Attached files
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EX-31.1 - 1st United Bancorp, Inc. | i00179_ex31-1.htm |
EX-32.1 - 1st United Bancorp, Inc. | i00179_ex32-1.htm |
EX-99.1 - 1st United Bancorp, Inc. | i00179_ex99-1.htm |
EX-31.2 - 1st United Bancorp, Inc. | i00179_ex31-2.htm |
EXCEL - IDEA: XBRL DOCUMENT - 1st United Bancorp, Inc. | Financial_Report.xls |
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UNITED STATES |
SECURITIES AND EXCHANGE COMMISSION |
Washington, DC 20549 |
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FORM 10-Q |
(Mark One)
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x |
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 March 31, 2012 |
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OR |
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o |
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934. |
For the transition period from ____________________ to ____________________
Commission file number 001-34462
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1ST UNITED BANCORP, INC. |
(Exact Name of Registrant as specified in its charter) |
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FLORIDA |
65-0925265 |
(State or Other Jurisdiction of Incorporation or Organization) |
(I.R.S. Employer Identification No.) |
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One North Federal Highway, Boca Raton |
33432 |
(Address of Principal Executive Offices) |
(Zip Code) |
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(561) 362-3400 |
(Registrants Telephone Number, Including Area Code) |
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N/A |
(Former Name, Former Address and Former Fiscal Year, if Changed Since Last Report.) |
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes x No o
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§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 x No o
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of large accelerated filer, accelerated filer, and smaller reporting company in Rule 12b-2 of the Exchange Act. (Check one):
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Large accelerated filer o |
Accelerated filer x |
Non-accelerated filer o |
Smaller reporting company o |
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
Indicate the number of shares outstanding of each of the issuers classes of common stock, as of the latest practicable date.
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Class |
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Outstanding at April 16, 2012 |
Common stock, $.01 par value |
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34,054,520 |
1ST UNITED BANCORP, INC.
March 31, 2012
INDEX
INTRODUCTORY NOTE
Caution Concerning Forward-Looking Statements
The SEC encourages companies to disclose forward-looking information so that 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 the 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, 2011 (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, including the Dodd-Frank Wall Street Reform and Consumer Protection Act; |
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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 the estimate for our loan loss provision; |
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our ability to integrate the business and operations of companies and banks that we have acquired, and those we may acquire in the future; |
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the failure to achieve expected gains, revenue growth, and/or expense savings from past and future acquisitions; |
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the frequency and magnitude of foreclosure of our loans; |
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increased competition and its effect on pricing, including the impact on our net interest margin from repeal of Regulation Q; |
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our customers willingness to make timely payments on their loans; |
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our ability to comply with the terms of the loss sharing agreements with the FDIC; |
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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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changes in the securities and real estate markets; |
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changes in monetary and fiscal policies of the U.S. Government; |
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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 risks of geographic and industry concentrations; |
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our need and our ability to incur additional debt or equity financing; |
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the effects of harsh weather conditions, including hurricanes, and man-made disasters; |
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our ability to comply with the extensive laws and regulations to which we are subject; |
1
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the willingness of clients to accept third-party products and services rather than our products and services and vice versa; |
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technological changes; |
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negative publicity and the impact on our reputation; |
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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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the limited trading activity of our common stock; |
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the concentration of ownership of our common stock; |
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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 Securities and Exchange Commission; and |
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our ability to manage the risks involved in the foregoing. |
However, other factors besides those listed above 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. These forward-looking statements are not guarantees of future performance, but reflect the present expectations of future events by our management and are subject to a number of factors and uncertainties that could cause actual results to differ materially from those described in the forward-looking statements. Any forward-looking statements made by us 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.
2
1ST UNITED
BANCORP, INC.
CONSOLIDATED BALANCE SHEETS
(Dollar amounts in thousands)
(unaudited)
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March 31, |
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December 31, |
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ASSETS |
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Cash and due from financial institutions |
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$ |
134,569 |
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$ |
164,724 |
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Federal funds sold |
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1,227 |
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700 |
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Cash and cash equivalents |
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135,796 |
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165,424 |
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Securities available for sale |
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219,248 |
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201,722 |
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Loans held for sale |
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192 |
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100 |
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Loans, net of allowance of $12,366 and $12,836 at March 31, 2012 and December 31, 2011 |
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855,567 |
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867,994 |
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Nonmarketable equity securities |
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11,211 |
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11,207 |
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Premises and equipment, net |
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12,191 |
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12,383 |
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Other real estate owned |
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13,385 |
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13,512 |
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Company-owned life insurance |
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15,656 |
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5,093 |
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FDIC loss share receivable |
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66,210 |
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71,900 |
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Goodwill |
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51,969 |
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51,969 |
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Core deposit intangible |
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3,117 |
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3,260 |
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Accrued interest receivable and other assets |
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16,259 |
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16,683 |
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Total assets |
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$ |
1,400,801 |
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$ |
1,421,247 |
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LIABILITIES AND SHAREHOLDERS EQUITY |
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Deposits |
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Non-interest bearing |
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$ |
354,038 |
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$ |
329,283 |
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Interest bearing |
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811,327 |
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852,425 |
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Total deposits |
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1,165,365 |
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1,181,708 |
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Federal funds purchased and repurchase agreements |
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11,138 |
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8,746 |
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Federal Home Loan Bank advances |
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5,000 |
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Accrued interest payable and other liabilities |
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8,420 |
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10,442 |
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Total liabilities |
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1,184,923 |
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1,205,896 |
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Commitments and contingencies (Note 9) |
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Shareholders equity |
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Preferred stock no par, 5,000,000 shares authorized; no shares issued or outstanding |
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Common stock $0.01 par value; 60,000,000 shares authorized; 30,914,166 and 30,569,032 issued and outstanding at March 31, 2012 and December 31, 2011, respectively |
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309 |
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307 |
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Additional paid-in capital |
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218,078 |
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217,800 |
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Accumulated deficit |
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(4,539 |
) |
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(5,319 |
) |
Accumulated other comprehensive income |
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2,030 |
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2,563 |
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Total shareholders equity |
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215,878 |
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215,351 |
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Total liabilities and shareholders equity |
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$ |
1,400,801 |
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$ |
1,421,247 |
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See accompanying notes to the consolidated financial statements.
3
1ST UNITED
BANCORP, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(Dollars in thousands, except per share data)
(unaudited)
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Three months ended |
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2012 |
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2011 |
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Interest income: |
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Loans, including fees |
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$ |
14,372 |
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$ |
13,717 |
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Securities available for sale |
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1,327 |
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787 |
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Federal funds sold and other |
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189 |
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177 |
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Total interest income |
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15,888 |
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14,681 |
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Interest expense: |
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Deposits |
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1,428 |
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1,631 |
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Federal funds purchased and repurchase agreements |
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3 |
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6 |
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Federal Home Loan Bank and Federal Reserve Bank borrowings |
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6 |
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55 |
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Other borrowings |
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32 |
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Total interest expense |
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1,437 |
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1,724 |
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Net interest income |
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14,451 |
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12,957 |
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Provision for loan losses |
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1,300 |
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1,900 |
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Net interest income after provision for loan losses |
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13,151 |
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11,057 |
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Non-interest income: |
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Service charges and fees on deposit accounts |
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832 |
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931 |
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Net losses on sales of OREO |
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(25 |
) |
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(224 |
) |
Net gains on sales of securities |
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498 |
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Net gains on sales of loans held for sale |
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19 |
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11 |
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Increase in cash surrender value of Company owned life insurance |
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63 |
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36 |
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Adjustment to FDIC loss share receivable |
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(1,315 |
) |
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(244 |
) |
Other |
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208 |
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219 |
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Total non-interest income |
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280 |
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729 |
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Non-interest expense: |
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Salaries and employee benefits |
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5,709 |
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5,242 |
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Occupancy and equipment |
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1,945 |
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2,052 |
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Data processing |
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879 |
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891 |
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Telephone |
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214 |
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231 |
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Stationery and supplies |
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125 |
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88 |
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Amortization of intangibles |
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143 |
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129 |
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Professional fees |
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678 |
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513 |
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Advertising |
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72 |
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33 |
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Merger reorganization expense |
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340 |
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450 |
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Regulatory assessment |
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358 |
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455 |
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Other |
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1,713 |
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1,107 |
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Total non-interest expense |
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12,176 |
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11,191 |
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Income before taxes |
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1,255 |
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595 |
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Income tax expense |
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475 |
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240 |
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Net income |
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$ |
780 |
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$ |
355 |
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Basic earnings per common share |
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$ |
0.03 |
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$ |
0.01 |
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Diluted earnings per common share |
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$ |
0.03 |
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$ |
0.01 |
|
See accompanying notes to the consolidated financial statements.
4
1ST UNITED
BANCORP, INC.
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
Three months ended March 31, 2012 and 2011
(Dollars in thousands)
(unaudited)
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Three months ended |
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2012 |
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2011 |
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Net income |
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$ |
780 |
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$ |
355 |
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Other comprehensive income (loss): |
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Unrealized gains (losses) on securities available for sale |
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(859 |
) |
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152 |
|
Income tax benefit (expense) |
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326 |
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(57 |
) |
Other comprehensive income (loss) |
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(533 |
) |
|
95 |
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Comprehensive income |
|
$ |
247 |
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$ |
450 |
|
5
1ST UNITED BANCORP, INC.
CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS
EQUITY
Three months ended March 31, 2012 and 2011
(Dollars in thousands)
(unaudited)
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Shares
of |
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Common |
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Additional |
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Accumulated |
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Accumulated |
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Total |
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Balance at January 1, 2011 |
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24,793,089 |
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$ |
248 |
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$ |
181,697 |
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$ |
(8,989 |
) |
$ |
532 |
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$ |
173,488 |
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Comprehensive income: |
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Net income |
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355 |
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355 |
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Change in net unrealized gain on securities available for sale, net of taxes |
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95 |
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|
95 |
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Total comprehensive income, net of taxes |
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450 |
|
Stock-based compensation expense |
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311 |
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|
311 |
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Restricted stock grants |
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14,514 |
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Issuance of common stock, net of cost of $2,042 |
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5,000,000 |
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50 |
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|
30,408 |
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|
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|
|
|
|
|
30,458 |
|
Balance at March 31, 2011 |
|
|
29,807,603 |
|
$ |
298 |
|
$ |
212,416 |
|
$ |
(8,634 |
) |
$ |
627 |
|
$ |
204,707 |
|
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|
|
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Balance at January 1, 2012 |
|
|
30,569,032 |
|
$ |
307 |
|
$ |
217,800 |
|
$ |
(5,319 |
) |
$ |
2,563 |
|
$ |
215,351 |
|
Comprehensive income: |
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|
|
|
|
|
|
|
|
|
|
|
|
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Net income |
|
|
|
|
|
|
|
|
|
|
|
780 |
|
|
|
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|
780 |
|
Change in net unrealized gain on securities available for sale, net of taxes |
|
|
|
|
|
|
|
|
|
|
|
|
|
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(533 |
) |
|
(533 |
) |
Total comprehensive income, net of taxes |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
247 |
|
Stock-based compensation expense |
|
|
|
|
|
|
|
|
280 |
|
|
|
|
|
|
|
|
280 |
|
Restricted stock grants |
|
|
345,134 |
|
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2 |
|
|
(2 |
) |
|
|
|
|
|
|
|
|
|
Balance at March 31, 2012 |
|
|
30,914,166 |
|
$ |
309 |
|
$ |
218,078 |
|
$ |
(4,539 |
) |
$ |
2,030 |
|
$ |
215,878 |
|
See accompanying notes to the consolidated financial statements.
6
1ST UNITED BANCORP, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
Three months ended March 31, 2012 and 2011
(Dollars in thousands)
(unaudited)
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2012 |
|
2011 |
|
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Cash flows from operating activities |
|
|
|
|
|
|
|
Net income |
|
$ |
780 |
|
$ |
355 |
|
Adjustments to reconcile net income to net cash provided by (used in) operating activities |
|
|
|
|
|
|
|
Provision for loan losses |
|
|
1,300 |
|
|
1,900 |
|
Depreciation and amortization |
|
|
602 |
|
|
601 |
|
Net accretion of purchase accounting adjustments |
|
|
3,493 |
|
|
2,942 |
|
Net amortization of securities |
|
|
623 |
|
|
(269 |
) |
Adjustment to FDIC receivable |
|
|
1,315 |
|
|
244 |
|
Increase in cash surrender value of company-owned life insurance |
|
|
(63 |
) |
|
(37 |
) |
Stock-based compensation expense |
|
|
280 |
|
|
311 |
|
Net (gains) losses on sales of securities |
|
|
(498 |
) |
|
|
|
Net loss on other real estate owned |
|
|
25 |
|
|
224 |
|
Net loss on premises and equipment |
|
|
|
|
|
11 |
|
Net gain on sale of loans held for sale |
|
|
(19 |
) |
|
(11 |
) |
Write-down of other real estate owned |
|
|
264 |
|
|
|
|
Loans originated for sale |
|
|
(809 |
) |
|
(812 |
) |
Proceeds from sale of loans held for sale |
|
|
736 |
|
|
5,623 |
|
Net change in: |
|
|
|
|
|
|
|
Deferred income tax |
|
|
(113 |
) |
|
(298 |
) |
Deferred loan fees |
|
|
17 |
|
|
225 |
|
Accrued interest receivable and other assets |
|
|
424 |
|
|
(3,525 |
) |
Accrued interest payable and other liabilities |
|
|
(1,583 |
) |
|
774 |
|
Net cash provided by (used in) operating activities |
|
|
6,774 |
|
|
8,258 |
|
Cash flows from investing activities |
|
|
|
|
|
|
|
Proceeds from sales and calls of securities |
|
|
29,945 |
|
|
1,000 |
|
Proceeds from security maturities and prepayments |
|
|
12,420 |
|
|
6,423 |
|
Purchases of securities |
|
|
(60,875 |
) |
|
(15,946 |
) |
Loan originations and payments, net |
|
|
5,036 |
|
|
42,192 |
|
Proceeds from sale of other real estate owned |
|
|
2,280 |
|
|
1,952 |
|
Cash received from FDIC loss sharing agreements |
|
|
4,514 |
|
|
(244 |
) |
Purchase of nonmarketable equity securities, net |
|
|
(4 |
) |
|
252 |
|
Purchase of Company owned life insurance |
|
|
(10,500 |
) |
|
|
|
Additions to premises and equipment, net |
|
|
(267 |
) |
|
(352 |
) |
Net cash provided by (used in) investing activities |
|
|
(17,451 |
) |
|
35,277 |
|
|
|
|
|
|
|
|
|
Cash flows from financing activities |
|
|
|
|
|
|
|
Net change in deposits |
|
|
(16,343 |
) |
|
(38,790 |
) |
Net change in federal funds purchased and repurchase agreements |
|
|
2,392 |
|
|
(559 |
) |
Net change in Federal Home Loan Bank advance |
|
|
(5,000 |
) |
|
|
|
Net change in other borrowings |
|
|
|
|
|
(125 |
) |
Issuance of common stock net of expense |
|
|
|
|
|
30,458 |
|
Net cash provided by (used in) financing activities |
|
|
(18,951 |
) |
|
(9,016 |
) |
|
|
|
|
|
|
|
|
Net change in cash and cash equivalents |
|
|
(29,628 |
) |
|
34,519 |
|
Beginning cash and cash equivalents |
|
|
165,424 |
|
|
119,752 |
|
|
|
|
|
|
|
|
|
Ending cash and cash equivalents |
|
$ |
135,796 |
|
$ |
154,271 |
|
Supplemental cash flow information: |
|
|
|
|
|
|
|
Interest paid |
|
$ |
1,345 |
|
$ |
1,759 |
|
Transfer of loans to other real estate owned |
|
|
2,581 |
|
|
1,586 |
|
See accompanying notes to the consolidated financial statements.
7
1ST UNITED BANCORP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in thousands, except per share data)
(unaudited)
NOTE 1 BASIS OF PRESENTATION
Nature of Operations and Principles of Consolidation: The consolidated financial statements include 1st United Bancorp, Inc. (Bancorp or Company) and its wholly-owned subsidiaries, 1st United Bank (1st United) and Equitable Equity Lending (EEL), together referred to as the Company. Intercompany transactions and balances are eliminated in consolidation.
Bancorps primary business is the ownership and operation of 1st United. 1st United is a state chartered commercial bank that provides financial services through its four offices in Palm Beach County, four offices in Broward County, four offices in Miami-Dade County, one office each in the cities of Vero Beach, Sebastian and Barefoot Bay, Florida and four offices in Pinellas and Pasco counties. 1st Uniteds primary deposit products are checking, savings, and term certificate accounts, and its primary lending products are commercial and residential mortgages, and commercial and installment loans. Substantially all loans are secured by specific items of collateral including commercial and residential real estate, business assets and consumer assets. Commercial loans are expected to be repaid from the cash flow supporting the operations of businesses. Other financial instruments, which potentially represent concentrations of credit risk, include deposit accounts in other financial institutions and federal funds sold.
EEL is a commercial finance subsidiary that from time to time will hold foreclosed assets, performing loans or non-performing loans. At March 31, 2012, EEL held $2,423 in performing loans and $1,816 in non-performing loans.
The accompanying consolidated financial statements have been prepared in accordance with the instructions to Form 10-Q and, therefore, do not include all information and notes necessary for a complete presentation of the financial position, results of operations and cash flow activity required in accordance with accounting principles generally accepted in the United States. In the opinion of management of the Company, all adjustments (consisting only of normal recurring adjustments) necessary for a fair statement of results for the interim periods have been made. These consolidated financial statements and notes should be read in conjunction with the consolidated financial statements and notes included in the Companys Annual Report on Form 10-K for the year ended December 31, 2011.
In preparing the consolidated financial statements, management is required to make estimates and assumptions that affect the reported asset and liability balances and revenue and expense amounts and the disclosure of contingent assets and liabilities. Actual results could differ significantly from those estimates. The December 31, 2011 balance sheet was derived from the Companys December 31, 2011 audited financial statements and has been adjusted for additional information related to the fair values of assets and liabilities acquired. See Note 2. Certain amounts for the prior year have been reclassified to conform to the current years presentation.
Operations are managed and financial performance is evaluated on a company-wide basis. Accordingly, all financial operations are considered by management to be aggregated in one reportable operating segment.
Earnings Per Common Share: Basic earnings per common share is net income divided by the weighted average number of common shares outstanding during the period. Diluted earnings per share includes the dilutive effect of additional potential common shares issuable under stock options and restricted stock. Earnings per common share is restated for all stock splits and stock dividends through the date of issue of the consolidated financial statements.
Stock options to acquire 3,658,070 and 2,094,478, respectively, shares of common stock were not considered in computing diluted earnings (loss) per share for the quarters ended March 31, 2012 and 2011 because consideration of those instruments would be antidilutive.
FDIC Loss Share Receivable. The FDIC Loss Share Receivable represents the estimated amounts due from the Federal Deposit Insurance Corporation (FDIC) related to the loss share agreements which were booked as of the acquisition dates of Republic Federal Bank, N.A. (Republic),The Bank of Miami, N.A. (TBOM) and Old Harbor Bank of Florida (Old Harbor). The receivable represents the discounted value of the FDICs reimbursed portion of estimated losses we expect to realize on loans and other real estate (Covered Assets) acquired as a result of the TBOM, Republic and Old Harbor acquisitions. As losses are realized on Covered Assets, the portion that the FDIC pays the Company in cash for principal and up to 90 days of interest, reduces the FDIC Loss Share Receivable.
8
1ST UNITED BANCORP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in thousands, except per share data)
(unaudited)
NOTE 1 BASIS OF PRESENTATION (continued)
The FDIC Loss Share Receivable is reviewed quarterly and adjusted for any changes in expected cash flows based on recent performance and expectations for future performance of the Covered Assets. Any increases in cash flows of the Covered Assets will be accreted into income over the life of the Covered Asset but will reduce immediately the FDIC Loss Share Receivable. Any decreases in the expected cash flows of the Covered Assets will result in the impairment to the Covered Asset and an increase in the FDIC Loss Share Receivable to be reflected immediately. Non-cash adjustments to the FDIC Loss Share Receivable are recorded to non-interest income.
Certain Acquired Loans: As part of business acquisitions, the Company evaluated each of the acquired loans under ASC 310-30 to determine whether (1) there was evidence of credit deterioration since origination, and (2) it was probable that we would not collect all contractually required payment receivable. The Company determined the best indicator of such evidence was an individual loans payment status and/or whether a loan was determined to be classified by us based on our review of each individual loan. Therefore, generally each individual loan that should have been or was on nonaccrual at the acquisition date, loans contractually past due 60 days or more, and each individual loan that was classified by us were included subject to ASC 310-30. These loans were recorded at the discounted expected cash flows of the individual loan and are currently disclosed in Note 4.
Loans which were evaluated under ASC 310-30, and where the timing and amount of cash flows can be reasonably estimated, were accounted for in accordance with ASC 310-30-35. The Company applies the interest method for these loans under this subtopic and the loans are excluded from non-accrual. If, at acquisition, we identified loans that we could not reasonably estimate cash flows or if subsequent to acquisition such cash flows could not be estimated, such loans would be included in non-accrual. These acquired loans are recorded at the allocated fair value, such that there is no carryover of the sellers allowance for loan losses. Such acquired loans are accounted for individually. The Company estimates the amount and timing of expected cash flows for each purchased loan, and the expected cash flows in excess of the allocated fair value is recorded as interest income over the remaining life of the loan (accretable yield). The excess of the loans contractual principal and interest over expected cash flows is not recorded (non-accretable difference). Over the life of the loan, expected cash flows continue to be estimated. If the present value of expected cash flows is less than the carrying amount, a loss is recorded through the allowance for loan losses. If the present value of expected cash flows is greater than the carrying amount, it is recognized as part of future interest income.
Allowance for Loan Losses. In originating loans, the Company recognizes that credit losses will be experienced and the risk of loss will vary with, among other things: general economic conditions; the type of loan being made; the creditworthiness of the borrower over the term of the loan; and, in the case of a collateralized loan, the quality of the collateral for such a loan. The allowance for loan losses represents our estimate of the allowance necessary to provide for probable incurred losses in the loan portfolio. In making this determination, the Company analyzes the ultimate collectability of the loans in its portfolio, feedback provided by internal loan staff, the independent loan review function and information provided by examinations performed by regulatory agencies.
The allowance for loan losses is evaluated at the portfolio segment level using the same methodology for each segment. The historical net losses for a rolling two year period is the basis for the general reserve for each segment which is adjusted for each of the same qualitative factors (i.e., nature and volume of portfolio, economic and business conditions, classification, past due and non-accrual trends) evaluated by each individual segment. Impaired loans and related specific reserves for each of the segments are also evaluated using the same methodology for each segment. The qualitative factors totaled approximately 20 basis points of the allowance for loan losses at March 31, 2012.
A loan is considered impaired when, based on current information and events, it is probable the Company will be unable to collect the scheduled payments of principal or interest when due according to the contractual terms of the loan agreement. Factors considered by management in determining impairment include payment status, collateral value, and the probability of collecting scheduled principal and interest payments when due. Loans that experience insignificant payment delays (loan payments made within 90 days of the due date) and payment shortfalls (which are tracked as past due amounts) generally are not classified as impaired. The Company determines the past due status of a loan based on the number of days contractually
9
1ST UNITED BANCORP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in thousands, except per share data)
(unaudited)
NOTE 1 BASIS OF PRESENTATION (continued)
past due. Management determines the significance of payment delays and payment shortfalls on a case-by-case basis, taking into consideration all of the circumstances surrounding the loan and the borrower, including the length of the delay, the reasons for the delay, the borrowers prior payment record, and the amount of the shortfall in relation to the principal and interest owed.
Charge-offs of loans are made by portfolio segment at the time that the collection of the full principal, in managements judgment, is doubtful. This methodology for determining charge-offs is consistently applied to each segment.
On a quarterly basis, management reviews the adequacy of the allowance for loan losses. Commercial credits are graded by risk management and the loan review function validates the assigned credit risk grades. In the event that a loan is downgraded, it is included in the allowance analysis at the lower grade. To establish the appropriate level of the allowance, the Company reviews and classifies a sample of loans (including all impaired and nonperforming loans) as to potential loss exposure. The Companys analysis of the allowance for loan losses consists of three components: (i) specific credit allocation established for expected losses resulting from analysis developed through specific credit allocations on individual loans for which the recorded investment in the loan exceeds the fair value; (ii) general portfolio allocation based on historical loan loss experience for each loan category; and (iii) qualitative reserves based on general economic conditions as well as specific economic factors in the markets in which the Company operates.
The specific credit allocation component of the allowance for loan losses is based on a regular analysis of loans where the internal credit rating is at or below the substandard classification and the loan is determined to be impaired as determined by management.
The impairment, if any, is determined based on either the present value expected future cash flows discounted at the loans effective interest rate, the market price of the loan, or if the loan is collateral dependent, the fair value of the underlying collateral less estimated cost of sale. The Company may classify a loan as substandard; however, it may not be classified as impaired. A loan may be classified as substandard by management if, for example, the primary source of repayment is insufficient, the financial condition of the borrower and/or guarantors has deteriorated or there are chronic delinquencies.
Troubled Debt Restructurings. A loan is considered a troubled debt restructured loan based on individual facts and circumstances. A modification may include either an increase or reduction in interest rate or deferral of principal payments or both. The Company classifies troubled debt restructured loans as impaired and evaluates the need for an allowance for loan losses on a loan-by-loan basis. An allowance for loan losses is based on either the present value of estimated future cash flows or the estimated fair value of the underlying collateral. Loans retain their interest accrual status at the time of modification.
NOTE 2 ACQUISITIONS
Old Harbor Bank of Florida
On October 21, 2011, the Company, through its banking subsidiary, entered into a purchase and assumption agreement and certain loss sharing agreements with the Federal Deposit Insurance Corporation (FDIC) and the FDIC as receiver, to acquire certain assets and assume substantially all of the deposits, other than depository organized - brokered deposits, and certain liabilities of Old Harbor, located in Clearwater, Florida. Assets acquired included cash and cash equivalents, investments securities, loans with unpaid principal of $149,186, and other real estate owned. A majority of the loans and all other real estate owned are covered under loss sharing agreements (Covered Assets) between the FDIC and 1st United. The loss sharing agreements cover 70% of losses incurred up to $49 million on covered loans and other real estate owned as well as third party collection costs and 90 days of accrued interest on covered loans.
The Company accounted for the transaction under the acquisition method of accounting which requires purchased assets and assumed liabilities to be recorded at their respective acquisition date fair values. The estimated fair values are considered preliminary and are subject to refinement as additional information relative to the closing date fair values becomes available during the measurement period, not to exceed one year. Specifically, additional information related to the fair value over loans, other real estate and the FDIC loss share receivable are preliminary and may change as new information becomes available.
10
1ST UNITED BANCORP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in thousands, except per share data)
(unaudited)
NOTE 2 ACQUISITIONS (continued)
The acquisition of Old Harbor is consistent with the Companys plan to enhance both its footprint and competitive position. This acquisition provided for the initial expansion into Floridas Gulf Coast markets, specifically Pasco and Pinellas counties. The Company believes it is well-positioned to deliver superior customer service, achieve stronger financial performance and enhance shareholder value through the synergies of combined operations, all of which contributed to the resulting goodwill associated with the transaction. The Company completed the integration of Old Harbor in March 2012.
The Bank of Miami, N.A. Acquisition
On December 17, 2010, the Company, through its banking subsidiary 1st United Bank, entered into a purchase and assumption agreement with the FDIC, as receiver for TBOM. Per the agreement, the Company assumed all deposits, except certain brokered deposits, and borrowings and acquired certain assets of TBOM including loans, other real estate owned and cash and investments. All of the loans acquired are covered under two loss sharing agreements. The loss sharing agreements cover 80% of losses incurred on acquired loan and other real estate as well as third party collection costs and 90 days of accrued interest on covered loans. The term of the loss sharing and loss recoveries is ten years for residential real estate and five years with respect to losses on non-residential real estate and eight years with respect to loss recovery. The reimbursable losses from the FDIC are based on the book value of the relevant loan as determined by the FDIC as the date of the transaction. New loans made after that date are not covered under the loss share agreement with the FDIC.
The Company received a $38,000 net discount on the assets acquired. TBOM operated three banking facilities in Miami-Dade County, Florida. None of the centers were retained by the Company and the related deposits were serviced from existing branch facilities.
NOTE 3 SECURITIES
The amortized cost and fair value of securities available for sale and the related gross unrealized gains and losses recognized in accumulated other comprehensive income (loss) were as follows.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Amortized |
|
Gross |
|
Gross |
|
Fair |
|
||||
March 31, 2012 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Residential collateralized mortgage obligations |
|
$ |
6,888 |
|
$ |
83 |
|
$ |
|
|
$ |
6,971 |
|
Residential mortgage-backed |
|
|
209,106 |
|
|
3,357 |
|
|
(186 |
) |
|
212,277 |
|
|
|
$ |
215,994 |
|
|
3,440 |
|
|
(186 |
) |
|
219,248 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2011 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Residential collateralized mortgage obligations |
|
$ |
7,657 |
|
$ |
100 |
|
$ |
|
|
$ |
7,757 |
|
Residential mortgage-backed |
|
|
189,953 |
|
|
4,023 |
|
|
(11 |
) |
|
193,965 |
|
|
|
$ |
197,610 |
|
$ |
4,123 |
|
$ |
(11 |
) |
$ |
201,722 |
|
At March 31, 2012 and December 31, 2011, there were no holdings of securities of any one issuer, other than the U.S. government agencies, in an amount greater than 10% of shareholders equity. All of the residential collateralized mortgage obligations and residential mortgage-backed securities at March 31, 2012 and December 31, 2011 were issued or sponsored by U.S. government agencies.
11
1ST UNITED BANCORP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in thousands, except per share data)
(unaudited)
NOTE 3 SECURITIES (continued)
The amortized cost and fair value of debt securities at March 31, 2012 by contractual maturity were as shown in the table below. Securities not due at a single maturity date, primarily mortgage-backed securities, are shown separately.
|
|
|
|
|
|
|
|
|
|
Amortized |
|
Fair |
|
||
Due in one year or less |
|
$ |
|
|
$ |
|
|
Due from one to five years |
|
|
|
|
|
|
|
Due from five to ten years |
|
|
|
|
|
|
|
Due after ten years |
|
|
|
|
|
|
|
Residential mortgage-backed and residential collateralized mortgage obligations |
|
|
215,994 |
|
|
219,248 |
|
|
|
$ |
215,994 |
|
$ |
219,248 |
|
Securities as of March 31, 2012 and December 31, 2011 with a fair value of $18,930 and $23,343, respectively, were pledged to secure public deposits and repurchase agreements.
Proceeds and gross gains and (losses) from the sale of securities available for sales for the three months ended March 31, 2012, were as follows:
|
|
|
|
|
|
|
|
|
|
Three months ended |
|
||||
|
|
2012 |
|
2011 |
|
||
Proceeds from sale |
|
$ |
29,945 |
|
$ |
|
|
Gross gain |
|
$ |
498 |
|
$ |
|
|
Gross (loss) |
|
|
|
|
|
|
|
Net gains (losses) on sales of securities |
|
$ |
498 |
|
$ |
|
|
Gross unrealized losses at March 31, 2012 and December 31, 2011, respectively, aggregated by investment category and length of time that individual securities have been in a continuous unrealized loss position, were as follows.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Less than 12 Months |
|
12 Months or More |
|
Total |
|
||||||||||||
|
|
Fair |
|
Unrealized |
|
Fair |
|
Unrealized |
|
Fair |
|
Unrealized |
|
||||||
March 31, 2012 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Residential collateral mortgage obligations |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
Residential mortgage-backed |
|
|
29,550 |
|
|
(186 |
) |
|
14 |
|
|
|
|
|
29,564 |
|
|
(186 |
) |
|
|
$ |
29,550 |
|
$ |
(186 |
) |
$ |
14 |
|
$ |
|
|
$ |
29,564 |
|
$ |
(186 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2011 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Residential collateral mortgage obligations |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
Residential Mortgage-backed |
|
|
7,487 |
|
|
(11 |
) |
|
14 |
|
|
|
|
|
7,501 |
|
|
(11 |
) |
|
|
$ |
7,487 |
|
$ |
(11 |
) |
$ |
14 |
|
$ |
|
|
$ |
7,501 |
|
$ |
(11 |
) |
12
1ST UNITED BANCORP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in thousands, except per share data)
(unaudited)
NOTE 3 SECURITIES (continued)
In determining other than temporary impairment (OTTI) for debt securities, management considers many factors, including: (1) the length of time and the extent to which the fair value has been less than cost, (2) the financial condition and near-term prospects of the issuer, (3) whether the market decline was affected by macroeconomic conditions, and (4) whether the Company has the intent to sell the debt security or more likely than not will be required to sell the debt security before its anticipated recovery. The assessment of whether OTTI exists involves a high degree of subjectivity and judgment and is based on the information available to management at a point in time.
At March 31, 2012 and December 31, 2011, there were 8 and 7, respectively, residential mortgage-backed securities with unrealized losses. At March 31, 2012 and December 31, 2011, securities with unrealized losses had depreciated 0.63% and 0.15%, respectively, from the Companys amortized cost basis. The decrease in fair value is attributable to changes in the interest rate environment. Based on the Companys assessment, the unrealized losses at March 31, 2012, and December 31, 2011 were deemed to be temporary.
NOTE 4 - LOANS
Loans at March 31, 2012 and December 31, 2011 were as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
March 31, 2012 |
|
December 31, 2011 |
|
||||||||||||||
|
|
Loans |
|
Loans Not |
|
Total |
|
Loans |
|
Loans Not |
|
Total |
|
||||||
Commercial |
|
$ |
45,704 |
|
$ |
130,348 |
|
$ |
176,052 |
|
$ |
46,180 |
|
$ |
125,846 |
|
$ |
172,026 |
|
Real estate: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Residential |
|
|
109,271 |
|
|
78,990 |
|
|
188,261 |
|
|
110,515 |
|
|
86,165 |
|
|
196,680 |
|
Commercial |
|
|
222,388 |
|
|
228,129 |
|
|
450,517 |
|
|
232,236 |
|
|
223,616 |
|
|
455,852 |
|
Construction and land development |
|
|
12,600 |
|
|
28,334 |
|
|
40,934 |
|
|
16,300 |
|
|
27,836 |
|
|
44,136 |
|
Consumer and other |
|
|
945 |
|
|
11,189 |
|
|
12,134 |
|
|
1,069 |
|
|
11,014 |
|
|
12,083 |
|
|
|
$ |
390,908 |
|
$ |
476,990 |
|
|
867,898 |
|
$ |
406,300 |
|
$ |
474,477 |
|
|
880,777 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Add (deduct): |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Unearned income and net deferred loan (fees) costs |
|
|
|
|
|
|
|
|
35 |
|
|
|
|
|
|
|
|
53 |
|
Allowance for loan losses |
|
|
|
|
|
|
|
|
(12,366 |
) |
|
|
|
|
|
|
|
(12,836 |
) |
|
|
|
|
|
|
|
|
$ |
855,567 |
|
|
|
|
|
|
|
$ |
867,994 |
|
The Company has segregated and evaluates its loan portfolio through five portfolio segments. The five segments are residential real estate, commercial, commercial real estate, construction and land development and consumer and other. Most of the Companys business activity is with customers located in Palm Beach, Broward and Miami-Dade counties. Therefore, the Companys exposure to credit risk is significantly affected by changes in these counties.
Residential real estate loans are a mixture of fixed rate and adjustable rate residential mortgage loans. As a policy, the Company holds adjustable rate loans and sells fixed rate loans into the secondary market. Changes in interest rates or market conditions may impact a borrowers ability to meet contractual principal and interest payments. Residential real estate loans are secured by real property.
Commercial loans consist of small-to medium-sized businesses including professional associations, medical services, retail trade, construction, transportation, wholesale trade, manufacturing and tourism. Commercial loans are derived from our market areas and underwritten based on the borrowers ability to service debt from the businesss underlying cash flows. As a general practice, we obtain collateral such as real estate, equipment or other assets although such loans may be uncollateralized but guaranteed.
13
1ST UNITED BANCORP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in thousands, except per share data)
(unaudited)
NOTE 4 - LOANS (continued)
Commercial real estate loans include loans secured by office buildings, warehouses, retail stores and other property located in or near our markets. These loans are originated based on the borrowers ability to service the debt and secondarily based on the fair value of the underlying collateral.
Construction loans include residential and commercial real estate loans and are typically for owner-occupied or pre-sold / pre-leased properties. The terms of these loans are generally short-term with permanent financing upon completion. Land development loans include loans to develop both residential and commercial properties.
Consumer and other loans include second mortgage loans, home equity loans secured by junior liens on residential real estate and home improvement loans. These loans are originated based primarily on credit scores, debt-to-income ratios and loan-to-value ratios.
Activity in the allowance for loan losses for the three months ended March 31, 2012 was as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commercial |
|
Residential |
|
Commercial |
|
Construction |
|
Consumer |
|
Total |
|
||||||
Beginning balance, January 1, 2012 |
|
$ |
3,111 |
|
$ |
1,945 |
|
$ |
5,302 |
|
$ |
2,409 |
|
$ |
69 |
|
$ |
12,836 |
|
Provisions for loan losses |
|
|
1,493 |
|
|
59 |
|
|
(41 |
) |
|
(161 |
) |
|
(50 |
) |
|
1,300 |
|
Loans charged off |
|
|
(31 |
) |
|
(284 |
) |
|
(1,697 |
) |
|
|
|
|
|
|
|
(2,012 |
) |
Recoveries |
|
|
20 |
|
|
113 |
|
|
37 |
|
|
22 |
|
|
50 |
|
|
242 |
|
Ending Balance, March 31, 2012 |
|
$ |
4,593 |
|
$ |
1,833 |
|
$ |
3,601 |
|
$ |
2,270 |
|
$ |
69 |
|
$ |
12,366 |
|
Activity in the allowance for loan losses for the three months ended March 31, 2011 was as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commercial |
|
Residential |
|
Commercial |
|
Construction |
|
Consumer |
|
Total |
|
||||||
Beginning balance, January 1, 2011 |
|
$ |
3,832 |
|
$ |
3,026 |
|
$ |
4,145 |
|
$ |
1,895 |
|
$ |
152 |
|
$ |
13,050 |
|
Provisions for loan losses |
|
|
(270 |
) |
|
1,202 |
|
|
589 |
|
|
359 |
|
|
20 |
|
|
1,900 |
|
Loans charged off |
|
|
(200 |
) |
|
(140 |
) |
|
(539 |
) |
|
|
|
|
(133 |
) |
|
(1,012 |
) |
Recoveries |
|
|
50 |
|
|
|
|
|
11 |
|
|
33 |
|
|
|
|
|
94 |
|
Ending Balance, March 31, 2011 |
|
$ |
3,412 |
|
$ |
4,088 |
|
$ |
4,206 |
|
$ |
2,287 |
|
$ |
39 |
|
$ |
14,032 |
|
14
1ST UNITED BANCORP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in thousands, except per share data)
(unaudited)
NOTE 4 - LOANS (continued)
Allowance for Loan Losses Allocation
As of March 31, 2012:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commercial |
|
Residential |
|
Commercial |
|
Construction |
|
Consumer |
|
Total |
|
||||||
Specific Reserves: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Impaired loans |
|
$ |
3,012 |
|
$ |
413 |
|
$ |
1,387 |
|
$ |
1,007 |
|
$ |
|
|
$ |
5,819 |
|
Purchase credit impaired loans |
|
|
|
|
|
111 |
|
|
117 |
|
|
|
|
|
|
|
|
228 |
|
Total specific reserves |
|
|
3,012 |
|
|
524 |
|
|
1,504 |
|
|
1,007 |
|
|
|
|
|
6,047 |
|
General reserves |
|
|
1,581 |
|
|
1,309 |
|
|
2,097 |
|
|
1,263 |
|
|
69 |
|
|
6,319 |
|
Total |
|
$ |
4,593 |
|
$ |
1,833 |
|
$ |
3,601 |
|
$ |
2,270 |
|
$ |
69 |
|
$ |
12,366 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loans individually evaluated for impairment |
|
$ |
14,448 |
|
$ |
8,678 |
|
$ |
22,358 |
|
$ |
6,263 |
|
$ |
1 |
|
$ |
51,748 |
|
Purchase credit impaired loans |
|
|
9,916 |
|
|
23,820 |
|
|
59,279 |
|
|
6,903 |
|
|
|
|
|
99,918 |
|
Loans collectively evaluated for impairment |
|
|
151,688 |
|
|
155,763 |
|
|
368,880 |
|
|
27,768 |
|
|
12,133 |
|
|
716,232 |
|
|
|
$ |
176,052 |
|
$ |
188,261 |
|
$ |
450,517 |
|
$ |
40,934 |
|
$ |
12,134 |
|
$ |
867,898 |
|
As of December 31, 2011:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commercial |
|
Residential |
|
Commercial |
|
Construction |
|
Consumer |
|
Total |
|
||||||
Specific Reserves: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Impaired loans |
|
$ |
1,719 |
|
$ |
188 |
|
$ |
2,563 |
|
$ |
892 |
|
$ |
|
|
$ |
5,362 |
|
Purchase credit impaired loans |
|
|
|
|
|
110 |
|
|
542 |
|
|
|
|
|
|
|
|
652 |
|
Total Specific Reserves |
|
|
1,719 |
|
|
298 |
|
|
3,105 |
|
|
892 |
|
|
|
|
|
6,014 |
|
General reserves |
|
|
1,392 |
|
|
1,647 |
|
|
2,197 |
|
|
1,517 |
|
|
69 |
|
|
6,822 |
|
Total |
|
$ |
3,111 |
|
$ |
1,945 |
|
$ |
5,302 |
|
$ |
2,409 |
|
$ |
69 |
|
$ |
12,836 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loans individually evaluated for impairment |
|
$ |
13,936 |
|
$ |
9,231 |
|
$ |
24,826 |
|
$ |
6,277 |
|
$ |
|
|
$ |
54,270 |
|
Purchase credit impaired loans |
|
|
10,486 |
|
|
24,841 |
|
|
63,047 |
|
|
7,308 |
|
|
|
|
|
105,682 |
|
Loans collectively evaluated for impairment |
|
|
147,604 |
|
|
162,608 |
|
|
367,979 |
|
|
30,551 |
|
|
12,083 |
|
|
720,825 |
|
|
|
$ |
172,026 |
|
$ |
196,680 |
|
$ |
455,852 |
|
$ |
44,136 |
|
$ |
12,083 |
|
$ |
880,777 |
|
15
1ST UNITED BANCORP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in thousands, except per share data)
(unaudited)
NOTE 4 - LOANS (continued)
The following tables present loans individually evaluated for impairment by class of loan as of March 31, 2012 and December 31, 2011, respectively.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Recorded Investment in Impaired Loans |
|
||||||||||||||||
March 31, 2012 |
|
Loans Subject to Loss |
|
Loans Not Subject to Loss |
|
||||||||||||||
|
|
Unpaid |
|
Recorded |
|
Allowance |
|
Unpaid |
|
Recorded |
|
Allowance |
|
||||||
Residential Real Estate: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
First mortgages |
|
$ |
2,137 |
|
$ |
1,285 |
|
$ |
266 |
|
$ |
2,712 |
|
$ |
2,213 |
|
$ |
134 |
|
HELOCs and equity |
|
|
|
|
|
|
|
|
|
|
|
13 |
|
|
13 |
|
|
13 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commercial: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Secured non-real estate |
|
|
|
|
|
|
|
|
|
|
|
3,261 |
|
|
2,151 |
|
|
1,243 |
|
Secured real estate |
|
|
|
|
|
|
|
|
|
|
|
3,058 |
|
|
3,016 |
|
|
1,769 |
|
Unsecured |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commercial Real Estate: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Owner occupied |
|
|
140 |
|
|
78 |
|
|
14 |
|
|
7,880 |
|
|
7,103 |
|
|
688 |
|
Non-owner occupied |
|
|
632 |
|
|
487 |
|
|
85 |
|
|
6,115 |
|
|
6,115 |
|
|
600 |
|
Multi-family |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Construction and Land Development: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Construction |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Improved land |
|
|
|
|
|
|
|
|
|
|
|
621 |
|
|
264 |
|
|
138 |
|
Unimproved land |
|
|
|
|
|
|
|
|
|
|
|
2,516 |
|
|
2,516 |
|
|
869 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Consumer and other |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total March 31, 2012 |
|
$ |
2,909 |
|
$ |
1,850 |
|
$ |
365 |
|
|
26,176 |
|
$ |
23,391 |
|
$ |
5,454 |
|
16
1ST UNITED BANCORP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in thousands, except per share data)
(unaudited)
NOTE 4 LOANS (continued)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Recorded Investment in Impaired Loans |
|
||||||||||
|
|
With No Allowance |
|
||||||||||
March 31, 2012 |
|
Loans |
|
Loans Not |
|
||||||||
|
|
Unpaid |
|
Recorded |
|
Unpaid |
|
Recorded |
|
||||
Residential Real Estate: |
|
|
|
|
|
|
|
|
|
|
|
|
|
First mortgages |
|
$ |
347 |
|
$ |
321 |
|
$ |
4,628 |
|
$ |
3,893 |
|
HELOCs and equity |
|
|
|
|
|
|
|
|
953 |
|
|
953 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commercial: |
|
|
|
|
|
|
|
|
|
|
|
|
|
Secured non-real estate |
|
|
|
|
|
|
|
|
3,570 |
|
|
1,050 |
|
Secured real estate |
|
|
|
|
|
|
|
|
8,293 |
|
|
8,231 |
|
Unsecured |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commercial Real Estate: |
|
|
|
|
|
|
|
|
|
|
|
|
|
Owner occupied |
|
|
|
|
|
|
|
|
1,317 |
|
|
1,317 |
|
Non-owner occupied |
|
|
398 |
|
|
346 |
|
|
9,007 |
|
|
5,212 |
|
Multi-family |
|
|
1,714 |
|
|
1,700 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Construction and Land Development: |
|
|
|
|
|
|
|
|
|
|
|
|
|
Construction |
|
|
|
|
|
|
|
|
|
|
|
|
|
Improved land |
|
|
|
|
|
|
|
|
7,950 |
|
|
3,483 |
|
Unimproved land |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Consumer and other |
|
|
|
|
|
|
|
|
18 |
|
|
1 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total March 31, 2012 |
|
$ |
2,459 |
|
$ |
2,367 |
|
$ |
35,736 |
|
$ |
24,140 |
|
17
1ST UNITED BANCORP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in thousands, except per share data)
(unaudited)
NOTE 4 LOANS (continued)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Recorded Investment in Impaired Loans |
|
||||||||||||||||
December 31, 2011 |
|
Loans Subject to Loss |
|
Loans Not Subject to Loss |
|
||||||||||||||
|
|
Unpaid |
|
Recorded |
|
Allowance |
|
Unpaid |
|
Recorded |
|
Allowance |
|
||||||
Residential Real Estate: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
First mortgages |
|
$ |
1,588 |
|
$ |
810 |
|
$ |
165 |
|
$ |
2,478 |
|
$ |
1,979 |
|
$ |
10 |
|
HELOCs and equity |
|
|
|
|
|
|
|
|
|
|
|
13 |
|
|
13 |
|
|
13 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commercial: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Secured non-real estate |
|
|
|
|
|
|
|
|
|
|
|
1,871 |
|
|
710 |
|
|
446 |
|
Secured real estate |
|
|
|
|
|
|
|
|
|
|
|
1,700 |
|
|
1,686 |
|
|
1,273 |
|
Unsecured |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commercial Real Estate: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Owner occupied |
|
|
140 |
|
|
81 |
|
|
11 |
|
|
7,849 |
|
|
7,073 |
|
|
666 |
|
Non-owner occupied |
|
|
633 |
|
|
487 |
|
|
85 |
|
|
6,577 |
|
|
6,577 |
|
|
1,773 |
|
Multi-family |
|
|
443 |
|
|
427 |
|
|
28 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Construction and Land |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Development: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Construction |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Improved land |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Unimproved land |
|
|
|
|
|
|
|
|
|
|
|
2,516 |
|
|
2,516 |
|
|
892 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Consumer and other |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total December 31, 2011 |
|
$ |
2,804 |
|
$ |
1,805 |
|
$ |
289 |
|
$ |
23,004 |
|
$ |
20,554 |
|
$ |
5,073 |
|
18
1ST UNITED BANCORP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in thousands, except per share data)
(unaudited)
NOTE 4 LOANS (continued)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Recorded Investment in Impaired Loans |
|
||||||||||
|
|
With No Allowance |
|
||||||||||
December 31, 2011 |
|
Loans |
|
Loans Not |
|
||||||||
|
|
Unpaid |
|
Recorded |
|
Unpaid |
|
Recorded |
|
||||
Residential Real Estate: |
|
|
|
|
|
|
|
|
|
|
|
|
|
First mortgages |
|
$ |
478 |
|
$ |
423 |
|
$ |
6,008 |
|
$ |
5,362 |
|
HELOCs and equity |
|
|
|
|
|
|
|
|
644 |
|
|
644 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commercial: |
|
|
|
|
|
|
|
|
|
|
|
|
|
Secured non-real estate |
|
|
|
|
|
|
|
|
3,150 |
|
|
2,026 |
|
Secured real estate |
|
|
|
|
|
|
|
|
9,563 |
|
|
9,514 |
|
Unsecured |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commercial Real Estate: |
|
|
|
|
|
|
|
|
|
|
|
|
|
Owner occupied |
|
|
|
|
|
|
|
|
476 |
|
|
476 |
|
Non-owner occupied |
|
|
398 |
|
|
345 |
|
|
11,868 |
|
|
8,089 |
|
Multi-family |
|
|
1,271 |
|
|
1,271 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Construction and Land Development: |
|
|
|
|
|
|
|
|
|
|
|
|
|
Construction |
|
|
|
|
|
|
|
|
|
|
|
|
|
Improved land |
|
|
|
|
|
|
|
|
8,598 |
|
|
3,761 |
|
Unimproved land |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Consumer and other |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total December 31, 2011 |
|
$ |
2,147 |
|
$ |
2,039 |
|
$ |
40,307 |
|
$ |
29,872 |
|
19
1ST UNITED BANCORP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in thousands, except per share data)
(unaudited)
NOTE 4 LOANS (continued)
Average of impaired loans and related interest income for three months ended March 31, 2012 and 2011 were as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three months ended March 31, 2012 |
|
Three months ended March 31, 2011 |
|
||||||||||||||
|
|
Average |
|
Interest |
|
Cash |
|
Average |
|
Interest |
|
Cash |
|
||||||
Residential Real Estate: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
First mortgages |
|
$ |
7,943 |
|
$ |
28 |
|
$ |
1 |
|
$ |
9,275 |
|
$ |
159 |
|
$ |
107 |
|
HELOC and equity |
|
|
961 |
|
|
|
|
|
|
|
|
1,666 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commercial: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Secured non real estate |
|
|
3,412 |
|
|
18 |
|
|
|
|
|
1,051 |
|
|
1 |
|
|
2 |
|
Secured real estate |
|
|
11,266 |
|
|
16 |
|
|
1 |
|
|
49 |
|
|
2 |
|
|
|
|
Unsecured |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commercial Real Estate: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Owner occupied |
|
|
8,520 |
|
|
44 |
|
|
1 |
|
|
10,199 |
|
|
332 |
|
|
134 |
|
Non-owner occupied |
|
|
12,167 |
|
|
122 |
|
|
|
|
|
9,294 |
|
|
264 |
|
|
91 |
|
Multifamily |
|
|
1,699 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Construction and Land Development: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Construction |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Improved Land |
|
|
3,752 |
|
|
29 |
|
|
|
|
|
5,450 |
|
|
105 |
|
|
46 |
|
Unimproved Land |
|
|
2,516 |
|
|
27 |
|
|
|
|
|
1,128 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Consumer and Other: |
|
|
11 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||||
Total |
|
$ |
52,247 |
|
$ |
284 |
|
$ |
3 |
|
$ |
38,112 |
|
$ |
863 |
|
$ |
380 |
|
Modifications of terms for our loans and their inclusion as troubled debt restructurings are based on individual facts and circumstances. Loan modifications that are included as troubled debt restructurings may involve a reduction of the stated interest rate of the loan, an extension of the maturity date at a stated rate of interest lower than the current market rate for new debt with similar risk, or deferral of principal payments, regardless of the period of the modification. Generally, we will allow interest rate reductions for a period of less than two years after which the loan reverts back to the contractual interest rate. Each of the loans included as troubled debt restructurings at March 31, 2012 had either an interest rate modification from 6 months to 2 years before reverting back to the original interest rate or a deferral of principal payments which can range from 6 to 12 months before reverting back to an amortizing loan. All of the loans were modified due to financial stress of the borrower. In order to determine if a borrower is experiencing financial difficulty, an evaluation is performed to determine the probability that the borrower will be in payment default on any of its debt in the foreseeable future with the modification. This evaluation is performed under the Companys internal underwriting policy. During the quarter ended March 31, 2012, the Company modified $299 in commercial loans and $1,367 in commercial real estate loans. During the year ended December 31, 2011, the Company modified $5,992 in commercial real estate loans, $1,527 in commercial loans, $1,894 in residential real estate loans and $2,516 in land loans. All troubled debt restructurings are classified as either special mention or substandard by the Company. The following is a summary of our performing troubled debt restructurings as of March 31, 2012 and December 31, 2011, respectively, all of which were performing in accordance with the restructured terms.
20
1ST UNITED BANCORP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in thousands, except per share data)
(unaudited)
NOTE 4 LOANS (continued)
|
|
|
|
|
|
|
|
|
|
March 31, |
|
December 31, |
|
||
Residential real estate |
|
$ |
2,305 |
|
$ |
2,306 |
|
Commercial real estate |
|
|
12,448 |
|
|
11,394 |
|
Construction and land development |
|
|
5,999 |
|
|
6,013 |
|
Commercial |
|
|
2,364 |
|
|
2,124 |
|
Total |
|
$ |
23,116 |
|
$ |
21,837 |
|
At March 31, 2012, there were seven loans which were troubled debt restructured loans with a carrying amount of $7,416 and specific reserves of $965 that were non-accrual and included in non-accrual loans. At December 31, 2011, there were five loans which were troubled debt restructured loans with a carrying amount of $7,100 and specific reserves of $684 that were non-accrual and included in non-accrual loans. Loans retain their accrual status at their time of modification. As a result, if the loan is on non-accrual at the time that it is modified, it stays on non-accrual, and if a loan is accruing at the time of modification, it generally stays on accrual. A loan on non-accrual will be individually evaluated based on sustained adherence to the terms of the modification agreement prior to being placed on accrual status. Troubled debt restructurings are considered impaired. The average yield on the loans classified as troubled debt restructurings was 4.72% and 4.63% at March 31, 2012 and December 31, 2011, respectively. The Company had no commitments to lend additional funds for loans classified as troubled debt restructured at March 31, 2012.
Of the $23,116 of performing troubled debt restructurings March 31, 2012, $9,748 were classified as special mention and $13,368 were classified as substandard. At December 31, 2011 of the $21,837 of performing trouble debt restructurings, $8,135 were classified as special mention and $13,702 were classified as substandard. The Company monitors the performance of loans modified monthly. A modified loan will be reclassified to non-accrual and is in default if the loan is not performing in accordance with the modification agreement, the loan becomes contractually past due in accordance with the modification agreement or other weaknesses are observed which makes collection of principal and interest unlikely. Loans modified within the last twelve months and defaulted within the quarter ended March 31, 2012 are comprised of one commercial loan for $33 and one commercial real estate loan for $285. These loans are included in non-accrual loans at March 31, 2102 with a specific reserve in the allowance for loan losses of $116 .
During the quarter ended March 31, 2012, we had approximately $2,788 million in commercial real estate loans on which we lowered the interest rate prior to maturity to competitively retain a loan. During the year ended December 31, 2011, we had approximately $5.0 million in commercial real estate which we lowered the interest rate prior to maturity to competitively retain the loan. Due to the borrowers significant deposit balances and/or the overall quality of the loans, these loans were not included in troubled debt restructurings. In addition, each of these borrowers was not considered to be in financial distress and the modified terms matched current market terms for borrowers with similar risk characteristics. We had no other loans where we extended the maturity or forgave principal that were not already included in troubled debt restructurings or otherwise impaired.
Interest accrued and unpaid at the time a loan is placed on non-accrual status is charged against interest income. During the quarters ended March 31, 2012 and 2011, interest income not recognized on non-accrual loans (but would have been recognized if these loans were current) was approximately $514 and $185, respectively.
Non-accrual loans represent loans which are 90 days and over past due and loans for which management believes collection of contractual amounts due are uncertain of collection. Included in the tables that follow are loans in non-accrual and 90 days and over past due categories with a carrying value of $37,500 and $43,476 as of March 31, 2012 and December 31, 2011, respectively. Loans which are 90 days or greater past due and accruing interest income were $0 and $647 at March 31, 2012 and December 31, 2011, respectively. The following tables summarize past due and non-accrual loans by the number of days past due as of March 31, 2012 and December 31, 2011, respectively:
21
1ST UNITED BANCORP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in thousands, except per share data)
(unaudited)
NOTE 4 LOANS (continued)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accruing 30 59 |
|
Accruing 60-89 |
|
Non-Accrual and |
|
Total |
|
||||||||||||||||
|
|
Loans |
|
Loans Not |
|
Loans |
|
Loans Not |
|
Loans |
|
Loans Not |
|
Loans |
|
Loans Not |
|
||||||||
Residential Real Estate: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
First mortgages |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
3,957 |
|
$ |
3,883 |
|
$ |
3,957 |
|
$ |
3,883 |
|
HELOCs and equity |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
68 |
|
|
953 |
|
|
68 |
|
|
953 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commercial: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Secured non-real estate |
|
|
405 |
|
|
201 |
|
|
|
|
|
329 |
|
|
29 |
|
|
1,909 |
|
|
434 |
|
|
2,439 |
|
Secured real estate |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,169 |
|
|
9,983 |
|
|
1,169 |
|
|
9,983 |
|
Unsecured |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commercial Real Estate: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Owner occupied |
|
|
|
|
|
231 |
|
|
|
|
|
|
|
|
789 |
|
|
5,082 |
|
|
789 |
|
|
5,313 |
|
Non-owner occupied |
|
|
|
|
|
1,729 |
|
|
|
|
|
|
|
|
2,976 |
|
|
4,225 |
|
|
2,976 |
|
|
5,954 |
|
Multi-family |
|
|
|
|
|
317 |
|
|
|
|
|
|
|
|
1,996 |
|
|
|
|
|
1,996 |
|
|
317 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Construction and Land Development: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Construction |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Improved land |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
264 |
|
|
|
|
|
264 |
|
Unimproved land |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
216 |
|
|
|
|
|
216 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Consumer and other |
|
|
|
|
|
1 |
|
|
|
|
|
|
|
|
|
|
|
1 |
|
|
|
|
|
2 |
|
Total March 31, 2012 |
|
$ |
405 |
|
$ |
2,479 |
|
$ |
|
|
$ |
329 |
|
$ |
11,200 |
|
$ |
26,300 |
|
$ |
11,605 |
|
$ |
29,108 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accruing 30 59 |
|
Accruing 60-89 |
|
Non-Accrual and |
|
Total |
|
||||||||||||||||
|
|
Loans |
|
Loans Not |
|
Loans |
|
Loans Not |
|
Loans |
|
Loans Not |
|
Loans |
|
Loans Not |
|
||||||||
Residential Real Estate: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
First mortgages |
|
$ |
1,864 |
|
$ |
402 |
|
$ |
|
|
$ |
|
|
$ |
4,622 |
|
$ |
5,103 |
|
$ |
6,486 |
|
$ |
5,505 |
|
HELOCs and equity |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
323 |
|
|
644 |
|
|
323 |
|
|
644 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commercial: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Secured non-real estate |
|
|
666 |
|
|
479 |
|
|
|
|
|
146 |
|
|
228 |
|
|
1,882 |
|
|
894 |
|
|
2,507 |
|
Secured real estate |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,013 |
|
|
9,930 |
|
|
1,013 |
|
|
9,930 |
|
Unsecured |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commercial Real Estate: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Owner occupied |
|
|
|
|
|
272 |
|
|
|
|
|
|
|
|
798 |
|
|
4,781 |
|
|
798 |
|
|
5,053 |
|
Non-owner occupied |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2,737 |
|
|
8,904 |
|
|
2,737 |
|
|
8,904 |
|
Multi-family |
|
|
356 |
|
|
|
|
|
|
|
|
318 |
|
|
2,077 |
|
|
|
|
|
2,433 |
|
|
318 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Construction and Land Development: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Construction |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
87 |
|
|
|
|
|
87 |
|
|
|
|
Improved land |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
264 |
|
|
|
|
|
264 |
|
Unimproved land |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
80 |
|
|
|
|
|
80 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Consumer and other |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
3 |
|
|
|
|
|
3 |
|
Total December 31, 2011 |
|
$ |
2,886 |
|
$ |
1,153 |
|
$ |
|
|
$ |
464 |
|
$ |
11,965 |
|
$ |
31,511 |
|
$ |
14,851 |
|
$ |
33,128 |
|
22
1ST UNITED BANCORP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in thousands, except per share data)
(unaudited)
NOTE 4 LOANS (continued)
Credit Quality Indicators:
The Company categorizes loans into risk categories based on relevant information about the ability of borrowers to service their debt such as: current financial information, historical payment experience, credit documentation, public information, and current economic trends, among other factors. The Company analyzes loans individually by classifying the loans as to credit risk. Loans classified as substandard or special mention are reviewed quarterly by the Company for further deterioration or improvement to determine if appropriately classified and impairment. All other loans greater than $1,000, commercial and personal lines of credit greater than $100, and unsecured loans greater than $100 are specifically reviewed at least annually to determine the appropriate loan grading. In addition, during the renewal process of any loan, as well if a loan becomes past due, the Company will evaluate the loan grade.
Loans excluded from the scope of the annual review process above are generally classified as pass credits until: (a) they become past due; (b) management becomes aware of deterioration in the credit worthiness of the borrower; or (c) the customer contacts the Company for a modification. In these circumstances, the loan is specifically evaluated for potential classification as to special mention, substandard or doubtful. The Company uses the following definitions for risk ratings:
|
|
|
Special Mention. Loans classified as special mention have a potential weakness that deserves managements close attention. If left uncorrected, these potential weaknesses may result in deterioration of the repayment prospects for the loan or of the institutions credit position at some future date. |
|
|
|
Substandard. Loans classified as substandard are inadequately protected by the current net worth and payment capacity of the obligor or of the collateral pledged, if any. Loans so classified have a well-defined weakness or weaknesses that jeopardize the liquidation of the debt. They are characterized by the distinct possibility that the institution will sustain some loss if the deficiencies are not corrected. |
|
|
|
Doubtful. Loans classified as doubtful have all the weaknesses inherent in those classified as substandard, with the added characteristic that the weaknesses make collection or liquidation in full, on the basis of currently existing facts, conditions, and values, highly questionable and improbable. |
23
1ST UNITED BANCORP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in thousands, except per share data)
(unaudited)
NOTE 4 LOANS (continued)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loans Subject to Loss Share Agreements |
|
Loans Not Subject to Loss Share Agreements |
|
|||||||||||||||
|
|
Total |
|
Pass |
|
Special |
|
Substandard |
|
Pass |
|
Special |
|
Substandard |
|
|||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
March 31, 2012 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Residential Real Estate: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
First mortgages |
|
$ |
132,609 |
|
$ |
93,385 |
|
$ |
2,852 |
|
$ |
3,957 |
|
$ |
25,390 |
|
$ |
2,568 |
|
$ |
4,457 |
|
HELOCs and equity |
|
|
55,652 |
|
|
9,009 |
|
|
|
|
|
68 |
|
|
39,169 |
|
|
5,003 |
|
|
2,403 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commercial: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Secured non-real estate |
|
|
112,794 |
|
|
23,046 |
|
|
736 |
|
|
29 |
|
|
79,340 |
|
|
5,224 |
|
|
4,419 |
|
Secured real estate |
|
|
51,384 |
|
|
16,575 |
|
|
|
|
|
1,169 |
|
|
20,763 |
|
|
2,149 |
|
|
10,728 |
|
Unsecured |
|
|
11,874 |
|
|
4,149 |
|
|
|
|
|
|
|
|
7,286 |
|
|
|
|
|
439 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commercial Real Estate: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Owner occupied |
|
|
171,634 |
|
|
46,247 |
|
|
8,406 |
|
|
789 |
|
|
94,567 |
|
|
9,014 |
|
|
12,611 |
|
Non-owner occupied |
|
|
238,262 |
|
|
129,179 |
|
|
2,343 |
|
|
2,977 |
|
|
83,429 |
|
|
12,846 |
|
|
7,488 |
|
Multi-family |
|
|
40,621 |
|
|
28,542 |
|
|
1,909 |
|
|
1,996 |
|
|
7,504 |
|
|
353 |
|
|
317 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Construction and Land Development: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Construction |
|
|
5,942 |
|
|
|
|
|
|
|
|
|
|
|
5,942 |
|
|
|
|
|
|
|
Improved land |
|
|
18,348 |
|
|
5,661 |
|
|
|
|
|
|
|
|
7,168 |
|
|
1,311 |
|
|
4,208 |
|
Unimproved land |
|
|
16,644 |
|
|
6,502 |
|
|
221 |
|
|
216 |
|
|
7,189 |
|
|
|
|
|
2,516 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Consumer and other |
|
|
12,134 |
|
|
945 |
|
|
|
|
|
|
|
|
11,053 |
|
|
8 |
|
|
128 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total March 31, 2012 |
|
$ |
867,898 |
|
$ |
363,240 |
|
$ |
16,467 |
|
$ |
11,201 |
|
$ |
388,800 |
|
$ |
38,476 |
|
$ |
49,714 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loans Subject to Loss Share Agreements |
|
Loans Not Subject to Loss Share Agreements |
|
|||||||||||||||
|
|
Total |
|
Pass |
|
Special |
|
Substandard |
|
Pass |
|
Special |
|
Substandard |
|
|||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2011 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Residential Real Estate: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
First mortgages |
|
$ |
140,128 |
|
$ |
95,151 |
|
$ |
1,363 |
|
$ |
4,622 |
|
$ |
26,156 |
|
$ |
5,567 |
|
$ |
7,269 |
|
HELOCs and equity |
|
|
56,552 |
|
|
9,056 |
|
|
|
|
|
323 |
|
|
39,774 |
|
|
5,449 |
|
|
1,950 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commercial: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Secured non-real estate |
|
|
116,886 |
|
|
25,521 |
|
|
748 |
|
|
228 |
|
|
81,132 |
|
|
6,160 |
|
|
3,097 |
|
Secured real estate |
|
|
44,716 |
|
|
15,466 |
|
|
251 |
|
|
1,013 |
|
|
15,639 |
|
|
1,663 |
|
|
10,684 |
|
Unsecured |
|
|
10,424 |
|
|
2,953 |
|
|
|
|
|
|
|
|
7,029 |
|
|
|
|
|
442 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commercial Real Estate: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Owner occupied |
|
|
173,505 |
|
|
46,173 |
|
|
8,478 |
|
|
798 |
|
|
97,428 |
|
|
10,036 |
|
|
10,592 |
|
Non-owner occupied |
|
|
241,902 |
|
|
132,822 |
|
|
6,277 |
|
|
2,737 |
|
|
76,072 |
|
|
12,776 |
|
|
11,218 |
|
Multi-family |
|
|
40,445 |
|
|
30,970 |
|
|
1,904 |
|
|
2,077 |
|
|
4,817 |
|
|
677 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Construction and Land Development: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Construction |
|
|
8,173 |
|
|
3,246 |
|
|
|
|
|
87 |
|
|
4,840 |
|
|
|
|
|
|
|
Improved land |
|
|
18,447 |
|
|
5,743 |
|
|
|
|
|
|
|
|
7,203 |
|
|
1,290 |
|
|
4,211 |
|
Unimproved land |
|
|
17,516 |
|
|
6,922 |
|
|
222 |
|
|
80 |
|
|
7,777 |
|
|
|
|
|
2,515 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Consumer and other |
|
|
12,083 |
|
|
1,069 |
|
|
|
|
|
|
|
|
10,877 |
|
|
5 |
|
|
132 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total December 31, 2011 |
|
$ |
880,777 |
|
$ |
375,092 |
|
$ |
19,243 |
|
$ |
11,965 |
|
$ |
378,744 |
|
$ |
43,623 |
|
$ |
52,110 |
|
24
1ST UNITED BANCORP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in thousands, except per share data)
(unaudited)
NOTE 4 LOANS (continued)
As part of the acquisition of Old Harbor in 2011, TBOM in 2010 and Republic in 2009 from the FDIC and of Equitable Financial Group, Inc. and Citrus Bank, N.A. in 2008, the Company acquired certain loans for which there was, at acquisition, evidence of deterioration of credit quality since origination and it was probable, at acquisition, that all contractually required payments would not be collected. The carrying amount of these loans at March 31 2012 was approximately $99,919, net of a discount of $44,037. During the three months ended March 31, 2012 and 2011, the Company accreted $1,846 and $1,468, respectively, into interest income on these loans. The remaining accretable discount was $12,931 at March 31, 2012. In addition, $99,919 is covered by the FDIC loss share agreements.
At March 31, 2012, $8,869 of these loans were included in nonaccrual loans and in the substandard classification. Further, the Company has recorded an allowance for loan losses of $228 at March 31, 2012 related to these loans. For the three months ended March 31, 2012 and 2011, the Company recorded no additional allowance for loan losses for these loans.
NOTE 5 COMMON STOCK OFFERING
Bancorp completed the issuance of 5,000,000 common shares during the quarter ended March 31, 2011. In April 2011, the underwriter exercised its full over-allotment option and 750,000 common shares were issued at $6.50 per share for additional proceeds of $4,531, net of offering costs of $344.
NOTE 6 FAIR VALUES
Fair Value Measurements
Fair value is defined as the price that would be received on the sale of an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. The accounting guidance establishes a fair value hierarchy which requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. The standard describes three levels of inputs that may be used to measure fair value:
|
|
|
|
|
Level I: 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 II: 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 III: Significant unobservable inputs that reflect a reporting entitys own assumptions about the assumptions that market participants would use in pricing an asset or liability. |
The fair values of securities available for sale are determined by obtaining quoted prices on nationally recognized securities exchanges (Level I inputs) or 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 (Level II inputs).
The fair value of impaired loans with specific allocations of the allowance for loan losses and other real estate owned is based on recent real estate appraisals less estimated costs of sale. For residential real estate impaired loans and other real estate owned, appraised values are based on the comparative sales approach. For commercial and commercial real estate impaired loans and other real estate owned, appraisers may use either a single valuation approach or a combination of approaches such as comparative sales, cost or the income approach. A significant unobservable input in the income approach is the estimated income capitalization rate for a given piece of collateral. At March 31, 2012, the range of capitalization rates utilized to determine the fair value of the underlying collateral ranged from 8% to 12%. Adjustments to appraisals may be made by the appraiser to reflect local market conditions or other economic factors and may result in changes in the fair value of a given assets over time. As such, the fair value of impaired loans and other real estate owned are considered a Level III in the fair value hierarchy.
The Company recovers the carrying value of other real estate owned through the sale of the property. The ability to affect future sales prices is subject to market conditions and factors beyond our control and may impact the estimated fair value of a property.
Appraisals for impaired loans and other real estate owned are performed by certified general appraisers whose qualifications and licenses have been reviewed and verified by the Company. Once reviewed, a member of the appraisal department reviews the assumptions and approaches utilized in the appraisal as well as the overall resulting fair value in comparisons to independent data sources such as recent market data or industry wide-statistics. On an annual basis, the Company compares the actual selling price of collateral that has been sold to the most recent appraised value to determine what additional adjustments, if any, should be made to the appraisal value to arrive at fair value. Based on our most recent analysis, no discounts to current appraisals have been warranted.
25
1ST UNITED BANCORP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in thousands, except per share data)
(unaudited)
NOTE 6 FAIR VALUES (continued)
Assets measured at fair value on a recurring basis at March 31, 2012 and December 31, 2011, are summarized below.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fair value measurements at March 31, 2012 using |
|
||||||||||
|
|
March 31, |
|
Quoted prices |
|
Significant |
|
Significant |
|
||||
Securities Available for Sale: |
|
|
|
|
|
|
|
|
|
|
|
|
|
Residential collateralized mortgage obligations |
|
$ |
6,971 |
|
$ |
|
|
$ |
6,971 |
|
$ |
|
|
Residential mortgage-backed |
|
|
212,277 |
|
|
|
|
|
212,277 |
|
|
|
|
|
|
$ |
219,248 |
|
$ |
|
|
$ |
219,248 |
|
$ |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fair value measurements at December 31, 2011 using |
|
||||||||||
|
|
December 31, |
|
Quoted prices |
|
Significant |
|
Significant |
|
||||
Securities available for sale: |
|
|
|
|
|
|
|
|
|
|
|
|
|
Residential collateralized mortgage obligations |
|
$ |
7,757 |
|
$ |
|
|
$ |
7,757 |
|
$ |
|
|
Residential mortgage-backed |
|
|
193,965 |
|
|
|
|
|
193,965 |
|
|
|
|
|
|
$ |
201,722 |
|
$ |
|
|
$ |
201,722 |
|
$ |
|
|
There were no liabilities measured at fair value on a recurring basis at March 31, 2012 and December 31, 2011.
Assets measured at fair value on a non-recurring basis are summarized below.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fair value measurements at March 31, 2012 using |
|
||||||||||
|
|
March 31, |
|
Quoted prices |
|
Significant |
|
Significant |
|
||||
Assets: |
|
|
|
|
|
|
|
|
|
|
|
|
|
Impaired loans |
|
|
|
|
|
|
|
|
|
|
|
|
|
Residential real estate |
|
$ |
3,098 |
|
$ |
|
|
$ |
|
|
$ |
3,098 |
|
Commercial |
|
|
2,155 |
|
|
|
|
|
|
|
|
2,155 |
|
Commercial real estate |
|
|
12,396 |
|
|
|
|
|
|
|
|
12,396 |
|
Construction and land development |
|
|
1,773 |
|
|
|
|
|
|
|
|
1,773 |
|
Consumer and other |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
19,422 |
|
$ |
|
|
$ |
|
|
$ |
19,422 |
|
Other real estate owned: |
|
|
|
|
|
|
|
|
|
|
|
|
|
Commercial real estate |
|
$ |
9,535 |
|
$ |
|
|
$ |
|
|
$ |
9,535 |
|
Residential real estate |
|
|
3,850 |
|
|
|
|
|
|
|
|
3,850 |
|
|
|
$ |
13,385 |
|
$ |
|
|
$ |
|
|
$ |
13,385 |
|
At March 31, 2012, impaired loans, which had a specific allowance for loan losses allocated, had a carrying amount of $25,241, with a valuation allowance of $5,819 resulting in an additional provision of loan losses of $1,823 for the period.
26
1ST UNITED BANCORP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in thousands, except per share data)
(unaudited)
NOTE 6 FAIR VALUES (continued)
Other real estate owned, which are measured for impairment using the fair value of the collateral less estimated cost to sell, had a carrying amount of $13,420, and had a valuation of $35 at March 31, 2012.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fair value measurements at December 31, 2011 using |
|
||||||||||
|
|
December 31, |
|
Quoted prices in |
|
Significant |
|
Significant |
|
||||
Assets: |
|
|
|
|
|
|
|
|
|
|
|
|
|
Impaired loans |
|
|
|
|
|
|
|
|
|
|
|
|
|
Residential |
|
$ |
2,614 |
|
$ |
|
|
$ |
|
|
$ |
2,614 |
|
Commercial |
|
|
677 |
|
|
|
|
|
|
|
|
677 |
|
Commercial real estate |
|
|
12,082 |
|
|
|
|
|
|
|
|
12,082 |
|
Construction and land development |
|
|
1,624 |
|
|
|
|
|
|
|
|
1,624 |
|
Consumer and other |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
16,997 |
|
$ |
|
|
$ |
|
|
$ |
16,997 |
|
Other real estate owned: |
|
|
|
|
|
|
|
|
|
|
|
|
|
Commercial real estate |
|
$ |
9,989 |
|
$ |
|
|
$ |
|
|
$ |
9,989 |
|
Residential real estate |
|
|
3,523 |
|
|
|
|
|
|
|
|
3,523 |
|
|
|
$ |
13,512 |
|
$ |
|
|
$ |
|
|
$ |
13,512 |
|
Impaired loans, which are measured for impairment using the fair value of the collateral for collateral dependent loans, had a carrying amount of $22,359, with a valuation allowance of $5,362 resulting in an additional provision for loan losses of $6,116 for the year ended December 31, 2011.
Other real estate owned, which are measured for impairment using the fair value of the collateral less estimated cost to sell, had a carrying amount of $13,512, with no valuation allowance for the year ended December 31, 2011.
Transfers of assets and liabilities between levels within the fair value hierarchy are recognized when an event or change in circumstances occurs. There have been no transfers between fair value levels for 2012 and 2011.
27
1ST UNITED BANCORP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in thousands, except per share data)
(unaudited)
NOTE 6 FAIR VALUES (continued)
Carrying amount and estimated fair values of financial instruments were as follows at March 31, 2012 and December 31, 2011.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
March 31, |
|
December 31, |
|
||||||||
|
|
Carrying |
|
Fair |
|
Carrying |
|
Fair |
|
||||
Financial assets |
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents |
|
$ |
135,796 |
|
$ |
135,796 |
|
$ |
165,424 |
|
$ |
165,424 |
|
Securities available for sale |
|
|
219,248 |
|
|
219,248 |
|
|
201,722 |
|
|
201,722 |
|
Loans, net, including loans held for sale |
|
|
855,759 |
|
|
856,190 |
|
|
868,094 |
|
|
867,301 |
|
Nonmarketable equity securities |
|
|
11,211 |
|
|
N/A |
|
|
11,207 |
|
|
N/A |
|
FDIC loss share receivable |
|
|
66,210 |
|
|
66,210 |
|
|
71,900 |
|
|
71,900 |
|
Accrued interest receivable |
|
|
3,174 |
|
|
3,174 |
|
|
2,947 |
|
|
2,947 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Financial liabilities |
|
|
|
|
|
|
|
|
|
|
|
|
|
Deposits |
|
|
1,165,365 |
|
|
1,165,308 |
|
|
1,181,708 |
|
|
1,181,841 |
|
Federal funds purchased and repurchase agreements |
|
|
11,138 |
|
|
11,139 |
|
|
8,746 |
|
|
8,747 |
|
Federal Home Loan Bank advances |
|
|
|
|
|
|
|
|
5,000 |
|
|
5,000 |
|
Accrued interest payable |
|
|
522 |
|
|
522 |
|
|
430 |
|
|
430 |
|
Fair value methods and assumptions are periodically evaluated by the Company. The methods and assumptions used to estimate fair value are described as follows:
Cash and cash equivalents
The carrying amounts of cash and cash equivalents approximate the fair value and are classified as either Level I or Level II in the fair value hierarchy.
Loans, net
The fair value of variable rate loans that reprice frequently and with no significant change in credit risk is based on the carrying value and results in a classification of Level III within the fair value hierarchy. Fair value for other loans are estimated using discounted cash flows analysis using interest rates currently being offered for loans with similar terms to borrowers of similar credit quality resulting in a Level III classification in the fair value hierarchy. The methods used to estimate the fair value of loans do not necessarily represent an exit price.
Nonmarketable equity securities
Nonmarketable equity securities include Federal Home Loan Bank Stock and Federal Reserve Bank Stock. It is not practicable to determine the fair value of nonmarketable equity securities due to restrictions placed on their transferability.
FDIC Loss Share Receivable
The fair value of the FDIC Loss Share Receivable represents the discounted value of the FDICs reimbursed portion of estimated losses the Company expects to realize on loans and other real estate owned covered under Loss Sharing Agreements. As a result, the fair value is considered a Level III classification in the fair value hierarchy.
Deposits
The fair value of demand deposits (e.g. interest and non-interest bearing, savings and certain types of money market accounts) are, by definition, equal to the amount payable in demand at the reporting date (i.e. carrying value) resulting in a Level II classification in the fair value hierarchy. The carrying amounts of variable rate, fixed-term money market accounts and certificate of deposits approximates their fair value at the reporting date in a Level II classification in the fair value hierarchy. Fair values for fixed rate certificates of deposit are estimated using a discounted cash flows calculation that applies interest rates currently being offered on certificates to a schedule of aggregated expected monthly maturities on time deposits resulting in a Level II classification.
Federal Funds purchased and repurchase agreements
The carrying amounts of federal funds and repurchase agreements generally mature within ninety days and approximate their fair value resulting in a Level II classification in the fair value hierarchy.
Federal Home Loan Advances
The fair value of Federal Home Loan Bank Advances are estimated using a discounted cash flow analysis based on the current borrowing rates for similar types of borrowings and are classified as a Level II in the fair value hierarchy.
Accrued interest receivable/ payable
The carrying amounts of accrued interest receivable approximate fair value resulting in a Level III classification. The carrying amounts of accrued interest payable approximate fair value resulting in a Level II classification.
Off-balance sheet instruments
The fair value of off-balance-sheet instruments is based on the current fees that would be charged to enter into or terminate such arrangements, taking into account the remaining terms of the agreements andthe counterparties credit standing. The fair value of commitments is not material.
28
1ST UNITED BANCORP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in thousands, except per share data)
(unaudited)
NOTE 7 ADOPTION OF NEW ACCOUNTING STANDARDS
In September 2011, the Financial Accounting Standard Board (FASB) amended guidance on the annual goodwill impairment test performed by the Company. Under the amended guidance, the Company will have the option to first assess qualitative factors to determine whether it is necessary to perform a two-step impairment test. If the Company believes, as a result of the qualitative assessment, that it is more likely than not that the fair value of a reporting unit is less than the carrying value, the quantitative impairment test is required. If the Company believes the fair value of a reporting unit is greater than the carrying value, no further testing is required. A company can choose to perform the qualitative assessment on some or none of its reporting entities. The amended guidance includes examples of events and circumstances that might indicate that a reporting units fair value is less than its carrying amount. These include macro-economic conditions such as deterioration in the entitys operating environment, entity-specific events such as declining financial performance, and other events such as an expectation that a reporting unit will be sold. The amended guidance is effective for annual and interim goodwill impairment tests performed for fiscal years beginning after December 15, 2011. However, an entity can choose to early adopt even if its annual test date is before the issuance of the final standard, provided that the entity has not yet performed its 2011 annual impairment test or issued its financial statements. The adoption of this guidance did not have a material impact on our consolidated financial statements.
In May 2011, the FASB issued an amendment to achieve common fair value measurement and disclosure requirements between U.S. and international accounting principles. Overall, the guidance is consistent with existing U.S. accounting principles; however, there are some amendments that change a particular principle or requirement for measuring fair value or for disclosing information about fair value measurements. This update clarifies the application of existing fair value measurement requirements, changes certain principles in existing guidance and requires additional fair value disclosures. The update permits measuring financial assets and liabilities on a net credit risk basis, if certain criteria are met, increases disclosure surrounding company determined market prices of (Level 3) financial instruments, and also requires the fair value hierarchy disclosure of financial assets and liabilities that are not recognized at fair value in the financial statements, but are included in disclosures at fair value. The amendments in this guidance are effective during interim and annual periods beginning after December 15, 2011. The adoption of this guidance did not have a material impact on our consolidated financial statements.
In September 2011, the FASB amended existing guidance and eliminated the option to present the components of other comprehensive income as part of the statement of changes in shareholders equity. The amendment requires that comprehensive income be presented in either a single continuous statement or in a two separate consecutive statement approach and changes the presentation of reclassification items out of other comprehensive income to net income. In December 2011, the FASB deferred certain provisions related to the reclassifications of items out of accumulated other comprehensive income and the presentation of the reclassification items. The adoption of the remaining amendment changed the presentation of the components of comprehensive income for the Company as part of the consolidated statement of shareholders equity effective January 1, 2012, with the components of comprehensive income presented in a separate statement.
29
1ST UNITED BANCORP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in thousands, except per share data)
(unaudited)
NOTE 8 EARNINGS PER COMMON SHARE
Basic earnings per common share is net income divided by the weighted average number of common shares outstanding during the period. Diluted earnings per share includes the dilutive effect of additional potential common shares issuable under stock options and restricted stock.
|
|
|
|
|
|
|
|
|
|
Three months ended |
|
||||
|
|
2012 |
|
2011 |
|
||
Net income |
|
$ |
780 |
|
$ |
355 |
|
Basic EPS: |
|
|
|
|
|
|
|
Weighted average shares of common stock outstanding |
|
|
30,584,940 |
|
|
25,307,603 |
|
Basic EPS |
|
$ |
0.03 |
|
$ |
0.01 |
|
|
|
|
|
|
|
|
|
Diluted EPS: |
|
|
|
|
|
|
|
Weighted average shares of common stock outstanding |
|
|
30,584,940 |
|
|
25,307,603 |
|
Effect of dilutive shares: |
|
|
|
|
|
|
|
Stock options |
|
|
|
|
|
59,905 |
|
Restricted stock |
|
|
3,644 |
|
|
|
|
Total dilutive shares |
|
|
30,588,584 |
|
|
25,367,508 |
|
Diluted EPS |
|
$ |
0.03 |
|
$ |
0.01 |
|
NOTE 9 COMMITMENTS AND CONTINGENCIES
The Company issues loan commitments, lines of credit, and letters of credit to meet its customers financing needs. Commitments to make loans are generally made for periods ranging from 60 to 90 days and may expire without being used. Off balance sheet risk to credit loss may exist up to the face amount of these instruments. The Company uses the same credit policies to make such commitments as are used to originate loans which include obtaining collateral at the time exercise of the commitment.
The contractual amount of financial instruments with off-balance-sheet risk was as follows at March 31, 2012 and December 31, 2011.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
March 31, 2012 |
|
December 31, 2011 |
|
||||||||
|
|
Fixed |
|
Variable |
|
Fixed |
|
Variable |
|
||||
Commitments to make loans |
|
$ |
4,620 |
|
$ |
3,911 |
|
$ |
2,520 |
|
$ |
5,903 |
|
Unused lines of credit |
|
|
8,505 |
|
|
59,675 |
|
|
600 |
|
|
60,020 |
|
Stand-by letters of credit |
|
|
3,137 |
|
|
1,636 |
|
|
3,990 |
|
|
1,110 |
|
The fixed rate loan commitments have interest rates ranging from 2.0% to 18.0% and the underlying loans have maturities ranging from one month to 28 years.
30
1ST UNITED BANCORP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in thousands, except per share data)
(unaudited)
NOTE 10 SUBSEQUENT EVENTS
On April 1, 2012, the Company completed its merger of Anderen Financial, Inc., a Florida corporation and its wholly-owned subsidiary Anderen Bank, a Florida-chartered commercial bank, pursuant to the Agreement and Plan of Merger, dated October 24, 2011 (the Merger Agreement). In accordance with the terms of the Merger Agreement, each share of AFI common stock was cancelled and automatically converted, at the election of the AFI shareholders, into the right to receive cash, common stock of the Company, or a combination of 50% cash and 50% common stock of the Company. The consideration paid to AFI shareholders was $38,250, which consisted of approximately $19,125 in cash and 3,140,430 shares of the Companys common stock. At December 31, 2011, the audited financial statements of AFI had assets of $206,728 including $146,016 of total loans, $49,413 of cash and securities, $1,253 of other real estate owned and $13,128 in other assets. Liabilities included $166,668 in deposits. The Company expects to record goodwill associated with the transaction, however, the amount will not be known until the initial fair value accounting is completed.
31
ITEM 2. MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following is managements discussion and analysis of certain significant factors that have affected our financial condition and operating results during the periods included in the accompanying consolidated financial statements, and should be read in conjunction with such financial statements. Managements discussion and analysis is divided into subsections entitled Business Overview, Operating Results, Financial Condition, Capital Resources, Cash Flows and Liquidity, Off Balance Sheet Arrangements, and Critical Accounting Policies. Our financial condition and operating results principally reflect those of its wholly-owned subsidiaries, 1st United Bank (1st United) and Equitable Equity Lending (EEL). The consolidated entity is referred to as the Company, Bancorp, we, us, or our.
The following discussion should be read in conjunction with the condensed consolidated financial statements and notes thereto included in this Quarterly Report on Form 10-Q.
32
CAUTION CONCERNING FORWARD-LOOKING STATEMENTS
This Quarterly Report on Form 10-Q, including this MD&A section, 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. Please see the Introductory Note and Item 1A. Risk Factors of our Annual Report on Form 10-K, as updated from time to time, 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 above, or 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
We are a financial holding company headquartered in Boca Raton, Florida.
We follow a business plan that emphasizes the delivery of banking services to businesses and individuals in our geographic market who desire a high level of personalized service. The business plan includes business banking, services to professionals, real estate lending and private banking, as well as full community banking products and services. The business plan also provides for an emphasis on our Small Business Administration and Export-Import Bank lending program, as well as on small business lending. We focus on the building of a balanced loan and deposit portfolio, with emphasis on low cost liabilities and variable rate loans.
As is the case with banking institutions generally, our operations are materially and significantly influenced by general economic conditions and by related monetary and fiscal policies of financial institution regulatory agencies, including the Federal Reserve Bank and the FDIC. Deposit flows and costs of funds are influenced by interest rates on competing investments and general market rates of interest. Lending activities are affected by the demand for financing of real estate and other types of loans, which in turn is affected by the interest rates at which such financing may be offered and other factors affecting local demand and availability of funds. We face strong competition in the attraction of deposits (our primary source of lendable funds) and in the origination of loans.
Pending Acquisitions
Acquisition of Anderen Finanical, Inc.
On April 1, 2012, 1st United Bancorp, Inc. completed its acquisition of Anderen Financial, Inc., a Florida corporation and its wholly-owned subsidiary Anderen Bank, a Florida-chartered commercial bank, pursuant to the Agreement and Plan of Merger, dated October 24, 2011. Pursuant to the terms of the Merger Agreement, each share of AFI common stock, $0.01 par value per share, was cancelled and automatically converted into the right to receive cash, common stock of the Company or a combination of cash and common stock of the Company. AFI shareholders could elect to receive cash, stock, or a combination of 50% cash and 50% stock, provided, however, that each such election was subject to mandatory allocation procedures to ensure the total consideration was approximately 50% cash and 50% stock. The value of the Per Share Consideration was $7.73. The total value of the consideration paid to AFI shareholders was $38.3 million, which consisted of approximately $19.1 million in cash and 3,140,430 shares of the Companys common stock. The Company will estimate the acquisition fair value of the acquired assets and assumed liabilities in accordance with Financial Accounting Standards Board (FASB) Accounting Standards Codification (ASC) Topic 805, Business Combinations (ASC Topic 805) and ASC Topic 820, Fair Value Measurements. The estimated fair values are considered preliminary and are subject to refinement as additional information relative to the closing date fair values becomes available during the measurement period,
33
not to exceed one year. The Company anticipates recording goodwill associated with this transaction and integrating the operations of Anderen by June 2012.
Recent Acquisitions
Acquisition of Old Harbor Bank of Florida
On October 21, 2011, 1st United entered into an agreement with the Federal Deposit Insurance Corporation (FDIC) to acquired substantially all of the assets of Old Harbor Bank of Florida (Old Harbor). The fair value of the assets acquired included $24.7 million in cash and cash equivalents, $31.0 million in securities available for sale, $116.7 million in loans and $2.3 million in other real estate owned. 1st United also assumed approximately $209.6 million in deposits. 1st United recorded goodwill from the initial fair value transaction of $7.0 million. Old Harbor operated seven banking centers in Pasco and Pinellas Counties, Florida, and had 42 employees.
The deposits were acquired with a 0% premium and assets were acquired at a discount of approximately $8.5 million, subject to customary adjustments. The terms of the Old Harbor Agreement provide for the FDIC to indemnify 1st United against claims with respect to liabilities and assets of Old Harbor or any of its affiliates not assumed or otherwise purchased by 1st United and with respect to certain other claims by third parties.
In connection with the acquisition of Old Harbor, 1st United entered into loss sharing agreements (the Old Harbor Loss Sharing Agreements) with the FDIC that collectively cover a substantial portion of the loan portfolio and all of the other real estate owned (the Covered Assets). None of the other acquired assets of Old Harbor are covered by the Old Harbor Loss Sharing Agreements with the FDIC. The Old Harbor Loss Sharing Agreements provide for the reimbursement of 70% of losses with respect to Covered Assets, up to approximately $49 million. The loss sharing agreement applicable to single-family residential mortgage loans and to commercial loans and other real estate owned are for ten and five years, respectively.
The Company accounted for the transaction under the acquisition method of accounting which requires purchased assets and assumed liabilities to be recorded at their respective acquisition date fair value. The purchased assets and assumed liabilities were recorded at their respective acquisition date fair values, and identifiable intangible assets were recorded at fair value. We recorded an estimated receivable from the FDIC in the amount of $18.1 million which represents the fair value of the FDICs portion of the losses that are expected to be incurred and reimbursed to us. The Company additionally recorded estimated goodwill associated with the transaction of $7.0 million. The estimated fair values are considered preliminary and are subject to refinement as additional information relative to the closing date fair values becomes available during the measurement period, not to exceed one year. Specifically, additional information related to the fair value over loans, other real estate and the FDIC loss share receivable are preliminary and may change as new information becomes available. The integration of the operations of Old Harbor was completed in March 2012.
The Bank of Miami Acquisition
On December 17, 2010, the Company, through our banking subsidiary 1st United, entered into a purchase and assumption agreement with the FDIC, as receiver for The Bank of Miami (TBOM). Per the agreement, the Company assumed all deposits, except certain brokered deposits, and borrowings and acquired certain assets of TBOM including loans, other real estate owned and cash and investments. All of the loans acquired are covered under two loss sharing agreements. The loss sharing agreements cover 80% of losses incurred on acquired loans and other real estate as well as third party collection costs and 90 days of accrued interest on covered loans. The term of the loss sharing and loss recoveries is ten years for residential real estate loans and five years with respect to losses on non-residential real estate loans and eight years with respect to loss recovery. The reimbursable losses from the FDIC are based on the book value of the relevant loan as determined by the FDIC as the date of the transaction. New loans made after that date are not covered under the loss share agreement with the FDIC.
1st United received a $38.0 million net discount on the assets acquired. TBOM operated three banking centers in Miami-Dade County, Florida. None of the centers were retained by the Company and the related deposits were serviced from existing 1st United branch facilities.
34
The Company accounted for the transaction under the acquisition method of accounting which requires purchased assets and assumed liabilities to be recorded at their respective acquisition date fair value. The purchased assets and assumed liabilities were recorded at their respective acquisition date fair values, and identifiable intangible assets were recorded at fair value. We recorded an estimated receivable from the FDIC in the amount of $36.3 million which represents the fair value of the FDICs portion of the losses that are expected to be incurred and reimbursed to us. The TBOM Loss Sharing Agreements are subject to certain servicing procedures as specified in the agreements.
Republic Federal Acquisition
On December 11, 2009, 1st United, entered into a purchase and assumption agreement (the Republic Agreement) with the FDIC, as receiver for Republic Federal Bank, National Association (Republic), Miami, Florida. According to the terms of the Republic Agreement, 1st United assumed all deposits (except certain brokered deposits) and borrowings, and acquired certain assets of Republic. Assets acquired included loans and cash and investments. All of Republics repossessed or foreclosed real estate and substantially all non-performing loans were retained by the FDIC. Republic operated four banking centers in Miami-Dade County, Florida, and had approximately 100 employees. We assumed approximately $349.6 million in deposits in this transaction.
All of the Republic loans acquired are covered by two loss sharing agreements (the Republic Loss Sharing Agreements) between the FDIC and 1st United, which affords 1st United significant loss protection. Under the Republic Loss Sharing Agreements, the FDIC will cover 80% of covered loan and foreclosed real estate losses up to $36 million and 95% of losses in excess of that amount. The Republic Loss Sharing Agreements also cover third party collection costs and 90 days of accrued interest on covered loans. The term for loss sharing and loss recoveries on residential real estate loans is ten years, while the term for loss sharing and loss recoveries on non-residential real estate loans is five years with respect to losses and eight years with respect to loss recoveries. The reimbursable losses from the FDIC are based on the book value of the relevant loan as determined by the FDIC at the date of the transaction. New loans made after that date are not covered by the Republic Loss Sharing Agreements.
Financial Overview
|
|
|
|
|
Net income for the quarter ended March 31, 2012 was $780,000 compared to net income of $355,000 for the quarter ended March 31, 2011. |
|
|
|
|
|
Net interest margin was 4.73% for the quarter ended March 31, 2012, compared to 4.90% for the quarter ended March 31, 2011. |
|
|
|
|
|
During the quarter ended March 31, 2012, we incurred approximately $574,000 in personnel, IT and facilities costs and merger reorganization expense that related to the integration of Old Harbor which are anticipated to be eliminated by June 30, 2012. |
|
|
|
|
|
Non-performing assets at March 31, 2012 represented 3.63% of total assets compared to 4.01% at December 31, 2011. Non-performing assets not covered by the Loss Share Agreements represented 2.03% of total assets at March 31, 2012 compared to 2.39% at December 31, 2011. |
|
|
|
|
|
Securities available for sale increased by approximately $17.5 million from December 31, 2011 to $219.2 million at March 31, 2012. The increase was a result of the Company investing excess liquidity of approximately $60.9 million in Agency securities during the quarter ended March 31, 2012, which was offset by investment maturities and prepayments of $12.4 million and sales of $29.9 million resulting in gains on sales of $498,000. |
|
|
|
|
|
FDIC Loss Share receivable was reduced by approximately $5.7 million from $71.9 million at December 31, 2011 to $66.2 million at March 31, 2012. The decrease was due to cash receipts of approximately $4.5 million, a reduction of $1.6 million related to the disposition of acquired loans at above their discounted carrying values, offset by accretion of income on the receivable of $294,000. |
35
|
|
|
|
|
The changes in operating results for the three months ended March 31, 2012 when compared to the same period ended March 31, 2011 were substantially the result of the TBOM and Old Harbor acquisitions. |
|
|
|
|
|
Net loans decreased by approximately $12.4 million to $855.6 million at March 31, 2012 primarily due to payoffs and resolutions on acquired loans partially offset by new loan production. |
|
|
|
|
|
On April 1, 2012, we completed the acquisition through merger of Anderen Financial, Inc. and its subsidiary, Anderen Bank, for approximately $38 million in stock and cash. |
OPERATING RESULTS
For the quarter ended March 31, 2012, we reported a net income of $780,000 compared to a net income of $355,000 for the quarter ended March 31, 2011.
Net Interest Income
Net interest income, which constitutes our principal source of income, represents the excess of interest income on interest-earning assets over interest expense on interest-bearing liabilities. Our principal interest-earning assets are federal funds sold, investment securities and loans. Our interest-bearing liabilities primarily consist of time deposits, interest-bearing checking accounts (NOW accounts), savings deposits and money market accounts. We invest the funds attracted by these interest-bearing liabilities in interest-earning assets. Accordingly, our 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 following table reflects the components of net interest income, setting forth for the periods 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).
36
Net interest earnings for the three-month periods ended March 31, 2012 and 2011 are reflected in the following table:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
March 31, 2012 |
|
March 31, 2011 |
|
||||||||||||||
(Dollars in thousands) |
|
Average |
|
Interest |
|
Average |
|
Average |
|
Interest |
|
Average |
|
||||||
Assets |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest-earning assets Loans |
|
$ |
876,212 |
|
$ |
14,372 |
|
|
6.58 |
% |
$ |
840,573 |
|
$ |
13,717 |
|
|
6.62 |
% |
Investment securities |
|
|
208,392 |
|
|
1,327 |
|
|
2.55 |
% |
|
99,191 |
|
|
890 |
|
|
3.59 |
% |
Federal funds sold and securities purchased under resale agreements |
|
|
141,832 |
|
|
189 |
|
|
0.53 |
% |
|
132,875 |
|
|
74 |
|
|
0.23 |
% |
Total interest-earning assets |
|
|
1,226,436 |
|
|
15,888 |
|
|
5.19 |
% |
|
1,072,639 |
|
|
14,681 |
|
|
5.56 |
% |
Non interest-earning assets |
|
|
189,726 |
|
|
|
|
|
|
|
|
189,229 |
|
|
|
|
|
|
|
Allowance for loan losses |
|
|
(13,256 |
) |
|
|
|
|
|
|
|
(13,390 |
) |
|
|
|
|
|
|
Total assets |
|
$ |
1,402,906 |
|
|
|
|
|
|
|
$ |
1,248,478 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Liabilities and Shareholders |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Equity |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest-bearing liabilities NOW accounts |
|
$ |
134,930 |
|
$ |
55 |
|
|
0.16 |
% |
$ |
122,676 |
|
$ |
58 |
|
|
0.19 |
% |
Money market accounts |
|
|
308,235 |
|
|
462 |
|
|
0.60 |
% |
|
251,133 |
|
|
536 |
|
|
0.87 |
% |
Savings accounts |
|
|
59,220 |
|
|
55 |
|
|
0.37 |
% |
|
40,457 |
|
|
55 |
|
|
0.55 |
% |
Certificates of deposit |
|
|
319,697 |
|
|
856 |
|
|
1.07 |
% |
|
325,735 |
|
|
982 |
|
|
1.22 |
% |
Fed funds purchased and repurchase agreements |
|
|
10,596 |
|
|
3 |
|
|
0.11 |
% |
|
14,282 |
|
|
6 |
|
|
0.17 |
% |
Federal Home Loan Bank advances and other borrowings |
|
|
550 |
|
|
6 |
|
|
4.38 |
% |
|
9,726 |
|
|
87 |
|
|
3.63 |
% |
Total interest-bearing liabilities |
|
|
833,228 |
|
|
1,437 |
|
|
0.69 |
% |
|
764,009 |
|
|
1,724 |
|
|
0.92 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-interest bearing liabilities |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Demand deposit accounts |
|
|
343,450 |
|
|
|
|
|
|
|
|
300,199 |
|
|
|
|
|
|
|
Other liabilities |
|
|
9,444 |
|
|
|
|
|
|
|
|
6,553 |
|
|
|
|
|
|
|
Total non-interest-bearing liabilities |
|
|
352,894 |
|
|
|
|
|
|
|
|
306,752 |
|
|
|
|
|
|
|
Shareholders equity |
|
|
216,784 |
|
|
|
|
|
|
|
|
177,717 |
|
|
|
|
|
|
|
Total liabilities and shareholders equity |
|
$ |
1,402,906 |
|
|
|
|
|
|
|
$ |
1,248,478 |
|
|
|
|
|
|
|
Net interest spread |
|
|
|
|
$ |
14,451 |
|
|
4.50 |
% |
|
|
|
$ |
12,957 |
|
|
4.64 |
% |
Net interest on average earning assets - Margin |
|
|
|
|
|
|
|
|
4.73 |
% |
|
|
|
|
|
|
|
4.90 |
% |
37
Our net interest income for the three months ended March 31, 2012 was positively impacted by the increase in average earning assets of $153.8 million as compared to the three months ended March 31, 2011 primarily the result of loans and investments acquired in the Old Harbor acquisition and the purchase of investments during the quarter ended March 31, 2012. These increases were primarily offset by a reduction in the overall yield earned on investments quarter to quarter as well as a slight decrease in the yield earned on loans. Earnings for the current quarter were also positively impacted by the accretion of discounts related to loans acquired in the Old Harbor, TBOM and Republic acquisitions of approximately $3.5 million for the three months ended March 31, 2012 as compared to $2.6 million for the same period in 2011. Included in the $3.5 million of accretion of discount in 2012 was approximately $1.6 million related to the disposition of assets acquired in the transactions above the discounted carrying value of the asset. A corresponding charge of approximately $1.6 million was recorded as an adjustment to FDIC loss share receivable in non-interest income related to these assets. Included in the $2.6 million of accretion discount in 2011 was approximately $513,000 related to the disposition of assets above the discounted carrying values; a corresponding charge of approximately $410,000 was recorded as an adjustment to FDIC loss share receivable in non-interest income related to those assets.
Net interest income was $14.4 million for the three months ended March 31, 2012, as compared to $13.0 million for the three months ended March 31, 2011, an increase of $1.4 million, or 11.53%. The increase resulted primarily from an increase in average earning assets of $153.8 million or 14.34% primarily due to the Old Harbor acquisition, securities purchases during the quarter ended March 31, 2012, and a reduction of the costs of funds of 23 basis points offset by a decrease in the yield earned on securities quarter over quarter. The net interest margin (i.e., net interest income divided by average earning assets) decreased 17 basis points from 4.90% during the three months ended March 31, 2011 to 4.73% during the three months ended March 31, 2012, mainly the result of lower overall yield earned on the investment portfolio, partially offset by a decrease in the costs of funds. Accretion of $3.5 million on acquired loans added approximately 115 basis points to the quarter ended March 31, 2012 net interest margin. This compares to accretion of loan discount of $2.6 million during the three months ended March 31, 2011, which added approximately 97 basis points to the March 31, 2011 margin. For the three months ended March 31, 2012, average loans represented 62.46% of total average assets and 74.50% of total average deposits and customer repurchase agreements, compared to average loans of 67.33% of total average assets and average loans of 79.71% to total average deposits and customer repurchase agreements at March 31, 2011. Our cost of funds was approximately 23 basis points lower for the three months ended March 31, 2012, as compared to 2011, primarily as a result of lower rates in the renewal of time deposits.
Rate Volume Analysis
The following table sets forth certain information regarding changes in our interest income and interest expense for the three months ended March 31, 2012 as compared to the three months ended March 31, 2011. 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.
38
Changes in interest earnings for the three-months ended March 31, 2012 and 2011:
|
|
|
|
|
|
|
|
|
|
|
|
|
March 31, 2012 and 2011 |
|
|||||||
(Dollars in thousands) |
|
Change |
|
Variance |
|
Variance |
|
|||
Assets |
|
|
|
|
|
|
|
|
|
|
Interest-earning assets |
|
|
|
|
|
|
|
|
|
|
Loans |
|
$ |
655 |
|
$ |
584 |
|
$ |
71 |
|
Investment securities |
|
|
437 |
|
|
755 |
|
|
(318 |
) |
Federal funds sold and securities purchased under resale agreements |
|
|
115 |
|
|
5 |
|
|
110 |
|
|
|
|
|
|
|
|
|
|
|
|
Total interest-earning assets |
|
$ |
1,207 |
|
$ |
1,344 |
|
$ |
(137 |
) |
Liabilities |
|
|
|
|
|
|
|
|
|
|
Interest-bearing liabilities |
|
|
|
|
|
|
|
|
|
|
NOW accounts |
|
$ |
(3 |
) |
$ |
5 |
|
$ |
(8 |
) |
Money market accounts |
|
|
(74 |
) |
|
106 |
|
|
(180 |
) |
Savings accounts |
|
|
|
|
|
21 |
|
|
(21 |
) |
Certificates of deposit |
|
|
(126 |
) |
|
(18 |
) |
|
(108 |
) |
Fed funds purchased and repurchase agreements |
|
|
(3 |
) |
|
(1 |
) |
|
(2 |
) |
Other borrowings |
|
|
(81 |
) |
|
(97 |
) |
|
16 |
|
|
|
|
|
|
|
|
|
|
|
|
Total interest-bearing liabilities |
|
|
(287 |
) |
|
16 |
|
|
(303 |
) |
|
|
|
|
|
|
|
|
|
|
|
Net interest spread |
|
$ |
1,494 |
|
$ |
1,328 |
|
$ |
166 |
|
Non-interest Income, Non-interest Expense, Provision for Loan Losses, and Income Tax Expense
Non-interest income includes service charges and fees on deposit accounts, net gains or losses on sales of securities, and all other items of income, other than interest, resulting from our business activities. Non-interest income decreased by $449,000 or 61.59%, to $280,000 for the quarter ended March 31, 2012 when compared to the quarter ended March 31, 2011. The decrease was principally a result of an adjustment to the FDIC receivable caused by the disposition of assets above the discounted carrying values. The adjustment to the FDIC receivable was partially offset by greater gains on sales of securities during the quarter ended March 31, 2012, as compared to the prior year.
Service charges and fees on deposits decreased from the quarter ended March 31, 2011 by approximately $99,000 to $832,000 for the quarter ended March 31, 2012 primarily as a result of lower activity service charges and wire transfer fees quarter over quarter.
The adjustment to FDIC indemnification asset during the quarter ended March 31, 2012 represented a $1.6 million expense due to the disposition of assets acquired in FDIC assisted acquisition transactions above the discounted carrying value of the asset. When such a disposition occurs, a lower actual loss on the asset is realized compared to the originally estimated loss net of interest income earned on the receivable. The FDIC loss share receivable is recorded at net realizable value with the discount accreted into income. The related accretion of income for the quarter ended March 31, 2012 was $294,000.
During the three months ended March 31, 2012, the Company had sales of $29.9 million of securities for a net gain of $498,000 as compared to no sales of securities during the three months ended March 31, 2011.
During the three months ended March 31, 2012, the Bank sold $2.3 million in OREO properties with a carrying value of $2.3 million and recorded losses on the dispositions of $25,000 as compared to sales of OREO with a carrying value of $1.32 million for a net loss of $224,000 for the three months ended March 31, 2011.
Non-interest expense is comprised of salaries and employee benefits, occupancy and equipment expense and other operating expenses incurred in supporting our various business activities. Non-interest expense increased by
39
$985,000, or 8.80%, from $11.2 million for the three months ended March 31, 2011 to $12.2 million for the three months ended March 31, 2012, primarily due to operations acquired as a result of the Old Harbor acquisition.
The following summarizes the changes in non-interest expense accounts for the three months ended March 31, 2012 compared to the three months ended March 31, 2011:
|
|
|
|
|
|
|
|
|
|
|
|
|
Three months ended |
|
|
|
|||||
(Dollars in thousands) |
|
March 31, |
|
March 31, |
|
Difference |
|
|||
Salaries and employee benefits |
|
$ |
5,709 |
|
$ |
5,242 |
|
$ |
467 |
|
Occupancy and equipment |
|
|
1,945 |
|
|
2,052 |
|
|
(107 |
) |
Data processing |
|
|
879 |
|
|
891 |
|
|
(12 |
) |
Telephone |
|
|
214 |
|
|
231 |
|
|
(17 |
) |
Stationery and supplies |
|
|
125 |
|
|
88 |
|
|
37 |
|
Amortization of intangibles |
|
|
143 |
|
|
129 |
|
|
14 |
|
Professional fees |
|
|
678 |
|
|
513 |
|
|
165 |
|
Advertising |
|
|
72 |
|
|
33 |
|
|
39 |
|
Merger reorganization expense |
|
|
340 |
|
|
450 |
|
|
(110 |
) |
Regulatory assessment |
|
|
358 |
|
|
455 |
|
|
(97 |
) |
Other |
|
|
1,713 |
|
|
1,107 |
|
|
606 |
|
Total non-interest expense |
|
$ |
12,176 |
|
$ |
11,191 |
|
$ |
985 |
|
Salary and employee benefits increased by approximately $467,000 to $5.7 million for the three months ended March 31, 2012 as compared to $5.2 million for the three months ended March 31, 2011, primarily as a result of the acquisition of the Old Harbor operation.
Occupancy and equipment decreased by approximately $107,000 to $1.9 million for the three months ended March 31, 2012 as compared to the three months ended March 31, 2011 of $2.1 million primarily as a result of decreased lease expense as well as equipment and furniture rental as a result of the integration of the TBOM operation in the second quarter of 2011. In May 2011, the three banking centers acquired as a result of the TBOM acquisition were closed. During the quarter ended March 31, 2012, the Company incurred approximately $45,000 in occupancy related expenses for Old Harbor banking centers which have been eliminated.
Data processing expenses decreased by $12,000 to $879,000 for the three months ended March 31, 2012, primarily the result of lower overall data processing expenses. Data processing integration costs for the Anderen merger is estimated at $200,000, and is anticipated to be incurred in the second quarter.
Professional fees increased by $165,000 to $678,000 for the three months ended March 31, 2012 due to increased computer consulting fees primarily due to the integration of the Old Harbor operation and legal fees associated with the Old Harbor ingetration and Anderen acquisition of $111,000.
Regulatory assessment decreased by $97,000 or 21.32% to $358,000 for the quarter ended March 31, 2012, as compared to $455,000 for the quarter ended March 31, 2011. The decrease is due to a change in the regulatory assessment methodology period over period.
Increases in other non-interest expenses were primarily due to the Old Harbor acquisition, as well as $264,000 in other real estate write downs for the quarter ending March 31, 2012 due to new appraisals received.
We recorded $1.3 million in provision for loan losses for the three months ended March 31, 2012, compared to $1.9 million for the three months ended March 31, 2011. The $1.3 million provision for loan losses for the three months ended March 31, 2012 was primarily the result of charge-offs during the quarter, changes within classified assets during the quarter and the continuing fluctuations of values on the underlying collateral on impaired loans. Substantially all of the charge-offs of $2.0 million for the quarter ended March 31, 2012 had specific reserves at December 31, 2011. The provision for loan losses of $1.3 million was less than net charge-off of $1.8 million primarily due to the reduction in the overall historical charge-off ratios used to determine general reserves as well as the overall reduction in special mention loans during the quarter.
40
We recorded income tax expense of $475,000 for the three months ended March 31, 2012, compared to $240,000 of income tax expense for the three months ended March 31, 2011. The increase is due to higher pretax income for the three months ended March 31, 2012 as compared to the three months ended March 31, 2011.
FINANCIAL CONDITION
At March 31, 2012 our total assets were $1.40 billion and our net loans were $855.6 million or 61.1% of total assets. At December 31, 2011, our total assets were $1.42 billion and our net loans were $868.0 million or 61.1% of total assets. Net loans decreased by approximately $12.4 million to $855.6 million at March 31, 2012 due primarily to payoffs and resolutions on acquired loans offset with new loan production.
At March 31, 2012, the allowance for loan losses was $12.4 million or 1.42% of total loans. At December 31, 2011, the allowance for loan losses was $12.8 million or 1.46% of total loans.
At March 31, 2012, our total deposits were $1.17 billion, a decrease of $16.3 million or 1.38% when compared to December 31, 2011 of $1.182 billion. Non-interest bearing deposits represented 30.38% of total deposits at March 31, 2012 compared to 27.87% at December 31, 2011. The decrease in total deposits was primarily a result of the run off of higher cost deposits acquired in the Old Harbor acquisition.
Loan Quality
Management seeks to maintain a high quality loan portfolio through sound underwriting and lending practices. The banking industry and its regulators view elements of loan concentrations as a concern that can give rise to deterioration in loan quality if not managed effectively.
Loan concentrations are defined as amounts loaned to a number of borrowers engaged in similar activities, and/or located in the same region, sufficient to cause them to be similarly impacted by economic or other conditions. We, on a routine basis, monitor these concentrations in order to consider adjustments in our lending practices to reflect economic conditions, loan-to-deposit ratios, and industry trends. As of March 31, 2012 and December 31, 2011, there were no concentration of loans within any portfolio category to any group of borrowers engaged in similar activities or in a similar business (other than noted below) that exceeded 10% of total loans, except that as of such dates loans collateralized with mortgages on real estate represented 84.23% and 84.17%, respectively, of the total loan portfolio and were to a broad base of borrowers in varying activities, businesses, and locations.
At 1st United, we consider our focus to be in business banking. Through our business banking activities, we provide commercial purpose real estate secured loans as referenced above and also provide commercial and residential real estate loans. Business banking also provides loan facilities ranging from commercial purpose non-real estate secured loans, to lines of credit, Export/Import Bank loans, SBA loans and letters of credit.
Commercial loans, unlike residential real estate loans (which generally are made on the basis of the borrowers ability to repay from employment and other income and which are collateralized by real property with values tending to be more readily ascertainable), are non-real estate secured commercial loans typically underwritten on the basis of the borrowers ability to make repayment from the cash flow of its business and generally are collateralized by a variety of business assets, such as accounts receivable, equipment and inventory. As a result, the availability of funds for the repayment of commercial loans may be substantially dependent on the success of the business itself, which is subject to adverse conditions in the economy. Commercial loans are generally repaid from operational earnings, the collection of rent, or conversion of assets. Commercial loans can also entail certain additional risks when they involve larger loan balances to single borrowers or a related group of borrowers, resulting in a more concentrated loan portfolio. Further, the collateral underlying the loans may depreciate over time, cannot be appraised with as much precision as residential real estate, and may fluctuate in value based on the success of the business.
41
The following charts illustrate the composition of loans in our loan portfolio as of March 31, 2012 and December 31, 2011.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loan Portfolio as of March 31, 2012 |
|||||||||||||
|
|||||||||||||
(Dollars in thousands) |
|
Total |
|
Total |
|
Percent of |
|
Percent of |
|
||||
Loan Types |
|
|
|
|
|
|
|
|
|
|
|
|
|
Residential Real Estate: |
|
|
|
|
|
|
|
|
|
|
|
|
|
First mortgages |
|
|
512 |
|
$ |
132,609 |
|
|
15.28 |
% |
|
9.47 |
% |
HELOCs and equity |
|
|
320 |
|
|
55,652 |
|
|
6.41 |
% |
|
3.97 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commercial: |
|
|
|
|
|
|
|
|
|
|
|
|
|
Secured non-real estate |
|
|
561 |
|
|
112,794 |
|
|
13.00 |
% |
|
8.05 |
% |
Secured real estate |
|
|
88 |
|
|
51,384 |
|
|
5.92 |
% |
|
3.67 |
% |
Unsecured |
|
|
35 |
|
|
11,874 |
|
|
1.37 |
% |
|
0.85 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commercial Real Estate: |
|
|
|
|
|
|
|
|
|
|
|
|
|
Owner occupied |
|
|
203 |
|
|
171,634 |
|
|
19.78 |
% |
|
12.25 |
% |
Non-owner occupied |
|
|
246 |
|
|
238,262 |
|
|
27.45 |
% |
|
17.01 |
% |
Multi-family |
|
|
91 |
|
|
40,621 |
|
|
4.68 |
% |
|
2.90 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Construction and Land Development: |
|
|
|
|
|
|
|
|
|
|
|
|
|
Construction |
|
|
2 |
|
|
5,942 |
|
|
0.68 |
% |
|
0.42 |
% |
Improved land |
|
|
34 |
|
|
18,348 |
|
|
2.11 |
% |
|
1.31 |
% |
Unimproved land |
|
|
25 |
|
|
16,644 |
|
|
1.92 |
% |
|
1.19 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Consumer and other |
|
|
214 |
|
|
12,134 |
|
|
1.40 |
% |
|
0.87 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total March 31, 2012 |
|
|
2,331 |
|
$ |
867,898 |
|
|
100.00 |
% |
|
61.96 |
% |
42
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loan Portfolio as of December 31, 2011 |
|||||||||||||
|
|||||||||||||
(Dollars in thousands) |
|
Total |
|
Total |
|
Percent of |
|
Percent of |
|
||||
Loan Types |
|
|
|
|
|
|
|
|
|
|
|
|
|
Residential Real Estate: |
|
|
|
|
|
|
|
|
|
|
|
|
|
First mortgages |
|
|
540 |
|
$ |
140,128 |
|
|
15.91 |
% |
|
9.86 |
% |
HELOCs and equity |
|
|
334 |
|
|
56,552 |
|
|
6.42 |
% |
|
3.98 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commercial: |
|
|
|
|
|
|
|
|
|
|
|
|
|
Secured non-real estate |
|
|
573 |
|
|
116,886 |
|
|
13.27 |
% |
|
8.22 |
% |
Secured real estate |
|
|
88 |
|
|
44,716 |
|
|
5.08 |
% |
|
3.15 |
% |
Unsecured |
|
|
39 |
|
|
10,424 |
|
|
1.18 |
% |
|
0.73 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commercial Real Estate: |
|
|
|
|
|
|
|
|
|
|
|
|
|
Owner occupied |
|
|
202 |
|
|
173,505 |
|
|
19.70 |
% |
|
12.21 |
% |
Non-owner occupied |
|
|
243 |
|
|
241,902 |
|
|
27.46 |
% |
|
17.02 |
% |
Multi-family |
|
|
96 |
|
|
40,445 |
|
|
4.59 |
% |
|
2.85 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Construction and Land Development: |
|
|
|
|
|
|
|
|
|
|
|
|
|
Construction |
|
|
7 |
|
|
8,173 |
|
|
0.93 |
% |
|
0.58 |
% |
Improved land |
|
|
34 |
|
|
18,447 |
|
|
2.09 |
% |
|
1.30 |
% |
Unimproved land |
|
|
27 |
|
|
17,516 |
|
|
1.99 |
% |
|
1.23 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Consumer and other |
|
|
224 |
|
|
12,083 |
|
|
1.38 |
% |
|
0.85 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total December 31, 2011 |
|
|
2,407 |
|
$ |
880,777 |
|
|
100.00 |
% |
|
61.98 |
% |
The following chart illustrates the composition of our construction and land development loan portfolio as of March 31, 2012 and December 31, 2011.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
March 31, 2012 |
|
December 31, 2011 |
|
||||||||
(Dollars in thousands) |
|
Balance |
|
% of |
|
Balance |
|
% of |
|
||||
Construction |
|
|
|
|
|
|
|
|
|
|
|
|
|
Residential |
|
$ |
1,778 |
|
|
0.20 |
% |
$ |
3,135 |
|
|
0.36 |
% |
Residential spec |
|
|
|
|
|
|
% |
|
1,492 |
|
|
0.17 |
% |
Commercial |
|
|
4,164 |
|
|
0.48 |
% |
|
263 |
|
|
0.03 |
% |
Commercial spec |
|
|
|
|
|
|
% |
|
3,283 |
|
|
0.37 |
% |
Land Development |
|
|
|
|
|
|
|
|
|
|
|
|
|
Residential |
|
|
7,087 |
|
|
0.82 |
% |
|
1,918 |
|
|
0.22 |
% |
Residential spec |
|
|
11,135 |
|
|
1.28 |
% |
|
19,136 |
|
|
2.17 |
% |
Commercial |
|
|
1,045 |
|
|
0.12 |
% |
|
1,048 |
|
|
0.12 |
% |
Commercial spec |
|
|
15,725 |
|
|
1.81 |
% |
|
13,861 |
|
|
1.57 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total |
|
$ |
40,934 |
|
|
4.71 |
% |
$ |
44,136 |
|
|
5.01 |
% |
Generally, interest on loans accrues and is credited to income based upon the principal balance outstanding. It is managements policy to discontinue the accrual of interest income and classify a loan as non-accrual when principal or interest is past due 90 days or more unless, in the determination of management, the principal and interest on the loan are well collateralized and in the process of collection. Consumer loans are generally charged-off after 90 days of delinquency unless adequately collateralized and in the process of collection. Loans are not returned to accrual status until principal and interest payments are brought current and future payments appear reasonably certain. Interest accrued and unpaid at the time a loan is placed on non-accrual status is charged against interest income.
43
We have identified certain assets as non-performing and troubled debt restructuring assets. These assets include non-accruing loans, foreclosed real estate, loans that are contractually past due 90 days or more as to principal or interest payments and still accruing, and troubled debt restructurings. All troubled debt restructurings, non-accruing loans and loans accruing 90 days or more past due are considered impaired. These assets present more than the normal risk that we will be unable to eventually collect or realize their full carrying value.
Modifications of terms for our loans and their inclusion as troubled debt restructurings are based on individual facts and circumstances. Loan modifications that are included as troubled debt restructurings may involve a reduction of the stated interest rate on the loan, extension of the maturity date at a stated rate of interest lower than the current market rate for new debt with similar risk, deferral of principal payments and/or forgiveness of principal, regardless of the period of the modification. Generally, we will allow interest rate reductions for a period of less than two years after which the loan reverts back to the contractual interest rate. Each of the loans included as troubled debt restructurings at March 31, 2012 had either an interest rate modification ranging from 6 months to 2 years before reverting back to the original interest rate and/or a deferral of principal payments which can range from 6 to 12 months before reverting back to an amortizing loan. All of the loans were modified due to financial stress of the borrower. The following is a summary of the unpaid principal balance of loans classified as troubled debt restructurings as of March 31, 2012, and December 31, 2011, which are performing in accordance with their modification agreements.
|
|
|
|
|
|
|
|
(Dollars in thousands) |
|
March 31, 2012 |
|
December 31, 2011 |
|
||
Residential real estate |
|
$ |
2,305 |
|
$ |
2,306 |
|
Commercial real estate |
|
|
12,448 |
|
|
11,394 |
|
Construction and land development |
|
|
5,999 |
|
|
6,013 |
|
Commercial |
|
|
2,364 |
|
|
2,124 |
|
|
|
|
|
|
|
|
|
Total |
|
$ |
23,116 |
|
$ |
21,837 |
|
At March 31, 2012, there were seven loans which were troubled debt restructured loans with a carrying amount of $7.4 million and specific reserves of $965,000 that were non-accrual and included in non-accrual loans. There were five loans which were troubled debt restructured loans with a carrying amount of $7.1 million and specific reserves of $684,000 that were non-accrual and included in non-accrual loans at December 31, 2011. Loans retain their accrual status at their time of modification. As a result, if the loan is on non-accrual at the time that it is modified, it stays on non-accrual, and if a loan is accruing at the time of modification, it generally stays on accrual. A loan on non-accrual will be individually evaluated based on sustained adherence to the terms of the modification agreement prior to being placed on accrual status. Troubled debt restructurings are considered impaired. The average yield on the loans classified as troubled debt restructurings was 4.72% and 4.63% at March 31, 2012 and December 31, 2011, respectively.
During the three months ended March 31, 2012, we had $2.8 million in loans for which we lowered the interest rate prior to maturity to competitively retain a loan. During the year ended December 31, 2011, we had approximately $5.0 million in commercial real estate loans on which we lowered the interest rate prior to maturity to competitively retain a loan. Due to the borrowers significant deposit balances and overall quality of the loans, these loans were not included in troubled debt restructurings. In addition, each of these borrowers was not considered to be in financial distress and the modified terms matched current market terms for borrowers with similar risk characteristics. We had no other loans where we extended the maturity or forgave principal that were not already included in troubled debt restructurings or otherwise impaired.
During the three months ended March 31, 2012 and 2011, interest income not recognized on non-accrual loans (but would have been recognized if these loans were current) was approximately $514,000 and $185,000, respectively.
44
Our non-performing and troubled debt restructuring assets at March 31, 2012 and December 31, 2011were as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
March 31, 2012 |
|
December 31, 2011 |
|
||||||||||||||
(Dollars in thousands) |
|
Assets Not |
|
Assets |
|
Total |
|
Assets Not |
|
Assets |
|
Total |
|
||||||
Non-Accrual Loans |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Residential real estate |
|
$ |
3,883 |
|
$ |
3,957 |
|
$ |
7,840 |
|
$ |
5,103 |
|
$ |
4,622 |
|
$ |
9,725 |
|
Home equity lines |
|
|
953 |
|
|
68 |
|
|
1,021 |
|
|
644 |
|
|
323 |
|
|
967 |
|
Commercial real estate |
|
|
9,307 |
|
|
5,761 |
|
|
15,068 |
|
|
13,038 |
|
|
5,612 |
|
|
18,650 |
|
Construction and land development |
|
|
264 |
|
|
216 |
|
|
480 |
|
|
264 |
|
|
167 |
|
|
431 |
|
Commercial |
|
|
11,892 |
|
|
1,198 |
|
|
13,090 |
|
|
11,812 |
|
|
1,241 |
|
|
13,053 |
|
Other |
|
|
1 |
|
|
|
|
|
1 |
|
|
3 |
|
|
|
|
|
3 |
|
Total |
|
$ |
26,300 |
|
$ |
11,200 |
|
$ |
37,500 |
|
$ |
30,864 |
|
$ |
11,965 |
|
$ |
42,829 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accruing => 90 days past due |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Residential real estate |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
Home equity lines |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commercial real estate |
|
|
|
|
|
|
|
|
|
|
|
647 |
|
|
|
|
|
647 |
|
Construction and land development |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commercial |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
647 |
|
$ |
|
|
$ |
647 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total non-accruing loans |
|
$ |
26,300 |
|
$ |
11,200 |
|
$ |
37,500 |
|
$ |
30,864 |
|
$ |
11,965 |
|
$ |
42,829 |
|
Accruing => 90 days past due |
|
|
|
|
|
|
|
|
|
|
|
647 |
|
|
|
|
|
647 |
|
Foreclosed real estate |
|
|
2,112 |
|
|
11,273 |
|
|
13,385 |
|
|
2,454 |
|
|
11,058 |
|
|
13,512 |
|
Total non-performing assets |
|
|
28,412 |
|
|
22,473 |
|
|
50,885 |
|
|
33,965 |
|
|
23,023 |
|
|
56,988 |
|
Trouble debt restructured loans |
|
|
23,060 |
|
|
56 |
|
|
23,116 |
|
|
21,781 |
|
|
56 |
|
|
21,837 |
|
Total non-performing assets and troubled debt restructured loans |
|
$ |
51,472 |
|
$ |
22,529 |
|
$ |
74,001 |
|
$ |
55,746 |
|
$ |
23,079 |
|
$ |
78,825 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Ratios |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total non-accruing and accruing => 90 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
days past due to total loans |
|
|
3.03 |
% |
|
1.29 |
% |
|
4.32 |
% |
|
3.58 |
% |
|
1.36 |
% |
|
4.94 |
% |
Total non-performing assets to total assets |
|
|
2.03 |
% |
|
1.60 |
% |
|
3.63 |
% |
|
2.39 |
% |
|
1.62 |
% |
|
4.01 |
% |
Total non-performing assets and troubled debt restructured loans to total assets |
|
|
3.67 |
% |
|
1.61 |
% |
|
5.28 |
% |
|
3.92 |
% |
|
1.62 |
% |
|
5.55 |
% |
Included in non-accrual loans are purchase credit impaired loans of $8.9 million that are subject to Loss Sharing Agreements in which cash flows could not be reasonably estimated. Of the non-performing assets and performing troubled debt restructuring, at March 31, 2012, $22.5 million were acquired in the Old Harbor, TBOM and Republic transactions and are all covered under the Loss Sharing Agreements as compared to $23.1 million at December 31, 2011. These assets were initially recorded at fair value and as such we do not expect to incur any additional future losses on these assets.
At March 31, 2012, the Bank had approximately $2.1 million of non-performing loans and $5.2 million of other real estate owned approved for sale and pending closing. Of these pending sales, $2.2 million are not covered under loss share, agreements and $5.1 million are covered under loss share agreements.
Since December 31, 2011, for non-performing assets not subject to Loss Share Agreements, we had approximately $1.9 million in non-accrual loans which were charged off, $3.0 million were paid off and approximately $818,000 was added to non-accrual and no loans were returned to accrual status during the period.
45
Loans included in non-accrual loans not covered by Loss Share Agreements at March 31, 2012 were as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(Dollars in thousands) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Carrying |
|
Specific |
|
Net Carrying |
|
Appraised |
|
Appraisal |
|
|||||
Loans greater than $1 million: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commercial property in St. Lucie. Brevard and Martin Counties |
|
$ |
11,381 |
|
$ |
2,381 |
|
$ |
9,000 |
|
$ |
13,360 |
|
|
9/13/2011 |
|
Commercial property in Palm Beach County |
|
|
4,554 |
|
|
416 |
|
|
4,138 |
|
|
4,200 |
|
|
3/6/2012 |
|
Residential property in Palm Beach County |
|
|
2,055 |
|
|
|
|
|
2,055 |
|
|
2,800 |
|
|
3/1/ 2012 |
|
Industrial condo in Broward County |
|
|
1,816 |
|
|
|
|
|
1,816 |
|
|
2,020 |
|
|
1/4/2012 |
|
Residential property in Broward County |
|
|
1,756 |
|
|
4 |
|
|
1,752 |
|
|
1,950 |
|
|
8/9/2011 |
|
Subtotal |
|
|
21,562 |
|
|
2,801 |
|
|
18,761 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loans under $1 million: |
|
|
4,738 |
|
|
755 |
|
|
3,983 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total |
|
$ |
26,300 |
|
$ |
3,556 |
|
$ |
22,744 |
|
|
|
|
|
|
|
Past due loans, categorized by loans subject to Loss Share Agreements and those not subject to Loss Share Agreements, at March 31, 2012 and December 31, 2011 were as follows:
March 31, 2012
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(Dollars in thousands) |
|
Accruing 30 - 59 |
|
Accruing 60-89 |
|
Non-Accrual
or Accrual and |
|
Total |
|
||||||||||||||||
|
|
Loans |
|
Loans
Not |
|
Loans |
|
Loans
Not |
|
Loans |
|
Loans
Not |
|
Loans |
|
Loans
Not |
|
||||||||
Residential Real Estate |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
4,025 |
|
$ |
4,836 |
|
$ |
4,025 |
|
$ |
4,836 |
|
Commercial |
|
|
405 |
|
|
201 |
|
|
|
|
|
329 |
|
|
1,198 |
|
|
11,892 |
|
|
1,603 |
|
|
12,422 |
|
Commercial Real Estate |
|
|
|
|
|
2,277 |
|
|
|
|
|
|
|
|
5,761 |
|
|
9,307 |
|
|
5,761 |
|
|
11,584 |
|
Construction and Land Development |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
216 |
|
|
264 |
|
|
216 |
|
|
264 |
|
Consumer and other |
|
|
|
|
|
1 |
|
|
|
|
|
|
|
|
|
|
|
1 |
|
|
|
|
|
2 |
|
Total March 31, 2012 |
|
$ |
405 |
|
$ |
2,479 |
|
$ |
|
|
$ |
329 |
|
$ |
11,200 |
|
$ |
26,300 |
|
$ |
11,605 |
|
$ |
29,108 |
|
December 31, 2011
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(Dollars in thousands) |
|
Accruing 30 - 59 |
|
Accruing 60-89 |
|
Non-Accrual
or Accrual |
|
Total |
|
||||||||||||||||
|
|
Loans |
|
Loans
Not |
|
Loans |
|
Loans
Not |
|
Loans |
|
Loans
Not |
|
Loans
Subject |
|
Loans
Not |
|
||||||||
Residential Real Estate |
|
$ |
1,864 |
|
$ |
402 |
|
$ |
|
|
$ |
|
|
$ |
4,945 |
|
$ |
5,747 |
|
$ |
6,809 |
|
$ |
6,149 |
|
Commercial |
|
|
666 |
|
|
479 |
|
|
|
|
|
146 |
|
|
1,241 |
|
|
11,812 |
|
|
1,907 |
|
|
12,437 |
|
Commercial Real Estate |
|
|
356 |
|
|
272 |
|
|
|
|
|
318 |
|
|
5,612 |
|
|
13,685 |
|
|
5,968 |
|
|
14,275 |
|
Construction and Land Development |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
167 |
|
|
264 |
|
|
167 |
|
|
264 |
|
Consumer and other |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
3 |
|
|
|
|
|
3 |
|
Total December 31, 2011 |
|
$ |
2,886 |
|
$ |
1,153 |
|
$ |
|
|
$ |
464 |
|
$ |
11,965 |
|
$ |
31,511 |
|
$ |
14,851 |
|
$ |
33,128 |
|
46
Past due loans subject to Loss Share Agreements decreased by $3.2 million from $14.9 million at December 31, 2011 to $11.6 million at March 31, 2012. Past due loans not subject to Loss Share Agreements decreased by $4.0 from $33.1 million at December 31, 2011 to $29.1 million at March 31, 2012. Overall there were decreases in loans accruing 30 to 59 days past due of $1.2 million and non-accrual loans past due greater than 90 days of $5.2 million between December 31, 2011 and March 31, 2012. These decreases were due to continued resolution of past due loans by the Company.
Certain Acquired Loans: As part of business acquisitions, the Company evaluated each of the acquired loans under ASC 310-30 to determine whether (1) there was evidence of credit deterioration since origination, and (2) it was probable that we would not collect all contractually required payment receivable. The Company determined the best indicator of such evidence was an individual loans payment status and/or whether a loan was determined to be classified by us based on our review of each individual loan. Therefore, generally each individual loan that should have been or was on nonaccrual at the acquisition date, loans contractually past due 60 days or more, and each individual loan that was classified by us were included subject to ASC 310-30. These loans were recorded at the discounted expected cash flows of the individual loan and are currently disclosed in Note 4.
Loans which were evaluated under ASC 310-30, and where the timing and amount of cash flows can be reasonably estimated, were accounted for in accordance with ASC 310-30-35. The Company applies the interest method for these loans under this subtopic and the loans are excluded from non-accrual. If at acquisition we identified loans that we could not reasonably estimate cash flows or if subsequent to acquisition such cash flows could not be estimated, such loans would be included in non-accrual. These acquired loans are recorded at the allocated fair value, such that there is no carryover of the sellers allowance for loan losses. Such acquired loans are accounted for individually. The Company estimates the amount and timing of expected cash flows for each purchased loan, and the expected cash flows in excess of the allocated fair value is recorded as interest income over the remaining life of the loan (accretable yield). The excess of the loans contractual principal and interest over expected cash flows is not recorded (non-accretable difference). Over the life of the loan, expected cash flows continue to be estimated. If the present value of expected cash flows is less than the carrying amount, a loss is recorded through the allowance for loan losses. If the present value of expected cash flows is greater than the carrying amount, it is recognized as part of future interest income.
For the three months ended March 31, 2012 and 2011, the Bank recorded $3.5 million and $2.6 million, respectively, in interest income related to the accretion of discounts on loans acquired under Loss Share Agreements. Included within these amounts were $1.6 million and $513,000 of accretion income related to loans which were resolved during the three months ended March 31, 2012 and 2011. The Bank records a charge to earnings with the FDIC loss share receivable within non-interest income for discounts realized on loans which were resolved at amounts greater than or equal to our acquired balance. For the three months ended March 31, 2012 and 2011, the Bank recorded a charge to the adjustment to FDIC loss share receivable of $1.6 million and $410,000, respectively.
47
Impaired Loans
The following tables present loans individually evaluated for impairment by class of loan as of March 31, 2012 and December 31, 2011.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Recorded Investment in Impaired Loans |
|
||||||||||||||||
|
|
With Allowance |
|
With No Allowance |
|
||||||||||||||
March 31, 2012 |
|
Loans Subject to Loss |
|
Loans Not Subject to |
|
Loans |
|
Loans Not |
|
||||||||||
(Dollars in thousands) |
|
Recorded |
|
Allowance |
|
Recorded |
|
Allowance |
|
Recorded |
|
Recorded |
|
||||||
Residential Real Estate |
|
$ |
1,285 |
|
$ |
266 |
|
$ |
2,226 |
|
$ |
147 |
|
$ |
321 |
|
$ |
4,846 |
|
Commercial |
|
|
|
|
|
|
|
|
5,167 |
|
|
3,012 |
|
|
|
|
|
9,281 |
|
Commercial Real Estate |
|
|
565 |
|
|
99 |
|
|
13,218 |
|
|
1,289 |
|
|
2,046 |
|
|
6,529 |
|
Construction and Land Development |
|
|
|
|
|
|
|
|
2,780 |
|
|
1,007 |
|
|
|
|
|
3,483 |
|
Consumer and other |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1 |
|
Total March 31, 2012 |
|
$ |
1,850 |
|
$ |
365 |
|
$ |
23,391 |
|
$ |
5,455 |
|
$ |
2,367 |
|
$ |
24,140 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Recorded Investment in Impaired Loans |
|
||||||||||||||||
|
|
With Allowance |
|
With No Allowance |
|
||||||||||||||
December 31, 2011 |
|
Loans Subject to Loss |
|
Loans Not Subject to |
|
Loans |
|
Loans Not |
|
||||||||||
(Dollars in thousands) |
|
Recorded |
|
Allowance |
|
Recorded |
|
Allowance |
|
Recorded |
|
Recorded |
|
||||||
Residential Real Estate |
|
$ |
810 |
|
$ |
165 |
|
$ |
1,992 |
|
$ |
23 |
|
$ |
423 |
|
$ |
6,006 |
|
Commercial |
|
|
|
|
|
|
|
|
2,396 |
|
|
1,719 |
|
|
|
|
|
11,540 |
|
Commercial Real Estate |
|
|
995 |
|
|
124 |
|
|
13,650 |
|
|
2,439 |
|
|
1,616 |
|
|
8,565 |
|
Construction and Land Development |
|
|
|
|
|
|
|
|
2,516 |
|
|
892 |
|
|
|
|
|
3,761 |
|
Consumer and other |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total December 31, 2011 |
|
$ |
1,805 |
|
$ |
289 |
|
$ |
20,554 |
|
$ |
5,073 |
|
$ |
2,039 |
|
$ |
29,872 |
|
Impaired loans decreased by $2.5 million from $54.3 million at December 31, 2011 to $51.7 million at March 31, 2012. Impaired loans subject to loss share agreements increased by $373,000 as the Bank continues to evaluate acquired credits. Impaired loans not subject to Loss Share Agreements decreased by $2.9 million from December 31, 2011 to March 31, 2012 primarily due to decreases in loans past due and non-accrual of approximately $5.2 million and slightly offset by increases in modified loans classified as TDRs of $1.7 million.
48
Allowance for Loan Losses
At March 31, 2012, the allowance for loan losses was $12.4 million or 1.42% of total loans. At December 31, 2011, the allowance for loan losses was $12.8 million or 1.46% of total loans. In originating loans, we recognize that credit losses will be experienced and the risk of loss will vary with, among other things: general economic conditions; the type of loan being made; the creditworthiness of the borrower and guarantors over the term of the loan; insurance; whether the loan is covered by a Loss Share Agreement; and, in the case of a collateralized loan, the quality of the collateral for such a loan. The allowance for loan losses represents our estimate of the amount necessary to provide for probable incurred losses in the loan portfolio. In making this determination, we analyze the ultimate collectability of the loans in our portfolio, feedback provided by internal loan staff, the independent loan review function and information provided by examinations performed by regulatory agencies.
The allowance for loan losses is evaluated at the portfolio segment level using the same methodology for each segment. The historical net losses for a rolling two year period is the basis for the general reserve for each segment which is adjusted for each of the same qualitative factors (i.e., nature and volume of portfolio, economic and business conditions, classification, past due and non-accrual trends) evaluated by each individual segment. Impaired loans and related specific reserves for each of the segments are also evaluated using the same methodology for each segment. The qualitative factors totaled approximately 20 basis points of the allowance for loan losses as of both March 31, 2012 and December 31, 2011.
A loan is considered impaired when, based on current information and events, it is probable that the Company will be unable to collect the scheduled payments of principal or interest when due according to the contractual terms of the loan agreement. Loans, for which the terms have been modified, and for which the borrower is experiencing financial difficulties, are considered troubled debt restructurings and generally classified as impaired.
Factors considered by management in determining impairment include payment status, collateral value, and the probability of collecting scheduled principal and interest payments when due. Loans that experience insignificant payment delays (loan payments made within 90 days of the due date) and payment shortfalls (which are tracked as past due amounts) generally are not classified as impaired. Management determines the significance of payment delays and payment shortfalls on a case-by-case basis, taking into consideration all of the circumstances surrounding the loan and the borrower, including the length of the delay, the reasons for the delay, the borrowers prior payment record, the borrowers and guarantors financial condition and the amount of the shortfall in relation to the principal and interest owed.
Charge-offs of loans are made by portfolio segment at the time that the collection of the full principal, in managements judgment, is doubtful. This methodology for determining charge-offs is consistently applied to each segment.
On a quarterly basis, management reviews the adequacy of the allowance for loan losses. Commercial credits are graded by risk management and the loan review function validates the assigned credit risk grades. In the event that a loan is downgraded, it is included in the allowance analysis at the lower grade. To establish the appropriate level of the allowance, we review and classify loans (including all impaired and non-performing loans) as to potential loss exposure.
Our analysis of the allowance for loan losses consists of three components: (i) specific credit allocation established for expected losses resulting from analysis developed through specific credit allocations on individual loans for which the recorded investment in the loan exceeds the fair value; (ii) general portfolio allocation based on historical loan loss experience for each loan category; and (iii) qualitative reserves based on general economic conditions as well as specific economic factors in the markets in which we operate.
The specific credit allocation component of the allowance for loan losses is based on a regular analysis of loans where the loan is determined to be impaired as determined by management. The amount of impairment, if any, is determined based on either the present value of expected future cash flows discounted at the loans effective interest rate, the market price of the loan, or, if the loan is collateral dependent, the fair value of the underlying collateral less cost of sale. Third party appraisals are used to determine the fair value of underlying collateral. At a minimum a new appraisal is obtained annually for all impaired loans based on an as is value. Generally no adjustments, other than a reduction for estimated disposal costs, are made by the Company to third party appraisals to determine the fair
49
value of the assets. The impact on the allowance for loan losses for new appraisals are reflected in the period the appraisal is received. A loan may also be classified as substandard and not be classified as impaired by management. A loan may be classified as substandard by management if, for example, the primary source of repayment is insufficient, the financial condition of the borrower and/or guarantors has deteriorated or there are chronic delinquencies. The following is a summary of our loan classifications at March 31, 2012 and December 31, 2011:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loans Subject to Loss Share |
|
Loans Not Subject to Loss Share |
|
||||||||||||||
(Dollars in thousands) |
|
Total |
|
Pass |
|
Special |
|
Substandard |
|
Pass |
|
Special |
|
Substandard |
|
|||||||
March 31, 2012 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Residential Real Estate |
|
$ |
188,261 |
|
$ |
102,394 |
|
$ |
2,852 |
|
$ |
4,025 |
|
$ |
64,559 |
|
$ |
7,571 |
|
$ |
6,860 |
|
Commercial |
|
|
176,052 |
|
|
43,770 |
|
|
736 |
|
|
1,198 |
|
|
107,389 |
|
|
7,373 |
|
|
15,586 |
|
Commercial Real Estate |
|
|
450,517 |
|
|
203,968 |
|
|
12,658 |
|
|
5,762 |
|
|
185,500 |
|
|
22,213 |
|
|
20,416 |
|
Construction and Land Development: |
|
|
40,934 |
|
|
12,163 |
|
|
221 |
|
|
216 |
|
|
20,299 |
|
|
1,311 |
|
|
6,724 |
|
Consumer and other |
|
|
12,134 |
|
|
945 |
|
|
|
|
|
|
|
|
11,053 |
|
|
8 |
|
|
128 |
|
Total March 31, 2012 |
|
$ |
867,898 |
|
$ |
363,240 |
|
$ |
16,467 |
|
$ |
11,201 |
|
$ |
388,800 |
|
$ |
38,476 |
|
$ |
49,714 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loans Subject to Loss Share |
|
Loans Not Subject to Loss Share |
|
||||||||||||||
(Dollars in thousands) |
|
Total |
|
Pass |
|
Special |
|
Substandard |
|
Pass |
|
Special |
|
Substandard |
|
|||||||
December 31, 2011 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Residential Real Estate |
|
$ |
196,680 |
|
$ |
104,207 |
|
$ |
1,363 |
|
$ |
4,945 |
|
$ |
65,930 |
|
$ |
11,016 |
|
$ |
9,219 |
|
Commercial |
|
|
172,026 |
|
|
43,940 |
|
|
999 |
|
|
1,241 |
|
|
103,800 |
|
|
7,823 |
|
|
14,223 |
|
Commercial Real Estate |
|
|
455,852 |
|
|
209,965 |
|
|
16,659 |
|
|
5,612 |
|
|
178,317 |
|
|
23,489 |
|
|
21,810 |
|
Construction and Land Development: |
|
|
44,136 |
|
|
15,911 |
|
|
222 |
|
|
167 |
|
|
19,820 |
|
|
1,290 |
|
|
6,726 |
|
Consumer and other |
|
|
12,083 |
|
|
1,069 |
|
|
|
|
|
|
|
|
10,877 |
|
|
5 |
|
|
132 |
|
Total December 31, 2011 |
|
$ |
880,777 |
|
$ |
375,092 |
|
$ |
19,243 |
|
$ |
11,965 |
|
$ |
378,744 |
|
$ |
43,623 |
|
$ |
52,110 |
|
All non-accrual loans and substantially all troubled debt restructurings are included in substandard loans.
Substandard loans totaled $60.9 million at March 31, 2012 (of which $11.2 million were subject to the Loss Sharing Agreements) and $64.1 million at December 31, 2011 (of which $12.0 million were subject to the Loss Sharing Agreements). The decrease of $3.2 million since December 31, 2011 was primarily due to the resolution of loans not covered under Loss Sharing Agreements of $2.4 million through sale or foreclosure during the quarter. There was a reduction of $2.4 million in the total substandard loans not covered under Loss Sharing Agreements period over period. We regularly evaluate the classifications of loans and recommend either upgrades or downgrades to credits as events or circumstances warrant. In addition, at March 31, 2012, we had $51.7 million (or 6.0% of total loans) in loans we classified as impaired. This compares to $54.3 million or 6.2% of total loans at December 31, 2011. The decrease was primarily due to the resolution of loans during the quarter. At March 31, 2012 and December 31, 2011, the specific credit allocation included in the allowance for loan losses for loans impaired were approximately $5.8 million and $5.4 million, respectively. The specific credit allocation for impaired loans is adjusted based on appraisals obtained at least annually. All loans classified as substandard that are collateralized by real estate are also re-appraised at a minimum on an annual basis.
We also have loans classified as Special Mention. We classify loans as Special Mention if there are declining trends in the borrowers business, questions regarding condition or value of the collateral, or other weaknesses. At March 31, 2012, we had $54.9 million (6.3% of outstanding loans), which included $16.5 million in loans subject to Loss Sharing Agreements, which compares to $62.9 million (7.14% of outstanding loans) of which $19.2 million were subject to Loss Sharing Agreements, at December 31, 2011. Special mention loans not subject to Loss Sharing Agreements were $38.5 million at March 31, 2011, a decrease of $5.1 million from December 31, 2011. The decrease is attributable to resolution of loans and ongoing reviews of loans classified as special mention. If there is further deterioration on these loans, they may be classified substandard in the future, and depending on whether the
50
loan is considered impaired, a specific credit allocation may be needed resulting in increased provisions for loan losses.
We determine the general portfolio allocation component of the allowance for loan losses statistically using a loss analysis that examines historical loan loss experience adjusted for current environmental factors. We perform the loss analysis quarterly and update loss factors regularly based on actual experience. The general portfolio allocation element of the allowance for loan losses also includes consideration of the amounts necessary for concentrations and changes in portfolio mix and volume.
We base the allowance for loan losses on estimates and ultimate realized losses may vary from current estimates. We review these estimates quarterly, and as adjustments, either positive or negative, become necessary, we make a corresponding increase or decrease in the provision for loan losses. The methodology used to determine the adequacy of the allowance for loan losses is consistent with prior years and there were no reallocations
Management remains watchful of credit quality issues. Should the economic climate deteriorate from current levels, borrowers may experience difficulty repaying loans and the level of non-performing loans, charge-offs and delinquencies could rise and require further increases in loan loss provisions.
During the three months ended March 31, 2012, we recorded $1.3 million in provision for loan losses primarily as a result of charge-offs during the period, changes within classified loans and a continued deterioration of real estate values on the underlying collateral of impaired loans.
Activity in the allowance for loan losses for the three months ended March 31, 2012 was as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(Dollars in thousands) |
|
Commercial |
|
Residential |
|
Commercial |
|
Construction |
|
Consumer |
|
Total |
|
||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Beginning balance, January 1, 2012 |
|
$ |
3,111 |
|
$ |
1,945 |
|
$ |
5,302 |
|
$ |
2,409 |
|
$ |
69 |
|
$ |
12,836 |
|
Provisions for loan losses |
|
|
1,493 |
|
|
59 |
|
|
(41 |
) |
|
(161 |
) |
|
(50 |
) |
|
1,300 |
|
Loans charged off |
|
|
(31 |
) |
|
(284 |
) |
|
(1,697 |
) |
|
|
|
|
|
|
|
(2,012 |
) |
Recoveries |
|
|
20 |
|
|
113 |
|
|
37 |
|
|
22 |
|
|
50 |
|
|
242 |
|
Ending Balance, March 31, 2012 |
|
$ |
4,593 |
|
$ |
1,833 |
|
$ |
3,601 |
|
$ |
2,270 |
|
$ |
69 |
|
$ |
12,366 |
|
Activity in the allowance for loan losses for the three months ended March 31, 2011 was as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(Dollars in thousands) |
|
Commercial |
|
Residential |
|
Commercial |
|
Construction |
|
Consumer |
|
Total |
|
||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Beginning balance, January 1, 2011 |
|
$ |
3,832 |
|
$ |
3,026 |
|
$ |
4,145 |
|
$ |
1,895 |
|
$ |
152 |
|
$ |
13,050 |
|
Provisions for loan losses |
|
|
(270 |
) |
|
1,202 |
|
|
589 |
|
|
359 |
|
|
20 |
|
|
1,900 |
|
Loans charged off |
|
|
(200 |
) |
|
(140 |
) |
|
(539 |
) |
|
|
|
|
(133 |
) |
|
(1,012 |
) |
Recoveries |
|
|
50 |
|
|
|
|
|
11 |
|
|
33 |
|
|
|
|
|
94 |
|
Ending Balance, March 31, 2011 |
|
$ |
3,412 |
|
$ |
4,088 |
|
$ |
4,206 |
|
$ |
2,287 |
|
$ |
39 |
|
$ |
14,032 |
|
51
The following tables reflect the allowance allocation per loan category and percent of loans in each category to total loans as of March 31, 2012 and December 31, 2011:
As of March 31, 2012:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(Dollars in thousands) |
|
Commercial |
|
Residential |
|
Commercial |
|
Construction |
|
Consumer |
|
Total |
|
||||||
Specific Reserves: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Impaired loans |
|
$ |
3,012 |
|
$ |
413 |
|
$ |
1,387 |
|
$ |
1,007 |
|
$ |
|
|
$ |
5,819 |
|
Purchase credit impaired loans |
|
|
|
|
111 |
|
|
117 |
|
|
|
|
|
|
|
228 |
|
||
Total specific reserves |
|
|
3,012 |
|
|
524 |
|
|
1,504 |
|
|
1,007 |
|
|
|
|
|
6,047 |
|
General reserves |
|
|
1,581 |
|
|
1,309 |
|
|
2,097 |
|
|
1,263 |
|
|
69 |
|
|
6,319 |
|
Total |
|
$ |
4,593 |
|
$ |
1,833 |
|
$ |
3,601 |
|
$ |
2,270 |
|
$ |
69 |
|
$ |
12,366 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Loans |
|
$ |
176,052 |
|
$ |
188,261 |
|
$ |
450,517 |
|
$ |
40,934 |
|
$ |
12,134 |
|
$ |
867,898 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Allowance as percent of loans per category as of March 31, 2012 |
|
|
2.61 |
% |
|
0.97 |
% |
|
0.80 |
% |
|
5.55 |
% |
|
0.57 |
% |
|
1.42 |
% |
As of December 31, 2011:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(Dollars in thousands) |
|
Commercial |
|
Residential |
|
Commercial |
|
Construction |
|
Consumer |
|
Total |
|
||||||
Specific Reserves: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Impaired loans |
|
$ |
1,719 |
|
$ |
188 |
|
$ |
2,563 |
|
$ |
892 |
|
$ |
|
|
$ |
5,362 |
|
Purchase credit impaired loans |
|
|
|
|
110 |
|
|
542 |
|
|
|
|
|
|
|
652 |
|
||
Total specific reserves |
|
|
1,719 |
|
|
298 |
|
|
3,105 |
|
|
892 |
|
|
|
|
|
6,014 |
|
General reserves |
|
|
1,392 |
|
|
1,647 |
|
|
2,197 |
|
|
1,517 |
|
|
69 |
|
|
6,822 |
|
Total |
|
$ |
3,111 |
|
$ |
1,945 |
|
$ |
5,302 |
|
$ |
2,409 |
|
$ |
69 |
|
$ |
12,836 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Loans |
|
$ |
172,026 |
|
$ |
196,680 |
|
$ |
455,852 |
|
$ |
44,136 |
|
$ |
12,083 |
|
$ |
880,777 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Allowance as percent of loans per category as of December 31, 2011 |
|
|
1.81 |
% |
|
0.99 |
% |
|
1.16 |
% |
|
5.46 |
% |
|
0.57 |
% |
|
1.46 |
% |
Real estate acquired by us as a result of foreclosure or by deed in lieu of foreclosure is classified as other real estate owned (OREO). OREO properties are recorded at the lower of cost or fair value less estimated selling costs, and the estimated loss, if any, is charged to the allowance for credit losses at the time the loan is transferred to OREO. Further write-downs in OREO are recorded at the time management believes additional deterioration in value has occurred and are charged to non-interest expense. At March 31, 2012, we had $13.4 million of OREO property, of which $3.1 million was a result of the Old Harbor acquisition, $3.7 was a result of the TBOM acquisition and $4.5 million as a result of the Republic acquisition and all are covered by their respective loss share agreements. At December 31, 2011, we had $13.5 million of OREO property, of which $11.1million were a result of the Old Harbor, TBOM and Republic acquisitions and were covered under the respective loss share agreements.
52
The following is a summary of other real estate owned as of March 31, 2012 and December 31, 2011:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
March 31, |
|
December 31, |
|
||||||||||||||
(Dollars in thousands) |
|
Assets Not |
|
Assets Subject |
|
Total |
|
Assets Not |
|
Assets |
|
Total |
|
||||||
Commercial real estate |
|
$ |
1,606 |
|
$ |
7,929 |
|
$ |
9,535 |
|
$ |
1,922 |
|
$ |
8,067 |
|
$ |
9,989 |
|
Residential real estate |
|
|
506 |
|
|
3,344 |
|
|
3,850 |
|
|
532 |
|
|
2,991 |
|
|
3,523 |
|
Total |
|
$ |
2,112 |
|
$ |
11,273 |
|
$ |
13,385 |
|
$ |
2,454 |
|
$ |
11,058 |
|
$ |
13,512 |
|
Investment Securities
We manage our securities available for sale portfolio, which represented 16.99% of our average earning asset base for the three months ended March 31, 2012, as compared to 12.99% at year ended December 31, 2011, to minimize interest rate risk, maintain sufficient liquidity, and maximize return. The portfolio includes callable U.S. government and federal agency bonds, residential mortgage-backed securities, and collateralized mortgage obligations. Our financial planning anticipates income streams generated by the securities portfolio based on normal maturity, pay downs and reinvestment.
FDIC Loss Share Receivable
The FDIC Loss Share Receivable represents the estimated amounts due from the FDIC related to Loss Sharing Agreements. The receivable represents the discounted value of the FDICs portion of estimated losses expected to be realized on covered assets. The receivable is reviewed quarterly and adjusted for any changes in expected cash flows based on recent performance and expectations for future performance of covered assets. During the three months ended March 31, 2012, the Company received cash of $4.5 million from the FDIC, recorded an adjustment of $1.6 million related to the disposal of covered assets at amounts above their carrying value and recorded discount accretion of $294,000.
Deposits
Total deposits decreased by $16.3 million from December 31, 2011 to total deposits of $1.165 billion at March 31, 2012, due primarily to partial run off of deposits acquired in the Old Harbor transaction which was partially offset by growth in transaction accounts during the quarter. At March 31, 2012, non-interest bearing deposits represented approximately 30.38% of deposits compared to 27.87% at December 31, 2011. The Bank had no brokered deposits at March 31, 2012. However, the Bank does participate in the CDARS program (reciprocal) with balances of $11.1 million at March 31, 2012.
CAPITAL RESOURCES
We are subject to regulatory capital requirements administered by federal banking agencies. Capital adequacy guidelines and prompt corrective action regulations involve quantitative measures of assets, liabilities, and certain off-balance-sheet items calculated under regulatory accounting practices. Capital amounts and classifications are also subject to qualitative judgments by regulators. Failure to meet capital requirements can initiate regulatory action.
The Federal banking regulatory authorities have adopted certain prompt corrective action rules with respect to depository institutions. The rules establish five capital tiers: well capitalized, adequately capitalized, undercapitalized, significantly undercapitalized, and critically undercapitalized. The various federal banking regulatory agencies have adopted regulations to implement the capital rules by, among other things, defining the relevant capital measures for the five capital categories. An institution is deemed to be well capitalized if it has a total risk-based capital ratio of 10% or greater, a Tier 1 risk-based capital ratio of 6% or greater, and a Tier 1 leverage ratio of 5% or greater and is not subject to a regulatory order, agreement, or directive to meet and maintain a specific capital level. At March 31, 2012, the Company met the capital ratios of a well capitalized financial
53
holding company with a total risk-based capital ratio of 25.10%, a Tier 1 risk-based capital ratio of 23.84%, and a Tier 1 leverage ratio of 11.78%. Depository institutions which fall below the adequately capitalized category generally are prohibited from making any capital distribution, are subject to growth limitations, and are required to submit a capital restoration plan. There are a number of requirements and restrictions that may be imposed on institutions treated as significantly undercapitalized and, if the institution is critically undercapitalized, the banking regulatory agencies have the right to appoint a receiver or conservator.
The following represents 1st United Bancorps and 1st United Banks regulatory capital ratios as of March 31, 2012 and December 31, 2011:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Actual |
|
Minimum Capital |
|
Minimum for |
|
||||||||||||
|
|
Amount |
|
% |
|
Amount |
|
% |
|
Amount |
|
% |
|
||||||
As of March 31, 2012 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Capital to risk-weighted assets |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Consolidated |
|
$ |
167,135 |
|
|
25.10 |
% |
$ |
53,266 |
|
|
8.00 |
% |
$ |
66,582 |
|
|
10.00 |
% |
1st United |
|
|
130,384 |
|
|
19.71 |
% |
|
52,929 |
|
|
8.00 |
% |
|
66,161 |
|
|
10.00 |
% |
Tier I capital to risk-weighted assets |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Consolidated |
|
|
158,762 |
|
|
23.84 |
% |
|
26,633 |
|
|
4.00 |
% |
|
39,949 |
|
|
6.00 |
% |
1st United |
|
|
122,066 |
|
|
18.45 |
% |
|
26,465 |
|
|
4.00 |
% |
|
39,697 |
|
|
6.00 |
% |
Tier I capital to total average assets |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Consolidated |
|
|
158,762 |
|
|
11.78 |
% |
|
53,913 |
|
|
4.00 |
% |
|
67,391 |
|
|
5.00 |
% |
1st United |
|
|
122,066 |
|
|
9.09 |
% |
|
53,718 |
|
|
4.00 |
% |
|
67,148 |
|
|
5.00 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As of December 31, 2011 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Capital to risk-weighted assets |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Consolidated |
|
$ |
165,832 |
|
|
25.23 |
% |
$ |
52,582 |
|
|
8.00 |
% |
$ |
65,728 |
|
|
10.00 |
% |
1st United |
|
|
130,011 |
|
|
19.94 |
% |
|
52,157 |
|
|
8.00 |
% |
|
65,196 |
|
|
10.00 |
% |
Tier I capital to risk-weighted assets |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Consolidated |
|
|
157,559 |
|
|
23.97 |
% |
|
26,291 |
|
|
4.00 |
% |
|
39,437 |
|
|
6.00 |
% |
1st United |
|
|
121,810 |
|
|
18.68 |
% |
|
26,079 |
|
|
4.00 |
% |
|
39,118 |
|
|
6.00 |
% |
Tier I capital to total average assets |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Consolidated |
|
|
157,559 |
|
|
11.79 |
% |
|
53,466 |
|
|
4.00 |
% |
|
66,833 |
|
|
5.00 |
% |
1st United |
|
|
121,810 |
|
|
9.15 |
% |
|
53,258 |
|
|
4.00 |
% |
|
66,573 |
|
|
5.00 |
% |
Bancorp has an effective shelf registration statement, which may be used form time to time when additional capital is required.
CASH FLOWS AND LIQUIDITY
Our primary sources of cash are deposit growth, maturities and amortization of loans and securities, operations, and borrowing. We use cash from these and other sources to first fund loan growth. Any remaining cash is used primarily to purchase a combination of short, intermediate, and longer-term investment securities.
We manage our liquidity position with the objective of maintaining sufficient funds to respond to the needs of depositors and borrowers and to take advantage of earnings enhancement opportunities. In addition to the normal inflow of funds from core-deposit growth together with repayments and maturities of loans and investments, we use other short-term funding sources such as brokered time deposits, securities sold under agreements to repurchase, overnight federal funds purchased from correspondent banks, the acceptance of short-term deposits from public entities, and Federal Home Loan Bank advances.
54
We monitor, stress test and manage our liquidity position on several bases, which vary depending upon the time period. As the time period is stress test expanded, other data is factored in, including estimated loan funding requirements, estimated loan payoffs, investment portfolio maturities or calls, and anticipated depository buildups or runoffs.
We classify all of our securities as available-for-sale to maintain significant liquidity. Our liquidity position is further enhanced by structuring our loan portfolio interest payments as monthly, complemented by retail credit and residential mortgage loans in our loan portfolio, resulting in a steady stream of loan repayments. In managing our investment portfolio, we provide for staggered maturities so that cash flows are provided as such investments mature.
Our securities portfolio, federal funds sold, and cash and due from financial institutions balances serve as primary sources of liquidity for 1st United. At March 31, 2012, we had approximately $355.0 million in cash and cash equivalents and securities, of which $18.9 million of securities, at fair value, were pledged.
At March 31, 2012, we had no short-term or long-term borrowings. At March 31, 2012, we had commitments to originate loans totaling $8.5 million and commitments of $68.2 million in unused lines of credit. Scheduled maturities of certificates of deposit during the twelve months following March 31, 2012 total $230.0 million, and loans maturing in the next twelve months total approximately $203.2 million.
Management believes that we have adequate resources to fund all of our commitments, that substantially all of our existing commitments will be funded in the subsequent twelve months and, if so desired, that we can adjust the rates on certificates of deposit and other deposit accounts to retain deposits in a changing interest rate environment. At March 31, 2012, we had short-term lines available from correspondent banks totaling $51.0 million, FRB discount window availability of $40.8 million, and borrowing capacity from the FHLB of $35.4 million based on collateral pledged, for a total credit available of $127.2 million. In addition, being well capitalized, the Bank can access wholesale deposits for approximately $332.4 million based on current policy limits.
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 clients.
At March 31, 2012, we had $8.5 million in commitments to originate loans, $68.2 million in unused lines of credit and $4.8 million in standby letters of 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 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. Standby letters of credit are conditional commitments issued by us to guarantee the performance of a client to a third party. We use the same credit policies in establishing commitments and issuing letters of credit as we do for on-balance sheet instruments.
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 FHLB, 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
Management views critical accounting policies as accounting policies that are important to the understanding of our financial statements and also involve estimates and judgments about inherently uncertain matters. In preparing the financial statements, management is required to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities as of the date of the consolidated balance
55
sheets and assumptions that affect the recognition of income and expenses on the consolidated statements of income for the periods presented. Actual results could differ significantly from those estimates. Material estimates that are particularly susceptible to significant change in subsequent periods are described as follows.
The allowance for loan losses is established as losses are estimated to have occurred through a provision for loan losses charged to earnings. Loan losses are charged against the allowance for loan losses when management believes the uncollectibility of a loan balance is confirmed. Subsequent recoveries, if any, are credited to the allowance for loan losses.
The allowance for loan losses is evaluated on a regular basis by management and is based upon managements periodic review of the collectibility of the loans in light of historical experience, the nature and volume of the loan portfolio, adverse situations that may affect the borrowers ability to repay, estimated value of any underlying collateral and prevailing economic conditions. This evaluation is inherently subjective as it requires estimates that are susceptible to significant revision as more information becomes available.
The allowance consists of specific and general components. The specific component relates to loans that are individually evaluated for impairment. For such loans, an allowance for loan losses is established based on either the present value of expected future cash flows discounted at the loans effective interest rate, the market price of the loan, or, if the loan is collateral dependent, the fair value of the underlying collateral less estimated costs of sale.
A loan is considered impaired when, based on current information and events, it is probable that we will be unable to collect the scheduled payments of principal or interest when due according to the contractual terms of the loan agreement. Factors considered by management in determining impairment include payment status, collateral value, and the probability of collecting scheduled principal and interest payments when due. Loans that experience insignificant payment delays and payment shortfalls generally are not classified as impaired. Management determines the significance of payment delays (loan payments made within 90 days of the due date) and payment shortfalls (which are tracked as past due amounts) on a case-by-case basis, taking into consideration all of the circumstances surrounding the loan and the borrower, including the length of the delay, the reasons for the delay, the borrowers prior payment record, and the amount of the shortfall in relation to the principal and interest owed. Management considers loan payments made within 90 days of the due date to be insignificant payment delays. Payment shortfalls are traced as past due amounts. Impairment is measured on a loan by loan basis for commercial and construction and land development loans by either the present value of expected future cash flows discounted at the loans effective interest rate, the loans obtainable market price, or the fair value of the collateral less estimated costs of sale if the loan is collateral dependent.
The general component considers the actual historical charge-offs over a rolling two year period by portfolio segment. The actual historical charge-off ratio is adjusted for qualitative factors including delinquency trends, loss and recovery trends, classified asset trends, non-accrual trends, economic and business conditions and other external factors by portfolio segment of loans.
Goodwill and Intangible Assets
Goodwill represents the excess of cost over fair value of assets of business acquired. Goodwill and intangible assets acquired in a purchase business combination and determined to have an indefinite useful life are not amortized, but instead tested for impairment at least annually. Intangible assets with estimable useful lives are amortized over their respective estimated useful lives to their estimated residual values. We acquired First Western Bank, on April 7, 2004, Equitable on February 29, 2008, Citrus on August 15, 2008, Republic on December 11, 2009, TBOM on December 17, 2010 and Old Harbor on October 21, 2011. Consequently, we were required to record the assets acquired, including identified intangible assets, and liabilities assumed at their fair value, which involves estimates based on third party valuations, such as appraisals, internal valuations based on discounted cash flow analyses or other valuation techniques. The determination of the useful lives of intangible assets is subjective, as is the appropriate amortization period for such intangible assets. In addition, purchase acquisitions typically result in recording goodwill, which is subject to ongoing periodic impairment tests based on the fair value of the reporting unit compared to its carrying amount, including goodwill. As of December 31, 2011, the required annual impairment test of goodwill was performed and no impairment existed as of the valuation date. If for any future period we determine that there has been impairment in the carrying value of our goodwill balances, we will record a charge to our earnings, which could have a material adverse effect on our net income, but not to our risk based capital ratios.
56
Income Taxes
Deferred income tax assets and liabilities are recorded to reflect the tax consequences on future years of temporary differences between revenues and expenses reported for financial statements and those reported for income tax purposes. Deferred tax assets and liabilities are measured using the enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be realized or settled. A valuation allowances is provided against deferred tax assets which are not likely to be realized.
FDIC Loss Share Receivable.
The FDIC Loss Share Receivable represents the estimated amounts due from the FDIC related to the Loss Sharing Agreements which were booked as of the acquisition dates of Republic, TBOM, and Old Harbor. The receivable represents the discounted value of the FDICs reimbursed portion of estimated losses we expect to realize on loans and other real estate owned (Covered Assets) acquired as a result of these acquisitions. The range of discount rates on the FDIC Loss Share Receivable was 2.12% to 3.97%. As losses are realized on Covered Assets, the portion that the FDIC pays the Company in cash for principal and up to 90 days of interest reduces the FDIC Loss Share Receivable.
The FDIC Loss Share Receivable is reviewed quarterly and adjusted for any changes in expected cash flows based on recent performance and expectations for future performance of the Covered Assets. Any increases in cash flows of the Covered Assets will be accreted into income over the life of the Covered Asset but will reduce immediately the FDIC Loss Share Receivable. Any decreases in the expected cash flows of the Covered Assets will result in the impairment to the Covered Asset and an increase in the FDIC Loss Share Receivable to be reflected immediately. Non-cash adjustments to the FDIC Loss Share Receivable are recorded to non-interest income.
Item 3. Quantitative and Qualitative Disclosures about Market Risk
Our net income is largely dependent on net interest income. Net interest income is susceptible to interest rate risk to the degree that interest-bearing liabilities mature or reprice on a different basis than interest-earning assets. When interest-bearing liabilities mature or reprice more quickly than interest-earning assets in a given period, a significant increase in market rates of interest could adversely affect net interest income. Similarly, when interest-earning assets mature or reprice more quickly than interest-bearing liabilities, falling interest rates could result in a decrease in net interest income. Net interest income is also affected by changes in the portion of interest-earning assets that are funded by interest-bearing liabilities rather than by other sources of funds, such as non-interest-bearing deposits and shareholders equity.
We manage our assets and liabilities through 1st Uniteds Asset Liability Committee (ALCO) Board Committee which meets quarterly and through our internal management committee which meets more frequently. Management closely monitors 1st Uniteds interest at risk calculations through model simulations and reports the results of its rate stress testing to ALCO on a quarterly basis.
We have established policy limits of risk, which are quantitative measures of the percentage change in net interest income (a measure of net interest income at risk) and the fair value of equity capital (a measure of economic value of equity (EVE) at risk) resulting from a hypothetical change in interest rates for maturities from one day to 30 years. We measure the potential adverse impacts that changing interest rates may have on our short-term earnings, long-term value, and liquidity by employing simulation analysis through the use of computer modeling. The simulation model captures optionality factors such as call features and interest rate caps and floors imbedded in investment and loan portfolio contracts. As with any method of gauging interest rate risk, there are certain shortcomings inherent in the interest rate modeling methodology used by us. When interest rates change, actual movements in different categories of interest-earning assets and interest-bearing liabilities, loan prepayments, and withdrawals of time and other deposits, may deviate significantly from assumptions used in the model. Finally, the methodology does not measure or reflect the impact that higher rates may have on adjustable-rate loan customers ability to service their debts, or the impact of rate changes on demand for loan, lease, and deposit products. Our interest rate risk management goal is to avoid unacceptable variations in net interest income and capital levels due to fluctuations in market rates. Management attempts to achieve this goal by balancing, within policy limits, the volume of floating-rate liabilities with a similar volume of floating-rate assets, by keeping the average maturity of
57
fixed-rate asset and liability contracts reasonably matched, by maintaining a pool of administered core deposits, and by adjusting pricing rates to market conditions on a continuing basis.
The balance sheet is subject to testing for interest rate shock possibilities to indicate the inherent interest rate risk. Average interest rates are shocked by plus or minus 100, 200 and 300 basis points (bp), although we may elect not to use particular scenarios that we determined are impractical in a current rate environment. 1st United has been consistently within policy limits on rates stress test up and down 100, 200, and 300 bp, both for net interest margin and EVE. Management has closely monitored 1st Uniteds gap position which has been liability sensitive during a stable rate environment. Variations on EVE have consistently shown low volatility.
|
|
|
|
|
|
|
|
|
Interest rate scenarios |
|
|
Percent change |
|
Percentage |
|
||
Up 300 basis points |
|
|
9.00 |
% |
|
(21.00 |
)% |
|
Up 200 basis points |
|
|
5.00 |
% |
|
(14.00 |
)% |
|
Up 100 basis points |
|
|
2.00 |
% |
|
(6.00 |
)% |
|
Base |
|
|
|
|
|
|
|
|
Down 100 basis points |
|
|
(2.00 |
)% |
|
8.00 |
% |
|
Down 200 basis points |
|
|
(6.00 |
)% |
|
18.00 |
% |
|
Down 300 basis points |
|
|
(10.00 |
)% |
|
30.00 |
% |
We had a positive gap position based on contractual and prepayment assumptions for the next 12 months, with a positive cumulative interest rate sensitivity gap as a percentage of total earning assets of 0.91%.
ITEM 4. CONTROLS AND PROCEDURES
(a) Evaluation of Disclosure Controls and Procedures
Our Chief Executive Officer, Rudy E. Schupp, and Chief Financial Officer, John Marino, have evaluated our disclosure controls and procedures, as defined in Rule 13a-15(e) under the Securities Exchange Act of 1934, as amended (the Exchange Act), as of the end of the period covered by this report. Based upon that evaluation, our Chief Executive Officer and Chief Financial Officer each have concluded that our disclosure controls and procedures are effective in ensuring that information required to be disclosed by us in the reports that we file or submit under the Exchange Act is recorded, processed, summarized, and reported within the time periods specified in the Securities and Exchange Commissions rules and forms. Such controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed is accumulated and communicated to our management, including our principal executive and principal financial officers, to allow timely decisions regarding disclosure.
(b) Changes in Internal Control Over Financial Reporting
Our management, including our Chief Executive Officer and Chief Financial Officer, has reviewed our internal control over financial reporting, as defined in Rule 13a-15(f) under the Exchange Act. There were no changes in internal control over financial reporting that occurred during the fiscal quarter covered by this report that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
From time-to-time we may be involved in litigation that arises in the normal course of business. As of the date of this Form 10-Q, we are not a party to any litigation that management believes could reasonably be expected to have a material adverse effect on our financial position or results of operations for an annual period.
58
In addition to the other information set forth in this Quarterly Report, you should carefully consider the factors discussed in Part I, Item 1A. Risk Factors in our 2011 Form 10-K, as updated in our subsequent quarterly reports. The risks described in our 2011 Form 10-K are not the only risks facing us. 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.
On April 26, 2012, we announced via press release our financial results for the three-month period ended March 31, 2012. A copy of our press release is included herein as Exhibit 99.1 and incorporated herein by reference.
The information furnished under Part II, Item 5 of this Quarterly Report, including Exhibit 99.1, shall not be deemed filed for purposes of Section 18 of the Securities Exchange Act of 1934, nor shall it be deemed incorporated by reference in any filing under the Securities Act of 1933, except as shall be expressly set forth by specific reference in such filing.
(a) The following exhibits are included herein:
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Exhibit No. |
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Name |
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31.1 |
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Certification Pursuant to Rule 13a-14(a) under the Securities Exchange Act of 1934, as amended. |
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31.2 |
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Certification Pursuant to Rule 13a-14(a) under the Securities Exchange Act of 1934, as amended. |
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32.1 |
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Certification Pursuant to 18 U.S.C. Section 1350 |
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99.1 |
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Press release to announce earnings, dated April 26, 2012. |
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101.INS |
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XBRL Instance Document |
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101.SCH |
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XBRL Taxonomy Extension Schema Document |
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101.CAL |
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XBRL Taxonomy Extension Calculation Linkbase Document |
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101.LAB |
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XBRL Taxonomy Extension Label Linkbase Document |
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101.PRE |
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XBRL Taxonomy Extension Presentation Linkbase Document |
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101.DEF |
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XBRL Taxonomy Extension Definition Linkbase Document |
59
Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
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1ST UNITED BANCORP, INC. |
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(Registrant) |
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Date: April 26, 2012 |
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By:/s/John Marino |
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JOHN MARINO |
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PRESIDENT AND CHIEF FINANCIAL OFFICER |
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(Mr. Marino is the principal financial officer and has been duly authorized to sign on behalf of the Registrant) |
60
EXHIBIT INDEX
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EXHIBIT |
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DESCRIPTION |
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31.1 |
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Certification Pursuant to Rule 13a-14(a) under the Securities Exchange Act of 1934, as amended. |
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31.2 |
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Certification Pursuant to Rule 13a-14(a) under the Securities Exchange Act of 1934, as amended. |
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32.1 |
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Certification Pursuant to 18 U.S.C. Section 1350 |
|
|
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99.1 |
|
Press release to announce earnings, dated April 26, 2012 |
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|
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101.INS |
|
XBRL Instance Document |
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|
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101.SCH |
|
XBRL Taxonomy Extension Schema Document |
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101.CAL |
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XBRL Taxonomy Extension Calculation Linkbase Document |
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101.LAB |
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XBRL Taxonomy Extension Label Linkbase Document |
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101.PRE |
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XBRL Taxonomy Extension Presentation Linkbase Document |
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101.DEF |
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XBRL Taxonomy Extension Definition Linkbase Document |
61