Supplementary Disclosure of Cash Flow and Non-Cash Information:
|
|
Cash payments for interest
|
|
$
|
1,737
|
|
|
$
|
1,918
|
|
Cash payments for income taxes
|
|
$
|
772
|
|
|
$
|
495
|
|
Transfer of loans to other real estate owned
|
|
$
|
397
|
|
|
$
|
640
|
|
Transfer of mortgage-backed securities held to maturity to investment
and mortgage-backed securities available for sale
|
|
$
|
3,591
|
|
|
$
|
--
|
|
See accompanying notes to consolidated financial statements.
Notes to Consolidated Financial Statements
Note 1 - Nature of Operations
On July 3, 2007, Quaint Oak Savings Bank completed its conversion from a Pennsylvania chartered mutual savings bank to a Pennsylvania chartered stock savings bank and changed its name to Quaint Oak Bank (“Bank”). In connection with the conversion, Quaint Oak Bank formed Quaint Oak Bancorp, Inc., a Pennsylvania chartered corporation (the "Company" or "Quaint Oak Bancorp"), which offered and sold 1,388,625 shares of its common stock at a price of $10.00 per share to eligible depositors of the Bank. Upon completion of the conversion and the offering, all of Quaint Oak Bank's common stock is owned by Quaint Oak Bancorp, and all of Quaint Oak Bancorp's common stock is, in turn, owned by the public. The Company sold 1,388,625 shares of its common stock, raising $13,886,250 of gross proceeds. Costs incurred in connection with the conversion and offering totaled $535,000 and were recorded as a reduction of the proceeds from the offering. The Company invested approximately $7.1 million or 53.0% of the net proceeds in Quaint Oak Bank. All remaining proceeds were retained by Quaint Oak Bancorp for future capital needs. The consolidated financial statements include the accounts of the Company and its wholly owned subsidiary, Quaint Oak Bank along with its wholly owned subsidiaries. At December 31, 2012, the Bank has five wholly-owned subsidiaries, Quaint Oak Mortgage, LLC, Quaint Oak Real Estate, LLC, Quaint Oak Abstract, LLC, QOB Properties, LLC, and Quaint Oak Insurance Agency, LLC, each a Pennsylvania limited liability company. The mortgage, real estate and abstract companies offer mortgage banking, real estate sales and title abstract services, respectively, in the Lehigh Valley region of Pennsylvania, and began operation in July 2009. QOB Properties, LLC began operations in July 2012 and holds Bank properties acquired through a foreclosure proceeding or acceptance of a deed in lieu of foreclosure. The insurance agency is currently inactive. All significant intercompany balances and transactions have been eliminated.
The Bank is subject to regulation by the Pennsylvania Department of Banking and the Federal Deposit Insurance Corporation. Pursuant to the Bank’s election under Section 10(l) of the Home Owners’ Loan Act, the Company is a savings and loan holding company regulated by the Board of Governors of the Federal Reserve System. The market area served by the Bank is principally Bucks County, Pennsylvania and to a lesser extent, Montgomery and Philadelphia Counties in Pennsylvania. We have two locations, our main office location in Southampton, PA and a branch banking office in the Lehigh Valley area of Pennsylvania. The principal deposit products offered by the Bank are certificates of deposit, passbook savings accounts, statement savings accounts and eSavings accounts. Loan products offered are fixed and adjustable rate residential and commercial mortgages, construction loans, home equity loans, auto loans, and lines of credit.
Note 2 - Summary of Significant Accounting Policies
Use of Estimates
The preparation of the financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of income and expenses during the reporting period. Actual results could differ from those estimates. The Company’s most significant estimates are the determination of the allowance for loan losses, the assessment of other-than-temporary impairment of investment and mortgage-backed securities, and the valuation of deferred tax assets.
Significant Group Concentrations of Credit Risk
The Bank has a significant concentration of loans in Philadelphia County, Pennsylvania. The concentration of credit by type of loan is set forth in Note 7. Although the Bank has a diversified loan portfolio, its debtors’ ability to honor their contracts is influenced by the region’s economy. During the year ended December 31, 2012, two investors purchased a total of 69% of all loans sold by the Bank from its mortgage loans held for sale, and the sales to these two investors accounted for approximately 62% of the gain on loans sold during the year.
Notes to Consolidated Financial Statements (Continued)
Note 2 - Summary of Significant Accounting Policies (Continued)
Cash and Cash Equivalents
For purposes of reporting cash flows, cash and cash equivalents include non-interest and interest-earning demand deposits and money market accounts with various financial institutions, all of which mature within ninety days of acquisition.
Investment and Mortgage-Backed Securities
Management determines the appropriate classification of debt securities at the time of purchase and reevaluates such designation as of each balance sheet date.
Securities classified as available for sale are those securities that the Company intends to hold for an indefinite period of time but not necessarily to maturity. Any decision to sell a security classified as available for sale would be based on various factors, including significant movement in interest rates, changes in maturity mix of the Company’s assets and liabilities, liquidity needs, regulatory capital requirements, and other similar factors. Securities available for sale are carried at fair value. Unrealized gains and losses are reported in other comprehensive income, net of related deferred tax effects. Realized gains and losses, determined on the basis of the cost of the specific securities sold, are included in earnings. Premiums and discounts are recognized in interest income using the interest method over the terms of the securities.
Investment securities and mortgage-backed securities classified as held to maturity are those debt securities the Company has both the intent and ability to hold to maturity regardless of the changes in market conditions, liquidity needs, or changes in general economic conditions. These securities are carried at cost adjusted for amortization of premium and accretion of discount, which are recognized in interest income using the interest method over the terms of the securities.
The Company follows the accounting guidance related to recognition and presentation of other-than-temporary impairment. This accounting guidance amended the recognition guidance for other-than-temporary impairments of debt securities and expanded the financial statement disclosures for other-than-temporary impairment losses on debt and equity securities. The recent guidance replaced the “intent and ability” indication in existing guidance by specifying that (a) if a company does not have the intent to sell a debt security prior to recovery and (b) it is more likely than not that it will not have to sell the debt security prior to recovery, the security would not be considered other-than-temporarily impaired unless there is a credit loss. When an entity does not intend to sell the security, and it is more likely than not the entity will not have to sell the security before recovery of its cost basis, it will recognize the credit component of an other-than-temporary impairment of a debt security in earnings and the remaining portion in other comprehensive income. For held-to-maturity debt securities, the amount of an other-than-temporary impairment recorded in other comprehensive income for the noncredit portion of a previous other-than-temporary impairment should be amortized prospectively over the remaining life of the security on the basis of the timing of future estimated cash flows of the security. The Company recognized no other-than-temporary impairment charges during the years ended December 31, 2012 and 2011.
Notes to Consolidated Financial Statements (Continued)
Note 2 - Summary of Significant Accounting Policies (Continued)
Federal Home Loan Bank Stock
|
Federal law requires a member institution of the Federal Home Loan Bank (FHLB) system to hold restricted stock of its district Federal Home Loan Bank according to a predetermined formula. FHLB stock is carried at cost and evaluated for impairment. When evaluating FHLB stock for impairment, its value is determined based on the ultimate recoverability of the par value of the stock. We evaluate our holdings of FHLB stock for impairment each reporting period. No impairment charges were recognized on FHLB stock during the year ended September 30, 2012 and 2011. In December 2008, the FHLB of Pittsburgh notified member banks that it was suspending dividend payments and restricting the repurchase of capital stock, to preserve capital. On October 29, 2010, the FHLB of Pittsburgh resumed the repurchase of capital stock. From October 29, 2010 through December 31, 2012 a total of 359,900 shares have been repurchased at $1.00 per share from the Bank. In February 2012, the FHLB of Pittsburgh announced a dividend of 0.10 percent annualized based on the stockholders’ average capital stock held during the quarter prior to payment. Dividends totaling $1,000 were paid in February, April, July and October 2012.
|
Loans Receivable
Loans receivable that management has the intent and ability to hold for the foreseeable future or until maturity or payoff are stated at their outstanding unpaid principal balances, net of an allowance for loan losses and any deferred fees. Interest income is accrued on the unpaid principal balance. Loan origination fees and costs are deferred and recognized as an adjustment of the yield (interest income) of the related loans. The Bank is generally amortizing these amounts over the contractual life of the loan.
The loans receivable portfolio is segmented into residential loans, commercial real estate loans, construction loans and consumer loans. The residential loan segment has two classes: one-to-four family residential owner occupied loans and one-to-four family residential non-owner occupied loans. The commercial real estate loan segment consists of the following classes: multi-family (five or more) residential, commercial real estate and commercial lines of credit. Construction loans are generally granted for the purpose of building a single residential home. The consumer loan segment consists of the following classes: home equity loans and consumer non-real estate loans. Included in the home equity class are home equity loans and home equity lines of credit. Included in the consumer non-real estate loans are loans secured by saving accounts and auto loans.
The accrual of interest is generally discontinued when principal or interest has become 90 days past due unless the loan is in the process of collection and is either guaranteed or well secured. When a loan is placed on nonaccrual status, unpaid interest credited to income in the current year is reversed and unpaid interest accrued in prior years is charged against the allowance for loan losses. Interest received on nonaccrual loans generally is either applied against principal or reported as interest income, according to management’s judgment as to the collectability of principal. Generally, loans are restored to accrual status when the obligation is brought current, has performed in accordance with the contractual terms for a reasonable period of time and the ultimate collectability of the total contractual principal and interest is no longer in doubt.
Allowance for Loan Losses
The allowance for loan losses represents management’s estimate of losses inherent in the loan portfolio as of the balance sheet date and is recorded as a reduction to loans. The allowance for loan losses is increased by the provision for loan losses, and decreased by charge-offs, net of recoveries. Loans deemed to be uncollectible are charged against the allowance for loan losses, and subsequent recoveries, if any, are credited to the allowance. All, or part, of the principal balance of loans receivable are charged off to the allowance as soon as it is determined that the repayment of all, or part, of the principal balance is highly unlikely. Because all identified losses are immediately charged off, no portion of the allowance for loan losses is restricted to any individual loan or groups of loans, and the entire allowance is available to absorb any and all loan losses.
Notes to Consolidated Financial Statements (Continued)
Note 2 - Summary of Significant Accounting Policies (Continued)
Allowance for Loan Losses (Continued)
The allowance for loan losses is maintained at a level considered adequate to provide for losses that can be reasonably anticipated. Management performs a quarterly evaluation of the adequacy of the allowance. The allowance is based on the Company’s past loan loss experience, known and inherent risks in the portfolio, adverse situations that may affect the borrower’s ability to repay, the estimated value of any underlying collateral, composition of the loan portfolio, current economic conditions and other relevant factors. This evaluation is inherently subjective as it requires material estimates that may be susceptible to significant revision as more information becomes available.
The allowance consists of specific, general and unallocated components. The specific component relates to loans that are identified as impaired. For loans that are identified as impaired, an allowance is established when the discounted cash flows (or collateral value or observable market price) of the impaired loan is lower than the carrying value of that loan. The general component covers pools of loans by loan class. These pools of loans are evaluated for loss exposure based upon historical loss rates for each of these categories of loans, adjusted for qualitative factors. These significant factors may include changes in lending policies and procedures, changes in existing general economic and business conditions affecting our primary lending areas, credit quality trends, collateral value, loan volumes and concentrations, seasoning of the loan portfolio, recent loss experience in particular segments of the portfolio, duration of the current business cycle and bank regulatory examination results. The applied loss factors are re-evaluated quarterly to ensure their relevance in the current economic environment. Residential mortgage lending generally entails a lower risk of default than other types of lending. Consumer loans and commercial real estate loans generally involve more risk of collectability because of the type and nature of the collateral and, in certain cases, the absence of collateral. It is the Company’s policy to establish a specific reserve for loss on any delinquent loan when it determines that a loss is probable. An unallocated component is maintained to cover uncertainties that could affect management’s estimate of probable losses. The unallocated component of the allowance reflects the margin of imprecision inherent in the underlying assumptions used in the methodologies for estimating specific and general losses in the portfolio.
A loan is considered impaired when, based on current information and events, it is probable that the Company 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 considered impaired. 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. Impairment is measured on a loan by loan basis by either the present value of expected future cash flows discounted at the loan’s effective interest rate or the fair value of the collateral if the loan is collateral dependent. An allowance for loan losses is established for an impaired loan if its carrying value exceeds its estimated fair value. The estimated fair values of substantially all of the Company’s impaired loans are measured based on the estimated fair value of the loan’s collateral.
A loan is considered a troubled debt restructuring (“TDR”) if the Company, for economic or legal reasons related to a debtor’s financial difficulties, grants a concession to the debtor that it would not otherwise consider. Concessions granted under a TDR typically involve a temporary or permanent reduction in payments or interest rate or an extension of a loan’s stated maturity date at less than a current market rate of interest. Loans identified as TDRs are designated as impaired.
For loans secured by real estate, estimated fair values are determined primarily through third-party appraisals. When a real estate secured loan becomes impaired, a decision is made regarding whether an updated certified appraisal of the real estate is necessary. This decision is based on various considerations, including the age of
Notes to Consolidated Financial Statements (Continued)
Note 2 - Summary of Significant Accounting Policies (Continued)
Allowance for Loan Losses (Continued)
the most recent appraisal, the loan-to-value ratio based on the original appraisal and the condition of the property. Appraised values are discounted to arrive at the estimated selling price of the collateral, which is considered to be the estimated fair value. The discounts also include estimated costs to sell the property.
The allowance calculation methodology includes further segregation of loan classes into risk rating categories. The borrower’s overall financial condition, repayment sources, guarantors and value of collateral, if appropriate, are evaluated annually for all loans (except one-to-four family residential owner-occupied loans) where the total amount outstanding to any borrower or group of borrowers exceeds $500,000, or when credit deficiencies arise, such as delinquent loan payments. Credit quality risk ratings include regulatory classifications of special mention, substandard, doubtful and loss. Loans criticized as special mention have potential weaknesses that deserve management’s close attention. If uncorrected, the potential weaknesses may result in deterioration of the repayment prospects. Loans classified substandard have a well-defined weakness or weaknesses that jeopardize the liquidation of the debt. They include loans that are inadequately protected by the current sound net worth and paying capacity of the obligor or of the collateral pledged, if any. Loans classified doubtful have all the weaknesses inherent in loans classified substandard with the added characteristic that collection or liquidation in full, on the basis of current conditions and facts, is highly improbable. Loans classified as a loss are considered uncollectible and are charged to the allowance for loan losses. Loans not classified are rated pass. In addition, Federal regulatory agencies, as an integral part of their examination process, periodically review the Company’s allowance for loan losses and may require the Company to recognize additions to the allowance based on their judgments about information available to them at the time of their examination, which may not be currently available to management. Based on management’s comprehensive analysis of the loan portfolio, management believes the current level of the allowance for loan losses is adequate.
Loans Held for Sale
Loans originated by the Bank’s mortgage banking subsidiary, Quaint Oak Mortgage, LLC, are intended for sale in the secondary market and are carried at the lower of cost or fair value (LOCOM). Gains and losses on loan sales (sales proceeds minus carrying value) are recorded in noninterest income, and direct loan origination costs and fees are deferred at origination of the loan and are
recognized in noninterest income upon sale of the loan.
Other Real Estate Owned
Other real estate owned or foreclosed assets are comprised of property acquired through a foreclosure proceeding or acceptance of a deed in lieu of foreclosure and loans classified as in-substance foreclosures. A loan is classified as in-substance foreclosure when the Bank has taken possession of the collateral regardless of whether formal foreclosure proceedings take place. Other real estate properties are initially recorded at fair value, net of estimated selling costs at the date of foreclosure, establishing a new cost basis. After foreclosure, valuations are periodically performed by management and the real estate is carried at the lower of cost or fair value less estimated costs to sell. Net revenue and expenses from operations and additions to the valuation allowance are included in other expenses.
Premises and Equipment
Premises and equipment are stated at cost less accumulated depreciation. Depreciation is computed on the straight-line method over the expected useful lives of the related assets. The costs of maintenance and repairs are expensed as incurred. Costs of major additions and improvements are capitalized.
Notes to Consolidated Financial Statements (Continued)
Note 2 - Summary of Significant Accounting Policies (Continued)
Advertising Costs
The Company expenses all advertising costs as incurred. Advertising costs are included in non-interest expense on the Consolidated Statements of Income.
Transfers of Financial Assets
Transfers of financial assets are accounted for as sales, when control over the assets has been surrendered. Control over transferred assets is deemed to be surrendered when (1) the assets have been isolated from the Company, (2) 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 (3) the Company does not maintain effective control over the transferred assets through an agreement to repurchase them before their maturity or the ability to unilaterally cause the holder to return specific assets.
Income Taxes
Deferred income taxes are provided on the liability method whereby deferred tax assets are recognized for deductible temporary differences and deferred tax liabilities are recognized for taxable temporary differences. Temporary differences are the differences between the reported amounts of assets and liabilities and their tax basis. Deferred tax assets are reduced by a valuation allowance when, in the opinion of management, it is more likely than not that some portion of the deferred tax assets will not be realized. Deferred tax assets and liabilities are adjusted for the effects of changes in tax laws and rates on the date of enactment.
The Company follows guidance related to accounting for uncertainty in income taxes, which sets out a consistent framework to determine the appropriate level of tax reserves to maintain for uncertain tax positions. 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 presumed to occur. The amount recognized is the largest amount of tax benefit that has more than 50 percent likelihood of being realized upon examination. For tax positions not meeting the more likely than not test, no tax benefit is recorded. The Company had no material uncertain tax positions or accrued interest and penalties as of December 31, 2012 and 2011. The Company’s policy is to account for interest as a component of interest expense and penalties as components of other expense. The Company is no longer subject to examination by taxing authorities for the years before January 1, 2009.
Comprehensive Income (Loss)
|
Accounting principles generally accepted in the United States of America require that recognized revenue, expenses, gains and losses be included in net income. Although certain changes in assets and liabilities, such as unrealized gains and losses on available for sale securities, are reported as a separate component of the equity section of the balance sheet, such items, along with net income, are components of comprehensive income.
|
Treasury Stock and Unallocated Common Stock
The acquisition of treasury stock by the Company, including unallocated stock held by certain benefit plans, is recorded under the cost method. At the date of subsequent reissue, treasury stock is reduced by the cost of such stock on a first-in, first-out basis with any excess proceeds credited to additional paid-in capital.
Notes to Consolidated Financial Statements (Continued)
Note 2 - Summary of Significant Accounting Policies (Continued)
Share-Based Compensation
Stock compensation accounting guidance (FASB ASC 718,
Compensation-Stock Compensation
) requires that the compensation cost relating to share-based payment transactions be recognized in financial statements. That cost is measured based on the grant date fair value of the equity or liability instruments issued. The stock compensation accounting guidance covers a wide range of share-based compensation arrangements including stock option and restricted share plans.
The stock compensation accounting guidance requires that compensation cost for all stock awards be calculated and recognized over the employees’ 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. A Black-Scholes model is used to estimate the fair value of stock options, while the closing price of the Company’s common stock on the grant date is used for restricted stock awards.
At December 31, 2012, the Company has two share-based plans; the 2008 Recognition and Retention Plan and the 2008 Stock Option Plan. Shares were awarded under both plans in May 2008. These plans are more fully described in Note 12.
The Company also has an employee stock ownership plan (“ESOP”). This plan is more fully described in Note 12. As ESOP shares are committed to be released and allocated among participants, the Company recognizes compensation expense equal to the average market price of the shares over the period earned.
Earnings Per Share
Amounts reported in earnings per share reflect earnings available to common stockholders’ for the period divided by the weighted average number of shares of common stock outstanding during the period, exclusive of unearned ESOP shares, unvested restricted stock (RRP) shares and treasury shares. Stock options and unvested restricted stock are regarded as potential common stock and are considered in the diluted earnings per share calculations to the extent they would have a dilutive effect if converted to common stock, computed using the “treasury stock” method.
Off-Balance Sheet Financial Instruments
In the ordinary course of business, the Bank has entered into off-balance sheet financial instruments consisting of commitments to extend credit. Such financial instruments are recorded in the balance sheet when they are funded.
Reclassifications
Certain items in the 2011 consolidated financial statements have been reclassified to conform to the presentation in the 2012 financial statements. Such reclassifications did not have a material impact on the overall financial statements.
Notes to Consolidated Financial Statements (Continued)
Note 2 - Summary of Significant Accounting Policies (Continued)
Recent Accounting Pronouncements
In May 2011, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) 2011-04 (Amendments to Achieve Common Fair Value Measurement and Disclosure Requirements in U.S. GAAP and IFRSs). This update amends FASB ASC Topic 820, Fair Value Measurement, to bring U.S. GAAP for fair value measurements in line with International Financial Reporting Standards. The update clarifies existing guidance for items such as: the application of the highest and best use concept to non-financial assets and liabilities; the application of fair value measurement to financial instruments classified in a reporting entity’s stockholder’s equity; and disclosure requirements regarding quantitative information about unobservable inputs used in the fair value measurements of level 3 assets. The Update also creates an exception to Topic 820 for entities which carry financial instruments within a portfolio or group, under which the entity is now permitted to base the price used for fair valuation upon a price that would be received to sell the net asset position or transfer a net liability position in an orderly transaction. The update also allows for the application of premiums and discounts in a fair value measurement if the financial instrument is categorized in level 2 or 3 of the fair value hierarchy. Lastly, the ASU contains new disclosure requirements regarding fair value amounts categorized as level 3 in the fair value hierarchy such as: disclosure of the valuation process used; effects of and relationships between unobservable inputs; usage of nonfinancial assets for purposes other than their highest and best use when that is the basis of the disclosed fair value; and categorization by level of items disclosed at fair value, but not measured at fair value for financial statement purposes. For public entities, this update is effective for interim and annual periods beginning after December 15, 2011. The adoption of this new guidance did not have an impact on our financial position or results of operations but expanded disclosures relating to fair value.
In June 2011, the FASB issued ASU No. 2011-05, Comprehensive Income (Topic 220) – Presentation of Comprehensive Income. The intent of this standard is to increase the prominence of comprehensive income in the financial statements. This standard requires the components of comprehensive income be presented either in a single continuous statement of comprehensive income or in two separate but consecutive statements. The single format would include the traditional income statement and the components of other comprehensive income, total other comprehensive income and total comprehensive income. In the two statement approach, the first statement would be the traditional income statement, which would be immediately followed by a separate statement which would include the components of other comprehensive income, total other comprehensive income and total comprehensive income. The amendments in this ASU will be applied retrospectively, and were required for the Company beginning in the first quarter 2012. The adoption of this new guidance did not have an impact on our financial position or results of operations.
Notes to Consolidated Financial Statements (Continued)
Note 3 – Earnings Per Share
Earnings per share (“EPS”) consists of two separate components, basic EPS and diluted EPS. Basic EPS is computed based on the weighted average number of shares of common stock outstanding for each period presented. Diluted EPS is calculated based on the weighted average number of shares of common stock outstanding plus dilutive common stock equivalents (“CSEs”). CSEs consist of shares that are assumed to have been purchased with the proceeds from the exercise of stock options, as well as unvested restricted stock (RRP) shares. Common stock equivalents which are considered antidilutive are not included for the purposes of this calculation. For the years ended December 31, 2012 and 2011, all outstanding stock options (107,570) were antidilutive.
The following table sets forth the composition of the weighted average shares (denominator) used in the basic and dilutive earnings per share computations.
|
|
|
For the Year Ended December 31,
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net Income
|
|
$
|
981,000
|
|
|
$
|
528,000
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average shares outstanding – basic
|
|
|
888,008
|
|
|
|
874,566
|
|
|
Effect of dilutive common stock equivalents
|
|
|
4,826
|
|
|
|
4,333
|
|
|
Adjusted weighted average shares outstanding – diluted
|
|
|
892,834
|
|
|
|
878,899
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic earnings per share
|
|
$
|
1.10
|
|
|
$
|
0.60
|
|
|
Diluted earnings per share
|
|
$
|
1.10
|
|
|
$
|
0.60
|
|
Note 4 – Investment in Interest-Earning Time Deposits
The investment in interest-earning
time deposits as
of December 31, 2012
and 2011, by contractual maturity, are
shown below:
|
|
|
|
|
|
|
|
|
|
|
(In Thousands)
|
|
|
Due in one year or less
|
|
$
|
3,325
|
|
|
$
|
3,058
|
|
|
Due after one year through five years
|
|
|
4,807
|
|
|
|
5,024
|
|
|
|
|
$
|
8,132
|
|
|
$
|
8,082
|
|
Note 5 – Investment Securities Available for Sale
The amortized cost and fair value of investment securities available for sale at December 31, 2012 and December 31, 2011 are summarized below (in thousands):
|
|
December 31, 2012
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Available for Sale:
|
|
|
|
|
|
|
|
|
|
|
|
|
U.S. Government agency securities
|
|
$
|
500
|
|
|
$
|
1
|
|
|
$
|
--
|
|
|
$
|
501
|
|
Corporate securities
|
|
|
1,747
|
|
|
|
81
|
|
|
|
(2
|
)
|
|
|
1,826
|
|
Short-term bond fund
|
|
|
1,127
|
|
|
|
15
|
|
|
|
--
|
|
|
|
1,142
|
|
Limited-term bond fund
|
|
|
528
|
|
|
|
--
|
|
|
|
(3
|
)
|
|
|
525
|
|
|
|
$
|
3,902
|
|
|
$
|
97
|
|
|
$
|
(
5
|
)
|
|
$
|
3,994
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Notes to Consolidated Financial Statements (Continued)
Note 5 – Investment Securities Available for Sale (Continued)
|
|
December 31, 2011
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Available for Sale:
|
|
|
|
|
|
|
|
|
|
|
|
|
U.S. Government agency securities
|
|
$
|
3,450
|
|
|
$
|
8
|
|
|
$
|
(1
|
)
|
|
$
|
3,457
|
|
Corporate securities
|
|
|
1,742
|
|
|
|
--
|
|
|
|
(74
|
)
|
|
|
1,668
|
|
Short-term bond fund
|
|
|
1,082
|
|
|
|
--
|
|
|
|
(12
|
)
|
|
|
1,070
|
|
Limited-term bond fund
|
|
|
518
|
|
|
|
--
|
|
|
|
(6
|
)
|
|
|
512
|
|
|
|
$
|
6,792
|
|
|
$
|
8
|
|
|
$
|
(
93
|
)
|
|
$
|
6,707
|
|
U.S. Government agency securities include an investment in a Federal Home Loan Mortgage Corporation (FHLMC) step-up bond at December 31, 2012 and investments in Federal Home Loan Mortgage Corporation (FHLMC), Federal National Mortgage Association (FNMA) and Federal Home Loan Bank (FHLB) step-up bonds at December 31, 2011.
The amortized cost and fair value of available for sale debt securities at December 31, 2012, by contractual maturity, are shown below. Expected maturities will differ from contractual maturities because borrowers may have the right to call or prepay obligations with or without call or prepayment penalties.
|
|
|
|
Amortized Cost
|
|
|
|
Fair Value
|
|
|
|
|
|
(In Thousands)
|
|
|
Due in one year or less
|
|
$
|
--
|
|
|
$
|
--
|
|
|
Due after one year through five years
|
|
|
1,747
|
|
|
|
1,826
|
|
|
Due after five years through ten years
|
|
|
500
|
|
|
|
501
|
|
|
|
|
$
|
2,247
|
|
|
$
|
2,327
|
|
The following table shows the Company’s gross unrealized losses and fair value, aggregated by investment category and length of time that the individual securities have been in a continuous unrealized loss position at December 31, 2012 and December 31, 2011 (dollar amounts in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Corporate securities
|
|
|
1
|
|
|
$
|
--
|
|
|
$
|
--
|
|
|
$
|
248
|
|
|
$
|
(2
|
)
|
|
$
|
248
|
|
|
$
|
(2
|
)
|
Limited-term bond fund
|
|
|
1
|
|
|
|
--
|
|
|
|
--
|
|
|
|
525
|
|
|
|
(3
|
)
|
|
|
525
|
|
|
|
(3
|
)
|
Total
|
|
|
2
|
|
|
$
|
--
|
|
|
$
|
--
|
|
|
$
|
773
|
|
|
$
|
(5
|
)
|
|
$
|
773
|
|
|
$
|
(5
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
U.S. Government agency
securities
|
|
|
1
|
|
|
$
|
499
|
|
|
$
|
(1
|
)
|
|
$
|
--
|
|
|
$
|
--
|
|
|
$
|
499
|
|
|
$
|
(1
|
)
|
Corporate securities
|
|
|
6
|
|
|
|
1,668
|
|
|
|
(74
|
)
|
|
|
--
|
|
|
|
--
|
|
|
|
1,668
|
|
|
|
(74
|
)
|
Short-term bond fund
|
|
|
1
|
|
|
|
1,070
|
|
|
|
(12
|
)
|
|
|
--
|
|
|
|
--
|
|
|
|
1,070
|
|
|
|
(12
|
)
|
Limited-term bond fund
|
|
|
1
|
|
|
|
--
|
|
|
|
--
|
|
|
|
512
|
|
|
|
(6
|
)
|
|
|
512
|
|
|
|
(6
|
)
|
Total
|
|
|
9
|
|
|
$
|
3,237
|
|
|
$
|
(87
|
)
|
|
$
|
512
|
|
|
$
|
(6
|
)
|
|
$
|
3,749
|
|
|
$
|
(93
|
)
|
Notes to Consolidated Financial Statements (Continued)
Note 5 – Investment Securities Available for Sale (Continued)
At December 31, 2012, there was one debt security in a gross unrealized loss position that at such date had an aggregated depreciation of 0.93% from the Company’s amortized cost basis. Management believes that the estimated fair value of the securities disclosed above is primarily dependent on the movement of market interest rates. Management evaluated the length and time and the extent to which the fair value has been less than cost and the financial condition and near term prospects of the issuer, including any specific events which may influence the operations of the issuer. The Company has the ability and intent to hold the security until maturity and the Company does not believe it will sell or be required to sell such security prior to the recovery of the amortized cost
basis. Management does not believe any individual unrealized loss as of December 31, 2012 represents an other-than-temporary impairment.
At December 31, 2012, there was one bond fund in an unrealized loss position that at such date had an aggregated depreciation of 0.57% from the Company’s amortized cost basis. Management believes that the estimated fair value of the securities disclosed above is primarily dependent on the movement of market interest rates. Management evaluated the length and time and the extent to which the fair value has been less than cost and the financial condition and near term prospects of the issuer, including any specific events which may influence the operations of the issuer. The Company has the ability and intent to hold the security until the anticipated recovery of fair value occurs. Management does not believe any individual unrealized loss as of December 31, 2012 represents an other-than-temporary impairment.
There were no impairment charges recognized during the years ended December 31, 2012 and 2011.
Note 6 – Mortgage-Backed Securities Held to Maturity
On March 30, 2012, the Company transferred all securities designated as held to maturity into the investment and mortgage-backed securities available for sale category. Management determined that it no longer had the positive intent to hold its investment in securities held to maturity for an indefinite period of time because of management’s desire to have more flexibility in managing the investment portfolio. The securities transferred had an amortized cost of $3.6 million and unrealized gross gains of $351,000 at the time of transfer. The net unrealized gain of $231,000 was recorded as other comprehensive income. In the second quarter of 2012, the Company sold these mortgage-backed securities and realized a gain of $331,000.
The amortized cost and fair value of mortgage-backed securities held to maturity at December 31, 2011 are summarized below (in thousands):
|
|
December 31, 2011
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Held to Maturity:
|
|
|
|
|
|
|
|
|
|
|
|
|
FNMA pass-through certificates
|
|
$
|
2,055
|
|
|
$
|
211
|
|
|
$
|
--
|
|
|
$
|
2,266
|
|
FHLMC pass-through certificates
|
|
|
1,833
|
|
|
|
149
|
|
|
|
--
|
|
|
|
1,982
|
|
|
|
$
|
3,888
|
|
|
$
|
360
|
|
|
$
|
--
|
|
|
$
|
4,248
|
|
Notes to Consolidated Financial Statements (Continued)
Note 7 - Loans Receivable, Net and Allowance for Loan Losses
The composition of net loans receivable is as follows:
|
|
|
|
|
|
|
|
|
|
|
(In Thousands)
|
|
|
Real estate loans:
|
|
|
|
|
|
|
|
One-to-four family residential:
|
|
|
|
|
|
|
|
Owner occupied
|
|
$
|
10,272
|
|
|
$
|
12,153
|
|
|
Non-owner occupied
|
|
|
35,118
|
|
|
|
29,606
|
|
|
Total one-to-four family residential
|
|
|
45,390
|
|
|
|
41,759
|
|
|
|
|
|
|
|
|
|
|
|
|
Multi-family (five or more) residential
|
|
|
3,315
|
|
|
|
3,715
|
|
|
Commercial real estate
|
|
|
18,694
|
|
|
|
18,200
|
|
|
Commercial lines of credit
|
|
|
1,901
|
|
|
|
1,654
|
|
|
Construction
|
|
|
9,765
|
|
|
|
5,263
|
|
|
Home equity loans
|
|
|
6,029
|
|
|
|
5,491
|
|
|
Total real estate loans
|
|
|
85,094
|
|
|
|
76,082
|
|
|
|
|
|
|
|
|
|
|
|
|
Auto and equipment loans
|
|
|
93
|
|
|
|
41
|
|
|
Loans secured by deposits
|
|
|
69
|
|
|
|
59
|
|
|
Total Loans
|
|
|
85,256
|
|
|
|
76,182
|
|
|
|
|
|
|
|
|
|
|
|
|
Deferred loan fees and costs
|
|
|
(105
|
)
|
|
|
(38
|
)
|
|
Allowance for loan losses
|
|
|
(860
|
)
|
|
|
(805
|
)
|
|
|
|
|
|
|
|
|
|
|
|
Net Loans
|
|
$
|
84,291
|
|
|
$
|
75,339
|
|
The following tables present the classes of the loan portfolio summarized by the aggregate pass rating and the classified ratings of special mention, substandard and doubtful within the Company’s internal risk rating system as of December 31, 2012 and 2011
(in thousands):
|
|
December 31, 2012
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
One-to-four family residential owner occupied
|
|
$
|
9,641
|
|
|
$
|
500
|
|
|
$
|
72
|
|
|
$
|
59
|
|
|
$
|
10,272
|
|
One-to-four family residential non-owner occupied
|
|
|
34,328
|
|
|
|
95
|
|
|
|
504
|
|
|
|
191
|
|
|
|
35,118
|
|
Multi-family residential
|
|
|
3,315
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
3,315
|
|
Commercial real estate and lines of credit
|
|
|
19,536
|
|
|
|
565
|
|
|
|
364
|
|
|
|
130
|
|
|
|
20,595
|
|
Construction
|
|
|
9,765
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
9,765
|
|
Home equity
|
|
|
5,295
|
|
|
|
428
|
|
|
|
268
|
|
|
|
38
|
|
|
|
6,029
|
|
Consumer non-real estate
|
|
|
156
|
|
|
|
-
|
|
|
|
6
|
|
|
|
-
|
|
|
|
162
|
|
|
|
$
|
82,036
|
|
|
$
|
1,588
|
|
|
$
|
1,214
|
|
|
$
|
418
|
|
|
$
|
85,256
|
|
Notes to Consolidated Financial Statements (Continued)
Note 7 - Loans Receivable, Net and Allowance for Loan Losses (Continued)
|
|
December 31, 2011
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
One-to-four family residential owner occupied
|
|
$
|
10,792
|
|
|
$
|
500
|
|
|
$
|
297
|
|
|
$
|
564
|
|
|
$
|
12,153
|
|
One-to-four family residential non-owner occupied
|
|
|
28,041
|
|
|
|
325
|
|
|
|
1,067
|
|
|
|
173
|
|
|
|
29,606
|
|
Multi-family residential
|
|
|
3,514
|
|
|
|
201
|
|
|
|
-
|
|
|
|
-
|
|
|
|
3,715
|
|
Commercial real estate and lines of credit
|
|
|
18,733
|
|
|
|
694
|
|
|
|
427
|
|
|
|
-
|
|
|
|
19,854
|
|
Construction
|
|
|
5,023
|
|
|
|
240
|
|
|
|
-
|
|
|
|
-
|
|
|
|
5,263
|
|
Home equity
|
|
|
4,862
|
|
|
|
52
|
|
|
|
577
|
|
|
|
-
|
|
|
|
5,491
|
|
Consumer non-real estate
|
|
|
89
|
|
|
|
11
|
|
|
|
-
|
|
|
|
--
|
|
|
|
100
|
|
|
|
$
|
71,054
|
|
|
$
|
2,023
|
|
|
$
|
2,368
|
|
|
$
|
737
|
|
|
$
|
76,182
|
|
The following tables summarize information in regards to impaired loans by loan portfolio class as of December 31, 2012 and 2011 (in thousands):
|
|
December 31, 2012
|
|
|
|
|
|
|
|
|
|
|
|
|
Average Recorded Investment
|
|
|
Interest Income Recognized
|
|
With no related allowance recorded:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
One-to-four family residential owner occupied
|
|
$
|
131
|
|
|
$
|
131
|
|
|
$
|
-
|
|
|
$
|
131
|
|
|
$
|
9
|
|
One-to-four family residential non-owner occupied
|
|
|
393
|
|
|
|
393
|
|
|
|
-
|
|
|
|
396
|
|
|
|
17
|
|
Multi-family residential
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
Commercial real estate and lines of credit
|
|
|
130
|
|
|
|
130
|
|
|
|
-
|
|
|
|
131
|
|
|
|
8
|
|
Construction
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
Home equity
|
|
|
244
|
|
|
|
244
|
|
|
|
-
|
|
|
|
246
|
|
|
|
14
|
|
Consumer non-real estate
|
|
|
6
|
|
|
|
6
|
|
|
|
-
|
|
|
|
9
|
|
|
|
1
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
With an allowance recorded:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
One-to-four family residential owner occupied
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
-
|
|
One-to-four family residential non-owner occupied
|
|
|
302
|
|
|
|
302
|
|
|
|
24
|
|
|
|
304
|
|
|
|
13
|
|
Multi-family residential
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
Commercial real estate and lines of credit
|
|
|
364
|
|
|
|
364
|
|
|
|
88
|
|
|
|
366
|
|
|
|
15
|
|
Construction
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
Home equity
|
|
|
62
|
|
|
|
62
|
|
|
|
28
|
|
|
|
64
|
|
|
|
4
|
|
Consumer non-real estate
|
|
|
--
|
|
|
|
--
|
|
|
|
-
|
|
|
|
--
|
|
|
|
--
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
One-to-four family residential owner occupied
|
|
$
|
131
|
|
|
$
|
131
|
|
|
$
|
-
|
|
|
$
|
131
|
|
|
$
|
9
|
|
One-to-four family residential non-owner occupied
|
|
|
695
|
|
|
|
695
|
|
|
|
24
|
|
|
|
700
|
|
|
|
30
|
|
Multi-family residential
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
Commercial real estate and lines of credit
|
|
|
494
|
|
|
|
494
|
|
|
|
88
|
|
|
|
497
|
|
|
|
23
|
|
Construction
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
Home equity
|
|
|
306
|
|
|
|
306
|
|
|
|
28
|
|
|
|
310
|
|
|
|
18
|
|
Consumer non-real estate
|
|
|
6
|
|
|
|
6
|
|
|
|
-
|
|
|
|
9
|
|
|
|
1
|
|
Notes to Consolidated Financial Statements (Continued)
Note 7 - Loans Receivable, Net and Allowance for Loan Losses (Continued)
|
|
December 31, 2011
|
|
|
|
|
|
|
|
|
|
|
|
|
Average Recorded Investment
|
|
|
Interest Income Recognized
|
|
With no related allowance recorded:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
One-to-four family residential owner occupied
|
|
$
|
861
|
|
|
$
|
861
|
|
|
$
|
-
|
|
|
$
|
867
|
|
|
$
|
16
|
|
One-to-four family residential non-owner occupied
|
|
|
424
|
|
|
|
424
|
|
|
|
-
|
|
|
|
427
|
|
|
|
27
|
|
Multi-family residential
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
Commercial real estate and lines of credit
|
|
|
38
|
|
|
|
38
|
|
|
|
-
|
|
|
|
38
|
|
|
|
1
|
|
Construction
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
Home equity
|
|
|
480
|
|
|
|
480
|
|
|
|
-
|
|
|
|
487
|
|
|
|
24
|
|
Consumer non-real estate
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
With an allowance recorded:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
One-to-four family residential owner occupied
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
-
|
|
One-to-four family residential non-owner occupied
|
|
|
816
|
|
|
|
816
|
|
|
|
91
|
|
|
|
820
|
|
|
|
32
|
|
Multi-family residential
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
Commercial real estate and lines of credit
|
|
|
389
|
|
|
|
389
|
|
|
|
36
|
|
|
|
390
|
|
|
|
16
|
|
Construction
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
Home equity
|
|
|
97
|
|
|
|
97
|
|
|
|
42
|
|
|
|
99
|
|
|
|
5
|
|
Consumer non-real estate
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
One-to-four family residential owner occupied
|
|
$
|
861
|
|
|
$
|
861
|
|
|
$
|
-
|
|
|
$
|
867
|
|
|
$
|
16
|
|
One-to-four family residential non-owner occupied
|
|
|
1,240
|
|
|
|
1,240
|
|
|
|
91
|
|
|
|
1,247
|
|
|
|
59
|
|
Multi-family residential
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
Commercial real estate and lines of credit
|
|
|
427
|
|
|
|
427
|
|
|
|
36
|
|
|
|
428
|
|
|
|
17
|
|
Construction
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
Home equity
|
|
|
577
|
|
|
|
577
|
|
|
|
42
|
|
|
|
586
|
|
|
|
29
|
|
Consumer non-real estate
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
At December 31, 2012, the Company had eight loans totaling $618,000 identified as troubled debt restructurings (TDRs). All eight loans are considered impaired with one loan in the amount of $71,000 on non-accrual status. Any TDR that is placed on non-accrual is not reverted back to accruing status until the borrower makes timely payments as contracted for at least six months and future collection under the revised terms is probable. None of the restructurings were made under a government assistance program. These restructurings were allowed in an effort to maximize the Company’s ability to collect on loans where borrowers were experiencing financial difficulty. All the Company’s TDRs as of December 31, 2012 have modifications with terms of interest-only payments for a period of nine months. In some cases the modification terms may include a small payment of principal in addition to interest. The following tables present the Company’s TDR loans as of December 31, 2012 and 2011 (dollar amounts in thousands):
|
|
December 31, 2012
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
One-to-four family residential owner occupied
|
|
|
1
|
|
|
$
|
71
|
|
|
$
|
71
|
|
|
$
|
-
|
|
|
$
|
-
|
|
One-to-four family residential non-owner occupied
|
|
|
4
|
|
|
|
302
|
|
|
|
-
|
|
|
|
302
|
|
|
|
10
|
|
Multi-family residential
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
Commercial real estate and lines of credit
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
Construction
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
Home equity
|
|
|
3
|
|
|
|
245
|
|
|
|
-
|
|
|
|
245
|
|
|
|
1
|
|
Consumer non-real estate
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
Total
|
|
|
8
|
|
|
$
|
618
|
|
|
$
|
71
|
|
|
$
|
547
|
|
|
$
|
11
|
|
Notes to Consolidated Financial Statements (Continued)
Note 7 - Loans Receivable, Net and Allowance for Loan Losses (Continued)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
One-to-four family residential owner occupied
|
|
|
1
|
|
|
$
|
71
|
|
|
$
|
71
|
|
|
$
|
-
|
|
|
$
|
-
|
|
One-to-four family residential non-owner occupied
|
|
|
5
|
|
|
|
617
|
|
|
|
-
|
|
|
|
617
|
|
|
|
12
|
|
Multi-family residential
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
Commercial real estate and lines of credit
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
Construction
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
Home equity
|
|
|
3
|
|
|
|
249
|
|
|
|
-
|
|
|
|
249
|
|
|
|
1
|
|
Consumer non-real estate
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
Total
|
|
|
9
|
|
|
$
|
937
|
|
|
$
|
71
|
|
|
$
|
866
|
|
|
$
|
13
|
|
The contractual aging of the TDRs in the tables above as of December 31, 2012 and 2011 is as follows (in thousands):
|
|
|
|
|
|
|
December 31, 2012
|
|
|
|
|
|
|
|
|
Current &
Past Due
Less than 30
Days
|
|
|
|
Past Due
30-89 Days
|
|
|
|
Greater
than 90
Days
|
|
|
|
Non-
Accrual
|
|
|
|
Total
|
|
One-to-four family residential owner occupied
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
71
|
|
|
$
|
71
|
|
One-to-four family residential non-owner occupied
|
|
|
-
|
|
|
|
-
|
|
|
|
302
|
|
|
|
-
|
|
|
|
302
|
|
Multi-family residential
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
Commercial real estate and lines of credit
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
Construction
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
Home equity
|
|
|
-
|
|
|
|
180
|
|
|
|
65
|
|
|
|
-
|
|
|
|
245
|
|
Consumer non-real estate
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
Total
|
|
$
|
-
|
|
|
$
|
180
|
|
|
$
|
367
|
|
|
$
|
71
|
|
|
$
|
618
|
|
|
|
|
|
|
|
|
December 31, 2011
|
|
|
|
|
|
|
|
|
Current &
Past Due
Less than
30 Days
|
|
|
|
Past Due
30-89 Days
|
|
|
|
Greater
than 90
Days
|
|
|
|
Non-
Accrual
|
|
|
|
Total
|
|
One-to-four family residential owner occupied
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
71
|
|
|
$
|
71
|
|
One-to-four family residential non-owner occupied
|
|
|
310
|
|
|
|
-
|
|
|
|
307
|
|
|
|
-
|
|
|
|
617
|
|
Multi-family residential
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
Commercial real estate and lines of credit
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
Construction
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
Home equity
|
|
|
-
|
|
|
|
182
|
|
|
|
67
|
|
|
|
-
|
|
|
|
249
|
|
Consumer non-real estate
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
Total
|
|
$
|
310
|
|
|
$
|
182
|
|
|
$
|
374
|
|
|
$
|
71
|
|
|
$
|
937
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
During the year ended December 31, 2012 there were no new TDRs identified and one loan identified as TDR at December 31, 2011, in the amount of $310,000, was removed from TDR status during the first quarter of 2012 as the borrower fulfilled the terms of the loan modification and has been making regular payments in accordance with the original loan terms for more than six months.
Notes to Consolidated Financial Statements (Continued)
Note 7 - Loans Receivable, Net and Allowance for Loan Losses (Continued)
The reserve for an impaired TDR loan is based upon the present value of the future expected cash flows discounted at the loan’s original effective rate or upon the fair value of the collateral less costs to sell, if the loan is deemed collateral dependent. At December 31, 2012 there were no commitments to lend additional funds to debtors whose loan terms have been modified as TDRs.
The general practice of the Bank is to work with borrowers so that they are able to pay back their loan in full. If a borrower continues to be delinquent or cannot meet the terms of a TDR modification and the loan is determined to be uncollectible, the loan will be charged off. As of December 31, 2012 all of our loans classified as TDRs were performing in accordance with their modified terms.
Following is a summary, by loan portfolio class, of changes in the allowance for loan losses for the year ended December 31, 2012 and recorded investment in loans receivable as of December 31, 2012 (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2012
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1-4
Family
Residential
Owner
Occupied
|
|
|
|
1-4 Family
Residential
Non-
Owner
Occupied
|
|
|
|
Multi-
Family
Residential
|
|
|
|
Commercial
Real Estate
and Lines of
Credit
|
|
|
|
Construction
|
|
|
|
Home
Equity
|
|
|
|
Consumer
Non-Real
Estate
|
|
|
|
Unallocated
|
|
|
|
Total
|
|
Allowance for loan losses:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Beginning balance
|
|
$
|
114
|
|
|
$
|
351
|
|
|
$
|
26
|
|
|
$
|
148
|
|
|
$
|
35
|
|
|
$
|
83
|
|
|
$
|
1
|
|
|
$
|
47
|
|
|
$
|
805
|
|
Charge-offs
|
|
|
--
|
|
|
|
(103
|
)
|
|
|
--
|
|
|
|
--
|
|
|
|
--
|
|
|
|
(4
|
)
|
|
|
--
|
|
|
|
--
|
|
|
|
(107
|
)
|
Recoveries
|
|
|
--
|
|
|
|
--
|
|
|
|
--
|
|
|
|
--
|
|
|
|
--
|
|
|
|
--
|
|
|
|
--
|
|
|
|
--
|
|
|
|
--
|
|
Provision
|
|
|
(37
|
)
|
|
|
120
|
|
|
|
(6
|
)
|
|
|
71
|
|
|
|
28
|
|
|
|
(11
|
)
|
|
|
--
|
|
|
|
(3
|
)
|
|
|
162
|
|
Ending balance
|
|
$
|
77
|
|
|
$
|
368
|
|
|
$
|
20
|
|
|
$
|
219
|
|
|
$
|
63
|
|
|
$
|
68
|
|
|
$
|
1
|
|
|
$
|
44
|
|
|
$
|
860
|
|
Ending balance evaluated
|
|
for impairment:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Individually
|
|
$
|
--
|
|
|
$
|
24
|
|
|
$
|
--
|
|
|
$
|
88
|
|
|
$
|
--
|
|
|
$
|
28
|
|
|
$
|
--
|
|
|
$
|
--
|
|
|
$
|
140
|
|
Collectively
|
|
$
|
77
|
|
|
$
|
344
|
|
|
$
|
20
|
|
|
$
|
131
|
|
|
$
|
63
|
|
|
$
|
40
|
|
|
$
|
1
|
|
|
$
|
44
|
|
|
$
|
720
|
|
Ending balance
|
|
$
|
10,272
|
|
|
$
|
35,118
|
|
|
$
|
3,315
|
|
|
$
|
20,595
|
|
|
$
|
9,765
|
|
|
$
|
6,029
|
|
|
$
|
162
|
|
|
$
|
--
|
|
|
$
|
85,256
|
|
Ending balance evaluated
|
for impairment:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Individually
|
|
$
|
131
|
|
|
$
|
695
|
|
|
$
|
--
|
|
|
$
|
494
|
|
|
$
|
--
|
|
|
$
|
306
|
|
|
$
|
6
|
|
|
$
|
--
|
|
|
$
|
1,632
|
|
Collectively
|
|
$
|
10,141
|
|
|
$
|
34,423
|
|
|
$
|
3,315
|
|
|
$
|
20,101
|
|
|
$
|
9,765
|
|
|
$
|
5,723
|
|
|
$
|
156
|
|
|
$
|
--
|
|
|
$
|
83,624
|
|
Notes to Consolidated Financial Statements (Continued)
Note 7 - Loans Receivable, Net and Allowance for Loan Losses (Continued)
Following is a summary, by loan portfolio class, of changes in the allowance for loan losses for the year ended December 31, 2011 and recorded investment in loans receivable as of December 31, 2011 (in thousands):
|
|
|
|
|
|
1-4 Family
Residential Owner Occupied
|
|
|
1-4 Family
Residential Non-Owner Occupied
|
|
|
Multi-Family
|
|
|
Commercial Real Estate and Lines of Credit
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Allowance for loan losses:
|
|
Beginning balance
|
|
$
|
185
|
|
|
$
|
335
|
|
|
$
|
23
|
|
|
$
|
155
|
|
|
$
|
40
|
|
|
$
|
92
|
|
|
$
|
1
|
|
|
$
|
40
|
|
|
$
|
871
|
|
Charge-offs
|
|
|
(93
|
)
|
|
|
(110
|
)
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
(203
|
)
|
Recoveries
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
--
|
|
Provision
|
|
|
22
|
|
|
|
126
|
|
|
|
3
|
|
|
|
(7
|
)
|
|
|
(5
|
)
|
|
|
(9
|
)
|
|
|
-
|
|
|
|
7
|
|
|
|
137
|
|
Ending balance
|
|
$
|
114
|
|
|
$
|
351
|
|
|
$
|
26
|
|
|
$
|
148
|
|
|
$
|
35
|
|
|
$
|
83
|
|
|
$
|
1
|
|
|
$
|
47
|
|
|
$
|
805
|
|
|
|
Ending balance evaluated
for impairment:
|
|
Individually
|
|
$
|
-
|
|
|
$
|
91
|
|
|
$
|
-
|
|
|
$
|
36
|
|
|
$
|
-
|
|
|
$
|
42
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
169
|
|
|
|
Collectively
|
|
$
|
114
|
|
|
$
|
260
|
|
|
$
|
26
|
|
|
$
|
112
|
|
|
$
|
35
|
|
|
$
|
41
|
|
|
$
|
1
|
|
|
$
|
47
|
|
|
$
|
636
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loans receivable:
|
|
Ending balance
|
|
$
|
12,153
|
|
|
$
|
29,606
|
|
|
$
|
3,715
|
|
|
$
|
19,854
|
|
|
$
|
5,263
|
|
|
$
|
5,491
|
|
|
$
|
100
|
|
|
$
|
-
|
|
|
$
|
76,182
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Ending balance evaluated
for impairment
|
|
Individually
|
|
$
|
861
|
|
|
$
|
1,240
|
|
|
$
|
-
|
|
|
$
|
427
|
|
|
$
|
-
|
|
|
$
|
577
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
3,105
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Collectively
|
|
$
|
11,292
|
|
|
$
|
28,366
|
|
|
$
|
3,715
|
|
|
$
|
19,427
|
|
|
$
|
5,263
|
|
|
$
|
4,914
|
|
|
$
|
100
|
|
|
$
|
-
|
|
|
$
|
73,077
|
|
The following table presents nonaccrual loans by classes of the loan portfolio as of December 31, 2012 and 2011 (in thousands):
|
|
|
|
|
|
|
One-to-four family residential owner occupied
|
|
$
|
131
|
|
|
$
|
808
|
|
One-to-four family residential non-owner occupied
|
|
|
488
|
|
|
|
624
|
|
Multi-family residential
|
|
|
-
|
|
|
|
--
|
|
Commercial real estate and lines of credit
|
|
|
445
|
|
|
|
427
|
|
Construction
|
|
|
--
|
|
|
|
--
|
|
Home equity
|
|
|
256
|
|
|
|
256
|
|
Consumer non-real estate
|
|
|
--
|
|
|
|
--
|
|
|
|
$
|
1,320
|
|
|
$
|
2,115
|
|
Non-performing loans, which consist of non-accruing loans plus accruing loans 90 days or more past due, amounted to $2.1 million and $3.3 million at December 31, 2012 and 2011, respectively. For the delinquent loans in our portfolio, we have considered our ability to collect the past due interest, as well as the principal balance of the loan, in order to determine whether specific loans should be placed on non-accrual status. In cases where our evaluations have determined that the principal and interest balances are collectible, we have continued to accrue interest.
Notes to Consolidated Financial Statements (Continued)
Note 7 - Loans Receivable, Net and Allowance for Loan Losses (Continued)
For the years ended December 31, 2012 and 2011, approximately $78,000 and $66,000 of interest income was recognized on non-accrual loans. Interest income foregone on non-accrual loans was approximately $22,000 and $83,000 for the years ended December 31, 2012 and 2011, respectively.
The performance and credit quality of the loan portfolio is also monitored by analyzing the age of the loans receivable as determined by the length of time a recorded payment is past due. The following tables present the classes of the loan portfolio summarized by the past due status as of December 31, 2012 and 2011 (in thousands):
|
|
|
|
|
|
|
|
|
Greater
|
|
|
|
|
|
|
|
|
|
|
|
Loans Receivable >
90 Days and Accruing
|
|
|
|
|
|
One-to-four family residential owner
occupied
|
|
$
|
348
|
|
|
$
|
373
|
|
|
$
|
721
|
|
|
$
|
9,551
|
|
|
$
|
10,272
|
|
|
$
|
242
|
|
One-to-four family residential non-owner
occupied
|
|
|
1,506
|
|
|
|
790
|
|
|
|
2,296
|
|
|
|
32,822
|
|
|
|
35,118
|
|
|
|
302
|
|
Multi-family residential
|
|
|
79
|
|
|
|
-
|
|
|
|
79
|
|
|
|
3,236
|
|
|
|
3,315
|
|
|
|
-
|
|
Commercial real estate and lines of credit
|
|
|
756
|
|
|
|
657
|
|
|
|
1,413
|
|
|
|
19,182
|
|
|
|
20,595
|
|
|
|
212
|
|
Construction
|
|
|
382
|
|
|
|
-
|
|
|
|
382
|
|
|
|
9,383
|
|
|
|
9,765
|
|
|
|
-
|
|
Home equity
|
|
|
238
|
|
|
|
321
|
|
|
|
559
|
|
|
|
5,470
|
|
|
|
6,029
|
|
|
|
65
|
|
Consumer non-real estate
|
|
|
6
|
|
|
|
-
|
|
|
|
6
|
|
|
|
156
|
|
|
|
162
|
|
|
|
-
|
|
|
|
$
|
3,315
|
|
|
$
|
2,141
|
|
|
$
|
5,456
|
|
|
$
|
79,800
|
|
|
$
|
85,256
|
|
|
$
|
821
|
|
|
|
|
|
|
|
|
|
|
Greater
|
|
|
|
|
|
|
|
|
|
|
|
Loans Receivable >
90 Days and Accruing
|
|
|
|
|
|
One-to-four family residential owner
occupied
|
|
$
|
1,009
|
|
|
$
|
861
|
|
|
$
|
1,870
|
|
|
$
|
10,283
|
|
|
$
|
12,153
|
|
|
$
|
53
|
|
One-to-four family residential non-owner
occupied
|
|
|
407
|
|
|
|
993
|
|
|
|
1,400
|
|
|
|
28,206
|
|
|
|
29,606
|
|
|
|
369
|
|
Multi-family residential
|
|
|
-
|
|
|
|
201
|
|
|
|
201
|
|
|
|
3,514
|
|
|
|
3,715
|
|
|
|
201
|
|
Commercial real estate and lines of credit
|
|
|
1,154
|
|
|
|
834
|
|
|
|
1,988
|
|
|
|
17,866
|
|
|
|
19,854
|
|
|
|
407
|
|
Construction
|
|
|
80
|
|
|
|
-
|
|
|
|
80
|
|
|
|
5,183
|
|
|
|
5,263
|
|
|
|
-
|
|
Home equity
|
|
|
524
|
|
|
|
440
|
|
|
|
964
|
|
|
|
4,527
|
|
|
|
5,491
|
|
|
|
184
|
|
Consumer non-real estate
|
|
|
11
|
|
|
|
-
|
|
|
|
11
|
|
|
|
89
|
|
|
|
100
|
|
|
|
-
|
|
|
|
$
|
3,185
|
|
|
$
|
3,329
|
|
|
$
|
6,514
|
|
|
$
|
69,668
|
|
|
$
|
76,182
|
|
|
$
|
1,214
|
|
Notes to Consolidated Financial Statements (Continued)
Note 8 - Premises and Equipment
The components of premises and equipment at December 31, 2012 and 2011 are as follows:
|
|
|
|
|
|
|
|
|
|
|
(In Thousands)
|
|
|
Land
|
|
$
|
208
|
|
|
$
|
208
|
|
|
Buildings
|
|
|
883
|
|
|
|
817
|
|
|
Leasehold improvements
|
|
|
346
|
|
|
|
39
|
|
|
Furniture, fixtures and equipment
|
|
|
547
|
|
|
|
330
|
|
|
|
|
|
1,984
|
|
|
|
1,394
|
|
|
Accumulated depreciation
|
|
|
(376
|
)
|
|
|
(270
|
)
|
|
|
|
$
|
1,608
|
|
|
$
|
1,124
|
|
In November 2011, the Company decided to relocate its 607-609 Lakeside Drive office in Southampton, PA to a larger facility at 501 Knowles Avenue in Southampton, PA. On November 14, 2011, the Company entered into a ten year lease agreement for 501 Knowles Avenue with a renewal option for an additional five years. Minimum rental payments began in July 2012. In connection with the execution of 501 Knowles Avenue lease agreement, the Company terminated its 607-609 Lakeside Drive office lease effective March 31, 2012. The Company moved into its new facility in March 2012. Rent expense under 607-609 Lakeside Drive office leases for each of the years ended December 31, 2012 and 2011 was $8,000 and $33,000, respectively. Lease expense under the 501 Knowles Avenue lease was $33,000.
Future minimum annual rental payments required under non-cancelable operating leases at December 31, 2012 are as follows (in thousands):
|
Years ending December 31,
|
|
|
|
|
2013
|
|
$
|
53
|
|
|
2014
|
|
|
53
|
|
|
2015
|
|
|
53
|
|
|
2016
|
|
|
58
|
|
|
2017
|
|
|
58
|
|
|
Thereafter
|
|
|
250
|
|
|
|
|
$
|
525
|
|
Deposits and the weighted average interest rate at December 31, 2012 and 2011 consist of the following:
|
|
|
|
2012
|
|
|
|
2011
|
|
|
|
|
|
Amount
|
|
|
|
Weighted
Average
Interest
Rate
|
|
|
|
Amount
|
|
|
|
Weighted
Average
Interest
Rate
|
|
|
|
|
|
|
|
|
|
(Dollars in Thousands)
|
|
|
|
|
|
|
Passbook savings accounts
|
|
$
|
2,890
|
|
|
|
0.25
|
%
|
|
$
|
2,943
|
|
|
|
0.33
|
%
|
|
Statement savings accounts
|
|
|
5,843
|
|
|
|
0.43
|
|
|
|
6,975
|
|
|
|
0.62
|
|
|
eSavings accounts
|
|
|
10,604
|
|
|
|
0.97
|
|
|
|
3,924
|
|
|
|
0.99
|
|
|
Certificate of deposit accounts
|
|
|
77,701
|
|
|
|
1.94
|
|
|
|
74,683
|
|
|
|
2.15
|
|
|
|
|
$
|
97,038
|
|
|
|
1.70
|
%
|
|
$
|
88,525
|
|
|
|
1.92
|
%
|
Notes to Consolidated Financial Statements (Continued)
Note 9 - Deposits (Continued)
A summary of certificates of deposit by maturity at December 31, 2012 is as follows (in thousands):
|
Years ending December 31:
|
|
|
|
|
2013
|
|
$
|
30,512
|
|
|
2014
|
|
|
15,137
|
|
|
2015
|
|
|
14,228
|
|
|
2016
|
|
|
7,212
|
|
|
2017
|
|
|
10,612
|
|
|
|
|
$
|
77,701
|
|
The aggregate amount of certificates of deposit with a minimum denomination of $100,000 was $33.3 million and $29.9 million at December 31, 2012 and 2011, respectively.
A summary of interest expense for the years ended December 31, 2012 and 2011 is as follows:
|
|
|
|
2012
|
|
|
|
2011
|
|
|
|
|
|
(In Thousands)
|
|
|
Passbook savings accounts
|
|
$
|
7
|
|
|
$
|
11
|
|
|
Statement savings accounts
|
|
|
26
|
|
|
|
44
|
|
|
eSavings
accounts
|
|
|
66
|
|
|
|
28
|
|
|
Certificate of deposit accounts
|
|
|
1,502
|
|
|
|
1,617
|
|
|
|
|
$
|
1,601
|
|
|
$
|
1,700
|
|
Note 10 - Borrowings
The Bank has two line of credit commitments from two different banks totaling $1.5 million. These lines of credit are demand facilities subject to continued review and modification or suspension at any time. Advances are secured by certain qualifying assets
of the Bank composed of loans. There were no borrowings under these lines of credit at December 31, 2012 and 2011. As of December 31, 2012 Quaint Oak Bank has $2.1 million in borrowing capacity with the Federal Reserve Bank of Philadelphia. There were no borrowings under this facility at December 31, 2012. The Bank has a maximum borrowing capacity with the Federal Home Loan Bank of approximately $47.0 million. Federal Home Loan Bank advances are secured by qualifying assets of the Bank.
Federal Home Loan Bank advances consist of the following at December 31, 2012 and 2011 (in thousands):
|
|
|
2012
|
|
|
|
2011
|
|
Maturity Period
|
|
|
Amount
|
|
|
|
Weighted
Interest
Rate
|
|
|
|
Amount
|
|
|
|
Weighted
Interest
Rate
|
|
1 to12 months
|
|
$
|
2,000
|
|
|
|
4.19
|
%
|
|
$
|
1,800
|
|
|
|
3.98
|
%
|
13 to 24 months
|
|
|
--
|
|
|
|
--
|
|
|
|
2,000
|
|
|
|
4.19
|
%
|
|
|
|
$
|
2,000
|
|
|
|
4.19
|
%
|
|
$
|
3,800
|
|
|
|
4.09
|
%
|
|
In June 2009, the Company borrowed $450,000 from a commercial bank to finance the purchase of a building in Allentown, Pennsylvania which serves as the offices for the three new active subsidiaries and a branch banking office which opened in February 2010. This loan was paid off with no prepayment penalty on November 10, 2011. The loan had an interest rate of 5.75%, a maturity of July 1, 2014, and was amortizing over 180 months. The loan had a balance $403,000 at the time of payoff.
Notes to Consolidated Financial Statements (Continued)
The components of income tax expense for the years ended December 31, 2012 and 2011 are as follows:
|
|
|
2012
|
|
|
2011
|
|
|
|
|
(In Thousands)
|
|
|
Federal:
|
|
|
|
|
|
|
|
Current
|
|
$
|
431
|
|
|
$
|
281
|
|
|
Deferred
|
|
|
85
|
|
|
|
2
|
|
|
|
|
|
516
|
|
|
|
283
|
|
|
State, current
|
|
|
76
|
|
|
|
71
|
|
|
|
|
$
|
592
|
|
|
$
|
354
|
|
The following table represents reconciliation between the reported income tax expense and the income tax expense which would be computed by applying the normal federal income tax rate of 34% to income before taxes for the years ended December 31, 2012 and 2011 is as follows:
|
|
|
|
2012
|
|
|
|
2011
|
|
|
|
|
|
(In Thousands)
|
|
|
Federal income tax at statutory rate
|
|
$
|
535
|
|
|
$
|
300
|
|
|
State tax, net of federal benefit
|
|
|
50
|
|
|
|
48
|
|
|
Stock compensation expense
|
|
|
5
|
|
|
|
5
|
|
|
Other
|
|
|
2
|
|
|
|
1
|
|
|
|
|
$
|
592
|
|
|
$
|
354
|
|
The components of the net deferred tax asset at December 31, 2012 and 2011 are as follows:
|
|
|
2012
|
|
|
2011
|
|
|
|
|
(In Thousands)
|
|
|
Deferred tax assets:
|
|
|
|
|
|
|
|
Allowance for loan losses
|
|
$
|
292
|
|
|
$
|
276
|
|
|
Stock-based compensation
|
|
|
50
|
|
|
|
45
|
|
|
Interest on non-accrual loans
|
|
|
4
|
|
|
|
39
|
|
|
Unrealized loss on investment securities available for sale
|
|
|
--
|
|
|
|
29
|
|
|
Deferred loan fees
|
|
|
36
|
|
|
|
13
|
|
|
Organization cost
|
|
|
3
|
|
|
|
3
|
|
|
Total deferred tax assets
|
|
|
385
|
|
|
|
405
|
|
|
|
|
|
|
|
|
|
|
Deferred tax liabilities:
|
|
|
|
|
|
|
|
Unrealized gain on investment securities available for sale
|
|
|
(32
|
)
|
|
|
--
|
|
|
Bank premises and equipment
|
|
|
(135
|
)
|
|
|
(41
|
)
|
|
Total deferred tax liabilities
|
|
|
(167
|
)
|
|
|
(41
|
)
|
|
|
|
|
|
|
|
|
|
|
|
Net Deferred Tax Asset
|
|
$
|
218
|
|
|
$
|
364
|
|
The net deferred tax asset at December 31, 2012 and 2011 of $218,000 and $364,000, respectively, is included in other assets.
Notes to Consolidated Financial Statements (Continued)
Note 12 – Stock Compensation Plans
Employee Stock Ownership Plan
The Company adopted an Employee Stock Ownership Plan (ESOP) during fiscal 2007 for the benefit of employees who meet the eligibility requirements of the plan. Using proceeds from a loan from the Company, the ESOP purchased 8%, or 111,090 shares of the Company’s then outstanding common stock in the open market at an average price of $9.35 for a total of $1.0 million. The Bank makes cash contributions to the ESOP on a quarterly basis sufficient to enable the ESOP to make the required loan payments to the Company. The loan bears an interest rate equal to 7.75%, with principal and interest to be paid quarterly in equal installments over 15 years. The loan is secured by the unallocated shares of common stock held by the ESOP.
Shares of the Company’s common stock purchased by the ESOP are held in a suspense account and reported as unallocated common stock held by the ESOP in stockholders’ equity until released for allocation to participants. As the debt is repaid, shares are released from collateral and are allocated to each eligible participant based on the ratio of each such participant’s base compensation to the total base compensation of eligible plan participants. As the unearned shares are committed to be released and allocated among participants, the Company recognizes compensation expense equal to the average price of the shares, and the shares become outstanding for earnings per share computations. During the years ended December 31, 2012 and 2011, the Company recognized $111,000 and $82,000 of ESOP expense, respectively.
The following table represents the components of the ESOP shares at December 31, 2012 and 2011:
|
|
|
|
|
|
|
|
|
Allocated shares
|
|
|
44,436
|
|
|
|
33,327
|
|
|
Unreleased shares
|
|
|
66,654
|
|
|
|
77,763
|
|
|
Total ESOP shares
|
|
|
111,090
|
|
|
|
111,090
|
|
|
Fair value of unreleased shares (in thousands)
|
|
$
|
733
|
|
|
$
|
653
|
|
Recognition and Retention Plan
In May 2008, the shareholders of Quaint Oak Bancorp approved the adoption of the 2008 Recognition and Retention Plan (the “RRP”) and Trust Agreement. In order to fund the RRP, the 2008 Recognition and Retention Plan Trust (the “RRP Trust”) acquired 55,545 shares of the Company’s stock in the open market at an average price of $9.36 totaling $520,000. Pursuant to the RRP, 43,324 shares acquired by the RRP Trust were granted to certain officers, employees and directors of the Company in May 2008, with 12,221 shares remaining available for future grant. Due to forfeiture of shares by certain employees in addition to unawarded shares, as of December 31, 2011, 12,459 shares remain available for future grant. The RRP share awards have vesting periods from five to seven years.
A summary of the status of the shares under the RRP as of December 31, 2012 and 2011 is as follows:
|
|
|
|
2012
|
|
|
|
2011
|
|
|
|
|
|
Number of
Shares
|
|
|
|
Weighted
Average Grant
Date Fair Value
|
|
|
|
Number of Shares
|
|
|
|
Weighted
Average Grant Date Fair Value
|
|
|
Unvested at the beginning of
the year
|
|
|
17,440
|
|
|
$
|
9.05
|
|
|
|
25,969
|
|
|
$
|
9.05
|
|
|
Granted
|
|
|
--
|
|
|
|
--
|
|
|
|
--
|
|
|
|
--
|
|
|
Vested
|
|
|
(8,546
|
)
|
|
|
9.05
|
|
|
|
(8,529
|
)
|
|
|
9.05
|
|
|
Forfeited
|
|
|
--
|
|
|
|
--
|
|
|
|
--
|
|
|
|
--
|
|
|
Unvested
at the end of the year
|
|
|
8,894
|
|
|
$
|
9.05
|
|
|
|
17,440
|
|
|
$
|
9.05
|
|
Notes to Consolidated Financial Statements (Continued)
Note 12 – Stock Compensation Plans (Continued)
Recognition and Retention Plan
(Continued)
Compensation expense on the RRP shares granted is recognized ratably over the five to seven year vesting period in an amount which is equal to the fair value of the common stock at the date of grant. Compensation expense was recognized in the amount of $77,000 for each of the years ended December 31, 2012 and 2011. A tax benefit of approximately $26,000 was recognized during these periods. As of December 31, 2012, approximately $32,000 in additional compensation expense will be recognized over the remaining service period of approximately 0.4 years.
Stock Options
In May 2008, the shareholders of Quaint Oak Bancorp approved the adoption of the 2008 Stock Option Plan (the “Option Plan”). The Option Plan authorizes the grant of stock options to officers, employees and directors of the Company to acquire 138,863 shares of common stock with an exercise price no less than the fair market value on the date of the grant. The Compensation Committee of the Board of Directors determined to grant the stock options in May 2008 at an exercise price equal to $10.00 per share which is higher than the fair market value of the common stock on the grant date. All incentive stock options issued under the Option Plan are intended to comply with the requirements of Section 422 of the Internal Revenue Code. Options will become vested and exercisable over a five to seven year period and are generally exercisable for a period of ten years after the grant date. Pursuant to the Option Plan, 108,311 stock options were granted to certain officers, employees and directors of the Company in May 2008. Due to forfeiture of stock options by certain employees in addition to unawarded stock options, as of December 31, 2012, 31,293 stock options remain available for future grant.
A summary of option activity under the Company’s Option Plan as of December 31, 2012 and 2011 and changes during the years ended December 31, 2012 and 2011 is as follows:
|
|
|
2012
|
|
|
|
|
|
|
Number
of
Shares
|
|
|
Weighted
Average Exercise
Price
|
|
|
Weighted
Average Remaining Contractual Life (in years)
|
|
|
Number
of
Shares
|
|
|
Weighted
Average Exercise
Price
|
|
|
Outstanding at the beginning of the year
|
|
|
107,570
|
|
|
$
|
10.00
|
|
|
|
6.4
|
|
|
|
107,570
|
|
|
$
|
10.00
|
|
|
Granted
|
|
|
--
|
|
|
|
--
|
|
|
|
--
|
|
|
|
--
|
|
|
|
--
|
|
|
Exercised
|
|
|
--
|
|
|
|
--
|
|
|
|
--
|
|
|
|
--
|
|
|
|
--
|
|
|
Forfeited
|
|
|
--
|
|
|
|
--
|
|
|
|
--
|
|
|
|
--
|
|
|
|
10.00
|
|
|
Outstanding at the end of the period
|
|
|
107,570
|
|
|
$
|
10.00
|
|
|
|
5.4
|
|
|
|
107,570
|
|
|
$
|
10.00
|
|
|
Exercisable at the end of the period
|
|
|
85,332
|
|
|
$
|
10.00
|
|
|
|
5.4
|
|
|
|
63,999
|
|
|
$
|
10.00
|
|
The estimated fair value of the options granted in May 2008 was $2.01 per share.
The fair value was estimated on the date of grant using the Black-Scholes option pricing model with the following assumptions:
Expected dividend yield 1.10%
Risk-free interest rate 3.5%
Expected life of options 7.5 years
Expected stock-price volatility 19.45%
The dividend yield was calculated on the dividend amount and stock price existing at the grant date. The risk free interest rate used was based on the rates of United States Treasury securities with maturities equal to the expected lives of the options. Although the contractual term of the options granted is ten years, the expected term of the options is less. As the Company has no history of granting stock option awards, management estimated the expected term of the stock options to be the average of the vesting period and the contractual term. The expected
Notes to Consolidated Financial Statements (Continued)
Note 12 – Stock Compensation Plans (Continued)
Stock Options
(Continued)
stock-price volatility was estimated by considering the Company’s own stock volatility for the period since July 5, 2007, the initial trading date. The actual future volatility may differ from our historical volatility.
At December 31, 2012, the aggregate intrinsic value of options outstanding was $108,000. At December 31, 2012,
the aggregate intrinsic value of options exercisable was $85,000. There was no intrinsic value of the options outstanding as of December 31, 2011 as all of the outstanding options were at exercise prices greater than the December 31, 2011 stock price. The aggregate intrinsic value of a stock option represents the total pre-tax intrinsic value (the amount by which the current market value of the underlying stock exceeds the exercise price of the option) that would have been received by the option holder had all option holders exercised their options on December 31, 2012. This amount changes based on changes in the market value of the Company’s common stock.
Compensation expense was recognized in the amount of $41,000 for each of the years ended December 31, 2012 and 2011. A tax benefit of approximately $9,000 was recognized during these periods. As of December 31, 2012, approximately $18,000 in additional compensation expense for awarded options remained unrecognized. This expense will be recognized over approximately 0.4 years.
Note 13 - Transactions with Executive Officers and Directors
Certain directors and executive officers of the Company, their families and their affiliates are customers of the Bank. Any transactions with such parties, including loans and commitments, are in the ordinary course of business at normal terms, including interest rate and collateralization, prevailing at the time and do not represent more than normal risks of collectability. None of these individuals were indebted to the Company for loans at December 31, 2012 and 2011, respectively.
Note 14 - Financial Instruments with Off-Balance Sheet Risk
The Company is a party to financial instruments with off-balance sheet risk in the normal course of business to meet the financing needs of its customers. These financial instruments include commitments to extend credit. Those instruments involve, to varying degrees, elements of credit risk in excess of the amount recognized in the balance sheet.
The Company’s exposure to credit loss in the event of nonperformance by the other party to the financial instrument for commitments to extend credit is represented by the contractual amount of those instruments. The Company uses the same credit policies in making commitments as it does for on-balance sheet instruments.
A summary of the Company's financial instrument commitments at December 31, 2012 and 2011 is as follows:
|
|
|
|
2012
|
|
|
|
2011
|
|
|
|
|
|
(In Thousands)
|
|
|
Commitments to originate loans
|
|
$
|
9,853
|
|
|
$
|
1,891
|
|
|
Unfunded commitments under lines of credit
|
|
|
9,246
|
|
|
|
4,311
|
|
Commitments to extend credit are agreements to lend to a customer as long as there is no violation of any condition established in the contract. Since the commitments may expire without being drawn upon, the total commitment amounts do not necessarily represent future cash requirements. Commitments generally have fixed expiration dates or other termination clauses and may require payment of a fee. The Company evaluates each customer’s credit worthiness on a case-by-case basis. The amount of collateral obtained, if deemed necessary by the Company upon
Notes to Consolidated Financial Statements (Continued)
Note 14 - Financial Instruments with Off-Balance Sheet Risk (Continued)
extension of credit, is based on management’s credit evaluation. Collateral held varies, but includes principally residential and commercial real estate
.
The Company terminated its Lakeside Office Park lease in Southampton, PA effective March 31, 2012 when Quaint Oak Bancorp relocated to 501 Knowles Avenue in Southampton, PA. The Company entered into a ten year lease on this property with a renewal option for an additional five years. Minimum rental commitments for the next five years at December 31, 2012, are summarized as below:
|
|
|
|
|
|
|
|
(In Thousands)
|
|
|
2013
|
|
$
|
53
|
|
|
2014
|
|
|
53
|
|
|
2015
|
|
|
53
|
|
|
2016
|
|
|
58
|
|
|
2017
|
|
|
58
|
|
|
Thereafter
|
|
|
250
|
|
|
|
|
$
|
525
|
|
Note 15 - Regulatory Matters
The Bank is subject to various regulatory capital requirements administered by the federal banking agencies. Failure to meet minimum capital requirements can initiate certain mandatory and possibly additional discretionary actions by regulators that, if undertaken, could have a direct material effect on the Company’s financial statements. Under capital adequacy guidelines and the regulatory framework for prompt corrective action, the Bank must meet specific capital guidelines that involve quantitative measures of the Bank’s assets, liabilities and certain off-balance sheet items as calculated under regulatory accounting practices. The Bank’s capital amounts and classification are also subject to qualitative judgments by the regulators about components, risk-weightings and other factors.
Quantitative measures established by regulation to ensure capital adequacy require the Bank to maintain minimum amounts and ratios (set forth below) of total and Tier 1 capital (as defined in the regulations) to risk-weighted assets, and of Tier 1 capital to average assets. Management believes, as of December 31, 2012, that the Bank meets all capital adequacy requirements to which it is subject.
As of December 31, 2012 the Bank was well capitalized under the regulatory framework for prompt corrective action. There are no conditions or events since December 31, 2012 that management believes have changed the Bank’s category.
The Bank’s actual capital amounts and ratios at December 31, 2012 and 2011 and the minimum amounts and ratios required for capital adequacy purposes and to be well capitalized under the prompt corrective action provisions are as follows:
Notes to Consolidated Financial Statements (Continued)
Note 15 - Regulatory Matters (Continued)
|
|
Actual
|
|
|
For Capital Adequacy
Purposes
|
|
|
To be Well Capitalized
Under Prompt
Corrective Action
Provisions
|
|
|
|
Amount
|
|
|
Ratio
|
|
|
Amount
|
|
|
Ratio
|
|
|
Amount
|
|
|
Ratio
|
|
As of December 31, 2012:
|
|
|
|
|
|
|
|
(Dollars in Thousands)
|
|
|
|
|
|
|
|
Total capital (to risk-weighted assets)
|
|
$
|
16,053
|
|
|
|
22.27
|
%
|
|
$
|
³
5,766
|
|
|
|
≥
8.00
|
%
|
|
$
|
³
7,207
|
|
|
|
≥
10.00
|
%
|
Tier 1 capital (to risk-weighted assets)
|
|
|
15,193
|
|
|
|
21.08
|
|
|
|
³
2,883
|
|
|
|
³
4.00
|
|
|
|
³
4,324
|
|
|
|
≥
6.00
|
|
Tier 1 capital (to average assets)
|
|
|
15,193
|
|
|
|
13.58
|
|
|
|
³
4,476
|
|
|
|
³
4.00
|
|
|
|
³
5,595
|
|
|
|
³
5.00
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For Capital Adequacy
|
|
|
To be Well Capitalized
Under Prompt
Corrective Action
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(Dollars in Thousands)
|
As of December 31, 2011:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total capital (to risk-weighted assets)
|
|
$
|
15,027
|
|
|
|
22.77
|
%
|
|
$
|
³
5,279
|
|
|
|
≥
8.00
|
%
|
|
$
|
³
6,598
|
|
|
|
≥
10.00
|
%
|
Tier 1 capital (to risk-weighted assets)
|
|
|
14,222
|
|
|
|
21.55
|
|
|
|
³
2,639
|
|
|
|
³
4.00
|
|
|
|
³
3,959
|
|
|
|
³
6.00
|
|
Tier 1 capital (to average assets)
|
|
|
14,222
|
|
|
|
13.23
|
|
|
|
³
4,300
|
|
|
|
³
4.00
|
|
|
|
³
5,375
|
|
|
|
³
5.00
|
|
Under the Dodd-Frank Wall Street Reform and Consumer Protection Act the Board of Governors of the Federal Reserve System as the primary regulator for the Company is authorized to extend leverage capital requirements and risk based capital requirements applicable to depository institutions and bank holding companies to thrift holding companies. However, the Federal Reserve Board has not issued regulations that address the levels of these capital requirements and when they will apply to Quaint Oak Bancorp.
Banking regulations place certain restrictions on dividends paid by the Bank to the Company. The Bank is subject to certain restrictions on the amount of dividends that it may declare without prior regulatory approval.
Note 16 – Fair Value Measurements and Fair Values of Financial Instruments
Fair value estimates are based on quoted market prices, if available, quoted market prices of similar assets or liabilities, or the present value of expected future cash flows and other valuation techniques. These valuations are significantly affected by discount rates, cash flow assumptions, and risk assumptions used. Therefore, fair value estimates may not be substantiated by comparison to independent markets and are not intended to reflect the proceeds that may be realizable in an immediate settlement of the instruments.
Fair value is determined at one point in time and is not representative of future value. These amounts do not reflect the total value of a going concern organization. Management does not have the intention to dispose of a significant portion of its assets and liabilities and therefore, the unrealized gains or losses should not be interpreted as a forecast of future earnings and cash flows.
Notes to Consolidated Financial Statements (Continued)
Note 16 – Fair Value Measurements and Fair Values of Financial Instruments (Continued)
The following is a discussion of assets and liabilities measured at fair value on a recurring basis and valuation techniques applied:
Investment and Mortgage-Backed Securities Available-For-Sale:
The fair value of securities available for sale (carried at fair value) and held to maturity (carried at amortized cost) are determined by obtaining quoted market prices on nationally recognized securities exchanges (Level 1), or matrix pricing (Level 2), which is a mathematical technique used widely in the industry to value debt securities without relying exclusively on quoted market prices for the specific securities but rather by relying on the securities’ relationship to other benchmark quoted prices.
We may be required from time to time to measure certain assets at fair value on a nonrecurring basis in accordance with US GAAP. These adjustments to fair value usually result from application of lower-of-cost-or-market accounting or write-downs of individual assets.
Impaired Loans:
Impaired loans are carried at the lower of cost or the fair value of the collateral for collateral-dependent loans less estimated costs to sell. Collateral is primarily in the form of real estate. The use of independent appraisals, discounted cash flow models and management’s best judgment are significant inputs in arriving at the fair value measure of the underlying collateral and impaired loans are therefore classified within level 3 of the fair value hierarchy.
Other Real Estate Owned:
Other real estate owned is carried at the lower of the investment in the real estate or the fair value of the real estate less estimated selling costs. The use of independent appraisals and management’s best judgment are significant inputs in arriving at the fair value measure of the underlying collateral and therefore other real estate owned is classified within level 3 of the fair value hierarchy.
The table below sets forth the financial assets and liabilities that were accounted for on a recurring and nonrecurring basis by level within the fair value hierarchy as of December 31, 2012 (in thousands):
|
|
|
|
|
|
Fair Value Measurements Using:
|
|
|
|
|
|
|
Quoted
Prices in
Active
Markets for Identical Assets
(Level 1)
|
|
|
Significant Other Observable
Inputs
(Level 2)
|
|
|
Unobservable Inputs
(Level 3)
|
|
Recurring fair value measurements
|
|
|
|
Investment securities available for sale
|
|
|
|
U.S. Government agency securities
|
|
$
|
501
|
|
|
$
|
-
|
|
|
$
|
501
|
|
|
$
|
-
|
|
Corporate securities
|
|
|
1,826
|
|
|
|
1,826
|
|
|
|
-
|
|
|
|
-
|
|
Short-term bond fund
|
|
|
1,142
|
|
|
|
1,142
|
|
|
|
-
|
|
|
|
-
|
|
Limited-term bond fund
|
|
|
525
|
|
|
|
525
|
|
|
|
-
|
|
|
|
-
|
|
Total investment securities available for sale
|
|
$
|
3,994
|
|
|
$
|
3,493
|
|
|
$
|
501
|
|
|
$
|
-
|
|
Total recurring fair value measurements
|
|
$
|
3,994
|
|
|
$
|
3,493
|
|
|
$
|
501
|
|
|
$
|
-
|
|
|
|
|
|
Nonrecurring fair value measurements
|
|
|
|
Impaired loans
|
|
$
|
588
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
588
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other real estate owned
|
|
|
170
|
|
|
|
-
|
|
|
|
-
|
|
|
|
170
|
|
Total nonrecurring fair value measurements
|
|
$
|
758
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
758
|
|
Notes to Consolidated Financial Statements (Continued)
Note 16 – Fair Value Measurements and Fair Values of Financial Instruments (Continued)
The table below sets forth the financial assets and liabilities that were accounted for on a recurring and nonrecurring basis by level within the fair value hierarchy as of December 31, 2011 (in thousands):
|
|
|
|
|
|
Fair Value Measurements Using:
|
|
|
|
|
|
|
Quoted
Prices in
Active
Markets for Identical
Assets
(Level 1)
|
|
|
Significant Other Observable
Inputs
(Level 2)
|
|
|
Unobservable Inputs
(Level 3)
|
|
Recurring fair value measurements
|
|
|
|
Investment securities available for sale
|
|
|
|
U.S. Government agency securities
|
|
$
|
3,457
|
|
|
$
|
-
|
|
|
$
|
3,457
|
|
|
$
|
-
|
|
Corporate securities
|
|
|
1,668
|
|
|
|
1,668
|
|
|
|
-
|
|
|
|
-
|
|
Short-term bond fund
|
|
|
1,070
|
|
|
|
1,070
|
|
|
|
-
|
|
|
|
-
|
|
Limited-term bond fund
|
|
|
512
|
|
|
|
512
|
|
|
|
-
|
|
|
|
-
|
|
Total investment securities available for sale
|
|
$
|
6,707
|
|
|
$
|
3,250
|
|
|
$
|
3,457
|
|
|
$
|
-
|
|
Total recurring fair value measurements
|
|
$
|
6,707
|
|
|
$
|
3,250
|
|
|
$
|
3,457
|
|
|
$
|
-
|
|
|
|
|
|
Nonrecurring fair value measurements
|
|
|
|
Impaired loans
|
|
$
|
1,133
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
1,133
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other real estate owned
|
|
|
185
|
|
|
|
-
|
|
|
|
-
|
|
|
|
185
|
|
Total nonrecurring fair value measurements
|
|
$
|
1,318
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
1,318
|
|
The following table presents additional quantitative information about assets measured at fair value on a nonrecurring basis and for which the Company has used level 3 inputs to determine fair value as of December 31, 2012 (in thousands):
|
|
|
|
|
Quantitative Information About Level 3 Fair Value Measurements
|
|
|
|
|
|
|
|
|
|
Impaired loans
|
|
$
|
588
|
|
Appraisal of collateral
(1)
|
|
Appraisal adjustments
(2)
|
|
0% to -58% (-18%)
(-8%)
|
|
|
|
|
|
|
|
L
iquidation expenses
(2)
|
|
(-8%)
|
Other real estate owned
|
|
$
|
170
|
|
Appraisal of collateral
(1) (3)
|
|
L
iquidation expenses
(2)
|
|
(-8%)
|
(1)
|
Fair value is generally determined through independent appraisals of the underlying collateral, which generally include various Level 3 inputs which are identifiable.
|
(2)
|
Appraisals may be adjusted by management for qualitative factors such as economic conditions and estimated liquidation expenses. The range and weighted average of liquidation expenses and other appraisal adjustments are presented as a percentage of the appraisal.
|
(3)
|
Includes qualitative adjustments by management and estimated liquidation expenses.
|
Notes to Consolidated Financial Statements (Continued)
Note 16 – Fair Value Measurements and Fair Values of Financial Instruments (Continued)
The estimated fair values of the Company’s financial instruments were as follows at December 31, 2012 and December 31, 2011 (in thousands):
|
|
|
|
|
|
|
|
Fair Value Measurements at
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Quoted Prices in Active Markets
for Identical
Assets
(Level 1)
|
|
|
Significant Other Observable Inputs
(Level 2)
|
|
|
Unobservable Inputs
(Level 3)
|
|
Financial Assets
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents
|
|
$
|
12,400
|
|
|
$
|
12,400
|
|
|
$
|
12,400
|
|
|
$
|
-
|
|
|
$
|
-
|
|
Investment in interest-earning time deposits
|
|
|
8,132
|
|
|
|
8,234
|
|
|
|
-
|
|
|
|
8,234
|
|
|
|
-
|
|
Investment securities available for sale
|
|
|
3,994
|
|
|
|
3,994
|
|
|
|
3,493
|
|
|
|
501
|
|
|
|
-
|
|
Loans held for sale
|
|
|
4,875
|
|
|
|
5,053
|
|
|
|
-
|
|
|
|
5,053
|
|
|
|
-
|
|
Loans receivable, net
|
|
|
84,291
|
|
|
|
86,503
|
|
|
|
-
|
|
|
|
-
|
|
|
|
86,503
|
|
Accrued interest receivable
|
|
|
657
|
|
|
|
657
|
|
|
|
657
|
|
|
|
-
|
|
|
|
-
|
|
Investment in FHLB stock
|
|
|
437
|
|
|
|
437
|
|
|
|
-
|
|
|
|
437
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Financial Liabilities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Deposits
|
|
|
97,038
|
|
|
|
98,279
|
|
|
|
19,337
|
|
|
|
78,942
|
|
|
|
-
|
|
FHLB advances, short-term
|
|
|
2,000
|
|
|
|
2,000
|
|
|
|
-
|
|
|
|
2,000
|
|
|
|
-
|
|
Accrued interest payable
|
|
|
81
|
|
|
|
81
|
|
|
|
81
|
|
|
|
-
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fair Value Measurements at
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Quoted Prices in Active Markets
for Identical
Assets
(Level 1)
|
|
|
Significant Other Observable Inputs
(Level 2)
|
|
|
Unobservable Inputs
(Level 3)
|
|
Financial Assets
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents
|
|
$
|
11,687
|
|
|
$
|
11,687
|
|
|
$
|
11,687
|
|
|
$
|
-
|
|
|
$
|
-
|
|
Investment in interest-earning time deposits
|
|
|
8,082
|
|
|
|
8,178
|
|
|
|
-
|
|
|
|
8,178
|
|
|
|
-
|
|
Investment securities available for sale
|
|
|
6,707
|
|
|
|
6,707
|
|
|
|
3,250
|
|
|
|
3,457
|
|
|
|
-
|
|
Mortgage-backed securities held to maturity
|
|
|
3,888
|
|
|
|
4,248
|
|
|
|
-
|
|
|
|
4,248
|
|
|
|
-
|
|
Loans held for sale
|
|
|
413
|
|
|
|
418
|
|
|
|
-
|
|
|
|
5,053
|
|
|
|
-
|
|
Loans receivable, net
|
|
|
75,339
|
|
|
|
77,005
|
|
|
|
-
|
|
|
|
-
|
|
|
|
77,005
|
|
Accrued interest receivable
|
|
|
543
|
|
|
|
543
|
|
|
|
543
|
|
|
|
-
|
|
|
|
-
|
|
Investment in FHLB stock
|
|
|
616
|
|
|
|
616
|
|
|
|
-
|
|
|
|
616
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Financial Liabilities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Deposits
|
|
|
88,525
|
|
|
|
90,106
|
|
|
|
13,842
|
|
|
|
76,264
|
|
|
|
-
|
|
FHLB advances, long-term
|
|
|
2,000
|
|
|
|
2,105
|
|
|
|
-
|
|
|
|
2,105
|
|
|
|
-
|
|
FHLB advances, short-term
|
|
|
1,800
|
|
|
|
1,800
|
|
|
|
-
|
|
|
|
1,800
|
|
|
|
-
|
|
Accrued interest payable
|
|
|
98
|
|
|
|
98
|
|
|
|
98
|
|
|
|
-
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Notes to Consolidated Financial Statements (Continued)
Note 16 – Fair Value Measurements and Fair Values of Financial Instruments (Continued)
The following methods and assumptions were used to measure the fair value of financial instruments recorded at cost on the Company’s consolidated balance sheets:
Cash and Cash Equivalents.
The carrying amounts reported in the balance sheet for cash and short-term instruments approximate those assets’ fair values.
Interest-Earning Time Deposits.
Fair values for interest-earning time deposits are estimated using a discounted cash flow calculation that applies interest rates currently being offered in the market on certificates to a schedule of aggregated expected monthly maturities on time deposits. The Company generally purchases amounts below the insured limit, limiting the amount of credit risk on these time deposits.
Loans Held for Sale
. Fair values of loans held for sale are based on commitments on hand from investors at prevailing market rates.
Loans Receivable, Net.
The fair values of loans are estimated using discounted cash flow methodology. The discount rates take into account interest rates currently being offered to customers for loans with similar terms, the credit risk associated with the loan and market factors, including liquidity. The valuation of the loan portfolio reflects discounts that the Company believes are consistent with transactions occurring in the market place for both performing and distressed loan types. The carrying value that fair value is compared to is net of the allowance for loan losses and other associated premiums and discounts. Due to the significant judgment involved in evaluating credit quality, loans are classified with level 3 of the fair value hierarchy.
Accrued Interest Receivable.
The carrying amount of accrued interest receivable approximates its fair value.
Federal Home Loan Bank Stock.
The carrying amount of restricted investment in Federal Home Loan Bank stock approximates fair value, and considers the limited marketability of such securities.
Deposits.
The carrying amount is considered a reasonable estimate of fair value for demand savings deposit accounts. The fair value of fixed maturity certificates of deposit is estimated by a discounted cash flow method using the rates currently offered for deposits of similar maturities.
Federal Home Loan Bank Borrowings.
Fair values of FHLB advances are estimated based on rates currently available to the Company for similar terms and remaining maturities.
Accrued Interest Receivable.
The carrying amount of accrued interest payable approximates its fair value.
Off-Balance Sheet Financial Instruments.
Off-balance sheet financial instruments consist of commitments to extend credit. Fair values for commitments to extend credit are estimated using the fees currently charged to enter into similar agreements, taking into account the remaining terms of the agreement and the present credit standing of the counterparties. The estimated fair value of the commitments to extend credit are insignificant and therefore are not presented in the above table.
Notes to Consolidated Financial Statements (Continued)
Note 17 – Quaint Oak Bancorp, Inc. (Parent Company Only)
Condensed financial statements of Quaint Oak Bancorp, Inc. are as follows (in thousands):
Balance Sheets
|
|
December 31,
|
|
|
|
2012
|
|
|
2011
|
|
Assets
|
|
|
|
|
|
|
Cash and cash equivalents
|
|
$
|
521
|
|
|
$
|
516
|
|
Investment in Quaint Oak Bank
|
|
|
15,253
|
|
|
|
14,178
|
|
Premises and equipment, net
|
|
|
1,020
|
|
|
|
973
|
|
Other assets
|
|
|
61
|
|
|
|
44
|
|
Total Assets
|
|
$
|
16,855
|
|
|
$
|
15,711
|
|
|
|
|
|
|
|
|
|
|
Liabilities and Stockholders’ Equity
|
|
|
|
|
|
|
|
|
Other liabilities
|
|
$
|
18
|
|
|
$
|
15
|
|
Stockholders’ equity
|
|
|
16,837
|
|
|
|
15,696
|
|
Total Liabilities and Stockholders’ Equity
|
|
$
|
16,855
|
|
|
$
|
15,711
|
|
Statements of Income
|
|
For the Year Ended December 31,
|
|
|
|
2012
|
|
|
2011
|
|
Income
|
|
|
|
|
|
|
Interest income
|
|
$
|
3
|
|
|
$
|
6
|
|
Rental income
|
|
|
84
|
|
|
|
79
|
|
Total Income
|
|
|
87
|
|
|
|
85
|
|
|
|
|
|
|
|
|
|
|
Expenses
|
|
|
|
|
|
|
|
|
Occupancy and equipment expense
|
|
|
60
|
|
|
|
87
|
|
Other expenses
|
|
|
90
|
|
|
|
76
|
|
Total Expenses
|
|
|
150
|
|
|
|
163
|
|
|
|
|
|
|
|
|
|
|
Net Loss Before Income Taxes
|
|
|
(63
|
)
|
|
|
(78
|
)
|
Equity in Undistributed Net Income of Subsidiary
|
|
|
1,023
|
|
|
|
581
|
|
Income Tax Benefit
|
|
|
21
|
|
|
|
25
|
|
Net Income
|
|
$
|
981
|
|
|
$
|
528
|
|
Notes to Consolidated Financial Statements (Continued)
Note 17 – Quaint Oak Bancorp, Inc. (Parent Company Only) (Continued)
Statements of Cash Flows
|
|
For the Year Ended December 31,
|
|
|
|
2012
|
|
|
2011
|
|
|
|
|
|
|
|
|
Operating Activities
|
|
|
|
|
|
|
Net income
|
|
$
|
981
|
|
|
$
|
528
|
|
Adjustments to reconcile net income to net cash provided by
operating activities:
|
|
|
|
|
|
|
|
|
Undistributed income in subsidiary
|
|
|
(1,023
|
)
|
|
|
(581
|
)
|
Depreciation expense
|
|
|
22
|
|
|
|
21
|
|
Stock-based compensation expense
|
|
|
294
|
|
|
|
201
|
|
Increase in other assets
|
|
|
(17
|
)
|
|
|
(4
|
)
|
Increase in other liabilities
|
|
|
3
|
|
|
|
63
|
|
Net cash provided by operating activities
|
|
|
260
|
|
|
|
228
|
|
|
|
|
|
|
|
|
|
|
Investing Activities
|
|
|
|
|
|
|
|
|
Net decrease in investment in interest-earning time deposits
|
|
|
--
|
|
|
|
513
|
|
Purchase of property and equipment
|
|
|
(69
|
)
|
|
|
(9
|
)
|
Net cash (used in)
provided by investing activities
|
|
|
(69
|
)
|
|
|
504
|
|
|
|
|
|
|
|
|
|
|
Financing Activities
|
|
|
|
|
|
|
|
|
Repayment of other borrowings
|
|
|
--
|
|
|
|
(423
|
)
|
Dividends paid
|
|
|
(153
|
)
|
|
|
(134
|
)
|
Purchase of treasury stock
|
|
|
(33
|
)
|
|
|
(47
|
)
|
Net cash used in financing activities
|
|
|
(186
|
)
|
|
|
(604
|
)
|
|
|
|
|
|
|
|
|
|
Net Increase in Cash and Cash Equivalents
|
|
|
5
|
|
|
|
128
|
|
Cash and Cash Equivalents-Beginning of Year
|
|
|
516
|
|
|
|
388
|
|
Cash and Cash Equivalents-End of Year
|
|
$
|
521
|
|
|
$
|
516
|
|
DIRECTORS AND EXECUTIVE OFFICERS
|
Directors
|
Robert T. Strong
President and Chief Executive Officer
|
James J. Clarke, Ph.D.
Principal of Clarke Consulting, Villanova, Pennsylvania
|
Robert J. Phillips
Chairman of the Board
Partner, Phillips and Phillips
Enterprises
Doylestown, Pennsylvania
|
Andrew E. DiPiero, Jr., Esq.
Attorney with Baratta, Russell & Baratta
Huntingdon Valley, Pennsylvania
|
George M. Ager, Jr.
Currently retired
|
Kenneth R. Gant, MBA
Associate Agent, Landis Agencies, Doylestown, Pennsylvania
|
John J. Augustine, CPA
Chief Financial Officer
|
Marsh B. Spink
Managing Partner of Lawn-Crest Realty
Philadelphia, Pennsylvania
|
|
|
|
|
|
|
Executive Officers
|
Diane J. Colyer
Chief Operating Officer and Corporate Secretary
|
Robert Farrer
Chief Risk Officer, Compliance Officer, Security Officer
and Community Reinvestment Act Officer
|
|
|
|
Curt T. Schulmeister
Chief Lending Officer
|
|
Main Office
|
|
Lehigh Valley Office
|
|
|
|
|
|
|
|
501 Knowles Avenue
|
|
1710 Union Boulevard
|
|
|
Southampton, Pennsylvania
|
|
Allentown, PA 18109
|
|
|
(215) 364-4059
|
|
(610) 351-9960
|
|
|
|
www.quaintoak.com
|
|
|
TRANSFER AGENT / REGISTRAR
|
Shareholders needing assistance with stock records, transfers or lost certificates, please contact Quaint Oak Bancorp, Inc.'s transfer agent, Registrar and Transfer Company.
Registrar and Transfer Company
10 Commerce Drive
Cranford, New Jersey 07016
(800) 368-5948
www.rtco.com
53