ý
|
QUARTERLY
REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF
1934
|
o
|
TRANSITION
REPORT PURSUANT TO 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
1934
|
Stewardship
Financial Corporation
|
||
(Exact
name of registrant as specified in its charter)
|
||
New
Jersey
|
22-3351447
|
|
(State
or other jurisdiction of
|
(I.R.S.
Employer Identification No.)
|
|
incorporation
or organization)
|
||
630
Godwin Avenue, Midland Park, NJ
|
07432
|
|
(Address
of principal executive offices)
|
(Zip
Code)
|
(201) 444-7100
|
||
(Registrant’s
telephone number, including area code)
|
||
(Former
name, former address and former fiscal year, if changed since last
report)
|
||
Large
accelerated filer o
|
Accelerated
filer o
|
Non-accelerated
filer ý
|
PAGE
|
|
NUMBER
|
|
1
|
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2
|
|
3
|
|
4
|
|
5
|
|
6
-
13
|
|
14
- 25
|
|
26
|
|
26
|
|
27
|
|
27
|
|
28
|
|
29
-32
|
Stewardship
Financial Corporation and
Subsidiary
|
||||||||
Consolidated
Statements of Financial Condition
(Unaudited)
|
||||||||
June
30,
|
December
31,
|
|||||||
2007
|
2006
|
|||||||
|
||||||||
Assets
|
||||||||
Cash
and due from banks
|
$ |
13,208,000
|
$ |
14,861,000
|
||||
Other
interest-earning assets
|
149,000
|
836,000
|
||||||
Cash
and cash equivalents
|
13,357,000
|
15,697,000
|
||||||
Securities
available for sale
|
79,219,000
|
72,746,000
|
||||||
Securities
held to maturity; estimated fair value
|
||||||||
of
$39,199,000 (2007) and $38,881,000 (2006)
|
39,864,000
|
39,163,000
|
||||||
FHLB-NY
stock, at cost
|
1,827,000
|
1,899,000
|
||||||
Loans,
net of allowance for loan losses of
|
||||||||
of
$ 4,181,000 (2007) and $4,101,000 (2006)
|
379,472,000
|
365,443,000
|
||||||
Mortgage
loans held for sale
|
1,672,000
|
2,155,000
|
||||||
Premises
and equipment, net
|
7,469,000
|
7,098,000
|
||||||
Accrued
interest receivable
|
3,069,000
|
2,912,000
|
||||||
Intangible
assets
|
86,000
|
102,000
|
||||||
Other
real estate
|
385,000
|
-
|
||||||
Bank
owned life insurance
|
8,111,000
|
8,522,000
|
||||||
Other
assets
|
4,306,000
|
4,012,000
|
||||||
Total
assets
|
$ |
538,837,000
|
$ |
519,749,000
|
||||
Liabilities
and stockholders' equity
|
||||||||
Liabilities
|
||||||||
Deposits:
|
||||||||
Noninterest-bearing
|
$ |
101,976,000
|
$ |
92,105,000
|
||||
Interest-bearing
|
349,502,000
|
342,118,000
|
||||||
Total
deposits
|
451,478,000
|
434,223,000
|
||||||
Other
borrowings
|
25,176,000
|
27,892,000
|
||||||
Subordinated
debentures
|
7,217,000
|
7,217,000
|
||||||
Securities
sold under agreements to repurchase
|
11,697,000
|
9,023,000
|
||||||
Accrued
interest payable
|
1,867,000
|
1,721,000
|
||||||
Accrued
expenses and other liabilities
|
2,788,000
|
2,367,000
|
||||||
Total
liabilities
|
500,223,000
|
482,443,000
|
||||||
Commitments
and contingencies
|
-
|
-
|
||||||
Stockholders'
equity
|
||||||||
Common
stock, no par value; 10,000,000 shares authorized;
|
||||||||
5,060,038
and 5,017,919 shares issued and outstanding at
|
||||||||
June
30, 2007 and December 31, 2006, respectively.
|
31,348,000
|
31,148,000
|
||||||
Retained
earnings
|
8,387,000
|
6,750,000
|
||||||
Treasury
stock; 9,302 shares outstanding at June 30, 2007.
|
(127,000 | ) |
-
|
|||||
Accumulated
other comprehensive loss
|
(994,000 | ) | (592,000 | ) | ||||
Total
stockholders' equity
|
38,614,000
|
37,306,000
|
||||||
Total
liabilities and stockholders' equity
|
$ |
538,837,000
|
$ |
519,749,000
|
||||
See
notes to unaudited consolidated financial statements.
|
Stewardship
Financial Corporation and
Subsidiary
|
||||||||
Consolidated
Statements of Income
|
||||||||
(Unaudited)
|
||||||||
Six
Months Ended
|
||||||||
June
30,
|
||||||||
2007
|
2006
|
|||||||
Interest
income:
|
||||||||
Loans
|
$ |
13,285,000
|
$ |
12,278,000
|
||||
Securities
held to maturity
|
||||||||
Taxable
|
464,000
|
440,000
|
||||||
Non-taxable
|
356,000
|
237,000
|
||||||
Securities
available for sale
|
||||||||
Taxable
|
1,837,000
|
1,285,000
|
||||||
Non-taxable
|
30,000
|
13,000
|
||||||
FHLB
dividends
|
58,000
|
47,000
|
||||||
Other
interest-earning assets
|
19,000
|
18,000
|
||||||
Total
interest income
|
16,049,000
|
14,318,000
|
||||||
Interest
expense:
|
||||||||
Deposits
|
5,621,000
|
3,792,000
|
||||||
Borrowed
money
|
953,000
|
1,087,000
|
||||||
Total
interest expense
|
6,574,000
|
4,879,000
|
||||||
Net
interest income before provision for loan losses
|
9,475,000
|
9,439,000
|
||||||
Provision
for loan losses
|
190,000
|
160,000
|
||||||
Net
interest income after provision for loan losses
|
9,285,000
|
9,279,000
|
||||||
Noninterest
income:
|
||||||||
Fees
and service charges
|
785,000
|
828,000
|
||||||
Bank
owned life insurance
|
160,000
|
154,000
|
||||||
Gain
on sales of mortgage loans
|
186,000
|
95,000
|
||||||
Merchant
processing
|
717,000
|
562,000
|
||||||
Life insurance proceeds | 459,000 | – | ||||||
Miscellaneous
|
195,000
|
263,000
|
||||||
Total
noninterest income
|
2,502,000
|
1,902,000
|
||||||
Noninterest
expenses:
|
||||||||
Salaries
and employee benefits
|
3,644,000
|
3,332,000
|
||||||
Occupancy,
net
|
716,000
|
607,000
|
||||||
Equipment
|
457,000
|
489,000
|
||||||
Data
processing
|
629,000
|
571,000
|
||||||
Advertising
|
200,000
|
201,000
|
||||||
FDIC
insurance premium
|
26,000
|
26,000
|
||||||
Amortization
of intangible assets
|
16,000
|
19,000
|
||||||
Charitable
contributions
|
368,000
|
362,000
|
||||||
Stationery
and supplies
|
193,000
|
153,000
|
||||||
Merchant
processing
|
650,000
|
514,000
|
||||||
Bank-card
related services
|
169,000
|
244,000
|
||||||
Miscellaneous
|
1,109,000
|
1,123,000
|
||||||
Total
noninterest expenses
|
8,177,000
|
7,641,000
|
||||||
Income
before income tax expense
|
3,610,000
|
3,540,000
|
||||||
Income
tax expense
|
1,070,000
|
1,264,000
|
||||||
Net
income
|
$ |
2,540,000
|
$ |
2,276,000
|
||||
Basic
earnings per share
|
$ |
0.51
|
$ |
0.45
|
||||
Diluted
earnings per share
|
$ |
0.50
|
$ |
0.45
|
||||
Weighted
average number of common shares outstanding
|
5,029,621
|
5,008,239
|
||||||
Weighted
average number of diluted common
|
||||||||
shares
outstanding
|
5,062,418
|
5,060,994
|
||||||
Share
data has been restated to reflect a 5% stock dividend paid November
15,
2006.
|
||||||||
See
notes to unaudited consolidated financial statements.
|
Stewardship
Financial Corporation and
Subsidiary
|
||||||||
Consolidated
Statements of Income
|
||||||||
(Unaudited)
|
||||||||
Three
Months Ended
|
||||||||
June
30,
|
||||||||
2007
|
2006
|
|||||||
Interest
income:
|
||||||||
Loans
|
$ |
6,715,000
|
$ |
6,304,000
|
||||
Securities
held to maturity
|
||||||||
Taxable
|
235,000
|
219,000
|
||||||
Non-taxable
|
179,000
|
119,000
|
||||||
Securities
available for sale
|
||||||||
Taxable
|
930,000
|
648,000
|
||||||
Non-taxable
|
16,000
|
6,000
|
||||||
FHLB
dividends
|
32,000
|
27,000
|
||||||
Other
interest-earning assets
|
10,000
|
11,000
|
||||||
Total
interest income
|
8,117,000
|
7,334,000
|
||||||
Interest
expense:
|
||||||||
Deposits
|
2,861,000
|
2,015,000
|
||||||
Borrowed
money
|
454,000
|
557,000
|
||||||
Total
interest expense
|
3,315,000
|
2,572,000
|
||||||
Net
interest income before provision for loan losses
|
4,802,000
|
4,762,000
|
||||||
Provision
for loan losses
|
180,000
|
110,000
|
||||||
Net
interest income after provision for loan losses
|
4,622,000
|
4,652,000
|
||||||
Noninterest
income:
|
||||||||
Fees
and service charges
|
391,000
|
450,000
|
||||||
Bank
owned life insurance
|
82,000
|
74,000
|
||||||
Gain
on sales of mortgage loans
|
97,000
|
45,000
|
||||||
Merchant
processing
|
352,000
|
296,000
|
||||||
Life insurance proceeds | 459,000 | – | ||||||
Miscellaneous
|
125,000
|
167,000
|
||||||
Total
noninterest income
|
1,506,000
|
1,032,000
|
||||||
Noninterest
expenses:
|
||||||||
Salaries
and employee benefits
|
1,850,000
|
1,711,000
|
||||||
Occupancy,
net
|
381,000
|
293,000
|
||||||
Equipment
|
240,000
|
247,000
|
||||||
Data
processing
|
322,000
|
277,000
|
||||||
Advertising
|
124,000
|
114,000
|
||||||
FDIC
insurance premium
|
13,000
|
13,000
|
||||||
Amortization
of intangible assets
|
8,000
|
9,000
|
||||||
Charitable
contributions
|
199,000
|
181,000
|
||||||
Stationery
and supplies
|
110,000
|
77,000
|
||||||
Merchant
processing
|
315,000
|
272,000
|
||||||
Bank-card
related services
|
74,000
|
123,000
|
||||||
Miscellaneous
|
546,000
|
546,000
|
||||||
Total
noninterest expenses
|
4,182,000
|
3,863,000
|
||||||
Income
before income tax expense
|
1,946,000
|
1,821,000
|
||||||
Income
tax expense
|
492,000
|
654,000
|
||||||
Net
income
|
$ |
1,454,000
|
$ |
1,167,000
|
||||
Basic
earnings per share
|
$ |
0.29
|
$ |
0.23
|
||||
Diluted
earnings per share
|
$ |
0.29
|
$ |
0.23
|
||||
Weighted
average number of common shares outstanding
|
5,039,902
|
5,023,707
|
||||||
Weighted
average number of diluted common
|
||||||||
shares
outstanding
|
5,063,811
|
5,075,956
|
||||||
Share
data has been restated to reflect a 5% stock dividend paid November
15,
2006.
|
||||||||
See
notes to unaudited consolidated financial statements.
|
Stewardship
Financial Corporation and
Subsidiary
|
||||||||
Consolidated
Statements of Cash Flows
|
||||||||
(Unaudited)
|
||||||||
Six
Months Ended
|
||||||||
June
30,
|
||||||||
2007
|
2006
|
|||||||
Cash
flows from operating activities:
|
||||||||
Net
income
|
$ |
2,540,000
|
$ |
2,276,000
|
||||
Adjustments
to reconcile net income to
|
||||||||
net
cash provided by operating activities:
|
||||||||
Depreciation
and amortization of premises and equipment
|
388,000
|
379,000
|
||||||
Amortization
of premiums and accretion of discounts, net
|
76,000
|
146,000
|
||||||
Accretion
of deferred loan fees
|
(59,000 | ) | (58,000 | ) | ||||
Provision
for loan losses
|
190,000
|
160,000
|
||||||
Originations
of mortgage loans held for sale
|
(17,522,000 | ) | (9,383,000 | ) | ||||
Proceeds
from sale of mortgage loans
|
18,191,000
|
10,181,000
|
||||||
Gain
on sale of loans
|
(186,000 | ) | (95,000 | ) | ||||
Deferred
income tax benefit
|
(12,000 | ) | (49,000 | ) | ||||
Amortization
of intangible assets
|
16,000
|
19,000
|
||||||
Nonqualified
stock option expense
|
26,000
|
24,000
|
||||||
Increase
in bank owned life insurance
|
(159,000 | ) | (155,000 | ) | ||||
Life
insurance proceeds
|
(459,000 | ) |
-
|
|||||
Increase
in accrued interest receivable
|
(156,000 | ) | (147,000 | ) | ||||
Increase
(decrease) in other assets
|
(34,000 | ) |
48,000
|
|||||
Increase
in accrued interest payable
|
146,000
|
236,000
|
||||||
Decrease
in other liabilities
|
(737,000 | ) | (730,000 | ) | ||||
Net
cash provided by operating activities
|
2,249,000
|
2,852,000
|
||||||
Cash
flows from investing activities:
|
||||||||
Purchase
of securities available for sale
|
(12,952,000 | ) | (5,613,000 | ) | ||||
Proceeds
from maturities and principal repayments
|
||||||||
on
securities available for sale
|
6,954,000
|
6,595,000
|
||||||
Purchase
of securities held to maturity
|
(4,513,000 | ) | (6,813,000 | ) | ||||
Proceeds
from maturities and principal repayments on
|
||||||||
securities
held to maturity
|
3,617,000
|
5,668,000
|
||||||
Proceeds
from calls on securities held to maturity
|
152,000
|
-
|
||||||
Purchase
of FHLB-NY stock
|
72,000
|
224,000
|
||||||
Net
increase in loans
|
(14,221,000 | ) | (13,919,000 | ) | ||||
Additional
investment in other real estate owned
|
(324,000 | ) |
-
|
|||||
Proceeds
from life insurance payout
|
1,030,000
|
-
|
||||||
Additions
to premises and equipment
|
(759,000 | ) | (453,000 | ) | ||||
Net
cash used in investing activities
|
(20,944,000 | ) | (14,311,000 | ) | ||||
Cash
flows from financing activities:
|
||||||||
Net
increase (decrease) in noninterest-bearing deposits
|
9,871,000
|
(4,138,000 | ) | |||||
Net
increase in interest-bearing deposits
|
7,384,000
|
19,628,000
|
||||||
Net
increase in securities sold under agreements
|
||||||||
to
repurchase
|
2,674,000
|
2,689,000
|
||||||
Net
decrease in short term borrowings
|
(1,900,000 | ) | (5,900,000 | ) | ||||
Payments
on long term borrowings
|
(817,000 | ) | (790,000 | ) | ||||
Cash
dividends paid on common stock
|
(903,000 | ) | (348,000 | ) | ||||
Payment
of discount on dividend reinvestment plan
|
(22,000 | ) |
-
|
|||||
Purchase
of treasury stock
|
-
|
(103,000 | ) | |||||
Options
exercised
|
45,000
|
101,000
|
||||||
Tax
benefit of stock options
|
1,000
|
174,000
|
||||||
Issuance
of common stock
|
22,000
|
49,000
|
||||||
Net
cash provided by financing activities
|
16,355,000
|
11,362,000
|
||||||
Net
decrease in cash and cash equivalents
|
(2,340,000 | ) | (97,000 | ) | ||||
Cash
and cash equivalents - beginning
|
15,697,000
|
14,028,000
|
||||||
Cash
and cash equivalents - ending
|
$ |
13,357,000
|
$ |
13,931,000
|
||||
Supplemental
disclosures of cash flow information:
|
||||||||
Cash
paid during the period for interest
|
6,428,000
|
4,643,000
|
||||||
Cash
paid during the period for income taxes
|
1,194,000
|
1,500,000
|
||||||
Noncash
investing activities - security purchases due brokers
|
1,159,000
|
-
|
||||||
-
transfer of loan to ORE
|
60,975
|
-
|
||||||
Noncash
financing activities - issuance of common stock
|
||||||||
under
dividend reinvestment plan
|
-
|
412,000
|
||||||
See
notes to unaudited consolidated financial statements.
|
Stewardship
Financial Corporation and Subsidiary
|
||||||||||||||||||||||||||||
Consolidated
Statement of Changes in Stockholders' Equity
|
||||||||||||||||||||||||||||
(Unaudited)
|
||||||||||||||||||||||||||||
For
the Period Ended June 30, 2007
|
||||||||||||||||||||||||||||
Accumulated
|
||||||||||||||||||||||||||||
Other
|
||||||||||||||||||||||||||||
Comprehensive
|
||||||||||||||||||||||||||||
Common
Stock
|
Treasury
Stock
|
Retained
|
Loss,
|
|||||||||||||||||||||||||
Shares
|
Amount
|
Shares
|
Amount
|
Earnings
|
Net
|
Total
|
||||||||||||||||||||||
Balance
-- December 31, 2006
|
5,017,919
|
$ |
31,148,000
|
-
|
$ |
-
|
$ |
6,750,000
|
$ | (592,000 | ) | $ |
37,306,000
|
|||||||||||||||
Cash
dividends paid
|
-
|
-
|
-
|
-
|
(903,000 | ) |
-
|
(903,000 | ) | |||||||||||||||||||
Payment
of discount on dividend
|
||||||||||||||||||||||||||||
reinvestment
plan
|
-
|
(22,000 | ) |
-
|
-
|
-
|
-
|
(22,000 | ) | |||||||||||||||||||
Common
stock issued under stock plans
|
1,810
|
22,000
|
-
|
-
|
-
|
-
|
22,000
|
|||||||||||||||||||||
Stock
option compensation expense
|
-
|
26,000
|
-
|
-
|
-
|
-
|
26,000
|
|||||||||||||||||||||
Stock
options exercised
|
40,309
|
173,000
|
(9,302 | ) | (127,000 | ) |
-
|
-
|
46,000
|
|||||||||||||||||||
Tax
benefit on stock options exercised
|
1,000
|
1,000
|
||||||||||||||||||||||||||
Comprehensive
income:
|
||||||||||||||||||||||||||||
Net
income for the six months
|
||||||||||||||||||||||||||||
ended
June 30, 2007
|
-
|
-
|
-
|
-
|
2,540,000
|
-
|
2,540,000
|
|||||||||||||||||||||
Unrealized
holding losses on securities
|
||||||||||||||||||||||||||||
available
for sale arising during the period
|
||||||||||||||||||||||||||||
(net
of tax benefit of $249,000)
|
-
|
-
|
-
|
-
|
-
|
(402,000 | ) | (402,000 | ) | |||||||||||||||||||
Total
comprehensive income, net of tax
|
2,138,000
|
|||||||||||||||||||||||||||
Balance
-- June 30, 2007
|
5,060,038
|
$ |
31,348,000
|
(9,302 | ) | $ | (127,000 | ) | $ |
8,387,000
|
$ | (994,000 | ) | $ |
38,614,000
|
|||||||||||||
For
the Period Ended June 30, 2006
|
||||||||||||||||||||||||||||
Accumulated
|
||||||||||||||||||||||||||||
Other
|
||||||||||||||||||||||||||||
Comprehensive
|
||||||||||||||||||||||||||||
Common
Stock
|
Treasury
Stock
|
Retained
|
Loss,
|
|||||||||||||||||||||||||
Shares
|
Amount
|
Shares
|
Amount
|
Earnings
|
Net
|
Total
|
||||||||||||||||||||||
Balance
-- December 31, 2005
|
5,027,283
|
$ |
28,211,000
|
(41,560 | ) | $ | (556,000 | ) | $ |
6,647,000
|
$ | (918,000 | ) | $ |
33,384,000
|
|||||||||||||
Cash
dividends paid
|
-
|
-
|
-
|
-
|
(760,000 | ) |
-
|
(760,000 | ) | |||||||||||||||||||
Common
stock issued under dividend
|
||||||||||||||||||||||||||||
reinvestment
plan
|
-
|
-
|
31,263
|
412,000
|
-
|
-
|
412,000
|
|||||||||||||||||||||
Common
stock issued under stock plans
|
-
|
-
|
3,544
|
49,000
|
-
|
-
|
49,000
|
|||||||||||||||||||||
Repurchase
common stock
|
-
|
-
|
(7,739 | ) | (103,000 | ) |
-
|
-
|
(103,000 | ) | ||||||||||||||||||
Stock
option compensation expense
|
-
|
24,000
|
-
|
-
|
-
|
-
|
24,000
|
|||||||||||||||||||||
Exercise
of stock options
|
37,523
|
233,000
|
(9,450 | ) | (132,000 | ) |
-
|
-
|
101,000
|
|||||||||||||||||||
Tax
benefit on stock options exercised
|
-
|
174,000
|
-
|
-
|
-
|
-
|
174,000
|
|||||||||||||||||||||
Comprehensive
income:
|
||||||||||||||||||||||||||||
Net
income for the six months
|
||||||||||||||||||||||||||||
ended
June 30, 2006
|
-
|
-
|
-
|
-
|
2,276,000
|
-
|
2,276,000
|
|||||||||||||||||||||
Unrealized
holding losses on securities
|
||||||||||||||||||||||||||||
available
for sale arising during the period
|
||||||||||||||||||||||||||||
(net
tax benefit of $331,000)
|
-
|
-
|
-
|
-
|
-
|
(528,000 | ) | (528,000 | ) | |||||||||||||||||||
Total
comprehensive income, net of tax
|
1,748,000
|
|||||||||||||||||||||||||||
Balance
-- June 30, 2006
|
5,064,806
|
$ |
28,642,000
|
(23,942 | ) | $ | (330,000 | ) | $ |
8,163,000
|
$ | (1,446,000 | ) | $ |
35,029,000
|
See
notes to unaudited consolidated financial statements.
|
2007
|
2006
|
|||||||||||||||
Weighted
|
Weighted
|
|||||||||||||||
Average
|
Average
|
|||||||||||||||
Shares
|
Exercise
Price
|
Shares
|
Exercise
Price
|
|||||||||||||
Outstanding
at beginning of year
|
75,422
|
$ |
5.98
|
75,989
|
$ |
6.03
|
||||||||||
Granted
|
-
|
-
|
-
|
-
|
||||||||||||
Exercised
|
39,259
|
4.05
|
-
|
-
|
||||||||||||
Forfeited
|
572
|
12.89
|
486
|
12.96
|
||||||||||||
Outstanding
at end of period
|
35,591
|
$ |
8.01
|
75,502
|
$ |
5.99
|
||||||||||
Options
exercisable
|
35,591
|
75,502
|
||||||||||||||
Weighted-average
remaining
|
||||||||||||||||
contractual
life
|
3.05
years
|
2.21
years
|
||||||||||||||
Aggregate
intrinsic value
|
$ |
249,000
|
$ |
519,000
|
Dividend
yield
|
2.25%
|
Expected
volatility
|
36.72%
|
Risk-free
interest rate
|
5.21%
|
Expected
life
|
6
years
|
2007
|
2006
|
|||||||||||||||
Weighted
|
Weighted
|
|||||||||||||||
Average
|
Average
|
|||||||||||||||
Shares
|
Exercise
Price
|
Shares
|
Exercise
Price
|
|||||||||||||
Outstanding
at beginning of year
|
57,860
|
$ |
12.96
|
45,568
|
$ |
7.12
|
||||||||||
Granted
|
-
|
-
|
52,500
|
12.86
|
||||||||||||
Exercised
|
1,050
|
12.86
|
37,523
|
6.20
|
||||||||||||
Expired
|
-
|
-
|
2,685
|
6.20
|
||||||||||||
Outstanding
at end of period
|
56,810
|
$ |
12.96
|
57,860
|
$ |
12.96
|
||||||||||
Options
exercisable
|
14,810
|
5,360
|
||||||||||||||
Weighted-average
remaining
|
||||||||||||||||
contractual
life
|
4.73
years
|
5.45
years
|
||||||||||||||
Aggregate
intrinsic value
|
$ |
116,000
|
$ |
-
|
||||||||||||
Weighted-average
fair value of
|
||||||||||||||||
options
granted during the period
|
$ |
4.55
|
June
30, 2007
|
||||||||||||
Gross
|
Gross
|
|||||||||||
Fair
|
Unrealized
|
Unrealized
|
||||||||||
Value
|
Holding
Gains
|
Holding
Losses
|
||||||||||
U.S.
government-sponsored agencies
|
$ |
39,432,000
|
$ |
14,000
|
$ |
488,000
|
||||||
Obligations
of state and political
|
||||||||||||
subdivisions
|
2,402,000
|
-
|
70,000
|
|||||||||
Mortgage-backed
securities
|
36,243,000
|
5,000
|
1,038,000
|
|||||||||
Other
securities
|
1,142,000
|
-
|
44,000
|
|||||||||
$ |
79,219,000
|
$ |
19,000
|
$ |
1,640,000
|
December
31, 2006
|
||||||||||||
Gross
|
Gross
|
|||||||||||
Amortized
|
Unrealized
|
Unrealized
|
||||||||||
Cost
|
Holding
Gains
|
Holding
Losses
|
||||||||||
U.S.
Treasury securities
|
||||||||||||
U.S.
government-sponsored agencies
|
$ |
32,117,000
|
$ |
28,000
|
$ |
347,000
|
||||||
Obligations
of state and political
|
||||||||||||
subdivisions
|
1,823,000
|
-
|
30,000
|
|||||||||
Mortgage-backed
securities
|
37,707,000
|
40,000
|
641,000
|
|||||||||
Other
securities
|
1,099,000
|
-
|
21,000
|
|||||||||
$ |
72,746,000
|
$ |
68,000
|
$ |
1,039,000
|
June
30, 2007
|
||||||||||||||||
Gross
|
Gross
|
|||||||||||||||
Carrying
|
Unrecognized
|
Unrecognized
|
Fair
|
|||||||||||||
Value
|
Holding
Gains
|
Holding
Losses
|
Value
|
|||||||||||||
U.S.
Treasury securities
|
$ |
501,000
|
$ |
-
|
$ |
3,000
|
$ |
498,000
|
||||||||
U.S.
government-sponsored agencies
|
11,275,000
|
6,000
|
127,000
|
11,154,000
|
||||||||||||
Obligations
of state and political
|
||||||||||||||||
subdivisions
|
21,549,000
|
2,000
|
398,000
|
21,153,000
|
||||||||||||
Mortgage-backed
securities
|
6,524,000
|
19,000
|
164,000
|
6,379,000
|
||||||||||||
Other
securities
|
15,000
|
-
|
-
|
15,000
|
||||||||||||
$ |
39,864,000
|
$ |
27,000
|
$ |
692,000
|
$ |
39,199,000
|
December
31, 2006
|
||||||||||||||||
Gross
|
Gross
|
|||||||||||||||
Carrying
|
Unrecognized
|
Unrecognized
|
Fair
|
|||||||||||||
Value
|
Holding
Gains
|
Holding
Losses
|
Value
|
|||||||||||||
U.S.
Treasury securities
|
$ |
502,000
|
$ |
-
|
$ |
2,000
|
$ |
500,000
|
||||||||
U.S.
government-sponsored agencies
|
10,776,000
|
8,000
|
109,000
|
10,675,000
|
||||||||||||
Obligations
of state and political
|
||||||||||||||||
subdivisions
|
20,516,000
|
53,000
|
154,000
|
20,415,000
|
||||||||||||
Mortgage-backed
securities
|
7,369,000
|
32,000
|
110,000
|
7,291,000
|
||||||||||||
$ |
39,163,000
|
$ |
93,000
|
$ |
375,000
|
$ |
38,881,000
|
June
30,
|
December
31,
|
|||||||
2007
|
2006
|
|||||||
Mortgage
|
||||||||
Residential
|
$ |
47,394,000
|
$ |
47,020,000
|
||||
Commercial
|
179,629,000
|
177,411,000
|
||||||
Commercial
|
84,761,000
|
72,606,000
|
||||||
Equity
|
19,451,000
|
20,010,000
|
||||||
Installment
|
52,518,000
|
52,389,000
|
||||||
Other
|
325,000
|
560,000
|
||||||
Total
loans
|
384,078,000
|
369,996,000
|
||||||
Less: Deferred
loan fees
|
425,000
|
452,000
|
||||||
Allowance
for loan losses
|
4,181,000
|
4,101,000
|
||||||
4,606,000
|
4,553,000
|
|||||||
Loans,
net
|
$ |
379,472,000
|
$ |
365,443,000
|
Note
6. Allowance for loan losses
|
||||||||
Six
Months Ended June 30,
|
||||||||
2007
|
2006
|
|||||||
Balance,
beginning of period
|
$ |
4,101,000
|
$ |
3,847,000
|
||||
Provision
charged to operations
|
190,000
|
160,000
|
||||||
Recoveries
of loans charged off
|
5,000
|
24,000
|
||||||
Loans
charged off
|
(115,000 | ) | (20,000 | ) | ||||
Balance,
end of period
|
$ |
4,181,000
|
$ |
4,011,000
|
June
30,
|
December
31,
|
|||||||
2007
|
2006
|
|||||||
Impaired
loans
|
||||||||
With
related allowance for loan losses
|
$ |
101,000
|
$ |
223,000
|
||||
Without
related allowance for loan losses
|
199,000
|
221,000
|
||||||
Total
impaired loans
|
$ |
300,000
|
$ |
444,000
|
||||
Related
allowance for loan losses
|
$ |
25,000
|
$ |
110,000
|
Three
Months Ended
|
Six
Months Ended
|
|||||||||||||||
June
30,
|
June
30,
|
|||||||||||||||
2007
|
2006
|
2007
|
2006
|
|||||||||||||
(Dollars and
shares in thousands)
|
||||||||||||||||
Net
income
|
$ |
1,454
|
$ |
1,167
|
$ |
2,540
|
$ |
2,276
|
||||||||
Weighted
average shares
|
5,040
|
5,024
|
5,030
|
5,008
|
||||||||||||
Effect
of dilutive stock options
|
24
|
52
|
32
|
53
|
||||||||||||
Total
weighted average dilutive shares
|
5,064
|
5,076
|
5,062
|
5,061
|
||||||||||||
Basic
earnings per share
|
$ |
0.29
|
$ |
0.23
|
$ |
0.51
|
$ |
0.45
|
||||||||
Diluted
earnings per share
|
$ |
0.29
|
$ |
0.23
|
$ |
0.50
|
$ |
0.45
|
Analysis
of Net Interest Income (Unaudited)
|
|||||||||||||||||||||||||||
For
the Six Months Ended June 30,
|
|||||||||||||||||||||||||||
2007
|
2006
|
|||||||||||||||||||||||
Average
|
Average
|
|||||||||||||||||||||||
Interest
|
Rates
|
Interest
|
Rates
|
|||||||||||||||||||||
Average
|
Income/
|
Earned/
|
Average
|
Income/
|
Earned/
|
|||||||||||||||||||
Balance
|
Expense
|
Paid
|
Balance
|
Expense
|
Paid
|
|||||||||||||||||||
(Dollars
in thousands)
|
||||||||||||||||||||||||
Assets
|
|
|||||||||||||||||||||||
Interest-earning
assets:
|
||||||||||||||||||||||||
Loans
(1)
|
$ |
374,235
|
$ |
13,285
|
7.16 | % | $ |
352,037
|
$ |
12,278
|
7.03 | % | ||||||||||||
Taxable
investment securities (1)
|
91,293
|
2,359
|
5.21
|
85,874
|
1,772
|
4.16
|
||||||||||||||||||
Tax-exempt
investment securities (1) (2)
|
22,267
|
559
|
5.02
|
16,614
|
364
|
4.38
|
||||||||||||||||||
Other
interest-earning assets
|
490
|
19
|
7.82
|
432
|
18
|
8.40
|
||||||||||||||||||
Total
interest-earning assets
|
488,285
|
16,222
|
6.70
|
454,957
|
14,432
|
6.40
|
||||||||||||||||||
Non-interest-earning
assets:
|
||||||||||||||||||||||||
Allowance
for loan losses
|
(4,111 | ) | (3,959 | ) | ||||||||||||||||||||
Other
assets
|
34,078
|
31,517
|
||||||||||||||||||||||
Total
assets
|
$ |
518,252
|
$ |
482,515
|
||||||||||||||||||||
Liabilities
and Stockholders' Equity
|
||||||||||||||||||||||||
Interest-bearing
liabilities:
|
||||||||||||||||||||||||
Interest-bearing
demand deposits
|
$ |
121,042
|
$ |
1,379
|
2.30 | % | $ |
116,764
|
$ |
887
|
1.53 | % | ||||||||||||
Savings
deposits
|
37,642
|
141
|
0.76
|
43,858
|
127
|
0.58
|
||||||||||||||||||
Time
deposits
|
182,482
|
4,101
|
4.53
|
147,764
|
2,778
|
3.79
|
||||||||||||||||||
Repurchase
agreements
|
9,862
|
224
|
4.58
|
6,068
|
125
|
4.15
|
||||||||||||||||||
FHLB
Borrowing
|
22,049
|
485
|
4.44
|
33,286
|
719
|
4.36
|
||||||||||||||||||
Subordinated
debenture
|
7,217
|
244
|
6.82
|
7,217
|
243
|
6.79
|
||||||||||||||||||
Total
interest-bearing liabilities
|
380,294
|
6,574
|
3.49
|
354,957
|
4,879
|
2.77
|
||||||||||||||||||
Non-interest-bearing
liabilities:
|
||||||||||||||||||||||||
Demand
deposits
|
95,181
|
89,375
|
||||||||||||||||||||||
Other
liabilities
|
4,565
|
3,828
|
||||||||||||||||||||||
Stockholders'
equity
|
38,212
|
34,355
|
||||||||||||||||||||||
Total
liabilities and stockholders' equity
|
$ |
518,252
|
$ |
482,515
|
||||||||||||||||||||
Net
interest income (taxable equivalent basis)
|
$ |
9,648
|
$ |
9,553
|
||||||||||||||||||||
Tax
equivalent adjustment
|
(173 | ) | (114 | ) | ||||||||||||||||||||
Net
interest income
|
9,475
|
9,439
|
||||||||||||||||||||||
Net
interest spread (taxable equivalent basis)
|
3.21 | % | 3.63 | % | ||||||||||||||||||||
Net
yield on interest-earning
|
||||||||||||||||||||||||
assets
(taxable equivalent basis) (3)
|
3.98 | % | 4.23 | % |
(1)
For purpose of these calculations, nonaccruing loans are included
in
the average balance. Fees are included in loan
interest. Loans and total interest-earning assets are net of
unearned income. Securities are included at amortized
cost.
|
|||||||||||||||||||||
(2)
The tax equivalent adjustments are based on a marginal tax
rate of 34%.
|
|||||||||||||||||||||
(3)
Net interest income (taxable equivalent basis) divided by average
interest-earning assets.
|
Analysis
of Net Interest Income (Unaudited)
For
the Three Months Ended June 30,
|
||||||||||||||||||||||||
2007
|
2006
|
|||||||||||||||||||||||
Average
|
Average
|
|||||||||||||||||||||||
Interest
|
Rates
|
Interest
|
Rates
|
|||||||||||||||||||||
Average
|
Income/
|
Earned/
|
Average
|
Income/
|
Earned/
|
|||||||||||||||||||
Balance
|
Expense
|
Paid
|
Balance
|
Expense
|
Paid
|
|||||||||||||||||||
(Dollars
in thousands)
|
||||||||||||||||||||||||
Assets
|
||||||||||||||||||||||||
Interest-earning
assets:
|
||||||||||||||||||||||||
Loans
(1)
|
$ |
376,149
|
$ |
6,715
|
7.16
|
% | $ |
355,341
|
$ |
6,304
|
7.12 | % | ||||||||||||
Taxable
investment securities (1)
|
91,744
|
1,197
|
5.23
|
85,118
|
894
|
4.21
|
||||||||||||||||||
Tax-exempt
investment securities (1) (2)
|
22,344
|
283
|
5.07
|
16,413
|
182
|
4.44
|
||||||||||||||||||
Other
interest-earning assets
|
562
|
10
|
7.14
|
597
|
11
|
7.39
|
||||||||||||||||||
Total
interest-earning assets
|
490,799
|
8,205
|
6.71
|
457,469
|
7,391
|
6.48
|
||||||||||||||||||
Non-interest-earning
assets:
|
||||||||||||||||||||||||
Allowance
for loan losses
|
(4,121 | ) | (3,986 | ) | ||||||||||||||||||||
Other
assets
|
34,559
|
32,761
|
||||||||||||||||||||||
Total
assets
|
$ |
521,237
|
$ |
486,244
|
||||||||||||||||||||
Liabilities
and Stockholders' Equity
|
||||||||||||||||||||||||
Interest-bearing
liabilities:
|
||||||||||||||||||||||||
Interest-bearing
demand deposits
|
$ |
122,565
|
$ |
719
|
2.35
|
%
|
$ |
114,840
|
$ |
481
|
1.68 | % | ||||||||||||
Savings
deposits
|
38,240
|
71
|
0.74
|
43,084
|
63
|
0.59
|
||||||||||||||||||
Time
deposits
|
182,565
|
2,071
|
4.55
|
151,860
|
1,471
|
3.89
|
||||||||||||||||||
Repurchase
agreements
|
10,531
|
121
|
4.61
|
6,515
|
70
|
4.31
|
||||||||||||||||||
FHLB
Borrowing
|
19,568
|
211
|
4.33
|
32,842
|
365
|
4.46
|
||||||||||||||||||
Subordinated
debenture
|
7,217
|
122
|
6.78
|
7,217
|
122
|
6.78
|
||||||||||||||||||
Total
interest-bearing liabilities
|
380,686
|
3,315
|
3.49
|
356,358
|
2,572
|
2.89
|
||||||||||||||||||
Non-interest-bearing
liabilities:
|
||||||||||||||||||||||||
Demand
deposits
|
97,434
|
91,370
|
||||||||||||||||||||||
Other
liabilities
|
4,573
|
3,851
|
||||||||||||||||||||||
Stockholders'
equity
|
38,544
|
34,665
|
||||||||||||||||||||||
Total
liabilities and stockholders' equity
|
$ |
521,237
|
$ |
486,244
|
||||||||||||||||||||
Net
interest income (taxable equivalent basis)
|
$ |
4,890
|
$ |
4,819
|
||||||||||||||||||||
Tax
equivalent adjustment
|
(88 | ) | (57 | ) | ||||||||||||||||||||
Net
interest income
|
4,802
|
4,762
|
||||||||||||||||||||||
Net
interest spread (taxable equivalent basis)
|
3.21
|
%
|
3.59 | % | ||||||||||||||||||||
Net
yield on interest-earning
|
||||||||||||||||||||||||
assets (taxable equivalent basis) (3) |
4.00
|
% | 4.23 | % |
(1)
For purpose of these calculations, nonaccruing loans are included
in the
average balance. Fees are included in loan
interest. Loans and total interest-earning assets are net of
unearned income. Securities are included at amortized
cost.
|
|||||||||||||||||||||||||||
(2)
The tax equivalent adjustments are based on a
marginal tax rate of 34%.
|
|||||||||||||||||||||||||||
(3)
Net interest income (taxable equivalent basis) divided
by average interest-earning assets.
|
06/30/07
|
03/31/07
|
12/31/06
|
09/30/06
|
|||||||||||||
(Dollars
in Thousands)
|
||||||||||||||||
Nonaccrual
loans: (1)
|
$ |
300
|
$ |
445
|
$ |
444
|
$ |
203
|
||||||||
Loans
past due 90 days or more: (2)
|
10
|
5
|
1,090
|
157
|
||||||||||||
Total
nonperforming loans
|
$ |
310
|
$ |
450
|
$ |
1,534
|
$ |
360
|
||||||||
Other
real estate owned
|
$ |
385
|
$ |
-
|
$ |
-
|
$ |
-
|
||||||||
Total
nonperforming assets
|
$ |
695
|
$ |
450
|
$ |
1,534
|
$ |
360
|
||||||||
Allowance
for loan losses
|
$ |
4,181
|
$ |
4,093
|
$ |
4,101
|
$ |
4,086
|
||||||||
Nonaccrual
loans to total loans
|
0.08 | % | 0.12 | % | 0.12 | % | 0.06 | % | ||||||||
Nonperforming
loans to total loans
|
0.08 | % | 0.12 | % | 0.41 | % | 0.10 | % | ||||||||
Nonperforming
loans to total assets
|
0.06 | % | 0.09 | % | 0.30 | % | 0.07 | % | ||||||||
Nonperforming
assets to total assets
|
0.13 | % | 0.09 | % | 0.30 | % | 0.07 | % | ||||||||
Allowance
for loan losses to total loans
|
1.09 | % | 1.10 | % | 1.11 | % | 1.11 | % |
Required
|
Actual
|
Excess
|
|
Risk-based
Capital
|
|||
Tier
1
|
4.00%
|
11.23%
|
7.23%
|
Total
|
8.00%
|
12.25%
|
4.25%
|
Leverage
Ratio
|
4.00%
|
8.92%
|
4.92%
|
Votes
for
|
Votes
Withheld
|
|
Election
of Director
|
||
Harold
Dyer
|
3,019,280
|
828,784
|
Abe
Van Wingerden
|
3,591,803
|
256,261
|
Michael
Westra
|
3,843,852
|
4,212
|
Howard
Yeaton
|
3,836,189
|
11,875
|
|
(a)
|
Exhibits
|
Date:
|
August
10, 2007
|
By:
|
/s/
Paul Van Ostenbridge
|
|
Paul
Van Ostenbridge
|
||||
President
and Chief Executive
|
||||
Officer
|
||||
(authorized
officer on behalf
|
||||
of
registrant)
|
||||
Date:
|
August
10, 2007
|
By:
|
/s/
Julie E. Holland
|
|
Julie
E. Holland
|
||||
Senior
Vice President and Treasurer
|
||||
(principal
accounting officer)
|
EXHIBIT
NUMBER
|
DESCRIPTION
|
|
Certification
of Paul Van Ostenbridge required by Rule 13a-14(a) or Rule
15d-14(a)
|
||
Certification
of Julie Holland required by Rule 13a-14(a) or Rule 15d-14(a)
|
||
Certification
of Paul Van Ostenbridge and Julie Holland required by Rule 13a-14(b)
or
Rule 15d-14(b) and Section 906 of the Sarbanes-Oxley Act of 2002,
18
U.S.C. Section 1350
|