x |
Annual report pursuant to Section 13 or 15 (d) of the Securities Exchange Act of 1934 for the fiscal year ended December 31, 2010, or
|
o |
Transition report pursuant to Section 13 or 15 (d) of Securities Exchange Act of 1934
|
California
|
91-2115369
|
|
(State or other jurisdiction of incorporation or organization)
|
(IRS Employer ID Number)
|
|
975 El Camino Real, South San Francisco, California
|
94080
|
|
(Address of principal executive offices)
|
(Zip code)
|
|
(650) 588-6800
|
||
(Registrant’s telephone number, including area code)
|
Securities registered pursuant to Section 12(b) of the Act:
|
None
|
|
Securities registered pursuant to Section 12(g) of the Act:
|
||
Title of Class:
|
Common Stock, no par value
|
Large accelerated filer o | Accelerated filer o | Non-accelerated filer x |
Smaller reporting company o |
PAGE
|
|||
3
|
|||
27
|
|||
34
|
|||
35
|
|||
36
|
|||
36
|
|||
36 | |||
39
|
|||
40
|
|||
60
|
|||
62
|
|||
104
|
|||
104
|
|||
106
|
|||
106
|
|||
106
|
|||
106 | |||
106
|
|||
106
|
|||
107
|
|||
107
|
|||
107
|
|||
107
|
|||
112
|
|||
Exhibit 31 – Rule 13a-14(a)/15d-14(a) Certifications
|
|
||
Exhibit 32 – Section 1350 Certifications
|
|
●
|
Expanded oversight of the accounting profession by creating a new independent public company oversight board to be monitored by the SEC.
|
|
●
|
Revised rules on auditor independence to restrict the nature of non-audit services provided to audit clients and to require such services to be pre-approved by the audit committee.
|
|
●
|
Improved corporate responsibility through mandatory listing standards relating to audit committees, certifications of periodic reports by the CEO and CFO and making issuer interference with an audit a crime.
|
|
●
|
Enhanced financial disclosures, including periodic reviews for largest issuers and real time disclosure of material company information.
|
|
●
|
Enhanced criminal penalties for a broad array of white collar crimes and increases in the statute of limitations for securities fraud lawsuits.
|
●
|
Disclosure of whether a company has adopted a code of ethics that applies to the company’s principal executive officer, principal financial officer, principal accounting officer or controller, or persons performing similar functions, and disclosure of any amendments or waivers to such code of ethics.
|
|
●
|
Disclosure of whether a company’s audit committee of its board of directors has a member of the audit committee who qualifies as an “audit committee financial expert.”
|
|
●
|
A prohibition on insider trading during pension plan black-out periods.
|
|
●
|
Disclosure of off-balance sheet transactions.
|
|
●
|
A prohibition on personal loans to directors and officers.
|
|
●
|
Conditions on the use of non-GAAP (generally accepted accounting principles) financial measures.
|
|
●
|
Standards of professional conduct for attorneys, requiring attorneys having an attorney-client relationship with a company, among other matters, to report “up the ladder” to the audit committee, to another board committee or to the entire board of directors regarding certain material violations.
|
|
●
|
Expedited filing requirements for Form 4 reports of changes in beneficial ownership of securities, reducing the filing deadline to within 2 business days of the date on which an obligation to report is triggered.
|
|
●
|
Accelerated filing requirements for reports on Forms 10-K and 10-Q by public companies which qualify as “accelerated filers,” with a phased-in reduction of the filing deadline for Form 10-K and Form 10-Q.
|
|
●
|
Disclosure concerning website access to reports on Forms 10-K, 10-Q and 8-K, and any amendments to those reports, by “accelerated filers” as soon as reasonably practicable after such reports and material are filed with or furnished to the SEC.
|
|
●
|
Rules requiring national securities exchanges and national securities associations to prohibit the listing of any security whose issuer does not meet audit committee standards established pursuant to the Act.
|
●
|
The name of the company’s independent auditor and a description of services, if any, performed for a company during the previous two fiscal years and the period from the end of the most recent fiscal year to the date of filing;
|
|
●
|
The annual compensation paid to each director and the five most highly compensated non-director executive officers (including the CEO) during the most recent fiscal year, including all plan and non-plan compensation for all services rendered to a company as specified in Item 402 of Regulation S-K such as grants, awards or issuance of stock, stock options and similar equity-based compensation;
|
|
●
|
A description of any loans made to a director or executive officer at a “preferential” loan rate during the company’s two most recent fiscal years, including the amount and terms of the loans;
|
|
●
|
Whether any bankruptcy was filed by a company or any of its directors or executive officers within the previous 10 years;
|
|
●
|
Whether any director or executive officer of a company has been convicted of fraud during the previous 10 years; and
|
|
●
|
A description of any material pending legal proceedings other than ordinary routine litigation as specified in Item 103 of Regulation S-K and a description of such litigation where the company was found legally liable by a final judgment or order.
|
Bid Price of FNB Bancorp
|
Cash
|
|||||||||||
Common Stock
|
Dividends
|
|||||||||||
|
High
|
Low
|
Declared (1)
|
|||||||||
2009
|
||||||||||||
First Quarter
|
$ | 12.50 | $ | 10.45 | $ | 0.15 | ||||||
Second Quarter
|
12.00 | 10.00 | 0.15 | |||||||||
Third Quarter
|
10.25 | 7.00 | 0.05 | |||||||||
Fourth Quarter
|
11.00 | 7.05 | 0.05 | |||||||||
2010
|
||||||||||||
First Quarter
|
$ | 8.75 | 7.05 | $ | 0.05 | |||||||
Second Quarter
|
9.50 | 7.00 | 0.05 | |||||||||
Third Quarter
|
9.00 | 7.50 | 0.05 | |||||||||
Fourth Quarter
|
10.00 | 7.00 | 0.05 |
Period Ending | ||||||||||||||||||||||||
Index
|
12/31/05
|
12/31/06
|
12/31/07
|
12/31/08
|
12/31/09
|
12/31/10
|
||||||||||||||||||
FNB Bancorp
|
100.00 | 102.10 | 76.83 | 41.91 | 31.26 | 42.90 | ||||||||||||||||||
Russell 2000
|
100.00 | 118.37 | 116.51 | 77.15 | 98.11 | 124.46 | ||||||||||||||||||
SNL Bank Pink > $500M
|
100.00 | 109.72 | 101.10 | 73.36 | 62.72 | 66.25 |
Dollar amounts in thousands, except
|
At and for the years ended December 31, | |||||||||||||||||||
per share amounts and ratios
|
2010
|
2009
|
2008
|
2007
|
2006
|
|||||||||||||||
STATEMENT OF EARNINGS
DATA
|
||||||||||||||||||||
Total interest income
|
$ | 34,428 | $ | 35,817 | $ | 39,427 | $ | 42,290 | $ | 37,196 | ||||||||||
Total interest expense
|
5,383 | 9,011 | 11,507 | 13,657 | 9,821 | |||||||||||||||
Net interest income
|
29,045 | 26,806 | 27,920 | 28,633 | 27,375 | |||||||||||||||
Provision for loan losses
|
1,854 | 4,596 | 3,045 | 690 | 683 | |||||||||||||||
Net interest income after
provision for loan losses
|
27,191 | 22,210 | 24,875 | 27,943 | 26,692 | |||||||||||||||
Total noninterest income
|
4,706 | 5,387 | 5,045 | 4,300 | 6,259 | |||||||||||||||
Total noninterest expenses
|
27,005 | 27,585 | 25,346 | 23,182 | 21,760 | |||||||||||||||
Earnings before provision (benefit) for income taxes
|
4,892 | 12 | 4,574 | 9,061 | 11,191 | |||||||||||||||
Provision (benefit) for income taxes
|
1,227 | (581 | ) | 611 | 2,382 | 3,609 | ||||||||||||||
Net earnings
|
3,665 | 593 | 3,963 | 6,679 | 7,582 | |||||||||||||||
Dividends and discount accretion
on preferred stock
|
853 | 632 |
—
|
—
|
—
|
|||||||||||||||
Net (loss) earnings available to common shareholders
|
$ | 2,812 | $ | (39 | ) | $ | 3,963 | $ | 6,679 | $ | 7,582 | |||||||||
PER SHARE DATA - see note (1)
|
||||||||||||||||||||
Net earnings per share:
|
||||||||||||||||||||
Basic
|
$ | 0.84 | $ | (0.01 | ) | $ | 1.17 | $ | 1.93 | $ | 2.25 | |||||||||
Diluted
|
$ | 0.84 | $ | (0.01 | ) | $ | 1.16 | $ | 1.91 | $ | 2.15 | |||||||||
Cash dividends per share
|
$ | 0.20 | $ | 0.30 | $ | 0.60 | $ | 0.60 | $ | 0.60 | ||||||||||
Weighted average shares outstanding:
|
||||||||||||||||||||
Basic
|
3,341,000 | 3,341,000 | 3,393,000 | 3,461,000 | 3,363,000 | |||||||||||||||
Diluted
|
3,341,000 | 3,362,000 | 3,416,000 | 3,497,000 | 3,523,000 | |||||||||||||||
Shares outstanding at period end
|
3,341,000 | 3,341,000 | 3,393,000 | 3,461,000 | 3,363,000 | |||||||||||||||
Book value per share
|
$ | 24.22 | $ | 23.61 | $ | 20.09 | $ | 19.23 | $ | 18.45 | ||||||||||
BALANCE SHEET DATA
|
||||||||||||||||||||
Investment securities
|
126,189 | 97,188 | 99,221 | 94,432 | 94,945 | |||||||||||||||
Net loans
|
474,828 | 494,349 | 497,984 | 489,574 | 419,437 | |||||||||||||||
Allowance for loan losses
|
9,524 | 9,829 | 7,075 | 5,638 | 5,002 | |||||||||||||||
Total assets
|
714,639 | 708,309 | 660,957 | 644,465 | 581,270 | |||||||||||||||
Total deposits
|
628,440 | 598,964 | 500,910 | 499,255 | 481,567 | |||||||||||||||
Stockholders’ equity
|
80,924 | 78,865 | 68,149 | 66,545 | 62,063 | |||||||||||||||
SELECTED PERFORMANCE DATA
|
||||||||||||||||||||
Return on average assets
|
0.39 | % | -0.01 | % | 0.60 | % | 1.07 | % | 1.32 | % | ||||||||||
Return on average equity
|
3.48 | % | -0.05 | % | 5.87 | % | 10.39 | % | 12.86 | % | ||||||||||
Net interest margin
|
4.80 | % | 4.47 | % | 4.75 | % | 5.05 | % | 5.26 | % | ||||||||||
Average loans as a percentage of
average deposits
|
78.18 | % | 91.32 | % | 97.93 | % | 91.74 | % | 78.92 | % | ||||||||||
Average total stockholders’ equity as
a percentage of average total assets
|
11.07 | % | 11.31 | % | 10.25 | % | 10.31 | % | 10.25 | % | ||||||||||
Common dividend payout ratio
|
22.62 | % | n/a | 44.71 | % | 25.69 | % | 21.43 | % | |||||||||||
SELECTED ASSET QUALITY RATIOS
|
||||||||||||||||||||
Net loan charge-offs to average loans
|
0.45 | % | 0.37 | % | 0.32 | % | 0.01 | % | 0.01 | % | ||||||||||
Allowance for loan losses/Total Loans
|
1.97 | % | 1.95 | % | 1.40 | % | 1.14 | % | 1.18 | % | ||||||||||
CAPITAL RATIOS
|
||||||||||||||||||||
Total risk-based capital
|
14.93 | % | 14.29 | % | 11.86 | % | 11.47 | % | 12.00 | % | ||||||||||
Tier 1 risk-based capital
|
13.67 | % | 13.04 | % | 10.67 | % | 10.52 | % | 11.05 | % | ||||||||||
Tier 1 leverage capital
|
10.52 | % | 10.77 | % | 9.70 | % | 9.89 | % | 10.08 | % |
1. |
The nature of credit risk inherent in the entity’s portfolio of financing receivables.
|
|
2. |
How that risk is analyzed and assessed in arriving at the allowance for credit losses.
|
|
3. |
The changes and reasons for those changes in the allowance for credit losses.
|
(1) |
Interest on non-accrual loans is recognized into income on a cash received basis if the loan has demonstrated performance and full collection is considered probable.
|
(2) |
Amounts of interest earned include loan fees of $1,075,000, $1,249,000 and $1,425,000 for the years ended
December 31, 2010, 2009 and 2008, respectively.
|
(3) |
Tax equivalent adjustments recorded at the statutory rate of 34% that are included in the nontaxable securities
portfolio are $401,000, $392,000, and $481,000 for the years ended December 31, 2010, 2009 and 2008, respectively, and were derived from nontaxable municipal interest income.
|
(4) |
The annualized net interest margin is computed by dividing net interest income by total average interest earning assets.
|
TABLE 2
|
Rate/Volume Variance Analysis | |||||||||||||||||||||||
(Dollar amounts in thousands)
|
Year Ended December 31 | |||||||||||||||||||||||
2010 compared to 2009
|
2009 compared to 2008
|
|||||||||||||||||||||||
Increase (decrease) (2)
|
Increase (decrease) (2)
|
|||||||||||||||||||||||
Interest
|
Interest
|
|||||||||||||||||||||||
Income/
|
Variance
|
Income/
|
Variance
|
|||||||||||||||||||||
Expense
|
Attributable To
|
Expense
|
Attributable To
|
|||||||||||||||||||||
Variance
|
Rate
|
Volume
|
Variance
|
Rate
|
Volume
|
|||||||||||||||||||
INTEREST EARNING ASSETS:
|
||||||||||||||||||||||||
Loans
|
$ | (1,332 | ) | $ | (652 | ) | $ | (680 | ) | $ | (2,797 | ) | $ | (3,104 | ) | $ | 307 | |||||||
Taxable securities
|
32 | (839 | ) | 871 | (469 | ) | (676 | ) | 207 | |||||||||||||||
Nontaxable securities (1)
|
(2 | ) | (39 | ) | 37 | (410 | ) | (9 | ) | (401 | ) | |||||||||||||
Federal funds sold
|
(78 | ) | (78 | ) | — | (28 | ) | (78 | ) | 50 | ||||||||||||||
Total
|
$ | (1,380 | ) | $ | (1,608 | ) | $ | 228 | $ | (3,704 | ) | $ | (3,867 | ) | $ | 163 | ||||||||
INTEREST BEARING LIABILITIES:
|
||||||||||||||||||||||||
Demand deposits
|
$ | (134 | ) | $ | (153 | ) | $ | 19 | $ | (22 | ) | $ | (13 | ) | $ | (9 | ) | |||||||
Money market
|
(982 | ) | (1,783 | ) | 801 | 748 | (426 | ) | 1,174 | |||||||||||||||
Savings deposits
|
(12 | ) | (13 | ) | 1 | (4 | ) | 5 | (9 | ) | ||||||||||||||
Time deposits
|
(1,114 | ) | (940 | ) | (174 | ) | (2,052 | ) | (1,740 | ) | (312 | ) | ||||||||||||
Federal Home Loan Bank
advances
|
(1,386 | ) | 436 | (1,822 | ) | (1,147 | ) | (218 | ) | (929 | ) | |||||||||||||
Federal funds purchased
|
— | — | — | (19 | ) | (19 | ) | — | ||||||||||||||||
Total
|
$ | (3,628 | ) | $ | (2,453 | ) | $ | (1,175 | ) | $ | (2,496 | ) | $ | (2,411 | ) | $ | (85 | ) | ||||||
NET INTEREST INCOME
|
$ | 2,248 | $ | 845 | $ | 1,403 | $ | (1,208 | ) | $ | (1,456 | ) | $ | 248 |
TABLE 3
|
Allocation of the Allowance for Loan Losses | |||||||||||||||||||||||||||||||||||||||
(Dollar amounts in thousands) | ||||||||||||||||||||||||||||||||||||||||
2010
|
2009
|
2008
|
2007
|
2006
|
||||||||||||||||||||||||||||||||||||
Amount
|
Percent
of loans
in each
category
to total
Loans
|
Amount
|
Percent
of loans in each
category
to total
Loans
|
Amount
|
Percent
of loans in each
category
to total
Loans
|
Amount
|
Percent
of loans in each
category
to total
Loans
|
Amount
|
Percent
of loans in each
category
to total
Loans
|
|||||||||||||||||||||||||||||||
Commercial
real estate
|
$ | 3,787 | 57.5 | % | $ | 4,168 | 54.3 | % | $ | 3,316 | 49.2 | % | $ | 2,609 | 50.5 | % | $ | 2,784 | 54.0 | % | ||||||||||||||||||||
Real estate
construction
|
1,999 | 5.7 | % | 3,110 | 9.4 | % | 1,388 | 13.0 | % | 1,576 | 11.6 | % | 539 | 8.7 | % | |||||||||||||||||||||||||
Real estate
multi family
|
578 | 8.8 | % | 881 | 11.5 | % | 694 | 10.3 | % | 598 | 11.6 | % | 596 | 11.6 | % | |||||||||||||||||||||||||
Real estate
1 to 4 family
|
971 | 14.7 | % | 832 | 10.8 | % | 702 | 10.4 | % | 462 | 9.0 | % | 484 | 9.4 | % | |||||||||||||||||||||||||
Commercial &
industrial
|
2,102 | 12.7 | % | 809 | 13.5 | % | 932 | 16.5 | % | 370 | 16.6 | % | 582 | 15.6 | % | |||||||||||||||||||||||||
Consumer loans
|
87 | 0.6 | % | 29 | 0.5 | % | 43 | 0.6 | % | 23 | 0.7 | % | 17 | 0.7 | % | |||||||||||||||||||||||||
Total
|
$ | 9,524 | 100.0 | % | $ | 9,829 | 100.0 | % | $ | 7,075 | 100.0 | % | $ | 5,638 | 100.0 | % | $ | 5,002 | 100.0 | % |
TABLE 4
|
Allow ance for Loan Losses | |||||||||||||||||||
Historical Analysis | ||||||||||||||||||||
(Dollar amounts in thousands)
|
For the year ended December 31, | |||||||||||||||||||
2010
|
2009
|
2008
|
2007
|
2006
|
||||||||||||||||
Balance at Beginning of Period
|
$ | 9,829 | $ | 7,075 | $ | 5,638 | $ | 5,002 | $ | 4,374 | ||||||||||
Provision for Loan Losses
|
1,854 | 4,596 | 3,045 | 690 | 683 | |||||||||||||||
Charge-offs:
|
||||||||||||||||||||
Real Estate
|
(1,376 | ) | (1,471 | ) | (493 | ) | (48 | ) | 0 | |||||||||||
Commercial
|
(812 | ) | (390 | ) | (1,284 | ) | (19 | ) | (49 | ) | ||||||||||
Consumer
|
(34 | ) | (60 | ) | (11 | ) | (13 | ) | (10 | ) | ||||||||||
Total
|
(2,222 | ) | (1,921 | ) | (1,788 | ) | (80 | ) | (59 | ) | ||||||||||
Recoveries:
|
||||||||||||||||||||
Real Estate
|
50 | 61 | 36 | 15 |
—
|
|||||||||||||||
Commercial
|
6 | 18 | 144 | 10 | 3 | |||||||||||||||
Consumer
|
7 |
—
|
—
|
1 | 1 | |||||||||||||||
Total
|
63 | 79 | 180 | 26 | 4 | |||||||||||||||
Net Charge-offs
|
(2,159 | ) | (1,842 | ) | (1,608 | ) | (54 | ) | (55 | ) | ||||||||||
Balance at End of Period
|
$ | 9,524 | $ | 9,829 | $ | 7,075 | $ | 5,638 | $ | 5,002 | ||||||||||
Percentages
|
||||||||||||||||||||
Allowance for loan losses/total loans
|
1.97 | % | 1.95 | % | 1.40 | % | 1.14 | % | 1.18 | % | ||||||||||
Net charge-offs/real estate loans
|
0.35 | % | 0.38 | % | 0.14 | % | 0.01 | % | 0.00 | % | ||||||||||
Net charge-offs/commercial loans
|
1.31 | % | 0.55 | % | 1.37 | % | 0.01 | % | 0.07 | % | ||||||||||
Net charge-offs/consumer loans
|
1.00 | % | 2.25 | % | 0.35 | % | 0.33 | % | 0.27 | % | ||||||||||
Net charge-offs/total loans
|
0.45 | % | 0.37 | % | 0.32 | % | 0.01 | % | 0.01 | % | ||||||||||
Allowance for loan losses/non-
performing loans
|
71.72 | % | 38.41 | % | 50.17 | % | 49.18 | % | 190.33 | % |
TABLE 5
|
Analysis of Nonperforming Assets | |||||||||||||||||||
(Dollar amounts in thousands)
|
December 31 | |||||||||||||||||||
2010
|
2009
|
2008
|
2007
|
2006
|
||||||||||||||||
Accruing loans 90 days or more
|
$ | — | $ | — | $ | — | $ | — | $ | — | ||||||||||
Nonaccrual loans
|
16,712 | 25,592 | 14,102 | 11,465 | 2,628 | |||||||||||||||
Other real estate owned
|
6,680 | 7,320 | 3,557 | 440 | — | |||||||||||||||
Total
|
$ | 23,392 | $ | 32,912 | $ | 17,659 | $ | 11,905 | $ | 2,628 |
TABLE 6
|
Noninterest Income
|
Variance
|
Variance
|
|||||||||||||||||||||||||
Years ended December 31,
|
2010 vs. 2009
|
2009 vs. 2008
|
||||||||||||||||||||||||||
(Dollar amounts in thousands)
|
2010
|
2009
|
2008
|
Amount
|
Percent
|
Amount
|
Percent
|
|||||||||||||||||||||
Service charges
|
$ | 2,703 | $ | 2,826 | $ | 2,888 | $ | (123 | ) | -4.4 | % | $ | (62 | ) | -2.1 | % | ||||||||||||
Death benefit bank owned life
insurance policy
|
— | 316 | 760 | (316 | ) | -100.0 | % | (444 | ) | -58.4 | % | |||||||||||||||||
Credit card fees
|
649 | 691 | 749 | (42 | ) | -6.1 | % | (58 | ) | -7.7 | % | |||||||||||||||||
Gain on sale of AFS securities
|
619 | 997 | 205 | (378 | ) | -37.9 | % | 792 | 386.3 | % | ||||||||||||||||||
Loss on impairment of securities
|
— | — | (495 | ) | — | — | 495 | 100.0 | % | |||||||||||||||||||
Gain on sale of other real estate owned
|
132 | — | — | 132 | n/a | — | — | |||||||||||||||||||||
Other income
|
603 | 557 | 938 | 46 | 8.3 | % | (381 | ) | -40.6 | % | ||||||||||||||||||
Total noninterest income
|
$ | 4,706 | $ | 5,387 | $ | 5,045 | $ | (681 | ) | -12.6 | % | $ | 342 | 6.8 | % |
TABLE 7
|
Noninterest Expenses
|
Variance
|
Variance
|
|||||||||||||||||||||||
(Dollar amounts in thousands)
|
Years ended December 31,
|
2010 vs. 2009
|
2009 vs. 2008
|
|||||||||||||||||||||||
2010
|
2009
|
2008
|
Amount
|
Percent
|
Amount
|
Percent
|
||||||||||||||||||||
Salaries and employee benefits
|
$ | 13,603 | $ | 13,359 | $ | 14,335 | $ | 244 | 1.8 | % | $ | (976 | ) | -6.8 | % | |||||||||||
Loss on impairment of other
real estate owned
|
957 | 2,396 | 218 | (1,439 | ) | -60.1 | % | 2,178 | 999.1 | % | ||||||||||||||||
Occupancy expense
|
2,036 | 2,084 | 2,081 | (48 | ) | -2.3 | % | 3 | 0.1 | % | ||||||||||||||||
Equipment expense
|
1,943 | 1,923 | 1,930 | 20 | 1.0 | % | (7 | ) | -0.4 | % | ||||||||||||||||
Professional fees
|
1,341 | 1,194 | 1,149 | 147 | 12.3 | % | 45 | 3.9 | % | |||||||||||||||||
FDIC assessment
|
1,350 | 1,128 | 435 | 222 | 19.7 | % | 693 | 159.3 | % | |||||||||||||||||
Telephone, postage, supplies
|
1,103 | 1,068 | 1,029 | 35 | 3.3 | % | 39 | 3.8 | % | |||||||||||||||||
Other real estate owned expense
|
1,012 | 852 | 246 | 160 | 18.8 | % | 606 | 246.3 | % | |||||||||||||||||
Advertising expense
|
411 | 439 | 686 | (28 | ) | -6.4 | % | (247 | ) | -36.0 | % | |||||||||||||||
Bankcard expenses
|
589 | 633 | 697 | (44 | ) | -7.0 | % | (64 | ) | -9.2 | % | |||||||||||||||
Data processing expense
|
518 | 554 | 495 | (36 | ) | -6.5 | % | 59 | 11.9 | % | ||||||||||||||||
Surety insurance
|
274 | 253 | 250 | 21 | 8.3 | % | 3 | 1.2 | % | |||||||||||||||||
Director expense
|
216 | 201 | 180 | 15 | 7.5 | % | 21 | 11.7 | % | |||||||||||||||||
Other
|
1,652 | 1,501 | 1,615 | 151 | 10.1 | % | (114 | ) | -7.1 | % | ||||||||||||||||
Total noninterest expense
|
$ | 27,005 | $ | 27,585 | $ | 25,346 | $ | (580 | ) | -2.1 | % | $ | 2,239 | 8.8 | % |
Table 8
|
|||||||||||||||||||||||||||||||||||
(Dollar amounts in thousands)
|
December 31 | ||||||||||||||||||||||||||||||||||
2010
|
2009
|
2008
|
2007
|
2006
|
|||||||||||||||||||||||||||||||
Commercial real estate
|
$ | 278,866 | 56 | % | $ | 273,981 | 55 | % | $ | 248,323 | 49 | % | $ | 250,343 | 49 | % | $ | 229,627 | 53 | % | |||||||||||||||
Real estate construction
|
27,577 | 6 | % | 47,189 | 9 | % | 65,647 | 13 | % | 57,362 | 12 | % | 37,094 | 9 | % | ||||||||||||||||||||
Real estate multi family
|
42,584 | 9 | % | 57,875 | 11 | % | 52,046 | 10 | % | 57,373 | 12 | % | 49,150 | 12 | % | ||||||||||||||||||||
Real estate 1 to 4 family
|
71,463 | 15 | % | 54,674 | 11 | % | 52,642 | 10 | % | 44,334 | 9 | % | 39,878 | 9 | % | ||||||||||||||||||||
Commercial & industrial
|
61,493 | 13 | % | 67,977 | 13 | % | 83,442 | 17 | % | 82,228 | 17 | % | 66,139 | 16 | % | ||||||||||||||||||||
Consumer loans
|
2,689 | 1 | % | 2,661 | 1 | % | 3,136 | 1 | % | 3,636 | 1 | % | 3,279 | 1 | % | ||||||||||||||||||||
Sub total
|
484,672 | 100 | % | 504,357 | 100 | % | 505,236 | 100 | % | 495,276 | 100 | % | 425,167 | 100 | % | ||||||||||||||||||||
Net deferred loan fees
|
(320 | ) | 0 | % | (179 | ) | 0 | % | (177 | ) | 0 | % | (64 | ) | 0 | % | (728 | ) | 0 | % | |||||||||||||||
Total
|
$ | 484,352 | 100 | % | $ | 504,178 | 100 | % | $ | 505,059 | 100 | % | $ | 495,212 | 100 | % | $ | 424,439 | 100 | % |
TABLE 9
|
Maturing
|
|||||||||||||||
Maturing
|
After 1
|
Maturing
|
||||||||||||||
(Dollar amounts in thousands)
|
Within
|
But Within
|
After 5
|
|||||||||||||
1 Year
|
5 Years
|
Years
|
Total
|
|||||||||||||
Commercial real estate
|
$ | 153,590 | $ | 89,452 | $ | 35,824 | $ | 278,866 | ||||||||
Real estate construction
|
15,188 | 8,846 | 3,543 | 27,577 | ||||||||||||
Real estate multi family
|
23,453 | 13,660 | 5,471 | 42,584 | ||||||||||||
Real estate 1 to 4 family
|
39,360 | 22,923 | 9,180 | 71,463 | ||||||||||||
Commercial & industrial
|
33,869 | 19,725 | 7,899 | 61,493 | ||||||||||||
Consumer loans
|
1,481 | 863 | 345 | 2,689 | ||||||||||||
Sub total
|
266,941 | 155,469 | 62,262 | 484,672 | ||||||||||||
Net deferred loan fees
|
(176 | ) | (103 | ) | (41 | ) | (320 | ) | ||||||||
Total
|
$ | 266,765 | $ | 155,366 | $ | 62,221 | $ | 484,352 | ||||||||
With predetermined
fixed interest rates
|
$ | 77,884 | $ | 45,361 | $ | 18,166 | $ | 141,411 | ||||||||
With floating interest rates
|
188,881 | 110,005 | 44,055 | 342,941 | ||||||||||||
Total
|
$ | 266,765 | $ | 155,366 | $ | 62,221 | $ | 484,352 |
TABLE 10
|
After | After | |||||||||||||||||||||||||||||||||||
(Dollar amounts in thousands)
|
Due
In 1 Year Or Less |
Yield
|
1 Year
Through 5 Years |
Yield
|
5 Years
Through 10 Years |
Yield
|
Due
After 10 Years |
Yield
|
Fair
Value |
Maturity
In Years |
Average
Yield
|
||||||||||||||||||||||||||
U. S. Treasury securities
|
$ | — | — | % | $ | 12,345 | 1.17 | % | $ | — | — | % | $ | — | — | % | $ | 12.345 | 3.61 | 1.17 | % | ||||||||||||||||
U. S. Government Agencies
|
3,086 | 3.99 | % | 42,095 | 2.58 | % | 933 | 2.20 | % |
—
|
— |
|
46,114 | 2.95 | 1.80 | % | |||||||||||||||||||||
Mortgage-backed securities
|
— | — | — | — | 3,911 | 1.34 | % | 15,157 | 3.46 | % | 19,068 | 17.97 | 3.01 | % | |||||||||||||||||||||||
States & Political Subdivisions
|
2,909 | 3.50 | % | 12,757 | 3.51 | % | 9,781 | 3.50 | % | 17,009 | 3.63 | % | 42,456 | 7.60 | 3.56 | % | |||||||||||||||||||||
Corporate Debt
|
1,023 | 1.54 | % | 4,238 | 3.69 | % | 945 | 1.87 | % |
—
|
— |
|
6,206 | 3.58 | 3.05 | % | |||||||||||||||||||||
Total
|
$ | 7,018 | 3.43 | % | $ | 71,435 | 2.00 | % | $ | 15,570 | 2.70 | % | $ | 32,166 | 3.55 | % | $ | 126,189 | 6.84 | 2.57 | % |
TABLE 11
|
Years Ended December 31, | |||||||||||||||||||||||
2010
|
2009
|
2008
|
||||||||||||||||||||||
(Dollar amounts in thousands)
|
Amortized
|
Fair
|
Amortized
|
Fair
|
Amortized
|
Fair
|
||||||||||||||||||
Cost
|
Value
|
Cost
|
Value
|
Cost
|
Value
|
|||||||||||||||||||
U. S. Treasury securities
|
$ | 12,440 | $ | 12,345 | $ | — | $ | — | $ | — | $ | — | ||||||||||||
U.S. Government Agencies
|
45,941 | 46,114 | 45,100 | 45,307 | 44,309 | 45,312 | ||||||||||||||||||
Mortgage-backed securities
|
18,564 | 19,068 | 22,185 | 22,279 | 13,686 | 14,130 | ||||||||||||||||||
States & Political Subdivisions
|
42,738 | 42,456 | 24,998 | 25,867 | 38,918 | 39,779 | ||||||||||||||||||
Corporate Debt
|
6,105 | 6,206 | 3,696 | 3,735 | — | — | ||||||||||||||||||
Total
|
$ | 125,788 | $ | 126,189 | $ | 95,979 | $ | 97,188 | $ | 96,913 | $ | 99,221 |
TABLE 12
|
Average Deposits and Average Rates paid for the period ending December 31,
|
|||||||||||||||||||||||||||||||||||
2010 | 2009 | 2008 | ||||||||||||||||||||||||||||||||||
(Dollar amounts
|
Average
|
Average
|
% of total
|
Average
|
Average
|
% of total
|
Average
|
Average
|
% of total
|
|||||||||||||||||||||||||||
in thousands)
|
Balance
|
Rate
|
Deposits
|
Balance
|
Rate
|
Deposits
|
Balance
|
Rate
|
Deposits
|
|||||||||||||||||||||||||||
Interest-bearing demand
|
$ | 61,397 | 0.3 | % | 9.8 | $ | 57,886 | 0.5 | % | 10.6 | $ | 59,472 | 0.6 | % | 11.6 | |||||||||||||||||||||
Money market
|
269,661 | 1.1 | % | 42.9 | 198,236 | 0.2 | % | 36.0 | 140,177 | 2.3 | % | 27.6 | ||||||||||||||||||||||||
Savings
|
44,075 | 0.3 | % | 7.0 | 43,531 | 0.3 | % | 7.9 | 46,695 | 0.3 | % | 9.2 | ||||||||||||||||||||||||
Time deposits
$100,000 or more
|
81,838 | 0.9 | % | 13.0 | 83,846 | 2.0 | % | 15.2 | 89,705 | 3.6 | % | 17.7 | ||||||||||||||||||||||||
Time deposits
under $100,000
|
42,725 | 1.2 | % | 6.8 | 49,542 | 2.0 | % | 9.0 | 53,190 | 2.8 | % | 10.5 | ||||||||||||||||||||||||
Total interest bearing deposits
|
$ | 499,696 | 1.0 | % | 79.5 | $ | 433,041 | 1.6 | % | 78.7 | 389,239 | 2.2 | % | 76.6 | ||||||||||||||||||||||
Demand deposits
|
129,062 | — | 20.5 | 116,946 | — | 21.3 | 118,784 | — | 23.4 | |||||||||||||||||||||||||||
Total deposits
|
$ | 628,758 | 0.8 | % | 100.0 | $ | 549,987 | 1.3 | % | 100.0 | $ | 508,023 | 1.7 | % | 100.0 |
TABLE 13
|
Analysis of Time Deposits $100,000 or more at December 31, 2010
|
||||||||||||||||
(Dollar amounts in thousands)
|
|||||||||||||||||
Three Months
Or Less |
Over Three
To Six Months |
Over Six
To Twelve Months |
Over
Twelve Months |
||||||||||||||
Total Deposits $100,000 or more
|
|||||||||||||||||
$82,364 | $ | 39,023 | $ | 7,544 | $ | 22,719 | $ | 13,078 |
TABLE 14
|
Minimum
|
|||||||||||
“Well Capitalized”
|
||||||||||||
Regulatory Capital Ratios
|
2010
|
2009
|
2008
|
Requirements
|
||||||||
Total Capital
|
14.85 | % | 14.24 | % | 11.84 | % | ≥ | 10.00 | % | |||
Tier 1 Capital
|
13.60 | % | 12.99 | % | 10.65 | % | ≥ | 6.00 | % | |||
Leverage ratios
|
10.46 | % | 10.73 | % | 9.68 | % | ≥ | 5.00 | % |
TABLE 15
|
Payments Due by Period | |||||||||||||||||||
(Dollar amounts in thousands)
|
1 year
|
Over 1 to
|
Over 3 to
|
Over
|
||||||||||||||||
Contractual Obligations
|
Total
|
or less
|
3 years
|
5 years
|
5 years
|
|||||||||||||||
Operating Leases
|
$ | 2,306 | $ | 549 | $ | 914 | $ | 306 | $ | 537 | ||||||||||
Salary Continuation Agreements
|
1,698 | 130 | 260 | 260 | 1,048 | |||||||||||||||
Total Contractual Cash Obligations
|
$ | 4,004 | $ | 679 | $ | 1,174 | $ | 566 | $ | 1,585 |
Amount of Commitment Expirations Per Period | ||||||||||||||||||||
Total
|
||||||||||||||||||||
(Dollar amounts in thousands)
|
Amounts
|
1 year
|
Over 1 to
|
Over 3 to
|
Over
|
|||||||||||||||
Other Commercial Commitments
|
Committed
|
or less
|
3 years
|
5 years
|
5 years
|
|||||||||||||||
Lines of Credit
|
$ | 47,860 | $ | 37,954 | $ | 2,753 | $ | 7,153 | $ | — | ||||||||||
Standby Letters of Credit
|
2,067 | 2,067 | — | — | — | |||||||||||||||
Other Commercial Commitments
|
46,156 | 40,917 | 5,235 | 4 | — | |||||||||||||||
Total Commercial Commitments
|
$ | 96,083 | $ | 80,938 | $ | 7,988 | $ | 7,157 | $ | 0 |
TABLE 16
|
Return on Equity and Assets | ||||||||
(Key financial ratios are computed on average balances)
|
|||||||||
Year Ended December 31, | |||||||||
2010
|
2009
|
2008
|
|||||||
Return on average assets
|
0.39 | % | (0.01 | )% | 0.60 | % | |||
Return on average equity
|
3.48 | % | (0.05 | )% | 5.87 | % | |||
Dividend payout ratio
|
22.62 | % | n/a | 44.71 | % | ||||
Average equity to assets ratio
|
11.07 | % | 11.31 | % | 10.25 | % |
TABLE 17
|
Market Risk in Securities | |||||||||||||||||||
(Dollar amounts in thousands)
|
Interest Rate Shock | |||||||||||||||||||
At December 31, 2010 | ||||||||||||||||||||
Available for Sale securities
|
||||||||||||||||||||
Rates Decline
|
Rates Increase
|
|||||||||||||||||||
Rate change
|
(2 | %) | (1 | %) |
Current
|
+1 | % | +2 | % | |||||||||||
Unrealized gain (loss)
|
$ | 6,245 | $ | 3,763 | $ | 401 | $ | (3,832 | ) | $ | (8,011 | ) | ||||||||
Change from current
|
$ | 5,844 | $ | 3,362 | $ | (4,233 | ) | $ | (8,412 | ) |
Market Risk on Net Interest Income | ||||||||||||||||||||
(Dollar amounts in thousands)
|
At December 31, 2010 | |||||||||||||||||||
Rates Decline
|
Rates Increase
|
|||||||||||||||||||
Rate change
|
(2 | %) | (1 | %) |
Current
|
+1 | % | +2 | % | |||||||||||
Change in net interest income
|
$ | 30,622 | $ | 29,970 | $ | 29,045 | $ | 28,797 | $ | 29,271 | ||||||||||
Change from current
|
$ | 1,577 | $ | 925 | $ | (248 | ) | $ | 226 |
INDEX TO FINANCIAL STATEMENTS
|
Page | ||
63
|
|
||
64 | |||
65 | |||
66 | |||
67 |
|
||
68
|
|
/s/ Moss Adams LLP
|
|
Portland, Oregon
|
|
March 28, 2011
|
(Dollar amounts in thousands)
|
2010
|
2009
|
||||||
Assets
|
||||||||
Cash and due from banks
|
$ | 60,874 | $ | 62,853 | ||||
Securities available-for-sale, at fair value
|
126,189 | 97,188 | ||||||
Loans, net of deferred loan fees and allowance for loan losses of
$9,524 and $9,829 on December 31, 2010 and December 31, 2009
|
474,828 | 494,349 | ||||||
Bank premises, equipment, and leasehold improvements, net
|
13,535 | 11,784 | ||||||
Other real estate owned, net
|
6,680 | 7,320 | ||||||
Goodwill
|
1,841 | 1,841 | ||||||
Accrued interest receivable and other assets
|
30,692 | 32,974 | ||||||
Total assets
|
$ | 714,639 | $ | 708,309 | ||||
Liabilities & Stockholders’ Equity
|
||||||||
Deposits
|
||||||||
Demand, noninterest bearing
|
$ | 137,237 | $ | 120,515 | ||||
Demand, interest bearing
|
60,413 | 57,368 | ||||||
Savings and money market
|
305,390 | 293,758 | ||||||
Time
|
125,400 | 127,323 | ||||||
Total deposits
|
628,440 | 598,964 | ||||||
Federal Home Loan Bank advances
|
— | 25,000 | ||||||
Accrued expenses and other liabilities
|
5,275 | 5,480 | ||||||
Total liabilities
|
633,715 | 629,444 | ||||||
Commitments and contingencies (Note 10)
|
||||||||
Stockholders’ equity
|
||||||||
Preferred stock - series A - no par value, authorized and outstanding
12,000 shares (liquidation preference of $1,000 per share plus accrued dividends)
|
11,747 | 11,534 | ||||||
Preferred stock - series B - no par value, authorized and outstanding
600 shares (liquidation preference of $1,000 per share plus accrued dividends)
|
615 | 629 | ||||||
Common stock, no par value, authorized 10,000,000 shares;
issued and outstanding 3,341,049 shares at December 31, 2010 and 3,340,649 shares at December 31, 2009
|
46,565 | 45,044 | ||||||
Retained earnings
|
21,760 | 20,945 | ||||||
Accumulated other comprehensive income, net of tax
|
237 | 713 | ||||||
Total stockholders’ equity
|
80,924 | 78,865 | ||||||
Total liabilities and stockholders’ equity
|
$ | 714,639 | $ | 708,309 |
(Amounts in thousands, except per share)
|
2010
|
2009
|
2008
|
|||||||||
Interest income:
|
||||||||||||
Interest and fees on loans
|
$ | 31,386 | $ | 32,718 | $ | 35,515 | ||||||
Interest and dividends on taxable securities
|
1,811 | 1,779 | 2,243 | |||||||||
Interest on tax-exempt securities
|
1,231 | 1,242 | 1,563 | |||||||||
Federal funds sold
|
— | 78 | 106 | |||||||||
Total interest income
|
34,428 | 35,817 | 39,427 | |||||||||
Interest expense:
|
||||||||||||
Deposits
|
4,832 | 7,074 | 8,404 | |||||||||
Federal Home Loan Bank advances
|
551 | 1,937 | 3,084 | |||||||||
Fed funds purchased
|
— | — | 19 | |||||||||
Total interest expense
|
5,383 | 9,011 | 11,507 | |||||||||
Net interest income
|
29,045 | 26,806 | 27,920 | |||||||||
Provision for loan losses
|
1,854 | 4,596 | 3,045 | |||||||||
Net interest income after provision for loan losses
|
27,191 | 22,210 | 24,875 | |||||||||
Noninterest income:
|
||||||||||||
Service charges
|
2,703 | 2,826 | 2,888 | |||||||||
Death benefit bank owned life insurance policy
|
— | 316 | 760 | |||||||||
Credit card fees
|
649 | 691 | 749 | |||||||||
Gain on sale or impairment of securities available for sale
|
619 | 997 | 205 | |||||||||
Loss on impairment of securities available for sale
|
— | — | (495 | ) | ||||||||
Gain on sale of other real estate owned
|
132 | — | — | |||||||||
Other income
|
603 | 557 | 938 | |||||||||
Total noninterest income
|
4,706 | 5,387 | 5,045 | |||||||||
Noninterest expense:
|
||||||||||||
Salaries and employee benefits
|
13,603 | 13,359 | 14,335 | |||||||||
Loss on impairment of other real estate owned
|
957 | 2,396 | 218 | |||||||||
Occupancy expense
|
2,036 | 2,084 | 2,081 | |||||||||
Equipment expense
|
1,943 | 1,923 | 1,930 | |||||||||
FDIC assessment
|
1,350 | 1,128 | 435 | |||||||||
Other real estate owned expense
|
1,012 | 852 | 246 | |||||||||
Professional fees
|
1,341 | 1,194 | 1,149 | |||||||||
Telephone, postage, supplies
|
1,103 | 1,068 | 1,029 | |||||||||
Advertising expense
|
411 | 439 | 686 | |||||||||
Bankcard expense
|
589 | 633 | 697 | |||||||||
Data processing expense
|
518 | 554 | 495 | |||||||||
Surety insurance
|
274 | 253 | 250 | |||||||||
Director expense
|
216 | 201 | 180 | |||||||||
Other expense
|
1,652 | 1,501 | 1,615 | |||||||||
Total noninterest expense
|
27,005 | 27,585 | 25,346 | |||||||||
Earnings before provision for income taxes
|
4,892 | 12 | 4,574 | |||||||||
Provision (benefit) for income taxes
|
1,227 | (581 | ) | 611 | ||||||||
Net earnings
|
3,665 | 593 | 3,963 | |||||||||
Dividends and discount accretion on preferred stock
|
853 | 632 | — | |||||||||
Net earnings (loss) available to common stockholders
|
$ | 2,812 | $ | (39 | ) | $ | 3,963 | |||||
Earnings (loss) per share data:
|
||||||||||||
Basic
|
$ | 0.84 | $ | (0.01 | ) | $ | 1.17 | |||||
Diluted
|
$ | 0.84 | $ | (0.01 | ) | $ | 1.16 | |||||
Weighted average shares outstanding:
|
||||||||||||
Basic
|
$ | 3,341 | $ | 3,341 | $ | 3,393 | ||||||
Diluted
|
$ | 3,341 | $ | 3,362 | $ | 3,416 |
Preferred
|
Accumulated
|
|||||||||||||||||||||||||||||||
(Dollar amounts in thousands)
|
stock
|
stock
|
other
|
Compre-
|
||||||||||||||||||||||||||||
Common stock
|
series
|
series
|
Retained
|
comprehensive
|
hensive
|
|||||||||||||||||||||||||||
Shares
|
Amount
|
A | B |
earnings
|
earnings
|
earnings
|
Total
|
|||||||||||||||||||||||||
Balance at December 31, 2007
|
2,965 | $ | 43,089 | $ | — | $ | — | $ | 23,039 | $ | 417 | $ | 66,545 | |||||||||||||||||||
Net earnings
|
— | — | — | — | 3,963 | — | $ | 3,963 | 3,963 | |||||||||||||||||||||||
Other comprehensive earnings:
|
||||||||||||||||||||||||||||||||
Unrealized gain on securities,
net of tax provision of $740
|
— | — | — | — | — | 1,066 | 1,066 | 1,066 | ||||||||||||||||||||||||
Gain on sale of securities reclassification adjustment net of tax
|
— | — | (121 | ) | (121 | ) | (121 | ) | ||||||||||||||||||||||||
Total comprehensive earnings
|
$ | 4,908 | ||||||||||||||||||||||||||||||
Cash dividends of $0.15
per share, quarterly
|
— | — | — | — | (2,226 | ) | — | (2,226 | ) | |||||||||||||||||||||||
Stock dividend of 5%
|
146 | 1,816 | — | — | (1,816 | ) | — | — | ||||||||||||||||||||||||
Stock-based compensation
expense
|
— | 171 | — | — | — | — | 171 | |||||||||||||||||||||||||
Stock repurchased and retired
|
(92 | ) | (1,464 | ) | — | — | — | — | (1,464 | ) | ||||||||||||||||||||||
Stock options exercised, including
tax benefit of $8
|
11 | 215 | — | — | — | — | 215 | |||||||||||||||||||||||||
Balance at December 31, 2008
|
3,030 | 43,827 | — | — | 22,960 | 1,362 | 68,149 | |||||||||||||||||||||||||
Preferred stock issued
|
11,360 | 640 | 12,000 | |||||||||||||||||||||||||||||
Net earnings
|
593 | $ | 593 | 593 | ||||||||||||||||||||||||||||
Other comprehensive earnings:
|
||||||||||||||||||||||||||||||||
Unrealized loss on securities,
net of tax benefit of $42
|
— | — | — | — | — | (61 | ) | (61 | ) | (61 | ) | |||||||||||||||||||||
Gain of sale of securities reclassification adjustment net of tax
|
— | — | (588 | ) | (588 | ) | (588 | ) | ||||||||||||||||||||||||
Total comprehensive loss
|
$ | (56 | ) | |||||||||||||||||||||||||||||
Dividends and accretion on preferred stock
|
— | 174 | (11 | ) | (632 | ) | — | (469 | ) | |||||||||||||||||||||||
Cash dividends of $0.15 per share
|
— | — | — | (462 | ) | — | (462 | ) | ||||||||||||||||||||||||
Cash dividends of $0.05 per share
|
— | — | — | (454 | ) | — | (454 | ) | ||||||||||||||||||||||||
Stock dividend of 5%
|
152 | 1,060 | — | — | (1,060 | ) | — | — | ||||||||||||||||||||||||
Stock-based compensation
expense
|
— | 157 | — | — | — | — | 157 | |||||||||||||||||||||||||
Balance at December 31, 2009
|
3,182 | 45,044 | 11,534 | 629 | 20,945 | 713 | 78,865 | |||||||||||||||||||||||||
Net earnings
|
3,665 | $ | 3,665 | 3,665 | ||||||||||||||||||||||||||||
Other comprehensive earnings:
|
||||||||||||||||||||||||||||||||
Unrealized loss on securities,
net of tax benefit of $77
|
— | — | — | — | — | (111 | ) | (111 | ) | (111 | ) | |||||||||||||||||||||
Gain on sale of securities reclassification adjustment net of tax
|
— | — | (365 | ) | (365 | ) | (365 | ) | ||||||||||||||||||||||||
Total comprehensive earnings
|
$ | 3,189 | ||||||||||||||||||||||||||||||
Dividends and accretion on preferred stock
|
— | 213 | (14 | ) | (853 | ) | — | (654 | ) | |||||||||||||||||||||||
Cash dividends of $0.05 per share
|
— | — | (646 | ) | — | (646 | ) | |||||||||||||||||||||||||
Stock dividend of 5%
|
159 | 1,351 | — | — | (1,351 | ) | — | — | ||||||||||||||||||||||||
Stock options exercised
|
— | 2 | — | — | — | — | 2 | |||||||||||||||||||||||||
Stock-based comp expense
|
— | 168 | — | — | — | — | 168 | |||||||||||||||||||||||||
Balance at December 31, 2010
|
3,341 | $ | 46,565 | $ | 11,747 | $ | 615 | $ | 21,760 | $ | 237 | $ | 80,924 |
(Dollar amounts in thousands)
|
||||||||||||
2010
|
2009
|
2008
|
||||||||||
Cash flows from operating activities:
|
||||||||||||
Net earnings
|
$ | 3,665 | $ | 593 | $ | 3,963 | ||||||
Adjustments to reconcile net earnings to net cash
provided by operating activities:
|
||||||||||||
Depreciation, amortization and accretion
|
2,554 | 2,217 | 1,928 | |||||||||
(Gain) loss on sale or impairment of securities available-for-sale
|
(619 | ) | (997 | ) | 290 | |||||||
Gain on sale of other real estate owned
|
(132 | ) | — | — | ||||||||
Loss on impairment of other real estate owned
|
957 | 4,227 | 616 | |||||||||
Stock-based compensation expense
|
168 | 157 | 171 | |||||||||
Provision for loan losses
|
1,854 | 4,596 | 3,045 | |||||||||
Deferred taxes
|
468 | (2,173 | ) | (470 | ) | |||||||
(Decrease) increase in interest receivable and other assets
|
1,946 | (2,738 | ) | (1,465 | ) | |||||||
Increase (decrease) in accrued expenses and other liabilities
|
126 | 429 | (2,385 | ) | ||||||||
Net cash provided by operating activities
|
10,987 | 6,311 | 5,693 | |||||||||
Cash flows from investing activities:
|
||||||||||||
Proceeds from matured/called securities available-for-sale
|
87,223 | 73,879 | 58,445 | |||||||||
Purchases of securities available-for-sale
|
(117,468 | ) | (72,613 | ) | (62,253 | ) | ||||||
Proceeds from sale of other real estate owned
|
4,300 | 2,291 | — | |||||||||
Investment in other real estate owned
|
(468 | ) | — | — | ||||||||
Net decrease (increase) in loans
|
13,518 | (8,846 | ) | (14,970 | ) | |||||||
Proceeds from sales of bank premises, equipment, and
leasehold improvements
|
11 | — | 15 | |||||||||
Purchases of bank premises, equipment, and leasehold improvements
|
(3,260 | ) | (307 | ) | (956 | ) | ||||||
Net cash used in investing activities
|
(16,144 | ) | (5,596 | ) | (19,719 | ) | ||||||
Cash flows from financing activities:
|
||||||||||||
Net increase (decrease) in demand and savings deposits
|
31,399 | 112,571 | (3,843 | ) | ||||||||
Net (decrease) increase in time deposits
|
(1,923 | ) | (14,517 | ) | 5,499 | |||||||
(Decrease) increase in FHLB advances
|
(25,000 | ) | (61,100 | ) | 20,100 | |||||||
Net decrease in federal funds purchased
|
— | — | (5,595 | ) | ||||||||
Cash dividends paid on common stock
|
(646 | ) | (1,212 | ) | (1,771 | ) | ||||||
Cash dividends paid of preferred stock series A and B
|
(654 | ) | (469 | ) | — | |||||||
Issuance of preferred stock series A
|
— | 11,360 | — | |||||||||
Issuance of preferred stock series B
|
— | 640 | — | |||||||||
Exercise of stock options including tax benefit of $8 in 2008
|
2 | — | 215 | |||||||||
Repurchases of common stock
|
— | — | (1,464 | ) | ||||||||
Net cash provided by financing activities
|
3,178 | 47,273 | 13,141 | |||||||||
Net (decrease) increase in cash and cash equivalents
|
(1,979 | ) | 47,988 | (885 | ) | |||||||
Cash and cash equivalents at beginning of year
|
62,853 | 14,865 | 15,750 | |||||||||
Cash and cash equivalents at end of year
|
$ | 60,874 | $ | 62,853 | $ | 14,865 | ||||||
Additional cash flow information:
|
||||||||||||
Interest paid
|
$ | 5,735 | $ | 9,517 | $ | 12,226 | ||||||
Income taxes paid
|
207 | 843 | 1,590 | |||||||||
Non-cash investing and financing activities:
|
||||||||||||
Accrued dividends
|
167 | 159 | 4,141 | |||||||||
Change in fair value of available-for-sale
securities, net of tax effect
|
(476 | ) | (649 | ) | 945 | |||||||
Loans transferred to other real estate ow
ned
|
4,149 | 7,885 | 3,515 | |||||||||
Deemed dividends on preferred stock
|
199 | 163 | — |
(1)
|
The Company and Summary of Significant Accounting Policies
|
|
FNB Bancorp (the “Company”) is a bank holding company registered under the Bank Holding Company Act of 1956, as amended. The Company was incorporated under the laws of the State of California on February 28, 2001. The consolidated financial statements include the accounts of FNB Bancorp and its wholly-owned subsidiary, First National Bank of Northern California (the “Bank”). The Bank provides traditional banking services in San Mateo and San Francisco counties. | ||
The preparation of consolidated 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 the disclosure of contingent assets and liabilities at the date of the financial statements and revenue and expenses during the reporting period. Actual results could differ from those estimates. For the Bank, the significant accounting estimates are the allowance for loan losses, the valuation of goodwill, the valuation of the allowance for deferred tax assets and fair value determinations such as OREO and impaired loans. A summary of the significant accounting policies applied in the preparation of the accompanying consolidated financial statements follows. | ||
(a)
|
Basis of Presentation
|
|
The accounting and reporting policies of the Company and its wholly-owned subsidiary are in accordance with accounting principles generally accepted in the United States of America. All intercompany balances and transactions have been eliminated.
|
||
(b)
|
Cash and Cash Equivalents
|
|
Cash and cash equivalents include cash on hand, amounts due from banks, and federal funds sold. Generally, federal funds are sold for one-day periods. The cash equivalents are readily convertible to known amounts of cash and present insignificant risk of changes in value due to original maturity dates of 90 days or less. Included in cash and cash equivalents are restricted balances at the Federal Reserve Bank which relate to a minimum cash reserve requirement of approximately $829,000 and $855,000 at December 31, 2010 and 2009, respectively.
|
||
(c)
|
Investment Securities
|
|
Investment securities consist of U.S. Treasury securities, U.S. agency securities, obligations of states and political subdivisions, obligations of U.S. corporations, mortgage-backed securities and other securities. At the time of purchase of a security, the Company designates the security as held-to-maturity or available-for-sale, based on its investment objectives, operational needs, and intent to hold. The Company classifies securities as held to maturity only if and when it has the positive intent and ability to hold the security to maturity. The Company does not purchase securities with the intent to engage in trading activity. Held to maturity securities are recorded at amortized cost, adjusted for amortization of premiums or accretion of discounts. The Company did not have any investments in the held-to-maturity portfolio at December 31, 2010 or 2009.
|
Securities available-for-sale are recorded at fair value with unrealized holding gains or losses, net of the related tax effect, reported as a separate component of stockholders’ equity until realized.
|
||
An impairment charge would also be recorded if the Company has the intent to sell a security that is currently in an unrealized loss position or where the Company may be required to sell a security that is currently in an unrealized loss position. A decline in the market value of any security available-for-sale or held-to-maturity below cost that is deemed other than temporary results in a charge to earnings and the corresponding establishment of a new cost basis for the security. Amortization of premiums and accretion of discounts on debt securities are included in interest income over the life of the related security held-to-maturity or available-for-sale using the effective interest method. Dividend and interest income are recognized when earned. Realized gains and losses for securities classified as available-for-sale and held-to-maturity are included in earnings and are derived using the specific identification method for determining the cost of securities sold.
|
||
Investments with fair values that are less than amortized cost are considered impaired. Impairment may result from either a decline in the financial condition of the issuing entity or, in the case of fixed interest rate investments, from rising interest rates. At each consolidated financial statement date, management assesses each investment to determine if impaired investments are temporarily impaired or if the impairment is other than temporary. This assessment includes a determination of whether the Company intends to sell the security, or if it is more likely than not that the Company will be required to sell the security before recovery of its amortized cost basis less any current-period credit losses. For debt securities that are considered other than temporarily impaired and that the Company does not intend to sell and will not be required to sell prior to recovery of the amortized cost basis, the amount of impairment is separated into the amount that is credit related (credit loss component) and the amount due to all other factors. The credit loss component is recognized in earnings and is calculated as the difference between the security’s amortized cost basis and the present value of its expected future cash flows. The remaining difference between the security’s fair value and the present value of the future expected cash flows is deemed to be due to factors that are not credit related and is recognized in other comprehensive income.
|
||
(d)
|
Derivatives
|
|
All derivatives contracts are recognized as either assets or liabilities in the balance sheet and measured at fair value. The Company did not hold any derivative contracts at December 31, 2010 or 2009.
|
(e)
|
Loans
|
|
Loans are reported at the principal amount outstanding, net of deferred loan fees and the allowance for loan losses. A loan is considered impaired when, based on current information and events, it is probable that the Company will be unable to collect all amounts due according to the contractual terms of the loan agreement, including scheduled interest payments. For a loan that has been restructured, the contractual terms of the loan agreement refer to the contractual terms specified by the original loan agreement, not the contractual terms specified by the restructuring agreement. An impaired loan is measured based upon the present value of future cash flows discounted at the loan’s effective rate, the loan’s observable market price, or the fair value of collateral if the loan is collateral dependent. Interest on impaired loans is recognized on a cash basis. If the measurement of the impaired loan is less than the recorded investment in the loan, an impairment is recognized by a charge to the allowance for loan losses. An unearned discount on installment loans is recognized as income over the terms of the loans by the interest method. Interest on other loans is calculated by using the simple interest method on the daily balance of the principal amount outstanding.
|
||
Loan fees net of certain direct costs of origination, which represent an adjustment to interest yield, are deferred and amortized over the contractual term of the loan using the interest method.
|
||
Loans on which the accrual of interest has been discontinued are designated as nonaccrual loans. Accrual of interest on loans is discontinued either when reasonable doubt exists as to the full and timely collection of interest or principal when a loan becomes contractually past due by 90 days or more with respect to interest or principal. When a loan is placed on nonaccrual status, all interest previously accrued but not collected is reversed against current period interest income. Interest accruals are resumed on such loans only when they are brought fully current with respect to interest and principal and when, in the judgment of management, the loans are estimated to be fully collectible as to both principal and interest. Restructured loans are loans on which concessions in terms have been granted because of the
borrowers’ financial difficulties. Interest is generally accrued on such loans in accordance with the new terms, once the borrower has demonstrated a history of at least six months repayment. A loan is considered to be a troubled debt restructuring when the Bank, for economic or legal reasons related to the debtor’s financial difficulties grants a concession to the debtor that makes it easier for the debtor to make their required loan payments. The concession may take the form of a temporary reduction in the interest rate or monthly payment amount due or may extend the maturity date of the loan. Other financial concessions may be agreed to as conditions warrant.
|
||
(f)
|
Allowance for Loan Losses
|
|
The allowance for loan losses is established through a provision for loan losses charged to expense. Loans are charged off against the allowance for loan losses when management believes that the collectibility of the principal is unlikely. The allowance is an amount that management believes will be adequate to absorb probable losses inherent in existing loans, standby letters of credit, overdrafts, and commitments to extend credit based on evaluations of collectibility and prior loss experience. The evaluations take into consideration such factors as changes in the nature and volume of the portfolio, overall portfolio quality, loan concentrations, specific problem loans and current and anticipated economic conditions that may affect the borrowers’ ability to pay. While management uses these evaluations to determine the level of the allowance for loan losses, future provisions may be necessary based on changes in the factors used in the evaluations. Material estimates relating to the determination of the allowance for loan losses are particularly susceptible to significant change in the near term. Management believes that the allowance for loan losses is adequate as of December 31, 2010. While management uses available information to recognize losses on loans, future additions to the allowance may be necessary based on changes in economic conditions, and our borrowers’ ability to pay. In addition, the banking regulators, as an integral part of its examination process, periodically review the Bank’s allowance for loan losses. The banking regulators may require the Bank to recognize additions to the allowance based on their judgment about information available to them at the time of their examination.
|
(g)
|
Premises and Equipment
|
|
Premises and equipment are reported at cost less accumulated depreciation using the straight-line method over the estimated service lives of related assets ranging from 3 to 50 years. Leasehold improvements are amortized over the estimated lives of the respective leases or the service lives of the improvements, whichever is shorter.
|
||
(h)
|
Other Real Estate Owned
|
|
Real estate properties acquired through, or in lieu of, loan foreclosure are to be sold and are initially recorded at the lower of the carrying amount of the loan or fair value of the property at the date of foreclosure less selling costs. Subsequent to foreclosure, valuations are periodically performed, and any subsequent revisions in the estimate of fair value are reported as an adjustment to the carrying value of the real estate, provided the adjusted carrying amount does not exceed the original amount at foreclosure. Revenues and expenses from operations and changes in the valuation allowance are included in other operating expenses. The Company may make loans to facilitate the sale of foreclosed real estate. Gains and losses on financed sales are recorded in accordance with the appropriate accounting standard, taking into account the buyer’s initial and continuing investment in the property, potential subordination and transfer of ownership.
|
||
(i)
|
Goodwill and Other Intangible Assets
|
|
Goodwill is recognized in a business acquisition transaction when the acquisition purchase price exceeds the fair market value of identified tangible and intangible assets and liabilities. Goodwill is subsequently evaluated for possible impairment at least annually. If impairment is determined to exist, it is recorded in the period it is identified. The Company evaluated goodwill at December 31, 2010, and found no impairment.
|
||
Other intangible assets consist of core deposit and customer intangible assets that are initially recorded at fair value and subsequently amortized over their estimated useful lives, usually no longer than a seven year period.
|
||
(j)
|
Cash Dividends
|
|
The Company’s ability to pay cash dividends is subject to restrictions set forth in the California General Corporation Law. Funds for payment of any cash dividends by the Company would be obtained from its investments as well as dividends and/or management fees from the Bank. The Bank’s ability to pay cash dividends is also subject to restrictions imposed under the National Bank Act and regulations promulgated by the Office of the Comptroller of the Currency.
|
(k)
|
Stock Dividend
|
|
On November 19, 2010, the Company announced that its Board of Directors had declared a five percent (5%) stock dividend resulting in approximately 159,086 shares, payable at the rate of one share of Common Stock for every twenty (20) shares of Common Stock owned. The stock dividend was paid on December 20, 2010, to stockholders of record on December 3, 2010. The earnings per share data for all periods presented has been adjusted for stock dividends, except for the Consolidated Statement of Changes in Stockholders’ Equity and Comprehensive Earnings, which shows the historical rollforward of stock dividends declared.
|
||
(l)
|
Income Taxes
|
|
Deferred income taxes are determined using the asset and liability method. Under this method, the net deferred tax asset or liability is recognized for tax consequences of temporary differences by applying current tax rates to differences between the financial reporting and the tax basis of existing assets and liabilities. Deferred tax assets and liabilities are reflected at currently enacted income tax rates applicable to the period in which the deferred tax assets or liabilities are expected to be realized or settled. A valuation allowance is established through the provision for income taxes for any deferred tax assets where the utilization of the asset is in doubt. During 2010, the Company recorded an addition to the deferred tax asset valuation allowance of $254,000 for tax credit carryforwards from the Bank’s investment in low income housing real estate partnerships, and since it is uncertain if the benefit will be eligible to offset future income tax liabilities. As changes in tax laws or rates are enacted, deferred tax assets and liabilities are adjusted through the provision for income taxes.
|
||
The Company had unrecognized tax benefits of $415,000 and $375,000 as of December 31, 2010 and 2009, respectively. These unrecognized tax benefits are related to income tax uncertainties surrounding the Bank’s Enterprise Zone net interest deduction. The Bank is currently being audited by the Franchise Tax Board for the years ended December 31, 2005 through 2008, and the outcome is uncertain.
|
||
The Company recognizes interest accrued and penalties related to unrecognized tax benefits in tax expense. During the years ended December 31, 2010 and 2009, the Company believes that any penalties and interest penalties that may exist are not material and the Company has not accrued for them.
|
(m)
|
Earnings per Share
|
|
Basic earnings per share is computed by dividing net income by the weighted average common shares outstanding. Diluted earnings per share reflects potential dilution from outstanding stock options, using the treasury stock method. There were 363,241, 342,889, and 305,258 antidilutive shares in the years ended December 31, 2010, 2009 and 2008, respectively, which were not included in the calculation. Reconciliation of weighted average shares used in computing basic and diluted earnings (loss) per share is as follows:
|
(Number of shares in thousands)
|
2010
|
2009
|
2008
|
|||||||||
Weighted average common shares outstanding-used
in computing basic earnings (loss) per share
|
3,341 | 3,341 | 3,393 | |||||||||
Dilutive effect of stock options outstanding,
using the treasury stock method
|
— | 21 | 23 | |||||||||
Shares used in computing diluted earnings (loss) per share
|
3,341 | 3,362 | 3,416 |
(n)
|
Stock Option Plans
|
|
Measurement of the cost of stock options granted is based on the grant-date fair value of each stock option granted using the Black-Scholes valuation model. The cost is then amortized to expense on a straight-line basis over each option’s requisite service period. The amortized expense of the stock option’s fair value has been included in salaries and employee benefits expense for the three years ended December 31, 2010, 2009 and 2008. The expected term of options granted is derived from the output of the option valuation model and represents the period of time that options granted are expected to be outstanding. The risk-free rate for periods within the contractual life of the option is based on the U. S. Treasury yield curve in effect at the time of the grant. The Company’s stock has limited liquidity and limited trading activity. Volatility was calculated using historical price changes on a monthly basis over the expected life of the option.
|
||
(o)
|
Fair Values of Financial Instruments
|
|
The accounting standards provide for a fair value measurement framework that quantifies fair value estimates by the level of pricing precision. The degree of judgment utilized in measuring the fair value of assets generally correlates to the level of pricing precision. Financial instruments rarely traded or not quoted will generally have a higher degree of judgment utilized in measuring fair value. Pricing precision is impacted by a number of factors including the type of asset, the availability of the asset, the market demand for the asset, and other conditions that were considered at the time of the valuation.
|
||
|
In general, fair values determined by Level 1 inputs utilize quoted prices (unadjusted) in active markets for identical assets or liabilities that the Company has the ability to access. Level 2 inputs include quoted prices for similar assets and liabilities in active markets, and inputs other than quoted prices that are observable for the asset or liability, such as interest rates and yield curves that are observable at commonly quoted intervals. Level 3 inputs are unobservable inputs for the asset or liability, and include situations where there is little, if any, market activity for the asset or liability. In certain cases, the inputs used to measure fair value may fall into different levels of the fair value hierarchy. In such cases, the level in the fair value hierarchy within which the fair value measurement in its entirety falls has been determined based on the lowest level input that is significant to the fair value measurement in its entirety. The Company’s assessment of the significance of a particular input to the fair value measurement in its entirety requires judgment, and considers factors specific to the asset or liability.
|
(p)
|
Income Tax Credits
|
|
At December 31, 2010, the Bank had a $2,026,000 investment in five partnerships, which own low-income affordable housing projects that generate tax benefits in the form of federal and state housing tax credits. As a limited partner investor in these partnerships, the Company receives tax benefits in the form of tax deductions from partnership operating losses and federal and state income tax credits. The federal and state income tax credits are earned over a 10-year period as a result of the investment properties meeting certain criteria and are subject to recapture for noncompliance with such criteria over a 15-year period. The expected benefit resulting from the low-income housing tax credits is recognized in the period for which the tax benefit is recognized in the Company’s consolidated tax returns. These investments are accounted for using the historical cost method less depreciation and amortization and are recorded in other assets on the balance sheet. The Company recognizes tax credits as they are allocated and amortizes the initial cost of the investments over the period that tax credits are allocated to the Company.
|
||
There is no residual value for the investment at the end of the tax credit allocation period. Cash received from operations of the limited partnership or sale of the properties, if any, will be included in earnings when realized.
|
||
(q)
|
Bank Owned Life Insurance
|
|
The Company purchased insurance on the lives of certain executives. The policies accumulate asset values to meet future liabilities including the payment of employee benefits such as the deferred compensation plan. Increases in the cash surrender value are recorded as other noninterest income in the consolidated statements of earnings. The cash surrender value of bank owned life insurance is reflected in other assets on the consolidated balance sheets in the amount of $9,195,000 and $8,866,000 at December 31, 2010 and 2009, respectively. During 2009 and 2008, the Company realized $316,000 and $760,000, respectively, in death benefits from a life insurance contract covering a former executive of the Company.
|
||
(r)
|
Federal Home Loan Bank Borrowings
|
|
The Bank maintains a collateralized line of credit with the Federal Home Loan Bank (“FHLB”) of San Francisco. Under this line, the Bank may borrow on a short term or a long term (over one year) basis. FHLB advances are recorded and carried at their historical cost. FHLB advances are not transferable and may contain prepayment penalties. In addition to the collateral pledged, the Company is required to hold prescribed amounts of FHLB stock that vary with the usage of FHLB credits.
|
||
(s)
|
Reclassifications
|
|
Certain prior year information has been reclassified to conform to current year presentation. The reclassifications had no impact on consolidated net earnings or retained earnings.
|
(t)
|
Recently Issued Accounting Pronouncements
|
|
In January, 2010, the Financial Accounting Standards Board issued Accounting Standards Update (“ASU”) No. 2010-06, to improve disclosure requirements related to “
Fair Value Measurements and Disclosures-Overall Subtopic (Subtopic 820-10)
” of the FASB Accounting Standards Codification, which was originally issued as FASB Statement No. 157, Fair Value Measurements. The new disclosures and clarifications of existing disclosures are effective for interim and annual reporting periods beginning after December 15, 2009 except for the disclosures about purchases, sales, issuances and settlements in the rollforward activity in Level 3 fair value measurements. The new disclosures require separate disclosures regarding transfers in and out of Levels 1 and 2 fair value measurements, and to describe the reasons for the transfers. As to activity in Level 3, a reporting entity is required to present separate information about purchases, sales, issuances and settlements (on a gross basis rather than as one net number). This requires first quarter of 2010 implementation so that investments shown by class and changes or transfers in levels disclosed. The Company only measures investment securities owned at fair value. Impaired loans and other real estate owned are measured and recorded at the lower of historical cost or fair value. Our adoption of this standard update did not have an impact on our financial condition or results of operations.
|
||
In February 2010, the FASB issued ASU No. 2010-09, “
Subsequent Events (Topic 855)—Amendments to Certain Recognition and Disclosure Requirements.
” This ASU eliminates the requirement to disclose the date through which a Company has evaluated subsequent events and refines the scope of the disclosure requirements for reissued financial statements. This ASU is effective for the first quarter of 2010. This ASU did not have a material impact on the Company’s consolidated financial statements, since it is not applicable to public companies.
|
||
In March, the FASB issued ASU No. 2010-11, “
Derivatives and Hedging (Topic 815)—Scope Exception Related to Embedded Credit Derivatives
.” The ASU eliminates the scope exception for bifurcation of embedded credit derivatives in interests in securitized financial assets, unless they are created solely by subordination of one financial instrument to another. The ASU is effective the first quarter beginning after June 15, 2010. The Company has evaluated the impact of adoption and the ASU did not have a material impact on the Company’s consolidated financial statements.
|
||
In April, the FASB issued ASU No. 2010-18, “
Receivables (Topic 310)—Effect of a Loan Modification When the Loan Is Part of a Pool That is Accounted for as a Single Asset
.” This ASU clarifies that modifications of loans that are accounted for within a pool under Topic 310-30 do not result in the removal of those loans from the pool even if the modification of those loans would otherwise be considered a troubled debt restructuring. An entity will continue to be required to consider whether the pool of assets in which the loan is included is impaired if expected cash flows for the pool change. No additional disclosures are required with this ASU. The amendments in this ASU are effective for modifications of loans accounted for within pools under Topic 310-30 occurring in the first interim or annual period ending on or after July 15, 2010. The amendments are to be applied prospectively and early application is permitted. Upon initial adoption of the guidance in this ASU, an entity may make a onetime election to terminate accounting for loans as a pool under Topic 310-30. This election may be applied on a pool-by-pool basis and does not preclude an entity from applying pool accounting to subsequent acquisitions of loans with credit deterioration. The Company has evaluated the impact of adoption and the ASU did not have a material impact on the Company’s consolidated financial statements.
|
In July 2010, the FASB issued ASU No. 2010-20,
Receivables (Topic 310): Disclosures about the Credit Quality of Financing Receivables and the Allowance for Credit Losses
. This update amends Topic 310 to improve the disclosures that an entity provides about the credit quality of its financing receivables and the related allowance for credit losses. As a result of these amendments, an entity is required to disaggregate by portfolio segment or class certain existing disclosures and provide certain new disclosures about its financing receivables and related allowance for credit losses. The amendments in this update apply to all entities, both public and nonpublic. The amendments in this update affect all entities with financing receivables, excluding short-term trade accounts receivable or receivables measured at fair value or lower of cost or fair value. For public entities, the disclosures required by this update as of the end of a reporting period are effective for interim and annual reporting periods ending on or after December 15, 2010. The disclosures about activity that occurs during a reporting period are effective for interim and annual reporting periods beginning on or after December 15, 2010. For nonpublic entities, the disclosures are effective for annual reporting periods ending on or after December 15, 2011. The amendments in this update encourage, but do not require, comparative disclosures for earlier reporting periods that ended before initial adoption. However, an entity should provide comparative disclosures for those reporting periods ending after initial adoption. As this ASU is disclosure-related only, the adoption of this ASU did not impact the Bank’s financial condition or results of operations.
|
||
In December 2010, the FASB issued ASU No. 2010-28,
Intangibles
-
Goodwill and Other (Topic 350)-When to Perform Step 2 of the Goodwill Impairment Test for Reporting Units with Zero or Negative Carrying Amounts.
The amendments in this update modify Step 1 of the goodwill impairment test for reporting units with zero or negative carrying amounts. For those reporting units, an entity is required to perform Step 2 of the goodwill impairment test if it is more likely than not that a goodwill impairment exists. The amendments become effective for public entities for fiscal years beginning after December 15, 2010. Early adoption is not permitted. The Company does not have goodwill with a zero or negative carrying amount.
|
||
In December, 2010, the FASB issued ASU No. 2010-29,
Business Combinations (Topic 805)
. The amendments in this Update specify that if a public entity presents comparative financial statements, the entity should disclose revenue and earnings of the combined entity as though the business combination(s) that occurred during the current yearhad occurred as of the beginning of the comparable prior annual reporting period.
|
In January, 2011, the FASB issued ASU No. 2011-01,
Deferral of the Effective Date of Disclosures about Troubled Debt Restructurings in Update No. 2010-20
. The amendments in this Update temporarily delay the effective date of the disclosures about troubled debt restructurings in Update 2010-20 for public entities. The delay is intended to allow the Board time to complete its deliberations on what constitutes a troubled debt restructuring. Currently, the guidance is anticipated to be effective for interim and annual periods ending after June 15, 2011.
|
||
(2)
|
Restricted Cash Balance | |
Cash and due from banks includes balances with the Federal Reserve Bank (the FRB). The Bank is required to maintain specified minimum average balances with the FRB, based primarily upon the Bank’s deposit balances. As of December 31, 2010 and 2009, the Bank maintained deposits in excess of the FRB reserve requirement, which was $829,000. | ||
(3)
|
Securities Available-for-Sale | |
The amortized cost and carrying values of securities available-for-sale are as follows: |
(Dollar amounts in thousands)
|
Amortized
|
Unrealized
|
Unrealized
|
Carrying
|
||||||||||||
cost
|
gains
|
losses
|
value
|
|||||||||||||
December 31, 2010:
|
||||||||||||||||
U.S. Treasury securities
|
$ | 12,440 | $ | 2 | $ | (97 | ) | $ | 12,345 | |||||||
Obligations of U.S.
government agencies
|
45,941 | 488 | (315 | ) | 46,114 | |||||||||||
Mortgage-backed securities
|
18,564 | 521 | (17 | ) | 19,068 | |||||||||||
Obligations of states
and political subdivisions
|
42,738 | 582 | (864 | ) | 42,456 | |||||||||||
Corporate debt
|
6,105 | 109 | (8 | ) | 6,206 | |||||||||||
$ | 125,788 | $ | 1,702 | $ | (1,301 | ) | $ | 126,189 | ||||||||
December 31, 2009:
|
||||||||||||||||
Obligations of U.S.
government agencies
|
$ | 45,100 | $ | 274 | $ | (67 | ) | $ | 45,307 | |||||||
Mortgage-backed securities
|
22,185 | 238 | (144 | ) | 22,279 | |||||||||||
Obligations of states
and political subdivisions
|
24,998 | 887 | (18 | ) | 25,867 | |||||||||||
Corporate debt
|
3,696 | 41 | (2 | ) | 3,735 | |||||||||||
$ | 95,979 | $ | 1,440 | $ | (231 | ) | $ | 97,188 |
An analysis of gross unrealized losses within the available-for-sale investment securities portfolio as of December 31, 2010 and December 31, 2009 follows: |
Total
|
< 12 Months
|
Total | 12 Months or > |
Total
|
Total
|
|||||||||||||||||||
December 31, 2010:
|
Fair
|
Unrealized
|
Fair | Unrealized |
Fair
|
Unrealized
|
||||||||||||||||||
(Dollar amounts in thousands)
|
Value
|
Losses
|
Value | Losses |
Value
|
Losses
|
||||||||||||||||||
U.S. Treasury securities
|
$ | 11,341 | $ | (97 | ) | $ |
—
|
$ |
—
|
$ | 11,341 | $ | (97 | ) | ||||||||||
Obligations of U.S.
government agencies
|
19,983 | (315 | ) |
—
|
—
|
19,983 | (315 | ) | ||||||||||||||||
Mortgage-backed securities
|
1,864 | (17 | ) |
—
|
—
|
1,864 | (17 | ) | ||||||||||||||||
Obligations of states
and political subdivisions
|
22,639 | (864 | ) |
—
|
—
|
22,639 | (864 | ) | ||||||||||||||||
Corporate debt
|
1,437 | (8 | ) |
—
|
—
|
1,437 | (8 | ) | ||||||||||||||||
Total
|
$ | 57,264 | $ | (1,301 | ) | $ |
—
|
$ |
—
|
$ | 57,264 | $ | (1,301 | ) |
Total
|
< 12 Months
|
Total |
12 Months or >
|
Total
|
Total
|
|||||||||||||||||||
December 31, 2009:
|
Fair
|
Unrealized
|
Fair |
Unrealized
|
Fair
|
Unrealized
|
||||||||||||||||||
(Dollar amounts in thousands)
|
Value
|
Losses
|
Value |
Losses
|
Value
|
Losses
|
||||||||||||||||||
Obligations of U.S. Government
agencies
|
$ | 12,252 | $ | (67 | ) | $ |
—
|
$ |
—
|
$ | 12,252 | $ | (67 | ) | ||||||||||
Mortgage-backed securities
|
14,332 | (144 | ) |
—
|
—
|
14,332 | (144 | ) | ||||||||||||||||
Obligations of states and
political subdivisions
|
1,502 | (7 | ) | 439 | (11 | ) | 1,941 | (18 | ) | |||||||||||||||
Corporate debt
|
1,058 | (2 | ) |
—
|
—
|
1,058 | (2 | ) | ||||||||||||||||
Total
|
$ | 29,144 | $ | (220 | ) | $ | 439 | $ | (11 | ) | $ | 29,583 | $ | (231 | ) |
At December 31, 2010, there were no securities in an unrealized loss position for greater than 12 consecutive months. Management periodically evaluates each security in an unrealized loss position to determine if the impairment is temporary or other-than-temporary. Management has determined that no investment security is other-than-temporarily impaired at December 31, 2010. The unrealized losses are due solely to interest rate changes, and the Company does not intend to sell nor expects it will be required to sell investment securities identified with impairments resulting from interest rate declines prior to the earliest of forecasted recovery or the maturity of the underlying investment security. | |
The amortized cost and carrying value of debt securities as of December 31, 2010, by contractual maturity, are shown below. Expected maturities may differ from contractual maturities because borrowers may have the right to call or prepay obligations with or without call or prepayment penalties. |
(Dollar amounts in thousands)
|
Amortized
|
Carrying
|
||||||
Cost
|
Value
|
|||||||
Available-for-sale:
|
||||||||
Due in one year or less
|
$ | 15,748 | $ | 16,008 | ||||
Due after one through five years
|
62,027 | 62,446 | ||||||
Due after five years through ten years
|
15,598 | 15,569 | ||||||
Due after ten years
|
32,415 | 32,166 | ||||||
$ | 125,788 | $ | 126,189 |
At December 31, 2010 and 2009, securities with an amortized cost of $87,064,000 and $87,854,000, and fair value of $87,755,000 and $88,791,000, respectively, were pledged as collateral for public deposits and for other purposes required by law. | |
As of December 31, 2010 and 2009, the Bank had investments in Federal Reserve Bank stock classified as other assets in the accompanying balance sheets of $1,062,000. These investments in Federal Reserve Bank stock are carried at cost, and evaluated periodically for impairment. Federal home Loan Bank and Federal Reserve Bank stock can be redeemed at par by the governmrent agencies. These securities cannot be sold to other investors. Management reviews the financial statements, credit rating and other pertinent financial information of these entities in order to determine if other than temporary impairment has occurred. So long as there is sufficient evidence to support the ability of these entities to continue to redeem their stock, then management believes these securities are not impaired. .As of December 31, 2010 and 2009, the Bank had investments in Federal Home Loan Bank stock classified as other assets in the accompanying balance sheets of $3,939,000 and $4,432,000, respectively. These investments in Federal Home Loan Bank stock are carried at cost, and periodically evaluated for impairment. | |
(4)
|
Loans
|
Loans are summarized as follows at December 31: |
(Dollar amounts in thousands)
|
2010
|
2009
|
||||||
Commercial real estate
|
$ | 278,866 | $ | 273,981 | ||||
Real estate construction
|
27,577 | 47,189 | ||||||
Real estate multi-family
|
42,584 | 57,875 | ||||||
Real estate 1 to 4 family
|
71,463 | 54,674 | ||||||
Commercial & industrial
|
61,493 | 67,977 | ||||||
Consumer loans
|
2,689 | 2,661 | ||||||
Gross loans
|
484,672 | 504,357 | ||||||
Net deferred loan fees
|
(320 | ) | (179 | ) | ||||
Allowance for loan losses
|
(9,524 | ) | (9,829 | ) | ||||
Net loans
|
$ | 474,828 | $ | 494,349 |
The Bank had total impaired loans of $27,302,000 and $26,532,000 at December 31, 2010 and 2009, respectively. The allowance for loan losses related to the impaired loans was $1,469,000 and $2,875,000 as of December 31, 2010 and 2009, respectively. The amount of the recorded investment in impaired loans for which there is no related allowance is $8,949,000 and $11,918,000 as of December 31, 2010 and 2009. The average recorded investment in impaired loans during 2010, 2009 and 2008 was $24,481,000, $20,338,000 and $12,193,000, respectively. |
Impaired Loans | ||||||||||||||||||||
For the Year Ended December 31, 2010 | ||||||||||||||||||||
Unpaid
|
Average
|
|||||||||||||||||||
(Dollar amounts in thousands)
|
Recorded
|
Principal
|
Related
|
Recorded
|
Income
|
|||||||||||||||
Investment
|
Balance
|
Allowance
|
Investment
|
Recognized
|
||||||||||||||||
With no related allowance recorded
|
||||||||||||||||||||
Commercial & industrial
|
$ | 4,743 | $ | 4,841 | $ | — | $ | 4,801 | $ | 74 | ||||||||||
Commercial real estate
|
4,206 | 4,206 | — | 4,323 | 131 | |||||||||||||||
Total
|
8,949 | 9,047 | — | 9,124 | 205 | |||||||||||||||
With an allowance recorded
|
||||||||||||||||||||
Commercial
|
$ | 2,644 | 3,044 | $ | 527 | $ | 2,945 | $ | 31 | |||||||||||
Commercial real estate construction
|
8,931 | 8,931 | 368 | 5,560 | 303 | |||||||||||||||
Commercial real estate
|
3,474 | 3,474 | 364 | 3,505 | 171 | |||||||||||||||
Residential- 1 to 4 family
|
3,304 | 3,349 | 210 | 3,347 | 100 | |||||||||||||||
Total
|
18,353 | 18,798 | 1,469 | 15,357 | 605 | |||||||||||||||
Total
|
||||||||||||||||||||
Commercial & industrial
|
$ | 7,387 | $ | 7,885 | $ | 527 | $ | 7,746 | $ | 105 | ||||||||||
Commercial real estate construction
|
8,931 | 8,931 | 368 | 5,560 | 303 | |||||||||||||||
Commercial real estate
|
7,680 | 7,680 | 364 | 7,828 | 302 | |||||||||||||||
Residential - 1 to 4 family
|
3,304 | 3,349 | 210 | 3,347 | 100 | |||||||||||||||
Grand total
|
$ | 27,302 | $ | 27,845 | $ | 1,469 | $ | 24,481 | $ | 810 |
Nonaccrual loans totaled $16,712,000 and $25,592,000 as of December 31, 2010 and 2009. The single largest nonaccrual loan that was added in 2009 was for a multifamily residential loan that totaled $8,718,000 as of December 31, 2009. Subsequent to December 31, 2009, Bank management and the borrower have agreed to the following: the borrower made a substantial loan repayment, the Bank agreed to waive a significant amount of nonaccrual interest related to this loan, and a loan modification arrangement was entered whereby the borrower agreed to make payments according to the modified loan terms in 2010 that were based on prevailing market rates at that time. If the borrower performs under the modified loan terms, this credit will be returned to accrual status. The difference between impaired loans and nonaccrual loans represents loans that are restructured, are performing under modified agreements, and interest is accrued. | |
The carrying amounts of loans include $16,712,000 and $25,592,000 of nonaccrual loans (loans that are not accruing interest) at December 31, 2010 and 2009, respectively. | |
The following aggregate information is provided at December 31, about the contractual provisions of these loans: |
(Dollars amounts in thousands)
|
2010
|
2009
|
||||||
Aggregate carrying amount
|
$ | 16,712 | $ | 25,592 | ||||
Effective rate
|
5.99 | % | 6.07 | % | ||||
Average term to maturity
|
94 months
|
63 months
|
Loans on Nonaccrual Status
|
|||||
As of December 31,
|
|||||
(Dollar amounts in thousands)
|
|||||
2010
|
|||||
Commercial & industrial
|
$ | 5,415 | |||
Real estate - construction
|
3,518 | ||||
Commercial real estate
|
6,662 | ||||
Real estate 1 to 4 family
|
1,117 | ||||
Total
|
$ | 16,712 |
Interest income on impaired loans of $810,000, $467,000 and $64,000 was recognized for cash payments received in 2010, 2009, and 2008, respectively. The amount of interest on impaired loans not collected in 2010, 2009 and 2008, was $290,000, $759,000 and $692,000, respectively. The cumulative amount of unpaid interest on impaired loans was $1,095,000, $806,000 and $1,022,000 at December 31, 2010, 2009 and 2008, respectively. During 2010, Bank management was able to come to agreement regarding the restructure of 13 loans with borrowers that were having difficulties making their loan payments. Total loan principal of troubled debt restructurings during 2010 was $19,409,000, of which $2,416,000 was commercial loans, $2,621,000 was residential loans, $4,598,000 was commercial real estate loans, and $9,774,000 was multi-family real estate loans. The troubled debt restructurings were made at current market rates, with loan terms that allow the borrowers to make interest-only payments, reduced principal reductions, or other modifications that helped these borrowers reduce their loan payments.
|
Modifications | ||||||||||||
As of December 31, 2010
|
||||||||||||
Pre-
|
Post-
|
|||||||||||
Modification
|
Modification
|
|||||||||||
Outstanding
|
Outstanding
|
|||||||||||
Number of
|
Recorded
|
Recorded
|
||||||||||
Contracts
|
Investment
|
Investment
|
||||||||||
Troubled Debt Restructurings
|
||||||||||||
Commercial & industrial
|
3 | $ | 2,416 | $ | 2,416 | |||||||
Real estate 1 to 4 family
|
4 | 2,621 | 2,621 | |||||||||
Commercial real estate
|
4 | 4,598 | 4,598 | |||||||||
Real estate multi family
|
2 | 9,774 | 9,774 | |||||||||
Total
|
13 | 19,409 | 19,409 |
Age Analysis of Past Due Loans
|
||||||||||||||||||||||||||||
As of December 31, 2010
|
||||||||||||||||||||||||||||
(Dollar amounts in thousands)
|
||||||||||||||||||||||||||||
30-59 | 60-89 |
Recorded
|
||||||||||||||||||||||||||
Days
|
Days
|
Over
|
Total
|
Investment >
|
||||||||||||||||||||||||
Past
|
Past
|
90 |
Past
|
Total
|
90 Days and
|
|||||||||||||||||||||||
Due
|
Due
|
Days
|
Due
|
Current
|
Loans
|
Accruing
|
||||||||||||||||||||||
Commercial & industrial
|
$ | 1,216 | $ | 250 | $ | 1,251 | $ | 2,717 | $ | 58,776 | $ | 61,493 | $ |
—
|
||||||||||||||
Commercial real estate
|
4,138 | 1,705 | 6,051 | 11,894 | 309,556 | 321,450 |
—
|
|||||||||||||||||||||
Real estate construction
|
—
|
—
|
1,556 |
1,556
|
26,021 | 27,577 |
—
|
|||||||||||||||||||||
Real estate 1 to 4 family
|
2,830 | 99 | 70 | 2,999 | 68,464 | 71,463 |
—
|
|||||||||||||||||||||
Consumer loans
|
2 |
—
|
—
|
2 | 2,687 | 2,689 |
—
|
|||||||||||||||||||||
Total
|
$ | 8,186 | $ | 2,054 | $ | 8,928 | $ | 19,168 | $ | 465,504 | $ | 484,672 | $ |
—
|
Credit Quality Indicators
|
||||||||||||||||||||||||
As of December 31, 2010
|
||||||||||||||||||||||||
(Dollar amounts in thousands)
|
||||||||||||||||||||||||
Special
|
Pooled
|
Total
|
||||||||||||||||||||||
Pass
|
mention
|
Substandard
|
Doubtful
|
loans
|
loans
|
|||||||||||||||||||
Commercial & industrial
|
$ | 53,915 | $ | 175 | $ | 6,327 | $ | 265 | $ | 811 | $ | 61,493 | ||||||||||||
Real estate construction
|
15,464 |
—
|
12,113 |
—
|
—
|
27,577 | ||||||||||||||||||
Commercial real estate
|
304,151 | 3,913 | 12,668 |
—
|
718 | 321,450 | ||||||||||||||||||
Real estate 1 to 4 family
|
66,460 |
—
|
4,734 | 269 |
—
|
71,463 | ||||||||||||||||||
Consumer loans
|
2,689 |
—
|
—
|
—
|
—
|
2,689 | ||||||||||||||||||
Totals
|
$ | 439,990 | $ | 4,088 | $ | 35,842 | $ | 534 | $ | 1,529 | $ | 484,672 |
(5)
|
Allowance for Loan Losses
|
Changes in the allowance for loan losses are summarized as follows for the years ended December 31:
|
(Dollar amounts in thousands)
|
2010
|
2009
|
2008
|
|||||||||
Balance, beginning of year
|
$ | 9,829 | $ | 7,075 | $ | 5,638 | ||||||
Loans charged off:
|
||||||||||||
Commercial real estate
|
(69 | ) |
—
|
—
|
||||||||
Real estate construction
|
(1,003 | ) | (398 | ) | (444 | ) | ||||||
Real estate multi family
|
(88 | ) |
—
|
—
|
||||||||
Real estate 1 to 4 family
|
(217 | ) | (1,073 | ) | (49 | ) | ||||||
Commercial & industrial
|
(812 | ) | (390 | ) | (1,284 | ) | ||||||
Consumer loans
|
(33 | ) | (60 | ) | (11 | ) | ||||||
Total charged off
|
(2,222 | ) | (1,921 | ) | (1,788 | ) | ||||||
Recoveries:
|
||||||||||||
Commercial real estate
|
||||||||||||
Real estate construction
|
36 | 36 | 36 | |||||||||
Real estate 1 to 4 family
|
14 | 25 |
—
|
|||||||||
Commercial & industrial
|
6 | 18 | 144 | |||||||||
Consumer loans
|
7 |
—
|
—
|
|||||||||
Total recoveries
|
63 | 79 | 180 | |||||||||
Net loans charged off
|
(2,159 | ) | (1,842 | ) | (1,608 | ) | ||||||
Provision for loan losses
|
1,854 | 4,596 | 3,045 | |||||||||
Balance, end of year
|
$ | 9,524 | $ | 9,829 | $ | 7,075 |
Allowance for Credit Losses and Recorded Investment in Loans
|
||||||||||||||||||||||||
For the Year Ended December 31, 2010
|
||||||||||||||||||||||||
(Dollar amounts in thousands)
|
||||||||||||||||||||||||
Commercial
|
Commercial
|
Real estate
|
Real estate
|
|||||||||||||||||||||
& industrial
|
Real Estate
|
Construction
|
1 to 4 family
|
Consumer
|
Total
|
|||||||||||||||||||
Allowance for credit losses
|
||||||||||||||||||||||||
Beginning balance
|
$ | 809 | $ | 5,177 | $ | 3,110 | $ | 704 | $ | 29 | $ | 9,829 | ||||||||||||
Charge-offs
|
(881 | ) | (1,091 | ) | 0 | (217 | ) | (33 | ) | (2,222 | ) | |||||||||||||
Recoveries
|
6 | 36 | 0 | 14 | 7 | 63 | ||||||||||||||||||
Provision
|
2,168 | (19 | ) | (1,111 | ) | 732 | 84 | 1,854 | ||||||||||||||||
Ending balance
|
$ | 2,102 | $ | 4,103 | $ | 1,999 | $ | 1,233 | $ | 87 | 9,524 | |||||||||||||
|
||||||||||||||||||||||||
Ending balance: individually
evaluated for impairment
|
$ | 527 | $ | 364 | $ | 368 | $ | 210 | $ | 0 | 1,469 | |||||||||||||
|
||||||||||||||||||||||||
Ending balance: collectively
evaluated for impairment
|
$ | 1,575 | $ | 3,739 | $ | 1,631 | $ | 1,023 | $ | 87 | 8,055 | |||||||||||||
Loans:
Ending balance
|
$ | 61,493 | $ | 321,450 | $ | 27,577 | $ | 71,463 | $ | 2,689 | 484,672 | |||||||||||||
|
||||||||||||||||||||||||
Ending balance: individually
evaluated for impairment
|
$ | 7,117 | $ | 7,950 | $ | 8,931 | $ | 3,304 | $ | 0 | 27,302 | |||||||||||||
|
||||||||||||||||||||||||
Ending balance: collectively
evaluated for impairment
|
$ | 54,376 | $ | 313,500 | $ | 68,159 | $ | 18,646 | $ | 2,689 | 457,370 |
(6)
|
Foreclosed Assets
|
A summary of the activity in the balance of foreclosed assets follows (in thousands):
|
Year ended December 31,
|
||||||||
2011
|
2010
|
|||||||
Beginning balance, net
|
$ | 7,320 | $ | 3,557 | ||||
Additions/transfers from loans
|
4,617 | 7,885 | ||||||
Disposition/sales
|
(4,933 | ) | (2,291 | ) | ||||
Valuation adjustments
|
(324 | ) | (1,831 | ) | ||||
Ending balance, net
|
$ | 6,680 | $ | 7,320 | ||||
Ending valuation allowance
|
(2,155 | ) | — | |||||
Ending number of foreclosed assets
|
5 | 5 | ||||||
Proceeds from sale of foreclosed assets
|
$ | 4,432 | $ | 2,049 | ||||
Gain (loss) on sale of foreclosed assets
|
$ | 132 | $ | (10 | ) |
(7)
|
Related Party Transactions
|
In the ordinary course of business, the Bank made loans and advances under lines of credit to directors, officers, and their related interests. The Bank’s policies require that all such loans be made at substantially the same terms as those prevailing at the time for comparable
transactions with unrelated parties and do not involve more than normal risk or unfavorable features. The following summarizes activities of loans to such parties at December 31:
|
(Dollar amounts in thousands)
|
2010
|
2009
|
||||||
Balance, beginning of year
|
$ | 16,536 | $ | 15,530 | ||||
Additions
|
6,769 | 11,628 | ||||||
Repayments
|
12,182 | 10,622 | ||||||
Balance, end of year
|
$ | 11,123 | $ | 16,536 |
2010 | 2009 | |||||||
Related party deposits
|
$ | 1,839 | $ | 1,658 |
(8)
|
Bank Premises, Equipment, and Leasehold Improvements
|
Bank premises, equipment and leasehold improvements are stated at cost, less accumulated depreciation and amortization, and are summarized as follows at December 31:
|
(Dollar amounts in thousands)
|
2010
|
2009
|
||||||
Buildings
|
$ | 10,242 | $ | 9,134 | ||||
Equipment
|
9,329 | 8,854 | ||||||
Leasehold improvements
|
1,328 | 1,152 | ||||||
20,899 | 19,140 | |||||||
Accumulated depreciation and amortization
|
(12,692 | ) | (11,784 | ) | ||||
8,207 | 7,356 | |||||||
Land
|
5,328 | 4,428 | ||||||
$ | 13,535 | $ | 11,784 |
Depreciation and amortization expense for the years ended December 31, 2010, 2009, and 2008 was $1,509,000, $1,554,000 and $1,597,000, respectively.
|
|
(9)
|
Deposits
|
The aggregate amount of jumbo time certificates, each with a minimum denomination of $100,000 or more, was $82,364,000 and $79,662,000 at December 31, 2010 and 2009, respectively.
|
At December 31, 2010, the scheduled maturities of all time certificates of deposit are as follows:
|
(Dollar amounts in thousands)
|
||||
Year ending December 31:
|
||||
2011
|
$ | 103,365 | ||
2012
|
8,877 | |||
2013
|
13,158 | |||
$ | 125,400 |
(10)
|
Federal Home Loan Bank Advances
|
As of December 31, 2010, there were no Federal Home Loan Bank (“FHLB”) advances. As of December 31, 2009, FHLB advances consisted of $20,000,000 in short-term advances due in one year or less, and $5,000,000 in long-term advances due in more than one year. The interest rate on total advances ranged from 1.84% to 4.62% at year end December 31, 2009. Average FHLB advances were $11,575,000 and $49
,
857,000 in 2010 and 2009, respectively. Weighted average rates were 3.20% and 3.88% in 2010 and 2009, respectively. Including prepayment penalties in 2010, the weighted average rate was 4.76%. The maximum amount borrowed during 2010 and 2009 was $25,000,000 and $86,100,000, respectively.
|
|
At December 31, 2010, the Bank had a maximum borrowing capacity under Federal Home Loan Bank advances of $162,515,000, of which the entire amount was available. The Federal Home Loan Bank advances are secured by a blanket collateral agreement pledge of FHLB stock and certain other qualifying collateral, such as commercial and mortgage loans.
|
|
(11)
|
Commitments and Contingencies
|
Operating Lease Commitments
|
|
The Bank leases a portion of its facilities and equipment under noncancelable operating leases expiring at various dates through 2019. Some of these leases provide that the Bank pay taxes, maintenance, insurance, and other occupancy expenses applicable to leased premises. Generally, the leases provide for renewal for various periods at stipulated rates.
|
|
The minimum rental commitments under the operating leases as of December 31, 2010 are as follows:
|
(Dollars in thousands)
|
|||||
Year ending December 31:
|
|||||
2011
|
$ | 549 | |||
2012
|
551 | ||||
2013
|
363 | ||||
2014
|
169 | ||||
2015
|
137 | ||||
Thereafter
|
537 | ||||
$ | 2,306 |
Total rent expense for operating leases was $641,000, $669,000 and $630,000, in 2010, 2009, and 2008, respectively.
|
|
Legal Commitments
|
|
The Bank is engaged in various lawsuits either as plaintiff or defendant in the ordinary course of business and, in the opinion of management, based upon the advice of counsel, the ultimate outcome of these lawsuits does not expect to have a material effect on the Bank’s financial condition or results of operations.
|
|
(12)
|
Salary Deferral Plan
|
The Bank maintains a salary deferral 401(k) plan covering substantially all employees, known as the FNB Bancorp Savings Plan (the “Plan”). The Plan allows employees to make contributions to the Plan up to a maximum allowed by law, and the Bank’s contribution is discretionary. Beginning in 2008, the Board approved a safe harbor election related to the Plan which requires the Company to contribute 3% of qualifying employees wages as a profit sharing contribution. The Bank’s contribution to the Plan for the years ended December 31, 2010, 2009, and 2008 was $294,000, $310,000 and $400,000, respectively.
|
|
(13)
|
Salary Continuation and Deferred Compensation Plans
|
The Bank maintains a Salary Continuation Plan for certain Bank officers. Officers participating in the Salary Continuation Plan are entitled to receive a monthly payment for a period of fifteen to twenty years upon retirement. The Company accrues such post-retirement
benefits over the individual’s employment period. The Salary Continuation Plan expense for the years ended December 31, 2010, 2009, and 2008 was $212,000, $197,000 and $238,000, respectively. Accrued compensation payable under the salary continuation plan totaled $1,698,000 and $1,616,000 at December 31, 2010 and 2009, respectively.
The Deferred Compensation Plan allows eligible officers to defer annually their compensation up to a maximum 80% of their base salary and 100% of their cash bonus. The officers are entitled to receive distribution upon reaching a specified age, passage of at least five years or termination of employment.
As of December 31, 2010 and 2009, the related liability included in accrued expenses and other liabilities was $644,000 and $711,000, respectively.
|
|
(14)
|
Preferred Stock
|
Preferred Stock was issued to the U. S. Treasury as part of the Treasury’s Capital Purchase Program. The Preferred Stock consists of two issues, Series A and Series B. The Series A and Series B Preferred Stock are both carried at liquidation value less discounts received plus premiums paid that are amortized over the expected timeframe that the Preferred Shares will be outstanding using the level yield method. The Series A and Series B Preferred Stock must be redeemed after ten years. The Series A Preferred Stock carries a dividend yield of 5% for the first five years. Beginning in year six, the dividend increases to 9% and continues at this rate until repaid. The Series B Preferred Stock pays a 9% dividend until repaid. Allocation of proceeds between the two issues was done in such a manner that the blended level yield of both issues would be 6.83% to the expected repayment date, which is currently anticipated to be three years from the date of issue. Operating restrictions related to the preferred stock are documented on the U. S. Department of the Treasury’s website and include restrictions on dividend payments and executive compensation, the establishment of the requirement that the Preferred Stock be repaid first with the proceeds from any future capital offering before any other use of the proceeds is allowed, establishment of additional reporting requirements related to lending activity of the Bank during the time the Preferred Stock is outstanding, and the execution of documents that allow the U. S. Department of the Treasury to add or change the conditions related to the issuance of the Preferred Stock unilaterally, at their discretion. In addition, beginning in the second quarter of 2010, the Company must obtain regulatory approval from the Office of the Comptroller of the Currency before TARP dividends can be paid. As of December 31, 2010, all dividend payments on our Preferred Stock have been paid in accordance with the Treasury’s Capital Purchase Program.
|
(15)
|
Income Taxes
|
The provision (benefit) for income taxes for the years ended December 31, consists of the following:
|
(Dollar amounts in thousands)
|
2010
|
2009
|
2008
|
|||||||||
Current:
|
||||||||||||
Federal
|
$ | 605 | $ | 828 | $ | 750 | ||||||
State
|
153 | 764 | 331 | |||||||||
$ | 758 | $ | 1,592 | $ | 1,081 | |||||||
Deferred:
|
||||||||||||
Federal
|
$ | 314 | $ | (1,775 | ) | $ | (352 | ) | ||||
State
|
155 | (398 | ) | (118 | ) | |||||||
469 | (2,173 | ) | (470 | ) | ||||||||
$ | 1,227 | $ | (581 | ) | $ | 611 |
The reason for the differences between the statutory federal income tax rate and the effective tax rates for the years ending December 31, are summarized as follows:
|
2010
|
2009
|
2008
|
||||||||||
Statutory rates
|
34.0 | % | 34.0 | % | 34.0 | % | ||||||
Increase (decrease) resulting from:
|
||||||||||||
Tax exempt Income for federal purposes
|
(10.5 | %) | (5,201.1 | %) | (19.1 | %) | ||||||
State taxes on income, net of federal benefit
|
4.2 | % | 2,051.1 | % | 3.3 | % | ||||||
Benefits from low income housing credits
|
(4.1 | %) | (1,505.8 | %) | (2.7 | %) | ||||||
Other, net
|
1.5 | % | (309.6 | %) | (2.2 | %) | ||||||
Effective tax rate
|
25.1 | % | (4,931.4 | %) | 13.3 | % |
The tax effect of temporary differences giving rise to the Bank’s net deferred tax asset are as follows:
|
December 31,
|
||||||||
(Dollar amounts in thousands)
|
2010
|
2009
|
||||||
Deferred tax assets
|
||||||||
Allowance for loan losses
|
$ | 4,260 | $ | 4,397 | ||||
Accrued salaries and officers compensation
|
1,186 | 1,341 | ||||||
Capitalized interest on buildings
|
18 | 20 | ||||||
Expenses accrued on books, not yet deductible in tax return
|
1,688 | 1,745 | ||||||
Depreciation
|
763 | 565 | ||||||
Net operating loss carryforward
|
568 | 727 | ||||||
Tax credit carryforwards
|
886 | 632 | ||||||
9,369 | 9,427 | |||||||
Less: deferred tax asset valuation allowance
|
(886 | ) | (632 | ) | ||||
8,483 | 8,795 | |||||||
Deferred tax liabilities
|
||||||||
Unrealized appreciation on available-for-sale
securities
|
$ | 165 | $ | 497 | ||||
State income taxes
|
625 | 507 | ||||||
Core deposit intangible
|
131 | 185 | ||||||
Expenses and credits deducted on tax return, not on books
|
98 | 5 | ||||||
Total deferred tax liabilities
|
1,019 | 1,194 | ||||||
Net deferred tax asset (included in other assets)
|
$ | 7,464 | $ | 7,601 |
Management believes that it is more likely than not that the deferred tax assets will be realized through recovery of taxes previously paid and/or future taxable income, with the exception of a portion of low income housing credit carryforwards. The Bank has federal net operating loss carryforwards resulting from the acquisition of Sequoia National Bank which expire in various tax years ending on December 31, 2013 through December 31, 2020, totaling $1,670,000 as of December 31, 2010. These losses are limited to approximately $468,000 per year under IRS regulations. All operating loss carryforwards are expected to be utilized prior to their expiration.
|
|
In assessing the Company’s ability to realize the tax benefits of deferred tax assets, management considers whether it is more likely than not that some portion or all of the deferred tax assets will be realized. The ultimate realization of deferred tax assets is dependent upon the generation of future taxable income during the periods in which those temporary differences become deductible. Management considers the scheduled reversal of deferred tax liabilities, projected future taxable income, and tax planning strategies in making this assessment. Based upon the level of historical taxable income and projections for future taxable income over the periods which the deferred tax assets are deductible, management believes it is more likely than not that the Company will realize the recorded benefits of these deductible differences, with the possible exception of our low income housing tax credit carryforwards. The Company owns investments in low income housing tax credit (“LIHTC”) that had a book value of $2,026,000 as of December 31, 2010. LIHTC investments are expected to have a fifteen year life and no residual value. The LIHTC investments are expected to generate operating losses of $2,026,000 and federal tax credits of $764,000 over the next eight years. These tax benefits have value to the Company only to the extent that they offset income taxes created from otherwise taxable earnings generated by the Company. In the opinion of management, a valuation allowance of $886,000 and $632,000 was necessary as of December 31, 2010 and 2009, respectively. The valuation allowance is equivalent to 100% of the low income housing credit carryforwards that existed as of December 31, 2010 and 2009.
|
(16)
|
Financial Instruments
|
The Bank is a party to financial instruments with off-balance-sheet risk in the normal course of business. These financial instruments include commitments to extend credit in the form of loans or through standby letters of credit. These instruments involve, to varying degrees, elements of credit and interest-rate risk in excess of the amount recognized in the balance sheet. The Bank’s exposure to credit loss is represented by the contractual amount of those instruments and is usually limited to amounts funded or drawn. The contract or notional amounts of these agreements, which are not included in the balance sheets, are an indicator of the Bank’s credit exposure. Commitments to extend credit generally carry variable interest rates and are subject to the same credit standards used in the lending process for on-balance-sheet instruments. Additionally, the Bank periodically reassesses the customer’s creditworthiness through ongoing credit reviews. The Bank generally requires collateral or other security to support commitments to extend credit. The following table provides summary information on financial instruments whose contract amounts represent credit risk as of December 31:
|
(Dollars amounts in thousands)
|
December 31
|
|||||||
2010
|
2009
|
|||||||
Financial instruments whose contract amounts represent credit risk:
|
||||||||
Undisbursed loan commitments
|
$ | 46,156 | $ | 26,064 | ||||
Lines of credit
|
43,646 | 57,832 | ||||||
Mastercard/Visa lines
|
4,214 | 4,260 | ||||||
Standby letters of credit
|
2,067 | 2,092 | ||||||
$ | 96,083 | $ | 90,248 |
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. Commitments generally have fixed expiration dates or other termination clauses and may require payment of a fee. Since many of the commitments are expected to expire without being drawn upon, the total commitment amounts do not necessarily represent future cash requirements. The Bank evaluates each customer’s creditworthiness on a case-by-case basis, following normal lending policies. The amount of collateral obtained, if deemed necessary by the Bank upon extension of credit, is based on management’s credit evaluation. Collateral held varies, but may include accounts receivable, inventory, property, plant and equipment, and income-producing commercial and residential properties. Equity reserves and unused credit card lines are additional commitments to extend credit. Many of these customers are not expected to draw down their total lines of credit, and therefore, the total contract amount of these lines does not necessarily represent future cash requirements.
|
Standby letters of credit are conditional commitments issued by the Bank to guarantee the performance of a customer to a third party. The credit risk involved in issuing letters of credit is essentially the same as that involved in extending loan facilities to customers. The Bank issues both financial and performance standby letters of credit. The financial standby letters of credit are primarily to guarantee payment to third parties. As of December 31, 2010, there were $1,980,000 issued in financial standby letters of credit. The performance standby letters of credit are typically issued to municipalities as specific performance bonds. As of December 31, 2010 there were $87,000 issued in performance standby letters of credit. The terms of the guarantees will expire in 2011. The Bank has experienced no draws on these letters of credit, and does not expect to in the future. However, should a triggering event occur, the Bank either has collateral in excess of the letters of credit or embedded agreements of recourse from the customer.
|
|
The following tables present information about the Company’s assets and liabilities measured at fair value as of December 31, 2010 and 2009, and indicates the fair value techniques used by the Company to determine such fair value.
|
Fair Value Measurements
|
||||||||||||||||
(Dollar amounts in thousands)
|
at December 31, 2010, Using
|
|||||||||||||||
Quoted Prices
|
||||||||||||||||
in Active
|
||||||||||||||||
Markets
|
Other
|
Significant
|
||||||||||||||
for Identical
|
Observable
|
Unobservable
|
||||||||||||||
Fair Value
|
Assets
|
Inputs
|
Inputs
|
|||||||||||||
Description
|
12/31/2010
|
(Level 1)
|
(Level 2)
|
(Level 3)
|
||||||||||||
Available-for-sale securities:
|
||||||||||||||||
U. S. Treasury securities
|
$ | 12,345 | $ | 12,345 | $ |
—
|
$ | — | ||||||||
Obligations of U.S.
Government agencies
|
46,114 |
—
|
46,114 | — | ||||||||||||
Mortgage-backed securities
|
19,068 |
—
|
19,068 | |||||||||||||
Obligations of states
and political subdivisions
|
42,456 |
—
|
42,456 | — | ||||||||||||
Corporate debt
|
6,206 |
—
|
6,206 | — | ||||||||||||
Total assets measured at fair value
|
$ | 126,189 | $ | 12,345 | $ | 113,844 | $ | — |
Fair Value Measurements
|
||||||||||||||||
at December 31, 2009, Using | ||||||||||||||||
(Dollar amounts in thousands)
|
Quoted Prices
|
|||||||||||||||
in Active |
|
|||||||||||||||
Markets |
|
Other
|
Significant
|
|||||||||||||
for Identical |
|
Observable
|
Unobservable
|
|||||||||||||
Fair Value
|
Assets |
|
Inputs
|
Inputs
|
||||||||||||
Description
|
12/31/2009
|
(Level 1) |
|
(Level 2)
|
(Level 3)
|
|||||||||||
Available-for-sale securities:
|
||||||||||||||||
Obligations of U.S.
government agencies
|
$ | 45,307 | $ |
—
|
|
$ | 45,307 | $ | — | |||||||
Mortgage-backed securities
|
22,279 |
—
|
|
22,279 | — | |||||||||||
Obligations of states
and political subdivisions
|
25,867 |
—
|
|
25,867 | — | |||||||||||
Corporate debt
|
3,735 |
—
|
|
3,735 | — | |||||||||||
Total assets measured at fair value
|
$ | 97,188 | $ |
—
|
|
$ | 97,188 | $ | — |
Fair Value Measurements | ||||||||||||||||||||
(Dollar amounts in thousands)
|
at December 31, 2010, Using
|
|||||||||||||||||||
Quoted Prices in
|
||||||||||||||||||||
Active Markets
|
Other
|
Significant
|
||||||||||||||||||
for Identical
|
Observable
|
Unobservable
|
||||||||||||||||||
Assets
|
Inputs
|
Inputs
|
Total
|
|||||||||||||||||
Description
|
Fair Value
|
(Level 1)
|
(Level 2)
|
(Level 3)
|
losses
|
|||||||||||||||
Impaired loans
|
$ | 10,471 | $ | — | $ | — | $ | 10,471 | $ | (1,069 | ) | |||||||||
Other real estate owned
|
6,680 | — | — | 6,680 | 552 | |||||||||||||||
Total impaired assets
measured at fair value
|
$ | 17,151 | $ | — | $ | — | $ | 17,151 | $ | (517 | ) |
Fair Value Measurements
|
||||||||||||||||||||
(Dollar amounts in thousands)
|
at December 31, 2009, Using
|
|||||||||||||||||||
Quoted Prices in
|
||||||||||||||||||||
Active Markets
|
Other
|
Significant
|
||||||||||||||||||
for Identical
|
Observable
|
Unobservable
|
||||||||||||||||||
Assets
|
Inputs
|
Inputs
|
Total
|
|||||||||||||||||
Description
|
Fair Value
|
(Level 1)
|
(Level 2)
|
(Level 3)
|
losses
|
|||||||||||||||
Impaired loans
|
$ | 23,743 | $ |
—
|
$ | — | $ | 23,743 | $ | 2,875 | ||||||||||
Other real estate owned
|
7,320 |
—
|
— | 7,320 | 1,831 | |||||||||||||||
Total impaired assets
measured at fair value
|
$ | 31,063 | $ |
—
|
$ | — | $ | 31,063 | $ | 4,706 |
The Bank does not record loans at fair value. However, from time to time, if a loan is considered impaired, and a specific allowance for loan losses is established, loans for which it is probable that payment of interest and principal will not be made in accordance with the contractual terms of the loan agreement, are considered impaired. Once a loan is identified as individually impaired, management measures impairment in accordance with the Financial Accounting Standards Board Accounting Standards Codification Section 820. In accordance with this guidance, impaired loans that have a specific allowance established based on the fair value of collateral require classification in the fair value hierarchy. If the fair value of the collateral is based on an observable market price, the Bank records the impaired loans as nonrecurring Level 3. When management determines the fair value of the collateral is further impaired below the appraised value and there is no observable market price, the Bank records the fair value of the impaired loans using nonrecurring Level 3 valuation inputs.
|
|
The following methods and assumptions were used by the Company in estimating the fair value disclosures for financial instruments:
|
Cash and Cash Equivalents.
|
|
The carrying amounts reported in the balance sheet for cash and short-term instruments are a reasonable estimate of fair value, which will approximate their historical cost.
|
Securities Available-for-Sale.
|
|
Fair values for investment securities are based on quoted market prices, where available. If quoted market prices are not available, fair values are based on quoted market prices of comparable instruments.
|
|
Federal Home Loan Bank and Federal Reserve Bank stock
.
|
|
Federal Home Loan Bank and Federal Reserve Bank stock can only be issued and redeemed at par by these entities. These securities cannot be sold in open market transactions. They are valued at cost.
|
|
Loans Receivable.
|
|
For variable-rate loans that reprice frequently and with no significant change in credit risk, fair values are based on carrying values. For fixed rate loans, fair values are based on discounted cash flows, credit risk factors, and liquidity factors.
|
|
B
ank Owned Life Insurance.
|
|
The fair value of bank owned life insurance is the cash surrender value of the policies, net of expenses.
|
|
Deposit liabilities.
|
|
The fair values disclosed for demand deposits (e.g., interest and non-interest checking, savings, and money market accounts) are, by definition, equal to the amount payable on demand at reporting date (i.e., their carrying amounts). The fair values for fixed-rate certificates of deposit are based on discounted cash flows.
|
|
Federal Home Loan Bank Advances.
|
|
The fair values of Federal Home Loan Bank Advances were based on discounted cash flows.
|
|
Undisbursed loan commitments, lines of credit, Mastercard line and standby letters of credit.
|
|
The fair value of these off-balance sheet items are based on discounted cash flows of expected fundings.
|
The following table provides summary information on the estimated fair value of financial instruments at December 31, 2010:
|
(Dollar amounts in thousands)
|
Carrying
|
Fair
|
||||||
amount
|
value
|
|||||||
Financial assets:
|
||||||||
Cash and cash equivalents
|
$ | 60,874 | $ | 60,874 | ||||
Securities available for sale
|
126,189 | 126,189 | ||||||
Loans, net
|
474,828 | 466,007 | ||||||
Bank owned life insurance
|
9,195 | 9,195 | ||||||
Federal Home Loan Bank stock
|
3,939 | 3,939 | ||||||
Federal Reserve Bank stock
|
1,062 | 1,062 | ||||||
Financial liabilities:
|
||||||||
Deposits
|
628,440 | 628,983 | ||||||
Off-balance-sheet liabilities:
|
||||||||
Undisbursed loan commitments, lines of credit, Mastercard line and standby letters of credit
|
0 | 3,603 |
The following table provides summary information on the estimated fair value of financial instruments at December 31, 2009:
|
(Dollar amounts in thousands)
|
Carrying
|
Fair
|
||||||
amount
|
value
|
|||||||
Financial assets:
|
||||||||
Cash and cash equivalents
|
$ | 62,853 | $ | 62,853 | ||||
Securities available for sale
|
97,188 | 97,188 | ||||||
Loans, gross, net
|
494,349 | 515,553 | ||||||
Bank owned life insurance
|
8,866 | 8,866 | ||||||
Federal Home Loan Bank stock
|
4,432 | 4,432 | ||||||
Federal Reserve Bank stock
|
1,062 | 1,062 | ||||||
Financial liabilities:
|
||||||||
Deposits
|
598,964 | 599,619 | ||||||
Federal Home Loan Bank advances
|
25,000 | 25,295 | ||||||
Off-balance-sheet liabilities:
|
||||||||
Undisbursed loan commitments, lines of credit,
Mastercard line and standby letters of credit
|
—
|
3,384 |
(17)
|
Significant Group Concentrations of Credit Risk
|
Most of the Bank’s business activity is with customers located within San Mateo and San Francisco counties. Generally, loans are secured by assets of the borrowers. Loans are expected to be repaid from cash flows or proceeds from the sale of selected assets of the borrowers. The Bank does not have significant concentrations of loans to any one industry, but does have loan concentrations in commercial real estate loans that are considered high by regulatory standards. The Bank has mitigated this concentration to a large extent by utilizing underwriting standards that are more conservative than regulatory guidelines, and performing stress testing on this segment of the portfolio to insure that the commercial real estate loan portfolio will perform within management expectations given an additional downturn in commercial lease rates and commercial real estate valuations. The distribution of commitments to extend credit approximates the distribution of loans outstanding. Commercial and standby letters of credit were granted primarily to commercial borrowers. The contractual amounts of credit-related financial instruments such as commitments to extend credit, credit-card arrangements, and letters of credit represent the amounts of potential accounting loss should the contract be fully drawn upon, the customer default, and the value of any existing collateral become worthless.
|
|
(18)
|
Regulatory matters
|
The Company, as a bank holding company, is subject to regulation by the Board of Governors of the Federal Reserve System under the Bank Holding Company Act of 1956, as amended. 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 Company and the Bank must meet specific capital guidelines that involve quantitative measures of the Company’s and the Bank’s assets, liabilities and certain off balance-sheet items as calculated under regulatory accounting practices.
|
|
The capital amounts and classification are also subject to qualitative judgments by the regulators about asset groupings, risk weightings and other factors. Quantitative measures established by regulation to ensure capital adequacy require the Company and the Bank to maintain minimum amounts and ratios (set forth in the table below) of total and Tier 1 capital (as defined in the regulations) to risk-weighted assets (as defined), and of Tier 1 capital (as defined) to average assets (as defined). Management believes, as of December 31, 2010, that the Company and the Bank have met all regulatory capital requirements.
|
|
As of December 31, 2010, the most recent notification from the regulatory agencies categorized the Bank as well capitalized under the regulatory framework for prompt corrective action. To be categorized as well capitalized the Bank must maintain minimum total risk-based, Tier 1 risk-based, and Tier 1 leverage ratios as set forth in the table. There are no conditions or events since that notification that management believes have changed the Bank’s categories.
|
|
As of December 31, 2010, the Bank was also in compliance with an Individual Mandatory Capital Requirement imposed by the OCC on the Bank, which requires the Bank to maintain capital ratios of at least 9% Tier 1 Capital Ratio and a 12% Risk-based Capital Ratio.
|
The consolidated actual capital amounts and ratios of the Company and the Bank are also presented in the following table:
|
To be w
ell
|
||||||||||||||||||||||||
For capital
|
capitalized under
|
|||||||||||||||||||||||
adequacy
|
prompt corrective
|
|||||||||||||||||||||||
(Dollar amounts in thousands)
|
Actual
|
purposes
|
action provisions
|
|||||||||||||||||||||
Amount
|
Ratio
|
Amount
|
Ratio
|
Amount
|
Ratio
|
|||||||||||||||||||
December 31, 2010:
|
||||||||||||||||||||||||
Total risk-based capital
(to risk weighted assets)
|
||||||||||||||||||||||||
Consolidated Company
|
$ | 82,797 | 14.93 | % | 44,365 | ≥ | 8.00 | % | 55,483 | ≥ | n/a | |||||||||||||
Bank
|
$ | 82,392 | 14.85 | % | 44,386 | ≥ | 8.00 | % | 55,483 | ≥ | 10.00 | % | ||||||||||||
Tier 1 capital (to risk
weighted assets)
|
||||||||||||||||||||||||
Consolidated Company
|
$ | 75,830 | 13.67 | % | 22,189 | ≥ | 4.00 | % | 33,276 | ≥ | n/a | |||||||||||||
Bank
|
$ | 75,425 | 13.60 | % | 22,070 | ≥ | 4.00 | % | 33,276 | ≥ | 6.00 | % | ||||||||||||
Tier 1 leverage capital (to
total average assets)
|
||||||||||||||||||||||||
Consolidated Company
|
$ | 75,830 | 10.52 | % | 28,833 | ≥ | 4.00 | % | 36,054 | ≥ | n/a | |||||||||||||
Bank
|
$ | 75,425 | 10.46 | % | 28,843 | ≥ | 4.00 | % | 36,054 | ≥ | 5.00 | % |
To be well
|
||||||||||||||||||||||||
For capital
|
capitalized under
|
|||||||||||||||||||||||
adequacy
|
prompt corrective
|
|||||||||||||||||||||||
(Dollar amounts in thousands)
|
Actual
|
purposes
|
action provisions
|
|||||||||||||||||||||
Amount
|
Ratio
|
Amount
|
Ratio
|
Amount
|
Ratio
|
|||||||||||||||||||
December 31, 2009:
|
||||||||||||||||||||||||
Total risk-based capital
(to risk weighted assets)
|
||||||||||||||||||||||||
Consolidated Company
|
$ | 83,206 | 14.29 | % | 46,581 | ≥ | 8.00 | % | 58,228 | ≥ | n/a | |||||||||||||
Bank
|
$ | 82,917 | 14.24 | % | 46,583 | ≥ | 8.00 | % | 58,228 | ≥ | 10.00 | % | ||||||||||||
Tier 1 capital (to risk
weighted assets)
|
||||||||||||||||||||||||
Consolidated Company
|
$ | 75,897 | 13.04 | % | 23,281 | ≥ | 4.00 | % | 34,923 | ≥ | n/a | |||||||||||||
Bank
|
$ | 75,608 | 12.99 | % | 23,282 | ≥ | 4.00 | % | 34,923 | ≥ | 6.00 | % | ||||||||||||
Tier 1 leverage capital (to
total average assets)
|
||||||||||||||||||||||||
Consolidated Company
|
$ | 75,897 | 10.77 | % | 28,188 | ≥ | 4.00 | % | 35,232 | ≥ | n/a | |||||||||||||
Bank
|
$ | 75,608 | 10.73 | % | 28,186 | ≥ | 4.00 | % | 35,232 | ≥ | 5.00 | % |
(19)
|
Stock Option Plans
|
In 1997, the Board of Directors of the Bank adopted the First National Bank of Northern California 1997 stock option plan approved by the shareholders of First National Bank at the 1997 Annual Meeting on October 15, 1997. Pursuant to the holding company reorganization effective March 15, 2002, the Bank stock option plan became the FNB Bancorp stock option Plan. In 2002, the Company adopted an incentive employee stock option plan known as the 2002 FNB Bancorp plan. In 2008, the Company adopted an incentive employee stock option plan known as the 2008 FNB Bancorp stock option plan. The plans allow the Company as of December 31, 2010 to grant options to employees covering 331,672 shares.
|
Incentive stock options currently outstanding become exercisable in one to five years from the grant date, based on a vesting schedule of 20% per year and expire 10 years after the grant date. Nonqualified options to directors become vested on the date of grant. The options exercise price is the fair value of the per share price of the underlying stock options at the grant date.
|
|
The amount of compensation expense for options recorded in the years ended December 31, 2010, December 31, 2009, and December 31 2008 was $168,000, $157,000 and $171,000, respectively. The income tax benefit related to stock option exercises was $0 for 2010, $0 for 2009 and $8,000 for 2008.
|
|
The amount of total unrecognized compensation expense related to non-vested options at December 31, 2010 was $423,000, and the weighted average period it will be amortized over is 2.1 years.
|
|
The assumptions for options granted in 2009 were as follows: dividend yield of 2.68% for the year; risk-free interest rate of 3.20%; expected volatility of 60.59%; expected life of 8.8 years. This resulted in a weighted average fair value of $3.77 per share. The assumptions for grants in 2008 were as follows: dividend yield of 4.86% for the year; risk-free interest rate of 3.51%; expected volatility of 50.92%; and expected life of 8.8 years. This resulted in a weighted average fair value of $4.22 per share.
|
|
A summary of option activity under the 2008 FNB Bancorp Plan as of December 31, 2010 and changes during the year then ended is presented below.
|
Weighted-
|
|||||||||||||
Average
|
|||||||||||||
2008 FNB Bancorp Plan
|
Weighted
|
Remaining
|
Aggregate
|
||||||||||
Average
|
Contractual
|
Intrinsic
|
|||||||||||
Exercise
|
Term
|
Value
|
|||||||||||
Options
|
Shares
|
Price
|
(in years)
|
(000) | |||||||||
Outstanding at January 1, 2010
|
154,772 | $ | 8.59 | ||||||||||
Granted
|
— | $ | 0.00 | ||||||||||
Exercised
|
(400 | ) | $ | 7.10 | $ | 1 | |||||||
Forfeited or expired
|
(1,723 | ) | $ | 8.06 | |||||||||
Outstanding at December 31, 2010
|
152,649 | $ | 8.60 |
8.4
|
$ | 257 | |||||||
Exercisable at December 31, 2010
|
56,239 | $ | 9.09 |
8.2
|
$ | 72 |
The following supplemental information applies to the three years ended December 31:
|
2008 FNB Bancorp Plan
|
||||||||||||
2010
|
2009
|
2008
|
||||||||||
Options outstanding
|
152,649 | 154,772 | 67,941 | |||||||||
Range of exercise prices
|
$7.10-$10.67 | $7.10-$10.67 | $10.67-$10.67 | |||||||||
Weighted average remaining
contractual life
|
8.4 | 9.5 | 9.7 | |||||||||
Fully vested options
|
56,239 | 29,740 | 9,925 | |||||||||
Weighted average exercise price
|
$ | 9.09 | $ | 9.54 | $ | 10.67 | ||||||
Aggregate intrinsic value
|
$ | 72,348 | $ | 3,420 | $ | 0 | ||||||
Weighted average remaining
contractual life (in years)
|
8.2 | 9.1 | 9.7 |
A summary of option activity under the 2002 FNB Bancorp Plan as of December 31, 2010 and changes during the year then ended is presented below.
|
Weighted-
|
|||||||||||||
Average
|
|||||||||||||
2002 FNB Bancorp Plan
|
Weighted
|
Remaining
|
Aggregate
|
||||||||||
Average
|
Contractual
|
Intrinsic
|
|||||||||||
Exercise
|
Term
|
Value
|
|||||||||||
Options
|
Shares
|
Price
|
(in years)
|
(000) | |||||||||
Outstanding at January 1, 2010
|
232,329 | $ | 22.51 | ||||||||||
Granted
|
— | $ | 0.00 | ||||||||||
Exercised
|
— | $ | 0.00 | ||||||||||
Forfeited or expired
|
(3,857 | ) | $ | 23.45 | |||||||||
Outstanding at December 31, 2010
|
228,472 | $ | 22.49 |
4.0
|
$ | 0 | |||||||
Exercisable at December 31, 2010
|
209,954 | $ | 22.13 |
3.8
|
$ | 0 |
The following supplemental information applies to the three years ended December 31:
|
2002 FNB Bancorp Plan
|
||||||||||||
2010
|
2009
|
2008
|
||||||||||
Options outstanding
|
228,472 | 232,329 | 242,261 | |||||||||
Range of exercise prices
|
$16.92-$28.40 | $16.92-$28.40 | $16.92-$28.40 | |||||||||
Weighted average remaining
contractual life
|
4.0 | 4.9 | 6.0 | |||||||||
Fully vested options
|
209,954 | 191,571 | 168,589 | |||||||||
Weighted average exercise price
|
$ | 22.13 | $ | 21.77 | $ | 21.27 | ||||||
Aggregate intrinsic value
|
$ | 0 | $ | 0 | $ | 0 | ||||||
Weighted average remaining
contractual life (in years)
|
3.8 | 4.6 | 5.4 |
A summary of option activity under the 1997 FNB Bancorp Plan as of December 31, 2010 and changes during the year then ended is presented below.
|
Weighted-
|
|||||||||||||
Average
|
|||||||||||||
1997 First National Bank Plan
|
Weighted
|
Remaining
|
Aggregate
|
||||||||||
Average
|
Contractual
|
Intrinsic
|
|||||||||||
Exercise
|
Term
|
Value
|
|||||||||||
Options
|
Shares
|
Price
|
(in years)
|
(000) | |||||||||
Outstanding at January 1, 2010
|
62,247 | $ | 19.26 | ||||||||||
Granted
|
— | $ | 0.00 | ||||||||||
Exercised
|
— | $ | 0.00 | ||||||||||
Forfeited or expired
|
(16,279 | ) | $ | 14.69 | |||||||||
Outstanding at December 31, 2010
|
45,968 | $ | 20.88 |
3.9
|
$ | 0 | |||||||
Exercisable at December 31, 2010
|
35,562 | $ | 19.64 |
3.1
|
$ | 0 |
The following supplemental information applies to the three years ended December 31:
|
1997 FNB Bancorp Plan
|
||||||||||||
2010
|
2009
|
2008
|
||||||||||
Options outstanding
|
45,968 | 62,247 | 72,911 | |||||||||
Range of exercise prices
|
$15.38-$25.09 | $14.69-$25.09 | $14.69-$25.09 | |||||||||
Weighted average remaining
contractual life
|
3.9 | 3.7 | 4.1 | |||||||||
Fully vested options
|
35,562 | 46,636 | 52,099 | |||||||||
Weighted average exercise price
|
$ | 19.64 | $ | 17.31 | $ | 16.16 | ||||||
Aggregate intrinsic value
|
$ | 0 | $ | 0 | $ | 0 | ||||||
Weighted average remaining
contractual life (in years)
|
3.1 | 2.5 | 2.4 |
(20)
|
Quarterly Data (Unaudited)
|
(Dollars in thousands)
|
First
|
Second
|
Third
|
Fourth
|
||||||||||||
2010
|
||||||||||||||||
Interest income
|
$ | 8,660 | $ | 8,756 | $ | 8,616 | $ | 8,396 | ||||||||
Interest expense
|
1,700 | 1,330 | 1,338 | 1,015 | ||||||||||||
Net interest income
|
6,960 | 7,426 | 7,278 | 7,381 | ||||||||||||
Provision for loan losses
|
250 | 315 | 464 | 825 | ||||||||||||
Net interest income, after provision
for loan losses
|
6,710 | 7,111 | 6,814 | 6,556 | ||||||||||||
Non-interest income
|
1,100 | 1,026 | 1,335 | 1,245 | ||||||||||||
Non-interest expense
|
6,538 | 7,237 | 6,698 | 6,532 | ||||||||||||
Income before income taxes
|
1,272 | 900 | 1,451 | 1,269 | ||||||||||||
Provision for income taxes
|
268 | 161 | 426 | 372 | ||||||||||||
Net earnings
|
1,004 | 739 | 1,025 | 897 | ||||||||||||
Dividends and discount accretion on preferred stock
|
212 | 214 | 214 | 213 | ||||||||||||
Net (loss) earnings available to common shareholders
|
$ | 792 | $ | 525 | $ | 811 | $ | 684 | ||||||||
Basic earnings per share
|
$ | 0.24 | $ | 0.16 | $ | 0.24 | $ | 0.20 | ||||||||
Diluted earnings per share
|
$ | 0.24 | $ | 0.16 | $ | 0.24 | $ | 0.20 |
(Dollars in thousands)
|
First
|
Second
|
Third
|
Fourth
|
||||||||||||
2009
|
||||||||||||||||
Interest income
|
$ | 8,911 | $ | 8,643 | $ | 9,283 | $ | 8,980 | ||||||||
Interest expense
|
2,319 | 2,362 | 2,293 | 2,037 | ||||||||||||
Net interest income
|
6,592 | 6,281 | 6,990 | 6,943 | ||||||||||||
Provision for loan losses
|
2,140 | 760 | 796 | 900 | ||||||||||||
Net interest income, after provision
for loan losses
|
4,452 | 5,521 | 6,194 | 6,043 | ||||||||||||
Non-interest income
|
1,349 | 1,245 | 1,672 | 1,111 | ||||||||||||
Non-interest expense
|
7,420 | 6,758 | 6,427 | 6,970 | ||||||||||||
(Loss) income before income taxes
|
(1,619 | ) | 8 | 1,439 | 184 | |||||||||||
(Benefit) provision for income taxes
|
(430 | ) | 4 | 176 | (331 | ) | ||||||||||
Net (loss) earnings
|
(1,189 | ) | 4 | 1,263 | 515 | |||||||||||
Dividends and discount accretion on preferred stock
|
16 | 189 | 214 | 213 | ||||||||||||
Net (loss) earnings available to common shareholders
|
$ | (1,205 | ) | $ | (185 | ) | $ | 1,049 | $ | 302 | ||||||
Basic (loss) earnings per share
|
$ | (0.36 | ) | $ | (0.06 | ) | $ | 0.31 | $ | 0.09 | ||||||
Diluted (loss) earnings per share
|
$ | (0.36 | ) | $ | (0.06 | ) | $ | 0.31 | $ | 0.09 |
There may be rounding differences between the sum of the four quarters presented and the annual amounts used throughout the annual report.
|
(21)
|
Condensed Financial Information of Parent Company
|
The parent company-only condensed balance sheets, condensed statements of income, and condensed statements of cash flows information are presented as of and for the years ended December 31, as follows:
|
FNB Bancorp
|
Condensed balance sheets
|
|||||||
(Dollars in thousands)
|
2010
|
2009
|
||||||
Assets:
|
||||||||
Cash and due from banks
|
$ | 390 | $ | 67 | ||||
Investments in subsidiary
|
80,519 | 78,576 | ||||||
Income tax receivable from subsidiary
|
7 | 4 | ||||||
Dividend receivable from subsidiary
|
167 | 159 | ||||||
Options expense receivable from subsidiary
|
—
|
215 | ||||||
Other assets
|
19 | 19 | ||||||
Total assets
|
$ | 81,102 | $ | 79,040 | ||||
Liabilities:
|
||||||||
Dividend declared
|
$ | 167 | $ | 159 | ||||
Other liabilities
|
11 | 16 | ||||||
Total liabilities
|
178 | 175 | ||||||
Stockholders’ equity
|
80,924 | 78,865 | ||||||
Total liabilities and stockholders’ equity
|
$ | 81,102 | $ | 79,040 |
FNB Bancorp
|
Condensed statements of earnings
|
|||||||||||
(Dollars in thousands)
|
2010
|
2009
|
2008
|
|||||||||
Income:
|
||||||||||||
Dividends from subsidiary
|
$ | 1,249 | $ | 1,385 | $ | 3,473 | ||||||
Other income
|
2 | 13 |
—
|
|||||||||
Total income
|
1,251 | 1,398 | 3,473 | |||||||||
Expense:
|
||||||||||||
Other expense
|
6 | 1 | 129 | |||||||||
Total expense
|
6 | 1 | 129 | |||||||||
Income before income taxes and equity
in undistributed earnings of subsidiary
|
1,245 | 1,397 | 3,344 | |||||||||
Income tax expense (benefit)
|
—
|
6 | (14 | ) | ||||||||
Income before equity in undistributed
earnings of subsidiary
|
1,245 | 1,391 | 3,358 | |||||||||
Equity in undistributed earnings (loss) of subsidiary
|
2,420 | (798 | ) | 605 | ||||||||
Net earnings
|
3,665 | 593 | 3,963 | |||||||||
Dividends and discount accretion on preferred stock
|
853 | 632 |
—
|
|||||||||
Net earnings (loss) available to common shareholders
|
$ | 2,812 | $ | (39 | ) | $ | 3,963 |
FNB Bancorp
|
Condensed statement of cash flows
|
|||||||||||
(Dollars in thousands)
|
2010
|
2009
|
2008
|
|||||||||
Net earnings
|
$ | 3,665 | $ | 593 | $ | 3,963 | ||||||
Income tax receivable from (payable to) subsidiary
|
1 | (2 | ) | 15 | ||||||||
Options expense receivable from (payable to) subsidiary
|
215 |
—
|
—
|
|||||||||
Capital purchase program funds received
|
—
|
12,000 |
—
|
|||||||||
Capital purchase program funds invested in subsidiary
|
—
|
(12,000 | ) |
—
|
||||||||
Accounts payable reimbursed by bank
|
5 |
—
|
—
|
|||||||||
Net decrease (increase) in other assets
|
(8 | ) | 141 | (69 | ) | |||||||
Net (decrease) increase in other liabilities
|
(5 | ) | 5 | (454 | ) | |||||||
Undistributed (earnings) loss of subsidiary
|
(2,420 | ) | 798 | (605 | ) | |||||||
Stock-based compensation expense
|
168 | 157 | 171 | |||||||||
Cash flows from operating activities
|
1,621 | 1,692 | 3,021 | |||||||||
Stock options exercised, including tax benefits of
$0 in 2010 and 2009, and $8 in 2008
|
2 | — | 215 | |||||||||
Cash dividends paid on stock
|
(646 | ) | (1,212 | ) | (1,771 | ) | ||||||
Cash dividends paid on preferred stock series A and B
|
(654 | ) | (469 | ) |
—
|
|||||||
Repurchases of common stock
|
—
|
—
|
(1,464 | ) | ||||||||
Cash flows provided by financing activities
|
(1,298 | ) | (1,681 | ) | (3,020 | ) | ||||||
Net increase in cash
|
323 | 11 | 1 | |||||||||
Cash, beginning of year
|
67 | 56 | 55 | |||||||||
Cash, end of year
|
$ | 390 | $ | 67 | $ | 56 |
a)
|
Pertain to the maintenance of records that in reasonable detail accurately and fairly reflect the transactions and dispositions of the assets of a company;
|
|
b)
|
Provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of a company are being made only in accordance with authorizations of management and the board of directors of the company, and
|
|
c)
|
Provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of a company’s assets that could have a material effect on its financial statements.
|
Date: March 28, 2011
|
|||
/s/
Thomas C. Mc Graw
|
/s/
David A. Curtis
|
||
Thomas C. Mc Graw
|
David A. Curtis
|
||
Chief Executive Officer
|
Chief Financial Officer
|
10.3
|
(deleted)
|
|
10.4
|
(deleted)
|
|
10.5
|
(deleted)
|
|
10.6
|
(deleted)
|
|
10.7
|
(deleted)
|
|
10.8(a)
|
(deleted)
|
|
10.8(b)
|
(deleted)
|
|
**10.9
|
First National Bank Profit Sharing and 401(k) Plan dated August 26, 1969.*
|
|
**10.10
|
First National Bank Deferred compensation Plan dated November 1, 1997.*
|
|
**10.11
|
Salary Continuation Agreement between First National Bank of Northern California and Michael R. Wyman,
dated December 20, 1996.*
|
|
**10.12
|
Salary Continuation Agreement between First National Bank of Northern California and Paul B. Hogan dated
December 20, 1996.*
|
|
|
||
**10.13
|
Salary Continuation Agreement between First National Bank of Northern California and James B. Ramsey,
dated December 23, 1999.*
|
|
|
||
**10.14
|
Form of Management Continuity Agreement signed on July 20, 2000, between First National Bank of
Northern California and Jim D. Black, Charles R. Key and Anthony J. Clifford.*
|
|
|
||
10.15
|
(deleted)
|
|
**10.16
|
Communications Site Lease Agreement as amended dated March 30, 1999, between First National Bank of
Northern California, as Lessor and Nextel of California, Inc., as Lessee, with respect to Redwood City Branch
Office.
|
|
10.17
|
(deleted)
|
|
**10.18
|
Separation Agreement between First National Bank of Northern California and Paul B. Hogan, dated
December 5, 2001.*
|
|
|
||
***10.19
|
First Amendment to Separation Agreement between First National Bank of Northern California and Paul B.
Hogan, dated March 22, 2002.*
|
|
|
||
****10.20
|
FNB Bancorp Stock Option Plan (effective March 15, 2002).*
|
|
****10.21
|
FNB Bancorp Stock Option Plan, Form of Incentive Stock Option Agreement.*
|
|
****10.22
|
FNB Bancorp Stock Option Plan, Form of Nonstatutory Stock Option Agreement.*
|
|
*****10.23
|
FNB Bancorp 2002 Stock option Plan (adopted June 28, 2002).*
|
|
*****10.24
|
FNB Bancorp 2002 Stock Option Plan, Form of Incentive Stock Option Agreement.*
|
|
*****10.25
|
FNB Bancorp 2002 Stock Option Plan, Form of Nonstatutory Stock option Agreement.*
|
|
******10.26
|
Lease Agreement dated August 13, 2003, for San Mateo Branch Office of First National Bank of Northern
California, located at 150 East Third Avenue, San Mateo, California.
|
|
10.27
|
Salary Continuation Agreement and Split-Dollar Agreement for Jim D. Black (incorporated by reference from
Exhibit 10.27 to the Company’s Current Report on Form 8-K filed with the Commission on September 10,
2004).*
|
10.28
|
Salary Continuation Agreement and Split-Dollar Agreement for Anthony J. Clifford (incorporated by
reference from Exhibit 10.28 to the Company’s Current Report on Form 8-K filed with the Commission on
September 10, 2004).*
|
|
10.29
|
Amended and Restated Salary Continuation and Split-Dollar Agreement for James B. Ramsey
(incorporated by reference from Exhibit 10.29 o the company’s current Report on Form 8-K filed with the
Commission on September 10, 2004).*
|
|
*******10.30
|
Lease Agreement dated May 1, 2003 as amended by Assignment, Assumption and Consent Agreement
for the Financial District Branch of First National Bank of Northern California located at 65 Post Street, San
Francisco, California.
|
|
*******10.31
|
Lease Agreement dated July 1, 1999, as amended by Assignment, Assumption and Consent for the Portola
Branch Office of First National Bank of Northern California located at 699 Portola Drive, San Francisco,
California.
|
|
10.32
|
Amendment to Salary Continuation Agreement for Jim D. Black (incorporated by reference from Exhibit
99.37 to the Company’s Current Report on Form 8-K filed with the Commission on July 26, 2006).*
|
|
10.33
|
Amendment to Salary Continuation Agreement for Anthony J. Clifford (incorporated by reference from
Exhibit 99.38 to the Company’s Current Report on Form 8-K filed with the Commission on July 26, 2006).*
|
|
10.34
|
Amendment to Amended and Restated Salary Continuation Agreement for James B. Ramsey
(incorporated by reference from Exhibit 99.39 to the Company’s Current report on Form 8-K filed with the
Commission on July 26, 2006).*
|
|
10.35
|
Lease Agreement dated February 3, 2006, for warehouse facility of First National Bank of Northern California
(incorporated by reference from Exhibit 10.35 to the company’s Annual Report on Form 10-K filed with the
Commission on March 13, 2008).
|
|
10.36
|
First National Bank Deferred Compensation Plan dated December 1, 2007 (incorporated by reference from
Exhibit 10.36 to the Company’s Annual Report on Form 10-K filed with the Commission on March 13,
2008).*
|
|
10.37
|
Amendment No. 5 to the First National Bank Profit Sharing and 401(k) Plan dated December 1, 2007
(incorporated by reference from Exhibit 10.37 to the Company’s Annual Report on Form 10-K filed with the
Commission on March 13, 2008).*
|
|
10.38
|
Executive Supplemental Compensation Agreement between First National Bank of Northern California and
David A. Curtis dated March 3, 2008 (incorporated by reference from Exhibit 10.38 to the Company’s
Current Report on Form 8-K filed with the Commission on March 6, 2008).*
|
|
10.39
|
Split-Dollar Life Insurance Agreement between First National Bank of Northern California and David A.
Curtis dated March 3, 2008 (incorporated by reference from Exhibit 10.39 to the Company’s Current
Report on Form 8-K filed with the Commission on March 6, 2008).*
|
|
********10.40
|
FNB Bancorp 2008 Stock option Plan (adopted February 22, 2008).*
|
|
10.41
|
Second 409A Amendment to the Salary Continuation Agreement for Jim D. Black (incorporated by reference
from Exhibit 99.66 to the Company’s Current Report on Form 8-K filed with the Commission on December
22, 2008).*
|
|
10.42
|
Second 409A Amendment to the Salary Continuation Agreement for Anthony J. Clifford (incorporated by
reference from Exhibit 99.67 to the Company’s Current Report on Form 8-K filed with the Commission on
December 22, 2008).*
|
|
10.43
|
Amendment to the Executive Supplemental Compensation Agreement for David A. Curtis (incorporated by
reference from Exhibit 99.68 to the Company’s Current Report on Form 8-K filed with the Commission on
December 22, 2008).*
|
10.44
|
Letter Agreement dated February 27, 2009, between FNB Bancorp and United States Department of the
Treasury pertaining to the election of directors by the holder(s) of the Series A and Series B Preferred Stock
(incorporated by reference from Exhibit 4.4 to the Company’s Current Report on Form 8-K filed with the
Commission on February 27, 2009)
|
|
10.45
|
Letter Agreement, including Schedule A and Securities Purchase Agreement Standard Terms, dated
February 27, 2009, between FNB Bancorp and United States Department of the Treasury, with respect to
to the issuance and sale of the Series A and Series B Preferred Stock and the Warrant (incorporated
by reference from Exhibit 10.1 to the Company’s Current Report on Form 8-K filed with the Commission on
February 27, 2009)
|
|
10.46
|
Letter Agreement dated February 27, 2009, between FNB Bancorp and United States Department of the
Treasury pertaining to the American Recovery and Reinvestment Act of 2009 (incorporated by reference from
Exhibit 10.2 to the Company’s Current Report on Form 8-K filed with the Commission on
February 27, 2009)
|
|
10.47
|
Letter Agreement dated February 27, 2009, between FNB Bancorp and United States Department of the
Treasury amending certain sections of the Securities Purchase Agreement Standard Terms (incorporated
by reference from Exhibit 10.3 to the Company’s Current Report on Form 8-K filed with the Commission
on February 27, 2009)
|
|
|
||
10.48
|
Form of Compensation Modification Agreement and Waiver, dated February 27, 2009, executed by each of:
|
|
Thomas C. McGraw
|
||
Chief Executive Officer
|
||
FNB Bancorp and First National Bank of Northern California
|
||
Jim D. Black, President
|
||
FNB Bancorp and First National Bank of Northern California
|
||
Anthony J. Clifford
|
||
Executive Vice President and Chief Operating Officer
|
||
FNB Bancorp and First National Bank of Northern California
|
||
David A. Curtis
|
||
Senior Vice President and Chief Financial Officer
|
||
FNB Bancorp and First National Bank of Northern California
|
||
Randy R. Brugioni
|
||
Senior Vice President and Senior Loan Officer
|
||
FNB Bancorp and First National Bank of Northern California
|
||
(incorporated by reference from Exhibit 10.4 to the Company’s Current Report on Form 8-K filed with the
Commission on February 27, 2009).
|
||
10.49
|
Lease agreement dated June 8, 1999, as amended August 18, 2009, for Linda Mar Branch Office of First
National Bank of Northern California at Linda Mar Shopping Center, Pacifica, California
|
|
10.50
|
Sublease agreement dated as of September 20, 2010, between Wells Fargo Bank, N. A. as Sublandlord, and
First National Bank of Northern California as Subtenant, for Chestnut Street Branch of First National
Bank of Northern California
|
|
|
||
******14.0
|
Code of Ethics
|
|
21.1
|
The Registrant has one subsidiary, First National Bank of Northern California
|
|
23.1
|
Consent of Moss Adams LLP
|
|
31.1
|
Rule 13a-14(a)/15d-14(a) Certification
(principal executive officer)
|
|
|
||
31.2
|
Rule 13a-14(a)/15d-14(a) Certification
(principal financial officer)
|
|
32.0
|
Section 1350 Certifications
|
*
|
Denotes management contracts, compensatory plans or arrangements.
|
|
**
|
Incorporated by reference to registrant’s Quarterly Report on Form 10-Q filed with the Commission on
May 15, 2002.
|
|
|
||
***
|
Incorporated by reference to registrant’s Annual Report on Form 10-K filed with the Commission on March
31, 2002.
|
|
|
||
****
|
Incorporated by reference to registrant’s Statement on Form S-8 (No. 333-91596) filed with the Commission
on July 1, 2002.
|
|
|
||
*****
|
Incorporated by reference to the registrant’s Registration Statement on Form S-8 (No. 333-98293) filed with
the Commission on August 16, 2002.
|
|
|
||
******
|
Incorporated by reference to registrant’s Annual Report on Form 10-K filed with the Commission on
March 30, 2003.
|
|
|
||
*******
|
Incorporated by reference to registrant’s Annual Report on Form 10-K filed with the Commission on
March 29, 2006.
|
|
|
||
********
|
Incorporated by reference from Appendix A to the Registrant’s Definitive Proxy Statement for its 2008
Annual Meeting of Shareholders, filed with the Commission on April 21, 2008.
|
FNB BANCORP
|
|||
Dated: March 28, 2011
|
By:
|
/s/ Thomas C. McGraw | |
Thomas C. McGraw
|
|||
Chief Executive Officer
|
|||
(Principal Executive Officer)
|
Signature
|
Title
|
Date
|
||
/s/ Lisa Angelot |
Chairwoman of the Board
|
March 28, 2011
|
||
Lisa Angelot
|
of Directors
|
|||
/s/ Thomas C. McGraw |
Director, Chief Executive
|
March 28, 2011
|
||
Thomas C. McGraw
|
Officer and Secretary
|
|||
/s/ David A. Curtis |
Senior Vice President
|
March 28, 2011
|
||
David A. Curtis | and Chief Financial Officer (Principal Financial Officer and Principal Accounting Officer) | |||
/s/ Thomas G. Atwood |
Director
|
March 28, 2011
|
||
Thomas G. Atwood, D. D. S.
|
||||
/s/ Ronald R. Barels |
Director
|
March 28, 2011
|
||
Ronald R. Barels, D.D.S.
|
||||
/s/ Merrie Turner Lightner |
Director
|
March 28, 2011
|
||
Merrie Turner Lightner
|
||||
/s/ Michael Pacelli |
Director
|
March 28, 2011
|
||
Michael Pacelli
|
||||
/s/ Edward J. Watson |
Director
|
March 28, 2011
|
||
Edward J. Watson
|
||||
/s/ Jim D. Black |
Director and President
|
March 28, 2011
|
||
Jim D. Black
|
||||
/s/ Anthony J. Clifford |
Director and Executive
|
March 28, 2011
|
||
Anthony J. Clifford
|
Vice President and Chief
|
|||
Operating Officer |
EXHIBIT 10.50
/s/ Moss Adams LLP
|
|
Portland, Oregon
|
|
March 28, 2011
|
I, Thomas C. McGraw, certify that: | |
1. I have reviewed this annual report on Form 10-K of FNB Bancorp; | |
2. Based on my knowledge, this annual report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; | |
3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; | |
4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f) for the registrant and have: | |
a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this annual report is being prepared; | |
b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; | |
c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and | |
d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s fourth fiscal quarter that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and | |
5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of registrant’s board of directors: | |
a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and | |
b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting. |
Date: March 28, 2011
|
|
/s/ Thomas C. McGraw | |
Thomas C. McGraw
|
|
Chief Executive Officer
|
I, David A. Curtis, certify that: | ||
1. I have reviewed this annual report on Form 10-K of FNB Bancorp; | ||
2. Based on my knowledge, this annual report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; | ||
3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; | ||
4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f) for the registrant and have: | ||
a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this annual report is being prepared; | ||
b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; | ||
c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and | ||
d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s fourth fiscal quarter that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and | ||
5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of registrant’s board of directors: | ||
a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and | ||
b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting. |
Date: March 28, 2011.
|
|
/s/ David A. Curtis | |
David A. Curtis
|
|
Senior Vice President and Chief Financial Officer
|
1.
|
The Company’s Annual Report on Form 10-K for the year ended December 31, 2010 (the “Form 10-K”) fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended; and
|
|
2.
|
Information contained in the Form 10-K fairly presents, in all material aspects, The financial condition and results of operations of the Company.
|
Dated: March 28, 2011
|
/s/ Thomas C. McGraw | |
Thomas C. McGraw
|
||
Chief Executive Officer
|
||
Dated: March 28, 2011
|
/s/ David A. Curtis | |
David A. Curtis
|
||
Senior Vice President
|
||
and Chief Financial Officer
|