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| JFBC > SEC Filings for JFBC > Form 10-Q on 14-Aug-2009 | All Recent SEC Filings |
14-Aug-2009
Quarterly Report
Forward-Looking Statements
In addition to historical information, this report includes certain forward-looking statements with respect to the financial condition, results of operations and business of the Company based on current management's expectations. Economic circumstances, the Company's operations and the Company's actual results could differ significantly from those discussed in the forward-looking statements. Factors that could cause future results to vary from current management expectations include, but are not limited to, general economic conditions, legislative and regulatory changes, monetary and fiscal policies of the federal government, changes in tax policies, rates and regulations, changes in interest rates, deposit flows, the cost of funds, demand for loan products, demand for financial services, competition, changes in the quality or composition of the Company's loan and securities portfolios, changes in accounting principles, and other economic, competitive, governmental, and technological factors affecting the Company's operations, markets, products, services and prices. Some of these and other factors are discussed in the Company's annual and quarterly reports filed with the Securities and Exchange Commission. Such developments could have an adverse impact on the Company's financial position and results of operations.
A. Overview - Financial Condition
During the period from December 31, 2008 to June 30, 2009, total assets increased $19,009,000 or 4.8%. The increase was due to a $15,697,000 or 17.1% increase in investment securities and an increase of $6,700,000 in federal funds sold, partially offset by a $1,349,000 or 0.5% decrease in net loans and a $1,091,000 or 12.2% decrease in cash and cash due from banks. The net increase in total assets was funded by the large increase in deposits.
Total deposits increased from $296,724,000 at December 31, 2008 to $330,466,000 at June 30, 2009, an increase of $33,742,000 or 11.4%. NOW and super NOW accounts increased $3,895,000 or 13.8%, savings and insured money market deposits increased $8,225,000 or 11.1% and time deposits increased $18,598,000 or 13.7% due to seasonal influences and the Bank's enhanced sales initiative, along with changes and uncertainty in the marketplace. Depositors have increasingly brought deposits to banks, possibly due to lack of other investment opportunities and uncertainty in the stock market. Demand deposits increased $3,040,000 to $61,688,000 at June 30, 2009, an increase of 5.2%. Short-term and long-term debt decreased $10,093,000 and $5,000,000 because the increase in total deposits satisfied the Company's liquidity needs.
Total stockholders' equity increased $766,000 or 1.8% from $42,662,000 at December 31, 2008 to $43,428,000 at June 30, 2009. This increase was the result of net income of $1,632,000, a decrease of $235,000 in accumulated other comprehensive loss, less the payment of cash dividends of $1,101,000.
Loan Portfolio Composition, dollars in thousands:
June 30, 2009 December 31, 2008
Amount Percent Amount Percent
REAL ESTATE LOANS
Residential $ 99,771 37.5 % $ 103,212 38.6 %
Commercial 92,738 34.9 93,069 34.9
Home Equity 32,246 12.1 31,096 11.6
Farm land 3,896 1.5 3,879 1.4
Construction 2,327 0.9 2,737 1.0
230,978 86.9 % 233,993 87.5 %
OTHER LOANS
Commercial loans 25,702 9.7 25,183 9.4
Consumer installment loans 8,096 3.0 7,511 2.8
Other consumer loans 325 0.1 173 0.1
Agricultural loans 787 0.3 430 0.2
34,910 13.1 % 33,297 12.5 %
Total loans 265,888 100.0 % 267,290 100.0 %
Unamortized deferred loan fees and
origination costs 354 273
Allowance for loan losses (3,198 ) (3,170 )
Total loans, net $ 263,044 $ 264,393
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B. Allowance for Loan Losses
The allowance for loan losses reflects management's assessment of the risk inherent in the loan portfolio, which includes factors such as the general state of the economy and past loan experience. For the six months ended June 30, 2009 and 2008, a provision of $150,000 and $40,000 was recorded, respectively. Total charge-offs for the six month period ended June 30, 2009 were $223,000 compared to $239,000 for the same period in the prior year, and recoveries were $101,000 and $64,000 for the periods ended June 30, 2009 and 2008, respectively. The amounts represent net charge-offs of $122,000 versus $175,000 for the six months ended June 30, 2009 and 2008. Based on management's analysis of the loan portfolio, management believes the current level of the allowance for loan losses is adequate.
Changes in the allowance for loan losses are summarized as follows for the periods indicated, dollars in thousands:
Six months Six months
ended ended Year ended
June 30, June 30, December 31,
2009 2008 2008
Balance at beginning of period $ 3,170 $ 3,352 $ 3,352
Provision for loan losses 150 40 265
Loans charged-off (223 ) (239 ) (647 )
Recoveries 101 64 200
Balance at ending of period $ 3,198 $ 3,217 $ 3,170
Annualized net charge-offs as a percentage of
average outstanding loans 0.09 % 0.14 % 0.17 %
Allowance for loan losses to:
Total loans 1.20 % 1.24 % 1.18 %
Total non-performing loans 33.8 % 136.0 % 51.8 %
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The allowance for loan losses was $3.2 million for all three periods presented, at June 30, 2009 and 2008 and December 31, 2008. Nonperforming loans were $9.5 million at June 30, 2009 and $6.1 million at December 31, 2008. An increase in nonperforming loans with a relatively stable allowance for loan losses is reflected in the decrease of the allowance's coverage on nonperforming loans from 136.0% at June 30, 2008 to 51.8% at December 31, 2008 and 33.8% at June 30, 2009. While nonperforming loans have increased, the Bank's loans remain well collateralized, and with the Bank's minimal loss history and low charge-offs, management believes the allowance is adequate.
C. Nonaccrual and Past Due Loans
The Company places a loan on nonaccrual status when collectability of principal or interest in accordance with the provisions of the loan documents is doubtful, or when either principal or interest is 90 days or more past due. The majority of the Company's total nonaccrual and past due loans are secured loans and, as such, management anticipates there will be limited risk of loss upon their ultimate resolution. Interest income on nonaccrual loans that are well secured is recorded on a cash basis.
Nonperforming loans are summarized as follows at the following dates, dollars in thousands:
June 30, December 31,
2009 2008
Nonaccrual loans $ 7,493 $ 5,434
Loans past due 90 days or more and
still accruing interest 1,979 686
Total nonperforming loans $ 9,472 $ 6,120
Non-performing loans as a percentage of total loans 3.56 % 2.29 %
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As of June 30, 2009, there were $8,124,000 in loans, compared to $5,191,000 at December 31, 2008, which were considered to be impaired under Statement of Financial Accounting Standards ("SFAS") No.114.
D. Capital
Under the Office of Controller of the Currency's risk-based capital rules, the Bank's Tier I risk-based capital was 15.8% and total risk-based capital was 16.9% of risk-weighted assets at June 30, 2009. These risk-based capital ratios are well above the minimum regulatory requirements of 4.0% for Tier I capital and 8.0% for total capital. The Bank's leverage ratio (Tier I capital to average assets) of 10.7% at June 30, 2009 is well above the 4.0% minimum regulatory requirement.
The following table shows the Bank's actual capital measurements compared to the minimum regulatory requirements as of June 30, 2009, dollars in thousands:
As of June 30, 2009 TIER I CAPITAL Banks' equity, excluding the after-tax net other comprehensive loss $ 43,654 TIER II CAPITAL Allowance for loan losses (1) $ 3,209 Total risk-based capital $ 46,863 Risk-weighted assets (2) $ 276,625 Average total assets $ 408,014 RATIOS Tier I risk-based capital (minimum 4.0%) 15.8 % Total risk-based capital (minimum 8.0%) 16.9 % Leverage (minimum 4.0%) 10.7 % |
1 For Federal Reserve risk-based capital rule purposes, the allowance for loan losses includes allowance for credit losses on off-balance sheet letters of credit.
2 Risk-weighted assets have been reduced for the portion of allowance for loan losses excluded from total Tier II capital.
CONSOLIDATED AVERAGE BALANCE SHEET
For the six months ended June 30, 2009
(Fully taxable equivalent)
Dollars in thousands
Average Interest Annualized
balance earned/paid yield/rate
ASSETS
Securities available for sale and held to
maturity: (1)
Taxable securities $ 52,048 $ 1,151 4.42 %
Tax exempt securities (2) 45,390 1,385 6.10 %
Total securities 97,438 2,536 5.21 %
Other 3,659 5 0.27 %
Loans
Real estate mortgages 192,561 6,335 6.58 %
Home equity loans 31,142 953 6.12 %
Time and demand loans 24,947 537 4.31 %
Installment and other loans 18,737 881 9.40 %
Total loans (3) 267,387 8,706 6.51 %
Total interest earning assets 368,484 11,247 6.10 %
Other assets 39,685
Total assets $ 408,169
LIABILITIES AND STOCKHOLDERS' EQUITY
NOW and Super NOW deposits $ 34,280 43 0.25 %
Savings and insured money market deposits 77,816 199 0.51 %
Time deposits 147,694 2,172 2.94 %
Total interest bearing deposits 259,790 2,414 1.86 %
Other 998 2 0.40 %
Federal Home Loan Bank borrowings 34,171 716 4.19 %
Total interest bearing liabilities 294,959 3,132 2.12 %
Demand deposits 57,287
Other liabilities 12,672
Total liabilities 364,918
Stockholders' equity 43,251
Total liabilities and stockholders' equity $ 408,169
Net interest income - tax effected 8,115
Less: Tax gross up on exempt securities (467 )
Net interest income per statement of income $ 7,648
Net interest spread 3.98 %
Net interest margin (4) 4.40 %
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1 Yields on securities available for sale are based on amortized cost.
2 Tax exempt securities are affected using a 34% tax rate for fully tax exempt municipals and 24% for dividends.
3 For the purpose of this schedule, interest on nonaccruing loans has been included only to the extent reflected in the consolidated income statement. However, the nonaccrual loan balances are included in the average amount outstanding.
4 Computed by dividing tax effected net interest income by total interest earning assets.
CONSOLIDATED AVERAGE BALANCE SHEET
For the six months ended June 30, 2008
(Fully taxable equivalent)
Dollars in thousands
Average Interest Annualized
balance earned/paid yield/rate
ASSETS
Securities available for sale and held to
maturity: (1)
Taxable securities $ 53,024 $ 1,302 4.91 %
Tax exempt securities (2) 47,406 1,596 6.73 %
Total securities 100,430 2,898 5.77 %
Other 2,147 29 2.70 %
Loans
Real estate mortgages 186,438 6,521 7.00 %
Home equity loans 26,201 854 6.52 %
Time and demand loans 25,019 817 6.53 %
Installment and other loans 18,332 943 10.29 %
Total loans (3) 255,990 9,135 7.14 %
Total interest earning assets 358,567 12,062 6.73 %
Other assets 31,717
Total assets $ 390,284
LIABILITIES AND STOCKHOLDERS' EQUITY
NOW and Super NOW deposits $ 31,907 79 0.50 %
Savings and insured money market deposits 85,644 485 1.13 %
Time deposits 125,311 2,526 4.03 %
Total interest bearing deposits 242,862 3,090 2.54 %
Other 1,351 22 3.26 %
Federal Home Loan Bank borrowings 30,000 639 4.26 %
Total interest bearing liabilities 274,213 3,751 2.74 %
Demand deposits 62,598
Other liabilities 9,054
Total liabilities 345,865
Stockholders' equity 44,419
Total liabilities and stockholders' equity $ 390,284
Net interest income - tax effected 8,311
Less: Tax gross up on exempt securities (508 )
Net interest income per statement of income $ 7,803
Net interest spread 3.99 %
Net interest margin (4) 4.64 %
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1 Yields on securities available for sale are based on amortized cost.
2 Tax exempt securities are affected using a 34% tax rate for fully tax exempt municipals and 24% for dividends.
3 For the purpose of this schedule, interest on nonaccruing loans has been included only to the extent reflected in the consolidated income statement. However, the nonaccrual loan balances are included in the average amount outstanding.
4 Computed by dividing tax effected net interest income by total interest earning assets.
CONSOLIDATED AVERAGE BALANCE SHEET
For the three months ended June 30, 2009
(Fully taxable equivalent)
Dollars in thousands
Average Interest Annualized
balance earned/paid yield/rate
ASSETS
Securities available for sale and held to
maturity: (1)
Taxable securities $ 55,718 $ 571 4.10 %
Tax exempt securities (2) 48,562 740 6.10 %
Total securities 104,280 1,311 5.03 %
Other 4,363 3 0.28 %
Loans
Real estate mortgages 191,723 3,131 6.53 %
Home equity loans 31,420 484 6.16 %
Time and demand loans 24,694 273 4.42 %
Installment and other loans 19,408 454 9.36 %
Total loans (3) 267,245 4,342 6.50 %
Total interest earning assets 375,888 5,656 6.02 %
Other assets 39,848
Total assets $ 415,736
LIABILITIES AND STOCKHOLDERS' EQUITY
NOW and Super NOW deposits $ 32,747 21 0.25 %
Savings and insured money market deposits 82,706 105 0.51 %
Time deposits 152,789 1,063 2.78 %
Total interest bearing deposits 268,242 1,189 1.77 %
Other 301 - 0.00 %
Federal Home Loan Bank borrowings 33,342 350 4.20 %
Total interest bearing liabilities 301,885 1,539 2.04 %
Demand deposits 57,431
Other liabilities 12,889
Total liabilities 372,205
Stockholders' equity 43,531
Total liabilities and stockholders' equity $ 415,736
Net interest income - tax effected 4,117
Less: Tax gross up on exempt securities (249 )
Net interest income per statement of income $ 3,868
Net interest spread 3.98 %
Net interest margin (4) 4.38 %
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1 Yields on securities available for sale are based on amortized cost.
2 Tax exempt securities are affected using a 34% tax rate for fully tax exempt municipals and 24% for dividends.
3 For the purpose of this schedule, interest on nonaccruing loans has been included only to the extent reflected in the consolidated income statement. However, the nonaccrual loan balances are included in the average amount outstanding.
4 Computed by dividing tax effected net interest income by total interest earning assets.
CONSOLIDATED AVERAGE BALANCE SHEET
For the three months ended June 30, 2008
(Fully taxable equivalent)
Dollars in thousands
Average Interest Annualized
balance earned/paid yield/rate
ASSETS
Securities available for sale and held to
maturity: (1)
Taxable securities $ 53,424 $ 651 4.87 %
Tax exempt securities (2) 47,476 776 6.54 %
Total securities 100,900 1,427 5.66 %
Other 1,849 11 2.38 %
Loans
Real estate mortgages 187,409 3,276 6.99 %
Home equity loans 26,447 420 6.35 %
Time and demand loans 25,136 357 5.68 %
Installment and other loans 18,518 472 10.20 %
Total loans (3) 257,510 4,525 7.03 %
Total interest earning assets 360,259 5,963 6.62 %
Other assets 31,517
Total assets $ 391,776
LIABILITIES AND STOCKHOLDERS' EQUITY
NOW and Super NOW deposits $ 30,475 38 0.50 %
Savings and insured money market deposits 87,167 215 0.99 %
Time deposits 125,723 1,199 3.81 %
Total interest bearing deposits 243,365 1,452 2.39 %
Other 1,373 8 2.33 %
Federal Home Loan Bank borrowings 30,000 316 4.21 %
Total interest bearing liabilities 274,738 1,776 2.59 %
Demand deposits 63,283
Other liabilities 9,191
Total liabilities 347,212
Stockholders' equity 44,564
Total liabilities and stockholders' equity $ 391,776
Net interest income - tax affected 4,187
Less: Tax gross up on exempt securities (248 )
Net interest income per statement of income $ 3,939
Net interest spread 4.03 %
Net interest margin (4) 4.65 %
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1 Yields on securities available for sale are based on amortized cost.
2 Tax exempt securities are affected using a 34% tax rate for fully tax exempt municipals and 24% for dividends.
3 For the purpose of this schedule, interest on nonaccruing loans has been included only to the extent reflected in the consolidated income statement. However, the nonaccrual loan balances are included in the average amount outstanding.
4 Computed by dividing tax effected net interest income by total interest earning assets.
VOLUME AND RATE ANALYSIS
(Dollars in thousands)
Six months ended June 30,
2009 compared to 2008
increase (decrease) due to change in
Volume Rate Total
INTEREST INCOME
Securities1 $ (86 ) $ (276 ) $ (362 )
Other 20 (44 ) (24 )
Loans 407 (836 ) (429 )
Total interest income 341 (1,156 ) (815 )
INTEREST EXPENSE
NOW and Super NOW deposits 6 (42 ) (36 )
Savings and insured money market deposits (44 ) (242 ) (286 )
Time deposits 451 (805 ) (354 )
Other (6 ) (14 ) (20 )
Federal Home Loan Bank borrowings 89 (12 ) 77
Total interest expense 496 (1,115 ) (619 )
Net interest income $ (155 ) $ (41 ) $ (196 )
Three months ended June 30,
2009 compared to 2008
increase (decrease) due to change in
Volume Rate Total
INTEREST INCOME
Securities1 $ 52 $ (169 ) $ (117 )
Other 16 (24 ) (8 )
Loans 170 (353 ) (183 )
Total interest income 238 (546 ) (308 )
INTEREST EXPENSE
NOW and Super NOW deposits 3 (20 ) (17 )
Savings and insured money market deposits (8 ) (102 ) (110 )
Time deposits 263 (399 ) (136 )
. . .
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