 26
Item 4T. Controls and Procedures ......................................................................... 26
PART II - OTHER INFORMATION
Item 4. Submission of Matters to a Vote of Security Holders ............................................. 26
Item 6. Exhibits ........................................................................................ 27
SIGNATURE 28
2
PART I - FINANCIAL INFORMATION
Item 1. - Financial Statements
COMMUNITY FIRST BANCORPORATION
Consolidated Balance Sheets
(Unaudited)
June 30, December 31,
2009 2008
----- ----
(Dollars in thousands)
Assets
Cash and due from banks ............................................................. $ 8,348 $ 9,204
Interest bearing balances due from banks ............................................ 16,872 12,969
Federal funds sold .................................................................. - 18,793
--------- ---------
Cash and cash equivalents ....................................................... 25,220 40,966
Securities available-for-sale ....................................................... 139,815 126,636
Securities held-to-maturity (fair value $10,588 for 2009
and $12,238 for 2008) ........................................................ 10,278 11,910
Other investments ................................................................... 1,307 1,220
Loans ............................................................................... 273,245 270,413
Allowance for loan losses ....................................................... (5,465) (5,475)
--------- ---------
Loans - net .................................................................. 267,780 264,938
Premises and equipment - net ........................................................ 8,598 8,655
Accrued interest receivable ......................................................... 2,528 2,776
Bank-owned life insurance ........................................................... 8,666 8,483
Other assets ........................................................................ 5,562 3,889
--------- ---------
Total assets ................................................................. $ 469,754 $ 469,473
========= =========
Liabilities
Deposits
Noninterest bearing ............................................................. $ 45,963 $ 41,962
Interest bearing ................................................................ 368,158 374,153
--------- ---------
Total deposits ............................................................... 414,121 416,115
Accrued interest payable ............................................................ 4,177 3,045
Long-term debt ...................................................................... 9,500 9,500
Other liabilities ................................................................... 1,429 885
--------- ---------
Total liabilities ............................................................ 429,227 429,545
--------- ---------
Shareholders' equity
Preferred stock - no par value; 10,000,000 shares authorized;
None issued and outstanding ..................................................... - -
Common stock - no par value; 10,000,000 shares authorized;
issued and outstanding - 3,609,811 for 2009 and
3,564,279 for 2008 .............................................................. 37,570 37,084
Additional paid-in capital .......................................................... 748 748
Retained earnings ................................................................... 2,672 1,769
Accumulated other comprehensive income (loss) ....................................... (463) 327
--------- ---------
Total shareholders' equity ................................................... 40,527 39,928
--------- ---------
Total liabilities and shareholders' equity ................................... $ 469,754 $ 469,473
========= =========
See accompanying notes to unaudited consolidated financial statements.
3
COMMUNITY FIRST BANCORPORATION
Consolidated Statements of Income
(Unaudited)
Period Ended June 30,
---------------------
Three Months Six Months
------------ ----------
2009 2008 2009 2008
---- ---- ---- ----
(Dollars in thousands, except per share)
Interest income
Loans, including fees ..................................... $ 4,197 $ 4,523 $ 8,246 $ 9,255
Interest bearing balances due from banks .................. 6 5 22 7
Securities
Taxable ................................................. 1,456 1,172 2,962 2,189
Tax-exempt .............................................. 202 208 411 414
Other investments ......................................... - 12 - 25
Federal funds sold ........................................ - 117 3 503
------- ------- ------- -------
Total interest income ................................. 5,861 6,037 11,644 12,393
------- ------- ------- -------
Interest expense
Time deposits $100M and over .............................. 990 1,057 2,083 2,210
Other deposits ............................................ 1,757 2,042 3,573 4,438
Long-term debt ............................................ 91 48 182 87
------- ------- ------- -------
Total interest expense ................................ 2,838 3,147 5,838 6,735
------- ------- ------- -------
Net interest income ............................................ 3,023 2,890 5,806 5,658
Provision for loan losses ...................................... 700 280 1,450 410
------- ------- ------- -------
Net interest income after provision ............................ 2,323 2,610 4,356 5,248
------- ------- ------- -------
Other income
Service charges on deposit accounts ....................... 348 375 671 735
ATM interchange and other fees ............................ 156 141 296 270
Credit life insurance commissions ......................... 3 3 9 7
Gains on sales of securities
available-for-sale .................................... 90 - 90 -
Increase in value of bank-owned
life insurance ........................................ 91 93 183 186
Other income .............................................. 64 13 74 36
------- ------- ------- -------
Total other income .................................... 752 625 1,323 1,234
------- ------- ------- -------
Other expenses
Salaries and employee benefits ............................ 1,244 1,108 2,425 2,145
Net occupancy expense ..................................... 134 130 269 249
Furniture and equipment expense ........................... 100 106 193 216
Amortization of computer software ......................... 112 81 207 156
ATM interchange and related expenses ...................... 101 95 214 205
Directors' fees ........................................... 34 34 57 61
FDIC insurance assessment ................................. 300 55 370 70
Other expense ............................................. 401 396 788 790
------- ------- ------- -------
Total other expenses .................................. 2,426 2,005 4,523 3,892
------- ------- ------- -------
Income before income taxes ..................................... 649 1,230 1,156 2,590
Income tax expense ............................................. 160 385 253 785
------- ------- ------- -------
Net income ..................................................... $ 489 $ 845 $ 903 $ 1,805
======= ======= ======= =======
Per share*
Net income ................................................ $ 0.14 $ 0.24 $ 0.25 $ 0.51
Net income, assuming dilution ............................. 0.14 0.23 0.25 0.49
* Per share information has been retroactively adjusted to reflect a 5% stock
dividend effective December 20, 2008.
See accompanying notes to unaudited consolidated financial statements.
4
COMMUNITY FIRST BANCORPORATION
Consolidated Statements of Changes in Shareholders' Equity
(Unaudited)
Common Stock Accumulated
------------ Additional Other
Number of Paid-in Retained Comprehensive
Shares Amount Capital Earnings Income (Loss) Total
------ ------ ------- -------- ------------- -----
(Dollars in thousands)
Balance, January 1, 2008 .......................... 3,324,105 $ 35,009 $ 681 $ 2,140 $ 80 $ 37,910
----------
Comprehensive income:
Net income .................................... - - - 1,805 - 1,805
----------
Unrealized holding gains and losses
on available-for-sale securities
arising during the period, net of
income taxes of $439 ........................ - - - - (784) (784)
----------
Total other comprehensive income .......... (784)
----------
Total comprehensive income .............. 1,021
----------
Exercise of employee stock options ................ 70,768 365 - - - 365
---------- ---------- ---------- ---------- ---------- ----------
Balance, June 30, 2008 ............................ 3,394,873 $ 35,374 $ 681 $ 3,945 $ (704) $ 39,296
========== ========== ========== ========== ========== ==========
Balance, January 1, 2009 .......................... 3,564,279 $ 37,084 $ 748 $ 1,769 $ 327 $ 39,928
----------
Comprehensive income:
Net income .................................... - - - 903 - 903
----------
Unrealized holding gains and losses
on available-for-sale securities
arising during the period, net of
income taxes of $410 ........................ - - - - (733) (733)
Reclassification adjustment,
net of income tax effects of $33 ............ - - - - (57) (57)
----------
Total other comprehensive income .......... (790)
----------
Total comprehensive income .............. 113
----------
Exercise of employee stock options ................ 45,532 486 - - - 486
---------- ---------- ---------- ---------- ---------- ----------
Balance, June 30, 2009 ............................ 3,609,811 $ 37,570 $ 748 $ 2,672 $ (463) $ 40,527
========== ========== ========== ========== ========== ==========
See accompanying notes to unaudited consolidated financial statements.
5
COMMUNITY FIRST BANCORPORATION
Consolidated Statements of Cash Flows
(Unaudited)
Six Months Ended
June 30,
--------
2009 2008
----- ----
(Dollars in thousands)
Operating activities
Net income .......................................................................... $ 903 $ 1,805
Adjustments to reconcile net income to net
cash provided by operating activities
Provision for loan losses .................................................... 1,450 410
Depreciation ................................................................. 195 219
Amortization of net loan fees and costs ...................................... (59) (85)
Securities accretion and premium amortization ................................ 323 (1)
Gains on sales of securities available-for-sale .............................. (90) -
Loss on sale of foreclosed assets ............................................ - 6
Increase in value of bank-owned life insurance ............................... (183) (186)
Decrease (increase) in interest receivable ................................... 248 (66)
Increase (decrease) in interest payable ...................................... 1,132 (543)
Decrease in prepaid expenses and other assets ................................ 246 143
Increase in other accrued expenses ........................................... 547 374
--------- ---------
Net cash provided by operating activities ................................ 4,712 2,076
--------- ---------
Investing activities
Purchases of securities available-for-sale .......................................... (103,423) (41,708)
Purchase of securities held-to-maturity ............................................. - (7,490)
Maturities, calls and paydowns of securities available-for-sale ..................... 82,930 28,780
Maturities, calls and paydowns of securities held-to-maturity ....................... 1,629 466
Proceeds from sales of securities available-for-sale ................................ 5,851 -
Proceeds from sales of other investments ............................................ 38 -
Purchases of other investments ...................................................... (125) (87)
Net increase in loans made to customers ............................................. (5,770) (12,838)
Purchases of premises and equipment ................................................. (138) (382)
Proceeds of sale of foreclosed assets ............................................... 300 34
Additional investments in foreclosed assets ......................................... (239) -
Investment in bank-owned life insurance ............................................. - (1,000)
--------- ---------
Net cash used by investing activities .................................... (18,947) (34,225)
--------- ---------
Financing activities
Net (decrease) increase in demand deposits, interest
bearing transaction accounts and savings accounts ............................... (7,155) 4,154
Net increase in certificates of deposit and other
time deposits ................................................................... 5,161 10,836
Net increase (decrease) in short-term borrowings .................................... - 1,500
Proceeds of issuing long-term debt .................................................. - 6,000
Repayments of long-term debt ........................................................ - (1,000)
Cash paid in lieu of issuing fractional shares ...................................... (3) -
Exercise of employee stock options .................................................. 486 365
--------- ---------
Net cash (used) provided by financing activities ......................... (1,511) 21,855
--------- ---------
Decrease in cash and cash equivalents .................................................... (15,746) (10,294)
Cash and cash equivalents, beginning ..................................................... 40,966 34,673
--------- ---------
Cash and cash equivalents, ending ........................................................ $ 25,220 $ 24,379
========= =========
See accompanying notes to unaudited consolidated financial statements.
6
COMMUNITY FIRST BANCORPORATION
Consolidated Statements of Cash Flows - continued
(Unaudited)
Six Months Ended
June 30,
2009 2008
---- ----
(Dollars in thousands)
Supplemental Disclosure of Cash Flow Information
Cash paid during the period for
Interest ...................................... $ 4,706 $ 7,278
Income taxes .................................. 8 900
Net transfers from loans to foreclosed assets ..... 1,537 -
Noncash investing and financing activities:
Other comprehensive income (loss) ............. (790) (784)
See accompanying notes to unaudited consolidated financial statements.
COMMUNITY FIRST BANCORPORATION
Notes to Unaudited Consolidated Financial Statements
Accounting Policies - A summary of significant accounting policies is included
in Community First Bancorporation's (the "Company") Annual Report on Form 10-K
for the year ended December 31, 2008 filed with the Securities and Exchange
Commission. Certain amounts in the 2008 financial statements have been
reclassified to conform to the current presentation. All amounts are stated in
thousands, except per share.
Management Opinion - In the opinion of management, the accompanying unaudited
consolidated financial statements of Community First Bancorporation reflect all
adjustments necessary for a fair presentation of the results of the periods
presented. Such adjustments were of a normal, recurring nature.
Investment Securities - The following table presents information about amortized
cost, unrealized gains, unrealized losses and estimated fair values of
securities:
7
June 30, 2009
-------------
Gross Gross
Unrealized Unrealized Estimated
Amortized Holding Holding Fair
Cost Gains Losses Value
---- ----- ------ -----
(Dollars in thousands)
Available-for-sale
Mortgage-backed securities
issued by US Government
agencies ...................... $ 1,626 $ 34 $ - $ 1,660
Government sponsored
enterprises (GSEs) ............ 80,217 462 1,284 79,395
Mortgage-backed securities
issued by GSEs ................ 38,858 697 88 39,467
State, county and
municipal ..................... 19,837 86 630 19,293
-------- -------- -------- --------
Total .................... $140,538 $ 1,279 $ 2,002 $139,815
======== ======== ======== ========
Held-to-maturity
Mortgage-backed securities
issued by US Government
agencies ...................... $ - $ - $ - $ -
Government sponsored
enterprises ................... - - - -
Mortgage-backed securities
issued by GSEs ................ 10,278 310 - 10,588
State, county and
municipal ..................... - - - -
-------- -------- -------- --------
Total .................... $ 10,278 $ 310 $ - $ 10,588
======== ======== ======== ========
The amortized cost and estimated fair value of securities by contractual
maturity are shown below:
June 30, 2009
-------------
Available-for-sale Held-to-maturity
------------------ ----------------
Amortized Estimated Amortized Estimated
Cost Fair Value Cost Fair Value
---- ---------- ---- ----------
(Dollars in thousands)
Due within one year .................................... $ 2,508 $ 2,562 $ - $ -
Due after one through five years ....................... 12,103 12,246 - -
Due after five through ten years ....................... 36,884 36,623 - -
Due after ten years .................................... 48,559 47,257 - -
-------- -------- -------- --------
100,054 98,688 - -
Mortgage-backed securities issued by:
US Government agencies .............................. 1,626 1,660 - -
GSEs ................................................ 38,858 39,467 10,278 10,588
-------- -------- -------- --------
Total ............................................... $140,538 $139,815 $ 10,278 $ 10,588
======== ======== ======== ========
The estimated fair values and gross unrealized losses of all of the Company's
investment securities whose estimated fair values were less than amortized cost
as of June 30, 2009 which had not been determined to be other-than-temporarily
impaired are presented below. The Company evaluates all available-for-sale
securities and all held-to-maturity securities for impairment as of each balance
sheet date. The securities have been segregated in the table by investment
category and the length of time that individual securities have been in a
continuous unrealized loss position.
8
June 30, 2009
-------------
Continuously in Unrealized Loss Position for a Period of
--------------------------------------------------------
Less than 12 Months 12 Months or more Total
------------------- ----------------- -----
Estimated Unrealized Estimated Unrealized Estimated Unrealized
Fair Value Loss Fair Value Loss Fair Value Loss
---------- ---- ---------- ---- ---------- ----
(Dollars in thousands)
Available-for-sale
US Government agencies ................. $ - $ - $ - $ - $ - $ -
Government-sponsored
enterprises (GSEs) ................... 51,078 1,284 - - 51,078 1,284
Mortgage-backed securities
issued by GSEs ....................... 6,849 88 - - 6,849 88
State, county and
municipal securities ................. 12,668 568 1,316 62 13,984 630
------- ------- ------- ------- ------- -------
Total .................. $70,595 $ 1,940 $ 1,316 $ 62 $71,911 $ 2,002
======= ======= ======= ======= ======= =======
Held-to-maturity
GSEs ................................... $ - $ - $ - $ - $ - $ -
------- ------- ------- ------- ------- -------
Total .................. $ - $ - $ - $ - $ - $ -
======= ======= ======= ======= ======= =======
As of June 30, 2009, 71 securities had been continuously in an unrealized loss
position for less than 12 months and 4 securities had been continuously in an
unrealized loss position for 12 months or more. The Company does not consider
these investments to be other-than-temporarily impaired because the unrealized
losses involve primarily issuances of state, county and municipal government
issuers and mortgage-backed securities issued by GSEs. The Company also believes
that the impairments resulted from current credit market disruptions, and notes
that there have been no failures by the issuers to remit periodic interest
payments as required nor is the Company aware that any such issuer has given
notice that it expects that it will be unable to make any such future payment
according to the terms of the bond indenture. Although the Company classifies a
majority of its investment securities as available-for-sale, management has not
determined that any specific securities will be disposed of prior to maturity
and believes that the Company has both the ability and the intent to hold those
investments until a recovery of fair value, including until maturity.
Substantially all of the issuers of state, county and municipal securities were
rated at least "investment grade" as of June 30, 2009.
The Company's subsidiary bank is a member of the Federal Home Loan Bank of
Atlanta ("FHLB") and, accordingly, is required to own restricted stock in that
institution in amounts that may vary from time to time. Because of the
restrictions imposed, the stock may not be sold to other parties, but is
redeemable by the FHLB at the same price as that at which it was acquired by the
Company's subsidiary. The Company evaluates this security for impairment based
on the probability of ultimate recoverability of the par value of the
investment. No impairment has been recognized based on this evaluation.
During the first six months of 2009, the Company sold 3 available-for-sale
securities for gross sales proceeds of $5,851. Gross realized gains resulting
from these sales totaled $90. There were no transfers of available-for-sale
securities to other categories in the 2009 six-month period.
Nonperforming Loans - As of June 30, 2009, there were $17,516 in nonaccrual
loans and no loans 90 days or more past due and still accruing interest.
Earnings Per Share - Basic earnings per common share is computed by dividing net
income applicable to common shares by the weighted average number of common
shares outstanding. Diluted earnings per share is computed by dividing
applicable net income by the weighted average number of common shares
outstanding and any dilutive potential common shares and dilutive stock options.
It is assumed that all dilutive stock options are exercised at the beginning of
each period and that the proceeds are used to purchase shares of the Company's
common stock at the average market price during the period. All 2008 per share
information has been retroactively adjusted to give effect to a 5% stock
dividend effective December 20, 2008. Net income per share and net income per
share, assuming dilution, were computed as follows:
9
Period Ended June 30,
---------------------
Three Months Six Months
------------ ----------
2009 2008 2009 2008
---- ---- ---- ----
(Dollars in thousands, except per share amounts)
Net income per share, basic
Numerator - net income ................................... $ 489 $ 845 $ 903 $ 1,805
========== ========== ========== ==========
Denominator
Weighted average common shares
issued and outstanding ............................... 3,609,811 3,528,229 3,597,298 3,519,916
========== ========== ========== ==========
Net income per share, basic .......................... $ .14 $ .24 $ .25 $ .51
========== ========== ========== ==========
Net income per share, assuming dilution
Numerator - net income ................................... $ 489 $ 845 $ 903 $ 1,805
========== ========== ========== ==========
Denominator
Weighted average common shares
issued and outstanding ............................... 3,609,811 3,528,229 3,597,298 3,519,916
Effect of dilutive stock options ......................... - 141,031 - 166,817
--------- --------- --------- ---------
Total shares ................................ 3,609,811 3,669,260 3,597,298 3,686,733
========== ========== ========== ==========
Net income per share, assuming dilution .................. $ .14 $ .23 $ .25 $ .49
========== ========== ========== ==========
Shareholders' Equity
On April 28, 2009, the Corporation's Board of Directors adopted an amendment to
the Corporation's Articles of Incorporation for which shareholder approval was
not required. As a result of this amendment, a "Series A" of the Corporation's
Preferred Stock with a liquidation amount of $1,000 per share was created.
Series A consists of 5,000 shares of fixed rate cumulative perpetual preferred
stock which shares except in certain very limited circumstances have no voting
rights. Upon issuance, such preferred stock would accrue dividends at a rate of
5.00% per annum. Cumulative dividends would be payable on each February 15, May
15, August 15 and November 15, if declared by the Corporation's Board of
Directors. No dividends may be declared and paid on other stock issuances, nor
may the Company effect any plan to purchase, redeem or otherwise acquire any
issue of stock that is subordinate to the Series A Preferred Stock, including
the Company's outstanding Common Stock, unless all cumulative dividends due on
the Series A Preferred Stock have been paid in their entirety.
Unless previously called for redemption, each outstanding share of Series A
Preferred Stock would be convertible into 100 shares of the Company's Common
Stock after June 17, 2019. If the Corporation calls the Series A Preferred Stock
for redemption prior to that date, each outstanding share would be convertible
into 100 shares of the Corporation's common stock until the second business day
preceding the redemption date. The conversion ratio would be adjusted for any
stock dividends declared and payable on the Corporation's Common Stock and for
any stock splits or reverse stock splits applicable thereto.
No shares of Fixed Rate Cumulative Perpetual Preferred Stock, Series A were
issued and outstanding as of June 30, 2009.
Fair Value Measurements - Fair value is defined as the price that would be
received to sell an asset or paid to transfer a liability in an orderly fashion
between market participants at the measurement date. A three-level hierarchy is
used for fair value measurements based upon the transparency of inputs to the
valuation of an asset or liability as of the measurement date. In developing
estimates of the fair values of assets and liabilities, no consideration of
large position discounts for financial instruments quoted in active markets is
allowed. However, an entity is required to consider its own creditworthiness
when valuing its liabilities. For disclosure purposes, fair values for assets
and liabilities are shown in the level of the hierarchy that correlates with the
lowest level input that is significant to the fair value measurement in its
entirety.
The three levels of the fair value input hierarchy are described as follows:
10
Level 1 inputs reflect quoted prices in active markets for identical assets or
liabilities.
Level 2 inputs reflect observable inputs that may consist of quoted market
prices for similar assets or liabilities, quoted prices that are not in an
active market, or other inputs that are observable in the market and can be
corroborated by observable market data for substantially the full term of the
assets or liabilities being valued.
Level 3 inputs reflect the use of pricing models and/or discounted cash flow
methodologies using other than contractual interest rates or methodologies that
incorporate a significant amount of management judgment, use of the entity's own
data, or other forms of unobservable data.
The following is a summary of the measurement attributes applicable to financial
assets and liabilities that are measured at fair value on a recurring basis:
Fair Value Measurement at Reporting Date Using
----------------------------------------------
Quoted Prices
in Active Significant
Markets for Other Significant
Identical Observable Unobservable
Assets Inputs Inputs
Description June 30, 2009 (Level 1) (Level 2) (Level 3)
----------- ------------- --------- --------- ---------
(Dollars in thousands)
Securities available-for-sale $ - $ 139,815 $ -
Pricing for the Company's securities available-for-sale is obtained from an
independent third-party that uses a process that may incorporate current market
prices, benchmark yields, broker/dealer quotes, issuer spreads, two-sided
markets, benchmark securities, bids, offers, other reference data and industry
and economic events that a market participant would be expected to use in
valuing the securities. Not all of the inputs listed apply to each individual
security at each measurement date. The independent third party assigns specific
securities into an "asset class" for the purpose of assigning the applicable
level of the fair value hierarchy used to value the securities. The techniques
used after adoption of SFAS No. 157 are consistent with the methods used
previously. Available-for-sale securities continue to be measured at fair value
with unrealized gains and losses, net of income taxes, recorded in other
comprehensive income.
In February 2008, the Financial Accounting Standards Board Staff issued FASB
Staff Position No. FAS 157-2 ("FSP 157-2") which delayed for one year the
effective date of the application of Statement of Financial Accounting Standards
No. 157 "Fair Value Measurements" ("SFAS No. 157") to nonfinancial assets and
liabilities, except for items that are recognized or disclosed at fair value in
the financial statements on a recurring basis (at least annually). In accordance
with FSP 157-2, the Company only partially applied SFAS No. 157 in periods
ending prior to March 31, 2009. As of June 30, 2009, the Company had no assets
or liabilities carried on the Consolidated Balance Sheets for which a change in
fair value was made on a non-recurring basis during the three-month period or
year-to-date period ended June 30, 2009 and which remained outstanding at the
end of the period.
SFAS No. 107, "Disclosures about Fair Values of Financial Instruments," as
amended, requires disclosure of the estimated fair value of certain on-balance
sheet and off-balance sheet financial instruments and the methods and
assumptions used to estimate their fair values. A financial instrument is
defined by SFAS No. 107 as cash, evidence of an ownership interest in an entity
or a contract that creates a contractual obligation or right to deliver or
receive cash or another financial instrument from a second entity on potentially
favorable or unfavorable terms. Financial instruments within the scope of SFAS
No. 157 that are not carried at fair value on the Consolidated Balance Sheets
are discussed below. Certain financial instruments and all nonfinancial
instruments are excluded from the scope of SFAS No. 157. Accordingly, the fair
value disclosures required by SFAS No. 157 provide only a partial estimate of
the Company's fair value.
For cash and due from banks, interest bearing deposits due from banks and
federal funds sold, the carrying amount approximates fair value because these
instruments generally mature in 90 days or less. The carrying amounts of accrued
interest receivable or payable approximate fair values.
The fair value of held-to-maturity mortgage-backed securities issued by
Government sponsored enterprises is estimated based on dealers' quotes for the
same or similar securities.
The fair value of FHLB stock is estimated at its cost because the FHLB
historically has redeemed its outstanding stock at that value.
11
Fair values are estimated for loans using discounted cash flow analyses, using
interest rates currently offered for loans with similar terms and credit
quality. The Company does not engage in originating, holding, guaranteeing,
servicing or investing in loans where the terms of the loan product give rise to
a concentration of credit risk.
The fair value of deposits with no stated maturity (noninterest bearing demand,
interest bearing transaction accounts and savings) is estimated as the amount
payable on demand, or carrying amount, as required by SFAS No. 157. The fair
value of time deposits is estimated using a discounted cash flow calculation
that applies rates currently offered to aggregate expected maturities.
The fair values of the Company's short-term borrowings, if any, approximate
their carrying amounts.
The fair values of fixed rate long-term debt instruments are estimated using
discounted cash flow analyses, based on the borrowing rates currently in effect
for similar borrowings. The fair values of variable rate long-term debt
instruments are estimated at the carrying amount.
The estimated fair values of off-balance-sheet financial instruments such as
loan commitments and standby letters of credit are generally based upon fees
charged to enter into similar agreements, taking into account the remaining
terms of the agreements and the counterparties' creditworthiness. The vast
majority of the banking subsidiary's loan commitments do not involve the
charging of a fee, and fees associated with outstanding standby letters of
credit are not material. For loan commitments and standby letters of credit, the
committed interest rates are either variable or approximate current interest
rates offered for similar commitments. Therefore, the estimated fair values of
these off-balance-sheet financial instruments are nominal.
The following is a summary of the carrying amounts and estimated fair values of
the Company's financial assets and liabilities:
June 30, 2009
-------------
Carrying Estimated
Amount Fair Value
------ ----------
(Dollars in thousands)
Financial assets
Cash and due from banks .......................... $ 8,348 $ 8,348
Interest bearing deposits due from banks ......... 16,872 16,872
Securities available-for-sale .................... 139,815 139,815
Securities held-to-maturity ...................... 10,278 10,588
Federal Home Loan Bank stock ..................... 1,307 1,307
Loans ............................................ 267,780 *
Accrued interest receivable ...................... 2,528 2,528
Financial liabilities
Deposits ......................................... 414,121 *
Accrued interest payable ......................... 4,177 4,177
Long-term debt ................................... 9,500 *
*Information not currently available.
The following is a summary of the notional or contractual amounts and estimated
fair values of the Company's off-balance sheet financial instruments:
12
June 30, 2009
-------------
Notional/ Estimated
Contract Fair
Amount Value
------ -----
(Dollars in thousands)
Off-balance sheet commitments
Loan commitments ............................... $ 25,829 $ -
Standby letters of credit ...................... 948 -
Subsequent Events - The Company has evaluated events subsequent to the balance
sheet date through August 14, 2009, which is the date that the financial
statements were issued, in accordance with the requirements of Statement of
Financial Accounting Standards No. 165, "Subsequent Events."
Subsequent events may either provide additional evidence about conditions that
existed at the balance sheet date, including estimates inherent in the process
of preparing financial statements (recognized subsequent events), or provide
evidence about conditions that did not exist at the balance sheet date but arose
after the balance sheet date but before the financial statements were issued
(nonrecognized subsequent events). The effects of recognized subsequent events,
if any, have been included in the financial statements. If the effects of
nonrecognized subsequent events, if any, are of a nature that they must be
disclosed to keep the financial statements from being misleading, the Company
would disclose both the nature of the event, an estimate of its financial effect
or would state that an estimate of the financial effect cannot be made. As of
June 30, 2009, there were no nonrecognized subsequent events that required
disclosure.
New Accounting Pronouncements - Statement of Financial Accounting Standards No.
160 "Noncontrolling Interests in Consolidated Financial Statements, an amendment
of ARB No. 51" ("SFAS No. 160") was effective as of January 1, 2009 and is
required to be applied prospectively with retrospective presentation and
disclosure requirements for comparative financial statements. Early adoption was
prohibited. SFAS No. 160 seeks to improve the relevance, comparability and
transparency of financial information that a reporting entity provides in its
consolidated financial statements by separately identifying and reporting
several financial statement components into amounts that are attributable to the
reporting entity or that are attributable to noncontrolling interests. SFAS No.
160 also specifies the conditions under which an entity is required to
deconsolidate its interest in a subsidiary. The Company currently has no
consolidated subsidiaries that are not wholly-owned nor are any transactions
contemplated that would result in such a condition. Therefore, the adoption of
SFAS No. 160 in January 2009 had no effect on the Company's consolidated
financial statements.
SFAS No. 161, "Disclosures about Derivative Instruments and Hedging Activities,"
was effective as of January 1, 2009. This standard requires enhanced disclosure
about an entity's derivative and hedging activities to improve the transparency
of financial reporting. The Company does not engage in any material derivative
or hedging activities. Therefore, the implementation of SFAS No. 161 had no
effect on the Company's consolidated financial statements.
Financial Accounting Standards Board ("FASB") Staff Position No. 142-3,
"Determination of the Useful Life of Intangible Assets" ("FSP 142-3"), amends
the factors that should be considered in developing renewal or extension
assumptions used to determine the useful life of a recognized intangible asset
under SFAS No. 142, "Goodwill and Other Intangible Assets." This Staff Position
was effective for the Company on January 1, 2009 and had no impact on the
Company's financial position, results of operations or cash flows.
FASB Staff Position No. APB 14-1, "Accounting for Convertible Debt Instruments
That May Be Settled in Cash upon Conversion (Including Partial Cash Settlement)"
("FSP APB 14-1") specifies that issuers of convertible debt instruments that may
be settled in cash upon conversion should separately account for the liability
and equity components that will reflect the entity's nonconvertible debt
borrowing rate when interest cost is recognized in a subsequent period. This FSP
provides guidance for initial and subsequent measurement as well as
derecognition provisions. This FSP was effective for the Company on January 1,
2009 and had no effect on the Company's financial position, results of
operations or cash flows.
FASB Staff Position No. EITF 03-6-1, "Determining Whether Instruments Granted in
Share-Based Payment Transactions are Participating Securities" ("FSP EITF
03-6-1") provides that unvested share-based payment awards that contain
non-forfeitable rights to dividends or dividend equivalents are participating
securities and must be included in the earnings per share computation. FSP EITF
03-6-1 was effective for the Company on January 1, 2009 and had no effect on the
Company's financial position, results of operations or cash flows.
13
FASB Staff Position SFAS 133-1 and FIN 45-4 "Disclosures about Credit
Derivatives and Certain Guarantees: An Amendment of FASB Statement No. 133 and
FASB Interpretation No. 45; and Clarification of the Effective Date of FASB
Statement No. 161" ("FSP SFAS 133-1 and FIN 45-4") amends SFAS 133 to require
the seller of credit derivatives to disclose the nature of the credit
derivative, the maximum potential amount of future payments, the fair value of
the derivative, and the nature of any recourse provisions. Disclosures must be
made for entire hybrid instruments that have embedded credit derivatives. FSP
SFAS 133-1 and FIN 45-4 also amends FASB Interpretation No. 45 ("FIN 45") to
require disclosure of the current status of the payment/performance risk of the
credit derivative guarantee. If an entity utilizes internal groupings as a basis
for the risk, disclosure must also be made of how the groupings are determined
and how the risks are managed. FSP SFAS 133-1 and FIN 45-4 clarifies the
effective date of SFAS 161 such that required disclosures should be provided for
any reporting period (annual or interim) beginning after November 15, 2008. The
adoption of this Staff Position had no material effect on the Company's
financial position, results of operations or cash flows.
FSP SFAS 140-4 and FIN 46(R)-8 "Disclosures by Public Entities (Enterprises)
about Transfers of Financial Assets and Interest in Variable Interest Entities"
was issued in December 2008 to require public companies to disclose additional
information about transfers of financial assets and any involvement with
variable interest entities. The FSP also requires certain disclosures for public
entities that are sponsors and servicers of qualifying special purpose entities.
The FSP was effective for the Company as of January 1, 2009. Application of this
FSP had no impact on the financial position, results of operations or cash flows
of the Company.
In April, 2009 FASB issued FSP No. FAS 107-1 and APB 28-1 "Interim Disclosures
about Fair Value of Financial Instruments." This FSP amends FASB Statement No
107 to require disclosures about fair value of financial instruments for interim
reporting periods of publicly traded companies as well as in annual financial
statements and amends APB Opinion No. 28 to require those disclosures in
summarized financial information at interim reporting periods. This FSP is
effective for interim reporting periods ending after June 15, 2009. The Company
adopted this FSP as of its mandatory adoption date.
In April, 2009 FASB issued FSP No. FAS 157-4 "Determining Fair Value When the
Volume and Level of Activity for the Asset or Liability Have Significantly
Decreased and Identifying Transactions That Are Not Orderly." This FSP provides
additional guidance for estimating fair value in accordance with FASB Statement
No. 157 when the volume and level of activity for the asset or liability have
significantly decreased. The FSP also includes guidance on identifying
circumstances that indicate a transaction is not orderly. The Company adopted
this FSP as of June 30, 2009.
In April, 2009 FASB issued FSP No. FAS 115-2 and FAS 124-2 "Recognition and
Presentation of Other-Than-Temporary Impairments." This FSP amends the
other-than-temporary guidance in U.S. Generally Accepted Accounting Principles
for debt securities to make the guidance more operational and to improve the
presentation and disclosure of other-than-temporary impairments on debt and
equity securities in the financial statements. The FSP does not amend existing
recognition and measurement guidance related to other-than-temporary impairments
of equity securities. The FSP requires that entities disclose information for
interim and annual periods to enable users of its financial statements to
understand the types of available-for-sale and held-to-maturity debt and equity
securities held, including information about investments in an unrealized loss
position for which an other-than-temporary impairment has or has not been
recognized and information that enables users to understand the reasons that an
other-than-temporary impairment of a debt security was not recognized in
earnings and the methodology and inputs used to calculate the portion of the
total other-than-temporary impairment that was recognized in earnings. The
Company adopted this FSP as of June 30, 2009.
The FASB issued SFAS No. 166, "Accounting for Transfers of Financial Assets - an
amendment of FASB Statement No. 140," in June 2009 to address practices that
developed since the original issuance of SFAS No. 140 that are not consistent
with the original intent and key requirements of that Statement and due to
concerns raised by users of financial statements that many of the financial
assets and related obligations that have been derecognized should continue to be
recognized in the financial statements of transferors. The Statement eliminates
from accounting literature, as of the Statement's effective date, the concept of
a "qualifying special-purpose entity," requires that a transferor recognize at
fair value all assets obtained (including a transferor's beneficial interest)
and liabilities incurred as a result of a transfer of financial interests
accounted for as a sale and provides for enhanced disclosures to provide users
of financial statements with more transparency about transfers of financial
assets and a transferor's continuing involvement with transferred financial
assets. Companies with interests in formerly qualifying special-purpose entities
under previous accounting standards will be required to re-evaluate whether
those entities should be consolidated in accordance with applicable
consolidation guidance. The Statement is effective for interim and annual
reporting periods beginning with an entity's first financial reporting period
that begins after November 15, 2009 and is to be applied to transfers that
occurred both before and after the effective date of the Statement. The Company
believes that adoption of this Statement will have no effect on its financial
condition, results of operations or cash flows.
14
The FASB issued SFAS No 167, "Amendments to FASB Interpretation No. 46(R)," in
June 2009 to improve financial reporting by enterprises involved with variable
interest entities. The Statement addresses the effects on certain provisions of
FASB Interpretation No. 46 (revised December 2003), "Consolidation of Variable
Interest Entities," ("FIN 46(R)") as a result of the elimination of the
qualifying special-purpose entity concept in SFAS No. 166 and constituent
concerns about the application of certain key provisions of FIN 46R including
those in which the accounting and disclosures made under that Interpretation
fail to provide timely and useful information about an enterprise's involvement
in a variable interest entity. The Statement requires entities to reassess
whether it is the primary beneficiary of a variable interest entity on an
ongoing basis and eliminates the quantitative approach previously required in
making that assessment. It is possible that application of this Statement may
change an entity's assessment of which entities with which it is involved are
variable interest entities. The Statement is effective for interim and annual
reporting periods beginning with an entity's first financial reporting period
that begins after November 15, 2009 and is to be applied to transfers that
occurred both before and after the effective date of the Statement. The Company
believes that adoption of this Statement will have no effect on its financial
condition, results of operations or cash flows.
CAUTIONARY NOTICE WITH RESPECT TO FORWARD-LOOKING STATEMENTS
This report contains "forward-looking statements" within the meaning of
the securities laws. The Private Securities Litigation Reform Act of 1995
provides a safe harbor for forward-looking statements. In order to comply with
the terms of the safe harbor, the Company notes that a variety of factors could
cause the Company's actual results and experience to differ materially from the
anticipated results or other expectations expressed in the Company's
forward-looking statements.
All statements that are not historical facts are statements that could
be "forward-looking statements." You can identify these forward-looking
statements through the use of words such as "may," "will," "should," "could,"
"would," "expect," "anticipate," "assume," "indicate," "contemplate," "seek,"
"plan," "predict," "target," "potential," "believe," "intend," "estimate,"
"project," "continue," or other similar words. Forward-looking statements
include, but are not limited to, statements regarding the Company's future
business prospects, revenues, working capital, liquidity, capital needs,
interest costs, income, business operations and proposed services.
These forward-looking statements are based on current expectations,
estimates and projections about the banking industry, management's beliefs, and
assumptions made by management. Such information includes, without limitation,
discussions as to estimates, expectations, beliefs, plans, strategies, and
objectives concerning future financial and operating performance. These
statements are not guarantees of future performance and are subject to risks,
uncertainties and assumptions that are difficult to predict. Therefore, actual
results may differ materially from those expressed or forecasted in such
forward-looking statements. The risks and uncertainties include, but are not
limited to:
o future economic and business conditions;
o lack of sustained growth and disruptions in the economies of the
Company's market areas;
o government monetary and fiscal policies;
o the effects of changes in interest rates on the levels, composition
and costs of deposits, loan demand, and the values of loan collateral,
securities, and interest sensitive assets and liabilities;
o the effects of competition from a wide variety of local, regional,
national and other providers of financial, investment, and insurance
services, as well as competitors that offer banking products and
services by mail, telephone, computer and/or the Internet;
o credit risks;
o higher than anticipated levels of defaults on loans;
o perceptions by depositors about the safety of their deposits;
o capital adequacy;
o the failure of assumptions underlying the establishment of the
allowance for loan losses and other estimates, including the value of
collateral securing loans;
o ability to weather the current economic downturn;
o loss of consumer or investor confidence;
o availability of liquidity sources;
o the risks of opening new offices, including, without limitation, the
related costs and time of building customer relationships and
integrating operations as part of these endeavors and the failure to
achieve expected gains, revenue growth and/or expense savings from
such endeavors;
o changes in laws and regulations, including tax, banking and securities
laws and regulations;
o changes in accounting policies, rules and practices;
o changes in technology or products may be more difficult or costly, or
less effective, than anticipated;
15
o the effects of war or other conflicts, acts of terrorism or other
catastrophic events that may affect general economic conditions and
economic confidence; and
o other factors and information described in this report and in any of
the other reports that we file with the Securities and Exchange
Commission under the Securities Exchange Act of 1934.
All forward-looking statements are expressly qualified in their
entirety by this cautionary notice. The Company has no obligation, and does not
undertake, to update, revise or correct any of the forward-looking statements
after the date of this report. The Company has expressed its expectations,
beliefs and projections in good faith and believes they have a reasonable basis.
However, there is no assurance that these expectations, beliefs or projections
will result or be achieved or accomplished.
Item 2. - Management's Discussion and Analysis of Financial Condition and
Results of Operations
(Dollar amounts, except per share data, are in thousands)
Changes in Financial Condition
During the first six months of 2009, the Company focused its efforts on
monitoring the performance of its portfolio of loans outstanding and maintaining
contact with its loan and deposit customers. Loans outstanding as of June 30,
2009 are $2,832 more than the December 31, 2008 amount. Securities
available-for-sale increased by $13,179, or 10.4%, during the 2009 six-month
period. Many issuers of fixed-rate securities continue to refinance their
outstanding obligations because of the currently available lower interest rates.
As a result, almost $85,000 of the Company's securities holdings were redeemed
early during the first six months of 2009 and the Company purchased more than
$103,000 of securities during the 2009 year-to-date period. Federal funds sold
decreased by $18,793, or 100%, since the end of 2008. During the fourth quarter
of 2008, the Federal Reserve Bank began paying interest on required reserve
balances held by banks. Additionally, a correspondent bank which previously was
utilized as the Bank's primary clearing bank, and which was the counterparty for
most of the Company's federal funds sold, was placed in receivership by
government regulators. While that event resulted in no loss to the Company, it
created a need for the Company to identify, contract with, and establish
internal procedures for new vendors to provide clearing and other banking
services.
Continued deterioration of real estate loans resulted in the Company's
foreclosing and taking possession of several properties during the first six
months of 2009. As of June 30, 2009, the Company's holdings of foreclosed real
properties totaled $1,902 comprising 11 properties. Two of the real properties,
with carrying amounts totaling $1,070, are commercial properties and the
remaining properties are residential properties. Four of the residential
properties are completed housing units. To date the Company has capitalized
costs of $239 and anticipates capitalizing additional costs of approximately $40
to put all properties in marketable condition. The Company also took possession
of personal property with a carrying amount of $280 during the first six months
of 2009.
Interest bearing deposits decreased by $5,995, or 1.6% and noninterest
bearing deposits increased by $4,001, or 9.5%. The Federal Deposit Insurance
Corporation's insurance limits for noninterest-bearing transaction accounts are
temporarily unlimited. This policy is believed to be responsible in part for
large depositors currently opting to maintain their funds in non-interest
bearing accounts.
The Company believes that its liquidity position continues to provide
it with sufficient flexibility to fund loan requests or make investments in
securities at attractive yields, and to meet normal demands for deposit
withdrawals by its customers. Management also believes that the current balance
sheet positions maintain the Company's exposures to changes in interest rates at
acceptable levels.
Results of Operations
Three Months Ended June 30, 2009 and 2008
The Company recorded consolidated net income of $489, or $.14 per
share, for the second quarter of 2009 compared with $845, or $.24 per share, for
the second quarter of 2008. Net income per share, assuming dilution was $.14 for
the 2009 quarter and $.23 for the 2008 period. Net income per share amounts for
2008 have been retroactively adjusted to reflect a five percent stock dividend
effective December 20, 2008.
Net interest income for the 2009 second quarter was $133, or 4.6%, more
than for the 2008 second quarter. Total interest income for the 2009 second
quarter decreased primarily because of lower rates earned on loans and
securities held. Total interest expense for the 2009 quarter was lower than for
the same period of 2008 due to lower interest rates paid for deposits.
16
The provision for loan losses for the second quarter of 2009 increased
by $420 over the amount for the same period of 2008 due to higher amounts of net
charge-offs, nonaccrual loans and potential problem loans. These negative
developments are believed to be due to a slowing in economic conditions,
especially with respect to residential real estate and higher levels of
unemployment. The effects of the deterioration of the residential real estate
market initially were evidenced by problems experienced by some builders and
developers. As the slowdown has lingered, those problems have spread to other
businesses that are more indirectly related to the new construction real estate
market. If the slow conditions continue or deteriorate further, it is possible
that relatively large provisions for loan losses may be needed in the future.
Unemployment in the Company's market area continued to increase during the
second quarter of 2009 reaching 15.1% in Oconee County and 13.2% in Anderson
County, SC as of June 30, 2009.
Noninterest income for the second quarter of 2009 increased by $127, or
20.3%, primarily due to a $90 gain realized on sales of securities
available-for-sale. Noninterest expense for the 2009 second quarter increased
from the amount recorded for the same 2008 period, primarily as a result of
higher salaries and employee benefits and a $245 increase in deposit insurance
expense. As of June 30, 2009, the Federal Deposit Insurance Corporation charged
a special assessment to all insured banks based on a percentage of their total
assets less Tier 1 capital. For the Company, this special assessment totaled
approximately $215. In addition, the assessment rate charged to banks on a
recurring basis was increased during the second quarter of 2009. The Company
continues to emphasize efforts to control expenses, but higher direct and
indirect expenses imposed by regulatory authorities limit the overall
effectiveness of the Company's efforts.
Summary Income Statement
------------------------
(Dollars in thousands)
For the Three Months Ended June 30, 2009 2008 Dollar Change Percentage Change
---- ---- ------------- -----------------
Interest income ................................... $5,861 $6,037 $ (176) -2.9%
Interest expense .................................. 2,838 3,147 (309) -9.8%
------ ------ ------
Net interest income ............................... 3,023 2,890 133 4.6%
Provision for loan losses ......................... 700 280 420 150.0%
Noninterest income ................................ 752 625 127 20.3%
Noninterest expenses .............................. 2,426 2,005 421 21.0%
Income tax expense ................................ 160 385 (225) -58.4%
------ ------ ------
Net income ........................................ $ 489 $ 845 $ (356) -42.1%
====== ====== ======
Six Months Ended June 30, 2009 and 2008
The Company recorded consolidated net income of $903 or .25 per share
for the first half of 2009 compared with $1,805 or $.51 per share for the first
half of 2008. Net income per share, assuming dilution was $.25 for the 2009 six
month period and $.49 for the 2008 six months. Net income per share amounts for
2008 have been retroactively adjusted to reflect a five percent stock dividend
effective December 20, 2008.
Net interest income for the first six months of 2009 increased by $148
or 2.6% over the 2008 amount. Increases in the average amounts of securities and
loans held mitigated some of the effects of lower yields earned on most
categories of earning assets and resulted in interest income decreasing less
than interest expenses. Lower interest expense was primarily caused by lower
rates paid for interest bearing deposits.
Noninterest income for the first six months of 2009 increased by $89
primarily as a result of gains on sales of securities available-for-sale
totaling $90.
Noninterest expenses for the 2009 period increased by $631 or 16.2%
over the amount for the 2008 six-month period. Salaries and employee benefits
increased by $280, or 13.1%, reflecting an increase of $200 in salaries and
wages due to increases in the number of employees and normal periodic increases
in employees' compensation and an increase of $27 in expenses related to certain
deferred compensation arrangements. Expenses for FDIC deposit insurance
increased by $300 over the prior year period due to a special assessment of $215
and increases in both the assessment rate and the assessment base over the prior
year amounts.
17
Summary Income Statement
------------------------
(Dollars in thousands)
For the Six Months Ended June 30, 2009 2008 Dollar Change Percentage Change
---- ---- ------------- -----------------
Interest income .................................... $11,644 $12,393 $ (749) -6.0%
Interest expense ................................... 5,838 6,735 (897) -13.3%
------- ------- -------
Net interest income ................................ 5,806 5,658 148 2.6%
Provision for loan losses .......................... 1,450 410 1,040 253.7%
Noninterest income ................................. 1,323 1,234 89 7.2%
Noninterest expenses ............................... 4,523 3,892 631 16.2%
Income tax expense ................................. 253 785 (532) -67.8%
------- ------- -------
Net income ......................................... $ 903 $ 1,805 $ (902) -50.0%
======= ======= =======
Net Interest Income
Due to continuing economic problems, including increasing levels of
real estate foreclosures and higher unemployment rates, governmental economic
policy makers including Congress, the Federal Reserve and the Department of the
Treasury have endeavored to enact legislation, promulgate regulations and
implement strategies intended to provide stimulus to the economy by creating
jobs, maintaining interest rates at low levels and through the provision of
other incentives, such as tax credits for first-time home-buyers or for the
purchase and installation of energy efficient residential heating and cooling
systems and other energy efficiency and alternative energy projects. To date,
the observable effects of these measures on the broad economy have been minimal.
Three Months Ended June 30, 2009 and 2008
The average yield on interest earning assets decreased to 5.24% for the
2009 three-month period from 6.12% for the 2008 three-month period. Yields on
all significant categories of earning assets were lower in the 2009 period.
Similarly, interest rates paid for deposits and borrowings were lower in the
2009 period. The average rate paid for interest-bearing liabilities during the
2009 three-month period was 2.98%, compared with 3.74% in the same period of
2008. Accordingly, the average interest rate spread for the 2009 period was 12
basis points lower than for the 2008 period.
18
Average Balances, Yields and Rates
Three Months Ended June 30,
---------------------------
2009 2008
---- ----
Interest Interest
Average Income/ Yields/ Average Income/ Yields/
Balances Expense Rates (1) Balances Expense Rates (1)
-------- ------- --------- -------- ------- ---------
(Dollars in thousands)
Assets
Interest-bearing balances due from banks .............. $ 13,690 $ 6 0.18% $ 1,802 $ 5 1.12%
Securities
Taxable .......................................... 138,021 1,456 4.23% 97,408 1,172 4.84%
Tax exempt (2) ................................... 19,870 202 4.08% 20,434 208 4.09%
--------- ------- -------- -------
Total investment securities .................. 157,891 1,658 4.21% 117,842 1,380 4.71%
Other investments ..................................... 1,320 - 0.00% 927 12 5.21%
Federal funds sold .................................... - - 0.00% 22,117 117 2.13%
Loans (2) (3) (4) ..................................... 275,480 4,197 6.11% 254,287 4,523 7.15%
--------- ------- -------- -------
Total interest earning assets ................ 448,381 5,861 5.24% 396,975 6,037 6.12%
Cash and due from banks ............................... 7,079 7,373
Allowance for loan losses ............................. (5,527) (2,636)
Valuation allowance - available-for-sale securities ... 1,296 869
Premises and equipment ................................ 8,505 8,828
Other assets .......................................... 15,068 12,296
--------- --------
Total assets ................................. $ 474,802 $423,705
========= ========
Liabilities and shareholders' equity
Interest bearing deposits
Interest bearing transaction accounts ............ $ 53,315 $ 90 0.68% $ 57,967 $ 258 1.79%
Savings .......................................... 21,209 20 0.38% 24,752 68 1.10%
Time deposits $100M and over ..................... 127,700 990 3.11% 108,182 1,057 3.93%
Other time deposits .............................. 170,605 1,647 3.87% 142,437 1,716 4.85%
--------- ------- -------- -------
Total interest bearing deposits .............. 372,829 2,747 2.96% 333,338 3,099 3.74%
Long-term debt ........................................ 9,500 91 3.84% 4,929 48 3.92%
--------- ------- -------- -------
Total interest bearing liabilities ........... 382,329 2,838 2.98% 338,267 3,147 3.74%
Noninterest bearing demand deposits ................... 46,016 41,307
Other liabilities ..................................... 4,870 4,138
Shareholders' equity .................................. 41,587 39,993
--------- --------
Total liabilities and shareholders' equity ... $ 474,802 $423,705
========= ========
Interest rate spread .................................. 2.26% 2.38%
Net interest income and net yield
on earning assets ................................ $ 3,023 2.70% $ 2,890 2.93%
Interest free funds supporting earning
assets ........................................... $ 66,052 $ 58,708
-----------------------------------------
(1) Yields and rates are annualized
(2) Yields on tax exempt instruments have not been adjusted to a tax-equivalent
basis.
(3) Nonaccrual loans are included in the average loan balances and income on
such loans is recognized on a cash basis.
(4) Includes immaterial amounts of loan fees.
19
Six Months Ended June 30, 2009 and 2008
For the first half of 2009, the average yield on interest earning
assets was 5.15%, compared with 6.19% for the 2008 period. Yields were lower on
substantially all types of earning assets in the 2009 period. Loan yields
decreased because a significant portion of the Company's loan portfolio consists
of variable rate instruments. Such variable rate loans, as offered by the
Company, do not normally subject the borrower to the risk of negative
amortization, nor do the loans involve the use of "teaser" rates or impose
onerous fees or other terms that would discourage borrowers from refinancing to
a lower cost product or one with a fixed rate. In addition, the significant
increase in nonaccrual loans during the 2009 period reduced loan income because
accrued but uncollected interest income on such loans is reversed against
previously recognized loan income at the time the loan is placed in nonaccrual
status and the future accrual of income is discontinued. Approximately $329 of
accrued interest income was reversed during the six months ended June 30, 2009,
including $155 of such income reversed during the three months then ended.
Income earned on securities increased due to changes in the composition of the
securities portfolio brought about by reinvesting the proceeds obtained from
maturities, calls and paydowns of securities and the investment of other funds,
principally deposits, obtained currently.
Average rates paid on interest-bearing liabilities were lower in the
2009 period as well, at 3.00% compared with 3.92% in the 2008 six-month period.
Decreases in interest rates paid resulted from the Company's responses to
actions taken by the Federal Reserve to maintain at low levels certain interest
rates within its purview.
Given the current economic environment, the Company expects that it
will be unable profitably to increase its loan portfolio significantly in the
near term. As a result, management anticipates that the Company will not grow
significantly until the negative economic trends begin to improve.
20
Average Balances, Yields and Rates
Six Months Ended June 30,
-------------------------
2009 2008
---- ----
Interest Interest
Average Income/ Yields/ Average Income/ Yields/
Balances Expense Rates (1) Balances Expense Rates (1)
-------- ------- --------- -------- ------- ---------
(Dollars in thousands)
Assets
Interest-bearing balances due from banks ............. $ 17,810 $ 22 0.25% $ 1,108 $ 7 1.27%
Securities
Taxable ......................................... 138,972 2,962 4.30% 92,739 2,189 4.75%
Tax exempt (2) .................................. 20,177 411 4.11% 20,524 414 4.06%
--------- ------- --------- -------
Total investment securities ................. 159,149 3,373 4.27% 113,263 2,603 4.62%
Other investments .................................... 1,271 - 0.00% 886 25 5.67%
Federal funds sold ................................... 3,995 3 0.15% 35,084 503 2.88%
Loans (2) (3) (4) .................................... 273,938 8,246 6.07% 252,271 9,255 7.38%
--------- ------- --------- -------
Total interest earning assets ............... 456,163 11,644 5.15% 402,612 12,393 6.19%
Cash and due from banks .............................. 7,819 7,811
Allowance for loan losses ............................ (5,473) (2,609)
Valuation allowance - available-for-
sale securities ................................. 1,355 823
Premises and equipment ............................... 8,635 8,835
Other assets ......................................... 14,584 12,247
--------- ---------
Total assets ................................ $ 483,083 $ 429,719
========= =========
Liabilities and shareholders' equity
Interest bearing deposits
Interest bearing transaction accounts ........... $ 56,319 $ 188 0.67% $ 58,856 $ 593 2.03%
Savings ......................................... 25,121 43 0.35% 33,489 277 1.66%
Time deposits $100M and over .................... 131,580 2,083 3.19% 105,614 2,210 4.21%
Other time deposits ............................. 169,929 3,342 3.97% 142,867 3,568 5.02%
--------- ------- --------- -------
Total interest bearing
deposits .................................. 382,949 5,656 2.98% 340,826 6,648 3.92%
Short-term borrowings ................................ 11 - 0.00% - - 0.00%
Long-term debt ....................................... 9,500 182 3.86% 4,714 87 3.71%
--------- ------- --------- -------
Total interest bearing
liabilities ............................... 392,460 5,838 3.00% 345,540 6,735 3.92%
Noninterest bearing demand deposits .................. 45,109 40,542
Other liabilities .................................... 4,428 4,233
Shareholders' equity ................................. 41,086 39,404
--------- ---------
Total liabilities and shareholders' equity .. $ 483,083 $ 429,719
========= =========
Interest rate spread ................................. 2.15% 2.27%
Net interest income and net yield
on earning assets ............................... $ 5,806 2.57% $ 5,658 2.83%
Interest free funds supporting earning assets ........ $ 63,703 $ 57,072
-----------------------------------------
(1) Yields and rates are annualized
(2) Yields on tax exempt instruments have not been adjusted to a tax-equivalent
basis.
(3) Nonaccrual loans are included in the average loan balances and income on
such loans is recognized on a cash basis.
(4) Includes immaterial amounts of loan fees.
21
Provision and Allowance for Loan Losses
The provision for loan losses was $700 for the second quarter of 2009,
compared with $280 for the second quarter of 2008. For the first half of 2009,
the provision for loan losses was $1,450, compared with $410 for the first half
of 2008. At June 30, 2009, the allowance for loan losses was 2.00% of loans, a
slight decrease from 2.02% at December 31, 2008 but significantly higher than
the ratio as of June 30, 2008.
For the first six months of 2009, net charge-offs totaled $1,460,
compared with $236 in net charge offs during the same period of 2008. The higher
levels of charge-offs in 2009 reflect the continuing deterioration of local
economic conditions. No particular industries or groups of borrowers are
disproportionately represented among the loans charged off. If local economic
conditions do not improve, it is likely that the Company will continue to
experience elevated levels of both net charge-offs and provisions for loan
losses. The activity in the allowance for loan losses is summarized in the table
below:
Six Months Year Ended Six Months Ended
Ended December 31 Ended
June 30, 2009 June 30, 2008
------------- ----------- -------------
(Dollars in thousands)
Allowance at beginning of period ................................. $ 5,475 $ 2,574 $ 2,574
Provision for loan losses ........................................ 1,450 4,550 410
Net charge-offs .................................................. (1,460) (1,649) (236)
--------- --------- ---------
Allowance at end of period ....................................... $ 5,465 $ 5,475 $ 2,748
========= ========= =========
Allowance as a percentage of loans outstanding
at period end .................................................. 2.00% 2.02% 1.07%
Loans at end of period ........................................... $ 273,245 $ 270,413 $ 256,818
========= ========= =========
22
Non-Performing and Potential Problem Loans
90 Days or
More Past Due Total Percentage Percentage
Nonaccrual and Still Nonperforming of Total Potential of Total
Loans Accruing Loans Loans Problem Loans Loans
----- -------- ----- ----- ------------- -----
(Dollars in thousands)
January 1, 2008 .................... $ 625 $ - $ 625 0.26% $ 3,088 1.26%
Net change ......................... (181) - (181) 962
--------- --------- -------- -------
March 31, 2008 ..................... 444 - 444 0.18% 4,050 1.61%
Net change ......................... 1,436 - 1,436 1,338
--------- --------- -------- -------
June 30, 2008 ...................... 1,880 - 1,880 0.73% 5,388 2.10%
Net change ......................... 2,845 - 2,845 1,194
--------- --------- -------- -------
September 30, 2008 ................. 4,725 - 4,725 1.77% 6,582 2.46%
Net change ......................... 7,074 - 7,074 328
--------- --------- -------- -------
December 31, 2008 .................. 11,799 - 11,799 4.36% 6,910 2.56%
Net change ......................... 2,835 - 2,835 2,367
--------- --------- -------- -------
March 31, 2009 ..................... 14,634 - 14,634 5.31% 9,277 3.37%
Net change ......................... 2,882 - 2,882 (1,511)
--------- --------- -------- -------
June 30, 2009 ...................... $ 17,516 $ - $ 17,516 6.41% $ 7,766 2.84%
========= ========= ======== =======
Potential problem loans include loans, other than non-performing loans,
that management has identified as having possible credit problems sufficient to
cast doubt upon the abilities of the borrowers to comply with the current
repayment terms. As of June 30, 2009, collateral for approximately 95% of the
dollar amount of nonaccrual loans consisted of real estate. At that date, real
estate collateral was held for approximately 80% of the dollar amount of
potential problem loans. Approximately 86% of potential problem loans were
secured by real estate as of June 30, 2008. As of June 30, 2009, approximately
81% of the Company's potential problem loans were included in the least severe
category of such loans, compared with approximately 92% of such loans as of June
30, 2008. Management expects that further deterioration of already weak economic
conditions within the Company's market areas is likely in the short-term,
especially with respect to real estate activities and real property values.
Consequently, management believes that the amounts of potential problem and
nonaccrual loans are likely to increase if current conditions in the Company's
local real estate markets continue or if those conditions deteriorate further,
it is possible that increased provisions for loan losses may be needed in the
future.
The statewide unemployment rate for South Carolina was 12.1%
(seasonally adjusted) as of June 30, 2009 compared with 8.8% as of December 31,
2008 and 6.5% as of June 30, 2008. The unemployment rates in Oconee and Anderson
Counties, South Carolina were 15.1% and 13.2%, respectively, as of June 30, 2009
compared with 10.9% and 9.6%, respectively, as of December 31, 2008 and 6.9% and
6.6%, respectively, as of June 30, 2008.
Noninterest Income
Noninterest income totaled $752 for the second quarter of 2009 compared
with $625 for the second quarter of 2008. The Company realized gains on sales of
securities available-for-sale of $90 in the 2009 period. There were no such
sales in the 2008 period. The Company recognized fees for residential real
estate loans originated for others totaling $46 in the 2009 three month period
compared with $2 for the 2008 period.
For the six months ended June 30, 2009, noninterest income totaled
$1,323 compared with $1,234 for the first half of 2008. Fees for residential
real estate loans originated for others totaled $70 for the 2009 period compared
with $14 for the 2008 period. Service charges and fees for deposit accounts are
lower for the 2009 period due to a decrease in the level of consumer activity.
Gains on sales of securities available-for-sale totaled $90 and $0 for the 2009
and 2008 six-month periods, respectively.
23
Noninterest Expenses
Noninterest expenses totaled $2,426 for the second quarter of 2009
compared with $2,005 for the second quarter of 2008, representing an increase of
$421. Compared with the 2008 period, salaries and employee benefits for the 2009
three-month period increased by $136 primarily as a result of increases in the
number of personnel and normal periodic adjustments in compensation. Deposit
insurance assessments increased by $245 over the amount for the second quarter
of 2008 due primarily to a special assessment during the second quarter of 2009.
For the six months ended June 30, 2009, salaries and employee benefits
increased by $280 over the amount for the same period of 2008 primarily as a
result of normal salary increases and increased numbers of employees. The
Company hired a special assets officer late in the first quarter of 2009 to
assist in administering the higher level of distressed loans and foreclosed
assets. Deferred compensation expenses were $27 more in the 2009 period than in
the 2008 period. Deposit insurance assessments for the 2009 six-month period
totaled $370 compared with $70 for the same period of 2008, primarily because of
the special assessment discussed previously. An increase in the assessment rate
has also been implemented during 2009 which is expected to result in continuing
increases in the amount of those expenses.
The Company continues to pursue a strategy to increase its market share
in its local market areas in Anderson and Oconee Counties of South Carolina.
Oconee County is served from four offices, which are located in Seneca, Walhalla
and Westminster. The Anderson County market is served from two offices in
Anderson and one in Williamston.
Liquidity
Liquidity is the ability to meet current and future obligations through
the liquidation or maturity of existing assets or the acquisition of additional
liabilities. The Company manages both assets and liabilities to achieve
appropriate levels of liquidity. Cash and short-term investments are the
Company's primary sources of asset liquidity. These funds provide a cushion
against short-term fluctuations in cash flow from both deposits and loans.
Securities available-for-sale are the Company's principal source of secondary
asset liquidity. However, the availability of this source is influenced by
market conditions. Individual and commercial deposits are the Company's primary
source of funds for credit activities. The Company also has significant amounts
of credit availability under its FHLB lines of credit and federal funds
purchased facilities.
As of June 30, 2009, the ratio of loans to total deposits was 66.0%,
compared with 65.0% as of December 31, 2008. Management believes that the
Company's liquidity sources are adequate to meet its operating needs.
Capital Resources
The Company's capital base increased by $599 since December 31, 2008 as
the result of net income of $903 for the first six months of 2009, less a $790
change in unrealized gains and losses on available-for-sale securities, net of
deferred income tax effects and $486 received from the exercise of employee
stock options. Unrealized losses on available-for-sale securities are not
considered to be other than temporary. The Company's available-for-sale
securities primarily consist of debt issuances of government-sponsored
enterprises. While not directly guaranteed by the U. S. Government, these issues
are generally considered to be of high quality and default risk is believed to
be remote. Therefore, the changes in market values are believed to be the result
only of changes in market interest rates. The Company currently has both the
intent and the ability to hold such securities until the market value recovers,
including until maturity.
The Company and its banking subsidiary (the "Bank") are subject to
regulatory risk-based capital adequacy standards. Under these standards, bank
holding companies and banks are required to maintain certain minimum ratios of
capital to risk-weighted assets and average total assets. Under the provisions
of the Federal Deposit Insurance Corporation Improvement Act of 1991 (FDICIA),
federal bank regulatory authorities are required to implement prescribed "prompt
corrective actions" upon the deterioration of the capital position of a bank. If
the capital position of an affected institution were to fall below certain
levels, increasingly stringent regulatory corrective actions are mandated.
The June 30, 2009 risk based capital ratios for the Company and the
Bank are presented in the following table, compared with the "well capitalized"
and minimum ratios under the regulatory definitions and guidelines:
24
Total
Tier 1 Capital Leverage
------ ------- --------
Community First Bancorporation ............. 13.3% 14.6% 8.7%
Community First Bank ....................... 12.6% 13.8% 8.2%
Minimum "well-capitalized" requirement ..... 6.0% 10.0% 6.0%
Minimum requirement ........................ 4.0% 8.0% 5.0%
On April 28, 2009, the Corporation's Board of Directors adopted an amendment to
the Corporation's Articles of Incorporation for which shareholder approval was
not required. As a result of this amendment, a "Series A" of the Corporation's
Preferred Stock with a liquidation amount of $1,000 per share was created.
Series A consists of 5,000 shares of fixed rate cumulative perpetual preferred
stock which shares have no voting rights except in certain very limited
circumstances. Upon issuance, such preferred stock would accrue dividends at a
rate of 5.00% per annum. Cumulative dividends would be payable on each February
15, May 15, August 15 and November 15, if declared by the Corporation's Board of
Directors. No dividends may be declared and paid on other stock issuances, nor
may the Company effect any plan to purchase, redeem or otherwise acquire any
issue of stock that is subordinate to the Series A Preferred Stock, including
the Company's outstanding Common Stock, unless all cumulative dividends due on
the Series A Preferred Stock have been paid in their entirety.
Unless previously called for redemption, each outstanding share of Series A
Preferred Stock would be convertible into 100 shares of the Company's Common
Stock after June 17, 2019. If the Corporation calls the Series A Preferred Stock
for redemption prior to that date, each outstanding share would be convertible
into 100 shares of the Corporation's common stock until the second business day
preceding the redemption date. The conversion ratio would be adjusted for any
stock dividends declared and payable on the Corporation's Common Stock and for
any stock splits or reverse stock splits applicable thereto.
No shares of Fixed Rate Cumulative Perpetual Preferred Stock, Series A were
issued and outstanding as of June 30, 2009.
Off-Balance-Sheet Arrangements
In the normal course of business, the Bank is party to financial instruments
with off-balance-sheet risk including commitments to extend credit and standby
letters of credit. Such instruments have elements of credit risk in excess of
the amount recognized in the balance sheet. The exposure to credit loss in the
event of nonperformance by the other parties to the financial instruments for
commitments to extend credit and standby letters of credit is represented by the
contractual notional amount of those instruments. Generally, the same credit
policies used for on-balance-sheet instruments, such as loans, are used in
extending loan commitments and standby letters of credit.
Following are the off-balance-sheet financial instruments whose contract amounts
represent credit risk:
June 30, 2009
-------------
(Dollars in
thousands)
Loan commitments ............................. $ 25,829
Standby letters of credit .................... 948
Loan commitments involve agreements to lend to a customer as long as there is no
violation of any condition established in the contract. Commitments generally
have fixed expiration dates or other termination clauses and some involve
payment of a fee. Many of the commitments are expected to expire without being
fully drawn; therefore, the total amount of loan commitments does not
necessarily represent future cash requirements. Each customer's creditworthiness
is evaluated on a case-by-case basis. The amount of collateral obtained, if any,
upon extension of credit is based on management's credit evaluation of the
borrower. Collateral held varies but may include commercial and residential real
properties, accounts receivable, inventory and equipment.
Standby letters of credit are conditional commitments to guarantee the
performance of a customer to a third party. The credit risk involved in issuing
standby letters of credit is the same as that involved in making loan
commitments to customers. Many letters of credit will expire without being drawn
upon and do not necessarily represent future cash requirements. The Bank
receives fees for loan commitments and standby letters of credit. The amount of
such fees was not material for the three months or six months ended June 30,
2009.
25
As described under "Liquidity," management believes that its various sources of
liquidity provide the resources necessary for the Bank to fund the loan
commitments and to perform under standby letters of credit, if the need arises.
Neither the Company nor the Bank are involved in other off-balance sheet
contractual relationships or transactions that could result in liquidity needs
or other commitments or significantly impact earnings.
Item 3. - Quantitative and Qualitative Disclosures About Market Risk
The Company's exposure to market risk is primarily related to the risk of loss
from adverse changes in market prices and rates. This risk arises principally
from interest rate risk inherent in the Company's lending, deposit gathering and
borrowing activities. Management actively monitors and manages its interest rate
risk exposure. Although the Company manages other risks, such as credit quality
and liquidity risk in the normal course of business, management considers
interest rate risk to be its most significant market risk and this risk could
potentially have the largest material effect on the Company's financial
condition and results of operations. Other types of market risk, such as
commodity price risk and foreign currency exchange risk, do not arise in the
normal course of the Company's community banking operations.
The Company uses a simulation model to assist in achieving consistent growth in
net interest income while managing interest rate risk. As of June 30 2009, the
model indicates that net interest income would decrease $51 and net income would
decrease $33 in the next twelve months if interest rates rose by 100 basis
points. Conversely, net interest income would increase $25 and net income would
increase $16 in the next twelve months if interest rates declined by 100 basis
points. In the current interest rate environment, it appears unlikely that there
will be any large changes in interest rates in the immediate future. The
prospective effects of hypothetical interest rate changes are based on a number
of assumptions, including the relative levels of market interest rates and
prepayment assumptions affecting loans, and should not be relied on as
indicative of actual future results. The prospective effects also do not
contemplate potential actions that the Company, its customers and the issuers of
its investment securities could undertake in response to changes in interest
rates.
As of June 30, 2009, there was no significant change from the interest rate
sensitivity analysis for the various changes in interest rates calculated as of
December 31, 2008. The foregoing disclosures related to the Company's market
risk should be read in conjunction with Management's Discussion and Analysis of
Financial Condition and Results of Operations included in the 2008 Annual Report
on Form 10-K filed with the Securities and Exchange Commission.
Item 4T. - Controls and Procedures
Based on the evaluation required by 17 C.F.R. Section 240.13a-15(b) or
240.15d-15(b) of the issuer's disclosure controls and procedures (as defined in
17 C.F.R. Sections 240.13a-15(e) and 240.15d-15(e)), the issuer's chief
executive officer and chief financial officer concluded such controls and
procedures, as of the end of the period covered by this report, were effective.
There has been no change in the Company's internal control over financial
reporting during the most recent fiscal quarter that has materially affected, or
is reasonably likely to materially affect, the Company's internal control over
financial reporting.
PART II - OTHER INFORMATION
Item 4. - Submission of Matters to a Vote of Security Holders.
On Tuesday, April 28, 2009, the shareholders of Community First
Bancorporation held their regular annual meeting. At the meeting, one matter was
submitted to a vote with results as follows:
1. Election of four directors to hold office for three-year terms:
SHARES VOTED
------------
AUTHORITY BROKER
DIRECTORS FOR WITHHELD NON-VOTES
--- -------- ---------
Larry S. Bowman, M.D. .......... 2,596,294 0 527,007
William M. Brown ............... 2,596,294 0 527,007
John R. Hamrick ................ 2,596,294 0 527,007
Frederick D. Shepherd, Jr. ..... 2,595,783 511 527,007
26
The following directors continue to serve until the expiration of their
terms at the annual meetings to be held in the years indicated and were not
voted on at the 2009 annual meeting: Robert H. Edwards - 2010; Blake L. Griffith
- 2010, Gary W. Thrift - 2010, James E. McCoy - 2011, James E. Turner - 2011 and
Charles L. Winchester - 2011.
Item 6. - Exhibits
Exhibits 3. Articles of Amendment to Articles of Incorporation
relating to authorization of Series A Preferred Stock
(incorporated by reference to Form 8-K filed June 22,
2009).
31. Rule 13a-14(a)/15d-14(a) Certifications
32. Certifications Pursuant to 18 U.S.C. Section 1350
27
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
COMMUNITY FIRST BANCORPORATION
August 14, 2009
----------------- /s/ Frederick D. Shepherd, Jr.
Date -------------------------------------------
Frederick D. Shepherd, Jr., Chief Executive
Officer and Chief Financial Officer
28
EXHIBIT INDEX
3. Articles of Amendment to Articles of Incorporation relating to
authorization of Series A Preferred Stock incorporated by
reference to Form 8-K filed June 22, 2009).
31. Rule 13a-14(a)/15d-14(a) Certifications
32. Certifications Pursuant to 18 U.S.C. Section 1350
29