UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
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x
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QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934
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For Quarter Ended September 30, 2010
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¨
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TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (D) OF SECURITIES EXCHANGE ACT OF 1934
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Commission File Number 000-24147
KILLBUCK
BANCSHARES, INC.
(Exact name of registrant as specified in its Charter)
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OHIO
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34-1700284
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(State or other jurisdiction of
incorporation or organization)
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(I.R.S. Employer
Identification No.)
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165 N. Main Street, Killbuck, OH
44637
(Address of principal executive offices and zip code)
(330) 276-2771
(Registrant’s telephone number, including area code)
Indicate by check mark whether
the registrant (1) has filed all reports required to be filed by Section 13 or 15 (d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such
reports), and (2) has been subject to such filing requirements for the past 90
days. Yes
x
No
¨
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a small reporting company. See the definitions of “large accelerated
filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):
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Large accelerated filer
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¨
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Accelerated filer
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¨
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Non-accelerated filer
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¨
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Smaller reporting Company
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x
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Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File
required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such
files).
¨
Yes
¨
No
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange
Act). Yes
¨
No
x
State the number of shares outstanding for each of the issuer’s classes of common equity as of the latest practicable date:
Class: Common Stock, no par value
Outstanding at November 9, 2010: 616,706
KILLBUCK BANCSHARES, INC.
Index
2
Killbuck Bancshares, Inc.
CONSOLIDATED BALANCE SHEET (UNAUDITED)
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September 30,
2010
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December 31,
2009
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ASSETS
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Cash and cash equivalents:
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Cash and amounts due from depository institutions
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$
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59,013,282
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$
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42,575,944
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Federal funds sold
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7,254,000
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2,938,000
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Total cash and cash equivalents
|
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|
66,267,282
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45,513,944
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Investment securities:
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Securities available for sale
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62,897,352
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65,334,849
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Securities held to maturity (fair value of $42,534,286 and $36,373,611)
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40,579,895
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35,086,821
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Total investment securities
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103,477,247
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100,421,670
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Loans (net of allowance for loan losses of $2,662,107 and $2,441,169)
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206,872,587
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207,575,135
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Loans held for sale, at lower of cost or market
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1,090,500
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271,000
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Premises and equipment, net
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5,959,719
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6,009,442
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Accrued interest receivable
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1,498,961
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1,467,901
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Goodwill, net
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1,329,249
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1,329,249
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Other assets
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9,273,744
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9,391,044
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Total assets
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$
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395,769,289
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$
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371,979,385
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LIABILITIES
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Deposits:
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Noninterest bearing demand
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$
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56,901,884
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$
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63,636,376
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Interest bearing demand
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27,427,442
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32,102,301
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Money market
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49,633,208
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28,669,992
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Savings
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46,906,167
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42,973,020
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Time
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164,424,230
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153,913,387
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Total deposits
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345,292,931
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321,295,076
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Short-term borrowings
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3,910,000
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5,660,000
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Federal Home Loan Bank advances
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741,518
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1,212,000
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Accrued interest and other liabilities
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1,058,717
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748,901
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Total liabilities
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351,003,166
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328,915,977
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SHAREHOLDERS’ EQUITY
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Common stock – No par value: 1,000,000 shares authorized, 718,431 issued
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8,846,670
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8,846,670
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Retained earnings
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44,983,071
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43,742,847
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Accumulated other comprehensive income
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479,096
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16,605
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Treasury stock, at cost (101,725 shares for both dates presented)
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(9,542,714
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)
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(9,542,714
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)
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Total shareholders’ equity
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44,766,123
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43,063,408
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Total liabilities and shareholders’ equity
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$
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395,769,289
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$
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371,979,385
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See accompanying notes to the unaudited consolidated financial statements.
3
Killbuck Bancshares, Inc.
CONSOLIDATED STATEMENT OF INCOME (UNAUDITED)
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Nine Months
Ended
September 30,
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2010
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2009
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INTEREST INCOME
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Interest and fees on loans
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$
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8,601,845
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$
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9,295,475
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Federal funds sold and other
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71,989
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36,524
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Investment securities:
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Taxable
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1,434,990
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1,663,897
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Exempt from federal income tax
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1,104,528
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1,059,279
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Total interest income
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11,213,352
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12,055,175
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INTEREST EXPENSE
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Deposits
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2,983,019
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3,354,635
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Short term borrowings
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7,417
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9,198
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Federal Home Loan Bank advances
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45,094
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70,630
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Total interest expense
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3,035,530
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3,434,463
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NET INTEREST INCOME
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8,177,822
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8,620,712
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Provision for loan losses
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215,182
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2,000
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NET INTEREST INCOME AFTER PROVISION FOR LOAN LOSSES
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7,962,640
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8,618,712
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NON INTEREST INCOME
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Service charges on deposit accounts
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98,748
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102,416
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ATM and interchange fees
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|
221,278
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184,901
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Fees on deposit accounts
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|
531,130
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572,574
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Gain on sale of loans, net
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|
136,189
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|
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|
108,430
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Earnings on bank owned life insurance
|
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|
418,304
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177,519
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Other income
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|
101,170
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|
111,099
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Total non interest income
|
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|
1,506,819
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|
|
|
1,256,939
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|
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|
|
|
|
|
|
|
|
|
|
|
NON INTEREST EXPENSE
|
|
|
|
|
|
|
|
|
|
Salaries and employee benefits
|
|
|
3,730,454
|
|
|
|
3,790,555
|
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|
Occupancy and equipment expense
|
|
|
720,533
|
|
|
|
768,672
|
|
|
Professional fees
|
|
|
247,403
|
|
|
|
290,999
|
|
|
Data processing
|
|
|
154,678
|
|
|
|
151,266
|
|
|
Insurance & bond expense
|
|
|
336,190
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|
|
|
334,671
|
|
|
Franchise tax
|
|
|
396,658
|
|
|
|
390,761
|
|
|
Postage, Express and Freight
|
|
|
157,166
|
|
|
|
154,810
|
|
|
Impairment loss
|
|
|
456,585
|
|
|
|
—
|
|
|
Other expenses
|
|
|
848,380
|
|
|
|
833,615
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|
|
|
|
|
|
|
|
|
|
|
|
Total non interest expense
|
|
|
7,048,047
|
|
|
|
6,715,349
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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|
|
INCOME BEFORE INCOME TAXES
|
|
|
2,421,412
|
|
|
|
3,160,302
|
|
|
Income taxes
|
|
|
256,129
|
|
|
|
709,688
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
NET INCOME
|
|
$
|
2,165,283
|
|
|
$
|
2,450,614
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Earning per common share
|
|
$
|
3.51
|
|
|
$
|
3.95
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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|
Dividend per share
|
|
$
|
1.50
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|
|
$
|
1.45
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted Average shares outstanding
|
|
|
616,706
|
|
|
|
619,054
|
|
|
|
|
|
|
|
|
|
|
|
See accompanying notes to the unaudited consolidated financial statements.
4
Killbuck Bancshares, Inc.
CONSOLIDATED STATEMENT OF INCOME (UNAUDITED)
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months
Ended
September 30,
|
|
|
|
|
2010
|
|
|
2009
|
|
|
|
|
|
|
INTEREST INCOME
|
|
|
|
|
|
|
|
|
|
Interest and fees on loans
|
|
$
|
2,840,300
|
|
|
$
|
3,023,714
|
|
|
Federal funds sold and other
|
|
|
28,518
|
|
|
|
12,443
|
|
|
Investment securities:
|
|
|
|
|
|
|
|
|
|
Taxable
|
|
|
472,459
|
|
|
|
492,975
|
|
|
Exempt from federal income tax
|
|
|
384,836
|
|
|
|
363,707
|
|
|
|
|
|
|
|
|
|
|
|
|
Total interest income
|
|
|
3,726,113
|
|
|
|
3,892,839
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
INTEREST EXPENSE
|
|
|
|
|
|
|
|
|
|
Deposits
|
|
|
1,018,148
|
|
|
|
1,059,251
|
|
|
Short term borrowings
|
|
|
2,396
|
|
|
|
2,850
|
|
|
Federal Home Loan Bank advances
|
|
|
12,935
|
|
|
|
21,283
|
|
|
|
|
|
|
|
|
|
|
|
|
Total interest expense
|
|
|
1,033,479
|
|
|
|
1,083,384
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
NET INTEREST INCOME
|
|
|
2,692,634
|
|
|
|
2,809,455
|
|
|
|
|
|
|
Provision for loan losses
|
|
|
60,000
|
|
|
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
NET INTEREST INCOME AFTER PROVISION FOR LOAN LOSSES
|
|
|
2,632,634
|
|
|
|
2,809,455
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
NON INTEREST INCOME
|
|
|
|
|
|
|
|
|
|
Service charges on deposit accounts
|
|
|
33,145
|
|
|
|
34,269
|
|
|
ATM and interchange fees
|
|
|
79,635
|
|
|
|
68,574
|
|
|
Fees on deposit accounts
|
|
|
172,631
|
|
|
|
198,827
|
|
|
Gain on sale of loans, net
|
|
|
84,258
|
|
|
|
17,738
|
|
|
Earnings on bank owned life insurance
|
|
|
57,844
|
|
|
|
58,960
|
|
|
Other income
|
|
|
27,464
|
|
|
|
35,881
|
|
|
|
|
|
|
|
|
|
|
|
|
Total non interest income
|
|
|
454,977
|
|
|
|
414,249
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
NON INTEREST EXPENSE
|
|
|
|
|
|
|
|
|
|
Salaries and employee benefits
|
|
|
1,358,849
|
|
|
|
1,305,694
|
|
|
Occupancy and equipment expense
|
|
|
234,582
|
|
|
|
258,193
|
|
|
Professional fees
|
|
|
54,163
|
|
|
|
94,894
|
|
|
Data processing
|
|
|
52,191
|
|
|
|
52,846
|
|
|
Insurance & bond expense
|
|
|
111,254
|
|
|
|
103,829
|
|
|
Franchise tax
|
|
|
129,965
|
|
|
|
131,826
|
|
|
Postage, Express and Freight
|
|
|
48,564
|
|
|
|
49,604
|
|
|
Impairment loss
|
|
|
456,585
|
|
|
|
—
|
|
|
Other expenses
|
|
|
307,227
|
|
|
|
283,526
|
|
|
|
|
|
|
|
|
|
|
|
|
Total non interest expense
|
|
|
2,753,380
|
|
|
|
2,280,412
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
INCOME BEFORE INCOME TAXES
|
|
|
334,231
|
|
|
|
943,292
|
|
|
Income taxes, (benefit)
|
|
|
(73,188
|
)
|
|
|
199,711
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
NET INCOME
|
|
$
|
407,419
|
|
|
$
|
743,581
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Earning per common share
|
|
$
|
0.66
|
|
|
$
|
1.20
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Dividend per share
|
|
$
|
.00
|
|
|
$
|
.00
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted Average shares outstanding
|
|
|
616,706
|
|
|
|
617,932
|
|
|
|
|
|
|
|
|
|
|
|
See accompanying notes to the unaudited consolidated financial statements.
5
Killbuck Bancshares, Inc.
CONSOLIDATED STATEMENT OF CHANGES IN SHAREHOLDERS’ EQUITY (UNAUDITED)
NINE MONTHS ENDED SEPTEMBER 30, 2010
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Common
Stock
|
|
|
Retained
Earnings
|
|
|
Accumulated
Other
Comprehensive
Income
|
|
|
Treasury
Stock
|
|
|
Total
Shareholders’
Equity
|
|
|
Comprehensive
Income
|
|
|
|
|
|
|
|
|
|
|
Balance, December 31, 2009
|
|
$
|
8,846,670
|
|
|
$
|
43,742,847
|
|
|
$
|
16,605
|
|
|
$
|
(9,542,714
|
)
|
|
$
|
43,063,408
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income
|
|
|
|
|
|
|
2,165,283
|
|
|
|
|
|
|
|
|
|
|
|
2,165,283
|
|
|
$
|
2,165,283
|
|
|
|
|
|
|
|
|
|
|
Cash dividends paid ($1.50 per share)
|
|
|
|
|
|
|
(925,059
|
)
|
|
|
|
|
|
|
|
|
|
|
(925,059
|
)
|
|
|
|
|
|
Other comprehensive income:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net unrealized gain on securities, net of tax $238,253
|
|
|
|
|
|
|
|
|
|
|
462,491
|
|
|
|
|
|
|
|
462,491
|
|
|
|
462,491
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Comprehensive income
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
2,627,774
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance, September 30, 2010 (Unaudited)
|
|
$
|
8,846,670
|
|
|
$
|
44,983,071
|
|
|
$
|
479,096
|
|
|
$
|
(9,542,714
|
)
|
|
$
|
44,766,123
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
See accompanying notes to the unaudited consolidated financial statements.
6
Killbuck Bancshares, Inc.
CONSOLIDATED STATEMENT OF CASH FLOWS (UNAUDITED)
|
|
|
|
|
|
|
|
|
|
|
|
|
Nine Months Ended
September 30,
|
|
|
|
|
2010
|
|
|
2009
|
|
|
OPERATING ACTIVITIES
|
|
|
|
|
|
|
|
|
|
Net income
|
|
$
|
2,165,283
|
|
|
$
|
2,450,614
|
|
|
Adjustments to reconcile net income to net cash provided by Operating activities:
|
|
|
|
|
|
|
|
|
|
Provision for loan losses
|
|
|
215,182
|
|
|
|
2,000
|
|
|
Gain on sale of loans
|
|
|
(136,189
|
)
|
|
|
(108,430
|
)
|
|
Provision for depreciation and amortization
|
|
|
351,308
|
|
|
|
760,713
|
|
|
Origination of loans held for sale
|
|
|
(7,373,245
|
)
|
|
|
(13,970,350
|
)
|
|
Proceeds from the sale of loans
|
|
|
6,689,934
|
|
|
|
14,078,780
|
|
|
Impairment loss
|
|
|
456,585
|
|
|
|
—
|
|
|
Bank Owned Life Insurance income
|
|
|
(418,304
|
)
|
|
|
—
|
|
|
Net change in:
|
|
|
|
|
|
|
|
|
|
Accrued interest and other assets
|
|
|
48,253
|
|
|
|
(333,067
|
)
|
|
Accrued expenses and other liabilities
|
|
|
137,741
|
|
|
|
(70,486
|
)
|
|
|
|
|
|
|
|
|
|
|
|
Net cash provided by operating activities
|
|
|
2,136,548
|
|
|
|
2,809,774
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
INVESTING ACTIVITIES
|
|
|
|
|
|
|
|
|
|
Investment securities available for sale:
|
|
|
|
|
|
|
|
|
|
Proceeds from maturities and repayments
|
|
|
56,378,792
|
|
|
|
26,013,858
|
|
|
Purchases
|
|
|
(53,697,133
|
)
|
|
|
(34,306,322
|
)
|
|
Bank CDs – Purchases
|
|
|
—
|
|
|
|
(1,715,000
|
)
|
|
Bank CDs – Proceeds from Maturities
|
|
|
—
|
|
|
|
735,000
|
|
|
Investment securities held to maturity:
|
|
|
|
|
|
|
|
|
|
Proceeds from maturities and repayments
|
|
|
822,255
|
|
|
|
1,564,701
|
|
|
Purchases
|
|
|
(6,404,804
|
)
|
|
|
(5,529,969
|
)
|
|
Net decrease (increase) in loans
|
|
|
347,366
|
|
|
|
(4,785,361
|
)
|
|
Proceeds from sale of foreclosed assets
|
|
|
22,500
|
|
|
|
—
|
|
|
Net Purchase of premises and equipment
|
|
|
(94,610
|
)
|
|
|
(78,395
|
)
|
|
Proceeds from bank owned life insurance
|
|
|
390,111
|
|
|
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash (used in) investing activities
|
|
|
(2,235,523
|
)
|
|
|
(18,101,488
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
FINANCING ACTIVITIES
|
|
|
|
|
|
|
|
|
|
Net increase in demand, money market and savings deposits
|
|
|
13,487,011
|
|
|
|
272,467
|
|
|
Net increase in time deposits
|
|
|
10,510,843
|
|
|
|
7,628,619
|
|
|
Net (decrease) in short term borrowings
|
|
|
(1,750,000
|
)
|
|
|
(1,405,000
|
)
|
|
Repayments of Federal Home Loan Bank advances
|
|
|
(470,482
|
)
|
|
|
(487,943
|
)
|
|
Purchase of Treasury stock
|
|
|
—
|
|
|
|
(470,491
|
)
|
|
Dividends paid
|
|
|
(925,059
|
)
|
|
|
(897,332
|
)
|
|
|
|
|
|
|
|
|
|
|
|
Net cash provided by financing activities
|
|
|
20,852,313
|
|
|
|
4,640,320
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net increase (decrease) in cash and cash equivalents
|
|
|
20,753,338
|
|
|
|
(10,651,394
|
)
|
|
Cash and cash equivalents at beginning of period
|
|
|
45,513,944
|
|
|
|
40,316,633
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents at end of period
|
|
$
|
66,267,282
|
|
|
$
|
29,665,239
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Supplemental Disclosures of Cash Flows Information
|
|
|
|
|
|
|
|
|
|
Cash Paid During the Period For:
|
|
|
|
|
|
|
|
|
|
Interest on deposits and borrowings
|
|
$
|
3,044,219
|
|
|
$
|
3,499,519
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income taxes
|
|
$
|
436,356
|
|
|
$
|
606,735
|
|
|
|
|
|
|
|
|
|
|
|
See accompanying notes to the unaudited consolidated financial statements.
7
Killbuck Bancshares, Inc.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
NOTE 1 – BASIS OF
PRESENTATION
The consolidated financial statements include the accounts of Killbuck Bancshares, Inc. (the “Company”) and its
wholly-owned subsidiary Killbuck Savings Bank Company (the “Bank”). All significant intercompany balances and transactions have been eliminated in the consolidation.
The accompanying reviewed consolidated financial statements have been prepared in accordance with the instructions to Form 10-Q and, therefore, do not necessarily include all information that would be
included in audited financial statements. The information furnished reflects all adjustments, which are, in the opinion of management, necessary for a fair statement of the results of operations. All such adjustments are of a normal recurring
nature. The results of operations for the interim periods are not necessarily indicative of the results to be expected for the full year.
These statements should be read in conjunction with the consolidated statements of and for the year ended December 31, 2009 and related notes which
are included on the Form 10-K (file no. 000-24147).
NOTE 2 – EARNINGS PER SHARE
The Company currently maintains a simple capital structure; therefore, there are no dilutive effects on earnings per share. As such, earnings per share
are calculated using the weighted number of shares for the period.
NOTE 3 – COMPREHENSIVE INCOME
The Company is required to present comprehensive income and its components in a full set of general purpose financial statements. Comprehensive income is
comprised of the following:
|
|
|
|
|
|
|
|
|
|
|
|
|
Nine Months
Ended
September 30, 2010
|
|
|
Nine Months
Ended
September 30, 2009
|
|
|
|
|
|
|
Net income
|
|
$
|
2,165,283
|
|
|
$
|
2,450,614
|
|
|
Other comprehensive income:
|
|
|
|
|
|
|
|
|
|
Net unrealized gain (loss) on securities
|
|
|
700,744
|
|
|
|
(658,205
|
)
|
|
Tax effect
|
|
|
(238,253
|
)
|
|
|
223,789
|
|
|
|
|
|
|
|
|
|
|
|
|
Total comprehensive income
|
|
$
|
2,627,774
|
|
|
$
|
2,016,198
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three
Months
Ended
September 30, 2010
|
|
|
Three
Months
Ended
September 30, 2009
|
|
|
|
|
|
|
Net income
|
|
$
|
407,419
|
|
|
$
|
743,581
|
|
|
Other comprehensive income:
|
|
|
|
|
|
|
|
|
|
Net unrealized gain (loss) on securities
|
|
|
275,979
|
|
|
|
(52,402
|
)
|
|
Tax effect
|
|
|
(93,833
|
)
|
|
|
17,817
|
|
|
|
|
|
|
|
|
|
|
|
|
Total comprehensive income
|
|
$
|
589,565
|
|
|
$
|
708,996
|
|
|
|
|
|
|
|
|
|
|
|
8
Killbuck Bancshares, Inc.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)—(Continued)
NOTE 4 – FAIR VALUE
MEASUREMENTS
The Company accounts for the fair value of its assets, including related disclosures, in accordance with the current
authoritative accounting guidance. This accounting guidance establishes a hierarchal disclosure framework associated with the level of pricing observability utilized in measuring assets and liabilities at fair value. The three broad levels defined
in this hierarchy are as follows:
|
|
|
|
|
Level I:
|
|
Quoted prices are available in active markets for identical assets or liabilities as of the reported date.
|
|
|
|
|
Level II:
|
|
Pricing inputs are other than quoted prices in active markets, which are either directly or indirectly observable as of the reported date. The nature of these assets and liabilities
include items for which quoted prices are available but traded less frequently, and items that are fair valued using other financial instruments, the parameters of which can be directly observed.
|
|
|
|
|
Level III:
|
|
Assets and liabilities that have little to no pricing observability as of the reported date. These items do not have two-way markets and are measured using management’s best
estimate of fair value, where the inputs into the determination of fair value require significant management judgment or estimation.
|
The following table presents the assets reported on the consolidated statements of financial condition at their fair value as of September 30, 2010 and December 31, 2009, by level within the
fair value hierarchy. As required by the authoritative accounting guidance, financial assets are classified in their entirety based on the lowest level of input that is significant to the fair value measurement.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
September 30, 2010
|
|
|
|
|
Level I
|
|
|
Level II
|
|
|
Level III
|
|
|
Total
|
|
|
|
|
(In thousands)
|
|
|
|
|
|
|
|
|
Assets measured on a recurring basis:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Securities available for sale :
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
U.S. Government and Agency Obligations
|
|
$
|
—
|
|
|
$
|
62,354
|
|
|
$
|
—
|
|
|
$
|
62,354
|
|
|
Mutual Funds
|
|
|
|
|
|
|
543
|
|
|
|
|
|
|
|
543
|
|
|
|
|
|
|
|
December 31, 2009
|
|
|
|
|
Level I
|
|
|
Level II
|
|
|
Level III
|
|
|
Total
|
|
|
|
|
(In thousands)
|
|
|
|
|
|
|
|
|
Assets measured on a recurring basis:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Securities available for sale :
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
U.S. Government and Agency Obligations
|
|
$
|
—
|
|
|
$
|
64,841
|
|
|
$
|
—
|
|
|
$
|
64,841
|
|
|
Mutual Funds
|
|
|
|
|
|
|
494
|
|
|
|
|
|
|
|
494
|
|
9
Killbuck Bancshares, Inc.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)—(Continued)
NOTE 5 – FAIR VALUE
DISCLOSURE OF FINANCIAL INSTRUMENTS
The carrying amounts and estimated fair values at September 30, 2010 and December 31, 2009
are as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2010
|
|
|
2009
|
|
|
|
|
Carrying
Amount
|
|
|
Fair
Value
|
|
|
Carrying
Amount
|
|
|
Fair
Value
|
|
|
|
|
(In thousands)
|
|
|
|
|
|
|
|
|
Financial assets:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and due from depository institutions
|
|
$
|
59,013
|
|
|
$
|
59,013
|
|
|
$
|
42,576
|
|
|
$
|
42,576
|
|
|
Federal funds sold
|
|
|
7,254
|
|
|
|
7,254
|
|
|
|
2,938
|
|
|
|
2,938
|
|
|
Securities available for sale
|
|
|
62,897
|
|
|
|
62,897
|
|
|
|
65,335
|
|
|
|
65,335
|
|
|
Securities held to maturity
|
|
|
40,580
|
|
|
|
42,534
|
|
|
|
35,087
|
|
|
|
36,374
|
|
|
Net loans
|
|
|
206,873
|
|
|
|
206,745
|
|
|
|
207,575
|
|
|
|
215,102
|
|
|
Loans held for sale
|
|
|
1,090
|
|
|
|
1,090
|
|
|
|
271
|
|
|
|
271
|
|
|
Accrued interest receivable
|
|
|
1,499
|
|
|
|
1,499
|
|
|
|
1,468
|
|
|
|
1,468
|
|
|
Regulatory stock
|
|
|
1,884
|
|
|
|
1,884
|
|
|
|
1,884
|
|
|
|
1,884
|
|
|
Bank Owned Life Insurance
|
|
|
5,677
|
|
|
|
5,677
|
|
|
|
5,662
|
|
|
|
5,662
|
|
|
|
|
|
|
|
|
Financial liabilities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Deposits
|
|
$
|
345,293
|
|
|
$
|
349,251
|
|
|
$
|
321,295
|
|
|
$
|
324,246
|
|
|
Short term borrowings
|
|
|
3,910
|
|
|
|
3,910
|
|
|
|
5,660
|
|
|
|
5,660
|
|
|
Federal Home Loan Bank advances
|
|
|
742
|
|
|
|
888
|
|
|
|
1,212
|
|
|
|
1,027
|
|
|
Accrued interest payable
|
|
|
174
|
|
|
|
174
|
|
|
|
183
|
|
|
|
183
|
|
Financial instruments are defined as
cash, evidence of ownership interest in an entity, or a contract which creates an obligation or right to receive or deliver cash or another financial instrument from/to a second entity on potentially favorable or unfavorable terms.
Fair value is defined as the amount at which a financial instrument could be exchanged in a current transaction between willing parties other than in a
forced or liquidation sale. If a quoted market price is available for a financial instrument, the estimated fair value would be calculated based upon the market price per trading unit of the instrument.
If no readily available market exists, the fair value estimates for financial instruments should be based upon management’s judgment regarding
current economic conditions, interest rate risk, expected cash flows, future estimated losses, and other factors as determined through various option pricing formulas or simulation modeling. As many of these assumptions result from judgments made by
management based upon estimates which are inherently uncertain, the resulting estimated fair values may not be indicative of the amount realizable in the sale of a particular financial instrument. In addition, changes in assumptions on which the
estimated fair values are based may have a significant impact on the resulting estimated fair values.
As certain assets and liabilities such
as deferred tax assets and liabilities, premises and equipment and many other operational elements of the Company, are not considered financial instruments, but have value, this estimated fair value of financial instruments would not represent the
full market value of the Company.
The Company employed simulation modeling in determining the estimated fair value of financial instruments
for which quoted market prices were not available based upon the following assumptions:
Cash and Due from Banks,
Federal Funds Sold, Accrued Interest Receivable, Regulatory Stock, BOLI, Short-Term Borrowings, and Accrued Interest Payable
The fair
value approximates the current carrying value.
10
Killbuck Bancshares, Inc.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)—(Continued)
NOTE 5 – FAIR VALUE DISCLOSURE OF FINANCIAL INSTRUMENTS-CONTINUED
Investment
Securities and Loans Held for Sale
The fair value of investment securities and loans held for sale are equal to the available quoted
market price. If no quoted market price is available, fair value is estimated using the quoted market price for similar securities.
Loans, Deposits, and Federal Home Loan Bank Advances
The fair value is estimated by
discounting future cash flows using current market inputs at which loans with similar terms and qualities would be made to borrowers of similar credit quality. Where quoted market prices were available, primarily for certain residential mortgage
loans, such market rates were utilized as estimates for fair value. Demand, savings, and money market deposit accounts are valued at the amount payable on demand as of the period presented. The fair values of certificates of deposit and other
borrowed funds are based on the discounted value of contractual cash flows. The discount rates are estimated using rates currently offered for similar instruments with similar remaining maturities.
Commitments to Extend Credit and Standby Letters of Credit
These financial instruments are generally not subject to sale, and estimated fair values are not readily available. The carrying value, represented by the net deferred fee arising from the unrecognized
commitment or letter of credit, and the fair value, determined by discounting the remaining contractual fee over the term of the commitment using fees currently charged to enter into similar agreements with similar credit risk, are not considered
material for disclosure.
11
Killbuck Bancshares, Inc.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)—(Continued)
NOTE 6 – INVESTMENT
SECURITIES
The amortized cost of securities and their estimated fair values are as follows:
Securities Available for Sale
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
September 30, 2010
|
|
|
|
|
Amortized
Cost
|
|
|
Gross
Unrealized
Gains
|
|
|
Gross
Unrealized
Losses
|
|
|
Fair
Value
|
|
|
Obligations of U.S. Government Agencies and Corporations
|
|
$
|
61,628,033
|
|
|
$
|
726,896
|
|
|
$
|
992
|
|
|
$
|
62,353,937
|
|
|
Mutual funds
|
|
|
543,415
|
|
|
|
—
|
|
|
|
—
|
|
|
|
543,415
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
62,171,448
|
|
|
$
|
726,896
|
|
|
$
|
992
|
|
|
$
|
62,897,352
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2009
|
|
|
|
|
Amortized
Cost
|
|
|
Gross
Unrealized
Gains
|
|
|
Gross
Unrealized
Losses
|
|
|
Fair
Value
|
|
|
Obligations of U.S. Government Agencies and Corporations
|
|
$
|
64,309,692
|
|
|
$
|
580,166
|
|
|
$
|
48,906
|
|
|
$
|
64,840,952
|
|
|
Mutual funds
|
|
|
1,000,000
|
|
|
|
—
|
|
|
|
506,103
|
|
|
|
493,897
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
65,309,692
|
|
|
$
|
580,166
|
|
|
$
|
555,009
|
|
|
$
|
65,334,849
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Securities Held to Maturity
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
September 30, 2010
|
|
|
|
Amortized
Cost
|
|
|
Gross
Unrealized
Gains
|
|
|
Gross
Unrealized
Losses
|
|
|
Fair
Value
|
|
|
Obligations of States and Political Subdivisions
|
|
$
|
40,579,895
|
|
|
$
|
1,984,314
|
|
|
$
|
29,923
|
|
|
$
|
42,534,286
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
40,579,895
|
|
|
$
|
1,984,314
|
|
|
$
|
29,923
|
|
|
$
|
42,534,286
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2009
|
|
|
|
|
Amortized
Cost
|
|
|
Gross
Unrealized
Gains
|
|
|
Gross
Unrealized
Losses
|
|
|
Fair
Value
|
|
|
Obligations of States and Political Subdivisions
|
|
$
|
35,086,821
|
|
|
$
|
1,328,071
|
|
|
$
|
41,281
|
|
|
$
|
36,373,611
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
35,086,821
|
|
|
$
|
1,328,071
|
|
|
$
|
41,281
|
|
|
$
|
36,373,611
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
12
Killbuck Bancshares, Inc.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)—(Continued)
NOTE 6 – INVESTMENT SECURITIES-CONTINUED
The following table shows the
Company’s gross unrealized losses and fair value, aggregated by investment category and length of time, that the individual securities have been in a continuous unrealized loss position, at September 30, 2010 and December 31, 2009. As
of September 30, 2010 there were a total of six securities in an unrealized loss position.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
September 30, 2010
|
|
|
|
|
Less than 12 months
|
|
|
12 months or greater
|
|
|
Total
|
|
|
|
|
Fair
Value
|
|
|
Gross
Unrealized
Loss
|
|
|
Number
of
Impaired
Securities
|
|
|
Fair
Value
|
|
|
Gross
Unrealized
Loss
|
|
|
Number
of
Impaired
Securities
|
|
|
Fair
Value
|
|
|
Gross
Unrealized
Loss
|
|
|
U.S. Government Agencies and Corporations
|
|
$
|
1,997,036
|
|
|
$
|
992
|
|
|
|
1
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
1,997,036
|
|
|
$
|
992
|
|
|
Obligations of States and Political Subdivisions
|
|
|
1,424,855
|
|
|
|
29,923
|
|
|
|
5
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,424,855
|
|
|
|
29,923
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total temporarily Impaired debt securities
|
|
$
|
3,421,891
|
|
|
$
|
30,915
|
|
|
|
6
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
$
|
3,421,891
|
|
|
$
|
30,915
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2009
|
|
|
|
|
Less than 12 months
|
|
|
12 months or greater
|
|
|
Total
|
|
|
|
|
Fair
Value
|
|
|
Gross
Unrealized
Loss
|
|
|
Number
of
Impaired
Securities
|
|
|
Fair
Value
|
|
|
Gross
Unrealized
Loss
|
|
|
Number
of
Impaired
Securities
|
|
|
Fair
Value
|
|
|
Gross
Unrealized
Loss
|
|
|
U.S. Government Agencies And Corporations
|
|
$
|
5,954,780
|
|
|
$
|
48,906
|
|
|
|
4
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
5,954,780
|
|
|
$
|
48,906
|
|
|
Obligations of States and Political Subdivisions
|
|
|
3,767,311
|
|
|
|
41,281
|
|
|
|
17
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
3,767,311
|
|
|
|
41,281
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total temporarily Impaired debt securities
|
|
|
9,722,091
|
|
|
|
90,187
|
|
|
|
21
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
9,722,091
|
|
|
|
90,187
|
|
|
Mutual Funds
|
|
|
—
|
|
|
|
—
|
|
|
|
|
|
|
$
|
493,897
|
|
|
$
|
506,103
|
|
|
|
1
|
|
|
|
493,897
|
|
|
|
506,103
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total temporarily Impaired equity securities
|
|
|
—
|
|
|
|
—
|
|
|
|
|
|
|
|
493,897
|
|
|
|
506,103
|
|
|
|
1
|
|
|
|
493,897
|
|
|
|
506,103
|
|
|
Total of all securities
|
|
$
|
9,722,091
|
|
|
$
|
90,187
|
|
|
|
21
|
|
|
$
|
493,897
|
|
|
$
|
506,103
|
|
|
|
1
|
|
|
$
|
10,215,988
|
|
|
$
|
596,290
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
13
Killbuck Bancshares, Inc.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)—(Continued)
NOTE 6 – INVESTMENT SECURITIES-CONTINUED
At least quarterly the corporation
conducts a comprehensive security level impairment assessment on all securities in an unrealized loss position to determine if other than temporary impairment (OTTI) exists. An unrealized loss exists when the current fair value of an individual
security is less than its amortized cost basis. Under the current OTTI accounting model for debt securities, which was amended by FASB and adopted by the Corporation in 2009, an OTTI loss must be recognized for a debt security in an unrealized loss
position if the Corporation intends to sell the security or it is more likely than not that the corporation will be required to sell the security before recovery of its amortized cost basis. In this situation, the amount of loss recognized in income
is equal to the difference between fair value and the amortized cost basis of the security. Even it the Corporation does not expect to sell the security, the Corporation must evaluate the expected cash flows to be received to determine if a credit
loss has occurred. In the event of a credit loss, only the amount of impairment associated with the credit loss is recognized in income. The portion of the unrealized loss relating to other factors, such as liquidity conditions in the market or
changes in the market interest rates, is recorded in other comprehensive income. Equity securities are also evaluated to determine whether the unrealized loss is expected to be recoverable based on whether evidence exists to support a realizable
value equal to or greater than the amortized cost basis. If it is probable that the Corporation will not recover the amortized cost basis, taking into consideration the estimated recovery period and its ability to hold the equity security until
recovery, OTTI is recognized. The security level assessment is performed on each security, regardless of the classification of the security as available for sale or held to maturity. The assessments are based on the nature of the securities, the
financial condition of the issuer, the extent and duration of the securities, the extent and duration of the loss and the intent and whether Management intends to sell or it is more likely than not that it will be required to sell a security before
recovery of its amortized cost basis, which may be maturity. For those securities for which the assessment shows the Corporation will recover the entire cost basis, Management does not intend to sell these securities and it is more likely than not
that the Corporation will not be required to sell them before the anticipated recovery of the amortized cost basis, the gross unrealized losses are recognized in other comprehensive income, net of tax.
14
Killbuck Bancshares, Inc.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)—(Continued)
NOTE 7 – NEW ACCOUNTING
PRONOUNCEMENTS
In December 2009, the FASB issued ASU 2009-16,
Accounting for Transfer of Financial Assets
. ASU 2009-16
provides guidance to improve the relevance, representational faithfulness, and comparability of the information that an entity provides in its financial statements about a transfer of financial assets; the effects of a transfer on its financial
position, financial performance, and cash flows; and a transferor’s continuing involvement, if any, in transferred financial assets. ASU 2009-16 is effective for annual periods beginning after November 15, 2009 and for interim periods
within those fiscal years. The adoption of this guidance did not have a material impact on the Company’s financial position or results of operation.
In January 2010, the FASB issued ASU 2010-01,
Equity (Topic 505): Accounting for Distributions to Shareholders with Components of Stock and Cash – a consensus of the FASB Emerging Issues Task
Force
. ASU 2010-01 clarifies that the stock portion of a distribution to shareholders that allows them to elect to receive cash or stock with a potential limitation on the total amount of cash that all shareholders can elect to receive in the
aggregate is considered a share issuance that is reflected in EPS prospectively and is not a stock dividend. ASU 2010-01 is effective for interim and annual periods ending on or after December 15, 2009 and should be applied on a retrospective
basis. The adoption of this guidance did not have a material impact on the Company’s financial position or results of operation.
In
January 2010, the FASB issued ASU 2010-05,
Compensation – Stock Compensation (Topic 718): Escrowed Share Arrangements and the Presumption of Compensation
. ASU 2010-05 updates existing guidance to address the SEC staff’s views on
overcoming the presumption that for certain shareholders escrowed share arrangements represent compensation. ASU 2010-05 is effective January 15, 2010. The adoption of this guidance did not have a material impact on the Company’s financial
position or results of operation.
In January 2010, the FASB issued ASU No. 2010-06,
Fair Value Measurements and Disclosures (Topic
820): Improving Disclosures about Fair Value Measurements
. ASU 2010-06 amends Subtopic 820-10 to clarify existing disclosures, require new disclosures, and includes conforming amendments to guidance on employers’ disclosures about
postretirement benefit plan assets. ASU 2010-06 is effective for interim and annual periods beginning after December 15, 2009, except for disclosures about purchases, sales, issuances, and settlements in the roll forward of activity in Level 3
fair value measurements. Those disclosures are effective for fiscal years beginning after December 15, 2010 and for interim periods within those fiscal years. The adoption of this guidance is not expected to have a significant impact on the
Company’s financial statements.
In February 2010, the FASB issued ASU 2010-08,
Technical Corrections to Various Topics
. ASU
2010-08 clarifies guidance on embedded derivatives and hedging. ASU 2010-08 is effective for interim and annual periods beginning after December 15, 2009. The adoption of this guidance did not have a material impact on the Company’s
financial position or results of operation.
In March 2010, the FASB issued ASU 2010-11,
Derivatives and Hedging
. ASU 2010-11 provides
clarification and related additional examples to improve financial reporting by resolving potential ambiguity about the breadth of the embedded credit derivative scope exception in ASC 815-15-15-8. ASU 2010-11 is effective at the beginning of the
first fiscal quarter beginning after June 15, 2010. The adoption of this guidance is not expected to have a significant impact on the Company’s financial statements.
In April 2010, the FASB issued ASU 2010-18,
Receivables (Topic 310): Effect of a Loan Modification When the Loan is a Part of a Pool That is Accounted for as a Single Asset – a consensus of the
FASB Emerging Issues Task Force
. ASU 2010-18 clarifies the treatment for a modified loan that was acquired as part of a pool of assets. Refinancing or restructuring the loan does not make it eligible for removal from the pool, the FASB said. The
amendment will be effective for loans that are part of an asset pool and are modified during financial reporting periods that end July 15, 2010 or later and is not expected to have a significant impact on the Company’s financial
statements.
15
Killbuck Bancshares, Inc.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)—(Continued)
NOTE 7 – NEW ACCOUNTING PRONOUNCEMENTS CONTINUED
In July 2010, FASB issued ASU
No. 2010-20,
Receivables (Topic 310): Disclosures about the Credit Quality of Financing Receivables and the Allowance for Credit Losses.
ASU 2010-20 is intended to provide additional information to assist financial statement users
in assessing an entity’s credit risk exposures and evaluating the adequacy of its allowance for credit losses. The disclosures as of the end of a reporting period are effective for interim and annual reporting periods ending on or after
December 15, 2010. The disclosures about activity that occurs during a reporting period are effective for interim and annual reporting periods beginning on or after December 15, 2010. The amendments in ASU 2010-20 encourage, but do
not require, comparative disclosures for earlier reporting periods that ended before initial adoption. However, an entity should provide comparative disclosures for those reporting periods ending after initial adoption. The Company is currently
evaluating the impact the adoption of this guidance will have on the Company’s financial position or results of operations.
In August,
2010, the FASB issued ASU 2010-21,
Accounting for Technical Amendments to Various SEC Rules and Schedules
. This ASU amends various SEC paragraphs pursuant to the issuance of Release No. 33-9026: Technical Amendments to Rules, Forms,
Schedules, and Codification of Financial Reporting Policies and is not expected to have a significant impact on the Company’s financial statements.
In August, 2010, the FASB issued ASU 2010-22,
Technical Corrections to SEC Paragraphs – An announcement made by the staff of the U.S. Securities and Exchange Commission
. This ASU amends
various SEC paragraphs based on external comments received and the issuance of SAB 112, which amends or rescinds portions of certain SAB topics and is not expected to have a significant impact on the Company’s financial statements.
16
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
The Private Securities Litigation Reform Act of 1995 contains safe harbor provisions regarding forward-looking statements. When used in this discussion,
the words “believes”, “anticipates”, “contemplates”, “expects”, and similar expressions are intended to identify forward-looking statements. Such statements are subject to certain risks and uncertainties,
which could cause actual results to differ materially from those projected. Those risks and uncertainties include changes in interest rates, risks associated with the ability to control costs and expenses, and general economic conditions. Killbuck
Bancshares, Inc. undertakes no obligation to publicly release the results of any revisions to those forward-looking statements, which may be made to reflect events or circumstances after the date hereof or to reflect the occurrence of unanticipated
events.
The Company conducts no significant business or operations of its own other than holding all of the outstanding stock of the Killbuck
Savings Bank Company. As a result, references to the Company generally refer to the Bank unless the context indicates otherwise.
Critical
Accounting Policies
The Company’s accounting policies are integral to understanding the results reported. The accounting policies are
described in detail in Note 1 of the consolidated financial statements filed with the Commission as part of the Company’s annual report on Form 10-K for its fiscal year ended December 31, 2009. Our most complex accounting policies require
management’s judgment to ascertain the valuation of assets, liabilities, commitments and contingencies. We have established detailed policies and control procedures that are intended to ensure valuation methods are well controlled and applied
consistently from period to period. In addition, the policies and procedures are intended to ensure that the process for changing methodologies occurs in an appropriate manner. The following is a brief description of our current accounting policies
involving significant management valuation judgments.
Allowance for Loan Losses
—Arriving at an appropriate level of allowance for
loan losses involves a high degree of judgment. The Company’s allowance for loan losses provides for probable losses based upon evaluations of known and inherent risks in the loan portfolio.
Management uses historical information to assess the adequacy of the allowance for loan losses as well as the prevailing business environment as it is
affected by changing economic conditions and various external factors, which may impact the portfolio in ways currently unforeseen. The allowance is increased by provisions for loan losses and by recoveries of loans previously charged-off and
reduced by loans charged-off. For a full discussion of the Company’s methodology of assessing the adequacy of the reserve for loan losses, refer to Note 1 of the consolidated financial statements filed with the Commission as part of the
Company’s annual report on Form 10-K for its fiscal year ended December 31, 2009.
Goodwill and Other Intangible Assets
—As discussed in Note 6 of the consolidated financial statements, filed with the Commission as part of the Company’s annual report on Form 10-K for its fiscal year ended December 31, 2009; the Company must assess goodwill and other
intangible assets each year for impairment. This assessment involves estimating cash flows for future periods. If the future cash flows were less than the recorded goodwill and other intangible assets balances, we would be required to take a charge
against earnings to write down the assets to the lower value.
Deferred Tax Assets
—We use an estimate of future earnings to
support our position that the benefit of our deferred tax assets will be realized. If future income should prove non-existent or less than the amount of the deferred tax assets within the tax years to which they may be applied, the asset may not be
realized and our net income will be reduced. Our deferred tax assets are described further in Note 13 of the consolidated financial statements filed with the Commission as part of the Company’s annual report on Form 10-K for its fiscal year
ended December 31, 2009.
17
Financial Condition
Total assets at September 30, 2010 were $395.8 million compared to $372.0 million at December 31, 2009.
The asset growth during the first nine months of 2010 generally reflects a $24.0 million, or 7.5% increase in total deposits. The deposit growth is
generally reflective of the Company’s continuing marketing efforts directed at profitable organic growth.
Cash and cash equivalents
increased by $20.8 million or 45.6% from December 31, 2009, to September 30, 2010, with cash and amounts due from depository institutions increasing $16.4 million. The Company has maintained above normal levels of cash and cash equivalents
due to the economic uncertainty in the environment and the less than optimal loan demand during the first nine months of 2010.
Investment
securities available for sale decreased by $2.4 million or 3.7% from December 31, 2009, to September 30, 2010 due to a decrease in suitable securities available to purchase for the portfolio. Investments held to maturity increased $5.5
million or 15.7% due to some attractive municipal securities available for the portfolio.
Net loans decreased by $0.7 million or 0.3% from
December 31, 2009 to September 30, 2010. An increase of $1.4 million occurred in the real estate loan category, which is attributable primarily to increases in residential real estate lending of $3.4 million plus an increase in farm
lending of $0.6 million offset by decreases of $1.7 million in commercial real estate lending and a decrease of $0.9 million in construction loan activity. The Company has seen a modest expansion of loan demand in the residential and farm sector,
while decreases in commercial real estate and construction type loan products reflected lessened demand. Commercial and other loan balances decreased by $2.2 million as demand slowed and consumer loan balances increased by $346,000.
The Company’s allowance for loan losses at September 30, 2010 totaled $2.7 million, or 1.26% of total loans, as compared to $2.4 million, or
1.16% of total loans at December 31, 2009.
The allowance for loan losses is management’s estimate of the amount of probable credit
losses in the portfolio. The Company determines the allowance for loan losses based upon an ongoing evaluation. This evaluation is inherently subjective, as it requires material estimates, including the amounts and timing of cash flows expected to
be received on impaired loans that may be susceptible to significant change. Increases to the allowance for loan losses are made by charges to the provision for loan losses. Loans deemed uncollectible are charged against the allowance for loan
losses. Recoveries of previously charged-off amounts are credited to the allowance for loan losses.
The Company’s allowance for loan
losses is the accumulation of various components calculated based upon independent methodologies. All components of the allowance for loan losses represent an estimation performed according to either Financial Accounting Standards Board Accounting
Standards Codification Topic 450-Contingencies, or Topic 310-Receivables. Management’s estimate of each allowance component is based on certain observable data that management believes is the most reflective of the underlying loan losses being
estimated. Changes in the amount of each component of the allowance for loan losses are directionally consistent with changes in the observable data and corresponding analyses. Some of the components that management factors in are current economic
conditions, loan growth assumptions, credit concentrations, and levels of nonperforming loans.
A key element of the methodology for
determining the allowance for loan losses is the Company’s credit-risk-evaluation process, which includes credit-risk grading of individual commercial loans. Loans are assigned credit-risk grades based on an internal assessment of conditions
that affect a borrower’s ability to meet its contractual obligation under the loan agreement. The assessment process includes reviewing a borrower’s current financial information, historical payment experience, credit documentation, public
information, and other information specific to each individual borrower. Certain commercial loans are reviewed on an annual or rotational basis or as management becomes aware of information affecting a borrower’s ability to fulfill its
obligation.
18
Total deposits at September 30,
2010 were $345.3 million compared to $321.3 million at December 31, 2009. Demand accounts decreased $11.4 million, while money market accounts, savings accounts and time deposits accounts increased $21.0 million, $3.9 million and $10.5 million
respectively. Management attributes these changes to the changes in interest rates. A Money Market account is a short term investment that customers use while waiting until the interest rates meet their expectations for longer term time deposits.
Management believes the demand accounts decreases are attributable to normal fluctuations due to customer usage.
Federal Home Loan Bank
advances decreased $470,000 due to maturities and scheduled repayments, and short-term borrowings decreased $1.7 million at September 30, 2010 from December 31, 2009.
Shareholders’ Equity increased by $1.7 million or 3.9%, which was mainly due to earnings of $2.2 million plus $462,000 of unrealized gain on securities included in other comprehensive income for the
first nine months of 2010, decreased by dividends paid totaling $925,000. The Company did not make any Treasury stock purchases during the first nine months of 2010. Management monitors risk-based capital and leveraged capital ratios in order to
assess compliance of the regulatory guidelines. At September 30, 2010, the total capital ratio was 19.65%; the Tier I capital ratio was 18.51%, and the leverage ratio was 11.03%, compared to regulatory capital requirements of 8.00%, 4.00% and
4.00% respectively. These ratios are well in excess of regulatory capital requirements.
19
RESULTS OF
OPERATIONS
Comparison of the Nine Months Ended September 30, 2010 and 2009
Net income for the nine-month period ended September 30, 2010, was $2,165,000, a decrease of $286,000 or 11.6% from the $2,451,000 reported at
September 30, 2009.
Total interest income of approximately $11,213,000 for the nine-month period ended September 30, 2010, compares
to $12,055,000 for the same period in 2009, a decrease of $842,000 or 7.0%. The decrease in total interest income is primarily attributable to a decrease in interest and fees on loans due primarily to a decrease in the average yield on the
underlying balances. See “Average Balance Sheet” for the nine-month periods ended September 30, 2010 and 2009. The yield on loans decreased to 5.45% for the first nine months of 2010 compared to 5.99% for the first nine months of
2009. Average loan balances were $210,465,000 for the first nine months of 2010 compared to $206,906,000 for the first nine months of 2009. The interest on investment securities of $2,540,000 for 2010 compares to $2,723,000 for 2009. The decrease in
investment income is primarily attributable to a decrease in yield. Average investment balances were $102,138,000 compared to $97,227,000 and the yields were 3.32% compared to 3.73% for the first nine months of 2010 and 2009 respectively. The
interest on Federal Funds decreased slightly due to a decrease in yield from 0.16% to 0.13%. The interest on balances held at the Federal Reserve Bank increased $36,000 due to an increase in average volume. The average balance outstanding in Due
from Federal Reserve Bank was $36,340,000 compared to $13,421,000 for the first nine months of 2010 and 2009 respectively. The yield on the excess liquidity in Due from Federal Reserve Bank decreased from 0.29% for 2009 to 0.24% for 2010.
Total interest expense of $3,036,000 for the nine-month period ending September 30, 2010 represents a decrease of $398,000 from the
$3,434,000 reported for the same nine-month period in 2009. The decrease in interest expense on deposits of $372,000 is due mainly to a decrease in interest rates. The decreases in the average rate paid on the underlying balances of the interest
bearing liabilities are due mainly to the Time deposits. The cost of Time deposits was 2.18% compared to 2.68% for this nine-month period of 2010 and 2009, respectively. The cost on interest bearing liabilities was 1.46%, compared to 1.81% for the
nine-month periods of 2010 and 2009 respectively. Average interest-bearing liabilities were $278,111,000 for the first nine months of 2010 compared to $253,157,000 for the first nine months of 2009. See “Average Balance Sheet” for the
nine-month periods ended September 30, 2010 and 2009.
Net interest income of $8,178,000 for the nine months ended September 30,
2010, compares to $8,621,000 for the same nine-month period in 2009, a decrease of $443,000 or 5.1%. The foregoing factors culminated in the Company’s attainment of an interest rate spread of 2.75% and a net yield on earning assets of 3.06% in
2010, compared to 3.15% and 3.55% respectively, in 2009. Management believes the Company’s reduction in spread and margin in 2010 primarily stems from the need to carry higher levels of liquidity in the current environment, and does not
represent a material adverse trend. The net interest margin is expected to stabilize but remain low.
The provision for loan losses was
$215,000 for the first nine months of 2010, as compared to $2,000 for the same nine-month period in 2009. The increased loss provision is attributable to management’s analysis of the allowance for loan losses. As stated previously, the Company
maintains the allowance at a level commensurate with the credit risks inherent in the portfolio.
Total non-interest income for the nine-month
period ended September 30, 2010, of $1,507,000 compares to $1,257,000 for the same nine-month period in 2009, an increase of $250,000 or 19.9%. ATM and interchange fees increased $36,000 due to increased usage of ATM machines. The Fees on
deposit accounts decreased $41,000 due to a decrease in non-sufficient funds activity. Gains on sale of loans increased $28,000 primarily due to an increase in refinancing. Bank Owned Life Insurance (BOLI) income increased $241,000 primarily due to
earnings and recoveries on BOLI in the first nine months of 2010.
20
Total non-interest expense of
$7,048,000 for the nine months ended September 30, 2010, compares to $6,715,000 for the same nine-month period in 2009. This represents an increase of $333,000 or 4.9%. Salary and employee benefits decreased approximately $60,000 due to one
fewer pay period in 2010 and a slight decrease in employee benefits. This decrease was partially offset by normal increases in salaries and employee benefits. Occupancy and Equipment costs decreased approximately $48,000 due mainly to decreased
depreciation expense of $60,000, offset by increases in furniture and equipment expenses of $8,000. An impairment loss of $457,000 was recognized during the third quarter of 2010 on a mutual fund owned by the Company. The non-publicly traded mutual
fund is comprised solely of community and regional financial institution stocks. The Company reviews its position in all securities quarterly and determined that, at September 30, 2010, the decline in fair value on the mutual fund should be
recognized as other than temporary impairment. The changes in the remaining expense accounts were attributable to increases/decreases in items that are normal and recurring in nature.
Income tax expense declined to $256,000 for the nine months ended September 30, 2010, representing a $454,000, or 63.9%, reduction from the $710,000 of income tax expense recorded in 2009. The
decline is primarily attributable to the impairment loss recognized during the third quarter of 2010 and higher levels of tax-exempt income in 2010. The Company’s effective tax rate was 10.6% in 2010, as compared to 22.5% in 2009. The principal
difference between the Company’s effective tax rate in 2010 and 2009 and the 34% statutory tax rate in effect for both years resulted from the beneficial effects of tax-exempt income.
21
RESULTS OF OPERATIONS
Comparison of the Three Months
Ended September 30, 2010 and 2009
Net income for the three-month period ended September 30, 2010, was $407,000, a decrease of
$337,000 or 45.2% from the $744,000 reported at September 30, 2009.
Total interest income of approximately $3,726,000 for the
three-month period ended September 30, 2010, compares to $3,893,000 for the same period in 2009, a decrease of $167,000 or 4.3%. The decrease in total interest income is primarily attributable to a decrease in interest and fees on loans due
primarily to a decrease in the average yield on the underlying balances. See “Average Balance Sheet” for the three-month periods ended September 30, 2010 and 2009. Interest and fees on loans decreased $183,000 or 6.1% for the
three-month period ended September 30, 2010 compared to the same period for 2009. The yield on loans decreased to 5.42% for the three-month period ended September 30, 2010 compared to 5.83% for the three-month period ended
September 30, 2009. Average loan balances were $209,613,000 compared to $207,588,000 for this three-month period of 2010 and 2009, respectively. The interest on investment securities of $857,000 remained unchanged for the three-month periods
ended September 30, 2010 and 2009. The average balances of investment securities were $106,090,000 for 2010 compared to $97,203,000 for 2009 and the yield was 3.23% compared to 3.53% for this three-month period of 2010 and 2009 respectively.
See “Average Balance Sheet” for the three-month periods ended September 30, 2010 and 2009.
Total interest expense of
$1,033,000 for the three-month period ending September 30, 2010, represents a decrease of $50,000 from the $1,083,000 reported for the same three-month period in 2009. The decrease in interest expense on deposits of $41,000 is due mainly to the
decreases in the average rate paid on the underlying balances of the interest bearing liabilities, specifically the Time deposits. The cost of Time deposits was 2.17% compared to 2.47% for this three-month period of 2010 and 2009, respectively and
the cost of interest bearing liabilities was 1.43% compared to 1.70% for this three-month period of 2010 and 2009 respectively. The average time deposits were $161,948,000 for this three-month period of 2010 compared to $152,295,000 for the same
three months of 2009. Average interest-bearing liabilities were $289,015,000 for this three-month period of 2010 compared to $255,544,000 for the same three months of 2009. See “Average Balance Sheet” for the three-month periods ended
September 30, 2010 and 2009.
Net interest income of $2,693,000 for the three months ended September 30, 2010, compares to
$2,809,000 for the same three-month period in 2009, a decrease of $116,000 or 4.2%. The foregoing factors culminated in the Company’s attainment of an interest rate spread of 2.63% and a net yield on earning assets of 2.93% in 2010, compared to
3.05% and 3.43% respectively, in 2009.
The provision for loan losses was $60,000 for the three-month period ended September 30, 2010, as
compared to no provision for the same three-month period in 2009. The increased loss provision is attributable to management’s analysis of the allowance for loan losses. As stated previously, the Company maintains the allowance at a level
commensurate with the credit risks inherent in the portfolio.
Total non-interest income for the three-month period ended September 30,
2010, of $455,000 compares to $414,000 for the same three-month period in 2009, an increase of $41,000 or 9.8%. ATM and interchange fees increased $11,000 due to increased usage of ATM machines. The Fees on deposit accounts decreased $26,000 due to
a decrease in non-sufficient funds activity. Gains on sale of loans increased $67,000 primarily due to refinancings. The changes in the remaining income accounts were attributable to increases/decreases in items that are normal and recurring in
nature.
22
Total non-interest expense of
$2,753,000 for the three months ended September 30, 2010, compares to $2,280,000 for the same three-month period in 2009. This represents an increase of $473,000 or 20.7%. Salary and employee benefits increased $53,000 or 4.1% due to normal
increases in salaries and employee benefits. Professional fees decreased approximately $41,000 due to lower auditing fees for SOX 404 compliance and other regulatory requirements such as Bank Secrecy Act and Gramm-Leach-Bliley Act. An impairment
loss of $457,000 was recognized during the third quarter of 2010 on a mutual fund owned by the Company. The non-publicly traded mutual fund is comprised solely of community and regional financial institution stocks. The Company reviews its position
in all securities quarterly and determined that, at September 30, 2010, the decline in fair value on the mutual fund should be recognized as other than temporary impairment. The changes in the remaining expense accounts were attributable to
increases/decreases in items that are normal and recurring in nature.
Income tax expense (benefit) declined to $(73,000) for the three months
ended September 30, 2010, representing a $273,000 reduction from the $200,000 of income tax expense recorded in 2009. The decline is primarily attributable to the $457,000 impairment loss, the $60,000 provision for loan losses and higher levels
of tax-exempt income in 2010.
23
Liquidity
Management monitors projected liquidity needs and determines the level desirable based in part on the Company’s commitments to make loans and
management’s assessment of the Company’s ability to generate funds.
The primary sources of funds are deposits, repayment of loans,
maturities of investments, funds provided from operations and advances from the FHLB of Cincinnati. While scheduled repayments of loans and maturities of investment securities are predictable sources of funds, deposit flows and loan repayments are
greatly influenced by the general level of interest rates, economic conditions and competition. The Company uses its sources of funds to fund existing and future loan commitments, to fund maturing time deposits and demand deposit withdrawals, to
invest in other interest-earning assets, to maintain liquidity, and to meet operating expenses.
Cash and amounts due from depository
institutions and federal funds sold totaled $66.3 million at September 30, 2010. These assets provide the primary source of liquidity for the Company. In addition, management has designated a portion of the investment portfolio, $62.9 million
as available for sale and has an available unused line of credit of $40.4 million with the Federal Home Loan Bank of Cincinnati to provide additional sources of liquidity at September 30, 2010. As of September 30, 2010, the Company had
commitments to fund loans of approximately $2.3 million and unused lines of credit totaling $40.1 million.
Cash was provided during the nine
month period ended September 30, 2010, mainly from operating activities of $2.1 million, and the net increase in deposits of $24.0 million, the maturities and repayments of investment securities of $57.2 million. Cash was used during the nine
month period ended September 30, 2010, mainly for the purchase of investment securities of $60.1 million and to reduce $2.2 million in Federal Home Loan Bank advances and short-term borrowings. In addition, $925,000 was used to pay dividends to
shareholders. Cash and cash equivalents totaled $66.3 million at September 30, 2010, an increase of $20.8 million from $45.5 million at December 31, 2009.
Management is not aware of any conditions, including any regulatory recommendations or requirements, which would adversely affect its liquidity or ability to meet its funding needs in the normal course of
business.
24
Risk Elements
The table below presents information concerning nonperforming assets including nonaccrual loans, renegotiated loans, loans 90 days or more past due, other
real estate loans and repossessed assets at September 30, 2010, and December 31, 2009. The Company ceased accruing interest on residential mortgages secured by real estate and consumer loans when principal or interest payments are
delinquent 90 days or more. Commercial loans, that are 90 days or more past due, are reviewed by the Bank President and the loan officers to determine whether they will be classified as nonperforming. These officers review various factors, which
include, but are not limited to, the timing of the maturity of the loan in relation to the ability to collect, whether the loan is deemed to be well secured, whether the loan is in the process of collection, and the favorable results of the analysis
of customer financial data. A nonperforming loan will only be re-classified as a performing loan when stringent criteria have been met. At the time the accrual of interest is discontinued, future income is recognized only when cash is received or
the loan has been returned to performing loan status. Renegotiated loans are those loans which terms have been renegotiated to provide a reduction or deferral of principal or interest as of result of the deterioration of the borrower.
|
|
|
|
|
|
|
|
|
|
|
|
|
September 30,
2010
|
|
|
December 31,
2009
|
|
|
|
|
(dollars in thousands)
|
|
|
|
|
|
|
Loans on nonaccrual basis
|
|
$
|
52
|
|
|
$
|
—
|
|
|
Loans past due 90 days or more
|
|
|
—
|
|
|
|
—
|
|
|
Renegotiated loans
|
|
|
—
|
|
|
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|
Total nonperforming loans
|
|
|
52
|
|
|
|
—
|
|
|
|
|
|
|
Other real estate
|
|
|
140
|
|
|
|
23
|
|
|
Repossessed assets
|
|
|
—
|
|
|
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|
Total nonperforming assets
|
|
$
|
192
|
|
|
$
|
23
|
|
|
|
|
|
|
Nonperforming loans as a percent of total loans
|
|
|
0.02
|
%
|
|
|
0.00
|
%
|
|
|
|
|
|
Nonperforming loans as a percent of total assets
|
|
|
0.01
|
%
|
|
|
0.00
|
%
|
|
|
|
|
|
Nonperforming assets as a percent of total assets
|
|
|
0.05
|
%
|
|
|
0.01
|
%
|
Management monitors impaired loans on a
continual basis. As of September 2010, impaired loans had no material effect on the Company’s financial position or results from operations.
The allowance for loan losses at September 30, 2010, totaled $2,662,000 or 1.26% of total loans as compared to $2,441,000 or 1.16% at December 31, 2009. Provisions for loan losses were $215,000
for the nine months ended September 30, 2010 and $2,000 for the nine months ended September 30, 2009.
The level of funding for the
provision is a reflection of the overall loan portfolio. Nonperforming loans consist of approximately $180,000 in residential mortgages and approximately $12,000 in consumer loan balances. The collateral requirements on such loans reduce the risk of
potential losses to an acceptable level in management’s opinion.
Management performs a quarterly evaluation of the allowance for loan
losses. The evaluation incorporates internal loan review and actual historical losses, as well as any negative economic trends in the local market. The evaluation is presented to and approved by the Board of Directors. Although the Company maintains
its allowance for loan losses at a level that it considers to be adequate to provide for the inherent risk of loss in its portfolio, there can be no assurance that future losses will not exceed estimated amounts or that additional provisions for
loan losses will not be required in future periods.
25
AVERAGE BALANCE
SHEET
Average Balance Sheet for the Nine-Month Period Ended September 30
The following table sets forth certain information relating to the Company’s average balance sheet and reflects the average yield on assets and
average cost of liabilities for the periods indicated and the average yields earned and rates paid. Such yields and costs are derived by dividing income or expense by the average balance of assets or liabilities, respectively, for the periods
presented.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Period Ended
|
|
|
|
|
2010
|
|
|
2009
|
|
|
|
|
Average
Balance
|
|
|
Interest
|
|
|
Yield/
Rate
|
|
|
Average
Balance
|
|
|
Interest
|
|
|
Yield/
Rate
|
|
|
Assets
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest Earnings Assets:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loans (1)(2)(3)
|
|
$
|
210,464,679
|
|
|
$
|
8,601,845
|
|
|
|
5.45
|
%
|
|
$
|
206,905,771
|
|
|
$
|
9,295,475
|
|
|
|
5.99
|
%
|
|
Securities-taxable (4)
|
|
|
62,347,836
|
|
|
|
1,373,056
|
|
|
|
2.94
|
%
|
|
|
61,740,605
|
|
|
|
1,585,587
|
|
|
|
3.42
|
%
|
|
Securities-nontaxable (4)
|
|
|
37,905,681
|
|
|
|
1,104,528
|
|
|
|
3.89
|
%
|
|
|
33,751,864
|
|
|
|
1,059,279
|
|
|
|
4.18
|
%
|
|
Securities-Equity (4,5)
|
|
|
1,884,560
|
|
|
|
61,934
|
|
|
|
4.38
|
%
|
|
|
1,734,560
|
|
|
|
78,310
|
|
|
|
6.02
|
%
|
|
Federal funds sold
|
|
|
6,976,357
|
|
|
|
6,675
|
|
|
|
0.13
|
%
|
|
|
6,556,359
|
|
|
|
7,708
|
|
|
|
0.16
|
%
|
|
Due from Federal Reserve Bank
|
|
|
36,339,715
|
|
|
|
65,314
|
|
|
|
0.24
|
%
|
|
|
13,421,474
|
|
|
|
28,816
|
|
|
|
0.29
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total interest earnings assets
|
|
|
355,918,828
|
|
|
|
11,213,352
|
|
|
|
4.20
|
%
|
|
|
324,110,633
|
|
|
|
12,055,175
|
|
|
|
4.96
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Noninterest earning assets:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and due from other institutions
|
|
|
9,477,807
|
|
|
|
|
|
|
|
|
|
|
|
10,199,930
|
|
|
|
|
|
|
|
|
|
|
Premises and equipment, net
|
|
|
5,913,166
|
|
|
|
|
|
|
|
|
|
|
|
6,192,475
|
|
|
|
|
|
|
|
|
|
|
Accrued interest
|
|
|
1,135,298
|
|
|
|
|
|
|
|
|
|
|
|
1,278,820
|
|
|
|
|
|
|
|
|
|
|
Other assets
|
|
|
9,434,916
|
|
|
|
|
|
|
|
|
|
|
|
8,190,378
|
|
|
|
|
|
|
|
|
|
|
Less allowance for loan losses
|
|
|
(2,530,431
|
)
|
|
|
|
|
|
|
|
|
|
|
(2,518,939
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total noninterest earnings assets
|
|
|
23,430,756
|
|
|
|
|
|
|
|
|
|
|
|
23,342,664
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Assets
|
|
$
|
379,349,584
|
|
|
|
|
|
|
|
|
|
|
$
|
347,453,297
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Liabilities and Shareholders’ Equity
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest bearing liabilities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest bearing demand
|
|
$
|
26,660,254
|
|
|
$
|
30,224
|
|
|
|
0.15
|
%
|
|
$
|
26,059,089
|
|
|
$
|
29,723
|
|
|
|
0.15
|
%
|
|
Money market accounts
|
|
|
43,964,261
|
|
|
|
256,283
|
|
|
|
0.78
|
%
|
|
|
28,670,605
|
|
|
|
183,558
|
|
|
|
0.85
|
%
|
|
Savings deposits
|
|
|
44,761,963
|
|
|
|
127,967
|
|
|
|
0.38
|
%
|
|
|
40,928,340
|
|
|
|
119,871
|
|
|
|
0.39
|
%
|
|
Time deposits
|
|
|
157,455,902
|
|
|
|
2,568,545
|
|
|
|
2.18
|
%
|
|
|
150,557,793
|
|
|
|
3,021,483
|
|
|
|
2.68
|
%
|
|
Short term borrowings
|
|
|
4,321,467
|
|
|
|
7,417
|
|
|
|
0.23
|
%
|
|
|
5,353,424
|
|
|
|
9,198
|
|
|
|
0.23
|
%
|
|
Federal Home Loan Advances
|
|
|
947,006
|
|
|
|
45,094
|
|
|
|
6.35
|
%
|
|
|
1,587,346
|
|
|
|
70,630
|
|
|
|
5.93
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total interest bearing liabilities
|
|
|
278,110,853
|
|
|
|
3,035,530
|
|
|
|
1.46
|
%
|
|
|
253,156,597
|
|
|
|
3,434,463
|
|
|
|
1.81
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Noninterest bearing liabilities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Demand deposits
|
|
|
56,611,026
|
|
|
|
|
|
|
|
|
|
|
|
50,193,496
|
|
|
|
|
|
|
|
|
|
|
Accrued expenses and other liabilities
|
|
|
2,668,115
|
|
|
|
|
|
|
|
|
|
|
|
2,864,614
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total noninterest bearing liabilities
|
|
|
59,279,141
|
|
|
|
|
|
|
|
|
|
|
|
53,058,110
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Shareholders’ equity
|
|
|
41,959,590
|
|
|
|
|
|
|
|
|
|
|
|
41,238,590
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Liabilities and Shareholders’ Equity
|
|
$
|
379,349,584
|
|
|
|
|
|
|
|
|
|
|
$
|
347,453,297
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net interest income
|
|
|
|
|
|
$
|
8,177,822
|
|
|
|
|
|
|
|
|
|
|
$
|
8,620,712
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest rate spread (6)
|
|
|
|
|
|
|
|
|
|
|
2.75
|
%
|
|
|
|
|
|
|
|
|
|
|
3.15
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net yield on interest earning assets (7)
|
|
|
|
|
|
|
|
|
|
|
3.06
|
%
|
|
|
|
|
|
|
|
|
|
|
3.55
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1)
|
For purposes of these computations, the daily average loan amounts outstanding are net of deferred loan fees.
|
|
(2)
|
Included in loan interest income are loan related fees of $246,000 and $275,000 in 2010 and 2009, respectively.
|
|
(3)
|
Nonaccrual loans are included in loan totals and do not have a material impact on the information presented.
|
|
(4)
|
Average balance is computed using the carrying value of securities. The average yield has been computed using the historical amortized cost average balance for
securities.
|
|
(5)
|
Equity securities are comprised of common stock of the Federal Home Loan Bank, Federal Reserve Bank, and Great Lakes Bankers Bank.
|
|
(6)
|
Interest rate spread represents the difference between the average yield on interest earning assets and the average cost of interest bearing liabilities.
|
|
(7)
|
Net yield on interest earning assets represents net interest income as a percentage of average interest earning assets.
|
26
AVERAGE BALANCE SHEET
Average Balance Sheet for the
Three-Month Period Ended September 30
The following table sets forth certain information relating to the Company’s average
balance sheet and reflects the average yield on assets and average cost of liabilities for the periods indicated and the average yields earned and rates paid. Such yields and costs are derived by dividing income or expense by the average balance of
assets or liabilities, respectively, for the periods presented.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Period Ended
|
|
|
|
|
2010
|
|
|
2009
|
|
|
|
|
Average
Balance
|
|
|
Interest
|
|
|
Yield/
Rate
|
|
|
Average
Balance
|
|
|
Interest
|
|
|
Yield/
Rate
|
|
|
Assets
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest Earnings Assets:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loans (1)(2)(3)
|
|
$
|
209,613,124
|
|
|
$
|
2,840,300
|
|
|
|
5.42
|
%
|
|
$
|
207,587,818
|
|
|
$
|
3,023,714
|
|
|
|
5.83
|
%
|
|
Securities-taxable (4)
|
|
|
64,301,850
|
|
|
|
453,209
|
|
|
|
2.82
|
%
|
|
|
60,651,342
|
|
|
|
457,906
|
|
|
|
3.02
|
%
|
|
Securities-nontaxable (4)
|
|
|
39,904,041
|
|
|
|
384,836
|
|
|
|
3.86
|
%
|
|
|
34,816,800
|
|
|
|
363,707
|
|
|
|
4.18
|
%
|
|
Securities-Equity (4,5)
|
|
|
1,884,560
|
|
|
|
19,250
|
|
|
|
4.09
|
%
|
|
|
1,734,560
|
|
|
|
35,069
|
|
|
|
8.09
|
%
|
|
Federal funds sold
|
|
|
9,222,546
|
|
|
|
3,225
|
|
|
|
0.14
|
%
|
|
|
6,789,321
|
|
|
|
2,065
|
|
|
|
0.12
|
%
|
|
Due from Federal Reserve Bank
|
|
|
42,346,255
|
|
|
|
25,293
|
|
|
|
0.24
|
%
|
|
|
16,229,068
|
|
|
|
10,378
|
|
|
|
0.26
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total interest earnings assets
|
|
|
367,272,376
|
|
|
|
3,726,113
|
|
|
|
4.06
|
%
|
|
|
327,808,909
|
|
|
|
3,892,839
|
|
|
|
4.75
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Noninterest earning assets:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and due from other institutions
|
|
$
|
9,822,551
|
|
|
|
|
|
|
|
|
|
|
$
|
9,675,153
|
|
|
|
|
|
|
|
|
|
|
Premises and equipment, net
|
|
|
5,856,230
|
|
|
|
|
|
|
|
|
|
|
|
6,111,544
|
|
|
|
|
|
|
|
|
|
|
Accrued interest
|
|
|
1,060,478
|
|
|
|
|
|
|
|
|
|
|
|
1,178,927
|
|
|
|
|
|
|
|
|
|
|
Other assets
|
|
|
9,523,310
|
|
|
|
|
|
|
|
|
|
|
|
8,341,036
|
|
|
|
|
|
|
|
|
|
|
Less allowance for loan losses
|
|
|
(2,628,391
|
)
|
|
|
|
|
|
|
|
|
|
|
(2,500,868
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total noninterest earnings assets
|
|
|
23,634,178
|
|
|
|
|
|
|
|
|
|
|
|
22,805,792
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Assets
|
|
$
|
390,906,554
|
|
|
|
|
|
|
|
|
|
|
$
|
350,614,701
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Liabilities and Shareholders’ Equity
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest bearing liabilities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest bearing demand
|
|
$
|
26,823,225
|
|
|
$
|
9,574
|
|
|
|
0.14
|
%
|
|
$
|
25,236,692
|
|
|
$
|
9,395
|
|
|
|
0.15
|
%
|
|
Money market accounts
|
|
|
49,602,647
|
|
|
|
87,361
|
|
|
|
0.70
|
%
|
|
|
30,726,250
|
|
|
|
67,435
|
|
|
|
0.88
|
%
|
|
Savings deposits
|
|
|
45,727,631
|
|
|
|
41,257
|
|
|
|
0.36
|
%
|
|
|
40,940,158
|
|
|
|
40,204
|
|
|
|
0.39
|
%
|
|
Time deposits
|
|
|
161,948,362
|
|
|
|
879,956
|
|
|
|
2.17
|
%
|
|
|
152,294,778
|
|
|
|
942,217
|
|
|
|
2.47
|
%
|
|
Short term borrowings
|
|
|
4,122,934
|
|
|
|
2,396
|
|
|
|
0.23
|
%
|
|
|
4,921,774
|
|
|
|
2,850
|
|
|
|
0.23
|
%
|
|
Federal Home Loan Advances
|
|
|
790,521
|
|
|
|
12,935
|
|
|
|
6.54
|
%
|
|
|
1,424,618
|
|
|
|
21,283
|
|
|
|
5.98
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total interest bearing liabilities
|
|
|
289,015,320
|
|
|
|
1,033,479
|
|
|
|
1.43
|
%
|
|
|
255,544,270
|
|
|
|
1,083,384
|
|
|
|
1.70
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Noninterest bearing liabilities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Demand deposits
|
|
|
56,638,381
|
|
|
|
|
|
|
|
|
|
|
|
50,828,045
|
|
|
|
|
|
|
|
|
|
|
Accrued expenses and other liabilities
|
|
|
3,654,138
|
|
|
|
|
|
|
|
|
|
|
|
3,736,863
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total noninterest bearing liabilities
|
|
|
60,292,519
|
|
|
|
|
|
|
|
|
|
|
|
54,564,908
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Shareholders’ equity
|
|
|
41,598,715
|
|
|
|
|
|
|
|
|
|
|
|
40,505,523
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Liabilities and Shareholders’ Equity
|
|
$
|
390,906,554
|
|
|
|
|
|
|
|
|
|
|
$
|
350,614,701
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net interest income
|
|
|
|
|
|
$
|
2,692,634
|
|
|
|
|
|
|
|
|
|
|
$
|
2,809,455
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest rate spread (6)
|
|
|
|
|
|
|
|
|
|
|
2.63
|
%
|
|
|
|
|
|
|
|
|
|
|
3.05
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net yield on interest earning assets (7)
|
|
|
|
|
|
|
|
|
|
|
2.93
|
%
|
|
|
|
|
|
|
|
|
|
|
3.43
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1)
|
For purposes of these computations, the daily average loan amounts outstanding are net of deferred loan fees.
|
|
(2)
|
Included in loan interest income are loan related fees of $90,000 and $102,000 in 2010 and 2009, respectively.
|
|
(3)
|
Nonaccrual loans are included in loan totals and do not have a material impact on the information presented.
|
|
(4)
|
Average balance is computed using the carrying value of securities. The average yield has been computed using the historical amortized cost average balance for
securities.
|
|
(5)
|
Equity securities are comprised of common stock of the Federal Home Loan Bank, Federal Reserve Bank, and Great Lakes Bankers Bank.
|
|
(6)
|
Interest rate spread represents the difference between the average yield on interest earning assets and the average cost of interest bearing liabilities.
|
|
(7)
|
Net yield on interest earning assets represents net interest income as a percentage of average interest earning assets.
|
27
Rate/Volume
Analysis
The table below sets forth certain information regarding changes in interest income and interest expense of the Company for
the periods indicated. For each category of interest-earning assets and interest-bearing liabilities, information is provided on changes attributable to (i) changes in volume (changes in average volume multiplied by old rate) and
(ii) changes in rates (changes in rate multiplied by old average volume). Changes, which are not solely attributable to rate, or volume are allocated to changes in rate due to rate sensitivity of interest-earning assets and interest-bearing
liabilities (dollars in thousands).
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Nine-Month Period Ended September
|
|
|
|
|
2010 Compared to 2009
|
|
|
|
|
Increase (Decrease) Due To
|
|
|
|
|
Volume
|
|
|
Rate
|
|
|
Net
|
|
|
|
|
|
|
|
Interest income
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loans
|
|
$
|
160
|
|
|
$
|
(854
|
)
|
|
$
|
(694
|
)
|
|
Securities-taxable
|
|
|
16
|
|
|
|
(229
|
)
|
|
|
(213
|
)
|
|
Securities-nontaxable
|
|
|
130
|
|
|
|
(84
|
)
|
|
|
46
|
|
|
Securities-equities
|
|
|
7
|
|
|
|
(23
|
)
|
|
|
(16
|
)
|
|
Federal funds sold
|
|
|
1
|
|
|
|
(2
|
)
|
|
|
(1
|
)
|
|
Due from Federal Reserve Bank
|
|
|
50
|
|
|
|
(14
|
)
|
|
|
36
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total interest earning Assets
|
|
|
364
|
|
|
|
(1,206
|
)
|
|
|
(842
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest expense
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest bearing demand
|
|
|
1
|
|
|
|
(1
|
)
|
|
|
—
|
|
|
Money market accounts
|
|
|
98
|
|
|
|
(25
|
)
|
|
|
73
|
|
|
Savings deposits
|
|
|
11
|
|
|
|
(3
|
)
|
|
|
8
|
|
|
Time deposits
|
|
|
138
|
|
|
|
(591
|
)
|
|
|
(453
|
)
|
|
Short-term borrowing
|
|
|
(2
|
)
|
|
|
1
|
|
|
|
(1
|
)
|
|
Federal Home Loan Bank Advances
|
|
|
(28
|
)
|
|
|
2
|
|
|
|
(26
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total interest bearing Liabilities
|
|
|
218
|
|
|
|
(617
|
)
|
|
|
(399
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net change in net interest income
|
|
$
|
146
|
|
|
$
|
(589
|
)
|
|
$
|
(443
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
28
Rate/Volume Analysis
The table below sets forth certain
information regarding changes in interest income and interest expense of the Company for the periods indicated. For each category of interest-earning assets and interest-bearing liabilities, information is provided on changes attributable to
(i) changes in volume (changes in average volume multiplied by old rate) and (ii) changes in rates (changes in rate multiplied by old average volume). Changes, which are not solely attributable to rate, or volume are allocated to changes
in rate due to rate sensitivity of interest-earning assets and interest-bearing liabilities (dollars in thousands).
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three-Month Period Ended September
|
|
|
|
|
2010 Compared to 2009
|
|
|
|
|
Increase (Decrease) Due To
|
|
|
|
|
Volume
|
|
|
Rate
|
|
|
Net
|
|
|
|
|
|
|
|
Interest income
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loans
|
|
$
|
30
|
|
|
$
|
(213
|
)
|
|
$
|
(183
|
)
|
|
Securities-taxable
|
|
|
28
|
|
|
|
(33
|
)
|
|
|
(5
|
)
|
|
Securities-nontaxable
|
|
|
53
|
|
|
|
(32
|
)
|
|
|
21
|
|
|
Securities-equities
|
|
|
3
|
|
|
|
(19
|
)
|
|
|
(16
|
)
|
|
Federal funds sold
|
|
|
1
|
|
|
|
—
|
|
|
|
1
|
|
|
Due from Federal Reserve Bank
|
|
|
17
|
|
|
|
(2
|
)
|
|
|
15
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total interest earning Assets
|
|
|
132
|
|
|
|
(299
|
)
|
|
|
(167
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest expense
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest bearing demand
|
|
|
1
|
|
|
|
—
|
|
|
|
1
|
|
|
Money market accounts
|
|
|
42
|
|
|
|
(23
|
)
|
|
|
19
|
|
|
Savings deposits
|
|
|
5
|
|
|
|
(4
|
)
|
|
|
1
|
|
|
Time deposits
|
|
|
60
|
|
|
|
(122
|
)
|
|
|
(62
|
)
|
|
Short-term borrowing
|
|
|
—
|
|
|
|
(1
|
)
|
|
|
(1
|
)
|
|
Federal Home Loan Bank Advances
|
|
|
(9
|
)
|
|
|
1
|
|
|
|
(8
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total interest bearing Liabilities
|
|
|
99
|
|
|
|
(149
|
)
|
|
|
(50
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net change in net interest income
|
|
$
|
33
|
|
|
$
|
(150
|
)
|
|
$
|
(117
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
29
Item 3 – QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Not Applicable to Smaller Reporting Companies.
Item 4 – CONTROLS AND PROCEDURES
The Company has carried out an evaluation, under the supervision and with the participation of the Company’s management, including the Company’s Chief Executive Officer and Senior Vice
President/ Chief Financial Officer, of the effectiveness of the design and operation of the Company’s disclosure controls and procedures pursuant to Exchange Act Rule 13a-15. Based upon that evaluation, the Chief Executive Officer and Senior
Vice President/Chief Financial Officer concluded that the Company’s disclosure controls and procedures are effective, as of the end of the period covered by this report, in timely alerting them to material information relating to the Company
(including its consolidated subsidiaries) required to be included in the Company’s periodic SEC filings.
Disclosure controls and
procedures are the control and other procedures of the Company that are designed to ensure that the information required to be disclosed by the Company in its reports or submitted under the Exchange Act is recorded, processed, summarized and
reported, within the time periods specified in the Securities and Exchanges Commission’s rules and forms.
There was no change in the
Company’s internal control over financial reporting that occurred during the Company’s fiscal quarter ended September 30, 2010 that has materially affected, or is reasonably likely to materially affect, the Company’s internal
control over financial reporting.
30
Part II – OTHER INFORMATION
Item 1 - Legal Proceedings
None
Item 1A - Risk Factors
Not Applicable to Smaller Reporting Companies.
Item 2 -
Unregistered sales of equity securities and use of proceeds
The Company did not engage in any unregistered sales of its securities during
the quarter ended September 30, 2010.
ISSUER PURCHASES OF EQUITY SECURITIES
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Period
|
|
(a) Total
Number of
Shares (or
Units)
Purchased
|
|
|
(b)
Average
Price
Paid per Share
(or Unit)
|
|
|
(c) Total Number of
Shares (or
Units)
Purchased as Part of
Publicly Announced
Plans or Programs
|
|
|
(d) Maximum Number
(or Approximate Dollar
Value) of Shares
(or
Units) that May Yet Be
Purchased Under the
Plans or Programs
|
|
|
July 1 – 31, 2010
|
|
|
0
|
|
|
|
—
|
|
|
|
N/A
|
|
|
|
N/A
|
|
|
August 1 – 31, 2010
|
|
|
0
|
|
|
|
—
|
|
|
|
N/A
|
|
|
|
N/A
|
|
|
September 1 – 30, 2010
|
|
|
0
|
|
|
|
—
|
|
|
|
N/A
|
|
|
|
N/A
|
|
|
Total (1)
|
|
|
0
|
|
|
|
—
|
|
|
|
N/A
|
|
|
|
N/A
|
|
|
(1)
|
No shares of common stock were purchased by Killbuck Bancshares in open-market transactions.
|
Item 3 - Default upon senior securities
None
Item 4 - (Removed and Reserved)
31
Item 5 - Other Information
None
Item 6 - Exhibits
The following exhibits are included in this report or incorporated herein by reference:
|
|
|
|
|
3.1(i)
|
|
Articles of Incorporation of Killbuck Bancshares, Inc.*
|
|
|
|
|
3.1(ii)
|
|
Amendment to the Articles of Incorporation of Killbuck Bancshares, Inc. increasing authorized shares.**
|
|
|
|
|
3.2
|
|
Code of Regulations of Killbuck Bancshares, Inc.*
|
|
|
|
|
31.1
|
|
Rule 13a-14(a) Certification
|
|
|
|
|
31.2
|
|
Rule 13a-14(a) Certification
|
|
|
|
|
32.1
|
|
Section 1350 Certifications
|
|
|
|
|
32.2
|
|
Section 1350 Certifications
|
|
|
|
|
99.1
|
|
Report of Independent Registered Public Accounting Firm
|
|
*
|
Incorporated by reference to an identically numbered exhibit to the Form 10 (file No. 0-24147) filed with SEC on April 30, 1998 and subsequently amended on
July 8, 1998 and July 31, 1998.
|
|
**
|
Incorporated by reference to Registrant’s report on Form 10-Q for the quarter ended March 31, 2004, filed with the Commission on May 13, 2004.
|
32
Signatures
Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused the report to be signed on its behalf by the undersigned, thereunto duly authorized.
|
|
|
|
|
|
|
|
|
Killbuck Bancshares, Inc.
|
|
|
|
|
|
Date: November 9, 2010
|
|
By:
|
|
/
S
/ L
UTHER
E.
P
ROPER
|
|
|
|
|
|
Luther E. Proper
|
|
|
|
|
|
President and Chief Executive Officer
|
|
|
|
|
|
Date: November 9, 2010
|
|
By:
|
|
/
S
/ L
AWRENCE
C
ARDINAL
|
|
|
|
|
|
Lawrence Cardinal
|
|
|
|
|
|
Chief Financial Officer
|
33
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