x
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ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
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¨
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TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
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South Carolina
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57-1021355
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(State or other jurisdiction of
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(IRS Employer
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incorporation or organization)
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Identification Number)
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256 Meeting Street, Charleston, SC
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29401
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(Address of principal executive offices)
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(Zip Code)
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Page
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PART I
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||
Item 1.
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Business
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3
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Item 1A.
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Risk Factors
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8
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Item 1B.
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Unresolved Staff Comments
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8
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Item 2.
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Properties
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8
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Item 3.
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Legal Proceedings
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8
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PART II
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||
Item 5.
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Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities
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8
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Item 6.
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Selected Financial Data
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10
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Item 7.
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Management’s Discussion and Analysis of Financial Condition and Results of Operations
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12
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Item 7A.
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Quantitative and Qualitative Disclosures About Market Risk
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17
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Item 8.
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Financial Statements and Supplementary Data
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31
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Item 9.
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Changes In and Disagreements with Accountants on Accounting and Financial Disclosure
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64
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Item 9A
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Controls and Procedures
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64
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Item 9B.
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Other Information
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65
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PART III
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||
Item 10.
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Directors, Executive Officers, and Corporate Governance of the Registrant
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65
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Item 11.
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Executive Compensation
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66
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Item 12.
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Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters
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66
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Item 13.
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Certain Relationships and Related Transactions and Director Independence
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67
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Item 14.
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Principal Accountant Fees and Services
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67
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Part IV
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||
Item 15.
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Exhibits and Financial Statement Schedules
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67
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·
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interest rates offered on deposit accounts
|
|
·
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interest rates charged on loans
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|
·
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credit and service charges
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·
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the quality of services rendered
|
|
·
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the convenience of banking facilities and other delivery channels and
|
|
·
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in the case of loans, relative lending limits.
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|
·
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Centralize responsibility for consumer financial protection by creating a new agency, the Bureau of Consumer Financial Protection, responsible for implementing, examining, and enforcing compliance with federal consumer financial laws
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·
|
Create the Financial Stability Oversight Council that will recommend to the Federal Reserve increasingly strict rules for capital, leverage, liquidity, risk management and other requirements as companies grow in size and complexity
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·
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Provide mortgage reform provisions regarding a customer’s ability to repay, restricting variable-rate lending by requiring that the ability to repay variable-rate loans be determined by using the maximum rate that will apply during the first five years of a variable-rate loan term, and making more loans subject to provisions for higher cost loans, new disclosures, and certain other revisions
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|
·
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Make permanent the $250,000 limit for federal deposit insurance and provide unlimited federal deposit insurance until December 31, 2012 for non-interest-bearing demand transaction accounts and Lawyer Trust Accounts (IOLTAs) at all depository institutions
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|
·
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Implement corporate governance revisions, including executive compensation and proxy access by shareholders, which apply to all public companies, not just financial institutions
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·
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Repeal the federal prohibitions on the payment of interest on demand deposits, thereby permitting depository institutions to pay interest on business transactions and other accounts.
|
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·
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Internal controls
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·
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Information systems and audit systems
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|
·
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Loan documentations
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|
·
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Credit underwriting
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|
·
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Interest rate risk exposure
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|
·
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Asset quality
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·
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Liquidity.
|
|
·
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The federal Truth-In-Lending Act, governing disclosures of credit terms to consumer borrowers
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·
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The Home Mortgage Disclosure Act of 1975, requiring financial institutions to provide information to enable the public and public officials to determine whether a financial institution is fulfilling its obligation to help meet the housing needs of the community it serves
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·
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The Equal Credit Opportunity Act, prohibiting discrimination on the basis of race, creed or other prohibited factors in extending credit
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·
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The Fair Credit Reporting Act of 1978, governing the use of provision of information to credit reporting agencies
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·
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The Fair Debt Collection Act, governing the manner in which consumer debt may be collected by collection agencies
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·
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The rules and regulations of the various federal agencies charged with the responsibility of implementing such federal laws.
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·
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The Right to Financial Privacy Act, which imposes a duty to maintain confidentiality of consumer financial records and prescribes procedures for complying with administrative subpoenas of financial records
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·
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The Electronic Funds Transfer Act and Regulation E issued by the Federal Reserve Board to implement that Act, which governs automatic deposits to and withdrawals from deposit and customer’s rights and liabilities arising from the use of automated teller machines and other electronic banking services
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·
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Regulation DD which implements the Truth in Savings Act to enable consumers to make informed decisions about deposit accounts at depository institutions. Regulation DD requires depository institutions to provide disclosures so that consumers can make meaningful comparisons among depository institutions.
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|
·
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Allowing check truncation without making it mandatory
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·
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Demanding that every financial institution communicate to accountholders in writing a description of its substitute check processing program and their rights under the law
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·
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Legalizing substitutions for and replacement of paper checks without agreement from consumers
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|
·
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Retaining in place the previously mandated electronic collection and return of checks between financial institutions only when individuals agreements are in place
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|
·
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Requiring that when account holders request verification, financial institutions produce the original check (or a copy that accurately represents the original) and demonstrate that the account debit was accurate and valid
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·
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Requiring the re-crediting of funds to an individual’s account on the next business day after a consumer proves that the financial institution has erred.
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High
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Low
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Dividends
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||||||||||
2010
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||||||||||||
Quarter ended March 31, 2010
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$ | 10.35 | $ | 8.64 | $ | 0.10 | ||||||
Quarter ended June 30, 2010
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$ | 10.96 | $ | 8.91 | $ | 0.10 | ||||||
Quarter ended September 30, 2010
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$ | 11.93 | $ | 8.87 | $ | 0.10 | ||||||
Quarter ended December 31, 2010
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$ | 12.44 | $ | 10.18 | $ | 0.10 | ||||||
2009
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||||||||||||
Quarter ended March 31, 2009
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$ | 11.71 | $ | 9.09 | $ | 0.16 | ||||||
Quarter ended June 30, 2009
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$ | 12.22 | $ | 9.32 | $ | 0.16 | ||||||
Quarter ended September 30, 2009
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$ | 13.36 | $ | 10.13 | $ | 0.00 | ||||||
Quarter ended December 31, 2009
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$ | 11.68 | $ | 8.64 | $ | 0.00 | ||||||
2008
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||||||||||||
Quarter ended March 31, 2008
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$ | 13.64 | $ | 12.27 | $ | 0.16 | ||||||
Quarter ended June 30, 2008
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$ | 13.65 | $ | 11.78 | $ | 0.16 | ||||||
Quarter ended September 30, 2008
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$ | 13.31 | $ | 10.28 | $ | 0.16 | ||||||
Quarter ended December 31, 2008
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$ | 12.26 | $ | 8.27 | $ | 0.16 |
·
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1 year of service
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0% Vested
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·
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2 Years of Service
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25% Vested
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·
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3 Years of Service
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50% Vested
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·
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4 Years of Service
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75% Vested
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·
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5 Years of Service
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100% Vested
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2010
|
2009 | 2008 | 2007 | 2006 | |||||||||||||||
For December 31:
|
||||||||||||||||||||
Net Income
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$ | 3,110,513 | $ | 1,869,854 | $ | 2,939,297 | $ | 3,831,244 | $ | 3,928,263 | ||||||||||
Selected Year End Balances:
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||||||||||||||||||||
Total Assets
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280,521,267 | 265,914,758 | 243,665,930 | 225,157,090 | 243,472,740 | |||||||||||||||
Total Loans (1)
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213,933,980 | 217,315,936 | 183,538,172 | 158,329,035 | 162,557,288 | |||||||||||||||
Investment Securities Available for Sale
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39,379,613 | 36,862,345 | 37,896,250 | 35,840,019 | 40,897,855 | |||||||||||||||
Federal Funds Sold
|
19,018,104 | 3,779,693 | 13,352,303 | 18,357,674 | 26,857,657 | |||||||||||||||
Interest Bearing Deposits in Other Banks
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8,302 | 8,269 | 8,212 | 8,109 | 7,990 | |||||||||||||||
Earning Assets
|
272,339,999 | 257,966,243 | 234,794,937 | 212,534,837 | 230,320,790 | |||||||||||||||
Deposits
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250,436,975 | 229,837,680 | 214,786,515 | 197,346,458 | 215,316,901 | |||||||||||||||
Shareholders' Equity
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28,718,882 | 27,567,197 | 26,808,064 | 25,692,570 | 23,640,431 | |||||||||||||||
Weighted Average Shares Outstanding-Diluted
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4,416,065 | 4,394,366 | 4,375,485 | 4,368,484 | 4,340,521 | |||||||||||||||
For the Year:
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||||||||||||||||||||
Selected Average Balances:
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||||||||||||||||||||
Total Assets
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266,100,518 | 257,195,300 | 228,987,689 | 236,019,185 | 232,257,502 | |||||||||||||||
Total Loans (1)
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212,960,118 | 202,885,118 | 165,905,847 | 162,006,962 | 159,659,211 | |||||||||||||||
Investment Securities Available for Sale
|
37,410,074 | 37,325,137 | 37,210,126 | 38,810,306 | 39,330,090 | |||||||||||||||
Federal
Funds Sold and Resale Agreements
|
6,845,909 | 7,095,852 | 14,475,859 | 22,548,768 | 19,893,084 | |||||||||||||||
Interest Bearing Deposits in Other Banks
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8,288 | 8,241 | 510,894 | 8,049 | 7,931 | |||||||||||||||
Earning Assets
|
257,224,389 | 247,314,348 | 218,102,726 | 223,374,085 | 218,890,316 | |||||||||||||||
Deposits
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233,712,645 | 223,770,359 | 200,955,703 | 209,104,665 | 207,459,557 | |||||||||||||||
Shareholders' Equity
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28,606,139 | 27,546,030 | 26,470,992 | 24,841,050 | 22,841,402 | |||||||||||||||
Performance Ratios:
|
||||||||||||||||||||
Return on Average Equity
|
10.87 | % | 6.79 | % | 11.10 | % | 15.42 | % | 17.20 | % | ||||||||||
Return on Average Assets
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1.17 | % | .73 | % | 1.28 | % | 1.62 | % | 1.69 | % | ||||||||||
Average Equity to Average Assets
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10.75 | % | 10.71 | % | 11.56 | % | 10.53 | % | 9.83 | % | ||||||||||
Net Interest Margin
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4.32 | % | 4.18 | % | 4.71 | % | 5.13 | % | 5.24 | % | ||||||||||
Net (Recoveries) Charge-offs to Average Loans
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.36 | % | .38 | % | .06 | % | (0.01 | )% | (0.02 | )% | ||||||||||
Allowance for Loan Losses as a
Percentage of Total Loans (excluding mortgage loans held for sale)
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1.41 | % | 1.42 | % | .79 | % | .85 | % | .82 | % | ||||||||||
Per Share:
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||||||||||||||||||||
Basic Earnings
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$ | 0.70 | $ | 0.43 | $ | 0.67 | $ | 0.88 | $ | 0.92 | ||||||||||
Diluted Earnings
|
0.71 | 0.43 | 0.67 | 0.88 | 0.91 | |||||||||||||||
Year End Book Value
|
6.48 | 6.26 | 6.74 | 6.50 | 6.02 | |||||||||||||||
Cash Dividends Declared
|
0.40 | 0.32 | 0.64 | 0.62 | 0.67 | |||||||||||||||
Dividend Payout Ratio
|
54.27 | % | 68.28 | % | 86.44 | % | 63.88 | % | 63.76 | % | ||||||||||
Full Time Employee Equivalents
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72 | 72 | 67 | 68 | 67 |
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(1)
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Including mortgage loans held for sale
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For Years Ended
|
||||||||||||||||||||
December 31,
|
||||||||||||||||||||
2010
|
2009
|
2008
|
2007
|
2006
|
||||||||||||||||
Operating Data:
|
||||||||||||||||||||
Interest and fee income
|
$ | 12,166,183 | $ | 11,671,949 | $ | 12,146,820 | $ | 16,482,178 | $ | 16,169,958 | ||||||||||
Interest expense
|
1,066,391 | 1,336,329 | 1,878,778 | 5,023,086 | 4,696,492 | |||||||||||||||
Net interest income
|
11,099,792 | 10,335,620 | 10,268,042 | 11,459,092 | 11,473,466 | |||||||||||||||
Provision for loan losses
|
670,000 | 2,369,000 | 192,000 | 40,000 | 240,000 | |||||||||||||||
Net interest income after provision for loan losses
|
10,429,792 | 7,966,620 | 10,076,042 | 11,419,092 | 11,233,466 | |||||||||||||||
Other income
|
2,050,350 | 2,264,056 | 1,472,854 | 1,543,869 | 1,467,393 | |||||||||||||||
Other expense
|
7,973,671 | 7,589,461 | 7,181,641 | 7,085,401 | 6,703,716 | |||||||||||||||
Income before income taxes
|
4,506,471 | 2,641,215 | 4,367,255 | 5,877,560 | 5,997,143 | |||||||||||||||
Income tax expense
|
1,395,958 | 771,361 | 1,427,958 | 2,046,316 | 2,068,880 | |||||||||||||||
Net income
|
$ | 3,110,513 | $ | 1,869,854 | $ | 2,939,297 | $ | 3,831,244 | $ | 3,928,263 | ||||||||||
Basic income per share
|
$ | 0.70 | $ | 0.43 | $ | 0.67 | $ | 0.88 | $ | 0.92 | ||||||||||
Diluted income per share
|
$ | 0.70 | $ | 0.43 | $ | 0.67 | $ | 0.88 | $ | 0.91 | ||||||||||
Weighted average common shares-basic
|
4,416,065 | 4,390,835 | 4,362,812 | 4,337,374 | 4,290,778 | |||||||||||||||
Weighted average common shares – diluted
|
4,416,065 | 4,394,366 | 4,375,485 | 4,368,484 | 4,340,521 | |||||||||||||||
Dividends per common share
|
$ | 0.40 | $ | 0.32 | $ | 0.64 | $ | 0.62 | $ | 0.67 |
As of
|
||||||||||||||||||||
December 31,
|
||||||||||||||||||||
2010
|
2009
|
2008
|
2007
|
2006
|
||||||||||||||||
Balance Sheet Data:
|
||||||||||||||||||||
Investment securities available for sale
|
$ | 39,379,613 | $ | 36,862,345 | $ | 37,896,250 | $ | 35,840,019 | $ | 40,897,855 | ||||||||||
Total loans (1)
|
213,933,980 | 217,315,936 | 183,538,172 | 158,329,035 | 162,557,288 | |||||||||||||||
Allowance for loan losses
|
2,938,588 | 3,026,997 | 1,429,835 | 1,355,099 | 1,294,994 | |||||||||||||||
Total assets
|
280,521,267 | 265,914,758 | 243,665,930 | 225,170,090 | 243,472,740 | |||||||||||||||
Total deposits
|
250,436,975 | 229,837,680 | 214,786,515 | 197,346,458 | 215,316,901 | |||||||||||||||
Shareholders' equity
|
28,718,882 | 27,567,197 | 26,808,064 | 25,692,570 | 23,640,431 |
|
·
|
Risk from changes in economic, monetary policy, and industry conditions
|
|
·
|
Changes in interest rates, shape of the yield curve, deposit rates, the net interest margin and funding sources
|
|
·
|
Market risk (including net income at risk analysis and economic value of equity risk analysis) and inflation
|
|
·
|
Risk inherent in making loans including repayment risks and changes in the value of collateral
|
|
·
|
Loan growth, the adequacy of the allowance for loan losses, provisions for loan losses, and the assessment of problem loans
|
|
·
|
Level, composition, and re-pricing characteristics of the securities portfolio
|
|
·
|
Deposit growth, change in the mix or type of deposit products and services
|
|
·
|
Continued availability of Senior Management
|
|
·
|
Technological changes
|
|
·
|
Ability to control expenses
|
|
·
|
Changes in compensation
|
|
·
|
Risks associated with income taxes including potential for adverse adjustments
|
|
·
|
Changes in accounting policies and practices
|
|
·
|
Changes in regulatory actions, including the potential for adverse adjustments
|
|
·
|
Recently enacted or proposed legislation
|
|
·
|
Current disarray in the financial service industry.
|
3 Months
|
6 Months
|
1 Year
|
||||||||||||||||||||||||||||||
Less
|
to Less
|
to Less
|
to Less
|
Estimated
|
||||||||||||||||||||||||||||
Earning Assets
|
Than 3
|
Than 6
|
Than 1
|
Than 5
|
5 years
|
Fair
|
||||||||||||||||||||||||||
(in 000’s)
|
1 Day
|
Months
|
Months
|
Year
|
Years
|
or More
|
Total
|
Value
|
||||||||||||||||||||||||
Loans (1)
|
$ | 146,688 | $ | 11,370 | $ | 14,529 | $ | 10,244 | $ | 30,983 | $ | 119 | $ | 213,933 | $ | 218,670 | ||||||||||||||||
Investment securities (2)
|
- | 6,158 | 3,016 | 446 | 9,465 | 19,897 | 38,982 | 39,380 | ||||||||||||||||||||||||
Short term investments
|
8 | - | - | - | - | - | 8 | 8 | ||||||||||||||||||||||||
Federal funds sold
|
19,018 | - | - | - | - | - | 19,018 | 19,018 | ||||||||||||||||||||||||
Total
|
$ | 165,714 | $ | 17,528 | $ | 17,545 | $ | 10,690 | $ | 40,448 | $ | 20,016 | $ | 271,941 | $ | 277,076 | ||||||||||||||||
Interest Bearing Liabilities
|
||||||||||||||||||||||||||||||||
(in 000's)
|
||||||||||||||||||||||||||||||||
CD's and other time deposits 100,000 and over
|
$ | - | $ | 18,412 | $ | 14,052 | $ | 12,450 | $ | 609 | $ | - | $ | 45,523 | $ | 45,678 | ||||||||||||||||
CD's and other time deposits under 100,000
|
118 | 6,087 | 4,341 | 5,412 | 1,802 | - | 17,760 | 17,919 | ||||||||||||||||||||||||
Money market and interest
bearing demand accounts
|
118,402 | - | - | - | - | - | 118,402 | 118,402 | ||||||||||||||||||||||||
Savings
|
11,867 | - | - | - | - | - | 11,867 | 11,867 | ||||||||||||||||||||||||
Short term borrowings
|
767 | - | - | - | - | - | 767 | 767 | ||||||||||||||||||||||||
$ | 131,154 | $ | 24,499 | $ | 18,393 | $ | 17,862 | $ | 2,411 | $ | - | $ | 194,319 | $ | 194,633 | |||||||||||||||||
Net
|
$ | 34,560 | $ | (6,971 | ) | $ | (848 | ) | $ | (7,172 | ) | $ | 38,037 | $ | 20,016 | $ | 77,622 | $ | 82,443 | |||||||||||||
Cumulative
|
$ | 27,589 | $ | 26,741 | $ | 19,569 | $ | 57,606 | $ | 77,622 |
|
(1)
|
Including mortgage loans held for sale.
|
|
(2)
|
At amortized cost
|
Payment Due by Period
|
||||||||||||||||
Total
|
Less than
1 Year
|
1-5
Years
|
After 5
Years
|
|||||||||||||
Contractual Obligations (in 000's)
|
||||||||||||||||
Time deposits
|
$ | 63,283 | $ | 60,872 | $ | 2411 | $ | - | ||||||||
Short-term borrowings
|
767 | 767 | ||||||||||||||
Operating leases
|
3,366 | 530 | 2,127 | 709 | ||||||||||||
Total contractual cash obligations
|
$ | 67,416 | $ | 62,169 | $ | 4,538 | $ | 709 |
2010
|
2009
|
2008
|
2007
|
2006
|
||||||||||||||||
Loans (1)
|
$ | 212,960,118 | $ | 202,885,118 | $ | 165,905,847 | $ | 162,006,962 | $ | 159,659,211 | ||||||||||
Investment securities available for sale
|
37,410,074 | 37,325,137 | 37,210,126 | 38,810,306 | 39,330,090 | |||||||||||||||
Federal funds sold and other investments
|
6,854,198 | 7,104,093 | 14,986,753 | 22,556,817 | 19,901,015 | |||||||||||||||
Non-earning assets
|
8,876,128 | 9,880,952 | 10,884,963 | 12,645,100 | 13,367,186 | |||||||||||||||
Total average assets
|
$ | 266,100,518 | $ | 257,195,300 | $ | 228,987,689 | $ | 236,019,185 | $ | 232,257,502 |
2010 vs. 2009
|
2009 vs. 2008
|
2008 vs. 2007
|
||||||||||||||||||||||||||||||||||
Net Dollar
|
Net Dollar
|
Net Dollar
|
||||||||||||||||||||||||||||||||||
Volume
|
Rate
|
Change (1)
|
Volume
|
Rate
|
Change (1)
|
Volume
|
Rate
|
Change (1)
|
||||||||||||||||||||||||||||
Loans (2)
|
$ | 505,801 | $ | 33,236 | $ | 539,037 | $ | 2,045,844 | $ | (2,110,432 | ) | $ | (64,588 | ) | $ | 319,364 | $ | (3,669,928 | ) | $ | (3,350,564 | ) | ||||||||||||||
Investment securities available for sale
|
3,415 | (47,591 | ) | (44,176 | ) | 4,959 | (110,125 | ) | (105,166 | ) | (72,076 | ) | (111,928 | ) | (184,004 | ) | ||||||||||||||||||||
Federal funds sold and and other investments
|
(473 | ) | (154 | ) | (627 | ) | (113,836 | ) | (191,281 | ) | (305,117 | ) | (289,842 | ) | (510,948 | ) | (800,790 | ) | ||||||||||||||||||
Interest Income
|
$ | 508,744 | $ | (14,510 | ) | $ | (494,234 | ) | $ | 1,936,967 | $ | (2,411,838 | ) | $ | (474,871 | ) | $ | (42,554 | ) | $ | (4,292,804 | ) | $ | (4,335,358 | ) | |||||||||||
Interest-bearing transaction accounts
|
$ | 9,831 | $ | (30,786 | ) | $ | (20,955 | ) | $ | 51,505 | $ | (387,556 | ) | $ | (336,051 | ) | $ | (78,764 | ) | $ | (2,224,793 | ) | $ | (2,303,557 | ) | |||||||||||
Savings
|
4,751 | (3,251 | ) | 1,499 | 2,484 | (34,835 | ) | (32,351 | ) | (46,710 | ) | (184,617 | ) | (231,327 | ) | |||||||||||||||||||||
Time deposits
|
2,486 | (247,677 | ) | (245,190 | ) | 416,787 | (596,021 | ) | (179,234 | ) | (41,587 | ) | (536,798 | ) | (578,385 | ) | ||||||||||||||||||||
Federal funds purchased
|
116 | (1,709 | ) | (1,594 | ) | 4,200 | (74 | ) | 4,126 | 64 | 0 | 64 | ||||||||||||||||||||||||
Demand notes issued to U.S.Treasury | - | - | - | (1,801 | ) | (7,258 | ) | (9,059 | ) | (9,429 | ) | (21,674 | ) | (31,103 | ) | |||||||||||||||||||||
Term auction facility
|
(6,082 | ) | 2,383 | (3,699 | ) | 10,120 | - | 10,120 | - | - | - | |||||||||||||||||||||||||
Interest expense
|
$ | 11,102 | $ | (281,040 | ) | $ | (269,938 | ) | $ | 483,295 | $ | (1,025,744 | ) | $ | (542,449 | ) | $ | (176,426 | ) | $ | (2,967,882 | ) | $ | (3,144,308 | ) | |||||||||||
Increase (decrease) in net interest income
|
$ | 764,172 | $ | 67,758 | $ | (1,191,050 | ) |
2010
|
2009
|
2008
|
||||||||||||||||||||||||||||||||||
Interest
|
Average
|
Interest
|
Average
|
Interest
|
Average
|
|||||||||||||||||||||||||||||||
Average
|
Paid/
|
Yield/
|
Average
|
Paid/
|
Yield/
|
Average
|
Paid/
|
Yield/
|
||||||||||||||||||||||||||||
Balance
|
Earned
|
Rate (1)
|
Balance
|
Earned
|
Rate (1)
|
Balance
|
Earned
|
Rate (1)
|
||||||||||||||||||||||||||||
Interest-Earning Assets
|
||||||||||||||||||||||||||||||||||||
Loans (2)
|
$ | 212,960,118 | $ | 10,693,501 | 5.02 | % | $ | 202,885,118 | $ | 10,154,464 | 5.01 | % | $ | 165,905,847 | $ | 10,219,052 | 6.16 | % | ||||||||||||||||||
Investment securities available for sale
|
37,410,074 | 1,459,731 | 3.90 | % | 37,325,137 | 1,503,907 | 4.03 | % | 37,210,126 | 1,609,073 | 4.32 | % | ||||||||||||||||||||||||
Federal funds sold
|
6,845,910 | 12,918 | 0.19 | % | 7,095,852 | 13,520 | 0.19 | % | 14,475,859 | 296,145 | 2.05 | % | ||||||||||||||||||||||||
Other investments
|
8,288 | 33 | 0.40 | % | 8,241 | 58 | 0.70 | % | 510,894 | 22,550 | 4.41 | % | ||||||||||||||||||||||||
Total earning assets
|
$ | 257,224,390 | $ | 12,166,183 | 4.73 | % | $ | 247,314,348 | $ | 11,671,949 | 4.72 | % | $ | 218,102,726 | $ | 12,146,820 | 5.57 | % | ||||||||||||||||||
Interest-Bearing Liabilities:
|
||||||||||||||||||||||||||||||||||||
Interest bearing transaction accounts
|
$ | 113,363,097 | $ | 207,983 | 0.18 | % | $ | 108,542,471 | $ | 228,938 | 0.21 | % | $ | 98,697,073 | $ | 564,989 | 0..57 | % | ||||||||||||||||||
Savings
|
11,557,910 | 22,849 | 0.20 | % | 9,289,183 | 21,350 | 0.23 | % | 8,860,083 | 53,701 | 0.61 | % | ||||||||||||||||||||||||
Time deposits
|
56,346,883 | 826,541 | 1.47 | % | 56,216,166 | 1,071,731 | 1.91 | % | 39,638,075 | 1,250,965 | 3.16 | % | ||||||||||||||||||||||||
Federal funds purchased
|
592,260 | 2,596 | 0.44 | % | 575,890 | 4,190 | 0.73 | % | 2,732 | 64 | 2.34 | % | ||||||||||||||||||||||||
Demand notes issued to U.S. Treasury
|
438,165 | - | 0.00 | % | 442,913 | - | 0.00 | % | 589,089 | 9,059 | 1.54 | % | ||||||||||||||||||||||||
Term auction facility
|
1,993,151 | 6,421 | 0.32 | % | 4,047,945 | 10,120 | 0.25 | % | - | - | 0.00 | % | ||||||||||||||||||||||||
Total interest bearing liabilities
|
$ | 184,291,466 | $ | 1,066,391 | 0.58 | % | $ | 179,114,568 | $ | 1,336,329 | 0.75 | % | $ | 147,787,052 | $ | 1,878,778 | 1.27 | % | ||||||||||||||||||
Net interest spread
|
4.15 | % | 3.97 | % | 4.30 | % | ||||||||||||||||||||||||||||||
Net interest margin
|
4.32 | % | 4.18 | % | 4.71 | % | ||||||||||||||||||||||||||||||
Net interest income
|
$ | 11,099,792 | $ | 10,335,620 | $ | 10,268,042 |
|
(1)
|
The effect of forgone interest income as a result of non-accrual loans was not considered in the above analysis.
|
|
(2)
|
Average loan balances include non-accrual loans and mortgage loans held for sale.
|
DECEMBER 31, 2010
|
||||||||||||||||
AMORTIZED
COST
|
GROSS
UNREALIZED
GAINS
|
GROSS
UNREALIZED
LOSSES
|
ESTIMATED
FAIR
VALUE
|
|||||||||||||
U.S. Treasury Notes
|
$ | 9,055,078 | $ | 8,784 | $ | 40,425 | $ | 9,023,437 | ||||||||
Government-Sponsored Enterprises
|
6,013,897 | 86,648 | - | 6,100,545 | ||||||||||||
Municipal Securities
|
23,913,091 | 577,462 | 234,922 | 24,255,631 | ||||||||||||
Total
|
$ | 38,982,066 | $ | 672,894 | $ | 275,347 | $ | 39,379,613 |
DECEMBER 31, 2009
|
||||||||||||||||
AMORTIZED
COST
|
GROSS
UNREALIZED
GAINS
|
GROSS
UNREALIZED
LOSSES
|
ESTIMATED
FAIR
VALUE
|
|||||||||||||
U.S. Treasury Bills
|
$ | 2,981,338 | $ | 137,256 | $ | - | $ | 3,118,594 | ||||||||
Government-Sponsored Enterprises
|
12,026,844 | 514,975 | - | 12,541,819 | ||||||||||||
Municipal Securities
|
20,615,647 | 675,572 | 89,287 | 21,201,932 | ||||||||||||
Total
|
$ | 35,623,829 | $ | 1,327,803 | $ | 89,287 | $ | 36,862,345 |
DECEMBER 31, 2008
|
||||||||||||||||
AMORTIZED
COST
|
GROSS
UNREALIZED
GAINS
|
GROSS
UNREALIZED
LOSSES
|
ESTIMATED
FAIR
VALUE
|
|||||||||||||
U.S. Treasury Bills
|
$ | 2,964,269 | $ | 262,137 | $ | - | $ | 3,226,406 | ||||||||
Government-Sponsored Enterprises
|
21,018,810 | 998,158 | - | 22,016,968 | ||||||||||||
Municipal Securities
|
12,489,652 | 183,123 | 19,899 | 12,652,876 | ||||||||||||
Total
|
$ | 36,472,731 | $ | 1,443,418 | $ | 19,899 | $ | 37,896,250 |
Book Value (in 000’s)
|
||||||||||||||||||||
Type
|
2010
|
2009
|
2008
|
2007
|
2006
|
|||||||||||||||
Commercial and industrial loans
|
$ | 52,216 | $ | 48,719 | $ | 46,840 | $ | 51,443 | $ | 53,609 | ||||||||||
Real estate loans
|
149,710 | 158,961 | 127,405 | 98,738 | 99,932 | |||||||||||||||
Loans to individuals for household, family and other personal expenditures
|
5,868 | 6,036 | 5,667 | 5,507 | 4,872 | |||||||||||||||
All other loans (including overdrafts)
|
214 | 179 | 226 | 709 | 259 | |||||||||||||||
Total Loans (excluding unearned income)
|
$ | 208,008 | $ | 213,895 | $ | 180,138 | $ | 156,397 | $ | 158,672 |
SELECTED LOAN MATURITY (IN 000’S)
|
||||||||||||||||
One year or
less
|
Over one but less
than five years
|
Over five
years
|
Total
|
|||||||||||||
Type
|
||||||||||||||||
Commercial and industrial loans
|
$ | 30,518 | $ | 19,075 | $ | 2,623 | $ | 52,216 | ||||||||
Real estate loans
|
46,115 | 55,344 | 48,251 | 149,710 | ||||||||||||
Loans to individuals for household, family and other personal expenditures
|
2,693 | 2,873 | 302 | 5,868 | ||||||||||||
All other loans (including overdrafts)
|
114 | - | 100 | 214 | ||||||||||||
Total Loans (excluding unearned income)
|
$ | 79,440 | $ | 77,292 | $ | 51,276 | $ | 208,008 |
|
1)
|
Specific Reserve analysis for impaired loans based on Financial Accounting Standards Board (FASB) ASC 310-10-35.
|
|
2)
|
General reserve analysis applying historical loss rates based on FASB ASC 450-20.
|
|
3)
|
Qualitative or environmental factors.
|
|
1)
|
Portfolio risk
|
|
2)
|
National and local economic trends and conditions
|
|
3)
|
Effects of changes in risk selection and underwriting practices
|
|
4)
|
Experience, ability and depth of lending management staff
|
|
5)
|
Industry conditions
|
|
6)
|
Effects of changes in credit concentrations
|
|
7)
|
Loan and credit administration risk
|
3 Months
|
6 Months
|
1 Year
|
||||||||||||||||||||||||||
Less
|
to Less
|
to Less
|
to Less
|
|||||||||||||||||||||||||
Than 3
|
Than 6
|
Than 1
|
Than 5
|
5 years
|
||||||||||||||||||||||||
(in 000’s)
|
1 Day
|
Months
|
Months
|
Year
|
Years
|
or More
|
Total
|
|||||||||||||||||||||
CD's and other time deposits 100,000 and over
|
$ | - | $ | 18,412 | $ | 14,052 | $ | 12,450 | $ | 609 | $ | - | $ | 45,523 | ||||||||||||||
CD's and other time deposits under 100,000
|
$ | 118 | $ | 6,087 | $ | 4,341 | $ | 5,421 | $ | 1,802 | $ | - | $ | 17,760 |
DECEMBER 31,
|
||||||||
|
2010
|
2009
|
||||||
ASSETS | ||||||||
Cash and due from banks
|
$ | 5,404,379 | $ | 5,794,540 | ||||
Interest bearing deposits in other banks
|
8,302 | 8,269 | ||||||
Federal funds sold
|
19,018,104 | 3,779,693 | ||||||
Investment securities available for sale (amortized cost of
$35,623,829 and $36,472,731 in 2010 and 2009, respectively)
|
39,379,613 | 36,862,345 | ||||||
Mortgage loans to be sold
|
5,908,316 | 3,433,460 | ||||||
Loans
|
208,025,664 | 213,882,476 | ||||||
Less: Allowance for loan losses
|
(2,938,588 | ) | (3,026,997 | ) | ||||
Net loans
|
205,087,076 | 210,855,479 | ||||||
Premises, equipment and leasehold improvements, net
|
2,436,526 | 2,516,189 | ||||||
Other real estate owned
|
659,492 | — | ||||||
Accrued interest receivable
|
1,054,791 | 1,152,240 | ||||||
Other assets
|
1,564,668 | 1,512,543 | ||||||
Total assets
|
$ | 280,521,267 | $ | 265,914,758 | ||||
LIABILITIES AND SHAREHOLDERS' EQUITY
|
||||||||
Liabilities:
|
||||||||
Deposits:
|
||||||||
Non-interest bearing demand
|
$ | 56,884,235 | $ | 48,394,049 | ||||
Interest bearing demand
|
50,394,101 | 49,257,712 | ||||||
Money market accounts
|
68,007,823 | 63,965,862 | ||||||
Certificates of deposit $100,000 and over
|
45,523,280 | 41,929,687 | ||||||
Other time deposits
|
17,760,278 | 16,943,042 | ||||||
Other savings deposits
|
11,867,258 | 9,347,328 | ||||||
Total deposits
|
250,436,975 | 229,837,680 | ||||||
Short-term borrowings
|
767,497 | 8,006,753 | ||||||
Accrued interest payable and other liabilities
|
597,913 | 503,128 | ||||||
Total liabilities
|
251,802,385 | 238,347,561 | ||||||
Commitments and contingencies (note 8)
|
||||||||
Shareholders' equity:
|
||||||||
Common stock - No par, 12,000,000 shares authorized;
Issued 4,649,317 shares at December 31, 2010 and 4,622,652 at December 31, 2009
Shares outstanding 4,429,866 at December 31, 2010 and 4,403,201 at December 31, 2009
|
— | — | ||||||
Additional paid in capital
|
28,202,939 | 23,511,560 | ||||||
Retained earnings
|
2,167,927 | 4,968,336 | ||||||
Treasury stock; 219,451 shares at December 31, 2010 and 2009
|
(1,902,439 | ) | (1,692,964 | ) | ||||
Accumulated other comprehensive income,
net of income taxes
|
250,455 | 780,265 | ||||||
Total shareholders' equity
|
28,718,882 | 27,567,197 | ||||||
Total liabilities and shareholders' equity
|
$ | 280,521,267 | $ | 265,914,758 |
YEARS ENDED DECEMBER 31,
|
||||||||||||
2010
|
2009
|
2008
|
||||||||||
Interest and fee income
|
||||||||||||
Interest and fees on loans
|
$ | 10,693,501 | $ | 10,154,464 | $ | 10,219,052 | ||||||
Interest and dividends on investment securities
|
1,459,731 | 1,503,907 | 1,609,073 | |||||||||
Other interest income
|
12,951 | 13,578 | 318,695 | |||||||||
Total interest and fee income
|
12,166,183 | 11,671,949 | 12,146,820 | |||||||||
Interest expense
|
||||||||||||
Interest on deposits
|
1,057,373 | 1,322,019 | 1,869,655 | |||||||||
Interest on short-term borrowings
|
9,018 | 14,310 | 9,123 | |||||||||
Total interest expense
|
1,066,391 | 1,336,329 | 1,878,778 | |||||||||
Net interest income
|
11,099,792 | 10,335,620 | 10,268,042 | |||||||||
Provision for loan losses
|
670,000 | 2,369,000 | 192,000 | |||||||||
Net interest income after provision for loan losses
|
10,429,792 | 7,966,620 | 10,076,042 | |||||||||
Other income
|
||||||||||||
Service charges, fees and commissions
|
1,030,218 | 1,037,056 | 972,300 | |||||||||
Mortgage banking income
|
1,004,324 | 1,020,373 | 472,326 | |||||||||
Other non-interest income
|
29,155 | 26,556 | 28,466 | |||||||||
Loss on other real estate owned
|
(13,347 | ) | — | — | ||||||||
Gain (loss) on sale of securities
|
— | 180,071 | (238 | ) | ||||||||
Total other income
|
2,050,350 | 2,264,056 | 1,472,854 | |||||||||
Other expense
|
||||||||||||
Salaries and employee benefits
|
4,568,095 | 4,242,913 | 4,168,271 | |||||||||
Net occupancy expense
|
1,316,986 | 1,280,744 | 1,350,957 | |||||||||
Other operating expenses
|
2,088,590 | 2,065,804 | 1,663,891 | |||||||||
(Recovery)provision for unfunded loans and commitments
|
— | — | (1,478 | ) | ||||||||
Total other expense
|
7,973,671 | 7,589,461 | 7,181,641 | |||||||||
Income before income tax expense
|
4,506,471 | 2,641,215 | 4,367,255 | |||||||||
Income tax expense
|
1,395,958 | 771,361 | 1,427,958 | |||||||||
Net income
|
$ | 3,110,513 | $ | 1,869,854 | $ | 2,939,297 | ||||||
Weighted average shares outstanding
|
||||||||||||
Basic
|
4,416,065 | 4,390,835 | 4,362,812 | |||||||||
Diluted
|
4,416,065 | 4,394,366 | 4,375,485 | |||||||||
Basic income per common share
|
$ | 0.70 | $ | 0.43 | $ | 0.67 | ||||||
Diluted income per common share
|
$ | 0.71 | $ | 0.43 | $ | 0.67 |
ACCUMULATED
|
||||||||||||||||||||||||
ADDITIONAL
|
OTHER
|
|||||||||||||||||||||||
COMMON
|
PAID IN
|
RETAINED
|
TREASURY
|
COMPREHENSIVE
|
||||||||||||||||||||
STOCK
|
CAPITAL
|
EARNINGS
|
STOCK
|
INCOME (LOSS)
|
TOTAL
|
|||||||||||||||||||
December 31, 2007
|
$ | — | $ | 22,978,812 | $ | 3,976,706 | $ | (1,692,964 | ) | $ | 430,016 | $ | 25,692,570 | |||||||||||
Comprehensive income:
|
||||||||||||||||||||||||
Net income
|
— | — | 2,939,297 | — | — | 2,939,297 | ||||||||||||||||||
Net unrealized gains on securities
(net of tax effect of $274,065)
|
— | — | — | — | 466,651 | 466,651 | ||||||||||||||||||
Reclassification adjustment for losses included in net income (net of tax effect of $88)
|
150 | 150 | ||||||||||||||||||||||
Total comprehensive income
|
— | — | — | — | — | 3,406,098 | ||||||||||||||||||
Exercise of Stock Options
|
— | 202,829 | — | — | — | 202,829 | ||||||||||||||||||
Stock-based compensation expense
|
— | 47,404 | — | — | — | 47,404 | ||||||||||||||||||
Cash dividends ($0.64 per common share)
|
— | — | (2,540,837 | ) | — | — | (2,540,837 | ) | ||||||||||||||||
December 31, 2008
|
$ | — | $ | 23,229,045 | $ | 4,375,166 | $ | (1,692,964 | ) | $ | 896,817 | $ | 26,808,064 | |||||||||||
Comprehensive income:
|
||||||||||||||||||||||||
Net income
|
— | — | 1,869,854 | — | — | 1,869,854 | ||||||||||||||||||
Net unrealized gains on securities
(net of tax effect of $1,826)
|
— | — | — | — | (3,105 | ) | (3,105 | ) | ||||||||||||||||
Reclassification adjustment for gains included in net income (net of tax effect of $66,624)
|
— | — | — | — | (113,447 | ) | (113,447 | ) | ||||||||||||||||
Total comprehensive income
|
— | — | — | — | — | 1,753,302 | ||||||||||||||||||
Exercise of Stock Options
|
— | 235,315 | — | — | — | 235,315 | ||||||||||||||||||
Stock-based compensation expense
|
— | 47,200 | — | — | — | 47,200 | ||||||||||||||||||
Cash dividends ($0.32 per common share)
|
— | — | (1,276,684 | ) | — | — | (1,276,684 | ) | ||||||||||||||||
December 31, 2009
|
$ | — | $ | 23,511,560 | $ | 4,968,336 | $ | (1,692,964 | ) | $ | 780,265 | $ | 27,567,197 | |||||||||||
Comprehensive income:
|
||||||||||||||||||||||||
Net income
|
— | — | 3,110,513 | — | — | 3,110,513 | ||||||||||||||||||
Net unrealized losses on securities (net of tax effect of $311,158)
|
— | — | — | — | (529,810 | ) | (529,810 | ) | ||||||||||||||||
Total comprehensive income
|
— | — | — | — | — | 2,580,703 | ||||||||||||||||||
Exercise of Stock Options
|
— | 210,811 | — | — | — | 210,811 | ||||||||||||||||||
10% Stock dividend
|
4,429,847 | (4,222,838 | ) | (209,475 | ) | (2,466 | ) | |||||||||||||||||
Stock-based compensation expense
|
— | 50,721 | — | — | — | 50,721 | ||||||||||||||||||
Cash dividends ($0.40 per common share)
|
— | — | (1,688,084 | ) | — | — | (1,688,084 | ) | ||||||||||||||||
December 31, 2010
|
$ | — | $ | 28,202,939 | $ | 2,167,927 | $ | (1,902,439 | ) | $ | 250,455 | $ | 28,718,882 |
YEARS ENDED DECEMBER 31,
|
||||||||||||
2010
|
2009
|
2008
|
||||||||||
Cash flows from operating activities:
|
||||||||||||
Net income
|
$ | 3,110,513 | $ | 1,869,854 | $ | 2,939,297 | ||||||
Adjustments to reconcile net income to net cash provided
by operating activities:
|
||||||||||||
Depreciation
|
231,922 | 217,784 | 249,444 | |||||||||
(Gain) loss on sale of securities
|
(180,071 | ) | 238 | |||||||||
Provision for loan losses
|
670,000 | 2,369,000 | 192,000 | |||||||||
Stock-based compensation expense
|
50,721 | 47,200 | 47,404 | |||||||||
Deferred income taxes
|
30,388 | (483,107 | ) | (33,458 | ) | |||||||
Net (accretion) and amortization of unearned
discounts on investment securities
|
28,915 | 45,994 | (17,235 | ) | ||||||||
Origination of mortgage loans held for sale
|
(83,127,187 | ) | (101,332,065 | ) | (39,380,636 | ) | ||||||
Proceeds from sale of mortgage loans held for sale
|
80,652,331 | 101,363,827 | 37,896,432 | |||||||||
Decrease (increase) in accrued interest
receivable and other assets
|
(1,156,908 | ) | (1,088,897 | ) | 356,188 | |||||||
(Decrease) increase in accrued interest
payable and other liabilities
|
94,785 | 68,033 | (122,456 | ) | ||||||||
Net cash provided by operating activities
|
585,480 | 2,897,552 | 2,127,218 | |||||||||
Cash flows from investing activities:
|
||||||||||||
Proceeds from calls and maturities of investment securities
available for sale
|
6,420,000 | 2,603,850 | 4,455,000 | |||||||||
Purchase of investment securities available for sale
|
(9,807,151 | ) | (11,959,800 | ) | (6,273,281 | ) | ||||||
Net decrease (increase) in loans
|
5,839,873 | (34,581,364 | ) | (23,822,197 | ) | |||||||
Purchase of premises, equipment and leasehold
improvements, net
|
(152,259 | ) | (309,497 | ) | (54,312 | ) | ||||||
Other real estate purchased
|
(101,300 | ) | — | — | ||||||||
Proceeds from sale of available for sale securities
|
183,340 | 10,338,930 | 520,000 | |||||||||
Net cash provided (used) by investing activities
|
2,382,503 | (33,907,881 | ) | (25,174,790 | ) | |||||||
Cash flows from financing activities:
|
||||||||||||
Net increase in deposit accounts
|
20,599,295 | 15,051,165 | 17,440,057 | |||||||||
Net (decrease) increase in short–term borrowings
|
(7,239,256 | ) | 7,006,753 | 72,127 | ||||||||
Dividends paid
|
(1,688,084 | ) | (1,912,940 | ) | (2,537,219 | ) | ||||||
Cash paid for fractional shares
|
(2,466 | ) | — | — | ||||||||
Stock options exercised
|
210,811 | 235,315 | 202,829 | |||||||||
Net cash (used) provided by financing activities
|
11,880,300 | 20,380,293 | 15,177,794 | |||||||||
Net increase (decrease) in cash and cash equivalents
|
14,848,283 | (10,630,036 | ) | (7,869,778 | ) | |||||||
Cash and cash equivalents at beginning of year
|
9,582,502 | 20,212,538 | 28,082,316 | |||||||||
Cash and cash equivalents at end of year
|
$ | 24,430,785 | $ | 9,582,502 | $ | 20,212,538 | ||||||
Supplemental disclosure of cash flow data:
|
||||||||||||
Cash paid during the year for:
|
||||||||||||
Interest
|
$ | 1,126,930 | $ | 1,331,796 | $ | 2,035,428 | ||||||
Income taxes
|
$ | 1,238,877 | $ | 1,174,104 | $ | 1,442,747 | ||||||
Supplemental disclosure for non-cash investing
and financing activity:
|
||||||||||||
Change in unrealized (loss) gain on securities available for
sale, net of income taxes
|
$ | (529,810 | ) | $ | (3,105 | ) | $ | 466,801 | ||||
Real estate acquired through foreclosure
|
$ | 741,470 | $ | — | $ | — | ||||||
Change in dividends payable
|
$ | — | $ | (636,256 | ) | $ | 3,618 |
1.
|
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
|
Level 1
|
Valuation is based upon quoted prices (unadjusted) in active markets for identical assets or liabilities that the Company has the ability to access. Level 1 assets and liabilities include debt and equity securities and derivative contracts that are traded in an active exchange market, as well as US Treasuries and money market funds.
|
|
Level 2
|
Valuation is based upon quoted prices for similar assets and liabilities in active markets, as well as inputs that are observable for the asset or liability (other than quoted prices), such as interest rates, foreign exchange rates, and yield curves that are observable at commonly quoted intervals. Level 2 assets and liabilities include debt securities with quoted prices that are traded less frequently than exchange-traded instruments, mortgage-backed securities, municipal bonds, corporate debt securities and derivative contracts whose value is determined using a pricing model with inputs that are observable in the market or can be derived principally from or corroborated by observable market data. This category generally includes certain derivative contracts and impaired loans.
|
|
Level 3
|
Valuation is generated from model-based techniques that use at least one significant assumption based on unobservable inputs for the asset or liability, which are typically based on an entity’s own assumptions, as there is little, if any, related market activity. In instances where the determination of the fair value measurement is based on inputs from different levels of the fair value hierarchy, the level in the fair value hierarchy within which the entire fair value measurement falls is based on the lowest level input that is significant to the fair value measurement in its entirety. The 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.
|
Quoted
Market Price
in active
markets
(Level 1)
|
Significant
Other
Observable
Inputs
(Level 2)
|
Significant
Unobservable
Inputs
(Level 3)
|
Balance
at
December 31, 2010
|
|||||||||||||
US Treasury Note
|
$ | 9,023,437 | $ | - | $ | - | $ | 9,023,437 | ||||||||
Government Sponsored Enterprises
|
$ | - | $ | 6,100,545 | $ | - | $ | 6,100,545 | ||||||||
Municipal Securities
|
$ | - | $ | 24,255,631 | $ | - | $ | 24,255,631 | ||||||||
Mortgage loans held for sale
|
$ | - | $ | 5,908,316 | $ | - | $ | 5,908,316 | ||||||||
Total
|
$ | 9,023,437 | $ | 36,264,492 | $ | - | $ | 45,287,929 |
Quoted
Market Price
in active
markets
(Level 1)
|
Significant
Other
Observable
Inputs
(Level 2)
|
Significant
Unobservable
Inputs
(Level 3)
|
Balance
at
December 31, 2009
|
|||||||||||||
US Treasury Note
|
$ | 3,118,594 | $ | - | $ | - | $ | 3,118,594 | ||||||||
Government Sponsored Enterprises
|
$ | - | $ | 12,541,819 | $ | - | $ | 12,541,819 | ||||||||
Municipal Securities
|
$ | - | $ | 21,201,932 | $ | - | $ | 21,201,932 | ||||||||
Mortgage loans held for sale
|
- | 3,433,460 | - | $ | 3,433,460 | |||||||||||
Total
|
$ | 3,118,594 | $ | 37,177,211 | $ | - | $ | 40,295,805 |
Quoted
Market Price
in active
markets
(Level 1)
|
Significant
Other
Observable
Inputs
(Level 2)
|
Significant
Unobservable
Inputs
(Level 3)
|
Balance
at
December 31, 2010
|
|||||||||||||
Impaired loans
|
$ | - | $ | 3,559,528 | $ | - | $ | 3,559,528 | ||||||||
Other real estate owned
|
$ | - | $ | 659,492 | $ | - | $ | 659,492 | ||||||||
Total
|
$ | - | $ | 4,219,020 | $ | - | $ | 4,219,020 |
Quoted
Market Price
in active
markets
(Level 1)
|
Significant
Other
Observable
Inputs
(Level 2)
|
Significant
Unobservable
Inputs
(Level 3)
|
Balance
at
December 31, 2009
|
|||||||||||||
Impaired loans
|
$ | - | $ | 2,502,002 | $ | - | $ | 2,502,002 | ||||||||
Total
|
$ | - | $ | 2,502,002 | $ | - | $ | 2,502,002 |
|
The carrying values of variable rate consumer and commercial loans and consumer and commercial loans with remaining maturities of three months or less, approximate fair value. The fair values of fixed rate consumer and commercial loans with maturities greater than three months are determined using a discounted cash flow analysis and assume the rate being offered on these types of loans by the Company at December 31, 2010 and December 31, 2009, approximate market.
|
|
The carrying amount approximates fair value due to the short-term nature of these instruments.
|
2.
|
INVESTMENT SECURITIES AVAILABLE FOR SALE
|
DECEMBER 31, 2010
|
||||||||||||||||
AMORTIZED
COST
|
GROSS
UNREALIZED
GAINS
|
GROSS
UNREALIZED
LOSSES
|
ESTIMATED
FAIR
VALUE
|
|||||||||||||
U.S. Treasury Notes
|
$ | 9,055,078 | $ | 8,784 | $ | 40,425 | $ | 9,023,437 | ||||||||
Government-Sponsored Enterprises
|
6,013,897 | 86,648 | - | 6,100,545 | ||||||||||||
Municipal Securities
|
23,913,091 | 577,462 | 234,922 | 24,255,631 | ||||||||||||
Total
|
$ | 38,982,066 | $ | 672,894 | $ | 275,347 | $ | 39,379,613 |
DECEMBER 31, 2009
|
||||||||||||||||
AMORTIZED
COST
|
GROSS
UNREALIZED
GAINS
|
GROSS
UNREALIZED
LOSSES
|
ESTIMATED
FAIR
VALUE
|
|||||||||||||
U.S. Treasury Notes
|
$ | 2,981,338 | $ | 137,256 | $ | - | $ | 3,118,594 | ||||||||
Government-Sponsored Enterprises
|
12,026,844 | 514,975 | - | 12,541,819 | ||||||||||||
Municipal Securities
|
20,615,647 | 675,572 | 89,287 | 21,201,932 | ||||||||||||
Total
|
$ | 35,623,829 | $ | 1,327,803 | $ | 89,287 | $ | 36,862,345 |
AMORTIZED
COST
|
ESTIMATED
FAIR
VALUE
|
|||||||
Due in one year or less
|
$ | 9,619,604 | $ | 9,719,581 | ||||
Due in one year to five years
|
9,465,147 | 9,608,773 | ||||||
Due in five years to ten years
|
8,832,440 | 9,137,645 | ||||||
Due in ten years and over
|
11,064,875 | 10,913,614 | ||||||
Total
|
$ | 38,982,066 | $ | 39,379,613 |
DECMBER 31, 2010
|
||||||||||||||||||||||||
Less than 12 months
|
12 months or longer
|
Total
|
||||||||||||||||||||||
Descriptions of Securities
|
Fair
Value
|
Unrealized
Losses
|
Fair
Value
|
Unrealized
Losses
|
Fair
Value
|
Unrealized
Losses
|
||||||||||||||||||
U.S. Treasury Notes
|
$ | 6,015,469 | 40,425 | $ | - | - | $ | 6,015,469 | $ | 40,425 | ||||||||||||||
Government-Sponsored Enterprises
|
- | - | - | - | - | - | ||||||||||||||||||
Municipal Securities
|
8,468,976 | 234,922 | - | - | 8,468,976 | 234,922 | ||||||||||||||||||
Total
|
$ | 14,484,445 | 275,347 | $ | - | - | $ | 14,484,445 | $ | 275,347 |
DECMBER 31, 2009
|
||||||||||||||||||||||||
Less than 12 months
|
12 months or longer
|
Total
|
||||||||||||||||||||||
Descriptions of Securities
|
Fair
Value
|
Unrealized
Losses
|
Fair
Value
|
Unrealized
Losses
|
Fair
Value
|
Unrealized
Losses
|
||||||||||||||||||
U.S. Treasury Notes
|
$ | - | - | $ | - | - | $ | - | $ | - | ||||||||||||||
Government-Sponsored Enterprises
|
- | - | - | - | - | - | ||||||||||||||||||
Municipal Securities
|
2,330,893 | 89,287 | - | - | 2,330,893 | 89,287 | ||||||||||||||||||
Total
|
$ | 2,330,893 | 89,287 | $ | - | - | $ | 2,330,893 | $ | 89,287 |
3.
|
LOANS
|
DECEMBER 31,
|
||||||||
2010
|
2009
|
|||||||
Commercial loans
|
$ | 50,601,639 | $ | 46,086,649 | ||||
Commercial real estate
|
108,004,910 | 117,044,598 | ||||||
Residential mortgage
|
16,071,839 | 18,682,428 | ||||||
Consumer loans
|
5,361,197 | 5,534,351 | ||||||
Personal banklines
|
27,734,166 | 26,269,420 | ||||||
Other
|
234,607 | 277,899 | ||||||
208,008,358 | 213,895,345 | |||||||
Deferred loan fees (Net)
|
17,306 | (12,869 | ) | |||||
Allowance for loan losses
|
(2,938,588 | ) | (3,026,997 | ) | ||||
Loans, net
|
$ | 205,087,076 | $ | 210,855,479 |
YEARS ENDED DECEMBER 31,
|
||||||||||||
2010
|
2009
|
2008
|
||||||||||
Balance at beginning of year
|
$ | 3,026,997 | $ | 1,429,835 | $ | 1,335,099 | ||||||
Provision for loan losses
|
670,000 | 2,369,000 | 192,000 | |||||||||
Charge offs
|
(778,820 | ) | (777,166 | ) | (114,313 | ) | ||||||
Recoveries
|
20,411 | 5,328 | 17,049 | |||||||||
Balance at end of year
|
$ | 2,938,588 | $ | 3,026,997 | $ | 1,429,835 |
Loans Receivable on Non-Accrual
|
||||
Commercial
|
$ | 6,702 | ||
Commercial
Real Estate:
|
||||
Commercial
Real Estate -
Construction
|
- | |||
Commercial
Real Estate - Other
|
938,626 | |||
Total
|
$ | 945,328 |
2010
|
30-59
Days
Past Due
|
60-89
Days
Past
Due
|
Greater
Than 90
Days
|
Total Past
Due
|
Current
|
Total Loans
Receivable
|
Recorded
Investment >
90 Days and
Accruing
|
|||||||||||||||||||||
Commercial
|
$ | 7,056 | 8,038 | - | 15,094 | 50,586,545 | 50,601,639 | - | ||||||||||||||||||||
Commercial Real Estate:
|
||||||||||||||||||||||||||||
Commercial Real Estate -Construction
|
- | - | - | - | - | - | - | |||||||||||||||||||||
Commercial Real Estate -Other
|
134,072 | 589,225 | 723,297 | 107,281,613 | 108,004,910 | - | ||||||||||||||||||||||
Consumer:
|
||||||||||||||||||||||||||||
Consumer-Credit Cards
|
- | - | - | - | - | - | - | |||||||||||||||||||||
Consumer-Other
|
309,684 | 5,864 | 315,548 | 49,086,261 | 49,401,809 | - | ||||||||||||||||||||||
Consumer-Subprime
|
- | - | - | - | - | - | - | |||||||||||||||||||||
Finance Leases
|
- | - | - | - | - | - | - | |||||||||||||||||||||
Total
|
$ | 450,812 | 13,902 | 589,225 | 1,053,939 | 206,954,419 | 208,008,358 | - |
Impaired and Restructured Loans
For the Year Ended December 31, 2010
|
||||||||||||||||||||
With no related
allowance
recorded:
|
Recorded
Investment
|
Unpaid
Principal
Balance
|
Related
Allowance
|
Average
Recorded
Investment
|
Interest Income
Recognized
|
|||||||||||||||
Commercial
|
$ | 83,350 | $ | 6,702 | $ | - | $ | 12,230 | $ | 33,997 | ||||||||||
Commercial
Real Estate
|
2,317,543 | 2,020,682 | - | 833,939 | 391,574 | |||||||||||||||
Consumer
Real Estate
|
230,250 | 230,022 | - | 171,179 | 43,112 | |||||||||||||||
Total
|
$ | 2,631,143 | $ | 2,257,406 | $ | - | $ | 1,017,348 | $ | 468,683 | ||||||||||
With an allowance recorded:
|
||||||||||||||||||||
Commercial
|
$ | 1,211,163 | $ | 1,207,163 | $ | 1,207,163 | $ | 807,846 | $ | 41,714 | ||||||||||
Commercial
Real Estate
|
126,000 | 94,959 | 86,084 | 87,431 | 17,702 | |||||||||||||||
Consumer
Real Estate
|
- | - | - | - | - | |||||||||||||||
Total
|
$ | 1,337,163 | $ | 1,302,122 | $ | 1,293,247 | $ | 895,277 | $ | 59,416 |
2010
|
Commercial
|
Commercial
Real Estate
Construction
|
Commercial
Real Estate
Other
|
Residential -Real Estate
|
Consumer -
Other
|
|||||||||||||||
Pass
|
$ | 44,267,813 | $ | 2,226,325 | $ | 97,949,596 | 47,631,860 | 5,207,215 | ||||||||||||
Watch
|
3,070,186 | 475,225 | 3,516,001 | 338,614 | 363,798 | |||||||||||||||
OAEM
|
1,934,919 | - | 116,277 | 379,092 | 234,007 | |||||||||||||||
Sub-Standard
|
1,349,738 | - | 3,721,487 | 1,071,100 | 79,985 | |||||||||||||||
Doubtful
|
- | - | - | - | 2,431 | |||||||||||||||
Loss
|
- | - | - | - | - | |||||||||||||||
- | - | - | ||||||||||||||||||
Total
|
$ | 50,622,656 | $ | 2,701,550 | $ | 105,303,361 | 49,420,666 | 5,887,436 |
SUMMARY OF LOAN LOSS EXPERIENCE
|
||||||||||||||||||||
Year Ended
|
||||||||||||||||||||
December 31,
|
||||||||||||||||||||
2010
|
2009
|
2008
|
2007
|
2006
|
||||||||||||||||
Allowance for loan losses, beginning of year
|
$ | 3,026,997 | $ | 1,429,835 | $ | 1,335,099 | $ | 1,294,994 | $ | 1,017,175 | ||||||||||
Charge-offs:
|
||||||||||||||||||||
Commercial
|
87,249 | 676,660 | 34,878 | 14,535 | 9,164 | |||||||||||||||
Consumer
|
55,258 | 66,219 | 3,470 | 4,336 | 15,692 | |||||||||||||||
Real estate
|
636,313 | 34,287 | 75,965 | - | - | |||||||||||||||
Other
|
- | - | - | 10,831 | - | |||||||||||||||
Total charge-offs
|
778,820 | 777,166 | 114,313 | 29,702 | 24,856 | |||||||||||||||
Recoveries:
|
||||||||||||||||||||
Commercial
|
14,427 | 2,250 | 10,173 | 164 | 50,227 | |||||||||||||||
Consumer
|
500 | 895 | 570 | 49,756 | 4,233 | |||||||||||||||
Real estate
|
5,484 | 2,183 | 6,306 | - | - | |||||||||||||||
Other
|
- | - | - | 683 | 8,215 | |||||||||||||||
Total recoveries
|
20,411 | 5,328 | 17,049 | 50,603 | 62,675 | |||||||||||||||
Net charge-offs (recoveries)
|
758,409 | 771,838 | 97,264 | (20,901 | ) | (37,819 | ) | |||||||||||||
Additions (recovery) to reserve through provision expense
|
670,000 | 2,369,000 | 192,000 | 40,000 | 240,000 | |||||||||||||||
Adjustment for unfunded lending commitments
|
- | - | - | (20,796 | ) | - | ||||||||||||||
Allowance for loan losses, end of year
|
$ | 2,938,588 | $ | 3,026,997 | $ | 1,429,835 | $ | 1,335,099 | $ | 1,294,994 | ||||||||||
Ratio of net charge-offs (recoveries)during the period to average loans outstanding during the period
|
0.36 | % | 0.38 | % | 0.06 | % | (0.01 | )% | (0.02 | )% | ||||||||||
Reserve for unfunded lending commitments
|
$ | 20,825 | $ | 20,825 | $ | 22,303 | $ | - | $ | - | ||||||||||
Adjustment for unfunded lending commitments
|
- | - | - | 20,796 | - | |||||||||||||||
(Recovery) provisions for unfunded lending commitments
|
- | - | (1,478 | ) | 1,507 | - | ||||||||||||||
Reserve for unfunded lending commitments, end of year
|
$ | 20,825 | $ | 20,825 | $ | 20,825 | $ | 22,303 | $ | - |
2010
|
Commercial
|
Commercial
Real Estate
|
Consumer
|
Residential
|
Finance
Leases
|
Total
|
Unallocated
|
|||||||||||||||||||||
Allowance
for Loan
Losses
|
||||||||||||||||||||||||||||
Beginning Balance
|
$ | 1,219,991 | $ | 349,939 | $ | - | $ | 932,071 | $ | - | $ | 3,026,997 | $ | 842,158 | ||||||||||||||
Charge-offs
|
417,078 | 21,356 | 55,257 | 285,128 | - | 778,819 | ||||||||||||||||||||||
Recoveries
|
14,427 | 5,484 | 500 | 0 | - | 20,411 | ||||||||||||||||||||||
Provisions
|
396,525 | 1,781,574 | 54,757 | (416,921 | ) | - | 670,000 | (249,511 | ) | |||||||||||||||||||
Ending Balance
|
1,213,865 | 2,115,641 | - | 230,022 | - | 2,938,588 | 592,647 | |||||||||||||||||||||
Ending Balances:
|
||||||||||||||||||||||||||||
Individually evaluated for impairment
|
1,213,865 | 2,115,641 | - | 230,022 | - | 3,559,528 | ||||||||||||||||||||||
Collectively evaluated for impairment
|
$ | 49,366,755 | $ | 105,889,267 | $ | 5,631,525 | $ | 49,102,706 | $ | - | $ | 209,990,253 | $ |
4.
|
PREMISES, EQUIPMENT AND LEASEHOLD IMPROVEMENTS
|
DECEMBER 31,
|
||||||||
2010
|
2009
|
|||||||
Bank buildings
|
$ | 1,813,277 | $ | 1,797,577 | ||||
Land
|
838,075 | 838,075 | ||||||
Leasehold purchase
|
30,000 | 30,000 | ||||||
Lease improvements
|
424,760 | 405,783 | ||||||
Equipment
|
2,948,691 | 3,486,206 | ||||||
6,054,803 | 6,557,641 | |||||||
Accumulated depreciation
|
(3,618,277 | ) | (4,041,452 | ) | ||||
Total
|
$ | 2,436,526 | $ | 2,516,189 |
5.
|
DEPOSITS
|
2011
|
$ | 60,872,666 | ||
2012
|
- | |||
2013
|
1,954,277 | |||
2014
|
- | |||
2015 and thereafter
|
456,615 | |||
$ | 63,283,558 |
6.
|
SHORT-TERM BORROWINGS
|
7.
|
INCOME TAXES
|
YEARS ENDED DECEMBER 31,
|
||||||||||||
2010
|
2009
|
2008
|
||||||||||
Income tax expense
|
$ | 1,395,958 | $ | 771,361 | $ | 1,427,958 | ||||||
Stockholders’ equity, for unrealized gains (losses) on securities available for sale
|
(311,158 | ) | (68,451 | ) | 274,153 | |||||||
Total
|
$ | 1,084,800 | $ | 702,910 | $ | 1,702,111 |
YEAR ENDED DECEMBER 31,
|
||||||||||||
2010
|
Current
|
Deferred
|
Total
|
|||||||||
U.S. Federal
|
$ | 1,244,706 | $ | 12,409 | $ | 1,257,115 | ||||||
State and local
|
138,843 | - | 138,843 | |||||||||
$ | 1,383,549 | $ | 12,409 | $ | 1,395,958 |
YEAR ENDED DECEMBER 31,
|
||||||||||||
2009
|
||||||||||||
U.S. Federal
|
$ | 1,170,075 | $ | (483,397 | ) | $ | 686,678 | |||||
State and local
|
84,683 | - | 84,683 | |||||||||
$ | 1,254,748 | $ | (483,397 | ) | $ | 771,361 |
YEAR ENDED DECEMBER 31,
2008
|
||||||||||||
U.S. Federal
|
$ | 1,327,664 | $ | (33,458 | ) | $ | 1,294,206 | |||||
State and local
|
133,752 | - | 133,752 | |||||||||
$ | 1,461,416 | $ | (33,458 | ) | $ | 1,427,958 |
YEARS ENDED
|
||||||||||||
DECEMBER 31,
|
||||||||||||
2010
|
2009
|
2008
|
||||||||||
Computed “expected” tax expense
|
$ | 1,532,200 | $ | 898,013 | $ | 1,492,123 | ||||||
Increase (reduction) in income taxes
|
||||||||||||
Resulting from:
|
||||||||||||
Tax exempt interest income
|
(270,759 | ) | (212,594 | ) | (132,788 | ) | ||||||
State income tax, net of federal benefit
|
91,637 | 55,891 | 88,276 | |||||||||
Other, net
|
42,880 | 30,051 | (19,653 | ) | ||||||||
$ | 1,395,958 | $ | 771,361 | $ | 1,427,958 |
DECEMBER 31,
|
||||||||
2010
|
2009
|
|||||||
Deferred tax assets:
|
||||||||
Deferred loan fees
|
$ | - | $ | 4,375 | ||||
State Net Operating Loss Carryforward
|
22,400 | 18,579 | ||||||
Bad Debt Reserves
|
930,369 | 960,428 | ||||||
Other
|
23,637 | 15,578 | ||||||
Total gross deferred tax assets
|
976,406 | 998,960 | ||||||
Less valuation allowance
|
(22,400 | ) | (18,579 | ) | ||||
Net deferred tax assets
|
954,006 | 980,381 | ||||||
Deferred tax liabilities:
|
||||||||
Prepaid expenses
|
(23,067 | ) | (17,510 | ) | ||||
Unrealized gain on securities
|
||||||||
available for sale
|
(147,093 | ) | (458,251 | ) | ||||
Deferred loan fees
|
(5,884 | ) | ||||||
Fixed assets, principally due to
|
||||||||
differences in depreciation
|
(59,692 | ) | (67,304 | ) | ||||
Other-Bond Accretion
|
(62,589 | ) | (80,384 | ) | ||||
Total gross deferred tax liabilities
|
(298,325 | ) | (623,449 | ) | ||||
Net deferred tax (liability) asset
|
$ | 655,681 | $ | 356,932 |
8.
|
COMMITMENTS AND CONTINGENCIES
|
2011
|
$ | 530,286 | ||
2012
|
533,015 | |||
2013
|
536,282 | |||
2014
|
522,169 | |||
2015
|
535,966 | |||
2016 and thereafter
|
708,673 | |||
Total
|
$ | 3,366,390 |
9.
|
RELATED PARTY TRANSACTIONS
|
10.
|
OTHER EXPENSE
|
YEARS ENDED DECEMBER 31,
|
||||||||||||
2010
|
2009
|
2008
|
||||||||||
Advertising and business development
|
$ | 10,658 | $ | 14,259 | $ | 32,594 | ||||||
Supplies
|
111,428 | 108,027 | 119,203 | |||||||||
Telephone and postage
|
166,376 | 169,785 | 168,158 | |||||||||
Insurance
|
43,594 | 48,710 | 45,320 | |||||||||
Professional fees
|
431,990 | 410,659 | 397,276 | |||||||||
Data processing services
|
351,101 | 290,420 | 295,305 | |||||||||
State and FDIC insurance and fees
|
363,339 | 472,028 | 113,091 | |||||||||
Courier service
|
179,407 | 178,105 | 180,665 | |||||||||
Other
|
430,697 | 373,811 | 312,279 | |||||||||
$ | 2,088,590 | $ | 2,065,804 | $ | 1,663,891 |
11.
|
STOCK
I
NCENTIVE PLAN AND EMPLOYEE STOCK OWNERSHIP PLAN AND TRUST
|
2010
|
2009
|
2008
|
||||||||||||||||||||||
Shares
|
Weighted
Average
Exercise
Price
|
Shares
|
Weighted
Average
Exercise
Price
|
Shares
|
Weighted
Average
Exercise
Price
|
|||||||||||||||||||
Outstanding, January 1
|
86,995 | $ | 10.61 | 115,937 | $ | 9.99 | 150,439 | $ | 10.05 | |||||||||||||||
Granted
|
33,000 | 10.77 | - | - | 4,950 | 12.90 | ||||||||||||||||||
Expired
|
(831 | ) | 8.54 | - | - | (14,575 | ) | 14.69 | ||||||||||||||||
Expired
|
(750 | ) | 10.77 | |||||||||||||||||||||
Exercised
|
(1,330 | ) | 8.54 | (1,452 | ) | 8.54 | ||||||||||||||||||
Exercised
|
(28,253 | ) | 8.11 | (27,490 | ) | 8.11 | (24,876 | ) | 8.15 | |||||||||||||||
Outstanding, December 31
|
88,831 | $ | 11.51 | 86,995 | $ | 10.61 | 115,937 | $ | 9.99 |
Exercise
Price: |
Number of
Options
Outstanding
|
Weighted
Average
Remaining
Contractual
Life
|
Weighted
Average
Exercise
Price
|
Intrinsic
Value of
Outstanding
Options
|
Number of
Options
Exercisable
|
Weighted
Average
Exercise
Price
|
Intrinsic
Value of
Exercisable
Options
|
||||||||||||||||||||||
$ | 8.11 | 13,134 | .4 | $ | 8.11 | $ | 46.626 | 13,134 | $ | 8.11 | $ | 46,626 | |||||||||||||||||
$ | 8.54 | 11.272 | 2.4 | $ | 8.54 | $ | 49,549 | 4,609 | $ | 8.54 | $ | 14,380 | |||||||||||||||||
$ | 15.11 | 18,975 | 5.4 | $ | 15.11 | $ | - | - | $ | - | $ | - | |||||||||||||||||
$ | 14.54 | 5,500 | 6.0 | $ | 14.54 | $ | - | - | $ | - | $ | - | |||||||||||||||||
$ | 14.10 | 5,500 | 6.5 | $ | 14.10 | $ | - | - | $ | - | $ | - | |||||||||||||||||
$ | 12.90 | 2,200 | 7.2 | 12.90 | |||||||||||||||||||||||||
$ | 10.77 | 32,250 | 9.7 | 10.77 | $ | - | - | $ | - | $ | - | ||||||||||||||||||
88,831 | 3.69 | $ | 11.51 | $ | 96,175 | 17,743 | $ | 8.30 | $ | 61,006 |
Nonvested Shares:
|
Shares
|
Weighted
Average Grant-
Date Fair Value
|
||||||
Nonvested at beginning of year
|
71,831 | $ | 3.46 | |||||
Granted
|
33,000 | 6.13 | ||||||
Vested
|
(32,166 | ) | 2.85 | |||||
Forfeited
|
(831 | ) | 2.86 | |||||
Forfeited
|
(750 | ) | 6.13 | |||||
Nonvested at end of year
|
71,084 | $ | 5.19 |
12.
|
DIVIDENDS
|
13.
|
INCOME PER COMMON SHARE
|
|
Basic earnings per share are computed by dividing net income by the weighted-average number of common shares outstanding. Diluted earnings per share are computed by dividing net income by the weighted-average number of common shares and potential common shares outstanding. Potential common shares consist of dilutive stock options determined using the treasury stock method and the average market price of common stock. All share and per share data have been retroactively restated for all common stock dividends and distributions including the 10% stock dividend declared on August 26, 2010.
|
|
The following is a summary of the reconciliation of average shares outstanding for the years ended December 31:
|
2010
|
2009
|
2008
|
||||||||||||||||||||||
Basic
|
Diluted
|
Basic
|
Diluted
|
Basic
|
Diluted
|
|||||||||||||||||||
Weighted average shares outstanding
|
4,416,065 | 4,416,065 | 4,390,835 | 4,390,835 | 4,362,812 | 4,362,812 | ||||||||||||||||||
Effect of dilutive securities:
|
||||||||||||||||||||||||
Stock options
|
- | - | - | 3,531 | - | 12,673 | ||||||||||||||||||
Average shares outstanding
|
4,416,065 | 4,416,065 | 4,390,835 | 4,394,366 | 4,362,812 | 4,375,485 |
14.
|
REGULATORY CAPITAL REQUIREMENTS
|
To Be Well
|
||||||||||||||||||||||||
Capitalized Under
|
||||||||||||||||||||||||
For Capital
|
Prompt Corrective
|
|||||||||||||||||||||||
Actual
|
Adequacy Purposes
|
Action Provisions
|
||||||||||||||||||||||
(Dollars in Thousands)
|
Amount
|
Ratio
|
Amount
|
Ratio
|
Amount
|
Ratio
|
||||||||||||||||||
As of December 31, 2010:
|
||||||||||||||||||||||||
Total capital to risk-weighted assets:
|
||||||||||||||||||||||||
Company
|
$ | 31,423 | 13.30 | % | $ | 18,908 | 8.00 | % | $ | N/A | N/A | |||||||||||||
Bank
|
$ | 31,200 | 13.20 | % | $ | 18,903 | 8.00 | % | $ | 23,628 | 10.00 | % | ||||||||||||
Tier 1 capital to risk-weighted assets:
|
||||||||||||||||||||||||
Company
|
$ | 28,469 | 12.05 | % | $ | 9,454 | 4.00 | % | $ | N/A | N/A | |||||||||||||
Bank
|
$ | 28,246 | 11.95 | % | $ | 9,451 | 4.00 | % | $ | 14,177 | 6.00 | % | ||||||||||||
Tier 1 capital to average assets:
|
||||||||||||||||||||||||
Company
|
$ | 28,469 | 10.40 | % | $ | 10,949 | 4.00 | % | $ | N/A | N/A | |||||||||||||
Bank
|
$ | 28,246 | 10.32 | % | $ | 10,947 | 4.00 | % | $ | 13,684 | 5.00 | % |
To Be Well
|
||||||||||||||||||||||||
Capitalized Under
|
||||||||||||||||||||||||
For Capital
|
Prompt Corrective
|
|||||||||||||||||||||||
Actual
|
Adequacy Purposes
|
Action Provisions
|
||||||||||||||||||||||
(Dollars in Thousands)
|
Amount
|
Ratio
|
Amount
|
Ratio
|
Amount
|
Ratio
|
||||||||||||||||||
As of December 31, 2009:
|
||||||||||||||||||||||||
Total capital to risk-weighted assets:
|
||||||||||||||||||||||||
Company
|
$ | 29,743 | 12.58 | % | $ | 18,910 | 8.00 | % | $ | N/A | N/A | |||||||||||||
Bank
|
$ | 29,670 | 12.55 | % | $ | 18,907 | 8.00 | % | $ | 23,634 | 10.00 | % | ||||||||||||
Tier 1 capital to risk-weighted assets:
|
||||||||||||||||||||||||
Company
|
$ | 26,787 | 11.33 | % | $ | 9,455 | 4.00 | % | $ | N/A | N/A | |||||||||||||
Bank
|
$ | 26,715 | 11.30 | % | $ | 9,455 | 4.00 | % | $ | 14,180 | 6.00 | % | ||||||||||||
Tier 1 capital to average assets:
|
||||||||||||||||||||||||
Company
|
$ | 26,787 | 10.02 | % | $ | 10,695 | 4.00 | % | $ | N/A | N/A | |||||||||||||
Bank
|
$ | 26,715 | 9.99 | % | $ | 10,694 | 4.00 | % | $ | 13,368 | 5.00 | % |
15.
|
DISCLOSURES REGARDING FAIR VALUE OF FINANCIAL INSTRUMENTS
|
2010
|
||||||||
Carrying
Amount
|
Estimated
Fair Value
|
|||||||
Cash and due from banks
|
$ | 5,404,379 | $ | 5,404,379 | ||||
Interest bearing deposits in other banks
|
8,302 | 8,302 | ||||||
Federal funds sold
|
19,018,104 | 19,018,104 | ||||||
Investments available for sale
|
39,379,613 | 39,379,613 | ||||||
Loans (1)
|
213,916,674 | 218,670,423 | ||||||
Deposits
|
250,436,975 | 250,750,331 | ||||||
Short-term borrowings
|
767,497 | 767,497 |
2009
|
||||||||
Carrying
Amount
|
Estimated
Fair Value
|
|||||||
Cash and due from banks
|
$ | 5,794,540 | $ | 5,794,540 | ||||
Interest bearing deposits in other banks
|
8,269 | 8,269 | ||||||
Federal funds sold
|
3,779,693 | 3,779,693 | ||||||
Investment securities available for sale
|
36,862,345 | 36,862,345 | ||||||
Loans (1)
|
217,325,936 | 222,968,621 | ||||||
Deposits
|
229,837,680 | 230,081,062 | ||||||
Short-term borrowings
|
8,006,753 | 8,006,753 |
|
(1) Includes mortgage loans to be sold
|
16.
|
BANK OF SOUTH CAROLINA CORPORATION - PARENT COMPANY
|
2010
|
2009
|
|||||||
Assets
|
||||||||
Cash
|
$ | 160,497 | $ | 39,626 | ||||
Investment in wholly-owned bank subsidiary
|
28,496,885 | 27,495,175 | ||||||
Other assets
|
61,500 | 32,396 | ||||||
Total assets
|
$ | 28,718,882 | $ | 27,567,197 | ||||
Liabilities and shareholders’ equity
|
||||||||
Shareholders’ equity
|
28,718,882 | 27,567,197 | ||||||
Total liabilities and shareholders' equity
|
$ | 28,718,882 | $ | 27,567,197 |
2010
|
2009
|
2008
|
||||||||||
Interest income
|
$ | 374 | $ | 540 | $ | 4,110 | ||||||
Net operating expenses
|
(136,384 | ) | (123,639 | ) | (148,182 | ) | ||||||
Dividends received from bank
|
1,715,000 | 905,000 | 2,240,000 | |||||||||
Equity in undistributed earnings of subsidiary
|
1,531,523 | 1,087,953 | 843,369 | |||||||||
Net income
|
$ | 3,110,513 | $ | 1,869,854 | $ | 2,939,297 |
2010
|
2009
|
2008
|
||||||||||
Cash flows from operating activities:
|
||||||||||||
Net income
|
$ | 3,110,513 | $ | 1,869,854 | $ | 2,939,297 | ||||||
Stock-based compensation expense
|
50,721 | 47,200 | 47,404 | |||||||||
Equity in undistributed earnings of subsidiary
|
(1,531,522 | ) | (1,087,953 | ) | (843,369 | ) | ||||||
Increase in other assets
|
(29,103 | ) | (25,521 | ) | — | |||||||
Net cash provided by operating activities
|
1,600,609 | 803,580 | 2,143,332 | |||||||||
Cash flows from financing activities:
|
||||||||||||
Dividends paid
|
(1,688,084 | ) | (1,912,940 | ) | (2,537,219 | ) | ||||||
Fractional shares paid
|
(2,466 | ) | ||||||||||
Stock options exercised
|
210,811 | 235,315 | 202,829 | |||||||||
Net cash used by financing activities
|
(1,479,739 | ) | (1,677,625 | ) | (2,334,390 | ) | ||||||
Net (decrease) increase in cash
|
120,870 | (874,045 | ) | (191,058 | ) | |||||||
Cash at beginning of year
|
39,626 | 913,671 | 1,104,729 | |||||||||
Cash at end of year
|
$ | 160,497 | $ | 39,626 | $ | 913,671 | ||||||
Change in dividend payable
|
$ | - | $ | (636,256 | ) | $ | 3,618 |
17.
|
QUARTERLY RESULTS OF OPERATIONS (UNAUDITED)
|
2010
|
||||||||||||||||
FOURTH
|
THIRD
|
SECOND
|
FIRST
|
|||||||||||||
Total interest and fee income
|
$ | 3,112,476 | $ | 3,059,416 | $ | 2,954,837 | $ | 3,039,454 | ||||||||
Total interest expense
|
246,524 | 254,217 | 272,846 | 292,804 | ||||||||||||
Net interest income
|
2,865,952 | 2,805,199 | 2,681,991 | 2,746,650 | ||||||||||||
Provision for loan losses
|
250,000 | 190,000 | 110,000 | 120,000 | ||||||||||||
Net interest income after provisions for loan losses
|
2,615,952 | 2,615,199 | 2,571,991 | 2,626,650 | ||||||||||||
Other income
|
595,021 | 560,989 | 473,587 | 420,753 | ||||||||||||
Other expense
|
1,998,711 | 1,998,737 | 1,990,557 | 1,985,666 | ||||||||||||
Income before income tax expense
|
1,212,262 | 1,177,451 | 1,055,021 | 1,061,737 | ||||||||||||
Income tax expense
|
379,059 | 355,850 | 326,179 | 334,870 | ||||||||||||
Net income
|
$ | 833,203 | $ | 821,601 | $ | 728,842 | $ | 726,867 | ||||||||
Basic income per common share
|
$ | .19 | $ | .19 | $ | .16 | $ | .16 | ||||||||
Diluted income per common share
|
$ | .19 | $ | .19 | $ | .16 | $ | .16 |
2009
|
||||||||||||||||
FOURTH
|
THIRD
|
SECOND
|
FIRST
|
|||||||||||||
Total interest and fee income
|
$ | 3,071,012 | $ | 2,971,678 | $ | 2,846,588 | $ | 2,782,671 | ||||||||
Total interest expense
|
319,825 | 345,117 | 340,649 | 330,738 | ||||||||||||
Net interest income
|
2,751,187 | 2,626,561 | 2,505,939 | 2,451,933 | ||||||||||||
Provision for loan losses
|
1,095,000 | 1,110,000 | 113,000 | 51,000 | ||||||||||||
Net interest income after provisions for loan losses
|
1,656,187 | 1,516,561 | 2,392,939 | 2,400,933 | ||||||||||||
Other income
|
500,990 | 515,102 | 656,662 | 591,302 | ||||||||||||
Other expense
|
1,951,017 | 1,858,576 | 1,996,912 | 1,782,956 | ||||||||||||
Income before income tax expense
|
206,160 | 173,087 | 1,052,689 | 1,209,279 | ||||||||||||
Income tax (benefit) expense
|
(64,810 | ) | 36,566 | 365,228 | 434,377 | |||||||||||
Net income
|
$ | 270,970 | $ | 136,521 | $ | 687,461 | $ | 774,902 | ||||||||
Basic income per common share
|
$ | .06 | $ | .03 | $ | .16 | $ | .18 | ||||||||
Diluted income per common share
|
$ | .06 | $ | .03 | $ | .16 | $ | .18 |
Plan Category
|
Number of Securities to be
Issued Upon Exercise of
Outstanding Options
Warrants and Rights
|
Weighted-Average Exercise
Price of Outstanding
Options, Warrants and Rights
|
Number of Securities
Remaining Available for
Future Issuance Under Equity
Compensation Plans
1
|
|||||||||
1998 Omnibus Stock Incentive Plan approved by Shareholders
2
|
56,656 | $ | 11.93 | - | ||||||||
2010 Omnibus Stock Incentive Plan approved by Shareholders
3
|
32,250 | 10.77 | 267,750 | |||||||||
Total
|
88,906 | $ | 11.51 | 267,750 |
1
|
In accordance with the 1998 Omnibus Stock Incentive Plan, no options may be granted under this Plan after April 14, 2008, due to its expiration. Options granted before this date shall remain valid in accordance with their terms. On May 14, 2011, 12,401 options to purchase stock will expire if not exercised, under the 1998 Omnibus Stock Incentive Plan.
|
2
|
The number of securities to be issued upon exercise of the outstanding options represents the total outstanding options under the 1998 Omnibus Stock Incentive Plan. As per the agreement the above options shall remain valid in accordance with their terms.
|
3
|
The 2010 Omnibus Stock Incentive Plan was approved by the Shareholders at the 2010 Annual Meeting. There were 300,000 shares reserved under this Plan. On September 24, 2010, 33,000 options were granted to employees (other than Executive Officers) with 750 forfeited with the resignation of one employee.
|
1.
|
The Consolidated Financial Statements and Report of Independent Auditors are included in this Form 10-K and listed on pages as indicated.
|
Page
|
|||||
(1)
|
Report of Independent Registered Public Accounting Firm
|
31 | |||
(2)
|
Consolidated Balance Sheets
|
32 | |||
(3)
|
Consolidated Statements of Operations
|
33 | |||
(5)
|
Consolidated Statements of Shareholders' Equity and Comprehensive Income
|
34 | |||
(5)
|
Consolidated Statements of Cash Flows
|
35 | |||
(6)
|
Notes to Consolidated Financial Statements
|
36 -64 |
2.
|
Exhibits
|
|
2.0
|
Plan of Reorganization (Filed with 1995 10-KSB)
|
|
3.0
|
Articles of Incorporation of the Registrant (Filed with 1995 10-KSB)
|
|
3.1
|
By-laws of the Registrant (Filed with 1995 10-KSB)
|
|
4.0
|
2011 Proxy Statement (Incorporated herein)
|
|
10.0
|
Lease Agreement for 256 Meeting Street (Filed with 1995 10-KSB)
|
|
10.1
|
Sublease Agreement for Parking Facilities at 256 Meeting Street (Filed with 1995 10-KSB)
|
|
10.2
|
Lease Agreement for 100 N. Main Street, Summerville, SC (Filed with 1995 10-KSB)
|
|
10.3
|
Lease Agreement for 1337 Chuck Dawley Blvd., Mt. Pleasant, SC (Filed with 1995 10-KSB)
|
|
10.4
|
Lease Agreement for 1071 Morrison Drive, Charleston, SC (Incorporated herein)
|
|
10.5
|
1998 Omnibus Stock Incentive Plan (Filed with 2008 10-K/A)
|
|
2010 Omnibus Stock Incentive Plan (Filed with 2010 Proxy Statement)
|
||
10.6
|
Employee Stock Ownership Plan (Filed with 2008 10-K/A)
|
|
13.0
|
2010 10-K (Incorporated herein)
|
|
14.0
|
Code of Ethics (Filed with 2004 10-KSB)
|
|
21.0
|
List of Subsidiaries of the Registrant (Filed with 1995 10-KSB)
|
|
The Registrant's only subsidiary is The Bank of South Carolina (Filed with 1995 10-KSB)
|
||
31.1
|
Certification of Principal Executive Officer pursuant to 15 U.S.C. 78 m(a) or 78 o(d) (Section 302 of the Sarbanes-Oxley Act of 2002)
|
|
31.2
|
Certification of Principal Financial Officer pursuant to 15 U.S.C. 78 m(a) or 78 o(d) (Section 302 of the Sarbanes-Oxley Act of 2002)
|
32.1
|
Certification of Principal Executive Officer pursuant to 18 U.S.C. 1350 (Section 906 of the Sarbanes-Oxley Act of 2002)
|
|
32.2
|
Certification of the Principal Financial Officer pursuant to 18 U.S.C. 1350 (Section 906 of the Sarbanes-Oxley Act of 2002)
|
Date: February 24, 2011
|
BANK OF SOUTH CAROLINA CORPORATION
|
By: /s/Sheryl G. Sharry
|
|
Sheryl G. Sharry
|
|
Chief Financial Officer
|
|
Executive Vice President and Treasurer
|
February 24, 2011
|
/s/David W. Bunch
|
David W. Bunch, Director
|
|
February 24, 2011
|
/s/Graham M. Eubank, Jr.
|
Graham M. Eubank, Jr., Director
|
|
February 24, 2011
|
/s/Fleetwood S. Hassell
|
Fleetwood S. Hassell, Executive Vice President
|
|
& Director
|
|
/s/Glen B. Haynes, DVM
|
|
February 24, 2011
|
Glen B. Haynes, DVM, Director
|
February 24, 2011
|
/s/William L. Hiott, Jr.
|
William L. Hiott, Jr., Director
|
|
February 24, 2011
|
/s/Katherine M. Huger
|
Katherine M. Huger, Director
|
|
February 24, 2011
|
/s/Richard W. Hutson, Jr.
|
Richard W. Hutson, Jr., Director
|
|
February 24, 2011
|
/s/Charles G. Lane
|
Charles G. Lane, Director
|
February 24, 2011
|
/s/Hugh C. Lane, Jr.
|
Hugh C. Lane, Jr., President,
|
|
Chief Executive Officer & Director
|
|
February 24, 2011
|
/s/Louise J. Maybank
|
Louise J. Maybank, Director
|
|
February 24, 2011
|
/s/Linda J. Bradley McKee, PHD, CPA
|
Linda J. Bradley McKee, PHD,CPA, Director
|
|
February 24, 2011
|
/s/Alan I. Nussbaum, MD
|
Alan I. Nussbaum, MD, Director
|
|
February 24, 2011
|
/s/Edmund Rhett, Jr., MD
|
Edmund Rhett, Jr., MD, Director
|
|
February 24, 2011
|
/s/Malcolm M. Rhodes, MD
|
Malcolm M. Rhodes, MD, Director
|
|
February 24, 2011
|
/s/David R. Schools
|
David R. Schools, Director
|
|
February 24, 2011
|
/s/Sheryl G. Sharry
|
Sheryl G. Sharry
|
|
Chief Financial Officer, Executive Vice
|
|
President & Treasurer, Director
|
|
February 24, 2011
|
/s/Thomas C. Stevenson, III
|
Thomas C. Stevenson, III, Director
|
1.
|
I have reviewed this Annual Report on Form 10-K of the Bank of South Carolina Corporation;
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2.
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Based on my knowledge, this 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;
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3.
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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.
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4.
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The registrant’s other certifying officer (s) 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 controls over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)), for the registrant and have:
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a)
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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 subsidiary, is made known to us by others within the entity, particularly during the period in which this report is being prepared;
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b)
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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;
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c)
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Evaluated the effectiveness of registrant’s disclosure controls and procedures within 90 days prior to the filing date of the report 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
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d)
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Disclosed in this report any changes in registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting: and
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5.
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The registrant’s other certifying officer (s) 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 the registrant’s board of directors (or persons performing the equivalent functions):
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a)
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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
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b)
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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.
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February 24, 2011
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/s/Hugh C. Lane, Jr.
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Hugh C. Lane, Jr.
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President and Chief Executive Officer
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1.
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I have reviewed this Annual Report on Form 10-K of the Bank of South Carolina Corporation;
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2.
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Based on my knowledge, this 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;
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3.
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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.
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4.
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The registrant’s other certifying officers 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:
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|
a)
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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 subsidiary, is made known to us by others within the entity, particularly during the period in which this report is being prepared;
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b)
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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;
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c)
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Evaluated the effectiveness of the registrant’s disclosure controls and procedures within 90 days prior to the filing date of the report 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
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d)
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Disclosed in this report any changes in the registrant’s internal control over financial reporting that occurred during registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonable likely to materially affect, registrant’s internal control over financial reporting: and
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5.
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The registrant’s other certifying officer (s) 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 the registrant’s board of directors (or persons performing the equivalent functions):
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a)
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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
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b)
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Any fraud, whether or not material, that involves Management or other employees who have a significant role in registrant’s internal control over financial reporting.
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February 24, 2011
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/s/Sheryl G. Sharry
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Sheryl G. Sharry
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Chief Financial Officer
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Executive Vice President and Treasurer
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1.
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the report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended, (U.S.C. 78m or 78o(d)); and
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2.
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the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.
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Date: February 24, 2011
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BY:/s/Hugh C. Lane, Jr.
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Hugh C. Lane, Jr.
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President
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1.
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the report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended, (U.S.C. 78m or 78o(d)); and
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2.
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the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.
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Date: February 24, 2011
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BY:/s/Sheryl G. Sharry
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Sheryl G. Sharry
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Chief Financial Officer
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Executive Vice President & Treasurer
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