Item 7.
Management’s Discussion and Analysis of Financial
Condition and Results of Operations
Management’s discussion and analysis (“MD&A”)
provides supplemental information, which sets forth the major factors that have affected our financial condition and results of
operations and should be read in conjunction with the Consolidated Financial Statements and related notes included in the Annual
Report on Form 10-K. The MD&A is divided into subsections entitled “Business Overview,” “Financial Overview,”
“Financial Condition,” “Results of Operations,” “Interest Rate Risk Management,” “Liquidity
and Capital Resources,” “Off-Balance Sheet Arrangements,” and “Critical Accounting Policies.” The
following information should provide a better understanding of the major factors and trends that affect our earnings performance
and financial condition, and how our performance during 2013 compared with prior years. Throughout this section, 1
st
United
Bancorp, Inc., and its subsidiaries, collectively, are referred to as “Company,” “we,” “us,”
or “our.” Unless the context indicates otherwise, all dollar amounts in this MD&A are in thousands.
CAUTION CONCERNING FORWARD-LOOKING
STATEMENTS
This Annual Report on Form 10-K, including this MD&A
section, contains “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of
1995. These forward-looking statements include, among others, statements about our beliefs, plans, objectives, goals, expectations,
estimates and intentions that are subject to significant risks and uncertainties and are subject to change based on various factors,
many of which are beyond our control. The words “may,” “could,” “should,” “would,”
“believe,” “anticipate,” “estimate,” “expect,” “intend,” “plan,”
“target,” “goal,” and similar expressions are intended to identify forward-looking statements.
All forward-looking statements, by their nature, are subject
to risks and uncertainties. Our actual future results may differ materially from those set forth in our forward-looking statements.
Please see the Introductory Note and
Item 1A Risk Factors
of this Annual Report for a discussion of factors that could cause
our actual results to differ materially from those in the forward-looking statements.
However, other factors besides those listed in
Item 1A
Risk Factors
or discussed in this Annual Report also could adversely affect our results, and you should not consider any such
list of factors to be a complete set of all potential risks or uncertainties. Any forward-looking statements made by us or on our
behalf speak only as of the date they are made. We do not undertake to update any forward-looking statement, except as required
by applicable law.
Business Overview
We are a financial holding company headquartered in Boca Raton,
Florida. Our principal subsidiary, 1
st
United, is a Florida-chartered commercial bank, which operates 21 banking centers
in Florida, from Central Florida through the Treasure Coast to South Florida, including Brevard, Broward, Hillsborough, Indian
River, Miami-Dade, Orange, Palm Beach, and Pinellas Counties.
Over the past ten years, we have grown under the stewardship
of our highly experienced executive management team. Specifically, we have:
|
▪
|
increased total assets from $66.8 million to $1.845 billion;
|
|
▪
|
increased total net loans from $39.6 million to $1.125 billion;
|
|
▪
|
grown non-interest bearing deposits from $4.6 million to $526.3 million; and
|
|
▪
|
expanded our branch network from one location to 21 locations.
|
We follow a business plan that emphasizes the delivery of
commercial banking services to businesses and individuals in our geographic market who desire a high level of personalized service.
The business plan includes business banking, professional market services, real estate lending and private banking, as well as
full community banking products and services. The business plan also provides for an emphasis on our Small Business Administration
lending program, as well as on small business lending. We focus on the building of a balanced loan and deposit portfolio, with
emphasis on low cost liabilities and variable rate loans.
As is the case with banking institutions generally, our operations
are materially and significantly influenced by general economic conditions and by related monetary and fiscal policies of financial
institution regulatory agencies, including the Federal Reserve Bank and the FDIC. Deposit flows and costs of funds are influenced
by interest rates on competing investments and general market rates of interest. Lending activities are affected by the demand
for financing of real estate and other types of loans, which in turn is affected by the interest rates at which such financing
may be offered and other factors affecting local demand and availability of funds. We face strong competition in the attraction
of deposits (our primary source of lendable funds) and in the origination of loans.
We have experienced a high volume of bankruptcy filings in
Florida during recent years. According to the most recent data available from the U.S. Federal Courts, Florida had the second highest
number of bankruptcy filings in the United States through the first three quarters of 2013. Only California experienced more bankruptcy
filings. The majority of the filings in Florida were non-business bankruptcies.
Based on data from the U.S. Census Bureau, from 2006
through the end of 2010, median household income decreased by 3.1% in Florida. Additionally, real estate property valuations
have also been depressed during the recent economic downturn as evidenced by our higher level of problem assets and
credit-related costs. According to the Federal Housing Finance Agency, Florida experienced negative trends in single-family
home prices (as indicated by negative housing price indexes) in nearly every quarter beginning with the second quarter of
2007 through the end of 2011 with positive housing price indexes through the end of 2013. Economic conditions such a high
unemployment, high volumes of non-business bankruptcy filings, decreased median household income, and depressed real estate
values all affect the value of our loan portfolio and the associated risks. While general economic conditions have stabilized
in the state of Florida, a relapse of the recession or an economic downturn in Florida would likely exacerbate the adverse
effects of these difficult market conditions on our clients, which would likely have a negative impact on our financial
results.
We intend to continue to opportunistically expand and grow
our business by building on our business strategy and increasing market share in key Florida markets. We believe the demographics
and growth characteristics within the communities we serve will provide significant franchise enhancement opportunities to leverage
our core competencies while acquisitive growth will enable us to take advantage of the extensive infrastructure and scalable platform
that we have assembled.
A significant portion of our growth has been through acquisitions.
Under our current management team, we have consummated eight transactions since 2004:
Acquired Bank
|
|
Headquarters
|
|
Year Acquired
|
First Western Bank
|
|
Cooper City, Florida
|
|
2004
|
Equitable Bank
|
|
Fort Lauderdale, Florida
|
|
2008
|
Citrus Bank, N.A.
(1)
|
|
Vero Beach, Florida
|
|
2008
|
Republic Federal Bank, N.A.
(2)
|
|
Miami, Florida
|
|
2009
|
The Bank of Miami, N.A.
(2)
|
|
Miami, Florida
|
|
2010
|
Old Harbor Bank of Florida
(2)
|
|
Clearwater, Florida
|
|
2011
|
Anderen Financial, Inc.
|
|
Palm Harbor, Florida
|
|
2012
|
Enterprise Bancorp, Inc.
|
|
North Palm Beach, Florida
|
|
2013
|
|
(1)
|
Branch acquisition
|
|
(2)
|
FDIC-assisted transaction
|
Enterprise Bancorp, Inc.
On July 1, 2013, the Company completed its acquisition
of Enterprise Bancorp, Inc., a Florida corporation (“EBI”), and its wholly-owned subsidiary Enterprise Bank of
Florida, a Florida-chartered commercial bank (“Enterprise”), pursuant to the Agreement and Plan of Merger (the
“EBI Merger Agreement”), dated March 22, 2013, as amended, by and among the Company, 1st United Bank, EBI and
Enterprise. In accordance with the EBI Merger Agreement, the Company acquired EBI through the merger of a wholly-owned
subsidiary of the Company with and into EBI and 1st United Bank acquired Enterprise Bank through the merger of Enterprise
Bank with and into 1st United Bank (collectively, the “EBI Merger”).
Pursuant to the terms of the EBI Merger Agreement, each share
of EBI common stock issued and outstanding was converted into the right to receive consideration based on EBI’s total consolidated
assets and the EBI Tangible Book Value (as defined in the EBI Merger Agreement) as of June 30, 2013. The total value of the consideration
paid to EBI shareholders was approximately $45.6 million, which consisted of approximately $5.1 million in cash (less the $400,000
holdback described below), $22.1 million in loans (including all nonperforming loans), other real estate, and repossessed assets
of Enterprise and $18.3 million in impaired and below investment grade securities and other investments of Enterprise. Each holder
of a share of EBI common stock was entitled to consideration from the Company equal to approximately $6.01 per share (less their
per share pro rata portion of the $400,000 holdback described below). The total consideration paid to all EBI shareholders in connection
with the Merger was subject to a holdback amount of $400,000 to defray potential damages and related expenses incurred to defend
or settle certain litigation. The Company does not anticipate the litigation and related costs will exceed the $400,000. The Company
recorded goodwill associated with the transaction of approximately $5.5 million which is not deductible for tax purposes. The Company
acquired a net deferred tax liability of $233,000 and recorded a deferred tax asset in other assets as a result of purchase accounting adjustments.
The Company accounted for the transaction under the acquisition
method of accounting which requires purchased assets and liabilities assumed to be recorded at their respective fair values at
the date of acquisition. See Note 4 of the Notes to the Consolidated Financial Statements for additional information related to
the fair value of loans acquired. The Company determined the fair value of core deposit intangibles, securities, and deposits with
the assistance of third party valuations. The valuation of FHLB advances was based on current rates for similar borrowings. The
estimated fair values are subject to refinement as additional information relative to the closing date fair values becomes available
through the measurement period.
Anderen Financial, Inc.
On April 1, 2012, we completed our acquisition of
Anderen Financial, Inc., a Florida corporation and its wholly-owned subsidiary Anderen Bank, a Florida-chartered commercial
bank (collectively referred to herein as “AFI”), pursuant to the Agreement and Plan of Merger (Anderen Merger
Agreement”), dated October 24, 2011. Pursuant to the terms of the Anderen Merger Agreement, each outstanding share of
AFI common stock, $0.01 par value per share, was cancelled and automatically converted into the right to receive cash, common
stock of the Company or a combination of cash and common stock of the Company. AFI shareholders could elect to receive cash,
stock, or a combination of 50% cash and 50% stock, provided, however, that each election was subject to mandatory allocation
procedures to ensure the total consideration was approximately 50% cash and 50% stock. The value of the AFI per share
consideration was $7.73 calculated per the Anderen Merger Agreement. The total value of the consideration paid to AFI
shareholders was $38.3 million which consisted of approximately $19.1 million in cash and 3,140,354 shares of the
Company’s common stock. The Company’s common stock was valued at $6.09 per share with a total value of $19.1
million, net of approximately $61,000 of costs. The Company recorded goodwill of $5.8 million as a result of the merger which
is not deductible for tax purposes. Total net deferred tax assets acquired was $5.9 million, primarily related to loss carry
forwards. The Company completed the integration of AFI in June 2012.
The Company accounted for the transaction under the acquisition
method of accounting which requires purchased assets and liabilities assumed to be recorded at their respective fair values at
the date of acquisition. See Note 4 of the Notes to the Consolidated Financial Statement for additional information related to
the fair value of loans acquired. The Company uses third party valuations to determine the fair value of the core deposit intangible,
securities, fixed assets and deposits. The fair value of other real estate owned was based on recent appraisals of the properties.
The estimated fair value are subject to refinement as additional information relative to the closing date fair values. The
Company updated the previously reported consolidated balance sheet for the year ended December 31, 2012 for the final measurement
period adjustments.
Financial Overview
|
▪
|
Net earnings for the year ended December 31, 2013 were $6.9 million compared to net
earnings of $4.7 million in 2012. Operating results for the year ended December 31, 2013 when compared to the year ended
December 31, 2012 were impacted by the EBI Merger in July 2013 and net loan growth of $61.3 million for the year ended
December 31, 2013.
|
|
▪
|
Net interest margin increased to 5.29% for the year ended December 31, 2013 compared to
5.13% for the year ended December 31, 2012. Excluding interest accretion related to the resolution of and changes
in cash flows on acquired assets, our net interest margin would have been 4.16% and 4.32% for the years ended December
31, 2013 and 2012, respectively.
|
|
▪
|
The Company recorded provisions for loan losses of $3.5
million for the year ended December 31, 2013 as compared to $6.4 million for the year ended December 31, 2012.
|
|
▪
|
During the year ended December 31, 2013, we incurred approximately $1.7 million in personnel, IT and facilities costs and merger reorganization expense that related to the integration of EBI. During the year ended December 31, 2012, we incurred approximately $1.8 million in personnel, IT, facilities and merger reorganization expense related to the integrations of AFI and Old Harbor.
|
|
▪
|
Non-performing assets at December 31, 2013 represented 1.87% of total assets compared to 2.74% at December 31, 2012. Non-performing assets not covered by the Loss Sharing Agreements represented 0.91% of total assets at December 31, 2013 compared to 1.17% at December 31, 2012.
|
|
▪
|
Total assets increased to $1.845 billion at December 31, 2013 from $1.569 billion at
December 31, 2012 primarily due to the EBI acquisition. In addition, at December 31, 2013 we had a short term deposit of
approximately $128 million that was deposited in December 2013 and subsequently paid out in January, 2014.
|
|
▪
|
Securities available for sale increased by approximately $67.8 million from $260.1 million at December 31, 2012 to $328.0 million at December 31, 2013. The increase was a result of the Company investing excess liquidity of approximately $174.4 million primarily in residential mortgage backed securities during the year ended December 31, 2013, as well as the acquisition of $4.0 million of residential mortgage backed securities from EBI, which was offset by sales of $33.7 million, maturities and principal payments of $57.5 million and an increase in the unrealized loss on securities held of $16.9 million.
|
|
▪
|
Net loans increased by approximately $221.0 million to $1.125 billion at December 31, 2013 from $903.6 million at December 31, 2012. The change was due to the acquisition of $159.2 million of loans in connection with the acquisition of EBI as well as new loan production of $336.6 million which was offset by payoffs and resolutions of $275.3 million during the year.
|
|
▪
|
Other real estate owned decreased by $949,000 to $18.6 million from $19.5 million at December 31, 2012. The change was due to the foreclosure of $8.4 million of loans, OREO proceeds from sales of $9.4 million, net of a $1.1 million gain for the year ended December 31, 2013 and write-downs on properties due to updated fair values of $1.1 million. At December 31, 2013, we had $1.1 million in OREO under contract for sale.
|
|
▪
|
FDIC loss share receivable was reduced by approximately $19.2 million from $48.6
million at December 31, 2012 to $29.3 million at December 31, 2013. The decrease was due to cash receipts from the
FDIC of approximately $6.5 million and approximately $15.8 million related to adjustments resulting from the disposition of
acquired loans at above their discounted carrying values and the impact of changes in anticipated cash flows offset by accretion
of income on the receivable of $574,000.
|
|
▪
|
Deposits increased by $244.9 million from $1.303 billion at December 31, 2012 to $1.548
billion at December 31, 2013 due primarily from the acquisition of $177.2 million in deposits from the EBI Merger and one
customer deposit of $128.0 million received in December 2013 and withdrawn in January 2014, offset by anticipated runoff of
acquired higher cost time deposits and money market accounts. The percentage of non-interest bearing deposits to total
deposits was approximately 34% at December 31, 2013 compared to approximately 33% at December 31, 2012.
|
|
▪
|
Federal Home Loan Bank Advances were $35.0 million at December
31, 2013 and were assumed in connection with the EBI Merger. There were no Federal Home Loan Bank Advances at December 31, 2012.
|
|
▪
|
Total shareholders’ equity decreased to $230.1 million at December 31, 2013 from
$236.7 million at December 31, 2012. The change was due to net unrealized losses on securities available for
sale in accumulated other comprehensive income (loss) of $8.3 million at December 31, 2013 from a net unrealized gain on
securities available for sale of $2.3 million at December 31, 2012. The decrease in accumulated other
comprehensive income (loss) was partially offset by net income for the year ended December 31, 2013 of $6.9
million.
|
Financial Condition
At December 31, 2013, our total assets were $1.845
billion and our net loans were $1.125 billion or 61.0% of total assets. At December 31, 2012, our total assets were $1.569
billion and our net loans were $903.6 million or 57.7% of total assets. The increase in net loans from December 31, 2012 to
December 31, 2013 was $221.0 million or 24.5%. These increases were attributed to the EBI Merger which added approximately
$159.2 million in net loans. During the year ended December 31, 2013, we had new loan production and fundings of
approximately $336.6 million which was offset by payoffs, sales, pay downs and charge-offs of $275.3 million.
At December 31, 2013, the allowance for loan losses was $9.6
million or 0.85% of total loans. At December 31, 2012, the allowance for loan losses was $9.8 million or 1.07% of total loans.
At December 31, 2013, our total deposits were $1.548
billion, an increase of $244.9 million (18.8%) over December 31, 2012 of $1.303 billion. The increase was mainly due to the
EBI Merger in July 1, 2013, which added approximately $177.2 million in deposits as of December 31, 2013 and one customer
deposit of $128.0 million received in December 2013 and withdrawn in January 2014 offset by anticipated runoff of acquired
higher cost time deposits and money market accounts. Non-interest bearing deposits represented 34.0% of total deposits at
December 31, 2013 compared to 32.8% at December 31, 2012.
There were $35.0 million in Federal Home Loan Bank advances
as of December 31, 2013 which compares to no Federal Home Loan Bank advances as of December 31, 2012. The Federal Home Loan Bank
advances were assumed as part of the EBI Merger.
Refer to Part 1, Item 1. Business for a discussion of our
investment portfolio, loan portfolio, deposits and borrowings.
Results of Operations
We recorded net earnings of $6.9 million for the year ended
December 31, 2013, compared to net earnings of $4.7 million for the year ended December 31, 2012. Income for the year ended December
31, 2013 was positively impacted by the EBI acquisition in July 2013, an increase in interest income due to net loan growth and
purchases of securities available for sale and a reduction in the provision for loan losses year-over year offset by an increase
in non-interest expense due to the disposal of two banking centers and equipment and write-downs to our other real estate owned
portfolio due to updated appraisals received during 2013.
We recorded net earnings of $4.7 million for the year ended
December 31, 2012, compared to net earnings of $3.7 million for the year ended December 31, 2011. Income for the year ended December
31, 2012 was impacted by the Old Harbor acquisition at the end of 2011 as well as the AFI acquisition in April 2012. Income for
the year ended December 31, 2012 was also impacted by a reduction in the provision for loan losses year-over year of $650,000 as
well as salary, occupancy, data processing and integration expenses of $1.8 million related to the Old Harbor and AFI acquisitions
incurred in the year ended December 31, 2012 as compared to $1.1 million in such costs incurred in the year ending December 31,
2011 related to the TBOM and Old Harbor acquisitions. Overall operating expenses increased by $8.1 million in 2012 primarily as
a result of the Old Harbor acquisition in October 2011 as well as the AFI acquisition in April 2012.
Net Interest Income
Net interest income, which constitutes the principal source
of our income, represents the excess of interest income on interest-earning assets over interest expense on interest-bearing liabilities.
The principal interest-earning assets are federal funds sold, investment securities, and loans. Interest-bearing liabilities primarily
consist of time deposits, interest-bearing checking accounts (“NOW accounts”), savings deposits, money market accounts,
FHLB borrowings, and repurchase agreements. Funds attracted by these interest-bearing liabilities are invested in interest-earning
assets. Accordingly, net interest income depends upon the volume of average interest-earning assets and average interest-bearing
liabilities and the interest rates earned or paid on them.
The following table reflects the components of net interest
income, setting forth for the periods presented, (1) average assets, liabilities and shareholders’ equity, (2) interest income
earned on interest-earning assets and interest paid on interest-bearing liabilities, (3) average yields earned on interest-earning
assets and average rates paid on interest-bearing liabilities, (4) our net interest spread (i.e., the average yield on interest-earning
assets less the average rate on interest-bearing liabilities) and (5) our net interest margin (i.e., the net yield on interest
earning assets).
Net interest earnings for the years ended December 31,
2013 and 2012 are reflected in the following table:
(Dollars in thousands)
|
|
Year ended
|
|
|
December 31, 2013
|
|
December 31, 2012
|
|
|
Average
Balance
|
|
Interest
Income/
Expense
|
|
Average
Rates
Earned/
Paid
|
|
Average
Balance
|
|
Interest
Income/
Expense
|
|
Average
Rates
Earned/
Paid
|
Assets
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest-earning assets
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loans (a)
|
|
$
|
1,023,001
|
|
|
$
|
71,948
|
|
|
|
7.03
|
%
|
|
$
|
931,807
|
|
|
$
|
66,929
|
|
|
|
7.18
|
%
|
Investment securities
|
|
|
325,510
|
|
|
|
7,153
|
|
|
|
2.20
|
%
|
|
|
216,039
|
|
|
|
5,106
|
|
|
|
2.36
|
%
|
Federal funds sold and securities purchased under resale agreements
|
|
|
88,018
|
|
|
|
649
|
|
|
|
0.74
|
%
|
|
|
169,909
|
|
|
|
814
|
|
|
|
0.48
|
%
|
Total interest earning assets
|
|
|
1,436,529
|
|
|
|
79,750
|
|
|
|
5.55
|
%
|
|
|
1,317,755
|
|
|
|
72,849
|
|
|
|
5.53
|
%
|
Non-interest earning assets
|
|
|
229,978
|
|
|
|
|
|
|
|
|
|
|
|
225,917
|
|
|
|
|
|
|
|
|
|
Allowance for loan losses
|
|
|
(10,019
|
)
|
|
|
|
|
|
|
|
|
|
|
(11,381
|
)
|
|
|
|
|
|
|
|
|
Total Assets
|
|
$
|
1,656,488
|
|
|
|
|
|
|
|
|
|
|
$
|
1,532,291
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Liabilities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest-bearing liabilities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
NOW accounts
|
|
$
|
206,527
|
|
|
$
|
262
|
|
|
|
0.13
|
%
|
|
$
|
154,687
|
|
|
$
|
233
|
|
|
|
0.15
|
%
|
Money market accounts
|
|
|
343,377
|
|
|
|
1,073
|
|
|
|
0.31
|
%
|
|
|
338,242
|
|
|
|
1,569
|
|
|
|
0.46
|
%
|
Savings accounts
|
|
|
62,792
|
|
|
|
165
|
|
|
|
0.26
|
%
|
|
|
63,736
|
|
|
|
194
|
|
|
|
0.30
|
%
|
Certificates of deposit
|
|
|
296,983
|
|
|
|
2,180
|
|
|
|
0.73
|
%
|
|
|
336,970
|
|
|
|
3,296
|
|
|
|
0.98
|
%
|
Repos
|
|
|
15,824
|
|
|
|
17
|
|
|
|
0.11
|
%
|
|
|
11,779
|
|
|
|
14
|
|
|
|
0.12
|
%
|
Other borrowings
|
|
|
18,623
|
|
|
|
93
|
|
|
|
0.50
|
%
|
|
|
137
|
|
|
|
7
|
|
|
|
5.11
|
%
|
Total interest-bearing liabilities
|
|
|
944,126
|
|
|
|
3,790
|
|
|
|
0.40
|
%
|
|
|
905,551
|
|
|
|
5,313
|
|
|
|
0.59
|
%
|
Non-interest-bearing liabilities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Demand deposit accounts
|
|
|
467,445
|
|
|
|
|
|
|
|
|
|
|
|
385,066
|
|
|
|
|
|
|
|
|
|
Other liabilities
|
|
|
8,766
|
|
|
|
|
|
|
|
|
|
|
|
8,562
|
|
|
|
|
|
|
|
|
|
Total non-interest-bearing liabilities
|
|
|
476,211
|
|
|
|
|
|
|
|
|
|
|
|
393,628
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Shareholders’ Equity
|
|
|
236,151
|
|
|
|
|
|
|
|
|
|
|
|
233,112
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Liabilities and Shareholders’ Equity
|
|
$
|
1,656,488
|
|
|
|
|
|
|
|
|
|
|
$
|
1,532,291
|
|
|
|
|
|
|
|
|
|
Net interest spread
|
|
|
|
|
|
$
|
75,960
|
|
|
|
5.15
|
%
|
|
|
|
|
|
$
|
67,536
|
|
|
|
4.94
|
%
|
Net interest on average earning
assets-Margin (b)
|
|
|
|
|
|
|
|
|
|
|
5.29
|
%
|
|
|
|
|
|
|
|
|
|
|
5.13
|
%
|
|
(a)
|
Average loans include non-performing loans. Interest on loans includes loan origination fees of $678,000 in 2013, and $490,000 in 2012.
|
|
(b)
|
Net interest margin is net interest income divided by average total interest-earning assets.
|
Our net interest income for the year ended December
31, 2013 was positively impacted by an increase in average earning assets of $118.8 million or 9.0% as compared to the year
ended December 31, 2012 primarily due to increases in loans from the EBI acquisition as well as net organic loan growth and
an increase in investment securities. Earnings were also positively impacted by the accretion of discounts related to
acquired loans of approximately $22.3 million for the year ended December 31, 2013 as compared to $19.7 million for the
same period in 2012. Included in the $22.3 million of accretion of discount in 2013 was approximately $16.2 million related
to the disposition of assets acquired in the transactions above the discounted purchase price of the asset and accretion
of discounts on purchased credit impaired loans due to increases in estimated cash flows. For the year ended December
31, 2013, we took a charge of approximately $15.8 million, including $1.0 million related to the resolution of other real
estate owned, as an adjustment to the FDIC receivable. This charge was recorded in non-interest income in the
consolidated statements of operations and was substantially related to changes in cash flows of loss share assets. Included
in the $19.7 million of accretion of discount in 2012 was approximately $10.7 million related to the disposition of assets
acquired in the transactions above the discounted purchase price of the asset. For the year ended December 31, 2012, we took
a charge of approximately $13.7 million, including $3.4 million related to the resolution of other real estate owned, as an
adjustment to the FDIC receivable. This charge was recorded in non-interest income within the consolidated statements of
operations and was substantially related to changes in cash flows of loss share assets.
Net interest income was $76.0 million for year ended
December, 2013, as compared to $67.5 million for the year ended December 31, 2012, an increase of $8.4 million or 12.5%. The
increase resulted primarily from an increase in average earning assets of $118.8 million or 9.0% primarily a result of the
EBI acquisition, net organic loan growth, an increase in accretion income on acquired loans and a reduction in our average
cost of funds.
The net interest margin (i.e., net interest income divided
by average earning assets) increased 16 basis points from 5.13% during the year ended December 31, 2012 to 5.29% during the year
ended December 31, 2013, primarily due to a reduction in the yield on our interest bearing deposits. Our cost of funds was approximately
27 basis points for the year ended December 31, 2013, as compared to 41 basis points in 2012, primarily as a result of lower
rates on money market and certificate of deposit accounts. Accretion of $22.3 million on acquired loans added approximately
156 basis points to the net interest margin for the year ended December 31, 2013; of this amount, $16.2 million or 113 basis points
related to resolved loss share assets and changes in cash flows during the year ended December 31, 2013. This compares to accretion
of loan discount of $19.7 million during the year ended December 31, 2012, which added approximately 150 basis points to the December 31,
2012 margin. Of this amount, $10.7 million or 81 basis points related to resolved loss share assets and changes in cash flows
during the year ended December 31, 2012.
For the year ended December 31, 2013, average loans represented
71.2% of total average interest-earning assets and 73.4% of total average deposits and customer repurchase agreements, compared
to average loans to total average interest-earning assets of 70.71% and average loans to total average deposits and customer repurchase
agreements of 72.2% at December 31, 2012.
Net interest earnings for the years ended December 31, 2012
and 2011 are reflected in the following table:
(Dollars in thousands)
|
|
Years ended
|
|
|
December 31, 2012
|
|
December 31, 2011
|
|
|
Average
Balance
|
|
Interest
Income/
Expense
|
|
Average
Rates
Earned/
Paid
|
|
Average
Balance
|
|
Interest
Income/
Expense
|
|
Average
Rates
Earned/
Paid
|
Assets
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest-earning assets
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loans (a)
|
|
$
|
931,807
|
|
|
$
|
66,929
|
|
|
|
7.18
|
%
|
|
$
|
831,830
|
|
|
$
|
55,311
|
|
|
|
6.65
|
%
|
Investment securities
|
|
|
216,039
|
|
|
|
5,106
|
|
|
|
2.36
|
%
|
|
|
147,608
|
|
|
|
4,362
|
|
|
|
2.96
|
%
|
Federal funds sold and securities purchased under resale agreements
|
|
|
169,909
|
|
|
|
814
|
|
|
|
0.48
|
%
|
|
|
156,842
|
|
|
|
736
|
|
|
|
0.47
|
%
|
Total interest earning assets
|
|
|
1,317,755
|
|
|
|
72,849
|
|
|
|
5.53
|
%
|
|
|
1,136,280
|
|
|
|
60,409
|
|
|
|
5.32
|
%
|
Non-interest earning assets
|
|
|
225,917
|
|
|
|
|
|
|
|
|
|
|
|
180,407
|
|
|
|
|
|
|
|
|
|
Allowance for loan losses
|
|
|
(11,381
|
)
|
|
|
|
|
|
|
|
|
|
|
(13,438
|
)
|
|
|
|
|
|
|
|
|
Total Assets
|
|
$
|
1,532,291
|
|
|
|
|
|
|
|
|
|
|
$
|
1,303,249
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Liabilities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest-bearing liabilities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
NOW accounts
|
|
$
|
154,687
|
|
|
$
|
233
|
|
|
|
0.15
|
%
|
|
$
|
125,267
|
|
|
$
|
222
|
|
|
|
0.18
|
%
|
Money market accounts
|
|
|
338,242
|
|
|
|
1,569
|
|
|
|
0.46
|
%
|
|
|
278,104
|
|
|
|
2,192
|
|
|
|
0.79
|
%
|
Savings accounts
|
|
|
63,736
|
|
|
|
194
|
|
|
|
0.30
|
%
|
|
|
44,696
|
|
|
|
238
|
|
|
|
0.53
|
%
|
Certificates of deposit
|
|
|
336,970
|
|
|
|
3,296
|
|
|
|
0.98
|
%
|
|
|
297,806
|
|
|
|
3,339
|
|
|
|
1.12
|
%
|
Repos
|
|
|
11,779
|
|
|
|
14
|
|
|
|
0.12
|
%
|
|
|
11,998
|
|
|
|
16
|
|
|
|
0.13
|
%
|
Other borrowings
|
|
|
137
|
|
|
|
7
|
|
|
|
5.11
|
%
|
|
|
9,053
|
|
|
|
342
|
|
|
|
3.78
|
%
|
Total interest-bearing liabilities
|
|
|
905,551
|
|
|
|
5,313
|
|
|
|
0.59
|
%
|
|
|
766,924
|
|
|
|
6,349
|
|
|
|
0.83
|
%
|
Non-interest-bearing liabilities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Demand deposit accounts
|
|
|
385,066
|
|
|
|
|
|
|
|
|
|
|
|
325,277
|
|
|
|
|
|
|
|
|
|
Other liabilities
|
|
|
8,562
|
|
|
|
|
|
|
|
|
|
|
|
7,187
|
|
|
|
|
|
|
|
|
|
Total non-interest-bearing liabilities
|
|
|
393,628
|
|
|
|
|
|
|
|
|
|
|
|
332,464
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Shareholders’ Equity
|
|
|
233,112
|
|
|
|
|
|
|
|
|
|
|
|
203,861
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Liabilities and Shareholders’ Equity
|
|
$
|
1,532,291
|
|
|
|
|
|
|
|
|
|
|
$
|
1,303,249
|
|
|
|
|
|
|
|
|
|
Net interest spread
|
|
|
|
|
|
$
|
67,536
|
|
|
|
4.94
|
%
|
|
|
|
|
|
$
|
54,060
|
|
|
|
4.49
|
%
|
Net interest on average earning
assets-Margin (b)
|
|
|
|
|
|
|
|
|
|
|
5.13
|
%
|
|
|
|
|
|
|
|
|
|
|
4.76
|
%
|
|
(a)
|
Average loans include non-performing loans. Interest on loans includes loan fees of $490,000 in 2012 and $301,000 in 2011.
|
Our net interest income for the year ended December 31, 2012
was positively impacted by an increase in average earning assets of $181.5 million or 16.0% as compared to the year ended December
30, 2011 primarily due to increases in loans acquired in the AFI and Old Harbor acquisitions as well as increases in investments
due to net purchases through 2012 and the acquisition of investments from our merger with AFI. Earnings were also positively impacted
by the accretion of discounts related to acquired loans of approximately $19.7 million for the year ended December 31, 2012 as
compared to $11.8 million for the same period in 2011. Included in the $19.7 million of accretion of discount in 2012 was approximately
$10.7 million related to the disposition of assets acquired in the transactions above the discounted purchase price of the asset.
For the year ended December 31, 2012, we took a charge of approximately $13.7 million, including $3.4 million related to the resolution
of other real estate owned, as an adjustment to the FDIC receivable. This charge was recorded in non-interest income in within
the consolidated statements of operations and was substantially related to changes in cash flows of loss share assets.
Included in the $11.8 million of accretion of discount in
2011 was approximately $4.3 million related to the disposition of assets acquired in the transactions above the discounted purchase
price of the asset. For the year ended December 31, 2011, we took a charge of approximately $3.8 million related to resolved loans
as an adjustment to the FDIC receivable. This charge was recorded in non-interest income in within the consolidated statements
of operations and was substantially related to changes in cash flows of loss share assets.
Net interest income was $67.5 million for year ended December,
2012, as compared to $54.1 million for the year ended December 31, 2011, an increase of $13.5 million or 24.9%. The increase resulted
primarily from an increase in average earning assets of $181.5 million or 16.0% primarily due to the AFI and Old Harbor acquisitions
as well as a reduction in our average cost of funds.
The net interest margin (i.e., net interest income
divided by average earning assets) increased 37 basis points from 4.76% during the year ended December 31, 2011 to 5.13%
during the year ended December 31, 2012, due to an increase in the yield earned on assets of 21 basis point coupled with a
decrease of our cost of funds during the year as well as an increase in accretion income during the year. Our cost of funds
was approximately 41 basis points for the year ended December 31, 2012, as compared to 58 basis points in 2011,
primarily as a result of lower rates in the renewal of time deposits. Accretion of $19.7 million on acquired loans added
approximately 150 basis points to the net interest margin for the year ended December 31, 2012; of this amount, $10.7 million
or 81 basis points related to resolved loss share assets and changes in cash flows during the year ended December 31, 2012.
This compares to accretion of loan discount of $11.8 million during the year December 31, 2011, which added approximately 104
basis points to the December 31, 2011 margin. Of this amount, $4.3 million or 38 basis points related to resolved loss
share assets and changes in cash flows during the year ended December 31, 2011.
For the year ended December 31, 2012, average loans represented
70.71% of total average interest-earning assets and 72.2% of total average deposits and customer repurchase agreements, compared
to average loans to total average interest-earning assets of 73.21% and average loans to total average deposits and customer repurchase
agreements of 76.80% at December 31, 2011.
Rate Volume Analysis
The following table sets forth certain information regarding
changes in our interest income and interest expense for the year ended December 31, 2013, as compared to the year ended December
31, 2012, and the year ended December 31, 2012 as compared to the year ended December 31, 2011. For each category of interest-earning
assets and interest-bearing liabilities, information is provided on changes attributable to changes in interest rate and changes
in the volume. Changes in both volume and rate have been allocated based on the proportionate absolute changes in each category.
Changes in interest earnings for the years ended December
31, 2013 and 2012 were as follows:
(Dollars in thousands)
|
|
Years ended
December 31, 2013 and 2012
|
|
|
Change in
Interest
Income/
Expense
|
|
Variance
Due to
Volume
Changes
|
|
Variance
Due to
Rate
Changes
|
Assets
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest-earning assets
|
|
|
|
|
|
|
|
|
|
|
|
|
Loans
|
|
$
|
5,019
|
|
|
$
|
6,438
|
|
|
$
|
(1,419
|
)
|
Investment securities
|
|
|
2,047
|
|
|
|
2,428
|
|
|
|
(381
|
)
|
Federal funds sold and securities purchased under resale agreements
|
|
|
(165
|
)
|
|
|
(492
|
)
|
|
|
327
|
|
Total interest-earning assets
|
|
$
|
6,901
|
|
|
$
|
8,374
|
|
|
$
|
(1,473
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Liabilities and Shareholders’ Equity
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest-bearing liabilities
|
|
|
|
|
|
|
|
|
|
|
|
|
NOW accounts
|
|
$
|
29
|
|
|
$
|
70
|
|
|
$
|
(41
|
)
|
Money market accounts
|
|
|
(496
|
)
|
|
|
23
|
|
|
|
(519
|
)
|
Savings accounts
|
|
|
(29
|
)
|
|
|
(3
|
)
|
|
|
(26
|
)
|
Certificates of deposit
|
|
|
(1,116
|
)
|
|
|
(360
|
)
|
|
|
(756
|
)
|
Federal funds purchased and repos
|
|
|
3
|
|
|
|
4
|
|
|
|
(1
|
)
|
Other borrowings
|
|
|
86
|
|
|
|
98
|
|
|
|
(12
|
)
|
Total interest-bearing liabilities
|
|
$
|
(1,523
|
)
|
|
$
|
(168
|
)
|
|
$
|
(1,355
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net interest spread
|
|
$
|
8,424
|
|
|
$
|
8,542
|
|
|
$
|
(118
|
)
|
Changes in interest earnings for the years ended December
31, 2012 and 2011 were as follows:
(Dollars in thousands)
|
|
Years ended
December 31, 2012 and 2011
|
|
|
Change in
Interest
Income/
Expense
|
|
Variance
Due to
Volume
Changes
|
|
Variance
Due to
Rate
Changes
|
Assets
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest-earning assets
|
|
|
|
|
|
|
|
|
|
|
|
|
Loans
|
|
$
|
11,618
|
|
|
$
|
6,968
|
|
|
$
|
4,650
|
|
Investment securities
|
|
|
744
|
|
|
|
1,739
|
|
|
|
(995
|
)
|
Federal funds sold and securities purchased under resale agreements
|
|
|
78
|
|
|
|
62
|
|
|
|
16
|
|
Total interest-earning assets
|
|
$
|
12,440
|
|
|
$
|
8,769
|
|
|
$
|
3,671
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Liabilities and Shareholders’ Equity
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest-bearing liabilities
|
|
|
|
|
|
|
|
|
|
|
|
|
NOW accounts
|
|
$
|
11
|
|
|
$
|
47
|
|
|
$
|
(36
|
)
|
Money market accounts
|
|
|
(623
|
)
|
|
|
407
|
|
|
|
(1,030
|
)
|
Savings accounts
|
|
|
(44
|
)
|
|
|
80
|
|
|
|
(124
|
)
|
Certificates of deposit
|
|
|
(43
|
)
|
|
|
411
|
|
|
|
(454
|
)
|
Federal funds purchased and repos
|
|
|
(2
|
)
|
|
|
—
|
|
|
|
(2
|
)
|
Other borrowings
|
|
|
(335
|
)
|
|
|
(424
|
)
|
|
|
89
|
|
Total interest-bearing liabilities
|
|
$
|
(1,036
|
)
|
|
$
|
521
|
|
|
$
|
(1,557
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net interest spread
|
|
$
|
13,476
|
|
|
$
|
8,248
|
|
|
$
|
5,228
|
|
Provision for Loan Losses
The provision for loan losses is charged to earnings to bring
the allowance for loan losses to a level deemed adequate by management and is based upon anticipated experience, the volume and
type of lending conducted by us, the amounts of past due and non-performing loans, general economic conditions, particularly as
they relate to our market area, and other factors related to the collectability of our loan portfolio. For the year ended December
31, 2013, the provision for loan losses was $3.5 million as compared to $6.4 million for the year ended December 31, 2012 and $7.0
million for the year ended December 31, 2011. The decrease in the provision for loan losses between the years ended December 31,
2013 and 2012 was due to a reduction in charge-offs as a result of a decrease in impaired and classified loans period-over-period
and continued stabilization in changes in the fair values on the underlying collateral on impaired loans. Total charge-offs for
the year ended December 31, 2013 were $3.8 million as compared to $9.8 million for the year ended December 31, 2012. During the
year ended December 31, 2012, the Company strategically resolved an $11.4 million non-performing loan collateralized by 15 gas
stations through acceptance of a bulk sale offer at below appraised values. The resolution resulted in a $5.4 million charge-off
during the year.
The decrease in the provision for loan losses between the
years ended December 31, 2012 and December 31, 2011 was due to a decrease in special mention loans of $13.9 million since December
31, 2011 which have a higher allocation of general reserve, coupled with the improvement in the historic loss factor associated
with construction and land development loans. Total charge-offs for the year ended December 31, 2012 were $9.8 million as compared
to $7.4 million for the year ended December 31, 2011.
As of December 31, 2013 and 2012, the allowance for loan
losses was 0.85% and 1.07%, respectively, of total loans. As of December 31, 2013 and 2012, the allowance for loan losses to non-accrual
loans was 60.9% and 45.9%, respectively. The change in the allowance as a percentage of non-accrual loans over the prior
year is primarily due to the continued timely charge-off of specific assets and resolution of impaired loans. The Company obtains
new appraisals annually for all non-accruing loans and provides specific reserves when values less disposal costs are less than
the carrying value of the loans. Specific reserves are generally charged off at the earlier of resolution or within one year.
Non-Interest Income
The following is a schedule of non-interest income for the
years ended December 31, 2013, 2012, and 2011:
(Dollars in thousands)
|
|
Years ended
December 31,
|
|
|
2013
|
|
2012
|
|
2011
|
Service charges and fees on deposit accounts
|
|
$
|
3,332
|
|
|
$
|
3,451
|
|
|
$
|
3,581
|
|
Net gains (losses) on sales of other real estate owned
|
|
|
1,133
|
|
|
|
3,278
|
|
|
|
(264
|
)
|
Net gains on sales of securities
|
|
|
824
|
|
|
|
1,673
|
|
|
|
364
|
|
Net gains on sales of loans held for sale
|
|
|
58
|
|
|
|
106
|
|
|
|
58
|
|
Increase in cash surrender value of Company owned life insurance
|
|
|
618
|
|
|
|
498
|
|
|
|
151
|
|
Adjustment to FDIC loss share receivable
|
|
|
(15,250
|
)
|
|
|
(12,488
|
)
|
|
|
(3,236
|
)
|
Other
|
|
|
1,035
|
|
|
|
816
|
|
|
|
1,085
|
|
|
|
$
|
(8,250
|
)
|
|
$
|
(2,666
|
)
|
|
$
|
1,739
|
|
Year Ended December 31, 2013, compared
to Year Ended December 31, 2012
Non-interest income includes service charges and fees on
deposit accounts, net gains on the sales of securities available for sale and other real estate owned and all other items of income,
other than interest, resulting from our business activities.
Non-interest income decreased to a net charge of $8.3 million
for the year ended December 31, 2013 from a net charge of $2.7 million for the year ended December 31, 2012. The change was due
to an increase in adjustments to reduce the FDIC loss share receivable during the year ended December 31, 2013 as compared to the
same period in 2012 due to increased resolutions, including sales, payoffs and transfers to other real estate owned, of acquired
assets in excess of fair value and changes in cash flows of loss share assets, reduced gains on the sales of other real estate
owned and securities available for sale offset by an increase in the earnings on Company owned life insurance.
Service charges on deposit accounts decreased by $119,000
or 3.4% for the year ended December 31, 2013, as compared to the year ended December 31, 2012. This decrease was due to the change
in the mix and level of transactions on customer accounts year-over-year.
For the year ending
December 31, 2013, the Bank sold OREO properties with a carrying value of $8.2 million and recorded net gains on the disposition
of $1.1 million as compared to sales of OREO with a carrying value of $24.1 million for net gains of $3.3 million for the year
ended December 31, 2012. Net gains related to the resolution of OREO covered under Loss Sharing Agreements was $1.1 million and
$3.4 million for the years ended December 31, 2013 and 2012, respectively. Of this amount, approximately $1.0 million was recorded
as an adjustment to FDIC loss share receivable due to the changes in estimated cash flows at December 31, 2013 as compared to $3.4
million at December 31, 2012.
During the year ended December 31, 2013, we sold approximately
$33.7 million of securities resulting in a net gain of $824,000 as compared to 2012 when we sold $102.5 million of securities for
a net gain of $1.7 million.
The increase in earnings on the cash surrender value of Company
owned life insurance of $120,000 for the year ended December 31, 2013 as compared to the prior year was due to the purchase of
$3.0 million in policies in 2013.
The adjustment to the FDIC loss share receivable during
the years ended December 31, 2013 and 2012 represented $15.8 million and $13.7 million of expense, respectively, related to
changes in cash flows on assets covered by Loss Sharing Agreement and the resolution of other real estate owned property
which reduces the FDIC receivable. These amounts were partially offset by interest income earned on the FDIC receivable of
$574,000 and $1.2 million during the years ended December 31, 2013 and 2012, respectively.
Year Ended December 31, 2012, compared
to Year Ended December 31, 2011
Non-interest income decreased to a net charge of $2.7 million
for the year ended December 31, 2012 from $1.7 million for the year ended December 31, 2011. The change was due to an increase
in adjustments to reduce the FDIC loss share receivable during the year ended December 31, 2012 as compared to the same period
in 2011 due to the resolution, including sales, payoffs and transfers to other real estate owned, of acquired in excess of fair
value and changes in cash flows of loss share assets offset by an increase in gains on the sales of securities and resolution of
OREO and an increase in the interest income received on Company owned life insurance.
Service charges on deposit accounts decreased by $130,000
or 3.6% for the year ended December 31, 2012, as compared to the year ended December 31, 2011. This decrease was primarily due
to the change in the mix and level of individual customer accounts year-over-year offset by an increase in average deposits of
19.4% in 2012 as compared to 2011 due to the acquisition of $161.0 million in deposits from the AFI merger.
For the year ending
December 31, 2012, the Bank sold OREO properties with a carrying value of $24.1 million and recorded net gains on the disposition
of $3.3 million as compared to sales of OREO with a carrying value of $6.1 million for a net loss of $264,000 for the year ended
December 31, 2011. Net gains related to the resolution of OREO covered under Loss Sharing Agreements was $3.4 million and $0 for
the years ended December 31, 2012 and 2011, respectively. Of this amount, approximately $3.4 million was recorded as an adjustment
to FDIC loss share receivable due to the changes in estimated cash flows.
During the year ended December 31, 2012, we sold approximately
$102.5 million of securities resulting in a net gain of $1.7 million as compared to 2011 when we sold $20.3 million of securities
for a net gain of $364,000.
The increase in earnings on the cash surrender value of Company
owned life insurance of $347,000 for the year ended December 31, 2012 as compared to the prior year was due to the purchase of
$15.5 million in policies in 2012.
The adjustment to the FDIC loss share receivable during the
years ended December 31, 2012 and 2011 represented a $13.7 million and $3.8 million expense, respectively, related to increases
in cash flows on assets covered by Loss Sharing Agreement which reduces the FDIC receivable. The $13.7 million for the year ended
December 31, 2012 includes $3.2 million related to resolved OREO covered by loss share assets during the year and the related charges
in estimated cash flows. This amount was partially offset by interest income earned on the FDIC receivable of $1.2 million and
$566,000 during the years ended December 31, 2012 and 2011, respectively.
Non-Interest Expenses
The following is a schedule of non-interest expense for years
ended December 31, 2013, 2012 and 2011:
(Dollars in thousands)
|
|
Years ended
December 31,
|
|
|
2013
|
|
2012
|
|
2011
|
Salaries and employee benefits
|
|
$
|
25,023
|
|
|
$
|
24,303
|
|
|
$
|
20,186
|
|
Occupancy and equipment
|
|
|
8,100
|
|
|
|
7,958
|
|
|
|
7,732
|
|
Data processing
|
|
|
3,903
|
|
|
|
3,686
|
|
|
|
3,481
|
|
Telephone
|
|
|
899
|
|
|
|
917
|
|
|
|
814
|
|
Stationary and supplies
|
|
|
382
|
|
|
|
480
|
|
|
|
387
|
|
Amortization of intangibles
|
|
|
745
|
|
|
|
684
|
|
|
|
514
|
|
Professional fees
|
|
|
1,675
|
|
|
|
1,631
|
|
|
|
1,131
|
|
Advertising
|
|
|
263
|
|
|
|
258
|
|
|
|
293
|
|
Merger reorganization expense
|
|
|
1,745
|
|
|
|
1,784
|
|
|
|
1,076
|
|
Disposal of banking centers and equipment
|
|
|
828
|
|
|
|
—
|
|
|
|
—
|
|
Regulatory assessment
|
|
|
1,595
|
|
|
|
1,482
|
|
|
|
1,395
|
|
Other real estate owned expense
|
|
|
2,040
|
|
|
|
1,245
|
|
|
|
323
|
|
Loan expense
|
|
|
1,448
|
|
|
|
2,307
|
|
|
|
1,900
|
|
Other
|
|
|
4,626
|
|
|
|
4,249
|
|
|
|
3,613
|
|
|
|
$
|
53,272
|
|
|
$
|
50,984
|
|
|
$
|
42,845
|
|
Year Ended December 31, 2013, compared
to Year Ended December 31, 2012
Non-interest expense is comprised of salaries and employee
benefits, occupancy and equipment expense, and other operating expenses incurred in supporting our various business activities.
During the year ended December 31, 2013, non-interest expense increased to $53.3 million compared to $51.0 million for the year
ended December 31, 2012, an increase of $2.3 million or 4.5%. The increase was primarily due to the strategic decision to close
two banking centers and the write-off of obsolete equipment as well as an increase in the write-downs to other real estate owned
due to updated appraisals received during the year.
Salary and employee benefit costs were $25.0 million for
the year ended December 31, 2013, an increase of $720,000 or 3.0%.The change was due primarily to the addition of 14 new employees
related to the acquisition of EBI.
Occupancy and equipment increased by $142,000 or 1.8%. The
increase was due to the addition of two new banking centers acquired from EBI offset by closures of two legacy banking centers.
Of the two banking centers closed, one was located in South Florida and closed in January 2014 and the other was located on the
west coast of Florida and closed in the third quarter of 2013. The total estimated annualized occupancy savings due to the closure
of these banking centers is approximately $1.0 million per year.
Data processing increased $217,000 or 5.9% from $3.7
million for the year ended December 31, 2012 to $3.9 million for the year ended December 31, 2013 due to increased
transactions related to the acquisition of EBI in July 2013.
Merger reorganization expenses were consistent year-over-year.
The $1.7 million of expense for the year ended December 31, 2013 was due to the merger and integration of EBI which was completed
during the third quarter of 2013. Merger reorganization expense for the year ended December 31, 2012 related to the integration
of Old Harbor as well as the merger and integration of AFI. Merger reorganization expenses include legal and professional, IT integration
and conversion, severance and lease termination expense.
Disposal of banking centers and equipment relates to the
decision to strategically close one banking center in South Florida and close one banking center on the west coast of Florida.
The Company recorded an expense of $632,000 for the remaining facility lease, write-off of leasehold improvements and other fixed
assets and severance costs. Additionally, the Company disposed of computer storage related equipment which was determined to be
obsolete during the quarter ended December 31, 2013 and recorded a charge of $178,000 related to the write-off of these fixed assets.
OREO expense increased by $795,000 to $2.0 million for the
year ended December 31, 2013, as compared to $1.2 million for the year ended December 31, 2012. The change was due to an increase
in write downs on OREO due to changes in estimated fair values during the year ended December 31, 2013 of $1.1 million as compared
to $340,000 for the year ended December 31, 2012.
Loan expenses primarily include the costs associated with
the collection of legacy as well as loss sharing assets. Loan expenses decreased by $859,000 from $2.3 million for the
year ended December 31, 2012 compared to $1.4 million for the year ended December 31, 2013. The change was primarily due to a
reduction in impaired and classified loans period-over-period and a reduction in loans covered under loss sharing agreements.
The increase in other non-interest expenses of $377,000 was
due to the EBI Merger.
Year Ended December 31, 2012, compared
to Year Ended December 31, 2011
Non-interest expense is comprised of salaries and employee
benefits, occupancy and equipment expense, and other operating expenses incurred in supporting our various business activities.
During the year ended December 31, 2012, non-interest expense increased to $51.0 million compared to $42.8 million for the year
ended December 31, 2011, an increase of $8.1 million or 19.0%. A substantial portion of the increase in non-interest expense was
due to the acquisition of Old Harbor in October 2011 as well as the AFI Acquisition in April 2012.
Salary and employee benefit costs were $24.3 million for
the year ended December 31, 2012, an increase of $4.1 million or 20.4%. The increase was primarily a result of the salaries added
in the acquisition of Old Harbor in October 2011 as well as the AFI Acquisition in April 2012.
Occupancy and equipment increased by $226,000 or 2.9% year-over-year.
The Company integrated and closed four banking centers in May 2011, which were added as part of the TBOM acquisition in 2010. This
cost was partially offset by the seven banking centers added from the AFI Acquisition in April 2012 and Old Harbor acquisition
in October 2011.
Data processing costs were $3.7 million for the year ended
December 31, 2012 or an increase of $205,000 compared to 2011, due to the increase in the number of transactions processed as a
result of the acquisitions of Old Harbor in October of 2011 and AFI in April of 2012.
Professional fees were $1.6 million, or an increase of $500,000
compared to 2011 due to an increase in professional services related to audits and computer consulting due to the expansion of
operations period-over-period.
Merger reorganization expenses increased by $708,000 to $1.8
million for the year ended December 31, 2012 as compared to $1.1 million for the year ended December 31, 2011, as a result of the
integration of Old Harbor and the merger and integration of AFI during the year ended December 31, 2012. The $1.1 million of expense
for the year ended December 31, 2011 was the result of the integration of TBOM. Costs include legal and professional, IT integration
and conversion, severance and lease termination fees.
OREO expense increased by $922,000 to $1.2 million for the
year ended December 31, 2012, as compared to $323,000 for the year ended December 31, 2011. The increase is due to an increase
in the number of OREO properties (primarily a result of ORE acquired from the Old Harbor transaction in October 2011) period-over-period
and the write down of properties held within the portfolio by $340,000 during the year ended December 31, 2012 to market values
during the year.
Loan expenses primarily include the costs associated with
the collection of legacy as well as loss sharing assets. Loan expenses increased by $407,000 from $1.9 million for the year ended
December 31, 2011 to $2.3 million for the year ended December 31, 2012. The change was primarily due to foreclosure related expenses
associated with the increase in loss share assets as a result of the Old Harbor acquisition.
Increases in other non-interest expenses of $636,000 were
primarily due to the AFI merger and the acquisition of Old Harbor.
Income Tax Expense (Benefit)
During the year ended December 31, 2013, we recognized income
tax expense of $4.1 million due to pre-tax earnings of $11.0 million. During the year ended December 31, 2012, we recognized income
tax expense of $2.8 million due to pre-tax earnings of $7.5 million. During the year ended December 31, 2011, we recognized income
tax expense of $2.3 million due to pre-tax earnings of $6.0 million. The effective tax rate for the years ended December 31, 2013
and 2012 was 37.3% and 38.1% for the year ended December 31, 2011.
Analysis for Three Month Periods
ended December 31, 2013 and 2012
Results of Operations
We recorded net earnings of $2.6 million for the quarter ended December 31, 2013, compared to net earnings
of $1.7 million for the quarter ended December 31, 2012. Income for the quarter ended December 31, 2013 was positively impacted
by the EBI acquisition in July 2013, an increase in interest income due to net loan growth and purchases of securities available
for sale and a reduction in the provision for loan losses quarter over quarter offset by an increase in non-interest expense due
to the write-off of computer equipment and write-downs to our other real estate owned portfolio due to updated appraisals received.
Net Interest Income
Net interest income, which constitutes our principal source
of income, represents the excess of interest income on interest-earning assets over interest expense on interest-bearing liabilities.
Our principal interest-earning assets are federal funds sold, investment securities and loans. Our interest-bearing liabilities
primarily consist of time deposits, interest-bearing checking accounts (“NOW accounts”), savings deposits and money
market accounts. We invest the funds attracted by these interest-bearing liabilities in interest-earning assets. Accordingly, our
net interest income depends upon the volume of average interest-earning assets and average interest-bearing liabilities and the
interest rates earned or paid on them.
The following table reflects the components of net interest
income, setting forth for the periods presented, (1) average assets, liabilities and shareholders’ equity, (2) interest income
earned on interest-earning assets and interest paid on interest-bearing liabilities, (3) average yields earned on interest-earning
assets and average rates paid on interest-bearing liabilities, (4) our net interest spread (i.e., the average yield on interest-earning
assets less the average rate on interest-bearing liabilities) and (5) our net interest margin (i.e., the net yield on interest-earning
assets).
Net interest earnings for the three-month periods ended December
31, 2013 and 2012 are reflected in the following table:
|
|
December 31, 2013
|
|
December 31, 2012
|
(Dollars in thousands)
|
|
Average
Balance
|
|
Interest
Income/
Expense
|
|
Average
Rates
Earned/
Paid
|
|
Average
Balance
|
|
Interest
Income/
Expense
|
|
Average
Rates
Earned/
Paid
|
Assets
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest-earning assets
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loans
|
|
$
|
1,132,668
|
|
|
$
|
19,682
|
|
|
|
6.89
|
%
|
|
$
|
924,306
|
|
|
$
|
17,321
|
|
|
|
7.43
|
%
|
Investment securities
|
|
|
337,525
|
|
|
|
2,125
|
|
|
|
2.52
|
%
|
|
|
224,747
|
|
|
|
1,070
|
|
|
|
1.90
|
%
|
Federal funds sold and securities purchased under resale agreements
|
|
|
65,825
|
|
|
|
157
|
|
|
|
0.95
|
%
|
|
|
182,199
|
|
|
|
221
|
|
|
|
0.48
|
%
|
Total interest-earning assets
|
|
|
1,536,018
|
|
|
|
21,964
|
|
|
|
5.67
|
%
|
|
|
1,331,252
|
|
|
|
18,612
|
|
|
|
5.55
|
%
|
Non interest-earning assets
|
|
|
236,583
|
|
|
|
|
|
|
|
|
|
|
|
232,102
|
|
|
|
|
|
|
|
|
|
Allowance for loan losses
|
|
|
(10,068
|
)
|
|
|
|
|
|
|
|
|
|
|
(9,618
|
)
|
|
|
|
|
|
|
|
|
Total assets
|
|
$
|
1,762,533
|
|
|
|
|
|
|
|
|
|
|
$
|
1,553,736
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Liabilities and Shareholders’ Equity
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest-bearing liabilities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
NOW accounts
|
|
$
|
249,135
|
|
|
$
|
75
|
|
|
|
0.12
|
%
|
|
$
|
165,117
|
|
|
$
|
57
|
|
|
|
0.14
|
%
|
Money market accounts
|
|
|
354,508
|
|
|
|
265
|
|
|
|
0.30
|
%
|
|
|
335,112
|
|
|
|
293
|
|
|
|
0.35
|
%
|
Savings accounts
|
|
|
62,472
|
|
|
|
43
|
|
|
|
0.27
|
%
|
|
|
64,069
|
|
|
|
42
|
|
|
|
0.26
|
%
|
Certificates of deposit
|
|
|
291,623
|
|
|
|
546
|
|
|
|
0.74
|
%
|
|
|
320,394
|
|
|
|
725
|
|
|
|
0.90
|
%
|
Fed funds purchased and repurchase agreements
|
|
|
15,180
|
|
|
|
4
|
|
|
|
0.13
|
%
|
|
|
15,794
|
|
|
|
6
|
|
|
|
0.15
|
%
|
Federal Home Loan Bank advances and
other borrowings
|
|
|
35,400
|
|
|
|
48
|
|
|
|
0.54
|
%
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
%
|
Total interest-bearing liabilities
|
|
|
1,008,318
|
|
|
|
981
|
|
|
|
0.39
|
%
|
|
|
900,486
|
|
|
|
1,123
|
|
|
|
0.49
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-interest bearing liabilities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Demand deposit accounts
|
|
|
507,960
|
|
|
|
|
|
|
|
|
|
|
|
405,857
|
|
|
|
|
|
|
|
|
|
Other liabilities
|
|
|
10,541
|
|
|
|
|
|
|
|
|
|
|
|
7,115
|
|
|
|
|
|
|
|
|
|
Total non-interest-bearing liabilities
|
|
|
518,501
|
|
|
|
|
|
|
|
|
|
|
|
412,972
|
|
|
|
|
|
|
|
|
|
Shareholders’ equity
|
|
|
235,714
|
|
|
|
|
|
|
|
|
|
|
|
240,278
|
|
|
|
|
|
|
|
|
|
Total liabilities and shareholders’ equity
|
|
$
|
1,762,533
|
|
|
|
|
|
|
|
|
|
|
$
|
1,553,736
|
|
|
|
|
|
|
|
|
|
Net interest spread
|
|
|
|
|
|
$
|
20,983
|
|
|
|
5.29
|
%
|
|
|
|
|
|
$
|
17,489
|
|
|
|
5.06
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net interest on average earning assets - Margin
|
|
|
|
|
|
|
|
|
|
|
5.42
|
%
|
|
|
|
|
|
|
|
|
|
|
5.21
|
%
|
Our net interest income for the three months ended
December 31, 2013 was impacted by an increase in total average earning assets of $204.8 million or 15.4% offset by an
increase of $107.8 million or 12.0% in interest bearing liabilities as compared to the three months ended December 31, 2012.
The increases were primarily due to the acquisition of EBI in July 2013.
Interest earnings for the current quarter were positively
impacted by the accretion of discounts related to acquired loans of approximately $6.2 million as compared to $5.6 million for
the same period in 2012. Included in the $6.2 million of accretion of discount for the quarter ended December 31, 2013 was approximately
$5.0 million related to the disposition of assets acquired in the transactions above the discounted carrying value of the asset
and accretion of discounts on purchase credit impaired loans due to increases in estimated cash flows. For the quarter ended December
31, 2013, we took a charge of approximately $4.7 million, including $102,000 related to the resolution of other real estate owned,
as an adjustment to the FDIC loss share receivable. This charge was recorded in non-interest income within the consolidated statements
of operations and was substantially related to changes in cash flows of loss share assets. Included in the $5.6 million of accretion
discount for the quarter ended December 31, 2012 was approximately $3.4 million related to the disposition of assets above the
discounted carrying values and accretion of discounts on purchase credit impaired loans due to increases in estimated cash flows.
For the quarter ended December 31, 2012, we took a charge of approximately $3.6 million, including $297,000 related to the resolution
of other real estate owned, as an adjustment to the FDIC loss share receivable. This charge was recorded in non-interest income
within the consolidated statements of operations substantially related to changes in cash flows of loss share assets.
Net interest income was $21.0 million for the three months
ended December 31, 2013, as compared to $17.5 million for the three months ended December 31, 2012, an increase of $3.5 million,
or 20.0%. The change resulted from an increase in total average earning assets of $204.8 million offset by an increase of $107.8
million in interest bearing liabilities, an increase in accretion on acquired loans and a reduction in cost of funds.
The net interest margin (i.e., net interest income divided
by average earning assets) increased 21 basis points from 5.21% during the three months ended December 31, 2012 to 5.42% during
the three months ended December 31, 2013. Accretion of $6.2 million on acquired loans added approximately 159 basis points to the
quarter ended December 31, 2013 net interest margin. Of the 159 basis points, 129 basis points related to resolved loss share assets
and changes in cash flows during the quarter. This compares to accretion of loan discount of $5.6 million during the three months
ended December 31, 2012, which added approximately 166 basis points to the December 31, 2012 margin. Of the 166 basis points for
the quarter ended December 31, 2012, 101 basis points related to resolved loss share assets and changes in cash flows.
For the three months ended December 31, 2013, average loans
represented 73.7% of total average interest-earnings assets and 76.5% of total average deposits and customer repurchase agreements,
compared to average loans of 69.4% of total average interest-earning assets and average loans of 70.8% to total average deposits
and customer repurchase agreements at December 31, 2012. Our cost of funds was approximately 8 basis points lower for the three
months ended December 31, 2013, as compared to December 31, 2012, primarily as a result of lower rates offered on our deposit products.
Rate Volume Analysis
The following table sets forth certain information regarding
changes in our interest income and interest expense for the three months ended December 31, 2013 as compared to the three months
ended December 31, 2012. For each category of interest-earning assets and interest-bearing liabilities, information is provided
on changes attributable to changes in interest rate and changes in the volume. Changes in both volume and rate have been allocated
based on the proportionate absolute changes in each category.
Changes in interest earnings for the three months ended
December 31, 2013 and 2012:
|
|
December 31, 2013 and 2012
|
|
(Dollars in thousands)
|
|
Change
in
Interest
Income/
Expense
|
|
|
Variance
Due to
Volume
Changes
|
|
|
Variance
Due to
Rate
Changes
|
|
Assets
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest-earning assets
|
|
|
|
|
|
|
|
|
|
|
|
|
Loans
|
|
$
|
2,361
|
|
|
$
|
3,690
|
|
|
$
|
(1,329
|
)
|
Investment securities
|
|
|
1,055
|
|
|
|
642
|
|
|
|
413
|
|
Federal funds sold and securities purchased under resale agreements
|
|
|
(64
|
)
|
|
|
(195
|
)
|
|
|
131
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total interest-earning assets
|
|
$
|
3,352
|
|
|
$
|
4,137
|
|
|
$
|
(785
|
)
|
Liabilities
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest-bearing liabilities
|
|
|
|
|
|
|
|
|
|
|
|
|
NOW accounts
|
|
$
|
18
|
|
|
$
|
26
|
|
|
$
|
(8
|
)
|
Money market accounts
|
|
|
(28
|
)
|
|
|
16
|
|
|
|
(44
|
)
|
Savings accounts
|
|
|
1
|
|
|
|
(1
|
)
|
|
|
2
|
|
Certificates of deposit
|
|
|
(179
|
)
|
|
|
(61
|
)
|
|
|
(118
|
)
|
Fed funds purchased and repurchase agreements
|
|
|
(1
|
)
|
|
|
—
|
|
|
|
(1
|
)
|
Other borrowings
|
|
|
48
|
|
|
|
48
|
|
|
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total interest-bearing liabilities
|
|
|
(141
|
)
|
|
|
28
|
|
|
|
(169
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net interest spread
|
|
$
|
3,493
|
|
|
$
|
4,109
|
|
|
$
|
(616
|
)
|
Non-interest Income, Non-interest Expense, Provision
for Loan Losses, and Income Tax Expense
The following is a schedule of non-interest income for the
three months ended December 31, 2013 and 2012:
|
|
Three months ended
|
|
|
(Dollars in thousands)
|
|
December 31,
2013
|
|
December 31,
2012
|
|
Difference
|
Service charge and fees on deposit accounts
|
|
$
|
863
|
|
|
$
|
858
|
|
|
$
|
5
|
|
Net gains on sales of other real estate owned
|
|
|
120
|
|
|
|
305
|
|
|
|
(185
|
)
|
Net gains on sales of securities
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
Net gains on sales of loans held for sale
|
|
|
—
|
|
|
|
26
|
|
|
|
(26
|
)
|
Increase in cash surrender value of Company owned life insurance
|
|
|
167
|
|
|
|
155
|
|
|
|
12
|
|
Adjustment to FDIC loss share receivable
|
|
|
(4,673
|
)
|
|
|
(3,221
|
)
|
|
|
(1,452
|
)
|
Other
|
|
|
274
|
|
|
|
209
|
|
|
|
65
|
|
Total non-interest income
|
|
$
|
(3,249
|
)
|
|
$
|
(1,668
|
)
|
|
$
|
(1,581
|
)
|
Non-interest income includes service charges and fees
on deposit accounts, net gains or losses on sales of securities, and all other items of income, other than interest,
resulting from our business activities. Non-interest income decreased by $1.6 million for the quarter ended December 31, 2013
when compared to the quarter ended December 31, 2012. The decrease was the result of an increase in the adjustment to the
FDIC loss share receivable due to a reduction in resolutions of assets above their carrying value and a reduction in gains on
the sale of other real estate owned quarter over quarter.
During the three months ended December 31, 2013, we received
proceeds from the sale of OREO properties of $1.1 million with a carrying value of $971,000 and recorded a net gain of $120,000
on the these dispositions as compared to sales of $4.1 million of OREO with a carrying value of $3.8 million resulting in a net
gain of $305,000 for the three months ended December 31, 2012.
The adjustment to the FDIC loss share receivable during the
quarter ended December 31, 2013 represented a $4.7 million expense related to changes in cash flows on assets covered by Loss Share
Agreements and the resolution of OREO property which reduces the FDIC receivable. This compares to $3.6 million for the quarter
ended December 31, 2012. These amounts were partially offset by interest income earned on the FDIC receivable of $21,000 and $344,000
for the quarters ended December 31, 2013 and 2012, respectively.
Non-interest expense is comprised of salaries and employee
benefits, occupancy and equipment expense and other operating expenses incurred in supporting our various business activities.
Non-interest expense increased by $581,000, or 4.8%, from $12.2 million for the three months ended December 31, 2012 to $12.8 million
for the three months ended December 31, 2013, primarily due to the write-off of computer storage equipment that was deemed obsolete
and write downs to other real estate owned quarter-over-quarter.
The following summarizes the changes in non-interest expense
accounts for the three months ended December 31, 2013 compared to the three months ended December 31, 2012:
|
|
Three months ended
|
|
|
(Dollars in thousands)
|
|
December 31,
2013
|
|
December 31,
2012
|
|
Difference
|
Salaries and employee benefits
|
|
$
|
6,195
|
|
|
$
|
6,199
|
|
|
$
|
(4
|
)
|
Occupancy and equipment
|
|
|
1,987
|
|
|
|
1,936
|
|
|
|
51
|
|
Data processing
|
|
|
1,008
|
|
|
|
896
|
|
|
|
112
|
|
Telephone
|
|
|
229
|
|
|
|
198
|
|
|
|
31
|
|
Stationery and supplies
|
|
|
97
|
|
|
|
94
|
|
|
|
3
|
|
Amortization of intangibles
|
|
|
202
|
|
|
|
178
|
|
|
|
24
|
|
Professional fees
|
|
|
402
|
|
|
|
455
|
|
|
|
(53
|
)
|
Advertising
|
|
|
63
|
|
|
|
56
|
|
|
|
7
|
|
Disposal of banking centers and equipment
|
|
|
178
|
|
|
|
—
|
|
|
|
178
|
|
Regulatory assessment
|
|
|
414
|
|
|
|
355
|
|
|
|
59
|
|
OREO expense
|
|
|
548
|
|
|
|
276
|
|
|
|
272
|
|
Loan expense
|
|
|
227
|
|
|
|
510
|
|
|
|
(283
|
)
|
Other
|
|
|
1,224
|
|
|
|
1,040
|
|
|
|
184
|
|
Total non-interest expense
|
|
$
|
12,774
|
|
|
$
|
12,193
|
|
|
$
|
581
|
|
Salaries and employee benefits was impacted in the fourth
quarter 2013 by an increase in salaries due to the Enterprise acquisition offset by a reduction in contributions to our retirement
plans as compared to the quarter ended December 31, 2012.
Data processing expenses increased by $112,000 from $896,000
for the quarter ended December 31, 2012 as compared to $1.0 million for the quarter ended December 31, 2012 due to an increase
in the number of transactions resulting from the EBI acquisition.
Disposal of banking centers and equipment relates to the
write-off of computer storage equipment which was deemed obsolete and replaced during the quarter ended December 31, 2013. We incurred
a charge of $178,000 related to this disposal of fixed assets.
Other real estate owned (“OREO”) expense increased
by approximately $272,000 to $548,000 for the three months ended December 31, 2013, as compared to $276,000 for the three months
ended December 31, 2012. The change was primarily due to write downs of $359,000 on OREO properties due to changes in the estimated
fair values during the quarter ended December 31, 2013 as compared to none for the quarter ended December 31, 2012.
Loan expense includes the costs associated with the collection
of legacy as well as loss sharing assets. Loan expense decreased by $283,000 from $510,000 for the three months ended December
31, 2012 to $227,000 for the three months ended December 31, 2013. The change was primarily due to a reduction in non-performing
assets and assets covered under Loss Sharing Agreements.
Other expense increased $184,000 from $1.0 million for the
quarter ended December 31, 2012 to $1.2 million for the quarter ended December 31, 2013. The change was primarily due to increases
in expenses due to increased transactions and volume as the result of the EBI acquisition.
The provision for loan losses is charged to earnings to bring
the allowance for loan losses to a level deemed adequate by management and is based upon anticipated experience, the volume and
type of lending conducted by us, the amounts of past due and non-performing loans, general economic conditions, particularly as
they relate to our market area, and other factors related to the collectability of our loan portfolio. During the quarter ended
December 31, 2013, we recorded $780,000 in provision for loan losses as compared to $900,000 for the three months ended December
31, 2012. The decrease in the provision for loan losses quarter-over-quarter was due to a continued reduction of impaired and special
mention assets. Charge-offs for the quarter ended December 31, 2013 were $1.1 million as compared to $508,000 for the quarter ended
December 31, 2012.
We recorded income tax expense of $1.6 million for the three
months ended December 31, 2013, compared to $1.0 million for the three months ended December 31, 2012. The change is due to higher
pretax income for the three months ended December 31, 2013 as compared to the three months ended December 31, 2012.
Inflation
The impact of inflation on the banking industry differs significantly
from that of other industries in which a large portion of total resources are invested in fixed assets such as property, plant
and equipment.
Assets and liabilities of financial institutions are virtually
all monetary in nature, and therefore are primarily impacted by interest rates rather than changing prices. While the general level
of inflation underlies most interest rates, interest rates react more to changes in the expected rate of inflation and to changes
in monetary and fiscal policy. Net interest income and the interest rate spread are good measures of our ability to react to changing
interest rates and are discussed in further detail in the section entitled “Results of Operations.”
Interest Rate Risk Management
Our net income is largely dependent on net interest income.
Net interest income is susceptible to interest rate risk to the degree that interest-bearing liabilities mature or re-price on
a different basis than interest-earning assets. When interest-bearing liabilities mature or re-price more quickly than interest-earning
assets in a given period, a significant increase in market rates of interest could adversely affect net interest income. Similarly,
when interest-earning assets mature or re-price more quickly than interest-bearing liabilities, falling interest rates could result
in a decrease in net interest income. Net interest income is also affected by changes in the portion of interest-earning assets
that are funded by interest-bearing liabilities rather than by other sources of funds, such as non-interest-bearing deposits and
shareholders’ equity.
We manage our interest rate risk through 1
st
United’s
Asset Liability Committee (“ALCO”) Board Committee which meets at least quarterly and through our internal management
committee which meets more frequently. Management closely monitors 1
st
United’s interest at risk calculations
through model simulations and reports the results of its rate stress testing to ALCO on a quarterly basis.
We have established policy limits of risk, which are quantitative
measures of the percentage change in net interest income (a measure of net interest income at risk) and the fair value of equity
capital (a measure of economic value of equity (“EVE”) at risk) resulting from a hypothetical change in interest rates
for maturities from one day to 30 years. We measure the potential adverse impacts that changing interest rates may have on our
short-term earnings, long-term value, and liquidity by employing simulation analysis through the use of computer modeling. The
simulation model captures optionality factors such as call features and interest rate caps and floors imbedded in investment and
loan portfolio contracts. As with any method of gauging interest rate risk, there are certain shortcomings inherent in the interest
rate modeling methodology used by us. When interest rates change, actual movements in different categories of interest-earning
assets and interest-bearing liabilities, loan prepayments, and withdrawals of time and other deposits, may deviate significantly
from assumptions used in the model. Finally, the methodology does not measure or reflect the impact that higher rates may have
on adjustable-rate loan customers’ ability to service their debts, or the impact of rate changes on demand for loan, lease,
and deposit products.
Our interest rate risk management goal is to avoid unacceptable
variations in net interest income and capital levels due to fluctuations in market rates. Management attempts to achieve this goal
by balancing, within policy limits, the volume of floating-rate liabilities with a similar volume of floating-rate assets, by keeping
the average maturity of fixed-rate asset and liability contracts reasonably matched, by maintaining a pool of administered core
deposits, and by adjusting pricing rates to market conditions on a continuing basis.
The balance sheet is subject to testing for interest rate
shock possibilities to indicate the inherent interest rate risk. Average interest rates are shocked by plus or minus 100 and 200
basis points (“bp”) and plus 300 bp, although we may elect not to use particular scenarios that we determined are impractical
in a current rate environment. It is management’s goal to structure the balance sheet so that net interest earnings at risk
over a one-year and two-year period and the economic value of equity at risk do not exceed policy guidelines at the various interest
rate shock levels.
1
st
United has been consistently within policy
limits on rates stress test up and down 100, 200, and 300 bp, both for net interest margin and EVE. Management has closely monitored
1
st
United’s gap position which has been slightly liability sensitive during a stable rate environment.
The following tables illustrate the above measurements at
December 31, 2013:
Net Interest Margin
Actual Change at (+ or -) hundred-basis point change in interest rates
|
(Dollars in thousands)
|
|
-300
|
|
-200
|
|
-100
|
|
0
|
|
100
|
|
200
|
|
300
|
Net interest income at one year
|
|
$
|
56,971
|
|
|
$
|
59,428
|
|
|
$
|
61,989
|
|
|
$
|
63,221
|
|
|
$
|
63,339
|
|
|
$
|
63,897
|
|
|
$
|
64,361
|
|
Interest change
|
|
|
(6,250
|
)
|
|
|
(3,793
|
)
|
|
|
(1,232
|
)
|
|
|
—
|
|
|
|
118
|
|
|
|
675
|
|
|
|
1,140
|
|
Percentage change
|
|
|
(9.89
|
)%
|
|
|
(6.00
|
)%
|
|
|
(1.95
|
)%
|
|
|
—
|
|
|
|
0.19
|
%
|
|
|
1.07
|
%
|
|
|
1.80
|
%
|
Net interest income at two years
|
|
$
|
50,439
|
|
|
$
|
55,147
|
|
|
$
|
59,777
|
|
|
$
|
62,402
|
|
|
$
|
63,434
|
|
|
$
|
64,748
|
|
|
$
|
66,006
|
|
Interest change
|
|
|
(11,963
|
)
|
|
|
(7,255
|
)
|
|
|
(2.625
|
)
|
|
|
—
|
|
|
|
1,032
|
|
|
|
2,346
|
|
|
|
3,604
|
|
Percentage change
|
|
|
(19.17
|
)%
|
|
|
(11.63
|
)%
|
|
|
(4.21
|
)%
|
|
|
—
|
|
|
|
1.65
|
%
|
|
|
3.76
|
%
|
|
|
5.78
|
%
|
Economic Value of Equity
Actual Change at (+ or -) hundred-basis point change in interest rates
|
(Dollars in thousands)
|
|
-300
|
|
-200
|
|
-100
|
|
0
|
|
100
|
|
200
|
|
300
|
Equity value at one year
|
|
$
|
317,756
|
|
|
$
|
280,574
|
|
|
$
|
258,158
|
|
|
$
|
252,271
|
|
|
$
|
231,972
|
|
|
$
|
215,248
|
|
|
$
|
199,167
|
|
Value change at:
|
|
|
65,485
|
|
|
|
28,302
|
|
|
|
5,887
|
|
|
|
—
|
|
|
|
(20,299
|
)
|
|
|
(37,023
|
)
|
|
|
(53,104
|
)
|
Percent change at:
|
|
|
25.96
|
%
|
|
|
11.22
|
%
|
|
|
2.33
|
%
|
|
|
—
|
|
|
|
(8.05
|
)%
|
|
|
(14.68
|
)%
|
|
|
(21.05
|
)%
|
Rate Sensitive Assets over Rate Sensitive Liabilities
At December 31, 2013, the twelve-month gap position was at
.78.
(Dollars in thousands)
|
|
Up to 3
months
|
|
>3 months
<1 year
|
|
>1 year
<3 years
|
|
>3 years
<5 years
|
|
>5 years
|
|
Total
|
Interest-earning deposits
|
|
$
|
152,521
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
152,521
|
|
Federal funds sold
|
|
|
408
|
|
|
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
|
—
|
|
|
|
408
|
|
Securities available for sale
|
|
|
8,887
|
|
|
|
26,279
|
|
|
|
67,819
|
|
|
|
67,005
|
|
|
|
157,971
|
|
|
|
327,961
|
|
Nonmarketable equity securities
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
9,997
|
|
|
|
9,997
|
|
Loans
|
|
|
360,915
|
|
|
|
191,913
|
|
|
|
248,447
|
|
|
|
147,550
|
|
|
|
142,262
|
|
|
|
1,091,087
|
|
Total interest-earning assets
|
|
$
|
522,731
|
|
|
$
|
218,192
|
|
|
$
|
316,266
|
|
|
$
|
214,555
|
|
|
$
|
310,230
|
|
|
$
|
1,581,974
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
NOW accounts
|
|
$
|
158,661
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
158,661
|
|
IOTA accounts
|
|
|
186,199
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
186,199
|
|
Money market accounts
|
|
|
328,736
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
328,736
|
|
Regular savings accounts
|
|
|
60,338
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
60,338
|
|
Certificate of deposit
|
|
|
79,687
|
|
|
|
122,843
|
|
|
|
78,200
|
|
|
|
6,938
|
|
|
|
—
|
|
|
|
287,668
|
|
Repurchase agreements
|
|
|
14,363
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
14,363
|
|
Feds funds purchased & FHLB advances
|
|
|
—
|
|
|
|
—
|
|
|
|
35,018
|
|
|
|
—
|
|
|
|
—
|
|
|
|
35,018
|
|
Total interest-bearing liabilities
|
|
$
|
827,984
|
|
|
$
|
122,843
|
|
|
$
|
113,218
|
|
|
$
|
6,938
|
|
|
$
|
—
|
|
|
$
|
1,070,983
|
|
Gap
|
|
$
|
(305,253
|
)
|
|
$
|
95,349
|
|
|
$
|
203,048
|
|
|
$
|
207,617
|
|
|
$
|
310,230
|
|
|
$
|
510,991
|
|
Cumulative gap
|
|
$
|
(305,253
|
)
|
|
$
|
(209,904
|
)
|
|
$
|
(6,856
|
)
|
|
$
|
200,761
|
|
|
$
|
510,991
|
|
|
|
|
|
Cumulative gap ratio
|
|
|
0.63
|
|
|
|
0.78
|
|
|
|
0.99
|
|
|
|
1.19
|
|
|
|
1.48
|
|
|
|
|
|
Liquidity and Capital Resources
Liquidity
We manage our liquidity position with the objective of maintaining
sufficient funds to respond to the needs of depositors and borrowers and to take advantage of earnings enhancement opportunities.
In addition to the normal inflow of funds from core-deposit growth together with repayments and maturities of loans and investments,
we utilize other short-term funding sources such as securities sold under agreements to repurchase, overnight federal funds purchased
from correspondent banks and the acceptance of short-term deposits from public entities, Federal Home Loan Bank advances and brokered
time deposits.
We monitor and manage our liquidity position on several fronts,
which vary depending upon the time period. As the time period is expanded, other data is factored in, including estimated loan
funding requirements, estimated loan payoffs, investment portfolio maturities or calls, and anticipated depository buildups or
runoffs.
We classify all of our securities as available-for-sale,
thereby maintaining liquidity. Our liquidity position is further enhanced by structuring our loan portfolio interest payments as
monthly complemented by retail credit and residential mortgage loans in our loan portfolio, resulting in a steady stream of loan
repayments. In managing our investment portfolio, we provide for staggered maturities so that cash flows are provided as such investments
mature.
Our cash flows are comprised of three classifications: cash
flows from operating activities, cash flows from investing activities, and cash flows from financing activities. Cash flows used
in investing activities, offset by those provided by operating activities and financing activities, resulted in a net decrease
in cash and cash equivalents of $8.9 million from December 31, 2012 to December 31, 2013. During the year ended December 31, 2013,
we experienced net cash transferred from acquisitions of $39.9 million, proceeds from sales of securities and maturities and prepayments
of $91.2 million and net increases in deposits of $68.2 million primarily due to a $128 million customer deposit in December 2013
which was withdrawn in early January 2014 offset by reductions in higher interest-bearing accounts. These increases were offset
by purchases of securities of $174.4 million and proceeds and net loan originations of $51.9 million.
Our securities portfolio, federal funds sold, and cash and
due from bank deposit balances serve as primary sources of liquidity for us. At December 31, 2013, we had cash and due from bank
balances of $198.2 million and available to be pledged securities in the amount of $297.8 million.
In November 2013, we filed a shelf registration statement
on Form S-3 with the SEC through which we may sell from time to time any combination of common stock, preferred stock, debt securities,
warrants, subscription rights, and units, in one or more offerings. We may seek to obtain debt or equity financings in the future.
Such financings, however, may not be available on terms acceptable to us, or at all. In addition, the Loss Sharing Agreements with
the FDIC limit our ability to raise additional equity if a change of control would occur as defined in the Loss Sharing Agreements.
At December 31, 2013, we had borrowings from the FHLB of
$35.0 million. At December 31, 2013, we had commitments to originate loans totaling $51.7 million. Scheduled maturities of certificates
of deposit during the twelve months following December 31, 2013 totaled $202.5 million.
Management believes that we have adequate resources to
fund all of our commitments, that substantially all of our existing commitments will be funded in the subsequent twelve
months and, if so desired, that we can adjust the rates on certificates of deposit and other deposit accounts to retain
deposits in a changing interest rate environment. At December 31, 2013, we had short-term lines of credit available from
correspondent banks totaling $73.0 million, Federal Reserve Bank discount window availability of $69.0 million and borrowing
capacity from the FHLB of $60.4 million based on collateral pledged, for a total credit available of $202.4 million. In
addition, being “well capitalized,” 1
st
United can access the wholesale deposits for approximately
$395.6 million based on current policy limits.
Contractual Obligations
Contractual agreements at December 31, 2013 were as
follows:
(Dollars in thousands)
|
|
|
|
Payments Due by Period
|
Contractual Obligations
|
|
Total
|
|
Less
than 1
Year
|
|
1-3
Years
|
|
3-5
Years
|
|
More
than 5
Years
|
|
|
|
|
|
|
|
|
|
|
|
Certificates of deposit
|
|
$
|
287,668
|
|
|
$
|
202,530
|
|
|
$
|
78,200
|
|
$
|
6,938
|
|
|
$
|
—
|
|
Federal Home Loan Bank Advances
|
|
|
35,000
|
|
|
|
—
|
|
|
|
35,000
|
|
|
—
|
|
|
|
—
|
|
Operating leases
|
|
|
19,055
|
|
|
|
3,444
|
|
|
|
5,659
|
|
|
3,555
|
|
|
|
6,397
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
341,723
|
|
|
$
|
205,974
|
|
|
$
|
118,859
|
|
$
|
10,493
|
|
|
$
|
6,397
|
|
We discuss our securities portfolio, deposits and borrowings
further in Item 1. Business.
Capital Resources
The following table summarizes the changes in our shareholders’
equity for the periods indicated:
(Dollars in thousands)
|
|
Years ended December 31,
|
|
|
2013
|
|
2012
|
|
|
|
|
|
Balance at beginning of period
|
|
$
|
236,690
|
|
|
$
|
215,351
|
|
Issuance of common stock for acquisition, net of costs of $61
|
|
|
—
|
|
|
|
19,065
|
|
Exercise of stock options
|
|
|
11
|
|
|
|
—
|
|
Stock based compensation expense
|
|
|
1,508
|
|
|
|
1,258
|
|
Dividends paid
|
|
|
(1,029
|
)
|
|
|
(3,407
|
)
|
Dividends declared
|
|
|
(3,428
|
)
|
|
|
—
|
|
Net income
|
|
|
6,871
|
|
|
|
4,728
|
|
Change in unrealized gains (losses) on available for sale securities
|
|
|
(10,515
|
)
|
|
|
(305
|
)
|
|
|
|
|
|
|
|
|
|
Balance at end of period
|
|
$
|
230,108
|
|
|
$
|
236,690
|
|
The Federal banking regulatory authorities have adopted certain
“prompt corrective action” rules with respect to depository institutions. The rules establish five capital tiers: “well
capitalized,” “adequately capitalized,” “undercapitalized,” “significantly undercapitalized,”
and “critically undercapitalized.” The various federal banking regulatory agencies have adopted regulations to implement
the capital rules by, among other things, defining the relevant capital measures for the five capital categories. An institution
is deemed to be “well capitalized” if it has a total risk-based capital ratio of 10% or greater, a Tier I risk-based
capital ratio of 6% or greater, and a Tier I leverage ratio of 5% or greater and is not subject to a regulatory order, agreement,
or directive to meet and maintain a specific capital level. At December 31, 2013, 1
st
United met the capital ratios
of a “well capitalized” financial institution with a total risk-based capital ratio of 15.47%, a Tier 1 risk-based
capital ratio of 14.61%, and a Tier I leverage ratio of 9.66%. Depository institutions which fall below the “adequately capitalized”
category generally are prohibited from making any capital distribution, are subject to growth limitations, and are required to
submit a capital restoration plan. There are a number of requirements and restrictions that may be imposed on institutions treated
as “significantly undercapitalized” and, if the institution is “critically undercapitalized,” the banking
regulatory agencies have the right to appoint a receiver or conservator. The following represents Bancorp’s regulatory capital
ratios for the respective periods:
|
|
|
|
December 31,
|
|
|
Well Capitalized Regulatory Requirement
|
|
2013
|
|
2012
|
Total capital to risk-weighted assets
|
|
|
10.00
|
%
|
|
|
15.47
|
%
|
|
|
22.43
|
%
|
Tier I capital to risk-weighted assets
|
|
|
6.00
|
%
|
|
|
14.61
|
%
|
|
|
21.21
|
%
|
Tier I capital to total average assets
|
|
|
5.00
|
%
|
|
|
9.66
|
%(a)
|
|
|
11.44
|
%
|
(a)
Tier I capital to year end assets was
9.21%.
Off-Balance Sheet Arrangements
We do not currently engage in the use of derivative instruments
to hedge interest rate risks. However, we are a party to financial instruments with off-balance sheet risks in the normal course
of business to meet the financing needs of our clients.
At December 31, 2013, we had $51.7 million in
commitments to originate loans and $8.0 million in standby letters of credit. Commitments to extend credit are agreements to
lend to a customer so long as there is no violation of any condition established in the contract. Commitments generally have
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 us to guarantee the performance of a client to
a third party. We use the same credit policies in establishing commitments and issuing letters of credit as we do for
on-balance sheet instruments.
If commitments arising from these financial instruments continue
to require funding at historical levels, management does not anticipate that such funding will adversely impact our ability to
meet on-going obligations. In the event these commitments require funding in excess of historical levels, management believes current
liquidity, available lines of credit from the FHLB, investment security maturities and our revolving credit facility provide a
sufficient source of funds to meet these commitments.
CRITICAL ACCOUNTING POLICIES
Allowance for Loan Losses
Management views critical accounting policies as accounting
policies that are important to the understanding of our financial statements and also involve estimates and judgments about inherently
uncertain matters. In preparing the financial statements, management is required to make estimates and assumptions that affect
the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities as of the date of the consolidated
balance sheets and assumptions that affect the recognition of income and expenses on the consolidated statements of income for
the periods presented. Actual results could differ significantly from those estimates. Material estimates that are particularly
susceptible to significant change in subsequent periods are described as follows.
The allowance for loan losses is established as losses are
estimated to have occurred through a provision for loan losses charged to earnings. Loan losses are charged against the allowance
for loan losses when management believes the uncollectibility of a loan balance is confirmed. Subsequent recoveries, if any, are
credited to the allowance for loan losses.
The allowance for loan losses is evaluated on a regular basis
by management and is based upon management’s periodic review of the collectibility of the loans in light of historical experience,
the nature and volume of the loan portfolio, adverse situations that may affect the borrower’s ability to repay, estimated
value of any underlying collateral and prevailing economic conditions. This evaluation is inherently subjective as it requires
estimates that are susceptible to significant revision as more information becomes available.
The allowance consists of specific and general components.
The specific component relates to loans that are individually evaluated for impairment. For such loans, an allowance for loan losses
is established based on either the present value of expected future cash flows discounted at the loan’s effective interest
rate, the market price of the loan, or, if the loan is collateral dependent, the fair value of the underlying collateral less estimated
costs of sale.
A loan is considered impaired when, based on current information
and events, it is probable that we will be unable to collect the scheduled payments of principal or interest when due according
to the contractual terms of the loan agreement. Factors considered by management in determining impairment include payment status,
collateral value, and the probability of collecting scheduled principal and interest payments when due. Loans that experience insignificant
payment delays and payment shortfalls generally are not classified as impaired. Management determines the significance of payment
delays (loan payments made within 90 days of the due date) and payment shortfalls (which are tracked as past due amounts) on a
case-by-case basis, taking into consideration all of the circumstances surrounding the loan and the borrower, including the length
of the delay, the reasons for the delay, the borrower’s prior payment record, and the amount of the shortfall in relation
to the principal and interest owed. Management considers loan payments made within 90 days of the due date to be insignificant
payment delays. Payment shortfalls are traced as past due amounts. Impairment is measured on a loan by loan basis for commercial
and construction and land development loans by either the present value of expected future cash flows discounted at the loan’s
effective interest rate, the loan’s obtainable market price, or the fair value of the collateral less estimated costs of
sale if the loan is collateral dependent.
The general component considers the actual historical charge-offs
over a rolling two-year period by portfolio segment. The actual historical charge-off ratio is adjusted for qualitative factors
including delinquency trends, loss and recovery trends, classified asset trends, non-accrual trends, economic and business conditions
and other external factors by portfolio segment of loans.
Goodwill and Intangible Assets
Goodwill represents the excess of cost over fair value of
assets of business acquired. Goodwill and intangible assets acquired in a purchase business combination and determined to have
an indefinite useful life are not amortized, but instead tested for impairment at least annually. Intangible assets with estimable
useful lives are amortized over their respective estimated useful lives to their estimated residual values. We acquired First Western
Bank, on April 7, 2004, Equitable on February 29, 2008, Citrus on August 15, 2008, Republic on December 11, 2009, TBOM on December
17, 2010, Old Harbor on October 21, 2011, AFI in April of 2012 and EBI in July 2013. Consequently, we were required to record
the assets acquired, including identified intangible assets, and liabilities assumed at their fair value, which involves estimates
based on third party valuations, such as appraisals, internal valuations based on discounted cash flow analyses or other valuation
techniques. The determination of the useful lives of intangible assets is subjective, as is the appropriate amortization period
for such intangible assets. In addition, purchase acquisitions typically result in recording goodwill, which is subject to ongoing
periodic impairment tests based on the fair value of the reporting unit compared to its carrying amount, including goodwill. As
of December 31, 2013, the required annual impairment test of goodwill was performed and no impairment existed as of the valuation
date. If for any future period we determine that there has been impairment in the carrying value of our goodwill balances, we will
record a charge to our earnings, which could have a material adverse effect on our net income, but not to our risk based capital
ratios.
Income Taxes
Deferred income tax assets and liabilities are recorded to
reflect the tax consequences on future years of temporary differences between revenues and expenses reported for financial statements
and those reported for income tax purposes. Deferred tax assets and liabilities are measured using the enacted tax rates expected
to apply to taxable income in the years in which those temporary differences are expected to be realized or settled. A valuation
allowances is provided against deferred tax assets which are not likely to be realized.
Purchased Credit Impaired Loans
We account for acquisitions
under the purchase accounting method. All identifiable assets acquired and liabilities assumed are recorded at fair value. We review
each loan or loan pool acquired to determine whether there is evidence of a deterioration in credit quality since inception and
if it is probable that the Company will be unable to collect all amounts due under the contractual loan agreements. We consider
expected prepayments and estimated cash flows including principal and interest payments at the date of acquisition. The amount
in excess of the estimated future cash flows is not accreted into earnings. The amount in excess of the estimated future cash flows
over the book value of the loan is accreted into interest income over the remaining life of the loan (accretable yield). The Company
records these loans on the acquisition date at their net realizable value. Thus, an allowance for estimated future losses is not
established on the acquisition date. We refine our estimates of the fair value of loans acquired for up to one year from the date
of acquisition. Subsequent to the date of acquisition, we update the expected future cash flows on loans acquired. Losses or a
reduction in cash flow which arise subsequent to the date of acquisition are reflected as a charge through the provision for loan
losses. An increase in the expected cash flows adjusts the level of the accretable yield recognized on a prospective basis over
the remaining life of the loan.
FDIC Loss Share Receivable
We have entered into agreements with the FDIC for reimbursement
of losses within certain acquired loan portfolios. The FDIC loss share receivable is recorded at fair value on the date of acquisition
based upon the expected reimbursements to be received from the FDIC adjusted by a discount rate which reflects counter party credit
risk and other uncertainties. Changes in the underlying credit quality of the loans covered by the FDIC loss share receivable result
in either an increase or a decrease in the FDIC loss share receivable. Deterioration in loan credit quality increases the FDIC
loss share receivable; increases in credit quality decrease the FDIC loss share receivable. Proceeds received for reimbursement
of incurred losses reduce the FDIC loss share receivable.
Item 8.
Financial Statements and Supplementary Data
REPORT OF INDEPENDENT REGISTERED PUBLIC
ACCOUNTING FIRM
Board of Directors and Shareholders
1
st
United Bancorp, Inc.
Boca Raton, Florida
We have audited the accompanying consolidated balance sheets
of 1
st
United Bancorp, Inc. as of December 31, 2013 and 2012 and the related consolidated statements of operations,
comprehensive income, changes in shareholders’ equity, and cash flows for each of the years in the three-year period ended
December 31, 2013. We also have audited the Company’s internal control over financial reporting as of December 31, 2013,
based on criteria established in the 1992 Internal Control – Integrated Framework issued by the Committee of Sponsoring
Organizations of the Treadway Commission (COSO). The Company’s management is responsible for these financial statements,
for maintaining effective internal control over financial reporting, and for its assessment of the effectiveness of internal control
over financial reporting, included in the accompanying Management’s Report on Internal Control Over Financial Reporting
contained in Item 9A. of the accompanying Form 10-K. Our responsibility is to express an opinion on these financial statements
and an opinion on the Company’s internal control over financial reporting based on our audits.
We conducted our audits in accordance with the standards
of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audits to
obtain reasonable assurance about whether the financial statements are free of material misstatement and whether effective internal
control over financial reporting was maintained in all material respects. Our audits of the financial statements included examining,
on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles
used and significant estimates made by management, and evaluating the overall financial statement presentation. Our audit of internal
control over financial reporting included obtaining an understanding of internal control over financial reporting, assessing the
risk that a material weakness exists, and testing and evaluating the design and operating effectiveness of internal control based
on the assessed risk. Our audits also included performing such other procedures as we considered necessary in the circumstances.
We believe that our audits provide a reasonable basis for our opinions.
A company’s internal control over financial reporting
is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial
statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control
over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable
detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance
that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted
accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations
of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized
acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.
Because of its inherent limitations, internal control over
financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods
are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance
with the policies or procedures may deteriorate.
As permitted, the Company has excluded the current year acquisition
of Enterprise Bancorp, Inc. from the scope of management’s report on internal control over financial reporting. As such,
this acquired institution has also been excluded from the scope of our audit of internal control over financial reporting.
In our opinion, the consolidated financial statements referred
to above present fairly, in all material respects, the financial position of 1
st
United Bancorp, Inc. as of December
31, 2013 and 2012, and the results of its operations and its cash flows for each of the years in the three-year period ended December
31, 2013 in conformity with accounting principles generally accepted in the United States of America. Also in our opinion, the
Company maintained, in all material respects, effective internal control over financial reporting as of December 31, 2013, based
on criteria established in Internal Control – Integrated Framework issued by the Committee of Sponsoring Organizations of
the Treadway Commission (COSO).
|
/s/ Crowe Horwath LLP
|
|
|
Crowe Horwath LLP
|
|
Fort Lauderdale, Florida
February 10, 2014
1
st
UNITED BANCORP, INC.
CONSOLIDATED BALANCE SHEETS
December 31, 2013 and 2012
(Dollar amounts in thousands, except per share data)
|
|
|
|
|
|
|
2013
|
|
2012
|
|
|
|
|
|
ASSETS
|
|
|
|
|
|
|
|
|
Cash and due from financial institutions
|
|
$
|
197,813
|
|
|
$
|
206,871
|
|
Federal funds sold
|
|
|
408
|
|
|
|
246
|
|
Cash and cash equivalents
|
|
|
198,221
|
|
|
|
207,117
|
|
Securities available for sale
|
|
|
327,961
|
|
|
|
260,122
|
|
Loans held for sale
|
|
|
—
|
|
|
|
524
|
|
Loans, net of allowance of $9,648 and $9,788 at year ends 2013 and 2012, respectively
|
|
|
1,124,571
|
|
|
|
903,600
|
|
Nonmarketable equity securities
|
|
|
9,977
|
|
|
|
8,625
|
|
Premises and equipment, net
|
|
|
16,944
|
|
|
|
17,780
|
|
Other real estate owned
|
|
|
18,580
|
|
|
|
19,529
|
|
Company-owned life insurance
|
|
|
24,710
|
|
|
|
21,092
|
|
FDIC loss share receivable
|
|
|
29,331
|
|
|
|
48,568
|
|
Goodwill
|
|
|
63,991
|
|
|
|
58,499
|
|
Core deposit intangible
|
|
|
3,807
|
|
|
|
3,268
|
|
Accrued interest receivable and other assets
|
|
|
27,020
|
|
|
|
19,888
|
|
Total assets
|
|
$
|
1,845,113
|
|
|
$
|
1,568,612
|
|
|
|
|
|
|
|
|
|
|
LIABILITIES AND SHAREHOLDERS’ EQUITY
|
|
|
|
|
|
|
|
|
Deposits
|
|
|
|
|
|
|
|
|
Non-interest bearing
|
|
$
|
526,311
|
|
|
$
|
426,968
|
|
Interest bearing
|
|
|
1,021,602
|
|
|
|
876,054
|
|
Total deposits
|
|
|
1,547,913
|
|
|
|
1,303,022
|
|
Federal funds purchased and repurchase agreements
|
|
|
14,363
|
|
|
|
19,855
|
|
Federal Home Loan Bank advances
|
|
|
35,018
|
|
|
|
—
|
|
Accrued interest payable and other liabilities
|
|
|
17,711
|
|
|
|
9,045
|
|
Total liabilities
|
|
|
1,615,005
|
|
|
|
1,331,922
|
|
|
|
|
|
|
|
|
|
|
Commitments and contingencies (Note 18)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Shareholders’ equity
|
|
|
|
|
|
|
|
|
Preferred stock – no par, 5,000,000 shares authorized and undesignated at year end, respectively; no shares issued or outstanding
|
|
|
—
|
|
|
|
—
|
|
Common stock – $0.01 par value; 60,000,000 shares authorized; 34,288,841 and 34,070,270 issued and outstanding at year end 2013 and 2012, respectively
|
|
|
343
|
|
|
|
341
|
|
Additional paid-in capital
|
|
|
239,606
|
|
|
|
238,089
|
|
Accumulated deficit
|
|
|
(1,584
|
)
|
|
|
(3,998
|
)
|
Accumulated other comprehensive income (loss)
|
|
|
(8,257
|
)
|
|
|
2,258
|
|
Total shareholders’ equity
|
|
|
230,108
|
|
|
|
236,690
|
|
Total liabilities and shareholders’ equity
|
|
$
|
1,845,113
|
|
|
$
|
1,568,612
|
|
See accompanying notes to the consolidated financial statements
|
1
st
UNITED BANCORP, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
Years ended December 31, 2013, 2012, and 2011
(Dollar amounts in thousands, except per share data)
|
|
Years ended
December 31,
|
|
|
2013
|
|
2012
|
|
2011
|
|
|
|
|
|
|
|
Interest income:
|
|
|
|
|
|
|
|
|
|
|
|
|
Loans, including fees
|
|
$
|
71,948
|
|
|
$
|
66,929
|
|
|
$
|
55,311
|
|
Securities
|
|
|
7,153
|
|
|
|
5,106
|
|
|
|
4,362
|
|
Federal funds sold and other
|
|
|
649
|
|
|
|
814
|
|
|
|
736
|
|
Total interest income
|
|
|
79,750
|
|
|
|
72,849
|
|
|
|
60,409
|
|
Interest expense:
|
|
|
|
|
|
|
|
|
|
|
|
|
Deposits
|
|
|
3,680
|
|
|
|
5,292
|
|
|
|
5,991
|
|
Federal funds purchased and repurchase agreements
|
|
|
17
|
|
|
|
14
|
|
|
|
16
|
|
Federal Home Loan Bank advances
|
|
|
93
|
|
|
|
7
|
|
|
|
230
|
|
Other borrowings
|
|
|
—
|
|
|
|
—
|
|
|
|
112
|
|
Total interest expense
|
|
|
3,790
|
|
|
|
5,313
|
|
|
|
6,349
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net interest income
|
|
|
75,960
|
|
|
|
67,536
|
|
|
|
54,060
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Provision for loan losses
|
|
|
3,475
|
|
|
|
6,350
|
|
|
|
7,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net interest income after provision for loan losses
|
|
|
72,485
|
|
|
|
61,186
|
|
|
|
47,060
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-interest income:
|
|
|
|
|
|
|
|
|
|
|
|
|
Service charges and fees on deposit accounts
|
|
|
3,332
|
|
|
|
3,451
|
|
|
|
3,581
|
|
Net gains (losses) on sales of other real estate owned
|
|
|
1,133
|
|
|
|
3,278
|
|
|
|
(264
|
)
|
Net gains on sales of securities
|
|
|
824
|
|
|
|
1,673
|
|
|
|
364
|
|
Net gains on sales of loans held for sale
|
|
|
58
|
|
|
|
106
|
|
|
|
58
|
|
Increase in cash surrender value of Company owned life insurance
|
|
|
618
|
|
|
|
498
|
|
|
|
151
|
|
Adjustment to FDIC loss share receivable
|
|
|
(15,250
|
)
|
|
|
(12,488
|
)
|
|
|
(3,236
|
)
|
Other
|
|
|
1,035
|
|
|
|
816
|
|
|
|
1,085
|
|
Total non-interest income
|
|
|
(8,250
|
)
|
|
|
(2,666
|
)
|
|
|
1,739
|
|
Non-interest expense:
|
|
|
|
|
|
|
|
|
|
|
|
|
Salaries and employee benefits
|
|
|
25,023
|
|
|
|
24,303
|
|
|
|
20,186
|
|
Occupancy and equipment
|
|
|
8,100
|
|
|
|
7,958
|
|
|
|
7,732
|
|
Data processing
|
|
|
3,903
|
|
|
|
3,686
|
|
|
|
3,481
|
|
Telephone
|
|
|
899
|
|
|
|
917
|
|
|
|
814
|
|
Stationery and supplies
|
|
|
382
|
|
|
|
480
|
|
|
|
387
|
|
Amortization of intangibles
|
|
|
745
|
|
|
|
684
|
|
|
|
514
|
|
Professional fees
|
|
|
1,675
|
|
|
|
1,631
|
|
|
|
1,131
|
|
Advertising
|
|
|
263
|
|
|
|
258
|
|
|
|
293
|
|
Merger reorganization expense
|
|
|
1,745
|
|
|
|
1,784
|
|
|
|
1,076
|
|
Disposal of banking centers and equipment
|
|
|
828
|
|
|
|
—
|
|
|
|
—
|
|
Regulatory assessment
|
|
|
1,595
|
|
|
|
1,482
|
|
|
|
1,395
|
|
Other real estate owned expense
|
|
|
2,040
|
|
|
|
1,245
|
|
|
|
323
|
|
Loan expense
|
|
|
1,448
|
|
|
|
2,307
|
|
|
|
1,900
|
|
Other
|
|
|
4,626
|
|
|
|
4,249
|
|
|
|
3,613
|
|
Total non-interest expense
|
|
|
53,272
|
|
|
|
50,984
|
|
|
|
42,845
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income before income taxes
|
|
|
10,963
|
|
|
|
7,536
|
|
|
|
5,954
|
|
Income tax expense
|
|
|
4,092
|
|
|
|
2,808
|
|
|
|
2,282
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income
|
|
$
|
6,871
|
|
|
$
|
4,728
|
|
|
$
|
3,672
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic earnings per common share
|
|
$
|
0.20
|
|
|
$
|
0.14
|
|
|
$
|
0.13
|
|
Diluted earnings per common share
|
|
$
|
0.20
|
|
|
$
|
0.14
|
|
|
$
|
0.13
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
See accompanying notes to the consolidated
financial statements
1st UNITED BANCORP, INC.
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
Years ended December 31, 2013, 2012, and 2011
(Dollar amounts in thousands, except per share data)
|
|
Years ended December 31,
|
|
|
2013
|
|
2012
|
|
2011
|
Net income
|
|
$
|
6,871
|
|
|
$
|
4,728
|
|
|
$
|
3,672
|
|
Other comprehensive income (loss):
|
|
|
|
|
|
|
|
|
|
|
|
|
Unrealized gains (losses) on securities available for sale
|
|
|
(16,035
|
)
|
|
|
1,181
|
|
|
|
3,623
|
|
Reclassification adjustment for securities gains (losses) included in net income
|
|
|
(824
|
)
|
|
|
(1,673
|
)
|
|
|
(364
|
)
|
Income tax benefit (expense)
|
|
|
6,344
|
|
|
|
187
|
|
|
|
(1,228
|
)
|
Other comprehensive income (loss)
|
|
|
(10,515
|
)
|
|
|
(305
|
)
|
|
|
2,031
|
|
Comprehensive income (loss)
|
|
$
|
(3,644
|
)
|
|
$
|
4,423
|
|
|
$
|
5,703
|
|
|
(1)
|
Amounts are included in net gains on sales of securities on the Consolidated Statements of Operations in total non-interest income. Income tax expense associated with the reclassification adjustment for the years ended December 31, 2013, 2012 and 2011 was $310, $630 and $137, respectively.
|
1
st
UNITED BANCORP, INC.
CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS’ EQUITY
Years ended December 31, 2013, 2012 and 2011
(Dollar amounts in thousands, except per share data)
|
|
Shares of
Common Stock
|
|
Common
Stock
|
|
Additional
Paid-In
Capital
|
|
Accumulated
Deficit
|
|
Accumulated
Other
Comprehensive
Income (loss)
|
|
Total
Shareholders’
Equity
|
Balance at December 31, 2010
|
|
|
24,793,089
|
|
|
$
|
248
|
|
|
$
|
181,697
|
|
|
$
|
(8,991
|
)
|
|
$
|
532
|
|
|
$
|
173,486
|
|
Net income
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
3,672
|
|
|
|
—
|
|
|
|
3,672
|
|
Other comprehensive income
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
2,031
|
|
|
|
2,031
|
|
Stock-based compensation expense
|
|
|
—
|
|
|
|
—
|
|
|
|
1,072
|
|
|
|
—
|
|
|
|
—
|
|
|
|
1,072
|
|
Restricted stock grants
|
|
|
25,943
|
|
|
|
1
|
|
|
|
(1
|
)
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
Issuance of common stock,
net of cost of $2,285
|
|
|
5,750,000
|
|
|
|
58
|
|
|
|
35,032
|
|
|
|
—
|
|
|
|
—
|
|
|
|
35,090
|
|
Balance at December 31, 2011
|
|
|
30,569,032
|
|
|
$
|
307
|
|
|
$
|
217,800
|
|
|
$
|
(5,319
|
)
|
|
$
|
2,563
|
|
|
$
|
215,351
|
|
Net income
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
4,728
|
|
|
|
—
|
|
|
|
4,728
|
|
Other comprehensive loss
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
(305
|
)
|
|
|
(305
|
)
|
Stock-based compensation expense
|
|
|
—
|
|
|
|
—
|
|
|
|
1,258
|
|
|
|
—
|
|
|
|
—
|
|
|
|
1,258
|
|
Restricted stock grants
|
|
|
360,884
|
|
|
|
3
|
|
|
|
(3
|
)
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
Dividends paid ($0.10 per share)
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
(3,407
|
)
|
|
|
—
|
|
|
|
(3,407
|
)
|
Issuance of common stock,
net of costs of $61
|
|
|
3,140,354
|
|
|
|
31
|
|
|
|
19,034
|
|
|
|
—
|
|
|
|
—
|
|
|
|
19,065
|
|
Balance at December 31, 2012
|
|
|
34,070,270
|
|
|
$
|
341
|
|
|
$
|
238,089
|
|
|
$
|
(3,998
|
)
|
|
$
|
2,258
|
|
|
$
|
236,690
|
|
Net income
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
6,871
|
|
|
|
—
|
|
|
|
6,871
|
|
Other comprehensive loss
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
(10,515
|
)
|
|
|
(10,515
|
)
|
Dividends paid ($0.03 per share)
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
(1,029
|
)
|
|
|
—
|
|
|
|
(1,029
|
)
|
Dividends declared ($0.10 per share)
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
(3,428
|
)
|
|
|
—
|
|
|
|
(3,428
|
)
|
Stock-based compensation expense
|
|
|
—
|
|
|
|
—
|
|
|
|
1,508
|
|
|
|
—
|
|
|
|
—
|
|
|
|
1,508
|
|
Exercise of stock options
|
|
|
1,785
|
|
|
|
—
|
|
|
|
11
|
|
|
|
—
|
|
|
|
—
|
|
|
|
11
|
|
Restricted stock grants
|
|
|
216,786
|
|
|
|
2
|
|
|
|
(2
|
)
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
Balance at December 31, 2013
|
|
|
34,288,841
|
|
|
$
|
343
|
|
|
$
|
239,606
|
|
|
$
|
(1,584
|
)
|
|
$
|
(8,257
|
)
|
|
$
|
230,108
|
|
See accompanying notes to the consolidated
financial statements
1
st
UNITED BANCORP, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
Years ended December 31, 2013, 2012 and 2011
(Dollar amounts in thousands, except per share data)
|
|
|
|
|
|
|
|
|
2013
|
|
2012
|
|
2011
|
Cash flows from operating activities
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income
|
|
$
|
6,871
|
|
|
$
|
4,728
|
|
|
$
|
3,672
|
|
Adjustments to reconcile net income to net cash provided by (used in) operating activities
|
|
|
|
|
|
|
|
|
|
|
|
|
Provision for loan losses
|
|
|
3,475
|
|
|
|
6,350
|
|
|
|
7,000
|
|
Depreciation and amortization
|
|
|
3,745
|
|
|
|
3,377
|
|
|
|
2,741
|
|
Net accretion of purchase accounting adjustments
|
|
|
(22,281
|
)
|
|
|
(19,101
|
)
|
|
|
(8,863
|
)
|
Net amortization of securities
|
|
|
3,318
|
|
|
|
2,636
|
|
|
|
1,423
|
|
Adjustment to FDIC receivable
|
|
|
15,250
|
|
|
|
12,488
|
|
|
|
3,236
|
|
Increase in cash surrender value of company-owned life insurance
|
|
|
(618
|
)
|
|
|
(498
|
)
|
|
|
(151
|
)
|
Stock-based compensation expense
|
|
|
1,508
|
|
|
|
1,258
|
|
|
|
1,072
|
|
Net (gains) losses on sales of securities
|
|
|
(824
|
)
|
|
|
(1,673
|
)
|
|
|
(364
|
)
|
Net (gains) losses on other real estate owned
|
|
|
(1,133
|
)
|
|
|
(3,278
|
)
|
|
|
264
|
|
Net loss on premises and equipment
|
|
|
—
|
|
|
|
11
|
|
|
|
32
|
|
Disposal of banking centers and equipment
|
|
|
828
|
|
|
|
—
|
|
|
|
—
|
|
Net gain on sales of loans held for sale
|
|
|
(58
|
)
|
|
|
(106
|
)
|
|
|
(58
|
)
|
Write downs on other real estate owned property
|
|
|
1,143
|
|
|
|
340
|
|
|
|
—
|
|
Loans originated for sale
|
|
|
(3,107
|
)
|
|
|
(6,483
|
)
|
|
|
(3,422
|
)
|
Proceeds from sales of loans held for sale
|
|
|
3,689
|
|
|
|
6,165
|
|
|
|
8,180
|
|
Net change in:
|
|
|
|
|
|
|
|
|
|
|
|
|
Deferred income taxes
|
|
|
(195
|
)
|
|
|
(6,441
|
)
|
|
|
1,692
|
|
Deferred loan fees
|
|
|
(19
|
)
|
|
|
(63
|
)
|
|
|
(164
|
)
|
Accrued interest receivable and other assets
|
|
|
(603
|
)
|
|
|
9,210
|
|
|
|
(4,826
|
)
|
Accrued interest payable and other liabilities
|
|
|
1,472
|
|
|
|
(1,464
|
)
|
|
|
2,979
|
|
Net cash provided by (used in) operating activities
|
|
|
12,461
|
|
|
|
7,456
|
|
|
|
14,443
|
|
Cash flows from investing activities
|
|
|
|
|
|
|
|
|
|
|
|
|
Proceeds from sales and calls of securities
|
|
|
33,705
|
|
|
|
102,521
|
|
|
|
20,288
|
|
Proceeds from security maturities and prepayments
|
|
|
57,495
|
|
|
|
69,688
|
|
|
|
38,975
|
|
Purchases of securities
|
|
|
(174,421
|
)
|
|
|
(194,322
|
)
|
|
|
(125,522
|
)
|
Loan originations and payments, net
|
|
|
(51,866
|
)
|
|
|
79,262
|
|
|
|
105,877
|
|
Proceeds from sale of other real estate owned
|
|
|
9,377
|
|
|
|
27,350
|
|
|
|
6,405
|
|
Cash received from FDIC loss sharing agreements
|
|
|
6,460
|
|
|
|
11,559
|
|
|
|
14,095
|
|
Redemption of nonmarketable equity securities
|
|
|
1,784
|
|
|
|
3,078
|
|
|
|
7,728
|
|
Purchase of nonmarketable equity securities
|
|
|
(1,281
|
)
|
|
|
—
|
|
|
|
—
|
|
Proceeds from maturity of time deposit
|
|
|
—
|
|
|
|
—
|
|
|
|
75
|
|
Cash transferred in connection with acquisitions
|
|
|
39,861
|
|
|
|
(11,188
|
)
|
|
|
33,833
|
|
Additions to premises and equipment, net
|
|
|
(1,135
|
)
|
|
|
(1,727
|
)
|
|
|
(4,206
|
)
|
Purchase of company-owned life insurance
|
|
|
(3,000
|
)
|
|
|
(15,500
|
)
|
|
|
(215
|
)
|
Net cash provided by (used in) investing activities
|
|
|
(83,021
|
)
|
|
|
70,721
|
|
|
|
97,333
|
|
Cash flows from financing activities
|
|
|
|
|
|
|
|
|
|
|
|
|
Net change in deposits
|
|
|
68,174
|
|
|
|
(39,186
|
)
|
|
|
(92,304
|
)
|
Net change in federal funds purchased and repurchase agreements
|
|
|
(5,492
|
)
|
|
|
11,109
|
|
|
|
(4,140
|
)
|
Net change in short-term Federal Home Loan Bank advances
|
|
|
—
|
|
|
|
(5,000
|
)
|
|
|
—
|
|
Net change in other borrowings
|
|
|
—
|
|
|
|
—
|
|
|
|
(4,750
|
)
|
Issuance of common stock, net of expense
|
|
|
—
|
|
|
|
—
|
|
|
|
35,090
|
|
Exercise of stock options
|
|
|
11
|
|
|
|
—
|
|
|
|
—
|
|
Dividends paid
|
|
|
(1,029
|
)
|
|
|
(3,407
|
)
|
|
|
—
|
|
Net cash provided by (used in) financing activities
|
|
|
61,664
|
|
|
|
(36,484
|
)
|
|
|
(66,104
|
)
|
Net change in cash and cash equivalents
|
|
|
(8,896
|
)
|
|
|
41,693
|
|
|
|
45,672
|
|
Beginning cash and cash equivalents
|
|
|
207,117
|
|
|
|
165,424
|
|
|
|
119,752
|
|
Ending cash and cash equivalents
|
|
$
|
198,221
|
|
|
$
|
207,117
|
|
|
$
|
165,424
|
|
Supplemental cash flow information:
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest paid
|
|
$
|
3,822
|
|
|
$
|
5,429
|
|
|
$
|
6,701
|
|
Income taxes paid
|
|
|
2,910
|
|
|
|
357
|
|
|
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Supplemental disclosures of noncash activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
Transfer of loans to other real estate owned
|
|
|
8,438
|
|
|
|
29,952
|
|
|
|
10,503
|
|
Dividends declared
|
|
|
3,428
|
|
|
|
—
|
|
|
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
See accompanying notes to the consolidated
financial statements
1
st
UNITED BANCORP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollar amounts in thousands, except per share data)
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Nature of Operations and Principles of Consolidation
:
The consolidated financial statements include 1
st
United Bancorp, Inc. (“Bancorp” or “Company”)
and its wholly-owned subsidiaries, 1
st
United Bank (“1
st
United”) and Equitable Equity Lending,
Inc. (“EEL”), together referred to as “the Company.” Intercompany transactions and balances are eliminated
in consolidation.
Bancorp’s primary business is the ownership and operation
of 1
st
United. 1
st
United is a state chartered commercial bank that provides financial services through its
four offices in Palm Beach County, four offices in Broward County, four offices in Miami-Dade County, one office each in the cities
of Vero Beach, Sebastian and Barefoot Bay, four offices in Pinellas and one office each in Pasco, Orange and Hillsborough Counties.
Its primary deposit products are checking, savings, and term certificate accounts, and its primary lending products are commercial
and residential mortgages, commercial, and installment loans. Substantially all loans are secured by specific items of collateral
including commercial and residential real estate, business assets and consumer assets. Commercial loans are expected to be repaid
from cash flow from operations of businesses. However, the customers’ ability to repay their loans is dependent on the real
estate and general market conditions. Other financial instruments, which potentially represent concentrations of credit risk, include
deposit accounts in other financial institutions and federal funds sold.
EEL is a commercial finance subsidiary that from time
to time will hold foreclosed assets, performing loans or non-performing loans. At December 31, 2013, EEL held $2,388 in
performing loans.
Operating Segments
: While the chief decision-makers
monitor the revenue streams of the various products and services, operations are managed and financial performance is evaluated
on a Company-wide basis. Operating segments are aggregated into one as operating results for all segments are similar. Accordingly,
all of the financial service operations are considered by management to be aggregated in one reportable operating segment.
Reclassifications
: Certain amounts in the prior year
financial statements were reclassified to conform to the current year’s presentation. These reclassifications had no impact
on the prior periods’ net income or shareholders’ equity.
Use of Estimates
: To prepare financial statements
in conformity with accounting principles generally accepted in the United States of America, management makes estimates and assumptions
based on available information. These estimates and assumptions affect the amounts reported in the financial statements and the
disclosures provided, and actual results could differ. The allowance for loan losses, carrying value of goodwill and intangible
assets, carrying value of deferred tax assets, FDIC loss share receivable, and fair values of financial instruments are particularly
subject to change.
Cash and Cash Equivalents
: Cash and cash equivalents
includes cash, deposits with other financial institutions with original maturities under 90 days, and federal funds sold. Net cash
flows are reported within the statement of cash flows for loan and deposit transactions, and federal funds purchased and repurchase
agreements.
Securities Available for Sale
: Debt securities are
classified as available for sale when they might be sold before maturity. Equity securities with readily determinable fair values
are classified as available for sale. Securities available for sale are carried at fair value, with unrealized holding gains and
losses reported in other comprehensive income net of tax.
Interest income includes amortization of purchase premium
or discount. Premiums and discounts on securities are amortized on the level-yield method without anticipating prepayments, except
for mortgage-backed where prepayments are anticipated. Gains and losses on sales are recorded on the trade date and determined
using the specific identification method.
Management evaluates securities for other-than-temporary
impairment (“OTTI”) at least on a quarterly basis, and more frequently when economic or market conditions warrant such
evaluation. Consideration is given to (1) the length of time and the extent to which the fair value has been less than cost, (2)
the financial condition and near term prospects of the issuer including an evaluation of credit ratings, (3) the impact of changes
in market interest rates, (4) the intent of the Company to sell a security, and (5) whether it is more likely than not the Company
will have to sell the security before recovery of its cost basis. If the Company intends to sell an impaired security, or if it
is more likely than not the Company will have to sell the security before recovery of its cost basis, the Company records an other-than-temporary
loss in an amount equal to the entire difference between fair value and amortized cost. Otherwise, only the credit portion of the
estimated loss is recognized in earnings, with the other portion of the loss recognized in other comprehensive income.
1
st
UNITED BANCORP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollar amounts in thousands, except per share data)
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
Concentration of Credit Risk:
Most of the Company’s
business activity is with customers located within Brevard, Broward, Hillsborough, Indian River, Miami-Dade, Hillsborough, Orange,
Palm Beach, Pinellas Counties. Therefore, the Company’s exposure to credit risk is significantly affected by changes in the
economy in these counties.
Loans Held for Sale
: Loans held for sale are carried
at the lower of aggregate cost or market. Net unrealized losses, if any, are recorded as a valuation allowance and charged to earnings.
Residential real estate loans held for sale are sold with
servicing released. Gains and losses on sales of residential real estate loans held for sale are based on the difference between
the selling price and the carrying value of the related loan sold.
The guaranteed portion of loans originated through certain
government guaranteed lending programs are sold while retaining the unguaranteed portion and servicing. Gains and losses on sales
of the guaranteed portion are based on the difference between the selling price and the allocated carrying value of the portion
of the loan being sold. Additionally, the Company periodically refers government guaranteed loans to third parties. Fees for such
referrals are recognized into income at the time of referral.
Loans
: Loans, excluding certain purchased loans which
have shown evidence of deterioration since origination, that management has the intent and ability to hold for the foreseeable
future or until maturity or payoff are reported at the principal balance outstanding, net of unearned interest, deferred loan fees
and costs, and an allowance for loan losses. Interest income is accrued on the unpaid principal balance. Loan origination fees,
net of certain direct origination costs, are deferred and recognized in interest income using the level-yield method without anticipating
prepayments. The recorded investment in a loan excludes accrued interest receivable and unearned income as well as net deferred
loan fees or cost which are not significant.
Interest income on commercial, residential and consumer loans
is discontinued at the time the loan is 90 days delinquent unless the loan is well-secured and in process of collection. Past due
status is based on the contractual terms of the loan. In all cases, loans are placed on nonaccrual or charged-off at an earlier
date if collection of principal or interest is considered doubtful.
All interest accrued but not received for loans placed on
non-accrual is reversed against interest income. Interest received on such loans is accounted for on cost-recovery method with
cash payments applied as a principle reduction, until qualifying for return to accrual. Loans are returned to accrual status when
all the principal and interest amounts contractually due are brought current and future payments are reasonably assured.
Certain Acquired Loans
: As part of business acquisitions,
the Company evaluated each of the acquired loans under ASC 310-30 to determine whether (1) there was evidence of credit deterioration
since origination, and (2) it was probable that we would not collect all contractually required payment receivable. The Company
determined the best indicator of such evidence was an individual loan’s payment status and/or whether a loan was determined
to be classified by us based on our review of each individual loan. Therefore, generally each individual loan that should have
been or was on nonaccrual at the acquisition date, loans contractually past due 60 days or more, and each individual loan that
was classified as either special mention, substandard or loss were subject to ASC 310-30.
Loans which were evaluated under ASC 310-30, and where the
timing and amount of cash flows can be reasonably estimated, were accounted for in accordance with ASC 310-30-35. The Company applies
the interest method for these loans under this subtopic and the loans are excluded from non-accrual. If at acquisition we identified
loans that we could not reasonably estimate cash flows or if subsequent to acquisition such cash flows could not be estimated,
such loans would be included in non-accrual. These acquired loans are recorded at the allocated fair value, such that there is
no carryover of the seller’s allowance for loan losses. Such acquired loans are accounted for individually. The Company estimates
the amount and timing of expected cash flows for each purchased loan, and the expected cash flows in excess of the allocated fair
value is recorded as interest income over the remaining life of the loan (accretable yield). The excess of the loan’s contractual
principal and interest over expected cash flows is not recorded (non-accretable difference). Over the life of the loan, expected
cash flows continue to be estimated. If the present value of expected cash flows is less than the carrying amount, a loss is recorded
through the allowance for loan losses. If the present value of expected cash flows is greater than the carrying amount, it is recognized
as part of future interest income.
1
st
UNITED BANCORP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollar amounts in thousands, except per share data)
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
Troubled Debt Restructurings
. A loan is considered
a troubled debt restructured loan based on individual facts and circumstances. A modification may include either an increase or
reduction in interest rate or deferral of principal payments or both. Loans for which the terms have been modified resulting in
a concession, and for which the borrower is experiencing financial difficulties, are considered troubled debt restructurings. The
Company classifies troubled debt restructured loans as impaired and evaluates the need for an allowance for loan losses on a loan-by-loan
basis. An allowance for loan losses is based on either the present value of estimated future cash flows or the estimated fair value
of the underlying collateral. Loans retain their interest accrual status at the time of modification.
Allowance for Loan Losses
: In originating loans, we
recognize that credit losses will be experienced and the risk of loss will vary with, among other things: general economic conditions;
the type of loan being made; the creditworthiness of the borrower over the term of the loan; and, in the case of a collateralized
loan, the quality of the collateral for such a loan. The allowance for loan losses represents our estimate of the allowance necessary
to provide for probable incurred credit losses in the loan portfolio. In making this determination, we analyze the ultimate collectability
of the loans in our portfolio, feedback provided by internal loan staff, the independent loan review function and information provided
by examinations performed by regulatory agencies.
The allowance for loan losses is evaluated at the portfolio
segment level using the same methodology for each segment. The historical net losses for a rolling two year period is the basis
for the general reserve for each segment which is adjusted for each of the same qualitative factors (i.e., nature and volume of
portfolio, economic and business conditions, classification, past due and non-accrual trends) evaluated by each individual segment.
Impaired loans and related specific reserves for each of the segments are also evaluated using the same methodology for each segment.
The qualitative factors added approximately 7 and 11 basis points to the general reserve of the allowance for loan losses at December
31, 2013 and 2012, respectively.
A loan is considered impaired when, based on current information
and events, it is probable we will be unable to collect the scheduled payments of principal or interest when due according to the
contractual terms of the loan agreement. Factors considered by management in determining impairment include payment status, collateral
value, and the probability of collecting scheduled principal and interest payments when due. Loans that experience insignificant
payment delays (loan payments made within 90 days of the due date) and payment shortfalls (which are tracked as past due amounts)
generally are not classified as impaired. The Company determines the past due status of a loan based on the number of days contractually
past due. Management determines the significance of payment delays and payment shortfalls on a case-by-case basis, taking into
consideration all of the circumstances surrounding the loan and the borrower, including the length of the delay, the reasons for
the delay, the borrower’s prior payment record, and the amount of the shortfall in relation to the principal and interest
owed.
Charge-offs of loans are made by portfolio segment at the
time that the collection of the full principal, in management’s judgment, is doubtful. This methodology for determining charge-offs
is consistently applied to each segment.
On a quarterly basis, management reviews the adequacy of
the allowance for loan losses. Commercial credits are graded by risk management and the loan review function validates the assigned
credit risk grades. In the event that a loan is downgraded, it is included in the allowance analysis at the lower grade. Our analysis
of the allowance for loan losses consists of three components: (i) specific credit allocations on individual loans where a loss
is expected based on the underlying collateral value or a cash flow analysis; (ii) general portfolio allocation based on historical
loan loss experience for each loan category; and (iii) qualitative reserves based on general economic conditions as well as specific
economic factors in the markets in which we operate.
The specific credit allocation component of the allowance
for loan losses is based on a regular analysis of loans where the loan is determined to be impaired as determined by management.
1
st
UNITED BANCORP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollar amounts in thousands, except per share data)
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
The impairment, if any, is determined based on either the
present value expected future cash flows discounted at the loan’s effective interest rate, the market price of the loan,
or if the loan is collateral dependent, the fair value of the underlying collateral less estimated cost of sale. The Company may
classify a loan as substandard; however, it may not be classified as impaired. A loan may be classified as substandard by management
if, for example, the primary source of repayment is insufficient, the financial condition of the borrower and/or guarantors has
deteriorated or there are chronic delinquencies. For troubled debt restructured loans that subsequently default, the Company determines
the amount of specific reserve in accordance with our allowance for loan loss policy.
Transfers of Financial Assets
: Transfers of financial
assets are accounted for as sales, when control over the assets has been relinquished. Control over transferred assets is deemed
to be surrendered when the assets have been isolated from the Company, the transferee obtains the right (free of conditions that
constrain it from taking advantage of that right) to pledge or exchange the transferred assets, and the Company does not maintain
effective control over the transferred assets through an agreement to repurchase them before their maturity.
Nonmarketable Equity Securities
: Nonmarketable equity
securities include Federal Home Loan Bank (FHLB) and Federal Reserve Bank (FRB) stock.
The Bank is a member of the FHLB system. Members are required
to own a certain amount of stock based on the level of borrowings and other factors, and may invest on additional amounts. FHLB
stock is carried at cost, classified as a restricted security, and periodically evaluated for impairment based on the ultimate
recovery par value. Both cash and stock dividends are reported as income.
The Bank is a member of its regional Federal Reserve Bank.
FRB stock is carried at cost, classified as a restricted security, and periodically evaluated for impairment based on the ultimate
recovery par value. Both cash and stock dividends are reported as income.
Premises and Equipment
: Premises and equipment are
stated at cost less accumulated depreciation. Depreciation is computed on a straight line basis over the assets’ useful lives,
which range from 3 to 10 years. Amortization of leasehold improvements is computed utilizing the straight-line method over the
shorter of the lease term or the useful life of the asset. Land is carried at cost.
Premises and equipment and other long-term assets are reviewed
for impairment when events indicate their carrying amount may not be recoverable from future undiscounted cash flows. If impaired,
the assets are recorded at fair value and a charge is recorded in the consolidated statement of operations in the current period.
Other Real Estate Owned
: Assets acquired through or
instead of loan foreclosure are initially recorded at fair value less costs to sell when acquired, establishing a new cost basis.
These assets are subsequently accounted for at the lower of cost or fair value less the estimated cost to sell the asset. If fair
value declines subsequent to foreclosure, a valuation allowance is recorded through expense. Costs after acquisition are expensed.
Company-Owned Life Insurance
: The Company has purchased
life insurance policies on certain key executives. Company-owned life insurance is recorded at the amount that can be realized
under the insurance contract at the balance sheet date, which is the cash surrender value adjusted for other charges or other amounts
due that are probable at settlement.
Goodwill and Core Deposit Intangible
: Goodwill resulting
from business combinations prior to January 1, 2009 represents the excess of the purchase price over the fair value of the net
assets of businesses acquired. Goodwill resulting from business combinations after January 1, 2009, is generally determined as
the excess of the fair value of the consideration transferred, plus the fair value of any non-controlling interests in the acquiree,
over the fair value of the net assets acquired and liabilities assumed as of the acquisition date. Goodwill and intangible assets
acquired in a purchase business combination and determined to have an indefinite useful life are not amortized, but tested for
impairment at least annually or more frequently if events and circumstances exist that indicate the necessity for such impairment
tests to be performed. The Company has selected December 31 as the date to perform the annual impairment test. Intangible assets
with definite useful lives are amortized over their estimated useful lives to their estimated residual values. Goodwill is the
only intangible asset with an indefinite life on our balance sheet.
1
st
UNITED BANCORP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollar amounts in thousands, except per share data)
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
FDIC Loss Share Receivable.
The FDIC Loss Share Receivable
represents the estimated amounts due from the FDIC related to the Loss Sharing Agreements which were booked as of the acquisition
dates of Republic, TBOM, and Old Harbor. The receivable represents the discounted value of the FDIC’s reimbursed portion
of estimated losses we expect to realize on loans and other real estate owned (“Covered Assets”) acquired as a result
of these acquisitions. The range of discount rates on the FDIC Loss Share Receivable was 2.12% to 3.97%. As losses are realized
on Covered Assets, the portion that the FDIC pays the Company in cash for principal and up to 90 days of interest reduces the FDIC
Loss Share Receivable.
The FDIC Loss Share Receivable is reviewed quarterly and
adjusted for any changes in expected cash flows based on recent performance and expectations for future performance of the Covered
Assets. Prior to October 1, 2012, any increases in cash flows of Covered Assets would be accreted into income over the life of
the Covered Asset and would reduce immediately the FDIC Loss Share Receivable. Subsequent to October 1, 2012, due to the adoption
of new guidance by the Financial Accounting Standards Board (“FASB”) any increases in cash flows of Covered Assets
will be accreted into income over the life of the covered asset with a reduction to the FDIC Loss Share Receivable over the shorter
of the life of the loan or the remaining term of the respective Loss Share Agreements. Any decreases in the expected cash flows
of the Covered Assets will result in the impairment to the Covered Asset and an increase in the FDIC Loss Share Receivable to be
reflected immediately. Non-cash adjustments to the FDIC Loss Share Receivable are recorded to non-interest income.
Loan Commitments and Related Financial Instruments
:
Financial instruments include off-balance sheet credit instruments, such as commitments to make loans and commercial letters of
credit, issued to meet customer financing needs. The face amount for these items represents the exposure to loss, before considering
customer collateral or ability to repay. Such financial instruments are recorded when they are funded.
Income Taxes
: Income tax expense is the total of the
current year income tax due or refundable and the change in deferred tax assets and liabilities. Deferred tax assets and liabilities
are the expected future tax amounts for the temporary differences between carrying amounts and tax bases of assets and liabilities,
computed using enacted tax rates. A valuation allowance, if any, reduces deferred tax assets to the amount expected to be realized.
A tax position is recognized as a benefit only if it is “more
likely than not” that the tax position would be sustained in a tax examination, with a tax examination being presumed to
occur. The amount recognized is the largest amount of tax benefit that is greater than 50% likely of being realized on examination.
For tax positions not meeting the “more likely than not” test, no tax benefit is recorded.
The Company recognizes interest and/or penalties related
to income tax matters in income tax expense.
Earnings Per Common Share
: Basic earnings per common
share is net income available to common shareholders divided by the weighted average number of common shares outstanding during
the period. Diluted earnings per share includes the dilutive effect of additional potential common shares issuable under stock
options and restricted stock grants. Earnings per common share is restated for all stock splits and stock dividends through the
date of issue of the consolidated financial statements.
Stock-Based Compensation
: Compensation cost is recognized
for stock options and restricted stock awards issued to employees and directors, based on the fair value of these awards at the
date of grant. A Black-Scholes model is utilized to estimate the fair value of stock options, while the market price of the Company’s
common stock at the date of grant is used for restricted stock awards. Compensation cost is recognized over the required service
period, generally defined as the vesting period. For awards with graded vesting, compensation cost is recognized on a straight-line
basis over the requisite service period for the entire award.
Comprehensive Income
Comprehensive income consists
of net income and other comprehensive income. Other comprehensive income includes unrealized gains and losses on securities available
for sale, net of related taxes, which are also recognized as separate components of shareholders’ equity.
1
st
UNITED BANCORP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollar amounts in thousands, except per share data)
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
Loss Contingencies
: Loss contingencies, including claims
and legal actions arising in the ordinary course of business, are recorded as liabilities when the likelihood of loss is probable
and an amount or range of loss can be reasonably estimated. Management does not believe there now are such matters that will have
a material effect on the financial statements.
Fair Value of Financial Instruments
: Fair values of
financial instruments are estimated using relevant market information and other assumptions, as more fully disclosed in a separate
note. Fair value estimates involve uncertainties and matters of significant judgment regarding interest rates, credit risk, prepayments,
and other factors, especially in the absence of broad markets for particular items. Changes in assumptions or in market conditions
could significantly affect the estimates.
Recently Adopted Accounting Standards
In February 2013, the Financial Accounting Standards Board
(FASB) issued updated guidance related to disclosure of reclassification amounts out of other comprehensive income. The standard
requires that companies present either in a single note or parenthetically on the face of the financial statements, the effect
of significant amounts reclassified from each component of accumulated other comprehensive income based on its source and the income
statement line items affected by the reclassification. The new requirements became effective for public companies in fiscal years,
and interim periods within those years, beginning after December 15, 2012. The Company adopted this standard on January 1, 2013.
The effect of adopting this standard increased our disclosure surrounding reclassification items out of accumulated other comprehensive
income.
NOTE 2 –ACQUISITIONS
Enterprise Bancorp Inc.
On July 1, 2013, the Company completed its acquisition of
Enterprise Bancorp, Inc., a Florida corporation (“EBI”), and its wholly-owned subsidiary Enterprise Bank of Florida,
a Florida-chartered commercial bank (“Enterprise”), pursuant to the Agreement and Plan of Merger (the “Merger
Agreement”), dated March 22, 2013, as amended, by and among the Company, 1st United Bank, EBI and Enterprise. In accordance
with the Merger Agreement, the Company acquired EBI through the merger of a wholly-owned subsidiary of the Company with and into
EBI and 1st United Bank acquired Enterprise Bank through the merger of Enterprise Bank with and into 1st United Bank (collectively,
the “Merger”).
Pursuant to the terms of the Merger Agreement, each share
of EBI common stock issued and outstanding was converted into the right to receive consideration based on EBI’s total consolidated
assets and the EBI Tangible Book Value (as defined in the Merger Agreement) as of June 30, 2013. The total value of the consideration
paid to EBI shareholders was approximately $45,565, which consisted of approximately $5,115 in cash(less the $400 holdback described
below), $22,138 in loans (including all nonperforming loans), other real estate, and repossessed assets of Enterprise and $18,312
in impaired and below investment grade securities and other investments of Enterprise. Each holder of a share of EBI common stock
was entitled to consideration from the Company equal to approximately $6.01 per share (less their per share pro rata portion of
the $400 holdback described below). The total consideration paid to all EBI shareholders in connection with the Merger was subject
to a holdback amount of $400 to defray potential damages and related expenses incurred to defend or settle certain litigation.
The Company does not anticipate the litigation and related costs will exceed the $400. The Company recorded goodwill associated
with the transaction of approximately $5,492 which is not deductible for tax purposes. The Company acquired a net deferred tax
liability of $233 and recorded a deferred tax asset in other assets as a result of purchase accounting adjustments.
The Company accounted for the transaction under the acquisition
method of accounting which requires purchased assets and liabilities assumed to be recorded at their respective fair values at
the date of acquisition. See Note 4 for additional information related to the fair value of loans acquired. The Company determined
the fair value of core deposit intangibles, securities, and deposits with the assistance of third party valuations. The valuation
of FHLB advances was based on current rates for similar borrowings. The estimated fair values over loans are subject to refinement
as additional information relative to the closing date fair values becomes available through the measurement period.
The acquisition of EBI is consistent with the Company’s
plans to continue to enhance its market area and competitive position within the state of Florida. This acquisition expands the
Company’s existing presence in the Northern Palm Beach County marketplace and adds one new banking center. The Company believes
it is well-positioned to deliver superior customer service, achieve stronger financial performance and enhance shareholder value
through the synergies of combined operations. All of these contributed to the resulting goodwill in the transaction. The fair value
of assets acquired and liabilities assumed on July 1, 2013 were as follows:
1
st
UNITED BANCORP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollar amounts in thousands, except per share data)
NOTE 2 –ACQUISITIONS (continued)
|
|
July 1, 2013
(as initially reported)
|
|
Measurement
Period Adjustments
|
|
July 1, 2013
(As adjusted)
|
Cash
|
|
$
|
44,576
|
|
|
$
|
—
|
|
|
$
|
44,576
|
|
Securities available for sale
|
|
|
3,972
|
|
|
|
—
|
|
|
|
3,972
|
|
Federal Home Loan Bank stock
|
|
|
1,855
|
|
|
|
—
|
|
|
|
1,855
|
|
Loans
|
|
|
159,168
|
|
|
|
—
|
|
|
|
159,168
|
|
Core deposit intangible
|
|
|
1,283
|
|
|
|
—
|
|
|
|
1,283
|
|
Fixed assets
|
|
|
421
|
|
|
|
—
|
|
|
|
421
|
|
Other assets
|
|
|
1,039
|
|
|
|
—
|
|
|
|
1,039
|
|
TOTAL ASSETS ACQUIRED
|
|
$
|
212,314
|
|
|
$
|
—
|
|
|
$
|
212,314
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Deposits
|
|
$
|
177,160
|
|
|
$
|
—
|
|
|
$
|
177,160
|
|
Federal Home Loan Bank advances
|
|
|
35,025
|
|
|
|
—
|
|
|
|
35,025
|
|
Other
|
|
|
1,143
|
|
|
|
(237
|
)
|
|
|
906
|
|
TOTAL LIABILITIES ASSUMED
|
|
$
|
213,328
|
|
|
$
|
(237
|
)
|
|
$
|
213,091
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Excess of liabilities assumed over assets acquired
|
|
$
|
1,014
|
|
|
$
|
(237
|
)
|
|
$
|
777
|
|
Cash paid
|
|
|
4,715
|
|
|
|
—
|
|
|
|
4,715
|
|
Goodwill
|
|
$
|
5,729
|
|
|
$
|
(237
|
)
|
|
$
|
5,492
|
|
The following summarizes the net interest and other income,
net income and earnings per share as if the merger with EBI was effective as of January 1, 2012, the beginning of the annual period
prior to acquisition. With the integration of operations during the year ended December 31, 2013, the income associated with the
merger of EBI is impractical to determine. There were no material, nonrecurring adjustments to the pro forma net interest and other
income, net income and earnings per share presented below:
|
|
Years ended December 31,
|
|
|
2013
(1)
|
|
2012
(1)
|
Net interest and non-interest income
|
|
$
|
67,514
|
|
|
$
|
69,036
|
|
|
|
|
|
|
|
|
|
|
Net income
|
|
|
6,477
|
|
|
|
6,499
|
|
|
|
|
|
|
|
|
|
|
Basic earnings per share
|
|
|
0.19
|
|
|
|
0.19
|
|
|
|
|
|
|
|
|
|
|
Diluted earnings per share
|
|
|
0.19
|
|
|
|
0.19
|
|
(1)
|
The merger was effective July 1, 2013. There were no proforma adjustments subsequent to July 1, 2013.
|
1
st
UNITED BANCORP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollar amounts in thousands, except per share data)
NOTE 2 –ACQUISITIONS (continued)
Anderen Financial Inc.
On April 1, 2012, the
Company completed its acquisition of Anderen Financial, Inc., a Florida corporation and its wholly-owned subsidiary Anderen Bank,
a Florida-chartered commercial bank (Anderen Financial, Inc. and Anderen Bank are subsequently referred to herein collectively
as “AFI”), pursuant to the Agreement and Plan of Merger, dated October 24, 2011 (the “Merger Agreement”).
Pursuant to the terms of the Merger Agreement, each share of AFI common stock, $0.01 par value per share, was cancelled and automatically
converted into the right to receive cash, common stock of the Company or a combination of cash and common stock of the Company.
AFI shareholders could elect to receive cash, stock, or a combination of 50% cash and 50% stock, provided, however, that each such
election was subject to mandatory allocation procedures to ensure the total consideration was approximately 50% cash and 50% stock.
The total value of the consideration paid to AFI shareholders was $38,250 which consisted of approximately $19,125 in cash and
3,140,354 shares of the Company’s common stock. The Company’s common stock was valued at $6.09 per share, which was
determined to be the fair value of the stock on the date of acquisition, with a total value of $19,065. The Company incurred $1,309
in merger reorganization expense during the year ended December 31, 2012 related to this acquisition. The Company recorded goodwill
of $5,994 as a result of the merger which is not deductible for tax purposes. Total net deferred tax assets acquired was $5,651,
primarily related to loss carry forwards. Additionally, the Company recorded $4,251 in deferred tax assets, which are included
in other assets, as a result of purchase accounting adjustments. The Company completed the integration of AFI in June 2012.
The Company accounted for the transaction under the acquisition
method of accounting which requires purchased assets and liabilities assumed to be recorded at their respective fair values at
the date of acquisition. See Note 4 for additional information related to the fair value of loans acquired. The Company determined
the fair value of core deposit intangibles, securities, fixed assets and deposits with the assistance of third party valuations.
The fair value of other real estate owned (“OREO”) was based on recent appraisals of the properties. The estimated
fair values were subject to refinement as additional information relative to the closing date fair values became available through
the measurement period. As a result, the Company updated the previously reported consolidated balance sheet for the year ended
December 31, 2012 for the final measurement period adjustments.
The acquisition of AFI is consistent with the Company’s plans to continue to enhance its footprint and competitive position
within the state of Florida. This acquisition complemented the initial expansion into the Florida Gulf Coast markets with the acquisition
of Old Harbor. The Company believes it is well-positioned to deliver superior customer service, achieve stronger financial performance
and enhance shareholder value through the synergies of combined operations. All of these factors contributed to the resulting goodwill
in the transaction. The fair value of the assets acquired and liabilities assumed on April 1, 2012 was as follows:
1
st
UNITED BANCORP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollar amounts in thousands, except per share data)
NOTE 2 – ACQUISITIONS (continued)
|
|
April 1, 2012
(as initially reported)
|
|
Final Measurement
Period Adjustments
|
|
April 1, 2012
(As adjusted)
|
Cash
|
|
$
|
1,444
|
|
|
$
|
—
|
|
|
$
|
1,444
|
|
Federal Funds sold
|
|
|
6,500
|
|
|
|
—
|
|
|
|
6,500
|
|
Securities available for sale
|
|
|
37,742
|
|
|
|
—
|
|
|
|
37,742
|
|
Federal Home Loan Bank stock
|
|
|
496
|
|
|
|
—
|
|
|
|
496
|
|
Loans
|
|
|
131,986
|
|
|
|
(373
|
)
|
|
|
131,613
|
|
Other real estate owned
|
|
|
527
|
|
|
|
—
|
|
|
|
527
|
|
Core deposit intangible
|
|
|
692
|
|
|
|
—
|
|
|
|
692
|
|
Fixed assets
|
|
|
5,595
|
|
|
|
—
|
|
|
|
5,595
|
|
Other assets
|
|
|
10,911
|
|
|
|
(50
|
)
|
|
|
10,861
|
|
TOTAL ASSETS ACQUIRED
|
|
$
|
195,893
|
|
|
$
|
(423
|
)
|
|
$
|
195,470
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Deposits
|
|
$
|
160,979
|
|
|
$
|
—
|
|
|
$
|
160,979
|
|
Other
|
|
|
2,124
|
|
|
|
111
|
|
|
|
2,235
|
|
TOTAL LIABILITIES ASSUMED
|
|
$
|
163,103
|
|
|
$
|
111
|
|
|
$
|
163,214
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Excess of assets acquired over liabilities assumed
|
|
$
|
32,790
|
|
|
$
|
534
|
|
|
$
|
32,256
|
|
Purchase price
|
|
|
38,250
|
|
|
|
—
|
|
|
|
38,250
|
|
Goodwill
|
|
$
|
5,460
|
|
|
$
|
534
|
|
|
$
|
5,994
|
|
The operating results of the Company for the year ending
December 31, 2013 includes the operating results of AFI since the acquisition date of April 1, 2012. The following summarizes the
net interest and other income, net income and earnings per share as if the merger with AFI was effective as of the beginning of
the comparable prior annual reporting period presented. There was no material, nonrecurring adjustments to the pro forma net interest
and other income, net income and earnings per share presented below:
(Dollars in thousands, except per share data)
|
|
Years ended December 31,
|
|
|
2013
|
|
2012
(1)
|
Net interest and other income
|
|
$
|
67,710
|
|
|
$
|
66,903
|
|
|
|
|
|
|
|
|
|
|
Net income
|
|
|
6,871
|
|
|
|
4,846
|
|
|
|
|
|
|
|
|
|
|
Basic earnings per share
|
|
|
0.20
|
|
|
|
0.13
|
|
|
|
|
|
|
|
|
|
|
Diluted earnings per share
|
|
|
0.20
|
|
|
|
0.13
|
|
(1)
|
The merger was effective April 1, 2012. There were no proforma adjustments subsequent to April 1, 2012.
|
1
st
UNITED BANCORP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollar amounts in thousands, except per share data)
NOTE 3 – SECURITIES
The amortized cost and fair value of securities available
for sale and the related gross unrealized gains and losses recognized in accumulated other comprehensive income were as follows.
|
|
Amortized
Cost
|
|
Gross
Unrealized
Gains
|
|
Gross
Unrealized
Losses
|
|
Fair Value
|
2013
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
U.S. Treasury
|
|
$
|
935
|
|
|
$
|
—
|
|
|
$
|
(17
|
)
|
|
$
|
918
|
|
Municipal Securities
|
|
|
6,368
|
|
|
|
—
|
|
|
|
(764
|
)
|
|
|
5,604
|
|
Commercial mortgaged-backed
|
|
|
4,469
|
|
|
|
—
|
|
|
|
(395
|
)
|
|
|
4,074
|
|
Residential collateralized mortgage obligations
|
|
|
826
|
|
|
|
—
|
|
|
|
(8
|
)
|
|
|
818
|
|
Residential mortgage-backed
|
|
|
328,602
|
|
|
|
442
|
|
|
|
(12,497
|
)
|
|
|
316,547
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
341,200
|
|
|
$
|
442
|
|
|
$
|
(13,681
|
)
|
|
$
|
327,961
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2012
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Municipal Securities
|
|
$
|
500
|
|
|
$
|
—
|
|
|
$
|
(31
|
)
|
|
$
|
469
|
|
Residential collateralized mortgage obligations
|
|
|
3,793
|
|
|
|
—
|
|
|
|
(34
|
)
|
|
|
3,759
|
|
Residential mortgage-backed
|
|
|
252,208
|
|
|
|
3,831
|
|
|
|
(145
|
)
|
|
|
255,894
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
256,501
|
|
|
$
|
3,831
|
|
|
$
|
(210
|
)
|
|
$
|
260,122
|
|
At December 31, 2013 and 2012, there were no holdings of securities
of any one issuer, other than the U.S. Government agencies, in an amount greater than 10% of shareholders’ equity. All of
the residential collateralized mortgage obligations and commercial and residential mortgage-backed securities at December 31, 2013
and 2012 were issued or sponsored by U.S. Government agencies.
The amortized cost and fair value of debt securities at December
31, 2013 by contractual maturity were as follows. Securities not due at a single maturity date, primarily mortgage-backed securities,
are shown separately.
|
|
Amortized Cost
|
|
Fair
Value
|
Due in one year or less
|
|
$
|
—
|
|
|
$
|
—
|
|
Due from one to five years
|
|
|
—
|
|
|
|
—
|
|
Due from five to ten years
|
|
|
935
|
|
|
|
918
|
|
Due after ten years
|
|
|
6,368
|
|
|
|
5,604
|
|
Commercial mortgage-backed
|
|
|
4,469
|
|
|
|
4,074
|
|
Residential mortgage-backed and residential collateralized mortgage obligations
|
|
|
329,428
|
|
|
|
317,365
|
|
|
|
$
|
341,200
|
|
|
$
|
327,961
|
|
Securities available for sale at December 31, 2013 and 2012
with a fair value of $30,208 and $28,891, respectively, were pledged to secure public deposits and repurchase agreements.
Securities purchased during the years ended December 31,
2013, 2012, and 2011 were $174,421, $194,322 and $125,522, respectively. We purchase securities using excess cash reserves.
1
st
UNITED BANCORP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollar amounts in thousands, except per share data)
NOTE 3 – SECURITIES (continued)
Proceeds and gross gains and (losses) from the sale of securities
available for sales for the years ended December 31, 2013, 2012 and 2011, respectively, were as follows:
|
|
December 31,
|
|
|
2013
|
|
2012
|
|
2011
|
Proceeds from sale
|
|
$
|
33,705
|
|
|
$
|
102,521
|
|
|
$
|
20,288
|
|
Gross gain
|
|
$
|
856
|
|
|
$
|
1,673
|
|
|
$
|
364
|
|
Gross loss
|
|
|
(32
|
)
|
|
|
—
|
|
|
|
—
|
|
Net gains on sales of securities
|
|
$
|
824
|
|
|
$
|
1,673
|
|
|
$
|
364
|
|
The income tax expense related to these net gains on sales
of securities was $310, $630 and $140, respectively, for the years ended December 31, 2013, 2012 and 2011.
Gross unrealized losses at December 31, 2013 and 2012, respectively,
aggregated by investment category and length of time that individual securities have been in a continuous unrealized loss position,
are as follows.
|
|
Less than 12 Months
|
|
12 Months or More
|
|
Total
|
|
|
Fair
Value
|
|
Unrealized
Loss
|
|
Fair
Value
|
|
Unrealized
Loss
|
|
Fair
Value
|
|
Unrealized
Loss
|
2013
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
U.S. Treasury
|
|
$
|
918
|
|
|
$
|
(17
|
)
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
918
|
|
|
$
|
(17
|
)
|
Municipal Securities
|
|
|
5,190
|
|
|
|
(678
|
)
|
|
|
413
|
|
|
|
(86
|
)
|
|
|
5,603
|
|
|
|
(764
|
)
|
Residential collateralized mortgage obligations
|
|
|
—
|
|
|
|
—
|
|
|
|
818
|
|
|
|
(8
|
)
|
|
|
818
|
|
|
|
(8
|
)
|
Commercial mortgaged-backed
|
|
|
—
|
|
|
|
—
|
|
|
|
4,073
|
|
|
|
(395
|
)
|
|
|
4,073
|
|
|
|
(395
|
)
|
Residential mortgage-backed
|
|
|
277,291
|
|
|
|
(12,353
|
)
|
|
|
3,644
|
|
|
|
(144
|
)
|
|
|
280,935
|
|
|
|
(12,497
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
283,399
|
|
|
$
|
(13,048
|
)
|
|
$
|
8,948
|
|
|
$
|
(633
|
)
|
|
$
|
292,347
|
|
|
$
|
(13,681
|
)
|
2012
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Municipal Securities
|
|
|
469
|
|
|
$
|
(31
|
)
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
469
|
|
|
$
|
(31
|
)
|
Residential collateralized mortgage obligations
|
|
$
|
3,759
|
|
|
|
(34
|
)
|
|
|
—
|
|
|
|
—
|
|
|
|
3,759
|
|
|
|
(34
|
)
|
Residential mortgage-backed
|
|
|
35,838
|
|
|
|
(145
|
)
|
|
|
14
|
|
|
|
—
|
|
|
|
35,852
|
|
|
|
(145
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
40,066
|
|
|
$
|
(210
|
)
|
|
$
|
14
|
|
|
$
|
—
|
|
|
$
|
40,080
|
|
|
$
|
(210
|
)
|
In determining other than temporary impairment (“OTTI”)
for debt securities, management considers many factors, including: (1) the length of time and the extent to which the fair value
has been less than cost, (2) the financial condition and near-term prospects of the issuer, (3) whether the market decline was
affected by macroeconomic conditions, and (4) whether the Company has the intent to sell the debt security or more likely than
not will be required to sell the debt security before its anticipated recovery. The assessment of whether OTTI exists involves
a high degree of subjectivity and judgment and is based on the information available to management at a point in time.
At December 31, 2013, 100% of the residential and commercial
mortgage mortgage-backed securities as well as residential collateralized mortgage obligations held by the Company were issued
by the U.S. government and U.S. government sponsored entities and agencies, primarily Fannie Mae, Freddie Mac, and Ginnie Mae,
institutions which the government has affirmed its commitment to support.
1
st
UNITED BANCORP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollar amounts in thousands, except per share data)
NOTE 3 – SECURITIES (continued)
At December 31, 2013, there were 92 available for sale securities
with unrealized losses of which one was a U.S. Treasury security, eight were municipal securities, three were residential
collateralized mortgage obligations, one was a commercial mortgage-backed security and 79 were residential mortgage backed securities.
At December 31, 2012, there were 15 available for sale securities with unrealized losses of which one was a municipal security,
three were residential collateralized mortgage obligations, one was a commercial mortgage-backed security, and 10 were residential
mortgage backed securities. At December 31, 2013 and 2012, securities with unrealized losses had depreciated 4.68% and 0.52%,
respectively, from the Company’s amortized cost basis. The decline in fair value is attributable to changes in interest
rates and liquidity, and not credit quality. The Company does not have the intent to sell these mortgage backed securities and
it is likely that it will not be required to sell these securities prior to their anticipated recovery. The Company does not consider
these securities to be other–than–temporarily impaired at December 31, 2013.
NOTE 4 - LOANS
Loans at year end were as follows:
|
|
December 31, 2013
|
|
December 31, 2012
|
|
|
Loans
Subject to
Loss Share
Agreements
|
|
Loans Not
Subject to
Loss Share
Agreements
|
|
Total
|
|
Loans
Subject to
Loss Share
Agreements
|
|
Loans Not
Subject to
Loss Share
Agreements
|
|
Total
|
Commercial
|
|
$
|
27,573
|
|
|
$
|
182,691
|
|
|
$
|
210,264
|
|
|
$
|
33,025
|
|
|
$
|
146,473
|
|
|
$
|
179,498
|
|
Real estate:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Residential
|
|
|
68,259
|
|
|
|
110,585
|
|
|
|
178,844
|
|
|
|
86,981
|
|
|
|
78,936
|
|
|
|
165,917
|
|
Commercial
|
|
|
144,311
|
|
|
|
555,540
|
|
|
|
699,851
|
|
|
|
198,666
|
|
|
|
315,908
|
|
|
|
514,574
|
|
Construction and land development
|
|
|
6,505
|
|
|
|
28,781
|
|
|
|
35,286
|
|
|
|
8,426
|
|
|
|
33,463
|
|
|
|
41,889
|
|
Consumer and other
|
|
|
2
|
|
|
|
9,733
|
|
|
|
9,735
|
|
|
|
11
|
|
|
|
11,279
|
|
|
|
11,290
|
|
Total loans
|
|
$
|
246,650
|
|
|
$
|
887,330
|
|
|
|
1,133,980
|
|
|
$
|
327,109
|
|
|
$
|
586,059
|
|
|
|
913,168
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Add (deduct):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Unearned income and net deferred loan (fees) costs
|
|
|
|
|
|
|
|
|
|
|
239
|
|
|
|
|
|
|
|
|
|
|
|
220
|
|
Allowance for loan losses
|
|
|
|
|
|
|
|
|
|
|
(9,648
|
)
|
|
|
|
|
|
|
|
|
|
|
(9,788
|
)
|
Loans, net of allowance
|
|
|
|
|
|
|
|
|
|
$
|
1,124,571
|
|
|
|
|
|
|
|
|
|
|
$
|
903,600
|
|
The Company has segregated and evaluates its loan portfolio
through five portfolio segments. The five segments are commercial, residential real estate, commercial real estate, construction
and land development, consumer and other. Most of the Company’s business activity is with customers located in Brevard, Broward,
Hillsborough, Indian River, Miami-Dade, Orange, Hillsborough, Palm Beach and Pinellas Counties. Therefore, the Company’s
exposure to credit risk is significantly affected by changes in these counties.
1
st
UNITED BANCORP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollar amounts in thousands, except per share data)
NOTE 4 - LOANS (continued)
Residential real estate loans are a mixture of fixed rate
and adjustable rate residential mortgage loans. As a policy, the Company holds adjustable rate loans and sells fixed rate loans
into the secondary market. Changes in interest rates or market conditions may impact a borrower’s ability to meet contractual
principal and interest payments. Residential real estate loans are secured by real property.
Commercial loans borrowers consist of small-to medium-sized
businesses including professional associations, medical services, retail trade, construction, transportation, wholesale trade,
manufacturing and tourism. Commercial loans are derived from our market areas and underwritten based on the borrower’s ability
to service debt from the business’s underlying cash flows. As a general practice, we obtain collateral such as real estate,
equipment or other assets although other commercial loans may be uncollateralized but guaranteed.
Commercial real estate loans include loans secured by office
buildings, warehouses, retail stores and other property located in or near our markets. These loans are originated based on the
borrower’s ability to service the debt and secondarily based on the fair value of the underlying collateral.
Construction loans include residential and commercial real
estate loans and are typically for owner-occupied or pre-sold / pre-leased properties. The terms of these loans are generally short-term
with permanent financing upon completion. Land development loans include loans to develop both residential and commercial properties.
Consumer and other loans include second mortgage loans, home
equity loans secured by junior and senior liens on residential real estate and home improvement loans. These loans are originated
based primarily on credit scores, debt-to-income ratios and loan-to-value ratios.
The initial fair value for loans acquired in the EBI
and AFI Acquisition without specifically identified credit deficiencies was based primarily on a discounted cash flow
methodology that considered factors including the type of loan and related collateral, classification and accrual status,
fixed or variable interest rate, term of loan and whether or not the loan was amortizing, and current discount rates. Loans
were grouped together according to similar characteristics and were treated in the aggregate when applying various valuation
techniques. The discount rates used for loans were based on current market rates for new originations of comparable loans and
included adjustments for liquidity concerns. The discount rate does not include a factor for credit losses as that has been
included in the estimated cash flows. Management prepared the purchase price allocations for EBI loans, and in part relied on
a third party for the valuation of loans at July 1, 2013. The aggregate contractual balance was $161,078 with purchase
accounting discounts of $1,910 for a net carrying value of $159,168. The fair value adjustment of $1,910 will be
accreted into interest income over the average life of the loans. Management prepared the purchase price allocations for AFI
loans, and in part relied on a third party for the valuation of covered non-impaired loans at April 1, 2012. The aggregate
contractual balance was $125,988 with purchase accounting discounts of $3,650 for a net carrying value of $122,338. The
fair value adjustment of $3,650 will be accreted into interest income over the average life of the loans.
The Company has purchased loans as part of its acquisitions
AFI in 2012, Old Harbor from the FDIC in 2011, TBOM from the FDIC in 2010, and Republic from the FDIC in 2009, for which there
was, at acquisition, evidence of deterioration of credit quality since origination and it was probable, at the time of acquisition
that all contractually required payments would not be collected. The carrying amount of those loans at December 31, 2013, 2012
and 2011 was as follows:
|
|
2013
|
|
2012
|
|
2011
|
Commercial
|
|
$
|
21,930
|
|
|
$
|
27,603
|
|
|
$
|
22,173
|
|
Real estate
|
|
|
86,533
|
|
|
|
126,819
|
|
|
|
161,947
|
|
Construction and land development
|
|
|
4,964
|
|
|
|
12,761
|
|
|
|
19,411
|
|
Consumer
|
|
|
64
|
|
|
|
64
|
|
|
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Unpaid principal balance
|
|
$
|
113,491
|
|
|
$
|
167,247
|
|
|
$
|
203,531
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Carrying amount
|
|
$
|
65,215
|
|
|
$
|
84,186
|
|
|
$
|
104,767
|
|
1
st
UNITED BANCORP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollar amounts in thousands, except per share data)
NOTE 4 - LOANS (continued)
For those purchased credit impaired loans disclosed above,
the Company increased the allowance for loan losses by $107, $368, and $432 during 2013, 2012 and 2011, respectively. The allowance
for loan losses related to these loans was $1,011, $1,020 and $652 at year end 2013, 2013 and 2011, respectively. No allowance
for loan losses was reversed during the years ended 2013, 2012 or 2011.
During the years ended December 31, 2013 and 2012, the Company
accreted $14,701 and $11,837, respectively, into interest income on acquired loans. The remaining accretable discount was $19,453
at December 31, 2013. In addition, $62,881 of the $65,215 in loans are covered by the FDIC loss share agreements.
Loans purchased during the year for which it was probable
at acquisition that all contractually required payments would not be collected were as follows:
|
|
2013
|
|
2012
|
|
2011
|
Contractually required payments receivable of loans purchased during the year:
|
|
$
|
—
|
|
|
$
|
15,339
|
|
|
$
|
55,651
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash flows expected to be collected at acquisition
|
|
$
|
—
|
|
|
$
|
9,077
|
|
|
$
|
29,936
|
|
Fair value of acquired loans at acquisition
|
|
$
|
—
|
|
|
$
|
7,927
|
|
|
$
|
24,178
|
|
Accretable yield, or income expected to be collected, was
as follows.
Balance at January 1, 2011
|
|
$
|
20,887
|
|
New loans purchased
|
|
|
5,758
|
|
Accretion of income
|
|
|
(6,421
|
)
|
Reclassifications from non-accretable difference
|
|
|
217
|
|
Balance at December 31, 2011
|
|
|
20,441
|
|
New loans purchased
|
|
|
1,150
|
|
Accretion of income
|
|
|
(7,720
|
)
|
Reclassifications from non-accretable difference
|
|
|
22,583
|
|
Resolution of covered assets
|
|
|
(4,117
|
)
|
Balance at December 31, 2012
|
|
$
|
32,337
|
|
New loans purchased
|
|
|
—
|
|
Accretion of income
|
|
|
(8,632
|
)
|
Reclassifications from non-accretable difference
|
|
|
1,817
|
|
Resolution of covered assets
|
|
|
(6,069
|
)
|
Balance at December 31, 2013
|
|
$
|
19,453
|
|
Resolutions of covered assets includes sales, payoffs and
transfers to (and sales of) other real estate owned in an amount in excess of the amount expected.
Income is not recognized on certain purchased credit impaired
loans if the Company cannot reasonably estimate cash flows expected to be collected. The carrying amounts of such loans were as
follows:
|
|
2013
|
|
2012
|
|
2011
|
Loans purchased during the year
|
|
$
|
—
|
|
|
$
|
1,559
|
|
|
$
|
4,778
|
|
Loans at end of year
|
|
|
2,764
|
|
|
|
5,487
|
|
|
|
6,435
|
|
1
st
UNITED BANCORP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollar amounts in thousands, except per share data)
NOTE 4 - LOANS (continued)
Activity in the allowance for loan losses for the years ended December
31, 2013, 2012 and 2011 was as follows:
|
|
Commercial
|
|
Residential
Real Estate
|
|
Commercial
Real Estate
|
|
Construction
and Land
Development
|
|
Consumer
and Other
|
|
Total
|
Beginning balance, January 1, 2013
|
|
$
|
2,735
|
|
|
$
|
1,869
|
|
|
$3,398
|
|
$
|
1,745
|
|
|
$41
|
|
$
|
9,788
|
|
Provisions for loan losses
|
|
|
1,007
|
|
|
|
867
|
|
|
2,005
|
|
|
(458
|
)
|
|
54
|
|
|
3,475
|
|
Loans charged off
|
|
|
(724
|
)
|
|
|
(309
|
)
|
|
(1,862)
|
|
|
(898
|
)
|
|
(17)
|
|
|
(3,810
|
)
|
Recoveries
|
|
|
66
|
|
|
|
10
|
|
|
9
|
|
|
96
|
|
|
14
|
|
|
195
|
|
Ending Balance, December 31, 2013
|
|
$
|
3,084
|
|
|
$
|
2,437
|
|
|
$3,550
|
|
$
|
485
|
|
|
$92
|
|
$
|
9,648
|
|
|
|
Commercial
|
|
Residential
Real Estate
|
|
Commercial
Real Estate
|
|
Construction
and Land
Development
|
|
Consumer
and Other
|
|
Total
|
Beginning balance, January 1, 2012
|
|
$
|
3,111
|
|
|
$
|
1,945
|
|
|
$5,302
|
|
$
|
2,409
|
|
|
$69
|
|
$
|
12,836
|
|
Provisions for loan losses
|
|
|
5,229
|
|
|
|
754
|
|
|
1,145
|
|
|
(700
|
)
|
|
(78)
|
|
|
6,350
|
|
Loans charged off
|
|
|
(5,648
|
)
|
|
|
(1,019
|
)
|
|
(3,159)
|
|
|
—
|
|
|
—
|
|
|
(9,826
|
)
|
Recoveries
|
|
|
43
|
|
|
|
189
|
|
|
110
|
|
|
36
|
|
|
50
|
|
|
428
|
|
Ending Balance, December 31, 2012
|
|
$
|
2,735
|
|
|
$
|
1,869
|
|
|
$3,398
|
|
$
|
1,745
|
|
|
$41
|
|
$
|
9,788
|
|
|
|
Commercial
|
|
Residential
Real Estate
|
|
Commercial
Real Estate
|
|
Construction
and Land
Development
|
|
Consumer
and Other
|
|
Total
|
Beginning balance, January 1, 2011
|
|
$
|
3,832
|
|
|
$
|
3,026
|
|
|
$4,145
|
|
$
|
1,895
|
|
|
$152
|
|
$
|
13,050
|
|
Provisions for loan losses
|
|
|
522
|
|
|
|
1,735
|
|
|
3,059
|
|
|
1,640
|
|
|
44
|
|
|
7,000
|
|
Loans charged off
|
|
|
(1,306
|
)
|
|
|
(2,829
|
)
|
|
(1,937)
|
|
|
(1,162
|
)
|
|
(132)
|
|
|
(7,366
|
)
|
Recoveries
|
|
|
63
|
|
|
|
13
|
|
|
35
|
|
|
36
|
|
|
5
|
|
|
152
|
|
Ending Balance, December 31, 2011
|
|
$
|
3,111
|
|
|
$
|
1,945
|
|
|
$5,302
|
|
$
|
2,409
|
|
|
$69
|
|
$
|
12,836
|
|
The allocation of the allowance for loan losses by portfolio
segment at December 31, 2013 and 2012 was as follows:
As of December 31, 2013:
|
|
Commercial
|
|
Residential
Real Estate
|
|
Commercial
Real Estate
|
|
Construction
and Land
Development
|
|
Consumer
and Other
|
|
Total
|
Specific Reserves:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Impaired loans
|
|
$
|
835
|
|
|
$
|
460
|
|
|
$
|
413
|
|
|
$
|
271
|
|
|
$
|
—
|
|
|
$
|
1,979
|
|
Purchase credit impaired loans
|
|
|
464
|
|
|
|
269
|
|
|
|
278
|
|
|
|
—
|
|
|
|
—
|
|
|
|
1,011
|
|
Total specific reserves
|
|
|
1,299
|
|
|
|
729
|
|
|
|
691
|
|
|
|
271
|
|
|
|
—
|
|
|
|
2,990
|
|
General reserves
|
|
|
1,785
|
|
|
|
1,708
|
|
|
|
2,859
|
|
|
|
214
|
|
|
|
92
|
|
|
|
6,658
|
|
Total
|
|
$
|
3,084
|
|
|
$
|
2,437
|
|
|
$
|
3,550
|
|
|
$
|
485
|
|
|
$
|
92
|
|
|
$
|
9,648
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loans individually evaluated for impairment
|
|
$
|
3,937
|
|
|
$
|
3,567
|
|
|
$
|
19,625
|
|
|
$
|
3,830
|
|
|
$
|
—
|
|
|
$
|
30,959
|
|
Purchase credit impaired loans
|
|
|
7,426
|
|
|
|
16,556
|
|
|
|
38,854
|
|
|
|
2,354
|
|
|
|
25
|
|
|
|
65,215
|
|
Loans collectively evaluated for impairment
|
|
|
198,901
|
|
|
|
158,721
|
|
|
|
641,372
|
|
|
|
29,102
|
|
|
|
9,710
|
|
|
|
1,037,806
|
|
Total
|
|
$
|
210,264
|
|
|
$
|
178,844
|
|
|
$
|
699,851
|
|
|
$
|
35,286
|
|
|
$
|
9,735
|
|
|
$
|
1,133,980
|
|
1
st
UNITED BANCORP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollar amounts in thousands, except per share data)
NOTE 4 - LOANS (continued)
As of December 31, 2012:
|
|
Commercial
|
|
Residential
Real Estate
|
|
Commercial
Real Estate
|
|
Construction
and Land
Development
|
|
Consumer
and Other
|
|
Total
|
Specific Reserves:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Impaired loans
|
|
$
|
510
|
|
|
$
|
474
|
|
|
$
|
1,128
|
|
|
$
|
1,002
|
|
|
$
|
—
|
|
|
$
|
3,114
|
|
Purchase credit impaired loans
|
|
|
355
|
|
|
|
359
|
|
|
|
306
|
|
|
|
—
|
|
|
|
—
|
|
|
|
1,020
|
|
Total Specific Reserves
|
|
|
865
|
|
|
|
833
|
|
|
|
1,434
|
|
|
|
1,002
|
|
|
|
—
|
|
|
|
4,134
|
|
General reserves
|
|
|
1,870
|
|
|
|
1,036
|
|
|
|
1,964
|
|
|
|
743
|
|
|
|
41
|
|
|
|
5,654
|
|
Total
|
|
$
|
2,735
|
|
|
$
|
1,869
|
|
|
$
|
3,398
|
|
|
$
|
1,745
|
|
|
$
|
41
|
|
|
$
|
9,788
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loans individually evaluated for impairment
|
|
$
|
4,168
|
|
|
$
|
5,825
|
|
|
$
|
24,006
|
|
|
$
|
6,094
|
|
|
$
|
—
|
|
|
$
|
40,093
|
|
Purchase credit impaired loans
|
|
|
8,923
|
|
|
|
18,363
|
|
|
|
52,276
|
|
|
|
4,221
|
|
|
|
30
|
|
|
|
83,813
|
|
Loans collectively evaluated for impairment
|
|
|
166,407
|
|
|
|
141,729
|
|
|
|
438,292
|
|
|
|
31,574
|
|
|
|
11,260
|
|
|
|
789,262
|
|
|
|
$
|
179,498
|
|
|
$
|
165,917
|
|
|
$
|
514,574
|
|
|
$
|
41,889
|
|
|
$
|
11,290
|
|
|
$
|
913,168
|
|
The following table represents loans individually evaluated
for impairment by class of loan as of December 31, 2013:
|
|
Recorded Investment in Impaired Loans
With Allowance
|
December 31, 2013
|
|
Loans Subject to Loss
Share Agreements
|
|
Loans Not Subject to Loss
Share Agreements
|
(Dollars in thousands)
|
|
Unpaid Principal
|
|
Recorded
Investment
|
|
Allowance
for Loan
Losses
Allocated
|
|
Unpaid Principal
|
|
Recorded
Investment
|
|
Allowance
for Loan
Losses
Allocated
|
Residential Real Estate:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
First mortgages
|
|
$
|
1,254
|
|
|
$
|
1,089
|
|
|
$
|
192
|
|
|
$
|
632
|
|
|
$
|
632
|
|
|
$
|
171
|
|
HELOCs and equity
|
|
|
39
|
|
|
|
38
|
|
|
|
38
|
|
|
|
191
|
|
|
|
191
|
|
|
|
59
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commercial:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Secured – non-real estate
|
|
|
359
|
|
|
|
357
|
|
|
|
53
|
|
|
|
3,719
|
|
|
|
1,537
|
|
|
|
730
|
|
Secured – real estate
|
|
|
54
|
|
|
|
52
|
|
|
|
52
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
Unsecured
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commercial Real Estate:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Owner occupied
|
|
|
302
|
|
|
|
274
|
|
|
|
23
|
|
|
|
1,469
|
|
|
|
1,049
|
|
|
|
41
|
|
Non-owner occupied
|
|
|
466
|
|
|
|
329
|
|
|
|
76
|
|
|
|
4,291
|
|
|
|
4,283
|
|
|
|
273
|
|
Multi-family
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Construction and Land Development:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Construction
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
Improved land
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
527
|
|
|
|
527
|
|
|
|
271
|
|
Unimproved land
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Consumer and other
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total December 31, 2013
|
|
$
|
2,474
|
|
|
$
|
2,139
|
|
|
$
|
434
|
|
|
$
|
10,829
|
|
|
$
|
8,219
|
|
|
$
|
1,545
|
|
1
st
UNITED BANCORP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollar amounts in thousands, except per share data)
NOTE 4 – LOANS (continued)
|
|
Recorded Investment in Impaired Loans
|
|
|
With No Allowance
|
December 31, 2013
|
|
Loans
Subject to
Loss Share
Agreements
|
|
Loans Not
Subject to Loss
Share
Agreements
|
(Dollars in thousands)
|
|
Unpaid
Principal
|
|
Recorded
Investment
|
|
Unpaid
Principal
|
|
Recorded
Investment
|
Residential Real Estate:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
First mortgages
|
|
$
|
1,451
|
|
|
$
|
1,170
|
|
|
$
|
106
|
|
|
$
|
—
|
|
HELOCs and equity
|
|
|
59
|
|
|
|
—
|
|
|
|
447
|
|
|
|
447
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commercial:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Secured – non-real estate
|
|
|
—
|
|
|
|
—
|
|
|
|
1,126
|
|
|
|
810
|
|
Secured – real estate
|
|
|
—
|
|
|
|
—
|
|
|
|
1,181
|
|
|
|
1,181
|
|
Unsecured
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commercial Real Estate:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Owner occupied
|
|
|
—
|
|
|
|
—
|
|
|
|
5,437
|
|
|
|
5,287
|
|
Non-owner occupied
|
|
|
1,597
|
|
|
|
1,374
|
|
|
|
7,144
|
|
|
|
7,029
|
|
Multi-family
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Construction and Land Development:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Construction
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
Improved land
|
|
|
—
|
|
|
|
—
|
|
|
|
7,597
|
|
|
|
3,303
|
|
Unimproved land
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Consumer and other
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total December 31, 2013
|
|
$
|
3,107
|
|
|
$
|
2,544
|
|
|
$
|
23,038
|
|
|
$
|
18,057
|
|
1
st
UNITED BANCORP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollar amounts in thousands, except per share data)
NOTE 4 - LOANS (continued)
The following table presents loans individually evaluated
for impairment by class of loan as of December 31, 2012:
|
|
Recorded Investment in Impaired Loans
With Allowance
|
December 31, 2012
|
|
Loans Subject to Loss
Share Agreements
|
|
Loans Not Subject to Loss
Share Agreements
|
(Dollars in thousands)
|
|
Unpaid Principal
|
|
Recorded
Investment
|
|
Allowance
for Loan
Losses
Allocated
|
|
Unpaid Principal
|
|
Recorded
Investment
|
|
Allowance
for Loan
Losses
Allocated
|
Residential Real Estate:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
First mortgages
|
|
$
|
1,823
|
|
|
$
|
1,414
|
|
|
$
|
355
|
|
|
$
|
393
|
|
|
$
|
393
|
|
|
$
|
62
|
|
HELOCs and equity
|
|
|
40
|
|
|
|
40
|
|
|
|
40
|
|
|
|
156
|
|
|
|
156
|
|
|
|
17
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commercial:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Secured – non-real estate
|
|
|
473
|
|
|
|
473
|
|
|
|
122
|
|
|
|
2,337
|
|
|
|
1,453
|
|
|
|
388
|
|
Secured – real estate
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
Unsecured
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commercial Real Estate:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Owner occupied
|
|
|
2,538
|
|
|
|
2,277
|
|
|
|
233
|
|
|
|
2,973
|
|
|
|
2,540
|
|
|
|
185
|
|
Non-owner occupied
|
|
|
470
|
|
|
|
353
|
|
|
|
25
|
|
|
|
4,680
|
|
|
|
4,680
|
|
|
|
437
|
|
Multi-family
|
|
|
1,250
|
|
|
|
1,250
|
|
|
|
248
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Construction and Land Development:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Construction
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
Improved land
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
148
|
|
|
|
148
|
|
|
|
42
|
|
Unimproved land
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
2,506
|
|
|
|
2,506
|
|
|
|
960
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Consumer and other
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total December 31, 2012
|
|
$
|
6,594
|
|
|
$
|
5,807
|
|
|
$
|
1,023
|
|
|
$
|
13,193
|
|
|
$
|
11,876
|
|
|
$
|
2,091
|
|
1
st
UNITED BANCORP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollar amounts in thousands, except per share data)
NOTE 4 - LOANS (continued)
|
|
Recorded Investment in Impaired Loans
|
|
|
With No Allowance
|
December 31, 2012
|
|
Loans
Subject to
Loss Share
Agreements
|
|
Loans Not
Subject to Loss
Share
Agreements
|
(Dollars in thousands)
|
|
Unpaid Principal
|
|
Recorded
Investment
|
|
Unpaid Principal
|
|
Recorded
Investment
|
Residential Real Estate:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
First mortgages
|
|
$
|
1,682
|
|
|
$
|
1,065
|
|
|
$
|
2,638
|
|
|
$
|
1,961
|
|
HELOCs and equity
|
|
|
59
|
|
|
|
—
|
|
|
|
796
|
|
|
|
796
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commercial:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Secured – non-real estate
|
|
|
—
|
|
|
|
—
|
|
|
|
3,791
|
|
|
|
1,012
|
|
Secured – real estate
|
|
|
397
|
|
|
|
—
|
|
|
|
1,530
|
|
|
|
1,230
|
|
Unsecured
|
|
|
3
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commercial Real Estate:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Owner occupied
|
|
|
—
|
|
|
|
—
|
|
|
|
6,363
|
|
|
|
6,151
|
|
Non-owner occupied
|
|
|
757
|
|
|
|
648
|
|
|
|
5,867
|
|
|
|
5,792
|
|
Multi-family
|
|
|
—
|
|
|
|
—
|
|
|
|
315
|
|
|
|
315
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Construction and Land Development:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Construction
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
Improved land
|
|
|
—
|
|
|
|
—
|
|
|
|
7,865
|
|
|
|
3,440
|
|
Unimproved land
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Consumer and other
|
|
|
—
|
|
|
|
—
|
|
|
|
1
|
|
|
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total December 31, 2012
|
|
$
|
2,898
|
|
|
$
|
1,713
|
|
|
$
|
29,166
|
|
|
$
|
20,697
|
|
1
st
UNITED BANCORP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollar amounts in thousands, except per share data)
NOTE 4 - LOANS (continued)
Average recorded investment in impaired loans and related
interest income and cash-based interest income for the years ended December 31, 2013, 2012 and 2011 were as follows:
|
|
Year ended December 31, 2013
|
|
Year ended December 31, 2012
|
|
|
Average
Recorded
Investment
|
|
Interest
Income
|
|
Cash
Basis
|
|
Average
Recorded
Investment
|
|
Interest
Income
|
|
Cash
Basis
|
Residential Real Estate
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
First mortgages
|
|
$
|
2,554
|
|
|
$
|
27
|
|
|
$
|
28
|
|
|
$
|
7,981
|
|
|
$
|
85
|
|
|
$
|
102
|
|
HELOC and equity
|
|
|
699
|
|
|
|
6
|
|
|
|
7
|
|
|
|
1,481
|
|
|
|
18
|
|
|
|
18
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commercial
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Secured non real estate
|
|
|
3,196
|
|
|
|
69
|
|
|
|
71
|
|
|
|
3,375
|
|
|
|
185
|
|
|
|
183
|
|
Secured real estate
|
|
|
1,255
|
|
|
|
48
|
|
|
|
48
|
|
|
|
6,511
|
|
|
|
55
|
|
|
|
57
|
|
Unsecured
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commercial Real Estate
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Owner occupied
|
|
|
8,199
|
|
|
|
322
|
|
|
|
303
|
|
|
|
12,304
|
|
|
|
593
|
|
|
|
599
|
|
Non-owner occupied
|
|
|
11,260
|
|
|
|
343
|
|
|
|
342
|
|
|
|
14,425
|
|
|
|
489
|
|
|
|
474
|
|
Multifamily
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
1,625
|
|
|
|
12
|
|
|
|
12
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Construction and Land Development
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Construction
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
Improved land
|
|
|
3,893
|
|
|
|
8
|
|
|
|
8
|
|
|
|
3,724
|
|
|
|
59
|
|
|
|
59
|
|
Unimproved land
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
2,829
|
|
|
|
109
|
|
|
|
114
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Consumer and Other
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
29
|
|
|
|
—
|
|
|
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
31,056
|
|
|
$
|
823
|
|
|
$
|
807
|
|
|
$
|
54,284
|
|
|
$
|
1,605
|
|
|
$
|
1,618
|
|
1
st
UNITED BANCORP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollar amounts in thousands, except per share data)
NOTE 4 - LOANS (continued)
|
|
Year ended December 31, 2011
|
|
|
Average
Recorded
Investment
|
|
Interest
Income
|
|
Cash
Basis
|
Residential Real Estate
|
|
|
|
|
|
|
|
|
|
|
|
|
First mortgages
|
|
$
|
9,088
|
|
|
$
|
29
|
|
|
$
|
81
|
|
HELOC and equity
|
|
|
630
|
|
|
|
1
|
|
|
|
12
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commercial
|
|
|
|
|
|
|
|
|
|
|
|
|
Secured non real estate
|
|
|
8,392
|
|
|
|
116
|
|
|
|
77
|
|
Secured real estate
|
|
|
3,769
|
|
|
|
67
|
|
|
|
430
|
|
Unsecured
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commercial Real Estate
|
|
|
|
|
|
|
|
|
|
|
|
|
Owner occupied
|
|
|
9,437
|
|
|
|
161
|
|
|
|
167
|
|
Non-owner occupied
|
|
|
15,512
|
|
|
|
429
|
|
|
|
153
|
|
Multifamily
|
|
|
1,659
|
|
|
|
—
|
|
|
|
6
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Construction and Land Development
|
|
|
|
|
|
|
|
|
|
|
|
|
Construction
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
Improved land
|
|
|
4,387
|
|
|
|
264
|
|
|
|
12
|
|
Unimproved land
|
|
|
2,516
|
|
|
|
111
|
|
|
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Consumer and Other
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
55,390
|
|
|
$
|
1,178
|
|
|
$
|
938
|
|
Generally, interest accrued on loans and is credited to income
based upon the principal balance outstanding. It is management’s policy to discontinue the accrual of interest income and
classify a loan as non-accrual when principal or interest is past due 90 days or more unless, in the determination of management,
the principal and interest on the loan are well collateralized and in the process of collection. Consumer installment loans are
generally charged-off after 90 plus days past due unless adequately collateralized and in the process of collection. Loans are
not returned to accrual status until principal and interest payments are brought current and future payments appear reasonably
certain. Interest accrued and unpaid at the time a loan is placed on non-accrual status is charged against interest income. During
the years ended December 31, 2013, 2012 and 2011, interest income not recognized on non-accrual loans was approximately $970,
$1,346, and $1,545 respectively.
Non-accrual loans represent loans which are 90 days and over
past due and loans for which management believes collection of contractual amounts due are uncertain of collection. Nonperforming
loans represent loans which are not performing in accordance with the contractual loan agreements. Included in the tables that
follow are loans in non-accrual and 90 plus days past due categories with a carrying value of $15,836 and $23,416 as of December
31, 2013 and 2012, respectively. Loans which are 90 days or greater past due and accruing interest income were $0 and $2,109 at
December 31, 2013 and 2012, respectively. Nonperforming loans and impaired loans are defined differently. As such, some loans may
be included in both categories, whereas other loans may only be included in one category.
Loans accounted for under ASC 310-30 at December 31, 2013 and 2012
which were contractually accruing 30 to 59 days past due were $6,508 and $2,720, respectively; 30 to 59 days contractually past
due and non-accrual were $0 and $274, respectively; contractually 60 to 89 days past due and accruing were $0 and $0, respectively;
contractually 60 to 89 days past due and non-accrual were $0 and $805, respectively; contractually 90 plus days past due and accruing
were $0 and $1,804, respectively and contractually 90 plus days past due and non-accrual were $28,815 and $20,666, respectively.
These amounts are excluded from the disclosures of loans past due and on non-accrual. Loans which are 90 days or greater past due
and accruing interest income were $0 and $2,109 at December 31, 2013 and 2012, respectively.
1
st
UNITED BANCORP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollar amounts in thousands, except per share data)
NOTE 4 - LOANS (continued)
The following tables summarize past due and non-accrual loans
by the number of days past due as of December 31, 2013 and 2012:
December 31, 2013
(Dollars in thousands)
|
|
Accruing 30 - 59
|
|
Accruing 60-89
|
|
Non-Accrual/Accrual and
90 days and over past due
|
|
Total
|
|
|
Loans
Subject to
Loss Share
Agreements
|
|
Loans Not
Subject to
Loss Share
Agreements
|
|
Loans
Subject to
Loss Share
Agreements
|
|
Loans Not
Subject to
Loss Share
Agreements
|
|
Loans
Subject to
Loss Share
Agreements
|
|
Loans Not
Subject to
Loss Share
Agreements
|
|
Loans
Subject to
Loss Share
Agreements
|
|
Loans Not
Subject to
Loss Share
Agreements
|
Residential Real Estate:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
First mortgages
|
|
$
|
306
|
|
|
$
|
1,085
|
|
|
$
|
—
|
|
|
$
|
24
|
|
|
$
|
3,137
|
|
|
$
|
48
|
|
|
$
|
3,443
|
|
|
$
|
1,157
|
|
HELOCs and equity
|
|
|
27
|
|
|
|
—
|
|
|
|
162
|
|
|
|
—
|
|
|
|
96
|
|
|
|
491
|
|
|
|
285
|
|
|
|
491
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commercial:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Secured – non-real estate
|
|
|
—
|
|
|
|
461
|
|
|
|
—
|
|
|
|
—
|
|
|
|
39
|
|
|
|
1,518
|
|
|
|
39
|
|
|
|
1,979
|
|
Secured – real estate
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
416
|
|
|
|
—
|
|
|
|
416
|
|
|
|
—
|
|
Unsecured
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commercial Real Estate:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Owner occupied
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
1,737
|
|
|
|
722
|
|
|
|
1,115
|
|
|
|
722
|
|
|
|
2,852
|
|
Non-owner occupied
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
2,261
|
|
|
|
2,182
|
|
|
|
2,261
|
|
|
|
2,182
|
|
Multi-family
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
62
|
|
|
|
—
|
|
|
|
62
|
|
|
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Construction and Land Development:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Construction
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
Improved land
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
3,688
|
|
|
|
—
|
|
|
|
3,688
|
|
Unimproved land
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
35
|
|
|
|
—
|
|
|
|
35
|
|
|
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Consumer and other
|
|
|
—
|
|
|
|
34
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
26
|
|
|
|
—
|
|
|
|
60
|
|
Total December 31, 2013
|
|
$
|
333
|
|
|
$
|
1,580
|
|
|
$
|
162
|
|
|
$
|
1,761
|
|
|
$
|
6,768
|
|
|
$
|
9,068
|
|
|
$
|
7,263
|
|
|
$
|
12,409
|
|
1
st
UNITED BANCORP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollar amounts in thousands, except per share data)
NOTE 4 - LOANS (continued)
December 31, 2012
(Dollars in thousands)
|
|
Accruing 30 - 59
|
|
Accruing 60-89
|
|
Non-Accrual/Accrual and
90 days and over past due
|
|
Total
|
|
|
Loans
Subject to
Loss Share
Agreements
|
|
Loans Not
Subject to
Loss Share
Agreements
|
|
Loans
Subject to
Loss Share
Agreements
|
|
Loans Not
Subject to Loss
Share
Agreements
|
|
Loans
Subject to
Loss Share
Agreements
|
|
Loans Not
Subject to
Loss Share
Agreements
|
|
Loans Subject
to Loss Share
Agreements
|
|
Loans Not
Subject to
Loss Share
Agreements
|
Residential Real Estate:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
First mortgages
|
|
$
|
1,013
|
|
|
$
|
95
|
|
|
$
|
1,207
|
|
|
$
|
—
|
|
|
$
|
4,085
|
|
|
$
|
2,019
|
|
|
$
|
6,305
|
|
|
$
|
2,114
|
|
HELOCs and equity
|
|
|
—
|
|
|
|
197
|
|
|
|
—
|
|
|
|
—
|
|
|
|
103
|
|
|
|
796
|
|
|
|
103
|
|
|
|
993
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commercial:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Secured – non-real estate
|
|
|
—
|
|
|
|
200
|
|
|
|
—
|
|
|
|
94
|
|
|
|
147
|
|
|
|
805
|
|
|
|
147
|
|
|
|
1,099
|
|
Secured – real estate
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
424
|
|
|
|
—
|
|
|
|
424
|
|
|
|
—
|
|
Unsecured
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commercial Real Estate:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Owner occupied
|
|
|
—
|
|
|
|
1,873
|
|
|
|
—
|
|
|
|
—
|
|
|
|
2,820
|
|
|
|
2,487
|
|
|
|
2,820
|
|
|
|
4,360
|
|
Non-owner occupied
|
|
|
581
|
|
|
|
—
|
|
|
|
—
|
|
|
|
1,707
|
|
|
|
2,242
|
|
|
|
2,085
|
|
|
|
2,823
|
|
|
|
3,792
|
|
Multi-family
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
1,331
|
|
|
|
315
|
|
|
|
1,331
|
|
|
|
315
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Construction and Land Development:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Construction
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
Improved land
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
3,440
|
|
|
|
—
|
|
|
|
3,440
|
|
Unimproved land
|
|
|
—
|
|
|
|
2,767
|
|
|
|
—
|
|
|
|
—
|
|
|
|
288
|
|
|
|
—
|
|
|
|
288
|
|
|
|
2,767
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Consumer and other
|
|
|
—
|
|
|
|
99
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
29
|
|
|
|
—
|
|
|
|
128
|
|
Total December 31, 2012
|
|
$
|
1,594
|
|
|
$
|
5,231
|
|
|
$
|
1,207
|
|
|
$
|
1,801
|
|
|
$
|
11,440
|
|
|
$
|
11,976
|
|
|
$
|
14,241
|
|
|
$
|
19,008
|
|
Modifications of terms for the Company’s loans and
their inclusion as troubled debt restructurings are based on individual facts and circumstances. Loan modifications that are included
as troubled debt restructurings may involve a reduction of the stated interest rate of the loan, an extension of the maturity date
at a stated rate of interest lower than the current market rate for new debt with similar risk, or deferral of principal payments,
regardless of the period of the modification. Generally, the Company will allow interest rate reductions for a period of less than
two years after which the loan reverts back to the contractual interest rate. Each of the loans included as troubled debt restructurings
at December 31, 2013 had either an interest rate modification from 6 months to 2 years before reverting back to the original interest
rate or a deferral of principal payments which can range from 6 to 12 months before reverting back to an amortizing loan. All of
the loans were modified due to financial stress of the borrower. In order to determine if a borrower is experiencing financial
difficulty, an evaluation is performed to determine the probability that the borrower will be in payment default on any of its
debt in the foreseeable future with the modification. This evaluation is performed under the Company’s internal underwriting
policy.
Loans retain their accrual status at the time of their
modification. As a result, if a loan is on non-accrual at the time it is modified, it stays as non-accrual, and if a loan is
on accrual at the time of the modification, it generally stays on accrual. A loan on non-accrual will be individually
evaluated based on sustained adherence to the terms of the modification agreement prior to being reclassified to accrual
status. The Company monitors the performance of loans modified on a monthly basis. A modified loan will be reclassified to
non-accrual and is in default if the loan is not performing in accordance with the modification agreement, the loan becomes
contractually past due in accordance with the modification agreement or other weaknesses are observed which makes collection
of principal and interest unlikely. The Company’s policy is to evaluate and potentially return a troubled debt
restructured loan from a non-accrual to accrual status upon the receipt of all past due principal and/or interest payments
since the date of and in accordance with the terms of the modification agreement and when future payments are reasonable
assured. The average yield on the performing loans classified as troubled debt restructurings were 4.38% and 4.76% as of
December 31, 2013 and 2012, respectively. Troubled debt restructuring loans are considered impaired.
1
st
UNITED BANCORP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollar amounts in thousands, except per share data)
NOTE 4 – LOANS (continued)
During the year ended December 31, 2013, the Company modified
$1,980 in commercial real estate loans, $90 in commercial loans, $299 in residential real estate loans. During the year ended December
31, 2012, the Company modified $6,391 in commercial real estate loans, $1,831 in commercial loans, $450 in residential real estate
loans and $149 in land loans. During the year ended December 31, 2011, the Company modified $5,992 in commercial real estate loans,
$1,527 in commercial loans, $1,894 in residential real estate loans and $2,516 in land loans. All troubled debt restructurings
are classified as either special mention or substandard by the Company.
The following is a summary of the Company’s performing
troubled debt restructurings as of December 31, 2013 and 2012, respectively, all of which were performing in accordance with the
restructured terms:
|
|
December 31,
2013
|
|
December 31,
2012
|
Residential real estate
|
|
$
|
834
|
|
|
$
|
605
|
|
Commercial real estate
|
|
|
15,341
|
|
|
|
17,315
|
|
Construction and land development
|
|
|
143
|
|
|
|
2,654
|
|
Commercial
|
|
|
2,328
|
|
|
|
3,699
|
|
Total
|
|
$
|
18,646
|
|
|
$
|
24,273
|
|
Of the $18,646 of performing troubled debt restructurings at December
31, 2013, $11,062 was classified as special mention and $7,584 was classified as substandard. Of the $24,273 of performing troubled
debt restructurings at December 31, 2012, $12,416 was classified as special mention and $11,857 was classified as substandard.
Total non-accruing troubled debt restructurings as of December
31, 2013 and 2012, respectively, were as follows:
|
|
December 31,
2013
|
|
December 31,
2012
|
Residential real estate
|
|
$
|
330
|
|
|
$
|
1,885
|
|
Commercial real estate
|
|
|
3,307
|
|
|
|
166
|
|
Construction and land development
|
|
|
3,303
|
|
|
|
3,440
|
|
Commercial
|
|
|
536
|
|
|
|
185
|
|
Total
|
|
$
|
7,476
|
|
|
$
|
5,676
|
|
These loans had a specific reserve in the allowance for loan
losses at December 31, 2013 and 2012 of $608 and $66, respectively. There were three loans for $833 which were modified
within the year ended December 31, 2013 that defaulted within the year ending December 31, 2013. There were no loans modified
within the year ended December 31, 2012 which defaulted within the year ended December 31, 2012. Loans modified within the
twelve months ended December 31, 2011 and defaulted during that period are comprised of one residential real estate loan for
$1,752, two commercial real estate loans for $4,781, one commercial loan for $285 and one land development loan for $264.
During the year ended December 31, 2013, the Company lowered
the interest rate on $10,618 of loans prior to maturity which the Company did not consider to be troubled debt restructurings.
During the year ended December 31, 2012, we had approximately $11,800 in loans on which we lowered the interest rate prior to maturity
to competitively retain the loan. Due to the borrowers’ significant deposit balances and/or overall quality of the loans,
these loans were not included in troubled debt restructurings during the years ended December 31, 2013 and 2012, respectively.
In addition, each of these borrowers were not considered to be in financial distress and the modified terms matched current market
terms for borrowers with similar risk characteristics. The Company had no other loans where we extended the maturity or forgave
principal that were not already included in troubled debt restructurings or otherwise impaired.
The Company had no commitments to lend additional funds for
loans classified as troubled debt restructurings at December 31, 2013. The Company has allocated $1,243 and $2,096 of specific
reserves to customers whose loan terms have been modified in troubled debt restructurings as of December 31, 2013 and 2012, respectively.
Interest accrued and unpaid at the time a loan is
placed on non-accrual status is charged against interest income. During the years ended December 31, 2013, 2012 and 2011
interest income not recognized on non-accrual loans (but would have been recognized if these loans were current) was
approximately $970, $1,346, and $1,545, respectively.
1
st
UNITED BANCORP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollar amounts in thousands, except per share data)
NOTE 4 – LOANS (continued)
Credit Quality Indicators:
The Company categorizes loans into risk categories based on
relevant information about the ability of borrowers to service their debt such as: current financial information, historical payment
experience, credit documentation, public information, and current economic trends, among other factors. The Company analyzes loans
individually by classifying the loans as to credit risk. Loans classified as substandard or special mention are reviewed quarterly
by the Company for further deterioration or improvement to determine if appropriately classified and impairment. All other loans
greater than $1,000, commercial and personal lines of credit greater than $100, and unsecured loans greater than $100 are specifically
reviewed at least annually to determine the appropriate loan grading. In addition, during the renewal process of any loan, as well
if a loan becomes past due, the Company will evaluate the loan grade.
Loans excluded from the scope of the annual review process
above are generally classified as pass credits until: (a) they become past due; (b) management becomes aware of deterioration in
the credit worthiness of the borrower; or (c) the customer contacts the Company for a modification. In these circumstances, the
loan is specifically evaluated for potential classification as to special mention, substandard or doubtful. The Company uses the
following definitions for risk ratings:
Special Mention.
Loans classified as special
mention have a potential weakness that deserves management’s close attention. If left uncorrected, these potential weaknesses
may result in deterioration of the repayment prospects for the loan or of the institution’s credit position at some future
date.
Substandard.
Loans classified as substandard
are inadequately protected by the current net worth and payment capacity of the obligor or of the collateral pledged, if any. Loans
so classified have a well-defined weakness or weaknesses that jeopardize the liquidation of the debt. They are characterized by
the distinct possibility that the institution will sustain some loss if the deficiencies are not corrected.
Doubtful.
Loans classified as doubtful have
all the weaknesses inherent in those classified as substandard, with the added characteristic that the weaknesses make collection
or liquidation in full, on the basis of currently existing facts, conditions, and values, highly questionable and improbable.
1
st
UNITED BANCORP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollar amounts in thousands, except per share data)
NOTE 4 - LOANS (continued)
|
|
|
|
Loans Subject to Loss Share Agreements
|
|
Loans Not Subject to Loss Share Agreements
|
(Dollars in thousands)
|
|
Total
|
|
Pass
|
|
Special
Mention
|
|
Substandard
|
|
Pass
|
|
Special
Mention
|
|
Substandard
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2013
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Residential Real Estate:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
First mortgages
|
|
$
|
117,830
|
|
|
$
|
56,000
|
|
|
$
|
1,121
|
|
|
$
|
3,137
|
|
|
$
|
52,822
|
|
|
$
|
4,032
|
|
|
$
|
718
|
|
HELOCs and equity
|
|
|
61,014
|
|
|
|
7,712
|
|
|
|
31
|
|
|
|
258
|
|
|
|
46,437
|
|
|
|
629
|
|
|
|
5,947
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commercial:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Secured – non-real estate
|
|
|
145,298
|
|
|
|
17,555
|
|
|
|
319
|
|
|
|
39
|
|
|
|
123,168
|
|
|
|
1,733
|
|
|
|
2,484
|
|
Secured – real estate
|
|
|
57,052
|
|
|
|
9,168
|
|
|
|
—
|
|
|
|
416
|
|
|
|
45,955
|
|
|
|
800
|
|
|
|
713
|
|
Unsecured
|
|
|
7,914
|
|
|
|
76
|
|
|
|
—
|
|
|
|
—
|
|
|
|
7,311
|
|
|
|
114
|
|
|
|
413
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commercial Real Estate:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Owner occupied
|
|
|
209,467
|
|
|
|
26,129
|
|
|
|
7,638
|
|
|
|
722
|
|
|
|
167,238
|
|
|
|
315
|
|
|
|
7,425
|
|
Non-owner occupied
|
|
|
451,982
|
|
|
|
93,010
|
|
|
|
409
|
|
|
|
2,261
|
|
|
|
345,941
|
|
|
|
5,009
|
|
|
|
5,352
|
|
Multi-family
|
|
|
38,402
|
|
|
|
14,080
|
|
|
|
—
|
|
|
|
62
|
|
|
|
24,260
|
|
|
|
—
|
|
|
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Construction and Land Development:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Construction
|
|
|
7,366
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
7,366
|
|
|
|
—
|
|
|
|
—
|
|
Improved land
|
|
|
16,538
|
|
|
|
2,943
|
|
|
|
—
|
|
|
|
—
|
|
|
|
6,851
|
|
|
|
2,656
|
|
|
|
4,088
|
|
Unimproved land
|
|
|
11,382
|
|
|
|
3,527
|
|
|
|
—
|
|
|
|
35
|
|
|
|
7,820
|
|
|
|
—
|
|
|
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Consumer and other
|
|
|
9,735
|
|
|
|
2
|
|
|
|
—
|
|
|
|
—
|
|
|
|
9,135
|
|
|
|
480
|
|
|
|
118
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total December 31, 2013
|
|
$
|
1,133,980
|
|
|
$
|
230,202
|
|
|
$
|
9,518
|
|
|
$
|
6,930
|
|
|
$
|
844,304
|
|
|
$
|
15,768
|
|
|
$
|
27,258
|
|
1
st
UNITED BANCORP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollar amounts in thousands, except per share data)
NOTE 4 - LOANS (continued)
|
|
|
|
Loans Subject to Loss Share Agreements
|
|
Loans Not Subject to Loss Share Agreements
|
(Dollars in thousands)
|
|
Total
|
|
Pass
|
|
Special
Mention
|
|
Substandard
|
|
Pass
|
|
Special
Mention
|
|
Substandard
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2012
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Residential Real Estate:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
First mortgages
|
|
$
|
109,562
|
|
|
$
|
71,487
|
|
|
$
|
2,547
|
|
|
$
|
4,085
|
|
|
$
|
26,304
|
|
|
$
|
2,552
|
|
|
$
|
2,587
|
|
HELOCs and equity
|
|
|
56,355
|
|
|
|
8,728
|
|
|
|
31
|
|
|
|
103
|
|
|
|
39,180
|
|
|
|
5,375
|
|
|
|
2,938
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commercial:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Secured – non-real estate
|
|
|
127,514
|
|
|
|
19,801
|
|
|
|
405
|
|
|
|
115
|
|
|
|
99,537
|
|
|
|
4,346
|
|
|
|
3,310
|
|
Secured – real estate
|
|
|
43,613
|
|
|
|
12,199
|
|
|
|
—
|
|
|
|
425
|
|
|
|
28,227
|
|
|
|
2,030
|
|
|
|
732
|
|
Unsecured
|
|
|
8,371
|
|
|
|
80
|
|
|
|
—
|
|
|
|
—
|
|
|
|
7,724
|
|
|
|
140
|
|
|
|
427
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commercial Real Estate:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Owner occupied
|
|
|
187,007
|
|
|
|
37,696
|
|
|
|
7,943
|
|
|
|
2,820
|
|
|
|
123,106
|
|
|
|
6,285
|
|
|
|
9,157
|
|
Non-owner occupied
|
|
|
290,858
|
|
|
|
123,224
|
|
|
|
2,321
|
|
|
|
2,242
|
|
|
|
147,104
|
|
|
|
11,278
|
|
|
|
4,689
|
|
Multi-family
|
|
|
36,709
|
|
|
|
21,089
|
|
|
|
—
|
|
|
|
1,331
|
|
|
|
13,974
|
|
|
|
—
|
|
|
|
315
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Construction and Land Development:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Construction
|
|
|
3,481
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
3,481
|
|
|
|
—
|
|
|
|
—
|
|
Improved land
|
|
|
20,117
|
|
|
|
4,033
|
|
|
|
—
|
|
|
|
—
|
|
|
|
9,071
|
|
|
|
3,138
|
|
|
|
3,875
|
|
Unimproved land
|
|
|
18,291
|
|
|
|
3,888
|
|
|
|
—
|
|
|
|
505
|
|
|
|
11,392
|
|
|
|
—
|
|
|
|
2,506
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Consumer and other
|
|
|
11,290
|
|
|
|
11
|
|
|
|
—
|
|
|
|
—
|
|
|
|
10,552
|
|
|
|
584
|
|
|
|
143
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total December 31, 2012
|
|
$
|
913,168
|
|
|
$
|
302,236
|
|
|
$
|
13,247
|
|
|
$
|
11,626
|
|
|
$
|
519,652
|
|
|
$
|
35,728
|
|
|
$
|
30,679
|
|
NOTE 5 – OTHER REAL ESTATE OWNED
The following is a summary of other real estate owned as
of December 31, 2013 and 2012:
|
|
December 31,
2013
|
|
December 31,
2012
|
(Dollars in thousands)
|
|
Assets Not
Subject
to Loss Share
Agreements
|
|
Assets Subject to
Loss Share
Agreements
|
|
Total
|
|
Assets Not
Subject
to Loss Share
Agreements
|
|
Assets Subject
to Loss Share
Agreements
|
|
Total
|
Commercial real estate
|
|
$
|
5,761
|
|
|
$
|
8,979
|
|
|
$
|
14,740
|
|
|
$
|
5,708
|
|
|
$
|
10,372
|
|
|
$
|
16,080
|
|
Residential real estate
|
|
|
2,002
|
|
|
|
1,838
|
|
|
|
3,840
|
|
|
|
646
|
|
|
|
2,803
|
|
|
|
3,449
|
|
Total
|
|
$
|
7,763
|
|
|
$
|
10,817
|
|
|
$
|
18,580
|
|
|
$
|
6,354
|
|
|
$
|
13,175
|
|
|
$
|
19,529
|
|
At December 31, 2013, other real estate owned measured at
fair value less costs to sell, had a carrying amount of $18,580 net of the valuation allowance of $0. At December 31, 2012, other
real estate owned had a carrying amount of $19,529, net of the valuation of $0.
1
st
UNITED BANCORP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollar amounts in thousands, except per share data)
NOTE 6 - PREMISES AND EQUIPMENT
At December 31, 2013 and 2012, premises and equipment were
as follows:
|
|
2013
|
|
2012
|
|
|
|
|
|
|
|
|
|
Land
|
|
$
|
3,600
|
|
|
$
|
3,600
|
|
Buildings
|
|
|
7,798
|
|
|
|
7,798
|
|
Buildings and leasehold improvements
|
|
|
6,622
|
|
|
|
6,406
|
|
Furniture, fixtures and equipment
|
|
|
8,870
|
|
|
|
8,983
|
|
|
|
|
26,890
|
|
|
|
26,787
|
|
|
|
|
|
|
|
|
|
|
Less accumulated depreciation
|
|
|
9,946
|
|
|
|
9,007
|
|
|
|
|
|
|
|
|
|
|
Premises and equipment, net
|
|
$
|
16,944
|
|
|
$
|
17,780
|
|
Depreciation expense was $2,039, $1,914, and $1,614, for
the years ended 2013, 2012, and 2011, respectively.
The Company leases several of its office facilities under
operating leases. Rent expense was $3,364, $3,354, and $3,596 for the years ended 2013, 2012, and 2011, respectively.
Rent commitments under these non-cancelable operating leases
were as follows, before considering renewal options that generally are present.
2014
|
|
|
$
|
3,443
|
|
2015
|
|
|
|
3,131
|
|
2016
|
|
|
|
2,528
|
|
2017
|
|
|
|
1,944
|
|
2018
|
|
|
|
1,612
|
|
Thereafter
|
|
|
|
6,397
|
|
|
|
|
$
|
19,055
|
|
NOTE 7 – FDIC LOSS SHARE RECEIVABLE
The activity in the FDIC Loss Share Receivable which resulted
from the acquisition of financial institutions covered under loss sharing agreements with the FDIC is as follows:
|
|
2013
|
|
2012
|
|
|
|
|
|
|
|
|
|
Beginning of year
|
|
$
|
48,568
|
|
|
$
|
72,895
|
|
Cash received
|
|
|
(6,460
|
)
|
|
|
(11,559
|
)
|
Discount accretion
|
|
|
574
|
|
|
|
1,224
|
|
Reduction for changes in cash flow estimate
|
|
|
(15,824
|
)
|
|
|
(13,712
|
)
|
Other
|
|
|
2,473
|
|
|
|
(280
|
)
|
End of year
|
|
$
|
29,331
|
|
|
$
|
48,568
|
|
As of the years ended December 31, 2013 and 2012, the Company
has determined that the FDIC loss share receivable is collectible. The reduction for changes in cash flow estimates is primarily
due to resolutions of covered assets in excess of the amount expected, which includes sales, payoffs and transfers to (and sales
of) other real estate owned as well as a reduction due to changes in expected cash flows of the remaining covered assets.
Pursuant to each loss share agreement, the Bank calculates an estimated
amount due to the FDIC related to losses on acquired assets. An amount due is payable at the end of the year of each respective
loss share agreement and is generally based on actual losses incurred. At December 31, 2013 and 2012, the Company calculated $4,218
and $1,833 due to the FDIC pursuant to these contracts and recorded these amounts in other liabilities on the consolidated balance
sheets.
1
st
UNITED BANCORP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollar amounts in thousands, except per share data)
NOTE 8 - GOODWILL AND CORE DEPOSIT INTANGIBLE
Goodwill
: The change in the balance for goodwill during
the years ended December 31, 2013, 2012 and 2011 was as follows:
|
|
2013
|
|
2012
|
|
2011
|
Beginning of year
|
|
|
$
|
58,499
|
|
|
$
|
52,505
|
|
|
$
|
45,008
|
|
Effect of acquisitions
|
|
|
|
5,492
|
|
|
|
5,994
|
|
|
|
7,497
|
|
Impairment
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
End of year
|
|
|
$
|
63,991
|
|
|
$
|
58,499
|
|
|
$
|
52,505
|
|
Impairment exists when the carrying value of goodwill exceeds
its fair value, which is determined through a two-step impairment test. The first step includes the determination of the carrying
value of the Company’s single reporting unit, including the existing goodwill and intangible assets, and estimating the fair
value of the reporting unit. The Company performed a qualitative assessment to determine if it was more likely than not that the
fair value of the reporting unit exceeded its carrying value, including goodwill at December 31, 2013. Qualitative factors that
were considered included, but not limited to, business strategy, customer base, financial performance and market and regulatory
dynamics. The results of the qualitative assessment indicated that the fair value of the reporting unit exceeded its carrying amount.
Consequently, no additional impairment test was necessary.
The amount of goodwill remaining to be deducted for tax purposes
was $14,321 at December 31, 2013.
Core Deposit Intangible
: The gross carrying amount
and accumulated amortization for core deposit intangible was as follows as of December 31, 2013 and 2012:
|
|
2013
|
|
2012
|
|
|
Gross
Cost
|
|
Accumulated
Amortization
|
|
Gross
Cost
|
|
Accumulated
Amortization
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Core deposit intangible
|
|
$
|
7,217
|
|
|
$
|
3,410
|
|
|
$5,934
|
|
$
|
2,666
|
|
Amortization expense was $745, $684, and $514 for the years
ended December 31, 2013, 2012, and 2011, respectively.
Estimated amortization expense for each of the next five
years is as follows.
2014
|
|
|
$
|
745
|
|
2015
|
|
|
|
685
|
|
2016
|
|
|
|
624
|
|
2017
|
|
|
|
570
|
|
2018
|
|
|
|
409
|
|
Thereafter
|
|
|
|
774
|
|
|
|
|
$
|
3,807
|
|
NOTE 9 - DEPOSITS
Time deposits of $100 or more were $202,715 and $207,843
at December 31, 2013 and 2012, respectively.
Scheduled maturities of time deposits for the next five years
are as follows.
2014
|
|
|
$
|
202,530
|
|
2015
|
|
|
|
52,069
|
|
2016
|
|
|
|
26,131
|
|
2017
|
|
|
|
5,020
|
|
2018
|
|
|
|
1,918
|
|
|
|
|
$
|
287,668
|
|
1
st
UNITED BANCORP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollar amounts in thousands, except per share data)
NOTE 10 - FEDERAL HOME LOAN BANK ADVANCES
The Company has a credit line with the Federal Home Loan
Bank (“FHLB”). This credit line is collateralized by $164,066 of residential first mortgage and commercial real estate
loans under a blanket lien arrangement. At December 31, 2013, the Bank had borrowing capacity from the FHLB of $60,401 based on
eligible pledged collateral. At December 31, 2013, maturities and interest rates on FHLB advances were as follows:
Maturity
|
Amount
|
Interest Rate
|
February 2015
|
$10,000
|
0.54%
|
March 2015
|
$10,000
|
0.43%
|
July 2015
|
$10,000
|
0.62%
|
September 2015
|
$ 5,000
|
0.58%
|
There were no FHLB advances outstanding at December 31, 2012.
NOTE 11 – OTHER BORROWINGS
On July 7, 2008, 1
st
United entered into a Subordinated
Capital Note Purchase Agreement (“Note Purchase Agreement”) with a correspondent bank (“Lender”). Pursuant
to the Note Purchase Agreement, 1
st
United issued to Lender an unsecured Subordinated Capital Note (the “Debenture”)
in the principal amount of $5,000. The Debenture bore interest at a fixed rate of 5.69% until May 16, 2010, after which time the
fluctuating interest rate is equal to the three month British Bankers Association LIBOR Daily Floating Rate (“LIBOR”)
plus 245 basis points per annum. 1
st
United began repaying principal of $125 each quarter on September 15, 2010. In
November 2011, 1
st
United repaid the Debenture in full and in conjunction with this transaction received a two percent
discount. The Company recorded a gain on the extinguishment of the debt of $87, which was recorded as other income in the consolidated
statement of operations. 1
st
United paid $112 in interest during the year ended December 31, 2011.
The Company has a credit line with the Federal Reserve Bank
of Atlanta. The line is collateralized by $104,622 of commercial loans under a blanket lien arrangement as of December 31, 2013.
There were no amounts outstanding under this line at December 31, 2013 and 2012.
NOTE 12 - BENEFIT PLANS AND EMPLOYMENT AGREEMENTS
401(k) Plan
: A 401(k) benefit plan allows
employee contributions up to 15% of their compensation, which are matched equal to 33% of the first 6.0% of the compensation
contributed. The Company increased the amount matched to 50% of the first 6% of compensation contributed, effective January
2014. Employee benefit expense related to this plan was $233, $211, and $115 for the years ended December 31, 2013, 2012 and
2011, respectively.
Employment Agreements
: The Company has entered into
rolling three-year employment agreements with three of its executive officers. The agreements provide for a base salary, supplemental
retirement benefits and cash and equity bonuses, which are tied to certain growth and/or profitability targets. Expense under the
associated supplemental retirement plans is allocated over years of service and totaled $955, $961, and $301 for the years ended
December 31, 2013, 2012 and 2011, respectively.
1
st
UNITED BANCORP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollar amounts in thousands, except per share data)
NOTE 13 - INCOME TAXES
Income tax expense was as follows:
|
|
Years ended December 31,
|
|
|
2013
|
|
2012
|
|
2011
|
|
|
|
|
|
|
|
Current Provision
|
|
|
|
|
|
|
|
|
|
|
|
|
Federal
|
|
$
|
3,298
|
|
|
$
|
176
|
|
|
$
|
209
|
|
State
|
|
|
528
|
|
|
|
—
|
|
|
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
3,826
|
|
|
|
176
|
|
|
|
209
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Deferred Provision
|
|
|
|
|
|
|
|
|
|
|
|
|
Federal
|
|
|
227
|
|
|
|
2,247
|
|
|
|
1,740
|
|
State
|
|
|
39
|
|
|
|
385
|
|
|
|
333
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
266
|
|
|
|
2,632
|
|
|
|
2,073
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Provision
|
|
|
|
|
|
|
|
|
|
|
|
|
Federal
|
|
|
3,525
|
|
|
|
2,423
|
|
|
|
1,949
|
|
State
|
|
|
567
|
|
|
|
385
|
|
|
|
333
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income tax expense
|
|
$
|
4,092
|
|
|
$
|
2,808
|
|
|
$
|
2,282
|
|
The balance of deferred tax assets and liabilities at December
31, 2013 and 2012 follows:
|
|
2013
|
|
2012
|
|
|
|
|
|
|
|
|
|
Deferred tax assets:
|
|
|
|
|
|
|
|
|
Net operating loss and credit carryforward
|
|
$
|
3,872
|
|
|
$
|
4,943
|
|
Allowance for loan losses
|
|
|
3,747
|
|
|
|
3,800
|
|
Fair value adjustment of loans and other real estate owned
|
|
|
9,164
|
|
|
|
16,923
|
|
Accrued expenses
|
|
|
731
|
|
|
|
505
|
|
Deferred and stock compensation
|
|
|
2,832
|
|
|
|
2,131
|
|
Unrealized loss on securities available for sale
|
|
|
4,982
|
|
|
|
—
|
|
Other
|
|
|
132
|
|
|
|
357
|
|
|
|
|
25,460
|
|
|
|
28,659
|
|
Deferred tax liabilities:
|
|
|
|
|
|
|
|
|
Deferred gain
|
|
|
(1,184
|
)
|
|
|
(2,175
|
)
|
FDIC loss share receivable
|
|
|
(9,450
|
)
|
|
|
(17,586
|
)
|
Tax deductible goodwill and other intangibles
|
|
|
(1,724
|
)
|
|
|
(954
|
)
|
Depreciation
|
|
|
(192
|
)
|
|
|
(493
|
)
|
Prepaid expenses
|
|
|
(189
|
)
|
|
|
(169
|
)
|
Unrealized gain on securities available for sale
|
|
|
—
|
|
|
|
(1,362
|
)
|
|
|
|
(12,739
|
)
|
|
|
(22,739
|
)
|
|
|
|
|
|
|
|
|
|
Net deferred tax asset (liability)
|
|
$
|
12,721
|
|
|
$
|
5,920
|
|
1
st
UNITED BANCORP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollar amounts in thousands, except per share data)
NOTE 13 - INCOME TAXES (continued)
The deferred tax liability related to the gain on the Republic
and TBOM transactions will reverse ratably over six years. The remainder will be realized as the applicable assets are recovered,
sold or mature.
The Company continues to assess its earnings history, its
estimate of future earnings, the expected reversal of differences in book and taxable income, and the expiration dates of its net
operating loss carryforwards to determine that it was more likely than not that the deferred tax assets will be realized. The Company
has determined that the realization of the deferred tax assets continues to be more likely than not and no valuation allowance
was recorded for at December 31, 2013 and 2012.
Also, due to the issuance of additional stock in September
of 2009, the Company underwent a “change of ownership” as that term is defined in the Internal Revenue Code. This
change of ownership also resulted in a limitation of the amount of net operating losses that can be utilized by the Company, annually,
under Internal Revenue Code Section 382. As of December 31, 2013, the Company has utilized all of the federal net operating
loss and credit carryforwards which were subject to this limitation. However, $13,153 of the Company’s state net
operating loss carry forwards remain subject to this limitation.
As part of the merger with AFI, the Company acquired federal
and state net operating loss carryforwards of $10,928 which begin to expire starting in 2028. The use of these net operating loss
carryforwards are also subject to an annual limitation by Internal Revenue Code Section 382.
At December 31, 2013, the Company has State net operating
loss carryforwards of approximately $25,983, which begin to expire in 2028. Inclusive within these amounts is $8,747 of remaining
federal and state net operating loss carryforwards which were acquired as part of the merger with AFI. It is anticipated that these
carryforwards, both Federal and State, will be utilized prior to their expiration, and the limitations under Internal Revenue Code
Section 382 will not materially impact the Company.
Effective tax rates differ from federal statutory rate of
34% applied to income before income taxes due to the following:
|
|
2013
|
|
2012
|
|
2011
|
Federal statutory rate times financial statement income
|
|
$
|
3,728
|
|
|
$
|
2,562
|
|
|
$
|
2,024
|
|
Effect of:
|
|
|
|
|
|
|
|
|
|
|
|
|
State taxes
|
|
|
395
|
|
|
|
250
|
|
|
|
219
|
|
Earnings from company owned life insurance
|
|
|
(210
|
)
|
|
|
(169
|
)
|
|
|
(51
|
)
|
Incentive stock option expense
|
|
|
100
|
|
|
|
74
|
|
|
|
49
|
|
Other, net
|
|
|
79
|
|
|
|
91
|
|
|
|
41
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
4,092
|
|
|
$
|
2,808
|
|
|
$
|
2,282
|
|
The Company and its subsidiaries are subject to U.S. federal
income tax, as well as income tax within the State of Florida. The Company is no longer subject to examination by taxing authorities
for years before 2010. The Company is currently under examination by the Internal Revenue Service. The examination is currently
in the information gathering phase. While there is no assurance as to the results of the audit, the Company does not currently
anticipate any material adjustments in connection with this examination. The Company believes that it has properly reported its
taxable income and that any adjustments would not have a material impact on the financial results of the Company.
There were no significant unrecognized tax benefits at December
31, 2013, and the Company does not expect any significant increase in unrecognized tax benefits in the next twelve months.
1
st
UNITED BANCORP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollar amounts in thousands, except per share data)
NOTE 14 – RELATED-PARTY TRANSACTIONS
Loans to principal officers, directors, and their affiliates
for the years ended December 31, 2013 and 2012 were as follows
|
|
Year ended December 31,
|
|
|
2013
|
|
2012
|
Beginning balance
|
|
$
|
12,976
|
|
|
$
|
9,693
|
|
New loans and advances
|
|
|
2,507
|
|
|
|
4,549
|
|
Repayments
|
|
|
(2,779
|
)
|
|
|
(1,266
|
)
|
|
|
|
|
|
|
|
|
|
Ending balance
|
|
$
|
12,704
|
|
|
$
|
12,976
|
|
Deposits held within our banking subsidiary from principal
officers, directors, and their affiliates at December 31, 2013 and 2012 were $32,399 and $19,217, respectively.
Additionally, the Company paid $67, $456, and $892, for the
years ended December 31, 2013, 2012 and 2011, respectively, to various entities owned by directors of the Company or 1
st
United Bank for architectural design services and furniture related to its office facilities, insurance services and legal services.
The Company entered into a lease that commenced in 2006 and can be renewed every 5 years on a property owned by a director, for
which it has made lease payments of $136, $133, and $136 during the years ended December 31, 2013, 2012 and 2011, respectively.
NOTE 15 – STOCK-BASED COMPENSATION
The Company had a non-executive officer stock option plan
(the “2003 Plan”) whereby up to 5% of the outstanding shares of the Company’s common stock may be issued under
the plan. At December 31, 2013 and 2012, 62,712 shares had been issued and no options were available to be issued under the plan.
No additional shares can be issued under the 2003 Plan.
In May 2008, the Company’s shareholders approved a
new Stock Incentive Plan (the “2008 Incentive Plan”). The 2008 Incentive Plan allows for up to 5% of outstanding shares
to be issued to employees, executive officers or Directors in the form of stock options, restricted stock, Phantom Stock units,
stock appreciation rights or performance share units. At December 31, 2013, there were 1,556,358 awards issued and outstanding
under the 2008 Incentive Plan. No additional shares can be issued under the 2008 Plan.
In May 2013, the Company’s shareholders approved a
new Stock Incentive Plan (the “2013 Incentive Plan”). The 2013 Incentive Plan allows for up to 5% of outstanding common
shares, but no more than 1,703,513 to be issued to employees, executive officers or Directors in the form of stock options, restricted
stock, Phantom Stock units, stock appreciation rights or performance share units. At December 31, 2013, 25,000 awards were issued
and outstanding under the 2013 Incentive Plan. Up to an additional 1,678,513 awards may be issued under the 2013 Incentive Plan.
Additionally, 3,219,322 and 3,059,322 options to purchase
the Company’s common stock were outstanding at December 31, 2013 and December 31, 2012, respectively, to executive officers
under employment agreements.
Lastly, the Company has entered into separate agreements
with its non-executive directors and executive council members whereby these individuals have been granted options to purchase
the Company’s common stock. At December 31, 2013 and 2012, 170,900 options and 107,800 options, respectively, were outstanding
under these agreements.
Under each of the above plans and agreements, the exercise
price is the market price at date of grant. The maximum option term is ten years and the vesting period ranges from immediate vesting
to up to ten years. The Company issues new shares to satisfy share option exercises. Total compensation costs that have been charged
against income for these plans and agreements were $1,088, $964, and $816, respectively, for the years ended December 31, 2013,
2012 and 2011.
The fair value of each option award is estimated on the date
of grant using a closed form option valuation (Black-Scholes) model that uses the assumptions noted in the table below. Expected
volatilities are based on historical volatilities of an appropriate bank peer group. The Company uses historical data to estimate
option exercise and post-vesting termination behavior. The expected term of options granted represents the period of time that
options granted are expected to be
1
st
UNITED BANCORP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollar amounts in thousands, except per share data)
NOTE 15 – STOCK-BASED COMPENSATION (continued)
outstanding, which takes into account that the options are
not transferable. The risk-free interest rate for the expected term of the option is based on the U.S. Treasury yield curve in
effect at the time of the grant.
The fair value of options granted during 2013, 2012 and 2011
was determined using the following weighted-average assumptions as of grant date.
|
|
2013
|
|
2012
|
|
2011
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Risk-free interest rate
|
|
|
1.25
|
%
|
|
|
1.77
|
%
|
|
|
2.17
|
%
|
Expected term
|
|
|
7.0 years
|
|
|
|
8.5 years
|
|
|
|
5.5 years
|
|
Expected stock price volatility
|
|
|
40
|
%
|
|
|
40
|
%
|
|
|
30
|
%
|
Dividend yield
|
|
|
1.0
|
%
|
|
|
—
|
|
|
|
—
|
|
A summary of stock option activity for the year ended December
31, 2013 follows:
|
|
Shares
|
|
Weighted
Average
Exercise
Price
|
|
Weighted
Average
Remaining
Contractual
Term
|
|
Aggregate
Intrinsic
Value
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Outstanding at beginning of year
|
|
|
3,983,571
|
|
|
$
|
7.40
|
|
|
|
6.4 years
|
|
|
$
|
1,053,745
|
|
Granted
|
|
|
335,100
|
|
|
|
6.16
|
|
|
|
|
|
|
|
|
|
Exercised
|
|
|
(1,785
|
)
|
|
|
6.70
|
|
|
|
|
|
|
|
|
|
Forfeited, exchanged or expired
|
|
|
(63,299
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
Outstanding at end of year
|
|
|
4,253,587
|
|
|
|
7.30
|
|
|
|
5.71 years
|
|
|
|
5,813,650
|
|
Fully vested and expected to vest
|
|
|
4,250,183
|
|
|
|
7.30
|
|
|
|
5.71 years
|
|
|
|
5,811,120
|
|
Exercisable at end of year
|
|
|
1,943,251
|
|
|
|
8.53
|
|
|
|
4.41 years
|
|
|
|
2,021,591
|
|
Information related to stock options granted during each
year follows:
|
|
2013
|
|
2012
|
|
2011
|
Intrinsic value of options exercised
|
|
$
|
2
|
|
|
$
|
—
|
|
|
$
|
—
|
|
Cash received from option exercises
|
|
$
|
11
|
|
|
|
—
|
|
|
|
—
|
|
Tax benefit realized from option exercises
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
Weighted average fair value of options granted
|
|
$
|
1.98
|
|
|
$
|
2.86
|
|
|
|
2.12
|
|
As of December 31, 2013 and 2012, there were $4,781 and $5,038,
respectively, of total unrecognized compensation cost related to non-vested stock options granted under the Plan. The cost is expected
to be recognized over a weighted-average period of 5.35 years.
In 2009, the Company granted 84,000 shares of its common
stock to non-employee directors pursuant to the terms of the 2008 Incentive Plan. The grant price was $7.15 per share. Under the
terms of the agreement, the restricted shares will vest one-seventh immediately and one-seventh equally at the end of the next
six years, subject to accelerated vesting upon a change of control. The fair value of restricted stock award at the grant date
was $601, which one-seventh immediately vested with the remaining being amortized into expense over the six-year vesting period
on the straight-line method. Amortization expense was $86, $86 and $81 for the years ended December 31, 2013, 2012 and 2011. At
December 31, 2013, 60,000 shares had vested and 24,000 shares were non-vested.
In 2011, the Company granted 101,600 shares of its common
stock to non-employee directors of the Company and 1
st
United. The fair value of the stock award was $640, which vest
one-seventh at the date of grant and one-seventh each year thereafter over the following six years. The grant price at the date
of grant was $6.30. Amortization expense for the years ended
1
st
UNITED BANCORP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollar amounts in thousands, except per share data)
NOTE 15 – STOCK-BASED COMPENSATION (continued)
December 31, 2013, 2012 and 2011 was $91, $91 and $175. At
December 31, 2013, 43,542 shares had vested and 58,058 shares were non-vested.
In 2012, the Company granted 208,335 shares of its common
stock to non-employee directors and executive officers of the Company and 1
st
United. The fair value of the stock award
was $1,230, which vest one-tenth each year over a ten year period. The grant price at the date of grant was $5.90. Amortization
expense for the years ended December 31, 2013 and 2012 was $122 and $102. At December 31, 2013, 20,834 shares had vested and
187,501 shares were non-vested.
In 2012, the Company granted 15,750 shares of its common
stock to new directors of the Company and 1
st
United. The fair value of the stock award was $95, which vest one-tenth
each year over a ten year period. The grant price at the date of grant was $6.05. Amortization expense for the years ended December
31, 2013 and 2012 was $10 and $7. At December 31, 2013, 1,575 shares had vested and 14,175 shares were non-vested.
In 2013, the Company granted 216,786 shares of its common
stock to non-employee directors and executive officers of the Company and 1
st
United. The fair value of the
stock award was $1,318, which vest one-tenth each year over a ten year period. The grant price at the date of grant was $6.08.
Amortization expense for the years ended December 31, 2013 was $110. At December 31, 2013, none of the shares were vested.
NOTE 16 – COMMON STOCK OFFERING
In April 2012, the Company completed the acquisition of AFI
and issued 3,140,354 in common stock. See Note 2.
NOTE 17 – CAPITAL REQUIREMENTS AND RESTRICTIONS
ON RETAINED EARNINGS
Banks and bank holding companies are subject to regulatory
capital requirements administered by federal banking agencies. Capital adequacy guidelines and, additionally for banks, prompt
corrective action regulations, involve quantitative measures of assets, liabilities, and certain off-balance-sheet times calculated
under regulatory accounting practices. Capital amounts and classifications are also subject to qualitative judgments by regulators.
Failure to meet capital requirements can initiate regulatory action.
Management believes as of December 31, 2013, the Company
and 1
st
United meet all capital adequacy requirements to which they are subject.
Prompt corrective action regulations provide five classifications:
well capitalized, adequately capitalized, undercapitalized, significantly undercapitalized, and critically undercapitalized, although
these terms are not used to represent overall financial condition. If adequately capitalized, regulatory approval is required to
accept brokered deposits. If undercapitalized, capital distributions are limited, as is asset growth and expansion, and capital
restoration plans are required. At December 31, 2013 and 2012, the most recent regulatory notifications categorized 1
st
United as well capitalized under the regulatory notifications framework for prompt corrective action. There are no conditions or
events since that notification that management believes have changed the institution’s category.
1
st
UNITED BANCORP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollar amounts in thousands, except per share data)
NOTE 17 – CAPITAL REQUIREMENTS AND RESTRICTIONS
ON RETAINED EARNINGS (continued)
The Company’s and 1
st
United’s actual
and required capital amounts and ratios at year end are presented.
|
|
Actual
|
|
Minimum Capital
Adequacy
|
|
Minimum for
Well Capitalized
|
|
|
Amount
|
|
%
|
|
Amount
|
|
%
|
|
Amount
|
|
%
|
As of December 31, 2013
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Capital to risk-weighted assets
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Consolidated
|
|
$
|
172,709
|
|
|
|
15.47
|
%
|
|
$
|
89,287
|
|
|
|
8.00
|
%
|
|
$
|
111,608
|
|
|
10.00
|
%
|
1
st
United
|
|
|
158,884
|
|
|
|
14.27
|
%
|
|
|
89,084
|
|
|
|
8.00
|
%
|
|
|
111,355
|
|
|
10.00
|
%
|
Tier I capital to risk-weighted assets
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Consolidated
|
|
|
163,061
|
|
|
|
14.61
|
%
|
|
|
44,643
|
|
|
|
4.00
|
%
|
|
|
66,965
|
|
|
6.00
|
%
|
1
st
United
|
|
|
149,236
|
|
|
|
13.40
|
%
|
|
|
44,542
|
|
|
|
4.00
|
%
|
|
|
66,813
|
|
|
6.00
|
%
|
Tier I capital to total average assets
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Consolidated
|
|
|
163,061
|
|
|
|
9.66
|
%
|
|
|
67,489
|
|
|
|
4.00
|
%
|
|
|
84,361
|
|
|
5.00
|
%
|
1
st
United
|
|
|
149,236
|
|
|
|
8.86
|
%
|
|
|
67,388
|
|
|
|
4.00
|
%
|
|
|
84,235
|
|
|
5.00
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As of December 31, 2012
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Capital to risk-weighted assets
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Consolidated
|
|
$
|
180,143
|
|
|
|
22.43
|
%
|
|
$
|
64,241
|
|
|
|
8.00
|
%
|
|
$
|
80,301
|
|
|
10.00
|
%
|
1
st
United
|
|
|
162,884
|
|
|
|
20.27
|
%
|
|
|
63,883
|
|
|
|
8.00
|
%
|
|
|
79,854
|
|
|
10.00
|
%
|
Tier I capital to risk-weighted assets
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Consolidated
|
|
|
170,355
|
|
|
|
21.21
|
%
|
|
|
32,120
|
|
|
|
4.00
|
%
|
|
|
48,180
|
|
|
6.00
|
%
|
1
st
United
|
|
|
152,280
|
|
|
|
19.07
|
%
|
|
|
31,942
|
|
|
|
4.00
|
%
|
|
|
47,912
|
|
|
6.00
|
%
|
Tier I capital to total average assets
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Consolidated
|
|
|
170,355
|
|
|
|
11.44
|
%
|
|
|
59,586
|
|
|
|
4.00
|
%
|
|
|
74,483
|
|
|
5.00
|
%
|
1
st
United
|
|
|
152,280
|
|
|
|
10.25
|
%
|
|
|
59,402
|
|
|
|
4.00
|
%
|
|
|
74,252
|
|
|
5.00
|
%
|
Dividend Restrictions
—The Company’s principal
source of funds for dividend payments is dividends received from 1
st
United. Banking regulations limit the amount of
dividends that may be paid without prior approval of regulatory agencies. Under these regulations, the amount of dividends that
may be paid in any calendar year is limited to the current year’s net profits, combined with the retained net profits of
the preceding two years, subject to the capital requirements described above. During the year ended December 31, 2013, 1
st
United declared and paid dividends of $5,250 to the Company. At December 31, 2013, 1
st
United could have, without
prior approval, declared additional net dividends of $5,553.
The Company paid quarterly cash dividends of $0.01 per share
on May 8, 2013, August 15, 2013 and November 15, 2013. Additionally, the board of directors declared a $0.10 per share special
cash dividend on December 23, 2013 of $3,428 which was paid January 2014. During December 2012, the Company paid a $0.10 special
cash dividend of $3,407 to holders of common shares as of the record date.
NOTE 18 – LOAN COMMITMENTS AND OTHER RELATED ACTIVITIES
Some financial instruments, such as loan commitments, credit
lines, letters of credit, and overdraft protection, are issued to meet customer’s financing needs. These are agreements to
provide credit or to support the credit of others, as long as conditions established in the contract are met, and usually have
expiration dates. Commitments to make loans are generally made for periods of 60 days or less and may expire without being used.
Off-balance-sheet risk to credit loss exists up to the face amount of these instruments, although material losses are not anticipated.
The same credit policies are used to make such commitments as are used for loans, including obtaining collateral at exercise of
the commitment.
1
st
UNITED BANCORP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollar amounts in thousands, except per share data)
NOTE 18 – LOAN COMMITMENTS AND OTHER RELATED ACTIVITIES
(continued)
The contractual amount of financial instruments with off-balance-sheet
risk was as follows at year end.
|
|
2013
|
|
2012
|
|
|
Fixed
Rate
|
|
Variable
Rate
|
|
Fixed
Rate
|
|
Variable
Rate
|
|
|
|
|
|
|
|
|
|
Commitments to make loans
|
|
$
|
29,104
|
|
|
$
|
22,557
|
|
|
$
|
23,661
|
|
$
|
2,958
|
|
Unused lines of credit
|
|
|
9,283
|
|
|
|
98,035
|
|
|
|
664
|
|
|
72,103
|
|
Stand-by letters of credit
|
|
|
7,205
|
|
|
|
782
|
|
|
|
5,349
|
|
|
1,610
|
|
Commitments to make loans are generally made for periods
of 60 days or less. The fixed rate loan commitments have interest rates ranging from 3.0% to 6.0% and the underlying loans have
maturities ranging from four months to 30 years.
NOTE 19 – FAIR VALUES
Fair Value Measurements
Fair value is defined as the price that would be received
on the sale of an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement
date. The accounting guidance establishes a fair value hierarchy which requires an entity to maximize the use of observable inputs
and minimize the use of unobservable inputs when measuring fair value. The standard describes three levels of inputs that may be
used to measure fair value:
|
●
|
Level I: Quoted prices (unadjusted) for identical assets or liabilities in active markets that the entity has the ability to access as of the measurement date.
|
|
|
|
|
●
|
Level II: Significant other observable inputs other than Level I prices such as quoted prices for similar assets or liabilities; quoted prices in markets that are not active; or other inputs that are observable or can be corroborated by observable market data.
|
|
|
|
|
●
|
Level III: Significant unobservable inputs that reflect a reporting entity’s own assumptions about the assumptions that market participants would use in pricing an asset or liability.
|
The fair values of securities available for sale are determined
by obtaining quoted prices on nationally recognized securities exchanges (Level I inputs) or matrix pricing, which is a mathematical
technique widely used in the industry to value debt securities without relying exclusively on quoted prices for the specific securities
but rather by relying on the securities’ relationship to other benchmark quoted securities (Level II inputs).
Assets measured at fair value on a recurring basis at December
31, 2013 and 2012, are summarized below.
|
|
Fair value measurements at December, 2013 using
|
|
|
December 31, 2013
|
|
Quoted prices
in active markets
for identical
assets
(Level I)
|
|
Significant
other
observable
inputs
(Level II)
|
|
Significant
unobservable
inputs
(Level III)
|
Securities Available for Sale:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
U.S. Treasury
|
|
$
|
918
|
|
|
$
|
—
|
|
|
$
|
918
|
|
|
$
|
—
|
|
Municipal Securities
|
|
|
5,604
|
|
|
|
—
|
|
|
|
5,604
|
|
|
|
—
|
|
Residential collateralized mortgage
obligations
|
|
|
818
|
|
|
|
—
|
|
|
|
818
|
|
|
|
—
|
|
Commercial mortgage-backed
|
|
|
4,074
|
|
|
|
—
|
|
|
|
4,074
|
|
|
|
—
|
|
Residential mortgage-backed
|
|
|
316,547
|
|
|
|
—
|
|
|
|
316,547
|
|
|
|
—
|
|
|
|
$
|
327,961
|
|
|
$
|
—
|
|
|
$
|
327,961
|
|
|
$
|
—
|
|
1
st
UNITED BANCORP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollar amounts in thousands, except per share data)
NOTE 19 – FAIR VALUES (continued)
|
|
Fair value measurements at December 31, 2012 using
|
|
|
December 31,
2012
|
|
Quoted prices
in active markets
for identical
assets
(Level I)
|
|
Significant
other
observable
inputs
(Level II)
|
|
Significant
unobservable
inputs
(Level III)
|
Securities available for sale:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Municipal Securities
|
|
$
|
469
|
|
|
$
|
—
|
|
|
$
|
469
|
|
|
$
|
—
|
|
Residential collateralized mortgage
obligations
|
|
|
3,759
|
|
|
|
—
|
|
|
|
3,759
|
|
|
$
|
—
|
|
Residential mortgage-backed
|
|
|
255,894
|
|
|
|
—
|
|
|
|
255,894
|
|
|
|
—
|
|
|
|
$
|
260,122
|
|
|
$
|
—
|
|
|
$
|
260,122
|
|
|
$
|
—
|
|
There were no liabilities measured at fair value on a recurring
basis at December 31, 2013 and December 31, 2012.
The fair value of impaired loans with specific allocations
of the allowance for loan losses and other real estate owned is based on recent real estate appraisals less estimated costs of
sale. For residential real estate impaired loans and other real estate owned, appraised values are based on the comparative sales
approach. For commercial and commercial real estate impaired loans and other real estate owned, appraisers may use either a single
valuation approach or a combination of approaches such as comparative sales, cost or the income approach. A significant unobservable
input in the income approach is the estimated income capitalization rate for a given piece of collateral. Adjustments to appraisals
may be made by the appraiser to reflect local market conditions or other economic factors and may result in changes in the fair
value of a given assets over time. As such, the fair value of impaired loans and other real estate owned are considered a Level
III in the fair value hierarchy.
The Company recovers the carrying value of other real estate
owned through the sale of the property. The ability to affect future sales prices is subject to market conditions and factors beyond
our control and may impact the estimated fair value of a property.
Appraisals for impaired loans and other real estate owned
are performed by certified general appraisers whose qualifications and licenses have been reviewed and verified by the Company.
Once reviewed, a member of the appraisal department reviews the assumptions and approaches utilized in the appraisal as well as
the overall resulting fair value in comparisons to independent data sources such as recent market data or industry wide statistics.
On an annual basis, the Company compares the actual selling price of collateral that has been sold to the most recent appraised
value to determine what additional adjustments, if any, should be made to the appraisal value to arrive at fair value. Based on
our most recent analysis, no discounts to current appraisals have been warranted.
1
st
UNITED BANCORP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollar amounts in thousands, except per share data)
NOTE 19 – FAIR VALUES (continued)
The significant unobservable inputs used in the fair value
measurements for Level 3 assets measured at fair value on a nonrecurring basis as of December 31, 2013 and 2012 are as follows:
Impaired Loans
|
|
Valuation
Techniques
|
|
Range of Unobservable Inputs
|
|
|
|
|
|
Residential
|
|
Appraisals of collateral value
|
|
Adjustment for sales comparatives related to physical features including gross living area,
site size, location and condition, generally an decline of 10% to an increase of 25%
|
Commercial
|
|
Discounted cash flow model
|
|
Discount rate from 0% to 6%
|
Commercial Real Estate
|
|
Appraisals of collateral value
|
|
Market capitalization rates between 8% and 12%. Market rental rates for similar properties
|
Construction and land development
|
|
Appraisals of collateral value
|
|
Adjustment for age of comparable sales, generally a decline of 35% to no change
|
|
|
|
|
|
Other real estate
|
|
|
|
|
|
|
|
|
|
Residential
|
|
Appraisals of collateral value
|
|
Adjustment for sales comparatives related to physical features including gross living area, site size, location and condition, generally an decline of 10% to an increase of 25%
|
Commercial
|
|
Appraisals of collateral value
|
|
Adjustment for age and physical conditions of comparable sales, generally a decline of 20% to an increase of 30%
|
Assets measured at fair value on a non-recurring basis are
summarized below.
|
|
Fair value measurements at December 31, 2013 using
|
|
|
December 31,
2013
|
|
Quoted prices in
active markets
for identical assets
(Level I)
|
|
Significant
other
observable
Inputs
(Level II)
|
|
Significant
unobservable
inputs
(Level III)
|
Assets:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Impaired loans
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Residential
|
|
$
|
1,490
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
1,490
|
|
Commercial
|
|
|
1,111
|
|
|
|
—
|
|
|
|
—
|
|
|
|
1,111
|
|
Commercial real estate
|
|
|
5,522
|
|
|
|
—
|
|
|
|
—
|
|
|
|
5,522
|
|
Construction and land development
|
|
|
256
|
|
|
|
—
|
|
|
|
—
|
|
|
|
256
|
|
Consumer and other
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
$
|
8,379
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
8,379
|
|
Other real estate:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commercial
|
|
$
|
14,740
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
14,740
|
|
Residential
|
|
|
3,840
|
|
|
|
—
|
|
|
|
—
|
|
|
|
3,840
|
|
|
|
$
|
18,580
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
18,580
|
|
At December 31, 2013, impaired loans, which had a specific
allowance for loan losses allocated, had a carrying amount of $10,358, with a valuation allowance of $1,979 resulting in an additional
provision of loan losses of $2,466 during the year December 31, 2013.
Other real estate owned, which are measured for impairment
using the fair value of the collateral less estimated cost to sell, had a carrying amount of $18,580, and had no valuation allowance
at December 31, 2013. During the year ended December 31, 2013, the Company recorded write-downs to other real estate owned
of $1,143 due to reductions in the estimated fair value of properties.
1
st
UNITED BANCORP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollar amounts in thousands, except per share data)
NOTE 19 – FAIR VALUES (continued)
|
|
Fair value measurements at December 31, 2012 using
|
|
|
December 31, 2012
|
|
Quoted prices in
active markets
for identical assets
(Level I)
|
|
Significant
other
observable
inputs
(Level II)
|
|
Significant
unobservable
inputs
(Level III)
|
Assets:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Impaired loans
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Residential
|
|
$
|
1,529
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
1,529
|
|
Commercial
|
|
|
1,416
|
|
|
|
—
|
|
|
|
—
|
|
|
|
1,416
|
|
Commercial real estate
|
|
|
9,972
|
|
|
|
—
|
|
|
|
—
|
|
|
|
9,972
|
|
Construction and land development
|
|
|
1,652
|
|
|
|
—
|
|
|
|
—
|
|
|
|
1,652
|
|
Consumer and other
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
$
|
14,569
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
14,569
|
|
Other real estate owned:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commercial real estate
|
|
$
|
16,080
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
16,080
|
|
Residential real estate
|
|
|
3,449
|
|
|
|
—
|
|
|
|
—
|
|
|
|
3,449
|
|
|
|
$
|
19,529
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
19,529
|
|
Impaired loans, which are measured for impairment using the
fair value of the collateral for collateral dependent loans, had a carrying amount of $17,683, with a valuation allowance of $3,114
resulting in an additional provision for loan losses of $3,778 for the year ended December 31, 2012.
Other real estate owned, which are measured for impairment
using the fair value of the collateral less estimated cost to sell, had a carrying amount of $19,529, with no valuation allowance
for the year ended December 31, 2012. During the year ended December 31, 2012, the Company recorded write-downs to other real estate
owned of $340 due to reductions in the estimated fair value of properties.
Transfers of assets and liabilities between levels within
the fair value hierarchy are recognized when an event or change in circumstances occurs. There have been no transfers between fair
value levels for 2013 and 2012.
Carrying amount and estimated fair values of financial
instruments were as follows at December 31, 2013 and 2012,respectively.
|
|
2013
|
|
2012
|
|
|
Carrying
Amount
|
|
Fair
Value
|
|
Carrying
Amount
|
|
Fair
Value
|
Financial assets
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents
|
|
$
|
198,221
|
|
|
$
|
198,221
|
|
|
$
|
207,117
|
|
|
$
|
207,117
|
|
Securities available for sale
|
|
|
327,961
|
|
|
|
327,961
|
|
|
|
260,122
|
|
|
|
260,122
|
|
Loans, net, including loans held for sale
|
|
|
1,124,571
|
|
|
|
1,130,355
|
|
|
|
904,124
|
|
|
|
910,761
|
|
Nonmarketable equity securities
|
|
|
9,977
|
|
|
|
N/A
|
|
|
|
8,625
|
|
|
|
N/A
|
|
Company owned life insurance
|
|
|
24,710
|
|
|
|
24,710
|
|
|
|
21,092
|
|
|
|
21,092
|
|
FDIC loss share receivable
|
|
|
29,331
|
|
|
|
29,331
|
|
|
|
48,568
|
|
|
|
48,568
|
|
Accrued interest receivable
|
|
|
3,991
|
|
|
|
3,991
|
|
|
|
3,428
|
|
|
|
3,428
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Financial liabilities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Deposits
|
|
$
|
1,547,913
|
|
|
$
|
1,548,743
|
|
|
$
|
1,303,022
|
|
|
$
|
1,299,140
|
|
Federal funds purchased and repurchase agreements
|
|
|
14,363
|
|
|
|
14,364
|
|
|
|
19,855
|
|
|
|
19,855
|
|
Federal Home Loan Bank advances
|
|
|
35,018
|
|
|
|
35,167
|
|
|
|
—
|
|
|
|
—
|
|
Accrued interest payable
|
|
|
282
|
|
|
|
282
|
|
|
|
314
|
|
|
|
314
|
|
1
st
UNITED BANCORP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollar amounts in thousands, except per share data)
NOTE 19 – FAIR VALUES (continued)
Fair value methods and assumptions are periodically evaluated by
the Company. The methods and assumptions used to estimate fair value are described as follows:
Cash and cash equivalents
The carrying amounts of cash and cash equivalents approximate
the fair value and are classified as Level I in the fair value hierarchy.
Loans, net
The fair value of variable rate loans that re-price frequently
and with no significant change in credit risk is based on the carrying value and results in a classification of Level III within
the fair value hierarchy. Fair value for other loans are estimated using discounted cash flows analysis using interest rates currently
being offered for loans with similar terms to borrowers of similar credit quality resulting in a Level III classification in the
fair value hierarchy. The methods used to estimate the fair value of loans do not necessarily represent an exit price.
Nonmarketable equity securities
Nonmarketable equity securities include Federal Home Loan
Bank Stock and Federal Reserve Bank Stock. It is not practicable to determine the fair value of nonmarketable equity securities
due to restrictions placed on their transferability.
FDIC Loss Share Receivable
The fair value of the FDIC Loss Share Receivable represents
the discounted value of the FDIC’s reimbursed portion of estimated losses the Company expects to realize on loans and other
real estate owned covered under Loss Sharing Agreements. As a result, the fair value is considered a Level III classification in
the fair value hierarchy.
Deposits
The fair value of non-interest bearing demand deposits is
equal to the amount payable at the reporting date (i.e. carrying value) resulting in a Level 1 classification in the fair value
hierarchy. The fair value of interest bearing demand deposits (e.g. interest bearing, savings and certain types of money market
accounts) are, by definition, equal to the amount payable in demand at the reporting date (i.e. carrying value) resulting in a
Level II classification in the fair value hierarchy. The carrying amounts of variable rate, fixed-term money market accounts and
certificate of deposits approximates their fair value at the reporting date in a Level II classification in the fair value hierarchy.
Fair values for fixed rate certificates of deposit are estimated using a discounted cash flows calculation that applies interest
rates currently being offered on certificates to a schedule of aggregated expected monthly maturities on time deposits resulting
in a Level II classification.
Federal Funds purchased and repurchase agreements
The carrying amounts of federal funds and repurchase agreements
generally mature within ninety days and approximate their fair value resulting in a Level II classification in the fair value hierarchy.
Federal Home Loan Advances
The fair value of Federal Home Loan Bank Advances are estimated
using a discounted cash flow analysis based on the current borrowing rates for similar types of borrowings and are classified as
a Level II in the fair value hierarchy.
Accrued interest receivable/payable
The carrying amounts of accrued interest receivable approximate
fair value resulting in a Level III classification. The carrying amounts of accrued interest payable approximate fair value resulting
in a Level II classification.
1
st
UNITED BANCORP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollar amounts in thousands, except per share data)
NOTE 19 – FAIR VALUES (continued)
Off-balance sheet instruments
The fair value of off-balance-sheet instruments is based
on the current fees that would be charged to enter into or terminate such arrangements, taking into account the remaining terms
of the agreements and the counterparties’ credit standing. The fair value of commitments is not material.
NOTE 20 – EARNINGS PER SHARE
The factors used in the earnings per share computation follow:
|
|
2013
|
|
2012
|
|
2011
|
Basic
|
|
|
|
|
|
|
|
|
|
|
|
|
Net Income
|
|
$
|
6,871
|
|
|
$
|
4,728
|
|
|
$
|
3,672
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average common shares outstanding
|
|
|
33,777,792
|
|
|
|
32,947,752
|
|
|
|
29,240,932
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic earnings per common share
|
|
$
|
0.20
|
|
|
$
|
0.14
|
|
|
$
|
0.13
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted
|
|
|
|
|
|
|
|
|
|
|
|
|
Net Income
|
|
$
|
6,871
|
|
|
$
|
4,728
|
|
|
$
|
3,672
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average common shares outstanding for basic earnings per common share
|
|
|
33,777,792
|
|
|
|
32,947,752
|
|
|
|
29,240,932
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Add: Dilutive effects of assumed exercise of stock options and
vesting of restricted stock
|
|
|
351,293
|
|
|
|
5,311
|
|
|
|
14,990
|
|
Average shares and dilutive potential common shares
|
|
|
34,129,086
|
|
|
|
32,953,063
|
|
|
|
29,255,922
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted earnings per common share
|
|
$
|
0.20
|
|
|
$
|
0.14
|
|
|
$
|
0.13
|
|
Stock options for 1,986,488, 3,983,571, and 3,568,975 shares
of common stock were not considered in computing diluted earnings per share for 2013, 2012, and 2011, respectively, because they
were antidilutive.
NOTE 21 – PARENT COMPANY ONLY CONDENSED FINANCIAL
INFORMATION
Condensed financial information of Bancorp follows:
CONDENSED BALANCE SHEETS
December 31
|
|
2013
|
|
2012
|
ASSETS
|
|
|
|
|
|
|
|
|
Cash and cash equivalents
|
|
$
|
14,522
|
|
|
$
|
10,028
|
|
Investment in subsidiaries
|
|
|
216,466
|
|
|
|
223,378
|
|
Other assets
|
|
|
3,972
|
|
|
|
3,298
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
234,960
|
|
|
$
|
236,704
|
|
LIABILITIES AND EQUITY
|
|
|
|
|
|
|
|
|
Other liabilities
|
|
$
|
1,424
|
|
|
$
|
14
|
|
Dividends payable
|
|
|
3,428
|
|
|
|
—
|
|
Shareholders’ equity
|
|
|
230,108
|
|
|
|
236,690
|
|
|
|
$
|
234,960
|
|
|
$
|
236,704
|
|
1
st
UNITED BANCORP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollar amounts in thousands, except per share data)
NOTE 21 – PARENT COMPANY ONLY CONDENSED FINANCIAL
INFORMATION (continued)
CONDENSED STATEMENTS OF INCOME
Years ended December 31
|
|
2013
|
|
2012
|
|
2011
|
|
|
|
|
|
|
|
Interest income
|
|
$
|
14
|
|
|
$
|
30
|
|
|
$
|
210
|
|
Equity in subsidiary income
|
|
|
7,571
|
|
|
|
5,373
|
|
|
|
4,036
|
|
Other income
|
|
|
9
|
|
|
|
—
|
|
|
|
—
|
|
Professional fees
|
|
|
(228
|
)
|
|
|
(173
|
)
|
|
|
(206
|
)
|
Other non-interest expense
|
|
|
(917
|
)
|
|
|
(891
|
)
|
|
|
(588
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income before income taxes
|
|
|
6,449
|
|
|
|
4,339
|
|
|
|
3,452
|
|
Income tax benefit
|
|
|
(422
|
)
|
|
|
(389
|
)
|
|
|
(220
|
)
|
Net income
|
|
$
|
6,871
|
|
|
$
|
4,728
|
|
|
$
|
3,672
|
|
CONDENSED STATEMENTS OF CASH FLOWS
Years ended December 31,
|
|
2013
|
|
2012
|
|
2011
|
Cash flows from operating activities
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income
|
|
$
|
6,871
|
|
|
$
|
4,728
|
|
|
$
|
3,672
|
|
Adjustments:
|
|
|
|
|
|
|
|
|
|
|
|
|
Equity in undistributed subsidiary income
|
|
|
(7,571
|
)
|
|
|
(5,373
|
)
|
|
|
(4,036
|
)
|
Stock based compensation expense
|
|
|
1,508
|
|
|
|
1,258
|
|
|
|
1,072
|
|
Net change in other assets and liabilities
|
|
|
336
|
|
|
|
(783
|
)
|
|
|
(291
|
)
|
Net cash provided by (used in) operating activities
|
|
|
1,144
|
|
|
|
(170
|
)
|
|
|
417
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash flows from investing activities
|
|
|
|
|
|
|
|
|
|
|
|
|
Investment in subsidiaries
|
|
|
133
|
|
|
|
4,902
|
|
|
|
(20,815
|
)
|
Distributions from subsidiaries
|
|
|
8,950
|
|
|
|
—
|
|
|
|
—
|
|
Cash paid in connection with merger, net
|
|
|
(4,715
|
)
|
|
|
(19,125
|
)
|
|
|
—
|
|
Net cash provided by (used in) investing activities
|
|
|
4,368
|
|
|
|
(14,223
|
)
|
|
|
(20,815
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash flows from financing activities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Dividends paid
|
|
|
(1,029
|
)
|
|
|
(3,407
|
)
|
|
|
—
|
|
Exercise of stock options
|
|
|
11
|
|
|
|
—
|
|
|
|
—
|
|
Issuance of common stock
|
|
|
—
|
|
|
|
—
|
|
|
|
(35,090
|
)
|
Net cash provided by (used in) financing activities
|
|
|
(1,018
|
)
|
|
|
(3,407
|
)
|
|
|
(35,090
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net change in cash and cash equivalents
|
|
|
4,494
|
|
|
|
(17,800
|
)
|
|
|
14,692
|
|
Beginning cash and cash equivalents
|
|
|
10,028
|
|
|
|
27,828
|
|
|
|
13,136
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Ending cash and cash equivalents
|
|
$
|
14,522
|
|
|
$
|
10,028
|
|
|
$
|
27,828
|
|
1
st
UNITED BANCORP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollar amounts in thousands, except per share data)
NOTE 22 – QUARTERLY RESULTS OF OPERATIONS (UNAUDITED)
|
|
First
Quarter
|
|
Second
Quarter
|
|
Third
Quarter
(a)
|
|
Fourth
Quarter
(a)
|
Year ended December 31, 2013
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total interest income
|
|
$
|
17,720
|
|
|
$
|
20,546
|
|
|
$
|
19,520
|
|
|
$
|
21,964
|
|
Total interest expense
|
|
|
991
|
|
|
|
898
|
|
|
|
920
|
|
|
|
981
|
|
Net interest income
|
|
|
16,729
|
|
|
|
19,648
|
|
|
|
18,600
|
|
|
|
20,983
|
|
Provision for loan losses
|
|
|
650
|
|
|
|
1,300
|
|
|
|
745
|
|
|
|
780
|
|
Net interest income after provision for loan losses
|
|
|
16,079
|
|
|
|
18,348
|
|
|
|
17,855
|
|
|
|
20,203
|
|
Net gain on other real estate owned
|
|
|
441
|
|
|
|
393
|
|
|
|
179
|
|
|
|
120
|
|
Gain on sale of securities
|
|
|
122
|
|
|
|
609
|
|
|
|
93
|
|
|
|
—
|
|
Adjustment to FDIC loss share receivable
|
|
|
(2,820
|
)
|
|
|
(4,922
|
)
|
|
|
(2,835
|
)
|
|
|
(4,673
|
)
|
Other noninterest income
|
|
|
1,274
|
|
|
|
1,211
|
|
|
|
1,254
|
|
|
|
1,304
|
|
Merger reorganization expense
|
|
|
—
|
|
|
|
127
|
|
|
|
1,618
|
|
|
|
—
|
|
Disposal of banking centers and equipment
|
|
|
—
|
|
|
|
404
|
|
|
|
246
|
|
|
|
178
|
|
Noninterest expense (b)
|
|
|
12,481
|
|
|
|
12,307
|
|
|
|
13,315
|
|
|
|
12,596
|
|
Income before income taxes
|
|
|
2,615
|
|
|
|
2,801
|
|
|
|
1,367
|
|
|
|
4,180
|
|
Income tax expense
|
|
|
995
|
|
|
|
1,034
|
|
|
|
487
|
|
|
|
1,576
|
|
Net income
|
|
$
|
1,620
|
|
|
$
|
1,767
|
|
|
$
|
880
|
|
|
$
|
2,604
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Earnings per share – basic
|
|
$
|
0.05
|
|
|
$
|
0.05
|
|
|
$
|
0.03
|
|
|
$
|
0.08
|
|
Earnings per share – diluted
|
|
|
0.05
|
|
|
|
0.05
|
|
|
|
0.03
|
|
|
|
0.08
|
|
(a)
|
includes acquisition of EBI
|
(b)
|
Noninterest expense for the second and third quarters were impacted by additional expenses incurred as a result of EBI acquisition.
|
|
|
First
Quarter
(c)
|
|
Second
Quarter
(c)
|
|
Third
Quarter
|
|
Fourth
Quarter
|
Year ended December 31, 2012
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total interest income
|
|
$
|
15,888
|
|
|
$
|
19,166
|
|
|
$
|
19,183
|
|
|
$
|
18,612
|
|
Total interest expense
|
|
|
1,437
|
|
|
|
1,476
|
|
|
|
1,277
|
|
|
|
1,123
|
|
Net interest income
|
|
|
14,451
|
|
|
|
17,690
|
|
|
|
17,906
|
|
|
|
17,489
|
|
Provision for loan losses
|
|
|
1,300
|
|
|
|
3,100
|
|
|
|
1,050
|
|
|
|
900
|
|
Net interest income after provision for loan losses
|
|
|
13,151
|
|
|
|
14,590
|
|
|
|
16,856
|
|
|
|
16,589
|
|
Net gain on other real estate owned
|
|
|
735
|
|
|
|
1,218
|
|
|
|
1,020
|
|
|
|
305
|
|
Gain on sale of securities
|
|
|
498
|
|
|
|
1,175
|
|
|
|
—
|
|
|
|
—
|
|
Adjustment to FDIC loss share receivable
|
|
|
(2,075
|
)
|
|
|
(3,042
|
)
|
|
|
(4,150
|
)
|
|
|
(3,221
|
)
|
Other noninterest income
|
|
|
1,122
|
|
|
|
1,240
|
|
|
|
1,261
|
|
|
|
1,248
|
|
Merger reorganization expense
|
|
|
451
|
|
|
|
1,309
|
|
|
|
24
|
|
|
|
—
|
|
Noninterest expense (d)
|
|
|
11,725
|
|
|
|
12,853
|
|
|
|
12,429
|
|
|
|
12,193
|
|
Income before income taxes
|
|
|
1,255
|
|
|
|
1,019
|
|
|
|
2,534
|
|
|
|
2,728
|
|
Income tax expense
|
|
|
475
|
|
|
|
372
|
|
|
|
960
|
|
|
|
1,001
|
|
Net income
|
|
$
|
780
|
|
|
$
|
647
|
|
|
$
|
1,574
|
|
|
$
|
1,727
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Earnings per share – basic
|
|
$
|
0.03
|
|
|
$
|
0.02
|
|
|
$
|
0.05
|
|
|
$
|
0.05
|
|
Earnings per share – diluted
|
|
|
0.03
|
|
|
|
0.02
|
|
|
|
0.05
|
|
|
|
0.05
|
|
(c)
|
includes acquisition of AFI
|
(d)
|
Noninterest expense for the first and second quarters were impacted by additional expenses incurred as a result of the Old Harbor and AFI acquisitions.
|