Attached files
file | filename |
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EX-32.1 - FLORIDIAN FINANCIAL GROUP INC | i00369_ex32-1.htm |
EX-31.2 - FLORIDIAN FINANCIAL GROUP INC | i00369_ex31-2.htm |
EX-31.1 - FLORIDIAN FINANCIAL GROUP INC | i00369_ex31-1.htm |
EX-10.1 - FLORIDIAN FINANCIAL GROUP INC | i00369_ex10-1.htm |
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON,
D.C. 20549
FORM 10-Q
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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, 2010 |
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OR |
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TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
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For the transition period from ____________ to ____________ |
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Commission File Number: 000-53589 |
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FLORIDIAN FINANCIAL GROUP, INC. |
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Florida |
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20-4539279 |
(State or other jurisdiction of incorporation or organization) |
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(I.R.S. Employer Identification No.) |
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175 Timacuan Boulevard, Lake Mary, Florida |
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32746 |
(Address of principal executive office) |
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(Zip Code) |
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(407) 321-3233 |
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(Registrants telephone number, including area code) |
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes x No o
Indicate by
check mark whether the registrant has submitted electronically and posted on
its corporate Web site, if any, every Interactive Data File required to be
submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this
chapter) during the preceding 12 months (or for such shorter period that the
registrant was required to submit and post such files).
Yes o No o
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See definitions of large accelerated filer, accelerated filer, and smaller reporting company in Rule 12b-2 of the Exchange Act.
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Large accelerated filer o |
Accelerated filer o |
Non-accelerated filer o |
Smaller reporting company x |
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(Do not check if smaller reporting company) |
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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 x
At July 31, 2010, 6,201,601 shares of the Registrants Common Stock, $5.00 par value, were outstanding.
1
FLORIDIAN FINANCIAL GROUP, INC.
QUARTERLY REPORT ON FORM 10-Q
FOR THE PERIOD ENDED JUNE 30, 2010
TABLE OF CONTENTS
2
INTRODUCTORY NOTE
Caution Concerning Forward-Looking Statements
The SEC encourages companies to disclose forward-looking information so investors can better understand a companys future prospects and make informed investment decisions. This Quarterly Report on Form 10-Q contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. These forward-looking statements include, among others, statements about our beliefs, plans, objectives, goals, expectations, estimates and intentions that are subject to significant risks and uncertainties and are subject to change based on various factors, many of which are beyond our control. The words may, could, should, would, believe, anticipate, estimate, expect, intend, plan, target, goal, and similar expressions are intended to identify forward-looking statements.
All forward-looking statements, by their nature, are subject to risks and uncertainties. Our actual future results may differ materially from those set forth in our forward-looking statements.
Our ability to achieve our financial objectives could be adversely affected by the factors discussed in detail in Part I, Item 2., Managements Discussion and Analysis of Financial Condition and Results of Operations, and Part II, Item 1A., Risk Factors in this Quarterly Report on Form 10-Q, the following sections of our Annual Report on Form 10-K for the year ended December 31, 2009 (the Annual Report): (a) Introductory Note in Part I, Item 1. Business, (b) Risk Factors in Part I, Item 1A. as updated in our subsequent quarterly reports on Form 10-Q; and (c) Introduction in Managements Discussion and Analysis of Financial Condition and Results of Operations, in Part II, Item 7, as well as:
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Legislative or regulatory changes; |
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the strength of the United States economy in general and the strength of the local economies in which we conduct operations; |
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the accuracy of our financial statement estimates and assumptions, including our allowance for loan losses; |
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the effects of the health and soundness of other financial institutions, including the FDICs need to increase Deposit Insurance Fund assessments; |
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the loss of our key personnel; |
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our need and our ability to incur additional debt or equity financing; |
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our ability to execute our growth strategy through expansion; |
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inflation, interest rate, market and monetary fluctuations; |
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the effects of our lack of a diversified loan portfolio, including the risk of geographic concentration; |
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the frequency and magnitude of foreclosure of our loans; |
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our customers willingness and ability to make timely payments on their loans; |
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fluctuations in collateral values; |
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effect of changes in the stock market and other capital markets; |
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the effects of harsh weather conditions, including hurricanes; |
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the effects of man-made disasters including the recent BP plc oil spill in the Gulf of Mexico; |
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our ability to comply with the extensive laws and regulations to which we are subject; |
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our customers perception of the safety of their deposits at the banks; |
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changes in the securities and real estate markets; |
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increased competition and its effect on pricing; |
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technological changes; |
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changes in monetary and fiscal policies of the U.S. Government; |
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the effects of security breaches and computer viruses that may affect our computer systems; |
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changes in consumer spending and saving habits; |
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changes in accounting principles, policies, practices or guidelines; |
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effect of governments action to the financial market crisis, including the possible nationalization of certain financial institutions; |
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anti-takeover provisions under Federal and state law as well as our Articles of Incorporation and our bylaws; |
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other risks described from time to time in our filings with the SEC; and |
3
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our ability to manage the risks involved in the foregoing. |
However, other factors besides those referenced also could adversely affect our results, and you should not consider any such list of factors to be a complete set of all potential risks or uncertainties. Any forward-looking statements made by us or on our behalf speak only as of the date they are made. We do not undertake to update any forward-looking statement, except as required by applicable law.
4
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PART I. |
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Item 1. |
Floridian Financial Group, Inc., and Subsidiaries
Condensed Consolidated Balance Sheets
June 30, 2010 and December 31, 2009 (Unaudited)
(Dollars in thousands, except per share amounts)
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June 30, 2010 |
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December 31, 2009 |
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Assets |
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Cash and due from banks |
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$ |
7,988 |
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$ |
7,743 |
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Federal funds sold |
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41,479 |
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550 |
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Total cash and cash equivalents |
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49,467 |
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8,293 |
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Securities available for sale |
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65,755 |
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81,707 |
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Securities held to maturity (Fair value of $10,475 at June 30, 2010 and $12,266 at December 31, 2009) |
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10,156 |
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12,259 |
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Other investments |
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190 |
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42 |
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Loans, net of allowance for loan losses of $7,944 and $9,038 at June 30, 2010 and December 31, 2009, respectively |
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327,091 |
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327,686 |
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Property and equipment, net |
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14,744 |
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15,250 |
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Intangible assets |
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1,989 |
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2,085 |
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Deferred income taxes |
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187 |
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275 |
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Other real estate owned |
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2,215 |
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3,023 |
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Other assets |
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16,024 |
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16,277 |
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Total assets |
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$ |
487,818 |
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$ |
466,897 |
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Liabilities and Shareholders Equity |
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Liabilities |
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Deposits: |
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Noninterest-bearing demand |
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$ |
83,410 |
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$ |
67,594 |
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Savings, NOW and money market |
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170,674 |
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174,238 |
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Time deposits under $100 |
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101,057 |
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92,999 |
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Time deposits of $100 or more |
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75,950 |
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71,821 |
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Total deposits |
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431,091 |
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406,652 |
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Short-term borrowings |
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6,766 |
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7,805 |
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Other liabilities |
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1,769 |
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1,957 |
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Total liabilities |
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439,626 |
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416,414 |
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Shareholders Equity |
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Preferred stock, $5 par value, 1,000,000 shares authorized; none outstanding |
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Common stock, $5 par value, 100,000,000 shares authorized; 6,201,601 and 6,193,846 shares issued and outstanding in 2010 and 2009, respectively |
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31,003 |
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30,969 |
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Additional paid-in capital |
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37,999 |
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37,793 |
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Retained deficit |
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(21,206 |
) |
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(18,133 |
) |
Accumulated other comprehensive income (loss) |
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396 |
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(146 |
) |
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Total shareholders equity |
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48,192 |
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50,483 |
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Total liabilities and shareholders equity |
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$ |
487,818 |
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$ |
466,897 |
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See Notes to Unaudited Condensed Consolidated Financial Statements.
5
Floridian Financial Group, Inc. and Subsidiaries
Condensed
Consolidated Statements of Operations (Unaudited)
For the Three Months Ended June 30, 2010 and 2009
(Dollars in thousands)
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For the
three months ended |
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2010 |
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2009 |
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Interest income: |
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Interest and fees on loans |
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$ |
4,555 |
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$ |
4,128 |
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Interest on securities |
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591 |
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526 |
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Interest on federal funds sold |
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10 |
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4 |
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Other interest |
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2 |
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Total interest income |
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5,156 |
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4,660 |
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Interest expense: |
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Interest on deposits |
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1,491 |
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1,567 |
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Other interest |
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50 |
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55 |
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Total interest expense |
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1,541 |
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1,622 |
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Net interest income |
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3,615 |
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3,038 |
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Provision for loan losses |
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3,634 |
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423 |
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Net interest income (expense) after provision for loan losses |
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(19 |
) |
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2,615 |
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Noninterest income: |
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Other noninterest income |
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272 |
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240 |
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Gain on sale of securities |
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10 |
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Total noninterest income |
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282 |
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240 |
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Noninterest expense: |
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Salaries and employee benefits |
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1,761 |
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1,736 |
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Occupancy and equipment expenses |
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828 |
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|
709 |
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FDIC insurance |
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212 |
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376 |
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Data processing |
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259 |
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212 |
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Other real estate expense |
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78 |
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19 |
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Professional fees |
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249 |
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90 |
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Credit and collection expense |
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66 |
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103 |
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Telephone and communications |
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58 |
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42 |
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Core deposit intangible amortization |
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48 |
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|
48 |
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Operating loss (recovery) |
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(70 |
) |
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570 |
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Other operating expenses |
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136 |
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300 |
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Total noninterest expense |
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3,625 |
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4,205 |
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Income (loss) before income taxes |
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(3,362 |
) |
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(1,350 |
) |
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Income tax benefit |
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Net income (loss) |
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$ |
(3,362 |
) |
$ |
(1,350 |
) |
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Basic net income (loss) per share |
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$ |
(0.54 |
) |
$ |
(0.22 |
) |
Diluted net income (loss) per share |
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$ |
(0.54 |
) |
$ |
(0.22 |
) |
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Average basic shares outstanding |
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6,204,365 |
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6,180,801 |
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Average diluted shares outstanding |
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6,204,365 |
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6,180,801 |
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See Notes to Unaudited Condensed Consolidated Financial Statements
6
Floridian Financial Group, Inc. and Subsidiaries
Consolidated Statement of Operations
(Unaudited)
For the Six Months Ended June 30, 2010 and 2009
(Dollars in thousands)
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For the
six months ended |
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2010 |
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2009 |
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Interest income: |
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Interest and fees on loans |
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$ |
9,019 |
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$ |
7,996 |
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Interest on securities |
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1,268 |
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|
1,043 |
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Interest on federal funds sold |
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17 |
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15 |
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Other interest |
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50 |
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Total interest income |
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10,304 |
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9,104 |
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Interest expense: |
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Interest on deposits |
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3,072 |
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|
3,258 |
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Other interest |
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103 |
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112 |
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Total interest expense |
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3,175 |
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3,370 |
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Net interest income |
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7,129 |
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5,734 |
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Provision for loan losses |
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3,823 |
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|
738 |
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Net interest income after provision for loan losses |
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3,306 |
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4,996 |
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Noninterest income: |
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Other noninterest income |
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562 |
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|
451 |
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Gain on sale of securities |
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|
13 |
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|
185 |
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Total noninterest income |
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|
575 |
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|
636 |
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Noninterest expense: |
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Salaries and employee benefits |
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3,490 |
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|
3,593 |
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Occupancy and equipment expenses |
|
|
1,631 |
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|
1,438 |
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FDIC insurance |
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|
427 |
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|
507 |
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Data processing |
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|
472 |
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|
409 |
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Other real estate expense |
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|
243 |
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|
38 |
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Professional fees |
|
|
347 |
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|
178 |
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Credit and collection expense |
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|
141 |
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|
165 |
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Telephone and communications |
|
|
113 |
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|
105 |
|
Core deposit intangible amortization |
|
|
96 |
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|
96 |
|
Operating loss (recovery) |
|
|
(450 |
) |
|
570 |
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Other operating expenses |
|
|
444 |
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|
591 |
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|
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|
|
|
|
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Total noninterest expense |
|
|
6,954 |
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|
7,690 |
|
|
|
|
|
|
|
|
|
|
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Loss before income taxes |
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|
(3,073 |
) |
|
(2,058 |
) |
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Income tax benefit |
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|
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Net loss |
|
$ |
(3,073 |
) |
$ |
(2,058 |
) |
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Basic earnings (loss) per share |
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$ |
(0.50 |
) |
$ |
(0.33 |
) |
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Diluted earnings (loss) per share |
|
$ |
(0.50 |
) |
$ |
(0.33 |
) |
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See Notes to Unaudited Consolidated Financial Statements
7
Floridian Financial Group, Inc. and Subsidiaries
Condensed Consolidated
Statements of Shareholders Equity
For the Six Months Ended June 30, 2010 and 2009 (Unaudited)
(Dollars in thousands, except per share amounts)
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Common |
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Additional |
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Retained |
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Accumulated |
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Total |
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Balance at December 31, 2008 |
|
$ |
30,786 |
|
$ |
36,983 |
|
$ |
(7,316 |
) |
$ |
261 |
|
$ |
60,714 |
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Comprehensive loss: |
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|
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Net loss |
|
|
|
|
|
|
|
|
(2,058 |
) |
|
|
|
|
(2,058 |
) |
Change in unrealized gain on securities available for sale, net of income tax |
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(665 |
) |
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Less reclassification adjustment for gains included in net income, net of taxes of $0 |
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|
|
|
|
|
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|
185 |
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|
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|
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|
|
|
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Net unrealized loss |
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|
|
|
|
|
|
(480 |
) |
|
(480 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total comprehensive loss |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(2,538 |
) |
Sale of 9,859 shares of common stock to employee benefit plan |
|
|
49 |
|
|
45 |
|
|
|
|
|
|
|
|
94 |
|
Share-based compensation |
|
|
|
|
|
115 |
|
|
|
|
|
|
|
|
115 |
|
Share-based compensation in acquisition, net of registration expense of |
|
|
|
|
|
236 |
|
|
|
|
|
|
|
|
236 |
|
Exercise of 6,450 stock options |
|
|
32 |
|
|
32 |
|
|
|
|
|
|
|
|
64 |
|
Sale of 7,616 shares of common stock for employee stock purchase plan |
|
|
38 |
|
|
57 |
|
|
|
|
|
|
|
|
95 |
|
Issuance of 5,290 shares of common stock for director fees |
|
|
27 |
|
|
35 |
|
|
|
|
|
|
|
|
62 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at June 30, 2009 |
|
$ |
30,932 |
|
$ |
37,503 |
|
$ |
(9,374 |
) |
$ |
(219 |
) |
$ |
58,842 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at December 31, 2009 |
|
$ |
30,969 |
|
$ |
37,793 |
|
$ |
(18,133 |
) |
$ |
(146 |
) |
$ |
50,483 |
|
Comprehensive income (loss): |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income |
|
|
|
|
|
|
|
|
(3,073 |
) |
|
|
|
|
(3,073 |
) |
Change in unrealized gain on securities available for sale, net of income tax |
|
|
|
|
|
|
|
|
|
|
|
555 |
|
|
|
|
Less reclassification adjustment for gains included in net income, net of taxes of $0 |
|
|
|
|
|
|
|
|
|
|
|
13 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net unrealized gain |
|
|
|
|
|
|
|
|
|
|
|
542 |
|
|
542 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total comprehensive income |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(2,531 |
) |
Sale of 5,717 shares of common stock to employee benefit plan |
|
|
29 |
|
|
19 |
|
|
|
|
|
|
|
|
48 |
|
Share-based compensation |
|
|
|
|
|
158 |
|
|
|
|
|
|
|
|
158 |
|
Sale of 4,727 shares of common stock for employee stock purchase plan |
|
|
24 |
|
|
35 |
|
|
|
|
|
|
|
|
59 |
|
Issuance of 2,300 shares of common stock for director fees |
|
|
11 |
|
|
18 |
|
|
|
|
|
|
|
|
29 |
|
Retirement of 6,000 shares of common stock |
|
|
(30 |
) |
|
(24 |
) |
|
|
|
|
|
|
|
(54 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at June 30, 2010 |
|
$ |
31,003 |
|
$ |
37,999 |
|
$ |
(21,206 |
) |
$ |
396 |
|
$ |
48,192 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
See Notes to Unaudited Condensed Consolidated Financial Statements
8
Floridian Financial Group, Inc. and Subsidiaries
Condensed Consolidated Statements of Cash
Flows (Unaudited)
For the Six Months Ended June 30, 2010 and 2009
(Dollars in thousands)
|
|
|
|
|
|
|
|
|
|
For the six months ended |
|
||||
|
|
|
|
||||
|
|
June 30, 2010 |
|
June 30, 2009 |
|
||
|
|
|
|
|
|
||
Cash Flows From Operating Activities |
|
|
|
|
|
|
|
Net loss |
|
$ |
(3,073 |
) |
$ |
(2,058 |
) |
Adjustments to reconcile net loss to net cash used in operating activities: |
|
|
|
|
|
|
|
Provision for loan losses |
|
|
3,823 |
|
|
738 |
|
Impairment of other real estate owned, net |
|
|
93 |
|
|
|
|
Depreciation and amortization |
|
|
640 |
|
|
615 |
|
Net accretion of securities |
|
|
91 |
|
|
448 |
|
Share-based compensation |
|
|
156 |
|
|
115 |
|
Realized gain on sales of available-for-sale securities |
|
|
(13 |
) |
|
(185 |
) |
Increase in cash surrender value |
|
|
(204 |
) |
|
(234 |
) |
Increase (decrease) in accrued interest receivable |
|
|
175 |
|
|
(307 |
) |
Decrease in accrued interest payable |
|
|
|
|
|
(30 |
) |
Other |
|
|
47 |
|
|
498 |
|
|
|
|
|
|
|
|
|
Net cash provided by (used in) operating activities |
|
|
1,735 |
|
|
(400 |
) |
|
|
|
|
|
|
|
|
Cash Flows From Investing Activities |
|
|
|
|
|
|
|
Purchases of securities available for sale |
|
|
(62,430 |
) |
|
(60,088 |
) |
Maturities, sales and calls on securities available for sale |
|
|
78,967 |
|
|
38,207 |
|
Calls on securities held to maturity |
|
|
2,000 |
|
|
|
|
Net increase in loans |
|
|
(3,543 |
) |
|
(36,862 |
) |
Purchases of property and equipment, net |
|
|
(38 |
) |
|
(461 |
) |
Net increase (decrease) in other investments |
|
|
(78 |
) |
|
15 |
|
Proceeds from sale of other real estate owned |
|
|
1,078 |
|
|
361 |
|
|
|
|
|
|
|
|
|
Net cash provided by (used in) investing activities |
|
|
15,956 |
|
|
(58,828 |
) |
|
|
|
|
|
|
|
|
Cash Flows From Financing Activities |
|
|
|
|
|
|
|
Net increase in deposits |
|
|
24,439 |
|
|
69,885 |
|
Net decrease in short-term borrowings |
|
|
(1,038 |
) |
|
(11,721 |
) |
Proceeds from sale of stock |
|
|
136 |
|
|
302 |
|
Retirement of stock |
|
|
(54 |
) |
|
|
|
|
|
|
|
|
|
|
|
Net cash provided by financing activities |
|
|
23,483 |
|
|
58,466 |
|
|
|
|
|
|
|
|
|
Net increase in cash and cash equivalents |
|
|
41,174 |
|
|
(762 |
) |
Cash and cash equivalents |
|
|
|
|
|
|
|
Beginning of period |
|
|
8,293 |
|
|
17,753 |
|
|
|
|
|
|
|
|
|
End of period |
|
$ |
49,467 |
|
$ |
16,991 |
|
|
|
|
|
|
|
|
|
(continued)
9
Floridian Financial Group, Inc. and Subsidiaries
Condensed Consolidated Statements of Cash
Flows (Unaudited) (continued)
For the Six Months Ended June 30, 2010 and 2009
(Dollars in thousands)
Supplemental Disclosures of Cash Flow Information and noncash transactions
|
|
|
|
|
|
|
|
|
|
For the six months ended |
|
||||
|
|
|
|
||||
|
|
June 30, 2010 |
|
June 30, 2009 |
|
||
|
|
|
|
|
|
||
|
|||||||
Interest paid |
|
$ |
1,635 |
|
$ |
3,380 |
|
|
|
|
|
|
|
|
|
Income taxes paid |
|
$ |
|
|
$ |
|
|
|
|
|
|
|
|
|
|
Loans transferred to other real estate owned |
|
$ |
72 |
|
$ |
627 |
|
|
|
|
|
|
|
|
|
See Notes to Unaudited Condensed Consolidated Financial Statements
10
Floridian Financial Group, Inc.
Notes to
Condensed Consolidated Financial Statements (Unaudited)
(Dollars in thousands, except per share amounts)
|
|
Note 1. |
Nature of Business and Summary of Significant Accounting Policies |
Nature of business: Floridian Financial Group, Inc. (the Company), a Florida corporation, is a registered bank holding company formed to organize and own 100% of its subsidiary banks, Floridian Bank and Orange Bank of Florida (collectively referred to as the Banks). The Company was incorporated in 2005, and became operational as a bank holding company once Floridian Bank opened. Floridian Bank is a state-chartered, federally-insured full service commercial banking institution and presently conducts business from its headquarters and main office in Daytona Beach and branch offices in Ormond Beach, Palm Coast and Port Orange, Florida. Orange Bank of Florida is a state-chartered, federally-insured full service commercial banking institution with its headquarters in Orlando, Florida. The Company operates from its main office and branch offices in the Orlando area, Crystal River and Lake County, Florida. The Company also has an equity interest in Floridian Financial Mortgage, LLC, which conducts mortgage banking operations throughout the Banks market areas.
Basis of Financial Statement Presentation: The accompanying unaudited condensed consolidated financial statements include the accounts of the Company and its Banks. Significant intercompany accounts and transactions have been eliminated in consolidation. The accounting and reporting policies of the Company conform to accounting principles generally accepted in the United States of America and general practices within the financial services industry. The accompanying interim period adjustments, which are necessary for a fair presentation of the consolidated financial statements, have been included. The results of operations for the six months ended June 30, 2010 are not necessarily indicative of the results which may be expected for the year as a whole or any other interim period. The interim period consolidated financial statements and financial information included in this Form 10-Q should be read in conjunction with the notes to the consolidated financial statements included in the Companys 2009 Form 10-K.
Reclassifications: Certain amounts in the 2009 financial statements have been reclassified for comparative purposes to conform with the presentation in the 2010 financial statements. The results of these classifications had no effect on net operations or shareholders equity.
Use of estimates: In preparing the condensed consolidated financial statements in conformity with accounting principles generally accepted in the United States of America, management is required to make estimates and assumptions that affect the reported amounts of assets and liabilities as of the date of the balance sheet and reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. Material estimates that are particularly susceptible to significant change in the near term relate to the determination of the allowance for loan losses, deferred tax assets and the fair value of financial instruments.
Income taxes: The Company accounts for income taxes according to the asset and liability method. Under this method, deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax basis. Deferred tax assets and liabilities are measured using the enacted tax rates applicable to taxable income for the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date. Valuation reserves are established against certain deferred tax assets when it is more likely than not that the deferred tax assets will not be realized. Increases or decreases in the valuation reserve are charged or credited to the income tax provision.
The Company recognizes a benefit from its tax positions only if it is more-likely-than-not that the tax position will be sustained on examination by taxing authorities, based on the technical merits of the position. The tax benefits recognized in the financial statements from such a position are measured based on the largest benefit that has a greater than 50% likelihood of being realized upon ultimate settlement with a taxing authority that has full knowledge of all relevant information.
The periods subject to examination for the Companys federal returns are the tax years subsequent to 2006. The periods subject to examination for the Companys significant state return, which is Florida, are the tax years subsequent to 2006. The Company believes that its income tax filing positions and deductions will be sustained
11
Floridian Financial Group, Inc.
|
|
Note 1. |
Nature of Business and Summary of Significant Accounting Policies (continued) |
upon examination and does not anticipate any adjustments that will result
in a material change in its financial statements. As a result, no reserve for
uncertain income tax positions has been recorded.
The Companys policy for
recording interest and penalties related to uncertain tax positions is to
record such items as part of its provision for federal and state income taxes.
Earnings per share: Basic earnings per share is calculated by dividing net income (loss) by the weighted average number of shares of common stock outstanding for each period presented. Diluted earnings per common share include the dilutive effect of stock options granted using the treasury stock method.
|
|
Note 2. |
Securities |
The amortized cost and estimated fair value of securities with gross unrealized gains and losses follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
June 30, 2010 |
|
||||||||||
|
|
|
|
||||||||||
(Dollars in Thousands) |
|
Amortized |
|
Gross |
|
Gross |
|
Fair |
|
||||
|
|
|
|
|
|
|
|
|
|
||||
Securities Available for Sale |
|
|
|
|
|
|
|
|
|
|
|
|
|
Debt Securities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
U.S. Government and federal agencies |
|
$ |
65,360 |
|
$ |
408 |
|
$ |
13 |
|
$ |
65,755 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total securities available for sale |
|
$ |
65,360 |
|
$ |
408 |
|
$ |
13 |
|
$ |
65,755 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Securities Held to Maturity |
|
|
|
|
|
|
|
|
|
|
|
|
|
Debt Securities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
U.S. Government and federal agencies |
|
$ |
10,156 |
|
$ |
319 |
|
$ |
|
|
$ |
10,475 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total securities held to maturity |
|
$ |
10,156 |
|
$ |
319 |
|
$ |
|
|
$ |
10,475 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2009 |
|
||||||||||
|
|
|
|
||||||||||
Securities Available for Sale |
|
|
|
|
|
|
|
|
|
|
|
|
|
Debt Securities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
U.S. Government and federal agencies |
|
$ |
81,942 |
|
$ |
60 |
|
$ |
295 |
|
$ |
81,707 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total securities available for sale |
|
$ |
81,942 |
|
$ |
60 |
|
$ |
295 |
|
$ |
81,707 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Securities Held to Maturity |
|
|
|
|
|
|
|
|
|
|
|
|
|
Debt Securities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
U.S. Government and federal agencies |
|
$ |
12,259 |
|
$ |
41 |
|
$ |
34 |
|
$ |
12,266 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total securities held to maturity |
|
$ |
12,259 |
|
$ |
41 |
|
$ |
34 |
|
$ |
12,266 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
12
Floridian Financial Group, Inc.
|
|
Note 2. |
Securities (continued). |
At June 30, 2010 and December 31, 2009, U.S. government obligations with a carrying value of $16.8 million and $21.3 million, respectively, were pledged to secure public deposits and for other purposes required or permitted by law. At June 30, 2010 and December 31, 2009, the carrying amount of securities pledged to secure repurchase agreements was $6.9 million and $7.6 million, respectively.
The carrying amount of debt securities by contractual maturity at June 30, 2010 follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(Dollars in Thousands) |
|
|
|
Within |
|
After 1 |
|
After 5 years |
|
Over |
|
Total |
|
|||||
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Available for Sale, at fair value |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
U.S. Government and federal agencies |
|
|
$ |
|
|
$ |
18,128 |
|
$ |
47,627 |
|
$ |
|
|
$ |
65,755 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||
Total |
|
|
$ |
|
|
$ |
18,128 |
|
$ |
47,627 |
|
$ |
|
|
$ |
65,755 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Securities Held to Maturity, at cost |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
U.S. Government and federal agencies |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
10,156 |
|
$ |
10,156 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||
Total |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
10,156 |
|
$ |
10,156 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the periods ended June 30, 2010 and December 31, 2009, proceeds from sales, maturities, and calls of securities available for sale amounted to $80.9 million and $119.1 million, respectively. Gross realized gains amounted to $13 thousand and $206 thousand, respectively. There were no gross losses for the periods ended June 30, 2010 and December 31, 2009.
Information pertaining to securities with gross unrealized losses at June 30, 2010 aggregated by investment category and length of time that individual securities have been in a continuous loss position, follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Less Than 12 Months |
Over 12 Months |
|
|
|
|
|||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||
(Dollars in Thousands) |
|
|
|
Gross |
|
Fair Value |
|
Gross |
|
Fair Value |
|
Total |
|
|||||
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Securities Available for Sale |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Debt Securities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
U.S. Government and federal agencies |
|
|
$ |
13 |
|
$ |
2,488 |
|
$ |
|
|
$ |
|
|
$ |
13 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||
Total securities available for sale |
|
|
$ |
13 |
|
$ |
2,488 |
|
$ |
|
|
$ |
|
|
$ |
13 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Securities Held to Maturity |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Debt Securities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
U.S. Government and federal agencies |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||
Total securities held to maturity |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
13
Floridian Financial Group, Inc.
|
|
Note 3. |
Loans and Allowance for Loan Losses |
Loans were comprised of the following:
|
|
|
|
|
|
|
|
|
|
June 30, 2010 |
|
December 31, 2009 |
|
||
|
|
|
|
|
|
||
|
|
|
|
|
|
|
|
Commercial |
|
$ |
46,060 |
|
$ |
48,565 |
|
Commercial real estate |
|
|
255,320 |
|
|
253,177 |
|
Residential real estate |
|
|
14,478 |
|
|
14,368 |
|
Consumer loans |
|
|
19,409 |
|
|
20,893 |
|
|
|
|
|
|
|
|
|
Total loans |
|
|
335,267 |
|
|
337,003 |
|
Allowance for loan losses |
|
|
(7,944 |
) |
|
(9,038 |
) |
Unearned fees |
|
|
(232 |
) |
|
(279 |
) |
|
|
|
|
|
|
|
|
Net loans |
|
$ |
327,091 |
|
$ |
327,686 |
|
|
|
|
|
|
|
|
|
Activity in the allowance for loan losses is as follows:
|
|
|
|
|
|
|
|
|
|
For the six months ended June 30, |
|
||||
|
|
|
|
||||
|
|
2010 |
|
2009 |
|
||
|
|
|
|
|
|
||
Beginning balance |
|
$ |
9,038 |
|
$ |
6,051 |
|
Loan charge offs |
|
|
(4,990 |
) |
$ |
(2,902 |
) |
Recoveries |
|
|
73 |
|
|
49 |
|
Provision |
|
|
3,823 |
|
|
738 |
|
|
|
|
|
|
|
|
|
Ending balance |
|
$ |
7,944 |
|
$ |
3,936 |
|
|
|
|
|
|
|
|
|
The following is a summary of information pertaining to impaired and nonaccrual loans:
|
|
|
|
|
|
|
|
|
|
June 30, 2010 |
|
December 31, 2009 |
|
||
|
|
|
|
|
|
||
Impaired loans without a valuation allowance |
|
$ |
26,453 |
|
$ |
13,959 |
|
Impaired loans with a valuation allowance |
|
|
14,886 |
|
|
12,769 |
|
|
|
|
|
|
|
|
|
Total impaired loans |
|
$ |
41,339 |
|
$ |
26,728 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Valuation allowance related to impaired loans |
|
$ |
2,359 |
|
$ |
3,206 |
|
Total nonaccrual loans |
|
|
3,080 |
|
|
3,105 |
|
Total loans past-due 90 days or more and still accruing |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
June 30, 2010 |
|
December 31, 2009 |
|
||
|
|
|
|
|
|
||
Average investment in impaired loans |
|
$ |
33,485 |
|
|
17,165 |
|
Interest income recognized on impaired loans |
|
|
456 |
|
|
425 |
|
Interest income recognized on a cash basis on impaired loans |
|
|
|
|
|
|
|
No additional funds are committed to be advanced in connection with impaired loans.
|
|
Note 4. |
Commitments and Contingencies |
On June 29, 2010, Orange Bank of Florida (Orange Bank), a wholly-owned subsidiary of Floridian Financial Group, Inc., entered into a contract for sale and purchase (the Agreement) with First Team Clermont OB, LLC, a Florida limited liability company (First Team). First Team is controlled by W. Warner Peacock, a director of the Company.
14
Floridian Financial Group, Inc.
|
|
Note 4. |
Commitments and Contingencies (continued). |
Pursuant to the Agreement, Orange Bank will purchase from First Team the real and personal property, including the land, building, and furniture and fixtures, which comprise Orange Banks Clermont branch (the Clermont Branch). Upon execution of the Agreement, Orange Bank paid to First Team, a sum of $120,000 as an earnest money deposit, which is not creditable toward the total purchase price (the Deposit). Excluding the Deposit, the total purchase price for the Clermont Branch is $2,450,000, which is payable as follows: (1) $750,000 at closing; (2) $850,000 on December 31, 2011; and (3) $850,000 on December 31, 2012. The purchase of the Clermont Branch is expected to occur on either December 30, 2010 or January 3, 2011, at First Teams option. The two $850,000 payments due in 2011 and 2012 will accrue interest at 6.5% per annum, which interest will be paid monthly to First Team. Finally, Orange Bank and First Team entered into a Second Amendment to Net Lease Agreement, which modifies the existing lease between the parties for the Clermont Branch such that no additional rent will accrue under the lease through December 31, 2010.
Financial instruments with off-balance-sheet risk: The financial statements do not reflect various commitments and contingent liabilities that arise in the normal course of business to meet the financing needs of customers. These include commitments to extend credit and honor stand-by letters of credit. These instruments involve, to varying degrees, elements of credit, interest rate and liquidity risks in excess of amounts reflected in the balance sheets. The extent of the Banks involvement in these commitments or contingent liabilities is expressed by the contractual, or notional, amounts of the instruments.
Commitments to extend credit, which amount to $52.0 million and $62.5 million at June 30, 2010 and December 31, 2009, respectively, represent legally binding agreements to lend to customers with fixed expiration dates or other termination clauses. Since many commitments are expected to expire without being funded, committed amounts do not necessarily represent future liquidity requirements. The amount of collateral obtained, if any, is based on managements credit evaluation in the same manner as though an immediate credit extension were to be granted.
Lines of credit: At June 30, 2010 and December 31, 2009, the Bank had unsecured federal funds lines of credit of $14.9 million and $20.2 million, respectively, available from its correspondent banks. At these dates, there were no outstanding draws under these lines. The highest single day borrowing under these lines was $3.1 million during the six months ended June 30, 2010.
|
|
Note 5. |
Regulatory Capital Matters |
The Company (on a consolidated basis) and Banks are subject to various regulatory capital requirements administered by the federal banking agencies. Failure to meet minimum capital requirements can initiate certain mandatory and possibly additional discretionary actions by regulators that, if undertaken, could have a direct material effect on the Companys financial statements. Under capital adequacy guidelines and the regulatory framework for prompt corrective action, the Banks must meet specific capital guidelines that involve quantitative measures of the Banks assets, liabilities, and certain off-balance-sheet items as calculated under regulatory accounting practices. The capital amounts and classification are also subject to qualitative judgments by the regulators about components, risk weightings, and other factors. Prompt corrective action provisions are not applicable to bank holding companies.
Quantitative measures established by regulation to ensure capital adequacy require the Company and Banks to maintain minimum amounts and ratios (set forth in the table on the following page) of total and Tier 1 capital (as defined in the regulations), to risk-weighted assets (as defined), and Tier 1 capital (as defined), to average assets (as defined). Management believes, as of June 30, 2010 and December 31, 2009, that the Company and Banks meet all capital adequacy requirements to which they are subject.
15
Floridian Financial Group, Inc.
|
|
Note 5. |
Regulatory Capital Matters (continued) |
At June 30, 2010, the Company and its banking subsidiaries exceeded all regulatory capital measures to be adequately capitalized. Further, the Company and its banking subsidiaries satisfied all the criteria to be well capitalized under the regulatory framework for prompt corrective action. To be categorized as well capitalized, the Company and the Banks must maintain minimum total risk-based, Tier 1 risk based, and Tier 1 leverage ratios as set forth in the following table.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Actual |
|
Minimum Amount and Ratio to |
|
||||||||
|
|
|
|
|
|
||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Amount |
|
Ratio |
|
Amount |
|
Ratio |
|
||||
|
|
|
|
|
|
|
|
|
|
||||
As of June 30, 2010: |
|
|
|
|
|
|
|
|
|
|
|
|
|
Total capital (to risk-weighted assets) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Consolidated |
|
$ |
50,407 |
|
|
13.3 |
% |
$ |
37,980 |
|
|
10.0 |
% |
Floridian Bank |
|
$ |
13,307 |
|
|
10.8 |
% |
$ |
12,310 |
|
|
10.0 |
% |
Orange Bank of Florida |
|
$ |
26,550 |
|
|
10.6 |
% |
$ |
25,050 |
|
|
10.0 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Tier 1 capital (to risk-weighted assets) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Consolidated |
|
$ |
45,620 |
|
|
12.0 |
% |
$ |
22,788 |
|
|
6.0 |
% |
Floridian Bank |
|
$ |
11,751 |
|
|
9.6 |
% |
$ |
7,386 |
|
|
6.0 |
% |
Orange Bank of Florida |
|
$ |
23,395 |
|
|
9.3 |
% |
$ |
15,030 |
|
|
6.0 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Tier 1 capital (to average assets) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Consolidated |
|
$ |
45,620 |
|
|
9.6 |
% |
$ |
23,859 |
|
|
5.0 |
% |
Floridian Bank |
|
$ |
11,751 |
|
|
7.4 |
% |
$ |
7,965 |
|
|
5.0 |
% |
Orange Bank of Florida |
|
$ |
23,395 |
|
|
7.6 |
% |
$ |
15,386 |
|
|
5.0 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As of December 31, 2009: |
|
|
|
|
|
|
|
|
|
|
|
|
|
Total capital (to risk-weighted assets) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Consolidated |
|
$ |
53,149 |
|
|
13.8 |
% |
$ |
38,633 |
|
|
10.0 |
% |
Floridian Bank |
|
$ |
14,477 |
|
|
11.7 |
% |
$ |
12,372 |
|
|
10.0 |
% |
Orange Bank of Florida |
|
$ |
26,514 |
|
|
10.3 |
% |
$ |
25,830 |
|
|
10.0 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Tier 1 capital (to risk-weighted assets) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Consolidated |
|
$ |
48,268 |
|
|
12.5 |
% |
$ |
23,180 |
|
|
6.0 |
% |
Floridian Bank |
|
$ |
12,925 |
|
|
10.5 |
% |
$ |
7,423 |
|
|
6.0 |
% |
Orange Bank of Florida |
|
$ |
23,238 |
|
|
9.0 |
% |
$ |
15,498 |
|
|
6.0 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Tier 1 capital (to average assets) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Consolidated |
|
$ |
48,268 |
|
|
10.0 |
% |
$ |
24,190 |
|
|
5.0 |
% |
Floridian Bank |
|
$ |
12,925 |
|
|
8.2 |
% |
$ |
7,882 |
|
|
5.0 |
% |
Orange Bank of Florida |
|
$ |
23,238 |
|
|
7.4 |
% |
$ |
15,697 |
|
|
5.0 |
% |
The payment of dividends by a Florida state bank is subject to various restrictions set forth in the Florida Financial Institutions Code. Such restrictions generally limit dividends to an amount not exceeding net income for the current and two preceding years, less any dividends paid during that period. Accordingly, management does not expect the payment of dividends at any time in the near future. Since the Company is dependent upon the Banks ability to pay dividends, the Company is, in effect, similarly restricted as to its ability to pay dividends.
16
Floridian Financial Group, Inc.
|
|
Note 6. |
Fair Values of Financial Instruments |
Effective January 1, 2008, we adopted the provisions of Financial Accounting Standards Board (FASB) guidance for Fair Value Measurements for financial assets and financial liabilities. This guidance defines fair value, establishes a framework for measuring fair value in generally accepted accounting principles and expands disclosures about fair value measurements. The application of this standard in situations where the market for a financial asset is not active was clarified by the issuance of and interpretation by the FASB in Determining the Fair Value of a Financial Asset When the Market for That Asset Is Not Active, in October 2008.
This Interpretation became effective immediately and did not significantly impact the methods by which the Company determines the fair values of its financial assets.
The original standard defines fair value as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants. A fair value measurement assumes that the transaction to sell the asset or transfer the liability occurs in the principal market for the asset or liability or, in the absence of a principal market, the most advantageous market for the asset or liability. The price in the principal (or most advantageous) market used to measure the fair value of the asset or liability shall not be adjusted for transaction costs. An orderly transaction is a transaction that assumes exposure to the market for a period prior to the measurement date to allow for marketing activities that are usual and customary for transactions involving such assets and liabilities; it is not a forced transaction. Market participants are buyers and sellers in the principal market that are (i) independent, (ii) knowledgeable, (iii) able to transact and (iv) willing to transact.
This guidance requires the use of valuation techniques that are consistent with the market approach, the income approach and/or the cost approach. The market approach uses prices and other relevant information generated by market transactions involving identical or comparable assets and liabilities. The income approach uses valuation techniques to convert expected future amounts, such as cash flows or earnings, to a single present value amount on a discounted basis. The cost approach is based on the amount that currently would be required to replace the service capacity of an asset (replacement cost). Valuation techniques should be consistently applied. Inputs to valuation techniques refer to the assumptions that market participants would use in pricing the asset or liability. Inputs may be observable, meaning those that reflect the assumptions market participants would use in pricing the asset or liability developed based on market data obtained from independent sources, or unobservable, meaning those that reflect the reporting entitys own assumptions about the assumptions market participants would use in pricing the asset or liability developed based on the best information available in the circumstances. In that regard, the guidance establishes a fair value hierarchy for valuation inputs that gives the highest priority to quoted prices in active markets for identical assets or liabilities and the lowest priority to unobservable inputs. The fair value hierarchy is as follows:
|
|
|
Level 1: Quoted prices (unadjusted) for identical assets or liabilities in active markets that the entity has the ability to access as of the measurement date. |
|
|
|
Level 2: Significant other observable inputs other than Level 1 prices such as quoted prices for similar assets or liabilities; quoted prices in markets that are not active; or other inputs that are observable or can be corroborated by observable market data. |
|
|
|
Level 3: Significant unobservable inputs that reflect a reporting entitys own assumptions about the assumptions that market participants would use in pricing an asset or liability. |
A financial instruments categorization within the valuation hierarchy is based upon the lowest level of input that is significant to the fair value measurement.
A description of the valuation methodologies used for instruments measured at fair value, as well as the general classification of such instruments pursuant to the valuation hierarchy, is set forth below.
In general, fair value is based upon quoted market prices, where available. If such quoted market prices are not available, fair value is based upon internally developed models that primarily use, as inputs, observable market-
17
Floridian Financial Group, Inc.
|
|
Note 6. |
Fair Values of Financial Instruments (continued) |
based parameters. Valuation adjustments may be made to ensure that financial instruments are recorded at fair value. These adjustments may include amounts to reflect counterparty credit quality, the Companys creditworthiness, among other things, as well as unobservable parameters. Any such valuation adjustments are applied consistently over time. Our valuation methodologies may produce a fair value calculation that may not be indicative of net realizable value or reflective of future fair values. While management believes the Companys valuation
methodologies are appropriate and consistent with other market participants, the use of different methodologies or assumptions to determine the fair value of certain financial instruments could result in a different estimate of fair value at the reporting date.
The following methods and assumptions were used by the Company in estimating the fair value of its financial instruments:
Cash and due from banks, interest-bearing demand deposits in other banks, and federal funds sold: Due to the short-term nature of these instruments, fair values approximate their carrying amounts.
Investment Securities: The fair values of investment securities are determined by quoted prices in active markets, when available. If quoted market prices are not available, the fair value is determined by a matrix pricing, which is a mathematical technique, widely used in the industry to value debt securities without relying exclusively on quoted prices for the specific securities but rather by relying on the securities relationship to other benchmark quoted securities.
Loans: For variable-rate loans that reprice frequently and with no significant change in credit risk, fair values are based on carrying values. Fair values for all other loans (for example, commercial, commercial real estate, residential real estate, and consumer loans) are estimated using discounted cash flow analyses, using interest rates currently being offered for loans with similar terms to borrowers of similar credit quality. Fair values for nonperforming loans are estimated using discounted cash flow analyses or underlying collateral values, where applicable.
Impaired Loans: Loans for which it is probable that payment of interest and principal will not be made in accordance with the contractual terms of the loan agreement are considered impaired. Once a loan is identified as individually impaired, management measures impairment in accordance with the FASB guidance accounting by creditors for impairment of a loan, and the fair value of impaired loans is estimated using one of several methods, including collateral value, market value of similar debt, enterprise value, liquidation value and discounted cash flows. Those impaired loans not requiring an allowance represent loans for which the fair value of the expected repayments or collateral exceed the recorded investments in such loans. At June 30, 2010, substantially all of the total impaired loans were evaluated based on the fair value of the collateral. In accordance with accounting literature, impaired loans where an allowance is established based on the fair value of collateral require classification in the fair value hierarchy. Collateral values are estimated using level 3 inputs based on customized discounting criteria.
Other Real Estate Owned: Other real estate owned consists of property acquired through, or in lieu of, loan foreclosures or other proceedings and is initially recorded at the lower of the related loan balances less any specific allowance for loss, or fair value at the date of foreclosure, which establishes a new cost basis. Subsequent to foreclosure, the properties are held for sale and are carried at the net fair value at the time of acquisition is charged to the allowance for loan losses. Properties are evaluated regularly to ensure the recorded amounts are supported by current fair values, and a charge to operations is recorded as necessary to reduce the carrying amount to fair value less estimated costs to dispose.
Accrued interest receivable and accrued interest payable: The fair values of accrued interest receivable and accrued interest payable approximate their carrying amounts.
Deposits: The fair value of demand deposits, including non-interest-bearing demand deposits, savings accounts, NOW accounts and money market demand accounts, is equal to their carrying value. Fixed rate term deposits are valued using discounted cash flows. The discount rate used is based on interest rates currently being offered on comparable deposits as to amount and term.
18
Floridian Financial Group, Inc.
|
|
Note 6. |
Fair Values of Financial Instruments (continued) |
Short-term borrowings: The carrying amounts of borrowings under repurchase agreements maturing in the amount of $6,766 approximate their fair values.
Off-balance-sheet instruments: Loan commitments and letters of credit are negotiated at current market rates and are relatively short-term in nature. Therefore, their estimated fair value approximates the fees charged and is nominal at June 30, 2010 and December 31, 2009.
Financial Instruments Recorded at Fair Value on a Recurring Basis
The following table sets forth the Companys assets and liabilities which are carried at fair value on a recurring basis as of June 30, 2010 and December 31, 2009, segregated by the level of the valuation inputs within the fair value hierarchy utilized to measure fair value:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
June 30, 2010 |
|
||||||||||
|
|
|
|
||||||||||
|
|
Quoted Prices in |
|
Significant Other |
|
Significant |
|
Total at |
|
||||
|
|
|
|
|
|
|
|
|
|
||||
Securities available for sale U.S. Government and federal agencies |
|
$ |
|
|
$ |
65,755 |
|
$ |
|
|
$ |
65.755 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2009 |
|
||||||||||
|
|
|
|
||||||||||
|
|
Quoted Prices in |
|
Significant Other |
|
Significant |
|
Total at |
|
||||
|
|
|
|
|
|
|
|
|
|
||||
Securities available for sale U.S. Government and federal agencies |
|
$ |
|
|
$ |
81,707 |
|
$ |
|
|
$ |
81,707 |
|
19
Floridian Financial Group, Inc.
|
|
Note 6. |
Fair Values of Financial Instruments (continued) |
Financial Instruments Recorded at Fair Value on a Nonrecurring Basis
The Company may be required, from time to time, to measure certain financial assets and financial liabilities at fair value on a nonrecurring basis in accordance with U.S. generally accepted accounting principles. These include assets that are measured at the lower of cost or market that were recognized at fair value below cost at the end of the period.
The fair values of assets measured at fair value on a nonrecurring basis are as follows at June 30, 2010 and December 31, 2009:
|
|
|
|
|
|
|
|
|
|
|
|
|
June 30, 2010 |
|
|||||||
|
|
|
|
|||||||
|
|
Quoted Prices in |
|
Significant Other |
|
Significant |
|
|||
|
|
|
|
|
|
|
|
|||
Impaired loans |
|
$ |
|
|
$ |
|
|
$ |
4,743 |
|
Other real estate owned and repossessed property |
|
$ |
|
|
$ |
|
|
$ |
2,305 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2009 |
|
|||||||
|
|
|
|
|||||||
|
|
Quoted Prices in |
|
Significant Other |
|
Significant |
|
|||
|
|
|
|
|
|
|
|
|||
Impaired loans |
|
$ |
|
|
$ |
|
|
$ |
6,051 |
|
Other real estate owned and repossessed property |
|
$ |
|
|
$ |
|
|
$ |
3,023 |
|
20
Floridian Financial Group, Inc.
|
|
Note 6. |
Fair Values of Financial Instruments (continued) |
Following is a summary of the carrying amounts and approximate fair values of the Companys financial instruments at June 30, 2010 and December 31, 2009. The fair value estimates presented are based on pertinent information available to management as of June 30, 2010 and December 31, 2009. Although management is not aware of any factors that would significantly affect the estimated fair values, they have not been comprehensively revalued for purposes of these financial statements since the statement of financial condition date and therefore, current estimates of fair value may differ significantly from the amounts disclosed.
|
|
|
|
|
|
|
|
|
|
June 30, 2010 |
|
|
|
||
|
|
|
|
||||
|
|
Carrying |
|
Estimated |
|
||
|
|
|
|
||||
Financial assets: |
|
|
|
|
|
|
|
Cash and due from banks |
|
$ |
7,988 |
|
$ |
7,988 |
|
Federal funds sold |
|
|
41,479 |
|
|
41,479 |
|
Securities held to maturity |
|
|
10,156 |
|
|
10,475 |
|
Available-for-sale securities |
|
|
65,755 |
|
|
65,755 |
|
Loans, net |
|
|
327,091 |
|
|
324,827 |
|
Accrued interest receivable |
|
|
1,542 |
|
|
1,542 |
|
|
|
|
|
|
|
|
|
Financial liabilities: |
|
|
|
|
|
|
|
Deposits |
|
|
431,091 |
|
|
432,610 |
|
Short-term borrowings |
|
|
6,766 |
|
|
6,766 |
|
Accrued interest payable |
|
|
202 |
|
|
202 |
|
|
|
|
|
|
|
|
|
|
|
December 31, 2009 |
|
|
|
|
|
|
|
|
|
||||
|
|
Carrying |
|
Estimated |
|
||
|
|
|
|
||||
Financial assets: |
|
|
|
|
|
|
|
Cash and due from banks |
|
$ |
7,743 |
|
$ |
7,743 |
|
Federal funds sold |
|
|
550 |
|
|
550 |
|
Securities held to maturity |
|
|
12,259 |
|
|
12,266 |
|
Available-for-sale securities |
|
|
81,707 |
|
|
81,707 |
|
Loans, net |
|
|
327,686 |
|
|
325,524 |
|
Accrued interest receivable |
|
|
1,717 |
|
|
1,717 |
|
|
|
|
|
|
|
|
|
Financial liabilities: |
|
|
|
|
|
|
|
Deposits |
|
|
406,652 |
|
|
408,203 |
|
Short-term borrowings |
|
|
7,805 |
|
|
7,805 |
|
Accrued interest payable |
|
|
204 |
|
|
204 |
|
|
|
Note 7. |
New Accounting Pronouncements |
The FASB provided additional guidance in Accounting for Transfers of Financial Assets, amending previously issued guidance on Accounting for Transfers and Servicing of Financial Assets and Extinguishments of Liabilities, to enhance reporting about transfers of financial assets, including securitizations, and where companies have continuing exposure to the risks related to transferred financial assets. This new guidance eliminates the concept of a qualifying special-purpose entity and changes the requirements for derecognizing financial assets. The new guidance also requires additional disclosures about all continuing involvements with transferred financial assets
21
Floridian Financial Group, Inc.
|
|
Note 7. |
New Accounting Pronouncements (continued) |
including information about gains and losses resulting from transfers during the period. This pronouncement became effective January 1, 2010 and did not have a significant impact on the Companys consolidated financial statements.
The FASB issued new amendments to previously issued interpretations regarding Consolidation of Variable Interest Entities, to change the way a company determines when an entity that is insufficiently capitalized or is not controlled through voting (or similar rights) should be consolidated. The determination of whether a company is required to consolidate an entity is based on, among other things, an entitys purpose and design and a companys ability to direct the activities of the entity that most significantly impact the entitys economic performance. This rule requires additional disclosures about the reporting entitys involvement with variable-interest entities and any significant changes in risk exposure due to that involvement as well as its effect on the entitys financial statements. The new amendments became effective January 1, 2010 and did not have a significant impact on the Companys consolidated financial statements.
The FASB issued additional guidance on Fair Value Measurements and DisclosuresImproving Disclosures about Fair Value Measurements. This update requires additional fair value disclosures including:
|
|
|
|
|
Transfers in and out of Levels 1 and 2: A reporting entity should disclose separately the amounts of significant transfers in and out of Level 1 and Level 2 fair value measurements and describe the reasons for the transfers. |
|
|
|
|
|
Activity in Level 3 fair value measurements. In the reconciliation for fair value measurements using significant unobservable inputs (Level 3), a reporting entity should present separately information about purchases, sales, issuances, and settlements (that is, on a gross basis rather than as one net number). |
|
|
|
The update also clarifies two existing disclosures as follows: |
||
|
||
|
|
Level of disaggregation: A reporting entity should provide fair value measurement disclosures for each class of assets and liabilities. |
|
|
|
|
|
Disclosures about inputs and valuation techniques: A reporting entity is required to provide disclosures about the valuation techniques and inputs used to measure fair value for both recurring and nonrecurring fair value measurements. Those disclosures are required for fair value measurements that fall in either Level 2 or Level 3. |
The new disclosures and clarifications of existing disclosures are effective for interim and annual reporting periods beginning after December 15, 2009, except for the disclosures about purchases, sales, issuances, and settlements in the roll forward of activity in Level 3 fair value measurements. Those disclosures are effective for fiscal years beginning after December 15, 2010, and for interim periods within those fiscal years. Early adoption is permitted. The Company adopted the applicable disclosure provisions required for adoption in 2010.
|
|
MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS |
The following managements discussion and analysis provides supplemental information, which sets forth the major factors that have affected our financial condition and results of operations during the periods included in the accompanying consolidated financial statements and should be read in conjunction with the Consolidated Financial Statements and related notes. The analysis is divided into subsections entitled Business Overview, Results of Operations, Market Risk, Financial Condition, Liquidity, Capital Resources, Off-Balance Sheet Arrangements, and Critical Accounting Policies. Throughout this section, Floridian Financial Group, Inc., and subsidiaries, collectively, are referred to as Company, we, us, or our.
CAUTION CONCERNING FORWARD-LOOKING STATEMENTS
This Quarterly Report on Form 10-Q, including this managements discussion and analysis section, contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. These
22
forward-looking statements include, among others, statements about our beliefs, plans, objectives, goals, expectations, estimates and intentions that are subject to significant risks and uncertainties and are subject to change based on various factors, many of which are beyond our control. The words may, could, should, would, believe, anticipate, estimate, expect, intend, plan, target, goal, and similar expressions are intended to identify forward-looking statements.
All forward-looking statements, by their nature, are subject to risks and uncertainties. Our actual future results may differ materially from those set forth in our forward-looking statements. Please see the Introductory Note and Item 1A. Risk Factors of our 2009 Annual Report on Form 10-K, as updated in our subsequent quarterly reports filed on Form 10-Q, and in our other filings made from time to time with the SEC after the date of this report.
However, other factors besides those listed in our Quarterly Report or in our Annual Report also could adversely affect our results, and you should not consider any such list of factors to be a complete set of all potential risks or uncertainties. Any forward-looking statements made by us or on our behalf speak only as of the date they are made. We do not undertake to update any forward-looking statement, except as required by applicable law.
Business Overview
About Our Business
We are a multi-bank holding company headquartered in Lake Mary, Florida, a community situated between Orlando and Daytona Beach, Florida. We were incorporated on September 8, 2005 as the bank holding company of Floridian Bank, a Florida chartered commercial bank. We commenced operations, along with Floridian Bank, on March 20, 2006. Since 2006, we have grown rapidly.
On March 30, 2008, we closed a merger transaction in which Orange Bank of Florida, a Florida chartered commercial bank, became our wholly-owned subsidiary. The transaction was treated as a merger of equals where each shareholder of Orange Bank received 1.04 shares of our common stock. At the time of the merger, Orange Bank had approximately $196 million in assets, including approximately $121 million in loans, and approximately $176 million in deposits.
Both Floridian Bank and Orange Bank are full service commercial banks, providing a wide range of business and consumer financial services in our target marketplace, which is comprised primarily of Orange, Seminole, Citrus, Lake, Flagler, and Volusia Counties in Florida. Floridian Bank is headquartered in Daytona Beach, Florida, with a primary service area in Flagler and Volusia Counties. Orange Bank is headquartered in Orlando, Florida, with a primary service area in Orange, Seminole, Lake and Citrus Counties. Collectively, our Banks operate 13 banking offices.
Our growth strategy is to affiliate with banks or bank holding companies situated in market areas along the east coast of Florida from St. Johns County to West Palm Beach, along the I-4 Corridor east from Daytona Beach to Tampa, and along the west coast of Florida from Tampa to Naples. Our affiliate model is not a traditional merger and acquisition strategy. Rather, we expect to affiliate with community banks that are looking to benefit from a holding company structure to achieve their growth goals. Although the affiliate bank becomes a subsidiary, part of our strategy is to maintain the affiliate banks independence by keeping its existing directors and officers, as well as retaining the affiliate banks identity, while we provide centralized support to the affiliate bank. We expect that this strategy will permit us to grow while paying less than the book value multiple we would have had to pay in a traditional merger and acquisition strategy. In addition, we have registered with the FDIC to be considered for any FDIC assisted transactions that may occur. We may or may not participate in any assisted transaction following an assessment of the inherent risk in the target financial institution.
23
The Banks offer commercial and retail banking services with an emphasis on commercial and commercial real estate lending, particularly to the medical services industry. As of June 30, 2010, we had total assets of $487.8 million, deposits of $431.1 million, total gross loans of $335.0 million and total shareholders equity of $48.2 million. At June 30, 2010, our capital ratios all surpassed regulatory well capitalized measures:
|
|
|
|
|
|
|
|
|
As of |
|
Minimum to
be |
||
|
|
|
|
|
||
Risk Based Capital |
|
13.3 |
% |
|
10.0 |
% |
Tier 1 Capital |
|
12.0 |
% |
|
6.0 |
% |
Leverage Capital |
|
9.6 |
% |
|
5.0 |
% |
We have a joint venture with FBC Mortgage, LLC, a licensed correspondent mortgage lender, located in Orlando, Florida. The joint venture, Floridian Financial Mortgage, facilitates the origination of jumbo, conventional and FHA residential mortgages and sells most loans into the secondary market. The primary purpose of this operation is to supplement our sources of fee income provided by the Banks. We have a 49% interest in the joint venture and account for our interest using the equity method.
Our principal executive offices are located at 175 Timacuan Boulevard, Lake Mary, Florida 32746. The telephone number at that office is (407) 321-3233.
Results of Operations
Three months ended June 30, 2010 compared to the three months ended June 30, 2009.
CONDENSED SUMMARY OF EARNINGS
|
|
|
|
|
|
|
|
|
|
For the three months ended June 30, |
|
||||
|
|
|
|
||||
(Dollars in thousands, except per share data) |
|
2010 |
|
2009 |
|
||
|
|
|
|
|
|
||
Interest income |
|
$ |
5,156 |
|
$ |
4,660 |
|
Interest expense |
|
|
1,541 |
|
|
1,622 |
|
|
|
|
|
|
|
|
|
Net interest income |
|
|
3,615 |
|
|
3,038 |
|
Provision for loan losses |
|
|
3,634 |
|
|
423 |
|
Noninterest income |
|
|
282 |
|
|
240 |
|
Noninterest expense |
|
|
3,625 |
|
|
4,205 |
|
|
|
|
|
|
|
|
|
Income before income taxes |
|
|
(3,362 |
) |
|
(1,350 |
) |
Income tax benefit |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss |
|
$ |
(3,362 |
) |
$ |
(1,350 |
) |
|
|
|
|
|
|
|
|
Basic net loss per share |
|
$ |
(0.54 |
) |
$ |
(0.22 |
) |
Diluted net loss per share |
|
$ |
(0.54 |
) |
$ |
(0.22 |
) |
Selected operating ratios |
|
|
|
|
|
|
|
Return on average assets |
|
|
(2.81 |
%) |
|
(1.23 |
%) |
Return on average equity |
|
|
(26.41 |
%) |
|
(9.02 |
%) |
Dividend payout ratio |
|
|
N/A |
|
|
N/A |
|
Equity to assets ratio |
|
|
9.88 |
% |
|
13.07 |
% |
The net loss for the three months ended June 30, 2010 was $3.4 million compared to $1.4 million net loss for the same period of 2009. Net interest income increased $577 thousand due to $27.0 million in growth of average loans and lower rates on deposits. The loan loss provision increased $3.2 million as the Company experienced declining credit quality in the second quarter of 2010. This deterioration was concentrated among three loans totaling $14.0 million and were commercial real estate in nature. Noninterest expense decreased $580 thousand reflecting a $570 thousand operating loss and a $194 thousand one-time FDIC premium assessment recognized in 2009. Our 2010 professional fees increased $164 thousand due to higher compliance costs.
Our profitability is dependent to a large extent on net interest income which is the difference between the interest received on earning assets such as loans and securities and the interest paid on interest bearing liabilities principally deposits and borrowings. Our principal interest earning assets are loans, investment securities, and federal funds sold. Interest-bearing liabilities primarily consist of certificates of deposit, NOW accounts, savings deposits, and money market accounts. Funds attracted by these interest-bearing liabilities are invested in interest-earning assets.
24
Accordingly, net interest income depends upon the volume of average interest-earning assets and average interest-bearing liabilities and the interest rates earned or paid on them.
The significance of net interest income is largely enhanced as our size grows and the impact of market rates of interest as influenced by the Federal Reserves monetary policy.
Net interest Income
The following table reflects the components of net interest income, setting forth for the three month periods ended June 30, 2010 and 2009 presented, (1) average assets, liabilities and shareholders equity, (2) interest income earned on interest-earning assets and interest paid on interest-bearing liabilities, (3) average yields earned on interest-earning assets and average rates paid on interest-bearing liabilities, (4) our net interest spread (i.e., the average yield on interest-earning assets less the average rate on interest-bearing liabilities) and (5) our net interest margin (i.e., the net yield on interest earning assets):
AVERAGE BALANCES AND INTEREST RATES
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(Dollars in thousands) |
|
Three Months Ended |
|
||||||||||||||
|
|
|
|
||||||||||||||
|
|
June 30, 2010 |
|
June 30, 2009 |
|
||||||||||||
|
|
|
|
|
|
||||||||||||
|
|
Average |
|
Interest |
|
Rate |
|
Average |
|
Interest |
|
Rate |
|
||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Assets |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loans, net(1)(2) |
|
$ |
342,710 |
|
$ |
4,555 |
|
5.33 |
% |
$ |
315,158 |
|
$ |
4,128 |
|
5.31 |
% |
Investment securities |
|
|
79,344 |
|
|
591 |
|
2.98 |
% |
|
72,995 |
|
|
526 |
|
2.92 |
% |
Federal funds sold |
|
|
22,138 |
|
|
10 |
|
0.18 |
% |
|
10,000 |
|
|
4 |
|
0.13 |
% |
Deposits at interest with banks |
|
|
100 |
|
|
|
|
|
% |
|
519 |
|
|
2 |
|
2.03 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total earning assets |
|
|
444,292 |
|
|
5,156 |
|
4.65 |
% |
|
398,672 |
|
|
4,660 |
|
4.74 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other assets |
|
|
35,072 |
|
|
|
|
|
|
|
42,289 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total assets |
|
$ |
479,364 |
|
|
|
|
|
|
$ |
440,961 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Liabilities |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Savings, NOW and money market |
|
$ |
171,474 |
|
$ |
509 |
|
1.19 |
% |
$ |
193,190 |
|
$ |
776 |
|
1.63 |
% |
Certificates of deposit |
|
|
175,566 |
|
|
982 |
|
2.25 |
% |
|
117,869 |
|
|
791 |
|
2.71 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total interest bearing deposits |
|
|
347,040 |
|
|
1,491 |
|
1.72 |
% |
|
311,059 |
|
|
1,567 |
|
2.04 |
% |
Short term borrowings |
|
|
6,751 |
|
|
50 |
|
2.97 |
% |
|
7,088 |
|
|
55 |
|
3.14 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total interest bearing liabilities |
|
|
353,791 |
|
|
1,541 |
|
1.75 |
% |
|
318,148 |
|
|
1,622 |
|
2.07 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Noninterest bearing deposits |
|
|
72,546 |
|
|
|
|
|
|
|
59,257 |
|
|
|
|
|
|
Other liabilities |
|
|
1,975 |
|
|
|
|
|
|
|
3,677 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total liabilities |
|
|
428,312 |
|
|
|
|
|
|
|
381,081 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total shareholders equity |
|
|
51,052 |
|
|
|
|
|
|
|
59,879 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total liabilities and equity |
|
$ |
479,364 |
|
|
|
|
|
|
$ |
440,961 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest rate spread |
|
|
|
|
|
|
|
2.90 |
% |
|
|
|
|
|
|
2.67 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net interest income |
|
|
|
|
$ |
3,615 |
|
|
|
|
|
|
$ |
3,038 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net interest margin |
|
|
|
|
|
|
|
3.26 |
% |
|
|
|
|
|
|
3.09 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) |
Average balances include non-accrual loans, and are net of unearned loan fees of $247 and $253 at June 30, 2010 and 2009, respectively. |
|
|
(2) |
Interest income includes fees on loans of $64 and $46 for the three months ended June 30, 2010 and 2009, respectively. |
Net interest income increased $577 thousand, 20.0%, from $3.0 million in 2009 to $3.6 million in 2010. Of the $577 thousand growth in net interest income, $410 thousand was due to the growth in loans and investments. Funding the growth in loans and investments were time deposits which increased interest expense of $388 thousand; however, deposit rates were reduced 39 basis points from the comparable period resulting in an interest expense reduction of $378 thousand.
25
Now that the Federal Reserve has effectively established a zero interest rate policy, going forward we would expect there to be less impact on net interest earnings due to interest rate reductions. In managing the net interest margin, the Banks have been emphasizing originating loans with interest rate floors of approximately 6%. Further, the Banks are aggressively reducing their costs of funds and striving to lengthen deposit maturities at these lower rates. With these initiatives, it is anticipated that net interest earnings will improve in the short term. If interest rates begin to rise, the impact on net interest income will depend on the Banks ability to hold down deposit rates until market rates increase to the point when variable rate loans with interest rate floors start re-pricing.
The following table sets forth certain information regarding changes in our interest income and interest expense for the quarter ended June 30, 2010 compared to the quarter ended June 30, 2009. For each category of interest earning assets and interest-bearing liabilities, information is provided on changes attributable to changes in interest rate and changes in the volume. Changes in both volume and rate have been allocated based on the proportionate absolute changes in each category.
RATE VOLUME ANALYSIS
|
|
|
|
|
|
|
|
|
|
|
(Dollars in thousands) |
|
Three
months ended |
|
|||||||
|
|
|
|
|||||||
|
|
|
|
Due to average |
|
|||||
|
|
Total |
|
|
|
|||||
|
|
Change |
|
Volume |
|
Rate |
|
|||
|
|
|
|
|
|
|
|
|||
Interest earning assets |
|
|
|
|
|
|
|
|
|
|
Loans, net |
|
$ |
427 |
|
$ |
362 |
|
$ |
65 |
|
Investment securities |
|
|
65 |
|
|
46 |
|
|
19 |
|
Federal funds sold |
|
|
6 |
|
|
3 |
|
|
3 |
|
Other |
|
|
(2 |
) |
|
(1 |
) |
|
(1 |
) |
|
|
|
|
|
|
|
|
|
|
|
Total |
|
$ |
496 |
|
$ |
410 |
|
$ |
86 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest bearing liabilities |
|
|
|
|
|
|
|
|
|
|
Savings, NOW, money market |
|
$ |
(267 |
) |
$ |
(87 |
) |
$ |
(180 |
) |
Certificates of deposit |
|
|
191 |
|
|
388 |
|
|
(197 |
) |
Short term borrowings |
|
|
(5 |
) |
|
(4 |
) |
|
(1 |
) |
|
|
|
|
|
|
|
|
|
|
|
Total |
|
$ |
(81 |
) |
$ |
297 |
|
$ |
(378 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Changes in net interest income |
|
$ |
577 |
|
$ |
113 |
|
$ |
464 |
|
|
|
|
|
|
|
|
|
|
|
|
Provision for Loan Losses
The allowance for loan losses is established through a provision for loan losses charged against operations. Loans are charged against the allowance for loan losses when management believes that the collectability of the principal is unlikely. The allowance is an amount that management believes is adequate to absorb possible losses on existing loans that may become uncollectable, based on evaluations of the collectability of loans, industry historical loss experience, current economic conditions, portfolio mix, and other factors. While management uses the best information available to make its evaluation, future adjustments to the allowance may be necessary if there are significant changes in economic conditions.
Impaired loans are measured based on the present value of expected future cash flows discounted at the loans effective interest rate or, as a practical expedient, at the loans observable market price or the fair value of the collateral if the loan is collateral dependent. A loan is impaired when it is probable the creditor will be unable to collect all contractual principal and interest payments due in accordance with the terms of the loan agreement. Cash collections on impaired loans are credited to the loan receivable balance and no interest income is recognized on those loans until the principal balance is current.
The loan loss provision was $3.6 million for the three months ended June 30, 2010 compared to $423 thousand for the same period in 2009 representing an allowance of 2.37% of total loans at June 30, 2010. The increase in the loan loss provision was primarily due to impairment on three commercial real estate loans totaling $14.0 million which were deemed impaired in the three months ended June 30, 2010.
26
Non interest Income
Following is a schedule of non interest income:
|
|
|
|
|
|
|
|
|
|
Three months ended June 30, |
|
||||
|
|
|
|
||||
(Dollars in thousands) |
|
2010 |
|
2009 |
|
||
|
|
|
|
|
|
||
|
|||||||
Service charges on deposit accounts |
|
$ |
103 |
|
$ |
92 |
|
Cash surrender value life insurance |
|
|
92 |
|
|
65 |
|
Loan fee income |
|
|
5 |
|
|
15 |
|
Other |
|
|
72 |
|
|
68 |
|
Gain on sale of securities |
|
|
10 |
|
|
|
|
|
|
|
|
|
|
|
|
Totals |
|
$ |
282 |
|
$ |
240 |
|
|
|
|
|
|
|
|
|
Non interest income excluding the gain on sale of securities increased $32 thousand or 13.3% due to growth in deposit fees and the cash surrender value of Bank owned life insurance. The growth in deposit fees reflects the organic growth in deposits. It is expected that as our loans and deposits increase in the future, these fees will show a proportionate increase. The addition of Bank owned life insurance in mid year 2009 produced $92 thousand of cash surrender value for the three months ended June 30, 2010 up from $65 thousand in the same period 2009.
Non interest Expense
Following is a schedule of non interest expenses:
|
|
|
|
|
|
|
|
|
|
For the three months ended June 30, |
|
||||
|
|
|
|
||||
(Dollars in thousands) |
|
2010 |
|
2009 |
|
||
|
|
|
|
|
|
||
|
|||||||
Salaries and employee benefits |
|
$ |
1,761 |
|
$ |
1,736 |
|
Occupancy and equipment expense |
|
|
828 |
|
|
709 |
|
FDIC insurance |
|
|
212 |
|
|
376 |
|
Data processing |
|
|
259 |
|
|
212 |
|
Other real estate expense |
|
|
78 |
|
|
19 |
|
Professional fees |
|
|
249 |
|
|
90 |
|
Credit and collection expenses |
|
|
66 |
|
|
103 |
|
Telephone and communications |
|
|
58 |
|
|
42 |
|
Core deposit intangible amortization |
|
|
48 |
|
|
48 |
|
Operating loss (recovery) |
|
|
(70 |
) |
|
570 |
|
Other |
|
|
136 |
|
|
300 |
|
|
|
|
|
|
|
|
|
Totals |
|
$ |
3,625 |
|
$ |
4,205 |
|
|
|
|
|
|
|
|
|
Total noninterest expense of $3.6 million during the three months ended June 30, 2010 decreased $580 thousand or 13.8% from the same period in 2009. In the second quarter of 2009, $570 thousand was accrued for a probable loss associated with a customer fraud. In 2010, a settlement was reached related to the fraud and $380 thousand was recovered in the first quarter of 2010 and $70 thousand was recovered in the second quarter of 2010. It is anticipated the remaining $120 thousand will be recovered during the second half of 2010. FDIC insurance premiums declined $164 thousand primarily representing a special one-time insurance assessment of $194 thousand in 2009. Professional fees increased $159 thousand related to compliance costs.
It is anticipated that operating expenses will show modest increases in future periods generally associated with increased loan and deposit volumes.
27
Income Taxes
We file consolidated tax returns. Having incurred operating losses since our inception in 2006, we have accumulated a net tax benefit over the past four years. We have recorded a valuation allowance to partially offset the deferred tax assets associated with the net operating loss carry forwards generated by our net losses. Management will continue to monitor the deferred tax assets, and will determine whether we will require an additional valuation allowance, or if we experience net income, whether we will need to reverse any remaining valuation allowance. We did not recognize an income tax benefit for the quarters ended June 30, 2010 and 2009.
Six Months Ended June 30, 2010 Compared to the Six months Ended June 30, 2009
|
|
|
|
|
|
|
|
CONDENSED SUMMARY OF EARNINGS |
|||||||
|
|||||||
|
|
For the six months ended June 30, |
|
||||
|
|
|
|
||||
(Dollars in thousands, except per share data) |
|
2010 |
|
2009 |
|
||
|
|
|
|
|
|
||
Interest income |
|
$ |
10,304 |
|
$ |
9,104 |
|
Interest expense |
|
|
3,175 |
|
|
3,370 |
|
|
|
|
|
|
|
|
|
Net interest income |
|
|
7,129 |
|
|
5,734 |
|
Provision for loan losses |
|
|
3,823 |
|
|
738 |
|
Noninterest income |
|
|
575 |
|
|
636 |
|
Noninterest expense |
|
|
6,954 |
|
|
7,690 |
|
|
|
|
|
|
|
|
|
Income before income taxes |
|
|
(3,073 |
) |
|
(2,058 |
) |
Income tax benefit |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss |
|
$ |
(3,073 |
) |
$ |
(2,058 |
) |
|
|
|
|
|
|
|
|
Basic net loss per share |
|
$ |
(0.50 |
) |
$ |
(0.33 |
) |
|
|
|
|
|
|
|
|
Diluted net loss per share |
|
$ |
(0.50 |
) |
$ |
(0.33 |
) |
|
|
|
|
|
|
|
|
Selected operating ratios |
|
|
|
|
|
|
|
Return on average assets |
|
|
(1.29 |
)% |
|
(.94 |
)% |
Return on average equity |
|
|
(12.14 |
)% |
|
(6.87 |
)% |
Dividend payout ratio |
|
|
N/A |
|
|
N/A |
|
Equity to assets ratio |
|
|
9.88 |
% |
|
10.81 |
% |
The net loss for the six months ended June 30, 2010 was $3.1 million compared to a loss of $2.1 million for the same period in 2009.
Our profitability is dependent to a large extent on net interest income which is the difference between the interest received on earning assets such as loans and securities and the interest paid on interest bearing liabilities principally deposits and borrowings. Our principal interest earning assets are loans, investment securities, and federal funds sold. Interest-bearing liabilities primarily consist of certificates of deposit, NOW accounts, savings deposits, and money market accounts. Funds attracted by these interest-bearing liabilities are invested in interest-earning assets. Accordingly, net interest income depends upon the volume of average interest-earning assets and average interest-bearing liabilities and the interest rates earned or paid on them.
The significance of net interest income is largely enhanced as our size grows and the impact of market rates of interest as influenced by the Federal Reserves monetary policy.
28
Net Interest Income
The following table reflects the components of net interest income, setting forth for the six month periods ended June 30, 2010 and 2009 presented, (1) average assets, liabilities and shareholders equity, (2) interest income earned on interest-earning assets and interest paid on interest-bearing liabilities, (3) average yields earned on interest-earning assets and average rates paid on interest-bearing liabilities, (4) our net interest spread (i.e., the average yield on interest-earning assets less the average rate on interest-bearing liabilities) and (5) our net interest margin (i.e., the net yield on interest earning assets):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
AVERAGE BALANCES AND INTEREST RATES |
|||||||||||||||||||
|
|||||||||||||||||||
(Dollars in thousands) |
|
Six months ended June 30, |
|
||||||||||||||||
|
|
|
|
||||||||||||||||
|
|
2010 |
|
2009 |
|
||||||||||||||
|
|
|
|
|
|
||||||||||||||
|
|
Average |
|
Interest |
|
Rate |
|
Average |
|
Interest |
|
Rate |
|
||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Assets |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loans, net(1)(2) |
|
$ |
338,833 |
|
$ |
9,019 |
|
|
5.37 |
% |
$ |
307,311 |
|
$ |
7,996 |
|
|
5.25 |
% |
Investment securities |
|
|
85,329 |
|
|
1,268 |
|
|
2.97 |
|
|
67,147 |
|
|
1,043 |
|
|
3.13 |
|
Federal funds sold |
|
|
17,368 |
|
|
17 |
|
|
0.20 |
|
|
16,799 |
|
|
15 |
|
|
0.17 |
|
Deposits at interest with banks |
|
|
100 |
|
|
|
|
|
|
|
|
2,825 |
|
|
50 |
|
|
3.63 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total earning assets |
|
|
441,630 |
|
|
10,304 |
|
|
4.71 |
% |
|
394,082 |
|
|
9,104 |
|
|
4.66 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other assets |
|
|
36,964 |
|
|
|
|
|
|
|
|
43,310 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total assets |
|
$ |
478,594 |
|
|
|
|
|
|
|
$ |
437,392 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Liabilities |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Savings, NOW and money market |
|
$ |
173,524 |
|
$ |
1,105 |
|
|
1.28 |
% |
$ |
188,126 |
|
$ |
1,566 |
|
|
1.68 |
% |
Time deposits |
|
|
174,495 |
|
|
1,967 |
|
|
2.27 |
|
|
120,947 |
|
|
1,692 |
|
|
2.82 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total interest bearing deposits |
|
|
348,019 |
|
|
3,072 |
|
|
1.78 |
|
|
309,073 |
|
|
3,258 |
|
|
2.13 |
|
Short term borrowings |
|
|
7,040 |
|
|
103 |
|
|
2.95 |
|
|
6,772 |
|
|
112 |
|
|
3.33 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total interest bearing liabilities |
|
|
355,059 |
|
|
3,175 |
|
|
1.80 |
% |
|
315,845 |
|
|
3,370 |
|
|
2.15 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Noninterest bearing deposits |
|
|
70,563 |
|
|
|
|
|
|
|
|
58,631 |
|
|
|
|
|
|
|
Other liabilities |
|
|
1,934 |
|
|
|
|
|
|
|
|
2,579 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total liabilities |
|
|
427,556 |
|
|
|
|
|
|
|
|
377,234 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total shareholders equity |
|
|
51,038 |
|
|
|
|
|
|
|
|
60,158 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total liabilities and equity |
|
$ |
478,594 |
|
|
|
|
|
|
|
$ |
437,392 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest rate spread |
|
|
|
|
|
|
|
|
2.91 |
% |
|
|
|
|
|
|
|
2.51 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net interest income |
|
|
|
|
$ |
7,129 |
|
|
|
|
|
|
|
$ |
5,734 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net interest margin |
|
|
|
|
|
|
|
|
3.26 |
% |
|
|
|
|
|
|
|
2.93 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) |
Average balances include non-accrual loans and are net of unearned loan fees of $253 and $236 at June 30, 2010 and 2009, respectively. |
|
|
(2) |
Interest income includes fees on loans of $116 and $42 in the six months ended June 30, 2010 and 2009, respectively. |
29
Net interest income increased $1.4 million or 24.5% from $5.7 million in 2009 to $7.1 million in 2010 principally due to organic growth in loans and deposits over the 12 month period and lower rates on deposits. During 2010 and 2009, the Banks have emphasized originating loans with interest rate floors of approximately six percent. Further, the Banks are aggressively reducing their costs of funds and striving to lengthen deposit maturities at these lower rates. With these initiatives, it is anticipated that net interest earnings will improve in the short term. If interest rates begin to rise, the impact on net interest income will depend on the Banks ability to hold down deposit rates until market rates increase to the point loans with interest rates floor start re-pricing.
The following table sets forth certain information regarding changes in our interest income and interest expense for the quarter ended June 30, 2010 compared to the quarter ended June 30, 2009. For each category of interest earning assets and interest-bearing liabilities, information is provided on changes attributable to changes in interest rate and changes in the volume. Changes in both volume and rate have been allocated based on the proportionate absolute changes in each category.
RATE VOLUME ANALYSIS
|
|
|
|
|
|
|
|
|
|
|
|
(Dollars in thousands) |
|
|
Six months
ended |
|
|||||||
|
|
|
|
|
|||||||
|
|
Total |
|
Due To Average |
|
||||||
|
|
|
|
|
|||||||
|
|
|
Volume |
|
Rate |
|
|||||
|
|
|
|
|
|
|
|
||||
Interest earning assets |
|
|
|
|
|
|
|
|
|
|
|
Loans, net |
|
$ |
1,023 |
|
$ |
819 |
|
$ |
204 |
|
|
Investment securities |
|
|
225 |
|
|
281 |
|
|
(56 |
) |
|
Federal funds sold |
|
|
2 |
|
|
1 |
|
|
1 |
|
|
Other |
|
|
(50 |
) |
|
(48 |
) |
|
(2 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Total |
|
$ |
1,200 |
|
$ |
1,053 |
|
$ |
147 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest bearing liabilities |
|
|
|
|
|
|
|
|
|
|
|
Savings, NOW, money market |
|
$ |
(461 |
) |
$ |
(122 |
) |
$ |
(339 |
) |
|
Time deposits |
|
|
275 |
|
|
748 |
|
|
(473 |
) |
|
Short term borrowings |
|
|
(9 |
) |
|
5 |
|
|
(14 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Total |
|
$ |
(195 |
) |
$ |
631 |
|
$ |
(826 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Changes in net interest income |
|
$ |
1,395 |
|
$ |
422 |
|
$ |
973 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Provision for Loan Losses
The allowance for loan losses is established through a provision for loan losses charged against net interest income. Loans are charged against the allowance for loan losses when management believes that the collectability of the principal is unlikely. The allowance is an amount that management believes is adequate to absorb possible losses on existing loans that may become uncollectable, based on evaluations of the collectability of loans, industry historical loss experience, current economic conditions, portfolio mix, and other factors. While management uses the best information available to make its evaluation, future adjustments to the allowance may be necessary if there are significant changes in economic conditions.
Impaired loans are measured based on the present value of expected future cash flows discounted at the loans effective interest rate or, as a practical expedient, at the loans observable market price or the fair value of the collateral if the loan is collateral dependent. A loan is impaired when it is probable the creditor will be unable to collect all contractual principal and interest payments due in accordance with the terms of the loan agreement.
The loan loss provision was $3.8 million for the six months ended June 30, 2010 compared to $738 thousand for the same period in 2009 representing an allowance of 2.37% of total loans at June 30, 2010. The increase in the loan loss provision was primarily due to impairment on three commercial real estate loans totaling $14.0 million which were deemed impaired in the six months ended June 30, 2010.
30
Non Interest Income
Following is a schedule of non interest income:
|
|
|
|
|
|
|
|
|
|
|
|
Six months ended June 30, |
|
||||
|
|
|
|
|
||||
(Dollars in thousands) |
|
|
2010 |
|
2009 |
|
||
|
|
|
|
|
|
|
||
|
|
|
|
|
|
|
|
|
Service charges on deposit accounts |
|
$ |
220 |
|
$ |
177 |
|
|
Cash surrender value life insurance |
|
|
204 |
|
|
182 |
|
|
Loan fee income |
|
|
22 |
|
|
21 |
|
|
Other |
|
|
116 |
|
|
71 |
|
|
Gain on sale of securities |
|
|
13 |
|
|
185 |
|
|
|
|
|
|
|
|
|
|
|
Totals |
|
$ |
575 |
|
$ |
636 |
|
|
|
|
|
|
|
|
|
|
Non interest income, excluding gains on sales of securities, increased $111 thousand from 2009. Deposit fees increased $43 thousand reflecting growth in deposit accounts. Non interest income includes Bank owned life insurance which increased to $204 thousand for the six months ended June 30, 2010 from $182 thousand in the same period in 2009.
Non Interest Expense
Following is a schedule of non interest expense:
|
|
|
|
|
|
|
|
|
|
|
|
Six months ended June 30, |
|
||||
|
|
|
|
|
||||
(Dollars in thousands) |
|
|
2010 |
|
2009 |
|
||
|
|
|
|
|
|
|
||
|
|
|
|
|
|
|
|
|
Salaries and employee benefits |
|
$ |
3,490 |
|
$ |
3,593 |
|
|
Occupancy and equipment expense |
|
|
1,631 |
|
|
1,438 |
|
|
FDIC insurance |
|
|
427 |
|
|
507 |
|
|
Data processing |
|
|
472 |
|
|
409 |
|
|
Other real estate expense |
|
|
243 |
|
|
38 |
|
|
Professional fees |
|
|
347 |
|
|
178 |
|
|
Credit and collection expenses |
|
|
141 |
|
|
165 |
|
|
Telephone and communications |
|
|
113 |
|
|
105 |
|
|
Core deposit intangible amortization |
|
|
96 |
|
|
96 |
|
|
Operating loss (recovery) |
|
|
(450 |
) |
|
570 |
|
|
Other |
|
|
444 |
|
|
591 |
|
|
|
|
|
|
|
|
|
|
|
Totals |
|
$ |
6,954 |
|
$ |
7,690 |
|
|
|
|
|
|
|
|
|
|
Total non interest expense of $7.0 million during the six months ended June 30, 2010 decreased $736 thousand or 9.6% from the same period in 2009. In 2009, $570 thousand was accrued for a probable loss associated with a customer fraud. In 2010, a settlement was reached and $450 thousand was recovered in the first half of 2010. It is anticipated the remaining $120 thousand will be recovered during the remainder of 2010. For the six months ended June 30, 2010, personnel costs decreased $103 thousand due to reductions in our workforce in 2009. Occupancy expenses increased $193 thousand primarily due to a new branch opened in the fourth quarter of 2009. Other real estate expenses increased $205 thousand primarily due to write downs of properties to fair value. Professional fees increased $169 thousand related to compliance costs.
31
Income Taxes
We file consolidated tax returns. Having incurred annual operating losses since our inception in 2006, we have accumulated a net tax benefit over the past four years. We have recorded a valuation allowance to partially offset the deferred tax assets associated with the net operating loss carry forwards generated by our net losses. Management will continue to monitor the deferred tax assets, and will determine whether we will require an additional valuation allowance, or if we experience net income, whether we will need to reverse any remaining valuation allowance. We did not recognize an income tax benefit for the six months ended June 30, 2010 and 2009.
Market Risk
Market risk refers to potential losses arising from changes in interest rates, foreign exchange rates, equity prices and commodity prices. We are primarily exposed to interest rate risk inherent in our lending and deposit taking activities as a financial intermediary. To succeed in our capacity as a financial intermediary, we offer an extensive variety of financial products to meet the diverse needs of our customers. These products sometimes contribute to interest rate risk for us when product groups do not complement one another. For example, depositors may want short-term deposits while borrowers desire long-term loans. Changes in market interest rates may also result in changes in the fair value of our financial instruments, cash flows, and net interest income.
Interest rate risk is comprised of re-pricing risk, basis risk, yield curve risk, and options risk. Repricing risk arises from differences in the cash flow or repricing between asset and liability portfolios. Basis risk arises when asset and liability portfolios are related to different market rate indexes, which do not always change by the same amount. Yield curve risk arises when asset and liability portfolios are related to different maturities on a given yield curve; when the yield curve changes shape, the risk position is altered. Options risk arises from embedded options within asset and liability products as certain borrowers have the option to prepay their loans when rates fall while certain depositors can redeem their certificates of deposit early when rates rise.
We have established an Asset/Liability Committee (ALCO) for each Bank, which are responsible for each Banks interest rate risk management. We have implemented a sophisticated asset/liability model at both Banks to measure its interest rate risk. Interest rate risk measures used by us include earnings simulation, economic value of equity (EVE) and gap analysis. We do not use derivative financial instruments for market risk management purposes.
Gap analysis of EVE is a static measure that does not incorporate assumptions regarding future business. Gap analysis, while a helpful diagnostic tool, displays cash flows for only a single rate environment. EVEs long-term horizon helps identify changes in optionality and longer-term positions. However, EVEs liquidation perspective does not translate into the earnings-based measures that are the focus of managing and valuing a going concern. Net interest income simulations explicitly measure the exposure to earnings from changes in market rates of interest. Our current financial position is combined with assumptions regarding future business to calculate net interest income under various hypothetical rate scenarios. Each Banks ALCO reviews earnings simulations over the ensuing 12 months under various interest rate scenarios. Reviewing these various measures provides us with a reasonably comprehensive view of our interest rate risk profile.
The following gap analysis compares the difference between the amount of interest earning assets (IEA) and interest bearing liabilities (IBL) subject to repricing over a period of time. A ratio of more than one indicates a higher level of repricing assets over repricing liabilities for the time period. Conversely, a ratio of less than one indicates a higher level of repricing liabilities over repricing assets for the time period. It is the Banks policy to maintain a cumulative one year gap of +/- 10% and a ratio of IEA/IBL of 0.80 to 1.20. At June 30, 2010, we were within our policy limits.
32
GAP ANALYSIS
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(Dollars in thousands) |
|
|
Within |
|
4 To 6 |
|
7 To 12 |
|
Total |
|
||||
|
|
|
|
|
|
|
|
|
|
|
||||
|
||||||||||||||
Interest earning assets (IEA) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loans |
|
$ |
197,113 |
|
$ |
8,818 |
|
$ |
13,054 |
|
$ |
218,985 |
|
|
Investment securities |
|
|
44,428 |
|
|
18,284 |
|
|
4,034 |
|
|
66,746 |
|
|
Federal funds sold |
|
|
41,479 |
|
|
|
|
|
|
|
|
41,479 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total |
|
$ |
283,020 |
|
$ |
27,102 |
|
$ |
17,088 |
|
$ |
327,210 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest bearing liabilities (IBL) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Savings, NOW, money market |
|
$ |
170,674 |
|
$ |
|
|
$ |
|
|
$ |
170,674 |
|
|
Time deposits |
|
|
47,716 |
|
|
13,061 |
|
|
42,847 |
|
|
103,624 |
|
|
Short term borrowings |
|
|
6,766 |
|
|
|
|
|
|
|
|
6,766 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total |
|
$ |
225,156 |
|
$ |
13,061 |
|
$ |
42,847 |
|
$ |
281,064 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Period Gap |
|
|
57,864 |
|
|
14,041 |
|
|
(25,759 |
) |
$ |
46,146 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cumulative Gap |
|
$ |
57,864 |
|
$ |
71,905 |
|
$ |
46,146 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cumulative Gap / Total Assets |
|
|
11.9 |
% |
|
14.7 |
% |
|
9.5 |
% |
|
|
|
|
IEA / IBL (Cumulative) |
|
|
126 |
% |
|
130 |
% |
|
116 |
% |
|
|
|
Financial Condition
Lending Activity
The loan portfolio consists principally of loans to individuals and small- and medium-sized businesses within our primary market area of Central Florida. The table below shows our loan portfolio composition:
LOAN PORTFOLIO COMPOSITION
|
|
|
|
|
|
|
|
|
(Dollars in Thousands) |
|
|
June 30, 2010 |
|
December 31, 2009 |
|
||
|
|
|
|
|
|
|
||
Commercial |
|
$ |
46,060 |
|
$ |
48,565 |
|
|
Commercial real estate |
|
|
255,320 |
|
|
253,177 |
|
|
Residential mortgage |
|
|
14,478 |
|
|
14,368 |
|
|
Consumer loans |
|
|
19,409 |
|
|
20,893 |
|
|
|
|
|
|
|
|
|
|
|
Total loans |
|
|
335,267 |
|
|
337,003 |
|
|
Allowance for loan losses |
|
|
(7,944 |
) |
|
(9,038 |
) |
|
Net deferred fees |
|
|
(232 |
) |
|
(279 |
) |
|
|
|
|
|
|
|
|
|
|
Loans, Net |
|
$ |
327,091 |
|
$ |
327,686 |
|
|
|
|
|
|
|
|
|
|
Total loans decreased by $1.7 million during the first six months of 2010 reflecting $3.5 million of new loan originations net of loans paid down and loans paid off, $363 thousand transferred to other real estate owned and $5.0 million of charge-offs.
33
Non-Performing Assets
Non-performing assets include non-accrual loans, non-performing restructured loans, other real estate owned and repossessed property. Non-accrual loans represent loans on which interest accruals have been discontinued. Restructured loans are loans in which the borrower has been granted a concession on the interest rate or the original repayment terms due to financial distress. Other real estate owned is comprised principally of real estate properties obtained in partial or total loan satisfactions and is included in other assets at its estimated fair value less selling costs.
We discontinue interest accruals when principal or interest is due and has remained unpaid for 90 to 180 days depending on the loan type, unless the loan is both well secured and in the process of collection. When a loan is placed on non-accrual status, all accrued and unpaid interest and fees are reversed. Non-accrual loans may not be restored to accrual status until all delinquent principal and interest have been paid.
Non-performing loans are closely monitored on an ongoing basis as part of our loan review and work-out process. The potential risk of loss on these loans is evaluated by comparing the loan balance to the fair value of any underlying collateral or the present value of projected future cash flows. Losses are recognized where appropriate.
Non-performing assets increased approximately $7.1 million as of June 30, 2010 compared to December 31, 2009 due to a net increase of $7.8 million in non-performing restructured loans. In some instances, we restructure loans for borrowers experiencing lower cash flows due to the struggling economy. The increase in non-performing restructured loans during the first half of 2010 was primarily due to one $6.5 million commercial real estate loan.
NON-PERFORMING ASSETS
|
|
|
|
|
|
|
|
|
(Dollars in Thousands) |
|
|
June 30, 2010 |
|
December 31, 2009 |
|
||
|
|
|
|
|
|
|
||
|
|
|
|
|
|
|
|
|
Non-accrual loans |
|
$ |
3,080 |
|
$ |
3,105 |
|
|
Non-performing restructured loans |
|
|
14,293 |
|
|
6,476 |
|
|
|
|
|
|
|
|
|
|
|
Total non-performing loans |
|
|
17,373 |
|
|
9,581 |
|
|
Other real estate owned |
|
|
2,215 |
|
|
3,023 |
|
|
Repossessed property |
|
|
90 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total non-performing assets |
|
$ |
19,678 |
|
$ |
12,604 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-performing loans as a percentage of total loans |
|
|
5.2 |
% |
|
2.8 |
% |
|
Non-performing assets as a percentage of total assets |
|
|
4.0 |
% |
|
2.7 |
% |
|
|
|
|
|
|
|
|
|
|
Past Due 90 or more days and still accruing |
|
|
|
|
|
|
|
In the six months ended June 30, 2010, interest income not recognized on non-accrual loans (but would have been recognized if the loans were current) was approximately $54 thousand.
Allowance and Provision for Loan Losses
The allowance for loan losses represents managements estimate of probable loan losses inherent in the loan portfolio at a specific point in time. This estimate includes losses associated with specifically identified loans as well as estimated probable credit losses inherent in the remainder of the loan portfolio. Additions are made to the allowance through periodic provisions charged to income. Reductions to the allowance occur as loans are charged off.
During the first six months of 2010, we had net charge-offs of approximately $4.9 million representing 2.93% of year to date average loans. Further, as disclosed in Note 3 of the Consolidated Financial Statements, management added approximately $3.8 million to the allowance for loan losses through the loan loss provision, bringing the total allowance to a level of approximately $7.9 million or 2.37% of total loans outstanding at June 30, 2010. Management evaluates the adequacy of the allowance at least quarterly, and in doing so relies on various factors
34
including, but not limited to, assessment of potential loss, delinquency and non-accrual trends, portfolio growth, underlying collateral coverage and current economic conditions. This evaluation is subjective and requires material estimates that may change over time.
There are no residential mortgage loan concentrations in the loan portfolio. The majority of the charge-offs and impaired loans experienced in the first six months of 2010 were in the commercial real estate loan portfolio which represents 76.2% of gross loans. These types of loans are all within our general market areas and are made on terms typically at 80% loan to value. These real estate collateral dependent loans generally require an updated appraisal at least annually using a Board of Directors approved appraisal firm. In the event of a collateral shortfall following an appraisal update, the borrower is contacted to provide additional collateral or reduce the outstanding loan balance. Subsequent to these actions, if there is concern that the loan may not be collectable as originally documented, an evaluation is performed utilizing the guidance documented in the FASBs guidance for Accounting by Creditors for Impairment of a Loan and reserves are provided to offset any shortfalls in collectability. At June 30, 2010, there were two loans 30 to 89 days past due in the commercial real estate portfolio.
The following is a summary of information pertaining to impaired loans:
|
|
|
|
|
|
|
|
|
|
June 30, 2010 |
|
December 31, 2009 |
|
||
|
|
|
|
|
|
||
|
|
|
|
|
|
||
Impaired loans without a valuation allowance |
|
$ |
26,453 |
|
$ |
13,959 |
|
Impaired loans with a valuation allowance |
|
|
14,886 |
|
|
12,769 |
|
|
|
|
|
|
|
|
|
Total impaired loans |
|
$ |
41,339 |
|
$ |
26,728 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Valuation allowance related to impaired loans |
|
$ |
2,359 |
|
$ |
3,206 |
|
|
|
|
|
|
|
|
|
Investment Activity
Investment activities serve to enhance the overall yield on interest earning assets while supporting interest rate sensitivity and liquidity positions. Securities purchased with the intent and ability to retain until maturity are categorized as securities held to maturity and carried at amortized cost. All other securities are categorized as securities available for sale and are recorded at fair value. Securities, like loans, are subject to similar interest rate and credit risk. In addition, by their nature, securities classified as available for sale are also subject to market value risks that could negatively affect the level of liquidity available to us, as well as shareholders equity. A change in the value of securities held to maturity could also negatively affect the level of shareholders equity if there was a decline in the underlying creditworthiness of the issuers and an other-than-temporary impairment is deemed or a change in our intent and ability to hold the securities to maturity.
As of June 30, 2010, securities totaling $65.8 million and $10.2 million were classified as available for sale and held to maturity, respectively. During the six months ended June 30, 2010, securities available for sale decreased by $16.0 million as we used proceeds from called securities to increase cash balances in anticipation of new loan originations and to re-balance our deposit mix by reducing time deposit scheduled to mature in the third quarter of 2010. Securities held to maturity decreased $2.1 million from December 31, 2009 due to one security being called.
Deposits and Short-Term Borrowings
As a bank holding company, our primary source of funds is deposits. Those deposits are provided by businesses, municipalities, and individuals located within the markets served by our subsidiaries. In addition, we accept a limited amount of brokered deposits.
Total deposits increased $24.4 million to $431.1 million at June 30, 2010, compared to December 31, 2009. Non-interest bearing demand deposits increased $15.9 million due to $5.9 million in organic growth and higher balances held by small businesses. In addition, a municipality temporarily deposited $10.0 million in the second quarter which was subsequently withdrawn in the third quarter. Time deposits increased $12.1 million as depositors sought safety and the yield of time deposits.
Short-term borrowings, made up of federal funds purchased, and other short-term borrowings, decreased by $1.0 million at June 30, 2010 compared to a balance of $7.8 million at December 31, 2009. This decrease is the
35
result of a reduction in short term funding needs due to growth in deposit funding sources. As of June 30, 2010, total short-term borrowings were approximately14.0% of our total shareholders equity.
Liquidity
Our goal in liquidity management is to satisfy the cash flow requirements of depositors and borrowers as well as our operating cash needs with cost-effective funding. Our Board of Directors has established an Asset/Liability Policy in order to achieve and maintain earnings performance consistent with long-term goals while maintaining acceptable levels of interest rate risk, a well-capitalized balance sheet, and adequate levels of liquidity. This policy designates each Banks ALCO as the body responsible for meeting these objectives. Each ALCO, which includes members of executive management, reviews liquidity on a periodic basis and approves significant changes in strategies that affect balance sheet or cash flow positions.
The primary source of liquidity is deposits provided by commercial and retail customers. The Banks attract these deposits by offering an array of products designed to match customer needs and priced in the middle of our competitors. Deposits can be very price sensitive; therefore, we believe that fluctuating deposit offering rates to the top of the market would generate a larger inflow of funds. In addition to local market deposits, the Banks have access to national brokered certificates of deposit markets as well as deposit subscription services. The Banks use these alternative sources of deposits to supplement deposits particularly when the rates are lower than the local market. These sources of deposit are limited by our policies to 25% of assets. Overall deposit levels are monitored on a constant basis as are liquidity policy levels, which must be maintained at a minimum of 14% of total deposits. Sources of these liquidity levels include cash and due from banks, short-term investments such as federal funds sold, and our investment portfolio, which can also be used as collateral for short-term borrowings. Alternative sources of funds include unsecured federal funds lines of credit through correspondent banks. The Banks have established contingency plans in the event of extraordinary fluctuations in cash resources.
Operating Activities
Cash flows from operating activities primarily include net income (loss), adjusted for items that did not impact cash. Net cash provided by operating activities was $1.7 million for the six months ended June 30, 2010 an increase of $1.3 million from $400 thousand net cash used in operating activities for the same period last year. The increase was primarily due to our net income for the six months ended June 30, 2010.
Investing Activities
Cash used in investing activities reflects the impact of loans and investments acquired for our interest-earning asset portfolios, as well as cash flows from asset sales and the impact of acquisitions. For the six months ended June 30, 2010, we had net cash provided by investing activities of $16.0 million, compared to $58.8 million net cash used in investing activities for the same period in 2009. The change in cash flows from investing activities was primarily due to an increase of $40.8 million from maturities and calls on securities, and $33.3 million from slower loan growth.
Financing Activities
Cash flows from financing activities include transactions and events whereby cash is obtained from depositors, creditors or investors. For the six months ended June 30, 2010, we had net cash flows provided by financing activities of $23.5 million, compared to $58.5 million for the six months ended June 30, 2009. The change in cash flows from financing activities was primarily due to lower deposit growth.
Capital Resources
The assessment of capital adequacy depends on a number of factors such as asset quality, liquidity, earnings performance, changing competitive conditions and economic forces. We seek to maintain a strong capital base to support growth and expansion activities, to provide stability to current operations and to promote public confidence.
We offer a stock purchase plan to our employees and directors to purchase shares of our common stock at fair market value. In 2009, employees purchased 4,727 shares valued at $12.50, which were issued in February 2010.
36
Holders of our common stock are entitled to receive dividends when, as and if declared by our Board of Directors out of funds legally available for that purpose. We have not paid any dividends to our holders of common stock in the past and we currently do not intend to pay dividends on our common stock in the near future. In the event that we decide to pay dividends, there are a number of restrictions on our ability to do so.
For a foreseeable period of time, our principal source of cash revenues will be dividends paid by the Banks to us with respect to their common stock. There are certain restrictions on the payment of these dividends imposed by federal and state banking laws, regulations and authorities.
The declaration and payment of dividends on our common stock will depend upon our earnings and financial condition, liquidity and capital requirements, the general economic and regulatory climate, our ability to service any equity or debt obligations senior to the common stock and other factors deemed relevant by our Board of Directors. Regulatory authorities in their discretion could impose administratively stricter limitations on the ability of the Banks to pay dividends to us if such limits were deemed appropriate to preserve certain capital adequacy requirements.
Off-Balance Sheet Arrangements
We do not currently engage in the use of derivative instruments to hedge interest rate risks. However, we are a party to financial instruments with off-balance sheet risks in the normal course of business to meet the financing needs of our customers.
At June 30, 2010, we had $52.0 million in commitments to extend credit. Commitments to extend credit are agreements to lend to a customer so long as there is no violation of any condition established in the contract. Commitments generally have fixed expiration dates or other termination clauses and may require payment of a fee. Since many of the commitments are expected to expire without being drawn upon, the total commitment amounts do not necessarily represent future cash requirements.
If commitments arising from these financial instruments continue to require funding at historical levels, management does not anticipate that such funding will adversely impact our ability to meet on-going obligations. In the event these commitments require funding in excess of historical levels, management believes current liquidity, available lines of credit from the Federal Home Loan Bank, investment security maturities and our revolving credit facility provide a sufficient source of funds to meet these commitments.
Critical Accounting Policies
Allowance for Loan Losses
The allowance for loan losses is a valuation allowance for probable incurred credit losses. Loan losses are charged against the allowance when management believes the uncollectibility of a loan balance is confirmed. Subsequent recoveries, if any, are credited to the allowance. Management estimates the allowance balance required using past loan loss experience, the nature and volume of the portfolio, information about specific borrower situations and estimated collateral values, economic conditions, and other factors. Allocations of the allowance may be made for specific loans, but the entire allowance is available for any loan that, in managements judgment, should be charged-off.
The allowance consists of specific and general components. The specific component relates to loans that are individually classified as impaired or loans otherwise classified as substandard or doubtful. The general component covers non-classified loans and is based on historical loss experience adjusted for current factors.
A loan is impaired when full payment under the loan terms is not expected. Commercial and commercial real estate loans are individually evaluated for impairment. If a loan is impaired, a portion of the allowance is allocated so that the loan is reported, net, at the present value of estimated future cash flows using the loans existing rate or at the fair value of collateral if repayment is expected solely from the collateral. Large groups of smaller balance homogeneous loans, such as consumer and residential real estate loans, are collectively evaluated for impairment, and, accordingly, they are not separately identified for impairment disclosures.
Income Taxes
37
We account for income taxes according to the asset and liability method. Under this method, deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax basis. Deferred tax assets and liabilities are measured using the enacted tax rates applicable to taxable income for the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date. Valuation reserves are established against certain deferred tax assets when it is more likely than not that the deferred tax assets will not be realized. Increases or decreases in the valuation reserve are charged or credited to the income tax provision.
We recognize a benefit from its tax positions only if it is more-likely-than-not that the tax position will be sustained on examination by taxing authorities, based on the technical merits of the position. The tax benefits recognized in the financial statements from such a position are measured based on the largest benefit that has a greater than 50% likelihood of being realized upon ultimate settlement with a taxing authority that has full knowledge of all relevant information.
The periods subject to examination for our federal returns are the tax years subsequent to 2006. The periods subject to examination for our significant state return, which is Florida, are the tax years subsequent to 2006. We believe our income tax filing positions and deductions will be sustained upon examination and does not anticipate any adjustments that will result in a material change in its financial statements. As a result, no reserve for uncertain income tax positions has been recorded.
The Companys policy for recording interest and penalties related to uncertain tax positions is to record such items as part of its provision for federal and state income taxes.
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QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK |
See Market Risk in Managements Discussion and Analysis of Financial Condition and Results of Operations, above, which is incorporated herein by reference. Management has determined that no additional disclosures are necessary to assess changes in information about market risk that have occurred since December 31, 2009.
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CONTROLS AND PROCEDURES |
Evaluation of Disclosure Controls and Procedures
As of June 30, 2010, the end of the period covered by this Form 10-Q, our management, including our Chief Executive Officer and Chief Financial Officer, evaluated the effectiveness of our disclosure controls and procedures (as defined in Rule 13a-15(e) under the Securities Exchange Act of 1934). Based upon that evaluation, our Chief Executive Officer and Chief Financial Officer each concluded that as of June 30, 2010, the end of the period covered by this Form 10-Q, we maintained effective disclosure controls and procedures.
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OTHER INFORMATION |
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Legal Proceedings |
We are party to lawsuits and claims arising out of the normal course of business. In managements opinion, there are no known pending claims or litigation, the outcome of which would, individually or in the aggregate, have a material effect on our consolidated results of operations, financial position, or cash flows.
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Risk Factors |
In addition to the other information set forth in this Quarterly Report on Form 10-Q, you should carefully consider the factors discussed in Part I, Item 1A. Risk Factors in our 2009 Annual Report on Form 10-K, as updated in our subsequent quarterly reports.. The risks described in our 2009 Annual Report on Form 10-K are not the only risks we face. Additional risks and uncertainties not currently known to us or that we currently deem to be immaterial also may materially adversely affect our business, financial condition and/or operating results. There have been no material changes in our risk factors from those disclosed in our 2009 Annual Report on Form 10-K except for the following:
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The Dodd-Frank Wall Street Reform Wall Street and Consumer Protection Act of 2010 will have a significant impact on our business and operations and will substantially increase our cost of doing business which could have a material adverse effect on our results of operations and financial condition.
On July 21, 2010, the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010 (the Dodd-Frank Act), was signed into law. The Dodd-Frank Act represents a comprehensive overhaul of the financial services industry within the United States, establishes the new federal Bureau of Consumer Financial Protection (the BCFP), and will require the BCFP and other federal agencies to implement many new and significant rules and regulations. At this time, it is difficult to predict the extent to which the Dodd-Frank Act or the resulting rules and regulations will impact the Companys business. Compliance with these new laws and regulations will likely result in additional costs, which could be significant, and could adversely impact the Companys results of operations, financial condition or liquidity.
Our management is reviewing the provisions of the Dodd-Frank Act and assessing its probable impact on our business, financial condition, and results of operations of the Company.
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Purchases of Equity Securities by the Issuer and Affiliated Purchasers |
The following table contains information about all purchases made by or on behalf of us or any affiliated purchaser (as defined in Rule 10b-18(a)(3) under the Exchange Act) of shares or other units of any class of our equity securities that is registered pursuant to Section 12 of the Exchange Act.
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Period |
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Average |
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Total number of |
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Maximum Number |
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April 1, 2010 to |
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May 1, 2010 to |
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June 1, 2010 to |
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6,000 |
(1) |
$ |
9.00 |
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Total |
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6,000 |
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$ |
9.00 |
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(1) |
The shares were purchased from Floridian Bank and Orange Bank after the banks foreclosed on a loan collateralized by our common stock. |
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Exhibits |
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(A) |
Exhibits |
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10.1 |
Contract for sale and purchase made and entered into as of June 30, 2010 by and between First Team Clermont OB, LLC, a Florida limited liability company and Orange Bank of Florida, a Florida corporation |
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31.1 |
Certification of CEO Pursuant to Securities Exchange Act Rule 13a-14(a) / 15d-14(a) as Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. |
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31.2 |
Certification of CFO Pursuant to Securities Exchange Act Rule 13a-14(a) / 15d-14(a) as Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. |
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32.1 |
Certification Under Section 906 of the Sarbanes-Oxley Act of 2002. |
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Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this Report to be signed on its behalf by the undersigned Chief Financial Officer hereunto duly authorized.
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FLORIDIAN FINANCIAL GROUP, INC. |
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(Registrant) |
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By: |
/s/ Michael V. Kearney |
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Michael V. Kearney |
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Executive Vice President and Chief Financial Officer |
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(Mr. Kearney is the Principal Financial Officer and has been duly authorized to sign on behalf of the Registrant) |
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Date: August 13, 2010 |
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Exhibit Index
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10.1 |
Contract for sale and purchase made and entered into as of June 30, 2010 by and between FIRST TEAM CLERMONT OB, LLC, a Florida limited liability company (Seller) and ORANGE BANK OF FLORIDA, a Florida corporation (Buyer) |
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31.1 |
Certification of CEO Pursuant to Securities Exchange Act Rule 13a-14(a) / 15d-14(a) as Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. |
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31.2 |
Certification of CFO Pursuant to Securities Exchange Act Rule 13a-14(a) / 15d-14(a) as Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. |
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32.1 |
Certification Under Section 906 of the Sarbanes-Oxley Act of 2002. |
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