Attached files
SECURITIES
AND EXCHANGE COMMISSION
Washington,
D.C. 20549
Form
10-Q/A
Amendment
No. 1
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þ
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QUARTERLY REPORT PURSUANT TO
SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
1934
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For
the quarterly period ended June 30,
2009
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OR
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o
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TRANSITION
REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
1934
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Commission
file number 333-12892
MISSION COMMUNITY
BANCORP
(Exact
name of registrant as specified in its charter)
California
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77-0559736
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(State
or other jurisdiction
of
incorporation)
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(I.R.S.
Employer
Identification
No.)
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581 Higuera St., San Luis
Obispo, California 93401
(Address
of principal executive offices)
(805)
782-5000
Issuer’s
telephone number
Not
applicable
(Former
name, former address and former fiscal year, if changed since last
report)
Indicate
by check mark whether the issuer (1) has filed all reports required to be filed
by Section 13 or 15(d) of the Exchange Act during the past 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 þ No o
Indicate
by check mark whether or to registrant has submitted electronically and posted
on its corporate Website, if any, every Interactive Data File required to be
submitted and posted pursuant to Rule 405 or Regulation S-T during the preceding
12 months (or for such shorter period that the registrant was required to submit
and post such files).
o Yes
o 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.
Large
accelerated filer o
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Accelerated
filer o
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Non-accelerated
filer o
(Do not
check if a smaller reporting company)
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Smaller
reporting company þ
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Indicate
by check mark whether the registrant is a shell company (as defined in Rule
12b-2 of the Exchange Act).
Yes
o No þ
APPLICABLE
ONLY TO CORPORATE ISSUERS
State the
number of shares outstanding of each of the issuer’s classes of common equity,
as of the latest practicable date: 1,345,602 shares of common stock
outstanding as of August 10, 2009.
Mission
Community Bancorp
Form
10-Q/A
EXPLANATORY
NOTE
We are
filing this Amended Quarterly Report on Form 10-Q/A (the “Amended Filing” or
“Form 10-Q/A”) to our Quarterly Report on Form 10-Q for the six months ended
June 30, 2009 (the “Original Filing”) to amend and restate our unaudited
condensed consolidated financial statements and related disclosures for the six
months ended June 30, 2009, as discussed in Note 8 to the accompanying
restated unaudited condensed consolidated financial statements. The
Original Filing was filed with the Securities and Exchange Commission (“SEC”) on
August 14, 2009. This
Amendment corrects and restates the original Quarterly Report on Form 10-Q, but
continues to be reported as of the date of the original filing of the Form 10-Q
on August 14, 2009. The Company has not updated the disclosures in
this Amendment to report as of a later date. All information
contained in this Amendment is subject to updating and supplementing as provided
in the periodic reports filed with the SEC subsequent to the original filing
date.
Background
of the Restatement
On
June 11, 2010, the Company announced that its Audit Committee, with the
assistance of its independent auditors, had determined that an error had been
made with respect to the recognition of $511 thousand in tax benefits
in the first six months of 2009. As a result of this error, the
Company announced that the previously issued unaudited condensed consolidated
financial statements for the fiscal quarters ended March 31, 2009,
June 30, 2009, and September 30, 2009 in the Company’s Forms 10-Q for
those periods should no longer be relied upon (collectively, the “Affected
Periods”). The error had been corrected on a year-to-date basis as of
September 30, 2009. This restatement reflects the appropriate
portions of the correction in the first and second quarters of 2009, rather than
in the third quarter. The financial statements for the full year 2009
are not included in the Affected Periods.
Description
of the Error
The
recognition of a $479 thousand tax benefit in the first fiscal quarter of 2009
and an additional $32 thousand in the second quarter was based on management’s
understanding at the time that, under the American Recovery and Reinvestment Act
of 2009 (“ARRA”), the Company would be able to carry back 2008’s net operating
loss (“NOL”) to five prior years rather than two years, and thereby increase the
Company’s current tax receivable. However, at that time, management
was unaware of a previous interpretation under the tax law that would disqualify
the Company from electing the extended carryback period under
ARRA. The error was corrected on a year-to-date basis as of September
30, 2009. This restatement reflects the appropriate portions of that
correction in the first and second quarters of 2009, rather than in the third
quarter.
Restatement
of Other Financial Statements
This
amendment to our Quarterly Report on Form 10-Q is being filed to restate our
unaudited condensed consolidated financial statements and related financial
information for the six-month period ended June 30, 2009. With the
filing of this Form 10-Q/A, we are concurrently filing amendments to our
Quarterly Reports on Form 10-Q for the quarterly periods ended March 31, 2009
and September 30, 2009. We are also concurrently filing an
amendment to our Form 10-Q for the quarterly period ending March 31,
2010. The amendment to this most recent Form 10-Q is being filed only
because the originally filed report for March 31, 2010 includes financial
statements which present comparisons to the uncorrected March 31, 2009,
financial statements. The consolidated financial statements and
related financial information contained in any of the Company’s filings with the
SEC during the Affected Periods should no longer be relied
upon.
Mission Community Bancorp
June
30, 2009
Index
PART I
Item
1. Financial Statements (Restated)
Condensed
Consolidated Balance Sheets
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||||||||||||
Unaudited
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(dollars
in thousands)
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|||||||||||
(Restated)
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||||||||||||
June 30, 2009
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December 31, 2008
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June 30, 2008
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||||||||||
Assets
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||||||||||||
Cash
and due from banks
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$ | 11,837 | $ | 7,804 | $ | 2,799 | ||||||
Federal
funds sold
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1,145 | 9,920 | 160 | |||||||||
Total
cash and cash equivalents
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12,982 | 17,724 | 2,959 | |||||||||
Interest-bearing
deposits in other banks
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575 | 11,710 | 550 | |||||||||
Investment
securities available for sale
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43,764 | 24,846 | 25,669 | |||||||||
Loans
held for sale
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1,227 | 1,264 | 1,088 | |||||||||
Loans,
net of unearned income
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150,216 | 152,047 | 147,354 | |||||||||
Less
allowance for loan losses
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(3,474 | ) | (3,942 | ) | (2,986 | ) | ||||||
Net
loans
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146,742 | 148,105 | 144,368 | |||||||||
Federal
Home Loan Bank stock and other stock, at cost
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2,849 | 2,757 | 2,195 | |||||||||
Premises
and equipment
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2,807 | 2,599 | 3,466 | |||||||||
Other
real estate owned
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2,300 | 983 | - | |||||||||
Company
owned life insurance
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2,837 | 2,789 | 2,739 | |||||||||
Accrued
interest and other assets
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3,240 | 2,713 | 3,017 | |||||||||
Total
Assets
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$ | 219,323 | $ | 215,490 | $ | 186,051 | ||||||
Liabilities and Shareholders'
Equity
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||||||||||||
Deposits:
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||||||||||||
Noninterest-bearing
demand
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$ | 22,129 | $ | 22,802 | $ | 23,157 | ||||||
Money
market, NOW and savings
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40,796 | 32,668 | 38,710 | |||||||||
Time
certificates of deposit
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97,760 | 89,334 | 64,313 | |||||||||
Total
deposits
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160,685 | 144,804 | 126,180 | |||||||||
Other
borrowings
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30,044 | 45,700 | 37,200 | |||||||||
Junior
subordinated debt securities
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3,093 | 3,093 | 3,093 | |||||||||
Accrued
interest and other liabilities
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1,317 | 1,376 | 1,059 | |||||||||
Total
liabilities
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195,139 | 194,973 | 167,532 | |||||||||
Shareholders'
Equity:
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||||||||||||
Preferred
stock - Series A (100,000 shares issued and outstanding)
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392 | 392 | 392 | |||||||||
Preferred
stock - Series B (20,500 shares issued and outstanding)
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192 | 192 | 192 | |||||||||
Preferred
stock - Series C (50,000 shares issued and outstanding)
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500 | 500 | 500 | |||||||||
Preferred
stock - Series D (5,116 shares issued and outstanding)
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5,068 | - | - | |||||||||
Common
stock - 10,000,000 shares authorized;
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||||||||||||
Issued
and outstanding: 1,345,602 at June 30, 2009;
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||||||||||||
1,345,602
at December 31, 2008;
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||||||||||||
and
1,120,576 at June 30, 2008
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18,042 | 18,042 | 14,193 | |||||||||
Additional
paid-in capital
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206 | 172 | 132 | |||||||||
Retained
earnings (deficit)
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(213 | ) | 864 | 3,260 | ||||||||
Accumulated
other comprehensive income -
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||||||||||||
unrealized
appreciation on available-for-sale
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||||||||||||
securities
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(3 | ) | 355 | (150 | ) | |||||||
Total
shareholders' equity
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24,184 | 20,517 | 18,519 | |||||||||
Total
Liabilities and Shareholders' Equity
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$ | 219,323 | $ | 215,490 | $ | 186,051 |
The
accompanying notes are an integral part of these consolidated financial
statements.
Mission Community Bancorp and
Subsidiary
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||||||||||||||||
Condensed
Consolidated Statements of Income
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||||||||||||||||
Unaudited
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(in
thousands, except per share data)
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|||||||||||||||
For the Three Months Ended
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For the Six Months Ended
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|||||||||||||||
(Restated)
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(Restated)
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|||||||||||||||
June 30, 2009
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June 30, 2008
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June 30, 2009
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June 30, 2008
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|||||||||||||
Interest
Income
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||||||||||||||||
Interest
and fees on loans
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$ | 2,288 | $ | 2,291 | $ | 4,619 | $ | 4,720 | ||||||||
Interest
on investment securities
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329 | 316 | 588 | 528 | ||||||||||||
Other
interest income
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18 | 44 | 111 | 138 | ||||||||||||
Total
interest income
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2,635 | 2,651 | 5,318 | 5,386 | ||||||||||||
Interest
Expense
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||||||||||||||||
Interest
on money market, NOW and savings deposits
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128 | 155 | 281 | 357 | ||||||||||||
Interest
on time certificates of deposit
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623 | 515 | 1,273 | 1,120 | ||||||||||||
Other
interest expense
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346 | 380 | 745 | 746 | ||||||||||||
Total
interest expense
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1,097 | 1,050 | 2,299 | 2,223 | ||||||||||||
Net
interest income
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1,538 | 1,601 | 3,019 | 3,163 | ||||||||||||
Provision
for loan losses
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381 | 2,325 | 681 | 2,545 | ||||||||||||
Net
interest income after provision for loan losses
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1,157 | (724 | ) | 2,338 | 618 | |||||||||||
Non-interest
income
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||||||||||||||||
Service
charges on deposit accounts
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79 | 83 | 161 | 153 | ||||||||||||
Gain
on sale of loans
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112 | 9 | 174 | 39 | ||||||||||||
Loan
servicing fees, net of amortization
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23 | 20 | 48 | 45 | ||||||||||||
Grants
and awards
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7 | - | 7 | - | ||||||||||||
Gain
on sale of available-for-sale securities
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- | - | 239 | - | ||||||||||||
Other
income and fees
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42 | 26 | 70 | 57 | ||||||||||||
Total
non-interest income
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263 | 138 | 699 | 294 | ||||||||||||
Non-interest
expense
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||||||||||||||||
Salaries
and employee benefits
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914 | 922 | 1,893 | 1,884 | ||||||||||||
Occupancy
expenses
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160 | 158 | 332 | 279 | ||||||||||||
Furniture
and equipment
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126 | 102 | 237 | 215 | ||||||||||||
Data
processing
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193 | 131 | 379 | 263 | ||||||||||||
Professional
fees
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170 | 82 | 265 | 173 | ||||||||||||
Marketing
and business development
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36 | 57 | 70 | 90 | ||||||||||||
Office
supplies and expenses
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66 | 57 | 136 | 114 | ||||||||||||
Insurance
and regulatory assessments
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241 | 52 | 298 | 101 | ||||||||||||
Loan
and lease expenses
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34 | 25 | 66 | 46 | ||||||||||||
Provision
for unfunded commitments
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- | 15 | 35 | 15 | ||||||||||||
Other
expenses
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192 | 147 | 313 | 288 | ||||||||||||
Total
non-interest expense
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2,132 | 1,748 | 4,024 | 3,468 | ||||||||||||
(Loss)
before income taxes
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(712 | ) | (2,334 | ) | (987 | ) | (2,556 | ) | ||||||||
Income
tax expense (benefit)
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- | (988 | ) | - | (1,104 | ) | ||||||||||
Net
(loss)
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$ | (712 | ) | $ | (1,346 | ) | $ | (987 | ) | $ | (1,452 | ) | ||||
Net
(loss) applicable to common stock
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$ | (712 | ) | $ | (1,205 | ) | $ | (988 | ) | $ | (1,298 | ) | ||||
Per
Common Share Data:
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||||||||||||||||
Net
Income (Loss) - Basic
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$ | (0.53 | ) | $ | (1.08 | ) | $ | (0.73 | ) | $ | (1.28 | ) | ||||
Net
Income (Loss) - Diluted
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$ | (0.53 | ) | $ | (1.08 | ) | $ | (0.73 | ) | $ | (1.28 | ) | ||||
Average
common shares outstanding - basic
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1,345,602 | 1,120,576 | 1,345,602 | 1,017,147 | ||||||||||||
Average
common shares outstanding - diluted
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N/A | N/A | N/A | N/A |
The
accompanying notes are an integral part of these consolidated financial
statements.
Condensed
Consolidated Statements of Changes in Shareholders' Equity
(Restated)
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||||||||||||||||||||||||||||||||
(Unaudited
- dollars in thousands)
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||||||||||||||||||||||||||||||||
Accumulated
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||||||||||||||||||||||||||||||||
Additional
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Retained
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Other
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||||||||||||||||||||||||||||||
Preferred
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Common Stock
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Paid-In
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Comprehensive
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Earnings
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Comprehensive
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|||||||||||||||||||||||||||
Stock
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Shares
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Amount
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Capital
|
Income
|
(Deficit)
|
Income(Loss)
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Total
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|||||||||||||||||||||||||
Balance
at January 1, 2008
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$ | 1,084 | 689,232 | $ | 7,126 | $ | 108 | $ | 4,712 | $ | 108 | $ | 13,138 | |||||||||||||||||||
Exercise
of stock options
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||||||||||||||||||||||||||||||||
and
related tax benefit of $25
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20,700 | 232 | 232 | |||||||||||||||||||||||||||||
Issuance
of common stock
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||||||||||||||||||||||||||||||||
in
public offering, net
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||||||||||||||||||||||||||||||||
of
offering expenses
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410,644 | 6,835 | 6,835 | |||||||||||||||||||||||||||||
Stock-based
compensation
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24 | 24 | ||||||||||||||||||||||||||||||
Comprehensive
income:
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||||||||||||||||||||||||||||||||
Net
(loss)
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$ | (1,452 | ) | (1,452 | ) | (1,452 | ) | |||||||||||||||||||||||||
Net
unrealized gain on
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||||||||||||||||||||||||||||||||
available-for-sale
securities,
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||||||||||||||||||||||||||||||||
net
of taxes of $180
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- | - | - | - | (258 | ) | - | (258 | ) | (258 | ) | |||||||||||||||||||||
Total
comprehensive income (loss)
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$ | (1,710 | ) | |||||||||||||||||||||||||||||
Balance
at June 30, 2008
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$ | 1,084 | 1,120,576 | $ | 14,193 | $ | 132 | $ | 3,260 | $ | (150 | ) | $ | 18,519 | ||||||||||||||||||
Balance
at January 1, 2009
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$ | 1,084 | 1,345,602 | $ | 18,042 | $ | 172 | $ | 864 | $ | 355 | $ | 20,517 | |||||||||||||||||||
Issuance
of 5,116 shares of
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||||||||||||||||||||||||||||||||
Series
D preferred stock
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||||||||||||||||||||||||||||||||
to
U.S. Treasury Department,
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||||||||||||||||||||||||||||||||
net
of issuance costs of $48
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5,068 | 5,068 | ||||||||||||||||||||||||||||||
Dividends
declared and paid
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||||||||||||||||||||||||||||||||
on
Series D preferred stock
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(90 | ) | (90 | ) | ||||||||||||||||||||||||||||
Stock-based
compensation
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34 | 34 | ||||||||||||||||||||||||||||||
Comprehensive
income (loss):
|
||||||||||||||||||||||||||||||||
Net
(loss)
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$ | (987 | ) | (987 | ) | (987 | ) | |||||||||||||||||||||||||
Less
beginning of year
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||||||||||||||||||||||||||||||||
unrealized gain on | ||||||||||||||||||||||||||||||||
securities
sold during
|
||||||||||||||||||||||||||||||||
the period, net | ||||||||||||||||||||||||||||||||
of
taxes of $-0-
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(285 | ) | (285 | ) | (285 | ) | ||||||||||||||||||||||||||
Net
unrealized gain on
|
||||||||||||||||||||||||||||||||
remaining available- | ||||||||||||||||||||||||||||||||
for-sale
securities,
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||||||||||||||||||||||||||||||||
net
of taxes of $2
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- | - | - | - | (73 | ) | - | (73 | ) | (73 | ) | |||||||||||||||||||||
Total
comprehensive income (loss)
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$ | (1,345 | ) | |||||||||||||||||||||||||||||
Balance
at June 30, 2009
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$ | 6,152 | 1,345,602 | $ | 18,042 | $ | 206 | $ | (213 | ) | $ | (3 | ) | $ | 24,184 |
The
accompanying notes are an integral part of these consolidated financial
statements.
Condensed
Consolidated Statements of Cash Flows
|
||||||||
(Unaudited
- dollars in thousands)
|
||||||||
For the Six Months Ended
|
||||||||
(Restated)
|
||||||||
June 30, 2009
|
June 30, 2008
|
|||||||
Operating
Activities
|
||||||||
Net
(loss)
|
$ | (987 | ) | $ | (1,452 | ) | ||
Adjustments
to reconcile net (loss) to net
|
||||||||
cash
provided by (used in) operating activities:
|
||||||||
Depreciation
|
211 | 176 | ||||||
Accretion
of discount on securities and loans, net
|
(67 | ) | (88 | ) | ||||
Provision
for credit losses
|
681 | 2,545 | ||||||
Provision
for losses on unfunded loan commitments
|
35 | 15 | ||||||
Stock-based
compensation
|
33 | 24 | ||||||
Gain
on sale of securities
|
(239 | ) | - | |||||
Gain
on loan sales
|
(174 | ) | (39 | ) | ||||
Increase
in company-owned life insurance
|
(48 | ) | (45 | ) | ||||
Other,
net
|
(619 | ) | (1,295 | ) | ||||
Proceeds
from loan sales
|
3,920 | 2,712 | ||||||
Loans
originated for sale
|
(3,690 | ) | (718 | ) | ||||
Net
cash provided by (used in) operating activities
|
(944 | ) | 1,835 | |||||
Investing
Activities
|
||||||||
Net
change in Federal Home Loan Bank and other stock
|
(92 | ) | (135 | ) | ||||
Net
decrease (increase) in deposits in other banks
|
11,135 | - | ||||||
Purchase
of available-for-sale securities
|
(30,007 | ) | (12,880 | ) | ||||
Proceeds
from maturities, calls and paydowns of available-for-sale
securities
|
3,258 | 3,922 | ||||||
Proceeds
from sales of available-for-sale securities
|
7,726 | - | ||||||
Net
decrease (increase) in loans
|
(602 | ) | (24,615 | ) | ||||
Purchase
of bank-owned life insurance
|
- | (405 | ) | |||||
Purchases
of premises and equipment
|
(419 | ) | (109 | ) | ||||
Proceeds
from sale of fixed assets
|
- | 5 | ||||||
Net
cash provided by (used in) investing activities
|
(9,001 | ) | (34,217 | ) | ||||
Financing
Activities
|
||||||||
Net
increase in demand deposits and savings accounts
|
7,455 | 6,072 | ||||||
Net
increase in time deposits
|
8,426 | 7,675 | ||||||
Net
increase (decrease) in other borrowings
|
(15,656 | ) | 9,000 | |||||
Proceeds
from issuance of common stock in public offering, net
|
- | 6,835 | ||||||
Proceeds
from issuance of preferred stock under TARP-CPP, net
|
5,068 | - | ||||||
Payment
of TARP-CPP dividends
|
(90 | ) | - | |||||
Net
cash provided by financing activities
|
5,203 | 29,814 | ||||||
Net
increase (decrease) in cash and cash equivalents
|
(4,742 | ) | (2,568 | ) | ||||
Cash
and cash equivalents at beginning of year
|
17,724 | 5,527 | ||||||
Cash
and cash equivalents at end of period
|
$ | 12,982 | $ | 2,959 | ||||
Non-cash
changes:
|
||||||||
Real
estate acquired by foreclosure
|
$ | 1,317 | - | |||||
Supplemental
disclosures of cash flow information:
|
||||||||
Interest
paid
|
2,363 | 2,266 | ||||||
Taxes
paid
|
- | 35 |
The
accompanying notes are an integral part of these consolidated financial
statements.
Mission Community Bancorp and Subsidiary
Notes
to Condensed Consolidated Financial Statements (Restated)
Note
1 – Basis of Presentation and Management Representations
The
unaudited consolidated financial statements include accounts of Mission
Community Bancorp (“the Company”) and its subsidiary, Mission Community Bank
(“the Bank”) and the Bank’s subsidiary, Mission Community Development
Corporation. All material inter-company balances and transactions
have been eliminated.
These
financial statements have been prepared in accordance with the Securities and
Exchange Commission’s rules and regulations for quarterly reporting and,
therefore, do not necessarily include all information and footnote disclosures
normally included in financial statements prepared in accordance with generally
accepted accounting principles. These financial statements should be
read in conjunction with the Company’s Form 10-K for the year ended December 31,
2008, which was filed on March 16, 2009.
Operating
results for interim periods are not necessarily indicative of operating results
for an entire fiscal year. In the opinion of management, the
unaudited financial statements for the three- and six-month periods ended June
30, 2009 and 2008 reflect all adjustments, consisting only of normal recurring
accruals and provisions, necessary for a fair presentation of the Company’s
financial position and results of operations.
Note
2 – Stock Based Compensation
The
Company has a stock option plan, adopted in 1998, which is more fully described
in Note I to the consolidated financial statements in the Company’s Annual
Report on Form 10-K. The 1998 Stock Option Plan has been terminated
with respect to the granting of future options under the Plan. In
2008 the Company adopted the Mission Community Bancorp 2008 Stock Incentive
Plan, which has been approved by the Company’s shareholders. The 2008
Plan provides for the grant of various equity awards, including stock
options.
On
January 1, 2006, the Company implemented Statement of Financial Accounting
Standards No. 123 (Revised 2004), Share-Based Payment (“SFAS
123R”), which addresses accounting for equity-based compensation arrangements,
including employee stock options. SFAS 123R replaced SFAS 123 and
superseded Accounting Principles Board (APB) Opinion No. 25, “Accounting for
Stock Issued to Employees,” and the related guidance. The Company
adopted the “modified prospective method,” where stock-based compensation
expense is recorded beginning on the adoption date and prior periods are not
restated. Under this method, compensation expense is recognized using
the fair value based method for all new awards granted after January 1,
2006. Additionally, compensation expense for unvested options that
were outstanding at December 31, 2005, is being recognized over the requisite
service period based on the fair value of those options as previously calculated
under the pro forma disclosures of SFAS 123.
On May
27, 2008, the Company granted to the Bank’s two most senior officers options to
purchase a total of 41,064 shares of common stock at an exercise price of $18.00
per share. These non-qualified stock options were granted under the
2008 Stock Incentive Plan, vest over five years, and expire ten years after the
date of grant. The fair value ascribed to those options, using the
Black-Scholes option pricing model, was $4.58 per share, or a total of
$188,073.
During
the six-month periods ended June 30, 2009 and 2008, the Bank recognized pre-tax
stock-based compensation expense of $33 thousand and $24 thousand, respectively,
as a result of adopting SFAS 123R. As of June 30, 2009, the Company
has unvested options outstanding with unrecognized compensation expense totaling
$165 thousand, which is scheduled to be recognized as follows (in
thousands):
July 1
through December 31,
2009 $ 37
2010 38
2011 38
2012 37
2013 15
Total
unrecognized compensation cost $165
Note
3 — Operating Segments
The
Company has only one reportable operating segment—commercial
banking. The commercial banking segment provides traditional banking
services such as checking and savings accounts, time certificates of deposit and
loans.
Note
4 — Preferred Stock
On
January 9, 2009, in exchange for aggregate consideration of $5,116,000, Mission
Community Bancorp issued to the United States Department of the Treasury (“the
Treasury”) a total of 5,116 shares of a new Series D Fixed Rate Cumulative
Perpetual Preferred Stock (the “Series D Preferred”) having a liquidation
preference of $1,000 per share. This transaction is a part of the
Capital Purchase Program of the Treasury’s Troubled Asset Relief Program
(“TARP”). The Series D Preferred Stock pays cumulative dividends at a
rate of 5% per year for the first five years and thereafter at a rate of 9% per
year. The Company may not redeem the Series D Preferred Stock during
the first three years except with the proceeds from a “qualified equity
offering.” After three years, the Company may, at its option, redeem the Series
D Preferred Stock at par value plus accrued and unpaid dividends. The
Series D Preferred Stock is generally non-voting. Prior to January 9,
2012, unless the Company has redeemed the Series D Preferred Stock or the
Treasury Department has transferred the Series D Preferred Stock to a third
party, the consent of the Treasury Department will be required for the Company
to issue a common stock dividend or repurchase its common stock, or other equity
or capital securities, other than in connection with benefit plans consistent
with past practice and certain other circumstances. The $5.1 million
in new capital was subsequently invested in Mission Community Bank as Tier 1
capital.
Note
5 —Income taxes
The
Company recognized no income tax expense or benefit for the six months ended
June 30, 2009, as compared with a $1,104 thousand tax benefit for the same
period in 2008. No tax benefit was recorded for the most recent
quarter due to a limitation on the Company’s ability to recognize deferred tax
assets.
Note
6 — Fair Value Measurement
The
Company has adopted Statement of Financial Accounting Standards No. 157 (“SFAS
No. 157”), Fair Value
Measurements. SFAS No. 157, which was effective for financial
assets and liabilities on January 1, 2008, and for non-financial assets and
liabilities on January 1, 2009, defines fair value, establishes a framework for
measuring fair value, and expands disclosures about fair value
measurements. This Statement establishes a fair value hierarchy,
which requires an entity to maximize the use of observable inputs and minimize
the use of unobservable inputs when measuring fair value. The
Statement describes three levels of inputs that may be used in fair value
measurement:
|
·
|
Level
1—Quoted prices in active markets for identical assets or
liabilities
|
|
·
|
Level
2—Estimates based on significant other observable inputs that market
participants would use in pricing the asset or
liability
|
|
·
|
Level
3—Estimates based on significant unobservable inputs
that reflect the entity’s own assumptions about the assumptions market
participants would use in pricing the asset or
liability.
|
When
feasible, Level 1 pricing is preferable to Level 2, and Level 3 pricing would
only be used if neither Level 1 nor Level 2 pricing methods were considered
appropriate.
The Bank
has one security in its available-for-sale portfolio that has been assessed as
“impaired” since 2004. Prior to January 1, 2008, the Bank has used a
pricing method for this security that would be considered Level 2
pricing. Upon adoption of SFAS No. 157 in 2008, the Bank concluded
that Level 3 pricing was more appropriate for this security, given the lack of
observable inputs to
the estimation process. Due to the illiquidity in the secondary
market for this security, this fair value estimate cannot be corroborated by
observable market data. This change in estimate resulted in a
reduction in the fair value of this security by $168 thousand as of January 1,
2008. Because this security remains in the available-for-sale
portfolio, this change in estimate was included in other comprehensive income
but had no effect on reported net income (loss).
The
following table provides the hierarchy and fair value for each major category of
assets and liabilities measured at fair value as of June 30, 2009:
(in
thousands)
|
Fair Value Measurements
Using
|
|||||||||||||||
Level 1
|
Level 2
|
Level 3
|
Total
|
|||||||||||||
Financial
assets measured at fair value on a recurring basis:
|
||||||||||||||||
Available-for-sale
securities
|
$ | - | $ | 43,744 | $ | 20 | $ | 43,764 | ||||||||
Financial
sssets measured at fair value on a non-recurring basis:
|
||||||||||||||||
Collateral-Dependent
Impaired
|
||||||||||||||||
Loans,
Net of Specific Reserves
|
$ | - | $ | - | $ | 4,262 | $ | 4,262 | ||||||||
Non-financial
sssets measured at fair value on a non-recurring basis:
|
||||||||||||||||
Foreclosed
real estate
|
$ | - | $ | - | $ | 1,400 | $ | 1,400 | ||||||||
Other
real estate
|
- | - | 900 | 900 |
Collateral-dependent
impaired loans, which are measured for impairment using the fair value of the
collateral, had a carrying value of $5,138,000, with a specific reserve of
$876,000, as of June 30, 2009.
The
following table presents a reconciliation of assets measured at fair value on a
recurring basis using significant unobservable inputs (Level 3) during the first
six months of 2008 and 2009:
(in
thousands)
|
Level 3 Securities Available for
Sale
|
|||||||
Six Months Ended June 30
|
||||||||
2009
|
2008
|
|||||||
Balance
at beginning of year
|
$ | 32 | $ | - | ||||
Transfers
into Level 3
|
92 | 227 | ||||||
Unrealized
gains (losses)
|
||||||||
included
in other comprehensive income (loss)
|
- | (168 | ) | |||||
Purchases
|
- | - | ||||||
Settlements
|
- | - | ||||||
Paydowns
and maturities
|
(104 | ) | (7 | ) | ||||
Balance
at end of period
|
$ | 20 | $ | 52 | ||||
Total
unrealized gains (losses)
|
||||||||
for
the period relating to assets still held at the reporting
date
|
$ | - | $ | (168 | ) |
The
following methods and assumptions were used to estimate the fair value of
significant financial instruments that are not carried at fair value in the
consolidated balance sheet:
Financial
Assets. The carrying amounts of cash and short-term
investments are considered to approximate fair value. Short-term
investments include federal funds sold and interest bearing deposits with other
banks. The fair value of loans are estimated
using a
combination of techniques, including discounting estimated future cash flows and
quoted market prices of similar instruments, where available.
Financial
Liabilities. The carrying amounts of deposit liabilities
payable on demand and short-term borrowed funds are considered to approximate
fair value. For fixed maturity deposits, fair value is estimated by
discounting estimated future cash flows using currently offered rates for
deposits of similar remaining maturities. The fair value of long-term
debt is based on rates currently available to the Bank for debt with similar
terms and remaining maturities.
Off-Balance Sheet
Financial Instruments. The fair value of commitments to extend
credit and standby letters of credit is estimated using the fees currently
charged to enter into similar agreements. The fair value of these
financial instruments is not material.
The
estimated fair value of financial instruments is summarized as
follows:
June
30, 2009
|
||||||||
Carrying
Value
|
Fair
Value
|
|||||||
Financial
Assets:
|
||||||||
Cash
and due from banks
|
$ | 11,837 | $ | 11,837 | ||||
Federal
funds sold
|
1,145 | 1,145 | ||||||
Interest-bearing
deposits in other banks
|
575 | 575 | ||||||
Investment
securities
|
43,764 | 43,764 | ||||||
Loans,
net
|
147,969 | 148,450 | ||||||
Federal
Home Loan Bank and other stocks
|
2,849 | 2,849 | ||||||
Company
owned life insurance
|
2,837 | 2,837 | ||||||
Accrued
interest receivable
|
876 | 876 | ||||||
Financial
Liabilities:
|
||||||||
Deposits
|
160,685 | 161,129 | ||||||
Other
borrowings
|
30,044 | 34,812 | ||||||
Junior
subordinated debt securities
|
3,093 | 3,262 | ||||||
Accrued
interest and other liabilities
|
1,317 | 1,317 |
Note
7 — Recent Accounting Pronouncements
In April
2009, the Financial Accounting Standards Board (“FASB”) issued FASB Staff
Position (“FSP”) FAS 157-4, “Determining Whether a Market Is Not Active and a
Transaction Is Not Distressed.” FSP FAS 157-4 provides guidelines for
making fair value measurements more consistent with the principles presented in
SFAS 157. FSP FAS 157-4 provides additional authoritative guidance in
determining whether a market is active or inactive, and whether a transaction is
distressed, is applicable to all assets and liabilities (i.e. financial and
nonfinancial) and will require enhanced disclosures.
Also in
April 2009, the FASB issued FSP FAS 115-2 and EITF 99-20-2, “Recognition and
Presentation of Other-Than-Temporary Impairments.” The FSP amends
FASB Statements No. 115, “Accounting for Certain Investments in Debt and Equity
Securities,” and EITF Issue No. 99-20, “Recognition of Interest Income and
Impairment on Purchased Beneficial Interests and Beneficial Interests That
Continue to Be Held by a Transferor in Securitized Financial Assets,” to make
the other-than-temporary impairment guidance more operational and to improve
the
presentation
of other-than-temporary impairments in the financial statements. This
statement applies to other-than-temporary impairments of debt and equity
securities and requires a company to assert that (a) it does not have the intent
to sell the security in question and (b) it is more likely than not that it will
not have to sell the security in question before recovery of its cost basis to
avoid an impairment being considered other-than-temporary. This FSP
also changes the amount of impairment losses recognized in
earnings. Under this FSP impairments are separated into two
components: (i) the amount of impairments related to credit losses and (ii) and
the amount related to other factors. The amount of impairment related
to credit losses is reflected as a charge to earnings, while the amount deemed
to be related to other factors is reflected as an adjustment to shareholders’
equity through other comprehensive income.
And also
in April 2009 the FASB issued FSP FAS 107-1 and APB 28-1, “Interim Disclosures
about Fair Value of Financial Instruments.” This FSP amends FASB
Statement No. 107, “Disclosures about Fair Value of Financial Instruments,” to
require disclosures about fair value of financial instruments in interim as well
as in annual financial statements. This FSP also amends APB Opinion No. 28,
“Interim Financial Reporting,” to require those disclosures in all interim
financial statements.
The
standards summarized in the preceding paragraphs were effective for the
financial reporting period ended June 30, 2009, and did not have a material
effect on the Company’s financial condition or results of
operations. The new interim disclosures required by FSP FAS No. 107-1
and APB 28-1 are included in Note 6 – Fair Value Measurement.
The
Company implemented Statement of Financial Accounting Standards No. 165,
Subsequent Events (SFAS 165), effective for the financial reporting period ended
June 30, 2009. This standard establishes general standards of accounting for and
disclosure of events that occur after the balance sheet date but before
financial statements are issued. The adoption of SFAS 165 did not impact the
Company’s financial position or results of operations. The Company evaluated all
events or transactions that occurred after June 30, 2009 up through August 13,
2009, the date these financial statements were available to be issued. During
this period the Company did not have any material recognizable subsequent
events.
Note
8 — Restated Financial Statements
When
initially issued, the Company’s financial statements reflected a $511 thousand
tax benefit for the first six months of 2009, including a $32 thousand tax
benefit for the second quarter. The recognition of the tax benefits
was based on management’s understanding at the time that, under the American
Recovery and Reinvestment Act of 2009 (“ARRA”), the Company would be able to
carry back 2008’s net operating loss (“NOL”) to five prior years rather than two
years, and thereby increase the Company’s current tax
receivable. ARRA, which was enacted in February, 2009, provided (for
tax year 2008 only) an extended NOL carryback period of up to five years for an
electing “eligible small business.” Eligible small business was
defined to be a small business with average “gross receipts” for 2006-2008 of
$15 million or less. Based on total income per the Company’s
consolidated tax returns for 2006 and 2007 and estimated total income expected
to be reported for its 2008 tax return, management believed that the Company’s
average gross receipts were less than $15 million. However,
management was unaware at that time that—for banks—the term “gross receipts” has
been interpreted under the tax law to include gross sales of securities and
loans. When gross sales of SBA loans, not merely the gains on sale,
are included in gross receipts, the Company’s three-year average gross receipts
exceeds $15
million. Therefore,
the Company did not qualify for the extended carryback period under
ARRA. The error had been corrected on a year-to-date basis as of
September 30, 2009. These restated financial statements reflect the
appropriate portion of that correction in the first and second quarters of 2009,
rather than in the third quarter.
The
accompanying financial statements reflect the following changes from those
originally issued as of and for the three and six months ended June 30,
2009:
|
·
|
In
the condensed consolidated balance sheet, accrued interest and other
assets has been reduced from $3,751,000 to $3,240,000. Retained
earnings has been reduced from $298,000 to a deficit of $(213,000) and
total shareholders’ equity has been reduced from $24,695,000 to
$24,184,000. Total assets has been reduced from $219,834,000 to
$219,323,000, and total liabilities and shareholders’ equity has had the
same adjustment.
|
|
·
|
In
the condensed consolidated statement of income, income tax expense
(benefit) has been changed from a benefit of $32 thousand for the three
months and $511 thousand for the six months to zero for both
periods. The net loss of $(680) thousand for the three months
and $(476) thousand for the six months have been changed to a net loss of
$(712) thousand for the three months and $(987) thousand for the six
months. Net loss applicable to common stock has been changed
from $(682) thousand for the three months and $(519) thousand for the six
months to a loss of $(712) thousand for the three months and $(988)
thousand for the six months. Basic and diluted earnings (loss)
per share have both been changed from $(0.51) for the three months and
$(0.39) for the six months to $(0.53) for the three months and $(0.73) for
the six months. No changes were made to loss before income
taxes.
|
|
·
|
In
addition to the balance sheet changes noted above for retained earnings
and total shareholders’ equity, the condensed consolidated statement of
shareholders’ equity reflects an increase in the comprehensive loss from
$(834) thousand to $(1.345)
million.
|
|
·
|
In
the condensed consolidated statement of cash flows, changes have been made
to the components of net cash provided by (used in) operating activities,
but no changes have been made to total net cash provided by (used in)
operating activities, investing activities or financing
activities.
|
|
Item 2. Management’s Discussion and Analysis
of Financial Condition and Results of Operations
(Restated)
|
Forward-Looking
Statements
Some
matters discussed in this Form 10-Q may be “forward-looking statements” within
the meaning of the Private Litigation Reform Act of 1995 and therefore may
involve risks, uncertainties and other factors which may cause our actual
results to be materially different from the results expressed or implied by our
forward-looking statements. These statements generally appear with
words such as “anticipate,” “believe,” “estimate,” “may,” “intend,” and
“expect.” Although management believes that the assumptions and
expectations reflected in such forward-looking statements are reasonable, it can
give no assurance that such expectations will prove to be
correct. Factors that could cause actual results to differ from
results discussed in forward-looking statements include, but are not limited to:
economic conditions (both generally and in the markets where the Bank operates);
competition from other providers of financial services offered by the Bank;
government regulation and legislation; changes in interest rates; material
unforeseen changes in the financial stability and liquidity of the Bank’s credit
customers; and other risks detailed in the Company’s filings with the Securities
and Exchange Commission, all of which are difficult to predict and which may be
beyond the control of the Company or the Bank. The Company undertakes
no obligation to revise forward-looking statements to reflect events or changes
after the date of this discussion or to reflect the occurrence of unanticipated
events.
Restatements
of Results of Operations and Financial Condition
In this
amendment to its Quarterly Report on Form 10-Q, the Company has voluntarily
corrected and restated its earnings (loss) for the first six months of 2009 to
correct for an error in the recognition of income tax benefits in the first and
second quarters. The Company’s originally-issued financial
statements for the six months reflected a $511 thousand tax benefit, including a
$32 tax benefit in the second quarter. The recognition of the tax
benefits was based on management’s understanding at the time that, under the
American Recovery and Reinvestment Act of 2009 (“ARRA”), the Company would be
able to carry back 2008’s net operating loss (“NOL”) to five prior years rather
than two years, and thereby increase the Company’s current tax
receivable. However, at that time management was unaware of a
previous interpretation under the tax law that would disqualify the Company from
electing the extended carryback period under ARRA. The error was
corrected on a year-to-date basis as of September 30, 2009. This
restatement reflects the appropriate portions of that correction in the first
and second quarters of 2009, rather than in the third quarter.
Further
information on this restatement and the specific accounts affected are detailed
in Note 8 to the Notes to Condensed Consolidated Financial Statements
(Restated).
Overview
of Results of Operations and Financial Condition
|
·
|
The
Company incurred a net loss of $(712) thousand for the second quarter of
2009, as compared with a net loss of $(1.346) million for the second three
months of 2008. For the first six months of 2009, the Company’s
net loss was $(987) thousand, as
compared
|
Index
|
with
a net loss of $(1.452) million for the first half of 2008. The
factors resulting in the 2009 results will be discussed
below.
|
|
·
|
Net
interest income for the three-month period ended June 30, 2009 decreased
by $63 thousand, or 4%, from the comparable period in 2008, due primarily
to a decrease in the net interest margin of 0.80 percentage
points. For the first half of 2009, net interest income
declined by $144 thousand, or 5%, from the first six months of
2008.
|
|
·
|
The
provision for loan losses decreased by $1.944 million, or 84%, from the
second quarter of 2008 to the same quarter in 2009. For the six
months, the loan loss provision declined by $1.864 million, or
73%. Increased risk in a few large relationships, along with a
general downturn in the economy in 2008, caused management and the board
of directors to enhance the allowance for loan and lease losses (“ALLL”)
by $2.3 million in the second quarter of last
year.
|
|
·
|
For
the three months ended June 30, 2009, non-interest income increased by
$125 thousand, or 91%, from the same period in 2008, primarily due to
increased gains on sales of SBA-guaranteed loans in 2009. For
the first six months of 2009, non-interest income was up $405 thousand, or
138%, over the same period in 2008. In addition to increased
sales of SBA-guaranteed loans, non-interest income for the first six
months of 2009 included $239 thousand of gains on the sale of appreciated
securities.
|
|
·
|
Non-interest
expense increased by $384 thousand, or 22%, for the second three months of
2009, as compared to the second quarter of 2008. For the first
half of 2009, non-interest expense was up $556 thousand, or
16%. These increases were principally due to material increases
in FDIC insurance assessments, the cost of outsourcing Information
Technology management, costs associated with opening a new branch office
in Santa Maria, and professional fees primarily related to problem loan
resolution.
|
|
·
|
No
tax benefit was recorded for the six months or three months ended June
30, 2009, due to a limitation on the Company’s ability to recognize
deferred tax assets.
|
|
·
|
Total
assets increased by $4.3 million, or 2.0%, from December 31, 2008 to June
30, 2009. Total loans decreased by $1.9 million, or 1.2%, over
that period, while deposits increased by $15.9 million, or
11.0%.
|
|
·
|
On
January 9, 2009, the Company issued to the United States Department of the
Treasury (“the Treasury”) a total of 5,116 shares of a new Series D Fixed
Rate Cumulative Perpetual Preferred Stock (“Series D Preferred”) at $1,000
per share. This transaction is a part of the Capital Purchase
Program of the TARP. The $5.1 million in new capital was
subsequently invested in Mission Community Bank as Tier 1
capital.
|
Income
Summary
For the
three months ended June 30, 2009, the Company incurred a net loss of $(712)
thousand. This compares with a net loss of $(1.346) million for the
comparable period of 2008. For the first six months of 2009, the
Company’s net loss was $987 thousand, as compared with a net loss of $(1.452)
million for the first half of 2008.
Index
Return on
average assets (annualized) was (1.28)% for the second quarter of 2009, as
compared with (3.00)% for the second quarter of 2008. Annualized
return on average equity was (11.37)% for the second quarter of 2009 as compared
with (26.76)% for the comparable 2008 period. For the first half of
2009, return on average assets was (0.90)%, as compared with (1.68)% for the
same period in 2008. Return on average equity was (8.07)% for the
first six months of 2009, as compared with (16.06)% for the comparable period in
2008.
Excluding
tax benefits, the Company incurred a loss of $(712) thousand for the second
quarter of 2009—a reduction of $1,622 thousand from the pre-tax loss of $(2,334)
thousand recorded for the same period in 2008. For the first six
months of 2009, the Company’s pre-tax loss was $(987) thousand—a $1,569
reduction from the $(2,556) thousand loss before taxes for the first half of
2008.
The
income statement components of this are as follows:
Pre-Tax
Income Variance Summary
|
||||||||
(In
thousands)
|
Effect
on Pre-Tax Income
|
|||||||
Increase
(Decrease)
|
||||||||
2nd Quarter
|
Six Months
|
|||||||
Change
from 2008 to 2009 in:
|
||||||||
Net
interest income
|
$ | (63 | ) | $ | (144 | ) | ||
Provision
for loan losses
|
1,944 | 1,864 | ||||||
Non-interest
income
|
125 | 405 | ||||||
Non-interest
expense
|
(384 | ) | (556 | ) | ||||
Change
in income (loss) before income taxes
|
$ | 1,622 | $ | 1,569 |
These
variances will be explained in the discussion below.
Net
Interest Income
Net
interest income is the largest source of the Bank’s operating
income. For the three-month period ended June 30, 2009, net interest
income was $1.538 million, a decrease of $63 thousand, or 4%, from the
comparable period in 2008. For the first six months of 2009, net
interest income was $3.019 million, down $144 thousand, or 5%, from the first
half of 2008.
The net
interest margin (net interest income as a percentage of average interest earning
assets) was 3.05% for the three-month period ended June 30, 2009, a decrease of
80 basis points as compared to the same period in 2008. As short-term
interest rates dropped throughout 2008—2.25% in the first four months of 2008
and 1.75% in the fourth quarter—the Bank experienced increasing pressure on the
margin, as competition for deposits in the local market would not permit
decreases in deposit rates at the same speed or to the same degree as loan rates
were falling. In addition, the Bank has received an influx of CD
deposits since mid-year 2008, as local depositors sought out safety, with yield
often a secondary concern (see the Deposits section of this
report). Opportunities to place those new funds in assets earning
higher rates than the CD’s have been limited this year, putting additional
pressure on the net interest margin.
The
following tables show the relative impact of changes in average balances of
interest earning assets and interest bearing liabilities, and interest rates
earned and paid by the Company and the Bank on those assets and liabilities for
the three- and six-month periods ended June 30, 2009 and 2008:
Index
Net
Interest Analysis
|
||||||||||||||||||||||||
(Dollars
in thousands)
|
||||||||||||||||||||||||
For
the Three Months Ended
|
||||||||||||||||||||||||
June
30, 2009
|
June
30, 2008
|
|||||||||||||||||||||||
Average
|
Average
|
Average
|
Average
|
|||||||||||||||||||||
Balance
|
Interest
|
Rate
|
Balance
|
Interest
|
Rate
|
|||||||||||||||||||
ASSETS
|
||||||||||||||||||||||||
Interest-earning
assets:
|
||||||||||||||||||||||||
Loans,
net of unearned income*
|
$ | 153,405 | $ | 2,288 | 6.03 | % * | $ | 140,808 | $ | 2,291 | 6.60 | % * | ||||||||||||
Investment
securities*
|
37,283 | 329 | 3.75 | % * | 27,147 | 316 | 4.96 | % * | ||||||||||||||||
Federal
funds sold
|
11,241 | 7 | 0.23 | % | 594 | 3 | 2.23 | % | ||||||||||||||||
Other
interest income
|
5,296 | 12 | 0.92 | % | 2,798 | 41 | 5.87 | % | ||||||||||||||||
Total
interest-earning assets / interest income
|
207,225 | $ | 2,636 | 5.18 | % | 171,347 | $ | 2,651 | 6.31 | % | ||||||||||||||
Non-interest-earning
assets:
|
||||||||||||||||||||||||
Allowance
for loan losses
|
(3,757 | ) | (1,384 | ) | ||||||||||||||||||||
Cash
and due from banks
|
10,509 | 2,174 | ||||||||||||||||||||||
Premises
and equipment
|
2,678 | 3,503 | ||||||||||||||||||||||
Other
assets
|
6,951 | 4,761 | ||||||||||||||||||||||
Total
assets
|
$ | 223,606 | $ | 180,401 | ||||||||||||||||||||
LIABILITIES
AND SHAREHOLDERS' EQUITY
|
||||||||||||||||||||||||
Interest-bearing
liabilities:
|
||||||||||||||||||||||||
Interest-bearing
deposits:
|
||||||||||||||||||||||||
Transaction
accounts
|
$ | 8,435 | $ | 32 | 1.51 | % | $ | 2,356 | $ | 4 | 0.75 | % | ||||||||||||
Savings
and Money Market deposit accounts
|
29,626 | 97 | 1.31 | % | 38,592 | 150 | 1.57 | % | ||||||||||||||||
Certificates
of deposit
|
101,507 | 623 | 2.46 | % | 59,025 | 514 | 3.51 | % | ||||||||||||||||
Total
interest-bearing deposits
|
139,568 | 752 | 2.16 | % | 99,973 | 668 | 2.70 | % | ||||||||||||||||
Federal
funds purchased
|
29 | - | 0.83 | % | 136 | 1 | 2.81 | % | ||||||||||||||||
Federal
Home Loan Bank advances
|
33,251 | 315 | 3.79 | % | 34,047 | 331 | 3.91 | % | ||||||||||||||||
Subordinated
debt
|
3,093 | 32 | 4.14 | % | 3,093 | 49 | 6.32 | % | ||||||||||||||||
Total
borrowed funds
|
36,373 | 347 | 3.82 | % | 37,276 | 381 | 4.10 | % | ||||||||||||||||
Total
interest-bearing liabilities / interest expense
|
175,941 | 1,099 | 2.50 | % | 137,249 | 1,049 | 3.08 | % | ||||||||||||||||
Non-interest-bearing
liabilities:
|
||||||||||||||||||||||||
Non-interest-bearing
deposits
|
21,398 | 21,680 | ||||||||||||||||||||||
Other
liabilities
|
1,141 | 1,240 | ||||||||||||||||||||||
Total
liabilities
|
198,480 | 160,169 | ||||||||||||||||||||||
Shareholders'
equity
|
25,126 | 20,232 | ||||||||||||||||||||||
Total
liabilities and shareholders' equity
|
$ | 223,606 | $ | 180,401 | ||||||||||||||||||||
Net
interest-rate spread
|
2.68 | % | 3.23 | % | ||||||||||||||||||||
Impact
of non-interest-bearing
|
||||||||||||||||||||||||
sources
and other changes in
|
||||||||||||||||||||||||
balance
sheet composition
|
0.37 | % | 0.62 | % | ||||||||||||||||||||
Net
interest income / margin on earning assets
|
$ | 1,537 | 3.05 | % ** | $ | 1,602 | 3.85 | % ** | ||||||||||||||||
*Yields
on municipal securities and loans have been adjusted to their
fully-taxable equivalents
|
||||||||||||||||||||||||
**
Net interest income as a % of earning assets
|
Net
Interest Analysis
|
||||||||||||||||||||||||
(Dollars
in thousands)
|
||||||||||||||||||||||||
For
the Six Months Ended
|
||||||||||||||||||||||||
June
30, 2009
|
June
30, 2008
|
|||||||||||||||||||||||
Average
|
Average
|
Average
|
Average
|
|||||||||||||||||||||
Balance
|
Interest
|
Rate
|
Balance
|
Interest
|
Rate
|
|||||||||||||||||||
ASSETS
|
||||||||||||||||||||||||
Interest-earning
assets:
|
||||||||||||||||||||||||
Loans,
net of unearned income*
|
$ | 153,892 | $ | 4,619 | 6.10 | % * | $ | 134,334 | $ | 4,720 | 7.13 | % * | ||||||||||||
Investment
securities*
|
30,269 | 588 | 4.41 | % * | 23,081 | 528 | 5.21 | % * | ||||||||||||||||
Federal
funds sold
|
14,957 | 16 | 0.21 | % | 3,228 | 50 | 3.14 | % | ||||||||||||||||
Other
interest income
|
9,856 | 95 | 1.95 | % | 4,070 | 88 | 4.35 | % | ||||||||||||||||
Total
interest-earning assets / interest income
|
208,974 | 5,318 | 5.21 | % | 164,713 | 5,386 | 6.67 | % | ||||||||||||||||
Non-interest-earning
assets:
|
||||||||||||||||||||||||
Allowance
for loan losses
|
(3,846 | ) | (1,274 | ) | ||||||||||||||||||||
Cash
and due from banks
|
7,003 | 2,296 | ||||||||||||||||||||||
Premises
and equipment
|
2,648 | 3,522 | ||||||||||||||||||||||
Other
assets
|
6,619 | 4,613 | ||||||||||||||||||||||
Total
assets
|
$ | 221,398 | $ | 173,870 | ||||||||||||||||||||
LIABILITIES
AND SHAREHOLDERS' EQUITY
|
||||||||||||||||||||||||
Interest-bearing
liabilities:
|
||||||||||||||||||||||||
Interest-bearing
deposits:
|
||||||||||||||||||||||||
Interest-bearing
demand accounts
|
$ | 8,874 | 74 | 1.68 | % | $ | 2,251 | 8 | 0.71 | % | ||||||||||||||
Savings
and Money Market deposit accounts
|
26,998 | 207 | 1.55 | % | 37,046 | 349 | 1.89 | % | ||||||||||||||||
Certificates
of deposit
|
98,008 | 1,273 | 2.62 | % | 58,361 | 1,120 | 3.86 | % | ||||||||||||||||
Total
interest-bearing deposits
|
133,880 | 1,554 | 2.34 | % | 97,658 | 1,477 | 3.04 | % | ||||||||||||||||
Federal
funds purchased
|
15 | - | 0.83 | % | 68 | 1 | 2.81 | % | ||||||||||||||||
Federal
Home Loan Bank advances
|
36,930 | 682 | 3.73 | % | 31,136 | 636 | 4.11 | % | ||||||||||||||||
Subordinated
debt
|
3,093 | 63 | 4.12 | % | 3,093 | 109 | 7.10 | % | ||||||||||||||||
Total
borrowed funds
|
40,038 | 745 | 3.76 | % | 34,297 | 746 | 4.38 | % | ||||||||||||||||
Total
interest-bearing liabilities / interest expense
|
173,918 | 2,299 | 2.67 | % | 131,955 | 2,223 | 3.39 | % | ||||||||||||||||
Non-interest-bearing
liabilities:
|
||||||||||||||||||||||||
Non-interest-bearing
deposits
|
21,433 | 22,435 | ||||||||||||||||||||||
Other
liabilities
|
1,147 | 1,304 | ||||||||||||||||||||||
Total
liabilities
|
196,498 | 155,694 | ||||||||||||||||||||||
Shareholders'
equity
|
24,900 | 18,176 | ||||||||||||||||||||||
Total
liabilities and shareholders' equity
|
$ | 221,398 | $ | 173,870 | ||||||||||||||||||||
Net
interest-rate spread
|
2.54 | % | 3.28 | % | ||||||||||||||||||||
Impact
of non-interest-bearing
|
||||||||||||||||||||||||
sources
and other changes in
|
||||||||||||||||||||||||
balance
sheet composition
|
0.45 | % | 0.67 | % | ||||||||||||||||||||
Net
interest income / margin on earning assets
|
$ | 3,019 | 2.99 | % ** | $ | 3,163 | 3.95 | % ** | ||||||||||||||||
*Yields
on municipal securities and loans have been adjusted to their
fully-taxable equivalents
|
||||||||||||||||||||||||
**
Net interest income as a % of earning assets
|
Shown in
the following tables are the relative impacts on net interest income of changes
in the average outstanding balances (volume) of earning assets and interest
bearing liabilities and the rates earned and paid by the Bank and the Company on
those assets and liabilities for the three- and six-month periods ended June 30,
2009 and 2008. Changes in interest income and expense that are not
attributable specifically to either rate or volume are allocated proportionately
among both variances.
Rate
/ Volume Variance Analysis
|
||||||||||||
(In
thousands)
|
Three
Months Ended June 30, 2009
|
|||||||||||
Compared
to 2008
|
||||||||||||
Increase
(Decrease)
|
||||||||||||
in
interest income and expense
|
||||||||||||
due
to changes in:
|
||||||||||||
Volume
|
Rate
|
Total
|
||||||||||
Interest-earning
assets:
|
||||||||||||
Loans,
net of unearned income
|
$ | 196 | $ | (199 | ) | $ | (3 | ) | ||||
Investment
securities
|
101 | (88 | ) | 13 | ||||||||
Federal
funds sold
|
9 | (5 | ) | 4 | ||||||||
Other
interest income
|
21 | (50 | ) | (29 | ) | |||||||
Total
increase (decrease) in interest income
|
327 | (342 | ) | (15 | ) | |||||||
Interest-bearing
liabilities:
|
||||||||||||
Transaction
accounts
|
20 | 8 | 28 | |||||||||
Savings
deposits
|
(32 | ) | (21 | ) | (53 | ) | ||||||
Certificates
of deposit
|
294 | (185 | ) | 109 | ||||||||
Total
interest-bearing deposits
|
282 | (198 | ) | 84 | ||||||||
Federal
funds purchased
|
(1 | ) | - | (1 | ) | |||||||
FHLB
advances
|
(8 | ) | (8 | ) | (16 | ) | ||||||
Subordinated
debt
|
- | (17 | ) | (17 | ) | |||||||
Total
borrowed funds
|
(9 | ) | (25 | ) | (34 | ) | ||||||
Total
increase (decrease) in interest expense
|
273 | (223 | ) | 50 | ||||||||
Increase
(decrease) in net interest income
|
$ | 54 | $ | (119 | ) | $ | (65 | ) |
Rate
/ Volume Variance Analysis
|
||||||||||||
(In
thousands)
|
Six
Months Ended June 30, 2009
|
|||||||||||
Compared
to 2008
|
||||||||||||
Increase
(Decrease)
|
||||||||||||
in
interest income and expense
|
||||||||||||
due
to changes in:
|
||||||||||||
Volume
|
Rate
|
Total
|
||||||||||
Interest-earning
assets:
|
||||||||||||
Loans,
net of unearned income
|
$ | 637 | $ | (738 | ) | $ | (101 | ) | ||||
Investment
securities
|
148 | (88 | ) | 60 | ||||||||
Federal
funds sold
|
47 | (81 | ) | (34 | ) | |||||||
Other
interest income
|
75 | (68 | ) | 7 | ||||||||
Total
increase (decrease) in interest income
|
907 | (975 | ) | (68 | ) | |||||||
Interest-bearing
liabilities:
|
||||||||||||
Transaction
accounts
|
45 | 21 | 66 | |||||||||
Savings
deposits
|
(84 | ) | (58 | ) | (142 | ) | ||||||
Certificates
of deposit
|
595 | (442 | ) | 153 | ||||||||
Total
interest-bearing deposits
|
556 | (479 | ) | 77 | ||||||||
Federal
funds purchased
|
(1 | ) | - | (1 | ) | |||||||
FHLB
advances
|
111 | (65 | ) | 46 | ||||||||
Subordinated
debt
|
- | (46 | ) | (46 | ) | |||||||
Total
borrowed funds
|
110 | (111 | ) | (1 | ) | |||||||
Total
increase (decrease) in interest expense
|
666 | (590 | ) | 76 | ||||||||
Increase
(decrease) in net interest income
|
$ | 241 | $ | (385 | ) | $ | (144 | ) |
The
tables above reflect the impact of lower yields received on loans due to the
reduction in the prime rate over the past year, while growth in the balances of
loans and other interest-earning assets have had a positive, albeit lesser,
impact. On the liability side, the rate reductions have also had a
beneficial effect, but not enough to offset the reduction in loan
yields. Overall, the
Index
pressure
we have experienced on the net interest margin over the past several quarters is
just beginning to ease up as we move through 2009.
Based on
current economic forecasts, the Bank anticipates that short-term interest rates
will remain low through the remainder of 2009. We expect this to
result in some continued easing of pressure on the net interest margin, since
more fixed rate funding sources (certificates of deposit and borrowed funds)
than loans are expected to reprice downward as they mature over the balance of
2009 and as additional opportunities to place lower-earning assets into more
profitable investment options become available.
Provision
for Loan Losses
The Bank
recorded a $381 thousand provision for loan losses for the three months ended
June 30, 2009, as compared with $2.325 million for the second quarter of
2008. For the six months ended June 30, 2009, the loan loss provision
totaled $681 thousand, down from $2.545 million in the first half of
2008.
During
the first quarter of last year, in the normal course of business, the Bank
underwent both an annual external credit review and a regulatory
examination. While there were no noted issues reflected in those reviews,
the downturn in the economy, combined with events in the banking sector last
year, caused management to initiate an additional third party review of the
Bank’s loan portfolio in the second quarter of 2008. After the results of
that review, management and the board of directors decided to enhance the
allowance for loan and lease losses by $2.3 million, resulting in the unusually
large loan loss provision in the second quarter of last year.
Loan
charge-offs totaled $963 thousand and recoveries totaled $18 thousand for the
second quarter of 2009, as compared with $700 thousand of charge-offs and $5
thousand of recoveries for the same period in 2008. For the six
months, charge-offs were $1.173 million and recoveries were $24 thousand in
2009, as compared with $721 thousand of charge-offs and $12 thousand of
recoveries for the first half of 2008. The ratio of allowance
for loan losses to total loans was 2.29% at June 30, 2009, as compared to 2.01%
a year ago and 2.57% as of December 31, 2008.
The
provision for loan losses and allowance for loan losses reflect management’s
consideration of the various risks in the loan portfolio. Additional
discussion of loan quality and the allowance for loan losses is provided in the
Asset Quality, Potential
Problem Loans and Allowance for Loan and Lease
Losses sections of this report.
Non-Interest
Income
Non-interest
income represents service charges on deposit accounts and other non-interest
related charges and fees, including fees from the sale of loans and gains on
sales of securities. For the three-month period ended June 30, 2009,
non-interest income was $263 thousand, an increase of $125 thousand, or
91%, from the same period in 2008. This increase was primarily due to
increased gains on the sale of SBA loans. After several months of a
nearly frozen secondary market for SBA loans, the market began to thaw toward
the end of the first quarter of this year. For the first half of
2009, non-interest income totaled $699 thousand, up from $294 thousand in the
first six months of 2008. The increase in non-interest income for the
first six months of 2009 was also due to the sale of $7.5 million of appreciated
securities in the first quarter, on which the Bank recognized $239 thousand in
gains.
Index
The
following table shows the major components of non-interest income:
Non-Interest
Income
|
||||||||||||||||||||||||||||||||
(In
thousands)
|
For the Three Months Ended June
30,
|
For the Six Months Ended June
30,
|
||||||||||||||||||||||||||||||
$ Amount
|
Change
|
$ Amount
|
Change
|
|||||||||||||||||||||||||||||
2009
|
2008
|
$ | % | 2009 | 2008 | $ | % | |||||||||||||||||||||||||
Service
charges on deposit accounts
|
$ | 79 | $ | 83 | $ | (4 | ) | -5 | % | $ | 161 | $ | 153 | $ | 8 | 5 | % | |||||||||||||||
Gain
on sale of loans
|
112 | 9 | 103 | 1144 | % | 174 | 39 | 135 | 346 | % | ||||||||||||||||||||||
Loan
servicing fees, net of amortization
|
23 | 20 | 3 | 15 | % | 48 | 45 | 3 | 7 | % | ||||||||||||||||||||||
Grants
and awards
|
7 | - | 7 |
nm
|
7 | - | 7 |
nm
|
||||||||||||||||||||||||
Gain
on sale of available-for-sale securities
|
- | - | - |
nm
|
239 | - | 239 |
nm
|
||||||||||||||||||||||||
Other
income and fees
|
42 | 26 | 16 | 62 | % | 70 | 57 | 13 | 23 | % | ||||||||||||||||||||||
Total
non-interest income
|
$ | 263 | $ | 138 | $ | 125 | 91 | % | $ | 699 | $ | 294 | $ | 405 | 138 | % | ||||||||||||||||
nm
- not meaningful
|
The
majority of the service charge income shown in the table relates to NSF fee
income and other fees not directly assessed on deposit accounts. Many
of the Bank’s deposit products and services have low or no monthly fees, and the
Bank does not expect to change this strategy in the near future.
Non-Interest
Expense
Non-interest
expense represents salaries and benefits, occupancy expenses, professional fees,
outside services, and other miscellaneous expenses necessary to conduct
business.
Non-interest
expenses increased by $384 thousand, or 22%, for the three months ended June 30,
2009, as compared to the second quarter of 2008. For the first half
of 2009, non-interest expenses were up $556 thousand, or 16%, over the same
period in 2008.
The
following table shows the major components of non-interest
expenses:
Non-Interest
Expense
|
||||||||||||||||||||||||||||||||
(In
thousands)
|
For the Three Months Ended June
30,
|
For the Six Months Ended June
30,
|
||||||||||||||||||||||||||||||
$ Amount
|
Change
|
$ Amount
|
Change
|
|||||||||||||||||||||||||||||
2009
|
2008
|
$ | % | 2009 | 2008 | $ | % | |||||||||||||||||||||||||
Salaries
and employee benefits
|
$ | 914 | $ | 922 | $ | (8 | ) | -1 | % | $ | 1,893 | $ | 1,884 | $ | 9 | 0 | % | |||||||||||||||
Occupancy
expenses
|
160 | 158 | 2 | 1 | % | 332 | 279 | 53 | 19 | % | ||||||||||||||||||||||
Furniture
and equipment
|
126 | 102 | 24 | 24 | % | 237 | 215 | 22 | 10 | % | ||||||||||||||||||||||
Data
processing
|
193 | 131 | 62 | 47 | % | 379 | 263 | 116 | 44 | % | ||||||||||||||||||||||
Professional
fees
|
170 | 82 | 88 | 107 | % | 265 | 173 | 92 | 53 | % | ||||||||||||||||||||||
Marketing
and business development
|
36 | 57 | (21 | ) | -37 | % | 70 | 90 | (20 | ) | -22 | % | ||||||||||||||||||||
Office
supplies and expenses
|
66 | 57 | 9 | 16 | % | 136 | 114 | 22 | 19 | % | ||||||||||||||||||||||
Insurance
and regulatory assessments
|
241 | 52 | 189 | 363 | % | 298 | 101 | 197 | 195 | % | ||||||||||||||||||||||
Loan
and lease expenses
|
34 | 25 | 9 | 36 | % | 66 | 46 | 20 | 43 | % | ||||||||||||||||||||||
Provision
for unfunded loan commitments
|
- | 15 | (15 | ) | -100 | % | 35 | 15 | 20 | 133 | % | |||||||||||||||||||||
Other
|
192 | 147 | 45 | 31 | % | 313 | 288 | 25 | 9 | % | ||||||||||||||||||||||
Total
non-interest expense
|
$ | 2,132 | $ | 1,748 | $ | 384 | 22 | % | $ | 4,024 | $ | 3,468 | $ | 556 | 16 | % |
The
increase in non-interest expense was principally due to material increases in
FDIC insurance assessments (FDIC insurance increased $186 thousand for the
second quarter of 2009 vs. 2008, and $191 thousand for the six months), the cost
of outsourcing Information Technology management ($52 thousand for the second
quarter and $104 thousand for the six months
Index
included
in data processing expense), and professional fees ($47 thousand for the second
quarter and $54 thousand for the six months) primarily related to problem loan
resolution. Insurance and regulatory assessments for the second
quarter and first six months of 2009 include a $97 thousand special FDIC
assessment.
Salaries
and benefits have been essentially flat, despite the increased staff for the
Santa Maria branch office, which opened in December 2008. For the
second quarter, the Santa Maria branch added $77 thousand in salaries and
benefits expense, as compared to the second quarter of 2008. For the
six months, the additional salaries and benefits totaled $140
thousand. In all, Santa Maria represents increased non-interest
expenses of $155 thousand for the second quarter and $298 thousand for the six
months.
Income
Taxes
No tax
benefit was recorded for the six months ended June 30, 2009, due to a limitation
on the Company’s ability to recognize deferred tax assets. For the
first six months of 2008 the Company recorded a $1.104 million tax benefit,
which represents an effective tax rate (income tax benefit divided by the loss
before income taxes) of 43.2%.
Balance
Sheet Analysis
At June
30, 2009, consolidated assets totaled $219.3 million, as compared with $215.5
million at December 31, 2008, and $186.0 million at the end of 2008’s second
quarter. This represents an increase of $33.3 million (18%) over the
past twelve months. Total loans increased $3.0 million (2%) over that
period, while deposits increased $34.5 million (27%) and shareholders’ equity
increased $5.7 million (31%). The growth in shareholders’ equity was
the result of a private placement of common stock in December 2008 for a total
of $3.8 million, and the issuance in January 2009 of $5.1 million of preferred
stock to the United States Department of the Treasury under the Capital Purchase
Program of the TARP. See the Capital Ratios section of this
report.
The
following table shows balance sheet growth trends over the past five
quarters:
Balance
Sheet Growth
|
||||||||||||||||||||||||||||||||||||||||
(dollars
in thousands)
|
Increase(Decrease)
From Previous Quarter End*
|
|||||||||||||||||||||||||||||||||||||||
June 30, 2009
|
March 31, 2009
|
December 31, 2008
|
September 30, 2008
|
June 30, 2008
|
||||||||||||||||||||||||||||||||||||
$ | % | $ | % | $ | % | $ | % | $ | % | |||||||||||||||||||||||||||||||
Total
Assets
|
$ | (6,330 | ) | -11.3 | % | $ | 10,163 | 19.1 | % | $ | (3,260 | ) | -5.9 | % | $ | 32,699 | 69.9 | % | $ | 13,512 | 31.5 | % | ||||||||||||||||||
Earning
Assets
|
(8,757 | ) | -16.4 | % | 14,967 | 30.4 | % | (4,825 | ) | -9.4 | % | 29,791 | 67.8 | % | 12,778 | 31.7 | % | |||||||||||||||||||||||
Loans
|
(2,903 | ) | -7.5 | % | 1,035 | 2.7 | % | 1,956 | 5.1 | % | 2,913 | 7.8 | % | 17,295 | 53.0 | % | ||||||||||||||||||||||||
Deposits
|
(407 | ) | -1.0 | % | 16,288 | 45.6 | % | (5,389 | ) | -14.3 | % | 24,013 | 75.7 | % | 6,385 | 21.4 | % | |||||||||||||||||||||||
Borrowings
|
(5,256 | ) | -59.7 | % | (10,400 | ) | -92.3 | % | - | 0.0 | % | 8,500 | 90.9 | % | 9,000 | 128.4 | % | |||||||||||||||||||||||
Shareholders'
Equity
|
(908 | ) | -14.5 | % | 4,575 | 90.4 | % | 1,904 | 40.7 | % | 94 | 2.0 | % | (1,671 | ) | -33.3 | % | |||||||||||||||||||||||
*Percentages
shown as annualized rates
|
Index
Loans
The
following table shows the composition of our loan portfolio by type of
loan:
Loan
Portfolio Composition
|
||||||||||||||||||||||||
(Dollars
in thousands)
|
||||||||||||||||||||||||
June
30, 2009
|
December
31, 2008
|
June
30, 2008
|
||||||||||||||||||||||
Type of Loan
|
Amount
|
Percentage
|
Amount
|
Percentage
|
Amount
|
Percentage
|
||||||||||||||||||
Commercial
|
$ | 23,811 | 16.4 | % | $ | 24,454 | 16.0 | % | $ | 28,696 | 20.0 | % | ||||||||||||
Agricultural
|
- | 0.0 | % | - | 0.0 | % | - | 0.1 | % | |||||||||||||||
Leases,
net of unearned income
|
1,580 | 0.9 | % | 1,491 | 1.0 | % | 1,153 | 0.9 | % | |||||||||||||||
Municipal
loans
|
2,744 | 1.8 | % | 2,729 | 1.8 | % | 2,782 | 2.1 | % | |||||||||||||||
Real
estate
|
104,500 | 66.6 | % | 98,049 | 63.9 | % | 88,059 | 59.1 | % | |||||||||||||||
Construction
|
15,396 | 12.0 | % | 22,857 | 14.9 | % | 24,388 | 15.5 | % | |||||||||||||||
Consumer
|
3,412 | 2.3 | % | 3,731 | 2.4 | % | 3,364 | 2.3 | % | |||||||||||||||
Total
loans
|
$ | 151,443 | 100.0 | % | $ | 153,311 | 100.0 | % | $ | 148,442 | 100.0 | % |
The table
shows flat loan growth in the first half of 2009. Real estate loans,
which are predominately commercial real estate loans, have increased, while
construction and commercial loans have declined. Of the total real
estate and construction loans as of June 30, 2009, 69% are commercial mortgage
loans, and 46% of those are owner-occupied properties. Approximately
9% of the owner-occupied commercial mortgage loans contain SBA
guarantees.
Asset
Quality
Non-accrual
loans totaled $3.2 million at June, 2009, as compared to $3.6 million at
December 31, 2008 and $4.9 million at June 30, 2008.
Management
classifies loans as non-accrual when principal or interest is past due 90 days
or more based on the contractual terms of the loan, unless the loan is
well-secured and in the process of collection. Loans that are not
past-due 90 days or more will also be classified as non-accrual when, in the
opinion of management, there exists a reasonable doubt as to the full and timely
collection of either principal or interest. Once a loan is classified
as non-accrual, it may not be reclassified as an accruing loan until all
principal and interest payments are brought current and the loan is considered
to be collectible as to both principal and interest.
Restructured
loans are those loans with concessions in interest rates or repayment terms due
to a decline in the financial condition of the borrower. Foreclosed
real estate represents real estate acquired in satisfaction of loans through
foreclosure or other means and is carried on an individual asset basis at the
lower of the recorded investment in the related loan or the estimated fair value
of the property, less selling expenses.
The
following table presents information about the Company’s non-performing loans,
including quality ratios as of June 30, 2009, December 31, 2008 and June 30,
2008:
Non-Performing
Assets
|
||||||||||||
(in
thousands)
|
June
30
|
December
31
|
June
30
|
|||||||||
2009
|
2008
|
2008
|
||||||||||
Loans
in nonaccrual status
|
$ | 3,202 | $ | 3,557 | $ | 4,944 | ||||||
Loans
past due 90 days or more and accruing
|
1,336 | 265 | - | |||||||||
Restructured
loans in accruing status
|
260 | 675 | - | |||||||||
Total
nonperforming loans
|
4,798 | 4,497 | 4,944 | |||||||||
Foreclosed
real estate
|
1,400 | 83 | - | |||||||||
Total
nonperforming assets
|
$ | 6,198 | $ | 4,580 | $ | 4,944 | ||||||
Allowance
for loan losses
|
$ | 3,474 | $ | 3,942 | $ | 2,986 | ||||||
Asset
quality ratios:
|
||||||||||||
Non-performing
assets to total assets
|
2.83 | % | 2.13 | % | 2.66 | % | ||||||
Non-performing
loans to total loans
|
3.17 | % | 2.93 | % | 3.33 | % | ||||||
Allowance
for loan losses to total loans
|
2.29 | % | 2.57 | % | 2.01 | % | ||||||
Allowance
for loan losses to total
|
||||||||||||
non-performing
loans
|
72 | % | 88 | % | 60 | % |
The high
level of non-performing loans over the past year has been due to the significant
downturn in the economy and reduction in real estate collateral values in 2008
and 2009. The $4.8 million of non-performing loans as of June 30,
2009, includes $1.1 million of SBA loans, which are supported by $1.0 million of
SBA loan guarantees.
Potential
Problem Loans
At June
30, 2009, the Bank had approximately $17.1 million of loans that were not
categorized as non-performing but for which known information about the
borrower’s financial condition caused management to have concern about the
ability of the borrowers to comply with the repayment terms of the
loans. This represents a $0.5 million decrease from the $17.6 million
of potential problem loans at December 31, 2008. The $17.1 million of
potential problem loans are supported by $590 thousand of SBA loan
guarantees.
Potential
problem loans were identified through the ongoing loan review process and are
subject to continuing management attention. Management has provided
in the allowance for loan and lease losses for potential losses related to these
loans, based on an evaluation of current market conditions, loan collateral,
other secondary sources of repayment and cash flow generation.
While
credit quality, as measured by loan delinquencies and by the Bank’s internal
risk grading system, appears to be manageable as of June 30, 2009, there can be
no assurances that new problem loans will not develop in future
periods. A continuing decline in economic conditions in the Bank’s
market area or other factors could adversely impact individual borrowers or the
loan portfolio in general. The Bank has well defined underwriting
standards and expects to continue with prompt collection efforts, but economic
uncertainties or changes may cause one or more borrowers to experience problems
in the coming months.
Index
Allowance
for Loan and Lease Losses
The
allowance for loan and lease losses (“ALLL”) at June 30, 2009 totaled $3.5
million, a decrease of $468 thousand from December 31, 2008. The
ratio of ALLL to total loans at June 30, 2009, was 2.29%, as compared with 2.57%
at December 31, 2008, and 2.01% at June 30, 2008. At June 30, 2009
and 2008, the ratio of ALLL to total non-performing loans was 72% and 60%,
respectively.
The
following table provides an analysis of the changes in the ALLL for the three-
and six-month periods ended June 30, 2009 and 2008:
Allowance
for Loan and Lease Losses
|
||||||||||||||||
(dollars
in thousands)
|
Three
Months Ended
|
Six
Months Ended
|
||||||||||||||
June
30,
|
June
30,
|
|||||||||||||||
2009
|
2008
|
2009
|
2008
|
|||||||||||||
Balance
at beginning of period
|
$ | 4,038 | $ | 1,356 | $ | 3,942 | $ | 1,150 | ||||||||
Provision
for loan losses
|
381 | 2,325 | 681 | 2,545 | ||||||||||||
Loans
charged off
|
(963 | ) | (700 | ) | (1,173 | ) | (721 | ) | ||||||||
Recoveries
of previous charge-offs
|
18 | 5 | 24 | 12 | ||||||||||||
Net
recoveries (charge-offs)
|
(945 | ) | (695 | ) | (1,149 | ) | (709 | ) | ||||||||
Balance
at end of period
|
$ | 3,474 | $ | 2,986 | $ | 3,474 | $ | 2,986 | ||||||||
Allowance
for loan losses as a percentage of:
|
||||||||||||||||
Period
end loans
|
2.29 | % | 2.01 | % | 2.29 | % | 2.01 | % | ||||||||
Non-performing
loans
|
72 | % | 60 | % | 72 | % | 60 | % | ||||||||
As
a percentage of average loans (annualized):
|
||||||||||||||||
Net
charge-offs (recoveries)
|
2.69 | % | 1.99 | % | 1.73 | % | 1.07 | % | ||||||||
Provision
for loan losses
|
1.09 | % | 6.64 | % | 1.03 | % | 3.82 | % |
Loans
charged off in the second quarter of 2009 included one construction loan for a
mini-storage facility ($498 thousand), two owner-occupied commercial real estate
loans (total of $207 thousand), one non-owner-occupied residential lot loan ($59
thousand), and several small commercial loans secured by non-real estate assets
(total of $195 thousand). Charge-offs in the first quarter of 2009
included one home equity loan ($115 thousand), primarily due to declining
property values; the balance remaining upon payoff of one construction loan for
a multi-family residential project ($68 thousand); and a few small commercial
loans secured by non-real estate assets (total of $23 thousand). For
the second quarter of 2008, loan charge-offs included non-real estate secured
commercial loans totaling $696 thousand.
The Bank
makes provisions for loan losses when required to bring the total allowance for
loan and lease losses to a level deemed appropriate for the level of risk in the
loan portfolio. At least quarterly, management conducts an assessment
of the overall quality of the loan portfolio and general economic trends in the
local market. The determination of the appropriate level for the
allowance is based on that review, considering such factors as historical
experience, the volume and type of lending conducted, the amount of and
identified potential loss associated with specific nonperforming loans,
regulatory policies, general economic conditions, and other factors related to
the collectibility of loans in the portfolio.
Based on
its quarterly review, management believes that the allowance for loan losses at
June 30, 2009, is sufficient to absorb losses inherent in the loan
portfolio. This assessment is based upon the best available
information and does involve uncertainty and matters of
judgment. Accordingly, the adequacy of the allowance cannot be
determined with precision and could be susceptible to significant change in
future periods.
Index
In
addition, management has established a reserve for undisbursed loan
commitments. As of June 30, 2009, this reserve totaled $105,000 and
is included in other liabilities in the consolidated balance sheet.
Investments
In 2004,
management established a loss reserve for one of the Bank’s asset-backed
securities after concluding it was “other than temporarily
impaired.” The security is in non-accrual status, with any interest
payments received being credited to the reserve. As of June 30, 2009,
the book value of the security was $20 thousand ($307 thousand amortized cost
less the loss reserve, which totals $287 thousand).
While
management has made a best effort to determine the probable loss on this
security, no assurances can be given that future changes in the underlying
collateral and payments will not materially affect the value of this security
with either positive or negative changes. However, management will
continue to closely monitor this investment and, if needed, recognize additional
write-downs.
Excluding
the impaired asset-backed security referred to above, all securities in the
Bank’s investment portfolio are considered to be investment
grade. The portfolio consists of a mixture of fixed-rate
mortgage-backed securities (37%), floating-rate mortgage-backed securities (7%),
fixed-rate US agency securities (36%), fixed-rate tax-exempt municipal
securities (8%), fixed-rate CMO’s (6%) and floating-rate corporate debt
securities (6%). The Bank has no investments in FannieMae or
FreddieMac equity securities (common or preferred) and none of the
mortgage-backed securities are backed by “sub-prime” mortgages. None
of the Bank’s municipal securities may be called before 2011. The
average life of the portfolio is projected to be 3.0 years, with a duration of
2.7 years.
Deposits
Deposits
are the primary source of funding for lending and investing
needs. Total deposits were $160.7 million as of June 30, 2009, as
compared with $144.8 million at December 31, 2008, and $126.2 million at June
30, 2008.
The Bank
generally prices deposits at or above the median rate by classification based on
periodic interest rate surveys in the local market. Deposit rates are
then adjusted to balance the cost of funds versus funding needs and asset and
liability considerations. The Net Interest Analysis
and Rate/Volume
Analysis earlier in this Discussion contain information regarding the
average rates paid on deposits for the first six months of 2009 and
2008.
The Bank
is one of only two banks in San Luis Obispo county participating in the
Certificate of Deposit Account Registry Service (“CDARS”)
program. This program permits the Bank’s customers to place their
certificates of deposit at one institution—Mission Community Bank—and have those
deposits fully-insured by the FDIC, up to $50 million. The CDARS
program acts as a clearinghouse, matching deposits from one institution in the
CDARS network of nearly 3,000 banks with other network banks (in increments of
less than the per-depositor FDIC insurance limit), so funds that a customer
places with the Bank essentially remain on the Bank’s balance
sheet. The CDARS program has become very attractive since mid-year
2008, as local depositors sought out safety, with yield often a secondary
concern. As of June 30, 2009, the
Index
Bank had
issued $48.5 million of certificates of deposit to local customers through the
CDARS program, up from $6.8 million as of June 30, 2008.
On
October 3, 2008, then-President Bush signed into law the Emergency Economic
Stabilization Act of 2008 (“EESA”). The legislation was in response
to the financial crises affecting the banking system and financial
markets. EESA temporarily (until December 31, 2009) raised the basic
limit on FDIC deposit insurance coverage from $100,000 to $250,000 per
depositor. Since then, the FDIC has extended the $250,000 limit
through the end of 2013. See also Effects of Inflation and Economic
Issues below, for a discussion of the Emergency Economic Stabilization
Act of 2008 (“EESA”), and its potential impact on the Company.
On
October 14, 2008, the FDIC announced another temporary program (until December
31, 2009) to provide full FDIC insurance coverage for non-interest bearing
transaction accounts, regardless of dollar amount. Management and the
board of directors evaluated the additional cost of this optional insurance
program and determined that it would be in the Bank’s best interests to provide
this coverage to its depositors. The cost to the Bank for this
additional deposit insurance coverage is 10 basis points on the amount of
non-interest-bearing deposits in excess of $250,000. To date, the
FDIC has not extended the unlimited insurance coverage for non-interest bearing
accounts beyond 2009.
Borrowings
In
addition to the Company’s junior subordinated debt securities, the Bank has
borrowed from, and expects to continue to have borrowings from, the Federal Home
Loan Bank of San Francisco (“FHLB”). Interest rates and terms for
FHLB borrowings are generally more favorable than the rates for similar term
certificates of deposit.
As of
June 30, 2009, borrowings from the FHLB totaled $29.8 million, with a weighted
average interest rate of 3.82%. Of the $29.8 million, $3.0 million
was borrowed in 2003 for 10 years to offset a specific pool of the Bank’s fixed
rate loans maturing in 2013. During the second quarter of 2007, $3.0
million of short-term brokered deposits were replaced with $3.0 million of FHLB
advances maturing in 2010. The remaining $23.8 million was borrowed
to meet shorter-term funding needs and matures on various dates from July
through December 2009.
Capital
Total
shareholders’ equity has increased $5.7 million, or 31%, over the past twelve
months. The growth in shareholders’ equity was the result of 1) a
private placement on December 2, 2008 of 225,026 shares of common stock sold to
the Carpenter Community BancFund-A, L.P. at a price of $17.10 per share,
for aggregate gross proceeds to the Company of $3.8 million, and 2) the issuance
on January 9, 2009, of 5,116 shares of a Series D Fixed Rate Cumulative
Perpetual Preferred Stock to the United States Department of the Treasury at
$1,000 per share. The preferred stock issue is part of the Capital
Purchase Program of the TARP. The Company invested a total of $8.1
million from these two capital transactions in Mission Community Bank as Tier 1
capital.
The
following table shows the Bank’s capital ratios, as calculated under regulatory
guidelines, compared to the regulatory minimum capital ratios and the regulatory
minimum capital ratios
Index
needed to
qualify as a “well-capitalized” institution at June 30, 2009, December 31,
2008, and June 30, 2008:
Mission
Community Bank
|
||||||||||||||||||||||||
Capital
Ratios
|
Amount
of Capital Required
|
|||||||||||||||||||||||
(dollars
in thousands)
|
To
Be
|
To
Be Adequately
|
||||||||||||||||||||||
Actual
|
Well-Capitalized
|
Capitalized
|
||||||||||||||||||||||
Amount
|
Ratio
|
Amount
|
Ratio
|
Amount
|
Ratio
|
|||||||||||||||||||
As
of June 30, 2009:
|
||||||||||||||||||||||||
Total
Capital (to Risk-Weighted Assets)
|
$ | 26,928 | 15.72 | % | $ | 17,125 | 10.0 | % | $ | 13,700 | 8.0 | % | ||||||||||||
Tier
1 Capital (to Risk-Weighted Assets)
|
$ | 24,763 | 14.46 | % | $ | 10,275 | 6.0 | % | $ | 6,850 | 4.0 | % | ||||||||||||
Tier
1 Capital (to Average Assets)
|
$ | 24,763 | 11.14 | % | $ | 11,116 | 5.0 | % | $ | 8,893 | 4.0 | % | ||||||||||||
As
of December 31, 2008:
|
||||||||||||||||||||||||
Total
Capital (to Risk-Weighted Assets)
|
$ | 22,467 | 13.27 | % | $ | 16,937 | 10.0 | % | $ | 13,550 | 8.0 | % | ||||||||||||
Tier
1 Capital (to Risk-Weighted Assets)
|
$ | 20,326 | 12.00 | % | $ | 10,162 | 6.0 | % | $ | 6,775 | 4.0 | % | ||||||||||||
Tier
1 Capital (to Average Assets)
|
$ | 20,326 | 9.47 | % | $ | 10,729 | 5.0 | % | $ | 8,583 | 4.0 | % | ||||||||||||
As
of June 30, 2008:
|
||||||||||||||||||||||||
Total
Capital (to Risk-Weighted Assets)
|
$ | 22,328 | 13.62 | % | $ | 16,398 | 10.0 | % | $ | 13,119 | 8.0 | % | ||||||||||||
Tier
1 Capital (to Risk-Weighted Assets)
|
$ | 20,256 | 12.35 | % | $ | 9,839 | 6.0 | % | $ | 6,559 | 4.0 | % | ||||||||||||
Tier
1 Capital (to Average Assets)
|
$ | 20,256 | 11.29 | % | $ | 8,973 | 5.0 | % | $ | 7,179 | 4.0 | % |
See also
Effects of Inflation and
Economic Issues below, for a discussion of EESA and its potential impact
on the Company.
Liquidity
The
Bank’s liquidity, which primarily represents the ability to meet fluctuations in
deposit levels and provide for customers’ credit needs, is managed through
various funding strategies that reflect the maturity structures of the sources
of funds and the assets being funded. The Bank’s liquidity is further
augmented by payments of principal and interest on loans and increases in
short-term liabilities such as demand deposits and short-term certificates of
deposit. Cash and cash equivalents (primarily federal funds sold) are
the primary means for providing immediate liquidity. The Bank had
$13.0 million in cash and cash equivalents on June 30, 2009, as compared with
$17.7 million as of December 31, 2008 and $3.0 million on June 30,
2008.
In order
to meet the Bank’s liquidity requirements, the Bank endeavors to maintain an
appropriate ratio of loans to deposits, and to maintain sufficient
off-balance-sheet sources of funds which may be drawn upon when
needed. For the month of June 2009, the Bank’s loans-to-deposits
ratio was 91%. The sources of funding ratio, which measures available
off-balance-sheet sources of funds as a percentage of total on-balance-sheet
assets, was 41.5% as of June 30, 2009.
One of
the Bank’s off-balance-sheet sources of funds is potential borrowing capacity
through the FHLB. FHLB borrowings are collateralized by loans and/or
investments and can be structured over various terms ranging from overnight to
ten years. As of June 30, 2009, the Bank had outstanding borrowings
from the FHLB totaling $29.8 million. Interest rates and terms for
FHLB borrowings are generally more favorable than the rates for similar term
brokered certificates of deposit or for federal funds purchased. The
Bank has the potential (on a secured basis) to borrow from the FHLB up to
approximately 25 percent of its total assets. Based on this
limitation and loans and securities pledged as of June 30, 2009, an additional
$22.2 million could
Index
be
borrowed from the FHLB if needed. The Bank has been reducing its FHLB
borrowings as they have matured over the past few months, and it expects to
continue to do so in 2009 and 2010. However, FHLB borrowings may be
used from time to time when needed as part of the Bank’s normal liquidity
management to fund asset growth on a cost-effective basis.
The Bank
also has access to the Federal Reserve Bank of San Francisco’s (“FRB-SF”)
“Discount Window” for additional secured borrowing should the need
arise. As of June 30, 2009, the Bank had pledged $55.4 million of its
loan portfolio to the FRB-SF, which provided the Bank with $34.9 million in
additional short-term borrowing capacity.
On
October 14, 2008, The FDIC announced a new program, the Temporary Liquidity Guarantee
Program (“TLGP”), in which the Bank and the Company chose to
participate. TLGP provides FDIC guarantees for qualifying unsecured
debt issued on or before June 30, 2009. No qualifying debt was issued
by the Bank or the Company on or before the June 30
deadline. Therefore, participation in the TLGP program has resulted
in no cost to the Bank or the Company.
Off-Balance-Sheet
Arrangements
In the
normal course of business, the Bank enters into financial commitments to meet
the financing needs of its customers, including commitments to extend credit and
standby letters of credit. Those instruments involve, to varying
degrees, elements of credit and interest rate risk not recognized in the
consolidated balance sheet.
As of the
dates indicated, the Bank had the following outstanding financial commitments
whose contractual amount represents credit risk:
Loan
Commitments
|
||||||||||||
(in
thousands)
|
June
30
|
December
31
|
June
30
|
|||||||||
2009
|
2008
|
2008
|
||||||||||
Commitments
to Extend Credit
|
$ | 19,234 | $ | 28,427 | $ | 31,133 | ||||||
Standby
Letters of Credit
|
304 | 304 | 197 | |||||||||
$ | 19,538 | $ | 28,731 | $ | 31,330 |
The
Bank’s exposure to credit loss in the event of nonperformance on commitments to
extend credit and standby letters of credit is represented by the contractual
amount of those instruments. The Bank uses the same credit policies in making
commitments as it does for loans reflected in the financial
statements. The effect on the Bank’s revenues, expenses, cash flows
and liquidity from the unused portion of commitments to provide credit cannot be
reasonably predicted, as there is no guarantee the lines of credit will ever be
used.
Effects
of Inflation and Economic Issues
A
financial institution’s asset and liability structure is substantially different
from that of an industrial firm in that primarily all assets and liabilities of
a bank are monetary in nature, with relatively little investments in fixed
assets or inventories. Inflation has an important impact on the
growth of total assets and the resulting need to increase equity capital at
higher than normal
Index
rates in
order to maintain an appropriate equity to assets ratio. Management
believes that the impact of inflation on financial results depends on the
Company’s ability to react to changes in interest rates and, by such reaction,
reduce the inflationary impact on performance. Management has
attempted to structure the mix of financial instruments and manage interest rate
sensitivity in order to minimize the potential adverse effects of inflation or
other market forces on net interest income and, therefore, earnings and
capital.
California’s
statewide unemployment rate stands at 11.6% as of June 2009, significantly above
the national average of 8.5%. For San Luis Obispo and Santa Barbara
Counties, unemployment has trended upward over the past twelve months to stand
at 9.0% and 8.2%, respectively. However, these continue to be some of
the lowest unemployment rates in the state. After several years of
strong appreciation, local real estate values declined in 2007 and 2008, as
residential and commercial sale activity slowed. There can be no
assurance that the economy will not deteriorate further or that real estate
values will return to pre-2007 levels in the short term or at all. As
such, the Bank closely monitors credit quality, interest rate risk and
operational expenses.
The EESA
gives the U.S. Treasury the authority to, among other things; invest in
preferred stock of financial institutions and purchase mortgages,
mortgage-backed securities and certain other financial instruments from
financial institutions for the purpose of stabilizing and providing liquidity to
the U.S. financial markets. There can be no assurance, however, as to
the ultimate impact the EESA will have on the financial
markets. Although the extreme level of volatility experienced in the
fourth quarter of 2008 has abated to a large extent and credit availability,
while still limited, appears to be improving, if the EESA fails to achieve its
goal to help stabilize the financial markets or if financial market conditions
worsen, the Company’s financial condition or results of operations could be
materially and adversely affected.
On
October 14, 2008, the U.S. Treasury Department announced that it would
utilize a portion of the EESA funding to directly purchase up to $250 billion of
preferred stock in banks. Management and the board of directors
evaluated the initial terms of this capital purchase program and determined that
it would be in the Company’s best interests to apply for the maximum amount of
capital that might be made available to the Company and submitted its
application in November 2008. The Treasury Dept., in consultation
with the Federal Reserve Bank of San Francisco, which serves as the primary
federal regulator of the Bank, subsequently determined that the Company was
eligible for $5.1 million of capital, which was issued in the form of Series D
preferred stock on January 9, 2009.
Item
3. Quantitative
and Qualitative Disclosures About Market Risk
Not
applicable.
Item
4T. Controls
and Procedures
The
Company’s Chief Executive Officer and its Chief Financial Officer, after
evaluating the effectiveness of the Company’s disclosure controls and
procedures, as defined in Exchange Act Rules 13a-15(e) and 15(d)-15(e)
promulgated under the Exchange Act, as of the end of the period covered by this
report (the “Evaluation Date”) have concluded that as of the Evaluation Date,
the Company’s disclosure controls and procedures were adequate and effective to
ensure that material information relating to the Company would be made known to
them by others within the Company, particularly during the period in which this
report was being prepared. Disclosure controls and procedures are
designed to ensure that information required to be disclosed by us in the
reports that we file or submit under the Exchange Act is recorded, processed,
summarized and reported within the time periods specified in the Securities and
Exchange Commission’s rules and forms. Disclosure controls and
procedures include, without limitation, controls and procedures designed to
ensure that information required to be disclosed by us in the reports that we
file under the Exchange Act is accumulated and communicated to our management,
including our Chief Executive Officer and Chief Financial Officer, as
appropriate to allow timely decisions regarding required
disclosure.
There
were no significant changes in the Company’s internal controls or in other
factors that could significantly affect the Company’s internal controls over
financial reporting in the Company’s fiscal quarter ended June 30,
2009.
PART II - OTHER INFORMATION
Item
1.
|
Legal Proceedings
|
There are
no material legal proceedings to which the Company is a party or to which any of
its property is subject.
Item
1A.
|
Risk
Factors
|
Not
applicable.
Item
2.
|
Unregistered
Sales of Equity Securities and Use of
Proceeds
|
None.
Item
3.
|
Defaults
Upon Senior Securities
|
None.
Item
4.
|
Submission
of Matters to a Vote of Security
Holders
|
The
following matters were approved at the Company’s Annual Meeting of Shareholders,
which was held on May 27, 2009:
Election
of Directors — Election of the following nine persons to the Board of
Directors to serve until the 2010 Annual Meeting of Shareholders and until their
successors are elected and have qualified:
Bruce M.
Breault Anita
M. Robinson
Roxanne
Carr Gary
E. Stemper
William
B.
Coy Brooks
W. Wise
Howard N.
Gould Karl
F. Wittstrom
Richard
Korsgaard
Shares Percent
Authority
given 1,106,243
82.2%
Authority
withheld 4,700
0.3
Abstain -0-
-0-
Amendment
of Bylaws — To amend Section 3.2 of the Company’s bylaws to increase the
authorized range of directors on the Company’s Board of Directors to between
eight (8) and fifteen (15) directors.
Shares
Percent
For 1,096,191
81.5%
Against 13,452
1.0
Abstain 1,300
0.1
Advisory
Vote on Executive Compensation — To approve, on an advisory and
non-binding basis, the compensation paid to the Company’s Named Executive
Officers.
Shares
Percent
For 1,090,926
81.1%
Against 16,148
1.2
Abstain 3,869
0.3
A total
of 1,110,943 shares (82.6% of those outstanding and entitled to vote) were
represented in person or by proxy.
Item 5.
|
Other
Information
|
None.
Item
6. Exhibits
Exhibit
Index:
Exhibit #
|
||
2.1
|
Plan
of Reorganization and Agreement of Merger dated as of October 4, 2000
(A)
|
|
3.1
|
Restated
Articles of Incorporation (I)
|
|
3.2
|
Certificate
of Amendment to Articles of Incorporation (L)
|
|
3.3
|
Bylaws,
as amended (B)
|
|
4.1
|
Certificate
of Determination for Series A Non-Voting Preferred Stock
(B)
|
|
4.2
|
Certificate
of Determination for Series B Non-Voting Preferred Stock
(B)
|
|
4.3
|
Certificate
of Determination for Series C Non-Voting Preferred Stock
(D)
|
|
4.4
|
Purchase
Agreement dated October 10, 2003, by and among Registrant, Mission
Community Capital Trust I, and Bear Stearns & Co., Inc.
(E)
|
|
4.5
|
Indenture
dated as of October 14, 2003 by and between Registrant and Wells Fargo
Bank, National Association, as trustee (E)
|
|
4.6
|
Declaration
of Trust of Mission Community Capital Trust I dated October 10,
2003 (E)
|
|
4.7
|
Amended
and Restated Declaration of Trust of Mission Community Capital Trust I
dated October 14, 2003 by and among the Registrant, Wells Fargo Delaware
Trust Company, as Trustee, and Anita M. Robinson and William C. Demmin, as
Administrators (E)
|
|
4.8
|
Guarantee
Agreement dated October 14, 2003 between Registrant, as Guarantor, and
Wells Fargo Bank, National Association, as Guarantee Trustee
(E)
|
|
4.9
|
Fee
Agreement dated October 14, 2003 by and among the Registrant, Wells Fargo
Delaware Trust Co., Bear Stearns & Co., Inc. and Mission Community
Capital Trust I (E)
|
|
4.10
|
Certificate
of Determination for Series D Preferred Stock (R)
|
|
10.1
|
Purchase
and Sale Agreement and Lease dated January, 1997, as amended
(B)
|
|
10.2
|
Intentionally
omitted
|
|
10.3
|
Lease
Agreement – Paso Robles (B)
|
|
10.4
|
Lease
Agreement – San Luis Obispo (B)
|
|
10.5
|
Lease
Agreement – Arroyo Grande (B)
|
|
10.6
|
1998
Stock Option Plan, as amended (B)
|
|
10.7
|
Lease
Agreement – 569 Higuera, San Luis Obispo (D)
|
|
10.8
|
Lease
Agreement – 671 Tefft Street, Nipomo CA (C)
|
|
10.9
|
Intentionally
omitted
|
|
10.10
|
Lease
Agreement – 3480 S. Higuera, San Luis Obispo
(F)
|
|
10.11
|
Salary
Protection Agreement — Mr. Pigeon (G)
|
|
10.12
|
Salary
Protection Agreement — Mr. Judge (H)
|
|
10.13
|
Second
Amended and Restated Employment Agreement dated August 28, 2006 between
Anita M. Robinson and Mission Community Bank (J)
|
|
10.14
|
Employment
Agreement dated June 3, 2007 between Brooks Wise and Mission Community
Bank (J)
|
|
10.15
|
Financial
Advisory Services Agreement dated January 4, 2007 between the Company and
Seapower Carpenter Capital, Inc. (K)
|
|
10.16
|
Common
Stock Repurchase Agreement dated August 10, 2007 between Fannie Mae and
the Company (M)
|
|
10.17
|
Build-to-Suit
Lease Agreement between Walter Bros. Construction Co., Inc. and Mission
Community Bank for property at South Higuera Street and Prado Road in San
Luis Obispo, California (N)
|
|
10.18
|
Lease
Agreement – 1670 South Broadway, Santa Maria (O)
|
|
|
||
10.19
|
Mission
Community Bancorp 2008 Stock Incentive Plan (P)
|
|
10.20
|
Amendment
No. 1 to Second Amended and Restated Employment Agreement dated December
29, 2008 by and among Mission Community Bancorp, Mission Community Bank,
and Anita M. Robinson (Q)
|
|
10.21
|
Amendment
No. 1 to Employment Agreement dated December 29, 2008 by and among Mission
Community Bancorp, Mission Community Bank, and Brooks W. Wise
(Q)
|
|
10.22
|
Amended
and Restated Salary Protection Agreement dated December 29, 2008 by and
between Mission Community Bank and Ronald B. Pigeon (Q)
|
|
10.23
|
Letter
Agreement dated January 9, 2009 between Mission Community Bancorp and the
United States Department of Treasury, which includes the Securities
Purchase Agreement—Standard Terms attached thereto, with respect to the
issuance and sale of the Series D Preferred Stock (R)
|
|
10.24
|
Side
Letter Agreement dated January 9, 2009 amending the Stock Purchase
Agreement between Mission Community Bancorp and the Department of the
Treasury (R)
|
|
10.25
|
Side
Letter Agreement dated January 9, 2009 between Mission Community Bancorp
and The Department of the Treasury regarding maintenance of two open seats
on the Board of Directors (R)
|
|
10.26
|
Side
Letter Agreement dated January 9, 2009 between Mission Community Bancorp
and The Department of the Treasury regarding CDFI status
(R)
|
|
(A)
Included in the Company’s Form 8-K filed on December 18, 2000
(B)
Included in the Company’s Form 10-KSB filed on April 2, 2001
(C)
Included in the Company’s Form 10-QSB filed August 12, 2002
(D)
Included in the Company’s Form 10-QSB filed on November 12,
2002
(E)
Included in the Company’s Form 8-K filed on October 21, 2003
(F)
Included in the Company’s Form 10-QSB filed on August 10,
2004
(G)
Included in the Company’s Form 8-K filed on January 19, 2005
(H)
Included in the Company’s Form 8-K filed on February 17, 2005
(I)
Included in the Company’s Form 10-QSB filed on August 14,
2006
(J)
Included in the Company’s Form 8-K filed on June 13, 2007
(K)
Included in the Form SB-2 Registration Statement of the Company filed on
June 13, 2007
(L)
Included in Pre-Effective Amendment No. 1 to the Form SB-2 Registration
Statement of the Company filed on July 24, 2007
(M)
Included in the Company’s Form 8-K filed on August 14, 2007
(N)
Included in the Company’s Form 8-K filed on October 23, 2007
(O)
Included in the Company’s Form 10-KSB filed on March 28, 2008
(P)
Included in the Company’s Form 10-Q filed on May 15, 2008
(Q)Included
in the Company’s Form 8-K filed on December 30, 2008
(R)Included
in the Company’s Form 8-K filed on January 14, 2009
|
Signatures
Pursuant
to the requirements of Section 13 of the Securities Exchange Act of 1934, the
Company has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
MISSION
COMMUNITY BANCORP
By: /s/ Anita M.
Robinson
ANITA M.
ROBINSON
President
and Chief Executive Officer
Dated: June
15, 2010
By: /s/ Ronald B.
Pigeon
RONALD B.
PIGEON
Executive
Vice President and Chief Financial Officer
Dated: June
15, 2010