Attached files
file | filename |
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EX-23.1 - CAMDEN NATIONAL CORP | v221355_ex23-1.htm |
EX-32.1 - CAMDEN NATIONAL CORP | v221355_ex32-1.htm |
EX-31.1 - CAMDEN NATIONAL CORP | v221355_ex31-1.htm |
EX-31.2 - CAMDEN NATIONAL CORP | v221355_ex31-2.htm |
EX-32.2 - CAMDEN NATIONAL CORP | v221355_ex32-2.htm |
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
x QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 2011
OR
¨ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE
SECURITIES EXCHANGE ACT OF 1934
Commission File No. 0-28190
CAMDEN NATIONAL CORPORATION
(Exact name of registrant as specified in its charter)
MAINE
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01-0413282
|
|
(State or other jurisdiction of
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(I.R.S. Employer
|
|
incorporation or organization)
|
Identification No.)
|
|
2 ELM STREET, CAMDEN, ME
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04843
|
|
(Address of principal executive offices)
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(Zip Code)
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Registrant's telephone number, including area code: (207) 236-8821
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 periods that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
Yes x No ¨
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§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 ¨ No ¨
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):
Large accelerated filer ¨
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Accelerated filer x
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Non-accelerated filer ¨
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Smaller reporting company ¨
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( Do not check if a smaller reporting company)
|
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).
Yes ¨ No x
Indicate the number of shares outstanding of each of the issuer's classes of common stock, as of the latest practical date:
Outstanding at May 6, 2011: Common stock (no par value) 7,677,693 shares.
CAMDEN NATIONAL CORPORATION
FORM 10-Q FOR THE QUARTER ENDED MARCH 31, 2011
TABLE OF CONTENTS OF INFORMATION REQUIRED IN REPORT
PAGE
|
||
PART I. FINANCIAL INFORMATION
|
||
ITEM 1.
|
FINANCIAL STATEMENTS
|
3 |
Report of Independent Registered Public Accounting Firm
|
3
|
|
Consolidated Statements of Condition March 31, 2011 and December 31, 2010
|
4
|
|
Consolidated Statements of Income Three Months Ended March 31, 2011 and 2010
|
5
|
|
Consolidated Statements of Changes in Shareholders’ Equity Three Months Ended March 31, 2011 and 2010
|
6
|
|
Consolidated Statements of Cash Flows Three Months Ended March 31, 2011 and 2010
|
7
|
|
Notes to Consolidated Financial Statements Three Months Ended March 31, 2011 and 2010
|
8-22
|
|
ITEM 2.
|
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
|
23-34
|
ITEM 3.
|
QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK
|
35-36
|
ITEM 4.
|
CONTROLS AND PROCEDURES
|
36
|
PART II. OTHER INFORMATION
|
||
ITEM 1.
|
LEGAL PROCEEDINGS
|
37
|
ITEM 1A.
|
RISK FACTORS
|
37
|
ITEM 2.
|
UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
|
37
|
ITEM 3.
|
DEFAULTS UPON SENIOR SECURITIES
|
37
|
ITEM 4.
|
REMOVED AND RESERVED
|
37
|
ITEM 5.
|
OTHER INFORMATION
|
37
|
ITEM 6.
|
EXHIBITS
|
38
|
SIGNATURES
|
39
|
|
EXHIBIT INDEX
|
40
|
|
EXHIBITS
|
|
2
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
The Shareholders and Board of Directors
Camden National Corporation
We have reviewed the accompanying interim consolidated financial information of Camden National Corporation and Subsidiaries as of March 31, 2011, and for the three-month periods ended March 31, 2011 and 2010. These financial statements are the responsibility of the Company's management.
We conducted our reviews in accordance with standards of the Public Company Accounting Oversight Board (United States). A review of interim financial information consists principally of applying analytical procedures to financial data and making inquiries of persons responsible for financial and accounting matters. It is substantially less in scope than an audit in accordance with standards of the Public Company Accounting Oversight Board (United States), the objective of which is to express an opinion regarding the financial statements taken as a whole. Accordingly, we do not express such an opinion.
Based on our reviews, we are not aware of any material modifications that should be made to the accompanying financial statements for them to be in conformity with accounting principles generally accepted in the United States of America.
/s/ Berry, Dunn, McNeil & Parker, LLC
|
|
Berry, Dunn, McNeil & Parker, LLC
|
Bangor, Maine
May 9, 2011
3
CONSOLIDATED STATEMENTS OF CONDITION
March 31,
|
December 31,
|
|||||||
2011
|
2010
|
|||||||
(In Thousands, Except Number of Shares)
|
(unaudited)
|
|||||||
ASSETS
|
||||||||
Cash and due from banks
|
$
|
25,970
|
$
|
31,009
|
||||
Securities
|
|
|||||||
Securities available for sale, at fair value
|
621,958
|
553,579
|
||||||
Securities held to maturity, at amortized cost (fair value $38,037 at December 31, 2010)
|
—
|
36,102
|
||||||
Federal Home Loan Bank and Federal Reserve Bank stock, at cost
|
21,962
|
21,962
|
||||||
Total securities
|
643,920
|
611,643
|
||||||
Trading account assets
|
2,239
|
2,304
|
||||||
Loans held for sale
|
—
|
5,528
|
||||||
Loans
|
1,536,463
|
1,524,752
|
||||||
Less allowance for loan losses
|
(22,887
|
)
|
(22,293
|
)
|
||||
Net loans
|
1,513,576
|
1,502,459
|
||||||
Goodwill and other intangible assets
|
45,677
|
45,821
|
||||||
Bank-owned life insurance
|
43,324
|
43,155
|
||||||
Premises and equipment, net
|
24,737
|
25,044
|
||||||
Deferred tax asset
|
11,660
|
12,281
|
||||||
Interest receivable
|
7,355
|
6,875
|
||||||
Prepaid FDIC assessment
|
5,648
|
6,155
|
||||||
Other real estate owned
|
2,190
|
2,387
|
||||||
Other assets
|
12,021
|
11,346
|
||||||
Total assets
|
$
|
2,338,317
|
$
|
2,306,007
|
||||
LIABILITIES AND SHAREHOLDERS’ EQUITY
|
||||||||
Liabilities
|
|
|||||||
Deposits
|
||||||||
Demand
|
$
|
227,027
|
$
|
229,547
|
||||
Interest checking, savings and money market
|
731,586
|
721,905
|
||||||
Retail certificates of deposit
|
453,724
|
464,662
|
||||||
Brokered deposits
|
132,344
|
99,697
|
||||||
Total deposits
|
1,544,681
|
1,515,811
|
||||||
Federal Home Loan Bank advances
|
167,134
|
214,236
|
||||||
Other borrowed funds
|
348,305
|
302,069
|
||||||
Junior subordinated debentures
|
43,640
|
43,614
|
||||||
Accrued interest and other liabilities
|
23,832
|
24,282
|
||||||
Total liabilities
|
2,127,592
|
2,100,012
|
||||||
|
||||||||
Shareholders’ Equity
|
||||||||
Common stock, no par value; authorized 20,000,000 shares, issued and outstanding 7,677,243 and 7,658,496 shares on March 31, 2011 and December 31, 2010, respectively
|
50,950
|
50,936
|
||||||
Retained earnings
|
155,149
|
150,730
|
||||||
Accumulated other comprehensive income
|
||||||||
Net unrealized gains on securities available for sale, net of tax
|
6,364
|
6,229
|
||||||
Net unrealized losses on derivative instruments, at fair value, net of tax
|
(562
|
)
|
(709
|
)
|
||||
Net unrecognized losses on postretirement plans, net of tax
|
(1,176
|
)
|
(1,191
|
)
|
||||
Total accumulated other comprehensive income
|
4,626
|
4,329
|
||||||
Total shareholders’ equity
|
210,725
|
205,995
|
||||||
Total liabilities and shareholders’ equity
|
$
|
2,338,317
|
$
|
2,306,007
|
See Report of Independent Registered Public Accounting Firm.
The accompanying notes are an integral part of these consolidated financial statements.
4
CONSOLIDATED STATEMENTS OF INCOME
(unaudited)
|
Three Months Ended March 31,
|
|||||||
(In Thousands, Except Number of Shares and per Share Data)
|
2011
|
2010
|
||||||
Interest Income
|
||||||||
Interest and fees on loans
|
$
|
19,469
|
$
|
20,447
|
||||
Interest on U.S. government and sponsored enterprise obligations
|
4,885
|
5,163
|
||||||
Interest on state and political subdivision obligations
|
466
|
539
|
||||||
Interest on federal funds sold and other investments
|
40
|
22
|
||||||
Total interest income
|
24,860
|
26,171
|
||||||
Interest Expense
|
||||||||
Interest on deposits
|
3,015
|
4,118
|
||||||
Interest on borrowings
|
2,591
|
3,294
|
||||||
Interest on junior subordinated debentures
|
695
|
694
|
||||||
Total interest expense
|
6,301
|
8,106
|
||||||
Net interest income
|
18,559
|
18,065
|
||||||
Provision for credit losses
|
1,119
|
1,996
|
||||||
Net interest income after provision for credit losses
|
17,440
|
16,069
|
||||||
Non-Interest Income
|
||||||||
Income from fiduciary services
|
1,547
|
1,567
|
||||||
Service charges on deposit accounts
|
1,231
|
1,280
|
||||||
Other service charges and fees
|
870
|
690
|
||||||
Bank-owned life insurance
|
539
|
371
|
||||||
Brokerage and insurance commissions
|
358
|
294
|
||||||
Mortgage banking income
|
80
|
89
|
||||||
Net losses on sale of securities
|
(33
|
)
|
—
|
|||||
Other income
|
526
|
329
|
||||||
Total non-interest income before other-than-temporary impairment of securities
|
5,118
|
4,620
|
||||||
Other-than-temporary impairment of securities
|
—
|
(48
|
)
|
|||||
Total non-interest income
|
5,118
|
4,572
|
||||||
Non-Interest Expenses
|
||||||||
Salaries and employee benefits
|
6,851
|
6,225
|
||||||
Furniture, equipment and data processing
|
1,200
|
1,130
|
||||||
Net occupancy
|
1,060
|
1,034
|
||||||
Other real estate owned and collection costs
|
491
|
974
|
||||||
Regulatory assessments
|
703
|
715
|
||||||
Consulting and professional fees
|
674
|
788
|
||||||
Amortization of intangible assets
|
144
|
144
|
||||||
Other expenses
|
2,162
|
1,912
|
||||||
Total non-interest expenses
|
13,285
|
12,922
|
||||||
Income before income taxes
|
9,273
|
7,719
|
||||||
Income Taxes
|
2,934
|
2,406
|
||||||
Net Income
|
$
|
6,339
|
$
|
5,313
|
||||
Per Share Data
|
||||||||
Basic earnings per share
|
$
|
0.83
|
$
|
0.69
|
||||
Diluted earnings per share
|
$
|
0.83
|
$
|
0.69
|
||||
Weighted average number of common shares outstanding
|
7,659,970
|
7,652,089
|
||||||
Diluted weighted average number of common shares outstanding
|
7,672,398
|
7,659,640
|
See Report of Independent Registered Public Accounting Firm.
The accompanying notes are an integral part of these consolidated financial statements.
5
CAMDEN NATIONAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS’ EQUITY
(unaudited)
Common Stock
|
Accumulated
Other
|
Total
|
||||||||||||||||||
(In Thousands, Except Number of Shares and per Share Data)
|
Shares
Outstanding
|
Amount
|
Retained
Earnings
|
Comprehensive
Income
|
Shareholders’
Equity
|
|||||||||||||||
Balance at December 31, 2009
|
7,644,837 | $ | 50,062 | $ | 133,634 | $ | 6,865 | $ | 190,561 | |||||||||||
Net income
|
— | — | 5,313 | — | 5,313 | |||||||||||||||
Other comprehensive income, net of tax:
|
||||||||||||||||||||
Change in fair value of securities available for sale
|
— | — | — | 1,320 | 1,320 | |||||||||||||||
Change in fair value of cash flow hedges
|
— | — | — | (203 | ) | (203 | ) | |||||||||||||
Change in net unrecognized losses on postretirement plans
|
— | — | — | 8 | 8 | |||||||||||||||
Total comprehensive income
|
— | — | 5,313 | 1,125 | 6,438 | |||||||||||||||
Stock-based compensation expense
|
— | 64 | — | — | 64 | |||||||||||||||
Exercise of stock options and issuance of restricted stock
|
10,851 | 54 | — | — | 54 | |||||||||||||||
Common stock repurchased
|
(1,385 | ) | — | (44 | ) | — | (44 | ) | ||||||||||||
Cash dividends declared ($0.25 per share)
|
— | — | (1,916 | ) | — | (1,916 | ) | |||||||||||||
Balance at March 31, 2010
|
7,654,303 | $ | 50,180 | $ | 136,987 | $ | 7,990 | $ | 195,157 | |||||||||||
Balance at December 31, 2010
|
7,658,496 | $ | 50,936 | $ | 150,730 | $ | 4,329 | $ | 205,995 | |||||||||||
Net income
|
— | — | 6,339 | — | 6,339 | |||||||||||||||
Other comprehensive income, net of tax:
|
||||||||||||||||||||
Change in fair value of securities available for sale
|
— | — | — | 136 | 136 | |||||||||||||||
Change in fair value of cash flow hedges
|
— | — | — | 148 | 148 | |||||||||||||||
Change in net unrecognized losses on postretirement plans
|
— | — | — | 13 | 13 | |||||||||||||||
Total comprehensive income
|
— | — | 6,339 | 297 | 6,636 | |||||||||||||||
Stock-based compensation expense
|
— | 138 | — | — | 138 | |||||||||||||||
Exercise of stock options and issuance of restricted stock
|
26,782 | 145 | — | — | 145 | |||||||||||||||
Common stock repurchased
|
(8,035 | ) | (269 | ) | — | — | (269 | ) | ||||||||||||
Cash dividends declared ($0.25 per share)
|
— | — | (1,920 | ) | — | (1,920 | ) | |||||||||||||
Balance at March 31, 2011
|
7,677,243 | $ | 50,950 | $ | 155,149 | $ | 4,626 | $ | 210,725 |
See Report of Independent Registered Public Accounting Firm.
The accompanying notes are an integral part of these consolidated financial statements.
6
CONSOLIDATED STATEMENTS OF CASH FLOWS
(unaudited)
|
Three Months Ended March 31,
|
|||||||
(In Thousands)
|
2011
|
2010
|
||||||
Operating Activities
|
||||||||
Net income
|
$
|
6,339
|
$
|
5,313
|
||||
Adjustments to reconcile net income to net cash provided by operating activities:
|
||||||||
Provision for credit losses
|
1,119
|
1,996
|
||||||
Depreciation and amortization
|
960
|
707
|
||||||
Stock-based compensation expense
|
138
|
64
|
||||||
Increase in interest receivable
|
(480
|
)
|
(264
|
)
|
||||
Amortization of intangible assets
|
144
|
144
|
||||||
Net decrease (increase) in trading assets
|
65
|
(69
|
)
|
|||||
Net investment securities losses
|
33
|
—
|
||||||
Other-than-temporary impairment of securities
|
—
|
48
|
||||||
Increase in other real estate owned valuation allowance
|
84
|
370
|
||||||
Originations of mortgage loans held for sale
|
(3,096
|
)
|
—
|
|||||
Proceeds from the sale of mortgage loans
|
8,618
|
—
|
||||||
Loss on sale of mortgage loans
|
6
|
—
|
||||||
Decrease in prepaid FDIC assessment
|
507
|
562
|
||||||
(Increase) decrease in other assets
|
(156
|
)
|
654
|
|||||
(Decrease) increase in other liabilities
|
(455
|
)
|
1,652
|
|||||
Net cash provided by operating activities
|
13,826
|
11,177
|
||||||
Investing Activities
|
||||||||
Proceeds from maturities of securities held to maturity
|
251
|
—
|
||||||
Proceeds from sales and maturities of securities available for sale
|
39,147
|
40,784
|
||||||
Purchase of securities available for sale
|
(71,800
|
)
|
(19,887
|
)
|
||||
Net increase in loans
|
(12,796
|
)
|
(3,961
|
)
|
||||
Proceeds from the sale of other real estate owned
|
209
|
212
|
||||||
Proceeds from bank-owned life insurance
|
370
|
—
|
||||||
Purchase of premises and equipment
|
(288
|
)
|
(3,148
|
)
|
||||
Net cash (used) provided by investing activities
|
(44,907
|
)
|
14,000
|
|||||
Financing Activities
|
||||||||
Net increase in deposits
|
28,869
|
5,219
|
||||||
Proceeds from Federal Home Loan Bank long-term advances
|
80,000
|
11,200
|
||||||
Repayments on Federal Home Loan Bank long-term advances
|
(127,088
|
)
|
(41,302
|
)
|
||||
Net change in short-term Federal Home Loan Bank borrowings
|
(37,275
|
)
|
4,385
|
|||||
Net increase (decrease) in other borrowed funds
|
83,577
|
(2,646
|
)
|
|||||
Common stock repurchase
|
(269
|
)
|
(44
|
)
|
||||
Proceeds from exercise of stock options
|
145
|
54
|
||||||
Cash dividends paid on common stock
|
(1,917
|
)
|
(1,916
|
)
|
||||
Net cash provided (used) by financing activities
|
26,042
|
(25,050
|
)
|
|||||
Net (decrease) increase in cash and cash equivalents
|
(5,039
|
)
|
127
|
|||||
Cash and cash equivalents at beginning of year
|
31,009
|
29,772
|
||||||
Cash and cash equivalents at end of period
|
$
|
25,970
|
$
|
29,899
|
||||
Supplemental information
|
||||||||
Interest paid
|
$
|
6,302
|
$
|
8,260
|
||||
Income taxes paid
|
—
|
1,000
|
||||||
Transfer from loans to other real estate owned
|
96
|
304
|
See Report of Independent Registered Public Accounting Firm.
The accompanying notes are an integral part of these consolidated financial statements.
7
CAMDEN NATIONAL CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Amounts in Tables Expressed in Thousands, Except Number of Shares and per Share Data)
NOTE 1 - BASIS OF PRESENTATION
The accompanying unaudited consolidated financial statements were prepared in accordance with instructions for Form 10-Q and, therefore, do not include all disclosures required by accounting principles generally accepted in the United States of America (“GAAP”) for complete presentation of financial statements. In the opinion of management, the consolidated financial statements contain all adjustments (consisting only of normal recurring accruals) necessary to present fairly the consolidated statements of condition of Camden National Corporation (the “Company”) as of March 31, 2011 and December 31, 2010, the consolidated statements of income for the three months ended March 31, 2011 and 2010, the consolidated statements of changes in shareholders' equity for the three months ended March 31, 2011 and 2010, and the consolidated statements of cash flows for the three months ended March 31, 2011 and 2010. All significant intercompany transactions and balances are eliminated in consolidation. Certain items from the prior year were reclassified to conform to the current year presentation. The income reported for the three-month period ended March 31, 2011 is not necessarily indicative of the results that may be expected for the full year. The information in this report should be read in conjunction with the consolidated financial statements and accompanying notes included in the December 31, 2010 Annual Report on Form 10-K.
NOTE 2 – EARNINGS PER SHARE
Basic earnings per common share (“EPS”) excludes dilution and is computed by dividing net income applicable to common stock by the weighted average number of common shares outstanding for the year. Diluted EPS reflects the potential dilution that could occur if certain securities or other contracts to issue common stock (such as stock options) were exercised or converted into additional common shares that would then share in the earnings of the Company. Diluted EPS is computed by dividing net income applicable to common stock by the weighted average number of common shares outstanding for the year, plus an incremental number of common-equivalent shares computed using the treasury stock method. The following table sets forth the computation of basic and diluted earnings per share under the two-class method, as unvested share-based payment awards include the nonforfeitable right to receive dividends and therefore are considered participating securities:
Three Months Ended March 31,
|
||||||||
2011
|
2010
|
|||||||
Net income, as reported
|
$
|
6,339
|
$
|
5,313
|
||||
Weighted-average common shares outstanding – basic
|
7,659,970
|
7,652,089
|
||||||
Dilutive effect of stock-based compensation
|
12,428
|
7,551
|
||||||
Weighted-average common and potential common shares – diluted
|
|
7,672,398
|
7,659,640
|
|||||
Basic earnings per share – common stock
|
$
|
0.83
|
$
|
0.69
|
||||
Basic earnings per share – unvested share-based payment awards
|
0.83
|
0.69
|
||||||
Diluted earnings per share – common stock
|
0.83
|
0.69
|
||||||
Diluted earnings per share – unvested share-based payment awards
|
0.83
|
0.69
|
At March 31, 2011 and 2010, options to purchase 54,050 and 98,877 shares, respectively, of common stock were not considered in the computation of potential common shares for purposes of diluted EPS, since the exercise prices of the options were greater than the average market price of the common stock for the respective periods.
8
NOTE 3 – SECURITIES
The following tables summarize the amortized costs and estimated fair values of securities available for sale and held to maturity, as of the dates indicated:
Amortized
Cost
|
Unrealized
Gains
|
Unrealized
Losses
|
Fair
Value
|
|||||||||||||
March 31, 2011
|
|
|
|
|
||||||||||||
Available for sale
|
|
|
|
|
||||||||||||
Obligations of U.S. government sponsored enterprises
|
$
|
79,868
|
$
|
162
|
$
|
(1,335
|
)
|
$
|
78,695
|
|||||||
Obligations of states and political subdivisions
|
44,316
|
2,644
|
—
|
46,960
|
||||||||||||
Mortgage-backed securities issued or guaranteed by U.S. government sponsored enterprises
|
460,763
|
15,015
|
(3,893
|
)
|
471,885
|
|||||||||||
Private issue collateralized mortgage obligations
|
22,219
|
—
|
(2,368
|
)
|
19,851
|
|||||||||||
Total debt securities
|
607,166
|
17,821
|
(7,596
|
)
|
617,391
|
|||||||||||
Equity securities
|
5,000
|
—
|
(433
|
)
|
4,567
|
|||||||||||
Total securities available for sale
|
$
|
612,166
|
$
|
17,821
|
$
|
(8,029
|
)
|
$
|
621,958
|
|||||||
December 31, 2010
|
|
|
|
|
||||||||||||
Available for sale
|
|
|
|
|
||||||||||||
Obligations of U.S. government sponsored enterprises
|
$
|
49,870
|
$
|
237
|
$
|
(750
|
)
|
$
|
49,357
|
|||||||
Obligations of states and political subdivisions
|
13,777
|
443
|
—
|
14,220
|
||||||||||||
Mortgage-backed securities issued or guaranteed by U.S. government sponsored enterprises
|
451,909
|
15,986
|
(3,053
|
)
|
464,842
|
|||||||||||
Private issue collateralized mortgage obligations
|
23,441
|
—
|
(2,719
|
)
|
20,722
|
|||||||||||
Total debt securities
|
538,997
|
16,666
|
(6,522
|
)
|
549,141
|
|||||||||||
Equity securities
|
5,000
|
—
|
(562
|
)
|
4,438
|
|||||||||||
Total securities available for sale
|
$
|
543,997
|
$
|
16,666
|
$
|
(7,084
|
)
|
$
|
553,579
|
|||||||
Held to maturity
|
|
|
|
|
||||||||||||
Obligations of states and political subdivisions
|
$
|
36,102
|
$
|
1,935
|
$
|
—
|
$
|
38,037
|
||||||||
Total securities held to maturity
|
$
|
36,102
|
$
|
1,935
|
$
|
—
|
$
|
38,037
|
During the first quarter of 2011, $36.1 million of municipal bonds that had been previously classified as held to maturity at purchase were moved to the available for sale category and the associated unrealized gains and temporary unrealized losses on these securities are now being reported on an after-tax basis in shareholders’ equity as accumulated other comprehensive income or loss. This change reflects management’s decision during the first quarter of 2011 to more actively manage these investments in changing economic environments.
Impaired Securities
Management reviews the Company’s investment portfolio on a periodic basis to determine the cause, magnitude and duration of declines in the fair value of each security. Thorough evaluations of the causes of the unrealized losses are performed to determine whether the impairment is temporary or other than temporary in nature. Considerations such as the ability of the securities to meet cash flow requirements, levels of credit enhancements, risk of curtailment, recoverability of invested amount over a reasonable period of time and the length of time the security is in a loss position, for example, are applied in determining other than temporary impairment (“OTTI”). Once a decline in value is determined to be other-than-temporary, the value of the security is reduced and a corresponding charge to earnings is recognized.
The following table shows the unrealized gross losses and estimated fair values of investment securities at March 31, 2011 and December 31, 2010, by length of time that individual securities in each category have been in a continuous loss position.
9
Less Than 12 Months
|
12 Months or More
|
Total
|
||||||||||||||||||||||
Fair
Value
|
Unrealized
Losses
|
Fair
Value
|
Unrealized
Losses
|
Fair
Value
|
Unrealized
Losses
|
|||||||||||||||||||
March 31, 2011
|
||||||||||||||||||||||||
U.S. government sponsored enterprises
|
$
|
58,538
|
$
|
(1,335
|
)
|
$
|
—
|
$
|
—
|
$
|
58,538
|
$
|
(1,335
|
)
|
||||||||||
Mortgage-backed securities
|
134,731
|
(3,893
|
)
|
77
|
—
|
134,808
|
(3,893
|
)
|
||||||||||||||||
Private issue collateralized mortgage obligations
|
2,109
|
(2
|
)
|
17,741
|
(2,366
|
)
|
19,850
|
(2,368
|
)
|
|||||||||||||||
Equity securities
|
—
|
—
|
4,567
|
(433
|
)
|
4,567
|
(433
|
)
|
||||||||||||||||
Total
|
$
|
195,378
|
$
|
(5,230
|
)
|
$
|
22,385
|
$
|
(2,799
|
)
|
$
|
217,763
|
$
|
(8,029
|
)
|
|||||||||
December 31, 2010
|
|
|
|
|
|
|
||||||||||||||||||
U.S. government sponsored enterprises
|
$
|
29,145
|
$
|
(750
|
)
|
$
|
—
|
$
|
—
|
$
|
29,145
|
$
|
(750
|
)
|
||||||||||
Mortgage-backed securities
|
96,604
|
(3,053
|
)
|
85
|
—
|
96,689
|
(3,053
|
)
|
||||||||||||||||
Private issue collateralized mortgage obligations
|
2,160
|
(79
|
)
|
18,562
|
(2,640
|
)
|
20,722
|
(2,719
|
)
|
|||||||||||||||
Equity securities
|
—
|
—
|
4,438
|
(562
|
)
|
4,438
|
(562
|
)
|
||||||||||||||||
Total
|
$
|
127,909
|
$
|
(3,882
|
)
|
$
|
23,085
|
$
|
(3,202
|
)
|
$
|
150,994
|
$
|
(7,084
|
)
|
At March 31, 2011, $217.8 million of the Company’s investment securities had unrealized losses that are primarily considered temporary. A portion of the unrealized loss was related to the private issue collateralized mortgage obligations (“CMOs”), which includes $8.8 million that have been downgraded to non-investment grade. The Company’s share of these downgraded CMOs is in the senior tranches. Management believes the unrealized loss for the CMOs is the result of current market illiquidity and the underestimation of value in the market. Including the CMOs, there were 22 securities with a fair value of $22.4 million in the investment portfolio which had unrealized losses for twelve months or longer. Management currently has the intent and ability to retain these investment securities with unrealized losses until the decline in value has been recovered. Stress tests are performed regularly on the higher risk bonds in the investment portfolio using current statistical data to determine expected cash flows and forecast potential losses. The results of the stress tests at March 31, 2011, reflect potential future credit losses in the base case; however, the analysis reflects improvements in potential losses for the private issue CMOs that the Company has recorded OTTI write-downs on in prior periods and, therefore, there were no OTTI write-downs during the first quarter of 2011.
At March 31, 2011, the Company held Duff & Phelps Select Income Fund Auction Preferred Stock with an amortized cost of $5.0 million which failed at auction during 2008. The security is rated Triple-A by Moody’s and Standard and Poor’s. Management believes the failed auctions are a temporary liquidity event related to this asset class of securities. The Company is currently collecting all amounts due according to contractual terms and has the ability and intent to hold the securities until they clear auction, are called, or mature; therefore, the securities are not considered other-than-temporarily impaired.
Security Gains and Losses
The following information details the Company’s sales of securities:
Three Months Ended March 31,
|
||||||||
|
2011
|
2010
|
||||||
Available for sale
|
|
|
||||||
Proceeds from sales of securities
|
$ | 3,406 | $ | — | ||||
Gross realized gains
|
16 | — | ||||||
Gross realized (losses)
|
(49 | ) | — |
During the first quarter of 2011, the Company sold nine municipal bonds that the Company was monitoring that either had below “A” ratings, split ratings, withdrawn ratings, or negative outlooks or were revenue bonds. The Company had not recorded any OTTI on these securities; however, due to increased pressures on state and local government revenues around the country as municipalities struggle with a weakened economy, management decided to sell these securities.
10
Securities Pledged
At March 31, 2011 and 2010, securities with an amortized cost of $478.8 million and $346.2 million and a fair value of $490.4 million and $363.5 million, respectively, were pledged to secure Federal Home Loan Bank (“FHLB”) advances, public deposits, and securities sold under agreements to repurchase and for other purposes required or permitted by law.
Contractual Maturities
The amortized cost and estimated fair values of debt securities by contractual maturity at March 31, 2011 are shown below. Expected maturities will differ from contractual maturities because borrowers may have the right to call or prepay obligations with or without call or prepayment penalties.
Amortized
Cost
|
Fair
Value
|
|||||||
Available for sale
|
||||||||
Due in one year or less
|
$
|
2,142
|
$
|
2,160
|
||||
Due after one year through five years
|
100,404
|
100,097
|
||||||
Due after five years through ten years
|
84,074
|
88,051
|
||||||
Due after ten years
|
420,546
|
427,083
|
||||||
|
$
|
607,166
|
$
|
617,391
|
NOTE 4 – LOANS AND ALLOWANCE FOR LOAN LOSSES
The composition of the Company’s loan portfolio, excluding residential loans held for sale, at March 31, 2011 and December 31, 2010 was as follows:
March 31,
2011
|
December 31,
2010
|
|||||||
Residential real estate loans
|
$ | 595,548 | $ | 596,655 | ||||
Commercial real estate loans
|
464,197 | 464,037 | ||||||
Commercial loans
|
198,148 | 180,592 | ||||||
Home equity loans
|
266,484 | 270,627 | ||||||
Consumer loans
|
12,449 | 13,188 | ||||||
Deferred loan fees net of costs
|
(363 | ) | (347 | ) | ||||
Total loans
|
$ | 1,536,463 | $ | 1,524,752 |
The Company’s lending activities are primarily conducted in Maine. The Company makes single family and multi-family residential loans, commercial real estate loans, business loans, municipal loans and a variety of consumer loans. In addition, the Company makes loans for the construction of residential homes, multi-family properties and commercial real estate properties. The ability and willingness of borrowers to honor their repayment commitments is generally dependent on the level of overall economic activity within the geographic area and the general economy. During the first quarter of 2011, the Company sold $8.6 million of fixed-rate residential mortgage loans on the secondary market that resulted in a net loss on the sale of loans of $6,000. For the year ended December 31, 2010, the Company sold $20.1 million of fixed-rate residential mortgage loans on the secondary market, which resulted in a net gain on the sale of loans of $106,000.
The allowance for loan losses (“ALL”) is management’s best estimate of the inherent risk of loss in the Company’s loan portfolio as of the statement of condition date. Management makes various assumptions and judgments about the collectability of the loan portfolio and provides an allowance for potential losses based on a number of factors. If the assumptions are wrong, the ALL may not be sufficient to cover losses and may cause an increase in the allowance in the future. Among the factors that could affect the Company’s ability to collect loans and require an increase to the allowance in the future are: general real estate and economic conditions; regional credit concentration; industry concentration, for example in the hospitality, tourism and recreation industries; and a requirement by federal and state regulators to increase the provision for loan losses or recognize additional charge-offs.
The following is a summary of activity in the allowance for loan losses:
Three Months Ended March 31,
|
||||||||
|
2011
|
2010
|
||||||
Balance at beginning of period
|
$
|
22,293
|
$
|
20,246
|
||||
Loans charged off
|
(847
|
)
|
(1,253
|
)
|
||||
Recoveries on loans previously charged off
|
324
|
386
|
||||||
Net charge-offs
|
(523
|
)
|
(867
|
)
|
||||
Provision for loan losses
|
1,117
|
2,000
|
||||||
Balance at end of period
|
$
|
22,887
|
$
|
21,379
|
11
The following table presents the allowance for loan losses and select loan information for the quarter ended March 31, 2011:
Residential
Real Estate
|
Commercial
Real Estate
|
Commercial
|
Home
Equity
|
Consumer
|
Unallocated
|
Total
|
||||||||||||||||||||||
Allowance for loan losses:
|
|
|
|
|
||||||||||||||||||||||||
Beginning balance
|
$ | 3,273 | $ | 8,198 | $ | 5,633 | $ | 2,051 | $ | 202 | $ | 2,936 | $ | 22,293 | ||||||||||||||
Loans charged off
|
(172 | ) | (231 | ) | (391 | ) | (9 | ) | (44 | ) | — | (847 | ) | |||||||||||||||
Recoveries
|
50 | 9 | 80 | 164 | 21 | — | 324 | |||||||||||||||||||||
Provision (reduction)
|
763 | (278 | ) | 115 | (249 | ) | 59 | 707 | 1,117 | |||||||||||||||||||
Ending balance
|
$ | 3,914 | $ | 7,698 | $ | 5,437 | $ | 1,957 | $ | 238 | $ | 3,643 | $ | 22,887 | ||||||||||||||
Ending Balance: Individually evaluated for impairment
|
$ | 930 | $ | 544 | $ | 427 | $ | 212 | $ | 9 | $ | — | $ | 2,122 | ||||||||||||||
Ending Balance: Collectively evaluated for impairment
|
$ | 2,984 | $ | 7,154 | $ | 5,010 | $ | 1,745 | $ | 229 | $ | 3,643 | $ | 20,765 | ||||||||||||||
Loans ending balance:
|
||||||||||||||||||||||||||||
Ending Balance: Individually evaluated for impairment
|
$ | 10,566 | $ | 6,551 | $ | 4,042 | $ | 1,276 | $ | 76 | $ | — | $ | 22,511 | ||||||||||||||
Ending Balance: Collectively evaluated for impairment
|
$ | 584,619 | $ | 457,646 | $ | 194,106 | $ | 265,208 | $ | 12,373 | $ | — | $ | 1,513,952 | ||||||||||||||
Loans ending balance
|
$ | 595,185 | $ | 464,197 | $ | 198,148 | $ | 266,484 | $ | 12,449 | $ | — | $ | 1,536,463 |
The following table presents the allowance for loan losses and select loan information for the year ended December 31, 2010:
Residential
Real Estate
|
Commercial
Real Estate
|
Commercial
|
Home
Equity
|
Consumer
|
Unallocated
|
Total
|
||||||||||||||||||||||
Allowance for loan losses:
|
|
|
|
|
||||||||||||||||||||||||
Beginning balance
|
$ | 2,693 | $ | 6,930 | $ | 5,015 | $ | 1,773 | $ | 184 | $ | 3,651 | $ | 20,246 | ||||||||||||||
Loans charged off
|
(1,262 | ) | (1,382 | ) | (1,502 | ) | (932 | ) | (469 | ) | — | (5,547 | ) | |||||||||||||||
Recoveries
|
225 | 232 | 553 | 123 | 136 | — | 1,269 | |||||||||||||||||||||
Provision (reduction)
|
1,617 | 2,418 | 1,567 | 1,087 | 351 | (715 | ) | 6,325 | ||||||||||||||||||||
Ending balance
|
$ | 3,273 | $ | 8,198 | $ | 5,633 | $ | 2,051 | $ | 202 | $ | 2,936 | $ | 22,293 | ||||||||||||||
Ending Balance: Individually evaluated for impairment
|
$ | 840 | $ | 660 | $ | 631 | $ | 316 | $ | 25 | $ | — | $ | 2,472 | ||||||||||||||
Ending Balance: Collectively evaluated for impairment
|
$ | 2,433 | $ | 7,538 | $ | 5,002 | $ | 1,735 | $ | 177 | $ | 2,936 | $ | 19,821 | ||||||||||||||
Loans ending balance:
|
||||||||||||||||||||||||||||
Ending Balance: Individually evaluated for impairment
|
$ | 9,330 | $ | 6,182 | $ | 4,486 | $ | 1,711 | $ | 25 | $ | — | $ | 21,734 | ||||||||||||||
Ending Balance: Collectively evaluated for impairment
|
$ | 586,978 | $ | 457,855 | $ | 176,106 | $ | 268,916 | $ | 13,163 | $ | — | $ | 1,503,018 | ||||||||||||||
Loans ending balance
|
$ | 596,308 | $ | 464,037 | $ | 180,592 | $ | 270,627 | $ | 13,188 | $ | — | $ | 1,524,752 |
The Company focuses on maintaining a well-balanced and diversified loan portfolio. Despite such efforts, it is recognized that credit concentrations may occasionally emerge as a result of economic conditions, changes in local demand, natural loan growth and runoff. To ensure that credit concentrations can be effectively identified, all commercial and commercial real estate loans are assigned Standard Industrial Classification codes, North American Industry Classification System codes, state and county codes. Shifts in portfolio concentrations are continuously monitored by the Company’s Risk Management Group.
12
To further identify loans with similar risk profiles, the Company categorizes each loan category by credit risk exposure and applies a credit quality indicator to all commercial, commercial real estate and residential real estate loans. These indicators are represented by grades 1 through 10 from lowest to highest risk rating. The Company uses the following definitions when assessing grades for the purpose of evaluating the risk and adequacy of the ALL.
Grade 1 – Substantially risk free loans. Loans to borrowers of unquestioned financial strength with stable earnings, cash flows and sufficient primary and secondary sources of repayment. These loans have no known or suspected shortcomings or weaknesses. Most loans in this category are secured by properly margined liquid collateral. Loan to value and loan to cost parameters are most conservative.
Grade 2 – Loans with minimal risk. Include loans to borrowers with a solid financial condition and good liquidity, significant cash flows and interest coverage and well-defined repayment strength. Loan to value and loan to cost parameters are conservative.
Grade 3 – Loans with very modest risk. Borrowers in this category exhibit strong sources of repayment, consistent earnings and acceptable profitability growth. Working capital, debt to worth and coverage ratios are comparable with industry standards and there are no known negative trends. Collateral protection is adequate. Loan to value parameters do not exceed the maximum established by the Company’s loan policy.
Grade 4 – Loans with less than average risk. Loans to borrowers with adequate repayment source or a recently demonstrated ability to service debt with acceptable margins. Working capital, debt to worth and coverage ratios may be on the lower end of industry standards, but are not considered unsatisfactory. There may be minor negative trends but collateral position is adequate. Loan to value and debt coverage ratios meet the Company’s loan policy criteria.
Grade 5 – Average risk loans. Loans to borrowers with acceptable financial strength but possible vulnerability to changing economic conditions or inconsistent earnings history. Borrower evidences a reasonable ability to service debt in the normal course of business and has available and adequate secondary sources of repayment. Working capital, debt to worth and coverage ratios may be below industry standards, but are not considered unsatisfactory. Loan to value and debt coverage ratios meet the criteria outlined in the Company’s loan policy.
Grade 6 – Loans with maximum acceptable risk (Watch List). Loans in this grade exhibit the majority of the attributes associated with Grade 5, perform at that level, but have been recognized to possess characteristics or deficiencies that warrant monitoring. These loans have potential weaknesses which may, if not checked or corrected, weaken the assets or inadequately protect the Company’s credit position at some future date.
A Grade 6-Watch rating is assigned to the loan when one or more of the following circumstances exist:
|
-
|
Lack of sufficient current information to properly assess the risk of the loan facility or value of pledged collateral.
|
|
-
|
Adverse economic, market or other external conditions which may directly affect the obligor’s financial condition.
|
|
-
|
Significant cost overruns occurred.
|
|
-
|
Market share may exhibit some volatility. Sales and profits may be tied to business, credit or product cycles.
|
Grade 7 – Loans with potential weakness (Special Mention). Loans in this category are currently protected based on collateral and repayment capacity and do not constitute undesirable credit risk, but have potential weakness that may result in deterioration of the repayment process at some future date. This classification is used if a negative trend is evident in the obligor’s financial situation. Special mention loans do not sufficiently expose the Company to warrant adverse classification.
Grade 8 – Loans with definite weakness (Substandard). Loans classified as substandard are inadequately protected by the current sound worth and paying capacity of the obligor or by collateral pledged. Borrowers experience difficulty in meeting debt repayment requirements. Deterioration is sufficient to cause the Company to look to the sale of collateral.
Grade 9 – Loans with potential loss (Doubtful). Loans classified as doubtful have all the weaknesses inherent in the substandard grade with the added characteristic that the weaknesses make collection or liquidation of the loan in full highly questionable and improbable. The possibility of some loss is extremely high, but because of specific pending factors that may work to the advantage and strengthening of the asset, its classification as an estimated loss is deferred until its more exact status may be determined.
Grade 10 – Loans with definite loss (Loss). Loans classified as loss are considered uncollectible. The loss classification does not mean that the asset has absolutely no recovery or salvage value, but rather that it is not practical or desirable to defer writing off the asset because recovery and collection time may be protracted.
Asset quality indicators are periodically reassessed to appropriately reflect the risk composition of the Company’s loan portfolio. Home equity and consumer loans are not individually risk rated, but rather analyzed as groups taking into account delinquency rates and other economic conditions which may affect the ability of borrowers to meet debt service requirements, including interest rates and energy costs. Performing loans include loans that are current and loans that are past due less than 90 days. Loans that are past due over 90 days and non-accrual loans are considered non-performing.
13
The following table summarizes credit risk exposure indicators by portfolio segment as of March 31, 2011:
Residential
Real Estate
|
Commercial
Real Estate
|
Commercial
|
Home
Equity
|
Consumer
|
||||||||||||||||
Pass (Grades 1-6)
|
$ | 580,232 | $ | 397,965 | $ | 165,765 | $ | — | $ | — | ||||||||||
Performing
|
— | — | — | 264,918 | 12,373 | |||||||||||||||
Special Mention (Grade 7)
|
895 | 14,900 | 12,773 | — | — | |||||||||||||||
Substandard (Grade 8)
|
14,058 | 51,327 | 19,610 | — | — | |||||||||||||||
Non-performing
|
— | — | — | 1,566 | 76 | |||||||||||||||
Doubtful (Grade 9)
|
— | 5 | — | — | — | |||||||||||||||
Loss (Grade 10)
|
— | — | — | — | — | |||||||||||||||
Total
|
$ | 595,185 | $ | 464,197 | $ | 198,148 | $ | 266,484 | $ | 12,449 |
The following table summarizes credit risk exposure indicators by portfolio segment as of December 31, 2010:
Residential
Real Estate
|
Commercial
Real Estate
|
Commercial
|
Home
Equity
|
Consumer
|
||||||||||||||||
Pass (Grades 1-6)
|
$ | 583,460 | $ | 390,488 | $ | 146,412 | $ | — | $ | — | ||||||||||
Performing
|
— | — | — | 268,873 | 13,163 | |||||||||||||||
Special Mention (Grade 7)
|
— | 22,692 | 11,089 | — | — | |||||||||||||||
Substandard (Grade 8)
|
12,848 | 50,852 | 23,091 | — | — | |||||||||||||||
Non-performing
|
— | — | — | 1,754 | 25 | |||||||||||||||
Doubtful (Grade 9)
|
— | 5 | — | — | — | |||||||||||||||
Loss (Grade 10)
|
— | — | — | — | — | |||||||||||||||
Total
|
$ | 596,308 | $ | 464,037 | $ | 180,592 | $ | 270,627 | $ | 13,188 |
The Company closely monitors the performance of its loan portfolio. In situations when the financial condition of the borrower is deteriorating, payment in full of both principal and interest is not expected as scheduled or principal or interest has been in default for 90 days or more, a loan is placed on non-accrual status. Exceptions may be made if the asset is well-secured by collateral sufficient to satisfy both the principal and accrued interest in full and collection is assured by a specific event such as the closing of a pending sale contract. When one loan to a borrower is placed on non-accrual status, all other loans to the borrower are re-evaluated to determine if they should also be placed on non-accrual status. All previously accrued and unpaid interest is reversed at this time. A loan may be returned to accrual status when collection of principal and interest is assured and the borrower has demonstrated timely payments of principal and interest for a reasonable period. Unsecured loans are not normally placed on non-accrual status, as they are charged-off once their collectability is in doubt.
The following is a loan aging analysis by portfolio segment (including loans past due over 90 days and non-accrual loans) and a summary of non-accrual loans and loans past due over 90 days and accruing as of March 31, 2011:
30-59 days
Past Due
|
60-89 days
Past Due
|
Greater
than
90 Days
|
Total
Past Due
|
Current
|
Total Loans
Outstanding
|
Loans > 90
Days Past
Due and
Accruing
|
Non-Accrual
Loans
|
|||||||||||||||||||||||||
Residential real estate
|
$ | 2,752 | $ | 1,518 | $ | 5,988 | $ | 10,258 | $ | 584,927 | $ | 595,185 | $ | — | $ | 8,171 | ||||||||||||||||
Commercial real estate
|
2,780 | 1,048 | 4,334 | 8,162 | 456,035 | 464,197 | — | 6,442 | ||||||||||||||||||||||||
Commercial
|
1,633 | 305 | 2,925 | 4,863 | 193,285 | 198,148 | 124 | 3,977 | ||||||||||||||||||||||||
Home equity
|
176 | 184 | 1,275 | 1,635 | 264,849 | 266,484 | 306 | 1,261 | ||||||||||||||||||||||||
Consumer
|
46 | 3 | 76 | 125 | 12,324 | 12,449 | — | 76 | ||||||||||||||||||||||||
Total
|
$ | 7,387 | $ | 3,058 | $ | 14,598 | $ | 25,043 | $ | 1,511,420 | $ | 1,536,463 | $ | 430 | $ | 19,927 |
The following is a loan aging analysis by portfolio segment (including loans past due over 90 days and non-accrual loans) and a summary of non-accrual loans and loans past due over 90 days and accruing as of December 31, 2010:
30-59 days
Past Due
|
60-89 days
Past Due
|
Greater
than
90 Days
|
Total
Past Due
|
Current
|
Total Loans
Outstanding
|
Loans > 90
Days Past
Due and
Accruing
|
Non-Accrual
Loans
|
|||||||||||||||||||||||||
Residential real estate
|
$ | 1,488 | $ | 1,533 | $ | 5,616 | $ | 8,637 | $ | 587,671 | $ | 596,308 | $ | 424 | $ | 7,225 | ||||||||||||||||
Commercial real estate
|
1,642 | 979 | 4,166 | 6,787 | 457,250 | 464,037 | 214 | 6,072 | ||||||||||||||||||||||||
Commercial
|
911 | 883 | 2,888 | 4,682 | 175,910 | 180,592 | 15 | 4,421 | ||||||||||||||||||||||||
Home equity
|
590 | 170 | 739 | 1,499 | 269,128 | 270,627 | 58 | 1,696 | ||||||||||||||||||||||||
Consumer
|
164 | 28 | 25 | 217 | 12,971 | 13,188 | — | 25 | ||||||||||||||||||||||||
Total
|
$ | 4,795 | $ | 3,593 | $ | 13,434 | $ | 21,822 | $ | 1,502,930 | $ | 1,524,752 | $ | 711 | $ | 19,439 |
14
The Company takes a conservative approach in credit risk management but remains focused on community lending and reinvesting. Credit administration works closely with borrowers experiencing credit problems to assist in loan repayment or term modifications. Restructured loans consist of loans that provide term modifications or a reduction of either interest or principal due to the borrower’s financial hardship. Once the obligation has been restructured due to credit problems, it will continue to remain in restructured status until paid in full. Loans restructured due to credit difficulties amounted to $2.6 and $2.3 million at March 31, 2011 and December 31, 2010, respectively. Both non-accrual and restructured loans are considered impaired. All impaired loans are allocated a portion of allowance to cover potential losses. At March 31, 2011 and December 31, 2010, there were no impaired loans without a related recorded allowance.
The following is a summary of impaired loan balances and associated allowance by portfolio segment as of March 31, 2011:
Recorded
Investment
|
Unpaid Principal
Balance
|
Related
Allowance
|
Average
Recorded
Investment
|
Interest Income
Recognized
|
||||||||||||||||
With an allowance recorded:
|
||||||||||||||||||||
Residential real estate
|
$ | 10,566 | $ | 10,856 | $ | 930 | $ | 10,541 | $ | 36 | ||||||||||
Commercial real estate
|
6,551 | 7,805 | 544 | 5,881 | 3 | |||||||||||||||
Commercial
|
4,042 | 4,475 | 427 | 4,198 | 45 | |||||||||||||||
Home equity
|
1,276 | 1,305 | 212 | 1,669 | — | |||||||||||||||
Consumer
|
76 | 236 | 9 | 59 | — | |||||||||||||||
Ending Balance
|
$ | 22,511 | $ | 24,677 | $ | 2,122 | $ | 22,348 | $ | 84 |
The following is a summary of impaired loan balances and associated allowance by portfolio segment as of December 31, 2010:
Recorded
Investment
|
Unpaid Principal
Balance
|
Related
Allowance
|
Average
Recorded
Investment
|
Interest Income
Recognized
|
||||||||||||||||
With an allowance recorded:
|
||||||||||||||||||||
Residential real estate
|
$ | 9,330 | $ | 9,750 | $ | 840 | $ | 7,739 | $ | 30 | ||||||||||
Commercial real estate
|
6,182 | 7,198 | 660 | 6,334 | 4 | |||||||||||||||
Commercial
|
4,486 | 4,708 | 631 | 4,499 | 1 | |||||||||||||||
Home equity
|
1,711 | 2,049 | 316 | 1,118 | 1 | |||||||||||||||
Consumer
|
25 | 185 | 25 | 113 | — | |||||||||||||||
Ending Balance
|
$ | 21,734 | $ | 23,890 | $ | 2,472 | $ | 19,803 | $ | 36 |
NOTE 5 – GOODWILL, CORE DEPOSIT AND TRUST RELATIONSHIP INTANGIBLES
The Company has recognized goodwill and certain identifiable intangible assets in connection with certain acquisitions of other businesses in prior years. The changes in core deposit intangible and trust relationship intangible for the three months ended March 31, 2011 are shown in the table below:
Core Deposit Intangible
|
||||||||||||
Total
|
Accumulated
Amortization
|
Net
|
||||||||||
Balance at December 31, 2010
|
$
|
14,444
|
$
|
(10,930
|
)
|
$
|
3,514
|
|||||
2011 amortization
|
— |