HOPFED BANCORP INC Form 10-Q for Period Ending 9/30/2013
: 6.21.0
 
Document and Entity Information
9 Months Ended
Sep. 30, 2013
Nov. 12, 2013
Document And Entity Information [Abstract]
  
Document Type
10-Q 
 
Amendment Flag
false 
 
Document Period End Date
Sep. 30, 2013 
 
Document Fiscal Year Focus
2013 
 
Document Fiscal Period Focus
Q3 
 
Entity Registrant Name
HOPFED BANCORP INC 
 
Entity Central Index Key
0001041550 
 
Current Fiscal Year End Date
--12-31 
 
Entity Filer Category
Smaller Reporting Company 
 
Entity Common Stock, Shares Outstanding
 
7,469,267 
Consolidated Condensed Statements of Financial Condition (USD $)
In Thousands, unless otherwise specified
Sep. 30, 2013
Dec. 31, 2012
Assets
  
Cash and due from banks
$ 24,566 
$ 31,563 
Interest-earning deposits
3,777 
5,613 
Cash and cash equivalents
28,343 
37,176 
Federal Home Loan Bank stock, at cost
4,428 
4,428 
Securities available for sale
322,776 
356,345 
Loans receivable, net of allowance for loan losses of $9,418 at September 30, 2013, and $10,648 at December 31, 2012
532,013 
524,985 
Accrued interest receivable
5,042 
5,398 
Real estate and other assets owned
1,439 
1,548 
Bank owned life insurance
9,574 
9,323 
Premises and equipment, net
21,707 
22,557 
Deferred tax assets
4,033 
 
Intangible asset
162 
292 
Other assets
5,936 
5,637 
Total assets
935,453 
967,689 
Deposits:
  
Non-interest-bearing
98,437 
94,083 
Interest-bearing accounts:
  
Interest-bearing checking
155,655 
147,047 
Savings and money market
89,869 
81,643 
Other time deposits
382,976 
437,092 
Total deposits
726,937 
759,865 
Federal Home Loan Bank advances
47,276 
43,741 
Repurchase agreements
48,182 
43,508 
Subordinated debentures
10,310 
10,310 
Advances from borrowers for taxes and insurance
822 
396 
Dividends payable
326 
180 
Deferred tax liability
   
568 
Accrued expenses and other liabilities
4,882 
4,122 
Total liabilities
838,735 
862,690 
Stockholders' equity:
  
Preferred stock, par value $0.01 per share; authorized - 500,000 shares; 18,400 shares issued and no shares outstanding at September 30, 2013, and December 31, 2012
   
   
Common stock, par value $.01 per share; authorized 15,000,000 shares; 7,927,287 issued and 7,474,267 outstanding at September 30, 2013, and 7,905,728 issued and 7,502,812 outstanding at December 31, 2012
79 
79 
Common stock warrant
 
556 
Additional paid-in-capital
76,662 
76,288 
Retained earnings
43,916 
41,829 
Accumulated other comprehensive income, net of taxes
96 
9,723 
Total stockholders' equity
96,718 
104,999 
Total liabilities and stockholders' equity
935,453 
967,689 
Preferred Stock [Member]
  
Stockholders' equity:
  
Treasury stock
(18,400)
(18,400)
Common Stock [Member]
  
Stockholders' equity:
  
Treasury stock
(5,635)
(5,076)
Total stockholders' equity
$ 79 
$ 79 
Consolidated Condensed Statements of Financial Condition (Parenthetical) (USD $)
In Thousands, except Share data, unless otherwise specified
Sep. 30, 2013
Dec. 31, 2012
Loans receivable, allowance for loan losses
$ 9,418 
$ 10,648 
Preferred stock, par value
$ 0.01 
$ 0.01 
Preferred stock, shares authorized
500,000 
500,000 
Preferred stock, shares issued
18,400 
18,400 
Preferred stock, shares outstanding
Common stock, par value
$ 0.01 
$ 0.01 
Common stock, shares authorized
15,000,000 
15,000,000 
Common stock, shares issued
7,927,287 
7,905,728 
Common stock, shares outstanding
7,474,267 
7,502,812 
Preferred Stock [Member]
  
Treasury stock, shares
18,400 
18,400 
Common Stock [Member]
  
Treasury stock, shares
453,020 
402,916 
Consolidated Condensed Statements of Income (USD $)
3 Months Ended9 Months Ended
In Thousands, except Share data, unless otherwise specified
Sep. 30, 2013
Sep. 30, 2012
Sep. 30, 2013
Sep. 30, 2012
Interest and dividend income:
    
Loans receivable
$ 6,605 
$ 7,403 
$ 20,163 
$ 22,617 
Investment in securities, taxable
1,641 
2,014 
5,237 
6,823 
Nontaxable securities available for sale
544 
573 
1,676 
1,695 
Interest-earning deposits
18 
20 
Total interest and dividend income
8,795 
9,996 
27,094 
31,155 
Interest expense:
    
Deposits
1,622 
2,640 
5,604 
8,279 
Advances from Federal Home Loan Bank
445 
1,017 
1,335 
2,155 
Repurchase agreements
245 
236 
717 
721 
Subordinated debentures
184 
185 
548 
553 
Total interest expense
2,496 
4,078 
8,204 
11,708 
Net interest income
6,299 
5,918 
18,890 
19,447 
Provision for loan losses
426 
506 
1,208 
1,775 
Net interest income after provision for loan losses
5,873 
5,412 
17,682 
17,672 
Non-interest income:
    
Other-than-temporary impairment losses on debt securities
(511)
 
(511)
 
Portion of losses recognized in other comprehensive income
111 
 
111 
 
Net impairment losses recognized in earnings
(400)
 
(400)
 
Service charges
949 
963 
2,739 
2,874 
Merchant card income
245 
212 
727 
620 
Mortgage origination revenue
147 
218 
559 
684 
Gain on sale of securities
201 
944 
1,617 
1,618 
Income from bank owned life insurance
88 
80 
250 
238 
Financial services commission
314 
280 
958 
778 
Other operating income
225 
200 
630 
641 
Total non-interest income
1,769 
2,897 
7,080 
7,453 
Non-interest expenses:
    
Salaries and benefits
3,735 
3,447 
11,297 
10,515 
Occupancy
878 
875 
2,605 
2,614 
Data processing
652 
610 
1,948 
1,863 
State bank tax
143 
161 
432 
485 
Intangible amortization
33 
48 
130 
178 
Professional services
493 
435 
1,435 
1,320 
Deposit insurance and examination
137 
419 
548 
1,272 
Advertising
292 
324 
933 
952 
Postage and communications
149 
146 
427 
444 
Supplies
159 
64 
388 
280 
Loss on disposal of equipment
   
 
13 
Loss (gain) on real estate owned
(54)
68 
(7)
287 
Real estate owned
78 
19 
186 
90 
Other operating
289 
350 
1,060 
1,196 
Total non-interest expense
6,984 
6,971 
21,382 
21,509 
Income before income tax
658 
1,338 
3,380 
3,616 
Income tax expense
122 
263 
694 
652 
Net income
536 
1,075 
2,686 
2,964 
Less:
    
Dividend on preferred shares
 
229 
 
689 
Accretion dividend on preferred shares
 
27 
 
83 
Net income available to common shareholders
$ 536 
$ 819 
$ 2,686 
$ 2,192 
Net income available to common shareholders
    
Per share, basic
$ 0.07 
$ 0.11 
$ 0.36 
$ 0.29 
Per share, diluted
$ 0.07 
$ 0.11 
$ 0.36 
$ 0.29 
Dividend per share
$ 0.04 
$ 0.02 
$ 0.08 
$ 0.06 
Weighted average shares outstanding - basic
7,483,582 
7,487,283 
7,483,606 
7,485,571 
Weighted average shares outstanding - diluted
7,483,582 
7,487,283 
7,483,606 
7,485,571 
Consolidated Condensed Statements of Comprehensive Income (Loss) (USD $)
3 Months Ended9 Months Ended
In Thousands, unless otherwise specified
Sep. 30, 2013
Sep. 30, 2012
Sep. 30, 2013
Sep. 30, 2012
Statement Of Income And Comprehensive Income [Abstract]
    
Net income
$ 536 
$ 1,075 
$ 2,686 
$ 2,964 
Other comprehensive income, net of tax:
    
Unrealized gain (loss) on investment securities available for sale, net of tax effect of $637 and ($1,180) for the three months ended September 30, 2013 and September 30, 2012, respectively; and $4,640 and ($2,008) for the nine months ended September 30, 2013, and September 30, 2012, respectively;
(1,236)
1,770 
(9,007)
3,897 
Unrealized gain on derivatives, net of tax effect of ($22) and ($5) for the three month period ended September 30, 2013, and September 30, 2012, respectively; and of ($94) and ($26) for the nine month periods ending September 30, 2013, and September 30, 2012, respectively;
43 
10 
183 
50 
Reclassification adjustment for other than temporary impairment included in net income, net of tax effect of ($136) for the three and nine month periods ended September 30, 2013.
264 
 
264 
 
Reclassification adjustment for gains included in net income, net of tax effect of $68 and $321 for the three month periods ended September 30, 2013, and September 30, 2012, respectively; and $550 for the nine month periods ended September 30, 2013, and September 30, 2012, respectively;
(132)
(623)
(1,067)
(1,068)
Total other comprehensive income, net of tax
(1,061)
1,157 
(9,627)
2,879 
Comprehensive income (loss)
$ (525)
$ 2,232 
$ (6,941)
$ 5,843 
Consolidated Condensed Statements of Comprehensive Income (Loss) (Parenthetical) (USD $)
3 Months Ended9 Months Ended
In Thousands, unless otherwise specified
Sep. 30, 2013
Sep. 30, 2012
Sep. 30, 2013
Sep. 30, 2012
Statement Of Income And Comprehensive Income [Abstract]
    
Unrealized gain (loss) on investment securities available for sale, tax effect
$ 637 
$ (1,180)
$ 4,640 
$ (2,008)
Unrealized gain (loss) on derivatives, tax effect
(22)
(5)
(94)
(26)
Reclassification adjustment for other than temporary impairment included in net income, net of tax effect
(136)
 
(136)
 
Reclassification adjustment for gains included in net income, tax effect
$ 68 
$ 321 
$ 550 
$ 550 
Consolidated Condensed Statement of Stockholders' Equity (USD $)
In Thousands, except Share data
Total
USD ($)
Common Stock [Member]
USD ($)
Preferred Stock [Member]
Common Stock Warrants [Member]
USD ($)
Additional Capital Surplus [Member]
USD ($)
Retained Earnings [Member]
USD ($)
Treasury Stock Preferred [Member]
USD ($)
Treasury Stock Common [Member]
USD ($)
Accumulated Other Comprehensive Income [Member]
USD ($)
Beginning balance at Dec. 31, 2012
$ 104,999 
$ 79 
 
$ 556 
$ 76,288 
$ 41,829 
$ (18,400)
$ (5,076)
$ 9,723 
Beginning balance, Shares at Dec. 31, 2012
 
7,502,812 
18,400 
      
Restricted stock awards, Shares
 
21,559 
       
Consolidated net income
2,686 
    
2,686 
   
Compensation expense, restricted stock awards
75 
   
75 
    
Net change in unrealized gain on securities available for sale, net of income tax benefit of $5,054
(9,810)
       
(9,810)
Net change in unrealized loss on derivatives, net of income taxes of $94
183 
       
183 
Repurchase of warrant
(257)
  
(556)
299 
    
Repurchase of treasury stock
(559)
      
(559)
 
Repurchase of treasury stock, Shares
 
(50,104)
       
Cash dividend to common stockholders
(599)
    
(599)
   
Ending balance at Sep. 30, 2013
$ 96,718 
$ 79 
  
$ 76,662 
$ 43,916 
$ (18,400)
$ (5,635)
$ 96 
Ending balance, Shares at Sep. 30, 2013
 
7,474,267 
18,400 
      
Consolidated Condensed Statement of Stockholders' Equity (Parenthetical) (USD $)
9 Months Ended
In Thousands, unless otherwise specified
Sep. 30, 2013
Net change in unrealized gain on securities available for sale, net of income taxes
$ 5,054 
Net change in unrealized loss on derivatives, net of income tax benefit
94 
Accumulated Other Comprehensive Income [Member]
 
Net change in unrealized gain on securities available for sale, net of income taxes
5,054 
Net change in unrealized loss on derivatives, net of income tax benefit
$ 94 
Consolidated Condensed Statements of Cash Flows (USD $)
9 Months Ended
In Thousands, unless otherwise specified
Sep. 30, 2013
Sep. 30, 2012
Cash flows from operating activities:
  
Net cash provided by operating activities
$ 6,473 
$ 5,716 
Cash flows from investing activities
  
Proceeds from sales, calls and maturities of securities available for sale
99,619 
140,001 
Purchase of securities available for sale
(80,959)
(101,768)
Net (increase) decrease in loans
(9,033)
13,978 
Proceeds from sale of foreclosed assets
913 
2,403 
Purchase of premises and equipment
(288)
(517)
Net cash provided by investing activities
10,252 
54,097 
Cash flows from financing activities:
  
Net increase in demand deposits
4,354 
8,901 
Net decrease in time and other deposits
(37,282)
(39,740)
Increase in advances from borrowers for taxes and insurance
426 
486 
Advances from Federal Home Loan Bank
23,000 
8,000 
Repayment of advances from Federal Home Loan Bank
(19,465)
(27,097)
Net increase (decrease) in repurchase agreements
4,674 
(281)
Cash used to repurchase warrant
(257)
 
Cash used to repurchase common stock
(559)
 
Dividend paid on preferred stock
   
(690)
Dividends paid on common stock
(449)
(449)
Net cash used in financing activities
(25,558)
(50,870)
Increase (decrease) in cash and cash equivalents
(8,833)
8,943 
Cash and cash equivalents, beginning of period
37,176 
48,760 
Cash and cash equivalents, end of period
28,343 
57,703 
Supplemental disclosures of Cash Flow Information:
  
Interest paid
8,463 
11,892 
Income taxes paid
495 
1,545 
Supplemental disclosures of non-cash investing and financing activities:
  
Loans charged off
2,858 
3,086 
Foreclosures and in substance foreclosures of loans during period
797 
1,104 
Net unrealized gains (losses) on investment securities classified as available for sale
(14,864)
4,286 
Increase (decrease) in deferred tax asset related to unrealized gains on investments
5,054 
1,457 
Dividends declared and payable
299 
150 
Issue of unearned restricted stock
$ 232 
$ 74 
Basis of Presentation
9 Months Ended
Sep. 30, 2013
Accounting Policies [Abstract]
 
Basis of Presentation

(1) BASIS OF PRESENTATION

HopFed Bancorp, Inc. (the “Company”) was formed at the direction of Heritage Bank, formerly Hopkinsville Federal Savings Bank (the “Bank”), to become the holding company of the Bank upon the conversion of the Bank from a federally chartered mutual savings bank to a federally chartered stock savings bank. The conversion was consummated on February 6, 1998.

On June 5, 2013, Heritage Bank changed its legal name to Heritage Bank USA, Inc. and became a Kentucky state chartered commercial bank regulated by the Kentucky Department of Financial Institutions and the Federal Deposit Insurance Corporation. On June 5, 2013, HopFed Bancorp, Inc. become a commercial bank holding company regulated by the Board of Governors of the Federal Reserve System. The Company’s primary assets are the outstanding capital stock of the converted Bank, and its sole business is that of the converted Bank. The Bank owns 100% of the stock of Fall and Fall Insurance Agency (“Fall & Fall”) of Fulton, Kentucky. Fall & Fall sells life and casualty insurance to both individuals and businesses. The majority of Fall & Fall’s customer base is within the geographic footprint of the Bank.

The Bank operates a mortgage division, Heritage Mortgage Services, in Clarksville, Tennessee with agents located in several of its markets. The Bank has a financial services division, Heritage Wealth Management, with offices in Murray, Kentucky, Kingston Springs, Tennessee and Pleasant View, Tennessee. Agents of Heritage Wealth Management travel throughout western Kentucky and middle Tennessee offering fixed and variable annuities, mutual funds and brokerage services.

The accompanying unaudited financial statements have been prepared in accordance with accounting principles generally accepted (“GAAP”) in the United States of America for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by U.S. GAAP for complete financial statements. In the opinion of management, all adjustments (consisting of only normal recurring accruals) necessary for fair representation have been included. The results of operations and other data for the nine month period ended September 30, 2013, are not necessarily indicative of results that may be expected for the entire fiscal year ending December 31, 2013.

The accompanying unaudited financial statements should be read in conjunction with the Consolidated Financial Statements and the Notes thereto included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2012. The accounting policies followed by the Company are set forth in the Summary of Significant Accounting Policies in the Company’s December 31, 2012, Consolidated Financial Statements.

Income Per Share
9 Months Ended
Sep. 30, 2013
Earnings Per Share [Abstract]
 
Income Per Share

(2) INCOME PER SHARE

The following schedule reconciles the numerators and denominators of the basic and diluted income per share (“IPS”) computations for the three and nine month periods ended September 30, 2013, and September 30, 2012. Diluted common shares arise from the potentially dilutive effect of the Company’s stock options and warrant outstanding.

 

     Three Month Periods Ended
September 30,
 
     2013      2012  

Basic IPS:

     

Net income available to common stockholders

   $ 536,000       $ 819,000   

Average common shares outstanding

     7,483,582         7,487,283   
  

 

 

    

 

 

 

Net income per share available to common shareholders, basic

   $ 0.07       $ 0.11   
  

 

 

    

 

 

 

Diluted IPS

     

Net income available to common stockholders

   $ 536,000       $ 819,000   
  

 

 

    

 

 

 

Average common shares outstanding

     7,483,582         7,487,283   

Dilutive effect of stock options

     —           —     
  

 

 

    

 

 

 

Average diluted shares outstanding

     7,483,582         7,487,283   
  

 

 

    

 

 

 

Net income per share available to common shareholders, diluted

   $ 0.07       $ 0.11   
  

 

 

    

 

 

 
     Nine Month Periods Ended
September 30,
 
     2013      2012  

Basic IPS:

     

Net income available to common stockholders

   $ 2,686,000       $ 2,192,000   

Average common shares outstanding

     7,483,606         7,485,571   
  

 

 

    

 

 

 

Net income per share available to common shareholders, basic

   $ 0.36       $ 0.29   
  

 

 

    

 

 

 

Diluted IPS

     

Net income available to common stockholders

   $ 2,686,000       $ 2,192,000   
  

 

 

    

 

 

 

Average common shares outstanding

     7,483,606         7,485,571   

Dilutive effect of stock options

     —           —     
  

 

 

    

 

 

 

Average diluted shares outstanding

     7,483,606         7,485,571   
  

 

 

    

 

 

 

Net income per share available to common shareholders, diluted

   $ 0.36       $ 0.29   
  

 

 

    

 

 

 
Stock Compensation
9 Months Ended
Sep. 30, 2013
Disclosure Of Compensation Related Costs Sharebased Payments [Abstract]
 
Stock Compensation

(3) STOCK COMPENSATION

The Company incurred compensation cost related to the HopFed Bancorp, Inc. 2004 Long Term Incentive Plan of $28,000 and $75,000 for the three and nine month periods ended September 30, 2013, and $23,000 and $77,000 for the three and nine month periods ended September 30, 2012, respectively. The Company issued 21,332 shares of restricted stock during the three month period ended September 30, 2013. The Company issued 21,559 shares of restricted stock during the nine month period ended September 30, 2013. The Company issued 10,392 shares of restricted stock during the nine month period ended September 30, 2012. The Company did not issue restricted stock during the three month period ended September 30, 2012. The table below provides a detail of the Company’s future compensation expense related to restricted stock vesting at September 30, 2013:

 

Year Ended

December 31,

   Future
Expense
 

2013

   $ 34,256   

2014

     124,192   

2015

     101,773   

2016

     48,272   

2017

     3,125   
  

 

 

 

Total

   $ 311,618   
  

 

 

 

The compensation committee may make additional awards of restricted stock, thereby increasing the future expense related to this plan. In addition, award vesting may be accelerated due to certain events as outlined in the restricted stock award agreement. Any acceleration of vesting will change the timing of, but not the aggregate amount of, compensation expense incurred.

At the 2013 HopFed Bancorp, Inc. Annual Shareholder Meeting, shareholders approved a management recommendation to create the HopFed Bancorp, Inc. 2013 Long Term Incentive Plan (“the 2013 Plan”). The 2013 Plan provides for up to 300,000 shares to be granted to Directors and employees of the Company and the Bank. The details of the plan are discussed in the Company’s Definitive Proxy Statement dated April 5, 2013, and SEC Form S-8 dated June 28, 2013. The 2013 Plan replaces the Company’s 2004 Long Term Incentive Plan. At September 30, 2013, the Company has issued 21,332 shares of restricted stock under the 2013 Long Term Incentive Plan and may issue an additional 278,668 shares of restricted stock under the plan.

Securities
9 Months Ended
Sep. 30, 2013
Investments Debt And Equity Securities [Abstract]
 
Securities

(4) SECURITIES

Management evaluates securities for other-than-temporary impairment at least on a quarterly basis, and more frequently when economic or market concerns warrant such evaluations. Consideration is given to (1) the length of time and the extent to which the fair value has been less than cost, (2) the financial condition and near-term prospects of the issuer, and (3) the intent and ability of the Company to retain its investment in the issuer for a period of time sufficient to allow for any anticipated recovery in fair value.

At September 30, 2013, the Company has 88 securities with unrealized losses. The carrying amount of securities and their estimated fair values at September 30, 2013, were as follows:

 

     September 30, 2013  
            Gross      Gross     Estimated  
     Amortized      Unrealized      Unrealized     Fair  
     Cost      Gains      Losses     Value  
     (Dollars in Thousands)  

Restricted:

          

FHLB stock

   $ 4,428         —           —          4,428   
  

 

 

    

 

 

    

 

 

   

 

 

 

Unrestricted:

          

U.S. government and agency securities:

          

Agency debt securities

   $ 120,813         2,284         (2,050     121,047   

Corporate bonds

     2,000         —           (8     1,992   

Taxable municipal bonds

     17,813         317         (456     17,674   

Tax free municipal bonds

     66,281         2,418         (811     67,888   

Trust preferred securities

     1,600         —           (111     1,489   

Mortgage-backed securities:

          

GNMA

     18,086         725         (105     18,706   

FNMA

     67,913         675         (1,565     67,023   

FHLMC

     1,418         17         —          1,435   

NON-AGENCY CMOs

     13,807         36         (387     13,456   

AGENCY CMOs

     12,052         189         (175     12,066   
  

 

 

    

 

 

    

 

 

   

 

 

 
   $ 321,783         6,661         (5,668     322,776   
  

 

 

    

 

 

    

 

 

   

 

 

 

 

The carrying amount of securities and their estimated fair values at December 31, 2012, was as follows:

 

     December 31, 2012  
     Amortized
Cost
     Gross
Unrealized
Gains
     Gross
Unrealized
Losses
    Estimated
Fair
Value
 
     (Dollars in Thousands)  

Restricted:

          

FHLB stock

   $ 4,428         —           —          4,428   
  

 

 

    

 

 

    

 

 

   

 

 

 

Unrestricted:

          

U.S. government and agency securities:

          

Agency debt securities

   $ 147,659         5,202         (83     152,778   

Taxable municipal bonds

     12,535         1,209         (8     13,736   

Tax free municipal bonds

     68,331         5,756         (40     74,047   

Trust preferred securities

     2,000         —           (511     1,489   

Mortgage-backed securities:

          

GNMA

     19,172         1,244         (19     20,397   

FNMA

     64,805         2,558         (58     67,305   

FHLMC

     4,519         153         —          4,672   

SLMA CMO

     5,412         80         —          5,492   

AGENCY CMOs

     16,055         426         (52     16,429   
  

 

 

    

 

 

    

 

 

   

 

 

 
   $ 340,488         16,628         (771     356,345   
  

 

 

    

 

 

    

 

 

   

 

 

 

 

The scheduled maturities of debt securities available for sale at September 30, 2013, were as follows:

 

     Amortized
Cost
     Estimated
Fair
Value
 

Due within one year

   $ 305       $ 308   

Due in one to five years

     14,276         14,485   

Due in five to ten years

     36,507         36,032   

Due after ten years

     50,984         51,618   
  

 

 

    

 

 

 
     102,072         102,443   

Amortizing agency bonds

     106,435         107,646   

Mortgage-backed securities

     113,276         112,687   
  

 

 

    

 

 

 

Total unrestricted securities available for sale

   $ 321,783       $ 322,776   
  

 

 

    

 

 

 

The scheduled maturities of debt securities available for sale at December 31, 2012, were as follows:

 

     Amortized
Cost
     Estimated
Fair
Value
 

Due within one year

   $ 345       $ 346   

Due in one to five years

     11,499         11,682   

Due in five to ten years

     30,007         32,316   

Due in more than ten years

     53,222         57,290   
  

 

 

    

 

 

 
     95,073         101,634   

Amortizing agency bonds

     135,452         140,416   

Mortgage-backed securities

     109,963         114,295   
  

 

 

    

 

 

 

Total unrestricted securities available for sale

   $ 340,488       $ 356,345   
  

 

 

    

 

 

 

 

The estimated fair value and unrealized loss amounts of impaired investments as of September 30, 2013, are as follows:

 

     Less than 12 months     12 months or longer     Total  
     Estimated      Unrealized     Estimated      Unrealized     Estimated      Unrealized  
     Fair Value      Losses     Fair Value      Losses     Fair Value      Losses  

Available for sale

               

U.S. government and agency securities:

               

Agency debt securities

   $ 36,537         (2,034     1,283         (16     37,820         (2,050

Corporate bonds

     1,992         (8     —           —          1,992         (8

Taxable municipals

     6,629         (421     882         (35     7,511         (456

Tax free municipals

     13,915         (811     —           —          13,915         (811

Mortgage-backed securities:

               

GNMA

     4,330         (105     —           —          4,330         (105

FNMA

     44,187         (1,565     —           —          44,187         (1,565

FHLMC

     —           —          —           —          —           —     

NON-AGENCY CMOs

     5,309         (387     —           —          5,309         (387

AGENCY CMOs

     4,468         (175     —           —          4,468         (175
  

 

 

    

 

 

   

 

 

    

 

 

   

 

 

    

 

 

 

Total temporarily impaired available for sale securities

   $ 117,367         (5,506     2,165         (51     119,532         (5,557

Other-than-temporarily impaired debt securities: (1)

               

Trust preferred securities

     —           —          1,489         (111     1,489         (111
  

 

 

    

 

 

   

 

 

    

 

 

   

 

 

    

 

 

 

Total temporarily impaired and other-than-temporarily impaired securities

   $ 117,367       ($ 5,506     3,654         (162     121,021         (5,668
  

 

 

    

 

 

   

 

 

    

 

 

   

 

 

    

 

 

 

 

(1)  Includes an other-than-temporary impaired available for sale debt securities in which a portion of the other-than-temporary impairment loss remains in accumulated other comprehensive loss.

 

The estimated fair value and unrealized loss amounts of impaired investments as of December 31, 2012, were as follows:

 

     Less than 12 months     12 months or longer     Total  
     Estimated      Unrealized     Estimated      Unrealized     Estimated      Unrealized  
     Fair Value      Losses     Fair Value      Losses     Fair Value      Losses  
     (Dollars in Thousands)  

Available for sale

               

U.S. government and agency securities:

               

Agency debt securities

   $ 12,317         (83     —           —          12,317         (83

Taxable municipal bonds

     885         (8     —           —          885         (8

Tax free municipal bonds

     5,315         (40     —           —          5,315         (40

Trust preferred securities

     —           —          1,489         (511     1,489         (511

Mortgage-backed securities:

               

GNMA

     —           —          1,415         (19     1,415         (19

FNMA

     7,077         (58     —           —          7,077         (58

FHLMC

     —           —          —           —          —           —     

NON-AGENCY CMOs

     —           —          —           —          —           —     

AGENCY CMOs

     3,691         (52     —           —          3,691         (52
  

 

 

    

 

 

   

 

 

    

 

 

   

 

 

    

 

 

 

Total Available for Sale

   $ 29,285         (241     2,904         (530     32,189         (771
  

 

 

    

 

 

   

 

 

    

 

 

   

 

 

    

 

 

 

At September 30, 2013, the Company has determined that all securities with unrealized losses are temporarily impaired with one exception as discussed below.

In June of 2008, the Company purchased $2.0 million of an $8.0 million private placement subordinated trust preferred debt instrument issued by First Financial Services Corporation (“FFKY”) of Elizabethtown, Kentucky with a fixed rate of interest of 8.0%. The additional capital was used to finance a small acquisition within the Louisville, Kentucky metropolitan area for FFKY, a $969.7 million commercial bank holding company headquartered in Elizabethtown, Kentucky.

In October of 2010, FFKY notified the Company that it would defer future dividend payments to its investment trust (the trust preferred agreement allows for a deferral period of up to five years). Since October 2010, the Company has not recognized interest on the trust preferred debt and has continued to review all publically available financial information related to FFKY and its banking subsidiary, First Federal Savings Bank of Elizabethtown. In 2013, the Company has noted improvements in credit quality, earnings and capital retention at of FFKY. However, three years into the five year permitted deferral period, it appears unlikely that FFKY will be able to resume dividend payments by October 2015. As a result of this conclusion, the Company determined that its investment in FFKY was other than temporarily impaired at September 30, 2013.

 

The Company used several sources of information to develop a rational for the impairment charge. The most significant source of information was the auction of FFKY’s $20.0 million in Preferred Stock issued to the United States Treasury as part of the TARP program. The Treasury sold the securities in April 2013 for approximately 54% of par. The preferred securities are equity and are subordinated to the Company’s trust securities. Therefore, this auction was used to help establish a floor for the value of the subordinated debt. Furthermore, improvements in FFKY’s financial condition, including a tier one capital ratio of 7.27% and a total risk based capital ratio of 12.36%, make it evident to the Company that FFKY remains a viable institution unlikely to fail. However, the timing of our receipt of past due and future dividends is uncertain and the investment’s book value should be reduced based on the continued lack of cash flow provided by the subordinated debt. Therefore, at September 30, 2013, the Company determined that we would reduce the value of our investment in the subordinated debt by $400,000 through an impairment charge.

The following table summarizes other-than-temporary impairment losses on securities for the nine month period ended September 30, 2013:

 

     Trust Preferred         
     Securities      Total  
     (Dollars in Thousands)  

Total other-than-temporary impairment losses

   $ 511       $ 511   

Less: unrealized other-than-temporary losses recognized in accumulated other comprehensive loss (1)

     111         111   
  

 

 

    

 

 

 

Net impairment losses recognized in earnings (2)

   $ 400       $ 400   
  

 

 

    

 

 

 

 

(1) Represents the non-credit component of the other-than-temporary impairment
(2) Represents the credit component of the other-than-temporary impairment

 

Activity related to the credit component recognized in earnings on debt securities held by the Company for which a portion of other-than-temporary impairment was recognized in accumulated other comprehensive loss for the nine month period ended September 30, 2013 and 2012, respectively, is as follows:

 

     Nine month period ended  
     September 30, 2013  
     (Dollars in Thousands)  

Balance, December 31, 2012

   $ —     

Credit losses on securities for which other-than-temporary impairment was not previously recorded:

     400   

Additional credit losses on securities for which an other-than temporary impairment charge was previously recorded

     —     

Reductions for securities sold during the period

     —     
  

 

 

 

Balance, September 30, 2013

   $ 400   
  

 

 

 

At September 30, 2013, securities with a book value of approximately $154.7 million and a market value of approximately $150.1 million were pledged to various municipalities for deposits in excess of FDIC limits as required by law. The Federal Home Loan Bank of Cincinnati has issued letters of credit in the Bank’s name totaling $13.5 million secured by the Bank’s loan portfolio to secure additional municipal deposits.

At September 30, 2013, securities with a book and market value of $32.2 million were sold under agreements to repurchase from various customers. Furthermore, the Company has two wholesale repurchase agreements with third parties secured by investments with a combined book value of $19.9 million and a market value of $19.4 million. One repurchase agreement is in the amount of $6.0 million and has a maturity of September 18, 2016, and is currently callable on a quarterly basis and has a fixed rate of interest of 4.36%. The second repurchase agreement, in the amount of $10.0 million, has a maturity of September 5, 2014, is currently callable quarterly and has a fixed rate of interest of 4.28%.

Loans
9 Months Ended
Sep. 30, 2013
Receivables [Abstract]
 
Loans

(5) LOANS

Set forth below is selected data relating to the composition of the loan portfolio by type of loan at September 30, 2013, and December 31, 2012. At September 30, 2013 and December 31, 2012, there were no concentrations of loans exceeding 10% of total loans other than as disclosed below:

 

     September 30, 2013     September 30, 2013     December 31, 2012     December 31, 2012  
     Amount     Percent     Amount     Percent  
     (Dollars in thousands, except percentages)  

Real estate loans:

        

One-to-four family (closed end) first mortgages

   $ 157,857        29.2   $ 162,335        30.3

Second mortgages (closed end)

     3,576        0.7     4,336        0.8

Home equity lines of credit

     35,072        6.5     37,083        6.9

Multi-family

     28,433        5.2     33,056        6.2

Construction

     9,358        1.7     18,900        3.5

Land

     37,647        6.9     45,906        8.6

Farmland

     50,908        9.4     46,799        8.7

Non-residential real estate

     151,495        28.0     122,637        22.9
  

 

 

   

 

 

   

 

 

   

 

 

 

Total mortgage loans

     474,346        87.6     471,052        87.9

Consumer loans

     12,379        2.3     13,886        2.6

Commercial loans

     54,735        10.1     50,549        9.5
  

 

 

   

 

 

   

 

 

   

 

 

 

Total other loans

     67,114        12.4     64,435        12.1
  

 

 

   

 

 

   

 

 

   

 

 

 

Total loans, gross

     541,460        100.0     535,487        100.0
    

 

 

     

 

 

 

Deferred loan costs (fees), net of income

     (29       146     

Less allowance for loan losses

     (9,418       (10,648  
  

 

 

     

 

 

   

Total loans

   $ 532,013        $ 524,985     
  

 

 

     

 

 

   

 

The Company assigns an industry standard NAICS code to each loan in the Company’s portfolio. By assigning a standard code to each type of loan, management can more readily determine concentrations in risk by industry, location and loan type. This information is most useful when analyzing the Company’s non-residential real estate loan portfolio. At September 30, 2013, and December 31, 2012, the Company’s non-residential real estate loan portfolio was made up of the following loan types:

 

     September 30, 2013      December 31, 2012  
     (Dollars in Thousands)  

Land

   $ 37,647         45,906   

Manufacturing

     4,102         3,856   

Professional, Technical

     1,884         2,025   

Retail Trade

     11,768         12,391   

Other Services

     19,419         18,303   

Finance & Insurance

     1,886         386   

Agricultural, Forestry, Fishing & Hunting

     47,421         42,420   

Real Estate and Rental and Leasing

     53,221         48,249   

Wholesale Trade

     21,745         8,891   

Arts, Entertainment & Recreation

     3,127         3,461   

Accommodations / Food Service

     26,002         17,152   

Healthcare and Social Assistance

     6,972         7,932   

Transportation & Warehousing

     1,152         1,295   

Information

     2,469         2,488   

Non-industry

     863         46   

Admin Support / Waste Mgmt

     372         541   
  

 

 

    

 

 

 

Total

   $ 240,050         215,342   
  

 

 

    

 

 

 

The allowance for loan losses totaled $9.4 million at September 30, 2013, $10.6 million at December 31, 2012, and $10.5 million at September 30, 2012, respectively. The ratio of the allowance for loan losses to total loans was 1.74% at September 30, 2013, 1.99% at December 31, 2012, and 1.91% at September 30, 2012.

The following table indicates the type and level of non-accrual loans at the dates indicated below:

 

     September 30, 2013      December 31, 2012      September 30, 2012  
     (Dollars in Thousands)  

One-to-four family mortgages

   $ 865         2,243         2,795   

Home equity line of credit

     275         66         24   

Junior lien

     2         4         —     

Multi-family

     —           38         190   

Construction

     —           —           —     

Land

     2,257         2,768         3,279   

Non-residential real estate

     7,187         1,134         1,268   

Farmland

     744         648         49   

Consumer loans

     316         145         59   

Commercial loans

     482         617         2,160   
  

 

 

    

 

 

    

 

 

 

Total non-accrual loans

   $ 12,128         7,663         9,824   
  

 

 

    

 

 

    

 

 

 

 

The following table provides a detail of the Company’s activity in the allowance for loan loss account by loan type for the nine month period ended September 30, 2013:

 

     Balance
12/31/2012
     Charge off
2013
    Recovery
2013
     General
Provision
2013
    Specific
Provision
2013
    Ending
Balance
9/30/2013
 
     (Dollars in Thousands)  

One-to-four family mortgages

   $ 2,490         (432     47         (350     386        2,141   

Home equity line of credit

     374         (21     9         (80     2        284   

Junior liens

     230         (119     27         43        (79     102   

Multi-family

     524         (38     164         (136     (164     350   

Construction

     256         —          —           (187     —          69   

Land

     2,184         (393     7         (954     282        1,126   

Non-residential real estate

     2,914         (1,040     14         431        1,359        3,678   

Farmland

     719         —          —           (96     (184     439   

Consumer loans

     338         (535     146         242        387        578   

Commercial loans

     619         (280     6         296        10        651   
  

 

 

    

 

 

   

 

 

    

 

 

   

 

 

   

 

 

 

Total

   $ 10,648         (2,858     420         (791     1,999        9,418   
  

 

 

    

 

 

   

 

 

    

 

 

   

 

 

   

 

 

 

The following table provides a detail of the Company’s activity in the allowance for loan loss account by loan type for the year ended December 31, 2012:

 

     Balance
12/31/2011
     Charge off
2012
    Recovery
2012
     General
Provision
2012
    Specific
Provision
2012
    Balance
12/31/2012
 
     (Dollars in Thousands)  

One-to-four family mortgages

   $ 2,640         (379     81         324        (176     2,490   

Home equity line of credit

     408         (67     6         6        21        374   

Junior liens

     277         (1     4         —          (50     230   

Multi-family

     1,201         (417     —           429        (689     524   

Construction

     139         —          —           117        —          256   

Land

     1,332         (1,033     405         635        845        2,184   

Non-residential real estate

     3,671         (1,120     137         718        (492     2,914   

Farmland

     —           —          —           315        404        719   

Consumer loans

     262         (510     150         404        32        338   

Commercial loans

     1,332         (157     12         (171     (397     619   
  

 

 

    

 

 

   

 

 

    

 

 

   

 

 

   

 

 

 

Total

   $ 11,262         (3,684     795         2,777        (502     10,648   
  

 

 

    

 

 

   

 

 

    

 

 

   

 

 

   

 

 

 

 

The table below presents currently performing, past due and non-accrual balances at September 30, 2013, by loan classification allocated between performing and non-performing:

 

     Currently     

30 - 89

Days

     Non-accrual      Special      Impaired Loans
Currently Performing
        

September 30, 2013

   Performing      Past Due      Loans      Mention      Substandard      Doubtful      Total  
     (Dollars in Thousands)  

One-to-four family mortgages

   $ 148,481         1,682         865         1,423         5,406         —           157,857   

Home equity line of credit

     33,672         248         275         —           877         —           35,072   

Junior liens

     3,128         33         2         44         369         —           3,576   

Multi-family

     28,433         —           —           —           —           —           28,433   

Construction

     9,007         175         —           176         —           —           9,358   

Land

     17,259         133         2,257         1,789         16,209         —           37,647   

Non-residential real estate

     127,731         90         7,187         2,183         14,304         —           151,495   

Farmland

     44,428         103         744         807         4,826         —           50,908   

Consumer loans

     11,376         151         316         —           536         —           12,379   

Commercial loans

     51,324         91         482         96         2,742         —           54,735   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total

   $ 474,839         2,706         12,128         6,518         45,269         —           541,460   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

The table below presents currently performing, past due and non-accrual balances at December 31, 2012, by loan classification allocated between performing and non-performing:

 

     Currently     

30 - 89

Days

     Non-accrual      Special      Impaired Loans
Currently Performing
        

December 31, 2012

   Performing      Past Due      Loans      Mention      Substandard      Doubtful      Total  
     (Dollars in Thousands)  

One-to-four family mortgages

   $ 155,936         1,339         2,243         779         2,038         —           162,335   

Home equity line of credit

     34,732         5         66         1,109         1,171         —           37,083   

Junior liens

     3,584         237         4         47         464         —           4,336   

Multi-family

     27,463         —           38         1,478         4,077         —           33,056   

Construction

     13,876         176         —           —           4,848         —           18,900   

Land

     14,237         137         2,768         7,683         21,081         —           45,906   

Non-residential real estate

     101,894         293         1,134         1,230         18,647         —           123,198   

Farmland

     44,256         —           648         669         665         —           46,238   

Consumer loans

     13,266         74         145         —           401         —           13,886   

Commercial loans

     43,961         230         617         516         5,225         —           50,549   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total

   $ 453,205         2,491         7,663         13,511         58,617         —           535,487   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

 

All loans listed as 30-89 days past due and non-accrual are not performing as agreed. Loans listed as special mention, substandard and doubtful are paying as agreed. However, the customer’s financial statements may indicate weaknesses in their current cash flow, the customer’s industry may be in decline due to current economic conditions, collateral values used to secure the loan may be declining, or the Company may be concerned about the customer’s future business prospects.

The Company does not originate loans it considers sub-prime and is not aware of any exposure to the additional credit concerns associated with sub-prime lending in either the Company’s loan or investment portfolios. The Company does have a significant amount of construction and land development loans. Management reports to the Company’s Board of Directors on the status of the Company’s specific construction and development loans as well as the market trends in those markets in which the Company actively participates.

The Company’s annualized net charge off ratios for nine month periods ended September 30, 2013, September 30, 2012, and the year ended December 31, 2012, was 0.61%, 0.61% and 0.52%, respectively. The ratios of allowance for loan losses to non-accrual loans at September 30, 2013, September 30, 2012, and December 31, 2012, was 77.67%, 106.78%, and 138.99% respectively.

 

The table on the below sets forth an analysis of the Bank’s allowance for loan losses for the periods presented:

 

     Nine month period ended
September 30, 2013
    Year ended
December 31, 2012
    Nine month period ended
September 30, 2012
 
     (Dollars in Thousands, Except Percentages)  

Beginning balance, allowance for loan loss

   $ 10,648        11,262        11,262   

Charge offs

      

One-to-four family mortgages

     (432     (379     (282

Home equity line of credit

     (21     (67     (65

Junior liens

     (119     (1     (1

Multi-family

     (38     (417     (416

Construction

     —          —          —     

Land

     (393     (1,033     (1,033

Non-residential real estate

     (1,040     (1,120     (799

Consumer loans

     (535     (510     (284

Commercial loans

     (280     (157     (206
  

 

 

   

 

 

   

 

 

 

Total charge offs

     (2,858     (3,684     (3,086
  

 

 

   

 

 

   

 

 

 

Recoveries

      

One-to-four family mortgages

     47        81        77   

Home equity line of credit

     9        6        5   

Junior liens

     27        4        3   

Multi-family

     164        —          —     

Construction

     —          —          —     

Land

     7        405        234   

Non-residential real estate

     14        137        100   

Consumer loans

     146        150        110   

Commercial loans

     6        12        10   
  

 

 

   

 

 

   

 

 

 

Total recoveries

     420        795        539   
  

 

 

   

 

 

   

 

 

 

Net Charge offs

     (2,438     (2,889     (2,547
  

 

 

   

 

 

   

 

 

 

Provision for loan losses

     1,208        2,275        1,775   
  

 

 

   

 

 

   

 

 

 

Ending balance

     9,418        10,648        10,490   
  

 

 

   

 

 

   

 

 

 

Average loan balance, gross

   $ 537,233        533,081        556,332   
  

 

 

   

 

 

   

 

 

 

Ratio of net charge offs to average outstanding loans during the period

     0.61     0.52     0.61
  

 

 

   

 

 

   

 

 

 

The determination of the allowance for loan losses is based on management’s analysis, completed on a quarterly basis. Various factors are considered, including the market value of the underlying collateral, growth and composition of the loan portfolio, the relationship of the allowance for loan losses to outstanding loans, historical loss experience, delinquency trends and prevailing economic conditions. Although management believes its allowance for loan losses is adequate, there can be no assurance that additional allowances will not be required or that losses on loans will not be incurred.

 

The Company conducts annual reviews on all loan relationships above $1 million to ascertain the borrowers continued ability to service their debt as agreed. In addition to the credit relationships mentioned above, management may classify any credit relationship once it becomes aware of adverse credit trends for that customer. Typically, the annual review consists of updated financial statements for borrowers and any guarantors, a review of the borrower’s credit history with the Company and other creditors, and current income tax information.

As a result of this review, management will classify loans based on their credit risk. Additionally, the Company provides a risk grade for all loans past due more than sixty days. The Company uses the following risk definitions for risk grades:

Satisfactory loans of average strength having some deficiency or vulnerability to changing economic or industry conditions. These customers should have reasonable amount of capital and operating ratios. Secured loans may lack in margin or liquidity. Loans to individuals, perhaps supported in dollars of net worth, but with supporting assets may be difficult to liquidate.

Watch loans are acceptable credits: (1) that need continual monitoring, such as out-of territory or asset-based loans (since the Bank does not have an asset-based lending department), or (2) with a marginal risk level to business concerns and individuals that; (a) have exhibited favorable performance in the past, though currently experiencing negative trends; (b) are in an industry that is experiencing volatility or is declining, and their performance is less than industry norms; and (c) are experiencing unfavorable trends in their financial position, such as one-time net losses or declines in asset values. These marginal borrowers may have early warning signs of problems such as occasional overdrafts and minor delinquency. If considered marginal, a loan would be a “watch” until financial data demonstrated improved performance or further deterioration to a “substandard” grade usually within a 12-month period. In the table on page 25, Watch loans are included with satisfactory loans and classified as Pass.

Other Loans Especially Mentioned are currently protected but are potentially weak. These loans constitute an undue and unwarranted credit risk but not to the point of justifying a substandard classification. The credit risk may be relatively minor yet constitutes an unwarranted risk in light of the circumstances surrounding a specific loan. These credit weaknesses, if not checked or corrected, will weaken the loan or inadequately protect the Bank’s credit position at some future date.

 

A Substandard loan is inadequately protected by the current sound worth and paying capacity of the obligor or of the collateral pledged. Loans so classified have a well-defined weakness or weaknesses that jeopardize the liquidation of the debt. The loans are characterized by the distinct possibility that the Bank will sustain some loss if the deficiencies are not corrected. This does not imply ultimate loss of the principal, but may involve burdensome administrative expenses and the accompanying cost to carry the credit. Examples of substandard loans include those to borrowers with insufficient or negative cash flow, negative net worth coupled with inadequate guarantor support, inadequate working capital, and/or significantly past-due loans and overdrafts.

A loan classified Doubtful has all the weaknesses inherent in a substandard credit except that the weaknesses make collection or liquidation in full (on the basis of currently existing facts, conditions, and values) highly questionable and improbable. The possibility of loss is extremely high, but because of certain pending factors charge-off is deferred until its more exact status may be determined. Pending factors include proposed merger, acquisition, or liquidation procedures, capital injection, perfecting liens on additional collateral, and refinancing plans. The doubtful classification is applied to that portion of the credit in which the full collection of principal and interest is questionable.

A loan is considered to be impaired when management determines that it is probable that the Company will be unable to collect all principal and interest payments due in accordance with the contractual terms of the loan agreement. The value of individually impaired loans is measured based on the present value of expected payments using the fair value of the collateral if the loan is collateral dependent. Currently, it is management’s practice to classify all substandard or doubtful loans as impaired. At September 30, 2013, December 31, 2012, and September 30, 2012, the Company’s impaired loans totaled $45.3 million, $66.6 million and $75.8 million, respectively. At September 30, 2013, December 31, 2012, and September 30, 2012, the Company’s specific reserve for impaired loans totaled $3.4 million, $3.8 million and $3.6 million, respectively.

 

A summary of the Company’s impaired loans, including their respective regulatory classification and their respective specific reserve at September 30, 2013, were as follows:

 

            Special      Impaired Loans             Specific
Allowance
for
     Allowance
for
Performing
 

September 30, 2013

   Pass      Mention      Substandard      Doubtful      Total      Impairment      Loans  
     (Dollars in Thousands)  

One-to-four family mortgages

   $ 151,028         1,423         5,406         —           157,857         755         1,386   

Home equity line of credit

     34,195         —           877         —           35,072         66         218   

Junior liens

     3,163         44         369         —           3,576         17         85   

Multi-family

     28,433         —           —           —           28,433         —           350   

Construction

     9,182         176         —           —           9,358         —           69   

Land

     19,649         1,789         16,209         —           37,647         828         298   

Non-residential real estate

     135,008         2,183         14,304         —           151,495         1,573         2,105   

Farmland

     45,275         807         4,826         —           50,908         —           439   

Consumer loans

     11,839         —           540         —           12,379         119         459   

Commercial loans

     51,893         96         2,746         —           54,735         44         607   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total

   $ 489,665         6,518         45,277         —           541,460         3,402         6,016   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

A summary of the Company’s impaired loans and their respective reserve at December 31, 2012, were as follows:

 

            Special      Impaired Loans             Specific
Allowance
for
     Allowance
for
Performing
 
     Pass      Mention      Substandard      Doubtful      Total      Impairment      Loans  
     (Dollars in Thousands)  

One-to-four family mortgages

   $ 156,961         779         4,595         —           162,335         754         1,736   

Home equity line of credit

     34,737         1,109         1,237         —           37,083         76         298   

Junior liens

     3,821         47         468         —           4,336         188         42   

Multi-family

     27,463         1,478         4,115         —           33,056         38         486   

Construction

     14,052         —           4,848         —           18,900         —           256   

Land

     14,374         7,683         23,849         —           45,906         932         1,252   

Non-residential real estate

     107,947         669         14,021         —           122,637         1,240         1,681   

Farmland

     38,496         1,230         7,073         —           46,799         184         528   

Consumer loans

     13,330         —           556         —           13,886         121         217   

Commercial loans

     44,191         516         5,842         —           50,549         308         311   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total

   $ 455,372         13,511         66,604         —           535,487         3,841         6,807   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

 

Impaired loans by classification type and the related valuation allowance amounts at September 30, 2013, were as follows:

 

                          For the nine month period ended  
     At September 30, 2013      September 30, 2013  
     Recorded
Investment
     Unpaid
Principal
Balance
     Related
Allowance
     Average
Recorded
Investment
     Interest
Income
Recognized
 
     (Dollars in thousands)  

Impaired loans with no recorded reserve:

  

One-to-four family mortgages

   $ 2,310         2,310         —           2,087         4   

Home equity line of credit

     602         602         —           539         3   

Junior liens

     2         2         —           239         —     

Multi-family

     —           —           —           1,321         —     

Construction

     —           —           —           1,371         —     

Land

     12,663         12,663         —           10,446         96   

Farmland

     4,826         4,826         —           4,669         115   

Non-residential real estate

     8,495         8,495         —           7,058         20   

Consumer loans

     64         64         —           44         7   

Commercial loans

     2,623         2,623         —           2,500         51   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total

   $ 31,585         31,585         —           30,274         296   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 
     Recorded
Investment
     Unpaid
Principal
Balance
     Related
Allowance
     Average
Recorded
Investment
     Interest
Income
Recognized
 
     (Dollars in thousands)  

Impaired loans with recorded reserve:

  

One-to-four family mortgages

   $ 3,096         3,220         755         2,701         26   

Home equity line of credit

     275         275         66         372         1   

Junior liens

     367         367         17         151         1   

Multi-family

     —           —           —           —           —     

Construction

     —           —           —           —           —     

Land

     3,546         3,546         828         4,351         20   

Farmland

     —           —           —           151         —     

Non-residential real estate

     5,809         6,842         1,573         4,150         3   

Consumer loans

     476         476         119         373         —     

Commercial loans

     123         212         44         536         1   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total

   $ 13,692         14,938         3,402         12,785         52   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total impaired loans

   $ 45,277         46,523         3,402         43,059         348   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

 

Impaired loans by classification type and the related valuation allowance amounts at December 31, 2012, were as follows:

 

     At December 31, 2012                
     Recorded
Investment
     Unpaid
Principal
Balance
     Related
Allowance
     Average
Recorded
Investment
     Interest
Income
Recognized
 

Impaired loans with no recorded reserve:

              

One-to-four family mortgages

   $ 1,759         1,759         —           5,279         107   

Home equity line of credit

     1,169         1,169         —           869         50   

Junior liens

     —           —           —           281         3   

Multi-family

     4,077         4,077         —           3,626         219   

Construction

     4,848         4,848         —           3,133         174   

Land

     20,279         20,279         —           19,857         504   

Farmland

     5,701         5,701         —           5,701         202   

Non-residential real estate

     9,662         9,662         —           14,235         653   

Consumer loans

     81         81         —           66         5   

Commercial loans

     1,617         1,617         —           2,701         165   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total

   $ 49,193         49,193         —           55,748         2,082   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 
     Recorded
Investment
     Unpaid
Principal
Balance
     Related
Allowance
     Average
Recorded
Investment
     Interest
Income
Recognized
 

Impaired loans with recorded reserve:

              

One-to-four family mortgages

     2,836         2,836         754         3,135         145   

Home equity line of credit

     68         68         76         162         3   

Junior liens

     468         468         188         365         38   

Multi-family

     38         38         38         2,640         4   

Construction

     —           —           —           1,095         —     

Land

     3,570         3,570         932         4,848         213   

Farmland

     1,372         1,372         184         1,372         92   

Non-residential real estate

     4,359         4,359         1,240         5,206         231   

Consumer loans

     475         475         121         223         1   

Commercial loans

     4,225         4,225         308         4,470         28   
  

 

 

       

 

 

    

 

 

    

 

 

 

Total

     17,411         17,411         3,841         23,516         755   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total impaired loans

   $ 66,604         66,604         3,841         79,264         2,837   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

 

 

On a periodic basis, the Bank may modify the terms of certain loans. In evaluating whether a restructuring constitutes a troubled debt restructuring (TDR), Financial Accounting Standards Board has issued Accounting Standards Update 310 (ASU 310), A Creditor’s Determination of Whether a Restructuring is a Troubled Debt Restructuring. In evaluating whether a restructuring constitutes a TDR, the Bank must separately conclude that both of the following exist:

 

    The restructuring constitutes a concession

 

    The debtor is experiencing financial difficulties

ASU 310 provides the following guidance for the Bank’s evaluation of whether it has granted a concession as follows:

 

    If a debtor does not otherwise have access to funds at a market interest rate for debt with similar risk characteristics as the restructured debt, the restructured debt would be considered a below market rate, which may indicate that the Bank may have granted a concession. In that circumstance, the Bank should consider all aspects of the restructuring in determining whether it has granted a concession, the creditor must make a separate assessment about whether the debtor is experiencing financial difficulties to determine whether the restructuring constitutes a TDR.

 

    A temporary or permanent increase in the interest rate on a loan as a result of a restructuring does not eliminate the possibility of the restructuring from being considered a concession if the new interest rate on the loan is below the market interest rate for loans of similar risk characteristics.

 

    A restructuring that results in a delay in payment that is insignificant is not a concession. However, the Bank must consider a variety of factors in assessing whether a restructuring resulting in a delay in payment is insignificant.

 

A summary of the Company’s loans classified as Troubled Debt Restructurings (TDR’s) that are reported as performing at September 30, 2013 and December 31, 2012, is below:

 

     September 30, 2013      December 31, 2012  
     (Dollars in Thousands)  

TDR by Loan Type:

  

One-to-four family mortgages

   $ —           1,888   

Home equity line of credit

     —           —     

Junior lien

     —           196   

Multi-family

     —           234   

Construction

     —           4,112   

Land

     —           3,424   

Non-residential real estate

     —           3,173   

Farmland

     —           909   

Consumer loans

     —           5   

Commercial loans

     —           128   
  

 

 

    

 

 

 

Total TDR

     —           14,069   
  

 

 

    

 

 

 

Less:

     

TDR in non-accrual status

     

One-to-four family mortgages

     —           —     

Home equity line of credit

     —           —     

Junior lien

     —           (100

Multi-family

     —           —     

Construction

     —           —     

Land

     —           (2,768

Non-residential real estate

     —           (44

Farmland

     —           —     

Consumer loans

     —           —     

Commercial loans

     —           (119
     

 

 

 

Total non-accrual TDR

     —           (3,031
  

 

 

    

 

 

 

Total performing TDR

   $ —           11,038   
  

 

 

    

 

 

 

The decline in TDR’s is the largely the result of loans being paid off and refinanced to terms considered to be market driven.

Real Estate and Other Assets Owned
9 Months Ended
Sep. 30, 2013
Banking And Thrift [Abstract]
 
Real Estate and Other Assets Owned

(6) REAL ESTATE AND OTHER ASSETS OWNED

The Company’s real estate and other assets owned represent properties and personal collateral acquired through customer loan defaults. The property is recorded at the lower of cost or fair value less estimated cost to sell and carrying cost at the date acquired. Any difference between the book value and estimated market value is recognized as a charge off through the allowance for loan loss account. Additional real estate owned and other asset losses may be determined on individual properties at specific intervals or at the time of disposal. In general, the Company will obtain a new appraisal on all real estate owned with a book balance in excess of $250,000 on an annual basis. Additional losses are recognized as a non-interest expense.

 

At September 30, 2013, December 31, 2012, and September 30, 2012, the Company had balances in other real estate owned and non-accrual loans consisting of the following:

 

     September 30, 2013     December 31, 2012     September 30, 2012  
     (Dollars in Thousands)  

One-to-four family mortgages

   $ 252        258        147   

Multi-family

     —          —          —     

Construction

     —          130        216   

Land

     1,112        1,112        275   

Non-residential real estate

     73        44        43   

Consumer assets

     2        4        —     
  

 

 

   

 

 

   

 

 

 

Total other real estate owned

     1,439        1,548        681   
  

 

 

   

 

 

   

 

 

 

Total non-accrual loans

     12,128        7,663        9,824   
  

 

 

   

 

 

   

 

 

 

Total non-performing assets

   $ 13,567        9,211        10,505   
  

 

 

   

 

 

   

 

 

 

Non-performing assets / Total assets

     1.45     0.95     1.05
  

 

 

   

 

 

   

 

 

 

 

The following is a summary of the activity in the Company’s real estate and other assets owned for the nine month period ending September 30, 2013:

 

 

     Activity During 2013  
     Balance                   Reduction     Gain (Loss)     Balance  
     12/31/2012      Foreclosures      Proceeds     in Values     on Sale     9/30/2013  
     (Dollars in Thousands)  

One-to-four family mortgages

   $ 258         750         (782     (8     34        252   

Multi-family

     —           —           —          —          —          —     

Construction

     130         —           (110     (110     90        —     

Land

     1,112         —           —          —          —          1,112   

Non-residential real estate

     44         40         (18     (11     18        73   

Consumer assets

     4         7         (3     (4     (2     2   
  

 

 

    

 

 

    

 

 

   

 

 

   

 

 

   

 

 

 

Total

   $ 1,548         797         (913     (133     140        1,439   
  

 

 

    

 

 

    

 

 

   

 

 

   

 

 

   

 

 

 

The following is a summary of the activity in the Company’s real estate and other assets owned for the year ended December 31, 2012:

 

     Activity During 2012  
     Balance                   Reduction     Gain (Loss)     Balance  
     12/31/2011      Foreclosures      Proceeds     in Values     on Sale     12/31/2012  
     (Dollars in Thousands)  

One-to-four family mortgages

   $ 480         983         (1,084     (92     (29     258   

Multi-family

     905         —           (875     —          (30     —     

Construction

     465         —           (321     —          (14     130   

Land

     248         1,229         (269     (77     (19     1,112   

Non-residential real estate

     160         64         (178     (20     18        44   

Consumer assets

     9         9         (11     —          (3     4   
  

 

 

    

 

 

    

 

 

   

 

 

   

 

 

   

 

 

 

Total

   $ 2,267         2,285         (2,738     (189     (77     1,548   
  

 

 

    

 

 

    

 

 

   

 

 

   

 

 

   

 

 

 
Investments in Affiliated Companies
9 Months Ended
Sep. 30, 2013
Equity Method Investments And Joint Ventures [Abstract]
 
Investments in Affiliated Companies

(7) INVESTMENTS IN AFFILIATED COMPANIES

Investments in affiliated companies accounted for under the equity method consist of 100% of the common stock of HopFed Capital Trust 1 (“Trust”), a wholly-owned statutory business trust. The Trust was formed on September 25, 2003. Summary financial information for the Trust follows (Dollars in Thousands):

 

Summary Statements of Financial Condition

   At September 30, 2013      At December 31, 2012  

Assets - investment in subordinated debentures issued by HopFed Bancorp, Inc.

   $ 10,310         10,310   
  

 

 

    

 

 

 

Liabilities

     

Stockholder’s equity – trust preferred securities

     10,000         10,000   

Common stock (100% Owned by HopFed Bancorp, Inc.)

     310         310   
  

 

 

    

 

 

 

Total stockholders’ equity

   $ 10,310       $ 10,310   
  

 

 

    

 

 

 

Summary Statement of Income

 

     Three Month Periods      Nine Month Period  
     Ended September 30,      Ended September 30,  
     2013      2012      2013      2012  

Income – interest income from subordinated debentures issued by HopFed Bancorp, Inc.

   $ 88         93       $ 264         282   
  

 

 

    

 

 

    

 

 

    

 

 

 

Net income

   $ 88         93       $ 264         282   
  

 

 

    

 

 

    

 

 

    

 

 

 

Summary Statement of Stockholders’ Equity

 

     Trust Preferred
Securities
     Common
Stock
     Retained
Earnings
    Total
Stockholders’
Equity
 

Beginning balances, December 31, 2012

   $ 10,000         310         —          10,310   

Net income

     —           —           264        264   

Dividends:

          

Trust preferred securities

     —           —           (256     (256

Common paid to HopFed Bancorp, Inc.

     —           —           (8     (8
  

 

 

    

 

 

    

 

 

   

 

 

 

Ending balances, September 30, 2013

   $ 10,000         310         —          10,310   
  

 

 

    

 

 

    

 

 

   

 

 

 
Fair Value of Assets and Liabilities
9 Months Ended
Sep. 30, 2013
Fair Value Disclosures [Abstract]
 
Fair Value of Assets and Liabilities

(8) FAIR VALUE OF ASSETS AND LIABILITIES

ASC 820-10, Fair Value Measurements defines fair value, establishes a framework for measuring fair value and expands disclosure about fair value. The statement establishes a fair value hierarchy which requires an entity to maximize the use of observable input and minimize the use of unobservable inputs when measuring fair value. The standard describes three levels of inputs that may be used to measure fair value.

 

    Level 1 is for assets and liabilities that management has obtained quoted prices (unadjusted for transaction cost) or identical assets or liabilities in active markets that the Company has the ability to access as of the measurement date.

 

    Level 2 is for assets and liabilities in which significant unobservable inputs other than Level 1 prices such as quoted prices for similar assets and liabilities; quoted prices in markets that are not active; or other inputs that are observable or can be corroborated by observable market data.

 

    Level 3 is for assets and liabilities in which significant unobservable inputs that reflect a reporting entity’s own assumptions about the assumptions that market participants would use in pricing an asset or liability.

The fair values of securities available for sale is primarily determined by a matrix pricing, which is a mathematical technique that is widely used in the industry to value debt securities without exclusively using quoted prices for the individual securities in the Company’s portfolio but rather by relying on the securities relationship to other benchmark quoted securities. Impaired loans are valued at the net present value of expected payments using the fair value of any assigned collateral. The values for bank owned life insurance are obtained from stated values from the respective insurance companies. The liability associated with the Company’s derivative is obtained from a quoted value supplied by our correspondent banker. The value of real estate owned is obtained from appraisals completed on properties at the time of acquisition and annually thereafter.

 

Assets and Liabilities Measured on a Recurring Basis

The assets and liabilities measured at fair value on a recurring basis at September 30, 2013, are summarized below (Dollars in Thousands):

 

Description

   Total carrying
value in the
consolidated
balance sheet at
September 30, 2013
     Quoted Prices
In Active
Markets for
Identical Assets
(Level 1)
     Significant
Other
Observable
Inputs
(Level 2)
     Significant
Unobservable
Inputs
(Level 3)
 

Assets

           

Available for sale securities

   $ 322,776         —           321,287         1,489   

Bank owned life insurance

   $ 9,574         —           9,574         —     

Liabilities

           

Interest rate swap

   $ 848         —           848         —     

The assets and liabilities measured at fair value on a recurring basis at December 31, 2012, are summarized below (Dollars in Thousands):

 

Description

   Total carrying
value in the
consolidated
balance sheet at
December 31, 2012
     Quoted Prices
In Active
Markets for
Identical Assets
(Level 1)
     Significant
Other
Observable
Inputs
(Level 2)
     Significant
Unobservable
Inputs
(Level 3)
 

Assets

           

Available for sale securities

   $ 356,345         —           354,856         1,489   

Bank owned life insurance

   $ 9,323         —           9,323         —     

Liabilities

           

Interest rate swap

   $ 1,126         —           1,126         —     

 

The assets and liabilities measured at fair value on a non-recurring basis are summarized below for September 30, 2013 (Dollars in Thousands):

 

Description

   Total carrying
value in the
consolidated
balance sheet at
September 30, 2013
     Quoted Prices
In Active
Markets for
Identical Assets
(Level 1)
     Significant
Other
Observable
Inputs
(Level 2)
     Significant
Unobservable
Inputs
(Level 3)
 
            (Dollars in Thousands)  

Assets

     

Other real estate owned

   $ 1,437         —           —           1,437   

Other assets owned

     2         —           —           2   

Impaired loans, net of reserve of $3,402

     41,875         —           —           41,875   

The assets and liabilities measured at fair value on a non-recurring basis are summarized below for December 31, 2012 (Dollars in Thousands):

 

Description

   Total carrying
value in the
consolidated
balance sheet at
December 31, 2012
     Quoted Prices
In Active
Markets for
Identical Assets
(Level 1)
     Significant
Other
Observable
Inputs
(Level 2)
     Significant
Unobservable
Inputs
(Level 3)
 

Assets

           

Other real estate owned

   $ 1,544         —           —           1,544   

Other assets owned

     4         —           —           4   

Impaired loans, net of reserve of $3,841

     62,763         —           —           62,763   

 

The table below includes a roll-forward of the consolidated condensed statement of financial condition items for the nine month periods ended September 30, 2013, and September 30, 2012, (including the change in fair value) for assets and liabilities classified by HopFed Bancorp, Inc. within level 3 of the valuation hierarchy for assets and liabilities measured at fair value on a recurring basis. When a determination is made to classify an asset or liability within level 3 of the valuation hierarchy, the determination is based upon the significance of the unobservable factors to the overall fair value measurement. However, since level 3 assets and liabilities typically include, in addition to the unobservable or level 3 components, observable components (that is components that are actively quoted and can be validated to external sources), the gains and losses in the table below include changes in fair value due in part to observable factors that are part of the valuation methodology.

 

Nine month period ended September 30,

   2013      2012  
     Other Assets      Other Liabilities      Other Assets      Other Liabilities  
     (Dollars in Thousands)  

Fair value, January 1,

   $ 1,489         —           993         —     

Change in unrealized losses included in other comprehensive income for assets and liabilities still held at September 30,

     —           —           429         —     

Purchases, issuances and settlements, net

     —           —           —           —     

Transfers in and/or out of Level 3

     —           —           —           —     
  

 

 

    

 

 

    

 

 

    

 

 

 

Fair value, September 30,

   $ 1,489         —           1,422         —     
  

 

 

    

 

 

    

 

 

    

 

 

 

 

The estimated fair values of financial instruments were as follows at September 30, 2013:

 

     Carrying
Amount
     Estimated
Fair
Value
     Quoted Prices
In Active Markets
for Identical
Assets
Level 1
     Using
Significant
Other
Observable
Inputs
Level 2
     Significant
Unobservable
Inputs
Level 3
 
     (Dollars in Thousands)  

Financial Assets:

  

Cash and due from banks

   $ 24,566         24,566       $ 24,566         —           —     

Interest-earning deposits

     3,777         3,777         3,777         —           —     

Securities available for sale

     322,776         322,776         —           321,287         1,489   

Federal Home Loan Bank stock

     4,428         4,428         —           4,428         —     

Loans receivable

     532,013         535,651         —           —           535,651   

Accrued interest receivable

     5,042         5,042         —           5,042         —     

Bank owned life insurance

     9,574         9,574         —           9,574         —     

Financial liabilities:

              

Deposits

     726,937         726,116            726,116         —     

Advances from borrowers for taxes and insurance

     822         822         —           822         —     

Advances from Federal Home Loan Bank

     47,276         46,168         —           46,168         —     

Repurchase agreements

     48,182         49,161         —           49,161         —     

Subordinated debentures

     10,310         10,091         —           —           10,091   

Off-balance-sheet liabilities:

              

Commitments to extend credit

     —           —           —           —           —     

Commercial letters of credit

     —           —           —           —           —     

Market value of interest rate swap

     848         848         —           848         —     

 

The estimated fair values of financial instruments were as follows at December 31, 2012:

 

     Carrying
Amount
     Estimated
Fair
Value
     Quoted Prices
In Active Markets
for Identical
Assets
Level 1
     Using
Significant
Other
Observable
Inputs
Level 2
     Significant
Unobservable
Inputs
Level 3
 
     (Dollars in Thousands)  

Financial Assets:

  

Cash and due from banks

   $ 31,563         31,563       $ 31,563         —           —     

Interest-earning deposits

     5,613         5,613         5,613         —           —     

Securities available for sale

     356,345         356,345         —           354,856         1,489   

Federal Home Loan Bank stock

     4,428         4,428         —           4,428         —     

Loans receivable

     524,985         532,040         —           —           532,040   

Accrued interest receivable

     5,398         5,398         —           5,398         —     

Bank owned life insurance

     9,323         9,323         —           9,323         —     

Financial liabilities:

              

Deposits

     759,865         756,426         —           756,426         —     

Advances from borrowers for taxes and insurance

     396         396         —           396         —     

Advances from Federal Home Loan Bank

     43,741         49,293         —           49,293         —     

Repurchase agreements

     43,508         44,779         —           44,779         —     

Subordinated debentures

     10,310         10,092         —           —           10,092   

Off-balance-sheet liabilities:

                 —     

Commitments to extend credit

     —           —           —           —           —     

Commercial letters of credit

     —           —           —           —           —     

Market value of interest rate swap

     1,126         1,126         —           1,126         —     
Participation in the United States of America Treasury Department's Capital Purchase Program
9 Months Ended
Sep. 30, 2013
Equity [Abstract]
 
Participation in the United States of America Treasury Department's Capital Purchase Program

(9) PARTICIPATION IN THE UNITED STATES OF AMERICA TREASURY DEPARTMENT’S CAPITAL PURCHASE PROGRAM

On December 12, 2008, HopFed Bancorp issued and sold 18,400 shares of preferred stock to the United States Treasury (Treasury) for $18,400,000 pursuant to the Capital Purchase Program. The Company also issued a common stock warrant to the Treasury as a condition to its participation in the Capital Purchase Program. The warrant was immediately exercisable and allowed the holder to purchase 253,667 shares of the Company’s common stock at $10.88 per share. The warrant would have expired on December 12, 2018. The preferred stock had no stated maturity and was non-voting, other than having class voting rights on certain matters, and paid cumulative dividends quarterly at a rate of 5% per year for the first five years and 9% thereafter. The Company repurchased the preferred stock from the Treasury at par on December 19, 2012, and repurchased the warrant from the Treasury on January 16, 2013, for $256,257. The Company cancelled all Preferred Treasury Shares on August 22, 2013.

Stock Options
9 Months Ended
Sep. 30, 2013
Disclosure Of Compensation Related Costs Sharebased Payments [Abstract]
 
Stock Options

(10) STOCK OPTIONS

At September 30, 2013, all stock options outstanding were issued under the HopFed Bancorp, Inc. 1999 Stock Option Plan. At September 30, 2013, the Company can no longer issue options under this plan. The remaining 20,808 options are fully vested with a strike price of $16.67 and have a final maturity of June 1, 2014.

Derivative Instruments
9 Months Ended
Sep. 30, 2013
Derivative Instruments And Hedging Activities Disclosure [Abstract]
 
Derivative Instruments

(11) DERIVATIVE INSTRUMENTS

Under guidelines of Financial Accounting Standards Board (“FASB”) ASC 815, Derivative Instruments and Hedging Activities, as amended, all derivative instruments are required to be carried at fair value on the consolidated statement of financial position. ASC 815 provides special hedge accounting provisions, which permit the change in fair value of the hedge item related to the risk being hedged to be recognized in earnings in the same period and in the same income statement line as the change in the fair value of the derivative.

A derivative instrument designated in a hedge relationship to mitigate exposure to changes in the fair value of an asset, liability or firm commitment attributable to a particular risk, such as interest rate risk, are considered fair value hedges under ASC 815. Derivative instruments designated in a hedge relationship to mitigate exposure to variability in expected future cash flows, or other types of forecasted transactions, are considered cash flow hedges. Cash value hedges are accounted for by recording the fair value of the derivative instrument and the fair value related to the risk being hedged of the hedged asset or liability on the consolidated statement of financial position with corresponding offsets recorded in the consolidated statement of financial position.

The adjustment to the hedged asset or liability is included in the basis of the hedged item, while the fair value of the derivative is recorded as a freestanding asset or liability. Actual cash receipts or payments and related amounts accrued during the period on derivatives included in a fair value hedge relationship are recorded as adjustments to the income or expense recorded on the hedged asset or liability.

Under both the fair value and cash flow hedge methods, derivative gains and losses not effective in hedging the change in fair value or expected cash flows of the hedged item are recognized immediately in the income statement. At the hedge’s inception and at least quarterly thereafter, a formal assessment is performed to determine whether changes in the fair values or cash flows of the derivative instrument has been highly effective in offsetting changes in the fair values or cash flows of the hedged items and whether they are expected to be highly effective in the future. If it is determined a derivative instrument has not been, or will not continue to be highly effective as a hedge, hedged accounting is discontinued. ASC 815 basis adjustments recorded on hedged assets and liabilities are amortized over the remaining life of the hedged item beginning no later than when hedge accounting ceases. There were no fair value hedging gains or losses, as a result of hedge ineffectiveness, recognized for the nine month period ended September 30, 2013, or the year ended December 31, 2012.

 

In October of 2008, the Bank entered into an interest rate swap agreement for a term of seven years and an amount of $10.0 million. The Bank will pay a fixed rate of 7.27% for seven years and receive an amount equal to the three-month London Interbank Lending Rate (LIBOR) plus 3.10%. The interest rate swap is classified as a cash flow hedge by the Bank and is tested quarterly for effectiveness. At September 30, 2013, and December 31, 2012, the cost of the Bank to terminate the cash flow hedge was approximately $848,000 and $1,126,000, respectively.

Regulatory Changes
9 Months Ended
Sep. 30, 2013
Text Block [Abstract]
 
Regulatory Changes

(12) REGULATORY CHANGES

On June 5, 2013, the Company announced that its wholly owned subsidiary, Heritage Bank, has completed its conversion from a federally chartered savings and loan to a state chartered commercial bank regulated by the Kentucky Department of Financial Institutions and the Federal Deposit Insurance Corporation. In connection with the Bank’s charter conversion, the Company has received approval from the Board of Governors of the Federal Reserve System (the “Federal Reserve”) to convert our holding company from a savings and loan holding company to a bank holding company also with an effective date of June 5, 2013.

On July 2, 2013, the Board of Governors of the Federal Reserve Bank approved the final rule for BASEL III capital requirements for all commercial banks charted in the United States of America. The rule was subsequently approved by the FDIC on July 9, 2013. The rule will implement in the United States the Basel III regulatory capital reforms from the Basel Committee on Banking Supervision and certain changes required by the Dodd-Frank Wall Street Reform and Consumer Protection Act. Under the final rule, minimum requirements will increase for both the quantity and quality of capital held by banking organizations. Consistent with the international Basel framework, the rule includes a new minimum ratio of common equity tier 1 capital to risk-weighted assets of 4.5% and a common equity tier 1 capital conservation buffer of 2.5% of risk-weighted assets that will apply to all supervised financial institutions. The rule also raises the minimum ratio of tier 1 capital to risk-weighted assets from 4 percent to 6 percent and includes a minimum leverage ratio of 4 percent for all banking organizations. In addition, for the largest, most internationally active banking organizations, the final rule includes a new minimum supplementary leverage ratio that takes into account off-balance sheet exposures. The transition period for implementation of Basel III is January 1, 2015, through December 31, 2018.

 

Management believes that at September 30, 2013, the Company and the Bank would have met all new capital adequacy requirements on a fully phased-in-basis if such requirements were then effective. There can be no assurance that the Basel III capital rules will not be revised before the effective date and phase-in periods. At September 30, 2013, the Company’s analysis of its capital position as compared to the Basel III requirements for January 1, 2019 is provided in the table below:

 

                  January 1, 2019  
                  Minimum     Minimum Ratio  
     Actual     Ratio     With Buffer  
     (Dollars in Thousands)  
     Amount      Ratio     Amount      Ratio     Amount      Ratio  

Common Equity Tier 1 Capital Ratio

               

Consolidated

     96,461         16.4     26,495         4.5     41,215         7.0

Heritage Bank

     100,371         17.1     26,402         4.5     41,070         7.0

Tier 1 Capital Ratio to Risk Weighted Assets

               

Consolidated

     106,461         18.1     35,327         6.0     50,047         8.5

Heritage Bank

     100,371         17.1     35,203         6.0     49,870         8.5

Minimum Total Capital Ratio to Risk Weighted Assets

               

Consolidated

     113,818         19.3     47,103         8.0     61,823         10.5

Heritage Bank

     107,728         18.4     46,937         8.0     61,605         10.5
Effect of New Accounting Pronouncements
9 Months Ended
Sep. 30, 2013
Accounting Changes And Error Corrections [Abstract]
 
Effect of New Accounting Pronouncements

(13) EFFECT OF NEW ACCOUNTING PRONOUNCEMENTS

ASU 2012-02, “Intangibles – Goodwill and Other (Topic 350) - Testing Indefinite-Lived Intangible Assets for Impairment.” ASU 2012-02 give entities the option to first assess qualitative factors to determine whether the existence of events or circumstances leads to a determination that it is more likely than not that an indefinite-lived intangible asset is impaired. If, after assessing the totality of events or circumstances, an entity determines it is more likely than not that an indefinite-lived intangible asset is impaired, then the entity must perform the quantitative impairment test. If, under the quantitative impairment test, the carrying amount of the intangible asset exceeds its fair value, an entity should recognize an impairment loss in the amount of that excess.

Permitting an entity to assess qualitative factors when testing indefinite-lived intangible assets for impairment results in guidance that is similar to the goodwill impairment testing guidance in ASU 2011-08. ASU 2012-02 is effective for the Company’s beginning January 1, 2013 (early adoption permitted) and did not have a significant impact on the Company’s financial statements.

 

ASU 2012-06,“Business Combinations (Topic 805) – Subsequent Accounting for an Indemnification Asset Recognized at the Acquisition Date as a Result of a Government-Assisted Acquisition of a Financial Institution (a consensus of the FASB Emerging Issues Task Force).” ASU 2012-06 clarifies the applicable guidance for subsequently measuring an indemnification asset recognized as a result of a government-assisted acquisition of a financial institution.

Under ASU 2012-06, when a reporting entity recognizes an indemnification asset as a result of a government-assisted acquisition of a financial institution and, subsequently, a change in the cash flows expected to be collected on the indemnification asset occurs (as a result of a change in cash flows expected to be collected on the assets subject to indemnification), the reporting entity should subsequently account for the change in the measurement of the indemnification asset on the same basis as the change in the assets subject to indemnification. Any amortization of changes in value should be limited to the contractual term of the indemnification agreement (that is, the lesser of the term of the indemnification agreement and the remaining life of the indemnified assets). ASU 2012-06 became effective for the Company on January 1, 2013 and did not have a significant impact on the Corporation’s financial statements.

ASU 2013-02, “Comprehensive Income (Topic 220) – Reporting of Amounts Reclassified Out of Accumulated Other Comprehensive Income.” ASU 2013-02 amends recent guidance related to the reporting of comprehensive income to enhance the reporting of reclassifications out of accumulated other comprehensive income. ASU 2013-02 became effective for the Company on January 1, 2013, and did not have a significant impact on the Company’s financial statements.

ASU 2013-08, “Financial Services – Investment Companies (Topic 946) – Amendments to the Scope, Measurement and Disclosure Requirements.” ASU 2013-08 clarifies the characteristics of investment companies and sets forth a new approach for determining whether a company is an investment company. The fundamental characteristics of an investment company include (i) the company obtains funds from investors and provides the investors with investment management services; (ii) the company commits to its investors that its business purpose and only substantive activities are investing the funds for returns solely from capital appreciation, investment income, or both; and (iii) the company or its affiliates do not obtain or have the objective of obtaining returns or benefits from an investee or its affiliates that are not normally attributable to ownership interests or that are other than capital appreciation or investment income. ASU 2013-08 also sets forth the scope, measurement and disclosure requirements for investment companies. ASU 2013-08 is effective for the Company on January 1, 2014 and is not expected to have a significant impact on the Company’s financial statements.

ASU 2013-10, “Derivatives and Hedging (Topic 815) – Inclusion of the Fed Funds Effective Swap Rate (or Overnight Index Swap Rate) as a Benchmark Interest Rate for Hedge Accounting Purposes.” ASU 2013-10 permits the Fed Funds Effective Swap Rate (or Overnight Index Swap Rate) to be used as a U.S. benchmark interest rate for hedge accounting purposes under Topic 815, in addition to interest rates on direct Treasury obligations of the U.S. government and the London Interbank Offered Rate (“LIBOR”). ASU 2013-10 is effective prospectively for qualifying new or re-designated hedging relationships entered into on or after July 17, 2013, and did not have a material impact on the Corporation’s financial statements.

 

Other accounting standards that have been issued or proposed by the FASB or other standards-setting bodies are not expected to have a material impact on the Company’s financial position, results of operations or cash flows.

Income Taxes
9 Months Ended
Sep. 30, 2013
Income Tax Disclosure [Abstract]
 
Income Taxes

(14) Income Taxes

The Company and its subsidiaries file consolidated federal income tax returns and Tennessee excise tax returns. The Company and its non-bank subsidiaries filed consolidated Kentucky income tax returns. The Bank is exempt from Kentucky corporate income tax. The Company has no unrecognized tax benefits and has accrued any interest or penalties for uncertain tax positions.

The effective tax rate differs from the statutory federal rate of 35% and Tennessee excise rate of 6.50% due to investments in qualified municipal securities; bank owned life insurance, income apportioned to Kentucky and certain non-deductible expenses.

Termination of Merger Agreement
9 Months Ended
Sep. 30, 2013
Business Combinations [Abstract]
 
Termination of Merger Agreement

(15) Termination of Merger Agreement

On August 23, 2013, the Company announced that a previously announced merger of Heritage Bank USA, Inc. and Sumner Bank and Trust (“Sumner Bank”) of Gallatin, Tennessee, was terminated by mutual consent. The mutual decision to terminate was due to Sumner Bank’s failure to meet a certain performance requirement under the merger agreement. Each party will bear its own costs and expenses in connection with the terminated transaction, without penalties. In the three month period ended September 30, 2013, the Company incurred approximately $150,000 in expenses related to the termination of the merger.

Loans (Policies)
9 Months Ended
Sep. 30, 2013
Receivables [Abstract]
 
Derivative Instruments and Hedging Activities
Comprehensive Income
Intangibles - Goodwill and Other
Business Combinations
Troubled Debt Restructuring
Fair Value Measurements
Financial Services Investment Companies
Derivative and Hedging Activities

Under guidelines of Financial Accounting Standards Board (“FASB”) ASC 815, Derivative Instruments and Hedging Activities, as amended, all derivative instruments are required to be carried at fair value on the consolidated statement of financial position. ASC 815 provides special hedge accounting provisions, which permit the change in fair value of the hedge item related to the risk being hedged to be recognized in earnings in the same period and in the same income statement line as the change in the fair value of the derivative.

A derivative instrument designated in a hedge relationship to mitigate exposure to changes in the fair value of an asset, liability or firm commitment attributable to a particular risk, such as interest rate risk, are considered fair value hedges under ASC 815. Derivative instruments designated in a hedge relationship to mitigate exposure to variability in expected future cash flows, or other types of forecasted transactions, are considered cash flow hedges. Cash value hedges are accounted for by recording the fair value of the derivative instrument and the fair value related to the risk being hedged of the hedged asset or liability on the consolidated statement of financial position with corresponding offsets recorded in the consolidated statement of financial position.

The adjustment to the hedged asset or liability is included in the basis of the hedged item, while the fair value of the derivative is recorded as a freestanding asset or liability. Actual cash receipts or payments and related amounts accrued during the period on derivatives included in a fair value hedge relationship are recorded as adjustments to the income or expense recorded on the hedged asset or liability.

Under both the fair value and cash flow hedge methods, derivative gains and losses not effective in hedging the change in fair value or expected cash flows of the hedged item are recognized immediately in the income statement. At the hedge’s inception and at least quarterly thereafter, a formal assessment is performed to determine whether changes in the fair values or cash flows of the derivative instrument has been highly effective in offsetting changes in the fair values or cash flows of the hedged items and whether they are expected to be highly effective in the future. If it is determined a derivative instrument has not been, or will not continue to be highly effective as a hedge, hedged accounting is discontinued. ASC 815 basis adjustments recorded on hedged assets and liabilities are amortized over the remaining life of the hedged item beginning no later than when hedge accounting ceases. There were no fair value hedging gains or losses, as a result of hedge ineffectiveness, recognized for the nine month period ended September 30, 2013, or the year ended December 31, 2012.

ASU 2013-02, “Comprehensive Income (Topic 220) – Reporting of Amounts Reclassified Out of Accumulated Other Comprehensive Income.” ASU 2013-02 amends recent guidance related to the reporting of comprehensive income to enhance the reporting of reclassifications out of accumulated other comprehensive income. ASU 2013-02 became effective for the Company on January 1, 2013, and did not have a significant impact on the Company’s financial statements.

ASU 2012-02, “Intangibles – Goodwill and Other (Topic 350) - Testing Indefinite-Lived Intangible Assets for Impairment.” ASU 2012-02 give entities the option to first assess qualitative factors to determine whether the existence of events or circumstances leads to a determination that it is more likely than not that an indefinite-lived intangible asset is impaired. If, after assessing the totality of events or circumstances, an entity determines it is more likely than not that an indefinite-lived intangible asset is impaired, then the entity must perform the quantitative impairment test. If, under the quantitative impairment test, the carrying amount of the intangible asset exceeds its fair value, an entity should recognize an impairment loss in the amount of that excess.

Permitting an entity to assess qualitative factors when testing indefinite-lived intangible assets for impairment results in guidance that is similar to the goodwill impairment testing guidance in ASU 2011-08. ASU 2012-02 is effective for the Company’s beginning January 1, 2013 (early adoption permitted) and did not have a significant impact on the Company’s financial statements.

ASU 2012-06, “Business Combinations (Topic 805) – Subsequent Accounting for an Indemnification Asset Recognized at the Acquisition Date as a Result of a Government-Assisted Acquisition of a Financial Institution (a consensus of the FASB Emerging Issues Task Force).” ASU 2012-06 clarifies the applicable guidance for subsequently measuring an indemnification asset recognized as a result of a government-assisted acquisition of a financial institution.

Under ASU 2012-06, when a reporting entity recognizes an indemnification asset as a result of a government-assisted acquisition of a financial institution and, subsequently, a change in the cash flows expected to be collected on the indemnification asset occurs (as a result of a change in cash flows expected to be collected on the assets subject to indemnification), the reporting entity should subsequently account for the change in the measurement of the indemnification asset on the same basis as the change in the assets subject to indemnification. Any amortization of changes in value should be limited to the contractual term of the indemnification agreement (that is, the lesser of the term of the indemnification agreement and the remaining life of the indemnified assets). ASU 2012-06 became effective for the Company on January 1, 2013 and did not have a significant impact on the Corporation’s financial statements.

On a periodic basis, the Bank may modify the terms of certain loans. In evaluating whether a restructuring constitutes a troubled debt restructuring (TDR), Financial Accounting Standards Board has issued Accounting Standards Update 310 (ASU 310), A Creditor’s Determination of Whether a Restructuring is a Troubled Debt Restructuring. In evaluating whether a restructuring constitutes a TDR, the Bank must separately conclude that both of the following exist:

 

    The restructuring constitutes a concession

 

    The debtor is experiencing financial difficulties

ASU 310 provides the following guidance for the Bank’s evaluation of whether it has granted a concession as follows:

 

    If a debtor does not otherwise have access to funds at a market interest rate for debt with similar risk characteristics as the restructured debt, the restructured debt would be considered a below market rate, which may indicate that the Bank may have granted a concession. In that circumstance, the Bank should consider all aspects of the restructuring in determining whether it has granted a concession, the creditor must make a separate assessment about whether the debtor is experiencing financial difficulties to determine whether the restructuring constitutes a TDR.

 

    A temporary or permanent increase in the interest rate on a loan as a result of a restructuring does not eliminate the possibility of the restructuring from being considered a concession if the new interest rate on the loan is below the market interest rate for loans of similar risk characteristics.

 

    A restructuring that results in a delay in payment that is insignificant is not a concession. However, the Bank must consider a variety of factors in assessing whether a restructuring resulting in a delay in payment is insignificant.

ASC 820-10, Fair Value Measurements defines fair value, establishes a framework for measuring fair value and expands disclosure about fair value. The statement establishes a fair value hierarchy which requires an entity to maximize the use of observable input and minimize the use of unobservable inputs when measuring fair value. The standard describes three levels of inputs that may be used to measure fair value.

 

    Level 1 is for assets and liabilities that management has obtained quoted prices (unadjusted for transaction cost) or identical assets or liabilities in active markets that the Company has the ability to access as of the measurement date.

 

    Level 2 is for assets and liabilities in which significant unobservable inputs other than Level 1 prices such as quoted prices for similar assets and liabilities; quoted prices in markets that are not active; or other inputs that are observable or can be corroborated by observable market data.

 

    Level 3 is for assets and liabilities in which significant unobservable inputs that reflect a reporting entity’s own assumptions about the assumptions that market participants would use in pricing an asset or liability.

The fair values of securities available for sale is primarily determined by a matrix pricing, which is a mathematical technique that is widely used in the industry to value debt securities without exclusively using quoted prices for the individual securities in the Company’s portfolio but rather by relying on the securities relationship to other benchmark quoted securities. Impaired loans are valued at the net present value of expected payments using the fair value of any assigned collateral. The values for bank owned life insurance are obtained from stated values from the respective insurance companies. The liability associated with the Company’s derivative is obtained from a quoted value supplied by our correspondent banker. The value of real estate owned is obtained from appraisals completed on properties at the time of acquisition and annually thereafter.

ASU 2013-08, “Financial Services – Investment Companies (Topic 946) – Amendments to the Scope, Measurement and Disclosure Requirements.” ASU 2013-08 clarifies the characteristics of investment companies and sets forth a new approach for determining whether a company is an investment company. The fundamental characteristics of an investment company include (i) the company obtains funds from investors and provides the investors with investment management services; (ii) the company commits to its investors that its business purpose and only substantive activities are investing the funds for returns solely from capital appreciation, investment income, or both; and (iii) the company or its affiliates do not obtain or have the objective of obtaining returns or benefits from an investee or its affiliates that are not normally attributable to ownership interests or that are other than capital appreciation or investment income. ASU 2013-08 also sets forth the scope, measurement and disclosure requirements for investment companies. ASU 2013-08 is effective for the Company on January 1, 2014 and is not expected to have a significant impact on the Company’s financial statements.

ASU 2013-10, “Derivatives and Hedging (Topic 815) – Inclusion of the Fed Funds Effective Swap Rate (or Overnight Index Swap Rate) as a Benchmark Interest Rate for Hedge Accounting Purposes.” ASU 2013-10 permits the Fed Funds Effective Swap Rate (or Overnight Index Swap Rate) to be used as a U.S. benchmark interest rate for hedge accounting purposes under Topic 815, in addition to interest rates on direct Treasury obligations of the U.S. government and the London Interbank Offered Rate (“LIBOR”). ASU 2013-10 is effective prospectively for qualifying new or re-designated hedging relationships entered into on or after July 17, 2013, and did not have a material impact on the Corporation’s financial statements.

Income Per Share (Tables)
9 Months Ended
Sep. 30, 2013
Earnings Per Share [Abstract]
 
Reconciliation of Basic and Diluted Income (Loss) Per Share
Reconciliation of Basic and Diluted Income (Loss) Per Share

The following schedule reconciles the numerators and denominators of the basic and diluted income per share (“IPS”) computations for the three and nine month periods ended September 30, 2013, and September 30, 2012. Diluted common shares arise from the potentially dilutive effect of the Company’s stock options and warrant outstanding.

 

     Three Month Periods Ended
September 30,
 
     2013      2012  

Basic IPS:

     

Net income available to common stockholders

   $ 536,000       $ 819,000   

Average common shares outstanding

     7,483,582         7,487,283   
  

 

 

    

 

 

 

Net income per share available to common shareholders, basic

   $ 0.07       $ 0.11   
  

 

 

    

 

 

 

Diluted IPS

     

Net income available to common stockholders

   $ 536,000       $ 819,000   
  

 

 

    

 

 

 

Average common shares outstanding

     7,483,582         7,487,283   

Dilutive effect of stock options

     —           —     
  

 

 

    

 

 

 

Average diluted shares outstanding

     7,483,582         7,487,283   
  

 

 

    

 

 

 

Net income per share available to common shareholders, diluted

   $ 0.07       $ 0.11   
  

 

 

    

 

 

 
     Nine Month Periods Ended
September 30,
 
     2013      2012  

Basic IPS:

     

Net income available to common stockholders

   $ 2,686,000       $ 2,192,000   

Average common shares outstanding

     7,483,606         7,485,571   
  

 

 

    

 

 

 

Net income per share available to common shareholders, basic

   $ 0.36       $ 0.29   
  

 

 

    

 

 

 

Diluted IPS

     

Net income available to common stockholders

   $ 2,686,000       $ 2,192,000   
  

 

 

    

 

 

 

Average common shares outstanding

     7,483,606         7,485,571   

Dilutive effect of stock options

     —           —     
  

 

 

    

 

 

 

Average diluted shares outstanding

     7,483,606         7,485,571   
  

 

 

    

 

 

 

Net income per share available to common shareholders, diluted

   $ 0.36       $ 0.29   
  

 

 

    

 

 

 
Stock Compensation (Tables)
9 Months Ended
Sep. 30, 2013
Disclosure Of Compensation Related Costs Sharebased Payments [Abstract]
 
Company's Future Compensation Expense Related to Restricted Stock Vesting
Company's Future Compensation Expense Related to Restricted Stock Vesting

The table below provides a detail of the Company’s future compensation expense related to restricted stock vesting at September 30, 2013:

 

Year Ended

December 31,

   Future
Expense
 

2013

   $ 34,256   

2014

     124,192   

2015

     101,773   

2016

     48,272   

2017

     3,125   
  

 

 

 

Total

   $ 311,618   
  

 

 

 
Securities (Tables)
9 Months Ended
Sep. 30, 2013
Investments Debt And Equity Securities [Abstract]
 
Amortized Cost of Securities and their Estimated Fair Values
Maturities of Debt Securities Available for Sale
Estimated Fair Value and Unrealized Loss Amounts of Impaired Investments
Summary Other Than Temporary Impairment Losses on Securities
Activity Related to Credit Component Recognized in Earnings on Debt Securities Held by Entity

At September 30, 2013, the Company has 88 securities with unrealized losses. The carrying amount of securities and their estimated fair values at September 30, 2013, were as follows:

 

     September 30, 2013  
            Gross      Gross     Estimated  
     Amortized      Unrealized      Unrealized     Fair  
     Cost      Gains      Losses     Value  
     (Dollars in Thousands)  

Restricted:

          

FHLB stock

   $ 4,428         —           —          4,428   
  

 

 

    

 

 

    

 

 

   

 

 

 

Unrestricted:

          

U.S. government and agency securities:

          

Agency debt securities

   $ 120,813         2,284         (2,050     121,047   

Corporate bonds

     2,000         —           (8     1,992   

Taxable municipal bonds

     17,813         317         (456     17,674   

Tax free municipal bonds

     66,281         2,418         (811     67,888   

Trust preferred securities

     1,600         —           (111     1,489   

Mortgage-backed securities:

          

GNMA

     18,086         725         (105     18,706   

FNMA

     67,913         675         (1,565     67,023   

FHLMC

     1,418         17         —          1,435   

NON-AGENCY CMOs

     13,807         36         (387     13,456   

AGENCY CMOs

     12,052         189         (175     12,066   
  

 

 

    

 

 

    

 

 

   

 

 

 
   $ 321,783         6,661         (5,668     322,776   
  

 

 

    

 

 

    

 

 

   

 

 

 

 

The carrying amount of securities and their estimated fair values at December 31, 2012, was as follows:

 

     December 31, 2012  
     Amortized
Cost
     Gross
Unrealized
Gains
     Gross
Unrealized
Losses
    Estimated
Fair
Value
 
     (Dollars in Thousands)  

Restricted:

          

FHLB stock

   $ 4,428         —           —          4,428   
  

 

 

    

 

 

    

 

 

   

 

 

 

Unrestricted:

          

U.S. government and agency securities:

          

Agency debt securities

   $ 147,659         5,202         (83     152,778   

Taxable municipal bonds

     12,535         1,209         (8     13,736   

Tax free municipal bonds

     68,331