LAPORTE BANCORP, INC.
CONSOLIDATED STATEMENTS OF INCOME
(Unaudited)
|
|
|
|
|
|
|
|
|
|
Three Months Ended March 31,
|
|
2016
|
|
2015
|
|
(Dollars in thousands,
except per share data)
|
Interest and dividend income:
|
|
|
|
Loans, including fees
|
$
|
4,124
|
|
|
$
|
3,601
|
|
Taxable securities
|
327
|
|
|
410
|
|
Tax exempt securities
|
368
|
|
|
408
|
|
Federal Home Loan Bank stock
|
43
|
|
|
43
|
|
Other interest income
|
73
|
|
|
19
|
|
Total interest and dividend income
|
4,935
|
|
|
4,481
|
|
Interest expense:
|
|
|
|
Deposits
|
340
|
|
|
294
|
|
Federal Home Loan Bank advances
|
309
|
|
|
268
|
|
Subordinated debentures
|
47
|
|
|
42
|
|
Short-term borrowings
|
—
|
|
|
1
|
|
Total interest expense
|
696
|
|
|
605
|
|
Net interest income
|
4,239
|
|
|
3,876
|
|
Provision for loan losses
|
—
|
|
|
105
|
|
Net interest income after provision for loan losses
|
4,239
|
|
|
3,771
|
|
Noninterest income:
|
|
|
|
Service charges on deposit accounts
|
75
|
|
|
76
|
|
ATM and debit card fees
|
105
|
|
|
103
|
|
Wire transfer fees
|
118
|
|
|
78
|
|
Earnings on bank owned life insurance, net
|
106
|
|
|
105
|
|
Net gains on mortgage banking activities
|
156
|
|
|
130
|
|
Loan servicing fees, net
|
98
|
|
|
13
|
|
Net gains on sales of securities available-for-sale
|
—
|
|
|
50
|
|
Gains (losses) on other assets
|
(30
|
)
|
|
10
|
|
Other income
|
38
|
|
|
37
|
|
Total noninterest income
|
666
|
|
|
602
|
|
Noninterest expense:
|
|
|
|
Salaries and employee benefits
|
2,150
|
|
|
1,934
|
|
Legal and other consulting fees
|
659
|
|
|
21
|
|
Occupancy and equipment
|
429
|
|
|
468
|
|
Data processing
|
178
|
|
|
153
|
|
Bank examination fees
|
114
|
|
|
112
|
|
Collection and other real estate owned
|
98
|
|
|
31
|
|
FDIC insurance
|
69
|
|
|
70
|
|
Advertising
|
42
|
|
|
82
|
|
Amortization of intangible assets
|
11
|
|
|
14
|
|
Other expenses
|
409
|
|
|
380
|
|
Total noninterest expense
|
4,159
|
|
|
3,265
|
|
Income before income taxes
|
746
|
|
|
1,108
|
|
Income tax expense
|
151
|
|
|
156
|
|
Net income
|
$
|
595
|
|
|
$
|
952
|
|
|
|
|
|
Earnings per share (Note 3):
|
|
|
|
Basic
|
$
|
0.11
|
|
|
$
|
0.18
|
|
Diluted
|
0.11
|
|
|
0.18
|
|
See accompanying condensed notes to consolidated financial statements (unaudited).
LAPORTE BANCORP, INC.
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(Unaudited)
|
|
|
|
|
|
|
|
|
|
Three Months Ended March 31,
|
|
2016
|
|
2015
|
|
(Dollars in thousands)
|
Net income
|
$
|
595
|
|
|
$
|
952
|
|
Other comprehensive income:
|
|
|
|
Unrealized gains on securities:
|
|
|
|
Unrealized holding gains arising during the period
|
1,299
|
|
|
1,012
|
|
Reclassification adjustment for net gains included in net income
|
—
|
|
|
(50
|
)
|
Gross unrealized gains
|
1,299
|
|
|
962
|
|
Related income tax expense
|
(442
|
)
|
|
(327
|
)
|
Net unrealized gains
|
857
|
|
|
635
|
|
Unrealized losses on cash flow hedges:
|
|
|
|
Gross unrealized losses
|
(607
|
)
|
|
(449
|
)
|
Related income tax benefit
|
207
|
|
|
153
|
|
Net unrealized losses
|
(400
|
)
|
|
(296
|
)
|
Total other comprehensive income
|
457
|
|
|
339
|
|
Comprehensive income
|
$
|
1,052
|
|
|
$
|
1,291
|
|
See accompanying condensed notes to consolidated financial statements (unaudited).
LAPORTE BANCORP, INC.
CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS’ EQUITY
(Unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Common
Stock
|
|
Additional
Paid-In
Capital
|
|
Retained
Earnings
|
|
Accumulated
Other
Comprehensive
Income,
Net of Tax
|
|
Unearned
ESOP
Shares
|
|
Total
|
|
(Dollars in thousands, except per share data)
|
Balance at January 1, 2015
|
$
|
57
|
|
|
$
|
40,609
|
|
|
$
|
44,258
|
|
|
$
|
522
|
|
|
$
|
(3,058
|
)
|
|
$
|
82,388
|
|
Net income
|
—
|
|
|
—
|
|
|
952
|
|
|
—
|
|
|
—
|
|
|
952
|
|
Other comprehensive income
|
—
|
|
|
—
|
|
|
—
|
|
|
339
|
|
|
—
|
|
|
339
|
|
Cash dividends on common stock,
$0.04 per share
|
—
|
|
|
—
|
|
|
(225
|
)
|
|
—
|
|
|
—
|
|
|
(225
|
)
|
Repurchase of common stock, 53,874 shares
|
(1
|
)
|
|
(675
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(676
|
)
|
ESOP shares earned, 5,621 shares
|
—
|
|
|
28
|
|
|
—
|
|
|
—
|
|
|
45
|
|
|
73
|
|
Exercise of stock options, 4,472 shares
|
—
|
|
|
29
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
29
|
|
Stock based compensation expense
|
—
|
|
|
173
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
173
|
|
Balance at March 31, 2015
|
$
|
56
|
|
|
$
|
40,164
|
|
|
$
|
44,985
|
|
|
$
|
861
|
|
|
$
|
(3,013
|
)
|
|
$
|
83,053
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at January 1, 2016
|
$
|
56
|
|
|
$
|
40,120
|
|
|
$
|
47,940
|
|
|
$
|
310
|
|
|
$
|
(2,878
|
)
|
|
$
|
85,548
|
|
Net income
|
—
|
|
|
—
|
|
|
595
|
|
|
—
|
|
|
—
|
|
|
595
|
|
Other comprehensive income
|
—
|
|
|
—
|
|
|
—
|
|
|
457
|
|
|
—
|
|
|
457
|
|
Cash dividends on common stock,
$0.04 per share
|
—
|
|
|
—
|
|
|
(223
|
)
|
|
—
|
|
|
—
|
|
|
(223
|
)
|
ESOP shares earned, 5,621 shares
|
—
|
|
|
39
|
|
|
—
|
|
|
—
|
|
|
45
|
|
|
84
|
|
Exercise of stock options, 1,892 shares
|
—
|
|
|
16
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
16
|
|
Stock based compensation expense
|
—
|
|
|
170
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
170
|
|
Tax benefit related to stock based compensation
|
—
|
|
|
76
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
76
|
|
Balance at March 31, 2016
|
$
|
56
|
|
|
$
|
40,421
|
|
|
$
|
48,312
|
|
|
$
|
767
|
|
|
$
|
(2,833
|
)
|
|
$
|
86,723
|
|
See accompanying condensed notes to consolidated financial statements (unaudited).
LAPORTE BANCORP, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
|
|
|
|
|
|
|
|
|
|
Three Months Ended March 31,
|
|
2016
|
|
2015
|
|
(Dollars in thousands)
|
Cash flows from operating activities:
|
|
|
|
Net income
|
$
|
595
|
|
|
$
|
952
|
|
Adjustments to reconcile net income to net cash from operating activities:
|
|
|
|
Depreciation
|
142
|
|
|
140
|
|
Provision for loan losses
|
—
|
|
|
105
|
|
Net gains on securities available-for-sale
|
—
|
|
|
(50
|
)
|
Net amortization on securities available-for-sale
|
120
|
|
|
192
|
|
Net gains on sales of loans
|
(146
|
)
|
|
(124
|
)
|
Originations of loans held for sale
|
(4,166
|
)
|
|
(3,354
|
)
|
Proceeds from sales of loans held for sale
|
7,207
|
|
|
3,729
|
|
Recognition of mortgage servicing rights
|
(10
|
)
|
|
(6
|
)
|
Amortization of mortgage servicing rights
|
15
|
|
|
13
|
|
Net change in mortgage servicing rights valuation allowance
|
8
|
|
|
14
|
|
Net (gains) losses on sales of other real estate owned
|
—
|
|
|
(10
|
)
|
Write down of other real estate owned and assets held for sale
|
47
|
|
|
—
|
|
Earnings on bank owned life insurance, net
|
(106
|
)
|
|
(105
|
)
|
Amortization of intangible assets
|
11
|
|
|
14
|
|
ESOP compensation expense
|
84
|
|
|
73
|
|
Stock based compensation expense
|
170
|
|
|
173
|
|
Change in assets and liabilities:
|
|
|
|
Accrued interest receivable and other assets
|
773
|
|
|
192
|
|
Accrued interest payable and other liabilities
|
(378
|
)
|
|
(58
|
)
|
Net cash provided by operating activities
|
4,366
|
|
|
1,890
|
|
Cash flows from investing activities:
|
|
|
|
Net change in interest-earning time deposits at other financial institutions
|
(933
|
)
|
|
980
|
|
Proceeds from sales of securities available-for-sale
|
—
|
|
|
10,262
|
|
Proceeds from maturities, calls, and principal repayments of securities available-for-sale
|
2,781
|
|
|
5,181
|
|
Purchases of securities available-for-sale
|
(1,600
|
)
|
|
—
|
|
Net change in loans
|
4,101
|
|
|
(22,346
|
)
|
Proceeds from sales of other real estate owned
|
—
|
|
|
35
|
|
Premises and equipment expenditures, net
|
(11
|
)
|
|
(124
|
)
|
Net cash provided by (utilized for) investing activities
|
4,338
|
|
|
(6,012
|
)
|
Cash flows from financing activities:
|
|
|
|
Net change in deposits
|
(29,803
|
)
|
|
11,936
|
|
Repayment of FHLB long-term advances
|
—
|
|
|
(5,000
|
)
|
Net change in FHLB short-term advances
|
14,132
|
|
|
81
|
|
Net change in short-term borrowings
|
—
|
|
|
500
|
|
Stock options exercised
|
16
|
|
|
29
|
|
Tax benefit related to stock-based compensation
|
76
|
|
|
—
|
|
Dividends paid on common stock
|
(223
|
)
|
|
(225
|
)
|
Repurchase of common stock
|
—
|
|
|
(676
|
)
|
Net cash (utilized for) provided by financing activities
|
(15,802
|
)
|
|
6,645
|
|
Net (decrease) increase in cash and cash equivalents
|
(7,098
|
)
|
|
2,523
|
|
Cash and cash equivalents at beginning of period
|
18,459
|
|
|
8,698
|
|
Cash and cash equivalents at end of period
|
$
|
11,361
|
|
|
$
|
11,221
|
|
(continued)
LAPORTE BANCORP, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS (continued)
(Unaudited)
|
|
|
|
|
|
|
|
|
|
Three Months Ended March 31,
|
|
2016
|
|
2015
|
|
(Dollars in thousands)
|
Supplemental cash flow information:
|
|
|
|
Cash paid during the period for:
|
|
|
|
Interest
|
$
|
689
|
|
|
$
|
607
|
|
Income taxes
|
53
|
|
|
—
|
|
Supplemental noncash disclosures:
|
|
|
|
Transfers from loans receivable to other real estate owned
|
$
|
—
|
|
|
$
|
127
|
|
See accompanying condensed notes to consolidated financial statements (unaudited).
LAPORTE BANCORP, INC.
CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
NOTE 1 – BASIS OF PRESENTATION AND CONSOLIDATION
The unaudited consolidated financial statements include the accounts of LaPorte Bancorp, Inc., a Maryland corporation (the “Bancorp”), its wholly owned subsidiaries, LSB Risk Management, Inc., The LaPorte Savings Bank (the “Bank”), the Bank’s wholly-owned subsidiary, LSB Investments, Inc. (“LSB Inc.”), and LSB Inc.’s wholly-owned subsidiary, LSB Real Estate, Inc. (“LSB REIT”), together referred to as the “Company.” The Bancorp was formed in June 2012. LSB Risk Management, LLC was formed on December 27, 2013 as a captive insurance company and is incorporated in Nevada. LSB Inc. was formed on October 1, 2011 to manage a portion of the Bank’s investment portfolio and is incorporated in Nevada. LSB REIT, a real estate investment trust, was formed on January 1, 2013 to invest in assets secured by residential or commercial real estate properties originated by the Bank and is incorporated in Maryland. Intercompany transactions and balances are eliminated in consolidation.
The unaudited consolidated financial statements have been prepared by management in accordance with U.S. generally accepted accounting principles for interim financial statements and Article 8 of Regulation S-X of the Securities and Exchange Commission (“SEC”). In the opinion of management, the unaudited consolidated financial statements contain all material adjustments (consisting of normal recurring accruals) and disclosures which are necessary to make the financial statements not misleading and for a fair presentation of the financial position and results of operations for the interim periods presented herein.
Certain information and footnote disclosures normally included in consolidated financial statements prepared in accordance with United States generally accepted accounting principles have been condensed or omitted pursuant to the rules and regulations of the SEC. Accordingly, the interim consolidated financial statements included herein should be read in conjunction with the audited consolidated financial statements included in the Annual Report on Form 10-K of the Company for the fiscal year ended
December 31, 2015
. The results for the
three
month periods ended
March 31, 2016
may not indicate the results to be expected for any other interim period or for the full year ending
December 31, 2016
.
Reclassifications
: Some items in the prior year financial statements were reclassified to conform to the current presentation.
NOTE 2 – RECENT ACCOUNTING PRONOUNCEMENTS
In May 2014, the FASB issued ASU No. 2014-09
“Revenue from Contracts with Customers (Topic 606).”
This ASU clarifies that an entity should recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods and services. This ASU is effective for annual reporting periods beginning after December 15, 2016, including interim periods within that reporting period. The amendments can be applied retrospectively to each prior reporting period or retrospectively with the cumulative effect of initially applying this Update recognized at the date of initial application. The Company is still evaluating the impact relating to adopting this standard.
In June 2014, the FASB issued ASU No. 2014-12
“Compensation - Stock Compensation (Topic 718) - Accounting for Share Based Payments When the Terms of an Award Provide That a Performance Target Could Be Achieved after the Requisite Service Period.”
This ASU requires that a performance target that affects vesting and that could be achieved after the requisite service period be treated as a performance condition. ASU 2014-12 became effective for interim and annual periods beginning after December 15, 2015 and did not have a significant impact on the Company’s financial condition or results of operations.
In April 2015, the FASB issued ASU No. 2015-05
“Intangibles - Goodwill and Other - Internal Use Software (Subtopic 350-40) - Customer’s Accounting for Fees Paid in a Cloud Computing Arrangement.”
This ASU provides guidance to customers about whether a cloud computing arrangement includes a software license. If a cloud computing arrangement includes a software license, the customer should account for the software license element of the arrangement consistent with the acquisition of other software licenses. If a cloud computing arrangement does not include a software license, the customer should account for the arrangement as a service contract. The new guidance does not change the accounting for a customer’s accounting for service contracts. ASU 2015-05 became effective for interim and annual periods beginning after December 15, 2015 and did not have a significant impact on the Company’s financial condition or results of operations.
LAPORTE BANCORP, INC.
CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
In January 2016, the FASB issued ASU No. 2016-01
“Financial Instruments - Overall (Subtopic 825-10) - Recognition and Measurement of Financial Assets and Financial Liabilities.”
This ASU is intended to improve the recognition and measurement of financial instruments by requiring equity investments to be measured at fair value with changes in fair value recognized in net income; requiring public business entities to use the exit price notion when measuring the fair value of financial instruments for disclosure purposes; requiring separate presentation of financial assets and financial liabilities by measurement category and form of financial asset on the balance sheet or the accompanying notes to the financial statements; eliminating the requirement for public business entities to disclose the method(s) and significant assumptions used to estimate the fair value that is required to be disclosed for financial instruments measured and amortized at cost on the balance sheet; and requiring a reporting organization to present separately in other comprehensive income the portion of the total change in the fair value of a liability resulting from a change in the instrument-specific credit risk when the organization has elected to measure the liability at fair value in accordance with the fair value option for financial instruments. ASU 2016-01 is effective for interim and annual reporting periods beginning after December 15, 2017. The amendments should be applied through a cumulative-effect adjustment to the balance sheet as of the beginning of the fiscal year of adoption. The amendments related to equity securities without readily determinable fair values (including disclosure requirements) should be applied prospectively to equity investments that exist as of the date of adoption. The Company will be evaluating the impact of adopting this ASU.
In February 2016, the FASB issued ASU No. 2016-02
“Leases (Topic 842).”
This ASU requires lessees and lessors to classify leases as either capital leases or operating leases. The ASU also requires lessees to recognized assets and liabilities for all leases with the exception of short term leases. There are new disclosure requirements for these leases which will provide users of financial statements with information to understand the amount, timing and uncertainty of cash flows arising from leases. ASU 2016-02 will become effective for fiscal years beginning after December 31, 2018, including interim periods within those fiscal years. Early adoption is permitted. The Company will be evaluating the impact of adopting this ASU.
In March 2016, the FASB issued ASU No. 2016-05
“Derivatives and Hedging (Topic 815).”
This ASU applies to all reporting entities for which there is a change in the counterparty to a derivative instrument that has been designated as a hedging instrument under Topic 815. The ASU clarifies that a change in the counterparty to a derivative instrument that has been designated as the hedging instrument under Topic 815 does not, in and of itself, require dedesignation of that hedging relationship provided that all other hedge accounting criteria as identified in Topic 815 continue to be met. ASU 2016-05 will become effective for fiscal years beginning after December 15, 2016, including interim periods within those fiscal years. Early adoption is permitted. The Company will be evaluating the impact of adopting this ASU.
In March 2016, the FASB issued ASU No. 2016-09
“Compensation - Stock Compensation (Topic 718) - Improvements to Employee Share-Based Payment Accounting.”
This ASU requires all income tax effects of awards to be recognized in teh income statement when the awards vest or are settled. It also allows an employer to repurchase more of an employee’s shares than it can today for tax withholding purposes without triggering liability accounting and to make a policy election for forfeitures as they occur. ASU 2016-09 is effective for fiscal years beginning after December 15, 2016, including interim periods within those fiscal years. Early adoption is permitted. The Company will be evaluating the impact of adopting this ASU.
NOTE 3 – EARNINGS PER SHARE
Basic earnings per common share is determined by dividing net earnings available to common shareholders by the weighted average number of common shares outstanding for the period. Employee Stock Ownership Plan (“ESOP”) shares are considered outstanding for this calculation unless unearned. Diluted earnings per common share is determined by dividing net earnings available to common shareholders by the weighted average number of common shares outstanding for the period, adjusted for the dilutive effect of common share equivalents.
LAPORTE BANCORP, INC.
CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
The factors used in the earnings per common share computation follow:
|
|
|
|
|
|
|
|
|
|
Three Months Ended March 31,
|
|
2016
|
|
2015
|
|
(Dollars in thousands, except per share data)
|
Basic:
|
|
|
|
Net income
|
$
|
595
|
|
|
$
|
952
|
|
|
|
|
|
Weighted average common shares outstanding
|
5,579,678
|
|
|
5,627,687
|
|
Less: Average unallocated ESOP shares
|
(356,965
|
)
|
|
(379,449
|
)
|
Average shares
|
5,222,713
|
|
|
5,248,238
|
|
|
|
|
|
Basic earnings per common share
|
$
|
0.11
|
|
|
$
|
0.18
|
|
|
|
|
|
Diluted:
|
|
|
|
Net income
|
$
|
595
|
|
|
$
|
952
|
|
|
|
|
|
Weighted average common shares outstanding for basic earnings per common share
|
5,222,713
|
|
|
5,248,238
|
|
Add: Dilutive effects of assumed exercises of stock options
|
162,603
|
|
|
109,750
|
|
Average shares and dilutive potential common shares
|
5,385,316
|
|
|
5,357,988
|
|
|
|
|
|
Diluted earnings per common share
|
$
|
0.11
|
|
|
$
|
0.18
|
|
NOTE 4 – SECURITIES AVAILABLE-FOR-SALE
The amortized cost and fair value of available-for-sale securities and the related gross unrealized gains and losses recognized in accumulated other comprehensive income (loss) were as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
March 31, 2016
|
|
Amortized
Cost
|
|
Gross Unrealized
Gains
|
|
Gross Unrealized
Losses
|
|
Fair Value
|
|
(Dollars in thousands)
|
U.S. federal agency obligations
|
$
|
11,052
|
|
|
$
|
70
|
|
|
$
|
(1
|
)
|
|
$
|
11,121
|
|
State and municipal
|
49,976
|
|
|
2,621
|
|
|
—
|
|
|
52,597
|
|
Mortgage-backed securities – residential
|
16,585
|
|
|
263
|
|
|
(9
|
)
|
|
16,839
|
|
Government agency sponsored collateralized
mortgage obligations
|
40,595
|
|
|
352
|
|
|
(211
|
)
|
|
40,736
|
|
Corporate debt securities
|
1,000
|
|
|
—
|
|
|
(52
|
)
|
|
948
|
|
Total
|
$
|
119,208
|
|
|
$
|
3,306
|
|
|
$
|
(273
|
)
|
|
$
|
122,241
|
|
LAPORTE BANCORP, INC.
CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2015
|
|
Amortized
Cost
|
|
Gross Unrealized
Gains
|
|
Gross Unrealized
Losses
|
|
Fair Value
|
|
(Dollars in thousands)
|
U.S. federal agency obligations
|
$
|
9,442
|
|
|
$
|
1
|
|
|
$
|
(71
|
)
|
|
$
|
9,372
|
|
State and municipal
|
50,020
|
|
|
2,397
|
|
|
(17
|
)
|
|
52,400
|
|
Mortgage-backed securities – residential
|
17,671
|
|
|
98
|
|
|
(73
|
)
|
|
17,696
|
|
Government agency sponsored collateralized
mortgage obligations
|
42,376
|
|
|
139
|
|
|
(679
|
)
|
|
41,836
|
|
Corporate debt securities
|
1,000
|
|
|
—
|
|
|
(61
|
)
|
|
939
|
|
Total
|
$
|
120,509
|
|
|
$
|
2,635
|
|
|
$
|
(901
|
)
|
|
$
|
122,243
|
|
At
March 31, 2016
and
December 31, 2015
, all of our mortgage-backed securities were issued by U.S. government-sponsored enterprises and all of our collateralized mortgage obligations were issued by either U.S. government-sponsored enterprises or the U.S. Small Business Administration.
Securities with unrealized losses at
March 31, 2016
and
December 31, 2015
, aggregated by investment category and length of time that individual securities have been in a continuous unrealized loss position, were as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
March 31, 2016
|
|
Continuing Unrealized Loss For Less Than 12 Months
|
|
Continuing Unrealized Loss For 12 Months or More
|
|
Total
|
|
Fair
Value
|
|
Unrealized
Loss
|
|
Fair
Value
|
|
Unrealized
Loss
|
|
Fair
Value
|
|
Unrealized
Loss
|
|
(Dollars in thousands)
|
U.S. federal agency obligations
|
$
|
1,099
|
|
|
$
|
(1
|
)
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
1,099
|
|
|
$
|
(1
|
)
|
Mortgage-backed securities – residential
|
900
|
|
|
(3
|
)
|
|
813
|
|
|
(6
|
)
|
|
1,713
|
|
|
(9
|
)
|
Government agency sponsored
collateralized mortgage obligations
|
3,087
|
|
|
(32
|
)
|
|
15,667
|
|
|
(179
|
)
|
|
18,754
|
|
|
(211
|
)
|
Corporate debt securities
|
—
|
|
|
—
|
|
|
948
|
|
|
(52
|
)
|
|
948
|
|
|
(52
|
)
|
Total temporarily impaired
|
$
|
5,086
|
|
|
$
|
(36
|
)
|
|
$
|
17,428
|
|
|
$
|
(237
|
)
|
|
$
|
22,514
|
|
|
$
|
(273
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2015
|
|
Continuing Unrealized Loss For Less Than 12 Months
|
|
Continuing Unrealized Loss For 12 Months or More
|
|
Total
|
|
Fair
Value
|
|
Unrealized
Loss
|
|
Fair
Value
|
|
Unrealized
Loss
|
|
Fair
Value
|
|
Unrealized
Loss
|
|
(Dollars in thousands)
|
U.S. federal agency obligations
|
$
|
8,371
|
|
|
$
|
(71
|
)
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
8,371
|
|
|
$
|
(71
|
)
|
State and municipal
|
4,512
|
|
|
(14
|
)
|
|
856
|
|
|
(3
|
)
|
|
5,368
|
|
|
(17
|
)
|
Mortgage-backed securities – residential
|
9,259
|
|
|
(48
|
)
|
|
809
|
|
|
(25
|
)
|
|
10,068
|
|
|
(73
|
)
|
Government agency sponsored
collateralized mortgage obligations
|
11,200
|
|
|
(136
|
)
|
|
18,148
|
|
|
(543
|
)
|
|
29,348
|
|
|
(679
|
)
|
Corporate debt securities
|
—
|
|
|
—
|
|
|
939
|
|
|
(61
|
)
|
|
939
|
|
|
(61
|
)
|
Total temporarily impaired
|
$
|
33,342
|
|
|
$
|
(269
|
)
|
|
$
|
20,752
|
|
|
$
|
(632
|
)
|
|
$
|
54,094
|
|
|
$
|
(901
|
)
|
LAPORTE BANCORP, INC.
CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
Management periodically evaluates each investment security for potential other-than-temporary impairment, relying primarily on industry analyst reports and observation of market conditions and interest rate fluctuations. The unrealized losses on the Company’s investments in U.S. federal agency obligations, mortgage-backed securities, agency collateralized mortgage obligations, and corporate debt securities were a result of changes in interest rates and not a result of a decline in credit quality. Management believes it will be able to collect all amounts due according to the contractual terms of the underlying investment securities and that the noted declines in fair value are considered temporary. The unrealized losses on the Company’s investment in state and municipal securities were also caused by changes in interest rates. The contractual terms of those investments do not permit the issuer to settle the securities at a price less than the amortized cost basis of the investments. The Company does not intend to sell the securities and is not more likely than not to be required to sell them before their anticipated recovery.
Proceeds from sales of securities available-for-sale were as follows:
|
|
|
|
|
|
|
|
|
|
Three Months Ended March 31,
|
|
2016
|
|
2015
|
|
(Dollars in thousands)
|
Proceeds
|
$
|
—
|
|
|
$
|
10,262
|
|
Gross gains
|
—
|
|
|
84
|
|
Gross losses
|
—
|
|
|
(34
|
)
|
The amortized cost and fair value of debt securities at
March 31, 2016
by contractual maturity were as follows. Securities not due at a single maturity date, primarily mortgage-backed securities and collateralized mortgage obligations (“CMO”), are shown separately.
|
|
|
|
|
|
|
|
|
|
March 31, 2016
|
|
Amortized
Cost
|
|
Fair
Value
|
|
(Dollars in thousands)
|
Due in one year or less
|
$
|
1,249
|
|
|
$
|
1,262
|
|
Due from one to five years
|
23,354
|
|
|
23,816
|
|
Due from five to ten years
|
26,625
|
|
|
27,976
|
|
Due after ten years
|
10,800
|
|
|
11,612
|
|
Subtotal
|
62,028
|
|
|
64,666
|
|
Mortgage-backed securities and government agency sponsored collateralized mortgage obligations
|
57,180
|
|
|
57,575
|
|
Total
|
$
|
119,208
|
|
|
$
|
122,241
|
|
Securities pledged at
March 31, 2016
and
December 31, 2015
had a carrying amount of approximately
$42.3 million
and
$43.1 million
, respectively, and were pledged to secure Federal Home Loan Bank (“FHLB”) advances and cash flow hedges.
At
March 31, 2016
and
December 31, 2015
, the Company did not hold any securities of any one issuer, other than the U.S. government and its agencies, in an amount greater than 10% of shareholders’ equity.
LAPORTE BANCORP, INC.
CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
NOTE 5 – LOANS
Loans were as follows for the dates indicated:
|
|
|
|
|
|
|
|
|
|
March 31, 2016
|
|
December 31, 2015
|
|
(Dollars in thousands)
|
Commercial
|
$
|
158,254
|
|
|
$
|
154,830
|
|
Residential mortgage
|
39,919
|
|
|
40,478
|
|
Mortgage warehouse
|
122,328
|
|
|
128,902
|
|
Residential construction
|
2,806
|
|
|
3,301
|
|
Home equity
|
14,311
|
|
|
13,990
|
|
Consumer and other
|
3,171
|
|
|
3,380
|
|
Subtotal
|
340,789
|
|
|
344,881
|
|
Net deferred loan costs
|
298
|
|
|
305
|
|
Allowance for loan losses
|
(3,636
|
)
|
|
(3,634
|
)
|
Loans, net
|
$
|
337,451
|
|
|
$
|
341,552
|
|
At
March 31, 2016
and
2015
, the Bank’s mortgage warehouse division had repurchase agreements with
34
and
29
mortgage companies, respectively. The following table identifies the activity and related interest and fee income attributable to the mortgage warehouse division for the periods presented:
|
|
|
|
|
|
|
|
|
|
Three Months Ended March 31,
|
|
2016
|
|
2015
|
|
(Dollars in thousands)
|
Mortgage Warehouse:
|
|
|
|
Originations
|
$
|
1,051,049
|
|
|
$
|
765,001
|
|
Sold Loans
|
1,063,755
|
|
|
738,064
|
|
Interest income
|
1,264
|
|
|
1,246
|
|
Warehouse fees
|
340
|
|
|
235
|
|
Wire transfer fees
|
112
|
|
|
73
|
|
Loan servicing fees
|
84
|
|
|
—
|
|
At March 31, 2016, the total participated balance of mortgage warehouse loans was
$91.0 million
and the total lines of credit availability was
$5.0 million
. The Company records a servicing fee on the participated balances.
LAPORTE BANCORP, INC.
CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
NOTE 6 – ALLOWANCE FOR LOAN LOSSES
The following tables present the activity in the allowance for loan losses by portfolio segment for the
three
months ended
March 31, 2016
and
2015
:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended March 31, 2016
|
|
Commercial
|
|
Residential Mortgage
|
|
Mortgage
Warehouse
|
|
Residential
Construction
|
|
Home
Equity
|
|
Consumer
and Other
|
|
Total
|
|
(Dollars in thousands)
|
Allowance for loan losses:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Beginning balance
|
$
|
2,440
|
|
|
$
|
591
|
|
|
$
|
460
|
|
|
$
|
4
|
|
|
$
|
93
|
|
|
$
|
46
|
|
|
$
|
3,634
|
|
Charge-offs
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(4
|
)
|
|
(4
|
)
|
Recoveries
|
1
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
5
|
|
|
6
|
|
Provision
|
42
|
|
|
(13
|
)
|
|
(14
|
)
|
|
(1
|
)
|
|
(9
|
)
|
|
(5
|
)
|
|
—
|
|
Ending balance
|
$
|
2,483
|
|
|
$
|
578
|
|
|
$
|
446
|
|
|
$
|
3
|
|
|
$
|
84
|
|
|
$
|
42
|
|
|
$
|
3,636
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended March 31, 2015
|
|
Commercial
|
|
Residential Mortgage
|
|
Mortgage
Warehouse
|
|
Residential
Construction
|
|
Home
Equity
|
|
Consumer
and Other
|
|
Total
|
|
(Dollars in thousands)
|
Allowance for loan losses:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Beginning balance
|
$
|
2,116
|
|
|
$
|
676
|
|
|
$
|
654
|
|
|
$
|
4
|
|
|
$
|
90
|
|
|
$
|
55
|
|
|
$
|
3,595
|
|
Charge-offs
|
(20
|
)
|
|
(5
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(5
|
)
|
|
(30
|
)
|
Recoveries
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
5
|
|
|
5
|
|
Provision
|
154
|
|
|
(59
|
)
|
|
19
|
|
|
1
|
|
|
(5
|
)
|
|
(5
|
)
|
|
105
|
|
Ending balance
|
$
|
2,250
|
|
|
$
|
612
|
|
|
$
|
673
|
|
|
$
|
5
|
|
|
$
|
85
|
|
|
$
|
50
|
|
|
$
|
3,675
|
|
LAPORTE BANCORP, INC.
CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
The following tables present the balance in the allowance for loan losses and the recorded investment in loans by portfolio segment and based on impairment method as of the dates indicated:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
March 31, 2016
|
|
Commercial
|
|
Residential Mortgage
|
|
Mortgage
Warehouse
|
|
Residential
Construction
|
|
Home
Equity
|
|
Consumer
and Other
|
|
Total
|
|
(Dollars in thousands)
|
Allowance for loan losses:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Ending balance attributable
to loans:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Individually evaluated
for impairment
|
$
|
898
|
|
|
$
|
36
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
15
|
|
|
$
|
—
|
|
|
$
|
949
|
|
Collectively evaluated
for impairment
|
1,585
|
|
|
542
|
|
|
446
|
|
|
3
|
|
|
69
|
|
|
42
|
|
|
2,687
|
|
Acquired with deteriorated
credit quality
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
Total ending allowance
|
$
|
2,483
|
|
|
$
|
578
|
|
|
$
|
446
|
|
|
$
|
3
|
|
|
$
|
84
|
|
|
$
|
42
|
|
|
$
|
3,636
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loans:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Individually evaluated
for impairment
|
$
|
2,850
|
|
|
$
|
1,309
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
94
|
|
|
$
|
—
|
|
|
$
|
4,253
|
|
Collectively evaluated
for impairment
|
155,404
|
|
|
38,505
|
|
|
122,328
|
|
|
2,806
|
|
|
14,217
|
|
|
3,171
|
|
|
336,431
|
|
Acquired with deteriorated
credit quality
|
—
|
|
|
105
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
105
|
|
Total ending loan balance
|
$
|
158,254
|
|
|
$
|
39,919
|
|
|
$
|
122,328
|
|
|
$
|
2,806
|
|
|
$
|
14,311
|
|
|
$
|
3,171
|
|
|
$
|
340,789
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2015
|
|
Commercial
|
|
Residential Mortgage
|
|
Mortgage
Warehouse
|
|
Residential
Construction
|
|
Home
Equity
|
|
Consumer
and Other
|
|
Total
|
|
(Dollars in thousands)
|
Allowance for loan losses:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Ending balance attributable
to loans:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Individually evaluated
for impairment
|
$
|
885
|
|
|
$
|
43
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
17
|
|
|
$
|
—
|
|
|
$
|
945
|
|
Collectively evaluated
for impairment
|
1,555
|
|
|
548
|
|
|
460
|
|
|
4
|
|
|
76
|
|
|
46
|
|
|
2,689
|
|
Acquired with deteriorated
credit quality
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
Total ending allowance
|
$
|
2,440
|
|
|
$
|
591
|
|
|
$
|
460
|
|
|
$
|
4
|
|
|
$
|
93
|
|
|
$
|
46
|
|
|
$
|
3,634
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loans:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Individually evaluated
for impairment
|
$
|
2,920
|
|
|
$
|
1,283
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
97
|
|
|
$
|
—
|
|
|
$
|
4,300
|
|
Collectively evaluated
for impairment
|
151,910
|
|
|
39,089
|
|
|
128,902
|
|
|
3,301
|
|
|
13,893
|
|
|
3,380
|
|
|
340,475
|
|
Acquired with deteriorated
credit quality
|
—
|
|
|
106
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
106
|
|
Total ending loan balance
|
$
|
154,830
|
|
|
$
|
40,478
|
|
|
$
|
128,902
|
|
|
$
|
3,301
|
|
|
$
|
13,990
|
|
|
$
|
3,380
|
|
|
$
|
344,881
|
|
LAPORTE BANCORP, INC.
CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
The following table presents information related to impaired loans by class of loans as of the dates indicated:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
March 31, 2016
|
|
December 31, 2015
|
|
Unpaid
Principal
Balance
|
|
Recorded
Investment
|
|
Allowance for
Loan Losses
Allocated
|
|
Unpaid
Principal
Balance
|
|
Recorded
Investment
|
|
Allowance for
Loan Losses
Allocated
|
|
(Dollars in thousands)
|
With no related allowance recorded:
|
|
|
|
|
|
|
|
|
|
|
|
Commercial:
|
|
|
|
|
|
|
|
|
|
|
|
Real estate
|
$
|
1,334
|
|
|
$
|
1,312
|
|
|
$
|
—
|
|
|
$
|
1,436
|
|
|
$
|
1,366
|
|
|
$
|
—
|
|
Residential mortgage
|
1,144
|
|
|
1,074
|
|
|
—
|
|
|
1,054
|
|
|
988
|
|
|
—
|
|
Home equity
|
79
|
|
|
79
|
|
|
—
|
|
|
81
|
|
|
80
|
|
|
—
|
|
Subtotal
|
2,557
|
|
|
2,465
|
|
|
—
|
|
|
2,571
|
|
|
2,434
|
|
|
—
|
|
With an allowance recorded:
|
|
|
|
|
|
|
|
|
|
|
|
Commercial:
|
|
|
|
|
|
|
|
|
|
|
|
Real estate
|
1,214
|
|
|
1,214
|
|
|
624
|
|
|
1,214
|
|
|
1,214
|
|
|
624
|
|
Construction
|
25
|
|
|
25
|
|
|
25
|
|
|
41
|
|
|
41
|
|
|
41
|
|
Land
|
430
|
|
|
299
|
|
|
249
|
|
|
431
|
|
|
299
|
|
|
220
|
|
Residential mortgage
|
295
|
|
|
235
|
|
|
36
|
|
|
355
|
|
|
295
|
|
|
43
|
|
Home equity
|
16
|
|
|
15
|
|
|
15
|
|
|
17
|
|
|
17
|
|
|
17
|
|
Subtotal
|
1,980
|
|
|
1,788
|
|
|
949
|
|
|
2,058
|
|
|
1,866
|
|
|
945
|
|
Total
|
$
|
4,537
|
|
|
$
|
4,253
|
|
|
$
|
949
|
|
|
$
|
4,629
|
|
|
$
|
4,300
|
|
|
$
|
945
|
|
The following tables present loans individually evaluated for impairment by class of loans for the periods indicated:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended March 31,
|
|
2016
|
|
2015
|
|
Average
Recorded
Investment
|
|
Interest
Income
Recognized
|
|
Average
Recorded
Investment
|
|
Interest
Income
Recognized
|
|
(Dollars in thousands)
|
With no related allowance recorded:
|
|
|
|
|
|
|
|
Commercial:
|
|
|
|
|
|
|
|
Real estate
|
$
|
1,350
|
|
|
$
|
19
|
|
|
$
|
2,933
|
|
|
$
|
45
|
|
Five or more family
|
—
|
|
|
—
|
|
|
3,692
|
|
|
60
|
|
Land
|
—
|
|
|
—
|
|
|
120
|
|
|
—
|
|
Residential mortgage
|
1,081
|
|
|
7
|
|
|
1,098
|
|
|
1
|
|
Home equity
|
80
|
|
|
1
|
|
|
—
|
|
|
—
|
|
Subtotal
|
2,511
|
|
|
27
|
|
|
7,843
|
|
|
106
|
|
With an allowance recorded:
|
|
|
|
|
|
|
|
Commercial:
|
|
|
|
|
|
|
|
Real estate
|
1,214
|
|
|
—
|
|
|
933
|
|
|
—
|
|
Construction
|
29
|
|
|
—
|
|
|
—
|
|
|
—
|
|
Land
|
299
|
|
|
—
|
|
|
1,440
|
|
|
—
|
|
Residential mortgage
|
236
|
|
|
5
|
|
|
916
|
|
|
2
|
|
Home equity
|
16
|
|
|
—
|
|
|
7
|
|
|
—
|
|
Subtotal
|
1,794
|
|
|
5
|
|
|
3,296
|
|
|
2
|
|
Total
|
$
|
4,305
|
|
|
$
|
32
|
|
|
$
|
11,139
|
|
|
$
|
108
|
|
LAPORTE BANCORP, INC.
CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
The following table presents the recorded investment in nonaccrual loans and loans past due over
90 days
still on accrual by class of loans as of the dates indicated.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Nonaccrual
|
|
Loans Past Due
Over 90 Days
Still Accruing
|
|
March 31, 2016
|
|
December 31, 2015
|
|
March 31, 2016
|
|
December 31, 2015
|
|
(Dollars in thousands)
|
Commercial:
|
|
|
|
|
|
|
|
Real estate
|
$
|
1,362
|
|
|
$
|
1,396
|
|
|
—
|
|
|
$
|
—
|
|
Construction
|
25
|
|
|
41
|
|
|
—
|
|
|
—
|
|
Land
|
299
|
|
|
299
|
|
|
—
|
|
|
—
|
|
Residential mortgage
|
620
|
|
|
590
|
|
|
94
|
|
|
—
|
|
Home equity
|
21
|
|
|
23
|
|
|
—
|
|
|
—
|
|
Total
|
$
|
2,327
|
|
|
$
|
2,349
|
|
|
$
|
94
|
|
|
$
|
—
|
|
The following tables present the aging of the recorded investment in past due loans by class of loans as of the dates indicated
:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
March 31, 2016
|
|
30-59
Days
Past Due
|
|
60-89
Days
Past Due
|
|
Greater than
90 Days
Past Due
|
|
Total
Past Due
|
|
Current
|
|
Total
|
|
(Dollars in thousands)
|
Commercial:
|
|
|
|
|
|
|
|
|
|
|
|
Commercial and industrial
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
17,377
|
|
|
$
|
17,377
|
|
Real estate
|
401
|
|
|
37
|
|
|
1,311
|
|
|
1,749
|
|
|
94,714
|
|
|
96,463
|
|
Five or more family
|
18
|
|
|
—
|
|
|
—
|
|
|
18
|
|
|
22,470
|
|
|
22,488
|
|
Construction
|
—
|
|
|
—
|
|
|
25
|
|
|
25
|
|
|
12,174
|
|
|
12,199
|
|
Land
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
9,727
|
|
|
9,727
|
|
Residential mortgage
|
—
|
|
|
—
|
|
|
624
|
|
|
624
|
|
|
39,295
|
|
|
39,919
|
|
Mortgage warehouse
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
122,328
|
|
|
122,328
|
|
Residential construction:
|
|
|
|
|
|
|
|
|
|
|
|
Construction
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
1,939
|
|
|
1,939
|
|
Land
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
867
|
|
|
867
|
|
Home equity
|
—
|
|
|
—
|
|
|
7
|
|
|
7
|
|
|
14,304
|
|
|
14,311
|
|
Consumer and other
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
3,171
|
|
|
3,171
|
|
Total
|
$
|
419
|
|
|
$
|
37
|
|
|
$
|
1,967
|
|
|
$
|
2,423
|
|
|
$
|
338,366
|
|
|
$
|
340,789
|
|
LAPORTE BANCORP, INC.
CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2015
|
|
30-59
Days
Past Due
|
|
60-89
Days
Past Due
|
|
Greater than
90 Days
Past Due
|
|
Total
Past Due
|
|
Current
|
|
Total
|
|
(Dollars in thousands)
|
Commercial:
|
|
|
|
|
|
|
|
|
|
|
|
Commercial and industrial
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
18,117
|
|
|
$
|
18,117
|
|
Real estate
|
1,282
|
|
|
—
|
|
|
102
|
|
|
1,384
|
|
|
90,916
|
|
|
92,300
|
|
Five or more family
|
20
|
|
|
—
|
|
|
—
|
|
|
20
|
|
|
22,672
|
|
|
22,692
|
|
Construction
|
41
|
|
|
—
|
|
|
—
|
|
|
41
|
|
|
11,041
|
|
|
11,082
|
|
Land
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
10,639
|
|
|
10,639
|
|
Residential mortgage
|
176
|
|
|
—
|
|
|
495
|
|
|
671
|
|
|
39,807
|
|
|
40,478
|
|
Mortgage warehouse
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
128,902
|
|
|
128,902
|
|
Residential construction:
|
|
|
|
|
|
|
|
|
|
|
|
Construction
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
2,423
|
|
|
2,423
|
|
Land
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
878
|
|
|
878
|
|
Home equity
|
—
|
|
|
—
|
|
|
8
|
|
|
8
|
|
|
13,982
|
|
|
13,990
|
|
Consumer and other
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
3,380
|
|
|
3,380
|
|
Total
|
$
|
1,519
|
|
|
$
|
—
|
|
|
$
|
605
|
|
|
$
|
2,124
|
|
|
$
|
342,757
|
|
|
$
|
344,881
|
|
Troubled Debt Restructurings
A loan modification is considered a troubled debt restructuring (“TDR”) when a borrower is experiencing financial difficulty and the Company grants a concession it would not otherwise consider but for the borrower’s financial difficulties. The following table presents the Company’s TDRs as of the dates indicated:
|
|
|
|
|
|
|
|
|
|
March 31, 2016
|
|
December 31, 2015
|
|
(Dollars in thousands)
|
TDRs:
|
|
|
|
Performing in accordance with modified repayment terms
|
$
|
1,699
|
|
|
$
|
1,720
|
|
Nonperforming
|
—
|
|
|
—
|
|
|
$
|
1,699
|
|
|
$
|
1,720
|
|
|
|
|
|
Specific reserve
|
$
|
—
|
|
|
$
|
—
|
|
TDRs previously disclosed resulted in no charge-offs during the
three
months ended
March 31, 2016
and
2015
. The Company had not committed to lend additional amounts to customers with outstanding TDR loans at
March 31, 2016
and
December 31, 2015
.
LAPORTE BANCORP, INC.
CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
The following tables present loans by class modified as TDRs that occurred during the periods indicated:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended March 31,
|
|
2016
|
|
2015
|
|
Number of Loans
|
|
Pre-Modification Outstanding Recorded Investment
|
|
Post-Modification Outstanding Recorded Investment
|
|
Number of Loans
|
|
Pre-Modification Outstanding Recorded Investment
|
|
Post-Modification Outstanding Recorded Investment
|
|
(Dollars in thousands)
|
Commercial:
|
|
|
|
|
|
|
|
|
|
|
|
Real Estate
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
1
|
|
|
$
|
207
|
|
|
$
|
207
|
|
Total
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
1
|
|
|
$
|
207
|
|
|
$
|
207
|
|
During the
three
months ended
March 31, 2015
, the concession granted by the Company consisted of a reduction in monthly payments.
There were
no
TDRs that defaulted within twelve months following the modification during the
three
months ended
March 31, 2016
and
2015
.
A loan is considered to be in payment default once it is
90 days
contractually past due under the modified terms.
In order to determine whether a borrower is experiencing financial difficulty, an evaluation is performed of the probability that the borrower will be in payment default on any of its debt in the foreseeable future without the modification. This evaluation is performed by the Company’s Officer Loan Committee.
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. The analysis includes loans with risk ratings of Special Mention, Substandard, and Doubtful. This analysis is performed on a quarterly basis. 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 paying 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.
Loans not meeting the criteria above that are analyzed individually as part of the above described process are considered to be pass-rated loans. The Bank monitors credit quality on loans not rated through the loan’s individual payment performance.
LAPORTE BANCORP, INC.
CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
The following tables present the risk category of loans by class based on the most recent analysis performed as of the dates indicated:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
March 31, 2016
|
|
Pass
|
|
Special
Mention
|
|
Substandard
|
|
Doubtful
|
|
(Dollars in thousands)
|
Commercial:
|
|
|
|
|
|
|
|
Commercial and industrial
|
$
|
16,963
|
|
|
$
|
414
|
|
|
$
|
—
|
|
|
$
|
—
|
|
Real estate
|
92,274
|
|
|
1,570
|
|
|
2,619
|
|
|
—
|
|
Five or more family
|
22,488
|
|
|
—
|
|
|
—
|
|
|
—
|
|
Construction
|
12,174
|
|
|
—
|
|
|
25
|
|
|
—
|
|
Land
|
9,327
|
|
|
101
|
|
|
299
|
|
|
—
|
|
Residential mortgage
|
38,904
|
|
|
21
|
|
|
994
|
|
|
—
|
|
Mortgage warehouse
|
122,328
|
|
|
—
|
|
|
—
|
|
|
—
|
|
Residential construction:
|
|
|
|
|
|
|
|
Construction
|
1,939
|
|
|
—
|
|
|
—
|
|
|
—
|
|
Land
|
867
|
|
|
—
|
|
|
—
|
|
|
—
|
|
Home equity
|
14,217
|
|
|
—
|
|
|
94
|
|
|
—
|
|
Consumer and other
|
3,171
|
|
|
—
|
|
|
—
|
|
|
—
|
|
Total
|
$
|
334,652
|
|
|
$
|
2,106
|
|
|
$
|
4,031
|
|
|
$
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2015
|
|
Pass
|
|
Special
Mention
|
|
Substandard
|
|
Doubtful
|
|
(Dollars in thousands)
|
Commercial:
|
|
|
|
|
|
|
|
Commercial and industrial
|
$
|
17,807
|
|
|
$
|
310
|
|
|
$
|
—
|
|
|
$
|
—
|
|
Real estate
|
86,548
|
|
|
3,075
|
|
|
2,677
|
|
|
—
|
|
Five or more family
|
22,692
|
|
|
—
|
|
|
—
|
|
|
—
|
|
Construction
|
11,041
|
|
|
—
|
|
|
41
|
|
|
—
|
|
Land
|
10,258
|
|
|
82
|
|
|
299
|
|
|
—
|
|
Residential mortgage
|
39,490
|
|
|
21
|
|
|
967
|
|
|
—
|
|
Mortgage warehouse
|
128,902
|
|
|
—
|
|
|
—
|
|
|
—
|
|
Residential construction:
|
|
|
|
|
|
|
|
Construction
|
2,423
|
|
|
—
|
|
|
—
|
|
|
—
|
|
Land
|
878
|
|
|
—
|
|
|
—
|
|
|
—
|
|
Home equity
|
13,893
|
|
|
—
|
|
|
97
|
|
|
—
|
|
Consumer and other
|
3,380
|
|
|
—
|
|
|
—
|
|
|
—
|
|
Total
|
$
|
337,312
|
|
|
$
|
3,488
|
|
|
$
|
4,081
|
|
|
$
|
—
|
|
LAPORTE BANCORP, INC.
CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
Purchased Loans
The Company purchased loans during 2007, for which there was, at acquisition, evidence of deterioration of credit quality since origination and it was then probable that all contractually required payments would not be collected. The outstanding balance and carrying amount of those loans was as follows:
|
|
|
|
|
|
|
|
|
|
March 31, 2016
|
|
December 31, 2015
|
|
(Dollars in thousands)
|
Residential mortgage
|
105
|
|
|
106
|
|
Carrying amount, net of allowance of $0
|
$
|
105
|
|
|
$
|
106
|
|
Accretable yield, or income expected to be collected, was as follows:
|
|
|
|
|
|
|
|
|
|
Three Months Ended March 31,
|
|
2016
|
|
2015
|
|
(Dollars in thousands)
|
Beginning balance
|
$
|
—
|
|
|
$
|
18
|
|
Reclassification from non-accretable yield
|
—
|
|
|
—
|
|
Accretion of income
|
—
|
|
|
(11
|
)
|
Ending balance
|
$
|
—
|
|
|
$
|
7
|
|
For the purchased loans disclosed above, the Company did not increase the allowance for loan losses during the
three months ended March 31, 2016
or
2015
.
No
allowance for loan losses was reversed during the
three months ended March 31, 2016
or
2015
.
NOTE 7 – FAIR VALUE
Fair value is the exchange price that would be received for an asset or paid to transfer a liability (exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. There are three levels of inputs that may be used to measure fair values:
Level 1 – 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 2 – Significant other observable inputs other than Level 1 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 3 – Significant unobservable inputs that reflect a company’s own assumptions about the assumptions that market participants would use in pricing an asset or liability.
The Company used the following methods and significant assumptions to estimate the fair value of each type of financial asset:
Investment Securities
: The fair values for investment securities are determined by quoted market prices, if available (Level 1). For securities where quoted prices are not available, fair values are calculated based on market prices of similar securities (Level 2).
Loans Held for Sale and Loan Commitment Derivatives
: The fair value of loans held for sale and residential mortgage loan commitments are determined by obtaining quoted prices for similar loans and commitments with similar interest rates and maturities from major secondary markets (Level 2).
Derivatives-Interest Rate Swaps
: The fair values of derivatives are based on valuation models using observable market data as of the measurement date (Level 2).
LAPORTE BANCORP, INC.
CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
Impaired Loans
: At the time a loan is considered impaired, it is valued at the lower of cost or fair value, less estimated costs to sell. Impaired loans carried at fair value generally receive specific allocations of the allowance for loan losses. For collateral dependent loans, fair value is commonly based on recent real estate appraisals performed by qualified independent third-party appraisers. These appraisals may utilize a single valuation approach or a combination of approaches including cost, comparable sales, and the income approach. The cost approach is based on the cost to replace the existing property. The comparable sales approach evaluates the sales prices of comparable properties within the same market area. The income approach considers net operating income generated by the property and the rate of return required by an investor. Adjustments are routinely made in the appraisal process by the independent third-party appraisers to adjust for differences between the comparable sales and income data available. Such adjustments are usually significant and typically result in a Level 3 classification of the inputs for determining fair value. Non-real estate collateral may be valued using an appraisal, net book value per the borrower’s financial statements, or aging reports, adjusted or discounted based on management’s historical knowledge, changes in market conditions from the time of the valuation, and management’s expertise and knowledge of the client and client’s business, resulting in a Level 3 fair value classification. Impaired loans are evaluated on a quarterly basis for additional impairment and adjusted accordingly.
Other Real Estate Owned
: Assets acquired through or instead of loan foreclosures are initially recorded at fair value less cost to sell when acquired, establishing a new cost basis. These assets are subsequently accounted for at the lower of cost or fair value, less estimated costs to sell. Fair value is commonly based on recent real estate appraisals performed by qualified independent third-party appraisers. These appraisals may utilize a single valuation approach or a combination of approaches including cost, comparable sales, and the income approach. The cost approach is based on the cost to replace the existing property. The comparable sales approach evaluates the sales prices of comparable properties within the same market area. The income approach considers net operating income generated by the property and the rate of return required by an investor. Adjustments are routinely made in the appraisal process by the independent third-party appraisers to adjust for differences between the comparable sales and income data available. Such adjustments are usually significant and typically result in a Level 3 classification of the inputs for determining fair value.
The President and Chief Financial Officer (“President/CFO”), Senior Vice President – Chief Accounting Officer (“SVP – CAO”), and Executive Vice President – Credit (“EVP – Credit”) are responsible for determining the valuation processes and procedures for the fair value measurement of impaired loans and other real estate owned properties. The President/CFO, SVP – CAO, and EVP – Credit review impaired loans and other real estate owned properties on a quarterly basis to determine the accuracy of third-party appraisals, auction values, values derived from trade publications, any additional data received from the borrower, and the appropriateness of unobservable inputs, generally discounts due to collection issues and current market conditions which are utilized in determining the fair value. The EVP – Credit determines discounts based on the valuation source and asset type for impaired loans. These discounts are reviewed periodically, annually at a minimum, for appropriateness. Current trends in market values and gains and losses on sales of similar assets are also considered when determining discounts of asset categories.
The tables below present the valuation methodology and unobservable inputs for impaired loans and other real estate owned at
March 31, 2016
and
December 31, 2015
.
|
|
|
|
|
|
|
|
|
|
March 31, 2016
|
|
Valuation
Methodology
|
|
Unobservable Inputs
|
|
Range of
Inputs
|
|
Average of
Inputs
|
Impaired loans:
|
|
|
|
|
|
|
|
Commercial land
|
Appraisals
|
|
Discounts for changes
in market conditions
|
|
74%
|
|
74%
|
Other real estate owned, net:
|
|
|
|
|
|
|
|
Commercial real estate
|
Appraisals
|
|
Discounts for changes
in market conditions
|
|
54%
|
|
54%
|
LAPORTE BANCORP, INC.
CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
|
|
|
|
|
|
|
|
|
|
December 31, 2015
|
|
Valuation
Methodology
|
|
Unobservable Inputs
|
|
Range of
Inputs
|
|
Average of
Inputs
|
Impaired loans:
|
|
|
|
|
|
|
|
Commercial:
|
|
|
|
|
|
|
|
Real estate
|
Appraisals
|
|
Discounts for changes
in market conditions
|
|
8%
|
|
8%
|
Land
|
Appraisals
|
|
Discounts for changes
in market conditions
|
|
10%
|
|
10%
|
Residential mortgage
|
Appraisals
|
|
Discounts for changes
in market conditions
|
|
0-20%
|
|
10%
|
Other real estate owned, net:
|
|
|
|
|
|
|
|
Residential mortgage
|
Appraisals
|
|
Discounts for changes
in market conditions
|
|
30%
|
|
30%
|
Mortgage Servicing Rights
: On a quarterly basis, loan servicing rights are evaluated for impairment based on the fair value of the rights as compared to the carrying amount. If the carrying amount of an individual tranche exceeds fair value, impairment is recorded on that tranche so that the servicing asset is carried at fair value. Fair value is determined at a tranche level, based on a valuation model that calculates the present value of estimated future net servicing income. The valuation model utilizes assumptions that market participants would use in estimating future net servicing income and that can be validated against available market data (Level 2).
Fair value at
March 31, 2016
was determined using a discount rate of
10.0%
; prepayment speeds ranging from
8.0%
to
20.9%
, depending on the stratification of the specific right; and a weighted average default rate of approximately
0.5%
. Fair value at
December 31, 2015
was determined using a discount rate of
10.0%
; prepayment speeds ranging from
6.9%
to
22.1%
, depending on the stratification of the specific right; and a weighted average default rate of approximately
0.5%
.
Assets and liabilities measured at fair value on a recurring basis, including financial assets and liabilities for which the Company has elected the fair value option, are summarized in the following tables:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
March 31, 2016
|
|
Carrying
Value
|
|
Quoted Prices in
Active Markets
for Identical Assets
(Level 1)
|
|
Significant
Other
Observable Inputs
(Level 2)
|
|
Significant
Unobservable
Inputs
(Level 3)
|
|
(Dollars in thousands)
|
Financial Assets:
|
|
|
|
|
|
|
|
Investment securities available-for-sale:
|
|
|
|
|
|
|
|
U.S. federal agency obligations
|
$
|
11,121
|
|
|
$
|
—
|
|
|
$
|
11,121
|
|
|
$
|
—
|
|
State and municipal
|
52,597
|
|
|
—
|
|
|
52,597
|
|
|
—
|
|
Mortgage-backed securities – residential
|
16,839
|
|
|
—
|
|
|
16,839
|
|
|
—
|
|
Government agency sponsored collateralized
mortgage obligations
|
40,736
|
|
|
—
|
|
|
40,736
|
|
|
—
|
|
Corporate debt securities
|
948
|
|
|
—
|
|
|
948
|
|
|
—
|
|
Total investment securities available-for-sale
|
$
|
122,241
|
|
|
$
|
—
|
|
|
$
|
122,241
|
|
|
$
|
—
|
|
Loans held for sale
|
$
|
686
|
|
|
$
|
—
|
|
|
$
|
686
|
|
|
$
|
—
|
|
Derivatives – residential mortgage loan commitments
|
$
|
54
|
|
|
$
|
—
|
|
|
$
|
54
|
|
|
$
|
—
|
|
Financial Liabilities:
|
|
|
|
|
|
|
|
Derivatives – interest rate swaps
|
$
|
(1,872
|
)
|
|
$
|
—
|
|
|
$
|
(1,872
|
)
|
|
$
|
—
|
|
LAPORTE BANCORP, INC.
CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2015
|
|
Carrying
Value
|
|
Quoted Prices in
Active Markets
for Identical Assets
(Level 1)
|
|
Significant
Other
Observable Inputs
(Level 2)
|
|
Significant
Unobservable
Inputs
(Level 3)
|
|
(Dollars in thousands)
|
Financial Assets:
|
|
|
|
|
|
|
|
Investment securities available-for-sale:
|
|
|
|
|
|
|
|
U.S. federal agency obligations
|
$
|
9,372
|
|
|
$
|
—
|
|
|
$
|
9,372
|
|
|
$
|
—
|
|
State and municipal
|
52,400
|
|
|
—
|
|
|
52,400
|
|
|
—
|
|
Mortgage-backed securities – residential
|
17,696
|
|
|
—
|
|
|
17,696
|
|
|
—
|
|
Government agency sponsored collateralized
mortgage obligations
|
41,836
|
|
|
—
|
|
|
41,836
|
|
|
—
|
|
Corporate debt securities
|
939
|
|
|
—
|
|
|
939
|
|
|
—
|
|
Total investment securities available-for-sale
|
$
|
122,243
|
|
|
$
|
—
|
|
|
$
|
122,243
|
|
|
$
|
—
|
|
Loans held for sale
|
$
|
3,581
|
|
|
$
|
—
|
|
|
$
|
3,581
|
|
|
$
|
—
|
|
Derivatives – residential mortgage loan commitments
|
$
|
39
|
|
|
$
|
—
|
|
|
$
|
39
|
|
|
$
|
—
|
|
Financial Liabilities:
|
|
|
|
|
|
|
|
Derivatives – interest rate swaps
|
$
|
(1,265
|
)
|
|
$
|
—
|
|
|
$
|
(1,265
|
)
|
|
$
|
—
|
|
There were no transfers between Level 1, Level 2, and Level 3 during the periods indicated above.
The difference between the aggregate fair value and the aggregate remaining contractual principal balance outstanding for loans held for sale was:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
March 31, 2016
|
|
December 31, 2015
|
|
Aggregate
Fair Value
|
|
Difference
|
|
Contractual
Principal
|
|
Aggregate
Fair Value
|
|
Difference
|
|
Contractual
Principal
|
|
(Dollars in thousands)
|
Loans held for sale
|
$
|
686
|
|
|
$
|
22
|
|
|
$
|
664
|
|
|
$
|
3,581
|
|
|
$
|
110
|
|
|
$
|
3,471
|
|
The following table presents the amount of gains and losses from fair value changes included in income before income taxes for financial assets carried at fair value for the
three months ended March 31, 2016
and
2015
:
|
|
|
|
|
|
|
|
|
|
Three Months Ended March 31,
|
|
2016
|
|
2015
|
|
(Dollars in thousands)
|
Loans held for sale:
|
|
|
|
Other gains (losses)
|
$
|
(88
|
)
|
|
$
|
(11
|
)
|
Interest income
|
15
|
|
|
5
|
|
Interest expense
|
—
|
|
|
—
|
|
Total changes in fair values included in
current period earnings
|
$
|
(73
|
)
|
|
$
|
(6
|
)
|
For items for which the fair value option has been elected, interest income is recorded within the consolidated statements of income and comprehensive income (loss) based on the contractual amount of interest income earned on financial assets (none were delinquent or in nonaccrual status).
LAPORTE BANCORP, INC.
CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
Assets measured at fair value on a non-recurring basis are summarized below:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
March 31, 2016
|
|
Carrying
Value
|
|
Quoted Prices in Active
Markets for
Identical Assets
(Level 1)
|
|
Significant
Other
Observable
Inputs
(Level 2)
|
|
Significant
Unobservable
Inputs
(Level 3)
|
|
(Dollars in thousands)
|
Impaired loans:
|
|
|
|
|
|
|
|
Commercial land
|
$
|
50
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
50
|
|
Other real estate owned, net:
|
|
|
|
|
|
|
|
Commercial real estate
|
41
|
|
|
—
|
|
|
—
|
|
|
41
|
|
Mortgage servicing rights
|
180
|
|
|
—
|
|
|
180
|
|
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2015
|
|
Carrying
Value
|
|
Quoted Prices in Active
Markets for
Identical Assets
(Level 1)
|
|
Significant
Other
Observable
Inputs
(Level 2)
|
|
Significant
Unobservable
Inputs
(Level 3)
|
|
(Dollars in thousands)
|
Impaired loans:
|
|
|
|
|
|
|
|
Commercial:
|
|
|
|
|
|
|
|
Real estate
|
$
|
590
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
590
|
|
Land
|
79
|
|
|
—
|
|
|
—
|
|
|
79
|
|
Residential mortgage
|
252
|
|
|
—
|
|
|
—
|
|
|
252
|
|
Other real estate owned, net:
|
|
|
|
|
|
|
|
Residential mortgage
|
36
|
|
|
—
|
|
|
—
|
|
|
36
|
|
Mortgage servicing rights
|
145
|
|
|
—
|
|
|
145
|
|
|
—
|
|
Impaired loans, which are measured for impairment using the fair value of the collateral for collateral dependent loans, had a gross carrying amount of
$299,000
, with a valuation allowance of
$249,000
at
March 31, 2016
, resulting in an additional provision of
$29,000
for the
three
months ended
March 31, 2016
. At
March 31, 2015
, impaired loans had a carrying amount of
$1.8 million
, with a valuation allowance of
$767,000
, resulting in an additional provision for loan losses of
$261,000
for the
three months ended March 31, 2015
.
At
March 31, 2016
, other real estate owned had a carrying amount of
$41,000
, which resulted in write-downs of
$30,000
for the
three months ended March 31, 2016
. During the
three months ended March 31, 2015
, no write-downs were recorded on the carrying amount of other real estate owned, which is measured at the lower of cost or fair value less costs to sell.
Mortgage servicing rights, which are carried at lower of cost or fair value, were carried at their fair value of
$180,000
at
March 31, 2016
, which was made up of the outstanding balance of
$274,000
, net of a valuation allowance of
$94,000
, resulting in a charge of
$8,000
for the three months ended March 31, 2016. At
March 31, 2015
, mortgage servicing rights were carried at their fair value of
$196,000
, which was made up of the outstanding balance of
$301,000
, net of a valuation allowance of
$105,000
, resulting in a charge of
$14,000
for the
three months ended March 31, 2015
.
LAPORTE BANCORP, INC.
CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
The carrying amounts and estimated fair values of financial instruments for the periods presented are as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
March 31, 2016
|
|
Carrying
Value
|
|
Quoted Prices in Active
Markets for
Identical Assets
(Level 1)
|
|
Significant
Other
Observable
Inputs
(Level 2)
|
|
Significant
Unobservable
Inputs
(Level 3)
|
|
(Dollars in thousands)
|
Financial assets:
|
|
|
|
|
|
|
|
Cash and due from financial institutions
|
$
|
11,361
|
|
|
$
|
11,361
|
|
|
$
|
—
|
|
|
$
|
—
|
|
Interest-earning time deposits at other financial institutions
|
14,532
|
|
|
—
|
|
|
14,596
|
|
|
—
|
|
Securities available-for-sale
|
122,241
|
|
|
—
|
|
|
122,241
|
|
|
—
|
|
Loans held for sale
|
686
|
|
|
—
|
|
|
686
|
|
|
—
|
|
Loans, net
|
337,451
|
|
|
—
|
|
|
—
|
|
|
340,354
|
|
Federal Home Loan Bank stock
|
4,029
|
|
|
—
|
|
|
4,029
|
|
|
—
|
|
Accrued interest receivable
|
1,404
|
|
|
—
|
|
|
689
|
|
|
716
|
|
Financial liabilities:
|
|
|
|
|
|
|
|
Deposits
|
$
|
(361,156
|
)
|
|
$
|
—
|
|
|
$
|
(361,719
|
)
|
|
$
|
—
|
|
Federal Home Loan Bank advances
|
(69,132
|
)
|
|
—
|
|
|
(69,786
|
)
|
|
—
|
|
Subordinated debentures
|
(5,155
|
)
|
|
—
|
|
|
—
|
|
|
(5,146
|
)
|
Accrued interest payable
|
(182
|
)
|
|
—
|
|
|
(179
|
)
|
|
(3
|
)
|
Derivatives – interest rate swaps
|
(1,872
|
)
|
|
—
|
|
|
(1,872
|
)
|
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2015
|
|
Carrying
Value
|
|
Quoted Prices in Active
Markets for
Identical Assets
(Level 1)
|
|
Significant
Other
Observable
Inputs
(Level 2)
|
|
Significant
Unobservable
Inputs
(Level 3)
|
|
(Dollars in thousands)
|
Financial assets:
|
|
|
|
|
|
|
|
Cash and due from financial institutions
|
$
|
18,459
|
|
|
$
|
18,459
|
|
|
$
|
—
|
|
|
$
|
—
|
|
Interest-earning time deposits at other financial institutions
|
13,599
|
|
|
—
|
|
|
13,641
|
|
|
—
|
|
Securities available-for-sale
|
122,243
|
|
|
—
|
|
|
122,243
|
|
|
—
|
|
Loans held for sale
|
3,581
|
|
|
—
|
|
|
3,581
|
|
|
—
|
|
Loans, net
|
341,552
|
|
|
—
|
|
|
—
|
|
|
344,488
|
|
Federal Home Loan Bank stock
|
4,029
|
|
|
—
|
|
|
4,029
|
|
|
—
|
|
Accrued interest receivable
|
1,519
|
|
|
—
|
|
|
760
|
|
|
759
|
|
Financial liabilities:
|
|
|
|
|
|
|
|
Deposits
|
$
|
(390,959
|
)
|
|
$
|
—
|
|
|
$
|
(390,914
|
)
|
|
$
|
—
|
|
Federal Home Loan Bank advances
|
(55,000
|
)
|
|
—
|
|
|
(55,197
|
)
|
|
—
|
|
Subordinated debentures
|
(5,155
|
)
|
|
—
|
|
|
—
|
|
|
(5,139
|
)
|
Accrued interest payable
|
(175
|
)
|
|
—
|
|
|
(172
|
)
|
|
(3
|
)
|
Derivatives – interest rate swaps
|
(1,265
|
)
|
|
—
|
|
|
(1,265
|
)
|
|
—
|
|
LAPORTE BANCORP, INC.
CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
The methods and assumptions, not previously presented, used to estimate fair value are described as follows:
Cash and due from financial institutions
: The carrying amounts of cash and due from financial institutions approximate fair values and are classified as Level 1.
Interest-earning time deposits at other financial institutions
: The fair values of the Company’s interest-earning time deposits at other financial institutions are estimated using discounted cash flow analyses based on current rates for similar types of interest-earning time deposits and are classified as Level 2.
Loans held for sale
: The fair value of loans held for sale is estimated based upon binding contracts and quotes from third-party investors resulting in Level 2 classification.
Loans
: The fair values of loans are based on discounted cash flow analyses, using interest rates currently being offered for loans with similar terms to borrowers of similar credit quality resulting in a Level 3 classification. Impaired loans are valued at the lower of cost or fair value as described previously. The methods utilized to estimate the fair value of loans do not necessarily represent an exit price.
Federal Home Loan Bank stock
: The fair value of Federal Home Loan Bank stock is based on the price at which it may be resold to the Federal Home Loan Bank.
Deposits
: The carrying amounts of demand deposits approximate their fair values and are classified as Level 2. Fair values of fixed rate certificates of deposit are estimated using a cash flow calculation reduced by known maturities, estimated principal payments, and estimated early withdrawal amounts. These cash flows are discounted to the current market rate. This method results in a Level 2 calculation.
Federal Home Loan Bank Advances
: The fair values of the Company’s Federal Home Loan Bank advances are estimated using discounted cash flow analyses based on current borrowing rates for similar types of borrowing arrangements resulting in a Level 2 classification.
Subordinated Debentures:
The fair value of the Company’s subordinated debentures are estimated using discounted cash flow analyses based on the current borrowing rates for similar types of borrowing arrangements resulting in a Level 3 classification.
Short-term borrowings:
The carrying amounts of short-term borrowings approximate fair values and are classified as Level 2.
Accrued Interest Receivable/Payable
: The carrying amounts of accrued interest approximate fair value resulting in a Level 1, Level 2, or Level 3 classification based on the underlying asset or liability.
NOTE 8 – DERIVATIVES
The Company utilizes interest rate swap agreements as part of its asset liability management strategy to help manage its interest rate risk position. The notional amount of the interest rate swap does not represent an amount exchanged by the parties. The amount exchanged is determined by reference to the notional amount and the other terms of the individual interest rate swap agreement.
The counterparties to the Company’s derivatives are exposed to credit risk whenever the derivative is in a liability position. As a result, the Company has collateralized these liabilities with securities held in safekeeping by The Bank of New York and PNC Bank. At
March 31, 2016
and
December 31, 2015
, the Company had securities with a fair value of
$4.0 million
and
$3.7 million
, respectively, posted as collateral for these derivatives.
Interest Rate Swaps Designated as Cash Flow Hedges
: Interest rate swaps with notional amounts of
$40.0 million
as of
March 31, 2016
and
December 31, 2015
, respectively, were designated as cash flow hedges of FHLB advances.
LAPORTE BANCORP, INC.
CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
All interest rate swaps were determined to be fully effective during the periods presented. As such, no amount of ineffectiveness has been included in net income. Therefore, the aggregate fair value of the swaps is recorded in other assets (liabilities) with changes in fair value recorded in other comprehensive income (loss). The amount included in accumulated other comprehensive income (loss) would be reclassified to current earnings should the hedges no longer be considered effective. The hedge would no longer be considered effective if a portion of the hedge becomes ineffective, the item hedged is no longer in existence, or the Company discontinues hedge accounting. The Company expects the hedges to remain fully effective during the remaining terms of the swaps. The Company does not expect any amounts to be reclassified from other comprehensive income (loss) over the next 12 months.
Information related to the interest-rate swaps designated as cash flow hedges as of
March 31, 2016
and
December 31, 2015
were as follows:
|
|
|
|
|
|
|
|
|
|
March 31, 2016
|
|
December 31, 2015
|
|
(Dollars in thousands)
|
FHLB advance:
|
|
|
|
Notional amount
|
$
|
10,000
|
|
|
$
|
10,000
|
|
Unrealized losses
|
(86
|
)
|
|
(154
|
)
|
Fixed interest rate payable
|
3.69
|
%
|
|
3.69
|
%
|
Variable interest rate receivable (Three month LIBOR plus 0.25%)
|
0.87
|
|
|
0.57
|
|
Maturity date
|
July 19, 2016
|
FHLB advance:
|
|
|
|
Notional amount
|
$
|
10,000
|
|
|
$
|
10,000
|
|
Unrealized losses
|
(466
|
)
|
|
(276
|
)
|
Fixed interest rate payable
|
2.09
|
%
|
|
2.09
|
%
|
Variable interest rate receivable (One month LIBOR)
|
0.44
|
|
|
0.35
|
|
Maturity date
|
March 15, 2020
|
FHLB advance:
|
|
|
|
Notional amount
|
$
|
10,000
|
|
|
$
|
10,000
|
|
Unrealized losses
|
(541
|
)
|
|
(339
|
)
|
Fixed interest rate payable
|
2.23
|
%
|
|
2.23
|
%
|
Variable interest rate receivable (One month LIBOR)
|
0.44
|
|
|
0.35
|
|
Maturity date
|
June 15, 2020
|
FHLB advance:
|
|
|
|
Notional amount
|
$
|
10,000
|
|
|
$
|
10,000
|
|
Unrealized losses
|
(779
|
)
|
|
(496
|
)
|
Fixed interest rate payable
|
2.62
|
%
|
|
2.62
|
%
|
Variable interest rate payable (One month LIBOR)
|
0.44
|
|
|
—
|
|
Maturity date
|
March 15, 2021
|
Interest expense recorded on these swap transactions is reported as a component of interest expense on FHLB advances. Interest expense recorded on these swap transactions totaled
$171,000
and
$127,000
during the
three months ended March 31, 2016
and
2015
, respectively.
LAPORTE BANCORP, INC.
CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
The following table presents the net gains (losses) recorded in accumulated other comprehensive income (loss) and the Consolidated Statements of Income relating to the Company’s cash flow derivative instruments for the periods indicated:
|
|
|
|
|
|
|
|
|
|
Three Months Ended March 31,
|
|
2016
|
|
2015
|
|
(Dollars in thousands)
|
Interest rate contracts:
|
|
|
|
Net amount of gain (loss):
|
|
|
|
Recognized in OCI (Effective Portion)
|
$
|
400
|
|
|
$
|
296
|
|
Reclassified from OCI to interest income
|
—
|
|
|
—
|
|
Recognized in other non-interest income (Ineffective Portion)
|
—
|
|
|
—
|
|
The following table reflects the cash flow hedges included in the Consolidated Balance Sheets as of the dates indicated:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
March 31, 2016
|
|
December 31, 2015
|
|
Notional
Amount
|
|
Fair
Value
|
|
Notional
Amount
|
|
Fair
Value
|
|
(Dollars in thousands)
|
Included in other liabilities:
|
|
|
|
|
|
|
|
Interest rate swaps related to FHLB advances
|
$
|
(40,000
|
)
|
|
$
|
(1,872
|
)
|
|
$
|
(40,000
|
)
|
|
$
|
(1,265
|
)
|
NOTE 9 – STOCK-BASED COMPENSATION
During the month of September 2011, the Company implemented the 2011 Equity Incentive Plan (the “2011 Plan”) which was approved by shareholders on May 10, 2011. The 2011 Plan provided for the issuance of stock options or restricted share awards to directors and employees. Total shares authorized for issuance under the 2011 Plan were
417,543
.
On May 13, 2014, the Company’s shareholders approved the 2014 Equity Incentive Plan (the “2014 Plan”) which provides for the issuance of stock options or restricted share awards to directors and employees and effectively terminated the 2011 Plan. The total shares authorized for issuance under the 2014 Plan are
473,845
shares of the Company’s common stock plus, at the date the 2014 Plan was approved, there were
14,471
shares of stock that were rolled over from the terminated 2011 Plan and added to the shares available for awards under the 2014 Plan. In addition, any stock awards that had been granted under the 2011 Plan and subsequently forfeited were also included for issuance under the 2014 Plan.
On October, 14, 2014, the Company implemented the 2014 Plan and granted
332,250
shares of stock as stock options and
126,800
shares of stock as restricted share awards to directors and employees. Compensation costs related to these grants will be amortized over a
five
year period on a straight-line basis. The options and restricted share awards vest
20%
annually.
Compensation expense related to the Plans totaled
$170,000
and
$173,000
for the
three months ended March 31, 2016
and
2015
, respectively.
Stock-Based Compensation
Compensation expense is recognized for stock options and restricted stock awards issued to employees or directors based on their grant date fair value. A Black-Scholes model is utilized to estimate the fair value of stock options. The market price of the Company’s common stock at the grant date is used for restricted stock awards.
Compensation expense is recognized over the required service period, generally defined as the vesting period. For awards with graded vesting, compensation expense is recognized on a straight-line basis over the requisite service period for the entire award.
LAPORTE BANCORP, INC.
CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
Stock Options
The 2011 Plan permitted the stock option grants to employees or directors for up to
298,245
shares of common stock. The 2014 Plan permits stock option grants to directors and employees for up to
352,544
shares of common stock. Option awards are generally granted with an exercise price equal to the market price of the Company’s common stock on the grant date. Option awards have vesting periods of
five
years and
ten
-year contractual terms. Options granted generally vest
20%
annually.
The fair value of each option award is estimated on the grant date using a closed form option valuation (Black-Scholes) model. Expected volatilities are based on historical volatilities of companies within the Company’s peer group. The expected term of options granted represents the period of time that options granted are expected to be 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.
Below is the summary of the activity in the stock option plan for the period presented:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended March 31, 2016
|
|
Shares
|
|
Weighted
Average
Exercise
Price
|
|
Weighted
Average
Remaining
Contractual
Term
|
|
Aggregate
Intrinsic
Value
|
|
(Dollars in thousands, except per share data)
|
Outstanding at January 1, 2016
|
581,826
|
|
|
$
|
9.40
|
|
|
7.5 years
|
|
$
|
3,377
|
|
Granted
|
—
|
|
|
—
|
|
|
|
|
|
Exercised
|
(1,892
|
)
|
|
8.31
|
|
|
|
|
|
Forfeited or expired
|
—
|
|
|
—
|
|
|
|
|
|
Outstanding at March 31, 2016
|
579,934
|
|
|
$
|
9.40
|
|
|
7.3 years
|
|
$
|
3,689
|
|
Exercisable at end of period
|
256,962
|
|
|
$
|
7.79
|
|
|
6.3 years
|
|
$
|
2,048
|
|
During the
three months ended March 31, 2016
,
1,892
options were exercised which had an intrinsic value of
$13,000
. The Company received
$16,000
in cash and realized
$6,000
in tax benefits related to the exercise of these options. At
March 31, 2016
, there was
$587,000
of total unrecognized compensation cost related to nonvested stock options granted, which is expected to be expensed over a weighted-average period of
3.3 years
. The 2014 Plan had
22,132
shares available for future grant at
March 31, 2016
.
Restricted Share Awards
The 2011 Plan provided for the issuance of up to
119,298
restricted shares to directors and employees. The 2014 Plan provides for the issuance of up to
135,772
of restricted shares to directors and employees. Compensation expense is recognized over the vesting period of the awards based on the grant date fair value of the Company’s common stock at issue date as determined by the listing price on the respective date. Shares vest
20%
annually over
five
years. The 2014 Plan had
9,870
shares available for future grant at
March 31, 2016
.
A summary of changes in the Company’s nonvested restricted shares the was as follows for the period presented:
|
|
|
|
|
|
|
|
|
Three Months Ended March 31, 2016
|
|
Shares
|
|
Weighted-Average
Grant-Date
Fair Value
|
Nonvested at January 1, 2016
|
125,152
|
|
|
$
|
10.58
|
|
Granted
|
—
|
|
|
—
|
|
Vested
|
—
|
|
|
—
|
|
Forfeited
|
—
|
|
|
—
|
|
Nonvested at March 31, 2016
|
125,152
|
|
|
$
|
10.58
|
|
LAPORTE BANCORP, INC.
CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
At
March 31, 2016
, there was
$1.1 million
of total unrecognized compensation expense related to nonvested shares granted, which is expected to be recognized over a weighted-average period of
3.3 years
. At
March 31, 2016
, the nonvested shares had an intrinsic value of
$649,000
.
NOTE 10 – ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS)
A summary of the changes in accumulated other comprehensive income (loss) by component for the periods indicated is as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended March 31,
|
|
2016
|
|
2015
|
|
Gains (Losses)
on Cash Flow
Hedges
|
|
Unrealized
Gains (Losses)
on Available-
for-Sale
Securities
|
|
Total
|
|
Gains (Losses)
on Cash Flow
Hedges
|
|
Unrealized
Gains (Losses)
on Available-
for-Sale
Securities
|
|
Total
|
|
(Dollars in thousands)
|
Beginning balance
|
$
|
(836
|
)
|
|
$
|
1,146
|
|
|
$
|
310
|
|
|
$
|
(763
|
)
|
|
$
|
1,285
|
|
|
$
|
522
|
|
Other comprehensive income (loss) before reclassification
|
(400
|
)
|
|
857
|
|
|
457
|
|
|
(296
|
)
|
|
668
|
|
|
372
|
|
Amounts reclassified from accumulated other comprehensive income (loss)
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(33
|
)
|
|
(33
|
)
|
Net current period other comprehensive income (loss)
|
(400
|
)
|
|
857
|
|
|
457
|
|
|
(296
|
)
|
|
635
|
|
|
339
|
|
Ending balance
|
$
|
(1,236
|
)
|
|
$
|
2,003
|
|
|
$
|
767
|
|
|
$
|
(1,059
|
)
|
|
$
|
1,920
|
|
|
$
|
861
|
|
A summary of the reclassifications out of accumulated other comprehensive income (loss) for the periods indicated is as follows:
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended March 31,
|
|
|
2016
|
|
2015
|
|
|
Amount Reclassified from Accumulated Other Comprehensive
Income (Loss)
|
|
Amount Reclassified from Accumulated Other Comprehensive
Income (Loss)
|
|
|
(Dollars in thousands)
|
Unrealized gains and losses on available-for-sale securities:
|
|
|
|
|
Net gains on securities
|
|
$
|
—
|
|
|
$
|
50
|
|
Income tax expense
|
|
—
|
|
|
(17
|
)
|
Net of tax
|
|
$
|
—
|
|
|
$
|
33
|
|
NOTE 11 – OFFSETTING FINANCIAL ASSETS AND LIABILITIES
The following tables summarize gross and net information about financial instruments and derivative instruments that are offset in the Company’s statement of Consolidated Balance Sheets or that are subject to an enforceable master netting arrangement at
March 31, 2016
and
December 31, 2015
.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
March 31, 2016
|
|
Gross
Amounts of
Recognized
Liabilities
|
|
Gross
Amounts
Offset
in the
Consolidated
Balance Sheet
|
|
Net
Amounts of
Liabilities
Presented
in the
Consolidated
Balance Sheet
|
|
Gross Amounts Not Offset in the
Consolidated Balance Sheet
|
|
|
|
|
Financial
Instruments
|
|
Cash
Collateral
Pledged
|
|
Net
Amount
|
|
(Dollars in thousands)
|
Derivatives
|
$
|
1,872
|
|
|
$
|
—
|
|
|
$
|
1,872
|
|
|
$
|
(3,977
|
)
|
|
$
|
—
|
|
|
$
|
(2,105
|
)
|
LAPORTE BANCORP, INC.
CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2015
|
|
Gross
Amounts of
Recognized
Liabilities
|
|
Gross
Amounts
Offset
in the
Consolidated
Balance Sheet
|
|
Net
Amounts of
Liabilities
Presented
in the
Consolidated
Balance Sheet
|
|
Gross Amounts Not Offset in the
Consolidated Balance Sheet
|
|
|
|
|
Financial
Instruments
|
|
Cash
Collateral
Pledged
|
|
Net
Amount
|
|
(Dollars in thousands)
|
Derivatives
|
$
|
1,265
|
|
|
$
|
—
|
|
|
$
|
1,265
|
|
|
$
|
(3,696
|
)
|
|
$
|
—
|
|
|
$
|
(2,431
|
)
|
If an event of default occurs causing an early termination of an interest rate swap derivative, an early termination amount payable to one party by the other party may be reduced by set-off against any other amount payable by the one party to the other party. If a default in performance of any obligation of a repurchase agreement occurs, each party will set-off property held in respect of transactions against obligations owing in respect of any other transactions.
NOTE 12 – PENDING MERGER
On March 10, 2016, the Company entered into an Agreement and Plan of Merger (the “Merger Agreement”) with Horizon Bancorp (“Horizon”), an Indiana corporation. Pursuant to the Merger Agreement, the Company will merge with and into Horizon, with Horizon as the surviving corporation (the “Merger”). Immediately following the Merger, The La Porte Savings Bank, an Indiana chartered savings bank and wholly-owned subsidiary of the Company (“LPS Bank”), will merge with and into Horizon Bank, National Association, the wholly-owned national bank subsidiary of Horizon (“Horizon Bank”), with Horizon Bank as the surviving bank.
Subject to the terms and conditions of the Merger Agreement, upon the completion of the Merger, each share of outstanding Company common stock,
$0.01
par value per share, will be converted into
0.629
shares (the “Exchange Ratio”) of Horizon common stock, no par value, or
$17.50
per share in cash. The Merger Agreement provides that, in the aggregate,
65%
of the outstanding shares of the Company will be converted into the right to receive shares of Horizon common stock and the remaining
35%
of the outstanding shares of the Company will be converted into the right to receive cash. The Exchange Ratio is subject to adjustments for stock splits, stock dividends, recapitalization, or similar transactions, or as otherwise described in the Merger Agreement. No fractional shares of Horizon common stock will be issued arising from the Exchange Ratio, instead, Horizon will pay each holder of Company stock an amount in cash determined by multiplying the fractional shares by an average of the daily closing sales price of a share of Horizon’s common stock during the 15 consecutive trading days immediately preceding the second business day prior to the closing date of the Merger. Immediately prior to the Merger, each outstanding stock option to purchase Company common stock will be converted into the right to receive cash equal to
$17.50
minus the per share exercise price for each stock option, minus any applicable taxes required to be withheld by law. The Merger remains subject to regulatory approval, Company shareholder approval and other customary closing conditions. Based on Horizon’s March 9, 2016 closing price of
$24.21
per share as reported on the NASDAQ Global Select Market, the transaction value is estimated at
$94.1 million
.
NOTE 13 – SUBSEQUENT EVENT
On April 26, 2016, a shareholder class and derivative action lawsuit was filed against the Company, each of LaPorte Bancorp’s directors, and Horizon in connection with the Company entering into the Merger Agreement with Horizon. The lawsuit, which was filed in the Superior Court of LaPorte County, Indiana, alleges that the members of LaPorte Bancorp’s Board of Directors breached their fiduciary duties to the Company’s shareholders by approving the proposed Merger for inadequate consideration; entering into the Merger Agreement containing unreasonable deal protection devices; and approving the transaction in order to receive benefits not equally shared by all other LaPorte Bancorp shareholders. The lawsuit also alleges claims against Horizon for aiding and abetting these alleged breaches of fiduciary duties. The plaintiff seeks, among other things, class certification, declaratory relief, to enjoin the consummation of the proposed transaction, rescission or recissory damages if the Merger is consummated, costs and reasonable attorneys’ and experts’ fees. The Company believes the claims asserted in this action to be without merit and intends to vigorously defend against this lawsuit. However, at this time, it is not possible to predict the outcome of the proceeding or its impact on LaPorte Bancorp, Horizon, or the proposed Merger.