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
|
|
2
|
|
3
|
|
4
|
|
5
|
|
6
-
13
|
|
14
- 26
|
|
27
|
|
27
|
|
28
|
|
28
|
|
29
|
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30
–33
|
|
Stewardship
Financial Corporation and
Subsidiary
|
||||||||
Consolidated
Statements of Financial
Condition
|
||||||||
(Unaudited)
|
||||||||
September
30,
|
December
31,
|
|||||||
2007
|
2006
|
|||||||
Assets
|
||||||||
Cash
and due from banks
|
$ |
9,999,000
|
$ |
14,861,000
|
||||
Other
interest-earning assets
|
49,000
|
836,000
|
||||||
Cash
and cash equivalents
|
10,048,000
|
15,697,000
|
||||||
Securities
available for sale
|
79,654,000
|
72,746,000
|
||||||
Securities
held to maturity; estimated fair value
|
||||||||
of
$39,695,000 (2007) and $38,881,000 (2006)
|
39,911,000
|
39,163,000
|
||||||
FHLB-NY
stock, at cost
|
1,605,000
|
1,899,000
|
||||||
Loans,
net of allowance for loan losses of
|
||||||||
of
$ 4,249,000 (2007) and $4,101,000 (2006)
|
391,345,000
|
365,443,000
|
||||||
Mortgage
loans held for sale
|
1,387,000
|
2,155,000
|
||||||
Premises
and equipment, net
|
7,667,000
|
7,098,000
|
||||||
Accrued
interest receivable
|
3,193,000
|
2,912,000
|
||||||
Intangible
assets
|
78,000
|
102,000
|
||||||
Other
real estate
|
353,000
|
-
|
||||||
Bank
owned life insurance
|
8,192,000
|
8,522,000
|
||||||
Other
assets
|
3,750,000
|
4,012,000
|
||||||
Total
assets
|
$ |
547,183,000
|
$ |
519,749,000
|
||||
Liabilities
and stockholders' equity
|
||||||||
Liabilities
|
||||||||
Deposits:
|
||||||||
Noninterest-bearing
|
$ |
96,397,000
|
$ |
92,105,000
|
||||
Interest-bearing
|
362,174,000
|
342,118,000
|
||||||
Total
deposits
|
458,571,000
|
434,223,000
|
||||||
Other
borrowings
|
20,262,000
|
27,892,000
|
||||||
Subordinated
debentures
|
7,217,000
|
7,217,000
|
||||||
Securities
sold under agreements to repurchase
|
16,804,000
|
9,023,000
|
||||||
Accrued
interest payable
|
1,928,000
|
1,721,000
|
||||||
Accrued
expenses and other liabilities
|
2,321,000
|
2,367,000
|
||||||
Total
liabilities
|
507,103,000
|
482,443,000
|
||||||
Commitments
and contingencies
|
-
|
-
|
||||||
Stockholders'
equity
|
||||||||
Common
stock, no par value; 10,000,000 shares authorized;
|
||||||||
5,314,142
and 5,268,815 shares issued and outstanding at
|
||||||||
September
30, 2007 and December 31, 2006, respectively.
|
34,994,000
|
31,148,000
|
||||||
Retained
earnings
|
5,535,000
|
6,750,000
|
||||||
Treasury
stock; 8,232 shares outstanding at September 30, 2007.
|
(112,000 | ) |
-
|
|||||
Accumulated
other comprehensive loss
|
(337,000 | ) | (592,000 | ) | ||||
Total
stockholders' equity
|
40,080,000
|
37,306,000
|
||||||
Total
liabilities and stockholders' equity
|
$ |
547,183,000
|
$ |
519,749,000
|
See
notes to unaudited consolidated financial statements.
|
Stewardship
Financial Corporation and Subsidiary
|
||||||||
Consolidated
Statements of Income
|
||||||||
(Unaudited)
|
||||||||
Nine
Months Ended
|
||||||||
September
30,
|
||||||||
2007
|
2006
|
|||||||
Interest
income:
|
||||||||
Loans
|
$ |
20,289,000
|
$ |
18,963,000
|
||||
Securities
held to maturity
|
||||||||
Taxable
|
691,000
|
663,000
|
||||||
Non-taxable
|
551,000
|
394,000
|
||||||
Securities
available for sale
|
||||||||
Taxable
|
2,868,000
|
1,962,000
|
||||||
Non-taxable
|
50,000
|
23,000
|
||||||
FHLB
dividends
|
87,000
|
77,000
|
||||||
Other
interest-earning assets
|
39,000
|
29,000
|
||||||
Total
interest income
|
24,575,000
|
22,111,000
|
||||||
Interest
expense:
|
||||||||
Deposits
|
8,810,000
|
6,188,000
|
||||||
Borrowed
money
|
1,378,000
|
1,619,000
|
||||||
Total
interest expense
|
10,188,000
|
7,807,000
|
||||||
Net
interest income before provision for loan losses
|
14,387,000
|
14,304,000
|
||||||
Provision
for loan losses
|
280,000
|
250,000
|
||||||
Net
interest income after provision for loan losses
|
14,107,000
|
14,054,000
|
||||||
Noninterest
income:
|
||||||||
Fees
and service charges
|
1,160,000
|
1,247,000
|
||||||
Bank
owned life insurance
|
240,000
|
233,000
|
||||||
Gain
on sales of mortgage loans
|
259,000
|
165,000
|
||||||
Merchant
processing
|
1,070,000
|
884,000
|
||||||
Life
insurance proceeds
|
459,000 | - | ||||||
Miscellaneous
|
229,000
|
357,000
|
||||||
Total
noninterest income
|
3,417,000
|
2,886,000
|
||||||
Noninterest
expenses:
|
||||||||
Salaries
and employee benefits
|
5,425,000
|
5,045,000
|
||||||
Occupancy,
net
|
1,122,000
|
982,000
|
||||||
Equipment
|
696,000
|
690,000
|
||||||
Data
processing
|
869,000
|
880,000
|
||||||
Advertising
|
311,000
|
283,000
|
||||||
FDIC
insurance premium
|
50,000
|
38,000
|
||||||
Amortization
of intangible assets
|
24,000
|
29,000
|
||||||
Charitable
contributions
|
546,000
|
543,000
|
||||||
Other
real estate expense
|
37,000
|
|||||||
Stationery
and supplies
|
256,000
|
240,000
|
||||||
Merchant
processing
|
965,000
|
801,000
|
||||||
Bank-card
related services
|
240,000
|
368,000
|
||||||
Miscellaneous
|
1,509,000
|
1,611,000
|
||||||
Total
noninterest expenses
|
12,050,000
|
11,510,000
|
||||||
Income
before income tax expense
|
5,474,000
|
5,430,000
|
||||||
Income
tax expense
|
1,705,000
|
1,929,000
|
||||||
Net
income
|
$ |
3,769,000
|
$ |
3,501,000
|
||||
Basic
earnings per share
|
$ |
0.71
|
$ |
0.66
|
||||
Diluted
earnings per share
|
$ |
0.71
|
$ |
0.66
|
||||
Weighted
average number of common shares outstanding
|
5,289,047
|
5,270,688
|
||||||
Weighted
average number of diluted common
|
||||||||
shares
outstanding
|
5,317,745
|
5,321,844
|
Share
data has been restated to reflect a 5% stock dividend paid November
15,
2006 and a 5% stock dividend payable
November 15, 2007.
|
||||||||
See
notes to unaudited consolidated financial statements.
|
Stewardship
Financial Corporation and Subsidiary
|
||||||||
Consolidated
Statements of Income
|
||||||||
(Unaudited)
|
||||||||
Three
Months Ended
|
||||||||
September
30,
|
||||||||
2007
|
2006
|
|||||||
Interest
income:
|
||||||||
Loans
|
$ |
7,004,000
|
$ |
6,685,000
|
||||
Securities
held to maturity
|
||||||||
Taxable
|
227,000
|
223,000
|
||||||
Non-taxable
|
195,000
|
157,000
|
||||||
Securities
available for sale
|
||||||||
Taxable
|
1,031,000
|
677,000
|
||||||
Non-taxable
|
20,000
|
10,000
|
||||||
FHLB
dividends
|
29,000
|
30,000
|
||||||
Other
interest-earning assets
|
20,000
|
11,000
|
||||||
Total
interest income
|
8,526,000
|
7,793,000
|
||||||
Interest
expense:
|
||||||||
Deposits
|
3,189,000
|
2,396,000
|
||||||
Borrowed
money
|
425,000
|
532,000
|
||||||
Total
interest expense
|
3,614,000
|
2,928,000
|
||||||
Net
interest income before provision for loan losses
|
4,912,000
|
4,865,000
|
||||||
Provision
for loan losses
|
90,000
|
90,000
|
||||||
Net
interest income after provision for loan losses
|
4,822,000
|
4,775,000
|
||||||
Noninterest
income:
|
||||||||
Fees
and service charges
|
375,000
|
419,000
|
||||||
Bank
owned life insurance
|
80,000
|
79,000
|
||||||
Gain
on sales of mortgage loans
|
73,000
|
70,000
|
||||||
Merchant
processing
|
353,000
|
322,000
|
||||||
Miscellaneous
|
34,000
|
94,000
|
||||||
Total
noninterest income
|
915,000
|
984,000
|
||||||
Noninterest
expenses:
|
||||||||
Salaries
and employee benefits
|
1,781,000
|
1,713,000
|
||||||
Occupancy,
net
|
406,000
|
375,000
|
||||||
Equipment
|
239,000
|
201,000
|
||||||
Data
processing
|
240,000
|
309,000
|
||||||
Advertising
|
111,000
|
82,000
|
||||||
FDIC
insurance premium
|
24,000
|
12,000
|
||||||
Amortization
of intangible assets
|
8,000
|
10,000
|
||||||
Charitable
contributions
|
178,000
|
181,000
|
||||||
Other
real estate owned
|
37,000
|
-
|
||||||
Stationery
and supplies
|
63,000
|
87,000
|
||||||
Merchant
processing
|
315,000
|
287,000
|
||||||
Bank-card
related services
|
71,000
|
124,000
|
||||||
Miscellaneous
|
400,000
|
488,000
|
||||||
Total
noninterest expenses
|
3,873,000
|
3,869,000
|
||||||
Income
before income tax expense
|
1,864,000
|
1,890,000
|
||||||
Income
tax expense
|
635,000
|
665,000
|
||||||
Net
income
|
$ |
1,229,000
|
$ |
1,225,000
|
||||
Basic
earnings per share
|
$ |
0.23
|
$ |
0.23
|
||||
Diluted
earnings per share
|
$ |
0.23
|
$ |
0.23
|
||||
Weighted
average number of common shares outstanding
|
5,304,678
|
5,294,369
|
||||||
Weighted
average number of diluted common
|
||||||||
shares
outstanding
|
5,321,768
|
5,337,407
|
Share
data has been restated to reflect a 5% stock dividend paid November
15,
2006 and a 5% stock dividend payable
November 15, 2007.
|
||||||||
See
notes to unaudited consolidated financial statements.
|
Stewardship
Financial Corporation and Subsidiary
|
||||||||
Consolidated
Statements of Cash Flows
|
||||||||
(Unaudited)
|
||||||||
Nine
Months Ended
|
||||||||
September
30,
|
||||||||
2007
|
2006
|
|||||||
Cash
flows from operating activities:
|
||||||||
Net
income
|
$ |
3,769,000
|
$ |
3,501,000
|
||||
Adjustments
to reconcile net income to
|
||||||||
net
cash provided by operating activities:
|
||||||||
Depreciation
and amortization of premises and equipment
|
569,000
|
544,000
|
||||||
Amortization
of premiums and accretion of discounts, net
|
102,000
|
199,000
|
||||||
Accretion
of deferred loan fees
|
(71,000 | ) | (94,000 | ) | ||||
Provision
for loan losses
|
280,000
|
250,000
|
||||||
Valuation
reserve on other real estate
|
32,000
|
-
|
||||||
Originations
of mortgage loans held for sale
|
(24,308,000 | ) | (17,318,000 | ) | ||||
Proceeds
from sale of mortgage loans
|
25,335,000
|
17,073,000
|
||||||
Gain
on sale of loans
|
(259,000 | ) | (165,000 | ) | ||||
Deferred
income tax benefit
|
(32,000 | ) | (103,000 | ) | ||||
Amortization
of intangible assets
|
24,000
|
29,000
|
||||||
Nonqualified
stock option expense
|
38,000
|
38,000
|
||||||
Increase
in bank owned life insurance
|
(240,000 | ) | (233,000 | ) | ||||
Life
insurance proceeds
|
(459,000 | ) |
-
|
|||||
Increase
in accrued interest receivable
|
(281,000 | ) | (161,000 | ) | ||||
Decrease
in other assets
|
120,000
|
82,000
|
||||||
Increase
in accrued interest payable
|
207,000
|
619,000
|
||||||
Decrease
in other liabilities
|
(37,000 | ) | (99,000 | ) | ||||
Net
cash provided by operating activities
|
4,789,000
|
4,162,000
|
||||||
Cash
flows from investing activities:
|
||||||||
Purchase
of securities available for sale
|
(15,628,000 | ) | (11,260,000 | ) | ||||
Proceeds
from maturities and principal repayments
|
||||||||
on
securities available for sale
|
8,815,000
|
8,867,000
|
||||||
Proceeds
from calls on securities available for sale
|
300,000
|
-
|
||||||
Purchase
of securities held to maturity
|
(7,450,000 | ) | (11,430,000 | ) | ||||
Proceeds
from maturities and principal repayments on
|
||||||||
securities
held to maturity
|
6,471,000
|
9,579,000
|
||||||
Proceeds
from calls on securities held to maturity
|
152,000
|
950,000
|
||||||
Purchase
of FHLB-NY stock
|
294,000
|
130,000
|
||||||
Net
increase in loans
|
(26,171,000 | ) | (20,192,000 | ) | ||||
Additional
investment in other real estate owned
|
(324,000 | ) |
-
|
|||||
Proceeds
from life insurance payout
|
1,030,000
|
-
|
||||||
Additions
to premises and equipment
|
(1,138,000 | ) | (659,000 | ) | ||||
Net
cash used in investing activities
|
(33,649,000 | ) | (24,015,000 | ) | ||||
Cash
flows from financing activities:
|
||||||||
Net
increase in noninterest-bearing deposits
|
4,292,000
|
8,889,000
|
||||||
Net
increase in interest-bearing deposits
|
20,056,000
|
14,394,000
|
||||||
Net
increase in securities sold under agreements
|
||||||||
to
repurchase
|
7,781,000
|
4,148,000
|
||||||
Net
decrease in short term borrowings
|
(6,400,000 | ) | (3,400,000 | ) | ||||
Payments
on long term borrowings
|
(1,230,000 | ) | (1,190,000 | ) | ||||
Cash
dividends paid on common stock
|
(1,358,000 | ) | (733,000 | ) | ||||
Payment
of discount on dividend reinvestment plan
|
(33,000 | ) | (10,000 | ) | ||||
Purchase
of treasury stock
|
-
|
(235,000 | ) | |||||
Options
exercised
|
59,000
|
233,000
|
||||||
Tax
benefit of stock options
|
2,000
|
-
|
||||||
Issuance
of common stock
|
42,000
|
69,000
|
||||||
Net
cash provided by financing activities
|
23,211,000
|
22,165,000
|
||||||
Net
decrease (increase) in cash and cash equivalents
|
(5,649,000 | ) |
2,312,000
|
|||||
Cash
and cash equivalents - beginning
|
15,697,000
|
14,028,000
|
||||||
Cash
and cash equivalents - ending
|
$ |
10,048,000
|
$ |
16,340,000
|
||||
Supplemental
disclosures of cash flow information:
|
||||||||
Cash
paid during the period for interest
|
9,980,000
|
7,198,000
|
||||||
Cash
paid during the period for income taxes
|
1,699,000
|
2,080,000
|
||||||
Noncash
investing activities - transfer of loan to ORE
|
61,000
|
-
|
||||||
Noncash
financing activities - issuance of common stock
|
||||||||
under
dividend reinvestment plan
|
-
|
412,000
|
||||||
Noncash
transfer of credit card loans to loans held for sale
|
3,501,000
|
See
notes to unaudited consolidated financial statements.
|
Stewardship
Financial Corporation and
Subsidiary
|
||||||||||||||||||||||||||||
Consolidated
Statement of Changes in Stockholders' Equity
|
||||||||||||||||||||||||||||
(Unaudited)
|
||||||||||||||||||||||||||||
For
the Period Ended September 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
|
-
|
-
|
-
|
-
|
(1,358,000 | ) |
-
|
(1,358,000 | ) | |||||||||||||||||||
5%
stock dividend (payable
|
||||||||||||||||||||||||||||
November
15, 2007)
|
253,054
|
3,631,000
|
(392 | ) | (5,000 | ) | (3,626,000 | ) |
-
|
-
|
||||||||||||||||||
Payment
of discount on dividend
|
||||||||||||||||||||||||||||
reinvestment
plan
|
-
|
(33,000 | ) |
-
|
-
|
-
|
-
|
(33,000 | ) | |||||||||||||||||||
Common
stock issued under stock plans
|
1,810
|
22,000
|
1,462
|
20,000
|
-
|
-
|
42,000
|
|||||||||||||||||||||
Stock
option compensation expense
|
-
|
38,000
|
-
|
-
|
-
|
-
|
38,000
|
|||||||||||||||||||||
Stock
options exercised
|
41,359
|
186,000
|
(9,302 | ) | (127,000 | ) |
-
|
-
|
59,000
|
|||||||||||||||||||
Tax
benefit on stock options exercised
|
2,000
|
2,000
|
||||||||||||||||||||||||||
Comprehensive
income:
|
||||||||||||||||||||||||||||
Net
income for the nine months
|
||||||||||||||||||||||||||||
ended
September 30, 2007
|
-
|
-
|
-
|
-
|
3,769,000
|
-
|
3,769,000
|
|||||||||||||||||||||
Unrealized
holding gains on securities
|
||||||||||||||||||||||||||||
available
for sale arising during the period
|
||||||||||||||||||||||||||||
(net
of taxes of $163,000)
|
-
|
-
|
-
|
-
|
-
|
255,000
|
255,000
|
|||||||||||||||||||||
Total
comprehensive income, net of tax
|
4,024,000
|
|||||||||||||||||||||||||||
Balance
-- September 30, 2007
|
5,314,142
|
$ |
34,994,000
|
(8,232 | ) | $ | (112,000 | ) | $ |
5,535,000
|
$ | (337,000 | ) | $ |
40,080,000
|
|||||||||||||
For
the Period Ended September 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
|
-
|
-
|
-
|
-
|
(1,145,000 | ) |
-
|
(1,145,000 | ) | |||||||||||||||||||
5%
stock dividend (payable
|
||||||||||||||||||||||||||||
November
15, 2006)
|
253,240
|
3,135,000
|
(1,119 | ) | (14,000 | ) | (3,121,000 | ) |
-
|
-
|
||||||||||||||||||
Payment
of discount on dividend
|
||||||||||||||||||||||||||||
reinvestment
plan
|
-
|
(10,000 | ) |
-
|
-
|
-
|
-
|
(10,000 | ) | |||||||||||||||||||
Common
stock issued under dividend
|
||||||||||||||||||||||||||||
reinvestment
plan
|
-
|
-
|
31,262
|
412,000
|
-
|
-
|
412,000
|
|||||||||||||||||||||
Common
stock issued under stock plans
|
-
|
-
|
5,107
|
69,000
|
-
|
-
|
69,000
|
|||||||||||||||||||||
Repurchase
common stock
|
-
|
-
|
(7,739 | ) | (103,000 | ) |
-
|
-
|
(103,000 | ) | ||||||||||||||||||
Stock
option compensation expense
|
-
|
38,000
|
-
|
-
|
-
|
-
|
38,000
|
|||||||||||||||||||||
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 nine months
|
||||||||||||||||||||||||||||
ended
September 30, 2006
|
-
|
-
|
-
|
-
|
3,501,000
|
-
|
3,501,000
|
|||||||||||||||||||||
Unrealized
holding gains on securities
|
||||||||||||||||||||||||||||
available
for sale arising during the period
|
||||||||||||||||||||||||||||
(net
of taxes of $113,000)
|
-
|
-
|
-
|
-
|
-
|
179,000
|
179,000
|
|||||||||||||||||||||
Total
comprehensive income, net of tax
|
3,680,000
|
|||||||||||||||||||||||||||
Balance
-- September 30, 2006
|
5,318,046
|
$ |
31,781,000
|
(23,499 | ) | $ | (324,000 | ) | $ |
5,882,000
|
$ | (739,000 | ) | $ |
36,600,000
|
|||||||||||||
See
notes to unaudited consolidated financial statements.
|
2007
|
2006
|
|||||||||||||||
Weighted
|
Weighted
|
|||||||||||||||
Average
|
Average
|
|||||||||||||||
Shares
|
Exercise
Price
|
Shares
|
Exercise
Price
|
|||||||||||||
Outstanding
at beginning of year
|
79,193
|
$ |
5.70
|
79,788
|
$ |
5.74
|
||||||||||
Granted
|
-
|
-
|
-
|
-
|
||||||||||||
Exercised
|
(41,222
|
) |
4.05
|
-
|
-
|
|||||||||||
Forfeited
|
(1,384
|
) |
12.89
|
(510
|
) |
12.34
|
||||||||||
Outstanding
at end of period
|
36,587
|
$ |
8.01
|
79,278
|
$ |
5.70
|
||||||||||
Options
exercisable
|
36,587
|
79,278
|
||||||||||||||
Weighted-average
remaining
|
||||||||||||||||
contractual
life
|
2.78
years
|
2.21
years
|
||||||||||||||
Aggregate
intrinsic value
|
$ |
199,000
|
$ |
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
|
60,753
|
$ |
12.34
|
47,846
|
$ |
6.78
|
||||||||||
Granted
|
-
|
-
|
55,125
|
12.25
|
||||||||||||
Exercised
|
(2,205
|
) |
12.24
|
(39,399
|
) |
5.90
|
||||||||||
Expired
|
-
|
-
|
(2,819
|
) |
5.90
|
|||||||||||
Outstanding
at end of period
|
58,548
|
$ |
12.35
|
60,753
|
$ |
12.34
|
||||||||||
Options
exercisable
|
14,180
|
5,628
|
||||||||||||||
Weighted-average
remaining
|
||||||||||||||||
contractual
life
|
4.48
years
|
5.51
years
|
||||||||||||||
Aggregate
intrinsic value
|
$ |
77,000
|
$ |
-
|
||||||||||||
Weighted-average
fair value of
|
||||||||||||||||
options
granted during the period
|
$ | - | $ |
4.33
|
September
30, 2007
|
||||||||||||
Gross
|
Gross
|
|||||||||||
Fair
|
Unrealized
|
Unrealized
|
||||||||||
Value
|
Holding
Gains
|
Holding
Losses
|
||||||||||
U.S.
government-sponsored agencies
|
$ |
40,818,000
|
$ |
212,000
|
$ |
87,000
|
||||||
Obligations
of state and political
|
||||||||||||
subdivisions
|
2,421,000
|
1,000
|
49,000
|
|||||||||
Mortgage-backed
securities
|
35,216,000
|
27,000
|
621,000
|
|||||||||
Other
securities
|
1,199,000
|
-
|
35,000
|
|||||||||
$ |
79,654,000
|
$ |
240,000
|
$ |
792,000
|
|||||||
December
31, 2006
|
||||||||||||
Gross
|
Gross
|
|||||||||||
Fair
|
Unrealized
|
Unrealized
|
||||||||||
Value
|
Holding
Gains
|
Holding
Losses
|
||||||||||
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
|
September
30, 2007
|
||||||||||||||||
Gross
|
Gross
|
|||||||||||||||
Carrying
|
Unrealized
|
Unrealized
|
Fair
|
|||||||||||||
Value
|
Holding
Gains
|
Holding
Losses
|
Value
|
|||||||||||||
U.S.
Treasury securities
|
$ |
501,000
|
$ |
3,000
|
$ |
-
|
$ |
504,000
|
||||||||
U.S.
government-sponsored agencies
|
10,826,000
|
34,000
|
14,000
|
10,846,000
|
||||||||||||
Obligations
of state and political
|
||||||||||||||||
subdivisions
|
22,478,000
|
41,000
|
209,000
|
22,310,000
|
||||||||||||
Mortgage-backed
securities
|
6,106,000
|
27,000
|
98,000
|
6,035,000
|
||||||||||||
$ |
39,911,000
|
$ |
105,000
|
$ |
321,000
|
$ |
39,695,000
|
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
|
September
30,
|
December
31,
|
|||||||
2007
|
2006
|
|||||||
Mortgage
|
||||||||
Residential
|
$ |
45,675,000
|
$ |
47,020,000
|
||||
Commercial
|
190,517,000
|
177,411,000
|
||||||
Commercial
|
84,160,000
|
72,606,000
|
||||||
Equity
|
19,287,000
|
20,010,000
|
||||||
Installment
|
54,002,000
|
52,389,000
|
||||||
Other
|
2,367,000
|
560,000
|
||||||
Total
loans
|
396,008,000
|
369,996,000
|
||||||
Less: Deferred
loan fees
|
414,000
|
452,000
|
||||||
Allowance
for loan losses
|
4,249,000
|
4,101,000
|
||||||
4,663,000
|
4,553,000
|
|||||||
Loans,
net
|
$ |
391,345,000
|
$ |
365,443,000
|
Note
6. Allowance for loan losses
|
||||||||
Nine
Months Ended September 30,
|
||||||||
2007
|
2006
|
|||||||
Balance,
beginning of period
|
$ |
4,101,000
|
$ |
3,847,000
|
||||
Provision
charged to operations
|
280,000
|
250,000
|
||||||
Recoveries
of loans charged off
|
8,000
|
26,000
|
||||||
Loans
charged off
|
(140,000 | ) | (37,000 | ) | ||||
Balance,
end of period
|
$ |
4,249,000
|
$ |
4,086,000
|
September
30,
|
December
31,
|
|||||||
2007
|
2006
|
|||||||
Impaired
loans
|
||||||||
With
related allowance for loan losses
|
$ |
85,000
|
$ |
223,000
|
||||
Without
related allowance for loan losses
|
153,000
|
221,000
|
||||||
Total
impaired loans
|
$ |
238,000
|
$ |
444,000
|
||||
Related
allowance for loan losses
|
$ |
25,000
|
$ |
110,000
|
Three
Months Ended
|
Six
Months Ended
|
|||||||||||||||
September
30,
|
September
30,
|
|||||||||||||||
2007
|
2006
|
2007
|
2006
|
|||||||||||||
(Dollars
and shares in thousands, except per share data)
|
||||||||||||||||
Net
income
|
$ |
1,229
|
$ |
1,225
|
$ |
3,769
|
$ |
3,501
|
||||||||
Weighted
average shares
|
5,305
|
5,294
|
5,289
|
5,271
|
||||||||||||
Effect
of dilutive stock options
|
17
|
43
|
28
|
51
|
||||||||||||
Total
weighted average dilutive shares
|
5,322
|
5,337
|
5,317
|
5,322
|
||||||||||||
Basic
earnings per share
|
$ |
0.23
|
$ |
0.23
|
$ |
0.71
|
$ |
0.66
|
||||||||
Diluted
earnings per share
|
$ |
0.23
|
$ |
0.23
|
$ |
0.71
|
$ |
0.66
|
Analysis
of Net Interest Income (Unaudited)
|
|||||||||||||||||||||||||||
For
the Nine Months Ended September
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)
|
$ |
379,189
|
$ |
20,289
|
7.15 | % | $ |
356,857
|
$ |
18,963
|
7.10 | % | ||||||||||||
Taxable
investment securities (1)
|
93,092
|
3,646
|
5.24
|
85,211
|
2,702
|
4.24
|
||||||||||||||||||
Tax-exempt
investment securities (1) (2)
|
22,880
|
872
|
7.62
|
17,877
|
606
|
6.78
|
||||||||||||||||||
Other
interest-earning assets
|
744
|
39
|
7.01
|
498
|
29
|
7.79
|
||||||||||||||||||
Total
interest-earning assets
|
495,905
|
24,846
|
6.70
|
460,443
|
22,300
|
6.48
|
||||||||||||||||||
Non-interest-earning
assets:
|
||||||||||||||||||||||||
Allowance
for loan losses
|
(4,147 | ) | (3,993 | ) | ||||||||||||||||||||
Other
assets
|
33,395
|
32,584
|
||||||||||||||||||||||
Total
assets
|
$ |
525,153
|
$ |
489,034
|
||||||||||||||||||||
Liabilities
and Stockholders' Equity
|
||||||||||||||||||||||||
Interest-bearing
liabilities:
|
||||||||||||||||||||||||
Interest-bearing
demand deposits
|
$ |
127,765
|
$ |
2,353
|
2.46 | % | $ |
115,775
|
$ |
1,433
|
1.65 | % | ||||||||||||
Savings
deposits
|
37,363
|
211
|
0.76
|
43,026
|
188
|
0.58
|
||||||||||||||||||
Time
deposits
|
183,801
|
6,246
|
4.54
|
154,696
|
4,567
|
3.95
|
||||||||||||||||||
Repurchase
agreements
|
10,534
|
351
|
4.45
|
6,755
|
220
|
4.35
|
||||||||||||||||||
FHLB
Borrowing
|
20,281
|
662
|
4.36
|
31,333
|
1,034
|
4.41
|
||||||||||||||||||
Subordinated
debenture
|
7,217
|
365
|
6.76
|
7,217
|
365
|
6.76
|
||||||||||||||||||
Total
interest-bearing liabilities
|
386,961
|
10,188
|
3.52
|
358,802
|
7,807
|
2.91
|
||||||||||||||||||
Non-interest-bearing
liabilities:
|
||||||||||||||||||||||||
Demand
deposits
|
95,602
|
91,335
|
||||||||||||||||||||||
Other
liabilities
|
4,014
|
3,991
|
||||||||||||||||||||||
Stockholders'
equity
|
38,576
|
34,906
|
||||||||||||||||||||||
Total
liabilities and stockholders' equity
|
$ |
525,153
|
$ |
489,034
|
||||||||||||||||||||
Net
interest income (taxable equivalent basis)
|
$ |
14,658
|
$ |
14,493
|
||||||||||||||||||||
Tax
equivalent adjustment
|
(271 | ) | (189 | ) | ||||||||||||||||||||
Net
interest income
|
14,387
|
14,304
|
||||||||||||||||||||||
Net
interest spread (taxable equivalent basis)
|
3.18 | % | 3.57 | % | ||||||||||||||||||||
Net
yield on interest-earning
|
||||||||||||||||||||||||
assets
(taxable equivalent basis) (3)
|
3.95 | % | 4.21 | % | ||||||||||||||||||||
(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 September
30,
|
2007
|
2006
|
|||||||||||||||||||||||
Average
Balance
|
Interest
Income/
Expense
|
Average
Rates
Earned/
Paid
|
Average
Balance
|
Interest
Income/
Expense
|
Average
Rates
Earned/
Paid
|
|||||||||||||||||||
(Dollars
in thousands)
|
||||||||||||||||||||||||
Assets
|
||||||||||||||||||||||||
Interest-earning
assets:
|
||||||||||||||||||||||||
Loans
(1)
|
$ |
388,936
|
$ |
7,003
|
7.14
|
%
|
$ |
366,340
|
$ |
6,685
|
7.24 | % | ||||||||||||
Taxable
investment securities (1)
|
96,633
|
1,288
|
5.29
|
83,904
|
930
|
4.40
|
||||||||||||||||||
Tax-exempt
investment securities (1) (2)
|
24,085
|
313
|
5.20
|
20,361
|
242
|
4.75
|
||||||||||||||||||
Other
interest-earning assets
|
1,242
|
19
|
6.07
|
627
|
11
|
6.96
|
||||||||||||||||||
Total
interest-earning assets
|
510,896
|
8,623
|
6.70
|
471,232
|
7,868
|
6.62
|
||||||||||||||||||
Non-interest-earning
assets:
|
||||||||||||||||||||||||
Allowance
for loan losses
|
(4,217 | ) | (4,061 | ) | ||||||||||||||||||||
Other
assets
|
33,564
|
32,791
|
||||||||||||||||||||||
Total
assets
|
$ |
540,243
|
$ |
499,962
|
||||||||||||||||||||
Liabilities
and Stockholders' Equity
|
||||||||||||||||||||||||
Interest-bearing
liabilities:
|
||||||||||||||||||||||||
Interest-bearing
demand deposits
|
$ |
140,991
|
$ |
973
|
2.74
|
%
|
$ |
113,829
|
$ |
546
|
1.90 | % | ||||||||||||
Savings
deposits
|
36,816
|
71
|
0.77
|
41,388
|
61
|
0.58
|
||||||||||||||||||
Time
deposits
|
186,397
|
2,144
|
4.56
|
168,333
|
1,789
|
4.22
|
||||||||||||||||||
Repurchase
agreements
|
11,855
|
127
|
4.25
|
8,106
|
95
|
4.65
|
||||||||||||||||||
FHLB
Borrowing
|
16,802
|
176
|
4.16
|
27,489
|
315
|
4.55
|
||||||||||||||||||
Subordinated
debenture
|
7,217
|
122
|
6.71
|
7,217
|
122
|
6.71
|
||||||||||||||||||
Total
interest-bearing liabilities
|
400,078
|
3,613
|
3.58
|
366,362
|
2,928
|
3.17
|
||||||||||||||||||
Non-interest-bearing
liabilities:
|
||||||||||||||||||||||||
Demand
deposits
|
96,431
|
93,296
|
||||||||||||||||||||||
Other
liabilities
|
4,444
|
4,314
|
||||||||||||||||||||||
Stockholders'
equity
|
39,290
|
35,990
|
||||||||||||||||||||||
Total
liabilities and stockholders' equity
|
$ |
540,243
|
$ |
499,962
|
||||||||||||||||||||
Net
interest income (taxable equivalent basis)
|
$ |
5,010
|
$ |
4,940
|
||||||||||||||||||||
Tax
equivalent adjustment
|
(97 | ) | (75 | ) | ||||||||||||||||||||
Net
interest income
|
4,913
|
4,865
|
||||||||||||||||||||||
Net
interest spread (taxable equivalent basis)
|
3.11
|
%
|
3.45 | % | ||||||||||||||||||||
Net
yield on interest-earning
|
||||||||||||||||||||||||
assets
(taxable equivalent basis) (3)
|
3.89
|
%
|
4.16 | % |
(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.
|
09/30/07
|
06/30/07
|
03/31/07
|
12/31/06
|
|||||||||||||
(Dollars
in Thousands)
|
||||||||||||||||
Nonaccrual
loans: (1)
|
$ |
238
|
$ |
300
|
$ |
445
|
$ |
444
|
||||||||
Loans
past due 90 days or more: (2)
|
28
|
10
|
5
|
1,090
|
||||||||||||
Total
nonperforming loans
|
$ |
266
|
$ |
310
|
$ |
450
|
$ |
1,534
|
||||||||
Other
real estate owned (3)
|
$ |
353
|
$ |
385
|
$ |
-
|
$ |
-
|
||||||||
Total
nonperforming assets
|
$ |
619
|
$ |
695
|
$ |
450
|
$ |
1,534
|
||||||||
Allowance
for loan losses
|
$ |
4,249
|
$ |
4,181
|
$ |
4,093
|
$ |
4,101
|
||||||||
Nonaccrual
loans to total loans
|
0.06 | % | 0.08 | % | 0.12 | % | 0.12 | % | ||||||||
Nonperforming
loans to total loans
|
0.07 | % | 0.08 | % | 0.12 | % | 0.41 | % | ||||||||
Nonperforming
loans to total assets
|
0.05 | % | 0.06 | % | 0.09 | % | 0.30 | % | ||||||||
Nonperforming
assets to total assets
|
0.11 | % | 0.13 | % | 0.09 | % | 0.30 | % | ||||||||
Allowance
for loan losses to total loans
|
1.07 | % | 1.09 | % | 1.10 | % | 1.11 | % |
Required
|
Actual
|
Excess
|
||||||||||
Risk-based
Capital
|
||||||||||||
Tier
1
|
4.00 | % | 11.14 | % | 7.14 | % | ||||||
Total
|
8.00 | % | 12.14 | % | 4.14 | % | ||||||
Leverage
Ratio
|
4.00 | % | 8.76 | % | 4.76 | % |
|
(a)
|
Exhibits
|
Date:
|
November
14, 2007
|
By:
|
/s/
Paul Van Ostenbridge
|
|
Paul
Van Ostenbridge
|
||||
President
and Chief Executive
|
||||
Officer
|
||||
(authorized
officer on behalf
|
||||
of
registrant)
|
||||
Date:
|
November
14, 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
|