Add
ACBA to Portfolio
Set Alert
Email to a
Friend
| |||
|
|
Quotes & Info
|
| ACBA > SEC Filings for ACBA > Form 10-Q on 13-Aug-2008 | All Recent SEC Filings |
13-Aug-2008
Quarterly Report
This Quarterly Report on Form 10-Q may contain certain forward-looking statements consisting of estimates with respect to the financial condition, results of operations and business of the Company that are subject to various factors which could cause actual results to differ materially from these estimates. These factors include, but are not limited to, general economic conditions, changes in interest rates, deposit flows, loan demand, real estate values, and competition; changes in accounting principles, policies, or guidelines; changes in legislation or regulation; and other economic, competitive, governmental, regulatory, and technological factors affecting the Company's operations, pricing, products, and services. There are no pending legal proceedings other than those incurred in the normal course of business to which the Company or subsidiaries are a party, or of which any of their property is the subject.
COMPARISON OF FINANCIAL CONDITION AT JUNE 30, 2008 AND DECEMBER 31, 2007
Total assets at June 30, 2008 increased by $24.3 million or 4.8% to $529.9 million compared to $505.6 million at December 31, 2007. The Company had earning assets of $487.8 million at June 30, 2008. Gross loans increased by $19.9 million or 5.1% to $412.9 million from $393.0 million at December 31, 2007. Investment securities and other non-marketable equity securities increased by $1.7 million or 2.2% to $80.6 million from $78.9 million at December 31, 2007. Total deposits as of June 30, 2008 increased by $16.7 million or 4.2% to $416.5 million compared to $399.8 million at December 31, 2007. Total borrowed money as of June 30, 2008 increased $8.6 million or 17.4% to $58.1 million compared to $49.5 million at December 31, 2007. Stockholders' equity was $54.8 million at June 30, 2008 compared to $54.0 million at December 31, 2007 for an increase of $747,000 million or 1.4%.
The allowance for loan losses increased by $650,000 or 11.3% to $6.4 million at June 30, 2008 as compared to $5.7 million at December 31, 2007. The increase in the allowance was due to a loan loss provision of $721,000 and was reduced by net loan and lease charge-offs of $71,000 for the six months ended June 30, 2008. The allowance for loan losses equaled 1.55% of total loans outstanding at June 30, 2008 as compared to 1.46% at December 31, 2007. The increase in the percentage of the allowance for loan losses to total loans outstanding is due to an increase in non-accrual loans and leases and related reserves. In addition the allowance for loan losses equaled 298% of non-performing loans and leases, which totaled $2.1 million at June 30, 2008 and 333% of non-performing loans and leases at December 31, 2007 which totaled $1.7 million. The increase in non-performing loans and leases is discussed further under "Provision for Loan Losses".
The Company had investment securities available for sale of $75.8 million at June 30, 2008. The portfolio increased by $782,000 or 1.0% from the $75.0 million balance at December 31, 2007. In addition the Company had investment securities held to maturity of $1.8 million at June 30, 2008 and December 31, 2007.
Interest-earning deposits with banks at June 30, 2008 decreased by $181,000 or 19.5% to $749,000 compared to $930,000 at December 31, 2007. The Company holds funds in interest-earning deposits with banks to provide liquidity for future loan demand and to satisfy fluctuations in deposit levels.
Non-interest earning assets at June 30, 2008 increased by $3.5 million or 9.1% to $42.0 million compared to $38.5 million at December 31, 2007. The increase is primarily attributable to an increase in the cash and due from banks category of $1.7 million to $16.1 million. The cash and due from banks primarily represents customer deposits that are in the process of collection and not available for overnight investment combined with cash on hand in the branches. Bank premises and equipment was $8.4 million at June 30, 2008, a decrease of $260,000. Accrued interest receivable decreased $492,000 to $2.1 million at June 30, 2008 as a result of the timing in the collection of interest income combined with lower interest rates in the loan portfolio. Other assets increased by $2.4 million primarily as a result of funding the $1.6 million Supplemental Employee Retirement Plan (SERP).
Total deposits increased $16.8 million or 4.2% from $399.8 million at December 31, 2007 to $416.6 million at June 30, 2008. The composition of the deposit base, by category, at June 30, 2008 is as follows: 13% non-interest bearing demand deposits, 4% savings deposits, 17% money market and NOW accounts and 66% time deposits. The non-interest bearing demand deposits and savings experienced decreases over the six-month period. Dollar and percentage decreases were as follows: non-interest bearing demand deposits, $2.2 million or 4.0% and savings, $6.5 million or 26.8%. The money and NOW category experienced an increase over the six-month period of $1.4 million or 2.0%. The time deposits experienced and increase of $24.1 million or 9.5%. Time deposits of $100,000 or more totaled $165.1 million, or 39.6% of total deposits at June 30, 2008. The composition of deposits at December 31, 2007 was 14% non-interest bearing demand deposits, 6% savings deposits, 17% money market and NOW accounts and 63% time deposits.
From time to time the Company also utilizes brokered deposits as a funding source. Brokered deposit balances at June 30, 2008 were $32.8 million as compared to $12.0 million at December 31, 2007, a $20.8 million or 173.3% increase.
Short-term borrowings consist of securities sold under agreement to repurchase and federal funds purchased. Total securities sold under agreement to repurchase and federal funds purchased, secured by certain of the Company's investment securities, decreased $11.4 million or 36.1% from $31.5 million at December 31, 2007 to $20.1 million at June 30, 2008. Long-term borrowings consist of advances from the Federal Home Loan Bank of Atlanta, subordinated debentures, and capital lease obligations. The Company had advances from the Federal Home Loan Bank of Atlanta at June 30, 2008 of $26.0 million with maturity dates ranging from July 2012 through February 2018. At December 31, 2007 the Company had advances from the Federal Home Loan Bank of Atlanta of $6.0 million with maturity dates ranging from July 2012 through February 2013. These advances are secured by a blanket lien on 1-4 family real estate loans, certain commercial real estate loans and certain securities available for sale. The Company also maintained the capital lease for its main office. The recorded obligation under this capital lease at June 30, 2008 and December 31, 2007 was $1.7 million. In addition, the Company carried subordinated debentures in the amount of $10.3 million at June 30, 2008 and December 31, 2007. The maturity date of the subordinated debentures is December 2033 and they are redeemable on or after December 2008.
Other liabilities decreased $1.9 million or 82.7% to $393,000 at June 30, 2008 from $2.3 million at December 31, 2007. The decrease is primarily attributable to a decrease in accrued income taxes for the year combined with a decrease in accrued interest on long-term debt. Stockholders' equity increased $747,000 or 1.4% to $54.8 million at June 30, 2008 compared to $54.0 million at December 31, 2007.
Comparison of Results of Operations for the Three Months Ended June 30, 2008 and 2007
Net Income. The Company generated net income for the three months ended June 30, 2008 of $484,000 compared to net income for the three months ended June 30, 2007 of $1,222,000. On a per share basis, basic earnings were $.07 for the first three months of 2008 compared to $.18 for 2007, and diluted earnings were $.07 for 2008 compared to $.17 for 2007. For the three months ended June 30, 2008 and 2007, respectively annualized return on average assets was 0.36% and 1.00% and annualized return on average equity was 3.46% and 8.81%.
Net Interest Income. Net interest income decreased $980,000 from $4.9 million for the three months ended June 30, 2007 to $3.9 million for the three months ended June 30, 2008. Net interest income decreased due to compression in net interest margin partially offset by growth in average earning assets.
Total average earning assets increased $28.4 million or 6.2% from an average of $460.6 million during the second quarter of 2007 to an average of $489.0 million during the second quarter of 2008. The Company experienced good loan growth with average loan balances increasing by $34.2 million, while average balances for investment securities and interest-earning deposits decreased $5.8 million. Average interest-bearing liabilities increased by $38.5 million during the three months ended June 30, 2008. Average interest-bearing deposits increased $19.2 million and average borrowings increased $19.3 million.
Net interest margin is interest income earned on loans, securities and other earning assets, less interest expense paid on deposits and borrowings, expressed as a percentage of total average earning assets. The net interest margin for the quarter ended June 30, 2008 was 3.23% compared to 4.28% for the same quarter in 2007. The decrease in net interest margin is primarily a result of deposit and borrowings costs decreasing slower than the yield on earning assets. The Federal Open Market Committee (FOMC) decreased short-term rates seven times for a total of 325 basis points beginning September 18, 2007 and ending April 30, 2008. Since the majority of our loans (approximately 60%) float with the prime lending rate, the yield on our loans decreased immediately as the FOMC lowered rates. Due to the longer term maturity structure of our deposits and borrowings, the costs of those liabilities were slower to decrease. The average yield on the Company's interest bearing assets decreased 152 basis points from 7.75% for the quarter ended June 30, 2007 to 6.23% for the same quarter in 2008. At the same time the average cost on interest earning liabilities only decreased 73 basis points from 4.22% for the quarter ended June 30, 2007 to 3.49% for the same quarter in 2008. The interest rate spread, which is the difference between the average yield on earning assets and the cost of interest-bearing funds, decreased 80 basis points from 3.53% in the quarter ended June 30, 2007 to 2.73% for the same quarter in 2008.
Provision for Loan Losses. Provisions for loan losses are charged to income to bring the allowance for loan losses to a level deemed appropriate by management. The Company's provision for loan losses for the quarter ended June 30, 2008 was $296,000, representing a $65,000 or 28.1% increase from the $231,000 recorded for the quarter ended June 30, 2007. The increase in the provision was primarily related to a increase in non-performing loans and leases of $630,000 or 41.7% from $1.5 million at June 30, 2007 to $2.1 million at June 30, 2008. Non-performing loans and leases are defined as non-accrual loans and leases plus loans and
leases 90 days past due and still accruing. Non-performing loans increased from $674,000 at June 30, 2007 to $1.6 million at June 30, 2008 while non-performing leases decreased from $837,000 million at June 30, 2007 to $527,000 at June 30, 2008. The Company continues to successfully liquidate the remainder of the leasing portfolio which is being serviced by a third party leasing company. As of June 30, 2008 the leasing portfolio totaled approximately $2.7 million compared to the balance of $5.9 million at June 30, 2007.
Non-interest Income. Non-interest income decreased by $182,000 or 25.2% to $540,000 for the three months ended June 30, 2008 compared with $722,000 for the same period in the prior year. Non-interest income as a percentage of total revenue (defined as net interest income plus non-interest income) decreased to 12.1% for the three months ended June 30, 2008 from 12.8% for the same period in the prior year. The largest components of non-interest income were service charges on deposit accounts of $597,000 for the quarter ended June 30, 2008, compared to $608,000 in 2007 and fees from mortgage banking operations of $95,000 in 2008 as compared to $93,000 in 2007. Other components of non-interest income include changes in fair value of interest rate floors and the SERP investment. The value of the 7.75% interest rate floor decreased $148,000 due to the market's perception that the Federal Open Market Committee is not going to drop short-term rates in the near future and the value of the SERP investment also decreased $72,000 due to market fluctuations.
Non-interest Expense. Total non-interest expense decreased $39,000 or 1.1% from $3.5 million for the three months ended June 30, 2007 to $3.4 million for the same period in 2008. The decrease was primarily due to a decrease in compensation expense of $104,000 or 6.0% related to a reduction in accrued incentive compensation and a decrease in other expenses of $111,000 or 11.9%. These decreases were partially offset by an increase in professional fees from $243,000 in 2007 to $369,000 in 2008. The increase in professional fees was primarily attributable to data processing related services, legal fees incurred in the ordinary course of business and fees associated with on-going regulatory and accounting compliance.
Provision for Income Taxes. The Company's provision for income taxes, as a percentage of income before income taxes, was 34.7% and 36.7% for the three months ended June 30, 2008 and 2007, respectively. Increased relative levels of tax exempt income in 2008 resulted in the lower effective tax rate.
Comparison of Results of Operations for the Six Months Ended June 30, 2008 and 2007
Net Income. The Company generated net income for the six months ended June 30, 2008 of $1.5 million compared to net income for the six months ended June 30, 2007 of $2.5 million. On a per share basis, basic earnings were $.23 for the first six months of 2008 compared to $.36 for 2007, and diluted earnings were $.22 for 2008 compared to $.35 for 2007. For the six months ended June 30, 2008 and 2007, respectively annualized return on average assets was .57% and 1.03% and annualized return on average equity was 5.35% and 9.04%.
Net Interest Income. Net interest income decreased $1.4 million from $9.7 million for the six months ended June 30, 2007 to $8.3 million for the six months ended June 30, 2008. The net interest income decrease was a result of the compression in net interest margin and was partially offset by an increase in average earning assets.
Total average earning assets increased $29.8 million or 6.6% from an average of $453.2 million during the first half of 2007 to an average of $483.0 during the first half of 2008. The Company experienced solid loan growth with average loan balances increasing by $27.3 million. Average balances for investment securities and interest-earning deposits increased $2.5 million. Average interest-bearing liabilities increased by $36.7 million for the six months ended June 30, 2008. Average deposits increased $20.0 million while average borrowings increased by $16.7 million.
Net interest margin is interest income earned on loans, securities and other earning assets, less interest expense paid on deposits and borrowings, expressed as a percentage of total average earning assets. The net interest margin for the six months ended June 30, 2008 was 3.44% compared to 4.32% for the six months ended June 30, 2007. The decrease in net interest margin is primarily a result of deposit and borrowings costs decreasing slower than the yield on earning assets. The Federal Open Market Committee (FOMC) decreased short-term rates seven times for a total of 325 basis points beginning September 18, 2007 and ending April 30, 2008. Since the majority of our loans (approximately 60%) float with the prime lending rate, the yield on our loans decreased immediately as the FOMC lowered rates. Due to the longer term maturity structure of our deposits and borrowings, the costs of those liabilities were slower to decrease. The yield on our interest earning assets decreased 122 basis points from 7.78% for the six months ended June 30, 2007 to 6.56% for the six months ended June 30, 2008. During the same time period, the cost of our interest bearing liabilities decreased from 4.22% to 3.67% or 55 basis points. The interest rate spread, which is the difference between the average yield on earning assets and the cost of interest-bearing funds, decreased 67 basis points from 3.56% for the six months ended June 30, 2007 to 2.89% for the same period in 2008.
Provision for Loan Losses. Provisions for loan losses are charged to income to bring the allowance for loan losses to a level deemed appropriate by management. The Company's provision for loan losses for the six months ended June 30, 2008 was $721,000, representing a $307,000 or 74.2% increase over the $414,000 recorded for the six months ended June 30, 2007. The increase in the provision was primarily related to an increase in non-performing loans and leases of $630,000 or 41.7% from $1.5 million at June 30, 2007 to $2.1 million at June 30, 2008. Non-performing loans and leases are defined as non-accrual loans and leases plus loans and leases 90 days past due and still accruing. Non-performing loans increased from $674,000 at June 30, 2007 to $1.6 million at June 30, 2008. In addition non-performing leases decreased from $837,000 at June 30, 2007 to $527,000 at June 30, 2008. The Company continues to successfully liquidate the remainder of the leasing portfolio which is being serviced by a third party leasing company. As of June 30, 2008 the leasing portfolio totaled approximately $2.7 million compared to the balance of $5.9 million at June 30, 2007.
Non-Interest Income. Non-interest income increased by $30,000 or 2.0% to $1.6 million for the six months ended June 30, 2008. Non-interest income as a percentage of total revenue (defined as net interest income plus non-interest income) increased to 15.9% at June 30, 2008 from 13.6% at June 30, 2007. The largest components of non-interest income were service charges on deposit accounts of $1.2 million for the six months ended June 30, 2008 an increase of $10,000 from the same period in 2007 and fees from mortgage banking operations of $181,000 in 2008 as compared to $173,000 in 2007 or a 4.6% increase. Other components of non-interest income include changes in fair value of interest rate floors and the SERP investment. The value of the 7.75% interest rate floor increased $124,000 while the value of the SERP investment decreased $91,000 due to market fluctuations.
Non-Interest Expenses. Total non-interest expense decreased from $6.9 million for the six months ended June 30, 2007 to $6.8 million for the same period in 2008, a $70,000 or 1.0% decrease. The decrease was primarily due to a decrease in compensation expense of $19,000 related to a reduction in accrued incentive compensation offset by the addition of personnel and a decrease in other expenses of $40,000.
Income Taxes. The Company's provision for income taxes, as a percentage of income before income taxes, was 35.3% and 36.5% for the six months ended June 30, 2008 and 2007, respectively. Increased relative levels of tax exempt income in 2008 resulted in the lower effective tax rate.
Liquidity and Capital Resources
Maintaining adequate liquidity while managing interest rate risk is the primary goal of the Company's asset and liability management strategy. Liquidity is the ability to fund the needs of the Company's borrowers and depositors, pay operating expenses, and meet regulatory liquidity requirements. Maturing investments, loan and mortgage-backed security principal repayments, deposit growth, borrowings from the Federal Home Loan Bank, and federal funds lines from correspondent banks are presently the main sources of the Company's liquidity. The Company's primary uses of liquidity are to fund loans, operating expenses, deposit withdrawals, repay borrowings and to make investments.
As of June 30, 2008, liquid assets (cash and due from banks, interest-earning deposits with banks, and investment securities available for sale) were approximately $92.6 million, which represents 17.5% of total assets and 19.5% of total deposits and borrowings. Supplementing this liquidity, the Company has available lines of credit from correspondent banks of approximately $35.5 million and an additional line of credit with the FHLB equal to 15% of assets (subject to available qualified collateral, with borrowings of $26.0 million outstanding from the FHLB at June 30, 2008). At June 30, 2008, outstanding commitments to extend credit were $9.0 million and available line of credit balances totaled $86.9 million. Management believes that the combined aggregate liquidity position of the Company is sufficient to meet the funding requirements of loan demand and deposit maturities and withdrawals in the near term.
Certificates of deposit represented 66.6% of the Company's total deposits at June 30, 2008, and 63.4% at December 31, 2007. The Company's growth strategy will include efforts focused at increasing the relative volume of transaction deposit accounts. Certificates of deposit of $100,000 or more represented 39.6% of the Company's total deposits at June 30, 2008. These deposits are generally considered rate sensitive, but management believes most of them are relationship-oriented. While the Company will need to pay competitive rates to retain these deposits at maturity, there are other subjective factors that will determine the Company's continued retention of those deposits.
Banks and bank holding companies, as regulated institutions, must meet required levels of capital. The FDIC and the Federal Reserve, the primary regulators of the Bank and the Company, respectively, have adopted minimum capital regulations or guidelines that categorize components and the level of risk associated with various types of assets. Financial institutions are expected to maintain a level of capital commensurate with the risk profile assigned to its assets in accordance with these guidelines. At June 30, 2008, the Company maintained capital levels exceeding the minimum levels for "well capitalized" bank holding companies and banks.
|
|