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| SUPR > SEC Filings for SUPR > Form 10-Q/A on 9-Nov-2009 | All Recent SEC Filings |
9-Nov-2009
Quarterly Report
assets. The negative effect of loans placed on non-accrual on the net interest
margin for the second quarter of 2009 is estimated to be 0.11%.
Our total assets increased to $3.2 billion at June 30, 2009, compared to
$3.1 million at December 31, 2008. Loans increased to $2.39 billion at June 30,
2009, an increase of 3.6% from December 31, 2008 and 11.6% from June 30, 2008.
Our total deposits at June 30, 2009 increased 3.8% to $2.6 billion from
March 31, 2009 and increased 11.2% from December 31, 2008.
Consistent with the continuing economic decline's effect on real estate-related
credits, our non-performing loans increased during the quarter to
$117.7 million, or 4.91% of loans at June 30, 2009, from $74.2 million, or 3.15%
of loans at March 31, 2009. This increase was largely driven by three shared
participation credits totaling $22.4 million and increases in the 1-4 family
mortgage portfolio of $6.5 million and real estate construction of $15 million.
Loans in the 30-89 days past due category decreased to 1.50% of total loans at
June 30, 2009 from 2.33% of total loans at March 31, 2009. Non-performing assets
are 4.77% of total assets at June 30, 2009.
Net loan charge-offs decreased slightly to 0.39% as a percentage of average
loans during the second quarter of 2009, compared to 0.42% during the first
quarter of 2009. Of the $2.3 million net charge-offs in the second quarter of
2009, the Bank's net charge-offs were $1.8 million, or 0.31% of consolidated
average loans, and our two consumer finance companies' net charge-offs were $0.5
million, or 0.08% of consolidated average loans.
The provision for loan losses was approximately $6.0 million in the second
quarter of 2009, increasing the allowance for loan losses to 1.40% of net loans,
or $33.5 million, at June 30, 2009, compared to 1.27% of net loans, or
$29.9 million, at March 31, 2009.
Short-term liquid assets (cash and due from banks, interest-bearing deposits in
other banks and federal funds sold) increased $13.5 million, or 15.1%, to
$102.9 million at June 30, 2009 from $89.4 million at December 31, 2008. At
June 30, 2009, short-term liquid assets were 3.2% of total assets, compared to
2.9% at December 31, 2008. On March 31, 2009, the Bank completed a placement of
a $40 million aggregate principal amount 2.625% Senior Note due 2012 (the
"Note"). The Note is guaranteed by the Federal Deposit Insurance Corporation
("FDIC") under its Temporary Liquidity Guarantee Program ("TLGP") and is backed
by the full faith and credit of the United States. Management continually
monitors our liquidity position and will increase or decrease short-term liquid
assets as necessary. Our principal sources of funds are deposits, principal and
interest payments on loans, federal funds sold and maturities and sales of
investment securities. In addition to these sources of liquidity, we have access
to a minimum of $250 million in additional funding from traditional sources.
Management believes it has established sufficient sources of funds to meet its
anticipated liquidity needs.
The Bank continues to be well-capitalized under regulatory guidelines, with a
total risk-based capital ratio of 11.04%, a Tier I core capital ratio of 8.31%
and a Tier I risk-based capital ratio of 9.83% as of June 30, 2009. The Bank's
tangible common equity ratio is 8.31% at June 30, 2009.
Our total risk based capital ratio was 10.64% and our tangible common equity
ratio was 7.96% at June 30, 2009. In addition, on July 15, 2009, we began
closing on a private placement of or common stock, $0.001 par value per share,
pursuant to which we anticipate issuing approximately 1.7 million shares for an
aggregate price of approximately $3.7 million.
Recent Accounting Pronouncements
On April 9, 2009, the Financial Accounting Standards Board ("FASB") finalized
three FASB Staff Positions ("FSPs") regarding the accounting treatment for
investments including mortgage-backed securities. These FSPs changed the method
for determining if an other-than-temporary impairment ("OTTI") exists and the
amount of OTTI to be recorded through an entity's income statement. The changes
brought about by the FSPs provide greater clarity and reflect a more accurate
representation of the credit and noncredit components of an OTTI event. The
three FSPs are as follows:
• FSP SFAS 157-4 Determining Fair Value When the Volume and Level of Activity
for the Assets or Liability Have Significantly Decreased and Identifying
Transactions That Are Not Orderly ("FSP 157-4") provides guidelines for
making fair value measurements more consistent with the principles presented
in SFAS No. 157, Fair Value Measurements ("SFAS 157"). It emphasizes that
even if there has been a significant decrease in the volume and level of
activity for the asset or liability and regardless of the valuation
technique used, the objective of a fair value measurement remains the same.
Fair
value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction (that is, not a forced liquidation or distressed sale), between market participants at the measurement date under current market conditions.
• FSP SFAS 115-2 and SFAS 124-2, Recognition and Presentation of Other-than-temporary impairments ("FSP 115-2 and 124-2") provides additional guidance designed to create greater clarity and consistency in accounting for and presenting impairment losses on securities. It amends OTTI impairment guidance for debt securities to make the guidance more operational and to improve the presentation and disclosure of OTTI on debt and equity securities in the financial statements. It does not amend existing recognition and measurement guidance related to OTTI of equity securities.
• FSP SFAS 107-1 and APB 28-1, Interim Disclosures about Fair Value of Financial Instruments ("FSP 107-1 and APB 28-1") enhances consistency in financial reporting by increasing the frequency of fair value disclosures.
These staff positions are effective for financial statements issued for periods
ending after June 15, 2009, with early application possible for the first
quarter of 2009. We elected to adopt FSP 157-4 and FSP 115-2 and 124-2 as of
March 31, 2009, while deferring the election of FSP 107-1 and APB 28-1 until
June 30, 2009. The adoption of FSP 107-1 and APB 28-1 as of June 30, 2009 did
not have a significant impact on our financial condition, results of operations
or cash flow. The effect of the early adoption of FSP 115-2 and 124-2 in the
first quarter of 2009 resulted in the portion of OTTI determined to be
credit-related ($5.8 million, pre-tax) being recognized in current earnings,
while the portion of OTTI related to other factors ($4.6 million, pre-tax) was
recognized in other comprehensive loss (see Notes 3 and 8 to the condensed
consolidated financial statements). For the second quarter of 2009, the portion
of OTTI determined to be credit-related ($5.8 million, pre-tax) being recognized
in current earnings, while the portion of OTTI related to other factors
($0.9 million, pre-tax)
Statement of Financial Accounting Standards No. 161
In March 2008, the FASB issued SFAS No. 161, Disclosures About Derivative
Instruments and Hedging Activities, an Amendment of FASB Statement No. 133
("SFAS 161"). SFAS 161 amends SFAS 133, Accounting for Derivative Instruments
and Hedging Activities ("SFAS 133") to amend and expand the disclosure
requirements of SFAS 133 to provide greater transparency about (i) how and why
an entity uses derivative instruments, (ii) how derivative instruments and
related hedge items are accounted for under SFAS 133 and its related
interpretations, and (iii) how derivative instruments and related hedged items
affect an entity's financial position, results of operations and cash flows. To
meet those objectives, SFAS 161 requires qualitative disclosures about
objectives and strategies for using derivatives, quantitative disclosures about
fair value amounts of gains and losses on derivative instruments and disclosures
about credit-risk-related contingent features in derivative agreements. SFAS 161
was effective for us on January 1, 2009 and did not have a significant impact on
our financial position, results of operations or cash flows (see Note 5 to the
Condensed Consolidated Financial Statements).
See Note 1 to the condensed consolidated financial statements for other recent
accounting pronouncements that are not expected to have a significant effect on
our financial condition, results of operations or cash flows.
Results of Operations
The following table sets forth key earnings and other financial data for the
periods indicated:
Three Months Six Months
Ended June 30, Ended June 30,
2009 2008 2009 2008
(Dollars in thousands, except per share data)
Net (loss) income $ (5,694 ) $ 841 $ (9,268 ) $ 1,537
Net (loss) income applicable to common
shareholders (6,861 ) 841 (11,578 ) 1,537
Net (loss) income per common share
(diluted) (0.68 ) 0.08 (1.15 ) 0.15
Net interest margin 3.24 % 3.39 % 3.18 % 3.21 %
Net interest spread 3.04 % 3.17 % 2.98 % 2.96 %
Return on average assets (0.72 )% 0.11 % (0.60 )% 0.10 %
Return on average tangible assets (0.72 )% 0.12 % (0.60 )% 0.11 %
Return on average stockholders' equity (9.28 )% 0.96 % (7.51 )% 0.88 %
Return on average tangible equity (10.07 )% 2.04 % (8.17 )% 1.87 %
Common book value per share $ 16.66 $ 34.68 $ 16.66 $ 34.68
Tangible common book value per share 14.79 16.24 14.79 16.24
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The change in our net income during the periods ended June 30, 2009 compared to
2008 is primarily the result of security impairment losses (OTTI), foreclosure
losses, FDIC assessments and the accrual of dividends on preferred stock which
began in the fourth quarter of 2008. Changes in other components of our
operations are discussed in the various sections that follow.
Net Interest Income. Net interest income is the difference between the income
earned on interest-earning assets and interest paid on interest-bearing
liabilities used to support such assets. The following table summarizes the
changes in the components of net interest income for the periods indicated:
Increase (Decrease) in
Second Quarter 2009 vs 2008 First Six Months of 2009 vs 2008
Average Income/ Yield/ Average Income/ Yield/
Balance Expense Rate Balance Expense Rate
(Dollars in thousands)
ASSETS
Interest-earning
assets:
Loans, net of unearned
income $ 304,943 $ (749 ) (0.98 )% $ 313,573 $ (3,142 ) (1.14 )%
Investment securities
Taxable (32,771 ) (365 ) 0.08 (19,056 ) (408 ) 0.09
Tax-exempt 226 5 - 270 2 (0.00 )
Total investment
securities (32,545 ) (360 ) 0.08 (18,786 ) (406 ) 0.09
Federal funds sold 121 (16 ) (1.91 ) (1,100 ) (91 ) (2.78 )
Other investments 21,709 (276 ) (3.35 ) 16,934 (558 ) (3.22 )
Total interest
-earning assets $ 294,228 (1,401 ) (0.89 ) $ 310,621 (4,197 ) (1.01 )
Interest-bearing
liabilities:
Demand deposits $ 9,766 (1,608 ) (1.00 ) $ (12,339 ) (4,490 ) (1.31 )
Savings deposits 149,108 519 (0.24 ) 145,539 1,207 (0.03 )
Time deposits 169,607 (1,511 ) (0.93 ) 139,928 (4,677 ) (1.11 )
Other borrowings (69,564 ) (419 ) 0.21 (2,140 ) (870 ) (0.52 )
Subordinated
debentures 7,182 287 1.07 7,163 466 0.73
Total interest
-bearing liabilities $ 266,099 (2,732 ) (0.76 ) $ 278,151 (8,364 ) (1.02 )
Net interest
income/net interest
spread 1,331 (0.13 )% 4,167 0.01 %
Net yield on earning
assets (0.17 )% (0.04 )%
Taxable equivalent
adjustment:
Investment securities 2 -
Net interest income $ 1,329 $ 4,167
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The following table depicts, on a taxable equivalent basis for the periods indicated, certain information related to our average balance sheet and our average yields on assets and average costs of liabilities. Average yields are calculated by dividing income or expense by the average balance of the corresponding assets or liabilities. Average balances have been calculated on a daily basis.
Three Months Ended June 30,
2009 2008
Average Income/ Yield/ Average Income/ Yield/
Balance Expense Rate Balance Expense Rate
(Dollars in thousands)
ASSETS
Interest-earning
assets:
Loans, net of
unearned income (1) $ 2,459,020 $ 35,959 5.87 % $ 2,154,077 $ 36,708 6.85 %
Investment securities
Taxable 280,655 3,778 5.40 313,426 4,143 5.32
Tax-exempt (2) 41,510 658 6.36 41,284 653 6.36
Total investment
securities 322,165 4,436 5.52 354,710 4,796 5.44
Federal funds sold 3,498 2 0.23 3,377 18 2.14
Other investments 71,650 456 2.55 49,941 732 5.90
Total interest
-earning assets 2,856,333 40,853 5.74 2,562,105 42,254 6.63
Noninterest-earning
assets:
Cash and due from
banks 81,951 61,729
Premises and
equipment 105,519 102,445
Accrued interest and
other assets 160,060 289,167
Allowance for loan
losses (29,889 ) (24,104 )
Total assets $ 3,173,974 $ 2,991,342
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LIABILITIES AND STOCKHOLDERS' EQUITY Interest-bearing liabilities: Demand deposits $ 672,869 $ 2,172 1.29 % $ 663,103 $ 3,780 2.29 % Savings deposits 235,946 904 1.54 86,838 385 1.78 Time deposits 1,402,255 11,033 3.16 1,232,648 12,544 4.09 Other borrowings 292,474 2,597 3.56 362,038 3,016 3.35 Subordinated debentures 60,795 1,206 7.96 53,613 919 6.89 Total interest -bearing liabilities 2,664,339 17,912 2.70 2,398,240 20,644 3.46 Noninterest-bearing liabilities: Demand deposits 245,819 219,647 Accrued interest and other liabilities 17,663 21,701 Stockholders' equity 246,153 351,754 Total liabilities and stockholders 'equity $ 3,173,974 $ 2,991,342 Net interest income/net interest spread 22,941 3.04 % 21,610 3.17 % Net yield on earning assets 3.22 % 3.39 % Taxable equivalent adjustment: Investment securities (2) 224 222 Net interest income $ 22,717 $ 21,388 |
(1) Nonaccrual loans are included in loans, net of unearned income. No adjustment has been made for these loans in the calculation of yields.
(2) Interest income and yields are presented on a fully taxable equivalent basis using a tax rate of 34%.
The following table sets forth, on a taxable equivalent basis, the effect that the varying levels of interest-earning assets and interest-bearing liabilities and the applicable rates have had on changes in net interest income for the three-month periods ended June 30, 2009 and 2008.
Three Months Ended June 30,
2009 vs. 2008 (1)
Increase Changes Due To
(Decrease) Rate Volume
(Dollars in thousands)
Increase (decrease) in:
Income from interest-earning assets:
Interest and fees on loans $ (749 ) $ (5,612 ) $ 4,863
Interest on securities
Taxable (365 ) 63 (428 )
Tax-exempt 5 - 5
Interest on federal funds (16 ) (17 ) 1
Interest on other investments (276 ) (518 ) 242
Total interest income (1,401 ) (6,084 ) 4,683
Expense from interest-bearing liabilities:
Interest on demand deposits (1,608 ) (1,663 ) 55
Interest on savings deposits 519 (59 ) 578
Interest on time deposits (1,511 ) (3,096 ) 1,585
Interest on other borrowings (419 ) 183 (602 )
Interest on subordinated debentures 287 154 133
Total interest expense (2,732 ) (4,481 ) 1,749
Net interest income $ 1,331 $ (1,603 ) $ 2,934
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(1) The change in interest due to both rate and volume has been allocated to rate and volume changes in proportion to the relationship of the absolute dollar amounts of the changes in each.
Six Months Ended June 30,
2009 2008
Average Income/ Yield/ Average Income/ Yield/
Balance Expense Rate Balance Expense Rate
(Dollars in thousands)
ASSETS
Interest-earning
assets:
Loans, net of unearned
income (1) $ 2,425,767 $ 70,911 5.89 % $ 2,112,194 $ 74,053 7.03 %
Investment securities:
Taxable 291,255 7,787 5.39 310,311 8,195 5.30
Tax-exempt (2) 40,898 1,307 6.44 40,628 1,305 6.44
Total investment
securities 332,153 9,094 5.52 350,939 9,500 5.43
Federal funds sold 5,359 7 0.26 6,459 98 3.04
Other investments 64,739 818 2.55 47,805 1,376 5.77
Total interest
-earning assets 2,828,018 80,830 5.76 2,517,397 85,027 6.77
Noninterest-earning
assets:
Cash and due from
banks 76,104 59,193
Premises and equipment 105,300 103,035
Accrued interest and
other assets 156,807 288,300
Allowance for loan
losses (29,508 ) (23,459 )
Total assets $ 3,136,721 $ 2,944,466
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