Attached files
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EX-31 - EXHIBIT 31.1 - TECHE HOLDING CO | ex31-1.htm |
EX-31 - EXHIBIT 31.2 - TECHE HOLDING CO | ex31-2.htm |
EX-32 - EXHIBIT 32 - TECHE HOLDING CO | ex-32.htm |
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
(Mark One)
x |
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the quarterly period ended |
December 31, 2009 |
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OR
o |
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
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For the transition period from _________________________ to_________________________
Commission file number 1-13712
TECHE HOLDING COMPANY |
(Exact name of registrant as specified in its charter) |
Louisiana |
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72-128746 |
(State or other jurisdiction of incorporation or organization) |
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(I.R.S. Employer Identification No.) |
211 Willow Street, Franklin, Louisiana |
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70538 |
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(Address of principal executive offices) |
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(Zip Code) |
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Registrant’s telephone number, including area code (337) 365-0366
N/A |
Former name, former address and former fiscal year, if changed since last report. |
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 o
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (Section 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes o No o
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.
Large accelerated filer o |
Accelerated filer o |
Non-accelerated filer o (Do not check if a smaller reporting company) |
Smaller reporting company x |
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes o No x
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APPLICABLE ONLY TO CORPORATE ISSUERS: |
Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date: February 9, 2010.
Class |
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2,100,388 |
$.01 par value common stock |
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Outstanding Shares |
TECHE HOLDING COMPANY
QUARTERLY REPORT ON FORM 10-Q
INDEX
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Page |
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PART I. |
FINANCIAL INFORMATION |
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Item 1. |
Financial Statements |
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Consolidated Balance Sheets as of December 31, 2009 (Unaudited) and September 30, 2009 |
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3 |
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Consolidated Statements of Income - (Unaudited) for the three months ended December 31, 2009 and 2008 |
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4 |
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Consolidated Statements of Cash Flows - (Unaudited) for the three months ended December 31, 2009 and 2008 |
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5 |
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Notes to Consolidated Financial Statements (Unaudited) |
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6 |
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Item 2. |
Management’s Discussion and Analysis of Financial Condition and Results of Operations |
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17 |
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Item 3. |
Quantitative and Qualitative Disclosure About Market Risk |
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24 |
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Item 4T. |
Controls and Procedures |
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24 |
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PART II. |
OTHER INFORMATION |
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Item 1. |
Legal Proceedings |
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24 |
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Item 1A. |
Risk Factors |
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25 |
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Item 2. |
Unregistered Sales of Equity Securities and Use of Proceeds |
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25 |
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Item 3. |
Defaults Upon Senior Securities |
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25 |
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Item 4. |
Submission of Matters to a Vote of Security Holders |
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25 |
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Item 5. |
Other Information |
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25 |
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Item 6. |
Exhibits |
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25 |
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Signatures |
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TECHE HOLDING COMPANY
CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
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December 31, 2009 |
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September 30, |
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ASSETS |
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(unaudited) |
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Cash and due from banks |
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$ |
13,329 |
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$ |
13,958 |
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Interest-bearing deposits |
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8,341 |
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9,717 |
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Securities available-for-sale - at estimated fair value (amortized cost of $18,435 and $20,277) |
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18,934 |
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20,936 |
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Securities held-to-maturity—at amortized cost (estimated fair |
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62,549 |
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75,384 |
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Loans receivable—net of allowance for loan losses of $7,744 and $6,806 |
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594,543 |
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588,527 |
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Accrued interest receivable |
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2,597 |
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2,622 |
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Investment in Federal Home Loan Bank stock, at cost |
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5,129 |
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5,063 |
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Real estate owned, net |
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1,128 |
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1,953 |
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Prepaid expenses and other assets |
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6,840 |
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3,321 |
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Goodwill |
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3,647 |
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3,647 |
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Life insurance contracts |
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12,873 |
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12,724 |
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Premises and equipment, net |
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27,354 |
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27,219 |
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TOTAL ASSETS |
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$ |
757,264 |
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$ |
765,071 |
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LIABILITIES AND STOCKHOLDERS’ EQUITY |
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Deposits |
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$ |
575,491 |
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$ |
585,469 |
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Advances from Federal Home Loan Bank |
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103,451 |
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100,628 |
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Advance payments by borrowers for taxes and insurance |
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1,611 |
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2,433 |
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Accrued interest payable |
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457 |
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743 |
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Accounts payable and other liabilities |
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3,932 |
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4,313 |
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TOTAL LIABILITIES |
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684,942 |
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693,586 |
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COMMITMENTS AND CONTINGENCIES |
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STOCKHOLDERS’ EQUITY: |
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Preferred stock, 5,000,000 shares authorized, none issued |
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— |
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— |
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Common stock, $.01 par value, 10,000,000 shares authorized; 4,668,934 and 4,666,950 shares issued |
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47 |
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47 |
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Additional paid-in capital |
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52,335 |
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52,285 |
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Retained earnings |
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70,786 |
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69,786 |
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Unearned ESOP shares |
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(521 |
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(586 |
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Treasury stock 2,570,296 and 2,570,296 shares - at cost |
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(50,234 |
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(50,234 |
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Accumulated other comprehensive loss on held-to-maturity securities |
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(420 |
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(247 |
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Accumulated other comprehensive income on available for sale securities |
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329 |
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434 |
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TOTAL STOCKHOLDERS’ EQUITY |
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72,322 |
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71,485 |
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TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY |
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$ |
757,264 |
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$ |
765,071 |
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See Notes to Unaudited Consolidated Financial Statements.
* derived from audited financial statements
TECHE HOLDING COMPANY
UNAUDITED CONSOLIDATED STATEMENTS OF INCOME
(IN THOUSANDS, EXCEPT PER SHARE DATA)
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Three Months Ended |
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December 31, |
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2009 |
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2008 |
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INTEREST INCOME |
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Interest and fees on loans |
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$ |
9,730 |
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$ |
10,148 |
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Interest and dividends on investments |
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695 |
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1,032 |
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Other interest income |
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75 |
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34 |
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TOTAL INTEREST INCOME |
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10,500 |
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11,214 |
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INTEREST EXPENSE: |
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Deposits |
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1,930 |
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3,179 |
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Advances from Federal Home Loan Bank |
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1,137 |
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1,199 |
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TOTAL INTEREST EXPENSE |
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3,067 |
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4,378 |
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NET INTEREST INCOME |
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7,433 |
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6,836 |
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PROVISION FOR LOAN LOSSES |
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1,196 |
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155 |
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NET INTEREST INCOME AFTER PROVISION FOR LOAN LOSSES |
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6,237 |
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6,681 |
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NON-INTEREST INCOME: |
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Total other-than temporary impairment losses |
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(366 |
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(312 |
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Portion of impairment losses recognized in other |
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262 |
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- |
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Net impairment losses recognized in earnings |
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(104 |
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(312 |
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Service charges and other |
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3,816 |
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3,726 |
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Gain on sale of premises and equipment |
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- |
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1 |
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Gain (loss) on securities |
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68 |
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(124 |
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Other income |
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198 |
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225 |
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TOTAL NON-INTEREST INCOME |
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3,978 |
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3,516 |
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NON-INTEREST EXPENSE: |
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Compensation and employee benefits |
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3,998 |
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4,011 |
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Occupancy expense |
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1,523 |
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1,503 |
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Marketing and professional |
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661 |
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852 |
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FDIC premiums and assessment |
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394 |
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47 |
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Other operating expenses |
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1,065 |
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1,182 |
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TOTAL NON-INTEREST EXPENSE |
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7,641 |
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7,595 |
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INCOME BEFORE INCOME TAXES |
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2,574 |
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2,602 |
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INCOME TAXES |
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841 |
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838 |
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NET INCOME |
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$ |
1,733 |
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$ |
1,764 |
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BASIC EARNINGS PER COMMON SHARE |
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$ |
0.83 |
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$ |
0.83 |
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DILUTED EARNINGS PER COMMON SHARE |
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$ |
0.82 |
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$ |
0.83 |
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See Notes to Unaudited Consolidated Financial Statements.
TECHE HOLDING COMPANY
UNAUDITED CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
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For the Three Months |
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2009 |
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2008 |
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CASH FLOWS (USED) PROVIDED BY OPERATING ACTIVITIES: |
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Net income |
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$ |
1,733 |
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$ |
1,764 |
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Adjustments to reconcile net income to net cash used by operating activities: |
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Accretion of discount and amortization of premium on investments |
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(38 |
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(73 |
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Impairment of debt securities |
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104 |
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312 |
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Provision for loan losses |
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1,196 |
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155 |
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(Gain) Loss on sale of OREO |
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(22 |
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1 |
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(Gain) Loss on sale and impairment of equity securities |
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(68 |
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124 |
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Depreciation |
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384 |
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400 |
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Excess tax benefits from share-based payment arrangements |
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(36 |
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-- |
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Change in accounts payable and other liabilities |
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(381 |
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(1,076 |
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Change in life insurance contracts |
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(149 |
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(156 |
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Change in prepaid expenses and other assets |
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(3,519 |
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818 |
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Change in accrued interest payable |
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(286 |
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(20 |
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Other items– net |
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743 |
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(34 |
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Net cash (used) provided by operating activities |
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(339 |
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2,215 |
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CASH FLOWS FROM INVESTING ACTIVITIES: |
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Proceeds from sale of equity securities |
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355 |
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-- |
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Principal repayments of mortgage-backed securities available for sale |
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1,539 |
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1,387 |
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Principal repayments of securities held to maturity |
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12,527 |
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2,012 |
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Net loan originations |
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(6,487 |
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(14,918 |
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Purchase of loans |
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(725 |
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-- |
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Purchase of FHLB stock |
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(66 |
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(23 |
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Proceeds from sale of fixed assets |
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-- |
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1 |
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Proceeds from sale of OREO |
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384 |
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153 |
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Purchase of premises and equipment |
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(519 |
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(255 |
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Net cash provided (used) by investing activities |
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7,008 |
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(11,643 |
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CASH FLOWS FROM FINANCING ACTIVITIES: |
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Net decrease in deposits |
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(9,978 |
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(446 |
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Net increase (decrease) in FHLB advances |
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2,823 |
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(1,386 |
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Net decrease in advance payments by borrowers for taxes and insurance |
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(822 |
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(230 |
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Dividends paid |
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(733 |
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(745 |
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Excess tax benefits from share-based payment arrangements |
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36 |
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-- |
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Purchase of common stock for treasury |
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-- |
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(126 |
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Net cash (used) provided by financing activities |
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(8,674 |
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(2,933 |
) |
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NET DECREASE IN CASH |
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(2,005 |
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(12,361 |
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CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD |
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23,675 |
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50,112 |
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CASH AND CASH EQUIVALENTS, END OF PERIOD |
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$ |
21,670 |
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$ |
37,751 |
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Supplemental schedule of noncash investing activities: |
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Transfer from loans to real estate owned |
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$ |
726 |
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$ |
483 |
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Loans originated to finance sale of real estate owned |
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1,311 |
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-- |
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See Notes to Unaudited Consolidated Financial Statements.
TECHE HOLDING COMPANY
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1 - PRINCIPLES OF CONSOLIDATION
The consolidated financial statements as of December 31, 2009 and September 30, 2009 and for the three month periods ended December 31, 2009 and 2008, include the accounts of Teche Holding Company (the “Company”) and its subsidiary, Teche Federal Bank (the “Bank”). The Company’s business is conducted principally through the Bank. All significant inter-company accounts and transactions have been eliminated in consolidation.
NOTE 2 - BASIS OF PRESENTATION
The accompanying consolidated financial statements were prepared in accordance with instructions for Form 10-Q and, therefore, do not include all information necessary for a complete presentation of consolidated financial condition, results of operations, and cash flows in conformity with accounting principles generally accepted in the United States of America. However, all adjustments, consisting of normal recurring accruals, which, in the opinion of management, are necessary for a fair presentation of the consolidated financial statements have been included. The results of operations for the three months ended December 31, 2009 are not necessarily indicative of the results that may be expected for the entire fiscal year or any other period. These financial statements should be read in conjunction with the audited consolidated financial statements and the accompanying notes thereto included in the Company’s Annual Report on Form 10-K for the year ended September 30, 2009. Certain items related to the financial statements dated September 30, 2009 and December 31, 2008 were reclassified to conform to the December 31, 2009 financial statements. The items reclassified were immaterial. The reclassification had no impact on net income or stockholders’ equity.
NOTE 3 - INCOME PER SHARE
Basic and diluted net income per share is computed based on the weighted average number of shares outstanding during each period. Diluted net income per share reflects the potential dilution that could occur if stock options were exercised, resulting in the issuance of common stock that then shared in the net income of the Company.
Following is a summary of the information used in the computation of basic and diluted income per common share for the three months ended December 31, 2009 and 2008 (in thousands).
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Three Months Ended |
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December 31, |
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2009 |
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2008 |
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Weighted average number of common shares outstanding - used in computation of basic income per common share |
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2,098 |
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2,118 |
Effect of dilutive securities: |
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Stock options |
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18 |
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11 |
Weighted average number of common shares outstanding plus effect of dilutive securities - used in computation of diluted net income per common share |
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2,116 |
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2,129 |
For the three month periods ending December 31, 2009 and 2008, net income for determining diluted earnings per share was equivalent to net income. Options to purchase shares that have been excluded from the determination of diluted earnings per share because they are antidilutive (the exercise price is higher than the current market price) amount to approximately 192,000 for the three months ended December 31, 2009 and 197,000 for the three months ended December 31, 2008.
NOTE 4 - COMPREHENSIVE INCOME
Comprehensive income includes net income and other comprehensive income which includes unrealized gains and losses on securities. Following is a summary of the Company’s comprehensive income for the three months ended December 31, 2009 and 2008 (in thousands).
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For Three Months |
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Ended December 31, |
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2009 |
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2008 |
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Net income |
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$ |
1,733 |
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$ |
1,764 |
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Reclassification of realized losses (gains), net of tax |
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(45) |
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287 |
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Noncredit portion of OTTI losses on held-to-maturity securities, net of tax |
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(173 |
) |
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-- |
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Unrealized gains (losses), net of tax |
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(61 |
) |
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54 |
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Total comprehensive income |
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$ |
1,454 |
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$ |
2,105 |
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NOTE 5 - NEW ACCOUNTING PRONOUNCEMENTS
On June 29, 2009, the FASB issued an accounting pronouncement establishing the FASB Accounting Standards CodificationTM (the “ASC”) as the source of authoritative accounting principles recognized by the FASB to be applied by nongovernmental entities. This pronouncement was effective for financial statements issued for interim and annual periods ending after September 15, 2009, for most entities. On the effective date, all non-SEC accounting and reporting standards were superceded. The Company adopted this new accounting pronouncement for the year ended September 30, 2009, as required, and adoption did not have a material impact on the Company’s financial statements taken as a whole.
ASC (805) – Business Combinations, changes the way that acquiring entities will account for business combinations. Some of the more significant changes are that the equity securities issued as consideration will be valued at the date that the acquirer takes control of assets and assumes liabilities of the acquired company (typically would be the date of closing), and that direct costs of the acquisition will be expensed as incurred rather than capitalized. This statement was effective for the Company beginning October 1, 2009. Adoption of this standard did not have an impact on the consolidated financial statements but will impact the accounting for future business combinations.
ASC (810) – Non-controlling Interests in Consolidated Financial Statements, which improves the relevance, comparability, and transparency of financial information provided to investors by requiring all entities to report non-controlling (minority) interests in subsidiaries in the same way as equity in the consolidated financial statements. Moreover, this guidance eliminates the diversity that currently exists in accounting for transactions between an entity and non-controlling interests by requiring they be treated as equity transactions. This statement is effective for fiscal years, and interim periods within those fiscal
years, beginning on or after December 15, 2008. Earlier adoption is prohibited. This statement shall be applied prospectively as of the beginning of the fiscal year in which this statement is initially applied, except for the presentation and disclosure requirements. The presentation and disclosure requirements shall be applied retrospectively for all periods presented. Adoption of this standard had no impact on the consolidated financial statements.
ASC (860) Accounting for Transfers and Servicing of Financial Assets and Extinguishments of Liabilities, will require more information about transfers of financial assets, including securitization transactions, and where companies have continuing exposure to the risks related to transferred financial assets. This guidance also eliminates the concept of a qualifying special-purpose entity, and changes the requirements for derecognizing financial assets and requires additional disclosures.
ASC (810) Consolidation of Variable Interest Entities, changes how a company determines when an entity that is insufficiently capitalized or is not controlled through voting (or similar rights) should be consolidated. The determination of whether a company is required to consolidate an entity is based on, among other things, an entity’s purpose and design and a company’s ability to direct the activities of the entity that most significantly impact the entity’s economic performance.
Both ASC (860) and ASC (810) will be effective as of the beginning of each reporting entity’s first annual reporting period that begins after November 15, 2009, for interim periods within that first annual reporting period and for interim and annual reporting periods thereafter. Earlier application is prohibited. The recognition and measurement provisions shall be applied to transfers that occur on or after the effective date. Adoption of these standards had no impact on the consolidated financial statements.
NOTE 6 – FAIR VALUE MEASUREMENTS
The Company utilizes fair value measurements to record fair value adjustments to certain assets and liabilities and to determine fair value disclosures. Available for sale securities are recorded at fair value on a recurring basis. Additionally, from time to time, the Company may be required to record at fair value other assets on a nonrecurring basis, such as securities held-to-maturity, loans held for sale, loans held for investment and certain other assets. These nonrecurring fair value adjustments typically involve application of lower of cost or market accounting, other than temporary impairment accounting or impairments of individual assets.
A three-tier fair value hierarchy which prioritizes the inputs used in measuring fair value as follows:
Level 1 - Observable inputs such as quoted prices in active markets;
Level 2 - Inputs, other than the quoted prices in active markets, that are observable either directly or indirectly; and
Level 3 - Unobservable inputs in which there is little or no market data, which require the reporting entity to develop its own assumptions.
Following is a description of valuation methodologies used for assets recorded at fair value.
Investment Securities
Securities available for sale are valued at quoted market prices where available. If quoted market prices are not available, fair values are based on quoted market prices of comparable securities. Level 1 securities include those traded on an active exchange, such as the New York Stock Exchange, U.S.
Treasury securities that are traded by dealers or brokers in active over-the-counter markets and money market funds. Level 2 securities include mortgage-backed securities issued by government sponsored entities, municipal bonds. Securities classified as Level 3 include asset-backed securities in less liquid markets. Securities held to maturity are valued using discounted cash flow models that use assumptions about prepayment speeds, coupon default rates, discount rates and timing and other assumptions that may affect the amounts of cash flows.
Loans
The Company does not record loans at fair value on a recurring basis. However, from time to time, a loan is considered impaired and an allowance for loan losses is established. Loans for which it is probable that payment of interest and principal will not be made in accordance with the contractual terms of the loan agreement are considered impaired. Once a loan is identified as individually impaired, management measures impairment in accordance with ASC (310), “Accounting by Creditors for Impairment of a Loan”. The fair value of impaired loans is estimated using one of several methods, including collateral value, market value of similar debt, enterprise value, liquidation value and discounted cash flows. Those impaired loans not requiring an allowance represent loans for which the fair value of the expected repayments or collateral exceed the recorded investments in such loans. At December 31, 2009, substantially all of the impaired loans were evaluated based on the fair value of the collateral less estimated costs to sell. Impaired loans where an allowance is established based on the fair value of collateral require classification in the fair value hierarchy. When the fair value of the collateral is based on an observable market price or a current appraised value, the Company records the impaired loan as nonrecurring Level 2. When an appraised value is not available or management determines the fair value of the collateral is further impaired below the appraised value and there is no observable market price, the Company records the impaired loan as nonrecurring Level 3.
|
|
Fair Value |
|
Fair Value Hierarchy |
|||||||||
|
|
At December 31, 2009 |
|
Level 1 |
|
Level 2 |
|
Level 3 |
|
||||
(In thousands) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Assets valued on a recurring basis: |
|
|
|
|
|
|
|
|
|
|
|
|
|
Mortgage-backed securities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
Government National Mortgage Assoc. |
|
$ |
2,326 |
|
$ |
- |
|
$ |
2,326 |
|
$ |
- |
|
Federal Home Loan Mortgage Corp. |
|
|
7,576 |
|
|
- |
|
|
7,576 |
|
|
- |
|
Federal National Mortgage Assoc. |
|
|
5,618 |
|
|
- |
|
|
5,618 |
|
|
- |
|
|
|
|
15,520 |
|
|
- |
|
|
15,520 |
|
|
- |
|
Collateralized mortgage obligations |
|
|
|
|
|
|
|
|
|
|
|
|
|
CMO’s: |
|
|
|
|
|
|
|
|
|
|
|
|
|
Government National Mortgage Assoc. |
|
|
3,043 |
|
|
- |
|
|
3, 043 |
|
|
- |
|
Other equity securities |
|
|
370 |
|
|
370 |
|
|
- |
|
|
- |
|
Total AFS securities |
|
$ |
18,933 |
|
$ |
370 |
|
$ |
18,563 |
|
$ |
- |
|
Assets valued on a non-recurring basis: |
|
|
|
|
|
|
|
|
|
|
|
|
|
CMO’s: Private label |
|
$ |
428 |
|
$ |
- |
|
$ |
428 |
|
$ |
- |
|
Impaired loans |
|
|
7,796 |
|
|
- |
|
|
7,796 |
|
|
- |
|
Total non-recurring |
|
$ |
8,224 |
|
$ |
- |
|
$ |
8,224 |
|
$ |
- |
|
|
|
Fair Value At September |
|
Fair Value Hierarchy |
|||||||||
|
|
30, 2009 |
|
Level 1 |
|
Level 2 |
|
Level 3 |
|
||||
(In thousands) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Assets valued on a recurring basis: |
|
|
|
|
|
|
|
|
|
|
|
|
|
Mortgage-backed securities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
Government National Mortgage Assoc. |
|
$ |
2,549 |
|
$ |
- |
|
$ |
2,549 |
|
$ |
- |
|
Federal Home Loan Mortgage Corp. |
|
|
8,322 |
|
|
- |
|
|
8,322 |
|
|
- |
|
Federal National Mortgage Assoc. |
|
|
6,020 |
|
|
- |
|
|
6,020 |
|
|
- |
|
|
|
|
16,891 |
|
|
- |
|
|
16,891 |
|
|
- |
|
Collateralized mortgage obligations |
|
|
|
|
|
|
|
|
|
|
|
|
|
CMO’s: |
|
|
|
|
|
|
|
|
|
|
|
|
|
Government National Mortgage Assoc. |
|
|
3,317 |
|
|
- |
|
|
3,317 |
|
|
- |
|
Marketable equity securities |
|
|
728 |
|
|
728 |
|
|
- |
|
|
- |
|
Total recurring |
|
$ |
20,936 |
|
$ |
728 |
|
$ |
20,208 |
|
$ |
- |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Assets valued on a non-recurring basis: |
|
|
|
|
|
|
|
|
|
|
|
|
|
CMO’s: Private label |
|
$ |
164 |
|
$ |
- |
|
$ |
164 |
|
$ |
- |
|
Impaired loans |
|
|
2,988 |
|
|
- |
|
|
2,988 |
|
|
- |
|
Total non-recurring |
|
$ |
3,152 |
|
$ |
- |
|
$ |
3,152 |
|
$ |
- |
|
The fair value of a financial instrument is the current amount that would be exchanged between willing parties, other than in a forced liquidation. Fair value is best determined based upon quoted market prices. However, in many instances, there are no quoted market prices for the Company’s various financial instruments. In cases where quoted market prices are not available, fair values are based on estimates using present value or other valuation techniques. Those techniques are significantly affected by the assumptions used, including the discount rate and estimates of future cash flows. Accordingly, the fair value estimates may not be realized in an immediate settlement of the instrument. SFAS 107 excludes certain financial instruments and all non-financial instruments from its disclosure requirements. Accordingly, the aggregate fair value amounts presented may not necessarily represent the underlying fair value of the Company.
The following methods and assumptions were used by the Company in estimating fair value disclosures for financial instruments:
Cash - For those short-term instruments, the carrying amount is a reasonable estimate of fair value.
Investment Securities – See discussion in the beginning of Note 6 on the evaluation of fair value of investment securities. Investment securities’ fair value equals quoted market price, if available. If a quoted market price is not available, fair value is estimated using quoted market prices for similar securities.
Loans - See discussion in the beginning of Note 6 on the evaluation of fair value of impaired loans. The fair value of loans is estimated by discounting the future cash flows using the current rates at which similar loans would be made to borrowers for the same remaining maturities.
Federal Home Loan Bank Stock - Federal Home Loan Bank (FHLB) stock is recorded at cost and is periodically reviewed for impairment. No ready market exists for the FHLB stock. It has no quoted market value and is carried at cost. Cost approximates fair market value based upon the redemption requirements of the FHLB, and this investment is not considered impaired at December 31, 2009. FHLB of Dallas is still redeeming stock.
Bank owned life insurance- The carrying amounts of bank owned life insurance contracts approximate fair value.
Accrued Interest - The carrying amounts of accrued interest receivable and payable approximate fair value.
Deposits - The fair value of demand deposits, savings accounts, and certain money market deposits is the amount payable on demand at the reporting date. The fair value of fixed-maturities certificates of deposit is estimated using the rates currently offered for deposits of similar remaining maturities.
Advances from Federal Home Loan Bank - The fair value of advances is estimated using rates currently available for advances of similar remaining maturities.
Commitments - The fair value of commitments to extend credit was not significant.
The estimated fair values of the Company’s financial instruments are as follows at December 31, 2009 and September 30, 2009:
|
|
December 31, 2009 |
|
|
|
September 30, 2009 |
|||||||||
|
|
Carrying |
|
Estimated |
|
|
|
Carrying |
|
|
Estimated |
||||
|
|
Amount |
|
Fair Value |
|
|
|
Amount |
|
|
Fair Value |
||||
(In thousands) |
|
|
|
|
|
|
|
|
|
|
|
|
|
||
Financial assets: |
|
|
|
|
|
|
|
|
|
|
|
|
|
||
Cash and cash equivalents |
|
$ |
21,670 |
|
$ |
21,670 |
|
|
|
$ 23,675 |
|
|
$ 23,675 |
||
Investment securities |
|
|
81,483 |
|
|
82,922 |
|
|
|
96,320 |
|
|
97,823 |
||
FHLB stock |
|
|
5,129 |
|
|
5,129 |
|
|
|
5,063 |
|
|
5,063 |
||
Accrued interest receivable |
|
|
2,597 |
|
|
2,597 |
|
|
|
2,622 |
|
|
2,622 |
||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||
Life Insurance contracts |
|
|
12,873 |
|
|
12,873 |
|
|
|
12,724 |
|
|
12,724 |
||
Loans receivable, net |
|
|
594,543 |
|
|
621,501 |
|
|
|
588,527 |
|
|
617,323 |
||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||
Financial liabilities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
||
Deposits |
|
|
575,491 |
|
|
581,984 |
|
|
|
585,469 |
|
|
593,273 |
||
Advances from Federal Home Loan Bank |
|
|
103,451 |
|
|
109,219 |
|
|
|
100,628 |
|
|
107,931 |
||
Accrued interest payable |
|
|
457 |
|
|
457 |
|
|
|
743 |
|
|
743 |
||
NOTE 7 – SECURITIES
The amortized cost and estimated fair values of securities available-for-sale are as follows:
|
|
December 31, 2009 |
|||||||||||
|
|
|
|
Gross |
|
Gross |
|
Estimated |
|
||||
|
|
Amortized Cost |
|
Unrealized Gains |
|
Unrealized Losses |
|
Fair Value |
|
||||
(In thousands) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Mortgage-backed securities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
Government National Mortgage Assoc. |
|
$ |
2,294 |
|
$ |
33 |
|
$ |
- |
|
$ |
2,327 |
|
Federal Home Loan Mortgage Corp. |
|
|
7,430 |
|
|
146 |
|
|
- |
|
|
7,576 |
|
Federal National Mortgage Assoc. |
|
|
5,476 |
|
|
142 |
|
|
- |
|
|
5,618 |
|
|
|
|
15,200 |
|
|
321 |
|
|
- |
|
|
15,521 |
|
Collateralized mortgage obligations |
|
|
|
|
|
|
|
|
|
|
|
|
|
CMO’s: |
|
|
|
|
|
|
|
|
|
|
|
|
|
Government National Mortgage Assoc. |
|
|
2,926 |
|
|
117 |
|
|
- |
|
|
3,043 |
|
Other equity securities |
|
|
309 |
|
|
61 |
|
|
- |
|
|
370 |
|
Total |
|
$ |
18,435 |
|
$ |
499 |
|
$ |
- |
|
$ |
18,934 |
|
|
|
September 30, 2009 |
|||||||||||||||||||||||||
|
|
|
|
Gross |
|
Gross |
|
Estimated |
|
||||||||||||||||||
|
|
Amortized Cost |
|
Unrealized Gains |
|
Unrealized Losses |
|
Fair Value |
|
||||||||||||||||||
(In thousands) |
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||
Mortgage-backed securities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||
Government National Mortgage Assoc. |
|
$ |
2,508 |
|
$ |
41 |
|
$ |
- |
|
$ |
2,549 |
|
||||||||||||||
Federal Home Loan Mortgage Corp. |
|
|
8,187 |
|
|
139 |
|
|
(4) |
|
|
8,322 |
|
||||||||||||||
Federal National Mortgage Assoc. |
|
|
5,809 |
|
|
211 |
|
|
- |
|
|
6,020 |
|
||||||||||||||
|
|
|
16,504 |
|
|
391 |
|
|
(4) |
|
|
16,891 |
|
||||||||||||||
Collateralized mortgage obligations |
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||
CMO’s: |
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||
Government National Mortgage Assoc. |
|
|
3,181 |
|
|
136 |
|
|
- |
|
|
3,317 |
|
||||||||||||||
Other equity securities |
|
|
592 |
|
|
159 |
|
|
(23) |
|
|
728 |
|
||||||||||||||
Total |
|
$ |
20,277 |
|
$ |
686 |
|
$ |
(27) |
|
$ |
20,936 |
|
||||||||||||||
The amortized cost and estimated fair values of securities held-to-maturity are as follows:
|
|
December 31, 2009 |
|||||||||||
|
|
|
|
Gross |
|
Gross |
|
Estimated |
|
||||
|
|
Amortized Cost |
|
Unrealized Gains |
|
Unrealized Losses |
|
Fair Value |
|
||||
(In thousands) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Investment securities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
Federal Home Loan Bank Bonds |
|
$ |
16,436 |
|
$ |
71 |
|
$ |
- |
|
$ |
16,507 |
|
Time deposits other banks |
|
|
7,299 |
|
|
- |
|
|
- |
|
|
7,299 |
|
Mortgage-backed securities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
Federal National Mortgage Assoc. |
|
|
23,011 |
|
|
916 |
|
|
(2) |
|
|
23,925 |
|
Federal Home Loan Mortgage Corp. |
|
|
10,085 |
|
|
589 |
|
|
- |
|
|
10,674 |
|
Private Label |
|
|
2,168 |
|
|
203 |
|
|
(386) |
|
|
1,985 |
|
CMO’s: |
|
|
|
|
|
|
|
|
|
|
|
|
|
Federal Home Loan Mortgage Corp. |
|
|
313 |
|
|
- |
|
|
(17) |
|
|
296 |
|
Federal National Mortgage Assoc. |
|
|
1,768 |
|
|
43 |
|
|
(24) |
|
|
1,787 |
|
Private Label |
|
|
1,469 |
|
|
59 |
|
|
(13) |
|
|
1,515 |
|
Total |
|
$ |
62,549 |
|
$ |
1,881 |
|
$ |
(442) |
|
$ |
63,988 |
|
|
|
September 30, 2009 |
|||||||||||
|
|
|
|
Gross |
|
Gross |
|
Estimated |
|
||||
|
|
Amortized Cost |
|
Unrealized Gains |
|
Unrealized Losses |
|
Fair Value |
|
||||
(In thousands) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Investment securities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
Federal Home Loan Bank |
|
$ |
16,476 |
|
$ |
97 |
|
$ |
- |
|
$ |
16,573 |
|
Time deposits other banks |
|
|
17,049 |
|
|
24 |
|
|
- |
|
|
17,073 |
|
Mortgage-backed securities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
Federal National Mortgage Assoc. |
|
|
24,658 |
|
|
1,212 |
|
|
(1) |
|
|
25,869 |
|
Federal Home Loan Mortgage Corp. |
|
|
10,770 |
|
|
709 |
|
|
- |
|
|
11,479 |
|
Private Label |
|
|
2,572 |
|
|
146 |
|
|
(588) |
|
|
2,130 |
|
CMO’s: |
|
|
|
|
|
|
|
|
|
|
|
|
|
Federal Home Loan Mortgage Corp. |
|
|
341 |
|
|
6 |
|
|
- |
|
|
347 |
|
Federal National Mortgage Assoc. |
|
|
1,843 |
|
|
63 |
|
|
- |
|
|
1,906 |
|
Private Label |
|
|
1,675 |
|
|
40 |
|
|
(205) |
|
|
1,510 |
|
Total |
|
$ |
75,384 |
|
$ |
2,297 |
|
$ |
(794) |
|
$ |
76,887 |
|
Details concerning securities with unrealized losses as of December 31, 2009 are as follows:
|
|
Securities with losses |
|
Securities with losses |
|
|
|
|
|
||||||||||
|
|
under 12 months |
|
over 12 months |
|
Total |
|
||||||||||||
(In thousands) |
|
Fair Value |
|
Unrealized |
|
Fair value |
|
Unrealized |
|
Fair value |
|
Unrealized |
|
||||||
Available-for-sale |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Mortgage-backed securities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Federal Home Loan |
|
$ |
- |
|
$ |
- |
|
$ |
- |
|
$ |
- |
|
$ |
- |
|
$ |
- |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Marketable equity securities |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
|
$ |
- |
|
$ |
- |
|
$ |
- |
|
$ |
- |
|
$ |
- |
|
$ |
- |
|
Details concerning securities with unrealized losses as of December 31, 2009 are as follows:
|
|
Securities with losses |
|
Securities with losses |
|
|
|
|
|
||||||||||
|
|
under 12 months |
|
over 12 months |
|
Total |
|
||||||||||||
(In thousands) |
|
Fair value |
|
Unrealized |
|
Fair value |
|
Unrealized |
|
Fair value |
|
Unrealized |
|
||||||
Held-to-maturity |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Investment securities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Federal Home Loan Bank |
|
$ |
- |
|
$ |
- |
|
$ |
- |
|
$ |
- |
|
$ |
- |
|
$ |
- |
|
Time Deposits Other Banks |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
Mortgage-backed securities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Federal National |
|
|
44 |
|
|
(1) |
|
|
102 |
|
|
(1) |
|
|
146 |
|
|
(2) |
|
Federal Home Loan Mortgage Corp |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
Private Label |
|
|
34 |
|
|
(4) |
|
|
895 |
|
|
(344) |
|
|
929 |
|
|
(348) |
|
CMO’s: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Federal Home Loan Mortgage Corporation |
|
|
296 |
|
|
(17) |
|
|
- |
|
|
- |
|
|
296 |
|
|
(17) |
|
Federal National Mortgage Assoc. |
|
|
706 |
|
|
(24) |
|
|
32 |
|
|
- |
|
|
738 |
|
|
(24) |
|
Private Label |
|
|
17 |
|
|
(44) |
|
|
424 |
|
|
(7) |
|
|
441 |
|
|
(51) |
|
|
|
$ |
1,097 |
|
$ |
(90) |
|
$ |
1,453 |
|
$ |
(352) |
|
$ |
2,550 |
|
$ |
(442) |
|
Details concerning securities with unrealized losses as of September 30, 2009 are as follows:
|
|
Securities with losses |
|
Securities with losses |
|
|
|
|
|
||||||||||
|
|
under 12 months |
|
over 12 months |
|
Total |
|
||||||||||||
(In thousands) |
|
Fair value |
|
Unrealized |
|
Fair value |
|
Unrealized |
|
Fair value |
|
Unrealized |
|
||||||
Available-for-sale |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Mortgage-backed securities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Federal Home Loan |
|
$ |
1,463 |
|
$ |
(4) |
|
$ |
- |
|
$ |
- |
|
$ |
1,463 |
|
$ |
(4) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Marketable equity securities |
|
|
64 |
|
|
(12) |
|
|
11 |
|
|
(11) |
|
|
75 |
|
|
(23) |
|
|
|
$ |
1,527 |
|
$ |
(16) |
|
$ |
11 |
|
$ |
(11) |
|
$ |
1,538 |
|
$ |
(27) |
|
Details concerning securities with unrealized losses as of September 30, 2009 are as follows:
|
|
Securities with losses |
|
Securities with losses |
|
|
|
|
|
||||||||||
|
|
under 12 months |
|
over 12 months |
|
Total |
|
||||||||||||
(In thousands) |
|
Fair value |
|
Unrealized |
|
Fair value |
|
Unrealized |
|
Fair value |
|
Unrealized |
|
||||||
Held-to-maturity |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Investment securities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Federal Home Loan Bank |
|
$ |
- |
|
$ |
- |
|
$ |
- |
|
$ |
- |
|
$ |
- |
|
$ |
- |
|
Time deposits other banks |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
Mortgage-backed securities: |
|
|
|
|
|
|
|
|
|
|