UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
x
|
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
|
For the quarterly period ended September 30, 2012
or
¨
|
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: 000-28635
VIRGINIA COMMERCE BANCORP, INC.
(Exact name of registrant as specified in its charter)
|
|
|
VIRGINIA
|
|
54-1964895
|
(State or other jurisdiction of
incorporation or organization)
|
|
(I.R.S. Employer
Identification No.)
|
5350 LEE HIGHWAY, ARLINGTON, VIRGINIA 22207
(Address of principal executive offices) (Zip Code)
703-534-0700
(Registrants telephone number, including area code)
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
¨
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).
x
Yes
¨
No
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer or a smaller reporting company. See the definitions of large accelerated
filer, accelerated filer and smaller reporting company in Rule 12b-2 of the Exchange Act.
|
|
|
|
|
|
|
Large accelerated filer
|
|
¨
|
|
Accelerated filer
|
|
x
|
|
|
|
|
Non-accelerated filer
|
|
¨
|
|
Smaller reporting company
|
|
¨
|
Indicate by check mark whether the registrant is a shell company (as defined in Rule12b-2 of the Exchange
Act). Yes
¨
No
x
As of November 2, 2012, the number of outstanding shares of registrants common stock, par value $1.00 per share, was: 30,824,726.
TABLE OF CONTENTS
2
PART I. FINANCIAL INFORMATION
ITEM 1.
FINANCIAL STATEMENTS
VIRGINIA COMMERCE BANCORP, INC.
CONSOLIDATED BALANCE SHEETS
(Dollars in thousands except share and per share data)
|
|
|
|
|
|
|
|
|
|
|
(Unaudited)
September 30,
2012
|
|
|
(Audited)
December 31,
2011
|
|
Assets
|
|
|
|
|
|
|
|
|
Cash and due from banks
|
|
$
|
29,620
|
|
|
$
|
31,569
|
|
Interest bearing deposits in other banks
|
|
|
213,973
|
|
|
|
51,000
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents
|
|
|
243,593
|
|
|
|
82,569
|
|
Investment securities, available-for-sale, at fair value
|
|
|
545,143
|
|
|
|
593,064
|
|
Investment securities, held-to-maturity, at amortized cost (fair value of $34,431)
|
|
|
|
|
|
|
31,892
|
|
Restricted investments, at cost
|
|
|
11,272
|
|
|
|
11,214
|
|
Loans held-for-sale
|
|
|
19,330
|
|
|
|
18,485
|
|
Loans, net of allowance for loan losses of $41,288 and $48,729
|
|
|
2,102,588
|
|
|
|
2,120,291
|
|
Premises and equipment, net
|
|
|
10,511
|
|
|
|
11,413
|
|
Accrued interest receivable
|
|
|
9,541
|
|
|
|
10,007
|
|
Other real estate owned, net of valuation allowance of $5,287 and $6,517
|
|
|
14,089
|
|
|
|
8,925
|
|
Bank-owned life insurance
|
|
|
14,176
|
|
|
|
14,017
|
|
Other assets
|
|
|
34,499
|
|
|
|
36,641
|
|
|
|
|
|
|
|
|
|
|
Total assets
|
|
$
|
3,004,742
|
|
|
$
|
2,938,518
|
|
|
|
|
|
|
|
|
|
|
Liabilities and Stockholders Equity
|
|
|
|
|
|
|
|
|
Deposits
|
|
|
|
|
|
|
|
|
Noninterest-bearing demand deposits
|
|
$
|
390,692
|
|
|
$
|
337,937
|
|
Savings and interest-bearing demand deposits
|
|
|
1,174,789
|
|
|
|
1,173,568
|
|
Time deposits
|
|
|
647,075
|
|
|
|
780,653
|
|
|
|
|
|
|
|
|
|
|
Total deposits
|
|
$
|
2,212,556
|
|
|
$
|
2,292,158
|
|
Securities sold under agreement to repurchase
|
|
|
409,320
|
|
|
|
263,273
|
|
Other borrowed funds
|
|
|
|
|
|
|
25,000
|
|
Trust preferred capital notes
|
|
|
66,762
|
|
|
|
66,570
|
|
Accrued interest payable
|
|
|
2,131
|
|
|
|
2,418
|
|
Other liabilities
|
|
|
2,445
|
|
|
|
5,328
|
|
Commitments and contingent liabilities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total liabilities
|
|
$
|
2,693,214
|
|
|
$
|
2,654,747
|
|
|
|
|
|
|
|
|
|
|
Stockholders Equity
|
|
|
|
|
|
|
|
|
Preferred stock, net of discount, $1.00 par value per share, 1,000,000 shares authorized, Series A; $1,000 stated value; 71,000
issued and outstanding at September 30, 2012 and December 31, 2011
|
|
$
|
68,621
|
|
|
$
|
67,195
|
|
Common stock, $1.00 par value per share, 50,000,000 shares authorized, 31,824,756 issued and outstanding at September 30,
2012, including 110,215 in unvested shares and 30,263,672 issued and outstanding at December 31, 2011, including 49,998 in unvested shares
|
|
|
31,715
|
|
|
|
30,214
|
|
Surplus
|
|
|
117,905
|
|
|
|
111,042
|
|
Warrants
|
|
|
8,520
|
|
|
|
8,520
|
|
Retained earnings
|
|
|
79,258
|
|
|
|
60,999
|
|
Accumulated other comprehensive income, net
|
|
|
5,509
|
|
|
|
5,801
|
|
|
|
|
|
|
|
|
|
|
Total stockholders equity
|
|
$
|
311,528
|
|
|
$
|
283,771
|
|
|
|
|
|
|
|
|
|
|
Total liabilities and stockholders equity
|
|
$
|
3,004,742
|
|
|
$
|
2,938,518
|
|
|
|
|
|
|
|
|
|
|
Notes to consolidated financial statements are an integral part of these statements.
3
VIRGINIA COMMERCE BANCORP, INC.
CONSOLIDATED STATEMENTS OF INCOME
(Dollars in thousands except per share data)
(Unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended September 30,
|
|
|
Nine Months Ended September 30,
|
|
|
|
2012
|
|
|
2011
|
|
|
2012
|
|
|
2011
|
|
Interest and dividend income:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest on loans, including fees
|
|
$
|
29,820
|
|
|
$
|
31,456
|
|
|
$
|
90,868
|
|
|
$
|
95,144
|
|
Interest and dividends on investment securities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Taxable
|
|
|
2,232
|
|
|
|
3,185
|
|
|
|
7,328
|
|
|
|
9,177
|
|
Tax-exempt
|
|
|
574
|
|
|
|
593
|
|
|
|
1,748
|
|
|
|
1,777
|
|
Dividend on restricted investments
|
|
|
105
|
|
|
|
95
|
|
|
|
310
|
|
|
|
287
|
|
Interest on deposits in other banks
|
|
|
132
|
|
|
|
21
|
|
|
|
257
|
|
|
|
21
|
|
Federal funds sold
|
|
|
|
|
|
|
53
|
|
|
|
|
|
|
|
152
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total interest and dividend income
|
|
$
|
32,863
|
|
|
$
|
35,403
|
|
|
$
|
100,511
|
|
|
$
|
106,558
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest expense:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest on deposits
|
|
$
|
4,261
|
|
|
$
|
6,485
|
|
|
$
|
13,668
|
|
|
$
|
20,178
|
|
Interest on securities sold under agreement to repurchase
|
|
|
1,017
|
|
|
|
965
|
|
|
|
3,068
|
|
|
|
2,859
|
|
Interest on other borrowed funds
|
|
|
242
|
|
|
|
272
|
|
|
|
779
|
|
|
|
806
|
|
Interest on trust preferred capital notes
|
|
|
975
|
|
|
|
952
|
|
|
|
2,932
|
|
|
|
3,015
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total interest expense
|
|
$
|
6,495
|
|
|
$
|
8,674
|
|
|
$
|
20,447
|
|
|
$
|
26,858
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net interest income
|
|
$
|
26,368
|
|
|
$
|
26,729
|
|
|
$
|
80,064
|
|
|
$
|
79,700
|
|
Provision for loan losses
|
|
|
3,111
|
|
|
|
3,933
|
|
|
|
12,267
|
|
|
|
11,210
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net interest income after provision for loan losses
|
|
$
|
23,257
|
|
|
$
|
22,796
|
|
|
$
|
67,797
|
|
|
$
|
68,490
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-interest income:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Service charges on deposits
|
|
$
|
882
|
|
|
$
|
839
|
|
|
$
|
2,638
|
|
|
$
|
2,430
|
|
Non-deposit investment services commissions
|
|
|
211
|
|
|
|
340
|
|
|
|
705
|
|
|
|
1,053
|
|
Gain on sale of mortgage loans held-for-sale
|
|
|
1,082
|
|
|
|
744
|
|
|
|
2,913
|
|
|
|
1,799
|
|
Gain on sale of investment securities available-for-sale
|
|
|
2,056
|
|
|
|
|
|
|
|
5,976
|
|
|
|
503
|
|
Total other-than-temporary impairment losses on investment securities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(3,107
|
)
|
Portion of loss recognized in other comprehensive income
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2,375
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net impairment losses on investment securities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(732
|
)
|
Increase in surrender value of bank-owned life insurance
|
|
|
50
|
|
|
|
58
|
|
|
|
159
|
|
|
|
544
|
|
Other income
|
|
|
444
|
|
|
|
(41
|
)
|
|
|
704
|
|
|
|
75
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total non-interest income
|
|
$
|
4,725
|
|
|
$
|
1,940
|
|
|
$
|
13,095
|
|
|
$
|
5,672
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-interest expense:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Salaries and employee benefits
|
|
$
|
7,493
|
|
|
$
|
6,591
|
|
|
$
|
22,517
|
|
|
$
|
19,676
|
|
Premises and equipment expenses
|
|
|
2,380
|
|
|
|
2,293
|
|
|
|
7,142
|
|
|
|
7,006
|
|
FDIC insurance
|
|
|
660
|
|
|
|
864
|
|
|
|
2,488
|
|
|
|
3,394
|
|
(Gain) loss on other real estate owned
|
|
|
(141
|
)
|
|
|
546
|
|
|
|
1,566
|
|
|
|
1,022
|
|
Other real estate owned expenses
|
|
|
322
|
|
|
|
277
|
|
|
|
902
|
|
|
|
616
|
|
Franchise tax expense
|
|
|
935
|
|
|
|
780
|
|
|
|
2,435
|
|
|
|
2,326
|
|
Data processing expenses
|
|
|
664
|
|
|
|
652
|
|
|
|
1,992
|
|
|
|
1,942
|
|
Other operating expenses
|
|
|
2,899
|
|
|
|
2,890
|
|
|
|
8,354
|
|
|
|
7,881
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total non-interest expense
|
|
$
|
15,212
|
|
|
$
|
14,893
|
|
|
$
|
47,396
|
|
|
$
|
43,863
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income before provision for income taxes
|
|
$
|
12,770
|
|
|
$
|
9,843
|
|
|
$
|
33,496
|
|
|
$
|
30,299
|
|
Provision for income taxes
|
|
|
4,284
|
|
|
|
3,277
|
|
|
|
11,148
|
|
|
|
9,931
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income
|
|
$
|
8,486
|
|
|
$
|
6,566
|
|
|
$
|
22,348
|
|
|
$
|
20,368
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Effective dividend on preferred stock
|
|
$
|
1,364
|
|
|
|
1,349
|
|
|
$
|
4,090
|
|
|
|
4,012
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income available to common stockholders
|
|
$
|
7,122
|
|
|
$
|
5,217
|
|
|
$
|
18,258
|
|
|
$
|
16,356
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Earnings per common share, basic
|
|
$
|
0.22
|
|
|
$
|
0.18
|
|
|
$
|
0.58
|
|
|
$
|
0.55
|
|
Earnings per common share, diluted
|
|
$
|
0.21
|
|
|
$
|
0.17
|
|
|
$
|
0.54
|
|
|
$
|
0.53
|
|
Notes to consolidated financial statements are an integral part of these statements.
4
VIRGINIA COMMERCE BANCORP, INC.
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(Dollars in thousands)
(Unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended Sept. 30,
|
|
|
Nine Months Ended Sept. 30,
|
|
|
|
2012
|
|
|
2011
|
|
|
2012
|
|
|
2011
|
|
Net Income
|
|
$
|
8,486
|
|
|
$
|
6,566
|
|
|
$
|
22,348
|
|
|
$
|
20,368
|
|
Other Comprehensive Income (loss):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Unrealized net gains on investment securities available-for-sale, net of
tax
(1)
|
|
|
1,772
|
|
|
|
2,287
|
|
|
|
1,929
|
|
|
|
7,862
|
|
Reclassification adjustment for transfer of investment securities from held-to-maturity to available-for-sale, net of tax of $895
in 2012
|
|
|
|
|
|
|
|
|
|
|
1,663
|
|
|
|
|
|
Reclassification adjustment for gains on sale of investment securities, net of tax
(2)
|
|
|
(1,336
|
)
|
|
|
|
|
|
|
(3,884
|
)
|
|
|
(327
|
)
|
Reclassification adjustment for impairment loss on investment securities, net of tax $256 in 2011
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
476
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Other Comprehensive Income (Loss)
|
|
|
436
|
|
|
|
2,287
|
|
|
|
(292
|
)
|
|
|
8,011
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Comprehensive Income
|
|
$
|
8,922
|
|
|
$
|
8,853
|
|
|
$
|
22,056
|
|
|
$
|
28,379
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1)
|
Net of tax of $954 and $1,232 for the three months ended September 30, 2012 and 2011, respectively and $1,039 and $4,230 for the nine months ended
September 30, 2012 and 2011, respectively.
|
(2)
|
Net of tax of $(720) for September 30, 2012, and $(2,092) and $(176) for the nine months ended September 30, 2012 and 2011, respectively.
|
Notes to consolidated financial statements are an integral part of these statements.
5
VIRGINIA COMMERCE BANCORP, INC.
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS EQUITY
(Dollars in thousands)
(Unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Preferred
Stock
|
|
|
Common
Stock
|
|
|
Surplus
|
|
|
Warrants
|
|
|
Retained
Earnings
|
|
|
Accumulated
Other
Comprehensive
Income (Loss)
|
|
|
Total
Stockholders
Equity
|
|
Balance, January 1, 2011
|
|
$
|
65,445
|
|
|
$
|
28,954
|
|
|
$
|
105,056
|
|
|
$
|
8,520
|
|
|
$
|
39,208
|
|
|
$
|
(1,589
|
)
|
|
$
|
245,594
|
|
Net income
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
20,368
|
|
|
|
|
|
|
|
20,368
|
|
Other comprehensive income
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
8,011
|
|
|
|
8,011
|
|
Capital common stock issued
|
|
|
|
|
|
|
426
|
|
|
|
2,075
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2,501
|
|
Stock options/warrants exercised
|
|
|
|
|
|
|
322
|
|
|
|
976
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,298
|
|
Stock option expense
|
|
|
|
|
|
|
|
|
|
|
436
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
436
|
|
Discount on preferred stock
|
|
|
1,349
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1,349
|
)
|
|
|
|
|
|
|
|
|
Dividend on preferred stock
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(2,662
|
)
|
|
|
|
|
|
|
(2,662
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance, September 30, 2011
|
|
$
|
66,794
|
|
|
$
|
29,702
|
|
|
$
|
108,543
|
|
|
$
|
8,520
|
|
|
$
|
55,565
|
|
|
$
|
6,422
|
|
|
$
|
275,546
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance, January 1, 2012
|
|
$
|
67,195
|
|
|
$
|
30,214
|
|
|
$
|
111,042
|
|
|
$
|
8,520
|
|
|
$
|
60,999
|
|
|
$
|
5,801
|
|
|
$
|
283,771
|
|
Net income
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
22,348
|
|
|
|
|
|
|
|
22,348
|
|
Other comprehensive (loss)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(292
|
)
|
|
|
(292
|
)
|
Capital common stock issued
|
|
|
|
|
|
|
426
|
|
|
|
1,968
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2,394
|
|
Stock options/warrants exercised
|
|
|
|
|
|
|
1,075
|
|
|
|
4,479
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
5,554
|
|
Stock option expense
|
|
|
|
|
|
|
|
|
|
|
416
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
416
|
|
Discount on preferred stock
|
|
|
1,426
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1,426
|
)
|
|
|
|
|
|
|
|
|
Dividend on preferred stock
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(2,663
|
)
|
|
|
|
|
|
|
(2,663
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance, September 30, 2012
|
|
$
|
68,621
|
|
|
$
|
31,715
|
|
|
$
|
117,905
|
|
|
$
|
8,520
|
|
|
$
|
79,258
|
|
|
$
|
5,509
|
|
|
$
|
311,528
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Notes to consolidated financial statements are an integral part of these statements.
6
VIRGINIA COMMERCE BANCORP, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Dollars in thousands)
(Unaudited)
|
|
|
|
|
|
|
|
|
|
|
Nine Months Ended
September 30,
|
|
|
|
2012
|
|
|
2011
|
|
CASH FLOWS FROM OPERATING ACTIVITIES:
|
|
|
|
|
|
|
|
|
Net income
|
|
$
|
22,348
|
|
|
$
|
20,368
|
|
Adjustments to reconcile net income to net cash provided by operating activities:
|
|
|
|
|
|
|
|
|
Depreciation and amortization
|
|
|
1,665
|
|
|
|
1,645
|
|
Provision for loan losses
|
|
|
12,267
|
|
|
|
11,210
|
|
Stock based compensation expense
|
|
|
416
|
|
|
|
436
|
|
Deferred tax expense
|
|
|
982
|
|
|
|
6,420
|
|
Accretion of trust preferred securities discount
|
|
|
192
|
|
|
|
192
|
|
Amortization of premiums and accretion of security discounts, net
|
|
|
6,127
|
|
|
|
1,236
|
|
Loans originated for sale
|
|
|
(146,770
|
)
|
|
|
(103,656
|
)
|
Sales of loans
|
|
|
148,498
|
|
|
|
97,801
|
|
(Gain) loss on sale of loans
|
|
|
(2,573
|
)
|
|
|
(1,560
|
)
|
Loss on sale/valuation of OREO
|
|
|
1,566
|
|
|
|
637
|
|
Gain on sale of investment securities available-for-sale
|
|
|
(5,976
|
)
|
|
|
(503
|
)
|
Impairment loss on investment securities
|
|
|
|
|
|
|
732
|
|
Changes in other assets and other liabilities:
Decrease (increase) in accrued interest receivable
|
|
|
466
|
|
|
|
(255
|
)
|
Decrease in other assets
|
|
|
1,158
|
|
|
|
8,809
|
|
Increase (decrease) in other liabilities
|
|
|
(2,883
|
)
|
|
|
38
|
|
Decrease in accrued interest payable
|
|
|
(287
|
)
|
|
|
(171
|
)
|
|
|
|
|
|
|
|
|
|
Net Cash Provided By Operating Activities
|
|
$
|
37,196
|
|
|
$
|
43,379
|
|
|
|
|
|
|
|
|
|
|
CASH FLOWS FROM INVESTING ACTIVITIES:
|
|
|
|
|
|
|
|
|
Net (increase) decrease in loans
|
|
$
|
(4,300
|
)
|
|
$
|
35,125
|
|
Purchase of investment securities available-for-sale
|
|
|
(334,067
|
)
|
|
|
(325,168
|
)
|
Proceeds from principal payments, calls and maturities on investment securities available-for-sale
|
|
|
256,274
|
|
|
|
129,019
|
|
Proceeds from principal payments, calls and maturities on investment securities held-to-maturity
|
|
|
1,873
|
|
|
|
4,063
|
|
Sale of investment securities available-for-sale
|
|
|
155,133
|
|
|
|
12,645
|
|
(Purchase) redemption of FHLB stock
|
|
|
(58
|
)
|
|
|
396
|
|
Purchase of premises and equipment
|
|
|
(763
|
)
|
|
|
(1,087
|
)
|
Proceeds from sale of other real estate owned
|
|
|
3,006
|
|
|
|
12,365
|
|
|
|
|
|
|
|
|
|
|
Net Cash Provided By (Used In) Investing Activities
|
|
$
|
77,098
|
|
|
$
|
(132,642
|
)
|
|
|
|
|
|
|
|
|
|
CASH FLOWS FROM FINANCING ACTIVITIES:
|
|
|
|
|
|
|
|
|
Net increase in demand, NOW, money market and savings accounts
|
|
$
|
53,976
|
|
|
$
|
110,830
|
|
Net (decrease) increase in time deposits
|
|
|
(133,578
|
)
|
|
|
10,908
|
|
Net increase in securities sold under agreement to repurchase
|
|
|
146,047
|
|
|
|
48,926
|
|
Proceeds from exercise of stock options and warrants
|
|
|
5,554
|
|
|
|
1,298
|
|
Net proceeds from issuance of common stock
|
|
|
2,394
|
|
|
|
2,501
|
|
Repayment of other borrowed funds
|
|
|
(25,000
|
)
|
|
|
|
|
Dividend paid on preferred stock
|
|
|
(2,663
|
)
|
|
|
(2,662
|
)
|
|
|
|
|
|
|
|
|
|
Net Cash Provided By Financing Activities
|
|
$
|
46,730
|
|
|
$
|
171,801
|
|
|
|
|
|
|
|
|
|
|
Net Increase In Cash and Cash Equivalents
|
|
|
161,024
|
|
|
|
82,538
|
|
CASH AND CASH EQUIVALENTS - BEGINNING OF PERIOD
|
|
$
|
82,569
|
|
|
$
|
47,387
|
|
|
|
|
|
|
|
|
|
|
CASH AND CASH EQUIVALENTS END OF PERIOD
|
|
$
|
243,593
|
|
|
$
|
129,925
|
|
|
|
|
|
|
|
|
|
|
Supplemental Disclosure of Cash Flow Information:
|
|
|
|
|
|
|
|
|
Income taxes paid
|
|
$
|
10,840
|
|
|
$
|
3,348
|
|
Interest paid
|
|
|
20,734
|
|
|
|
27,029
|
|
Supplemental Schedule of Noncash Investing Activities:
|
|
|
|
|
|
|
|
|
Unrealized (loss) gain on available-for-sale securities
|
|
$
|
(3,008
|
)
|
|
$
|
12,321
|
|
Unrealized gain on securities transferred from held-to-maturity to available-for-sale
|
|
|
2,558
|
|
|
|
|
|
OREO transferred from loans
|
|
|
14,634
|
|
|
|
6,214
|
|
Loans made on the disposition of OREO
|
|
|
4,898
|
|
|
|
3,540
|
|
Notes to consolidated financial statements are an integral part of these statements.
7
VIRGINIA COMMERCE BANCORP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
The accompanying unaudited consolidated financial statements of Virginia Commerce Bancorp, Inc. and its subsidiaries (the
Company) have been prepared in accordance with accounting principles generally accepted in the United States of America (GAAP) for interim financial information. All significant intercompany balances and transactions have
been eliminated. In the opinion of management, the accompanying unaudited consolidated financial statements contain all adjustments and reclassifications consisting of a normal and recurring nature considered necessary to present fairly the
consolidated balance sheets as of September 30, 2012 and December 31, 2011, the consolidated statements of income for the three and nine months ended September 30, 2012 and 2011, consolidated statements of comprehensive income for the
three and nine month periods ended September 30, 2012 and 2011, and consolidated statements of changes in stockholders equity and consolidated statements of cash flows for the nine months ended September 30, 2012 and 2011. These
statements should be read in conjunction with the Companys annual report on Form 10-K for the year ended December 31, 2011. In preparing these consolidated financial statements, management has evaluated subsequent events and transactions
for potential recognition or disclosure through the date these consolidated financial statements were issued. Management has concluded there were no material subsequent events to be disclosed at this time.
Operating results for the three and nine month periods ended September 30, 2012, are not necessarily indicative of the results that may be expected
for the year ending December 31, 2012, or any other period. Reclassifications of prior years amounts are made whenever necessary to conform to the current years presentation.
Fair Value Measurements
The Company uses fair value measurements to record fair value adjustments to certain
assets and liabilities and to determine fair value disclosures. In accordance with the Fair Value Measurements and Disclosures Topic 820 of Financial Accounting Standards Board (FASB) Accounting Standards Codification
(ASC), the fair value of a financial instrument is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. Fair value is best
determined based upon quoted market prices. However, in many instances, there are no quoted market prices for the Companys various financial instruments. In cases where quoted market prices are not available, fair values are based on estimates
using present value or other valuation techniques. Those techniques are significantly affected by the assumptions used, including the discount rate and estimates of future cash flows. Accordingly, the fair value estimates may not be realized in an
immediate settlement of the instrument.
Fair value guidance provides a consistent definition of fair value, which focuses on exit price in an
orderly transaction (that is, not a forced liquidation or distressed sale) between market participants at the measurement date under current market conditions. If there had been a significant decrease in the volume and level of activity for the
asset or liability, a change in valuation technique or the use of multiple valuation techniques may be appropriate. In such instances, determining the price at which willing market participants would transact at the measurement date under current
market conditions depends on the facts and circumstances and requires the use of significant judgment. The fair value is a reasonable point within the range that is most representative of fair value under current market conditions.
Fair Value Hierarchy
In accordance with the FASB guidance, the Company groups its financial assets and financial
liabilities and certain non-financial assets generally measured at fair value in three levels, based on the markets in which the assets and liabilities are traded and the reliability of the assumptions used to determine fair value.
Level 1 - Valuation is based on quoted prices in active markets for identical assets or liabilities that the reporting entity has the ability to access
at the measurement date. Level 1 assets and liabilities generally include debt and equity securities that are traded in an active exchange market. Valuations are obtained from readily available pricing sources for market transactions involving
identical assets or liabilities.
8
Level 2 Valuation is based on inputs other than quoted prices included within Level 1 that are
observable for the asset or liability, either directly or indirectly. The valuation may be based on 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 for substantially the full term of the asset or liability.
Level 3 Valuation is based on
unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities. Level 3 assets and liabilities include financial instruments whose value is determined using pricing
models, discounted cash flow methodologies, or similar techniques, as well as instruments for which determination of fair value requires significant management judgment or estimation.
An asset or liabilitys categorization within the valuation hierarchy is based upon the lowest level of input that is significant to the fair value measurement.
The following describes the valuation techniques used by the Company to measure certain financial assets and liabilities recorded at fair value on a
recurring basis in the financial statements:
Investment securities available-for-sale
: Investment securities available-for-sale are
recorded at fair value on a recurring basis. Fair value measurement is based upon quoted market prices, when available (Level 1). If quoted market prices are not available, fair values are measured utilizing independent valuation techniques of
identical or similar securities for which significant assumptions are derived primarily from or corroborated by observable market data. Third party vendors compile prices from various sources and may determine the fair value of identical or similar
securities by using pricing models that consider observable market data (Level 2).
The following table summarizes the Companys financial assets measured at fair value on a recurring basis for September 30,
2012 and December 31, 2011, respectively (dollars in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Carrying value at September 30, 2012
|
|
Description
|
|
Balance as of
September 30,
2012
|
|
|
Quoted Prices
in Active
Markets for
Identical
Assets
(Level 1)
|
|
|
Significant
Other
Observable
Inputs
(Level 2)
|
|
|
Significant
Unobservable
Inputs
(Level
3)
|
|
Assets:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Investment securities available-for-sale
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
U.S. Government Treasury obligations
|
|
$
|
15,000
|
|
|
$
|
|
|
|
$
|
15,000
|
|
|
$
|
|
|
U.S. Government Agency obligations
|
|
$
|
429,416
|
|
|
$
|
|
|
|
$
|
429,416
|
|
|
$
|
|
|
Pooled trust preferred securities
|
|
$
|
358
|
|
|
$
|
|
|
|
$
|
358
|
|
|
$
|
|
|
Obligations of states and political subdivisions
|
|
$
|
100,369
|
|
|
$
|
|
|
|
$
|
100,369
|
|
|
$
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Carrying value at December 31, 2011
|
|
Description
|
|
Balance as of
December 31,
2011
|
|
|
Quoted Prices
in Active
Markets for
Identical
Assets
(Level 1)
|
|
|
Significant
Other
Observable
Inputs
(Level 2)
|
|
|
Significant
Unobservable
Inputs
(Level
3)
|
|
Assets:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Investment securities available-for-sale
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
U.S. Government Agency obligations
|
|
$
|
523,987
|
|
|
$
|
|
|
|
$
|
523,987
|
|
|
$
|
|
|
Pooled trust preferred securities
|
|
$
|
456
|
|
|
$
|
|
|
|
$
|
456
|
|
|
$
|
|
|
Obligations of states and political subdivisions
|
|
$
|
68,621
|
|
|
$
|
|
|
|
$
|
68,621
|
|
|
$
|
|
|
At September 30, 2012 and December 31, 2011, the Company did not have any liabilities measured at fair value on a recurring
basis.
9
Certain assets are measured at fair value on a nonrecurring basis in accordance with GAAP.
Adjustments to the fair value of these assets usually result from the application of lower-of-cost-or-market accounting or write-downs of individual assets. The following describes the valuation techniques used by the Company to measure certain
assets recorded at fair value on a nonrecurring basis in the financial statements:
Loans held for sale
: Loans held for sale are
carried at the lower of cost or market value. These loans currently consist of one-to-four family residential loans originated for sale in the secondary market. Fair value is based on the price secondary markets are currently offering for similar
loans using observable market data which is not materially different than cost due to the short duration between origination and sale (Level 2). As such, the Company records any fair value adjustments on a nonrecurring basis. No nonrecurring fair
value adjustments were recorded on loans held for sale during the periods ended September 30, 2012, and December 31, 2011. Gains and losses on the sale of loans are recognized in fees and net gains on loans held-for-sale on the
Consolidated Statements of Income.
Impaired Loans
: Loans are designated as impaired when, in the judgment of management based on
current information and events, it is probable that all amounts due according to the contractual terms of the loan agreement will not be collected. The measurement of loss associated with impaired loans can be based on either the observable market
price of the loan or the fair value of the collateral. Fair value is measured based on the value of the collateral securing the loans. Collateral may be in the form of real estate, financial assets, personal or business assets including equipment,
inventory, and accounts receivable. The vast majority of the collateral is real estate. An impaired loan that is collateralized by cash is considered Level 1. The value of real estate collateral is determined utilizing an income or market valuation
approach based on an appraisal conducted by an independent, licensed appraiser outside of the Company or using observable market data (Level 2). However, if the collateral is a house or building in the process of construction or if an appraisal of
the real estate property is over two years old, then the fair value is considered Level 3. The value of business equipment is based upon an outside appraisal if deemed significant, or the net book value on the applicable businesss financial
statements if not considered significant, using observable market data. Likewise, values for inventory and accounts receivables collateral are based on financial statement balances or aging reports (Level 3). Impaired loans are measured at fair
value on a nonrecurring basis through the allowance for loan losses. Any fair value adjustments are recorded in the period incurred as provision for loan losses on the Consolidated Statements of Income.
Other Real Estate Owned / Foreclosed Assets:
Assets acquired through, or in lieu of, loan foreclosure are held-for-sale and are initially recorded
at the lesser of carrying value or fair value less cost to sell at the date of foreclosure, establishing a new cost basis. Subsequent to foreclosure, valuations are periodically performed by management and the assets are carried at the lower of
carrying amount or fair value less cost to sell. Revenue and expenses from operations and changes in the valuation are included in net expenses for other real estate owned. When the fair value of the collateral is based on an observable market price
or a current appraised value, the Company records the foreclosed asset as Level 2 valuation. When an appraised value is not available or management determines the fair value of the collateral is further impaired below the appraised value and there
is no observable market price, the Company records the foreclosed asset as Level 3 valuation.
The following table summarizes the Companys assets that were measured at fair value on a nonrecurring basis for
September 30, 2012 and December 31, 2011, respectively (dollars in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Carrying value at September 30, 2012
|
|
Description
|
|
Balance as of
September 30,
2012
|
|
|
Quoted Prices
in
Active
Markets
for
Identical
Assets
(Level 1)
|
|
|
Significant
Other
Observable
Inputs
(Level 2)
|
|
|
Significant
Unobservable
Inputs
(Level
3)
|
|
Assets:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Impaired loans
|
|
$
|
79,273
|
|
|
$
|
707
|
|
|
$
|
50,649
|
|
|
$
|
27,917
|
|
Other real estate owned
|
|
$
|
14,089
|
|
|
$
|
|
|
|
$
|
9,050
|
|
|
$
|
5,039
|
|
10
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Carrying value at December 31, 2011
|
|
Description
|
|
Balance as of
December 31,
2011
|
|
|
Quoted Prices
in Active
Markets for
Identical
Assets
(Level 1)
|
|
|
Significant
Other
Observable
Inputs
(Level 2)
|
|
|
Significant
Unobservable
Inputs
(Level
3)
|
|
Assets:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Impaired loans
|
|
$
|
83,207
|
|
|
$
|
750
|
|
|
$
|
74,078
|
|
|
$
|
8,379
|
|
Other real estate owned
|
|
$
|
8,925
|
|
|
$
|
|
|
|
$
|
4,257
|
|
|
$
|
4,668
|
|
The changes in Level 3 assets measured at estimated fair value on a nonrecurring basis during the nine months ended September 30,
2012, were as follows (dollars in thousands):
|
|
|
|
|
|
|
|
|
|
|
Carrying value at
September 30,
2012
|
|
|
|
Impaired
Loans
|
|
|
Other Real
Estate Owned
|
|
Balance - January 1, 2012
|
|
$
|
8,379
|
|
|
$
|
4,668
|
|
Decrease in carrying value (included in earnings)
|
|
|
(185
|
)
|
|
|
|
|
Transfers into Level 3
|
|
|
26,361
|
|
|
|
909
|
|
Transfers out of Level 3
|
|
|
(6,638
|
)
|
|
|
(538
|
)
|
|
|
|
|
|
|
|
|
|
Balance September 30, 2012
|
|
$
|
27,917
|
|
|
$
|
5,039
|
|
At September 30, 2012 and December 31, 2011, the Company did not have any liabilities measured at fair value on a
nonrecurring basis.
The following table displays quantitative information about Level 3 Fair Value Measurements for September 30, 2012
(dollars in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
Quantitative information about Level 3 Fair Value Measurements for September 30, 2012
|
|
Assets
|
|
Fair
Value
|
|
Valuation Technique(s)
|
|
Unobservable input
|
|
Range
|
|
Impaired loans
|
|
|
|
Discounted appraised value
|
|
Selling cost
|
|
|
5% - 10
|
%
|
|
|
|
|
|
|
Discount for lack of marketability and age of appraisal
|
|
|
0% - 35
|
%
|
|
|
|
|
Discounted cash flow
|
|
Discount for expected levels of future cash flows
|
|
|
10% - 25
|
%
|
Other real estate owned
|
|
|
|
Discounted appraised value
|
|
Selling cost
|
|
|
5% - 10
|
%
|
|
|
|
|
|
|
Discount for lack of marketability and age of appraisal
|
|
|
0% - 20
|
%
|
The following methods and assumptions were used to estimate the fair value of each class of financial instruments for which it is
practicable to estimate that value:
Cash and Short-Term Investments
For these short-term instruments, including interest-bearing deposits in other banks, the
carrying amount is a reasonable estimate of fair value.
Investment Securities
For securities held for investment purposes, fair values are based upon quoted market prices, when available. If
quoted market prices are not available, fair values are measured utilizing independent valuation techniques of identical or similar securities for which significant assumptions are derived primarily from or corroborated by observable market data.
Third party vendors compile prices from various sources and may determine the fair value of identical or similar securities by using pricing models that consider observable market data. The carrying value of restricted stock approximates fair value
based on the redemption provisions of the issuers.
11
Loans Held-for-Sale
Fair value is based on the price secondary markets are currently offering for
similar loans using observable market data which is not materially different than cost due to the short duration between origination and sale.
Bank-Owned Life Insurance
Bank-owned life insurance represents insurance policies on officers, directors and past employees of
the Bank. The cash values of the policies are estimates using information provided by insurance carriers. These policies are carried at their cash surrender value, which approximates the fair value.
Loan Receivables
For certain homogeneous categories of loans, such as some residential
mortgages, and other consumer loans, fair value is estimated using the quoted market prices for securities backed by similar loans, adjusted for differences in loan characteristics. The fair value of other types of loans is estimated by discounting
the future cash flows using the current rates at which similar loans would be made to borrowers with similar credit ratings and for the same remaining maturities.
Deposits and Borrowings
The fair value of non-interest-bearing demand, savings accounts, and certain money market deposits is
the amount payable on demand at the reporting date. For all other deposits and borrowings, the fair value is determined using the discounted cash flow method. The discount rate was equal to the rate currently offered on similar products.
Accrued Interest
The carrying amounts of accrued interest approximate fair value.
Off-Balance Sheet Financial Instruments
The fair value of commitments to extend credit is estimated using the fees currently
charged to enter similar agreements, taking into account the remaining terms of the agreements and the present creditworthiness of the counterparties. For fixed-rate loan commitments, fair value also considers the difference between current levels
of interest rates and the committed rates. The fair value of stand-by letters of credit is based on fees currently charged for similar agreements or on the estimated cost to terminate them or otherwise settle the obligations with the counterparties
at the reporting date.
At September 30, 2012 and December 31, 2011, the fair value of loan commitments and stand-by letters of
credit were deemed immaterial, and therefore, are not included in the table below.
In the normal course of business, the Company is subject
to market risk which includes interest rate risk (the risk that general interest rate levels will change). As a result, the fair values of the Companys financial instruments will change when interest rate levels change and that change may be
either favorable or unfavorable to the Company. Management attempts to match maturities of assets and liabilities to the extent believed necessary to minimize this risk.
12
The balance sheet carrying amounts and estimated fair values of the Companys financial instruments are
as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fair Value Measurements
as of
September 30, 2012, using
|
|
(Dollars in thousands)
|
|
Carrying
Amount
|
|
|
Quoted
Prices in
Active
Markets for
Identical
Assets
|
|
|
Significant
Other
Observable
Inputs
|
|
|
Significant
Unobservable
Inputs
|
|
|
|
|
|
|
Level 1
|
|
|
Level 2
|
|
|
Level 3
|
|
Financial assets:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and short-term investments
|
|
$
|
243,593
|
|
|
$
|
243,593
|
|
|
$
|
|
|
|
$
|
|
|
Investment securities
|
|
|
545,143
|
|
|
|
|
|
|
|
545,143
|
|
|
|
|
|
Restricted stock
|
|
|
11,272
|
|
|
|
|
|
|
|
11,272
|
|
|
|
|
|
Loans held-for-sale
|
|
|
19,330
|
|
|
|
|
|
|
|
19,330
|
|
|
|
|
|
Loan receivables
|
|
|
2,102,588
|
|
|
|
707
|
|
|
|
2,212,737
|
|
|
|
27,917
|
|
Bank-owned life insurance
|
|
|
14,176
|
|
|
|
14,176
|
|
|
|
|
|
|
|
|
|
Accrued interest receivable
|
|
|
9,541
|
|
|
|
|
|
|
|
9,541
|
|
|
|
|
|
|
|
|
|
|
Financial liabilities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Deposits
|
|
$
|
2,212,556
|
|
|
$
|
|
|
|
$
|
2,200,613
|
|
|
$
|
|
|
Securities sold under agreement to repurchase
|
|
|
409,320
|
|
|
|
350,401
|
|
|
|
75,000
|
|
|
|
|
|
Other borrowed funds
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Trust preferred capital notes
|
|
|
66,762
|
|
|
|
|
|
|
|
67,407
|
|
|
|
|
|
Accrued interest payable
|
|
|
2,131
|
|
|
|
|
|
|
|
2,131
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fair Value Measurements
as of
December 31, 2011, using
|
|
(Dollars in thousands)
|
|
Carrying
Amount
|
|
|
Quoted Prices
in Active
Markets for
Identical
Assets
|
|
|
Significant
Other
Observable
Inputs
|
|
|
Significant
Unobservable
Inputs
|
|
|
|
|
|
|
Level 1
|
|
|
Level 2
|
|
|
Level 3
|
|
Financial assets:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and short-term investments
|
|
$
|
82,569
|
|
|
$
|
82,569
|
|
|
$
|
|
|
|
$
|
|
|
Investment securities
|
|
|
624,956
|
|
|
|
|
|
|
|
627,495
|
|
|
|
|
|
Restricted stock
|
|
|
11,214
|
|
|
|
|
|
|
|
11,214
|
|
|
|
|
|
Loans held-for-sale
|
|
|
18,485
|
|
|
|
|
|
|
|
18,485
|
|
|
|
|
|
Loan receivables
|
|
|
2,120,291
|
|
|
|
750
|
|
|
|
2,114,199
|
|
|
|
8,379
|
|
Bank-owned life insurance
|
|
|
14,017
|
|
|
|
14,017
|
|
|
|
|
|
|
|
|
|
Accrued interest receivable
|
|
|
10,007
|
|
|
|
|
|
|
|
10,007
|
|
|
|
|
|
|
|
|
|
|
Financial liabilities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Deposits
|
|
$
|
2,292,158
|
|
|
$
|
|
|
|
$
|
2,311,842
|
|
|
$
|
|
|
Securities sold under agreement to repurchase
|
|
|
263,273
|
|
|
|
206,145
|
|
|
|
75,000
|
|
|
|
|
|
Other borrowed funds
|
|
|
25,000
|
|
|
|
|
|
|
|
25,733
|
|
|
|
|
|
Trust preferred capital notes
|
|
|
66,570
|
|
|
|
|
|
|
|
103,680
|
|
|
|
|
|
Accrued interest payable
|
|
|
2,418
|
|
|
|
|
|
|
|
2,418
|
|
|
|
|
|
13
Amortized cost and fair value of the investment securities available-for-sale and held-to-maturity as of
September 30, 2012, and December 31, 2011, are as follows (dollars in thousands). As of March 31, 2012, the Company transferred its held-to-maturity investment portfolio with an amortized cost of $30.0 million and a fair value of
$32.5 million, to its available-for-sale investment portfolio.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
September 30, 2012
|
|
Amortized
Cost
|
|
|
Gross
Unrealized
Gains
|
|
|
Gross
Unrealized
(Losses)
|
|
|
Fair Value
|
|
Available-for-sale:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
U.S. Government treasury obligations
|
|
$
|
15,000
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
15,000
|
|
U.S. Government agency obligations
|
|
$
|
422,637
|
|
|
|
7,347
|
|
|
|
(568
|
)
|
|
|
429,416
|
|
Pooled trust preferred securities
|
|
|
5,646
|
|
|
|
|
|
|
|
(5,288
|
)
|
|
|
358
|
|
Obligations of states and political subdivisions
|
|
|
93,384
|
|
|
|
7,035
|
|
|
|
(50
|
)
|
|
|
100,369
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Investment securities available-for-sale
|
|
$
|
536,667
|
|
|
$
|
14,382
|
|
|
$
|
(5,906
|
)
|
|
$
|
545,143
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2011
|
|
Amortized
Cost
|
|
|
Gross
Unrealized
Gains
|
|
|
Gross
Unrealized
(Losses)
|
|
|
Fair Value
|
|
Available-for-sale:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
U.S. Government agency obligations
|
|
$
|
514,961
|
|
|
$
|
9,455
|
|
|
$
|
(429
|
)
|
|
$
|
523,987
|
|
Pooled trust preferred securities
|
|
|
5,526
|
|
|
|
56
|
|
|
|
(5,126
|
)
|
|
|
456
|
|
Obligations of states and political subdivisions
|
|
|
63,652
|
|
|
|
4,997
|
|
|
|
(28
|
)
|
|
|
68,621
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Investment securities available-for-sale
|
|
$
|
584,139
|
|
|
$
|
14,508
|
|
|
$
|
(5,583
|
)
|
|
$
|
593,064
|
|
|
|
|
|
|
Held-to-maturity:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
U.S. Government agency obligations
|
|
$
|
3,763
|
|
|
$
|
253
|
|
|
$
|
|
|
|
$
|
4,016
|
|
Obligations of state and political subdivisions
|
|
|
28,129
|
|
|
|
2,286
|
|
|
|
|
|
|
|
30,415
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Investment securities held-to-maturity
|
|
$
|
31,892
|
|
|
$
|
2,538
|
|
|
$
|
|
|
|
$
|
34,431
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The amortized cost of securities pledged as collateral for repurchase agreements, certain public deposits, and other purposes was
$434.8 million and $392.8 million at September 30, 2012 and December 31, 2011, respectively.
Management evaluates securities for
other-than-temporary impairment at least on a quarterly basis, and more frequently when economic or market concerns warrant such evaluation. An impairment is considered to be other-than-temporary if the Company (1) intends to sell the security,
(2) more likely than not will be required to sell the security before recovering its cost, or (3) does not expect to recover the securitys entire amortized cost basis.
Provided below is a summary of all securities which were in an unrealized loss position at September 30, 2012, and December 31, 2011, that were evaluated for other-than-temporary impairment, and
deemed to not have an other-than-temporary impairment. Presently, the Company does not intend to sell any of these securities, does not expect to be required to sell these securities, and expects to recover the adjusted amortized cost of all the
securities. For U.S. Government Agency obligations and obligations of states and political subdivisions, the unrealized losses result from market or interest rate risk, while the unrealized losses pertaining to the pooled trust preferred securities
are due to liquidity discounts, performance and credit ratings, as well as interest rate risk.
14
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
At September 30, 2012
|
|
Less Than 12 Months
|
|
|
12 Months or Longer
|
|
|
Total
|
|
(Dollars in thousands)
|
|
Fair
Value
|
|
|
Unrealized
Losses
|
|
|
Fair
Value
|
|
|
Unrealized
Losses
|
|
|
Fair
Value
|
|
|
Unrealized
Losses
|
|
Available-for-sale:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
U.S. Government agency obligations
|
|
$
|
67,026
|
|
|
$
|
(568
|
)
|
|
$
|
|
|
|
$
|
|
|
|
$
|
67,026
|
|
|
$
|
(568
|
)
|
Pooled trust preferred securities
|
|
|
|
|
|
|
|
|
|
|
358
|
|
|
|
(5,288
|
)
|
|
|
358
|
|
|
|
(5,288
|
)
|
Obligations of states and political subdivisions
|
|
|
3,870
|
|
|
|
(50
|
)
|
|
|
|
|
|
|
|
|
|
|
3,870
|
|
|
|
(50
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
70,896
|
|
|
$
|
(618
|
)
|
|
$
|
358
|
|
|
$
|
(5,288
|
)
|
|
$
|
71,254
|
|
|
$
|
(5,906
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
At December 31, 2011
|
|
Less Than 12 Months
|
|
|
12 Months or Longer
|
|
|
Total
|
|
(Dollars in thousands)
|
|
Fair
Value
|
|
|
Unrealized
Losses
|
|
|
Fair
Value
|
|
|
Unrealized
Losses
|
|
|
Fair
Value
|
|
|
Unrealized
Losses
|
|
Available-for-sale:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
U.S. Government agency obligations
|
|
$
|
74,594
|
|
|
$
|
(429
|
)
|
|
$
|
|
|
|
$
|
|
|
|
$
|
74,594
|
|
|
$
|
(429
|
)
|
Pooled trust preferred securities
|
|
|
|
|
|
|
|
|
|
|
306
|
|
|
|
(5,126
|
)
|
|
|
306
|
|
|
|
(5,126
|
)
|
Obligations of states and political subdivisions
|
|
|
313
|
|
|
|
(10
|
)
|
|
|
512
|
|
|
|
(18
|
)
|
|
|
825
|
|
|
|
(28
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
74,907
|
|
|
$
|
(439
|
)
|
|
$
|
818
|
|
|
$
|
(5,144
|
)
|
|
$
|
75,725
|
|
|
$
|
(5,583
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As of September 30, 2012, the Company had two pooled trust preferred securities that were deemed to be other-than-temporarily
impaired (OTTI) based on a present value analysis of expected future cash flows. The following table provides further information on these securities as of September 30, 2012 (dollars in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Security
|
|
Class
|
|
|
Moodys
Ratings
(Lowest
Assigned
Rating)
|
|
Book
Value
|
|
|
Market
Value
|
|
|
Unrealized
Loss
|
|
|
Current
Defaults
and
Deferrals
|
|
|
% of Current
Defaults and
Deferrals to
Current
Collateral
|
|
|
Excess
Sub (1)
|
|
|
Estimated
Incremental
Defaults
Required to
Break Yield
(2)
|
|
|
Cumulative Other
Comprehensive
Loss (3)
|
|
|
Amount of
OTTI
Related to
Credit
Loss (3)
|
|
PreTSL X
|
|
|
B-1
|
|
|
C
|
|
$
|
542
|
|
|
$
|
13
|
|
|
$
|
529
|
|
|
$
|
168,795
|
|
|
|
40.5
|
%
|
|
|
-47.0
|
%
|
|
|
BROKEN
|
|
|
$
|
529
|
|
|
|
|
|
PreTSL
XXVI
|
|
|
C-2
|
|
|
C
|
|
|
2,167
|
|
|
|
13
|
|
|
|
2,154
|
|
|
$
|
265,500
|
|
|
|
29.5
|
%
|
|
|
-21.1
|
%
|
|
|
BROKEN
|
|
|
|
2,154
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
|
|
|
|
|
$
|
2,709
|
|
|
$
|
26
|
|
|
$
|
2,683
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
2,683
|
|
|
$
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1)
|
Excess subordination is the difference between the remaining performing collateral and the amount of bonds outstanding that are pari passu and senior to the class the
Company owns. Negative excess subordination indicates there is not enough performing collateral in the pool to cover the outstanding balance of all classes senior to those the Company owns.
|
(2)
|
A break in yield for a given class means that defaults/deferrals have reached such a level that the class would not receive all of its contractual cash flows (principal
and interest) by maturity (so that it is not just a temporary interest shortfall, but an actual loss in yield on the investment). This represents additional defaults beyond those assumed in our cash flow modeling.
|
(3)
|
Pre-tax credit losses recorded in 2012.
|
Trust preferred security, PreTSL VI, was redeemed in third quarter 2012 resulting in a gain of $436 thousand.
As of September 30, 2012, the Company had one pooled trust preferred security that was deemed to be temporarily impaired based on a present value
analysis of expected future cash flows. The security had a market value of $332 thousand. The following table provides further information on this security as of September 30, 2012 (in thousands):
15
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Security
|
|
Class
|
|
|
Moodys
Ratings
(Lowest
Assigned
Rating)
|
|
|
Book
Value
|
|
|
Market
Value
|
|
|
Unrealized
Loss
|
|
|
Current
Defaults
and
Deferrals
|
|
|
% of Current
Defaults and
Deferrals to
Current
Collateral
|
|
|
Excess
Sub (1)
|
|
|
Estimated
Incremental
Defaults
Required to
Break Yield
(2)
|
|
|
Cumulative Other
Comprehensive
Loss (3)
|
|
|
Amount of
OTTI
Related to
Credit
Loss (3)
|
|
PreTSL XXVII
|
|
|
B
|
|
|
|
Cc
|
|
|
$
|
2,937
|
|
|
$
|
332
|
|
|
$
|
2,605
|
|
|
$
|
86,800
|
|
|
|
26.7
|
%
|
|
|
0.1
|
%
|
|
$
|
|
|
|
$
|
2,605
|
|
|
$
|
|
|
(1)
|
Excess subordination is the difference between the remaining performing collateral and the amount of bonds outstanding that are pari passu and senior to the class the
Company owns. Negative excess subordination indicates there is not enough performing collateral in the pool to cover the outstanding balance of all classes senior to those the Company owns.
|
(2)
|
A break in yield for a given class means that defaults/deferrals have reached such a level that the class would not receive all of its contractual cash flows (principal
and interest) by maturity (so that it is not just a temporary interest shortfall, but an actual loss in yield on the investment). This represents additional defaults beyond those assumed in our cash flow modeling.
|
(3)
|
Pre-tax credit losses recorded in 2012.
|
The following table presents a roll-forward of the credit loss component amount of OTTI recognized in earnings:
|
|
|
|
|
(in thousands)
|
|
|
|
Amount recognized through December 31, 2011
|
|
$
|
4,200
|
|
Additions:
|
|
|
|
|
Initial credit impairments
|
|
|
|
|
Subsequent credit impairments
|
|
|
|
|
|
|
|
|
|
Amount recognized through September 30, 2012
|
|
$
|
4,200
|
|
Management has evaluated each of these securities for potential impairment under ASC 325 Investments-Other and the most
recently issued related guidance, and has reviewed each of the issues collateral participants most recent earnings, capital and loan loss reserve levels, and non-performing loan levels to estimate a future deferral and default rate in
basis points for the remaining life of each security. For the quarter ending September 30, 2012, we used a consistent 75 basis points for all PreTSL securities, X, XXVI and XXVII, for expected deferrals and defaults as a percentage of remaining
performing collateral for future periods. In performing a detailed present value cash flow analysis for each security, the deferral rate was treated the same. If this analysis results in a present value of expected cash flows that is less than the
book value of a security (that is, a credit loss exists), an OTTI is considered to have occurred. If there is no credit loss, any impairment is considered temporary. The cash flow analysis we performed used discount rates equal to the credit spread
at the time of purchase for each security and then added the current 3-month LIBOR forward interest rate curve. The analysis also assumed 15% recoveries on deferrals after two years and prepayments of 1% per year on each security. As of
September 30, 2012, performing issuers included 33 out of 50 issuers in PreTSL X, 46 out of 69 issuers in PreTSL XXVI, and 34 out of 49 issuers in PreTSL XXVII.
Our investment in Federal Home Loan Bank (FHLB) stock totaled $6.0 million at September 30, 2012. FHLB stock is generally viewed as a long-term investment and as a restricted security,
which is carried at cost, because there is no market for the stock, other than FHLBs or member institutions.
16
Major classifications of loans, excluding loans held-for-sale, are summarized at September 30, 2012, and December 31, 2011,
as follows (dollars in thousands):
|
|
|
|
|
|
|
|
|
|
|
September 30, 2012
|
|
|
December 31, 2011
|
|
Commercial
|
|
$
|
229,951
|
|
|
$
|
252,382
|
|
Real estate-one-to-four family residential:
|
|
|
|
|
|
|
|
|
Permanent first and second
|
|
|
280,150
|
|
|
|
246,420
|
|
Home equity loans and lines
|
|
|
118,646
|
|
|
|
126,530
|
|
|
|
|
|
|
|
|
|
|
Total real estate one-to-four family residential
|
|
$
|
398,796
|
|
|
$
|
372,950
|
|
Real estate-multi-family residential
|
|
|
86,842
|
|
|
|
76,506
|
|
Real estate-non-farm, non-residential:
|
|
|
|
|
|
|
|
|
Owner-occupied
|
|
|
467,255
|
|
|
|
460,773
|
|
Non-owner-occupied
|
|
|
691,462
|
|
|
|
672,137
|
|
|
|
|
|
|
|
|
|
|
Total real estate-non-farm, non-residential
|
|
$
|
1,158,717
|
|
|
$
|
1,132,910
|
|
Real estate-construction:
|
|
|
|
|
|
|
|
|
Residential
|
|
|
155,770
|
|
|
|
151,117
|
|
Commercial
|
|
|
105,137
|
|
|
|
175,300
|
|
|
|
|
|
|
|
|
|
|
Total real estate-construction
|
|
$
|
260,907
|
|
|
$
|
326,417
|
|
Consumer
|
|
|
7,141
|
|
|
|
8,592
|
|
Farmland
|
|
|
4,889
|
|
|
|
2,573
|
|
|
|
|
|
|
|
|
|
|
Total Loans
|
|
$
|
2,147,243
|
|
|
$
|
2,172,330
|
|
|
|
|
|
|
|
|
|
|
Less unearned income
|
|
|
3,367
|
|
|
|
3,310
|
|
Less allowance for loan losses
|
|
|
41,288
|
|
|
|
48,729
|
|
|
|
|
|
|
|
|
|
|
Loans, net
|
|
$
|
2,102,588
|
|
|
$
|
2,120,291
|
|
|
|
|
|
|
|
|
|
|
Classes of loans by risk rating as of September 30, 2012, excluding loans held-for-sale, are summarized as follows (dollars in
thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Internal Risk Rating Grades
|
|
Pass
|
|
|
Watch
|
|
|
Special
Mention
|
|
|
Substandard
|
|
|
Doubtful
|
|
|
Total
Loans
|
|
Commercial
|
|
$
|
163,539
|
|
|
$
|
28,262
|
|
|
$
|
14,710
|
|
|
$
|
21,630
|
|
|
$
|
1,810
|
|
|
$
|
229,951
|
|
Real estate-one-to-four family residential:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Permanent first and second
|
|
|
231,543
|
|
|
|
14,590
|
|
|
|
11,252
|
|
|
|
22,651
|
|
|
|
114
|
|
|
|
280,150
|
|
Home equity loans and lines
|
|
|
108,153
|
|
|
|
2,737
|
|
|
|
1,968
|
|
|
|
4,243
|
|
|
|
1,545
|
|
|
|
118,646
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total real estate-one-to-four family residential
|
|
$
|
339,696
|
|
|
$
|
17,327
|
|
|
$
|
13,220
|
|
|
$
|
26,894
|
|
|
$
|
1,659
|
|
|
$
|
398,796
|
|
Real estate-multi-family residential
|
|
|
81,738
|
|
|
|
5,104
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
86,842
|
|
Real estate-non-farm, non-residential:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Owner-occupied
|
|
|
357,423
|
|
|
|
66,865
|
|
|
|
21,376
|
|
|
|
21,591
|
|
|
|
|
|
|
|
467,255
|
|
Non-owner-occupied
|
|
|
483,742
|
|
|
|
131,036
|
|
|
|
33,608
|
|
|
|
43,076
|
|
|
|
|
|
|
|
691,462
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total real estate-non-farm, non-residential
|
|
$
|
841,165
|
|
|
$
|
197,901
|
|
|
$
|
54,984
|
|
|
$
|
64,667
|
|
|
$
|
|
|
|
$
|
1,158,717
|
|
Real estate-construction:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Residential
|
|
|
81,656
|
|
|
|
18,262
|
|
|
|
18,095
|
|
|
|
37,757
|
|
|
|
|
|
|
|
155,770
|
|
Commercial
|
|
|
33,365
|
|
|
|
15,277
|
|
|
|
28,560
|
|
|
|
27,935
|
|
|
|
|
|
|
|
105,137
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total real estate-construction
|
|
$
|
115,021
|
|
|
$
|
33,539
|
|
|
$
|
46,655
|
|
|
$
|
65,692
|
|
|
$
|
|
|
|
$
|
260,907
|
|
Consumer
|
|
|
6,585
|
|
|
|
230
|
|
|
|
222
|
|
|
|
104
|
|
|
|
|
|
|
|
7,141
|
|
Farmland
|
|
|
1,000
|
|
|
|
3,889
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
4,889
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
1,548,744
|
|
|
$
|
286,252
|
|
|
$
|
129,791
|
|
|
$
|
178,987
|
|
|
$
|
3,469
|
|
|
$
|
2,147,243
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
17
Classes of loans by risk rating as of December 31, 2011, excluding loans held-for-sale, are summarized
as follows (dollars in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Internal Risk Rating Grades
|
|
Pass
|
|
|
Watch
|
|
|
Special
Mention
|
|
|
Substandard
|
|
|
Doubtful
|
|
|
Total
Loans
|
|
Commercial
|
|
$
|
172,457
|
|
|
$
|
51,935
|
|
|
$
|
1,506
|
|
|
$
|
22,178
|
|
|
$
|
4,306
|
|
|
$
|
252,382
|
|
Real estate-one-to-four family residential:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Permanent first and second
|
|
|
195,786
|
|
|
|
16,726
|
|
|
|
7,004
|
|
|
|
26,904
|
|
|
|
|
|
|
|
246,420
|
|
Home equity loans and lines
|
|
|
111,800
|
|
|
|
4,937
|
|
|
|
1,441
|
|
|
|
6,105
|
|
|
|
2,247
|
|
|
|
126,530
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total real estate-one-to-four family residential
|
|
$
|
307,586
|
|
|
$
|
21,663
|
|
|
$
|
8,445
|
|
|
$
|
33,009
|
|
|
$
|
2,247
|
|
|
$
|
372,950
|
|
Real estate-multi-family residential
|
|
|
71,756
|
|
|
|
4,274
|
|
|
|
|
|
|
|
476
|
|
|
|
|
|
|
|
76,506
|
|
Real estate-non-farm, non-residential:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Owner-occupied
|
|
|
357,480
|
|
|
|
62,766
|
|
|
|
21,777
|
|
|
|
18,750
|
|
|
|
|
|
|
|
460,773
|
|
Non-owner-occupied
|
|
|
481,584
|
|
|
|
111,779
|
|
|
|
31,361
|
|
|
|
47,413
|
|
|
|
|
|
|
|
672,137
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total real estate-non-farm, non-residential
|
|
$
|
839,064
|
|
|
$
|
174,545
|
|
|
$
|
53,138
|
|
|
$
|
66,163
|
|
|
$
|
|
|
|
$
|
1,132,910
|
|
Real estate-construction:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Residential
|
|
|
70,323
|
|
|
|
30,546
|
|
|
|
12,984
|
|
|
|
37,264
|
|
|
|
|
|
|
|
151,117
|
|
Commercial
|
|
|
63,520
|
|
|
|
59,217
|
|
|
|
27,395
|
|
|
|
25,168
|
|
|
|
|
|
|
|
175,300
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total real estate-construction
|
|
$
|
133,843
|
|
|
$
|
89,763
|
|
|
$
|
40,379
|
|
|
$
|
62,432
|
|
|
$
|
|
|
|
$
|
326,417
|
|
Consumer
|
|
|
8,169
|
|
|
|
233
|
|
|
|
119
|
|
|
|
71
|
|
|
|
|
|
|
|
8,592
|
|
Farmland
|
|
|
2,573
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2,573
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
1,535,448
|
|
|
$
|
342,413
|
|
|
$
|
103,587
|
|
|
$
|
184,329
|
|
|
$
|
6,553
|
|
|
$
|
2,172,330
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loan risk-ratings for the Bank are defined as follows:
Pass.
Loans to persons or entities with a strong to acceptable financial condition, adequate collateral margins, adequate cash flow to service long-term debt, adequate liquidity and sound net
worth. These entities are profitable now, with projections indicating continued profitability into the foreseeable future. Closely held corporations or businesses where a majority of the profits are withdrawn by the owners or paid in dividends are
included in this rating category. Overall, these loans are basically sound.
Watch.
These loans are characterized by greater than
average risk. Borrowers may have marginal cash flow, marginal profitability, or have experienced an unprofitable year and a declining financial condition. The borrower has in the past satisfactorily handled debts with the Bank, but in recent months
has either been late, delinquent in making payments, or made sporadic payments. While the Bank continues to be adequately secured, margins have decreased or are decreasing, despite the borrowers continued satisfactory condition. Other
characteristics of borrowers in this class may include inadequate credit or financial information. This classification includes loans to established borrowers that are reasonably margined by collateral, but where potential for improvement in
financial capacity appears limited.
Special Mention.
Loans in this category have potential weaknesses that deserve managements
close attention. If left uncorrected, these potential weaknesses may result in deteriorating prospects for the asset or in the institutions credit position at some future date. Other assets especially mentioned (OAEMs) are not
adversely classified and do not expose the Bank to sufficient risk to warrant adverse classification.
Substandard.
A loan classified
as substandard has a well-defined weakness and is inadequately protected by the sound worth and paying capacity of the borrower or the collateral pledged. Distinct loss potential, while existing in the aggregate amount of substandard loans, does not
necessarily exist in individual assets that are rated substandard.
Doubtful.
A loan classified as doubtful has all the weaknesses
inherent in a loan 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. These are
poor quality loans in which neither the collateral, if any, nor the financial condition of the borrower presently ensure collectability in full in a reasonable period of time; in fact, there is permanent impairment in the collateral securing the
Banks loan. These loans are in a work-out status and have a defined work-out strategy.
Loss.
Loans classified as loss are
considered uncollectible and of such little value that their continuance as bankable assets is not warranted. The Bank takes losses in the period in which they become uncollectible.
18
As of September 30, 2012 and December 31, 2011, there were $324 thousand and $166 thousand,
respectively, in checking account overdrafts that were reclassified on the consolidated balance sheets as loans.
4.
|
Allowance for Loan Losses
|
An analysis of the allowance for loan losses for the nine months ended September 30, 2012, and the year ended December 31,
2011 is shown below:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Allowance for Loan Losses
- By Segment
(Dollars in thousands)
For the nine months ended
September 30, 2012
|
|
Commercial
|
|
|
Non-Farm,
Non-Res.
Real
Estate
|
|
|
Real Estate
Construction
|
|
|
Consumer
|
|
|
Real
Estate
One-to-Four
Family
Residential
|
|
|
Real Estate
Multi-
Family
Residential
|
|
|
Farmland
|
|
|
Unallocated
|
|
|
Total
|
|
Allowance for loan losses:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Beginning Balance
|
|
$
|
10,378
|
|
|
$
|
12,554
|
|
|
$
|
15,161
|
|
|
$
|
245
|
|
|
$
|
9,724
|
|
|
$
|
608
|
|
|
$
|
59
|
|
|
$
|
|
|
|
$
|
48,729
|
|
Charge-offs
|
|
|
(5,904
|
)
|
|
|
(6,388
|
)
|
|
|
(5,593
|
)
|
|
|
(292
|
)
|
|
|
(3,612
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(21,789
|
)
|
Recoveries
|
|
|
929
|
|
|
|
43
|
|
|
|
487
|
|
|
|
34
|
|
|
|
470
|
|
|
|
118
|
|
|
|
|
|
|
|
|
|
|
|
2,081
|
|
Provision
|
|
|
(1,072
|
)
|
|
|
8,398
|
|
|
|
1,246
|
|
|
|
250
|
|
|
|
3,457
|
|
|
|
(75
|
)
|
|
|
63
|
|
|
|
|
|
|
|
12,267
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Ending Balance
|
|
$
|
4,331
|
|
|
$
|
14,607
|
|
|
$
|
11,301
|
|
|
$
|
237
|
|
|
$
|
10,039
|
|
|
$
|
651
|
|
|
$
|
122
|
|
|
$
|
|
|
|
$
|
41,288
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Ending Balance:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Individually evaluated for impairment
|
|
$
|
558
|
|
|
$
|
3,815
|
|
|
$
|
4,034
|
|
|
$
|
53
|
|
|
$
|
5,256
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
13,716
|
|
Collectively evaluated for impairment
|
|
|
3,773
|
|
|
|
10,792
|
|
|
|
7,267
|
|
|
|
184
|
|
|
|
4,783
|
|
|
|
651
|
|
|
|
122
|
|
|
|
|
|
|
|
27,572
|
|
|
|
|
|
|
|
|
|
|
|
Financing Receivables:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Ending Balance
|
|
$
|
229,951
|
|
|
$
|
1,158,717
|
|
|
$
|
260,907
|
|
|
$
|
7,141
|
|
|
$
|
398,796
|
|
|
$
|
86,842
|
|
|
$
|
4,889
|
|
|
$
|
|
|
|
$
|
2,147,243
|
|
|
|
|
|
|
|
|
|
|
|
Ending Balance:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Individually evaluated for impairment
|
|
|
23,440
|
|
|
|
79,554
|
|
|
|
65,693
|
|
|
|
104
|
|
|
|
30,910
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
199,701
|
|
Collectively evaluated for impairment
|
|
|
206,511
|
|
|
|
1,079,163
|
|
|
|
195,214
|
|
|
|
7,037
|
|
|
|
367,886
|
|
|
|
86,842
|
|
|
|
4,889
|
|
|
|
|
|
|
|
1,947,542
|
|
19
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Allowance for Loan
Losses - By Segment
(Dollars in thousands)
For the year ended
Dec. 31, 2011
|
|
Commercial
|
|
|
Non-Farm,
Non-Res.
Real
Estate
|
|
|
Real Estate
Construction
|
|
|
Consumer
|
|
|
Real
Estate
One-to-Four
Family
Residential
|
|
|
Real
Estate
Multi-
Family
Residential
|
|
|
Farmland
|
|
|
Unallocated
|
|
|
Total
|
|
Allowance for credit losses:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Beginning Balance
|
|
$
|
9,972
|
|
|
$
|
16,453
|
|
|
$
|
26,584
|
|
|
$
|
373
|
|
|
$
|
8,337
|
|
|
$
|
619
|
|
|
$
|
63
|
|
|
$
|
41
|
|
|
$
|
62,442
|
|
Charge-offs
|
|
|
(2,357
|
)
|
|
|
(9,188
|
)
|
|
|
(16,631
|
)
|
|
|
(156
|
)
|
|
|
(3,577
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(31,909
|
)
|
Recoveries
|
|
|
672
|
|
|
|
431
|
|
|
|
2,005
|
|
|
|
38
|
|
|
|
201
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
3,347
|
|
Provision
|
|
|
2,091
|
|
|
|
4,858
|
|
|
|
3,203
|
|
|
|
(10
|
)
|
|
|
4,763
|
|
|
|
(11
|
)
|
|
|
(4
|
)
|
|
|
(41
|
)
|
|
|
14,849
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Ending Balance
|
|
$
|
10,378
|
|
|
$
|
12,554
|
|
|
$
|
15,161
|
|
|
$
|
245
|
|
|
$
|
9,724
|
|
|
$
|
608
|
|
|
$
|
59
|
|
|
$
|
|
|
|
$
|
48,729
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Ending Balance:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Individually evaluated for impairment
|
|
$
|
5,351
|
|
|
$
|
2,991
|
|
|
$
|
6,786
|
|
|
$
|
52
|
|
|
$
|
5,508
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
20,688
|
|
Collectively evaluated for impairment
|
|
|
5,027
|
|
|
|
9,563
|
|
|
|
8,375
|
|
|
|
193
|
|
|
|
4,216
|
|
|
|
608
|
|
|
|
59
|
|
|
|
|
|
|
|
28,041
|
|
|
|
|
|
|
|
|
|
|
|
Financing Receivables:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Ending Balance
|
|
$
|
252,382
|
|
|
$
|
1,132,910
|
|
|
$
|
326,417
|
|
|
$
|
8,592
|
|
|
$
|
372,950
|
|
|
$
|
76,506
|
|
|
$
|
2,573
|
|
|
$
|
|
|
|
$
|
2,172,330
|
|
|
|
|
|
|
|
|
|
|
|
Ending Balance:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Individually evaluated for impairment
|
|
|
26,484
|
|
|
|
70,464
|
|
|
|
67,083
|
|
|
|
71
|
|
|
|
35,659
|
|
|
|
476
|
|
|
|
|
|
|
|
|
|
|
|
200,237
|
|
Collectively evaluated for impairment
|
|
|
225,898
|
|
|
|
1,062,446
|
|
|
|
259,334
|
|
|
|
8,521
|
|
|
|
337,291
|
|
|
|
76,030
|
|
|
|
2,573
|
|
|
|
|
|
|
|
1,972,093
|
|
A loans past due status is based on the contractual due date of the most delinquent payment due. Loans are generally placed on
non-accrual status when the collection of principal or interest is 90 days or more past due, or earlier, if collection is uncertain based on an evaluation of the net realizable value of the collateral and the financial strength of the borrower.
Loans 90 days or more past due may remain on accrual status if management determines it has adequate collateral to cover the principal and interest. For those loans that are carried on non-accrual status, payments are first applied to principal
outstanding. A loan may be returned to accrual status if the borrower has demonstrated a sustained period of repayment performance in accordance with the contractual terms of the loan and there is reasonable assurance the borrower will continue to
make payments as agreed. These policies are applied consistently across our loan portfolio.
Included in certain loan categories in the
following impaired loans table are troubled debt restructurings (TDRs) that were classified as impaired. A TDR loan is a loan that has been restructured with a modification that could include interest rate modification, deferral of
interest or principal or an extension of term. At September 30, 2012, the Company had $10.8 million in real estate construction, $22.6 million in non-farm/non-residential, $6.9 million in commercial and $4.6 million in real estate permanent
one-to-four- family that were TDR modifications and considered impaired. Included in this amount of $44.9 million, the Bank had TDRs that were performing in accordance with their modified terms of $44.8 million at September 30, 2012, and the
Bank had TDRs of $0.1 million that were not performing in accordance with their modified terms, but were still accruing interest, at September 30, 2012.
20
Information about past due loans and impaired loans as of September 30, 2012 and December 31,
2011, is as follows (dollars in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-Accrual and Past Due by Class
September 30, 2012
|
|
30-59
Days
Past
Due
|
|
|
60-89
Days
Past
Due
|
|
|
90+ Days
Past Due
|
|
|
Total
Past Due
|
|
|
Current
(1)
|
|
|
Total Loans
|
|
|
90+ Days
Past Due
and Still
Accruing
|
|
|
Non-
Accrual
Loans
|
|
Commercial
|
|
$
|
214
|
|
|
$
|
807
|
|
|
$
|
2,368
|
|
|
$
|
3,389
|
|
|
$
|
226,562
|
|
|
$
|
229,951
|
|
|
$
|
|
|
|
$
|
3,443
|
|
Real estate-one-to-four family residential:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Permanent first and second
|
|
|
1,908
|
|
|
|
87
|
|
|
|
3,117
|
|
|
|
5,112
|
|
|
|
275,038
|
|
|
|
280,150
|
|
|
|
|
|
|
|
5,689
|
|
Home equity loans and lines
|
|
|
633
|
|
|
|
|
|
|
|
1,577
|
|
|
|
2,210
|
|
|
|
116,436
|
|
|
|
118,646
|
|
|
|
|
|
|
|
2,576
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total real estate-one-to-four family residential
|
|
$
|
2,541
|
|
|
$
|
87
|
|
|
$
|
4,694
|
|
|
$
|
7,322
|
|
|
$
|
391,474
|
|
|
$
|
398,796
|
|
|
$
|
|
|
|
$
|
8,265
|
|
Real estate-multi-family residential
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
86,842
|
|
|
|
86,842
|
|
|
|
|
|
|
|
|
|
Real estate-non-farm, non-residential:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Owner-occupied
|
|
|
289
|
|
|
|
7,117
|
|
|
|
1,540
|
|
|
|
8,946
|
|
|
|
458,309
|
|
|
|
467,255
|
|
|
|
|
|
|
|
1,804
|
|
Non-owner-occupied
|
|
|
3,397
|
|
|
|
683
|
|
|
|
4,731
|
|
|
|
8,811
|
|
|
|
682,651
|
|
|
|
691,462
|
|
|
|
|
|
|
|
4,731
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total real estate-non-farm, non-residential
|
|
$
|
3,686
|
|
|
$
|
7,800
|
|
|
$
|
6,271
|
|
|
$
|
17,757
|
|
|
$
|
1,140960
|
|
|
$
|
1,158,717
|
|
|
$
|
|
|
|
$
|
6,535
|
|
Real estate-construction:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Residential
|
|
|
|
|
|
|
74
|
|
|
|
15,009
|
|
|
|
15,083
|
|
|
|
140,687
|
|
|
|
155,770
|
|
|
|
|
|
|
|
10,510
|
|
Commercial
|
|
|
930
|
|
|
|
|
|
|
|
5,360
|
|
|
|
6,290
|
|
|
|
98,847
|
|
|
|
105,137
|
|
|
|
|
|
|
|
16,679
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total real estate-construction
|
|
$
|
930
|
|
|
$
|
74
|
|
|
$
|
20,369
|
|
|
$
|
21,373
|
|
|
$
|
239,534
|
|
|
$
|
260,907
|
|
|
$
|
|
|
|
$
|
27,189
|
|
Consumer
|
|
|
13
|
|
|
|
|
|
|
|
|
|
|
|
13
|
|
|
|
7,128
|
|
|
|
7,141
|
|
|
|
|
|
|
|
18
|
|
Farmland
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
4,889
|
|
|
|
4,889
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Loans
|
|
$
|
7,384
|
|
|
$
|
8,768
|
|
|
$
|
33,702
|
|
|
$
|
49,854
|
|
|
$
|
2,097,389
|
|
|
$
|
2,147,243
|
|
|
$
|
|
|
|
$
|
45,450
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1)
|
For the purposes of this table, loans 1-29 days past due are included in the balance of Current loans.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non Accrual and Past Due by class
December 31, 2011
|
|
30-59
Days
Past
Due
|
|
|
60-89
Days
Past
Due
|
|
|
90+
Days
Past
Due
|
|
|
Total
Past Due
|
|
|
Current
(1)
|
|
|
Total
Loans
|
|
|
90+ Days
Past Due
and Still
Accruing
|
|
|
Non-
Accrual
Loans
|
|
Commercial
|
|
$
|
176
|
|
|
$
|
1,222
|
|
|
$
|
3,384
|
|
|
$
|
4,782
|
|
|
$
|
247,600
|
|
|
$
|
252,382
|
|
|
$
|
|
|
|
$
|
5,005
|
|
Real estate-one-to-four family residential:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Permanent first and second
|
|
|
582
|
|
|
|
2,966
|
|
|
|
3,306
|
|
|
|
6,854
|
|
|
|
239,566
|
|
|
|
246,420
|
|
|
|
71
|
|
|
|
3,912
|
|
Home equity loans and lines
|
|
|
335
|
|
|
|
240
|
|
|
|
2,605
|
|
|
|
3,180
|
|
|
|
123,350
|
|
|
|
126,530
|
|
|
|
250
|
|
|
|
3,142
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total real estate-one-to-four family residential
|
|
$
|
917
|
|
|
$
|
3,206
|
|
|
$
|
5,911
|
|
|
$
|
10,034
|
|
|
$
|
362,916
|
|
|
$
|
372,950
|
|
|
$
|
321
|
|
|
$
|
7,054
|
|
Real estate-multi-family residential
|
|
|
|
|
|
|
|
|
|
|
476
|
|
|
|
476
|
|
|
|
76,030
|
|
|
|
76,506
|
|
|
|
|
|
|
|
476
|
|
Real estate-non-farm, non-residential:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Owner-occupied
|
|
|
24
|
|
|
|
984
|
|
|
|
909
|
|
|
|
1,917
|
|
|
|
458,856
|
|
|
|
460,773
|
|
|
|
|
|
|
|
1,999
|
|
Non-owner-occupied
|
|
|
262
|
|
|
|
5,801
|
|
|
|
|
|
|
|
6,063
|
|
|
|
666,074
|
|
|
|
672,137
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total real estate-non-farm, non-residential
|
|
$
|
286
|
|
|
$
|
6,785
|
|
|
$
|
909
|
|
|
$
|
7,980
|
|
|
$
|
1,124,930
|
|
|
$
|
1,132,910
|
|
|
$
|
|
|
|
$
|
1,999
|
|
Real estate-construction:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Residential
|
|
|
600
|
|
|
|
161
|
|
|
|
10,384
|
|
|
|
11,145
|
|
|
|
139,972
|
|
|
|
151,117
|
|
|
|
|
|
|
|
18,479
|
|
Commercial
|
|
|
|
|
|
|
|
|
|
|
5,505
|
|
|
|
5,505
|
|
|
|
169,795
|
|
|
|
175,300
|
|
|
|
|
|
|
|
5,505
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total real estate-construction
|
|
$
|
600
|
|
|
$
|
161
|
|
|
$
|
15,889
|
|
|
$
|
16,650
|
|
|
$
|
309,767
|
|
|
$
|
326,417
|
|
|
$
|
|
|
|
$
|
23,984
|
|
Consumer
|
|
|
105
|
|
|
|
|
|
|
|
11
|
|
|
|
116
|
|
|
|
8,476
|
|
|
|
8,592
|
|
|
|
11
|
|
|
|
18
|
|
Farmland
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2,573
|
|
|
|
2,573
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Loans
|
|
$
|
2,084
|
|
|
$
|
11,374
|
|
|
$
|
26,580
|
|
|
$
|
40,038
|
|
|
$
|
2,132,292
|
|
|
$
|
2,172,330
|
|
|
$
|
332
|
|
|
$
|
38,536
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1)
|
For the purposes of this table, loans 1-29 days past due are included in the balance of Current loans.
|
21
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Impaired Loans as of September 30, 2012
|
|
Recorded
Investment
(Bank
Balance)
|
|
|
Unpaid
Principal
Balance
(Customer
Balance)
|
|
|
Related
Allowance
|
|
|
Quarterly
Average
Recorded
Investment
|
|
|
Interest
Income
Recognized
|
|
With no related allowance:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commercial
|
|
$
|
20,882
|
|
|
$
|
20,918
|
|
|
$
|
|
|
|
$
|
19,346
|
|
|
$
|
628
|
|
Real estate-one-to-four family residential:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Permanent first and second
|
|
|
7,642
|
|
|
|
7,940
|
|
|
|
|
|
|
|
6,828
|
|
|
|
222
|
|
Home equity loans and lines
|
|
|
1,978
|
|
|
|
1,978
|
|
|
|
|
|
|
|
1,085
|
|
|
|
35
|
|
Real estate-multi-family residential
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Real estate-non-farm/non-residential:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Owner-occupied
|
|
|
12,472
|
|
|
|
12,573
|
|
|
|
|
|
|
|
12,329
|
|
|
|
400
|
|
Non-owner-occupied
|
|
|
27,489
|
|
|
|
27,517
|
|
|
|
|
|
|
|
18,257
|
|
|
|
593
|
|
Real estate construction:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Residential
|
|
|
20,910
|
|
|
|
20,976
|
|
|
|
|
|
|
|
18,506
|
|
|
|
601
|
|
Commercial
|
|
|
15,320
|
|
|
|
15,399
|
|
|
|
|
|
|
|
19,273
|
|
|
|
626
|
|
Consumer
|
|
|
19
|
|
|
|
19
|
|
|
|
|
|
|
|
10
|
|
|
|
|
|
|
|
|
|
|
|
With an allowance recorded:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commercial
|
|
$
|
2,558
|
|
|
$
|
2,558
|
|
|
$
|
558
|
|
|
$
|
5,561
|
|
|
$
|
181
|
|
Real estate-one-to-four family residential:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Permanent first and second
|
|
|
17,671
|
|
|
|
17,675
|
|
|
|
3,531
|
|
|
|
19,233
|
|
|
|
624
|
|
Home equity loans and lines
|
|
|
3,619
|
|
|
|
3,701
|
|
|
|
1,725
|
|
|
|
5,824
|
|
|
|
189
|
|
Real estate-multi-family residential
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Real estate-non-farm/non-residential:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Owner-occupied
|
|
|
9,757
|
|
|
|
9,757
|
|
|
|
1,487
|
|
|
|
7,352
|
|
|
|
239
|
|
Non-owner-occupied
|
|
|
29,836
|
|
|
|
29,836
|
|
|
|
2,328
|
|
|
|
35,951
|
|
|
|
1,167
|
|
Real estate construction:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Residential
|
|
|
16,848
|
|
|
|
16,855
|
|
|
|
3,666
|
|
|
|
14,961
|
|
|
|
486
|
|
Commercial
|
|
|
12,615
|
|
|
|
12,642
|
|
|
|
368
|
|
|
|
14,147
|
|
|
|
459
|
|
Consumer
|
|
|
85
|
|
|
|
89
|
|
|
|
53
|
|
|
|
79
|
|
|
|
3
|
|
|
|
|
|
|
|
Total :
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commercial
|
|
$
|
23,440
|
|
|
$
|
23,476
|
|
|
$
|
558
|
|
|
$
|
24,907
|
|
|
$
|
809
|
|
Real estate-one-to-four family residential
|
|
|
30,910
|
|
|
|
31,294
|
|
|
|
5,256
|
|
|
|
32,969
|
|
|
|
1,070
|
|
Real estate multi-family residential
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Real estate non-farm/non-residential
|
|
|
79,554
|
|
|
|
79,683
|
|
|
|
3,815
|
|
|
|
73,889
|
|
|
|
2,399
|
|
Real estate-construction
|
|
|
65,693
|
|
|
|
65,872
|
|
|
|
4,034
|
|
|
|
66,886
|
|
|
|
2,171
|
|
Consumer
|
|
|
104
|
|
|
|
108
|
|
|
|
53
|
|
|
|
89
|
|
|
|
3
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Impaired Loans
|
|
$
|
199,701
|
|
|
$
|
200,433
|
|
|
$
|
13,716
|
|
|
$
|
198,738
|
|
|
$
|
6,452
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
22
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Impaired Loans as of December 31, 2011
|
|
Recorded
Investment
(Bank
Balance)
|
|
|
Unpaid
Principal
Balance
(Customer
Balance)
|
|
|
Related
Allowance
|
|
|
Average
Recorded
Investment
|
|
|
Interest
Income
Recognized
|
|
With no related allowance:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commercial
|
|
$
|
11,020
|
|
|
$
|
11,039
|
|
|
|
|
|
|
$
|
17,536
|
|
|
$
|
789
|
|
Real estate-one-to-four family residential:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Permanent first and second
|
|
|
4,802
|
|
|
|
4,944
|
|
|
|
|
|
|
|
11,273
|
|
|
|
507
|
|
Home equity loans and lines
|
|
|
325
|
|
|
|
330
|
|
|
|
|
|
|
|
4,503
|
|
|
|
202
|
|
Real estate-multi-family residential
|
|
|
476
|
|
|
|
485
|
|
|
|
|
|
|
|
238
|
|
|
|
11
|
|
Real estate-non-farm/non-residential:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Owner-occupied
|
|
|
15,853
|
|
|
|
15,949
|
|
|
|
|
|
|
|
25,992
|
|
|
|
1,169
|
|
Non-owner-occupied
|
|
|
25,232
|
|
|
|
25,232
|
|
|
|
|
|
|
|
29,601
|
|
|
|
1,331
|
|
Real estate construction:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Residential
|
|
|
16,494
|
|
|
|
16,496
|
|
|
|
|
|
|
|
15,268
|
|
|
|
687
|
|
Commercial
|
|
|
22,140
|
|
|
|
22,140
|
|
|
|
|
|
|
|
21,580
|
|
|
|
970
|
|
Consumer
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
11
|
|
|
|
|
|
|
|
|
|
|
|
With an allowance recorded:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commercial
|
|
$
|
15,464
|
|
|
$
|
15,478
|
|
|
$
|
5,351
|
|
|
$
|
12,533
|
|
|
$
|
564
|
|
Real estate-one-to-four family residential:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Permanent first and second
|
|
|
22,696
|
|
|
|
22,701
|
|
|
|
3,421
|
|
|
|
16,602
|
|
|
|
747
|
|
Home equity loans and lines
|
|
|
7,836
|
|
|
|
7,881
|
|
|
|
2,087
|
|
|
|
6,667
|
|
|
|
300
|
|
Real estate-multi-family residential
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Real estate-non-farm/non-residential:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Owner-occupied
|
|
|
3,543
|
|
|
|
3,543
|
|
|
|
582
|
|
|
|
5,444
|
|
|
|
245
|
|
Non-owner-occupied
|
|
|
25,836
|
|
|
|
25,835
|
|
|
|
2,409
|
|
|
|
29,147
|
|
|
|
1,311
|
|
Real estate construction:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Residential
|
|
|
20,770
|
|
|
|
20,795
|
|
|
|
6,035
|
|
|
|
30,297
|
|
|
|
1,362
|
|
Commercial
|
|
|
7,679
|
|
|
|
7,694
|
|
|
|
751
|
|
|
|
18,850
|
|
|
|
848
|
|
Consumer
|
|
|
71
|
|
|
|
74
|
|
|
|
52
|
|
|
|
110
|
|
|
|
5
|
|
|
|
|
|
|
|
Total :
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commercial
|
|
$
|
26,484
|
|
|
$
|
26,517
|
|
|
$
|
5,351
|
|
|
$
|
30,069
|
|
|
$
|
1,352
|
|
Real estate-one-to-four family residential
|
|
|
35,659
|
|
|
|
35,856
|
|
|
|
5,508
|
|
|
|
39,045
|
|
|
|
1,756
|
|
Real estate multi-family residential
|
|
|
476
|
|
|
|
485
|
|
|
|
|
|
|
|
238
|
|
|
|
11
|
|
Real estate non-farm, non-residential
|
|
|
70,464
|
|
|
|
70,559
|
|
|
|
2,991
|
|
|
|
90,184
|
|
|
|
4,055
|
|
Real estate-construction
|
|
|
67,083
|
|
|
|
67,125
|
|
|
|
6,786
|
|
|
|
85,995
|
|
|
|
3,867
|
|
Consumer
|
|
|
71
|
|
|
|
74
|
|
|
|
52
|
|
|
|
121
|
|
|
|
5
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Impaired Loans
|
|
$
|
200,237
|
|
|
$
|
200,616
|
|
|
$
|
20,688
|
|
|
$
|
245,650
|
|
|
$
|
11,046
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
In performing a specific reserve analysis on all impaired loans as of September 30, 2012, current third party appraisals,
evaluations or tax assessed values were used with respect to approximately 75% of impaired loans to assist with the evaluation of collateral values for the purpose of establishing specific reserves. Other loans predominately representing smaller
individual balances were evaluated based upon current tax assessed values or estimated liquidation value of business assets. When a loan is identified as impaired and collateral dependent, a current evaluation of collateral value via third party
appraisal or other valuation methodology is conducted within the calendar quarter of identification when possible, but within 90 days after identification. Charge-offs and specific reserves are established upon determination of collateral value.
During the interim between identification of an impaired loan and receipt of a current appraisal of the related collateral, specific reserves are established based upon interim methodologies including discounted cash flow analysis, tax assessment
values and review of market comparables. In general, variances between charge-offs and fair value of collateral is limited to estimates of projected costs of sale. Costs of sale are estimated at 10% of value. Partially charged-off loans remain
non-performing until such time as a viable restructuring plan is developed. Upon execution of a forbearance agreement including modified terms, an impaired loan will be re-classified from non-performing to a troubled debt restructuring, but will
continue to be identified as a TDR until the loan performs under the modified terms for the remainder of the calendar year in which it was restructured, but not less than six months for minimum measurement period. The loan will remain impaired for
purposes of specific reserve analysis until fully repaid.
23
Information about new troubled debt restructurings during the three and nine months ended September 30,
2012, is as follows (dollars in thousands):
Troubled Debt Restructurings (TDRs)
New TDRs by Loan Type
As of
September 30, 2012
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
7/1/2012 to 9/30/2012
|
|
|
1/1/2012 to 9/30/2012
|
|
Loan Type:
|
|
# of
Loans
|
|
|
Balance at
Restructure
|
|
|
Balance at
9/30/2012
|
|
|
# of
Loans
|
|
|
Balance at
Restructure
|
|
|
Balance at
9/30/2012
|
|
Commercial
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1
|
|
|
$
|
|
|
|
$
|
|
|
Real estate-one-to-four family residential:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Permanent first and seconds
|
|
|
2
|
|
|
|
804
|
|
|
|
804
|
|
|
|
6
|
|
|
|
2,690
|
|
|
|
2,688
|
|
Home equity loans and lines
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total real estate-one-to-four family residential:
|
|
|
2
|
|
|
$
|
804
|
|
|
$
|
804
|
|
|
|
6
|
|
|
$
|
2,690
|
|
|
$
|
2,688
|
|
Real estate-multi-family residential
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Real estate-non-farm, non-residential:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Owner-occupied
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-owner-occupied
|
|
|
1
|
|
|
|
8,000
|
|
|
|
8,000
|
|
|
|
1
|
|
|
|
8,000
|
|
|
|
8,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total real estate-non-farm, non-residential:
|
|
|
1
|
|
|
$
|
8,000
|
|
|
$
|
8,000
|
|
|
|
1
|
|
|
$
|
8,000
|
|
|
$
|
8,000
|
|
Real estate-construction:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Residential
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commercial
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total real estate-construction:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Consumer
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Farmland
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Loans
|
|
|
3
|
|
|
$
|
8,804
|
|
|
$
|
8,804
|
|
|
|
8
|
|
|
$
|
10,690
|
|
|
$
|
10,688
|
|
Troubled Debt Restructurings (TDRs)
New TDRs by Type of Restructure
As of September 30, 2012
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
7/1/2012 to 9/30/2012
|
|
|
1/1/2012 to 9/30/2012
|
|
Type of Restructure:
|
|
# of
Loans
|
|
|
Balance at
Restructure
|
|
|
Balance at
9/30/2012
|
|
|
# of
Loans
|
|
|
Balance at
Restructure
|
|
|
Balance at
9/30/2012
|
|
Interest-only conversion
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1
|
|
|
|
70
|
|
|
|
70
|
|
Rate reduction
|
|
|
3
|
|
|
|
8,804
|
|
|
|
8,804
|
|
|
|
5
|
|
|
|
9,275
|
|
|
|
9,275
|
|
Extended amortization
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Deferment of principal or interest payable
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Combination *
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2
|
|
|
|
1,345
|
|
|
|
1,343
|
|
Other
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Loans
|
|
|
3
|
|
|
$
|
8,804
|
|
|
$
|
8,804
|
|
|
|
8
|
|
|
$
|
10,690
|
|
|
$
|
10,688
|
|
*
|
Represents a combination of any of the above restructure types.
|
24
Information about troubled debt restructurings within the prior twelve months that defaulted during the
three and nine months ended September 30, 2012, is as follows (dollars in thousands):
Troubled Debt Restructurings (TDRs)
TDRs Restructured Within Prior 12 Months that Defaulted in Selected Periods
As of September 30, 2012
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Defaults occurring in 3rd Quarter 2012
(7/1/2012 9/30/2012)
|
|
|
Defaults occurring Year-to-date
(1/1/2012
9/30/2012)
|
|
Loan Type:
|
|
# of
Loans
|
|
|
Balance at
Restructure
|
|
|
Balance at
9/30/2012
|
|
|
# of
Loans
|
|
|
Balance at
Restructure
|
|
|
Balance at
9/30/2012
|
|
Commercial
|
|
|
3
|
|
|
$
|
753
|
|
|
$
|
380
|
|
|
|
3
|
|
|
|
753
|
|
|
$
|
380
|
|
Real estate-one-to-four family residential:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Permanent first and seconds
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Home equity loans and lines
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total real estate-one-to-four family residential:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Real estate-multi-family residential
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Real estate-non-farm, non-residential:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Owner-occupied
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-owner-occupied
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total real estate-non-farm, non-residential:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Real estate-construction:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Residential-owner-occupied
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Residential-builder
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commercial
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total real estate-construction:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Farmland
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Consumer
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Loans
|
|
|
3
|
|
|
$
|
753
|
|
|
$
|
380
|
|
|
|
3
|
|
|
$
|
753
|
|
|
$
|
380
|
|
5.
|
Earnings Per Common Share
|
The following shows the weighted average number of shares used in computing earnings per common share and the effect on the weighted
average number of shares of dilutive potential common stock. As of September 30, 2012, and 2011, there were 974,122 and 3,556,728 anti-dilutive stock options outstanding, respectively.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
|
|
|
Nine Months Ended
|
|
|
|
September 30, 2012
|
|
|
September 30, 2011
|
|
|
September 30, 2012
|
|
|
September 30, 2011
|
|
|
|
|
|
|
Per
|
|
|
|
|
|
Per
|
|
|
|
|
|
Per
|
|
|
|
|
|
Per
|
|
|
|
|
|
|
Share
|
|
|
|
|
|
Share
|
|
|
|
|
|
Share
|
|
|
|
|
|
Share
|
|
|
|
Shares
|
|
|
Amount
|
|
|
Shares
|
|
|
Amount
|
|
|
Shares
|
|
|
Amount
|
|
|
Shares
|
|
|
Amount
|
|
Basic earnings per share
|
|
|
31,824,656
|
|
|
$
|
0.22
|
|
|
|
29,746,581
|
|
|
$
|
0.18
|
|
|
|
31,713,132
|
|
|
$
|
0.58
|
|
|
|
29,557,306
|
|
|
$
|
0.55
|
|
Effect of dilutive securities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stock options
|
|
|
1,926,033
|
|
|
|
|
|
|
|
1,120,281
|
|
|
|
|
|
|
|
1,932,276
|
|
|
|
|
|
|
|
1,099,183
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted earnings per share
|
|
|
33,750,689
|
|
|
$
|
0.21
|
|
|
|
30,866,862
|
|
|
$
|
0.17
|
|
|
|
33,645,408
|
|
|
$
|
0.54
|
|
|
|
30,656,489
|
|
|
$
|
0.53
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
6.
|
Stock Compensation Plan
|
At September 30, 2012, the Company had two stock-based compensation plans, the 1998 Stock Option Plan and the Companys 2010
Equity Plan (the 2010 Plan). The 2010 Plan replaced the 1998 Stock Option Plan and as such no further options may be granted under the 1998 Stock Option Plan. Included in salaries and employee benefits expense for the nine months ended
September 30, 2012 and 2011 is $416 thousand and $436 thousand, respectively, of stock-based compensation expense which is based on the estimated fair value of 920,376 options granted between January 2007 and September 2012, as adjusted for
stock dividends, and 121,421 restricted stock grants, amortized on a straight-line basis over a five year requisite service period. As of September 30, 2012, there was $1.5 million of total unrecognized compensation expense related to
restricted stock grants and stock option awards which will be recognized over the remaining requisite service periods.
25
The fair value of each grant is estimated at the grant date using the Black-Scholes option-pricing model
with the following weighted average assumptions for grants in 2012 and 2011:
|
|
|
|
|
|
|
2012
|
|
2011
|
Expected volatility
|
|
33.68%
|
|
32.21%
|
Expected dividends
|
|
0.00%
|
|
0.00%
|
Expected term (in years)
|
|
7.2
|
|
7.2
|
Risk-free rate
|
|
1.10% to 1.44%
|
|
2.33% to 2.81%
|
Stock option plan activity for the nine months ended September 30, 2012, is summarized below:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Number of
Shares
|
|
|
Weighted
Average
Exercise
Price
|
|
|
Weighted
Average
Remaining
Contractual
Term
|
|
|
Aggregate
Intrinsic
Value
($000)
|
|
Outstanding at January 1, 2012
|
|
|
1,696,117
|
|
|
$
|
8.95
|
|
|
|
|
|
|
|
|
|
Granted
|
|
|
84,750
|
|
|
|
8.59
|
|
|
|
|
|
|
|
|
|
Exercised
|
|
|
206,266
|
|
|
|
3.13
|
|
|
|
|
|
|
|
|
|
Forfeited
|
|
|
29,763
|
|
|
|
8.64
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Outstanding at September 30, 2012
|
|
|
1,544,838
|
|
|
$
|
9.71
|
|
|
|
4.20 years
|
|
|
$
|
2,161
|
|
Exercisable at September 30, 2012
|
|
|
1,204,644
|
|
|
$
|
10.52
|
|
|
|
3.16 years
|
|
|
$
|
1,443
|
|
The total value of in-the-money options exercised during the nine months ended September 30, 2012 was $944 thousand.
Restricted stock awards generally vest in equal installments over five years. The compensation expense associated with these awards is based on the grant
date fair value of the award. The value of the portion of the award that is ultimately expected to vest is recognized as expense ratably over the requisite service period.
A summary of the non-vested restricted stock activity under the 2010 Plan for the nine months ended September 30, 2012 is summarized below:
|
|
|
|
|
|
|
|
|
|
|
Number of
Shares
|
|
|
Weighted-
Average
Grant Date
Fair Value
|
|
Non-vested at the beginning of year
|
|
|
49,998
|
|
|
$
|
5.93
|
|
Granted
|
|
|
71,423
|
|
|
|
8.89
|
|
Vested
|
|
|
11,206
|
|
|
|
5.92
|
|
Forfeited
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-vested at end of the period
|
|
|
110,215
|
|
|
$
|
7.67
|
|
|
|
|
|
|
|
|
|
|
We recognized share-based compensation expense associated with shares of restricted stock of $119 thousand for the nine months ended
September 30, 2012.
26
A comparison of the September 30, 2012 capital ratios of the Company and its wholly-owned subsidiary, Virginia
Commerce Bank (the Bank), with the minimum regulatory guidelines is as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Actual Capital
|
|
|
Minimum
Capital
Requirements
|
|
|
Minimum to
be
Well-Capitalized
Under Prompt
Corrective Action
Provisions
|
|
Total Risk-Based Capital:
|
|
|
|
|
|
|
|
|
|
|
|
|
Company
|
|
|
17.55
|
%
|
|
|
8.00
|
%
|
|
|
|
|
Bank
|
|
|
17.06
|
%
|
|
|
8.00
|
%
|
|
|
10.00
|
%
|
|
|
|
|
Tier 1 Risk-Based Capital:
|
|
|
|
|
|
|
|
|
|
|
|
|
Company
|
|
|
16.29
|
%
|
|
|
4.00
|
%
|
|
|
|
|
Bank
|
|
|
15.81
|
%
|
|
|
4.00
|
%
|
|
|
6.00
|
%
|
|
|
|
|
Leverage Ratio:
|
|
|
|
|
|
|
|
|
|
|
|
|
Company
|
|
|
12.27
|
%
|
|
|
4.00
|
%
|
|
|
|
|
Bank
|
|
|
12.00
|
%
|
|
|
4.00
|
%
|
|
|
5.00
|
%
|
8.
|
Other Borrowed Funds and Lines of Credit
|
The Bank maintains a $452.3 million line of credit with the FHLB of Atlanta. The interest rate and term of each advance from the line
is dependent upon the advance and commitment type. Advances on the line are secured by all of the Banks qualifying first liens and home equity lines-of-credit on one-to-four unit single-family dwellings. As of September 30, 2012, the
carrying value of these qualifying loans totaled approximately $250.1 million and the amount of available credit using this collateral was $159.4 million. Advances on credit facility in excess $143.6 million, but limited to $308.7 million, require
pledging of additional assets, including other types of loans and investment securities. The Bank had $25.0 million in advances outstanding as of December 31, 2011. On September 21, 2012, the $25.0 million advance matured. The Bank has
additional short-term lines of credit totaling $47.0 million with nonaffiliated banks at September 30, 2012, on which there were no amounts outstanding.
9.
|
Trust Preferred Capital Notes
|
On December 19, 2002, the Company completed a private placement issuance of $15.0 million of trust preferred securities through a
newly formed, wholly-owned, subsidiary trust (VCBI Capital Trust II) which issued $470 thousand in common equity to the Company. These securities bear a floating rate of interest, adjusted semi-annually, of 330 basis points over six month LIBOR,
which as of November 2, 2012, was 4.03%. These securities have been callable at par since December 30, 2007, on any semi-annual interest payment date, but have not been redeemed to date. On December 20, 2005, the Company completed a
private placement of $25.0 million of trust preferred securities through a newly formed, wholly-owned, subsidiary trust (VCBI Capital Trust III) which issued $774 thousand in common equity to the Company. These securities had a fixed rate of
interest of 6.19% until February 23, 2011, at which time they converted to a floating rate, adjusted quarterly, of 142 basis points over three month LIBOR, which as of November 2, 2012, was 1.85%. These securities became callable at par
beginning February 23, 2011.
On September 24, 2008, the Company completed a private placement, to its directors and certain
executive officers, of $25.0 million of trust preferred securities through a newly formed, wholly-owned, subsidiary trust (VCBI Capital Trust IV) which issued $775 thousand in common equity to the Company. These securities bear a fixed rate of
interest of 10.20% and are callable at par beginning September 24, 2013. In connection with the issuance of the trust preferred securities, the Company also issued warrants to purchase an aggregate of 1.5 million shares of common stock to
the purchasers. The warrants have a five year term and an exercise price of $6.83 per share.
The principal asset of each trust is a similar
amount of the Companys junior subordinated debt securities with an approximately 30 year term from issuance and like interest rates to the trust preferred securities. The obligations of the Company with respect to the trust preferred
securities constitute a full and unconditional guarantee by the Company of each trusts obligations with respect to the trust preferred securities to the extent set forth in the related guarantees. Subject to certain exceptions and limitations,
the Company may elect from time to time to defer interest payments on the junior subordinated debt securities, resulting in a deferral of distribution payments on the related trust preferred securities. If the Company defers interest payments on the
junior subordinated debt securities, or otherwise is in default of the obligations in respect to the trust preferred securities, the Company would be prohibited from making dividend payments to its stockholders, and from most purchases, redemptions
or acquisitions of the Companys common stock.
27
Under currently applicable capital standards, the trust preferred securities may be
included in Tier 1 capital for regulatory capital adequacy purposes up to 25.0% of Tier 1 capital after its inclusion. The portion of the trust preferred securities not qualifying as Tier 1 capital may be included as part of total
qualifying capital in Tier 2 capital, subject to limitation. For additional information see Managements Discussion and Analysis Capital in Item 2 of this quarterly report on Form 10-Q.
10.
|
Preferred Stock and Warrant
|
On December 12, 2008, the Company entered into a Letter Agreement (Agreement) with the United States Department of the
Treasury (Treasury) under the Troubled Asset Relief Program (TARP) Capital Purchase Program, whereby the Company issued and sold to the Treasury 71,000 shares of fixed rate cumulative perpetual preferred stock with a par
value of $1.00 and a liquidation amount of $1,000 per share, for a total price of $71.0 million. In addition, the Treasury received a warrant to purchase 2,696,203 shares of the Companys common stock at an exercise price of $3.95 per share.
Subject to certain restrictions, the preferred stock and the warrant are transferable by the Treasury. The allocated carrying values at September 30, 2012, of the preferred stock and the warrant, based on their relative fair values, were $62.5
million and $8.5 million, respectively.
The preferred stock pays dividends quarterly, beginning February 2009, at a rate of 5% per year
for the first five years, then increases to 9% thereafter. The Company may redeem the preferred stock at any time, subject to approval by the Treasury after consultation with the Board of Governors of the Federal Reserve System (the Federal
Reserve), at the liquidation amount of $1,000 per share plus any accrued and unpaid dividends.
The warrant has a ten year term and is
immediately exercisable. Pursuant to the terms of the Agreement, the Treasury will not exercise voting rights with respect to any shares of common stock it acquires upon exercise of the warrant; voting rights may be exercised by any other holder.
28
ITEM 2.
MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
Unless the context otherwise requires, the terms we, us and our
refer to Virginia Commerce Bancorp, Inc. and its subsidiaries on a consolidated basis. The following discussion and analysis, the purpose of which is to provide investors and others with information that we believe to be necessary for an
understanding of our current financial condition, changes in financial condition and results of operations, should be read in conjunction with the consolidated financial statements, notes and other information contained in this report.
Cautionary Note Regarding Forward-Looking Statements
This managements discussion and analysis and other portions of this report, contain forward-looking statements within the meaning of the Securities and Exchange Act of 1934, as amended (the
Exchange Act), including statements of goals, intentions, and expectations as to future trends, plans, events or results of Company operations and policies, including but not limited to our outlook on earnings, and statements regarding
asset quality, concentrations of credit risk, the adequacy of the allowance for loan losses, projected asset growth, the deposit portfolio and expected future changes in the deposit portfolio, the net interest margin, liquidity, our investment
securities portfolio, capital position, our plans regarding and expected future levels of our non-performing assets, business opportunities in our markets, strategic initiatives to capitalize on those opportunities and general economic conditions.
When we use words such as may, will, anticipates, believes, expects, plans, estimates, potential, continue, should, and similar
words or phrases, you should consider them as identifying forward-looking statements. These forward-looking statements are not guarantees of future performance. These statements are based upon current and anticipated economic conditions, nationally
and in the Companys market, interest rates and interest rate policy, competitive factors, and other conditions which by their nature, are not susceptible to accurate forecast, and are subject to significant uncertainty. Because of these
uncertainties and the assumptions on which this discussion and the forward-looking statements are based, actual future operations and results may differ materially from those indicated herein.
Our forward-looking statements are subject, to the following principal risks and uncertainties, among others:
|
|
|
adverse governmental or regulatory policies may be enacted;
|
|
|
|
the Dodd-Frank Wall Street Reform and Consumer Protection Act (the Dodd-Frank Act) could increase our regulatory compliance burden and
associated costs, place restrictions on certain products and services, and limit our future capital raising strategies;
|
|
|
|
the interest rate environment may compress margins and adversely affect net interest income;
|
|
|
|
adverse effects may be caused by changes to credit quality;
|
|
|
|
changes in rates of deposit and loan growth;
|
|
|
|
balances of risk-sensitive assets to risk-sensitive liabilities;
|
|
|
|
competition from other financial services companies in our markets could adversely affect operations;
|
|
|
|
our concentrations of commercial, commercial real estate and construction loans, may adversely affect our earnings and results of operations;
|
|
|
|
an economic slowdown could adversely affect credit quality, loan originations and the value of collateral securing the Companys loans; and
|
|
|
|
social and political conditions such as war, political unrest and terrorism or natural disasters could have unpredictable negative effects on our
businesses and the economy.
|
Other factors, risks and uncertainties that could cause our actual results to differ materially
from estimates and projections contained in these forward-looking statements are discussed under Risk Factors in the Companys annual report on Form 10-K for the year ended December 31, 2011.
29
Readers are cautioned against placing undue reliance on any such forward-looking statements. The Company
disclaims any obligation to update or revise publicly or otherwise any forward-looking statements to reflect subsequent events, new information or future circumstances.
Non-GAAP Presentations
The Company prepares its financial statements under accounting
principles generally accepted in the United States, or GAAP. However, this quarterly report on Form 10Q also refers to certain non-GAAP financial measures that we believe, when considered together with GAAP financial measures, provide
investors with important information regarding our operational performance. An analysis of any non-GAAP financial measures should be used in conjunction with results presented in accordance with GAAP.
Adjusted operating earnings is a non-GAAP financial measure that reflects net income available to common stockholders excluding impairment loss on
securities, realized gains and losses on sale of securities, and death benefits received from bank-owned life insurance. These excluded items are difficult to predict and we believe that adjusted operating earnings provides the Company and investors
with a valuable measure of the Companys operational performance and a valuable tool to evaluate the Companys financial results. Calculation of adjusted operating earnings for the three months ended September 30,
2012, September 30, 2011, and June 30, 2012 is as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months
Ended
September 30,
|
|
|
Three Months
Ended
June 30,
|
|
(Dollars in thousands, except per share data)
|
|
2012
|
|
|
2011
|
|
|
2012
|
|
Net Income Available to Common Stockholders
|
|
$
|
7,122
|
|
|
$
|
5,217
|
|
|
$
|
6,357
|
|
Adjustments to net income:
|
|
|
|
|
|
|
|
|
|
|
|
|
Realized gain on sale of securities
|
|
|
(2,056
|
)
|
|
|
|
|
|
|
(1,328
|
)
|
Death benefits received from bank-owned life insurance
|
|
|
|
|
|
|
|
|
|
|
|
|
Net tax effect adjustment
|
|
|
720
|
|
|
|
|
|
|
|
465
|
|
|
|
|
|
Adjusted Operating Earnings
|
|
$
|
5,786
|
|
|
$
|
5,217
|
|
|
$
|
5,494
|
|
|
|
|
|
Earnings per common share-diluted
|
|
$
|
0.21
|
|
|
$
|
0.17
|
|
|
$
|
0.19
|
|
Adjustments to earnings per common share-diluted
|
|
|
|
|
|
|
|
|
|
|
|
|
Realized gain on sale of securities, net tax affect
|
|
$
|
0.04
|
|
|
|
|
|
|
$
|
0.03
|
|
|
|
|
|
Adjusted operating earnings per common share-diluted
|
|
$
|
0.17
|
|
|
$
|
0.17
|
|
|
$
|
0.16
|
|
The adjusted efficiency ratio is a non-GAAP financial measure that is computed by dividing non-interest expense by the
sum of net interest income on a tax equivalent basis, and non-interest income excluding impairment loss on securities, realized gains and losses on sale of securities, and death benefits received from bank-owned life insurance. We believe that this
measure provides investors with important information about our operating efficiency. Comparison of our adjusted efficiency ratio with those of other companies may not be possible because other companies may calculate the adjusted efficiency ratio
differently. Calculation of the adjusted efficiency ratio for the three months and nine months ended September 30, 2012, and September 30, 2011, is as follows:
30
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
September 30,
|
|
|
Nine Months Ended
September 30,
|
|
(Dollars in thousands)
|
|
2012
|
|
|
2011
|
|
|
2012
|
|
|
2011
|
|
Summary Operating Results:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-interest expense
|
|
$
|
15,212
|
|
|
$
|
14,893
|
|
|
$
|
47,396
|
|
|
$
|
43,863
|
|
|
|
|
|
|
Net interest income
|
|
|
26,368
|
|
|
|
26,729
|
|
|
|
80,064
|
|
|
|
79,700
|
|
|
|
|
|
|
Non-interest income
|
|
|
4,725
|
|
|
|
1,940
|
|
|
|
13,095
|
|
|
|
5,672
|
|
Impairment loss on securities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
732
|
|
Gain on sale of securities
|
|
|
(2,056
|
)
|
|
|
|
|
|
|
(5,976
|
)
|
|
|
(503
|
)
|
Death benefits received from bank owned life insurance
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(361
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Adjusted non-interest income
|
|
$
|
2,669
|
|
|
$
|
1,940
|
|
|
$
|
7,119
|
|
|
$
|
5,540
|
|
|
|
|
|
|
Total net interest income and non-interest income, adjusted (1)
|
|
$
|
29,037
|
|
|
$
|
28,669
|
|
|
$
|
87,183
|
|
|
$
|
85,240
|
|
Efficiency Ratio, adjusted
|
|
|
51.8
|
%
|
|
|
51.3
|
%
|
|
|
53.7
|
%
|
|
|
50.8
|
%
|
(1)
|
Tax Equivalent Income of $29,397 for the three months ended September 30, 2012 and $88,274 for the nine months ended September 30, 2012. Tax Equivalent Income
of $29,048 for the three months ended September 30, 2011 and $86,394 for the nine months ended September 30, 2011.
|
The tangible common equity ratio is a non-GAAP financial measure representing the ratio of tangible common equity to tangible assets. Tangible common
equity and tangible assets are non-GAAP financial measures derived from GAAP-based amounts. We calculate tangible common equity for the Company by excluding the balance of intangible assets and $68.6 million outstanding preferred stock, net of
unamortized discount, issued to the U.S. Treasury from total stockholders equity as of September 30, 2012. We calculate tangible assets by excluding the balance of intangible assets from total assets. We had no intangible assets for the
periods presented. We believe that this is consistent with the treatment by regulatory agencies, which exclude intangible assets from the calculation of regulatory capital ratios. Accordingly, we believe that these non-GAAP financial measures
provide information that is important to investors and that is useful in understanding our capital position and ratios. However, these non-GAAP financial measures are supplemental and are not substitutes for an analysis based on a GAAP measure. As
other companies may use different calculations for non-GAAP measures, our presentation may not be comparable to other similarly titled measures reported by other companies. Calculation of the Companys tangible common equity ratio as of
September 30, 2012, and December 31, 2011, is as follows:
|
|
|
|
|
|
|
|
|
|
|
As of
September 30,
|
|
|
December 31,
|
|
(Dollars in thousands)
|
|
2012
|
|
|
2011
|
|
Tangible common equity:
|
|
|
|
|
|
|
|
|
Total stockholders equity
|
|
$
|
311,528
|
|
|
$
|
283,771
|
|
|
|
|
Less:
|
|
|
|
|
|
|
|
|
Outstanding TARP senior preferred stock
|
|
|
68,621
|
|
|
|
67,195
|
|
Intangible assets
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Tangible common equity
|
|
$
|
242,907
|
|
|
$
|
216,576
|
|
|
|
|
Total tangible assets
|
|
$
|
3,004,742
|
|
|
$
|
2,938,518
|
|
|
|
|
Tangible common equity ratio
|
|
|
8.08
|
%
|
|
|
7.37
|
%
|
Additional Information
Our common stock is listed for quotation on the Global Select Market of The NASDAQ Stock Market under the symbol VCBI. Additional information can be found through our website at
www.vcbonline.com by selecting About VCB/Investor Relations/SEC Filings. Electronic copies of our 2011 Annual Report on Form 10-K are available free of charge by visiting the SEC Filings section of our website. Electronic
copies of quarterly reports on Form 10-Q and current reports on Form 8-K are also available. These reports are posted as soon as reasonably practicable after they are electronically filed with the SEC.
31
Where we have included website addresses in this report, such as our website address, we have included those
addresses as inactive textual references only. Except if specifically incorporated by reference into this report, information on those websites is not part hereof.
General
The following presents managements discussion and analysis of the
consolidated financial condition and results of operations of Virginia Commerce Bancorp, Inc. and subsidiaries (the Company) as of the dates and for the periods indicated. This discussion should be read in conjunction with the
Companys Consolidated Financial Statements and the Notes thereto, and other financial data appearing elsewhere in this report. The Company is the parent bank holding company for Virginia Commerce Bank (the Bank), a Virginia
state-chartered bank that commenced operations in May 1988. The Bank pursues a traditional community banking strategy, offering a full range of business and consumer banking services through twenty-eight branch offices, one residential mortgage
office and one wealth management office.
Headquartered in Arlington, Virginia, the Bank serves the Northern Virginia suburbs of Washington,
D.C., including Arlington, Fairfax, Fauquier, Loudoun, Prince William, Spotsylvania and Stafford Counties and the cities of Alexandria, Fairfax, Falls Church, Fredericksburg, Manassas and Manassas Park. Its service area also covers, to a lesser
extent, Washington, D.C. and the nearby Maryland counties of Montgomery and Prince Georges. The Banks customer base includes small-to-medium sized businesses including firms that have contracts with the U.S. government, associations, retailers
and industrial businesses, professionals and their firms, business executives, investors and consumers.
Critical Accounting Policies
For the period ended September 30, 2012, there were no changes in the Companys critical accounting policies as reflected in the
Companys most recent annual report.
The Companys financial statements are prepared in accordance with GAAP. The financial
information contained within our statements is, to a significant extent, financial information that is based on measures of the financial effects of transactions and events that have already occurred. A variety of factors could affect the ultimate
value that is obtained either when earning income, recognizing an expense, recovering an asset or relieving a liability. We use historical loss factors as one factor in determining the inherent loss that may be present in our loan portfolio. Actual
losses could differ significantly from the historical factors that we use. In addition, GAAP itself may change from one previously acceptable method to another method. Although the economics of our transactions would be the same, the timing of
events that would impact our transactions could change.
The allowance for loan losses is an estimate of the losses that are inherent in our
loan portfolio. The allowance is based on two basic principles of accounting: (i) Accounting for Contingencies (ASC 450, Contingencies), which requires that losses be accrued when they are probable of occurring and
estimable and (ii) Accounting by Creditors for Impairment of a Loan (ASC 310, Receivables), which requires that losses be accrued based on the differences between the value of collateral, present value of future cash
flows or values that are observable in the secondary market and the loan balance.
Our allowance for loan losses has two basic components: the
specific allowance and the general allowance. Each of these components is determined based upon estimates that can and do change when the actual events occur. The specific allowance is used to individually allocate an allowance for impaired loans.
Impairment testing includes consideration of the borrowers overall financial condition, resources and payment record, support available from financial guarantors and the fair market value of collateral. These factors are combined to estimate
the probability and severity of inherent losses based on the Companys calculation of the loss embedded in the individual loan. Large groups of smaller balance, homogeneous loans, representing 1-4 family residential first and second trusts,
including home equity lines-of-credit, are collectively evaluated for impairment based upon factors such as levels and trends in delinquencies, trends in loss and problem loan identification, trends in volumes and concentrations, local and national
economic trends and conditions including estimated levels of housing price depreciation/homeowners loss of equity, competitive factors and other considerations. These factors are converted into reserve percentages and applied against the
homogenous loan pool balances. Impaired loans which meet the criteria for substandard, doubtful and loss are segregated from performing loans within the portfolio. Internally classified loans are then grouped by loan type (commercial, real
estate-one-to-four family residential, real estate-
32
multi-family residential, real estate-non-farm, non-residential, real estate-construction, consumer, and farmland). The general formula is used to estimate the loss of non-classified loans. These
un-criticized loans are also segregated by loan type and allowance factors are assigned by management based on delinquencies, loss history, trends in volume and terms of loans, effects of changes in lending policy, the experience and depth of
management, national and local economic trends, concentrations of credit, quality of the loan review system and the effect of external factors (i.e. competition and regulatory requirements). The factors assigned differ by loan type. The general
allowance recognizes potential losses whose impact on the portfolio has yet to be recognized by a specific allowance. Allowance factors and the overall size of the allowance may change from period to period based on managements assessment of
the above described factors and the relative weights given to each factor. Further information regarding the allowance for loan losses is provided under the caption Allowance for Loan Losses and Allowance for Loan Losses later in this
report and in Note 4 to the Consolidated Financial Statements.
The Companys 1998 Stock Option Plan (the 1998 Plan), which
is stockholder-approved, permitted the grant of share options to its directors and officers for up to 2.3 million shares of common stock. The Companys 2010 Equity Plan (the 2010 Plan), which is also stockholder-approved and
replaces the 1998 Plan, permits the grant of share-based awards in the form of stock options, stock appreciation rights, restricted and unrestricted stock, performance units, options and other awards to its directors, officers and employees for up
to 1.5 million shares of common stock. To date, the Company has granted stock options and restricted stock under the 2010 Plan. The Company also has option awards outstanding under the 1998 Plan, but since May 2, 2010, the effective date
of the 2010 Plan, no new awards can be granted under the 1998 Plan. The Company recognizes expense for its share-based compensation based on the fair value of the awards that are granted.
Option awards are generally granted with an exercise price equal to the market price of the Companys stock at the date of grant, generally vest in equal annual installments based on 5 years of
continuous service and have 10-year contractual terms. The fair value of each option award is estimated on the date of grant using a Black-Scholes option pricing model that currently uses historical volatility of the Companys stock based on a
7.2 year expected term, before exercise, for the options granted, and a risk-free interest rate based on the United States Department of the Treasury (the Treasury) curve in effect at the time of the grant to estimate total stock-based
compensation expense. This amount is then amortized on a straight-line basis over the requisite service period, currently 5 years, to salaries and benefits expense. Restricted stock awards generally vest in equal installments over 5 years. The
compensation expense associated with these awards is based on the grant date fair value of the award. The value of the portion of the award that is ultimately expected to vest is recognized ratably over the requisite service period. See Note 6 to
the Consolidated Financial Statements for additional information regarding the plans and related expense.
On a quarterly basis the Company
reviews any securities which are considered to be impaired as defined by accounting guidance, to determine if the impairment is deemed to be other-than-temporary. If it is determined that the impairment is other-than-temporary, i.e. impaired because
of credit issues rather than interest rate, the investment is written down through the Consolidated Statements of Income in accordance with accounting guidance. See Note 2 to the Consolidated Financial Statements for additional information regarding
our securities and related impairment testing.
Results of Operations
Summary Financial Results
Net Income and Adjusted Operating Earnings
For the nine months ended September 30, 2012, the Company recorded net income of $22.3 million. After an effective dividend of $4.1
million to the U.S. Treasury on preferred stock, the Company reported net income available to common stockholders of $18.3 million, or $0.54 per diluted common share, compared to net income available to common stockholders of $16.4 million, or $0.53
per diluted common share for the first nine months of 2011. The Company recorded net income available to common stockholders of $7.1 million, or $0.21 per diluted common share, for the quarter ending September 30, 2012, compared to $5.2
million, or $0.17 per diluted common share, in the third quarter of 2011.
Adjusted operating earnings (a non-GAAP measure) for the three
months ended September 30, 2012, were $5.8 million, compared to $5.2 million in the prior year. The year-over-year increase in adjusted operating earnings is primarily due to lower provisioning for loan losses of $822 thousand and increased
non-interest income of $729
33
thousand, after non-interest income is adjusted to exclude the impact of realized gains on sale of securities, partially offset by increased non-interest expenses of $319 thousand, decreased net
interest income of $361 thousand, and $287 thousand in increased provision for income taxes. The Company calculates adjusted operating earnings by excluding impairment losses on securities, realized gains and losses on sale of securities and death
benefits received from bank-owned life insurance, from net income available to common stockholders.
Net Interest Income
Net interest income is the excess of interest earned on loans and investments over the interest paid on deposits and borrowings. Net interest income is
the most significant component of our total revenue. Net interest income is affected by overall balance sheet growth, changes in interest rates and changes in the mix of investments, loans, deposits and borrowings. Net interest income for the third
quarter of 2012, of $26.4 million declined $361 thousand, or 1.4%, over the same quarter last year. Net interest income for the nine months ended 2012, of $80.1 million was up $364 thousand, or 0.5%, from $79.7 million for the nine months ended
September 30, 2011. The net interest margin decreased 23 basis points from 3.85% for the three months ended September 2011, to 3.62% for the same period in 2012 and also decreased from 3.95% for the nine months ended 2011, to 3.74% for the same
period in 2012. The year-over-year decrease in third quarter and year-to-date net interest margin was primarily driven by lower average yielding loan and investment security assets, the impact of which was partially offset by a lower cost of average
interest-bearing liabilities. For year-to-date 2012 compared to the same period in 2011, average loan yields declined 26 basis points, from 5.86% to 5.60%, and average investment security yields declined 115 basis points, from 3.41% to 2.26%, while
rates on average interest-bearing deposits declined 40 basis points, from 1.37% to 0.97%. Management anticipates the net interest margin will range between 3.60% and 3.70% during the fourth quarter of 2012.
Interest and dividend income decreased $2.5 million on average total interest-earnings assets of $2.94 billion for the three months ended
September 30, 2012, compared to interest and dividend income generated by average total interest-earnings assets of $2.79 billion for the same period in 2011. The decline in interest and dividend income is mostly attributable to lower yielding
average loan and investment security assets being generated in the current low interest rate environment.
Interest expense decreased $2.2
million on an average total interest-bearing liability balance of $2.31 billion for the quarter ended September 30, 2012, compared to interest expense on an average total interest-bearing liability balance of $2.26 billion for the same period
in 2011. The average rate paid on total interest-bearing liabilities was 1.12% for the third quarter of 2012, as compared to 1.18% for the second quarter of 2012, and 1.52% for the third quarter of 2011.
The following tables provide a comparative average balance sheet and net interest income analysis for the three and nine months ended September 30,
2012, as compared to the same period in 2011. Average rates are presented on a fully taxable-equivalent (FTE) basis, using a statutory Federal tax rate of 35% for 2012 and 2011.
34
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended September 30,
|
|
|
|
2012
|
|
|
2011
|
|
(Dollars in thousands)
|
|
Average
Balance
|
|
|
Interest
Income-
Expense
|
|
|
Average
Yields
/Rates
|
|
|
Average
Balance
|
|
|
Interest
Income-
Expense
|
|
|
Average
Yields
/Rates
|
|
Assets
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Investment securities
(1)
|
|
$
|
550,210
|
|
|
$
|
2,806
|
|
|
|
2.26
|
%
|
|
$
|
524,271
|
|
|
$
|
3,778
|
|
|
|
3.11
|
%
|
Restricted investments
|
|
|
11,272
|
|
|
|
105
|
|
|
|
3.68
|
%
|
|
|
11,561
|
|
|
|
95
|
|
|
|
3.26
|
%
|
Loans, net of unearned income
(2)
|
|
|
2,176,109
|
|
|
|
29,820
|
|
|
|
5.46
|
%
|
|
|
2,147,176
|
|
|
|
31,456
|
|
|
|
5.83
|
%
|
Interest-bearing deposits in other banks
|
|
|
200,966
|
|
|
|
132
|
|
|
|
0.26
|
%
|
|
|
34,887
|
|
|
|
21
|
|
|
|
0.23
|
%
|
Federal funds sold
|
|
|
|
|
|
|
|
|
|
|
0.00
|
%
|
|
|
75,900
|
|
|
|
53
|
|
|
|
0.27
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total interest-earning assets
|
|
$
|
2,938,557
|
|
|
$
|
32,863
|
|
|
|
4.50
|
%
|
|
$
|
2,793,795
|
|
|
$
|
35,403
|
|
|
|
5.08
|
%
|
Other assets
|
|
|
82,555
|
|
|
|
|
|
|
|
|
|
|
|
82,006
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Assets
|
|
$
|
3,021,112
|
|
|
|
|
|
|
|
|
|
|
$
|
2,875,801
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Liabilities and Stockholders Equity
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest-bearing deposits:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
NOW accounts
|
|
$
|
380,623
|
|
|
$
|
357
|
|
|
|
0.37
|
%
|
|
$
|
317,245
|
|
|
$
|
527
|
|
|
|
0.66
|
%
|
Money market accounts
|
|
|
242,896
|
|
|
|
248
|
|
|
|
0.41
|
%
|
|
|
221,202
|
|
|
|
559
|
|
|
|
1.00
|
%
|
Savings accounts
|
|
|
569,339
|
|
|
|
585
|
|
|
|
0.41
|
%
|
|
|
655,941
|
|
|
|
1,452
|
|
|
|
0.88
|
%
|
Time deposits
|
|
|
665,193
|
|
|
|
3,071
|
|
|
|
1.84
|
%
|
|
|
779,997
|
|
|
|
3,947
|
|
|
|
2.01
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total interest-bearing deposits
|
|
$
|
1,858,051
|
|
|
$
|
4,261
|
|
|
|
0.91
|
%
|
|
$
|
1,974,385
|
|
|
$
|
6,485
|
|
|
|
1.30
|
%
|
Securities sold under agreement to repurchase
(3)
|
|
|
365,235
|
|
|
|
1,017
|
|
|
|
1.11
|
%
|
|
|
192,823
|
|
|
|
965
|
|
|
|
1.99
|
%
|
Other borrowed funds
|
|
|
22,282
|
|
|
|
242
|
|
|
|
4.25
|
%
|
|
|
25,000
|
|
|
|
272
|
|
|
|
4.25
|
%
|
Trust preferred capital notes
|
|
|
66,727
|
|
|
|
975
|
|
|
|
5.72
|
%
|
|
|
66,471
|
|
|
|
952
|
|
|
|
5.60
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total interest-bearing liabilities
|
|
$
|
2,312,295
|
|
|
$
|
6,495
|
|
|
|
1.12
|
%
|
|
$
|
2,258,679
|
|
|
$
|
8,674
|
|
|
|
1.52
|
%
|
Noninterest-bearing demand deposits and other liabilities
|
|
|
401,460
|
|
|
|
|
|
|
|
|
|
|
|
346,155
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total liabilities
|
|
$
|
2,713,755
|
|
|
|
|
|
|
|
|
|
|
$
|
2,604,834
|
|
|
|
|
|
|
|
|
|
Stockholders equity
|
|
|
307,357
|
|
|
|
|
|
|
|
|
|
|
|
270,967
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total liabilities and stockholders equity
|
|
$
|
3,021,112
|
|
|
|
|
|
|
|
|
|
|
$
|
2,875,801
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest rate spread
|
|
|
|
|
|
|
|
|
|
|
3.38
|
%
|
|
|
|
|
|
|
|
|
|
|
3.56
|
%
|
Net interest income and margin
|
|
|
|
|
|
$
|
26,368
|
|
|
|
3.62
|
%
|
|
|
|
|
|
$
|
26,729
|
|
|
|
3.85
|
%
|
Ratio of average interest-earning assets to average interest-bearing liabilities
|
|
|
127.1
|
%
|
|
|
|
|
|
|
|
|
|
|
123.7
|
%
|
|
|
|
|
|
|
|
|
(1)
|
Yields on securities available-for-sale have been calculated on the basis of historical cost and do not give effect to changes in the fair value of those securities,
which are reflected as a component of stockholders equity. Average yields on securities are stated on a tax equivalent basis, using a 35% rate.
|
(2)
|
Loans placed on non-accrual status are included in the average balances. Net loan fees and late charges included in interest income on loans totaled $2.0 million and
$1.0 million for the three months ended September 30, 2012, and 2011, respectively.
|
(3)
|
The securities sold under agreement to repurchase related to customers had an average balance of $290.2 million at an average rate of 0.23% for the three months ended
September 30, 2012, and $117.8 million at an average rate of 0.38% for the same period 2011. Also included are wholesale agreements with an average balance of $75.0 million at an average rate of 4.52% for the three months ended
September 31, 2012, and $75.0 million at an average rate of 4.51% for the same period for 2011.
|
35
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Nine Months Ended September 30,
|
|
|
|
2012
|
|
|
2011
|
|
(Dollars in thousands)
|
|
Average
Balance
|
|
|
Interest
Income-
Expense
|
|
|
Average
Yields
/Rates
|
|
|
Average
Balance
|
|
|
Interest
Income-
Expense
|
|
|
Average
Yields
/Rates
|
|
Assets
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Investment securities
(1)
|
|
$
|
581,381
|
|
|
$
|
9,076
|
|
|
|
2.26
|
%
|
|
$
|
458,694
|
|
|
$
|
10,954
|
|
|
|
3.41
|
%
|
Restricted investments
|
|
|
11,254
|
|
|
|
310
|
|
|
|
3.68
|
%
|
|
|
11,616
|
|
|
|
287
|
|
|
|
3.30
|
%
|
Loans, net of unearned income
(2)
|
|
|
2,172,353
|
|
|
|
90,868
|
|
|
|
5.60
|
%
|
|
|
2,176,604
|
|
|
|
95,144
|
|
|
|
5.86
|
%
|
Interest-bearing deposits in other banks
|
|
|
132,897
|
|
|
|
257
|
|
|
|
0.26
|
%
|
|
|
12,125
|
|
|
|
21
|
|
|
|
0.23
|
%
|
Federal funds sold
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
74,906
|
|
|
|
152
|
|
|
|
0.27
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total interest-earning assets
|
|
$
|
2,897,885
|
|
|
$
|
100,511
|
|
|
|
4.68
|
%
|
|
$
|
2,733,945
|
|
|
$
|
106,558
|
|
|
|
5.27
|
%
|
Other assets
|
|
|
75,569
|
|
|
|
|
|
|
|
|
|
|
|
87,199
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Assets
|
|
$
|
2,973,454
|
|
|
|
|
|
|
|
|
|
|
$
|
2,821,144
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Liabilities and Stockholders Equity
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest-bearing deposits:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
NOW accounts
|
|
$
|
354,154
|
|
|
$
|
972
|
|
|
|
0.37
|
%
|
|
$
|
320,380
|
|
|
$
|
1,775
|
|
|
|
0.74
|
%
|
Money market accounts
|
|
|
227,301
|
|
|
|
704
|
|
|
|
0.41
|
%
|
|
|
198,605
|
|
|
|
1,543
|
|
|
|
1.04
|
%
|
Savings accounts
|
|
|
599,799
|
|
|
|
2,001
|
|
|
|
0.45
|
%
|
|
|
672,553
|
|
|
|
4,965
|
|
|
|
0.99
|
%
|
Time deposits
|
|
|
710,515
|
|
|
|
9,991
|
|
|
|
1.88
|
%
|
|
|
780,310
|
|
|
|
11,895
|
|
|
|
2.04
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total interest-bearing deposits
|
|
$
|
1,891,769
|
|
|
$
|
13,668
|
|
|
|
0.97
|
%
|
|
$
|
1,971,848
|
|
|
$
|
20,178
|
|
|
|
1.37
|
%
|
Securities sold under agreement to repurchase
(3)
|
|
|
321,871
|
|
|
|
3,068
|
|
|
|
1.27
|
%
|
|
|
181,226
|
|
|
|
2,859
|
|
|
|
2.11
|
%
|
Other borrowed funds
|
|
|
24,088
|
|
|
|
779
|
|
|
|
4.25
|
%
|
|
|
25,000
|
|
|
|
806
|
|
|
|
4.25
|
%
|
Trust preferred capital notes
|
|
|
66,663
|
|
|
|
2,932
|
|
|
|
5.78
|
%
|
|
|
66,409
|
|
|
|
3,015
|
|
|
|
5.99
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total interest-bearing liabilities
|
|
$
|
2,304,391
|
|
|
$
|
20,447
|
|
|
|
1.19
|
%
|
|
$
|
2,244,483
|
|
|
$
|
26,858
|
|
|
|
1.60
|
%
|
Noninterest-bearing demand deposits and other liabilities
|
|
|
369,169
|
|
|
|
|
|
|
|
|
|
|
|
316,829
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total liabilities
|
|
$
|
2,673,560
|
|
|
|
|
|
|
|
|
|
|
$
|
2,561,312
|
|
|
|
|
|
|
|
|
|
Stockholders equity
|
|
|
299,894
|
|
|
|
|
|
|
|
|
|
|
|
259,832
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total liabilities and stockholders equity
|
|
$
|
2,973,454
|
|
|
|
|
|
|
|
|
|
|
$
|
2,821,144
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest rate spread
|
|
|
|
|
|
|
|
|
|
|
3.49
|
%
|
|
|
|
|
|
|
|
|
|
|
3.67
|
%
|
Net interest income and margin
|
|
|
|
|
|
$
|
80,064
|
|
|
|
3.74
|
%
|
|
|
|
|
|
$
|
79,700
|
|
|
|
3.95
|
%
|
Ratio of average interest-earning assets to average interest-bearing liabilities
|
|
|
125.8
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
121.8
|
%
|
|
|
|
|
(1)
|
Yields on securities available-for-sale have been calculated on the basis of historical cost and do not give effect to changes in the fair value of those securities,
which are reflected as a component of stockholders equity. Average yields on securities are stated on a tax equivalent basis, using a 35% rate.
|
(2)
|
Loans placed on non-accrual status are included in the average balances. Net loan fees and late charges included in interest income on loans totaled $3.7 million and
$3.0 million for the nine months ended September 30, 2012, and 2011, respectively.
|
(3)
|
The securities sold under agreement to repurchase related to customers had an average balance of $246.9 million at an average rate of 0.29% for the nine months ended
September 30, 2012, and $106.2 million at an average rate of 0.42% for the same period 2011. Also included are wholesale agreements with an average balance of $75.0 million at an average rate of 4.52% for the nine months ended
September 31, 2012, and $75.0 million at an average rate of 4.52% for the same period for 2011.
|
36
Provision for Loan Losses and Allowance for Loan Losses
Provisions for loan losses were $3.1 million for the quarter ended September 30, 2012, compared to $3.9 million in the same period in
2011, with total net charge-offs of $8.5 million for the three months ended September 30, 2012, versus $7.7 million in the third quarter of 2011. For the nine months ended September 30, 2012, provisions for loan losses totaled $12.3
million, compared to $11.2 million for the prior year period, with 2012 year-to-date net charge-offs amounting to $19.7 million, compared to $24.2 million in the first nine months of 2011. The increase in non-performing assets of $4.3 million
between September 30, 2011 and September 30, 2012, coupled with the decrease in the allowance for loan losses of $8.1 million in the same period, contributed to the allowance for loan losses to non-performing loans coverage ratio declining
to 90.8% at September 30, 2012, compared to 108.6% at September 30, 2011. The allowance for loan loss to non-performing loans coverage ratio decreased from 125.4% at December 31, 2011, to 90.8% at September 30, 2012, primarily
related to charge-offs of loans with a specific reserve during the first nine months of 2012. Net charge-off declined by $4.5 million for the nine months ended 2012, compared to the same period in 2011, was primarily due to net charge-offs in the
real estate-construction loan portfolio decreasing $8.2 million, from $13.3 million in 2011 to $5.1 million in 2012.
Total
non-performing assets and loans 90+ days past due increased from $47.8 million as of December 31, 2011, to $59.5 million at September 30, 2012. Total non-performing loans and loans 90+ past due have increased $11.7 million between
December 31, 2011 and September 30, 2012, total non-performing assets and loans 90+ days past due have increased $3.7 million over the last twelve months from $55.9 million at September 30, 2011. As of September 30, 2012,
allowance for loan losses represented 1.92% of total loans, down from 2.24% and 2.30% at December 31, 2011 and September 30, 2011, respectively. The decreases in allowance for loan losses as a percentage of total loans from
December 31, 2011 and September 30, 2011, to September 30, 2012, is primarily due to charge-offs incurred during the first nine months of 2012 that were supported by specific reserves in the allowance for loan losses during 2011. See
Risk Elements and Non-Performing Assets later in this discussion for more information on non-performing assets and loans 90+ days past due and other impaired loans.
Management believes that the allowance for loan losses is adequate at September 30, 2012. However, there can be no assurance that additional provisions for loan losses will not be required in the
future, including as a result of possible changes in the economic assumptions underlying managements estimates and judgments, adverse developments in the economy, and the residential real estate market in particular, on a national basis or in
the Companys market area, or changes in the circumstances of particular borrowers.
The Company generates a quarterly
analysis of the allowance for loan losses, with the objective of quantifying portfolio risk into a dollar figure of inherent losses, thereby translating the subjective risk value into an objective number. Emphasis is placed on at least semi-annual
independent external loan reviews and monthly internal reviews. The determination of the allowance for loan losses is based on applying and summing the results of eight qualitative factors and a historical loss factor to each category of loans along
with any specific allowance for impaired and adversely classified loans within the particular category. Each factor is assigned a percentage weight and that total weight is applied to each loan category. The resulting sum from each loan category is
then combined to arrive at a total allowance for all categories. Factors are different for each loan category. Qualitative factors include: levels and trends in delinquencies and non-accruals, trends in volumes and terms of loans, effects of any
changes in lending policies, the experience, ability and depth of management, national and local economic trends and conditions, concentrations of credit, quality of the Companys loan review system, and regulatory requirements. The total
allowance required thus changes as the percentage weight assigned to each factor is increased or decreased due to its particular circumstance, as historical loss factors are updated, as the various types and categories of loans change as a
percentage of total loans and as specific allowances are required on impaired loans and charge-offs occur. The decision to specifically reserve for or to charge-off or partially charge-off an impaired loan balance is based upon an evaluation of that
loans potential to improve, based upon near term change in financial or market conditions, which would enable collection of the portion of the loan determined to be impaired. If these conditions are determined to be favorable, a specific
reserve would be established as opposed to a charge-off. For further information regarding the allowance for loan losses see Note 4 to the Consolidated Financial Statements.
37
The following schedule summarizes the changes in the allowance for loan losses:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Nine Months
Ended
September 30,
2012
|
|
|
Nine Months
Ended
September 30,
2011
|
|
|
Twelve Months
Ended
December 31,
2011
|
|
|
|
(Dollars in thousands)
|
|
Allowance, at beginning of period
|
|
$
|
48,729
|
|
|
$
|
62,442
|
|
|
$
|
62,442
|
|
Provision charged against income
|
|
|
12,267
|
|
|
|
11,210
|
|
|
|
14,849
|
|
Recoveries:
|
|
|
|
|
|
|
|
|
|
|
|
|
Consumer loans
|
|
|
34
|
|
|
|
13
|
|
|
|
38
|
|
Commercial
|
|
|
929
|
|
|
|
497
|
|
|
|
2,637
|
|
Real estate loans
|
|
|
1,118
|
|
|
|
294
|
|
|
|
672
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Recoveries
|
|
$
|
2,081
|
|
|
$
|
804
|
|
|
$
|
3,347
|
|
Losses charged to reserve:
|
|
|
|
|
|
|
|
|
|
|
|
|
Consumer loans
|
|
|
(292
|
)
|
|
|
(103
|
)
|
|
|
(156
|
)
|
Commercial loans
|
|
|
(5,904
|
)
|
|
|
(2,056
|
)
|
|
|
(29,396
|
)
|
Real estate loans
|
|
|
(15,593
|
)
|
|
|
(22,892
|
)
|
|
|
(2,357
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total loans charged to reserve
|
|
$
|
(21,789
|
)
|
|
$
|
(25,051
|
)
|
|
$
|
(31,909
|
)
|
Net charge-offs
|
|
|
(19,708
|
)
|
|
|
(24,247
|
)
|
|
|
(28,562
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Allowance, at end of period
|
|
$
|
41,288
|
|
|
$
|
49,405
|
|
|
$
|
48,729
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Ratio of net charge-offs to average total loans outstanding during period
|
|
|
0.91
|
%
|
|
|
1.11
|
%
|
|
|
1.31
|
%
|
Allowance for loan losses to total loans
|
|
|
1.92
|
%
|
|
|
2.30
|
%
|
|
|
2.24
|
%
|
The following schedule provides a breakdown of the allowance for loan loss by loan type:
|
|
|
|
|
|
|
|
|
|
|
|
|
(Dollars in thousands)
|
|
September 30, 2012
|
|
|
September 30, 2011
|
|
|
December 31, 2011
|
|
Allocation of the allowance for loan losses:
|
|
|
|
|
|
|
|
|
|
|
|
|
Real estate mortgage
|
|
$
|
25,297
|
|
|
$
|
25,143
|
|
|
$
|
22,886
|
|
Real estate construction
|
|
|
11,423
|
|
|
|
15,517
|
|
|
|
15,220
|
|
Commercial
|
|
|
4,331
|
|
|
|
8,408
|
|
|
|
10,378
|
|
Consumer
|
|
|
237
|
|
|
|
333
|
|
|
|
245
|
|
Unallocated
|
|
|
|
|
|
|
4
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
41,288
|
|
|
$
|
49,405
|
|
|
$
|
48,729
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For a more detailed allocation of the allowance for loan losses, including general and specific allowances for each
segment of the loan portfolio, see Note 4 to the Consolidated Financial Statements.
Risk Elements and Non-Performing Assets
Non-performing assets consist of non-accrual loans and OREO (foreclosed properties). For the nine months ended September 30, 2012, total
non-performing assets and loans 90+ days past due and still accruing interest increased by $11.7 million, from $47.8 million at December 31, 2011, to $59.5 million at September 30, 2012. As a result, the ratio of non-performing assets and loans 90+
days past due and still accruing to total assets increased from 1.63% of total assets at December 31, 2011, to 1.98% of total assets at September 30, 2012. The increase during the first nine months of 2012 in non-performing assets and loans 90+ days
past due and still accruing as a percent of total assets was primarily due to increased non-performing assets in the Companys real estate construction and real estate non-farm, non-residential segments of the loan portfolio and increased OREO
balances. In particular, non-accrual
38
commercial real estate construction loans have increased $11.2 million from December 31, 2011 to September 30, 2012, partially offset by a decline of $8.0 million in non-accrual
residential real estate construction loans over the same period. Loans are placed in non-accrual status when in the opinion of management the collection of additional interest is unlikely or a specific loan meets the criteria for non-accrual status
established by regulatory authorities. No interest is taken into income on non-accrual loans. A loan remains on non-accrual status until the loan is current as to both principal and interest or the borrower demonstrates the ability to pay and remain
current, or both.
Our underwriting for new acquisition, development, and construction loans always includes the interest cost for the loan
whether an interest reserve is approved or not. In other words, the equity requirement in the new loan is established reflecting the amount of interest required to serve the project. We continually monitor the adequacy of reserve requirements,
including interest reserves, during the draw process to ensure the project is being completed on time and within budget. We have restructured loans due to the slow market, re-underwriting each loan based on time and cost to complete. We do
not continue funding interest reserves just to keep the loan from becoming non-performing. We consider whether the loan to value ratio will support current and future advances and whether the project is meeting certain completion criteria necessary
to successfully complete the project. Once a loan becomes non-performing, we do not allow draws on interest reserves.
Other impaired
loans, that are currently performing, and TDRs, performing in accordance with their modified terms, decreased from $160.2 million at December 31, 2011, to $140.2 million at September 30, 2012. These loans have been identified by the
Company as having certain weaknesses as a result of the Companys specific knowledge about the customer or recent credit events, and are classified as substandard and subject to impairment testing at each balance sheet date.
Included in the loan portfolio at September 30, 2012, are loans classified as TDRs, totaling $44.9 million, a 14.1% decrease from $52.3 million at
December 31, 2011. The net reduction in TDRs consisted of $18.6 million in total reductions to TDRs which were offset by $11.2 million in additions to TDRs. Reductions to TDRs were comprised of note and collateral sales of $5.9 million,
upgrades to performing status of reviewable TDRs of $5.9 million, principal payments of $1.2 million, downgrades to non-performing status of $2.4 million and charge-offs of $3.2 million. These loans, which have been provided concessions such as rate
reductions, payment deferrals, and in some cases forgiveness of principal, are all on accrual status. If the loan was on non-accrual at the time of the concession it is the Companys policy that it remain on non-accrual status and perform in
accordance with the modified terms for a period of six months. All loans reported as troubled debt restructurings accrue interest. The Company does not report any non-accrual loans as troubled debt restructurings. If a troubled debt restructuring is
on non-accrual status, it is reported as a non-accrual asset and not as a troubled debt restructuring.
Foreclosed real properties (or OREO)
include properties that have been substantively repossessed or acquired in complete or partial satisfaction of debt. OREO, net of allowance, increased from $8.9 million at December 31, 2011, to $14.1 million at September 30, 2012,
primarily due to foreclosure on collateral notes and real estate from a seasoned business that became insolvent following several years of reduced cash flows related to the recession. Such properties, which are held for resale, are carried at the
lower of book value or fair value, including a reduction for the estimated selling expenses. Reviews and discussions with regard to value and disposition of each foreclosed property are conducted monthly by the Companys Special Asset
Committee. The carrying value of a foreclosed asset is immediately adjusted down when new information is obtained, including a potentially acceptable offer, the sale of a similar property in the vicinity of one of the Companys assets, and/or a
change in the price the property is being listed for. The Company also uses the advice of outside consultants and real estate agents with knowledge of the markets the properties are located in. Appraisals are ordered when the property is foreclosed
on, but are not routinely updated at each balance sheet date. The Company confirms that it performed the above noted procedures and made the proper impairment adjustments, if any, at the balance sheet date.
39
Total non-performing assets as of the dates indicated consisted of the following:
|
|
|
|
|
|
|
|
|
|
|
|
|
(Dollars in thousands)
|
|
September 30, 2012
|
|
|
September 30, 2011
|
|
|
December 31, 2011
|
|
Non-accrual loans:
|
|
|
|
|
|
|
|
|
|
|
|
|
Commercial
|
|
$
|
3,443
|
|
|
$
|
5,486
|
|
|
$
|
5,005
|
|
Real estate-one-to-four family residential:
|
|
|
|
|
|
|
|
|
|
|
|
|
Permanent first and second
|
|
|
5,689
|
|
|
|
1,960
|
|
|
|
3,912
|
|
Home equity loans and lines
|
|
|
2,576
|
|
|
|
3,051
|
|
|
|
3,142
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total real estate-one-to-four family residential
|
|
$
|
8,265
|
|
|
$
|
5,011
|
|
|
$
|
7,054
|
|
Real estate-multi-family residential
|
|
|
|
|
|
|
486
|
|
|
|
476
|
|
Real estate-non-farm, non-residential:
|
|
|
|
|
|
|
|
|
|
|
|
|
Owner-occupied
|
|
|
1,804
|
|
|
|
3,689
|
|
|
|
1,999
|
|
Non-owner-occupied
|
|
|
4,731
|
|
|
|
3,878
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total real estate-non-farm, non-residential
|
|
$
|
6,535
|
|
|
$
|
7,567
|
|
|
$
|
1,999
|
|
Real estate-construction:
|
|
|
|
|
|
|
|
|
|
|
|
|
Residential
|
|
|
10,510
|
|
|
|
20,181
|
|
|
|
18,479
|
|
Commercial
|
|
|
16,679
|
|
|
|
6,083
|
|
|
|
5,505
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total real estate-construction
|
|
$
|
27,189
|
|
|
$
|
26,264
|
|
|
$
|
23,984
|
|
Consumer
|
|
|
18
|
|
|
|
22
|
|
|
|
18
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total non-accrual loans
|
|
$
|
45,450
|
|
|
$
|
44,836
|
|
|
$
|
38,536
|
|
OREO
|
|
|
14,089
|
|
|
|
10,377
|
|
|
|
8,925
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total non-performing assets
|
|
$
|
59,539
|
|
|
$
|
55,213
|
|
|
$
|
47,461
|
|
|
|
|
|
Loans 90+ days past due and still accruing:
|
|
|
|
|
|
|
|
|
|
|
|
|
Commercial
|
|
$
|
|
|
|
$
|
89
|
|
|
$
|
|
|
Real estate-one-to-four family residential:
|
|
|
|
|
|
|
|
|
|
|
|
|
Permanent first and second
|
|
|
|
|
|
|
|
|
|
|
71
|
|
Home equity loans and lines
|
|
|
|
|
|
|
|
|
|
|
250
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total real estate-one-to-four family residential
|
|
$
|
|
|
|
$
|
|
|
|
$
|
321
|
|
Real estate-multi-family residential
|
|
|
|
|
|
|
|
|
|
|
|
|
Real estate-non-farm, non-residential:
|
|
|
|
|
|
|
|
|
|
|
|
|
Owner-occupied
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-owner-occupied
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total real estate-non-farm, non-residential
|
|
$
|
|
|
|
$
|
|
|
|
$
|
|
|
Real estate-construction:
|
|
|
|
|
|
|
|
|
|
|
|
|
Residential
|
|
|
|
|
|
|
|
|
|
|
|
|
Commercial
|
|
|
|
|
|
|
574
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total real estate-construction
|
|
$
|
|
|
|
$
|
574
|
|
|
$
|
|
|
Consumer
|
|
|
|
|
|
|
|
|
|
|
11
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total loans 90+ days past due and still accruing
|
|
$
|
|
|
|
$
|
663
|
|
|
$
|
332
|
|
Total non-performing assets and loans 90+ days past due
|
|
$
|
59,539
|
|
|
$
|
55,876
|
|
|
$
|
47,793
|
|
|
|
|
|
|
|
September 30, 2012
|
|
|
September 30, 2011
|
|
|
December 31, 2011
|
|
Non-performing assets
|
|
|
|
|
|
|
|
|
|
|
|
|
to total loans:
|
|
|
2.77
|
%
|
|
|
2.57
|
%
|
|
|
2.18
|
%
|
to total assets:
|
|
|
1.98
|
%
|
|
|
1.88
|
%
|
|
|
1.62
|
%
|
Non-performing assets and loans 90+ days past due loans
|
|
|
|
|
|
|
|
|
|
|
|
|
to total loans:
|
|
|
2.77
|
%
|
|
|
2.60
|
%
|
|
|
2.20
|
%
|
to total assets:
|
|
|
1.98
|
%
|
|
|
1.90
|
%
|
|
|
1.63
|
%
|
Allowance for loan losses to total loans
|
|
|
1.92
|
%
|
|
|
2.30
|
%
|
|
|
2.24
|
%
|
Allowance for loan losses to non-performing loans
|
|
|
90.84
|
%
|
|
|
108.58
|
%
|
|
|
125.37
|
%
|
40
Non-performing loans continue to be concentrated in residential and commercial construction and land
development loans in outer sub-markets hardest hit by the residential downturn and commercial and consumer credits experiencing the after shocks in sub-contracting businesses and unemployment levels. Overall, as of September 30, 2012, $27.2
million, or 59.8%, of non-performing loans represented acquisition, development and construction (ADC) loans, $6.5 million, or 14.4%, represented non-farm, non-residential loans, $8.3 million, or 18.2%, represented loans on one-to-four
family residential properties, and $3.4 million, or 7.6%, represented commercial and industrial (C&I) loans. There was no interest actually received on non-accrual loans in nine months ended September 30, 2011 or 2012. The
Company continues to pursue an aggressive campaign to further reduce non-performing assets and other impaired loans and is implementing and executing various disposition strategies on an ongoing basis. See Note 4 to the Consolidated Financial
Statements for additional information regarding the Companys non-performing loans.
The following provides a breakdown of the
construction and non-farm/non-residential loan portfolios by location, including loans on non-accrual status, with dollars in thousands:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As of September 30, 2012
|
|
Residential, Acquisition, Development and Construction
By County/Jurisdiction of Origination:
(Dollars in thousands)
|
|
Total
Outstandings
|
|
|
Percentage
of Total
|
|
|
Non-accrual
Loans
|
|
|
Non-accruals
as a % of
Outstandings
|
|
|
Net charge-
offs as a %
of
Outstandings
|
|
District of Columbia
|
|
$
|
7,935
|
|
|
|
5.1
|
%
|
|
$
|
495
|
|
|
|
0.3
|
%
|
|
|
|
|
Montgomery, MD
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Prince Georges, MD
|
|
|
9,276
|
|
|
|
6.0
|
%
|
|
|
4,389
|
|
|
|
2.8
|
%
|
|
|
1.8
|
%
|
Other Counties in MD
|
|
|
2,714
|
|
|
|
1.7
|
%
|
|
|
195
|
|
|
|
0.1
|
%
|
|
|
0.1
|
%
|
Arlington/Alexandria, VA
|
|
|
32,397
|
|
|
|
20.8
|
%
|
|
|
|
|
|
|
|
|
|
|
-0.3
|
%
|
Fairfax, VA
|
|
|
28,555
|
|
|
|
18.3
|
%
|
|
|
|
|
|
|
|
|
|
|
0.2
|
%
|
Culpeper/Fauquier, VA
|
|
|
2,284
|
|
|
|
1.5
|
%
|
|
|
200
|
|
|
|
0.1
|
%
|
|
|
|
|
Fredericksburg, VA
|
|
|
2,288
|
|
|
|
1.5
|
%
|
|
|
2,288
|
|
|
|
1.5
|
%
|
|
|
0.9
|
%
|
Loudoun, VA
|
|
|
15,437
|
|
|
|
9.9
|
%
|
|
|
279
|
|
|
|
0.2
|
%
|
|
|
0.2
|
%
|
Prince William, VA
|
|
|
11,854
|
|
|
|
7.6
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
Spotsylvania, VA
|
|
|
349
|
|
|
|
0.2
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
Stafford, VA
|
|
|
37,088
|
|
|
|
23.8
|
%
|
|
|
2,664
|
|
|
|
1.7
|
%
|
|
|
|
|
Other Counties in VA
|
|
|
3,168
|
|
|
|
2.0
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
Outside VA, D.C. & MD
|
|
|
2,425
|
|
|
|
1.6
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
155,770
|
|
|
|
100.0
|
%
|
|
$
|
10,510
|
|
|
|
6.7
|
%
|
|
|
2.9
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As of September 30, 2012
|
|
Commercial, Acquisition, Development and Construction
By County/Jurisdiction of Origination:
(Dollars in thousands)
|
|
Total
Outstandings
|
|
|
Percentage
of Total
|
|
|
Non-accrual
Loans
|
|
|
Non-accruals
as a % of
Outstandings
|
|
|
Net charge-offs
(recoveries) as
a % of
Outstandings
|
|
District of Columbia
|
|
$
|
|
|
|
|
|
|
|
$
|
|
|
|
|
|
|
|
|
|
|
Montgomery, MD
|
|
|
1,908
|
|
|
|
1.8
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
Prince Georges, MD
|
|
|
6,365
|
|
|
|
6.1
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
Other Counties in MD
|
|
|
2,127
|
|
|
|
2.0
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
Arlington/Alexandria, VA
|
|
|
10,278
|
|
|
|
9.8
|
%
|
|
|
521
|
|
|
|
0.5
|
%
|
|
|
|
|
Fairfax, VA
|
|
|
4,341
|
|
|
|
4.1
|
%
|
|
|
2,385
|
|
|
|
2.3
|
%
|
|
|
0.3
|
%
|
Culpeper/Fauquier, VA
|
|
|
2,975
|
|
|
|
2.8
|
%
|
|
|
2,975
|
|
|
|
2.8
|
%
|
|
|
0.1
|
%
|
Frederick, VA
|
|
|
2,000
|
|
|
|
1.9
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
Henrico, VA
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loudoun, VA
|
|
|
12,990
|
|
|
|
12.4
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
Prince William, VA
|
|
|
38,306
|
|
|
|
36.4
|
%
|
|
|
|
|
|
|
|
|
|
|
0.1
|
%
|
Spotsylvania, VA
|
|
|
1,700
|
|
|
|
1.6
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
Stafford, VA
|
|
|
17,669
|
|
|
|
16.8
|
%
|
|
|
9,963
|
|
|
|
9.5
|
%
|
|
|
|
|
Other Counties in VA
|
|
|
4,478
|
|
|
|
4.3
|
%
|
|
|
835
|
|
|
|
0.8
|
%
|
|
|
|
|
Outside VA, D.C. & MD
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
105,137
|
|
|
|
100.0
|
%
|
|
$
|
16,679
|
|
|
|
15.9
|
%
|
|
|
0.5
|
%
|
41
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As of September 30, 2012
|
|
Non-Farm/Non-Residential
By County/Jurisdiction of Origination:
(Dollars in thousands)
|
|
Total
Outstandings
|
|
|
Percentage
of Total
|
|
|
Non-accrual
Loans
|
|
|
Non-accruals
as a % of
Outstandings
|
|
|
Net charge-
offs as a
% of
Outstandings
|
|
District of Columbia
|
|
$
|
84,482
|
|
|
|
7.3
|
%
|
|
$
|
|
|
|
|
|
|
|
|
|
|
Montgomery, MD
|
|
|
19,760
|
|
|
|
1.7
|
%
|
|
|
1,830
|
|
|
|
0.1
|
%
|
|
|
|
|
Prince Georges, MD
|
|
|
75,896
|
|
|
|
6.5
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
Other Counties in MD
|
|
|
49,532
|
|
|
|
4.2
|
%
|
|
|
|
|
|
|
|
|
|
|
0.2
|
%
|
Arlington/Alexandria, VA
|
|
|
183,261
|
|
|
|
15.8
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
Fairfax, VA
|
|
|
271,006
|
|
|
|
23.4
|
%
|
|
|
829
|
|
|
|
0.1
|
%
|
|
|
|
|
Culpeper/Fauquier, VA
|
|
|
3,330
|
|
|
|
0.3
|
%
|
|
|
2,079
|
|
|
|
0.2
|
%
|
|
|
|
|
Frederick, VA
|
|
|
7,726
|
|
|
|
0.7
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
Henrico, VA
|
|
|
21,828
|
|
|
|
1.9
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
Loudoun, VA
|
|
|
151,429
|
|
|
|
13.1
|
%
|
|
|
975
|
|
|
|
0.1
|
%
|
|
|
0.1
|
%
|
Prince William, VA
|
|
|
199,303
|
|
|
|
17.2
|
%
|
|
|
822
|
|
|
|
0.1
|
%
|
|
|
|
|
Spotsylvania, VA
|
|
|
10,125
|
|
|
|
0.9
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
Stafford, VA
|
|
|
19,574
|
|
|
|
1.7
|
%
|
|
|
|
|
|
|
|
|
|
|
0.2
|
%
|
Other Counties in VA
|
|
|
52,252
|
|
|
|
4.5
|
%
|
|
|
|
|
|
|
|
|
|
|
0.1
|
%
|
Outside VA, D.C. & MD
|
|
|
9,213
|
|
|
|
0.8
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
1,158,717
|
|
|
|
100.0
|
%
|
|
$
|
6,535
|
|
|
|
0.6
|
%
|
|
|
0.6
|
%
|
Total TDRs as of the dates indicated consisted of the following:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
September 30, 2012
|
|
|
September 30, 2011
|
|
|
December 31, 2011
|
|
|
|
(Dollars in thousands)
|
|
Troubled debt restructurings:
|
|
|
|
|
|
|
|
|
|
|
|
|
Commercial
|
|
$
|
6,910
|
|
|
$
|
9,496
|
|
|
$
|
7,135
|
|
Real estate-one-to-four family residential:
|
|
|
|
|
|
|
|
|
|
|
|
|
Permanent first and second
|
|
|
4,585
|
|
|
|
4,199
|
|
|
|
3,974
|
|
Home equity loans and lines
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total real estate-one-to-four family residential
|
|
$
|
4,585
|
|
|
$
|
4,199
|
|
|
$
|
3,974
|
|
Real estate-multi-family residential
|
|
|
|
|
|
|
|
|
|
|
|
|
Real estate-non-farm, non-residential:
|
|
|
|
|
|
|
|
|
|
|
|
|
Owner-occupied
|
|
|
3,395
|
|
|
|
4,372
|
|
|
|
3,893
|
|
Non-owner-occupied
|
|
|
19,160
|
|
|
|
30,679
|
|
|
|
17,525
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total real estate-non-farm, non-residential
|
|
$
|
22,555
|
|
|
$
|
35,051
|
|
|
$
|
21,418
|
|
Real estate-construction:
|
|
|
|
|
|
|
|
|
|
|
|
|
Residential
|
|
|
3,622
|
|
|
|
7,027
|
|
|
|
4,207
|
|
Commercial
|
|
|
7,220
|
|
|
|
15,881
|
|
|
|
15,521
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total real estate-construction:
|
|
$
|
10,842
|
|
|
$
|
22,908
|
|
|
$
|
19,728
|
|
Consumer
|
|
|
|
|
|
|
32
|
|
|
|
9
|
|
Farmland
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total troubled debt restructurings
|
|
$
|
44,892
|
|
|
$
|
71,686
|
|
|
$
|
52,264
|
|
Included in this amount of $44.9 million, the Bank had TDRs that were performing in accordance with their modified terms
of $44.8 million at September 30, 2012.
Concentrations of Credit Risk
The Bank does a general banking business, serving the commercial and personal banking needs of its customers. The Banks market area consists of the Northern Virginia suburbs of Washington, D.C.,
including Arlington, Fairfax, Fauquier, Loudoun, Prince William, Spotsylvania and Stafford Counties, the cities of Alexandria, Fairfax, Falls Church, Fredericksburg, Manassas and Manassas Park, and, to a lesser extent, certain Maryland suburbs and
the city of Washington, D.C. Substantially all of the Companys loans are made within its market area.
The ultimate collectability of
the Banks loan portfolio and the ability to realize the value of any underlying collateral, if needed, are influenced by the economic conditions of the market area. The Companys operating results are therefore closely related to the
economic conditions and trends in the Metropolitan Washington, D.C. area.
42
At September 30, 2012, the Company had $1.51 billion, or 70.2%, of total loans concentrated in
commercial real estate. Commercial real estate for purposes of this discussion includes all construction loans, loans secured by multi-family residential properties and loans secured by non-farm, non-residential properties. At December 31,
2011, commercial real estate loans were $1.54 billion, or 70.7%, of total loans. Total construction loans of $260.9 million at September 30, 2012, represented 12.2% of total loans, loans secured by multi-family residential properties of $86.8
million represented 4.0% of total loans, and loans secured by non-farm, non-residential properties of $1.16 billion represented 54.0% of total loans.
Construction loans at September 30, 2012, included $145.3 million in loans to commercial builders of single family residential property and $10.5 million to individuals on single family residential
property, together representing 7.3% of total loans. These loans are made to a number of unrelated entities and generally have a term of twelve to eighteen months. In addition, the Company had $105.1 million of construction loans on non-residential
commercial property at September 30, 2012, representing 4.9% of total loans. Total construction loans of $260.9 million include $114.2 million in land acquisition and/or development loans on residential property and $51.7 million in land
acquisition and/or development loans on commercial property, together totaling $165.9 million, or 7.7% of total loans. Potential adverse developments in the Northern Virginia real estate market or economy, including substantial increases in mortgage
interest rates, slower housing sales, and increased commercial property vacancy rates, could have an adverse impact on these groups of loans and the Banks income and financial position. At September 30, 2012, the Company had no other
concentrations of loans in any one industry exceeding 10% of its total loan portfolio. An industry for this purpose is defined as a group of counterparties that are engaged in similar activities and have similar economic characteristics that would
cause their ability to meet contractual obligations to be similarly affected by changes in economic or other conditions. In addition, the Bank has commercial loans of $230.0 million, or 10.7% of the Banks total loan portfolio, to businesses
and organizations, including trade associations, professional corporations, community associations, government contractors, medical practitioners, property management companies, religious organizations and houses of worship, heavy equipment
contractors and others primarily located in the Northern Virginia market. These commercial loans generally represent short term obligations to support working capital needs and/or term loans to finance the purchase of business assets.
The Bank has established formal policies relating to the credit and collateral requirements in loan originations including policies that establish limits
on various loan types as a percentage of total loans and total capital. Loans to purchase real property are generally collateralized by the related property with limitations based on the propertys appraised value. Credit approval is primarily
a function of collateral and the evaluation of the creditworthiness of the individual borrower and guarantors and/or the individual project, to include an analysis of cash flows and secondary repayment sources.
The federal banking regulators have issued guidance for those institutions which are deemed to have concentrations in commercial real estate lending.
Pursuant to the supervisory criteria contained in the guidance for identifying institutions with a potential commercial real estate concentration risk, institutions which have (1) total reported loans for construction, land development, and
other land which represent in total 100% or more of an institutions total risk-based capital; or (2) total commercial real estate loans representing 300% or more of the institutions total risk-based capital and the
institutions commercial real estate loan portfolio has increased 50% or more during the prior 36 months are identified as having potential commercial real estate concentration risk. Institutions which are deemed to have concentrations in
commercial real estate lending are expected to employ heightened levels of risk management with respect to their commercial real estate portfolios and may be required to hold higher levels of capital. The Company, like many community banks, has a
concentration in commercial real estate loans. Management has extensive experience in commercial real estate lending and has implemented and continues to maintain heightened portfolio monitoring and reporting, and strong underwriting criteria with
respect to its commercial real estate portfolio. The Company is well-capitalized. Nevertheless, it is possible that the Company could be required to maintain higher levels of capital as a result of our commercial real estate concentration, which
could require us to obtain additional capital, and may adversely affect stockholder returns.
Non-Interest Income
Non-interest income represented 14.1% and 6.6% of total revenue for the nine months ended September 30, 2012, and September 30, 2011,
respectively. Although interest income is our primary source of revenue, we remain committed to increasing non-interest income as a way to improve profitability and diversify our sources of revenue.
For the three months ended September 30, 2012, the Company recognized $4.7 million in non-interest income, compared to non-interest income of $1.9
million for the three months ended September 30, 2011. For the nine months ended September 30, 2012, the Company recognized $13.1 million in non-interest income, compared to non-interest income of $5.7 million for the nine months ended
September 30, 2011.
43
The following table presents the components of non-interest income for the three and nine months ended
September 30, 2012, and 2011:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
September 30,
|
|
|
Nine Months Ended
September 30,
|
|
|
From the Three
Months
Ended
September 30, 2011 to
the Three Months
Ended September 30,
2012
|
|
(Dollars in thousands)
|
|
2012
|
|
|
2011
|
|
|
2012
|
|
|
2011
|
|
|
$ change
|
|
|
% change
|
|
Service charges on deposits
|
|
$
|
882
|
|
|
$
|
839
|
|
|
$
|
2,638
|
|
|
$
|
2,430
|
|
|
$
|
43
|
|
|
|
5.1
|
%
|
Non-deposit investment services commissions
|
|
|
211
|
|
|
|
340
|
|
|
|
705
|
|
|
|
1,053
|
|
|
|
(129
|
)
|
|
|
-37.9
|
%
|
Gains on loans held-for-sale
|
|
|
1,082
|
|
|
|
744
|
|
|
|
2,913
|
|
|
|
1,799
|
|
|
|
338
|
|
|
|
45.4
|
%
|
Gain on sale of securities available-for-sale
|
|
|
2,056
|
|
|
|
|
|
|
|
5,976
|
|
|
|
503
|
|
|
|
2,056
|
|
|
|
100.0
|
%
|
Impairment loss on securities, net
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(732
|
)
|
|
|
|
|
|
|
|
%
|
Bank-owned life insurance
|
|
|
50
|
|
|
|
58
|
|
|
|
159
|
|
|
|
544
|
|
|
|
(8
|
)
|
|
|
13.8
|
%
|
Other income
|
|
|
444
|
|
|
|
(41
|
)
|
|
|
704
|
|
|
|
75
|
|
|
|
485
|
|
|
|
1,118.2
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Non-Interest Income
|
|
$
|
4,725
|
|
|
$
|
1,940
|
|
|
$
|
13,095
|
|
|
$
|
5,672
|
|
|
$
|
2,785
|
|
|
|
143.6
|
%
|
Included in non-interest income for the third quarter of 2012, is a gain on sale of securities of $2.1 million, while the
third quarter of 2011 did not include a gain or loss on sale of securities. For the nine months ended September 30, 2012, non-interest income included a gain on sale of securities of $6.0 million, while non-interest income for the nine months
ended September 30, 2011, included an impairment loss on securities of $732 thousand, which was partially offset by a gain on sale of securities of $503 thousand as well as a bank-owned life insurance death benefit of $361 thousand. Excluding
the gain on sale of securities available-for-sale, impairment loss on securities and bank-owned life insurance death benefits, non-interest income grew 37.6%, from $1.9 million for the three months ended September 30, 2011, to $2.7 million for
the three months ended September 30, 2012, and grew 28.5%, from $5.5 million for the nine months ended September 30, 2011, to $7.1 million for the nine months ended September 30, 2012.
Fees and net gains on loans held-for-sale increased in the third quarter of 2012, on a year-over-year basis by $338 thousand, or 45.4%. The increase can
be primarily attributed to higher volume of mortgage loans originated for sale in the secondary market, which was driven by lower interest rates on mortgage products during 2012. For the nine months ended September 30, 2012, fees and net gains
on loans held-for-sale increased $1.1 million, or 61.9% compared to the nine months ended September 30, 2011. Mortgage loans held-for sale totaling $146.8 million were closed in the nine months ended 2012, as compared to $103.7 million to the
same period for 2011.
Non-Interest Expense
For the three months ended September 30, 2012, the Company recognized $15.2 million in non-interest expense, compared to non-interest expense of $14.9 million for the three months ended
September 30, 2011. For the nine months ended September 30, 2012, the Company recognized $47.4 million in non-interest expense, compared to non-interest expense of $43.9 million for the nine months ended September 30, 2011. The
following table presents the components of non-interest expense for the three and nine months ended September 30, 2012, and 2011:
44
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
September 30,
|
|
|
Nine Months Ended
September 30,
|
|
|
From the Three Months
Ended
Sept
30, 2011 to the
Three Months Ended
Sept 30, 2012
|
|
(Dollars in thousands)
|
|
2012
|
|
|
2011
|
|
|
2012
|
|
|
2011
|
|
|
$ change
|
|
|
% change
|
|
Salaries and employee benefits expense
|
|
$
|
7,493
|
|
|
$
|
6,591
|
|
|
$
|
22,517
|
|
|
$
|
19,676
|
|
|
$
|
902
|
|
|
|
13.7
|
%
|
Premises and equipment expense
|
|
|
2,380
|
|
|
|
2,293
|
|
|
|
7,142
|
|
|
|
7,006
|
|
|
|
87
|
|
|
|
3.8
|
%
|
FDIC insurance
|
|
|
660
|
|
|
|
864
|
|
|
|
2,488
|
|
|
|
3,394
|
|
|
|
(204
|
)
|
|
|
-23.6
|
%
|
(Gain) loss on other real estate owned
|
|
|
(141
|
)
|
|
|
546
|
|
|
|
1,566
|
|
|
|
1,022
|
|
|
|
(687
|
)
|
|
|
-125.8
|
%
|
OREO expense
|
|
|
322
|
|
|
|
277
|
|
|
|
902
|
|
|
|
616
|
|
|
|
45
|
|
|
|
16.3
|
%
|
Franchise tax expense
|
|
|
935
|
|
|
|
780
|
|
|
|
2,435
|
|
|
|
2,326
|
|
|
|
155
|
|
|
|
19.9
|
%
|
Data processing expense
|
|
|
664
|
|
|
|
652
|
|
|
|
1,992
|
|
|
|
1,942
|
|
|
|
12
|
|
|
|
1.8
|
%
|
Other operating expense
|
|
|
2,899
|
|
|
|
2,890
|
|
|
|
8,354
|
|
|
|
7,881
|
|
|
|
9
|
|
|
|
0.3
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Non-Interest Expense
|
|
$
|
15,212
|
|
|
$
|
14,893
|
|
|
$
|
47,396
|
|
|
$
|
43,863
|
|
|
$
|
319
|
|
|
|
2.1
|
%
|
The majority of the increase from the third quarter of 2011 to the third quarter of 2012, for the quarter ended
September 30, 2012, was a $902 thousand increase to salaries and employee benefits, $87 thousand increase in occupancy expense, and $155 thousand increase in franchise tax, partially offset by a decrease of $642 on other real estate owned
losses and $204 thousand in FDIC insurance. The increase in salaries and employee expense includes the impact of adding key personnel in our sales and support functions to support our continued growth and commissions paid to mortgage originators in
connection with greater mortgage production sold into the secondary market. For the nine months ended September 30, 2012 salaries and employee benefits expenses were $22.5 million, compared to $19.7 million for the same period in 2011. The
nine-month increase in salaries and employee benefits of $2.8 million was also due to adding key personnel in sales and support functions and greater commissions paid to mortgage originators.
Provision for Income Taxes
The Companys income tax provisions are adjusted for
non-deductible expenses and non-taxable income before applying the U.S. federal income tax rate of 35%. For the nine months ended September 30, 2012, the Company recorded an income tax provision of $11.1 million compared to a provision of $9.9
million for the same period in 2011. Our effective tax rate was 33.3% and 32.8% for the nine months ended September 30, 2012 and September 30, 2011, respectively. Our provision for income taxes was positively impacted by non-taxable income
generated by the bank-owned life insurance earnings, and earnings from tax-exempt investment securities, which provided the greatest benefit to our effective tax rate.
Financial Condition
Total Assets
Total assets increased by $66.2 million, or 2.3%, to $3.00 billion at September 30, 2012, as compared to $2.94 billion at December 31, 2011. The
increase was largely the result of an increase in cash and cash equivalents of $161.0 million, which offset a decrease in loans, net of allowance for loan losses, of $17.7 million and a decrease in investment securities of $79.8 million.
Cash and cash equivalents of $243.6 million at September 30, 2012, increased primarily due to the growth in funding provided by securities sold
under agreement to repurchase. During the first nine months of 2012, securities sold under agreement to repurchase increased $146.0 million, or 55.5%, to $409.3 million at September 30, 2012. Securities sold under agreement to repurchase are
entered into primarily with in-market commercial customers that generally maintain a full relationship with the Bank, in the form of lending facilities and other deposit products. We invest these funds in short-term liquid assets, such as
interest-bearing deposits held at the Federal Reserve Bank, and investment securities available-for-sale to provide additional liquidity and incremental low-risk returns.
Investment Securities
Investment securities were $545.1 million representing a decrease of
$79.8 million from December 31, 2011. During the third quarter of 2012, the Company sold $26.0 million of investment securities resulting in a $1.6 million realized gain on sale of securities, and PreTSL VI was redeemed resulting in a gain of
$436 thousand. The purchase
45
of investment securities made during the third quarter were predominantly at a premium to book value in short-term, pass-through mortgage backed securities and collateralized mortgage obligations
issued by government sponsored entities, with an average life of three to five and a half years. This strategy positions the Company with strong liquid assets to maintain a constant flow of funds to support future loan growth and to provide
repricing opportunities if rates begin to rise over the next few years. We held 18.1% of our total assets in the investment security portfolio at September 30, 2012, compared to 21.3% at December 31, 2011. We expect the current level of
investment securities as a percentage of total assets will decline over time as the mix between investment securities and loans will change due to anticipated growth in our loan portfolio.
The investment portfolio also contains three pooled trust preferred securities with a book value of $5.6 million, and a fair value of $358 thousand at September 30, 2012, for which the Company
performs a quarterly analysis to determine whether any other than temporary impairment exists on the three pooled trust preferred securities. The analysis includes stress tests on the underlying collateral and cash flow estimates based on expected
prepayments and on the current and projected future levels of deferrals and defaults within each pool. There has been no recorded impairment loss in the nine months ended September 30, 2012, compared to an impairment loss of $732 thousand for
the same time period in 2011.
Loans
Loans, net of allowance for loan losses, decreased $17.7 million, or 0.8%, from $2.12 billion at December 31, 2011, to $2.10 billion at September 30, 2012. The most significant decrease in
loans, net was $65.5 million, or 20.1%, in our real estate construction portfolio. The Company has significantly reduced its concentration in real estate construction loans, both residential and commercial, from 15.0% of total loans at
December 31, 2011, to 12.2% at September 30, 2012. Loan growth has been favorable in our real estate non-farm, non-residential portfolio, real estate one-to-four family residential, and real estate multi-family residential increasing $25.8
million, $25.8 million, and $10.3 million, respectively, from December 31, 2011 to September 30, 2012. The orientation of loan generation efforts and loan mix is reflective of the continued focus on building greater market share in
commercial lending and residential real estate lending, while limiting ADC lending and non-farm, non-residential real estate lending to select transactions in key markets with solid economic metrics.
Loans held-for-sale
Loans
held-for-sale, which are originated by our mortgage division and intended for sale in the secondary market, increased $845 thousand, from $18.5 million at December 31, 2011, to $19.3 million at September 30, 2012. Loans sold to
correspondent banks are subject to repurchase as a result of specific events outlined in the correspondent purchase agreements. The repurchase events, include but are not limited to, deficiencies in documentation standards, and defaults or pay-offs
within a specified period of time. The Company did not maintain a reserve for repurchases at September 30, 2012, and December 31, 2011, and has historically experienced an insignificant amount of repurchases.
Deposits
Total deposits at
September 30, 2012, were $2.21 billion, a decrease of $79.6 million, or 3.5%, from $2.29 billion at December 31, 2011. The decrease was driven by reductions in time deposits of $133.6 million or 17.1% while demand deposits increased $52.8
million, or 15.6%. The reduction in time deposits was intentional and resulted from a series of interest rate reductions that began in late 2011, and continued through the third quarter of 2012. As a result, the cost of total interest-bearing
deposits declined from 1.30% for the quarter ended September 30, 2011, to 0.91% for the quarter ended September 30, 2012. The cost of total deposits declined from 1.11% for the quarter ended September 30, 2011, to 0.76% for the
quarter ended September 30, 2012. The Companys deposit mix continues to be heavily weighted in lower-cost noninterest-bearing demand deposits, savings and interest-bearing demand deposits, which comprised 70.8% of total deposits at
September 30, 2012, compared to 65.9% at December 31, 2011.
Capital Levels and Stockholders Equity
Stockholders equity increased $27.8 million, or 9.8%, from $283.8 million at December 31, 2011, to $311.5 million at September 30, 2012,
with approximately $7.3 million in net proceeds from the above referenced stock issuances, net income to common stockholders of $18.3 million for the first nine months of 2012, a $292 thousand decrease in other comprehensive income related to the
investment securities portfolio, $1.4 million in the accretion
46
of the discount on preferred stock and $1.1 million in proceeds and tax benefits related to the exercise of options by the Companys directors and officers, and stock option expense credits.
The Companys Tier 1 and total qualifying capital ratios are each up 174 basis points from December 31, 2011, to 16.29% and 17.55%, respectively, and its tangible common equity ratio is up 71 basis points to 8.08% at September 30,
2012.
Liquidity
The
Companys principal source of liquidity and funding is its customer deposit base. The level of deposits necessary to support the Companys lending and investment activities is determined through monitoring loan demand. Considerations in
managing the Companys liquidity position include, but are not limited to, scheduled cash flows from existing loans and investment securities, anticipated deposit activity including the maturity of time deposits, pricing and dollar amount of
in-market customer deposits, use of wholesale funding such as Certificate of Deposit Account Registry Service (CDARS) reciprocal deposits, borrowing capacity at the FHLB, and projected needs from anticipated extensions of credit. The
Companys liquidity position is monitored daily by management to maintain a level of liquidity that can efficiently meet current needs and is evaluated for both current and longer term needs as part of the asset/liability management process. On
a monthly basis, the Asset/Liability Committee (ALCO) of the board of directors reviews a comprehensive liquidity analysis and updates the Companys liquidity strategy as necessary.
The Company has taken a very prudent and disciplined approach to wholesale funding as a source of liquidity. Our successful strategy in gathering
in-market customer deposits to fund loan growth has limited our reliance on wholesale funding. Wholesale funding sources include, but are not limited to, Federal funds, public funds (such as state and local municipalities), FHLB advances, securities
sold under agreement to repurchase, and brokered deposits. We have set limits on the use of wholesale funding sources, which includes limiting brokered deposits to no more than $50.0 million maturing in any one-month and to no more than 10.0% of
total deposits maturing within one-year.
As of September 30, 2012, and September 30, 2011, we did not have any brokered deposits,
other than CDARS reciprocal deposits, on our balance sheet. CDARS reciprocal deposits are deposits that have been placed into a deposit placement service which allows us to place our customers funds in FDIC-insured time deposits at other banks
and at the same time, receive an equal sum of funds from customers of other banks within the deposit placement service. CDARS reciprocal deposits of $55.1 million and $95.5 million are included in our time deposit portfolio and account for 2.5% and
4.2% of our total deposits at September 30, 2012, and December 31, 2011, respectively. Time deposits comprise approximately $647.1 million, or 29.3%, of our total deposit liabilities at September 30, 2012. At September 30, 2012
and 2011, we had customer securities sold under agreement to repurchase of $334.3 million and $126.7 million, respectively. We also had wholesale securities sold under agreement to repurchase of $75.0 million as of September 30, 2012 and 2011.
The Company measures total liquidity through cash and cash equivalents, investment securities available-for-sale, mortgage loans
held-for-sale, other loans and investment securities maturing within one year, less securities pledged as collateral for repurchase agreements, public deposits and other purposes, and less any outstanding Federal funds purchased. These liquidity
sources decreased $40.7 million, or 5.2%, from $781.2 million at December 31, 2011, to $740.5 million at September 30, 2012, primarily due to a $168.9 million increase in securities pledged as collateral for repurchase agreements,
partially offset by a $163.0 million increase in interest-bearing deposit accounts at other banks. Additional sources of liquidity available to the Bank include the capacity to borrow funds through established short-term lines of credit with various
correspondent banks and the Federal Home Loan Bank of Atlanta. See Note 8 to the Consolidated Financial Statements for further information regarding these additional liquidity sources.
It is our opinion that our liquidity position at September 30, 2012, is adequate to respond to fluctuations on and off balance sheet. In addition, we know of no trends,
demands, commitments, events or uncertainties that may result in, or that are reasonably likely to result in our inability to meet anticipated or unexpected liquidity needs.
Off-Balance Sheet Arrangements
The Company enters into certain off-balance sheet
arrangements in the normal course of business to meet the financing needs of its customers. These off-balance sheet arrangements include unfunded lines of credit, commitments to extend credit, standby letters of credit and financial guarantees,
totaling $582.9 million and $539.2 million as of September 30, 2012, and December 31, 2011, respectively. These arrangements would impact the
47
Companys liquidity and capital resources to the extent customers accept and/or use these commitments. These instruments involve, to varying degrees, elements of credit and interest rate
risk in excess of the amount recognized in the balance sheet. With the exception of these off-balance sheet arrangements, and the Companys obligations in connection with its trust preferred securities, the Company has no off-balance sheet
arrangements that have or are reasonably likely to have a current or future effect on the Companys financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures, or capital
resources, that is material to investors.
Unfunded lines of credit and commitments to extend credit amounted to $538.2 million at
September 30, 2012, and $498.1 million at December 31, 2011, represent legally binding agreements to lend to a customer as long as there is no violation of any condition established in the contract. Unfunded lines of credit and commitments
to extend credit were $478.9 million and $59.3 million, respectively, at September 30, 2012, and were $478.3 million and $19.8 million, respectively, at December 31, 2011. Commitments to extend credit generally have fixed expiration dates
or other termination clauses and may require payment of a fee. Since many of the commitments are expected to expire without being drawn upon, the total commitment amounts do not necessarily represent future cash requirements.
Standby letters of credit are conditional commitments issued by the Company guaranteeing the performance of a customer to a third party. Those guarantees
are primarily issued to support public and private borrowing arrangements. At September 30, 2012, and December 31, 2011, the Company had $44.7 million and $41.1 million, respectively, in outstanding standby letters of credit.
Contractual Obligations
Since
December 31, 2011, there have been no significant changes in the Companys contractual obligations.
Capital
The assessment of capital adequacy depends on a number of factors such as asset quality, liquidity, earnings performance, changing competitive conditions
and economic forces, and the overall level of growth. The adequacy of the Companys current and future capital is monitored by management on an ongoing basis. Management seeks to maintain a capital structure that will assure an adequate level
of capital to support anticipated asset growth and to absorb potential losses.
We are subject to various regulatory capital requirements
administered by banking regulators. Failure to meet minimum capital requirements can initiate certain actions by regulators that could have a material effect on our financial condition and the consolidated financial statements. Both the
Companys and the Banks capital levels continue to meet regulatory requirements. The primary indicators relied on by bank regulators in measuring the capital position are the Tier 1 risk-based capital, total risk-based capital, and
leverage ratios. Tier 1 capital consists of common and qualifying preferred stockholders equity, less goodwill, and for the Company includes certain minority interests relating to bank subsidiary issued securities, and a limited amount of
restricted core capital elements. Restricted core capital elements include qualifying cumulative preferred stock interests, certain minority interests in subsidiaries and qualifying trust preferred securities. All of the $71.0 million in preferred
stock interests issued to the Treasury under the Capital Purchase Program qualify as Tier 1 capital. Total risk-based capital consists of Tier 1 capital, qualifying subordinated debt, and a portion of the allowance for loan losses, and for the
Company, a limited amount of excess restricted core capital elements. Risk-based capital ratios are calculated with reference to risk-weighted assets. The leverage ratio compares Tier 1 capital to total average assets. The Banks Tier 1
risk-based capital ratio was 15.81% at September 30, 2012, compared to 14.21% at December 31, 2011, and its total risk-based capital ratio was 17.06% at September 30, 2012, compared to 15.47% at December 31, 2011. These ratios
are in excess of the minimum regulatory requirement of 4.00% and 8.00%, respectively. The Banks leverage ratio was 12.00% at September 30, 2012, compared to 11.40% at December 31, 2011, and in excess of the minimum regulatory
requirement of 4.00%. The Companys Tier 1 risk-based capital ratio, total risk-based capital ratio, and leverage ratio was 16.29%, 17.55%, and 12.27%, respectively, at September 30, 2012, compared to 14.55%, 15.81%, and 11.61% at
December 31, 2011. In addition the Companys and the Banks capital ratios exceeded the amounts required to be considered well capitalized as defined in the applicable banking regulations. The increases in these capital
ratios are due to additional Tier 1 capital raised through exercise of warrants totaling $7.3 million, additional net income available to common stockholders of $18.3 million and an $84.5 million reduction in risk-weighted assets at
September 30, 2012, compared to December 31, 2011.
48
The ability of the Company to continue to maintain its overall asset size, or to grow, is dependent on its
earnings and the ability to obtain additional funds for contribution to the Banks capital, through earnings, borrowing, the sale of additional common stock, or the issuance of additional other qualifying securities. In the event that the
Company is unable to obtain additional capital for the Bank on a timely basis, the growth of the Company and the Bank may be curtailed, and the Company and the Bank may be required to reduce their level of assets in order to maintain compliance with
regulatory capital requirements. Under those circumstances net income and the stockholders equity may be adversely affected.
Guidance
by the federal banking regulators provides that banks which have concentrations in construction, land development or commercial real estate loans (other than loans for majority owner occupied properties) would be expected to maintain higher levels
of risk management and, potentially, higher levels of capital. It is possible that we may be required to maintain higher levels of capital than we would otherwise be expected to maintain as a result of our levels of construction, development
and commercial real estate loans.
Pursuant to the Dodd-Frank Wall Street Reform and Consumer Protection Act, the Federal Reserve has revised
the capital treatment of trust preferred securities to provide that, beginning in 2011, such securities can be counted as Tier 1 capital at the holding company level, together with other restricted core capital elements, up to 25% of total capital
(net of goodwill), and any excess as Tier 2 capital, subject to limitation. At September 30, 2012, trust preferred securities represented 17.5% of the Companys Tier 1 capital and 16.2% of its total risk-based capital. The Federal Reserve
Board, acting in concert with the other federal banking regulatory agencies, has published proposed rules that, if adopted, would generally implement the Basel III capital standards upon bank holding companies greater than $500 million in total
consolidated assets. Among other changes, the proposed rules to implement the Basel III capital standards would phase-out treatment of trust preferred securities as Tier 1 capital over a five-year implementation period. The Company anticipates that
the Federal Reserve Board will adopt a final version of these proposed rules sometime in 2013. We will continue to monitor the impact that these regulations will have on our Company. See Note 9 to the Consolidated Financial Statements for further
information regarding trust preferred securities.
Capital Issuances.
As noted above, during 2008, the Company accepted
an investment by Treasury under the Capital Purchase Program. In connection with that investment, the Company entered into and consummated a Securities Purchase Agreement with the Treasury, pursuant to which the Company issued 71,000 shares of the
Companys Fixed Rate Cumulative Perpetual Preferred Stock, Series A (Series A Preferred Stock), having a liquidation amount per share equal to $1,000, for a total purchase price of $71.0 million. The Series A Preferred Stock pays
cumulative dividends at a rate of 5% per year for the first five years and thereafter at a rate of 9% per year. Subject to approval by the Treasury after consultation with the Companys and Banks federal regulators, the Company
may, at its option, redeem the Series A Preferred Stock at the liquidation amount plus accrued and unpaid dividends. The Series A Preferred Stock is non-voting, except in limited circumstances.
In connection with the purchase of the Series A Preferred Stock, the Treasury was issued a warrant (the Warrant) to purchase 2,696,203 shares
of the Companys common stock at an initial exercise price of $3.95 per share. The Warrant provides for the adjustment of the exercise price and the number of shares of the common stock issuable upon exercise pursuant to customary anti-dilution
provisions, such as upon stock splits or distributions of securities or other assets to holders of the common stock, and upon certain issuances of the common stock (or securities exercisable or exchangeable for, or convertible into, common stock) at
or below 90% of the market price of the common stock on the trading day prior to the date of the agreement on pricing such securities. The Warrant expires ten years from the date of issuance. If the Company redeems the Series A Preferred Stock in
full prior to exercise of the Warrant, the Warrant may be liquidated based upon the then current fair market value of the common stock. The Treasury has agreed not to exercise voting power with respect to any shares of common stock issued upon
exercise of the Warrant.
Please refer to Note 9 to the Consolidated Financial Statements for additional information regarding the issuance in
2008 of $25 million of trust preferred securities and warrants to purchase 1.5 million shares of the Companys common stock to certain directors and executive officers of the Company.
Recent Accounting Pronouncements
In
July 2012, the FASB issued ASU 2012-02, Intangibles Goodwill and Other (Topic 350): Testing Indefinite-Lived Intangible Assets for Impairment. The amendments in this ASU apply to all entities that have indefinite-lived intangible
assets, other than goodwill, reported in their financial statements. The amendments in this ASU
49
provide an entity with the option to make a qualitative assessment about the likelihood that an indefinite-lived intangible asset is impaired to determine whether it should perform a quantitative
impairment test. The amendments also enhance the consistency of impairment testing guidance among long-lived asset categories by permitting an entity to assess qualitative factors to determine whether it is necessary to calculate the assets
fair value when testing an indefinite-lived intangible asset for impairment. The amendments are effective for annual and interim impairment tests performed for fiscal years beginning after September 15, 2012. Early adoption is permitted. The
Company does not expect the adoption of ASU 2012-02 to have a material impact on its consolidated financial statements.
In October 2012, the
FASB issued ASU 2012-06, Business Combinations (Topic 805): Subsequent Accounting for an Indemnification Asset Recognized at the Acquisition Date as a Result of a Government-Assisted Acquisition of a Financial Institution. The amendments
in this ASU clarify the applicable guidance for subsequently measuring an indemnification asset recognized as a result of a government-assisted acquisition of a financial institution. In addition, the amendments should resolve current diversity in
practice on the subsequent measurement of these types of indemnification assets. The amendments are effective for fiscal years, and interim periods within those years, beginning on or after December 15, 2012. Early adoption is permitted. The
amendments should be applied prospectively to any new indemnification assets acquired after the date of adoption and to indemnification assets existing as of the date of adoption arising from a government-assisted acquisition of a financial
institution. The Company does not expect the adoption of ASU 2012-06 to have a material impact on its consolidated financial statements.
In
April 2011, the Financial Accounting Standards Board (the FASB) issued Accounting Standards Update (ASU) 2011-03, Transfers and Servicing (Topic 860) Reconsideration of Effective Control for Repurchase
Agreements. The amendments in this ASU remove from the assessment of effective control (1) the criterion requiring the transferor to have the ability to repurchase or redeem the financial assets on substantially the agreed terms, even in
the event of default by the transferee and (2) the collateral maintenance implementation guidance related to that criterion. The amendments in this ASU are effective for the first interim or annual period beginning on or after December 15,
2011. The guidance should be applied prospectively to transactions or modifications of existing transactions that occur on or after the effective date. Early adoption is not permitted. The adoption of the new guidance did not have a material impact
on the Companys consolidated financial statements.
In May 2011, the FASB issued ASU 2011-04, Fair Value Measurement (Topic 820)
Amendments to Achieve Common Fair Value Measurement and Disclosure Requirements in U.S. GAAP and IFRSs. This ASU is the result of joint efforts by the FASB and International Accounting Standards Board (IASB) to develop a single,
converged fair value framework on how (not when) to measure fair value and what disclosures to provide about fair value measurements. The ASU is largely consistent with existing fair value measurement principles in U.S. GAAP (Topic 820), with many
of the amendments made to eliminate unnecessary wording differences between U.S. GAAP and International Financial Reporting Standards (IFRS). The amendments are effective for interim and annual periods beginning after December 15, 2011, with
prospective application. Early application is not permitted. The Company has included the required disclosures in its consolidated financial statements.
In June 2011, the FASB issued ASU 2011-05, Comprehensive Income (Topic 220) Presentation of Comprehensive Income. The objective of this ASU is to improve the comparability, consistency
and transparency of financial reporting and to increase the prominence of items reported in other comprehensive income by eliminating the option to present components of other comprehensive income as part of the statement of changes in
stockholders equity. The amendments require that all non-owner changes in stockholders equity be presented either in a single continuous statement of comprehensive income or in two separate but consecutive statements. The single
statement of comprehensive income should include the components of net income, a total for net income, the components of other comprehensive income, a total for other comprehensive income, and a total for comprehensive income. In the two-statement
approach, the first statement should present total net income and its components followed consecutively by a second statement that should present all the components of other comprehensive income, a total for other comprehensive income, and a total
for comprehensive income. The amendments do not change the items that must be reported in other comprehensive income, the option for an entity to present components of other comprehensive income either net of related tax effects or before related
tax effects, or the calculation or reporting of earnings per share. The amendments in this ASU should be applied retrospectively. The amendments are effective for fiscal years and interim periods within those years beginning after December 15,
2011. Early adoption is permitted because compliance with the amendments is already permitted. The amendments do not require transition disclosures. The Company has included the required disclosures in its consolidated financial statements.
50
In September 2011, the FASB issued ASU 2011-08, Intangible Goodwill and Other (Topic 350)
Testing Goodwill for Impairment. The amendments in this ASU permit an entity to first assess qualitative factors related to goodwill to determine whether it is more likely than not that the fair value of the reporting unit is less
than its carrying amount as a basis for determining whether it is necessary to perform the two-step goodwill test described in Topic 350. The more-likely-than-not threshold is defined as having a likelihood of more than 50 percent. Under
the amendments in this ASU, an entity is not required to calculate the fair value of a reporting unit unless the entity determines that it is more likely than not that its fair value is less than its carrying amount. The amendments in this ASU
are effective for annual and interim goodwill impairment tests performed for fiscal years beginning after December 15, 2011. Early adoption is permitted, including for annual and interim goodwill impairment tests performed as of a date before
September 15, 2011, if an entitys financial statements for the most recent annual or interim period have not yet been issued. The adoption of the new guidance did not have a material impact on the Companys consolidated
financial statements.
In December 2011, the FASB issued ASU 2011-11, Balance Sheet (Topic 210) Disclosures about Offsetting
Assets and Liabilities. This ASU requires entities to disclose both gross information and net information about both instruments and transactions eligible for offset in the balance sheet and instruments and transactions subject to an agreement
similar to a master netting arrangement. An entity is required to apply the amendments for annual reporting periods beginning on or after January 1, 2013, and interim periods within those annual periods. An entity should provide the disclosures
required by those amendments retrospectively for all comparative periods presented. The Company does not expect the adoption of ASU 2011-11 to have a material impact on its consolidated financial statements.
In December 2011, the FASB issued ASU 2011-12, Comprehensive Income (Topic 220) Deferral of the Effective Date for Amendments to the
Presentation of Reclassifications of Items Out of Accumulated Other Comprehensive Income in Accounting Standards Update No. 2011-05. The amendments are being made to allow the FASB time to redeliberate whether to present on the face of
the financial statements the effects of reclassifications out of accumulated other comprehensive income on the components of net income and other comprehensive income for all periods presented. While the FASB is considering the operational concerns
about the presentation requirements for reclassification adjustments and the needs of financial statement users for additional information about reclassification adjustments, entities should continue to report reclassifications out of accumulated
other comprehensive income consistent with the presentation requirements in effect before ASU 2011-05. All other requirements in ASU 2011-05 are not affected by ASU 2011-12, including the requirement to report comprehensive income either in a single
continuous financial statement or in two separate but consecutive financial statements. Public entities should apply these requirements for fiscal years, and interim periods within those years, beginning after December 15, 2011. The Company has
included the required disclosures in its consolidated financial statements.
Internet Access To Company Documents
The Company provides access to its SEC filings through the Banks web site at www.vcbonline.com. After accessing the web site, the filings are
available upon selecting About VCB/Investor Relations/SEC Filings. The annual report on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K, and all amendments to those reports are made available as soon as reasonably
practicable after the reports are electronically filed or furnished to the SEC.
ITEM 3.
QUANTITATIVE
AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
In the normal course of business, the Company is exposed to market risk, or interest rate
risk, as its net income is largely dependent on its net interest income. Market risk is managed by the Companys Asset/Liability Management Committee that formulates and monitors the performance of the Company based on established levels of
market risk as dictated by policy. In setting tolerance levels, or limits on market risk, the Committee considers the impact on earnings and capital, the level and general direction of interest rates, liquidity, local economic conditions and other
factors. Interest rate risk, or sensitivity, can be defined as the amount of forecasted net interest income that may be gained or lost due to favorable or unfavorable movements in interest rates. Interest rate risk, or sensitivity, arises when the
maturity or repricing of interest-earning assets differs from the maturing or repricing of interest-bearing liabilities and as a result of the difference between total interest-earning assets and interest-bearing liabilities. The Company seeks to
manage interest rate sensitivity while enhancing net interest income by periodically adjusting this asset/liability position. In order to closely monitor and measure interest rate sensitivity, the Company uses earnings simulation models on a
quarterly basis.
51
We use a duration gap of equity approach to manage our long-term interest rate risk. This approach uses a
model which generates estimates of the change in our market value of portfolio equity (MVPE) over a range of interest rate scenarios. Given the current low interest rate environment, we limited the downward shock to 100 basis points.
MVPE is the present value of expected cash flows from assets and liabilities using various assumptions about estimated loan prepayment rates, reinvestment rates and deposit decay rates all discounted to a measurement date.
Our short term interest rate sensitivity is managed through the use of a model that generates estimates of the change in the net interest income when
interest rates are shocked upward and downward from the base case. Given the current rate environment, we limited the downward change to 100 basis points. Net interest income depends upon the relative amounts of interest-earning assets and
interest-bearing liabilities and the interest rates earned or paid on them. The model captures the timing of the repricing of interest sensitive assets and interest sensitive liabilities as well as the degree of change (beta) in the
interest rates of particular asset and liability products that occurs as interest rates move upward or downward. The model assumes that the composition of the interest sensitive assets and interest sensitive liabilities existing at
September 30, 2012, remains constant over a two year period (base case) and also assumes that a particular change in interest rates is reflected uniformly across the yield curve regardless of the duration to maturity or repricing of specific
assets and liabilities.
The following table provides an analysis of our interest rate risk as measured by the estimated change in MVPE and
net interest income from the base case, resulting from instantaneous and sustained parallel shifts in interest rates as of September 30, 2012:
|
|
|
|
|
|
|
|
|
Interest
Rate Scenario
|
|
Sensitivity of Market
Value of Portfolio
Equity
September 30, 2012
Market Value of
Portfolio Equity
Percent Change
from Base
|
|
|
Sensitivity of Net
Interest Income
September 30,
2012
Net Interest
Income
Percent
Change
from Base
|
|
Up 200 bps
|
|
|
-5.0
|
%
|
|
|
+8.2
|
%
|
Up 300 bps
|
|
|
-12.7
|
%
|
|
|
+11.6
|
%
|
Down 100 bps
|
|
|
-0.8
|
%
|
|
|
-6.5
|
%
|
Management believes the modeled results are consistent with the short duration of the Companys balance sheet and
given the many variables that affect the actual timing of when assets and liabilities will reprice and the extent of that repricing. In shocking the current two year projection upward, interest-bearing liabilities are repricing slightly higher than
interest-earning assets; however, that decline in interest income is being offset by a higher level of interest-earning assets relative to interest-bearing liabilities. Since the earnings model uses numerous assumptions regarding the effect of
changes in interest rates on the timing and extent of repricing characteristics, future cash flows and customer behavior, the model cannot precisely estimate net income and the effect on net income from sudden changes in interest rates. Actual
results will differ from the simulated results due to the timing, magnitude and frequency of interest rate changes and changes in market conditions and management strategies, among other factors.
ITEM 4.
CONTROLS AND PROCEDURES
The Company maintains a system of controls and procedures designed to ensure that information required to be disclosed in reports that the company files with the SEC is recorded, processed, summarized and
reported, within the time periods specified in the SECs rules and forms. The Companys management, with the participation of the Companys Chief Executive Officer and Chief Financial Officer, has evaluated the effectiveness of the
Companys disclosure controls and procedures (as defined in Rule 13a-15(e) under the Exchange Act) as of the end of the period covered by this report. Based on that evaluation, the Chief Executive Officer and the Chief Financial Officer have
concluded that the Companys disclosure controls and procedures were effective as of September 30, 2012, to ensure that information required to be disclosed by the Company in reports that it files or submits under the Exchange Act is
recorded, processed, summarized and reported within the time periods specified in SEC rules and forms and that such information is accumulated and communicated to the Companys management, including the Companys Chief Executive Officer
and Chief Financial Officer, as appropriate to allow timely decisions regarding required disclosure. Because of the inherent limitations in all control systems, no evaluation of controls can provide
52
absolute assurance that the Companys disclosure controls and procedures will detect or uncover every situation involving the failure of persons within the Company or its subsidiary to
disclose material information required to be set forth in the Companys periodic reports.
The Companys management is also
responsible for establishing and maintaining adequate internal control over financial reporting (as defined in Rule 13a-15(f) under the Exchange Act). There was no change in the Companys internal control over financial reporting during the
most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, the Companys internal control over financial reporting.
53
PART II. OTHER INFORMATION
Item 1.
LEGAL PROCEEDINGS None
Item 1A.
RISK FACTORS
There have been no material
changes in the risk factors faced by the Company from those disclosed in the Companys annual report on Form 10-K for the year ended December 31, 2011.
Item 2.
UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
|
(a)
|
Sales of Unregistered Securities.
- None
|
|
(b)
|
Use of Proceeds.-
Not Applicable.
|
|
(c)
|
Issuer Purchases of Securities.
- None
|
Item 3.
DEFAULTS UPON SENIOR SECURITIES - None
Item
4.
MINE SAFETY DISCLOSURES - None
Item 5.
OTHER INFORMATION
|
(a)
|
Required 8-K Disclosures.
None
|
|
(b)
|
Changes in Procedures for Director Nominations by Securityholders.
None
|
Item 6.
EXHIBITS
|
|
|
Exhibit
No.
|
|
Description
|
|
|
3.1
|
|
Articles of Incorporation of Virginia Commerce Bancorp, Inc., as amended (incorporated by reference to Exhibit 3.1 to the Companys Quarterly Report on Form 10-Q for the
quarter ended March 31, 2006)
|
|
|
3.2
|
|
Articles of Amendment to the Articles of Incorporation relating to the Series A Preferred Stock (incorporated by reference to Exhibit 3.1 to the Companys Current Report on
Form 8-K filed on December 15, 2008)
|
|
|
3.3
|
|
Amended and Restated By-laws of Virginia Commerce Bancorp, Inc. (incorporated by reference to Exhibit 3.2 to the Companys Current Report on Form 8-K filed on July 27,
2007)
|
|
|
3.4
|
|
Amendment to the Amended and Restated By-laws of Virginia Commerce Bancorp, Inc. (incorporated by reference to exhibit 3.4 to the Companys Current Report on Form 8-K filed on
January 28, 2011)
|
|
|
31.1
|
|
Certification of Peter A. Converse, President and Chief Executive Officer
|
|
|
31.2
|
|
Certification of Mark S. Merrill, Executive Vice President and Chief Financial Officer
|
|
|
32.1
|
|
Certification of Peter A. Converse, President and Chief Executive Officer
|
|
|
32.2
|
|
Certification of Mark S. Merrill, Executive Vice President and Chief Financial Officer
|
|
|
101
|
|
The following materials from Virginia Commerce Bancorp, Inc.s quarterly report on Form 10-Q for the quarter ended September 30, 2012, formatted in XBRL (Extensible
Business Reporting Language), furnished herewith: (i) Consolidated Balance Sheets, (ii) Consolidated Statements of Income, (iii) Consolidated Statements of Comprehensive Income, (iv) Consolidated Statements of Changes in Stockholders Equity,
(v) Consolidated Statements of Cash Flows, and (vi) Notes to Consolidated Financial Statements
|
54
SIGNATURES
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.
|
|
|
|
|
|
|
|
|
|
|
Virginia Commerce Bancorp, Inc.
|
|
|
|
|
(Registrant)
|
|
|
|
|
Date: November 8, 2012
|
|
|
|
BY
|
|
/s/ Peter A. Converse
|
|
|
|
|
|
|
Peter A. Converse, President and Chief Executive Officer
|
|
|
|
|
|
|
(Principal Executive Officer)
|
|
|
|
|
Date: November 8, 2012
|
|
|
|
BY
|
|
/s/ Mark S. Merrill
|
|
|
|
|
|
|
Mark S. Merrill, Executive Vice President and Chief Financial Officer
|
|
|
|
|
|
|
(Principal Financial Officer)
|
55
Virginia Commerce Bancorp (MM) (NASDAQ:VCBI)
Graphique Historique de l'Action
De Juin 2024 à Juil 2024
Virginia Commerce Bancorp (MM) (NASDAQ:VCBI)
Graphique Historique de l'Action
De Juil 2023 à Juil 2024